- AMMB Holdings Bhd’s (AMMB)’s 1QFY14 net earnings of RM468mil led to annualised net earnings coming in at 2.6% above consensus forecast of RM1,824mil FY14. The 1Q net earnings accounted for 25.6% of consensus estimates.

- AMMB achieved a 15.1% upward spike in net earnings on a QoQ basis in 1Q, aided by a 3.9% QoQ increase in operating revenue (operating income level), and a loan loss provision writeback of RM20.4mil in 1Q. This was in contrast to a loan loss provision of RM75.8mil in 4QFY13.

- Gross loans growth was 7.4% on annualised basis. Net interest margin was stable at 2.65% in 1QFY14, compared to 2.70% in 4QFY13.

- Non-interest income posted an increase of 15.2% QoQ, driven mainly by much two main items. First, there was an overall higher net gain on securities available-for-sale of RM16.7mil in 1QFY14 compared to a marginal gain of only RM1.8mil in 4QFY13.

- Secondly, net foreign exchange gain (which includes gains and losses from spot and forward contracts and other derivatives) recorded a larger gain of RM28.9mil (4QFY13: RM16.1mil).

- These offset the loss on revaluation of securities held-fortrading of RM29.7mil (4QFY13: gain of RM 28.9mil).

- CASA rose substantially by 6.9% QoQ in 1Q (4QFY13: 9.5% QoQ), above the overall group deposit growth of 2.9% QoQ or an annualised group deposit growth of 11.4%.

- Thus, CASA contribution has now crossed over 20%, to 20.6% in 1QFY14 from 19.9% in 4QFY13.

- Gross impaired loans continue to be better with the balance reduced by 3.7% QoQ. This is the ninth consecutive quarter of sequentially improving impaired loans.

- Gross impaired loans ratio is now at only 1.9%, below the 2.0% mark in 4QFY13. Loan loss cover continues to rise comfortably to 132.2% in 1QFY14 from 129.3% in 4QFY13.

- The main KPIs for FY14F are unchanged: (a) Net earnings growth of 10% to 12%; (b) ROE target of 14.0% to 14.5%; (c) CTI target of less than 46%; (d) gross impaired loans ratio of less than 2.0%; (e) loans growth target of 10%; (f) NIM expected to contract by 10bps or less; (g) Fee income ratio of 35%; (h) CASA contribution of more than 20%; (i) credit cost of 30bps or less; (j) LDR of around 90%; and (k) target CET1 ratio of 8.5%, Tier 1 ratio of 10.5% and total RWCR of 14.5%.

Source: AmeSecurities