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Nikkei Markets

Hong Leong Financial Group’s net profit rises 11.1%

Company expects to maintain performance after non-interest income drive earnings

Hong Leong Bank, which accounts for most of Hong Leong Financial Group’s profits, is aiming a return-on-equity of about 11% this fiscal year.

KUALA LUMPUR (Nikkei Markets) -- Hong Leong Financial Group, the financial services arm of Malaysian tycoon Quek Leng Chan, said Wednesday its net profit rose 11.1% in the fiscal first quarter from a year earlier thanks to higher non-interest income.

   Net profit for the period ended Sep. 30 totaled 505.7 million ringgit ($120.55 million) compared with 455.25 million ringgit in the same period last year, the company said in an exchange filing. Quarterly net interest income fell 5.2% on-year to 690.9 million ringgit, while non-interest income rose 33.5% to 521.19 million ringgit.

   The group is expected to maintain its performance "in line with market conditions" for the current financial year, it said.

   A robust start to the current financial year is “a measure of our management focus that our core businesses continue to show strong credit and liquidity risk metrics,” said the company’s President and Chief Executive Officer Tan Kong Khoon. “We have a clear business and digital strategy.”

   Hong Leong Financial mostly provides 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.

   Net profit at its listed commercial banking division, Hong Leong Bank, climbed 10.6% to 706.92 million ringgit thanks to higher net income, lower allowance for impairment losses on loans, advances and financing.

   Quarterly net interest income fell 5.7% on-year to 698.25 million ringgit, while other operating income rose 36.4% to 379.70 million ringgit, it added.

   Analysts said Hong Leong Bank’s earnings were largely within expectations, although a 22% surge in its share price so far this year will likely limit further sharp gains.

   "There's some pressure coming from net interest income compression,” MIDF Amanah Investment Bank’s analyst Imran Yassin Yusof said. “Loans growth is okay although at a slower pace this year in line with deposits.”

   Hong Leong Bank, which accounts for most of Hong Leong Financial Group’s profits, is aiming a return-on-equity of about 11% this fiscal year. The lender is also targeting to keep non-interest income ratio above 27%.

   “By entrenching ourselves in the communities, leveraging on our branch footprint and digital capabilities, we continue to grow our domestic franchise and regional businesses,” said Hong Leong Bank’s Chief Executive Domenic Fuda.

   Hong Leong Capital’s net profit rose 20% year-on-year to 24.03 million ringgit led by a surge in profits at its fund and unit trust management segment.

   On investment banking front, Hong Leong Capital said it will continue to offer structured products but flagged tough times ahead for its stockbroking business amid pressure on brokerage charges. The unit said it also plans to launch regional and global funds in the current fiscal year.

   Shares of Hong Leong Financial Group ended unchanged while Hong Leong Bank edged up 0.1%. The benchmark FTSE Bursa Malaysia KLCI was also 0.1% higher.

  -- Jason Ng and Alexander Winifred

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