KUALA LUMPUR (April 2): AMMB Holdings Bhd’s (AMMB) planned goodwill write-down and proposed private placement will not affect its ratings in the immediate term, RAM Rating Services Bhd (RAM Ratings) said.
The goodwill impairment does not affect the group’s capital ratios and its liquidity position, according to the credit rating agency.
“While credit positive, the planned private placement is not sufficient to restore the group’s loss absorption buffer to pre-1Malaysia Development Bhd (1MDB) settlement level,” it said in a statement today.
AMMB announced yesterday that it was assessing the carrying value of goodwill related to certain lines of business and any impairment would be reflected in its fourth quarter results for the financial year ended March 31, 2021.
The financial services provider also proposed to undertake a private placement of up to 300 million new shares, representing 9.97% of its existing share capital, which was expected to raise gross proceeds of about RM810 million based on an issue price of RM2.70 per share.
RAM Ratings in early March downgraded AMMB’s ratings to AA3/Stable/P1 from AA2/Stable/P1 to reflect the adverse financial impact of the RM2.83 billion global settlement with the Malaysian government in relation to the group’s historical dealings with 1MDB.
The agency said AMMB’s goodwill arose from legacy corporate exercises and acquisitions, while it was still subjected to audit review, the goodwill assessment was focused on its conventional commercial and investment banking operations which had an aggregate goodwill of RM1.9 billion.
Separately, AMMB is proposing to undertake a private placement to mitigate the impact of capital erosion attributed to the global settlement.
Scheduled to be completed by the second quarter of this year, the fresh capital could add about 70 basis points to the group’s common equity tier-1 (CET-1) capital ratio, which would lift the metric to around 12% as at end-December 2020, RAM Ratings said.
“If successfully implemented, the placement will strengthen the group’s loss absorption buffer, enabling it to better withstand anticipated asset quality headwinds and elevated credit costs affecting Malaysian banks in general,” it added.
