Latest news with #HongLeong
New Straits Times
2 days ago
- Business
- New Straits Times
Hong Leong poised to benefit from China associate's share price rally
KUALA LUMPUR: Hong Leong Bank Bhd is set to attract renewed investor interest following the strong performance of its China associate, Bank of Chengdu Co Ltd, whose share price recently surged to a record high despite geopolitical challenges. In a research note, CIMB Securities said Bank of Chengdu's stock hit RMB19.57, up 21.7 per cent from its February low, as market sentiment improved after the finalisation of United States tariffs on China. Hong Leong Bank holds a 17.8 per cent stake in Bank of Chengdu, which remains a key contributor to its earnings. "The risk-reward trade-off for Hong Leong is now tilted to the upside," CIMB Securities said, upgrading its rating on the stock to "buy" from "hold" and raising the target price to RM21.50 from RM21.40. The firm noted that Bank of Chengdu's improving outlook and consensus expectations for a 4.2 per cent year-on-year rise in pre-tax profit for financial year 2026 (FY26) contrast with its earlier conservative estimate of a 5.8 per cent decline. Aligning projections with market consensus could imply a potential target price of RM24.10 for Hong Leong, it said. Despite Bank of Chengdu's positive momentum, Hong Leong's own market capitalisation declined 9.3 per cent to RM42.1 billion since February, partly due to a one-off dilution loss of RM408 million. Of this, RM393 million was linked to the conversion of Bank of Chengdu's convertible bonds. "Hong Leong confirmed that this is a one-off loss," CIMB Securities said, adding that the dilution was caused by Bank of Chengdu's bondholders converting at a lower price, compared with Hong Leong's earlier and more favourable conversion. Bank of Chengdu's contribution to Hong Leong's group pre-tax profit stood at 25.7 per cent in the March quarter, maintaining its critical role in Hong Leong's earnings base. The Chengdu-based lender reported a robust return on equity of 14.8 per cent, with loans and deposits rising 17 per cent and 15 per cent year-on-year, respectively. Asset quality at Bank of Chengdu also remained solid, with a gross impaired loans ratio of just 0.66 per cent and loan loss coverage at 456 per cent. CIMB Securities noted that only six to seven per cent of Bank of Chengdu's loans are linked to the manufacturing sector and are largely domestically focused, making the impact of US tariffs manageable. Meanwhile, Hong Leong's asset quality continued to outperform industry standards. Its gross impaired loans ratio stood at 0.57 per cent as at March, lower than the banking industry's 1.42 per cent. Hong Leong's loan loss coverage dropped to 95 per cent in the third quarter of 2025 from 139 per cent in the previous quarter due to a RM399 million write-back of pre-emptive provisioning. Despite this, the firm said it remains "not overly concerned" as about half of the impaired loans are backed by strong property collateral and the remainder is covered by provisioning at 1.8 times. "Looking ahead, we expect Hong Leong to rebuild its loan loss cover in the coming quarters, consistent with its traditionally conservative credit culture," it said. CIMB Securities also raised its dividend payout forecasts for Hong Leong, projecting yields of 4.5 per cent for FY26 and 5.1 per cent for FY27, driven by improved capital ratios under Basel III. The dividend per share is expected to rise to 88 sen in FY26 and 99 sen in FY27, from 71 sen previously. Key catalysts for Hong Leong include its stable asset quality and higher dividend payouts, while downside risks include potential spikes in credit costs and elevated funding costs. Shares of Hong Leong last traded at RM19.40 apiece, valuing the lender at RM42.05 billion.
The Star
28-05-2025
- Business
- The Star
Hong Leong Bank records improved 9M net profit of RM3.18bil
Hong Leong Bank group managing director and CEO Kevin Lam KUALA LUMPUR: Hong Leong Bank Bhd maintained a growth trajectory in the nine months ended March 31, 2025 (9MFY25) with double-digit expansion in non-interest income, while the bank's gross loans and financing crossed a RM200bil milestone, said group managing director and CEO Kevin Lam. "We are pleased to announce that our business performance thus far has been commendable underpinned by solid loans/financing growth, strong non-interest income contribution and healthy asset quality." In 9MFY25, Hong Leong posted a net profit of RM3.18bil, up from RM3.16bil in the year-ago period. The bank reported revenue of RM4.78bil, an increase from RM4.29bil in the comparative period, while earnings per share rose to 155.36 sen from 154.3 sen previously. The higher cumulative performance was in spite of the weaker third-quarter performance, which logged a net profit of RM946.7mil against RM1.04bil in 3QFY24. Revenue during this quarter was higher at RM1.55bil, against RM1.44bil in the year-ago quarter. During the nine-months period, the bank's net interest income rose to 5.8% year-on-year (y-o-y) to RM3.66bil, underpinned by strong loans/financing growth and effective funding cost management. As a result, net interest margin gained 5 basis points y-o-y to 1.9%. Non-interest income in 9MFY25 jumped 34.1% y-o-y to RM1.12bil, attributed to the encouraging performance in the wealth management business and GM franchise sales alongside the higher treasury and foreign exchange gain. Hong Leong Bank's gross loans, advance and financing grew 7.2% y-o-y to RM201.2bil, on the back of expansion in the key segments of mortgage, auto loans, SME and commercial banking as well as key overseas markets. Customer deposits in 9MFY25 rose 5.9% y-o-y to RM225bil with current account savings account (Casa) expanding 5% y-o-y to RM68.3bil. The bank's Casa ratio stood at 30.4%. "'We are confident that the Malaysian economy will remain resilient amidst the ongoing external headwinds, whilst at Hong Leong Bank, we focus on the execution of the 3-5 Year Transformative Plan to deliver sustainable results to our stakeholders," said Lam on the bank's outlook. Meanwhile, Hong Leong Bank's parent company Hong Leong Financial Group Bhd (HLFG) announced a net profit of RM2.4bil in 9MFY25, slightly higher from RM2.39bil in the year-ago period, while revenue rose to RM5.45bil from RM5.04bil in the comparative period. The group's third-quarter net profit was RM714.12mil, down from RM818.07mil in 3QFY24, and revenue slipped to RM1.7bil from RM1.76bil in the previous corresponding quarter. It said in a statement the insurance division, HLA Holdings Sdn Bhd recorded a 13.5% weaker pre-tax profit of RM489mil due to reduced investment income and mark-to-market gains as well as lower share of profits from associate, partially mitigated by higher net insurance service results. The investment banking and asset management division, Hong Leong Capital Bhd's pre-tax profit was lower by 23.6% y-o-y to RM57mil, primarily attributable to lower mark-to-market gains on equity investments. HLFG president and CEO Tan Kong Khoon said the group demonstrated resilience in the first nine months of FY25 despite a challenging operating environment. However, he added that global economic uncertainties stemming from trade disruptions and geopolitical tensions had a negative impact on investment income within the insurance and investment banking divisions.
