Management Discussion & Analysis
We are pleased to present the Management Discussion and Analysis (“MD&A”) for the financial year ended 30 June 2022 (“FY2022”). In this report, we would like to provide a review of Hong Leong Financial Group Berhad’s (“HLFG” or “the Group”) business operations and financial performance during FY2022.
FY2022 remained a challenging year as the global economic recovery faced challenges ranging from the emergence of new strains of the COVID-19, supply chain disruption, the Russia-Ukraine armed conflict and high inflation rate. Interest rates rose at a rapid pace in some advanced economies and negatively impacted the investment markets. Malaysia benefited from its high vaccination rate and was able to remove mobility restrictions and as a result, domestic demand and trade numbers improved. Nonetheless, strong external headwinds clouded the economic landscape and investment sentiments.
Against this backdrop, our business operations and financial performance remained resilient in FY2022. The Group recorded a net profit attributable to shareholders of RM2.45 billion, representing 8.3% improvement over previous year supported by robust contributions from the Group’s core businesses - our commercial banking division in particular. In line with the group-wide strategy of being “digital at the core”, we continued to deliver commendable financial results and further strengthen our business franchises with the objective of achieving long-term sustainable growth.
HLFG GROUP PERFORMANCE HIGHLIGHTS
Hong Leong Financial Group Berhad is an investment holding company and has three core businesses in the group:
- Commercial and Islamic banking under Hong Leong Bank Berhad (“HLB”);
- Insurance and Family Takaful, housed under our insurance holding company HLA Holdings Sdn Bhd (“HLAH”); and
- Investment banking and asset management under Hong Leong Capital Berhad (“HLCB”).
The robust contribution from associates came from Bank of Chengdu (“BOCD”), our associate in China. The share of profit from BOCD increased by 40.5% y-o-y to RM1.0 billion and its contribution made up 20.9% of HLFG Group’s profitability.
In terms of asset quality, the Group’s credit cost has reduced significantly from RM650 million a year ago to RM163 million as conditions for loans under moratorium stabilised in part to HLB's payment relief assistance efforts. Our gross impaired loan ratio (“GIL”) remained stable at 0.49%; the result was credited to our rigorous discipline in risk management and our extensive customer engagement efforts to reach out to our affected customers.
HLFG achieved a Return on Equity (“ROE”) of 10.4%, and our book value per share grew by 6.4% y-o-y to RM21.41. In line with the Group’s performance, the Board of Directors have declared a final dividend of 31 sen to make up a full financial year dividend of 46 sen. This is 6 sen higher than the previous financial year.
With the economic outlook remaining uneven in the immediate term, the Group shall be prudent in its capital and risk management to ensure our operating businesses remain resilient and adequately capitalised to deliver our business objectives. The Group consolidated capital position is above regulatory limits with a Common Equity Tier 1, Tier 1 and Total Capital Ratios at 11.8%, 13.0% and 15.9% respectively as at 30 June 2022.
During the year, RAM Rating Services Berhad (“RAM”) reaffirmed AA1/P1 Corporate Credit Ratings to HLFG. Concurrently, RAM maintained the long-term Financial Institution Ratings of HLB at AAA in recognition of its superior asset quality and reaffirmed HLIB’s AAA/P1 Financial Institution Ratings. All the above long-term ratings have a stable outlook. Moody’s Investors Services Ltd reaffirmed HLB’s baseline credit assessment at A3 on the back of HLB’s strong retail and small and medium enterprise (“SME”) franchises and effective risk management.
On 20 July 2022, HLFG was recognised as the Best Managed Bank and Financial Holding group in Malaysia by the prestigious The Asian Banker Leadership Achievement Awards 2022. Held once every three years, the Leadership Achievement Awards programme is highly coveted and we are honoured to have received this award for the second consecutive time. This award is an attestation to the efforts of the entire Group and a reflection of our commitment to execute diligently our business strategies in building sustainable value for our shareholders.
COMMERCIAL BANKING FINANCIAL & OPERATIONAL REVIEW
HLB’s regional financial services are provided via:
- A branch in Singapore;
- A branch in Hong Kong;
- 100% owned commercial bank Hong Leong Bank Vietnam Limited;
- 100% owned commercial bank Hong Leong Bank (Cambodia) PLC;
- 18% equity interest in the Bank of Chengdu Co., Ltd; and
- 12% equity interest in the Sichuan Jincheng Consumer Finance Limited Company.
