Citi lowers target price for AMMB

CITI Investment Research is maintaining its "sell/low risk" rating on AMMB Holdings Bhd, citing slower-than-expected operating improvements.The foreign-owned research house is lowering its target price for AMMB shares to RM3.55.In a report, it said industry competition should limit net interest margin (NIM) expansion going forward, and AMMB's third-quarter results have highlighted the challenging environment to bring in low-cost current account and savings account deposits and reduce credit costs."We are reducing our forward EPS estimates by 10 to 15 per cent to account for tougher competition for low-cost deposits, car and mortgage lending and a higher charge-off rate," Citi said.On the positive side, the research house cites AMMB's overall improvement in asset quality indictors for the nine months ended December 2007.Gross non-performing loan (NPL) ratio declined to 7.9 per cent from 8.7 per cent in September on NPL sales and write-offs. Loan loss cover continues to rise, now at 69 per cent against the industry average of 73 per cent.There was also a 33 per cent surge in interest income from short-term deposits and securities held to maturity."However, we see this surge as unsustainable," Citi added.Issues highlighted in the report include AMMB's loan growth of 1.8 per cent, largely corporate driven; RM83 million impairment loss on securities due to weak capital markets; and proportion of low-cost deposits rose to 13.2 per cent from 12.8 per cent, slower than expected. -www.btimes.com.my