Friday 29 Mar 2024
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KUALA LUMPUR (Nov 30): Hong Leong Financial Group Bhd's (HLFG) net profit in the first quarter ended Sept 30, 2017 (1QFY18) grew 17.9% year-on-year to RM455.25 million from RM386.19 million last year, mainly due to higher contribution from the commercial banking and insurance divisions.

In a filing with Bursa Malaysia today, HLFG said quarterly revenue came in at RM1.28 billion, which was an 8.2% increase from the RM1.18 billion recorded in 1QFY17.

HLFG's commercial banking division Hong Leong Bank Bhd (HLB) posted a growth of 17.8% y-o-y in 1QFY18's net profit to RM638.97 million against RM542.63 million a year earlier, driven by a robust topline growth as well as prudent cost control and healthy contributions from its overseas associates, said HLB's group managing director and chief executive officer (CEO) Domenic Fuda.

HLB's revenue in 1QFY18 climbed 7.5% y-o-y to RM1.18 billion from RM1.1 billion, underpinned by continued expansion in net interest income as well as sustained strong non-interest income contribution.

Net interest income for the quarter under review, said HLB, improved for the sixth consecutive quarter, growing 10.5% y-o-y to RM886 million, on the back of prudent loan pricing and funding cost management.

"Consequently, net interest margin rose by 12 basis points y-o-y to 2.13% as compared to 2.01% in the same quarter last year," said HLB.

"Non-interest income remained stable at RM293 million giving rise to non-interest income ratio of 24.9%, achieved on the back of strong wealth management income as well as stable treasury income," it added.

HLB reported a growth of 3.2% in gross loans, advances and financing growth to RM124.9 billion, led by improvements in its key segments of domestic retail and small and medium enterprises (SME), as well as overseas operations, although it was partially offset by some corporate loans repayments.

Domestic loans to the retail segment continued to fuel HLB's loan growth, rising 4.2% y-o-y amid cautious consumer backdrop. Residential mortgages expanded 9.9% to RM58 billion, supported by a healthy loan pipeline, while transport vehicle loans declined to RM17.3 billion, no thanks to weak automobile sales.

Meanwhile, SME loans and financing improved 6.5% y-o-y to RM20.6 billion, accounting for 16.5% of HLB's loan base. As for operations beyond Malaysian borders, loans and financing from international businesses grew 10.9% to RM6.6 billion.

"International operations accounted for 21.5% of the bank's pre-tax profit in 1QFY18, led by steady recovery from Bank of Chengdu (BOCD) during the quarter. Profit contribution from BOCD rebounded, improving 65.5% y-o-y to RM148 million in 1QFY18 and contributing 18.9% of the bank's pre-tax profit," HLB said.

"The Malaysian economy is expected to expand at a healthy pace supported by domestic demand and further improvement in the external macro environment. Correspondingly, loans and deposits are expected to continue its moderate growth trend moving forward on the back of a resilient macro landscape," Fuda said.

As for HLFG's insurance division, HLA Holdings Sdn Bhd posted a pre-tax profit of RM60.6 million in 1QFY18, which was a rise of 13.1% y-o-y, thanks to lower actuarial reserves arising from higher interest rates and business growth.

As for Hong Leong Assurance Bhd (HLA), new business premiums within HLFG's target segment of regular premiums grew 9.2% y-o-y to RM139.3 million in the quarter under review.

HLFG said HLA's management expense ratio stood at 6.7% during the quarter under review, remaining among the lowest in the industry.

"We are pleased to have made a strong start in 1QFY18 for our new financial year. Our core businesses continue to show strong credit and liquidity risk metrics, which are important in these times," said HLFG's president and CEO Tan Kong Khoon.

"We have a clear and focused business and digital strategy, which we will continue to execute diligently and we remain focused on building long-term sustainable value for our shareholders," Tan added.

At 2.33pm, HLFG's share price was 0.4% or six sen higher at RM15.70, valuing it at RM17.91 billion, while HLB rose 0.5% or eight sen higher to RM15.40, giving it a market capitalisation of RM32.09 billion.

 

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