UOB Kay Hian
Date of Report: Thursday, 28 August 2025
Hong Leong Bank Berhad Delivers Robust FY25 Results: Above-Industry Growth, Strong Dividends, and Attractive Valuation
Executive Summary: Hong Leong Bank’s FY25 Performance Stands Out
Hong Leong Bank Berhad (HLBK MK), Malaysia’s fourth largest bank by assets, delivered a solid all-round performance in FY25. The bank’s core earnings, asset quality, and capital returns all outperformed expectations, solidifying its position as a top pick in the Malaysian financial sector. With a strong retail banking focus and a presence in China via its 20% stake in Bank of Chengdu, HLBK continues to outperform peers while maintaining impeccable asset quality. This report, compiled by UOB Kay Hian, retains a BUY rating with a target price of RM23.80, implying an attractive 20.6% upside.
Key Investment Highlights
BUY rating maintained with a target price of RM23.80 (1.19x FY26F P/B, 11.5% ROE).
FY25 core net profit: RM4.68 billion (+11.6% YoY), in line at 97% of forecast.
Dividend per share: 96 sen for FY25; payout ratio jumps to 47%, with further upside likely.
Asset quality: Best-in-class, with GIL ratio at 0.54% and robust coverage.
Loan growth: 7.8% YoY in FY25, outpacing industry and management targets.
Valuation: Trades at just 1.00x P/B (vs sector’s 1.15x), despite stronger ROEs.
FY26 Guidance: Loans growth of 6-7%, NIM of 1.80-1.90%, ROE of 11.5-12.0%.
Financial Performance Review
FY25 and 4QFY25 Results
Hong Leong Bank’s FY25 performance was driven by higher provision writebacks, robust non-interest income, positive operating JAWS, and strong loan growth. While quarter-on-quarter earnings fell due to a normalisation of provision writebacks, the underlying operating profit showed sequential improvement.

Operational Drivers and Strategic Highlights
NIM and Funding Strategy
Net Interest Margin (NIM) held steady at 1.90% in 4QFY25, up 3bps QoQ, thanks to lower SRR and strong growth in CASA (+10% YoY).
Active repricing of fixed deposits (75% of FDs to reprice in six months post-OPR cut).
Loan-to-deposit ratio at 86.6% (below peers’ >90%), positioning HLBK well for further OPR cuts.
Loan Growth Momentum
FY25 loan growth of 7.8% YoY, exceeding both management’s 6-7% target and analyst expectations.
Growth was broad-based:
Auto loans: +10.1%
Mortgages: +6.0%
SME loans: +8.0%
FY26 forecast: 6% loan growth, at the lower end of guidance.
Asset Quality and Provisions
GIL ratio improved to 0.54% (from 0.57%).
Loan loss coverage (LLC) rose to 97%; total regulatory coverage at 167%.
Net credit cost was a 1bp writeback in 4QFY25; full-year writeback of 18bps (vs 6bps in FY24).
Provision writebacks mainly from reversal of excess overlays.
Dividend Upside and Capital Strength
FY25 dividend payout ratio rises to 47% (from 34%), with DPS at 96 sen (4.8% yield).
CET1 ratio at 14.2%, with a potential uplift under full Basel 4 in July 2026.
FY26-27 payout assumptions raised to 50% and 55%, translating into a potential 5.7% yield for FY26.
Bank of Chengdu: A Strategic Overseas Stake
HLBK’s share in Bank of Chengdu (BoC) was diluted to 17.8% (from 19.8%) as part of a refocus on domestic growth.
BoC’s contribution fell 33% YoY, mainly due to ringgit strength and dilution.
BoC remained resilient:
Earnings grew 7%
GIL ratio stable at 0.66%
Exceptional LLC (loan loss coverage) of 453%
Management Guidance for FY26
Net credit cost: <10bps GIL ratio: <0.65% Loan growth: 6-7% Cost-to-income ratio: ~39% NIM: 1.80-1.90% ROE: 11.5-12.0% Valuation and Financial Forecasts HLBK’s valuation remains compelling at just 1.00x P/B, below the sector average, with a robust outlook for ROE and dividend yield. The target price of RM23.80 is based on 1.19x FY26F P/B, aligning with its historical mean.

Environmental, Social, and Governance (ESG) Commitments
Environmental: Targeting a 40-50% reduction in Scope 1 and 2 emissions by 2031. HLBK’s market share for hybrid vehicle financing rose to 9% in 2021, with such loans now 2.8% of its HP loan book.
Social: Women now comprise 40% of upper management.
Governance: 55% of the board are Independent Non-Executive Directors (INED).
Outlook and Final Thoughts
Hong Leong Bank’s FY25 results underscore its unique positioning in Malaysia’s banking landscape: delivering above-industry growth with best-in-class asset quality, robust capital ratios, and a compelling dividend story. Management’s FY26 guidance is both credible and conservative, with scope for further capital optimisation and upside surprises. Trading at a notable discount to peers despite superior ROE and growth, HLBK remains a top BUY for investors seeking quality, growth, and yield in the region’s banking sector.
Broker Contact:
Keith Wee Teck Keong
UOB Kay Hian
+603 2147 1981
[email protected]