KUALA LUMPUR: AMMB Holdings Bhd (AmBank Group) could post a net loss of RM3.87 billion in the year ended March 31, 2021 (FY21), said Affin Hwang Capital.
This is due to a massive RM1.94 billion impairment in the fourth quarter (Q4), Affin Hwang analyst Tan Ei Leen said.
AmBank Group announced on Wednesday that it had concluded its annual goodwill review and other impairment after taking into account two factors that were previously absent in previous years.
These included the adverse effects of Covid-19 on economic growth and the RM2.83 billion settlement with the Finance Ministry.
"The group will be making a one-time impairment charge of RM1.94 billion in Q4," Tan said in a report today.
The RM1.94 billion included a goodwill impairment charge of RM1.79 billion of its conventional and investment banking business and a RM148 million impairment on carrying value of its investment in an associate company (AmFirst REIT).
Affin Hwang has trimmed AmBank Group's earning per share in FY22-FY23 by 7.6 per cent to 7.7 per cent.
"This was due to the dilution impact of the issuance of 300 million new shares arising from the completion of the RM825 million private placement," Tan said.
She said some marginal off-setting impact of additional interest income could be earned from the placement proceeds.
Tan said AmBank Group's FY21 core net profit would not be impacted as it was an one-off goodwill impairment.
"We maintain a hold call for AmBank Group with a target price of RM3.30 from RM2.90, given a 0.57-59 percentage points enhancement in FY22 to FY23E return on equity through goodwill impairment."
Tan said AmBank Group's dividends were also expected to resume from FY22 as asset quality improved, given a potential return to normalcy of its retail loan book.