KUALA LUMPUR: AMMB posted higher underlying net profit of RM791.9mil in the first half ended Sept 30,2020 -- which was an increase of 11.4% from a year ago – excluding its adjustment for modification loss and higher macro provisions due to the Covid-19 pandemic.
The banking group said on Monday that however when it included the modification loss and provisions, its net profit was lower at RM602.48mil compared with RM711.03mil a year ago.
It said total income increased by 5.3% to RM2.25bil, driven by higher trading and investment income.
“Excluding the net modification loss of RM34.5mil, underlying income increased by 6.9%, ” it said.
“Cost-to-income (CTI) ratio improved further to 47.3% from 49.4% a year ago, delivering a positive JAWS of 4.6%. Profit before provisions (PBP) grew by 9.8% to RM1.18bil, underlying PBP increased by 13.0%, ” it said.
AMMB explained it took a larger net impairment charge of RM382.4mil compared with net impairment of RM76.60mil a year ago, mainly due to an additional RM214.8mil in pre-emptive macro provisions taken in the first half of the financial year.
It also recorded an improvement in gross impaired loans (GIL) ratio, which declined to 1.57% (FY20: 1.73%), while there was an increase in loan loss coverage (LLC) ratio at 99.9% (FY20: 93.4%2).
“Gross loans and financing grew by 3.1% year-to-date (YTD) to RM110.6bil. Customer deposits increased by 1.6% year-to-date (YTD) to RM114.8bil, current account and savings account (CASA) balances grew by 18.2% (CASA mix higher at 29.7%), ” it said.
The group recorded a net impairment charge of RM382.4mil in 1H, compared to RM76.6mil a year ago.
AMMB explained the additional RM214.8mil in macro provisions that was charged during the half year, brought the total pre-emptive macro provisions to RM382.1mill, of which RM167.3mil was taken in the previous financial year.
The provisions were made in relation to the Group’s exposures to retail and SME customers that are affected by Covid-19 as well as the aviation and oil and gas sectors.
For the second quarter, its net profit was RM237.32mil compared with RM319.57mil a yuear ago. Its revenue dipped to RM2.14bil from RM2.35bil. Earnings per share were 7.89 sen compared with 10.62 sen.
AmBank Group CEO Datuk Sulaiman Mohd Tahir said the recent resurgence in the number of Covid-19 cases underscores the highly volatile circumstances that are exacerbating the damage already inflicted on the economy while posing challenges to swift economic recovery.
“Against this backdrop, we have set aside an additional RM205mil to strengthen provision coverage in the second quarter of FY21, bringing our total allowances to RM1.74bil on our balance sheet.
“This has raised the group’s loan loss coverage to 99.9% and further increased our credit reserves against the risks posed by the pandemic, ” he said.
Sulaiman said amidst the health crisis and macroeconomic headwinds in its 1H, the group has delivered resilient results with sustained growth in revenue and profit before provisions, which were up 5.3% and 9.8% respectively.
He also said due to the uncertain economic environment in the near term triggered by the resurgence of Covid-19 outbreak, capital and liquidity conservation was paramount in preserving the group’s financial resilience.
“To this end, the group has deferred its interim dividend for the half year ended Sept 30 as an additional measure of prudence while navigating through the current economic uncertainties, ” he said.
Commenting on the financial performance, he said in terms of its quarterly performance, the group’s total income increased by 5.7% compared with 1Q, underpinned by recovery in net interest margin following the repricing of balance sheet and unwinding of net modification loss.
This was offset by lower markets trading gains and softer Insurance income.
“Net profit decreased by 35.0% quarter-on-quarter (QoQ), mainly due to higher macro provisions taken in 2QFY21, ” he said.
On the outlook, Sulaiman said Gross Domestic Product (GDP) for 2020 was expected to contract between -5.3% and -5.7%.
The inflation pressure is expected to remain weak with the reintroduction of the Conditional MCO the government in October. Upside to demand is limited and cost pressures continue to be muted. Headline inflation is projected to remain subdued, averaging around -0.9% to -1.1%.
“The OPR currently stands at 1.75% as the country’s economic activity is projected to improve further while the world economy contends with the resurgence in COVID-19 cases.
“The pace of the economic growth in the near term continues to be subjected to the unpredictable course of the pandemic and subsequent containment measures worldwide.
“ On the back of a weak domestic economic outlook, overall banking industry loans growth for the full year is likely to hover around 4% to 5%, primarily supported by the government stimulus measures, ” he said.
Sulaiman said AMMB had reached out to more than 500,000 customers since the onset of the pandemic to offer repayment assistance through multiple channels.
“We will continue to make available debt rehabilitation support until 30 June 2021 to assist our customers during these trying times.
“As this global crisis continues to accelerate structural changes to our economy, the group is progressing towards the new normal under its refreshed Focus 8 strategy which is premised on building our digital capabilities and driving efficiency through automation.
“ To this end, we will be rolling out our digital onboarding and e-KYC initiatives by end of 2020 while developing collaborations with cross-industry partners. We will continue to invest in growth opportunities and remain steadfast in protecting the long-term interests of our stakeholders by maintaining a sound balance sheet, ” he said.
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