Hong Leong Bank posts higher FY21 net profit of RM2.86bil, declares 35.22c div/share

Gross loans and financing saw a healthy growth of 6.8% year-on-year (y-o-y), driven by expansion in key segments and funding disbursed to support SMEs and corporate businesses as part of their cashflow needs during the past year.

Our asset quality remained healthy as we recorded a low GIL ratio of 0.46% while concurrently, ensuring our customers receive the necessary assistance throughout their recovery journey.

“As the journey ahead remains uncertain until all economic sectors reopen, we have built up additional pre-emptive impairment buffers as cover for this uncertain business environment,” said Hong Leong Bank group managing director and CEO Dominic Fuda in a statement accompanying the results.

He added that the economic environment remains challenging, with some economies seeing steady recovery although signs of plateauing have emerged.

Continued policy support and vaccine progress should help cushion uncertainties surrounding the pandemic and the resurging cases caused by new variants.

“Domestically, containment measures pose downside risks to growth outlook but favourable vaccination rates and growth in our major trading partners, plus accommodative policy measures, should underpin a reasonable level of growth going into 2022,” he said.

The board of directors declared a final dividend of 35.22 sen per share, which brought the total payout in the year to 50 sen per share for a payout ratio of 36%.

In FY21, the bank's net interest income rose to RM4.31bil, which resulted in a 26bps increase in net interest margin to 2.14% amid efforts to manage funding costs, loan and financing expansion and the absence of a modification loss registered last year.

Net interest income came to RM1.16bil with a non-interest income ratio of 21.2% as card fees remained subdued on the back of cautious retail custimer spend although the impact was partially mitigated by higher contribution from wealth management activities.

Operating expenses dropped 1.2% year-on-year (y-o-y) to RM2.08bil while cost-to-income ratio ended at 38%.

Consequently, operating profit before allowances for FY2021 was RM3.39bil, a 26.7% y-o-y increase compared to last year.

According to the bank, the 6.8% y-o-y jump in gross loans to RM155.8bil was mainly owing to expansion in its key segments of mortgages, SME and commercial banking.

The loans-to-deposit ratio ended at 83.9% while loan-to-credit ratio improved to 145.3% compared to 136.8% a year ago.

Customer deposits in FY21 rose 5.6% to RM183.3bil while current account, savings account (CASA) climbed 22.5% to RM59.2bil for a higher CASA ratio of 32.3%.

The banks funding base remained stable, supported by a sound individual deposit base, exemplified by an individual deposit mix ratio of 51.2%.

In terms of asset quality, the bank registered a record low GIL ratio of 0.46% while loan impairment coverage (LIC) wa solid at 247%.

Inclusive of regulatory reserve, the banks LIC ratio stood at 304%.

The capital position of the bank is healthy and supportive of future growth opportunities with CET 1, Tier 1 and total capital ratios at 13.6%, 14.1% and 16.2% respectively as at June 30, 2021.

Meanwhile, Hong Leong Financial Group Bhd

Revenue for the year grew 17.9% to RM6.2bil from RM5.26bil in FY20.

The group declared a final dividend of 29.2 sen per share for a total payout of 40 sen per share in FY21.

Despite the challenging business environment due to the on-going COVID-19 pandemic, the group has navigated through the year to deliver a commendable performance across all core operating businesses.

We anticipate a gradual recovery of the Malaysia economy underpinned by the rapid COVID-19 vaccination rollout and the countrys expected progression under the National Recovery Plan.

“Notwithstanding this, we shall continue to prudently manage our key business risks and ensure our business continuity plans remain in place,” said Hong Leong Finanical Group president and CEO Tan Kong Khoon.