Hong Leong Capital Berhad announced the results for the nine months ended 31 March 2022 recording a net profit of RM64.3 million, a decrease of 51.5% year-on-year.
Reflecting the reduced market activity in its local stock market, a lower profit contribution was recorded by its key operating subsidiary; Hong Leong Investment Bank Berhad.
Book value per share decreased from RM4.06 as at 30 June 2021 to RM3.99 as of 31 March 2022 from a lower valuation of financial investments at fair value through other comprehensive income for the financial period.
Chairman Tan Kong Khoon commented on the depressing results, “The year 2022 is expected to be challenging amid multiple headwinds for global GDP growth. The protracted Russia-Ukraine war and sanctions against Russia, alongside China’s COVID-19 lockdowns, will continue to pose risks and uncertainties globally. Concerns of further net outflows by foreigners and rising inflation’s impact on economic growth may further constrain global economic recovery and dampened the investment climate.
As for the investment banking business, HLIB’s net profit after tax decreased 58.6% y-o-y to RM45.7 million, arising from lower profit contributions from the stockbroking division and investment banking division. HLIB contributed 71.0% of HLCB’s profit after tax.
The stockbroking division’s financial performance was affected by the significantly lower Bursa market activity in the first 9 months of its financial year 2022, with Bursa traded value decreasing by 47.5% y-o-y. The lower retail participation during this period has also led HLIB to record a lower market share during this period. The Bank took action to embark on some new business initiatives to diversify our revenue base and help cushion the drop in brokerage related income.
The investment banking division’s performance was adversely affected by delays in the completion of mandated deals within the current financial year caused by disruption from the movement restrictions. The banking subsidiary has continuously adopted stringent cost discipline and tighten cost control to optimise cost structure.
Capital position remained robust with Common Equity Tier 1, Tier 1, and Total Capital Ratios at 32.5%, 32.5%, and 43.0% respectively as at 31 March 2022.
The fund management business recorded an increase in profit after tax by 12.7% to RM16.5 million. This was contributed by the higher management fee income from our enlarged equity funds under management with a higher net fee rate.
HLAM has launched its first ESG fund, the Hong Leong Global ESG Fund (“HLGESGF”) on 20 April 2022. The HLGESGF aims to provide investors with a medium to long-term capital growth by investing in a globally diversified portfolio of companies with a focus on ESG criteria in the investment process and will incorporate the principles of ESG in security selection through MSCI ESG Ratings.