Hong Leong Bank profit rises 17.8% in 1Q on higher NII

By NG MIN SHEN / Pic By MUHD AMIN NAHARUL

Hong Leong Bank Bhd (HLB) netted profit of RM638.97 million for the first quarter ended Sept 30, 2017 (1Q18), up 17.8% from RM542.63 million posted a year earlier mainly on higher net income and revenue, prudent cost control and larger contribution from overseas associates.

Revenue for the quarter climbed 7.3% to RM1.18 billion from RM1.1 billion registered the year prior, underpinned by continued expansion in net interest income (NII) and sustained strong non-interest income contribution.

NII for the three months grew for the sixth consecutive quarter, rising 10.5% year-onyear (YoY) to RM886 million on prudent loan pricing and funding cost management.

Net interest margin increased by 12 basis points YoY to 2.13% against 2.01% previously.

Non-interest income of RM293 million was achieved on strong wealth management income and stable treasury income. However, operating expenses were 3.4%, or RM16.5 million, higher at RM507.15 million against RM490.69 million last year. The lender’s cost-toincome ratio stood at 43% during the quarter.

Allowance for impairment losses on loans, advances and financing also increased by RM20.36 million to RM43.41 million from RM23.05 million last year, while share of profit from joint venture was lower by RM1.66 million at RM4.57 million versus RM6.23 million previously.

Profit contribution from Bank of Chengdu Co Ltd soared 65.6% YoY to RM148 million in 1Q18, contributing 18.9% to the group’s pretax profit.

Gross loans, advances and financing expanded 3.2% YoY to RM124.9 billion.

“This was led by growth in our domestic retail, and small and medium enterprises (SMEs), as well as overseas operations while partially offset by some corporate loans repayments,” the bank said in a statement last week.

Domestic loans to the retail segment rose 4.2% YoY, while residential mortgages grew ahead of the industry at 9.9% YoY to RM58 billion on a healthy loan pipeline.

Transport vehicle loans, however, fell to RM17.3 billion, following continuing weak automobile industry sales.

Loans and financing to SMEs increased 6.5% YoY to RM20.6 billion, representing 16.5% of the bank’s loan base.

Loans and financing from international operations grew 10.9% YoY to RM6.6 billion. Customer deposits expanded 2.3% YoY to RM152.7 billion in the 1Q, as current account and savings account grew 11.5% YoY to RM41 billion. Individual deposits widened to RM84.7 billion, representing an industry- leading mix of 55.5%. The lender’s gross impaired loan ratio stood at 0.98%, while loan impairment coverage ratio stood at 96%. Inclusive of the regulatory reserve set aside as at end-September 2017, its coverage ratio would be at 148%.

HLB group MD and CEO Domenic Fuda said the group will continue to pursue its digital transformation, while growing its domestic franchise and regional businesses.

“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 improvements and business growth going forward,” he said.

The bank’s parent, Hong Leong Financial Group Bhd grew its earnings 17.9% to RM455.25 million in 1Q18 from RM386.19 million previously.

Revenue stood at RM1.28 billion, up 8.5% versus RM1.18 billion last year.