Hong Leong Bank lowers FY18 loan growth target

KUALA LUMPUR: Hong Leong Bank Bhd, which posted a 24% jump in its net profit for the second quarter ended Dec 31, 2017 (Q218), has revised its FY18 loan growth target to 3%-4% from 5%-6% after its loan growth for the first six months of FY18 (1H18) came in below its expectation, at 1.8%.

Group managing director and CEO Domenic Fuda said most of its key performance indicators were met in a solid first half performance, except for loan growth.

“With the slowdown in the industry, 5%-6% (original loan growth target) will be tough to do, so we’re guiding for 3%-4%,” he told a media briefing when announcing its Q218 results here today.

The bank’s loan growth expanded 1.8% year-on-year to RM125.5 billion in 1H18 on the back of moderate industry credit growth as well as still cautious business sentiments.

Transport vehicle loans were 4.5% lower at RM17.3 billion, affected by weaker vehicle sales. Overall loan growth also partially negated by some unscheduled corporate loan repayments, but was led by expansion in the key segments of mortgages, small and medium enterprises (SME) and overseas operations.

In 2017, the banking industry posted loan growth of 4.1%, slower than the 5.3% in the preceding year.

Fuda explained that the transport vehicle loan is actually a sizeable portfolio for the bank and expects the slowdown in vehicle sales to plateau.

“We’re seeing a little bit of pick-up in motor vehicles and we’re seeing better traction among the SME portfolio. In the stock of housing loans that we have, we see a pick-up in the stock waiting for drawdown. Our approvals in the 2H last year was better than 1H last year,” he said.

Hong Leong Bank’s net profit for Q218 rose 24.2% to RM683.07 million from RM549.94 million a year ago mainly due to higher net income, lower allowance for impairment losses on loans, advances and financing as well as higher share of profit from associate companies.

Its revenue jumped 4.2% to RM1.23 billion from RM1.18 billion in the previous year’s corresponding quarter.

For the six months period, the bank’s net profit increased 21.0% to RM1.32 billion from RM1.09 billion a year ago, mainly due to higher net income, write back of impairment losses on financial investments and higher share of profit from associated company.

Its revenue went up 5.8% to RM2.41 billion compared with RM2.27 billion in the previous year’s corresponding period, anchored by asset-liability management and stable franchise-led non-interest income contributions.

Hong Leong Bank proposed an interim single-tier dividend of 16.0 sen per share for the current quarter.