RAM Ratings upgrades AMMB Group’s ratings to AA2/P1

Published on 02 Oct 2023.

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RAM Ratings has upgraded AMMB Holdings Berhad’s (AMMB) long-term corporate credit rating and the long-term financial institution ratings of its banking subsidiaries to AA2/P1 from AA3/P1. Concurrent with the upgrade, the outlook on all the ratings has been revised to stable from positive. We have also assigned ratings to AmBank (M) Berhad’s Proposed RM8 billion Subordinated Notes Programme, which allows for the issuance of Additional Tier-1 Notes and Tier-2 Notes (see table).

The upgrade reflects the Group’s stronger capitalisation following a series of decisive corporate measures as well as broadly sustained key credit metrics. These efforts – including a private placement and the sale of AMMB Group’s general insurance outfit – restored its common equity tier-1 capital (CET-1) ratio to the pre-1Malaysia Development Berhad settlement level of 12.6% as at end-June 2023 (without transitional arrangement) compared to 10.4% as at end-March 2021. The sturdier capitalisation provides an improved loss absorption buffer and a more comfortable base for further growth. 

The Group’s asset quality is healthy despite a higher formation of new impaired loans in 1Q FY Mar 2024, arising primarily from the mortgage and retail small and medium enterprise (SME) portfolios. We do not expect material deterioration in overall asset quality, given management’s tight monitoring and aggressive collection efforts. Crucially, these portfolios are largely well-collateralised. The Group is anticipated to keep its gross impaired loan (GIL) ratio at ~2.0% or below (end-June 2023: 1.7%), potentially via writeoffs. GIL coverage (including regulatory reserves) was sound at 104.9% as at end-June 2023.

We view AMMB’s funding and liquidity profile to be moderate. Faster loan growth had pushed the net loans to customer funding ratio to 97% as at end-June 2023, but including long-term funding, the ratio was a more comfortable 87%. As at end-June 2023, the Group’s liquidity coverage ratio (LCR) and net stable funding ratio were a respective 170% and 104%. The LCR, which is higher after being partly boosted by the early refinancing of tier-2 debt, will normalise in the next quarter.

As with other banks, AMMB faces net interest margin (NIM) pressure. This is primarily due to keen deposit competition in the retail segment, the full impact of deposit repricing and declining current and savings account balances. A larger portfolio of investment securities, which yields less than lending activities, also contributed to the weak NIM. Margin pressure however has likely stabilised. NIM registered at an annualised 1.7% in 1Q FY Mar 2024, from 2.0% in fiscal 2023. 

AMMB is at the tail-end of its Focus 8 strategy (FY Mar 2021-FY Mar 2024) which has yielded sound results. The Group is on target to deliver a return on equity of 10% (based on net profit), has expanded its lending portfolio of mid-sized corporations and SMEs to a third of its loan book and, more importantly, improved the granularity of its loan base along the way. We believe AMMB Group is well-placed to fend off incoming competition from digital banks, having observed a steady stream of digital offerings resulting from the Group’s investments in internal systems and strategic partnerships with various parties including fintech players. The Group’s next planned phase of growth will see it accelerating its coverage of mid-sized corporations and SMEs, strengthening its digital proposition and further optimising its cost structure.


Table 1: Issuer and issue ratings of AMMB and banking entities


Analytical contacts
Chan Yin Huei
(603) 3385 2498

Wong Yin Ching, CFA
(603) 3385 2555

Media contact
Sakinah Ariffin
(603) 3385 2500


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 2023 by RAM Rating Services Berhad

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