Annual Report 2015 - Affin Islamic Bank Berhad

Transcription

Annual Report 2015
COVER RATIONALE
Identifying and converting potential can be challenging, especially in volatile markets.
It requires conviction, discipline and a focus on the long term.
At AFFIN ISLAMIC, we understand the value of potential.
With expertise across a wide array of disciplines, backed by our focus on results,
we constantly think ahead and strive to anticipate change before it happens.
This forward thinking approach helps our customers look to the future with confidence.
TABLE OF CONTENTS
organisation
02
03
04
05
09
10
11
Corporate Information
Corporate Structure
Board of Directors
Profile of Board of Directors
Management Team
Shariah Committee Members
Profile of Shariah Committee Members
executive summary
14
17
20
22
Our Vision
AFFIN ISLAMIC to play a significant role in the
ever expanding Islamic banking world by providing
innovative Shariah Compliant financial solutions and
services, which will establish itself as a “PREMIER
LOCAL AND INTERNATIONAL ISLAMIC FINANCIAL
INSTITUTION”.
Chairman’s Statement
CEO’s Performance Review
Corporate Diary
Financial Highlights
other information
23 24
Network of Branches
Notice of Annual General Meeting
financial statements
25 Financial Statements
corporate
information
PRINCIPAL
ACTIVITIES
NAME
Affin Islamic Bank
Berhad
(Co. No.: 709506-V)
Affin Islamic Bank
Berhad is principally
involved in the carrying
out of Islamic banking
and finance related
services. The Bank
has two (2) associate
companies which
are principally
engaged in property
management services.
DATE OF
INCORPORATION
13 September 2005
Chief Executive
Officer
En. Kamarul Ariffin Bin
Mohd Jamil
(Resigned w.e.f.
31.3.2015)
SECRETARY
Nimma Safira Binti
Khalid
En. Nazlee Bin Khalifah
(Appointed w.e.f.
3.6.2015)
BOARD OF DIRECTORS
Chairman
YBhg. Jen. Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)
(Non-Independent Non-Executive Director)
En. Mohd Suffian Bin Haji Haron
(Independent Non-Executive Director)
Directors
YBhg. Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin
YBhg. Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman
Affin Islamic Bank Berhad (709506-V) | Annual Report 2015
YBhg. Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli
Bin Mohd Nor (Bersara)
02
YBhg. Tan Sri Dato’ Seri Mohamed Jawhar
Assoc. Prof. Dr. Said Bouheraoua
REGISTERED
OFFICE
AUTHORISED SHARE
CAPITAL
ISSUED AND PAID-UP
SHARE CAPITAL
17th Floor
Menara AFFIN
80, Jalan Raja Chulan
50200 Kuala Lumpur
Tel.: 03-2055 9000
Fax: 03-2026 1415
No. of shares
1,000,000,000
Par value
RM1.00
Total
RM1,000,000,000
No. of shares
460,000,002
Par value
RM1.00
Total
RM460,000,002
SUBSTANTIAL
SHAREHOLDER
No. of shares
Affin Bank Berhad
460,000,002
EXTERNAL AUDITORS
PricewaterhouseCoopers
(AF 1146)
corporate
STructure
as at 31 December 2015
35.28%
Lembaga Tabung Angkatan Tentera
59.98%
OTHERS
Boustead Holdings Berhad
Bank of East Asia Limited
20.69%
23.52%
20.51%
Affin Holdings berhad
100%
100%
30%
KL South Development Sdn Bhd 2
(jointly owned by AFFIN Islamic Bank Berhad and Albatha
Bukit Kiara Holdings Sdn Bhd with a 30:70 ownership)
Affin Islamic Bank Berhad
Affin Bank Berhad
50%
100%
Affin MoneyBrokers Sdn Bhd
AFFIN-i Nadayu Sdn Bhd 2
(jointly owned by AFFIN Islamic Bank Berhad and
Jurus Positif Sdn Bhd with a 50:50 ownership)
100%
Affin-ACF Holdings Sdn Bhd
100%
100%
Affin Investment Berhad
(formerly known as AFFIN Investment Bank Berhad)
100%
ABB Nominee (Tempatan) Sdn Bhd
AFFIN-ACF Nominees (Tempatan) Sdn Bhd 3
100%
100%
PAB Properties Sdn Bhd
100%
PAB Property Development Sdn Bhd 3
100%
100%
Affin Hwang Investment Bank Berhad
BSNC Nominees (Tempatan) Sdn Bhd 3
ABB Trustee Berhad 2
100%
Affin Hwang Nominees
(Tempatan) Sdn Bhd
100%
70%
Affin Hwang Asset Management
Berhad
100%
Asian Islamic Investment
Management Sdn Bhd
100%
Affin Nominees
(Tempatan) Sdn Bhd
100%
Affin Nominees
(Asing) Sdn Bhd
100%
Affin Recoveries Berhad 1
100%
AFFIN Factors Sdn Bhd 1
Affin Hwang Nominees
(Asing) Sdn Bhd
100%
Affin Hwang Futures
Sdn Bhd
(80% held by Directors of AFFIN Bank Berhad
in trust for AFFIN Bank Berhad)
100%
ABB Nominee (Asing) Sdn Bhd 1
100%
Affin Futures Sdn Bhd 1
100%
ABB IT & Services Sdn Bhd 1
100%
AFFIN Capital Services Berhad
(formerly known as AFFIN Fund
Management Berhad)
100%
BSNCB Nominees (Tempatan) Sdn Bhd 1
51%
AXA Affin Life Insurance Berhad
34.5%
AXA Affin General Insurance Berhad
Dormant companies – inactive but company currently holding asset.
Associate companies.
Companies where application to strike-off has been filed by the Bank.
1
2
3
03
board of
directors
YBhg. Jen. Tan Sri Dato’ Seri
Ismail Bin Haji Omar (Bersara)
Chairman/
Non-Independent
Non-Executive Director
04
YBhg. Tan Sri Dato’ Seri Lodin
Bin Wok Kamaruddin
Non-Independent
YBhg. Laksamana Madya Tan Sri
Dato’ Seri Ahmad Ramli
bin Mohd Nor (Bersara)
Non-Independent
YBhg. Tan Sri Dato’ Seri
Mohamed Jawhar
Independent
en. Mohd Suffian
bin Haji Haron
Independent
YBhg. Tan Sri Dato’ Sri Abdul
Aziz Bin Abdul Rahman
Independent
Assoc. Prof. Dr. Said
Bouheraoua
Independent
profile of
directors
YBhg. Jen. Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)
Chairman / Non-Independent Non-Executive Director
Jen. Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara), aged 74, was appointed as Director and Chairman
of AFFIN ISLAMIC on 1 April 2006.
He was formerly Chief Defence Forces (CDF) Malaysia from 1995 until his retirement in 1998,
after 38 years of military service. He graduated from the 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 Nations
International Peace Academy, Vienna; the National Defence College, India and the National Institute of
Public Administration (INTAN), Malaysia.
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.
He was the Chairman of Affin Holdings Berhad and Affin-ACF Finance Berhad from 1999, prior to joining
AFFINBANK. He currently holds directorships in AFFINBANK, ABB Trustee Berhad, EP Engineering Sdn
Bhd and Global Medical Alliance Sdn Bhd.
Jen. Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) attended all 11 scheduled monthly Board Meetings
and all 3 Special Board Meetings held during the financial year ended 31 December 2015.
YBhg. Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin
Non-Independent Non-Executive Director
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin, aged 66, was reappointed to the Board of Directors of
AFFIN ISLAMIC 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.
He has extensive experience in managing a provident fund and in the establishment, restructuring and
management of various business interests ranging from plantation, trading, financial services, property
development to oil and gas, pharmaceuticals and shipbuilding.
He is also the Chairman of Boustead Heavy Industries Corporation Berhad, Boustead Naval Shipyard Sdn
Bhd, Pharmaniaga Berhad and Boustead Petroleum Marketing Sdn Bhd. He sits on the Board of The
University of Nottingham in Malaysia, Minority Shareholder Watchdog Group, FIDE Forum, AFFINBANK,
Affin Hwang Investment Bank Berhad, AXA Affin Life Insurance Berhad and Boustead Plantations Berhad.
Tan Sri Dato’ Seri Lodin graduated from the University of Toledo, Ohio, USA with a Bachelor of Business
Administration and a Master of Business Administration. Among the many awards he received todate
include the Chevalier De La Legion D’Honneur from the French Government, the Malaysian Outstanding
Entrepreneurship Award, the Degree of Doctor of Laws (honoris causa) (LLD) from the University of
Nottingham, United Kingdom, the UiTM Alumnus of the Year 2010 Award and The BrandLaureate Most
Eminent Brand ICON Leadership Award 2012 by Asia Pacific Brands Foundation. He is also a Chartered
Banker, AICB.
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin attended all 11 scheduled monthly Board Meetings and all
3 Special Board Meetings held during the financial year ended 31 December 2015.
Tan Sri Dato’ Seri Lodin 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.
05
profile of
directors
YBhg. Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Mohd Nor (Bersara)
Tan Sri Dato’ Seri Ahmad Ramli Bin Mohd Nor, aged 71, was appointed to the Board of Directors of AFFIN
ISLAMIC on 1 July 2006.
He graduated from the Brittania Royal Naval College Dartmouth, United Kingdom in 1965, the Indonesia
Naval Staff College in 1976, the United States Naval War College and Naval Post-Graduate School
Monterey in 1981. He also holds a Masters Degree in Public Administration from the Harvard University,
United States of America. He was in the Malaysian Navy and retired as Chief of Royal Malaysian Navy
in 1999.
Presently he is the Executive Deputy Chairman / Managing Director of Boustead Heavy Industries
Corporation Berhad. He is also the Board member of Favelle Favco Berhad.
Tan Sri Dato’ Seri Ahmad Ramli Bin Mohd Nor attended 10 out of 11 scheduled monthly Board Meetings
and all 3 Special Board Meetings held during the financial year ended 31 December 2015.
YBhg. Tan Sri Dato’ Seri Mohamed Jawhar
Independent Non-Executive Director
Tan Sri Dato’ Seri Mohamed Jawhar, aged 71, was appointed to the Board of Directors of AFFIN ISLAMIC
on 1 July 2006.
His other positions include: Independent Non-Executive Director, AFFINBANK; Non-Executive Chairman, New
Straits Times Press (Malaysia) Berhad; Member of Securities Commission Malaysia; Member, Operations
Review Panel, Malaysian Anti-Corruption Commission; Distinguished Fellow, Institute of Diplomacy and
Foreign Relations (IDFR); Distinguished Fellow, Malaysian Institute of Defence and Security (MiDAS);
Fellow, Institute of Public Security of Malaysia (IPSOM), Ministry of Home Affairs; Board Member, Institute
of Advanced Islamic Studies (IAIS); and Member, Laureate Advisory Board, INTI International University and
Colleges. He is also the Expert and Eminent Person from Malaysia for the ASEAN Regional Forum (ARF).
06
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 (CSCAP) 2007-2009.
He served with the government for over 20 years before he joined Institute of Strategic
& International Studies (ISIS) Malaysia as Deputy Director-General in 1990. He was
appointed Director-General in March 1997 and later as Chairman and CEO in 2006. He
was appointed Chairman ISIS Malaysia on 9 January 2010 relinquished the position on
8 January 2015.
During his government service, his positions include 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.
Tan Sri Dato’ Seri Mohamed Jawhar attended all 11 scheduled monthly Board Meetings and all 3 Special
Board Meetings held during the financial year ended 31 December 2015.
profile of
directors
En. Mohd Suffian Bin Haji Haron, aged 70, was appointed to the Board of Directors of AFFIN ISLAMIC on
1 July 2006
He graduated from the University of Malaya (1970) with a Bachelor of Economics and holds a Master of
Business Administration from University of Oregon (USA) in 1976.
He started his career as a Diplomatic and Administrative Officer, attached to the Prime Minister’s
Department and the Ministry of Public Enterprises. Whilst at the Prime Minister’s Department, he was
also assigned as the Assistant to the Special Economic Adviser to the Government. He served the Board of
Directors of Fraser’s Hill Development Corporation, the State Development Corporations of Perak, Pahang
and Terengganu as well as the Board of Directors of Bank Pembangunan Malaysia Berhad, Kompleks
Kewangan Malaysia Berhad, HICOM and the Council of Majlis Amanah Rakyat (MARA). After thirteen
years of service, he left the Government Service to serve a GLC involved in international business, after
which he ventured on his own to be the Managing Director of Insurance Broking Company. Amongst his
other involvements after that were in the securities industry and asset management activities. He has
also served as a Director of Hitachi Sales (Malaysia) Sdn Bhd, Meiden Electric Engineering Sdn Bhd, Far
East Computers (India) and Affin Discount Berhad. He also brings with him vast experience in general
trading, power generation and transmission, aircraft maintenance as well as the oil and gas services
sectors.
Presently he is a Board member of AffinBank, ABB Trustee Berhad, L.K & Associates Sdn Bhd and
Pharmaniaga Berhad.
En. Mohd Suffian Bin Haji Haron attended all 11 scheduled monthly Board Meetings and all 3 Special
Board Meetings held during the financial year ended 31 December 2015.
YBhg. Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman, aged 69, was appointed to the Board of Directors of AFFIN
ISLAMIC on 1 November 2011.
He graduated with a Bachelor of Commerce from University of New South Wales, Sydney, Australia. He is
a 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.
Presently he is a Board member of the International Islamic University Malaysia.
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman attended 10 out of 11 scheduled monthly Board Meetings
and 2 out of 3 Special Board Meetings held during the financial year ended 31 December 2015.
At the corporate level, he was with PricewaterhouseCoopers Sydney, Malaysia Airlines Berhad and
Managing Director of Bank Kerjasama Rakyat Malaysia Berhad 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.
07
profile of
directors
Assoc. Prof. Dr. Said Bouheraoua
Assoc. Prof. Dr. Said Bouheraoua, aged 48, was appointed to the Board of Directors of AFFIN ISLAMIC
on 19 June 2014.
Dr. Said, an Algerian, obtained his Ph.D in Fiqh/Usul Fiqh (Shariah) from International Islamic University
Malaysia (IIUM) in 2002. He was also an Associate Professor at Department of Islamic Law, Ahmad
Ibrahim Kulliyyah of Laws, IIUM. He is currently a Senior Researcher at the International Shariah Research
Academy for Islamic Finance (ISRA) and the editor-in-chief of ISRA International Journal of Islamic
Finance.
Dr. Said has throughout his career as Lecturer/Researcher published several books and articles in
international referred journals. He has also presented papers in international conferences and conducted
training sessions in Islamic finance in Malaysia and abroad.
Assoc. Prof. Dr. Said Bouheraoua attended 8 out of 11 scheduled monthly Board Meetings and all 3
Special Board Meetings held during the financial year ended 31 December 2015
08
management
Team
EN. KAMARUL ARIFFIN BIN MOHD JAMIL
Chief Executive Officer
(Resigned w.e.f 31.3.2015)
EN. FERDAUS TOH BIN ABDULLAH
EN. NAZLEE BIN KHALIFAH
(Appointed w.e.f. 3.6.2015)
Head, Investment & Structured Finance
EN. HAZLAN BIN HASAN
EN. MOHD FAIZ BIN RAHIM
Head, Shariah Supervisory
EN. MOHD FIZAR BIN MOHIDIN
Head, Islamic Treasury
PN. ZURINA AYU BINTI SAMSUDIN
Head, Product Development
PN. JOZAIMAH BINTI JOHAN ALI
Head, Strategic Management
PN. RADZIAH BINTI AHMAD
Head, Islamic Consumer & Bancatakaful
EN. MOHD RUSLEE BIN OMAR
Head, Strategic Business Alliances
CIK NORAZLINDA BINTI MOHD FADZIL
Head, Promotion & Marketing Communications
Deputy Chief Executive Officer
09
shariah
committee members
ASSOCIATE PROFESSOR
DR. SAID BOUHERAOUA
10
ASSOCIATE PROFESSOR
DR. AHMAD AZAM OTHMAN
ASSOCIATE PROFESSOR
DR. ZULKIFLI HASAN
USTAZ MOHAMMAD
MAHBUBI ALI
USTAZ AHMAD
ALFISYAHRIN Jamilin
profile of shariah
committee members
ASSOCIATE PROFESSOR DR. SAID BOUHERAOUA
Associate Professor Dr. Said Bouheraoua was appointed as a Director of AFFIN ISLAMIC on 19 June
2014. Dr. Said, an Algerian, obtained a Bachelor in Fiqh and Usul Fiqh from the University of Algiers
in 1991, Master of Quran and Sunnah in 1998 and Ph.D in Fiqh/Usul Fiqh (Shariah) from International
Islamic University Malaysia (IIUM) in 2002. He was also an Associate Professor at Department of Islamic
Law, Ahmad Ibrahim Kulliyyah of Laws, IIUM. He is currently a Senior Researcher at the International
Shariah Research Academy for Islamic Finance (ISRA), and is the editor-in-chief of ISRA International
Journal of Islamic Finance. Dr. Said has throughout his career as Lecturer/ Researcher published four
books, five chapters in books and several articles in international referred journals. He has also presented
several papers in international conferences and conducted several training sessions in Islamic finance
in Malaysia and abroad.
ASSOCIATE PROFESSOR DR. AHMAD AZAM OTHMAN
Dr. Ahmad Azam Othman is currently an Associate Professor at Islamic Law Department, Ahmad
Ibrahim Kulliyyah of Laws (AIKOL), International Islamic University Malaysia (IIUM). He was the Director
of Harun M. Hashim Law Centre, AIKOL, IIUM and the Head of Islamic Law Department, AIKOL, IIUM. His
specialised areas are Islamic Law of Property, Obligations, Transactions, Personal Bankruptcy, Banking
and Takaful as well as comparative laws. He has vast experience in teaching for postgraduate as well
as undergraduate courses. He is also an internal examiner and supervisor to a number of PhD Theses
and Master Dissertation in various areas including Islamic Banking, Islamic Microfinance, Islamic Capital
Market, Takaful and Waqf. Dr. Ahmad Azam Othman holds a PhD from University of Wales, UK. In addition,
he holds a Master of Comparative Laws from IIUM where he also obtained his LLB (Bachelor of Laws) and
LLB.S (Bachelor of Shariah) as his first degree.
11
profile of shariah
committee members
ASSOCIATE PROFESSOR DR. ZULKIFLI HASAN
Dr. Zulkifli Hasan is an Associate Professor at the Faculty of Syariah and Law, Universiti Sains Islam Malaysia
(USIM). He has vast experiences in applied banking and finance including takaful and these include as
an advocate and solicitor, in-house counsel for Bank Muamalat Malaysia Berhad, member of Rules and
Regulations Working Committee for Association of Islamic Banking Institutions Malaysia and member
of corporate governance working committee for Awqaf South Africa. He also underwent internship at
Hawkamah, the Institute for Corporate Governance, Dubai International Financial Centre whereby he was
involved in developing corporate governance guidelines for Islamic Financial Institutions in the Middle
East and North Africa (MENA) as well as in the Task Force on Environmental, Social and Governance (ESG)
which led towards development of the S&P/ Hawkamah Pan Arab ESG Index. His articles and books have
been published in reputable academic journals and publishers and he has presented numerous papers
in various conferences both local and abroad. His book entitled ‘Shari’ah Governance in Islamic Bank’
published by the Edinburgh University Press won the MAPIM Best Publication in the category of social
science. In 2013, he represented Malaysia in the prestigious Young Muslim Intellectuals in Southeast
Asia Programme in Japan organized by Japan Foundation. He has been selected as a recipient of a 2014
grant to conduct scholarly research at Fordham University, New York, United States of America by the J.
William Fulbright Foreign Scholarship Board through the Fulbright US-ASEAN Visiting Scholars Initiative.
Dr. Zulkifli Hasan holds a PhD in Islamic Finance from Durham University, UK. Besides this, he holds a
Master of Comparative Laws from International Islamic University of Malaysia where he also obtained his
LLB (Bachelor of Laws) and LLB.S (Bachelor of Shariah) as his first degree. His research interest include
corporate and Shari’ah governance and regulation in Islamic finance.
USTAZ MOHAMMAD MAHBUBI ALI
12
Mohammad Mahbubi Ali was a researcher at the International Shari’ah Research Academy for Islamic
Finance (ISRA). During his stint in ISRA, he had contributed to numerous ISRA’s research publications,
mainly involving in Central Bank of Malaysia’s Shari’ah Standards. Currently, he serves as a Shariah
consultant for ZICO Shariah Advisory, Shariah/research consultant for ISRA and ISRA Consultancy Sdn
Bhd, associate consultant for IIFIN Consulting Sdn Bhd, and associate trainer for Amanie Academy Centre
of Excellence. He was also a lecturer at University of Kuala Lumpur and Unitar International University. In
his young age, he has managed to contribute extensively in Islamic Finance through his regular writings
featured in the Islamic Finance News (IFN), Business Islamica, The General Council for Islamic Banks
and Financial Institutions (CIBAFI), Epicentre and many others. He has published numerous articles in
international and local referred academic journals, written several book chapters and presented a number
of papers in various international conferences. His paper entitled: “A Framework of Income Purification
for Islamic Financial Institutions,” co-authored with Dato’ Dr. Asyraf Wajdi Dusuki and Lokmanulhakim
Hussain, was conferred best paper presentation in Sharia Economics Conference, University of Hannover,
Germany, 2013. He received a bachelor degree in Shari’ah Business and Finance from Islamic Business
School, Tazkia Indonesia and Chartered Islamic Finance Professional (CIFP) from INCEIF, The Global
University in Islamic Finance, Malaysia. He is a PhD candidate in Islamic Banking and Finance from the
Institute of Islamic Banking and Finance, International Islamic University Malaysia (IIUM).
profile of shariah
committee members
USTAZ AHMAD ALFISYAHRIN Jamilin
(Appointed w. e. f.1 September 2015)
Ahmad Alfisyahrin Jamilin is currently the Head of Shariah at First Gulf Bank, United Arab Emirates.
He was previously the Chief Shariah Officer at Al Rajhi Bank Malaysia and Shariah Counsel at HSBC
(Amanah) Middle East based in Dubai, United Arab Emirates. Alfisyahrin came with a colorful experience
in his career where he was a Vice President in Global Markets and Structured Investment for Al Rajhi
Bank Malaysia and a Shariah specialist for Sukuk and syndication for Global HSBC Amanah while he
holds a Bachelor in Shariah (honours) from the Islamic University of Madinah, Saudi Arabia.
Alfisyahrin practiced Islamic banking and finance in multiple areas such as front-liner, product structurer
and developer, Shariah specialist and documentation expert. He used to be the originator, transactor and
developer for Sukuk and Treasury products and transactions, and had experience in the conversion of
conventional bank to Islamic. Apart from that, he undertake corporate financial advisory for specialized
or non-vanilla requirements in the areas which include general corporate finance, structured finance,
capital management, contract finance and project finance, managing global Shariah affairs in the global
Islamic banking presence including but not limited to United Arab Emirates, Bahrain, Qatar, Saudi Arabia,
United States of America, United Kingdom, Mauritius, Bangladesh, Malaysia, Indonesia, Brunei and
Singapore. He also has experience in establishing and managing Shariah division and fund custodial and
administrative services by providing Shariah advisory, equity screening, audit and purification process.
13
chairman’s
statement
profit before
zakat and taxation
(pbzt)
TOTAL ASSETS
rm13.4
rm117.4
million
million
Jen. Tan Sri Dato’ Seri Ismail
Bin Haji Omar (Bersara)
Chairman
Dear shareholders,
It gives me pleasure to present the financial and operational highlights of
AFFIN ISLAMIC, given the Bank’s very encouraging performance within
a challenging economic environment that faces the financial industry in
Malaysia.
The Board of Directors is committed to ensure the Bank continues to grow
from strength to strength, building on its fundamentals in order to ensure its
long-term sustainability and steady returns to stakeholders. Since the Bank
was established in 2006, we have kept a keen eye on its progress and been
pleased not only by its financial scorecard but also with increasing market
awareness of the brand and its reputation as an Islamic bank that keeps
innovating to introduce Shariah compliant products that appeal to the various
segments of the market.
14
We are also committed to play our role in advancing Islamic banking
more generally within the local financial landscape. In 2015, we made a
quantum leap in this direction when AFFIN ISLAMIC joined forces with five
other Islamic banking institutions to form a consortium offering an Islamic
Account Platform (IAP). Through the IAP, we will be presenting investment
opportunities in local businesses and entrepreneurs that have been riskassessed by the participating banks. We also see the IAP as presenting a new
medium to facilitate greater public-private partnerships in financing strategic
ventures within specific industries. It is also envisaged for IAP to be eventually
positioned to facilitate fund intermediation across borders.
Along with enhanced governance in the Islamic banking sector, we believe
that Islamic financial institutions in general are better positioned to meet the
requirements of the market. AFFIN ISLAMIC in particular has been focusing
intently on fulfilling both the investment and financing needs of our growing
customer base.
“Our total assets grew 5.2% to RM13.4 million
and profit before zakat and taxation (PBZT)
increased by 28.1% to RM117.4 million.”
As a result, I am pleased to share that the Bank has grown our assets by
5.2%, increased our profit before zakat and taxation (PBZT) by 28.1% to
RM117.4 million, and our earnings per share to 23.5 sen compared to 18.5
sen in 2014.
In addition to increasing our shareholder value in financial terms, the Bank has
also been working assiduously to grow our market reputation and integrate
ourselves more fully into local communities via a series of community outreach
programmes and zakat (business tithes) contributions. These initiatives are
undertaken not out of a sense of obligation but because we truly believe that,
by giving back to the communities that surround us, we are building our brand
thus increasing the intrinsic and long-term value of the Bank.
In 2015, AFFIN ISLAMIC contributed a total of RM5.5 million in zakat to
different causes and sectors of the under-served population. We contributed
a total of RM1.5 million to the six state zakat centres, while also channelling
RM4.0 million in direct contributions to deserving individuals and charitable
organisations. Of this sum, RM2.6 million went towards helping the poor
and needy to provide for themselves. A total of RM478,842 was channelled
towards knowledge cause (Fisabilillah), inclusive of Muallaf activities. Among
our Muallaf contributions were RM60,000 to Multiracial Reverted Muslim
(MRM) and RM25,000 to Interactive Da’wah Training to assist newly converted
Muslims. On our educational aid, AFFIN ISLAMIC contributed RM250,000 to
support deserving students pursuing tertiary education at local institutions
of higher learning such as Universiti Teknologi MARA (UiTM), Universiti
Kebangsaan Malaysia (UKM) and Management & Science University (MSU) to
chairman’s
statement
Contribution to Tabung Zakat Angkatan Tentera Malaysia.
name a few. To help eligible recipients to settle their debts, the Bank disbursed
RM45,212.43 under Gharimin. Meanwhile, we also contributed RM75,000
towards Riqab (rehabilitation of Aqidah), which included RM50,000 to Pusat
Jagaan Remaja Puteri Raudhatus Sakinah.
In addition, we contributed RM700,000 to Tabung Zakat Angkatan Tentera
Malaysia, which manages funds to be allocated to deserving members of the
armed forces.
Besides our zakat contribution, through the AFFIN Barakah Charity Account-i,
AFFIN ISLAMIC donated RM18,360 to Yayasan Kanser Malaysia (YKM) for
the purchase of basic medical needs and equipment for poor patients; and
RM20,000 to Pemulihan Dalam Komuniti (PDK) Kasih Templer Autisma to
assist children with autism and other special needs.
We launched the AFFIN Barakah Charity Account-i as a Mudharabah savings
account in 2013 to facilitate charitable donations by depositors. Via the
account, customers pledge to donate a certain percentage of their monthly
earned investment profit to a worthy cause.
In addition, we jointly sponsored Utusan Melayu’s Tutor Pull-out Programme
under which specially prepared Tutor Pull-out were distributed to primary and
secondary school students, to supplement their normal curriculum learning
materials.
We also support corporate responsibility initiatives together with our parent
company, AFFINBANK. Every year, we join forces to hold a ‘Majlis Berbuka
Puasa Bersama Anak-anak Yatim’, at AFFINBANK’s Head Office to bring
cheer to orphans. This year, about 160 children from three orphanages in
the Klang Valley were invited to a ‘buka puasa’ (breaking of fast) dinner which
was attended by Senior Management from both banks during the month of
Ramadhan. We also presented the children with a token of ‘duit raya’ to add
to the occasion.
