RETAIL BANKING | Cesar Tordesillas, Malaysia

Off items pull down Hong Leong Group's profit before tax by 34.4%

Hong Leong Financial Group's profit before tax decreased 34.4% to157.8 million for the first fiscal half-year ended 31 December 2011.


The decrease was caused mainly due to several one-off items being booked last year, namely a RM175 million one-off life insurance surplus transfer and a gain on the transfer of Hong Leong Assurance Bhd’s general
insurance business of RM619 million.

Excluding these non-recurring one-off items, the ‘normalised’ profit before tax recorded a of37.6 per centy-o-y in 1HFY12, driven positively by the results of Hong Leong Bank Bhd.

HLFG’s Commercial Banking division, HLB, achieved a growth in profit before tax of 48.7 per cent y-o-y for 1HFY12.

This was due to higher earnings from the enlarged banking group segments, lower allowances for impaired loans  and a higher share of earnings from 20 per cent-owned associate Bank of Chengdu Co Ltd (profit after taxation.

The growth was achieved despite one-time costs of RM115 million being booked for the recently concluded Voluntary Separation Scheme exercise in December. The group’s Insurance Division held under HLA Holdings Sdn Bhd recorded a ‘normalised’ profit before tax of RM39.0 million in 1HFY12 compared to the ‘normalised’ profit before tax of RM46 million in 1HFY11.

The lower profit before taxation was mainly due to lower contributions at its Hong Kong general insurance subsidiary Hong Leong Insurance Ltd arising from mark-to-market movements from its investments.

The Investment Banking division, held under Hong Leong Capital Bhd recorded a lowerprofit before tax of RM22.5 million in 1HFY12, a decrease of 20.5 per cent.

“This was due to two more muted capital markets activity as sentiment was affected by the European debt crisis as well as lower trading volumes on Bursa Malaysia; besides the lumpy nature of investment banking earnings.”

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