notes to the financial statements - AFFINBANK

Transcription

OUR VISION
A Premier Partner for Financial Growth and
Innovative Services.
OUR MISSION
To provide innovative financial solutions and services
to target customers in order to generate profits and
create value for our shareholders and other
stakeholders.
In so doing, we provide opportunities for employees
to contribute and excel; and be competitive in
providing our solutions and services to our valued
customers.
We shall conduct our business with integrity and
professionalism in compliance with good corporate
governance principles and practices.
COVER RATIONALE
The cover design’s theme – AFFINBANK celebrates
35 Years ‘A Journey’– illustrates the inspiring and
challenging odyssey of AFFINBANK. A specially
created 35th anniversary logo takes place of pride in
the design, since its inception on 23rd October 1975,
and it is complemented by graphic waves that wend
its way gracefully across the cover. The fine lines
represent the employees, shareholders and
customers of our Bank, as they achieve harmony, on
a mutually beneficial journey of growth. Through ups
and downs, we will stay in sync with our stakeholders
as we forge ahead vibrantly.
TABLE OF
CONTENTS
Corporate Milestone 4
Corporate Structure 6
Corporate Information 7
Board of Directors 8
Profile of Directors 9
Management Team 13
Management Team Profiles 15
Chairman’s Statement 17
Operational Review 20
Financial Highlights 23
Corporate Diary 24
Statement of Corporate Governance 26
Statement on Internal Control 34
Audit & Examination Committee 37
Network of Branches 39
Notice of Annual General Meeting 44
Annual Report 2010
4
CORPORATE MILESTONE
OUR
JOURNEY
2000
1975
25 APRIL
• Change name of Perwira Affin Bank Berhad (PAB) to Affin Bank
Berhad (AFFINBANK).
23 OCTOBER
• Incorporation of Perwira Habib Bank Malaysia Berhad (PHB).
2000
Shareholders listing as according to Annual Report 1977 PHB:
- Lembaga Tabung Angkatan Tentera
34%
- Habib Bank Limited Pakistan
33.33%
- Syarikat Permodalan Kebangsaan Berhad
26%
- Haji Hamidi bin Tan Sri Dato’ Osman
6.67%
30 AUGUST
• Merger of PAB & BSN Commercial Bank (M) Berhad signed,
paving formation of new AFFINBANK.
2001
1992
JANUARY
• AFFINBANK commenced operations with 110 branches
nationwide.
• Emergence of Affin Holdings Berhad as biggest shareholder
of PHB.
2005
1994
JUNE
• Merger with Affin-ACF Finance Berhad.
21 APRIL
• Became Perwira Affin Bank Berhad (PAB) from Perwira Habib
Bank Malaysia Berhad (PHB) since AFFIN Holdings has 100%
of PAB.
2005
• Introduction to the new logo and tagline - ‘Banking Without
Barriers’
1999
2006
5 APRIL
• Signing of MoU between PAB & BSN Commercial Bank (M)
Berhad.
1 APRIL
• Affin Islamic Bank Berhad (AFFIN ISLAMIC) commenced its
operations.
5
AFFIN BANK BERHAD
(25046-T)
Annual Report 2010
6
CORPORATE STRUCTURE
PAB Properties
Sdn. Bhd.
100%
ABB Nominees
(Tempatan) Sdn. Bhd.
100%
Affin-ACF Holdings Sdn. Bhd.
100%
ABB Nominee (Asing)
Sdn. Bhd.
100%
Affin Factors Sdn. Bhd.
Affin-ACF Capital
Sdn. Bhd.
100%
Affin Capital Sdn. Bhd.
100%
ABB Trustee Berhad
100%
100%
PAB Property
Development Sdn. Bhd.
35.66%
100%
LEMBAGA TABUNG ANGKATAN TENTERA
Lembaga Tabung
Angkatan Tentera
PAB Property
Management Sdn. Bhd.
100%
Affin Money Brokers
Sdn. Bhd.
ABB Venture
Capital Sdn. Bhd.
100%
100%
Affin Futures
Sdn. Bhd.
100%
20.69%
BSNC Nominees
Affin-ADB Sdn. Bhd.
100%
Boustead Holdings Berhad
100%
BSNCB Nominees
100%
Affin Holdings Berhad
Affin Bank Berhad
100%
23.52%
Affin Islamic Bank Berhad
BSN Merchant Nominees
100%
100%
Bank of East Asia Limited*
ABB Asset Management
(M) Berhad
100%
AXA Affin Life Insurance
Berhad
100%
Affin-ACF Nominees
100%
BSN Merchant Nominees
(Asing) Sdn. Bhd.
100%
OTHERS
20.13%
AXA Affin General Insurance
Berhad
ABB IT & Services
Sdn. Bhd.
100%
100%
BHI Insurance (M)
Sdn Bhd
100%
Affin Investment Bank
Berhad
Affin Fund Management Berhad
100%
100%
Affin Nominees
100%
Merchant Nominees
100%
Affin Nominees
(Asing) Sdn. Bhd.
100%
Classic Precision
Sdn. Bhd.
67%
* more than 20% shareholdings as at 28.2.2009
7
AFFIN BANK BERHAD
(25046-T)
CORPORATE INFORMATION
BOARD OF DIRECTORS
YBhg. Dato Sri Abdul Aziz bin Abdul Rahman
Independent Non-Executive Director
Chairman
YBhg. Jen. Tan Sri Dato’ Seri Ismail bin Hj. Omar (Bersara)
Chairman
Non-Independent Non-Executive Director
Mr. Aubrey Li Kwok-Sing
Directors
Mr. Brian Li Man-Bun
Alternate Director to Aubrey Li Kwok-Sing
YBhg. Dato’ Zulkiflee Abbas bin Abdul Hamid
Managing Director/ Chief Executive Officer
Non-Independent Executive Director
Mr. Stephen Charles Li
Mr. Eric Koh Thong Hau
Alternate Director to Stephen Charles Li
YBhg. Tan Sri Dato’ Lodin bin Wok Kamaruddin
(Re-appointed as Director w.e.f. 4.10.2010)
En. Mohd Suffian bin Haji Haron
YM. Dr. Raja Abdul Malek bin Raja Jallaludin
YBhg. Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli
bin Mohd Nor (Bersara)
YBhg. Dato’ Zulkiflee Abbas bin Abdul Hamid
NAME
SECRETARIES
ISSUED AND PAID-UP SHARE CAPITAL
Affin Bank Berhad (Co. No.: 25046-T)
Nimma Safira binti Khalid
Azizah binti Shukor
No. of shares
Par value
Total
DATE OF INCORPORATION
23 October 1975
PRINCIPAL ACTIVITIES
Affin Bank Berhad is principally involved in
carrying out the banking and finance
related services. The Bank has seventeen
(17) subsidiary companies and three (3)
associate companies which are principally
engaged in property management
services, nominees services, trustees
management services and factoring
services.
1,439,285,382
RM1.00
RM1,439,285,382.00
REGISTERED OFFICE
17th Floor, Menara AFFIN,
80, Jalan Raja Chulan
50200 Kuala Lumpur.
Tel.: 03-2055 9000
Fax.: 03-2026 1415
AUTHORISED SHARE CAPITAL
No. of shares
Par value
Total
2,000,000,000
RM1.00
RM2,000,000,000
SUBSTANTIAL SHAREHOLDER
No. of shares
1,439,285,382
EXTERNAL AUDITORS
PricewaterhouseCoopers (AF 1146)
Annual Report 2010
8
BOARD OF DIRECTORS
1. YBhg. Jen. Tan Sri Dato’ Seri Ismail bin Haji Omar
(Bersara)
Chairman
2. YBhg. Dato’ Zulkiflee Abbas bin Abdul Hamid
3. YBhg. Dato’ Sri Abdul Aziz bin Abdul Rahman
6. Mr. Aubrey Li Kwok-Sing
7. Mr. Stephen Charles Li
8. En. Mohd. Suffian bin Haji Haron
9. YBhg. Tan Sri Dato’ Lodin bin Wok Kamaruddin
(Re-appointed as Director w.e.f. 4.10.2010)
4. YM. Dr. Raja Abdul Malek bin Raja Jallaludin
5. YBhg. Laksamana Madya Tan Sri Dato’ Seri Ahmad
Ramli bin Mohd Nor (Bersara)
3
4
2
5
6
7
1
8
9
9
AFFIN BANK BERHAD
(25046-T)
PROFILE OF DIRECTORS
YBHG. JEN. TAN SRI DATO’
SERI ISMAIL BIN HJ. OMAR
(BERSARA)
YBHG. DATO’ ZULKIFLEE
ABBAS BIN ABDUL HAMID
Chairman
Jen. Tan Sri Dato' Seri Ismail bin Hj. Omar (Bersara), aged 70, was
appointed as a Director and Chairman of AFFINBANK on 21 May
2002.
Dato’ Zulkiflee Abbas bin Abdul Hamid aged 54, was appointed
as a Managing Director/Chief Executive Officer on 1 April 2009.
He was formerly Chief Defence Forces (CDF) Malaysia from 1995
until his retirement in 1998, after 38 years of military service. He
graduated from Royal Military Academy, Sandhurst, United
Kingdom in 1961 and subsequently attended professional and
management development courses at several institutions
including The Land Forces Command and Staff College, Canada;
the United Nation International Peace Academy, Vienna; the
National Defence College, India and INTAN Malaysia.
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.
Tan Sri was Chairman of Affin Holdings Berhad and Affin-ACF
Finance from 1999 prior to joining AFFINBANK. Currently, he
among others is on the Board of Directors of AFFIN ISLAMIC,
ABB Trustee Berhad, EP Engineering Sdn Bhd and Global Medical
Alliance Sdn Bhd.
Tan Sri Ismail displays strong board chair leadership as he sets
the Board’s tone, direction and culture. Tan Sri Ismail creates the
appropriate environment to allow for full engagement by all
members of the Board for effective Board discussions and
decision making. Tan Sri Ismail possesses a high level of
leadership experience to lead effective Board oversight function.
Jen. Tan Sri Dato’ Seri Ismail bin Hj Omar attended all 18 Board
Meetings held during the financial year ended 31 December 2010.
Prior to joining AFFINBANK, Dato’ Zulkiflee Abbas was the Chief
Credit Officer in one of Malaysia’s leading bank. He also served in
various positions there including as a Board member of its
subsidiaries. He graduated with a Master in Business
Administration from the Southern Illinois University, United States
of America. Dato’ Zulkiflee Abbas joined AFFINBANK in March
2005 as Director, Enterprise Banking. He was later made the
Director of Business before assuming his current position.
Dato’ Zulkiflee Abbas has vast working experience in banking
being 29 years in the industry. Dato’ Zulkiflee Abbas possesses
the necessary knowledge and professional competence in the
conduct of the licensed institution’s business. Dato’ Zulkiflee
Abbas balances the Board mix and help to enhance Board
effectiveness.
Dato’ Zulkiflee Abbas bin Abdul Hamid attended all 18 Board
Annual Report 2010
10
(continued)
YBHG. TAN SRI DATO’
LODIN BIN WOK KAMARUDDIN
YM. DR. RAJA ABDUL MALEK
BIN RAJA JALLALUDIN
(Re-appointed as Director w.e.f.4.10.2010)
Tan Sri Dato' Lodin bin Wok Kamaruddin, aged 62, was
re-appointed to the Board of Directors of AFFINBANK on 4
October 2010. He was appointed as the Managing Director of
Affin Holdings Berhad in February 1991 and redesignated as
Deputy Chairman on 1 July 2008.
Dr. Raja Abdul Malek bin Raja Jallaludin, aged 65, was appointed
to the Board of Directors of AFFINBANK on 29 January 1991.
