Hong Leong Bank's mutual separation scheme could cost around US$21m

Its Malaysian operations currently employ close to 9,500 staff.

According to Maybank Kim Eng, Hong Leong Bank has followed in the recent footsteps of CIMB, RHB and Affin, with a mutual separation scheme (MSS) for its Malaysian operations.

This will be its second such scheme in four years, having put through a voluntary separation scheme (VSS) in FYE6/12, following its merger with EON Bank in May 2011.

"HL Bank’s FYE6/15 cost/income ratio (CIR) of 45% (ex-exceptionals) compares well against an industry average of 49% but is still a distant second to Public Bank’s 30%. There is room, therefore, for further cost efficiencies."

Here's more from Maybank Kim Eng:

The VSS in FY12 cost the bank about MYR114m and involved about 1,200 personnel. HL Bank’s Malaysian operations currently employ close to 9,500 staff.

Assuming a 10% acceptance rate and a proportionately similar structure to the FY12 VSS, HL Bank’s MSS could cost the bank about MYR90m (3% of FY16 pretax profit).

We estimate potential savings under this scenario to be about MYR78m per annum moving forward. This would lower our projected FY17 CIR to 40.8% from 42.6% and raise our FY17 net profit by 2.7%.