RAM Ratings reaffirms AmBank’s AA2 rating

Published on 18 Nov 2019.

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RAM Ratings has reaffirmed AmBank (M) Berhad’s (the Bank) AA2/Stable/P1 financial institution ratings (FIRs) and the ratings of its debt facilities (Table 1).

AmBank is the core subsidiary of AMMB Holdings Berhad – a mid-sized banking group ranking sixth by total assets in Malaysia. With double-digit annual expansion up to FY Mar 2019, the Bank has captured market share in residential property mortgages and SMEs – segments where it used to be under-represented. On the other hand, AmBank’s auto loans continued to decline amid keen competition, weighing down its lending growth to 6% in FY Mar 2019.

At 1.5% as at end-June 2019, AmBank’s gross impaired-loan (GIL) ratio was healthier than some bigger peers’ as well as the industry average (1.6%). A lumpy repayment in 1Q FY Mar 2020 had largely counterbalanced the higher inflow of new impaired loans. Looking ahead, some slippage is likely amid the challenging business conditions and the seasoning of the Bank’s mortgage portfolio, although we do not expect any major impact. 

AmBank has been recording loan impairment writebacks since FY Mar 2014, thanks to strong recoveries. As the latter taper off, especially after the recent disposal of a portfolio of legacy written-off loans, net impairments will normalise, albeit still deemed benign. Meanwhile, the Bank’s GIL coverage ratio (inclusive of regulatory reserves) stood at a comfortable 105% as at end-June 2019.

AmBank’s deposit-funding capabilities lag that of peers in view of a high loans-to-deposits ratio of 95% as at end-June 2019 and a relatively low proportion (20%) of current and savings account deposits. Including other funding sources, the Bank’s loans-to-funds ratio of 84% is more in line with peers’. Its funding and liquidity positions are healthy, with an average liquidity coverage ratio of 182% in 1Q FY Mar 2020 and a net stable funding ratio of 114%.

In FY Mar 2019, AmBank’s core pre-tax profit (excluding expenses for mutual separation scheme and gain on disposal of written-off loans) of RM1.2 bil was 15% higher y-o-y, driven by a larger impairment writeback and loan growth. However, profitability is still moderate, seen in the Bank’s core return on risk-weighted assets of 1.6%, given a relatively thin net interest margin (1.7%) and high cost-to-income ratio (56%). Cost savings from an ongoing group-wide efficiency programme will lend support to AmBank’s bottom line as net impairments normalise.

Relative to its risk profile, AmBank’s common equity tier-1 capital ratio of 11.4% as at end-June 2019 is sound. The ratio does not consider unaudited profit for 1Q FY Mar 2020, including which the figure would have been 11.7%.

Table 1: AmBank’s issue ratings



RM7 bil Senior Notes Issuance Programme (2010/2040)


RM4 bil Tier-2 Subordinated Notes Programme (2013/2043)



Analytical contact
Lim Yu Cheng, CFA, FRM
(603) 3385 2492

Media contact
Padthma Subbiah
(603) 3385 2577


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

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Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

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