• We maintain our BUY call on Hong Leong Bank (HLBB) with an unchanged FV of RM15.90/share. This is based on FY21 ROE of 9.7% leading to a P/BV of 1.1x. We make no changes to our estimates.

• The group organized a conference call to provide updates on the measures announced by BNM to address the Covid-19 outbreak.

• We understand that the ringgit liquidity in the banking system is still ample. In terms of liquidity of the USD, some stress has been seen in earlier weeks, but the situation has improved recently. The group has an exposure to USD loans and bonds equivalent to RM3.6bil.

• The group’s total loans stood at RM141bil as at the end of Dec 2019 — RM40bil are loans to SMEs (smaller SMEs: RM4bil) while retails loans made up close to RM100bil or 68.4% of its total loans. The retail loans consisted largely of RM70bil in mortgages and RM3.5bil in outstanding credit cards. For its mortgage book, the average LTV is around 79% with most loans ranging between RM250,000 and RM750,000.

• Around 82% of the mortgage loans are for the purchase of the first residential property. About 50% of the mortgage loans are granted for the purchase of completed residential properties with the remaining for acquiring properties under construction. Some 80% of the mortgage borrowers have monthly incomes higher than RM3,000.

• Management highlighted that 90% of its domestic loan borrowers will be opting for the moratorium to defer repayments for 6 months. These include 86% of retail and SME borrowers, and 4% of commercial/corporate (non-SME) borrowers. This week, the group has received requests from 10,000 borrowers to opt out of the moratorium. These included 5% of their 8,000 to 8,500 SME borrowers who have chosen to continue with their existing payments.

Source: AmInvest Research - 2 Apr 2020