KUALA LUMPUR: AMMB HOLDINGS BHD or the AmBank Group is targeting to maintain its loan growth of 6% for financial year 2020 (FY20) if the country’s GDP hovers around 4.5%.
If the GDP were to increase, group chief executive officer Datuk Sulaiman Mohd Tahir said the growth could go up to 8% or 9%.
“It will be very good if we can grow at 6%.
“We have built the process, the system and we’re very clear about the target market and we want to grow faster than the industry,” he told a briefing of the group’s financial results for the year ended March 31, 2019.
AmBank’s gross loans and financing grew 5.7% to RM101.8bil for FY19.
Group chief financial officer Jamie Ling said the growth rate included a 17% decline in auto loans so the challenge for the upcoming financial year will be to solve the conundrum if auto loans will continue to shrink or is now at a solid base where it can be stabilised and not be a drag to the growth rate.
AmBank Group has recorded a 33% jump in net profit for FY19 to RM1.505bil from RM1.132bil in FY18, on the back of its transformation strategy bearing fruit and generating value for the group.
Net interest income grew 3.9% to RM2.58bil with the consistent expansion of the bank’s loan base while total income stood at RM3.92bil.
Net interest margin contracted to 11bps to 1.89% due to higher liquidity surplus and lending rate pressures in retail banking.
The tougher market conditions also impacted non-interest income, which dipped 10.2% year-on-year (y-o-y) to RM1.34bil, resulting in lower contributions from investment banking, trading and investment income.
There was also a net recovery of RM303.8mil, underpinned by retail debt sale and the resolution of several large non-performing loans (NPLs), as compared to a net impairment charge of RM15.7mil in FY18.
Asked if more NPLs would be sold, Sulaiman said the NPL book is shrinking and while there is not much to sell, and assuming that it clears the “two big cases” that the bank has, the focus is really to run the bank optimally.
“We can’t mention names but clearly these are two legacy loans that we have extended once upon a time.
“They are fully collateralised, in the sense that they are backed by properties and because of that, it is a matter of time that we can have the disposal done.
“We are quite at the advanced stage of disposal which means that we can see numbers in our first quarter of FY20 from April to June,” he said.
Sulaiman added that one of the key drivers for the improving overall profitability in FY19 was the group’s continuous cost discipline and business efficiency measures where expenses were reduced by 12% y-o-y or by RM290mil.
This gave the bank a positive JAWS of 11% while improving its cost-to-income (CTI) ratio from 60.8% in FY18 to 54.3% for FY19, which is below its target of 55%.
Sulaiman said the group hopes to improve this to 52.5% for FY20.
On the customer deposits front, a growth of 11.6% y-o-y to RM106.9bil was recorded, where current accounts and savings accounts (Casa) rose 22.1% to RM24.9bil, which makes AmBank the fastest growing bank in terms of Casa, according to Sulaiman.
For AmBank’s prospects for FY20, Sulaiman said he is cognisant that competition will remain fierce and that regional and international headwinds will have an impact on local market dynamics.
“We are confident that our growth strategy in terms of improving profitability and strengthening our balance sheet is on track.
“Our drive to reduce cost will also carry through into the new financial year,” he said, adding that moving into the final year of the group’s BET300 three-year business efficiency transformation programme, it will continue to maintain a tight rein on cost and pacing its investments while driving operational efficiencies through digitalisation and streamlining processes.
Among the bank’s priorities for FY20 will be to continue to increase penetration in the targeted segments and products, especially in the areas of transaction banking, foreign exchange, SMEs and wealth management.
“Casa growth continues to be a main priority and we need to accelerate our Casa growth and diversify our sources of funding in order to better manage our cost of funds.
“We have also embarked on developing our digital roadmap and exploring smart digital partnerships to create new customer access points,” he said.
Amidst a challenging operating landscape, Sulaiman is bullish on the group’s prospects based on its track record.