AMMB Holdings Bhd group chief financial officer Shafiq Abdul Jabbar is anticipating NIM expansion in the first quarter because the initiatives the group had taken so far had already helped reduce the cost of funds. (Photo by Suhaimi Yusuf/The Edge)

KUALA LUMPUR (May 27): AMMB Holdings Bhd (KL:AMBANK) says pressure on its net interest margin (NIM) appears to be easing and the group is expecting NIM to expand in the April to June period this year — its first quarter of FY2025.

AMMB's NIM fell 28 basis points to 1.79% in FY2024 from 2.07% a year ago, due to higher funding costs.

“As to where we see this going in the future, we are internally really re-looking at deposit composition.... We are also looking at alternative funding sources," said its group chief financial officer Shafiq Abdul Jabbar.

Shafiq is anticipating NIM expansion in the first quarter because the initiatives the group had taken so far had already helped reduce the cost of funds.

However, he cautioned that market conditions can be unpredictable and could impact the outlook for the group’s NIM.

Ringgit seen at 4.5 to 4.6 in 2024

Meanwhile, the group sees the ringgit as having an upward bias against the greenback this year and should strengthen to between 4.5 and 4.6 against US dollar this year, according to AMMB group chief executive officer Jamie Ling.

As at 7pm, the local currency was trading at 4.6965 versus the US dollar. The ringgit has recovered from this year's low of 4.7987 — its lowest point in 26 years. Still, on a year-to-date basis, the ringgit has weakened 1.93% against the US dollar.

Ling said the ringgit's recovery is supported by three factors, chief of which is the anticipation of US interest rate cut, which would narrow the interest rate differential between Malaysia and the US.

“The second one is the manufacturing upcycle, particularly the tech cycle, which will lead to stronger regional growth in Asia and the rebound in trade. Malaysia, being an open economy, should benefit from more foreign currency in terms of balance of trade," he said.

The third catalyst for ringgit is domestic growth, which is supported by consumption, he said.

Domestic consumption is expected to rise in the second half of this year as the government will be giving targeted aid to those most in need, he said, adding this increase in spending is expected to offset, or at least partially counterbalance, the impact of the fuel subsidy rationalisation that is included in the ongoing fiscal reform package.