CEO Morning Brief

Hong Leong Bank’s 1Q Earnings Up 5% on Better Associates’ Contribution, Reversal of Impairment Losses

Publish date: Fri, 01 Dec 2023, 08:49 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Nov 30): Hong Leong Bank Bhd’s (HLB) net profit rose 4.93% to RM1.03 billion for the first quarter ended Sept 30, 2023 (1QFY2024) against RM981.41 million a year ago, on higher contributions from the bank’s associates and reversal of impairment losses.

Based on its filing to Bursa Malaysia, HLB recorded a net written back of allowance for impairment losses on loans, advances and financing of RM88.7 million, and a higher share of profit from the associated company of RM89.5 million during the quarter.

However, this was mitigated by lower net income of RM105.8 million, higher operating expenses of RM15.7 million, and allowance for impairment losses on financial investments and other assets of RM700,000.

As such, earnings per share increased to 50.26 sen from 47.91 sen in 1QFY2023, the bank’s filing showed on Thursday. Its return-on-equity (ROE) stood at 12.1% for the quarter.

Quarterly revenue, meanwhile, slipped 7.05% to RM1.39 billion from RM1.5 billion.

Commenting on the results, HLB group managing director and chief executive officer Kevin Lam said in a statement: “Our net profit after tax for 1QFY2024 improved 4.9% year-on-year (y-o-y) to RM1,030 million, mainly contributed by strong loan/financing expansion, sustained non-interest income and improved asset quality metrics, coupled with solid contributions from our associates. Consequently, we achieved a higher return on equity (ROE) of 12.1% for the first quarter”.

For the quarter under review, interest income improved 3.4% quarter-on-quarter (q-o-q) to RM1.13 billion, due to solid loan or financing growth and effective asset/liability management.

Correspondingly, net interest margin (NIM) has improved to 1.84% from 1.83%, which marks a consecutive second quarter of improvement.

Non-interest income for 1QFY2024 was RM268 million, with a non-interest income ratio of 19.2%, mainly supported by higher wealth management income, growth in credit card-related fee, and improved performance in trade finance and foreign exchange.

“Our gross loans and financing portfolio grew 7.2% year-on-year to RM181.7 billion, led by growth across our mortgage, auto loans, SMEs (small and medium enterprises) and commercial banking segments, as well as overseas operations.

“In line with our robust credit underwriting process, we continue to closely monitor our asset quality, ending the quarter with a stable GIL (gross impaired loan) ratio of 0.57% and a solid LIC (loan impairment coverage) of 164.6%,” added Lam.

For the quarter, the bank’s capital position remained healthy, with CET 1 (Common Equity Tier 1), Tier 1 and Total Capital ratios at 12.6%, 13.6% and 15.7% respectively as at Sept 30, 2023.

The bank’s liquidity coverage ratio (LCR) stood at 137.5%, while customer deposits for 1QFY2024 rose by 6.0% y-o-y to RM209.2 billion, with current accounting and savings (casa) standing at RM61.9 billion, and casa ratio at 29.6%.

The bank’s funding base continues to be boosted by an established individual deposit portfolio, which grew 6.0% y-o-y to RM105.1 billion, representing an individual deposit mix of 50.3%.

The group is committed to the execution of its aligned strategic priorities to deliver sustainable outcomes, in line with its journey to be a highly digital and innovative Asean financial services institution, Lam said.

“Amid the dynamic business landscape, forming new and enhancing existing strategic partnerships will be our top priority, as we leverage on our digital expertise as a competitive advantage. We believe that seizing opportunities through new growth engines and building world class talents will enable us to build a robust Asean franchise.

“In line with our carbon-neutral ambition, we remain steadfast in our sustainability commitments by continuously enhancing our ESG (environmental, social and governance) strategies and practices, while working with our stakeholders to create positive impact across our customers, communities and environment,” Lam added.

At the time of writing on Thursday, HLB’s share price was eight sen or 0.42% lower at RM19.02. At this price, the bank had a market value of RM41.23 billion.

Read also:
Hong Leong Financial Group posts higher 1Q profit on improved contributions from all operating segments

Source: TheEdge - 1 Dec 2023

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