Hong Leong Bank Q1 net profit rises 18%

Improvement driven by top line growth and cost control

KUALA LUMPUR: Hong Leong Bank Bhd posted a net profit of RM638.97mil in the first quarter of its financial year, 17.8% higher compared to RM542.63mil a year ago on improved income contributions.

Group managing director and CEO Domenic Fuda said the improvement was driven by a robust top line growth, coupled with prudent cost control and healthy contributions from our overseas associates.

“While the business environment has been more moderate during the quarter, we remain confident that with our strategic priorities in place we should continue to see further operational improvement and business growth going forward,” he added.

Fuda said the Malaysian economy is expected to expand at a healthy pace, supported by domestic and further improvement in the external macro environment.

Correspondingly, loans and deposit growth are expected to continue its moderate growth trend moving forward on the back of a resilient macro landscape, he said.

Moving forward, Fuda said the bank will continue to pursue a digital strategy for the bank.

The bank recorded a total income of RM1.8bil – 7.5% higher than the previous corresponding quarter, on expansion in net interest income and sustained strong non-interest income contribution.

Net interest income rose 10.5% year-onyear (y-o-y) to RM886mil on the back of prudent loan pricing and funding cost management. Net interest margin rose 12 basis points (bps) on-year to 2.13% compared to 2.01% in the same quarter last year.

Revenue outpaced expenses growth for the first quarter, which resulted in an improved cost-to-income ratio of 43% due to operating efficiencies.

Operating profit expanded 10.9% to RM671mil compared to RM606mil in the year-ago quarter.

Gross loans, advances and financing growth expanded 3.2% y-o-y to RM124.9bil led by growth in domestic retail and SME as well as overseas operations.

“Domestic loans to the retail segment continued to be a driver of the bank’s loan growth, expanding 4.2% y-o-y amidst cautious consumer backdrop.

“Residential mortgages grew 9.9% y-o-y ahead of industry to RM58bil supported by a healthy loan pipeline while transport vehicle loans were lower at RM17.3bil, following still weak automobile industry sales.”

Meanwhile, loans and financing to SME grew 6.5% to RM20.6bil, representing 16.5% of the bank’s loans base, while loans and financing from international operations rose 10.9% to RM6.6bil.

The bank said funding and liquidity positions remained stable with loans-to-deposit ratio and liquidity coverage ratio of 81.8% and 119% respectively.

“Customer deposits for Q1’FY18 increased by 2.3% y-o-y to RM152.7bil as total current and savings account (CASA) grew at a stronger pace of 11.5% y-o-y to RM41bil, achieving an improved CASA mix of 26.8%.”

The bank’s individual deposit expanded to RM84.7bil, representing an industry-leading mix of 55.5%, it said.

The bank said gross impaired loan ratio and loan impairment coverage ratio remained stable at 0.98% and 96% respectively.

“The bank’s capital position remains robust with Common Equity Tier 1, Tier 1 and Total Capital Ratios at 12.9%, 13.3% and 15.3% respectively.”

In its international operations, a steady recovery from Bank of Chengdu saw contribution improving 65.6% on-year to RM148mil, representing 18.9% of the bank’s pre-tax profit.

International operations accounted for 21.5% of pre-tax profit in the first quarter.