Profitability & Efficiency
In FY2022, HLB’s revenue reported at RM5.6 billion or an increase of 2.4% y-o-y, underpinned by higher net interest income (“NII”) buoyed by loans and financing growth and effective funding cost management. NII increased to RM4.62 billion or 7.2% y-o-y as expansion in loans and financing and robust control over cost of funds mitigated the impact from lower securities yield. NIM remained stable y-o-y at 2.14%.
Operating expenses remained stable at RM2,098 million while CIR improved to 37.5%, delivering a positive jaws effect. The Bank had managed its operating expenses prudently and in a disciplined manner that resulted in y-o-y improvement in CIR from 38% to 37.5% in FY2022.
Notwithstanding the economic headwinds, HLB’s robust underlying performance and sound fundamentals, coupled with lower loan impairment allowances had delivered a higher PBT of 25.8% y-o-y to RM4,367 million and PAT was up 15.0% y-o-y to RM3,289 million respectively. HLB’s ROE climbed to 10.9% from 10.1% and earnings per share improved from 140 sen to 161 sen in FY2022.
Balance Sheet & Liquidity
Gross loans, advances and financing grew by 8.0% y-o-y to RM168 billion. The Bank’s domestic loans growth of 6.7% y-o-y continued to outperform the industry growth rate with residential mortgages expanded by 6.8% y-o-y while domestic loans to business enterprises increased by 13.3% y-o-y.
Residential mortgages increased to RM82 billion backed by healthy loan pipeline, while the vehicle financing stood at RM18 billion or up 5.3% y-o-y driven by higher automotive vehicle sales that was supported by vehicle sales tax exemption.
Domestic loans to business enterprises increased to RM55.2 billion, whilst the SMEs financing segment grew 15.7% y-o-y with the rebound in economic activities and our continued support to those customers that require financial assistance during the recovery phase. The Bank’s community banking initiative, within the SME segment maintained a solid growth of 17.0% y-o-y, attributed to the seamless banking experience provided to customers via our strong commitment in technologies and innovation.
HLB customer deposits for FY2022 rose by 7.6% y-o-y to RM197.3 billion, with CASA expanding 11.5% y-o-y that uplifted the CASA ratio to 33.5% from 32.3% a year ago. Our sound deposit base was a result of the Bank’s effective cash management offerings and improved cross-selling efforts. The Loan-to-Deposit ratio of 83.5% and a Loan-to-Fund ratio of 84.7% placed HLB in a healthy funding position to support sustainable business growth.
Asset Quality & Capital Adequacy
The Bank’s asset quality remained solid, with a stable GIL ratio of 0.49%. The loan impairment coverage ratio (“LIC”) stood at 212% as at 30 June 2022. Inclusive of provisions made and the value of securities held on our GIL, the LIC ratio increased to 282%. HLB’s capital position remained robust, with Common Equity Tier 1, Tier 1 and Total Capital Ratios at 13.4%, 14.5% and 16.7% respectively as at 30 June 2022. On April 2022, the Bank issued a Green Capital Securities of RM900 million to bolster its Tier 1 and Total Capital Ratio, providing further support for future business growth.
HLB has declared a final dividend of 37 sen per share, bringing the total dividend to 55 sen per share for FY2022, with a dividend payout ratio of approximately 34%.
Personal Financial Services (“PFS”)
The PFS division remained the largest contributor to HLB in FY2022 for its revenue and PBT by 50.7% and 35.0% respectively. The mortgage business recorded a modest loan growth of 5.4% y-o-y in FY2022 on the back of the ongoing economic recovery with approvals for properties in the affordable housing segment, especially for first homebuyers grew by 42%. The auto financing business recorded an improvement of 4.0% y-o-y supported by newmodel launches, sales tax exemptions and strong promotional offers by car manufacturers. The Bank expanded penetration into the top five automotive brands through strategic collaborations and better dealer coverage that contributed to overall volume growth in FY2022. For personal loans, the Bank experienced higher demand for financing with new funding expanded by 31% y-o-y as the economy rebounded and country transitioned to endemicity. In terms of asset quality, PFS registered a low GIL ratio of 0.40% in FY2022 that could provide the business some headroom to support our customers with their credit needs and provide payment relief assistance when the government’s PEMULIH programme expires.
