HONG LEONG BANK BERHAD Q3 2025 Latest Quarterly Report Analysis

Financial Performance: A Closer Look

For the third quarter ended 31 March 2025, HLB reported a slight decrease in pre-tax profit and net profit compared to the same quarter last year. However, the year-to-date performance for the nine-month period tells a story of steady growth, driven by core banking activities.

Quarterly Performance (Q3 FY2025 vs Q3 FY2024)

The marginal 0.5% decrease in pre-tax profit for the quarter was primarily attributed to higher operating expenses, a lower share of profit from associated companies, and a significant non-cash dilution loss of RM407.6 million from an associated company. Despite these factors, the impact was softened by higher net income and a substantial write-back of impairment losses on loans, advances, and financing.

Year-to-Date Performance (9M FY2025 vs 9M FY2024)

For the nine-month period, HLB demonstrated strong underlying performance, with pre-tax profit increasing by 3.9% and net profit also showing a positive trend. This growth was largely propelled by a higher net income and significant write-backs of impairment losses, offsetting the impact of higher operating expenses and the aforementioned dilution loss.

Segmental Review: Pillars of Growth

HLB’s diversified business segments contributed to its overall performance, each navigating unique market dynamics:

Personal Financial Services (PFS)

• Q3 FY2025 Pre-tax Profit: RM509.0 million (up from RM490.2 million in Q3 FY2024).
• 9M FY2025 Pre-tax Profit: RM1,463.4 million (up from RM1,443.8 million in 9M FY2024).
• This segment saw increased profitability driven by higher total income, despite facing higher impairment allowances and operating expenses. Its loan base expanded to RM132.2 billion and deposit base to RM115.4 billion as at 31 March 2025.

Business and Corporate Banking (BCB)

• Q3 FY2025 Pre-tax Profit: RM366.1 million (up from RM351.1 million in Q3 FY2024).
• 9M FY2025 Pre-tax Profit: RM1,159.3 million (up from RM1,075.6 million in 9M FY2024).
• Growth was primarily due to lower impairment losses and higher total income, partially offset by increased operating expenses. The loan base grew to RM53.7 billion and deposit base to RM52.8 billion as at 31 March 2025.

Global Markets

• Q3 FY2025 Pre-tax Loss: RM14.7 million (improved from a loss of RM53.0 million in Q3 FY2024).
• 9M FY2025 Pre-tax Profit: RM24.9 million (a significant turnaround from a loss of RM53.3 million in 9M FY2024).
• The segment’s improved performance was largely due to higher total income and lower impairment losses on financial investments, although operating expenses were higher.

International Banking

• Q3 FY2025 Pre-tax Loss: RM59.3 million (compared to a profit of RM427.1 million in Q3 FY2024).
• 9M FY2025 Pre-tax Profit: RM806.3 million (down from RM1,279.3 million in 9M FY2024).
• This segment’s performance was significantly impacted by higher impairment losses on loans and a lower share of profit from its associated company in China. Notably, the Group recorded a non-cash dilution loss of RM393 million due to Bank of Chengdu Co., Ltd.’s convertible bond conversion, which reduced HLB’s equity interest from 19.8% to 17.8%. Additionally, a RM15 million dilution loss was recognized from the divestment of a 10% equity interest in Sichuan Jincheng Consumer Finance Limited Company. These strategic adjustments, while impacting current period profitability, are part of the bank’s portfolio management.

Financial Health and Capital Strength

HLB’s balance sheet remains robust, reflecting prudent management and sustained growth in key areas:

• Total Assets: Increased to RM300.9 billion as at 31 March 2025, up from RM297.8 billion as at 30 June 2024, indicating continued expansion.
• Gross Loans, Advances, and Financing: Grew to RM201.2 billion (from RM194.9 billion), demonstrating healthy lending activity.
• Deposits from Customers: Increased to RM225.0 billion (from RM220.4 billion), reflecting strong customer confidence and funding stability.
• Impaired Loans Ratio: Saw a slight increase to 0.57% (from 0.53%), which is still a very low figure, indicating sound asset quality.
• Capital Adequacy Ratios: While showing a slight decrease, HLB’s capital ratios remain comfortably above regulatory requirements, affirming its financial resilience.
  

  Capital Ratio (Group)	31 March 2025	30 June 2024
  CET I Capital Ratio	12.804%	13.855%
  Tier I Capital Ratio	13.750%	14.837%
  Total Capital Ratio	15.712%	16.828%

Dividends: Returning Value to Shareholders

In a positive development for shareholders, HLB announced an interim single tier dividend of 28 sen per share for the financial year ending 30 June 2025, which was paid on 26 March 2025. This marks an increase from the 25 sen per share paid in the corresponding period last year, reflecting the bank’s commitment to returning value to its investors.

Outlook and Strategic Direction

HLB maintains a cautiously balanced outlook for the Malaysian economy, anticipating a growth rate of between 4.5% – 5.5% this year. This optimism is underpinned by sustained private consumption, a healthy labour market, and the expected realization of investment projects. However, the bank acknowledges global uncertainties, particularly those related to evolving tariff policies and central bank responses, which could influence the final growth outcome. Nevertheless, resilient domestic demand is expected to provide a buffer against external headwinds.

Looking ahead, HLB is steadfast in executing its 3-5 Year Transformative Plan, aiming to be the best-run bank in Malaysia. Key strategic initiatives include:

1. Leveraging Technology and AI: To create innovative banking solutions and enhance customer experience.
2. Strengthening ASEAN Franchise: By continuously enhancing digital capabilities and fostering strategic alliances with global partners.
3. Empowering People: Investing in its workforce to excel in a dynamic business environment.
4. ESG Integration: Proactively embedding environmental, social, and governance strategies into operations, aligned with its carbon-neutral ambition.