KUALA LUMPUR: Following a solid performance in its recent quarter, Hong Leong Bank Bhd group managing director and CEO Domenic Fuda said the group remains cautiously optimistic over the business outlook for the remainder of 2023.
"We are pleased with the solid underlying performance of the Bank year-to-date underpinned by healthy loan/financing growth, solid asset quality and prudent funding and liquidity positions amid a slowing global landscape," he said in a statement.
However, he cautioned that lingering recession risks among the major economies would continue to cloud the global growth outlook.
In the third quarter of its financial year ended March 31, 2023, Hong Leong posted a net profit of RM929.96mil, which represents an earnings per share of 45.39 sen, up from a net profit of RM784.8mil in the same quarter in 2022.
The bank reported revenue of RM1.4bil, up from RM1.35bil in the comparative quarter.
Year-to-date, Hong Leong registered a net profit of RM2.95bil and revenue of RM4.38bil, which compares to net profit of RM2.38bil and revenue of RM4.1bil in the previous corresponding period.
Accordingly, the bank's return on equity improved to 12.3% in 9MFY23.
During the nine months period, Hong Leong said the increase in total income was mainly owing to a higher non-interest income contribution of RM919mil, which represented 43.7% growth year-on-year (y-o-y).
It said the improved performance was attributed to higher credit card related fees coupled with improved performance in trade finance, trading and foreign exchange due to the strengthening of our local currency.
Net interest income meanwhile was stable y-o-y at RM3.46bil during the nine-month period on the back of still elevated funding cost pressure, which was mitigated by loan/financing expansion and discipline asset/liability management.
Correspondingly, net interest margin (NIM) for 9MFY23 stood at 2.03%.
Operating expenses were stable at RM1.65bil during the period, leading to a cost-to-income ratio of 37.6%.
The bank said gross loans, advances and financing continue to deliver solid growth of 7.2% y-o-y to RM174.2bil, driven by expansion in the key segments of mortgages, SME and commercial banking, as well as overseas operations.
It said domestic loans and financing grew 6.2% y-o-y, which outpaced the industry growth rate of 4.9% y-o-y.
As at March 31, 2023, the bank's loan-to-deposit ratio stood at 84% while liquidity coverage ratio remained above regulatory requirements at 140%.
Customer deposits for 9MFY23 increased 6.6% y-o-y to RM203bil, supported by solid growth in business deposits of 7.7% y-o-y to RM93.9bil while current account savings account (Casa) ratio was steady at 29.8%.
The bank said its asset quality positions remained healthy with a stable gross impaired loans (GIL) ratio of 0.52% while loan impairment coverage (LIC) ratio stood at 197% as at March 31, 2023.
Inclusive of the provisions made and the value of securities held on GIL, the bank’s LIC ratio was 267%.
The capital position of the bank remained solid with CET 1, Tier 1 and Total Capital ratios at 12.9%, 13.9% and 16.0% respectively as at March 31, 2023.
Meanwhile, Hong Leong Bank's parent company Hong Leong Financial Group Bhd (HLFG) recorded a net profit of RM2.17bil in the nine-month period to March 31 as compared to RM1.78bil in the same period in the previous financial year.
In a statement, HLFG said it recognised higher contribution from Hong Leong Bank and the insurance division, HLA Holdings Sdn Bhd, while the investment banking division, Hong Leong Capital Bhd recorded lower contributions.
Group revenue rose to RM4.96bil from RM4.61bil in the comparative period.
"Given the challenging global headwinds, we maintain a cautious outlook on the economic landscape and shall take necessary precautions to safeguard the financial health and stability of our businesses," said HLFG president and CEO Tan Kong Khoon.