KUALA LUMPUR: CIMB Equities Research is maintaining its FY19-21F EPS forecasts and dividend discount model-based target price of RM4.39 for AMMB Holdings Bhd
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It said on Friday it also retained its Hold call on AMMB as it was concerned about the expected upturn in credit-cost cycle, starting from 4QFY19F.
“However, we think that the share price could be supported by its attractive dividend yield of 4.1% projected for FY19F. We prefer RHB Bank for exposure to Malaysian banks,” it said.
AMMB’s 9MFY3/19 net profit was within expectations at 76% of CIMB Research’s full-year forecast and 74% of Bloomberg consensus estimates.
“We expect 4QFY19 net profit to be lower (compared to 3QFY19) as we think that the net write-back of loan loss provisioning (LLP) in 3QFY19 will not be sustainable,” it said.
The bank’s net profit surged by 19% on-year in 9MFY3/19, mainly spurred by (1) 9.5% on-year drop in overheads, aided by the cost savings from the mutual separation scheme, and (2) a RM29.7mil net write-back in LLP in 9MFY19 compared to a provision of RM28mil in 9MFY18.
“However, we were disappointed by the weak revenue growth of 1.2% on-year in 9MFY19. This was mainly caused by the 5.2% on-year decline in non-interest income with an across-the-board decline – down by 5.1% on-year for fee income, 35.4% on-year for investment income and 89.2% on-year for foreign exchange profit,” it said.
CIMB Research pointed out loan growth moderated from 7.5% on-year at end-September 2018 to 6% on-year at end-December 2018, but this was still slightly above the industry’s 5.6%.
The slowdown mainly came from the residential mortgage segment, with growth declining from 20.7% on-year at end-September 2018 to 17% on-year at end-December 2018 (vs. the industry’s 7.6%).
Auto loan continued to contract (by 14.3% on-year at end-December 2018) due to the bank’s deliberate move to reduce exposure to this loan segment.
Gross impaired loan ratio fell from 1.72% at end-September 2018 to 1.62% at end-December 2018while the loan loss coverage increased from 79.7% to 82.5% over the same period, it said.
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