Highlights

MIDF Sector Research

Author: sectoranalyst   |   Latest post: Fri, 22 Mar 2019, 4:56 PM

 

AMMB Holdings Berhad - Bearing Fruit From Cost Rationalisation Initiatives

Author:   |    Publish date:


INVESTMENT HIGHLIGHTS

  • No surprise in earnings
  • Lower OPEX main driver
  • NOII weakness moderated by NII growth
  • Recoveries also boosted earnings
  • Robust loans growth and building liquidity buffer through deposits growth
  • No change to forecast
  • Maintain NEUTRAL with unchanged TP to RM4.50

In line with expectations. The Group posted 9MFY19 earnings which was in line with our and consensus’ expectations. It came in at 76.6% and 74.9% of respective full year estimates.

Earnings growth contributed by lower OPEX. The 3QFY19 and 9MFY19 OPEX fell -11.1%yoy and -9.5%yoy respectively as the benefit from the Group cost rationalisation initiatives continue to bear fruit. Personnel cost for 9MFY19 contracted -4.3%yoy to RM895.4m. The management expects that CI will be kept at below 55% level for FY19.

Weak NOII moderated by NII growth. NOII continue to be affected by the volatile market conditions, falling -2.7%yoy in 9MFY19. Main contributors for the drop were lower fee income and trading income. These contracted -5.1%yoy to RM390.9m and -35.4%yoy to RM111.6m respectively. However, the NOII weakness was moderated by NII increase of +5.0%yoy. This was despite NIM compression.

Recoveries also boosted earnings. The Group registered a lumpy recovery from several of its large corporate accounts in 3QFY19 which resulted in write backs. There were recoveries amounting to RM215.4m vs. RM97.4m in 3QFY18. We understand these were from legacy accounts.

Robust loans growth driven by targeted segments. Gross loans as at 3QFY19 grew +6.0%yoy to RM100.4b. The gross loans growth were led by mortgage which expanded +17.0%yoy to RM29.8b and SMEs

which grew +20.1%yoy to RM18.8b.

Building up buffer. Meanwhile, deposits grew at faster pace at +6.9%yoy to RM106.8b. We understand that this is to build up a liquidity buffer. CASA rose +10.5%yoy to RM22.1b coming from nonretail segment which grew +17.0%yoy to RM10.3%. Fixed deposits (FD) grew +6.0%yoy supported by the +14.8%yoy rise to RM41.0b in retail FD.

Source: MIDF Research - 22 Feb 2019

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