Shortly after market hours this evening (04 August), Singapore’s largest finance company in Hong Leong Finance Limited (SGX:S41) have made available its results for the first half of the financial year ended 30 June 2022 (i.e. 1H FY2022.)
Some background about the company before I proceed to share my review about its latest results (for the benefit of those who may not be familiar with the company) – Hong Leong Finance has evolved from a Small & Medium Enterprise (SME) in 1961 to become Singapore’s largest finance company today with a distribution network of 28 branches (all of them strategically located in Singapore.) The company is ranked as the “Best Performing Bank in Singapore”, among the “Top 100 ASEAN Banks” and “Top 1000 World Banks” for 2021 by The Banker (an international publication owned by The Financial Times Ltd), as well as being recognised among the “Top 100 Singapore Brands 2021” by Brand Finance.
In this post, you’ll find my review about the bank’s key financial results, along with its dividend payout declared for the period under review.
Let’s begin:
Key Financial Results (1H FY2021 vs. 1H FY2022)
As the financial company has switched to half-yearly reporting of its full financial results since FY2020, it did not provide any updates for the first quarter ended 31 March.
Hence, in this section, you can only find a review of the company’s results on a year-on-year (y-o-y) basis (i.e. 1H FY2021 vs. 1H FY2022):
| 1H FY2021 | 1H FY2022 | Variance (%) | |
| – Net Interest Income / Hiring Charges (S$’000) | $89,223k | $96,432k | +8.1% |
| – Fee & Commission Income (S$’000) | $4,671k | $8,108k | +73.6% |
| – Other Operating Income (S$’000) | $157k | $76k | -51.6% |
| Total Income (S$’000) | $94,051k | $104,616k | +11.2% |
| Total Expenses (S$’000) | $43,494k | $48,471k | +11.4% |
| Net Profit Attributable to Shareholders ($’000) | $44,685k | $45,116k | +1.0% |
Just like my forecast for the 3 Singapore-listed banks (in DBS, UOB, and OCBC), my forecast for Hong Leong Finance’s result is largely similar – in that its net interest income to record improvements (from Fed’s interest rate hike announcements in recent months), along with its fee & commission income, as well as other operating income recording declines due to a poor market sentiment for the current period under review. Also, I am of the opinion that if its net profit attributable to shareholders is able to match the amount recorded in the same time period last year, it will be considered as a good set of result.
As far as Hong Leong Finance’s latest y-o-y financial results is concerned, it certainly met my expectation – the 8.1% growth in its net interest income / hiring charges can be attributed to a 10 basis point increase in its net interest margin to 1.52%. Also, the better performance is helped by a healthy asset growth and lower funding cost. The finance company’s fee and commission income surged by 73.6% led by fee income from rebound lending activities. However, its other operating income fell by 51.6%.
The 11.4% increase in total expenses was due to a lower base recorded in 1H FY2021, along with costs associated with headcount growth in the company’s drive to further enhance its risk and compliance management and technology transformation.
Finally, as a result of an increase in total expenses, along with a sum of S$1,833k of allowances for doubtful debts and other financial assets (vs. a sum of S$3,309k reversal or recovery of doubtful debts and other financial assets in 1H FY2021), its net profit attributable to shareholders grew at a slower pace at just 1.0% – again this is within my forecast.
Dividend Payout to Shareholders
The management of Hong Leong Finance declares a dividend payout for its shareholders on a half-yearly basis – once when it reports its results for the first half of the financial year (which is now), and once when it reports its results for the second half of the financial year (which normally will be some time between early-to-mid February.)
For the first half of the current financial year under review (i.e. 1H FY2022), the finance company’s management have declared a dividend payout of 3.75 cents/share, which is the same as the amount declared in the same time period last year (i.e. 1H FY2021.)
If you are a shareholder of the company, do take note of the following dates regarding its dividend payout:
Ex-Date: 17 Aug 2022
Record Date: 18 Aug 2022
Payout Date: 01 Sep 2022
Closing Thoughts
As I’ve mentioned earlier in this post, the finance company’s latest set of results was within my forecast. The same can also be said for its interim dividend payout this time round, considering the economic headwinds for the period under review, and quite possibly for the second half of the current financial year – that said, I expect Hong Leong Finance for the second half of the current financial year to be similar as what you’ve just seen in the section above (for the first half of the current financial year.)
With that, I have come to the end of my review of Hong Leong Finance’s latest results for the first half of the financial year ended 30 June 2022. As always, the contents above are purely for educational purposes only, and they do not constitute any buy or sell calls for the finance company’s shares. You should always 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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