1 Financial Highlights: FY18 Key financial highlights Strong - - PowerPoint PPT Presentation

1

FY18 RESULTS ANALYST PRESENTATION

28 August 2018

Agenda

Financial Highlights: FY18

1

HLB FY18 ended 30 June 2018 2,543 2,779

FY2017 FY2018 RM'mil 0.96% 0.87% 96% 89% 151% 155% FY2017 FY2018 4,551 4,840 FY2017 FY2018 RM'mil

155.2 157.4 FY2017 FY2018 RM'bil 2,008 2,060 44.1% 42.6% FY2017 FY2018 RM'mil 125.1 129.1 FY2017 FY2018 RM'bil

Total Income Opex & CIR GIL & Coverage Ratio Gross Loans Operating Profit Deposits

3

Key financial highlights

Strong performance backed by robust top-line, strategic cost management and improved efficiencies

• 6%
• 3%
• 1%

9%

HLB FY18 ended 30 June 2018

Management guidance

Stellar set of performance with all KPIs met

P

3.1% Achieved FY18 Target FY18 Gross Loan Growth LD Ratio Non-Interest Income Ratio Cost-to-Income Ratio Gross Impaired Loan Ratio Net Interest Margin Return on Equity 82.0%

P

82.0%

P

2.1% 82.0%

P

27.8%

P

42.6% 82.0%

P

0.87%

P

11.3% 3% - 4% (revised) ~82% >2.1% ~26% <44% <1% 10% - 11%

4

HLB FY18 ended 30 June 2018

2,102 2,233 1,903 2,145 FY14 FY15 FY16 FY17 FY18

RM'mil

RM’mil FY17 FY18 YoY % Total Income 4,551 4,840 +6% Operating expenses (2,008) (2,060) +3% Operating profit before allowances 2,543 2,779 +9% Loan allowances & other impairments (159) (70)

• 56%

Share of profits from associates & JV 364 537 +47% Profit before tax 2,748 3,246 +18% Profit after tax 2,145 2,638 +23% Profit after tax (underlying)* 2,247 2,638 +17%

5

Profit & Loss

Robust growth on revenue, prudent cost management and strong contributions from BOCD

• Record-breaking

PBT and PAT, underpinned by robust top-line performance, healthy NIM and solid non-interest income

• CIR lowest in 6 years, reaffirming

positive JAWS for 8 consecutive quarters

• Strong

growth in contributions from BOCD

Record profit

2,638

Note *: Excluding one-off tax impact of RM102 mil in FY17

HLB FY18 ended 30 June 2018

3,355 3,495

2.09% 2.10% FY2017 FY2018

6

Net Interest Income & NIM

Stable NIM underpinned by prudent pricing and funding cost management

864 886 896 867 846 2.14% 2.13% 2.13% 2.10% 2.03% Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 RM'mil Net Interest Income NIM

HLB FY18 ended 30 June 2018

609 574 427 623 91 105 68 70 (27) 26.3% 27.8% FY2017 FY2018

Fee Income Trading & Investment Forex Islamic and others Dilution of investment (BOCD) Non Interest Income ratio

Non-Interest Income

Strong momentum leading to an improved NII ratio of 28%

7

1,196 1,344

RM’mil

24%

Wealth Management Income (Malaysia) Credit Card Fees

8%

FY17 RM85 mil FY18 RM105 mil FY18 RM218 mil FY17 RM236 mil

HLB FY18 ended 30 June 2018

FY2015 FY2016 FY2017 FY2018

1,112 1,106 484 534 156 161 256 260 44.1% 42.6%

FY2017 FY2018

Personnel cost 54% Establishm ent 26% Marketing 8% Admin & general 12%

Operating Expense

CIR lowest at 42.6% in the past 6 years, led by efficiency gains from continuous digitization efforts

8

Composition of Operating Expenses

FY18

RM’mil

2,008 2,060

Establishment 26%

Digitization Related CAPEX

Of which: Digitization related RM97 mil

HLB FY18 ended 30 June 2018

104,169 113,418 120,605 125,147 129,069

8.0% 7.9% 7.9% 7.7% 7.6%

FY14 FY15 FY16 FY17 FY18 RM'mil

3,755 3,998 3,899 1,850 1,812 1,678

7.5% 7.5% 6.8%

FY16 FY17 FY18

18,446 17,584 16,894

10.1% 9.4% 8.8%

FY16 FY17 FY18

19,226 20,377 20,480

7.0% 7.0% 6.7%

FY16 FY17 FY18

51,510 56,861 61,370

11.2% 11.3% 11.3%

FY16 FY17 FY18

Loans

Growth led predominantly by mortgages and SME

9

Note: * Loan figures (RM mil) are based on group, but market share data is based on domestic only.

