Hong Leong Financial Group Berhad (HLFG) announced its final results for the financial year ended 30 June (FY18).

Group profit before tax grew 15.8% year-on-year (y-o-y) to a record RM3,579 million, with strong contributions recorded from our commercial banking and insurance businesses, whilst net profit after tax and minority interests came in at RM1,907 million, up 26.6% y-o-y.

Book value per share increased from RM14.52 as at 30 June 2017 to RM15.55 as at 30 June.

Hong Leong Financial Group’s president & chief executive officer, Tan Kong Khoon commented, “We are pleased to achieve another year of record profits for FY18 where the strong financial performance reflects the careful management and diligent execution of our business strategy across the group.

“Our core businesses continue to show strong credit and liquidity risk metrics while we have a clear business and digital strategy and we remain focused on building long-term sustainable value for our shareholders.”

HLFG raised its total dividend from 38 sen per share last year to 40 sen per share in FY18.

Hong Leong Bank Berhad’s (HLB) profit before tax grew 18.1% y-o-y to RM3,246 million due to both higher net interest income and non-interest income as well as higher associate contribution from the Bank of Chengdu, whose profit contribution rose 50.5% y-o-y to RM516 million.

Net interest income grew 4.2% yoy to RM3,495 million in FY18, aided by both loan growth and an improved net interest margin at 2.1%, reflecting prudent loan pricing and funding cost management whereas non-interest income improved by 12.5% y-o-y to RM 1,344 million with a higher non-interest income ratio of 27.8% while overall loans grew 3.1% y-o-y to RM 129.1 billion as at 30 June.

HLB’s Loan/Deposit ratio remained at 82.0% while HLB’s liquidity coverage ratio stood at 126%.

Asset quality continued to be strong with the Gross Impaired Loans Ratio improving further to 0.87%, loan impairment coverage ratio remained at 89.5% inclusive of regulatory reserves set aside as at 30 June, HLB’s loan impairment coverage ratio was higher at 155.4%.

Cost/Income ratio improved to 42.6% in FY18, at the lower end of the industry range, as revenue growth continued to outpace expense growth while capital position remained with Common Equity Tier 1, Tier 1 and Total Capital Ratios at 12.6%, 13.3% and 16.3% respectively as HLB raised its total dividend from 45.0 sen per share last year to 48.0 sen per share in FY18, which will translate to better cash flows for HLFG.
HLA Holdings Sdn Bhd (HLA), HLFG’s insurance division, recorded a pretax profit of RM348 million in FY18, an increase of RM10 million y-o-y. In the preceding year (FY17), HLA showed higher profits arising from increases in long term interest rates.

HLA continue to make significant progress in growing their Non-Participating and Investment Link new business premiums while the management expense ratio was 5.9% in FY18.

The focus remains on growing and improving the quality of HLA’s premium base, increasing profitability drivers as well as growth across multiple distribution channels.

The Investment Banking division under Hong Leong Capital Berhad, recorded a pretax profit of RM79 million in FY18, a decrease of RM5 million y-o-y, reflecting subdued corporate market activities.

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