Business

Wednesday August 29, 2012

HLB: Banking sector outlook remains challenging

By DANIEL KHOO
danielkhoo@thestar.com.my


KUALA LUMPUR: Hong Leong Bank Bhd (HLB), the country's fourth largest bank by profit size, said the outlook for the banking industry “remains challenging” on the backdrop of changing industry dynamics and increased regulations.

Group managing director Datuk Yvonne Chia said that despite the challenging outlook, “we continue to remain positive on the future of the economy.”

“It is going to take a combination of boldness of investing in the future because there is a lot more regulatory and the introduction of front-end innovation for the non-financial centres that are also competing with the banks. Margins are also under pressure,” she said at a briefing on HLB's results for the financial year ended June 30 (FY12).

“This will mean that banks will have to transform efficiency, find new areas of growth as well as balancing own portfolio mix and yields.

“One of the key areas we will work on is to further enhance the productivity of our people. It is about scaling up our productivity and how to ensure we will remain profitable and investing,” she added.

HLB's net profit for FY12 grew 7.5% to RM1.65bil from RM1.53bil achieved in its proforma consolidated accounts in FY11. Revenue came in at RM3.89bil.

“The positive results reflect the combined strength of our merged bank,” Chia said in a statement.

“We achieved satisfactory performance on our key shareholder value indicators as well. Basic earnings per share rose to 99 sen against 78 sen last year. Net assets per share increased to RM6.52 from RM5.14 last year, while return on equity improved to 17.5% from 16.3%,” she added.

On an actual basis, HLB's net profits grew by 45% year-on-year. In the fourth quarter of FY12 alone, it raked in RM394.57mil on the back of revenue of RM965.94mil.

Net interest incomes in FY12 compared to the proforma FY11 witnessed marginal year-on-year growth of 0.3% to RM3.03bil while non-interest income declined year-on-year by 15.8% to RM868mil.

HLB said the growth in net interest income was primarily driven by expansion in customer loans while the drop in non-interest income was due to “forex and hedging losses due to unfavourable market conditions”.

The bank saw a 2.6% drop in operating expenses in FY12 to RM1.93bil from RM1.98bil in the proforma FY11. Net interest margins in FY12 stood at 2.12% from 2.27% in the proforma FY11.

Moving forward, Chia said HLB would focus on financing the commercial and supply chain segment and that could see a year-on-year projected growth in the range of “the lower teens”.

Chief operating officer Moey Tan said growth could also be expected in the residential financing while hire purchase could see some “portfolio rebalancing” in the works.

Meanwhile, Hong Leong Financial Group Bhd (HLFG) announced that its net profit for the financial year ended June 30 (FY12) declined to RM273.7mil from RM296.72mil in the previous year on the back of increased revenue at RM1.09bil from RM953.19mil previously.

HLFG said in a statement that the decrease was mainly due to two one-off gains booked in FY11 a RM175mil one-off life insurance surplus transfer and a gain on the transfer of Hong Leong Assurance Bhd's general insurance business of RM619mil.

HLFG said there were also a number of non-recurring one-off expenses and losses totalling RM199mil which were booked in its consolidated results, including HLB's RM175mil integration expenses.

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