Kenanga Investment Bank has raised AmBank’s FY2024F earnings following the encouraging quarterly results.

“The group could be a key beneficiary of the ongoing economic recovery from its notable SME loans profile (21%) – asset quality concerns on household sectors aside,” Kenanga said.

It added that the group’s final dividend announcement of 12.3 sen was a positive surprise, compared to AmBank’s historical payout average of 35%, with a full-year dividend of 18.3 sen per share.

AmBank’s full-year net profit of RM1.74 billion made up 103% of Kenanga’s forecast and 104% of Public Investment Bank Bhd’s (PublicInvest) forecast.

Kenanga said the group’s FY2023 total income grew by 12% driven by strong net interest income as loan base grew 9% while net interest margin (NIM) saw a six basis points (bps) expansion.

However, deposit competition has crept up in recent periods, with NIMs contracting 29bps quarter-on-quarter, it said.

As a whole, Kenaga said the bank’s continuing operations reported a 28% increase in earnings but after excluding discontinued operations in AmGeneral and minority interests, net profit for FY2023 was reported at RM1.74 billion (a 16% increase).

Risks to its calls include a higher-than-expected margin squeeze, lower-than-expected loan growth, deterioration in asset quality, slowdown in capital market activities, currency fluctuations, and changes to the overnight policy rate (OPR).

Meanwhile, RHB Investment Bank and PublicInvest repeated most of Kenanga’s points, both placing “buy” calls on AmBank.

RHB added that AmBank’s inexpensive valuation and positive earnings momentum bode well for investors.

“A solid loan pipeline, improving CASA (current account and savings account) mix, and stronger non-II (non-interest income) offers opportunities for earnings reprieve given an uncertain NIM trajectory,” the research house added.

At the close of trade, AmBank’s share price was up 1.71% or 6 sen at RM3.57, giving it a market capitalisation of RM11.83 billion.