A Critical Review Of Ambank In Malaysia Finance Essay
Ambank established in August 1975, AmBank Group is the sixth largest banking group in Malaysia and comprises AMMB Holdings Berhad and its subsidiaries AmInvestment Group Berhad, AmBank (M) Berhad, and AmAssurance Berhad.
AmBank (M) Berhad, through its subsidiaries, provides commercial and Islamic banking products and services principally in Malaysia. It offers personal banking services, including deposits comprising savings accounts, current accounts, and fixed deposits; cards, such as credit and prepaid cards; loans comprising vehicle and property financing; family first solutions; wealth management services, including unit trust, bank assurance, personal investment solutions, and institutional and corporate investment solutions; and structured deposits.
The company also provides business banking services, which consist of current accounts and fixed deposits, loans and financing, cash management, trade services, factoring, and treasury services.
In addition, AmBank offers investment banking services consisting of corporate finance, debt markets and structured finance, Islamic markets, equity markets and derivatives, treasury and derivatives, stocks and futures broking, funds management, trustee services, private equity, and private banking; Syariah compliant products and services, which include investment advisory services and treasury products; and unit trust funds, as well as provides life and general insurance products and services.
Further, the company offers Internet banking services. The company is based in Kuala Lumpur, Malaysia. AmBank (M) Berhad is a subsidiary of AMFB Holdings Berhad.
2.0 What kind of industry in the market?
Ambank group is very popular status over in the market. It is proud banking heritage spanning over 30 plus years. Ambank manage financial service in global concept. It is doesn’t top company in the world and if top 4 largest listed banking group (market cap) in Malaysia with diversified business fundamentals. Global overall ranging list of Ambank, a top 20 listed company on the Bursa Saham Malaysia (market cap ~RM15.07 billion) and rank 188 (global 1,000 banks by market cap).
Ambank group very well capitalized with tier 1 CAR of 9.8% and total RWCA of 15.3%. ANZ is our strategic partner, one of only 11 AA rated banks in the world. Ambank group’s profitable growth, diversification and rebalancing dynamic focus on volume versus price trade offs and asset quality. Ambank in the market is leverage but leading position and capital market recovery.
Medium and longer term plans of Ambank targets cost efficient, continue investments to disclose during FY2010 results. This is Ambank group’s high level priorities for 2010.
Ambank group is committed to providing new and innovative product and service to its customer with its partnership with Australia and New Zealand banking group (ANZ), one of Australia’s leading Banks.
Figure 1.0 Ambank group loans (Ganesh Kumar Nadarajah, 2010)
3.0 What is the strategic Business unit of Ambank?
Figure 2.0 Strategic focus Maintain viable growth and rebalancing focus. (Ganesh Kumar Nadarajah, 2010)
Ambank group strategic focus is maintain viable growth and rebalancing focus as per above figure 2.0. This may focus in many levels such as de-risk, diversify and de-risk + diversify. In de-risk portion of differentiated growth from low to high. Line of credit, ECM, Afs fixed Inc, Debt Capital Management, Mortage and auto financing in the portion of de-risk. In portion diversify and de-risk + diversify having 9 bubbles of differentiated growth.
Ambank group derive private equity, international biz, credit cards, broking, Assurance general, Assurance life, corporate finance and loop in the diversify.
Ambank group merge de-risk + diversify into a portion that are, HIT Fixed Inc, AFSB, FUM, ALM, Private Banking, Deposits, Biz – transactional trade, Corporate and institutional lending and fix derivatives.
3.1 How Ambank independently managed business unit?
Figure 3.0 Profit growths, with conservative provisioning. (Ganesh Kumar Nadarajah, 2010)
Starting from income of Ambank, all divisions recorded growth in incomes. Total income of Ambank year 09’ and 10’ are RM’ Mil 2,156.1 (FY09) and RM’ Mil 2,670.0 (FY10). Percentage of total income of year 2009 and 2010 is +23.8% high. An expense management of Ambank is reflects salary and staffing increases, and CPI, but within CTI targets. An expenses of year 2009 is RM’ Mil 943.9 and year 2010 RM’ Mil 1,089.9. Total percentage of expenses year 2009 and year 2010 is +15.5% high.
