PETALING JAYA: AMMB Holdings Bhd
(AmBank) could reassess its growth strategy, particularly within its business banking portfolio, if oil prices stay elevated for a prolonged period amid persistent cost inflation.
Sectors such as real estate and consumer-related industries are seen as more vulnerable to a potential slowdown, stated Kenanga Research in a note.
“To preserve earnings sustainability, AmBank intends to further limit exposure to smaller-sized mortgages and focus more on small and medium enterprises (SMEs) with guarantees, while enhancing monitoring of portfolio sensitivity to inflation risks,” it added.
“In the financial year of 2027 (FY27), the optics for growth are more cautious,” the research house said.
“We have not made any changes to our FY27 earnings for now, pending the unveiling for its targets during AmBank’s earnings release for the fourth quarter of FY26 (4Q26) on May 28.”
Kenanga Research further pointed out that headwinds are emerging for the banking group, although near-term impact is limited.
Despite concerns over geopolitical tensions and oil-driven inflation, the group does not expect a material impact on the asset quality or delinquencies in 4Q26.
Moreover, uptake for the recently announced repayment assistance programme remains minimal with the group expecting its full-year credit cost guidance of 20 basis points to 30 basis points (bps) to be achieved.
“On that note, there may be no immediate need to top up its RM484mil management overlay supported by encouraging recovery trends, particularly within its retail SME portfolio, which may even allow for potential writebacks.
“AmBank expects to close FY26 with sustained earnings growth, which we anticipate at 6% year-on-year,” the research house said.
“The group is cognisant of inflationary pressures which could undermine growth strategies, particularly in its business banking segment.
“That said, its impact will likely only become clearer over the coming quarters, especially in terms of target segment performance and asset quality trends,” the research house added.
On the positive side, Kenanga Research said non-interest income is expected to remain supportive for AmBank, with trading income benefiting from ongoing market volatility.
It also said the group is looking to increase client-driven fee income, particularly in foreign exchange and syndication, which are more sustainable over the longer term.
This should help cushion potential net interest margin (NIM) compression, especially as funding costs rise amid increasing competition for shorter-tenure deposits across the market.
Commenting on the upcoming 4Q26 results, the research house expects AmBank to report between RM520mil to RM560mil in earnings, arriving close to its full-year forecast of RM2.12bil.
“Though our NIM projection (about 2%) could potentially disappoint, this could be supported by better-than-expected treasury and investment performances during 1Q26.
“As the group still anticipates credit cost to fall within the guided range of 20 bps to 30 bps, our 26 bps assumption for the year remains valid.”
Looking ahead, Kenanga Research has maintained its “outperform” view on AmBank and a target price of RM7.45 per share.
The research house added that AmBank still looks to maintain its 10% return on equity (ROE) as it continues to balance higher margin SME accounts supported by the rebalancing into cheaper funding sources.
“Assuming AmBank is to pay out its aspired 45 sen dividend at current price points, a yield of about 7% could be expected, making it the highest yield provider among banks.”
However, Kenanga Research noted that every additional 1% ROE adjustment would raise the target price by approximately RM1.05.
