HLFG 1Q earnings rise 24%

by **Cals** Wed 27 Nov 2013, 10:20

Business & Markets 2013

Written by Wei Lynn Tang of theedgemalaysia.com

Wednesday, 27 November 2013 10:08

KUALA LUMPUR: Hong Leong Financial Group Bhd’s (HLFG) net profit rose 23.9% year-on-year (y-o-y) to RM430.2 million for its first quarter ended Sept 30 of 2014 financial year (1QFY14). Net income rose 8.6% to RM1.17 billion.

“This is a very good first quarter performance contributed not only by Hong Leong Bank but also by other divisions in the group”, it said in its announcement to Bursa Malaysia.

The growth in earnings was contributed by its three core businesses of commercial banking, insurance, and investment banking, which showed an increase in profit before tax (PBT) of 9.7%, 84.1% and 58.1% respectively. The group’s PBT for 1QFY14 stood at RM812.6 million, an increase of 18% y-o-y.

Compared to the preceding quarter, HLFG’s PBT rose 43.7% from RM565.4 million, mainly due to higher contribution from commercial banking and insurance, which increased RM195.5 million.

Based on the group’s 1QFY14 net income of RM1.17 billion, its commercial banking division, Hong Leong Bank Bhd (HLB), contributed the most at 88% with RM1.03 billion.

HLB’s PBT at RM699.3 million, which rose 9.7% y-o-y, was contributed by a higher net income, higher write-back on allowance for impairment losses on loans, advances and financing, and higher share of profit from its 20% stake in Bank of Chengdu.

“Bank of Chengdu remains the key contributor. Its profit contribution improved by 46.6% to RM89 million and accounted for 12.8% of the group’s PBT,” HLB said.

HLB’s net profit rose 14% y-o-y to RM544 million on 2.7% increase in net income to RM1.029 billion.

Alliance Research maintained its “buy” call on HLB with a target price of RM15.60. Gross loan growth for 1QFY14 remained unexciting, expanding 7.1% y-o-y and 1.1% q-o-q to RM98.3 billion, which came below management and house targets of 10% and 9% respectively. This was attributed to declines in margin financing and personal loan portfolio by 8% y-o-y and 3.7% y-o-y.

HLFG’s insurance division, HLA Holdings Sdn Bhd, recorded the highest increase in PBT with 84.1% growth y-o-y to RM81.2 million.

The higher earnings were largely due to a higher net income of RM39.7 million mainly from lower actuarial reserves arising from higher interest rates, and supported by the continued good performance from the 70% owned life insurance subsidiary Hong Leong Assurance Bhd (HLA).

“Gross premiums increased by 15.3% y-o-y to RM506.3 million and HLA’s management expense ratio had further improved to 5.7%”, HLFG said.

“Our focus remains to grow and improve our premium base, profit as well as distribution channels”, the group said.

Its investment banking division, Hong Leong Capital Bhd (HLCB), saw an increase of 58.1% in PBT to RM18.5 million in the quarter. This is contributed by its investment banking and stockbroking businesses, which reported a 23.8% increase in PBT to RM15.6 million from RM12.6 million a year ago. The division contributed 85% to HLCB’s PBT in the quarter.

HLFG’s earnings per share (EPS) increased 23.7% y-o-y to 41.3 sen in the quarter, “a record in terms of recurring EPS for a particular quarter”, said the group.

“We are encouraged by the strong earnings growth achieved in our first quarter results. We will strive not only to sustain but improve our business performances going forward in the execution of our business plans,” said HLFG president and CEO Raymond Choong.

HLFG announced its first interim dividend of 13 sen per share. The stock closed at RM15.30 yesterday, up two sen.

This article first appeared in The Edge Financial Daily, on November 27, 2013.