2011 Annual Report - AFFINBANK

Transcription

Flourishing on a Firm Foundation
Annual Report 2011 / Abridged Version
OUR VISION
A Premier Partner for Financial Growth and Innovative Services.
OUR MISSION
To provide innovative financial solutions and services to target
customers in order to generate profits and create value for our
shareholders and other stakeholders.
In so doing, we provide opportunities for employees to contribute
and excel; and be competitive in providing our solutions and
services to our valued customers.
We shall conduct our business with integrity and professionalism in
compliance with good corporate governance principles and
practices.
COVER RATIONALE
The cover design features the theme--Flourishing On A Firm
Foundation--to emphasize the stability of our organization.
The graphic illustration of a fast-growing tree appears on
the cover, and it is firmly anchored by roots that reach deep
down into the ground.
Similarly, our expansion is based on an extremely solid
foundation. The white expanse on the cover symbolizes our
integrity, while the blue portion represents the bright future
that lies ahead of us.
TABLE OF
CONTENTS
2 Corporate Milestone
4 Corporate Structure
5 Corporate Information
6 Board of Directors
8 Profile of Directors
12 Management Team
14 Management Team Profiles
18 Chairman’s Statement
22 Performance Review
25 Financial Highlights
26 Corporate Diary
28 Statement of Corporate Governance
36 Statement on Internal Control
39 Audit & Examination Committee
41 Network of Branches
46 Notice of Annual
General Meeting
47 Financial Statements
1975
• Emergence of Affin
Holdings Berhad as
biggest shareholder of
PHB.
23 OCTOBER
• Incorporation of Perwira
Habib Bank Malaysia
Berhad (PHB).
2
Annual Report 2011
21 APRIL
• Became Perwira Affin Bank
Berhad (PAB) from Perwira
Habib Bank Malaysia
Berhad (PHB) since AFFIN
Holdings has 100%
of PAB.
1999
1994
1992
CORPORATE
MILESTONE
5 APRIL
• Signing of MoU between
PAB & BSN Commercial
Bank (M) Berhad.
30 AUGUST
• Merger of PAB & BSN
Commercial Bank (M)
Berhad signed,
paving formation of new
AFFINBANK.
2006
JANUARY
• AFFINBANK commenced
operations with 110
branches nationwide.
2005
2001
2000
25 APRIL
• Change name of Perwira
Affin Bank Berhad (PAB) to
Affin Bank Berhad
(AFFINBANK).
1 APRIL
• Affin Islamic Bank Berhad
(AFFIN ISLAMIC)
commenced its
operations.
JUNE
• Merger with Affin-ACF
Finance Berhad.
• Introduction to the new
logo and tagline - ‘Banking
Without Barriers’
AFFIN BANK BERHAD (25046-T)
3
CORPORATE
STRUCTURE
ABB Trustee Berhad **
100%
ABB Nominee (Tempatan)
Sdn. Bhd.
100%
PAB Properties Sdn Bhd
100%
Affin-ACF Holdings Sdn. Bhd.
100%
Affin Recoveries Berhad
100%
Affin-ACF Capital
Sdn. Bhd.
Affin Factors Sdn Bhd #
100%
35.33%
LEMBAGA TABUNG ANGKATAN TENTERA
Lembaga Tabung
Angkatan Tentera
ABB Nominee (Asing)
Sdn Bhd #
AXA Affin Life Insurance
Berhad
100%
51%
ABB IT & Services Sdn Bhd. #
100%
Affin Futures
Sdn. Bhd. #
100%
AXA Affin General Insurance
Berhad ***
BSNCB Nominees (Tempatan)
Sdn. Bhd. #
33.6%
100%
20.69%
AFFIN-ACF Nominees
(Tempatan) Sdn. Bhd. #
100%
Boustead Holdings Berhad
Affin Holdings Berhad
Affin Bank Berhad
Affin Islamic Bank Berhad
100%
100%
AFFIN-i Nadayu Sdn. Bhd. ##
(formerly known as AFFIN-i Goodyear Sdn Bhd)
50%
23.52%
Affin Capital Sdn. Bhd.
Bank of East Asia Limited*
ABB Venture
Capital Sdn Bhd. #1
100%
100%
ABB Asset Management
(M) Berhad #1
100%
BSNC Nominees (Tempatan)
Sdn. Bhd. #1
Affin-ADB Sdn. Bhd.
100%
100%
OTHERS
PAB Property Development
Sdn. Bhd. #1
20.46%
100%
PAB Property Management
Services Sdn. Bhd. #1
100%
Affin Money Brokers
Sdn. Bhd.
BSN Merchant Nominees (Asing)
Sdn. Bhd. #1
100%
100%
BSN Merchant Nominees
(Tempatan) Sdn. Bhd.
100% (strike-off w.e.f. 6.9.2012)
UBB Trustee (Malaysia) Berhad ***
#
##
**
***
1.
Dormant
AFFIN-i Nadayu Sdn Bhd is jointly owned by
Affin Islamic Bank Berhad and Jurus Positif
Sdn Bhd with a 50-50 ownership
80% held by Directors of Affin Bank Berhad
in trust for Affin Bank Berhad
Associates
In members’ voluntary
winding-up
20%
Affin Investment Bank
Berhad
Affin Fund Management Berhad
100%
100%
Affin Nominees
100%
Affin Nominees
(Asing) Sdn. Bhd.
100%
Classic Precision
Sdn. Bhd.
67%
Merchant Nominees
(Asing) Sdn. Bhd. 1
100%
Merchant Nominees
1
4
Annual Report 2011
100%
CORPORATE
INFORMATION
NAME
Affin Bank Berhad (Co. No.: 25046-T)
DATE OF INCORPORATION
23 October 1975
PRINCIPAL ACTIVITIES
Affin Bank Berhad is principally involved in the carrying out of
banking and finance related services. The Bank has seventeen
(17) subsidiary companies and three (3) associate companies
which are principally engaged in property management
services, nominees services, trustees management services
and factoring services.
BOARD OF DIRECTORS
Chairman
YBhg. Jen Tan Sri Dato' Seri Ismail bin Hj. Omar (Bersara)
(Non-Independent Non-Executive Director)
Mr. Lee Chor Kee
(Alternate Director to Mr. Stephen Charles Li)
(Appointed as Alternate Director w.e.f. 18.4.2011
and resigned as Alternate Director w.e.f. 16.8.2011)
Encik Mohd Suffian bin Haji Haron
(Independent Non-Executive Director)
YBhg. Tan Sri Dato’ Seri Mohamed Jawhar bin Hassan
(Appointed as Director w.e.f. 1.11.2011)
Managing Director/Chief Executive Officer
YBhg. Dato' Zulkiflee Abbas bin Abdul Hamid
SECRETARIES
Nimma Safira binti Khalid
Azizah binti Shukor (Resigned as Joint-Company Secretary
w.e.f. 12.1.2012)
REGISTERED OFFICE
Directors
YBhg. Dato’ Zulkiflee Abbas bin Abdul Hamid
(Non-Independent Executive Director)
(Resigned as Director w.e.f. 1.11.2011)
17th Floor, Menara AFFIN,
80, Jalan Raja Chulan,
50200 Kuala Lumpur.
Tel.: 03-2055 9000 Fax.: 03-2026 1415
YBhg. Tan Sri Dato’ Lodin bin Wok Kamaruddin
AUTHORISED SHARE CAPITAL
YM. Dr. Raja Abdul Malek bin Raja Jallaludin
YBhg. Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli
bin Mohd Nor (Bersara)
YBhg. Dato Sri Abdul Aziz bin Abdul Rahman
Mr. Aubrey Li Kwok-Sing
Mr. Brian David Li Man-Bun
(Alternate Director to Mr. Aubrey Li Kwok-Sing)
(Resigned as Alternate Director w.e.f. 18.4.2011)
No. of shares
2,000,000,000
Par value
RM1.00
Total
RM2,000,000,000
ISSUED AND PAID-UP SHARE CAPITAL
No. of shares
1,439,285,382
Par value
RM1.00
Total
RM1,439,285,382
SUBSTANTIAL SHAREHOLDER
Mr. Gary Cheng Shui Hee
(Alternate Director to Mr. Aubrey Li Kwok-Sing)
(Appointed as Alternate Director w.e.f. 18.4.2011)
Mr. Stephen Charles Li
No. of shares
Affin Holdings Berhad 1,439,285,382
EXTERNAL AUDITORS
PricewaterhouseCoopers (AF 1146)
Mr. Eric Koh Thong Hau
(Alternate Director to Mr. Stephen Charles Li)
(Resigned as Alternate Director w.e.f. 1.1.2011)
5
BOARD OF
DIRECTORS
from left to right:
1.
YBHG. JEN. TAN SRI DATO’ SERI ISMAIL BIN HAJI
OMAR (BERSARA)
Chairman
Non-Independent Non-Executive Director
2.
YBHG. DATO’ ZULKIFLEE ABBAS BIN ABDUL HAMID
Managing Director/ Chief Executive Officer
3.
YBHG. DATO’ SRI ABDUL AZIZ BIN ABDUL RAHMAN
Independent Non-Executive Director
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Annual Report 2011
4.
YM. DR. RAJA ABDUL MALEK BIN RAJA
JALLALUDIN
5.
YBHG. LAKSAMANA MADYA TAN SRI DATO’ SERI
AHMAD RAMLI BIN MOHD NOR (BERSARA)
from left to right:
6.
MR. AUBREY LI KWOK-SING
7.
MR. STEPHEN CHARLES LI
8.
EN. MOHD. SUFFIAN BIN HAJI HARON
9.
YBHG. TAN SRI DATO’ SERI MOHAMED JAWHAR
BIN HASSAN
10. YBHG. TAN SRI DATO' LODIN BIN WOK
KAMARUDDIN
7
PROFILE OF DIRECTORS
YBHG. JEN. TAN SRI DATO’ SERI ISMAIL BIN HJ. OMAR
(BERSARA)
Chairman / Non-Independent Non-Executive Director
YBHG. DATO’ ZULKIFLEE ABBAS BIN ABDUL HAMID
Managing Director / Chief Executive Officer
Jen. Tan Sri Dato' Seri Ismail bin Hj. Omar (Bersara), aged 71,
was appointed as a Director and Chairman of AFFINBANK on
21 May 2002.
Dato’ Zulkiflee Abbas bin Abdul Hamid aged 55, was appointed
the Managing Director/Chief Executive Officer on 1 April 2009.
He was formerly Chief Defence Forces (CDF) Malaysia from 1995
until his retirement in 1998, after 38 years of military service.
He graduated from Royal Military Academy, Sandhurst, United
Kingdom in 1961 and subsequently attended professional and
management development courses at several institutions
including The Land Forces Command and Staff College, Canada;
the United Nation International Peace Academy, Vienna; the
National Defence College, India and INTAN Malaysia.
Prior to joining AFFINBANK, Dato’ Zulkiflee Abbas was the Chief
Credit Officer in one of Malaysia’s leading banks where he also
served in various positions in the bank’s subsidiaries including as
a board member. He graduated with a Master in Business
Administration from the Southern Illinois University, United States
of America. Dato’ Zulkiflee Abbas joined AFFINBANK in March
2005 as Director, Enterprise Banking. He was later made the
Director of Business in 2007 and subsequently the Executive
Director, Banking in 2008 before assuming his current position.
His military service saw Key Command and Staff appointments at
all levels of the Armed Forces. As CDF, his responsibilities
included key roles in Malaysia’s Regional and International
Defence Relations.
Dato’ Zulkiflee Abbas has more than 30 years of extensive
experience in the banking sector. He posseses the necessary
knowledge and professional competence in the conduct of the
licensed institution’s business.
Tan Sri was Chairman of Affin Holdings Berhad and Affin-ACF
Finance from 1999 prior to joining AFFINBANK. He currently holds
directorships in Affin Islamic Bank Berhad, ABB Trustee, EP
Engineering Sdn Bhd and Global Medical Alliance Sdn Bhd.
Dato’ Zulkiflee Abbas bin Abdul Hamid attended all
17 Board Meetings held during the financial year ended
31 December 2011.
Tan Sri Ismail displays strong board chair leadership as he sets the
Board’s tone, direction and culture. Tan Sri Ismail creates the
appropriate environment to allow for full engagement by all
members of the Board for effective Board discussions and
decision making. Tan Sri Ismail possesses a high level of
leadership experience to lead effective Board oversight function.
Jen. Tan Sri Ismail bin Hj Omar attended all 17 Board Meetings
held during the year ended 31 December 2011.
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Annual Report 2011
Profile Of Directors
(cont’d)
YBHG. TAN SRI DATO' LODIN BIN WOK KAMARUDDIN
YM. DR. RAJA ABDUL MALEK BIN RAJA JALLALUDIN
Tan Sri Dato' Lodin bin Wok Kamaruddin, aged 63, was
re-appointed to the Board of Directors of AFFINBANK on
4 October 2010. He was appointed as the Managing Director of
Affin Holdings Berhad in February 1991 and redesignated as
Deputy Chairman on 1 July 2008.
Dr. Raja Abdul Malek bin Raja Jallaludin, aged 66, was appointed
to the Board of Directors of AFFINBANK on 29 January 1991.
Tan Sri Dato’ Lodin has vast business and management
experience pursuant to his various positions held in Lembaga
Tabung Angkatan Tentera (“LTAT”) Group of Companies. He is the
Chief Executive of LTAT and the Deputy Chairman / Group
Managing Director of Boustead Holdings Berhad. Prior to joining
LTAT, he was the General Manager of Perbadanan Kemajuan
Bukit Fraser for 9 years. Tan Sri Lodin is also the Chairman of
Boustead Heavy Industries Corporation Berhad, Boustead Naval
Shipyard Sdn Bhd, Boustead Petroleum Marketing Sdn Bhd,
Boustead REIT Managers Sdn Bhd, Johan Ceramics Berhad and
1Malaysia Development Berhad and also sits on the Boards of
UAC Berhad, The University of Nottingham in Malaysia Sdn Bhd,
Minority Shareholder Watchdog Group, Atlas Hall Sdn Bhd, Affin
Islamic Bank Berhad, Affin Investment Bank Berhad and AXA
Affin Life Insurance Berhad.
He graduated from the University of Toledo, Ohio, USA with a
Bachelor of Business Administration and a Master of Business
Administration Degree.
Tan Sri Dato’ Lodin attended all 17 Board Meetings held during
the financial year ended 31 December 2011
He graduated as a doctor from the University of Malaya in 1972
and, early in his career, worked at the General Hospital, Kuala
Lumpur and the Faculty of Medicine, UKM. In late 1975, he went
into private medical practice and became a senior partner of
Drs. Catterall, Khoo, Raja Malek & Partners until 2003 when he
resigned from the firm. Professionally he is widely experienced and
had served in various peer and academic activities. Amongst
others, he had been a clinical tutor in the Faculty of Medicine,
UMMC; been a member of the Ethical Committee of the Malaysian
Medical Council, MOH; was the Chairman of Council Academy of
Family Physicians, Malaysia.
Dr. Raja Abdul Malek also has vast experience in the
pharmaceutical world and had actively been involved since 1984.
He had been the Medical Director (Malaysia-Singapore) for Parke
Davis-Warner Lambert from 1984-2000, and had remained briefly
so too with Pfizer Malaysia when these two Incorporations
merged in 2001. In 2003, Dr. Raja Abdul Malek joined
HOE/Pharmaceuticals/HOEPharma Holdings Bhd as the Director
of Medical and Scientific Affairs and holds this position to this day.
His other directorship in public and private companies include ABB
Trustee Berhad. He is also a member of the Advisory Panel of StemLife
Berhad and Hartamanis Holding Sdn. Bhd.
Notwithstanding his tenure of 20 years with AFFINBANK, Dr. Raja
Abdul Malek continues to demonstrate independence of judgment
and objectivity in both his actions and thoughts.
Dr. Raja Abdul Malek possesses certain personal qualities such
as incisiveness which brings diversity and different perspective in
Board decision-making that could further balance and strengthen
the Board as a whole.
Dr. Raja Abdul Malek bin Raja Jallaludin attended all 17 Board
Meetings held during the financial year ended 31 December 2011.
9
(cont’d)
YBHG. LAKSAMANA MADYA TAN SRI DATO’ SERI AHMAD
RAMLI BIN MOHD NOR (BERSARA)
MR. AUBREY LI KWOK-SING
Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor, aged 68, was
appointed to the Board of Directors of AFFINBANK on 21 May 2002.
He resigned as Director with effect from 30 September 2011.
Mr. Aubrey Li Kwok-Sing, aged 62, was appointed to the
Board of Directors of AFFINBANK on 17 March 2008. He is a
Director of The Bank of East Asia, Limited and Chairman of
MCL Partners Limited.
Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor sits on the Board of
Affin Islamic Bank Berhad.
Tan Sri Dato’ Seri Ahmad Ramli during his tenure attended
all 14 Board Meetings held for the period January to September
2011.
YBHG. DATO' SRI ABDUL AZIZ BIN ABDUL RAHMAN
Dato' Sri Abdul Aziz bin Abdul Rahman, aged 66, was appointed
to the Board of Directors of AFFINBANK on 28 January 2003.
Dato’ Sri Abdul Aziz graduated with a Bachelor of Commerce
from University of New South Wales, Sydney, Australia. He is
member of the Malaysian Institute of Certified Public Accountants
(MICPA) and the Malaysian Institute of Accountants (MIA).
He has served as Chairman and board member of several
government institutions, agencies and public listed companies,
both in Australia and Malaysia.
At the corporate level he was with Price Waterhouse & Co.
Sydney, Malaysia Airlines and Managing Director of Bank Rakyat
Bhd before venturing into politics and public service as the
Pahang State Assemblyman, State Executive Councillor and
Deputy Chief Minister of Pahang. He was a Senator of Malaysian
Parliament for a maximum period of two (2) terms.
Presently he is a Board member of Affin Islamic Bank Berhad, the
International Islamic University Malaysia, University Malaysia
Pahang and their associated holding companies.
Dato’ Sri Abdul Aziz’s expertise and knowledge carries across a
broad spectrum relating to finance and accounting. His standing in
the community contributes effectively to his role as an Independent
Director particularly in meeting various stakeholders expectation.
Dato' Sri Abdul Aziz bin Abdul Rahman attended 16 out of
17 Board Meetings held during the financial year ended
31 December 2011.
10
Annual Report 2011
Mr. Aubrey Li possesses extensive experience in investment
banking, merchant banking and capital markets. He is also a
Director of Café de Coral Holdings Limited, China Everbright
International Limited, Kunlun Energy Limited, Kowloon
Development Co. Ltd, Pokfulam Development Company
Limited, Tai Ping Carpets International Limited, Atlantis
Investment Management (Ireland) Limited and Dalton Capital
(Guernsey) Limited.
Mr. Aubrey Li brings in related knowledge and experience in
the banking fields, business development and strategy which
are considered to be a value in achieving AFFINBANK’s
business objectives.
Mr. Aubrey Li Kwok-Sing attended 6 out of the 17 Board
Meetings held during the financial year ended 31 December
2011.
Mr. Aubrey Li’s Alternate Director, Mr Gary Cheng, appointed
with effect from 18 April 2011 and had during his tenure
attended 5 out of 10 Board Meetings held for the period April
to December 2011.
(cont’d)
MR. STEPHEN CHARLES LI
YBHG. TAN SRI DATO’ SERI MOHAMED JAWHAR
BIN HASSAN
Mr. Stephen Charles Li, aged 52, was appointed to the Board of
Directors of AFFINBANK on 17 March 2008. Mr. Li is a Director of
The Bank of East Asia, Limited. He resigned as Director with effect
from 16 August 2011.
Tan Sri Dato’ Seri Mohamed Jawhar, aged 68, was appointed as
a Director of AFFINBANK on 1 November 2011.
Mr. Stephen Charles Li during his tenure attended 5 out of 12
Board Meetings held for the period January to August 2011.
Mr. Stephen Charles Li’s Alternate Director, Mr. Lee Chor Kee,
appointed with effect from 18 April 2011, had during his tenure
attended 1 out of 6 Board Meetings held for the period April to
August 2011. Mr. Lee resigned as Alternate Director with effect
from 16 August 2011.
EN. MOHD SUFFIAN BIN HAJI HARON
Encik Mohd Suffian bin Haji Haron aged 66, was appointed to the
Board of Directors of AFFINBANK on 15 August 2009.
He graduated with a Bachelor of Economics from University of
Malaya (1970) and holds a Master of Business Administration
from University of Oregon in the United States (1976).
His current directorships in public companies include, Affin Islamic
Bank Berhad, L.K. & Associates Sdn Bhd, Idaman Pharma
Manufacturing Sdn Bhd and Pharmaniaga Berhad.
Encik Mohd Suffian brings a diverse professional experience to
the Board. His background provides the necessary independence
to the Board and add value by drawing on his experience and
contributing to the Board’s decision-making process.
Encik Mohd Suffian attended 16 out of the 17 Board Meetings
held in the financial year ended 31 December 2011.
His other positions include: Independent Non-Executive Director,
Affin Islamic Bank Berhad; Chairman ISIS Malaysia,
Non-Executive Chairman, New Straits Times Press (Malaysia)
Berhad; Member of Securities Commission Malaysia; Member,
Advisory Board, Malaysian Anti-Corruption Commission;
Distinguished Fellow, Institute of Diplomacy and Foreign Relations
(IDFR); Board Member, Institute of Advanced Islamic Studies
(IAIS); Chairman, Malaysian National Committee of the Council for
Security Cooperation in the Asia Pacific (CSCAP); and Member,
International Advisory Board, East West Center, USA. He is also
Expert and Eminent Person for the ASEAN Regional Forum (ARF).
He was also Co-Chair, Network of East Asia Think-tanks (NEAT)
2005-2006; Chairman, Malaysian National Committee, Pacific
Economic Cooperation Council (PECC) 2006-2010; and
Co-Chair, Council for Security Cooperation in the Asia Pacific
(CSCSP) 2007-2009.
He served with the government before he joined ISIS Malaysia as
Deputy Director-General in 1990, Director-General in March 1997 and
was subsequently appointed Chairman and CEO in 2006. He was
appointed Chairman ISIS Malaysia on 9 January 2010.
His positions in government included Director-General,
Department of National Unity; Under-Secretary, Ministry of Home
Affairs; Director (Analysis) Research Division, Prime Minister’s
Department; and Principal Assistant Secretary, National Security
Council. He also served as Counselor in the Malaysian Embassies
in Indonesia and Thailand.
His appropriate leadership skills and vast experience are useful to
the Board to gain a wider and forward looking perspective on
decision making.
Tan Sri Dato’ Seri Jawhar during his tenure attended 1 out of 2 Board
Meetings held for the period November to December 2011.
11
12
Annual Report 2011
MR. TAN KOK TOON
Director, Treasury
EN. SHARIFFUDIN BIN MOHAMAD
Executive Director, Operations
MR. EE KOK SIN
Chief Financial Officer
YBHG. DATO' ZULKIFLEE ABBAS BIN ABDUL HAMID
EN. AMIRUDIN BIN ABDUL HALIM
Director, Business Banking
PN. KHATIMAH BINTI MAHADI
Group Chief Internal Auditor
MANAGEMENT
TEAM
13
YBHG. DATO' MOHAMAD ASLAM KHAN GULAM HASSAN
Chief Recovery Specialist
EN. IDRIS BIN ABD. HAMID
Director, Consumer Banking
PN. NOR ROZITA NORDIN
Chief Human Resource Officer
EN. KAMARUL ARIFFIN BIN MOHD. JAMIL
Chief Executive Officer, Affin Islamic Bank Berhad
MR. KASINATHAN T. KASIPILLAI
Group Chief Risk Officer
EN. NAZLEE KHALIFAH
Chief Corporate Strategist
MANAGEMENT TEAM
PROFILES
YBHG. DATO' ZULKIFLEE ABBAS BIN
ABDUL HAMID
Dato’ Zulkiflee Abbas bin Abdul Hamid, 55
years old, currently holds the position of
of AFFINBANK since 1 April 2009.
He joined AFFINBANK in March 2005 as
Director, Enterprise Banking and later on
was made Executive Director, Banking
before assuming his current position.
Dato’ Zulkiflee has been in the banking
industry for almost 30 years. He started in
a local leading bank, working his way up
through various ranks and responsibities
at home and abroad. He left in 2005 while
he was the Chief Credit Officer.
Under his current portfolio, Dato’ Zulkiflee
also holds directorships in Affin Investment
Bank Berhad and Affin Islamic Bank
Berhad
Dato’ Zulkiflee holds a Masters in Business
Administration from Southern Illinois
University, United States of America, the
same university of which he obtained his
Bachelor of Science (Marketing).
14
Annual Report 2011
EN. SHARIFFUDIN MOHAMAD
Executive Director, Operations
EN. KAMARUL ARIFFIN MOHD JAMIL
Chief Executive Officer, Affin Islamic Bank
Berhad
Kamarul Ariffin Mohd Jamil is the Chief
Executive Officer of Affin Islamic Bank
Berhad (AFFIN ISLAMIC) since 2006.
He joined AFFINBANK in 2003 as Head,
Corporate Strategy Division and in 2005
was appointed as Head, Islamic Banking
Division.
His appointment to his current position
was in 2006 when AFFIN ISLAMIC was
incorporated
as
a
wholly-owned
subsidiary of AFFINBANK.
Prior to AFFINBANK, Kamarul held various
positions in Pengurusan Danaharta
Nasional Berhad, namely Head of
Managing Director's Office and Special
Assistant to Managing Director between
1999 to 2003.
Kamarul graduated from the University of
Cambridge in 1992 with a Bachelor of Arts
(Economics).
Shariffudin Mohamad is the Executive
Director, Operations of AFFINBANK.
He joined AFFINBANK as the Director,
Operations in August 2007 and was
appointed to his present position effective
1 November 2009.
While he was the Director, Operations, he
was also the Chief Corporate Strategist
and Chief Human Resource Officer.
Currently, he oversees the Operations
Division
encompassing
Branch
Operations, Information Technology,
Property and Logistics, Strategic and
Support Services including Customer
Fulfillment,
Legal
and
Corporate
Communications.
He brings with him over two decades of
banking experience with a well-known
international financial institution and its
acclaimed global outsourcing outfit.
He graduated with a Bachelor in Finance
and a Master in Business Administration
from Southern Illinois University, United
States of America.
Management Team Profiles
(cont’d)
MR. TAN KOK TOON
Director, Treasury
EN. AMIRUDIN ABDUL HALIM
Director, Business Banking
Amirudin Abdul Halim joined AFFINBANK
as Director, Business Banking in July
2009.
He brings with him over 20 years of
banking experience across many fields
within the industry from credit control,
branch operations, business and
consumer banking to corporate services.
Amirudin served in several senior
capacities during his long-term tenure with
a local leading bank and brought
recognition to the bank in 2007 when it
received The Asian Banker's 'Excellence
in Retail Financial Services for Automobile
Lending'.
He graduated with a Bachelor of Arts
degree in Finance from St. Louis
University, United States of America.
He has attended various programmes by
Stamford University, Wharton Business
School, Washington University and Asian
Institute of Management, Philippines.
EN. IDRIS ABD. HAMID
Director, Consumer Banking
Idris Abd Hamid has over 30 years of
experience in the banking and finance
industry. His career with AFFINBANK
began in 1994 when he was the General
Manager for Affin Finance Berhad and he
was later made Deputy Chief Executive
Officer for AFFIN-ACF Finance Berhad
from 2000 to 2005.
Prior to joining AFFINBANK, Idris held
various positions at Arab-Malaysian
Finance (currently known as AmBank)
from 1984 to 1994 as Branch Manager,
Assistant Manager Corporate Loans and
Head of Consumer Loans Division. He
graduated from the University of Northern
Colorado and Southern Illinois University,
USA with Masters in Business
Administration and Bachelor of Science in
Finance respectively.
Tan Kok Toon (KT) completed his Bachelor
of Science (Hons) in Mathematics from
Universiti Malaya in 1987.
He joined AFFINBANK as Head of
Treasury in October 2004 and is
responsible for managing all aspects of
Treasury Division across the Group which
includes Affin Islamic Bank Berhad and
Affin Investment Bank Berhad. He is the
current Honorary Secretary, Persatuan
Pasaran Kewangan Malaysia (Association
Cambiste Internationale) and the
Chairman to its Seminar and Education
Committee.
Prior to AFFINBANK, KT worked in one of
the largest banks in Malaysia. For more
than 18 years, he served in various
capacities of Treasury operations, such as
Treasury Manager with the Bank’s New
York branch and as Treasury Business
Advisor to turnaround a business project
in the Philippines. KT is also the president
of Kelab Sukan dan Rekreasi AFFINBANK.
15
(cont’d)
MR. EE KOK SIN
Chief Financial Officer
Ee Kok Sin began his career in 1982 as a
Trainee Accountant with a firm of
Chartered Accountants in London. He has
extensive experience in auditing, treasury
functions, financial accounting, financial
management and information technology.
Prior to his appointment at AFFINBANK,
he was the General Manager, Finance &
Services of Pengurusan Danaharta
Nasional Berhad. He is a Fellow Member
of the Association of the Chartered
Certified Accountants (FCCA) and a
member of The Malaysian Institute of
Certified Public Accountants (MICPA) and
Malaysian Institute of Accountants (MIA).
16
Annual Report 2011
MR. KASINATHAN T. KASIPILLAI
Group Chief Risk Officer
Kasinathan holds a Masters in Business
Administration from the University of Bath,
UK and is a Certified Risk Professional
awarded by Bank Administration Institute,
Chicago, USA. He is also an Associate
Fellow of Institute of Bankers Malaysia.
This is in recognition of his pioneering work
in developing the Certified Credit
Professional
(CCP)
certification.
He continues to serve as an active
member of CCP Examination Committee
to this day. He has over 30 years of local
and overseas banking experience
particularly in the area of Risk
Management. He comes from a foreign
bank background having earlier worked in
the risk function of that bank in a number
of countries including London, Singapore,
Hong Kong, Mumbai and Jakarta.
PN. KHATIMAH MAHADI
Group Chief Internal Auditor
Khatimah Mahadi has 30 years of
experience in Internal Auditing including 23
years in financial services with Citibank
Berhad, a development bank and a
finance company. In addition, she also had
a stint with a local bank, Lembaga
Pasaran dan Perlesenan Getah and
Auditing/Consulting Firm Hanafiah, Raslan
& Mohamad. She was also the Director of
Compliance and Country Internal Audit
Head when she was with Citibank Berhad.
(cont’d)
EN. NAZLEE KHALIFAH
Chief Corporate Starategist
YBHG. DATO' MOHAMAD
ASLAM KHAN GULAM HASSAN
Chief Recovery Specialist
Dato' Mohamad Aslam Khan holds a
Bachelor's
Degree
in
Business
Administration with honours. He joined
AFFINBANK in 1996 as the General
Manager of Commercial Banking Division
and was later appointed the Head of
Special Asset Management. He has held
various positions domestically and
internationally both in the business and
business support divisions. Dato' Aslam
has over 35 years of banking experience.
Prior to AFFINBANK, he held various
positions at Maybank for 21 years. His last
position there was the General Manager of
Maybank in New York. He also had a fiveyear stint with the former Oriental Bank as
the General Manager, Enterprise Banking
Division.
PN. NOR ROZITA NORDIN
Chief Human Resource Officer
Puan Nor Rozita Nordin was appointed as
Chief Human Resource Officer of
AFFINBANK on 1 May 2011.
Prior to that, she was the Executive VicePresident and Head of Group Human
Resource at EON Bank Group (which
comprises EON Bank Berhad, EONCap
Islamic Bank Berhad and MIMB
Investment Bank Berhad).
Nazlee Khalifah was appointed to the post
of Chief Corporate Strategist in April 2011.
Prior to the appointment, he served as
Head, Business Strategy & Support,
Business Banking since joining the Bank
in February 2009. Before joining
AFFINBANK in February 2009, he was
employed in various capacity in Maybank
especially in Planning and Strategic
Management. He holds a Bachelor of
Business Administration majoring in
Accounting and Finance from Simon
Fraser University, Vancouver, Canada.
She has more than 28 years of extensive
working experience in Human Resource
Development and Customer Relations
Strategy from various industries (Banking
& Finance, Shared Services, Automotive
Retail and Manufacturing, Insurance and
Healthcare). She has served strategic roles
in the areas of Performance and Human
Capital Development, Compensation and
Benefits, Manpower Planning and
Recruitment,
Industrial
Relations,
Employee
Engagement,
Customer
Relationship Management and Analytics,
Contact Centre Management and Target
Marketing, both in national and
multinational corporations.
She holds a Master of Science
degree,
Bachelor
of
Science
(Education) and Bachelor of Arts
(Linguistics) degrees from Southern
Illinois University at Carbondale, USA.
17
CHAIRMAN’S
STATEMENT
Dear Shareholders,
On behalf of the Board of Directors, I am pleased to present the
Annual Report and Audited Financial Statements of Affin Bank
Berhad (AFFINBANK) for the financial year ended 31 December 2011.
18
Annual Report 2011
Chairman’s Statement
(cont’d)
Despite the challenging market environment in 2011, I am pleased to report that we have
chalked up another profitable year, with a profit before taxation and zakat attributable to
shareholders that grew impressively by 17.5% to RM613.1 million from RM521.9 million.
AFFINBANK’s success can be attributed to the Bank’s transformation effort through
various activities such as branch expansion, relocation, product innovation, aggressive
marketing, prudent lending policies, strong risk management practice and efficient
customer services.
During the year, we continued to grow organically in Malaysia. We embarked on a reform
programme by relocating four branches to more vibrant commercial vicinities and opened
6 new branches, which has contributed to the growth and profitability of the Bank.
+17.5%
Profit Before Taxation & Zakat
+14.2%
Loan Growth
We also invested on human capital i.e. training and developing of existing staff as well as
new recruitment. We introduced new products and campaigns and improved our
customer touchpoints to ensure excellent and efficient customer service. At the same
time, we continued to improve on our risk management practices to be abreast with the
prevailing economic climate.
The Bank’s lending activities remained focused on consumer financing and small medium
enterprises. During the year the Bank’s total gross loan grew by 14.2%, with hire
purchase, home mortgage segment and SME financing contributing to the growth. This
loan growth is equally matched with a strong growth in customer deposits. The Bank
recorded an increase of 18.0% in its customer deposit portfolio, which subsequently
increased the Bank’s total deposit portfolio from 19.7% in 2010 to 23.5% in 2011.
The Bank’s asset quality remained resilient and is reflected by the lower net impaired
loan from 2.02% in 2010 to 1.31% in 2011.
Our strong financial performance has enabled us to recommend a final tax exempt
dividend of 5 sen per share for the year under review. Together with the interim
single-tier dividend of 7 sen paid on 28 December 2011, the total dividend payout
for the 2011 financial year would amount to 12 sen per share or RM172.7 million.
19
(cont’d)
+18.0%
Customer Deposits Growth
As the Bank continues to forge ahead in our business operations and growth, we have
not forgotten our role as a corporate citizen. We continued to participate in our
stakeholders’ activities by sponsoring the annual ‘Hari Pahlawan’ and contributing to the
Armed Forces for its ‘Bungkusan Hari Raya’ and its Yayasan Warisan Perajurit to fund its
education activities for the Armed Forces personnel and children. The Bank also took
part in a school programme called ‘Young Voices for Conservation’ with TrEES (Treat
Every Environment Special Sdn Bhd), a non-government organization. 15 primary
and secondary schools within Klang Valley and Putrajaya took part in this unique
conservation community programme with the Forestry Department of Selangor and the
Selangor Water Management Agency as partners and approved by the Ministry
of Education.
The Bank also continued to be the sole official Bank at the 2011 LIMA, held every two
years in Langkawi to demonstrate its continuous commitment to its stakeholders and in
support of national interest. It also took part in The GLC Open Day which served as an
avenue to educate the public on the roles and contributions of government-linked
companies (GLC) in the economy.
Looking ahead, the year 2012 is going to be quite challenging for the Malaysian banking
industry. Although the prospects for the global economy in the months ahead are
uncertain, we remain optimistic about economic prospects in Asia.
Building on the momentum created in 2011, the Bank’s main focus will be to further
leverage on its strengths by cross selling and customising products in order to achieve
sustainable business growth. The Bank’s business is expected to remain strong despite
intense competition amid further liberalisation, consolidation and regulatory changes in
year 2012.
The Bank will also continue to seek improvements in our customer services, provide
quicker turnaround time via better process efficiency and actively manage our operating
costs to maintain profitability. With our strong balance sheet and capital position, the
Bank is confident that we will be able to meet all the challenges and opportunities ahead
in order to serve and provide continued support to our valued customers.
20
Annual Report 2011
(cont’d)
On behalf of the Board, I would like to thank our shareholders, customers and business
partners for their continuing support. My appreciation goes to all staff and management
for their dedicated services and for delivering a commendable performance for the
current year. Our growth over the past year is a direct result of the dedication, passion
and hard work of our people – a team which is now over 3,200 strong. Finally, I wish to
thank all my fellow Board Members for their wise counsel and contributions.
Jen Tan Sri Dato’ Seri Ismail bin Hj. Omar (Bersara)
Chairman
21
PERFORMANCE
REVIEW
Affin Bank Berhad (AFFINBANK) reported profit before taxation and
zakat of RM613.1 million for the financial year ended 31 December
2011, an increase of 17.5% from RM521.9 million in 2010.
22
Annual Report 2011
Profit after taxation and zakat increased by 15.4% to RM440.0 million for the year ended
31 December 2011, compared with RM381.2 million the year before.
The stronger performance was attributable to the successfulness of its mid to long-term
strategies coming to fruition, focusing on organic growth which included marketing
expansion activities and human capital development.
Notwithstanding the intense competition in the banking industry and the difficult business
environment in 2011, the Bank continuously improvised on its reach and services
towards its customers by strengthening its internal and external resources.
The Bank had embarked on a reform programme by diagnosing business development
difficulties at existing branches and relocating 4 of them to more vibrant commercial
vicinities. The relocated branches were Sandakan, Ampang New Village, Johor Bahru
and Sungai Petani.
A total of 6 new branches at new growth areas were also opened to improve the Bank’s
presence in the market. The new branches are located in Meru, Klang; Gemas; Jitra;
Kulim; Prince Commercial Centre, Kuching and Mutiara Rini, Johor. This has ultimately
contributed to the overall growth and profitability of the Bank which has a total of 97
branches as of year-end.
The year under review also saw the launch of new products and campaigns including the
second wave of its highly successful nationwide savings campaign dubbed ‘O.M.G It’s
Back!’ that targeted new, existing conventional and Shariah compliant savings, current
and fixed deposit account holders.
The Bank also launched a new insurance product called ‘OMG Home Protector’ which
protects the contents of the houses or homes in collaboration with AXA Affin. Similarly,
the collaboration also cut across to its hire purchase division when it made public its
‘Affin HP Life’, an insurance coverage that not only covers the life of the insurer but that
of the remaining outstanding balance of the loan on the insurer’s vehicle.
In addition, AFFINBANK's Islamic banking subsidiary Affin Islamic Bank Berhad had
launched its flexible home and business property financing campaign called 'Let's Talk
MM'. The financing products offered under this campaign is based on the globally
accepted Islamic concept of ‘diminishing partnership’ called Musharakah Mutanaqisah.
During the year, the Bank’s net interest income rose by 3.2% to RM774.8 million from
RM751.0 million recorded in 2010. Islamic banking income increased by 11.9% to
RM198.9 million from RM177.8 million the year before.
+15.4%
Profit After Taxation and Zakat
-10.9%
Total Impaired Loans Improved
2.85%
Gross Impaired Ratio
23
Earnings per share increased by 15.5% to 30.6 sen per share from 26.5 sen per share
during the year under review.
During the year, the Bank’s total assets rose by RM7.1 billion to RM49.2 billion, compared
with RM42.1 billion in 2010.
Deposits from customers increased 18.0% to RM36.5 billion from RM31.0 billion
recorded the year before. Of this total, fixed deposits remained as the biggest contributor
in the year under review contributing RM22.3 billion, an increase of 11.4% from RM20.0
billion in 2010.
Even with the growth in financing, the Bank’s impaired loans continued to improve. Total
impaired loan improved 10.9% to RM865.7 million for the year under review, compared
with RM971.1 million a year ago due to the Bank’s better credit underwriting standards,
asset portfolio and risk management. Gross impaired ratio is at 2.85% as compared to
3.66% in 2010.
Net loans, advances and financing increased by 14.3% to RM29.7 billion from RM26.0
billion the year before, mainly contributed by household loans, followed by real estate,
transport, storage and communication.
The Bank is well capitalised with its risk weighted capital ratio at 11.91% and a core
capital ratio of 9.78%.
On 19 July 2011, RAM Rating Services Berhad has reaffirmed the Bank's longterm and
short-term financial institution ratings, at A1 and P1, respectively, with a stable outlook.
Moving into 2012, the Bank will continue its broad expansion plans and marketing
activities abide the uncertainties, globally and within the country. The continued economic
crises in Europe and US will affect those in the export industry and the ripple effect will
be felt but not significantly. The Economic Transformation Programme (ETP) by the
Malaysian Government will ensure the growth of the economy domestically and there
will be many opportunities for the small and medium-sized businesses (SMEs) as well as
its citizens.
The Bank is confident that it will continue to register growth next year with emphasis on
its fee-base income while strengthening its core business areas with more improved and
innovative products and services.
24
Annual Report 2011
11.91%
Risk Weighted Capital Ratio
9.78%
Core Capital Ratio
FINANCIAL
HIGHLIGHTS
EARNINGS PER SHARE (EPS)
(Sen)
30.6
26.5
22.1
23.0
11
10
09
08
20
20
20
20
PROFIT BEFORE TAXATION
AND ZAKAT (PBT)
(RM’million)
18.0
07
20
TOTAL ASSETS
(RM’billion)
613.1
521.9
425.1
454.6
322.0
49.2
42.1
35.6
33.0
11
10
09
08
07
11
10
09
08
20
20
20
20
20
20
20
20
20
31.9
07
20
AFFINBANK’s EPS for the financial year
AFFINBANK achieved PBT of RM613.1
AFFINBANK’s financial position as at
ended 31 December 2011 stood at
million, a commendable 17.5% rise for
31 December 2011 continued to
30.6 sen, compared to 26.5 sen the
the year ended 31 December 2011,
remain strong with total assets of
year before.
compared to RM521.9 million in 2010.
RM49.2 billion, an increase of 17.1%
AFFINBANK’s PAT also rose by 15.4%
compared with RM42.1 billion as at
to RM440.0 million for the year ended
31 December 2010.
31 December 2011.
NET LOANS, ADVANCES &
FINANCING
(RM’billion)
DEPOSITS FROM CUSTOMERS
(RM’billion)
29.7
26.0
22.0
19.5
11
10
09
08
20
20
20
20
16.8
07
20
SHAREHOLDERS’ EQUITY
(RM’billion)
36.5
31.0
26.4
25.2
23.5
11
10
09
08
07
20
20
20
20
20
3.6
11
20
3.3
10
20
3.0
09
20
shareholders’
2.7
08
20
equity
2.5
07
20
AFFINBANK’s net loans, advances and
Total deposits increased by 18.0%
Total
financing grew by 14.3% to RM29.7
year-on-year to RM36.5 billion as at
AFFINBANK increased by 8.7% to
of
billion compared with RM26.0 billion in
31 December 2011, in correspondence
RM3.6 billion from RM3.3 billion the
2010, as economic activities and
to AFFINBANK’s loan growth.
year before.
demand for credit gathered momentum
during the year under review.
25
26
Annual Report 2011
AFFINBANK hosts ‘An Evening
Of Mystique Gold’ as a form of
appreciation towards its top
valued corporate and
consumer clients.
31 May 2011
Affin Banking Group
participates in the GovernmentLinked Companies (GLC) Open
Day, organized by Khazanah
Nasional which featured
multiple activities such as
exhibitions, forums and talks.
24-26 June 2011
AFFINBANK synergises efforts
with the Bank of East Asia
(BEA) to add value to
customers and clients.
Speakers from the Bank of East
Asia and experts in the fields of
business and economy
primarily from East Asia touch
on topics such as Updates on
the 12th Five-year Plan
Conference, Tax Issues in China
and Matters to Observe and
Understand When Setting Up
China Enterprises.
30 May 2011
AFFINBANK continues to
reward deserving young talents
through the AFFINBANK
Examination Excellence Award
and Scholarship Programme
2011 which is well into its
eighth year.
16 June 2011
AFFINBANK provides strong
financial support for Treat Every
Environment Special Sdn Bhd
(TrEES) Young Voices For
Conservation school
programme and educates
students on financial
management and budgeting.
20 May 2011
AFFINBANK garners a deposit
growth of RM1.2 billion for its
eight months Oh My Goshh!
(O.M.G) deposit savings
campaign. Grand Prize Winner
Lee Guan Seong takes home
RM500,000 in cash deposit,
while the second prize of
RM200,000 cash deposit goes
to Chen Bee Kheng and third
prize winner Chong Chon Yuan
receives RM100,000.
June – November 2011
CORPORATE
DIARY
14 & 17 August 2011
19 August 2011
AFFINBANK sponsors LIMA as
the sole official bank to
demonstrate the Bank’s
commitment to its stakeholders
and to strengthen rapport with
the community within the
defense industry.
6-10 December 2011
Partnering with the National
Blood Centre, AFFINBANKers
take some time out from their
busy schedules to help a good
cause at a blood donation drive
held at Menara Affin.
In keeping with its annual
tradition, AFFINBANK holds a
‘buka puasa’ feast with 108
orphans and 30 new Muslim
converts from the Klang Valley
area.
24 October 2011
9 August 2011
Affin Banking Group (ABG)
celebrated Hari Raya by
opening its doors to corporate
clients and peer companies at
its first Hari Raya Open House,
held at The Royale
Chulan Hotel.
Antitrust training for staff is
conducted over a period of two
days to educate and enlighten
AFFINBANKers on the AntiTrust
Act and to embrace these
new laws.
8 September 2011
AFFINBANK holds true to its
tradition to contribute cash and
in-kind worth RM100,000 to the
Armed Forces personnel
serving overseas, in the spirit of
Ramadhan month.
27
STATEMENT OF CORPORATE GOVERNANCE
The Board of Directors of AFFINBANK (“Board”) and Management appreciate the importance of adopting high standards of Corporate
Governance in all areas of its business towards enhancing business prosperity and corporate accountability with the ultimate objective
of safeguarding the interest of shareholder’s value. The Board and Management are fully committed and constantly strive to ensure
that the principles of the Malaysian Code on Corporate Governance (“Code”) and Bank Negara Malaysia (BNM) Guidelines on Corporate
Governance for Licensed Institutions (Revised BNM/GP1) are adopted and practised throughout the group. This is important so as to
ensure that AFFINBANK is managed safely and soundly where risks and business prudence are appropriately balanced so as to
maximize shareholder’s return and protect the interests of all stakeholders (it also enables the shareholder of AFFINBANK and the
public to access and determine the standards of Corporate Governance). Throughout 2011 and to date, AFFINBANK continues to
conduct its business with integrity and exercises a high level of transparency and objectivity.
The Board and Management are fully committed in ensuring employees adhere closely to BNM’s Guidelines (BNM/GP7) on Code of
Ethics (“COE”), which aims at instilling the five values namely discipline, integrity, humility, caring and creativity in AFFINBANK and its
employees. The Board and Management set high ethical business standards and practices for business conduct and the code of
behaviour for employees to adhere to. In addition to the COE, all Directors are also required to observe the Directors’ COE.
Responsibility for implementation of these policies and guidelines rests primarily with Management, with oversight by the Audit &
Examination Committee. Good Corporate Governance is the foundation of the culture and business practices of AFFINBANK.
