KUALA LUMPUR: Hong Leong Bank Bhd recorded an improved set of financial results in its 2023 financial year on the back of higher non-interest income while net interest income was stable despite higher funding costs.

In a statement, Hong Leong Bank group managing director and CEO Kevin Lam said the bank’s results for the year were commendable, underpinned by robust loan/financing growth, healthy asset quality and reasonable returns amidst the ongoing external headwinds and volatility in global markets.

“We continue to navigate through an evolving business operating environment by remaining agile in executing our key strategic priorities and driving business growth,” he said.

Over the course of the financial year, Hong Leong Bank posted a net profit of RM3.82bil, which was an increase from RM3.29bil in the previous year.

The bank’s earnings per share rose to 186.37 sen as compared to 160.6 sen in FY22.

Revenue meanwhile was slightly improved to RM5.69bil from RM5.6bil in the previous year.

In the fourth quarter alone, the bank’s net profit came in at RM864.68mil, lower than RM907.64mil in the same quarter in 2022, while revenue dropped to RM1.3bil from RM1.5bil.

The board of directors declared a final dividend of 38 sen a share, which brings the full-year payout to 59 sen a share for a dividend payout ratio of 32%.

In FY23, the bank said net interest income was stable y-o-y at RM4.55bil, on the back of elevated funding cost pressure, which was was mitigated by expansion in the loan and financing portfolio and effective asset and liability management.

Consequently, the bank recorded a net interest margin (NIM) of 1.98% in FY23.

According to the bank, it expects a stabilisation of funding cost pressure coupled with the overnight policy rate hike in May to provide further relief to NIM moving forward.

Meanwhile, non-interest income in FY23 improved 15.8% y-o-y to RM1.13bil with a non-interest income ratio of 19.9%, attributed mainly to a growth in credit card-related fees as well as an improved performance in trade finance and foreign exchange.

Operating expenses meanwhile was RM2.23bil while cost-to-income ratio was 39.3%.

Hong Leong Bank reported gross loans, advances and financing rose 8% y-o-y to RM181.7bil, on expansion in its key segments of mortgages, auto loans, SME and commercial banking, as well as overseas operations.

Customer deposits in FY23 rose 7.3% y-o-y to RM211.7bil with a stable current account savings account (Casa) of RM65.1bil, representing a Casa ratio of 30.8%.

Separately, the bank’s parent company, Hong Leong Financial Group Bhd (HLFG), reported a net profit of RM626.27mil in 4Q23, down from RM674.68mil in the corresponding quarter in FY22.

The bottomline represented an earnings per share of 55.2 sen, down from 59.5 sen in the previous year.

The group’s revenue dipped to RM1.47bil from RM1.65bil previously.

In statement, HLFG said the weaker performance was attributed to lower contribution from its investment banking division, Hong Leong Capital Bhd.

“Our commercial banking and insurance businesses delivered a commendable set of results under a challenging global economic environment while our investment banking business was impacted by the lower Bursa Malaysia trading volume and higher interest rates subduing new bonds issuance and customers’ appetite for investments in unit trust,” said HLFG president and CEO Tan Kong Khoon.

He said the group is maintaining a cautious outlook for its 2024 financial year given the uncertainties in the global economic landscape coupled with domestic challenges.