Higher allowance for impairment hits AMMB’s Q2 results

PETALING JAYA: AMMB Holdings Bhd’s net profit for its second quarter ended Sept 30, 2020 fell by 25.7% to RM237.32 million from RM319.57 million in the same quarter of the previous year on the back of a higher allowance for impairment on loans, advances and financing.

Its revenue stood at RM2.14 billion, a 9% decline from RM2.35 billion previously.

In the six-month period, AMMB posted a net profit of RM602.48 million, a 15.3% decline from RM711.03 million reported in the same period of the previous year.

Revenue stood at RM4.35 billion an 8.2% decrease from RM4.74 billion registered previously.

According to its Bursa filing, in the first half of the financial year the group saw a decrease in funding cost due to lower interest expense on deposits from customers and financial institutions, securities sold under repurchase agreements, term funding and debt capital.

It revealed that fee-based income declined by RM14.7 million due lower income from fees on loans and securities and corporate advisory, while market based income increased from gains on sale of securities and higher revaluation gain on trading securities offset by higher losses on derivatives and lower gains on foreign exchange.

Meanwhile, net income from insurance business increased mainly due to lower insurance claims offset by lower net earned premium.

For first-half 2021, the group’s net interest income (NII) of RM1.35 billion was stable compared to a year ago and excluding the net modification loss, NII increased by 2.9%, driven by assets growth.

Meanwhile, net interest margin (NIM) contracted 13 bps to 1.76%, given the lower assets yield resulting from a cumulative 125 bps reduction in the Overnight Policy Rate (OPR) for the year 2020.

AMMB’s group CEO Datuk Sulaiman Mohd Tahir commented that 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.

He pointed out that in 1H’21FY its net profit stood at RM602.5 million as a result of the additional macro provisions taken and excluding the net modification loss and preemptive macro provisions, underlying net profit was RM791.9 million, up 11.4%.

“To this end, the group has deferred its interim dividend for the half year ended Sept 30, 2020 as an additional measure of prudence while navigating through the current economic uncertainties.”