AMMB in its 1HFY23 results were above expectations on low credit costs, Maybank IG said it maintains its credit cost guidance, which would imply higher credit costs in 2HFY23. Forecasts are maintained and it said will continue to maintain a BUY on the stock.
The banking group’s 2QFY23 core net profit of MYR469m (+63% YoY, +16% QoQ) took 1HFY23 core net profit to MYR873m (+35% YoY) – above expectations at 58%/55% of full-year forecast and consensus. The main variance emanated from still low credit costs of just 24bps in 2QFY23 (20bps in 1QFY23). 1HFY23 net credit cost was 22bps but management maintains its 35-40bps credit cost guidance for FY23. Our forecasts are unchanged with a credit cost estimate of 40bps for FY23.
As for loan growth, the research house notes on the picked up the pace, rising 7.6% YoY and NIM in 1HFY23 improved 12bps YoY. NOII in 1HFY23 declined just 11% YoY, contributing to 1HFY23 operating income growth of 8.7%. Operating expenses rose at a faster rate of 10%, contributing to operating profit growth of 7.7% YoY. Credit cost remained relatively low, resulting in 1HFY23 provisions declining 56% YoY.
In this respect, AMMB had declared an interim DPS of 6sen, representing a payout ratio of 23%. Its capital ratios are recovering nicely and its CET1 ratio would be 12.2% after the dividend payment. The bank is on target to restore its payout ratio to its historical range of 35-40%. Maybank IG forecasts impute a payout ratio of 35%.