PFS CASA deposits grew 6% y-o-y with the CASA ratio maintaining at 37.3% as the resumption of economic activities supported new accounts growth by 33.3% versus FY2021. Our mobile deposit specialists had also intensified the acquisition of customers through community-based programmes such as HLB@School and HLB@Work. The Bank also launched several digital initiatives to nurture environmental stewardship among the younger generation and promote a wider adoption of cashless transactions. HLB Earth Hero is a first-in-market personalised banking platform designed for young children to learn to “Earn, Save and Spend” linked to an eco-friendly theme reported a 92.2% y-o-y growth in junior account opening. A “Project Cashless Kampung” inclusivity initiative was rolled out in Sekinchan, Selangor to enable all 800 business owners to receive cashless and contactless payments while educating the community about the security and convenience of such payment systems.
During the year, the rapid adoption of digital banking and payments continued with digital financial transactions increasing by 36% y-o-y and our Connect platform saw a 13% growth in its user base. With over two million users in total, the number of monthly active users on Connect also improved to 71% of the PFS customer base in FY2022 compared to 66% in FY2021. In total, 92% of all financial and non-financial PFS transactions are now conducted via Connect.
Moving ahead, PFS is committed to move towards a more digitalised business environment and will put our customer needs at the forefront as we expect the growing acceptance of digital banking to continue driving business growth in these areas.
Regional Wealth Management (“RWM”)
In spite of volatile market conditions, the Regional Wealth Management business (“RWM”) revenue increased by 10% y-o-y and registered a 18% y-o-y growth in overall assets under management (“AUM”). The sales in unit trust slowed during the financial year but this was offset by better performance in the bancassurance, fixed income and structured products. Bancassurance fee income improved by 58% y-o-y, mainly contributed by revival in credit insurance sales whilst capital-protected structured products garnered strong sales growth of more than 212% as customers sought shelter from equity market volatility. Moving ahead, RWM diverse range of products, disciplined focus on cross-selling and client experience will enable the business to navigate the volatility in the financial markets and contribute to the Bank's performance next year
Business & Corporate Banking (“BCB”)
The BCB division reported a revenue of RM1,489 million or 9% growth y-o-y and accounted for 21% of HLB’s PBT. BCB delivered a commendable performance with loans and financing growth outpacing that of the industry at 11% y-o-y. We focused on our strategic segments of commercial and SME client segments, both of which registered strong growth, expanding by 13% and 17% y-o-y respectively. The loans growth was backed by 27% y-o-y rise in demand deposits.
With the gradual recovery in the economy, BCB continued to provide financial support to our commercial and SME customers as they revived their business from the effects of the pandemic with working capital facilities, range of bank-initiated payment relief assistance programmes and the facilitation of access to government financial assistance programmes. In FY2022, HLB disbursed RM128 million under the PEMULIH Government Guarantee Scheme Programme (“PGGS”) that provides financing to businesses of up to RM1 million with a maximum tenure of seven years.
On the digital front, BCB enhanced the digital banking experience for our customers with the launch of BCB digital onboarding experience for account opening and Hong Leong ConnectFirst (“HLCF”) sign-ups, where nine out of ten new accounts were being onboarded digitally. This enhancement reduced the time for our customers and improved the efficiency of account opening process over conventional methods without the need to adhere to branch opening hours.
BCB’s sustained performance particularly in SMEs segment, had garnered industry recognition in the form of awards and accolades such as our fourth consecutive award as the Best SME Bank in Malaysia and the Best Cash Management Bank in Malaysia from The Asian Banker. Their focus on sustainability and support towards financing of renewable energy projects over the last few years had also earned HLB’s recognition as the Best Bank for Sustainable Energy Financing at the National Energy Awards in 2021.
Moving forward, BCB will remain focused on supporting Malaysian businesses, particularly the SMEs, via our comprehensive suite of financing and banking services, which we will continue to improve to meet the evolving needs of the market and our customers.
