Annual Report 2015 - AFFINBANK

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 AFFINBANK, 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
Our Vision
A Premier Partner for Financial Growth and
Innovative Services.
Our mission
To provide innovative financial solutions and services
to target customers in order to generate profits
and create value for our shareholders and other
stakeholders.
Corporate Information
Corporate Structure
Board of Directors
Profile of Board of Directors
Management Team
Profile of Management Team
executive summary
14
17
20
22
Chairman’s Statement
MD/CEO’s Performance Review
Corporate Diary
Financial Highlights
CORPORATE GOVERNANCE
23
30
34 Statement on Corporate Governance
Statement on Risk Management &
Internal Control
Audit & Examination Committee
In so doing, we provide opportunities for employees
to contribute and excel; and be competitive in
providing our solutions and services to our valued
customers.
other information
We shall conduct our business with integrity and
professionalism in compliance with good corporate
governance principles and practices.
financial statements
39 44
45 Network of Branches
Notice of Annual General Meeting
Financial Statements
corporate
information
PRINCIPAL
ACTIVITIES
NAME
Affin Bank Berhad
(Co. No.: 25046-T)
Affin Bank Berhad is
principally involved
in the carrying out of
banking and finance
related services. The
Bank has twelve (12)
subsidiary companies
and three (3) associate
companies which are
principally engaged in
property management
services, nominees’
services, trustee
management services
and factoring services.
DATE OF
INCORPORATION
23 October 1975
Managing Director/
Chief Executive
Officer
SECRETARY
YBhg. Dato’ Zulkiflee
Abbas Bin Abdul Hamid
(Retired w.e.f. 1.4.2015)
Nimma Safira Binti
Khalid
En. Kamarul Ariffin Bin
Mohd Jamil
(Appointed w.e.f. 1.4.2015)
BOARD OF DIRECTORS
Chairman
YBhg. Jen. Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)
(Non-Independent Non-Executive Director)
Directors
YBhg. Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin
YBhg. Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman
(Independent Non-Executive Director)
(Retired w.e.f. 27.1.2015)
Affin Bank Berhad (25046-T) | Annual Report 2015
Mr. Aubrey Li Kwok-Sing
02
Mr. Tang Peng Wah
(Alternate Director to Mr. Aubrey Li Kwok-Sing)
En. Mohd Suffian Bin Haji Haron
YBhg. Tan Sri Dato’ Seri Mohamed Jawhar
YBhg. Tan Sri Mohd Ghazali Bin Mohd Yusoff
En. Abd Malik Bin A Rahman
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
2,000,000,000
Par value
RM1.00
Total
RM2,000,000,000
No. of shares
1,688,769,616
Par value
RM1.00
Total
RM1,688,769,616
SUBSTANTIAL
SHAREHOLDER
No. of shares
Affin Holdings Berhad
1,688,769,616
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%
Affin Hwang Nominees
(Asing) Sdn Bhd
70%
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
100%
ABB Nominee (Asing) Sdn Bhd 1
Affin Hwang Asset Management
Berhad
100%
Affin Hwang Futures
Sdn Bhd
(80% held by Directors of AFFIN Bank Berhad
in trust for AFFIN Bank Berhad)
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
04
YBhg. Jen. Tan Sri Dato’ Seri
Ismail bin Haji Omar (Bersara)
Chairman/ Non-Independent
Non-Executive Director
YBhg. Tan Sri Dato’ Seri Lodin
Bin Wok Kamaruddin
Non-Independent
mR. Aubrey Li Kwok-Sing
Non-Independent
EN. Mohd Suffian
bin Haji Haron
Independent
YBhg. Tan Sri Dato’ Seri
Mohamed Jawhar
Independent
YBhg. Tan Sri Mohd Ghazali
Bin Mohd Yusoff
Independent
YBhg. tAn srI dato’ sri
abdul aziz bin abdul rahman
Independent
(Retired w.e.f. 27.1.2015)
EN. Abd Malik Bin A Rahman
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 the Director and
Chairman of AFFINBANK on 21 May 2002.
He was formerly the Chief of Defence Force (CDF) of 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 AFFIN ISLAMIC, 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 10 Special Board Meetings held during the financial year ended 31 December 2015.
Non-Independent Non-Executive Director
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin, aged 66, was reappointed to the Board of Directors of
AFFINBANK on 4 October 2010. He was appointed as the Managing Director of Affin Holdings Berhad in
February 1991 and redesignated as Deputy Chairman on 1 July 2008.
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.
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.
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 to date
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 2
out of 10 Special Board Meetings held during the financial year ended 31 December 2015.
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, AFFIN ISLAMIC,
Affin Hwang Investment Bank Berhad, AXA Affin Life Insurance Berhad and Boustead Plantations Berhad.
05
profile of
diRectors
Mr. Aubrey Li Kwok-Sing, aged 65, was appointed to the Board of Directors of AFFINBANK on 17 March
2008. He is also a Director of The Bank of East Asia, Limited and Chairman of IAM Holdings (Hong Kong)
Limited (formerly known as MCL Partners Limited).
He possesses extensive experience in investment banking, merchant banking and capital markets.
Presently he is a Board member of Café de Coral Holdings Limited, China Everbright International Limited,
Kunlun Energy Limited, Kowloon Development Co. Ltd, Pokfulam Development Company Limited and Tai
Ping Carpets International Limited.
Mr. Aubrey Li Kwok-Sing attended 5 out of 11 scheduled monthly Board Meetings held during the
financial year ended 31 December 2015.
Mr. Aubrey Li Kwok-Sing’s Alternate Director, Mr. Tang Peng Wah was appointed on 23 June 2014. He
attended 5 out of 11 scheduled monthly Board Meetings and 4 out of 10 Special Board Meetings held
during the financial year ended 31 December 2015.
Independent Non-Executive Director
En. Mohd Suffian Bin Haji Haron, aged 70, was appointed to the Board of Directors of AFFINBANK on
15 August 2009.
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.
06
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 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 AFFIN ISLAMIC, 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 10 Special
Board Meetings held during the financial year ended 31 December 2015.
profile of
diRectors
Tan Sri Dato’ Seri Mohamed Jawhar, aged 71, was appointed to the Board of Directors of AFFINBANK
on 1 November 2011.
His other positions include: Independent Non-Executive Director, AFFIN ISLAMIC; 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).
He was also the 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 was subsequently appointed Chairman and CEO in 2006. He was appointed Chairman ISIS
Malaysia on 9 January 2010 and 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 10
Special Board Meetings held during the financial year ended 31 December 2015.
YBhg. Tan Sri Mohd Ghazali Bin Mohd Yusoff
Tan Sri Mohd Ghazali Bin Mohd Yusoff, aged 69, was appointed to the Board of Directors of AFFINBANK
on 20 June 2014.
He holds a Degree of the Utter Bar from Middle Temple, Inns-of-Court, London. He joined the Malaysian
Judicial and Legal Service in 1974. Senior positions held include serving as Deputy Public Prosecutor,
State Legal Adviser, Registrar of Companies and Chief Registrar of the Supreme Court and SolicitorGeneral.
Presently he is a Board Member of AXA AFFIN Life Insurance Berhad.
Tan Sri Mohd Ghazali Bin Mohd Yusoff attended all 11 scheduled monthly Board Meetings and all 10
Special Board Meetings held during the financial year ended 31 December 2015.
He was elevated to the bench as Judge of the High Court, Court of Appeal and later to the Federal Court.
He retired in January 2012.
07
profile of
diRectors
YBhg. Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman
Independent Non-Executive Director (Retired w.e.f. 27.1.2015)
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman, aged 69, was appointed to the Board of Directors of
AFFINBANK on 28 January 2003.
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.
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.
Presently he is a Board member of AFFIN ISLAMIC and the International Islamic University Malaysia.
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman retired as Director with effect from 27 January 2015.
En. Abd Malik bin A Rahman
Independent Non-Executive Director (Appointed w.e.f. 3.3.2015)
En. Abd Malik Bin A Rahman, aged 67, was appointed to the Board of Directors of AFFINBANK on
3 March 2015.
En. Malik is currently an Independent Non-Executive Director of AFFIN Holdings Berhad, Boustead
Heavy Industries Corporation Berhad, CYL Corporation Berhad, Lee Swee Kiat Group Berhad and Innity
Corporation Berhad as well as Director of several private limited companies including Boustead Penang
Shipyard Sdn Bhd. He is also a Director of the subsidiaries of AFFIN Holdings Berhad, namely AFFIN
Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) and AFFIN
Hwang Asset Management Berhad (formerly known as Hwang Investment Management Berhad).
08
He is a Chartered Accountant member of the Malaysian Institute of Accountants, a member of the
Malaysian Institute of Certified Public Accountants, a member of Certified Financial Planners (USA), a
member of Chartered Management Institute (UK), a member of the Malaysian Institute of Management
and Fellow of the Association of Chartered Certified Accountants (UK).
En. Malik has held various senior management positions in Peat Marwick Mitchell & Company (currently
known as KPMG), Esso Group of Companies, Colgate-Palmolive (M) Sdn Bhd, Amway (Malaysia) Sdn Bhd,
Fima Metal Box Berhad and Guinness Anchor Berhad. He was the General Manager, Corporate Services
of Kelang Multi Terminal Sdn Bhd (currently known as Westports Malaysia) from 1994 until 2003.
En. Abd Malik Bin A Rahman attended all 9 scheduled monthly Board Meetings and 8 out of 10 Special
Board Meetings held for the period from March to December 2015.
management
Team
YBHG. Dato’ Zulkiflee Abbas Bin Abdul Hamid
Managing Director/ Chief Executive Officer
(Retired w.e.f. 1.4.2015)
EN. KAMARUL ARIFFIN BIN MOHD JAMIL
Managing Director/ Chief Executive Officer,
Affin Bank Berhad (Appointed w.e.f. 1.4.2015)
EN. NAZLEE BIN KHALIFAH
Chief Executive Officer, Affin Islamic Bank Berhad
EN. SHARIFFUDIN BIN MOHAMAD
Executive Director, Operations & Strategic Services
EN. AMIRUDIN BIN ABDUL HALIM
MR. RAMANATHAN RAJOO
Chief Financial Officer
MR. TAN KOK TOON
Director, Group Treasury
PN. KHATIMAH BINTI MAHADI
EN. IDRIS BIN ABD HAMID
Director, Consumer Banking
PN. NOR ROZITA BINTI NORDIN
Chief Human Resource Officer
PN. NIMMA SAFIRA BINTI KHALID
Chief Compliance Officer & Company Secretary
PN. NORHAZLIZAWATI BINTI MOHD RAZALI
Group Chief Credit Officer
(Appointed w.e.f. 1 August 2015)
MR. WONG KOK LEONG
Group Chief Risk Officer
(Appointed w.e.f. 1 August 2015)
MR. KASINATHAN T. KASIPILLAI
Group Chief Risk Officer
(Retired w.e.f. 1 August 2015)
Executive Director, Business Banking
Group Chief Internal Auditor
09
PROFILE OF
MANAGEMENT TEAM
YBHG. Dato’ Zulkiflee Abbas Bin Abdul Hamid
Managing Director/Chief Executive Officer (Retired w.e.f. 1.4.2015)
Dato’ Zulkiflee Abbas Bin Abdul Hamid is the Managing Director/Chief Executive Officer of Affin Bank
Berhad, a position held since April 2009. Dato’ Zulkiflee also held the mandate to drive Affin Banking
Group’s strategic and developmental agenda for all entities within the group. Subsequently, effective 2
January 2014, he was appointed the Group Chief Executive Officer of Affin Holdings Berhad. Dato’ Zulkiflee
currently holds dual position as the Group CEO of Affin Holdings Berhad and MD/CEO of Affin Bank Berhad.
Dato’ Zulkiflee joined AFFINBANK on 1 March 2005 as Director of Enterprise Banking. Subsequently in
2008, Dato’ Zulkiflee was appointed as Executive Director of Banking, which encompassed both Business
and Consumer Banking.
Dato’ Zulkiflee holds a Master in Business Administration (1981) and a Bachelor of Science degree in
Marketing (1979), both from Southern Illinois University.
Dato’ Zulkiflee retired as Managing Director/Chief Executive Officer with effect from 1 April 2015.
EN. KAMARUL ARIFFIN BIN MOHD JAMIL
Managing Director/Chief Executive Officer, Affin Bank Berhad (Appointed w.e.f. 1.4.2015)
En. Kamarul Ariffin Bin Mohd Jamil was appointed as the Managing Director/Chief Executive Officer of
Affin Bank Berhad on April 2014 and is currently also holding the position Group Chief Executive Officer
of Affin Holdings Berhad.
Kamarul joined Affin Bank Berhad in 2003 as Head, Corporate Strategy Division. In 2005, Kamarul was
appointed as Head, Islamic Banking Division. With the establishment of Affin Islamic Bank, Kamarul was
appointed as its Chief Executive Officer in 2006.
Prior to AFFINBANK, Kamarul held various positions at Pengurusan Danaharta Nasional Berhad,
Trenergy Malaysia Berhad and Shell Malaysia Trading Sdn Bhd in various capacities including business
development and strategic planning.
Kamarul graduated from the University of Cambridge in 1992 with a Bachelor of Arts in Economics.
EN. NAZLEE BIN KHALIFAH
Chief Executive Officer, Affin Islamic Bank Berhad
10
En. Nazlee Bin Khalifah was appointed as the Chief Executive Officer of Affin Islamic Bank Berhad on
June 2015. Prior to AFFIN ISLAMIC, Nazlee held the position as Head of Business Strategy and Support,
Business Banking Division for Affin Bank Berhad in 2009 and subsequently, in April 2011, Nazlee was
appointed as Chief Corporate Strategist.
Nazlee has more than 20 years’ experience in the banking industry. Prior to joining AFFINBANK, Nazlee
was with a leading local bank for 17 years in various capacities, mostly in Strategic Management
positions.
Nazlee graduated from Simon Fraser University in Vancouver in 1991, with a Bachelor’s degree in
Business Administration, majoring in Accounting and Finance.
PROFILE OF
MANAGEMENT TEAM
EN. SHARIFFUDIN BIN MOHAMAD
Executive Director, Operations & Strategic Services
En. Shariffudin Bin Mohamad joined Affin Bank Berhad in 2007 as Director of Operations and was
appointed as Executive Director, Operations in 2009.
Shariffudin has more than 25 years of local and overseas experience in banking. His hands-on experience
covers Branch Operations, Trade Finance, Corporate Banking, Corporate Relationship Management, Credit
Operations, Cash Management and Securities Services. His last position was Head, Project Management
Services (Technology & Operations) in a leading foreign bank and its local outsourcing subsidiary.
Shariffudin graduated from Southern Illinois University, with a Master in Business Administration (1981)
and a Bachelor of Science degree in Finance (1980).
EN. AMIRUDIN BIN ABDUL HALIM
Executive Director, Business Banking
En. Amirudin Bin Abdul Halim joined Affin Bank Berhad as Director, Business Banking in July 2009 and
was appointed as Executive Director, Banking in 2014.
Prior to AFFINBANK, Amirudin was at a leading local bank for more than 21 years where he gained
extensive banking experience in Branch Operations, Credit Control, Business Banking, Retail Marketing,
Consumer Banking and Corporate Services.
He has served in several senior strategic roles, including Deputy Head of Business Banking Division,
Head of Mortgage and Automobile Financing and as the Deputy Chief Executive Officer of a subsidiary
of a leading local bank.
Amirudin graduated with a Bachelor of Arts degree in Finance from St. Louis University in 1986.
MR. RAMANATHAN RAJOO
Chief Financial Officer
Ramanathan brings with him more than 27 years of experience in Finance and Accounting from various
audit and financial institutions, which include auditing, financial accounting, financial management,
administration and services, and credit recovery.
Ramanathan holds a Bachelor’s degree in Accounting from Universiti Kebangsaan Malaysia (UKM) and a
Master in Business Administration (MBA) (Finance) from Universiti Putra Malaysia (UPM). He is a qualified
Chartered Accountant with a Certified Practicing Accountant (CPA) qualification from Australia. He is also
a member of the Malaysian Institute of Accountants (MIA), and a Certified Credit Professional.
Mr. Ramanathan joined BSN Commercial Bank (BSNC) in 1991, which merged with Affin Bank Berhad in
2001. Ramanathan was appointed as Head, Finance of the Bank in 2005 and subsequently appointed
as Chief Financial Officer in 2014.
11
PROFILE OF
MANAGEMENT TEAM
MR. TAN KOK TOON
Director, Group Treasury
Mr. Tan Kok Toon joined Affin Bank Berhad as its Head of Treasury in October 2004 and is responsible for
managing all aspects of Treasury Division. He is currently the Honorary Secretary of Persatuan Pasaran
Kewangan Malaysia (Association Cambiste Internationale) and Chair to the Seminar and Education
Committee.
Prior to AFFINBANK, Tan was with a leading bank in Malaysia. Tan has more than 20 years of banking
experience, particularly in Treasury Operations. He has served as Treasury Manager with the New York
Branch, and was Treasury Business Advisor to turn around a business project in the Philippines.
Tan graduated from Universiti Malaya (UM) in 1987 with a Bachelor of Science (honours) in Mathematics.
PN. KHATIMAH BINTI MAHADI
Group Chief Internal Auditor
Pn. Khatimah Binti Mahadi joined Affin Bank Berhad as Chief Internal Auditor in 2004. Khatimah has
more than 30 years of experience in Internal Auditing.
She has led the Audit and Compliance function in a number of large local and foreign financial institutions.
Khatimah holds a Diploma in Accountancy from UiTM in 1978 and was awarded as one of the first 45
Chartered Bankers in Malaysia in 2015.
EN. IDRIS BIN ABD HAMID
Director, Consumer Banking
En. Idris Bin Abd Hamid is the Director of Consumer Banking, a position he has held since May 2009.
Idris began his career with Affin Bank Berhad in 1994 as General Manager of Affin Finance Berhad. He was
appointed as Deputy Chief Executive Officer for Affin-ACF Finance Berhad from 2000 to 2005.
Idris has over 30 years of experience in the banking industry, which includes exposure as Branch Manager,
and Corporate and Consumer Loans Management.
Idris graduated with a Master in Business Administration from the University of Northern Colorado in 1984.
12
PN. NOR ROZITA BINTI NORDIN
Chief Human Resource Officer
Pn. Nor Rozita Binti Nordin was appointed as Chief Human Resource Officer of Affin Bank Berhad in May
2011. Prior to joining AFFINBANK, Rozita was the Executive Vice-President and Head of Group Human
Resources at a local banking group.
Rozita has more than 30 years’ experience in Human Resource Development and Customer Relations
Strategy, in various industries which include banking, oil and gas, manufacturing, retail, and shared services.
Rozita has taken on strategic and operational roles, both locally and abroad.
Rozita graduated from Southern Illinois University with a Master of Science in 1984, a Bachelor of Science
in Education and a Bachelor of Arts in Linguistics, both in 1982.
PROFILE OF
MANAGEMENT TEAM
PN. NIMMA SAFIRA BINTI KHALID
Chief Compliance Officer & Company Secretary
Pn. Nimma Safira Binti Khalid is the Chief Compliance Officer & Company Secretary of Affin Bank Berhad.
Nimma joined AFFINBANK in 2001 as Manager, Legal & Secretarial. She was subsequently assigned to
the President/CEO’s office as the Executive Assistant from 2003 to 2005.
Nimma started her career of 20 years as an Advocate & Solicitor of the High Court of Malaya in 1994.
She then moved in-house as Legal Officer/Company Secretary of a commercial bank from 1995 to
2000. Nimma graduated with Bachelor of Laws in 1992 and Bachelor of Laws (Shariah) in 1993; both
from the International Islamic University, Malaysia.
PN. NORHAZLIZAWATI BINTI MOHD RAZALI
Group Chief Credit Officer (Appointed w.e.f.1 August 2015)
Puan Norhazlizawati (Liza) Binti Mohd Razali joined Affin Bank Berhad as Group Chief Credit Officer, on 1
August 2015.
Liza has more than 24 years of banking experience, primarily in credit risk management and business
lending. She has been a member of senior management for many years, holding key positions in both
business and credit risk management. Her areas of strength include Credit and Risk Management,
Commercial & SME Lending, Relationship Management, and Project Management.
Liza holds a Bachelor of Arts (Hons) in Business Studies from Leeds Metropolitan University, United Kingdom.
She also holds a Certified Credit Professional (Business) qualification from the Asian Institute of Chartered
Bankers.
MR. WONG KOK LEONG
Group Chief Risk Officer (Appointed w.e.f.1 August 2015)
Mr. Wong Kok Leong joined Affin Group in 2000 as Head, Risk Management at Affin Investment Bank.
Prior to his appointment as Group Chief Risk Officer on 1 August 2015, he held the positions of Group
Chief Credit Officer and Head, Group Market Risk.
His previous career stints include a law firm, regulatory body and stock exchange. Wong holds a Master
of Law from Cambridge University, UK, Bachelor of Laws from Buckingham University, UK and Bachelor
of Economics (Accounting) from Monash University, Australia. He is a Fellow of CPA Australia as well as
the Financial Services Institute of Australasia (FINSIA).
He also holds professional certifications in risk management, project management, financial planning,
training, coaching and mentoring.
Mr. Kasinathan T. Kasipillai joined Affin Bank Berhad in 2005 as its Chief Risk Officer. Kasinathan has more
than 35 years of local and overseas banking experience particularly in the areas of Risk Management.
He comes from a foreign bank background working in the risk function serving in a number of countries
including London, Singapore, Hong Kong, Mumbai and Jakarta.
Kasinathan holds a Master in Business Administration from the University of Bath, UK and is a Certified
Risk Professional awarded by Bank Administration Institute, Chicago, USA.
Kasinathan retired as Group Chief Risk Officer with effect from 1 August 2015.
MR. KASINATHAN T. KASIPILLAI
Group Chief Risk Officer (Retired w.e.f. 1 August 2015)
13
chairman’s
statement
net loaNS &
advances/
financing
TOTAL ASSETS
rm59.8
rm42.1
billion
billion
Jen. Tan Sri Dato’ Seri Ismail
Bin Haji Omar (Bersara)
Chairman
Dear shareholders,
Given a challenging macro-economic environment, the year 2015 was tough
for almost every industry in the country, including finance. Amid falling oil
prices and value of the Ringgit, increased costs due to the Goods and Services
Tax (GST) and continuing restrictions on personal and home financing, as well
as regulatory requirements regarding capital, liquidity and risk management,
AFFINBANK performed relatively well. Our net loans, advances & financing
grew 6.7% to RM42.1 billion; and total assets increased by 0.5% to RM59.8
billion. Although the Bank’s profit before zakat and tax (PBZT) dipped to
RM461.2 million, this was due to one-off provisioning for few large accounts,
and does not in any way reflect the strength of our fundamentals, which
continue to remain robust.
14
If anything, actions taken during the year under review serve to further
enhance the Bank’s core values. Efforts were made to diversify and increase
the quality of our loans portfolio while attracting more deposits from a
wider range of customers. We also created more avenues for income
growth through strategic product bundling and cross-selling of our cards,
wealth management and Bancassurance businesses. These initiatives
were supported by heightened operational efficiencies backed by increased
investments in IT, as well as a more productive and energised workforce, who
have been the recipients of enhanced training and professional development.
One of the key focus areas in our professional development programmes is
to build a strong internal knowledge base of the increasingly complex web
of regulatory requirements, thus ensuring the Bank adheres to all edicts
on capital adequacy, liquidity coverage, risk management and corporate
governance. I’m pleased to note that these efforts have not been in vain, as
the Bank is making good progress in meeting the various deadlines set by
Bank Negara Malaysia (BNM) to meet Basel II and III requirements as well
as those contained in the Financial Services Act 2013 and Islamic Financial
Services Act 2013.
“Our net loans, advances & financing grew 6.7%
to RM42.1 billion; and total assets increased by
0.5% to RM59.8 billion.”
BUILDING INTANGIBLE VALUE
While building the value of the Bank via financial performance and regulatory
compliance, we are also creating a stronger brand and market reputation by
playing a key role in community development.
The Bank has over the years taken great interest in serving pockets of the
community that are underprivileged. This we do via a well-oiled corporate
responsibility (CR) machinery that focuses on providing aid either directly
to charitable organisations, or indirectly to deserving bodies or individuals
through donations or sponsorships via third parties.
Given that the Lembaga Tabung Angkatan Tentera (LTAT, or the Armed Forces
Fund Board) is a major shareholder of the Bank, we are supportive of initiatives
driven by LTAT, especially those that target retired Armed Forces personnel
or their children. We continue to make a yearly contribution of RM1 million
to Yayasan Warisan Perajurit, a foundation established by LTAT to provide
educational assistance to the children of current and retired Malaysian Armed
Forces personnel. We also sponsored advertising activities during the threemonth Tabung Pahlawan Campaign from August to October 2015 which
provides a platform for the general public to contribute to and show their
support for the Malaysian Armed Forces. In conjunction with Hari Raya, we
contributed RM100,000 worth of gifts to the Welfare Fund of the Malaysian
Armed Forces.
chairman’s
statement
‘Buka Puasa’ for orphans from selected orphanages.
In conjunction with Hari Raya, we organised our annual ‘Majlis Berbuka Puasa
Bersama Anak-anak Yatim’ breaking of fast with orphans. Organised together
with AFFIN ISLAMIC, the event this year saw us treat about 160 children from
three orphanages in the Klang Valley to a scrumptious dinner at our Head
Office, Menara Affin.
To celebrate Chinese New Year, we visited the Old Folks Home at Jalan
Ampang, where we distributed ‘ang pow’ (red packets of token cash), gifts
and dry food to the residents.
Firm in the belief that education is one of the most effective enablers of social
empowerment, one of our flagship CR initiatives is the AFFINBANK Education
Excellence Award, implemented since 2003.
In 2015, the Bank presented to 39 children of Bank staff who excelled in
their SPM and STPM examinations with Education Excellence Awards totalling
RM58,850.
Children having fun exploring Aquaria KLCC.
Under the same programme, the Bank also awarded scholarships to children
of Bank staff who are pursuing Diploma/Degree programmes in universities
in Malaysia. To date, we have disbursed a total of RM1.09 million in tertiary
education scholarships, benefitting 35 children of staff.
AFFINBANK also took 69 underprivileged children on educational trips to the
National Museum, Petrosains and Aquaria KLCC.
We also contribute readily to efforts aimed at bridging the education gap.
This year, we channelled RM100,000 towards Tabung Pendidikan 1 Billion,
a fund for the advancement of education of the nation. Together with AFFIN
ISLAMIC, we sponsored the distribution of Utusan Malaysia’s Tutor Pull-out to
primary and secondary school students, to supplement reference materials
used by the schools.
15
chairman’s
statement
Contribution of RM100,000 worth of gifts to the Malaysian Armed Forces in conjunction with Hari Raya.
Since 2011, we have been sponsoring various CR efforts of BHPetrol, one of our
sister companies. This includes opening savings account for underprivileged
individuals featured on its TV programme Di Celah-celah Kehidupan, with
an initial sum of RM1,000 as a gift from the Bank. We also sponsor the
BHPetrol Orange Run organised to raise funds for selected charities. This
year, proceeds were donated to Damai Disabled Person Association Malaysia,
The National Autism Society of Malaysia and Pusat Harian Kanak-kanak
Spastik Bandar Ipoh.
Providing another platform for staff to participate in CR activity, the Bank sent
teams to participate in The Edge KL Rat Race and The Bursa Bull Run. Both
runs are held in aid of charities selected by the organisers.
OUTLOOK
From all indications, the year 2016 looks set to continue to be challenging
to the financial and banking sectors. Some of these challenges are due to
external headwinds that are beyond our control, yet others are to do with
regulatory compliance which actually serve to enhance the robustness of
individual banks and, collectively, that of the entire industry. Seen in this light,
we positively embrace the opportunity to strengthen our fundamentals by
meeting the new requirements set upon us.
16
We shall take this opportunity of great change to review and enhance our
entire operational framework – encompassing our customer interfaces and
distribution channels, to our products and solutions, operations, technology,
people and organisation and performance management. Our aim is to
safeguard our sustainability by ensuring we remain relevant in the marketplace.
A Strategic Transformation Programme led by our Managing Director/CEO
with the participation of every single member of the Management team, and
support of the Board of Directors has been put in place. With such strong
endorsement, I have every reason to believe that it will unfold to reveal a
stronger, more resilient Bank which will provide even greater value to our
stakeholders.
ACKNOWLEDGEMENTS
AFFINBANK has been growing steadily in strength and stature over the last
few years. For this, we have many stakeholders to thank. On behalf of our
Board of Directors, I would like to acknowledge our shareholders for your
belief in us. Rest assured that we are committed to growing the value of your
assets. I would also like to express my appreciation to our numerous business
partners, whose support has been crucial to our successes, as well as our
customers who motivate us to keep innovating and producing even better,
more effective products and solutions to serve their needs.
I would also like to acknowledge my fellow colleagues on the Board for their
wise counsel that has guided AFFINBANK through the peaks and troughs of
a very dynamic and demanding industry. My sincere appreciation goes to
this team for their astute and effective leadership. Most of all, I would like to
express my heartfelt gratitude to all our employees who have demonstrated a
high level of integrity and commitment in their daily actions and performance.
Keep up the fantastic work, and together we will fulfil our ambitions as well
as those of our stakeholders.
Jen. Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)
Chairman
md/ceo’s
performance review
0.95%
6.7%
Net impaired LOANS/
financing ratio
growth in net loaNS &
advances/ financing
14.5%
TOTAL
CAPITAL RATIO
Kamarul Ariffin Bin Mohd Jamil
As we welcome a new chapter, let me do a
quick recap of 2015 - we were embroiled in the
decline of our currency, collapse in oil prices,
capital outflows, slowdown in China and other
countries, bearish outlook for sectors such as
oil & gas, property, plantation, automobile,
consumer and banking.
To say that Affin sailed through 2015 unscathed is an understatement. It was
indeed a tough year for us; nonetheless we charted a series of milestones that
we can be proud of. AFFINBANK continued to grow both our retail and business
banking segments in a prudent manner. We also placed greater emphasis on
enhancing our fee income via transactional banking, and on increasing our brand
recognition and visibility by expanding our domestic footprint.
FINANCIAL PERFORMANCE
The intense competition as well as less disposable income of consumers across
the board due to rising costs contributing to a marginal decrease in deposits of
0.5%. However, the bank’s total assets continue to grow by 0.5%, from RM59.5
billion to RM59.8 billion.
BUSINESS INITIATIVES
Throughout the year, the Bank continued to focus on building our deposit base via
various exciting campaigns. In conjunction with Chinese New Year, we launched
a “G.O.A.T.S” Campaign offering customers higher fixed deposit promotional
rates, exclusive gifts and an additional 0.39% per annum Current/Savings
Account interest rate to tie in with our 39th Anniversary.
From March to June 2015, we ran a campaign that bundled our unit trust and
fixed deposit (FD) accounts. Customers who invested a minimum of RM50,000,
with an equal amount placed in the unit trust and FD account, were eligible to
5.50% interest in the FD over a three-month period. Subsequently, a promotion
was held to grow the Bank’s company and individual current account base. This
was followed by the AffinGOLD Home Sweet Home campaign offering special
rates to new subscribers to the AffinGOLD account, which is a savings/current
account designed for senior citizens.
Meanwhile, we relaunched the AFFINBANK BHPetrol ‘Touch and Fuel’
MasterCard® Contactless with enhanced benefits and privileges, such as cash
rebates for petrol of up to 10% on weekends at BHPetrol stations nationwide,
and savings up to 0.8% with AFFIN Bonus cash rebate on overall monthly retail
spending (excluding petrol and government related transactions), finance charges
of only 9.99% per annum as well as personal accident insurance coverage up
to RM30,000 a year.
During the year, AFFINBANK grew our net loans, advances and financing by
6.7% year-on-year from RM39.5 billion in 2014 to RM42.1 billion. Although this
was accompanied by an increase in our net impaired loans ratio from 0.84%
to 0.95%, much of this increase was due to a new Bank Negara Malaysia
(BNM) regulation which reclassifies restructured and rescheduled (R&R) loans
as ‘impaired’. Our gross impaired loans ratio similarly increased, from 1.78%
to 1.80%.
For the year under review, AFFINBANK’s profit before zakat and taxation (PBZT)
dropped 36.0% to RM461.2 million. This was due to one-off provisioning on few
large accounts. We are confident of restoring our profitability to previous levels in
the coming year as Management places more emphasis on diversifying our asset
and liability portfolio, concentrating on areas where we can excel.
17
md/ceo’s
performance review
The relaunch of AFFINBANK BHPetrol ‘Touch & Fuel’ MasterCard® Contactless.
As part of efforts to increase customer convenience, hence their experience,
AFFINBANK signed an agreement with Bursa Malaysia Berhad to launch an
electronic subscription and payment service for those applying for our rights
issue. We are only the second financial institution to provide investors such
convenience. Leveraging on IT, we have also provided a channel for customers to
apply for eSaver or eSaver-i account via the internet.
In the more conventional space, we continued to extend our reach by expanding
our branch network and ensuring banks are located in areas that will best serve
our customers. During the year, we opened one new branch in Kota Damansara,
Selangor and relocated the Kulai branch. We also installed three new off-site
Self-Service Machines, bringing the total of such facilities to 119.
18
RISK MANAGEMENT
To address Basel III capital adequacy requirement, Affin Holdings Berhad is
issuing a Basel III-compliant RM1.0 billion subordinated loan to AFFINBANK in
three stages. The first drawdown of RM400 million was executed in December
2015, the second and third drawdowns, of RM300 million each, will be issued
in May 2016 and January 2017. These will replace existing sub-loans that are
not Basel III-compliant. At the same time, AFFINBANK increased our capital in our
wholly-owned subsidiary AFFIN ISLAMIC by RM100 million in December 2015.
IT & OPERATIONAL HIGHLIGHTS
To strengthen our risk management capabilities, the Asset Liability Management
System which incorporates a Large Exposure module is at its final stages of
implementation. This will enable the Bank to better manage large exposures,
quantify and manage interest rates as well as liquidity risk.
As part of efforts to create greater operational efficiencies, the Bank is investing
substantially in various IT systems and upgrades to support our day-to-day
functions as well as to comply with regulatory requirements.
At the same time, an internal Foreign Exchange Administration (FEA) Working
Group is coordinating activities to enhance AFFINBANK’s internal compliance
structure in respect of the FEA Notices.
In line with BNM’s directive for all debit cards to employ the Chip & Pin system
(as opposed to necessitating the owner’s signature for transactions), we are
migrating to the Europay-Mastercard-Visa (EMV) chip and the Malaysian Chip
Card Specification (MCCS). We are also implementing eSDMS, a Software
Distribution and Management System, to improve the security of our ATMs,
while ensuring our ATM Operating System runs on a supported version such as
Windows 7 and above.
DEVELOPING OUR HUMAN CAPITAL
Meanwhile, to support our Human Resources (HR) function, we are upgrading our
existing HR Management System to the latest version of PeopleSoft. In addition,
we are installing a new system to support the migration of our cash rebate
scheme for the Bank’s customers into a point-based loyalty programme.
To become a premier Banking institution in the country, it is crucial to have people
who are able to support our ambitions. The Bank has continued to invest in
Human Capital Development programmes in 2015, with new and enhanced
professional training and development programmes for employees. These
programmes focussed on 4 main areas: Compliance, Leadership Proficiency,
Functional Capabilities, Nurturing Young Talent.
The Bank implemented Compliance related programmes and related initiatives
to instill and strengthen knowledge so as to ensure adherence to regulatory and
statutory requirements, which among others included Anti-Money Laundering,
Personal Data Protection, Responsible Lending, Foreign Exchange Act, and the
FSA/IFSA.
md/ceo’s
performance review
Kota Damansara branch opening.
The Bank strived to strengthen human capital capabilities through professional
and leadership programmes at all levels, so as to enhance productivity, efficiency
and performance. New programmes included Leading at the Next Level: Building
Leadership Influence for Middle and Senior Leaders in the Bank.
The Bank continued to provide opportunities for all levels of staff to enhance skills
and meet their career aspirations. These initiatives include the Bank’s Upward
Mobility Scheme, which saw more than 15% of employees filling in higher-level
positions in the Bank.
The Bank introduced new technical/functional training programmes to support
business and operational demand for competent human capital in the Bank,
which included among others, enhancement of the Relationship Management
Programme, e-Shariah programmes, Tele-Collectors Training, and Professional
Selling Skills Programme.
The Bank also continued to build on its aspiration of nurturing young talent
in the Bank. A total of 96 fresh graduates were hired in 2015, to fill various
roles in the Bank, particularly in the areas of Sales and Analytics. These young
talent were provided with a myriad of training programmes, which included both
classroom and experiential learning interventions, to nurture and develop their
competencies.
OUTLOOK & ACKNOWLEDGEMENTS
This year will likely be more challenging than 2015 in the face of continued
economic headwinds. However, we are confident of maintaining steady
performance as we build our customer and stakeholder value while intensifying
all efforts to institutionalise best practices in corporate governance, capital,
liquidity and risk control. The Bank will continue to target/focus on the domestic
retail banking segments such as consumer deposits, digitalisation of consumer
banking and cash management services, and grow our loans portfolio with a
particular focus on high-end auto financing and mortgage.
We began the year 2016 by launching our Affinity Group Strategic Transformation
Programme which seeks to enhance every aspect of our operations to enable
AFFINBANK to become a formidable Bank for our employees and customers.
In order to create a discernable impact through this transformation programme,
much effort will be required and with the unwavering support from our various
stakeholders, this goal is within our reach.
At this juncture I would like to thank all our stakeholders for their steadfast
support to AFFINBANK. My heartfelt thanks to our regulators, shareholders and
customers, as well as our Board of Directors, my colleagues in the Management
Team and, most of all, our more than 3,500 dedicated employees.
As the Bank grows and expands, it will continue to review existing programmes
and strengthen them, as well as identify new ones to complement existing
initiatives, so as to ensure AFFIN bankers are given every opportunity to grow
and develop their careers with the Bank.
19
corporate
diary
JAN
FEB
Opening Branch Kota Damansara, Selangor
JUN
Blood Donation Drive
eRights - Bursa Malaysia & AFFINBANK
Bursa Malaysia Berhad signed an agreement
with AFFINBANK to offer electronic subscription
and payment services for the application of
rights issue (eRights).
JUL
“Majlis Berbuka Puasa Bersama
Anak-anak Yatim”
AFFINBANK Group hosted a ‘Buka Puasa’
event for a total of 160 children from four
orphanages at its corporate head office,
Menara Affin.
MAR
Chinese New Year Charity
Activity - Visit to Old Folks
Home
JAN
LIMA 2015
AUGUST
Participation Bursa Bull Charge 2015
NOV
JUL
Contribution - RM100,000 worth of Hari
Raya gifts to the Welfare Fund of the
Malaysian Armed Forces
AFFINBANK BHPetrol ‘Touch and Fuel’
MasterCard® Contactless Relaunch
AFFINBANK relaunched its AFFINBANK BHPetrol
‘Touch and Fuel’ MasterCard® Contactless credit
card today with improvement to
its benefits and privileges.
SEPT
20
Sponsorship - BHP Orange Run 2015
AFFINBANK collaborated with BHPetrol in
support for their BHP Orange Run 2015, a
12-km long run organised to raise funds
for selected charities.
DEC
Jalinan Mesra AFFINBANK Bersama AnakAnak Yatim dan Fakir Miskin Pertubuhan
Kebajikan Baitul Barokah Wal Mahabbah
JUL
Contribution - Malaysian Armed Forces
A Corporate Social Responsibility activity where a
total of 69 underprivileged children were brought
to visit three fun and educational places such as
the National Museum, Petrosains and
Aquaria KLCC.
corporate
diary
21
financial
highlights
Earnings Per Share (EPS)
Sen
‘15
20.5
‘14
33.3
‘13
37.5
‘12
35.0
AFFINBANK’s EPS for the financial year ended 31 December
2015 stood at 20.5 sen compared to 33.3 sen the year before.
Profit Before Zakat And Taxation
RM’million
‘15
461.2
‘14
720.1
‘13
762.2
‘12
703.2
AFFINBANK recorded profit before zakat and taxation of
RM461.2 million for the financial year ended 31 December 2015
compared to RM720.1 million in the same period of 2014.
Total Assets
RM’billion
‘15
59.8
‘14
59.5
‘13
56.4
‘12
52.1
AFFINBANK’s financial position as at 31 December 2015
continued to remain strong with total assets of RM59.8
billion, an increase of 0.5% compared to RM59.5 billion as at
31 December 2014.
Net Loans, Advances & Financing
RM’billion
‘15
42.1
‘14
39.5
‘13
36.2
‘12
33.5
AFFINBANK’s net loans, advances and financing grew by 6.7%
to RM42.1 billion compared to RM39.5 billion in 2014.
Deposits From Customers
RM’billion
22
‘15
47.8
‘14
48.0
‘13
46.1
‘12
41.3
Total deposits as at 31 December 2015 are RM47.8 billion
compared to RM48.0 billion in the year before.
