In line. AMMB's annualised 1QFY13 net profit was largely in line with consensus and our full-year forecasts, with 1QFY13 earnings representing 27% and 26% of the respective full-year estimates. Earnings expanded 4.6% y-o-y and 30.9% q-o-q. However, growth was largely driven by strong loans loss recoveries during the quarter and benefits from the maiden quarter adoption of MFRS139, which resulted in 1Q13's annualised credit cost dipping to 32bps vs FY12's 51bps and management's full-year FY13 guidance for 40-45bps. Pre-provision operating profit declined 5.3% y-o-y given the: i) high base effect of 1Q13's trading income gains, and ii) an uptick in overhead costs due to further infrastructure investment spending. Meanwhile, earnings expanded 30% q-o-q, largely attributed to strong recoveries, which helped to bring down loans loss provisions by 88%.

Stable NIMs, loans growth. Net interest income expanded by a commendable 2.1% q-o-q, underpinned by a relatively benign NIMs compression of just 2bps q-o-q and a commendable 3.3% q-o-q loans growth. The surprisingly robust CASA growth of 33% y-o-y helped to offset the otherwise intense asset yield compression. This helped to mitigate NIMs compression to a more manageable 2bps. That said, guidance is for further compression in NIMs in the ensuing quarters while the degree of sustainability of the group's strong CASA growth recently remains questionable.

Slowing loan growth offset by uptick in margins. The group reported a below-industry loan growth of 7.2%, as it opted to focus on its profitable segments rather than drive growth in all channels. SME loans registered the strongest growth at 18.2% while mortgage loans was the star within the retail portfolio at 6.1% growth, but this was still significantly below the industry mortgage average of 13%. Hire purchase continued to lag, growing at just 3.4%, while corporate loans expanded at a relatively commendable 7%. Management said moving forward, retail loans growth will continue to face challenges in view of Bank Negara's cooling measures but remains optimistic that business and corporate loan growth will continue to gain traction, with the Economic Transformation Programme partially driving the growth momentum in 2012.

Source: OSK