Tan Sri Dato’ Lodin has vast business and management
experience pursuant to his various positions held in Lembaga
Tabung Angkatan Tentera (“LTAT”) Group of Companies. He is the
Chief Executive of LTAT and the Deputy Chairman/ Group
Managing Director of Boustead Holdings Berhad. Prior to joining
LTAT, he was the General Manager of Perbadanan Kemajuan Bukit
Fraser for 9 years. Tan Sri Lodin is also the Chairman of Boustead
Heavy Industries Corporation Berhad, Boustead Naval Shipyard
Sdn Bhd, Boustead Petroleum Marketing Sdn Bhd, Boustead
REIT Managers Sdn Bhd, Johan Ceramics Berhad and 1Malaysia
Development Berhad and also sits on the Boards of UAC Berhad,
The University of Nottingham in Malaysia Sdn Bhd, Minority
Shareholder Watchdog Group, Atlas Hall Sdn Bhd, AFFIN
ISLAMIC, Affin Investment Bank Berhad and AXA Affin Life
Insurance Berhad.
He graduated from the University of Toledo, Ohio, USA with a
Bachelor of Business Administration and a Master of Business
Administration Degree.
Tan Sri Dato’ Lodin attended 2 out of the 3 Board Meetings from
4 October 2010 until the financial year ended 31 December 2010.
He graduated as a doctor from the University of Malaya in 1972
and, early in his career, worked at the General Hospital, Kuala
Lumpur and the Faculty of Medicine, UKM. In late 1975, he went
into private medical practice and became a senior partner of Drs.
Catterall, Khoo, Raja Malek & Partners until 2003 when he
resigned from the firm. Professionally he is widely experienced and
had served in various peer and academic activities. Amongst
others, he had been a clinical tutor in the Faculty of Medicine,
UMMC; been a member of the Ethical Committee of the Malaysian
Medical Council, MOH; was the Chairman of Council Academy of
Family Physicians, Malaysia.
Dr. Raja Abdul Malek also has vast experience in the
pharmaceutical world and had actively been involved since 1984.
He had been the Medical Director (Malaysia-Singapore) for Parke
Davis-Warner Lambert from 1984-2000, and had remained briefly
so too with Pfizer Malaysia when these two Incorporations
merged in 2001. In 2003, Dr. Raja Abdul Malek joined HOE/
Pharmaceuticals/ HOEPharma Holdings Berhad as the Director
of Medical and Scientific Affairs and holds this position to this day.
His other directorships in public and private companies include
ABB Trustee Berhad. He is also a member of the Advisory Panel
of StemLife Berhad.
Notwithstanding his tenure of 19 years with AFFINBANK, Dr. Raja
Abdul Malek continues to demonstrate independence of judgment
and objectivity in both his actions and thoughts.
Dr. Raja Abdul Malek possesses certain personal qualities such
as incisiveness which brings diversity and different perspective in
Board decision making that could further balance and strengthen
the Board as a whole.
Dr. Raja Abdul Malek bin Raja Jallaludin attended 17 out of the 18
Board Meetings held during the financial year ended 31 December
2010.
11
AFFIN BANK BERHAD
(25046-T)
(continued)
YBHG. LAKSAMANA MADYA
TAN SRI DATO’ SERI AHMAD
RAMLI BIN MOHD NOR (BERSARA)
YBHG. DATO’ SRI ABDUL AZIZ
BIN ABDUL RAHMAN
Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor, aged 67, was
appointed to the Board of Directors of AFFINBANK on 21 May
2002. He retired as Chief of Royal Malaysian Navy in 1999.
Dato' Sri Abdul Aziz bin Abdul Rahman, aged 65, was appointed
to the Board of Directors of AFFINBANK on 28 January 2003.
He graduated from the Brittania Royal Naval College Dartmouth,
United Kingdom in 1965, the Indonesia Naval Staff College in
1976, the United States Naval War College and Naval PostGraduate School Monterey in 1981. He also holds a Master
Degree in Public Administration from the Harvard University,
United States of America.
He currently holds directorships in AFFIN ISLAMIC, Muhibbah
Engineering (M) Berhad and Favelle Favco Berhad.
Tan Sri Dato' Seri Ahmad Ramli is presently the Executive Deputy
Chairman/ Group Managing Director of Boustead Heavy
Industries Corporation Berhad.
Tan Sri Dato' Seri Ahmad Ramli’s appropriate leadership with
strategically critical skills and experience has added value to the
Board’s performance. Tan Sri Dato’ Seri Ahmad Ramli contributes
to the mix of skills and experience of the Board through his
relevant expertise in business, management and strategic
planning on both short term and long term strategic issues.
Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor attended 16 out of
the 18 Board Meetings held during the financial year ended 31
December 2010.
Dato’ Sri Abdul Aziz graduated with a Bachelor of Commerce from
University of New South Wales, Sydney, Australia. He is member
of the Malaysian Institute of Certified Public Accountants (MICPA)
and the Malaysian Institute of Accountants (MIA).
He has served as Chairman and board member of several
government institutions, agencies and public listed companies,
both in Australia and Malaysia.
At the corporate level he was with Price Waterhouse & Co.
Sydney, Malaysia Airlines and Managing Director of Bank Rakyat
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 the International Islamic
University Malaysia, University Malaysia Pahang and their
associated holding companies.
Dato’ Sri Abdul Aziz’s expertise and knowledge carries across a
broad spectrum relating to finance and accounting. His standing
in the community contributes effectively to his role as an
Independent Director particularly in meeting various stakeholders
expectation.
Dato' Sri Abdul Aziz bin Abdul Rahman attended all 18 Board
Annual Report 2010
12
(continued)
MR. AUBREY LI KWOK-SING
MR. STEPHEN CHARLES LI
Mr. Aubrey Li Kwok-Sing, aged 61, was appointed to the Board of
Directors of AFFINBANK on 17 March 2008. He is a Director of The
Bank of East Asia, Limited and Chairman of MCL Partners Limited.
Mr. Stephen Charles Li, aged 51, was appointed to the Board of
Directors of AFFINBANK on 17 March 2008. Mr. Li is a Director of
The Bank of East Asia, Limited.
Mr. Aubrey Li possesses extensive experience in investment
banking, merchant banking and capital markets. He is also a Director
of Café de Coral Holdings Limited, China Everbright International
Limited, Kunlun Energy Limited, Kowloon Development Co. Ltd,
Pokfulam Development Company Limited, Tai Ping Carpets
International Limited, Atlantis Investment Management (Ireland)
Limited and Dalton Capital (Guernsey) Limited.
Mr. Li also holds directorships in hedge funds based in the U.K.
and E.U. He has over 16 years experience in investment banking
having held senior capital markets positions with several
international investment banks in London and Hong Kong.
Mr. Aubrey Li brings in related knowledge and experience in the
banking fields, business development and strategy which are
considered to be a value in achieving AFFINBANK business
objectives.
Mr. Aubrey Li Kwok-Sing attended 11 out of the 18 Board
EN. MOHD SUFFIAN BIN
HAJI HARON
Encik Mohd Suffian bin Haji Haron aged 66, was appointed to the
Board of Director of AFFINBANK on 15 August 2009.
He graduated with a Bachelor of Economics from University of
Malaya (1970) and holds a Master of Business Administration from
University of Oregon in the United States (1976).
Current directorships in public companies include, AFFIN
ISLAMIC, L.K. & Associates Sdn Bhd, Idaman Pharma
Manufacturing Sdn Bhd and Polmag Sdn Bhd.
Encik Mohd Suffian brings a diverse professional experience to
the Board. His background provides the necessary independence
to the Board and add value by drawing on his experience and
contributing to the Board’s decision-making process.
Encik Mohd Suffian bin Haji Haron attended all 18 Board Meetings
held in the financial year ended 31 December 2010.
Mr. Li holds a Bachelor of Science (Hons.) Degree in Mathematics
from King’s College, University of London, United Kingdom in
1981. He is also a member of the Institute of Chartered
Accountants in England and Wales.
Mr. Li engaged himself actively in the deliberations at the Board of
Directors meeting. His global expertise, skills, work exposure and
knowledge in investment banking and accounting brings balance
to the Board and adds value that could further improve the
Board’s performance and effectiveness.
Mr. Stephen Charles Li attended 8 out of the 18 Board Meetings
held during the financial year ended 31 December 2010.
Mr. Stephen Charles Li’s alternate director, Mr. Eric Koh Tong Hau,
attended 10 out of 18 Board Meetings held during the financial
year ended 31 December 2010.
13
AFFIN BANK BERHAD
(25046-T)
MANAGEMENT TEAM
1.
YBhg. Dato' Zulkiflee Abbas bin Abdul Hamid
2.
En. Amirudin bin Abdul Halim
Director, Business Banking
3.
Mr. Tan Kok Toon
Director, Treasury
4.
Pn. Khatimah binti Mahadi
Group Chief Internal Auditor
5.
En. Shariffudin bin Mohamad
Executive Director, Operations
5
4
3
2
1
Annual Report 2010
14
MANAGEMENT TEAM
(continued)
6.
En. Kamarul Ariffin bin Mohd. Jamil
Chied Executive Officer, Affin Islamic Bank Berhad
7.
Mr. Kasinathan T. Kasipillai
Group Chief Risk Officer
8.
En. Idris bin Abd. Hamid
Director, Consumer Banking
9.
Mr. Ee Kok Sin
Chief Financial Officer
10. Mr. Richard Kong
Chief Human Resource Officer
11. YBhg. Dato' Mohamad Aslam Khan Gulam Hassan
Chief Recovery Specialist
7
8
6
9
10
11
15
AFFIN BANK BERHAD
(25046-T)
MANAGEMENT TEAM PROFILES
YBHG. DATO' ZULKIFLEE
ABBAS BIN ABDUL HAMID
Dato’ Zulkiflee Abbas bin Abdul Hamid, 54 years old, currently
holds the position of Managing Director/ Chief Executive Officer of
AFFINBANK since 1 April 2009.
He joined AFFINBANK in March 2005 as Director, Enterprise
Banking and later on was made Executive Director, Banking
before assuming his current position.
Dato’ Zulkiflee has been in the banking industry for almost 30
years. He started in a local leading bank, working his way up
through various ranks and responsibities at home and abroad. He
left in 2005 while he was the Chief Credit Officer.
Under his current portfolio, Dato’ Zulkiflee also holds directorships
in Affin Investment Bank Berhad and Affin Islamic Bank Berhad
Dato’ Zulkiflee holds a Masters in Business Administration from
Southern Illinois University, United States of America, the same
university of which he obtained his Bachelor of Science (Marketing).
EN. KAMARUL ARIFFIN
MOHD JAMIL
While he was the Director, Operations, he was also the Chief
Corporate Strategist and Chief Human Resource Officer.
Currently, he oversees the Operations Division encompassing
Branch Operations, Information Technology, Property and Logistics,
Strategic and Support Services including Customer Fulfillment, Legal
and Corporate Communications.
He brings with him over two decades of banking experience with a
well-known international financial institution and its acclaimed global
outsourcing outfit.
He graduated with a Bachelor in Finance and a Master in Business
Administration from Southern Illinois University, United States of
America.
EN. AMIRUDIN
ABDUL HALIM
Director, Business Banking
Amirudin Abdul Halim joined AFFINBANK as Director, Business
Banking in July 2009.
He brings with him over 20 years of banking experience across
many fields within the industry from credit control, branch
operations, business and consumer banking to corporate
services.
Chief Executive Officer, Affin Islamic Bank Berhad
Kamarul Ariffin Mohd Jamil is the Chief Executive Officer of Affin
Islamic Bank Berhad (AFFIN ISLAMIC) since 2006.
He joined AFFINBANK in 2003 as Head, Corporate Strategy
Division and in 2005 was appointed as Head, Islamic Banking
Division. His appointment to his current position was in 2006 when
AFFIN ISLAMIC was incorporated as a wholly-owned subsidiary of
AFFINBANK.
Prior to AFFINBANK, Kamarul held various positions in
Pengurusan Danaharta Nasional Berhad, namely Head of
Managing Director's Office and Sepecial Assistant to Managing
Director between 1999 to 2003.
