AmBank’s 3Q net profit down 30.96% on higher allowance for loans impairment

Thursday 25 Apr 2024

KUALA LUMPUR (March 1): AMMB Holdings Bhd (AmBank)’s net profit for the third quarter ended Dec 31, 2020 (3QFY21) fell 30.96% to RM263.83 million from RM382.15 million a year ago, due to higher allowance for impairment on loans, advances, and financing.

Its quarterly revenue also slipped 11.81% to RM2.09 billion, from RM2.37 billion a year ago, its filing to Bursa Malaysia showed.

The banking group did not declare any dividend for the latest quarter.

For the nine months ended Dec 31, 2020 (9MFY21), the group’s net profit slid 20.75% to RM866.32 million, from RM1.09 billion a year ago, as its revenue declined by 9.38% to RM6.44 billion, from RM7.11 billion.

The group said in a statement that its net profit year to date was affected by additional macro provisions during the year, while it continued to extend financial assistance to its borrowers.

“Arising from the economic uncertainties due to the Covid-19 pandemic, we have undertaken proactive measures by setting aside macro provisions of RM59.7 million in this quarter, with cumulative macro provisions taken since the pandemic of RM441.8 million,” it said.

For 9MFY21, the group’s net interest income grew 3% year on year to RM2.13 billion.

However, net interest margin contracted 8 basis points (bps) to 1.85% year on year, from the impact of the cumulative 125 bps reduction in Overnight Policy Rate during the year 2020.

Meanwhile, non-interest income rose 10.5% year on year, largely contributed by strong trading and investment income from group treasury and markets and general insurance, as well as higher fee income from fund management and stockbroking.

The group recorded a net impairment charge of RM644.5 million in 9MFY21, compared to RM133.5 million a year ago, mainly due to macro provisions of RM274.5 million in 9MFY21.

“The total pre-emptive macro provisions to date amounted to RM441.8 million and were made in relation to the group’s exposure to retail and small and medium sized enterprises customers affected by the Covid-19 pandemic as well as the aviation and oil and gas sectors,” it said.

The group’s gross loans and financing increased 4.4% year to date to RM111.9 billion, driven by growth in retail banking and business banking.

AmBank group chief executive officer Datuk Sulaiman Mohd Tahir said the group will continue to reinforce its digitalisation agenda to deliver cost efficiencies and to improve end-to-end solutions for customers.

“At the same time, the group remains resolute in fortifying its fundamentals in terms of productivity, risk management and balance sheet strength to meet the challenges of the coming year," he said.

He also noted the group had reached an agreement with the Ministry of Finance of Malaysia for a sum of RM2.83 billion to be paid to the Malaysian government as the full and final settlement on all outstanding claims and actions in relation to the group's previous involvement with 1Malaysia Development Bhd and its related entities.

"While this will undoubtedly have a material impact on the group's 4QFY21 earnings and consequently FY21 results, it is important to note that we have adequate capital buffers to absorb the global settlement without an immediate need to raise additional equity capital.

“However, as a consequence of the global settlement, the group will not be proposing any final dividends for FY21. The group would like to assure investors and stakeholders that we remain financially resilient and are ready to capitalise on the opportunities ahead with our refreshed Focus 8 strategy,” he said.

The Focus 8 strategy, according to AmBank, is: deliver growth in targeted segments, build capital-light business, ramp up digital strategy, explore digital bank option, leverage strategic partnerships, increase return on equity (ROE), build sustainability and connecting people.

Meanwhile, the group had requested a suspension of the trading of its securities from 9am to 5pm today and tomorrow.

Last Friday, shares of AmBank fell seven sen or 2.17% to RM3.16, valuing the group at RM9.51 billion.

Edited BySurin Murugiah

Text Size