Kenanga downgrades AMMB to 'market perform' on high credit cost guidance

KUALA LUMPUR: Kenanga Research is downgrading its call on AMMB Holdings Bhd to "market perform" on fears that some borrowers coming out of moratorium have started to fall behind in repayments.

The research house cited that the bank also faces rising FY21 credit cost due to uncertainties over the strength of the economic recovery and outcome of specific syndicated loan restructurings.

According to Kenanga, AMMB has briefed that the size of its B40 exposure was RM10bil.

"We cut FY21E PATMI by 16% as we raised our credit cost assumption to 75bps (from 45bps). Our FY22E credit cost is largely unchanged for now (44bps vs 46bps previously), as we await further updates from AMMB," said Kenanga.

It revised its target price higher to RM3.70 from RM3.60 as its GGM-derived target 2021 price-book value has been raised to 0.56x from 0.54x after incorporating a lower risk-free rate assumption of 2.7% from 3%.

"While still early days, we think the rising days-past-due (DPD) loan trends could stoke investors’ concerns.

"Coupled with the recent share price action, we are downgrading our recommendation to MARKET ERFORM from OUTPERFORM. While valuations look attractive, we expect share price to take a breather until a clearer picture on asset quality is available," it said.
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