KUALA LUMPUR (May 31): AMMB Holdings Bhd (AmBank) said it has adequate provisions to cover its exposure to "two specific" troubled oil and gas (O&G) players, supported by the overlay provisions it has been making since 2020.

At the bank’s media briefing following the release of its result for the financial year ended March 31, 2022 (FY22), AmBank group chief executive officer Datuk Sulaiman Mohd Tahir said the group has been taking significant overlay provisions since the start of the pandemic, as prudential measures.

“Some of these provisions are now being utilised against the O&G exposure that we have been mentioning since last quarter’s update.

“The impairment charge of RM766 million was 33% lower this year, due to reversals of both forward-looking and partial utilisation of our central overlay provisions, which offset the provision charges that we have for our O&G exposure totalling RM747 million,” he said.

Asked if the provisions already made would be enough to cover the bank’s O&G exposure, AmBank group chief financial officer Jamie Ling said the group has provided up to 83% of its total exposure for O&G.

“We have provided up to 83% of our total exposure for O&G — for the two specific [companies]. From that perspective, we have drawn the line around that episode. 83% is one of the highest cover levels for this, so we are confident that it’s adequate,” said Ling.

To recap, AmBank has exposure to the financially distressed Sapura Energy Bhd and Serba Dinamik Holdings Bhd.

Sapura Energy is currently in negotiations with creditors for a proposed scheme of arrangement as part of its debt restructuring plan, after receiving winding-up petitions as its cash flow was strained due to non-performing projects, while financial obligations piled up.

The integrated upstream service provider has secured a restraining order against its creditors, which lasts three months from March 10 to June 9.

At end-January 2022, Sapura Energy had short-term borrowings of RM10.66 billion, which included long-term debts that was recategorised after breaching certain covenants. This was against cash equivalents of RM717.75 million.

Meanwhile, Serba Dinamik Bhd posted its largest net loss to date of RM434.19 million for its third quarter ended March 31, 2022 — its third consecutive quarter in the red.

The cash-strapped company is currently in court, seeking a restraining order against creditors of its subsidiaries, as it plans to engage with creditors for a proposed scheme of arrangement that it anticipates will provide “100% return” to its creditors.

AmBank’s share price rose 21 sen or 6.1% to close at RM3.64 on Tuesday (May 31), giving it a market capitalisation of RM12.06 billion.