The following statements set out the commitment of AFFINBANK in applying good Corporate Governance principles and the extent
of compliance with the recommended best practices.
1.
Board of Directors
The Board is committed in establishing and enhancing shareholder’s value in the long term. The Board is pleased to report that
the Board has to its best efforts and knowledge complied with the principles and best practices of the Code throughout the
financial year under review.
In 2011, AFFINBANK Board went through some changes in its membership. These changes however, have not affected the
Board’s performance. AFFINBANK continues to have a strong and experienced Board, befitting its aspiration to become a mid
size Bank of prominence.
The Board of AFFINBANK has a balance composition with a strong independent element. It consists of representatives from the
private sector with suitable qualifications fulfilling the fit and proper criteria as required by BNM/GP1, a mixture of different skills,
competencies, experience and personalities. Directors’ profiles which appear on pages 8 to 11 reflect clearly the depth and
diversity in expertise and perspective to lead AFFINBANK as well as allow for an independent and objective analysis of
major issues.
Board’s Responsibilities
The Board acknowledges their roles and responsibilities for the overall performance of AFFINBANK. These ensure the
board functions objectively and effectively.
The Board’s responsibilities remain within the framework of BNM Guidelines and AFFINBANK’s Board Policy Manual. The Board
also exercises great care to ensure that high ethical standards are upheld, and that the interests of stakeholders are not
compromised. These include responsibility for determining AFFINBANK’s general policies and strategies for the short, medium
and long term, approving business plans, including targets and budgets, and approving major strategic decisions. The terms of
reference of the Board Committees disclosed on page 39 of this Annual Report provide an outline of its roles and functions.
In carrying out its functions, the Board has delegated specific responsibilities to other Board Committees, which operated under
approved terms of reference, to assist the Board in discharging their duties. The Chairmen of the various Committees report on
the outcome of their Committee meetings to the Board and any further deliberation is made at Board level, if required. These
reports and deliberations are incorporated into the Minutes of the Board meetings. The various Committees are listed below:Board Remuneration Committee (“BRC”)
•
28
The BRC is responsible for providing a formal and transparent procedure for developing the remuneration policy for Directors,
Managing Director/Chief Executive Officer and key senior management officers and ensuring that compensation is
competitive and consistent with AFFINBANK’s culture, objectives and strategies. The Committee obtains advice from experts
in compensation and benefits, both internally and externally.
Annual Report 2011
Statement Of Corporate Governance
(cont’d)
Board Nominating Committee (“BNC”)
•
The BNC is responsible for providing a formal and transparent procedure for the appointment of Directors and Managing
Director/Chief Executive Officer, assessing the effectiveness of individual Director, the Board as a whole and the performance
of the Managing Director/Chief Executive Officer and key senior management personnel.
Board Risk Management Committee (“BRMC”)
•
The BRMC is responsible for overseeing management’s activities in managing credit, market, liquidity, operational, legal
and other risks and to ensure that the risk management process is in place and functioning.
Board Loan Review and Recovery Committee (“BLRRC”)
•
The BLRRC is responsible in providing critical review of loans and other credit facilities with higher risk implications, after
due process of checking, analysis, review and recommendation by the Credit Risk Management function, and if found
necessary, exercise the power to veto loan applications that have been approved by the Group Management Loan
Committee.
Audit & Examination Committee (“AEC”)
•
The AEC is responsible for providing oversight on reviewing the adequacy and integrity of the internal control systems and
oversees the work of the internal and external auditors.
Board Composition and Balance
The Board composition is in compliance with the Revised BNM/GP1. The Board consists of seven (7) Non-Executive Directors
with one (1) Alternate Director; four (4) are Independent Non-Executive Directors and three (3) are Non-Independent Non-Executive
Directors. All Directors met the criteria set by the BNM guidelines.
Board meetings are presided by a Non-Independent Non-Executive Chairman whose role is clearly separated from the role of the
Managing Director/Chief Executive Officer. The Chairman is responsible for ensuring the effectiveness and smooth functioning of
the Board, the governance structure, independence and inculcate a positive culture in the Board.
The Board comprises Directors who, as a group, provides a mixture of core competencies such as finance, accounting, business,
management, marketing, information technology and investment management, which are essential for the effective functioning
and discharging of responsibilities by the Board.
The Managing Director/Chief Executive Officer is responsible for the overall day-to-day business affairs of AFFINBANK while
providing strong leadership in the implementation of Board decisions.
In 2011, the Board composition has been further strenghtened by having majority Independent Directors. Although all the Directors
have an equal responsibility for the Group’s business directions and operations, the role of these Independent Non-Executive
Directors are particularly important in ensuring that the strategies proposed by the management are fully discussed and evaluated,
having considered the long term interests of AFFINBANK’s objectives. No individual or small group of individuals dominate the
Board’s decision making process.
Independence and Conflict of Interest
It is the Directors’ responsibility to declare whether they have a potential or actual interest in any transaction of AFFINBANK.
Where issues involve conflict of interest, the interested Directors abstained from discussing or voting on the matter.
Appointments and Re-election to the Board
In 2011, BNM approved the re-appointment of six (6) Non-Independent Non-Executive Directors and two (2) appointments of
Independent Non-Executive Directors. In accordance with the Company’s Memorandum and Articles of Association, one-third
(1/3) of the Directors, or, if their number is not three (3) or a multiple of three (3), the number nearest to one-third (1/3), shall retire
from office at each Annual General Meeting and they may offer themselves for re-election.
29
(cont’d)
Directors’ Training
All newly appointed Non-Executive Directors are furnished by AFFINBANK with copies of the BNM Guidelines, the Banking and
Financial Institutions Act 1989 and other relevant legislation governing the banking industry to facilitate their understanding of
banking business requirements. All Directors have attended various training programmes organised internally as well as externally
by the relevant authorities such as BNM, Securities Commission (“SC”) and Companies Commission of Malaysia (“CCM”).
In addition, the members of the Board keep abreast with the relevant developments in business, banking and finance industry
as well as new regulatory requirements on a continuous basis via various conferences, seminars and training programmes
organised within the Group and by other external organizers. The development and training programmes attended by the Directors
during the financial year ended 31 December 2011 are set out below.
30
Director
Course Title
Trainer/Organiser
Date
YBhg. Jen Tan Sri Dato’
Seri Ismail bin Haji Omar
(Bersara)
1.
Regulator-Industry
Dialogue
Bank Negara
Malaysia
7 March 2011
2.
Economic Outlook
and Implication of
Financial and
Banking Industries
Affin Holdings
Berhad
28 March 2011
3.
Affin Holdings Berhad Talk
“Economic Outlook of
Banking Sector 2012/2013”
by Dr Yeah Kim Leng
Affin Holdings
Berhad
26 July 2011
4.
8th Kuala Lumpur
Islamic Finance
Forum 2011
Kuala Lumpur
Islamic Finance
(KLIFF)
4 & 5 October 2011
5.
Towards excellence
in Corporate Board
Governance (in
relation to Corporate
Governance
Blueprint 2011)
Affin Holdings
Berhad
27 October 2011
6.
BNM/OMFIF – First Asian
Central Banks Watchers
Conference “Asian
Perspectives on
World Finance”
Bank Negara
Malaysia
1 November 2011
7.
BNM Islamic Finance
Master Class by Joseph
DiVanna
Bank Negara
Malaysia
16 November 2011
Annual Report 2011
(cont’d)
Director
Course Title
Trainer/Organiser
Date
YBhg. Dato’ Zulkiflee
Abbas bin Abdul Hamid
(Resigned as Director
w.e.f. 1 November 2011)
1.
Regulator-Industry
Dialogue
Bank Negara
Malaysia
7 March 2011
2.
Economic Outlook
and Implication of
Financial and
Banking Industries
Affin Holdings
Berhad
28 March 2011
3.
8th Kuala Lumpur
Islamic Finance
Forum 2011
Kuala Lumpur
Islamic Finance
(KLIFF)
4 & 5 October 2011
1.
2011 BNM Governor’s
address on the
Malaysian Economic
and Panel discussion
ICLIF (FIDE-BNM)
24 March 2011
2.
Economic Outlook and
Implication of
Financial and banking
Industries
Affin Holdings
Berhad
28 March 2011
3.
Banking Insights
(everything you
wanted to know about
banking but didn’t
dare ask)
Bank Negara
Malaysia
(FIDE/ICLIF)
8 & 9 April 2011
4.
Board IT Governance
and Risk Management
Bank Negara
Malaysia (FIDE/ICLIF)
12 & 13 April 2011
5.
The Nomination and
Remuneration
Committee Programme
BNM (FIDE)
18 & 19 July 2011
6.
Towards excellence in
Corporate Board of
Governance (in
relation to Corporate
Governance Blueprint 2011)
Affin Holdings
Berhad
27 October 2011
1.
Implication of
Industries
Affin Holdings
Berhad
28 March 2011
YM. Dr. Raja Abdul Malek
bin Raja Jallaludin
YBhg. Laksamana Madya
Tan Sri Dato’ Seri
Ahmad Ramli bin
Mohd Nor (Bersara)
(Resigned as Director
w.e.f. 30 September 2011)
31
(cont’d)
Director
Course Title
Trainer/Organiser
Date
YBhg. Dato’ Sri
Abdul Aziz bin
Abdul Rahman
1.
Implication of
Industries
Affin Holdings
Berhad
28 March 2011
2.
Launch of PIDM
Annual Report 2010
and Annual Dialogue
Perbadanan
Insuran Deposit
Malaysia
12 May 2011
3.
Corporate Governance
Blue Print
Bursa Malaysia
Berhad
10 August 2011
Mr. Aubrey Li
Kwok-Sing &
Mr Gary Cheng Shui
Hee (Alternaten Director to
Mr Aubrey Li Kwok-Sing)
1.
Directors Induction
Programme
Affin Bank Berhad
3 August 2011
Mr. Stephen Charles Li
(Resigned as Director w.e.f.
16 August 2011) and
Mr. Lee Chor Kee (Alternate
Director to Mr. Stephen
Charles Li) (Resigned as
Alternate Director w.e.f.
16 August 2011)
1.
Directors Induction
Programme
Affin Bank Berhad
3 August 2011
Encik Suffian bin
Haji Haron
1.
Implication of
Industries
Affin Holdings
Berhad
28 March 2011
2.
Risk Management in
Islamic Finance
Bank Negara
Malaysia (FIDE)
31 June 2011
3.
Basel III: The impact
on Islamic Finance
(Part 2)
Islamic Banking &
Finance Institute
(IBFIM)
10 & 11 October
2011
4.
Towards excellence in
Corporate Board of
Governance (in relation to
Corporate Governance
Blueprint 2011)
Affin Holdings
Berhad
27 October 2011
1.
Implication of
Industries
Affin Holdings
Berhad
28 March 2011
2.
8th Kuala Lumpur
Islamic Finance
Forum 2011
Kuala Lumpur
Islamic Finance
(KLIFF)
4 & 5 October 2011
YBhg. Tan Sri Dato’
Seri Mohamed
Jawhar bin Hassan
32
Annual Report 2011
(cont’d)
Meeting and Supply of Information to the Board
Board meetings for each financial year are scheduled in advance before the end of the each financial year to enable the Directors
to plan accordingly and fit the year’s Board meetings into their respective schedules.
The Board meets on a scheduled basis at least twelve (12) times a year. Additional meetings are convened when necessary to
review progress reports on AFFINBANK’s financial performance, approve strategies, business plans and significant policies as well
as to consider business and other proposals which require the Board’s approval. For Financial year ended 31 December 2011,
seventeen (17) Board meetings were held. Meetings are usually held at the Bank’s Board Room at 19th Floor, Menara Affin,
80 Jalan Raja Chulan, 50200 Kuala Lumpur.
Board meetings are conducted in accordance to a structured agenda. Board Members are provided with the structured agenda
together with the relevant documents and information in a form and of a quality appropriate in advance of each Board meeting.
This is to facilitate the Directors to peruse the Board papers and seek clarifications that may require from the Management or the
Company Secretary well ahead of the meeting date. Urgent papers may be presented for tabling at the Board meetings under
supplemental agenda.
The Board monitors AFFINBANK’s performance by reviewing the monthly Management Report, which provides a comprehensive
review and analysis of AFFINBANK’s operational and financial issues. In addition, the Minutes of the various Board Committees
and Management Committee meetings and other issues are also tabled and considered by the Board.
Procedures are in place for Directors to seek independent professional advice at AFFINBANK’s expense. AFFINBANK also
provides the Board full access to necessary materials and relevant information including the services of the Company Secretary
in order for the Board to fulfill their duties and specific responsibilities.
2.
Directors’ Remuneration
Composition
AFFINBANK acknowledges the importance of attracting and retaining the right calibre of Directors with the necessary skills,
qualifications and experience for effective Board oversight of AFFINBANK’s business activities and affairs.
The make-up of the Managing Director/Chief Executive Officer’s remuneration remained unchanged consisting of salary,
allowances, bonus and other customary benefits as appropriate. Any salary review, takes into account market rates and the
performance of the individual and of AFFINBANK.
Non-executive Directors’ emoluments consist of three components – an annual fee as a Board member, an allowance for
attendance of meetings and a committee fee. The Directors’ fees, allowances and committee fees are those recommended by
the Board and in line with Affin Holdings group of companies.
Directors’ emoluments are disclosed in the relevant note to the financial statements as an aggregate sum, in conformance to the
relevant legislation.
33
(cont’d)
Shareholder
AFFINBANK is a wholly owned subsidiary of Affin Holdings Berhad, a company listed on Bursa Malaysia Securities Berhad.
Annual General Meeting (“AGM”)
The Annual Report and financial statements for year ended December 2010 were tabled at the 35th AGM on 15 March 2011.
Likewise the Annual Report and financial statements for year ended December 2011 will be tabled at the 36th AGM on
21 March 2012.
3.
Accountability and Audit
Financial Reporting
AFFINBANK continues to subscribe to the philosophy of transparent, fair, reliable and easily understandable reporting to
stakeholders. The Board upholds its responsibility by regularly providing updates on AFFINBANK’s performance through quarterly
announcements, ad hoc press conferences, and briefings to the media throughout 2011.
The Board acknowledges and accepts full responsibility for the financial information contained in this Annual Report and by which
means it provides a balanced, clear and meaningful assessment of its financial position and prospects as presented here in this
Annual Report and all other reports to the stakeholders, regulatory authorities and public.
Statement of Directors’ Responsibility for Preparing the Financial Statement
The Board is confident that the financial statements for the financial year ended 2011 gives a true and fair view of the state of
affairs, the results and cash flow of AFFINBANK and the Group for the financial year. The Board also strives to ensure that financial
reporting presents a true and fair assessment of AFFINBANK’s position and prospects. There is reasonable assurance that
AFFINBANK has maintained proper accounting records used and consistently applied appropriate accounting policies supported
by reasonable and prudent judgments and estimates, and prepared the financial statements in accordance to the provision of
the Companies Act 1965, approved accounting standards in Malaysia and BNM Guidelines.
All published information on AFFINBANK is available at www.affinbank.com.my.
INTERNAL CONTROL
AFFINBANK has a well-established and fully operational risk management and internal control system. The Statement on Internal
Control, which is set out in pages 36 through 38 of the Annual Report provides an overview on the risk management
process/framework as well as on how the internal control system has been designed to manage risks and avert failures.
AFFINBANK continues to enhance its system of internal control and risk management, in order to better quantify its compliance
with the Code.
The Board has overall responsibility for maintaining the proper management and protection of AFFINBANK’s interests by ensuring
effective implementation of the risk management policy and process, as well as adherence to a sound system of internal control,
and by seeking regular assurance on their effectiveness. The Board also recognizes that risks cannot be eliminated completely.
As such, the inherent system of internal control is designed to provide a reasonable though not absolute assurance against the
risk of material errors, fraud or losses occurring.
The Audit & Examination Committee has an oversight responsibility for the adequacy and integrity of the internal control system.
Reliance is placed on the results of independent audits performed primarily by internal auditors, the outcome of statutory audits
on financial statements conducted by external auditors and on representations by Management based on their control selfassessment of all areas of their responsibility.
34
Annual Report 2011
(cont’d)
Minutes of Audit & Examination Committee meetings, which provide a summary of the proceedings, are circulated to Board
members for notation and discussion.
AFFINBANK has an established Internal Audit Division which reports functionally to the Audit & Examination Committee and
administratively to the Managing Director/Chief Executive Officer. The division is responsible for conducting independent audits
in accordance with the approved 2011 Internal Audit Plan.
RELATIONSHIP WITH AUDITORS
A professional and transparent relationship continues to exist between the Board/Audit & Examination Committee and the external
auditors. The Audit & Examination Committee is authorized to communicate directly with both the external and internal auditors.
A full Audit & Examination Committee report outlining its role in relation to the Auditors is set out in page 39 to 40. In addition,
the external auditors meet with the Board at least once a year when the annual audited financial statements are presented to
the Board.
ASSURANCE
The Board through the Audit & Examination Committee has satisfactorily performed its oversight role in ensuring there is a sound
internal control system and regular review on the adequacy and integrity of the system. Assurance on the effectiveness of risk
management, control and governance process is obtained from the Management and Auditors (internal and external).
BNM auditors, internal auditors and external auditors conduct independent audits on AFFINBANK’s business operations, support
activities and financial records and statements respectively to derive an opinion on the adequacy and integrity of AFFINBANK’s
overall internal control framework.
Finally, with the benefit of the above assurances and the external auditor’s comments incorporated in their audit report on the
financial statements for the financial year ended December 2011, the Board is able to conclude that AFFINBANK conducts its
business prudently and in line with good governance practices.
35
STATEMENT ON INTERNAL CONTROL
INTERNAL CONTROL
AFFINBANK has a well-established and fully operational risk management and internal control system. The Statement on Internal
Control, which is set out in pages 36 through 38 of the Annual Report provides an overview on the risk management process/framework
as well as on how the internal control system has been designed to manage risks and avert failures. AFFINBANK continues to enhance
its system of internal control and risk management, in order to better quantify its compliance with the Code.
The Board has overall responsibility for maintaining the proper management and protection of AFFINBANK’s interests by ensuring
effective implementation of the risk management policy and process, as well as adherence to a sound system of internal control, and
by seeking regular assurance on their effectiveness. The Board also recognizes that risks cannot be eliminated completely. As such,
the inherent system of internal control is designed to provide a reasonable though not absolute assurance against the risk of material
errors, fraud or losses occurring.
The Audit & Examination Committee has an oversight responsibility for the adequacy and integrity of the internal control system.
Reliance is placed on the results of independent audits performed primarily by Group internal auditors, the outcome of statutory audits
on financial statements conducted by external auditors and on representations by Management based on their control self-assessment
of all areas of their responsibility.
Minutes of Audit & Examination Committee meetings, which provide a summary of the proceedings, are circulated to Board members
for notation and discussion.
AFFINBANK has an established Group Internal Audit Division which reports functionally to the Audit Examination Committee and
administratively to the Managing Director/Chief Executive Officer. The division is responsible for conducting independent audits in
accordance with the approved 2011 Internal Audit Plan.
RELATIONSHIP WITH AUDITORS
A professional and transparent relationship continues to exist between the Board/Audit & Examination Committee and the external
auditors. The Audit Committee is authorized to communicate directly with both the external and Group internal auditors . A full Audit
Committee report outlining its role in relation to the Auditors is set out in page 40. In addition, the external auditors meets with the Board
at least once a year when the annual audited financial statements are presented to the Board.
ASSURANCE
The Board through the Audit & Examination Committee has satisfactorily performed its oversight role in ensuring there is a sound
internal control system and regular review on the adequacy and integrity of the system. Assurance on the effectiveness of risk
management, control and governance process is obtained from the Management and Auditors (internal and external).
BNM auditors, Group internal auditors and external auditors conduct independent audits on AFFINBANK’s business operations, support
activities and financial records and statements respectively to derive an opinion on the adequacy and integrity of AFFINBANK’s overall
internal control framework.
Finally, with the benefit of the above assurances and the external auditor’s comments incorporated in their audit report on the financial
statements for the financial year ended 31 December 2011, the Board is able to conclude that AFFINBANK conducts its business
prudently and in line with good governance practices.
36
Annual Report 2011
Statement On Internal Control
(cont’d)
Responsibility
The Board acknowledges overall responsibility for AFFINBANK Group’s system of internal controls and its effectiveness. The system
of internal controls encompasses controls relating to financial, operational, risk management and compliance with applicable laws,
regulations, policies and guidelines.
However, the system of internal controls is designed to manage rather than eliminate the risks of failure to achieve the goals and
objectives of the Group. Therefore, it can only provide a reasonable and not absolute assurance against material misstatement of
management and financial information, or against financial losses or fraud.
The Board has an established process for identifying, evaluating, managing and reporting on all significant risks that may impact the
achievement of business goals and objectives of the Group. The system of internal controls is dynamic and updated from time to time
to get the changes in regulatory guidelines and business environment. This process is regularly reviewed by the Board through its
Board Risk Management Committee (BRMC) and Audit and Examination Committee (AEC).
The Board is of the view that the system of internal controls in place for the year under review is sound and sufficient to safeguard the
investment of the shareholders, the interest of the customers and regulators, and the assets of the Group.
The management assists the Board in implementing the policies approved by the Board, implementing risk and control procedures,
and developing, operating and monitoring internal controls to mitigate and control identified risks.
Key Internal Control Processes
The key processes put in place to assist the Board in reviewing the adequacy and integrity of the system of internal controls include
the following:
*
Relevant Board committees are established with specific responsibilities delegated by the Board to deliberate on matters within
the respective scope of responsibility. The committees are guided by written terms of reference and their minutes of meetings are
tabled to the Board.
*
The BRMC assists the Board in its supervisory role concerning the overall management of risk in the Bank. It has responsibility
for reviewing and approving all risk management policies and risk management methodologies. BRMC also reviews guidelines
and portfolio management reports including risk exposure information.
*
The Board Loan Review and Recovery Committee (BLRRC) critically reviews loans and other credit facilities with higher risk
implications, after due process of checking, analysis, review and recommendation by Group Risk Management and if found
necessary, exercise the power to veto loan applications that have been approved by the Group Management Loan Committee
(GMLC). BLRRC also review the non performing loan reports presented by the Management.
*
Management Committee (MCM), comprising the senior management team, assists the Board in managing day-to-day operations
and ensure its effectiveness. MCM formulates tactical plans and business strategies, monitors the Bank overall performance and
ensures that the activities are in accordance with corporate objectives, strategies, policies and annual business plan and budget.
*
The Group Management Loan Committee (GMLC) is established within senior management to approve complex and larger loans
and workout recovery proposals beyond the delegated authority of the concerned individual senior management personnel of
the Bank. The other committees comprising senior management include Asset & Liability Management Committee (ALCO) which
manages market and liquidity risks and Group Operational Risk Management Committee (GORMC) which manages
operational risk.
37
Statement On Internal Control
(cont’d)
*
A detailed budgeting process is in place with annual business plans and budgets prepared by the business divisions, reviewed
by the MCM and approved by the Board. The actual business performances are monitored against the approved targets and
budgets of each business division by MCM on a monthly basis.
*
The business plan is supported by an annual credit plan, prepared by Group Risk Management and approved by BRMC.
The credit plan sets out the prevailing risk appetite and provides credit strategies and lending guidelines for the development and
management of new and existing customer relationships.
*
Policies and procedures for key processes are documented and regularly updated to ensure relevance and compliance with
internal controls, directives, laws and regulations. To enhance risk culture and awareness, road shows are undertaken by Group
Risk Management across the Bank.
*
Proper guidelines for the hiring and termination of employees, staff training programs and performance appraisals are established
and other relevant procedures in place to ensure staff are adequately trained and equipped to carry out their responsibilities
competently.
*
An integrated risk management framework is in place. The risk management function operates in an independent capacity and
is a part of the Bank’s senior management structure which works closely as a team in managing risks to enhance stakeholders’
value. Its responsibilities extend to cover market, liquidity, credit and operational risks. The risk management function reports
to BRMC.
38
Annual Report 2011
AUDIT AND
EXAMINATION COMMITTEE
TERMS OF REFERENCE OF THE AUDIT AND EXAMINATION COMMITTEE
Size and Composition
Meetings
YM. Dr. Raja Abdul Malek
bin Raja Jallaludin
Member
YBhg. Dato’ Sri Abdul Aziz
bin Abdul Rahman
AEC Chairman
Meetings shall be held at a frequency to be decided by the Audit and Examination
Committee. At the request of the Group Internal Auditors, the Chairman shall convene a
meeting to consider any matters that they may wish to bring to the attention of the Directors
or shareholders. A quorum shall consist of at least two (2) members. The Group Chief
Internal Auditor shall be the Secretary to the Audit and Examination Committee.
YBhg. Tan Sri Dato’ Seri Mohamed Jawhar bin Hassan
Member
Representative from Affin Islamic Bank Berhad
The Committee shall consist of at least three (3) members but not more than five (5)
members, appointed by the Board from amongst the non-executive Directors of the Bank.
39
Audit and Examination Committee
Authority
The Committee shall have unlimited access to all records, information and documents relevant to its activities, to the Group Internal
Audit and External Auditors and to senior management of the Bank and its subsidiaries. The Group Internal Auditors and External
Auditors shall have free access to the Audit and Examination Committee and be allowed to attend and to be heard at the Committee
meetings. The Committee is authorised by the Board to obtain outside and independent professional advice as and when it is
considered necessary.
Duties and Responsibilities
The duties and responsibilities of the Audit and Examination Committee are:
1.
To review AFFINBANK’s financial statements and to ensure compliance with disclosure requirements and any adjustments as
suggested by the External Auditors, prior to submission to the Board.
2.
To review the reports of the Group Internal Auditor, the External Auditors, Bank Negara Malaysia examiners or any other relevant
parties and decide on actions to be taken on relevant issues raised in the reports.
3.
To review with the External Auditors the scope of their audit plan, the system of internal accounting controls, the audit reports,
the assistance given by the management and its staff to the auditors, and any findings and action to be taken.
4.
To make recommendation to the Board on the appointment of External Auditors.
5.
To review the effectiveness and performance of the Group Internal Audit functions from time to time.
6.
To review and approve the annual audit plan and budget for Group Internal Audit, which sets out the audit objectives, auditable
areas, scope of coverage, frequency of audit and duration of each audit assignment.
7.
To ensure that Group Internal Audit has adequate resources and support services to carry out its functions.
8.
To review the overall performance of the Group Chief Internal Auditor, including the remuneration package.
9.
To review any significant related party transactions that may arise within the Bank’s group or associate companies and report to
the Board any areas of concern.
10. To escalate to the Board via minutes of meetings or special reports on any exception identified.
11. To carry out such other responsibilities as may be delegated by the Board from time to time.
40
Annual Report 2011
NETWORK OF BRANCHES
WILAYAH PERSEKUTUAN
1.
Bangsar
No. 4 & 6,
Jalan Telawi 3,
Bangsar Baru,
59100 Kuala Lumpur.
Tel : 03-2283 5025
Fax : 03-2283 5028
2.
Bangunan Getah Asli
Tingkat Bawah,
148, Jalan Ampang,
50450 Kuala Lumpur.
Tel : 03-2162 8770
Fax : 03-2162 8587
3.
4.
5.
6.
7.
Batu Cantonment
No. 840 & 842,
Batu 4 3/4,
Jalan Ipoh,
51200 Kuala Lumpur.
Tel : 03-6258 7370
Fax : 03-6251 8214
Central
Ground & Mezzanine Floor,
Menara Affin,
P.O.Box 12744,
50788 Kuala Lumpur.
Tel : 03-2055 2222
Fax : 03-2070 7592
Jalan Bunus
133, Jalan Bunus,
Off Jalan Masjid India,
50100 Kuala Lumpur.
Tel : 03-2693 4686
Fax : 03-2691 3207
Jalan Ipoh
468-11 & 468-11B,
Batu 3, Jalan Ipoh,
51200 Kuala Lumpur.
Tel : 03-4042 5554
Fax : 03-4042 4912
LTAT
Ground Floor,
Bangunan LTAT,
Jalan Bukit Bintang,
55100 Kuala Lumpur.
Tel : 03-2142 6311
Fax : 03-2148 0586
8.
Selayang
81-85, Jalan 2/3A,
Pusat Bandar Utara,
KM 12, Jalan Ipoh,
68100 Batu Caves,
Kuala Lumpur.
Tel : 03-6137 2053
Fax : 03-6138 7122
15. Wisma Pertahanan
G.05, Tingkat Bawah,
Wisma Pertahanan,
Kementerian Pertahanan Malaysia,
Jalan Padang Tembak,
50634 Kuala Lumpur.
Tel : 03-2698 7912
Fax : 03-2698 6071
9.
Seri Petaling
10-12, Jalan Raden Tengah,
Bandar Baru Seri Petaling,
57000 Kuala Lumpur.
Tel : 03-9058 5600
Fax : 03-9058 8513
WILAYAH PERSEKUTUAN
PUTRAJAYA
1.
10. Setapak
159 & 161, Jalan Genting Kelang,
P.O.Box 202,
53300 Setapak,
Kuala Lumpur.
Tel : 03-4023 0455
Fax : 03-4021 3921
11. Taman Maluri
250 & 252, Jalan Mahkota,
Taman Maluri,
55100 Kuala Lumpur.
Tel : 03-9282 7250
Fax : 03-9283 4380
12. Taman Midah
38 & 40, Jalan Midah 1,
Taman Midah, Cheras,
56000 Kuala Lumpur.
Tel : 03-9130 0366
Fax : 03-9131 7024
WILAYAH PERSEKUTUAN
LABUAN (OFFSHORE)
1.
Labuan Offshore
Unit 3 (J), Level 3,
Main Office Tower,
Financial Park Labuan,
Jalan Merdeka,
87000 Federal Territory Labuan.
Tel : 087-411 931
Fax : 087-411 973
SELANGOR
1.
Ampang Jaya
No. 11 & 11A,
Jalan Mamanda 7/1,
Ampang Point,
68000 Ampang,
Selangor.
Tel : 03-4257 6802
Fax : 03-4257 8636
2.
Ampang New Village
No. 21G & 23G
Jalan Wawasan 2/2
Bandar Baru Ampang
68000 Ampang,
Selangor.
Tel : 03-4296 2311
Fax : 03-4296 2206
13. Taman Tun Dr. Ismail
47 & 49, Jalan Tun Mohd Fuad 3,
Taman Tun Dr. Ismail,
60000 Kuala Lumpur.
Tel : 03-7727 9080
Fax : 03-7727 9543
14. Wangsa Maju
No. 2 & 4, Jalan 1/27F,
Kuala Lumpur Sub-Urban Centre,
Wangsa Maju,
53300 Kuala Lumpur.
Tel : 03-4143 2814
Fax : 03-4143 3095
Putrajaya
Jabatan Akauntan Negara,
Kompleks Kementerian Kewangan,
No. 1, Persiaran Perdana,
Presint 2,
62594 Putrajaya,
Wilayah Persekutuan.
Tel : 03-8888 3814
Fax : 03-8889 2082
41
Network Of Branches
(cont’d)
3.
Ara Damansara
Unit B-G-07 & B-G-08
Block B, No. 2
Jalan PJU 1A/7A
Ara Damansara
47301 Petaling Jaya, Selangor
Tel : 03-7847 3177
Fax : 03-7847 2677
9.
4.
Bandar Bukit Tinggi, Klang
No 77 & 79, Jalan Batu Nilam 5,
Bandar Bukit Tinggi,
41200 Klang, Selangor.
Tel : 03-3323 2822
Fax : 03-3323 2858
5.
Jalan Meru, Klang
No. 40, Pelangi Avenue,
Jalan Kelicap 42A/KU1,
Klang Bandar Di Raja,
41050 Klang,
Selangor.
Tel : 03-3341 5237
Fax : 03-3341 5427
10. Kompleks PKNS
Lot G17-20,
Ground Floor,
Kompleks PKNS,
40000 Shah Alam,
Selangor.
Tel : 03-5510 5200
Fax : 03-5510 8200
6.
Kajang
2 & 3, Jalan Saga,
Taman Sri Saga,
Off Jalan Sg. Chua,
43000 Kajang,
Selangor.
Tel : 03-8737 7435
Fax : 03-8737 7433
7.
Kepong
6, Jalan 54,
Desa Jaya,
52100 Kepong,
Selangor.
Tel : 03-6276 4942
Fax : 03-6276 6375
8.
42
Kinrara
No. 1, Jalan TK1/11A,
Taman Kinrara, Section 1,
Batu 7 1/2, Jalan Puchong,
47100 Puchong,
Selangor.
Tel : 03-8070 3403
Fax : 03-8075 8159
Annual Report 2011
Klang Utara
No. 29 & 31,
Jalan Tiara 3,
Bandar Baru Klang,
41150 Klang,
Selangor.
Tel : 03-3342 1585
Fax : 03-3342 1719
11. Kota Warisan
No. 48, Jalan Warisan Megah 1/4,
43900 Sepang,
Selangor.
Tel : 03-8706 6300
Fax : 03-8706 6599
12. PJ State
No. 38 & 40,
Jalan Yong Shook Lin,
46050 Petaling Jaya,
Selangor.
Tel : 03-7955 0032
Fax : 03-7954 0012
13. Port Klang
No. 1, Jalan Berangan,
42000 Port Klang,
Selangor.
Tel : 03-3168 8366
Fax : 03-3167 2784
14. Puchong
No. 16 & 18,
Jalan Bandar 3,
Pusat Bandar Puchong,
47100 Puchong,
Selangor.
Tel : 03-5882 2880
Fax : 03-5882 2881
15. Rawang
No. 33G & 35G,
Jln 1B, Fortune Avenue,
48000 Rawang,
Selangor.
Tel : 03-6091 3322
Fax : 03-6091 3344
16. Sea Park
20-22, Jalan 21/12,
Sea Park,
Selangor.
Tel : 03-7875 6514
Fax : 03-7876 6020
17. Seri Kembangan
36, Jalan PSK 3,
Pusat Perdagangan Seri
Kembangan,
43300 Seri Kembangan,
Selangor.
Tel : 03-8945 6429
Fax : 03-8945 6442
18. Subang Jaya
7 & 9, Jalan SS 15/8A,
Selangor.
Tel : 03-5634 8043
Fax : 03-5634 8040
19. The Curve
Lot G32 & 126,
Ground & First Floor,
The Curve Shopping Complex,
Jalan PJU 7/8,
Mutiara Damansara,
Selangor.
Tel : 03-7726 7258
Fax : 03-7727 8912
20. UiTM
Universiti Teknologi MARA,
Tingkat 2,
Menara UiTM,
40450 Shah Alam,
Selangor.
Tel : 03-5519 2377
Fax : 03-5510 5580
21. USJ Taipan
8A & 8B, Jalan USJ 10/1J,
47610 UEP Subang Jaya,
Petaling Jaya,
Selangor.
Tel : 03-8023 7271
Fax : 03-8023 9161
Network Of Branches
(cont’d)
NEGERI SEMBILAN
JOHOR
1.
1.
Ayer Hitam
No. 765, Jalan Batu Pahat,
86100 Ayer Hitam,
Johor.
Tel : 07-758 1100
Fax : 07-758 1001
2.
Batu Pahat
No. 3 & 4, Jalan Merah,
Taman Bukit Pasir,
83000 Batu Pahat,
Johor.
Tel : 07-433 4210
Fax : 07-433 3246
3.
Johor Bahru
No. 24 & 25
Jalan Kebun Teh 1
Kebun Teh Commercial City
80250 Johor Bahru
Johor
Tel : 07-221 2403
Fax : 07-221 2462
2.
Gemas
No. 1 & 2, Ground Floor
Laman Niaga Pernama
Kem Syed Sirajuddin
73400 Gemas
Negeri Sembilan
Tel : 07-948 3622
Fax : 07-948 5022
Nilai
5733 & 5734, Jalan TS 2/1,
Taman Semarak Phase II,
71800 Nilai,
Negeri Sembilan.
Tel : 06-799 4114
Fax : 06-799 5115
3.
Port Dickson
3 & 4, Jalan Mahajaya,
P.D. Centre Point,
71000 Port Dickson,
Negeri Sembilan.
Tel : 06-647 3950
Fax : 06-647 4776
4.
Seremban
No. 175, Jalan Dato'
Bandar Tunggal,
70000 Seremban,
Negeri Sembilan.
Tel : 06-762 9651
Fax : 06-763 6125
4.
Johor Jaya
130 & 132, Jalan Ros Merah 2/17,
Taman Johor Jaya,
81100 Johor Bahru,
Johor.
Tel : 07-351 8602
Fax : 07-351 4122
5.
Kluang
503, Jalan Mersing,
86000 Kluang,
Johor.
Tel : 07-772 4736
Fax : 07-772 4486
MELAKA
1.
2.
Bukit Baru
No. 7 & 8, Jalan DR1,
Delima Point,
Taman Delima Raya,
75150 Melaka.
Tel : 06-232 1386
Fax : 06-232 1579
Melaka Raya
200 & 201,
Taman Melaka Raya,
Off Jalan Parameswara,
75000 Melaka.
Tel : 06-283 5500
Fax : 06-284 6618
6.
7.
Kulai
13 & 14, Jalan Raya,
Taman Sri Kulai Baru, Batu 21,
81000 Kulai,
Johor.
Tel : 07-663 9799
Fax : 07-663 9800
Muar
1 Jalan Petrie,
84000 Muar,
Johor.
Tel : 06-953 2384
Fax : 06-953 3489
8.
Mutiara Rini
No. 28 & 30
Jalan Utama 45
Taman Mutiara Rini
81300, Skudai
Johor.
Tel : 07-557 0900
Fax : 07-557 1244
9.
Permas Jaya
23 & 25,
Jalan Permas 10/2,
Bandar Baru Permas Jaya,
81750 Johor Bahru,
Johor.
Tel : 07-386 3703
Fax : 07-386 5061
10. Segamat
No. 1, Ground Floor,
Jalan Nagasari 23,
Bandar Segamat Baru,
85000 Segamat, Johor.
Tel : 07-943 1378
Fax : 07-943 1373
11. Tampoi
49 & 51,
Jalan Sri Perkasa 2/1,
Taman Tampoi Utara,
81200 Tampoi, Johor Bahru,
Johor.
Tel : 07-241 4946
Fax : 07-241 4953
PERAK
1.
Ipoh
No. 1 & 3,
Ground & First Floor,
Persiaran Greentown 9,
Greentown Business Centre,
30450 Ipoh,
Perak.
Tel : 05-255 0980
Fax : 05-255 0976
2.
Ipoh Garden
No. 27A-27A1,
Jalan Sultan Azlan Shah Utara,
31400 Ipoh,
Perak.
Tel : 05-549 7277
Fax : 05-549 7299
43
Network Of Branches
(cont’d)
3.
Lumut
Tingkat Bawah,
Kompleks Mutiara Armada,
Jalan Nakhoda,
Pengkalan TLDM,
32100 Lumut,
Perak.
Tel : 05-683 5051
Fax : 05-683 5579
3.
4.
4.
5.
6.
Sitiawan
No. 11 & 12, Taman Sitiawan 1,
Jalan Lumut,
32000 Sitiawan,
Perak.
Tel : 05-692 8401
Fax : 05-691 7339
Taiping
No. 40 & 42,
Jalan Tupai,
34000 Taiping,
Perak.
Tel : 05-806 6816
Fax : 05-808 0432
Teluk Intan
11, Medan Sri Intan,
Jalan Sekolah,
36000 Teluk Intan,
Perak.
Tel : 05-621 0130
Fax : 05-621 0128
PULAU PINANG
1.
5.
Bayan Baru
124 & 126, Jalan Mayang Pasir,
Taman Sri Tunas,
11950 Bayan Baru,
Pulau Pinang.
Tel : 04-644 7593
Fax : 04-645 2709
2.
Butterworth
55-57, Jalan Selat,
Taman Selat,
P.O.Box 165,
Off Jalan Bagan Luar,
12000 Butterworth,
Pulau Pinang.
Tel : 04-333 1372
Fax : 04-332 3299
44
Annual Report 2011
6.
7.
8.
Fettes Park
98-G-32,
Jalan Fettes,
Prima Tanjung Business Centre,
Tanjung Tokong,
11200 Pulau Pinang.
Tel : 04-899 9069
Fax : 04-899 0767
KEDAH
1.
Alor Setar
No. 147 & 148,
Susuran Sultan Abdul Hamid 8,
Kompleks Sultan Abdul Hamid,
Fasa 2 Persiaran Sultan
Abdul Hamid,
05050 Alor Setar,
Kedah.
Tel : 04-772 1477
Fax : 04-771 4796
2.
Kulim
No. 13 & 14,
Jalan KLC Satu (1)
Kulim Landmark Central,
09000 Kulim,
Kedah Darul Aman
Tel : 04-495 5566
Fax : 04-490 4717
3.
Prai
No. 2, Tingkat Kikik 7,
Taman Inderawasi,
13600 Pulau Pinang.
Tel : 04-399 3900
Fax : 04-397 9243
Langkawi
149-151,
Persiaran Bunga Raya,
Langkawi Mall,
07000 Kuah,
Langkawi,
Kedah.
Tel : 04-966 4426
Fax : 04-966 4717
4.
Seberang Jaya
No. 10, Jalan Todak Satu,
Pusat Bandar Seberang Jaya,
13700 Prai,
Pulau Pinang.
Tel : 04-399 5881
Fax : 04-399 2881
Sungai Petani
No. 55, Jalan Perdana Heights,
2/2 Perdana Heights
08000 Sungai Petani, Kedah
Tel : 04-422 0831
Fax : 04-422 6675
TERENGGANU
Jalan Macalister
No. 104C, 104D & 104E,
Jalan Macalister,
10400 Pulau Pinang.
Tel : 04-229 1495
Fax : 04-226 1530
Kepala Batas
Lot 1317 & 1318,
Lorong Malinja,
Taman Sepakat,
Off Jalan Butterworth,
13200 Kepala Batas,
Seberang Prai Utara,
Pulau Pinang.
Tel : 04-575 1824
Fax : 04-575 1975
Wisma Pelaut
1A, Light Street,
Wisma Pelaut,
10200 Pulau Pinang.
Tel : 04-263 6633
Fax : 04-261 9801
1.
Kemaman
K711-713,
Wisma IKY Naga,
Jalan Sulaimani,
24000 Kemaman,
Terengganu.
Tel : 09-858 1744
Fax : 09-859 1572
Network Of Branches
(cont’d)
2.
Kemaman Supply Base
Ground Floor,
Admin Building Block B,
Kemaman Supply Base,
24007 Kemaman,
Terengganu.
Tel : 09-863 1297
Fax : 09-863 1295
4.
Temerloh
9, Ground Floor,
Jalan Ahmad Shah,
28000 Temerloh,
Pahang.
Tel : 09-296 8811
Fax : 09-296 8800
SARAWAK
1.
Bintulu
Sub Lot 13,
Off Lot 3299,
Parkcity Commerce Square,
97000 Bintulu,
Sarawak.
Tel : 086-314 248
Fax : 086-314 206
2.
Kuching
Lot 247 & 248,
Section 49, KTLD,
Jalan Tuanku Abdul Rahman,
93100 Kuching,
Sarawak
Tel : 082-422 909
Fax : 082-257 366
3.
Miri
Lot 2387 & 2388,
Block A4,
Jalan Boulevard 1A,
Boulevard Commercial Center,
KM 3, Jalan Miri-Pujut,
98000 Miri,
Sarawak.
Tel : 085-437 442
Fax : 085-437 297
4.
Prince Commercial Centre
No. 1&2, Jalan Penrissen Batu 7,
Kota Sentosa, 93250 Kuching,
Sarawak.
Tel : 082-613 466
Fax : 082-612 088
5.
Sibu
No. 91 & 93,
Jalan Kampung Nyabor,
96000 Sibu,
Sarawak.
Tel : 084-325 926
Fax : 084-325 960
PERLIS
KELANTAN
1.
1.
Jeli
No. A1 & A2, Blok A,
Bandar Baru Bukit Bunga,
11700 Bukit Bunga,
Tanah Merah,
Kelantan.
Tel : 09-946 8955
Fax : 09-946 8954
2.
Kota Bharu
13788H & 3788I,
Seksyen 13,
Jalan Sultan Ibrahim,
15050 Kota Bharu,
Kelantan.
Tel : 09-744 5688
Fax : 09-744 2202
Kangar
A2, Taman Pengkalan Asam,
Jalan Alor Setar-Kangar,
01000 Kangar,
Perlis.
Tel : 04-977 8669
Fax : 04-977 8566
SABAH
PAHANG
1.
Jengka
Nadi Kota,
26400 Bandar Jengka,
Pahang.
Tel : 09-466 2233
Fax : 09-466 2422
2.
Kuantan
1, Jalan Tun Ismail,
P.O.Box 354,
25740 Kuantan,
Pahang.
Tel : 09-515 7146
Fax : 09-513 4027
3.
Mentakab
70, Jalan Temerloh,
28400 Mentakab,
Pahang.
Tel : 09-278 4487
Fax : 09-277 6654
1.
Jalan Gaya, Kota Kinabalu
No. 86,
Jalan Gaya,
88000 Kota Kinabalu,
Sabah.
Tel : 088-230 213
Fax : 088-212 476
2.
Kota Kinabalu
Lot 19 & 20, Block K,
Sadong Jaya Complex,
Jalan Ikan Juara 3,
Karamunsing,
88300 Kota Kinabalu,
Sabah.
Tel : 088-264 410
Fax : 088-261 414
3.
Sandakan
Lot No. 163 & 164,
Block 18, Prima Square,
Batu 4, Jalan Utara,
90000 Sandakan, Sabah.
Tel : 089-224 577
Fax : 089-224 566
4.
Tawau
TB 281, 282 & 283,
Jalan Haji Karim,
Town Extension II,
P.O. Box 630,
91008 Tawau,
Sabah.
Tel : 089-778 197
Fax : 089-762 199
45
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT THE 36TH ANNUAL GENERAL
MEETING OF AFFIN BANK BERHAD WILL BE HELD AT THE BOARD
ROOM, 19TH FLOOR, MENARA AFFIN, 80, JALAN RAJA CHULAN,
50200 KUALA LUMPUR ON 21st MARCH 2012 AT 5.30 P.M. FOR THE
TRANSACTION OF THE FOLLOWING BUSINESS:Agenda:
1.
To receive the Statutory Statements of Accounts for the year ended 31 December 2011 together with the Directors' and Auditors'
Reports thereon.
2.
To declare a final tax exempted dividend of 5 Sen amounting to RM71,964,269.00 for the financial year ended 31 December 2011.
3.
To re-elect the following Directors who retire pursuant to Article 91(a) of the Articles of Association and who, being eligible, offer
themselves for re-election:(a)
(b)
YBhg. Dato’ Sri Abdul Aziz bin Abdul Rahman
Mr. Aubrey Li Kwok-Sing
4.
To re-elect YBhg. Tan Sri Dato’ Seri Mohamed Jawhar bin Hassan who retires in accordance with Article 91(e) of the Company’s
Article of Association and who being eligible, offers himself for re-election.
5.
To consider and if thought fit, to pass the following resolutions in accordance with Section 129(6) of the Companies Act, 1965:(a)
“That pursuant to Section 129(6) of the Companies Act, 1965, YBhg. Jen Tan Sri Dato’ Seri Ismail bin Haji Omar (Bersara)
be and is hereby re-appointed as Director of the Company to hold office until the next Annual General Meeting”.
6.
To appoint Messrs PricewaterhouseCoopers as Auditors for the financial year ending 31 December 2012 and to authorise the
Directors to fix their remuneration
7.
To approve Directors’ fees and Committees fees for 2011.
8.
To transact any other ordinary business.