Shareholders’ Equity
RM’billion
‘15
5.5
‘14
5.2
‘13
4.4
‘12
4.1
Total shareholders’ equity of AFFINBANK is RM5.5 billion as at
31 December 2015 compared to RM5.2 billion in 2014.
Statement on
corporate governance
The Board of Directors of AFFINBANK (Board) and Management seek to embrace high standards and principles of Corporate Governance in all areas of its business;
towards enhancing business prosperity and corporate integrity, having the ultimate objective of safeguarding shareholder’s value, interests of the stakeholders and
depositors. The Board also continuously review its governance model to ensure its relevance, effectiveness and ability to meet the challenges of the future.
The Board and Management are fully committed and constantly strive in ensuring AFFINBANK operates in accordance to the Financial Services Act 2013 and Islamic
Financial Services Act 2013 (FSA/IFSA), Malaysian Code of Corporate Governance 2012 (MCCG), Bank Negara Malaysia (BNM) Guidelines on Corporate Governance
for Licensed Institutions (Revised BNM/GP1) and other relevant regulations. The Board and Management place great importance on the safety and soundness
of AFFINBANK as a financial institution; where risks and business prudence are appropriately balanced. Throughout 2015 and to date, AFFINBANK continues to
conduct its business with integrity and exercises high level of transparency and objectivity.
AFFINBANK specifies standard for fit and proper requirement for Directors as laid out under the FSA/IFSA. The Board and Management remain dedicated in ensuring
adherence to BNM’s Guidelines on Code of Ethics (COE) (BNM/GP7), which aims at instilling the five values namely discipline, integrity, humility, caring and creativity
in AFFINBANK. The Board and Management set a high ethical business standards and practices for business conduct and the code of behaviour for employees. The
Board believes in leadership by example, thus all Directors are guided by the Directors’ COE. The responsibility for implementation of COE policies and guidelines rest
primarily with Management; with oversight by the Audit & Examination Committee.
The following statements set out the commitment of AFFINBANK in applying best principles of Corporate Governance and the extent of compliance with the
recommended practices.
Board of Directors
The Board is committed in establishing long term sustainable value to the shareholders as well as the stakeholders. AFFINBANK has complied with the principles
and recommendations of MCCG throughout the financial year under review, except for the recommendation on the tenure of Independent Director which should
not exceed cumulative term of nine (9) years. The Board adopts AFFIN Holdings Group’s policy that the maximum tenure for an Independent Director is 15 years
until 2013. Thereafter, the maximum tenure will be reduced to 12 years. Notwithstanding, the Nominating Committee determines on an annual basis whether an
Independent Director remains objective and is free from relationship or influence that could undermine his ability to execute independent judgment.
The Board comprises majority Independent Directors in compliance with the Revised BNM/GP1 where no individual or small group of individuals should be allowed to
dominate the Board decision making and with Principle 3, Recommendation 3.5 of the MCCG where more than one-third of its Directors are Independent Directors.
This provides an effective check and balance in the function of the Board. It consists of representatives from the private sectors with suitable qualifications fulfilling the
fit and proper criteria, mix of skills, competencies, experience and personalities. Directors’ profiles which appear on page 5 to 8 reflect clearly the depth and diversity
of expertise and perspective to lead AFFINBANK which allow for objective analysis of major issues.
Board Responsibilities
The Board acknowledges its roles and responsibilities for the overall performance of AFFINBANK.
The Board’s responsibilities remain within the framework of FSA/IFSA, BNM Policy Documents and AFFINBANK’s Board Policy Manual. The Board exercises great
care to ensure that high ethical standards are upheld, and that the interests of stakeholders are not compromised. These include responsibility for determining
AFFINBANK’s general policies and short medium and long term strategies, approving business plans, including targets and budgets, and approving major strategic
decisions.
In carrying out its functions, the Board has delegated specific responsibilities to other Board Committees, which operates under approved terms of reference, primarily
to assist the Board in execution of its duties. The Board Committees shall report the outcome of their meetings to the Board for deliberation at the Board’s level, if
required. Reports and deliberations are incorporated into the Minutes of the Board meetings. The various Board Committees are listed below:-
The current composition of the BRC is in compliance with Revised BNM/GP1. The BRC is responsible for providing a formal and transparent procedure for developing
the remuneration policy for Directors, Managing Director/Chief Executive Officer and key responsible persons. BRC is to ensure that compensation is competitive and
consistent with AFFINBANK’s culture and strategic objectives. BRC obtains advice from experts in compensation and benefits, both internally and externally.
Board Nominating Committee (BNC)
The current composition of the BNC is in compliance with Revised BNM/GP1 and is in line with Principle 2, Recommendation 2.1 of the MCCG. The BNC is
responsible for providing a formal and transparent procedure for the appointment of Directors, Managing Director/Chief Executive Officer and key responsible persons.
BNC assesses the effectiveness of individual Director, the Board as a whole and the performance of the Managing Director/Chief Executive Officer as well as key
responsible persons.
Board Remuneration Committee (BRC)
23
Statement on
The BNC also review and recommend the process for successions planning for the Board, Managing Director/Chief Executive Officer and key responsible persons;
making appropriate recommendations to the Board.
Board Risk Management Committee (BRMC)
The current composition of the BRMC is in compliance with Revised BNM/GP1. The BRMC is responsible for overseeing Management’s activities in managing credit,
market, liquidity, operational, legal reputational and other risks so as to ensure that the risk management process is adequately in placed and effectively functioned.
Board Loan Review and Recovery Committee (BLRRC)
The BLRRC is responsible in providing critical review of loans and other credit facilities with higher risk implications, after due process of checking, analysis, review
and recommendation by the Group Credit Management Division function, and if found necessary, exercise the power to veto loan applications that have been approved
by the Group Management Loan Committee.
Audit & Examination Committee (AEC)
The current composition of the AEC is in compliance with Revised BNM/GP1. The AEC is responsible for providing oversight on reviewing the adequacy and integrity
of the internal control systems and oversees the work of the internal and external auditors.
Board Composition and Balance
During the financial year under review, the Board comprises of the following:
Type of Directors
Composition
Percentage (%)
Non-Independent Non-Executive Directors*
3/7
42.9
Independent Non-Executive Directors
4/7
57.1
* not inclusive of one (1) Alternate Non-Independent Non-Executive Director
The Board composition of AFFINBANK meets the recommendations of the MCCG which states that the Board must comprise a majority of Independent Directors
where the Chairman of the Board is not an Independent Director. All Directors fulfilled the fit and proper criteria in accordance with the Policy Documents issued by
BNM.
On an annual basis, the Board considers the list of Independent Directors who have served in that capacity for a cumulative term of more than nine (9) years to justify
and seek shareholder’s approval in Annual General Meeting in the event it decided to retain any of its Independent Directors who have served in that capacity for a
cumulative term of more than nine (9) years.
The role of these Independent Non-Executive Directors are particularly important in ensuring that the strategies proposed by Management are fully deliberated and
evaluated impartially, in line with the long term objectives of AFFINBANK. No individual or small group of individuals dominate the Board’s decision making process.
Board meetings are presided by a Non-Independent Non-Executive Chairman whose role is clearly separated from the role of the Managing Director/Chief Executive
Officer. The Chairman is responsible for ensuring the effectiveness and smooth functioning of the Board, the governance structure and the independence of the Board.
The Chairman also inculcates positive culture within the Board.
24
The Board comprises Directors who, as a group, provides a mixture of core competencies such as finance, accounting, business, management, marketing, and
investment management, which are essential for the effective functioning in discharging Board’s responsibilities.
The Managing Director/Chief Executive Officer is responsible for the overall day-to-day business affairs of AFFINBANK while providing strong leadership in the
implementation of Board decisions.
Statement on
Independence and Conflict of Interest
It is the Directors’ responsibility to declare whether they have a potential or actual interest in any transaction of AFFINBANK. Where issues involve conflict of interest,
the interested Directors declared and abstained from discussing or voting on the matter. This is important to mitigate risk arising from potential conflict of interest
situation or undue influence from interested parties.
Appointment and Re-appointment to the Board
The proposed appointment of new Board members, as well as re-appointment of the Board members are recommended by the BNC to ensure that the level and
make-up of its members are of the necessary credibility, integrity and calibre with the required skills and knowledge.
The re-appointment of a Director would be subject to the BNM guidelines on fit and proper criteria and is in line with Principle 2, Recommendation 2.2 of MCCG.
All appointment and re-appointment of Directors are subject to the approval of BNM.
Re-election of Directors
In accordance with the Company’s Memorandum and Articles of Association, at least one-third (1/3) of the Directors for the time being, or, if their number is not
three (3) or a multiple of three (3), the number nearest to one-third (1/3), shall retire from office at each Annual General Meeting and they may offer themselves for
re-election.
Continuing Education
All newly appointed Non-Executive Directors are furnished by AFFINBANK with copies of the FSA/IFSA and other relevant legislation governing the banking industry to
facilitate their understanding and requirements of banking business. All Directors have attended various training programmes organised internally as well as externally
by the relevant authorities such as BNM, Securities Commission (SC) and Companies Commission of Malaysia (CCM). All Directors are required to complete the
Financial Institutions Directors’ Education training (FIDE) organized by BNM within one year from the date of appointment. In addition, the members of the Board are
kept abreast with the relevant developments in business, banking and finance industry as well as new regulatory requirements on a continuous basis through various
conferences, seminars and training programmes. The development and training programmes attended by the Directors during the financial year ended 31 December
2015 are set out below:YBhg. Jen. Tan Sri Dato’ Seri Ismail bin Haji Omar (Bersara)
Organiser
Course Title
1.FIDE
Financial Services in Turbulent Times: A Dialogue with Tan Sri Lin See-Yan
2. BNM/ FIDE
Dialogue with the Governor of BNM – Economic and Financial Services Sector: Trends and
Challenges Moving Forward
3.MEA
Financial Governance and Economic Growth
4.FIDE
6th Distinguished Board Leadership Series – “Digital Transformation & Its Impact on Financial
Services – Role of the Board in Maximising Potential” by Joydeep Sangupta
5.AHB
Economy And Financial Market Post Global Financial Crisis, Economic Outlook, Issues and
Prospects and Addressing Concerns on Trans-Pacific Partnership Agreement (TPPA)
6.AHB
Budget 2016 and GST Updates, Cybercrime in Financial Services Sector, Anti Money
Laundering Act, South East Asia Banking
28 - 29 September 2015
4 November 2015
11 November 2015
3 December 2015
Date
5 February 2015
10 February 2015
23 March 2015
21 May 2015
3 September 2015
21 September 2015
Organiser
Course Title
1.FIDE
Financial Services in Turbulent Times: A Dialogue with Tan Sri Lin See-Yan
2. Affin Hwang
Affin Hwang Conference Series 2015: Navigating Through Turbulent Times
3. BNM/ FIDE
4.FIDE
2nd Distinguished Board Leadership Series – Board’s Strategic Leadership Innovation &
Growth In Uncertain Times by Ram Charan
5.SC
The World Capital Markets Symposium 2015 – Markets and Technology: Driving Future
Growth Through Innovation
6. Bursa Malaysia
Corporate Governance Breakfast Series with Directors: Future of Auditor Reporting – The
Game Changer for Boardroom
Date
5 February 2015
23 March 2015
25
Statement on
7. SC/ SIDC
8. SC/ SIDC
9. SC/ SIDC
10. SC/ SIDC
11. SC/ SIDC
12.AHB
13.FIDE
Capital Market Director’s Training Program (CMDP) 2015 – Module 2A: Business Challenges
and Regulatory Expectations: What Directors Need to Know (Equities & Future Broking)
CMDP 2015 – Module 4: Current and Emerging Regulatory Issues In The Capital Market
CMDP 2015 – Module 1: Directors As Gatekeepers of Market Participants
CMDP 2015 – Module 2B: Business Challenges and Regulatory Expectations – What
Directors Need to Know (Fund Management)
CMDP 2015 – Module 3: Risk & Compliance Oversight – Action Plan For Board Directors
Prospects and Addressing Concerns on TPPA
Directors’ Remuneration Report 2015
YBhg. Tan Sri Dato’ Sri Abdul Aziz bin Abdul Rahman
Organiser
Course Title
1.FIDE
3rd Distinguished Board Leadership Series – “Impact of the New Accounting Standard on
Bank – What Directors should be aware of”
2. Bursa Malaysia/ ICLIF
Corporate Governance Breakfast Series: The Board’s Response in light of Rising Shareholder
Engagements
3. The Asian Institute of Finance 7th International Conference on Financial Crime and Terrorism Financing
4. MeLearn Global
2nd Annual Malaysia’s War on Corruption Symposium 2015
5.FIDE
En. Mohd Suffian bin Haji Haron
Organiser
Course Title
1.FIDE
2. ICLIF/ FIDE
Focus Group on Islamic Banking
3.AHB
4.AHB
Laundering Act, South East Asian Banking
5.FIDE
Organiser
1. KPMG/ Kowloon
Development
2.KPMG
3.Deloitte
26
4. Hong Kong Institute of
Bankers
5. KPMG/ BEA
6.PwC
7. Ernst & Young/ China
Everbright International
8. Chinese University of HK/
Café de Coral
9. PwC/ Café de Coral
29 September 2015
2 October 2015
5 October 2015
7 October 2015
20 October 2015
11 November 2015
7 December 2015
Date
5 June 2015
4 August 2015
7 - 8 October 2015
11 - 12 November 2015
7 December 2015
Date
5 June 2015
7 September 2015
11 November 2015
3 December 2015
7 December 2015
Course Title
Risk Management and Internal Control
Date
28 April 2015
KPMG Independent Non-Independent Director Forum
Deloitte Independent Non-Executive Director Forum Workshop (INED)
- Corporate Governance: roles and responsibilities of INEDs
Hong Kong Institute of Bankers Annual Banking Conference 2015
- Reshaping Banking for the New Normal
Market disruption in the financial sector – date and analytics
PwC Non-executive Director Programme
- Smart Data – is your Board ready to drive greater value from data to create and sustain a
competitive?
Environmental, safety, health and social management system - introduction
8 June 2015
24 September 2015
Big Business powered by Big Data by Prof K N Lau
18 December 2015
(1.5 hours)
18 December 2015
(0.5 hours)
Accounting standards update
- HKFRS9 Financial Instruments
- New auditor’s report
25 September 2015
26 November 2015
11 December 2015
17 December 2015
Statement on
Organiser
Course Title
1. The National Institute for
6th NIDS Workshop on Asia Pacific Security
Defence Studies, Japan
2. Ministry of Foreign Affairs
ASEAN Regional Forum (ARF) – Experts & Eminent Person
ARF – Workshop on Counter Redicalisation
3. SEARCT ASEAN Malaysia
National Secretariat &
Ministry of Foreign Affairs
4.ASLI
12th ASEAN Leadership
5.FIDE
2nd Distinguished Board Leadership Series
– Board’s Strategic Leadership Innovation & Growth In Uncertain Times by Ram Charan
6.ISIS
29th Asia-Pacific Roundtable
7.FIDE
8. Asian World Summit
7th Annual Corporate Governance summit
Board Risk Intelligence 2015 – Risk Governance Into Practice
10.SC
The SC Synergy and Crowdfounding Forum 2015
11. Institute of Chinese Studies, Workshop ASEAN & China: A Mutual Socialization Contest
University Malaya
Engagements
13. Center for ASEAN Studies – TU-ASEAN International Conference 2015
Thammasat University (TU)
14.SC
World Capital Markets Symposium 2015
15.MIDAS
MIDAS Conference – Militant Ideologies and Radicalism in Malaysia
16.MEA
Malaysian Economic Convention 2015 – Financial Governance and Economic Growth
17.USIM
World Islamic Countries University Leaders Summit 2015
18.WIEF
11th WIEF Forum – Building Resilience for Equitable Growth
19.SIIS
SIIS Annual Conference: Transformation of World Order : China’s Roles and Challenges
12 - 12 March 2015
25 - 26 March 2015
26 - 27 April 2015
21 May 2015
2 - 3 June 2015
5 June 2015
8 June 2015
11 June 2015
12 June 2015
15 June 2015
4 August 2015
7 August 2015
3 - 4 September 2015
22 September 2015
28 September 2015
29 September 2015
3 - 4 November 2015
14 - 15 November 2015
Date
27 January 2015
4 March 2015
23 March 2015
6 May 2015
5 June 2015
26 October 2015
4 November 2015
11 November 2015
3 December 2015
7 December 2015
YBhg. Tan Sri Mohd Ghazali bin Mohd Yusoff
Organiser
Course Title
1.ICLIF
Insuring the Future: Improving the Corporate Governance of Major Asia-Pacific Insurance
Companies
2.FIDE
Economic and Financial Services Sector: Trends and Challenges Moving Forward for the
Banking Industry
3. FIDE/ BNM
4.FIDE
Industry Consultation Session – Director’s Remuneration Study
5.FIDE
6.FIDE
Director Register Project – Focus Group Session “Discussion on Competencies for Board
Talent”
7.FIDE
6th Distinguished Board Leadership Series – “Digital Transformation & Its Impact on Financial
Services – Role of the Board in Maximising Potential” by Joydeep Sangupta
8.AHB
9.AHB
Laundering Act, South East Asia Banking
10.FIDE
Date
21 - 22 January 2015
27
Statement on
En. Abd Malik bin A Rahman
Organiser
1. Affin Hwang
2.FIDE
3.FIDE
5. SC/ SIDC
6. SC/ SIDC
7. SC/ SIDC
8. SC/ SIDC
9. SC/ SIDC
10. Bursa Malaysia/ CLSA/ ICLIF
11. Affin Hwang/ Sheila
Hussain Vijay & Partners
13. Bursa Malaysia/ IIAM
14. Bursa Malaysia/ SIDC
15.AHB
Course Title
Affin Hwang Conference Series 2015: Navigating Through Turbulent Times
Industry Consultation Session – Director’s Remuneration Study
3rd distinguished Board Leadership Series – “Impact of the New Accounting Standard on
7th Annual Corporate Governance Summit
CMDP 2015 – Module 1: Directors as Gate Keepers of Market Participants
CMDP 2015 – Module 2A:- Business Challenges and Regulatory Expectations – What
Directors need to know (Equities & Future Broking)
CMDP 2015 – Module 2B:- Business Challenges and Regulatory Expectations – What
Directors need to know (Fund Management)
CMDP 2015 – Module 3 – Risk Oversight and Compliance – Action Plan Board of Directors
CMDP 2015 – Module 4: Current and Amerging Regulatory Issues in the Capital Market
Engagements
AMLATFPUAA 2001: Complexity & its impact on Investment Banking
Date
10 February 2015
6 May 2015
5 June 2015
Board Chairman Series Part 2: Leadership Excellence from The Chair
Corporate Governance: How to Maximise Internal Audit
The Interplay between CG, NFI and Investment Decision
3 September 2015
9 September 2015
22 September 2015
11 November 2015
Mr. Tang Peng Wah (Alternate Director to Mr. Aubrey Li Kwok-Sing)
Organiser
Course Title
1.ICLIF
FIDE Core Program –
Module A
Module B
2. AHB
Abbreviation
28
Affin Hwang
- Affin Hwang Investment Bank Berhad
AHB
- Affin Holdings Berhad
AIBIM
- Association of Islamic Banking Institutions Malaysia
ASLI
- Asian Strategy & Leadership Institute
BNM
- Bank Negara Malaysia
FIDE
- Financial Institutions Directors’ Education
ICLIF
- The Iclif Leadership and Governance Centre
IISS
- The International Institute for Strategic Studies
IPSOM
- Institut Keselamatan Awam Malaysia
ISIS
- Institute of Strategy & International Studies Malaysia
MEA
- Malaysian Economic Association
MICG
- Malaysia Institute of Corporate Governance
MIDAS
- Malaysia Institute of Defence Security
MIMA
- Maritime Institute of Malaysia
MSWG
- Minority Shareholder Watchdog Group
SC
- Securities Commission
SC/ SIDC
- Securities Commission/ Securities Industries Development Corporation
SIIS
- Shanghai Institute for International Studies
SPRM
- Suruhanjaya Pencegahan Rasuah Malaysia
UiTM
- Universiti Teknologi MARA
USIM
- Universiti Sains Islam Malaysia
WIEF
- World Islamic Economic Forum Foundation
8 June 2015
15 June 2015
16 June 2015
17 June 2015
2 July 2015
3 July 2015
4 August 2015
24 August 2015
Date
10 - 13 March 2015
5 - 7 October 2015
11 November 2015
Statement on
Board Meetings and Access to Information
Board meetings are scheduled in advance at the beginning of calendar year with additional meetings duly convened as and when necessary to review progress reports
on AFFINBANK’s financial performance, approved strategies, business plans and significant policies as well as to consider business and other proposals which require
the Board’s approval. For the financial year ended 31 December 2015, twenty one (21) Board meetings were held. Meetings are usually held at the Board Room at
19th Floor, Menara Affin, 80, Jalan Raja Chulan, 50200 Kuala Lumpur.
The Board has full and timely access to information via board portal software as papers are uploaded in advance of meetings to enable the Directors to obtain further
explanation, where necessary, in order to be properly briefed prior to the meetings. The Board papers include the minutes of previous Board meeting, minutes of
meeting of Board Committees and reports relevant to the issues of the meetings covering all related banking aspects such as financial, investment, information
technology, operation, human resource and regulatory compliance matters. The Managing Director/Chief Executive Officer keeps the Board informed, on timely basis,
of all material matters affecting AFFINBANK’s performance and major developments.
Members of the Senior Management are invited to attend the Board meetings to present and brief the Board on matters/reports relating to their areas of responsibility
as and when required.
All the Board members have direct access to timely and accurate information and access to the advice and service of the Company Secretary in order for the
Board members to discharge their duties and specific responsibilities effectively. Procedures are in place for Directors to seek independent professional advice at
AFFINBANK’s expense.
Directors’ Remuneration
AFFINBANK acknowledges the importance of attracting and retaining Directors with high calibre having the necessary skills, qualifications and experience for effective
Board oversight of AFFINBANK’s business activities and affairs.
AFFINBANK emphasizes in the setting of a fair and comprehensive remuneration package of the Board that commensurate with their expertise, skills, responsibilities
and the risks of being a Director of a financial institution.
The determination of remuneration packages for Non-Executive Directors (NEDs) including the Non-Executive Chairman is a matter for the Board as a whole following
the relevant recommendation made by the BRC after independent benchmarking with relevant external peers.
Remuneration package for Non-Executive Directors is structured in such a way that it is competitive with the industry and consistent with AFFINBANK’s business policy
and so as to link to their level of responsibilities undertaken and contribution to the effective functioning of the Board. Non-Executive Directors’ emoluments consist
of three (3) components – an annual fee as a Board member, an allowance for attendance of meetings and committee fee.
The make-up of the Managing Director/Chief Executive Officer’s remuneration consists of salary, allowances, bonus and other customary benefits as appropriate.
Any salary review, takes into account market rates and the performance of the individual and of AFFINBANK. A significant portion of the Managing Director/Chief
Executive Officer’s compensation package has been made variable in nature depending on AFFINBANK’s performance during the year, which is determined based on
the individual Key Performance Indicators aligned with the corporate objectives, and approved by the Board.
In line with good corporate governance, the Board has set out its intention to periodically review Directors’ remuneration, the existing remuneration framework to be
in line with AFFIN Holdings Group’s overall practice on compensation and benefits. The Managing Director/Chief Executive Officer does not participate in any way in
determining his individual remuneration. The Board as a whole determines the remuneration of Non-Executive Directors.
Directors’ remunerations are disclosed in the relevant note to the financial statements as an aggregate sum, in conformance to the relevant legislation.
AFFINBANK is a wholly-owned subsidiary of AFFIN Holdings Berhad, a company listed on Bursa Malaysia Securities Berhad.
Annual General Meeting (AGM)
The Annual Report and financial statements for the year ended 31 December 2014 were tabled at the 39th AGM on 24 March 2015. Likewise the Annual Report and
financial statements for the year ended 31 December 2015 will be tabled at the 40th AGM on Tuesday, 22 March 2016.
Shareholder
29
STATEMENT ON
RISK MANAGEMENT AND INTERNAL CONTROL
1. Corporate Governance & Board’s Oversight
a.
The Board recognises and exercises overall responsibilities in promoting good corporate governance and ensuring sound system of internal controls and
risk management practices are maintained throughout AFFIN Bank Group.
b.
The Board is of the view that the system of internal controls instituted by the Group’s operating units for the year under review and up to the date of annual
report is sound and sufficient to safeguard shareholders’ investment, customers’ interests and the Group’s assets.
c.
Notwithstanding this, there are ongoing reviews to ensure the effectiveness, adequacy and integrity of the system. The control procedures are designed to
manage rather than to eliminate completely all risks of failure to achieve business objectives and can only provide reasonable and not absolute assurance
against material errors, losses, fraud or the occurrence of unforeseeable circumstances.
d.
The Board meets regularly to discuss matters related to system of internal controls which cover inter alia financial, liquidity, capital, operational, compliance,
controls and risk management procedures.
e.
The Board extended the responsibilities of the Audit and Examination Committee (“AEC”) and Board Risk Management Committee (“BRMC”) to include the
role of oversight on internal controls and risk management strategies, policies and other risk related matters.
f.
AEC and BRMC comprised of Independent Non-Executive Directors.
g.
Regular reports received from the Group’s management on financial performance, key operating statistics, legal and regulatory compliance, breach of law
or regulations, unauthorized activities and fraud are reviewed by the Board.
2. Business and Capital Plan including Budget
a.
The annual business plan and financial budget of AFFIN Bank Group are tabled and approved by the Board.
b.
A structured framework and processes with regard to capital expenditure and revenue is in place.
c.
The internal capital targets are being set on a yearly basis.
d.
The variances between the actual and targeted results are presented to the Boards on a periodic basis to allow for timely responses and corrective actions
to be taken to mitigate risks.
3. Audit & Examination Committee and Group Internal Audit (“GIA”)
a. Group Internal Audit carry out regular reviews of the business processes and activities to assess the effectiveness of internal control and highlight
significant risks impacting the Group. The AEC conducts annual reviews on the adequacy of the scope of work and resources of Group Internal Audit
Division.
30
b.
The AEC regularly review and hold discussions with management on the action taken on internal control issues identified by Group Internal Audit, external
auditors and regulatory authorities.
c.
All significant and material findings by GIA, external auditors and regulators are reported to AEC for reviews and deliberation and subsequently escalated
to the Board.
d.
The AEC, through GIA, follow up and monitor the status of actions on recommendations made by Group Internal Audit, the external auditors and regulatory
authorities. In addition, it can direct investigations in respect of any specific instances or events, which are deemed to have violated internal policies
pertaining to confidentiality or financial impropriety which have material impact on the Group.
e.
Shariah related findings are escalated to the Shariah Committee.
f.
GIA continuously conduct awareness programs/training on controls and compliance including controls certification programs to further strengthen staff
knowledge (inter & intra department) in creating a robust control and compliance environment.
g.
The management of business and support departments that are rated “Needs Improvement” and “Unsatisfactory” by GIA are counseled by AEC.
h.
All related party transactions and audit and non-audit related fees proposed by external auditors or Chief Financial Officer (“CFO”) are reviewed by AEC.
STATEMENT ON
4. Risk Management Framework
a. Board Risk Management Committee (“BRMC”)
• GBRMC has been established and their responsibilities, amongst others, include overseeing the effective implementation of the Enterprise-Wide Risk
Management framework.
b. Risk Assessment
• Risk Assessment is in place to provide the process for the identification of the Group’s material risks, from the perspective of impact on the Group’s
financial standing and reputation.
• Consistent and well-accepted methodologies of risk measurement introduced to assess Liquidity, Capital Position, Asset and Liability Management
and other relevant metrics.
c.
Risk Governance Structure
• The Risk Governance Structure is aligned across all the business units and subsidiaries of the Group. These are aligned through the streamlining of
the Risk Frameworks, Policies and Organisational Structures in order to embed and enhance risk management and risk culture.
d. Risk Governance Policies and Procedures
• Risk Management policies and procedures are reviewed and updated regularly to ensure relevance to the current business needs and current/
applicable regulatory requirements.
e. Whistle Blowing Policy
• This policy provides avenue for employees to report actual and suspected malpractice, misconduct and violations of the Group policies in a safe and
confidential manner.
f.
Operational Risk Management
• Process facilitated by Group Risk.
• Risk Control Self Assessment (RCSA) has been implemented to enable management to identify and assess the risks under their areas of supervision
and control on a continual basis.
• This serves as a trigger point to determine Key Risk Indicators (KRIs) to adopt and monitor operational risk exposures.
g. Concerns and breaches, if any, will be escalated to the Group CEO and Board Risk Management Committee (BRMC). The same will then be escalated to
the Board.
h. The operational risk are being reviewed and monitored by Group Risk Management. Discrepancies, if any, are escalated to Group Operational Risk
Management Committee (GORMC), BRMC, AEC and Shariah Committee (SC) on Shariah related matters. Relevant trainings relating to Operational Risk
such as Anti-Money Laundering Act (AMLA), Whistle Blowing Policy, Business Continuity Plan etc. are being provided by Group Risk Management Division
(“GRMD”).
5. Compliance Framework
a. AFFIN Bank Group has put in place a Compliance Framework. The compliance main function is to facilitate advice, monitor and educate the business
and support units/entities to act in accordance with laws, regulations and guidelines. In line with good governance, Compliance Department reports
independently to the Board.
•
•
•
•
•
Compliance Framework : Policies and Procedures
- Policies and Procedures are reviewed on a periodic basis or as and when required to reflect current practices and the applicable legal/
regulatory requirements.
Training
- Scheduled trainings are regularly conducted to create compliance awareness amongst the staff.
Compliance Matrix
- Compliance Matrix has been established. It is a document that encompasses relevant laws, regulations and guidelines that apply to the
business and support units/entities.
Compliance Plan
- The respective Compliance Department has drawn-up the plan which was tabled and approved by the Board.
Anti-Money Laundering/Counter Financing Terrorism (AML/CFT)
- The Group AMLA office function, a unit within Group Risk Management Division maintains Group AML/CFT policies and procedures, duly
approved by BRMC.
31
STATEMENT ON
6. Shariah Governance Framework
a.
The Shariah Committee is responsible for overseeing all Shariah matters of the Group. The Shariah Committee, amongst others, ensures that the Shariah
rulings relating to Islamic banking and capital market products and services comply with the fundamental Shariah percepts and resolutions by the relevant
Shariah authorities.
b.
Shariah Committee acts as an adviser on Shariah matters to all business and support units within the group in carrying out their Islamic financial activities.
c. The Shariah Governance Framework (SGF) is the enterprise-wide Shariah management plan consisting of Shariah governance mechanisms to be
undertaken by relevant sections across the Group. The implementation of the SGF is inline with BNM’s requirements effected through the following
functions at the subsidiaries:
•
Shariah Research
- The Shariah Research Unit comprises qualified Shariah officers who conduct the pre-product approval process, research, vetting of issues for
submission and undertake administrative duties relating to the Shariah Committee.
•
Shariah Review
- The Shariah Compliance Review comprising qualified Shariah officers, is responsible for conducting the Shariah compliance review function.
- The Shariah Compliance Review has established the Policy and Procedures Manual which sets out the Shariah compliance review function,
encompassing regular assessment on Shariah compliance in the activities and operations of the subsidiaries, including examining and
evaluating the level of compliance to the Shariah, remedial rectification measures to resolve non-compliances and control mechanisms to avoid
recurrences.
•
Shariah Risk Management
- Shariah Non-Compliance (“SNC”) risk is identified as one of the material risks under its Islamic banking business. In this regard, AFFIN Bank
Group has established a dedicated Shariah Risk Management team to facilitate a systematic and consistent approach in managing SNC.
•
Shariah Audit
- Group Internal Audit Division provides independent assurance on the efficiency and effectiveness of the internal control systems and related
policies and procedures implemented by management governing Islamic products and services. Findings related to Shariah products and
services are reported to the Shariah Committee of the respective subsidiaries and AEC.
7. Escalation Process
a.
The channels of communication and procedures have been established for reporting immediately to the Board and appropriate levels of management any
significant control failings or weaknesses that are identified together with details of corrective action being undertaken.
b. Corrective Action Tracking on resolution of issues/findings highlighted by external audit, Group Internal Audit and regulators, if any, have also been
escalated to Group Management Committee Meeting (“MCM”), AEC and Board.
8.Human Resources
32
a.
The Group acknowledges that people development is critical in ensuring that employees have the right competencies for the tasks they are entrusted with,
and are able to exercise sound judgment when fulfilling those responsibilities.
b.
HR Policies and Procedures (“HRPP”)
• HRPP is in place and provide clarity for the organisation in all aspects of human resource management in the Group.
• Periodically, the HRPP is reviewed to ensure policies and procedures remain relevant and appropriate controls are in place to manage operational
risks. Changes, if any, are communicated to all employees via intranet.
c.
Human Resources has in place various initiatives and training programs to address the human capital requirement, including knowledge management.
d.
A performance-based appraisal system to evaluate and compensate/reward its employees accordingly is in place. Staff performance assessment is done
annually.
e.
The recruitment process including screening process is in place.
f.
The e-learning facilities at subsidiaries provides staff the freedom of time and space to learn and update their knowledge at their convenience while
meeting the organisation’s needs for its employees who are spread across geography to be competent in key areas.
STATEMENT ON
9. Policies/Procedures including Empowerment and Approving Authority Policies
a.
Policies and Procedures covering all functions have been developed throughout the Group and approvals have been obtained from the relevant committees
and Board. The policies and procedures are updated timely to incorporate changes to systems, work environment and guidelines issued by regulators.
b.
Empowerment and Approving Authority Policies
There is a clearly defined framework and empowerment approved by the main operating subsidiaries’ respective Board for acquisitions and disposals of
property, plant and equipment, awarding tenders, applications for capital expenditure, writing off operational and credit items, approving general expenses
including donations, etc.
10. Conclusion
a.
The Statement on Risk Management and Internal Control is reviewed by the external auditors in line with Recommended Practice Guide (“RPG”) 5 (Revised)
by Malaysian Institute of Internal Auditors (“MIA”).
b.
The Board, through the AEC, BRMC and Shariah Committee reviewed the effectiveness of the Shariah Governance Framework (“SGF”), Risk Management
and Internal Control Framework and are operating adequately and effectively in all material aspects during the financial year under review based on the
Shariah requirements, Risk Management and Internal Control system adopted by the Group.
c. Taking into consideration the assurance from the management and input from the relevant assurance providers, it is viewed that the Group’s Risk
Management and Internal Control System are operating adequately and effectively to safeguard shareholders’ investment and AFFIN Bank Group’s assets.
33
AUDIT & EXAMINATION
COMMITTEE REPORT
The Board is pleased to present the Report on Audit and Examination Committee (AEC) for the Financial Year ended 31 December 2015.
AUDIT & EXAMINATION COMMITTEE
The AEC comprises of the following Directors:
YBhg. Tan Sri Dato’ Sri Abdul Aziz
Bin Abdul Rahman
Chairman/
YBhg. Tan Sri Dato’ Seri
Mohamed Jawhar
Member/
YBhg. Tan Sri Mohd Ghazali
Bin Mohd Yusoff
Member/
Assoc. Prof. Dr. Said Bouheraoua
Member/
TERMS OF REFERENCE
1.OBJECTIVE
Audit & Examination Committee (AEC) is established as a Committee of the Board of Directors. The primary objectives of AEC are to:
a.
Establish the framework and oversee the audit function of AFFIN Bank Group;
b. Provide assistance to the Board in fulfilling its statutory and fiduciary responsibilities in ensuring that good Corporate Governance, system of internal
controls, codes of conduct and compliance with regulatory and statutory requirements are maintained by the AFFIN Bank Group;
c.
Implement and support the function of the Board by reinforcing the independence and objectivity of the Group Internal Audit Division (GIA); and
d.
Ensure that Internal and External Audit functions are properly conducted and audit recommendations are implemented effectively.
2. COMPOSITION AND APPOINTMENT
34
a.
AEC shall have at least three (3) members of whom all must be Non-Executive Directors with a majority of them being Independent Directors. The Chairman
of the Committee shall be an Independent Non-Executive Director. No Alternate Director shall be appointed to the AEC.
b.
At least one (1) member of the Committee must be a qualified accountant.
c.
AEC members and the Chairman shall be appointed by the Board of Directors based on the recommendations of the Nomination Committee.
d. The Board shall review the Terms of Reference and performance of the AEC and each of its members at least once every three (3) years to determine
whether the AEC has carried out its duties in accordance with its Terms of Reference.
e.
If a member of the Committee resigns or for any reason ceases to be member in the AEC resulting in non-compliance with the requirements, then the
Board shall, within three (3) months of the events, appoint such number of new members as may be required.
f. The AEC shall have no executive powers.
3.QUORUM
The quorum for a meeting of the Committee shall be two thirds (2/3) of the Committee with the majority present being Independent Non-Executive Directors. If
the Chairman is unable to attend any meeting, any other Independent Non-Executive member present shall act as Chairman. All resolutions of the Committee
shall be adopted by a simple majority vote, each member having one (1) vote. In case of equality of votes, the Chairman shall have a second or casting vote.
AUDIT & EXAMINATION
COMMITTEE REPORT
4. ATTENDANCE OF MEETINGS
a.
The notice of meeting should be served to the AEC members at least seven (7) days before the meeting. The agenda and AEC papers are to be circulated
at least five (5) days before each meeting.
b.
The Group Chief Internal Auditor is invited to attend all meetings of the Audit & Examination Committee.
c.
The Committee may invite members of Management, External Auditors or any employees as applicable to participate in the AEC meetings as necessary to
carry out the Committee’s responsibilities.
d.
All the original Minutes of AEC meetings are in the custody of the Company Secretary and shall be signed by the Chairman of the meeting at which the
proceedings are held or by the Chairman of the next succeeding meeting. The signed minutes shall be conclusive evidence without any further proof of the
facts thereon stated. Minutes of each meeting shall be distributed to the AEC members and all other members of the Board.
5. FREQUENCY OF MEETINGS
a.
The AEC shall meet at least four (4) times in a financial year with the objective of reviewing the internal audit reports and AFFIN Bank Group’s financial
reporting. The AEC complements this through regular meetings with the Senior Management and both the Internal and External Auditors to review the
AFFIN Bank Group’s overall state of governance and internal controls. To ensure that critical issues are highlighted to all Board members in a timely manner,
where possible, the AEC meetings are convened before the Board meetings. The AEC, through its Chairman, shall report to the Board after each meeting
where issues can be further deliberated, if necessary.
b. Besides the minimum of four (4) AEC meetings in a year, additional meetings shall be scheduled whenever deemed necessary by the AEC’s Chairman or
the majority of the Committee members.
6.AUTHORITY
The AEC is authorised by the Board to :a.
Investigate any activity or matter within its Terms of Reference;
b.
Be able to obtain external legal or other independent professional advice or other necessary resources to perform its duties;
c. Have full and unrestricted Access to any information pertaining to the AFFIN Bank Group;
d. Maintain direct communication channels with the External Auditors, Internal Auditors and all employees of the AFFIN Bank Group;
e.
Be able to convene meetings with the External and Internal Auditors; excluding the attendance of the members of Management Committee at least twice
a year; and
f. Report to the Regulatory Bodies on matters duly reported by it to the Board which have not been satisfactorily resolved resulting in a breach of any
regulatory requirements.
7. FUNCTIONS AND DUTIES
The functions and duties of AEC shall include, but not limited to the following:
To review the Quarterly Financial Results and Year-End Financial Statement prior to the approval by the Board focusing on the following:
• Changes in or implementation of major Accounting policy;
• Significant and unusual events or any going concern assumption;
• Significant adjustments arising from the audit; and
• Compliance with Accounting standards, disclosure requirements and other legal requirements.
b. To act upon any request from the Board to investigate and report on any issue of concern as regard to the Management of the Group.
c. To obtain external professional advice and to invite outsiders with relevant experience to attend meetings, subject to the approval of the relevant regulatory
body, where necessary.
d. To recommend to the Board the appointment of External Auditors and their audit fee.
a.
35
AUDIT & EXAMINATION
COMMITTEE REPORT
e. To review with the External Auditors the scope of the audit plan, system of internal controls, the audit reports (including Management letter and Management
response), the assistance given by the Management and any findings or action to be taken.
f. To meet with the External Auditors without the presence of members of management at least twice a year.
g. To review the proposals for non-audit services rendered by the External Auditors or 3rd parties. If the External Auditors are engaged, the AEC is responsible
for ensuring that such engagement does not compromise the independence of the External Auditors in their roles as Statutory Auditors of AFFIN Bank
Group.
h. To review the adequacy and effectiveness of AFFIN Bank Group’s control environment.
i. To consider the major findings of internal investigations and Management response.
j. To review the findings of any examination by regulatory authorities and the Management response.
k. To review existing policies and practices within AFFIN Bank Group in order to regulate and streamline the same to ensure uniformity.
l. To ensure that the Accounts are prepared in a timely and accurate manner with frequent reviews of the adequacy of provisions against contingencies, bad
and doubtful debts.
m. To review any related party transactions that may arise within the AFFIN Bank Group.
n. To review the adequacy of the scope, functions, competency and resources of the Group Internal Audit Division and the necessary authority to carry its
work. The review may cover the planned audit work, internal audit programmes, the results of completed work and Management implementation of agreed
actions as recommended by Group Chief Internal Auditor (GCIA). Where appropriate, the Committee may direct the Management to rectify and improve the
system of internal controls and procedures based on the Group Internal Auditors’ recommendations and suggestions for improvements.
