BANKING - Hong Leong - Malaysian Islamic Bank Looking Abroad for Acquisitions

Hong Leong Bank Bhd is eyeing acquisitions abroad which are well-priced and would make a good franchise that complements its overall strategy.

“It’s hard to pinpoint which countries to invest in but certain countries are more compelling. However, Indonesia and Thailand are compelling,” group managing director and chief executive officer Yvonne Chia told reporters at its financial results briefing in Kuala Lumpur yesterday.  “We do have opportunities knocking on our door,” she said.

Hong Leong Bank posted a 51% jump in its net profit to RM301.1mil for its fourth quarter ended June 30, compared with a year earlier.

“The increase was due to higher net interest income by RM59.6mil, higher share of profit from Bank of Chengdu Co Ltd by RM29.9mil and lower allowance for losses on loans, advances and financing by RM87mil.

“This was, however, offset by lower net income from Islamic banking business by RM13.3mil, lower non-interest income by RM22.2mil, higher other operating expenses by RM3.4mil and higher taxation expense by RM35.4mil,” the bank said in a filing with Bursa Malaysia yesterday.  Revenue for the quarter was also higher at RM517.8mil compared with RM493.6mil a year earlier.  Hong Leong has a 20% equity interest in Bank of Chengdu.

For the full year, Hong Leong’s net profit was up 9.1% to RM988mil despite a marginal drop in revenue to RM2.05bil from RM2.09bil before.  HLB’s earnings per share rose 9.1% year-on-year to 68.2 sen. Net assets per share grew 13.3% to RM4.43.

Return on assets improved to 1.2% from 1.15%, while the return on average shareholders’ funds stood at 16.3%. Total assets grew 7% year-on-year to RM85bil.  Its gross non-performing loan (NPL) ratio and net NPL ratio further improved to 1.9% and 1.2% respectively in FY10, from 2.2% and 1.3% last year.

“It continues our track record of unbroken profitability as a commercial bank since commencing our business transformation in 2005,” Chia said. “The Hong Leong discipline of prime value creation, the bedrock of our management philosophy, has been consistent in improving returns to shareholders.”

Going forward, Chia said that overall it was very excited about the prospects of the group.  “There are opportunities to assert our liquidity franchise to strongly grow for scale. In a fast liberalising sector, efficiency of delivery and human capital effectiveness will continue to be our prime focus to differentiate the bank from its competitors,” she said.

Updating on the acquisition of EON Capital Bhd (EON Cap), Chia said it would be up to the EON Cap board and shareholders to decide.

“The offer is on the table and the deadline remains at Nov 30,” she said at its financial results briefing.  Hong Leong has offered to acquire the entire assets and liabilities of EON Cap at RM7.30 a share or RM5.06bil in cash.

But, the plan hit a snag when Primus Pacific Partners Ltd, EON Cap’s largest shareholder with a 20.2% stake, filed a legal suit against the directors of EON Cap and three entities controlled by Rin Kei Mei and Tan Sri Tiong Hiew King for RM1.11bil in damages as it believed that the price for EON Cap should be much higher.  Primus had bought its stake in EON Cap at RM9.55 per share.

The High Court has fixed a final case management between Primus and EON Cap directors for Sept 2.  “The corporate move to acquire EON Capital Bhd is really an inorganic in-country commitment to create a stronger bank. The merger means a winning combination for customers,” she said.

In an announcement to Bursa Malaysia, Hong Leong Bank said it concurred with the change in the date for EON Cap EGM to approve its proposed acquisition of EON Cap’s assets and liabilities from Aug 20 to Sept 30.

It also agreed that all the approvals from Bank Negara/Finance Ministry, shareholders of EON Cap and Hong Leong Bank, and the Securities Commission, on terms and conditions acceptable to Hong Leong Bank, were obtained, and the acceptance of the offer by EON Cap was given by Nov 30.

Source : http://www.globalislamicfinancemagazine.com/?com=news_list&nid=932 - Aug 27, 2010