Kamarul graduated from the University of Cambridge in 1992 with
a Bachelor of Arts (Economics).
EN. SHARIFFUDIN
MOHAMAD
Executive Director, Operations
Shariffudin Mohamad is the Executive Director, Operations of
AFFINBANK.
He joined AFFINBANK as the Director, Operations in August 2007 and
was appointed to his present position effective 1 November 2009.
Amirudin served in several senior capacities during his long-term
tenure with a local leading bank and brought recognition to the
bank in 2007 when it received The Asian Banker's 'Excellence in
Retail Financial Services for Automobile Lending'.
He graduated with a Bachelor of Arts degree in Finance from St.
Louis University, United States of America and has attended
various programmes by Stamford University, Wharton Business
School, Washington University and Asian Institute of Management,
Philippines.
EN. IDRIS ABD. HAMID
Director, Consumer Banking
Idris Abd Hamid has over 30 years of experience in the banking
and finance industry. His career with AFFINBANK began in 1994
when he was the General Manager for Affin Finance Berhad and
he was later made Deputy Chief Executive Officer for AFFIN-ACF
Finance Berhad from 2000 to 2005. Prior to joining AFFINBANK,
Idris held various positions at Arab-Malaysian Finance (currently
known as AmBank) from 1984 to 1994 as Branch Manager,
Assistant Manager Corporate Loans and Head of Consumer
Loans Division. He graduated from the University of Northern
Colorado and Southern Illinois University, USA with Masters in
Business Administration and Bachelor of Science in Finance
respectively.
Annual Report 2010
16
MANAGEMENT TEAM PROFILES
(continued)
MR. TAN KOK TOON
Director, Treasury
Tan Kok Toon (KT) completed his Bachelor of Science (Hons) in
Mathematics from Universiti Malaya in 1987.
He joined AFFINBANK as Head of Treasury in October 2004 and
is responsible for managing all aspects of Treasury Division across
the Group which includes AFFIN Islamic Bank Berhad and Affin
Investment Bank Berhad. He is the current Honorary Secretary,
Persatuan Pasaran Kewangan Malaysia (Association Cambiste
Internationale) and the Chairman to its Seminar and Education
Committee.
Prior to AFFINBANK, KT worked in one of the largest banks in
Malaysia. For more than 18 years, he served in various capacities
of Treasury operations, such as Treasury Manager with the Bank’s
New York branch and as Treasury Business Advisor to turnaround
a business project in the Philippines. KT is also the president of
Kelab Sukan dan Rekreasi AFFINBANK.
He has over 30 years of local and overseas banking experience
particularly in the area of Risk Management. He comes from a
foreign bank background having earlier worked in the risk function
of that bank in a number of countries including London,
Singapore, Hong Kong, Mumbai and Jakarta.
PN. KHATIMAH MAHADI
Group Chief Internal Auditor
Khatimah Mahadi has 30 years of experience in Internal Auditing
including 23 years in financial services with Citibank Berhad, a
development bank and a finance company. In addition, she also
had a stint with a local bank, Lembaga Pasaran dan Perlesenan
Getah and Auditing/Consulting Firm Hanafiah, Raslan &
Mohamad. She was also the Director of Compliance and Country
Internal Audit Head when she was with Citibank Berhad.
YBHG. DATO' MOHAMAD
ASLAM KHAN GULAM HASSAN
Chief Recovery Specialist
MR. EE KOK SIN
Chief Financial Officer
Ee Kok Sin began his career in 1982 as a Trainee Accountant with
a firm of Chartered Accountants in London. He has extensive
experience in auditing, treasury functions, financial accounting,
financial management and information technology.
Prior to his appointment at AFFINBANK, he was the General
Manager, Finance & Services of Pengurusan Danaharta Nasional
Berhad. He is a Fellow Member of the Association of the
Chartered Certified Accountants (FCCA) and a member of The
Malaysian Institute of Certified Public Accountants (MICPA) and
Malaysian Institute of Accountants (MIA).
MR. KASINATHAN T.KASIPILLAI
Group Chief Risk Officer
Kasinathan holds a Masters in Business Administration from the
University of Bath, UK and is a Certified Risk Professional awarded
by Bank Administration Institute, Chicago, USA. He is also an
Associate Fellow of Institute of Bankers Malaysia. This is in
recognition of his pioneering work in developing the Certified
Credit Professional (CCP) certification. He continues to serve as an
active member of CCP Examination Committee to this day.
Dato' Mohamad Aslam Khan holds a Bachelor's Degree in
Business Administration with honours. He joined AFFINBANK in
1996 as the General Manager of Commercial Banking Division
and was later appointed the Head of Special Asset Management.
He has held various positions domestically and internationally both
in the business and business support divisions. Dato' Aslam has
over 35 years of banking experience.
Prior to AFFINBANK, he held various positions at Maybank for 21
years. His last position there was the General Manager of Maybank
in New York. He also had a five-year stint with the former Oriental
Bank as the General Manager, Enterprise Banking Division.
MR. RICHARD KONG
Chief Human Resource Officer
Richard was previously the General Manager, Operations at
Pengurusan Danaharta Nasional Berhad until its winding down in
December 2005. He has 35 years of extensive banking
experience, including service in a leading international bank,
Standard Chartered Bank Malaysia Berhad.
During his tenure with the Bank, he had the opportunity to serve
as Head, Special Assets Management (SAM) Malaysia, Regional
Head SAM for Malaysia, Brunei & the Philippines. Richard also
worked as a Senior Account Manager in SCB Nakornthon Bank
in Bangkok, during the Asian financial crisis. He has a strong track
record in the areas of asset management, credit risk management,
commercial and domestic corporate banking and also in
manpower planning, training and development.
17
AFFIN BANK BERHAD
(25046-T)
CHAIRMAN’S
STATEMENT
O
n behalf of the Board of Directors, I am pleased to present the Annual Report and
Financial Statements of Affin Bank Berhad (AFFINBANK) for the financial year ended
31 December 2010.
During the year under review, Malaysia’s economy outperformed expectations to chalk up a
commendable growth of 7.2% in 2010 compared with a contraction of 1.7% in 2009,
bolstered by a rebound in manufacturing and services as well as brisk exports and imports.
The government, which implemented a RM67 billion stimulus package two years ago to
boost the economy which was severely affected by the global downturn, had earlier
forecasted Malaysia’s gross domestic product to grow by 5% to 6% in 2010.
However, the continued influx of foreign direct investments, a healthy reserves position
maintained by Bank Negara and a record performing ringgit as well as high commodity
prices, boosted growth and aided the country’s rebound in 2010.
In tandem with the strong rebound in the Malaysian economy, the Group’s net profit after
zakat and tax attributable to shareholders also rose by 20% to RM381.2 million for the year
ended 31 December 2010. The good performance was driven primarily by the deposits
business sector especially the retail segment, improved customer touch-points to ensure
excellent and efficient customer service, continuous improvements on risk management
practices to be abreast with prevailing economic climate and human capital development.
In a healthier economic environment which facilitated higher actual loan recoveries, total
allowances for losses on loans, advances and financing reduced to RM95.4 million for the
current financial year compared with RM187.5 million in 2009, when the market conditions
and economic environment were under great duress due to the global financial crisis.
Total loans and advances after deducting allowance for loan losses grew by 18% to RM26.0
billion compared with RM22.0 billion a year ago as economic activities and demand for credit
gathered momentum during the year under review. To support the loan growth, total deposits
correspondingly increased by 17% year-on-year to RM30.8 billion as at 31 December 2010.
The Group’s total equity as at 31 December 2010 rose to RM3.3 billion contributed by
RM346 million growth in the Reserves.
18
Annual Report 2010
CHAIRMAN’S STATEMENT
(continued)
“
AFFINBANK’s loan growth momentum remained
strong at 17.5% year-on-year in December 2010
compared with the industry’s 12.8% for 2010.
Improvements were seen in property loan segments
(+14.6% for residential mortgages and 64.3% for nonresidential mortgages), auto (+18.9%) and working
capital loans (+13.1%) in December 2010.
In line with the Group’s strong financial performance,
the Board approved a second and final one-tier tax
exempt dividend of 5 sen per share for the year under
review. Together with the first interim of 5.28 sen paid
on 6 December 2010, the total dividend payout for the
2010 financial year amounted to 10.28 sen gross
dividend per ordinary share or RM129.0 million.
AFFINBANK’s loan growth momentum remained
strong at 17.5% year-on-year in December 2010
compared with the industry’s 12.8% for 2010.
Improvements were seen in property loan segments
(+14.6% for residential mortgages and 64.3% for nonresidential mortgages), auto (+18.9%) and working
capital loans (+13.1%) in December 2010.
This loan growth momentum is expected to remain
steady in 2011 due to strong consumer sentiment,
healthy business confidence, a stable interest rate
environment and pent-up credit demand spurred by a
recovering economy.
As the Group continues to forge ahead in our business
operations and growth, we have not forgotten our role
as corporate citizen. The year saw us undertaking
several corporate social responsibility initiatives
including the donation of 50 homes valued at RM1.8
million for the poor at Bukit Kenau Integrated
Community Centre in Pekan, Pahang under Affin
Islamic Bank, RM1 million contribution to Yayasan
Perajurit, the yearly Tabung Hari Pahlawan campaign,
annual contribution of Bungkusan Hari Raya to Tabung
Kebajikan Angkatan Tentera, and handouts of ‘duit
raya’ during our Hari Raya Open House with orphans
and new converts.
”
Backed with a strong and experienced Board, befitting
its aspiration to become a mid-size bank of
prominence, the Board of Directors remains
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,
same as per the requirements set out in the Bank
Negara Malaysia’s Guidelines on Directorship in the
banking institutions (‘BNM/ GP1’).
Throughout 2010 and to date, the Bank continues to
conduct its business with integrity and exercise a high
level of transparency and objectivity.
In a move to extend its reach and encouraged with the
growth potential in Indonesia, AFFINBANK had in
August 2010 acquired an 80% equity interest in
Indonesian bank, PT Bank Ina Perdana for RM138
million.
PT Bank Ina Perdana has a niche positioning as a retail
bank in the small and medium enterprise (SME) sector,
which fits in nicely with AFFINBANK’s long term plan to
further grow its business and increase its shareholders
value. It has 22 branches which are strategically
located in major cities in Indonesia.
We see this acquisition as a step forward for
AFFINBANK and Affin Islamic Bank Berhad (AFFIN
ISLAMIC). The potential for Islamic banking in
Indonesia is vast and AFFIN ISLAMIC has the
capabilities and expertise to ensure the growth and
development of Shariah banking as we move
regionally.
19
AFFIN BANK BERHAD
(25046-T)
This acquisition was the first for AFFINBANK to
venture out of the Malaysian borders.
Looking ahead, the economic outlook for 2011 is
expected to be more subdued as the first quarter of
the year have demonstrated how geopolitical risks in
the Middle East and North Africa (MENA) virtually
cannot be anticipated as uprisings lead to the spiralling
of global oil prices to a 30-month high of US$112.09
per barrel (for Brent crude) on 25 February and a 29month high of US$96.98 per barrel (WTI). The major
concern is that the dominoes in the Middle East could
continue to fall. If the recent rise in oil prices is
sustained, it would have a dampening impact on the
global economy.
So far, the Malaysian economy has shown the ability to
absorb the crude oil price increases and is expected to
grow between 5.0% and 6.0% in 2011, driven by
domestic demand and strong export performance,
backed by the Economic Transformation Programme.
The banking industry in Malaysia is expected to
sustain its profitability with healthy capital and strong
asset quality in 2011.
High-impact projects like the Mass Rapid Transit in
Klang Valley especially in Greater Kuala Lumpur, are
expected to generate a large multiplier effect to the
economy and spur business and consumer spending,
thus supporting overall economic growth especially in
the loan sector.
