PETALING JAYA: Analysts are positive on AMMB Holdings Bhd
, as the banking group is likely to record meaningful quarter-on-quarter (q-o-q) earnings growth next quarter, as well as a larger dividend payout in the future.
Hong Leong Investment Bank (HLIB) Research said AMMB’s risk-reward profile remained skewed to the upside even after taking into consideration the recent price recovery from the overhang of Australia’s ANZ Group’s share disposal.
“On top of potentially booking meaningful sequential profit growth in the next quarter, the adoption of the foundation internal rating-based model possibly in financial year 2025 (FY25) could help to elevate its common equity tier one ratio to more than 14% versus the current 13.4%.
“Without transitional arrangements, this creates scope for a larger dividend payout in the future,” it added.
The research house expected AMMB’s net interest margin (NIM) in the fourth quarter ending March 31, 2024 to be stable, as seasonal fixed deposits (FDs) competition abates and AMMB is shying away from writing loans with low margins.
HLIB Research said the banking group’s NIM was compressed three basis points (bps) sequentially in the third quarter of FY23 (3Q23) due to the typical year-end contest for FD, which drove up cost of funds.
“In addition, its loan-to-deposit ratio is not overly stretched at 97% versus a year ago (over 100%), giving it some leeway not to aggressively chase for pricey deposits.
“Overall, management retains its full-year FY24 NIM slippage guidance of 27 bps vs our forecast of minus 19 bps,” it added.
However, the research house anticipated AMMB to record a softer loan growth and non-interest income.
“The 4% year-on-year loan growth may taper into 4Q24 given the high base effect last year, large repayment at wholesale banking coupled with disciplined lending to prevent NIM erosion. This is in line with our 3% estimate,” it explained.
The research house has retained its “buy” call but with a higher target price of RM4.60 from RM4.20 previously, after rolling over our valuation to calendar year 2025.
Similarly, RHB Research has maintained its “buy” call on the counter with a revised target price of RM5 from RM4.80 previously, with 5% FY25 yield.
“AMMB is one of the environmental, social and governance leaders, given its active financing of green property development projects,”it said.
