PETALING JAYA: As earnings visibility strengthens and payout ratios rise, AMMB Holdings Bhd
offers a compelling combination of dividend growth, capital optionality, and valuation upside.
CIMB Research said in a note to clients that its “buy” rating and target price (TP) of RM7.35 on the lender remain unchanged, anchored on a financial year ending March 31, 2027 (FY27) price-to-book value (P/BV) multiple of 1.09 times, although pegging it to an FY28 P/BV of 1.12 times would raise its TP to RM7.80.
CIMB Research said with AMMB now positioning a 60% dividend payout ratio (already reflected in its FY27 to FY29 forecasts) as the new sustainable level, the investment case for AMMB is arguably becoming stronger.
“We have raised our dividend forecasts for FY28 and FY29 to 45 sen from 42 sen and 50 sen from 44 sen, respectively, noting the upside risk of further P/BV multiple re-rating on the horizon.
“While any distribution of the RM2bil to RM2.1bil excess capital above the 60% payout ratio is unlikely within FY27, prospects should improve by FY28, when the Basel 3.1 transition for internal ratings-based banks takes effect on Jan 1, 2028.
“Although AMMB has yet to determine the mode of distribution, we view a multi-year capital return plan with a progressive step-up in ordinary dividends as a more credible pathway than a one-off special dividend.”
It noted that AMMB’s Strategy Day held on July 31 reinforced its capital return–led thesis, underpinned by the group’s optimised and de-risked balance sheet, steady earnings growth, and improved return on assets, which rose to 1.05% in FY26 from 0.97% in FY24.
A key highlight of the Strategy Day was the increase in dividend payout to 55% in FY26 from 40% in FY24, primarily supported by RM2.2bil of common equity Tier 1 capital unlocked through the optimisation of RM15.5bil worth of risk-weighted assets.
CIMB Research said it came away from AMMB’s Strategy Day with three key takeaways.
Firstly, the group now expects to achieve its targeted doubling of dividend per share ahead of the original timeline, with a near-term affirmation likely before FY29.
Secondly, Basel 3.1 could unlock RM2bil to RM2.1bil in excess capital, enhancing prospects for higher shareholder distributions and more capital-efficient growth.
Lastly, AMMB remains on track to achieve its FY29 return on assets (ROA) target of 1.1% by reallocating capital towards higher-ROA segments such as mid-corporates and business banking, which will benefit from lower capital intensity under Basel 3.1.
