Analysts positive on AMMB, loans growth continues despite Covid-19 headwinds

KUCHING: Analysts have turned positive on AMMB Holdings Bhd (AMMB), as the group has shown resilience in light of the challenging environment and it has still recorded loans growth despite Covid-19 headwinds.

The research arm of Hong Leong Investment Bank Bhd (HLIB Research) turned positive on AMMB given leading Covid19 vaccines have high efficacy rates, indicating a step closer to winning the battle against the virus.

“This would spur a faster economic recovery, owing to improve business and consumer confidence along with more lenient safety distancing measures,” HLIB Research said.

“Also, it alleviates strain on businesses, which in turn curbs non-performing loan (NPL) formation.”

Looking ahead, HLIB Research sees subsiding net interest margin (NIM) pressure as the overnight policy rate (OPR) is already at an all-time low.

“Besides, downward deposit repricing should aid gradual NIM recovery. That said, loans growth is seen to chug along despite Covid-19 headwinds as AMMB grabs market share from peers.”

Separately, the research arm expected gross impaired loan (GIL) ratio to remain at low levels in the first half of 2021 (1H21), since troubled borrowers can seek for targeted assistance from AMMB.

“However, it may hide actual damage and lead to a lag in NPL formation if the situation does not improve swiftly. As such, management is likely to step up their pre-emptive provisioning in the short-haul but it will drop and normalise progressively.”

Meanwhile, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) continued to like the group’s resilience in light of the challenging environment.

MIDF Research believed that net interest income (NII) is improving and in tandem with the strong non-interst income (NOII) performance and contained operating expenditure (opex), it will be able to moderate the increase in provisions.

“This will also moderate any asset quality deterioration,” MIDF Research said.

“In addition, the situation is expected to improve in current year 2021 with the positive development of the vaccine.”