OSK Research said AMMB’s annualised 1QFY11 net profit was 21.5% and 20.2% above consensus and its full-year forecast.
It said on Wednesday, Aug 18 the stronger than expected results were largely driven by: i) lower-than-expected loan loss provision (-33% y-o-y and -38.3% q-o-q), ii) a RM10.2m write-back in financial investments, and iii) further improvement in cost containment measures, which resulted in a 7.2% q-o-q decline in operating expenses and a cost to income ratio of 38.5% versus its full-year implied 41.5% targeted run rate.
The research house said although a longer term expansion in less volatile transaction fee income and a solidifying forex and derivative platform could be the group’s key catalysts for its medium to longer term ROE targets of 15%-18%, the group’s immediate term margins are likely to be pressured by rising interest rates given its high fixed rate loan portfolio and relatively low CASA deposit base.
“Post earnings revision, we have tweaked upwards our TP from RM5.60 to RM5.78 (1.65x FY11 PBV, 12.8% ROE). Despite this upward revision, we are maintaining our NEUTRAL recommendation given the limited upside after the recent share price rally,” it said.
Written by OSK Research
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