HLB FY18 ended 30 June 2018

101% 91% 86% 84% 95% 129% 136% 120% 96% 89% 177% 181% 151% 155% FY14 FY15 FY16 FY17 FY18

Industry LIC LIC LIC (incld reg reserve)

1,232 948 957 1,203 1,126 1.18% 0.84% 0.79% 0.96% 0.87% 1.76% 1.61% 1.62% 1.63% 1.58% FY14 FY15 FY16 FY17 FY18

RM'mil

Gross impaired loans GIL Ratio Industry GIL ratio

Asset Quality

Stable asset quality with improved GIL ratio, impaired loans coverage at 155% with regulatory reserves

Gross Impaired Loans Loan Impairment Coverage (LIC)

10

Note: Industry ratio has been restated by regulators

HLB FY18 ended 30 June 2018

Asset Quality

Healthy credit portfolios; as well as improvement to domestic asset quality

11

14 6 13

0.25% 0.09% 0.19%

FY16 FY17 FY18 145 143 134

0.79% 0.81% 0.79%

FY16 FY17 FY18 233 307 353

0.45% 0.54% 0.58%

FY16 FY17 FY18 273 303 353

1.42% 1.49% 1.72%

FY16 FY17 FY18 943 1,197 1,113

0.82% 1.01% 0.91%

FY16 FY17 FY18

HLB FY18 ended 30 June 2018 62,697 63,340 62,745

7.3% 6.9% 6.6%

FY16 FY17 FY18

81,353 86,176 88,159

12.3% 12.5% 12.1%

FY16 FY17 FY18

84,719 87,976 88,222

9.0% 9.0% 8.4%

FY16 FY17 FY18

37,185 38,764 41,202

7.5% 7.3% 7.5%

FY16 FY17 FY18 130,252 140,276 148,524 155,233 157,414

8.2% 8.2% 8.6% 8.7% 8.4%

FY14 FY15 FY16 FY17 FY18 RM'mil

Deposit

Healthy growth on the back of solid CASA momentum

12

Note: * Deposit figures are based on group, but market share data is based on domestic

• nly; Business enterprise deposits including FI

HLB FY18 ended 30 June 2018

10.5% 10.8% 12.7% 13.3% 12.6% 11.9% 11.9% 13.1% 13.7% 13.3% 14.6% 14.3% 14.7% 15.8% 16.3% FY14 FY15 FY16 FY17 FY18

CET1 Tier 1 Total capital ratio

Liquidity & Capital

Robust liquidity and capital positions

Loan Deposit Ratio Capital Adequacy^

Note: * Industry data derived from banking system’s commercial banks plus Islamic banks only Note: ^ Capital base & ratio after proposed dividends

13

Liquidity Coverage Ratio (LCR)

FY18 Minimum requirement in Year 2018 Minimum requirement by Year 2019 LCR 126% 90% 100%

82.3% 84.0% 89.3% 91.3% 91.3% 80.0% 80.9% 81.2% 80.6% 82.0% FY14 FY15 FY16 FY17 FY18

Industry LDR HLB LDR

HLB FY18 ended 30 June 2018

106.6 109.8 129.0 10.7% 10.3% 11.3% 1.09% 1.17% 1.32% FY2016 FY2017^ FY2018 EPS ROE ROA 41 41 41 45 48 34% 32% 44% 43% 37% FY14 FY15 FY16 FY17 FY18 Net DPS Dividend Payout (on actual reported PAT)

Shareholder Value

ROE continues to improve on strong underlying performance

Return on Equity, Return on Assets & EPS Declared Higher DPS

14

Note: * Excluding one-off MSS costs; ^ Excluding one-off tax impact of RM102 mil

HLB FY18 ended 30 June 2018

1,651 2,124 H1FY17 H1FY18

RMB'mil

2.05% 1.61% H1FY17 H1FY18 2,897 4,081 H1FY17 H1FY18

RMB'mil

143,850 162,783 H1FY17 H1FY18

RMB'mil

Performance of Associated Company:

Bank of Chengdu Co., Ltd.

