1HFY22 core PATAMI of RM707.6m (+18% YoY) is within expectations with 2HFY22 anticipated to be slightly slower. Management believes its earnings target is on track for FY22 but remain cautious of potential bumps from further provisioning on specific accounts and prosperity tax. Maintain MP and our GGM- derived PBV TP of RM3.15.

1HFY22 broadly within. 1HFY22 PATAMI of RM707.6m is deemed to be broadly within expectations. It made up 58%/56% of our/consensus full-year estimate. 2HFY22 could be softer no thanks to further specific allowances and tax provisions. No dividends were declared, as expected.

YoY, 1HFY22 total income improved by 5% to RM2.33b on the back of stronger NII (+18%) fuelled by 5% loans growth and NIMs of 2.04% (+27bps) while NOII decreased (-18%) mainly on lower treasury performance. CIR narrowed to 43.3% (-4.4ppt) against more optimised operating cost (-5%). Concurrently, we saw credit cost easing to 61bps (-14bps) as pre-emptive measures softened provisioning needs. All in, 1HFY22 PATAMI reported at RM707.6m (+18%).

QoQ, 2QFY22 total income reduced by 8% as both NII (-6%) and NOII (-13%) declined from normalising NIMs (2.0%, -9bps) and fewer fees and trading income. Operating expenses rose by 4% but was offset by less impairment booked (-14%). Overall, the weaker top-line led 2QFY22 PATAMI to RM321.0m (-17%).

Key briefing’s highlights. With the current progress of our economic recovery, management believes that the group is on track to achieve its RM350m PATAMI per quarter ambitions. The impact from URUS is expected to be immaterial looking at the slow application inflows. On the flipside, management is selectively guarded in the oil & gas segment on certain accounts which may be at risk. Additionally, the impact of prosperity tax may be more proportionate towards FY22 than FY23 owing to the group’s financial period. Recall that management expects a net impact of RM130m-RM140m from this one-off tax. This may affect the group’s decision on dividends in the near-term. Other FY22 guidances remain unchanged.

Post results, we make some minor earnings model updates.

Maintain MARKET PERFORM and TP of RM3.15. Our TP is based on an unchanged CY22E GGM-derived PBV of 0.62x (1.0SD below 5-year mean). At current price points, we believe the risk-to-reward for AMBANK is well balanced. As the group moves past the Global Settlement and kitchen sinking saga, investors may relook the stock as it regains fundamental stability. That said, it currently offers less comparable returns in relation to its large-cap peers but could be well appreciated if it builds on its strong asset quality (GIL <2%) and registers strong recovery traction.

Risks to our call include: (i) higher/lower-than-expected margin squeeze, (ii) higher/lower-than-expected loans growth, (iii) better/worse-than-expected deterioration in asset quality, (iv) improvement/slowdown in capital market activities, (v) favourable/unfavourable currency fluctuations, and (vi) changes to OPR.

Source: Kenanga Research - 29 Nov 2021