KUALA LUMPUR (Nov 29): Hong Leong Bank Bhd’s net profit for the first quarter ended Sept 30, 2021 (1QFY22) jumped 17.7% to RM858.25 million from RM728.9 million a year ago, mainly due to higher net income and lower operating expenses as well as allowances for impairment losses on loans.
Earnings per share were at 41.91 sen compared with 35.6 sen previously, according to its filing with Bursa Malaysia on Monday (Nov 29). Quarterly revenue was up 2.3% to RM1.38 billion from RM1.35 billion.
Hong Leong Bank said the rise in profit was mainly due to higher net income of RM31.1 million, lower operating expenses of RM13.8 million as well as lower allowances for impairment losses on loans, advances and financing of RM55.6 million.
Additionally, the group also saw the written back of impairment losses on financial investments and other financial assets of RM500,000, and a higher share of profit from associated companies of RM50.9 million.
On a quarterly basis, Hong Leong Bank saw its net profit surge 24.48% from RM689.48 million for the immediate preceding quarter (4QFY21), while revenue climbed 3.75% from RM1.33 billion.
Hong Leong Bank group managing director and chief executive officer Domenic Fuda said the Malaysian economy was showing signs of gaining momentum following the implementation of the National Recovery Plan and the reopening of the economy as vaccination rates continued to rise.
“Resumption of 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 separate statement on Monday.
Fuda noted that the bank’s continued execution of its strategic priorities provided a strong foundation to begin the new financial year with an encouraging set of results for 1QFY22, underpinned by an effective cost management structure, continued discipline in its investments and loan/financing portfolio growth.
“Gross loans and financing growth was healthy at 5.2% year-on-year (y-o-y), driven by the positive business sentiment and economic recovery during the quarter as well as expansion in small and medium enterprises (SMEs) and corporate businesses.
“While ensuring that all clients receive the necessary assistance, we continued to closely monitor and uphold our asset quality, ending the quarter with a solid gross impaired loan ratio of 0.48%.
“Amid the still uncertain business backdrop, we leaned on the side of prudence and continued to build up additional pre-emptive impairment buffers,” Fuda said.
For 1QFY22, Hong Leong Bank said its total income saw a growth of 2.3% y-o-y to RM1.38 billion, led by loan/financing expansion, prudent asset-liability management and higher net interest income.
It added that net interest income for 1QFY22 grew 13% y-o-y to RM1.12 billion, with a corresponding net interest margin of 2.13%, mainly attributed to the bank's concerted efforts in managing funding cost and loan/financing expansion.
Meanwhile, Hong Leong Bank’s gross loans, advances and financing maintained growth, expanding 5.2% y-o-y to RM155.8 billion, as the bank continued to provide financing support to clients in support of their business growth and personal financing needs.
The bank said its healthy loan growth was predominantly led by expansion in key segments of mortgages, SME and commercial banking, said Hong Leong Bank.
It added that the capital position of the bank was healthy and supportive of future growth opportunities with its Common Equity Tier 1, Tier 1 and total capital ratios at 13%, 13.5% and 15.7% respectively as at Sept 30, while its loan-to-deposit ratio was maintained at 83.8% and its liquidity coverage ratio improved to 167.2%, compared with 157.3% a year ago.
On the business outlook, Fuda said the recovery in the global economy had shifted to a lower gear, softened by disruptions to the global supply chain and the resultant heightening of inflationary risks.
“On a more positive note, we observed added signs of a recovery in the Malaysian economy, spurred by phased reopening of more economic sectors and the lifting of the interstate travel ban. The continued accommodative policy stance will also help underpin the recovery going forward,” Fuda said.
Concurrently, he noted that the bank will continue to be disciplined in its investments and expenditures to ensure a cost structure that enables the group to invest in growth opportunities that will deliver sustainable outcomes to its stakeholders.
“With the increasing importance of sustainability for financial institutions, the bank has plans under way to play its part in promoting and integrating environmental, social and governance considerations in its business operations and practices. This would help the bank in sustaining its competitive edge,” he added.
At the noon break on Monday, Hong Leong Bank’s share price had slipped 16 sen or 0.87% to RM18.14, valuing the banking group at RM39.24 billion.