Hong Leong Bank (HLB) has announced its results for the quarter ended 30 September 2022 (Q1FY23).
Net profit after tax for Q1FY23 was higher by 14.3% year-on-year (y-o-y) at RM981 million.
Gross loans and financing expanded 8.8% y-o-y to RM169.5 billion, maintaining its strong growth momentum.
Asset quality remained solid with a Gross Impaired Loan (GIL) ratio of 0.49% and healthy loan impairment coverage (“LIC”) ratio of 212.2%.
Robust capital and liquidity positions with Common Equity Tier 1 (CET 1), Tier 1 and Total Capital ratios at 12.9%, 14.0% and 16.1% respectively while Loans to Deposits ratio (LDR) and Liquidity Coverage ratio (“LCR”) were resilient at 84.2% and 136.9% respectively.
“We commenced the new financial year with a set of encouraging results for the first quarter led by continued loan/financing growth, prudent balance sheet and funding management as well as cost optimisation. Amidst the challenging macroeconomic environment, the Malaysian economy did well during the quarter with growth underpinned by a healthy labour market, diversified export base and ongoing policy support,” Domenic Fuda, Group Managing Director and Chief Executive Officer of HLB remarked.
“Our net profit after tax grew 14.3% y-o-y to RM981 million for the first quarter underpinned by topline growth, effective cost management, low credit costs and robust contribution from
associates. Consequently, we recorded an improved return on equity (“ROE”) of 12.6%,” he said.
“Gross loans and financing portfolio expanded 8.8% y-o-y to RM169.5 billion, supported by
expansion in our mortgage, SME and commercial banking segments, as well as overseas
operations. In line with our robust credit underwriting process, our overall GIL ratio is stable at
0.49%, with adequate LIC of 212.2%.”
Total income for Q1FY23 recorded a growth of 8.7% y-o-y to RM1,500 million, driven by
expansion in net interest income and sustained non-interest income contribution.
Net interest income for Q1FY23 was higher by 9.9% y-o-y or 6.2% quarter-on-quarter
(q-o-q) at RM1,232 million, as a result of solid loan/financing growth and effective
asset/liability management. Correspondingly, net interest margin (NIM) improved 5bps
y-o-y or 8bps q-o-q to 2.18%.
Non-interest income for Q1FY23 rose 3.4% y-o-y to RM268 million with a non-interest income ratio of 17.9%. This is mainly attributed to higher fee income and sustained performance in treasury market activities.
Operating expenses for the quarter continue to be prudently managed at RM541 million.
Revenue continued to outpace expenses growth for Q1FY23, delivering positive JAWS
with an improved cost-to-income ratio (CIR) of 36.0%.
Consequently, operating profit after allowances for Q1FY23 grew by 11.9% y-o-y to RM922
million on the back of strong underlying business performance.
Meanwhile, gross loans, advances and financing maintained a robust growth trajectory, expanding 8.8% y-o-y to RM169.5 billion. The growth is led by expansion in our key segments of mortgages, SME and commercial banking, as well as overseas operations.
Domestic loans/financing growth of 7.1% y-o-y continues to outperform the industry growth
rate of 6.5% y-o-y.
Residential mortgages increased 8.4% y-o-y to RM84.4 billion, supported by a healthy loan
pipeline while transport vehicle loans/financing growth momentum picked up and expanded
by 10.1% y-o-y to RM18.2 billion, benefitting from higher vehicle sales.
Loans to domestic business enterprises were 13.0% higher y-o-y at RM54.8 billion, whilst our support of SMEs saw this loan/financing portfolio up 14.5% y-o-y to RM30.2 billion. The Bank’s community banking initiative, within the SME segment, maintained a solid growth rate of 18.1% y-o-y, attributable to a strong loan/financing pipeline led by our digitalised processes to improve the turnaround time from loan application to approval and disbursement.
Loans and financing from overseas operations grew 34.3% y-o-y, led by solid y-o-y growth of 52.3%, 32.5% and 27.9% in Vietnam, Singapore and Cambodia respectively.
Liquidity remained robust and continues to be supportive of business growth with a LDR of
84.2%. LCR for Q1FY23 stood at 136.9%, comfortably above regulatory requirements.
Customer deposits for Q1FY23 rose by 7.7% y-o-y to RM197.4 billion, with CASA growth at 7.7% y-o-y to RM63.7 billion and maintaining a stable CASA ratio at 32.3%, signifying effectiveness of the Bank’s cash management solutions and product innovations.
The Bank’s stable funding base continues to be backed by an established individual deposit portfolio, which expanded 4.7% y-o-y to RM99.1 billion, representing an individual deposit mix ratio of 50.2%.
The Bank’s asset quality positions remained solid with a stable GIL ratio of 0.49% whilst LIC ratio is well positioned at 212.2% as at 30 September 2022. Inclusive of the provisions made and the value of securities held on our GIL, the Bank’s LIC ratio comfortably stood at 282.2%.
Capital position of the Bank remains strong with CET 1, Tier 1 and Total Capital ratios at 12.9%, 14.0% and 16.1% respectively as at 30 September 2022.
International operations accounted for 25.2% of the Bank’s pre-tax profit in Q1FY23, primarily driven by the robust contribution from Bank of Chengdu (BOCD). Profit contribution from BOCD improved 22.6% y-o-y to RM259.9 million in Q1FY23, representing 21.9% of the Bank’s pre-tax profit.