Contibution from AFFIN Barakah Charity Account-i to PDK Kasih Autisma.
15
chairman’s
statement
Zakat presentation to Management & Science University (MSU).
Ultimately, we function to serve the needs of the nation. This is reflected
not only in our corporate responsibility initiatives but also in the emphasis
we place on providing our customers with products that truly meet their
needs. I’m pleased to share that in January 2016, as part of a Group
Strategic Transformation Programme, we are conducting a thorough review
of our position within the Islamic finance industry, assessing segments of
the population that we are ideally suited to serve, and plan strategically to
deliver products that will add value to these target markets. In addition, we are
building on our customer service to further enhance our customer experience.
The idea is ensure we keep relevant to a rapidly changing marketplace and
become a ‘dream bank’ not only for our customers but also our employees.
16
Our employees, after all, are our most valued assets. I would like to take this
opportunity to thank them, on behalf of the Board of Directors, for their hard
work and commitment to the Bank. I would also like to acknowledge our
Management for their able leadership which has seen the Bank grow over
the years. Finally, I would like to express my sincerest appreciation to all other
stakeholders from the regulators to our business partners, shareholders and
customers for their continued support. We value all your contributions, which
have helped us achieve all our successes to date, and are committed to keep
growing so we can attain even greater heights in the Islamic banking space
in the years to come.
Jen. Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)
Chairman
Presentation of Zakat to Pusat Jagaan Remaja Puteri Raudhatus Sakinah.
ceo’s
performance review
28.1%
growth in profit
before zakaT and
taxation
28.5%
growth in
net
financing
The year 2015 was challenging for the banking
sector in Malaysia - both Islamic and conventional
- due to a bearish capital market and decline of
our currency which, combined with an increase
in US interest rates, led to capital outflow. This
necessitated conscious efforts to increase
our capital adequacy, hence competition and
increased cost for deposits.
Despite the narrowing net profit margin (NPM) and challenging environment,
however, AFFIN ISLAMIC continued to grow our overall financing and assets
as compared to the previous year while increasing our profit before zakat and
taxation (PBZT) by 28.1% to RM117.4 million year-on-year, exceeding the
2015 target by 16.7%.
FINANCIAL RESULTS
In defiance of the challenging environment, the Bank’s performance for the
year ended 31 December 2015 was extremely encouraging, with positive
results in all key financial parameters. AFFIN ISLAMIC achieved a total
financing growth of 28.5% and experienced an increase in net financing,
advances & other financing to RM9.2 billion with our net impaired financing
ratio stable at 1.1%.
In an increasingly competitive environment, it is more important than ever to
operate at a high level of efficiency, and I am pleased to say that constant
efforts towards this end have had a positive effect on our balance sheet. By
managing our operating costs effectively, AFFIN ISLAMIC managed to improve
our cost to income ratio from 55.48% in 2014 to 47.61%. This played a part
in the increase in PBZT as reported above, and a 27.3% increase in profit
after zakat and taxation from RM66.6 million to RM84.8 million.
BUSINESS INITIATIVES
We continued to explore different market segments in order to better
understand consumers’ characteristics, needs and how we can better serve
them.
Our marketing efforts were concentrated on channels that appeal to an
increasingly more tech-savvy and ‘connected’ population via various online
and social media interaction. During the year, we organised competitions on
social media such as ‘Create Your Own Version of Raya Song’ and ‘Guess
for an iPad’. Supplementing on our online efforts, we extended our reach to
consumers belonging to Gen Y via more direct approach, such as presenting
a talk geared specifically towards first-time home buyers during Prospek
Hartanah.
These targeted efforts were supplemented by mass advertising in order to
increase brand visibility among the public. We ran a nationwide advertisement
campaign using digital displays at Giant hypermarkets, while also promoting
Ar-Rahnu and AFFIN ISLAMIC Impian Haji, a Term Deposit-i campaign, on
digital screens at selected locations.
This has been the result of conscientious efforts to strengthen the Bank at
our core – building its fundamentals while strengthening our relationships
with retail and commercial customers. We have continued to identify and
segmentalise our key markets, and invest in products that are relevant and
provide extra value to them.
The bank’s deposit portfolio continued to grow, surpassing the RM10.0 billion
mark, as a result of various collaborations with our parent, AFFINBANK. These
included promotions such as the AFFIN Best Deposit Campaign, Merdeka
Combo Campaign and Year End Bonanza 2015. Together, these enabled AFFIN
ISLAMIC to end the year with total assets of RM13.4 billion, an expansion by
5.2% from the previous financial year.
17
ceo’s
performance review
Ground breaking ceremony of Kompleks At-Tijarah AFFIN-UiTM.
Additionally, we created more awareness of our Term Deposit-i by advertising
it on a highly visible billboard in Petaling Jaya. Other products were advertised
in the New Straits Times daily and i-Property, Prospek Hartanah and Solusi
magazines. The Bank collaborated with strategic business partners such as
MARA, Management & Science University (MSU) and Universiti Teknologi
MARA to organise events and create awareness on Islamic banking.
2015 also saw AFFIN ISLAMIC work with other Islamic banking institutions
to raise the bar of Islamic financial services in the country, enabling Islamic
banks to become financial intermediaries. In October, the Bank, along with
five others chosen by Bank Negara Malaysia, set up a consortium - Raeed
Holdings Sdn Bhd - to offer a Shariah compliant Investment Account Platform
(IAP) providing investors the opportunity to fund businesses, corporates, new
growth industries as well as entrepreneurs with viable projects.
18
The IAP is an exciting development as it marks the first cooperation among
Islamic banks to create a new Shariah compliant investment avenue with
attractive returns. The initiative is particularly beneficial to investors who
do not have dedicated risk assessment resources, as this function will be
overseen by the sponsoring banks. IAP will also be positioned to facilitate
more public-private partnerships in financing strategic ventures within
specific industries. Through the IAP, government agencies can identify viable
ventures to invest in and create opportunities for the private sector to partially
fund them. It is also envisaged for IAP to be eventually positioned to facilitated
fund intermediation across borders.
The fact that AFFIN ISLAMIC was chosen by BNM to be part of this IAP
speaks volumes of our credibility and integrity, which are qualities that we will
continue to uphold as we serve our valued customers.
During the year, we also strengthened our position in the community via
various contributions. Key among these were a RM4.5 million contributed
to help build Kompleks At-Tijarah UiTM; and RM18,360 to Yayasan Kanser
Malaysia (YKM). The amount channelled to YKM was partly derived from our
AFFIN Barakah Charity Account-i, through which customers pledge a certain
percentage of their monthly profits to charity. This year, RM20,000 from this
savings account was also channelled towards Pemulihan Dalam Komuniti
(PDK) Kasih Templer Autisma, which cares for children with autism and other
special needs.
OUTLOOK & PROSPECTS
The year 2016 is going to be challenging for the banking industry, given the
expected slowdown in both global and local economies. We expect intense
competition for market share and more stringent regulatory requirement,
therefore; it is essential for banks to manage the envolving of customer
behaviours and expectations.
In response, AFFIN ISLAMIC together with our parent, AFFINBANK, are
embarking on a comprehensive Strategic Transformation Programme that will
analyze our position in the industry to capture greater growth, profitability and
sustainability.
In 2016, we continue to invest in new product capabilities and infrastructure
to seize opportunities offered by new affluent segments. Together, we will
step up efforts to enhance our efficiency and productivity to establish a highperformance culture by integrating strategic functions of AFFIN ISLAMIC with
AFFINBANK for greater operational effectiveness and optimal utilization of
resources.
ceo’s
performance review
Distributing ‘duit raya’ to orphans from selected orphanages.
The bank will continue to safeguard strong asset quality, pursuing disciplined
risk management framework, while maintaining best practices in corporate
governance and adhering to the regulators’ capital and liquidity requirements.
The launch of IAP with our partner banks will elevate our role in the expanding
Islamic banking world. We will continue to launch innovative Shariah-based
financial solutions and services to strengthen AFFIN ISLAMIC’s position as a
premier local and international Islamic financial institution.
ACKNOWLEDGEMENTS
The Bank is at an exciting juncture in our onward journey. We have achieved
much over the years, and in 2015, for which I would like to thank our various
stakeholders - from our customers to our partners and investors as well as to
our Board of Directors, Management Team and Shariah Committee members.
To everyone who has contributed to AFFIN ISLAMIC, thank you for your
support. Let us continue to work together for even better performance and
results in the future.
Launching of Kompleks At-Tijarah AFFIN-UiTM.
19
corporate
diary
JAN
JUL
Zakat contribution to Pusat Zakat Melaka
AFFIN ISLAMIC contributed RM364,800 of its Zakat
funds to eligible Asnaf of Pusat Zakat Melaka. The
mock cheque was presented by Ustaz Mohd Faiz
Rahim, Head of Shariah Supervisory to Yang Dipertua
Negeri Melaka, Tun Mohd Khalil Yaakob during
Sambutan Maulidur Rasul held at Bukit Falah, Melaka.
JAN
Wakaf Desa Fahmi
A total of RM350,000 was contributed to Wakaf
Desa Fahmi, a centre that offers accommodation to
hardcore poor, homeless, neglected Muslims and
tahfiz students. The mock cheque was presented
by Deputy CEO AFFIN ISLAMIC, En. Ferdaus Toh
Abdullah to Dr. Kamarolzaman Hajar, founder of
Wakaf Desa Fahmi.
JUN
Ground breaking ceremony of Kompleks
At-Tijarah AFFIN-UiTM
The ground breaking ceremony of Kompleks
At-Tijarah AFFIN UiTM which was funded by
AFFINBANK & AFFIN ISLAMIC was held at UiTM
Puncak Alam campus on 11 June. The ceremonious
event was graced by Chairman of AFFINBANK
& AFFIN ISLAMIC, YBhg. Jen. Tan Sri Dato’ Seri
Ismail Hj. Omar (Bersara), Managing Director/
CEO of AFFINBANK, En. Kamarul Ariffin Mohd
Jamil, Chief Executive Officer of AFFIN ISLAMIC,
En. Nazlee Khalifah, Deputy Chief Executive Officer of
AFFIN ISLAMIC, En. Ferdaus Toh Abdullah, and Vice
Chancellor of Universiti Teknologi Mara, YBhg. Tan
Sri Dato’ Sri Prof. Ir. Dr. Sahol Hamid Abu Bakar. The
first in UiTM, the complex of Islamic Centre consists
of four components which are ‘Rukhsah’, Food &
Beverages, Da’wah and Medical & Health.
JUL
International Islamic University Malaysia
(IIUM) Hijrah Grand Iftar
In the month of Ramadhan, AFFIN ISLAMIC presented
zakat contribution amounting RM100,000 to
deserving students of International Islamic University
Malaysia (IIUM). The mock cheque was presented by
En. Nazlee Khalifah, Chief Executive Officer of Affin
Islamic Bank Berhad to, The Honourable Tan Sri Dato’
Seri Utama Dr. Rais Yatim, Advisor to the Government
of Malaysia and President of IIUM in a Hijrah Grand
Iftar held at IIUM Gombak.
MAR
Yayasan Kanser Malaysia
20
Yayasan Kanser Malaysia, a non-profit organisation
received donation of RM18,360.49. The amount
was raised from customers’ dividends through
AFFIN Barakah Charity Account-i, which provides
customers the option to donate a certain percentage
of their monthly earned Hibah (profit/dividend)
to a worthy cause.
APR
Islamic Relief Malaysia
A mock cheque of RM15,000 zakat contribution
was presented by Ustaz Helmi Afizal Zainal from
Zakat Management to En. Zairulshahfuddin Zainal
Abidin, Country Director of Islamic Relief Malaysia
in a ceremony held at Bangi, Selangor. Islamic Relief
Malaysia is a Non-Government Organisation (NGO)
that provides humanitarian aid in Asia Pacific region.
Zakat contribution to Management and
Science University (MSU)
Management and Science University (MSU) received
a total of RM100,000 to assist Asnaf students
and RM30,000 for MSU Mobile Clinic.The zakat
contribution was presented by Deputy Chief Executive
Officer of AFFIN ISLAMIC, En. Ferdaus Toh Abdullah
to President of MSU, Prof. Tan Sri Dato’ Wira Dr. Mohd
Shukri Ab. Yajid.
OCT
Pusat Jagaan Bakti Cahaya Hati
AFFIN ISLAMIC spreads cheer and happiness to
45 children of Pusat Jagaan Bakti Cahaya Hati
(PJBCH). The centre is a welfare home for orphans
and underprivileged children. The mock cheque was
presented by Head of Shariah Supervisory AFFIN
ISLAMIC, Ustaz Mohd Faiz Rahim, to Puan Hajah
Wahyuning, founder of PJBCH in Rawang, Selangor.
FEB
Pusat Zakat Perak
Contribution of RM364,800 to Pusat Zakat Perak
was presented by Encik Kamarul Ariffin, Chief
Executive Officer of AFFIN ISLAMIC during Corporate
Zakat Presentation Ceremony which was graced
by Duli Yang Maha Mulia Paduka Seri Sultan
Nazrin Muizzuddin Shah, the Sultan of Perak. The
ceremony was witnessed by Menteri Besar Perak,
Dato’ Seri Dr. Zambry Abdul Kadir.
JUL
Majlis Penyampaian Sumbangan Angkatan
Tentera Malaysia (ATM)
AFFIN ISLAMIC contributed zakat funds amounting
to RM700,000 to ‘Tabung Zakat Angkatan Tentera
Malaysia’. The zakat contribution was presented by
AFFIN ISLAMIC Independent Non-Executive Director,
YBhg. Tan Sri Dato’ Sri Abdul Aziz bin Abdul Rahman,
to Minister of Defence, YB Datuk Seri Hishammuddin
Tun Hussein during Majlis Penyampaian Sumbangan
Hari Raya Aidilfitri held at Ministry of Defence,
Kuala Lumpur.
NOV
MSU Islamic Finance Conference 2015
AFFIN ISLAMIC presented a seminar entitled Islamic
Finance: Maturing Towards Sustainable Talent at MSU
Islamic Finance Conference 2015. The event was
attended by 800 students from universities around
Selangor and KL.
NOV
Majlis Pelancaran Tabung Pendidikan
Kanak-kanak PDK Kasih Autisma
Ninety autistic and disabled children of PDK Kasih
Templer Autisma, a community rehabilitation
centre for autistic and disabled children received a
contribution amounting to RM20,000 from AFFIN
Barakah Charity Account-i. The mock cheque was
presented by Chief Executive Officer of AFFIN ISLAMIC,
En. Nazlee Khalifah and Deputy Chief Executive
Officer, En. Ferdaus Toh Abdullah to Dato’ Saiful
Bahri Abdul Hadi, Chairman of PDK Kasih Autisma at
Putrajaya Lake Club.
corporate
diary
21
financial
highlights
Earnings Per Share (EPS)
Sen
‘15
23.5
‘14
18.5
‘13
16.4
‘12
25.8
AFFIN ISLAMIC’s EPS for the financial year ended 31 December
2015 stood at 23.5 sen compared to 18.5 sen the year before
with an increase of 27.0%.
Profit Before Zakat And Taxation
RM’million
‘15
117.4
‘14
91.7
‘13
87.3
‘12
106.4
AFFIN ISLAMIC achieved profit before zakat and taxation of
RM117.4 million for the year ended 31 December 2015 with
an increase of 28.1% compared with RM91.7 million in 2014.
Total Assets
RM’billion
‘15
13.4
‘14
12.7
‘13
12.3
‘12
11.7
AFFIN ISLAMIC’s financial position as at 31 December 2015
continued to remain strong with total assets of RM13.4 billion,
an increase of 5.2% compared with RM12.7 billion as at
31 December 2014.
Net Financing, Advances & Other Financing
RM’billion
‘15
9.2
‘14
7.2
‘13
6.0
‘12
5.1
AFFIN ISLAMIC’s net financing, advances and financing grew by
28.5% to RM9.2 billion compared to RM7.2 billion in 2014.
Deposits From Customers
RM’billion
22
‘15
10.0
‘14
9.9
‘13
9.3
‘12
9.0
Total deposits increased by 1.3% year-on-year to RM10.0 billion
as at 31 December 2015 compared to RM9.9 billion in the year
before.
Shareholders’ Equity
RM’million
‘15
954.8
‘14
772.1
‘13
704.4
‘12
655.0
Total shareholders’ equity of AFFIN ISLAMIC is RM954.8 million
as at 31 December 2015 with an increase of 23.7% compared
to RM772.1 million in 2014.
NETWORK
OF BRANCHES
WILAYAH PERSEKUTUAN
JOHOR
1.Fraser
20-G & 20-1,
Jalan Metro Pudu,
Fraser Business Park,
55100 Kuala Lumpur.
Tel : 03-9222 8877
Fax : 03-9222 9877
1. Taman Molek
No. 23, 23-01, 23-02,
Jalan Molek 1/29,
Taman Molek,
81100 Johor Bahru, Johor.
Tel : 07-351 9522
Fax : 07-357 9522
SELANGOR
PULAU PINANG
1.Bangi
No.175 & 177 Ground Floor,
Jalan 8/1, Seksyen 8,
43650 Bandar Baru Bangi,
Selangor.
Tel : 03-8925 7333
Fax : 03-8927 4815
1. Juru Auto-City
No. 1813A,
Jalan Perusahaan, Auto-City,
North-South Highway,
Juru Interchange,
13600 Prai, Pulau Pinang.
Tel : 04-507 7422
Fax : 04-507 6522 / 0522
2.MSU Shah Alam
Management & Science University,
2nd Floor, University Drive,
Persiaran Olahraga, Section 13,
40100 Shah Alam,
Selangor.
Tel : 03-5510 0425
Fax : 03-5510 0563
3.SS2
161-163,
Jalan SS2/24,
47300 Petaling Jaya,
Selangor.
Tel : 03-7874 3513
Fax : 03-7874 3480
NEGERI SEMBILAN
1.Jitra
No. 17, Jalan Tengku Maheran 2,
Taman Tengku Maheran, Fasa 4,
06000 Jitra, Kedah.
Tel : 04-919 0888
Fax : 04-919 0380
TERENGGANU
1. Kuala Terengganu
63 & 63-A,
Jalan Sultan Ismail,
20200 Kuala Terengganu,
Terengganu.
Tel : 09-622 3725
Fax : 09-623 6496
1.Senawang
No. 312-G & 312-1,
Jalan Bandar Senawang 17,
Pusat Bandar Senawang,
70450 Seremban,
Negeri Sembilan.
Tel : 06-675 7066
Fax : 06-675 7188
KEDAH
23
notice of
annual general meeting
NOTICE IS HEREBY
GIVEN THAT THE 10TH
ANNUAL GENERAL
MEETING OF
AFFIN ISLAMIC
BANK BERHAD
WILL BE HELD AT THE
BOARD ROOM,
19TH FLOOR,
MENARA AFFIN,
80, JALAN RAJA
CHULAN, 50200
KUALA LUMPUR ON
TUESDAY,
22 MARCH 2016
AT 8.30 A.M. FOR
THE TRANSACTION
OF THE FOLLOWING
BUSINESSES:-
Agenda
1. To receive the Statutory Statements of Accounts for the year ended 31 December 2015 together with the
Directors’ and Auditors’ Reports thereon.
2. To re-elect Assoc. Prof. Dr. Said Bouheraoua who retire pursuant to Article 68 of the Company’s Articles of
Association and who, being eligible, offer himselves for re-election.
3. To consider and if thought fit, to pass the following resolutions in accordance with Section 129(6) of the
Companies Act, 1965:
(a) That YBhg. Jen. Tan Sri Dato’ Seri Ismail bin Haji Omar (Bersara), retiring in accordance with Section 129(6)
of the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until
the conclusion of the next Annual General Meeting.
(b) That YBhg. Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli bin Mohd Nor (Bersara), retiring in
accordance with Section 129(6) of the Companies Act, 1965, be and is hereby re-appointed as a Director
of the Company to hold office until the conclusion of the next Annual General Meeting.
(c) That En. Mohd Suffian bin Haji Haron, retiring in accordance with Section 129(6) of the Companies Act,
1965, be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the
next Annual General Meeting
(d) That YBhg. Tan Sri Dato’ Seri Mohamed Jawhar, retiring in accordance with Section 129(6) of the Companies
Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until the conclusion
of the next Annual General Meeting.
(e) That YBhg. Tan Sri Dato’ Sri Abdul Aziz bin Abdul Rahman, retiring in accordance with Section 129(6) of
the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until
the conclusion of the next Annual General Meeting.
4. To approve the payment of Directors’ fees and Committees’ fees for financial year ended 31 December 2015.
5. To re-appoint Messrs PricewaterhouseCoopers as Auditors for the financial year ending 31 December 2016 and
to authorise the Directors to fix their remuneration.
6. To transact any other ordinary business of the Company.
BY ORDER OF THE BOARD
NIMMA SAFIRA BINTI KHALID
Secretary
NOTE:
1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote instead of him and the proxy need not be a
member of the Company.
24
The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a
corporation, either under the seal or in some other manner approved by Directors.
The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of 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 Lumpur,
at least forty-eight (48) hours before the time appointed for holding the Meeting or adjourned Meeting as the case may be otherwise the person so
named shall not be entitled to vote in respect thereof.
2.
Reference is made to Recommendation 3.2 and 3.3 of the Malaysian Code on Corporate Governance 2012 which states that the tenure of an
Independent Director should not exceed a cumulative term of nine (9) years.
Tan Sri Dato’ Seri Mohamed Jawhar and En. Mohd Suffian bin Haji Haron have served on the Board as Independent Non-Executive Directors for a
cumulative term exceeding nine (9) years, however, they remain independent as they are free from any business or other relationship, which could
interfere with the exercise of independent judgement or the ability to act in the best interest of the Company. The Nominating Committee and the
Board have determined at the annual assessment carried out that Tan Sri Dato’ Seri Mohamed Jawhar and En. Mohd Suffian bin Haji Haron remain
independent in mind and character. They participate actively in the Board as well as Board Committees’ deliberations and decision making.
Financial
Statements
26
Directors’ Report
38
Statements of Financial Position
39
Income Statements
40
Statements of Comprehensive Income
41
Statements of Changes in Equity
43
Statements of Cash Flows
45
Summary of Significant Accounting Policies
58
Notes to the Financial Statements
128
Statement by Directors
128
Statutory Declaration
129
Independent Auditors’ Report
130
Shariah Committee’s Report
132
Basel II Pillar 3 Disclosures
directors’ report
for the financial year ended 31 December 2015
The Directors hereby submit their report together with the audited financial statements of the Bank for the financial year ended 31 December 2015.
PRINCIPAL ACTIVITIES
The principal activities of the Bank are Islamic banking business and the provision of related financial services. There were no significant changes in
these activities during the financial year.
FINANCIAL RESULTS
Economic Entity
and The Bank
RM’000
Profit before zakat and taxation
Zakat
Profit before taxation
Taxation
Net profit for the financial year
117,375
(3,779)
113,596
(28,811)
84,785
DIVIDENDS
No dividends have been paid by the Bank in respect of the financial year ended 31 December 2014 and 2015.
The Directors do not recommend the payment of any dividend in respect of the current financial year.
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 FINANCING
Before the financial statements of the Bank were made out, the Directors took reasonable steps to ascertain that actions had been taken in relation to
the writing off of bad financing and the making of allowances for doubtful financing, and have satisfied themselves that all known bad financing had
been written off and adequate allowances had been made for bad and doubtful financing.
26
At the date of this report, the Directors are not aware of any circumstances which would render the amount written off for bad financing, or the amount
of the allowance for doubtful financing in the financial statements of the Bank, inadequate to any substantial extent.
CURRENT ASSETS
Before the financial statements of the Bank were made out, the Directors took reasonable steps to ascertain that any current assets, other than
financing, which were unlikely to be realised in the ordinary course of business, their values as shown in the accounting records of 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 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 Bank’s financial statements misleading or inappropriate.
directors’ report
CONTINGENT AND OTHER LIABILITIES
At the date of this report there does not exist:
(a) any charge on the assets of 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 Bank that has arisen since the end of the financial year other than those in the ordinary course of banking
business or activities of the Bank.
No contingent or other liability of the Bank has become enforceable, or is likely to become enforceable 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 Bank to meet its obligations 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
Bank, that would render any amount stated in the financial statements misleading.
ITEMS OF AN UNUSUAL NATURE
The results of the operations of 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 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
There were no material events subsequent to the reporting date that require disclosure or adjustments to the financial statements.
DIRECTORS
The Directors of the Bank who have held office since the date of the last report and at the date of this report are:
Chairman/ Non-Independent Non-Executive Director
Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Mohd Nor (Bersara)
Tan Sri Dato’ Seri Mohamed Jawhar
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman
Associate Professor Dr. Said Bouheraoua
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin
27
directors’ report
RESPONSIBILITY STATEMENT BY BOARD OF DIRECTORS
In the course of preparing the annual financial statements of the Bank, the Directors are collectively responsible in ensuring that these financial
statements are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements
of the Companies Act, 1965 in Malaysia.
It is the responsibility of the Directors to ensure that the financial reporting of the Bank present a true and fair view of the state of affairs of the Bank as
at 31 December 2015 and of the financial results and cash flows 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 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 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 128 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 is as follows:
As at
1.1.2015
*1,051,328
-
-
*1,051,328
Boustead Heavy Industries Corporation Berhad
*2,000,000
-
-
*2,000,000
5,916,465
-
-
5,916,465
*
Bought
AFFIN Holdings Berhad
Boustead Petroleum Sdn Bhd
28
Ordinary shares of RM1 each
As at
Sold
31.12.2015
Shares held in trust by nominee company
directors’ report
DIRECTORS’ INTERESTS
As at
1.1.2015
ABB Trustee Berhad**
**
Ordinary shares of RM10 each; RM5 uncalled
As at
Bought
Sold
31.12.2015
20,000
-
-
20,000
Shares held in trust in AFFIN Bank Berhad
Ordinary shares of 50 sen each
As at
Sold
31.12.2015
As at
1.1.2015
Bought
Boustead Holdings Berhad^
28,192,758
-
-
28,192,758
Pharmaniaga Berhad^^
12,500,148
-
-
12,500,148
Boustead Plantation Berhad^^^
31,381,600
-
-
31,381,600
^
Shares held in trust by nominee company - 25,992,758
Shares held under own name - 2,200,000
^^
Shares held under own name - 9,382,837
^^^
Shares held under own name - 440,000
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
Neither at the end of the financial year, nor at any time during the financial year, did there subsist any arrangement to which the Bank is a party with
the object or objects of enabling Directors of the Bank to acquire benefits by means of the acquisition of shares in, or debenture of, the Bank or any
other body corporate.
Since the date of incorporation, no Director of the Bank has received or become entitled to receive a benefit (other than the fees and other emoluments
shown in Note 28 to the financial statements) by reason of a contract made by the Bank or 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.
29
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 Corporate Governance for Licensed Islamic Banks.
(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 Chief Executive Officer (‘CEO’) 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 CEO, 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
Throughout the financial year, 14 Board meetings were held. All Directors have complied with the minimum number of attendances for Board
meetings as stipulated by Bank Negara Malaysia. All Directors review Board papers or reports providing updates on operational, financial and
corporate developments prior to the Board meetings. These papers and reports are circulated prior to the meeting to enable the Directors to obtain
further explanations and having sufficient time to deliberate on the issues and make decisions during the meeting.
30
directors’ report
(i) Board of Directors Responsibility and Oversight (continued)
Board Balance
Currently the Board has seven members, comprising three Non-Independent Non-Executive Directors (including the Chairman) and four
Independent Non-Executive Directors. The Board of Directors meetings are presided by Non-Independent Non-Executive Chairman whose role is
clearly separated from the role of CEO. 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
14 / 14
Member/ Non-Independent Non-Executive Director
14 / 14
13 / 14
Member/ Independent Non-Executive Director
14 / 14
14 / 14
12 / 14
11 / 14
31
directors’ report
Board Committees
The Board is assisted by three committees with specific terms of reference. This enables the committees to focus on areas or issues of critical
importance to the operations of Bank. Compositions, functions and terms of reference of these committees are highlighted below:
Nomination Committee
The Nomination Committee was established to provide a formal and transparent procedure for the appointment of Directors and CEO. 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 CEO and key senior management officers.
