Hong Leong Bank gets SC nod to issue up to USD300m bonds

Hong Leong Bank gets SC nod to issue up to USD300m bonds
Written by Joseph Chin of theedgemalaysia.com
Thursday, 10 March 2011 18:28


KUALA LUMPUR: HONG LEONG BANK BHD [] has received approval for its proposed issue of up to US$300 million senior unsecured bonds from the Securities Commission.

“The proceeds from the issuance of the senior bonds will be used for working capital and general banking purposes,” it said on Thursday, March 10.

Barclays Bank PLC, The Royal Bank of Scotland plc and Standard Chartered Bank are joint lead managers and bookrunners for the senior bonds.

CIMB Investment Bank Bhd and Hong Leong Investment Bank Bhd have been appointed co-managers.


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Moody's assigns A3 to Hong Leong Bank's proposed notes
Written by theedgemalaysia.com
Thursday, 10 March 2011 11:56


KUALA LUMPUR: Moody's Investors Service has assigned an A3 foreign currency rating to HONG LEONG BANK BHD []’s proposed issue of senior debt notes. The rating outlook is stable.

The ratings agency said on Thursday, March 10 the exact amount of the issuance has yet to be decided.

The notes will represent an unsecured, unsubordinated obligation of Hong Leong Bank. The issuance will be subject to a negative pledge.

Hong Leong Bank’s A3 foreign currency senior unsecured rating is driven by its C-bank financial strength rating (BFSR), which maps to a baseline credit assessment (BCA) of Baa1, as well as the imputed systemic support.

The bank's ratings are underpinned by its: (1) established consumer and middle-market banking franchise (which comprises a well-to-do Chinese community), (2) conservative management, (3) very high levels of capital and liquidity, and (4) efficient operations.

In addition, Moody's notes that the bank's asset quality, while improving, is still moderate when compared with global banks of similar ratings.

The rating also incorporates the inherent market risks.

As the sixth-largest Malaysian bank in terms of assets, Moody's believed that Hong Leong Bank enjoyed a very high probability of systemic support, leading to two notches of uplift for its A2 long-term global local currency (GLC) deposit rating from its Baa1 BCA.

The bank’s long-term senior unsecured foreign currency debt rating is similar to Malaysia's A3 foreign currency bond ceiling.

Hong Leong Bank Q2 net climbs 30pc

HONG Leong Bank Bhd (5819)said its second quarter net profit jump 30 per cent as it made more money in all key businesses.

Net profit for the quarter to December 31 2010 was RM291.4 million compared with RM224.7 million in the same quarter a year ago.

In a statement yesterday, the lender said revenue also rose to RM603.9 million from RM519.4 million before.

This was aided by lending out of its Singapore branch, profit contributions from global markets, the treasury division and Islamic banking arm and loan growth in the auto, property and small and medium sized enterprises.

Group managing director and chief executive Yvonne Chia said on a pre-tax profit basis the quarter's RM360 million profit marks the strongest quarter in the past five financial years.

"We are satisfied that the underlying operations are sound to strongly support the growth opportunities and the bank's track record of sustainably creating shareholder value remains firm, with return on average shareholder funds at 16.4 per cent and annualised earnings per share at 75.5 sen".

The bank has a loan to deposit ratio of 68 per cent, which means it has room to continue growing its loans.

Chia remains optimistic of prospects due to the rebound in economic activities.

For the first six months to December 2010, the lending portfolio for the purchase of residential properties grew 16 per cent while for the purchase of non-residential properties saw an expansion of 15 per cent.

Hong Leong Islamic Bank Bhd, the group's wholly-owned subsidiary, contributed 7 per cent of the Group's pre-tax profits in the first half of the financial year.

Profits from the group's 20 per cent shareholding in Bank of Chengdu Co Ltd. grew 41 per cent year-on-year to RM81 million for the six-month period.

Read more: Hong Leong Bank Q2 net climbs 30pc http://www.btimes.com.my/Current_News/BTIMES/articles/HONRES/Article/#ixzz1ErsFndVQ

One Year Performance of Selected Stocks in KLSE (2)

Credit Suisse says HLB's offer price for EON Cap too low

Tuesday May 18, 2010

Credit Suisse says HLB's offer price for EON Cap too low
By RISEN JAYASEELAN


PETALING JAYA: Credit Suisse Securities (M) Sdn Bhd has deemed Hong Leong Bank Bhd's (HLB) offer price for the assets and liabilities of EON Capital Bhd (EON Cap) too low.

This has put the board of directors of EON Cap in a quandary, sources said. EON Cap's board met yesterday to discuss Credit Suisse's opinion on the offer.

The board had requested for its shares to be suspended from trading, pending an announcement related to the offer.

EON Cap said late yesterday evening that its board meeting had been adjourned “pending further clarification from independent financial adviser Credit Suisse.”

But a party familiar with the deal said with Credit Suisse telling the board that the offer was too low, the board has been put in a tough spot as to what to tell shareholders.