BY ORDER OF THE BOARD
NIMMA SAFIRA KHALID
Secretary
NOTE:
A member entitled to attend and vote at the Meeting is entitled to appoint
The instrument appointing a proxy and the power of attorney or other
a proxy to attend and vote instead of him and the proxy need not be a
authority, if any, under which it is signed or a notarially certified copy of
member of the Company.
such power or authority shall be deposited at the Company’s registered
office at the 17th Floor, Menara Affin, 80, Jalan Raja Chulan, 50200 Kuala
The instrument appointing a proxy shall be in writing under the hand of the
Lumpur, at least forty-eight (48) hours before the time appointed for holding
appointor of his attorney duly authorised in writing or, if the appointor is a
the Meeting or adjourned Meeting as the case may be otherwise the
corporation, either under the seal or in some other manner approved
person so named shall not be entitled to vote in respect thereof.
by Directors.
46
Annual Report 2011
FINANCIAL
STATEMENTS
48 Directors' Report
64 Statements of Financial Position
65 Income Statements
66 Statements of Comprehensive Income
67 Statement of Changes in Equity
69 Statements of Cash Flows
72 Summary of Significant
Accounting Policies
90 Notes to the Financial Statements
181 Statement by Directors
181 Statutory Declaration
182 Independent Auditors' Report
184 Basel II Pillar 3 Disclosures
DIRECTORS’ REPORT
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
The Directors hereby submit their report together with the audited financial statements of the Group and the Bank for the financial year
ended 31 December 2011.
PRINCIPAL ACTIVITIES
The principal activities of the Bank during the financial year are banking and related financial services. The principal activities of the
subsidiaries are Islamic banking business, property management services, nominee and trustee services. Islamic banking business
refers generally to the acceptance of deposits and granting of financing under the Shariah principles. There were no significant changes
in the nature of these activities during the financial year.
FINANCIAL RESULTS
The Group
RM'000
The Bank
RM'000
Profit before taxation and zakat
Taxation and zakat
613,065
(173,062)
536,371
(147,875)
Net profit for the financial year
440,003
388,496
DIVIDENDS
The dividends on ordinary shares paid or declared by the Bank since 31 December 2010 were as follows:
In respect of the financial year ended 31 December 2010 as shown in the Directors' report for that financial year:
RM'000
Final tax exempt dividend of 5 sen per share paid on 16 March 2011
71,964
In respect of the financial year ended 31 December 2011 :Single-tier interim dividend of 7 sen per share paid on 28 December 2011
100,750
The Directors now recommend the payment of a final tax exempt dividend of 5 sen per share amounting to RM71,964,269 which is
subject to the approval of members at the forthcoming Annual General Meeting of the Bank.
RESERVES AND PROVISIONS
All material transfers to or from reserves or provisions during the financial year are shown in the financial statements and notes to the
financial statements.
BAD AND DOUBTFUL DEBTS AND FINANCING
Before the financial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain that proper
action had been taken in relation to the writing off of bad debts and financing and the making of allowance for bad and doubtful debts
and financing, and satisfied themselves that all known bad debts and financing had been written off and adequate allowances made
for doubtful debts and financing.
At the date of this report, the Directors are not aware of any circumstances which would render the amount written off for bad debts
and financing, or the amount of the allowance for doubtful debts and financing, in the financial statements of the Group and the Bank
inadequate to any substantial extent.
48
Annual Report 2011
DIRECTORS’ REPORT
CURRENT ASSETS
Before the financial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain that any
current assets, other than debts and financing, which were unlikely to realise in the ordinary course of business, their values as shown
in the accounting records of the Group and the Bank, have been written down to an amount which they might expected so to realise.
At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current
assets in the financial statements of the Group and the Bank misleading.
VALUATION METHODS
At the date of this report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing
methods of valuation of assets or liabilities in the Group's and the Bank's financial statements misleading or inappropriate.
CONTINGENT AND OTHER LIABILITIES
At the date of this report there does not exist:
(a)
any charge on the assets of the Group or the Bank which has arisen since the end of the financial year which secures the liabilities
of any other person; or
(b)
any contingent liability in respect of the Group or the Bank that has arisen since the end of the financial year other than in the
ordinary course of banking business or activities of the Group.
No contingent or other liability of the Group or the Bank has become enforceable, or is likely to become enforecable within the period
of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of
the Group or the Bank to meet their obligation as and when they fall due.
CHANGE OF CIRCUMSTANCES
At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial
statements of the Group and the Bank that would render any amount stated in the financial statements misleading.
ITEMS OF AN UNUSUAL NATURE
The results of the operations of the Group and the Bank during the financial year were not, in the opinion of the Directors, substantially
affected by any item, transaction or event of a material and unusual nature.
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a
material and unusual nature likely, in the opinion of the Directors, to affect substantially the results of the operations of the Group or
the Bank for the current financial year in which this report is made.
SIGNIFICANT EVENT DURING THE FINANCIAL YEAR
There is no significant event during the financial year.
SUBSEQUENT EVENTS
The subsequent event to the reporting date is disclosed in Note 45.
49
DIRECTORS’ REPORT
DIRECTORS
The Directors of the Bank who have held office during the period since the date of the last report are:
Jen Tan Sri Dato' Seri Ismail bin Haji Omar (Bersara)
Chairman/Non-Independent Non-Executive
Dato' Zulkiflee Abbas bin Abdul Hamid (Managing Director/Chief Executive Officer)
Non-Independent Executive Director
(Resigned as Director w.e.f 1 November 2011)
Tan Sri Dato' Lodin bin Wok Kamaruddin
Dr Raja Abdul Malek bin Raja Jallaludin
Laksamana Madya Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor (Bersara)
(Resigned as Director w.e.f 30 September 2011)
Dato' Sri Abdul Aziz bin Abdul Rahman
Mr Aubrey Li Kwok-Sing
Mr Brian Li Man-Bun
Non-Independent Non-Executive Director (Alternate Director to Mr Aubrey Li Kwok-Sing)
(Resigned as Alternate Director w.e.f 18 April 2011)
Mr Gary Cheng Shui Hee
Non-Independent Non-Executive Director (Alternate Director to Mr Aubrey Li Kwok-Sing)
(Appointed as Alternate Director w.e.f 18 April 2011)
Mr Stephen Charles Li
(Resigned as Director w.e.f 16 August 2011)
Mr Eric Koh Thong Hau
Non-Independent Non-Executive Director (Alternate Director to Mr Stephen Charles Li)
(Resigned as Alternate Director w.e.f 1 January 2011)
Mr Lee Chor Kee
Non-Independent Non-Executive Director (Alternate Director to Mr Stephen Charles Li)
(Appointed as Alternate Director w.e.f 18 April 2011 and resigned as Alternate Director w.e.f 16 August 2011)
En. Mohd Suffian bin Haji Haron
Tan Sri Dato' Seri Mohamed Jawhar
(Appointed as Director w.e.f 1 November 2011)
50
Annual Report 2011
DIRECTORS’ REPORT
RESPONSIBILITY STATEMENT BY BOARD OF DIRECTORS
In the course of preparing the annual financial statements of the Group and of the Bank, the directors are collectively responsible in
ensuring that these financial statements are drawn up in accordance with MASB Approved Accounting Standards in Malaysia for
Entities Other than Private Entities, Bank Negara Malaysia Guidelines and the provisions of the Companies Act, 1965.
It is the responsibility of the directors to ensure that the financial reporting of the Group and of the Bank present a true and fair view of
the state of affairs of the Group and of the Bank as at 31 December 2011 and of the financial results and cash flows of the Group and
of the Bank for the financial year then ended.
The financial statements are prepared on the going concern basis and the directors have ensured that proper accounting records are
kept, applied the appropriate accounting policies on a consistent basis and made accounting estimates that are reasonable and fair
so as to enable the preparation of the financial statements of the Group and of the Bank with reasonable accuracy.
The directors have also taken the necessary steps to ensure that appropriate systems are in place for the assets of the Group and of
the Bank to be properly safeguarded for the prevention and detection of fraud and other irregularities. The systems, by their nature,
can only provide reasonable and not absolute assurance against material misstatements, whether due to fraud or error.
The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set out on page 181 of the financial statements.
DIRECTORS' INTERESTS
According to the register of Directors' shareholdings, the interest of Directors in office at the end of the financial year in shares, warrants
and options of related companies are as follows:
Ordinary shares of RM1 each
As at
1.1.2011
Bought
Sold
As at
31.12.2011
*808,714
-
-
*808,714
Boustead Heavy Industries Corporation Berhad
2,000,000
-
-
2,000,000
Boustead Petroleum Sdn Berhad
5,916,465
-
-
5,916,465
Al-Hadharah Boustead REIT
250,000
-
-
250,000
Pharmaniaga Berhad
-
-
3,184,538
AFFIN Holdings Berhad
3,184,538^
* Shares held in trust by nominee company
^ Acquisition of shares arising from Boustead Holdings Berhad ('BHB') Dividend in Specie of RM452,273 and subscription of
entitlement of Restricted Offer of RM1,083,814 on 28 October 2011 and 28 December 2011 respectively. On 29 December 2011,
shares acquired under BHB Divestment 2 of RM1,648,351.
51
DIRECTORS’ REPORT
DIRECTORS' INTERESTS (continued)
Ordinary shares of RM10 each; RM5 uncalled
ABB Trustee Berhad ***
As at
1.1.2011
Bought
Transfer
As at
31.12.2011
20,000
20,000
-
-
20,000
20,000
*** Shares held in trust for the Bank
Ordinary shares of 50 sen each
Boustead Holdings Berhad
As at
1.1.2011
Bought
Sold
As at
31.12.2011
26,122,599
-
111,000
26,011,599
Redeemable preference shares of RM1 each
Boustead Petroleum Sdn Berhad
As at
1.1.2011
Bought
Sold
As at
31.12.2011
50
-
-
50
Other than the above, the Directors in office at the end of the financial year did not have any other interest in shares, warrants and
options over shares in the Bank or its related corporations during the financial year.
DIRECTORS' BENEFITS
During and at the end of the financial year, no other arrangements subsisted to which the Bank or any of its subsidiaries is a party with
the object or objects of enabling Directors of the Bank or any of its subsidiaries to acquire benefits by means of the acquisition of shares
in, or debenture of, the Bank or any other body corporate, except for the share options granted to directors of the Bank by AFFIN
Holdings Berhad, Boustead Holdings Berhad and Lembaga Tabung Angkatan Tentera.
Since the end of the previous financial year, no Director of the Bank has received or become entitled to receive a benefit (other than
the fees and other emoluments shown in the Note 31 to the financial statements) by reason of a contract made by the Bank or by a
related corporation with the Director or with a firm of which he is a member or with a company in which he has a substantial
financial interest.
52
Annual Report 2011
DIRECTORS’ REPORT
CORPORATE GOVERNANCE
The Board of Directors is committed to ensure the highest standards of corporate governance throughout the organisation with the
objectives of safeguarding the interests of all stakeholders and enhancing the shareholders' value and financial performance of the Bank.
The Board considers that it has applied the Best Practices as set out in the Malaysian Code of Corporate Governance throughout the
financial year. The Bank is also required to comply with BNM's Guidelines on Directorship in the banking institutions ('BNM/GP1').
(i)
Board of Directors Responsibility and Oversight
The Board of Directors
The direction and control of the Bank rest firmly with the Board as it effectively assumes the overall responsibility for corporate
governance, strategic direction, formulation of policies and overseeing the investments and operations of the Bank. The Board
exercises independent oversight on the management and bears the overall accountability for the performance of the Bank and
compliance with the principle of good governance.
There is a clear division of responsibility between the Chairman and the Managing Director/Chief Executive Officer to ensure that
there is a balance of power and authority. The Board is responsible for reviewing and approving the longer-term strategic plans
of the Bank as well as the business strategies. It is also responsible for identifying the principal risks and implementation of
appropriate systems to manage those risks as well as reviewing the adequacy and integrity of the Bank's internal control systems,
management information systems, including systems for compliance with applicable laws, regulations and guidelines.
Whilst, the Management Committee, headed by the Managing Director/Chief Executive Officer, is responsible for the
implementation of the strategies and internal control as well as monitoring performance. The Committee is also a forum to
deliberate issues pertaining to the Bank's business, strategic initiatives, risk management, manpower development, supporting
technology platform and business processes.
The Board Meetings
The Board meets on a monthly basis, to review the Bank's financial and business performance, to oversee the conduct of the
Bank's business as well as to ensure that adequate internal control systems are in place. The Board met 17 times during the
financial year.
Board Balance
The Board of Directors comprises of seven Non-Executive Directors and one alternate Non-Executive Director. There are four
Independent Non-Executive Directors and three Non-Independent Non-Executive Directors. The Board of Directors meetings
are presided by a Non-Independent Non-Executive Chairman whose role is clearly separated from the role of the Managing
Director/Chief Executive Officer.
In 2011, the Bank continues to have a strong and experienced Board, befitting its aspiration to become a mid size Bank of
prominence. It consists of representatives from the private sector with suitable qualifications and experience in relevant areas
particularly in banking.
53
DIRECTORS’ REPORT
CORPORATE GOVERNANCE (continued)
(i)
Board of Directors Responsibility and Oversight (continued)
Board Balance (continued)
The composition of the Board and the number of meetings attended by each director are as follows:
Directors
Total Meetings Attended
Chairman / Non-Independent Non-Executive Director
17 / 17
Dato' Zulkiflee Abbas bin Abdul Hamid
Managing Director/Chief Executive Officer
Non-Independent Executive Director
15 / 15
17 / 17
17 / 17
14 / 14
16 / 17
54
6 / 17
Mr Brian Li Man-Bun
(Alternate Director to Mr Aubrey Li Kwok-Sing)
0/7
Mr Gary Cheng Shui Hee
(Alternate Director to Mr Aubrey Li Kwok-Sing)
5 / 10
6 / 12
Mr Eric Koh Thong Hau
(Alternate Director to Mr Stephen Charles Li)
0/0
Mr Lee Chor Kee
(Alternate Director to Mr Stephen Charles Li)
1/5
Annual Report 2011
DIRECTORS’ REPORT
(i)
Board Balance (continued)
Directors
16 / 17
(* Attended AFFIN Bank's Special Board Meeting by invitation on 12 May 2011)
2/3*
Board Committees
Nomination Committee
Nominating Committee was established to provide a formal and transparent procedure for the appointment of Directors and
Managing Director/Chief Executive Officer. The committee also assesses the effectiveness of the Board as a whole, contribution
of each Director, contribution of the Board's various committees and the performance of Managing Director/Chief Executive
Officer and key senior management officers.
During the financial year ended 31 December 2011, a total of 5 meetings were held. The Nominating Committee comprises the
following members and the details of attendance of each member at the Nominating Committee meetings held during the financial
year are as follows:
Members
Chairman/Independent Non-Executive Director
5/5
Member/Non-Independent Executive Director
4/4
Member/Non-Independent Non-Executive Director
3/3
Member/Independent Non-Executive Director
4/5
5/5
55
DIRECTORS’ REPORT
(i)
Board Committees (continued)
Remuneration Committee
Remuneration Committee was established to evaluate and recommend a framework of remuneration for Directors, the Chief
Executive Officer and key senior management officers that is competitive and consistent with the Bank's culture, objectives and
strategy.
During the financial year ended 31 December 2011, a total of 6 meetings were held. The Remuneration Committee comprises
the following members and the details of attendance of each member at the Remuneration Committee meetings held during the
financial year are as follows:
Members
6/6
4/4
6/6
(*Attended AFFIN Bank's Special Board Remuneration meeting by invitation on 22 April 2011)
1 / 1*
Shariah Committee
The Bank's business activities are subject to Shariah compliance and conformation by the Shariah Committee. The Shariah
Committee is formed as legislated under Section 3(5)(b) of the Islamic Banking Act, 1983 and as per Shariah Governance
Framework for Islamic Financial Institutions.
The duties and responsibility of the Shariah Committee are as follows:
56
•
To advise the Board on Shariah matters in order to ensure that the business operations of the Bank comply with the Shariah
principles at all times;
•
To endorse and validate relevant documentations of the Bank's products to ensure that the products comply with Shariah
principles; and
•
To advise the Bank on matters to be referred to the Shariah Advisory Council.
Annual Report 2011
DIRECTORS’ REPORT
(i)
Board Committees (continued)
Shariah Committee (continued)
The Shariah Committee was established in December 1995. During the year, a total of 8 meetings were held. The Shariah
Committee comprises the following members and the details of attendance of each member at the Shariah Committee meetings
held are as follows:
Members
(ii)
Associate Professor Dr. Asyraf Wajdi bin Dato' Dusuki
Chairman
8/8
Associate Professor Dr. Said Bouheraoua
Member
8/8
Associate Professor Dr. Md Khalil bin Ruslan
Member
(Resigned as member w.e.f 1 October 2011)
6/6
Assistant Professor Dr. Ahmad Azam bin Othman
Member
(Appointed as member w.e.f 1 October 2011)
2/2
Dr. Yasmin Hanani binti Mohd Safian
Member
1/2
Dr. Zulkifli bin Hasan
Member
2/2
Risk Management
The Risk Management function, operating in an independent capacity, is part of the Bank's senior management structure which
works closely as a team in managing risks to enhance stakeholders' value.
The Risk Management function provides support to the Board Risk Management Committee ('BRMC'). Committees namely
Board Loan Recovery Committee ('BLRC'), Management Loan Committee ('MLC'), Asset and Liability Management Committee
('ALCO') and Operational Risk Management Committee assist the BRMC in managing credit, liquidity and operational risk
respectively.
Responsibilities of these committees include:
•
•
•
•
risk identification
risk assessment and measurement
risk control and migration
risk monitoring
57
DIRECTORS’ REPORT
(ii)
Risk Management (continued)
Board Risk Management Committee ('BRMC')
The main function of Board Risk Management Committee is to assist the Board in its supervisory role in the management of risk
in the Bank. It has responsibility for approving and reviewing the credit risk strategy, credit risk framework and credit policies of
the Bank.
BRMC was established to provide oversight and management of all risks in the Bank. The Committee also ensures that the
procedures and framework in relation to identifying, measuring, monitoring and controlling risk are operating effectively. The
Bank's risk management framework is set out in Note 38 to the financial statements.
The BRMC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during the financial year ended 31
December 2011, a total of 4 meetings were held. The BRMC comprises the following members and details of attendance of each
member at the BRMC meetings held during the financial year are as follows:
Members
4/4
3/4
(Representative from AFFIN Islamic Bank Berhad)
3/4
Board Loan Review and Recovery Committee ('BLRC')
Board Loan Review Committee critically reviews loans and other credit facilities with higher risk implications, after due process
of checking, analysis, review and recommendation by the Credit Risk Management function, and if found necessary, exercise the
power to veto loan applications that have been accepted by the Management Loan Committee. The Committee is also responsible
to review on the impaired loans presented by Management.
The BLRC meeting for the Bank were jointly held with AFFIN Islamic Bank and during the financial year ended 31 December 2011,
a total of 14 meetings were held. The BLRC comprises the following members and details of attendance of each member at the
BLRC meetings held during the financial year are as follows:
Members
58
Chairman/Non-Independent Non-Executive Director
14 / 14
(Represent AFFIN Islamic Bank Berhad w.e.f 6 October 2011)
14 / 14
(Represent AFFIN Islamic Bank Berhad w.e.f 1 January 2011 to 8 September 2011)
14 / 14
Annual Report 2011
DIRECTORS’ REPORT
(ii)
Risk Management (continued)
Management Loan Committee ('MLC')
Management Loan Committee approves complex and larger loans and workout/recovery proposals beyond the delegated
authority of the concerned individual senior management personnel of the Bank.
Individual approvers
For the delegated authority, a dual sign-off approval system is in place, independent of business imperatives.
Asset and Liability Management Committee ('ALCO')
ALCO's responsibilities include:
•
•
•
•
•
•
•
•
•
•
•
Managing the asset and liability of the Bank through coordination of the Bank's overall planning process including strategic
planning, budgeting and asset and liability management process;
Directing the Bank's overall acquisition and allocation of funds;
Prudently managing the Bank's interest rate exposure;
Determine the overall Balance Sheet strategy and ensuring policy compliance;
Determined the type and scope of derivative activities, approve individual derivative transactions as well as control over the
level of exposure in derivatives;
Reviewing market risks in the Bank's trading portfolios;
Managing the effective usage of economic and regulatory capital throughout the organisation;
Reviewing and recommending the capital plan for approval;
Approving capital management standards and policies, capital raising and repayment transactions;
Reviewing quarterly capital adequacy monitoring reports; and
Reviewing and approving key assumptions inherent in economic capital modeling and stress/scenario tests.
Operational Risk Management Committee
Responsibilities of these committees include:
•
•
•
•
•
•
•
To evaluate operational risks issues on escalating importance/strategic risk exposure;
To review and recommend on broad operational risks management policies best practices for adoption by the Bank's
operating units;
To review the effectiveness of broad internal controls and making recommendation on changes if necessary;
To review/approve recommendation on operational risk management groups section up to address specific issue;
To take the lead in inculcating an operational risks awareness culture;
To approve operational risk management methodologies/measurements tools; and
To review and approve the strategic operational risk management initiatives/plans and to endorse for BRMC's approval if
necessary.
59
DIRECTORS’ REPORT
(iii) Internal Audit and Internal Control Activities
In accordance with Bank Negara Malaysia's GP10 guidelines, the Group Internal Audit Division ('GIA') conducts continuous
reviews on auditable areas within the Bank. The continuous reviews by GIA are focused on areas of significant risks and
effectiveness of internal control in accordance to the audit plan approved by the Audit and Examination Committee ('AEC'). The
risk highlighted on the respective auditable areas as well as recommendation made by the GIA are addressed at AEC and
Management meetings on bi-monthly basis. The AEC also conduct annual reviews on the adequacy of internal audit function,
scope of work, resources and budget of GIA.
At present, GIA consists of Operational Audit, IS Audit, Credit Review, Investigation and Compliance. Audit activities include these
key components:
•
Conduct audit on all auditable entities (Head Office, branches and subsidiaries) processes, services, products, system and
provide an independent assessment to the Board of Directors, AEC and Management that appropriate control environment
is maintained with clear authority and responsibility with sufficient staff and resources to carry out control responsibilities.
•
Perform risk assessments to identify risk and evaluate actions taken to provide reasonable assurance that procedures and
controls exist to contain those risks.
•
Maintain strong control activities including documented processes and system incorporating adequate controls to produce
accurate financial data and provide for the safeguarding of assets, and a documented review of reported results.
•
Ensure effective information flows and communication, including:
-
•
training and the dissemination of standards and requirements;
an information system to produce and convey complete, accurate and timely data including financial data;
the upward communication of trends, developments and emerging issues.
Monitor controls, including procedures to verify that controls are in place and functioning, follow up on corrective action on
control finding until its full resolution.
Based on GIA's review, identification and assessment of risk, testing and evaluation of controls, GIA will provide an opinion
on the effectiveness of internal controls maintained by each entity.
The AEC comprises members of the Bank's Board of Directors whose primary function is to assist the Board of Directors in its
supervision over:
•
The reliability and integrity of accounting policies and financial reporting and disclosure practices,
•
The provision of advice to the Board with regards to the financial statements and business risks to enable the Board to fulfill
its fiduciary duties and obligations, and
•
The establishment and maintenance of processes to ensure that they:
-
are in compliance with all applicable laws, regulations and company policies; and
have adequately addressed the risk relating to internal controls and system, management of inherent and business
risks, and ensuring that the assets are properly managed and safeguarded.
The AEC is made up of at least three but not more than five members appointed by the Board of Directors from among its nonexecutive directors.
60
Annual Report 2011
DIRECTORS’ REPORT
(iii) Internal Audit and Internal Control Activities (continued)
The AEC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during the financial year ended 31 December
2011, a total of 10 meetings were held. The Audit and Examination Committee comprises the following members and details of
attendance of each member at the Audit and Examination Committee meetings held during the financial year are as follows:
Members
10 / 10
10 / 10
(Representative from AFFIN Islamic Bank Berhad)
10 / 10
(iv) Management Reports
Before each Board meeting, Directors are provided with a complete set of board papers itemised in the agenda for Board's
review/approval and/or notation.
The Board monitors the Bank's performance by reviewing the monthly Management Report, which provides a comprehensive
review and analysis of the Bank's operations and financial issues. In addition, the minutes of the Board Committees and
Management Committees meetings and other issues are also tabled and considered by the Board.
Procedures are in place for Directors to seek both independent professional advice at the Bank's expense and the advice and
services of the Company Secretary in order to fulfil their duties and specific responsibilities.
BUSINESS PLAN AND STRATEGY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Notwithstanding the intense competition in the banking industry and the difficult business environment in 2011, the Bank made
continuous efforts to build on its core business and internal resource capability. In terms of profitability, the Bank’s performance has
become more resilient as it continued to strengthen its funding structure, liquidity position and capitalisation level. One of the Bank’s
main emphasis was also on expansion. The Bank embarked on a rebuilding programme by diagnosing business development problems
at existing branches and relocating a number of branches to more vibrant commercial vicinities. New branches were also opened to
improve the Bank’s presence in the market. This has ultimately contributed to the overall growth and profitability of the Bank.
The Bank was able to ensure sustainable business growth through:
•
•
•
•
•
Aggressive branch expansion and relocation programs which optimised branch networks further develop the deposits business
sector especially the retail segment
Human capital restructuring and development
Product innovations and campaigns
Improving customer touchpoints to ensure excellent & efficient customer service
Continuous improvement on risk management practices to be abreast with prevailing economic climate.
The Bank’s lending activities remained focused on consumer financing and small medium enterprises ('SME'). During the year the
Bank’s total gross loan grew by 14.19% with hire purchase and home mortgage segment and SME financing increasing by 65.8%.
This loan growth is equally matched with a strong growth in customer deposits. The Bank recorded an increase of 12.6% in its customer
deposits portfolio (excluding NID), increasing its consumer deposits base from 19.7% in 2010 to 23.5% in 2011.
61
DIRECTORS’ REPORT
BUSINESS PLAN AND STRATEGY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011(continued)
The Group’s asset quality remained resilient despite a more stringent classification of impaired loans under FRS139. The strong asset
quality is reflected by the lower net impaired loan from 2.02% in 2010 to 1.31% in 2011.
Overall for 2011, the Group’s success can be attributed to the Group’s transformation effort through various activities such as branch
expansion, relocation, product innovation, aggressive marketing, prudent lending policies, strong risk management practice and efficient
customer services.
BUSINESS OUTLOOK FOR 2012
Building on the momentum created in 2011, the Bank’s main focus will be to further leverage on AFFIN Banking Group ('ABG') strengths
by cross selling and customising products in order to achieve sustainable business growth. The Group’s business is expected to
remain strong despite intense competition amid further liberalisation, consolidation and regulatory changes in year 2012.
For Consumer Banking, the Bank will continue to aggressively market for consumer deposit through campaigns as well as new product
launches targeting selective clientele. On a broader perspective, the Bank will look at how it grows its loans and advances by digging
deeper into identifying market segments and enhancing existing clientele portfolios. Focus will be on cost capital and growing SME
loans as well as pushing its fee income base.
RATING BY EXTERNAL AGENCIES
The Bank has been rated by the following external rating agency:
Name of rating agency:
Date of rating:
Rating classifications:
- Long term:
- Short term:
RATING AGENCY MALAYSIA BERHAD
19 July 2011
A1
P1
RAM has reaffirmed the Bank's long-term and short-term financial institution ratings, at A1 and P1, respectively, with a stable outlook.
'A' rating is defined by RAM as being able to offer adequate safety for timely payment of interest and principal, and has adequate credit
profile but possess one or more problem areas, giving rise to the possibility of future riskiness. Entities rated in this category have
generally performed at industry average and are considered to be more vulnerable to changes in economic condition than those rated
in the higher categories. The subscript 1 in this category indicates as higher end of its generic rating in the A category. A P1 rating is
defined by RAM as obligations which are supported by superior ability with regards to timely payment of obligations.
ZAKAT
The Bank's subsidiary, AFFIN Islamic Bank Berhad ('AFFIN Islamic') is obliged to pay zakat to comply with the principles of shariah.
AFFIN Islamic does not pay zakat on behalf of the shareholders or depositors.
62
Annual Report 2011
DIRECTORS’ REPORT
HOLDING COMPANY AND ULTIMATE HOLDING CORPORATE BODY
The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the ultimate holding
corporate body is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung Angkatan Tentera Act, 1973.
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
In accordance with resolution of the Board of Directors dated 28 February 2012.
JEN TAN SRI DATO' SERI ISMAIL BIN HAJI OMAR (BERSARA)
Chairman
Director
63
STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2011
Note
ASSETS
Cash and short-term funds
Deposits and placements with banks and
other financial institutions
Financial assets held-for-trading
Financial investments available-for-sale
Financial investments held-to-maturity
Loans, advances and financing
Other assets
Derivative financial assets
Tax recoverable
Deferred tax assets
Statutory deposits with Bank Negara Malaysia
Investment in subsidiaries
Investment in jointly controlled entity
Amount due from subsidiaries
Amount due from jointly controlled entity
Property and equipment
Intangible assets
9,879,366
8,640,457
5,527,439
6,108,452
3
4
5
6
7
8
9
486,694
149,832
6,698,418
521,105
29,692,266
166,543
49,901
3,430
1,268,650
290
2,745
172,830
156,133
192,522
149,945
5,804,417
432,537
25,974,847
186,461
54,981
49,930
4,291
245,130
500
2,745
170,722
154,436
1,098,988
149,832
5,214,533
521,105
25,318,061
116,690
49,901
1,108,650
287,389
356,897
164,034
156,771
564,917
149,945
4,455,472
432,537
22,419,251
184,582
54,981
46,072
245,130
287,429
185,271
162,760
156,868
49,248,203
42,063,921
40,070,290
35,453,667
17
36,547,444
30,982,407
29,072,424
25,432,075
18
7,526,912
82,059
6,619,735
110,161
6,043,837
82,059
5,749,003
110,161
19
20
21
428,459
326,735
97,399
16,242
20,118
601,850
288,891
353,892
70,195
22
24,932
300,682
428,459
309,134
97,399
16,212
48,307
19,211
601,850
288,891
317,002
70,195
47,926
24,932
300,682
45,647,218
38,750,917
36,718,892
32,340,867
1,439,285
2,161,700
1,439,285
1,873,719
1,439,285
1,912,113
1,439,285
1,673,515
3,600,985
3,313,004
3,351,398
3,112,800
49,248,203
42,063,921
40,070,290
35,453,667
19,919,985
18,844,780
18,030,311
16,821,892
10
11
12
13
14
15
16
22
10
23
TOTAL LIABILITIES
Share capital
Reserves
24
25
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
COMMITMENTS AND CONTINGENCIES
The Bank
2011
2010
RM'000
RM'000
2
TOTAL ASSETS
LIABILITIES AND EQUITY
Deposits from customers
Deposits and placements of banks and
Bills and acceptances payable
Recourse obligation on loans
sold to Cagamas Berhad
Other liabilities
Derivative financial liabilities
Provision for taxation
Amount due to subsidiaries
Deferred tax liabilities
Subordinated term loan
The Group
2011
2010
RM'000
RM'000
37
The accounting policies on pages 72 to 89 and the notes on pages 90 to 180 form an integral part of these financial statements.
64
Annual Report 2011
INCOME STATEMENTS
Note
The Group
2011
2010
RM'000
RM'000
1,795,662
(1,020,847)
1,816,728
(1,020,882)
Interest income
Interest expense
26
27
Net interest income
Islamic Banking income
28
774,815
198,933
750,987
177,783
795,846
-
762,687
-
Other operating income
29
973,748
186,884
928,770
227,351
795,846
185,407
762,687
226,904
Net income
Other operating expense
30
1,160,632
(533,713)
1,156,121
(530,911)
981,253
(442,001)
989,591
(440,145)
626,919
625,210
539,252
549,446
(12,699)
(945)
(95,394)
(7,912)
613,275
(210)
521,904
-
536,371
-
474,794
-
613,065
(167,570)
(5,492)
521,904
(136,041)
(4,626)
536,371
(147,875)
-
474,794
(128,089)
-
Net profit after taxation and zakat
440,003
381,237
388,496
346,705
Attributable to:
Equity holders of the Bank
440,003
381,237
388,496
346,705
30.6
26.5
27.0
24.1
Operating profit before allowances
Allowances for losses on loans,
advances and financing
Impairment losses on securities
32
Share of joint venture's results
Taxation
Zakat
Earnings per share (sen)
- Basic/fully diluted
34
35
1,511,835
(760,848)
The Bank
2011
2010
RM'000
RM'000
(1,936)
(945)
1,523,568
(760,881)
(66,740)
(7,912)
65
STATEMENTS OF COMPREHENSIVE INCOME
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
440,003
381,237
388,496
346,705
27,622
16,474
30,420
11,334
(6,930)
(4,115)
(7,604)
(2,834)
20,692
12,359
22,816
8,500
Total comprehensive income for the financial year
460,695
393,596
411,312
355,205
Attributable to equity holders of the Bank:
- Total comprehensive income
460,695
393,596
411,312
355,205
Note
Profit after taxation and zakat
Other comprehensive income:
Net fair value change in financial
investments available-for-sale
Deferred tax on financial investments
available-for-sale
Other comprehensive income for the
financial year, net of tax
10
66
Annual Report 2011
STATEMENT OF CHANGES IN EQUITY
Attributable to Equity Holders of the Bank
Share
capital
RM'000
Share
premium
RM'000
Statutory
reserves
RM'000
AFS
revaluation
reserves
RM'000
Retained
profits
RM'000
Total
RM'000
1,439,285
408,389
888,910
54,249
522,171
3,313,004
-
-
-
20,692
440,003
-
440,003
20,692
Total comprehensive income
-
-
-
20,692
440,003
460,695
Dividend paid (Note 36)
Transfer to statutory reserves
-
-
122,134
-
(172,714)
(122,134)
(172,714)
-
At 31 December 2011
1,439,285
408,389
1,011,044
74,941
667,326
3,600,985
At 1 January 2010
Comprehensive income:
Other comprehensive income
1,439,285
408,389
789,221
41,890
351,596
3,030,381
-
-
-
12,359
381,237
-
381,237
12,359
-
-
-
12,359
381,237
393,596
-
-
99,689
-
(110,973)
(99,689)
(110,973)
-
1,439,285
408,389
888,910
54,249
522,171
3,313,004
The Group
At 1 January 2011
At 31 December 2010
67
STATEMENT OF CHANGES IN EQUITY
Non-distributable Distributable
Share
capital
RM'000
Share
premium
RM'000
Statutory
reserves
RM'000
AFS
revaluation
reserves
RM'000
Retained
profits
RM'000
Total
RM'000
1,439,285
408,389
807,500
45,795
411,831
3,112,800
-
-
-
22,816
388,496
-
388,496
22,816
-
-
-
22,816
388,496
411,312
-
-
97,124
-
(172,714)
(97,124)
(172,714)
-
At 31 December 2011
1,439,285
408,389
904,624
68,611
530,489
3,351,398
At 1 January 2010
1,439,285
408,389
720,824
37,295
262,775
2,868,568
-
-
-
8,500
346,705
-
346,705
8,500
-
-
-
8,500
346,705
355,205
-
-
86,676
-
(110,973)
(86,676)
(110,973)
-
1,439,285
408,389
807,500
45,795
411,831
3,112,800
The Bank
At 1 January 2011
At 31 December 2010
68
Annual Report 2011
STATEMENTS OF CASH FLOWS
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
613,065
521,904
536,371
474,794
(50)
(141,979)
(23,276)
(311)
(116,495)
(15,522)
(50)
(141,830)
(23,229)
(311)
(116,347)
(15,522)
(23)
(9,705)
(8)
(2,901)
(23)
(9,705)
(8)
(2,901)
(20,568)
(901)
(30,938)
(664)
(20,568)
(901)
(30,938)
(664)
(546)
(24,102)
(2,546)
(1,217)
(23,733)
(2,053)
(546)
(24,102)
(2,378)
(1,217)
(23,635)
(2,053)
9
13,230
17,878
(137)
(6,303)
9,549
9
13,230
17,878
(137)
(6,303)
9,549
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments for items not involving the movement
of cash and cash equivalents:
Interest income:
- financial assets held-for-trading
- financial investments available-for-sale
- financial investments held-to-maturity
Dividend income:
Amortisation of premium less accretion of discount
Gain on sale:
Unrealised loss/(gain) on revaluation
- derivatives
- foreign exchange
Allowance for impairment loss
Depreciation of property and equipment
Property and equipment written-off
Foreclosed properties - diminution in value
Gain on sale of property and equipment
Amortisation of intangible assets
Loss/(gain) on sale of foreclosed properties
Net individual impairment
Net collective impairment
Bad debt and financing written-off
Litigation loss arising from loans
Interest expense - subordinated term loan
Subsidiary - diminution in value
Share of joint venture's results
Operating profit before changes in working capital
945
18,872
423
2,542
(23)
9,366
272
103,338
67,662
15,956
40,000
19,884
210
4,012
3,900
20,071
514
2,440
(219)
16,474
(6,330)
177,354
(3,044)
15,810
78,000
10,633
-
699,933
650,786
945
17,853
414
2,332
(23)
8,836
272
99,682
59,788
15,791
40,000
19,884
40
609,970
4,012
3,900
19,297
513
2,422
(219)
15,658
(6,330)
161,938
(16,409)
15,628
78,000
10,633
573,350
69
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
CASH FLOWS FROM OPERATING ACTIVITIES (continued)
(Increase)/decrease in operating assets:
Interest income from financial assets held-for-trading
Foreign exchange transaction
Other assets
Derivative financial instruments
Statutory deposits with Bank Negara Malaysia
(294,172)
650
50
35,547
(3,904,375)
(132,364)
32,284
(1,023,520)
-
(49,393)
1,609
311
(48,511)
(4,148,877)
167,702
(2,982)
(25,530)
(1,688)
(534,071)
650
50
36,381
(3,074,071)
(84,208)
32,284
(863,520)
(171,245)
-
62,189
1,609
311
(48,921)
(3,450,614)
142,513
(2,982)
(25,530)
46,210
-
Deposits and placements of banks and
Recourse obligation on loans sold to Cagamas Berhad
Other liablilities
5,565,037
4,449,487
3,640,349
3,534,208
907,177
(28,102)
139,568
(66,342)
1,584,726
15,896
(10,943)
(33,551)
294,834
(28,102)
139,568
(46,765)
1,216,567
15,896
(10,943)
(51,542)
Cash generated from operations
Tax paid
Zakat paid
1,931,371
(113,437)
(5,203)
2,549,042
(138,418)
(3,493)
(47,896)
(100,020)
-
2,002,321
(118,028)
-
Net cash generated from/(used in) operating activities
1,812,731
2,407,131
(147,916)
1,884,293
Increase/(decrease) in operating liabilities:
70
Annual Report 2011
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
141,979
23,276
116,495
15,522
141,830
23,229
116,347
15,522
23
9,705
8
2,901
23
9,705
8
2,901
(85,121)
22,946
(85,289)
22,946
(822,654)
14,528
(684,914)
(37,701)
2,166
118,687
(32,893)
(1,718)
2,480
24,941
(9,608)
(1,043)
2,166
118,687
(28,828)
(1,599)
2,480
24,941
(9,482)
(1,043)
(646,550)
189,170
(504,990)
136,919
(18,716)
300,000
(172,714)
(10,495)
(110,973)
(18,716)
300,000
(172,714)
(10,495)
(110,973)
Net cash generated from/(used in) financing activities
108,570
(121,468)
108,570
(121,468)
Net increase/(decrease) in cash and cash equivalents
Net (decrease)/increase in foreign exchange
Cash and cash equivalents at beginning of the financial year
1,274,751
(35,842)
8,640,457
2,474,833
27,843
6,137,781
(544,336)
(36,677)
6,108,452
1,899,744
28,252
4,180,456
CASH AND CASH EQUIVALENTS AT
END OF THE FINANCIAL YEAR (Note 2)
9,879,366
8,640,457
5,527,439
6,108,452
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received:
Dividend income:
Redemption of financial investments
held-to-maturity net of purchase
Net (purchase)/sale of financial investments
available-for-sale
Proceeds from disposal of
- property and equipment
- foreclosed properties
Purchase of property and equipment
Purchase of intangible assets
Net cash (used in)/generated from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Interest payment on subordinated term loan
Increase in subordinated term loan
Payment of dividend
71
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been used consistently in dealing with items which are considered material in relation to the
financial statements. These policies have been consistently applied to all the financial years presented, unless otherwise stated.
(A) BASIS OF PREPARATION
The financial statements of the Group and the Bank have been prepared in accordance with Malaysian Accounting Standards
Board ('MASB') Approved Accounting Standards in Malaysia for Entities Other Than Private Entities, Bank Negara Malaysia
('BNM') Guidelines and the provisions of the Companies Act, 1965. The financial statements incorporate those activities relating
to Islamic banking business which have been undertaken by AFFIN Islamic Bank Berhad, a wholly owned subsidiary of the Bank.
Islamic banking business refers generally to the acceptance of deposits and granting of financing under the Shariah principles.
The financial statements of the Group and the Bank have been prepared under the historical cost convention, unless otherwise
indicated in this summary of significant accounting policies.
The preparation of financial statements in conformity with MASB Approved Accounting Standards in Malaysia for Entities Other
Than Private Entities and BNM Guidelines requires the use of certain critical accounting estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the reported period. It also requires Directors to exercise
judgment in the process of applying the Bank's accounting policies. Although these estimates are based on the Directors' best
knowledge of current events and actions, actual results may differ.
The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in Note 44.
Standards, amendments to published standards and interpretations that are applicable to the Group and are effective
The new accounting standards, amendments and improvements to published standards and interpretations that are effective for
the Group and the Bank’s financial year beginning on or after 1 January 2011 are as follows:
•
Revised FRS 1 “First-time adoption of financial reporting standards”
•
Revised FRS 3 "Business combinations"
•
Revised FRS 127 "Consolidated and separate financial statements"
•
Amendment to FRS 7 "Financial instruments: Disclosures - improving disclosures about financial instruments"
•
Amendments to FRS 1 "First-time adoption of financial reporting standards"
•
Amendment to FRS 132 "Financial instruments: Presentation – Classification of rights issues"
•
IC Interpretation 4 "Determining whether an arrangement contains a lease"
•
IC Interpretation 17 "Distribution of non-cash assets to owners"
•
Improvements to FRSs (2010)
The adoption of the above revised accounting standards, amendments and improvements to the published standards and
interpretations did not have any significant impact to the results of the Group and the Bank.
72
Annual Report 2011
(A) BASIS OF PREPARATION (continued)
Standards, amendments to published standards and interpretations to existing standards that are applicable to the
Group but not yet effective
The Group and the Bank will apply the new standards, amendments to standards and interpretations in the following period:
(i)
Financial year beginning on/after 1 January 2012
In the next financial year, the Group will be adopting the new IFRS-compliant framework, Malaysian Financial Reporting
Standards ('MFRS'). MFRS 1 "First-time adoption of MFRS" provides for certain optional exemptions and certain mandatory
exceptions for first-time MFRS adopters.
•
MFRS 139 "Financial instruments: recognition and measurement" - Bank Negara Malaysia has removed the transitional
provision for banking institutions on loan impairment assessment and provisioning to comply with the MFRS 139
requirements
•
The revised MFRS 124 "Related party disclosures" (effective from 1 January 2012) removes the exemption to disclose
transactions between government-related entities and the government, and all other government-related entities. The
following new disclosures are now required for government related entities:
-
•
(ii)
the name of the government and the nature of their relationship;
the nature and amount of each individually significant transactions; and
the extent of any collectively significant transactions, qualitatively or quantitatively.
IC Interpretation 19 "Extinguishing financial liabilities with equity instruments" (effective from 1 July 2011) provides
clarification when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to
accept the entity’s shares or other equity instruments to settle the financial liability fully or partially. A gain or loss, being
the difference between the carrying value of the financial liability and the fair value of the equity instruments issued, shall
be recognised in income statement. Entities are no longer permitted to reclassify the carrying value of the existing
financial liability into equity with no gain or loss recognised in income statement.
Financial year beginning on/after 1 January 2013
•
MFRS 9 "Financial instruments - classification and measurement of financial assets and financial liabilities" (effective
from 1 January 2015) replaces the multiple classification and measurement models in MFRS 139 with a single model
that has only two classification categories: amortised cost and fair value. The basis of classification depends on the
entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial
asset.
The accounting and presentation for financial liabilities and for de-recognising financial instruments has been relocated
from MFRS 139, without change, except for financial liabilities that are designated at fair value through profit or loss
('FVTPL'). Entities with financial liabilities designated at FVTPL recognise changes in the fair value due to changes in
the liability’s credit risk directly in other comprehensive income ('OCI'). There is no subsequent recycling of the amounts
in OCI to profit or loss, but accumulated gains or losses may be transferred within equity.
The guidance in MFRS 139 on impairment of financial assets and hedge accounting continues to apply.
73
(A) BASIS OF PREPARATION (continued)
Standards, amendments to published standards and interpretations to existing standards that are applicable to the
Group but not yet effective (continued)
(ii)
Financial year beginning on/after 1 January 2013 (continued)
•
MFRS 10 "Consolidated financial statements" (effective from 1 January 2013) changes the definition of control. An
investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. It establishes control as the basis for
determining which entities are consolidated in the consolidated financial statements and sets out the accounting
requirements for the preparation of consolidated financial statements. It replaces all the guidance on control and
consolidation in MFRS 127 "Consolidated and separate financial statements" and IC Interpretation 112 "Consolidation
– special purpose entities".
•
MFRS 11 "Joint arrangements" (effective from 1 January 2013) requires a party to a joint arrangement to determine
the type of joint arrangement in which it is involved by assessing its rights and obligations arising from the arrangement,
rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations
arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts
for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to
the net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures
is no longer allowed.
•
MFRS 12 "Disclosures of interests in other entities" (effective from 1 January 2013) sets out the required disclosures
for entities reporting under the two new standards, MFRS 10 and MFRS 11, and replaces the disclosure requirements
currently found in MFRS 128 "Investments in associates". It requires entities to disclose information that helps financial
statement readers to evaluate the nature, risks and financial effects associated with the entity’s interests in subsidiaries,
associates, joint arrangements and unconsolidated structured entities.
•
MFRS 13 "Fair value measurement" (effective from 1 January 2013) aims to improve consistency and reduce
complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure
requirements for use across MFRSs. The requirements do not extend the use of fair value accounting but provide
guidance on how it should be applied where its use is already required or permitted by other standards. The enhanced
disclosure requirements are similar to those in MFRS 7 "Financial instruments: Disclosures", but apply to all assets and
liabilities measured at fair value, not just financial ones.
•
The revised MFRS 127 "Separate financial statements" (effective from 1 January 2013) includes the provisions on
separate financial statements that are left after the control provisions of MFRS 127 have been included in the new
MFRS 10.
•
The revised MFRS 128 "Investments in associates and joint ventures" (effective from 1 January 2013) includes the
requirements for joint ventures, as well as associates, to be equity accounted following the issue of MFRS 11.
•
Amendment to MFRS 7 "Financial instruments: Disclosures on transfers of financial assets" (effective from 1 July 2011)
promotes transparency in the reporting of transfer transactions and improve users’ understanding of the risk exposures
relating to transfers of financial assets and the effect of those risks on an entity’s financial position, particularly those
involving securitisation of financial assets.
•
Amendment to MFRS 101 "Financial statement presentation" (effective from 1 July 2012) requires entities to separate
items presented in 'other comprehensive income' ('OCI') in the statement of comprehensive income into two groups,
based on whether or not they may be recycled to income statement in the future. The amendments do not address
which items are presented in OCI.
The Group and the Bank will apply these standards when effective.
