How Hong Leong Finance was hurt by Singapore's car loan curbs

Even prospects just got disappointing.

According to UOB Kayhian, ,management focuses on growing housing loans for HDB flats where loan quantum is smaller but asset yields are higher due to less competition.

Hong Leong Finance (HLF) also adopts a selective approach in financing medium-sized developers with a good track record.

Here's more from UOB Kayhian:

Growth is supported by government land sale programme, particularly for mass-market projects.

Volume of car loans has shrunk but loan quantum has increased due to customers’ preference for continental and luxury cars as a result of higher COE prices.

However, prospects for car loans have diminished after the curbs were introduced in Feb 13. The maximum LTV ratio was lowered to 50% and the tenure of car loans was capped at five years.

The advent of floating-rate housing loans has caused severe NIM compression. HLF is also unfairly penalised by having to maintain CET-1 CAR at above 14%, which is much more stringent compared to requirements for commercial banks.