Thursday, November 17, 2011

HDBSVR maintains Hold on AMMB, target price RM6.70

KUALA LUMPUR (Nov 17): Hwang DBS Vickers Research (HDBSVR) is retaining its Hold rating and RM6.70 target price for AMMB HOLDINGS BHD [] based on 15.5% returns on equity, 6% growth and 11.5% cost of equity.

It said on Thursday that AMMB's 1HFY12 profit was 51%/53% of its/consensus' estimates. Non-interest income was the main earnings driver, led by markets (treasury) segment as the bank lightened its fixed income portfolio to take advantage of the lower yield environment.

'These are expected to inch down in 2HFY12. NIM improved because loans grew ahead of deposits.

'We understand competition for deposits remains intense, and there could be further NIM pressure ahead. AMMB said that its balance sheet is still biased towards a rate hike,' it said.

HDBSVR said the variable rate loans are now 53% of total loans vs 47% a year ago.

'We trimmed loan and deposit growth to 8% each from 12% and 10%, respectively, so loan-to-deposit ratio remains at about 90%. 6MFY12 loan growth was only 2% while deposits growth was flat, but this could build up in 2HFY12 led by the corporate & investment banking business,' it said.

HDBSVR said its earnings estimates are little changed after this adjustment.

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