8. AUDIT COMMITTEE MEETINGS HELD IN THE FINANCIAL YEAR ENDED 31 DECEMBER 2015
During the Financial Year Ended 31 December 2015, a total of eight (8) AEC meetings were held. The AEC members and details of the attendance of each
member at the meetings are as follows:
Name of Committee Member
36
Attendance
YBhg. Tan Sri Dato’ Sri Abdul Aziz Abdul Rahman
Chairman/Independent Non-Executive Director
8/8
YBhg. Tan Sri Dato’ Seri Mohamed Jawhar Hassan
Member/Independent Non-Executive Director
8/8
YBhg. Tan Sri Mohd Ghazali Mohd Yusoff
8/8
Assoc. Prof. Dr. Said Bouheraoua
8/8
The AEC is in compliance with the principles and best practices set out in the Malaysian Code on Corporate Governance. The AEC members comprise individuals
with a diversity of skills, knowledge and caliber in providing independent, objectivity and effective oversight.
The AEC meetings’ agenda, relevant AEC papers and audit reports were distributed to the AEC members five (5) days prior to the date of the meetings.
AFFIN Bank Group External Auditors attended three (3) AEC meetings during the period. There were discussions between the AEC and the External Auditors
with regard to significant audit issues, changes in the implementation of major Accounting policies, compliance with Accounting standards and other legal
requirements including regulatory requirement and business issues highlighted by them for Financial Year Ended 31 December 2015. The AEC had also
reviewed the External Auditors’ Audit Plan for the Financial Year Ending 31 December 2015.
The AEC had two (2) private meetings with the External Auditors without the presence of Management and Internal Auditors in year 2015. In addition, the
External Auditors were invited to attend the annual general meeting to respond to shareholders’ questions on audit related issues. The AEC also had direct and
unrestricted Access to the Internal Auditors and had ad-hoc discussions with the Internal Auditor without the presence of Management.
AUDIT & EXAMINATION
COMMITTEE REPORT
As the Board is ultimately responsible for the financial reporting and overall management of AFFIN Bank Group, the Chairman of the Audit & Examination
Committee had consistently briefed the Board of Directors on issues discussed at the AEC meetings and the minutes of the AEC meetings are tabled to the Board
for information and action by the Board where appropriate.
AEC members had attended trainings in the Financial Year Ended 2015 for continuous improvements.
9. SUMMARY OF ACTIVITIES OF THE AUDIT & EXAMINATION COMMITTEE
The Audit Committee has carried out the following activities in discharging its duties and responsibilities for the Financial Year Ended 31 December 2015:
9.1 EXTERNAL AUDIT
a.
Reviewed the 2015 Audit Plan to ensure the scope of work adequately covered the activities of Affin Bank Group;
b.
Reviewed the significant audit findings, accounting, taxation and other matters raised by the external auditors; and
c.
Reviewed and evaluated the External Audit performance, objectivity and independence during the year before recommending to the Board for their
reappointment.
9.2. NON-AUDIT SERVICES
Reviewed the non-audit services rendered by the External Auditors or 3rd parties.
9.3.GROUP INTERNAL AUDIT
a. Reviewed and approved the Group Internal Audit Annual Plan (proposed by Group Chief Internal Auditor) and Training Budget for Year 2015 in
ensuring that adequate scope and comprehensive coverage on the audit activities and critical risk areas are adequately identified and covered;
b.
Reviewed and evaluated the adequacy of resources and the competencies of staff within the Group Internal Audit Division (GIAD) to execute the plan
as well as the audit programmes used in the execution of Internal Auditors’ job to ensure satisfactory performance of GIAD;
c.
Reviewed the internal control issues identified by GIAD, External and Regulatory Auditors as well as Management response to audit recommendations
and implementation of agreed action plans with particular attention on the following:
• Control environment (integrity, ethical values and competency of the personnel);
• Control activities (policies and procedures),
• Risk assessment (identified and assessed relevant risks and its preventive measure); and
• Monitor the status of corrective actions taken by Management to rectify any deficiencies identified by Internal Audit as well as ensuring that all
issues are adequately resolved on a timely basis;
d.
Reviewed the status report of Group Internal Audit activities for the Financial Year Ended 31 December 2015 to ensure all the planned activities were
satisfactorily carried out;
e.
Reviewed the summary of audit findings by significant operating entities’ Internal Auditors to ensure their significant audit findings especially on the
investigations, fraud and non-compliances with regulatory and statutory requirements were promptly resolved; and
f.
Reviewed the Audit Committee Terms of Reference and Group Internal Audit Manual.
37
AUDIT & EXAMINATION
COMMITTEE REPORT
9.4GROUP INTERNAL AUDIT FUNCTION
a. Group Internal Audit is guided by its Group Internal Audit Charter. Its primary role is to assist the Group Audit Committee to discharge its duties
and responsibilities by independently reviewing and reporting on the adequacy and integrity of the Group’s risk management, internal control and
governance processes;
b. Group Internal Audit adopt a risk-based approach towards the planning and conduct of audits, which is consistent with the Group’s framework in
designing, implementing and monitoring its internal control system;
c.
The group internal auditors closely monitored the implementation of the audit recommendations in order to obtain assurance that all major risk and
control concerns have been duly addressed. Audit reports were presented to the management and Group Audit Committee;
d.
Group Internal Audit worked closely with the external auditors to ensure that significant issues are duly addressed and resolved on a timely basis; and
e.
The total Group Internal Audit cost for year 2015 was RM2.9 million.
9.5 FINANCIAL RESULTS
a.
Reviewed with the senior Management the quarterly and half yearly unaudited financial results before recommending to the Board for their approval.
b.
Reviewed with the senior Management and External Auditors the annual audited financial statements of the Company before recommending to the
Board for their approval. The review is focusing on matters set out in the following Requirements, Acts and Standards:
• Provisions of the Companies Act;
• Financial Services Act and Islamic Financial Services Act;
• Applicable approved Accounting standards in Malaysia; and
• Other relevant legal and regulatory requirements.
9.6 RELATED PARTY TRANSACTIONS
Reviewed related party transactions and recurrent related party transactions and the appropriateness of such transactions to avoid potential or actual
conflict of interest. This is also to ensure that decisions are based on the best interest of the company and its shareholders.
9.7OTHERS
38
Reviewed the Statement on Internal Control and Audit Committee Report for inclusion in the Year 2015 Annual Report before recommending to the Board
for approval.
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OF branches
WILAYAH PERSEKUTUAN
1.Bangsar
No. 4 & 6,
Jalan Telawi 3,
Bangsar Baru,
59100 Kuala Lumpur.
Tel : 03-2283 5025
Fax : 03-2283 5028
2.
3.
Bangunan Getah Asli
Tingkat Bawah,
148, Jalan Ampang,
50450 Kuala Lumpur.
Tel : 03-2162 8770
Fax : 03-2162 8587
Batu Cantonment
No. 840 & 842,
Batu 4 3/4,
Jalan Ipoh,
51200 Kuala Lumpur.
Tel : 03-6258 7370
Fax : 03-6251 8214
4.Central
Ground & Mezzanine Floor,
80, Menara Affin,
Jalan Raja Chulan,
P.O.Box 12744,
50788 Kuala Lumpur.
Tel : 03-2055 2222
Fax : 03-2070 7592
5.
Jalan Bunus
133, Jalan Bunus,
Off Jalan Masjid India,
50100 Kuala Lumpur.
Tel : 03-2693 4686
Fax : 03-2691 3207
6.
Jalan Ipoh
468-11 & 468-11B,
Batu 3, Jalan Ipoh,
51200 Kuala Lumpur.
Tel : 03-4042 5554
Fax : 03-4042 4912
9.
Seri Petaling
10-12, Jalan Raden Tengah,
Bandar Baru Seri Petaling,
57000 Kuala Lumpur.
Tel : 03-9058 5600
Fax : 03-9058 8513
10.Setapak
159 & 161, Jalan Genting Kelang,
P.O.Box 202,
53300 Setapak,
Kuala Lumpur.
Tel : 03-4023 0455
Fax : 03-4021 3921
11.
Taman Maluri
250 & 252, Jalan Mahkota,
Taman Maluri,
55100 Kuala Lumpur.
Tel : 03-9282 7250
Fax : 03-9283 4380
12.
Taman Midah
38 & 40, Jalan Midah 1,
Taman Midah, Cheras,
56000 Kuala Lumpur.
Tel : 03-9130 0366
Fax : 03-9131 7024
13.
Taman Tun Dr. Ismail
47 & 49, Jalan Tun Mohd Fuad 3,
Taman Tun Dr. Ismail,
60000 Kuala Lumpur.
Tel : 03-7727 9080
Fax : 03-7727 9543
14.
Wangsa Maju
No. 2 & 4, Jalan 1/27F,
Kuala Lumpur Sub-Urban Centre,
Wangsa Maju,
53300 Kuala Lumpur.
Tel : 03-4143 2814
Fax : 03-4143 3095
15.
Wisma Pertahanan
G.05, Tingkat Bawah,
Wisma Pertahanan,
Kementerian Pertahanan Malaysia,
Jalan Padang Tembak,
50634 Kuala Lumpur.
Tel : 03-2698 7912
Fax : 03-2698 6071
WILAYAH PERSEKUTUAN PUTRAJAYA
1.Putrajaya
Bangunan Jabatan Akauntan Negara,
Kompleks Kementerian Kewangan,
No. 1, Persiaran Perdana,
Presint 2,
62594 Putrajaya,
Wilayah Persekutuan.
Tel : 03-8888 3814
Fax : 03-8889 2082
WILAYAH PERSEKUTUAN LABUAN
(OFFSHORE)
1.
Labuan Offshore
Unit 3 (J), Level 3,
Main Office Tower,
Financial Park Labuan,
Jalan Merdeka,
87000 Federal Territory Labuan.
Tel : 087-411 931
Fax : 087-411 973
SELANGOR
1.
Ampang Jaya
No. 11 & 11A,
Jalan Mamanda 7/1,
Ampang Point,
68000 Ampang, Selangor.
Tel : 03-4257 6802
Fax : 03-4257 8636
2.
Ampang New Village
No. 21G & 23G,
Jalan Wawasan 2/2,
Bandar Baru Ampang,
68000 Ampang, Selangor.
Tel : 03-4296 2311
Fax : 03-4296 2206
3.
Ara Damansara
Unit B-G-07 & B-G-08 Block B,
No. 2 Jalan PJU 1A/7A,
Ara Damansara,
47301 Petaling Jaya, Selangor.
Tel : 03-7847 3177
Fax : 03-7847 2677
7.LTAT
Ground Floor,
Bangunan LTAT,
Jalan Bukit Bintang,
55100 Kuala Lumpur.
Tel : 03-2142 6311
Fax : 03-2148 0586
8.Selayang
81-85, Jalan 2/3A,
Pusat Bandar Utara,
KM 12, Jalan Ipoh,
68100 Batu Caves,
Kuala Lumpur.
Tel : 03-6137 2053
Fax : 03-6138 7122
39
network
OF branches
4.
Bandar Bukit Tinggi
No. 77 & 79, Jalan Batu Nilam 5,
Bandar Bukit Tinggi,
41200 Klang, Selangor.
Tel : 03-3323 2822
Fax : 03-3323 2858
5.Cyberjaya
P1-13, Shaftsbury Square,
Lot No. 2350, Cyber 6,
Persiaran Multimedia,
63000 Cyberjaya, Selangor.
Tel : 03-8318 1944
Fax : 03-8318 1934
6.
Jalan Meru, Klang
No. 38 & 40, Pelangi Avenue,
Jalan Kelicap 42A/KU1,
Klang Bandar DiRaja,
Tel : 03-3341 5237
Fax : 03-3341 5427
7.Kajang
2 & 3, Jalan Saga,
Taman Sri Saga,
Off Jalan Sg. Chua,
43000 Kajang, Selangor.
Tel : 03-8737 7435
Fax : 03-8737 7433
8.Kepong
6, Jalan 54, Desa Jaya,
52100 Kepong, Selangor.
Tel : 03-6276 4942
Fax : 03-6276 6375
9.Kinrara
No. 1, Jalan TK1/11A,
Taman Kinrara, Section 1,
Batu 7 1/2, Jalan Puchong,
47100 Puchong, Selangor.
Tel : 03-8075 5682
Fax : 03-8075 8159
40
10.
Klang Utara
No. 29 & 31,
Jalan Tiara 3,
Bandar Baru Klang,
Tel : 03-3342 1585
Fax : 03-3342 1719
11.
Kompleks PKNS
Lot G17-20,
Ground Floor,
Kompleks PKNS,
40000 Shah Alam, Selangor.
Tel : 03-5510 5200
Fax : 03-5510 8200
12.
Kota Damansara
Nos. B-G-19, 20 & 21 (GF),
Dataran Cascades,
Jalan PJU 5/1,
Kota Damansara PJU 5,
Tel : 03-7610 0890
Fax : 03-7610 0889
13.
Kota Kemuning
No. 15-1 & 17-1 (GF),
No. 8 Jalan Anggerik Vanilla,
BE 31/BE Kota Kemuning,
Seksyen 31,
Tel : 03-5120 1811
Fax : 03-5120 1588
14.
Kota Warisan
No. 48, Jalan Warisan Megah 1/4,
43900 Sepang, Selangor.
Tel : 03-8706 6300
Fax : 03-8706 6599
15.
PJ State
No. 38 & 40,
Jalan Yong Shook Lin,
Tel : 03-7955 0032
Fax : 03-7954 0012
16.
Port Klang
No. 1, Jalan Berangan,
42000 Port Klang, Selangor.
Tel : 03-3168 8366
Fax : 03-3167 2784 / 6432
17.Puchong
J-03-G, Block J, Setiawalk,
Persiaran Wawasan,
Pusat Bandar Puchong,
47160 Puchong, Selangor.
Tel : 03-5882 2880
Fax : 03-5882 2881
18.Rawang
No. 33G & 35G,
Jln 1B, Fortune Avenue,
48000 Rawang, Selangor.
Tel : 03-6091 3322
Fax : 03-6091 3344
19.
Sea Park
20-22, Jalan 21/12, Sea Park,
Tel : 03-7875 6514
Fax : 03-7876 6020
20. Seri Kembangan
No. 36, Jalan PSK 3,
Pusat Perdagangan Seri Kembangan,
43300 Seri Kembangan, Selangor.
Tel : 03-8945 6429
Fax : 03-8945 6442
03-8943 5306
21.
Subang Jaya
7 & 9, Jalan SS 15/8A,
47500 Subang Jaya, Selangor.
Tel : 03-5634 8045
Fax : 03-5634 8040
22.
Taman Demang
No. 47, Jalan DD3A/1,
BASCO Business Centre,
Taman Dato’ Demang,
43300 Seri Kembangan, Selangor.
Tel : 03-8959 2588
Fax : 03-8958 5288
23.
The Curve
Lot K-G32A-D & G32,
Ground Floor,
The Curve Shopping Complex,
Jalan PJU 7/8,
Mutiara Damansara,
Tel : 03-7726 7258
Fax : 03-7727 8912
24.UiTM
Universiti Teknologi MARA,
Tingkat 2,
Menara Sultan Abdul Aziz Shah,
Tel : 03-5519 2377
Fax : 03-5510 5580
25.USJ Taipan
8A & 8B, Jalan USJ 10/1J,
47610 UEP Subang Jaya,
Petaling Jaya, Selangor.
Tel : 03-8023 7271
Fax : 03-8023 9161
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OF branches
NEGERI SEMBILAN
JOHOR
1.Gemas
No. 1 & 2, Ground Floor,
Laman Niaga Pernama,
Kem Syed Sirajuddin,
73400 Gemas, Negeri Sembilan.
Tel : 07-948 3622
Fax : 07-948 5022
1.
Ayer Hitam
No. 765, Jalan Batu Pahat,
86100 Ayer Hitam, Johor.
Tel : 07-758 1100
Fax : 07-758 1001
2.
Batu Pahat
No. 3 & 4, Jalan Merah,
Taman Bukit Pasir,
83000 Batu Pahat, Johor.
Tel : 07-433 4210
Fax : 07-433 3246
9.Mutiara Rini
No. 28 & 30,
Jalan Utama 45,
Taman Mutiara Rini,
81300, Skudai, Johor.
Tel : 07-557 0900
Fax : 07-557 1244
3.
Danga Bay
No. 17 & 18 Blok 6,
Danga Bay, Jalan Skudai,
80200 Johor Bahru, Johor.
Tel : 07-234 3842
Fax : 07-234 8852
10.
4.
Johor Bahru
No. 24 & 25,
Jalan Kebun Teh 1,
Kebun Teh Commercial City,
Tel : 07-221 2403
Fax : 07-221 2462
11.Segamat
No. 1, G-Floor,
Jalan Nagasari 23,
Bandar Segamat Baru,
85000 Segamat, Johor.
Tel : 07-943 1378
Fax : 07-943 1373
5.
Johor Jaya
130 & 132, Jalan Ros Merah 2/17,
Taman Johor Jaya,
Tel : 07-351 8602
Fax : 07-351 4122
2.Nilai
5733 & 5734, Jalan TS 2/1,
Taman Semarak Phase II,
71800 Nilai, Negeri Sembilan.
Tel : 06-799 4114
Fax : 06-799 5115
3.
Port Dickson
3 & 4, Jalan Mahajaya,
P.D. Centre Point,
71000 Port Dickson,
Negeri Sembilan.
Tel : 06-647 3950
Fax : 06-647 4776
4.Seremban
No. 175,
Jalan Dato’ Bandar Tunggal,
70000 Seremban,
Negeri Sembilan.
Tel : 06-762 9651
Fax : 06-763 6125
MELAKA
1.
Bukit Baru
No. 7 & 8, Jalan DR1,
Delima Point,
Taman Delima Raya,
75150 Melaka.
Tel : 06-232 1386
Fax : 06-232 1579
Permas Jaya
23 & 25, Jalan Permas 10/2,
Bandar Baru Permas Jaya,
Tel : 07-386 3703
Fax : 07-386 5061
12.Tampoi
No. 49 & 51, Jalan Sri Perkasa 2/1,
Taman Tampoi Utama,
81200 Tampoi, Johor Bahru,
Johor.
Tel : 07-241 4946
Fax : 07-241 4953
6.Kluang
503, Jalan Mersing,
86000 Kluang, Johor.
Tel : 07-772 4736
Fax : 07-772 4486
7.Kulai
199 & 200,
Jalan Kenanga 29/4,
Indahpura,
81000 Kulai, Johor.
Tel : 07-660 8495
Fax : 07-660 8363
2.Melaka Raya
200 & 201,
Taman Melaka Raya,
Off Jalan Parameswara,
75000 Melaka.
Tel : 06-283 5500
Fax : 06-284 6618
8.Muar
No. 30A & 30A-1,
Jalan Arab,
84000 Muar, Johor.
Tel : 06-953 2384
Fax : 06-953 3489
41
network
OF branches
PERAK
PULAU PINANG
1.Ipoh
No. 1 & 3,
Ground & First Floor,
Persiaran Greentown 9,
Greentown Business Centre,
30450 Ipoh, Perak.
Tel : 05-255 0980
Fax : 05-255 0976
1.
2.
2.Butterworth
55-57, Jalan Selat,
Taman Selat,
P.O.Box 165,
Off Jalan Bagan Luar,
12000 Butterworth, Pulau Pinang.
Tel : 04-333 1372
Fax : 04-332 3299
3.Lumut
Ground Floor,
Kompleks Mutiara Armada,
Jalan Nakhoda,
Pengkalan TLDM,
32100 Lumut, Perak.
Tel : 05-683 5051
Fax : 05-683 5579
3.
Fettes Park
No. 98-G-31 & 32,
Jalan Fettes,
Prima Tanjung Business Centre,
Tanjung Tokong,
11200 Pulau Pinang.
Tel : 04-899 9069
Fax : 04-899 0767
4.Sitiawan
No. 11 & 12, Taman Sitiawan 1,
Jalan Lumut,
32000 Sitiawan, Perak.
Tel : 05-692 8401
Fax : 05-691 7339
4.
Jalan Macalister
No. 104C, 104D & 104E,
Jalan Macalister,
10400 Pulau Pinang.
Tel : 04-229 1495
Fax : 04-226 1530
5.Taiping
No. 40 & 42,
Jalan Tupai,
34000 Taiping, Perak.
Tel : 05-806 6816
Fax : 05-808 0432
5.
Kepala Batas
Lot 1317 & 1318,
Lorong Malinja, Taman Sepakat,
Off Jalan Butterworth,
13200 Kepala Batas,
Seberang Prai Utara,
Pulau Pinang.
Tel : 04-575 1824
Fax : 04-575 1975
6.
42
Ipoh Garden
No. 27A-27A1,
Jalan Sultan Azlan Shah Utara,
31400 Ipoh, Perak.
Tel : 05-549 7277
Fax : 05-549 7299
Bayan Baru
124 & 126, Jalan Mayang Pasir,
Taman Sri Tunas,
11950 Bayan Baru, Pulau Pinang.
Tel : 04-644 7593
Fax : 04-645 2709
Teluk Intan
11, Medan Sri Intan,
Jalan Sekolah,
36000 Teluk Intan, Perak.
Tel : 05-621 0130
Fax : 05-621 0128
6.Prai
No. 2, Tingkat Kikik 7,
Taman Inderawasih,
13600 Prai, Pulau Pinang.
Tel : 04-397 8543
Fax : 04-397 9243
7.
Seberang Jaya
No. 10, Jalan Todak Satu,
Pusat Bandar Seberang Jaya,
13700 Prai, Pulau Pinang.
Tel : 04-399 5881
Fax : 04-399 2881
8.
Wisma Pelaut
1A, Light Street,
Wisma Pelaut,
10200 Pulau Pinang.
Tel : 04-263 6633
Fax : 04-261 9801
KEDAH
1.
Alor Setar
No. 147 & 148,
Susuran Sultan Abdul Hamid 8,
Kompleks Sultan Abdul Hamid,
Fasa 2, Persiaran Sultan Abdul Hamid,
05050 Alor Setar, Kedah.
Tel : 04-772 1477
Fax : 04-771 4796
2.Kulim
No. 13 & 14,
Jalan KLC Satu (1),
Kulim Landmark Central,
09000 Kulim, Kedah.
Tel : 04-495 5566
Fax : 04-490 4717
3.Langkawi
149-151,
Persiaran Bunga Raya,
Langkawi Mall,
07000 Kuah, Langkawi, Kedah.
Tel : 04-966 4426
Fax : 04-966 4717
4. Sungai Petani
No. 55, Jalan Perdana Heights,
2/2, Perdana Heights,
08000 Sungai Petani, Kedah.
Tel : 04-421 1808
Fax : 04-422 6675
network
OF branches
TERENGGANU
1. Kemaman
K711-713,
Wisma IKY Naga,
Jalan Sulaimani,
24000 Kemaman, Terengganu.
Tel : 09-858 1744
Fax : 09-859 1572
2.
Kemaman Supply Base
Ground Floor,
Admin Building Block B,
Kemaman Supply Base,
24007 Kemaman, Terengganu.
Tel : 09-863 1297
Fax : 09-863 1295
KELANTAN
1.Jeli
A1 & A2, Blok A,
Bandar Baru Bukit Bunga,
11700 Bukit Bunga,
Tanah Merah, Kelantan.
Tel : 09-946 8955
Fax : 09-946 8954
2.
Kota Bharu
3788H & 3788I,
Seksyen 13,
Jalan Sultan Ibrahim,
15050 Kota Bharu, Kelantan.
Tel : 09-744 5688
Fax : 09-744 2202
PAHANG
1.Jengka
Nadi Kota,
26400 Bandar Jengka, Pahang.
Tel : 09-466 2233
Fax : 09-466 2422
4.Temerloh
No. 9, Ground Floor,
Jalan Ahmad Shah,
28000 Temerloh, Pahang.
Tel : 09-296 8811
Fax : 09-296 8800
PERLIS
1.Kangar
No. 25 & 27, Jalan Satu,
Taman Pertiwi Indah,
Jalan Kangar - Alor Setar,
01000 Kangar, Perlis
Tel : 04-977 7200
Fax : 04-977 6100
SABAH
1.
Jalan Gaya, Kota Kinabalu
No. 86, Jalan Gaya,
88000 Kota Kinabalu, Sabah.
Tel : 088-230 213
Fax : 088-265 430/ 088-212 476
2.
Kota Kinabalu
Lot 19 & 20, Block K,
Sadong Jaya Complex,
Jalan Ikan Juara 3, Karamunsing,
88300 Kota Kinabalu, Sabah.
Tel : 088-264 410
Fax : 088-261 414
3.
Lahad Datu
Ground Floor, Lot 1 & 2,
Bandar Sri Perdana, Fasa 5 KM4,
Jalan Silam Bandar Sri Perdana,
91100 Lahad Datu, Sabah.
Tel : 089-865 733
Fax : 089-865 735
4.Sandakan
Lot No. 163 & 164,
Block 18, Jalan Prima Square,
Batu 4, Jalan Utara,
90000 Sandakan, Sabah.
Tel : 089-212 752
Fax : 089-212 644
5.Tawau
TB. 281, 282 & 283,
Jalan Haji Karim,
Town Extension II,
P.O. Box 630,
91008 Tawau, Sabah.
Tel : 089-778 197
Fax : 089-762 199
SARAWAK
1.Bintulu
Sub Lot 13,
Off Lot 3299,
Parkcity Commerce Square,
97000 Bintulu, Sarawak.
Tel : 086-314 248
Fax : 086-314 206
2.Kuching
Lot 247 & 248,
Section 49, KTLD,
Jalan Tuanku Abdul Rahman,
93100 Kuching, Sarawak.
Tel : 082-245 888
Fax : 082-257 366
3.Miri
Lot 2387 & 2388, 1st Floor,
Block A4, Jalan Boulevard 1A,
Boulevard Commercial Center,
KM 3, Jalan Miri-Pujut,
98000 Miri, Sarawak.
Tel : 085-437 442
Fax : 085-437 297
4.
Prince Commercial Centre
Ground Floor, No. 1 & 2,
Jalan Penrissen Batu 7,
Kota Sentosa,
93250 Kuching, Sarawak.
Tel : 082-613 466
Fax : 082-629 466
5.Sibu
No. 91 & 93,
Jalan Kampung Nyabor,
96000 Sibu, Sarawak.
Tel : 084-325 926
Fax : 084-325 960
2.Kuantan
G2-Ground Floor G2,
Menara Zenith, Jalan Putra,
Square 6, Putra Square,
25200 Kuantan, Pahang.
Tel : 09-514 8584
Fax : 09-514 8580
3.Mentakab
70, Jalan Temerloh,
28400 Mentakab, Pahang.
Tel : 09-278 4487
Fax : 09-277 6654
43
notice of
annual general meeting
NOTICE IS HEREBY
GIVEN THAT THE 40TH
ANNUAL GENERAL
MEETING OF
AFFIN BANK BERHAD
WILL BE HELD AT THE
BOARD ROOM,
19TH FLOOR,
MENARA AFFIN,
80, JALAN RAJA
CHULAN, 50200
KUALA LUMPUR ON
TUESDAY,
22 MARCH 2016
AT 9.00 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 declare a final single tier dividend of 6.18 sen amounting to RM104,366,000.00 for the financial year ended
31 December 2015.
3. To re-elect Mr. Aubrey Li Kwok-Sing who retire pursuant to Article 91(a) of the Company’s Articles of Association
and who, being eligible, offer himself for re-election.
4. 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 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.
(c) 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.
(d) That YBhg. Tan Sri Mohd Ghazali bin Mohd Yusoff, 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.
5.
To re-elect En. Abd Malik bin A Rahman who retire pursuant to Article 91(e) of the Company’s Article of Association
and who being eligible, offers himself for re-election.
6. To approve the payment of Directors’ fees and Committees’ fees for financial year ended 31 December 2015.
7. To re-appoint Messrs PricewaterhouseCoopers as Auditors for the financial year ending 31 December 2016 and
to authorise the Directors to fix their remuneration.
8. To transact any other ordinary business of the Company.
BY ORDER OF THE BOARD
NIMMA SAFIRA BINTI KHALID
Secretary
44
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.
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.
Financial
Statements
46
Directors’ Report
62
Statements of Financial Position
63
Income Statements
64
Statements of Comprehensive Income
65
Statements of Changes in Equity
67
Statements of Cash Flows
70
Summary of Significant Accounting Policies
86
Notes to the Financial Statements
184
Statement by Directors
184
Statutory Declaration
185
Independent Auditors’ Report
186
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 Group and the Bank for the financial year ended 31
December 2015.
PRINCIPAL ACTIVITIES
The principal activities of the Bank during the financial year are banking and related financial services. The principal activities of the subsidiaries are
Islamic banking business, property management services, nominee and trustee services. Islamic banking business refers generally to the acceptance of
deposits and granting of financing under the Shariah principles. There were no significant changes in the nature of these activities during the financial
year.
FINANCIAL RESULTS
The Group
The Bank
RM’000
RM’000
461,235
344,229
(3,779)
-
Profit before taxation
457,456
344,229
Taxation
(111,874)
(82,939)
Net profit for the financial year
345,582
261,290
Profit before zakat and taxation
Zakat
DIVIDENDS
The dividends on ordinary shares paid or declared by the Bank since 31 December 2014 were as follows:
In respect of the financial year ended 31 December 2014 as shown in the Directors’ report for that financial year:
RM’000
Final single-tier dividend of 3.91 sen per share paid on 31 March 2015
66,031
The Directors now recommend the payment of a final single-tier dividend of 6.18 sen per share on the Bank’s issued and paid up capital of
RM1,688,769,616 comprising of 1,688,769,616 shares amounting to RM104,366,000 for the financial year ended 31 December 2015 which is subject
to the approval of members at the forthcoming Annual General Meeting of the Bank.
46
directors’ report
RESERVES AND PROVISIONS
All material transfers to or from reserves or provisions during the financial year are shown in the financial statements and notes to the financial
statements.
BAD AND DOUBTFUL DEBTS AND FINANCING
Before the financial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain that proper action had
been taken in relation to the writing off of bad debts and financing and the making of allowance for bad and doubtful debts and financing, and satisfied
themselves that all known bad debts and financing had been written off and adequate allowances made for doubtful debts and financing.
At the date of this report, the Directors are not aware of any circumstances which would render the amount written off for bad debts and financing, or
the amount of the allowance for doubtful debts and financing, in the financial statements of the Group and the Bank inadequate to any substantial extent.
CURRENT ASSETS
Before the financial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain that any current assets,
other than debts and financing, which were unlikely to realise in the ordinary course of business, their values as shown in the accounting records of the
Group and the Bank, have been written down to an amount which they might expected so to realise.
At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current assets in the financial
statements of the Group and the Bank misleading.
VALUATION METHODS
At the date of this report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing methods of
valuation of assets or liabilities in the Group’s and the Bank’s financial statements misleading or inappropriate.
CONTINGENT AND OTHER LIABILITIES
At the date of this report there does not exist:
(a) any charge on the assets of the Group or the Bank which has arisen since the end of the financial year which secures the liabilities of any other
person; or
(b) any contingent liability in respect of the Group or the Bank that has arisen since the end of the financial year other than in the ordinary course of
banking business or activities of the Group.
No contingent or other liability of the Group or the Bank has become enforceable, or is likely to become 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 Group or the Bank to meet their
obligation as and when they fall due.
47
directors’ report
CHANGE OF CIRCUMSTANCES
At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the
Group and the Bank that would render any amount stated in the financial statements misleading.
ITEMS OF AN UNUSUAL NATURE
The results of the operations of the Group and the Bank during the financial year were not, in the opinion of the Directors, substantially affected by any
item, transaction or event of a material and unusual nature.
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and
unusual nature likely, in the opinion of the Directors, to affect substantially the results of the operations of the Group or the Bank for the current financial
year in which this report is made.
SIGNIFICANT EVENT DURING THE FINANCIAL YEAR
There is no significant event during the financial year.
SUBSEQUENT EVENTS
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:
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman
(Retired w.e.f. 27.1.2015)
Mr Aubrey Li Kwok-Sing
48
Tan Sri Dato’ Seri Mohamed Jawhar
Tan Sri Mohd Ghazali Bin Mohd Yusoff
En. Abd. Malik Bin A Rahman
(Appointment w.e.f. 3.3.2015)
Mr Tang Peng Wah
(Alternate Director to Mr Aubrey Li Kwok-Sing)
directors’ report
RESPONSIBILITY STATEMENT BY BOARD OF DIRECTORS
In the course of preparing the annual financial statements of the Group and of the Bank, the Directors are collectively responsible in ensuring that these
financial statements are drawn up in accordance with 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 Group and of the Bank present a true and fair view of the state of
affairs of the Group and of the Bank as at 31 December 2015 and of the financial results and cash flows of the Group and of the Bank for the financial
year then ended.
The financial statements are prepared on the going concern basis and the Directors have ensured that proper accounting records are kept, applied the
appropriate accounting policies on a consistent basis and made accounting estimates that are reasonable and fair so as to enable the preparation of
the financial statements of the Group and of the Bank with reasonable accuracy.
The Directors have also taken the necessary steps to ensure that appropriate systems are in place for the assets of the Group and of the Bank to be
properly safeguarded for the prevention and detection of fraud and other irregularities. The systems, by their nature, can only provide reasonable and
not absolute assurance against material misstatements, whether due to fraud or error.
The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set out on page 184 of the financial statements.
49
directors’ report
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:
Ordinary shares of RM1 each
As at
1.1.2015
Bought
Sold
As at
31.12.2015
AFFIN Holdings Berhad
* 1,051,328
-
-
*1,051,328
Boustead Heavy Industries Corporation Berhad
* 2,000,000
-
-
* 2,000,000
5,916,465
-
-
5,916,465
Boustead Petroleum Sdn Bhd
*
Shares held in trust by nominee company
Ordinary shares of RM10 each; RM5 uncalled
ABB Trustee Berhad **
Jen.Ô11 Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)
As at
1.1.2015
Bought
Sold
As at
31.12.2015
20,000
-
-
20,000
** Shares held in trust for the Bank
Ordinary shares of 50 sen each
50
As at
1.1.2015
Bought
Sold
As at
31.12.2015
Boustead Holdings Berhad^
28,192,758
-
-
28,192,758
Pharmaniaga Berhad^^
12,500,148
-
-
12,500,148
Boustead Plantations 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’ report
DIRECTORS’ BENEFITS
During and at the end of the financial year, no other arrangements subsisted to which the Bank or any of its subsidiaries is a party with the object or
objects of enabling Directors of the Bank or any of its subsidiaries to acquire benefits by means of the acquisition of shares in, or debenture of, the Bank
or any other body corporate.
Since the end of the previous financial year, no Director of the Bank has received or become entitled to receive a benefit (other than the fees and other
emoluments shown in the Note 32 to the financial statements) by reason of a contract made by the Bank or by a related corporation with the Director
or with a firm of which he is a member or with a company in which he has a substantial financial interest.
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 Institutions.
(i) Board of Directors Responsibility and Oversight
The Board of Directors
The direction and control of the Bank rest firmly with the Board as it effectively assumes the overall responsibility for corporate governance,
strategic direction, formulation of policies and overseeing the investments and operations of the Bank. The Board exercises independent oversight
on the management and bears the overall accountability for the performance of the Bank and compliance with the principle of good governance.
There is a clear division of responsibility between the Chairman and the Managing Director/Chief Executive Officer (‘MD/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 MD/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
The Board meets on a monthly basis, to review the Bank’s financial and business performance, to oversee the conduct of the Bank’s business as
well as to ensure that adequate internal control systems are in place. The Board met 21 times during the financial year.
Board Balance
In 2015, the Bank continues to have a strong and experienced Board, befitting its aspiration to become a mid-size Bank of prominence. It consists
of representatives from the private sector with suitable qualifications and experience in relevant areas particularly in banking.
The Board of Directors comprises of seven Non-Executive Directors and one alternate Non-Executive Director. There are four Independent NonExecutive Directors and four Non-Independent Non-Executive Directors. The Board of Directors meetings are presided by a Non-Independent NonExecutive Chairman whose role is clearly separated from the role of the MD/CEO.
51
directors’ report
(i) Board of Directors Responsibility and Oversight (continued)
Board Balance (continued)
The composition of the Board and the number of meetings attended by each director are as follows:
Directors
Total Meetings Attended
21 / 21
13 / 21
Member / Non-Independent Non-Executive Director
1/1
Member / Independent Non-Executive Director
(Retired w.e.f. 27.1.2015)
5 / 21
21 / 21
21 / 21
21 / 21
17 / 19
Mr Tang Peng Wah
52
9 / 21
directors’ report
Board Committees
Nomination Committee
Nominating Committee was established to provide a formal and transparent procedure for the appointment of Directors and MD/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 MD/CEO and key senior management officers.
During the financial year ended 31 December 2015, a total of 7 meetings were held. The Nominating Committee comprises the following members
and the details of attendance of each member at the Nominating Committee meetings held during the financial year are as follows:
Members
7/7
Chairman / Independent Non-Executive Director
7/7
7/7
7/7
2/2
53
directors’ report
Board Committees (continued)
Remuneration Committee
Remuneration Committee was established to evaluate and recommend a framework of remuneration for Directors, the MD/CEO and key senior
management officers that is competitive and consistent with the Bank’s culture, objectives and strategy.
During the financial year ended 31 December 2015, a total of 7 meetings were held. The Remuneration Committee comprises the following
members and the details of attendance of each member at the Remuneration Committee meetings held during the financial year are as follows:
Members
7/7
7/7
54
7/7
directors’ report
Board Committees (continued)
Shariah Committee
AFFIN Islamic Bank Berhad’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 responsibilities of the Shariah Committee are as 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 to ensure that the products comply with Shariah principles; and
•
To advise the AFFIN Islamic Bank Berhad on matters to be referred to the Shariah Advisory Council.
The Shariah Committee was established in December 1995. During the year, 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 are as follows:
Members
Associate Professor Dr. Said Bouheraoua
11 / 11
Chairman
Assistant Professor Dr. Ahmad Azam Bin Othman
11 / 11
Member
Dr. Zulkifli Bin Hasan
11 / 11
Member
Ustaz Mohammad Mahbubi Bin Ali
11 / 11
Member
Ustaz Ahmad Alfisyahrin Jamilin
3/3
Member
Member
(Resigned w.e.f. 1.4.2015)
4/5
Dr. Yasmin Hanani Binti Mohd Safian
55
directors’ report
(ii) Group Risk Management
The Group Risk Management function, operating in an independent capacity, is part of the Bank’s senior management structure in managing risks
to enhance stakeholders’ value.
The Group Risk Management function provides 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 Group Early Alert Committee (‘GEAC’) 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
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 39 to the financial statements.
During the financial year ended 31 December 2015, a total of 6 meetings were held. The BRMC comprises the following members and details of
attendance of each member at the BRMC meetings held during the financial year are as follows:
Members
6/6
6/6
(Represent AFFIN Islamic Bank Berhad)
6/6
56
6/6
directors’ report
(ii) Group Risk Management (continued)
Board Loan Review and Recovery Committee (‘BLRRC’)
Board Loan Review and Recovery Committee (‘BLRRC’) critically reviews loans and other credit facilities with higher risk implications, after due
process of checking, analysis, review and recommendation by the Credit Management function, and if found necessary, exercise the power to veto
loan applications that have been accepted by the Group Management Loan Committee (‘GMLC’). The Committee is also responsible to review the
impaired loans presented by Management.
The BLRRC meeting for the Bank were jointly held with AFFIN Islamic Bank and during the financial year ended 31 December 2015, a total of 12
meetings were held. The BLRRC comprises the following members and details of attendance of each member at the BLRRC meetings held during
the financial year are as follows:
Members
12 / 12
12 / 12
12 / 12
Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Mohd Nor (Bersara)
12 / 12
57
directors’ report
(ii) Group Risk Management (continued)
Management Committee (‘MCM’)
MCM comprising the senior management team chaired by the 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’)
Group Management Loan Committee (‘GMLC’) approves complex and larger loans 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 MD/CEO, 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 the 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 as well as review the actions taken to address emerging risks and issues in these accounts.
(iii) Internal Audit and Internal Control Activities
In accordance with Bank Negara Malaysia’s Guidelines on Corporate Governance for Licensed Institutions, 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 risks highlighted on
the respective auditable areas as well as recommendation made by the GIA are addressed at AEC and Management meetings on bi-monthly basis.
The AEC also conduct annual reviews on the adequacy of internal audit function, scope of work, resources and budget of GIA.
At present, GIA consists of Operational Audit, IS Audit, Credit Review, Investigation and Compliance. Audit activities include these key components:
58
•
Conduct audit on all auditable entities (Head Office, branches and subsidiaries) processes, services, products, system and provide an
independent assessment to the Board of Directors, AEC and Management that appropriate control environment is maintained with clear
authority and responsibility with sufficient staff and resources to carry out control responsibilities.
