AMMB Stock Halted on Surprise $699 Million 1MDB Settlement

(Bloomberg) -- AMMB Holdings Bhd. asked for its shares to be suspended for two days after the Malaysian bank said it will suffer losses following a 2.83 billion ringgit ($699 million) settlement to the government over the 1MDB scandal.

The lender that held former Prime Minister Najib Razak's bank accounts, said the settlement will hurt its earnings for the year ending March 2021. It will set aside provisions in the final quarter of the fiscal year, which will translate to a proforma loss of 93.89 sen a share, and will skip the final dividend, according to a filing.

The payment is a “sucker punch” and a “huge negative surprise especially when we thought AMMB has laid the past behind them when they settled the 54 million ringgit fine by Bank Negara Malaysia back in 2015,” Chan Jit Hoong, an analyst at Hong Leong Investment Bank Bhd., said in a report Monday.

The unexpected move sparked analyst downgrades on AMMB. Chan cut the stock to hold from buy and slashed his target price to 2.95 ringgit from 4.05 ringgit. Maybank Kim Eng analyst Desmond Chng also cut his rating to hold from buy. CGS-CIMB Research lowered the stock, saying the company would be clouded by the negative sentiment in the near term. The shares slid more than 2% on Friday and are down 13% so far this year.

Read: Malaysian Bank That Highlighted 1MDB Scandal to Pay $699 Million

The 1MDB scandal set off investigations in Asia, the U.S. and Europe, and led to the ouster of Najib in 2018. Authorities spent years tracking funds that allegedly flowed from 1MDB into ornaments of wealth. Goldman Sachs Group Inc. last year admitted its role in the biggest foreign bribery case in U.S. enforcement history, reaching multiple international settlements in the billions of dollars to end probes into its fund-raising for 1MDB.

The payment is for “all outstanding claims and actions in relation to the AmBank Group's involvement in the 1MDB matter,” Malaysia's finance ministry said in a statement on Friday, referring to a unit of AMMB. The statement didn't specify AMMB's wrongdoing in the 1MDB scandal that it was penalized for.

There are adequate capital buffers to absorb this settlement without an immediate need to raise additional equity capital, AMMB said. While it is highly liquid, it will seek to raise tier 2 debt capital to fund working capital.

“While the recent settlement will resolve AmBank Group's financial liabilities to the Malaysian government because of its previous involvement in 1MDB-related transactions, the large settlement amount of 2.8 billion ringgit will materially erode its capital,” said Tengfu Li, an analyst at Moody's Investors Service. “According to the group, its proforma common equity tier 1 ratio will fall significantly to 11% from 13.5% previously.”

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