KUALA LUMPUR (Nov 28): AMMB Holdings Bhd (KL:AMBANK) could potentially deliver higher-than-expected dividends thanks to its stronger capital position and earnings growth, analysts flagged on Thursday.
Dividend per share declared so far has reached 10.3 sen, sharply higher than the six sen declared in the same period last year, which puts the country’s sixth-largest bank by assets on track to hit the consensus expectations of 26 sen by the end of the financial year ending March 2025 (FY2025).
“With higher capital base, we believe the group would take a more generous stance on dividends,” said Kenanga Investment Bank, noting that the adoption of the foundation internal ratings-based approach, in particular, boosts its capital ratio and brightens the outlook for dividend.
The research house expects AMMB to distribute 29 sen per share for FY2025, which would still sustain its common equity Tier 1 capital and provide the company “comfortable balance for further capital management”. Kenanga maintained its ‘outperform’ call on the stock.
Shares of AMMB have climbed 35% so far this year, tracking strong gains in the sector. Banking stocks, as proxies to the country’s improving economic growth outlook, have rallied this year, benefiting from a recent surge in foreign inflow.
AMMB has 11 ‘buy’, five ‘hold’ and no ‘sell’ calls among the research houses covering the stock. The consensus 12-month target price is RM6.04, according to Bloomberg, implying potential upside of 12% from current price of RM5.40.
Despite the rally, AMMB’s valuations remain “relatively undemanding”, said Hong Leong Investment Bank and maintained the stock on ‘buy’ call. The research house noted that its target price of RM6.15 is based on premium valuations justified by its return-on-equity that will be above historical levels.
Beyond the dividends, earnings in FY2025 are expected to be bolstered by a strong investment banking pipeline, a more stable net interest margins, 5% loan growth and continued provision write-back, said TA Securities.
“Asset quality remained solid, supported by sufficient loan loss coverage and overlay buffers,” the research house added. “AMMB has successfully strengthened its balance sheet, which is evident by improving capital ratios and raising dividend payout.”
The common equity Tier 1 capital ratio — a measure of a bank’s capital strength based on the highest quality of regulatory capital — came in at 15.29% based on the new approach.
Net profit for the second quarter ended Sept 30, 2024 (2QFY2025) was RM500.57 million or 15.14 sen per share. Year-on-year, net interest income edged up 6.8% and Islamic banking income gained 41%, while non-interest income, such as fees and commissions, fell 24%.