KUALA LUMPUR (May 31): Hong Leong Bank Bhd reported an 18.5% year-on-year growth in net profit for the third quarter ended March 31, 2023 (3QFY2023), thanks to lower impairment losses and better contribution from 18%-owned Bank of Chengdu.

Net profit grew to RM929.96 million for 3QFY2023 from RM784.8 million a year ago, despite an 11% decline in net interest income to RM846.65 million from RM947.63 million. Earnings per share (EPS) rose to 45.39 sen from 38.32 sen previously.

For the cumulative nine-month period (9MFY2023), net profit grew by 24% to RM2.95 billion from RM2.38 billion in the previous corresponding period, while net interest income dropped by 1.3% to RM2.79 billion from RM2.83 billion. EPS increased to 144.17 sen from 116.29 sen previously.

In a statement on Wednesday (May 31), managing director and chief executive officer Domenic Fuda attributed the strong profitability for 9MFY2023 to “healthy topline growth, prudent cost management and robust contributions from our associates”.

The group’s return on equity improved to 12.3% for 9MFY2023, up from 10.9% for FY2022, while gross loans and financing grew 7.2% year-on-year to RM174.2 billion, driven by expansion in mortgage, small and medium enterprise, and commercial banking segments.

Hong Leong recorded a gross impaired loan ratio of 0.52% for 3QFY2023, compared to 0.49% as at FY2022.

“We remain cautiously optimistic with the business outlook for the remainder of 2023 and 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 further challenged by the recent US and European banking sector turmoil which has heightened downside growth risks and highlighted financial stability risks,” said Fuda.

Fuda will be retiring by the end of next Month (June 30) after leading the bank for over seven years since February 2016. He will be succeeded by Kevin Lam Sai Yoke, effective July 1.

Going forward, Fuda expects Malaysia’s resilient domestic demand underpinned by continuous expansion in private consumption and pick-up in investment activities to help cushion external headwinds and uncertainties in the global financial markets.

“While the US banking turmoil appears contained for now, lingering recession risks among the major economies would continue to cloud global growth outlook,” he said.

“We continue to prudently manage our credit and liquidity risks and remain steadfast in navigating the ongoing business disruptions to ensure banking and financing requirements of individuals and businesses are met.

“Amidst the challenging operating environment, we are disciplined in our investments and expenditures which allow us to invest in growth opportunities that will deliver sustainable outcomes to our stakeholders,” he added.

Hong Leong Bank’s stellar performance also lifted its 64% parent Hong Leong Financial Group Bhd’s net profit for 3QFY2023 by 23.4% to RM712.45 million or 62.8 sen per share from RM577.48 million or 50.9 sen per share a year ago.

Apart from commercial banking operations, Hong Leong Financial also attributed its stronger performance to higher contributions from the insurance division.

The financial group’s net interest income, however, dropped 9.5% to RM876.39 million for 3QFY2023 from RM968.39 million a year ago.

For the 9MFY2023 period, net profit grew 22% to RM2.165 billion from RM1.78 billion in the previous corresponding period, although net interest income declined 1.35% to RM2.87 billion from RM2.91 billion.

“Looking ahead, the global economy is expected to face headwinds from weaker demands, rising geopolitical polarisation and financial stability risk following the recent banking sector turmoil in the US and Europe,” said Hong Leong Financial’s president and CEO Tan Kong Khoon.

Although the Malaysian external trade momentum is expected to moderate following two consecutive years of double-digit expansion, Tan said the economy is projected to be supported by a recovery in the tourism sector and normalisation of domestic demand thanks to a low unemployment rate.

“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,” he added.

Shares of Hong Leong Bank were unchanged at RM19.54 at afternoon market break, valuing it at RM42.36 billion.

Hong Leong Financial, meanwhile, was 18 sen or 1% lower at RM17.58, giving it a market capitalisation of RM20.17 billion.