AMMB Q1 earnings at RM339m (Update)

KUALA LUMPUR: AMMB Holdings Bhd posted earnings of RM339.51mil in the first quarter ended June 30, 2015 during a soft quarter which was impacted by slowing economic growth while it reduced its exposure to less preferred  segments and instead emphasised on growing variable rate loans.

It said on Wednesday the earnings were lower compared with the RM536.94mil a year ago when there was a one-off divestment gain.

“Excluding one-off divestment gains in Q1FY2015, profit after tax and non-controlling interests increased by 3.1% to RM339.5mil driven by lower provisions and operating expenses,” it said.

Revenue fell to RM2.109bil from RM2.583bil a year ago. Earnings per share were 11.31 sen compared with 17.86 sen.

“Reduction in earnings for current period ended June 30 was mainly due to lower income reported from other operating income, net interest income and net income from insurance business by RM412.7mil, RM81.9mil and RM5.7mil respectively. 

“Besides, impairment writeback on financial investments or RM5mil was reported for previous period ended June 30, 2014 as compared to nil for current reporting period ended June 30,” AMMB said in the notes accompanying its financial results.

The banking group said, however, this was cushioned by lower provision reported from impairment on loans, advances and financing, doubtful sundry receivables and foreclosed properties by RM70.3mil, RM32.5mil and RM5.5mil respectively.

Lower expenses were reported from other operating expenses and acquisition and business efficiency expenses by RM70mil and RM69.7mil. 

There was a higher writeback of provision for commitments and contingencies of RM16.2mil. 

During the quarter, AMMB’s retail banking’s net profit fell 3.7%  on-year to RM118.5mil as gross loans contracted 4.6% on-year mainly from continued de-risking  activities as it shift towards preferred segments and margin compression.

This was partially mitigated by lower expenses through disciplined cost management driven by reduction of personnel costs and lower loan loss allowances in line with improved asset quality.

The bank said its primary loans growth focus was mortgage, which grew 6.7% on-year. Excluding the auto finance segment, gross loans growth was 1.3%. Customer deposits expanded 5.4%, driven by strategic initiatives targeting small businesses and emerging affluent segments.

Commenting on its wholesale banking, AMMB said the division experienced a soft quarter where net profit declined 12.6% to RM189.2mil. 

This was attributable to margin compression, subdued capital market activities stemming from weak business sentiments and lower trading income impacted by unfavourable yield curve movements. 

However, the impact was partially offset by higher foreign exchange sales capitalising on volatile USD/MYR exchange rate and personnel cost savings from right sizing programmes.

AMMB’s net lending fell 2.4% on-quarter, mostly attributed to wholesale banking (-3.8%), as a result of large repayments during the quarter. 

Its retail banking’s loan portfolio contracted 1.2% on-quarter due to auto finance (-2.4%), partially offset by mortgage loans (+2.0%).

It said with the aspiration to deliver sustainable growth and risk-adjusted returns, the group’s portfolio re-balancing  initiatives was guided by gradual reduction in exposures to less preferred  segments and emphasis on growing variable rate loans. 

“To date, we have increased our variable-rate  loans  from 57%  a  year  ago  to  65%,  whilst our composition  of  retail  and  non-retail  loans  stood  at 54%  and  46% respectively,” AMMB said. 

“The group’s current and savings account composition was relatively stable although deposits declined 2.5% on-quarter.  While there were some outflows of term deposits in first quarter FY16 due to intense market competition, the liquidity coverage ratio (LCR) for the group’s three banking entities were above 100% as at June 30, well above regulatory requirements,” it added. 

Non-interest   income   for   the   quarter   was   RM347.2mil, constituting 36% of total income. 

Excluding one-off divestment gain, non-interest  income  decreased  8.7%  on-year  impacted  by  lower  fees from lending, securities and investment banking activities as well as drop in contributions from the insurance businesses. 

AMMB said the process of identifying the next group managing director was being led by the group nomination and remuneration committee of the board.

“The board recognises the urgency and significance of finding the appropriate candidate who can lead the group to the next level of growth, and is in the process of narrowing down a list of suitable candidates,” it said. 

To recap, Datuk Mohamed Azmi Mahmood was appointed as the acting group managing director on April 2, following the resignation of Ashok Ramamurthy. 

Azmi said: “Despite a soft quarter with slowing economic growth, our group remains committed to deliver risk-adjusted returns with key initiatives in place to drive sustainable growth, supported by ongoing investments to improve our capabilities and customer experience. 

“We remain focused on our FY2015-2017 strategic agenda to deliver on focused organic growth and continue to leverage on our strategic partnerships, deliver on acquisitions, optimise efficiency and build sustainability.”