41% 29% 13%

Financial Highlights as at H1 ended 30 June 2018 (unaudited)

Improved ROE Solid Cost-to-income Ratio Prudent Coverage Ratio Healthy Total Capital Ratio

0.44% 16

15.1% 1% 24% 232% 13.7% 7%

Agenda

Business Update

2

HLB FY18 ended 30 June 2018

Digital Banking (Wholesale)

17

+20 20%

Users

+45 45%

Transactional Amount

+57% 7%

Transactional Users

+22 22%

Transactional Volume

KEY DIGITAL METRICS Y-o-Y FY18

Wholesale

cv cv

Partner Collaboration Value added services to support our GSME customers

Simplifying HR by providing one platform to manage payroll, benefits, employee information & more. Cloud accounting system for business starters including free access billing, invoice issuance, system automated bookkeeping & more.

HLB FY18 ended 30 June 2018

Digital Banking (Retail)

18

+26 26%

Active Users

+64 64%

Mobile Users

+29 29%

Transactional Users

+70 70%

Transactional Volume

KEY DIGITAL METRICS Y-o-Y FY18

Retail

cv cv

Credit Card self-service via Connect will

accelerate migration from Call Center with 41% adoption rate in the first month

JomRaya trended #1 on Google Play

(Arcade Game) within 7 days of launch

In-Principle-Approval for online Personal Loan will accelerate digital

contribution from 12% to 20%

MAY JUNE JUNE

HIGHLIGHTS FOR Q4FY18

HLB FY18 ended 30 June 2018

e-Sports sponsorship, customized game weapons, exclusive partnerships

19

46 466%

Q-o-Q growth in transaction value

■WeChat Pay

■Strategic collaboration with Tencent

Cross Border Master Merchant Acquirer in Malaysia (Feb 2018) Bank in Malaysia to attain Local Currency Master Merchant Acquirer (July 2018) Bank in Malaysia to introduce the new Android Based All-In-One Smart Terminal

x3 x3 ti

times es by Dec 2018

>10 1000 00

Terminals

in less than 6 months

1st 1st 1st

Retail, Groceries, F&B, Convenience Stores, Entertainment & many more!

On-going collaboration with via Gamification

PLAY NOW

HLB FY18 ended 30 June 2018

67.3m (37%) 96.0m (43%) 138.6m (46%) 202.2m (47%) 8.3m (5%) 21.7m (10%) 49.1m (16%) 116.4m (27%)

30.6m (17%) 29.5m (13%) 28.4m (9%) 24.5m (6%) 75.5m (42%) 78.7m (35%) 84.4m (28%) 86.0m (20%) FY15 FY16 FY17 FY18

Internet Mobile Branch SST

■Digital Transformation Milestones

20

COST SAVINGS

RM61

61

million

FY18

SHIFT: TRADITIONAL >>> DIGITAL

74%

• 3%

Resulting in a 3% reduction

• f total cost base

42%

HLB FY18 ended 30 June 2018

21

• Healthy traction on top-line growth; A record year with new milestones achieved.
• Managing expenses remain a key focus, delivered positive JAWS for the 8th

consecutive quarter.

• Credit quality remains stable with no particular credit stresses in any segment. GIL

are well secured with collateral.

• BOCD: Steady contribution post IPO; expect healthy performance in the new financial

year.

• Liquidity and capital positions remain strong and supportive of further growth. Well-

prepared for MFRS 9 adoption effective 1 July 2018.

Summary

Record FY18 results, setting the base for continuing solid performance in the new financial year

HLB FY18 ended 30 June 2018

Management Guidance

Guidance for FY19

22

Target FY19 FY18 Actual Gross Loan Growth LD Ratio Non-Interest Income Ratio Cost-to-Income Ratio Gross Impaired Loan Ratio Net Interest Margin Return on Equity 3.1% 82.0% 2.1% 27.8% 42.6% 0.87% 11.3% In line with industry ~82% >2% >27% <43% <1% ~11%

Appendix

Supplementary Information

3

HLB FY18 ended 30 June 2018 4,039 4,067 4,178 4,551 4,840 0.8% 0.7% 2.7% 8.9% 6.3% FY14 FY15 FY16 FY17 FY18 2,613 2,746 2,382 2,748 3,246

9.2% 5.1%

• 13.3%

15.4% 18.1% FY14 FY15 FY16 FY17 FY18 44.4% 44.6% 49.9% 44.1% 42.6% FY14 FY15 FY16 FY17 FY18 2.15% 2.06% 1.94% 2.09% 2.10% FY14 FY15 FY16 FY17 FY18 24

Key Financials – 5 Years Trend

HLB FY18 ended 30 June 2018

25

Group Performance

RM’mil FY17 FY18 Change % (YoY)

