Hong Leong Bank Bhd's net profit fell by 8.1% to RM633.89mil from RM690.03mil a year ago due to lower net income but mitigated by lower operating expenses, lower allowance for impairments and a higher share of profit from an associated company. It announced on Tuesday its revenue fell by 7.1% to RM1.166bil from RM1.256bil. Earnings per share were 30.98 sen compared with 33.73 sen.

For the nine months, its net profit rose by 0.8% to RM2.028bil from RM2.012bil in the previous corresponding period. Its revenue fell by 2.8% to 3.558bil from RM2.663bil.

Hong Leong Bank Group Managing Director and CEO Domenic Fuda said: "Despite ongoing economic challenges, loan growth momentum for Hong Leong Bank accelerated to a healthy 6.5% y-o-y expansion to RM133.6bil, whilst continuing to uphold its solid asset quality, signifying the bank's commitment towards delivering on sustainable results to our stakeholders."

"Net profit after tax for the third quarter and nine months achieved RM634mil and RM2.028bil respectively, attributed to healthy expansion in loan book despite lingering concerns in the operating environment, outstanding asset quality as well as a consistently strong contribution from our associates," he said.

Fuda said Q3 saw a pick-up in net interest margin to 2.00%, up 2bps on the prior quarter. He added this positive performance reflected the bank's commitment to further enhance product offerings, such as the recent launch of its co-branded Emirates HLB cards aimed at accelerating growth in its payments' business by leveraging on the growing Malaysian travel segment.

Nine months performance

Total income for 9MFY19 stood at RM3.558bil, driven mainly by healthy growth in the loan book.

Net interest income for 9MFY19 was lower at RM2.574bil on the back of still elevated funding cost pressure during the period under review.

Correspondingly, net interest margin (NIM) for 9MFY19 fell to 1.98% compared with the corresponding nine months. However, NIM for Q3FY19 saw an uptick of 2bps quarter-on-quarter to 2% on prudent pricing management.

Non-interest income for 9MFY19 moderated slightly to RM984 million, with non-interest income ratio recorded at 27.7%.

This was due to weaker performance in treasury market activities, mitigated by higher foreign exchange gains and gains on the divestment of the joint venture.

Operating expenses remain well-managed and were only marginally higher by 0.8% y-o-y at RM1.562bil for the nine months as it continues to reap benefits from our digitization efforts and strategic cost management initiatives.

Loan growth led by business banking, mortgages and international operations

Gross loans, advances and financing gained pace and expanded 6.5% y-o-y to RM133.6bil despite a relatively slower domestic credit growth environment as well as general soft business sentiments.

Overall loan growth was predominantly driven by growth in it's business banking and mortgages segments.

Domestic loans to business enterprises increased by 11.4% y-o-y to RM38.8bil. Its reported SME portfolio increased by 1.1% y-o-y to RM20.9bil, wherein our community banking initiative continues to deliver promising growth of 34.1% y-o-y and 10.3% q-o-q.

Domestic loans to the retail segment remain the key growth driver, expanding 6.3% y-o-y, making up 71% of the bank's total loans.

Residential mortgages grew ahead of industry at 9.4% y-o-y to RM65.9bil, sustained by a healthy loan pipeline and steady approvals while transport vehicle loans were stable with a 0.8% y-o-y growth to RM17.1bil, also ahead of the industry.

Loans and financing from overseas operations continue to grow at a healthy pace of 6.5% y-o-y, driven by growth in Cambodia and Vietnam, which increased 28.4% and 62.1% y-o-y respectively.