KUALA LUMPUR, Jan 10 — AMMB Holdings Bhd’s Mutual Separation Scheme (MSS) is expected to cost the company between RM100 million to RM150 million, according to TA Securities Holdings Bhd.
However, TA Securities also said the one-off offer to confirmed employees of AmBank Bhd, AmInvestment Bank Bhd and AmBank Islamic Bhd, will help the parent company save up to RM70 million a year from 2019.
“Management expects cost savings amounting of some RM60-70 million per annum from financial year 2019 (FY19).
“We are not entirely surprised by this exercise, as it is in tandem with the group’s four-year strategic transformation agenda and part of AMMB’s organisational structure for optimal efficiency,” it said in its research report released today.
The scheme is aimed at trimming its banking staff force by some 1,200 to 1,500 from around 9,500 currently.
The research house said the exercise follows in the footsteps of several other banking groups, which had accelerated cost cutting initiatives via separation schemes in recent years.
“We estimate the impact of this MSS to AMMB’s earnings to be minimal,” it said.
Based on preliminary guidance from the management, TA Securities forecasts that AMMB’s earnings for the 2018 financial year will dip some 8 per cent due to the one-off expense.
But it said AMMB’s earnings for the next two subsequent years will likely rise between 3 and 4 per cent as the result of those cost-saving measures.
The report predicts the cost-to-income ratio for the 2019 and 2020 financial years will improve to an average of 54 per cent compared to 57 per cent currently, thereby helping the company meet its target of below 55 per cent.
“Nevertheless, we keep our estimates for AMMB unchanged for now following more guidance in the next two weeks as the one-off expense as well as annual cost savings would ultimately depend on final take up rate of the exercise,” it said.
The research house forecast stronger topline growth for AMMB, noting it had invested in people and processes in targeted segments such as the retail SME, business banking space, wealth, cards and merchants.
At the same time, TA Securities said there were risks from some corporate accounts in the commercial real estate and oil and gas sectors that could materialise in the second half of this year.
“This could result in several lumpy credit charges in upcoming results,” it said.
