KUALA LUMPUR: AMMB Holdings Bhd's (AmBank Group) third quarter ended Dec 31, 2023 (3Q24) results came in within Maybank Investment Bank Bhd's (Maybank IB) expectations.
Maybank broadly maintained its forecasts but raised its target price to RM5.05 from RM4.75.
This adjustment is based on a marginally higher calendar year 2024 (CY24) estimate price-to-book value of 0.83 times compared to 0.77 times previously, with a forecasted financial year 2025 (FY25) estimate return on equity of 8.7 per cent versus 8.6 per cent before.
"We also raise our FY24 estimate dividend payout ratio to 40 per cent from 35 per cent," it said in a note.
AmBank reported a 3Q24 core net profit of RM408 million, marking an eight per cent year-on-year (YoY) decrease and a 13 per cent quarter-on-quarter (QoQ) decrease.
This brought the nine-month period core net profit to RM1.23 billion, reflecting a five per cent YoY decrease.
Maybank IB said these figures align with expectations, representing 75 per cent and 72 per cent of its full-year forecast and consensus, respectively.
Additionally, the group recognised an additional tax credit of RM538 million out of RM772 million related to its Global Settlement payment of RM2.83 billion in 2021.
However, it utilised this credit to augment its impairment allowances and allocate an additional provision of RM80 million for various anticipated costs.
Maybank IB also noted that AmBank's absolute gross impaired loans (GILs) remained stable QoQ and increased by 11 per cent year-to-date.
The group's GIL ratio stood at 1.60 per cent at the end of December 2023, up from 1.46 per cent at the end of March 2023.
"Given its large tax credit, management took the opportunity to offset this by recognising one-off credit impairment overlays of RM28 million in 3Q24.
"This raised its credit cost to 74 basis points (bps) in 3Q24 from 17bps in 2Q24 and 51bps in 1Q24, but positively, this improved the group's loan loss coverage to 110.7 per cent end-December 2023 from 96.2 per cent end-September 2023. Management guides for sustainable credit cost of 30-35bps moving forward," it said.
With the tax write-back, AmBank's Common Equity Tier 1 (CET1) ratio improved substantially to 13.4 per cent at the end of December 2023, compared to 12.7 per cent at the end of Sept 2023.
Maybank IB said the group's capital ratios are comfortable, leading it to believe that this sets the stage for higher dividend payouts.
Consequently, it raised its FY24 estimate payout ratio to 40 per cent from 35 per cent.