KUALA LUMPUR: Hong Leong Bank Bhd
recorded income and earnings growth in its 2022 financial year, but not without its share of headwinds given the current macroeconomic environment.
According to group managing director and CEO Domenic Fuda, the recovery momentum has been punctuated by persistent inflationary threats stemming from the protracted global supply chain disruptions and risks of aggressive policy normalisation.
"The overall economic outlook remains uncertain and bumpy," he said in a statement.
However, he noted Malaysia is on track to achieve the upper end of its 5.3% to 6.3% growth projection this year, underpinned by continuous improvement in domestic demand, amid an improving labour market, targeted policy support and borders reopening.
Announcing the results of 4QFY22, Hong Leong Bank said net profit was RM907.64mil, a 31.64% improvement over the previous comparative quarter.
Revenue during the quarter was up 12.47% year-on-year (y-o-y) to RM1.5bil.
Earnings per share rose to 44.32 sen compared with 33.68 sen.
The group declared a final dividend of 37 sen a share, bringing FY22's total payout to 55 sen a share with a dividend payout ratio of 35%.
For the entire financial year, the bank registered a net profit of RM3.29bil, a 14.98% improvement over the previous year, while revenue increased 2.39% y-o-y to RM5.6bil.
The group said net interest income for the year was 7.2% higher y-o-y at RM4.62bil, representing a net interest margin of 2.14%.
Non-interest income however was down to RM979mil with a non-interest income ratio of 17.5%, mainly owing to lower disposal gains on investment securities.
The bank said operating expenses rose slightly to RM2.1bil with tight management of expenses, leading to a cost-to-income ratio of 37.5%.
Correspondingly, operating profit after allowances for FY22 improved 22% y-o-y to RM3.34bil, and profit before tax was up 25.8% to RM4.37bil.
On financing, the bank said gross loans, advances and financing expanded 8% y-o-y to RM168.2bil on expansion of the key segments of mortgages, SME and commercial banking.
Domestic loans and financing grew 6.7% y-o-y while loans and financing from overseas operations expanded 27.3%, with strong growth recorded in Vietnam, Cambodia and Singapore.
Meanwhile, the bank maintained a healthy funding and liquidity with loans-to-deposits ratio and liquidity coverage ratio of 83.5% and 145.3% respectively.
There was 7.6% growth in customer deposits in FY22, which amounted to RM197.3bil. Current account savings account (Casa) expanded 11.5% to RM66.1bil, lifting the Casa ratio to 33.5% from 32.3% a year prior.
Maintaining its asset quality, gross impaired loans ratio stood at 0.49% while loan impairment coverage (LIC) ratio was 211.8% as at June 30, 2022.
Inclusive of the provisions made and the value of securities held on our GIL, the bank’s LIC ratio comfortably stood at 281.8%.
Capital position of the bank was healthy with CET 1, Tier 1 and Total Capital ratios at 13.4%, 14.5% and 16.7% respectively as at June 30, 2022.
Over at the bank's holding company, Hong Leong Financial Group Bhd (HLFG), net profit in FY22 was 8.25% higher y-o-y at RM2.45bil due to higher contribution from Hong Leong Bank, although insurance unit HLA Holdings Sdn Bhd and investment banking arm Hong Leong Capital Bhd registered lower contributions.
Meanwhile, group revenue was RM6.25bil, 0.85% higher than in the previous year.
The group posted earnings per share of RM2.163 in FY22 compared with RM1.998 in the previous year.
It declared a final dividend of 31 sen per share, bringing the full-year payout to 46 sen per share.
Said HLFG president and CEO Tan Kong Khoon, the group expects Malaysia's economy to remain resilient altough the recovery momentum is facing external headwinds from a slowing gobal economy, sharp interest rate hikes in advanced economies, the prolonged Russia-Ukraine war and strains in China’s economy in 2H22.
"The normalisation of interest rates by Bank Negara Malaysia may be mildly positive to our commercial banking business but the risk of softening of economic activities with consumer sentiment turning cautious may curtail private sector consumption and further dampen the outlook in investment climate.
"While many factors remain at play, the downside risks and uncertainties coupled with rising domestic inflation trend would likely put some pressure on our operating cost, that calls for more stringent cost discipline and vigilance to adapt to a volatile business environment in the new financial year,” he said in a statement.
