Thursday, September 18th, 2025

AMMB Holdings: Strategic Growth Plan Targets Enhanced Profitability by FY29

Date: October 22, 2024
Broker: Maybank Investment Bank Berhad

Overview of AMMB Holdings

AMMB Holdings is an integrated financial services provider, offering retail banking, wholesale banking, investment banking, and Islamic banking, among other services. The company is implementing a strategic plan to drive growth and profitability over the next five years.

“Winning Together” Strategic Plan (FY24-FY29)

AMMB Holdings has laid out a five-year strategic plan, termed “Winning Together,” aiming to achieve significant growth and profitability improvements by FY29. Key targets include enhancing return on equity (ROE), reducing costs, and increasing dividend payouts.

Key Financial Goals

  1. Improving Dividend Payout

    • The company plans to increase its dividend payout to over 40% by FY29.
    • With a robust capital ratio, AMMB is expected to achieve a 50% payout by FY25, with potential for a 60% payout in subsequent years.
  2. Reducing Cost-Income Ratio (CIR)

    • AMMB aims to lower its CIR to 40% by FY29, down from 45% in FY24.
    • Achieving this will require improving efficiency, especially in the retail banking sector, where the current CIR is 60%.
  3. Increasing Return on Assets (ROA)

    • The plan targets an ROA of 1.1% by FY29, translating to an ROE of 11-12%.
    • Current forecasts indicate gradual improvement, with an ROE target of 9.6% by FY27.

Business Banking as Key Growth Driver

  • The company is consolidating its SME and mid-corporate divisions to form a unified business banking unit.
  • This division is set to drive future growth, with a projected pretax profit growth rate of 17% CAGR for SMEs and 9% for mid-corporates through FY29.
  • By FY29, business banking is expected to contribute 44% of AMMB’s total group pretax profit.

Performance of Retail and Wholesale Banking

  1. Retail Banking

    • Facing challenges from net interest margin (NIM) compression and increased competition in mortgages.
    • AMMB is focusing on improving productivity and asset quality, particularly by selectively lending to higher-yield segments.
    • Despite difficulties, asset quality has stabilized, with provisions adequately accounted for.
  2. Wholesale Banking

    • Growth is targeted through deeper relationships with newly identified corporate clients.
    • The division remains a net provider of funds for the bank, with plans to diversify its asset base to improve yields.
    • Management forecasts a 5% CAGR for pretax profit in this sector over the next five years.

Financial Highlights and Performance Metrics

  • Share Price and Valuation: Current share price at MYR 5.15, with a 12-month target of MYR 5.95, reflecting a 16% upside.
  • Key Financial Metrics (FY23-FY27):
    • Operating income expected to grow from MYR 4.47 billion in FY23 to MYR 5.25 billion by FY27.
    • Net interest margin forecasted to improve slightly, from 1.85% in FY25 to 1.91% in FY27.
    • Core net profit growth is projected at a steady rate, from MYR 1.86 billion in FY25 to MYR 2.09 billion in FY27.

Recent Developments and Performance Indicators

  • NIM Performance: 1QFY25 NIM of 1.89% exceeded the FY25 target of 1.80%, driven by a shift towards more profitable lending.
  • Loan Growth: Although AMMB’s loan book contracted by 1% in 1QFY25, the business banking sector saw robust double-digit growth.
  • Credit Cost: Lower-than-expected credit cost in 1QFY25 (11bps) offers room for improved provisions management, with forecasts for FY25 set at 25bps.
  • Capital Adequacy: The company’s Common Equity Tier 1 (CET1) ratio reached 13.68% by June 2024, with an expected boost of 150-200bps by March 2025 from the Internal Ratings-Based (IRB) framework transition.

Risks and Considerations

  • The strategic plan’s success is subject to several risk factors, including a potential slowdown in the domestic economy, increased competition in deposit rates, and asset quality concerns, particularly regarding exposure to commercial properties.
  • AMMB’s ability to achieve its ambitious ROE and CIR targets depends on favorable market conditions and successful execution of its strategic initiatives.

Conclusion

AMMB Holdings’ “Winning Together” plan outlines a comprehensive strategy to improve profitability, drive growth, and deliver value to shareholders by FY29. With a focus on enhancing efficiency, consolidating business units, and targeting profitable segments, the company is well-positioned to exceed its current financial expectations, though it must navigate a competitive and challenging market landscape.

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