KUALA LUMPUR: AMMB’s 1HFY18 earnings were within Maybank Investment Bank’s expectations and positively, loan growth momentum has been sustained, though this has been offset somewhat by lower net interest margins (NIMs) for the quarter.
“Our earnings forecasts are unchanged but with return on equity (ROEs) expected to trend around the 8% range, which is the lowest within our bank coverage.
“We trim our CY18 price-to-book value (PBV) multiple peg to 0.75 times from 0.8 times and our target price to RM4.50 from RM4.80. Dividend yield of 4.5% (FY18) nevertheless provides support to share price,” it said.
Maybank Research said AMMB’s 2QFY18 core net profit of RM332mil (-6% on-year; -7% on-quarter) took 1HFY18 core net earnings to RM687mil (+2% on-year) – within expectations at 49% of its full-year forecast and consensus.
Positively, loan growth momentum was sustained, averaging 4% on an annualised basis, and asset quality was stable.
On the flip side, NIM compressed by 5bps on-quarter in 2QFY18 due to higher funding cost, while the contraction in NOII and negative JAWS led to the overall YoY decline in 2QFY18 earnings.
“Credit recoveries continued to provide support to overall earnings but encouragingly, management took the opportunity to top up its regulatory reserves ahead of MFRS9, contributing to an overall higher loan loss coverage (LLC) including regulatory reserves ratio of 101% from 80% endJune 2017.
“Our forecasts are broadly maintained, a key assumption being that credit recoveries are sustained in FY18 before normalising back to credit costs in FY19.
“We expect NIM to average 2.02% in FY18 (+4bps YoY) and to remain flat in FY19. We project ROEs to trend around the 8% range, averaging 8.3% in FY18 and FY19 respectively,” Maybank Research said.