AMMB Holdings Bhd, Malaysia's fifth- biggest lender, said profit surged 31 per cent in the fourth quarter on increased lending and fewer provisions for bad debt.

Net income climbed to RM316.3 million or 10.54 sen a share, in the three months ended March 31, from RM241.7 million, or 8.03 sen, a year earlier, AMMB said in an exchange filing today. Revenue increased 9 per cent to RM1.81 billion.

AMMB joins Malayan Banking Bhd and Public Bank Bhd. in reporting higher profits after the Southeast Asian economy grew at the fastest pace in a decade last year, spurring demand for loans and prompting the government to raise interest rates four times since March 2010 to contain inflation. AMMB also proposed boosting its final dividend 14 per cent to 12 sen a share.

The bank expects increased activity in the lending, fund management and debt markets after Prime Minister Datuk Seri Najib Razak identified US$444 billion of private sector-led investments to drive growth this decade, Managing Director Cheah Tek Kuang said in the statement.

'The banking sector is set to benefit from the economic transformation program,' he said. 'We are well-positioned to benefit from these opportunities.'

Loan Income Rises

Net interest income, or revenue from borrowers after deducting interest paid to depositors, advanced 7 per cent to RM550.8 million in the quarter through March, AMMB said. Allowances for bad loans and financing fell 23 per cent to RM114.2 million, it said.

The central bank has boosted interest rates to curb inflation, which accelerated to a 23-month high in March. It last raised the benchmark overnight policy rate to 3 per cent from 2.75 per cent on May 5. The government will release first-quarter gross domestic product and April inflation data today.

AMMB, part-owned by Australia and New Zealand Banking Group Ltd, expects the benchmark rate to remain at 3 per cent for this year, Cheah said.

Malaysia's economy may have expanded 4.9 per cent in the first quarter through March after a 7.2 per cent growth last year, according to the median forecast of 20 economists surveyed by Bloomberg News.

Shares of the Kuala Lumpur-based lender fell 0.5 per cent to RM6.37 at 10.34 am in Kuala Lumpur after trading resumed at 10 am.

The stock had been suspended from trading before the announcement. - Bloomberg