Hong Leong Bank results within expectation

PETALING JAYA: While Hong Leong Bank Bhd’s (HLB) results for the first three months of financial year 2017 came within Kenanga Research’s expectations, the research house believes that there is no clear catalyst for the bank going forward.

Kenanga Research said on Wednesday that the positive growth of core net profit in the first quarter of financial year 2017 (1QFY17) which grew by 8% year-on-year (YoY) to RM543mil, was due to healthy topline growth across the board coupled with improved contribution from its overseas associate.

To note, loans growth was slower at 4% YoY but despite slower loans, net interest margin improved by four basis points due to efficient funding management and loan loss provisions falling by 4%. Going forward, loans growth will be still be a challenge in this uncertain environment coupled with the management’s focus of maintaining quality and margins over loans growth.

Kenanga Research has maintained its earnings projections for FY17 and FY18 at RM2.106bil and RM2.246bil, respectively.

The research house has reiterated its “market perform” call on HLB and left the target price unchanged at RM13.56.

Meanwhile, MIDF Research moted that HLB’s non-interest income (NOII) was the primary reason that boosted the group’s total income for 1QFY17, which was 7.2% YoY higher at RM1.1bil. HLB’s NOII grew by 12.2% YoY to RM294.8mil which was mainly contributed by greater trading and investment income from dividends and gains of sale of financial assets.

The research house said that asset quality remains stable and overall gross impared loans (GIL) ratio stood at 0.84% as at 1QFY17. To note, GIL only rose by one basis point YoY.

“We view that there is possibility that the group to continue with its good start in FY17.

“As such, we are upgrading our call on Hong Leong Bank to buy,” said MIDF Research in its report, while adding that the target price has been revised upward to RM15.