74
Annual Report 2011
(B) ECONOMIC ENTITIES IN THE GROUP
The consolidated financial statements include the financial statements of the Bank, subsidiaries and a jointly controlled entity, made
up to the end of the financial year.
Subsidiaries
Subsidiaries are all those corporations or other entities over which the Group has power to govern the financial and operating
policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are consolidated using the acquisition method of accounting except for certain business combinations which were
accounted for using the predecessor basis of accounting as follows:
•
subsidiaries that were consolidated prior to 1 April 2002 in accordance with Malaysian Accounting Standard 2 "Accounting
for Acquisitions and Mergers", the generally accepted accounting principles prevailing at that time
•
business combinations consolidated on/after 1 April 2002 but with agreement dates before 1 January 2006 that meet the
conditions of a merger as set out in MASB 21 "Business Combinations"
•
internal group reorganisations, as defined in MASB 21, consolidated on/after 1 April 2002 but with agreement dates before
1 January 2006 where:
-
•
the ultimate shareholders remain the same, and the rights of each such shareholder, relative to the others, are
unchanged; and
the minorities' share of net assets of the Group is not altered by the transfer
combinations involving entities or businesses under common control with agreement dates on/after 1 January 2006.
The Group has taken advantage of the transitional provision provided by MASB 21, FRS 3 and FRS 3 (revised) to apply these
Standards prospectively. Accordingly, business combinations entered into prior to the respective effective dates have not been
restated to comply with these Standards.
Under the acquisition method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to
the Group and are de-consolidated from the date that control ceases.
The consideration transferred for acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and
the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from
a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date.
In a business combination achieved in stages, the previously held equity interest in the acquiree is re-measured at its acquisition
date fair value and the resulting gain or loss is recognised in income statement.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets
acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain
purchase, the gain is recognised in income statement. Refer to accounting policy Note (C) on goodwill.
75
(B) ECONOMIC ENTITIES IN THE GROUP (continued)
Subsidiaries (continued)
Change in accounting policy
The Group has changed its accounting policy on business combinations when it adopted the revised FRS 3 "Business
combinations" and FRS 127 "Consolidated and separate financial statements".
Previously, contingent consideration in a business combination was recognised when it is probable that payment will be made.
Acquisition-related costs were included as part of the cost of business combination. Any adjustment to the fair values of the
subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group was accounted
for as a revaluation.
The Group has applied the new policies prospectively to transactions occurring on or after 1 January 2011. As a consequence,
no adjustments were necessary to any of the amounts previously recognised in the financial statements.
The adoption of the new policies has no impact on the results of the Group as there is no business combination during the year.
Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised
losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary, to ensure consistency with the policies adopted by the Group.
The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group’s share of its net assets
as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary is recognised
in the consolidated income statement.
Changes in ownership interests
When the Group ceases to have control or joint control, any retained interest in the entity is remeasured to its fair value with the
change in carrying amount recognised in income statement. This fair value is its fair value on initial recognition as a financial asset
in accordance with FRS 139. Any amounts previously recognised in other comprehensive income in respect of that entity are
accounted for as if the Group had directly disposed of the related assets or liabilities.
Change in accounting policy
The Group has changed its accounting policy prospectively for transactions occurring on or after 1 January 2011 for transactions
involving the loss of control or joint control when it adopted the revised FRS 127 "Consolidated and Separate Financial
Statements". The revisions to FRS 127 contained consequential amendments to FRS 131 "Interests in Joint Ventures".
Previously when the Group ceased to have control or joint control over an entity, the carrying amount of the investment at the
date control or joint control ceased became its cost on initial measurement as a financial asset in accordance with FRS 139.
The adoption of the new policy has no impact on the results of the Group as there is no transactions involving the loss of control
or joint control during the year.
76
Annual Report 2011
(B) ECONOMIC ENTITIES IN THE GROUP (continued)
Jointly controlled entity
Jointly controlled entities are corporations, partnerships or other entities over which there is contractually agreed sharing of control
by the Group with one or more parties where the strategic financial and operating decisions relating to the entities require
unanimous consent of the parties sharing control.
Investment in jointly controlled entities are accounted for in the consolidated financial statements using the equity method of
accounting and are initially recognised at cost. The Group's investment in jointly controlled entities includes goodwill identified on
acquisition, net of any accumulated impairment loss.
The Group's share of the post-acquisition profits or losses of the jointly controlled entities are recognised in the income statement,
and its share of the post-acquisition movements in reserves are recognised in other comprehensive income. The cummulative
post-acquisition movements are adjusted against the carrying amount of the investment.
When the Group's share of losses in a jointly controlled entities equals or exceeds its interest in the jointly controlled entity,
including any other unsecured receivables, the Group's interest is reduced to nil and recognition of further losses is discontinued
except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the jointly
controlled entity.
Unrealised gains on transactions between the Group and its jointly controlled entity are eliminated to the extent of the Group's
interest in the jointly controlled entity; unrealised losses are also eliminated unless the transaction provides evidence on impairment
of the asset transferred. Where neccessary, adjustments have been made to the financial statements of jointly controlled entities
to ensure consistency of accounting policies with those of the Group.
Investment in subsidiaries and jointly controlled entity
In the Bank's separate financial statements, the investment in subsidiaries and jointly controlled entity is stated at cost less
accumulated impairment losses. At each reporting date, the Bank assesses whether there is any indication of impairment. If such
indication exist, an analysis is performed to assess whether the carrying amount of the investment is fully recoverable. A writedown is made if the carrying amount exceeds the recoverable amount. Any subsequent increase in recoverable amount is
recognised in the income statement (refer to accounting policy D for impairment of non-financial assets).
On disposal of investment in subsidiaries and jointly controlled entity, the difference between disposal proceed and the carrying
amounts of the investments are recognised in profit or loss.
(C) INTANGIBLE ASSET
Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets at
the date of acquisition.
Goodwill on acquisition of subsidiaries are included in the statement of financial position as intangible assets. Goodwill is tested
for impairment annually or more frequently if events or changes in circumstances indicated that the goodwill may be impaired.
The amount retained in the consolidated financial statements is stated at cost less accumulated impairment losses. Impairment
losses on goodwill (inclusive of impairment losses recognised in a previous interim period) are not reversed. Gains and losses on
the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units ('CGU') for the purpose of impairment testing. The allocation is made to those
CGUs that are expected to benefit from the synergies of the business combination in which goodwill arose identified according
to operating segment.
77
(C) INTANGIBLE ASSET (continued)
Computer software
Acquired computer software are capitalised on the basis of the cost incurred to acquire and bring to use the specific software.
These costs are amortised over their estimated useful lives (five years). Computer software classified as intangible asset are
stated at cost less accumulated amortisation and accumulated impairment losses, if any.
Costs associated with developing or maintaining computer software programmes are recognised as an expense when incurred.
Costs that are directly associated with identifiable and unique software products controlled by the Group, and that will probably
generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software
development employee costs and appropriate portion of relevant overhead.
(D) IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the assets's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
The impairment loss is charged to the income statement unless it reverses a previous revaluation in which case it is charged to
the revaluation surplus. Any subsequent increase in recoverable amount is recognised in the income statement unless it reverses
an impairment loss on a revalued asset in which case it is taken to revaluation surplus.
(E)
RECOGNITION OF INTEREST / FINANCING INCOME
Financial assets classified as held-to-maturity and loans and receivables are measured at amortised cost using effective interest
method. Interest income is recognised using effective interest rates ('EIR'), which is the rate that exactly discounts estimated
future cash receipts through the expected life of the loan or, when appropriate, a shorter period to the net carrying amount of
the loan.
When a loan is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow
discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income.
Interest income on impaired financing is recognised using the original effective interest rate.
Islamic financing income is recognised on an accrual basis in accordance with the Shariah principles and Guidelines on Financial
Reporting for Licensed Islamic Banks ('BNM/GP8-i'). Al-Ijarah Thumma Al-Bai' ('AITAB') financing income recognised using the
effective income rates method over the lease terms, whilst Al-Bai' Bithaman Ajil ('BBA'), Al-Murabahah, Al-Istisna' and Bai'-Inah
financing income is recognised on a monthly basis over the period of the financing contracts, based on an agreed profit at the
inception of such contracts.
Interest income from securities portfolio is recognised on an accrual basis using the effective interest method. The interest income
includes coupons earned/accrued and accretion/amortisation of discount/premium on these securities.
78
Annual Report 2011
(F)
RECOGNITION OF FEES, OTHER INCOME AND INTEREST EXPENSE
Loan arrangement fees and commissions are recognised as income when all conditions precedent are fulfilled.
Commitment fees and guarantee fees which are material are recognised as income based on time apportionment.
Dividends from subsidiaries are recognised when the shareholders' right to receive payment is established.
Dividends from securities portfolio are recognised when received.
Fees and other profit from Islamic banking business are recognised on an accrual basis in accordance with the principles
of Shariah.
Interest expense and attributable profit payable on deposits and borrowings are recognised on an accrual basis.
(G) FINANCIAL ASSETS
All financial assets which include derivative financial instruments have to be recognised in the statement of financial position and
measured in accordance with their assigned category.
The Group and the Bank allocates financial assets to the following FRS 139 categories: loans, advances and financing; financial
assets at fair value through profit or loss, financial investments available-for-sale; and financial investments held-to-maturity.
Management determines the classification of its financial instruments at initial recognition.
Loans, advances and financing are non-derivative financial assets with fixed or determinable payments that are not quoted in
active market.
Loans, advances and financing are initially recognised at fair value which is the cash consideration to originate or purchase the
loan including any transaction costs and measured subsequently at amortised cost using the effective interest rate method, less
impairment allowance.
An uncollectible loan, advance and financing or portion of a loan, advance and financing classified as bad is written off after
taking into consideration the realisable value of collateral, if any, when in the judgement of the management, there is no prospect
of recovery.
At each reporting date, the Group and the Bank assess whether there is objective evidence that a loan or group of loans is
impaired. A loan or a group of loans is impaired and impairment losses are incurred only if there is objective evidence of impairment
as a result of one or more events that occurred after the initial recognition of the loan (a ‘loss event’) and that loss event (or events)
has an impact on the estimated future cash flows of the loan or group of loans that can be reliably estimated.
The criteria that the Group and the Bank use to determine that there is objective evidence of an impairment loss include among
others:
•
•
•
•
past due contractual payments;
significant financial difficulties of borrower;
probability of bankruptcy or other financial re-organisation;
default of related borrower.
79
(G) FINANCIAL ASSETS (continued)
Loans, advances and financing (continued)
The estimated period between a loss occurring and its identification for credit cards is six months and for all other loans are
twelve months.
The Group and the Bank first assess whether objective evidence of impairment exists individually for loans that are individually
significant, and individually or collectively for loans that are not individually significant. If the Group and the Bank determine that
no objective evidence of impairment exists for an individually assessed loan, whether significant or not, it includes the loan in a
group of loans with similar credit risk characteristics and collectively assesses them for impairment. Loans that are individually
assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective
assessment of impairment. Loans that are individually assessed for impairment and for which no impairment loss is required
(over collateralised loans) are collectively assessed as a separate segment.
The amount of the loss is measured as the difference between the loan’s carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been incurred) discounted at the loan’s original effective interest rate. The
carrying amount of the loan is reduced through the use of an allowance account and the amount of the loss is recognised in the
income statement. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract.
The calculation of the present value of the estimated future cash flows of a collateralised loan reflects the cash flows that may
result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
For the purposes of a collective evaluation of impairment, loans are grouped on the basis of similar credit risk characteristics. Those
characteristics are relevant to the estimation of future cash flows for groups of such loans by being indicative of the borrowers’
ability to pay all amounts due according to the contractual terms of the loans being evaluated.
Future cash flows in a group of loans that are collectively evaluated for impairment are estimated on the basis of the contractual
cash flows of the loans in the Bank and historical loss experience for loans with credit risk characteristics similar to those in the
Bank. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that
did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical
period that do not currently exist.
Estimates of changes in future cash flows for groups of loans should reflect and be directionally consistent with changes in related
observable data from period to period (for example, changes in unemployment rates, property prices, payment status, or other
factors indicative of changes in the probability of losses in the Group and the Bank and their magnitude). The methodology and
assumptions used for estimating future cash flows are reviewed regularly by the Group and the Bank to reduce any differences
between loss estimates and actual loss experience.
The collective assessment is also subject to the transitional arrangement prescribed in BNM's guidelines on Classification and
Impairment Provisions for Loans/Financing issued on 17 December 2010.
80
Annual Report 2011
Financial assets at fair value through profit or loss
This category comprises two sub-categories: financial assets classified as held-for-trading and financial assets designated by the
Group and the Bank as at fair value through profit or loss upon initial recognition.
A financial asset is classified as held-for-trading if it is acquired or incurred principally for the purpose of selling or repurchasing it
in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is
evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorised as held-fortrading unless they are
designated and effective as hedging instruments. Derivatives are recognised in the statement of financial position as 'Derivative
financial assets' when their fair values are positive. Financial assets held-for-trading consist of debt instruments, including moneymarket paper, traded corporate and bank loans, and equity instruments, as well as financial assets with embedded derivatives.
They are recognised in the statement of financial position as 'Financial assets held-for-trading'.
Financial instruments included in this category are recognised intially at fair value; transaction costs are taken directly to the
income statement. Gains and lossess arising from changes in fair value are included directly in the income statement.
The Group and the Bank may designate certain financial assets upon initial recognition as at fair value through profit or loss (fair
value option). This designation cannot subsequently be changed. The fair value option is only applied when the following conditions
are met:
•
•
•
the application of the fair value option reduces or eliminates an accounting mismatch that would otherwise arise or
the financial assets are part of a portfolio of financial instruments which is risk managed and reported to senior management
on a fair value basis or
the financial assets consists of debt host and an embedded derivatives that must be separated.
Financial assets for which the fair value option is applied are recognised in the statement of financial position as 'Financial assets
designated at fair value'. Fair value changes relating to financial assets designated at fair value through profit or loss are recognised
in the income statement.
The Group and the Bank may choose to reclassify a non-derivative financial assets held-for-trading out of this category where:
•
•
in rare circumstances, it is no longer held for the purpose of selling or repurchasing in the near term or
it is no longer held for purpose of trading, it would have met the definition of a loan and receivable on initial classification
and the Group and the Bank have the intention and ability to hold it for the foreseeable future or until maturity.
Financial investments available-for-sale are non-derivative financial assets that are either designated in this category or not
classified as held-for-trading or held-to-maturity investments.
Investments in equity instruments where there is no quoted market price in an active market and whose fair value cannot be reliably
measured, will be stated at cost.
Any gains or losses arising from the change in fair value adjustments are recognised directly in statement of comprehensive
income except for impairment losses and foreign exchange gains or losses. When the financial asset is derecognised, the
cumulative gains or loss previously recognised in statement of comprehensive income shall be transferred to the
income statement.
A financial investments available-for-sale that would have met the definition of loans and receivables may only be transferred from
the available-for-sale classification where the Group and the Bank have the intention and the ability to hold the asset for the
foreseeable future or until maturity.
81
Financial investments available-for-sale (continued)
Impairment of financial investments available-for-sale is assessed when there is an objective evidence of impairment. Cumulative
unrealised losses that had been recognised directly in equity shall be removed and recognised in income statement even though
the securities have not been derecognised. Impairment loss in addition to the above unrealised losses is also recognised in the
income statement. Subsequent reversal of impairment on debt instrument in the income statement is allowed when the decrease
in impairment can be related objectively to an event occuring after the impairment was recognised.
In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security
below its cost is objective evidence of impairment resulting in the recognition of an impairment loss. Impairment losses recognised
in the income statement on equity instruments shall not be reversed.
Financial investments held-to-maturity are non-derivative financial assets with fixed or determinable payments and fixed maturity
that the Group and the Bank have the positive intention and ability to hold to maturity.
Financial investments held-to-maturity are measured at amortised cost using the effective interest method. Gains or losses are
recognised in income statement when the securities are derecognised or impaired and through the amortisation process.
If, as a result of a change in intention or ability, it is no longer appropriate to calssify a financial investment as held-to-maturity, the
Group and the Bank shall reclassify the investment as available-for-sale and remeasured at fair value, and the difference between
its carrying amount and fair value shall be recognised in other comprehensive income, except for impairment losses and foreign
exchange gains and losses.
Any sale or reclassification of a significant amount of financial investments held-to-maturity before maturity during the current
financial year or last two preceding financial years will “taint” the entire category and result in the remaining financial investments
held-to-maturity being reclassified to available-for-sale except for sales or reclassification that:
•
•
•
are so close to maturity or call date that changes in the market rate of interest would not have significant effect on the
financial asset's fair value;
occur after the Group and the Bank have collected substantially all of the financial asset's original principal; or
are attributable to an isolated event that is beyond the Group and the Bank's control are non-recurring and could not have
been reasonably anticipated by the Group and the Bank.
Impairment of financial investments held-to-maturity is assessed when there is an objective evidence of impairment.
The impairment loss is measured as the difference between the financial investments' carrying amount and the present value of
estimated future cash flows discounted at the financial investments' original effective interest rate. Subsequent reversal of
impairment is allowed in the event of an objective decrease in impairment. Recognition of impairment losses and its reversal is
made through the income statement.
Recognition
The Group and the Bank use trade date accounting for regular way contracts when recording financial asset transactions. Financial
assets that are transferred to a third party but do not qualify for derecognition are presented in the statement of financial position
as 'Assets pledged as collateral', if the transferee has the right to sell or repledge them.
De-recognition
Financial assets are derecognised when the contractual rights to receive the cash flows from these assets have ceased to exist
or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred
(that is, if substantially all the risk and rewards have not been transferred, the Group and the Bank tests control to ensure that
continuing involvement on the basis of any retained powers of control does not prevent the de-recognition).
82
Annual Report 2011
(H) FINANCIAL LIABILITIES
All financial liabilities which include derivative financial instruments have to be recognised in the statement of financial position and
measured in accordance with their assigned category.
The Group and the Bank's holding in financial liabilities are in financial liabilities at fair value through profit or loss (including financial
liabilities held-for-trading and those that designated at fair value) and financial liabilities at amortised cost. Financial liabilities are
derecognised when extinguished.
Financial liabilities at fair value through profit or loss
This category comprises two sub-categories: financial liabilities classified as held-for-trading, and financial liabilities designated
by the Group and the Bank as at fair value through profit or loss upon initial recognition.
A financial liability is classified as held-for-trading if it is acquired or incurred principally for the purpose of selling or repurchasing
it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is
evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorised as held-for-trading unless they are
designated and effective as hedging instruments. Derivatives are recognised in the statement of financial position as 'Derivative
financial liabilities' when their fair values are negative.
Gains and losses arising from changes in fair value of financial liabilities classified held-for-trading are included in the income
statement.
Other liabilities measured at amortised cost
Financial liabilities that are not classified as at fair value through profit or loss fall into this category and are measured at amortised
cost. All the financial liabilities of the Group and the Bank are measured at amortised cost.
De-recognition
Financial liabilities are de-recognised when they have been redeemed or otherwise extinguished.
(I)
OFFSETTING FINANCIAL INSTRUMENTS
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the assets and settle
the liability simultaneously.
(J)
PROPERTY AND EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
83
(J)
PROPERTY AND EQUIPMENT AND DEPRECIATION (continued)
Freehold land is not depreciated as it has an infinite life. Other property and equipment are depreciated on the straight line basis
to write off the cost of the assets or their revalued amounts, to their residual values over their estimated useful lives, summarised
as follows:
Buildings
Leasehold buildings
Renovation and leasehold premises
Office equipment and furniture
Computer equipment and software
Motor vehicles
50 years
Over the remaining lease period
5 years or the period of the lease whichever is greater
10 years
5 years
5 years
Depreciation on capital work-in-progress commences when the assets are ready for their intended use.
Residual value and useful lives of assets are reviewed, and adjusted if appropriate, at each reporting date.
At each reporting date, the Group assesses whether there is any indication of impairment. If such indications exist, an analysis
is performed to assess whether the carrying amount of the asset is recoverable. A write down is made if the carrying amount
exceeds the recoverable amount. Any subsequent increase in the recoverable amount is recognised in the income statement (refer
to accounting policy D on impairment of non-financial assets).
Gains and losses on disposal are determined by comparing proceeds with carrying amount and are recognised within other
operating income in the income statement.
(K) LEASES
Accounting by lessee
Finance leases
Leases of property and equipment where the Group assumes substantially all the benefits and risks of ownership are classified
as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property
and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges so as to achieve a periodic constant rate on the finance
balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest
element of the finance charge is charged to the income statement over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each period. Property and equipment acquired under finance leases
are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the leased
assets and recognised as an expense in income statement over the lease term on the same basis as the lease expense.
84
Annual Report 2011
(K) LEASES (continued)
Accounting by lessee (continued)
Operating leases
Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the
income statement on the straight line basis over the lease period.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are recognised in income statement when
incurred.
Accounting by lessor
Finance leases
When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The
difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease
income is recognised over the term of the lease using the net investment method so as to reflect a constant periodic rate of return.
Operating leases
When assets are leased out under an operating lease, the asset is included in the statement of financial position based on the
nature of the asset. Lease income is recognised over the term of the lease on a straight-line basis.
(L)
FOREIGN CURRENCY TRANSLATIONS
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Ringgit
Malaysia, which is the Group and the Bank’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchanges rate prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income
statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
Changes in the fair value of monetary financial assets denominated in foreign currency classified as available-for-sale are analysed
between translation differences resulting from changes in the amortised cost of the financial asset and other changes in the
carrying amount of the financial asset. Translation differences related to changes in the amortised cost are recognised in income
statement, and other changes in the carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit and loss,
are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities
classified as available-for-sale are included in the fair value reserve in other comprehensive income.
85
(M) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
Derivatives are initially recognised at fair values on the date on which derivative contracts are entered into and are subsequently
remeasured at their fair values. Fair values are obtained from quoted market prices in active markets, including recent market
transactions, and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. All
derivatives are carried as assets when fair values are positive and as liabilities when fair values are negative.
The best evidence of fair value of a derivative at initial recognition is the transaction price (i.e the fair value of the consideration
given or received) unless fair value of the instrument is evidenced by comparison with other observable current market transactions
in the same instrument (i.e without modification or repackaging) or based on a valuation technique whose variables include only
data from observable markets. When such evidence exists, the Group and the Bank recognise profits immediately.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: (1) hedges of the
fair value of recognised assets or liabilities or firm commitments (fair value hedge); or (2) hedges of highly probable future cash
flows attributable to a recognised asset or liability, or a forecasted transaction (cash flow hedge). Hedge accounting is used for
designated derivatives in this way provided certain criterias are met.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and an on-going basis, of whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flows of hedged items.
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement,
together with any changes in the fair value of the hedged assets or liabilities that are attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which
the effective interest method is used, is amortised to income statement over the period to maturity. The adjustment to the carrying
amount of a hedged equity security remains in retained earnings until the disposal of the equity security.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised
in other comprehensive income. The gain and loss relating to the ineffective portion is recognised immediately in the income
statement.
Amounts accumulated in other comprehensive income are recycled to the income statement in the periods in which the hedged
item will affect income statement (for example, when the forecast sale that is hedged take place).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing at that time remains in other comprehensive income and is recognised when the forecast transaction is
ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cummulative gain
or loss that was reported in other comprehensive income is immediately transferred to the income statement.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does
not qualify for hedge accounting are recognised immediately in the income statement.
Gains and losses on interest rate swaps, futures, forward and option contracts that qualify as hedges are deferred and amortised
over the life of hedged assets or liabilities as adjustments to interest income or interest expense. Gains and losses on interest rate
swaps, futures, forward and option contracts that do not qualify as hedges are recognised in the current financial year using the
mark-to-market method and are included in the income statement.
86
Annual Report 2011
(N) CURRENT AND DEFERRED INCOME TAXES
Current tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in income statement, except to the extent
that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in
other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period where the Group’s subsidiaries and branch operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities. This liability is measured using the single best estimate of the most likely outcome.
Deferred tax
Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to
assets and liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences or unused tax losses can be utilised.
Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the end of the
reporting date and are expected to apply when the related deferred tax assets is realised or the deferred tax liability is settled.
Deferred tax is recognised on temporary differences arising on investment in subsidiaries and jointly controlled entity except
where the timing of the reversal of the temporary difference can be controlled by the Group and it is possible that the temporary
difference will not reverse in the foreseeable future.
Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied by the same taxation authority
on either the taxable entity or different taxable entities where there is an intention to settle the balances on net basis.
(O) ZAKAT
Zakat represents business zakat payable by the Group to comply with the principles of Shariah and as approved by the Shariah
Committee. The Bank's subsidiary, AFFIN Islamic Bank Berhad only pays zakat on its business and does not pay zakat on behalf
of depositors or shareholders. Zakat provision is calculated based on 2.5% of the net asset method.
(P)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of cash in hand, bank balances and deposits and placements maturing within one month
which are held for the purpose of meeting short term commitments and are readily convertible to cash without significant risk of
changes in value.
(Q) FORECLOSED PROPERTIES
Foreclosed properties are stated at the lower of cost and net realisable value.
87
(R) CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The Group and the Bank does not recognise a contingent liability but discloses its existence in the financial statements. A
contingent liability is possible obligation that arises from past events whose existence will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events beyond the control of the Group and the Bank or a present obligation that is
not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability
also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.
However, contingent liabilities do not include financial guarantee contracts.
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events beyond the control of the Group and the Bank. The Group and the Bank does
not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not
virtually certain.
(S)
BILLS AND ACCEPTANCES PAYABLE
Bills and acceptances payable represent the Bank's own bills and acceptances rediscounted and outstanding in the market.
(T)
OTHER PROVISIONS
Provisions are recognised by the Group and the Bank when all of the following conditions have been met:
•
•
•
the Group and the Bank has a present legal or constructive obligation as a result of past events;
it is probable that an outflow of resources to settle the obligation will be required; and
a reliable estimate of the amount of obligation can be made.
Where the Group and the Bank expect a provision to be reimbursed (for example, under an insurance contract), the reimbursement
is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in
the provision due to passage of time is recognised as finance cost expense.
(U) EMPLOYEE BENEFITS
Short term employee benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in which the
associated services are rendered by employees of the Group.
88
Annual Report 2011
(U) EMPLOYEE BENEFITS (continued)
Defined contribution plan
The defined contribution plan is a pension plan under which the Group pays fixed contributions to the National Pension Scheme,
the Employees' Provident Fund ('EPF') and will have no legal or constructive obligations to pay further contributions if the fund
does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.
The Group's contribution to defined contribution plans are charged to the income statement in the period to which they relate.
Once the contributions have been paid, the Group has no further payment obligations.
Termination benefits
Termination benefits are payable whenever an employee's employment is terminated before the normal retirement date or
whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits
when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan
without any possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary
redundancy.
(V)
FINANCIAL GUARANTEE CONTRACT
Financial guarantee contracts are contracts that require the Group or Bank to make specified payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt
instrument. Such financial guarantees are given to financial institutions and other bodies on behalf of customers to secure loans,
overdrafts and other banking facilities.
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The fair value of a financial
guarantee at the time of signature is zero because all guarantees are agreed on arm’s length terms and the value of the premium
agreed corresponds to the value of the guarantee obligation. No receivable for the future premiums is recognised.
The liability is subsequently recognised at the higher of the amount determined in accordance with FRS 137 "Provisions,
contingent liabilities and contingent assets" and the amount initially recognised less cumulative amortisation, where appropriate.
The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual
payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount
that would be payable to a third party for assuming the obligations.
Where financial guarantees in relation to loans or payables of subsidiaries are provided by the Group for no compensation, the
fair values are accounted for as contributions and recognised as part of the cost of investment in subsidiaries.
89
NOTES TO THE FINANCIAL STATEMENTS
1
GENERAL INFORMATION
The Bank is principally engaged in all aspects of banking and related financial services. The principal activities of the Bank's
subsidiaries are Islamic banking business, property management services, nominee and trustee services. There have been no
significant changes in these principal activities during the financial year.
The number of employees in the Group and the Bank as at 31 December 2011 was 3,293 (2010: 3,113) and 3,095 (2010: 2,933)
employees respectively.
The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the ultimate
holding corporate body is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung Angkatan Tentera
Act, 1973.
The Bank is a limited liability company, incorporated and domiciled in Malaysia.
2
CASH AND SHORT-TERM FUNDS
Cash and bank balances with banks
and other financial institutions
Money at call and deposit placements
maturing within one month
3
172,014
172,530
168,388
169,157
9,707,352
8,467,927
5,359,051
5,939,295
9,879,366
8,640,457
5,527,439
6,108,452
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
156,235
330,459
15,681
176,841
768,529
330,459
388,076
176,841
486,694
192,522
1,098,988
564,917
FINANCIAL ASSETS HELD-FOR-TRADING
At fair value
Bank Negara Malaysia Monetary Notes
Negotiable Instruments of Deposit
90
The Bank
2011
2010
RM'000
RM'000
DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS
Licensed banks
Licensed investment banks
4
The Group
2011
2010
RM'000
RM'000
Annual Report 2011
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
149,832
-
99,853
50,092
149,832
-
99,853
50,092
149,832
149,945
149,832
149,945
5
FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE
The Group
2011
2010
RM'000
RM'000
At fair value
Malaysian Government treasury bills
Malaysian Government securities
Malaysian Government investment issues
BNM Sukuk
Negotiable Instruments of Deposit and
Islamic Debt Certificates
Bankers' acceptances and Islamic accepted bills
Khazanah bonds
Quoted securities:
Shares in Malaysia
Private debt securities in Malaysia
6
The Bank
2011
2010
RM'000
RM'000
39,421
430,728
2,611,724
174,620
166,566
763,701
1,410,778
32,017
1,006,592
39,421
430,728
1,915,445
24,949
137,730
763,701
674,170
849,557
802,322
14,262
141,072
556,994
13,250
802,322
-
141,072
556,994
-
4,073,077
4,090,970
3,212,865
3,123,224
33,585
2,167
51,375
2,167
23,230
2,167
40,920
2,167
Unquoted securities:
Shares in Malaysia
Private debt securities
- in Malaysia
- outside Malaysia
105,902
93,173
105,833
93,101
1,935,129
576,894
1,266,117
340,620
1,315,135
576,894
899,797
329,523
Allowance for impairment of securities
6,726,754
(28,336)
5,844,422
(40,005)
5,236,124
(21,591)
4,488,732
(33,260)
6,698,418
5,804,417
5,214,533
4,455,472
FINANCIAL INVESTMENTS HELD-TO-MATURITY
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
At amortised cost
Quoted securities:
34,623
38,123
34,623
38,123
Unquoted securities:
574,066
482,166
574,066
481,998
Allowance for impairment of securities
608,689
(87,584)
520,289
(87,752)
608,689
(87,584)
520,121
(87,584)
521,105
432,537
521,105
432,537
91
7
LOANS, ADVANCES AND FINANCING
The Group
2011
2010
RM'000
RM'000
(i)
By type
1,856,907
1,971,364
1,649,343
1,747,438
4,544,089
8,869,439
1,409,858
9,980,935
42,928
374,449
694,365
147,691
93,116
2,286,027
12,318
3,885,327
7,835,986
1,371,964
7,784,898
39,077
266,050
659,074
151,146
101,682
2,476,644
3,185
3,273,275
7,637,022
1,265,396
8,633,582
42,534
340,869
602,521
138,821
93,116
2,153,483
12,318
2,831,771
6,774,821
1,254,969
6,850,106
37,688
222,092
601,137
143,110
101,682
2,334,181
3,185
Gross loans, advances and financing
Less:
Allowance for impairment
- Individual
- Collective
30,312,122
26,546,397
25,842,280
22,902,180
Total net loans, advances and financing
29,692,266
Overdrafts
Term loans/financing
- Housing loans/financing
- Hire purchase receivables
- Syndicated financing
- Other term loans/financing
Bills receivables
Trust receipts
Claims on customers under acceptances credits
Staff loans/financing (of which RM Nil to Directors)
Credit/charge cards
Revolving credits
Factoring
(ii)
(168,257)
(451,599)
(175,849)
(395,701)
25,974,847
(133,329)
(390,890)
25,318,061
(139,709)
(343,220)
22,419,251
-
Included in term loans are housing loans sold to Cagamas Berhad with recourse amounting to RM428,459,000
(2010: RM288,891,000).
-
Included in Group's other term loan/financing as at reporting date is RM23.3 million (2010: RM13.5 million) of term
financing disbursed by AFFIN Islamic Bank Bhd to jointly controlled entity, AFFIN-i Goodyear Sdn Bhd.
By maturity structure
The Group
2011
2010
RM'000
RM'000
Maturing within one year
One year to three years
Three years to five years
Over five years
92
The Bank
2011
2010
RM'000
RM'000
Annual Report 2011
The Bank
2011
2010
RM'000
RM'000
5,745,936
3,738,038
5,386,223
15,441,925
6,552,073
2,748,818
4,411,920
12,833,586
5,128,886
3,511,510
4,689,710
12,512,174
5,989,754
2,581,046
3,906,606
10,424,774
30,312,122
26,546,397
25,842,280
22,902,180
7
LOANS, ADVANCES AND FINANCING (continued)
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
(iii) By type of customer
Domestic banking Institutions
Domestic non-banking institutions
- Stockbroking companies
- Others
Domestic business enterprises
- Small medium enterprises
- Others
Government and statutory bodies
Individuals
Other domestic entities
Foreign entities
949
-
949
-
2,078,889
270
2,146,330
1,771,630
270
1,724,629
7,573,762
7,257,740
65,487
12,908,539
164,857
261,899
6,789,502
5,785,703
75,394
11,473,630
45,584
229,984
6,989,064
6,409,423
49,642
10,438,005
47,337
136,230
6,311,415
5,265,662
75,394
9,369,378
43,749
111,683
30,312,122
26,546,397
25,842,280
22,902,180
283,990
8,869,438
4,482,642
286,138
7,834,034
3,934,311
191,221
7,637,022
3,887,802
183,375
6,773,029
3,400,299
11,271,790
5,404,262
10,210,602
4,281,312
9,225,843
4,900,392
8,596,943
3,948,534
30,312,122
26,546,397
25,842,280
22,902,180
489,126
431,334
2,272,033
160,641
2,433,031
3,000,445
482,204
373,899
1,790,610
194,137
2,367,389
2,328,423
402,511
431,167
2,051,720
159,825
2,108,657
2,557,560
385,200
373,664
1,660,682
193,273
2,027,689
2,283,744
1,436,865
1,582,862
4,266,707
1,146,839
13,039,953
52,286
1,213,751
921,590
4,396,591
855,655
11,579,272
42,876
1,392,540
1,572,087
3,833,101
734,469
10,549,125
49,518
1,164,859
915,146
3,809,129
584,559
9,461,991
42,244
30,312,122
26,546,397
25,842,280
22,902,180
(iv) By interest/profit rate sensitivity
Fixed rate
- Housing loans/financing
- Hire purchase receivables
- Other fixed rate loans/financing
Variable rate
- BLR plus
- Cost plus
(v)
By economic sectors
Primary agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water supply
Construction
Real estate
Wholesale & retail trade and
restaurants & hotels
Transport, storage and communication
Finance, insurance and business services
Education, health and others
Household
Others
93
7
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
(vi) By economic purpose
Purchase of securities
Purchase of transport vehicles
Purchase of landed property of which:
- Residential
- Non-residential
Fixed assets other than land and building
Personal use
Credit card
Consumer durable
Construction
Merger and acquisition
Working capital
Others
131,246
9,112,854
268,145
7,869,187
131,165
7,880,728
254,706
6,807,263
4,632,718
3,791,366
326,549
819,498
93,116
958
1,594,137
98,651
9,489,000
222,029
3,982,258
2,637,636
339,184
721,877
101,682
1,067
772,577
4,867
9,635,096
212,821
3,258,417
3,042,970
276,513
780,772
93,116
932
1,444,217
98,651
8,618,767
216,032
2,913,043
2,211,785
329,088
689,560
101,682
1,033
648,490
4,867
8,739,309
201,354
30,312,122
26,546,397
25,842,280
22,902,180
56,604
942,274
1,525,797
917,610
9,330,844
8,886,609
753,916
696,178
2,631,232
633,914
580,189
268,161
1,011,152
1,272,938
262,731
541,973
27,648
902,980
1,271,331
853,633
7,602,382
8,720,586
721,564
663,856
2,027,324
623,000
567,382
256,176
732,788
1,173,362
277,901
124,484
53,590
728,495
1,424,482
719,023
7,858,891
7,675,315
683,030
656,132
2,456,572
378,967
252,758
58,223
985,563
1,211,948
262,722
436,569
25,762
691,342
1,176,306
689,294
6,423,997
7,876,473
660,393
623,077
1,889,371
368,284
277,903
58,335
707,464
1,137,077
277,889
19,213
30,312,122
26,546,397
25,842,280
22,902,180
(vii) By geographical distribution
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Sarawak
Sabah
Labuan
Outside Malaysia
94
Annual Report 2011
7
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
(viii) Movements of impaired loans
At beginning of the financial year
Classified as impaired
Reclassified as non-impaired
Amount recovered
Amount written-off
At end of the financial year
Ratio of gross impaired loans, advances
and financing to gross loans, advances and financing
971,123
535,462
(343,790)
(185,271)
(111,862)
1,039,783
689,486
(313,791)
(221,338)
(223,017)
818,522
422,487
(273,189)
(165,246)
(109,256)
908,943
596,797
(271,704)
(198,624)
(216,890)
865,662
971,123
693,318
818,522
2.85%
3.66%
2.68%
3.57%
(ix) Movements in allowance for impairment on loans, advances and financing
(x)
Individual impairment
Provision for loan impairment
Amount recovered
Amount written-off
Unwinding of discount of allowance
175,849
116,909
(13,571)
(96,224)
(14,706)
175,953
198,023
(20,669)
(170,906)
(6,552)
139,709
111,880
(12,198)
(93,889)
(12,173)
152,725
172,716
(10,778)
(169,730)
(5,224)
168,257
175,849
133,329
139,709
Collective impairment
Provision for loan impairment/(recovered)
Amount written-off
Exchange differences
395,701
67,662
(12,118)
354
449,893
(3,044)
(49,850)
(1,298)
343,220
59,788
(12,118)
-
405,968
(16,409)
(46,339)
-
451,599
395,701
390,890
343,220
7,855
48,663
1,928
189,515
4,159
34,519
5,086
51,926
8,547
509,810
3,654
11,937
50
99,831
2,360
252,660
8,263
48,103
4,633
15,108
8,301
519,877
-
7,810
28,197
1,662
121,609
4,159
32,299
5,086
23,537
8,510
456,892
3,557
11,874
78,707
2,066
175,208
8,263
45,555
4,633
14,469
8,301
469,446
-
865,662
971,123
693,318
818,522
Impaired loans by economic sectors
Primary agriculture
Manufacturing
Construction
Real estate
Wholesale & retail trade and restaurants & hotels
Household
Others
95
7
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
(xi) Impaired loans by economic purpose
Purchase of securities
Purchase of transport vehicles
Purchase of landed property of which:
- Residential
- Non-residential
Fixed assets other than land and building
Personal use
Credit card
Consumer durable
Construction
Working capital
Others
2,721
106,606
2,741
81,586
2,721
95,291
2,741
73,743
382,814
34,354
17,758
12,699
499
33
63,547
243,112
1,519
407,763
44,744
3,633
16,373
636
34
63,407
349,989
217
340,922
33,850
17,758
8,611
499
33
57
192,157
1,419
365,321
44,119
3,185
16,170
636
34
1,694
310,666
213
865,662
971,123
693,318
818,522
332
24,835
25,585
23,884
407,273
122,787
39,790
16,229
65,744
11,840
5,776
7,193
7,694
15,533
15
91,152
840
40,612
30,120
16,202
426,852
185,642
37,483
15,854
88,097
17,013
8,009
6,171
6,614
14,387
45
77,182
332
23,834
23,774
21,332
360,343
110,570
37,609
16,033
62,945
8,122
3,156
2,707
7,456
15,090
15
-
840
39,228
27,892
14,559
382,454
173,975
35,466
15,356
85,252
13,368
6,529
3,011
6,387
14,160
45
-
865,662
971,123
693,318
818,522
(xii) Impaired loans by geographical distribution
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Sarawak
Sabah
Labuan
Outside Malaysia
96
Annual Report 2011
8
OTHER ASSETS
The Group
2011
2010
RM'000
RM'000
21,421
104,755
40,337
30
21,623
4,160
160,648
30
20,923
56,775
38,962
30
20,222
4,077
160,253
30
166,543
186,461
116,690
184,582
160,648
1,190
(118,959)
180,329
1,370
(18,611)
160,253
(118,959)
179,916
1,370
(18,611)
Foreclosed properties - diminution in value
42,879
(2,542)
163,088
(2,440)
41,294
(2,332)
162,675
(2,422)
40,337
160,648
38,962
160,253
Other debtors, deposits and prepayments
Clearing accounts
Foreclosed properties (a)
Others
(a)
Foreclosed properties
Amount arising during the financial year
Disposal during the financial year
9
The Bank
2011
2010
RM'000
RM'000
DERIVATIVE FINANCIAL ASSETS
The Group and The Bank
2011
Contract/
notional
amount
Assets
RM'000
RM'000
2010
Contract/
notional
amount
Assets
RM'000
RM'000
At fair value
Foreign exchange derivatives:
Currency forwards
Cross currency swaps
246,307
879,504
2,433
16,097
240,549
1,347,158
2,381
35,206
Interest rate derivatives:
Interest rate swap
444,560
31,371
576,120
17,394
1,570,371
49,901
2,163,827
54,981
97
10
DEFERRED TAX ASSETS / (LIABILITIES)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts determined after appropriate
offsetting, are shown in the statement of financial position:
The Group
2011
2010
RM'000
RM'000
Deferred tax assets:
- to be recovered after more than 12 months
- to be recovered within 12 months
Deferred tax liabilities:
- to be recovered after more than 12 months
- to be recovered within 12 months
(Charged)/credited to income statement (Note 34)
-
5,221
(930)
-
-
-
4,291
-
-
(6,099)
(14,019)
(2,876)
(22,056)
(5,263)
(13,948)
(2,876)
(22,056)
(20,118)
(24,932)
(19,211)
(24,932)
(20,641)
33,665
(24,932)
35,121
7,453
(50,191)
13,325
(57,219)
- property and equipment
- intangible assets
- general allowance on bad and doubtful debts
- collective allowances (transitional provision) for bad
and doubtful financing
- revaluation gain on forex
- revaluation gain on derivatives
- others
(73)
(424)
-
913
2,908
(83,767)
(36)
24
-
844
3,092
(72,750)
(6,785)
14,735
6,785
13,507
2,929
6,534
(267)
13,604
267
11,879
2,929
(3,480)
Charged to equity
(6,930)
(4,115)
(7,604)
(2,834)
(20,118)
(20,641)
(19,211)
(24,932)
98
The Bank
2011
2010
RM'000
RM'000
Annual Report 2011
10
DEFERRED TAX ASSETS / (LIABILITIES) (continued)
The movements in deferred tax assets and liabilities during the financial year are as follows:
The Group
2011
2010
RM'000
RM'000
Subject to income tax
Deferred tax assets (before offsetting)
Collective allowances (transitional provision) for
bad and doubtful financing
Others
Offsetting
Deferred tax assets (after offsetting)
The Bank
2011
2010
RM'000
RM'000
14,747
6,785
12
13,616
267
12
14,747
(14,747)
6,797
(2,506)
13,616
(13,616)
279
(279)
-
4,291
-
-
Deferred tax liabilities (before offsetting)
Intangible assets
AFS revaluation reserves
(5,413)
(5,676)
(23,776)
(5,340)
(5,252)
(16,846)
(5,095)
(4,862)
(22,870)
(5,059)
(4,886)
(15,266)
Offsetting
(34,865)
14,747
(27,438)
2,506
(32,827)
13,616
(25,211)
279
Deferred tax liabilities (after offsetting)
(20,118)
(24,932)
(19,211)
(24,932)
The amount of unused tax losses for which no deferred tax asset is recognised in the statement of financial position are
as follows:
Tax losses
11
103,871
105,260
-
-
STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA
A non-interest bearing statutory deposit is maintained with Bank Negara Malaysia in compliance with requirements of Section
26(2)(c) of the Central Bank of Malaysia Act 2009, the amounts of which is determined at a set percentages of total
eligible liabilities.
99
12
INVESTMENT IN SUBSIDIARIES
The Bank
2011
2010
RM'000
RM'000
Unquoted shares, at cost
Less: Allowance for impairment losses
319,557
(32,168)
319,557
(32,128)
287,389
287,429
The subsidiaries of the Bank, all of which are incorporated in Malaysia, are as follows:
Name
Principal Activities
AFFIN Islamic Bank Bhd
PAB Properties Sdn Bhd
ABB Nominee (Tempatan) Sdn Bhd
ABB Nominee (Asing) Sdn Bhd
ABB Trustee Berhad*
AFFIN Factors Sdn Bhd
AFFIN Futures Sdn Bhd
PAB Property Management Services Sdn Bhd
PAB Property Development Sdn Bhd
ABB Venture Capital Sdn Bhd
ABB IT & Services Sdn Bhd
BSNCB Nominees (Tempatan) Sdn Bhd
BSNC Nominees (Tempatan) Sdn Bhd
ABB Asset Management (M) Bhd
AFFIN Recoveries Bhd
BSN Merchant Nominees (Tempatan) Sdn Bhd
BSN Merchant Nominees (Asing) Sdn Bhd
AFFIN-ACF Nominees (Tempatan) Sdn Bhd
Islamic banking business
Property management services
Share nominee services
Share nominee services
Trustee management services
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
* 80% held by Directors of the Bank, in trust for the Bank.
100
Annual Report 2011
Percentage of equity held
2011
2010
%
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
13
INVESTMENT IN JOINTLY CONTROLLED ENTITY
The Group
2011
2010
RM'000
RM'000
Unquoted shares at cost
Group's share of post acquisition retained losses
500
(210)
500
-
290
500
The Group did not account for the share of post acquisition retained losses in 2010 as it is immaterial and has not commenced
the development of land.
The summarised financial information of jointly controlled entity are as follows:
10
(420)
31,711
31,132
Revenue
Loss after tax
Total assets
Total liabilities
2
(89)
21,518
20,619
The jointly controlled entity was incorporated on 1 April 2008 and the details are as follows:
Name
Principal activities
AFFIN-i Goodyear Sdn Bhd
Land development project
Issued and
paid up
share capital
RM'000
1,000
Percentage of
equity held
2011
2010
%
%
50
50
On 1 April 2008, AFFIN Islamic Bank Berhad and Jurus Positif Sdn Bhd, a subsidiary of Mutiara Goodyear Development Berhad,
entered into a joint venture agreement under the Shariah principles ('Musharakah Agreement') to develop a land into a housing
scheme at Bukit Gambir, Pulau Pinang.
The agreement also includes an arrangement where Jurus Positif Sdn Bhd may acquire the Bank's shares upon the completion
of the project at a mutually agreed price, unless if both shareholders decide to continue the joint venture for subsequent projects.
Major strategic operation and financial decisions relating to the activities of AFFIN-i Goodyear Sdn Bhd requires unanimous
consent by both joint venture parties. The Group's interest in AFFIN-i Goodyear Sdn Bhd has been treated as investment in
jointly controlled entity, which has been accounted for in the consolidated financial statements using the equity method
of accounting.
14
AMOUNT DUE FROM SUBSIDIARIES
The Bank
2011
2010
RM'000
RM'000
Advances to a subsidiary
Other receivables
355,535
1,362
183,541
1,730
356,897
185,271
The advances of RM355,535,000 (2010: RM183,541,000) to subsidiary is unsecured, bear interest at 3.02% per annum (2010:
2.62%) and have no fixed terms of repayment.
