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December 26, 2007 |
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AMBANK BHD: Fitch Maintains 'BB' Rating on Hybrid Securities Fitch Ratings has revised the Outlook on Malaysia-based AmBank (M) Berhad's ratings to Positive from Stable. Concurrently, the agency has affirmed the bank's Long-term foreign currency Issuer Default Rating at 'BBB-' with a Stable Outlook, Short-term foreign currency IDR at 'F3', Individual rating at 'C/D', Support rating at '3' and Support Rating Floor at 'BB'. Fitch has also affirmed the 'BB' rating on the bank's hybrid securities. The ratings reflect the bank's improved, but still weak, balance sheet strength and moderate profitability as well as the benefits from its new strategic partner, the Australian and New Zealand Banking Group Limited (ANZ; ANZ National Bank Limited is rated 'AA-' (AA minus)). With ANZ's involvement in AmBank's strategic direction and operational matters, AmBank's financial strength and market position is expected to improve further over the longer term. Most of ANZ's seconded managerial personnel have been designated to focus on AmBank's retail strategy and risk management. The bank's asset quality has improved considerably over the past two to three years, thanks to its concerted recovery initiatives and write-offs. At end-H1FY08, its gross NPL ratio stood at 7.9% (industry: 6%). Loan loss reserve over NPLs doubled to 65% (industry: 70%) from 30% at end-FY05; the bulk of additional provisions was incurred in FY07 in view of the capital injection by ANZ. Notwithstanding the hefty provisions - which resulted in FY07 being a loss-making year - AmBank's Total CAR remained at 12% thanks to ANZ's capital injection; Tier 1 CAR stood at 6.3% at end-H1FY08. The bank has emerged on a stronger footing as reflected by its lower net NPL to equity ratio of 38% at end- H1FY08 (FY05: 139%). Nonetheless, AmBank's current capital position only permits a modest loan expansion, unless fresh capital is injected. Excluding the one-off hefty provision, AmBank's underlying performance has remained stable, driven by its consumer-led lending activities. This segment, with auto financing being the largest, along with SME lending will continue to be the bank's main growth engine with an increasing emphasis on fee income. However, given that higher loan loss coverage over NPLs is expected, credit costs are likely to limit the bank's profitability in the near term. With a network of 176 branches, 260 ATMs and 56 Electronic Banking Centres, AmBank has a sizeable presence in the consumer market with a notable franchise in car hire-purchase financing. The commercial bank is part of the AMMB Holdings Berhad (AHB) group, whose two major shareholders are AmCorpGroup Berhad (owned by the Non-Executive Chairman, Tan Sri Azman Hashim with 18.1% shareholding), and ANZ with a shareholding of 14.1%. Subject to regulatory approvals, ANZ's shareholding can increase up to 24.9% through the exercise of conversion option attached to the convertible and exchange instruments that it had injected into the group. |
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