Q4FY18

Change % (YoY) Change % (QoQ) Net interest income 3,355 3,495 +4.2% 846

• 2.1%
• 2.5%

Non-interest income 1,196 1,344 +12.5% 331 +14.8%

• 15.0%

Total income 4,551 4,840 +6.3% 1,176 +2.1%

• 6.3%

Operating expenses (2,008) (2,060) +2.6% (511)

• 0.9%
• 3.0%

Operating profit before allowances 2,543 2,779 +9.3% 665 +4.5%

• 8.8%

Allowances for loans and other impairments (159) (70) +56.3% (5) +91.7% +53.1% Share of profits from associate & JV 364 537 +47.4% 117 +11.1%

• 14.2%

Profit before tax 2,748 3,246 +18.1% 778 +14.4%

• 9.1%

Profit after tax 2,145 2,638 +23.0% 626 +29.6%

• 9.3%

Profit after tax (underlying)* 2,247 2,638 +17.4% 626 +7.1%

• 9.3%

Note *: Excluding one-off tax impact of RM102 mil in FY17

HLB FY18 ended 30 June 2018 Note *: Excluding one-off tax impact of RM102 mil in FY17

Q4FY17 Q3FY18 Q4FY18

FY2017

FY2018 Net Interest Margin

2.14% 2.10 2.03% 2.09% 2.1%

Non-interest Income Ratio

25.0% 30.9% 28.1% 26.3%

27.8% Cost-to-Income Ratio

44.7% 41.9% 43.4% 44.1%

42.6% ROE

10.4%* 11.9% 10.6% 10.3%*

11.3% ROA

1.20%* 1.38% 1.25% 1.17%*

1.32% Loan-to-Deposit Ratio

80.6% 81.3% 82.0% 80.6%

82.0% Credit Charge (Net) - bps

21 4 3 13 6

Loan Impairment Coverage (LIC)

96% 96% 89% 96%

89% LIC including regulatory reserves

151% 162% 155% 151%

155% CET-1 ratio

13.3% 12.0% 12.6% 13.3%

12.6% Tier-1 ratio

13.7% 12.7% 13.3% 13.7%

13.3% Total Capital Ratio

15.8% 15.3% 16.3% 15.8%

16.3%

26

Highlights of Key KPIs

HLB FY18 ended 30 June 2018

223 282 FY2017 FY2018 RM'mil 204 207 37.2% 32.1% FY2017 FY2018 13.9% 15.5% FY2017 FY2018 24.6 26.5 FY2017 FY2018 RM'bil 20.8 22.9 FY2017 FY2018 RM'bil 498 585 FY2017 FY2018 RM'mil

Total Net Income Opex & CIR Gross Financing Deposits Profit after Tax & Zakat Capital Adequacy

27 8%

HLISB - Key financial highlights

• 17%
• 27%
• 10%

RM’mil

YOU THANK

For further information, please visit www.hlb.com.my or contact: Investor Relations: Chow Sheng Wai Head, Corporate Finance & Investor Relations DID: +60320812972 Email: IR@hlbb.hongleong.com.my

This presentation has been prepared by Hong Leong Bank (“HLB”) for selected recipients for information purposes only and the information contained herein has been obtained from sources believed to be reliable. The information contained herein is believed to be correct as of the date of this presentation and is given in summary form and does not purport to be

• complete. HLB does not make any guarantee, representation or warranty, whether expressed or implied, as to the adequacy, accuracy or completeness or reliability of any such

information, opinion or estimate contained and shall not be responsible or liable for any consequences of any reliance thereon by any recipient. Opinions and estimates constitute the judgment of HLB as of the date of this presentation and are subject to change without notice. HLB does not act as any recipient’s financial advisor or agent and the information contained herein is not intended to be relied upon as advice to any recipient and should not be construed as an offer or recommendation to buy or sell securities. This presentation does not purport to contain all the information that a prospective investor may require and the information contained herein does not take into account the specific investment objectives, financial situation or particular needs of every recipient hence it may not be appropriate for all persons. Each recipient is responsible to make his or her own independent assessment of the information provided herein and should not treat the information provided as advice relating to investment or related matters. Each recipient should consult his or her own advisers and must make his or her own independent decision regarding any investment. Certain statements contained in this presentation may be statements of future expectations and involve known and unknown risks and uncertainties. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. HLB does not have any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Each recipient should not place undue reliance

• n forward-looking statements, which is believed to be correct only as of the date of this presentation.

The information contained in this presentation is strictly confidential and its contents, views or opinions may not be reproduced, redistributed, transmitted or passed on, directly or indirectly, to any other person or published electronically or via print, in whole or in part, for any purpose. The intellectual property in the presentation belong to HLB unless specifically indicated otherwise.

Disclaimer