101
102
Annual Report 2011
22,811
10,939
1,923
-
At 31 December 2011
Net book value as at 31 December 2011
1,811
112
-
-
12,862
22,811
At 31 December 2011
Accumulated depreciation
and impairment losses
At 1 January 2011
Charge for the financial year
Disposal
Write-off
12,862
-
50 years
or more
RM'000
24,287
(1,476)
-
Freehold
land
RM'000
3,928
1,452
1,332
120
-
5,380
5,380
-
Less than
50 years
RM'000
Leasehold land
Cost
At 1 January 2011
Additions
Disposals
Write-off
Reclassification
The Group
2011
15 PROPERTY AND EQUIPMENT
18,747
13,266
13,273
535
(542)
-
32,013
33,211
(1,198)
-
Buildings
on
freehold
land
RM'000
67,487
21,582
19,793
1,789
-
89,069
89,069
-
Buildings
on
leasehold
land
RM'000
17,301
88,056
83,152
6,884
(799)
(1,181)
105,357
96,040
11,252
(805)
(1,347)
217
Renovation
RM'000
18,781
35,667
33,904
3,059
(183)
(1,113)
54,448
49,991
4,882
(188)
(1,276)
1,039
Office
equipment
and
furniture
RM'000
10,108
57,509
53,693
6,026
(2,210)
67,617
64,425
4,889
(2,304)
607
Computer
equipment
and
software
RM'000
863
3,100
2,765
347
(12)
-
3,963
3,563
412
(12)
-
Motor
vehicles
RM'000
1,865
-
-
1,865
1,617
11,458
(11,210)
Capital
work-in
progress
RM'000
172,830
222,555
209,723
18,872
(1,536)
(4,504)
395,385
380,445
32,893
(3,679)
(4,927)
(9,347)
Total
RM'000
103
24,287
-
At 31 December 2010
-
24,287
At 31 December 2010
At 1 January 2010
Disposal
Write-off
Reclassification
25,087
(800)
-
Cost
At 1 January 2010
Additions
Disposals
Write-off
Reclassification
Transfer to intangible assets (Note 16)
The Group
2010
Freehold
land
RM'000
15 PROPERTY AND EQUIPMENT (continued)
11,051
1,811
1,757
111
(57)
-
12,862
13,470
(608)
-
50 years
or more
RM'000
4,048
1,332
1,227
122
(17)
-
5,380
5,694
(314)
-
Less than
50 years
RM'000
Leasehold land
19,938
13,273
12,810
552
(89)
-
33,211
33,480
(269)
-
Buildings
on
freehold
land
RM'000
69,276
19,793
18,078
1,789
(74)
-
89,069
89,549
(480)
-
Buildings
on
leasehold
land
RM'000
12,888
83,152
77,314
6,011
(137)
(36)
-
96,040
94,540
1,653
(154)
(52)
53
-
Renovation
RM'000
16,087
33,904
32,369
3,078
(37)
(1,511)
5
49,991
50,241
1,358
(47)
(1,648)
87
-
Office
equipment
and
furniture
RM'000
10,732
53,693
46,091
8,091
(484)
(5)
64,425
62,414
2,601
(554)
(36)
-
Computer
equipment
and
software
RM'000
798
2,765
2,779
317
(317)
(14)
-
3,563
3,457
437
(317)
(14)
-
Motor
vehicles
RM'000
1,617
-
-
1,617
2,251
3,559
(104)
(4,089)
Capital
work-in
progress
RM'000
170,722
209,723
192,425
20,071
(728)
(2,045)
-
380,445
380,183
9,608
(2,989)
(2,268)
(4,089)
Total
RM'000
104
Annual Report 2011
19,814
9,276
1,696
-
At 31 December 2011
1,593
103
-
-
10,972
19,814
At 31 December 2011
At 1 January 2011
Disposal
Write-off
Reclassification
10,972
-
21,290
(1,476)
-
50 years
or more
RM'000
3,928
1,452
1,332
120
-
5,380
5,380
-
Less than
50 years
RM'000
Leasehold land
Cost
At 1 January 2011
Additions
Disposals
Write-off
Reclassification
The Bank
2011
Freehold
land
RM'000
18,033
12,344
12,384
502
(542)
-
30,377
31,575
(1,198)
-
Buildings
on
freehold
land
RM'000
67,081
21,080
19,309
1,771
-
88,161
88,161
-
Buildings
on
leasehold
land
RM'000
16,260
85,834
81,328
6,486
(799)
(1,181)
-
102,094
93,648
10,391
(805)
(1,347)
207
Renovation
RM'000
17,731
35,069
33,457
2,907
(183)
(1,110)
(2)
52,800
48,830
4,396
(188)
(1,273)
1,035
Office
equipment
and
furniture
RM'000
9,290
56,034
52,505
5,708
(2,179)
-
65,324
62,595
4,386
(2,264)
607
Computer
equipment
and
software
RM'000
756
2,745
2,501
256
(12)
-
3,501
3,101
412
(12)
-
Motor
vehicles
RM'000
1,865
-
-
1,865
1,617
9,243
(8,995)
Capital
work-in
progress
RM'000
164,034
216,254
204,409
17,853
(1,536)
(4,470)
(2)
380,288
367,169
28,828
(3,679)
(4,884)
(7,146)
Total
RM'000
105
21,290
-
At 31 December 2010
-
21,290
At 31 December 2010
At 1 January 2010
Disposal
Write-off
Transfer to subsidiary
22,090
(800)
-
Cost
At 1 January 2010
Additions
Disposals
Write-off
Reclassification
Transfer to intangible assets (Note 16)
Transfer to subsidiary
The Bank
2010
Freehold
land
RM'000
9,379
1,593
1,547
103
(57)
-
10,972
11,580
(608)
-
50 years
or more
RM'000
4,048
1,332
1,227
122
(17)
-
5,380
5,694
(314)
-
Less than
50 years
RM'000
Leasehold land
19,191
12,384
11,954
519
(89)
-
31,575
31,844
(269)
-
Buildings
on
freehold
land
RM'000
68,852
19,309
17,612
1,771
(74)
-
88,161
88,641
(480)
-
Buildings
on
leasehold
land
RM'000
12,320
81,328
75,760
5,741
(137)
(36)
-
93,648
92,153
1,647
(154)
(52)
54
-
Renovation
RM'000
15,373
33,457
32,023
2,978
(37)
(1,511)
4
48,830
49,103
1,338
(47)
(1,648)
87
(3)
Office
equipment
and
furniture
RM'000
10,090
52,505
45,156
7,837
(482)
(6)
62,595
60,782
2,501
(550)
(36)
(102)
Computer
equipment
and
software
RM'000
600
2,501
2,606
226
(317)
(14)
-
3,101
2,995
437
(317)
(14)
-
Motor
vehicles
RM'000
1,617
-
-
1,617
701
3,559
(105)
(2,538)
-
Capital
work-in
progress
RM'000
162,760
204,409
187,885
19,297
(728)
(2,043)
(2)
367,169
365,583
9,482
(2,989)
(2,264)
(2,538)
(105)
Total
RM'000
16
INTANGIBLE ASSETS
The Group
Computer
Software
RM'000
Total
RM'000
Cost
At 1 January 2011
Additions
Disposal
Write-off
Reclassification from property and equipment (Note 15)
133,430
-
109,015
1,718
(4)
(4)
9,347
242,445
1,718
(4)
(4)
9,347
At 31 December 2011
133,430
120,072
253,502
Less: Accumulated amortisation
At 1 January 2011
Amortised during the financial year
Disposal
Write-off
-
(88,009)
(9,366)
3
3
(88,009)
(9,366)
3
3
At 31 December 2011
-
(97,369)
(97,369)
133,430
22,703
156,133
Cost
At 1 January 2010
Additions
Write-off
133,430
-
104,501
1,043
(618)
4,089
237,931
1,043
(618)
4,089
At 31 December 2010
133,430
109,015
242,445
At 1 January 2010
Write-off
-
(71,861)
(16,474)
326
(71,861)
(16,474)
326
At 31 December 2010
-
(88,009)
(88,009)
133,430
21,006
154,436
106
Goodwill
RM'000
Annual Report 2011
16
INTANGIBLE ASSETS (continued)
The Bank
Goodwill
RM'000
Computer
Software
RM'000
Total
RM'000
Cost
At 1 January 2011
Additions
Disposal
Write-off
137,323
-
104,937
1,599
(4)
(4)
7,142
242,260
1,599
(4)
(4)
7,142
At 31 December 2011
137,323
113,670
250,993
At 1 January 2011
Disposal
Write-off
-
(85,392)
(8,836)
3
3
(85,392)
(8,836)
3
3
At 31 December 2011
-
(94,222)
(94,222)
137,323
19,448
156,771
Cost
At 1 January 2010
Additions
Write-off
137,323
-
101,973
1,043
(618)
2,539
239,296
1,043
(618)
2,539
At 31 December 2010
137,323
104,937
242,260
At 1 January 2010
Write-off
-
(70,060)
(15,658)
326
(70,060)
(15,658)
326
At 31 December 2010
-
(85,392)
(85,392)
137,323
19,545
156,868
107
16
INTANGIBLE ASSETS (continued)
Goodwill
The carrying amount of the Bank's goodwill have been allocated to the following business segments, which represents the Bank's
cash-generating units ('CGUs'):
Enterprise banking
Consumer banking
2011
RM'000
2010
RM'000
123,591
13,732
123,591
13,732
137,323
137,323
Goodwill is allocated to the Bank's CGU which are expected to benefits from the synergies of the acquisitions. For annual
impairment testing purposes, the recoverable amount of the CGUs are determined based on value-in-use calculations using the
cash flow projections based on the 2012 financial budgets approved by the Directors, covering a period of 5 years. The cash flow
beyond the fifth year are projected based on the assumption that the Year 5 operating cash flow will be generated by the respective
CGUs at a growth rate of 5% (2010: 5%) on perpetual basis.
The cash flow projections are derived based on a number of key factors including past performance and management’s
expectations of the market developments. The discount rates used are based on the pre-tax weighted average cost of capital
plus an appropriate risk premium where applicable ('WACC'), at the date of assessment of the CGUs.
Pre-tax discount rate
2011
Enterprise
banking
%
2011
Consumer
banking
%
2010
Enterprise
banking
%
2010
Consumer
banking
%
14.80
14.74
14.29
14.21
No impairment charge was required for goodwill arising from all the business segments. Management views that any reasonable
possible change to the assumptions applied is not likely to cause the recoverable amount of all the business segments to be lower
than its carrying amount.
17 DEPOSITS FROM CUSTOMERS
The Group
2011
2010
RM'000
RM'000
(i)
By type of deposit
Demand deposits
Savings deposits
Fixed deposits
Special investment deposits
Money market deposits
Negotiable instruments of deposit ('NID')
108
The Bank
2011
2010
RM'000
RM'000
Annual Report 2011
6,166,579
1,526,891
22,313,675
822,914
528,435
5,188,950
5,063,155
1,400,535
20,037,784
642,171
707,411
3,131,351
4,229,705
1,223,359
18,021,753
528,435
5,069,172
3,565,188
1,142,332
16,885,793
707,411
3,131,351
36,547,444
30,982,407
29,072,424
25,432,075
17 DEPOSITS FROM CUSTOMERS (continued)
The Group
2011
2010
RM'000
RM'000
(ii)
The Bank
2011
2010
RM'000
RM'000
Maturity structure of fixed deposit and NID
Due within six months
Six months to one year
One year to three years
Three years to five years
22,187,250
5,018,157
95,977
201,241
19,988,828
3,133,020
24,167
23,120
18,647,951
4,208,729
33,205
201,040
17,233,254
2,740,853
20,856
22,181
27,502,625
23,169,135
23,090,925
20,017,144
6,793,344
10,961,534
6,763,627
12,028,939
4,769,914
9,789,744
5,027,100
11,395,649
3,600,922
8,603,523
6,157,670
10,710,309
2,969,799
8,197,090
4,591,770
9,673,416
36,547,444
30,982,407
29,072,424
25,432,075
(iii) By type of customer
Government and statutory bodies
Business enterprise
Individuals
Others
18 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS
The Group
2011
2010
RM'000
RM'000
Licensed banks
Licensed investment banks
Bank Negara Malaysia
Other financial institutions
Maturity structure of deposits
Due within six months
Six months to one year
The Bank
2011
2010
RM'000
RM'000
3,724,682
1,754,811
794,523
1,252,896
5,024,966
439,546
308,497
846,726
2,752,720
1,704,745
794,427
791,945
4,308,897
423,868
308,497
707,741
7,526,912
6,619,735
6,043,837
5,749,003
7,524,234
2,678
6,550,733
69,002
6,041,159
2,678
5,680,001
69,002
7,526,912
6,619,735
6,043,837
5,749,003
19 RECOURSE OBLIGATION ON LOANS SOLD TO CAGAMAS BERHAD
In the normal course of banking operations, the Bank sells loans to Cagamas Berhad with recourse at values equivalent to the
unpaid principal balances of loans and advances due from the borrowers.
The Bank is liable in respect of housing loans and hire purchase portfolio sold directly and indirectly to Cagamas Berhad, under
the condition that the Bank undertakes to administer these loans on behalf of Cagamas Berhad and to buy back any loans which
are regarded as defective based on an agreed prudential criteria. Such financing transactions and the obligations to buy back
the loans are reflected as a liability on the statement of financial position.
109
20
OTHER LIABILITIES
Bank Negara Malaysia and Credit
Guarantee Corporation Funding programmes
Margin and collateral deposits
Sundry creditors
Clearing accounts
Defined contribution plan (a)
Accrued employee benefits (b)
21
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
36,071
72,793
206,888
10,754
229
43,009
65,191
188,983
44,616
11,968
125
36,071
72,133
190,513
10,211
206
43,009
62,552
172,182
27,706
11,448
105
326,735
353,892
309,134
317,002
(a)
The Group and the Bank contributes to the Employee Provident Fund ('EPF'), the national defined contribution plan.
Once the contributions have been paid, the Group and the Bank has no further payment obligations.
(b)
This refers to the accruals for short-term employee benefits for leave entitlement. Under employment contract, employees
earn their leave entitlement which they are entitled to carry forward and will lapse if not utilised in the following accounting
period. Accruals are made for the estimated liability for unutilised annual leave.
DERIVATIVE FINANCIAL LIABILITIES
2011
Contract/
notional
amount
Liabilities
RM'000
RM'000
22
At fair value
Currency forwards
Cross currency swaps
466,576
1,465,194
6,313
33,904
487,922
340,850
19,025
22,715
Interest rate derivatives:
Interest rate swap
1,950,455
57,182
919,193
28,455
3,882,225
97,399
1,747,965
70,195
AMOUNT DUE TO SUBSIDIARIES
The amount due to subsidiaries is unsecured, interest-free and have no fixed terms of repayment.
110
2010
Contract/
notional
amount
Liabilities
RM'000
RM'000
Annual Report 2011
23
SUBORDINATED TERM LOAN
On 10 March 2009, the Bank has taken the first 10 year subordinated loan amounting to RM300 million. The first subordinated
loan was constituted by Trust Deed dated 6 March 2009 and were issued on 10 March 2009.
On 26 May 2011, the Bank has taken the second 10 year subordinated loan amounting to RM300 million. The second
subordinated loan was constituted by Trust Deed dated 20 May 2011 and were issued on 26 May 2011.
Both the subordinated loans were taken with the Bank's Holding Company.
The subordinated loans have a prepayment option on the first prepayment date or any interest payment date subsequent to the
first prepayment date, giving the Bank the right, subject to Bank Negara Malaysia ('BNM') approval, to prepay the loans in whole
or in part.
Interest on subordinated loans payable by quarterly.
Subordinated loan I
Value
:
RM300 million
Interest rate
:
Cost of Fund ('COF') plus 0.75% per annum for period of thirty six months from the issue date, COF plus
1.75% per annum for the next twenty four months and thereafter COF plus 2.00% for the next 5 years.
Subordinated loan II
Value
:
RM300 million
Interest rate
:
Cost of Fund ('COF') plus 1.00% per annum for the 10 years.
COF refers to rate determined by the lender on an interest determination date falling within the interest duration.
24
SHARE CAPITAL
Number of ordinary
shares of RM1 each
2011
2010
RM'000
RM'000
2011
2010
RM'000
RM'000
Authorised
At beginning/end of the financial year
2,000,000
2,000,000
2,000,000
2,000,000
Issued and fully paid
At beginning/end of the financial year
1,439,285
1,439,285
1,439,285
1,439,285
111
25
RESERVES
The Group
2011
2010
RM'000
RM'000
Retained profits
Share premium
AFS revaluation reserves
Statutory reserves
Statutory reserves
Transfer from retained profits
(a)
The Bank
2011
2010
RM'000
RM'000
667,326
408,389
74,941
1,011,044
522,171
408,389
54,249
888,910
530,489
408,389
68,611
904,624
411,831
408,389
45,795
807,500
2,161,700
1,873,719
1,912,113
1,673,515
888,910
122,134
789,221
99,689
807,500
97,124
720,824
86,676
1,011,044
888,910
904,624
807,500
A single tier company tax was introduced effective 1 January 2008. Under this single tier system, tax on a company’s profits
is a final tax, and dividends distributed to shareholders will be exempted from tax. Companies with Section 108 tax credit
balance are given an option to elect to move to a single tier system immediately or allowed to use the Section 108 credit
balance for the purpose of dividend distribution during a transitional period of 6 years until 31 December 2013.
The Bank has elected to use its Section 108 credit balance for the purpose of dividend distribution during a transitional period
of 6 years until 31 December 2013. The Section 108 balance of the Bank as at 31 December 2007 will be frozen and can
only be adjusted downwards for any tax discharged, remitted or refunded during the 6 years period.
As at 31 December 2011, the Bank has a tax credit balance of RM2,533,928 under Section 108 of the Income Tax Act,
1967 and tax exempt account balance of RM82,896,257 under Section 12 of the Income Tax (Amendment) Act 1999,
subject to agreement by the Inland Revenue Board.
112
(b)
The statutory reserves of the Group and the Bank are maintained in compliance with the provisions of the Banking and
Financial Institutions Act, 1989 and are not distributable as cash dividends.
(c)
AFS revaluation reserves represent the unrealised gains or losses arising from the change in fair value of investments
classified as financial investment available-for-sale. The gains or losses are transferred in the income statement upon disposal
or when the securities become impaired.
Annual Report 2011
26
INTEREST INCOME
The Group
2011
2010
RM'000
RM'000
Money at call and deposit placements
with financial institutions
Financial assets/investments
- Held-for-trading
- Available-for-sale
- Held-to-maturity
Interest rate derivatives
Others
Amortisation of premium less accretion of discount
of which:
Interest income earned on impaired loans,
advances and financing
27
The Bank
2011
2010
RM'000
RM'000
1,388,531
1,190,417
1,388,531
1,190,417
148,478
108,787
165,052
117,260
50
141,979
23,276
71,879
-
311
116,495
15,522
48,701
-
50
141,830
23,229
71,879
4,688
311
116,347
15,522
48,701
3,408
1,774,193
21,469
1,480,233
31,602
1,795,259
21,469
1,491,966
31,602
1,795,662
1,511,835
1,816,728
1,523,568
11,555
(382)
11,555
(382)
INTEREST EXPENSE
Deposits and placements of banks
Loan sold to Cagamas Berhad
Others
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
114,418
788,840
19,884
14,913
81,302
1,490
110,572
552,448
10,633
14,559
66,152
6,484
114,419
788,874
19,884
14,913
81,302
1,490
110,579
552,474
10,633
14,559
66,152
6,484
1,020,847
760,848
1,020,882
760,881
113
28
ISLAMIC BANKING INCOME
The Group
2011
2010
RM'000
RM'000
Income derived from investment of depositors' funds and others
Income derived from investment of shareholders' funds
Total distributable income
Income attributable to depositors
29
287,402
18,052
389,763
(190,830)
305,454
(127,671)
198,933
177,783
OTHER OPERATING INCOME
The Group
2011
2010
RM'000
RM'000
Fee income
Commission
Service charges and fees
Guarantee fees
Income from financial instruments
Gain arising on financial assets held-for-trading:
- net gain on disposal
- unrealised (losses)/gains
Gains/(losses) on derivatives:
- realised
- unrealised
114
368,911
20,852
Annual Report 2011
The Bank
2011
2010
RM'000
RM'000
13,329
51,987
25,017
12,421
47,815
27,392
13,329
51,987
25,017
12,421
47,815
27,392
90,333
87,628
90,333
87,628
546
(9)
1,217
137
546
(9)
1,217
137
537
1,354
537
1,354
2,600
(13,230)
1,089
6,303
2,600
(13,230)
1,089
6,303
(10,630)
7,392
(10,630)
7,392
29
OTHER OPERATING INCOME (continued)
The Group
2011
2010
RM'000
RM'000
Income from financial instruments (continued)
Gain arising on financial investments available-for-sale:
- net gain on disposal
- gross dividend income
Gain arising on financial investments held-to-maturity:
- net gain on redemption
- gross dividend income
Other income
Foreign exchange gains/(losses):
- realised
- unrealised
Rental income
Gain on sale of property and equipment
(Loss)/Gain on disposal of foreclosed properties
Other non-operating income
30
The Bank
2011
2010
RM'000
RM'000
24,102
23
23,733
8
24,102
23
23,635
8
24,125
23,741
24,125
23,643
2,546
9,705
2,053
2,901
2,378
9,705
2,053
2,901
12,251
4,954
12,083
4,954
74,386
(17,878)
2,211
23
(272)
11,798
82,790
(9,549)
1,834
219
6,330
20,658
74,386
(17,878)
2,161
23
(272)
10,539
82,791
(9,549)
1,780
219
6,330
20,362
70,268
102,282
68,959
101,933
186,884
227,351
185,407
226,904
OTHER OPERATING EXPENSES
Personnel costs (a)
Establishment costs (b)
Marketing expenses (c)
Administrative and general expenses (d)
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
290,791
166,781
17,266
58,875
295,053
167,973
11,553
56,332
235,592
142,477
14,555
49,377
240,585
143,342
9,633
46,585
533,713
530,911
442,001
440,145
115
30
OTHER OPERATING EXPENSES (continued)
(a)
Personnel costs
Wages, salaries and bonuses
Defined contribution plan ('EPF')
Other personnel costs
(b)
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
220,817
36,003
33,971
228,427
35,770
30,856
178,539
29,352
27,701
186,516
29,223
24,846
290,791
295,053
235,592
240,585
Establishment costs
The Group
2011
2010
RM'000
RM'000
Rental of premises
Equipment rental
Repair and maintenance
Depreciation
IT Consultancy fees
Dataline rental
Security services
Electricity, water and sewerage
Other establishment costs
(c)
20,222
905
27,757
18,872
9,366
57,272
3,477
10,461
8,491
9,958
18,985
741
24,849
20,071
16,474
54,659
5,014
9,228
8,118
9,834
16,995
877
23,540
17,853
8,836
49,799
3,022
8,625
7,220
5,710
15,980
718
21,061
19,297
15,658
47,348
4,313
7,679
6,858
4,430
166,781
167,973
142,477
143,342
Marketing expenses
The Group
2011
2010
RM'000
RM'000
Business promotion and advertisement
Entertainment
Travelling and accommodation
Other marketing expenses
116
The Bank
2011
2010
RM'000
RM'000
Annual Report 2011
The Bank
2011
2010
RM'000
RM'000
9,348
2,463
3,899
1,556
4,701
2,048
3,511
1,293
8,346
2,057
2,956
1,196
4,330
1,819
2,490
994
17,266
11,553
14,555
9,633
30
OTHER OPERATING EXPENSES (continued)
(d)
Administration and general expenses
The Group
2011
2010
RM'000
RM'000
Telecommunication expenses
Auditors' remuneration
Professional fees
Property and equipment written off
Mail and courier charges
Stationery and consumables
Other administration and general expenses
The Bank
2011
2010
RM'000
RM'000
4,901
1,479
13,954
423
3,834
9,423
24,861
4,665
2,180
21,958
514
4,456
6,897
15,662
4,157
1,025
10,262
414
3,295
7,224
23,000
3,965
1,859
16,739
513
3,798
5,360
14,351
58,875
56,332
49,377
46,585
6,331
20,222
905
5,320
18,985
741
6,009
16,995
877
5,477
15,980
718
795
(4)
133
555
18,872
9,366
423
707
12
264
1,197
20,071
16,474
514
619
88
318
17,853
8,836
414
569
168
1,122
19,297
15,658
513
The expenditure includes the following statutory disclosure:
Directors' remuneration (Note 31)
Rental of premises
Equipment rental
Auditors' remuneration
- statutory audit fees
- (over)/under provision prior year
- audit related fees
- non audit fees
Depreciation of property and equipment
Property and equipment written off
31
CEO AND DIRECTORS' REMUNERATION
The Directors of the Bank who have held office during the financial year are as follows:
Executive Director
Dato' Zulkiflee Abbas bin Abdul Hamid (Resigned as Director w.e.f 1 November 2011)
Non-Executive Directors
Jen Tan Sri Dato' Seri Ismail bin Haji Omar (Bersara) (Chairman)
Mr Brian Li Man-Bun (Alternate Director to Mr Aubrey Li Kwok-Sing)
Mr Gary Cheng Shui Hee (Alternate Director to Mr Aubrey Li Kwok-Sing)
117
31
CEO AND DIRECTORS' REMUNERATION (continued)
Non-Executive Directors (continued)
Mr Eric Koh Thong Hau (Alternate Director to Mr Stephen Charles Li)
Mr Lee Chor Kee (Alternate Director to Mr Stephen Charles Li)
The aggregate amount of remuneration for the Directors of the Bank for the financial year were as follows:
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
Executive Director
Salaries
Bonuses
Other employee benefits
Benefits-in-kind
1,431
2,471
638
90
122
1,260
2,236
569
62
98
1,431
2,471
638
90
122
1,260
2,236
569
62
98
Non-Executive Directors
Fees
Benefits-in-kind
1,554
25
1,069
26
1,232
25
1,226
26
Directors' remuneration (Note 30)
6,331
5,320
6,009
5,477
A summary of the total remuneration of the Directors, distinguishing between Executive and Non-Executive Directors.
The Bank
2011
Salaries
RM'000
Bonuses
RM'000
Directors'
Fees
RM'000
*Other
emoluments
RM'000
Benefits in-kind
RM'000
Total
RM'000
1,431
2,471
-
728
122
4,752
1,431
2,471
-
728
122
4,752
-
-
168
97
202
96
-
25
-
289
97
202
-
-
125
190
86
-
-
125
190
86
-
-
5
59
-
-
5
59
-
-
1
189
14
-
-
1
189
14
-
-
1,136
96
25
1,257
1,431
2,471
1,136
824
147
6,009
Executive Director/CEO
Non-executive Directors
Jen Tan Sri Dato' Seri Ismail bin Haji Omar
(Bersara)
Dr. Raja Abdul Malek bin Raja Jallaludin
Laksamana Madya Tan Sri Dato' Seri
Ahmad Ramli bin Mohd Nor (Bersara)
Mr Gary Cheng Shui Hee (Alternate Director
to Mr Aubrey Li Kwok-Sing )
Mr Lee Chor Kee (Alternate Director
to Mr Stephen Charles Li )
Total
118
Annual Report 2011
31
CEO AND DIRECTORS' REMUNERATION (continued)
A summary of the total remuneration of the Directors, distinguishing between Executive and Non-Executive Directors.
The Bank
2010
Executive Director/CEO
Non-executive Directors
Jen Tan Sri Dato' Seri Ismail bin Haji Omar
(Bersara)
Dr. Raja Abdul Malek bin Raja Jallaludin
Laksamana Madya Tan Sri Dato' Seri
Ahmad Ramli bin Mohd Nor (Bersara)
Mr Brian Li Man-Bun (Alternate Director
to Mr Aubrey Li Kwok-Sing )
Mr Eric Koh Thong Hau (Alternate Director
to Mr Stephen Charles Li )
Total
Salaries
RM'000
Bonuses
RM'000
Directors'
Fees
RM'000
*Other
emoluments
RM'000
Benefits in-kind
RM'000
Total
RM'000
1,260
2,236
-
631
98
4,225
1,260
2,236
-
631
98
4,225
-
-
169
22
202
96
-
26
-
291
22
202
-
-
163
192
91
-
-
163
192
91
-
-
88
-
-
88
-
-
10
193
-
-
10
193
-
-
1,130
96
26
1,252
1,260
2,236
1,130
727
124
5,477
* Executive Director’s Other emoluments include allowance and EPF
32
ALLOWANCES FOR LOSSES ON LOANS, ADVANCES AND FINANCING
- made in the financial year
- written-back
- made/(written-back)
Bad debts and financing
- recovered
- written-off
Litigation losses arising from loans
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
116,909
(13,571)
111,880
(12,198)
172,716
(10,778)
59,788
(16,409)
(213,325)
15,791
40,000
(172,417)
15,628
78,000
67,662
198,023
(20,669)
(3,044)
(214,257)
15,956
40,000
(172,726)
15,810
78,000
12,699
95,394
1,936
66,740
119
33
SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
Related parties that have transactions and their relationship with the Bank are as follows:
Related parties
Relationship
Lembaga Tabung Angkatan Tentera ('LTAT')
Ultimate holding corporate body
AFFIN Holdings Berhad ('AHB')
Holding company
Subsidiaries and associates of LTAT
Subsidiary and associate companies of the ultimate holding
corporate body
Subsidiaries and associates of AHB as disclosed in its
financial statements
Subsidiary and associate companies of the holding company
Subsidiaries of AFFIN Bank Berhad as disclosed in Note 12
Subsidiaries
Joint controlled entity as disclosed in Note 13
Joint controlled entity of subsidiary
Voting shares in body corporate not less than 15% of votes
Other related companies
Key management personnel
The key management personnel of the Bank consist of:
- Chief Executive Officer
- Members of Senior Management team and the company
secretary
Related parties of key management personnel (deemed as
related to the Bank)
- Close family members and dependents of key management
personnel
- Entities that are controlled, jointly controlled or significantly
influenced by, or for which significant voting power in such
entity resides with, directly or indirectly by key management
personnel or its close family members
Key management personnel includes the Chief Executive Officer of the Bank in office during the year and his remuneration for
the financial year end are disclosed in Note 33(b).
120
Annual Report 2011
121
(a)
Expenditure
Interest on fixed deposits
Interest on Negotiable Instruments of Deposit
Interest on deposits and placements of banks
Interest on special investment account
Interest on money market deposits
Interest on repurchase agreements
Brokerage fees
Rental
Others
Income
Interest on private debt securities
Interest on advances
Interest on deposits and placements with
banks and other financial institutions
Other income
The Group
Related parties balances
135
326
1
613
5,496
2,633
613
9,831
-
-
4,421
-
-
-
6,585
-
-
-
Ultimate holding
corporate body
2011
2010
RM'000
RM'000
33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (continued)
28,791
230
19,884
8,677
-
-
-
-
16,011
109
10,633
5,269
-
-
-
-
Holding
company
2011
2010
RM'000
RM'000
26,174
190
418
2,523
46
11,564
1,609
7,309
2,515
44,237
6,696
5,769
3,145
28,627
23,465
15
671
1,891
526
11,449
2,715
4,766
1,432
27,403
808
5,813
3,149
17,633
Other related
companies
2011
2010
RM'000
RM'000
-
-
-
-
-
-
-
-
-
1
-
1
Companies in
which certain
Directors have
substantial interest
2011
2010
RM'000
RM'000
122
Annual Report 2011
(a)
Commitment
Amount due to
Demand and fixed deposits
Deposits and placement of banks and other
financial institutions
Special investment account
Intercompany balances
Other payables
Amount due from
Advances
Deposits and placement with banks and other
Security deposits
The Group
Related parties balances (continued)
-
528,215
492,930
-
-
57,416
-
98
98
528,215
-
98
98
435,514
-
-
-
Ultimate holding
corporate body
2011
2010
RM'000
RM'000
-
887,210
601,850
300
-
285,060
-
3,730
3,600
130
-
-
601,140
300,682
76
300,382
-
3,674
3,600
74
-
Holding
company
2011
2010
RM'000
RM'000
1,718,550
1,337,004
704,465
10,181
115,767
33
35
456,222
50,301
2,090,396
575,742
2,745
2,990
749,884
759,035
1,861,329
510,425
4,157
17,394
153,008
97
335,769
-
783,038
190,490
2,745
2,983
67,203
519,617
Other related
companies
2011
2010
RM'000
RM'000
-
38
-
38
-
-
-
-
-
6
-
6
-
-
-
-
Companies in
which certain
Directors have
2011
2010
RM'000
RM'000
123
(a)
Expenditure
Interest on short term advances
Interest on fixed deposits
Interest on Negotiable Instruments of Deposit
Interest on money market deposits
Brokerage fees
Rental
Others
Income
Interest on special investment account
Interest on private debt securities
Interest on advances
Interest on deposits and placements with
banks and other financial institutions
Other income
The Bank
5,263
9,831
-
-
4,324
326
613
-
-
-
6,585
2,633
613
-
-
-
Ultimate holding
corporate body
2011
2010
RM'000
RM'000
28,791
8,677
230
19,884
-
-
-
16,011
5,269
109
10,633
-
-
-
Holding
company
2011
2010
RM'000
RM'000
418
34
384
-
81,491
661
64,917
15,913
-
476
7
23
352
94
71,466
1,404
63,031
7,031
-
Subsidiaries
2011
2010
RM'000
RM'000
25,446
190
7,149
2,516
2,523
44
11,564
1,460
43,110
6,696
5,753
3,146
27,515
22,343
15
4,649
1,432
1,891
497
11,449
2,410
26,530
808
5,750
3,149
16,823
Other related
companies
2011
2010
RM'000
RM'000
-
-
-
-
-
-
-
1
-
1
Companies
which certain
Directors have
2011
2010
RM'000
RM'000
124
Annual Report 2011
(a)
Commitment
-
-
-
-
601,138
527,149
492,215
887,210
300,682
74
601,850
300
-
3,674
-
3,730
3,600
74
300,382
-
98
98
3,600
130
-
285,060
-
98
98
-
Holding
company
2011
2010
RM'000
RM'000
527,149
-
-
-
Ultimate holding
corporate body
2011
2010
RM'000
RM'000
Amount due to
Demand and fixed deposits
434,798
Deposits and placement of banks and other
57,417
Other payables
-
Amount due from
Special investment account
Advances
Security deposits
The Bank
1,800
49,127
48,307
-
820
-
1,072,965
145,802
356,897
-
570,266
425,599
2,990
749,884
735,705
704,473
115,767
33
35
430,505
50,301
473,957
4,157
153,008
91
316,701
-
2,200 1,628,322 1,861,329
49,560 1,301,114
47,954
-
1,606
-
766,786
190,490
2,981
67,202
506,113
Other related
companies
2011
2010
RM'000
RM'000
665,101 1,914,178
144,964
184,738
-
330,197
5,202
-
Subsidiaries
2011
2010
RM'000
RM'000
-
-
-
-
-
-
-
-
5
-
5
-
-
-
-
Companies
which certain
Directors have
2011
2010
RM'000
RM'000
33
SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (continued)
(b)
Key management personnel compensation
The remuneration of key management personnel of the Group and the Bank during the year are as follows:
The Group
2011
2010
RM'000
RM'000
Short-term employment benefits
Salaries
Bonuses
Other employee benefits
Benefits-in-kind
The Bank
2011
2010
RM'000
RM'000
7,009
10,182
2,905
1,119
380
6,618
8,695
2,594
1,038
445
6,427
9,154
2,640
1,067
311
5,706
7,683
2,265
890
383
21,595
19,390
19,599
16,927
Included in the above table are Directors' remuneration as disclosed in Note 31.
34
TAXATION
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
Current tax
Under provision in prior year
Deferred tax (Note 10)
152,316
22,707
(7,453)
66,627
19,223
50,191
135,373
25,827
(13,325)
56,599
14,271
57,219
Tax expense for the year
167,570
136,041
147,875
128,089
The taxation charge arising in
Malaysia for the financial year
The Group
2011
2010
%
%
The Bank
2011
2010
%
%
Statutory tax rate in Malaysia
Tax effect in respect of:
Non allowable expenses
Non taxable income
Utilisation of previously
unrecognised tax losses
Effect of different tax rate
Tax savings arising from income exempt
from tax for International Currency
Business Unit (ICBU)
Under accrual in prior years
Recognition of deferred tax previously not recognised
Others
25.00
25.00
25.00
2.04
(0.44)
1.94
(0.17)
2.29
(0.46)
2.10
(0.18)
(0.02)
(0.94)
(0.01)
(0.51)
(1.08)
(0.56)
(0.18)
3.70
(2.87)
1.04
0.54
3.68
(4.40)
4.81
(3.04)
0.05
3.01
(2.39)
Average effective tax rate
27.33
26.07
27.57
26.98
25.00
Tax savings of the Group as a result of utilisation of tax losses brought forward from previous years from which the related credit
is recognised during the financial year amounted to RM102,000 (2010: RM62,000)
125
35
EARNINGS PER SHARE
The basic and fully diluted earnings per ordinary share for the Group and the Bank have been calculated based on the net profit
attributable to equity holders of the Group and the Bank of RM440,003,000 (2010: RM381,237,000) and RM388,496,000
(2010: RM346,705,000) respectively. The weighted average number of shares in issue during the financial year of 1,439,285,000
(2010: 1,439,285,000) is used for the computation.
36
DIVIDEND
Dividends declared or proposed for the financial year are as follows:
2011
Dividend
Amount of
per share
dividend
sen
RM'000
Ordinary shares
Interim dividend paid
Proposed final dividend
Dividends in respect of the financial year
2010
Dividend
Amount of
per share
dividend
sen
RM'000
7.00
5.00
100,750
71,964
5.28
5.00
57,000
71,964
12.00
172,714
10.28
128,964
At the forthcoming Annual General Meeting, a final tax exempt dividend in respect of the current financial year of 5 sen per share
amounting to RM71,964,000 will be proposed for shareholder's approval. These financial statements do not reflect this final
dividend which will be accounted for in the shareholder's equity as an appropriation of retained profits in the financial year ending
31 December 2011 when approved by the shareholder.
Dividends recognised as distribution to ordinary equity holders of the Bank:
2011
Dividend
Amount of
per share
dividend
sen
RM'000
Ordinary shares
Interim dividend
Final dividend
126
Annual Report 2011
2010
Dividend
Amount of
per share
dividend
sen
RM'000
7.00
5.00
100,750
71,964
5.28
5.00
57,000
53,973
12.00
172,714
10.28
110,973
127
37
Direct credit substitutes
Transaction-related contingent items
Short-term self-liquidating
trade-related contingencies
Irrevocable commitments to extend credit:
- maturity less than one year
- maturity more than one year
Foreign exchange related contracts:
- less than one year
- one year to less than five years
Interest rate related contracts:
- more than five years
Unutilised credit card lines
The commitments and contingencies consist of:
as a result of these transactions.
Positive
fair value
of derivative
contracts
RM'000
17,255
15,087
2,168
17,900
3,596
14,304
35,155
Principal
amount
RM'000
386,900
2,375,506
973,727
10,541,754
7,015,300
3,526,454
3,057,581
2,987,581
70,000
2,395,015
133,140
1,787,852
474,023
189,502
19,919,985
4,061,557
194,745
2,108,351
1,403,060
705,291
54,798
49,028
5,770
91,110
156
47,055
43,899
37,900
386,900
1,187,753
Credit
equivalent
amount*
RM'000
The Group
2011
3,491,574
159,463
1,758,003
1,113,217
644,786
19,610
17,625
1,985
22,789
67
12,427
10,295
28,463
373,254
1,129,992
Risk weighted
amount*
RM'000
18,844,780
1,232,752
10,310,068
6,062,519
4,247,549
2,416,479
2,215,359
201,120
1,495,313
93,784
956,256
445,273
594,104
408,608
2,387,456
Principal
amount
RM'000
46,155
36,412
25,842
10,570
9,743
2,664
7,079
-
-
Positive
fair value
of derivative
contracts
RM'000
2,109,313
246,551
70,499
50,821
19,678
71,106
14
32,602
38,490
118,821
408,608
1,193,728
Credit
equivalent
amount*
RM'000
The Group
2010
1,596,123
140,554
28,169
19,952
8,217
16,781
3
7,936
8,842
89,026
299,520
1,022,073
Risk weighted
amount*
RM’000
In the normal course of business, the Group and the Bank make various commitments and incurs certain contingent liabilities with legal recourse to their customers. No material losses are anticipated
COMMITMENTS AND CONTINGENCIES
128
Annual Report 2011
37
*
17,255
15,087
2,168
17,900
3,596
14,304
35,155
378,797
2,226,050
627,826
9,155,540
6,057,224
3,098,316
3,057,581
2,987,581
70,000
2,395,015
133,140
1,787,852
474,023
189,502
18,030,311
3,632,302
125,564
1,831,108
1,211,445
619,663
54,798
49,028
5,770
91,110
156
47,055
43,899
37,900
378,797
1,113,025
3,151,504
131,304
1,522,025
956,882
565,143
19,610
17,625
1,985
22,789
67
12,427
10,295
28,463
366,784
1,060,529
Risk weighted
amount*
RM'000
16,821,892
546,276
9,198,609
5,360,954
3,837,655
2,416,479
2,215,359
201,120
1,495,313
93,784
956,256
445,273
594,104
382,080
2,189,031
Principal
amount
RM'000
46,155
36,412
25,842
10,570
9,743
2,664
7,079
-
-
Positive
fair value
of derivative
contracts
RM'000
1,846,277
109,255
70,499
50,821
19,678
71,106
14
32,602
38,490
118,821
382,080
1,094,516
Credit
equivalent
amount*
RM'000
The Bank
2010
1,451,919
109,027
28,169
19,952
8,217
16,781
3
7,936
8,842
89,026
280,656
928,260
Risk weighted
amount*
RM’000
The credit equivalent amount and risk-weighted amount is arrived at using the credit conversion factors as per Bank Negara Malaysia's revised Risk Weighted Capital
Adequacy Framework ("RWCAF") and Capital Adequacy for Islamic Banks ("CAFIB") guidelines.
Transaction-related contingent items
Short-term self-liquidating
trade-related contingencies
Irrevocable commitments to extend credit:
- maturity less than one year
- maturity more than one year
Foreign exchange related contracts:
Interest rate related contracts:
- more than five years
Principal
amount
RM'000
Credit
equivalent
amount*
RM'000
The Bank
2011
Positive
fair value
of derivative
contracts
RM'000
COMMITMENTS AND CONTINGENCIES (continued)
37
COMMITMENTS AND CONTINGENCIES (continued)
The table below analyses the contractual or underlying principal amounts of derivative financial instruments held or issued.
In addition, they also set out the corresponding gross positive credit equivalent of the derivative financial instruments.
2011
Credit
Principal
equivalent
amount
amount
RMʼ000
RM'000
2010
Credit
Principal
equivalent
amount
amount
RM’000
RM'000
Foreign exchange contracts
Forward contracts
Swaps
712,883
2,344,698
7,108
47,690
728,471
1,688,008
15,115
55,384
Interest rate contracts
Swaps
2,395,015
91,110
1,495,313
71,106
Foreign exchange related contracts and interest rate related contracts are subject to market risk and credit risk.
38
FINANCIAL RISK MANAGEMENT
(i)
Credit Risk
Credit risk is the potential financial loss resulting from the failure of the customer or counterparty to settle the financial and
contractual obligations to the Bank. Credit risk emanates mainly from loans, advances and financing, loan commitments
arising from such lending activities, as well as through financial transactions with counterparties including interbank money
market activities, derivative instruments used for hedging and debt securities.
The management of credit in the Bank is governed by a set of credit policies approved by the Board of Directors. Approval
authorities are delegated to Senior Management and Group Management Loan Committee ('GMLC') to implement the
credit policies and ensure sound credit granting standards.
An independent Group Risk Management ('GRM') function with a direct reporting line to Board Risk Management Committee
('BRMC') is in place to ensure adherence to risk standards and discipline. Portfolio management risk reports are submitted
regularly to BRMC.
Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit Plan. New businesses are
governed by the risk acceptance criteria and customer qualifying criteria/fitness standards prescribed in the Credit Plan. The
Credit Plan is reviewed at least annually and approved by the BRMC.
129
38
FINANCIAL RISK MANAGEMENT (continued)
(i)
Credit Risk (continued)
Credit Risk measurement
Credit evaluation is the process of analysing the creditworthiness of the prospective customer against the Bank’s
underwriting criteria and the ability of the Bank to make a return commensurate to the level of risk undertaken. A critical
element in the evaluation process is the assignment of a credit risk grade to the counterparty. This assists in the risk
assessment and decision making process. The Bank has developed internal rating models to support the assessment and
quantification of credit risk.
For consumer mass market products, statistically developed application scorecards are used by the Business to assess the
risks associated with the credit application. The scorecards are used as a decision support tool at loan origination.
Over-the-Counter ('OTC') Derivatives
The OTC Derivatives credit exposure is computed using the Current Exposure Method. Under the Current Exposure method,
computation of credit equivalent exposure for interest rate and exchange rate related contracts is derived from the
summation of the two elements; the replacement costs (obtained by marking-to-market) of all contracts and the potential
future exposure of outstanding contracts (Add On charges depending on the specific remaining tenor to maturity).
Risk limit control and mitigation policies
The Bank employs various policies and practices to control and mitigate credit risk.
Lending limits
The Bank establishes internal limits and related lending guidelines to manage large exposures and avoid undue concentration
of credit risk in its credit portfolio. The limits include single customer groupings, connected parties, and geographical and
industry segments. These risks are monitored regularly and the limits reviewed annually or sooner depending on changing
market and economic conditions.
The credit risk exposure for derivative and loan books is managed as part of the overall lending limits with customers
together with potential exposure from market movements.
Collateral
Credits are established against borrower’s capacity to repay rather than rely solely on security. However, collateral may be
taken to mitigate credit risk. The main collateral types accepted and given value by the Bank are:
-
130
mortgage over residential properties;
charges over commercial real estate or vehicles financed;
charges over business assets such as business premises, inventory and accounts receivable; and
charges over financial instruments such as marketable equities.
Annual Report 2011
38
(i)
Risk limit control and mitigation policies (continued)
Financing covenants (for credit related commitments and loans books)
The primary purpose of these instruments is to ensure that funds are available to a customer when required. Guarantees
and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit are
collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan.
Commitment to extend credit represents unutilised portion of approved credit in the form of loans, guarantees or letters of
credit. In terms of credit risk, the Bank is potentially exposed to loss in an amount equal to the total unutilised commitments.
However, the potential amount of loss is less than the total unutilised commitments, as most commitments to extend credit
are contingent upon customers maintaining specific minimum credit standards.
The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater
degree of credit risk than short-term commitments.
Credit Risk monitoring
Retail credits are actively monitored and managed on a portfolio basis by product type. A new collection management
system has been implemented with a dedicated team in place to promptly identify, monitor and manage delinquent accounts
at early stages of delinquency.
Corporate credits and large individual accounts are reviewed by the Business Units at least once a year against updated
information. This is to ensure that the credit grades remain appropriate and detect any signs of weaknesses or deterioration
in the credit quality. Remedial action is taken where evidence of deterioration exists.
Early Alert Process is in place as part of a means to pro-actively identify, report and manage deteriorating credit quality.
Watchlist accounts are closely reviewed and monitored with corrective measures initiated to prevent them from turning
impaired. As a rule, watchlist accounts are either worked up or worked out within a period of twelve months.
Credit Risk culture
The Bank recognises that learning is a continuous journey and is committed to enhance the knowledge and required skills
set of its staff. It places strong emphasis in creating and enhancing risk awareness in the organisation.
