KUALA LUMPUR (Feb 28): Hong Leong Bank Bhd (HLB) reported a 4.4% growth in net profit for the second quarter ended Dec 31, 2023 (2QFY2024), as higher contributions from associate companies and write-backs from past provisions offset a decline in net interest income.

HLB has a 19.8% stake in Bank of Chengdu Co Ltd in China.

Net profit rose to RM1.09 billion or 53.09 sen per share for 2QFY2024, from RM1.04 billion or 50.87 sen per share a year ago.

The group declared an interim dividend of 25 sen, with an ex-date of March 14.

Net interest income fell by 0.5% to RM950.03 million for 2QFY2024, from RM954.65 million a year ago.

For the first half ended Dec 31, 2023 (1HFY2024), net profit grew 4.7% to RM2.12 billion from RM2.02 billion a year earlier, despite net interest income falling 3.7% to RM1.87 billion from RM1.94 billion for 1HFY2023.

The group attributed the lower net interest income to funding cost pressure, though it was partially mitigated by an expansion in its loan portfolio and effective asset and liability management.

These efforts led to an improvement in the net interest margin, which stood at 1.85% in 1HFY2024, while the cost-to-income ratio was 39.7%.

HLB’s gross loans and financing portfolio grew 7.5% year-on-year to RM185.2 billion in 1HFY2024, led by growth across the mortgage, auto loan, SME (small and medium enterprise) and commercial banking segments, as well as overseas operations, said group managing director and chief executive officer Kevin Lam Sai Yoke.

The return on equity stood at 12.2% for 1HFY2024, said Lam, adding: “We consistently monitor our asset quality, and place strong emphasis on our credit underwriting process, as evidenced by a stable GIL (gross impaired loan) ratio of 0.56%, and a sufficient LIC (loan impairment coverage) ratio of 163.4%.”

Hong Leong Financial Group Bhd (HLFG), which owns 64% of HLB, also eked out a 2.5% growth in net profit to RM831.87 million for 2QFY2024, from RM811.5 million a year ago, driven by higher contributions from its commercial banking, investment banking and stockbroking divisions.

This was despite net interest income falling by 0.4% to RM975.86 million for 2QFY2024, from RM979.86 million a year earlier.

The group, which is 78%-controlled by tycoon Tan Sri Quek Leng Chan, also declared an interim dividend of 18 sen, with an ex-date of March 14.

For 1HFY2024, HLFG's net profit grew 6.2% to RM1.57 billion from RM1.48 billion for the previous corresponding period, while net interest income fell by 3.4% to RM1.92 billion from RM1.99 billion.

President and CEO Tan Kong Khoon said the 1HFY2024 financial performance was "a positive reflection of the strong fundamentals and growing momentum in all segments of our business”. 

“Strong asset quality, stringent cost controls and higher contributions from our associates contributed to improved profitability. This was achieved despite the challenging operating environment, amid macroeconomic headwinds and financial market volatility,” Tan said in a filing with Bursa Malaysia on Wednesday.

Going into 2HFY2024, he said the group is maintaining a cautious stance, given the continuing macroeconomic uncertainty. 

“HLFG will actively prioritise our strategic focus on delivering sustainable and improved performance by growing target segments, developing new product offerings, as well as enhancing customer-centricity,” he said.

“With asset quality being a key priority, the group will continue to uphold its sound loan monitoring and management of credit risk, while also maintaining its strong capital and liquidity position to support asset growth. 

“This is on top of prudent cost control and continuous technology investment in operational resiliency and digital capabilities across all operating companies,” he added.

Shares in HLB were trading two sen or 0.1% higher at RM19.62 at Wednesday's afternoon break, giving the stock a market capitalisation of RM42.53 billion.

Meanwhile, HLFG climbed eight sen or 0.5% to RM16.68, valuing it at RM19.14 billion.