•
Perform risk assessments to identify risk and evaluate actions taken to provide reasonable assurance that procedures and controls exist to
contain those risks.
•
Maintain strong control activities including documented processes and system incorporating adequate controls to produce accurate financial
data and provide for the safeguarding of assets, and a documented review of reported results.
directors’ report
(iii) Internal Audit and Internal Control Activities (continued)
•
Ensure effective information flows and communication, including:
-
-
-
•
training and the dissemination of standards and requirements;
an information system to produce and convey complete, accurate and timely data including financial data;
the upward communication of trends, developments and emerging issues.
Monitor controls, including procedures to verify that controls are in place and functioning, follow up on corrective action on control finding until
its full resolution.
Based on GIA’s review, identification and assessment of risk, testing and evaluation of controls, GIA will provide an opinion on the effectiveness of
internal controls maintained by each entity.
Audit and Examination Committee (‘AEC’)
The AEC comprises members of the Bank’s Board of Directors whose primary function is to assist the Board of Directors in its supervision over:
•
The reliability and integrity of accounting policies and financial reporting and disclosure practices;
•
The provision of advice to the Board with regards to the financial statements and business risks to enable the Board to fulfill its fiduciary duties
and obligations; and
•
The establishment and maintenance of processes to ensure that they:
-
are in compliance with all applicable laws, regulations and policies; and
-
have adequately addressed the risk relating to internal controls and system, management of inherent and business risks, and ensuring
that the assets are properly managed and safeguarded.
The AEC is made up of at least three but not more than five members appointed by the Board of Directors from among its non-executive directors.
The AEC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during the financial year ended 31 December 2015, a total of
8 meetings were held. The AEC comprises the following members and details of attendance of each member at the AEC meetings held during the
financial year are as follows:
Members
8/8
8/8
Tan Sri Mohd Ghazali bin Mohd Yusoff
8/8
Associate Professor Dr. Said Bouheraoua
8/8
59
directors’ report
(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.
BUSINESS PLAN AND STRATEGY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015
Taking into account the dynamically changing economic environment and its impacts, the Bank throughout 2015 continues to strive for business growth
and withstand its position in the industry. The industry’s overall loan growth for 2015 was moderate as expected with domestic loan growth hovers in
the range of 9.00% to 9.50%.
Despite the challenges faced, the Bank was able to preserve its asset quality and maintain its cost-toincome ratio at 50.09%. Net impaired loans ratio
stood at 0.95%, ROE (before tax) at 9.10% and ROA (before tax) at 0.80%. Overall, the Bank’s key financial numbers are very much within the industry
standard.
Recognising the intense competition and the need to differentiate ourselves in the marketplace, the Bank has formulated a medium to long-term
transformation plans predicted upon the rapidly evolving economy as well as digitalisation and demographics.
BUSINESS OUTLOOK FOR 2016
Gross Domestics Product (‘GDP’) growth for Malaysia is projected to be remained from last year within the range of 4.5% to 5.0% in year 2016. This
reflects the impact of plunge of crude oil price where the oil prices are estimated to stay low and recover the earliest by the second half of 2016.
The decline in crude oil price together with the challenging external environment and US rate hikes; continues to poses headwinds to the Malaysian
Government budget, trade balance and exchange rate.
Amid softer economic growth outlook and increasing regulated business environment, the Bank is confident that the domestic economy still holds
much opportunity for business growth and intends to pursue these opportunities prudently. The Bank will continue to ensure that loans portfolio is well
managed through proactive account management.
Our strategic focus for the business continues with the emphasis on both retail and business banking segments. The Bank will continuously pace up
efforts to improve efficiency and productivity in delivering our products and services. We will retain our competitive edge and grow our business within
the well-defined risk parameters and be guided by our strategic plans.
60
The Bank has put further emphasis on transactional banking as major source of fee income and further enhances our brand recognition and visibility by
increasing our domestic footprint while exploring the potential of establishing a presence in ASEAN and beyond.
We believe that the strong relationship built with our customers will put us in good stead to further grow our business in targeted key segments.
The Bank will also continue to collaborate and leverage on Group synergy by exploring potential business opportunities with the LTAT/Boustead Group
of Companies.
directors’ report
RATING BY EXTERNAL AGENCIES
The Bank has been rated by the following external rating agency:
Name of rating agency:
RATING AGENCY MALAYSIA BERHAD (‘RAM’)
Date of rating:
21 August 2015
Rating classifications:
- Long term:
AA3
- Short term:
P1
RAM has reaffirmed the Bank’s long-term and short-term financial institution ratings, at AA3 and P1, respectively, with a stable outlook.
‘AA’ rating is defined by RAM as an entity has a strong capacity to meets its financial obligations and is resilient against adverse changes in circumstances,
economic condition and/or operating environments. The subscript 3 in this category indicates as the lower end of its generic rating in the AA category.
A P1 rating is defined by RAM as obligations which are supported by superior ability with regards to timely payment of obligations.
ZAKAT
The Bank’s subsidiary, AFFIN Islamic Bank Berhad (‘AFFIN Islamic’) is obliged to pay zakat to comply with the principles of Shariah. AFFIN Islamic does
not pay zakat on behalf of its depositors.
HOLDING COMPANY AND ULTIMATE HOLDING CORPORATE BODY
The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the ultimate holding corporate body
is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung Angkatan Tentera Act, 1973.
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
In accordance with resolution of the Board of Directors dated 3 March 2016.
Chairman
Director
61
statements of financial position
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
2
4,070,710
6,938,912
2,573,348
3,777,042
Note
ASSETS
Cash and short-term funds
Deposits and placements with banks and
other financial institutions
3
351,687
238,222
1,310,764
962,050
Financial assets held-for-trading
4
150,121
149,904
150,121
149,904
Derivative financial assets
5
174,037
88,658
174,745
88,672
Financial investments available-for-sale
6
10,287,350
9,947,911
8,811,977
8,415,411
Financial investments held-to-maturity
7
380,654
476,155
304,372
393,401
Loans, advances and financing
8
42,104,597
39,456,172
32,902,688
32,292,551
Other assets
9
72,798
223,406
68,546
174,655
Amount due from subsidiaries
10
-
-
61
438
Amount due from joint ventures
11
39,936
14,855
-
-
46,206
20
46,179
-
Tax recoverable
Deferred tax assets
12
3,598
3,118
-
218
Statutory deposits with Bank Negara Malaysia
13
1,604,600
1,696,550
1,345,000
1,398,550
Investment in subsidiaries
14
-
-
489,074
389,074
Property and equipment
16
407,313
149,131
399,913
141,031
Intangible assets
17
153,137
147,688
156,604
150,690
59,846,744
59,530,702
48,733,392
48,333,687
18
47,813,213
48,047,224
37,814,118
38,180,212
19
2,735,596
4,849,676
1,778,206
3,699,386
1,740,946
-
1,740,946
-
414,140
237,426
413,944
237,419
77,114
94,308
77,114
94,308
21
134,585
139,147
134,585
139,147
Other liabilities
22
399,718
359,644
354,008
328,063
Amount due to subsidiaries
23
TOTAL ASSETS
LIABILITIES AND EQUITY
Deposits from customers
Deposits and placements of banks and
Obligation on securities sold
under repurchase agreements
Derivative financial liabilities
20
Bills and acceptances payable
Recourse obligation on loans
sold to Cagamas Berhad
Provision for taxation
62
Deferred tax liabilities
12
Subordinated term loan
24
TOTAL LIABILITIES
-
-
422,166
296,781
10,052
28,029
-
23,939
15,104
-
15,104
-
1,004,446
604,310
1,004,446
604,310
54,344,914
54,359,764
43,754,637
43,603,565
Share capital
25
1,688,770
1,688,770
1,688,770
1,688,770
Reserves
26
3,813,060
3,482,168
3,289,985
3,041,352
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
COMMITMENTS AND CONTINGENCIES
38
5,501,830
5,170,938
4,978,755
4,730,122
59,846,744
59,530,702
48,733,392
48,333,687
22,301,945
23,427,860
20,192,355
21,359,914
The accounting policies on pages 70 to 85 and the notes on pages 86 to 183 form an integral part of these financial statements.
income statements
The Group
Note
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
Interest income
27
2,326,816
2,295,340
2,325,444
2,299,786
Interest expense
28
(1,495,771)
(1,447,605)
(1,495,791)
(1,447,672)
831,045
847,735
829,653
852,114
Net interest income
Income from Islamic banking business
Other operating income
238,921
220,369
-
-
1,069,966
1,068,104
829,653
852,114
184,577
223,222
185,068
222,544
1,254,543
1,291,326
1,014,721
1,074,658
(628,358)
(589,114)
(514,054)
(469,151)
626,185
702,212
500,667
605,507
33
(186,987)
18,468
(178,475)
22,193
6&7
22,037
(550)
22,037
-
461,235
720,130
344,229
627,700
(3,779)
(4,772)
-
-
29
30
Net income
Other operating expense
31
Operating profit before allowances
(Allowances for)/write-back of impairment losses on
loans, advances and financing
Write-back of/(allowances for) impairment losses
on securities
Profit before zakat and taxation
Zakat
Taxation
35
Net profit after zakat and taxation
457,456
715,358
344,229
627,700
(111,874)
(171,631)
(82,939)
(151,221)
345,582
543,727
261,290
476,479
345,582
543,727
261,290
476,479
20.5
33.3
15.5
29.2
Attributable to:
Equity holders of the Bank
Earnings per share (sen):
-Basic
36
63
statements of comprehensive income
The Group
Note
Profit after zakat and taxation
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
345,582
543,727
261,290
476,479
67,820
25,742
70,495
24,360
(16,479)
(6,178)
(17,121)
(5,847)
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
Other comprehensive income for the
financial year, net of tax
Total comprehensive income for the financial year
51,341
19,564
53,374
18,513
396,923
563,291
314,664
494,992
396,923
563,291
314,664
494,992
Attributable to equity holders of the Bank:
- Total comprehensive income
64
statements of changes in equity
Attributable to Equity Holders of the Bank
Share
capital
RM’000
Share
premium
RM’000
Statutory
reserves
RM’000
AFS
revaluation
reserves
RM’000
Regulatory
reserves
RM’000
Retained
profits
RM’000
Total
RM’000
1,688,770
858,904
1,469,794
17,604
184,366
951,500
5,170,938
-
-
-
-
-
345,582
345,582
- Financial investments
available-for-sale
-
-
-
51,341
-
-
51,341
Total comprehensive income
-
-
-
51,341
-
345,582
396,923
Dividends paid (Note 37)
-
-
-
-
-
(66,031)
(66,031)
-
-
107,715
-
94,181
(201,896)
-
At 31 December 2015
1,688,770
858,904
1,577,509
68,945
278,547
1,029,155
5,501,830
At 1 January 2014
1,518,337
529,337
1,317,376
(1,960)
-
1,004,534
4,367,624
-
-
-
-
-
543,727
543,727
available-for-sale
-
-
-
19,564
-
-
19,564
-
-
-
19,564
-
543,727
563,291
170,433
329,567
-
-
-
-
500,000
-
-
-
-
-
(259,977)
(259,977)
The Group
At 1 January 2015
Other comprehensive income
(net of tax)
Transfer to statutory reserves /
regulatory reserves
(net of tax)
Issued during the financial
year (Note 25)
regulatory reserves
-
-
152,418
-
184,366
(336,784)
-
At 31 December 2014
1,688,770
858,904
1,469,794
17,604
184,366
951,500
5,170,938
65
statements of changes in equity
Non-distributable
The Bank
At 1 January 2015
Distributable
Share
capital
RM’000
Share
premium
RM’000
Statutory
reserves
RM’000
AFS
revaluation
reserves
RM’000
Regulatory
reserves
RM’000
Retained
profits
RM’000
Total
RM’000
1,688,770
858,904
1,263,470
23,478
135,347
760,153
4,730,122
-
-
-
-
-
261,290
261,290
(net of tax)
available-for-sale
-
-
-
53,374
-
-
53,374
-
-
-
53,374
-
261,290
314,664
-
-
-
-
-
(66,031)
(66,031)
-
-
65,322
-
84,801
(150,123)
-
At 31 December 2015
1,688,770
858,904
1,328,792
76,852
220,148
805,289
4,978,755
At 1 January 2014
1,518,337
529,337
1,144,350
4,965
-
798,118
3,995,107
-
-
-
-
-
476,479
476,479
regulatory reserves
(net of tax)
available-for-sale
-
-
-
18,513
-
-
18,513
-
-
-
18,513
-
476,479
494,992
170,433
329,567
-
-
-
-
500,000
-
-
-
-
-
(259,977)
(259,977)
regulatory reserves
-
-
119,120
-
135,347
(254,467)
-
At 31 December 2014
1,688,770
858,904
1,263,470
23,478
135,347
760,153
4,730,122
Issued during the financial
year (Note 25)
66
statements of cash flows
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
457,456
715,358
344,229
627,700
(123)
(12)
(123)
(12)
- financial investments available-for-sale
(286,316)
(234,629)
(286,316)
(234,629)
- financial investments held-to-maturity
(17,017)
(20,062)
(17,017)
(20,062)
(2,635)
(2,589)
(2,635)
(2,589)
(7,675)
(35,642)
(7,675)
(35,642)
(250)
(1,092)
(250)
(1,092)
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments for items not involving the movement
of cash and cash equivalents:
Interest income:
- financial assets held-for-trading
Dividend income:
Accretion of discount less amortisation of premium:
Gain on sale:
(498)
(347)
(498)
(347)
(10,678)
(9,743)
(10,678)
(9,743)
-
(3,500)
-
(3,500)
Gain on redemption of financial investments
held-to-maturity
Unrealised loss/(gain) on revaluation:
-derivatives
- foreign exchange
232
(219)
232
(219)
3,750
(7,302)
3,750
(7,302)
(45,358)
122,129
(45,358)
122,129
-
550
-
-
(22,037)
-
(22,037)
-
15,044
14,951
13,960
13,954
Allowance for impairment loss:
Depreciation of property and equipment
Property and equipment written-off
84
114
76
110
Gain on sale of property and equipment
(1)
(6,319)
(1)
(6,319)
6,200
6,304
5,735
5,529
Amortisation of intangible assets
(3,329)
(684)
(2,937)
250,352
83,225
246,840
85,498
Net collective impairment
17,224
35,666
11,265
29,283
Gain on sale of foreclosed properties
Bad debt and financing written-off
Interest expense - subordinated term loan
Zakat
Operating profit before changes in working capital
3,603
4,380
3,596
4,370
28,189
29,879
28,189
29,879
3,779
4,772
-
-
392,641
692,543
264,600
594,059
(684)
Net individual impairment
67
statements of cash flows
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
(113,465)
244,375
(348,714)
144,706
CASH FLOWS FROM OPERATING ACTIVITIES (continued)
(Increase)/decrease in operating assets:
172
218
172
218
(2,919,604)
(3,351,658)
(871,838)
(2,232,792)
(318,117)
(166,316)
(361,174)
(158,609)
Derivative financial instruments
91,335
110,520
90,452
110,499
91,950
(237,200)
53,550
(172,200)
Other assets
-
-
125,762
303,507
(25,081)
(10,670)
-
-
(234,011)
1,959,142
(366,094)
1,379,484
(2,114,080)
784,132
(1,921,180)
1,039,851
1,740,946
-
1,740,946
-
(17,194)
4,100
(17,194)
4,100
(4,562)
(258,643)
(4,562)
(258,643)
(Decrease)/increase in operating liabilities:
Obligation on securities sold
under repurchase agreements
Recourse obligation on loans sold to Cagamas Berhad
Other liabilities
Cash (used in)/generated from operations
Zakat paid
Tax refund
Tax paid
Net cash (used in)/generated from operating activities
68
41,808
(26,221)
25,944
(29,639)
(3,387,262)
(255,678)
(1,589,330)
724,541
(5,511)
(10,885)
-
(2,134)
1,364
2,016
1,350
-
(179,258)
(181,372)
(156,206)
(160,713)
(3,570,667)
(445,919)
(1,744,186)
561,694
statements of Cash flows
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
286,316
234,629
286,316
234,629
17,017
20,062
17,017
20,062
2,635
2,589
2,635
2,589
117,788
28,773
111,316
26,464
(253,265)
(2,262,796)
(307,717)
(2,014,252)
2
13,009
2
13,009
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received:
Dividend income:
Redemption of financial investments
held-to-maturity net of purchase
Net purchase of financial investments
available-for-sale
Proceeds from disposal of
- property and equipment
4,877
10,055
4,877
9,075
(285,117)
(13,898)
(284,710)
(12,734)
(5)
(236)
(5)
(236)
(109,752)
(1,967,813)
(170,269)
(1,721,394)
Proceeds from issuance of shares
-
500,000
-
500,000
Investment in subsidiary
-
-
(100,000)
-
Repayment of subordinated term loan
-
(300,000)
-
(300,000)
Interest payment on subordinated term loan
(28,053)
(30,534)
(28,053)
(30,534)
Drawndown of subordinated term loan
400,000
-
400,000
-
Payment of dividend
(66,031)
(259,977)
(66,031)
(259,977)
Net cash generated from/(used in) financing activities
305,916
(90,511)
205,916
(90,511)
(3,374,503)
(2,504,243)
(1,708,539)
(1,250,211)
506,301
41,454
504,845
39,557
6,938,912
9,401,701
3,777,042
4,987,696
4,070,710
6,938,912
2,573,348
3,777,042
- foreclosed properties
Purchase of property and equipment
Purchase of intangible assets
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in cash and cash equivalents
Net increase in foreign exchange
Cash and cash equivalents at beginning of
the financial year
CASH AND CASH EQUIVALENTS AT
END OF THE FINANCIAL YEAR (Note 2)
69
summary of significant accounting policies
The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements.
These policies have been consistently applied to all the financial years presented, unless otherwise stated.
(A) BASIS OF PREPARATION
The financial statements of the Group and the Bank have been prepared in accordance with Malaysian Financial Reporting Standards (‘MFRS’),
International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The financial statements incorporate
those activities relating to Islamic banking business which have been undertaken by AFFIN Islamic Bank Berhad, a wholly owned subsidiary of the
Bank. Islamic banking business refers generally to the acceptance of deposits and granting of financing under the Shariah principles.
The financial statements of the Group and the Bank have been prepared under the historical cost convention, unless otherwise indicated in this
summary of significant accounting policies.
The preparation of financial statements in conformity with 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 Group and 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 45.
Standards, amendments to published standards and interpretations that are effective
The Group and the Bank have 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 Group and the Bank
but not yet effective
A number of new standards and amendments to standards and interpretations are effective for financial year beginning on or after 1 January 2016.
None of these is expected to have a significant effect on the consolidated financial statements of the Group and the Bank, except the following
set out below:
70
•
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 interest.
(A) BASIS OF PREPARATION
Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and 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 Group and 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 Group and the Bank except
for MFRS 9. The financial effect of adoption of MFRS 9 is still being assessed by the Group and the Bank.
(B)CONSOLIDATION
The consolidated financial statements include the financial statements of the Bank, subsidiaries and a joint venture, made up to the end of the
financial year.
(i)Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
to direct relevant activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests
issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement and fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited exceptions measured initially at their fair values at the acquisition date. The
Group recognises any non-controlling interest in the acquiree on the acquisition-by-acquisition basis, either at fair value or at the noncontrolling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of
any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recognised as goodwill. If the total of
the consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net
assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.
Acquisition related costs are expensed as incurred.
If the business combination is achieved in stages, the carrying value of the acquirer’s previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date, any gains or losses arising from such re-measurement are recognised in profit or loss.
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(B)CONSOLIDATION
(i) Subsidiaries (continued)
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair
value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with MFRS 139 in profit or loss.
Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.
The Group applies predecessor accounting to account for business combinations under common control. Under the predecessor accounting,
assets and liabilities acquired are not restated to their respective fair values but at the carrying amounts from the consolidated financial
statements of the ultimate holding company of the Group and adjusted to ensure uniform accounting policies of the Group. The difference
between any consideration given and the aggregate carrying amounts of the assets and liabilities (as of the date of the transaction) of the
acquired entity is recognised as an adjustment to equity. No additional goodwill is recognised.
The acquired entity’s results, assets and liabilities are consolidated from the date on which the business combination between entities under
common control occurred. Consequently, the consolidated financial statements do not reflect the results of the acquired entity for the period
before the transaction occurred. The corresponding amounts for the previous year are not restated.
Inter-company transactions, balances, unrealised gains on transactions between group companies are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the Group.
(ii) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as transactions with equity owners of the
Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests
to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any
consideration paid or received is recognised in equity attributable to owners of the Group.
(iii) Disposal of subsidiaries
When the Group ceases to consolidate because of a loss of control, any retained interest in the entity is re-measured 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, joint venture or financial asset. In addition, any amounts previously recognised in other
comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This
may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
Gains or losses on the disposal of subsidiaries include the carrying amount of goodwill relating to the subsidiaries sold.
(iv) Joint arrangements
72
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 Group’s share of the post-acquisition profits or losses of the joint venture in profit or loss, and the Group’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 Group’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 Group’s net investment in the joint venture,
the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the joint
venture.
The Group 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.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interests 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 Group.
(B)CONSOLIDATION
(iv) Joint arrangements (continued)
When the Group 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 Group 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.
(C) INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURES IN SEPARATE FINANCIAL STATEMENTS
In the Bank’s separate financial statements, investments in subsidiaries and joint ventures are carried at cost less accumulated impairment losses.
On disposal of investments in subsidiaries and joint ventures, the difference between disposal proceeds and carrying amounts of the investments
are recognised in profit or loss.
The amounts due from subsidiaries of which the Bank does not expect repayment in the foreseeable future are considered as part of the Bank’s
investments in the subsidiaries.
(D) INTANGIBLE ASSETS
Goodwill
Goodwill arises from a business combination and represents the excess of the aggregate of fair value of consideration transferred, the amount of
any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the net identifiable
assets acquired and liabilities assumed on the acquisition date. If the fair value of consideration transferred, the amount of non-controlling interest
and the fair value of previously held interest in the acquiree are less than the fair value of the net identifiable assets of the acquiree, the resulting
gain is recognised in the profit or loss.
Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might
be impaired, and carried at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business
combination is allocated to each of the cash generating units (“CGUs”), or groups of CGUs, that are expected to benefit from the synergies of the
combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is
monitored for internal management purposes. Goodwill is monitored at the operating segment level.
The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal.
Any impairment is recognised immediately as an expense and is not subsequently reversed.
Computer software
(i) it is technically feasible to complete the software product so that it will be available for use;
(ii) management intends to complete the software product and use or sell it;
(iii) there is an ability to use or sell the software product;
(iv) it can be demonstrated how the software product will generate probable future economic benefits;
(v) adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
(vi) the expenditure attributable to the software product during its development can be reliably measured.
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 and the Bank are recognised as
intangible assets when the following criteria are met:
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(D) INTANGIBLE ASSETS
Computer software (continued)
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.
(E) IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable.
An impairment loss is recognised for the amount by which the 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 groups
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.
(F) RECOGNITION OF INTEREST AND FINANCING INCOME AND EXPENSE
74
Interest and financing income and expense for all interest/profit-bearing financial instruments are recognised within “interest income”, “interest
expense” and “income from Islamic banking business” respectively in the income statement using the effective interest/profit method.
The effective interest/profit method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the
interest and financing income or expense over the relevant period. The effective interest/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 interest/profit rate, the Group and the Bank take 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 interest rate, but not future credit losses.
Interest or income on impaired financial assets is recognised using the rate of interest/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.
When a loan/financing receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash
flow discounted at the original effective interest/profit rate of the instrument, and continues unwinding the discount as interest/profit income.
Interest/profit income on impaired loans/financing and receivables are recognised using the original effective interest/profit rate.
(G) RECOGNITION OF FEES AND OTHER INCOME
Fees and commissions are recognised as income when all conditions precedent are fulfilled. Commitment fees for loans, advances and financing
that are likely to be drawn down are deferred (together with related direct costs) and income which forms an integral part of the effective interest/
profit rate of a financial instrument is recognised as an adjustment to the effective interest/profit rate on the financial instrument.
Commitment fees and 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 investments available-for-sale are recognised upon disposal
of the assets, as the difference between net disposal proceeds and the carrying amount of the assets.
(H) FINANCIAL ASSETS
Classification
The Group and the Bank classify its financial assets in the following categories: at fair value through profit or loss, loans and receivables, availablefor-sale 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 O)
The Group and the Bank have not elected to designate any financial assets at fair value through profit or loss.
(ii) Loans and receivables
Loans 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
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
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 Group and
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.
Financial investments held-to-maturity are non-derivative financial assets with fixed or determinable payments and fixed maturities that the
Group’s and the Bank’s management have the positive intention and ability to hold to maturity. If the Group and 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.
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(H) 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. Loans and
receivables and held-to-maturity financial assets are subsequently carried at amortised cost using the effective interest/profit method.
Changes in the fair values of financial assets at fair value through profit or loss, including the effects of currency translation, interest/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 I) and foreign exchange gains and losses on monetary assets (Note N).
Interest/profit and dividend income on financial investments available-for-sale are recognised separately in income statements. Interest/profit on
financial investments available-for-sale calculated using the effective interest/profit method is recognised in income statements. Dividend income
on available-for-sale equity instruments are recognised in income statements when the Group’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
Group and the Bank have transferred substantially all risks and rewards of ownership.
Loans and receivables that are factored out to banks and other financial institutions with recourse to the Group and 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 borrowings.
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
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The Group and 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 loans 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 Group and the Bank may choose to reclassify financial assets that would meet the definition of loans and receivables out of
the held-for-trading or available-for-sale categories if the Group and the Bank have 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/profit rates for financial assets
reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date. Further increases in estimates of
cash flows adjust the effective interest/profit rates prospectively.
(I) IMPAIRMENT OF FINANCIAL ASSETS
Assets carried at amortised cost
The Group and the Bank assess 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.
The criteria that the Group and the Bank use to determine that there is objective evidence of an impairment loss include among others:
•
•
•
•
•
•
past due contractual payments;
significant financial difficulties of the borrower;
probability of bankruptcy or other financial re-organisation;
default of related borrower;
measurable decrease in estimated future cashflow 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 interest/profit rate. The asset’s
carrying amount of the asset is reduced and the amount of the loss is recognised in income statements. If ‘loans and receivables’ or a ‘held-tomaturity investment’ has a variable interest/profit rate, the discount rate for measuring any impairment loss is the current effective interest/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 loans, advances and financing, the Group and the Bank first assess whether objective evidence of impairment exists individually for loans,
advances and financing that are individually significant, and individually or collectively for loans, advances and financing that are not individually
significant. If the Group and the Bank determine that no objective evidence of impairment exists for individually assessed loans, advances and
financing, whether significant or not, it includes the asset in a group of loans, advances and financing with similar credit risk characteristics and
collectively assesses them for impairment.
(i) Individual impairment allowance
Loans, advances and 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. Loans/financings that are individually assessed for impairment and for which no
impairment loss is required (over-collateralised loans) are collectively assessed as a separate segment.
The amount of the loss is measured as the difference between the loan/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 loan/financing’s original effective interest/profit rate.
The carrying amount of the loan/financing is reduced through the use of an allowance account and the amount of the loss is recognised in
the income statement. If a loan/financing has a variable interest/profit rate, the discount rate for measuring any impairment loss is the current
effective interest/profit rate determined under the contract.
The calculation of the present value of the estimated future cash flows of a collateralised loan reflects the cash flows that may result from
foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
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(I) IMPAIRMENT OF FINANCIAL ASSETS
(ii) Collective impairment allowance
For the purposes of a collective evaluation of impairment, loans, advances and 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 loans, advances and financing by
being indicative of the borrowers’ ability to pay all amounts due according to the contractual terms of the loans being evaluated.
Future cash flows in a group of loans/financing that are collectively evaluated for impairment are estimated on the basis of the contractual
cash flows of the loans in the Bank and historical loss experience for loans with credit risk characteristics similar to those in the Bank.
Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the
period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently
exist.
Estimates of changes in future cash flows for groups of loans should reflect and be directionally consistent with changes in related observable
data from period to period (for example, changes in unemployment rates, property prices, payment status, or other factors indicative of
changes in the probability of losses in the Group and the Bank and their magnitude). The methodology and assumptions used for estimating
future cash flows are reviewed regularly by the Group and the Bank to reduce any differences between loss estimates and actual loss
experience.
Based on the Guideline on Classification and Impairment Provisions for Loans/Financing, banking institutions are required to maintain, in
aggregate collective impairment provisions and regulatory reserves of no less than 1.2% of total outstanding loans/financing (excluding loans/
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 Group and the Bank have maintained the collective impairment provisions and regulatory reserves of no less than
1.2% in the books.
Assets classified as available-for-sale
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The Group and the Bank assess 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 Group and the Bank assess 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 Group and the Bank use 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.
(J) FINANCIAL LIABILITIES
All financial liabilities which include derivative financial instruments have to be recognised in the statement of financial position and measured in
accordance with their assigned category.
The Group and the Bank’s holding in financial liabilities are in financial liabilities at fair value through profit or loss (including financial liabilities
held-for-trading and those that designated at fair value) and financial liabilities at amortised cost. Financial liabilities are 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 Group and
the Bank as at fair value through profit or loss upon initial recognition. The Group and 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.
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.
(K) 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.
(L) PROPERTY AND EQUIPMENT AND DEPRECIATION
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 borrowing 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 asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the
replaced part is de-recognised. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which
they are incurred.
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(L) PROPERTY AND EQUIPMENT AND DEPRECIATION
Freehold land is not depreciated as it has an infinite life. Other 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:
Buildings
50 years
Leasehold buildings
50 years or over the remaining lease period, whichever is shorter
Renovation and leasehold premises
5 years or the period of the lease whichever is greater
Office equipment and furniture
10 years
Computer equipment and software
5 years
Motor vehicles
5 years
Depreciation on capital work in progress commences when the assets are ready for their intended use.
Residual value and useful lives of assets are reviewed, and adjusted if appropriate, at the end of each reporting period.
At the end of the reporting period, the Group 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.
Gains and losses on disposal are determined by comparing proceeds with carrying amount and are recognised within other operating income in
the income statement.
(M)LEASES
Accounting by lessee
Finance leases
Leases of property and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases.
Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the
minimum lease payments.
Each lease payment is allocated between the liability and finance charges so as to achieve a periodic constant rate on the finance balance
outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is
charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability
for each period. Property and equipment acquired under finance leases are depreciated over the shorter of the estimated useful life of the asset
and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the leased assets and
recognised as an expense in income statement over the lease term on the same basis as the lease expense.
Operating leases
80
Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on the straight-line
basis over the lease period.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are recognised in income statement when incurred.
(N) FOREIGN CURRENCY TRANSLATIONS
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (‘the functional currency’). The 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 exchanges 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 cashflow 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.
(O) 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 Group and the Bank have 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.
81
(P) CURRENT AND DEFERRED INCOME TAXES
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 Group’s subsidiaries and branch operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. This liability is
measured using the single best estimate of the most likely outcome.
Deferred tax
82
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 subsidiaries and joint venture except where the
timing of the reversal of the temporary difference can be controlled by the Group 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 recognised.
Deferred income tax assets are recognised on deductible temporary differences arising from investment in subsidiaries and 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.
(Q)ZAKAT
Zakat represents business zakat payable by the Group to comply with the principles of Shariah and as approved by the Shariah Committee. The
Bank’s subsidiary, AFFIN Islamic Bank Berhad only pays zakat on its business and does not pay zakat on behalf of depositors. Zakat provision is
calculated based on 2.5775% of the prior year’s net asset method.
(R) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of cash in hand, bank balances and deposits and placements maturing within one month which are held for
the purpose of meeting short term commitments and are readily convertible to known amount of cash without significant risk of changes in value.
(S) FORECLOSED PROPERTIES
Foreclosed properties are stated at the lower of their carrying amount and fair value less cost to sell.
(T) CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The Group and the Bank do 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 Group and the Bank or a present obligation that
is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in
the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably. However, contingent liabilities
do not include financial guarantee contracts.
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one
or more uncertain future events beyond the control of the Group and the Bank. The Group and the Bank do not recognise contingent assets but
discloses its existence where inflows of economic benefits are probable, but not virtually certain.
(U) 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 J).
(V)PROVISIONS
Provisions are recognised by the Group and the Bank when all of the following conditions have been met:
•
the Group and the Bank have a present legal or constructive obligation as a result of past events;
•
it is probable that an outflow of resources to settle the obligation will be required; and
•
a reliable estimate of the amount of obligation can be made.
Where the Group and the Bank expect a provision to be reimbursed (for example, under an insurance contract), the reimbursement is recognised
as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class
of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of 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.
83
(W) 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 Group pays fixed contributions to the National Pension Scheme, the Employees’
Provident Fund (‘EPF’) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to
pay all employee benefits relating to employee service in the current and prior periods.
The Group’s contribution to defined contribution plans are charged to the income statement in the period to which they relate. 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 Group recognises termination benefits when it is demonstrably committed to
either terminate the employment of current employees according to a detailed formal plan without any possibility of withdrawal or to provide
termination benefits as a result of an offer made to encourage voluntary redundancy.
(X) FINANCIAL GUARANTEE CONTRACTS
Financial guarantee contracts are contracts that require the Group or Bank to make specified payments to reimburse the holder for a loss it incurs
because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are
given to financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The 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 loans or 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.
(Y) SALE AND REPURCHASE AGREEMENTS
84
Securities purchased under resale agreements are securities which the Group and the Bank have purchased with a commitment to resell at future
dates. The commitment to resell the securities is reflected as an asset on the statements of financial position.
Conversely, obligations on securities sold under repurchase agreements are securities which the Group and the Bank have sold from its portfolio,
with a commitment to repurchase at future dates. Such financing and the obligation to repurchase the securities is reflected as a liability on the
statement of financial position.
The difference between sale and repurchase price as well as purchase and resale price are amortised as interest income and interest expense
respectively on an effective yield method.
(Z) RESTRICTED INVESTMENT ACCOUNTS (‘RIA’)
These deposits are used to fund specific financing. The RIA is a contract based on the 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.
(AA) 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 Group, 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 are 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 interest 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.
•
85
notes to the financial statements
1
GENERAL INFORMATION
The Bank is principally engaged in all aspects of banking and related financial services. The principal activities of the Bank’s subsidiaries are
Islamic banking business, property management services, nominee and trustee services. There have been no significant changes in these principal
activities during the financial year.
The number of employees in the Group and the Bank as at 31 December 2015 was 3,620 (2014: 3,499) and 3,357 (2014: 3,250) employees
respectively.
The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the ultimate holding corporate
body is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung Angkatan Tentera Act, 1973.
The Bank is a limited liability company, incorporated and domiciled in Malaysia.
2
CASH AND SHORT-TERM FUNDS
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
837,705
265,430
830,099
258,390
3,233,005
6,673,482
1,743,249
3,518,652
4,070,710
6,938,912
2,573,348
3,777,042
Cash and bank balances with banks
and other financial institutions
Money at call and deposit placements
maturing within one month
3
DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS
The Group
2015
Licensed banks
Other financial institutions
4
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
316,653
238,222
1,310,764
962,050
35,034
-
-
-
351,687
238,222
1,310,764
962,050
FINANCIAL ASSETS HELD-FOR-TRADING
The Group
2015
86
2014
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
-
149,904
-
149,904
150,121
-
150,121
-
150,121
149,904
150,121
149,904
At fair value
Bank Negara Malaysia Monetary Notes
Negotiable Instruments of Deposit
5
DERIVATIVE FINANCIAL ASSETS
The Group
2015
The Group
2014
Contract/
notional amount
RM’000
Assets
RM’000
Contract/
notional amount
RM’000
Assets
RM’000
966,652
76,445
911,475
41,850
2,571,803
81,272
1,670,492
24,710
39,130
(12)
-
-
1,610,148
16,332
2,461,000
22,098
5,187,733
174,037
5,042,967
88,658
At fair value
Foreign exchange derivatives:
Currency forwards
Cross currency swaps
Currency options
Interest rate derivatives:
Interest rate swaps
The Bank
2015
The Bank
2014
Contract/
notional amount
RM’000
Assets
RM’000
77,153
921,005
41,864
81,272
1,670,492
24,710
(12)
-
-
1,610,148
16,332
2,461,000
22,098
5,320,874
174,745
5,052,497
88,672
Contract/
notional amount
RM’000
Assets
RM’000
Currency forwards
1,099,793
2,571,803
39,130
At fair value
Currency options
Interest rate swaps
87
6
FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
-
225,782
-
200,778
At fair value
Money market instruments:
Malaysian Government treasury bills
Malaysian Government securities
Malaysian Government investment issues
Sukuk Perumahan Kerajaan
39,997
50,663
39,997
50,663
1,863,822
2,180,038
1,249,964
1,678,503
655,690
351,735
468,472
272,595
-
1,387,284
-
1,102,406
2,134,612
1,331,452
2,134,612
1,331,452
437,819
353,165
272,538
232,996
5,131,940
5,880,119
4,165,583
4,869,393
714
13,487
232
13,005
-
2,167
-
2,167
206,010
160,379
204,935
159,803
4,446,167
3,406,335
3,937,676
2,884,587
503,820
530,746
503,820
530,746
10,288,651
9,993,233
8,812,246
8,459,701
Negotiable Instruments of Deposit and
Islamic Debt Certificates
Khazanah Bonds/Sukuk
Quoted securities:
Shares in Malaysia
Private debt securities in Malaysia
Unquoted securities:
Shares in Malaysia
Private debt securities
- in Malaysia
- outside Malaysia
Allowance for impairment losses
(1,301)
(45,322)
(269)
(44,290)
10,287,350
9,947,911
8,811,977
8,415,411
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
45,322
44,772
44,290
44,290
-
6,157
-
6,157
-
550
-
-
(44,021)
(6,505)
(44,021)
(6,505)
-
348
-
348
1,301
45,322
269
44,290
Movement in allowance for impairment losses
At beginning of the financial year
88
Transfer from allowance for impairment losses on
loans, advances and financing
Allowance made during the financial year
Amount written-off
Exchange differences
At end of the financial year
7
FINANCIAL INVESTMENTS HELD-TO-MATURITY
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
23,439
23,439
23,439
23,439
357,393
496,994
281,111
414,240
380,832
520,433
304,550
437,679
(178)
(44,278)
(178)
(44,278)
380,654
476,155
304,372
393,401
At amortised cost
Quoted securities:
Unquoted securities:
Movement in allowance for impairment losses
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
44,278
56,363
44,278
56,363
Amount write-back
(22,037)
-
(22,037)
-
Amount written-off
(22,063)
(12,085)
(22,063)
(12,085)
178
44,278
178
44,278
89
8
LOANS, ADVANCES AND FINANCING
(i) By type
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
1,960,022
1,943,124
1,645,595
1,739,162
6,172,180
5,777,114
4,075,922
3,944,934
12,000,990
10,963,715
9,290,597
8,919,007
1,810,209
1,488,044
1,319,486
1,226,013
13,416,080
13,424,503
10,555,927
11,505,061
Bills receivables
321,091
1,194,884
284,455
1,182,694
Trust receipts
298,417
244,117
285,817
224,268
1,016,613
1,120,038
892,716
998,621
146,494
133,166
136,958
123,537
83,769
81,870
83,769
81,870
5,373,961
3,612,801
4,751,488
2,805,676
4,369
4,674
4,369
4,674
42,604,195
39,988,050
33,327,099
32,755,517
-Individual
(270,137)
(239,259)
(231,621)
(207,740)
-Collective
(229,461)
(292,619)
(192,790)
(255,226)
42,104,597
39,456,172
32,902,688
32,292,551
Overdrafts
Term loans/financing
- Housing loans/financing
- Hire purchase receivables
- Syndicated financing
- Business term loans/financing
Claims on customers under acceptances credits
Staff loans/financing (of which RM Nil to Directors)
Credit cards
Revolving credits
Factoring
Gross loans, advances and financing
Less:
Total net loans, advances and financing
-
Included in the Group and the Bank’s term loans are housing loans sold to Cagamas Berhad with recourse amounting to RM134,585,000
(2014: RM139,147,000).
-
Included in the Group’s business term loans/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 AFFIN Islamic Bank Berhad to joint ventures AFFIN-i Nadayu Sdn Bhd and KL South
Development Sdn Bhd respectively.
