AMMB Holdings Bhd
(Jan 30, RM6.28)
Maintain hold with lower target price (TP) of RM6.70: AMMB has guided for low single-digit loan growth with circa 15 basis points (bps) net interest margin squeeze, 15 bps credit cost, still fairly high loan-to-deposit ratio circa 14% return on equity, higher year-on-year non-performing loan ratios, among others.

The scene is unlikely to change going into its financial year ending March 31, 2016 (FY16), in our view, as AMMB continues to be selective in writing loans and further pressures on deposit costs are surfacing.

AMMB officially announced that its group managing director Ashok Ramamurthy will be stepping down. It was also announced that the other three senior management personnel, said to be leaving the bank, will continue to serve in accordance to their contracts.

AMMB tends to be in the limelight when it comes to potential changes in shareholders. We believe ANZ is committed to this franchise as this is probably the only one of its operations where it has strong management control. That said, we would not discount any significant changes in its shareholding structure. Possible changes at the shareholders’ level could ignite a rerating of the stock. — AllianceDBS Research, Jan 30

This article first appeared in The Edge Financial Daily, on February 4, 2015.