Hong Leong Financial Group Berhad (HLFG) recorded a net profit attributable to shareholders (PATAMI) of RM2,791 million, an increase of 13.8% year-on-year (y-o-y) attributed to higher contributions from the commercial banking division, Hong Leong Bank Berhad (HLB) and the insurance division, HLA Holdings Sdn Bhd (HLAH) while the investment banking division, Hong Leong Capital Berhad (HLCB) recorded lower contribution for the financial year ended 30 June 2023 (FY23).
Total income from the Group’s Islamic banking and Takaful businesses for the year increased to RM1,085 million, higher by 9.5% y-o-y. The Islamic businesses contributed 11.3% towards HLFG Group’s total profit before tax. While, book values per share increased from RM21.41 as at 30 June 2022 to RM23.62 as at 30 June 2023.
The Group declared a final dividend of 32 sen per share. Including the interim dividend of 17 sen per share, the total dividend for the financial year is 49 sen per share.
Hong Leong Financial Group’s President & Chief Executive Officer, Tan Kong Khoon said: “Our Commercial Banking and Insurance businesses delivered a commendable set of results under a challenging global economic environment while our Investment Banking business was impacted by the lower Bursa Malaysia trading volume and higher interest rates subduing new bonds issuance and customers’ appetite for investments in unit trust.
Going forward, the major economies are expected to experience a moderation in GDP growth while the tense geopolitical climate may lead to more reciprocal trade protection measures.
Malaysia’s GDP is anticipated to expand between 4.0% and 5.0% supported by robust domestic demand, a low unemployment rate, and the gradual easing of inflationary pressure (from a recent peak of 4.7% in August 2022 to 2.0% in July 2023).
However, the domestic market faces potential downside risks from China’s weaker than anticipated economic growth, an elevated cost of funding and volatile foreign exchange market conditions.
Given the uncertainties in the global economic landscape coupled with domestic challenges, we are maintaining a cautious outlook for the new financial year and shall remain vigilant as the Group navigates through this uncertain business environment.”
In the Group’s Commercial Banking segment HLB recorded an improved net profit after tax of RM3,818 million for the year, an increase of 16.1% y-o-y underpinned by healthy loan growth, higher non-interest income and robust contribution from associates. Consequently, HLB recorded an improved return on equity (ROE) of 11.8%.
HLB’s operating expenses for FY23 were tightly managed at RM2,233 million. Accordingly, the cost-to-income ratio (CIR) remained solid at 39.3%. This is achieved through its strategic cost management initiatives and continuous efforts to digitise operations.
Gross loans, advances and financing registered robust growth of 8.0% y-o-y to RM181.7 billion led by expansion in key segments of mortgages, auto loans, SME and commercial banking, as well as overseas operations.
Residential mortgages increased 8.1% y-o-y to RM89.1 billion while transport vehicle loans/financing expanded by 10.9% y-o-y to RM19.6 billion, attributed to the higher sales volume of motor vehicles.
Domestic loans to business enterprises increased 10.2% y-o-y to RM60.8 billion, whilst the support of SMEs saw this loan/financing portfolio improved by 9.7% y-o-y to RM33.0 billion. HLB’s community banking initiative, within the SME segment, continued to maintain solid growth of 13.2% y-o-y, attributed to a strong loan/financing pipeline, innovative solutions that meet the clients’ needs and digitalised onboarding initiatives that enhance customer experience.
Asset quality position remained stable with a Gross Impaired Loans (“GIL”) ratio of 0.57% whilst Loan Impairment Coverage (“LIC”) ratio recorded at 168.8% as at 30 June 2023. Inclusive of the provisions made and the value of securities held on our GIL, the HLB’s LIC ratio stood at 238.8%.
HLB’s capital position remained solid with CET 1, Tier 1 and Total Capital ratios at 12.8%, 13.9% and 15.9% respectively as at 30 June 2023.
The Group’s Insurance segment, HLAH recorded a net profit after tax of RM366 million, an increase of 8.1% y-o-y. This was mainly contributed by improved investment income from positive mark-to-market (MTM) valuation gains on investment, offset by lower operating surplus from its subsidiaries.
Hong Leong Assurance Berhad (HLA), our key insurance operating subsidiary, registered a net profit after tax of RM284 million, an increase of 10.6% y-o-y. Both gross premiums and new business regular premiums declined to RM3,102 million and RM530 million, or by 2.2% and 17.3%. The declines were mainly due to the cautious sentiments among customers and the impact from competitive bank deposit rates.
Family Takaful operating subsidiary, Hong Leong MSIG Takaful Berhad (HLMT) delivered a robust growth of 20.1% y-o-y increase in gross contribution as the business continues to strengthen its agency distribution, affinity partnerships and bancassurance channels.
Overseas general insurance companies, HL Assurance Pte. Ltd and Hong Leong Insurance (Asia) Limited’s gross premiums have rebounded and improved by 41.1% and 20.3% y-o-y respectively, mainly attributed to higher travelling activities and contribution from diversified distribution channels.
HLCB, the investment Bank of the Group, recorded a net profit after tax of RM50 million, a decrease of 31.2% y-o-y due to lower profit contribution from its key operating subsidiaries; Hong Leong Investment Bank Berhad (HLIB) and Hong Leong Asset Management Bhd (HLAM).
HLIB reported a lower net profit after tax of RM34 million, arising from reduced profit contribution from both stockbroking and investment banking divisions. The stockbroking division’s financial performance was affected by weaker Bursa market activity with traded value contracted by approximately 26% y-o-y. The investment banking division’s performance was impacted by the elevated interest rate which led to escalation in funding costs and a challenging underwriting environment.
The fund management business under HLAM and its subsidiary, Hong Leong Islamic Asset Management Sdn Bhd (“HLISAM”) recorded a net profit after tax of RM8 million, a decrease of 60.0% y-o-y. The lower performance was mainly due to the contraction of assets under management in the money market funds driven by the removal of tax exemption for this category of funds coupled with impact from competitive fixed deposits interest rates.
