Hong Leong Bank posts RM2.5bil profit in financial year 2020


The bank’s managing director and CEO Domenic Fuda (pic) also believes there will be another overnight policy rate (OPR) cut before the year is out. As it is, the market is predicting a 25 basis points cut.

KUALA LUMPUR: Hong Leong Bank Bhd reported net profit of RM2.49bil for its financial year (FY) ended June 30 amid challenging times and forecast gross loan growth of 5% to 6% for the current financial year.

The bank’s managing director and CEO Domenic Fuda (pic) also believes there will be another overnight policy rate (OPR) cut before the year is out. As it is, the market is predicting a 25 basis points cut.

If this happens, the cut could have a one to two basis points (bps) impact on the bank’s net interest margin (NIM) for current FY 2021, though it would be manageable.

Thus far, the NIM had been compressed by about RM130mil in the first half of 2020 led by the 100bps OPR reduction by Bank Negara.

He said the projection of 5% to 6% of gross loan growth is higher than the industry average of about 4%. “We foresee loan demand to pick up and this will be driven by the pipeline of products including loans in residential mortgages, small and medium enterprises (SMEs) and commercial banking, ” Fuda said after releasing the results yesterday.

The bank has also projected a net interest margin of 1.95%-2% from 1.88%, cost to income ratio of below 43% (44% for FY20), and gross impaired loan ratio of below 1% (0.61% FY20).

For FY20, the bank’s net profit of RM2.49bil is 6.7% lower than RM2.66bil recorded a year ago.

The bank’s total income grew 1.1% to RM4.7bil on the back of loan/financing expansion and improved non-interest income contribution, after the impact of the one off modification loss and OPR cuts. Gross loans and financing recorded a 6.1% year-on-year growth to RM1.45bil, with asset quality remaining steady, reflected by a lower gross impaired loan ratio of 0.61%, the bank said.

Earnings per share (EPF) declined to 121.88 sen from 130.23 sen a year earlier.

“It is not a bad performance (given the challenging times) and that has given us some confidence to forecast a 5.6% loan growth, ’’ Fuda said.

He said net profit while 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.

He did say the full impact of Covid-19 pandemic has yet to be fully felt.

The bank also declared a dividend payment of 20 sen, bringing the total payout for the full year to 36 sen per share. Asked if the dividend policy will be maintained in the current fiscal year, Fuda said with robust performance they could pay, but it was too premature to even predict for now.

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