Hong Leong Bank posts net profit of RM2.49bil in FY20

KUALA LUMPUR: Hong Leong Bank Bhd posted a net profit of RM2.49bil in the financial year ended June 30, 2020, a 6.7% decline over the previous financial year, owing to headwinds experienced in the second half of the year.

The board has recommended a final dividend of 20 sen per share, bringing total payout in the financial year to 36 sen per share, it said in a filing with Bursa Malaysia today.

In FY20, the bank's total income rose 1.1% year-on-year (y-o-y) to RM4.78bil on the back of loan/financing expansion and improved non-interest income contribution.

This was despite a lower fourth-quarter net interest income, which slipped 5.5% y-o-y to RM773mil due to the 50bps overnight policy rate cut in May and a one-off modification loss of RM142mil due to the loan moratorium.

Net interest income was RM3.41bil while net interest margin was 8bps lower y-o-y to 1.88% on the back of a combined 100bps OPR cut during the year.

Non-interest income for the financial year was 2.9% higher at RM1.37bil with non-interest income ratio maintained at 28.87%.

Cost-to-income ratio moderated to 44% with positive JAWS attained for the year.

Operating expenses at the bank were flattish at RM2.1bil, owing to its digitisation efforts and strategic cost management initiatives to drive efficiencies.

"We are proud to be able to sustain our business performance with above industry loan/financing growth momentum, disciplined cost management and healthy contributions from our associates.

"Net profit whilst adversely affected from ongoing headwinds, OPR cuts and one-off modification loss due to the loan/financing moratorium initiatives, underlying performance was resilient with good contribution from loan/financing growth and higher treasury and investment income," said Hong Leong Bank group managing director and CEO Domenic Fuda in a statement.

He cautioned that downside risks remain amid uncertainties over the pandemic and the full extent of the economic fallout.

"The ‘new normal’ operating environment will no doubt present new growth opportunities which we will endeavour to capture by being agile and responsive to the changing landscape.

"Concurrently, we continue to revamp our cost structure, enabling us to invest in growth opportunities and deliver sustainable outcomes to our stakeholders," he added.

In a separate statement, Hong Leong Financial Group Bhd annnounced a 3.2% lower net profit of RM1.86bil for the financial year ended June 30, 2020, from RM1.92bil in the previous financial year on marginally lower revenue.

The weaker performance was owing to the decline in net profit in the banking arm as well as the group's insurance subsidiary, Hong Leong Assurance Bhd, which reported a 36.1% decline in net profit to RM141.2mil.

The investment arm, Hong Leong Capital Bhd, reported a 39.1% increase in net profit to RM94.2mil due to positive results from its stockbroking and asset management businesses.

The group proposed a final single-tier dividend of 25 sen per share.
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