For effective and efficient staff learning, the Bank has implemented an E–Learning Program with an online Learning
Management System ('LMS'). The LMS provides staff with a progressive self-learning alternative at own pace.
Group Risk Management commenced an Internal Credit Certification ('ICC') Programme for both Business Banking and
Consumer Credit in July 2009 and August 2009 respectively. In October 2010, the Bank introduced ICC-Market Risk with
the Diagnostic Assessment conducted through the LMS.
The aim of the ICCs is to assist the core credit related group of personnel in the Bank achieve a minimum level of knowledge
and analytical skills required to make sound corporate and commercial loans to customers. It is envisaged that the core credit
related group of personnel would all be certified within 2 to 3 years.
131
38
(i)
Maximum exposure to credit risk
For financial assets recognised on the statement of financial position, the exposure to credit risk equals their carrying amount.
For financial guarantees granted, the maximum exposure to credit risk is the maximum amount that the Group and the
Bank would have to pay if guarantee were to be called upon. For loan commitments and other commitments, the maximum
exposure to credit risk is the full amount of the undrawn credit facilities granted to customers.
All financial assets of the Group and the Bank are subject to credit risk except for cash in hand, equity securities held as
financial assets held-for-trading or financial investments available-forsale, as well as non-financial assets.
The exposure to credit risk of the Group and the Bank equals their carrying amount in the statement of financial position as
at reporting date, except for the followings:
The Group
2011
2011
Maximum
Carrying
Credit
Value
Exposure
RMʼ000
RM'000
Credit risk exposures of on-balance sheet assets:
Other assets
Credit risk exposure of off-balance sheet items:
Financial guarantees
Loan commitments and other credit related commitments
Total maximum credit risk exposure
*9,879,366
6,698,418
166,543
9,737,883
6,585,100
108,207
^
2,762,407
17,157,578
1,574,653
2,486,904
36,664,312
20,492,747
#
^
The Bank
2011
2011
Maximum
Carrying
Credit
Value
Exposure
RMʼ000
RM'000
*5,527,439
5,214,533
116,690
5,385,956
5,104,894
59,056
^
2,604,847
15,425,464
1,491,822
2,140,480
28,888,973
14,182,208
#
^
The Group
2010
2010
Maximum
Carrying
Credit
Value
Exposure
RM’000
RM'000
Credit risk exposures of on-balance sheet assets:
Other assets
Credit risk exposure of off-balance sheet items:
Financial guarantees
Loan commitments and other credit related commitments
Total maximum credit risk exposure
*8,640,457
#
5,804,417
186,461
^
*6,108,452
8,534,879
5,697,708
8,607
2,796,064
16,048,716
1,602,338
506,976
33,476,115
16,350,508
^
The Bank
2010
2010
Maximum
Carrying
Credit
Value
Exposure
RM’000
RM'000
4,455,472
184,582
6,002,874
4,352,544
7,384
2,571,111
14,250,781
1,476,596
369,681
27,570,398
12,209,079
#
^
^
*
including cash in hand
including equity securities
^
amount stated at notional value
#
Whilst the Group and the Bank's maximum exposure to credit risk is the carrying value of the assets, or in the case of offbalance sheet items, the amount guaranteed, committed or accepted, in most cases the likely exposure is far less due to
collateral, credit enhancements and other actions taken to mitigate the credit exposure.
The financial effect of collateral held for loans, advances and financing of the Group and the Bank are 63% (2010: 59%) and
62% (2010: 58%) respectively. The financial effects of collateral for the other financial assets are insignificant.
132
Annual Report 2011
133
38
(i)
-
718,522
9,019,361
486,694
486,694
-
9,737,883
-
Cash and
short-term
funds
RM'000
149,832
-
-
149,832
-
Financial
assets
heldfortrading
RM'000
6,585,100
10,273
-
3,256,493
3,117,024
145,796
55,514
Financial
investments
availablefor-sale
RM'000
521,105
20,537
330
16,186
27,362
179,282
204,721
72,687
Financial
investments
held-tomaturity
RM'000
Risk concentrations for commitments and contingencies are based on the credit equivalent balances in Note 37.
* Not inclusive of collective allowance amounting to RM450 million.
Total assets
Agriculture
Manufacturing
Construction
Real estate
Finance, insurance and
business services
Government and
government agencies
Others
The Group
2011
Deposits and
placements
with banks
and other
financial
institutions
RM'000
30,143,865
1,435,434
14,175,465
61,386
4,244,103
486,--776
431,334
2,261,321
159,611
2,306,998
2,998,575
1,582,862
Loans,
advances and
financing*
RM'000
The credit risk concentrations of the Group and the Bank, by industry concentration, are set out in the following tables:
108,207
107,637
-
570
-
8,791,750
487,238
431,334
2,441,835
305,407
2,511,729
2,998,575
1,711,301
On
balance
sheet
total
RM'000
49,901 47,782,587
316 1,466,560
- 14,283,432
- 12,353,426
47,643
462
1,232
10
238
Derivative
Other financial
assets
assets
RM'000
RM'000
4,061,557
509,842
496,341
119,731
687,259
42,645
37,417
654,642
289
989,050
369,397
154,944
Commitments
and
contingencies
RM'000
Credit risk is the risk of financial loss from the failure of customers to meet their obligations. Exposure to credit risk is managed through portfolio management. The credit
portfolio's risk profiles and exposures are reviewed and monitored regularly to ensure that an acceptable level of risk diversification is maintained. Exposure to credit risk is
also managed in part by obtaining collateral security and corporate and personal guarantees.
Credit risk concentrations
134
Annual Report 2011
38
(i)
192,522
-
247,132
8,287,747
192,522
-
-
8,534,879
-
-
Deposits and
placements
with banks
and other
financial
institutions
RM'000
149,945
-
-
149,945
-
-
Financial
assets
heldfortrading
RM'000
5,697,708
-
3,379,655
2,173,568
30,222
20,530
93,733
-
Financial
investments
availablefor-sale
RM'000
432,537
24,037
330
16,186
27,361
-
157,515
207,108
-
Financial
investments
held-tomaturity
RM'000
Total assets
Agriculture
Manufacturing
Construction
Real estate
Transport, storage and
communication
business services
Government and
government agencies
Others
The Group
2010
Cash and
short-term
funds
RM'000
Credit risk concentrations (continued)
26,370,548
1,198,629
12,443,544
75,394
4,346,670
921,590
476,425
373,899
1,743,308
192,953
2,274,981
2,323,155
Loans,
advances and
financing*
RM'000
8,607
8,607
-
-
-
-
7,189,832
951,919
476,428
374,143
1,922,191
286,699
2,482,243
2,323,155
On
balance
sheet
total
RM'000
54,981 41,441,727
836 1,223,502
152 12,452,633
- 11,758,982
52,634
107
3
244
838
13
154
-
Derivative
Other
financial
assets
assets
RM'000
RM'000
2,109,313
140,172
486,808
135,825
241,832
26,231
31,535
1,053
207,361
57
652,610
185,829
Commitments
and
contingencies
RM'000
135
38
(i)
1,098,988
-
-
668,863
4,717,093
1,098,988
-
-
5,385,956
-
Cash and
short-term
funds
RM'000
149,832
-
-
149,832
-
-
Financial
assets
heldfortrading
RM'000
5,104,894
-
2,410,543
2,543,665
4,890
145,796
-
Financial
investments
availablefor-sale
RM'000
521,105
20,537
330
16,186
27,362
72,687
179,282
204,721
-
Financial
investments
held-tomaturity
RM'000
Total assets
Agriculture
Manufacturing
Construction
Real estate
communication
business services
Government and
government agencies
Others
The Bank
2011
Deposits and
placements
with banks
and other
financial
institutions
RM'000
25,708,951
1,392,298
11,275,156
55,802
3,810,888
1,572,087
400,161
431,167
2,047,851
158,795
2,009,056
2,555,690
Loans,
advances and
financing*
RM'000
59,056
59,056
-
-
-
-
7,199,624
8,347,241
1,649,902
400,623
431,167
2,228,365
304,591
2,213,787
2,555,690
On
balance
sheet
total
RM'000
49,901 38,078,683
316 1,413,151
- 11,334,542
-
47,643
238
462
1,232
10
-
Derivative
Other financial
assets
assets
RM'000
RM'000
3,632,302
482,819
450,577
39,651
608,711
138,196
40,030
37,417
620,567
289
868,661
345,384
Commitments
and
contingencies
RM'000
136
Annual Report 2011
38
(i)
564,917
-
321,806
5,681,068
564,917
-
-
6,002,874
-
-
Deposits and
placements
with banks
and other
financial
institutions
RM'000
149,945
-
-
149,945
-
-
Financial
assets
heldfortrading
RM'000
4,352,544
-
2,425,159
1,808,060
5,062
20,530
93,733
-
Financial
investments
availablefor-sale
RM'000
432,537
24,037
330
16,186
27,361
-
157,515
207,108
-
Financial
investments
held-tomaturity
RM'000
Total assets
Agriculture
Manufacturing
Construction
Real estate
communication
business services
Government and
government agencies
Others
The Bank
2010
Cash and
short-term
funds
RM'000
22,762,471
1,150,259
10,055,570
75,394
3,759,208
915,146
379,421
373,664
1,620,577
192,089
1,962,667
2,278,476
Loans,
advances and
financing*
RM'000
7,384
7,384
-
-
-
-
8,197,807
6,683,931
920,315
379,424
373,908
1,799,460
285,835
2,169,929
2,278,476
On
balance
sheet
total
RM'000
54,981 34,327,653
836 1,175,132
152 10,063,436
-
52,634
107
3
244
838
13
154
-
Derivative
Other
financial
assets
assets
RM'000
RM'000
1,846,277
136,037
483,002
3,859
209,594
26,231
6,267
1,032
203,874
57
590,495
185,829
Commitments
and
contingencies
RM'000
38
(i)
Collaterals
The main types of collateral obtained by the Group and the Bank are as follows:
-
for personal housing loans, mortgages over residential properties;
for commercial property loans, charges over the properties being financed;
for hire purchase, charges over the vehicles or plant and machineries financed; and
for other loans, charges over business assets such as premises, inventories, trade receivables or deposits.
Total loans, advances and financing - credit quality
All loans, advances and financing are categorised into “neither past due nor impaired”, “past due but not impaired” and
“impaired”. Past due loans refer to loans that are overdue by one day or more. Impaired loans are loans with months-inarrears more than 90 days or with impairment allowances.
Distribution of loans, advances and financing by credit quality
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
Neither past due nor impaired (a)
Past due but not impaired (b)
Impaired (c)
26,803,010
2,643,450
865,662
22,362,063
3,213,211
971,123
22,916,350
2,232,612
693,318
19,340,931
2,742,727
818,522
Gross loans, advances and financing
less: Allowance for impairment
-Individual
-Collective
30,312,122
26,546,397
25,842,280
22,902,180
Net loans, advances and financing
29,692,266
(168,257)
(451,599)
(175,849)
(395,701)
25,974,847
(133,329)
(390,890)
25,318,061
(139,709)
(343,220)
22,419,251
Past due but not impaired includes accounts within grace period of the Group and the Bank amounting to RM0.9 billion
(2010: RM1.2 billion) and RM0.8 billion (2010: RM1.1 billion) respectively.
(a)
Loans neither past due nor impaired
Analysis of loans, advances and financing that are neither past due nor impaired analysed based on the Group and
the Bank’s internal credit grading system is as follows:
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
Quality classification
Satisfactory
Special mention
22,345,076
4,457,934
18,598,272
3,763,791
18,817,505
4,098,845
15,964,665
3,376,266
26,803,010
22,362,063
22,916,350
19,340,931
137
38
(i)
Total loans, advances and financing - credit quality (continued)
(a)
Loans neither past due nor impaired (continued)
Quality classification definitions
Satisfactory: Exposures demonstrate a strong capacity to meet financial commitments, with negligible or low probability
of default and/or levels of expected loss.
Special mention: Exposures require varying degrees of special attention and default risk is of greater concern.
(b)
Loans past due but not impaired
Certain loans, advances and financing are past due but not impaired as the collateral values of these loans are in
excess of the principal and profit outstanding. Allowances for these loans may have been set aside on a portfolio
basis. The Bank’s loans, advances and financing which are past due but not impaired are as follows:
The Group
2011
2010
RM'000
RM'000
Past due up to 30 days
Past due 30-60 days
Past due 60-90 days
c)
The Bank
2011
2010
RM'000
RM'000
1,338,561
900,300
404,589
1,730,084
996,340
486,787
1,190,391
716,992
325,229
1,542,944
849,976
349,807
2,643,450
3,213,211
2,232,612
2,742,727
Loans impaired
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
Gross impaired loans
865,662
971,123
693,318
818,522
Individually impaired loans
114,330
439,997
38,938
329,510
Analysis of individually impaired assets:
138
Annual Report 2011
38
(i)
Collateral and other credit enhancements obtained
During the year, the Bank obtained assets by taking possession of collateral held as security or calling upon other credit
enhancements as follows:
2011
2010
RM'000
RM'000
Carrying amount
Nature of assets:
Condominium
Vacant industrial land
1,190
-
1,370
Foreclosed properties are sold as soon as practicable, with the proceeds used to reduce the outstanding indebtedness.
The carrying amount of foreclosed properties held by the Group and the Bank as at reporting date has been classified
as Other assets as disclosed in Note 8.
Private debt securities, treasury bills and derivatives
Private debt securities, treasury bills and other eligible bills included in financial assets held-for-trading and financial
investments available-for-sale are measured on a fair value basis. The fair value will reflect the credit risk of the issuer.
Most listed and some unlisted securities are rated by external rating agencies. The Group and the Bank mainly uses
external credit ratings provided by RAM, MARC, Standard & Poors' or Moody's.
The table below presents an analysis of debt securities, treasury bills and other eligible bills by rating agency.
139
140
Annual Report 2011
38
(i)
314,696
1,652,387
290,820
290,820
721,113
721,113
AA- to AA+
RM'000
314,696
1,652,387
AAA
RM'000
-
AA- to AA+
RM'000
-
AAA
RM'000
487,468
27,361
460,107
-
A- to A+
RM'000
312,276
27,361
284,915
-
A- to A+
RM'000
104,526
-
104,526
-
Lower than ARM'000
178,545
-
178,545
-
Lower than ARM'000
4,662,634
295,708
166,566
763,701
1,410,778
32,017
1,006,592
711,316
95,839
30,172
99,853
50,092
Unrated
RM'000
4,807,372
393,991
39,421
430,728
2,611,724
174,620
816,584
108,992
81,480
149,832
Unrated
RM'000
120,338
109,468
10,870
-
-
6,386,899
432,537
166,566
763,701
1,410,778
32,017
1,006,592
711,316
106,709
1,606,738
99,853
50,092
Total
RM'000
*Impaired
RM'000
7,369,355
521,105
39,421
430,728
2,611,724
174,620
816,584
113,318
2,512,023
149,832
Total
RM'000
104,079
99,753
4,326
-
-
RM'000
*Impaired
Collateral is not generally obtained directly from the issuers of debt securities. Certain debt securities may be collateralised by specifically identified assets that would be obtainable in the event
of default.
* Net of allowance for impairment
BNM Sukuk
Others
Quoted and unquoted Shares in Malaysia
The Group
2010
Others
The Group
2011
Private debt securities, treasury bills and derivatives (continued)
Credit risk (continued)
141
38
(i)
289,605
1,057,484
247,086
247,086
398,527
-
398,527
-
AA- to AA+
RM'000
289,605
1,057,484
AAA
RM'000
-
AA- to AA+
RM'000
-
AAA
RM'000
487,468
27,361
460,107
-
A- to A+
RM'000
312,276
27,361
284,915
-
A- to A+
RM'000
93,428
-
93,428
-
Lower than ARM'000
178,545
-
178,545
-
Lower than ARM'000
3,692,150
295,708
137,730
763,701
674,170
849,557
698,066
93,101
30,172
99,853
50,092
Unrated
RM'000
3,944,159
393,991
39,421
430,728
1,915,445
24,949
802,322
105,991
81,480
149,832
Unrated
RM'000
119,295
109,468
9,827
-
-
5,037,954
432,537
137,730
763,701
674,170
849,557
698,066
102,928
1,229,320
99,853
50,092
Total
RM'000
*Impaired
RM'000
5,885,470
521,105
39,421
430,728
1,915,445
24,949
802,322
109,639
1,892,029
149,832
Total
RM'000
103,401
99,753
3,648
-
-
RM'000
*Impaired
Collateral is not generally obtained directly from the issuers of debt securities. Certain debt securities may be collateralised by specifically identified assets that would be obtainable in the event
of default.
Others
The Bank
2010
Others
The Bank
2011
Private debt securities, treasury bills and derivatives (continued)
Credit risk (continued)
38
(ii)
Market risk
Market risk is defined as the risk of losses to the Bank’s portfolio positions arising from movements in market prices.
The Bank’s market risk management objective is to ensure that market risk is appropriately identified, measured, controlled,
managed and reported.
The Bank’s exposure to market risk stems primarily from interest rate risk and foreign exchange rate risk. Interest rate risk
arises mainly from differences in timing between the maturities or repricing of assets, liabilities and derivatives. The Bank is
also exposed to basis risk when there is a mismatch between the change in price of a hedge and the change in price of
the assets it hedges. Foreign exchange rate risk arises from unhedged positions of customers’ requirements and proprietary
position.
Market risk arising from the Bank’s trading book is primarily controlled through the imposition of Cut-loss and Value-at-Risk
(VaR) Limits which are approved by both the Asset Liability Management Committee ('ALCO') and Board Risk Management
Committee ('BRMC') in accordance with the Bank's risk appetite. These limits are set and reviewed regularly having regard
to a number of factors, including liquidity and the Bank's business strategy.
For non-trading book, the Bank quantifies the interest rate risk by analysing the repricing mismatch between the rate sensitive
assets and rate sensitive liabilities. The Bank also performs Net Interest Income simulation to assess the variation in earnings
under various rates scenarios.
The non-trading book’s interest rate risk is managed through limits set over time buckets together with an Overall Risk
Tolerance Limit.
In addition, the Bank conducts periodic stress test of its respective portfolios to ascertain market risk under abnormal
market conditions.
The Bank's Management, ALCO and BRMC are regularly kept informed of its risk profile and positions.
Value at risk ('VaR')
Value-at-Risk ('VaR') is used to compute the maximum potential loss amount over a specified holding period of a trading
portfolio. It measures the risk of losses arising from potential adverse movements in interest rates and foreign exchange rates
that could affect values of financial instruments.
The Variance-Covariance Parametric methodology is adopted to compute the potential loss amount. This is a statistically
defined, probability-based approach that uses volatilities and correlations to quantify price risks. Under this methodology,
a matrix of historical volatilities and correlations is computed from the past 100 business days’ market data. VaR is then
computed by applying these volatilities and correlations to the outstanding trading portfolio.
The table below sets out a summary of the Bank’s VaR profile by financial instrument types for the trading portfolio:
2011
Instruments
FX swap
Government securities
2010
Instruments
FX swap
Government securities
142
Annual Report 2011
Balance
RM'000
Average
for the year
RM'000
Minimum
RM'000
Maximum
RM'000
773
4
261
-
73
-
938
7
Balance
RM'000
Average
for the year
RM'000
Minimum
RM'000
Maximum
RM'000
201
-
241
1
1
134
-
437
11
18
38
(ii)
Market risk (continued)
Other Risk Measures
•
Mark-to-market
Mark-to-market valuation tracks the current market value of the outstanding financial instruments.
•
Stress testing
Stress tests are conducted to attempt to quantify market risk arising from low probability, abnormal market movements.
The stress test measure the change in value arising from range of extreme movements in the interest rates and foreign
exchange rates based on past experience and simulated stress scenarios.
•
Sensitivity/Dollar Duration
Sensitivity/Dollar Duration measures the change in value of a portfolio resulting from a 0.01% increase in interest rates.
This measure identifies the Bank’s interest rate exposures that are most vulnerable to interest rate changes and
facilitates the implementation of hedging strategies.
Net interest income sensitivity
The table below shows the pre-tax net interest income sensitivity for the non-trading financial assets and financial liabilities
held at reporting date. The sensitivity has been measured using the Repricing Gap Simulation methodology based on
100 basis points parallel shifts in the interest rate.
The Group
2011
2011
+100
-100
basis point basis point
RM million
RM million
Impact on net interest income
As percentage of net interest income
(13.9)
-1.4%
13.9
1.4%
The Group
2010
2010
+100
-100
basis point
basis point
RM million
RM million
Impact on net interest income
As percentage of net interest income
(25.7)
-2.8%
25.7
2.8%
The Bank
2011
2011
+100
-100
basis point basis point
RM million
RM million
(20.7)
-2.6%
20.7
2.6%
The Bank
2010
2010
+100
-100
basis point
basis point
RM million
RM million
(21.2)
-2.8%
21.2
2.8%
143
38
(ii)
Foreign exchange risk sensitivity analysis
Open position
The Group
2011
US Dollar
Others
US
Dollar
equivalent
amount
'000
(79)
(2,024)
Ringgit
Malaysia
equivalent
amount
'000
(250)
(6,432)
Ringgit
Malaysia
equivalent
amount for
1% fall in
US Dollar
'000
Impact of
1% fall in
US
Dollar
exchange
rate
'000
(247)
(6,367)
2
64
The impact on the outstanding foreign exchange position as at 31 December 2011 for a one percent change in
USD exchange rate from 3.1770 to 3.1452 was an increase of about RM66,815.
Open position
The Group
2010
US Dollar
Others
US
Dollar
equivalent
amount
'000
Ringgit
Malaysia
equivalent
amount
'000
Ringgit
Malaysia
equivalent
amount for
1% fall in
US Dollar
'000
(4,453)
(1,290)
(13,730)
(3,977)
(13,592)
(3,936)
Impact of
1% fall in
US
Dollar
exchange
rate
'000
(137)
(39)
USD exchange rate from 3.0835 to 3.0527 was a decrease of about RM176,000.
144
Annual Report 2011
38
(ii)
Foreign exchange risk sensitivity analysis (continued)
Open position
The Bank
2011
US Dollar
Others
US
Dollar
equivalent
amount
'000
9,166
(1,656)
Ringgit
Malaysia
equivalent
amount
'000
29,120
(5,260)
Ringgit
Malaysia
equivalent
amount for
1% fall in
US Dollar
'000
Impact of
1% fall in
US
Dollar
exchange
rate
'000
28,829
(5,208)
(291)
53
Open position
The Bank
2010
US
Dollar
equivalent
amount
'000
Ringgit
Malaysia
equivalent
amount
'000
Ringgit
Malaysia
equivalent
amount for
1% fall in
US Dollar
'000
US Dollar
Others
(5,944)
(984)
(18,329)
(3,034)
(18,145)
(3,003)
Impact of
1% fall in
US
Dollar
exchange
rate
'000
(183)
(30)
Foreign exchange risk
The Bank is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position
and cash flows. Limits are set on the level of exposure by currency and in aggregate for both overnight and intra-day
positions, which are monitored daily. The table summarises the Bank's exposure to foreign currency exchange rate risk at
reporting date. Included in the table are the Bank's financial instruments at carrying amounts, categorised by currency.
145
146
Annual Report 2011
38
(ii)
1,237,066
638,067
1,380,515
(61,730)
633,166
Net on-balance sheet financial position
Off balance sheet credit commitments
1,100,023
2,589
9,036
149,869
125,418
149,869
1,875,133
292,241
162,885
1,035,041
48
2,166
338
88,139
382,752
87,801
Euro
RM'000
United
States
Dollar
RM'000
Total financial liabilities
Liabilities
Other liabilities
Total financial assets
Assets
Deposits and placements with banks
Other assets
The Group
2011
Foreign exchange risk (continued)
139,367
31,477
10,958
1,315
9,643
150,325
49,736
97,872
25
2,692
Great
Britain
Pound
RM'000
343,693
-
22,938
5,670
70
947
16,251
366,631
81,085
251,818
1,098
32,630
Australian
Dollar
RM'000
66,028
287,601
96
-
96
66,124
32,085
32,584
473
-
982
Japanese
Yen
RM'000
100,189
23,668
4,482
1,213
3,269
104,671
79,872
1,619
183
22,997
Others
RM'000
1,225,614
2,356,427
1,425,409
1,105,693
2,659
12,511
304,546
2,651,023
405,411
576,895
1,135,343
48
3,472
529,854
Total
RM'000
147
38
(ii)
Liabilities
Other liabilities
Assets
The Group
2010
(4,184)
1,093,230
528,557
2,051,238
726,496
505,887
3,748
8,478
7,660
208,383
7,660
1,255,053
147,276
194,100
747,822
1,988
271
3,476
163,867
United
States
Dollar
RM'000
3,205
Euro
RM'000
37,186
65,866
11,898
3,410
8,488
49,084
46,893
113
20
2,058
Great
Britain
Pound
RM'000
43,382
25,235
14,271
4,166
34
98
9,973
57,653
15,685
39,823
96
2,049
Australian
Dollar
RM'000
37,088
328,457
25,619
-
25,619
62,707
29,604
29,633
356
-
3,114
Japanese
Yen
RM'000
61,663
68,370
4,596
67
374
4,155
66,259
7
30,184
1,147
1,522
33,399
Others
RM'000
703,692
3,632,396
790,540
510,053
3 ,849
12,360
264,278
1,494,232
192,572
340,633
749,709
3,626
207,692
Total
RM'000
148
Annual Report 2011
38
(ii)
1,202,047
617,619
363,709
(61,610)
417,394
1,065,071
2,589
9,036
149,264
125,351
149,264
1,819,666
334,268
162,885
875,511
48
2,166
338
87,654
444,788
87,316
Euro
RM'000
United
States
Dollar
RM'000
Liabilities
Other liabilities
Assets
Other assets
The Bank
2011
138,731
26,965
10,951
1,315
9,636
149,682
49,736
97,872
25
2,049
Great
Britain
Pound
RM'000
343,475
-
21,759
4,491
70
947
16,251
365,234
81,085
251,818
1,098
31,233
Australian
Dollar
RM'000
65,948
287,601
96
-
96
66,044
32,085
32,584
473
-
902
Japanese
Yen
RM'000
99,831
7,067
4,482
1,213
3,269
104,313
79,872
1,619
183
22,639
Others
RM'000
1,203,994
1,102,736
1,388,599
1,069,562
2,659
12,511
303,867
2,592,593
447,438
576,895
975,813
48
3,472
588,927
Total
RM'000
149
38
(ii)
Liabilities
Other liabilities
Assets
The Bank
2010
(4,305)
1,093,230
472,301
2,051,238
726,412
505,862
3,748
8,478
7,564
208,324
7,564
1,198,713
184,274
183,003
589,867
1,988
271
3,259
239,581
United
States
Dollar
RM'000
2,988
Euro
RM'000
37,030
65,866
11,895
3,410
8,485
48,925
46,893
113
20
1,899
Great
Britain
Pound
RM'000
43,098
25,235
14,271
4,166
34
98
9,973
57,369
15,685
39,823
96
1,765
Australian
Dollar
RM'000
36,943
328,457
25,619
-
25,619
62,562
29,604
29,633
356
-
2,969
Japanese
Yen
RM'000
61,427
68,370
4,596
67
374
4,155
66,023
30,170
1,147
1,543
33,163
Others
RM'000
646,494
3,632,396
790,357
510,028
3,849
12,360
264,120
1,436,851
229,563
329,522
591,754
3,647
282,365
Total
RM'000
150
Annual Report 2011
38
(ii)
1,275,642
-
16,940,591
26,966,073
Total assets
#
(1)
*
282,599
253,398
-
95,609
29,952
204,721
6,923,472
-
90,000
5,159,961
163,670
-
>1-5
years
RM'000
2,728,732 12,337,103
2,285,786
-
15,032
376,728
51,186
-
>3-12
months
RM'000
2,735,690
2,020,969
-
714,721
-
-
Over 5
years
RM'000
2,487,763
181,203
49,248,203
28,994,861
697,405
1,770,621
49,901
(451,599) *
#
697,405
1,770,621
18,530
31,371
9,879,366
4.94
3.55
3.01
4.11
5.16
2.86
Effective
interest
Total
rate
RM'000
%
486,694
149,832
6,698,418
521,105
-
Trading
book
RM'000
149,832
-
3,454
163,658
101,528
184,166
Non
interest/
profit
sensitive
RM'000
The negative balance represents collective allowance for loans, advances and financing.
Net of individual allowance.
Others include property and equipment, intangible assets, statutory deposits with BNM, tax recoverable, deferred tax assets, subsidiaries, other assets, investment in
jointly controlled entity and amount due from jointly controlled entity.
1,811,639
-
9,695,200
>1-3
months
RM'000
Assets
Financial investment held-to-maturity
- non-impaired
- impaired
Others (1)
The Group
2011
Up to 1
month
RM'000
Non-trading book
The following table represents the Group’s and the Bank’s assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates as
at reporting date.
Sensitivity to interest rates arises from mismatches in the interest rate characteristics of the assets and their corresponding liability funding. One of the major causes of these
mismatches is timing differences in the repricing of the assets and liabilities. These mismatches are actively managed as part of the overall interest rate risk management
process which is conducted in accordance with Group policy guidelines.
Interest/profit rate risk
151
38
(ii)
>1-3
months
RM'000
-
600,000
-
(2)
(3)
6,759,468 (10,304,011) (5,430,196) 10,222,174
Total interest sensitivity gap
(4,096,107)
(4,096,107)
-
6,583,870
3,600,985
2,982,885
3,326
1,850
363,095
40,217
13,775
82,059
2,478,563
Non
interest/
profit
sensitive
RM'000
Other liabilities include provision for taxation, deferred tax liabilities and other liabilities.
The off-balance sheet gap represents the net notional amounts of all interest rate sensitive derivative financial instruments.
2,724,651
2,735,690
(11,039)
6,154,305 (11,068,279) (5,464,746) 11,615,116
605,163
764,268
34,550 (1,392,942)
-
On-balance sheet interest sensitivity gap
Off-balance sheet interest sensitivity gap (3)
-
-
-
-
-
Over 5
years
RM'000
-
8,193,478
-
721,987
425,133
-
-
296,854
>1-5
years
RM'000
721,987
-
8,193,478
-
261,210
-
7,932,268
>3-12
months
RM'000
20,811,768 12,879,918
-
20,811,768 12,879,918
2,731,195
-
4,520,732
-
15,691,036 10,148,723
Up to 1
month
RM'000
Non-trading book
Total liabilities and equity
Equity
Total liabilities
Liabilities
Recourse obligation on loans sold
to Cagamas Berhad
Other liabilities (2)
The Group
2011
Interest/profit rate risk (continued)
124,021
124,021
-
57,182
-
57,182
57,182
-
-
Trading
book
RM'000
49,248,203
3,600,985
45,647,218
428,459
601,850
363,095
97,399
7,526,912
82,059
36,547,444
4.77
4.16
3.13
3.20
Effective
interest
Total
rate
RM'000
%
152
Annual Report 2011
38
(ii)
1,031,672
-
12,062,771
20,968,705
Total assets
#
(1)
*
132,468
930,603
207,108
29,597
395,267
24,037
7,527,074
-
3,260,546
113,955
-
>1-5
years
RM'000
3,167,757 10,901,575
2,466,714
-
30,270
670,773
-
-
>3-12
months
RM'000
Non-trading book
2,889,197
2,487,043
-
402,154
-
-
Over 5
years
RM'000
1,675,240
(395,701) *
795,274 #
814,215
45,238
187
92
145,074
87,437
183,424
Non
interest/
profit
sensitive
RM'000
159,596
9,743
149,853
-
-
Trading
book
RM'000
42,063,921
25,179,573
795,274
814,215
54,981
192,522
149,945
5,804,417
432,537
8,640,457
Total
RM'000
4.94
2.62
2.81
3.67
4.95
2.76
Effective
interest
rate
%
Others include property and equipment, intangible assets, statutory deposits with BNM, tax recoverable, deferred tax assets, subsidiaries, other assets, investment in
jointly controlled entity and amount due from jointly controlled entity.
2,301,851
-
>1-3
months
RM'000
8,457,033
Up to 1
month
RM'000
Assets
- non-impaired
- impaired
Others (1)
The Group
2010
153
38
(ii)
3,437,614
-
3,099,547
300,000
-
2,338,038
401,535
-
401,535
286,370
-
68,186
-
46,979
>1-5
years
RM'000
(8,552,300) (2,041,298)
9,795,582
(9,007,605) (2,036,105) 10,500,040
455,305
(5,193)
(704,458)
5,203,862
-
5,203,862
-
-
5,203,862
>3-12
months
RM'000
Non-trading book
2,843,906
2,889,197
(45,291)
-
-
-
-
-
-
Over 5
years
RM'000
(4,526,076)
(4,526,076)
-
6,201,316
3,313,004
2,888,312
2,521
682
378,846
52,747
14,388
110,161
2,328,967
Non
interest/
profit
sensitive
RM'000
2,038,401
299,637
(2)
(3)
-
18,930,304 11,309,456
-
18,930,304 11,309,456
7,871,842
>1-3
months
RM'000
15,530,757
Up to 1
month
RM'000
Equity
Total liabilities
Liabilities
to Cagamas Berhad
The Group
2010
142,148
142,148
-
17,448
-
17,448
17,448
-
-
Trading
book
RM'000
42,063,921
3,313,004
38,750,917
288,891
300,682
378,846
70,195
6,619,735
110,161
30,982,407
Total
RM'000
5.00
3.52
2.86
2.99
Effective
interest
rate
%
154
Annual Report 2011
38
(ii)
1,143,711
-
14,692,338
355,535
20,730,212
Total assets
#
(1)
*
652,010
203,758
-
95,609
29,952
204,721
5,924,372
-
287,210
4,152,676
163,670
-
>1-5
years
RM'000
2,207,033 10,527,928
1,924,100
-
24,804
206,943
51,186
-
>3-12
months
RM'000
Non-trading book
1,962,212
1,464,441
-
25,000
472,771
-
-
Over 5
years
RM'000
181,203
31,371
-
(390,890) *
559,989 #
1,833,534
18,530
1,362
2,462,223
149,832
-
-
Trading
book
RM'000
14,355
148,433
101,528
175,382
Non
interest/
profit
sensitive
RM'000
40,070,290
24,758,072
559,989
1,833,534
49,901
356,897
1,098,988
149,832
5,214,533
521,105
5,527,439
3.02
4.95
3.55
3.01
4.27
5.16
2.78
Effective
interest
Total
rate
RM'000
%
Others include property and equipment, intangible assets, statutory deposits with BNM, tax recoverable, deferred tax assets, investment in subsidiaries and
other assets.
1,999,479
-
>1-3
months
RM'000
5,352,057
Up to 1
month
RM'000
Assets
- non-impaired
- impaired
Others (1)
The Bank
2011
155
38
(ii)
2,406,195
-
3,364,801
600,000
-
5,829,366
659,063
-
659,063
425,133
-
-
233,930
>1-5
years
RM'000
(7,945,489) (4,566,108)
8,475,923
(8,709,757) (4,600,658) 9,868,865
764,268
34,550 (1,392,942)
6,807,691
-
6,807,691
-
261,210
-
6,546,481
>3-12
months
RM'000
Non-trading book
1,951,173
1,962,212
(11,039)
-
-
-
-
-
-
Over 5
years
RM'000
(3,868,886)
(3,868,886)
-
6,331,109
3,351,398
2,979,711
3,326
1,850
344,557
40,217
48,307
11,631
82,059
2,447,764
Non
interest/
profit
sensitive
RM'000
5,224,203
605,163
(2)
(3)
-
15,506,009 10,709,236
-
15,506,009 10,709,236
8,303,041
>1-3
months
RM'000
11,541,208
Up to 1
month
RM'000
Equity
Total liabilities
Liabilities
to Cagamas Berhad
The Bank
2011
124,021
124,021
-
57,182
-
57,182
57,182
-
-
-
Trading
book
RM'000
40,070,290
3,351,398
36,718,892
428,459
601,850
344,557
97,399
48,307
6,043,837
82,059
29,072,424
4.77
4.16
3.19
-
3.31
Effective
interest
Total
rate
RM'000
%
156
Annual Report 2011
38
(ii)
914,913
-
10,293,638
183,541
16,797,613
Total assets
#
(1)
*
462,664
734,627
207,108
29,597
333,650
24,037
2,864,508
2,136,368
-
67,272
660,868
-
-
>3-12
months
RM'000
9,076,119
6,715,183
-
2,246,981
113,955
-
>1-5
years
RM'000
Non-trading book
2,372,762
2,023,556
-
349,206
-
-
Over 5
years
RM'000
1,863,757
(343,220) *
678,813 #
1,082,841
45,238
1,730
5,384
92
130,140
87,437
175,302
Non
interest/
profit
sensitive
RM'000
159,596
9,743
-
149,853
-
-
Trading
book
RM'000
35,453,667
21,740,438
678,813
1,082,841
54,981
185,271
564,917
149,945
4,455,472
432,537
6,108,452
Total
RM'000
2.62
4.95
2.76
2.81
3.74
4.95
2.70
Effective
interest
rate
%
Others include property and equipment, intangible assets, statutory deposits with BNM, tax recoverable, deferred tax assets, investment in subsidiaries and
other assets.
2,319,312
-
>1-3
months
RM'000
5,933,150
Up to 1
month
RM'000
Assets
- non-impaired
- impaired
Others (1)
The Bank
2010
-
300,000
-
2,170,111
(2)
(3)
14,927,139
4,445,106
-
(6,966,951) (1,585,791)
(7,422,256) (1,580,598)
455,305
(5,193)
9,741,568
-
4,445,106
-
68,186
-
4,376,920
>3-12
months
RM'000
8,042,537
8,746,995
(704,458)
329,124
-
329,124
286,370
-
-
42,754
>1-5
years
RM'000
Non-trading book
2,327,471
2,372,762
(45,291)
-
-
-
-
-
-
Over 5
years
RM'000
(4,129,525)
(4,129,525)
-
5,993,282
3,112,800
2,880,482
2,521
682
341,934
52,747
47,926
13,581
110,161
2,310,930
Non
interest/
profit
sensitive
RM'000
Other liabilities include other liabilities and deferred tax liabilities.
-
157
Equity
9,741,568
3,187,614
-
2,479,622
-
14,927,139
6,553,954
>1-3
months
RM'000
12,147,517
Up to 1
month
RM'000
Total liabilities
Liabilities
to Cagamas Berhad
The Bank
2010
1,870,474
299,637
(ii)
38
142,148
142,148
-
17,448
-
17,448
17,448
-
-
-
Trading
book
RM'000
35,453,667
3,112,800
32,340,867
288,891
300,682
341,934
70,195
47,926
5,749,003
110,161
25,432,075
Total
RM'000
5.00
3.52
2.86
3.02
Effective
interest
rate
%
38
(iii) Liquidity Risk
Liquidity risk is the risk of incurring additional cost to generate cash to cover the required funding shortfall in the trading and
banking book. Liquidity risk arises from the Bank's funding activities and the management of its assets.
To measure and manage net funding requirements, the Bank adopts BNM's New Liquidity Framework ('NLF').
The NLF ascertains the liquidity condition based on the contractual and behavioral cash-flow of assets, liabilities and offbalance sheet commitments, taking into consideration the realisable cash value of the eligible liquefiable assets. The NLF
is also supported by indicative ratios on the Bank’s funding structure to monitor the reliance on particular funding sources.
The Bank employs liquidity risk indicators as an early alert of any structural change for liquidity risk management. Liquidity
risk is tracked using internal and external qualitative and quantitative indicators. The Bank also conducts liquidity stress
tests to gauge the Bank’s resilience in the event of a liquidity crisis. In addition, the Bank has in place the Contingency
Funding Plan, which provides a systematic approach in handling liquidity disruption. The document encompasses strategies,
decision-making authorities, and courses of action to be taken in the event of liquidity crisis and emergencies.
The BRMC is responsible for the Bank's liquidity policy although the strategic management of liquidity has been delegated
to the ALCO. The BRMC is informed regularly of the liquidity situation in the Bank.
Liquidity risk disclosure table which is based on contractual undiscounted cash flow:
The Group
2011
Recourse obligation on loans sold to
Cagamas Berhad
Other liabilities
The Group
2010
Cagamas Berhad
Other liabilities
158
Annual Report 2011
Up to 1
month
RM'000
>1-3
months
RM'000
>3-12
months
RM'000
>1-5
years
RM'000
Over 5
years
RM'000
Total
RM'000
18,060,100
10,230,464
8,163,881
301,839
-
36,756,284
4,538,018
82,059
2,783,990
-
270,956
-
235,100
-
-
7,828,064
82,059
3,172
326,735
2,148
5,545
4,338
26,189
21,314
456,743
115,350
692,392
491,649
326,735
835,542
23,012,232
13,024,337
8,482,340 1,109,032
692,392
46,320,333
Up to 1
month
RM'000
>1-3
months
RM'000
>3-12
months
RM'000
>1-5
years
RM'000
Over 5
years
RM'000
Total
RM'000
17,771,143
7,945,925
5,348,779
53,387
-
31,119,234
3,253,752
110,161
3,473,483
-
72,122
-
-
-
6,799,357
110,161
3,226
353,892
961
3,106
1,828
19,021
8,521
310,879
58,072
348,068
336,232
353,892
417,450
21,493,135
11,424,342
5,448,443
422,338
348,068
39,136,326
38
(iii) Liquidity Risk (continued)
Liquidity risk disclosure table which is based on contractual undiscounted cash flow (continued):
The Bank
2011
Cagamas Berhad
Other liabilities
The Bank
2010
Cagamas Berhad
Other liabilities
Up to 1
month
RM'000
>1-3
months
RM'000
>3-12
months
RM'000
>1-5
years
RM'000
Over 5
years
RM'000
Total
RM'000
13,884,254
8,370,572
6,747,083
238,879
-
29,240,788
3,379,595
82,059
2,457,466
-
270,956
-
235,100
-
-
6,343,117
82,059
3,172
309,134
48,307
2,148
5,545
4,338
26,189
21,314
456,743
115,350
692,392
491,649
309,134
48,307
835,542
17,708,669
10,837,921
7,065,542 1,046,072
692,392
37,350,596
Up to 1
month
RM'000
>1-3
months
RM'000
>3-12
months
RM'000
>1-5
years
RM'000
Over 5
years
RM'000
Total
RM'000
14,383,718
6,609,699
4,495,601
48,678
-
25,537,696
2,493,320
110,161
3,222,177
-
71,720
-
-
-
5,787,217
110,161
3,226
317,002
47,926
961
3,106
1,828
19,021
8,521
310,879
58,072
348,068
336,232
317,002
47,926
417,450
17,356,314
9,836,810
4,594,863
417,629
348,068
32,553,684
159
38
Derivative financial liabilities based on contractual undiscounted cash flow:
2011
Derivatives settled on net basis
Derivatives settled on gross basis
Outflow
Inflow
2010
Derivatives settled on net basis
Derivatives settled on gross basis
Outflow
Inflow
160
Annual Report 2011
Up to 1
month
RM'000
>1-3
months
RM'000
>3-12
months
RM'000
>1-5
years
RM'000
(1,264)
(2,920)
(3,604)
(12,051)
(1,368,790)
1,367,630
(763,020)
760,402
(860,055)
859,550
(70,000)
70,000
(1,160)
(2,618)
(505)
Over 5
years
RM'000
(1,416)
Total
RM'000
(21,255)
-
(3,061,865)
3,057,582
-
-
(4,283)
Up to 1
month
RM'000
>1-3
months
RM'000
>3-12
months
RM'000
>1-5
years
RM'000
Over 5
years
RM'000
Total
RM'000
(1,098)
(1,353)
(9,658)
(33,596)
(12,799)
(58,504)
(278,479)
278,466
(207,640)
205,907
(229,901)
229,397
(115,560)
115,560
-
(831,580)
829,330
(13)
(1,733)
(504)
-
-
(2,250)
161
38
(1)
869,340
15,055
180,193
361
670,961
2,770
-
295,957
149,832
329,024
101,167
2,413,151
109,808
22,636
2,745
1,268,650
14,572,336
-
>3-6
months
RM'000
9,879,366
Up to 3
months
RM'000
815,126
314,519
51,186
430,807
10,757
4,427
3,430
-
>6-12
months
RM'000
7,602,000
19,446
3,720,058
163,670
3,689,505
5,530
3,791
-
-
>1-3
years
RM'000
6,941,540
156,236
1,439,903
5,343,428
1,973
-
-
>3-5
years
RM'000
18,447,861
714,721
204,721
17,144,414
40,448
14,304
329,253
-
Over 5
years
RM'000
49,248,203
486,694
149,832
6,698,418
521,105
29,692,266
166,543
49,901
2,745
1,601,333
9,879,366
Total
RM'000
Other non-financial assets include tax recoverable, statutory deposits with BNM, deferred tax assets, investment in jointly controlled entity, property and equipment and
intangible assets.
Assets
Other assets
Other non-financial assets (1)
The Group
2011
The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-guarantees are important factors
in assessing the liquidity of the Group and the Bank. The table below provides analysis of assets and liabilities into relevant maturity tenures based on remaining
contractual maturities.
Liquidity risk for assets and liabilities based on remaining contractual maturities
162
Annual Report 2011
38
(2,361,675) (4,244,933)
- 13,493,662
490,736
(405)
(1,870,939)
(21,396,092)
769,559
(20,626,533)
On balance sheet gap
Derivatives
Net maturity mismatch
Other non-financial liabilities include provision for taxation and deferred tax liabilities.
3,231,015
35,968,428
(2)
10,855
-
3,326
1,850
326,735
36,846
-
9,248,324
5,060,059
4,345
16,242
2,678
-
259,870
-
5,036,794
>6-12
months
RM'000
7,264,364
82,059
>3-6
months
RM'000
2,960,290
Up to 3
months
RM'000
28,253,248
Liabilities
Cagamas Berhad
Other liabilities
Other non-financial liabilities (2)
The Group
2011
Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)
6,981,449
7,011,449
(30,000)
590,551
275,133
18,317
-
-
297,101
>1-3
years
RM'000
6,780,804
6,780,804
-
160,736
150,000
10,725
-
-
11
>3-5
years
RM'000
17,811,432
17,811,432
-
636,429
600,000
16,311
20,118
-
-
Over 5
years
RM'000
18,324,537
3,600,985
13,493,662
1,229,890
45,647,218
428,459
601,850
326,735
97,399
36,360
7,526,912
82,059
36,547,444
Total
RM'000
163
38
(1)
14,776
587,087
361
668,789
5,709
1,276,722
112,441
149,945
1,370,603
111,113
3,174,354
8,740
28,850
2,745
245,130
13,844,378
>3-6
months
RM'000
8,640,457
Up to 3
months
RM'000
1,041,451
15,680
184,027
780,775
10,930
109
49,930
-
>6-12
months
RM'000
5,382,846
2,168,054
113,955
3,085,018
5,127
10,692
-
-
>1-3
years
RM'000
5,511,590
49,625
1,092,492
4,366,931
2,542
-
-
>3-5
years
RM'000
15,006,934
402,154
207,108
13,898,980
161,664
7,079
329,949
-
Over 5
years
RM'000
42,063,921
192,522
149,945
5,804,417
432,537
25,974,847
186,461
54,981
2,745
625,009
8,640,457
Total
RM'000
Other non-financial assets include statutory deposits with BNM, deferred tax assets, investment in jointly controlled entity, property and equipment and intangible assets.