(ii) By maturity structure
The Group
2015
90
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
Maturing within one year
9,755,365
9,259,050
8,329,031
8,051,792
One year to three years
4,455,462
4,439,970
3,913,159
3,923,647
Three years to five years
Over five years
6,700,288
6,508,671
5,772,922
5,573,588
21,693,080
19,780,359
15,311,987
15,206,490
42,604,195
39,988,050
33,327,099
32,755,517
8
(iii) By type of customer
The Group
2015
RM’000
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
Domestic non-banking institutions
- Stockbroking companies
-Others
221
231
221
231
1,575,279
1,304,372
1,447,078
1,092,416
9,069,401
7,706,811
8,060,187
7,068,567
13,078,516
13,952,430
10,448,275
11,608,972
Domestic business enterprises
- Small medium enterprises
-Others
Government and statutory bodies
Individuals
1,137,674
92,725
534,604
33,298
16,799,087
15,521,321
12,067,560
11,671,052
Other domestic entities
109,263
13,634
83,478
9,442
Foreign entities
834,754
1,396,526
685,696
1,271,539
42,604,195
39,988,050
33,327,099
32,755,517
(iv) By interest/profit rate sensitivity
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
400,386
357,709
347,831
295,427
12,000,990
10,963,715
9,290,597
8,919,007
3,986,107
3,823,161
2,670,561
3,180,638
- BLR plus
16,014,700
16,064,029
12,228,698
12,972,290
- Cost plus
10,202,012
8,779,436
8,789,412
7,388,155
42,604,195
39,988,050
33,327,099
32,755,517
Fixed rate
- Housing loans/financing
- Hire purchase receivables
- Other fixed rate loans/financing
Variable rate
91
8
(v) By economic sectors
The Group
2015
Primary agriculture
Mining and quarrying
Manufacturing
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
692,126
684,340
413,218
417,288
723,167
622,359
710,130
621,563
2,254,941
2,049,476
2,029,121
1,814,510
173,888
254,771
116,517
201,658
Construction
3,521,131
3,990,973
2,966,971
3,411,861
Real estate
6,885,709
6,045,231
5,715,112
5,441,854
Wholesale & retail trade and restaurants & hotels
2,437,432
2,117,173
2,218,930
1,915,945
Transport, storage and communication
2,072,151
2,037,263
1,866,149
1,902,028
Finance, insurance and business services
4,285,232
4,853,095
3,718,355
4,099,442
Education, health and others
2,590,004
1,663,541
1,388,887
1,140,497
16,925,393
15,659,678
12,164,391
11,781,844
Electricity, gas and water supply
Household
Others
43,021
10,150
19,318
7,027
42,604,195
39,988,050
33,327,099
32,755,517
(vi) By economic purpose
The Group
2015
RM’000
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
299,011
290,047
296,578
287,098
12,438,031
11,444,211
9,702,193
9,391,932
-Residential
6,404,657
5,733,144
4,229,105
3,890,037
-Non-residential
5,891,022
5,771,894
4,911,687
4,864,336
Purchase of securities
Purchase of transport vehicles
Purchase of landed property of which:
Fixed assets other than land and building
240,609
326,163
164,273
259,089
Personal use
745,510
886,926
709,015
852,043
83,769
81,870
83,769
81,870
Credit card
Consumer durable
Construction
92
Merger and acquisition
Working capital
Others
852
803
852
803
3,127,244
3,117,428
2,325,499
2,434,105
247,706
340,771
247,706
340,771
12,777,233
11,478,251
10,440,927
9,981,580
348,551
516,542
215,495
371,853
42,604,195
39,988,050
33,327,099
32,755,517
8
(vii) By geographical distribution
The Group
2015
Perlis
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
155,914
130,950
34,185
32,923
Kedah
1,362,515
1,216,316
803,114
791,638
Pulau Pinang
2,142,594
1,985,420
1,911,468
1,828,526
1,302,338
1,169,769
914,655
835,636
Selangor
12,878,079
12,530,054
9,800,065
9,927,910
Wilayah Persekutuan
13,155,004
11,127,076
10,272,358
9,201,666
Perak
994,321
894,089
663,569
674,051
Melaka
1,003,701
982,343
854,858
879,071
Johor
Negeri Sembilan
3,449,496
3,145,860
3,004,105
2,825,710
Pahang
845,284
824,164
551,457
549,200
Terengganu
803,862
989,058
385,226
589,445
Kelantan
229,607
230,819
67,998
63,553
Sarawak
1,577,489
1,270,558
1,508,223
1,246,449
Sabah
1,621,746
1,704,712
1,593,194
1,620,334
Labuan
684,220
520,747
684,164
520,677
Outside Malaysia
398,025
1,266,115
278,460
1,168,728
42,604,195
39,988,050
33,327,099
32,755,517
(viii)Movements of impaired loans
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
713,648
706,185
584,491
574,555
-
(16,865)
-
(16,865)
872,231
543,093
763,856
452,130
Amount converted to financial investments
available-for-sale
Classified as impaired
(394,738)
(289,556)
(326,841)
(234,726)
(149,944)
(134,856)
(131,082)
(100,780)
Amount written-off
(273,350)
(94,353)
(264,285)
(89,823)
767,847
713,648
626,139
584,491
1.80%
1.78%
1.88%
1.78%
Ratio of gross impaired loans, advances and financing
to gross loans, advances and financing
Reclassified as non-impaired
Amount recovered
93
8
(ix) Movements in allowance for impairment on loans, advances and financing
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
239,259
223,701
207,740
189,117
-
(6,157)
-
(6,157)
-
12,314
-
12,314
Individual impairment
Amount converted to financial investments
available-for-sale
Transfer from collective impairment
257,645
75,297
254,086
73,788
Amount recovered
(7,293)
(4,386)
(7,246)
(604)
Amount written-off
Allowance made during the financial year
(192,965)
(50,870)
(190,583)
(49,057)
Unwinding of income
(33,004)
(12,432)
(32,376)
(11,669)
6,495
1,792
-
8
270,137
239,259
231,621
207,740
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
292,619
300,314
255,226
266,595
Transfer to individual impairment
-
(12,314)
-
(12,314)
Collective impairment
94
Net allowance made during the financial year
17,224
47,980
11,265
41,597
Amount written-off
(80,382)
(43,361)
(73,701)
(40,652)
229,461
292,619
192,790
255,226
8
(x) Impaired loans by economic sectors
The Group
2015
Primary agriculture
Manufacturing
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
14,388
17,556
14,388
17,439
15
-
15
-
35,535
31,450
35,187
28,747
148
246
148
246
Construction
81,302
258,070
80,914
187,791
Real estate
89,268
323
3,401
323
37,463
30,344
35,563
29,986
3,314
5,099
3,013
4,805
216,444
38,442
216,333
37,816
2,602
1,607
2,460
1,607
287,368
330,511
234,717
275,731
767,847
713,648
626,139
584,491
Household
(xi) Impaired loans by economic purpose
The Group
2015
Purchase of securities
Purchase of transport vehicles
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
804
10,298
804
10,298
82,026
86,409
69,400
74,189
180,137
231,048
140,674
188,967
24,010
31,278
22,634
30,192
164
282
164
282
20,539
7,826
20,044
7,346
389
326
389
326
16
13
16
13
Purchase of landed property of which:
-Residential
-Non-residential
Fixed assets other than land and building
Personal use
Credit card
Consumer durable
Construction
Working capital
77,071
12,164
7,041
252,663
336,206
249,403
23,644
16,434
23,644
16,434
767,847
713,648
626,139
584,491
Others
98,031
338,087
95
8
(xii) Impaired loans by geographical distribution
The Group
2015
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
Perlis
680
901
639
649
Kedah
19,972
22,141
18,964
20,841
Pulau Pinang
42,525
35,458
41,000
33,462
18,793
15,193
14,871
11,156
417,971
277,204
389,349
248,105
Wilayah Persekutuan
89,094
105,792
83,164
100,721
Negeri Sembilan
13,949
24,258
11,230
21,392
7,231
8,575
6,749
8,401
Perak
Selangor
Melaka
25,596
49,319
23,518
46,620
Pahang
8,262
48,236
6,917
44,789
Terengganu
5,307
17,139
1,389
12,830
Johor
9
2014
Kelantan
5,068
5,152
1,435
1,790
Sarawak
6,918
14,407
6,666
14,082
Sabah
20,614
12,384
20,248
12,195
Outside Malaysia
85,867
77,489
-
7,458
767,847
713,648
626,139
584,491
OTHER ASSETS
The Group
2015
RM’000
2014
The Bank
2015
RM’000
RM’000
2014
RM’000
60,927
34,596
57,568
33,456
Cheque clearing accounts
6,803
179,711
6,501
132,691
Foreclosed properties (a)
4,906
9,099
4,315
8,508
162
-
162
-
72,798
223,406
68,546
174,655
9,099
15,825
8,508
14,646
Disposal during the financial year
(4,193)
(6,726)
(4,193)
(6,138)
4,906
9,099
4,315
8,508
Other debtors, deposits and prepayments
Land held for sale (Note 16)
(a) Foreclosed properties
96
10 AMOUNT DUE FROM SUBSIDIARIES
The Bank
2015
Advances to other subsidiaries
2014
RM’000
RM’000
61
438
61
438
The advances to subsidiaries are unsecured, bear no interest rate (2014: 0%) and repayable on demand.
11 AMOUNT DUE FROM JOINT VENTURES
The Group
2015
Advances to joint ventures
2014
RM’000
RM’000
39,936
14,855
39,936
14,855
The advances to joint ventures are unsecured, bear average interest rate 7.85% (2014: 7.74%) and repayable on demand.
12 DEFERRED TAX ASSETS / (LIABILITIES)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when the deferred taxes relate to the same tax authority. The following amounts determined after appropriate offsetting, are shown in the
statement of financial position:
The Group
2015
Deferred tax assets
Deferred tax liabilities
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
3,598
3,118
-
218
(15,104)
-
(15,104)
-
(11,506)
3,118
(15,104)
218
20,517
17,904
16,549
14,479
Deferred tax assets:
- settled within 12 months
(4,219)
(4,188)
(4,012)
(3,968)
- settled within 12 months
(27,804)
(10,598)
(27,641)
(10,293)
Deferred tax (liabilities)/assets
(11,506)
3,118
(15,104)
218
3,118
9,945
218
6,985
- settled more than 12 months
1,855
(649)
1,799
(920)
Charged to equity
(16,479)
(6,178)
(17,121)
(5,847)
(11,506)
3,118
(15,104)
218
Credited/(charged) to income statement (Note 35)
Deferred tax liabilities:
97
12 DEFERRED TAX ASSETS / (LIABILITIES)
The movement in deferred tax assets and liabilities during the financial year are as follows (RM’000):
The Group
2015
Credited/(charged) to income statements
Charged to equity
The Group
2014
Charged to equity
The Bank
2015
Charged to equity
The Bank
2014
Charged to equity
98
Property
Intangible
Provision for
Financial
and equipment
assets
other liabilities
instrument AFS
Total
(3,950)
(3,422)
16,049
(5,559)
3,118
665
(782)
1,972
-
1,855
-
-
-
(16,479)
(16,479)
(3,285)
(4,204)
18,021
(22,038)
(11,506)
Property
Intangible
Provision for
Financial
and equipment
assets
other liabilities
instrument AFS
Total
(4,759)
(4,458)
18,543
619
9,945
809
1,036
(2,494)
-
(649)
-
-
-
(6,178)
(6,178)
(3,950)
(3,422)
16,049
(5,559)
3,118
Property
Intangible
Provision for
Financial
and equipment
assets
other liabilities
instrument AFS
(3,638)
(3,208)
14,479
(7,415)
218
620
(893)
2,072
-
1,799
-
-
-
(17,121)
(17,121)
(3,018)
(4,101)
16,551
(24,536)
(15,104)
Property
Intangible
Provision for
Financial
and equipment
assets
other liabilities
instrument AFS
Total
(4,451)
(4,058)
17,062
(1,568)
6,985
813
850
(2,583)
-
(920)
-
-
-
(5,847)
(5,847)
(3,638)
(3,208)
14,479
(7,415)
218
Total
The amount of unused tax losses for which no deferred tax asset is recognised in the statement of financial position are as follows:
The Group
2015
Tax losses
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
98,865
98,860
-
-
13 STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA
A non-interest bearing statutory deposit is maintained with Bank Negara Malaysia in compliance with requirements of Section 26(2)(c) of the
Central Bank of Malaysia Act 2009, the amounts of which is determined at a set percentages of total eligible liabilities.
14 INVESTMENT IN SUBSIDIARIES
The Bank
2015
Unquoted shares, at cost
Less: Allowance for impairment losses
2014
RM’000
RM’000
519,509
419,509
(30,435)
(30,435)
489,074
389,074
The subsidiaries of the Bank, all of which are incorporated in Malaysia, are as follows:
Percentage of equity held
Name
Principal Activities
2015
2014
%
%
AFFIN Islamic Bank Bhd
Islamic banking business
100
100
PAB Properties Sdn Bhd
Property management services
100
100
ABB Nominee (Tempatan) Sdn Bhd
Share nominee services
100
100
ABB Trustee Berhad *
Trustee management services
100
100
AFFIN Recoveries Bhd
Recovery of impaired loans
100
100
AFFIN Factors Sdn Bhd
Dormant
100
100
AFFIN Futures Sdn Bhd
Dormant
100
100
ABB Nominee (Asing) Sdn Bhd
Dormant
100
100
ABB IT & Services Sdn Bhd
Dormant
100
100
BSNCB Nominees (Tempatan) Sdn Bhd
Dormant
100
100
BSNC Nominees (Tempatan) Sdn Bhd (#)
Dormant
100
100
PAB Property Development Sdn Bhd (#)
Dormant
100
100
AFFIN-ACF Nominees (Tempatan) Sdn Bhd (#)
Dormant
100
100
*
#
80% held by Directors of the Bank, in trust for the Bank.
The Bank has filed application to strike-off company at Suruhjaya Syarikat Malaysia (‘SSM’).
99
15 INVESTMENT IN JOINT VENTURES
The Group
2015
2014
RM’000
RM’000
Unquoted shares at cost
650
650
Group’s share of post acquisition retained losses
(650)
(650)
-
-
14,268
4,920
The summarised financial information of joint ventures are as follows:
Revenue
(268)
(3,515)
Total assets
269,037
216,417
Total liabilities
275,307
222,420
Loss after tax
AFFIN-i
2015
2014
KLSD
2015
2014
RM’000
RM’000
RM’000
RM’000
(2,714)
(1,142)
(4,732)
(2,789)
Net liabilities
Loss for the financial year
(1,441)
(1,572)
1,173
(1,943)
(4,155)
(2,714)
(3,559)
(4,732)
Issued and paid up share capital
1,000
1,000
500
500
50
50
30
30
(2,078)
(1,357)
(1,068)
(1,420)
Interest in joint venture (%)
Interest in joint venture (RM’000)
Both the joint ventures’ principal activities are property developments.
As the Group’s share of cumulative losses of RM2.5 million (2014: RM2.1 million) as at 31 December 2015 has exceeded its interest in the joint
ventures, the Group does not recognise further losses in its financial statements.
Allowance for impairment of investment in joint ventures
100
The Bank determines at each reporting date whether there is any objective evidences 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 ventures exceed its recoverable amount. The recoverable amount is assessed based on higher
of the fair value less costs to sell and value in use.
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.
15 INVESTMENT IN JOINT VENTURES
AFFIN-i Nadayu Sdn Bhd (‘AFFIN-i’)
On 1 April 2008, AFFIN Islamic Bank Berhad (‘AiBB’) 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 AiBB’s shares upon the completion of
the project at a mutually agreed price, unless if both shareholders decide to continue the joint venture for subsequent projects.
Major strategic operation and financial decisions relating to the activities of AFFIN-i Nadayu requires unanimous consent by both joint venture
parties. The Group’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, AiBB 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, AiBB 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, AiBB 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 Group’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.
101
102
-
259,831
278,905
Reclassification to intangible assets (Note 17)
2,142
97
(137)
-
Disposal
Write-off
2,102
9,720
140
Net book value at end of the financial year 278,765
Reclassification
Charge for the financial year
140
Accumulated depreciation and
impairment losses
11,822
520
(520)
-
(162)
Reclassification to other assets (Note 9)
Reclassification
-
-
-
Write-off
-
3,822
2,078
137
-
-
128
1,813
5,900
-
-
-
-
-
5,380
Additions
12,342
50 years Less than
or more 50 years
RM’000
RM’000
19,236
Freehold
land
RM’000
<--Leasehold land-->
Disposals
Cost
The Group
2015
16 PROPERTY AND EQUIPMENT
13,544
12,824
-
-
-
439
12,385
26,368
-
-
-
-
-
-
26,368
Buildings
on
freehold
land
RM’000
55,072
25,910
-
-
-
1,628
24,282
80,982
-
-
-
-
-
-
80,982
9,345
103,675
-
(1,910)
(3)
5,646
99,942
113,020
439
-
-
(1,910)
(3)
2,354
112,140
Buildings
on
leasehold
land Renovation
RM’000
RM’000
14,552
45,055
-
(851)
(93)
3,441
42,558
59,607
141
-
-
(935)
(94)
1,457
59,038
6,262
69,193
-
(106)
-
3,156
66,143
75,455
56
-
-
(106)
-
3,192
72,313
Office Computer
equipment equipment
and
and
furniture
software
RM’000
RM’000
1,070
2,579
-
-
(7)
509
2,077
3,649
-
-
-
-
(7)
6
3,650
Motor
vehicles
RM’000
15,161
-
-
-
-
-
-
15,161
(272,111)
-
-
-
-
278,108
9,164
Capital
work in
progress
RM’000
407,313
263,556
-
(2,867)
(103)
15,044
251,482
670,869
(11,644)
(162)
-
(2,951)
(104)
285,117
400,613
Total
RM’000
Net book value at end of the financial year
19,096
140
10,200
2,142
-
(110)
-
Disposal
Write-off
2,146
12,342
106
140
19,236
-
impairment losses
-
-
-
Write-off
12,862
-
50 years
or more
RM’000
(520)
19,676
Freehold
land
RM’000
3,567
1,813
120
1,693
5,380
5,380
Less than
50 years
RM’000
-
-
-
-
-
-
<---Leasehold land--->
(440)
Disposals
Additions
Cost
The Group
2014
103
13,983
12,385
-
(326)
438
12,273
26,368
-
-
(435)
-
26,803
Buildings
on
freehold
land
RM’000
56,700
24,282
-
(2,369)
1,491
25,160
80,982
-
-
(8,087)
-
89,069
Buildings
on
leasehold
land
RM’000
12,198
99,942
(1,884)
(2,407)
5,707
98,526
112,140
-
(1,890)
(2,408)
2,354
114,084
Renovation
RM’000
16,480
42,558
(1,802)
(27)
3,386
41,001
59,038
-
(1,910)
(40)
1,561
59,427
Office
equipment
and
furniture
RM’000
6,170
66,143
(4)
-
3,110
63,037
72,313
-
(4)
-
1,757
70,560
Computer
equipment
and
software
RM’000
1,573
2,077
-
(1,713)
593
3,197
3,650
-
-
(1,713)
9
5,354
Motor
vehicles
RM’000
9,164
-
-
-
-
-
9,164
(1,751)
-
-
8,217
2,698
Capital
work in
progress
RM’000
149,131
251,482
(3,690)
(6,952)
14,951
247,173
400,613
(1,751)
(3,804)
(13,643)
13,898
405,913
Total
RM’000
104
(520)
-
-
(162)
259,831
-
Reclassification
(137)
1,843
8,089
-
Net book value at end of the financial year 276,397
-
-
Write-off
Reclassification
-
Reclassification from subsidiary
89
-
Disposal
1,891
-
impairment losses
Reclassification (to)/from subsidiary
Reclassification to other assets (Note 9)
9,932
-
-
Disposals
Write-off
276,397
-
-
Additions
RM’000
or more
3,822
2,078
-
137
-
-
128
1,813
5,900
-
-
-
520
-
-
-
5,380
RM’000
50 years
50 years Less than
10,452
RM’000
land
Freehold
<---Leasehold land-->
16,728
Cost
2015
The Bank
13,089
11,980
-
-
-
-
413
11,567
25,069
-
-
-
-
-
-
-
25,069
RM’000
54,739
25,335
-
-
-
-
1,610
23,725
80,074
-
-
-
-
-
-
-
80,074
RM’000
8,627
99,847
-
-
(1,904)
(3)
5,229
96,525
108,474
-
439
-
-
(1,904)
(3)
2,268
107,674
RM’000
land Renovation
on
leasehold
on
freehold
land
Buildings
Buildings
13,471
43,655
-
-
(845)
(92)
3,210
41,382
57,126
(1)
141
-
-
(921)
(93)
1,435
56,565
RM’000
furniture
and
equipment
Office
5,696
66,868
163
-
(106)
-
2,872
63,939
72,564
179
56
-
-
(106)
-
2,894
69,541
RM’000
software
and
equipment
Computer
822
2,327
-
-
-
(8)
409
1,926
3,149
-
-
-
-
-
(8)
5
3,152
RM’000
vehicles
Motor
Capital
15,161
-
-
-
-
-
-
-
15,161
-
(272,111)
-
-
-
-
278,108
9,164
RM’000
progress
work in
399 ,913
253,933
163
-
(2,855)
(103)
13,960
242,768
653,846
178
(11,644)
(162)
-
(2,931)
(104)
284,710
383,799
RM’000
Total
16,728
-
8,561
1,891
-
(110)
-
Disposal
Write-off
98
-
1,903
10,452
16,728
impairment losses
-
-
Write-off
-
(520)
(440)
Disposals
-
10,972
50 years
or more
RM’000
-
17,168
Freehold
land
RM’000
3,567
1,813
-
-
120
1,693
5,380
-
-
-
-
5,380
Less than
50 years
RM’000
<---Leasehold land--->
Additions
Cost
The Bank
2014
105
13,502
11,567
-
(326)
412
11,481
25,069
-
-
(435)
-
25,504
Buildings
on
freehold
land
RM’000
56,349
23,725
-
(2,369)
1,473
24,621
80,074
-
-
(8,087)
-
88,161
Buildings
on
leasehold
land
RM’000
11,149
96,525
(1,883)
(2,408)
5,331
95,485
107,674
-
(1,889)
(2,408)
1,787
110,184
Renovation
RM’000
15,183
41,382
(1,790)
(26)
3,164
40,034
56,565
-
(1,894)
(40)
1,219
57,280
Office
equipment
and
furniture
RM’000
5,602
63,939
(4)
-
2,861
61,082
69,541
-
(4)
-
1,501
68,044
Computer
equipment
and
software
RM’000
1,226
1,926
-
(1,255)
495
2,686
3,152
-
-
(1,255)
10
4,397
Motor
vehicles
RM’000
9,164
-
-
-
-
-
9,164
(1,751)
-
-
8,217
2,698
Capital
work in
progress
RM’000
141,031
242,768
(3,677)
(6,494)
13,954
238,985
383,799
(1,751)
(3,787)
(13,185)
12,734
389,788
Total
RM’000
17 INTANGIBLE ASSETS
The Group
2015
Goodwill
RM’000
Computer
Software
RM’000
Total
RM’000
133,430
134,479
267,909
Cost
Additions
-
5
5
Write-off
-
(21)
(21)
-
11,644
11,644
133,430
146,107
279,537
-
(120,221)
(120,221)
Amortised during the financial year
-
(6,200)
(6,200)
Write-off
-
21
21
-
(126,400)
(126,400)
133,430
19,707
153,137
133,430
132,492
265,922
Reclassification from property and equipment (Note 16)
Less: Accumulated amortisation
The Group
2014
Cost
Additions
-
236
236
-
1,751
1,751
133,430
134,479
267,909
-
(113,917)
(113,917)
-
(6,304)
(6,304)
-
(120,221)
(120,221)
133,430
14,258
147,688
106
The Bank
2015
Goodwill
RM’000
Computer
Software
RM’000
Total
RM’000
137,323
128,077
265,400
Cost
Additions
-
5
5
Write-off
-
(21)
(21)
-
11,644
11,644
137,323
139,705
277,028
-
(114,710)
(114,710)
-
(5,735)
(5,735)
Write-off
-
21
21
-
(120,424)
(120,424)
137,323
19,281
156,604
137,323
126,090
263,413
The Bank
2014
Cost
Additions
-
236
236
-
1,751
1,751
137,323
128,077
265,400
-
(109,181)
(109,181)
-
(5,529)
(5,529)
-
(114,710)
(114,710)
137,323
13,367
150,690
107
Goodwill
The carrying amount of the Group’s and the Bank’s goodwill has been allocated to the following business segments, which represent the Bank’s
cash-generating units (‘CGUs’):
2015
2014
RM’000
RM’000
Business banking
123,591
123,591
Consumer banking
13,732
13,732
137,323
137,323
Goodwill is allocated to the Bank’s CGU which are expected to benefit from the synergies of the acquisitions. For annual impairment testing
purposes, the recoverable amount of the CGUs are determined based on value-in-use calculations using the cash flow projections based on the
2016 financial budgets approved by the Directors, covering a period of 5 years based on the historical internal growth rate, revised for current
economic conditions. The cash flow beyond the fifth year are projected based on the assumption that the Year 5 operating cash flow are assumed
to grow on perpetual basis at a growth rate of 3.6% (2014: 4%), based on forecasted Gross Domestic Product (‘GDP’) growth rate of Malaysia
adjusted for specific risk of the CGUs.
The cash flow projections are derived based on a number of key factors including past performance and management’s expectations of the
market developments. The discount rates used are based on the pre-tax weighted average cost of capital plus an appropriate risk premium where
applicable, at the date of assessment of the CGUs.
Pre-tax discount rate
2015
2015
2014
2014
Business
banking
Consumer
banking
Business
banking
Consumer
banking
%
%
%
%
8.91
8.91
8.62
8.62
No impairment charge was required for goodwill arising from all the business segments. Management views that any reasonable possible change
to the assumptions applied is not likely to cause the recoverable amount of all the business segments to be lower than its carrying amount.
108
18 DEPOSITS FROM CUSTOMERS
(i) By type of deposit
Demand deposits
Savings deposits
Fixed deposits
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
7,740,305
8,096,462
5,306,347
5,434,454
1,951,353
2,047,242
1,538,959
1,651,904
28,952,441
28,592,534
22,429,816
23,063,094
Commodity Murabahah
630,118
1,030,814
-
-
Money market deposits
1,637,103
1,177,702
1,637,103
1,177,702
Negotiable instruments of deposit (‘NID’)
6,901,893
7,102,470
6,901,893
6,853,058
47,813,213
48,047,224
37,814,118
38,180,212
(ii) Maturity structure of fixed deposits and NID
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
Due within six months
29,025,361
29,384,792
24,244,323
24,816,632
Six months to one year
5,640,983
5,641,216
4,010,758
4,667,425
One year to three years
1,172,330
621,587
1,061,114
385,335
15,660
37,090
15,514
36,441
Three years to five years
Five years and above
(iii) By type of customer
-
10,319
-
10,319
35,854,334
35,695,004
29,331,709
29,916,152
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
8,103,704
8,715,204
5,158,224
5,315,859
Business enterprise
14,538,898
13,771,604
10,534,733
9,993,760
Individuals
12,209,520
13,062,614
10,931,299
11,869,711
Domestic banking institutions
6,944,295
6,903,478
6,943,481
6,654,065
Domestic non-banking financial institutions
4,609,745
4,347,937
3,296,595
3,370,981
425,725
381,967
361,141
321,512
Government and statutory bodies
Foreign entities
Other entities
864,420
588,645
654,324
48,047,224
37,814,118
38,180,212
981,326
47,813,213
109
19 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS
The Group
2015
Licensed banks
Licensed investment banks
Bank Negara Malaysia
Other financial institutions
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
1,583,912
2,018,521
1,031,696
1,467,113
103,689
401,518
103,689
401,518
-
47,898
-
47,898
1,047,995
2,381,739
642,821
1,782,857
2,735,596
4,849,676
1,778,206
3,699,386
2,735,596
4,801,778
1,778,206
3,651,488
Maturity structure of deposits
Due within six months
Six months to one year
-
47,898
-
47,898
2,735,596
4,849,676
1,778,206
3,699,386
Liabilities
RM’000
The Group
2014
Contract/
notional amount
RM’000
Liabilities
RM’000
20 DERIVATIVE FINANCIAL LIABILITIES
The Group
2015
Contract/
notional amount
RM’000
At fair value
Currency forwards
711,091
13,821
194,753
1,532
2,630,163
382,614
2,881,617
215,582
1,250,991
17,705
966,552
20,312
4,592,245
414,140
4,042,922
237,426
Interest rate swaps
The Bank
2015
Contract/
notional amount
RM’000
110
Liabilities
RM’000
The Bank
2014
Contract/
notional amount
RM’000
Liabilities
RM’000
At fair value
Currency forwards
745,337
13,625
206,166
1,525
2,630,163
382,614
2,881,617
215,582
Interest rate swaps
1,250,991
17,705
966,552
20,312
4,626,491
413,944
4,054,335
237,419
21 RECOURSE OBLIGATION ON LOANS SOLD TO CAGAMAS BERHAD
In the normal course of banking operations, the Bank sells loans to Cagamas Berhad with recourse at values equivalent to the unpaid principal
balances of loans and advances due from the borrowers.
The Bank is liable in respect of housing loans and hire purchase portfolio sold directly and indirectly to Cagamas Berhad, under the condition that
the Bank undertakes to administer these loans on behalf of Cagamas Berhad and to buy back any loans which are regarded as defective based
on an agreed prudential criteria. Such financing transactions and the obligations to buy back the loans are reflected as a liability on the statement
of financial position.
22 OTHER LIABILITIES
The Group
2015
Bank Negara Malaysia and Credit Guarantee Corporation
Funding programmes
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
38,536
33,602
38,536
33,602
131,678
145,430
118,678
134,435
Other creditors and accruals
62,438
74,325
56,678
65,889
Sundry creditors
97,639
89,430
87,783
82,046
Cheque clearing accounts
50,363
-
36,742
-
2,307
4,040
-
-
16,528
12,588
15,385
11,885
229
229
206
206
399,718
359,644
354,008
328,063
Margin and collateral deposits
Provision for zakat
Defined contribution plan (a)
Accrued employee benefits (b)
(a) The Group and the Bank contributes to the Employee Provident Fund (‘EPF’), the national defined contribution plan. Once the contributions
have been paid, the Group and the Bank has no further payment obligations.
(b) This refers to the accruals for short-term employee benefits for leave entitlement. Under employment contract, employees earn their leave
entitlement which they are entitled to carry forward and will lapse if not utilised in the following accounting period. Accruals are made for the
estimated liability for unutilised annual leave.
23 AMOUNT DUE TO SUBSIDIARIES
The amount due to subsidiaries is unsecured, interest-free and repayable on demand.
111
24 SUBORDINATED TERM LOAN
The Bank has taken subordinated loans as follows:
•
On 26 May 2011, subordinated loan I was consitituted by agreement dated 20 May 2011 and was issued on 26 May 2011 amounting to
RM300 million;
•
On 16 January 2012, subordinated loan II was consitituted by agreement dated 3 January 2012 and was issued on 16 January 2012
amounting to RM300 million and
•
On 30 December 2015, subordinated loan III was consitituted by agreement dated 11 December 2015 and was issued on 30 December 2015
amounting to RM400 million.
All the subordinated loans were taken with the Bank’s holding company.
The subordinated loans have a prepayment option on the first prepayment date or any interest payment date subsequent to the first prepayment
date, giving the Bank the right, subject to Bank Negara Malaysia (‘BNM’) approval, to prepay the loans in whole or in part.
Interest on subordinated loans I and II are payable by quarterly and subordinated loan III is payable by monthly.
Subordinated loan I and Subordinated loan II
Value
: RM300 million each
Interest rate
: Cost of Fund (‘COF’) plus 1.00% per annum for the 10 years.
Maturity date
: 26 May 2021 (Subordinated loan I)
16 January 2022 (Subordinated loan II)
Subordinated loan III
Value
: RM400 million
Interest rate
: Cost of Fund (‘COF’) plus 1.00% per annum for the 10 years.
Maturity date
: 30 December 2025
COF refers to rate determined by the lender on an interest determination date falling within the interest duration.
All subordinated loans are unsecured and also qualify for tier 2 capital for the purpose of determining the risk-weighted capital ratio of the Bank.
Subordinated loans I and II are subject to gradual phase-out treatment under Basel 3. The subordinated loan III may be written-off, either fully or
partially, at the dicreation of BNM, at the point of non-viability as determined by BNM.
112
25 SHARE CAPITAL
Number of ordinary
shares of RM1 each
The Group and The Bank
2015
2014
2015
2014
‘000
‘000
RM’000
RM’000
2,000,000
2,000,000
2,000,000
2,000,000
1,688,770
1,518,337
1,688,770
1,518,337
Authorised
At beginning/end of the financial year
Issued and fully paid
Issued during the financial year
-
170,433
-
170,433
1,688,770
1,688,770
1,688,770
1,688,770
26RESERVES
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
Retained profits
1,029,155
951,500
805,289
760,153
Share premium
858,904
858,904
858,904
858,904
68,945
17,604
76,852
23,478
1,577,509
1,469,794
1,328,792
1,263,470
278,547
184,366
220,148
135,347
3,813,060
3,482,168
3,289,985
3,041,352
AFS revaluation reserves
Statutory reserves
Regulatory reserves
Statutory reserves
1,469,794
1,317,376
1,263,470
1,144,350
Transfer from retained profits
107,715
152,418
65,322
119,120
1,577,509
1,469,794
1,328,792
1,263,470
(a) As at 31 December 2015, the Bank has a tax exempt account balance of RM10,931,988 (2014: RM10,931,988) under Section 12 of the
Income Tax (Amendment) Act 1999, subject to agreement by the Inland Revenue Board.
(b) The statutory reserves of the Group and the Bank are maintained in compliance with Section 47(2)(f) of the Financial Services Act 2013 and
Section 57(2)(f) of the Islamic Financial Services Act 2013 and is not distributable as cash dividends.
(d) The Group and the Bank are required to maintain in aggregate collective impairment allowances and regulatory reserves of no less than 1.2%
of total outstanding loans, advances and financing, net of individual impairment allowances.
(c) AFS revaluation reserves represent the unrealised gains or losses arising from the change in fair value of investments classified as financial
investment available-for-sale. The gains or losses are transferred in the income statement upon disposal or when the securities become
impaired.
113
27 INTEREST INCOME
The Group
2015
RM’000
Money at call and deposit placements
with financial institutions
Financial assets
-Held-for-trading
-Available-for-sale
-Held-to-maturity
Interest rate derivatives
Others
Accretion of discount less amortisation of premium
of which:
Interest income earned on impaired loans,
advances and financing
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
1,809,124
1,705,396
1,758,650
1,681,044
68,237
142,913
117,339
171,320
123
286,316
17,017
138,074
2,318,891
7,925
2,326,816
12
234,629
20,062
155,594
2,258,606
36,734
2,295,340
123
286,316
17,017
138,074
2,317,519
7,925
2,325,444
12
234,629
20,062
155,594
391
2,263,052
36,734
2,299,786
16,358
7,933
16,358
7,933
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
1,215,168
1,163,362
1,215,188
1,163,398
86,344
92,204
86,344
92,235
32,485
-
32,485
-
127,033
148,395
127,033
148,395
5,917
13,263
5,917
13,263
28,189
29,879
28,189
29,879
28 INTEREST EXPENSE
The Group
Deposits and placements of banks and other financial
institutions
Securities sold under repurchase agreements
Loan sold to Cagamas Berhad
Others
The Bank
635
502
635
502
1,495,771
1,447,605
1,495,791
1,447,672
29 INCOME FROM ISLAMIC BANKING BUSINESS
114
The Group
Income derived from investment of depositors’ funds and others
Income derived from investment of shareholders’ funds
2015
2014
RM’000
RM’000
509,434
450,257
36,402
31,972
Total distributable income
545,836
482,229
Income attributable to depositors
(306,915)
(261,860)
238,921
220,369
310
1,345
of which:
Financing income earned on impaired financing, advances and other financing
30 OTHER OPERATING INCOME
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
Commission
16,299
16,428
16,299
16,428
Service charges and fees
57,168
59,267
57,168
59,267
Guarantee fees
23,292
22,673
23,292
22,673
96,759
98,368
96,759
98,368
- net gain on disposal
498
347
498
347
- unrealised gains
(232)
219
(232)
219
266
566
266
566
- realised
4,576
6,789
4,576
6,789
- unrealised
(3,750)
7,302
(3,750)
7,302
826
14,091
826
14,091
10,678
9,743
10,678
9,743
2,635
2,589
2,635
2,589
13,313
12,332
13,313
12,332
-
3,500
-
3,500
-
3,500
-
3,500
Fee income
Income from financial instruments
Gain arising on financial assets held-for-trading:
Gains on derivatives:
Gain arising on financial investments available-for-sale:
- net gain on disposal
- gross dividend income
Gain arising on financial investments held-to-maturity:
- net gain on redemption
Other income
Foreign exchange gains/(losses):
-realised
17,053
186,097
17,053
186,097
- unrealised
45,358
(122,129)
45,358
(122,129)
Rental income
1,726
1,646
1,726
1,635
Gain on sale of property and equipment
Other non-operating income
Dividend from subsidiaries
1
6,319
1
6,319
684
3,329
684
2,937
8,591
19,103
8,282
18,828
-
-
800
-
73,413
94,365
73,904
93,687
184,577
223,222
185,068
222,544
Gain on disposal of foreclosed properties
115
31 OTHER OPERATING EXPENSES
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
Personnel costs (a)
357,009
341,999
285,942
266,659
Establishment costs (b)
201,336
183,487
170,535
151,090
Marketing expenses (c)
14,418
16,843
12,128
14,068
Administrative and general expenses (d)
55,595
46,785
45,449
37,334
628,358
589,114
514,054
469,151
(a) Personnel costs
The Group
2015
Wages, salaries and bonuses
Defined contribution plan (‘EPF’)
Other personnel costs
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
272,500
264,862
218,043
205,763
45,041
43,298
35,925
33,669
39,468
33,839
31,974
27,227
357,009
341,999
285,942
266,659
(b) Establishment costs
The Group
2015
2014
RM’000
RM’000
RM’000
24,183
23,430
19,986
18,933
1,305
1,099
1,191
974
Repair and maintenance
36,007
31,228
30,478
25,517
Depreciation of property and equipment
15,044
14,951
13,960
13,954
6,200
6,304
5,735
5,529
64,245
61,746
55,292
51,989
6,380
4,523
5,431
3,799
Security services
16,293
17,652
13,142
13,867
Electricity, water and sewerage
10,558
10,521
8,980
8,597
Insurance and indemnities
16,198
8,311
14,738
7,793
Equipment rental
Amortisation of intangible assets
IT Consultancy fees
Dataline rental
The Bank
2015
RM’000
Rental of premises
116
2014
Other establishment costs
4,923
3,722
1,602
138
201,336
183,487
170,535
151,090
31 OTHER OPERATING EXPENSES
(c) Marketing expenses
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
Business promotion and advertisement
6,736
8,551
5,967
7,532
Entertainment
2,193
2,984
1,908
2,559
Traveling and accommodation
3,646
3,641
2,873
2,802
Other marketing expenses
1,843
1,667
1,380
1,175
14,418
16,843
12,128
14,068
(d) Administration and general expenses
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
Telecommunication expenses
4,587
5,522
3,741
4,353
Auditors’ remuneration
1,440
1,778
1,148
1,285
Professional fees
7,008
6,686
5,918
5,640
84
114
76
110
Mail and courier charges
3,246
3,432
2,744
2,716
Stationery and consumables
9,247
8,569
6,951
6,126
Commissions expenses
4,306
3,110
3,769
2,851
Brokerage expenses
2,160
1,662
955
974
Directors’ fees and allowances
1,573
1,927
1,445
1,472
Donations
1,586
3,662
1,473
3,430
Settlement, clearing and bank charges
8,751
7,388
7,938
6,816
383
177
380
173
4,922
19
4,902
19
Property and equipment written-off
Stamp duties
Operational and litigation write-off expenses
Other administration and general expenses
6,302
2,739
4,009
1,369
55,595
46,785
45,449
37,334
The expenditure includes the following statutory disclosure:
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
7,391
8,621
7,263
8,166
- statutory audit fees
925
926
728
729
- over provision prior year
(33)
-
(22)
-
- audit related fees
391
391
245
245
- non audit fees
256
461
241
311
- over provision prior year
(99)
-
(44)
-
Directors’ remuneration (Note 32)
Auditors’ remuneration
The Group
2015
117
32 CEO AND DIRECTORS’ REMUNERATION
The MD/CEO and Directors of the Bank who have held office during the financial year are as follows:
Managing Director / Chief Executive Officer
Dato’ Zulkiflee Abbas Bin Abdul Hamid
(Resigned w.e.f. 31.3.2015)
Non-Executive Directors
Jen. Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) (Chairman)
(Retired w.e.f. 27.1.2015)
Mr Tang Peng Wah
The aggregate amount of remuneration for the Directors of the Bank for the financial year was as follows:
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
Salaries
1,215
1,980
1,215
1,980
Bonuses
3,498
3,418
3,498
3,418
883
1,044
883
1,044
70
99
70
99
152
153
152
153
1,547
1,899
1,419
1,444
26
28
26
28
7,391
8,621
7,263
8,166
Managing Director / Chief Executive Officer
Other employee benefits
Benefits-in-kind
Fees
Benefits-in-kind
118
Directors’ remuneration (Note 31)
A summary of the total remuneration of the MD/CEO and Directors, distinguishing between Executive and Non-Executive Directors:
The Group
Salaries
Bonuses
Directors’
Fees
* Other
emoluments
Benefitsin-kind
Total
2015
RM’000
RM’000
RM’000
RM’000
RM’000
RM’000
720
80
-
181
57
1,038
Managing Director/ Chief Executive
Officer
Total
495
3,418
-
772
95
4,780
1,215
3,498
-
953
152
5,818
-
-
351
96
26
473
Jen. Tan Sri Dato’ Seri Ismail Bin Haji
Omar (Bersara)
Tan Sri Dato’ Seri Lodin Bin Wok
Kamaruddin
-
-
348
-
-
348
-
-
373
-
-
373
-
-
379
-
-
379
Total
-
-
1,451
96
26
1,573
1,215
3,498
1,451
1,049
178
7,391
The Group
Salaries
Bonuses
Directors’
Fees
* Other
emoluments
Benefitsin-kind
Total
2014
RM’000
RM’000
RM’000
RM’000
RM’000
RM’000
1,980
3,418
-
1,143
153
6,694
Total
1,980
3,418
-
1,143
153
6,694
Omar (Bersara)
-
-
338
96
26
460
Kamaruddin
-
-
355
-
-
355
Grand total
Managing Director/ Chief Executive
Officer
-
-
363
-
2
365
-
-
369
-
-
369
-
-
378
-
-
378
Total
-
-
1,803
96
28
1,927
1,980
3,418
1,803
1,239
181
8,621
Grand total
*
Executive Director’s other emoluments include allowance and EPF.
