PETALING JAYA: AMMB Holdings Bhd (AmBank) expects to incur less than RM300 million in modification loss owing to the six-month moratorium temporary relief given to about 683,000 customers affected by the Covid-19 pandemic.
Group chief executive officer Datuk Sulaiman Mohd Tahir said the banking group has disbursed about RM65 billion to RM70 billion for the moratorium, which took effect from April 1 until September 30 this year.
He said the moratorium relief accounted for 65 per cent of AmBank's total loan book of RM110 billion.
"It is more of a timing loss, particularly when the bank gives a fixed rate of the hire-purchase loan and extends the loan tenure.
"However, the modification loss can be recouped over time when customers continue making their loan payments," he said at a press conference after exchanging documents between AmBank Group and Lagenda Properties Bhd here today.
Sulaiman said AmBank Group has about 1.1 million customers with a total loan book of RM110 billion.
Of the total, 18,000 customers were small and medium enterprises (SMEs) and over one million individuals' customers.
AmBank's SMEs loan based is primarily on the working capital, machine and factory financing, while individuals mainly for hire purchase and mortgage.
He said activities in terms of business expansion and lending during Movement Control Order (MCO), beginning March 18, 2020, was badly affected as activities were almost halted.
He said funding given by the government to SMEs would help reduce some of the bank's modification loss.
"Hence, the net impact on the modification loss will not that be substantial for the financial year ending December 31, 2020 (FY20).
"The loss is something manageable and we can recoup it over time," he said, adding that lower overnight policy rate (OPR) will impact the bank's net interest margin (NIM) and other income as well.
Sulaiman said moratorium given from all banks to individuals and SMEs help borrowers in terms of loan repayments during this challenging period.
He was hopeful that business volume to pick up to cover some of the shrinking margins.
Sulaiman said AmBank is likely to record 1.0 per cent to 2.0 per cent loan growth this year in anticipation of contraction in the gross domestic product (GDP).
"2020 will be a slower year compared to 2019's with a 5.0 per cent loan growth.
"This year's slower loan growth is expected mainly due to slowdown of the local economy as a whole as trade finance has been hit," he said.
Since early June, Sulaiman said a lot of economic activities had been returning with encouraging consumers spending, especially in cars and houses purchasing.
"The sentiment now is positive and the confidence grows as they (consumers) start to spend," he said.