Lower net interest income and fee and commission income hurt Hong Leong Finance's (HLF) earnings, as it faces uncertainties and volatility.

It reported a 6.6 per cent drop in first-quarter net profit to $14.5 million yesterday.

Net interest income dipped 2.1 per cent to $37.5 million for the three months to March 31, compared with the same period a year earlier.

Interest expense soared 47.2 per cent to $43.9 million, on higher interest payable on deposits, owing to higher prevailing interest rates and a higher deposit base.

HLF said: "Longer-term Singapore interbank rates had risen sharply compared to a year ago, compounded by intense competition for deposits from retail customers which comprise our core deposit base."

Fee and commission income plunged 37.9 per cent to $2.2 million, mainly owing to lower fee income from some lending products, said the firm, but offset by an increase in non-lending income.

Staff costs at the finance company were controlled, and other operating expenses increased 7.4 per cent to $5.5 million, mainly owing to higher expenses from operating lease premises.

Net loan assets, including hire purchase receivables - net of allowances - fell 1.6 per cent to $9.93 billion, year on year.

Deposits and balances of customers were $11.09 billion as at March 31, rising 4.4 per cent from March 31 last year.

The firm said: "Following the recent Budget, HLF will continue to partner government agencies to assist our small and medium-sized enterprises (SMEs) in their funding needs."

It said it had introduced new schemes to help SMEs in Housing Board estates "to tide over this challenging period".

Quarterly earnings per share stood at 13.11 cents, down from 14.04 cents a year earlier.

Net asset value per share inched up to $3.84 as at March 31, from $3.80 as at Dec 31.

HLF shares closed two cents lower at $2.40 yesterday.