AmBank expects clearer impairment risk to credit in 2H20

About 60% of its loan portfolio is currently under the moratorium, which ends on Sept 30, 2020


AMMB Holdings Bhd (AmBank) said the emergence of impairment risk to its credit portfolios will only be more apparent in the latter part of 2020, after its first-quarter earnings fell 6.7% due to losses arising from the blanket six-month loan moratorium.

The bank’s earnings slipped to RM365.17 million in its first quarter ended June 30, 2020 (1QFY21), from RM391.46 million a year ago, while revenue slid 7.4% to RM2.21 billion from RM2.39 billion previously.

About 60% of its loan portfolio is currently under the moratorium, which ends on Sept 30, 2020.

“The financial impact arising from the measures implemented in response to Covid-19 is a net loss of RM57.5 million in 1QFY21 (net modification loss),” AmBank said in a statement yesterday.

It recorded a net impairment of RM49.9 million during the quarter versus a net recovery of RM32.5 million a year ago.

An additional RM10.3 million of macro provision was charged this quarter, bringing the total preemptive macro provision to RM177.6 million, of which RM167.3 million was taken in the previous financial year.

“The group is closely monitoring the impact of the economic slowdown on the credit portfolios through stress tests, by identifying vulnerable borrowers and conducting regular portfolio reviews as part of the ongoing credit vigilance,” AmBank added.

It has adopted a multi-pronged approach to debt restructuring and rescheduling (R&R) during the loan moratorium period by providing repayment assistance to borrowers.

Net interest income fell 8.3% while net interest margin — excluding the net modification loss — compressed by 13 basis points to 1.79%, due to reductions in the Overnight Policy Rate.

Non-interest income rose 21%, boosted by strong trading income and higher investment income from general insurance.

As at end-June, gross loans and financing grew 4.1% to RM107.42 billion. Gross impaired loan ratio stood at 1.66% from 1.73% as at end-March 2020, with loan loss coverage at 97%.

Deposits grew 1.2% for the year-to-date to RM114.3 billion, while current account and savings account balances rose 6.2% to RM30.6 billion.

“For the full year of 2020, the industry’s loan growth is likely to hover between flat and 2%, which is much lower than 2019’s loan growth of 3.9%,” the group said.

Under the Special Relief Facility scheme targeted at small and medium enterprises (SME), AmBank has approved RM751 million in loans to its customers, where RM585 million loans have been disbursed to date.

For non-SME corporate customers, the banking group has approved the R&R of circa RM5 billion of outstanding loans so far.

“As part of our commitment to assist our customers in need, we have been proactively reaching out to our customers since the Movement Control Order (MCO) was lifted to better understand their financing needs and offer our assistance,” AmBank group CEO Datuk Sulaiman Mohd Tahir (picture) said.