By NG MIN SHEN / Pic By MUHD AMIN NAHARUL
AMMB Holdings Bhd’s (AmBank) net profit rose 5.9% to RM347.59 million in the first quarter ended June 30, 2018 (1Q19) from RM328.27 million posted in the previous year’s corresponding period, as a result of higher net interest income and lower expenses.
Quarterly revenue was 4.3% higher at RM2.17 billion compared to RM2.08 billion registered the year prior, as fund-based income from interest- bearing assets increased mainly from interest on fixed income securities and customer lending.
“Net interest income grew 4.7% year-on-year (YoY) to RM642 million, paced by loans growth of 2.2% with good traction in our targeted segments. Non-interest income was flat YoY at RM372 million,” AmBank group CEO Datuk Sulaiman Mohd Tahir (picture) said in a recent statement.
The group’s net interest margin (NIM) was flat at 2.02%, as there was an overall increase in interest expense due to higher interest from customer deposits and financial institutions deposits as a result of larger average deposit balances.
Wealth management fee income increased 8.7% YoY coupled with improved performance from the group’s insurance business, mitigating global markets and investment banking results which were impacted by weaker market sentiments.
Other operating income — including fee income, marketsbased trading and investment, and other incomes — decreased by RM48 million, due to lower income from sale of unit trusts, and sale and revaluation of trading securities.
Net income from the insurance business improved substantially, mainly attributed to lower insurance claims.
The group’s insurance-based joint ventures (JV) recorded improved results on lower actuarial reserving, contributing to the group RM15.9 million in share of profits from associates and JVs compared to share of losses of RM2.8 million a year ago.
Expenses fell 7% to RM513 million, reflecting savings from lower headcount and business efficiency initiatives.
“Our cost base is now leaner following the completion of the mutual separation scheme. Other operational expenses were also reduced as we continue to manage costs diligently through BET300, our three-year business efficiency transformation aimed at achieving RM300 million gross cost savings across the group,” Sulaiman said.
Cost-to-income ratio improved to 50.6% during the quarter from 56.3% last year, while credit costs recorded a higher charge during the quarter, attributable to higher allowance for loans provided on individually assessed customers, lower recoveries and higher provision for commitments and contingencies.
The group recorded a net debt charge of RM7 million, which it deemed “still a negligible amount” against its gross loan base.
Return on equity for the quarter stood at 8.3%, while return on assets was at 0.99%.
Gross loans and financing grew 2.2% for the year-to-date to RM98.4 billion, while gross impaired loans ratio was at 1.77%. Loan loss coverage ratio was higher at 106.3% against 100.5% last year.
On a segmented basis, mortgages expanded 4.8% to RM27.7 billion, loans to small and medium enterprises grew 2.8% to RM17.2 billion and card receivables were up 4.3% at RM2.1 billion.
Customer deposits grew 2.9% to RM98.6 billion driven by customer deposit acquiring and retention initiatives, while current accounts and savings accounts (CASA) climbed 2.1%.
“We remain focused on driving CASA as well as retail and business banking deposits to improve our funding resiliency. Our retail deposit mix increased to 53.9% from 51.5% as at end-March 2018. Our CASA composition stood at 21.1%,” Sulaiman stated.
The bank’s common equity Tier 1 ratio rose 30 basis points (bps) to 11.6%, while its total capital ratio was down 20bps at 16.4%.
It adopted the Malaysian Financial Reporting Standard (MFRS) 9 on April 1 this year, under which the impairment assessment is based on the expected credit loss model which uses forward-looking assumptions. The preceding accounting standard, MFRS 139, based impairment assessment on an incurred loss model.
“The Day One (April 1, 2018) impact to the group’s capital position was broadly neutral,” Sulaiman said.
In a separate exchange filing, the banking group said it anticipates banks’ NIMs to taper from the 1Q19, when NIMs were boosted by the January 2018 hike in the Overnight Policy Rate (OPR).
“The lagged re-pricing of banks’ deposit rates adjusting to the increase in the OPR coupled with keener competition for deposits compared to the first half of 2018 as the sector moves closer towards the implementation of the net stable funding ratio will be the contributing factors,” it said.