Building on the momentum created in 2010, the Bank
will continue to focus on ‘sustainable business growth’
in both Business Banking as well as Consumer
Banking segments, with an attitude of ‘lowest risk
tolerance’ financing.
The business units of the Bank comprise Business
Banking, Consumer Banking, Debt and Capital
Markets and Hire Purchase. Consumer Banking
provides credit cards, personal loans, mortgages and
deposit taking services to individuals.
For Business Banking, the Bank will be leveraging on
business opportunities arising from the 10th Malaysia
Plan as well as the Economic Transformation
Programme, while Consumer Banking will be
developing specific products and packages that suit
certain targeted market segments.
The Group will also continue to seek improvements in
our customer services, provide quicker turnaround
time via better process efficiency and actively manage
our operating costs to maintain profitability. With our
strong balance sheet and capital position, the Group
is confident that we will be able to meet all the
challenges and opportunities ahead in order to serve
and provide continued support to our valued
customers.
On behalf of the Board, I would like to thank our
shareholders, customers and business partners for
their continuing support. My appreciation goes to all
staff and management for their dedicated services and
for delivering a commendable performance for the
current year. Finally, I wish to thank all my fellow Board
Members for their wise counsel and contributions.
Jen. Tan Sri Dato’ Seri Ismail Bin Hj. Omar
(Bersara)
Chairman
22 March 2011
Annual Report 2010
20
O
n behalf of the Management team of Affin Bank Berhad (AFFINBANK), I am
pleased to put forth the review of our performance for the year ended
31 December 2010.
The year 2010 was a year of stability and performance across all boards for Malaysia
in light of its political developments and economic expansion plan by the Government
for its people.
Notwithstanding the difficult global economic environment experienced in Europe,
Malaysia has steadily moved forward to remain robust and outperformed its own
gross domestic product forecast.
The financial and banking sector in Malaysia has also profited from this setting with
its strong solvency position and high quality of loan portfolio. The improved earnings
from businesses, coupled with favourable employment prospects that bolstered the
debt servicing capacity of banks’ borrowers’ plus the credit compression and
injection from the public sector, ensured that the domestic financial markets were on
secured grounds.
In this respect, Affin Bank Berhad remained resilient and registered 22.8% higher
profit before zakat and tax of RM521.9 million for the financial year ended 31
December 2010 compared with RM425.1 million in 2009.
The stronger performance was achieved on the back of strong growth in the total
deposits especially the retail segment, improved customer touch-points to ensure
excellent and efficient customer service, continuous enhancement on risk
management practices in keeping abreast with prevailing economic climate and
human capital development.
Net profit after zakat and tax increased by 20% to RM381.2 million for the year ended
31 December 2010 compared with RM317.8 million the year before.
PERFORMANCE
REVIEW
21
AFFIN BANK BERHAD
(25046-T)
The higher profit after zakat and tax translated into a
return on equity (ROE) of 12.93%, a commendable
progression from 11.43% in the previous year. Return
on assets (ROA) improved to 1.04% from 0.93% a
year ago, indicating a marked enhancement in the
generation of the Bank’s investment.
Its net interest income rose by 2% to RM751.0 million
from RM736.0 million recorded in 2009. This is
contributed by the remarkable double-digit growth in
loans, advances and financing, in the wake of the
substantial increased of deposits.
Gross loans, advances and financing increased by
17.5% to RM26.5 billion from RM22.6 billion the year
before, mainly contributed by household loans,
followed by the construction, property and finance,
insurance and business services sectors.
AFFINBANK also recorded an increase of 2% in other
operating income to RM227.4 million from RM221.9
million in 2009. Islamic banking income increased by 9%
to RM177.8 million from RM162.6 million the year before.
During the year, the Group’s total assets rose by
RM6.5 billion to RM42.1 billion, compared with
RM35.6 billion in 2009. Net financing grew by 18.1%
to RM26 billion.
Earnings per share increased by 20% to 26.5 sen per
share from 22.1 sen per share during the year under
review.
The Group’s shareholders equity expanded further by
11.7% to RM3.3 billion in 2010 from RM3.0 billion the
year before.
Further details about the Bank’s performance by its
business and operations units are as stated:-
Business Banking
Business Banking segment represents 40% of the
Group's total revenue.
During the year, the Group's contract financing and its
small and medium enterprise (SME) financing grew
exponentially. Its commercial and institutional business
also outperformed its targets last year.
Consumer Banking
Consumer Banking segment constituted 37% of the
Group’s revenue. Mortgage and Hire Purchase being
the key products, grew by RM1.9 billion or 47.6%,
contributing to the Group’s loans, advances and
financing growth of RM3.9 billion.
The growth in deposits was admirable with deposits
from customers at the Group level increased 16.7% to
RM30.8 billion from RM26.4 billion recorded the year
before. Fixed deposits rose by 25.4% to RM19.9
billion from RM15.9 billion in 2009.
The launch of two new deposit products during the
year under review contributed to this healthy growth.
These were the AFFIN FD PLUS and the OMG (OH
MY GOSHH!) deposits campaigns which gave the
Bank the much needed visibility in terms of attractive
and better-than average industry’s rates, targeting its
existing clientele and capturing new customer
segments.
Treasury
The Bank’s treasury manages a fund size of RM14.4
billion and has maintained a sterling performance
in returns with the support of experienced fund
managers and financial analysts.
22
Annual Report 2010
PERFORMANCE REVIEW
(continued)
“
In this respect, Affin Bank Berhad remained resilient
and registered 22.8% higher profit before zakat and
tax of RM521.9 million for the financial year ended 31
December 2010 compared with RM425.1 million in
2009.
”
Operations
In 2010, the Group embarked on a rejuvenation
programme to create visibility and to brand
AFFINBANK as a progressive yet personalized
financial partner for its customers. Convenience for the
customers was the priority and relocation as well as
renovation underpinned this programme. Several
branches underwent a refurbishment exercise and a
couple of branches like Taiping and Alor Setar were
relocated to commerce areas that are more vibrant
and business-centric.
In creating new customer touch-points and channels,
the Bank has identified new business areas to
establish its presence and a new AFFIN Islamic branch
opened its doors in mid-December located at the
Management & Science University (MSU) campus in
Shah Alam.
Overall, the Group’s operating expenses increased by
4.8% to RM530.9 million against 2009 result of
RM506.5 million. This was mainly due to increased
personnel costs as the Bank continues its development
and investment in its human capital as well.
The Group is well capitalised with its risk weighted capital
ratio at 12.67% and a core capital ratio of 11.24%.
RAM Rating Services Berhad has reaffirmed the Bank’s
long term and short term financial institution ratings at A1
and P1 respectively, with a stable outlook.
In moving ahead with the times, year 2011 will be
challenging especially with regards to maintaining the
Bank’s upward momentum.
On the global front with crude oil prices on the rise and
the civil discontentment in the Middle East and North
Africa, many economies will be affected with rising
rates and prices due to difficulties of obtaining goods
and services as well as inflation and unemployment
and in the said countries, state welfare and rebuilding.
Note:* Source from CIA World Fact Book.
Looking at the socio-political stability in the country and
the Government Transformation Plans (GTP), Malaysia’s
economy will definitely benefit from these two factors.
The estimated population growth rate of 1.58%* and
the growing affluent in the country will also be
contributors, with regulated banking system and the
controlled monetary structures that are well-placed.
With all the factors and underlining conditions,
determining the way forward and the business
strategy for 2011 onwards will be two-pronged –
internal improvements and external aggression.
Internally, emphasis will be on customer service
enhancement with effective human capital
developments, credit and risk management
improvements and continuous branding process of
the rejuvenation programme for the existing branches.
External aggression will include product innovations
and campaigns, identification of new sites for
presence, securing new business inclusive of our
overseas acquisition, PT Bank Ina Perdana and
focused fee income business segments, image
building and corporate initiatives via corporate
responsibility programmes.
The Bank is well-positioned to the meet the challenges
ahead as it grow steadily yet substantially to enhance
its shareholders’ value and market standing.
Lastly, I would like to thank all our customers, fellow
colleagues, the Management team, stakeholders
including our regulators and government agencies as
well as our esteemed Board of Directors for their
continued support and confidence.
Dato’ Zulkiflee Abbas Bin Abdul Hamid
22 March 2011
23
AFFIN BANK BERHAD
(25046-T)
2009 2008 2007
2009 2008 2007
29.4
2010
33.0
2006
35.6
322.0
454.6
2010
425.1
2006
42.1
2009 2008 2007
272.3
2010
521.9
(RM’billion)
15.4
(RM’million)
18.0
(Sen)
23.0
TOTAL ASSETS
22.1
PROFIT BEFORE TAXATION (PBT)
26.5
EARNINGS PER SHARE (EPS)
31.9
FINANCIAL HIGHLIGHTS
2006
The Group’s net loans, advances and
financing grew by 18.1% to RM26.0 billion
compared with RM22.0 billion in 2009, as
economic activities and demand for credit
gathered momentum during the year under
review.
2009 2008 2007
Total deposits increased by 16.7%
year-on-year to RM30.8 billion as at 31
December 2010, in correspondence to the
Group’s loan growth.
2009 2008 2007
2.3
2010
2.5
2006
2.7
2010
3.0
2006
3.3
2009 2008 2007
22.6
2010
23.5
(RM’billion)
25.2
(RM’billion)
26.4
(RM’billion)
30.8
SHAREHOLDERS’ EQUITY
17.0
DEPOSITS FROM CUSTOMERS
16.8
NET LOANS, ADVANCES & FINANCING
19.5
The Group’s financial position as at 31
December 2010 continued to remain
strong with total assets of RM42.1 billion,
an increase of 18.2% compared with
RM35.6 billion as at 31 December 2009.
22.0
The Group achieved PBT of RM521.9
million, a commendable 22.8% rise for the
year ended 31 December 2010, compared
to RM425.1 million in 2009. The Group’s
PAT also rose by 20% to RM381.2 million
for the year ended 31 December 2010.
26.0
The Group’s EPS for the financial year
ended 31 December 2010 stood at 26.5
sen, compared to 22.1 sen the year
before.
2006
Total shareholders’ equity of the Group
increased by 11.7% to RM3.3 billion from
RM3.0 billion the year before.
Annual Report 2010
24
CORPORATE DIARY
AFFINBANK takes part in the DSA 2010 Exhibition for the first
time as the Official Bank.
AFFINBANK contributes RM5,000 to the Malam Wartawan
Malaysia 2010, to appreciate and strengthen network with the
media.
8 April 2010
8 April 2010
AFFINBANK shows support for the 14th Malaysian Banking
Summit 2010.
27 May 2010
Launching ceremony of the Integrated Community Centre at
Bukit Kenau, Mukim Pulau Manis, Pekan, Pahang, where 50
homes valued at RM1.8 million were built for the purpose of
eradicating hardcore poor.
16 July 2010
AFFINBANK sponsors RM160,000 for the Hari Pahlawan 2010
campaign.
AFFINBANK runs for a good cause at The Edge-Bursa
Malaysia Kuala Lumpur Rat Race.
19 July 2010
3 August 2010
25
AFFIN BANK BERHAD
(25046-T)
CORPORATE DIARY
(continued)
AFFINBANK continues its tradition to contribute cash and
in-kind worth RM100,000 to the Armed Forces personnel
serving overseas, in the spirit of Ramadhan month.
AFFINBANK hosts a breaking of fast for 130 orphans and 30
Muslim converts from around Klang Valley.
20 October 2010
16 August 2010
AFFINBANK contributed its internal AFFINBANKers Pakistan
Flood Relief Fund, in light of the tragedy in Pakistan.
AFFINBANK supports the Karnival Perpaduan 1 Malaysia while
promoting its latest financial products and services.
6 October 2010
14 November 2010
AFFINBANK demonstrates its role as a caring organisation
through community service for the Selangor and Federal
Territory Association for the Mentally Handicapped.
