AMMB’s private placement will replenish capital post 1MDB settlement, says S&P

AMMB’s private placement will replenish capital post 1MDB settlement, says S&P
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KUALA LUMPUR (April 6): S&P Global Ratings said AMMB Holdings Bhd's (unrated) proposed share placement will accelerate the group's capital replenishment.

“We expect the proposed private placement of approximately RM810 million to partially replenish the group's common equity tier-1 (CET 1) ratio to 11.7%,” it said in a statement today.

It said the proceeds from the share placement will flow into the group's operating subsidiaries, including AmBank (M) Bhd (BBB+/Negative/A-2), the main banking subsidiary of AMMB.

“This will augment the bank's capital buffers and provide more room for downside shocks,” it said.

It said the restoration of capital to levels before AMMB's settlement with the Malaysian government for its involvement in 1Malaysia Development Bhd (1MDB) will be gradual, and will likely involve a combination of retained earnings and divestitures of non-core assets.

“Based on our estimates, AMMB's RM2.83 billion settlement will result in a net loss in the fiscal year ended March 31, 2021, with a projected reduction in the group's CET 1 ratio to 11% from 13.5%,” it said.

According to S&P, AMMB is also assessing the carrying value of goodwill on its business lines to reflect the impact of Covid-19 and the 1MDB settlement as part of its annual review exercise.

“It will likely result in a write-down of goodwill, the amount of which will be subject to audit review. This will not affect our capital assessment because goodwill is already excluded from our capital calculations,” it said.

At noon break, AMMB fell two sen or 0.64% to RM3.12, valuing the group at RM9.36 billion.

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Surin Murugiah