Hlb First Quarter Pre-Tax Profits
At Rm198 Million
Strong Earnings Traction for 1st
The Bank Groups revenue growth momentum continues.
Net interest income was up 25% against last corresponding
quarter with the net interest margin widening to 2.2% from
1.8%. The core stream of non interest income was consistent
with the corresponding quarter last year, but non interest
income overall came in slightly lower at RM88 million after
accounting for mark-to-market losses on derivatives and
a lower advisory income from IPO deals. Overall, net income
was up 11%, coming in strongly at RM422 million.
Business Transformation initiatives
remain work-in-progress and leading indicators are positive
although operating expenses on infrastructure and people
are increasing, but this is to support future revenue growth
streams and greater sustainability as the franchise grows.
Pre-provision profit before tax
was up 9% against last corresponding quarter, evidencing
stronger fundamentals and competitiveness as the Bank moves
into its next transformation phase. The adoption of additional
provisioning for non-performing loans of 5 to 7 years and
over 7 years as per regulatory stipulations, however brought
the pre-tax profit to RM198 million or level with the corresponding
quarters pre-tax profits.
The Bank should continue to deliver
a sustainable profit stream on a platform of ongoing Business
Transformation initiatives that focus on high performance,
portfolio and business alignment, structural innovations
and new capabilities.
Strengthening Domestic Core Business
Total Assets expanded to RM 61.3
billion, up 1.2% q-o-q from RM 60.6 billion in the previous
quarter. Of this, loans, advances and financing grew to
RM 28.9 billion overall, up 1.3% q-o-q or 11.4% y-o-y, with
key market share gains through consumer loans growth in
the financing of landed properties (up 5.2% q-o-q) and credit
cards (up 13.4% q-o-q) whilst purchase of transport vehicles
declined slightly by 2.6% q-o-q, reflecting the market environment.
We continued to grow our deposits
franchise, with deposits from customers growing 1.7% q-o-q
or 4.5% y-o-y to RM 45.0 billion with the retail portion
strengthening to 62% of the total deposit base.
Expansion of our customer segments
and products continued despite the competition.
Asset quality maintained
The quality of loan assets remained
healthy, with gross NPL ratio improving to 4.5% (4.7% last
June 2006) and net NPL ratio lowering to 2.8% (3.1% last
June 2006). Both ratios are expected to remain below the
industry. The loan loss coverage ratio has also further
improved to 71.9% (65% last June 2006).
The ratios evidence the strong
asset quality mantra at the Group, underscored by prudent
lending and collection practices, complemented by effective
Strong Capital Position
The Groups core capital and
total capital ratio (after deducting proposed dividends)
stood at 12.98% and 16.31%, versus end June 2006 ratios
of 13.24% and 17.00%. Share buy-backs stood at 75,175,200
(4.8%) of the Banks issued share capital as at end
30 September 2006. They have been held as treasury shares
and none were resold or cancelled to date.
Structural Changes to Accelerate
Momentum of Key Business Pillars
The convergence of the Business
Banking, Trade, Debt Capital Market and Treasury businesses
offered a compelling need to re-organise them into a Group Business Banking division. Platform readiness and structural preparedness
for Group Business Banking was pursued, and Group Business Banking
as a Strategic Business Division commenced in August 2006,
shortly after the fiscal year end. The focus is on solutioning
and structured finance beyond lending, and to drive fee
income. The Group is building these new capabilities.
Group Consumer Banking has
continued to innovate to introduce new, relevant products
and services to the market, and they include notably:
The re-launch of the Hong Leong
Platinum Credit Card with distinct, superior propositions
to the core premium customers; and
The launch of Hong Leong InvestSafe,
an innovative investment product in collaboration with Amanah
Raya Berhad (AmanahRaya).
The launch of Hong Leong Personal
Loan, a monthly installment loan product that offers fast
loan approval within 48 hours nationwide. This product is
designed to help customers meet financial needs such as
home renovations, education fees, weddings, travel and house
A new stand-alone Priority Banking
Center in Damansara Heights, Kuala Lumpur to cater for the
affluent segment was also opened in September 2006.
Scaling Up Islamic Banking
Net profit before tax and zakat
from Islamic banking was RM 18.9 million for the first quarter,
up 10% from the corresponding quarter. The higher profit
was delivered through a combination of:
- Higher income derived from investments
from depositors and shareholders funds;
- Lower operating expenses; and
- Lower specific and general provisions.
Ongoing positioning efforts focused
on infrastructure building for Islamic Investment Banking
and Wealth Management capabilities in Hong Leong Islamic
Bank Berhad, its wholly-owned subsidiary.
The Groups new Takaful subsidiary,
Hong Leong Tokio Marine Takaful Bhd is expected to commence
operations by the end of 2006.
The Board has not recommended any
dividend for the 1st quarter interim results.
Press Release - 8/11/2006