Rising interest income, thanks to a bigger loan base and a better loan yield, has sent Hong Leong Finance's (HLF's) third-quarter profits higher.
Net profit for the third quarter ended Sept 30 rose 17.4 per cent to $16.8 million from a year earlier.
Interest on loans for the three months was $59.5 million, up 18.2 per cent from last year.
Net interest income and hiring charges rose 8.8 per cent to $40.9 million.
Net loan assets, including hire purchase receivables, stood at $10 billion as at Sept 30, a 4 per cent rise over the previous year's base of $9.6 billion as at Dec 31.
For the nine months to Sept 30, net profit rose 8.2 per cent to $46.4 million. Net interest income and hiring charges grew 8.2 per cent to $120.5 million.
Annualised earnings per share for the three months was 15.17 cents, up from 12.93 cents last year. Net asset value per share as at Sept 30 was $3.74, unchanged from Dec 31.
HLF said in a statement that while non-performing loans remain low and are substantially secured, it maintained a general provision pegged to the size of its loan portfolio.
AT A GLANCE
INTEREST ON LOANS: $59.5 million (+18.2%)
NET PROFIT: $16.8 million (+17.4%)
EARNINGS PER SHARE: 15.17 cents (+17.3%)
NET ASSET VALUE PER SHARE: $3.74 (unchanged)
It also noted that interest expense for the quarter had increased 26.7 per cent to $34 million. This was due to higher interest payable on deposits because of higher interest rates and a larger deposits base.
HLF noted that the global economy was "stuck in a low-growth pattern". It added that over-leveraged or commodity-dependent emerging economies, as well as a slowing China, heightened risks.
Meanwhile, the restructuring of the Singapore economy continued with little improvement in productivity, it added. Many small and medium-sized enterprises (SMEs) were facing the burden of high operating costs in a slowing economy. The property market continued to be lacklustre with little activity, it said.
HLF also said it had now achieved four consecutive quarters of improved operating results, indicating it may have turned a corner after suffering the impact of the prolonged low interest rate environment of the past several years.
But there are challenging and uncertain times ahead, it added.
It would remain cautious in its lending policy and focus on serving the SME markets and HDB dwellers, it said.
It had opened another SME centre to cater to SMEs in the heartland, bringing its number of such centres, spread over various parts of Singapore, to 10.
The focus on SME lending would enhance its hire-purchase machinery portfolio to help balance the decline in the motor-vehicle lending market, it said.