Back to square one for RHB, AMMB

PETALING JAYA: With the merger of AMMB Holdings Bhd and RHB Bank Bhd called off, it is now business as usual for both banks that now must strive to improve on their return on equity (ROEs), which are expected to trend below 10% in the near-term, said MaybankIB Research.
“Mergers are proving quite difficult, from the looks of it, with this being the second time in recent years that a proposed merger has been called off; the previous one being the proposed CIMB-RHB-MBSB merger back in 2014.
“We would have been neutral to slightly positive on the RHB-AMMB merger but now that it has been called off, it is back to square one and the focus will be on the operational and financial performance of both banks as they announce their results over the next couple of days,” MaybankIB said.
It maintained its “hold” call on both banks with unchanged target prices of RM5.25 for AMMB and RM5.45 for RHB.
AllianceDBS Research said without the merger, it is back to eight anchor banking groups with RHB ranking fourth by total assets and AMMB, sixth.
“We believe both banks will shift their focus back on their strategic plans, which have been outlined for the year/financial year.”
It gave a “hold” call for RHB with a target price of RM4.90, adding that RHB may still be saddled with some unfinished non-performing loan issues pertaining to the oil and gas sector, which may take a toll on earnings.
For AMMB, it gave a “hold” call with a target price of RM5.40, explaining that green shoots have emerged from strategic initiatives put in place since FY16; while FY17 earnings were testimony of deliveries.
AMMB shares fell 11 sen to close at RM4.59 today, while RHB shares rose 19 sen to RM5.07.