A provision of Ambank is higher GP and stronger loans growth. It is proactive provisioning to account for potential lag effects of economic downturn. Provisions include PER, impairment losses and provisions for commitments and contingencies.
Figure 4.0 Improved PATMI (Ganesh Kumar Nadarajah, 2010)
Above figure 4.0 shows of Ambank performances. Incomes growth in retails banking attributed to focus on profitable segments and business banking recorded lower provisions. Ambank is better investment banking performance from improving capital and equity market condition CIB impacted by higher general provisions or stronger lending performance.
Life and general insurance recorded higher incomes from longer fund base. Growth contributed by CIB and Business banking is growth focusing on more stable sectors and project financing with government support, GLS’s and large MNC’s competitive environments.
Figure 5.0 Strong CASA growths. (Ganesh Kumar Nadarajah, 2010)
Above figure 5.0 are shows to readers’ strong CASA growth. Loans growth on profitable segment and targeted industry sectors. More diversifies deposits base with initiative in retail and business segments driving high CASA growth and LD ratio impacted by stronger loans growth in the last two quarters. Finally its shows, very high characteristic of diversified cooperating of Ambank.
Figure 6.0 Viable segments and diversification.
Above figure 6.0 illustrated that to readers, retails targeting profitable segments 66% percentages high than business corporate is harness synergies via deepening customer relationship.
Figure 7.0 Good growth momentum for insurance and Funds Management.
Ambank provides two insurances as well. Two insurances are life and general. Life insurance aspirations are top preferred insurer in customer service and top 3in the life business. Strategic of Ambank’s life insurance has improved capital efficiency via ALM and enhance sales capabilities and improve operational efficiency via new system.
General insurance of Ambank’s aspirations is top 2 in motor business and top 3in general business. The strategic of general Ambank insurance build existing motor base business and enhance customer segmentation analytics. Ambank general insurance develops alternative channels for non-motor business and complete MAA Business acquisition.
4.0 What is the value System of Ambank?
Figure 8.0 Islamic bank of choice and ensure high degree of value (customer and stakeholder)
Strategic of Ambank of Islamic very strengthen international currency business unit (ICBU) and implement musyarakah (debt equity program). Strengthen of Ambank to Islamic bank retail segment and expend deposit business. Ambank group expand product tie-ups and alliances with third parties.
Ambank’s product level is banking services such as ATM services and online financing repayments. Deposits level are current Account-I, general investment Account-I, and Afdhal investment Account-I,
insuranceFinancial facilities of Ambank is, Al-Taslif card-I, Arif Hire Purchase-I, Home Financing-I, Direct Access Gurantee Scheme-I, Project Financing-I and Syndicated Financing-I. All this are as a product to bank system cooperates.
Islamic Finance achievement of Ambank group is, best takeful Award 2009- Malaysia takaful Association and world and Malaysia’s first bank to introduce HP based on Al-Ijarah Thumma Al-Bai for car financing in year 1993.
5.0 What is the challenge faced by Ambank?
Figure 9.0 Strong capital bases to meet ensuing challenges support growth.
Innovative Tier 1 capital Securities issued Ambank (M) Berhad are approved program RM500 mi, Q1FY10 issuance RM300 mil and Q2FY10 issuance RM185 mil. Capital management plan is strengthen capital profile and buffer. Ambank’s modeling and economic scenarios increased and improvements in capital diversification.
5.1 What is macro environment analysis of Ambank group?
Overall result of Ambank group, they are maintaining profitable growth and rebalancing focus via executing to our strategic. They didn’t focus only on strategic, income diversification, cost management, deposit growth and enhance risk discipline key priorities for FY2010 of Ambank group and position business for potential economic recovery towards beginning 1Q2010.