Global Markets (“GM”)
Global Markets reported a revenue of RM681 million or a decline of 32% y-o-y, contributed to 13% of HLB’s PBT. In FY2022, GM liquid asset portfolio was affected by lower portfolio yields in a rising interest rate environment while managing the negative mark-to-market impact on our bond holdings. Trading income was also impacted by the local and global bond sell-offs and the narrowing interest rate differentials of USD/MYR.
During the year, GM worked closely with our internal partners and customers to deliver innovative treasury solutions for the Bank and launched Hong Leong ConnectFirst Live, which allowed our corporate customers to book FX rates, including forward contracts directly with us. In line with the greater adoption of digital banking channels by customers, our digital remittance in foreign exchange (“FX”) volumes continued to remain strong and exceeded our branch volumes throughout FY2022.
Moving ahead, GM shall be prudent on balance sheet management in anticipation of further rise in interest rates as central banks adopt a more hawkish monetary policy stance. As the rebound in global trade flows has been positive for FX volumes, we expect our SME, commercial and retail customers continue to be active in FY2023.
Hong Leong Islamic Bank Berhad (“HLISB”) had navigated through a challenging financial year and reported a lower Profit Before Zakat and Taxation (“PBZT”) of RM438 million, or a decrease of 16.4% y-o-y. Financing assets recorded 11% y-o-y growth attributed to healthy growth in our retail, SMEs and corporate businesses financing, while the Halal sector recorded 15.5% growth in assets. The total assets of HLISB grew 14% y-o-y to RM51.4 billion in FY2022, that was above the average industry rate of 8%. Asset quality remained stable with a low Gross Impaired Financing (“GIF”) ratio at 0.44% for the financial year.
In the year under review, HLISB continued to offer assistance to all individuals and corporate customers, including SMEs and Micro SMEs, who were experiencing financial difficulties because of the prolonged pandemic. This was facilitated via the Bank’s COVID-19 Payment Relief Assistance Plans or the government’s PEMULIH programme to support vulnerable customers in their recovery efforts. In addition, HLISB, together with HLB, mobilised a flood relief assistance programme offering a payment deferment of up to six months on financing facilities for individuals, SME and Micro SME customers who were affected by the floods in December 2021.
HLISB is committed to become a sustainable and inclusive financial partner to our customers, led by our “Digital at the Core” ethos and brand promise of delivering services that are built around our customers’ needs. HLISB launched a new green energy financing facility, Solar Plus Financing-i which enables homeowners to install a solar powered energy system and immediately enjoy savings on monthly electricity bills. Meanwhile, the established Term Investment Account-i (“TIA-i”) that offers conveniently packaged and high-quality financing assets had gained a strong footing amongst our customers with the retail fund size having grown 40% y-o-y to RM618 million. In the SME segment, HLISB supported the SMEs and Halal sector businesses to raise financing through our partnerships with SME Corporation via the Shariah-Compliant SME Financing Scheme 3.0 (“SSFS 3.0”) Programme and Syarikat Jaminan Pembiayaan Perniagaan (“SJPP”).
Moving ahead, we will continue to be guided by the principles of value-based intermediation and the Bank’s sustainability agenda for transitioning towards a value-based business model. HLISB planned to provide more value-based finance solutions, support financial inclusion via our Islamic wealth management services, expand the SME and Halal business, upskill our workforce and explore the realm of Islamic social finance.
Overseas Banking Operations
HLB’s regional banking business contributed to 26.1% share of HLB’s PBT in FY2022, bolstered by positive business momentum in the countries of operations. HLB continued to see encouraging loan growth from businesses in Vietnam (39.3% y-o-y) and Cambodia (32.0% y-o-y), and strong profit contributions from BOCD. HLB owned 18% equity interest in BOCD, which contributed to HLB’s PBT of RM1.0 billion or 23.2% share of PBT in FY2022.
For its overseas branches, HLB’s Singapore operation is represented by HL Bank Singapore (“HLBS”) and a branch in Hong Kong (“HLBHK”). In FY2022, HLBS recorded a revenue of RM187 million and its gross loans grew 23% y-o-y to close at RM7.6 billion. The branch’s growth was driven by its ongoing transformation into a more holistic financial services provider, expanding from a niche Private Wealth Management outfit to business financing for the local SMEs and extending PFS products to cover the mass affluent segment. For HLBHK, the businesses were adversely affected by the severe restrictions and social distancing measures amid recurring waves of COVID-19 since January 2022.
