KUALA LUMPUR (Aug 28): Shares of AMMB Holdings Bhd is on the rebound today, after a stint of sell-off since Aug 22 resulting in a near 6% in the decline of its stocks, following news of its failed merger with rival RHB Bank Bhd.

Shares of AMMB — the nation's sixth largest bank by assets — opened 2 sen higher today from Friday's close of RM4.43.

At the noon market break, the counter was up 7 sen or 1.58% at RM4.50. The counter pared some gains to trade at RM4.46 at 3.13pm, still up 3 sen or 0.68%, giving it a market capitalisation of RM13.53 billion.

On the other hand, shares of RHB lost 2 sen to RM5.07, valuing the fourth biggest bank in Malaysia at RM20.29 billion.

In a joint statement dated Aug 22, the two parties said they were "not able to reach an agreement on mutually acceptable terms and conditions for the proposed merger", but did not elaborate.

AMMB has denied contingent liabilities as the reason behind the failed merger, including exposure related to transactions linked to 1Malaysia Development Bhd (1MDB).

HLIB Research said in a separate note today that AMMB had cited terms such as pricing and synergies as the reasons instead.

"AMMB explained that it is a norm for banks to incur certain contingent liabilities though banks are not expecting losses from these transactions," said the research house.

It added that the bank had incurred contingent liabilities from two products namely bank guarantee and letter of credit, amounting to RM8.5 billion or 7.4% of total liabilities.

HLIB Research pointed to corporate loans impairment, particularly in the oil and gas and commercial property sector — which comprised 2% and 8%, respectively, of AMMB's total gross loans presently. It, however, said AMMB could still enjoy net recoveries throughout 2018, which has so far lowered its credit costs.

"We feel that AMMB is showing progress towards its top 4 aspiration by 2020. Small and medium enterprise loans spiked 19% on an annualized basis while further net interest margin recovery is in sight owing to gradual shift from fixed deposit into Current Account/Saving Account (CASA).

"AMMB is currently trading at steep discount of 0.78 times price to book value," it said. The research house has maintained a 'buy' call on AMMB's counter, with an unchanged target price of RM5.20.