AMMB Holdings Bhd has proposed to acquire MBF Holdings Bhd’s subsidiary MBF Cards (M) Sdn Bhd for a total cash consideration of RM623.4mil

AMMB Holdings Bhd has proposed to acquire MBf Holdings Bhd’s subsidiary MBF Cards (M) Sdn Bhd for a total cash consideration of RM623.4mil.

The companies told Bursa Malaysia yesterday that the proposed acquisition would include a 33.33% owned associate company of MBF Cards called Bonuskad Loyalty Sdn Bhd, whose principal business is conducting a customer loyalty scheme. The shareholders of MBF Cards are MBf Holdings and its wholly-owned subsidiaries, Atox Cards Sdn Bhd and Jastura Sdn Bhd, which hold 51%, 11.55% and 37.45% equity interest respectively in MBF Cards.

“Based on MBF Cards’ net asset value (add share of earnings of Bonuskad) and profits after taxes as per the audited financial statements for the financial year ended Dec 31, 2011, the purchase price would be adjusted to RM647.5mil. This translates to a price to book multiple of 2.8 times and a price to earnings multiple of 12.9 times accordingly,” AMMB said in a statement.

The acquisition is still pending the approval of, among others, the other shareholders, MBf Holdings and Bank Negara.

In the statement, MBfH said the reason it was selling was because the credit card business operated in a highly competitive market where MBF Cards competed principally with bank-backed card issuers.

“As it is dependent on bank borrowings or debts raised through the capital market, (our) ability to continuously raise funds will be increasingly challenging. Currently in the absence of deposits taking its cost of funds is generally much higher,” MBfH said.

“The board believes that the proposed disposal is timely and provides an opportunity for MBfH to unlock the value of its investment in MBF Cards at an attractive valuation. The proposed disposal is expected to result in a gain of approximately RM383.89mil (after deducting estimated expenses of RM2mil) based on the audited financial statements of the MBfH group for FY2011,” it said.

“The board is also of the opinion that it would be more beneficial to focus and utilise its existing resources on the other business divisions within the group,” it added.

AMMB’s chairman Tan Sri Azman Hashim said that the acquisition enhances the profile of its merchant acquiring and card issuance businesses with a greatly enlarged merchant network and an increase in receivables.

“It also fits well with our Retail Banking strategic priorities and aspirations, including stronger customer centricity, accelerating growth in deposits and non-interest incomes, building our wealth management and growing quality assets in targeted segments,” Azman said.

Meanwhile MBfH’s board said that it is still assessing and evaluating plans for the optimal utilisation of the money that will potentially receive from the proposed disposal which may include, but not limited to: the repayment of bank borrowings, working capital for its business operations in Papua New Guinea and Fiji or for the acquisition of viable businesses / assets.

“It is expected that the loss of contribution to the MBfH Group’s future earnings consequent to the proposed disposal will be mitigated by the higher contributions from other investments / businesses and interest savings arising from the application of the proceeds from the proposed disposal,” MBfH said.

Source: www.thestar.com.my

AMMB Holdings' yearly net profit rises 12.5% to RM 1.5 Billion, non-interest income now 35% of total income, Kurnia Insurans acquisition to be completed by September 2012 - Managing Director Ashok Ramamurthy

(AMMB opening stock price today (18.5.2012) was RM 6.23)

AMMB Holdings Bhd grew its net profit by 12.5% year-on-year to RM1.51bil for the financial year ended March 31, 2012 and the banking group has attributed this to faster non-interest income growth.

Revenue for the year was 12.5% higher at RM8bil.

In a statement, AMMB said the results translated to a 14.1% return on equity (an increase of 0.5%) and 50.5 sen earnings per share (an increase of 13%).

The board of AMMB has recommended a final dividend of 13.5 sen.

AMMB group managing director Ashok Ramamurthy said it was the group's fifth consecutive year of a record financial performance.

“We successfully grew non-interest income to constitute 35% of total income now. We have continued to diversify and develop new business streams.

“Our foreign exchange and derivatives business now contribute about RM63mil to PAT (profit after tax), from a low start three years ago.

“We carved out transaction banking to focus on cash management and international trade, and this has contributed higher recurring non-interest income,” he said.

Meanwhile, the banking group is also planning to invest RM600mil on various projects or initiatives in the next three years.

Ashok said this would be a “fairly substantial uplift” compared with the RM350mil of investments in the previous four years.

He said the largest component of the new investments would be a core banking platform replacement, which was expected to cost RM300mil.

“It will take us 18 months to two years to complete.

“What it will give us is the capability to ensure that we have a platform going forward, that can remain with us and give us the competitive advantage for the next 15 or 20 years.”

Ashok also said the acquisition of Kurnia Insurans (Malaysia) Bhd was expected to be completed by September.

To recap, last month, Kurnia Asia Bhd inked an agreement to sell its 100% stake in Kurnia Insurans (Malaysia) Bhd to AmG Insurance Bhd, AMMB's 51%-owned general insurer, for RM1.55bil.

The acquisition would be proportionally financed by AMMB, the ultimate shareholder of the Ambank group, and Australia-listed Insurance Australia Group Ltd (IAG), which owns the balance 49% in AmG.

“This acquisition complements our medium term aspiration and strategic priorities to grow income from profitable segments.

“It is anticipated to accelerate the Group's focus to grow recurring non-interest income and provide cross-selling benefits.”

For the last financial year, AMMB's total income grew 7.8% to RM4.2bil, spurred by higher non-interest income. Non-interest income grew 26.3% to RM1.48bil to now constitute 35% of total income (compared with 30% in the financial year ended March 31, 2011).

Significant gains came from trading and investment (up 85.7%), partly riding on favourable market conditions.

Net interest income was RM2.74bil while net interest margin was 2.73%.

Cost-to-income ratio was at 40.2%.

Gross loans, including Islamic financing sold to Cagamas, rose 5.7% to RM77.7bil supported by business and corporate loans growth.

Business loans grew 14.9% to RM15.8bil from a diversified asset base, while corporate and institutional loans expanded 13.5% to RM14.6bil.

AMMB also said its loans portfolio now reflected a greater mix of non-retail, Islamic and variable rate loans.

Islamic loans represent 23% of the group's total loans and variable rate loans now constitute 55% of total loans.

Meanwhile, AMMB's low cost deposits grew 25.9%.

Customer deposits, including term funding and loans sold with recourse, rose 3.9% to RM84.4bil, bringing its loans to deposit ratio to 89.6%.

Ashok said the group aimed to aggressively invest, optimise and leverage connectivity to deliver growth over the next three to five years.

“For financial year 2013, the group is guided by four strategic themes towards achieving our medium term aspiration, to be Malaysia's preferred banking group with international connectivity.”

Among the four strategic themes is accelerating growth and business mix changes, which would involve the execution of a retail banking reshaping programme and growth in main bank relationship, aggressively growing transaction banking and markets' businesses, and enhancing the focus on AmLife transformation, complemented by AmTakaful.

“International connectivity remains a key agenda to the group. Plans are underway to uplift the Australia and New Zealand Banking Group international connectivity.”

The other strategic themes include strengthening customer centricity and connectivity, increasing productivity and efficiency, as well as acquiring and integrating to deliver synergies in the general insurance business with the strategic objective of being amongst the largest domestic insurers and market leader in motor insurance.

Source: www.thestar.com.my