CIMB, AMMB shares fall following rating downgrades
JP Morgan warned that rising long-dated bond yields would weaken banks’ trading gains and capital positions, with possible implications for dividends.
CIMB Group Holdings Bhd shares dropped as much as 39 sen, or 5%, to RM7.31 on Oct 7 as Malaysian banking stocks declined amid concerns about rising bond yields. AMMB Holdings Bhd lost 27 sen, or over 4%, to RM6.20, after JP Morgan lowered its ratings on both lenders.
The rating for CIMB was cut from “neutral” to “underweight”, while AMMB moved from “overweight” to “neutral”. CIMB’s share price reached a level last recorded on July 3. The Bursa Malaysia Financial Services Index hit its lowest point in 10 months; its constituents also include insurers and stockbrokers.
In its note covering Southeast Asian banks, JP Morgan said higher long-dated yields would reduce trading gains and weaken capital positions, potentially affecting dividends at some lenders. Funding costs could also increase, while investment banking revenue could suffer. The bank said third-quarter surprises were more likely to be negative for several lenders it covers.
JP Morgan put CIMB’s securities holdings at 29% of assets, the highest proportion among Malaysian banks. AMMB and RHB Bank Bhd each had 25%.
The note also highlighted differences in debt portfolio accounting. RHB had 6% classified as fair value through profit or loss, under which market-value changes enter the income statement immediately. CIMB’s proportion was the highest at 27%, while Public Bank Bhd had Malaysia’s lowest at 3%.
