Hong Leong Bank announces full year results Aug 2017

Kuala Lumpur, 22 August 2017 - Hong Leong Bank Berhad (“Bank” or “HLB”), (BM: HLBANK) today announced its results for the financial year ended 30 June 2017.

• Net profit after tax for the full year ended 30 June 2017 (“FY17”) expanded by 12.7% year-on-year (“y-o-y”) to RM2,145 million, compared to the corresponding period last year.
• Gross Loans & Financing grew to RM125.1 billion; led by domestic retail, SME and international operations.
• Capital position remained robust with CET-1, Tier-1 and Total Capital ratios at 13.3%, 13.7% and 15.8% respectively.

Mr. Domenic Fuda, the Group Managing Director & Chief Executive Officer of HLB commented, “We are pleased to announce a favourable set of results for FY17, underpinned by solid top-line performance, augured by sustained margin and efficiency improvements, as well as a moderate recovery from our associates’ contribution. Net profit for the financial year 2017 grew 12.7% y-o-y to RM2,145 million compared to the reported net profit last year of RM1,903 million. A new milestone was achieved with our operating profit for FY17 accelerating 21.6% y-o-y to RM2,543 million, the highest ever attained in the past 5 years whilst remaining committed towards delivering sustainable business growth and profitability.”

Healthy Profit Growth

• Total income for FY17 sustained its strong growth momentum, improving by 8.9% y-o-y to a record RM4,551 million, our highest level since the merger with EON Bank, on the back of a combination of prudent loan pricing and funding cost management coupled with healthy non-interest income contribution.
• Net interest income continued to improve in the fourth quarter (“Q4FY17”), underpinned by a 11.6% y-o-y growth to RM864 million, which led to a strong 9.1% y-o-y expansion to RM3,355 million for the full financial year. For the full year, net interest margin (“NIM”) rose to 2.09% compared to 1.94% in the year prior, a 19 bps improvement to 2.14% for the quarter versus the same quarter last year.
• Non-interest income for FY17 rose 8.4% y-o-y to RM1,196 million led by stronger wealth management fees, dividend income from investments and higher gains from treasury operations. Correspondingly, non-interest income ratio for FY17 was within expectations at 26.3% as efforts to diversify the Bank’s income intensify.  
• Operating expenses remained well managed, with positive JAWS reaffirmed for both the quarter and full year following strategic cost management initiatives as well as higher efficiencies attained. Accordingly, cost-to-income ratio (“CIR”) for FY17 was lower at 44.1% compared to the corresponding period last year.
• Consequently, operating profit for FY17 expanded 21.6% y-o-y to RM2,543 million compared to the same period last year of RM2,091 million.

Loan Growth Driven by Retail, SME and International Operations

• Gross loans, advances and financing grew 3.8% y-o-y to RM125.1 billion, predominantly led by growth in our key segments of domestic retail and SME as well as overseas operations.
• Domestic loans to the retail segment continued to be a driver of the Bank’s loan growth, expanding 5.2% y-o-y. Residential mortgages grew 10.4% y-o-y to RM56.9 billion underpinned by healthy loan pipelines and ahead of industry loan growth. Transport vehicle loans were lower at RM17.6 billion mainly as a result of softer industry growth during the year whilst credit card receivables rose 6.5% y-o-y to RM4.0 billion in FY17.
• Loans and financing to SME continued to grow at a healthy pace of 6.0% y-o-y to RM20.4 billion, representing 16.3% of the Bank’s loan base.
• Loans and financing from international operations accelerated 17.0% y-o-y to RM6.6 billion.

Healthy Funding and Liquidity Position

• Our funding and liquidity positions remain stable and prudent, with loans-to-deposits ratio of 80.6%.
• Customer deposits for FY17 increased by 4.5% y-o-y to RM155.2 billion. CASA grew 4.2% y-o-y to RM38.8 billion and CASA mix stood at 25.0%
• The Bank continued to maintain a stable funding base, with its individual deposit expanding 5.9% y-o-y to RM86.2 billion, representing an industry leading mix of 55.5%.

Robust Asset Quality and Capital Position

• We continue to place strong emphasis on preserving strong asset quality as gross impaired loan ratio and loan impairment coverage ratio for the Bank remained a prudent 0.96% and 96%, respectively. Inclusive of the regulatory reserve set aside as at 30 June 2017, the Bank’s coverage ratio would be higher at 151%
• The Bank’s capital position remains robust with Common Equity Tier 1, Tier 1 and Total Capital Ratios at 13.3%, 13.7% and 15.8% respectively.

Regional Contribution

• International operations accounted for 14.6% of the Bank’s pre-tax profit in FY17, led by improved contributions from Bank of Chengdu (“BOCD”) for two consecutive quarters. Profit contribution from BOCD improved 9.8% y-o-y to RM343 million in FY17, contributing 12.5% of the Bank’s pre-tax profit.

Dividend

• The Board has recommended a final dividend of 30.0 sen per share, bringing the total dividend to 45.0 sen for FY17, a 4.0 sen increase compared to the last financial year.

Business Outlook

Mr. Domenic Fuda commented, “Growth prospects of the Malaysian economy are expected to improve along with a better global macroeconomic backdrop. Domestic demand is expected to sustain with an additional boost from exports. As a result of the brighter growth outlook, loans and deposits are expected to continue its moderate growth trend moving forward.”

“Being digital at the core, executing our digital strategy remains our key priority in transforming our engagement with customers – by reimagining banking through customer journeys and optimizing our business to achieve operational excellence. We will continue to grow our domestic franchise and regional business through our Community Banking approach and differentiate ourselves via our multi-channel banking services.”

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