Friday 29 Mar 2024
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KUALA LUMPUR (Nov 26): AllianceDBS Research has downgraded Hong Leong Financial Group Bhd (HLFG) to Hold (from Buy ) at RM18.12 with a lower target price of RM19.50 (from RM19.60) and said HLFG’s results showed resilient trends.

In a note Wednesday, the research house said earnings were in line, but there was weakness in non-interest income as a result of mark-to-market losses and forex losses in the quarter.

“NIM was stable, loan-to- deposit ratio rose to 80% despite only 6% year-on-year (y-o-y) loan growth. Strong loan approvals coupled with improved utilisation of lines should lift loan momentum ahead.  HLFG declared 13 sen dividend per share,” it said.  

AllianceDBS Research said following the decline in interest rates y-o-y, the insurance operations needed to provide additional actuarial reserves, which in turn reduced pre-tax profit for its insurance operations.

It said the adjustments are made at the end of each financial quarter.

AllianceDBS Research said excluding the interest rate impact, insurance pre-tax profit would have grown by 20% y-o-y.

It said the underlying business improved with gross premiums growing 12% y-o-y, adding that a reversal of interest rate trends would be positive for its insurance operations.   

“HLFG has been the best performing financial stock under our coverage, but there is limited upside ahead.

“We tweaked FY15-16F earnings, which nudged down our target price by 10 sen,” it said.

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