Kenanga Research: AMMB has firm strategies to sustain near-to-medium fundamentals

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) says that AMMB Holdings Bhd (AMMB) has firm strategies in place that will help the group sustain its fundamentals in the near to medium-term.

In a company update report following a recent analyst briefing with AMMB, the research team noted the management guided that despite a moderating GDP environment, the group’s loans growth is expected to stay supported with returning margins to carry earnings.

Taking a more cautiously optimistic tone, AMMB’s management guided that it anticipated loans growth to see more modest performance of four to five per cent as overall activities appear to be easing.

However, as AMMB has a 21 per cent SME proportion to its overall books, the group noted that opportunities are present from the relocation of businesses from overseas to local logistics and industrial hubs. Currently, a growing data centre segment is also fuelling AMMB’s books.

“Additionally, its average housing loan value of 33 per cent of total loans remained steady at circa RM600k and was not diluted by a meaningful growth in affordable housing mix,” the research arm added.

AMMB’s margins are also expected to see a gradual return as the group had attributed previous net interest margin (NIM) pressures to the simultaneous maturity and renewal of fixed deposit accounts between December 2022 and January 2023 which have once again matured from an average tenure of seven months.

“As rates are significantly friendly to AMMB, funding cost would largely ease from here. However, due to most of its benefits likely being captured in the first quarter of financial year 2023 (1QFY24), this could be why the group is only anticipating stable NIMs throughout the year at circa 1.90 per cent,” the research arm pointed out.