There were 6 meetings held during the financial year ended 31 December 2015. The Nomination Committee comprises the following members:
Members
Chairman/ Independent Non-Executive Director
6/6
6/6
6/6
6/6
6/6
Remuneration Committee
The Remuneration Committee was established to evaluate and recommend to the Board the framework of remuneration and the remuneration
package for Directors, CEO and key senior management officers. The Board is ultimately responsible for the approval of the remuneration package.
The Committee is guided by the need to ‘attract and retain’ and at the same time link the rewards to clearly articulate corporate and individual
performance parameters.
32
There were 4 meetings held during the financial year ended 31 December 2015. The Remuneration Committee comprises the following members:
Members
Chairman/ Independent Non-Executive Director
4/4
4/4
4/4
directors’ report
Board Committees (continued)
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 the Islamic Financial Services Act, 2013 and as per Shariah Governance Framework for Islamic Financial Institutions.
The main duties and responsibility of the Shariah Committee among others follows:
•
•
•
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 and to ensure that the products comply with Shariah principles; and
To advise the Bank on matters to be referred to the Shariah Advisory Council.
During the financial year ended 31 December 2015, a total of 11 meetings were held. The Shariah Committee comprises the following members
and the details of attendance of each member at the Shariah Committee meetings held during the financial year are as follows:
Members
Chairman
11 / 11
Associate Professor Dr. Ahmad Azam Bin Othman
Member
11 / 11
Associate Professor Dr. Zulkifli Bin Hasan
Member
11 / 11
Ustaz Mohammad Mahbubi Ali
Member
11 / 11
3/3
Dr. Yasmin Hanani Binti Mohd Safian
Member
(Resigned w.e.f. 1.4.2015)
4/5
(ii) Group Risk Management
The GRM functions independently to provide support to the Board Risk Management Committee (‘BRMC’). Committees namely Board Loan
Review and Recovery Committee (‘BLRRC’), Management Committee (‘MCM’), Group Management Loan Committee (‘GMLC’), Asset and Liability
Management Committee (‘ALCO’), Group Operational Risk Management Committee (‘GORMC’) and Early Alert Committee (‘EAC’) assist the BRMC
in managing credit, market, liquidity and operational risks.
Responsibilities of these committees include:
• risk identification
• risk assessment and measurement
• risk control and mitigation
• risk monitoring
Ustaz Ahmad Alfisyahrin Bin Jamilin
Member
(Appointment w.e.f. 1.9.2015)
33
directors’ report
(ii) Group Risk Management (continued)
Board Risk Management Committee (‘BRMC’)
The main function of Board Risk Management Committee (‘BRMC’) is to assist the Board in its oversight role of managing risk in the Bank. It has
responsibility for approving and reviewing risk management policies of the Bank and 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. The Bank’s risk management framework is set out in Note 33 to the the financial statements.
The BRMC meeting for the Bank were jointly held with AFFIN Bank Berhad and the following Director of the Bank sits in the meeting:
Member
6/6
Board Loan Review and Recovery Committee (‘BLRRC’)
Board Loan Review and Recovery Committee (‘BLRRC’) critically reviews financing and other credit facilities with higher risk implications, after due
process of checking, analysis, review and recommendation by the Credit Management function, and if found necessary, exercise the power to veto
financing applications that have been accepted by the Group Management Loan Committee (‘GMLC’). The Committee is also responsible to review
the impaired financing presented by Management.
The BLRRC meeting for the Bank were jointly held with AFFIN Bank Berhad and the following Director of the Bank sits in the meeting:
Member
12 / 12
Management Committee (‘MCM’)
MCM comprising the senior management team chaired by AFFIN Bank Berhad’s Managing Director/Chief Eecutive Officer (MD/CEO), assists the
Board in managing the day-to-day operations. MCM formulates tactical plans and business strategies, monitors the Bank’s overall performance,
and ensures that the activities are carried out in accordance with corporate objectives, strategies, policies and annual business plan and budget.
Group Management Loan Committee (‘GMLC’)
34
Group Management Loan Committee (‘GMLC’) approves complex and larger financing as well as workout/recovery proposals beyond the delegated
authority of the concerned individual senior management personnel of the Bank.
Individual Approvers
Credit authority is delegated based on skills, experience and track record of the officer assuming an approver’s position. Delegation of credit
authority is subject to credit checks to ensure approvers have a clean disciplinary record and not be in a financially embarrassed position.
Asset and Liability Management Committee (‘ALCO’)
ALCO comprising the senior management team chaired by the CEO of AFFIN Islamic Bank manages the Bank’s asset and liability position as well
as oversees the Bank’s capital management to ensure that the Bank is adequately capitalised on an economic and regulatory basis.
directors’ report
(ii) Group Risk Management (continued)
Group Operational Risk Management Committee (‘GORMC’)
GORMC comprising the senior management team chaired by AFFIN Bank Berhad’s MD/CEO, manages the Bank’s Operational Risk by reviewing
and ensuring appropriate operational risk programme, process and framework are implemented in the Bank so as to reduce the original capital
charge and manage operational risk losses to an acceptable level.
Group Early Alert Committee (‘GEAC’)
Group Early Alert Committee (‘GEAC’) is established within senior management 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.
(iii) Internal Audit and Internal Control Activities
Relationship with the Auditors
The Bank has established appropriate relationship with both internal and external auditors in conducting the audit function of the Bank.
Internal Controls
The Board acknowledges its overall responsibility for maintaining a sound system of internal control to safeguard shareholders’ investments,
Bank’s assets, and the need to review the adequacy and integrity of those systems regularly.
In accordance with BNM’s Guidelines on Corporate Governance for Licensed Islamic Banks, 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 Committee 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 Committee 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 control 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; and
- 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 findings
till 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.
•
35
directors’ report
(iii) Internal Audit and Internal Control Activities (continued)
Audit and Examination Committee (‘AEC’)
The AEC comprises members of the Bank’s Board of Directors whose primary function is to assist the Board in its supervision over:
•
The reliability and integrity of accounting policies and financial reporting and disclosure practise;
•
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 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 meetings for the Bank were jointly held with AFFIN Bank Berhad during the financial year ended 31 December 2015 and the following
Independent Non-Executive Directors of the Bank sit in the meeting:
Members
Chairman / Independent Non-Executive Director
8/8
8/8
(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 fulfill their duties and specific responsibilities.
36
directors’ report
BUSINESS PLAN AND STRATEGY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 AND FUTURE OUTLOOK
The year 2015 was challenging for the banking sector in Malaysia due to soften economic environment. Despite the challenges, AFFIN ISLAMIC (‘The
Bank’) recorded a profit before zakat and tax of RM117.4 million for the financial year ended 31 December 2015, a higher growth of RM25.7 million or
28.1% over the corresponding financial year. Total net income closed at RM231.8 million, a growth of 9.5% year-on-year, driven by the growth in both
fund and fee based revenue with enlargement of financing assets. Additionally, the Bank continues to maintain a strong capital position with Total Capital
ratio of 14.415% and Common Equity Tier 1 ratio at 13.203% as at 31 December 2015.
Business Outlook For 2016
2016 is going to be a tough year for the banking industry where it is projected to be affected by the negative consumer sentiment and moderation in
household demand. BNM maintain the OPR at current level at 3.25% as it weigh the risks to economic growth and inflation rate. At the current level of
the OPR, the stance of monetary policy remains accommodative and supportive of economic activity.
Slower financing growth and narrowing net profit margins is expected in 2016 with potential stress on the asset quality. The Bank is targeting on
increasing its consumer deposits base by continuously to source for cheap deposits, namely from demand and saving deposits. Thru enhancing our
products and services and supporting Government initiatives on new economic measure, we will continue to support business activities of small
medium sized enterprises (‘SME’) segment.
Moving forward, the Bank is continuously enhancing its domestic reach while continuously exploring new opportunities beyond Malaysian shore. The
development of Affin Bank Group’s digital banking and transactional banking capabilities within is expected to further enhance our business proposition
to our customer.
RATING BY EXTERNAL RATING AGENCIES
The Bank was not rated by any external rating agencies during the financial year.
ZAKAT OBLIGATIONS
The Bank did not pay zakat on behalf of its depositors.
HOLDING COMPANY, PENULTIMATE AND ULTIMATE HOLDING CORPORATE BODY
The holding company of the Bank is AFFIN Bank Berhad. The penultimate holding company is AFFIN Holdings Berhad and 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.
Chairman
Director
Signed on behalf of the Board of Directors in accordance with their resolution dated 3 March 2016.
37
statements of financial position
Economic Entity
Note
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
ASSETS
Cash and short-term funds
2
1,918,570
3,333,472
1,918,570
3,333,472
Deposits and placements with banks and
other financial institutions
3
35,034
-
35,034
-
Derivatives financial assets
4
132
12
132
12
Financial investments available-for-sale
5
1,475,373
1,532,500
1,475,373
1,532,500
Financial investments held-to-maturity
6
76,283
82,754
76,283
82,754
Financing, advances and other financing
7
9,201,909
7,163,621
9,201,909
7,163,621
Other assets
9
3,759
48,315
3,759
48,315
Amount due from holding company
10
367,172
242,058
367,172
242,058
Amount due from joint ventures
11
39,936
14,855
39,936
14,855
Deferred tax assets
12
3,598
2,900
3,598
2,900
Statutory deposits with Bank Negara Malaysia
13
259,600
298,000
259,600
298,000
Investment in joint ventures
14
-
-
650
650
Property and equipment
15
2,613
3,261
2,613
3,261
Intangible assets
16
426
891
426
891
13,384,405
12,722,639
13,385,055
12,723,289
TOTAL ASSETS
LIABILITIES AND EQUITY
Deposits from customers
17
10,001,695
9,870,394
10,001,695
9,870,394
Deposits and placements of banks and
18
2,372,710
2,045,720
2,372,710
2,045,720
Derivatives financial liabilities
19
1,035
34
1,035
34
Other liabilities
20
44,119
30,358
44,119
30,358
10,031
4,071
10,031
4,071
12,429,590
11,950,577
12,429,590
11,950,577
Provision for taxation
TOTAL LIABILITIES
Share capital
21
460,000
360,000
460,000
360,000
Reserves
22
494,815
412,062
495,465
412,712
954,815
772,062
955,465
772,712
13,384,405
12,722,639
13,385,055
12,723,289
2,499,754
2,112,921
2,499,754
2,112,921
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
38
COMMITMENTS AND CONTINGENCIES
32
The accounting policies on pages 45 to 57 and the notes on pages 58 to 127 form an integral part of these financial statements.
income statements
Economic Entity
The Bank
2015
2014
2015
2014
Note
RM’000
RM’000
RM’000
RM’000
Income derived from investment of depositors’ funds
and others
23
556,537
472,996
556,537
472,996
Income derived from investment of shareholders’ funds
24
39,773
33,586
39,773
33,586
Allowances for impairment losses on financing,
advances and other financing
25
(8,512)
(3,725)
(8,512)
(3,725)
-
(550)
-
(550)
587,798
502,307
587,798
502,307
26
(356,017)
(290,628)
(356,017)
(290,628)
231,781
211,679
231,781
211,679
27
(114,406)
(120,023)
(114,406)
(120,023)
117,375
91,656
117,375
91,656
(3,779)
(4,772)
(3,779)
(4,772)
113,596
86,884
113,596
86,884
(28,811)
(20,288)
(28,811)
(20,288)
84,785
66,596
84,785
66,596
84,785
66,596
84,785
66,596
23.5
18.5
23.5
18.5
Allowances for impairment losses on securities
Total distributable income
Income attributable to the depositors
Total net income
Other operating expenses
Profit before zakat and taxation
Zakat
Taxation
29
Net profit after zakat and taxation
Attributable to:
Equity holders of the Bank
Earnings per share (sen):
-Basic
30
39
statements of of comprehensive income
Economic Entity
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
84,785
66,596
84,785
66,596
(2,674)
1,381
(2,674)
1,381
642
(332)
642
(332)
Other comprehensive (expense)/income for the
financial year, net of tax
(2,032)
1,049
(2,032)
1,049
Total comprehensive income for the year
82,753
67,645
82,753
67,645
82,753
67,645
82,753
67,645
Note
Profit after zakat and taxation
Other comprehensive income:
Items that may be reclassified subsequently to profit
and loss:
Net fair value change in financial investments
available-for-sale
Deferred tax on financial investments available-for-sale
12
Attributable to equity holders of the Bank:
- Total comprehensive income
40
statements of changes in equity
Attributable to Equity Holders of the Bank
Economic Entity
Share
capital
RM’000
Statutory
reserves
RM’000
AFS
revaluation
reserves
RM’000
Regulatory
reserves
RM’000
Retained
profits
RM’000
Total
RM’000
At 1 January 2015
360,000
206,324
(5,876)
49,020
162,594
772,062
-
-
-
-
84,785
84,785
Other comprehensive income (net of tax)
- Financial investments available-for-sale
-
-
(2,032)
-
-
(2,032)
Total comprehensive income
-
-
(2,032)
-
84,785
82,753
100,000
-
-
-
-
100,000
-
42,393
-
9,380
(51,773)
-
At 31 December 2015
460,000
248,717
(7,908)
58,400
195,606
954,815
At 1 January 2014
360,000
173,026
(6,925)
-
178,316
704,417
-
-
-
-
66,596
66,596
Issued during the financial year
Transfer to statutory reserves/regulatory reserves
-
-
1,049
-
-
1,049
-
-
1,049
-
66,596
67,645
-
33,298
-
49,020
(82,318)
-
360,000
206,324
(5,876)
49,020
162,594
772,062
At 31 December 2014
41
statements of changes in equity
Non-Distributable
Distributable
The Bank
Share
capital
RM’000
Statutory
reserves
RM’000
AFS
revaluation
reserves
RM’000
Regulatory
reserves
RM’000
Retained
profits
RM’000
Total
RM’000
At 1 January 2015
360,000
206,324
(5,876)
49,020
163,244
772,712
-
-
-
-
84,785
84,785
-
-
(2,032)
-
-
(2,032)
-
-
(2,032)
-
84,785
82,753
100,000
-
-
-
-
100,000
-
42,393
-
9,380
(51,773)
-
At 31 December 2015
460,000
248,717
(7,908)
58,400
196,256
955,465
At 1 January 2014
360,000
173,026
(6,925)
-
178,966
705,067
-
-
-
-
66,596
66,596
-
-
1,049
-
-
1,049
-
-
1,049
-
66,596
67,645
-
33,298
-
49,020
(82,318)
-
360,000
206,324
(5,876)
49,020
163,244
772,712
At 31 December 2014
42
statements of cash flows
Economic Entity
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
113,596
86,884
113,596
86,884
- financial investments available-for-sale
(49,589)
(46,602)
(49,589)
(46,602)
- financial investments held-to-maturity
(5,597)
(5,822)
(5,597)
(5,822)
(7,680)
(6,201)
(7,680)
(6,201)
(2,232)
(1,236)
(2,232)
(1,236)
882
47
882
47
-
550
-
550
1,033
945
1,033
945
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments for items not involving the movement of
cash and cash equivalents:
Finance income and hibah from:
Accretion of discount less amortisation of premium:
Gain on sale/redemption:
Gain on unrealised foreign exchange
Allowance for impairment loss:
Depreciation of property and equipment
Property and equipment written-off
8
4
8
4
Gain on sale of property and equipment
-
(118)
-
(118)
465
775
465
775
Net individual impairment
3,512
(2,273)
3,512
(2,273)
Net collective impairment
5,959
6,383
5,959
6,383
Amortisation of intangible assets
Bad debt on financing written-off
Zakat
Operating profit before changes in working capital
7
10
7
10
3,779
4,772
3,779
4,772
64,143
38,118
64,143
38,118
(35,034)
120,016
(35,034)
120,016
(Increase)/decrease in operating assets:
Deposits and placements with banks and other
financial institutions
(1,118,865)
(2,047,766)
(1,118,865)
42,231
(7,741)
42,231
(7,741)
38,400
(65,000)
38,400
(65,000)
(125,114)
(60,115)
(125,114)
(60,115)
-
(242,058)
-
(242,058)
(25,081)
(10,670)
(25,081)
(10,670)
Derivative financial instruments
882
22
882
22
Amount due to subsidiaries
(2,047,766)
Other assets
43
statements of cash flows
Economic Entity
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
131,301
579,850
131,301
579,850
Deposits and placements of banks and other financial
institutions
326,990
(196,760)
326,990
(196,760)
CASH FLOWS FROM OPERATING ACTIVITIES (continued)
Increase/(decrease) in operating liabilities:
15,495
3,167
15,495
3,167
(1,613,553)
(960,036)
(1,613,553)
(960,036)
Zakat paid
(5,511)
(8,751)
(5,511)
(8,751)
Tax refund
-
1,997
-
1,997
(22,909)
(20,517)
(22,909)
(20,517)
(1,641,973)
(987,307)
(1,641,973)
(987,307)
49,589
46,602
49,589
46,602
- financial investments held-to-maturity
5,597
5,822
5,597
5,822
Other liabilities
Cash used in operations
Tax paid
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Finance income and hibah received from:
Redemption of financial investments held-to-maturity
Net sale/(purchase) of financial investments available-for-sale
Proceed from disposal of property and equipment
6,472
2,310
6,472
2,310
64,365
(241,108)
64,365
(241,108)
-
118
-
118
(408)
(1,164)
(408)
(1,164)
125,615
(187,420)
125,615
(187,420)
Increase in share capital
100,000
-
100,000
-
Net cash generated from financing activities
100,000
-
100,000
-
(1,416,358)
(1,174,727)
(1,416,358)
(1,174,727)
1,456
1,898
1,456
1,898
Cash and cash equivalents at beginning of the financial year
3,333,472
4,506,301
3,333,472
4,506,301
CASH AND CASH EQUIVALENTS AT END OF
THE FINANCIAL YEAR (Note 2)
1,918,570
3,333,472
1,918,570
3,333,472
Purchase of property and equipment
Net cash generated from/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in cash and cash equivalents
44
Net increase in foreign exchange
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 Bank have been prepared in accordance with Malaysian Financial Reporting Standards (‘MFRS’), International
Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.
The financial statements of 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 MFRS 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 revenues and expenses during the reported period. It also requires Directors to exercise their judgment in the process of
applying the Bank’s accounting policies. Although these estimates and judgment 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 38.
Standards, amendments to published standards and interpretations that are effective
The Bank has applied the following amendments for the first time for the financial year beginning on 1 January 2015:
•
•
•
Annual Improvements to MFRSs 2010 - 2012 Cycle
Annual Improvements to MFRSs 2011 - 2013 Cycle
Amendments to MFRS 119 “Defined Benefit Plans: Employees Contributions”
The adoption of these amendments did not have any impact on the current or any prior year and are not likely to affect future periods.
Standards, amendments to published standards and interpretations to existing standards that are applicable to the Bank but not yet
effective
A number of new standards and amendments to standards and interpretations are effective for financial year beginning after 1 January 2015.
None of these is expected to have a significant effect on the consolidated financial statements of the Bank, except the following set out below:
Amendment to MFRS 11 ‘Joint arrangements’ (effective from 1 January 2016) requires an investor to apply the principles of MFRS 3 ‘Business
Combination’ when it acquires an interest in a joint operation that constitutes a business. The amendments are applicable to both the
acquisition of the initial interest in a joint operation and the acquisition of additional interest in the same joint operation. However, a previously
held interest is not remeasured when the acquisition of an additional interest in the same joint operation results in retaining joint control.
•
Amendments to MFRS 116 ‘Property, plant and equipment’ and MFRS 138 ‘Intangible assets’ (effective from 1 January 2016) clarify that the
use of revenue-based methods to calculate the depreciation of an item of property, plant and equipment is not appropriate. This is because
revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic
benefits embodied in the asset.
The amendments to MFRS 138 also clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption
of the economic benefits embodied in an intangible asset. This presumption can be overcome only in the limited circumstances where the
intangible asset is expressed as a measure of revenue or where it can be demonstrated that revenue and the consumption of the economic
benefits of the intangible asset are highly correlated.
•
MFRS 9 ‘Financial Instruments’ (effective from 1 January 2018) will replace MFRS 139 “Financial Instruments: Recognition and Measurement”.
MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for
financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income (“OCI”). The basis
of classification depends on the entity’s business model and the cash flow characteristics of the financial asset. Investments in equity
instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in
OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect
contractual cash flows and the cash flows represent principal and profit.
•
45
(A) BASIS OF PREPARATION
Standards, amendments to published standards and interpretations to existing standards that are applicable to the Bank but not yet
effective (continued)
For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities,
with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part
of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless
this creates an accounting mismatch.
MFRS 9 introduces an expected credit loss model on impairment for all financial assets that replaces the incurred loss impairment model used
in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit
losses are recognised.
•
MFRS 15 ‘Revenue from contracts with customers’ (effective from 1 January 2018) replaces MFRS 118 ‘Revenue’ and MFRS 111 ‘Construction
contracts’ and related interpretations. The standard deals with revenue recognition and establishes principles for reporting useful information
to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts
with customers.
Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits
from the good or service. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services
to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Bank will apply these standards when effective. The adoption of the above standards, amendments to published standards and interpretations
to existing standards are not expected to have any significant impact on the financial statements of the Bank except for MFRS 9. The financial effect
of adoption of MFRS 9 is still being assessed by the Bank.
(B) JOINT ARRANGEMENTS
Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost in the consolidated statement of financial
position. Under the equity method, the investment in a joint venture is initially recognised at cost, and adjusted thereafter to recognise the Economic
Entity’s share of the post-acquisition profits or losses of the joint venture in profit or loss, and the Economic Entity’s share of movements in other
comprehensive income of the joint venture in other comprehensive income. Dividends received or receivable from a joint venture are recognised as a
reduction in the carrying amount of the investment. When the Economic Entity’s share of losses in a joint venture equals or exceeds its interests in the
joint venture, including any long-term interests that, in substance, form part of the Economic Entity’s net investment in the joint venture, the Economic
Entity does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the joint venture.
The Economic Entity determines at each reporting date whether there is any objective evidence that the investment in the joint venture is impaired.
An impairment loss is recognised for the amount by which the carrying amount of the joint venture exceeds its recoverable amount.
46
Unrealised gains on transactions between the Economic Entity and its joint ventures are eliminated to the extent of the Economic Entity’s interest
in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Economic Entity.
When the Economic Entity ceases to equity account its joint venture because of a loss of joint control, any retained interest in the entity is remeasured
to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes
of subsequently accounting for the retained interest as an associate or financial asset. In addition, any amount previously recognised in other
comprehensive income in respect of the entity is accounted for as if the Economic Entity had directly disposed of the related assets or liabilities. This
may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a joint venture is reduced but joint control is retained, only a proportionate share of the amounts previously recognised in
other comprehensive income is reclassified to profit or loss where appropriate.
Investment in joint ventures in separate financial statements
In the Bank’s separate financial statements, investment in joint ventures is stated at cost less accumulated impairment losses. On disposal of
investment in joint ventures, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss.
(C) INTANGIBLE ASSETS
Computer software
Costs associated with maintaining computer software programmes are recognized as an expense as incurred. Development costs that are directly
attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets
when the following criteria are met:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
it is technically feasible to complete the software product so that it will be available for use;
management intends to complete the software product and use or sell it;
there is an ability to use or sell the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate
portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised
as an expense are not recognised as an asset in a subsequent period.
Computer software development costs recognised as assets are amortised from the point at which the asset is ready for use over their estimated
useful lives of five years.
(D) IMPAIRMENT ON NON-FINANCIAL ASSETS
Assets that have an indefinite useful life 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 asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs of disposal 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 which are largely independent of the cash inflows from other assets or group
of assets (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. Impairment losses on goodwill are not reversed. In respect of other assets, 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 reserve.
(E) RECOGNITION OF FINANCING INCOME AND EXPENSE
The effective profit method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the financing
income or expense over the relevant period. The effective profit rate is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial instruments or, when appropriate, a shorter period to the net carrying amount of the financial asset
or financial liability. When calculating the effective profit rate, the Bank takes into account all contractual terms of the financial instrument and
includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective profit rate, but not
future credit losses.
Profit or income on impaired financial assets is recognised using the rate of profit used to discount the future cash flows for the purpose of
measuring the impairment loss. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event
(or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.
Financing income and expense for all profit-bearing financial instruments are recognised within “income derived from investment from depositors’
funds”, “income derived from investment from shareholders’ funds” and “income attributable to depositors” respectively, in the income statement
using the effective profit method.
47
(E) RECOGNITION OF FINANCING INCOME AND EXPENSE
When a financing receivable is impaired, the Bank reduces the carrying amount to its recoverable amount, being the estimated future cash flow
discounted at the original effective profit rate of the instrument, and continues unwinding the discount as profit income. Profit income on impaired
financing and receivables are recognised using the original effective profit rate.
(F) RECOGNITION OF FEES AND OTHER INCOME
Fees and commissions are recognised as income when all conditions precedent are fulfilled.
Guarantee fees which are material are recognised as income based on a time apportionment method.
Dividends are recognised when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. However,
the investment may need to be tested for impairment as a consequence.
Net profit from financial assets held at fair value through profit or loss and financial instruments available-for-sale are recognised upon disposal of
the assets, as the difference between net disposal proceeds and the carrying amount of the assets.
(G) FINANCIAL ASSETS
Classification
The Bank classifies its financial assets in the following categories: at fair value through profit or loss, financing and receivables, available-forsale and held-to-maturity. The classification depends on the purpose for which the financial assets were acquired. Management determines the
classification at initial recognition and in the case of assets classified as held-to-maturity, re-evaluate this designation at the end of each reporting
period.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held-for-trading. A financial asset is classified in this category if it is
acquired or incurred principally for the purpose of selling or repurchasing it in the near term. Derivatives are also categorised as held for
trading unless they are designated as hedges (see Note M).
The Bank has not elected to designate any financial assets at fair value through profit or loss.
(ii) Financing and receivables
Financing and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
(iii) Financial investments available-for-sale
48
Financial investments available-for-sale are non-derivatives that are either designated in this category or not classified in any of the other
categories.
(iv) Financial investments held-to-maturity
Financial investments held-to-maturity are non-derivative financial assets with fixed or determinable payments and fixed maturities that the
Bank’s management has the positive intention and ability to hold to maturity. If the Bank were to sell other than an insignificant amount of
held-to-maturity financial assets, the whole category would be tainted and reclassified as available for sale.
Recognition and initial measurement
Regular purchases and sales of financial assets are recognised on the settlement date, the date that an asset is delivered to or by the Bank.
Financial assets are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset for
all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised
at fair value, and transaction costs are expensed in profit or loss.
(G) FINANCIAL ASSETS
Subsequent measurement - gains and losses
Financial investments available-for-sale and financial assets at fair value through profit or loss are subsequently carried at fair value. Financing and
receivables and held-to-maturity financial assets are subsequently carried at amortised cost using the effective profit method.
Changes in the fair values of financial assets at fair value through profit or loss, including the effects of currency translation, profit and dividend
income are recognised in income statement in the period in which the changes arise.
Changes in the fair value financial investments available-for-sale are recognised in other comprehensive income, except for impairment losses (see
accounting policy Note H) and foreign exchange gains and losses on monetary assets (Note L).
Profit and dividend income on financial investments available-for-sale are recognised separately in income statements. Profit on financial
investments available-for-sale calculated using the effective profit method is recognised in income statements. Dividend income on available-forsale equity instruments are recognised in income statements when the Bank’s right to receive payments is established.
De-recognition
Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Bank
has transferred substantially all risks and rewards of ownership.
Financing and receivables that are factored out to banks and other financial institutions with recourse to the Bank are not derecognised until the
recourse period has expired and the risks and rewards of the receivables have been fully transferred. The corresponding cash received from the
financial institutions is recorded as fundings.
When financial investments available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are
reclassified to profit or loss.
Reclassification of financial assets
The Bank may choose to reclassify a non-derivative trading financial asset out of the held-for-trading category if the financial asset is no longer
held for the purpose of selling it in the near term. Financial assets other than financings and receivables are permitted to be reclassified out of the
held-for-trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In
addition, the Bank may choose to reclassify financial assets that would meet the definition of financings and receivables out of the held-for-trading
or available-for-sale categories if the Bank has the intention and ability to hold these financial assets for the foreseeable future or until maturity
at the date of reclassification.
Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no
reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets
reclassified to financing and receivables and held-to-maturity categories are determined at the reclassification date. Further increases in estimates
of cash flows adjust the effective profit rates prospectively.
Assets carried at amortised cost
The Bank assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is
impaired. A financial asset or a group of financial assets 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 asset (a ‘loss event’) and that loss event (or events)
has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
(H) IMPAIRMENT OF FINANCIAL ASSETS
49
50
Assets carried at amortised cost (continued)
The criteria that the Bank uses to determine that there is objective evidence of an impairment loss include among others:
• past due contractual payments;
• significant financial difficulties of the customer;
• probability of bankruptcy or other financial re-organisation;
• default of related customer;
• measurable decrease in estimated future cash flow than was originally envisaged; and
• significant deterioration in issuer’s credit rating.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective profit rate. The asset’s carrying
amount of the asset is reduced and the amount of the loss is recognised in income statements. If ‘financing and receivables’ or a ‘held-to-maturity
investment’ has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit rate determined under the
contract.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after
the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss
is recognised in income statements.
When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures
have been completed and the amount of the loss has been determined.
For financing, advances and other financing, the Bank first assess whether objective evidence of impairment exists individually for financing,
advances and other financing that are individually significant, and individually or collectively for financing, advances and other financing that are
not individually significant. If the Bank determines that no objective evidence of impairment exists for individually assessed financing, advances
and other financing, whether significant or not, it includes the asset in a group of financing, advances and other financing with similar credit risk
characteristics and collectively assesses them for impairment.
(i)
Individual impairment allowance
Financing, advances and other financing 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. Financing that are individually assessed for impairment and for which
no impairment loss is required (over-collateralised financing) are collectively assessed as a separate segment.
The amount of the loss is measured as the difference between the financing’s carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been incurred) discounted at the financing’s original effective profit rate. The carrying
amount of the financing is reduced through the use of an allowance account and the amount of the loss is recognised in the income
statements. If a financing has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit rate
determined under the contract.
The calculation of the present value of the estimated future cash flows of a collateralised financing reflects the cash flows that may result
from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
(ii) Collective impairment allowance
For the purposes of a collective evaluation of impairment, financing, advances and other financing 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 financing, advances and
other financing by being indicative of the customers’ ability to pay all amounts due according to the contractual terms of the financing being
evaluated.
Future cash flows in a group of financing that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows
of the financing in the Bank and historical loss experience for financing 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.
(ii) Collective impairment allowance (continued)
Estimates of changes in future cash flows for groups of financings 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 Bank and their magnitude). The methodology and assumptions used for estimating
future cash flows are reviewed regularly by the Bank to reduce any differences between loss estimates and actual loss experience.
Based on the Guideline on Classification and Impairment Provisions for Financing, banking institutions are required to maintain, in aggregate
collective impairment allowances and regulatory reserves of no less than 1.2% of total outstanding financing (excluding financing, advances
and other financing with an explicit guarantee from the Federal Government of Malaysia), net of individual impairment provisions. Banking
institutions are required to comply with the requirement by 31 December 2015.
As at reporting date, the Bank has maintained the collective impairment provisions and regulatory reserves of no less than 1.2% in the books.
Assets classified as available-for-sale
The Bank assesses at the end of the reporting period whether there is objective evidence that a financial asset or a group of financial assets is
impaired.
For debt securities, the Bank assesses at each date of the statement of financial position whether there is any objective evidence that a financial
investment or group of financial investments is impaired. The criteria the Bank uses to determine whether there is objective evidence of impairment
include non-payment of coupon or principal redemption, significant financial difficulty of issuer or obligor and significant drop in rating. In the case
of equity securities classified as available-for-sale, in addition to the criteria above, a significant or prolonged decline in the fair value of the security
below its cost is also considered as an indicator that the assets are impaired.
If any such evidence exists for available-for-sale financial assets, the cumulative loss that had been recognised directly in equity is removed from
equity and recognised in income statements. The amount of cumulative loss reclassified to profit or loss is the difference between the acquisition
cost and the current fair value, less any impairment loss on that financial asset previously recognised in income statements. Impairment losses
recognised in income statements on equity instruments classified as available-for-sale are not reversed through income statements.
If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related
to an event occurring after the impairment loss was recognised in income statements, the impairment loss is reversed through income statements
in subsequent periods.
(I) 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 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 initially recognised at fair value plus
transaction costs for all financial liabilities not carried at fair value through profit or loss.
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 Bank as at
fair value through profit or loss upon initial recognition. The Bank do not have any non-derivative financial liabilities designated at fair value through
profit or loss.
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.
51
(I) FINANCIAL LIABILITIES
Financial liabilities at fair value through profit or loss (continued)
Financial liabilities classified as held-for-trading are initially recognised at fair value, and transaction costs are expensed in profit or loss. 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.
De-recognition
Financial liabilities are de-recognised when they have been redeemed or otherwise extinguished.
(J) 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.
The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event
of default, insolvency or bankruptcy.
(K) PROPERTY AND EQUIPMENT
52
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property and
equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management. Cost also include funding costs that are directly attributable to
the acquisition, construction or production of a qualifying asset.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate assets, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. The carrying amount of
the placed part is de-recognised. All the repairs and maintenance are recognised as expenses in profit or loss during the financial period in which
they are incurred.
Property and equipment are depreciated on the straight-line basis to allocate the cost, to their residual values over their estimated useful lives
summarised as follows:
Renovation
Office equipment and furniture
Computer equipment and software
Motor vehicles
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.
The assets’ residual value and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
At the end of the reporting period, the Bank assesses whether there is any indication of impairment or whenever events or changes in circumstances
indicate the carrying amount may not be recoverable. A write-down is made if the carrying amount exceeds the recoverable amount.
(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.
(L) FOREIGN CURRENCY TRANSLATIONS
Functional and presentation currency
The financial statements are presented in Ringgit Malaysia, which is the Bank’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of the transactions
or valuation where items are remeasured. 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.
However, exchange differences are deferred in other comprehensive income when they arose from qualifying cash flow or net investment hedge
or are attributable to items that form part of the net investment in a foreign operation.
Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation
differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. 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.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value
was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. 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
other comprehensive income.
(M) DERIVATIVE FINANCIAL INSTRUMENTS
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 at the end of each reporting period. 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.
The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged.
As at reporting date, the Bank has not designated any derivative as hedging instruments.
Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income
statement.
53
(N) CURRENT AND DEFERRED INCOME TAXES
54
Current tax
Tax expense for the period comprises current and deferred income tax. The income tax expense or credit for the period is the tax payable on the
current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and to unused tax losses. 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 in the
countries where the Bank and jointly controlled entity 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 provided 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 liabilities are not recognised if they arise from the
initial recognition of goodwill. Deferred tax is also 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, unused tax losses or unused tax credits can be utilised.
Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period and
are expected to apply when the related deferred tax assets is realised or the deferred tax liability is settled.
Deferred tax liability is recognised for all temporary differences associated with investment in joint venture where the timing of the reversal of the
temporary difference can be controlled by the Economic Entity and it is probable that the temporary difference will not reverse in the foreseeable
future. Generally, the joint venturer is unable to control the reversal of the temporary difference for joint ventures. Only where there is an agreement
in place that gives the joint venturer the ability to control the reversal of the temporary difference, a deferred tax liability is not rcognised.
Deferred income tax assets are recognised on deductible temporary differences arising from investment in joint arrangements only to the extent
that it is probable the temporary difference will reverse in future and there is sufficient taxable profit available against which the deductible
temporary difference can be utilised.
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
The Bank pays zakat based on 2.5775% of the prior year’s net asset method, to comply with the principles of Shariah and as approved by the
Shariah Committee. The Bank does not pay zakat on behalf of the depositors.
(P) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist 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 known amount of cash without significant risk of changes in value.
(Q) FORECLOSED PROPERTIES
Foreclosed properties are stated at the lower of their carrying amount and fair value less cost to sell.
(R) CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The Bank does not recognise contingent assets and liabilities other than those arising from business combination, but disclose 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 non-occurrence of one or more uncertain future events beyond the control of 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 non-occurrence of one
or more uncertain future events beyond the control of the Bank. The Bank does not recognise a contingent asset but discloses its existence where
inflows of economic benefits are probable, but not virtually certain.
(S) BILLS AND ACCEPTANCES PAYABLE
Bills and acceptances payable, which are financial liabilities, represent the Bank’s own bills and acceptances rediscounted and outstanding in the
market (see Note I).
(T)PROVISIONS
Provisions are recognised by the Bank when all of the following conditions have been met:
•
•
•
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 Bank expects a provision to be reimbursed (for example, under an insurance/takaful 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 management’s best estimate 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.
55
(U) EMPLOYEE BENEFITS
Short-term employee benefits
Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary benefits that are expected to be settled wholly within 12 months
after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the
reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
Defined contribution plan
The defined contribution plan is a pension plan under which the Bank 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 Bank’s contribution to defined contribution plans are charged to the income statement in the period to which they relate. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
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 Bank 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 CONTRACTS
56
Financial guarantee contracts are contracts that require the 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 banking facilities.
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value
and subsequently at the higher of the amount determined in accordance with MFRS 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 payables of subsidiaries are provided by the Bank for no compensation, the fair values are accounted for
as contributions and recognised as part of the cost of investment in subsidiaries.
(W) RESTRICTED INVESTMENT ACCOUNTS (“RIA”)
These deposits are used to fund specific financing. The RIA is a contract based on Shariah concept of Mudharabah between two parties, i.e.
investor and entrepreneur to finance a business venture where the investor provides capital and the business venture is managed solely by the
entrepreneur. The profit of the business venture will be shared based on pre-agreed ratios with the Bank as Mudarib (manager or manager of
funds), and losses shall be borne solely by capital provider.
(X) SHARE CAPITAL
Classification
Ordinary shares are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular
instrument.
Share issue costs
Incremental costs directly attributable to the issue of new shares or options are deducted against share premium account.
Dividend distribution
Liability is recognised for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Bank, on or
before the end of the reporting period but not distributed at the end of the reporting period.
Distributions to holders of an equity instrument is recognised directly in equity.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
•
the profit attributable to owners of the Bank, excluding any costs of servicing equity other than ordinary shares
•
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares
issued during the year and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures in the determination of basic earnings per share to take into account:
•
the after income tax effect of profit and other financing costs associated with dilutive potential ordinary shares, and
•
the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
57
notes to the financial statements
1
GENERAL INFORMATION
The Bank, a wholly-owned subsidiary of AFFIN Bank Berhad, was incorporated on 13 September 2005 and commenced operations on 1 April 2006.
The net assets of AFFIN Bank’s Islamic Division was transferred to AFFIN Islamic Bank on 1 April 2006.
The Bank is principally engaged in all aspects of Islamic banking and finance business and in the provision of related financial services in
accordance with the Shariah principles.
The number of employees in the Bank at the end of financial year was 263 (2014: 249) employees.
The holding company of the Bank is AFFIN Bank Berhad. The penultimate holding company is AFFIN Holdings Berhad and 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
Economic Entity and The Bank
Cash and bank balances with banks and other financial institutions
Money at call and interbank placements with remaining maturity not exceeding one month
3
2015
RM’000
2014
RM’000
7,605
7,039
1,910,965
3,326,433
1,918,570
3,333,472
DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS
Other financial institutions
4
2015
RM’000
2014
RM’000
35,034
-
35,034
-
DERIVATIVE FINANCIAL ASSETS
58
2015
Contract/
notional amount
RM’000
Assets
RM’000
2014
Contract/
notional amount
RM’000
Assets
RM’000
At fair value
Foreign exchange derivatives
- Currency forwards
61,967
132
12,960
12
61,967
132
12,960
12
5
FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE
2015
RM’000
2014
RM’000
-
25,004
Malaysian Government investment issues
613,857
501,536
Sukuk Perumahan Kerajaan
187,219
79,139
-
284,878
At fair value
Money market instruments:
Malaysian Government treasury bills
Bank Negara Malaysia Monetary Notes
Khazanah Sukuk
165,280
120,169
966,356
1,010,726
1,075
575
Unquoted securities:
Shares in Malaysia
Private debt securities/sukuk in Malaysia
Allowance for impairment losses
508,492
521,749
1,475,923
1,533,050
(550)
(550)
1,475,373
1,532,500
Movement in allowance for impairment losses
At beginning of the financial year
550
-
Allowance made during the year
-
550
550
550
At end of the financial year
6
FINANCIAL INVESTMENTS HELD-TO-MATURITY
2015
RM’000
2014
RM’000
76,283
82,754
76,283
82,754
At amortised cost
Unquoted securities:
Private debt securities/sukuk in Malaysia
59
7
FINANCING, ADVANCES AND OTHER FINANCING
(i) By type
2015
RM’000
2014
RM’000
314,426
203,963
- House financing
2,096,258
1,832,181
- Hire purchase receivables
2,710,393
2,044,709
490,723
262,031
2,860,153
1,919,442
Bills receivables
36,637
12,189
Trust receipts
12,600
19,848
123,897
121,416
9,536
9,629
622,473
807,125
9,277,096
7,232,533
- Individual
(38,516)
(31,519)
- Collective
(36,671)
(37,393)
9,201,909
7,163,621
Cash line
Term financing
- Syndicated financing
- Business term financing
Claims on customers under acceptance credits
Staff financing (of which RM Nil to Directors)
Revolving credit
Gross financing, advances and other financing
Less:
Total net financing, advances and other financing
*
Inculded in business term financing as at reporting date is RM53.7 million (2014 : RM53.7 million) and RM63.9 million (2014 : RM62.9
million) of term financing disbursed by the Bank to joint venture with AFFIN-i Nadayu Sdn Bhd and KL South Development Sdn Bhd
respectively.
(ii) By maturity structure
2015
RM’000
2014
RM’000
1,426,334
1,207,258
One year to three years
542,303
516,323
Three years to five years
927,366
935,083
6,381,093
4,573,869
9,277,096
7,232,533
Maturing within one year
60
Over five years
7
596,813
-
470,659
8,499
-
Trust receipts
Claims on customers under
acceptance credits
Business term financing
Gross financing, advances and
other financing
Revolving credit
Staff financing
Bills receivable
788,404
191,591
-
Syndicated financing
1,490,718
-
House financing
-
-
2,710,393
-
-
-
-
-
-
-
2,710,393
-
-
Al-Ijarah
Ijarah Thumma Al-Bai
1,011,560
-
Al-Bai
Bithaman Ajil
Hire purchase receivables
Term financing
Cash line
2015
RM’000
(iii) By contract
61
2,102,063
622,473
1,037
123,897
12,600
-
912,308
192,317
-
-
237,431
Murabahah
1,235,369
-
-
-
-
-
150,671
-
-
1,084,698
-
Musharakah
724,333
-
-
-
-
-
724,333
-
-
-
-
Istisna’
225,816
-
-
-
-
36,637
5,369
106,815
-
-
76,995
Others
9,277,096
622,473
9,536
123,897
12,600
36,637
2,860,153
490,723
2,710,393
2,096,258
314,426
Total
62
7
144,869
-
9,629
Gross financing, advances and
other financing
Revolving credit
1,665,340
679,697
-
-
-
-
-
Trust receipts
Claims on customers under
acceptance credits
Staff financing
-
534,828
558,223
-
-
-
Ijarah
-
1,097,488
-
Al-Bai
Bithaman Ajil
-
Bills receivable
Business term financing
Syndicated financing
Hire purchase receivables
House financing
Term financing
Cash line
2014
RM’000
(iii) By contract
2,044,709
-
-
-
-
-
-
-
2,044,709
-
-
Al-Ijarah
Thumma Al-Bai
1,356,947
807,125
-
121,416
19,848
-
332,541
-
-
-
76,017
Murabahah
852,954
-
-
-
-
-
118,261
-
-
734,693
-
Musharakah
370,082
-
-
-
-
-
370,082
-
-
-
-
Istisna’
262,804
-
-
-
-
12,189
5,507
117,162
-
-
127,946
Others
7,232,533
807,125
9,629
121,416
19,848
12,189
1,919,442
262,031
2,044,709
1,832,181
203,963
Total
7
(a) Movement in Restricted Investment Account
Included in financing, advances and other financing are exposures to Restricted Investments Accounts (“RIA”), as part of an arrangement
between AFFIN Islamic Bank Berhad and AFFIN Bank Berhad. AFFIN Bank Berhad is exposed to risks and rewards on RIA financing and will
account for all the individual and collective impairment for bad and doubtful financing arising thereon.
Economic Entity
and The Bank
2015
RM’000
695,588
Amount transferred from RPSIA on 25.6.15
2,410,000
New placement during the year
(1,792,803)
Redemption during the year
2,366
Income transferred from RPSIA
34,705
Income from RIA Investment
(33,830)
Profit distributed to mudarib
1,316,026
Investment assets:
130,037
Revolving credit
1,185,989
Other term financing
1,316,026
(b) Profit Sharing Ratio and Rate of Return
Investment account holder
Average profit
sharing ratio (%)
Average rate of
return (%)
Six months to one year
98.00
4.96
96.00
4.88
96.00
5.67
Over five years
95.00
5.20
Restricted investment accounts:
63
7
(iv) By type of customer
2015
2014
RM’000
RM’000
Domestic non-banking institutions
- Others
Domestic business enterprises
- Small medium enterprises
- Others
Government and statutory bodies
Individuals
Other domestic entities
Foreign entities
128,201
211,956
1,009,214
2,630,241
603,070
4,731,527
25,785
149,058
9,277,096
638,244
2,343,458
59,427
3,850,269
4,192
124,987
7,232,533
(v) By profit rate sensitivity
2015
2014
RM’000
RM’000
Fixed rate
- House financing
- Hire purchase receivables
- Other fixed rate financing
Variable rate
- BFR plus
- Cost plus
52,555
2,710,393
1,315,546
62,282
2,044,708
642,523
3,786,002
1,412,600
9,277,096
3,091,739
1,391,281
7,232,533
(vi) By economic sectors
64
2015
2014
RM’000
RM’000
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, takaful/insurance and business services
Education, health & others
Household
Others
278,908
13,037
225,820
57,371
554,160
1,170,597
218,502
206,002
566,877
1,201,117
4,761,002
23,703
9,277,096
267,052
796
234,966
53,113
579,112
603,377
201,228
135,235
753,653
523,044
3,877,834
3,123
7,232,533
7
(vii) By economic purpose
2015
2014
RM’000
RM’000
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
Construction
Working capital
Others
2,433
2,735,838
2,949
2,052,279
2,175,552
979,335
76,336
36,495
801,745
2,336,306
133,056
9,277,096
1,843,107
907,558
67,074
34,883
683,323
1,496,671
144,689
7,232,533
(viii)By geographical distribution
2015
2014
RM’000
RM’000
121,729
559,401
231,126
387,683
3,078,014
2,882,646
330,752
148,843
445,391
293,827
418,636
161,609
69,266
28,552
56
119,565
9,277,096
98,027
424,678
156,894
334,133
2,602,144
1,925,410
220,038
103,272
320,150
274,964
399,613
167,266
24,109
84,378
70
97,387
7,232,533
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Sarawak
Sabah
Labuan
Outside Malaysia
65
8
IMPAIRED FINANCING
(i) Movements of impaired financing
2015
2014
RM’000
RM’000
Classified as impaired
Reclassified as non-impaired
Amount recovered
Amount written-off
Ratio of gross impaired financing, advances and other financing to gross financing,
RIA/RPSIA financing
Less:
- Individual impairment allowance
- Collective impairment allowance on impaired financing
Total net financing, advances and other financing
Net impaired financing, advances and other financing as a percentage of net financing,
129,157
108,375
(67,897)
(18,862)
(9,065)
141,708
131,630
90,964
(54,830)
(34,076)
(4,531)
129,157
1.53%
1.79%
9,277,096
(1,316,026)
7,961,070
7,232,533
(608,590)
6,623,943
(38,516)
(12,921)
7,909,633
(31,519)
(16,273)
6,576,151
1.14%
1.24%
(ii) Movements in allowance for impairment on financing
2015
2014
RM’000
RM’000
Individual impairment
66
Allowance made during the financial year
Amount recovered
Amount written-off
Unwinding of income
Exchange differences
31,519
3,559
(47)
(2,383)
(628)
6,496
38,516
34,584
1,509
(3,782)
(1,813)
(763)
1,784
31,519
8
IMPAIRED FINANCING
(ii) Movements in allowance for impairment on financing (continued)
2015
2014
RM’000
RM’000
Collective impairment
Net allowance made during the financial year
Amount written-off
37,393
5,959
(6,681)
36,671
33,719
6,383
(2,709)
37,393
As a percentage of gross financing, advances and other financing (excluding RIA financing)
less individual assesment allowance
0.46%
0.57%
(iii) Impaired financing by economic sectors
2015
2014
RM’000
RM’000
Primary agriculture
Manufacturing
Construction
Real estate
Education, health & others
Household
348
388
85,867
1,900
301
111
142
52,651
141,708
117
2,703
70,279
358
294
626
54,780
129,157
(iv) Impaired financing by economic purpose
Purchase of transport vehicles
Purchase of landed property of which:
- Residential
- Non-residential
Personal use
Construction
Working capital
12,626
12,220
39,463
1,376
495
85,867
1,881
141,708
42,081
1,086
480
70,030
3,260
129,157
2015
2014
RM’000
RM’000
67
8
IMPAIRED FINANCING
(v) Impaired financing by geographical distribution
2015
2014
RM’000
RM’000
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Sarawak
Sabah
Outside Malaysia
9
41
1,008
1,525
3,922
28,622
5,930
2,719
482
2,078
1,345
3,918
3,633
252
366
85,867
141,708
252
1,300
1,996
4,037
29,098
5,071
2,866
175
2,699
3,446
4,309
3,362
325
189
70,032
129,157
OTHER ASSETS
2015
2014
RM’000
RM’000
Other debtors, deposits and prepayments
Cheque clearing accounts
Foreclosed properties (a)
3,062
302
395
3,759
900
47,020
395
48,315
395
395
(a) Foreclosed properties
68
At beginning/end of the financial year
10 AMOUNT DUE FROM HOLDING COMPANY
2015
2014
RM’000
RM’000
Advances to holding company
The advances to holding company are unsecured, bear no profit rate (2014: 0%) and payable on demand.
367,172
242,058
11 AMOUNT DUE FROM JOINT VENTURES
2015
2014
RM’000
RM’000
39,936
Advances to joint ventures
14,855
The advances to joint ventures are unsecured, bear profit rate of 7.85% (2014: 7.74%) and payable on demand.
12 DEFERRED TAX
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:
2015
2014
RM’000
RM’000
Deferred tax assets
Deferred tax assets:
- settled more than 12 months
- settled within 12 months
Deferred tax liabilities:
- settled more than 12 months
- settled within 12 months
Deferred tax assets
Credited to income statement (Note 29)
Credited/(charged) to equity
3,598
2,900
3,967
3,425
(206)
(163)
3,598
(220)
(305)
2,900
2,900
56
642
3,598
2,960
272
(332)
2,900
69
12 DEFERRED TAX
The movement in deferred tax assets and liabilities during the financial year are as follow:
2015
Property
and equipment
Intangible
assets
Provision for
other liabilities
Financial
instrument AFS
Total
Credited/(charged) to income
statements
Credited to equity
(311)
(214)
1,570
1,855
2,900
44
(267)
112
(102)
(100)
1,470
642
2,497
56
642
3,598
Property
and equipment
Intangible
assets
Provision for
other liabilities
Financial
instrument AFS
Total
(306)
(400)
1,479
2,187
2,960
(5)
(311)
186
(214)
91
1,570
(332)
1,855
272
(332)
2,900
2014
(Charged)/credited to income
statements
Charged to equity
13 STATUTORY DEPOSITS WITH BANK NEGARA MALAYSIA
70
The statutory deposits are maintained with Bank Negara Malaysia in compliance with Section 26(2)(c) of the Central Bank of Malaysia Act 2009,
the amounts of which are determined at set percentages of total eligible liabilities.
14 INVESTMENT IN JOINT VENTURES
Economic Entity
2015
2014
RM’000
RM’000
Unquoted shares at cost
Economic Entity’s share of post acquisition retained losses
650
(650)
-
650
(650)
-
The summarised financial information of joint ventures are as follows:
Revenue
Loss after tax
Total assets
Total liabilities
Capital commitment for property and equipment
AFFIN-i
2015
RM’000
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
650
650
650
650
2015
RM’000
2014
RM’000
14,268
(268)
269,037
275,307
-
4,920
(3,515)
216,417
222,420
-
KLSD
2015
RM’000
2014
RM’000
Net assets
Loss for the financial year
(2,714)
(1,441)
(4,155)
(1,142)
(1,572)
(2,714)
(4,732)
1,173
(3,559)
(2,789)
(1,943)
(4,732)
Issued and paid up share capital
Profit in joint venture (%)
Profit in joint venture (RM’000)
1,000
50
(2,078)
1000
50
(1,357)
500
30
(1,068)
500
30
(1,420)
Both the joint ventures’ principal activities are property development.
As the Bank’s share of cumulative losses of RM2.5 million (2014: RM2.1 million) as at 31 December 2015 has exceeded its profit in the joint
ventures, the Bank does not recognise further losses in its Economic Entity financial statements.
Allowance for impairment of investment in joint ventures
For the financial year ended 31 December 2015, the recoverable amount is assessed using the value in use calculations based on the cash flow
projections of the property development projects covering a period of 4 to 7 years based on actual historical sales, revised for current economic
and property market conditions.
The cash flow projections are derived based on a number of key factors including past performance and management’s expectations of the
property market developments. For financial year ended 31 December 2015, the value in use calculation was based on discount rate of 10%.
Impairment was not required for investment in joint ventures. The impairment charge is most sensitive to discount rate. If the discount rate
increased to 11.31% or selling price reduced by 8.27%, the estimated recoverable amount will be equal to the carrying value.
The Bank determines at each reporting date whether there is any objective evidence that the investment in the joint ventures is impaired. When
an objective evidence of impairment is identified, the investment in joint venture is tested for impairment. An impairment loss is recognised for
the amount by which the carrying amount of the joint venture exceeds its recoverable amount. The recoverable amount is assessed based on the
higher of the fair value less costs to sell and value in use.
71
14 INVESTMENT IN JOINT VENTURES
AFFIN-i Nadayu Sdn Bhd (‘AFFIN-i’)
On 1 April 2008, the Bank and Jurus Positif Sdn Bhd, a subsidiary of Nadayu Properties Berhad, entered into a Musharakah Joint Venture Agreement
under the Shariah principles (‘Musharakah Agreement’) to joint develop a land into a housing scheme at Bukit Gambir, Pulau Pinang.
The Musharakah Agreement also includes an arrangement whereby Jurus Positif Sdn Bhd may acquire the Bank’s shares upon the completion of
the project at a mutually agreed price, unless both shareholders decide to continue the joint venture for subsequent projects.
Major strategic operation and financial decisions relating to the activities of AFFIN-i Nadayu Sdn Bhd requires unanimous consent by both joint
venture parties. The Economic Entity’s interest in AFFIN-i Nadayu Sdn Bhd has been treated as investment in joint venture, which has been
accounted for in the consolidated financial statements using the equity method of accounting.
KL South Development Sdn Bhd (‘KLSD’)
On 2 January 2013, the Bank entered into a Musharakah Joint Venture Agreement (‘Musharakah Agreement’) with Albatha Bukit Kiara Holdings Sdn
Bhd (‘Albatha’), a subsidiary of Bukit Kiara Capital Sdn Bhd, to joint develop a property project namely “VERVE Suites KL South” at Jalan Klang Lama,
Kuala Lumpur.
Pursuant to the Musharakah Agreement, the Bank acquired 30% stake in the joint venture company namely KL South Development Sdn Bhd (‘KL
South’) by way of subscription of 150,000 shares of RM1.00 each in KL South at par. The remaining stake of 70% in KL South is held by Albatha.
Under the Musharakah structure, the Bank would be the sole banker to KL South, providing financing using the Islamic concept such as Ijarah for
the purchase of building and Istisna’ for the bridging financing.
