PETALING JAYA: AMMB Holdings Bhd
’s (AmBank) potential RM2.1bil excess capital release is expected to place it among top industry leaders in dividend appeal, and is projected to push yields to 8% in the financial year 2028 (FY28), says Kenanga Research.
At its Winning Together 2029 (WT29) strategy day, AmBank revealed that new capital rules, set to take effect in FY28, are poised to free up the excess capital through common equity tier one or CET1 improvement.
While it has yet to be decided how the capital will be distributed, Kenanga Research anticipates that it will be staggered for a sustainably higher dividend payout ratio.
“We have at this juncture taken the view that the more than 60 sen per share in excess capital is unlikely to be paid out in one time, to be stretched over the phased-in period of the capital floor, resulting in our own assumption of 12 sen per share additional dividends in FY28.
“This brings the payout ratio to 75% inclusive of the excess capital payout,” the research house said.
The research house added that it expects AmBank’s equity leverage to rise to 9.9 times from its current 9.6 times, which is below the industry average of 10.1 times, and the lowest among internal ratings- based banks.
It forecast that the bank will increase its leverage into high-quality investments, including growing its trading book and non-ringgit investments.
“The bank remains highly focused on its balance sheet growth in business banking, which continues to be justified by strong risk-adjusted returns,” the research house said.
As a result, Kenanga Research has raised its FY27 and FY28 earnings estimates for AmBank by 0.9 and 3.7%, respectively.
It also maintained an “outperform” call on the stock, raising the target price to RM7.75 from RM7.45 previously on slightly better return on equity.
TA Research, meanwhile, maintained its “hold” recommendation, noting that AmBank valuation has already been re-rated from 0.6 times book at launch to one time currently while foreign shareholding has risen meaningfully.
“Updating beta assumptions, we tweaked the target price higher to RM7 from RM6.70,” it said.
The research house pointed out that the bank has lagged behind its WT29 goal of lowering cost-to-income ratio (CTI) to 40% amid inflationary pressures and rising vendor costs.
“Compounding this, AmBank is in the midst of a heavy investment cycle, prioritising modernisation over near‑term CTI gains to build long‑term resilience,” it said, adding that RM700mil has been committed over the WT29 period.
Nevertheless, the research house highlighted that the bank is outperforming targets to double dividends per share to 45 sen by FY29, while its goal to expand return on assets is also on track.