AFFINBANK and MAHSA University College enters into a loan
facility agreement of RM324 million.
30 November 2010
20 November 2010
Annual Report 2010
26
STATEMENT OF CORPORATE GOVERNANCE
The Board of Directors of AFFINBANK (“Board”) and Management appreciate the importance of adopting high standards of Corporate
Governance in all areas of its business towards enhancing business prosperity and corporate accountability with the ultimate objective
of safeguarding the interest of shareholder’s value. The Board and Management are fully committed and constantly strive to ensure
that the principles of the Malaysian Code on Corporate Governance (“Code”) and Bank Negara Malaysia (BNM) Guidelines on Corporate
Governance for Licensed Institutions (Revised BNM/GP1) are adopted and practised throughout the group. This is important so as to
ensure that AFFINBANK is managed safely and soundly where risks and business prudence are appropriately balanced so as to
maximize shareholder’s return and protect the interests of all stakeholders. It also enable the shareholder of AFFINBANK and the public
to access and determine the standards of Corporate Governance. Throughout 2010 and to date, AFFINBANK continues to conduct
its business with integrity and exercise a high level of transparency and objectivity.
The Board and Management are fully committed in ensuring employees adhere closely to BNM’s Guidelines (BNM/GP7) on Code of
Ethics (“COE”), which aims at instilling the five values namely discipline, integrity, humility, caring and creativity in AFFINBANK and its
employees. The Board and Management set high ethical business standards and practices for business conduct and the code of
behaviour for employees to adhere to. In addition to the COE, all Directors are also required to observe the Directors’ COE. Responsibility
for implementation of these policies and guidelines rests primarily with Management, with oversight by the Audit & Examination
Committee. Good Corporate Governance is the foundation of the culture and business practices of AFFINBANK.
The following statements set out the commitment of AFFINBANK in applying good Corporate Governance principles and the extent
of compliance with the recommended best practices.
1.
Board of Directors
The Board is committed in establishing and enhancing shareholder’s value in the long term. The Board is pleased to report that
the Board has to its best efforts and knowledge, complied with the principles and best practices of the Code throughout the
financial year under review.
`The Board of AFFINBANK has a balance composition with a strong independent element. It consists of representatives from the
private sectors with suitable qualifications fulfilling the fit and proper criteria as required by BNM/GP1, a mixture of different skills,
competencies, experience and personalities. Directors’ profiles which appear on pages 9 to 12 reflect clearly the depth and
diversity in expertise and perspective they have to lead AFFINBANK as well as allow for an independent and objective analysis of
major issues.
Board’s Responsibilities
The Board acknowledges their roles and responsibilities for the overall performance of AFFINBANK. These will ensure the
Board functions objectively, independently and effectively.
The Board’s responsibilities remain within the framework of BNM Guidelines. The Board also exercises great care to ensure that
high ethical standards are upheld, and that the interests of stakeholders are not compromised. These include responsibility for
determining AFFINBANK’s general policies and strategies for the short, medium and long term, approving business plans, including
targets and budgets, and approving major strategic decisions. The terms of reference of the Board Committees disclosed on page
37 of this Annual Report provide an outline of its role and functions.
In carrying out its functions, the Board has delegated specific responsibilities to other Board Committees, which operated under
approved terms of reference, to assist the Board in discharging their duties. The Chairmen of the various Committees report on
the outcome of their Committee meetings to the Board and any further deliberation is made at Board level, if required. These
reports and deliberations are incorporated into the Minutes of the Board meetings. The various Committee are listed below
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 AFFINBANK’s culture, objectives and strategy. The Committee obtains advice from experts in
compensation and benefits, both internally and externally.
27
AFFIN BANK BERHAD
(25046-T)
(continued)
Board Nominating Committee (“BNC”)
*
The BNC is responsible for providing a formal and transparent procedure for the appointment of Directors and Managing
Director/Chief Executive Officer, assessing the effectiveness of individual Director, the Board as a whole and the performance
of the Managing Director/Chief Executive Officer and key senior management personnel.
Board Risk Management Committee (“BRMC”)
*
The BRMC is responsible for overseeing management’s activities in managing credit, market, liquidity, operational, legal and
other risks and to ensure that the risk management process is in place and functioning.
Board Loan Review and Recovery Committee (“BLRRC”)
*
The BLRRC is responsible in providing critical review of loans and other credit facilities with higher risk implications, after due
process of checking, analysis, review and recommendation by the Credit Risk Management function, and if found necessary,
exercise the power to veto loan applications that have been approved by the Group Management Loan Committee.
Audit & Examination Committee (“AEC”)
*
The AEC is responsible for providing oversight on reviewing the adequacy and integrity of the internal control systems and
oversees the work of the internal and external auditors.
Board Composition and Balance
The Board composition is in compliance with the Revised BNM/GP1. The Board consist of nine (9) Directors and two (2) alternate
Directors comprising one (1) Executive Director and eight (8) Non-Executive Directors, of whom three (3) are Independent NonExecutive Directors and five (5) are Non-Independent Non-Executive Directors. All Directors have met the criteria set by the BNM
guidelines.
Board meetings are presided by a Non-Independent Non-Executive Chairman whose role is clearly separated from the role of the
Managing Director/Chief Executive Officer. The Chairman is responsible for ensuring the effectiveness and smooth functioning of
the Board, the governance structure, independence and inculcate a positive culture in the Board.
The Board comprises Directors who, as a group, provides a mixture of core competencies such as finance, accounting, business,
management, marketing, information technology and investment management, which are essential for the effective functioning and
discharging of responsibilities by the Board.
The Managing Director/Chief Executive Officer is responsible for the overall day-to-day business affairs of AFFINBANK while
providing strong leadership in the implementation of Board decisions.
The composition of the Board is further balanced by the presence of Independent Non-Executive Directors. Although all the
Directors have an equal responsibility for the Group’s business directions and operations, the role of these Independent NonExecutive Directors are particularly important in ensuring that the strategies proposed by the management are fully discussed and
evaluated, having considered the long term interests of AFFINBANK’s objectives. No individual or small group of individuals
dominate the Board’s decision making process.
Independence and Conflict of Interest
It is the Directors’ responsibility to declare whether they have a potential or actual interest in any transaction of AFFINBANK. Where
issues involve conflict of interest, the interested Directors abstain from discussing or voting on the matter.
Appointments and Re-election to the Board
In 2010, BNM approved the reappointment of one (1) of Non-Independent Non-Executive Director. In accordance with the
Company’s Memorandum and Articles of Association, one-third (1/3) of the Directors, or, if their number is not three (3) or a
multiple of three (3), the number nearest to one-third (1/3), shall retire from office at each Annual General Meeting and they may
offer themselves for re-election.
Annual Report 2010
28
(continued)
Directors’ Training
In accordance with the Code, all newly appointed Non-Executive Directors are furnished by AFFINBANK with copies of the BNM
Guidelines, the Banking and Financial Institutions Act 1989, the Green Book and other relevant legislation governing the banking
industry to facilitate their understanding of banking business requirements. All Directors have attended various training programmes
organised internally as well as externally by the relevant authorities such as BNM, Securities Commission (“SC”) and Companies
Commission of Malaysia (“CCM”). In addition, the members of the Board keep abreast with the relevant developments in business,
banking and finance industry as well as new regulatory requirements on a continuous basis via various conferences, seminars and
training programmes organised within the Group and by other external organizers. The development and training programmes
attended by the Directors during the year ended 31 December 2010 are set out below.
Director
Course Title
Trainer/Organiser
Date
YBhg. Jen Tan Sri Dato’
Seri Ismail bin Haji Omar
(Bersara)
1.
World Islamic Economic
Forum - Gearing for
Economic Resurgence
World Islamic Economic
Forum Foundation
19 May 2010
2.
Invitation to Launch of
Performance Pays
- the Report on Non
-Executive Directors
Remuneration
BNM, FIDE
28 June 2010
3.
Islamic Banking
Training
1 July 2010
4.
2nd Annual Corporate
Governance Summit
2010 - Truth, Lies and
Corporate Governance
Asian World Summit
& Federation of
Public Listed Company
& Malaysian Institute of
6 & 7 July 2010
5.
Briefing on Financial
Reporting Standards (FRS)
Goods and Service Tax (GST)
8 July 2010
6.
Briefing by PwC on
Performance Pays:
A study of financial
institutions Directors’
Remuneration
20 August 2010
7.
The Financial Industry
Conference 2010
BNM
3 November 2010
29
AFFIN BANK BERHAD
(25046-T)
(continued)
Director
Course Title
Trainer/Organiser
Date
YBhg. Dato’ Zulkiflee
Abbas bin Abdul Hamid
1.
Performance Pays - the
Report on Non-Executive
Directors Remuneration,
BNM, FIDE
28 June 2010
2.
Islamic Banking Training
1 July 2010
3.
Governance Summit 2010
- Truth, Lies and
Asian World Summit
& Federation of
6 & 7 July 2010
4.
FIDE Programme for
Directors (Group 17)
The Financial
Institutions Directors’
Education (FIDE)
19 & 20 July 2010
2 & 3 August 2010
20 & 21 September 2010
18 & 19 October 2010
5.
Briefing by PwC on
Performance Pays:
Remuneration
20 August 2010
6.
Conference 2010
BNM
3 Nov. 2010
1.
FIDE Directors’
Compensation Study:
Focus Group workshop
BNM, FIDE
8 Feb. 2010
2.
Strategic Islamic Finance
PNB Investment Institute
Sdn Bhd
16 June 2010
3.
Performance Pays - the
Report on Non-Executive
Directors Remuneration,
BNM, FIDE
28 June 2010
4.
- Truth, Lies and Corporate
Governance
Asian World Summit
& Federation of
6 & 7 July 2010
5.
8 July 2010
YM. Dr. Raja Abdul Malek
bin Raja Jallaludin
Annual Report 2010
30
(continued)
Director
Course Title
Trainer/Organiser
Date
Dr. Raja Abdul Malek
bin Raja Jallaludin
6.
Briefing by PwC on
Performance Pays:
Remuneration
20 August 2010
7.
Regulatory Framework And
Directors Duties 2010
Malaysian Institute of
(MICG)
24 November 2010
1.
Hi-Tea Talk by YBhg Dr.
Abbas Mirakhor
AIBIM
8 June 2010
2.
Performance Pays the Report on Non-Executive
Directors Remuneration
BNM, FIDE
28 June 2010
3.
1 July 2010
4.
- Truth, Lies and Corporate
Governance
Asian World Summit
& Federation of
6 & 7 July 2010
5.
Goods and Service Tax
(GST)
8 July 2010
1.
Managing Risks in
Mortgage Financing
BNM-Cagamas
13 January 2010
2.
Hi-Tea Talk by Ybhg Dr.
Abbas Mirakhor
AIBIM
8 June 2010
3.
Board Risk Management
Committee Programme
BNM, FIDE
21 & 22 June 2010
4.
BNM, FIDE
28 June 2010
5.
1 July 2010
6.
Briefing by PwC on
Performance Pays:
Remuneration
20 August 2010
YBhg. Laksamana Madya
Tan Sri Dato’ Seri Ahmad
Ramli bin Mohd Nor
(Bersara)
YBhg. Dato’ Sri Abdul
Aziz Abdul Rahman
31
AFFIN BANK BERHAD
(25046-T)
(continued)
Director
Course Title
Trainer/Organiser
Date
Mr. Aubrey Li Kwok-Sing
& Mr. Brian Li Man-Bun
(Alternate director to Mr.
Aubrey Li)
1.
FIDE Programme for
The Financial Institutions
Directors’ Education (FIDE)
12 & 13 April 2010
10 &11 May 2010
17 & 18 Jun 2010
15 & 16 April 2010
Mr. Stephen Charles Li
& Mr. Eric Koh Tong Hau
(Alternate Director To
Mr. Stephen Charles Li)
1.
