After market hours yesterday (05 August 2021), financial institution Hong Leong Finance Limited (SGX:S41) posted its financial results for the first half of the year ended 30 June 2021.

As the Group have switched to reporting its financial statements on a half-yearly basis since the start of FY2020, it did not provide any updates for the first quarter ended 31 March 2021.

In this post, you’ll find my review on the key figures in the financial institution’s latest earnings report, along with its interim payout (just to jog your memory back to about the same time last year, the Monetary Authority of Singapore, or MAS, have recommended the banks and financial institutions to cap their dividend payouts to 60% of what was paid out in FY2019; however, as we are now in the midst of recovery from the worst of the pandemic, the MAS subsequently lifted this cap completely last week) where I seek to find out whether or not it has, just like the Singapore-listed banks, at least restored its payout to what was paid out in FY2019.

Let’s begin…

Key Financial Results (1H FY2020 vs. 1H FY2021)

The following table is the financial institution’s key financial results recorded for the first half of FY2021, compared against the same time period last year (i.e. 1H FY2020):

1H FY20201H FY2021% Variance
– Net Interest Income /
Hiring Charges (S$’000)		$82,168k$89,223k+8.6%
– Fee & Commission
Income (S$’000)		$4,813k$4,671k-3.0%
– Other Operating
Income (S$’000)		$83k$157k+89.2%
Total Income
(S$’000)		$87,064k$94,051k+8.0%
Total Expenses
($’000)		$37,799k$43,494k+15.1%
Net Profit Attributable
to Shareholders (S$’000)		$36,519k$44,685k+22.4%

On one glance, the financial institution’s latest set of financial results is a positive one, coming from a low-base in the previous financial year – where the country was battling the worst of the pandemic, particularly with the safe management measures implemented by the Singapore Government negatively impacted the lives of individuals, businesses, as well as the economy.

The 8.6% year-on-year (y-o-y) growth in its net interest income can be attributed to the financial institution calibrating their funding strategies to pare down the deposit base and tighten funding cost to manage the downward pressure on net interest margin, on the back of sustained low benchmark interest rate.

On the other hand, the 15.1% increase in its total expenses is due to lower base last year, due to offset of budget relief measures from the Singapore government. Excluding that, its total expenses would have been down by 4.6% with disciplined cost management.

Dividend Payout to Shareholders (1H FY2020 vs. 1H FY2021)

The following table is the financial institution’s interim dividend payout declared for FY2021 compared against the same time period last year:

1H FY20201H FY2021% Variance
Dividend Per Share
(S$’cents/share)		3.5 cents3.75 cents+7.1%

On a y-o-y basis, the improvement in its dividend payout is because the interim payout in the same time period last year had to be cap to 60.0% of what was paid out in FY2019. However, the cap on dividend payouts had since been lifted.

Having said that, the financial institutions interim dividend payout of 3.75 cents/share declared this time round, is still lower than the 5.0 cents/share of interim dividend payout declared when it released its 1H FY2019 results.

If you are a shareholder of the financial institution, here are the payout dates to take note:

Ex-Date: 20 August 2021
Record Date: 23 August 2021
Payout Date: 08 September 2021

Closing Thoughts

Compared to the same time period last year, the lives of individuals and most businesses have improved considerably. Even the economy in general are also slowly recovering from the worst of the pandemic. That said, the y-o-y improvements recorded in the financial institution’s latest set of financial results was very much within my expectations.

The only thing I’m a little disappointed in is that the interim dividend payout was not restored to what was paid out in 1H FY2019 (which was before the pandemic.) Also, there was no mentioning as to why the dividend wasn’t restored.

Looking into the second half of 2021, I’m confident of the economy in general recording further recoveries – barring another big cluster outbreak and the Singapore government having to bring back the dreadful ‘circuit breaker’ once again (in my opinion, there is a very low possibility of this happening.) As such, I am of the opinion that the financial institution’s financial results for the second half of the year, as well as for the full year for FY2021 will be an improved one. My focus will be more on its final dividend payout, where my expectation is one that is the same as that declared in FY2019.

With that, I have come to the end of my review of Hong Leong Finance’s latest 1H FY2021 financial results. Please note that everything you’ve just read above is purely for educational purposes only, and they do not represent any buy or sell call for the financial institution’s shares. As always, please do your own due diligence before you make any investment decisions.

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

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