The banking group registered a 6% increase in loans and financing in FY19, above the industry average of between 4% and 5%

By NG MIN SHEN / Pic By RAZAK GHAZALI

AMMB Holdings Bhd (AmBank) is eyeing loan growth of about 6% for its financial year ending March 31, 2020 (FY20), based on its target of expanding its loan book by one to 1.5 times faster than national GDP growth.

The banking group registered a 6% increase in loans and financing in FY19 — above the industry average of between 4% and 5% as Malaysia’s economy expanded by 4.5% during the period of January to March this year.

“The thought process is to drive loans growth at one to 1.5 times of GDP. So, if GDP is at circa 4.5%, the thought is, we can grow at about 6%. If GDP goes up — let’s say a revision of 5% to 7% growth — then, our loan growth would be at 8% to 9%,” AmBank group CEO Datuk Sulaiman Mohd Tahir told reporters at a briefing on the bank’s FY19 results in Kuala Lumpur yesterday.

Analyst estimates for Malaysia’s overall industry loan growth this year is averaging about 5%, given expectations for a weaker domestic economy, slowing global growth and the impact of trade tensions, coupled with political uncertainty at home.

AmBank saw its loan book rising to RM101.8 billion in FY19, mainly driven by its mortgages, which grew 11.8% year-on-year (YoY) to RM34.1 billion, while loans to small and medium enterprises (SMEs) rose 21.2% YoY to RM20.2 billion, comprising 19.9% of the group’s total loan base.

Sulaiman added that the group would have recorded a loan growth of about 9% during the year in review, had its auto financing segment, comprises 15% of the bank’s overall loan book, maintained status quo. The bank’s auto loan segment fell 3.1% in FY19.

Despite the drop in auto financing, AmBank CFO Jamie Ling Fou Tsong said there could be potential to revive the segment, given the release of new models from national carmaker Proton Holdings Bhd.

The bank’s net profit jumped 81.4% to RM459.67 million in the fourth quarter ended March 31, 2019 (4Q19) from RM253.41 million posted a year ago, driven by higher lending volume, lower expenses from non- repeat of severance cost and greater recoveries.

Its 4Q19 revenue was 5.4% higher at RM2.33 billion compared to RM2.21 billion recorded the year prior.

For FY19, net profit climbed 33.2% to RM1.505 billion from RM1.13 billion registered the year before, while revenue rose 6.3% to RM9.12 billion from RM8.58 billion previously.

The improved quarterly and yearly earnings were largely a result of a net recovery of RM303.8 million in FY19 compared to an impairment charge of RM15.7 million in the previous year, after the bank “resolved certain large non-performing loans (NPLs)” and completed the sale of retail NPLs.

Its gross impaired loans (GIL) fell to RM1.62 billion as at end-March 2019, giving it a GIL ratio of 1.59% for FY19 over the total loan book of RM101.8 billion.

Sulaiman said the bank has no immediate plans to get rid of any more NPLs beyond completing the ongoing disposal of two large corporate legacy loans. As at end-FY19, the bank had RM676 million worth of corporate NPLs.

“Looking at our shrinking NPL book, I don’t have much to sell anymore. We’ve had a cleanup of the books on the retail side, and on the corporate side, it’s more of individual cases. These corporate NPLs are fully collateralised backed by properties. We’re at quite an advanced stage of disposing at least one of them, hopefully, we can see better numbers in 1Q20,” he said.

The bank in January announced it would be selling NPLs totalling RM553.91 million to Aiqon Capital Group Sdn Bhd, in a deal estimated to provide AmBank with a net gain of RM229.94 million.

For the year in focus, AmBank’s net interest income was 3.9% stronger YoY at RM2.58 billion on strong loan and deposit growth. Its net interest margin fell 11 basis points to 1.89% from 2%, due to higher liquidity surplus and lending rate pressures in the retail banking segment.

Non-interest income slipped 10.2% YoY to RM1.34 billion, impacted by tougher market conditions which resulted in lower contributions from investment banking and trading income.

Deposits increased 11.6% YoY to RM106.9 billion, on the back of a 22.1% jump in current accounts and savings accounts deposits to RM24.9 billion.

Cost-to-income (CTI) ratio improved to 54.3% as at end-March 2019 from 60.8% a year ago, below the 55% target for FY19.

For FY20, the group has guided for return on equity (RoE) of about 9% (FY19: 8.8%) and a CTI ratio of 52.5% or less (FY19: 54.3%).

It also hopes to increase its dividend payout ratio to between 40% and 45%, after achieving 40% in FY19.