AMMB has enough capital to absorb RM2.8 billion impact on 1MDB

by AZREEN HANI/ FILE PIX

AMMB Holdings Berhad (AMMB) says it remains  financially resilient and has sufficient financial resources to absorb RM2.83 billion settlement with the Ministry of Finance (MOF) on 1Malaysia Development Berhad (1MDB) transactions.

“Undoubtedly, this settlement will have a material impact on the Group’s financial year results for the period ending 31 March 2021. A RM2.83 billion provision will be reflected in our Q4FY21 results. Consequently, we will not be proposing any final dividends for the year ending 31 March 2021,” the Group said in an exchange filing yesterday.

The Group, it added, remains financially resilient and has sufficient financial resources to absorb this Settlement without having to raise additional equity capital.

AMMB said the firm has since strengthened and enhanced its processes to meet the current stringent regulatory standards.

“To this end, the AMMB Group has decided to resolve these historical matters to allow the Group to focus fully on its business,” it added.

Yesterday MOF announced that the AMMB’s agreement to settle RM2.83 billion on all outstanding claims is part of the government’s continuing recovery efforts that it is pursuing against all parties directly or indirectly involved in 1MDB and its related entities.

This follows the Government’s successful negotiations on the Goldman Sachs’ RM15.8- billion (USD3.9-billion) settlement in July 2020.

“These settlements will not absolve other entities and individuals of their alleged wrongful involvement in 1MDB, and they will continue to be pursued through the criminal justice system,” MOF said in a statement.

“This latest settlement is beneficial for the Malaysian people. Resolving this through the court system would have cost a lot of time, money and resources. With this settlement, the payment of the monies will be expedited, instead of being held up by lengthy court battles, and can be utilised to fulfil 1MDB’s outstanding obligations,” minister Tengku Datuk Seri Zafrul Aziz said.

This settlement amount is in addition to the RM53.7 million penalty already imposed by Bank Negara Malaysia (BNM) and paid by the AmBank Group.

MOF added that the global settlement by AMMB Holdings Berhad also addresses the Securities Commission Malaysia’s (SC) requirements on compliance with its laws and guidelines. As part of the terms for the global settlement, the SC will require AmInvestment Bank Berhad to take corrective measures, including putting in place systems and processes to strengthen their due diligence framework for submission of corporate proposals.

Meanwhile AMMB stressed that it will continue as to strengthen its fundamentals, particularly in terms of corporate governance by continuing to improve the systems and processes to strengthen due diligence.

“The settlement of these legacy matters will enable the AmBank Group to focus on executing on its strategies for its business without any distractions. AmBank Group is committed to ensure that we continue to deliver value to shareholders, stakeholders and customers,” it said.

As at 31 December 2020, the estimated proforma impact to Core Equity Tier 1 (“CET1”) and Total Capital Ratio (“TCR”) ratio is estimated to be reduced from 13.52% to 11.01%; and 16.39% to 13.88%, respectively after the proposed provision for the Global Settlement.

The Group remains highly liquid, with Liquidity Coverage Ratio (“LCR”) of 155.8% and Net Stable Funding Ratio (“NSFR”) for all operating entities above 100%. However, the Group plans to raise Tier 2 debt capital to increase total capital available for on-going working capital purposes.