RAM Ratings reaffirms ratings of AMMB Holdings and banking entities

Published on 27 Nov 2020.

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RAM Ratings has reaffirmed AMMB Holdings Berhad’s (the Group) AA2/Stable/P1 corporate credit ratings and the AA2/Stable/P1 financial institution ratings of its banking subsidiaries – AmBank (M) Berhad, AmBank Islamic Berhad and AmInvestment Bank Berhad. Concurrently, the ratings of the entities’ sukuk/debt facilities have also been reaffirmed (Table 1). Despite AMMB’s structural subordination as a non-operating holding company, the ratings are equated to those of its banking subsidiaries, reflecting its debt-free status at holding company level. 

The reaffirmed ratings are premised on our view that AMMB will be able to weather the repercussions of the COVID-19 pandemic. Although its asset quality and earnings are expected to slip, the Group’s credit metrics are envisaged to remain commensurate with its ratings. AMMB is entering this crisis with healthy asset quality; its gross impaired loan (GIL) ratio stood at 1.7% as at end-June 2020. The Group’s ratings are also supported by its sound capitalisation, which is anticipated to adequately absorb greater provisioning needs arising from heightened credit risk.

AMMB’s GIL ratio is healthier than some of its bigger peers’, despite being marginally above the industry average of 1.5%. Extended payment relief assistance and loan restructuring are currently offered to borrowers that need further support after the expiration of the initial six-month deferment. That said, loan defaults are likely to rise - particularly after all the relief measures end - although the severity will depend on the strength and speed of the country’s economic recovery. As the situation is still very fluid, AMMB has been pre-emptively setting aside additional provisions; this is expected to continue in the coming quarters. The Group’s credit cost ratio climbed up to 31 bps in FY Mar 2020, followed by an annualised 16 bps in 1Q FY Mar 2021 (FY Mar 2019: -2 bps, adjusted for non-recurring item).  

The Group’s loans-to-deposits ratio had eased to 93% as at end-June 2020 (as at end-June 2019: 97%). Including other funding sources, its loans-to-funds ratio would come up to 85% - in line with its peers’. Concurrently, AMMB’s proportion of current and savings account deposits had grown to 27%, although still a shade below the industry’s 29%. While we note that the recent improvement was partly underpinned by the automatic loan moratorium, this ratio has been rising gradually through the years (end-March 2017: 21%). Given the uncertain operating climate, AMMB intends to maintain its excess liquidity buffer in the near term; its liquidity coverage ratio clocked in at a high 161% as at end-June 2020.

AMMB’s core pre-tax profit (i.e. excluding gains on disposal of written-off loans the previous year) slipped 1.5% to RM1.8 bil in FY Mar 2020. Stronger income from healthy loan growth as well as better cost-efficiency had been offset by heftier provisions. Its 1Q FY Mar 2021 net interest income was also tempered by a RM58 mil net modification loss. Overall, the Group’s profit performance is deemed moderate, with a core return on risk-weighted assets of 1.7% in FY Mar 2020 (FY Mar 2019: 1.8%) amid a relatively thin net interest margin (NIM) of 1.8%. Similar to its peers, AMMB’s near-term earnings are envisaged to be constrained by higher impairment charges and further NIM compression – although to a lesser degree. 

Relative to its risk profile, AMMB’s common equity tier-1 capital ratio of 12.5% as at end-June 2020 is deemed sound. This does not take into account its unaudited profit in 1Q FY Mar 2021, which would have contributed another 0.3 percentage points. Meanwhile, plans are afoot to adopt the Foundation Internal Ratings-Based Approach, with the formal transition likely to take place by March 2022. Based on the Group’s numbers as at end-August 2020, the adoption will add roughly 150 bps to its CET-1 capital ratio on a pro forma basis.

Table 1: Issue ratings of AMMB’s banking entities



AmBank (M) Berhad

RM7 billion Senior Notes Issuance Programme (2010/2040)


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


AmBank Islamic Berhad

RM3 billion Senior Sukuk Musyarakah Programme (2010/2040)


RM3 billion Subordinated Sukuk Murabahah Programme (2014/2044)



Analytical contact
Wong Yin Ching, CFA
(603) 3385 2555

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.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

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

Published by RAM Rating Services Berhad
© Copyright 2020 by RAM Rating Services Berhad

Rating Rationale: AMMB Holdings Berhad

Rating Rationale: AmBank (M) Berhad

Rating Rationale: AmBank Islamic Berhad

Rating Rationale: AmInvestment Bank Berhad

Ratings on AMMB Holdings Berhad