KUALA LUMPUR: AMMB Holdings Bhd (AmBank Group) expects a 4% to 5% loan growth for the financial year ending March 31, 2016 (FY16). It will be driven by mortgage, wholesale, and small and medium enterprise (SME) loans, said group acting managing director Datuk Mohamed Azmi Mahmood.

Automotive loans, which fell RM3 billion or 11.05% last year and affected FY15 loan growth as AmBank Group rebalanced its loan portfolio, are not expected to contract further, Mohamed Azmi told reporters after the group's annual general meeting yesterday.

“This year, we are not expecting the same level of contraction on the automotive side. We are expecting continued steady growth in mortgages, along with good growth in wholesale, which will come from the SME and commercial segments,” he said.

The group expects a 7% growth in its mortgage loans in FY16, against a growth of 6.2% in FY15.

AmBank Group chief financial officer Mandy Simpson said there are still opportunities in the mortgage market.

“There are specific propositions [that the AmBank Group can look at]. For example, we are eyeing young professionals as well as the secondary market,” she said.

As at June 30, 2015 (1QFY16), AmBank Group’s loans, advances and financing stood at RM84.07 billion, down 2.45% from RM86.17 billion a year ago.

On the group’s net interest margin, Simpson noted that the management is forecasting a 15 to 20 basis points (bps) contraction in FY16.

“The deposits available have [decreased a little], so prices for those deposits have gone up, and given this, they will have an impact on the margin as well,” she said.

“We are hopeful that the full year would broadly stay in the 21bps range. At the same time, we are looking to get some loan growth as well, so we need to balance the two. It is difficult to tell exactly [how] the market is going to price the deposits,” said Simpson.

Asked if the weakening ringgit would affect AmBank Group’s earnings, Simpson foresees that the impact would not be significant as most of the group’s businesses are conducted locally.

AmBank Group on Wednesday released its 1QFY16 results, which saw its net profit falling 36.8% to RM339.51 million from RM536.94 million in the corresponding period of last year.

The group posted a revenue of RM2.11 billion for 1QFY16, down 18.34% from RM2.58 billion in the previous corresponding quarter.

AmBank Group is undertaking loan portfolio rebalancing initiatives in order to gradually reduce its exposure to less preferred segments.

AmBank Group (fundamental: 1.5; valuation: 2.55) shares fell 14 sen or 2.83% to RM4.80 yesterday, with a market capitalisation of RM14.47 billion.

This article first appeared in digitaledge Daily, on August 21, 2015.