AMMB targets 6-7% growth in SME loans
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%.