ANALYSTS: GLOBAL SETTLEMENT WILL IMPACT AMMB HOLDINGS' EARNINGS IN FY21

KUALA LUMPUR, March 2  -- Maybank Investment Bank Bhd (Maybank IB) has retained a “hold” call on AMMB Holdings Bhd on the back of RM2.83 billion Global Settlement with the Ministry of Finance related to the 1Malaysia Development Bhd. 

The investment bank said the Global Settlement would impact AMMB Holdings’ earnings in financial year ending March 31, 2021 (FY21) but positively, the banking group’s capital was adequate, fundamentals were intact and the impact to earnings was one-off.

“Moreover, plans in the pipeline could restore Common Equity Tier 1 to 12.4 per cent on a proforma basis in financial year ending March 31, 2022 (FY22) by our estimates,” it said in a research note Tuesday.

AMMB Holdings Bhd's net profit for the third quarter ended Dec 31, 2021 fell to RM263.83 million from RM382.15 million in the same quarter a year ago, while revenue slipped to RM2.09 billion, down by 2.2 per cent, while basic earnings per share was at 8.77 sen from 12.71 sen previously.

Maybank IB said AMMB management continued to guide for credit cost of 80-100 basis points for FY21, which implies higher provisions in the fourth quarter (4Q) in the banking group’s retail and oil and gas book.

“Also, there are additional costs such as legal fees to be incurred and the cost/income ratio is expected to be a higher 49 per cent in 4Q compared to 48 per cent for the nine-month period of FY21, while non-interest income is estimated to be lower quarter-on-quarter,” it added.

Maybank IB said its FY21 forecast factored in the RM2.83 billion settlement with core earnings unchanged and also assumed no dividend payment for FY21 and FY22 for now.

Similarly, MIDF Research said the Global Settlement would have deep impact on AMMB Holdings’ FY21 earnings and to investors’ sentiment.

“The Global Settlement will lead to lower capital and hence, lower book value per share (BVPS) and we expect that its share price will face short-term selling pressure,” it said.

MIDF Research maintains “trading sell” call on AMMB Holdings with unchanged target price of RM2.75 based on pegging its FY22 BVPS to price by volume of 0.5x.

“A re-rating catalyst will be faster than expected accretion of loss capital,” it added.

 Trading of AMMB Holdings’ shares were suspended since Monday after the banking group agreed to pay RM2.83 billion to the government as settlement on all outstanding claims and actions in relation to its involvement in the 1MDB transactions.

The shares were last traded at RM3.16 last Friday.

-- BERNAMA