Assets
Other assets
The Group
2010
164
Annual Report 2011
38
(2)
3,287,106
602
22
(552,325) 11,431,456
(18,495,229)
2,047,932
32,725,205
14,770
-
2,521
682
353,892
22,738
-
69,002
-
3,217,480
>6-12
months
RM'000
(771,210) (2,245,655)
- 13,700,237
218,885
(23,126)
-
6,550,733
110,161
(18,880,827)
385,598
2,033,162
>3-6
months
RM'000
25,684,478
Up to 3
months
RM'000
Derivatives
Liabilities
Cagamas Berhad
Other liabilities
The Group
2010
5,310,850
5,340,850
(30,000)
41,996
17,828
-
-
24,168
>1-3
years
RM'000
5,194,765
5,194,765
-
316,825
286,370
7,336
-
-
23,119
>3-5
years
RM'000
14,675,081
14,675,081
-
331,853
300,000
6,921
24,932
-
-
Over 5
years
RM'000
17,564,598
3,313,004
13,700,237
551,357
38,750,917
288,891
300,682
353,892
70,195
24,954
6,619,735
110,161
30,982,407
Total
RM'000
165
38
(1)
24,879
63,031
361
514,844
2,770
605,885
671,105
149,832
270,179
101,167
2,317,892
60,727
22,636
356,897
1,108,650
10,586,524
>3-6
months
RM'000
5,527,439
Up to 3
months
RM'000
700,398
255,876
51,186
378,331
10,578
4,427
-
-
>6-12
months
RM'000
6,729,458
19,446
3,069,175
163,670
3,468,025
5,351
3,791
-
-
>1-3
years
RM'000
6,123,101
358,289
1,083,501
4,679,338
1,973
-
-
>3-5
years
RM'000
-
Over 5
years
RM'000
15,324,924
25,269
472,771
204,721
13,959,631
40,034
14,304
608,194
Other non-financial assets include statutory deposits with BNM, investment in subsidiaries, property and equipment and intangible assets.
Assets
Other assets
The Bank
2011
40,070,290
1,098,988
149,832
5,214,533
521,105
25,318,061
116,690
49,901
356,897
1,716,844
5,527,439
Total
RM'000
166
Annual Report 2011
38
(2,041,130) (3,547,266)
- 11,949,889
490,736
(405)
(17,913,852)
769,559
(17,144,293)
Derivatives
(2)
2,647,015
28,500,376
(1,550,394)
10,855
-
3,326
1,850
309,134
36,846
48,307
-
8,402,218
4,247,664
4,345
16,212
2,678
-
259,870
-
4,224,429
>6-12
months
RM'000
5,781,289
82,059
>3-6
months
RM'000
2,376,290
Up to 3
months
RM'000
22,237,565
Liabilities
Cagamas Berhad
Other liabilities
The Bank
2011
6,171,877
6,201,877
(30,000)
527,581
275,133
18,317
-
-
234,131
>1-3
years
RM'000
5,962,367
5,962,367
-
160,734
150,000
10,725
-
-
9
>3-5
years
RM'000
14,689,402
14,689,402
-
635,522
600,000
16,311
19,211
-
-
Over 5
years
RM'000
16,531,177
3,351,398
11,949,889
1,229,890
36,718,892
428,459
601,850
309,134
97,399
48,307
35,423
6,043,837
82,059
29,072,424
Total
RM'000
167
38
(1)
47,725
585,520
361
526,876
5,709
1,166,191
442,636
149,945
1,099,715
111,113
2,950,236
7,514
28,850
185,271
245,130
11,328,862
>3-6
months
RM'000
6,108,452
Up to 3
months
RM'000
995,317
15,680
174,050
748,576
10,830
109
46,072
-
>6-12
months
RM'000
4,548,289
1,496,103
113,955
2,922,556
4,983
10,692
-
-
>1-3
years
RM'000
4,685,616
58,876
750,878
3,873,320
2,542
-
-
>3-5
years
RM'000
12,729,392
349,206
207,108
11,397,687
161,255
7,079
607,057
-
Over 5
years
RM'000
Total
RM'000
35,453,667
564,917
149,945
4,455,472
432,537
22,419,251
184,582
54,981
185,271
898,259
6,108,452
Other non-financial assets include tax recoverable, statutory deposits with BNM, investment in subsidiaries, property and equipment and intangible assets.
Assets
Other assets
The Bank
2010
168
Annual Report 2011
38
(15,438,391)
1,614,644
27,152,851
14,770
-
2,521
682
317,002
22,738
47,926
2,886,948
602
-
69,002
-
2,817,344
>6-12
months
RM'000
(229,568) 10,330,763
(448,453) (1,891,631)
- 12,245,520
218,885
(23,126)
-
5,680,001
110,161
(15,823,989)
385,598
1,599,874
>3-6
months
RM'000
20,971,820
Up to 3
months
RM'000
Derivatives
Liabilities
Cagamas Berhad
Other liabilities
Deferred tax liabilities
The Bank
2010
4,479,604
4,509,604
(30,000)
38,685
17,828
-
-
20,857
>1-3
years
RM'000
4,369,730
4,369,730
-
315,886
286,370
7,336
-
-
22,180
>3-5
years
RM'000
12,397,539
12,397,539
-
331,853
300,000
6,921
24,932
-
-
Over 5
years
RM'000
15,909,677
3,112,800
12,245,520
551,357
32,340,867
288,891
300,682
317,002
70,195
47,926
24,932
5,749,003
110,161
25,432,075
Total
RM'000
38
(iv) Operational Risk Management
Operational risk is the risk of loss arising from inadequate or failed internal processes, action on or by people, infrastructure
or technology or events which are beyond the Bank’s immediate control which have an operational impact, including natural
disaster, fraudulent activities and money laundering.
The Bank manages operational risk through a control based environment in which policies and procedures are formulated
after taking into account individual unit’s business activities, the market in which it is operating and regulatory requirement
in force. Risk is identified through the use of assessment tools and measured using threshold/limits mapped against risk
matrix. Monitoring and control procedures include the use of key control standards, independent tracking of risk, back-up
procedures and contingency plans, including disaster recovery and business continuity plans. This is supported by periodic
reviews undertaken by Group Internal Audit to ensure adequacy and effectiveness of the Group Operational Risk
Management process.
The Bank gathers, analyses and reports operational risk loss and 'near miss' events to Group Operational Risk Management
Committee and Board Risk Management Committee. Appropriate remedial actions are reviewed for effectiveness and
implemented to minimise the recurrence of similar risk events.
As a matter of requirement, all Operational Risk Coordinators must satisfy an internal operational risk (including anti-money
laundering/counter financing of terrorism and business continuity management) Certification Program. These coordinators
will first go through an online self learning exercise before attempting on-line assessments to measure their skills and
knowledge level. This will enable Group Risk Management to prescribe appropriate training and development activities for
the coordinators.
(v)
Fair value of financial instruments
Financial instruments comprise financial assets, financial liabilities and also off balance sheet financial instruments. The fair
value of a financial instrument is the amount at which the instruments could be exchanged or settled between knowledgeable
and willing parties in an arm’s length transaction. The information presented herein represents estimates of fair values as at
reporting date.
Quoted market prices, when available, are used as the measure of fair values. For financial instruments, without quoted
market prices, fair values are estimated using net present value or other valuation techniques. These techniques involve a
certain degree of uncertainty depending on the assumptions used and judgments made regarding risk characteristics of
various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other
factors. Changes in these assumptions could materially affect these estimates and the resulting fair value.
Fair value information for non-financial assets and liabilities are excluded as they do not fall within the scope of FRS 132 which
requires fair values to be disclosed. This includes property and equipment, statutory deposits with Bank Negara Malaysia,
investment in subsidiaries, other assets, tax recoverable, deferred tax and intangible assets.
169
38
(v)
Fair value of financial instruments (continued)
The fair values of the financial assets and financial liabilities of the Group and the Bank approximated to their respective
carrying value as at reporting date, except for the following:
The Group
2011
Carrying
Fair
value
value
RMʼ000
RM'000
Financial assets
Financial liabilities
521,105
29,692,266
717,476
30,116,855
521,105
25,318,061
717,476
25,585,624
30,213,371
30,834,331
25,839,166
26,303,100
36,547,444
428,459
36,544,839
450,380
29,072,424
428,459
29,070,615
450,380
36,975,903
36,995,219
29,500,883
29,520,995
The Group
2010
Carrying
Fair
value
value
RM’000
RM'000
Financial assets
Financial liabilities
170
Annual Report 2011
The Bank
2011
Carrying
Fair
value
value
RMʼ000
RM'000
The Bank
2010
Carrying
Fair
value
value
RM’000
RM'000
432,537
25,974,847
648,319
26,270,051
432,537
22,419,251
648,319
22,690,852
26,407,384
26,918,370
22,851,788
23,339,171
30,982,407
288,891
30,971,746
303,270
25,432,075
288,891
25,424,521
303,270
31,271,298
31,275,016
25,720,966
25,727,791
38
(v)
The fair values of derivative financial instruments at the reporting date are as follows:
The Group and the Bank
2011
Underlying
notional
Asset
Liability
RM'000
RM'000
RM'000
The Group and the Bank
2010
Underlying
notional
Asset
Liability
RM'000
RM'000
RM'000
Foreign exchange contracts
- forward contracts
- swaps
712,883
2,344,698
2,433
16,097
6,313
33,904
728,471
1,688,008
2,381
35,206
19,025
22,715
Interest rate contracts
- swaps
2,395,015
31,371
57,182
1,495,313
17,394
28,455
The derivative financial instruments become favorable (assets) or unfavorable (liabilities) as a result of fluctuation in market
interest rates or foreign exchange rates relative to their terms. The extent to which instruments are favorable or unfavorable
and the aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time.
The fair value estimates were determined by application of the methodologies and assumptions described below.
Short-term funds and placements with banks and other financial institutions
For short-term funds and placements with banks and other financial institutions with maturity of less than six months, the
carrying amount is a reasonable estimate of fair value.
For amounts with maturities of six months or more, fair values have been estimated by reference to current rates at which
similar deposits and placements would be made to banks with similar credit ratings and maturities.
Financial assets held-for-trading, financial investments available-for-sale and held-to-maturity
The fair values of financial assets held-for-trading, financial investments available-for-sale and financial investments held-tomaturity are reasonable estimates based on quoted market prices. In the absence of such quoted prices, the fair values are
based on the expected cash flows of the instruments discounted by indicative market yields for the similar instruments as
at reporting date or the audited net tangible asset of the invested company.
Loans, advances and financing of the Group comprise of floating rate loans and fixed rate loans. For performing floating rate
loans, the carrying amount is a reasonable estimate of their fair values.
The fair values of performing fixed rate loans are arrived at using the discounted cash flows based on the prevailing market
rates of loans and advances with similar credit ratings and maturities.
The fair values of impaired loans and advances, whether fixed or floating are represented by their carrying values, net of
individual and collective allowances, being the reasonable estimate of recoverable amount.
171
38
(v)
Other assets and liabilities
The carrying value less any estimated allowance for financial assets and liabilities included in other assets and other liabilities
are assumed to approximate their fair values as these items are not materially sensitive to the shift in market interest rates.
Deposits from customers, banks and other financial institutions, bills and acceptances payable
The carrying values of deposits and liabilities with maturities of six months or less are assumed to be reasonable estimates
of their fair values. Where the remaining maturities of deposits and liabilities are above six months, their estimated fair values
are arrived at using the discounted cash flows based on prevailing market rates currently offered for similar remaining
maturities.
The estimated fair value of deposits with no stated maturity, which include non-interest bearing deposits, approximates
carrying amount which represents the amount repayable on demand.
For floating rate loans sold to Cagamas Berhad, the carrying value is generally a reasonable estimate of their fair values.
The fair values of fixed rate loans sold to Cagamas Berhad are arrived at using the discounted cash flow methodology at
prevailing market rates of similarly profiled loans.
For fixed rate borrowings, the estimate of fair value is based on discounted cash flow model using prevailing lending rates
for borrowings with similar risks and remaining term to maturity.
For floating rate borrowings, the carrying value is generally a reasonable estimate of their fair values.
Derivative financial instruments
The fair value of exchange rate and interest rate contracts is the estimated amount the Group would receive or pay to
terminate the contracts at the reporting date.
172
Annual Report 2011
38
(v)
Fair value measurements
The following table presents assets and liabilities measured at fair value and classified by level of the following fair value
measurement heirarchy:
(a)
Level 1 - quoted price (unadjusted) in active markets for identical assets and liabilities;
(b)
Level 2 - inputs other than quaoted price included within level 1 that are observable for the assets or liability, either
directly (i.e. as prices) or indirectly (i.e.derived from prices); and
(c)
Level 3 - inputs for the asset and liability that are not based on observable market data (unobservable inputs).
The Group
2011
Assets
Financial investments available-for-sale*
- Private debt securities
- Equity securities
- Other financial assets
Liabilities
The Group
2010
Assets
- Equity securities
Liabilities
Level 1
RMʼ000
Level 2
RM'000
Level 3
RMʼ000
Total
RM'000
-
149,832
-
149,832
7,454
-
2,512,024
4,073,076
49,901
105,864
-
2,512,024
113,318
4,073,076
49,901
-
97,399
-
97,399
Level 1
RM’000
Level 2
RM'000
Level 3
RM’000
Total
RM'000
-
149,945
-
149,945
13,536
-
1,606,737
4,090,971
54,981
93,173
-
1,606,737
106,709
4,090,971
54,981
-
70,195
-
70,195
173
38
(v)
Fair value measurements (continued)
The Bank
2011
Assets
- Equity securities
Liabilities
The Bank
2010
Assets
- Equity securities
Liabilities
Level 1
RMʼ000
Level 2
RM'000
Level 3
RMʼ000
Total
RM'000
-
149,832
-
149,832
3,844
-
1,892,031
3,212,863
49,901
105,795
-
1,892,031
109,639
3,212,863
49,901
-
97,399
-
97,399
Level 1
RM’000
Level 2
RM'000
Level 3
RM’000
Total
RM'000
-
149,945
-
149,945
9,827
-
1,229,320
3,123,224
54,981
93,101
-
1,229,320
102,928
3,123,224
54,981
-
70,195
-
70,195
Financial instruments that are valued using quoted prices in active market are classified as Level 1 of the valuation hierarcy.
These would include listed equities which are actively traded.
Where fair value is determined using quoted prices in less active markets or quoted prices for similar assets and liabilities,
such instruments are generally classified as Level 2. In cases where quoted prices are generally not available, the Group and
the Bank then determine fair value based upon valuation techniques that use as inputs, market parameters inclusing but
not limited to yield curves, volatilities and foreign exchange rates. The majority of valuation techniques employ only observable
market data and so reliability of the fair value measurement is high. These would include corporate private debt securities,
corporate notes and most of the Group's OTC derivatives.
The Group and the Bank classify financial instruments as Level 3 when there is reliance on unobservable inputs to the
valuation model attributing to a significant contribution to the instrument value. Valuation reserves or pricing adjustments
where applicable will be used to converge to fair value.
174
Annual Report 2011
38
(v)
Fair value measurements (continued)
The Group and the Bank may also use valuation models or discounted cash flow technique to determine the fair value.
Most of the OTC derivatives are priced using valuation models. Where derivative products have been established in the
markets for some time, the Group and the Bank use models that are widely accepted by the industry.
The valuation techniques and inputs used generally depend on the contractual terms and the risks inherent in the instrument
as well as the availability of pricing information in the market. Principal techniques used include discounted cash flows, and
other appropriate valuation models. OTC derivatives which are valued using unobservable inputs that are supported by little
or no market activity which are significant to the fair value of the assets or liabilities are classified as Level 3.
The following table present the changes in Level 3 instruments for the financial year ended:
The Group
2011
2010
RM'000
RM'000
Opening
Profit/(loss)
Sales
AFS revaluationn reserves
Allowance for impairment
Closing
93,173
200
(300)
12,829
(38)
105,864
25,279
67,894
93,173
The Bank
2011
2010
RM'000
RM'000
93,101
200
(300)
12,832
(38)
105,795
24,704
68,397
93,101
Effect of changes in significant unobservable assumptions to reasonably possible alternatives
As at reporting date, financial instruments measured with valuation techniques using significant unobservable inputs
(Level 3) mainly include unquoted shares held for socio economic purposes.
In estimating its significance, the Group and the Bank used an approach that is currently based on methodologies used for
fair value adjustments. These adjustments reflects the values that the Group and the Bank estimate are appropriate to
adjust from the valuations produced to reflect for uncertainties in the inputs used. The methodologies used can be a
statistical or other relevant approved techniques.
39
LEASE COMMITMENTS
The Bank has lease comitments in respect of rented premises and hired equipment, all of which are classified as operating leases.
A summary of the non-cancelable long-term commitments, net of subleases are as follows:
2011
2010
RMʼ000
RM'000
Within one year
One year to five years
20,956
83,824
19,771
79,084
175
40
CAPITAL AND OPERATING COMMITMENTS
Capital commitments
Capital expenditure approved by the Directors but not provided for in the financial statements amounted to approximately:
2011
2010
RMʼ000
RM'000
Authorised and contracted for
Authorised but not contracted for
Analysed as follows:
12,261
-
4,163
-
12,261
4,163
12,261
4,163
Operating commitments
Operating expenditure approved by the Directors but not provided for in the financial statements amounted to approximately:
2011
2010
RMʼ000
RM'000
Authorised and contracted for
41
266,202
320,852
CAPITAL MANAGEMENT
The Group and the Bank's objectives when managing capital are:
•
To comply with the capital requirements set by the regulators of the banking markets where the entities within the Group
and the Bank operates;
•
To safeguard the Group and the Bank's ability to continue as a going concern so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
•
To maintain a strong capital base to support the development of its business.
The Group and the Bank maintain a ratio of total regulatory capital to its risk-weighted assets above a minimum level agreed with
the management which takes into account the risk profile of the Group and the Bank.
The table in Note 42 below summarises the composition of regulatory capital and the ratios of the Group and the Bank for the
year ended 31 December 2011.
176
Annual Report 2011
42
CAPITAL ADEQUACY
The capital adequacy ratios are as follows:
The Group #
Basel II
Basel II
2011
2010
RM'000
RM'000
Tier I capital
Paid-up share capital
Share premium
Retained profits
Statutory reserve
Less:
Goodwill
Deferred tax assets *
The Bank
Basel II
Basel II
2011
2010
RM'000
RM'000
1,439,285
408,389
642,638
1,011,044
1,439,285
408,389
499,179
888,910
1,439,285
408,389
530,489
904,624
1,439,285
408,389
411,831
807,500
3,501,356
3,235,763
3,282,787
3,067,005
(137,323)
(3,658)
(137,323)
-
(137,323)
(3,659)
(137,323)
-
3,360,375
3,098,440
3,141,805
2,929,682
Tier II capital
Collective impairment @
600,000
182,269
300,000
153,538
600,000
138,227
300,000
111,304
Total Tier II capital
782,269
453,538
738,227
411,304
4,142,644
3,551,978
3,880,032
3,340,986
Total Tier I capital
Total capital
Less:
Investment in capital instruments of other banking institutions
Capital base
(40,257)
(27,389)
(39,858)
(27,429)
(40,257)
(287,389)
(39,858)
(287,429)
4,074,998
3,484,691
3,552,386
3,013,699
10.00%
12.12%
9.78%
11.91%
11.51%
12.94%
11.24%
12.67%
10.64%
12.03%
10.39%
11.78%
12.35%
12.71%
12.05%
12.40%
Risk-weighted assets for:
Credit risk
Market risk
Operational risk
31,344,231
133,160
2,135,976
24,768,236
96,572
2,062,578
27,608,268
102,489
1,828,940
21,849,466
91,973
1,776,655
Total risk-weighted assets
33,613,367
26,927,386
29,539,697
23,718,094
Core capital ratio
Risk-weighted capital ratio
Core capital ratio (net of proposed dividends) ^
Risk-weighted capital ratio (net of proposed dividends) ^
*
#
@
^
Deferred tax assets exclude deferred tax arising from AFS revaluation reserves.
The Group comprises the Bank and the Bank's subsidiary, AFFIN Islamic Bank Berhad.
Qualifying collective impairment is restricted to allowances on unimpaired portion of the loans, advances and financing.
Net proposed dividends of RM71,964,000 (2010: RM71,964,000).
177
42
CAPITAL ADEQUACY (continued)
The Group and the Bank implemented the Basel II - Risk-Weighted Assets Computation under the Risk-Weighted Capital
Adequacy Framework with effect from 1 January 2008. The Group and the Bank have adopted the Standardised Approach for
credit risk and market risk and Basic Indicator Approach for operational risk computation.
Pursuant to Bank Negara Malaysia’s circular, ‘Recognition of Deferred Tax Asset ('DTA') and Treatment of DTA for RWCR
Purposes’ dated 8 August 2003, deferred tax income/(expenses) is excluded from the calculation of Tier I capital and DTA is
excluded from the calculation of risk-weighted assets.
43
LITIGATIONS AGAINST THE BANK
(a)
A syndicate of lenders, including AFFIN Bank Berhad (the 'Bank'), had granted facilities of RM62.5 million (the 'Facilities')
to a Borrower to, inter alia, finance a development project. At borrower’s request, the Facilities were restructured in 1999
but in July 2000, continued drawdown under the restructured Facilities was refused as borrower had failed to comply with
conditions precedent for such drawdown. The lenders and borrower negotiated to resolve the default and the Facilities
were restructured again in 2003. Further financing was also granted in 2004 and the Project was completed with certificate
of fitness in January 2005.
Subsequent to the completion of the project, borrower brought a claim against the lead banker, as the agent of the syndicate
lenders, for loss and damage arising from alleged breach of duty and obligations owed by the lead banker to the borrower
in relation to various actions taken or omitted to be taken in disbursements and transactions under the Facilities. The lead
banker filed an action against the borrower and its guarantor of the Facilities, for recovery of the amounts outstanding under
the Facilities.
The 2 actions were consolidated and heard together at full trial. On 6 May 2009, the High Court granted judgment in favour
of borrower against the lead banker, as an agent of the lenders, and dismissed the lenders’ action for recovery of the
Facilities. The judgment against the lead banker included a sum of RM115.5 million to be paid, as well as further damages
to be assessed and an immediate release of all security granted by the borrower and its guarantors for the Facilities. The
award of damages of RM115.5 million was made despite parties’ agreement that the trial proceed only on issue of liability
and no evidence of damage/loss was produced. If the judgment of 6 May 2009 is maintained, lead banker will seek
contribution from the lenders, including the Bank.
The lead banker and the lenders have appealed to the Court of Appeal against the said High Court decision of 6 May 2009
and the appeal is fixed for hearing on 10 February 2012. On 10 February 2012, the defendant has proposed for the hearing
to go through Court Mediation. The lead banker and the lenders have agreed to the proposal and the Court of Appeal has
fixed 9 March 2012 for the Court Mediation to hear the case.
The solicitors for the lead banker and the lenders have expressed the view that the lead banker and the lenders have a more
than even chance of success in their appeal against the Judgment.
(b)
178
Other than above, there are various legal suits against the Bank in respect of claims and counter claims of approximately
RM42.8 million (2010: RM86.3 million). Based on legal advice, the Directors are of the opinion that no provision for damages
need to be made in the financial statements, as the probability of adverse adjudication against the Bank is remote.
Annual Report 2011
44
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The Group and the Bank makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. To enhance the information content of the estimates, certain variables that are
anticipated to have material impact to the Group’s and the Bank’s results and financial position are tested for sensitivity to changes
in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial year are discussed below.
Allowance for losses on loans, advances and financing
The accounting estimates and judgments related to the impairment of loans and provision for off-balance sheet positions is a
critical accounting estimate for because the underlying assumptions used for both the individually and collectively assessed
impairment can change from period to period and may significantly affect the Group and the Bank’s results of operations.
In assessing assets for impairment, management judgment is required. The determination of the impairment allowance required
for loans which are deemed to be individually significant often requires the use of considerable management judgment concerning
such matters as local economic conditions, the financial performance of the counterparty and the value of any collateral held,
for which there may not be a readily accessible market. The actual amount of the future cash flows and their timing may differ
from the estimates used by management and consequently may cause actual losses to differ from the reported allowances.
The impairment allowance for portfolios of smaller-balance homogenous loans, such as those to individuals and small business
customers of the private and retail business, and for those loans which are individually significant but for which no objective
evidence of impairment exists, is determined on a collective basis. The collective impairment allowance is calculated on a portfolio
basis using statistical models which incorporate numerous estimates and judgments, and therefore is subject to estimation
uncertainty. The Group and the Bank perform a regular review of the models and underlying data and assumptions as far as
possible to reflect the current economic circumstances. The probability of default, loss given defaults, and loss identification
period, amongst other things, are all taken into account during this review.
Estimated impairment of goodwill
The Group performs an impairment review on an annual basis to ensure that the carrying value of the goodwill does not exceed
its recoverable amounts from cash generating units to which the goodwill is allocated. The recoverable amount represents the
present value of the estimated future cash flows expected to arise from continuing operations. Therefore, in arriving at the
recoverable amount, management exercise judgment in estimating the future cash flows, growth rate and discount rate.
45
SUBSEQUENT EVENT
On 18 January 2012, the Bank will take on its third 10 year subordinated loan amounting to RM300 million.
The subordinated loan will be taken with the Bank's Holding Company.
The subordinated loans have a prepayment option on the first prepayment date or any interest payment date subsequent to the
first prepayment date, giving the Bank the right, subject to Bank Negara Malaysia ('BNM') approval, to prepay the loans in whole
or in part.
Interest on subordinated loans payable by quarterly.
The nominal value and interest rate of the subordinated loan payable semi-annually are as follows:
Value
Interest rate
:
:
RM300 million
Cost of Fund ('COF') plus 1.00% per annum for the 10 years.
COF refers to rate determined by the lender on an interest determination date falling within the interest duration.
179
46
CREDIT EXPOSURES ARISING FROM TRANSACTIONS WITH CONNECTED PARTIES
The following credit exposures are based on Bank Negara Malaysia's revised Guidelines on Credit Transaction and Exposures
with Connected Parties, which are effective 1 January 2008.
(i) The aggregate value of outstanding credit exposures with connected parties (RM'000)
2,412,021
(ii) The percentage of outstanding credit exposures to connected parties as a proportion of total credit exposures
6%
(iii) The percentage of outstanding credit exposures with connected parties which is impaired or in default
Nil
47
APPROVAL OF FINANCIAL STATEMENTS
The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on
28 February 2012.
180
Annual Report 2011
STATEMENT BY DIRECTORS
PURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965
We, JEN TAN SRI DATO' SERI ISMAIL BIN HAJI OMAR (BERSARA) and EN. MOHD SUFFIAN BIN HAJI HARON, two of the Directors
of AFFIN BANK BERHAD, state that, in the opinion of the Directors, the accompanying financial statements set out on pages 64 to
180 are drawn up so as to give a true and fair view of the state of affairs of the Group and the Bank as at 31 December 2011 and of
the results and cash flows of the Group and the Bank for the financial year ended on the date in accordance with the provisions of the
Companies Act, 1965, MASB Approved Accounting Standards for Entities Other Than Private Entities and Bank Negara
Malaysia Guidelines.
In accordance with a resolution of the Board of Directors dated 28 February 2012.
JEN TAN SRI DATO' SERI ISMAIL BIN HAJI OMAR (BERSARA)
Chairman
Director
STATUTORY DECLARATION
PURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965
I, EE KOK SIN, the officer of AFFIN BANK BERHAD primarily responsible for the financial management of the Group and the Bank, do
solemnly and sincerely declare that, in my opinion, the accompanying financial statements set out on pages 64 to 180, are correct and
I make this solemn declaration conscientiously believing the same to be true, by virtue of the provisions of the Statutory Declarations
Act, 1960.
EE KOK SIN
Subscribed and solemnly declared by the abovenamed EE KOK SIN at Kuala Lumpur in Malaysia on 28 February 2012, before me.
Commissioner for Oaths
181
INDEPENDENT AUDITORS' REPORT
TO THE MEMBER OF AFFIN BANK BERHAD
(Incorporated In Malaysia)
REPORT ON THE FINANCIAL STATEMENTS
We have audited the financial statements of AFFIN Bank Berhad, which comprise the statements of financial position as at 31 December
2011 of the Group and the Bank, and the statements of income, comprehensive income, changes in equity and cash flows of the Group
and the Bank for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on
pages 64 to 180.
Directorsʼ Responsibility for the Financial Statements
The directors of the Bank are responsible for the preparation of financial statements that give a true and fair view in accordance with
MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities, Bank Negara Malaysia Guidelines and the
Companies Act, 1965, and for such internal controls as the Directors determine are necessary to enable the preparation of financial
statements that are free from material misstatements, whether due to fraud or error.
Auditorsʼ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance
with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Bank’s preparation of the
financial statements that give a true and fair value in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with MASB Approved Accounting Standards in
Malaysia for Entities Other than Private Entities, Bank Negara Malaysia Guidelines and the Companies Act, 1965 so as to give a true
and fair view of the financial position of the Group and the Bank as of 31 December 2011 and of their financial performance and cash
flows for the year then ended.
182
Annual Report 2011
INDEPENDENT AUDITORS' REPORT
TO THE MEMBER OF AFFIN BANK BERHAD
(Incorporated In Malaysia)
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:
a)
In our opinion, the accounting and other records and the registers required by the Act to be kept by the Bank and its subsidiaries
have been properly kept in accordance with the provisions of the Act.
b)
We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Bank’s financial statements
are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and
we have received satisfactory information and explanations required by us for those purposes.
c)
Our audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made
under Section 174(3) of the Act.
OTHER MATTERS
This report is made solely to the member of the Bank, as a body, in accordance with Section 174 of the Companies Act, 1965 in
Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
PRICEWATERHOUSECOOPERS
(No. AF : 1146)
Chartered Accountants
SOO HOO KHOON YEAN
(No. 2682/10/13 (J) )
Chartered Accountant
Kuala Lumpur, Malaysia
28 February 2012
183
BASEL II PILLAR 3 DISCLOSURES
Table of Contents
Page
1.
Introduction
1.1 Background
1.2 Scope of Application
185
185
Risk Governance Structure
2.1 Overview
2.2 Board Committees
2.3 Management Committees
2.4 Group Risk Management Function
2.5 Internal Audit and Internal Control Activities
185
186
187
188
188
Capital
3.1 Capital Structure
3.2 Capital Adequacy
189
189
4.
Risk Management Objectives and Policies
190
5.
Credit Risk
5.1 Credit Risk Management Objectives and Policies
5.2 Application of Standardised Approach for Credit Risk
5.3 Credit Risk Measurement
5.4 Risk Limit Control and Mitigation Policies
5.5 Credit Risk Monitoring
5.6 Impairment Provisioning
5.7 Credit Risk Culture
190
190
191
191
193
193
198
Market Risk
6.1 Market Risk Management Objectives and Policies
6.3 Market Risk Measurement, Control and Monitoring
6.4 Value-At-Risk ('VaR')
6.5 Foreign Exchange Risk
6.6 Market Risk Culture
198
198
198
199
199
199
Liquidity Risk
7.1 Liquidity Risk Management Objectives and Policies
7.2 Liquidity Risk Measurement, Control and Monitoring
199
199
Operational Risk
8.1 Operational Risk Management Objectives and Policies
8.2 Application of Basic Indicator Approach for Operational Risk
8.3 Operational Risk Measurement, Control and Monitoring
8.4 Operational Risk Culture
200
200
200
200
Shariah Compliance
200
Appendices
201
2.
3.
6.
7.
8.
9.
184
Annual Report 2011
1
Introduction
1.1 Background
AFFIN Bank Berhad ('ABB') adopted Basel II in January 2008 in line with the directive from Bank Negara Malaysia ('BNM').
The Basel II framework is structured around three fundamental Pillars.
-
Pillar 1 defines the minimum capital requirement to ensure that financial institutions hold sufficient capital to cover their
exposure to credit, market and operational risks.
-
Pillar 2 requires financial institutions to have a process for assessing their overall capital adequacy in relation to their
risk profile and a strategy for maintaining their capital levels.
-
Pillar 3 requires financial institutions to establish and implement an appropriate disclosure policy that promotes
transparency regarding their risk management practices and capital adequacy positions.
ABB elected to adopt the following approaches under Pillar 1 requirements:
-
Standardised Approach for Credit Risk
Basic Indicator Approach for Operational Risk
Standardised Approach for Market Risk
1.2 Scope of Application
This document contains the disclosure requirements under Pillar 3 for ABB for the year ended 31 December 2011. The
disclosures are made in line with the Pillar 3 disclosure requirements under the Basel II framework as laid out by BNM.
The disclosures should be read in conjunction with ABB’s 2011 Annual Report for the year ended 31 December 2011.
The Group’s capital requirements are generally based on the principles of consolidation adopted in the preparation of its
financial statements. The Group’s consolidated entities comprises the Bank and the Bank’s subsidiary, AFFIN Islamic Bank
Berhad.
2
Risk Governance Structure
2.1 Overview
The Board of Directors of ABB is ultimately responsible for the overall performance of ABB. The Board’s responsibilities
remain within the framework of BNM Guidelines. The Board also exercises great care to ensure that high ethical standards
are upheld, and that the interests of stakeholders are not compromised. These include responsibility for determining ABB’s
general policies and strategies for the short, medium and long term, approving business plans, including targets and
budgets, and approving major strategic decisions.
The Board has overall responsibility for maintaining the proper management and protection of ABB’s interests by ensuring
effective implementation of the risk management policy and process, as well as adherence to a sound system of internal
control, and by seeking regular assurance on their effectiveness. The Board also recognises that risks cannot be eliminated
completely. As such, the inherent system of internal control is designed to provide a reasonable though not absolute
assurance against the risk of material errors, fraud or losses occurring. The system of internal controls encompasses controls
relating to financial, operational, risk management and compliance with applicable laws, regulations, policies and guidelines.
The terms of reference of the Board Committees as disclosed in the Annual Report provide an outline of its role and functions.
In carrying out its functions, the Board has delegated specific responsibilities to other Board Committees, which operated
under approved terms of reference, to assist the Board in discharging their duties. The Chairmen of the various Committees
report on the outcome of their Committee meetings to the Board and any further deliberation is made at Board level, if
required. These reports and deliberations are incorporated into the Minutes of the Board meetings. The Board meets on a
monthly basis.
The Board of ABB has a balance composition with a strong independent element. It consists of representatives from the
private sector with suitable qualifications fulfilling the fit and proper criteria as required by BNM/GP1, a mixture of different
skills, competencies, experience and personalities.
185
2
Risk governance structure (continued)
2.2 Board Committees
Board Remuneration Committee ('BRC')
The BRC is responsible for providing a formal and transparent procedure for developing the remuneration policy for Directors,
Managing Director/Chief Executive Officer and key senior management officers and ensuring that compensation is
competitive and consistent with ABB’s culture, objectives and strategy.
The Committee obtains advice from experts in compensation and benefits, both internally and externally.
Board Nominating Committee ('BNC')
The BNC is responsible for providing a formal and transparent procedure for the appointment of Directors and Managing
Director/Chief Executive Officer, assessing the effectiveness of individual Directors, the Board as a whole and the
performance of the Managing Director/Chief Executive Officer and key senior management personnel.
Board Risk Management Committee ('BRMC')
The BRMC is responsible for overseeing management’s activities in managing credit, market, liquidity, operational, legal
and other risks and to ensure that the risk management process is in place and functioning.
It has responsibility for reviewing and approving all risk management policies and risk management methodologies. BRMC
also reviews guidelines and portfolio management reports including risk exposure information.
The Committee also ensures that the procedures and framework in relation to identifying, measuring, monitoring and
controlling risk are operating effectively.
Board Loan Review and Recovery Committee ('BLRRC')
The BLRRC is responsible in providing critical review of loans and other credit facilities with higher risk implications, after
due process of checking, analysis, review and recommendation by the Credit Risk Management function, and if found
necessary, exercise the power to veto loan applications that have been approved by the Group Management Loan
Committee. BLRRC also reviews the impaired loans reports presented by the Management.
Audit and Examination Committee ('AEC')
The AEC is responsible for providing oversight on reviewing the adequacy and integrity of the internal control systems and
oversees the work of the internal and external auditors.
Reliance is placed on the results of independent audits performed primarily by internal auditors, the outcome of statutory
audits on financial statements conducted by external auditors and on representations by Management based on their control
self-assessment of all areas of their responsibility.
Minutes of Audit & Examination Committee meetings, which provide a summary of the proceedings, are circulated to Board
members for notation and discussion. ABB has an established Group Internal Audit Division (GIA) which reports functionally
to the Audit Committee and administratively to the Managing Director/Chief Executive Officer.
Shariah Committee
ABB's business activities are subject to Shariah compliance and conformation by the Shariah Committee. The Shariah
Committee is formed as legislated under Section 3(5)(b) of the Islamic Banking Act, 1983 and as per Shariah Governance
Framework for Islamic Financial Institutions.
The duties and responsibility of the Shariah Committee are as follows:
186
(i)
To advise the Board on Shariah matters in order to ensure that the business operations of ABB comply with the Shariah
principles at all times;
(ii)
To endorse and validate relevant documentations of ABB's products to ensure that the product comply with Shariah
principles; and
(iii)
To advise ABB on matters to be referred to the Shariah Advisory Council.
Annual Report 2011
2
Risk governance structure (continued)
2.3 Management Committees
Management Committee ('MCM')
MCM comprising the senior management team chaired by the MD/CEO, assists the Board in managing the day-to-day
operations and ensure its effectiveness. MCM formulates tactical plans and business strategies, monitors ABB’s overall
performance, and ensures that the activities are in accordance with corporate objectives, strategies, policies and annual
business plan and budget.
Group Management Loan Committee ('GMLC')
GMLC is established within senior management chaired by the MD/CEO to approve complex and larger loans and
workout/recovery proposals beyond the delegated authority of the concerned individual senior management personnel of
ABB.
Asset and Liability Management Committee ('ALCO')
ALCO's responsibilities include:
(i)
Managing the asset liability of ABB through coordination of the overall planning process including strategic planning,
budgeting and asset liability management process;
(ii)
Directing ABB's overall acquisition and allocation of funds;
(iii)
Prudently managing ABB's interest rate exposure;
(iv)
Determine the overall Balance Sheet strategy and ensuring policy compliance;
(v)
Determined the type and scope of derivative activities, approve individual derivative transactions as well as control over
the level of exposure in derivative
(vi)
Reviewing of market risks in ABB's trading portfolios;
(vii)
Managing the effective usage of economic and regulatory capital throughout the organisation;
(viii) Reviewing and recommending the capital plan for approval;
(ix)
Approving capital management standards and policies, capital raising and repayment transactions;
(x)
Reviewing quarterly capital adequacy monitoring reports; and
(xi)
Reviewing and approving key assumptions inherent in economic capital modeling and stress/scenario tests.
187
2
Risk Governance Structure (continued)
2.3 Management Committees (continued)
Group Operational Risk Management Committee ('GORMC')
GORMC is established within senior management to manage operational risks. Its responsibilities include:
(i)
To evaluate operational risks issues on escalating importance/strategic risk exposure;
(ii)
To review and recommend on broad operational risks management policies best practices for adoption by ABB's
operating units;
(iii)
To review the effectiveness of broad internal controls and making recommendation on changes if necessary;
(iv)
To review/approve recommendation on operational risk management groups section up to address specific issue;
(v)
To take the lead in inculcating an operational risks awareness culture;
(vi)
To approve operational risk management methodologies/measurements tools; and
(vii)
To review and approve the strategic operational risk management initiatives/plans and to endorse for BRMC's approval
if necessary.
Early Alert Committee ('EAC')
EAC is established within senior management chaired by the MD/CEO to monitor credit quality through monthly review of
the Early Alert, Watchlist and Exit Accounts and review the actions taken to address the emerging risks and issues in
these accounts.
2.4 Group Risk Management Function
An integrated risk management framework is in place. The Group Risk Management ('GRM') function, headed by Group
Chief Risk Officer ('GCRO') and operating in an independent capacity, is part of ABB's senior management structure which
works closely as a team in managing risks to enhance stakeholders' value.
GRM reports to BRMC. Committees namely BLRRC, GMLC, ALCO and GORMC assist BRMC in managing credit, liquidity
and operational risk. The responsibilities of these Committees include risk identification, risk assessment and measurement,
risk control and mitigation; and risk monitoring.
2.5 Internal Audit and Internal Control Activities
In accordance with BNM's GP10 guidelines, GIA conducts continuous reviews on auditable areas within ABB. The
continuous reviews by GIA are focused on areas of significant risks and effectiveness of internal control in accordance to
the audit plan approved by the AEC.
Based on GIA's review, identification and assessment of risk, testing and evaluation of controls, GIA will provide an opinion
on the effectiveness of internal controls maintained by each entity. The risks highlighted on the respective auditable areas
as well as recommendation made by the GIA are addressed at AEC and Management meetings on bi-monthly basis. The
AEC also conduct annual reviews on the adequacy of internal audit function, scope of work, resources and budget of GIA.
188
Annual Report 2011
3
Capital
3.1 Capital Structure
The following table sets forth details on the capital resources and capital adequacy ratios for the Group as at 31 December
2011. The Group’s Core capital ratio ('CCR') and Risk-weighted capital ratio ('RWCR') as at 31 December 2011 were above
the BNM minimum requirements of 4.0% and 8.0% respectively.
Tier I capital
Paid-up share capital
Share premium
Retained profits
Statutory reserves
Less:
Goodwill
Deferred tax assets
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
1,439,285
408,389
642,638
1,011,044
1,439,285
408,389
499,179
888,910
1,439,285
408,389
530,489
904,624
1,439,285
408,389
411,831
807,500
3,501,356
3,235,763
3,282,787
3,067,005
(137,323)
(3,658)
(137,323)
-
(137,323)
(3,659)
(137,323)
-
3,360,375
3,098,440
3,141,805
2,929,682
600,000
182,269
300,000
153,538
600,000
138,227
300,000
111,304
Total Tier II capital
782,269
453,538
738,227
411,304
Less:
Investment in capital instruments
of other banking institutions
(40,257)
(27,389)
(39,858)
(27,429)
(40,257)
(287,389)
(39,858)
(287,429)
Total Tier I capital
Tier II capital
Capital base
4,074,998
3,484,691
3,552,386
3,013,699
10.00%
12.12%
9.78%
11.91%
11.51%
12.94%
11.24%
12.67%
10.64%
12.03%
10.39%
11.78%
12.35%
12.71%
12.05%
12.40%
Risk-weighted assets for:
Credit risk
Market risk
Operational risk
31,344,231
133,160
2,135,976
24,768,236
96,572
2,062,578
27,608,268
102,489
1,828,940
21,849,466
91,973
1,776,655
Total risk-weighted assets
33,613,367
26,927,386
29,539,697
23,718,094
Core capital ratio
Risk-weighted capital ratio
Core capital ratio (net of proposed dividends)
Risk-weighted capital ratio (net of proposed dividends)
3.2 Capital Adequacy
The Group's has in place an internal limit for its CCR and RWCR, which is guided by the need to maintain a prudent
relationship between available capital and the risks of its underlying businesses. The capital management process is
monitored by managements through periodic reviews.
Refer to Appendix I.
189
4
Risk Management Objectives and Policies
ABB is principally engaged in all aspects of banking and related financial services. The principal activities of ABB's subsidiaries
are Islamic banking business, property management services, nominee and trustee services. There have been no significant
changes in these principal activities during the financial year.
ABB’s business activities involve the analysis, measurement, acceptance, and management of risks but it operates within well
defined risk acceptance criteria covering customer segments, industries and products. ABB does not enter into risk it cannot
administer, book, monitor or value, or deal with persons of questionable integrity.
ABB’s risk management policies are established to identify all the key risks, assess and measure these risks, control and mitigate
these risks, and manage and monitor the risk positions.
ABB regularly reviews its risk management policies and systems to reflect changes in markets, products and best practice in risk
management processes. ABB’s aim is to achieve an appropriate balance between risk and return and minimise any potential
adverse effects.
The key business risks to which ABB is exposed are credit risk, liquidity risk, market risk and operational risk.
5
Credit Risk
5.1 Credit Risk Management Objectives and Policies
Credit risk is the potential financial loss resulting from the failure of the customer or counterparty to settle the financial and
contractual obligations to ABB. Credit risk emanates mainly from loans and advances, loan commitments arising from such
lending activities, as well as through financial transactions with counterparties including interbank money market activities,
derivative instruments used for hedging and debt securities.
The management of credit in ABB is governed by a set of credit policies approved by the Board of Directors. Approval
authorities are delegated to Senior Management and GMLC to implement the credit policies and ensure sound credit
granting standards.
An independent GRM function with a direct reporting line to BRMC is in place to ensure adherence to risk standards and
discipline.
Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit Plan. New businesses are
governed by the risk acceptance criteria and customer qualifying criteria/fitness standards prescribed in the Credit Plan.
The Credit Plan is reviewed as least annually and approved by the BRMC.
ABB uses the following ECAIs to determine the risk weights for the rated credit exposures:•
•
•
•
•
190
RAM Rating Services Berhad
Malaysian Rating Corporation Berhad
Standard & Poor’s Rating Services
Moody’s Investors Service
Fitch Ratings
Annual Report 2011
5
5.2 Application of Standardised Approach for Credit Risk (continued)
The external ratings of the ECAIs are used to determine the risk weights of the following types of exposure: sovereigns,
banks, public sector entities and corporates.
The mapping of the rating categories of different ECAIs to the risk weights is in accordance with the guidelines provided by
BNM. In cases where there is no issuer or issue rating, the exposures are treated as unrated and accorded a risk weight
appropriate for unrated exposure in the respective category.
The external ratings are updated in the core banking system, and extracted and matched by the risk system according to
the above rules to determine the appropriate risk weights.
Refer to Appendix II and Appendices III (i) to III (ii).
5.3 Credit Risk Measurement
Credit evaluation is the process of analysing the creditworthiness of the prospective customer against ABB’s underwriting
criteria and the ability of ABB to make a return commensurate to the level of risk undertaken. A critical element in the
evaluation process is the assignment of a credit risk grade to the counterparty. This assists in the risk assessment and
decision making process. ABB has developed internal rating models to support the assessment and quantification of credit
risk.
For consumer mass market products, statistically developed application scorecards are used by the Business to assess the
risks associated with the credit application. The scorecards are used as a decision support tool at loan origination.
Over-the-Counter ('OTC') Derivatives
The OTC Derivatives credit exposure is computed using the Current Exposure Method. Under the Current Exposure method,
computation of credit equivalent exposure for interest rate and exchange rate related contracts is derived from the
summation of the two elements; the replacement costs (obtained by marking-to-market) of all contracts and the potential
future exposure of outstanding contracts (Add On charges depending on the specific remaining tenor to maturity).
5.4 Risk Limit Control and Mitigation Policies
ABB employs various policies and practices to control and mitigate credit risk.
Lending limits
ABB establishes internal limits and related lending guidelines to manage large exposures and avoid undue concentration of
credit risk in its credit portfolio. The limits include single customer groupings, connected parties, and geographical and
industry segments. These risks are monitored regularly and the limits reviewed annually or sooner depending on changing
market and economic conditions.
The credit risk exposure for derivative and loan books is managed as part of the overall lending limits with customers
together with potential exposure from market movements.
191
5
5.4 Risk Limit Control and Mitigation Policies (continued)
Collateral
Credits are established against borrower’s capacity to repay rather than rely solely on security. However, collateral may be
taken to mitigate credit risk. The main collateral types accepted and given value by ABB are:
•
•
•
•
Mortgages over residential properties;
Charges over commercial real estate or vehicles financed;
Charges over business assets such as business premises, inventory and account receivables; and
Charges over financial instruments such as marketable securities
In order to be recognised as security, all items pledged must have value and ABB must have physical control and/or legal
title thereto, together with the necessary documentation to enable ABB to realise the asset without the co-operation of the
asset owner. Other items, such as personal or corporate guarantees, may be taken for comfort but will not be treated as
security for approval purposes. Valuations are updated on a regular basis.