In parallel, our overseas franchise continues to invest and develop its digital capabilities to better serve the customers which includes enhanced mobile banking platforms, eKYC for retail customers, payment gateway platform and peer-to-peer instant fund transfer service capability.
INSURANCE/TAKAFUL FINANCIAL & OPERATIONAL REVIEW
HLFG’s 100%-owned subsidiary, HLA Holdings Sdn Bhd (“HLAH”) is the insurance holding company of our insurance division. HLAH holds:
- 70% equity interest in life insurance company Hong Leong Assurance Berhad (“HLA”);
- 65% equity interest in Family Takaful operator Hong Leong MSIG Takaful Berhad (“HLMT”);
- 100% equity interest in Hong Kong general insurance company Hong Leong Insurance (Asia) Limited (“HLIA”);
- 100% equity interest in Singapore general insurance company HL Assurance Pte. Ltd. (“HLAS”); and
- 30% equity interest in general insurance company MSIG Insurance (Malaysia) Bhd (“MSIG”).
In FY2022, HLAH recorded a net profit of RM339.0 million or 14.1% lower as compared to previous year. There was a one-off tax credit item in the prior year results and excluding the impact of this one-off item, the FY2022 net profit would have slightly decreased by 3.1% y-o-y on a normalised basis
HLA, as a life insurer, is the largest operating business within our insurance division, comprising 79.7% of HLAH’s total insurance PBT. HLA’s PBT increased modestly by 0.9% y-o-y to RM314 million in FY2022. The gross premiums slightly increased to RM3.2 billion or 0.8% y-o-y while new business regular premiums (“NBRP”) decreased to RM641 million or 12.6% y-o-y mainly due to lower contribution from agency channels disrupted by movement control restrictions and COVID-19 resurgence. The new business embedded value (“NBEV”) improved by 13.1% y-o-y to RM200 million while embedded value (“EV”) improved by 13.7% y-o-y to RM3.3 billion in FY2022. The improvements in NBEV and EV were driven by the positive impacts from higher long-term MGS rates and refinement in actuarial methodology. HLA’s digital transformation and product re-positioning plans had also contributed to deliver long-term value creation.
Our emphasis on Investment-Linked segment had resulted in a robust growth of 12% y-o-y and recorded premium of RM2.4 billion. Our market ranking in terms of new business for the Investment-Linked segment remained at No. 4 position as at 30 June 2022.
In terms of distribution, HLA continues to focus on building a productive and professional agency force while executing its Bancassurance by leveraging off the distribution network of its sister company HLB’s wide network of branches. The agency channel accounted for more than 70% of the total gross premiums contribution followed by the Banca channel. The total premiums from Banca channel grew modestly to RM686 million in FY2022 compared to RM667 million last year.
HLA’s management expense ratio was 6.0% in FY2022, amongst the lowest in the industry, reflecting its continuing efforts in strategic cost management whilst reinvesting into its digital transformation plans.
HLA has been awarded the coveted Domestic Life Insurer of the Year at the Asian Banking and Finance Insurance Asia Awards 2022 for the 7th consecutive time. During the same period, HLA had also been awarded the Best Life Insurance Company by International Finance Awards 2022 for the 5th time. These awards truly reflected HLA’s steadfast commitment to innovative insurance solutions, comprehensive coverage, and multi-channel distribution, which are the catalysts in delivering excellent customer experience.
Our Family Takaful business, HLMT registered a robust business growth trajectory with a 62% y-o-y increase in its gross contribution to RM544 million in FY2022 and outperformed the industry’s growth of 29%. The improvement in the gross contribution was underpinned by robust agency channel expansion over the past years. HLMT’s industry market share on an annual contribution equivalent basis expanded to 8.4% from 2.2% back in year 2017. In support of the Bantuan Keluarga Malaysia (“BKM”) initiative, HLMT had provided Takaful coverage to more than 200,000 customers under the Perlindungan Tenang Voucher programme, which is a financial assistance scheme by the Government of Malaysia to expand social protection for the lower-income group.
