KUALA LUMPUR (Aug 3): AMMB Holdings Bhd (KL:AMBANK) surged on Monday to a new record as the sixth-largest Malaysian bank by assets flagged a potential release of some RM2 billion in excess capital to shareholders.

Basel III reforms are estimated to lift AMMB’s common equity tier-1 (CET1) ratio — a key measure of a bank’s financial strength and ability to absorb losses — about two percentage points by March 31, 2028 (FY2028), according to analysts who attended the bank’s analyst briefing.

AMMB is weighing options, such as raising its dividend payout and returning the excess capital equivalent to about 60 sen per share, Maybank Investment Bank said in a note. “We are positive on AMMB’s capital management plan.”

Shares of AMMB rose as much as 4.73% to a new high of RM7.08 on Monday. The stock settled at RM7.03, still up 27 sen or 3.99%, after more than 13.28 million shares changed hands.

AMMB has risen more than 11% so far this year, bringing its market capitalisation to over RM23 billion. In May, the bank lifted its dividend payout to 55% with record-high earnings in the recently-ended financial year.

The distribution “should not impact growth prospects, given its CET-1 ratio of 14.8% is ample”, RHB Research said. “In fact, AMMB thinks a sustainable ordinary payout” is 60% of net profit, and expects to double its dividend to 45 sen per share before FY2029, the house noted.

The higher dividend distributions are underpinned by continued balance sheet expansion and “more efficient capital allocation” which strengthened CET1 despite the higher dividend payout, Public Investment Bank added.

Overall, the consensus is bullish on AMMB with 13 ‘buy’, four ‘hold’ and no ‘sell’ calls, according to research houses tracked by Bloomberg. The average 12-month target price is RM7.37.