AMMB ... Aug 09

AMMB had issued 194.9 million new shares to ANZ, following the latter’s move to convert the exchangeable bonds that ANZ had subscribed in 2007, into equity.

ANZ’s wholly owned unit ANZ Fund Pty Ltd had subscribed to the subordinated debt papers issued by AmBank (M) Bhd, following its entry into AMMB in end-2006 as a strategic equity partner.
The move to convert the bonds into equity would cement ANZ’s position in AMMB, and is taken as a positive sign as it showed confidence of the foreign banking group in AMMB.

Moreover, following the conversion of the exchangeable bonds into equity, AMMB’s Tier-1 capital ratio is boosted to 10.15% from 9.74%, while its core Tier-1 capital ratio would rise to 7.9% from 7.5%.

This move could be preparing for the higher dividend or more active capital management to enhance ROE (return on equity). Moreover, it also provides additional room to issue more hybrid capital and subdebt if the need arises or to optimise its capital structure.

Nevertheless, AMMB’s risk-weighted capital adequacy ratio remained unchanged.

According to agreements signed between ANZ, Australia’s third-largest banking group, and AMMB, ANZ may hold up to 24.95% stake in the local banking group following conversion of preference shares and subordinated debt papers that ANZ had subscribed to.

A check with Bloomberg data shows that the Employees Provident Fund is AMMB’s second-largest shareholder with 16.9% stake in the local banking group. Interestingly, Prudential plc is also a substantial shareholder with a 5.5% stake in AMMB.

Meanwhile, on ANZ’s regional operations, the banking group has entered into an agreement to acquire Royal Bank of Scotland’s (RBS) commercial banking assets in Taiwan, Hong Kong, Singapore and Indonesia.