Results in line. Posted 4Q17 net profit of RM335.8m (+19.9% YoY, +7.2% QoQ), bringing FY17 net profit to RM1.36bn (+5.2% YoY). FY17 PAT was spot on, accounting for 100% and 102.4% HLIB and consensus estimates respectively.
Deviations
None.
Dividend
Announced higher dividend of 12.6 sen, lifting FY17 dividend to 17.6 sen, translating to 40% payout or 3.4% yield.
Highlights
Against KPIs… Overall, AMMB made last hurdle in 4Q17 in meeting its KPIs, namely ROE, CTI and CET1 target. It only missing PAT growth KPI.
YoY… Net profit of RM335.8m (+19.9%) was led by significant reduction in loan-loss provision (LLP) of RM16.1m (-73% YoY) whilst NOII recovered, surging by 14.1% YoY to RM670.2m.
QoQ… While opex accelerated by +8.2% QoQ, net profit posted a healthy growth of +7.2% QoQ. This is due to NOII (+27.4% QoQ) and other income amounting to RM108m.
YTD… Net profit rose to RM1.36bn (+5.2% YoY) due to higher contribution from associates by +36.7%YoY to RM36.7m, which offset lower NII by -3% YoY despite an expansion in NIM by 4bps to 2.06%.
Loans… Although still below industry, AMMB’s loans rebounded by 3.5% YoY, emanating from growth in SME and mortgage by 10% YoY and 21% YoY respectively. Nevertheless, corporate and auto finance loans continued to slide due to portfolio rebalancing effort.
Deposits… Deposits staged a comeback with +4.1% YoY growth. Fixed deposit and CASA grew +3.6% YoY and +6.1% YoY respectively. CASA composition was stable at 21.1% (-5bps QoQ).
Asset quality… Further recovery with GIL declining to 1.83% from 1.91% in FY16, chiefly from business segment (manufacturing: -95.6% YoY) and construction (-184% YoY). Net credit cost weakened marginally at 19bps, while the loan loss coverage declined from 81.1% to 66.3%. .
Risks
Slower impact from de-risking of auto loan book and lower recoveries to impact bottom line.
Forecasts
We lower our FY18 and FY19 net profit forecast by 11% and 9.6% as we impute lower NOII contribution. We introduce FY20 forecast (+12.2%).
Rating
HOLD (↔)
Despite meeting most of its KPIs, we continue to expect challenging outlook for AMMB. Initiatives made have so far not translated into earnings growth. However, AMMB’s focus on prudent asset quality should be lauded given concern on its on-going weakness in this area.
Valuation
We raise our TP to RM5.20 (from RM5.00) as we roll our ROE into FY19. TP was based on GGM i) ROE of 8.8x ii) WACC of 8.9%. Maintain HOLD.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....