This article first appeared in The Edge Financial Daily, on May 4, 2016.

KUALA LUMPUR: Australia and New Zealand Banking Group Ltd (ANZ), the single largest shareholder of AMMB Holdings Bhd (AmBank), has made an impairment charge of A$260 million (RM780 million) for its 23.78% stake in the Malaysian banking group.

“During 1HFY16 (first financial half ended March 31, 2016), the group recognised a A$260 million impairment to its equity accounted investment in AMMB Holdings Bhd, bringing the carrying value in line with value-in-use calculations,” ANZ explained in its financial result announcement to the Australian Securities Exchange yesterday.

The rather massive impairment charges raised eyebrows. Some analysts attributed the write-off provision to the fall in AmBank’s share price, which has shed by roughly a quarter. The banking stock had been hovering between RM4 and RM4.50 in 1HFY16, compared with the range of RM6 to RM6.50 in the previous corresponding period.

The provision is also perceived as a preparation for ANZ to hive off its equity stake in AmBank. Speculation is rife that some private equity funds are keen on the shareholding held by ANZ.

Based on yesterday’s closing of RM4.48, ANZ’s stake in AmBank is valued at RM3.21 billion, which is about A$1.07 billion. ANZ paid RM2.58 billion, or an average of RM3.63 a share, for the stake in AmBank almost 10 years ago. The purchase of 716.84 million shares was transacted in two tranches.

The Employees Provident Fund is the second-largest shareholder with a 15.01% stake, followed by Tan Sri Azman Hashim, holding 12.97%.

Others perceived this might be an indication of ANZ expecting some increment on non-performing loan (NPL) provision in AmBank that could result in a dent in the latter’s earnings.

AmBank is among the few local banking groups that have yet to turn aggressive on making provision for NPLs.

The impairment charge of A$260 million is equivalent to about 8% of ANZ’s statutory profit after tax of A$2.74 billion in 1HFY16.