CIMB Research said AMMB would start to realise cost savings of RM80mil per annum from its mutual separation scheme from FY19F onwards.
PETALING JAYA: Moody’s Investors Service has upgraded AmBank (M) Bhd’s foreign-currency senior unsecured debt and long-term foreign-currency deposit rating to A3 from Baa1.
The rating agency has upgraded AmBank’s Baseline Credit Assessment (BCA) and adjusted BCA to baa2 from baa3. Moody’s has also affirmed AmBank’s short-term deposit ratings at P-2, counterparty risk assessments at A3(cr)/P-2(cr) and counterparty risk ratings at A3/P-2. The rating outlook is maintained at stable.
In a statement, Moody’s said the upgrade of AmBank’s BCA reflected its successful de-risking of the balance sheet since 2015, that had resulted in slower impaired loan formation. The de-risking has resulted in improved asset quality and stable capitalization amid challenging operating conditions in Malaysia.
AmBank’s gross impaired loans ratio was 1.5% at the end of December 2018, broadly stable from March 2018, and has remained below 2% since 2015.
AmBank’s Common Equity Tier 1 (CET1) capital ratio rose to 11.4% at the end of December 2018 from 10.9% a year ago, a result of risk-weighted assets (RWA) optimization and earnings retention.
“Moody’s expects the bank’s core profit to remain stable in 2019-2020, driven by its continued tight cost controls and steady revenue growth, offset by normalising net credit costs,” the rating agency said.
It noted that the bank’s deposit franchise remained smaller than that of the larger Malaysian banks that Moody’s rates, despite the bank’s active efforts to grow its customer deposit base.
Low-cost funding, such as current and savings accounts, constituted around 19% of AmBank’s deposit base as of the end of December 2018, below the system average of 26%. The bank’s gross loan-to-deposit ratio was 91% at the end of December 2018, in line with the banking system average of 89%.
Moody’s said the (P)Ba1 subordinated MTN rating was positioned two notches below AmBank’s baa2 adjusted BCA, in line with the agency’s standard notching guidance for subordinated debt, with loss triggered at the point of non-viability on a contractual basis.
“The extra notch relative to plain vanilla subordinated debt with normal loss severity reflects the potential uncertainty associated with the timing of loss absorption, given that Bank Negara Malaysia -- the country’s banking regulator -- has not defined the point at which it would deem the bank to be non-viable,” it said.
“The outlook on the bank’s ratings is stable, reflecting Moody’s expectation that its credit fundamentals will remain robust over the next 12-18 months,” Moody’s said.
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