Outlook of retail banking, Ambank group maintain asset growth focus on profitable segments whilst growing deposits. Ambank group expect higher income growth from historical fixed income assets (under FTP) and expect increased delinquencies and credit cost, through lower than previously anticipated. Ambank enhance focus on risk management and collections because to improve next times. Ambank group expect minimal profit growth for FY2010. All this expects are contributes excellent challenges of Ambank among with other banks groups.
Challenges of Ambank in business banking are focus on building a sustainable asset targeted towards stronger industry segments and with greater diversification. Ambank group is very proactive manage existing account to mitigate higher risk of default. Enhance focus on deposits and transaction based fees. Also expect rapid FY2009 profit growth to moderate in FY2010.
Investment banking of Ambank more stable economic environment with equity and debt market activities improving. It is more focus on core expertise in advisory and capital market activities. Expected of Ambank in investment banking is rising profit performance over FY2009.
Corporate and institutional banking of Ambank group focus on project financing with government support, GLC’s and large MNC’s. Ambank challenges on deepen on customer relationship to generate fee incomes and advisory mandates. Enhance focus on capital efficient business growth and loan pricing to reflect economic risks.
Life and general assurance of Ambank’s challenges very stable profits, and MAA business acquisition if proceeded with, will bring in synergies later. Markets biz, reducing volatile exposure and diversifying revenues. Markets disruption not expected to recur leading to improved fixed income profit performance.
Finally, the challenges on risk and financial governance are implemented new retail tools including 3G scorecards, PD, LGD models, non-retails PD, financial spreading tool, security indicators (collateral management), FTP, ALM disciplines, Base II and FRS requirements.
Upcoming challenges of Ambank adoption of the proposed BIS/BASE III capital and liquidity framework (2012).
(* All this information get when I have did interview with managing director Cheah Tek Kuang.)
5.2 Partnership of Ambank group
Partnership with Australia and New Zealand banking group since May 2007. Leveraging on ANZ’s expertise to strengthen risk management, financial management and strategic planning, improve transactional banking, and enhance delivery and distribution channels and new business such as FX and Derivatives.
Figure 10.0 Partnership of Ambank
ANZ is the only Australian bank to have been in the Asian region of over 40 year. Strategic banking partnerships and presence across 14 countries. In August 2009, ANZ acquired selected RBS business in Asia for US $550 million, thus reinforcing its strategic intent of a super regional objective.
5.3 Shareholding of Ambank group
Figure 11.0 Shareholding of Ambank
Above figure 11.0 shareholding structure of Ambank group excluding ANZ. Ambank group ranked No 18 (Malaysia – market capitalization) and 188 (global – 1000 banks by markets capitalization.)
Market capitalization of RM 15.07 billion on Bursa Saham Malaysia and market capitalization of US$4.41 billion on Bloomberg.
AHB in progress of due diligence to acquire of general insurance business of a local insurance company.
6.0 How Ambank response to challenges?
Below is a challenges report taken from news paper. This is an approved of Ambank’s challenges.
13 February 2007
AMMB Holdings Berhad records 16.1% increase in pre-tax profit for the period ended 31 December 2006
AMMB Holdings Berhad ("AHB" or the "Group") recorded a RM97.4 million or 16.1% increase in pre-tax profit to RM702.3 million for the period ended 31 December 2006, compared to RM604.9 million reported in the corresponding period ended 31 December 2005. Accordingly, AHB's net profit attributable to shareholders was RM334.9 million for the period ended 31 December 2006. On an annualized basis, net earnings per share stood at 20.96 sen whilst post-tax return on average shareholders funds was 8.6% for the period under review.
The improvement in the Group's pre-tax profits was attributable to marked increase in other operating income on the back of higher investment and trading income due to RM64.7 million higher gain on sale of securities held for trading, RM57.6 million increase in revaluation gain on securities held for trading, increased fund based income, RM57.9 million increase in fee income from improvement in brokerage, guarantees, underwriting and fund management activities, improvement in insurance premium income, transfer from profit equalization reserve and net gain on disposal of Menara AmBank to AmFirst REIT of RM19.3 million.
