AMMB seen to do well on stronger loan, deposit growth
PETALING JAYA: Analysts are expecting that AMMB Holdings Bhd would hold up fairly well in 2017 on the back of stronger loan and deposit growth, as well as stable margins expansion.
The banking group had beaten the consensus in the third quarter ended Dec 31, 2016 with a strong rise in net interest income and higher loan growth that was driven by mortgage and SME sector.
“AMMB remains an ‘add’ in our books, premised on expected recovery in financial year 2017 (FY17) earnings growth, pick-up in loan growth and attractive valuation,” said CIMB Research in a report.
It added that AMMB is trading at price-toearnings ratio of 9.8 times and price-to-book ratio of 0.8 times, compared to the industry’s 11.9 times and 1.3 times, respectively.
“We are impressed with the strong rebound in loan growth of 3.9% year-on-year (y-o-y) at end-December 2016, the fastest quarterly expansion in the past seven to eight years,” CIMB said.
It added that the key driver for the loan growth was a 21.6% y-o-y jump in residential mortgages, which is higher than the industry growth of 9.2%.
AMMB, which is undergoing a transition plan, posted a 4.3% rise in net profit in the third quarter to RM313.17mil from RM300.15mil a year ago. Revenue for the quarter, however, was down 6.5% to RM1.98bil.
The bank’s net interest margin (NIM), a measure of the difference between the interest income generated by banks and the amount of interest paid out to depositors, increased to 2.02% in the third quarter from 1.93% a year earlier, driven from higher loan growth.
We are impressed with the strong rebound in loan growth of 3.9% year-onyear at end-December 2016.
AllianceDBS Research reckoned that AMMB’s NIM growth is likely to taper off in the coming quarters, despite showing strong improvement in the recent quarter.
“AMMB did pay up for some wholesale deposits towards end-December and this could edge up funding costs. Its loans have finally shown traction and should end FY17 at 5%,” it said.
AMMB’s impaired loans ratio has improved in the third quarter to 1.54% from 1.64% in the second quarter, which according to CIMB is below the industry average of 1.61%.
AllianceDBS said AMMB is targeting to pare down its exposure in the oil and gas (O&G) sector, which now stood at 3% of its total loans.
“Its O&G exposure was reduced by RM600mil over the past nine months,” AllianceDBS said.
“Meanwhile, AMMB continues to monitor its real estate for non-residential properties loans, which are at 9% of total loans.
“Loans within this segment is well collateralised and deterioration in asset quality is not expected to have a big impact on provisions, according to management,” it added.