Major strategic operation and financial decisions relating to the activities of KL South requires consent by both joint venture parties. The Bank’s
interest in KL South has been treated as investment in joint venture, which has been accounted for in the consolidated financial statements using
the equity method of accounting.
KL South has commenced operations and the project is scheduled for completion by mid 2016.
72
15 PROPERTY AND EQUIPMENT
2015
Renovation
RM’000
Office
equipment
and
furniture
RM’000
Computer
equipment
and
software
RM’000
Motor
vehicles
RM’000
Total
RM’000
Cost
3,429
2,334
2,362
496
8,621
Additions
87
22
299
-
408
Write-off
(5)
(14)
-
-
(19)
Reclassification from/(to) holdings company
-
1
(179)
-
(178)
3,511
2,343
2,482
496
8,832
2,380
1,037
1,794
149
5,360
418
231
285
99
1,033
(5)
(6)
-
-
(11)
-
-
(163)
-
(163)
2,793
1,262
1,916
248
6,219
718
1,081
566
248
2,613
Renovation
RM’000
Office
equipment
and
furniture
RM’000
Computer
equipment
and
software
RM’000
Motor
vehicles
RM’000
Total
RM’000
2,864
2,008
2,107
954
7,933
567
342
255
-
1,164
Accumulated depreciation
Charge for the financial year
Write-off
Reclassification from/(to) holdings company
Net book value at end of the financial year
2014
Cost
Additions
-
-
-
(458)
(458)
Write-off
(2)
(16)
-
-
(18)
3,429
2,334
2,362
496
8,621
2,005
829
1,545
508
4,887
376
221
249
99
945
Accumulated depreciation
Disposal
-
-
-
(458)
(458)
Write-off
(1)
(13)
-
-
(14)
2,380
1,037
1,794
149
5,360
1,049
1,297
568
347
3,261
Disposals
73
16 INTANGIBLE ASSETS
Computer software
2015
2014
RM’000
RM’000
Cost
6,402
6,402
Less: Accumulated amortisation
5,511
4,736
465
775
5,976
5,511
426
891
17 DEPOSITS FROM CUSTOMERS
(i) By type of deposit
2015
2014
RM’000
RM’000
Non-Mudharabah
Demand deposits
2,435,998
2,664,058
Savings deposits
412,394
395,338
-
249,412
6,413,389
5,190,631
630,118
1,030,814
109,796
340,141
10,001,695
9,870,394
Negotiable islamic debt certificate (‘NIDC’)
Murabahah term deposits
Commodity Murabahah
Mudharabah
General investment deposits
(ii) Maturity structure of Murabahah term deposits, general investment deposits and NIDC
74
2015
2014
RM’000
RM’000
Due within six months
4,781,599
4,569,492
1,630,224
973,791
111,216
236,252
146
649
6,523,185
5,780,184
17 DEPOSITS FROM CUSTOMERS
(iii) By type of customer
2015
2014
RM’000
RM’000
Government and statutory bodies
2,945,481
3,399,344
Business enterprises
4,004,165
3,777,844
Individuals
1,278,221
1,192,904
814
249,413
Domestic banking institutions
1,313,150
976,957
Foreign entities
64,584
60,455
Others entities
395,280
213,477
10,001,695
9,870,394
Domestic non-banking financial institutions
18 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS
2015
2014
RM’000
RM’000
Mudharabah
Licensed banks (*)
1,967,535
1,446,838
405,175
598,882
2,372,710
2,045,720
Due within six months
1,558,905
1,710,730
202,205
-
-
228,787
100,375
106,203
Other financial institutions
Maturity structure of deposits
Over five years
*
511,225
-
2,372,710
2,045,720
Inclusive of Restricted Investment Account-i (‘RIA-i’) placed by the parent amounting to RM1,331.3 million. These investments are used to
fund certain specific financing. The RIA-i is a contract based on the Mudharabah principle between two parties to finance a financing where
the investor (i.e.’AFFIN BANK’) solely provides capital and the business venture is managed solely by the enterpreneur (i.e. ‘AFFIN Islamic’).
The profit of the business venture is shared between both parties based on pre-agreed ratio. Losses shall be borned by the investor.
75
19 DERIVATIVE FINANCIAL LIABILITIES
2015
2014
Contract/
notional amount
RM’000
Liabilities
RM’000
Contract/
notional amount
RM’000
Liabilities
RM’000
160,810
1,035
11,072
34
160,810
1,035
11,072
34
At fair value
Foreign exchange derivatives
- Currency forwards
20 OTHER LIABILITIES
2015
2014
RM’000
RM’000
Margin and collateral deposits
13,000
10,996
5,370
7,211
13,621
-
Sundry creditors
8,292
7,383
Provision for zakat
2,307
4,040
Defined contribution plan (a)
1,143
702
Other creditors and accruals
Cheque clearing accounts
Accrued employee benefits (b)
Charity funds (c)
23
23
363
3
44,119
30,358
(a) Defined contribution plan
The Bank contributes to the Employee Provident Fund (‘EPF’), the national defined contribution plan. Once the contributions have been paid,
the Bank has no further payment obligations.
(b) Accrued employee benefits
76
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.
20 OTHER LIABILITIES
(c) Charity funds
2015
RM’000
2014
RM’000
3
43
360
1
- Contribution to medical aid
-
16
- Contribution to education
-
15
- Contribution to non profit organisation
-
10
-
41
363
3
Sources and uses of charity funds
Sources of charity funds
- Non-Islamic/prohibited income
Uses of charity funds
The source of charity fund comes from purification of fees income earned from use of debit card at certain merchants that involve mixed of
Shariah compliant and non-Shariah compliant products and services. The charity fund was channeled to a number of charitable or public
purposes for example centre of disabled children, association for less fortunate ex-government servants and module development for Islamic
financial learning program.
The Bank does not charge gharamah for its financing facilities.
21 SHARE CAPITAL
Number of ordinary
shares of RM 1 each
2014
‘000
2015
RM ‘000
2014
RM ‘000
1,000,000
1,000,000
1,000,000
1,000,000
360,000
360,000
360,000
360,000
100,000
-
100,000
-
460,000
360,000
460,000
360,000
Authorised
Issued and fully paid
2015
‘000
77
22RESERVES
Retained profits
AFS revaluation reserves
Statutory reserves
Regulatory reserves
Economic Entity
2015
RM’000
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
195,606
162,594
196,256
163,244
(7,908)
(5,876)
(7,908)
(5,876)
248,717
206,324
248,717
206,324
58,400
49,020
58,400
49,020
494,815
412,062
495,465
412,712
Statutory reserves
206,324
173,026
206,324
173,026
Transfer from retained profits
42,393
33,298
42,393
33,298
248,717
206,324
248,717
206,324
(a) As at 31 December 2015, the Bank has tax exempt account balance of RM13,322,724 (2014: RM11,869,772) under Section 12 of the Income
Tax (Amendment) Act 1999, subject to agreement by the Inland Revenue Board.
(b) The statutory reserves of the Bank are maintained in compliance with Section 57(2)(f) of the Islamic Financial Services Act 2013 and is 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 to the income statement upon disposal or when the securities become
impaired. The depositors’ portion of net unrealised gains or losses on ‘Available-for-sale’ at the end of financial year is net unrealised losses
of RM9,711,083 (2014: net unrealised losses of RM7,217,763).
(d) The Bank is required to maintain in aggregate collective impairment allowances and regulatory reserves of no less than 1.2% of total
outstanding financing, advances and other financing, net of individual impairment allowances.
23 INCOME DERIVED FROM INVESTMENT OF DEPOSITORS’ FUNDS AND OTHERS
2015
2014
RM’000
RM’000
Income derived from investment of:
78
- General investment deposits (a)
356,462
302,102
- Other deposits (b)
200,075
170,894
556,537
472,996
a) Income derived from investment of general investment deposits
2015
RM’000
2014
RM’000
249,153
199,330
29,643
27,791
Finance income and hibah
Money at call and deposits with financial institutions
Accretion of discount less amortisation of premium
Total finance income and hibah
3,346
3,472
49,017
53,556
331,159
284,149
4,591
3,698
335,750
287,847
Other operating income
Fee income:
Commission
1,143
946
Service charges and fees
3,257
3,589
Guarantee fees
1,286
1,156
5,686
5,691
1,334
737
1,334
737
12,221
6,468
Income from financial instruments:
Gain on sale of financial investments available-for-sale
Other income:
Foreign exchange profit
- realised
- unrealised
Other non-operating income
Total income derived from investment of general investment deposits
(527)
(28)
1,998
1,387
13,692
7,827
356,462
302,102
79
b) Income derived from investment of other deposits
2015
RM’000
2014
RM’000
139,845
112,757
16,638
15,721
Money at call and deposits with financial institution
1,878
1,964
27,512
30,296
185,873
160,738
2,577
2,092
188,450
162,830
Fee income:
Commission
Guarantee fees
642
535
1,828
2,030
721
654
3,191
3,219
749
417
749
417
6,860
3,659
Other income:
- realised
- unrealised
Total income derived from investment of other deposits
80
(296)
(16)
1,121
785
7,685
4,428
200,075
170,894
24 INCOME DERIVED FROM INVESTMENT OF SHAREHOLDERS’ FUNDS
2015
RM’000
2014
RM’000
27,800
22,161
3,308
3,090
Money at call and deposits with financial institutions
373
386
5,469
5,954
36,950
31,591
512
411
37,462
32,002
Fee income:
Commission
128
105
363
399
Guarantee fees
143
129
634
633
149
82
149
82
1,364
719
Other income:
- realised
- unrealised
(59)
(3)
223
153
1,528
869
39,773
33,586
Total income derived from investment of shareholders’ funds
25 ALLOWANCES FOR IMPAIRMENT LOSSES ON FINANCING, ADVANCES AND OTHER FINANCING
2015
RM’000
2014
RM’000
3,559
1,509
(47)
(3,782)
5,959
6,383
(966)
(395)
- made during the financial year
- written-back
- net allowance made during the financial year
Bad debts on financing:
-recovered
- written-off
7
10
8,512
3,725
81
26 INCOME ATTRIBUTABLE TO THE DEPOSITORS
2015
2014
RM’000
RM’000
- mudharabah
- non-mudharabah
Deposits and placement of banks and other financial institutions
- mudharabah
Others
4,252
262,684
79,254
153,708
89,081
356,017
57,275
391
290,628
27 OTHER OPERATING EXPENSES
2015
2014
RM’000
RM’000
Personnel costs (a)
Establishment costs (b)
Marketing expenses (c)
Administrative and general expenses (d)
71,067
31,073
2,287
9,979
114,406
75,340
32,596
2,772
9,315
120,023
(a) Personnel costs
2015
2014
RM’000
RM’000
Wages, salaries and bonuses
Defined contribution plan (‘EPF’)
Other personnel costs
54,457
9,117
7,493
71,067
59,099
9,629
6,612
75,340
(b) Establishment costs
82
2015
2014
RM’000
RM’000
Rental of premises
Equipment rental
Repair and maintenance
Depreciation of property and equipment
Amortisation of intangible assets
IT consultancy fees
Dataline rental
Security services
Electricity, water and sewerage
Licence fees
Insurance/takaful and indemnities
Other establishment costs
4,604
87
5,503
1,033
465
8,953
949
3,151
1,578
366
1,459
2,925
31,073
4,904
60
5,667
945
775
9,757
724
3,785
1,920
214
517
3,328
32,596
27 OTHER OPERATING EXPENSES
(c) Marketing expenses
2015
2014
RM’000
RM’000
Business promotion and advertisement
Entertainment
Traveling and accommodation
Other marketing expenses
769
285
773
460
2,287
1,020
425
838
489
2,772
(d) Administration and general expenses
2015
2014
RM’000
RM’000
Telecommunication expenses
Auditors’ remuneration
Professional fees
Property and equipment written-off
Mail and courier charges
Stationery and consumables
Commissions expenses
Brokerage expenses
Directors’ fees and allowances
Donations
Settlement, clearing and bank charges
Stamp duties
Operational and litigation write-off expenses
GST Input tax-non recoverable
Other administration and general expenses
846
251
1,052
7
502
2,294
537
1,205
1,263
113
813
3
20
1,030
43
9,979
1,168
454
1,017
4
717
2,435
259
688
1,299
232
572
4
466
9,315
The expenditure includes the following statutory disclosures:
Directors’ remuneration (Note 28)
Auditors’ remuneration
- statutory audit fees
- over provision prior year
2,676
158
(12)
2,901
159
-
- audit related fees
146
146
- non-audit fees
- over provision prior year
15
(56)
149
-
2015
2014
RM’000
RM’000
83
28 CEO, DIRECTORS AND SHARIAH COMMITTEE MEMBERS’ REMUNERATION
The CEO and Directors of the Bank who have held office during the period since the date of the last report are:
CEO
Kamarul Ariffin Bin Mohd Jamil
(Resigned w.e.f. 31.3.2015)
Nazlee Bin Khalifah
(Appointment w.e.f. 3.6.2015)
Non-Executive Directors
Jen. Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) (Chairman)
The aggregate amount of remuneration for the CEOs, Directors and Shariah Committee members of the Bank for the financial year are as follows:
2015
RM’000
2014
RM’000
Salaries
421
645
Bonuses
709
678
CEO
191
218
Other employee benefits
79
43
Benefits-in-kind
13
88
1,176
1,117
4
2
83
110
2,676
2,901
Fees
Benefits-in-kind
Shariah Committee fees
84
Shariah fees
Directors’ remuneration (Note 27)
28 CEO, DIRECTORS AND SHARIAH COMMITTEE MEMBERS’ REMUNERATION
A summary of the total remuneration of the CEO and Directors, distinguishing between Executive and Non-Executive Directors.
Shariah
Fees
RM’000
Total
RM’000
146
124
270
10
3
13
-
994
419
1,413
152
-
-
-
152
-
157
-
-
-
157
-
-
187
160
143
-
2
-
-
189
160
143
-
-
215
162
1,176
-
2
4
83
83
217
245
1,263
421
709
1,176
270
17
83
2,676
2014
Salaries
RM’000
Bonuses
RM’000
* Other
Directors’
Fees emoluments
RM’000
RM’000
Benefitsin-kind
RM’000
Shariah
Fees
RM’000
Total
RM’000
CEO
Total
645
645
678
678
-
261
261
88
88
-
1,672
1,672
-
-
151
-
-
-
151
-
-
160
-
-
-
160
-
-
189
162
148
68
94
-
2
-
34
76
191
162
148
102
170
-
-
145
1,117
-
2
110
145
1,229
645
678
1,117
261
90
110
2,901
CEO
Nazlee Bin Khalifah
Total
Jen. Tan Sri Dato’ Seri Ismail Bin
Haji Omar (Bersara)
Tan Sri Dato’ Seri Lodin Bin Wok
Kamaruddin
Laksamana Madya Tan Sri Dato’ Seri Ahmad
Ramli Bin Mohd Nor (Bersara)
Tan Sri Dato’ Sri Abdul Aziz Bin
Abdul Rahman
Total
Grand Total
Non-executive Directors
Jen. Tan Sri Dato’ Seri Ismail Bin
Haji Omar (Bersara)
Tan Sri Dato’ Seri Lodin Bin Wok
Kamaruddin
Laksamana Madya Tan Sri Dato’ Seri Ahmad
Ramli Bin Mohd Nor (Bersara)
Dr. Asyraf Wajdi Bin Dato’ Dusuki
Tan Sri Dato’ Sri Abdul Aziz Bin
Abdul Rahman
Total
Grand Total
*
* Other
Directors’
Fees emoluments
RM’000
RM’000
Salaries
RM’000
Bonuses
RM’000
165
256
421
673
36
709
-
-
-
-
Executive Director’s other emoluments include allowance and EPF
Benefitsin-kind
RM’000
2015
85
29TAXATION
2015
RM’000
2014
RM’000
28,364
22,407
Under/(over) provision in prior year
503
(1,847)
Deferred tax (Note12)
(56)
(272)
28,811
20,288
%
%
25.00
25.00
0.11
(0.35)
1.52
(0.64)
(0.41)
(0.23)
0.43
24.55
(0.42)
(2.13)
0.02
23.35
Malaysian income tax
Current tax
Numerical reconciliation between the average effective tax rate and the Malaysia tax rate:
Malaysian tax rate
Tax effect of :
Non-allowable expense
Non taxable income
Tax saving arising from income exempt from tax
for International Currency Business Unit (ICBU)
Prior year deferred tax is not recognised, now recognised
Under/(over) provision in prior years
Change in tax
Average effective tax rate
30 EARNINGS PER SHARE
The basic earnings per ordinary share for the Economic Entity and the Bank have been calculated based on the net profit attributable to ordinary
equity holders of the Economic Entity and the Bank of RM84,785,000 (2014: RM66,596,000). The weighted average number of shares in issue
during the financial year of 360,548,000 (2014: 360,000,000) is used for the computation.
31 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
86
Related parties
Relationships
Lembaga Tabung Angkatan Tentera (‘LTAT’)
AFFIN Holdings Berhad (‘AHB’)
Ultimate holding corporate body, which is Government-Link
Investment Company (‘GLIC’) of the Government of Malaysia
Penultimate holding company
AFFIN Bank Berhad (‘ABB’)
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 penultimate holding company
Subsidiaries of ABB as disclosed in its financial statements
Subsidiary companies of the holding company
Joint ventures as disclosed in Note 14
Joint ventures with AFFIN Islamic Bank Berhad
Key management personnel
The key management personnel of the Bank consist of:
-Directors
- Chief Executive Officer
- Member of Senior Management team
- Close family members and dependents of key management personnel
- Entities that are controlled, jointly controlled or for which significant
voting power in such entity resides with, directly or indirectly by key
management personnel or its close family members
Related parties of key management personnel (deemed as related
to the Bank)
Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the
Bank either directly or indirectly.
The Bank do not have any individually or collectively significant transactions outside the ordinary course of business with the Government of
Malaysia and government related entities. In addition to related party disclosures mentioned elsewhere in the financial statements, set out below
are other significant related party transactions and balances.
(a) Related parties transactions and balances
Ultimate holding
corporate body
2015
2014
RM’000
RM’000
Penultimate
holding company
2015
2014
RM’000
RM’000
Holding
companies
2015
2014
RM’000
RM’000
Income
Income on deposits and placement
with banks and other financial
institutions
-
-
-
-
-
36
-
-
-
-
-
36
Profit paid on Murabahah term
deposit (TD)
-
6
-
-
-
-
Profit paid on deposits and
placement of banks and other
-
-
-
-
1,256
487
Profit paid on RIA/RPSIA
-
-
-
-
47,846
27,917
Expenditure
Other expenditure
-
-
-
-
73,305
81,851
-
6
-
-
122,407
110,255
Other related
companies
2015
2014
RM’000
RM’000
Companies in which
certain Directors have
substantial interest
2015
2014
RM’000
RM’000
Key management
personnel
2015
2014
RM’000
RM’000
Income
6,589
7,048
-
-
16
-
6,589
7,048
-
-
16
-
5,377
6,057
-
-
-
-
8
8
-
-
115
74
3,485
1,524
-
-
-
-
Expenditure
Profit paid on Murabahah term
deposit (TD)
Profit paid on general investment
deposits (GIA)
Profit paid on Commodity
murabahah
Profit paid on special investment
deposits (SIA)
Other expenditure
-
1,400
-
-
-
-
104
71
-
-
-
-
8,974
9,060
-
-
115
74
Income on financing, advances and
other financing
87
(a) Related parties transactions and balances (continued)
Ultimate holding
corporate body
2015
2014
RM’000
RM’000
Penultimate
holding company
2015
2014
RM’000
RM’000
Holding
companies
2015
2014
RM’000
RM’000
Amount due from
Intercompany balances
-
-
-
-
367,172
242,058
-
-
-
-
367,172
242,058
1,172
1,602
-
-
-
-
-
-
-
-
-
826,689
Amount due to
Demand and saving deposits
Special investment deposits (SIA)
Deposits and placement of banks
and other financial institutions
-
-
-
-
84,001
68,741
PSIA/RPSIA/RIA
-
-
-
-
1,331,318
-
1,172
1,602
-
-
1,415,319
895,430
-
-
-
-
-
-
Commitment
Other related
companies
2015
2014
RM’000
RM’000
Companies in which
certain Directors have
substantial interest
2015
2014
RM’000
RM’000
Key management
personnel
2015
2014
RM’000
RM’000
Amount due from
Income on financing,advances and
other financing
448,742
433,480
-
-
374
-
39,936
14,855
-
-
-
-
488,678
448,335
-
-
374
-
Demand and saving deposits
24,045
20,025
596
144
2,627
1,863
Murabahah term deposit (TD)
204,905
187,940
-
-
5,325
-
261
253
-
-
-
2,894
Intercompany balances
Amount due to
88
General investment deposits (GIA)
Commodity Murabahah
Commitments and contingencies
99,544
-
-
-
-
-
328,755
208,218
596
144
7,952
4,757
47,212
67,065
-
-
-
-
No impairment allowances were required at the Bank in 2015 and 2014 for financing, advances and other financing made to key management
personnel.
(b) Key management personnel compensation
2015
RM’000
2014
RM’000
1,176
1,117
4
2
Directors’ fees and allowances
Fees
Benefits-in-kind
83
110
1,263
1,229
Salaries
631
645
Bonuses
739
678
237
218
Other employee benefits
133
43
Shariah fees
Short-term employment benefits
Benefits-in-kind
13
88
1,753
1,672
Included in the above table is CEO and directors’ remuneration as disclosed in Note 28.
89
32 COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities with legal recourse to their
customers. No material losses are anticipated as a result of these transactions. These commitments and contingencies are not secured over the
assets of the Bank.
The commitments and contingencies consist of:
Principal
amount
2015
RM’000
Principal
amount
2014
RM’000
9,383
9,936
Transaction-related contingent items (*)
147,960
152,164
Short-term self-liquidating trade related contingencies
368,567
401,519
1,387,337
1,212,792
348,409
312,478
15,321
-
Direct credit substitutes (*)
Irrevocable commitments to extend credit:
- maturity less than one year
- maturity more than one year
Any commitments that are unconditionally cancelled at any time by the bank without prior notice
or that effectively provide for automatic cancellation due to deterioration in a customer’s
creditworthiness
Foreign exchange related contracts (#):
222,777
24,032
- one year to less than five years
-
-
- five year and above
-
-
2,499,754
2,112,921
- less than one year
*
Included in direct credit substitutes as above are financial guarantee contracts of RM9.4 million at the Bank (2014: RM9.9 million), of which
fair value at the time of issuance is zero.
#
The fair value of these derivatives have been recognised as “derivative financial assets” and “derivative financial liabilities” in the statement
of financial position and disclosed in Note 4 and 19 to the financial statements.
33 FINANCIAL RISK MANAGEMENT
(i) Credit risk
90
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 financing, advances and other financing, financing commitments arising from
such financing 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 risk in the Bank is governed by a set of approved credit policies, guidelines and procedures. 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, headed by Group Chief Risk Officer (‘GCRO’) with 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.
Financing 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 Annual Credit Plan. The Annual Credit Plan is reviewed
at least annually and approved by the BRMC.
(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 with 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 applications. The scorecards are used as a decision support tool at financing 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 profit 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.
Financing limits
The Bank establishes internal limits and related financing guidelines to manage large exposures and avoid undue concentration of credit
risk in its credit portfolio. The limits include single customer groupings, large exposures, connected parties, and industry segments. These
risks are monitored regularly and the limits reviewed annually or sooner depending on market and economic conditions when considered
appropriate.
The credit risk exposure for derivative and financing books is managed as part of the overall financing limits with customers together with
potential exposure from market movements.
Collateral
Credits are established against customer’s capacity to pay 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:-
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 securities.
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 financing.
Credit Related Commitments
Commitment to extend credit represents unutilised portion of approved credit in the form of financing, 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.
-
-
-
-
91
(i)
Credit risk (continued)
Credit risk monitoring
Retail credits are actively monitored and managed on a portfolio basis by product type. A collection management system is 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 any signs of weaknesses or deterioration in the credit quality are detected. Remedial
action is taken where evidence of deterioration emanates.
Early Alert Process is in place 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.
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 Bank would have to pay if the guarantee was to
be called upon. For financing commitments and other credit related commitments, the maximum exposure to credit risk is the full amount of
the undrawn credit facilities granted to customers.
All financial assets of 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-for-sale, as well as non-financial assets.
The exposure to credit risk of the Bank equals their carrying amount in the statement of financial position as at reporting date, except for the
followings:
2015
2015
Carrying Value
RM’000
Maximum
Credit Exposure
RM’000
1,475,373
1,474,848
3,759
3,045
9,383
9,383
Credit risk exposures of on-balance sheet assets:
#
Other assets
Credit risk exposure of off-balance sheet items:
92
Financial guarantees
^
Financing commitments and other credit related commitments
^
Total maximum credit risk exposure
2,267,594
599,365
3,756,109
2,086,641
Maximum exposure to credit risk (continued)
2014
2014
Carrying Value
RM’000
Maximum
Credit Exposure
RM’000
1,532,500
1,532,475
48,315
47,424
Credit risk exposures of on-balance sheet assets:
#
Other assets
Credit risk exposure of off-balance sheet items:
Financial guarantees
^
9,936
9,936
Financing commitments and other credit related commitments
^
2,078,953
555,183
3,669,704
2,145,018
Total maximum credit risk exposure
The following have been excluded for the purpose of maximum credit risk exposure calculation:
# investment in quoted and unquoted shares
^ amount stated at notional value
Whilst the Bank’s maximum exposure to credit risk is the carrying value of the assets, or in the case of off-balance 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 financing, advances and other financing of the Bank is 74% (2014: 72%). The financial effects of
collateral for the other financial assets are insignificant.
93
94
-
-
Agriculture
Manufacturing
Construction
Real estate
-
-
Others
35,034
-
-
Wholesale & retail trade and restaurants
& hotels
1,918,570
-
Government and government agencies
Total assets
35,034
7,500
1,911,070
Finance, takaful/insurance and business
services
2015
Cash and
short-term
funds
RM’000
132
-
-
-
132
-
-
-
-
-
-
-
Derivative
financial
assets
RM’000
1,474,848
-
-
1,091,486
257,118
45,669
-
-
-
80,575
-
-
Financial
investments
availablefor-sale
RM’000
76,283
-
-
-
76,283
-
-
-
-
-
-
-
Financial
investments
held-tomaturity
securities
RM’000
9,201,909
5,352,200
216,538
603,070
565,751
205,152
1,133,968
551,695
57,205
224,726
12,998
278,606
Financing,
advances
and other
financing
RM’000
3,045
3,045
-
-
-
-
-
-
-
-
-
-
Other
assets
RM’000
12,709,821
5,355,245
216,538
3,605,626
941,818
250,821
1,133,968
551,695
57,205
305,301
12,998
278,606
On
balance
sheet
total
RM’000
608,748
52,809
81,390
137,420
24,672
57,193
42,352
122,470
625
78,911
2,288
8,618
Commitments
and
contingencies
RM’000
The credit risk concentrations of the Bank, by industry concentration, are set out in the following tables:
Deposits and
placements
with banks
and other
financial
institutions
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 concentration
-
Manufacturing
Construction
Real estate
3,333,472
Others
Total assets
-
2,847,385
Government and government agencies
486,087
-
-
Cash and
short-term
funds
RM’000
Agriculture
2014
Credit risk concentration (continued)
95
12
-
2
-
10
-
-
-
-
-
-
-
Derivatives
financial assets
RM’000
1,532,475
-
10,216
1,164,251
303,519
54,489
-
-
-
-
-
-
Financial
investments
availablefor-sale
RM’000
82,754
-
-
-
82,754
-
-
-
-
-
-
-
Financial
investments
held-tomaturity
securities
RM’000
7,163,621
4,315,007
200,430
59,176
751,507
134,698
602,275
548,663
52,959
231,442
792
266,672
Financing,
advances
and other
financing
RM’000
47,424
47,424
-
-
-
-
-
-
-
-
-
-
Other
assets
RM’000
12,159,758
4,362,431
210,648
4,070,812
1,623,877
189,187
602,275
548,663
52,959
231,442
792
266,672
On
balance
sheet
total
RM’000
565,119
77,643
14,213
146,385
22,956
30,561
30,804
156,035
-
79,742
-
6,780
Commitments
and
contingencies
RM’000
Collaterals
The main types of collateral obtained by the Bank are as follows:
- for personal house financing, mortgages over residential properties;
- for commercial property financing, charges over the properties being financed;
- for hire purchase facilities, charges over the vehicles or plant and machineries financed; and
- for other financing, charges over business assets such as premises, inventories, trade receivables or deposits.
