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KUALA LUMPUR: Shareholders of AMMB Holdings Bhd are set to receive a higher dividend this financial year ending March 31, 2020 (FY20), based on the group’s guidance of a dividend payout ratio of 40-45% of its profit.
“(This is) the first year (after four years) that we’re giving more than 40%,” group CEO Datuk Sulaiman Mohd Tahir told a press conference after the group’s AGM and EGM here today.
Its FY19 dividend payout ratio was 40%, in line with its guidance of circa 40%. In fact, AMMB’s dividend payout ratio has been consistent at 40% from FY17 to FY19, and 36% in FY16.
Its FY20 guidance includes loan growth of 6%, return on equity (ROE) of 9%, cost-to-income (CTI) ratio of 52.5% and below, as well as common equity tier-1 (CET-1) ratio of 11.5% ±1%. For comparison, it reported loan growth of 5.7% in FY19, ROE of 8.8%, CTI ratio of 54.3% and CET-1 ratio of 11.9%.
As it approaches the final leg of its top four transformation journey (ending in FY20), Sulaiman said AMMB has in most instances achieved the top three spots in terms of growth rates.
The top four aspirations are to be top four in each of its top four growth segments of mass affluent, affluent, SME and mid corp; to be top four in each of its four focus products of cards, transaction banking, markets and wealth management; to sustain top four in each of its current engines of corporate loans, debt capital market, asset management; as well as to be among the top employers in Malaysia.
“In a lot of key financial metrics along the lines of segments, we’re number one, two and three. It sets a platform for us so that the growth is about driving the bank and ensure it continues to drive a capital-accretive business,” said Sulaiman, adding that these translate to improvement in its earnings.
He said the top four strategy has been successful and AMMB has evolved from previously focusing on hire purchases and corporates to now being known as an SME (small and medium enterprise) bank, business bank and known to have improved its current and savings account (casa) business, all which are path that can drive the sustainability of the bank.
“In terms of size, we’re still number six but in terms of driving value for shareholders and profitability, today we’re number one from an earnings perspective from our FY19 performance,” said Sulaiman.
He said the most valuable companies may not have the biggest base and companies that have the biggest assets may not necessarily create the most value as the “composition” of assets comes into play.
AMMB has reshaped its balance sheet which saw the SME business grow 21% in FY19. Casa grew 22%, deposits went up 12%, with total shareholders’ return of 21% during the year. Among others, Sulaiman cited AMMB’s SME growth of 21% and total shareholders’ return of 21% as among the highest in the industry in its respective segments.
“The whole idea is to drive growth and growth is where, from the shareholders perspective, you see value.”
Sulaiman said AMMB is targeting its FY20 loan growth to come in at 6% versus the industry’s 4.5-6% as it expects steady flow of loan disbursements of RM20 billion to SMEs in the next three years.
WASHINGTON, July 31 — US labour costs rose at their slowest pace in 1-1/2 years in the second quarter, the latest indication of benign inflation that could allow the Federal Reserve to cut interest rates today for the first time in a decade. The…
PETALING JAYA: Bank Negara Malaysia (BNM) has given the green light to RHB Bank Bhd to begin negotiations with Tokio Marine Asia Pte Ltd for the proposed disposal of its stake in RHB Insurance.
In a filing with Bursa Malaysia, RHB Bank said the approval is valid for six months from July 29, 2019. The bank is looking to sell up to 94.7% of its equity interest in RHB Insurance.
Pursuant to the Financial Services Act 2013, the relevant parties will need to obtain the prior approval of the Finance Minister with the recommendation of BNM, before entering into any definitive agreement for the proposed disposal.
“Accordingly, a detailed announcement on the proposed disposal will be made upon execution of the definitive agreement(s) for the proposed disposal,” said RHB Bank.
Hong Leong Investment Bank (HLIB) Research said the proposed disposal will not have any material impact to RHB Bank’s earnings as the insurance arm only contributes about 2-3% to its bottom line.
“Also, we believe RHB Bank can easily plug the hole through potential bancassurance distribution agreement with Tokio Marine, since they both already have an existing working relationship for life insurance products,” it said in its report today.
It said that the cash proceeds could also be ploughed back into the bank’s commercial banking operations, reinvested in debt securities to generate returns or distributed as special dividends.
According to HLIB Research, the commencement of talks is not surprising, as RHB Insurance is a non-core asset for the bank and talks of disposal had surfaced since 2015-2016.
“Overall, we welcome the potential sale effort considering RHB would then be able to focus more on growing its core banking businesses. That said, details of the deal are limited for now.
“If we were to assume management is capable of fetching 2.35 times P/B for its insurance unit (in line with the historical average M&A transaction involving Malaysian insurers), RHB Bank is poised to book in disposal gains of RM700 million to RM800 million (based on December 2018 data),” it added.
HLIB Research maintained its forecasts and “buy” call on RHB Bank, with an unchanged target price of RM6.45.
“We continue to like RHB for its appealing risk-reward profile given strong CET1 ratio of 16.1% (versus sector’s 13.4%), which allows room to divvy even more; we note that RHB Bank’s current dividend payout ratio of 36% is still below the sector average of 45% (at this level, dividend yield of about 5% would make RHB Bank an even more attractive stock to own),” it said.
On Bursa Malaysia today, RHB Bank was among the top gainers, closing 1.10% or 6 sen higher at RM5.50 on volume of 4.64 million shares.
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