Wednesday August 12, 2009

Islamic banking boosts AMMB’s Q1 net profit

By YEOW POOI LING

PETALING JAYA: AMMB Holdings Bhd posted a net profit of RM258.2mil for the first quarter ended June 30, a 27% jump compared with RM202.9mil recorded in the previous corresponding period, thanks mainly to contribution from the Islamic banking business and growth in other banking segments.

Excluding one-off adjustments, the group’s net profit for the quarter was RM263.7mil versus RM201.4mil a year ago.

In a filing to Bursa Malaysia yesterday, AMMB – the holding company of the AmBank group – said revenue for the quarter rose to RM1.53bil from RM1.41bil previously while earnings per share improved to 9.48 sen versus 7.45 sen a year ago. The higher revenue growth in the group helped to improve the cost-income ratio to 39.1% currently. Total assets stood at RM91.2bil, or 9.9% higher than a year ago.

Net loans and advances ended at RM58bil. Hire purchase loans expanded by RM80.9mil and accounted for 40.2% of total loans, followed by loans for residential mortgages, which accounted for 18.6% of total loans.

Customer deposits grew 21.3% year-on-year, fuelled by successful campaigns, introduction of new segment-based and repackaged products, cross-selling as well as focus on cash management and payroll crediting facilities. This brings the group’s loan-to-debt ratio to 88.6% from 98.3% previously.

Net non-performing loans (NPL) ratio stood at 2.4% and loan loss coverage rate improved to 78.6%. Tier 1 and risk-weighted capital adequacy ratios were 9.4% and 14.7% respectively.

Its retail banking was the largest contributor to earnings in absolute terms, followed by investment banking and insurance.

Of the segments, relationship banking’s lending grew the most at 45.7%, thanks to its emphasis on project financing with government support, government-linked and multinational companies.

Business banking’s net loans grew 13.7% with net NPL at 0.6% (excluding loan rehabilitation) while retail banking posted modest loans growth of 3.6%, in line with its strategy of delivering higher risk adjusted returns in target segments.

“The strong performance in the first quarter reflects the group’s sound and diversified business fundamentals. We have adopted prudent provisioning measures to combat potential credit deterioration in the quarters ahead due to economic contractions,” group chief executive officer and managing director Cheah Tek Kuang said in a statement.

The group’s mid-term goals were to focus on areas like income diversification, cost management, deposits growth and risk disciplines enhancement, he added.

AMMB’s performance was above analysts’ expectations. According to a banking analyst of a foreign broking house, the group’s investment banking was boosted by the recovery of the capital markets.

“There is a good chance that the banking group will be able to sustain its earnings trend in the next few quarters if the capital markets remained firm,” she said.

The group does not compete on volume basis, instead product offering is based on expected yield of each product. “If the yield of the product is not attractive, the bank doesn’t go in,” the analyst said.

Another analyst from a bank-backed brokerage said the strong rebound of the capital market was partly due to pent-up demand.

“There is no sharp deterioration in terms of asset quality,” he said, adding that he’s maintaining the earnings estimate of AMMB for the financial year ending March 31, 2010.

AMMB : [Stock Watch] [News]

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