Hong Leong Bank profits hit $173.1m in Q3

Lower than expected credit costs buoyed quarterly earnings.

Hong Leong Bank continued its steady performance after profits hit $173.1m (RM690.1m) in Q3, according to UOB Kay Hian, buoyed by lower than expected credit costs which clocked in at 4bp. 

A lumpy net trading gain worth $30.55m (RM121.8m) from a financial derivative instrument also buoyed the bank’s quarterly earnings.

Annualised loan growth for the nine months into FY18 also inched up by a measly 0.3% YoY as the strong-performing mortgage segment was able to offset a decline in working capital and auto loans.

Hong Leong also reported a 13.1% QoQ decline in gross impaired loans resulting in a GIL ratio of 0.84% in Q3, indicating healthy asset quality.

“The stable asset quality trend coupled with lumpy recoveries in 3QFY18 resulted in significantly lower net credit cost of 4bp in 3QFY18 and 7.0p for 9MFY18 which does indicate that there should be minimal capital impact on the group upon the adoption of MFRS9,” said analyst Keith Wee Teck Keong.

However, net interest income and fee income trends posted weak performances with net interest income falling 1.8% YoY due to higher-than-expected funding cost from aggressive fixed deposit build-up.

Also read: Malaysian bank earnings growth may slow 9.7% in 2018 amidst new leadership

Fee income inched up by a mere 1.1% YoY as lower credit card fee income dragged headline figures after falling 6.5% YoY.