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul
Rahman
119
The Bank
Salaries
Bonuses
Directors’
Fees
* Other
emoluments
Benefitsin-kind
Total
2015
RM’000
RM’000
RM’000
RM’000
RM’000
RM’000
720
80
-
181
57
1,038
Managing Director/Chief Executive
Officer
495
3,418
-
772
95
4,780
1,215
3,498
-
953
152
5,818
Omar (Bersara)
-
-
199
96
26
321
Kamaruddin
-
-
191
-
-
191
Rahman
-
-
10
-
-
10
-
-
113
-
-
113
Total
-
-
230
-
-
230
-
-
219
-
-
219
-
-
236
-
-
236
-
-
116
-
-
116
Mr Tang Peng Wah (Alternate Director to
Mr Aubrey Li Kwok-Sing)
-
-
9
-
-
9
Total
-
-
1,323
96
26
1,445
1,215
3,498
1,323
1,049
178
7,263
Grand total
*
120
A summary of the total remuneration of the MD/CEO and Directors, distinguishing between Executive and Non-Executive Directors:
The Bank
Salaries
Bonuses
Directors’
Fees
* Other
emoluments
Benefitsin-kind
Total
2014
RM’000
RM’000
RM’000
RM’000
RM’000
RM’000
1,980
3,418
-
1,143
153
6,694
Total
1,980
3,418
-
1,143
153
6,694
Omar (Bersara)
-
-
187
96
26
309
Kamaruddin
-
-
195
-
-
195
Managing Director/Chief Executive Officer
Dr. Raja Abdul Malek Bin Raja Jallaludin
-
-
59
-
-
59
-
-
125
-
-
125
Rahman
-
-
218
-
2
220
-
-
216
-
-
216
-
-
221
-
-
221
-
-
124
-
-
124
Mr Tan Peng Wah (Alternate Director to
Mr Aubrey Li Kwok-Sing)
-
-
3
-
-
3
Total
-
-
1,348
96
28
1,472
1,980
3,418
1,348
1,239
181
8,166
Grand total
*
121
33 ALLOWANCES FOR/(WRITE-BACK OF) IMPAIRMENT LOSSES ON LOANS, ADVANCES AND FINANCING
The Group
2015
2014
The Bank
2015
2014
RM’000
RM’000
RM’000
RM’000
257,645
87,611
254,086
86,102
(7,293)
(4,386)
(7,246)
(604)
17,224
35,666
11,265
29,283
-recovered
(84,192)
(141,739)
(83,226)
(141,344)
-written-off
3,603
4,380
3,596
4,370
186,987
(18,468)
178,475
(22,193)
- made during the financial year
-written-back
- net allowance made during the financial year
Bad debts and financing
34 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
Related parties that have transactions and their relationship with the Bank are as follows:
122
Related parties
Relationship
Lembaga Tabung Angkatan Tentera (‘LTAT’)
Ultimate holding corporate body, which is Government-Linked
Investment Company (‘GLIC’) of the Government of Malaysia
AFFIN Holdings Berhad (‘AHB’)
Holding company
Subsidiaries and associates of LTAT
Subsidiary and associate companies of the ultimate holding corporate
body
Subsidiaries and associates of AHB as disclosed in its financial
statements
Subsidiary and associate companies of the holding company
Subsidiaries of AFFIN Bank Berhad as disclosed in Note 14
Subsidiaries
Joint ventures as disclosed in Note 15
Joint ventures
Key management personnel
The key management personnel of the Group and the Bank consist of:
-Directors
- Managing Director/Chief Executive Officer
- Members of Senior Management team and the company secretary
Related parties of key management personnel (deemed as related to
the Bank)
- Close family members and dependents of key management
personnel
- Entities that are controlled, jointly controlled or for which significant
voting power in such entity resides with, directly or indirectly by
key management personnel or its close family members
Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the
Group and the Bank either directly or indirectly. Key management personnel include the Managing Director / Chief Executive Officer of the Bank in
office during the financial year and his remuneration for the financial year are disclosed in Note 32.
Expenditure
Interest on fixed deposits
Interest on Negotiable instruments of deposit
Interest on deposits and placements of banks
Profit paid on special investment deposits
Profit paid on commodity murabahah
Interest on money market deposits
Interest on subordinated term loan
Brokerage fees
Rental
Others
Income
Interest on private debt securities
Interest on loans, advances and financing
Interest on deposits and placements with
banks and other financial institutions
Other income
The Group
(a) Related parties transaction and balances
1,389
8,395
239
10,023
2,956
239
3,929
-
-
734
-
-
-
Ultimate holding
corporate body
2015
2014
RM’000
RM’000
276
28,189
30,861
2,396
-
-
-
2,043
29,879
36,253
4,331
-
-
-
Holding
company
2015
2014
RM’000
RM’000
740
3,485
7,905
548
12,259
6,145
51,049
14,083
5,884
909
8,112
101,893
29,786
63,086
6,562
1,400
1,524
1,708
563
12,107
5,707
50,244
15,184
5,489
3,851
8,508
115,100
26,889
75,852
Other related
companies
2015
2014
RM’000
RM’000
-
-
-
-
-
-
-
-
Companies in which
certain Directors have
substantial interest
2015
2014
RM’000
RM’000
116
315
199
-
95
95
199
199
-
86
86
Key management
personnel
2015
2014
RM’000
RM’000
The Group and 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.
123
(a) Related perties transaction and balances (continued)
The Group
Amount due from
Intercompany balances
Security deposits
Amount due to
Demand and savings deposits
Fixed deposits
Negotiable instruments of deposit
Commitments and contingencies
The Group
Amount due from
124
Amount due to
Demand and saving deposits
Fixed deposits
Ultimate holding
corporate body
2015
2014
RM’000
RM’000
Holding
company
2015
2014
RM’000
RM’000
Other related
companies
2015
2014
RM’000
RM’000
-
-
-
-
1,009,148
1,728,516
787,747
2,258,158
-
-
9
9
7
7
39,936
2,997
2,780,597
56,000
14,855
2,993
3,119,753
94,668
-
97,771
22,114
-
1,003
44,856
-
4,218
117,684
-
533,117
876,379
421,482
272,486
522,394
120,370
43,506
138,174
300,423
420,308
470
1,004,446
1,050,775
485
604,310
726,697
38,818
115,315
1,985,111
332,004
66,988
1,314,242
-
-
-
-
1,844,586
1,668,959
Companies in which
2015
2014
RM’000
RM’000
Key management
personnel
2015
2014
RM’000
RM’000
-
-
2,587
2,587
2,540
2,540
596
596
145
145
6,781
7,849
14,630
6,519
4,520
11,039
-
-
-
-
No impairment allowances were required at the Group and the Bank in 2015 and 2014 for loans, advances and financing made to key
management personnel.
Expenditure
Interest on fixed deposits
Interest on negotiable instruments
of deposit
Interest on deposits and placements
of banks and other financial
institutions
Interest on money market deposits
Interest on subordinated term loan
Brokerage fees
Rental
Others
Income
Interest on deposits and placements
with banks and other financial
institutions
Interest on special investment
deposits
Interest on private debt securities
Interest on loans, advances and
financing
Other income
The Bank
-
8,395
239
10,017
-
2,956
239
3,929
-
-
1,383
-
-
734
-
2014
RM’000
-
2015
RM’000
Ultimate holding
corporate body
125
276
28,189
30,861
-
2,396
-
-
-
2015
RM’000
2,043
29,879
36,253
-
4,331
-
-
-
2014
RM’000
Holding
company
18
407
438
-
13
73,305
122,407
47,846
-
1,256
2015
RM’000
12
407
455
-
36
81,851
110,255
27,917
-
487
2014
RM’000
Subsidiaries
740
7,905
548
12,259
6,041
42,086
5,884
8,709
56,497
8,112
95,304
29,786
909
2015
RM’000
6,562
1,708
563
12,107
5,636
41,184
5,489
9,119
68,804
8,508
108,052
26,889
3,851
2014
RM’000
Other related
companies
-
-
-
-
-
-
2015
RM’000
-
-
-
-
-
-
2014
RM’000
Companies which certain
Directors have substantial
interest
116
200
-
84
79
79
-
-
2015
RM’000
125
-
125
86
86
-
-
2014
RM’000
Key management
personnel
The Bank
Amount due from
Special investment account
Security deposits
Amount due to
Fixed deposits
The Bank
Amount due from
Deposits and placements with banks
Security deposits
126
Amount due to
Fixed deposits
Negotiable instruments of deposit
Deposits and placements of banks
Ultimate holding
corporate body
2015
2014
RM’000
RM’000
Holding
company
2015
2014
RM’000
RM’000
Subsidiaries
2015
2014
RM’000
RM’000
-
-
-
-
1,331,318
826,689
-
-
9
9
7
7
84,001
62
1,415,381
68,741
438
895,868
93,496
-
96,169
22,114
1,003
44,856
4,218
117,684
923
403
849
390
43,506
137,002
300,423
418,706
470
1,004,446
1,050,775
485
604,310
726,697
422,166
423,492
296,781
298,020
-
-
-
-
-
-
Other related
companies
2015
2014
RM’000
RM’000
Companies in which
2015
2014
RM’000
RM’000
Key management
personnel
2015
2014
RM’000
RM’000
1,089,870
1,279,775
787,747
1,824,678
-
-
2,212
2,540
2,997
2,372,642
56,000
2,993
2,671,418
-
-
2,212
2,540
510,506
671,636
421,482
255,969
335,147
120,370
-
-
4,153
2,524
-
4,656
1,626
-
38,818
115,315
1,757,757
332,004
66,988
1,110,478
-
-
6,677
6,282
1,797,375
1,910,887
-
-
-
-
No impairment allowances were required at the Bank in 2015 and 2014 for loans, advances and financing made to key management
personnel.
(b) Key management personnel compensation
The remuneration of key management personnel of the Group and the Bank during the year are as follows:
The Group
2015
RM’000
Directors’ fees and allowances
Fees
Benefits-in-kind
Short-term employment benefits
Salaries
Bonuses
Other employee benefits
Benefits-in-kind
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
1,547
26
1,573
1,899
28
1,927
1,419
26
1,445
1,444
28
1,472
7,441
9,859
3,038
1,176
441
21,955
7,870
10,133
3,197
1,111
428
22,739
6,810
9,120
2,801
1,043
428
20,202
7,225
9,455
2,979
1,068
340
21,067
Included in the above table is the CEO and directors’ remuneration as disclosed in Note 32.
35TAXATION
The Group
2015
RM’000
2014
RM’000
106,824
6,905
(1,855)
111,874
172,347
(1,365)
649
171,631
The Bank
2015
RM’000
2014
RM’000
The taxation charge arising in
Malaysia for the financial year
Current tax
Under/(over) provision in prior year
Deferred tax (Note 12)
Tax expense for the year
78,335
6,403
(1,799)
82,939
149,819
482
920
151,221
127
35TAXATION
Statutory tax rate in Malaysia
Tax effect in respect of:
Non allowable expenses
Non taxable income
Utilisation of previously unrecognised tax losses
Effect of different tax rate
Tax savings arising from income exempt from tax for
International Currency Business Unit (‘ICBU’)
Under/(over) accrual in prior years
Prior year deferred tax not recognised, now recognised
Change in tax rate
Average effective tax rate
The Group
2015
%
2014
%
The Bank
2015
%
2014
%
25.00
25.00
25.00
25.00
0.42
(0.29)
(1.22)
0.34
(0.39)
(0.01)
(0.71)
0.47
(0.27)
(1.64)
0.18
(0.35)
(0.81)
(0.10)
1.50
(1.07)
0.02
24.26
(0.05)
(0.19)
23.99
1.86
(1.35)
0.02
24.09
0.08
(0.01)
24.09
Tax savings of the Group as a result of utilisation of tax losses brought forward from previous years from which the related credit is recognised
during the financial year amounted to nil balance (2014: RM87,000).
36 EARNINGS PER SHARE
The basic earnings per ordinary share for the Group and the Bank have been calculated based on the net profit attributable to equity holders of the
Group and the Bank of RM345,582,000 (2014: RM543,727,000) and RM261,290,000 (2014: RM476,479,000) respectively. The weighted average
number of shares in issue during the financial year of 1,688,770,000 (2014: 1,633,403,000) is used for the computation.
37DIVIDENDS
Dividends recognised as distribution to ordinary equity holders of the Bank:
2015
Dividend
per share
sen
2014
Amount of
dividend
RM’000
Dividend
per share
sen
Amount of
dividend
RM’000
Ordinary shares
Single tier dividend:
128
- Interim dividend
- Final dividend
-
-
10.00
168,877
3.91
66,031
6.00
91,100
3.91
66,031
16.00
259,977
At the forthcoming Annual General Meeting, a single-tier final dividend in respect of the current financial year of 6.18 sen per share amounting to
RM104,366,000 will be proposed for shareholders’ approval. These financial statements do not reflect this final dividend which will be accounted
for in the shareholder’s equity as an appropriation of retained profits in the financial year ending 31 December 2016 when approved by the
shareholder.
38 COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Group and the Bank make various commitments and incurs certain contingent liabilities with legal recourse
to their customers. No material losses are anticipated as a result of these transactions. These commitment and contingencies are not secured over
the assets of the Group and the Bank.
The commitments and contingencies consist of:
The Group
The Bank
2015
2014
2015
2014
Principal
amount
RM’000
Principal
amount
RM’000
Principal
amount
RM’000
Principal
amount
RM’000
408,318
679,779
398,935
669,843
2,027,954
2,043,704
1,879,994
1,891,540
470,476
746,576
101,909
345,057
Irrevocable commitments to extend credit:
9,211,778
10,663,047
7,476,032
9,137,777
- maturity less than one year
7,494,453
8,641,021
6,107,115
7,428,229
- maturity more than one year
1,717,325
2,022,026
1,368,917
1,709,548
Foreign exchange related contracts (#):
6,918,839
5,658,337
7,086,226
5,679,280
- less than one year
6,497,779
5,110,352
6,665,166
5,131,295
421,060
451,955
421,060
451,955
-
96,030
-
96,030
2,861,139
3,427,552
2,861,139
3,427,552
Direct credit substitutes (*)
Transaction-related contingent items
Short-term self-liquidating trade-related contingencies
- one year to less than five years
- more than five years
Interest rate related contracts (#):
652,116
1,256,279
652,116
1,256,279
1,612,023
1,781,125
1,612,023
1,781,125
- more than five years
597,000
390,148
597,000
390,148
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 borrower’s creditworthiness
215,113
-
199,792
-
Unutilised credit card lines
188,328
208,865
188,328
208,865
22,301,945
23,427,860
20,192,355
21,359,914
- less than one year
- one year to less than five years
Included in direct credit substitutes as above are financial guarantee contracts of RM408.2 million and RM398.8 million at the Group and the
Bank, respectively (2014: RM454.7 million and RM444.8 million at the Group and the Bank, respectively), 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 5 and 20 to the financial statements.
*
129
39 FINANCIAL RISK MANAGEMENT
(i) Credit risk
Credit risk is the potential financial loss resulting from the failure of the customer or counterparty to settle the financial and contractual
obligations to the Bank. Credit risk emanates mainly from loans, advances and financing, loan commitments arising from such lending
activities, as well as through financial transactions with counterparties including interbank money market activities, derivative instruments
used for hedging and debt securities.
The management of credit 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.
Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit Plan. New businesses are governed by the risk
acceptance criteria and customer qualifying criteria/fitness standards prescribed in the Annual Credit Plan. The Annual Credit Plan is reviewed
at least annually and approved by the BRMC.
Credit risk measurement
Credit evaluation is the process of analysing the creditworthiness of the prospective customer against the Bank’s underwriting criteria and
the ability of the Bank to make a return commensurate to the level of risk undertaken. A critical element in the evaluation process is the
assignment of a credit risk grade to the counterparty. This assists in the risk assessment and decision making process. The Bank has
developed internal rating models to support the assessment and quantification of credit risk.
For consumer mass market products, statistically developed application scorecards are used by the Business to assess the risks associated
with the credit application. The scorecards are used as a decision support tool at loan origination.
Over-the-Counter (‘OTC’) Derivatives
The OTC Derivatives credit exposure is computed using the Current Exposure Method. Under the Current Exposure Method, computation
of credit equivalent exposure for interest rate and exchange rate related contracts is derived from the summation of the two elements;
the replacement costs (obtained by marking-to-market) of all contracts and the potential future exposure of outstanding contracts (Add On
charges depending on the specific remaining tenor to maturity).
Risk limit control and mitigation policies
The Bank employs various policies and practices to control and mitigate credit risk.
Lending limits
130
The Bank establishes internal limits and related lending guidelines to manage large exposures and avoid undue concentration of credit risk in
its credit portfolio. The limits include single customer groupings, 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.
The credit risk exposure for derivative and loan books is managed as part of the overall lending limits with customers together with potential
exposure from market movements.
(i) Credit risk (continued)
Risk limit control and mitigation policies (continued)
Collateral
Credits are established against borrower’s capacity to repay rather than rely solely on security. However, collateral may be taken to mitigate
credit risk. The main collateral types accepted and given value by 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 loan.
Credit related commitments
Commitment to extend credit represents unutilised portion of approved credit in the form of loans, guarantees or letters of credit. In terms of
credit risk, the Bank is potentially exposed to loss in an amount equal to the total unutilised commitments. However, the potential amount of
loss is less than the total unutilised commitments, as most commitments to extend credit are contingent upon customers maintaining specific
minimum credit standards.
The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit
risk than short-term commitments.
Credit risk monitoring
Retail credits are actively monitored and managed on a portfolio basis by product type. A 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.
For financial assets recognised on the statement of financial position, the exposure to credit risk equals their carrying amount. For financial
guarantees granted, the maximum exposure to credit risk is the maximum amount that the Group and the Bank would have to pay if the
guarantee was to be called upon. For loan commitments and other commitments, the maximum exposure to credit risk is the full amount of
the undrawn credit facilities granted to customers.
All financial assets of the Group and the Bank are subject to credit risk except for cash in hand, equity securities held as financial assets heldfor-trading or financial investments available-for-sale, as well as non-financial assets.
Maximum exposure to credit risk
131
Maximum exposure to credit risk (continued)
The exposure to credit risk of the Group and the Bank equals their carrying amount in the statement of financial position as at reporting date,
except for the followings:
The Group
2015
2015
Maximum
Carrying
credit exposure
value
RM’000
RM’000
The Bank
2015
2015
Maximum
Carrying
credit exposure
value
RM’000
RM’000
Credit risk exposures of on-balance sheet assets:
Other assets
*
4,070,710
#
10,287,350
@
72,798
3,866,154
10,081,927
51,133
408,168
408,168
12,113,799
3,503,442
26,952,825
17,910,824
*
2,573,348
8,811,977
@
68,546
2,368,792
8,607,079
47,792
398,785
398,785
9,846,205
2,904,077
21,698,861
14,326,525
#
Credit risk exposure of off-balance sheet items:
Financial guarantees
Loan commitments and other credit
related commitments
^
^
Total maximum credit risk exposure
^
^
The Group
2014
2014
Maximum
Carrying
credit exposure
value
RM’000
RM’000
The Bank
2014
2014
Maximum
Carrying
credit exposure
value
RM’000
RM’000
Credit risk exposures of on-balance sheet assets:
*
Other assets
132
6,938,912
9,947,911
@
223,406
6,770,321
9,817,200
200,875
454,742
454,742
13,887,229
4,177,194
31,452,200
21,420,332
#
*
3,777,042
8,415,411
@
174,655
3,608,451
8,284,726
153,014
444,806
444,806
11,808,276
3,622,011
24,620,190
16,113,008
#
Credit risk exposure of off-balance sheet items:
Financial guarantees
Loan commitments and other credit
related commitments
Total maximum credit risk exposure
^
^
^
^
Maximum exposure to credit risk (continued)
The following have been excluded for the purpose of maximum credit risk exposure calculation:
* cash in hand
# investment in quoted and unquoted shares
@prepayment
^ amount stated at notional value
Whilst the Group and the Bank’s maximum exposure to credit risk is the carrying value of the assets, or in the case of 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 loans, advances and financing of the Group and the Bank are 69% (2014: 67%) and 67% (2014: 66%)
respectively. The financial effects of collateral for the other financial assets are insignificant.
133
134
Agriculture
Manufacturing
Construction
Real estate
Transport, storage and
communication
Finance, insurance and
business services
Government and government
agencies
Wholesale & retail trade and
restaurants & hotels
Others
Total assets
The Group
2015
Deposits and
placements
with banks
and other
financial
institutions
RM’000
351,687
351,687
Cash and
short-term
funds
RM’000
-
884,527
2,981,627
3,866,154
150,121
-
150,121
-
-
Financial
assets
held-fortrading
RM’000
170
51,406
174,037
-
120,692
46
12
1,682
29
-
Derivative
financial
assets
RM’000
10,081,927
5,227,679
4,185,438
231,027
220,849
172,090
44,844
-
Financial
investments
availablefor-sale
RM’000
23,439
380,654
-
128,414
-
43,769
185,032
-
Financial
investments
held-tomaturity
RM’000
The credit risk concentrations of the Group and the Bank, by industry concentration, are set out in the following tables:
2,411,800
18,268,897
42,104,597
1,137,674
4,123,439
2,063,919
689,296
721,713
2,231,714
173,343
3,452,289
6,830,513
Loans,
advances
and
financing
RM’000
51,133
51,133
-
-
-
-
Other
assets
RM’000
2,435,409
18,371,436
57,160,310
9,346,980
9,944,318
2,294,992
689,308
721,713
2,498,014
345,462
3,682,165
6,830,513
488,511
315,735
3,911,610
193,568
255,852
212,590
77,179
90,954
644,852
2,769
1,094,261
535,339
On
balance Commitments
and
sheet
total contingencies
RM’000
RM’000
Credit risk is the risk of financial loss from the failure of customers to meet their obligations. Exposure to credit risk is managed through portfolio management. The credit portfolio’s risk profiles
and exposures are reviewed and monitored regularly to ensure that an acceptable level of risk diversification is maintained. Exposure to credit risk is also managed in part by obtaining collateral
security and corporate and personal guarantees.
Credit risk concentrations
Agriculture
Manufacturing
Construction
Real estate
communication
Finance, insurance and business
services
agencies
Others
Total assets
The Group
2014
238,222
238,222
-
752,780
6,017,541
6,770,321
Deposits and
placements
with banks
and other
financial
institutions
RM’000
-
Cash and
short-term
funds
RM’000
Credit risk concentrations (continued)
135
149,904
149,904
-
-
-
Financial
assets
held-fortrading
RM’000
372
1,463
88,658
-
81,880
35
119
1,132
3,620
37
-
Derivative
financial
assets
RM’000
45,306
9,817,200
5,778,549
3,455,064
220,459
55,077
167,170
90,569
5,006
Financial
investments
availablefor-sale
RM’000
23,439
476,155
-
202,521
-
60,040
190,155
-
Financial
investments
held-tomaturity
RM’000
2,095,396
17,060,061
39,456,172
92,404
4,794,881
2,028,262
679,067
620,990
2,019,420
253,948
3,784,234
6,027,509
Loans,
advances
and
financing
RM’000
200,875
200,875
-
-
-
-
Other
assets
RM’000
2,164,513
17,262,399
57,197,507
12,038,398
9,525,348
2,248,756
679,186
622,122
2,138,157
421,155
4,064,958
6,032,515
On
balance
sheet
total
RM’000
426,421
775,086
4,631,936
213,748
425,008
204,217
74,395
84,463
632,111
1,455
1,325,891
469,141
Commitments
and
contingencies
RM’000
136
Agriculture
Manufacturing
Construction
Real estate
communication
Finance, insurance and
business services
agencies
Others
Total assets
The Bank
2015
Deposits and
placements
with banks
and other
financial
institutions
RM’000
1,310,764
1,310,764
Cash and
short-term
funds
RM’000
-
1,298,235
1,070,557
2,368,792
150,121
-
150,121
-
-
Financial
assets
held-fortrading
RM’000
170
51,406
174,745
-
121,400
46
12
1,682
29
-
Derivative
financial
assets
RM’000
8,607,079
4,136,191
3,928,321
185,358
140,275
172,090
44,844
-
Financial
investments
availablefor-sale
RM’000
23,439
304,372
-
52,132
-
43,769
185,032
-
Financial
investments
held-tomaturity
RM’000
2,195,262
12,916,697
32,902,688
534,604
3,557,687
1,858,767
410,691
708,715
2,006,988
116,138
2,900,594
5,696,545
Loans,
advances
and
financing
RM’000
47,792
47,792
-
-
-
-
Other
assets
RM’000
2,218,871
13,015,895
45,866,353
5,741,352
10,418,660
2,044,171
410,703
708,715
2,192,714
288,257
3,130,470
5,696,545
407,121
262,926
3,302,862
56,148
231,180
155,397
68,561
88,666
565,941
2,144
971,791
492,987
On
balance Commitments
and
sheet
total contingencies
RM’000
RM’000
Agriculture
Manufacturing
Construction
Real estate
communication
Finance, insurance and business
services
agencies
Others
Total assets
The Bank
2014
962,050
962,050
-
438,296
3,170,155
3,608,451
Deposits and
placements
with banks
and other
financial
institutions
RM’000
-
Cash and
short-term
funds
RM’000
137
149,904
149,904
-
-
-
Financial
assets
held-fortrading
RM’000
369
1,463
88,672
-
81,897
35
119
1,132
3,620
37
-
Derivative
financial
assets
RM’000
35,089
8,284,726
4,614,297
3,151,547
165,971
55,077
167,170
90,569
5,006
Financial
investments
availablefor-sale
RM’000
23,439
393,401
-
119,767
-
60,040
190,155
-
Financial
investments
held-tomaturity
RM’000
1,894,966
12,744,460
32,292,551
33,228
4,043,701
1,893,563
412,662
620,198
1,787,978
200,989
3,235,572
5,425,234
Loans,
advances
and
financing
RM’000
153,014
153,014
-
-
-
-
Other
assets
RM’000
1,953,863
12,898,937
45,932,769
7,967,584
8,797,258
2,059,569
412,781
621,330
1,906,715
368,196
3,516,296
5,430,240
412,208
697,443
4,066,817
67,363
402,052
173,656
67,615
84,463
552,369
1,455
1,169,856
438,337
On
balance Commitments
and
sheet
total contingencies
RM’000
RM’000
Collaterals
The main types of collateral obtained by the Group and the Bank are as follows:
- for personal housing loans, mortgages over residential properties;
- for commercial property loans, charges over the properties being financed;
- for hire purchase, charges over the vehicles or plant and machineries financed; and
- for other loans, charges over business assets such as premises, inventories, trade receivables or deposits
Total loans, advances and financing - credit quality
All loans, advances and financing are categorised into “neither past due nor impaired”, “past due but not impaired” and “impaired”. Past due
loans refer to loans that are overdue by one day or more. Impaired loans are loans with months-in-arrears more than 3 months (i.e. 90 days)
or with impairment allowances.
Distribution of loans, advances and financing by credit quality
The Group
2015
RM’000
Neither past due nor impaired (a)
Past due but not impaired (b)
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
39,181,976
36,629,306
30,574,217
30,006,363
2,654,372
2,645,096
2,126,743
2,164,663
767,847
713,648
626,139
584,491
42,604,195
39,988,050
33,327,099
32,755,517
-Individual
(270,137)
(239,259)
(231,621)
(207,740)
-Collective
(229,461)
(292,619)
(192,790)
(255,226)
42,104,597
39,456,172
32,902,688
32,292,551
Impaired (c)
Gross loans, advances and financing
less: Allowance for impairment
Net loans, advances and financing
138
Total loans, advances and financing - credit quality (continued)
(a) Loans neither past due nor impaired
Analysis of loans, advances and financing that are neither past due nor impaired analysed based on the Group and the Bank’s internal
credit grading system is as follows:
The Group
2015
RM’000
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
Quality classification
Satisfactory
Special mention
38,594,431
32,282,000
30,022,816
29,659,256
587,545
347,306
551,401
347,107
39,181,976
36,629,306
30,574,217
30,006,363
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 alert and watchlist committee.
(b) Loans past due but not impaired
Certain loans, advances and financing are past due but not impaired as the collateral values of these loans are in excess of the principal
and profit outstanding. Allowances for these loans may have been set aside on a portfolio basis. The Bank’s loans, advances and
financing which are past due but not impaired are as follows:
The Group
2015
RM’000
Past due up to 30 days
Past due 31-60 days
Past due 61-90 days
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
1,498,813
1,510,507
1,257,382
1,298,568
819,181
801,073
606,202
607,415
333,516
263,159
258,680
2,645,096
2,126,743
2,164,663
336,378
2,654,372
139
Total loans, advances and financing - credit quality (continued)
(c) Loans impaired
The Group
2015
RM’000
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
Gross impaired loans
767,847
713,648
626,139
584,491
Individually impaired loans
527,128
407,907
424,929
324,945
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.
The Group
2015
RM’000
2014
RM’000
The Bank
2015
RM’000
2014
RM’000
Nature of assets
Industrial and residential properties
4,906
9,099
4,315
8,508
Deposits and short-term funds, private debt securities, treasury bills and derivatives - credit quality
Private debt securities, treasury bills and other eligible bills included in financial assets held-for-trading and financial investments availablefor-sale are measured on a fair value basis. The fair value will reflect the credit risk of the issuer.
Most listed and some unlisted securities are rated by external rating agencies. The Group and the Bank mainly uses external credit ratings
provided by RAM, MARC, Standard & Poors’ or Moody’s.
The table below presents 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.
140
1,352,885
-
1,107,456
437,819
2,230,351
8,209,306
-
Negotiable Instruments of Deposit and Islamic Debt Certificates
-
-
1,863,822
-
-
39,997
34,175
-
95,795
115,459
2,981,627
-
AAA
RM’000
Sovereigns
RM’000
655,690
Deposits and placements with banks and other financial institutions
Short-term funds
2015
The Group
4,247,796
-
1,132,880
-
2,084,572
-
-
-
32,539
-
236,228
761,577
AA- to AA+
RM’000
605,716
-
381,713
-
50,040
-
-
-
(6)
150,121
-
23,848
A- to A+
RM’000
72,490
-
67,542
-
-
-
-
-
1,647
-
-
3,301
Lower
than ARM’000
492,948
357,215
30,045
-
-
-
-
-
105,682
-
-
6
Unrated
RM’000
23,439
23,439
-
-
-
-
-
-
-
-
-
-
* Impaired
RM’000
15,004,580
380,654
4,949,987
437,819
2,134,612
655,690
1,863,822
39,997
174,037
150,121
351,687
3,866,154
Total
RM’000
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:
141
142
*
1,661,875
11,945,994
1,166,778
-
-
2,932,818
-
1,092,663
-
1,331,452
-
-
-
-
-
11,737
-
121,483
375,483
AA- to AA+
RM’000
326,986
-
304,817
-
-
-
-
-
-
-
309
-
-
21,860
A- to A+
RM’000
115,348
-
112,895
-
-
-
-
-
-
-
912
-
-
1,541
Lower
than ARM’000
490,000
408,716
30,046
-
-
-
-
-
-
-
51,238
-
-
-
Unrated
RM’000
67,439
67,439
-
-
-
-
-
-
-
-
-
-
-
-
* Impaired
RM’000
17,540,460
476,155
3,937,081
353,165
1,331,452
1,387,284
351,735
2,180,038
50,663
225,782
88,658
149,904
238,222
6,770,321
Total
RM’000
Net of allowance for impairment.
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.
353,165
1,229,882
-
-
-
1,387,284
351,735
-
50,663
2,180,038
-
24,462
225,782
-
116,739
353,896
AAA
RM’000
149,904
-
6,017,541
Short-term funds
Sovereigns
RM’000
The Group
2014
1,040,886
-
795,456
272,538
2,105,220
5,206,749
-
-
-
1,249,964
-
-
39,997
34,175
-
95,795
115,460
1,070,558
-
AAA
RM’000
Sovereigns
RM’000
468,472
Short-term funds
2015
The Bank
4,141,134
-
1,061,520
-
2,084,572
-
-
-
32,533
-
201,194
761,315
AA- to AA+
RM’000
598,476
-
381,713
-
50,040
-
-
-
(6)
150,121
-
16,608
A- to A+
RM’000
157,205
-
67,542
-
-
-
-
-
2,361
-
33,118
54,184
Lower
than ARM’000
1,747,984
280,933
30,045
-
-
-
-
-
105,682
-
960,992
370,332
Unrated
RM’000
23,439
23,439
-
-
-
-
-
-
-
-
-
-
* Impaired
RM’000
12,915,873
304,372
4,441,496
272,538
2,134,612
468,472
1,249,964
39,997
174,745
150,121
1,310,764
2,368,792
Total
RM’000
143
144
*
1,108,630
7,934,356
893,559
-
-
2,635,558
-
997,660
-
1,331,452
-
-
-
-
-
11,737
-
121,484
173,225
AA- to AA+
RM’000
323,182
-
304,817
-
-
-
-
-
-
-
309
-
-
18,056
A- to A+
RM’000
115,364
-
112,895
-
-
-
-
-
-
-
928
-
-
1,541
Lower
than ARM’000
1,302,675
325,962
30,046
-
-
-
-
-
-
-
51,236
-
723,828
171,603
Unrated
RM’000
67,439
67,439
-
-
-
-
-
-
-
-
-
-
-
-
* Impaired
RM’000
13,487,204
393,401
3,415,333
232,996
1,331,452
1,102,406
272,595
1,678,503
50,663
200,778
88,672
149,904
962,050
3,608,451
Total
RM’000
Net of allowance for impairment.
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.
232,996
1,076,356
-
-
-
1,102,406
272,595
-
50,663
1,678,503
-
24,462
200,778
-
116,738
73,871
AAA
RM’000
149,904
-
3,170,155
Short-term funds
Sovereigns
RM’000
The Bank
2014
Other financial assets - credit quality
Other financial assets of the Group and the Bank are neither past due nor impaired are summarised as below:
The Group
2015
RM’000
Short-term funds
3,866,154
The Bank
2015
RM’000
2014
RM’000
2014
RM’000
6,770,321
2,368,792
351,687
238,222
1,310,764
962,050
51,133
200,875
47,792
153,014
-
-
61
438
39,936
14,855
-
-
3,608,451
Other assets
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 interest rates and foreign exchange rates. The exposure
to market risk results largely from interest 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.
145
(ii) Market risk (continued)
Value-at-risk (‘VaR’)
Value-at-Risk (‘VaR’) is used to compute the maximum potential loss amount over a specified holding period of a Trading portfolio. It measures
the risk of losses arising from potential adverse movements in interest rates and foreign exchange rates that could affect values of financial
instruments.
The 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 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.
Balance
RM’000
Average
for the
financial year
RM’000
Minimum
RM’000
Maximum
RM’000
FX swap
472
605
253
3,128
FX spot (Metro Desk)
466
330
48
3,240
77
362
5
932
1
-
-
17
Balance
RM’000
Average
for the
financial year
RM’000
Minimum
RM’000
Maximum
RM’000
FX swap
668
432
6
2,400
FX spot (Metro Desk)
2015
Instruments
FX option
Government securities
2014
Instruments
146
138
222
31
776
Government securities
5
206
5
550
1
-
-
3
Other risk measures
•
Mark-to-market
Mark-to-market valuation tracks the current market value of the outstanding financial instruments.
•
Stress testing
Stress tests are conducted to attempt to quantify market risk arising from abnormal market movements. Stress tests measure the
changes in values arising from extreme movements in interest rates and foreign exchange rates based on past experience and simulated
stress scenarios.
Interest/profit rate sensitivity
The table below shows the sensitivity for the financial assets and financial liabilities held as at reporting date.
Impact on profit after tax is measured using Repricing Gap Simulation methodology based on 100 basis point parallel shifts in interest rate/
profit rate.
Impact on equity represents the changes in fair values of fixed income instruments held in available-for-sale portfolio arising from the shift
in interest/profit rate.
The Group
2015
+100
basis point
RM million
Impact on profit after tax
Impact on equity
The Bank
2015
-100
basis point
RM million
Impact on equity
2015
-100
basis point
RM million
(49.9)
49.9
(36.1)
36.1
(261.0)
261.2
(215.8)
213.1
The Group
Impact on profit after tax
2015
+100
basis point
RM million
The Bank
2014
+100
basis point
RM million
2014
-100
basis point
RM million
2014
+100
basis point
RM million
2014
-100
basis point
RM million
(18.8)
18.8
(26.4)
26.4
(206.8)
217.1
(176.2)
184.9
147
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:
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
1,512
1,206
1,143
886
United States Dollar
39,731
35,418
37,697
33,763
Great Britain Pound
2,347
33
2,215
36
(56)
211
3
217
+1%
Euro
Australian Dollar
Japanese Yen
Others
184
45
178
42
4,600
10,926
3,577
9,929
48,318
47,839
44,813
44,873
-1%
(1,512)
(1,206)
(1,143)
(886)
United States Dollar
(39,731)
(35,418)
(37,697)
(33,763 )
Great Britain Pound
(2,347)
(33)
(2,215)
(36)
56
(211)
(3)
(217)
(184)
(45)
(178)
(42)
(4,600)
(10,926)
(3,577)
(9,929)
(48,318)
(47,839)
(44,813)
(44,873)
Euro
Australian Dollar
Japanese Yen
Others
Foreign exchange risk
The Bank is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.
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 at reporting date. Included in the table are
the Bank’s financial instruments at carrying amounts, categorised by currency.
148
1,672
1,829,311
3,468,159
(479,733)
681,383
Net on-balance sheet financial position
Off balance sheet commitments
78
16
587,996
14,080
2,117
528,974
200,617
373,221
-
526,841
Total financial liabilities
Other liabilities
Liabilities
Total financial assets
2,417,307
-
Other assets
49,241
297,472
1,131,490
-
113,475
492
46,955
33,118
840,080
United States
Dollar
RM’000
-
1,794
Euro
RM’000
Assets
The Group
2015
Foreign exchange risk (continued)
149
287,647
25,229
10,494
-
117
-
10,377
35,723
-
-
-
31,537
-
4,186
Great Britain
Pound
RM’000
-
(7,438)
8,770
-
-
814
7,956
1,332
-
-
-
39
-
1,293
Australian
Dollar
RM’000
24,473
62
603
-
-
-
603
665
-
-
-
93
-
572
Japanese
Yen
RM’000
231,704
381,633
11,384
-
495
-
10,889
393,017
-
222,725
159,393
747
-
10,152
Others
RM’000
4,693,366
1,749,065
1,148,220
94
16,808
201,431
929,887
2,879,285
1,672
1,354,215
503,820
146,383
33,118
858,077
Total
RM’000
150
373
80,834
(33,013)
193,781
29
562
Other liabilities
-
80,243
47,821
-
195
Liabilities
Other assets
42,439
4,814
Euro
RM’000
Assets
The Group
2014
3,419,439
1,303,019
375,781
3,138
2,509
119,269
250,865
1,678,800
1,317
1,255,095
216,024
63,987
142,377
United States
Dollar
RM’000
5,319
(875)
6,305
-
-
-
6,305
5,430
-
-
-
15
5,415
Great Britain
Pound
RM’000
6,006
22,101
9,390
-
3
2,200
7,187
31,491
-
-
31,439
38
14
Australian
Dollar
RM’000
8,470
(2,462)
3,952
-
-
-
3,952
1,490
-
-
-
75
1,415
Japanese
Yen
RM’000
303,161
1,153,705
58,595
-
1,127
47,898
9,570
1,212,300
-
962,170
240,844
663
8,623
Others
RM’000
3,936,176
2,442,475
534,857
3,167
4,201
169,367
358,122
2,977,332
1,317
2,217,460
530,746
65,151
162,658
Total
RM’000
1,672
1,839,279
3,186,971
(471,578)
623,950
78
16
490,635
13,504
2,089
519,586
116,616
360,437
-
517,481
Other liabilities
Liabilities
2,329,914
-
Other assets
48,008
297,472
1,047,046
-
113,354
492
46,955
33,118
837,252
United States
Dollar
RM’000
-
561
Euro
RM’000
Assets
The Bank
2015
151
271,994
23,397
10,443
-
73
-
10,370
33,840
-
-
-
31,537
-
2,303
Great Britain
Pound
RM’000
8,112
7,696
8,766
-
-
814
7,952
1,070
-
-
-
38
-
1,032
Australian
Dollar
RM’000
23,539
244
598
-
-
-
598
842
-
-
-
93
-
749
Japanese
Yen
RM’000
94,121
382,752
8,792
-
495
-
8,297
391,544
-
222,725
159,393
746
-
8,680
Others
RM’000
4,208,687
1,766,398
1,038,820
94
16,161
117,430
905,135
2,805,218
1,672
1,269,771
503,820
146,260
33,118
850,577
Total
RM’000
152
373
80,818
(33,578)
151,762
29
563
Other liabilities
-
80,226
47,240
-
195
Liabilities
Other assets
42,439
4,233
Euro
RM’000
Assets
The Bank
2014
3,278,939
1,222,790
307,201
3,227
2,514
50,528
250,752
1,529,811
1,290
1,109,123
216,024
63,994
139,380
United States
Dollar
RM’000
6,408
(1,672)
6,295
-
-
-
6,295
4,623
-
-
-
15
4,608
Great Britain
Pound
RM’000
7,289
21,622
9,875
-
3
2,692
7,180
31,497
-
-
31,439
44
14
Australian
Dollar
RM’000
8,470
(2,868)
3,949
-
-
-
3,949
1,081
-
-
-
75
1,006
Japanese
Yen
RM’000
170,915
1,152,942
58,600
-
1,131
47,899
9,570
1,211,542
-
962,171
240,844
662
7,865
Others
RM’000
3,623,783
2,359,236
466,558
3,256
4,211
101,119
357,972
2,825,794
1,290
2,071,489
530,746
65,163
157,106
Total
RM’000
120,000
1,025,262
43,741
2,045,372
3,234,375
90,000
103,168
185,032
23,829,062
27,436,656
>1-3
months
RM’000
3,229,394
Up to 1
month
RM’000
4,029,505
22,237
5,171,225
140,000
903,260
76,223
-
>3-12
months
RM’000
* The negative balance represents collective impairment allowance for loans, advances and financing.
