This article first appeared in The Edge Financial Daily on July 5, 2018

KUALA LUMPUR: Hong Leong Bank Bhd (HLB) is allocating half of its total capital expenditure for the financial year ending June 30, 2019 (FY19), or RM115 million, for digital initiatives.

The balance has been earmarked for regulatory requirement changes and banking system maintenance, among other general expenses.

“We expect to see strong continued growth in digital banking transactions as we increase product and service offerings on these digital platforms,” said HLB group managing director and chief executive officer Domenic Fuda at the launch of the bank’s Annual Digital Day yesterday.

He said the strong adoption of its digital channels is a testament to the growing maturity and increased expectations of its customer base and Malaysians at large.

Fuda said 48% of HLB’s customers had carried out banking transactions on its digital and mobile platforms as at end-2017, with a growth of 73% in digital transactions. The bank has 750,000 mobile banking customers to date.

“We are targeting a 45% growth this year,” Fuda said, adding that the rate is in tandem with its growing customer base.

HLB said its digital innovations include facial recognition to approve transfers and transactions, as well as a virtual assistant chatbot. The virtual assistant will also be able to respond to voice commands to pay bills and transfer funds.

The bank also aims to allow its customers to transfer money using just a mobile number and use a scan and pay function to make shopping easier. These innovations are part of HLB’s Life365 initiative to encourage growth in customer adoption of its digital platforms.

It is also targeting to carry out transformation at 50 of its branches this financial year, which is expected to cost an aggregate sum of RM30 million. HLB currently has a total of 250 branches.

On the banking sector, Fuda said there have been increased activities and enthusiasm observed after the 14th general election on May 9, especially since the goods and services tax was effectively removed.

There was a pickup in automotive loans in May and June, which is expected to remain strong in July until the sales and services tax kicks in.

Fuda said the group has also seen better performance across its corporate lending, small and medium enterprise and mortgage segments in the second half of FY18 (2HFY18), compared with 1HFY18.

As such, the group expects to see stronger loan growth in FY19.

HLB had earlier cut its FY18 loan growth target to between 3% and 4% from an initial forecast of between 5% and 6%, citing subdued industry credit growth and selectivity as reasons.