Total financing, advances and other financing - credit quality
All financing, advances and other financing are categorised into “neither past due nor impaired”, “past due but not impaired” and “impaired”.
Past due financing refer to financing that are overdue by one day or more. Impaired financing are financing with months-in-arrears more than
3 months (i.e 90 days) or with impairment allowances.
Distribution of financing, advances and other financing by credit quality
2015
RM’000
2014
RM’000
8,607,759
6,622,943
Past due but not impaired (b)
527,629
480,433
Impaired (c)
141,708
129,157
9,277,096
7,232,533
(38,516)
(31,519)
Neither past due nor impaired (a)
less: Allowance for impairment
-Individual
-Collective
Net financing, advances and other financing
(36,671)
(37,393)
9,201,909
7,163,621
(a) Financing neither past due nor impaired
Analysis of financing, advances and other financing that are neither past due nor impaired analysed based on the Bank’s internal credit
grading system is as follows:
96
2015
RM’000
2014
RM’000
8,571,615
6,622,745
Quality classification
Satisfactory
Special mention
36,144
198
8,607,759
6,622,943
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 which are under the
monitoring of early alert and watchlist committee.
Total financing, advances and other financing - credit quality (continued)
(b) Financing past due but not impaired
Certain financing, advances and other financing are past due but not impaired as the collateral values of these financing are in excess of
the principal and profit outstanding. Allowances for these financing may have been set aside on a portfolio basis. The Bank’s financing,
advances and other financing which are past due but not impaired are as follows:
2015
RM’000
2014
RM’000
Past due up to 30 days
241,430
211,939
Past due 31-60 days
212,980
193,658
Past due 61-90 days
73,219
74,836
527,629
480,433
(c) Financing impaired
2015
RM’000
2014
RM’000
Gross impaired financing
141,708
129,157
Individually impaired financing
102,199
82,962
Analysis of impaired assets:
Collateral and other credit enhancements obtained
During the year, the Bank has obtained the following assets by taking possession of collateral held as security or calling upon other credit
enhancements.
2014
RM’000
395
395
Nature of assets
Industrial and residential properties
Deposits and short-term funds, private debt securities/sukuk, treasury bills and derivatives - credit quality
Private debt securities/sukuk, 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 Bank mainly uses external credit ratings provided by RAM,
MARC, Standard & Poor’s or Moody’s.
The table below presents the deposits and short-term funds, private debt securities/ sukuk, treasury bills and other eligible bills that neither
past due nor impaired and impaired, analysed by rating.
2015
RM’000
97
98
273,219
553,243
25,004
501,536
79,139
284,878
120,169
153,526
4,011,638
297,272
95,004
202,258
10
AA- to AA+
RM’000
106,787
71,360
35,034
132
261
AA- to AA+
RM’000
3,804
-
3,804
-
A- to A+
RM’000
7,239
-
-
7,239
A- to A+
RM’000
82,754
82,756
-
2
Unrated
RM’000
76,283
76,283
-
-
-
Unrated
RM’000
82,754
4,948,713
25,004
501,536
79,139
284,878
120,169
521,749
3,333,472
12
Total
RM’000
76,283
3,504,867
613,857
187,219
165,280
508,492
35,034
132
1,918,570
Total
RM’000
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.
Deposits and short-term funds, private debt securities, treasury bills and derivatives which are past due but not impaired is not significant.
280,024
-
2,847,386
-
312,001
3,002,557
Short-term funds
Derivative financial assets
Malaysian Government treasury bills
Bank Negara Malaysia Monetary Notes
Khazanah Sukuk
Private debt securities
312,001
613,857
187,219
165,280
125,131
AAA
RM’000
-
-
Sovereign
RM’000
-
1,911,070
Short-term funds
Deposits and placements with banks and other financial
institutions
Khazanah Sukuk
2014
AAA
RM’000
Sovereign
RM’000
2015
The table below presents the deposits and short-term funds, private debt securities, treasury bills and other eligible bills that neither past due nor impaired and impaired, analysed by rating:
Other financial assets - credit quality
Other financial assets of the Bank is neither past due nor impaired are summarised as below:
Short-term funds
Deposits and placements with banks and other financial institutions
Other assets
2015
RM’000
2014
RM’000
1,918,570
3,333,472
35,034
-
3,045
47,424
367,172
242,058
39,936
14,855
Other financial assets that are past due but not impaired or impaired are not significant.
(ii) Market risk
Market risk is the potential loss arising from movements in market variables such as profit rates and foreign exchange rates. The exposure to
market risk results largely from profit rate and foreign exchange rate risks.
The market risk management framework encompasses the following approaches:
Risk control parameters are established based on risk appetite, market liquidity and business strategies as well as macroeconomic conditions.
These parameters are reviewed at least annually.
Market risk stemming from the Trading book is primarily controlled through the imposition of Stop-loss and Value-at-Risk (‘VaR’) Risk Control
Parameters.
Profit rate risk is quantified by analysing the repricing mismatch between the rate sensitive assets and rate sensitive liabilities. Based on
the repricing mismatch, Earnings-at-Risk (‘EaR’) or Net Profit Margin (‘NPM’) simulation is conducted to assess the variation in short term
earnings.
In addition, the potential long term impact arising from the Bank’s exposures is also tracked by assessing the impact on Economic Value of
Equity (‘EVE’), also known as Economic Value-at-Risk (‘EVaR’).
Periodic stress tests are conducted to quantify market risk arising from abnormal market movements.
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 profit rates and foreign exchange rates that could affect values of financial
instruments.
The Bank adopts Historical Pricing Simulation Method (‘HPS’) to compute potential loss or Value-at-Risk (‘VaR’) amount. The HPS Method
uses the relative change of historical prices to estimate future potential changes in the market value of outstanding positions. The Bank
currently adopts 250 simulated business days for its HPS VaR computation. After applying these price changes to the outstanding portfolios,
250 simulated market values for the portfolio are generated and the change in the day-to-day market value is taken as simulated Profit &
Loss (‘P&L’) for the portfolio. Since VaR calculates the worst expected loss over a given day horizon and confidence level under normal market
condition, the 250 simulated values are sorted from the lowest to the highest simulated P&L. The VaR focuses on the tail of the distribution
(i.e the loss figures) at the 99th percentile.
Value-at-Risk (‘VaR’)
99
(ii) Market risk (continued)
Other risk measures
(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 abnormal market movements. Stress tests measure the
changes in values arising from extreme movements in profit rates and foreign exchange rates based on past experience and simulated
stress scenarios.
Profit rate sensitivity
The table below shows the sensitivity for the financial assets and financial liabilities held as at reporting date.
(i) Impact on profit after tax is measured using Repricing Gap Simulation methodology based on 100 basis points parallel shifts in profit
rate.
(ii) Impact in equity represents the changes in fair values of fixed income instruments held in available-for-sale portfolio arising from the
shift in the profit rate.
2015
(13.9)
13.9
Impact on equity
45.2
(48.1)
+100
basis point
RM million
-100
basis point
RM million
7.5
(7.5)
(30.6)
32.2
Impact on profit after tax
Impact on equity
-100
basis point
RM million
Impact on profit after tax
2014
100
+100
basis point
RM million
Foreign exchange risk sensitivity analysis
An analysis of the exposure to assess the impact of a one per cent change in exchange rate to the profit after tax are as follows:
2015
RM’000
2014
RM’000
+1%
370
343
United States Dollar
2,034
1,823
Great Britain Pound
131
10
Euro
Australian Dollar
Others
6
12
1,029
1,003
3,570
3,191
-1%
(370)
(343)
United States Dollar
(2,034)
(1,823)
Great Britain Pound
(131)
(10)
(6)
(12)
(1,029)
(1,003)
(3,570)
(3,191)
Euro
Australian Dollar
Others
Foreign exchange risk
The Bank takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.
Thresholds are set on the level of exposure by currency and in aggregate for both overnight and intra-day positions, which are monitored daily.
The following table summarises the Bank’s exposure to foreign currency exchange rate risk as at reporting date. Included in the table are the
Bank’s financial instruments at carrying amounts, categorised by currency.
101
102
(9,969)
281,188
(8,152)
57,432
Net on-balance sheet financial position
Off balance sheet commitments
576
27
97,361
84,001
9,386
12,784
9,359
Total financial liabilities
Derivative financial liabilities
Deposits and placements of banks and other financial institutions
Liabilities
87,392
84,444
-
1,234
120
-
Total financial assets
2,828
1,234
Euro
RM’000
United
States
Dollar
RM’000
Assets
2015
Foreign exchange risk
15,654
1,832
51
44
-
7
1,883
-
-
1,883
Great
Britain
Pound
RM’000
596
257
4
-
-
4
261
-
-
261
Australian
Dollar
RM’000
933
(182)
5
-
-
5
(177)
-
-
(177)
Japanese
Yen
RM’000
137,583
(1,119)
2,592
-
-
2,592
1,473
-
1
1,472
Others
RM’000
493,386
(17,333)
109,399
647
84,001
24,751
92,066
84,444
121
7,501
Total
RM’000
-
45,122
561
Net on-balance sheet financial position
Off balance sheet commitments
3
20
Total financial liabilities
-
17
Deposits and placements of banks and other financial institutions
Liabilities
581
-
Total financial assets
581
Euro
RM’000
Assets
2014
Foreign exchange risk (continued)
103
162,991
80,109
68,864
11
68,741
112
148,973
145,971
5
2,997
United
States
Dollar
RM’000
544
798
10
-
-
10
808
-
-
808
Great
Britain
Pound
RM’000
1,146
482
10
3
-
7
492
-
-
492
Australian
Dollar
RM’000
-
405
4
-
-
4
409
-
-
409
Japanese
Yen
RM’000
132,514
758
-
-
-
-
758
-
-
758
Others
RM’000
342,317
83,113
68,908
17
68,741
150
152,021
145,971
5
6,045
Total
RM’000
104
35,000
5,005
324,348
364,353
1,910,490
4,627,128
6,537,618
>1-3
months
RM’000
773,052
22,237
982,250
110,738
76,223
-
>3-12
months
RM’000
2,001,938
2,604,307
602,369
-
-
>1-5
years
RM’000
* The negative balance represents collective impairment allowance for financing, advances and other financing.
# Net of individual impairment allowance.
(1) Others include other assets and amount due from joint ventures.
- non-impaired
- impaired
Others (1)
Total assets
Assets
Economic Entity
2015
Up to 1
month
RM’000
Non-trading book
1,372,251
2,114,043
741,792
-
-
Over 5
years
RM’000
- *
103,192 #
20,414
367,172
259,600
774,021
34
15,469
60
8,080
Nonprofit
sensitive
RM’000
132
132
-
-
Trading
book
RM’000
9,098,717
103,192
42,651
367,172
259,600
13,376,724
35,034
132
1,475,373
76,283
1,918,570
Total
RM’000
Profit rate risk is the risk to earnings and capital arising from exposure to adverse movements in profit rates mainly due to mismatches in timing repricing of assets and liabilities. These
mismatches are actively managed from an earnings and economic value perspective. Profit rate risk thresholds are established in line with the Group’s strategy and risk appetite. These
thresholds are reviewed regularly to ensure relevance in the context of prevailing market conditions.
Profit rate risk
Net profit sensitivity gap
816,113
-
5,721,505
Other liabilities
Total liabilities
(2,268,285)
2,632,638
-
874,553
1,758,085
>1-3
months
RM’000
-
5,082,450
Up to 1
month
RM’000
639,055
Deposits and placements of banks and other
Liabilities
Economic Entity
2015
Profit rate risk (continued)
105
(2,241,548)
3,223,798
-
-
237,157
2,986,641
>3-12
months
RM’000
2,393,991
210,316
-
-
100,375
109,941
>1-5
years
RM’000
Non-trading book
1,614,043
500,000
-
-
500,000
-
Over 5
years
RM’000
130,267
44,119
-
21,570
64,578
Nonprofit
sensitive
RM’000
1,035
-
1,035
-
-
Trading
book
RM’000
12,419,559
44,119
1,035
2,372,710
10,001,695
Total
RM’000
106
-
7,365,481
377,548
1,025,091
-
-
-
-
621,063
82,690
321,338
-
-
>3-12
months
RM’000
2,272,027
-
-
-
-
1,502,265
-
769,762
-
-
>1-5
years
RM’000
Non-trading book
Total assets
-
-
-
-
-
Others (1)
-
238,322
-
- impaired
- non-impaired
4,040,481
-
-
139,226
-
-
3,325,000
-
>1-3
months
RM’000
Up to 1
month
RM’000
Assets
Economic Entity
2014
994,439
-
-
-
-
701,245
-
293,194
-
-
Over 5
years
RM’000
680,594
298,000
242,058
62,775
97,638 #
(37,393) *
64
8,980
-
8,472
Nonprofit
sensitive
RM’000
12
-
-
-
-
-
-
-
12
-
Trading
book
RM’000
12,715,192
298,000
242,058
62,775
97,638
7,065,983
82,754
1,532,500
12
3,333,472
Total
RM’000
716,890
6,648,591
Other liabilities
Total liabilities
-
873,909
5,774,682
Up to 1
month
RM’000
Liabilities
Economic Entity
2014
107
(1,897,259)
2,274,807
-
-
515,164
1,759,643
>1-3
months
RM’000
(1,333,280)
2,358,371
-
-
311,786
2,046,585
>3-12
months
RM’000
1,738,454
533,573
-
-
297,210
236,363
>1-5
years
RM’000
Non-trading book
994,439
-
-
-
-
-
Over 5
years
RM’000
131,130
30,358
-
47,651
53,121
Nonprofit
sensitive
RM’000
34
-
34
-
-
Trading
book
RM’000
11,946,506
30,358
34
2,045,720
9,870,394
Total
RM’000
108
-
982,250
-
-
22,237
-
773,052
76,223
110,738
-
-
-
>3-12
months
RM’000
2,604,307
-
-
-
-
2,001,938
-
602,369
-
-
-
>1-5
years
RM’000
Non-trading book
364,353
6,537,618
Total assets
-
-
Others (1)
-
- impaired
- non-impaired
-
324,348
5,005
-
4,627,128
-
-
35,000
-
>1-3
months
RM’000
-
1,910,490
Up to 1
month
RM’000
Assets
The Bank
2015
2,114,043
-
-
-
-
1,372,251
-
741,792
-
-
-
Over 5
years
RM’000
774,671
259,600
367,172
21,064
103,192 #
- *
60
15,469
-
34
8,080
Nonprofit
sensitive
RM’000
132
-
-
-
-
-
-
-
132
-
-
Trading
book
RM’000
13,377,374
259,600
367,172
43,301
103,192
9,098,717
76,283
1,475,373
132
35,034
1,918,570
Total
RM’000
816,113
-
5,721,505
Other liabilities
Total liabilities
(2,268,285)
2,632,638
-
874,553
1,758,085
>1-3
months
RM’000
-
5,082,450
Up to 1
month
RM’000
639,055
Liabilities
The Bank
2015
109
(2,241,548)
3,223,798
-
-
237,157
2,986,641
>3-12
months
RM’000
2,393,991
210,316
-
-
100,375
109,941
>1-5
years
RM’000
Non-trading book
1,614,043
500,000
-
-
500,000
-
Over 5
years
RM’000
130,267
44,119
-
21,570
64,578
Nonprofit
sensitive
RM’000
1,035
-
1,035
-
-
Trading
book
RM’000
12,419,559
44,119
1,035
2,372,710
10,001,695
Total
RM’000
110
-
7,365,481
377,548
1,025,091
-
-
-
-
621,063
82,690
321,338
-
-
>3-12
months
RM’000
2,272,027
-
-
-
-
1,502,265
-
769,762
-
-
>1-5
years
RM’000
Non-trading book
Total assets
-
-
-
-
-
Others (1)
-
238,322
-
- impaired
- non-impaired
4,040,481
-
-
139,226
-
-
3,325,000
-
>1-3
months
RM’000
Up to 1
month
RM’000
Assets
The Bank
2014
994,439
-
-
-
-
701,245
-
293,194
-
-
Over 5
years
RM’000
680,594
298,000
242,058
62,775
97,638 #
(37,393) *
64
8,980
-
8,472
Nonprofit
sensitive
RM’000
12
-
-
-
-
-
-
-
12
-
Trading
book
RM’000
12,715,192
298,000
242,058
62,775
97,638
7,065,983
82,754
1,532,500
12
3,333,472
Total
RM’000
716,890
6,648,591
Other liabilities
Total liabilities
-
873,909
5,774,682
Up to 1
month
RM’000
Liabilities
The Bank
2014
111
(1,897,259)
2,274,807
-
-
515,164
1,759,643
>1-3
months
RM’000
(1,333,280)
2,358,371
-
-
311,786
2,046,585
>3-12
months
RM’000
1,738,454
533,573
-
-
297,210
236,363
>1-5
years
RM’000
Non-trading book
994,439
-
-
-
-
-
Over 5
years
RM’000
131,130
30,358
-
47,651
53,121
Nonprofit
sensitive
RM’000
34
-
34
-
-
Trading
book
RM’000
11,946,506
30,358
34
2,045,720
9,870,394
Total
RM’000
(iii) Liquidity risk
112
Liquidity risk is the current and prospective risk to earnings or capital arising from a bank’s inability to meet its obligations when they fall due.
Liquidity risk includes the inability to manage sudden decreases or changes in funding sources. Liquidity risk also arises from the failure to
recognise changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value.
Liquidity risk management is managed on Group basis. The objective of liquidity risk management is to ensure that there are sufficient funds
to meet contractual and regulatory obligations without incurring unacceptable losses as well as to undertake new transactions. The Group’s
liquidity management process involves establishing liquidity risk management policies and thresholds, liquidity risk thresholds monitoring,
stress testing and establishing contingency funding plans. These building blocks of liquidity risk management are subject to regular reviews
to ensure relevance in the context of prevailing market conditions.
Liquidity risk monitoring is premised on BNM’s Liquidity Coverage Ratio (‘LCR’) final standards as well as BNM’s revised Basel III Observation
Period reporting for Net Stable Funding Ratio (‘NSFR’).
The LCR is a quantitative requirement which seeks to ensure that the Bank holds sufficient high-quality liquid assets (‘HQLA’) to withstand an
acute liquidity stress scenario over a 30-day horizon.
Long term liquidity risk profile is assessed via NSFR which promotes resilience over a longer time horizon for the Bank to fund its activities
with more stable sources of funding on an ongoing basis.
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. Liquidity positions in the major currencies are being closely monitored by
tracking the availability of medium to long term foreign currency funding and adhering to the internal guiding principles for foreign currency
assets creations.
The Bank also conducts liquidity stress test to assess the Bank’s resilience to withstand short term liquidity shocks over a 30-day horizon.
A Contingency Funding Plan is in place to alert and enable Management to act effectively and efficiently in handling liquidity disruption. The
document encompasses early warning system, strategies, decision-making authorities, and courses of actions to be taken in the event of
liquidity crisis and emergencies.
Basel III Liquidity Standards
The Basel Committee has developed two minimum standards for funding liquidity to achieve two separate but complementary objectives:
•
LCR – to promote short-term resilience of the Bank’s liquidity risk profile by ensuring that it has sufficient high-quality liquid assets to
survive a significant stress scenario lasting for one month.
•
NSFR – to promote resilience over a longer time horizon for the Bank to fund its activities with more stable sources of funding on an
ongoing basis.
The LCR and NSFR are tracked to assess the short term and long term liquidity risk profile of the Bank, in line with BNM’s Liquidity Coverage
Ratio (‘LCR’) final standards issued on 31st March 2015 as well as BNM’s revised Basel III Observation Period reporting for Net Stable Funding
Ratio (‘NSFR’) and Leverage Ratio (‘LR’) issued on 7th August 2015.
The BRMC is responsible for the Bank’s liquidity policy and the strategic management of liquidity has been delegated to the ALCO. The BRMC
is informed regularly on the liquidity position of the Bank.
(iii) Liquidity risk (continued)
Liquidity risk disclosure table which is based on contractual undiscounted cash flow
The table below provides analysis of cash flow payables for financial liabilities based on remaining contractual maturities on undiscounted
basis. The balances in the table below do not agree directly to the balances reported in the statement of financial position as the table
incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and profit payments.
2015
Deposits and placements of banks
Other liabilities
2014
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
5,097,116
1,794,130
3,092,531
117,444
-
10,101,221
641,964
882,012
248,440
115,683
713,148
2,601,247
44,119
-
-
-
-
44,119
5,783,199
2,676,142
3,340,971
233,127
713,148
12,746,587
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
5,795,304
1,786,796
2,109,611
249,691
-
9,941,402
876,956
524,466
316,529
366,666
-
2,084,617
30,358
-
-
-
-
30,358
6,702,618
2,311,262
2,426,140
616,357
-
12,056,377
113
Derivative financial liabilities based on contractual undiscounted cash flow:
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
Outflow
(137,476)
(1,067)
(22,327)
-
-
(160,870)
Inflow
137,416
1,067
22,327
-
-
160,810
(60)
-
-
-
-
(60)
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
Outflow
(11,079)
-
-
-
-
(11,079)
Inflow
11,072
-
-
-
-
11,072
(7)
-
-
-
-
(7)
2015
Derivatives settled on gross basis
Foreign exchange derivatives:
2014
Derivatives settled on gross basis
Foreign exchange derivatives:
114
Liquidity risk for assets and liabilities based on remaining contractual maturities
The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counterguarantees are important factors in assessing the liquidity of the Bank. The table below provides analysis of assets and liabilities into relevant
maturity tenures based on remaining contractual maturities.
Maturities of assets and liabilities of the Bank by remaining contractual maturities profile are as follows:
Economic Entity
2015
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
1,918,570
-
-
-
-
1,918,570
-
35,034
-
-
-
35,034
21
-
111
-
-
132
7,470
9,737
114,005
602,369
741,792
1,475,373
-
-
4,218
32,336
39,729
76,283
457,867
199,371
360,801
1,449,970
6,733,900
9,201,909
Assets
Deposits and placements with banks
Financial investments
available-for-sale
Financial investments held-tomaturity
Financing, advances and
other financing
Other assets
Statutory deposits with
Bank Negara Malaysia
Other non-financial assets (1)
2,244
499
315
278
423
3,759
367,172
-
-
-
-
367,172
39,936
-
-
-
-
39,936
259,600
-
-
-
-
259,600
3,598
-
-
-
3,039
6,637
3,056,478
244,641
479,450
2,084,953
7,518,883
13,384,405
5,094,545
1,772,560
3,023,229
111,361
-
10,001,695
640,829
877,670
242,611
111,600
500,000
2,372,710
Liabilities
Other liabilities
Net liquidity gap
726
9
300
-
-
1,035
44,119
-
-
-
-
44,119
-
-
10,031
-
-
10,031
5,780,219
2,650,239
3,276,171
222,961
500,000
12,429,590
(2,723,741)
(2,405,598)
(2,796,721)
1,861,992
7,018,883
(1) Other non-financial assets include deferred tax assets, property and equipment and intangible assets.
115
Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)
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
3,333,472
-
-
-
-
3,333,472
10
2
-
-
-
12
281
144,985
324,278
769,762
293,194
1,532,500
-
-
64
26,331
56,359
82,754
533,131
151,814
309,482
1,361,234
4,807,960
7,163,621
Economic Entity
2014
Assets
available-for-sale
other financing
Other assets
47,416
-
476
-
423
48,315
242,058
-
-
-
-
242,058
14,855
-
-
-
-
14,855
298,000
-
-
-
-
298,000
2,900
-
-
-
4,152
7,052
4,472,123
296,801
634,300
2,157,327
5,162,088
12,722,639
5,791,894
1,774,415
2,067,183
236,902
-
9,870,394
876,271
521,355
313,104
334,990
-
2,045,720
34
-
-
-
-
34
Liabilities
Other liabilities
116
Net liquidity gap
30,358
-
-
-
-
30,358
-
-
4,071
-
-
4,071
6,698,557
2,295,770
2,384,358
571,892
-
11,950,577
(2,226,434)
(1,998,969)
(1,750,058)
1,585,435
5,162,088
(1) Other non-financial assets include deferred tax assets, property and equipment and intangible assets.
The Bank
2015
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
1,918,570
-
-
-
-
1,918,570
-
35,034
-
-
-
35,034
21
-
111
-
-
132
7,470
9,737
114,005
602,369
741,792
1,475,373
-
-
4,218
32,336
39,729
76,283
457,867
199,371
360,801
1,449,970
6,733,900
9,201,909
2,244
499
315
278
423
3,759
Assets
Deposits and placements with banks
available-for-sale
other financing
Other assets
367,172
-
-
-
-
367,172
39,936
-
-
-
-
39,936
259,600
-
-
-
-
259,600
3,598
-
-
-
3,689
7,287
3,056,478
244,641
479,450
2,084,953
7,519,533
13,385,055
5,094,545
1,772,560
3,023,229
111,361
-
10,001,695
640,829
877,670
242,611
111,600
500,000
2,372,710
Liabilities
Other liabilities
9
300
-
-
1,035
-
-
-
-
44,119
-
-
10,031
-
-
10,031
5,780,219
2,650,239
3,276,171
222,961
500,000
12,429,590
(2,723,741)
(2,405,598)
(2,796,721)
1,861,992
7,019,533
(1) Other non-financial assets include deferred tax assets, investment in joint ventures, property and equipment and intangible assets.
Net liquidity gap
726
44,119
117
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
3,333,472
-
-
-
-
3,333,472
10
2
-
-
-
12
281
144,985
324,278
769,762
293,194
1,532,500
-
-
64
26,331
56,359
82,754
533,131
151,814
309,482
1,361,234
4,807,960
7,163,621
The Bank
2014
Assets
available-for-sale
other financing
Other assets
47,416
-
476
-
423
48,315
242,058
-
-
-
-
242,058
14,855
-
-
-
-
14,855
298,000
-
-
-
-
298,000
2,900
-
-
-
4,802
7,702
4,472,123
296,801
634,300
2,157,327
5,162,738
12,723,289
5,791,894
1,774,415
2,067,183
236,902
-
9,870,394
876,271
521,355
313,104
334,990
-
2,045,720
34
-
-
-
-
34
Liabilities
Other liabilities
118
Net liquidity gap
30,358
-
-
-
-
30,358
-
-
4,071
-
-
4,071
6,698,557
2,295,770
2,384,358
571,892
-
11,950,577
(2,226,434)
(1,998,969)
(1,750,058)
1,585,435
5,162,738
(1) Other non-financial assets include deferred tax assets, investment in joint ventures, property and equipment and intangible assets.
(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/financing of terrorism.
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.
The Bank 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 the Bank’s average annual gross income over the previous three years.
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 preventive and remedial actions are reviewed for effectiveness and implemented to
minimize the recurrence of such events.
As an internal 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 financial assets and liabilities
Fair value is defined as the price that would be received to sell as an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The Bank measure fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the
measurements:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which inputs other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are not based on observable market data.
Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference
to unadjusted quoted prices for identical assets or liabilities in active markets wherethe quoted prices is readily available, and the price
represents actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume
and frequency to provide pricing information on an on-going basis. These would include actively traded listed equities and actively exchangetraded derivatives.
Where fair value is determined using unquoted market 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 Bank then determines fair value
based upon valuation techniques that use as inputs, market parameters including 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.
Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data
(unobservable inputs). Such inputs are generally determined based on observable inputs of a similar nature, historical observations on the
level of the input or other analytical techniques.
119
(v) Fair value financial assets and liabilities (continued)
This category includes unquoted shares held for socio economic reasons. Fair values for shares held for socio economic reasons are based
on the net tangible assets of the affected companies. The Bank’s exposures to financial instruments classified as Level 3 comprised a small
number of financial instruments which constitute an insignificant component of the Bank’s portfolio of financial instruments. Hence, changing
one or more of the inputs to reasonable alternative assumptions would not change the value significantly for the financial assets in Level 3 of
the fair value hierarchy.
The Bank recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the transfer has
occurred. Transfers between fair value hierarchy primarily due to change in the leval of trading activity, change in observable market activity
related to an input, reassessment of available pricing information and change in the significance of the unobservable input. There were no
transfers between Level 1, 2 and 3 of the fair value hierarchy during the financial year (2014: RM25,000).
