AMMB's NPL disposal to have positive growth effects

KUALA LUMPUR: AMMB Holdings Bhd's proposed disposal of RM553.9mil in non-performing loans (NPL) and financing will have a positive impact on the group upon completion of the transaction in March 2019.

In a research note issued today, PublicInvest research said the cash infusion into the group for working capital purposes will further promote medium-to-long-term growth.

However, PublicInvest noted that the actual quantum cannot yet be identified pending settlment and adjustments. 

"The Group is also unable to definitively determine the date and original cost of investment of the sale portfolio as they comprise accounts that have been written off over the years, while some others may have been acquired from other financial institutions to which no specific value was ascribed. Suffice to say however, there will be gains recorded," it said.

The research house kept its forecasts unchanged pending further clarity and kept its trading buy call with a raised target price of RM4.50, from RM4.20 previously, following minor changes to long-term growth assumptions..

To recap, AmBank and AmBank Islamic are selling the NPLs worth RM428.1mil and RM125.8mil respectively, consisting of over 500,000 individual and corporate accounts across various product lines.

The buyers of the NPLs are special purpose vehicles owned by Aiqon Capital Group, which is a key player in Asia-Pacific for the acquisition and management of NPL assets.

According to PublicInvest, the group has acquired in excess of RM43bil in face value of non-performing assets in Malaysia, Singapore, Philippines, Thailand, Australia and Spain.

The transaction with AMMB is deemed as related as the executive chairman, CEO and major shareholder of Aqion is a related party to a major shareholder and director of AMMB.