Higher net profit for Hong Leong Bank

Hong Leong Bank group managing director and CEO Domenic Fuda said the group's strategic and tactical plans provided us a strong foundation to start the financial year on a positive note.

KUALA LUMPUR: Hong Leong Bank's net profit rose by 5.9% to RM728.90mil in its first quarter ended Sept 30,2020 from RM688.57mil a year ago due to higher net income, prudent cost control and robust contributions from its associates.

In a statement issued on Friday, the banking group said its pre-tax profit rose by 5.2% to RM890.25mil from RM846.55mil ago as net income was higher at RM133.50mil, operating expenses were lower at RM1.5mil and a higher share of proft from associated company of RM22.20mil.

However, this was mitigated by allowance for impairment losses on loans, advances and financing of RM113.3mil

Hong Leong Bank's revenue increased by 10.9% to RM1.35bul from RM1.21bil. Earnings per share were 35.6 sen compared with 33.65 sen.

Its group managing director and CEO Domenic Fuda said the environment which it operates in remains challenging, affected by the ongoing pandemic and cautious consumer and business sentiment.

“Nonetheless, our strategic and tactical plans provided us a strong foundation to start the financial year on a positive note, delivering net profit of RM729mil for the quarter, up 5.9% y-o-y underpinned by reasonable topline performance, prudent cost control and robust contributions from our associates.

“Gross loans and financing sustained its growth momentum, with a 6.8% y-o-y expansion buoyed by signs of economic recovery during the quarter, coupled with funding disbursed to support SMEs and corporate businesses.

“We continue to closely monitor our asset quality during this period of uncertainty, ending the quarter with a healthy GIL ratio of 0.48%. In view of the prolonged recovery situation, to err on the side of caution, we have continued to proactively build up pre-emptive credit loss buffers during the quarter, ” Fuda said.

Hong Leong Bank's gross loans and financing expanded 6.8% year-on-year to RM148.1bil, while upholding solid asset quality, as gross impaired loan (GIL) ratio improved to 0.48%.

Its capital and liquidity position remained strong with Common Equity Tier 1 (CET 1), Tier 1 and total capital ratios at 13.5%, 14.1% and 16.3% respectively.

Loans to deposits ratio (LDR) and liquidity coverage ratio (LCR) were prudently managed at 84.1% and 157% respectively.

Hong Leong Bank said its total income increased by 11% year-on-year (y-o-y) or 12.7% quarter-on-quarter (QoQ) to RM1.35bil, due to loan/financing expansion, prudent asset-liability management and sustained non-interest income contribution.

Net interest income reported a 12.5% y-o-y increase to RM992mil, as a result of asset growth and lower funding cost from repricing of fixed deposits post Ovenright Policy Rate (OPR) cuts. Consequently, net interest margin (NIM) for Q1 recovered to 2%.

Gross loans, advances and financing expanded by 6.8% y-o-y expansion to RM148.1bil, led by key segments of mortgages, SME and commercial banking, as well as overseas operations.

Hong Leong Bank said domestic loans/financing continues to outperform the industry growth rate, at 6.8% y-o-y.

As for residential mortgages, there was an increase of 8% y-o-y to RM74.5bil, supported by a healthy loan/financing pipeline while transport vehicle loans/financing growth remains muted with overall portfolio at RM17.2bil.

Hong Leong Bank's domestic loans/financing to business enterprises expanded 8.4% y-o-y to RM43.3bil, whilst loans and financing to SME increased by 9.4% y-o-y to RM23.8bil.

“The bank’s community banking initiative continues to see strong growth of 37.9% y-o-y or 10.8% q-o-q, partially aided by disbursement of Special Relief Facility (SRF) to support SMEs.

Loans and financing from overseas operations recorded a 7% y-o-y growth, led by expansion in Cambodia and Vietnam by 19.2% and 21% y-o-y respectively.

When compared with the preceding quarter ended June 30, its pre-tax profit rose by 37.2% to RM890.25mil from RM648.70mil mainly due to higher net income of RM152.2mil, lower allowance for impairments losses on loans, advances and financing of RM86.90mil and higher share of profit from associated companies of RM2.7mil.

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