Hong Leong turns cautious in lending

Aug 13, 2008
Hong Leong turns cautious in lending
By Lee Su Shyan, Assistant Money Editor

HONG Leong Finance, banker to many small and medium-sized enterprises
(SMEs), is easing up on lending as the economic gloom deepens.

Its loan underwriting standards have been tightened while the
quality, duration and yield of its loan portfolio are under
additional scrutiny to ensure sustainable profits.

The firm said yesterday the local economy has been hit by soaring oil
prices, the uncertain property market and volatile stock markets.

'In the face of one of the highest inflation rates in over a decade,
aggravated by the sub-prime woes and credit crunch in the US and
Europe, Hong Leong Finance has assumed a cautious stance in its
lending activities,' the firm said as it revealed its half-year
results.

But it assured customers that it will continue to support them and
the SME sector in general.

It added that it is emphasising the heartlander market and has
launched a number of campaigns in a bid to increase its deposit base.

As it steps up the distribution of wealth management
products, 'growing fee income has been given priority to complement
our interest income', Hong Leong Finance said.

For the second quarter ended June 30, net profit dipped 1.4per cent
to $31 million with a lower write-back of allowances for loans and
advances.

Net interest income and hiring charges rose 14.3 per cent to $50.7
million, helped by a higher loan base.

For the first half, net profit was up 6.7 per cent at $61.5million
while net interest income and hiring charges rose 16.2 per cent to
$98.7 million.

Earnings per share for the second quarter was 28.17 cents, marginally
lower than the 28.7 cents for the second quarter last year. Net asset
value inched up from $3.05 as of Dec 31 to $3.11.

An interim tax-exempt one-tier dividend of five cents per share has
been declared for the year ending Dec 31.

The company said it has no exposure to equity or debt securities
issued by US mortgage giants Fannie Mae and Freddie Mac, nor does it
have any US sub-prime-related instruments or collaterised debt
obligations.

Its shares ended two cents up at $3.52 yesterday with a volume of
418,000.