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HONG Leong Finance (HLF) yesterday reported a 10.2 per cent fall in second- quarter net profits to $27.8 million, as it was hurt by settlements with customers over the mis-selling of structured notes.
Revenues for the three months ended June 30 dropped by 12 per cent to $78.6 million.
Net interest income and hiring charges, on the other hand, rose by 10.2 per cent to $55.8 million, thanks to a sharp drop in interest expense.
For the half-year, net profits slipped 13 per cent to $53.5 million despite a 10.3 per cent rise in net interest income and hiring charges to $108.9 million.
Net loan assets, including hire purchase receivables (net of allowances), fell to $6.7 billion from $7.41 billion as of Dec 31. Deposits and savings accounts shrank to $7.19 billion from $8.1 billion during the same period.
At the operating level, HLF's profit in the second quarter was 19.9 per cent higher at $42.4 million.
But this was undone by top-up provisions amounting to $9.2 million for loans and advances, and settlements with wealth management customers over the mis-selling of structured products such as Lehman Minibonds.
The fallout from the structured notes fiasco also resulted in a sharp decline in fee and commission income, which fell by 54.1 per cent in the second quarter and 68.2 per cent for the half-year.
Last month, HLF was dealt the harshest penalty among 10 financial institutions by the Monetary Authority of Singapore over the mis-selling of structured notes: It cannot sell or advise customers on new structured notes for at least two years.
'Given the current and expected environment, the company has decided not to continue with the distribution of wealth management products, and will focus on its core lending and deposit-taking business,' HLF said in its statement yesterday.
Annualised earnings per share in the first six months fell to 24.31 cents from 27.96 cents previously, while net asset value per share firmed to $3.22 compared with $3.10 as of Dec 31.
The company declared an interim dividend of two cents a share, down from five cents in the corresponding period last year.
HLF shares yesterday ended unchanged at $2.81. The stock is up 36.4 per cent so far this year, underperforming the Straits Times Index, which has gained 46 per cent in the same period.
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