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A CHALLENGING YEAR FOR MALAYSIAN CAPITAL MARKETS

In the financial year under review, geopolitical tensions and the introduction of US trade tariff created persistent uncertainties on the global economy which resulted in a nuanced performance of Malaysia’s capital markets.

Against this challenging backdrop, Hong Leong Capital Berhad (“HLCB” or “the Group”) posted a net profit of RM58.4 million for the financial year ended 30 June 2025 (“FY2025”), which declined by 40% year-on-year (“y-o-y”). This performance reflects the subdued conditions of the Malaysian capital markets, which was marked by lower deal flows, softer domestic equity and bond markets amidst cautious investor sentiments.

To navigate a market which is filled with challenges and uncertainties, HLCB will remain resolute in strengthening its fundamentals by proactively expanding its distribution network and competitive edge. In FY2025, HLCB further expanded its footprint through the addition of stockbroking trading hubs across the nation as well as expanded its suite of products through collaboration with leading international players. During the year, the Group has also continued to integrate and deepen sustainability into its core strategy and operations, reinforcing its commitment to build a resilient and responsible business.

The Board has proposed a dividend payout of 19 sen per share, amounting to RM46.9 million. Despite moderate earnings, the dividend payout underscores the Group’s confidence in HLCB’s robust financial position and commitment to rewarding our shareholders.

On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements for Hong Leong Capital Berhad for FY2025.

For the financial year under review, global economic growth moderated as a result of an increasingly fragmented global trade environment which was triggered by a rapidly shifting US tariff landscape. The protracted Russia-Ukraine conflict and the regional wars that erupted in the Middle East and South Asia placed additional strain on market confidence and investors’ risk appetite.

Domestically, Malaysia’s GDP growth moderated in first half 2025 with GDP growing by 4.4%, in comparison to 5.1% in the same period last year. However, Malaysia’s economic fundamentals remain strong with domestic demand being the primary anchor of resilience, supported by steady expansion in retail trade and the continued realisation of both domestic and foreign investment projects.

The Malaysian equity market softened during the financial year, with the FBMKLCI declining by 4% to close at 1,533 points on 30 June 2025. This performance marks a reversal from the 16% gain recorded in the prior year and was primarily driven by foreign institutional outflows amid a broader risk-off sentiment towards emerging markets. Similarly, for corporate bonds and Sukuk, notwithstanding the increase in gross issuances, net issuances contracted by 12% implying higher refinancing exercises.

The Group posted a lower net profit of RM58.4 million reflecting weaker gains in equity investments, reduced stockbroking and fund management profitability which was partially mitigated by higher contribution from the investment banking business.

In a year defined by a muted bourse, Hong Leong Investment Bank Berhad’s (“HLIB”) Stockbroking division profitability declined by 28% y-o-y, resulting in a Profit before Tax (“PBT”) of RM36.7 million. This was largely due to a 16% decline in net brokerage income, driven by lower participation from the key segments, both the retail and local institutional of our business. The retail segment was more particularly affected, with traded value declining by 19%, causing a consequential drop in our share of the market to 3.46%. Our focus on international markets yielded stronger results, with the foreign share brokerage segment growing by 31% y-o-y, in line with HLebroking’s strategic direction to expand its access to international stock exchanges. Our unwavering commitment to service excellence and as a key member participant of the retail segment was recognised by the industry when we were named as one of the winners for the Best Retail Equities Participating Organisation – Investment Bank at the Bursa Excellence Awards 2024.

HLIB’s Investment Banking business performed better during the year, delivering a higher PBT of 5% y-o-y to RM21.8 million. This growth was largely driven by the Debt Markets division, which successfully completed several key mandates to achieve a 27% y-o-y increase in revenue. This was further supplemented by better performance from the Treasury & Markets division recording high net interest income through proactive funding cost management and effective portfolio management. The Equity Market division’s performance, however, faced slower deal flows and delayed completion as a result of weak market valuations.

Our fund management arm, Hong Leong Asset Management Berhad’s (“HLAM”), recorded RM10.2 million in PBT, a 49% decrease from the previous year. This was primarily due to lower fund performance fees, an outcome reflective of the subdued market conditions on Bursa Malaysia as compared to the previous year. Nevertheless, HLAM’s Assets Under Management (“AUM”) expanded by 27% y-o-y to RM12.8 billion, bolstered by healthy inflows into our Private Mandates, Money Market and Fixed Income Funds. Notably, our Islamic funds demonstrated strong AUM growth to RM2.2 billion, increasing by 18% y-o-y, cementing our commitment in growing prominence in this key segment of the market. Our commitment to delivering quality was again affirmed by the industry. We were honoured with two prestigious accolades at the LSEG Lipper Fund Awards Malaysia 2025 for our Hong Leong Dividend Fund and Hong Leong Consumer Products Sector Fund.

The Group’s balance sheet and risk metrics remained strong and well supported by solid and healthy asset quality. Our capital remains adequate with total capital ratio of our subsidiary, HLIB, at 40.9% as at 30 June 2025, well above the minimum regulatory requirement of 10.5%.

Our strategic priorities have been and will remain centered on creating sustainable, long-term value for our stakeholders. HLCB focused on enhancing our competitive edge through continuous product and service innovation while expanding our distribution network. To further deepen our role as responsible financial services, the Group will keep building sustainability-linked investments and financing activities.

