• Hong Leong Finance’s net profit rose 41% y-o-y/14% q-o-q on higher interest income, offsetting higher interest expense.
• Loan book grew by 2% q-o-q.
• Higher dividends declared as expected, 5 Scts for 2Q18 (2Q17: 4 Scts).
• Maintain BUY, Target Price maintained at S$3.20/share after rolling forward valuation base.

What’s New

Strong growth momentum.

Hong Leong Finance (HLF) continued to record strong growth momentum for the 8th quarter in a row, with S$29.6m net profit in 2Q18 (+41% y-o-y, +14% q-o-q), ahead of our expectations.

Total interest income was strong (+19% y-o-y, +9% q-o-q) led by higher loan base (+2% q-o-q) and higher loan yields, offsetting higher interest expense (slightly lower interest rates on a higher deposit base).

Fee and commission income was lower due to lower fees from lending and non-lending products. Staff costs increased 7% y-o-y on higher provisions for bonus.

Source: DBS Research - 13 Aug 2018