Ambank expects loan growth at 5% for FY21

Lender delivers resilient results despite pandemic

PETALING JAYA: AMMB Holdings Bhd (Ambank) expects its loan growth to range between 4% and 5% for its financial year ending March 31, 2021 (FY21), in line with what is expected of the industry.

Ambank group CEO Datuk Sulaiman Mohd Tahir said despite the weak domestic economic outlook, the expected pace of loan growth for the financial group would unlikely be far off the sector’s growth.

The group’s gross loan and financing grew 3.1% year-to-date (y-t-d) to Rm110.6bil, driven by growth in retail and business banking.

In a virtual media conference on the group’s first half result, Sulaiman told reporters that despite facing a public health crisis and macroeconomic headwinds in its H1FY21, the group has delivered resilient results.

As a result of the uncertain economic environment in the near term triggered by the resurgence of Covid-19, he said capital and liquidity conservation would be paramount in preserving the group’s financial resilience.

“To this end, the group has deferred its interim dividend for H1FY21 as an additional measure of prudence while navigating through the current economic uncertainties,” he said.

The company’s shares fell 13 sen to close at RM3.32 yesterday.

Ambank group saw its underlying net profit, excluding adjustment for modification loss and higher macro provisions due to the Covid-19 pandemic increase 11.4% year-on-year (y-o-y) to Rm791.9mil for H1FY21.

The banking group said, however, when it included the modification loss and provisions, its net profit was lower at Rm602.48mil for H1FY21 compared with Rm711.03mil in H1FY20.

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%.

Ambank Group said 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 H1FY21. The provisions were made in relation to the group’s exposures to retail and small and medium enterprise customers that are affected by Covid-19 as well as the aviation and oil and gas sectors.

For H1FY21, Ambank’s return on equity (ROE) stood at 6.3%, compared with 7.9% in H1FY20, and its underlying ROE was 8.3%, while return on assets (ROA) slid to 0.81%, compared with 1.01% in H1FY20.

The group’s basic earnings per share (EPS) slid to 20.02 sen from 23.63 sen in H1FY20.

The group recorded an improvement in gross impaired loans (GIL) ratio, which declined to 1.57% from 1.73% in FY20, while the loan loss coverage (LLC) ratio rose to 99.9% from 72.5% in FY20.

Sulaiman said the 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 LLC to 99.9% and further increased our credit reserves against the risks posed by the pandemic, ” he said.

For the second quarter, its net profit was Rm237.32mil compared with Rm319.57mil in the corresponding quarter a year ago.

Its revenue dipped to Rm2.14bil from Rm2.35bil in the corresponding quarter last year, while EPS fell to 7.89 sen from 10.62 sen previously.