loan growth


AMMB’s Q1 net profit up 12.6% on higher income

PETALING JAYA: AMMB Holdings Bhd’s net profit for the first quarter ended June 30, 2019 (Q1FY20) jumped 12.6% to RM391.46 million from RM347.59 million a year ago, underpinned by consistent net interest income (NII) growth, coupled with higher trading and insurance income.

Its revenue rose 10.1% to RM2.39 billion compared with RM2.17 billion in the previous year.

AmBank Group CEO Datuk Sulaiman Mohd Tahir (pix) said it recorded a higher return on equity at 8.8%.

“Total income rose 5.0% year-on-year from improved trading performance and better insurance income despite a subdued lending environment. At the same time, we continued to exert cost discipline with our cost-to-income (CTI) ratio further improving to 49.7%. This is a testament to our transformation strategy which has placed the group on a stronger footing to weather the more challenging operating landscape,” he said in a statement.

The bank’s NII increased 4.2% year on year (yoy), on the back of the expanded loans and deposits base. Non-interest income grew 6.4% to RM395.4 million, largely contributed by higher trading income and invest-ment income from group treasury and markets and general insurance.

The group is now in the third year of its BET300 efficiency programme and continues to record cost savings. which has allowed the group to reinvest some of these savings back into its strategic business streams as well as its digital capabilities and infrastructure.

It recorded a net recovery of RM32.5 million in Q1FY20 compared with an impairment charge of RM7.0 million in the previous year, mainly driven by a net write-back of provision for corporate loans. The group’s gross impaired loan ratio stood at 1.66% (FY19: 1.59%), with loan loss cover at 111.5%.

Gross loans increased 2.5% yoy, though contracted 1.0% year to date to RM100.8 billion, mainly due to corporate loan repayments and decline in auto loans.

Total customer deposits stood at RM102.8 billion, an increase of 4.2% yoy but down 3.9% year to date. The group’s current accounts and savings accounts (CASA) stood at RM23.1 billion, with CASA mix at 22.5%.

AMMB said the group’s capital position is adequate with common equity tier-1 ratio at 11.9% and total capital ratio at 15.4%.

Sulaiman said while Bank Negara Malaysia’s benchmark rate is expected to remain unchanged at 3% for the rest of the year, there is still room for the central bank to reduce the Overnight Policy Rate by 25 basis points in 2H2019 in a move to support domestic demand and in tandem with global monetary policy. In tandem with a moderate economic outlook, the banking system’s loan growth is envisaged to be around 4.6%.

Sulaiman said as part of its digital roadmap, AMMB will be rolling out more such initiatives.

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Singapore slashes 2019 GDP forecast as global risks expand

SINGAPORE: Singapore slashed its full-year economic growth forecast on Tuesday as global conditions were seen worsening and data confirmed the slowest growth rate in a decade amid mounting fears of recession in the city-state.

The government cut its forecast range for gross domestic product in Singapore – often seen as a bellwether for global growth because international trade dwarfs its domestic economy – to zero to 1% from its previous 1.5%-2.5% projection.

Singapore’s downgrade adds to concerns globally about the effect of increasing protectionism on exports and production. The deterioration in the global outlook has pushed central banks to cut interest rates and consider unconventional stimulus to shield their economies.

“Looking ahead, GDP growth in many of Singapore’s key final demand markets in the second half of 2019 is expected to slow from, or remain similar to, that recorded in the first half,” the trade ministry said in a statement on Tuesday.

The ministry flagged a host of growing economic risks including Hong Kong’s political situation, the Japan-Korea trade dispute, the Sino-U.S. tariff war, slowing growth in China and Brexit.

Final second quarter GDP data on Tuesday showed a 3.3% on-quarter contraction on a seasonally-adjusted annualised basis, slightly smaller than the 3.4% decline seen in the government’s advance estimate but lower than a 2.9% fall predicted in a Reuters poll.

Tuesday’s data also confirmed annual GDP expanded 0.1% in April-June from a year earlier, its slowest rate in a decade, and below poll expectations of 0.2%.

Singapore’s benchmark stock index fell 1.2% in early trade, underperforming other bourses in the region.

A central bank official said after the data that it was not considering an off-cycle policy meeting. The next of its scheduled semi-annual meetings is in October, when it is widely expected to ease policy.

Singapore has been hit hard by the Sino-U.S. trade war, which has disrupted world supply chains in a blow to business investment and corporate profits.

“Obviously, it feels like the storm is coming if you look at the whole macro economic fundamentals softening,” said Selena Ling, head of treasury and strategy at OCBC Bank.

“All the downside risks are piling up one one side,” Ling added, pointing to the myriad of global risks flagged in the trade ministry statement.

New Zealand, India and Thailand all cut interest rates last week, signalling major concerns about the outlook for economic growth. Last month, the U.S. Federal Reserve cut interest rates for the first time since 2008.

Analysts at Credit Suisse said in a note titled “a recession is coming” last week they expect Singapore to enter a technical recession in the third quarter, defined as two sequential periods of on-quarter contraction.

A faltering economy is expected to crimp growth at Singapore’s three local listed banks, which have so far benefited from improved margins, steady interest rates and loan growth.

Singapore Prime Minister Lee Hsien Loong said in an annual speech last week that the government stood ready to stimulate the economy. – Reuters

AMMB shareholders set to enjoy higher dividend for FY20

KUALA LUMPUR: Shareholders of AMMB Holdings Bhd are set to receive a higher dividend this financial year ending March 31, 2020 (FY20), based on the group’s guidance of a dividend payout ratio of 40-45% of its profit.

“(This is) the first year (after four years) that we’re giving more than 40%,” group CEO Datuk Sulaiman Mohd Tahir told a press conference after the group’s AGM and EGM here today.

Its FY19 dividend payout ratio was 40%, in line with its guidance of circa 40%. In fact, AMMB’s dividend payout ratio has been consistent at 40% from FY17 to FY19, and 36% in FY16.

Its FY20 guidance includes loan growth of 6%, return on equity (ROE) of 9%, cost-to-income (CTI) ratio of 52.5% and below, as well as common equity tier-1 (CET-1) ratio of 11.5% ±1%. For comparison, it reported loan growth of 5.7% in FY19, ROE of 8.8%, CTI ratio of 54.3% and CET-1 ratio of 11.9%.

As it approaches the final leg of its top four transformation journey (ending in FY20), Sulaiman said AMMB has in most instances achieved the top three spots in terms of growth rates.

The top four aspirations are to be top four in each of its top four growth segments of mass affluent, affluent, SME and mid corp; to be top four in each of its four focus products of cards, transaction banking, markets and wealth management; to sustain top four in each of its current engines of corporate loans, debt capital market, asset management; as well as to be among the top employers in Malaysia.

“In a lot of key financial metrics along the lines of segments, we’re number one, two and three. It sets a platform for us so that the growth is about driving the bank and ensure it continues to drive a capital-accretive business,” said Sulaiman, adding that these translate to improvement in its earnings.

He said the top four strategy has been successful and AMMB has evolved from previously focusing on hire purchases and corporates to now being known as an SME (small and medium enterprise) bank, business bank and known to have improved its current and savings account (casa) business, all which are path that can drive the sustainability of the bank.

“In terms of size, we’re still number six but in terms of driving value for shareholders and profitability, today we’re number one from an earnings perspective from our FY19 performance,” said Sulaiman.

He said the most valuable companies may not have the biggest base and companies that have the biggest assets may not necessarily create the most value as the “composition” of assets comes into play.

AMMB has reshaped its balance sheet which saw the SME business grow 21% in FY19. Casa grew 22%, deposits went up 12%, with total shareholders’ return of 21% during the year. Among others, Sulaiman cited AMMB’s SME growth of 21% and total shareholders’ return of 21% as among the highest in the industry in its respective segments.

“The whole idea is to drive growth and growth is where, from the shareholders perspective, you see value.”

Sulaiman said AMMB is targeting its FY20 loan growth to come in at 6% versus the industry’s 4.5-6% as it expects steady flow of loan disbursements of RM20 billion to SMEs in the next three years.

BNM Governor: Malaysia needs reforms to prepare for the future

KUALA LUMPUR: Malaysia needs to urgently embark on a structural reform to rebuild the country’s strengths and prepare for the future, said Bank Negara Malaysia Governor Datuk Nor Shamsiah Mohd Yunus (pix).

She said the reform should begin with addressing the country immediate economic vulnerabilities and complemented by efforts to raise longer-term growth potentials.

Among the vulnerabilities are enhancing Malaysia’s fiscal position, reducing imbalances in the property market and strengthening household resilience to ensure sustainability of future growth, he added.

“Today, with the global landscape changing more rapidly than ever, with rising protectionism and political efficacy, continued implementation of the structural reform will be paramount for Malaysia to secure a strong foothold in the future,“ she said at Malaysian Economy Symposium at Parliament House here today.

The inaugural symposium themed “Present and Future” was jointly organised by the Office of the Speaker of Dewan Rakyat, the Backbenchers Council and the Parliamentary Caucus on Reform and Governance.

Nor Shamsiah said Malaysia must interact fast in introducing reforms to reduce the current economic complexity by creating high-value jobs, extend domestic linkages, develop new and bolster existing economic cluster, and improve inclusivity.

To develop new and bolster existing economic clusters, she said the country needs to intensify efforts to accelerate investment in the downstream environment sectors such as mining and agriculture and look into the possibility of creating new and sustainable products in existing economic clusters such as palm oil and petroleum.

“We must also remain steadfast to introduce initiatives to support the development and modernisation of digital economy,” she said, adding that this entails a comprehensive intervention to enable business and households to generate income.

She also noted that the Malaysian economic environment is likely to become highly challenging in the immediate term, impacted by a challenging global environment and external headwinds with the ongoing trade dispute affecting Malaysia’s exports with growth to moderate in the range between 4.3 per cent and 4.8 per cent this year.

However, she emphasised that the Malaysian economy remains resilient, with inherent strength working in favour to weather the challenges.

“One of our strengths is multiple engines of growth that is further complimented by a broad export base,“ she explained.

Furthermore, she said Malaysia’s financial system remains stable with banks being well positioned to respond to credit demand from businesses and households.

Financing activity continued to facilitate economic activities with total loan disbursement from January to May this year totalling to RM527 billion, with 14.1 per cent higher than average loan disbursement from 2014 to 2018, she said.

“But higher repayment of RM537 billion during the same period led to lower outstanding loan growth.

“Given the moderate economic growth, it was also natural for the demand in financing to be slower as reflected in a lower loan application growth.

“Nonetheless, moving forward, the strength of credit is expected to remain stable in forthcoming (months) with the banks targeted loan growth of 6.0 to 7.0 per cent this year,“ said the Governor.

For small and medium enterprises (SMEs), she said beyond financing and financial assistance, more needs to be done to elevate the policy.

It is critical to uptake the initiative to enhance the productivity of SMEs by encouraging firms to engage in more higher value-added activities and utilisation of higher automation in their operations, she said.

SME productivity stood about 37.1 per cent of gross domestic product despite high financing support of 53.1 per cent of total business loans.

In comparison, Malaysia’s SME contribution to GDP was rather low compared with that of other countries such as Indonesia (60.6 per cent), China (60 per cent) , Japan (54.5 per cent), the United Kingdom (51 per cent), and Thailand (42.3 per cent), she added.

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