The following table presents assets and liabilities measured at fair value and classified by level of the following fair value measurement
hierarchy:
2015
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
-
132
-
132
- Money market instruments
-
966,356
-
966,356
- Equity securities
-
-
525
525
- Private debt securities/sukuk
-
508,492
-
508,492
-
1,474,980
525
1,475,505
-
1,035
-
1,035
-
1,035
-
1,035
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
-
12
-
12
- Money market instruments
-
1,010,726
-
1,010,726
- Equity securities
-
-
25
25
- Private debt securities/sukuk
-
521,749
-
521,749
-
1,532,487
25
1,532,512
-
34
-
34
-
34
-
34
Assets
Financial investments available for sale *
Liabilities
2014
Assets
120
Financial investments available for sale *
Liabilities
*
Net of allowance for impairment.
The following table present the changes in Level 3 instruments for the financial year ended:
Purchases
Total gains recognised in other comprehensive income
2015
RM’000
2014
RM’000
25
69
500
-
-
506
-
(550)
525
25
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.
Qualitative information about the fair value measurements using significant unobservable inputs (Level 3):
Valuation Unobservable
techniques
inputs
Inter-relationship
between significant
unobservable inputs and
fair value measurement
Net tangible
assets
Higher net tangible assets
results in higher fair value
Fair value assets
2015
RM’000
2014
RM’000
525
25
Financial investments availablefor-sale
Unquoted shares
Net tangible
assets
In estimating its significance, the Bank used an approach that is currently based on methodologies used for fair value adjustments. These
adjustments reflects the values that the Bank estimate is 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.
121
Effect of changes in significant unobservable assumptions to reasonably possible alternatives (continued)
The following tables analyse within the fair value hierarchy the Bank’s assets and liabilities not measured at fair value at 31 December 2015
but for which fair value is disclosed:
2015
Carrying
value
RM’000
Fair value
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
Financial assets
76,283
-
75,011
-
75,011
9,201,909
-
9,162,987
-
9,162,987
9,278,192
-
9,237,998
-
9,237,998
10,001,695
-
10,006,995
-
10,006,995
2,372,710
-
2,397,992
-
2,397,992
12,374,405
-
12,404,987
-
12,404,987
Financial liabilities
Fair value
Carrying
value
RM’000
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
82,754
-
81,066
-
81,066
7,163,621
-
7,129,708
-
7,129,708
7,246,375
-
7,210,774
-
7,210,774
9,870,394
-
9,872,154
-
9,872,154
2,045,720
-
2,043,653
-
2,043,653
11,916,114
-
11,915,807
-
11,915,807
2014
Financial assets
122
Other than as disclosed above, the total fair value of each financial assets and liabilities presented on the statements of financial position as
at reporting date of the Bank approximates the total carrying amount.
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 with similar credit ratings and maturities.
The fair values of financial investments held-to-maturity 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.
Financing, advances and other financing of the Bank comprise of floating rate financing and fixed rate financing. For performing floating rate
financing, the carrying amount is a reasonable estimate of their fair values.
The fair values of performing fixed rate financing are arrived at using the discounted cash flows based on the prevailing market rates of
financing, advances and other financing with similar credit ratings and maturities.
The fair values of impaired financing, advances and other financing whether fixed or floating are represented by their carrying values, net of
individual and collective allowances, being the reasonable estimate of recoverable amount.
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 profit rates.
Deposits from customers, banks and other financial institutions and 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-profit bearing deposits, approximates carrying amount which
represents the amount payable on demand.
123
34 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
In accordance with MFRS 132 “Financial Instruments: Presentation”, the Bank reports financial assets and financial liabilities on a net basis on the
statements of financial position only if there is a legally enforceable right to set off the recognised amounts and there is intention to settle on a net
basis, or to realise the asset and settle the liability simultaneously. The following table shows the impact of netting arrangement on:
•
All financial assets and liabilities that are reported net on statements of financial position; and
•
All derivative financial instruments and other similar secured financing and funding agreements that are subject to enforceable master netting
arrangements or similar agreements, but do not qualify for statements of financial position netting.
The table identifies the amounts that have been offset in the statements of financial position and also those amounts that are covered by
enforeable netting arrangements (offsetting arrangements and financial collateral) but do not qualify for netting under the requirements of MFRS
132 described above.
The “Net amounts” presented below are not intended to represent the Bank’s actual exposure to credit risk, as a variety of credit mitigation
strategies are employed in addition to netting and collateral arrangements.
Related amount not offset
Derivative financial assets and liabilities
The ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set off under netting agreements, such as the
ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same
counterparty can be offset and close-out netting applied across all outstanding transaction covered by the agreements if an event of default or
other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by
enabling the collateral to be realised in an event of default or if other predetermined events occur.
Effects of offsetting on the statements of
financial position
2015
Gross
amount
RM’000
Amount
offset
RM’000
Net amount
reported on
statement
of financial
position
RM’000
Related amounts not offset
Financial
instruments
RM’000
Financial
collateral
RM’000
Net
amount
RM’000
Financial assets
124
132
-
132
(126)
-
6
Total assets
132
-
132
(126)
-
6
1,035
-
1,035
(126)
-
909
Total liabilities
1,035
-
1,035
(126)
-
909
34 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
2014
Effects of offsetting on the statements
of financial position
Net amount
reported on
statement
of financial
Amount
Gross
position
offset
amount
RM’000
RM’000
RM’000
Related amounts not offset
Financial
instruments
RM’000
Financial
collateral
RM’000
Net
amount
RM’000
Financial assets
Total assets
12
12
-
12
12
(10)
(10)
-
2
2
Total liabilities
34
34
-
34
34
(10)
(10)
-
24
24
35 LEASE COMMITMENTS
The Bank has lease commitments in respect of rented premises and hired equipment, all of which are classified as operating leases. A summary
of the future minimum lease payments under non-cancelable operating leases commitments are as follows:
2015
2014
RM’000
RM’000
Within one year
One year to five years
689
249
783
550
36 CAPITAL MANAGEMENT
With effect from 1 January 2013, the total capital and capital adequacy ratios of the Bank are computed in accordance with Bank Negara
Malaysia’s Capital Adequacy Framework for Islamic Banks (Capital Components) dated 28 November 2012.
The Bank is currently adopting Standardised Approach for Credit Risk and Market Risk, the Basic Indicator Approach for Operational Risk. In line
with the transitional arrangements under the Bank Negara Malaysia’s Capital Adequacy Framework for Islamic Banks (Capital Components), the
minimum capital adequacy requirement for Common Equity Tier 1 Capital ratio (‘CET 1’) and Tier 1 Capital ratio are 4.5% and 6.0% respectively
for year 2015. The minimum regulatory capital adequacy requirement remains at 8.0% (2014 : 8.0%) for Total Capital ratio.
The Bank has adopted and to comply with the Guidelines and are subject to the transition arrangements as set out by BNM.
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 Bank operates;
•
To safeguard 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 Bank maintains 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 Bank.
The table in Note 37 below summarises the composition of regulatory capital and the ratios of the Bank for the financial year ended 31 December
2015.
125
37 CAPITAL ADEQUACY
Economic Entity
The Bank
2015
RM’000
2014
RM’000
2015
RM’000
2014
RM’000
Paid-up share capital
460,000
360,000
460,000
360,000
Statutory reserves
248,717
206,324
248,717
206,324
Retained profits
195,606
162,594
196,256
163,244
Unrealised gains and losses on AFS
(10,405)
(7,730)
(10,405)
(7,730)
893,918
721,188
894,568
721,838
Less:
Goodwill and other intangibles
Deferred tax assets
(426)
(891)
(426)
(891)
(3,598)
(2,900)
(3,598)
(2,900)
-
-
(260)
(130)
CET 1 capital
889,894
717,397
890,284
717,917
Tier I capital
889,894
717,397
890,284
717,917
Collective impairment @
23,750
21,120
23,750
21,120
Regulatory adjustments
58,400
49,020
58,400
49,020
-
-
(390)
(520)
Less:
Tier II capital
82,150
70,140
81,760
69,620
Total capital
972,044
787,537
972,044
787,537
CET 1 capital ratio
13.197%
12.456%
13.203%
12.465%
Tier 1 capital ratio
13.197%
12.456%
13.203%
12.465%
Total capital ratio
14.415%
13.674%
14.415%
13.674%
CET 1 capital ratio (net of proposed dividends)
13.197%
12.456%
13.203%
12.465%
Tier 1 capital ratio (net of proposed dividends)
13.197%
12.456%
13.203%
12.465%
Total capital ratio (net of proposed dividends)
14.415%
13.674%
14.415%
13.674%
6,336,026
5,390,103
6,336,026
5,390,103
3,650
2,590
3,650
2,590
403,377
366,578
403,377
366,578
6,743,053
5,759,271
6,743,053
5,759,271
Risk-weighted assets for:
Credit risk
Market risk
126
Operational risk
Total risk-weighted assets
@ Qualifying collective impairment is restricted to allowances on unimpaired portion of the financing, advances and other financing.
In accordance with BNM’s Guidelines on Investment Account, the credit and market risk weighted on the assets funded by the RIA are excluded from
calculation of capital adequacy. As at 31 December 2015, RIA assets excluded from Total Capital ratio calculation amounted to RM1,316,026,354
(2014: RM608,590,486).
38 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
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
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 impairment losses on financing, advances and other financing
The accounting estimates and judgments related to the impairment of financing and provision for off-balance sheet positions is a critical accounting
estimate because the underlying assumptions used for both the individually and collectively assessed impairment can change from period to period
and may significantly affect the Bank’s results of operations.
In assessing assets for impairment, management judgment is required. The determination of the impairment allowance required for financing 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 financing, such as those to individuals and small business customers of
the private and retail business, and for those financing 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 Bank performs 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.
Allowance for impairment of investment in joint ventures
Investment in joint ventures are reviewed for impairment annually or whenever events or changes in cirsumstances indicate that the carrying value
may not be recoverable. Significant judgment in the estimation of the present value of future cash flows generated by joint ventures, which invloves
uncertainties and are significantly affected by assumptions used and judgments made regarding estimates of future cash flows and discount rates.
Changes in assumptions could significantly affect the results of the Economy Entity’s test for impairment of investments.
39 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.
The Bank
(i) The aggregate value of outstanding credit exposures with connected parties (RM’000)
(iii) The percentage of outstanding credit exposures with connected parties which is impaired or in
default
2014
415,939
452,616
3%
5%
Nil
Nil
40 APPROVAL OF FINANCIAL STATEMENTS
The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 3 March 2016.
(ii) The percentage of outstanding credit exposures to connected parties as a proportion of total
credit exposures
2015
127
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 ISLAMIC BANK
BERHAD, state that, in the opinion of the Directors, the accompanying financial statements set out on pages 38 to 127 are drawn up so as to give a true
and fair view of the state of affairs of the Economic Entity and the Bank as at 31 December 2015 and of the results and cash flows of the Economic Entity
and the Bank for the financial year ended on the date in accordance with Malaysian Financial Reporting Standards, International Financial Reporting
Standards and the requirements of the Companies Act 1965, in Malaysia.
Signed on behalf of the Board of Directors in accordance with their resolution dated 3 March 2016.
JEN. TAN SRI DATO’ SERI ISMAIL BIN HAJI OMAR (BERSARA)
Chairman
EN. MOHD SUFFIAN BIN HAJI HARON
Director
STATUTORY DECLARATION
PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965
I, RAMANATHAN RAJOO, the officer of AFFIN ISLAMIC BANK BERHAD primarily responsible for the financial management of the Economic Entity and the
Bank, do solemnly and sincerely declare that in my opinion, the accompanying financial statements set out on pages 38 to 127 are correct and I make
this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.
RAMANATHAN RAJOO
128
Subscribed and solemnly declared by the abovenamed RAMANATHAN RAJOO at Kuala Lumpur in Malaysia on 3 March 2016, before me.
Commissioner for Oaths
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF AFFIN ISLAMIC BANK BERHAD (Incorporated in Malaysia)
REPORT ON THE FINANCIAL STATEMENTS
We have audited the financial statements of AFFIN Islamic Bank Berhad on pages 38 to 127 which comprise the statements of financial position as at 31
December 2015 of the Economic Entity and of the Bank, and the statements of income, comprehensive income, changes in equity and cash flows of the
Economic Entity and of the Bank for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on
Notes 1 to 39.
Directors’ Responsibility for the Financial Statements
The directors of the Bank are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian
Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The directors
are also responsible for such internal control as the directors determine are necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors’ 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 about 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 entity’s preparation of financial statements that give a true and fair
view 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 entity’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 give a true and fair view of the financial position of the Economic Entity and of the Bank as of 31 December 2015
and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International
Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that, in our opinion, the accounting and other records and
the registers required by the Act to be kept by the Bank have been properly kept in accordance with the provisions 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.
SOO HOO KHOON YEAN
(No. 2682/10/17 (J))
Chartered Accountant
PRICEWATERHOUSECOOPERS (No. AF : 1146) Chartered Accountants Kuala Lumpur, Malaysia
3 March 2016
129
shariah committee’s REPORT
In the name of Allah, the Most Beneficent, the Most Merciful
Praise be to Allah, the Lord of the Worlds, and peace and blessings upon our Prophet Muhammad and on his scion and companions
In compliance with the Shariah Governance Framework, Financial Reporting for Islamic Banking Institutions and other relevant guidelines issued by
Bank Negara Malaysia, we are required to submit the following report:
We have reviewed the principles and the contracts relating to the transactions and applications offered by AFFIN Islamic Bank Berhad (‘the Bank’) during
the period ended 31 December 2015. We have also conducted our review to form an opinion as to whether the Bank has complied with the Shariah
principles and with the Shariah rulings issued by the Shariah Advisory Council of Bank Negara Malaysia, as well as Shariah decisions made by us.
The management of the Bank is responsible for ensuring that the financial institution conducts its business in accordance with Shariah principles. It is
our responsibility to form an independent opinion, based on the review work carried out by Shariah review and Shariah audit of the Bank and to report
to you.
We have assessed the work carried out by Shariah review and Shariah audit which included examining, on a test basis, each type of transaction, the
relevant documentation and procedures adopted by the Bank.
We planned and performed our review so as to obtain all the information and explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the Bank has not violated the Shariah principles.
Interactive sessions and discussions has been conducted with senior management to enhance understanding on Islamic finance with periodic training
for staff in order to provide adequate knowledge and competence in undertaking tasks for the business of the Bank.
In our opinion:
1. the contracts, transactions and dealings entered into by the Bank during the year ended 31 December 2015 that we have reviewed are in
compliance with the Shariah principles;
2. the allocation of profit and incurrence of losses relating to investment accounts conform to the basis that had been approved by us in accordance
with Shariah principles;
3. all earnings that have been realised from sources or by means prohibited by the Shariah principles have been considered for refund or disposal
to charitable causes. The total of the earnings for financial year end 31 December 2015 is RM363,945.67 which comprises of refund and charity
amount.
130
The amount is due to cases of early settlement charge imposed on Hire Purchase-i accounts settled upon maturity date and earning of debit card
charged at certain merchants that involve mixed of Shariah compliant and Shariah non-compliant products and services. All the processes related
to the Shariah non-compliant events have been improved and control measures have been put in place in terms of communication, awareness as
well as IT system control.
4. the Shariah non-compliance events discovered were involved the following areas:
a. Home Financing-i: a case of absence of customer’s ownership share which the ownership share has been obtained and documented
accordingly; as well as few cases of fire insurance coverage being procured which have been renewed under takaful,
b. Hire Purchase-i (HP-i): few cases of erroneous early settlement charges imposed which have been refunded,
c. Tawarruq trading process: a case of trading operation not following the standard process in which ratification from customer has been
obtained.
5. the calculation of zakat is in compliance with Shariah principles. The zakat fund has distributed through a various channels i.e. States Zakat
Collection Centre, non-government organisation and individuals under asnaf categories of poor, needy, amil, riqab, gharimin and fisabilillah.
shariah committee’s REPORT
We, the members of the Shariah Committee of AFFIN ISLAMIC BANK BERHAD, do hereby confirm that the operations of the Bank for the year ended
31 December 2015 have been conducted in conformity with the Shariah principles.
Chairman of the Shariah Committee:
Shariah Committee:
Associate Professor Dr. Ahmad Azam Bin Othman
Shariah Committee:
Associate Professor Dr. Zulkifli Bin Hasan
Shariah Committee:
Ustaz Mohammad Mahbubi Ali
Shariah Committee:
Ustaz Ahmad Alfisyahrin Bin Jamilin
Kuala Lumpur, Malaysia
3 March 2016
131
basel ii
pillar 3 disclosures
133
133
133
1.Introduction
1.1Background
1.2 Scope of Application
133
133
134
135
135
136
2. Risk Governance Structure
2.1Overview
2.2 Board Committees
2.3 Management Committees
2.4 Group Risk Management Function
2.5 Internal Audit and Internal Control Activities
3. Capital Management
3.1 Internal Capital Adequacy Assessment Process (‘ICAAP’)
3.2 Capital Structure
3.3 Capital Adequacy
4. Risk Management Objectives and Policies
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
6. Market Risk
6.1 Market Risk Management Objectives and Policies
6.2 Application of Standardised Approach for Market Risk
6.3 Market Risk Measurement, Control and Monitoring
6.4 Value-at-Risk (‘VaR’)
6.5 Foreign Exchange Risk
7. Liquidity Risk
7.1 Liquidity Risk Management Objectives and Policies
7.2 Liquidity Risk Measurement, Control and Monitoring
8. 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
8.4Certification
9. Shariah Compliance
Appendices
136
136
136
138
138
138
138
139
139
139
140
141
145
145
145
145
146
146
146
146
147
147
147
147
148
148
148
149
basel II pillar 3 disclosures
1Introduction
1.1Background
AFFIN Islamic Bank Berhad (‘the Bank’) adopts Basel II since 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.
The Bank 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
2
This document contains the disclosure requirements under Pillar 3 for the Bank for the year ended 31 December 2015. 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 the Bank’s 2015 Annual Report for the year ended 31 December 2015.
Risk Governance Structure
2.1Overview
The Board of Directors of the Bank is ultimately responsible for the overall performance of the Bank. The Board’s responsibilities are congruent
with 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 the Bank’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 the Bank’s interests by ensuring effective
implementation of the risk management policy and process, as well as adherence to a sound system of internal control. 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 their respective roles and functions. In
carrying out its functions, the Board has delegated specific responsibilities to other Board Committees, which operate 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 the Bank has a balanced composition with a strong independent element. It consists of members with suitable qualifications
fulfilling the fit and proper criteria as required by BNM/GP1, a mixture of different skills, competencies and experience.
133
2
2.2 Board Committees
134
Board Remuneration Committee (‘BRC’)
The BRC is responsible for providing a formal and transparent procedure for developing the remuneration policy for Directors, Chief Executive
Officer (CEO) and key senior management officers and ensuring that compensation is competitive and consistent with the Bank’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 CEO, assessing the effectiveness
of individual Directors, the Board as a whole and the performance of the CEO as well as 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.
It has responsibility for approving and reviewing risk management policies and 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 for providing critical review of financing 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 financing applications that have been approved by the Group Management Loan Committee (‘GMLC’). BLRRC also reviews the impaired
financing reports presented by the Management.
Audit and Examination Committee (‘AEC’)
The AEC is responsible for providing oversight and reviewing the adequacy and integrity of the internal control systems as well as 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. The Bank has an established Group Internal Audit Division (‘GIA’) which reports functionally to the Audit Committee
and administratively to the MD/CEO of AFFIN Bank Berhad.
2
2.2 Board Committees (continued)
Shariah Committee
The Shariah Committee is formed as legislated under the Islamic Financial Services Act 2013 and as per Shariah Governance Framework for
Islamic Financial Institutions.
The duties and responsibility of the Shariah Committee are as follows:
(i) To advise the Board on Shariah matters to ensure that the business operations of the Bank comply with the Shariah principles at all
times;
(ii) To endorse and validate relevant documentation of the Bank’s products to ensure that the products comply with Shariah principles; and
(iii) To advise the Bank on matters to be referred to the Shariah Advisory Council.
2.3 Management Committees
Management Committee (‘MCM’)
MCM comprising the senior management team chaired by AFFIN Bank Berhad’s MD/CEO, assists the Board in managing the day-to-day
operations. MCM formulates tactical plans and business strategies, monitors the Bank’s overall performance, and ensures that activities are
carried out 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 AFFIN Bank Berhad’s MD/CEO to approve complex and larger financing as well
as workout/recovery proposals beyond the delegated authority of the concerned individual senior management personnel of the Bank.
Asset and Liability Management Committee (‘ALCO’)
ALCO comprising the senior management team chaired by the CEO of AFFIN Islamic Bank, manages the Bank’s asset and liability position as
well as oversees the Bank’s capital management to ensure that the Bank is adequately capitalised on an economic and regulatory basis.
Group Operational Risk Management Committee (‘GORMC’)
GORMC comprising the senior management team chaired by AFFIN Bank Berhad’s MD/CEO, manages the Bank’s Operational Risk by
reviewing and ensuring appropriate operational risk programme, process and framework are implemented in the Bank so as to reduce the
original capital charge and manage operational risk losses to an acceptable level.
Group Early Alert Committee (‘GEAC’)
GEAC is established within senior management to monitor credit quality through monthly review of the Early Alert, Watchlist and Exit Accounts
as well as review the actions taken to address 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 the Bank’s senior management structure which works closely as a team in
managing risks to enhance stakeholders’ value.
GRM reports to BRMC. Committees namely BLRRC, MCM, GMLC, ALCO, GORMC and GEAC assist BRMC in managing credit, market, liquidity
and operational risks. The responsibilities of these Committees include risk identification, risk assessment and measurement, risk control and
mitigation; and risk monitoring.
135
2
2.5 Internal Audit and Internal Control Activities
3
In accordance with BNM’s Guidelines on Corporate Governance for Licensed Islamic Banks, GIA conducts continuous reviews on auditable
areas within the Bank. The reviews by GIA are focused on areas of significant risks and effectiveness of internal control in accordance with
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 conducts annual reviews on the adequacy of internal
audit function, scope of work, resources and budget of GIA.
Capital Management
3.1 Internal Capital Adequacy Assessment Process (‘ICAAP’)
In line with the BNM guideline on Risk-Weighted Capital Adequacy Framework - Internal Capital Adequacy Assessment Process (Pillar 2),
the Bank has put in place the ICAAP Framework to assess the capital adequacy to ensure that the level of capital maintained by the Bank is
adequate at all times, taking into consideration the Bank’s risk profile and business strategies.
The Bank’s capital management approach is focused on maintaining an appropriate level of capital to meet its business needs and regulatory
requirements as capital adequacy and risk management are closely aligned. The Bank operates within an agreed risk appetite whilst
optimising the use of shareholders’ funds to deliver sustainable returns.
3.2 Capital Structure
136
With effect from 1 January 2013, the total capital and capital adequacy ratios of the Bank is computed in accordance with Bank Negara
Malaysia’s Capital Adequacy Framework for Islamic Banks (Capital Components).
The Bank is currently adopting Standardised Approach for Credit Risk and Market Risk and the Basic Indicator Approach for Operational
Risk. In line with the transitional arrangements under the Bank Negara Malaysia’s Capital Adequacy Framework for Islamic Banks (Capital
Components), the minimum capital adequacy requirement for Common Equity Tier 1 Capital ratio (‘CET 1’) and Tier 1 Capital ratio are 4.5%
and 6.0% respectively for year 2015. The minimum regulatory capital adequacy requirement remains at 8.0% (2014 : 8.0%) for Total Capital
ratio.
The following table sets forth further details on the capital resources and capital adequacy ratios for the Bank as at 31 December 2015.
3
Capital Management
3.2 Capital Structure (continued)
Economic Entity
2015
RM’000
The Bank
2014
RM’000
2015
RM’000
2014
RM’000
Paid-up share capital
460,000
360,000
460,000
360,000
Retained profits
195,606
162,594
196,256
163,244
Statutory reserves
248,717
206,324
248,717
206,324
Unrealised gains and losses on AFS
(10,405)
(7,730)
(10,405)
(7,730)
893,918
721,188
894,568
721,838
Less:
Goodwill and other intangibles
Deferred tax assets
(426)
(891)
(426)
(891)
(3,598)
(2,900)
(3,598)
(2,900)
-
-
(260)
(130)
CET 1 capital
889,894
717,397
890,284
717,917
Tier I capital
889,894
717,397
890,284
717,917
23,750
21,120
23,750
21,120
Regulatory adjustments
58,400
49,020
58,400
49,020
-
-
(390)
(520)
Less:
Tier II capital
82,150
70,140
81,760
69,620
Total capital
972,044
787,537
972,044
787,537
CET 1 capital ratio
13.197%
12.456%
13.203%
12.465%
Tier 1 capital ratio
13.197%
12.456%
13.203%
12.465%
Total capital ratio
14.415%
13.674%
14.415%
13.674%
CET 1 capital ratio (net of proposed dividends)
13.197%
12.456%
13.203%
12.465%
Tier 1 capital ratio (net of proposed dividends)
13.197%
12.456%
13.203%
12.465%
Total capital ratio (net of proposed dividends)
14.415%
13.674%
14.415%
13.674%
6,336,026
5,390,103
6,336,026
5,390,103
3,650
2,590
3,650
2,590
403,377
366,578
403,377
366,578
6,743,053
5,759,271
6,743,053
5,759,271
Risk-weighted assets for:
Market risk
Operational risk
Total risk-weighted assets
Credit risk
137
3
Capital Management
3.3 Capital Adequacy
The Bank’s has in place an internal limit for its CET1 capital ratio, Tier I capital ratio and Total capital ratio, 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 senior management through periodic reviews.
Refer to Appendix I
4
Risk Management Objectives and Policies
The Bank is principally engaged in all aspects of banking and related financial services. There have been no significant changes in these principal
activities during the financial year.
The Bank’s business activities involve the analysis, measurement, acceptance, and management of risks and which operates within well defined
risk acceptance criteria covering customer segments, industries and products. The Bank does not enter into risk it cannot administer, book, monitor
or value, or deal with persons of questionable integrity.
The Bank’s risk management policies are established to identify, assess, measure, control and mitigate all key risks, as well as manage and monitor
the risk positions.
The Bank regularly reviews its risk management policies and systems to reflect changes in markets, products and best practice in risk management
processes. The Bank’s aim is to achieve an appropriate balance between risk and return as well as minimise any potential adverse effects.
The key business risks to which the Bank is exposed to are credit risk, liquidity risk, market risk and operational risk.
5
Credit Risk
5.1 Credit Risk Management Objectives and Policies
138
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 financing, advances and other financing, financing commitments arising from
such financing 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 risk in the Bank is governed by a set of approved credit policies, guidelines and procedures. Approval authorities
are delegated to Senior Management and GMLC to implement the credit policies and ensure sound credit granting standards.
An independent GRM function, headed by Group Chief Risk Officer (‘GCRO’) with direct reporting line to BRMC is in place to ensure adherence
to risk standards and discipline.
Financing 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 Annual Credit Plan. The Annual Credit Plan is reviewed
at least annually and approved by the BRMC.
5
Credit Risk
5.2 Application of Standardised Approach for Credit Risk
The Bank uses the following External Credit Assessment Institutions (‘ECAIs’) to determine the risk weights for the rated credit exposures:•
•
•
•
•
RAM Rating Services Berhad
Malaysian Rating Corporation Berhad
Standard & Poor’s Rating Services
Moody’s Investors Service
Fitch Ratings
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 BNM guidelines. 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.
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 the Bank’s underwriting criteria and
the ability of the Bank to make a return commensurate with 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 financing 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 profit 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
The Bank employs various policies and practices to control and mitigate credit risk.
Financing limits
The Bank establishes internal limits and related financing 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 industry segments. These risks are monitored
regularly and the limits reviewed annually or sooner depending on market and economic conditions.
The credit risk exposure for derivative and financing books is managed as part of the overall financing limits with customers together with
potential exposure from market movements.
139
5
Credit Risk
5.4 Risk Limit Control and Mitigation Policies (continued)
Collateral
Credits are established against customer’s capacity to pay 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:
•
•
•
•
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
Credit related commitments
Commitment to extend credit represents unutilised portion of approved credit in the form of financing, 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.
