PETALING JAYA: AMMB Holdings Bhd’s (AMMB) net interest margins (NIMs) and gross impaired loan (GIL) ratio may be impacted in the coming quarters but this should be softened by pre-emptive provisioning by the group.

       Analysts said this following the release of the bank’s recent results which saw it report a second quarter of financial year 2022 (FY22) core bottom line of RM321mil, up 29% year-on-year, after accounting for net modification gains/losses and impairment of investment in its associate.

       Hong Leong Investment Bank (HLIB) Research said it expected AMMB’s NIM to come under slight pressure due to deposit rivalry and limited scope for further current account savings account (CASA) expansion.

       “Also, lending growth is anticipated to chug along given economic reopening.

       “Separately, GIL ratio is likely to creep upwards but we are not overly worried as AMMB has already made heavy pre-emptive provisioning in FY21 and in our view, credit risk has been adequately priced in by the market,” it told clients in a report.

       It said it also believed the government and Bank Negara would remain supportive in aiding troubled borrowers, limiting a significant deterioration in the bank’s GIL ratio.

       Like HLIB, MIDF Research said it was not expecting further notable growth for AMMB, given upcoming deposit rivalry and limited scope for CASA expansion.

       “We reduce our FY22 earnings forecast by 7% to account for prosperity tax,” it added, referring to the new proposed increased tax for companies beginning next year,” MIDF said.

       However, it said it increased its FY23 and FY24 forecasts by 7% and 8% respectively as it “grows increasingly positive” from the traction being seen in AMMB’s transformation plans.

       “Despite concerns on oil and gas sector newsflow and other pandemic-related setbacks, we believe that AmBank’s conservative overlay stance will be more than sufficient to handle any surprises.

       “Over a longer-term, we remain positive on its return on equity prospects following its goodwill impairment exercise as well as sleek cost-to income ratio,” said MIDF, adding that as a result, it was maintaining its “neutral’ recommendation on the lender, with a higher target price of RM3.20.

       At last look, the stock was down eight sen to RM3.07 apiece, valuing the entire banking group at over RM10bil.

       “While valuations appear to be undemanding, there are no compelling catalysts to re-rate the stock significantly higher,” said HLIB.

       It is maintaining its “hold” call on the stock but with a higher target price of RM3.30, from an earlier RM3.

       AMMB did not declare any dividends for the quarter under review to preserve and build up its capital.