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AMMB: Property sector a potential concern

KUALA LUMPUR: Banking group AMMB Holdings Bhd sees the property sector as a potential area of concern in its wholesale segment.

The segment comprises its non-retail services such as corporate banking, institutional banking and investment banking.

“On the non-retail side, the area that would create the most concern is property, which we do know that the supply and demand equation needs to be well managed by the various developers.

“We’ve gone through a period of relatively benign credit cycle, which is likely to get harsher as we move forward,” managing director Ashok Ramamurthy said at a press conference yesterday after announcing the group’s 2014 financial year (FY14) results.

He said the retail segment, too, would continue to face significant pressure in terms of loan growth.

“Household debt is at a very high level and is still growing, and the various measures that have been taken will soften the market,” Ashok said, referring to Bank Negara Malaysia’s recent moves to introduce stricter lending guidelines, particularly for the property segment, to curb rising household debt.

AMMB continues to aim for 10% growth in profit after tax and minority interests in FY15. It expects loan growth of around 9% in FY15, up from 5.3%, in FY14.

For its fourth quarter ended March 31, AMMB’s net profit rose 13.4% to RM486.3 million from the same quarter a year ago. This was on the back of just a 1.9% improvement in revenue.

For the full year, AMMB’s net profit rose 9.9% to RM1.78 billion from RM1.62 billion previously, supported by income growth and acquisitions. Revenue increased 10.3% to RM9.61 billion from RM8.71 billion.

Its return on equity (ROE), a measure of profitability, improved to 14.1%. The banking group is targeting ROE at between 14.2% and 14.5% for FY15.

The largest contributor to growth last year came from its insurance arm, whose net profit almost tripled to RM187.9 million mainly due to higher premium from its integration with Kurnia Insurans (M) Bhd.

Net profit from retail banking — the group’s single largest business segment — grew 9.2% to RM646.2 million.

The group declared a dividend of 16.9 sen for the fourth quarter, with the full-year payout at 24.1 sen.

AMMB is not looking at any acquisitions at the moment. The group has “all the key parts of the jigsaw in place” for organic growth over the next two to three years, Ashok said.

He said AMMB, which recently entered into a new partnership with Metlife International Ltd, is eyeing a top five spot in the domestic insurance market.

Ashok said any hike in the overnight policy rate would be neutral to slightly positive for its banking unit AmBank and he expects a 30% probability of a 25-basis point hike this year. Any hike, he said, would likely be in the third quarter.


This article first appeared in The Edge Financial Daily, on May 21, 2014.

 

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