Hong Leong Finance sees 38% drop in FY20 earnings of $63.9 mil on lower net interest income

Hong Leong Finance has posted earnings of $63.9 million for the FY2020 ended December, 38% lower than earnings of $103.1 million in the corresponding period the year before.

For the 2HFY2020, the group saw profit after tax (PAT) fall 45.8% y-o-y to $27.4 million, lower than the $36.5 million posted in 1HFY2020, which fell 30.5% y-o-y.

The lower figure was attributable to the lower net interest income (NII), driven by the compressed net interest margin (NIM) due to falling interest rates in March 2020, which were, in turn, attributable to the Covid-19 pandemic.

Interest on loans for the FY2020 fell 21.3% y-o-y to $230.4 million.

Hiring charges fell 8.9% y-o-y to $52.1 million.

Other interest income fell 39% y-o-y to $28.3 million.

Interest expense fell 15.8% y-o-y to $163.9 million, which includes interest on borrowings from banks and the Monetary Authority of Singapore’s (MAS) SGD Facility amounting to $49,000 for the year ended Dec 31, 2020.

Net interest income and hiring charges fell 27.2% y-o-y to $146.8 million.

Fee and commission income for the FY2020 fell 25.4% y-o-y to $10.2 million.

Other operating income surged 429% y-o-y to $1.7 million due to the gain on disposal of plant and equipment amounting to $1.4 million for FY2020 compared to the FY2019’s $62,000.

Earnings per share (EPS) for the FY2020 fell to 14.28 cents on a diluted basis, from EPS of 23.05 cents per share.

As at end-December, cash and cash equivalents stood at $931.4 million.

A final dividend of 5.5 cents per share has been declared for the FY2020, and payable on May 25.

This brings the total dividend for the FY2020 to a total of 9.0 cents per share.

“2020 had been an extremely eventful and challenging year. We are cautiously optimistic that the operating environment for 2021 will improve with the containment of the pandemic both globally and domestically, mainly because of promising vaccine developments,” says chairman Kwek Leng Beng.

“The financial industry’s operating environment is undergoing drastic changes, driven by the rapid digital transformation and the pandemic. We are paying close attention to the commercial risks and are positioned for growth when the economic rebound and consumers and business regain confidence for post-Covid-19 recovery,” he adds.

In his statement, Kwek also took the opportunity to announce the change in line-up to Hong Leong’s board of directors.

Chng Beng Hua, Cheng Shao Shiong @ Bertie Cheng, Po’ad bin Shaik Abu Bakar Mattar and Raymond Lim Kiang Kea – whom Kwek thanked in his statement – will be stepping down from the board upon the conclusion of Hong Leong’s annual general meeting (AGM) to be held in April.

Shares in Hong Leong Finance closed 1 cent higher or 0.4% up at $2.43 on Feb 25.