GEORGE TOWN: AMMB Holdings Bhd’s (AmBank Group) net profit dropped 37.6% to RM339.5 million or 11.31 sen per share in its first quarter ended June 30 (1QFY16), mainly on lower other operating income, net interest income and net income from the insurance business.

There was also an impairment write-back on financial investments that was reported in the previous corresponding period (1QFY15), when it posted a net profit of RM536.94 million, its filing with Bursa Malaysia yesterday showed.

In a statement, AmBank Group said excluding a one-off divestment gain in 1QFY15, non-interest income — which constituted 36% of its total income — fell 8.7% year-on-year (y-o-y) to RM347.2 million, impacted by lower fees from lending, securities and investment banking activities, as well as a drop in contributions from insurance businesses.

Its latest quarterly revenue came in 18.34% lower at RM2.11 billion versus RM2.58 billion in 1QFY15.

Segmentally, its profit after tax (PAT) for retail banking decreased 3.7% y-o-y as gross loans contracted (4.6% y-o-y), mainly from the de-risking of the auto finance portfolio and reducing exposure to less preferred segments, while margins were also compressed.

Its wholesale banking’s PAT declined 12.6% due to margin compression, subdued capital market activities, and lower fixed trading income. Loan growth was also flat y-o-y, given weak loan appetite and slow business investments, though deposits were stable y-o-y, it noted.

Meanwhile, its general insurance segment’s net premium PAT declined 5.9% y-o-y as a result of lower investment income, while life assurance and family takaful saw a loss of RM2.8 million, caused by lower net premium earned and higher management expenses.

It noted that while there were some outflows of term deposits in 1QFY16 due to intense market competition, the liquidity coverage ratios for the group’s three banking entities were above 100% as at June 30.

The group’s gross impaired loan ratio was at 1.80%, while loan loss coverage remained above 100%.

As at June 30, the group’s total assets stood at RM131.7 billion, while its total capital ratio was at 16.1%, based on Basel III requirements.

Moving forward, the group forecasts a modest annual gross domestic product growth of 4.7% for the country this year due to softer consumer demand and lower commodity prices. It expects private consumption to grow moderately as households adapt to the goods and services tax, but in the longer term, business and economic conditions are expected to remain challenging.

Externally, the recent yuan devaluation, ringgit depreciation and potential hike in US interest rates could lead to further market volatility, it noted.

“Our group remains committed to delivering risk-adjusted returns with key initiatives in place to drive sustainable growth, supported by ongoing investments to improve our capabilities and customer experience,” said acting group managing director Datuk Mohamed Azmi Mahmood.

This article first appeared in digitaledge Daily, on August 20, 2015.