AMMB Holding Berhad - Within expectations

Period    4Q12

Actual vs.  Expectations

 FY12 PAT of RM1,511m was within the consensus’ forecast (99%) and that of ours (95%). 

Dividends   Proposed a single-tier final dividend of 13.5 sen.

Key Result Highlights

 4Q12 net interest income contracted 4.4% QoQ and 8.3% YoY to RM504.9m. QoQ, net interest margin was squeezed by 12bps while there was just a moderate 1.7% loan growth in 4Q12.  

 We note that non-interest incomes were still strong despite a tough capital market in 4Q12. The noninterest income of RM518.2m (+4.5% QoQ and +26.2% YoY) contributed 51% of the total income in 4Q.  

 The group has maintained its focus on growing the targeted segments and is making steady progress in rebalancing its loans and deposits portfolio with loans growing by 5.7% on a YoY basis to RM77.7b. The fastest-growing segments were RM15.8b Business loans (+14.9% YoY) and RM14.5b Corporate loans (+13.5% YoY). RM48.2b Consumer loans grew only +1.6% YoY.

 Deposits meanwhile grew 3.9% YoY. The total deposits of RM84.4b consisted of 15.4% CASA. The stronger loan growth in 4QFY12 has led to a 220bps increase in the LDR to 89.6% vs. 87.4% in FY11.

 Gross impaired loans fell to RM1.9b with a gross impaired ratio improved to 2.45% (from 3.33% in FY11).  Loan loss coverage meanwhile hit a high at 112.6%. The group reported loan loss charges of RM128m or a credit charge at 56bps in FY12.

 Cost was well managed with a cost-to-income ratio of 40% in the year. 

 In summary, the achieved 14.1% ROE was in line with management’s guidance.

Outlook   The group has unveiled its new medium term aspiration for FY13-15, with a PAT growth target in the 9%-12% (CAGR) range with loan growth of 8-9% and ROE target in the 14%-15% range.  We believe these targets are reasonable and achievable supported by a projected dividend payout ratio in the range of 40%-50%.

Change to Forecasts

 We are maintaining our FY13E PAT of RM1,791.3m.

Rating  MAINTAIN OUTPERFORM

 Our OUTPERFORM rating is maintained as the current share price implies a 13.0% total upside (together with a 5.0% net div yield).

Valuation    We are keeping our target price of RM6.70 unchanged based on 1.6x the FY13 BV of RM4.16.

Risks   Tighter lending rules and a margin squeeze.

Source: Kenanga