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Hong Leong Finance FY19 net profit falls 13% to S$103.1m

HONG Leong Finance's net profit for the year ended Dec 31, 2019 fell 12.9 per cent to S$103.1 million from S$118.3 million a year ago, the group said on Thursday.

This came after it accounted for net loss allowance of doubtful debts amounting to S$1.6 million, against after a net recovery of doubtful debts of S$2.2 million in 2018.

Interest income and hiring charges totalled S$396.4 million, up 13.3 per cent from S$349.9 million in FY2018. This improvement came on the back of healthy loan growth and improved loans yield of 16 basis points (bps). Net interest income fell 4.9 per cent to S$201.7 million from S$212.1 million.

Interest expense rose 41.2 per cent to S$194.7 million, compared with S$137.8 million a year ago, driven by competitive deposit rates on enlarged deposit base to support the loan growth. Net interest margin declined by 17 bps as the higher cost of fund outweighed the improved loan spread.

Earnings per share were 23.09 Singapore cents, down from 26.56 cents in FY2018.

The board has proposed a final dividend of 10 cents per share. Combined with the interim dividend of five cents per share paid out on Sept 11, the aggregate dividend for FY2019 is 15 cents.

In the previous year, Hong Leong Finance paid out an aggregate dividend of 15 cents per share as well.

Net loan assets stood at S$11.6 billion as at Dec 31, growing by 12.4 per cent or S$1.3 billion over the previous year's base of S$10.3 billion. Net asset value per share was S$4.28 as at Dec 31.

Chairman Kwek Leng Beng said the group looks to 2020 "with great caution", because despite the de-escalation of US-China trade tensions, geopolitical uncertainties and the impact of the Covid-19 outbreak have contributed to sluggish interest rates and a weakened global growth outlook.

Mr Kwek expects that Hong Leong Finance will be somewhat cushioned from the economic impact of the Covid-19 outbreak, because it serves domestic customers only and does not have operations in China or overseas.

Hong Leong Finance shares closed down one cent or 0.38 per cent to S$2.59 on Thursday before the results were announced.