• AMMB’s 1HFY3/24 net profit was within our expectation, at 48% of our fullyear forecast.

• We are positive on the qoq NIM rebound of 6bp in 2QFY24, arising from a wider 17bp qoq expansion in gross yield vs. 11bp qoq rise in cost of fund.

• Reiterate Add, given its attractive valuation (CY24F P/E of 7x vs. the sector’s 9.8x) and potential write-back in management overlay.

1HFY3/24 Net Profit Within Our Expectation

AMMB Holdings’ 1HFY3/24 net profit was deemed within our expectation, at 48% of our full-year forecast but above street estimate at 51% of Bloomberg consensus’ estimates. We also regard the interim DPS of 6 sen as in line. 1HFY24 net profit inched up by 1.3% yoy, as 26.2% yoy growth in non-interest income was largely offset by the 7.3% yoy drop in net interest income and 81.4% yoy surge in loan loss provisioning (LLP).

Impressed by a Recovery in 2QFY24 NIM

We laud the ability of AMMB to improve its net interest margin (NIM) by 6bp qoq in 2QFY24, following two consecutive quarters of qoq declines, as we think most banks would experience weak margins in the quarter. We were even more impressed that this was achieved despite a 11bp qoq increase in 2QFY24 cost of fund. The stronger NIM in 2QFY24 was primarily due to the 17bp qoq rise in gross yield, partly coming from the hike in overnight policy rate in May 23. In our view, this also culminated from the bank’s p ush to grow its higher-yielding loans, such as SME loans. The NIM expansion helped AMMB increase its 2QFY24 net interest income by 7.7% qoq, despite a 3.9% qoq rise in total deposits

Projecting An 8.6% Hoh Growth in 2HFY24F Net Profit

We are projecting a net profit of RM921m for AMMB in 2HFY24F, representing a growth of 8.6% hoh (+4.6% yoy). We believe this is achievable as this reflects an average net profit of RM460.5m in 3Q-4QFY24, which is lower than 2QFY24’s net profit of RM469.9m. In addition, the 2HFY24F net profit growth would be supported by our expectation for a recovery in loan growth and stable credit costs, in line with the bank’s guidance.

Reiterate Add on AMMB

We retain our Add rating on AMMB given its attractive valuation of 7x CY24F P/E, which is one of the lowest in the sector. Potential re-rating catalysts include our expected pick-up in loan growth in the 2HFY24F, and potential partial write-back of management overlay (which stood at RM314m at end-Sep 23). Potential downside risks include material deterioration in loan growth and asset quality. We maintain our FY24-26F EPS forecasts but raise our DDM-based TP from RM4.39 to RM4.86 (cost of equity: 10.2%; terminal growth rate: 4%) as we roll over our TP to end-CY24F

Source: CGS-CIMB Research - 23 Nov 2023