Analysts neutral on AMMB
KUCHING: AMMB Holdings Bhd (AMMB) has garnered neutral views from analysts, following the group’s first nine months of 2018’s (9M18) results briefing.
According to the research arm of Hong Leong Investment Bank Bhd (HLIB Research), reversal of credit charge (from a credit recovery) derailed AMMB’s overall 9M18 net profit.
“Moving forward, management reiterated that current credit charge level could be sustained on the back of slower recoveries.
“Nevertheless, it is still pursuing a couple of impaired corporate accounts that could result in a positive surprise to its credit cost,” the research arm said.
Meanwhile, HLIB Research noted that as AMMB is incurring investment in various areas to enhance its operations, this could weaken the group’s net profit.
The research arm pointed out that the return on equity (ROE) target of 10 per cent in two to three years is challenging.
However, the research arm noted that the successful delivery of current strategy such as emphasising on mass affluent, affluent, small and medium enterprise (SME) and mid-corp accounts, will lend a hand to the ROE target, albeit difficult.
Meanwhile, HLIB Research said that management had reiterated current account, savings account (CASA) growth will soon kick start owing to its focus on non-retail CASA and business segments.
On asset quality, HLIB Research highlighted that at current loanlosscoverage of 101 per cent via a transfer from retained earnings to regulatory reserves, management is satisfied with the level presently and sees no issue with the Malaysian Financial Reporting Standard ( MFRS) 9 implementation which could come on board on April 1, 2018.
“Absolute gross impaired-loan (GIL) declined 0.6 per cent quarter on quarter q-o-q fueled by both retail and non-retail GIL.”
As for AMMB’s Common Equity Tier 1 (CET1), HLIB Research noted that at 11.8 per cent CET1 (fully loaded basis), it remains the lowest in the industry.
The research arm further noted that amid the MFRS9 implementation, provisioning level is adequate to weather the impact of MFRS9.
“Despite lower than expected results, AMMB is progressing in the areas it wants to grow especially in the non- retail segment with higher loan booked.
“Its recent mutual separation scheme ( MSS) initiative will ensure AMMB to be leaner and achieve ideal cost-to-income ratio (CTI) of 55 per cent.”