Lower provisions and strong cost management boosted earnings.
Hong Leong Bank profits rose 33.3% YoY to $156.25m (RM643.1m) in Q4FY18 on the back of sharply lower provisions brought about by lumpy recoveries, according to UOB Kay Hian.
The bank’s strong cost discipline also brought operating expenses down by 0.8% YoY, pushing overall revenue growth at 2.2%. Loan growth gained traction in Q4 after expanding 2.8% on a QoQ basis.
However, the bank reported a 6.4% increase in gross bad loan balance, pushing bad loan ratio from 0.84% in Q3 to 0.87% in Q4. “The uptick was largely attributed to the uptick in selected SME accounts which management guided as well collateralised,” said UOB analyst Keith Wee Teck Keon.
Here’s more from UOB Kay Hian:
Net interest income and fee income trends were weak with net interest income contracting 5.3% yoy on the back of higher funding cost, partially driven by re-pricing of fixed deposits following the OPR hike in 3QFY18. Fee income declined 9.9% yoy on the back of lower credit card fee income (-10.7% yoy) and services charges (-10.5% yoy).
The weak qoq revenue trend (-6.3% qoq) posed a drag to overall profitability with pre-provision operating profit and earnings declining 8.7% qoq and 9.3% qoq respectively despite lower opex and provision trends. Net interest income declined 3.2% qoq despite strong qoq loans growth traction (+2.8% qoq) as higher funding cost and re-pricing of deposits impacted NIM (-8bp). Non-interest income declined 14.1% qoq on the back of weaker fee income (-8.1% qoq) and trading income (-22.3% qoq) as volatility in bond yields impacted trading gains.
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