HLIB upgrades AMMB to Buy on earnings resilience, 6.6pct dividend yield

KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research has upgraded AMMB Holdings Bhd to "Buy" from "Hold", citing resilient earnings, attractive dividend prospects and an improving shareholder-return outlook.

HLIB raised its target price for AMMB to RM7 from RM6.80, implying 11.1 per cent upside from the current share price of RM6.30, excluding dividends.

Including an estimated dividend yield of 6.6 per cent, the revised target price offers a potential total return of 17.7 per cent.

"Following the recent share price pullback, we see a more favourable risk-reward profile emerging, presenting a decent buy-on-weakness opportunity before a more meaningful re-rating catalyst driven by the RM2 billion capital return program from FY28 onwards," the firm added.

HLIB said AMMB was well-positioned to deliver a net profit of RM514 million to RM557 million for the second quarter of the financial year ending March 2027 (Q2 FY27), bringing first-half net profit to RM1.03 billion and RM1.08 billion, or about 48 per cent to 50 per cent of its full-year earnings forecast.

It said stronger net interest income should help cushion weaker non-interest income amid a challenging operating environment.

However, volatility in Malaysian Government Securities (MGS) yields could weigh on non-interest income due to mark-to-market losses on the bank's financial instruments.

HLIB estimates that a 30-basis-point rise in MGS yields could cause AMMB to incur RM91.5 million in trading losses, equivalent to 4.2 per cent of its projected FY27 net profit.

However, the bank's US dollar-denominated interest-rate swap hedges were expected to partially offset the impact, while its net interest income was likely to provide further support.

HLIB also expects net interest margin (NIM) to ease marginally from 1.93 per cent in Q1 FY27 as deposit competition keeps funding costs elevated.

AMMB's asset quality remains stable, with no major signs of borrowers struggling to repay their loans. This should help the bank keep potential loan losses under control and protect its earnings.

The research firm additionally expects AMMB to potentially declare an interim dividend of about 15 sen per share alongside its second-quarter FY27 results, provided its earnings remain on track.

HLIB estimates AMMB could offer a dividend yield of around 6.5 per cent in FY27, making the stock attractive to investors seeking regular dividend income.