EON Capital Statement on Full-Year 2009 and Fourth-Quarter 2009 Earnings: EON Bank Group Doubles Profits and Earnings, Strengthens Capital Ratios and Improves Asset QualityGroup Reports Record Full-Year 2009 Profit After Tax of RM341.1 million
Earnings report highlights for full-year 2009:
Doubled Earnings and Profits: Net profits after tax more than doubled to RM341.1 million for full-year 2009 from 133.7 million in FY2008. Earnings per share also more than doubled to 49.2 sen from 19.3 sen in FY2008, and net assets per share increased to RM5.13 from RM4.62.
Strengthened Capital Position: The core capital ratio improved to 11.2% at year-end 2009 from 9.2%, while the risk weighted capital ratio improved to 14.4% at year-end from 12.6% a year earlier.
Improved Asset Quality: Gross non-performing loans declined to 3.8% from 5.0% in FY2008 and net non-performing loans fell to 2.3% from 2.5% in FY2008, while loan loss coverage strengthened in FY2009 to 86.1% from 80.4% last year.
Solid Loans and Deposits Growth: Led the industry on loans and deposits growth, with a growth rate of 8.1% for both net loans and core deposits in FY2009.
Greater Market Share: Gained market share in all key segments, including car financing, housing loans, credit cards and SME loans.
Increased Dividend for Shareholders: A higher tax-exempt dividend of 10 sen per share, from 5.77 sen per share in 2008, representing at 20.3% payout of net profit for the year, has been proposed by the Board of Directors.
KUALA LUMPUR, 19 February, 2010 – EON Capital Berhad (“ECB”), the holding company of the EON Bank Group, today announced that it doubled profits and earnings, strengthened capital ratios and improved asset quality in 2009. The Group reported full-year 2009 net profit after tax of RM341.1 million (FY2008: 133.7 million) resulting in earnings per share of 49.2 sen (FY2008: 19.3 sen) and net assets per share of RM5.13, up from RM4.62 a year earlier. Pre-tax returns on equity also improved to 12.5% (FY2008: 6.5%) and after-tax to 10.1% (FY2008: 4.2%).
On announcing EON Bank Group’s results, Chief Executive Officer Mr. Michael Lor said, “With an increase of more than 155% in net profits as well as improved loans growth, deposits and core capital ratio, EON has achieved superior financial results and above trend growth in 2009. Our investments in infrastructure, systems and
marketing position under our transformation program have delivered for us and, coupled with our strong capital base and improved asset quality, will continue to do so, positioning us for sustained growth in 2010 as Malaysia’s Preferred Bank.” Group Chairman, YAM Tan Sri Dato' Seri Syed Anwar Jamalullail, added, “EON Bank Group’s sustained strong performance is a testament to the quality of our management team and dedication of our shareholders. In recognition of the Group’s doubling of earnings and profits over last year, and solid position for future growth, the Board of Directors has proposed a higher tax-exempt dividend of 10 sen per share, compared to 5.77 sen per share last year, representing at 20.3% of net profit for the year.”
Mr. Lor continued by outlining several of the Group’s key performance indicators, saying, “EON now has a very sturdy foundation in place which will support sustained growth in 2010. Our capital position is strong; having increased our core capital ratio to 11.2% at year-end, up from 9.2% last year. And our asset quality continues to improve as a result of strategic improvements to our risk management efforts, as demonstrated by the decline in gross non-performing loans in 2009 to 3.8% from 5.0% in 2008. These internal improvements have been complemented by real market share gains in each of our key segments and industry leading net loans and core deposits growth, both of which grew by 8.1% in 2009 on the introduction of compelling and innovative new products.”
Outlining the Group’s plans for the future, Mr. Lor concluded, “In 2010 we will focus on building sustainable returns from our core businesses of consumer and SME banking, while also developing new revenue streams around several targeted offerings, including banc assurance, corporate and investment banking, treasury, as well as priority banking. We will also seek to enhance our performance by continuing internal improvements, such as strengthening risk management and establishing performance based motivations for employees.”
Strengthened Capital Position
In 2009, the capital position of the Group was enhanced with the issuance of RM500 million Innovative Tier One capital securities and the RM660 million of subordinated Medium Term Notes, to support the business expansion plans of the Group.
The Group’s core capital ratio (“CCR”) improved to 11.2% at year-end 2009 from 9.2% last year, while the Group’s risk-weighted capital ratio (“RWCR”) improved to 14.4% from 12.6% last year, representing further improvement from the Group’s prior quarter core capital ratio or 10.93% and risk-weighted capital ratio of 13.46%.
The Group has the flexibility to opportunistically tap the debt capital markets now that EON Bank has put in place the RM1.0 billion Innovative Tier One Capital Securities Program and a RM2.0 billion Subordinated Medium Term Note Program in 2009.
Improved Asset Quality
Despite the sharp contraction in the economy this year, new NPL formation to-date has shown a decreasing trend. After the initial rise in non-performing loans in the first quarter, the Group continued to see a steady decline in gross non-performing loans to 3.8% (FY2008: 5.0%) and the net NPL ratio to 2.3% (FY2008: 2.5%). The loan loss coverage ratio has also improved further to 86.1%, from 80.4% a year earlier.
These improvements in asset quality followed implementation of a combination of better underwriting standards, more robust collection activities and improvements in credit processes overall as part of the Group’s transformation program. To improve risk management, the Group recalibrated its credit scoring tools and credit rating models in 2009 to improve internal credit evaluation systems. As a result, tracking, monitoring, collection and legal recovery efforts are now centralised and intensified, leading to an improvement in gross and net NPL ratios.
