AMMB tar­gets 6-7% growth in SME loans

The Sun (Malaysia) - - SPEAK UP - BY EVA YEONG

KUALA LUMPUR: AMMB Hold­ings Bhd, which ex­pects net profit for the fi­nan­cial year end­ing March 31, 2017 (FY17) to rise by 5%, fore­sees growth in lend­ing to small and medium en­ter­prises (SMEs) out­pac­ing to­tal loan growth for the year.

To­tal loan growth is ex­pected to come in at 5% for the cur­rent fi­nan­cial year, while SME lend­ing is ex­pected to grow be­tween 6% and 7%.

AMMB aims to have SME loans make up 21% of its over­all loans com­po­si­tion by 2020, from 14% cur­rently.

“Amid a chal­leng­ing en­vi­ron­ment, last year we had neg­a­tive growth in terms of the SME space. This year we want to see pos­i­tive growth and our thoughts are that if loan growth are maybe over­all circa 5% or so for whole group then maybe it (SME) will be higher than that. We fore­see the SME loan growth to be faster than our to­tal loan growth,” group CEO Datuk Su­laiman Mohd Tahir told re­porters at a brief­ing on its first-half FY17 re­sults yes­ter­day.

The group posted a 7.81% fall in net profit for the sec­ond quar­ter ended Sept 30, 2016, to RM352.63 mil­lion from RM382.52 mil­lion a year ago, even as rev­enue rose marginally to RM2.10 bil­lion from RM2.09 bil­lion a year ago.

To­tal in­come for the quar­ter stood at RM954.2 mil­lion while re­turn on equity (ROE) and cost to in­come (CTI) ra­tio stood at 9% and 55% re­spec­tively. Net in­ter­est mar­gins (NIM) for the quar­ter stood at 1.92%.

“If you look at the full year, you can ex­pect as­set growth to re­main sub­dued given the softer macroe­co­nomic con­di­tion. The sec­ond half (of FY17) growth how­ever will be stronger, as we see a pick up in SME and mid-cor­po­rate draw downs along with con­tin­ued strength in mort­gages. So this re­flects some mo­men­tum build­ing in our new strat­egy. We will bal­ance this with main­tain­ing a fo­cus on as­set qual­ity and re­turns.

“As we go on to the final quar­ter of the cal­en­dar year, we are ex­pect­ing de­posit com­pe­ti­tion to in­ten­sify and in fact we are al­ready see­ing the mar­ket start to heat up with rates quite high at 4% quoted for re­tail FDs along with also short term large cor­po­rate de­posit also look­ing quite ex­pen­sive. Good for con­sumers and cor­po­rates but clearly it does have an im­pact on the banks. That will put a lit­tle pres­sure on our cost of funds in the sec­ond half,” CFO Mandy Simp­son said.

She said growth in the group’s net in­ter­est in­come in the first half of FY17 was af­fected by mar­gin com­pres­sion but have now sta­bilised.

“The mar­gins have now sta­bilised. Go­ing into next year, with the growth com­ing through in par­tic­u­lar SME and mid-cor­po­rate which gets some bet­ter re­turns, then that will help sup­port the higher profit growth along with ac­tiv­i­ties on the wealth side and the other mar­ket ac­tiv­i­ties which will drive some good in­come. That will sup­port stronger growth go­ing into 2018, Simp­son said.

AMMB is ex­pect­ing bet­ter growth of 10% in net profit for the fi­nan­cial year end­ing March 31, 2018.

Simp­son said the group will main­tain its fo­cus on cost by man­ag­ing ef­fi­ciency and al­lo­ca­tion of re­sources to help drive and im­prove profit and in­come.

The group ex­pects ROE for FY17 and FY18 to be at 8.5-9% and 10% re­spec­tively and the CTI ra­tios at 57% and 50%. Div­i­dend pay­outs are ex­pected to be about 40%.

From left: Simp­son, Su­laiman and group gen­eral man­ager, in­vestor re­la­tions & plan­ning, Ganesh Ku­mar Nadara­jah at the brief­ing yes­ter­day.

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