• Driving Product and Service Innovation

In June 2025, our fund management arm, HLAM, in collaboration with Lombard Odier, a prestigious international private bank with over 225 years of history, launched the Hong Leong All Roads Funds - three multi-asset funds that will be exclusively distributed by Hong Leong Bank Berhad. These funds aim to provide sophisticated investors access to a globally diversified portfolio, stability and risk-managed growth, whether they are conservative, balanced or growth-oriented.

For our equity trading business, we successfully added access to the Tokyo Stock Exchange. Today, HLIB offers our clients access to 10 foreign exchanges across 8 countries through our HLeBroking platform. During the year under review, we also continued to improve users experience by enhancing our Futures system to strengthen portfolio diversification and risk management. As part of this enhancement, we added the Hong Kong Exchanges and Clearing Limited market to our futures offerings. Our strategic emphasis on our affluent and SME client segments, supported by customised products, has started to yield tangible results and positive income growth.

In support of our strategic priorities, the adoption of advanced technologies to modernise our operations and enhance value for our clients is of paramount importance. We have begun embedding Artificial Intelligence (“AI”) into our risk monitoring tools to sharpen our predictive capabilities and strengthen governance, marking the first step of a broader digital transformation agenda, to integrate AI across our business lines to drive operational efficiency, personalise client services and unlock new opportunities for growth.

• Expanding Our Distribution and Enhancing Accessibility

We are committed to continuously improve accessibility of our services to a broader range of investors. In our Stockbroking business, we expanded our physical footprint by establishing new trading hubs in Kuantan in April 2025 and Kota Kinabalu in July 2025, bringing our services closer to our clients in these areas. Today, the Group is present in all the six regions across the nation. In tandem with our focus to improve accessibility, HLIB had availed digital account onboarding to our trading accounts including to our Shariah trading accounts, providing greater convenience for new clients.

In order to have a wider reach of our fund management products, HLAM has partnered with the iFAST digital platform, a leading portal covering Unit Trust and Private Retirement Scheme, to provide seamless and convenient access to our products. HLAM’s funds are also available via a network of non-bank third-party Institutional Unit Trust Advisers.

• Deepening Our Commitment to Sustainability

Sustainability will remain integral as part of our long-term strategic priorities. Our commitment was led and driven by a few key milestones during the year under review. First, our Debt Markets division successfully completed ESG-linked issuances amounting to RM1.1 billion in green bonds/Sukuk and sustainability-linked bonds. We are also intensifying our investments in sustainable bonds, with HLIB increasing its investments in green bonds/Sukuk by 45% y-o-y to a total of RM240.0 million. Additionally, HLIB is one of the first investment bank in Malaysia to offer ESG Share Margin Financing, a dedicated share margin financing for ESG-focused securities listed on Bursa Malaysia.

Reinforcing our support for the nation’s climate-related goals, HLCB achieved a significant milestone by becoming the first investment banking group in Malaysia to be an official signatory to the Partnership for Carbon Accounting Financials. In terms of social contribution, HLCB employees has contributed 281 volunteer hours to CSR initiatives, benefiting 1,053 individuals.

The Group is steadfast in its commitment to upholding the highest standards of corporate governance and integrity. Our Board provides robust oversight through its various committees, ensuring that a comprehensive framework of internal controls, risk management, and compliance is effectively implemented across all business operations.

We maintain a zero-tolerance policy towards bribery and corruption, reinforced by our Code of Conduct and continuous training for all directors and employees. This unwavering commitment to good governance is the bedrock of the trust placed in us by our stakeholders and is fundamental to creating sustainable, long-term value.

Looking ahead, the global economy will embrace slower growth and is adapting to a new era defined by persistent uncertainties, including elevated geopolitical tensions and uncertain US trade policies. Amid this landscape, innovation with the adoption of AI is critical for boosting productivity and creating new markets. Global capital will likely gravitate towards companies and economies that are not just managing current challenges, but are actively harnessing technological transformation to shape the future. The push for Digital Finance will drive greater financial inclusion, via faster, cheaper, higher quality and more transparent financial services.

On the domestic front, the IMF projects Malaysia’s economy to moderate to 4.5% in 2025 and 4.0% in 2026 from the 5.1% recorded last year, as a result of the spillover from external headwinds. Despite this moderation, we see resilience of our capital markets anchored by Malaysia’s solid domestic demand, supported by stable household spending and an improving tourism sector buoyed by initiatives like Visit Malaysia Year 2026. Furthermore, thematic catalysts such as the Johor-Singapore Special Economic Zone, underpinned by the enhanced connectivity of the upcoming Rapid Transit System Link and Malaysia’s growing prominence as a preferred destination for data centres, are set to be major drivers of market activity. These large-scale investments will fuel the debt capital markets through issuance of bonds and Sukuk for project financing, while also creating a pipeline of opportunities for new IPOs and M&A activities.

We are confident that the strategic thrusts undertaken by the Group this year will position us well to navigate the uncertainties of the global economy. Moving forward, we will remain focused on disciplined execution and prudent capital management while harnessing technology to sharpen our competitive edge. A key initiative will be the upcoming launch of a new trading platform for our institutional clients, equipped with algorithmic trading capabilities. By strategically embedding AI into our processes and client solutions, we will use data-driven decision making capabilities to unlock new avenues for growth. Concurrently, we will continue to leverage synergies within the broader Hong Leong Financial Group to broaden our market reach and deliver growth to our businesses and sustainable value to our stakeholders.

I would like to take this opportunity to express my appreciation to the Board of Directors, management and our staff for their stewardship, dedication and diligence. I would also like to express my gratitude to our regulators, government authorities, shareholders, customers, business partners and all other stakeholders for their continued support to the Group.