• Keep BUY and MYR5 TP, 18% upside and c.5% FY25F (Mar) yield. We expect AMMB to post a 4QFY24 net profit of c.MYR470m, in line with management’s quarterly run rate guidance of MYR400m. Our forecast, if correct, would bring the FY24 total to MYR1.86bn at the headline level, up 7% YoY. We continue to like AMMB for its solid growth and asset quality metrics, paired with potential dividend upside from its upcoming mid-term strategy refresh slated for later this year.

• NII – loans growth, NIM stability. From a recent meeting with management, AMMB should see loans growth of c.3% YoY in FY24F, driven mostly by the business banking division. Lumpy corporate repayments have been a bane for wholesale banking loans growth YTD, but one such corporate refinanced with unrated bonds, in which AMMB is involved in distributing. We were also guided for stable NIM during the quarter (3QFY24 NIM: 1.79%), and as such, NII could see a decent QoQ performance. Assuming NIM remains at 1.79% (ie 5bps drop YoY), YoY NII in 4Q could be flattish to slightly softer. On a full- year basis, NII will likely be subdued by a YoY NIM compression (>15bps).

• Non-II – decent trading performance. Despite the 10-year MGS yield stability during the quarter, management guided that it had a decent trading quarter in 4QFY24. Additionally, we think fees – eg unit trust, wealth, bancassurance – should also be strong.

• Expecting no drag from costs. After a kitchen-sinking quarter in 3Q, we think operating and credit costs could be more benign in 4Q, barring any seasonality effects on the former. GIL was reportedly stable, and we do not expect large reversals of overlays – especially those flagged for the retail book – as these provisions had just been reinforced in the previous quarter. Looking ahead, management revealed that overlay reversals will only be done on a case-by-case basis – it remains watchful over the household (mid- to-low income segment) and SME sectors.

• We expect a final DPS of 14.0 sen for 2HFY24 (2HFY23: 12.3 sen), bringing the full-year total to 20 sen (ie a 36% payout on our headline net profit assumption, FY23 DPS: 18.3 sen). This is commensurate with management’s indication that the full-year payout should land within the 35-40% range.

• Exciting times ahead. In a recent meeting, management shared some early ideas on its upcoming mid-term strategy refresh (slated for mid-CY24). These include focused initiatives for the retail segment, targeting mass-market wealth, integrated wealth for affluent customers, and potentially, retail brokerage. On the business side, the bank’s targeted growth space will be the mid-sized corporates and SMEs. We expect to hear more details of these aspirations in upcoming briefings and events. AMMB is scheduled to announce its 4QFY24 results on 27 May 2024.

Source: RHB Research - 15 May 2024