In FY2022, HLMT launched a brand promise campaign which focused on three core values: trust, legacy and dedication. Our brand message on the three core values resonates in the current times as these values connect us and help us to achieve our goals together.
During the year, HLMT was conferred Best Takaful Operator for Malaysia for the 3rd consecutive year by International Business Magazine Awards and Excellence in Takaful Insurance Services award by Global Halal Excellence Awards.
Overseas General Insurance
Our overseas general insurance companies, namely HLIA in Hong Kong and HLAS in Singapore, operate general insurance business focusing on online distribution channels in their digital-led and data-driven business model.
In FY2022, HLAS achieved a solid gross premium growth of 37% y-o-y and its underwriting profit improved 46% y-o-y. In spite of the disruptions from COVID-19, HLAS was able to find opportunities by diversifying its portfolio through continuous development in affinity partnerships to grow the customer database. HLAS is now positioned as an established general insurer in the Singapore market.
HLIA’s gross premium declined by 2% in FY2022 as compared to last financial year. This was mainly due to reduction in economic activities from Hong Kong’s “zero-COVID” policy and international border restrictions. HLIA was able to diversify its business to expand its commercial business portfolio and partly mitigated the adverse impact of border restrictions on its travel related insurance.
INVESTMENT BANKING FINANCIAL & OPERATIONAL REVIEW
HLCB is an investment holding company of the investment banking, stockbroking and asset management business group under HLFG. HLCB’s key operating subsidiary companies are 100%-owned Hong Leong Investment Bank Berhad (“HLIB”), 100%-owned Hong Leong Asset Management Bhd (“HLAM”) and HLAM’s 100%-owned Hong Leong Islamic Asset Management Sdn Bhd (“HLISAM”). HLIB provides a full range of investment banking services encompassing Debt Markets, Equity Markets and Treasury & Markets, while its Stockbroking services are provided through the head office at Menara Hong Leong, branches and several regional hubs across Malaysia. HLAM and HLISAM are fund management, Islamic fund management and unit trust companies offering and managing a broad spectrum of investment solutions through equities, fixed income, money market and multi-assets for segregated customised portfolios, unit trust funds and wholesale funds.
HLCB recorded a PBT of RM97.2 million in FY2022, a decrease of 45.2% y-o-y. The lower profit contribution was mainly attributed to a contraction of 46.7% y-o-y in Bursa Malaysia’s trading volumes that affected HLIB’s stockbroking business; and a weaker performance in the investment banking division that was affected by lower capital market activity and delays in the completion of some mandated deals. The unit trust and fund management business achieved a marginal annual growth rate of 1.8% in PBT to RM25.2 million despite tougher market conditions in FY2022.
HLCB had adopted a prudent approach in respect of the dividend payment and had declared a final dividend of 19.0 sen per share for FY2022 that was 7 sen lower than last year. The total capital ratio of HLCB’s key operating subsidiary, HLIB, remained healthy at 46.4% as at 30 June 2022.
Investment Banking (“IB”)
The Investment Banking business achieved a revenue of RM68.2 million or a decrease of 19.4% y-o-y mainly due to lower market activity and delays in completion of some mandated deals within the current financial year caused by disruptions from the movement restrictions.
Treasury & Markets was the main revenue contributor to the Investment Banking business, accounted for 58.2 % of the total revenue in FY2022. Treasury & Markets revenue fell 17.8% y-o-y to RM39.7 million due to a challenging trading environment affected by the rapid upswing in bond yields.
The Equity Markets performance rebounded with a jump in revenue growth of 47.9% y-o-y, mainly attributed to the improvement in Initial Public Offerings (“IPO”) related deal flows driven by an active IPO space in Malaysia during the financial year. The business had also actively pursued a more diverse range of corporate mandates and opportunities to diversify the income contribution mix under current market conditions.
The Debt Markets revenue fell 60.1% y-o-y and was adversely affected by delays in the completion of some mandated deals within the current financial year caused by disruptions from the movement restrictions.
Moving ahead, Treasury & Markets would continue to diligently manage its bond portfolio and identify trading and/or arbitrage opportunities in what we expect to be a volatile market. Our Debt Markets and Equity Markets divisions shall continue to provide innovative solutions to our customers and look at ways to collaborate in the areas of sustainable investments.
