HLIB Research anticipated that the banking group’s loan growth will gain momentum in 2Q25.
PETALING JAYA: AMMB Holdings Bhd
is expected to maintain resilient profits in the upcoming quarter, backed by sequential net interest margin (NIM) expansion, faster loan growth and steady non-interest income (NOII).
“AMMB is guiding for a full financial year 2025 (FY25) NIM expansion of 11 basis points (bps) versus our forecast of five bps,” noted Hong Leong Investment Bank (HLIB) Research.
The banking group’s NIM expanded 10 bps sequentially in the first quarter of FY25 (1Q25) due to lower cost of funds.
This trend is expected to persist heading into 2Q25, albeit with a smaller increase, as AMMB optimises funding cost and embraces discipline pricing strategy.
“Furthermore, management has been focusing on growing its higher margin segment like business banking and has turned selective in mortgage origination,” the research house said.
HLIB Research anticipated that the banking group’s loan growth will gain momentum in 2Q25 versus 1Q25’s 2.9% year-on-year (y-o-y) increase.
“Separately, the bank could also experience resilient sequential NOII performance coming possibly from larger treasury gains due to the robust fixed income market.”
It pointed out that the average 10-year Malaysian Government Securities yield was hovering at the 3.77% level in July to September versus 3.91% in April to June.
“Overall, we raise FY25-FY27 bottom line forecasts by 8%-9%, after pencilling in higher NIM and NOII assumptions.”
The research house believed that significant asset quality weakness requiring substantial provisions is unlikely, given the bright outlook for the local economy.
It noted that AMMB has made adequate provisions, highlighting elevated loan loss coverage (LLC) for the group’s retail, business and wholesale banking segments at 90%, 87% and 289%, respectively.
“Besides, loans under observation have fallen further in 1Q25 and the level of allowance made was conservative at 22%, similar to Stage 3 loans of 29% (versus Stages 1 and 2 of 1%).
“Moreover, the overall group’s LLC of 89% is high compared to pre-pandemic level of 65%,” it said.
HLIB Research found AMMB’s risk-reward profile is tilted to the upside despite the recent price increase.
“Besides, the adoption of the foundation internal rating-based model in August could potentially lift its common equity tier 1 ratio by 1.5 to two percentage points, creating scope for a larger dividend payout,” the brokerage added.