Continued Strong Loans Growth
In 2009, the Group outperformed the industry average in terms of loans growth for the first time in nearly ten years. The Group’s net loans growth rate of 8.1% exceeded its internal target of 6% and was significantly higher than the banking industry’s annualized loans growth of 7.4% for the first eleven months of 2009.
Loans Expanded by RM2.4 billion
Last year, the Group’s net loans, advances and financing expanded by RM2.4 billion, driven mainly by growth in housing loans (+RM849.7 million or 12.2% ), other term loans/finance (+RM975.6 million or 17.1%), hire purchase receivables (+RM237.6 million or 1.9%) and credit cards (+RM253.2 million or 21.2%), as well as commercial lending to SMEs (+RM589.9 million or 9.6%). The Group’s lending is mainly concentrated in consumer and SME lending, which accounts for 59.8% and 20.4% respectively of the total loans outstanding as at end-2009.
Approvals Increase on Strength of Housing Loan Growth
The Group’s loan approvals rose by 105.4% in 2009, compared to the previous year. Housing loan approvals were particularly strong, with approvals exceeding RM2.31 billion, more than double the RM1.12 billion of housing loans approved in 2008. This growth in home loans has been fuelled by implementation of a four-pillar growth plan to make getting a home loan easier, focused on providing:
Faster and simpler to processes;
Transparent and competitive pricing;
A more robust distribution capacity via re-invigorated branches and Mortgage Direct Sales Marketing team; as well as
Exciting and innovative products and campaigns – including the “Home Loan Fixed Deposit Package”, the first housing loan in Malaysia referenced to a 12-month Fixed Deposit Rate (instead of the Base Lending Rate).
The Group’s housing loan portfolio now stands at RM7.8 billion and accounts for nearly 21.3% of the gross loans portfolio (before deducting unearned interest/income).
Loans Growth to SMEs Demonstrates Commitment to Help SMEs Face Challenging Economy The Group’s strong commitment to SMEs in a more challenging economic environment resulted in a rise in commercial lending to SMEs of RM589.9 million or 9.6%. As at end-2009, total loans to the SMEs stood at RM6.75 billion, and accounted for 20.4% of the Group’s total loans outstanding. Many of these loans were provided to assist SMEs in their need for working capital financing. In support of the Government’s fiscal stimulus efforts, the Group actively promoted the Government’s Working Capital Guarantee Schemes for its SME customers. In 2009, a total of RM4.2 billion of new SME loans were approved, which accounted for 27.1% of the Group’s total loans approved of RM 15.4 billion for the year.
Major Gains in Car Loans Market Share, Performance Tempered Market Slowdown
Disbursements for car loans slowed during the year by RM720.6 million, tempered by the slowdown in the new car sales across the industry, as nearly 95% of the Group’s loans are for the purchase of new cars.
In the end, EON Capital was able to maintain its industry leadership as well as market share, and, with the launch of its recent campaign “Super Cash Contest” coupled with the launch of new models and the economic recovery, the Group expects loan disbursements to accelerate in 2010.
Targeting 14% Loans Growth in FY2010
The Group is confident of achieving its target of 14% loans growth in FY2010, as undrawn loan commitments had increased by RM2.1 billion or 16.1% during the year to RM15.0 billion (FY2008: RM12.9 billion).
Increased Market Share
Loans growth has helped EON Capital realize market share gains in all its key segments of car financing, housing loans, credit cards and SME loans.
The Group’s market share of domestic loans and advances has risen to 4.2%, as at end-November 2009, from 4.1% as at end-2008. With the implementation of various promotional campaigns and the successful tie-ups with Golden Screen Cinemas, Pavilion KL and ING, the Group is also making incremental gains in market share in credit card financing. The total credit card receivables have risen to RM1.45 billion or an increase of nearly RM253.2 million or 21.2%.
Most notably in the area of car financing, the Group made significant gains in market share as its subsidiary EON Bank Berhad leapfrogged to become the third largest car financier in the country. EON Bank increased its market share to 10.9% from 10.6% in 2008, despite the sluggish economic environment and overall industrial performance for the past year.
Strong Growth in Customer Deposits
Excluding money market deposits, the Group’s current, savings and fixed deposits rose by an industry leading 8.1%, or RM2.4 billion, in 2009, the same rate as loans growth. This growth figure is well ahead of the banking industry’s growth rate of 6.9%.
This growth coincides with the introduction of several new and innovative products last year, including the ‘SaveMonthly Savings Account’ that rewards depositors for their regular savings habits, as well as a refreshed ‘Smart Junior Savings Account’ for children. In 2010, the Group has lined up a number of customer deposit campaigns to further this trend, in addition to a currently running fixed deposit campaign, called ‘FD Mad Grab’.
Priorities for 2010
In 2010, EON Bank Group anticipates that stronger economic growth will enable the Group to pursue further its strategy of organic business growth, continued improvements in asset quality, better productivity and disciplined capital management. In line with the Group’s recently launched mission statement ‘To be the Preferred Malaysian Bank .... with best in class standards in delivery capabilities, customer experience and performance excellence,’ the Group’s major priorities for FY2010 will be:
Building sustainable returns from core businesses of consumer and SME banking, which represents up to 80.2% of Group’s overall business.
Developing new revenue streams from new business opportunities of bancassurance, corporate and investment banking, treasury and priority banking, to further diversify the sources of revenue from the Group’s business operations.
Strengthening the risk management and credit culture to ensure that there is a balance between returns and risk.
Establishing a performance motivated organization driven by engaged employees, where trust, accountability and performance in maximizing productivity, revenue and efficiency is the basis of the Group’s success.
Enhancing corporate efficiency by ensuring that the infrastructure and resources of the Group are channeled effectively towards meeting strategic business goals.
The Group expects to further enhance its earnings momentum and to continue to report a satisfactory financial performance for 2010.