The Stockbroking business of HLIB recorded revenue of RM95.1 million or 41.4% y-o-y reduction mainly driven by lower net brokerage income earned in FY2022. The performance was significantly affected by a much lower trading activity at Bursa Malaysia with traded volumes decreased by 46.7% y-o-y in FY2022. Although a decline was expected in FY2022 following record high traded volumes in FY2021, however the contraction in trading volume had exceeded expectations.
Net Brokerage income contribution from our retail segment had dropped to 73.3% while our institutional business increased to 26.7%. This was in line with the shift in the overall market with retail participation in trading at Bursa Malaysia declining to 29.3% from 36.4% as compared to the previous year. The reduced retail participation during the financial year has led to a lower market share for our stockbroking business.
Moving ahead, our stockbroking business aims to drive new areas of growth with plans to launch a new Shariah trading platform and further enhance its digital trading platform to allow a fully digital account opening experience for our customers.
The unit trust and fund management business operated under HLAM and its subsidiary, HLISAM recorded a PBT of RM25.2 million for FY2022, a marginal growth of 1.8% y-o-y. The improved performance was attributed to the increased net fee income earned from equity funds and fixed income funds with higher average Assets Under Management (“AUM”) of RM3.4 billion (45.0% y-o-y) and RM4.9 billion (61.3% y-o-y) respectively. The improvement was offset by weaker income contribution from the money market funds as the average AUM declined by 36.2% y-o-y to RM7.7 billion following the withdrawal of tax exemption effective 1 January 2022 on the distribution of interest income to non-individual unit holders.
In FY2022, HLAM won an impressive record of 20 individual Refinitiv Lipper Fund Awards for Malaysia Universe and Global Islamic and one Group Award for Best Equity Group - Malaysia Provident, which is a highly coveted award. This marks HLAM’s 5th time winning in the Group Award category for Best Equity - Malaysia Provident.
On 20 April 2022, HLAM launched its first ESG fund, the Hong Leong Global ESG Fund, aiming to provide medium- to long-term capital growth by investing in a globally diversified portfolio of companies with a focus on ESG criteria in the investment process. Moving ahead, HLAM shall continue to work closely with their distributors and customers via the digital platforms and virtual engagements to further build and diversify the AUM base.
At HLFG, we have increased focus in managing Environmental, Social and Governance (“ESG”) and its associated risks under a Group-wide approach. The Group has stepped up its commitment to support the global sustainability agenda and taken further steps to embed the principles and practices of sustainability into our businesses. During the year, we have conducted a group-wide Greenhouse Gas (“GHG”) emissions study, which covered the Company and key operating companies, in line with the GHG Protocol Corporate Accounting and Reporting Standards. Our operating companies, HLA and HLCB have set out their respective sustainability framework to guide and accelerate the sustainability agenda with the objective of delivering sustainability-linked value to stakeholders. We have also developed internal policies taking into consideration of ESG and sustainability best practices that covers the products and services, tax strategy and approach, lending assessment framework, investment policy and investment decisions across our businesses within the Group. Details of our sustainability achievements are set out in our Sustainability Statement.
Looking forward, we expect Malaysia’s economy to remain resilient supported by firm domestic demand, rebound in tourism-related sectors, improvement in the job market and robust growth in external trade surplus.
Nevertheless, we foresee the country’s economic recovery momentum will face external headwinds from a slowing global economy, rising inflationary pressures and the effects of a strengthening US dollar on emerging markets currencies. The Group shall remain cautious and be guarded against emerging risks as we operate amidst a challenging business environment in the new financial year. We shall continue to manage the businesses prudently, advancing on multiple fronts whilst strengthening our foundations for a digitalised and sustainable future.
Last but not least, we would like to take this opportunity to express our gratitude to the Board of Directors for their support and guidance, the management, colleagues and members of staff throughout the HLFG Group for their dedication and commitment.
Our sincere appreciation also goes out to the regulators, government authorities, shareholders, customers and business partners as well as to the community we serve for their continued faith and confidence in Hong Leong Financial Group.
For further information on our subsidiary companies, please refer to: