KUALA LUMPUR (Oct 28): AMMB Holdings Bhd (KL:AMBANK) will likely shrug off rising bond yields, and it may be time to start buying shares of the sixth-largest bank in Malaysia again, an analyst said.
The company, which operates the Ambank franchise, is expected to deliver a net profit of up to RM557 million for the September-end quarter, putting it on track to make RM2.15 billion for the financial year ending March 31, 2027 (FY2027), according to Hong Leong Investment Bank.
“With earnings tracking well, we see scope” for an interim dividend of about 15 sen per share, keeping AMMB on course towards its 60% payout target for FY2027 and 6.5% dividend yield, the house said.
Hong Leong Investment upgraded the stock to ‘buy’ on Wednesday, barely a month after cutting its recommendation to ‘hold’, and raised its target price by 20 sen to RM7.00.
Shares of AMMB Holdings have declined over 14% from its record high in August to RM6.30 on Wednesday as banking stocks reel from rising US interest rates and the subsequent ascent of government bond yields. A downgrade by JPMorgan earlier this month added to the woes.
Higher yields generally hurt banks as they take larger paper losses from lower prices of the bonds they hold, which eats into capital and forces them to book losses if they sell. Investors may also demand higher returns on corporate bonds, affecting appetite for new issuances and advisory fees.
Competition for deposits, meanwhile, is intensifying and threatening the cost of funding, Hong Leong Investment flagged. Still, asset quality pressure appears benign, helping to preserve earnings, the house said.
Hong Leong Investment is joining 12 other research houses in recommending AMMB Holdings out of 17 covering the stock. The remaining four have ‘hold’ calls, according to Bloomberg. The average target price is RM7.49.
“Following the recent share price pullback, we see a more favourable risk-reward profile emerging, presenting a decent buy-on-weakness opportunity before a more meaningful re-rating catalyst,” the house said, noting the RM2 billion capital return programme from FY2028 onwards.