Figure 12.0 Overall strategies
Risk, Capital and Funding profile of LD Ratio increased +1.6% percentages only and Tier 1 increased 1.9% percentages. There is only little increasing only year from 2009 to year 2010. RWCA has been creased 2.3 percentages this should me shows good risk solved but NET NPL/NPF Ratio dropped percentage from year 2009 to year 2010. Its will more considerate on future.
Ambank growth in Net lending/Financing increasing 14.1% percentages, its looks better than year 2009. Year 2010’s growth of Net lending/Financing increasing is 63,873 million. Growth in customer deposits 12.2% percentages of differentiates year 2009 to 2010. Enhance growth is CASA. Its shows 22.3% percentages strategies. Its very good level it seems.
Performance of ROE got dropped -0.5% percentages. Last year 2009 is very good performance of ROE 12.4%. Profit after Tax & MI increased 12.06% percentages. Have improvement on that performance level but EPS performance increased 6.6% percentages only. It is still quite good than year 2009. This overall strategy out results that Ambank’s good performance and challenges year 2009 and 2010. Essential to improve on next year than this year.
Figure 13.0 Differentiation of branch and ATM.
Ambank challenges to increase in customer facing and sales staff. Branch banking 10 new branches and planning 200+ by early 2011. Reaching out to our customer by expanding our self service machine network at branches, shopping centers and 7-eleven stores. Next challenges of network of Ambank drive profitability by expanding revenue streams through additional service like interbank loan, bill payment and full suits of prepaid top up services. Ambank maximizing our outbound sales productivity through our Award Winning Contact Centre and enhance customer experience via innovative mobile and internet banking services. Have increase deposit size through innovative products, campaign, marketing activities, banking solutions and competitive rates on CASA and FD.
Ambank maintain or improve market position at 5th or 6th assuming unchanged number of anchor banks. Establishing new line of business for example premier banking to cater to Affluent segment. Increase cross selling via Am Utopia.
6.1 What are the Advantages of Ambank?
The Group's net loans and advances outstanding increased by RM2.03 billion to RM46.9 billion as at 31 December 2006 with retail lending comprising the bulk of the Group's loans and advances. Hire purchase and credit cards receivables constituted RM23.9 billion and RM2.3 billion respectively, accounting for 43.1% and 4.1% of the Group's loan book respectively.
Meanwhile, total housing loans outstanding rose from RM9.8 billion as at 31 March 2006 to RM10.9 billion at 31 December 2006. The Group is making steady progress in mobilizing more low cost deposits. Approximately 54.1% of the Group's funding is mobilized from retail deposits as at 31 December 2006 compared to 51.1% recorded as at 31 March 2006.
6.2 What are Ambank sector shares?
Figure 14.0 Price movement/Target Price and recommendations
Banking sector share price movement target price and recommendation are 24.7% (RM4.88). It is in top level among PBB, RHBC, HLFG and CIMB. Ambank target already hit all the banks are listed here. Target price and recommendation share capital RM’ Mil 3, 0142.2. Reserves RM’ Mil is 6, 324.3. Price movement target price and recommendation is very higher than other banks.
Ambank is top 5 banking group in Malaysia and achieved to top 4 banking in Malaysia with diversified business fundamentals, supported by ANZ, our strategic partner and 1 of 11 AA rated banks in the world.
Good 9M result set the foundation for us to deliver above our earlier FY2010 market guidance. This guidance gets very helpful Ambank to improve all kind of level performance.
Its sound capital levels and executing to our strategic themes will position Ambank group to leverage economic upturn in 2010.
Ambank maintaining high vigilance on asset quality, risk disciplines, collections, restructuring activates and cost management. Ambank targets all cost and expenses. Ambank expect more and more for every year.
Ambank staying focused on executing to our strategic agenda around profitable growth and portfolio rebalancing will help Ambank achieve medium term aspirations (MTA).
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