Hong Leong Bank posts MYR1.56bn in net earnings for 9MFY2014

Loan growth was because of mortgages.

According to Nomura, Hong Leong Bank reported 9MFY14 net earnings of MYR1.56bn, accounting for 74% of our full-year estimates and 77% of consensus full-year estimates.

Weak treasury & FX income was more than offset by better NIMs, lower cost-income ratio, and robust asset quality.

Here’s more from Nomura:

Hong Leong Bank is one of the few banking groups that has seen stable NIMs, and we attribute this to its rising LD ratio. Management is willing to bring the LD ratio closer to industry levels of about 85%. NIMs rose about 3bps q-q due to a lower proportion of short-term corporate placements.

Cost income ratio continues to decline, falling to 43.3% from 43.6% in 2QFY14 (FY13: 44.6%).

Asset quality continues to remain robust with the gross NPL ratio improving to 1.2% from 1.4% and coverage ratio at 129% (industry at 104%). Credit cost was a mere 2bps for the quarter; excluding write-back of impairments, credit cost would be ~11bps.

Hong Leong Bank’s loan growth of 8% y-y was led by mortgages (13.5% y-y, ahead of industry’s 12%) and SME (15% y-y). Auto loans, which comprise 17% of total loans, declined 1% y-y, while corporate loans rose a mere 2%.

Overall deposits increased 3% y-y, with CASA rising at a faster pace of 8% resulting in a CASA ratio of 28% from 27% a year ago. Loan to deposit ratio for the bank increased to 80% from 77% over the same period and ranks as one of the lowest in the industry.

Hong Leong Bank continues to excel at cost discipline with cost income ratio improving slightly to 43% from 44%.