KUALA LUMPUR (Nikkei Markets) -- Hong Leong Financial Group, the financial services arm of Malaysian tycoon Quek Leng Chan, said Monday net profit rose 12% in the fiscal second quarter from a year earlier mostly driven by commercial banking business.
Net profit for the three months ended Dec. 31 totalled 495.34 million ringgit ($126.66 million) compared with 443.03 million ringgit over the same period last year, Hong Leong said in an exchange filing. Quarterly net interest income rose 6.2% on-year to 746.66 million ringgit, while non-interest income fell 9.8% to 462.53 million ringgit.
"Our core businesses continue to show strong credit and liquidity risk metrics," said Hong Leong Chief Executive Tan Kong Khoon. "We have a clear and focused business and digital strategy which we will continue to execute diligently."
Hong Leong Financial mostly provides consumer and commercial banking services through its listed Hong Leong Bank unit, while investment banking and stockbroking businesses are run by Hong Leong Capital. The company also owns unlisted HLA Holdings that sells life insurance products.
Quek -- Malaysia's second-richest person with net worth of $7.4 billion, according to Forbes -- also controls other businesses that range from property development to semiconductor manufacturing.
"Loans (growth) have not been strong at below mid-single digit," said Kenanga Investment Bank's analyst Ahmad Ramzani Ramli. "Management has indicated the next six months of 2018 will still be challenging," he said, noting cost pressure due to digitalization initiatives.
For the first six months, net profit rose 15% to 950.60 million ringgit from 829.23 million ringgit over the same period last year. Six-month net interest income was 6.5% higher at 1.48 billion ringgit from a year earlier, while non-interest income was 3.3% lower at 852.93 million ringgit.
"The group is expected to maintain its performance in line with market conditions for the current financial year," Hong Leong Financial said.
Net profit at Hong Leong Bank climbed 24% to 683.07 million ringgit in the fiscal second quarter thanks to higher net income, lower provisions for bad loans, and higher share of profit from associated company.
Hong Leong Bank, which typically accounts for about 90% of Hong Leong Financial's yearly operating profit, said its net interest margin rose five basis points to 2.13% at the end of 2017. In terms of asset quality, gross non-performing loan was 0.97%, while common equity Tier 1 ratio stood at 13.1%.
"Loans and deposits are expected to continue its moderate growth trend on the back of a resilient macro landscape," said Hong Leong Bank's Chief Executive Domenic Fuda. "We will continue to grow our domestic franchise and regional businesses through our multi-channel banking approach."
Hong Leong Bank is targeting a 5%-6% loan growth this fiscal year driven by loans to small and medium enterprise. The bank also hoped to sustain its loan-to-deposit ratio at 82%.
Hong Leong Capital, which mainly provides investment banking, stockbroking, and asset management, said its net profit fell 9.7% year-on-year to 20.68 million ringgit largely due to higher variable overhead expenses.
Shares of Hong Leong Financial Group fell 1.3% to 18.46 ringgit on Monday, while the benchmark FTSE Bursa Malaysia KLCI ended 0.1% lower.