· AMMB Holdings Bhd’s (AMMB)’s annualised 2QFY16 net was about 1.2% above the consensus full-year forecast net earnings of RM1,469mil for FY16F. There was a healthy 12.7% QoQ rebound in net earnings, due primarily to a loan loss provisioning write-back in this quarter.

· Loans was better on a sequential quarter basis, with growth at 1.4% QoQ in 2QFY16, compared to -2.5% QoQ in 1QFY16. This leads to lesser rate of contraction in annualised loans growth, of -2.2% in 2QFY16 (1QFY16: - 9.9%). Loans growth was supported predominantly by mortgage and corporate loans, thus reflecting the group’s portfolio rebalancing strategy and focus on preferred customer segments.

· Deposit growth was flat at -0.6% QoQ, while CASA growth was slightly stronger at 0.4% QoQ. This boosted CASA deposit contribution to total deposit to 21.1% in 2QFY15, from 20.9% in 1QFY15. The company said CASA was supported by active relationship management and payroll acquisition programmes, despite outflow of term deposits as expected from rate competition.

· Net interest margin (NIM) was held stable and unchanged at 2.12% in 2QFY16, if compared to 2.12% in 1QFY16. The company said that the positive impact from asset repricing was offset by margin compression as higheryield auto loans tapered off and increased contribution of wholesale loans.

· There was a 10.1% QoQ uptick in gross impaired loans in this quarter, thus taking the gross impaired loans ratio upwards to 1.95% in 2QFY16, from 1.80% in 1QFY16.

· The increase was contributed mainly by the construction, transport, and real estate segments. The company said there was an increase in the wholesale gross impaired loans ratio to 2.0% in 2QFY16, from 1.63% in 1QFY16, due to a single corporate real-estate loan which was subsequently settled in November 2015.

· Loan loss cover slid to 92.5% in 2QFY16, from 103.2% in 1QFY16.

· There were no credit costs in 2QFY16 due to the positive write-back in loan loss provision (1QFY16: 5bps). The company said the allowances were lower with higher recoveries from intensifying collection efforts.

· The company disclosed that its Financial Holding Company (FHC) level’s indicative CET1 ratio was 9.1% as at 30 September 2015.

Source: AmeSecurities Research - 20 Nov 2015