Robust earnings growth
Hong Leong Bank Berhad today announced a net profit before tax of RM722 million for the 12 months ended 30th June 2005. The result was 37% above reported earnings of RM522 million a year ago.
On a quarterly basis (April to June 2005), the quarter’s profit before tax was RM157 million against RM128 million June 2004, a 23% increase. The improved pre-tax profit was attributed to significantly higher non-interest income and lower loan loss provision.
Strong non-interest/fee income
Non-interest income grew significantly by 48% for the full year to RM344 million from RM232 million, attributable to stronger gains from business banking, treasury, wealth management sales and Singapore branch corporate finance opportunities. The emphasis on fee-based business has proven to be successful in mitigating the pressure on lending margins due to intense competition.
Consequently the non-interest income ratio improved significantly to 23.5% from 16.7% a year ago.
Strong momentum in consumer lending
The Bank’s loans book grew by 11% (net of provisions), backed up by a strong 23% growth in Mortgages and 17% in Credit Cards. This growth is in line with the Bank’s vision to be an integrated financial services provider, having dominant market position in personal financial services, with emphasis on innovation and service.
“We are glad that our Personal Financial Services segment continued to provide the growth impetus with increased sales in financial planning, wealth management and Islamic banking products, capitalizing on the strength of its customer base and deep relationship with the community. This reaffirms the Bank’s position in the market place and the trust we enjoy from the community “ said Ms Yvonne Chia, Group Managing Director of Hong Leong Bank.
Islamic Banking as a growing segment
The Bank’s Islamic Banking financing and deposit has shown good growth by contributing 13% and 12% respectively to the total Bank’s balance sheet. The Governor of Bank Negara Malaysia, YBhg, Tan Sri Dato’ Sri Dr. Zeti Akhtar Aziz officiated the launch of Hong Leong Islamic Bank on 19th July 2005. Hong Leong Islamic Bank with a paid-up capital of RM500 million and total assets of RM5 billion has established a dedicated team to offer a comprehensive range of services in areas like structured finance, capital market, personal financial services and wealth management.
Loan quality improves
The Bank’s asset quality continued to strengthen. The gross non-performing loans ratio (NPL), based on 3 month NPL classification, improved to 7.5% as of 30th June 2005 from 11.2% a year ago whilst the net NPL ratio improved to 4.5% from 5.4% for the same period last year. The sustained improvement is the result of strong credit risk management, effective collection efforts and prudent lending policies.
High capital ratio
Hong Leong Bank remains amongst the banks with the highest capital ratio in Malaysia with a risk-weighted capital ratio at 17.4% as of 30th June 2005. As part of capital management strategy, the Bank has to-date bought back a total of 51,542,700 shares or RM274 million, representing 3.26% of the issued and paid-up capital and they are held as Treasury shares.
The Bank has successfully issued and priced its inaugural Subordinated Bonds of US$200 million on 27th July 2005. The offering attracted strong demand from investors in Asia and Europe. In conjunction with the issue, Hong Leong Bank’s long term rating is rated Baa1/BBB+/BBB+ from Moody’s/Fitch/S&P respectively.
As for the Bank’s loan to deposit ratio, it stood at 67.3%. The strong deposit franchise and the completion of the recent US$200 million Subordinated Bonds will position the Bank with a strong liquidity for further business expansion and growth.
Earning per share for the reporting quarter is at 7.3 sen (basic as well as fully diluted) or 33.2 sen as of 30th June 2005 (June 2004 – 24.5 sen).
The Board declared a final dividend of 15.5 sen less 28% tax. With this, the total dividend for the year is 24 sen (previous year: 24 sen) or 51% of total PAT for the financial year ended 30th June 2005.
For further details, visit www.hlb.com.my or www.bursamalaysia.com/website/listing/lcannounce/lca.htm)
Press Release - 29/8/2005