FIDE Programme for
The Financial Institutions
Directors’ Education (FIDE)
12 & 13 Apr 2010
10 &11 May 2010
7 & 8 December 2009
15 & 16 April 2010
2.
Performance Pays the Report on
Non-Executive Directors
Remuneration,
BNM, FIDE
28 June 2010
3.
1 July 2010
1.
Managing Risks in
Mortgage Financing
BNM-Cagamas
13 Jan 2010
2.
Building Audit Committee
for Tomorrow
BNM, FIDE
17 & 18 May 2010
3.
Board Risk Management
Committee Programme
BNM, FIDE
21 & 22 June 2010
4.
BNM, FIDE
28 June 2010
5.
8 July 2010
6.
Conference 2010
BNM
3 November 2010
7.
Regulatory Framework And
Directors Duties 2010
Malaysian Institute of
(MICG)
24 November 2010
En. Mohd Suffian bin
Haji Haron
Annual Report 2010
32
(continued)
Meeting and Supply of Information to the Board
Board meetings for each financial year are scheduled in advance before the end of each financial year so as to enable the Directors
to plan accordingly and fit the year’s Board meetings into their respective schedules.
The Board meets on a scheduled basis at least twelve (12) times a year. Additional meetings are convened when necessary to
review progress reports on AFFINBANK’s financial performance, approve strategies, business plans and significant policies as well
as to consider business and other proposals which require the Boards’ approval. For Financial year ended 31 December 2010,
18 Board meetings were held. Meetings are usually held at the Bank’s Board Room at 19th Floor, Menara Affin, 80 Jalan Raja
Chulan, 50200 Kuala Lumpur.
Board meetings are conducted in accordance to a structured agenda. Board Members are provided with the structured agenda
together with the relevant proposals documents and information in a form and of a quality appropriate in advance of each Board
meeting. This is to facilitate the Directors to peruse the Board papers and seek clarifications that may require from the Management
or the Company Secretary well ahead of the meeting date. Urgent papers may be presented for tabling at the Board meetings
under supplemental agenda.
The Board monitors AFFINBANK’s performance by reviewing the monthly Management Report, which provides a comprehensive
review and analysis of AFFINBANK’s operation and financial issues. In addition, the Minutes of the various Board Committees and
Management Committee meetings and other issues are also tabled and considered by the Board.
Procedures are in place for Directors to seek independent professional advice at AFFINBANK’s expense. AFFINBANK also provides
the Board with assistance and their full access to necessary materials and relevant information and the advice and services of the
Company Secretary in order to fulfill their duties and specific responsibilities.
2.
Directors’ Remuneration
Composition
AFFINBANK acknowledges the importance of attracting and retaining the right calibre of Directors with the necessary skills,
qualifications and experience for effective Board oversight of AFFINBANK’s business activities and affairs.
The make-up of the Managing Director/Chief Executive Officer’s remuneration remained unchanged consisting of salary,
allowances, bonus and other customary benefits as appropriate. Any salary review, takes into account market rates and the
performance of the individual and of AFFINBANK.
Non-executive Directors’ emoluments consist of three components - an annual fee as a Board member which is subject to the
approval of the shareholder, an allowance for attendance of meetings and a Committee fee. A revision of Director’s fee was
effected in 2010. The Directors’ fees and allowances are those recommended by the Board and in line with Affin Holdings Group
of companies.
Directors’ emoluments are disclosed in the relevant note to the financial statements as an aggregate sum, in conformance to the
Affin Holdings relevant legislation.
Shareholder
AFFINBANK is a wholly owned subsidiary of Affin Holdings Berhad, a company listed on Bursa Malaysia.
Annual General Meeting (“AGM”)
The Annual Report and financial statements for year ended December 2009 were tabled at the 34th AGM on 24 March 2010.
Likewise the Annual Report and financial statements for year ended December 2010 was tabled at the 35th AGM on 15 March
2011.
33
AFFIN BANK BERHAD
(25046-T)
(continued)
3.
Accountability and Audit
Financial Reporting
AFFINBANK continues to subscribe to the philosophy of transparent, fair, reliable and easily understandable reporting to
shareholder. The Board upholds its responsibility by regularly providing updates on AFFINBANK’s performance through quarterly
announcements, ad hoc press conferences, and briefings to the media throughout 2010.
The Board acknowledges and accepts full responsibility for the financial information contained in this Annual Report and by which
it means to provide a balanced, clear and meaningful assessment of its financial position and prospects as presented here in this
Annual Report and all other reports to the stakeholders, regulatory authorities and public.
Statement of Directors’ Responsibility for Preparing the Financial Statement
The Board is confident that the financial statements for the financial year ended 2010 give a true and fair view of the state of
affairs, the results and cash flow of AFFINBANK and the Group for the financial year. The Board also strives to ensure that financial
reporting presents a true and fair assessment of AFFINBANK’s position and prospects. There is reasonable assurance that
AFFINBANK has maintained proper accounting records used and consistently applied appropriate accounting policies supported
by reasonable and prudent judgments and estimates, and prepared the financial statements in accordance to the provision of the
Companies Act 1965, approved accounting standards in Malaysia and BNM Guidelines.
All published information on AFFINBANK is available at www.affinbank.com.my.
Annual Report 2010
34
STATEMENT ON INTERNAL CONTROL
INTERNAL CONTROL
AFFINBANK has a well-established and fully operational risk management and internal control system. The Statement on Internal
Control, which is set out in pages 34 through 36 of the Annual Report provides an overview on the risk management process/framework
as well as on how the internal control system has been designed to manage risks and avert failures. AFFINBANK continues to enhance
its system of internal control and risk management, in order to better quantify its compliance with the CODE.
The Board has overall responsibility for maintaining the proper management and protection of AFFINBANK’s interests by ensuring
effective implementation of the risk management policy and process, as well as adherence to a sound system of internal control, and
by seeking regular assurance on their effectiveness. The Board also recognizes that risks cannot be eliminated completely. As such,
the inherent system of internal control is designed to provide a reasonable though not absolute assurance against the risk of material
errors, fraud or losses occurring.
The Audit & Examination Committee has an oversight responsibility for the adequacy and integrity of the internal control system.
Reliance is placed on the results of independent audits performed primarily by internal auditors, the outcome of statutory audits on
financial statements conducted by external auditors and on representations by Management based on their control self-assessment
of all areas of their responsibility.
Minutes of Audit & Examination Committee meetings, which provide a summary of the proceedings, are circulated to Board members
for notation and discussion.
AFFINBANK has an established Internal Audit Division which reports functionally to the Audit Committee and administratively to the
Managing Director/Chief Executive Officer. The division is responsible for conducting independent audits in accordance with the
approved 2009 Internal Audit Plan.
RELATIONSHIP WITH AUDITORS
A professional and transparent relationship continues to exist between the Board/Audit & Examination Committee and the external
auditors. The Audit Committee is authorized to communicate directly with both the external and internal auditors. A full Audit Committee
report outlining its role in relation to the Auditors is set out in page 37. In addition, the external auditors meets with the Board at least
once a year when the annual audited financial statements are presented to the Board.
ASSURANCE
The Board through the Audit & Examination Committee has satisfactorily performed its oversight role in ensuring there is a sound
internal control system and regular review on the adequacy and integrity of the system. Assurance on the effectiveness of risk
management, control and governance process is obtained from the Management and Auditors (internal and external).
BNM auditors, internal auditors and external auditors conduct independent audits on AFFINBANK’s business operations, support
activities and financial records and statements respectively to derive an opinion on the adequacy and integrity of AFFINBANK’s overall
internal control framework.
Finally, with the benefit of the above assurances and the external auditor’s comments incorporated in their audit report on the financial
statements for the financial year ended December 2010, the Board is able to conclude that AFFINBANK conducts its business prudently
and in line with good governance practices.
35
AFFIN BANK BERHAD
(25046-T)
(continued)
Responsibility
The Board acknowledges overall responsibility for AFFINBANK Group’s system of internal controls and its effectiveness. The system
of internal controls encompasses controls relating to financial, operational, risk management and compliance with applicable laws,
regulations, policies and guidelines.
However, the system of internal controls is designed to manage rather than eliminate the risks of failure to achieve the goals and
objectives of the Group. Therefore, it can only provide a reasonable and not absolute assurance against material misstatement of
management and financial information, or against financial losses or fraud.
The Board has an established process for identifying, evaluating, managing and reporting on all significant risks that may impact the
achievement of business goals and objectives of the Group. The system of internal controls is dynamic and updated from time to time
to get the changes in regulatory guidelines and business environment. This process is regularly reviewed by the Board through its
Board Risk Management Committee (BRMC) and Audit and Examination Committee (AEC).
The Board is of the view that the system of internal controls in place for the year under review is sound and sufficient to safeguard the
investment of the shareholders, the interest of the customers and regulators, and the assets of the Group.
The management assists the Board in implementing the policies approved by the Board, implementing risk and control procedures,
and developing, operating and monitoring internal controls to mitigate and control identified risks.
Key Internal Control Processes
The key processes put in place to assist the Board in reviewing the adequacy and integrity of the system of internal controls include
the following:
*
Relevant Board committees are established with specific responsibilities delegated by the Board to deliberate on matters within
the respective scope of responsibility. The committees are guided by written terms of reference and their minutes of meetings are
tabled to the Board.
*
The BRMC assists the Board in its supervisory role concerning the overall management of risk in the Bank. It has responsibility fir
reviewing and approving all risk management policies and risk management methodologies. BRMC also reviews guidelines and
portfolio management reports including risk exposure information.
*
The Board Loan Review and Recovery Committee (BLRRC) critically reviews loans and other credit facilities with higher risk
implications, after due process of checking, analysis, review and recommendation by Group Risk Management and if found
necessary, exercise the power to veto loan applications that have been approved by the Group Management Loan Committee
(GMLC). BLRRC also review the non performing loan reports presented by the Management.
*
Management Committee (MCM), comprising the senior management team, assists the Board in managing day-to-day operations
and ensure its effectiveness. MCM formulates tactical plans and business strategies, monitors the Bank overall performance and
ensures that the activities are in accordance with corporate objectives, strategies, policies and annual business plan and budget.
*
The Group Management Loan Committee (GMLC) is established within senior management to approve complex and larger loans
and workout recovery proposals beyond the delegated authority of the concerned individual senior management personnel or the
Bank. The other committees comprising senior management include Asset & Liability Management Committee (ALCO) which
manages market and liquidity risks and Group Operational Risk Management Committee (GORMC) which manages operational
risk.
Annual Report 2010
36
(continued)
*
A detailed budgeting process is in place with annual business plans and budgets prepared by the business divisions, reviewed
by the MCM and approved by the Board. The actual business performances are monitored against the approved targets and
budgets of each business division by MCM on a monthly basis.
*
The business plan is supported by an annual credit plan, prepared by Group Risk Management and approved by BRMC. The credit
plan sets out the prevailing risk appetite and provides credit strategies and lending guidelines for the development and management
of new and existing customer relationships.
*
Policies and procedures for key processes are documented and regularly updated to ensure relevance and compliance with
internal controls, directives, laws and regulations. To enhance risk culture and awareness, road shows are undertaken by Group
Risk Management across the Bank.
*
Proper guidelines for the hiring and termination of employees, staff training programs and performance appraisals are established
and other relevant procedures in place to ensure staff are adequately trained and equipped to carry out their responsibilities
competently.
*
An integrated risk management framework is in place. The risk management function operates in an independent capacity and
is a part of the Bank’s senior management structure which works closely as a team in managing risks to enhance stakeholders’
value. Its responsibilities extend to cover market, liquidity, credit and operational risks. The risk management function reports to
BRMC.
