Hong Leong Bank expects 10% loan growth for FY15

KUALA LUMPUR: Hong Leong Bank Bhd, which reported a 29.06% increase in net profit for the financial year ended June 30 2014, has set a 10% loan growth target for FY15 despite moderation in the industry loan growth.
Hong Leong Bank, the fifth largest bank in the country in terms of asset size, also failed to meet its target of achieving 10% or high single-digit loan growth for FY14, whereby it only managed to grow by 7.2% to RM104.2million.
However, speaking at a press conference here yesterday, its group managing director cum CEO Tan Kong Khoon believes the group can achieve the target by adopting good strategies and there is "strong pipeline" for its property loans.
"The momentum is still there, no apparent slowdown, nothing should cause an alarm," he stressed, referring to the concern by analysts that the slowdown in property loans would a major risk for Hong Leong Bank as it accounts for a big portion of the loan base.
He added that as the middle income group is growing, he foresees the group could grab more loans for residential properties.
On net interest margins (NIMs), Tan expects the compression will continue, but with a guidance to maintain above 2% for FY15 versus 2.08% for FY14.
Hong Leong Bank's net profit rose 29.06% to RM537.45 million against RM416.43 million in the previous corresponding period. Its full-year net profit grew 13.25% from RM1.86 billion to RM2.10 billion.
Revenue for the fourth quarter and FY14 went up 3.22% and 0.81% to RM1.0 billion and RM4.04 billion respectively.
The group a 26 sen final dividend, bringing a total of 41 sen for FY14.
It has delivered solid asset quality, with the record low of 1.18% for gross impaired loan ratio, with loan impairment coverage ratio stood at 128.9%, amongst the highest in the banking sector.
Its capital levels, meanwhile, remains healthy as its common equity tier1, tier1 and total capital ratios well above regulatory minimum of 10.5%, 11.9% and 14.6% respectively.
Tan said Hong Leong Bank continues to be on the lookout for acquisition opportunities within the Asean region.
"It is always on our mind, we are open for opportunities, but it depends on the right fit and the right price," he added.
In the meantime, he said the group already did a due diligence in regards to its bid to acquire state-owned Bank Mutiara in Indonesia, but the deal yet to be concluded as pricing is still the biggest issue.
According to reports, the acquisition could fetch nearly RM1 billion.
When asked on the implementation of the goods and services tax (GST), Tan said there will be an impact for the banking industry, but couldn't be quantified yet.
"There are still terms being deliberated by Bank Negara, the customs and the Association of Banks," he added.