Hong Leong Bank group managing director and CEO Domenic Fuda said the bank continues to face a challenging environment.(file pic) KUALA LUMPUR: Hong Leong Bank Bhd posted an operating profit of RM888.40mil before allowances in the second quarter ended Dec 31,2020 compared with RM710.53mil a year ago. However, net profit was down by 4.4% at RM670.78mil from RM701.81mil a year ago due to higher provision for impairment losses on loans, advances and financing due to the ongoing uncertainties surrounding the business environment caused by the Covid-19 pandemic. Announcing its results on Friday, Hong Leong Bank said revenue was higher at RM1.40bil compared with RM1.23bil a year ago. Earnings per share were 32.77 sen compared with RM34.29 sen. The board declared an interim dividend of 14.78 sen per share for the second quarter. In the first half, its operating profit before allowances was RM1.71bil compared with RM1.40bil in the previous corresponding period. Its net profit was slightly higher at RM1.40bil compared with RM1.39bil. Its revenue rose by 12.2% to RM2.75bil compared with RM2.45bil. Gross loans and financing maintained a growth of 6.2% year-on-year (YoY) to RM150bil while emphasising on asset quality as gross impaired loan (GIL) ratio remained resilient at 0.54% with a strong loans impairment coverage (LIC) ratio of 193%. Hong Leong Bank maintained healthy capital and liquidity positions with common equity tier 1 (CET 1), Tier 1 and total capital ratios strengthened to 13.8%, 14.4% and 16.6% respectively. Loans to deposits ratio (LDR) and liquidity coverage ratio (LCR) were conservatively managed at 84.1% and 166.0% respectively. Hong Leong Bank group managing director and CEO Domenic Fuda said the bank continues to face a challenging environment with the resurgence in Covid-19 cases and subsequent restrictions on people movement and economic activities resulting from actions taken to manage the evolving health situation. “Nevertheless, we continue to be agile and responsive to the changing landscape to ensure that we continue to provide the support to clients and staff needed to see the recovery journey through. “Our unwavering support of clients has enabled us to deliver a resilient set of results for H1FY21 as net profit was stable with growth of 0.7% y-o-y to RM1.4bil on the back of top line growth, disciplined cost management and robust contributions from our associates. “Gross loans and financing expanded by 6.2% y-o-y as economic activities adjust to the new norm, coupled with funding disbursed to support SMEs and corporate businesses. Working closely with clients to extend support where required, we were able to maintain a relatively low GIL ratio at 0.54%. “Further, in anticipation of the ongoing uncertainties surrounding the business environment, we remained prudent by building up additional pre-emptive impairment buffers during the quarter, ” he said. Commendable Business Performance • Total income for H1FY21 saw growth of 12.1% y-o-y to RM2,749 million, underpinned by growth in loan/financing, prudent cost control and higher net interest income. • Net interest income grew for the second consecutive quarter to RM1,083 million for the quarter ended 31 December 2020 (“Q2FY21”), up 18.8% y-o-y due to effective funding cost management. Accordingly, for H1FY21, net interest income was 15.7% higher y-o-y at RM2,075 million. As a result, net interest margin (“NIM”) improved to 2.15% and 2.08% for Q2FY21 and H1FY21 respectively. • Non-interest income for H1FY21 increased by 2.3% y-o-y to RM674 million with a corresponding non-interest income ratio of 24.5%. The improvement was driven by good Markets/Treasury performance as well as the continued recovery from wealth management activities. Card fees on the other hand remained subdued, on the back of cautious retail customer spend. • Operating expenses (“Opex”) for Q2FY21 remained around the same levels across the past few quarters, leading to H1FY21’s Opex lower by 1.6% y-o-y to RM1,033 million, with an improved CIR of 37.6%. • Correspondingly, operating profit before allowances for H1FY21 recorded a growth of 22.3% y-o-y to RM1,716 million, allowing the Bank to further build pre-emptive provisions to cover credit risk that might materialise in the quarters ahead. Expansion in Loans/Financing • Gross loans, advances and financing sustained its growth momentum, expanding by 6.2% y-o-y to RM150.0 billion, predominantly led by growth in our key segments of mortgages, SME and commercial banking. • Domestic loans/financing growth continued ahead of industry growth rate at 6.4% y-o-y. • Residential mortgages are 6.8% higher y-o-y at RM75.4 billion, on the back of a healthy loan pipeline while transport vehicle loans/financing remained muted at RM17.2 billion. • Domestic loans to business enterprises expanded strongly by 10.3% y-o-y to RM44.5 billion, whilst our support of SMEs saw this loan/financing portfolio grow 16.2% y-o-y to RM24.1 billion. The Bank’s community banking initiative, within the SME segment, maintained a robust growth rate of 33.4% y-o-y or 4.3% quarter-on-quarter, attributed to concerted efforts in improving customer experience by enhancing loan-processing turnaround time and our stepped up utilisation of available data to better understand the needs of these customers. • Loans and financing from overseas operations maintained reasonable expansion, attributed to healthy y-o-y growth of 9.4% and 8.2% in Vietnam and Cambodia respectively. Prudent Funding and Liquidity Position • Emphasis continues to be placed in maintaining strong funding and liquidity positions as enablers to continue to help clients through the recovery journey. The prudent LDR of 84.1% was maintained whilst LCR improved to 166.0%. • Customer deposits for H1FY21 rose by 5.7% y-o-y to RM176.5 billion, with CASA growth at 21.5% y-o-y to RM52.5 billion, raising the CASA ratio to 29.8%. The solid growth is predominantly due to the collaboration and cross-selling efforts throughout the Bank and our effective cash management offerings. • The Bank’s stable funding base continues to be supported by a sound individual deposit base which expanded 3.1% y-o-y to RM92.5 billion, exemplified by an individual deposit mix ratio of 52.4%.
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