Thursday 28 Mar 2024
By
main news image

AMMB Holdings Bhd 
(July 15, RM5.92)
Maintain hold with a lower target price of RM5.97:
AMMB Holdings Bhd held a conference call on July 14 to address the recent news article in the Wall Street Journal (WSJ) on certain accounts in its bank. During the call, chief financial officer Mandy Simpson reassured fund managers and analysts that the group adheres closely to all the regulations imposed by Bank Negara Malaysia, including the Financial Secrecy and Banking Act. She also said that she is not aware of any investigations being carried out on the bank, and if there are any the group will cooperate fully with the regulator. 

In spite of management’s denial of any leak of clients’ account information, we think the WSJ article could have a negative impact on AMMB’s business, although only in the short term. 

We cannot totally discount the possibility of some attrition in AMMB’s depositor base as some depositors may be concerned that their personal details could be leaked. However, we do not think the attrition will be significant. Overall, we are cautious on the earnings outlook for AMMB due to its anaemic loan growth, margin contraction and upturn in credit costs. The group recorded weak loan momentum of less than 2% year-on-year (y-o-y) between June 2014 and December 2014. Its loan base even contracted by 1.6% y-o-y in March 2015. Although we expect loan growth to recover to 7.6% in the financial year ending March 2016 (FY16), this would still be lower than the industry average of 8% to 10%. AMMB’s net interest margins slid quarter-on-quarter in the fourth quarter (4Q) of FY14 and 1QFY15. We advise investors to stay on the sidelines, given the group’s unfavourable prospects. Furthermore, the news in the WSJ would have a negative short-term impact on the stock sentiment. — CIMB Research, July 14

AMMB_fd_160715_theedgemarkets

This article first appeared in The Edge Financial Daily, on July 16, 2015.

      Print
      Text Size
      Share