AMMB open to merger and acquisition talks

KUALA LUMPUR: AMMB Holdings Bhd, which is seen as a potential takeover target, is open to more merger and acquisition (M&A) talks in a "decreasing pool of opportunity" as the banking sector consolidates further.
Speaking at a press conference after the company's AGM here yesterday, group managing director Ashok Ramamurthy (pix) said the proposed mega merger between CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) materialise, would lessen the number of M&A targets in the market but on a broader view, countries which have a few larger banks have generally done well during financial crisis.
Ashok stressed however, that the group has not received any takeover proposal but is open for an M&A exercise with no specific asset range.
"Should there be an opportunity for us to play a role and add value to shareholders in the consolidating banking sector, we'll always be open to it, but we haven't specifically looked at anything today to address it as we've got our hands full," he said, adding that the group has to work on the integration with Kurnia Insurans (M) Bhd, MBF Card (M) Sdn Bhd and MetLife International Holdings Inc.
Operation-wise, AMMB is targeting a loan growth of between 9% and 10% in FY15, one which analysts have called as over ambitious.
UOB Kay Hian in its research report said that AMMB is overly optimistic with its target, as its consumer loans is likely to grow at a moderate pace of 1% to 2% in FY15. Consumer loans make up 53% of the group's loan base.
Ashok explained that the projection is based on the fact that loan growth is typically double that of economic growth, and should be achievable considering the surprising second-quarter economic growth of 6.4%.
"The first-quarter consumer loan grew faster than expected, and business loan generally grows slower," he said. Ashok however conceded that the group would find a 1% or 2% difference from its target acceptable.
Meanwhile, Ashok expects a drop of 15 basis points in the group's net interest margin for FY15 , as pressure on asset quality increases.
"Net interest margin is clearly under pressure, not just for us, but also the industry, we don't expect it to go away anytime soon," he said.
Ashok said it has seen some impairment in its auto financing segment, while the credit card side has shown early signs of impairment. The property segment is yet to show any signs of needing provisions.
For the financial year ended March 31, 2014, AMMB posted a net profit of RM1.78 billion, an increase of 9.97% against RM1.62 billion in the previous corresponding period.