KUALA LUMPUR (Aug 21): AMMB Holdings Bhd's (AmBank) net profit for the first quarter ended June 30, 2023 (1QFY2024) dropped 7.8% to RM378.37 million, from RM410.39 million a year ago, as net impairment charges rose due to higher provisions.

Thus, earnings per share was lower at 11.44 sen from 12.40 sen, the banking group reported in a Bursa Malaysia filing on Monday (Aug 21).

“Net impairment charges were noticeably higher this quarter at RM190.4 million, compared to RM63.9 million in the same quarter the previous year, mainly due to higher provisions,” AmBank said in a separate statement on Monday.

It also noted that profit before provisions increased by 14% year-on-year (y-o-y) to RM694.2 million.

Revenue for the quarter rose 4.27% to RM1.2 billion, from RM1.15 billion previously. AmBank said continuing operations reported an 11.2% y-o-y growth, driven by a 67.8% increase in non-interest income (NOII), which was marginally offset by a 2.7% reduction in net interest income (NII).

“The strong growth in NOII from continuing operations was driven by trading gains in securities, higher fees earned from business banking, investment banking and asset management, as well as improved income from life and general insurance. A further RM51.1 million gain from the completion of our general insurance business disposal was recorded,” it said.

AmBank added that a lower net interest margin of 1.76% in 1QFY2024, versus 2.12% in 1QFY2023, was the key reason for its lower NII.

It reported that overall expenses decreased 6.6% year-on-year to RM507.7 million. As a result, cost-to-income (CTI) ratio was lower at 42.2% (1QFY2023: 47.2%). On continuing operations basis, CTI was at 44.1% (1QFY2023: 45.3%)

The bank’s group chief executive officer Datuk Sulaiman Mohd Tahir said: “This quarter's financial results underscores AmBank's commitment to resilience and strategic diversification of revenue sources. We navigated net interest margin compressions and, at the same time, solidified our liquidity with capital ratios improving further.”

AmBank said it remained highly liquid, with the group’s liquidity coverage ratio improving to 170% (FY2023: 149.2%).

“Total customer deposits stayed at RM130.3 billion, with time deposits increasing 11.2% to RM90.7 billion offset by a decrease in Casa (current account savings accounts) balances of 18.9% to RM39.6 billion,” it said.

“We attributed this to depositors favouring time deposits over Casa in search of better yields in the current rising interest rate environment, leading to a Casa mix of 30.4% (FY2023: 37.4%).”

Meanwhile, AmBank’s gross impaired loans ratio was at 1.66% (FY2023: 1.46%) with loan loss coverage ratio including regulatory reserves at 115.6% (FY2023: 127.7%).

“Our total gross loans and financing decreased by a marginal 1% to RM129 billion in 1QFY2024 due to lower customer activities which led to a reduction in the loans portfolio of wholesale banking (-4.2% year-to-date [YTD]) and business banking (-3.7% YTD). However, retail banking registered consistent loan growth (+1.3% YTD),” it said.

Looking forward, Sulaiman said AmBank is bullish on domestic demand despite the headwinds of tempered exports and muted external appetites.

“The group is focused on its commitment to value creation for shareholders and stakeholders alike. This entails not just an emphasis on revenue growth but also on strict cost discipline, fortifying our capital base, maintaining healthy liquidity levels and vigilantly monitoring asset quality.

“In this unfolding financial narrative, we are keenly eyeing opportunities in the SME (small and medium enterprise) sector while upholding our ESG (environmental, social and governance) mandates and championing a digital future for the group,” he said.

During Monday’s noon break, AmBank’s share price was unchanged at RM3.86 apiece, valuing the group at RM12.79 billion.