Financial institution Hong Leong Finance (SGX:S41) held its adjourned annual general meeting this afternoon, 25 June 2020, at 3pm, to provide a review of its FY2019 results, along with updates on their operations amid the Covid-19 outbreak in Singapore.

As a shareholder of the financial institution, I have tuned into its virtual AGM (no physical AGM this year due to restrictions put in place by the Singapore government to contain the community spread) and in this post, you’ll find a quick summary of the presentation by their President, Mr Ang Tang Chor:

Financial Performance in FY2019:

  • Net Interest Income dipped by 4.9% on a year-on-year (y-o-y) basis to S$2201.7m (FY2018: S$212.1m) due to increased cost of fund on higher deposit base to support loan growth
  • Non-interest income fell 12.0% y-o-y to S$14.0m (FY2018: S$16.0m) as a result of a 10.6% drop in its fee and commission income
  • Operating expenses, on the other hand, increased 2.3% y-o-y to S$90.2m (FY2018: S$88.2m), mainly stemming from the Group’s upgrade in system infrastructure and technology to support new business initiatives and to enhance compliance controls
  • Net attributable profit to shareholders fell 12.9% y-o-y to S$103.1m from a record high profit of S$118.3m in FY2018

Balance Sheet Position as at 31 December 2019:

  • Mr Ang shared that the financial institution’s balance sheet grew at 8% with its net assets per share rising to S$4.28
  • He reassured shareholders that the financial institution has a sound capital base and liquidity position, with regulatory ratios well above requirements

Customer Loans and Deposits:

  • Compared to FY2018, the financial institutions saw a loan growth by 12.4% to S$11.6b (FY2018: S$10.3b), while at the same time, its deposit base grew by 8.5% to S$12.3b (FY2018: S$11.3b) to support net funding requirements

Composition of Loans:

  • Hong Leong Finance has a well-diversified loan portfolio, with no exposure to the aviation, oil and gas, as well as travel sectors
  • In terms of its loans by business sectors, 46% is from building and construction, 23% from professionals and private individuals, and 19% from hotels, associations, as well as charity
  • Finally, its non-performing loans ratio is maintained at 0.8% in FY2019 (which is the same as FY2018)

Sources of Fund:

  • A huge majority of the financial institution’s fund comes from customer deposits (at 85%, or S$12.3b), with shareholders’ equity at 13%, or S$1.9b

Dividend Payout:

  • An interim dividend payout of 5 cents/share totalling S$22.3m has been paid on 11 September 2019
  • A final dividend of 10 cents/share (amounting to approximately S$44.8m) will be paid on 16 July 2020, bringing the total dividend payout in FY2019 to 15 cents/share, same as in FY2018

Covid-19 Update:

  • In this challenging and uncertain period, Mr Ang updated that the Chairman have instructed the financial institution to continue to maintain a strong liquidity, with sound internal controls in place. Also, the financial institution will continue to provide financial support to their customers
  • Mr Ang added that as Singapore has moved into Phase Two of re-opening, the financial institution is looking at re-opening their branches soon, with adequate measures in place to protect their staff as well as customers
  • He also shared that the financial institution have been encouraging their customers to renew or withdraw their deposits online using the PayNow option
  • Finally, he said that the financial institution will provide more detail when they report their 1H FY2020 results in August 2020

In Conclusion:

It was a really short AGM – less than 30 minutes from start to finish. Nothing was discussed on its dividend payouts, nor did the management discuss on what could be its financial performances ahead in the year 2020, in light of the Covid-19 situation.

I remain vested in the financial institution for now.

Related Documents:

Disclaimer: At the time of writing, I am a shareholder of Hong Leong Finance Limited.

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