CGS-CIMB REAFFIRMS ADD CALL ON HONG LEONG BANK DESPITE NET PROFIT BELOW EXPECTATION

KUALA LUMPUR, June 1 (Bernama) -- CGS-CIMB expects Hong Leong Bank Bhd (HLB) to post a weaker performance in the fourth quarter of 2023 (4Q FY2023) amid a lower outlook for net interest margin (NIM) during the quarter.

In a note today, it regard HLB’s nine-month FY2023 net profit as below market expectation.

“Although HLB's nine months net profit accounted for 79 per cent of our full-year forecast, we deem this in line as we anticipate a weaker 4Q FY2023,” CGS-CIMB said.

The research house said the results under review advanced by a commendable 24 per cent year-on-year spurred by a 41.4 per cent rise in non-interest income, 24.3 per cent drop in loan loss provisioning, 31.7 per cent increase in associate contribution from Bank of Chengdu (BoC), and non-recurrence of Cukai Makmur taxation.

Nevertheless, it still foresees HLB being able to record a strong core net profit growth of 12.5 per cent in FY2023, driven by an 18.6 per cent rise in non-interest income and an eight per cent increase in BoC contribution.

"We reaffirm the 'add' call, given the above-industry loan growth and its position as one of the most defensive banks against credit risks,” it added. 

In a filing with Bursa Malaysia yesterday, HLB's net profit for 3Q FY2023 increased to RM929.95 million from RM784.80 million posted in the same quarter last year.

“The increase in pretax profit was mainly due to higher net income, lower allowance for impairment losses on loans, advances and financing, a higher share of profit from associate companies and written back allowance for impairment losses on financial investments and other assets,” HLB said.

Revenue rose to RM1.39 billion from RM1.34 billion for 3Q.

For the nine-month period, the bank registered a higher net profit of RM2.95 billion and revenue of RM4.38 billion.

At 11.56 am, Hong Leong Bank was up four sen to RM19.40 sen with 354,700 shares transacted on Bursa Malaysia.

-- BERNAMA