Dato’ Sulaiman Mohd Tahir (Dato’ Sulaiman), AmBank Group Chief Executive Officer said, “The recent resurgence in the number of COVID-19 cases underscores the highly volatile circumstances that are exacerbating the damage already inflicted on the economy while posing challenges to swift economic recovery. Against this backdrop, we have set aside an additional RM205 million to strengthen provision coverage in the second quarter of FY21, bringing our total allowances to RM1.74 billion on our balance sheet. This has raised the Group’s loan loss coverage to 99.9% and further increased our credit reserves against the risks posed by the pandemic. Amidst the health crisis and macroeconomic headwinds in the first-half of FY21, I am pleased that the Group has delivered resilient results with sustained growth in revenue and profit before provisions, which were up 5.3% and 9.8% respectively. The Group’s net profit stood at RM602.5 million as a result of the additional macro provisions taken. Excluding the net modification loss and pre-emptive macro provisions, underlying net profit was RM791.9 million, up 11.4%.”
“In view of the uncertain economic environment in the near term triggered by the resurgence of COVID-19 outbreak, capital and liquidity conservation is paramount in preserving the Group’s financial resilience. To this end, the Group has deferred its interim dividend for the half year ended 30 September 2020 as an additional measure of prudence while navigating through the current economic uncertainties.”
“In line with the Group’s ongoing efforts to support SMEs and Malaysians impacted by COVID-19, we are extending our targeted Repayment Assistance Programme until 30 June 2021. The extension is intended to further aid our customers who are impacted by job loss or are facing income reductions due to the pandemic. As at mid-October 2020, we have processed more than 60,000 applications and have approved close to 100% of these applications. Since the onset of the pandemic, we have extended repayment assistance for loans and financing amounting to around RM11 billion.”
In terms of its quarterly performance, the Group’s total income increased by 5.7% compared with the preceding quarter (Q1FY21), underpinned by recovery in net interest margin following the repricing of balance sheet and unwinding of net modification loss. This was offset by lower Markets trading gains and softer Insurance income. Net profit decreased by 35.0% quarter-on-quarter (QoQ), mainly due to higher macro provisions taken in Q2FY21.
In the first half of FY21, the Group’s NII of RM1,353.8 million was stable compared to a year ago. Excluding the net modification loss, NII increased by 2.9%, driven by assets growth. Meanwhile, net interest margin (NIM) contracted 13 bps to 1.76%, given the lower assets yield resulting from a cumulative 125 bps reduction in Overnight Policy Rate (OPR) for the year 2020. Excluding the net modification loss, underlying net interest margin (NIM) was 1.80%, down 9 bps YoY. Non-interest income (NoII) grew by 13.8% YoY, contributed by strong trading and investment income from Group Treasury and Markets and General Insurance, as well as higher fee income from Fund Management and Stockbroking. Consequently, total income grew by 5.3% YoY to RM2,247.2 million.
The Group continues to exercise disciplined cost management. Operating expenses were broadly stable at RM1,062.4 million and CTI improved further to 47.3% from 49.4% a year ago. Consequently, PBP increased by 9.8% YoY, with underlying PBP up by 13.0%.
The Group recorded a net impairment charge of RM382.4 million in H1FY21, compared to RM76.6 million a year ago. The additional RM214.8 million in macro provisions that was charged during the half year, brought the total pre-emptive macro provisions to RM382.1 million, of which RM167.3 million was taken in the previous financial year. The provisions were made in relation to the Group’s exposures to retail and SME customers that are affected by COVID-19 as well as the aviation and oil and gas sectors. Gross impaired loans ratio stood at 1.57% (FY20: 1.73%), with loan loss coverage improving to 99.9% (FY20: 72.5%4). The Group is closely monitoring the impact of the economic slowdown on credit portfolios through stress tests, identifying vulnerable borrowers and conducting regular portfolio reviews as part of on-going credit vigilance.
The Group’s gross loans and financing increased 3.1% YTD to RM110.6 billion, driven by growth in Retail Banking and Business Banking. Mortgages grew RM1.6 billion to RM38.1 billion and loans to SME customers increased by RM1.7 billion to RM22.5 billion while Wholesale Banking loans fell by RM653.1 million from lower corporate utilisation.
Deposits from customers increased 1.6% YTD to RM114.8 billion. CASA balances registered robust growth of 18.2% YTD to RM34.1 billion, with CASA mix higher at 29.7% (FY20: 25.5%).
The Group continued to maintain sound capital and liquidity positions. The Group’s FHC CET1 ratio and total capital ratio strengthened to 13.5% and 16.6% respectively from capital accretion through profits and suspending interim dividend. Based on stress testing scenarios, the Group has adequate loss absorption capacity to maintain capital ratios above both internal capital targets and regulatory requirements. We remained highly liquid, with a liquidity coverage ratio (LCR) of 155.4% and net stable funding ratios5 (NSFR) of all banking subsidiaries above 100% as at 30 September 2020.