Hong Leong Bank eyes 6-7pct loan growth, up to 11.5pct ROE in FY27

KUALA LUMPUR: Hong Leong Bank Bhd (HLB) aims for a gross loan growth of 6-7% and a return on equity (ROE) of 11-11.5% in the fiscal year 2027. The targets follow a 7.7% increase in gross loans, advances, and financing to RM226.3 billion in FY26, with an ROE of 11.2%. HLB's ROE in FY26 fell short of its target of 11.5-12% due to lower profits from its stake in Bank of Chengdu Co Ltd after dilution and the impact of a stronger ringgit against the Chinese renminbi.

HLB group CEO Kevin Lam stated that the dilution reduced the associate's profit contribution and shaved over 40 basis points off the bank's ROE. HLB remains committed to enhancing its ROE by concentrating on core growth areas like wealth management and overseas expansion, supported by bank-wide artificial intelligence integration.

Despite consistently surpassing the seven percent loan growth mark, the bank maintains its loan growth guidance of 6-7% for FY27, citing the industry's current five percent growth rate as a reason for not adjusting the guidance upwards. For FY27, HLB targets a net interest margin of 1.80-1.90%, a cost-to-income ratio below 39%, a gross impaired loan ratio under 0.65%, a net credit cost below 10 basis points, and a current account savings account mix of around 35%, compared to 34.7% in FY26.

The more challenging environment is attributed to higher oil prices due to the Iran war, which could increase costs and put pressure on household and SME finances, prompting the bank to adopt a more cautious loan growth and credit underwriting approach.