Hong Leong Bank allocates RM115m capex for continued digital expansion

by NG MIN SHEN / pic by HUSSEIN SHAHARUDDIN

Hong Leong Bank Bhd (HLB) will spend RM115 million, or half of its capital expenditure (capex), for the financial year ending June 30, 2019 (FY19), expanding its digitalisation efforts.

“We have allocated about RM115 million, or half of the FY19 capex, for digital capabilities in the coming year, which include developing digital capabilities, as well as hiring in-house talents like data scientists and UX/UI (user experience/user interface) designers,” group MD and CEO Domenic Fuda (picture) said at the launch of the bank’s annual Digital Day in Kuala Lumpur yesterday.

The bank said 48% of the bank’s customers have been using the digital and mobile platforms for banking transactions as at end-2017, while digital transactions grew 73%.

Fuda said the group aims 45% growth in online transactions in 2018, largely driven by more products and service offerings on the digital platforms.

Among the bank’s digital offerings are facial recognition for transfer and transaction approvals, artificial intelligence (AI) chatbots and Pay Mobile Express, or PEx — which allows money transfers using only a mobile number and conversational AI, as well as payment via QR (quick response) codes.

The remaining 50% of its FY18 capex will be spent on regulatory requirement, compliance and maintenance of its core banking system.

HLB, Malaysia’s fifth-largest banking group based on assets, is also transforming 50 of its 250 branches to have greater and wider digital capabilities.

Some RM30 million has been allocated for this initiative. Implementation is expected within the next 12 months.

The banking group, with a total assets of RM195.6 billion according to its 2017 annual report, expects loan growth in FY19 to be better than FY18.

Net profit for the nine-month period of FY19 is already RM2.01 billion.

“We foresee loan growth to be stronger in FY19 compared to last year’s. There’s quite a bit of enthusiasm post-election. We see quite a bit in the pipeline for housing, small and medium enterprises (SMEs), and commercial banking,” Fuda said.

He added that the group’s corporate lending, and SME mortgage and auto loans performed better in the second half of FY18 (2H18) compared to 1H18.

“Auto sales were very strong in May and June, and I expect July to be strong too due to the absence of the Goods and Services Tax (GST), though I expect there will be some slowdown once the Sales and Services Tax is re-introduced.

“But we have seen better momentum in the last quarter of FY18 even with the GST, compared to the previous six to seven months,” Fuda said.

The group’s transport vehicle loans segment, which declined 4.7% year-on-year (YoY) in FY17, fell 4.5% YoY in 1H18 as well, contributing partly to the below-expectation 1.8% loan growth recorded in 1H18.

In February 2018, the bank slashed its loan growth expectations for FY18 to between 3% and 4% from 5% to 6% previously, on slower than expected industry growth and weak business sentiment.

Shares of HLB closed 20 sen, or 1.11% higher, at RM18.20 yesterday for a market capitalisation of RM37.07 billion.