37
AFFIN BANK BERHAD
(25046-T)
AUDIT AND EXAMINATION COMMITTEE
AUDIT AND EXAMINATION COMMITTEE (AEC)
01. YBhg. Dato’ Sri Abdul Aziz bin Abdul Rahman
AEC Chairman
02. YM. Dr. Raja Abdul Malek bin Raja Jallaludin
Member
03. YBhg. Tan Sri Mohamed Jawhar bin Hassan
Member
Representative from Affin Islamic Bank Berhad
01
02
03
TERMS OF REFERENCE OF THE AUDIT AND EXAMINATION COMMITTEE
Size and Composition
The Committee shall consist of at least three (3) members but not more than five (5) members, appointed by the Board from amongst
the non-executive Directors of the Bank.
Meetings
Meetings shall be held at a frequency to be decided by the Audit and Examination Committee. At the request of the Group Internal
Auditors, the Chairman shall convene a meeting to consider any matters that they may wish to bring to the attention of the Directors
or shareholders. A quorum shall consist of at least two (2) members. The Group Chief Internal Auditor shall be the Secretary to the Audit
and Examination Committee.
Authority
The Committee shall have unlimited access to all records, information and documents relevant to its activities, to the Group Internal
and External Auditors and to senior management of the Bank and its subsidiaries. The Group Internal and External Auditors shall have
free access to the Audit and Examination Committee and be allowed to attend and to be heard at the Committee meetings. The
Committee is authorised by the Board to obtain outside and independent professional advice as and when it is considered necessary.
Annual Report 2010
38
AUDIT AND EXAMINATION COMMITTEE
(continued)
Duties and Responsibilities
The duties and responsibilities of the Audit and Examination Committee are:
1.
To review AFFINBANK’s financial statements and to ensure compliance with disclosure requirements and any adjustments as
suggested by the External Auditors, prior to submission to the Board.
2.
To review the reports of the Group Internal Auditor, the External Auditors, Bank Negara Malaysia examiners or any other relevant
parties and decide on actions to be taken on relevant issues raised in the reports.
3.
To review with the External Auditors the scope of their audit plan, the system of internal accounting controls, the audit reports,
the assistance given by the management and its staff to the auditors, and any findings and action to be taken.
4.
To make recommendation to the Board on the appointment of External Auditors.
5.
To review the effectiveness and performance of the Group Internal Audit functions from time to time.
6.
To review and approve the annual audit plan and budget for Group Internal Audit, which sets out the audit objectives, auditable
areas, scope of coverage, frequency of audit and duration of each audit assignment.
7.
To ensure that Group Internal Audit has adequate resources and support services to carry out its functions.
8.
To review the overall performance of the Group Chief Internal Auditor, including the remuneration package.
9.
To review any significant related party transactions that may arise within the Bank’s group or associate companies and report to
the Board any areas of concern.
10. To escalate to the Board via minutes of meetings or special reports on any exception identified.
11. To carry out such other responsibilities as may be delegated by the Board from time to time.
39
AFFIN BANK BERHAD
(25046-T)
NETWORK OF BRANCHES
JOHOR
1.
2.
Ayer Hitam
No. 765, Jalan Batu Pahat,
86100 Ayer Hitam,
Johor.
Tel : 07-758 1100 / 1616
Fax : 07-758 1001
7.
Muar
1 Jalan Petrie,
84000 Muar,
Johor.
Tel : 06-953 2384/ 3753/ 9795
Fax : 06-953 3489
8.
Permas Jaya
23 & 25,
Jalan Permas 10/2,
Bandar Baru Permas Jaya,
81750 Johor Bahru,
Johor.
Tel : 07-386 3703/ 3857/ 3904
Fax : 07-386 5061
Batu Pahat
3 & 4, Jalan Merah,
Taman Bukit Pasir,
83000 Batu Pahat,
Johor.
Tel : 07-433 4210 / 4213
Fax : 07-433 3246
9.
3.
4.
5.
6.
Johor Bahru
M1-23 & M2-29,
Johor Bahru City Square,
106-108, Jalan Wong Ah Fook,
80000 Johor Bahru,
Johor.
Tel : 07-221 2403/ 2419/ 2440/ 2446
Fax : 07-221 2462
Johor Jaya
130 & 132, Jalan Ros Merah 2/17,
Taman Johor Jaya,
81100 Johor Bahru,
Johor.
Direct Line
Branch Manager
: 07-355 5115
Direct Line Manager
Branch Services
: 07- 351 8605
Tel : 07-351 8602/ 8603/ 8596
Fax : 07-351 4122
10. Tampoi
49 & 51,
Jalan Sri Perkasa 2/1,
Taman Tampoi Utara,
81200 Tampoi, Johor Bahru,
Johor.
Tel : 07-241 4946/ 4948/ 4951
Fax : 07-241 4953
Langkawi
149-151,
Persiaran Bunga Raya,
Langkawi Mall,
07000 Kuah,
Langkawi,
Kedah.
Tel : 04-966 4426/ 4427/ 4510
Fax : 04-966 4717
3.
Sungai Petani
23E & 23F,
Jalan Kampung Baru,
08000 Sungai Petani,
Kedah.
Tel : 04-421 1808/ 422 0831/
423 0684/ 423 0680
Fax : 04-422 6675
KELANTAN
1.
Jeli
No. A1 & A2, Blok A,
Bandar Baru Bukit Bunga,
11700 Bukit Bunga,
Tanah Merah,
Kelantan.
Tel : 09-946 8955/ 8952
Fax : 09-946 8954
2.
Kota Bharu
13788H & 3788I,
Seksyen 13,
Jalan Sultan Ibrahim,
15050 Kota Bharu,
Kelantan.
Tel : 09-744 5688/ 5582/ 743 8653
Fax : 09-744 2202
JOHOR (AFFIN ISLAMIC)
1.
Kluang
503, Jalan Mersing,
86000 Kluang,
Johor.
DL Branch Manager : 07-774 1359
Tel : 07-772 4736/ 4750/ 4758
Fax : 07-772 4486
Kulai
13 & 14, Jalan Raya,
Taman Sri Kulai Baru, Batu 21,
81000 Kulai,
Johor.
Tel : 07-663 9799/ 9802/ 9803
Fax : 07-663 9800
Segamat
No. 1, Ground Floor,
Jalan Nagasari 23,
Bandar Segamat Baru,
85000 Segamat, Johor.
Tel : 07-943 1378/ 1428/ 1432
Fax : 07-943 1373
3.
Taman Molek
No. 23, 23-01, 23-02,
Jalan Molek 1/29,
Taman Molek,
81100 Johor Bahru,
Johor.
Tel
: 07-351 9522 (3 lines)
Direct Line : 07-357 8522
Fax
: 07-357 9522
(Operations)
Fax
: 07-358 4355
(House Financing)
MELAKA
1.
Bukit Baru
No. 7 & 8, Jalan DR1,
Delima Point,
Taman Delima Raya,
75150 Melaka.
Tel : 06-232 1386/ 1390/ 1395
Fax : 06-232 1579
2.
Melaka Raya
200 & 201,
Taman Melaka Raya,
Off Jalan Parameswara,
75000 Melaka.
Tel : 06-283 5500/ 5501/ 5502
Fax : 06-284 6618
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
Annual Report 2010
40
NETWORK OF BRANCHES
(continued)
NEGERI SEMBILAN
PERAK
PERLIS
1.
Nilai
5733 & 5734, Jalan TS 2/1,
Taman Semarak Phase II,
71800 Nilai,
Negeri Sembilan.
Tel : 06-799 4114/ 5836/ 5837
Fax : 06-799 5115
1.
1.
2.
Port Dickson
3 & 4, Jalan Mahajaya,
P.D. Centre Point,
71000 Port Dickson,
Negeri Sembilan.
Tel : 06-647 3950/ 3951/ 3955
Fax : 06-647 4776
Ipoh
No. 1 & 3,
Ground & First Floor,
Persiaran Greentown 9,
Greentown Business Centre,
30450 Ipoh,
Perak.
Tel : 05-255 0980/ 0987
Fax : 05-255 0976
2.
Ipoh Garden
No. 27A-27A1,
Jalan Sultan Azlan Shah Utara,
31400 Ipoh,
Perak.
Tel : 05-549 7277/ 7266
Fax : 05-549 7299
1.
Bayan Baru
124 & 126, Jalan Mayang Pasir,
Taman Sri Tunas,
11950 Bayan Baru,
Pulau Pinang.
Tel : 04-644 7593/ 643 3815/
644 4171
Fax : 04-645 2709
3.
Lumut
Tingkat Bawah,
Kompleks Mutiara Armada,
Jalan Nakhoda,
Pengkalan TLDM,
32100 Lumut,
Perak.
Tel : 05-683 5051/ 5066
Fax : 05-683 5579
2.
Butterworth
55-57, Jalan Selat,
Taman Selat,
P.O.Box 165,
Off Jalan Bagan Luar,
12000 Butterworth,
Pulau Pinang.
Tel : 04-333 1372/ 3177
Fax : 04-332 3299
3.
Fettes Park
98-G-32,
Jalan Fettes,
Prima Tanjung Business Centre,
Tanjung Tokong,
11200 Pulau Pinang.
Tel : 04-899 9069
Fax : 04-899 0767
4.
Jalan Macalister
No. 104C, 104D & 104E,
Jalan Macalister,
10400 Pulau Pinang.
Tel : 04-229 1495
Fax : 04-226 1530
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/ 1853/ 1902
Fax : 04-575 1975
3.
Seremban
No. 175, Jalan Dato' Bandar Tunggal,
70000 Seremban,
Negeri Sembilan.
Tel : 06-762 9651/ 9652/ 9653
Fax : 06-763 6125
PAHANG
1.
2.
3.
4.
Jengka
Nadi Kota,
26400 Bandar Jengka,
Pahang.
Tel : 09-466 2233/ 2253
Fax : 09-466 2422
Kuantan
1, Jalan Tun Ismail,
P.O.Box 354,
25740 Kuantan,
Pahang.
Tel : 09-515 7146/ 7166/ 7642/ 7520
Fax : 09-513 4027
Mentakab
70, Jalan Temerloh,
28400 Mentakab,
Pahang.
Tel : 09-278 4487/ 277 2969
Fax : 09-277 6654
Temerloh
9, Ground Floor,
Jalan Ahmad Shah,
28000 Temerloh,
Pahang.
Tel : 09-296 8811
Fax : 09-296 8800
4.
5.
6.
Sitiawan
No. 11 & 12, Taman Sitiawan 1,
Jalan Lumut,
32000 Sitiawan,
Perak.
Tel : 05-692 8401/ 691 7516
Fax : 05-691 7339
Taiping
No. 40 & 42,
Jalan Tupai,
34000 Taiping,
Perak.
Tel : 05-806 6816
Fax : 05-808 0432
Teluk Intan
11, Medan Sri Intan,
Jalan Sekolah,
36000 Teluk Intan,
Perak.
Tel : 05-621 0130/ 0131/ 0133
Fax : 05-621 0128
Kangar
A2, Taman Pengkalan Asam,
Jalan Alor Setar-Kangar,
01000 Kangar,
Perlis.
Tel : 04-977 8669/ 8670/ 8672
Fax : 04-977 8566
PULAU PINANG
41
AFFIN BANK BERHAD
(25046-T)
NETWORK OF BRANCHES
(continued)
6.
7.
8.
Prai
No. 2, Tingkat Kikik 7,
Taman Inderawasi,
13600 Pulau Pinang.
Tel : 04-399 3900/ 397 8535/
397 8543
Fax : 04-397 9243
3.
Seberang Jaya
No. 10, Jalan Todak Satu,
Pusat Bandar Seberang Jaya,
13700 Prai,
Pulau Pinang.
Tel : 04-399 5881
Fax : 04-399 2881
4.