Prior to acceptance of any item as security, verification must be done to ensure that the security exists and an accurate and
up-to-date valuation can be placed upon it. A pre-facility disbursement site visit must be undertaken in respect of landed
security of significant value. Where third parties are used to undertake a valuation they must be taken from a list of approved
valuers.
All assets which provide security to ABB must be adequately insured with an insurer from the list of approved insurers.
The security documentation process is centralised in an independent Security Documentation Section at Head Office. ABB
adopts standardised Letter of Offer and Legal Documents. Variations/amendments require the approval from the relevant
approving authority in the Bank.
Financial covenants (for credit related commitments and loan books)
The primary purpose of these instruments is to ensure that funds are available to a customer when required. Guarantees
and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit are
collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan.
Commitment to extend credit represents unutilised portion of approved credit in the form of loans, guarantees or letters of
credit. In terms of credit risk, ABB is potentially exposed to loss in an amount equal to the total unutilised commitments.
However, the potential amount of loss is less than the total unutilised commitments, as most commitments to extend credit
are contingent upon customers maintaining specific minimum credit standards.
ABB monitors the term to maturity of credit commitments because longer-term commitments generally have a greater
degree of credit risk than short-term commitments.
Refer to Appendix IV (a) to (b).
192
Annual Report 2011
5
5.5 Credit Risk Monitoring
Retail credits are actively monitored and managed on a portfolio basis by product type. A new collection management
system has been implemented with a dedicated team in place to promptly identify, monitor and manage delinquent accounts
at early stages of delinquency.
Corporate credits and large individual accounts are reviewed by the Business Units at least once a year against updated
information. This is to ensure that the credit grades remain appropriate and detect any signs of weaknesses or deterioration
in the credit quality. Remedial action is taken where evidence of deterioration exists.
Early Alert Process is in place as part of a means to pro-actively identify, report and manage deteriorating credit quality.
Watchlist accounts are closely reviewed and monitored with corrective measures initiated to prevent them from turning
impaired. As a rule, watchlist accounts are either worked up or worked out within a period of twelve months.
Portfolio management risk reports are submitted regularly to EAC and BRMC.
5.6 Impairment Provisioning
Individual impairment provisioning
Significant loans, with or without past due status, are subject to individual assessment for impairment when an evidence of
impairment surfaces or at the very least once annually during the annual review process.
If impaired, the amount of loss is measured as the difference between the asset‘s carrying value and the present value of
estimated future cash flows discounted at the financial assets original effective interest rate. The level of impairment allowance
on significant loans is reviewed regularly, at least quarterly or more often when circumstances require.
Significant loans that are deemed not impaired after individual assessment are included in a group of loans with similar
characteristics and collectively assessed for impairment.
Collective impairment provisioning
All loans are grouped in respective business segments according to similar credit risk characteristics and is generally based
on industry, asset or collateral type, credit grade and past due status grouped based on business segments.
Portfolio provisioning is determined for each segment based on its respective loss probabilities and other information relevant
to estimation of the future cash flows of each segment.
Collective provisioning is applicable to all loans not covered under individual assessment as well as significant loans that are
deemed not impaired after individual assessment.
Total loans, advances and financing - credit quality
All loans, advances and financing are categorised into “neither past due nor impaired”, “past due but not impaired” and
“impaired”. Past due loans refer to loans that are overdue by one day or more. Impaired loans are loans with months-inarrears more than 90 days or with impaired allowances.
193
5
5.6 Impairment Provisioning (continued)
Analysed by economic sector
Past due loans
Primary agriculture
Manufacturing
Construction
Real estate
Household
Others
194
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
15,363
1,063
34,755
1,253
148,750
31,084
74,168
39,594
65,535
107,549
2,115,554
-
25,065
1,034
55,979
1,701
195,354
183,208
69,846
58,578
271,344
130,868
2,220,092
142
15,022
1,000
33,733
1,190
116,430
31,084
71,508
37,872
63,957
106,456
1,745,578
-
25,000
1,034
53,530
1,580
132,596
181,164
63,909
57,658
222,654
130,467
1,872,993
142
2,634,668
3,213,211
2,223,830
2,742,727
The Group
2011
2010
RM'000
RM'000
Primary agriculture
Manufacturing
Construction
Real estate
Household
2,350
10,712
1,030
126,033
1,870
1,431
22,604
45
2,182
5,778
47,302
1,184
92,408
1,900
15,122
3,368
8,786
-
2,349
3,869
1,030
99,601
1,870
242
22,213
45
2,110
5,778
40,105
1,184
65,022
1,900
14,600
3,368
7,752
-
168,257
175,848
133,329
139,709
Annual Report 2011
The Bank
2011
2010
RM'000
RM'000
5
Analysed by economic sector (continued)
Individual impairment charged
Primary agriculture
Manufacturing
Construction
Real estate
Household
Individual impairment written-off
Primary agriculture
Manufacturing
Construction
Real estate
Household
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
665
4,793
48
82,192
926
3,919
22,948
55
1,363
6,039
1,046
45,226
1,191
98,539
2,075
15,588
6,599
3,789
17,931
-
665
3,377
48
80,311
926
3,088
22,557
55
853
6,039
1,046
43,262
1,191
75,814
2,075
15,066
6,599
3,789
17,835
-
116,909
198,023
111,880
172,716
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
3,666
34,778
45,116
13
10,049
2,368
235
1,046
2,677
71,454
7,157
5,271
6,549
63,076
13,675
-
3,666
34,330
43,227
13
10,049
2,368
235
1,046
1,502
71,454
7,157
5,271
6,549
63,076
13,675
-
96,225
170,905
93,888
169,730
195
5
Analysed by economic sector (continued)
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
Primary agriculture
Manufacturing
Construction
Real estate
Household
Others
2,223
801
19,175
561
22,194
12,271
12,996
8,413
17,298
6,611
349,056
-
2,877
1,350
28,455
716
18,408
8,258
12,352
5,406
15,591
6,658
268,318
27,312
1,796
797
17,093
521
18,148
10,456
12,662
8,312
14,845
4,376
301,884
-
2,642
1,337
27,135
678
16,102
8,035
11,932
5,380
13,891
5,517
249,333
1,238
451,599
395,701
390,890
343,220
Analysed by geographical area
196
Past due loans
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Sarawak
Sabah
Labuan
Outside Malaysia
2,136
121,774
101,470
131,475
715,453
392,363
110,914
136,583
271,243
111,174
68,159
53,775
149,629
268,520
-
1,613
150,752
126,917
145,745
909,378
654,069
123,082
134,772
320,955
98,030
65,665
56,413
148,198
277,149
269
204
1,876
85,200
92,451
91,731
597,053
354,355
101,609
132,924
251,586
85,555
14,527
5,571
146,454
262,938
-
1,271
89,000
118,361
108,697
795,447
578,597
111,816
131,112
299,750
71,358
14,879
7,026
144,516
270,436
257
204
2,634,668
3,213,211
2,223,830
2,742,727
Annual Report 2011
5
Analysed by geographical area (continued)
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Outside Malaysia
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
1,283
858
2,404
95,843
30,858
2,349
930
6,843
66
26,823
6,394
646
2,084
68,011
28,525
2,127
777
2,778
5,968
2,613
1,154
27,386
1,283
858
2,404
95,842
29,597
2,349
930
66
-
6,394
640
2,084
60,293
54,881
2,127
777
2,778
5,968
2,613
1,154
-
168,257
148,463
133,329
139,709
The Group
2011
2010
RM'000
RM'000
The Bank
2011
2010
RM'000
RM'000
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Sarawak
Sabah
Labuan
438
20,780
19,788
16,412
179,768
80,214
25,262
12,629
44,068
10,711
6,757
7,655
10,683
16,434
-
312
11,156
12,111
13,267
128,479
154,491
8,937
9,198
26,892
6,658
4,105
3,129
6,079
9,895
992
418
17,603
18,211
12,870
155,598
71,426
23,530
12,156
41,487
7,699
2,992
1,129
10,253
15,518
-
303
9,581
11,227
12,138
91,650
150,545
8,103
8,889
25,460
5,266
2,767
734
5,930
9,635
992
451,599
395,701
390,890
343,220
197
5
5.7 Credit Risk Culture
ABB recognises that learning is a continuous journey and is committed to enhance the knowledge and required skills set
of its staff. It places strong emphasis in creating and enhancing risk awareness in the organisation.
For effective and efficient staff learning, ABB has implemented an E–Learning Program with an online Learning Management
System ('LMS'). The LMS provides staff with a progressive self-learning alternative at own pace.
GRM commenced an Internal Credit Certification ('ICC') Programme for both Business Banking and Consumer Credit in July
2009 and August 2009 respectively.
The aim of the ICCs is to assist the core credit related group of personnel in ABB achieve a minimum level of knowledge
and analytical skills required to make sound corporate and commercial loans to customers. It is envisaged that the core credit
related group of personnel would all be certified within 2 to 3 years.
6
Market Risk
6.1 Market Risk Management Objectives and Policies
Market risk is defined as the risk of losses to ABB’s portfolio positions arising from movements in market prices. ABB’s
market risk management objective is to ensure that market risk is appropriately identified, measured, controlled, managed
and reported.
ABB’s exposure to market risk stems primarily from interest rate risk and foreign exchange rate risk. Interest rate risk arises
mainly from differences in timing between the maturities or repricing of assets, liabilities and derivatives. ABB is also exposed
to basis risk when there is a mismatch between the change in price of a hedge and the change in price of the assets it
hedges. Foreign exchange rate risk arises from unhedged positions of customers' requirements and proprietary positions.
6.2 Application of Standardised Approach for Market Risk
ABB adopts the Standardised Approach for the purpose of calculating the capital requirement for market risk.
Refer to Appendix 1.
6.3 Market Risk Measurement, Control and Monitoring
Market risk arising from ABB’s trading book is primarily controlled through the imposition of Cut-loss and Value-at-Risk
('VaR') Limits which are approved by both ALCO and BRMC in accordance with ABB's risk appetite. These limits are set
and reviewed regularly having regard to a number of factors, including liquidity and ABB's business strategy.
For non-trading book, ABB quantifies the interest rate risk by analysing the repricing mismatch between the rate sensitive
assets and rate sensitive liabilities. ABB also performs Net Interest Income simulation to assess the variation in earnings under
various rates scenarios.
The non-trading book’s interest rate risk is managed through limits set over time buckets together with an Overall Risk
Tolerance Limit.
In addition, ABB conducts periodic stress test of its respective portfolios to ascertain market risk under abnormal market
conditions.
ABB's Management, ALCO and BRMC are regularly kept informed of its risk profile and positions.
198
Annual Report 2011
6
Market Risk (continued)
6.4 Value-at-Risk ('VaR')
Value-at-Risk ('VaR') is used to compute the maximum potential loss amount over a specified holding period of a Trading
portfolio. It measures the risk of losses arising from potential adverse movements in interest rates and foreign exchange rates
that could affect values of financial instruments.
The Variance-Covariance Parametric methodology is adopted to compute the potential loss amount. This is a statistically
defined, probability-based approach that uses volatilities and correlations to quantify price risks. Under this methodology,
a matrix of historical volatilities and correlations is computed from the past 100 business days’ market data. VaR is then
computed by applying these volatilities and correlations to the outstanding trading portfolio.
Other risk measures include the following:
(i)
Mark-to-Market valuation tracks the current market value of the outstanding financial instruments.
(ii)
Stress tests are conducted to attempt to quantify market risk arising from low probability, abnormal market movements.
The stress test measure the change in value arising from range of extreme movements in the interest rates and foreign
exchange rates based on past experience and simulated stress scenarios.
(iii)
Sensitivity/Dollar Duration is an additional measure of interest rate risk that is computed on a daily basis. It measures
the change in value of a portfolio resulting from a 0.01% increase in interest rates. This measure identifies ABB interest
rate exposures that are most vulnerable to interest rate changes and it facilitates the implementation of
hedging strategies.
6.5 Foreign Exchange Risk
ABB takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position
and cash flows. The Board sets limits on the level of exposure by currency and in aggregate for both overnight and intraday positions, which are monitored daily.
6.6 Market Risk Culture
In October 2010, ABB introduced ICC-Market Risk with the Diagnostic Assessment conducted through the LMS.
7
Liquidity Risk
7.1 Liquidity Risk Management Objectives and Policies
Liquidity risk is the risk of loss due to failure to access funds at reasonable cost to fund ABB's operations and meet its
liabilities when they fall due. Liquidity risk arises from ABB's funding activities and the management of its assets.
7.2 Liquidity Risk Measurement, Control and Monitoring
To measure and manage net funding requirements, ABB adopts BNM's New Liquidity Framework ('NLF'). The NLF
ascertains the liquidity condition based on the contractual and behavioral cash-flow of assets, liabilities and off-balance
sheet commitments, taking into consideration the realisable cash value of the eligible liquefiable assets. The NLF is also
supported by indicative ratios on the Bank’s funding structure to monitor the reliance on particular funding sources.
ABB employs liquidity risk indicators as an early alert of any structural change for liquidity risk management. The risk is
measured monthly using internal and external qualitative and quantitative liquidity risk indicators. ABB also conducts liquidity
stress tests to gauge ABB’s resilience in the event of a funding crisis. In addition, the Bank has in place the Contingency
Funding Plan, which provides a systematic approach in handling liquidity disruption. The document encompasses strategies,
decision-making authorities, and courses of action to be taken in the event of liquidity crisis and emergencies.
BRMC is responsible for ABB's liquidity policy although the strategic management of liquidity has been delegated to ALCO.
The BRMC is informed regularly of the liquidity situation in the ABB.
199
8
Operational Risk
8.1 Operational Risk Management Objectives and Policies
Operational risk is the risk of loss arising from inadequate or failed internal processes, action on or by people, infrastructure
or technology or events which are beyond the bank’s immediate control which have an operational impact, including natural
disaster, fraudulent activities and money laundering.
ABB manages operational risk through a control based environment in which policies and procedures are formulated after
taking into account individual unit’s business activities, the market in which it is operating and regulatory requirement
in force.
8.2 Application of Basic Indicator Approach for Operational Risk
ABB adopts the Basic Indicator Approach for the purpose of calculating the capital requirement for operational risk. The
capital requirement is calculated by taking 15% of ABB’s average annual gross income over the previous three years.
8.3 Operational Risk Measurement, Control and Monitoring
Risk is identified through the use of assessment tools and measured using threshold/limits mapped against risk matrix.
Monitoring and control procedures include the use of key control standards, independent tracking of risk, back-up
procedures and contingency plans, including disaster recovery and business continuity plans. This is supported by periodic
reviews undertaken by GIA to ensure adequacy and effectiveness of the Group Operational Risk Management process.
ABB gathers and reports operational risk loss and 'near miss' events to GORMC and BRMC. Appropriate remedial actions
are reviewed and implemented to minimise the recurrence of such events.
8.4 Operational Risk Culture
As a matter of requirement, all Operational Risk Coordinators must satisfy an internal operational risk (including anti-money
laundering/counter financing of terrorism and business continuity management) Certification Program. These coordinators
will first go through an on-line self learning exercise before attempting on-line assessments to measure their skills and
knowledge level. This will enable GRM to prescribe appropriate training and development activities for the coordinators.
9
Shariah Compliance
Shariah compliance is the fundamental of Islamic banking and finance. It gives legitimacy to the practices and business operations
of the Islamic financial institutions ('IFIs') concerned. Comprehensive compliance with Shariah principles would also boosts
confidence of shareholders and public that all the practices and activities by the IFIs are in compliance with the Shariah principles
at all times.
Shariah Governance Framework for Islamic Financial Institutions (the 'Framework') issued by Bank Negara Malaysia becomes the
main reference to oversee the Shariah governance process within AFFIN Islamic Bank Berhad. In order to comply with all the
requirements in the Framework, Board of Directors of the Bank are very committed to ensure among others all the required
Shariah compliance and research functions include Shariah Risk Management Control, Shariah Review, Shariah Research and
Shariah Audit are properly established to undertake its respective functions. Equally important to it, the existence of Shariah
Committee with qualified members that regularly provides the Bank with Shariah advice and guidance has further strengthened
the Shariah governance process within the Bank.
200
Annual Report 2011
201
APPENDIX I
3
2
1
3,746,630
314,927
4,061,557
Off Balance Sheet Exposures
Off Balance Sheet Exposures other than
OTC derivatives or credit derivatives
Defaulted Exposures
Total for Off-Balance Sheet Exposures
PSIA "Profit Sharing Investment Account"
OTC "Over The Counter"
Total RWA and Capital Requirements
OPERATIONAL RISK
Operational Risk
Interest Rate Risk
Foreign Currency Risk
MARKET RISK
Short Position
3,158,611
31,651
Long Position
3,280,139
31,367
54,182,644
50,121,087
Total for On-Balance Sheet Exposures
Total for On and Off-Balance Sheet Exposures
15,705,514
9,983,406
2,017,818
12,388,534
3,310,875
480,308
3,547,045
401,279
21,286
2,265,022
Gross
Exposures/EAD
before CRM
CREDIT RISK
On Balance Sheet Exposures
Corporates
Regulatory Retail
Other Assets
Sovereigns/Central Banks
Banks, Development Financial Institutions & MDBs
Insurance Companies, Securities Firms & Fund Managers
Residential Real Estate (RRE) Financing
Higher Risk Assets
Equity Exposure
Defaulted Exposures
Exposure Class
The Group
2011
Disclosure on Capital Adequacy under the Standardised Approach (RM'000)
121,528
(283)
53,041,242
3,898,896
3,591,861
307,035
49,142,346
14,866,815
9,881,160
2,017,818
12,388,534
3,310,875
480,308
3,542,236
400,748
21,286
2,232,566
Net
Exposures/EAD
after CRM
33,613,367
2,135,976
72,414
60,746
31,344,231
3,491,573
3,031,025
460,548
27,852,658
13,032,517
7,413,326
250,702
1,157,879
468,241
1,872,792
601,122
21,286
3,034,793
Risk Weighted
Assets
-
-
-
-
-
-
-
31,344,231
-
31,344,231
3,491,573
3,031,025
460,548
27,852,658
13,032,517
7,413,326
250,702
1,157,879
468,241
1,872,792
601,122
21,286
3,034,793
2,689,069
170,878
5,793
4,860
2,507,538
279,326
242,482
36,844
2,228,212
1,042,601
593,067
20,056
92,630
37,459
149,823
48,090
1,703
242,783
Total Risk
Total Risk
Minimum
Weighted Assets Weighted Assets
Capital
Absorbed by
after Effects of Requirements at
PSIA
PSIA
8%
The following information concerning the Group and the Bank's risk exposures are disclosed as accompanying information to the annual report, and does not form part of the audited accounts.
The Group and the Bank have adopted Basel II - Risk Weighted Assets computation under the BNM's Risk-Weighted Capital Adequacy Framework with effect from 1 January 2008. The Group and the Bank
have adopted the Standardised Approach for credit risk and market risk, and Basic Indicator Approach for operation risk computation.
202
Annual Report 2011
2,109,313
Long Position
2,609,530
8,899
2,077,478
31,835
Defaulted Exposures
OPERATIONAL RISK
Operational Risk
3
MARKET RISK
Interest Rate Risk
Short Position
2,473,385
22,612
44,615,085
42,505,772
14,018,930
9,990,439
1,007,575
11,727,290
51,159
1,970,016
95,362
1,980,809
389,024
1,275,168
Gross
Exposures/EAD
before CRM
CREDIT RISK
Corporates
Regulatory Retail
Other Assets
Public Sector Entities
Higher Risk Assets
Defaulted Exposures
2
1
Exposure Class
The Group
2010
(continued)
136,145
(13,713)
43,571,374
2,072,773
2,043,484
29,289
41,498,601
13,151,465
9,878,644
1,007,575
11,727,290
45,199
1,970,016
95,362
1,978,940
388,597
1,255,513
Net
Exposures/EAD
after CRM
26,927,386
2,062,578
69,361
27,211
24,768,236
1,596,123
1,552,189
43,934
23,172,113
11,707,401
7,408,826
355,022
10,941
9,040
540,152
95,362
778,567
582,895
1,683,907
Risk Weighted
Assets
-
-
-
-
-
-
-
Total Risk
Weighted Assets
Absorbed by
PSIA
24,768,236
-
24,768,236
1,596,123
1,552,189
43,934
23,172,113
11,707,401
7,408,826
355,022
10,941
9,040
540,152
95,362
778,567
582,895
1,683,907
Total Risk
Weighted Assets
after Effects of
PSIA
2,154,191
165,006
5,549
2,177
1,981,459
127,690
124,175
3,515
1,853,769
936,592
592,706
28,402
875
723
43,212
7,629
62,285
46,632
134,713
Minimum
Capital
Requirements at
8%
APPENDIX I
203
Long Position
3,280,139
30,075
3,321,998
310,304
Defaulted Exposures
OPERATIONAL RISK
Operational Risk
3
MARKET RISK
Interest Rate Risk
Short Position
3,158,611
979
44,031,517
3,632,302
40,399,215
13,814,948
8,680,704
2,278,319
7,251,236
3,135,881
369,693
2,437,678
359,952
21,286
2,049,518
Gross
Exposures/EAD
before CRM
CREDIT RISK
Corporates
Regulatory Retail
Other Assets
Higher Risk Assets
Equity Exposure
Defaulted Exposures
2
1
Exposure Class
The Bank
2011
(continued)
121,528
29,096
42,979,087
3,476,918
3,174,387
302,531
39,502,169
13,051,434
8,582,647
2,278,319
7,251,236
3,135,881
369,693
2,435,175
359,422
21,286
2,017,076
Net
Exposures/EAD
after CRM
29,539,697
1,828,940
72,414
30,075
27,608,268
3,151,504
2,697,711
453,793
24,456,764
11,685,047
6,439,439
468,235
1,122,880
369,693
1,056,292
539,133
21,286
2,754,759
Risk Weighted
Assets
-
-
-
-
-
-
-
27,608,268
-
27,608,268
3,151,504
2,697,711
453,793
24,456,764
11,685,047
6,439,439
468,235
1,122,880
369,693
1,056,292
539,133
21,286
2,754,759
2,363,175
146,315
5,793
2,406
2,208,661
252,120
215,817
36,303
1,956,541
934,804
515,155
37,459
89,830
29,575
84,503
43,131
1,703
220,381
Total Risk
Total Risk
Minimum
Weighted Assets Weighted Assets
Capital
Absorbed by
after Effects of Requirements at
PSIA
PSIA
8%
APPENDIX I
204
Annual Report 2011
1,846,277
Long Position
2,609,530
4,300
1,814,442
31,835
Defaulted Exposures
OPERATIONAL RISK
Operational Risk
3
MARKET RISK
Interest Rate Risk
Short Position
2,473,385
22,612
37,214,287
35,368,010
12,540,053
8,055,493
1,286,037
8,186,533
51,159
1,914,175
306
1,859,507
346,361
1,128,386
Gross
Exposures/EAD
before CRM
CREDIT RISK
Corporates
Regulatory Retail
Other Assets
Higher Risk Assets
Defaulted Exposures
2
1
Exposure Class
The Bank
2010
(continued)
136,145
(18,312)
36,255,157
1,809,737
1,780,448
29,289
34,445,420
11,749,181
7,951,324
1,286,037
8,186,533
45,199
1,914,175
306
1,857,981
345,933
1,108,751
Net
Exposures/EAD
after CRM
23,718,094
1,776,655
69,361
22,612
21,849,466
1,451,919
1,407,985
43,934
20,397,547
10,626,610
5,963,336
525,486
9,040
528,984
306
726,720
518,901
1,498,164
Risk Weighted
Assets
-
-
-
-
-
-
-
Total Risk
Weighted Assets
Absorbed by
PSIA
21,849,466
-
21,849,466
1,451,919
1,407,985
43,934
20,397,547
10,626,610
5,963,336
525,486
9,040
528,984
306
726,720
518,901
1,498,164
Total Risk
Weighted Assets
after Effects of
PSIA
1,897,447
142,132
5,549
1,809
1,747,957
116,154
112,639
3,515
1,631,803
850,129
477,067
42,038
723
42,319
24
58,138
41,512
119,853
Minimum
Capital
Requirements at
8%
APPENDIX I
APPENDIX I
Disclosure on Capital Adequacy under the Standardised Approach (continued)
Market risk is defined as the risk of losses in on and off-balance sheet positions arising from movements in market prices. The Bank’s
Capital-at-Risk ('CaR') is defined as the amount of the Bank’s capital that is exposed to the risk of unexpected losses arising particularly
from movements in interest and foreign exchange rates. A CaR Limit is set as a management trigger to ensure that the Bank’s exposure
to such movements do not compromise the Bank’s capital adequacy. The Bank is currently adopting BNM’s Standardised Approach
for the computation of market risk capital charges. The market risk capital charges addresses among others, capital requirement for
market risk which includes the interest rate risk pertaining to the Bank’s exposure in the trading book as well as foreign exchange risk
in the trading and banking books.
The computation of market risk capital charge covers the following outstanding financial instruments:
a)
b)
c)
d)
Foreign Exchange
Interest Rate Swap ('IRS')
Cross Currency Swap ('CCS')
Fixed Income Instruments (i.e. Private Debt and Government Securities)
205
206
Annual Report 2011
PSE "Public Sector Entities"
MDB "Multilateral Development Banks"
FDI "Financial Development Institutions"
-
40,257
-
15,084
523,929
-
-
1,869,989
775,822
15,142,052
1,252,732
-
-
1,668
797
10,147,345
7,952
407,616
-
-
1,719,914
626,070
954,581
531,245
174,089
-
-
37,058
453,716
-
-
1,740,442
35,371
238,760
3,245
-
-
-
-
-
-
2,053,153
1,790,162
20,389
-
Residential Higher Risk
Mortgage
Assets
Deduction
from Capital
Base
0%
10%
20%
35%
50%
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
Regulatory
Retail
Specialised
Other Financing/
Assets Investment Securitisation
-
1,600
36,001
-
12,407,931
51,243
-
Risk
Weights
Insurance
Companies,
Securities
Banks,
Firms
MDBs
& Fund
and FDIs
Managers Corporates
Exposures after Netting and Credit Risk Mitigation
Average
Risk
Weight
PSEs
Sovereigns
& Central
Bank
The Group
2011
Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM'000)
-
21,286
-
Equity
Exposure
-
-
14,148,373
4,028,108
1,719,914
3,192,851
11,101,926
16,522,671
2,327,399
-
After
Netting &
Credit Risk
Mitigation
Total
-
805,622
601,970
1,596,426
8,326,444
16,522,671
3,491,099
-
Total Risk
Weighted
Assets
APPENDIX II
207
-
39,858
1,751,344
573,341
39,824
-
-
105,464
-
-
1,104,217
1,330,074
12,189,309
326,319
-
-
875
238
9,997,337
8,703
543,654
-
-
1,406,021
572,920
247,982
1,018
-
-
34,559
423,216
-
Higher Risk
Assets
-
601,396
65,973
336,960
3,245
-
Other
Assets
-
-
-
Securitisation
-
-
45,209
-
Corporates
Residential
Mortgage
Deduction
from Capital
Base
0%
10%
20%
35%
50%
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
PSEs
Regulatory
Retail
Specialised
Financing/
Investment
-
11,719,253
131,982
10,941
-
Risk
Weights
Banks,
MDBs
and FDIs
Insurance
Companies,
Securities
Firms
& Fund
Managers
Average
Risk
Weight
Sovereigns
& Central
Bank
The Group
2010
(continued)
-
-
Equity
Exposure
-
-
12,320,649
3,099,600
1,406,021
2,476,573
9,997,337
12,973,742
1,297,452
-
After
Netting &
Credit Risk
Mitigation
Total
-
619,920
492,107
1,238,286
7,498,003
12,973,742
1,946,178
-
Total Risk
Weighted
Assets
APPENDIX II
208
Annual Report 2011
-
40,257
-
388,879
-
-
1,289,793
730,822
13,650,277
1,223,311
-
-
1,668
(125)
8,819,511
7,952
375,830
-
-
1,626,373
561,873
163,917
355,427
125,687
-
-
383,203
-
-
1,498,735
389,185
390,398
-
-
-
-
-
-
1,864,977
1,790,162
20,389
-
Residential Higher Risk
Mortgage
Assets
Deduction
from Capital
Base
0%
10%
20%
35%
50%
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
Regulatory
Retail
Specialised
Other Financing/
Assets Investment Securitisation
-
1,600
36,001
-
7,261,956
-
Risk
Weights
Insurance
Companies,
Securities
Banks,
Firms
MDBs
& Fund
and FDIs
Managers Corporates
Average
Risk
Weight
PSEs
Sovereigns
& Central
Bank
The Bank
2011
(continued)
-
21,286
-
Equity
Exposure
-
-
8,760,691
3,547,223
1,626,373
3,082,732
8,983,428
14,834,608
2,144,032
-
After
Netting &
Credit Risk
Mitigation
Total
-
709,445
569,231
1,541,366
6,737,571
14,834,608
3,216,048
-
Total Risk
Weighted
Assets
APPENDIX II
209
-
39,858
1,683,644
573,341
39,824
-
-
10,408
-
-
760,651
1,229,251
11,098,278
326,318
-
-
875
238
8,070,017
3,875
482,009
-
-
1,348,467
509,514
232,490
1,018
-
-
364,240
-
Higher Risk
Assets
-
562,902
247,060
476,074
-
Other
Assets
-
-
-
Securitisation
-
-
45,209
-
Corporates
Residential
Mortgage
Deduction
from Capital
Base
0%
10%
20%
35%
50%
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
PSEs
Regulatory
Retail
Specialised
Financing/
Investment
-
8,189,437
15
-
Risk
Weights
Banks,
MDBs
and FDIs
Insurance
Companies,
Securities
Firms
& Fund
Managers
Average
Risk
Weight
Sovereigns
& Central
Bank
The Bank
2010
(continued)
-
-
Equity
Exposure
-
-
8,752,339
2,737,454
1,348,467
2,312,344
8,070,017
11,860,949
1,173,585
-
After
Netting &
Credit Risk
Mitigation
Total
-
547,491
471,963
1,156,172
6,052,513
11,860,949
1,760,378
-
Total Risk
Weighted
Assets
APPENDIX II
210
Annual Report 2011
(i)
AAA to AA-
Rating &
Investment Inc
461,499
AAA to AA-
MARC
Total
AAA to AA3
RAM
461,499
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
907,646
907,646
A+ to A-
A+ to A-
A to A3
A+ to A-
A+ to A-
A1 to A3
-
-
BBB+ to BB-
BBB+ to BB-
BBB1 to BB3
BBB+ to BB-
BBB+ to BB-
Baa1 to Ba3
Ratings of Corporate by Approved ECAIs
Credit Exposures (using Corporate Risk Weights)
Public Sector Entities (applicable for entities risk weighted
based on their external ratings as corporates)
Insurance Cos, Securities Firms & Fund Managers
Corporates
On and Off-Balance Sheet Exposures
Exposure Class
The Group
2011
Disclosures on Rated Exposures according to Ratings by ECAIs (RM'000)
-
-
B+ to D
B+ to D
B to D
B+ to D
B+ to D
B1 to C
19,251,967
42,946
542,012
18,667,009
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
APPENDIX III
211
(i)
Total
Corporates
Exposure Class
The Group
2010
(continued)
AAA to AA3
AAA to AA-
AAA to AA-
RAM
MARC
Rating &
Investment Inc
433,081
433,081
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
1,155,313
1,155,313
A+ to A-
A+ to A-
A to A3
A+ to A-
A+ to A-
A1 to A3
3,570
3 ,570
BBB+ to BB-
BBB+ to BB-
BBB1 to BB3
BBB+ to BB-
BBB+ to BB-
Baa1 to Ba3
-
-
B+ to D
B+ to D
B to D
B+ to D
B+ to D
B1 to C
14,341,552
51,184
105,466
14,184,902
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
APPENDIX III
212
Annual Report 2011
(i)
AAA to AA-
Rating &
Investment Inc
458,514
AAA to AA-
MARC
Total
AAA to AA3
RAM
458,514
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
837,671
837,671
A+ to A-
A+ to A-
A to A3
A+ to A-
A+ to A-
A1 to A3
-
-
BBB+ to BB-
BBB+ to BB-
BBB1 to BB3
BBB+ to BB-
BBB+ to BB-
Baa1 to Ba3
Corporates
Exposure Class
The Bank
2011
(continued)
-
-
B+ to D
B+ to D
B to D
B+ to D
B+ to D
B1 to C
16,944,111
42,946
388,879
16,512,286
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
APPENDIX III
213
(i)
Total
Corporates
Exposure Class
The Bank
2010
(continued)
AAA to AA3
AAA to AA-
AAA to AA-
RAM
MARC
Rating &
Investment Inc
427,064
427,064
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
1,054,489
1,054,489
A+ to A-
A+ to A-
A to A3
A+ to A-
A+ to A-
A1 to A3
3,570
3,570
BBB+ to BB-
BBB+ to BB-
BBB1 to BB3
BBB+ to BB-
BBB+ to BB-
Baa1 to Ba3
-
-
B+ to D
B+ to D
B to D
B+ to D
B+ to D
B1 to C
12,806,193
51,184
10,410
12,744,599
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
APPENDIX III
214
Annual Report 2011
(ii)
AAA to AA-
Rating &
Investment Inc
534,983
AAA to AA-
MARC
Total
AAA to AA3-
RAM
534,983
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Banks, MDBs and FDIs
Exposure Class
12,459,175
12,459,175
A+ to A-
A+ to A-
A+ to A-
A1 to A3
-
-
BBB+ to BBB-
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
-
-
BB+ to B-
BB+ to B-
BB+ to B-
Ba1 to B3
106,461
106,461
A+ to A-
A+ to A-
A1 to A3
A+ to A-
A+ to A-
A1 to A3
106,345
106,345
BBB+ to BBB-
BBB+ to BBB-
BBB1+ to BBB3
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
20,389
20,389
BB+ to B-
BB+ to B-
BB1 to B3
BB+ to B-
BB+ to B-
Ba1 to B3
Ratings of Banking Institutions by Approved ECAIs
-
Total
AAA to AA-
Rating &
Investment Inc
-
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Caa1 to C
-
-
CCC+ to C
C+ to D
C1+ to D
CCC+ to D
CCC+ to D
Caa1 to C
-
-
CCC+ to C
CCC+ to D
3,095,526
3,095,526
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
-
-
Unrated
Unrated
Unrated
Unrated
APPENDIX III
CCC+ to D
Ratings of Sovereigns and Central Banks by Approved ECAIs
Sovereigns and Central Banks
Exposure Class
The Group
2011
(continued)
215
(ii)
AAA to AA-
Rating &
Investment Inc
911,685
AAA to AA-
MARC
Total
AAA to AA3-
RAM
911,685
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Exposure Class
11,851,234
11,851,234
A+ to A-
A+ to A-
A+ to A-
A1 to A3
-
-
BBB+ to BBB-
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
10,941
10,941
BB+ to B-
BB+ to B-
BB+ to B-
Ba1 to B3
62,276
62,276
A+ to A-
A+ to A-
A1 to A3
A+ to A-
A+ to A-
A1 to A3
116,038
116,038
BBB+ to BBB-
BBB+ to BBB-
BBB1+ to BBB3
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
-
-
BB+ to B-
BB+ to B-
BB1 to B3
BB+ to B-
BB+ to B-
Ba1 to B3
-
Total
AAA to AA-
Rating &
Investment Inc
-
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Exposure Class
The Group
2010
(continued)
157
157
CCC+ to C
C+ to D
C1+ to D
CCC+ to D
CCC+ to D
Caa1 to C
-
-
CCC+ to C
CCC+ to D
CCC+ to D
Caa1 to C
1,274,354
1,274,354
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
-
-
Unrated
Unrated
Unrated
Unrated
APPENDIX III
216
Annual Report 2011
(ii)
AAA to AA-
Rating &
Investment Inc
521,800
AAA to AA-
MARC
Total
AAA to AA3-
RAM
521,800
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Exposure Class
7,261,956
7,261,956
A+ to A-
A+ to A-
A+ to A-
A1 to A3
-
-
BBB+ to BBB-
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
-
-
BB+ to B-
BB+ to B-
BB+ to B-
Ba1 to B3
106,461
106,461
A+ to A-
A+ to A-
A1 to A3
A+ to A-
A+ to A-
A1 to A3
106,345
106,345
BBB+ to BBB-
BBB+ to BBB-
BBB1+ to BBB3
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
20,389
20,389
BB+ to B-
BB+ to B-
BB1 to B3
BB+ to B-
BB+ to B-
Ba1 to B3
-
Total
AAA to AA-
Rating &
Investment Inc
-
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Caa1 to C
-
-
CCC+ to C
C+ to D
C1+ to D
CCC+ to D
CCC+ to D
Caa1 to C
-
-
CCC+ to C
CCC+ to D
2,920,532
2,920,532
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
-
-
Unrated
Unrated
Unrated
Unrated
APPENDIX III
CCC+ to D
Exposure Class
The Bank
2011
(continued)
217
(ii)
AAA to AA-
Rating &
Investment Inc
899,824
AAA to AA-
MARC
Total
AAA to AA3-
RAM
899,824
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Exposure Class
8,189,452
8,189,452
A+ to A-
A+ to A-
A+ to A-
A1 to A3
-
-
BBB+ to BBB-
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
62,276
62,276
A+ to A-
A+ to A-
A1 to A3
A+ to A-
A+ to A-
A1 to A3
116,038
116,038
BBB+ to BBB-
BBB+ to BBB-
BBB1+ to BBB3
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
-
-
BB+ to B-
BB+ to B-
BB1 to B3
BB+ to B-
BB+ to B-
Ba1 to B3
-
-
BB+ to B-
BB+ to B-
BB+ to B-
Ba1 to B3
-
Total
AAA to AA-
Rating &
Investment Inc
-
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Exposure Class
The Bank
2010
(continued)
157
157
CCC+ to C
C+ to D
C1+ to D
CCC+ to D
CCC+ to D
Caa1 to C
-
-
CCC+ to C
CCC+ to D
CCC+ to D
Caa1 to C
1,218,515
1,218,515
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
-
-
Unrated
Unrated
Unrated
Unrated
APPENDIX III
APPENDIX IV
a)
Disclosures on Credit Risk Mitigation (RM'000)
The Group
2011
Exposure Class
Exposures
Covered by
Eligible
Financial
Collateral
Exposures
Covered by
Other
Eligible
Collateral
Credit Risk
On-Balance Sheet Exposures
Corporates
Regulatory Retail
Residential Mortgages
Higher Risk Assets
Other Assets
Equity Exposure
Defaulted Exposures
12,388,534
3,310,875
480,308
15,705,514
9,983,406
3,547,045
401,279
2,017,818
21,286
2,265,022
240,138
1,125
587
961,640
134,071
4,809
533
40,349
-
50,121,087
241,850
1,141,402
-
Off-Balance Sheet Exposures
Off-Balance Sheet exposures other
than OTC derivatives or credit derivatives
Defaulted Exposures
3,746,630
314,927
-
-
-
4,061,557
-
-
-
54,182,644
241,850
1,141,402
-
Total On and Off-Balance Sheet Exposures
218
Exposures
Exposures
before Covered by
CRM Guarantees/
Credit
Derivatives
Annual Report 2011
APPENDIX IV
a)
Disclosures on Credit Risk Mitigation (RM'000) (continued)
The Group
2010
Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
Exposures
Covered by
Eligible
Financial
Collateral
Exposures
Covered by
Other
Eligible
Collateral
Credit Risk
Corporates
Regulatory Retail
Higher Risk Assets
Other Assets
Defaulted Exposures
11,727,290
51,159
1,970,016
95,362
14,018,930
9,990,439
1,980,809
389,024
1,007,575
1,275,168
242,210
518
357
5,975
2
901,322
111,915
1,869
427
22,202
-
42,505,772
243,085
1,043,712
-
Off-Balance Sheet exposures other than
Defaulted Exposures
2,077,478
31,835
-
-
-
2,109,313
-
-
-
44,615,085
243,085
1,043,712
-
Exposure Class
219
APPENDIX IV
a)
The Bank
2011
Exposure Class
Exposures
Covered by
Eligible
Financial
Collateral
Exposures
Covered by
Other
Eligible
Collateral
Credit Risk
Corporates
Regulatory Retail
Higher Risk Assets
Other Assets
Equity Exposure
Defaulted Exposures
7,251,236
3,135,881
369,693
13,814,948
8,680,704
2,437,678
359,952
2,278,319
21,286
2,049,518
236,938
1,125
587
880,469
128,713
2,503
531
40,214
-
40,399,215
238,650
1,052,430
-
Defaulted Exposures
3,321,998
310,304
-
-
-
3,632,302
-
-
-
44,031,517
238,650
1,052,430
-
220
Exposures
Exposures
before Covered by
CRM Guarantees/
Credit
Derivatives
Annual Report 2011
APPENDIX IV
a)
The Bank
2010
Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
Exposures
Covered by
Eligible
Financial
Collateral
Exposures
Covered by
Other
Eligible
Collateral
Credit Risk
Corporates
Regulatory Retail
Higher Risk Assets
Other Assets
Defaulted Exposures
8,186,533
51,159
1,914,175
306
12,540,053
8,055,493
1,859,507
346,361
1,286,037
1,128,386
242,210
518
357
5,975
2
824,732
104,288
1,526
427
22,181
-
35,368,010
243,085
959,131
-
Defaulted Exposures
1,814,442
31,835
-
-
-
1,846,277
-
-
-
37,214,287
243,085
959,131
-
Exposure Class
b)
Disclosure on Off-Balance Sheet and Counterparty Credit Risk
Counterparty Credit Risk is the risk that the counterparty to a transaction could default before the final settlement of the
transaction's cashflows. An economic loss could occur if the transactions with the counterparty has a positive economic value
for the Bank at the time of default.
In contrast to the exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank
faces the risk of loss, Counterparty Credit Risk creates a bilateral risk of loss where the market value for many types of transactions
can be positive or negative to either counterparty.
In respect of off-balance sheet items, the credit risk inherent in each off-balance sheet instrument is translated into an on-balance
sheet exposure equivalent (credit equivalent) by multiplying the nominal principal amount with a credit conversion factor ('CCF')
as prescribed by the Standardised Approach under the Risk Weighted Capital Adequacy Framework. The resulting amount is then
weighted against the risk weight of the counterparty. In addition, counterparty risk weights for over-the-counter ('OTC') derivative
transactions will be determined based on the external rating of the counterparty and will not be subject to any specific ceiling.
221
APPENDIX IV
b)
Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM'000)
(continued)
The Group
2011
Description
Transaction related contingent items
Short term self liquidating trade related contingencies
Foreign exchange related contracts
One year or less
Over one year to five years
Interest/Profit rate related contracts
One year or less
Over five years
Other commitments, such as formal standby facilities
and credit lines, with an original maturity of over one year
and credit lines, with an original maturity of up to one year
Total
Positive Fair
Value of
Principal
Derivative
Amount
Contracts
Credit
Equivalent
Amount
Risk
Weighted
Amount
386,900
2,375,506
973,726
-
386,900
1,187,753
194,745
373,254
1,129,992
159,464
2,987,581
70,000
15,087
2,168
49,028
5,770
17,625
1,985
133,140
1,787,852
474,023
3,596
14,304
156
47,055
43,899
67
12,427
10,295
3,526,454
-
705,291
644,787
7,015,300
189,502
-
1,403,060
37,900
1,113,216
28,463
19,919,984
35,155
4,061,557
3,491,575
408,608
2,387,456
1,232,752
-
408,608
1,193,728
246,551
299,520
1,022,073
140,554
2,215,359
201,120
25,842
10,570
50,821
19,678
19,952
8,217
93,784
956,256
445,273
2,664
7,079
14
32,602
38,490
3
7,936
8,842
4,247,549
-
-
-
6,062,519
594,104
-
118,821
89,026
18,844,780
46,155
2,109,313
1,596,123
The Group
2010
One year or less
One year or less
Over five years
Total
---------222
Annual Report 2011
APPENDIX IV
b)
Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM'000)
(continued)
The Bank
2011
Description
One year or less
One year or less
Over five years
Total
Positive Fair
Value of
Principal
Derivative
Amount
Contracts
Credit
Equivalent
Amount
Risk
Weighted
Amount
378,797
2,226,050
627,826
-
378,797
1,113,025
125,564
366,784
1,060,529
131,304
2,987,581
70,000
15,087
2,168
49,028
5,770
17,625
1,985
133,140
1,787,852
474,023
3,596
14,304
156
47,055
43,899
67
12,427
10,295
3,098,316
-
619,663
565,143
6,057,224
189,502
-
1,211,445
37,900
956,882
28,463
18,030,311
35,155
3,632,302
3,151,504
382,080
2,189,031
546,276
-
382,080
1,094,516
109,255
280,656
928,260
109,027
2,215,359
201,120
25,842
10,570
50,821
19,678
19,952
8,217
93,784
956,256
445,273
2,664
7,079
14
32,602
38,490
3
7,936
8,842
3,837,655
-
-
-
5,360,954
594,104
-
118,821
89,026
16,821,892
46,155
1,846,277
1,451,919
The Bank
2010
One year or less
One year or less
Over five years
Total
223
APPENDIX IV
c)
Disclosures on Market Risk - Interest Rate Risk/Rate of Return Risk in the Banking Book
Interest rate risk is the current and prospective impact to the Bank's financial condition due to adverse changes in the interest
rates to which the balance sheet is exposed. The objective is to manage interest rate risk to achieve stable and sustainable net
interest income in the long term which impact can be viewed from the perspectives of (1) earnings in the next 12 months, and
(2) economic value.
(1)
Next 12 months' Earnings - Interest rate risk from the earnings perspective is the impact based on changes to the net
interest income over the next 12 months. This risk is measured monthly through sensitivity analysis including the application
of an instantaneous 100 basis point parallel shock in interest rates across the yield curve. The prospective change to the
net interest income is measured using an Asset Liability Management simulation model which incorporates the assessment
of both existing and new business.
(2)
Economic Value - Measuring the change in the economic value of equity is an assessment of the long term impact to the
earnings potential. This is assessed through the application of relevant duration factors to capture the net economic value
impact over the long term or total life of all balance sheet assets and liabilities to adverse changes in interest rates.
The above calculations do not take into account loan prepayments.
2011
Type of Currency
RM million
The Group
The Bank
Impact on Positions
(100 basis points) Parallel Shift
Impact on Positions
(100 basis points) Parallel Shift
Increase/(Decline) Increase/(Decline)
in Earnings in Economic Value
Increase/(Decline) Increase/(Decline)
in Earnings in Economic Value
Ringgit Malaysia
US Dollar
Great Britain Pound
Australian Dollar
Singapore Dollar
Japanese Yen
Others (*)
(20.0)
3.8
0.8
1.1
0.5
0.4
(0.7)
214.9
1.9
0.1
7.6
0.9
0.2
-
(28.0)
5.0
0.8
1.1
0.5
0.4
(0.7)
263.7
2.0
0.1
7.6
0.9
0.2
-
Total
(14.1)
225.6
(20.9)
274.5
Ringgit Malaysia
US Dollar
Great Britain Pound
Australian Dollar
Singapore Dollar
Japanese Yen
Others (*)
(31.2)
4.1
0.4
0.4
0.3
0.3
(0.1)
311.4
7.4
1.0
0.8
2.2
0.8
-
(26.8)
4.2
0.4
0.4
0.3
0.3
(0.1)
328.1
7.2
1.0
0.8
2.2
0.8
-
Total
(25.8)
323.6
(21.3)
340.1
2010
* Others comprise of NZD, UER, HKD and AED currencies where the amount of each currency is relatively small.
224
Annual Report 2011
17th Floor, Menara AFFIN,
50200 Kuala Lumpur
T: 03 2055 9000
F: 03 2026 1415
www.affinbank.com.my

2011 Annual Report - AFFINBANK

Transcription

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