-  AMMB Holdings Bhd’s (AMMB)’s 2QFY14 net earnings of RM442mil if annualised came in 1.5% below consensus’ forecast of RM1,821mil FY14F. The 1H net earnings accounted for 49.8% of consensus estimates.

-  Gross loans growth on annualised basis was 2.4% in 2QFY14 (1QFY14: 7.4%). Overall growth is reflective of the group’s current strategy to grow in selected customer segments and economic sectors in the current operating environment, coupled with single large repayments in the business and corporate segments while retail loans have been partly impacted by regulatory changes.

-  Net interest margin was lower by 6bps QoQ to 2.59% in 2Q, compared to the preceding 1Q’s 2.65%. This was attributed to higher margin compression from newer retail loans.

-  Non-interest income was stable QoQ, supported by strong contribution from corporate finance, debt capital market activities, broking and funds management. This was offset by continued volatility in the markets division, although there was continued healthy volume flows from the foreign exchange and derivative sales.

-  CASA deposit flattened off with a -8.2% QoQ growth in 2Q following a strong growth of +6.9% QoQ in 1Q, attributed to transaction account flows. CASA contribution to overall group deposit came in at 18.7% in 2Q (1Q: 20.6%).

-  Gross impaired loans ratio remained stable at 1.9% in 2Q, unchanged from 1Q’s 1.9%. Loan loss cover was 129.2% in 2Q (1Q: 132.2%).

-  There continued to be good recoveries in this 2Q, which led to a loan loss provision writeback of RM10.6mil (1Q writeback RM20.4mil).

-  The revised KPIs for FY14F are: (a) CTI target of less than 47%, revised from 46% previously; (b) loans growth target revised to 7%, from 10% previously; (c) credit cost of 20bps, from previous target of 30bps or less;

-  The other KPI targets are unchanged: (a) net earnings growth of 10% to 12%; (b) ROE target of 14.0% to 14.5%; (c) gross impaired loans ratio of less than 2.0%; (d) NIM contraction of -10bps; (e) fee income ratio of 35%; (f) CASA contribution of more than 20%; (g) LDR of around 90%; and (h) CET1 ratio of 8.5%, Tier 1 ratio of 10.5% and total RWCR of 14.5%.

Source: AmeSecurities