PETALING JAYA: AMMB Holdings Bhd’s net interest income is expected to see a quarter-on-quarter rebound as its modification loss begins to unwind.
Citing AMMB’s management, RHB Investment Bank said in a report that AMMB’s non-interest income is also seeing good traction.
“Broking income, bond trading and wealth management income were strong during the second quarter of its current financial year.”
However, notwithstanding the bank’s healthy capital ratio and ample liquidity, RHB said banks have either deferred, reduced or suspended dividend payments in the past two quarters, citing the uncertainties brought on by the pandemic and the movement control order (MCO).
“We see heightened risk on the outlook of final dividend amidst the renewed uncertainties.”
The research house also said AMMB’s management believed an additional cut of 25 basis points in the overnight policy rate is possible.
“The low-rate environment is likely to persist for a prolonged period, given the still fragile economy. Raising rates prematurely may put unnecessary pressure on corporates (that have frail corporate earnings) and household (new debt added).
“That said, management is wary of the recent resurgence in Covid-19 cases and the reimposition of the conditional MCO.”
RHB added that asset quality may still be masked by the targeted relief measures while gross impaired loans (GILs) would only start emerging in the second half of 2021.
“However, more preemptive provisions are to be expected in quarters ahead of the rise in GILs and the provision amount will depend greatly on January’s data.
“A worst-case provision of RM300mil to RM500mil (of which RM167mil and RM10mil were already provided in the fourth quarter of 2020 and first quarter of 2021 as macro overlay) is being reassessed, given the recent less favourable developments. We have already pencilled in around RM520mil for 2021.”
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