“The board had already said it was going to present the offer to shareholders. Does it now also tell shareholders not to accept the offer?” Sources say the situation is tenuous because HLB has no intention of raising its bid.

From its due diligence of EON Cap, HLB may be inclined to ask EON Cap to make some additional provisioning as a condition to the deal, stemming from what it (HLB) deems as unrecoverable loans.

This could mean that the price HLB is willing to pay for EON Cap may be lower than the RM7.20 per share it last made.

EON Cap is said to be disappointed that HLB has not recognised certain deferred tax assets in its valuation of the former, sources say.

HLB's offer is also priced at around 1.4 times the book value of EON Bank, which some analysts deem as low in light of other banking merger and acquisitions done at higher multiples.

The bottom line is that at present, HLB's offer is the only one on the table for EON Cap's shareholders.

Current market conditions are likely to make it difficult for other bidders, such as Affin Bank Bhd, to raise funds to acquire EON Cap.

If this deal falls through, the next bidder for EON Cap may no longer have the luxury of having a lower threshold of shareholder approval for the deal to go through.

http://biz.thestar.com.my/news/story.asp?file=/2010/5/18/business/6282935&sec=business

Related:
Comparative analysis of Malaysian Banking Stocks (16.5.2010)

A quick look at Hong Leong Bank (15.5.2010)

A quick look at Hong Leong Bank (15.5.2010)
http://spreadsheets.google.com/pub?key=tycFD1BTkA-RNW-zclpXrIw&output=html

Hong Leong's offer undervalues EONCap: Chairman

Hong Leong's offer undervalues EONCap: Chairman
By Chong Pooi Koon
Published: 2010/01/26

EON Capital has sought clarification from Hong Leong 'on a range of details' in its buyout proposal, particularly on the valuation.

EON Capital Bhd (EONCap)(5266), which must decide on Hong Leong Bank Bhd's takeover offer by tomorrow, may try to remove the clause that restricts it from talking to other potential bidders while asking for a higher price.
 EONCap, the smaller of the two banks, said it has yesterday sought clarification from Hong Leong "on a range of details" in its buyout proposal, particularly on the valuation.

"The board (of directors) is evaluating this approach, but on the face of it the offer price significantly undervalues EONCap," chairman Tan Sri Syed Anwar Jamalullail said in a statement yesterday.

Hong Leong, the sixth largest local bank, last Thursday said it will offer RM7.10 cash per share to take over EONCap. The offer priced EONCap at 1.4 times book value, which falls in the lower end of the past valuations range in local banking deals.

Still, many banking analysts feel that the price offered was fair given EONCap's weaker franchise, though others argued that scarcity premiums should be attached as there are not many local lenders left available for a takeover.

Hong Leong has also set strict conditions in its proposal, one of which requires EONCap to deal with it exclusively on the sale.

"In evaluating the Hong Leong Bank offer, we will consider all alternatives open to us in order to fulfil our responsibility to shareholders," Syed Anwar said yesterday.

Meanwhile, EON Banking Group chief executive officer Michael Lor was quoted by Bernama news agency as saying that EONCap's board was also looking into other offers as there were interested parties.

"If there are better opportunities, why not pursue all the alternatives?" he told reporters in Petaling Jaya yesterday. Lor, however, said that he did not know whether other banks had submitted their applications to Bank Negara Malaysia to participate in the negotiations.

EONCap said it had launched a three-year transformation programme in October 2007, which sharply improved the bank's performance despite difficult economic conditions in 2009.

"In the past year, we have seen our transformation programme succeeding. As Malaysia emerges from the economic downturn, EONCap is well positioned for future value creation," Syed Anwar said.

Why may Quek wants EONCap

How high a price Quek is willing to pay for EONCap will depend on how badly he wants to merge the two banking groups.

The biggest attraction for Quek is that a merger between HLBB and EONCap will enable the merged group to compete in an environment where competition is heating up very fast as libersailisation gathers pace.

There is, however, a view that Quek could be bulking up his banking operations domestically for bigger things in time to come.  The merger will immediately raise HLBB to a higher platform, perhaps putting it in a strong position to acquire Public Bank should the opportunity arises, an industry observer notes. 

Be that as it may, banking analysts say Quek has been making some really aggressive moves of late to propel both the Hong Leong Financial Group and Guoco Group to a higher platform regionally.  HLBB has been making inroads into China and Vietnam, and there are rumours it is trying to get into Thailand as well.  HLBB is the only Malaysian bank with a licence to operate a bank in Vietnam.

Quesk's strategy, according to an industry observer, is that for HLBB to become a significant player in the region, it has to be a bigger and stronger domestic player first.  This is more so when under the new Basel 2 framework, financial strength is key.  "This is why he wants scale for HLBB - it will give him the financial muscle to expand regionally... the move to buy EONCap and merge it with HLBB is all part of this bigger picture," he says.

How will Quek pay?

At RM8 a share, HLBB would have to fork out RM5.5 billion for a 100% stake in EONCap, says OSK Research.  The purchase, though, may not be entirely in cash, and could be in the form of equity and cash.