AMMB’s Q1 earnings slip on lower interest income due to OPR cut

PETALING JAYA: AMMB Holdings Bhd’s net profit for its first quarter ended June 30 fell 6.7% to RM365.17 million from RM391.46 million in the same quarter of the previous year, due to a decrease in interest income resulting from the Overnight Policy Rate (OPR) cut.

Revenue for the period stood at RM2.21 billion, a 7.4% decline from RM2.39 billion previously.

According to its Bursa disclosure, the retail banking division’s profit after tax (PAT) increased marginally by 1% to RM71.5 million. Its business banking division saw PAT increase by 5% to RM30.5 million, attributed to lower expenses and lower net impairment charge.

AMMB’s wholesale banking division saw a PAT of RM269.3 million, up 4.1% and its investment banking and fund management operations posted a PAT of RM26.5 million, a 36.3% increase.

Its life insurance and family takaful saw a PAT of RM21.2 million compared with RM10.7 million a year ago, mainly due to higher investment income.

On the other hand, the group’s profit after zakat and taxation for its Islamic banking division fell by 15.7% to RM71.7 million mainly due to net modification loss, while it’s PAT for general insurance fell by 8.4% to RM74.8 million.

AmBank Group CEO Datuk Sulaiman Mohd Tahir said the Covid-19 pandemic and the resulting movement control order (MCO) suspended many business operations and with rapid monetary easing, this resulted in the narrowing of margins for banks.

He commented that its costs were well managed, with the cost-to-income ratio at 49.3%, and the group’s net credit cost for the quarter stood at 16 basis points (bps), compared to a net recovery last year.

Sulaiman said with further reductions in the OPR to support the economy and ample liquidity in the banking system, net interest margin compressed further and, as a result, net interest income fell 8.3% year on year.

Excluding the net modification loss resulting from the sector wide measures to temporarily defer monthly loan repayments, AMMB’s underlying net interest margin was 1.74%, down 13 bps year on year.

Moving forward, the CEO acknowledged that there will be downside risks, but the group is will be cushioned by the swift introduction of fiscal stimulus and financial measures aimed at supporting economic growth.

“More stable commodity prices coupled with the current staggered relaxation of the MCO should gradually improve business and consumer sentiments,” he said in a press statement. “The easing of global lockdown should also help provide some positive impetus to trade and investment flows in the second half of 2020.”

At the same time, Sulaiman said, it is also watchful on the emergence of credit risk post moratorium.

source https://www.thesundaily.my/business/ammb-s-q1-earnings-slip-on-lower-interest-income-due-to-opr-cut-IF3676903