Core net profit (NP) of AMMB Holdings Bhd (AMMB) fell by -5% on a quarter-on-quarter basis, with weaker net interest income and higher
end-year costs dragging improvements in provisions and non-interest income.
FY23 CNP rose +56% yoy, with stronger net interest income and non-interest income contributing to topline improvement as well as much lower provisions. This offset increased operating expenses and tax, said MIDF Research (MIDF) in a recent report.
AMMB’s net interest margin decline was -31 basis points qoq to 1.82%. It expects net interest margin to remain around this range in the following quarter, buoyed by OPR hike effects.
AMMB ran a unique fixed deposit promotion that involved customers also contributing to current account savings account (CASA), with a series of incentive systems to encourage stickiness.
The overall intention is to convert some of these to priority customers and to shift the balances into wealth management. As a result, in contrast to peers, AMMB’s CASA rose by +5.3% qoq, boasting a CASA ratio of 37.4%.
AMMB’s ability to maintain these CASA balances could provide upside to loan growth and net interest margin, but do note that there was a fair amount of seasonality in 4Q deposit spikes and management is also unsure of the stickiness of such deposits.
“Forecasts revised: FY24F/25F Core NP adjusted by -6%/-9%. To reflect a poorer net interest margin outlook, higher operating expense, as well as weaker NOII balances going forward,” said MIDF.
MIDF maintains the BUY call with a revised GGM trading price of RM4.03. Key downside risks identified by MIDF were the lacklustre non-interest income recovery, sharp net interest margin compression due to inability to maintain CASA, and the higher-than-anticipated operating expenses.
