The group's second-quarter net profit rose 4.4% year-on-year to RM1.09bil.
PETALING JAYA: Hong Leong Bank Bhd
(HLB) is hopeful that the dynamic local business environment, underpinned by domestic policy support that is anticipated to cushion lingering external headwinds, will provide the bank with new growth opportunities.
Group managing director and chief executive Kevin Lam believes that on top of resilient national consumption that is expected to continue, an anticipated pick-up in investment activities is also tipped to provide added impetus to domestic growth prospects in 2024.
On the flipside, Lam acknowledged the prospects of a soft landing for the global economy as lagged effects from earlier policy tightening gained momentum, coupled with mounting challenges in China, intensifying geopolitical risks and the rerouting of shipping routes which would inevitably cloud the global economic landscape.
For the second quarter ended Dec 31, 2023 (2Q24), the group saw net profit notch up 4.4% year-on-year (y-o-y) to RM1.09bil, despite revenue narrowing by 1.5% to RM1.46bil.
HLB attributed the uptick in earnings to an increase in pre-tax profit, which was primarily due to net written back of allowance for impairment losses on loans, advances and financing of RM31.1mil, net written back of allowance for impairment losses on financial investments.
Cumulative net earnings for the six months up to Dec 31 (1H24) similarly grew 4.7% y-o-y to RM2.12bil, although turnover for the two quarters inched down 4.3% to RM2.86bil.
The rise in cumulative net profit was led by continued strong loans and financing expansion, improved non-interest income and robust contributions from the group’s associates, which in turn drove the bank’s return on equity to 12.2%.
Lam added: “Our gross loans and financing portfolio grew 7.5% y-o-y to RM185.2bil, led by growth across our mortgage, auto loans, small and medium enterprise (SME) and commercial banking segments as well as overseas operations.
“We consistently monitor our asset quality and place strong emphasis on our credit underwriting process, as evidenced by a stable gross impaired loans ratio of 0.56% and a sufficient loan impairment coverage of 163.4%.”
Going deeper into the numbers, he said the group’s domestic loan growth of 7.2% y-o-y has continued to outperform the industry’s growth rate of 5.3% y-o-y, with residential mortgages escalating by 7.2% y-o-y to RM92.3bil – supported by a healthy loan pipeline – while transport vehicle loans maintained a robust growth of 10.1% y-o-y to RM20.6bil.
The vehicle loan expansion was supported by the bank’s strategic collaborations to strengthen dealer coverage and higher motor vehicle sales arising from attractive year-end promotional offers from car manufacturers, said Lam.
“Domestic loans to business enterprises recorded a y-o-y expansion of 8.7% to RM60.3bil, while our support of SMEs saw this financing portfolio grow 9.6% y-o-y to RM34.3bil,” he said.
Lam said HLB’s community banking initiative within the SME segment contributed a 12.6% y-o-y growth, attributed to its strong loans pipeline, innovative customer-centric solutions and digitalised onboarding initiatives that enhance customer experience.
Compared with the preceding quarter ended Sept 30, he said group net profit widened 5.6% from RM1.03bil, in tandem with the growth of 5% in revenue from RM1.39bil.
This was due to a number of reasons including a higher net income of RM70.6mil and net written back of allowance for impairment losses on financial investments.
Declaring an interim dividend of 25.0 sen per share for 1H24, Lam said HLB will remain focused on delivering innovative and customer-centric banking solutions to its customers while pursuing opportunities for business growth and to drive franchise value.
“To make this possible, it remains crucial for us to build world-class digital capabilities and continue to support and enable our employees to develop their greatest potential,” he said.
