We maintain our BUY call on Hong Leong Bank (HLBB) with revised fair value ofRM24.10/share from RM22.60/share aft rolling forward our valuation to FY25F. Our FV is pegged FY25F ROE of 11%, leading to a P/BV of 1.2x with a 3% premiu accorded for a 4-star ESG rating.
Our earnings estimates are unchanged as 6MFY24 net profit RM2.1bil was within expectations, making up 53.2% of o estimate and 52.2% of consensus projection.
6MFY24 earnings grew by 4.7% YoY, supported by higher no interest income (NOII), lower provisions and a stronger sha of profits from associates.
On QoQ basis, the group reported a higher net profit RM1.1bil (+5.6%) in 2QFY24 on the back of increased n interest and NOII coupled with lower provisions.
The stronger NOII in 6MFY24 was contributed largely by high fee income which offset a weaker income from investmen trading and fx. Fee income grew 7.5% YoY to RM328mil 6MFY24 underpinned by increase in income from weal management, bancassurance, credit cards and fx gains.
The group’s loan growth grew by 7.5% YoY in 2QFY24 wi domestic loans expanding by 7.2% YoY above the industry 5.3% YoY. Loan growth was supported by expansion mortgages, auto financing, SME and overseas loan particularly Singapore.
Net interest margin (NIM) continued to improve marginally b 1bps QoQ to 1.85% in 2QFY24, driven by expansion of loan and asset liability management. 6MFY24 NIM fell by 29bps Yo to 1.85% due to higher funding cost.
CI ratio for 6M24 rose to 39.7% as a result of a negative JAW 8.7% YoY with growth in OPEX outpacing total income.
The share of profits from its associates, BOC and Sichua Jincheng Consumer Finance Limited’s continued to be robu at RM803mil (+25.8% YoY). It accounted for 31.1% of th group’s 6MFY24 PBT.
GIL ratio remained steady at 0.56%. Net credit cost in 6MFY was -6bps (6M23: 7bps), lower than management’s guidance 10bps for FY24. The group is on track to achieve all targets f FY24.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....