PubIic Invest Research said it remains encouraged over AmBank’s long-term prospects.
PETALING JAYA: AMMB Holdings Bhd
’s (AmBank) shares have rallied following a stellar financial performance, prompting several research houses to raise their target prices for the counter to reflect an optimistic outlook for the bank.
The group saw its shares rise to as high as RM5.21 yesterday before settling at RM5.11, up 10 sen, or 2% from a day earlier.
The country’s sixth-largest banking group on Tuesday reported stronger-than-expected net profit at RM500.2mil for the first quarter (1Q) of its financial year ending March 31, 2025, compared with RM378.37mil in 1Q24.
The group’s revenue remained on par with the year-ago performance at RM1.18bil, compared with RM1.2bil, while earnings per share rose to 15.13 sen from 11.44 sen previously.
In its report, Public Investment Bank Research (PubIic Invest Research) noted that AmBank’s results were slightly ahead of the brokerage’s and consensus estimates of 28% of full-year forecasts, thanks to notably lower provisions due in part to write-backs, as well as improvements in net interest margins (NIMs).
“We remain encouraged over AmBank’s long-term prospects, reflected by these steady improvements on the operational front as the group embarks on a new strategic journey under its Winning Together plans,” PubIic Invest Research said.
Of some concern, however, it noted was the still-elevated incidences of newly impaired loans, though this was tempered by better recoveries.
“We continue to note some encouraging developments in its expected numbers going forward nonetheless, with improvements in net credit costs despite recent worries, and likely margin expansion,” it added.
PubIic Invest Research retained its “trading buy” call on AmBank, with a higher target price of RM5.30, up from the previous RM4.80, while leaving its earnings estimates unchanged.
Maybank Investment Bank Research (MaybankIB Research), which maintained its “buy” call on AmBank, raised its target price for the counter to RM5.95 from RM5.05 after rolling forward the valuation year to 2025 from 2024.
“We have trimmed our loan-growth forecast from 4.5% to 3.5% for FY25, but raised our NIM assumption to 1.85% from 1.79% and lower our credit cost to 25 basis points (bps) from 35bps,” the research house said.
“Correspondingly, our earnings are raised by 2% to 3% for FY25-FY27,” it added.
MaybankIB Research said Ambank’s Common Equity Tier-1 ratio was a comfortable 13.2% as of end-June 2024 and was expected to improve by around 1.5bps by September once it fully implements the foundation internal rating-based approach.
“This would place it in a very comfortable position to raise its dividend payout ratio, which we are upping to 50%, from 42% previously,” it said.
Similarly optimistic about AmBank’s prospects, RHB Research raised its FY25 earnings forecast for the bank by 3% on higher NIM, while FY26-FY27 forecasts were now higher by 1%.
“While NIM had already expanded 10bps quarter-on-quarter, thanks to proactive cost-of-funds management, the group believes NIM still has room to improve further. Its funding mix can be optimised further as term-funding rates are still on a downtrend,” the research house said.
“In terms of deposits, Ambank began repricing down its board rates in July. A pick-up in loan growth, especially in higher-yielding product segments, should allow interest income to expand too,” it added.
RHB Research raised its target price for AmBank to RM5.90, from RM5.50 previously, and reiterated a “buy” call on the counter.
Meanwhile, UOB Kay Hian Research (UOBKH Research) maintained its “hold” call on AmBank with an increased target price of RM4.77 from RM4.28 following an earnings adjustment.
The revised target price is based on 0.77 times FY25 price-to-book value and return on equity of 9.1%.
“We believe that the current risk-to-reward ratio is fair, with the stock trading slightly above its historical mean price-to-book value,” the research house said.
UOBKH Research raised its earnings forecasts for AmBank by 10% for FY25 and 9% for FY26-FY27 on lower net credit cost assumptions.
