KUALA LUMPUR: Hong Leong Bank Bhd expects 6% to 7% growth in its loan segment for its financial year 2024, underpinned by key factors such as mortgages, small and medium enterprises (SME) and auto financing in Malaysia.

The bank is also expecting an increase in loan contribution from their overseas branches, particularly from Singapore,” said group managing director/CEO Kevin Lam.

Disclosing the bank’s FY23 financial results, Lam said the bank’s FY22 gross loans, advances and financing expanded 8% year-on-year (y-o-y) to RM181.7 billion, while domestic loans/financing grew 7.2% y-o-y.

Residential mortgages grew 8.1% y-o-y to RM89.1 billion, supported by a healthy loan pipeline while transport vehicle loans/financing extended its growth momentum of 10.9% y-o-y to RM19.6 billion, corresponding to the strong growth in motor vehicle sales.

Domestic loans to business enterprises increased 10.2% y-o-y to RM60.8 billion, whilst support of SME saw the loan/financing portfolio grow 9.7% y-o-y to RM33 billion.

Lam remarked that its current account savings account (CASA) declined last year due to a migration of CASA customers to fixed deposits (FD), “as the interest environment increased”.

“A lot of customers moved their funds that were previously sitting in CASA into FD. We’re seeing that the competition in FD is stabilising, waning right now. Not as much as what we saw in the second quarter of last year. So, the way we have to look at growing this is through our cash management activities on our business, banking, customer side and through our community banking acquisition activities,” he said.

Lam reckoned that if the interest rate continued to be elevated, its customer migration from CASA to FD will persist as a near term trend until the interest rates starts to stabilise, which may not happen soon as it is expected to remain at a higher level for a longer period of time.

“The challenge … that if we are competing for CASA using interest rates, that will not work. There is a lot of longer term effort that we need to make in terms of uplifting our cash management system capability, which our bank is committed to and (by) making more investments in our cash management systems for corporate customers, which we are working on … it is a bit of a medium term initiative,” he said.

On outlook, he said that the growth trajectory in the Malaysian economy is expected to stay modest in the region of 4% in 2023.

The group’s net profit rose 16.08% to RM3.82 billion in the financial year ended June 30, 2023 from RM3.29 billion, driven by continued loan or financing expansion, sustained non-interest income and robust contributions from its associates. While, revenue increased 1.57% to RM5.69 billion from RM5.6 billion.

The bank declared a final dividend of 38 sen per share, bringing the total dividend to 59 sen per share for FY23, with a dividend payout ratio of 32%.