Refer to Appendix IV (a) to (b).
5.5 Credit Risk Monitoring
140
Retail credits are actively monitored and managed on a portfolio basis by product type. A collection management system is 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 any signs of weaknesses or deterioration in the credit quality are detected. Remedial
action is taken where evidence of deterioration emanates.
Early Alert Process is in place 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.
Active portfolio monitoring enables the Bank to understand the overall risk profile and identify any adverse trends or areas of risk concentrations
affecting asset quality so that appropriate actions are adopted to manage and mitigate risks.
5
Credit Risk
5.6 Impairment Provisioning
Individual impairment provisioning
Significant financing, with or without past due status, are subject to individual assessment for impairment when 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 profit rate. The level of impairment allowance on significant financing is
reviewed regularly, at least quarterly or more often when circumstances require.
Significant financing that are deemed not impaired after individual assessment are included in a group of financing with similar characteristics
and collectively assessed for impairment.
Collective impairment provisioning
All financing 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 financing not covered under individual assessment as well as significant financing that are deemed
not impaired after individual assessment.
Total financing, advances and other financing - credit quality
All financing, advances and other financing are categorised into “neither past due nor impaired”, “past due but not impaired” and “impaired”.
Past due financing refer to financing that are overdue by one day or more. Impaired financing are financing with months-in-arrears more than
90 days or with impaired allowances.
141
5
Credit Risk
5.6 Impairment Provisioning (continued)
Analysed by economic sectors
2015
RM’000
2014
RM’000
Primary agriculture
865
594
220
200
1,898
2,782
Past due financing
Manufacturing
643
512
Construction
25,496
8,940
Real estate
1,015
27,588
6,309
4,388
2,409
3,224
Education, health and others
Household
3,854
2,701
18,405
10,133
466,515
421,481
527,629
482,543
2015
RM’000
2014
RM’000
Manufacturing
-
2,358
Construction
-
28,493
34,988
-
1,077
-
Household
2,451
668
38,516
31,519
Real estate
Individual impairment charged
142
Manufacturing
2015
RM’000
2014
RM’000
25
45
1,162
-
Household
2,373
1,463
3,560
1,508
Individual impairment written-off
Manufacturing
2015
2014
RM’000
RM’000
2,383
-
-
1,813
2,383
1,813
5
Credit Risk
Analysed by economic sectors (continued)
Primary agriculture
Manufacturing
2015
RM’000
2014
RM’000
302
380
39
4
1,094
1,166
166
154
Construction
2,465
1,956
Real estate
1,641
1,102
887
798
850
537
1,126
2,146
Education, health and others
2,437
1,479
25,664
27,671
36,671
37,393
Household
Analysed by geographical area
2015
RM’000
2014
RM’000
Perlis
844
704
Kedah
42,401
24,286
Pulau Pinang
14,685
12,375
Perak
56,804
51,982
Past due financing
145,077
76,127
44,649
Negeri Sembilan
26,460
14,367
Melaka
12,874
8,688
Johor
32,084
26,568
Pahang
21,444
23,077
Terengganu
55,596
55,371
Kelantan
25,727
39,262
Sarawak
2,841
2,050
Sabah
5,491
6,813
-
27,274
527,629
482,543
Outside Malaysia
154,251
Wilayah Persekutuan
Selangor
143
5
Credit Risk
Analysed by geographical area (continued)
2015
RM’000
2014
RM’000
Selangor
2,423
3,000
Wilayah Persekutuan
1,105
26
34,988
28,493
38,516
31,519
Outside Malaysia
2015
RM’000
2014
RM’000
Perlis
409
420
Kedah
1,886
1,337
Pulau Pinang
Perak
11,784
12,569
6,143
5,967
Negeri Sembilan
1,244
1,346
501
325
Johor
1,759
1,602
Pahang
1,522
1,537
Terengganu
3,066
3,611
Kelantan
3,091
3,305
Sarawak
272
271
Sabah
277
404
Melaka
Outside Malaysia
844
3,799
Wilayah Persekutuan
Selangor
144
948
3,709
60
56
36,671
37,393
6
Market Risk
6.1 Market Risk Management Objectives and Policies
Market risk is the potential loss arising from movements in market variables such as profit rates and foreign exchange rates. The exposure
to market risk results largely from profit rate and foreign exchange rate risks. The market risk management framework encompasses the
following approaches:
•
Risk control parameters are established based on risk appetite, market liquidity and business strategies as well as macroeconomic
conditions. These parameters are reviewed at least annually.
•
Market risk stemming from the Trading book is primarily controlled through the imposition of Stop-loss and Value-at-Risk (‘VaR’) Risk
Control Parameters.
•
Interest rate risk is quantified by analysing the repricing mismatch between the rate sensitive assets and rate sensitive liabilities. Based
on the repricing mismatch, Earnings-at-Risk (‘EaR’) or Net Interest Income (‘NII’) simulation is conducted to assess the variation in short
term earnings.
•
In addition, the potential long term impact arising from the Bank’s exposures is also tracked by assessing the impact on Economic Value
of Equity (‘EVE’), also known as Economic Value-at-Risk (‘EVaR’).
•
Periodic stress tests are conducted to quantify market risk arising from abnormal market movements.
6.2 Application of Standardised Approach for Market Risk
The Bank adopts the Standardised Approach for the purpose of calculating the capital requirement for market risk.
Refer Appendix I.
6.3 Market Risk Measurement, Control and Monitoring
The Bank’s market risk management control parameters are established based on its risk appetite, market liquidity and business strategies
as well as macroeconomic conditions. These parameters are reviewed at least on an annual basis.
Market risk arising from the Bank’s Trading book is primarily controlled through the imposition of Stop-loss and Value-at-Risk (‘VaR’) risk
control parameters.
The Bank quantifies profit rate risk by analysing the repricing mismatch between the rate sensitive assets and rate sensitive liabilities. Based
on the repricing mismatch, Net Profit Income simulation is conducted to assess the variation in short-term earnings. The potential long term
impact of the Bank’s exposures is also tracked by assessing the impact on economic value of equity (‘EVE’), also known as Economic Valueat-Risk (‘EVaR’).
Thresholds are set for Earnings-at-Risk (‘EaR’) and Economic Value-at-Risk (‘EVaR’) respectively.
In addition, the Bank conducts periodic stress test of its respective business portfolios to ascertain market risk under abnormal market
conditions.
145
6
Market Risk
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 profit rates and foreign exchange rates that could affect values of financial
instruments.
The Bank adopts Historical Pricing Simulation Method (‘HPS’) to compute potential loss or Value-at-Risk (‘VaR’) amount. The HPS Method
uses the relative change of historical prices to estimate future potential changes in the market value of outstanding positions. The Bank
currently adopts 250 simulated business days for its HPS VaR computation. After applying these price changes to the outstanding portfolios,
250 simulated market values for the portfolio are generated and the change in the day-to-day market value is taken as simulated Profit &
Loss (‘P&L’) for the portfolio. Since VaR calculates the worst expected loss over a given day horizon and confidence level under normal market
condition, the 250 simulated values are sorted from the lowest to the highest simulated P&L. The VaR focuses on the tail of the distribution
(i.e the loss figures) at the 99th percentile.
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 quantify market risk arising from abnormal market movements. Stress tests measure the changes in
values arising from extreme movements in profit rates and foreign exchange rates based on past experience and simulated stress
scenarios.
6.5 Foreign Exchange Risk
7
The Bank is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.
Thresholds are set on the level of exposure by currency as well as in aggregate for both overnight and intra-day positions and these are
monitored daily.
Liquidity Risk
7.1 Liquidity Risk Management Objectives and Policies
146
Liquidity risk is the current and prospective risk to earnings or capital arising from a bank’s inability to meet its obligations when they fall due.
Liquidity risk includes the inability to manage sudden decreases or changes in funding sources. Liquidity risk also arises from the failure to
recognise changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value.
Liquidity risk management is managed on Group basis. The objective of liquidity risk management is to ensure that there are sufficient funds
to meet contractual and regulatory obligations without incurring unacceptable losses as well as to undertake new transactions. The Group’s
liquidity management process involves establishing liquidity risk management policies and thresholds, liquidity risk thresholds monitoring,
stress testing and establishing contingency funding plans. These building blocks of liquidity risk management are subject to regular reviews
to ensure relevance in the context of prevailing market conditions.
7
Liquidity Risk
7.2 Liquidity Risk Measurement, Control and Monitoring
8
Liquidity risk monitoring is premised on BNM’s Liquidity Coverage Ratio (‘LCR’) final standards as well as BNM’s revised Basel III Observation
Period reporting for Net Stable Funding Ratio (‘NSFR’).
The LCR is a quantitative requirement which seeks to ensure that the Bank holds sufficient high-quality liquid assets (‘HQLA’) to withstand an
acute liquidity stress scenario over a 30-day horizon. Long term liquidity risk profile is assessed via NSFR which promotes resilience over a
longer time horizon for the Bank to fund its activities with more stable sources of funding on an ongoing basis.
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. Liquidity positions in the major currencies are being closely monitored by
tracking the availability of medium to long term foreign currency funding and adhering to the internal guiding principles for foreign currency
assets creations.
The Bank also conducts liquidity stress test to assess the Bank’s resilience to withstand short term liquidity shocks over a 30-day horizon.
A Contingency Funding Plan is in place to alert and enable Management to act effectively and efficiently in handling liquidity disruption. The
document encompasses early warning system, strategies, decision-making authorities, and courses of actions to be taken in the event of
liquidity crisis and emergencies.
Basel III Liquidity Standards
The Basel Committee has developed two minimum standards for funding liquidity to achieve two separate but complementary objectives:
•
LCR – to promote short-term resilience of the Bank’s liquidity risk profile by ensuring that it has sufficient high-quality liquid assets to
survive a significant stress scenario lasting for one month.
•
NSFR – to promote resilience over a longer time horizon for the Bank to fund its activities with more stable sources of funding on an
ongoing basis.
The LCR and NSFR are tracked to assess the short term and long term liquidity risk profile of the Bank, in line with BNM’s Liquidity Coverage
Ratio (‘LCR’) final standards issued on 31st March 2015 as well as BNM’s revised Basel III Observation Period reporting for Net Stable Funding
Ratio (‘NSFR’) and Leverage Ratio (‘LR’) issued on 7th August 2015.
The BRMC is responsible for the Bank’s liquidity policy and the strategic management of liquidity has been delegated to the ALCO. The BRMC
is informed regularly on the liquidity position of the Bank.
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/financing of terrorism.
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.
8.2 Application of Basic Indicator Approach for Operational Risk
The Bank 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 the Bank’s average annual gross income over the previous three years.
147
8
Operational Risk
8.3 Operational Risk Reasurement, 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 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 Process and Board
Risk Management Committee. Appropriate preventive and remedial actions are reviewed for effectiveness and implemented to minimize the
recurrence of such events.
8.4Certification
148
As an internal 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.
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 the Bank. 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,
Shariah Review, Shariah Research and Shariah Audit are properly established to effectively perform its respective functions.
Continuous training programs are provided to Shariah Committee members to equip them with better understanding and exposure on banking
operations and to Board of Directors, management members and staff for fundamental and advanced knowledge on Shariah and Islamic commercial
law matters.
Appendix I
Total RWA and Capital Requirements
MARKET RISK
Profit Rate Risk
Foreign Currency Risk
OPERATIONAL RISK
Operational Risk
Total for On and Off-Balance Sheet Exposures
Off Balance Sheet Exposures
Off Balance Sheet Exposures other than OTC derivatives or credit derivatives
Defaulted Exposures
Total for Off-Balance Sheet Exposures
CREDIT RISK
On Balance Sheet Exposures
Corporates
Regulatory Retail
Other Assets
Sovereigns/Central Banks
Banks, Development Financial Institutions & MDBs
Residential Mortgages
Higher Risk Assets
Defaulted Exposures
Total for On-Balance Sheet Exposures
OTC “Over The Counter”
PSIA “Profit Sharing Investment Account”
3
2
1
Exposure Class
2015
Disclosure on Capital Adequacy under the Standardised Approach (RM’000)
Long Position
50,690
3,327
Short Position
50,894
-
12,738,672
(205)
3,327
12,427,217
582,972
9,666
592,638
3,400,665
2,890,253
738,826
2,736,934
19,623
1,963,672
6,345
78,261
11,834,579
3,670,640
2,904,191
738,826
2,736,934
19,623
1,974,206
6,345
78,261
12,129,026
599,980
9,666
609,646
Net
Exposures/
EAD after CRM
Gross
Exposures/
EAD before CRM
6,743,053
403,377
323
3,327
6,336,026
447,760
14,463
462,223
2,656,194
2,167,828
137,870
799,774
9,518
102,619
5,873,803
Risk
Weighted
Assets
6,336,026
-
6,336,026
447,760
14,463
462,223
2,656,194
2,167,828
137,870
799,774
9,518
102,619
5,873,803
Total Risk
Weighted
Assets after
Effects of PSIA
539,444
32,270
26
266
506,882
35,821
1,157
36,978
212,496
173,426
11,030
63,982
761
8,209
469,904
Minimum
Capital
Requirements
at 8%
The following information concerning the Economic Entity 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 Bank has adopted Basel II - Risk Weighted Assets computation under the BNM’s Risk-Weighted Capital Adequacy Framework with effect from 1 January 2008. The Bank has adopted the Standardised
Approach for credit risk and market risk, and Basic Indicator Approach for operation risk computation.
149
150
Total RWA and Capital Requirements
MARKET RISK
Profit Rate Risk
Foreign Currency Risk
OPERATIONAL RISK
Operational Risk
Total for On and Off-Balance Sheet Exposures
Off Balance Sheet Exposures
Off Balance Sheet Exposures other than OTC derivatives or credit derivatives
Defaulted Exposures
CREDIT RISK
On Balance Sheet Exposures
Corporates
Regulatory Retail
Other Assets
Higher Risk Assets
Defaulted Exposures
OTC “Over The Counter”
PSIA “Profit Sharing Investment Account”
3
2
1
Exposure Class
2014
Disclosure on Capital Adequacy under the Standardised Approach (RM’000)
Long Position
12,872
2,566
Short Position
12,892
-
12,689,248
558,293
520
558,813
3,259,227
2,216,692
624,556
3,742,482
499,285
1,699,911
10,815
77,467
12,130,435
Gross
Exposures/
EAD before CRM
(20)
2,566
12,458,110
547,389
520
547,909
3,060,242
2,204,212
624,556
3,742,482
499,285
1,691,154
10,815
77,455
11,910,201
Net
Exposures/
EAD after CRM
5,759,271
366,578
24
2,566
5,390,103
399,796
756
400,552
2,339,198
1,653,281
79,117
96,000
702,176
16,223
103,556
4,989,551
Risk
Weighted
Assets
5,390,103
-
5,390,103
399,796
756
400,552
2,339,198
1,653,281
79,117
96,000
702,176
16,223
103,556
4,989,551
Total Risk
Weighted
Assets after
Effects of PSIA
460,741
29,326
2
205
431,208
31,984
61
32,045
187,136
132,262
6,329
7,680
56,174
1,298
8,284
399,163
Minimum
Capital
Requirements
at 8%
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 profit rates
and foreign exchange rates. A CaR reference threshold is set as a management trigger to ensure that the Bank’s capital adequacy is not impinged upon
in the event of adverse market movements. The Bank currently adopts BNM’s Standardised Approach for the computation of market risk capital charges.
The market risk capital charge addresses among others, capital requirement for market risk which includes the profit rate risk in the Bank’s 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
Islamic Profit Rate Swap
Islamic Cross Currency Profit Rate Swap
Fixed Income Instruments (i.e. Private Debt and Government Securities)
The Bank’s Trading Book Policy Statement stipulates the policies and procedures for including or excluding exposures from the Trading Book for the
purpose of calculating regulatory market risk capital.
151
152
-
2,794,890
59,684
-
PSEs
PSE “Public Sector Entities”
MDB “Multilateral Development Banks”
FDI “Financial Development Institutions”
Average Risk
Weight
Deduction from
Capital Base
0%
10%
20%
35%
50%
70%
75%
90%
100%
110%
115%
125%
135%
150%
250%
270%
350%
400%
625%
937.5%
1250%
Risk Weights
Sovereigns &
Central Banks
2015
-
-
-
19,623
5,386
-
Banks, MDBs
and FDIs
-
-
Insurance
Companies,
Securities
Firms &
Fund
Managers
-
270,254
600,245
25,760
2,938,656
17,953
-
Corporates
-
608
2,914,873
3,966
14,249
-
Regulatory
Retail
-
1,635,087
202,409
244
151,193
26,451
-
Residential
Mortgages
-
6,861
-
Higher
Risk
Assets
Exposures after Netting and Credit Risk Mitigation
Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM’000)
-
301,056
374,873
62,896
-
Other
Assets
Specialised
Financing /
Investment
-
-
Securitisation
-
-
-
Equity
-
-
-
-
3,385,823
1,040,188
1,635,087
228,777
2,915,117
3,156,711
65,514
-
Total
Exposure
after
Netting &
Credit Risk
Mitigation
-
208,038
572,280
114,388
2,186,338
3,156,711
98,271
-
Total Risk
Weighted
Assets
Appendix II
-
3,800,978
64,896
-
PSEs
PSE “Public Sector Entities”
MDB “Multilateral Development Banks”
FDI “Financial Development Institutions”
Average Risk
Weight
Deduction from
Capital Base
0%
10%
20%
35%
50%
70%
75%
90%
100%
110%
115%
125%
135%
150%
250%
270%
350%
400%
625%
937.5%
1250%
Risk Weights
Sovereigns &
Central Banks
2014
-
-
-
19,285
484,288
-
Banks, MDBs
and FDIs
Insurance
Companies,
Securities
Firms &
Fund
Managers
-
-
-
253,835
603,177
2,548,547
7,276
-
Corporates
-
143
2,277,563
3,688
16,254
-
Regulatory
Retail
-
1,375,024
192,808
366
142,671
30,850
-
Residential
Mortgages
-
11,905
-
Higher
Risk
Assets
Exposures after Netting and Credit Risk Mitigation
Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM’000)
153
-
346,956
248,103
29,497
-
Other
Assets
Specialised
Financing /
Investment
-
-
Securitisation
-
-
-
Equity
-
-
-
-
4,421,054
1,400,464
1,375,024
192,951
2,277,929
2,724,403
66,285
-
Total
Exposure
after
Netting &
Credit Risk
Mitigation
-
280,093
481,258
96,476
1,708,446
2,724,403
99,427
-
Total Risk
Weighted
Assets
Appendix II
154
Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000)
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
Total
On and Off-Balance-Sheet Exposures
Exposure Class
2014
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
Total
Exposure Class
2015
(i)
Moodys
S&P
Fitch
RAM
MARC
Rating &
Investment Inc
Moodys
S&P
Fitch
RAM
MARC
Rating &
Investment Inc
247,484
247,484
AAA to AA-
Aaa to Aa3
AAA to AAAAA to AAAAA to AA3
AAA to AA-
296,112
296,112
AAA to AA-
Aaa to Aa3
AAA to AAAAA to AAAAA to AA3
AAA to AA-
-
BBB+ to BB-
-
A+ to A-
-
BBB+ to BB-
-
Ratings of Corporate by Approved ECAIs
A1 to A3
Baa1 to Ba3
A+ to ABBB+ to BBA+ to ABBB+ to BBA to A3
BBB1 to BB3
A+ to ABBB+ to BB-
A+ to A-
Ratings of Corporate by Approved ECAIs
A1 to A3
Baa1 to Ba3
A+ to ABBB+ to BBA+ to ABBB+ to BBA to A3
BBB1 to BB3
A+ to ABBB+ to BB-
B+ to D
B1 to C
B+ to D
B+ to D
B to D
B+ to D
B+ to D
B1 to C
B+ to D
B+ to D
B to D
B+ to D
-
-
3,369,669
3,369,669
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
3,836,014
3,836,014
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Appendix IIl
5,310
5,310
Total
AAA to AA-
Aaa to Aa3
AAA to AAAAA to AAAAA to AA3AAA to AA-
Banks, MDBs and FDIs
Exposure Class
Moodys
S&P
Fitch
RAM
MARC
Rating &
Investment Inc
-
-
-
BBB+ to BBB-
BB+ to B-
-
-
A+ to A-
-
-
-
-
BBB+ to BBB-
BB+ to B-
-
-
Ratings of Banking Institutions by Approved ECAIs
A1 to A3
Baa1 to Baa3
Ba1 to B3
A+ to ABBB+ to BBBBB+ to BA+ to ABBB+ to BBBBB+ to BA1 to A3
BBB1+ to BBB3
BB1 to B3
A+ to ABBB+ to BBBBB+ to B-
2,854,574
2,854,574
A+ to A-
CCC+ to C
Caa1 to C
CCC+ to D
CCC+ to D
C1+ to D
C+ to D
CCC+ to C
Ratings of Sovereigns and Central Banks by Approved ECAIs
A1 to A3
Baa1 to Baa3
Ba1 to B3
Caa1 to C
A+ to ABBB+ to BBBBB+ to BCCC+ to D
A+ to ABBB+ to BBBBB+ to BCCC+ to D
Total
AAA to AA-
Aaa to Aa3
AAA to AAAAA to AA-
-
Moodys
S&P
Fitch
Rating &
Investment Inc
Sovereigns and Central Banks
Exposure Class
2015
(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000) (continued)
155
-
-
-
-
-
-
19,699
19,699
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Appendix lII
156
4,275
4,275
Total
14
14
BBB+ to BBB-
-
-
BB+ to B-
A+ to A-
-
-
BB+ to B-
AAA to AA-
BBB+ to BBB-
Ratings of Banking Institutions by Approved ECAIs
A1 to A3
Baa1 to Baa3
Ba1 to B3
A+ to ABBB+ to BBBBB+ to BA+ to ABBB+ to BBBBB+ to BA1 to A3
BBB1+ to BBB3
BB1 to B3
A+ to ABBB+ to BBBBB+ to B-
3,865,874
3,865,874
A+ to A-
-
-
-
-
Ratings of Sovereigns and Central Banks by Approved ECAIs
A1 to A3
Baa1 to Baa3
Ba1 to B3
A+ to ABBB+ to BBBBB+ to BA+ to ABBB+ to BBBBB+ to B-
Aaa to Aa3
AAA to AAAAA to AAAAA to AA3AAA to AA-
Banks, MDBs and FDIs
Exposure Class
Moodys
S&P
Fitch
RAM
MARC
Rating &
Investment Inc
-
Total
AAA to AA-
Aaa to Aa3
AAA to AAAAA to AA-
-
Moodys
S&P
Fitch
Rating &
Investment Inc
Sovereigns and Central Banks
Exposure Class
2014
(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000) (continued)
CCC+ to C
Caa1 to C
CCC+ to D
CCC+ to D
C1+ to D
C+ to D
CCC+ to C
Caa1 to C
CCC+ to D
CCC+ to D
-
-
-
-
-
-
499,284
499,284
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Appendix III
Disclosures on Credit Risk Mitigation (RM’000)
-
1,974,206
6,345
738,826
78,261
Other Assets
Defaulted Exposures
Total On and Off-Balance Sheet Exposures
Defaulted Exposures
Off-Balance sheet exposures other than OTC derivatives or credit derivatives
Off-Balance Sheet Exposures
Higher Risk Assets
12,738,672
28,960
-
-
9,666
609,646
-
599,980
28,960
-
2,904,191
Regulatory Retail
12,129,026
28,960
19,623
3,670,640
-
2,736,934
Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
Corporates
On-Balance Sheet Exposures
Credit Risk
Exposure Class
2015
a)
157
311,456
-
-
-
311,456
-
-
-
10,535
21,662
279,259
-
-
Exposures
Covered by
Eligible
Financial
Collateral
-
-
-
-
-
-
-
-
-
-
-
-
-
Exposures
Covered by
Other
Eligible
Collateral
Appendix IV
158
Disclosures on Credit Risk Mitigation (RM’000)
77,467
Defaulted Exposures
Total On and Off-Balance Sheet Exposures
Defaulted Exposures
Off-Balance sheet exposures other than OTC derivatives or credit derivatives
Off-Balance Sheet Exposures
12,689,248
558,813
520
558,293
12,130,435
624,556
Other Assets
10,815
Higher Risk Assets
-
3,200
-
-
-
3,200
-
-
-
-
2,216,692
1,699,911
Regulatory Retail
-
3,200
499,285
3,742,482
Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
3,259,227
Corporates
On-Balance Sheet Exposures
Credit Risk
Exposure Class
2014
a)
231,139
-
-
-
231,139
12
-
-
8,758
18,051
204,318
-
-
Exposures
Covered by
Eligible
Financial
Collateral
-
-
-
-
-
-
-
-
-
-
-
-
-
Exposures
Covered by
Other
Eligible
Collateral
Appendix IV
Total
- less than one year
Foreign exchange related contracts
Any commitments that are unconditionally cancelled at any time by the bank without prior notice or that effectively
provide for automatic cancellation due to deterioration in a customer’s creditworthiness
Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year
2,499,754
222,777
132
368,567
1,387,337
Short Term Self Liquidating trade related contingencies
132
73,713
277,467
348,409
Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year
609,646
898
-
73,980
174,205
147,960
Transaction related contingent items
15,321
9,383
Direct Credit Substitutes
9,383
Description
Total
Credit Equivalent
Amount
462,223
456
-
180,823
25,863
171,299
74,399
9,383
Total
Risk Weighted
Amount
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.
Total Principle
Amount
In contrast to the exposure to credit risk through a financing, where the exposure to credit risk is unilateral and only the financing 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.
Positive
Fair Value
of Derivative
Contracts
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.
2015
Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM’000)
Appendix IV
b)
159
160
Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM’000)
401,519
Short Term Self Liquidating trade related contingencies
Total
-less than one year
Foreign exchange related contracts
Any commitments that are unconditionally cancelled at any time by the bank without prior notice or that effectively
provide for automatic cancellation due to deterioration in a customer’s creditworthiness
2,112,921
24,032
31,652
1,181,140
312,478
Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year
152,164
Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year
9,936
Total Principle
Amount
Transaction related contingent items
Direct Credit Substitutes
Description
2014
b)
12
12
Positive
Fair Value
of Derivative
Contracts
558,812
23
-
236,228
80,304
156,239
76,082
9,936
Total Credit
Equivalent Amount
400,552
12
-
150,377
28,216
141,598
72,655
7,694
Total
Risk Weighted
Amount
Appendix IV
Profit rate risk is the current and prospective impact to the Bank’s financial condition due to adverse changes in the profit rates to which the statement of financial position is exposed. The objective of profit rate risk
management is to achieve a stable and sustainable net profit income from the perspectives of (1) earnings in the next 12 months, and (2) economic value.
Others comprise of SGD, JPY, EUR, AUD and GBP currencies where the amount of each currency is relatively small.
(18.5)
Total
*
-
Others (*)
73.0
-
(0.6)
(0.1)
US Dollar
73.0
Increase/(Decline)
in Economic Value
(17.8)
Increase/(Decline)
in Earnings
Ringgit Malaysia
Type of Currency (RM million)
2015
Impact on Positions
(100 basis points) Parallel Shift
2015
2014
10.2
-
(0.4)
10.6
Increase/(Decline)
in Earnings
44.8
-
-
44.8
Increase/(Decline)
in Economic Value
Impact on Positions
(100 basis points) Parallel Shift
2014
(2) Economic Value - Measuring the change in the economic value of equity (‘EVE’) is an assessment of the long term impact to the Bank’s capital. 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 profit rates.
(1) Next 12 months’ Earnings - Profit rate risk from the earnings perspective is the impact based on changes to the net profit income (‘NPI’) over the next 12 months. This risk is measured through sensitivity analysis
including the application of an instantaneous 100 basis point parallel shock in profit rates across the yield curve.
Disclosures on Market Risk - Profit Rate Risk/Rate of Return Risk in the Banking Book
Appendix IV
c)
161
AFFIN ISLAMIC BANK BERHAD (709506-V)
17th Floor, Menara AFFIN,
80, Jalan Raja Chulan,
50200 Kuala Lumpur
T : 03 2055 9000
F : 03 2026 1415
www.affinislamic.com.my

Annual Report 2015 - Affin Islamic Bank Berhad

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