Hong Leong Bank Q1 net profit up 10.6% to RM707m – Investing

KUALA LUMPUR: Hong Leong Bank delivered a firm set of results for the first quarter ended Sept 30, 2018 as net profit grew by 10.6% due to a robust growth in non-interest income contribution coupled with prudent cost control and lower impairment allowances.

It announced on Wednesday net profit rose to RM706.91mil from RM638.97mil a year ago while its revenue increased by 6% to RM1.249bil from RM1.178bil a year ago. Earnings per share were 34.55 sen compared with 31.24 sen.

“Gross loans and financing grew 4.0% year-on-year (y-o-y) to RM129.8bil with a lower gross impaired loan (GIL) ratio of 0.81%. 

“Capital positions remain strong after adoption of MFRS9 with common equity Tier 1 (CET 1), Tier 1 and total capital ratios at 12.4%, 13.1% and 16.1% respectively,” it said.

Total income for Q1FY19 improved by 6.0% y-o-y and 6.2% quarter-on-quarter (q-o-q) to RM1.249bil, driven mainly by robust non-interest income contribution and expansion in loan book. 

Hong Leong Bank said its net interest income came in lower at RM852mil versus a year ago mainly due to by rising funding cost from intensifying deposits competition over the past one year. 

It pointed out that consequently, net interest margin (NIM) for Q1FY19 was at 2%, 5 bps lower compared to the precedent quarter.

Its non-interest income surged by 35.4% y-o-y to RM397mil due to a higher non-interest income ratio of 31.8%. The main factors were improved performance in treasury market activities and gain on divestment of joint venture. 

As for the cost-to-income ratio, it improved further to 42.0% for Q1FY19, while again delivering positive JAWS for two straight years due to its digitisation and strategic cost management initiatives. 
Its operating profit rose by 7.8% y-o-y to RM724mil from RM671mil.

Hong Leong Bank’s group managing director and CEO Domenic Fuda said: “It is an encouraging start to the new financial year as the bank recorded a net profit after tax of RM707mil for the first quarter, growing 10.6% y-o-y compared to the same period last year. 

“The improvement was driven by a robust growth in non-interest income contribution coupled with prudent cost control and lower impairment allowances.” 

Fuda said business momentum picked up pace with gross loans and financing expanding 4.0% y-o-y despite persistent challenges in the operating environment. 

“We maintained a very solid asset quality position with GIL ratio of 0.81%, whilst loan impairment coverage (LIC) ratio at 128% is one of the strongest in the industry post adoption of MFRS9,” he said.

Fuda added the key to the bank’s growth wass digital innovation in its products and services.

The bank continued to roll out new and innovative solutions, including being the first bank in Malaysia to enable customers to bind their debit cards to WeChat Wallet and use WeChat Pay as an alternative payment option, and a Smart Terminal, a first-in-market point-of-sale payment solution for merchants which integrates and accepts all cards and e-payment/wallet transactions. 

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