# Net of individual impairment allowance.
(1) Others include other assets and amount due from joint ventures.
Assets
Financial investment held-to-maturity
- non-impaired
- impaired
Others (1)
Total assets
The Group
2015
8,933,778
12,850,641
3,916,863
-
-
>1-5
years
RM’000
Non-trading book
2,769,170
6,865,531
4,044,836
51,525
-
Over 5
years
RM’000
- *
497,710 #
85,591
1,604,600
3,348,998
1,687
293,961
24,133
841,316
Noninterest /
profit
sensitive
RM’000
324,158
150,121
174,037
-
-
Trading
book
RM’000
41,606,887
497,710
107,828
1,604,600
59,231,584
351,687
150,121
174,037
10,287,350
380,654
4,070,710
Total
RM’000
The following table represents the Group’s and the Bank’s assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates as at reporting date.
Interest/profit rate risk is the risk to earnings and capital arising from exposure to adverse movements in interest/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. Interest/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.
Interest/profit rate risk
153
154
16,708,290
1,573,027
94,590
1,000,000
19,375,907
8,060,749
Net interest/profit sensitivity gap
Up to 1
month
RM’000
Liabilities
Deposits and placements of banks and other financial institutions
Obligation on securities sold under repurchase agreements
Other liabilities
Total liabilities
The Group
2015
Interest/profit rate risk (continued)
(11,177,255)
11,880,260
894,140
1,637,230
14,411,630
>1-3
months
RM’000
(9,562,817)
14,471,910
262,132
14,734,042
>3-12
months
RM’000
11,590,022
1,126,840
133,779
1,260,619
>1-5
years
RM’000
Non-trading book
6,865,531
-
Over 5
years
RM’000
3,625,913
6,297
9,126
77,114
806
4,446
399,718
4,123,420
Noninterest /
profit
sensitive
RM’000
414,140
414,140
Trading
book
RM’000
47,813,213
2,735,596
1,740,946
414,140
77,114
134,585
1,004,446
399,718
54,319,758
Total
RM’000
Up to 1
month
RM’000
1,398,421
82,690
3,814,294
5,295,405
2,299,560
3,511,576
>3-12
months
RM’000
890,031
321,985
>1-3
months
RM’000
8,331,073
12,849,604
195,000
4,323,531
-
>1-5
years
RM’000
Non-trading book
* The negative balance represents collective impairment allowance for loans, advances and financing.
# Net of individual impairment allowance.
(1) Others include other assets and amount due from joint ventures.
Assets
6,667,893
814,505
-non-impaired
22,603,483
-impaired
Others (1)
Total assets
30,085,881
The Group
2014
155
2,225,992
4,586,401
40,000
2,320,409
-
Over 5
years
RM’000
(292,619) *
474,389 #
229,162
1,696,550
2,654,217
271,019
3,222
201,014
71,480
Noninterest /
profit
sensitive
RM’000
238,562
149,904
88,658
-
Trading
book
RM’000
38,981,783
474,389
229,162
1,696,550
59,221,646
6,938,912
238,222
149,904
88,658
9,947,911
476,155
Total
RM’000
156
18,948,297
2,052,022
600,000
21,600,319
8,485,562
Net interest/profit sensitivity gap
Up to 1
month
RM’000
Liabilities
Other liabilities
Total liabilities
The Group
2014
(11,263,587)
12,454,090
2,321,073
14,775,163
>1-3
months
RM’000
(7,842,697)
12,673,829
464,273
13,138,102
>3-12
months
RM’000
12,055,276
656,015
138,313
794,328
>1-5
years
RM’000
Non-trading book
4,576,401
10,000
10,000
Over 5
years
RM’000
3,304,993
12,308
94,308
834
4,310
359,644
3,776,397
Noninterest /
profit
sensitive
RM’000
237,426
237,426
Trading
book
RM’000
48,047,224
4,849,676
237,426
94,308
139,147
604,310
359,644
54,331,735
Total
RM’000
Up to 1
month
RM’000
*
#
377,157
792,522
3,256,453
4,426,132
1,721,024
3,009,198
>3-12
months
RM’000
224,176
1,020,257
43,741
>1-3
months
RM’000
6,931,840
10,346,335
100,000
3,314,495
-
>1-5
years
RM’000
Non-trading book
The negative balance represents collective impairment allowance for loans, advances and financing.
Net of individual impairment allowance.
Assets
1,742,152
90,000
103,168
185,032
-non-impaired
19,201,934
-impaired
Other assets
Total assets
21,322,286
The Bank
2015
157
1,396,919
5,251,488
500,000
3,303,044
51,525
Over 5
years
RM’000
- *
394,518 #
64,231
61
1,345,000
2,957,002
831,196
19,431
278,491
24,074
Noninterest
sensitive
RM’000
324,866
150,121
174,745
-
Trading
book
RM’000
32,508,170
394,518
64,231
61
1,345,000
47,637,307
2,573,348
1,310,764
150,121
174,745
8,811,977
304,372
Total
RM’000
158
11,628,440
1,354,424
94,590
1,000,000
14,077,454
7,244,832
Net interest sensitivity gap
Up to 1
month
RM’000
Liabilities
Other liabilities
Total liabilities
The Bank
2015
(8,908,970)
10,122,175
158,763
1,637,230
11,918,168
>1-3
months
RM’000
(7,321,269)
11,485,269
262,132
11,747,401
>3-12
months
RM’000
9,195,657
1,016,899
133,779
1,150,678
>1-5
years
RM’000
Non-trading book
5,251,488
-
Over 5
years
RM’000
3,561,335
2,887
9,126
77,114
806
4,446
354,008
422,166
4,431,888
Noninterest
sensitive
RM’000
413,944
413,944
Trading
book
RM’000
37,814,118
1,778,206
1,740,946
413,944
77,114
134,585
1,004,446
354,008
422,166
43,739,533
Total
RM’000
Up to 1
month
RM’000
*
#
67,233
1,077,083
3,193,231
4,337,547
2,061,238
3,449,192
>3-12
months
RM’000
315,164
750,805
321,985
>1-3
months
RM’000
6,828,808
10,874,787
492,210
3,553,769
-
>1-5
years
RM’000
Non-trading book
The negative balance represents collective impairment allowance for loans, advances and financing.
Net of individual impairment allowance.
Assets
3,514,330
814,505
-non-impaired
18,563,002
-impaired
Other assets
Total assets
22,891,837
The Bank
2014
159
1,524,747
3,591,962
40,000
2,027,215
-
Over 5
years
RM’000
(255,226) *
376,751 #
166,147
438
1,398,550
2,260,265
262,712
47,443
192,034
71,416
Noninterest
sensitive
RM’000
238,576
149,904
88,672
-
Trading
book
RM’000
31,915,800
376,751
166,147
438
1,398,550
47,644,166
3,777,042
962,050
149,904
88,672
8,415,411
393,401
Total
RM’000
160
13,174,947
1,349,550
600,000
15,124,497
7,767,340
Net interest sensitivity gap
Up to 1
month
RM’000
Liabilities
Other liabilities
Total liabilities
The Bank
2014
(9,366,328)
10,694,447
2,121,073
12,815,520
>1-3
months
RM’000
(6,509,417)
10,627,244
219,720
10,846,964
>3-12
months
RM’000
10,316,821
419,653
138,313
557,966
>1-5
years
RM’000
Non-trading book
3,581,962
10,000
10,000
Over 5
years
RM’000
3,253,921
9,043
94,308
834
4,310
328,063
296,781
3,987,260
Noninterest
sensitive
RM’000
237,419
237,419
Trading
book
RM’000
38,180,212
3,699,386
237,419
94,308
139,147
604,310
328,063
296,781
43,579,626
Total
RM’000
(iii) Liquidity risk
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 prudential thresholds, liquidity risk threshold
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 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.
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.
161
(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 interest payments.
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
20,067,223
12,061,467
14,898,900
1,249,343
-
48,276,933
1,577,348
901,469
265,323
-
-
2,744,140
Obligation on securities sold under repurchase
agreements
95,424
1,652,019
-
-
-
1,747,443
77,114
-
-
-
-
77,114
The Group
2015
Deposits and placements of banks and other
financial institutions
Recourse obligation on loans sold to Cagamas
Berhad
Other liabilities
The Group
2014
Berhad
Other liabilities
162
-
2,560
136,965
-
-
139,525
399,718
-
-
-
-
399,718
2,870
5,458
35,531
188,969
1,119,574
1,352,402
22,219,697
14,622,973
15,336,719
1,438,312
1,119,574
54,737,275
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
22,031,100
12,648,427
13,058,333
700,615
10,347
48,448,822
2,101,968
2,337,475
472,699
-
-
4,912,142
94,308
-
-
-
-
94,308
-
2,572
7,729
139,712
-
150,013
359,644
-
-
-
-
359,644
1,175
2,236
20,764
110,716
651,190
786,081
24,588,195
14,990,710
13,559,525
951,043
661,537
54,751,010
Liquidity risk disclosure table which is based on contractual undiscounted cash flow (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
14,972,708
10,267,337
11,806,369
1,131,899
-
38,178,313
1,357,452
160,221
265,323
-
-
1,782,996
agreements
95,424
1,652,019
-
-
-
1,747,443
77,114
-
-
-
-
77,114
The Bank
2015
Berhad
-
2,560
136,965
-
-
139,525
Other liabilities
354,008
-
-
-
-
354,008
422,166
-
-
-
-
422,166
The Bank
2014
Berhad
2,870
5,458
35,531
188,969
1,119,574
1,352,402
17,281,742
12,087,595
12,244,188
1,320,868
1,119,574
44,053,967
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
16,239,178
10,861,632
10,948,721
450,924
10,347
38,510,802
1,355,497
2,136,204
224,406
-
-
3,716,107
94,308
-
-
-
-
94,308
-
2,572
7,729
139,712
-
150,013
Other liabilities
328,063
-
-
-
-
328,063
296,781
-
-
-
-
296,781
1,175
2,236
20,764
110,716
651,190
786,081
18,315,002
13,002,644
11,201,620
701,352
661,537
43,882,155
163
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
(200)
(63)
(663)
(364)
948
(342)
Outflow
(842,774)
(764,282)
(1,913,243)
(538,917)
-
(4,059,216)
Inflow
842,714
765,846
1,919,957
429,666
-
3,958,183
(60)
1,564
6,714
(109,251)
-
(101,033)
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
(118)
(1,038)
(1,679)
(4,221)
(1,400)
(8,456)
Outflow
(954,124)
(591,013)
(1,391,627)
79,230
(105,145)
(2,962,679)
Inflow
954,362
592,492
1,396,306
417,974
98,789
3,459,923
238
1,479
4,679
497,204
(6,356)
497,244
The Group
2015
Derivatives settled on net basis
Derivatives settled on gross basis
The Group
2014
164
Derivative financial liabilities (continued)
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
(200)
(63)
(663)
(364)
948
(342)
Outflow
(705,298)
(763,215)
(1,890,916)
(538,917)
-
(3,898,346)
Inflow
705,298
764,779
1,897,630
429,666
-
3,797,373
-
1,564
6,714
(109,251)
-
(100,973)
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
(118)
(1,038)
(1,679)
(4,221)
(1,400)
(8,456)
Outflow
(943,045)
(591,013)
(1,391,627)
79,230
(105,145)
(2,951,600)
Inflow
943,290
592,492
1,396,306
417,974
98,789
3,448,851
245
1,479
4,679
497,204
(6,356)
497,251
The Bank
2015
The Bank
2014
165
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 Group and 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 Group and the Bank by remaining contractual maturities profile are as follows:
The Group
2015
Assets
Deposits and placements with banks and other
Other assets
Other non-financial assets (1)
166
Liabilities
agreements
Berhad
Other liabilities
Other non-financial liabilities (2)
Net liquidity gap
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
4,070,710
-
-
-
-
4,070,710
150,121
17,925
88,162
23,438
3,640,851
42,357
39,936
1,604,600
3,598
9,681,698
35,034
75,530
966,699
1,530,550
2,091
2,609,904
72,929
1,094,769
48,594
2,205,474
16,595
46,206
3,484,567
286,619
4,911
4,092,884
32,336
11,005,462
5,769
15,427,981
30,034
2,742
4,044,836
276,286
23,722,260
5,986
560,450
28,642,594
351,687
150,121
174,037
10,287,350
380,654
42,104,597
72,798
39,936
1,604,600
610,254
59,846,744
20,053,169
11,973,746
14,598,308
1,187,990
-
47,813,213
1,575,970
897,088
262,538
-
-
2,735,596
95,370
57,860
77,114
1,645,576
87,441
-
125,110
-
138,835
-
4,894
-
1,740,946
414,140
77,114
399,718
3,065
15,104
22,277,370
806
1,381
14,606,038
10,052
14,996,008
133,779
1,460,604
1,000,000
1,004,894
134,585
399,718
1,004,446
25,156
54,344,914
(12,595,672) (11,996,134) (11,511,441)
13,967,377
27,637,700
(1) Other non-financial assets include tax recoverable, deferred tax assets, property and equipment and intangible assets.
(2) Other non-financial liabilities include deferred tax liabilities and provision for taxation.
Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)
The Group
2014
Assets
Other assets
Liabilities
Berhad
Other liabilities
Other non-financial liabilities (2)
Net liquidity gap
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
6,938,912
-
-
-
-
6,938,912
149,904
13,892
795,662
70,359
3,014,294
194,602
14,855
1,696,550
3,118
12,892,148
22,322
838,305
75,807
1,867,264
2,803,698
44,429
1,518,997
16,064
2,305,986
13,467
20
3,898,963
196,937
5,040
4,474,538
70,331
10,573,753
5,363
15,325,962
41,285
2,975
2,320,409
243,594
21,694,875
9,974
296,819
24,609,931
238,222
149,904
88,658
9,947,911
476,155
39,456,172
223,406
14,855
1,696,550
299,957
59,530,702
22,013,079
12,571,232
12,794,289
658,624
10,000
48,047,224
2,058,948
35,500
94,308
2,325,072
42,356
-
465,656
100,581
-
45,569
-
13,420
-
4,849,676
237,426
94,308
359,644
2,940
24,564,419
834
1,370
14,940,864
28,029
13,388,555
138,313
842,506
600,000
623,420
139,147
359,644
604,310
28,029
54,359,764
(11,672,271) (12,137,166)
(9,489,592)
14,483,456
23,986,511
(1) Other non-financial assets include tax recoverable, deferred tax assets, property and equipment and intangible assets.
(2) Other non-financial liabilities include deferred tax liabilities and provision for taxation.
167
The Bank
2015
Assets
Other assets
Liabilities
agreements
Berhad
Other liabilities
Net liquidity gap
168
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
2,573,348
-
-
-
-
2,573,348
150,121
18,633
80,692
23,439
3,182,982
39,815
61
1,345,000
7,414,091
139,899
75,530
956,962
1,331,179
1,592
2,505,162
242,612
72,929
980,764
44,376
1,844,673
16,279
46,179
3,247,812
386,993
4,911
3,490,515
9,555,493
5,492
13,443,404
541,260
2,742
3,303,044
236,557
16,988,361
5,368
1,045,591
22,122,923
1,310,764
150,121
174,745
8,811,977
304,372
32,902,688
68,546
61
1,345,000
1,091,770
48,733,392
14,961,225
10,201,186
11,575,079
1,076,628
-
37,814,118
1,356,350
159,318
262,538
-
-
1,778,206
95,370
57,862
77,114
1,645,576
87,432
-
124,921
-
138,835
-
4,894
-
1,740,946
413,944
77,114
354,008
422,166
15,104
3,065
17,342,264
806
1,381
12,095,699
11,962,538
133,779
1,349,242
1,000,000
1,004,894
134,585
354,008
422,166
15,104
1,004,446
43,754,637
(9,928,173)
(9,590,537)
(8,714,726)
12,094,162
21,118,029
(1) Other non-financial assets include tax recoverable, investment in subsidiaries, property and equipment and intangible assets.
The Bank
2014
Assets
Other assets
Liabilities
Berhad
Other liabilities
Net liquidity gap
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
3,777,042
-
-
-
-
3,777,042
149,904
13,909
795,381
70,359
2,481,164
146,749
438
1,398,550
218
8,833,714
321,335
22,320
693,321
75,807
1,715,450
2,828,233
67,503
44,429
1,194,718
16,000
1,996,504
12,991
3,332,145
531,927
5,040
3,704,776
44,000
9,212,519
5,363
13,503,625
41,285
2,974
2,027,215
187,235
16,886,914
9,552
680,795
19,835,970
962,050
149,904
88,672
8,415,411
393,401
32,292,551
174,655
438
1,398,550
681,013
48,333,687
16,224,566
10,796,817
10,727,106
421,723
10,000
38,180,212
1,354,279
35,493
94,308
2,125,052
42,356
-
220,055
100,581
-
45,569
-
13,420
-
3,699,386
237,419
94,308
328,063
296,781
2,940
18,336,430
834
1,370
12,966,429
23,939
11,071,681
138,313
605,605
600,000
623,420
139,147
328,063
296,781
23,939
604,310
43,603,565
(9,502,716) (10,138,196)
(7,739,536)
12,898,020
19,212,550
(1) Other non-financial assets include deferred tax assets, investment in subsidiaries, property and equipment and intangible assets.
169
(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 operates 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 thresholds 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
minimise 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 undertakes an online self learning exercise before attempting on-line assessments to measure their skills and knowledge level. This will enable Group Risk
Management to prescribe appropriate training and development activities for the coordinators.
(v) Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
The Group and 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.
170
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 where the 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 Group and the Bank
then determine 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.
(v) Fair value of financial instruments (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 Group’s and the Bank’s exposure to financial instruments classified as Level 3
comprised a small number of financial instruments which constitute an insignificant component of the Group’s and 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 Group and the Bank recognise 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 level 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: Nil).
The following table presents assets and liabilities measured at fair value and classified by level of the following fair value measurement
hierarchy:
The Group
2015
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
-
150,121
174,037
-
150,121
174,037
-
5,131,940
4,949,987
10,406,085
205,423
205,423
5,131,940
205,423
4,949,987
10,611,508
Liabilities
Total
-
414,140
414,140
-
414,140
414,140
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
-
149,904
88,658
-
149,904
88,658
33
33
5,880,119
3,937,081
10,055,762
130,678
130,678
5,880,119
130,711
3,937,081
10,186,473
-
237,426
237,426
-
237,426
237,426
The Group
2014
Assets
Financial investments available-for-sale *
- Money market instruments
- Equity securities
- Private debt securities
Total
Liabilities
Total
*
Net of allowance for impairment
Assets
- Equity securities
Total
171
The Bank
2015
Level 3
RM’000
Total
RM’000
-
150,121
174,745
-
150,121
174,745
-
4,165,583
4,441,496
8,931,945
204,898
204,898
4,165,583
204,898
4,441,496
9,136,843
Liabilities
Total
-
413,944
413,944
-
413,944
413,944
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
-
149,904
88,672
-
149,904
88,672
33
33
4,869,393
3,415,333
8,523,302
130,652
130,652
4,869,393
130,685
3,415,333
8,653,987
-
237,419
237,419
-
237,419
237,419
Assets
- Equity securities
Total
Liabilities
Total
* Net of allowance for impairment.
Level 2
RM’000
Assets
- Equity securities
Total
The Bank
2014
172
Level 1
RM’000
The following table present the changes in Level 3 instruments for the financial year ended:
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
130,678
119,003
130,652
118,934
500
9,674
-
9,674
Sales
-
(10,221)
-
(10,221)
-
548
-
548
74,245
12,224
74,246
11,717
Purchases
Total gains recognised in other comprehensive income
-
(550)
-
-
205,423
130,678
204,898
130,652
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):
2015
RM’000
2014
RM’000
Valuation
techniques
Unobservable
inputs
Inter-relationship
between significant
unobservable inputs and
fair value measurement
The Group
Unquoted shares
205,423
130,678
Net tangible
assets
Net tangible
assets
Higher net tangible assets
results in higher fair value
The Bank
Unquoted shares
204,898
130,652
Net tangible
assets
Net tangible
assets
Higher net tangible assets
results in higher fair value
Fair value assets
Description
Financial investments
available-for-sale
In estimating its significance, the Group and the Bank used an approach that is currently based on methodologies used for fair value
adjustments. These adjustments reflects the values that the Group and the Bank estimate are appropriate to adjust from the valuations
produced to reflect for uncertainties in the inputs used. The methodologies used can be a statistical or other relevant approved techniques.
173
The following tables analyse within the fair value hierarchy of the Group’s and the Bank’s assets and liabilities not measured at fair value as
at reporting date but for which fair value is disclosed:
The Group
2015
Fair value
Carrying
value
RM’000
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
380,654
-
363,590
-
363,590
42,104,597
-
41,821,977
-
41,821,977
42,485,251
-
42,185,567
-
42,185,567
47,813,213
-
47,832,486
-
47,832,486
134,585
-
136,065
-
136,065
47,947,798
-
47,968,551
-
47,968,551
Financial assets
Financial liabilities
The Group
2014
Fair value
Carrying
value
RM’000
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
476,155
-
472,887
-
472,887
39,456,172
-
39,172,438
-
39,172,438
39,932,327
-
39,645,325
-
39,645,325
48,047,224
-
48,052,332
-
48,052,332
4,849,676
-
4,849,314
-
4,849,314
Financial assets
174
139,147
-
140,764
-
140,764
53,036,047
-
53,042,410
-
53,042,410
The Bank
2015
Fair value
Carrying
value
RM’000
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
1,310,764
-
1,336,046
-
1,336,046
304,372
-
288,579
-
288,579
Financial assets
32,902,688
-
32,658,990
-
32,658,990
34,517,824
-
34,283,615
-
34,283,615
37,814,118
-
37,828,091
-
37,828,091
The Bank
2014
134,585
-
136,065
-
136,065
37,948,703
-
37,964,156
-
37,964,156
Carrying
value
RM’000
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
962,050
-
959,983
-
959,983
Fair value
Financial assets
393,401
-
391,821
-
391,821
32,292,551
-
32,042,730
-
32,042,730
33,648,002
-
33,394,534
-
33,394,534
38,180,212
-
38,183,560
-
38,183,560
3,699,386
-
3,699,024
-
3,699,024
139,147
-
140,764
-
140,764
42,018,745
-
42,023,348
-
42,023,348
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 Group and the Bank approximates the total carrying amount.
175
The fair value estimates were determined by application of the methodologies and assumptions described below.
Short-term funds and placements with banks and other financial institutions
For short-term funds and placements with banks and other financial institutions with maturity of less than six months, the carrying amount
is a reasonable estimate of fair value.
For amounts with maturities of six months or more, fair values have been estimated by reference to current rates at which similar deposits
and placements would be made to banks with similar credit ratings and maturities.
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.
Loans, advances and financing of the Group comprise of floating rate loans and fixed rate loans. For performing floating rate loans, the
carrying amount is a reasonable estimate of their fair values.
The fair values of performing fixed rate loans are arrived at using the discounted cash flows based on the prevailing market rates of loans,
advances and financing with similar credit ratings and maturities.
The fair values of impaired loans, advances and 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.
Deposits from customers, banks and other financial institutions, bills and acceptances payable
The carrying values of deposits and liabilities with maturities of six months or less are assumed to be reasonable estimates of their fair values.
Where the remaining maturities of deposits and liabilities are above six months, their estimated fair values are arrived at using the discounted
cash flows based on prevailing market rates currently offered for similar remaining maturities.
The estimated fair value of deposits with no stated maturity, which include non-interest bearing deposits, approximates carrying amount
which represents the amount repayable on demand.
176
For floating rate loans sold to Cagamas Berhad, the carrying value is generally a reasonable estimate of their fair values.
The fair values of fixed rate loans sold to Cagamas Berhad are arrived at using the discounted cash flow methodology at prevailing market
rates of similarly profiled loans.
For fixed rate borrowings, the estimate of fair value is based on discounted cash flow model using prevailing lending rates for borrowings with
similar risks and remaining term to maturity.
For floating rate borrowings, the carrying value is generally a reasonable estimate of their fair values.
40 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
In accordance with MFRS 132 “Financial Instruments: Presentation”, the Group and the Bank report 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 reverse repurchase and repurchased agreements and other similar secured lending and borrowing
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
enforceable 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 Group’s and 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.
The ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set-off under netting agreements, such as global
master repurchase 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.
177
Effects of offsetting on the statements of
financial position
Related amounts not offset
Gross
amount
RM’000
Amount
offset
RM’000
Net amount
reported on
statement
of financial
position
RM’000
174,037
-
174,037
(74,365)
-
99,672
Total assets
174,037
-
174,037
(74,365)
-
99,672
1,740,946
-
1,740,946
(1,740,946)
-
-
The Group
2015
Financial
instruments
RM’000
Financial
collateral
RM’000
Net
amount
RM’000
Financial assets
Obligation on securities sold under
repurchase agreement
Total liabilities
414,140
-
414,140
(74,365)
-
339,775
2,155,086
-
2,155,086
(1,815,311)
-
339,775
Effects of offsetting on the statements of financial
position
Gross
amount
RM’000
Amount
offset
RM’000
Net amount
reported on
statement
of financial
position
RM’000
88,658
-
88,658
(33,932)
-
54,726
Total assets
88,658
-
88,658
(33,932)
-
54,726
237,426
-
237,426
(33,932)
-
203,494
Total liabilities
237,426
-
237,426
(33,932)
-
203,494
The Group
2014
Financial
instruments
RM’000
Financial
collateral
RM’000
Net
amount
RM’000
Financial assets
178
Effects of offsetting on the statements of
financial position
Gross
amount
RM’000
Amount
offset
RM’000
Net amount
reported on
statement
of financial
position
RM’000
174,745
-
174,745
(74,491)
-
100,254
Total assets
174,745
-
174,745
(74,491)
-
100,254
1,740,946
-
1,740,946
(1,740,946)
-
-
The Bank
2015
Financial
instruments
RM’000
Financial
collateral
RM’000
Net
amount
RM’000
Financial assets
Obligation on securities sold under
repurchase agreement
Total liabilities
413,944
-
413,944
(74,491)
-
339,453
2,154,890
-
2,154,890
(1,815,437)
-
339,453
Effects of offsetting on the statements of financial
position
Gross
amount
RM’000
Amount
offset
RM’000
Net amount
reported on
statement
of financial
position
RM’000
88,672
-
88,672
(33,922)
-
54,750
Total assets
88,672
-
88,672
(33,922)
-
54,750
237,419
-
237,419
(33,922)
-
203,497
Total liabilities
237,419
-
237,419
(33,922)
-
203,497
The Bank
2014
Financial
instruments
RM’000
Financial
collateral
RM’000
Net
amount
RM’000
Financial assets
179
41 LEASE COMMITMENTS
The Group and the Bank have 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-cancellable operating leases commitments are as follows:
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
Within one year
22,745
22,689
22,056
21,906
One year to five years
33,468
47,476
33,219
46,926
42 CAPITAL AND OPERATING COMMITMENTS
Capital commitments
Capital expenditure approved by the Directors but not provided for in the financial statements amounted to approximately:
The Bank
Authorised and contracted for
2015
2014
RM’000
RM’000
24,251
13,859
24,251
13,859
Analysed as follows:
Property and equipment
Operating commitments
Operating expenditure approved by the Directors but not provided for in the financial statements amounted to approximately:
The Bank
Authorised and contracted for
180
2015
2014
RM’000
RM’000
79,263
138,051
43 CAPITAL MANAGEMENT
With effect from 1 January 2013, the total capital and capital adequacy ratios of the Group and the Bank are computed in accordance with Bank
Negara Malaysia’s Capital Adequacy Framework (Capital Components).
The Group and the Bank are 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 (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 Group and the Bank’s objectives when managing capital are:
•
To comply with the capital requirements set by the regulators of the banking markets where the entities within the Group and the Bank
operates;
•
To safeguard the Group and the Bank’s ability to continue as a going concern so that it can continue to provide returns for shareholders and
benefits for other stakeholders; and
•
To maintain a strong capital base to support the development of its business.
The Group and the Bank maintain a ratio of total regulatory capital to its risk-weighted assets above a minimum level agreed with the management
which takes into account the risk profile of the Group and the Bank.
The table in Note 44 below summarises the composition of regulatory capital and the ratios of the Group and the Bank for the financial year ended
31 December 2015.
44 CAPITAL ADEQUACY
The capital adequacy ratios are as follows:
The Group (#)
Paid-up share capital
Share premium
Statutory reserves
Retained profits
Unrealised gains and losses on AFS
Less:
Goodwill and other intangibles
2015
RM’000
2014
RM’000
2015
RM’000
2014
RM’000
1,688,770
858,904
1,577,509
1,029,155
90,983
5,245,321
1,688,770
858,904
1,469,794
951,500
23,163
4,992,131
1,688,770
858,904
1,328,792
805,289
101,388
4,783,143
1,688,770
858,904
1,263,470
760,153
30,893
4,602,190
(153,137)
(147,688)
(156,604)
(150,690)
(50,041)
5,042,143
5,042,143
(3,118)
(12,739)
4,828,586
4,828,586
(55,763)
(195,630)
4,375,146
4,375,146
(218)
(16,991)
(77,815)
4,356,476
4,356,476
Deferred tax assets
55% of cumulative unrealised gains of AFS
Investment in subsidiaries/joint ventures
CET 1 capital
Tier I capital
The Bank
181
44 CAPITAL ADEQUACY
The Group (#)
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
820,000
480,000
820,000
480,000
Collective impairment @
133,809
150,254
110,058
129,134
Regulatory adjustments
278,547
184,366
220,148
135,347
-
-
(293,444)
(311,259)
Less:
Tier II capital
1,232,356
814,620
856,762
433,222
Total capital
6,274,499
5,643,206
5,231,908
4,789,698
CET 1 capital ratio
11.878%
11.936%
12.230%
12.510%
Tier 1 capital ratio
11.878%
11.936%
12.230%
12.510%
Total capital ratio
14.781%
13.950%
14.625%
13.754%
CET 1 capital ratio (net of proposed dividends)^
11.632%
11.773%
11.938%
12.320%
Tier 1 capital ratio (net of proposed dividends)^
11.632%
11.773%
11.938%
12.320%
Total capital ratio (net of proposed dividends)^
14.535%
13.786%
14.333%
13.564%
39,766,072
37,845,580
33,498,227
32,586,612
327,504
286,738
323,855
284,148
Risk-weighted assets for:
Credit risk
Market risk
Operational risk
Total risk-weighted assets
2,355,261
2,322,105
1,951,219
1,954,278
42,448,837
40,454,423
35,773,301
34,825,038
@ Qualifying collective impairment is restricted to allowances on unimpaired portion of the loans, advances and financing.
# The Group comprises the banking and non-banking subsidiaries.
^ Net proposed dividends of RM104,366,000 (2014: RM66,030,892).
In accordance with BNM’s Guidelines on Investment Account, the credit and market risk weighted on the assets funded by the RIA are included
in calculation of capital adequacy for the Bank. As at 31 December 2015, RIA assets included in the Total Capital ratio calculation amounted to
RM1,316,026,354 (2014: RM608,590,486).
The capital adequacy ratios of the AFFIN Islamic Bank Berhad is as follows:
182
Economic Entity
The Bank
2015
2014
2015
2014
CET 1 capital ratio
13.197%
12.456%
13.203%
12.465%
13.197%
12.456%
13.203%
12.465%
Total capital ratio
14.415%
13.674%
14.415%
13.674%
(Before and after deducting proposed dividend)
45 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The Group and the Bank make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. To enhance the information content of the estimates, certain variables that are anticipated to have material impact
to the Group’s and the Bank’s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial
year are discussed below.
Allowance for impairment losses on loans, advances and financing
The accounting estimates and judgments related to the impairment of loans and provision for off-balance sheet positions are 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 Group and the Bank’s results of operations.
In assessing assets for impairment, management judgment is required. The determination of the impairment allowance required for loans which
are deemed to be individually significant often requires the use of considerable management judgment concerning such matters as local economic
conditions, the financial performance of the counterparty and the value of any collateral held, for which there may not be a readily accessible
market. The actual amount of the future cash flows and their timing may differ from the estimates used by management and consequently may
cause actual losses to differ from the reported allowances.
The impairment allowance for portfolios of smaller-balance homogenous loans, such as those to individuals and small business customers of
the private and retail business, and for those loans which are individually significant but for which no objective evidence of impairment exists, is
determined on a collective basis. The collective impairment allowance is calculated on a portfolio basis using statistical models which incorporate
numerous estimates and judgments, and therefore is subject to estimation uncertainty. The Group and the Bank perform a regular review of the
models and underlying data and assumptions as far as possible to reflect the current economic circumstances. The probability of default, loss given
defaults, and loss identification period, amongst other things, are all taken into account during this review.
Estimated impairment of goodwill
The Group performs an impairment review on an annual basis to ensure that the carrying value of the goodwill does not exceed its recoverable
amounts from cash generating units to which the goodwill is allocated. The recoverable amount represents the present value of the estimated
future cash flows expected to arise from continuing operations. Therefore, in arriving at the recoverable amount, management exercise judgment
in estimating the future cash flows, growth rate and discount rate.
Impairment of investment in subsidiaries and joint ventures
Investment in subsidiaries and 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 is required in the estimation of the present value of future cash flows generated by
the subsidiairies and joint ventures, which uncertainties 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 Group’s test for impairment of
investments.
46 CREDIT EXPOSURES ARISING FROM TRANSACTIONS WITH CONNECTED PARTIES
The following credit exposures are based on Bank Negara Malaysia’s revised Guidelines on Credit Transaction and Exposures with Connected
Parties, which are effective 1 January 2008.
2014
2,319,413
2,660,459
(ii) The percentage of outstanding credit exposures to connected parties as a proportion of total credit
exposures
5%
5%
(iii) The percentage of outstanding credit exposures with connected parties which is impaired or in default
Nil
Nil
(i) The aggregate value of outstanding credit exposures with connected parties (RM’000)
47 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.
The Bank
2015
183
STATEMENT BY DIRECTORS
PURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965
We, JEN. TAN SRI DATO’ SERI ISMAIL BIN HAJI OMAR (BERSARA) and EN. MOHD SUFFIAN BIN HAJI HARON, two of the Directors of AFFIN BANK BERHAD,
state that, in the opinion of the Directors, the accompanying financial statements set out on pages 62 to 183 are drawn up so as to give a true and
fair view of the state of affairs of the Group and the Bank as at 31 December 2015 and of the results and cash flows of the Group 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.
In accordance with a resolution of the Board of Directors 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 BANK BERHAD primarily responsible for the financial management of the Group and the Bank, do solemnly
and sincerely declare that, in my opinion, the accompanying financial statements set out on pages 62 to 183, are correct and I make this solemn
declaration conscientiously believing the same to be true, by virtue of the provisions of the Statutory Declarations Act, 1960.
RAMANATHAN RAJOO
Subscribed and solemnly declared by the above named RAMANATHAN RAJOO at Kuala Lumpur in Malaysia on 3 March 2016, before me.
184
Commissioner for Oaths
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF AFFIN BANK BERHAD (Incorporated in Malaysia)
REPORT ON THE FINANCIAL STATEMENTS
We have audited the financial statements of AFFIN Bank Berhad on pages 62 to 183 which comprise the statements of financial position as at 31
December 2015 of the Group and of the Bank, and the statements of income, comprehensive income, changes in equity and cash flows of the Group
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 46.
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 Group 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 the following:
a)
In our opinion, the accounting and other records and the registers required by the Act to be kept by the Bank and its subsidiaries have been properly
kept in accordance with the provisions of the Act.
b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Bank’s financial statements are in form and
content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory
information and explanations required by us for those purposes.
OTHER MATTERS
This report is made solely to the member of the Bank, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no
other purpose. We do not assume responsibility to any other person for the content of this report.
PRICEWATERHOUSECOOPERS
(No. AF : 1146)
Chartered Accountants
Kuala Lumpur, Malaysia
3 March 2016
SOO HOO KHOON YEAN
(No. 2682/10/17 (J))
Chartered Accountant
c) Our audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section
174(3) of the Act.
185
basel ii
pillar 3 disclosures
187
187
187
1.Introduction
1.1Background
1.2 Scope of Application
187
187
188
189
189
190
2.
2.1Overview
2.2 Board Committees
2.3 Management Committees
2.4 Group Risk Management Function
2.5 Internal Audit and Internal Control Activities
190
190
190
192
3.
Capital Management
3.1 Internal Capital Adequacy Assessment Process (‘ICAAP’)
3.2 Capital Structure
3.3 Capital Adequacy
192
4. Risk Management Objectives and Policies
192
192
193
193
193
194
195
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
200
200
200
200
201
201
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
201
201
201
7. Liquidity Risk
7.1 Liquidity Risk Management Objectives and Policies
7.2 Liquidity Risk Measurement, Control and Monitoring
202
202
202
202
203
8.
203
9. Shariah Compliance
204
Appendices
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
basel II pillar 3 disclosures
1Introduction
1.1Background
AFFIN Bank Berhad (‘the Bank’) adopts Basel II in January 2008 in line with the directive from Bank Negara Malaysia (‘BNM’). The Basel II
framework is structured around three fundamental Pillars.
-
Pillar 1 defines the minimum capital requirement to ensure that financial institutions hold sufficient capital to cover their exposure to
credit, market and operational risks.
-
Pillar 2 requires financial institutions to have a process for assessing their overall capital adequacy in relation to their risk profile and a
strategy for maintaining their capital levels.
-
Pillar 3 requires financial institutions to establish and implement an appropriate disclosure policy that promotes transparency regarding
their risk management practices and capital adequacy positions.
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.
The Group’s capital requirements are generally based on the principles of consolidation adopted in the preparation of its financial statements.
The Group’s consolidated entities comprise the Bank and the Bank’s subsidiary, AFFIN Islamic Bank Berhad.
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 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.
187
2
2.2 Board Committees
188
Board Remuneration Committee (‘BRC’)
The BRC is responsible for providing a formal and transparent procedure for developing the remuneration policy for Directors, Managing
Director/Chief Executive Officer and key senior management officers and ensuring that compensation is competitive and consistent with 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 Managing Director/Chief
Executive Officer, assessing the effectiveness of individual Directors, the Board as a whole and the performance of the Managing Director/
Chief Executive Officer 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 loans and other credit facilities with higher risk implications, after due process of
checking, analysis, review and recommendation by the Credit Risk Management function, and if found necessary, exercise the power to veto
loan applications that have been approved by the Group Management Loan Committee (‘GMLC’). BLRRC also reviews the impaired loans
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 Managing Director/Chief Executive Officer.
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 AFFIN Islamic Bank comply with the Shariah principles
at all times;
(ii) To endorse and validate relevant documentations of AFFIN Islamic Bank’s products to ensure that the products comply with Shariah
principles; and
(iii) To advise AFFIN Islamic 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 the 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 MD/CEO to approve complex and larger loans 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 MD/CEO, 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 the 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’)
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.
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.
189
2
2.5 Internal Audit and Internal Control Activities
In accordance with BNM’s guidelines on Corporate Governance for Licensed Institutions, 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.
