Singapore-based financial institution Hong Leong Finance Limited (SGX:S41) was the first company I’ve added to my long-term investment portfolio when I started to build one back in late-August 2019 (and I have remained invested in the company since.)

The financial institution is currently Singapore’s largest finance company with a distribution network of 28 branches spread throughout the different parts of the country. In 2021, it was awarded the “Best-Performing Bank Singapore 2021”, “Top 1000 World Banks 2021”, as well as “Top 100 ASEAN Banks 2021” by The Banker, along with being awarded the “ASEAN Best Finance Company” during Asian Banking & Finance Retail Banking Awards 2021.

After market hours yesterday (23 February 2022), Hong Leong Finance released its latest results and also its dividend payout for the fourth quarter, and also for the full-year 2021 ended 31 December 2021, and in this post, you’ll find a summary, along with my thoughts, about it…

Financial Results (2H FY2020 vs. 2H FY2021, and FY2020 vs. FY2021)

The financial institution has switched to reporting its financial results on a half-yearly basis with effect from the financial year 2020, and as such, in this section, you’ll find a comparison of its financial results both on a half-yearly basis (where I will be comparing its results for the second half of the current financial year against that recorded in the same time period a year ago), as well as on a full-year basis (where I will be comparing its results for the current year against that recorded in the previous year) to find out whether it is improved or weakened:

2H FY2020 vs. 2H FY2021:

2H FY20202H FY2021% Variance
– Net Interest Income /
Hiring Charges (S$’mil)
$64.7m$88.7m+37.1%
– Fee & Commission
Income (S$’mil)
$5.4m$6.5m+20.4%
– Other Operating
Income (S$’mil)
$1.6m$0.1m-93.8%
Total Income
(S$’mil)
$71.7m$95.4m+33.1%
Net Profit Attributable
to Shareholders
(S$’mil)
$27.4m$40.1m+46.4%

Looking at the financial results recorded for the second half of the financial year under review (compared against the same time period last year), it was a much improved one (and also pretty much within my expectations, as compared to last year, normal business operations have more or less resumed after the Singapore government relaxes restrictions after the country achieved its vaccination target.)

Apart from its other operating income (which fell 93.8%, as it included loss on the disposal of plant and equipment), its net interest income/hiring charges, as well as its fee and commission income both saw good double-digit percentage gains – with the former as a result of strategic management of deposits reaping a substantial saving in funding cost, and the former due to improvements in both lending and corporate finance activities.

FY2020 vs. FY2021:

FY2020FY2021% Variance
– Net Interest Income /
Hiring Charges (S$’mil)
$146.8m$178.0m+21.3%
– Fee & Commission
Income (S$’mil)
$10.2m$11.2m+9.8%
– Other Operating
Income (S$’mil)
$1.7m$0.2m-88.2%
Total Income
(S$’mil)
$158.8m$189.4m+19.3%
Net Profit Attributable
to Shareholders
(S$’mil)
$63.9m$84.8m+32.7%

Apart from its other operating income (which plunged 88.2% compared to last year due to a loss on the disposal of plant and equipment in the second half of FY2021), Hong Leong Finance’s full-year results for FY2021 was an improved one compared to the previous year (which can be attributed to the fact that for the current financial year under review, businesses were able to once again resume their normal operations after Singapore opened up once again after hitting its vaccination targets.)

The huge 32.7% jump in its net profit attributable to shareholders was due to a huge decline in allowances for doubtful debts and other financial assets (which went down by 99.2% from $7.7m in FY2020 to just a mere $60,000 in FY2021.)

Dividend Payout to Shareholders

The management of Hong Long Finance pays out a dividend to its shareholders on a half-yearly basis – once when it reports its results for the first half of the financial year (known as interim dividend), and once when it reports its results for the second half of the financial year (known as final dividend.)

For the current period under review, the management have declared a dividend payout of 8.25 cents/share – a 50.0% increase compared to its payout of 5.5 cent/share in the same time period last year (however, do take note that the financial institution’s dividend payouts have been impacted due to the Monetary Authority of Singapore’s (MAS) advise for them to cap it to 60.0% of the amount paid out in FY2019 for prudence in light of the Covid-19 pandemic.)

Together with the financial institution’s interim payout of 3.75 cents/unit, for the full-year under review, its dividend payout amounts to 12.0 cents/unit – compared to the full-year payout of 9.0 cents/share in FY2020, it is an improvement by 33.3% (again, do take note that the financial institution’s dividend payout for FY2020 had been capped to 60.0% of what was paid out in FY2019.) Compared to its payout of 15.0 cents/share in FY2019, its full-year payout was still 20.0% lower – having said that, I also noted that the financial institution’s net profit attributable to shareholders was also about 17.7% lesser compared to FY2019.

If you are a shareholder of the financial institution, do take note of the following dates regarding its dividend payout:

Ex-Date: 10 May 2022
Record Date: 11 May 2022
Payout Date: 27 May 2022

Closing Thoughts

Personally, the latest set of results reported by the financial institution was pretty much within my expectation – as businesses more or less have their operations back to normal once again in the current financial year under review (unlike in FY2020, where they were severely impacted by the 2-month ‘circuit breaker’ implemented by the Singapore government to slow down the transmission of Covid-19 in the community.)

That said, however, its total revenue and net profit attributable to shareholders were still below pre-Covid levels (i.e. in FY2019) – for the former, it is still down by 12.2% (from $215.7m in FY2019 to $189.4m in FY2021), and for the latter, it is still down by 17.7% (from $103.1m in FY2019 to $84.8m in FY2021.)

Moving forward, with the Federal Reserve on the verge of announcing its first interest rate hike in March 2022 (and it has also signalled another 2 more rate hikes in the remaining months of 2022, and another 3 hikes in 2023), the financial institution’s net interest income/hiring charges business segment is poised to further benefit in the coming financial year ahead. On the other hand, any escalation of tensions between Russia and Ukraine leading to a full blown war (even worst would be if the world were to witness a break out of a third world war) could see the economy’s recovery coming to a standstill once again – and this will negatively impact the finance institution’s performance.

With that, I have come to the end of my review of Hong Leong Finance’s results for the second half, as well as for the full-year 2021 ended 31 December 2021. As usual, I hope you’ve found the contents above useful – but at the same time, do take note that they do not represent any buy or sell calls for the financial institution’s shares. You’re strongly advised to do your own due diligence before you make any investment decisions.

Related Documents

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

Get Your Daily Dose of the Latest on US & SG-listed Companies (Updated Every Weekday)

Get Daily Updates on Companies Listed in the US and Singapore Stock Markets on The Singaporean Investor's Substack Page

Stay updated on the latest trends and developments for companies listed on the Singapore and US stock markets by visiting The Singaporean Investor's Substack page for daily updates. Check it out here...

 

Are You Worried about Not Having Enough Money for Retirement?

You're not alone. According to the OCBC Financial Wellness Index, only 62% of people in their 20s and 56% of people in their 30s are confident that they will have enough money to retire.

But there is still time to take action. One way to ensure that you have a comfortable retirement is to invest in real estate investment trusts (REITs).

In 'Building Your REIT-irement Portfolio' which I've authored, you will learn everything you need to know to build a successful REIT investment portfolio, including a list of 9 things to look at to determine whether a REIT is worthy of your investment, 1 simple method to help you maximise your returns from your REIT investment, 4 signs of 'red flags' to look out for and what you can do as a shareholder, and more!

Get Your Copy of building Your REIT-irement Portfolio Here

You can find out more about the book, and grab your copy (ebook or physical book) here...