Hong Leong Financial Group Berhad (HLFG) has announced its first quarter results for the period ended 30 September 2017. The Group’s profit before tax grew 15.8% year-on-year (y-o-y) to RM840 million (mn) due to stronger contributions from both our commercial banking and insurance businesses. Its book value per share also increased from RM14.52 as of 30 June 2017 to RM14.91 by 30 September 2017.
Hong Leong Financial Group’s President & Chief Executive Officer, Tan Kong Khoon commented: “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.”
HLFG’s Commercial Banking division, Hong Leong Bank’s (HLB) profit before tax grew 15.7% y-o-y to RM780 mn due to higher net interest income as well as higher associate contribution from the Bank of Chengdu.
Net interest income expanded 10.5% y-o-y to RM886 mn in 1QFY18, aided by both loan growth and an improvement in net interest margin (NIM). NIM improved 12bps y-o-y to 2.13%, reflecting prudent loan pricing and funding cost management.
Residential mortgages increased 9.9% y-o-y to RM58.0 billion (bn) as at 30 September 2017. Loans to SMEs grew 6.5% y-o- y to RM20.6 bn. HLB’s Loan/Deposit ratio remained sound at 81.8% as at 30 September 2017, remaining among the lowest in the industry.
Asset quality continued to be strong with the gross impaired loans ratio standing at 0.98% as at 30 September 2017. Loan impairment coverage remained sound at 96%. Inclusive of the regulatory reserve set aside as at 30 September 2017, HLB’s loan impairment coverage ratio would be higher at 148%.
Cost/Income ratio improved to 43.0% in 1QFY18, at the lower end of the industry range, as revenue growth outpaced expense growth.
Meanwhile, HLA Holdings Sdn Bhd, HLFG’s insurance division, recorded a pretax profit of RM60.6 mn in 1QFY18, which is an increase of 13.1% y-o- y. This is mainly due to lower actuarial reserves arising from higher interest rates and business growth.
Hong Leong Assurance Berhad’s (HLA) new business premiums of regular premiums increased by 9.2% y-o-y to RM139.3 mn in 1QFY18. HLA’s management expense ratio was 6.7% in 1QFY18, which is still among the lowest in the industry.
Finally, the Investment Banking division under Hong Leong Capital Berhad, recorded a steady pretax profit of RM18.4 million in 1QFY18.