AMMB registers 6% drop in Q2 net profit

PETALING JAYA: AMMB Holdings Bhd’s net profit for the second quarter ended Sept 30, 2017 fell 6% to RM331.47 million from RM352.63 million a year ago due to lower fee- based income and treasury related income from customer flows.

In a filing with Bursa Malaysia, AMMB said its fee-based income declined during the quarter due to lower cards-related fees and incentive, transaction banking and fund management fees from lower volume.

Treasury-related income from customer flows was impacted by poor market sentiment, resulting in lower gains on derivatives cushioned by increase in revaluation of securities, while net income from insurance business declined due to lower premiums attributable to sluggish motor sales and impact from the de-tariffication policy.

The group’s insurance-based joint ventures also recorded higher losses due to actuarial valuations, lower non-interest income and higher operating expenses, impacting the group’s share of losses from the joint ventures.

Revenue for the quarter rose 1.2% to RM2.13 billion from RM2.1 billion a year ago as revenue from interest bearing assets increased, mainly due to interest on customer lending.

For the six months ended Sept 30, 2017, net profit fell 2.35% to RM659.74 million from RM675.63 million a year ago while revenue rose 1.04% to RM4.21 billion from RM4.16 billion a year ago.

AMMB CEO Datuk Sulaiman Mohd Tahir said it recorded a 2.3% year-on-year (y-o-y) growth in total income of RM1.95 billion during the period with topline growth momentum sustained in transaction banking, business and SME banking and retail banking while markets-based revenue was affected by market volatility.

“The group recorded an encouraging 9.9% growth y-o-y in net interest income (NII) supported by interest income from customer lending and fixed income securities. Interest income from customer lending continued to benefit from the robust growth in our targeted segments, namely, mortgages and the SME segments. Interest income from securities grew mainly from trading securities and investment in unrated corporate bonds and sukuk,” he said.

The group’s loans and financing base grew 2.2% year-to-date (y-t-d) to RM93 billion underpinned by a 10% rise in mortgage loans and 7.6% growth in SME loans. Cards receivables contributed RM80.7 million to its loans base, marking an encouraging y-t-d growth of 4.8%.

Deposits from customers and financial institutions rose 1.8% due to higher average balances in current accounts from its retail and cash management business as well as higher fixed deposits average balances.

Its current accounts and savings accounts composition stood at 21% with a target to grow to 27% progressively. In terms of funding costs management, the group settled all short-term borrowings and redeemed debt securities on the first call date.

“Collectively, these efforts resulted in an overall marginal increase of RM16.6 million in interest expense. Our net interest margin (NIM) improved six basis points to 1.99% as we continue to reduce our average cost of funds,” said Sulaiman.

Cost-to-income ratio increased to 57.2% from 55.6% a year ago while gross impaired loans stood at 1.88% with loan loss coverage of 101.4%. The group maintained adequate capital with Common Equity Tier-1 ratio at 11.5%.

The group has proposed a single-tier interim dividend of 5 sen for the financial year ending March 31, 2018 payable on Dec 28, 2017.

For the second half of the financial year ending March 31, 2018 (FY18), AMMB expects NII to continue delivering steady growth while non-interest income (NOII) from investment banking and money market activities is expected to be lumpy.

“Wealth management, cards and corporate banking continue to drive NOII in the second half of FY18. We expect credit cost to continue to normalise with reduced recoveries relative to FY17. Impairment allowances are expected to be at levels that are reflective of our loans growth. Our asset pricing continues to be refreshed as we improve our capability to price for risk for sustainable NIMs,” said Sulaiman.