AmBank FY23 results a ‘positive surprise’

RHB Research is keeping its FY24-FY25 forecast profit after tax and minority interests largely unchanged.

PETALING JAYA: AMMB Holdings Bhd (AmBank) wrapped up its financial year ended March 31, 2023 (FY23) on a decent note with a net profit of RM1.74bil and a final dividend of 12.3 sen, which was a positive surprise, according to analysts.

A quick poll of reports yesterday showed that research firms had a “buy” call on the banking group, given its inexpensive valuation and positive earnings momentum.

Analysts noted that AmBank’s gross loans grew 9% year-on-year in FY23, driven by households that comprised mostly residential mortgages as well as small and medium enterprises (SMEs).

This, according to RHB Research, compares with the FY23 target of 6%-7%.

However, it noted that “no formal guidance for FY24 was provided, although management is confident its current loan pipeline can help it achieve 5%-6% growth”.

Another thing that stood out was the group’s huge current account, savings account (CASA) uptake in the fourth quarter, and if retained, could bode well for net interest margin (NIM) outlook.

“AmBank ran a unique fixed-deposit promotion that involved customers also contributing to CASA with a series of incentive systems to encourage stickiness.

“The overall intention is to convert some of these to priority customers and to shift the balances into wealth management,” MIDF Research said after a briefing with the bank.

As a result, the research house said that in contrast to peers, AmBank’s CASA had risen by 5.3% quarter-on-quarter, bringing the ratio to 37.4%, from 32.2% in the third quarter.

According to MIDF Research, the group’s ability to maintain these CASA balances could provide upside to loan growth and NIM.

However, it noted that there was a fair amount of seasonality in fourth-quarter deposit spikes and management is unsure of the stickiness of such deposits.

Other highlights from the briefing is the timing of writebacks, which continue to be an uncertainty, as staging conditions may evolve, which may see the group withholding guidance on credit cost for now.

At present, Kenanga Research said AmBank sits on an overlay of RM461mil, which it had topped up from FY22’s RM394mil against selected corporate exposures.

Apart from benefiting from a growing SME base, the group is also expected to see better contribution from its stake in associate Liberty Insurance.

Post FY23 full-year numbers, Kenanga Research said it has raised its FY24 forecast earnings slightly, noting that AmBank’s 7% earnings per share growth is backed by modest improvements across the board, although NIMs could possibly come off.

RHB Research is keeping its FY24-FY25 forecast profit after tax and minority interests largely unchanged.

Meanwhile, MIDF Research has adjusted its FY24-FY25 numbers slightly lower to reflect a poorer NIM outlook, higher operating expenditure as well as weaker non-interest income balances, going forward.

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