3
Capital Management
3.1 Internal Capital Adequacy Assessment Process (‘ICAAP’)
In line with the BNM guidelines 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
With effect from 1 January 2013, the total capital and capital adequacy ratios of the Group and the Bank are computed in accordance with
Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components).
The Group and the Bank are 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 (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 Group and the Bank as at 31
December 2015.
190
3
Capital Management
3.2 Capital Structure (continued)
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
1,688,770
1,688,770
1,688,770
1,688,770
858,904
858,904
858,904
858,904
Statutory reserves
1,577,509
1,469,794
1,328,792
1,263,470
Retained profits
1,029,155
951,500
805,289
760,153
90,983
23,163
101,388
30,893
5,245,321
4,992,131
4,783,143
4,602,190
(153,137)
(147,688)
(156,604)
(150,690)
-
(3,118)
-
(218)
(50,041)
(12,739)
(55,763)
(16,991)
Paid-up share capital
Share premium
Unrealised gains and losses on AFS
Less:
Goodwill
Deferred tax assets
55% of cumulative unrealised gains of AFS
-
-
(195,630)
(77,815)
CET 1 capital
5,042,143
4,828,586
4,375,146
4,356,476
Tier I capital
5,042,143
4,828,586
4,375,146
4,356,476
820,000
480,000
820,000
480,000
133,809
150,254
110,058
129,134
Regulatory adjustments
278,547
184,366
220,148
135,347
-
-
(293,444)
(311,259)
Tier II capital
1,232,356
814,620
856,762
433,222
Total capital
6,274,499
5,643,206
5,231,908
4,789,698
Less:
11.878%
11.936%
12.230%
12.510%
11.878%
11.936%
12.230%
12.510%
Total capital ratio
14.781%
13.950%
14.625%
13.754%
CET 1 capital ratio (net of proposed dividends)
11.632%
11.773%
11.938%
12.320%
Tier 1 capital ratio (net of proposed dividends)
11.632%
11.773%
11.938%
12.320%
Total capital ratio (net of proposed dividends)
14.535%
13.786%
14.333%
13.564%
39,766,072
37,845,580
33,498,227
32,586,612
327,504
286,738
323,855
284,148
Risk-weighted assets for:
Credit risk
Market risk
Operational risk
Total risk-weighted assets
2,355,261
2,322,105
1,951,219
1,954,278
42,448,837
40,454,423
35,773,301
34,825,038
CET 1 capital ratio
191
3
Capital Management
3.3 Capital Adequacy
The Group and the Bank have in place an internal limit for its CET 1 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. The principal activities of the Bank’s subsidiaries are
Islamic banking business, property management services, nominee and trustee services. There have been no significant changes in these principal
activities during the financial year.
The 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 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
Credit risk is the potential financial loss resulting from the failure of the customer or counterparty to settle the financial and contractual
obligations to the Bank. Credit risk emanates mainly from loans and advances, loan commitments arising from such lending activities, as well
as through financial transactions with counterparties including interbank money market activities, derivative instruments used for hedging
and debt securities.
The management of credit 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.
192
Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit Plan. New businesses are governed by the risk
acceptance criteria and customer qualifying criteria/fitness standards prescribed in the 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 loan origination.
Over-the-Counter (‘OTC’) Derivatives
The OTC Derivatives credit exposure is computed using the Current Exposure Method. Under the Current Exposure Method, computation
of credit equivalent exposure for interest rate and exchange rate related contracts is derived from the summation of the two elements;
the replacement costs (obtained by marking-to-market) of all contracts and the potential future exposure of outstanding contracts (Add On
charges depending on the specific remaining tenor to maturity).
5.4 Risk Limit Control and Mitigation Policies
The Bank employs various policies and practices to control and mitigate credit risk.
Lending limits
The credit risk exposure for derivative and loan books is managed as part of the overall lending limits with customers together with potential
exposure from market movements.
The Bank establishes internal limits and related lending guidelines to manage large exposures and avoid undue concentration of credit risk
in its credit portfolio. The limits include single customer groupings, connected parties and industry segments. These risks are monitored
regularly and the limits reviewed annually or sooner depending on market and economic conditions.
193
5
Credit Risk
5.4 Risk Limit Control and Mitigation Policies (continued)
Collateral
Credits are established against borrower’s capacity to repay rather than rely solely on security. However, collateral may be taken to mitigate
credit risk. The main collateral types accepted and given value by 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 loans, guarantees or letters of credit. In terms of
credit risk, the Bank is potentially exposed to loss in an amount equal to the total unutilised commitments. However, the potential amount of
loss is less than the total unutilised commitments, as most commitments to extend credit are contingent upon customers maintaining specific
minimum credit standards.
The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit
risk than short-term commitments.
Refer to Appendix IV (a) to (b).
5.5 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.
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.
194
5
Credit Risk
5.6 Impairment Provisioning
Individual impairment provisioning
Significant loans, 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 interest rate. The level of impairment allowance on significant loans is reviewed
regularly, at least quarterly or more often when circumstances require.
Significant loans that are deemed not impaired after individual assessment are included in a group of loans with similar characteristics and
collectively assessed for impairment.
Collective impairment provisioning
All loans are grouped in respective business segments according to similar credit risk characteristics and is generally based on industry, asset
or collateral type, credit grade and past due status grouped based on business segments.
Portfolio provisioning is determined for each segment based on its respective loss probabilities and other information relevant to estimation
of the future cash flows of each segment.
Collective provisioning is applicable to all loans not covered under individual assessment as well as significant loans that are deemed not
impaired after individual assessment.
Total loans, advances and financing - credit quality
All loans, advances and financing are categorised into “neither past due nor impaired”, “past due but not impaired” and “impaired”. Past
due loans refer to loans that are overdue by one day or more. Impaired loans are loans with months-in-arrears more than 90 days or with
impaired allowances.
195
5
Credit Risk
5.6 Impairment Provisioning (continued)
Analysed by economic sectors
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
36,912
12,158
36,047
11,564
1,788
2,615
1,568
2,415
45,369
43,019
43,470
40,237
1,140
1,100
497
588
Construction
168,155
141,821
142,659
132,880
Real estate
276,752
359,196
275,737
331,607
112,400
77,511
106,091
73,123
41,771
50,250
39,362
47,026
58,783
89,818
54,930
87,117
83,093
67,577
64,689
57,444
1,828,209
1,800,031
1,361,693
1,380,662
2,654,372
2,645,096
2,126,743
2,164,663
Past due loans
Primary agriculture
Manufacturing
Household
The Group
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
426
2,435
426
2,435
13,821
18,663
13,821
16,305
Construction
45,659
180,242
45,659
151,749
Real estate
35,032
-
43
-
11,735
5,531
10,658
5,531
Household
2015
Manufacturing
Primary agriculture
196
The Bank
610
540
610
540
151,508
27,483
151,509
27,483
1,926
-
1,926
-
9,420
4,365
6,969
3,697
270,137
239,259
231,621
207,740
5
Credit Risk
Analysed by economic sectors (continued)
The Group
Individual impairment charged
Primary agriculture
Manufacturing
Construction
Real estate
Household
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
321
211
321
211
-
8
-
8
8,267
11,177
8,242
11,131
54,171
66,730
54,171
66,730
768
-
768
-
11,414
4,996
10,253
4,996
104
640
104
640
168,289
739
168,289
739
2,922
-
2,922
-
11,389
3,110
9,016
1,647
257,645
87,611
254,086
86,102
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
2,227
-
2,227
-
The Group
Individual impairment written-off
Primary agriculture
Manufacturing
Construction
Household
The Bank
-
7,226
-
7,226
11,793
4,011
9,411
4,011
148,771
21,032
148,771
21,032
2,938
1,813
2,938
-
-
3,308
-
3,308
26,386
3,509
26,386
3,509
850
9,971
850
9,971
192,965
50,870
190,583
49,057
197
5
Credit Risk
Analysed by economic sectors (continued)
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
Primary agriculture
2,404
2,838
2,102
2,191
1,454
1,369
1,415
1,365
Manufacturing
9,406
11,393
8,312
10,227
545
823
379
669
Construction
23,183
26,496
20,718
24,540
Real estate
20,165
17,722
18,524
16,620
13,896
16,246
13,009
15,448
7,622
8,461
6,772
7,924
10,286
30,732
9,159
28,259
7,368
5,890
4,931
4,410
133,132
170,649
107,469
143,573
229,461
292,619
192,790
255,226
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
Perlis
4,178
4,455
3,335
3,750
Kedah
122,883
109,040
80,482
84,534
97,462
87,424
82,776
75,049
Perak
127,279
117,262
70,476
65,279
Selangor
768,553
937,151
614,302
794,410
Wilayah Persekutuan
455,527
388,066
379,398
343,415
Negeri Sembilan
104,328
82,301
77,869
67,935
96,081
95,668
83,208
86,980
Household
Analysed by geographical area
The Group
Past due loans
Pulau Pinang
Melaka
262,571
254,439
230,486
227,871
Pahang
69,963
64,691
48,519
41,614
Terengganu
60,213
61,163
4,617
5,791
Johor
198
The Bank
Kelantan
32,780
45,729
7,053
6,465
Sarawak
155,101
135,361
152,260
133,311
Sabah
297,380
234,956
291,889
228,143
73
18
73
18
-
27,372
-
98
2,654,372
2,645,096
2,126,743
2,164,663
Labuan
Outside Malaysia
5
Credit Risk
Analysed by geographical area (continued)
The Group
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Johor
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
1,484
884
1,484
884
12,386
12,403
12,386
12,403
59
-
59
-
181,327
97,494
178,904
94,494
28,378
29,906
27,273
29,880
-
2,245
-
2,245
1,533
10,368
1,533
10,368
38
38,920
38
38,920
Terengganu
-
11,569
-
11,569
Sarawak
-
101
-
101
Pahang
Sabah
Outside Malaysia
9,944
-
9,944
-
34,988
35,369
-
6,876
270,137
239,259
231,621
207,740
The Group
The Bank
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
Perlis
901
833
492
413
Kedah
10,201
11,681
8,315
10,344
9,670
11,735
8,722
10,890
12,685
13,706
8,976
9,907
Selangor
70,220
110,202
58,436
97,633
Wilayah Persekutuan
46,984
52,783
40,840
46,815
7,814
12,101
6,570
10,755
Pulau Pinang
Perak
Negeri Sembilan
Melaka
Johor
7,594
8,879
7,093
8,555
21,283
23,967
19,524
22,364
6,352
8,135
4,830
6,598
4,718
6,184
1,652
2,574
Kelantan
3,733
4,210
642
906
9,280
9,277
9,009
9,006
Sabah
15,966
15,219
15,689
14,815
Labuan
1,504
1,273
1,504
1,272
Sarawak
Outside Malaysia
556
2,434
496
2,379
229,461
292,619
192,790
255,226
Pahang
Terengganu
199
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 interest rates and foreign exchange rates. The exposure
to market risk results largely from interest 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 to Appendix I.
6.3 Market Risk Measurement, Control and Monitoring
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 interest rate risk by analysing the repricing mismatch between the rate sensitive assets and rate sensitive liabilities.
Based on the repricing mismatch, Net Interest 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 Value-at-Risk (‘EVaR’).
Thresholds are set for Earnings-at-Risk (‘EaR’) and Economic Value-at-Risk (‘EVaR’) respectively.
200
In addition, the Bank conducts periodic stress test of its respective business portfolios to ascertain market risk under abnormal market
conditions.
The Bank’s Management, ALCO and BRMC are regularly kept informed of its risk profile and positions.
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 interest 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 interest rates and foreign exchange rates based on past experience and simulated stress scenarios.
6.5 Foreign Exchange Risk
The Bank is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.
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.
7
Liquidity Risk
7.1 Liquidity Risk Management Objectives and Policies
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.
7.2 Liquidity Risk Measurement, Control and Monitoring
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.
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’).
201
7
Liquidity Risk
7.2 Liquidity Risk Measurement, Control and Monitoring (continued)
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.
8
Operational Risk
8.1 Operational Risk Management Objectives and Policies
Operational risk is the risk of loss arising from inadequate or failed internal processes, action on or by people, infrastructure or technology
or events which are beyond the Bank’s immediate control which have an operational impact, including natural disaster, fraudulent activities
and money laundering/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.
8.3 Operational Risk Measurement, Control and Monitoring
202
Risk is identified through the use of assessment tools and measured using thresholds 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.
8
Operational Risk
8.4Certification
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 AFFIN Islamic Bank Berhad. In order to comply with all the requirements in the Framework, Board
of Directors of the Bank are very committed to ensure among others all the required Shariah compliance and research functions include Shariah
Risk Management, 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.
203
204
Appendix I
PSIA “Profit Sharing Investment Account”
OTC “Over The Counter”
Total RWA and Capital Requirements
2 MARKET RISK
Interest Rate Risk
Foreign Currency Risk
Option Risk
3 OPERATIONAL RISK
Operational Risk
Long Position
9,925,778
29,620
1,428
Short Position
10,011,694
43,399
1,440
63,988,907
Total for On and Off-Balance Sheet Exposures
(85,916)
(13,780)
(12)
62,692,965
4,091,769
46,171
4,137,940
24,905,986
13,338,914
3,393,639
6,297,843
3,759,522
395,268
4,986,564
197,993
23,439
1,255,857
58,555,025
25,813,553
13,493,458
3,393,598
6,297,843
3,757,958
395,268
5,014,762
197,993
23,439
1,276,975
59,664,847
4,274,047
50,013
4,324,060
Net
Exposures/
EAD after CRM
Gross
Exposures/
EAD before CRM
Off Balance Sheet Exposures
Off Balance Sheet Exposures other than OTC derivatives or credit derivatives
Defaulted Exposures
Total for Off-Balance Sheet Exposures
1 CREDIT RISK
On Balance Sheet Exposures
Corporates
Regulatory Retail
Other Assets
Sovereigns/Central Banks
Banks, Development Financial Institutions & MDBs
Insurance Companies, Securities Firms & Fund Managers
Residential Mortgages
Higher Risk Assets
Equity Exposure
Defaulted Exposures
Total for On-Balance Sheet Exposures
Exposure Class
The Group
2015
Disclosure on Capital Adequacy under the Standardised Approach (RM’000)
42,448,837
2,355,261
274,432
46,726
6,346
39,766,072
3,616,906
68,976
3,685,882
19,578,957
10,026,116
864,940
4,116
1,219,236
371,580
1,929,536
296,990
23,439
1,765,280
36,080,190
Risk
Weighted
Assets
39,766,072
-
39,766,072
3,616,906
68,976
3,685,882
19,578,957
10,026,116
864,940
4,116
1,219,236
371,580
1,929,536
296,990
23,439
1,765,280
36,080,190
Total Risk
Weighted
Assets after
Effects of PSIA
3,395,908
188,421
21,955
3,738
508
3,181,286
289,352
5,518
294,870
1,566,316
802,089
69,195
330
97,539
29,727
154,318
23,759
1,875
141,268
2,886,416
Minimum
Capital
Requirements
at 8%
The following information concerning the Group and the Bank’s risk exposures are disclosed as accompanying information to the annual report and does not form part of the audited accounts.
The Group and the Bank have adopted Basel II - Risk Weighted Assets computation under the BNM’s Risk-Weighted Capital Adequacy Framework with effect from 1 January 2008. The Group and the
Bank have adopted the Standardised Approach for credit risk and market risk, and Basic Indicator Approach for operation risk computation.
Long Position
9,177,910
12,713
Short Position
9,178,005
10,664
64,656,508
2 MARKET RISK
Interest Rate Risk
3 OPERATIONAL RISK
Operational Risk
4,843,323
26,932
4,870,255
23,991,290
12,212,450
2,837,198
10,469,658
4,562
3,971,739
394,070
4,636,437
256,200
23,472
989,177
59,786,253
Gross
Exposures/
EAD before CRM
Defaulted Exposures
1 CREDIT RISK
Corporates
Regulatory Retail
Other Assets
Public Sector Entities
Higher Risk Assets
Equity Exposure
Defaulted Exposures
Exposure Class
The Group
2014
205
(95)
2,049
63,489,545
4,635,439
23,652
4,659,091
23,178,220
12,096,823
2,837,198
10,469,658
1,149
3,971,739
394,070
4,615,808
256,200
23,472
986,117
58,830,454
Net
Exposures/
EAD after CRM
40,454,423
2,322,105
273,509
13,229
37,845,580
4,179,391
35,190
4,214,581
18,725,008
9,078,068
475,704
230
1,391,253
370,383
1,807,635
384,300
23,472
1,374,946
33,630,999
Risk
Weighted
Assets
37,845,580
-
37,845,580
4,179,391
35,190
4,214,581
18,725,008
9,078,068
475,704
230
1,391,253
370,383
1,807,635
384,300
23,472
1,374,946
33,630,999
Total Risk
Weighted
Assets after
Effects of PSIA
3,236,352
185,768
21,881
1,058
3,027,645
334,351
2,815
337,166
1,498,001
726,245
38,056
18
111,300
29,631
144,610
30,744
1,878
109,996
2,690,479
Minimum
Capital
Requirements
at 8%
Appendix I
206
2 MARKET RISK
Interest Rate Risk
Option Risk
3 OPERATIONAL RISK
Operational Risk
Long Position
9,875,089
26,292
1,428
Short Position
9,960,800
43,399
1,440
51,613,736
(85,711)
(17,107)
(12)
50,627,686
3,508,797
36,505
3,545,302
21,505,321
10,448,661
3,016,751
3,560,909
3,739,899
395,268
3,022,893
191,648
23,439
1,177,595
47,082,384
22,142,913
10,589,267
3,016,751
3,560,909
3,739,899
395,268
3,040,556
191,648
23,439
1,198,672
47,899,322
3,674,067
40,347
3,714,414
Net
Exposures/
EAD after CRM
Gross
Exposures/
EAD before CRM
Defaulted Exposures
1 CREDIT RISK
Corporates
Regulatory Retail
Other Assets
Higher Risk Assets
Equity Exposure
Defaulted Exposures
Exposure Class
The Bank
2015
35,773,301
1,951,219
274,110
43,399
6,346
33,498,227
3,169,145
54,513
3,223,658
16,922,764
7,858,288
795,251
4,116
1,219,237
371,581
1,129,760
287,472
23,439
1,662,661
30,274,569
Risk
Weighted
Assets
33,498,227
-
33,498,227
3,169,145
54,513
3,223,658
16,922,764
7,858,288
795,251
4,116
1,219,237
371,581
1,129,760
287,472
23,439
1,662,661
30,274,569
Total Risk
Weighted
Assets after
Effects of PSIA
2,861,865
156,098
21,929
3,472
508
2,679,858
253,532
4,361
257,893
1,353,821
628,663
63,620
329
97,539
29,726
90,381
22,998
1,875
133,013
2,421,965
Minimum
Capital
Requirements
at 8%
Appendix I
Long Position
9,165,038
10,147
Short Position
9,165,113
10,664
52,380,042
2 MARKET RISK
Interest Rate Risk
3 OPERATIONAL RISK
Operational Risk
4,285,030
26,412
4,311,442
20,732,063
9,995,757
2,449,423
6,727,176
4,562
3,648,454
394,070
2,936,526
245,386
23,472
911,711
48,068,600
Gross
Exposures/
EAD before CRM
Defaulted Exposures
1 CREDIT RISK
Corporates
Regulatory Retail
Other Assets
Higher Risk Assets
Equity Exposure
Defaulted Exposures
Exposure Class
The Bank
2014
207
(75)
(517)
51,444,217
4,088,049
23,133
4,111,182
20,117,978
9,892,610
2,449,423
6,727,176
1,149
3,648,454
394,070
2,924,655
245,386
23,472
908,662
47,333,035
Net
Exposures/
EAD after CRM
34,825,038
1,954,278
273,484
10,664
32,586,612
3,779,594
34,434
3,814,028
16,385,809
7,424,787
439,722
230
1,383,253
370,383
1,105,458
368,079
23,472
1,271,391
28,772,584
Risk
Weighted
Assets
32,586,612
-
32,586,612
3,779,594
34,434
3,814,028
16,385,809
7,424,787
439,722
230
1,383,253
370,383
1,105,458
368,079
23,472
1,271,391
28,772,584
Total Risk
Weighted
Assets after
Effects of PSIA
2,786,004
156,342
21,879
853
2,606,930
302,368
2,755
305,123
1,310,865
593,983
35,178
18
110,660
29,631
88,437
29,446
1,878
101,711
2,301,807
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 interest
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 interest 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 (‘FX’)
Interest Rate Swap (‘IRS’)
Cross Currency Swap (‘CCS’)
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.
208
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35%
50%
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
PSE “Public Sector Entities”
MDB “Multilateral Development Banks”
FDI “Financial Development Institutions”
Deduction from
Capital Base
-
1,610
80,265
20%
-
-
-
Average Risk
Weight
-
6,335,218
PSEs
0%
Sovereigns
& Central
Banks
10%
Risk Weights
The Group
2015
-
-
-
-
-
-
-
-
-
-
-
4,225
-
-
1,813,802
-
2,046,139
-
213,518
Banks, MDBs
and FDIs
-
-
-
-
-
-
-
-
-
-
-
379,455
-
-
-
-
29,609
-
-
Insurance
Companies,
Securities
Firms &
Fund
Managers
-
-
-
-
-
-
-
810,103
-
-
-
21,929,025
-
-
747,158
-
3,184,308
-
2,507,253
Corporates
-
-
-
-
-
-
-
176,220
-
-
-
96,667
-
13,498,351
2,230
-
760
-
-
Regulatory
Retail
-
-
-
-
-
-
-
103,478
-
-
-
319,244
-
10,106
354,537
4,428,937
-
-
-
Residential
Mortgages
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
203,669
Higher
Risk
Assets
Exposures after Netting and Credit Risk Mitigation
Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM’000)
209
-
-
-
-
-
-
-
-
-
-
-
746,507
-
-
-
-
592,163
-
2,054,969
Other
Assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Specialised
Financing /
Investment
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Securitisation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,439
Equity
-
-
-
-
-
-
-
-
1,293,470
-
-
-
23,498,562
-
13,508,457
2,917,727
4,428,937
5,934,854
-
11,110,958
Total
Exposure
after
Netting &
Credit Risk
Mitigation
-
-
-
-
-
-
-
-
-
1,940,206
-
-
-
23,498,561
-
10,131,342
1,458,864
1,550,128
1,186,971
Total Risk
Weighted
Assets
Appendix II
210
-
-
-
-
-
-
-
-
-
-
-
-
-
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,592
-
-
2,166,784
-
2,011,544
-
-
-
-
-
-
-
-
-
-
-
370,305
-
-
-
-
29,609
-
-
-
-
-
-
-
-
-
471,910
-
-
-
21,480,888
-
-
656,010
-
3,544,288
-
1,353,996
-
-
-
-
-
-
-
210,038
-
-
-
41,588
-
12,466,131
1,534
-
1,016
-
-
-
-
-
-
-
-
-
139,652
-
-
-
319,597
-
12,503
371,907
4,034,885
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
263,272
Higher
Risk
Assets
-
-
-
-
-
-
-
-
-
-
-
404,178
-
-
-
-
357,630
-
2,075,390
Other
Assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Specialised
Financing /
Investment
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Securitisation
-
-
50%
-
-
35%
2,759
-
79,017
Residential
Mortgages
-
64,896
20%
-
-
Corporates
Regulatory
Retail
Deduction from
Capital Base
-
PSEs
Banks, MDBs
and FDIs
Insurance
Companies,
Securities
Firms &
Fund
Managers
Average Risk
Weight
10,528,154
0%
Sovereigns &
Central Banks
10%
Risk Weights
The Group
2014
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,472
Equity
-
-
-
-
-
-
-
-
1,084,872
-
-
-
22,646,620
-
12,478,634
3,196,235
4,034,885
6,011,742
-
14,036,557
Total
Exposure
after
Netting &
Credit Risk
Mitigation
-
-
-
-
-
-
-
-
-
1,627,308
-
-
-
22,646,620
-
9,358,976
1,598,118
1,412,210
1,202,348
Total Risk
Weighted
Assets
Appendix II
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
-
-
-
-
-
-
-
-
-
-
-
-
4,225
-
-
1,813,802
-
-
-
-
-
-
-
-
-
-
-
379,455
-
-
-
-
29,609
-
-
-
-
-
-
-
792,150
-
-
-
18,990,369
-
-
721,398
-
2,584,063
-
2,236,999
-
-
-
-
-
-
-
161,971
-
-
-
92,701
-
10,583,478
1,622
-
760
-
-
-
-
-
-
-
-
-
77,027
-
-
-
168,051
-
9,861
152,128
2,793,850
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
196,808
Higher
Risk
Assets
-
-
-
-
-
-
-
-
-
-
-
678,354
-
-
-
-
584,485
-
1,753,912
Other
Assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Specialised
Financing /
Investment
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Securitisation
-
-
-
75%
-
-
-
50%
-
-
-
35%
2,040,753
-
-
Residential
Mortgages
Deduction from
Capital Base
1,610
20,580
20%
-
193,895
Corporates
Regulatory
Retail
-
-
-
Banks, MDBs
and FDIs
Insurance
Companies,
Securities
Firms &
Fund
Managers
Average Risk
Weight
-
3,540,329
PSEs
0%
Sovereigns
& Central
Banks
10%
Risk Weights
The Bank
2015
211
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,439
Equity
-
-
-
-
-
-
-
-
1,227,956
-
-
-
20,336,594
-
10,593,339
2,688,950
2,793,850
5,261,860
-
7,725,135
Total
Exposure
after
Netting &
Credit Risk
Mitigation
-
-
-
-
-
-
-
1,841,934
-
-
-
20,336,593
-
7,945,005
1,344,475
977,848
1,052,372
-
-
Total Risk
Weighted
Assets
Appendix II
212
-
-
-
-
-
-
-
-
-
-
-
-
-
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,592
-
-
2,342,784
-
1,527,255
-
-
-
-
-
-
-
-
-
-
-
370,305
-
-
-
-
29,609
-
-
-
-
-
-
-
-
-
464,634
-
-
-
18,932,341
-
-
656,009
-
2,941,110
-
1,100,162
-
-
-
-
-
-
-
193,784
-
-
-
37,900
-
10,188,567
1,391
-
1,016
-
-
-
-
-
-
-
-
-
108,803
-
-
-
176,926
-
12,138
179,099
2,659,862
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
251,367
Higher
Risk
Assets
-
-
-
-
-
-
-
-
-
-
-
369,405
-
-
-
-
351,586
-
1,728,433
Other
Assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Specialised
Financing /
Investment
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Securitisation
-
-
50%
-
-
35%
2,759
-
59,732
Residential
Mortgages
Deduction from
Capital Base
-
20%
-
-
Corporates
Regulatory
Retail
-
-
PSEs
Banks, MDBs
and FDIs
Insurance
Companies,
Securities
Firms &
Fund
Managers
Average Risk
Weight
6,727,176
0%
Sovereigns &
Central Banks
10%
Risk Weights
The Bank
2014
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,472
Equity
-
-
-
-
-
-
-
-
1,018,588
-
-
-
19,916,941
-
10,200,705
3,179,283
2,659,862
4,853,335
-
9,615,503
Total
Exposure
after
Netting &
Credit Risk
Mitigation
-
-
-
-
-
-
-
-
-
1,527,882
-
-
-
19,916,940
-
7,650,529
1,589,642
930,952
970,667
Total Risk
Weighted
Assets
Appendix II
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
The Group
2014
as corporates)
Corporates
Total
Exposure Class
The Group
2015
(i)
213
Moodys
S&P
Fitch
RAM
MARC
Rating &
Investment Inc
Moodys
S&P
Fitch
RAM
MARC
Rating &
Investment Inc
529,078
529,078
1,438,938
1,438,938
A+ to A-
-
AAA to AA-
BBB+ to BB-
-
-
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-
531,897
531,897
1,094,498
1,094,498
Aaa to Aa3
AAA to AAAAA to AAAAA to AA3
AAA to AA-
-
A+ to A-
A1 to A3
Baa1 to Ba3
BBB1 to BB3
A+ to ABBB+ to BB-
-
AAA to AA-
Aaa to Aa3
AAA to AA-
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
-
-
-
-
399,914
26,528,052
26,934,153
6,187
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
411,229
28,630,081
29,042,935
1,625
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Appendix III
214
Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000)
as corporates)
Corporates
Total
Exposure Class
The Bank
2014
as corporates)
Corporates
Total
Exposure Class
The Bank
2015
(i)
Moodys
S&P
Fitch
RAM
MARC
Rating &
Investment Inc
Moodys
S&P
Fitch
RAM
MARC
Rating &
Investment Inc
529,078
529,078
1,191,454
1,191,454
A+ to A-
-
AAA to AA-
BBB+ to BB-
-
-
BBB+ to BB-
-
-
A1 to A3
Baa1 to Ba3
BBB1 to BB3
A+ to ABBB+ to BB-
531,897
531,897
7.98,386
7.98,386
Aaa to Aa3
AAA to AA-
-
A+ to A-
A1 to A3
Baa1 to Ba3
BBB1 to BB3
A+ to ABBB+ to BB-
-
AAA to AA-
Aaa to Aa3
AAA to AA-
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
-
-
-
-
399,914
23,158,384
23,564,485
6,187
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
411,229
24,794,067
25,206,921
1,625
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Appendix III
626,853
626,853
Total
526,513
526,513
11,422
11,422
BBB+ to BBB-
-
-
56,763
56,763
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-
6,415,487
6,415,487
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
The Group
2015
(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000)
215
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
-
-
-
-
-
-
2,856,133
2,856,133
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Appendix III
216
691,236
691,236
Total
214,489
214,489
82,430
82,430
BBB+ to BBB-
-
-
6,592
6,592
BB+ to B-
A+ to A-
-
-
BB+ to B-
AAA to AA-
BBB+ to BBB-
A1 to A3
Baa1 to Baa3
Ba1 to B3
BBB1+ to BBB3
BB1 to B3
10,593,053
10,593,053
A+ to A-
A1 to A3
Baa1 to Baa3
Ba1 to B3
Aaa to Aa3
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
Exposure Class
The Group
2014
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
-
-
-
-
-
-
3,445,194
3,445,194
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Appendix III
621,543
621,543
Total
526,513
526,513
11,422
11,422
BBB+ to BBB-
-
-
56,763
56,763
BB+ to B-
A+ to A-
-
-
BB+ to B-
AAA to AA-
BBB+ to BBB-
A1 to A3
Baa1 to Baa3
Ba1 to B3
BBB1+ to BBB3
BB1 to B3
3,560,913
3,560,913
A+ to A-
A1 to A3
Baa1 to Baa3
Ba1 to B3
Aaa to Aa3
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
Exposure Class
The Bank
2015
(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000) (continued)
217
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
-
-
-
-
-
-
2,836,434
2,836,434
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Appendix III
218
686,961
686,961
Total
214,475
214,475
82,430
82,430
BBB+ to BBB-
-
-
6,592
6,592
BB+ to B-
A+ to A-
-
-
BB+ to B-
AAA to AA-
BBB+ to BBB-
A1 to A3
Baa1 to Baa3
Ba1 to B3
BBB1+ to BBB3
BB1 to B3
6,727,179
6,727,179
A+ to A-
A1 to A3
Baa1 to Baa3
Ba1 to B3
Aaa to Aa3
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
Exposure Class
The Bank
2014
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
-
-
-
-
-
-
2,945,910
2,945,910
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
Appendix III
Disclosures on Credit Risk Mitigation (RM’000)
129,448
666
95
395,268
25,813,553
13,493,458
5,014,762
197,993
3,393,598
23,439
1,276,975
59,664,847
Regulatory Retail
Defaulted Exposures
63,988,907
Total On and Off-Balance Sheet Exposures
130,209
-
-
50,013
4,324,060
-
4,274,047
Defaulted Exposures
Off-Balance Sheet exposures other than OTC derivatives or credit derivatives
Off-Balance Sheet Exposures
Equity Exposure
Other Assets
Higher Risk Assets
130,209
-
3,757,958
Corporates
-
6,297,843
Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
On-Balance Sheet Exposures
Credit Risk
Exposure Class
The Group
2015
a)
219
1,297,507
15
-
15
1,297,492
24,918
-
-
-
28,200
186,756
1,055,450
2,165
-
3
Exposures
Covered by
Eligible
Financial
Collateral
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Exposures
Covered by
Other
Eligible
Collateral
Appendix IV
220
-
64,656,508
135,038
-
26,932
4,870,255
-
135,038
4,843,323
59,786,253
Defaulted Exposures
152
23,472
989,177
Equity Exposure
Defaulted Exposures
-
256,200
-
2,837,198
Other Assets
Higher Risk Assets
4,636,437
865
134,021
23,991,290
12,212,450
Corporates
Regulatory Retail
394,070
-
3,971,739
-
4,562
10,469,658
Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
Credit Risk
Exposure Class
The Group
2014
a)
1,166,964
-
-
-
1,166,964
6,340
-
-
-
20,631
153,135
983,423
-
4
3,428
3
Exposures
Covered by
Eligible
Financial
Collateral
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Exposures
Covered by
Other
Eligible
Collateral
Appendix IV
100,488
666
95
395,268
22,142,913
10,589,267
3,040,556
191,648
3,016,751
23,439
1,198,672
47,899,322
Regulatory Retail
Defaulted Exposures
51,613,736
101,249
-
-
40,347
3,714,414
-
3,674,067
Defaulted Exposures
Equity Exposure
Other Assets
Higher Risk Assets
101,249
-
3,739,899
Corporates
-
3,560,909
Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
Credit Risk
Exposure Class
The Bank
2015
a)
221
986,050
15
-
15
986,035
24,918
-
-
-
17,665
165,093
776,191
2,165
-
3
Exposures
Covered by
Eligible
Financial
Collateral
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Exposures
Covered by
Other
Eligible
Collateral
Appendix IV
222
2,936,526
4,311,442
52,380,042
26,412
4,285,030
48,068,600
Defaulted Exposures
23,472
911,711
Defaulted Exposures
2,449,423
Equity Exposure
Other Assets
245,386
9,995,757
Higher Risk Assets
20,732,063
Regulatory Retail
394,070
Corporates
3,648,454
4,562
6,727,176
Exposures
before
CRM
Credit Risk
Exposure Class
a) Disclosures on Credit Risk Mitigation (RM’000)
The Bank
2014
131,838
-
-
-
131,838
152
-
-
-
-
865
130,821
-
-
-
-
Exposures
Covered by
Guarantees/
Credit
Derivatives
935,824
-
-
-
935,824
6,328
-
-
-
11,873
135,083
779,105
-
4
3,428
3
Exposures
Covered by
Eligible
Financial
Collateral
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Exposures
Covered by
Other
Eligible
Collateral
Appendix IV
Appendix IV
4,322,496
37,666
174,037
188,328
22,301,945
Total
-
215,113
1,498,891
7,494,453
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 borrower’s creditworthiness
Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year
46,292
858,663
4,892
597,000
33,020
2,261
43,291
286,022
1,717,325
3,430
8,010
652,116
4,402
1,612,023
153,303
94,095
470,476
421,060
1,013,977
2,027,954
6,497,779
408,318
Credit Equivalent
Amount
408,318
Positive Fair Value of
Derivative Contracts
Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year
Over five years
Over one year to five years
One year or less
Interest/Profit rate related contracts
One year or less
Foreign exchange related contracts
Short Term Self Liquidating trade related contingencies
Transaction related contingent Items
Direct Credit Substitutes
Description
Principal Amount
3,685,494
28,011
-
1,287,390
770,894
13,237
9,338
617
17,536
180,535
45,987
946,957
384,992
Risk Weighted
Amount
In contrast to the exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank faces the risk of loss, Counterparty Credit Risk creates a bilateral risk of loss where the market
value for many types of transactions can be positive or negative to either counterparty.
In respect of off-balance sheet items, the credit risk inherent in each off-balance sheet instrument is translated into an on-balance sheet exposure equivalent (credit equivalent) by multiplying the nominal principal amount
with a credit conversion factor (‘CCF’) as prescribed by the Standardised Approach under the Risk Weighted Capital Adequacy Framework. The resulting amount is then weighted against the risk weight of the counterparty.
In addition, counterparty risk weights for over-the-counter (‘OTC’) derivative transactions will be determined based on the external rating of the counterparty and will not be subject to any specific ceiling.
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.
Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM’000)
The Group
2015
b)
223
224
96,030
23,427,860
Total
279,345
208,865
8,361,676
88,658
4,722
390,148
2,022,026
Over five years
11,335
1,256,279
1,781,125
One year or less
6,041
360
1,244
64,956
451,955
5,110,352
746,576
2,043,704
679,779
Principal Amount
Over five years
One year or less
Transaction related contingent items
Description
The Group
2014
b)
4,870,219
41,773
-
1,672,335
1,011,013
33,652
47,984
4,641
14,405
41,516
151,954
149,315
1,021,852
679,779
Credit Equivalent
Amount
4,214,573
31,073
-
1,448,611
921,555
9,460
13,161
1,350
7,202
13,374
96,708
95,680
929,517
646,882
Risk Weighted
Amount
Appendix IV
174,745
3,714,415
20,192,355
37,666
199,792
188,328
Total
1,221,423
6,107,115
46,292
684,459
4,892
597,000
33,020
2,261
43,291
286,689
1,368,917
3,430
8,010
652,116
4,402
1,612,023
154,011
20,382
101,909
421,060
939,997
6,665,166
398,935
Credit Equivalent
Amount
398,935
1,879,994
Principal Amount
Over five years
One year or less
One year or less
Description
The Bank
2015
b)
225
3,223,658
28,011
-
1,106,567
599,595
13,237
9,338
617
17,536
180,467
20,124
872,558
375,608
Risk Weighted
Amount
Appendix IV
226
96,030
21,359,914
247,693
208,865
Total
7,180,536
88,672
4,722
390,148
1,709,548
Over five years
11,335
1,256,279
1,781,125
One year or less
6,041
360
1,244
64,970
451,955
5,131,295
345,057
1,891,540
669,843
Principal Amount
Over five years
One year or less
Description
The Bank
2014
b)
4,311,442
41,773
-
1,436,107
854,774
33,652
47,984
4,641
14,405
41,516
151,966
69,011
945,770
669,843
Credit Equivalent
Amount
3,814,028
31,073
-
1,298,235
779,957
9,460
13,161
1,350
7,202
13,374
96,702
67,464
856,862
639,188
Risk Weighted
Amount
Appendix IV
c)
Appendix IV
(0.1)
0.6
3.1
(4.6)
(0.1)
(0.1)
0.6
1.3
Euro
Great Britain Pound
Australian Dollar
Singapore Dollar
Others (#)
#
Others comprise of CNH, NZD, HKD and AED currencies where the amount of each currency is relatively small.
Total
422.6
14.0
(66.5)
405.0
US Dollar
Ringgit Malaysia
7.8
Increase/(Decline)
in Economic Value
(48.1)
1.4
0.6
(0.1)
(0.1)
(4.6)
8.4
(53.7)
Increase/(Decline)
in Earnings
349.6
3.1
0.6
-
-
(0.1)
14.0
332.0
Increase/(Decline)
in Economic Value
Impact on Positions
(100 basis points) Parallel Shift
Impact on Positions
Increase/(Decline)
in Earnings
The Bank
The Group
(71.4)
Type of Currency (RM million)
2015
(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 interest rates.
(1) Next 12 months’ Earnings - Interest rate risk from the earnings perspective is the impact based on changes to the net interest income (‘NII’) over the next 12 months. This risk is measured through sensitivity analysis
including the application of an instantaneous 100 basis point parallel shock in interest rates across the yield curve.
Interest rate risk is the current and prospective impact to the Bank’s financial condition due to adverse changes in the interest rates to which the balance sheet is exposed. The objective of interest rate risk management is
to achieve a stable and sustainable net interest income from the perspectives of (1) earnings in the next 12 months, and (2) economic value.
Disclosures on Market Risk - Interest Rate Risk/Rate of Return Risk in the Banking Book
227
228
c)
#
Others comprise of CNH, NZD, HKD and AED currencies where the amount of each currency is relatively small.
(25.0)
0.8
7.5
Singapore Dollar
Others (#)
Total
(0.1)
Australian Dollar
309.0
7.7
(0.6)
2.0
-
-
(0.4)
(0.1)
Euro
7.1
292.8
Increase/(Decline)
in Economic Value
8.0
(40.7)
Increase/(Decline)
in Earnings
(35.2)
7.6
0.8
(0.1)
(0.1)
(0.4)
8.3
(51.3)
Increase/(Decline)
in Earnings
Appendix IV
264.2
7.7
(0.6)
1.9
-
-
7.1
248.1
Increase/(Decline)
in Economic Value
The Bank
Impact on Positions
The Group
Impact on Positions
Great Britain Pound
US Dollar
Ringgit Malaysia
Type of Currency (RM million)
2014
Disclosures on Market Risk - Interest Rate Risk/Rate of Return Risk in the Banking Book
AFFIN BANK BERHAD (25046-T)
17th Floor, Menara AFFIN,
80, Jalan Raja Chulan,
50200 Kuala Lumpur
T : 03 2055 9000
F : 03 2026 1415
www.affinbank.com.my

Annual Report 2015 - AFFINBANK

Transcription

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