Hong Leong Bank’s net profit soars in 1Q22

By AZALEA AZUAR / pic by TMR FILE 

HONG Leong Bank Bhd’s net profit for its first quarter ended Sept 30, 2021 (1Q22), soared by 18% year-on-year (YoY) to RM858.25 million as revenue increased by 2.3% YoY to RM1.38 billion. 

The improve earnings for the quarter were primarily due to higher net income of RM47.6 million, lower operating expenses (opex) of RM25.2 million, lower allowance for impairment losses on loans, advances and financing of RM145.5 million, and written back of allowance for impairment losses on financial investments and other financial assets of RM0.4 million. 

The impact was mitigated by a lower share of profit from associated companies of RM1.2 million. 

Hong Leong Bank‘s 1Q22 total income observed a growth of loan or financing expansion, prudent asset-liability management and higher net interest income while its net interest increased 13% YoY to RM1.12 billion with a corresponding net interest margin at 2.13%. 

This was due to the bank’s efforts in managing funding cost and loan or financing expansion. 

Its non-interest income (NOII) dropped to RM259 million with a NOII ratio of 18.8%, mainly attributed to losses arising from the sale of financial assets which was 

alleviated by higher fee income from the wealth management segment, and opex shrunk 2.7% YoY to RM507 million as the bank continues to benefit from cost optimisation strategies. 

The bank’s cost-to-income ratio improved to 36.8% and the operating profit before allowance also increased 5.4% to RM873 million. The bank observed robust growth in its loans and financing to 5.2% YoY. 

Hong Leong Bank’s healthy loan growth in the period was mostly supported by expansion in key segments of mortgages, small and medium enterprises (SMEs), and commercial banking. 

Domestic loans rose 4.5% YoY, ahead of industry growth rate of 2.9% YoY, while domestic loans to business enterprises soared by 11.9% YoY to RM48.5 billion, while Hong Leong Bank’s support of SMEs saw this loan portfolio increase 10.8% YoY to RM26.4 billion. 

On the back of a healthy loan pipeline, residential mortgages increased by 4.5% YoY to RM77.9 billion while transport vehicle loans remained muted at RM16.5 billion due to lower car sales performance during the reimplementation of movement restrictions. 

Loans and financing from overseas operations grew 21.2% YoY which was attributed to solid YoY growth of 44.7%, 26.2% and 16.1% in Vietnam, Cambodia and Singapore, respectively. 

Hong Leong Bank group MD and CEO Domenic Fuda noted that Malaysia’s economy is gaining momentum following the implementation of the National Recovery Plan and the reopening of the economy as vaccination rates continue to rise. 

“Resumption in domestic demand and expansion in exports complemented with improved confidence from both consumers and businesses are expected to contribute to the country’s growth prospects in the year ahead. 

“Nonetheless, we remain vigilant and responsive to the needs of our existing and new clients to ensure that they receive the support needed in a timely manner as part of their recovery journeys,” he said in a filing to Bursa Malaysia yesterday. 

Fuda noted that the continued execution of their strategic priorities has provided the bank a strong foundation to begin the new financial year with an encouraging set of results for 1Q22, underpinned by an effective cost management structure, continued discipline in its investments and loan portfolio growth. 

“Amid the still uncertain business back-drop, we have leaned on the side of prudence and continue to build up additional pre-emptive impairment buffers,” he added. 

Hong Leong Bank’s shares closed 10 sen lower at RM18.20, giving it a market valuation of RM38 billion.