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KUALA LUMPUR (April 1): Following its RM2.83 billion settlement with the government in connection with the 1MDB scandal, AMMB Holdings Bhd (AmBank) has proposed a private placement to raise an estimated RM810 million.
The group said it plans to issue up to 300 million new shares or 9.97% of its current share capital to raise additional funds to strengthen its core capital ratios, including Common Equity Tier 1 (CET1) and Total Capital Ratio (TCR). .
“The proposed private placement allows the company to raise funds expeditiously as it can be implemented immediately,” Ambank said in an exchange statement.
It will also improve the group’s liquidity and financial flexibility by strengthening its financial position without incurring interest expenses compared to loans, the group added.
Ambank announced the RM2.83 billion settlement with the Ministry of Finance on February 26 in connection with historical transactions involving the banking group with 1MDB and its related entities.
“Accordingly, for the financial year ending March 31, 2021, Ambank will record a provision of RM2.83 billion and will not propose final dividends,” the group said.
As of December 31, 2020, the estimated pro forma impact of the settlement is a reduction in the group’s CET1 from 13.52% to 11.01% and a reduction in the RER from 16.39% to 13.88%, respectively, after of the provision proposed for liquidation. , He said.
AmBank emphasized that it remains resilient with capital levels within internal thresholds, after taking into account the effects of the 1MDB liquidation.
“The group’s franchise remains viable and the additional capital will facilitate the implementation of growth strategies to deliver value to its shareholders,” he said.
For illustrative purposes, AmBank said that the issue price of the placement shares is assumed to be RM2.70 each, which represents a discount of 9.77% to the five-day volume-weighted average market price of AmBank shares up to. on March 30, RM2.9922. .
The group intends to use RM806 million for working capital purposes and another RM4 million to cover corporate financial year expenses.
Following the private placement, the group’s share capital is expected to increase to 3.31 billion shares, from 3.01 billion today.
Assessment of goodwill due to impairment
In a separate announcement, AmBank said it is evaluating the book value of goodwill related to certain lines of business, taking into account recent changes in circumstances over the past 12 months, as part of the annual review exercise.
The result of this exercise is ongoing and will be subject to audit review. As a result of this review, any impairment of goodwill will be reflected in AmBank’s results for the fourth quarter ending March 31, 2021, the group said.
“A depreciation of goodwill is an item that is not effective, that will not have an impact on regulatory capital ratios and will not affect future earnings, as it is a non-recurring item.
“This review will focus more on goodwill related to conventional banking (RM1 495 million) and investment banking (RM428 million). Upon completion of this review, a separate announcement will be published as soon as possible.” the group.
AmBank shares closed seven sen or 2.39% higher today at RM3.00, valuing the group at RM9.04 billion. Since the beginning of the year, the stock has fallen 17.81%.
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