Wisma Pelaut
1A, Light Street,
Wisma Pelaut,
10200 Pulau Pinang.
Tel : 04-263 6633/ 2121/ 4373/
261 2494
Fax : 04-261 9801
Juru Auto-City
No. 1813A,
Jalan Perusahaan, Auto-City,
North-South Highway,
Juru Interchange,
13600 Prai, Pulau Pinang.
Tel
: 04-507 7422/ 7522/
3522 (Pilot)
Direct Line : 04-507 1522
Fax
: 04-507 6522/ 0522
1.
Bintulu
Sub Lot 13,
Off Lot 3299,
Parkcity Commerce Square,
97000 Bintulu,
Sarawak.
Tel : 086-314 248/ 249/ 261
Fax : 086-314 206
2.
Kuching
Lot 247 & 248,
Section 49, KTLD,
Jalan Tuanku Abdul Rahman,
93100 Kuching,
Sarawak.
Tel : 082-245 888/ 256 896/
422 909/ 589/ 598
Fax : 082-257 366
SABAH
1.
Jalan Gaya, Kota Kinabalu
No. 86,
Jalan Gaya,
88000 Kota Kinabalu,
Sabah.
Tel : 088-230 213 / 233 232
Fax : 088-212 476/ 088-265 430
2.
Sadong Jaya Complex,
Kota Kinabalu
Lot 19 & 20, Block K,
Sadong Jaya Complex,
Jalan Ikan Juara 3,
Karamunsing,
88300 Kota Kinabalu,
Sabah.
Tel : 088-264 410/ 413/ 261 515
Fax : 088-261 414
Tawau
TB 281, 282 & 283,
Jalan Haji Karim,
Town Extension II,
P.O. Box 630,
91008 Tawau,
Sabah.
Tel : 089-778 197/ 198
Fax : 089-762 199
SELANGOR
1.
Ampang Jaya
No. 11 & 11A,
Jalan Mamanda 7/1,
Ampang Point,
68000 Ampang,
Selangor.
Tel : 03-4257 6802/ 6804
Fax : 03-4257 8636
2.
Ampang New Village
49-G, Jalan Wawasan Ampang 2/1,
Bandar Baru Ampang,
68000 Ampang,
Selangor.
Tel : 03-4296 2210/ 2311
Fax : 03-4296 2206
3.
Jalan Meru, Klang
No. 40, Pelangi Avenue,
Jalan Kelicap 42A/KU1,
Klang Bandar Di Raja,
41050 Klang,
Selangor.
Tel : 03-3341 5237
Fax : 03-3341 5427
4.
Kajang
2 & 3, Jalan Saga,
Taman Sri Saga,
Off Jalan Sg. Chua,
43000 Kajang,
Selangor.
Tel : 03-8737 7435/ 7436/ 7437
Fax : 03-8737 7433
5.
Kelana Jaya
101, Block C, Menara Glomac,
Kelana Business Centre 97,
Jalan SS7/2,
47301 Kelana Jaya,
Petaling Jaya,
Selangor.
Tel : 03-7625 2111/ 7806 1749
Fax : 03-7806 1759
6.
Kepong
6, Jalan 54,
Desa Jaya,
52100 Kepong,
Selangor.
Tel : 03-6276 4942/ 4943/ 4946
Fax : 03-6276 6375
SARAWAK
PULAU PINANG (AFFIN ISLAMIC)
1.
Sandakan
Lot No. 163 & 164,
Block 18, Jalan Prima Square,
Batu 4, Jalan Utara,
90000 Sandakan, Sabah.
Tel : 089-212 752/ 212 753
Fax : 089-212 644
3.
4.
Miri
Lot 2387 & 2388,
Block A4,
Jalan Boulevard 1A,
Boulevard Commercial Center,
KM 3, Jalan Miri-Pujut,
98000 Miri,
Sarawak.
Tel : 085-437 442/ 443/ 445
Fax : 085-437 297
Sibu
No. 91 & 93,
Jalan Kampung Nyabor,
96000 Sibu,
Sarawak.
Tel : 084-325 926/ 943/ 340 929
Fax : 084-325 960
Annual Report 2010
42
NETWORK OF BRANCHES
(continued)
7.
8.
9.
Kinrara
No. 1, Jalan TK1/11A,
Taman Kinrara, Section 1,
Batu 7 1/2, Jalan Puchong,
47100 Puchong,
Selangor.
Direct Line : 03-8070 5682
Tel
: 03-8070 3403
Fax
: 03-8075 8159
Klang Utara
No. 29 & 31,
Jalan Tiara 3,
Bandar Baru Klang,
41150 Klang,
Selangor.
Tel : 03-3342 1585/ 1597/ 1602/ 1669
Fax : 03-3342 1719
Kompleks PKNS
Lot G17-20,
Ground Floor,
Kompleks PKNS,
40000 Shah Alam,
Selangor.
Tel : 03-5510 5200/ 6990/ 0523
Fax : 03-5510 8200
10. Kota Warisan
No. 48, Jalan Warisan Megah,
43900 Sepang,
Selangor.
Tel : 03-8706 6300
Fax : 03-8706 6599
11. PJ State
No. 38 & 40,
Jalan Yong Shook Lin,
46050 Petaling Jaya,
Selangor.
Tel: 03-7955 0032/ 7956 0022 (HPC)
Fax: 03-7954 0012/ 7956 0022 (HPC)
12. Port Klang
No. 1, Jalan Berangan,
42000 Port Klang,
Selangor.
Tel : 03-3168 8366/ 3167/ 7346
Fax : 03-3167 2784/ 6432
13. Puchong
No. 16 & 18,
Jalan Bandar 3,
Pusat Bandar Puchong,
47100 Puchong,
Selangor.
Tel : 03-5882 2880/ 2810/ 2816/ 2817
Fax : 03-5882 2881
14. Rawang
No. 33G & 35G,
Jln 1B, Fortune Avenue,
48000 Rawang,
Selangor.
Tel : 03-6091 3322/ 3311/ 2394/ 2396
Fax : 03-6091 3344
15. Sea Park
20-22, Jalan 21/12,
Sea Park,
Selangor.
Tel : 03-7875 6514/ 6255/ 6461
Fax : 03-7876 6020
16. Seri Kembangan
36, Jalan PSK 3,
Pusat Perdagangan Seri Kembangan,
43300 Seri Kembangan,
Selangor.
Tel : 03-8945 6429/ 8943 6488
Fax : 03-8945 6442/ 8943 5306
17. Subang Jaya
7 & 9, Jalan SS 15/8A,
Selangor.
Tel : 03-5634 8043/ 8045/ 8049
Fax : 03-5634 8040
18. The Curve, Damansara
Lot G32 & 126,
Ground & First Floor,
The Curve Shopping Complex,
Jalan PJU 7/8,
Mutiara Damansara,
Selangor.
Tel : 03-7726 7258/ 7728 7035
Fax : 03-7727 8912
19. UiTM
Institut Teknologi MARA,
Tingkat 2,
Menara UiTM,
40450 Shah Alam,
Selangor.
Tel : 03-5519 2377/ 1160
Fax : 03-5510 5580
20. USJ Taipan
8A & 8B, Jalan USJ 10/1J,
47610 UEP Subang Jaya,
Petaling Jaya,
Selangor.
Tel : 03-8023 7271/ 7206/ 8593/
8649/ 9095
Fax : 03-8023 9161
SELANGOR (AFFIN ISLAMIC)
1.
SS2
161-163, Jalan SS2/24,
Selangor.
Tel : 03-7874 3513
Fax : 03-7874 3480
2.
MSU Shah Alam
Management & Science University,
2nd Floor, University Drive,
Persiaran Olahraga, Section 13,
40100 Shah Alam,
Selangor.
Tel : 03-5510 0425
Fax : 03-5510 0563
TERENGGANU
1.
Kemaman
K711-713,
Wisma IKY Naga,
Jalan Sulaimani,
24000 Kemaman,
Terengganu.
Tel : 09-858 1744/ 2544/ 6572/ 3980
Fax : 09-859 1572
2.
Kemaman Supply Base
Ground Floor,
Admin Building Block B,
Kemaman Supply Base,
24007 Kemaman,
Terengganu.
Tel : 09-863 1297/ 1303
Fax : 09-863 1295
TERENGGANU (AFFIN ISLAMIC)
1.
Kuala Terengganu
63 & 63-A, Jalan Sultan Ismail,
20200 Kuala Terengganu,
Terengganu.
Tel : 09-622 3725/ 3825/ 3925
Fax : 09-623 6496
43
AFFIN BANK BERHAD
(25046-T)
NETWORK OF BRANCHES
(continued)
WILAYAH PERSEKUTUAN
8.
Selayang
81-85, Jalan 2/3A,
Pusat Bandar Utara,
KM 12, Jalan Ipoh,
68100 Batu Caves,
Kuala Lumpur.
Direct Line : 03-6136 2106
Tel
: 03-6137 2053/ 7122
Fax
: 03-6138 7122
Seri Petaling
10-12, Jalan Raden Tengah,
Bandar Baru Seri Petaling,
57000 Kuala Lumpur.
Tel : 03-9058 5600
Fax : 03-9058 8513
1.
Bangsar
No. 4 & 6,
Jalan Telawi 3,
Bangsar Baru,
59100 Kuala Lumpur.
Tel : 03-2283 5025/ 5026/ 5027
Fax : 03-2283 5028
2.
Bangunan Getah Asli
Tingkat Bawah,
148, Jalan Ampang,
50450 Kuala Lumpur.
Tel : 03-2162 8770
Fax : 03-2162 8587
9.
Batu Cantonment
No. 840 & 842,
Batu 4 3/4,
Jalan Ipoh,
51200 Kuala Lumpur.
Tel : 03-6258 7370/ 7690
Fax : 03-6251 8214
10. Setapak
159 & 161, Jalan Genting Kelang,
P.O.Box 202,
53300 Setapak,
Kuala Lumpur.
Tel : 03-4023 0455/ 0552
Fax : 03-4021 3921
4.
Central
Ground & Mezzanine Floor,
Menara Affin,
80, Jalan Raja Chulan,
P.O.Box 12744,
50788 Kuala Lumpur.
Tel : 03-2055 2222 (30 lines)
Fax : 03-2070 7592
11. Taman Maluri
250 & 252, Jalan Mahkota,
Taman Maluri,
55100 Kuala Lumpur.
Direct Line : 03-9282 7303
Tel
: 03-9282 7250
Fax
: 03-9283 4380
5.
Jalan Bunus
133, Jalan Bunus,
Off Jalan Masjid India,
50100 Kuala Lumpur.
Tel : 03-2693 4686 (5 lines)
Fax : 03-2691 3207
3.
6.
Jalan Ipoh
468-11 & 468-11B,
Batu 3, Jalan Ipoh,
51200 Kuala Lumpur.
Tel : 03-4042 5554 (3 lines)
Fax : 03-4042 4912
7.
LTAT
Ground Floor,
Bangunan LTAT,
Jalan Bukit Bintang,
55100 Kuala Lumpur.
Tel : 03-2142 6311/ 6173/ 6681
Fax : 03-2148 0586
12. Taman Midah
38 & 40, Jalan Midah 1,
Taman Midah, Cheras,
56000 Kuala Lumpur.
Tel : 03-9130 0366/ 0194/ 0215
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 / 9062 / 9082
Fax : 03-7727 9543
14. Wangsa Maju
No. 2 & 4, Jalan 1/27F,
Kuala Lumpur Sub-Urban Centre,
Wangsa Maju,
53300 Kuala Lumpur.
Direct Line : 03-4143 3005
Tel
: 03-4143 2814/ 2816
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/ 03-2691 5649
Fax : 03-2698 6071
WILAYAH PERSEKUTUAN
(AFFIN ISLAMIC)
1.
Fraser
20-G & 20-1, Jalan Metro Pudu,
Fraser Business Park,
55100 Kuala Lumpur.
Tel : 03-9222 8877
Fax : 03-9222 9877
WILAYAH PERSEKUTUAN
PUTRAJAYA
1.
Putrajaya
Jabatan Akauntan Negara,
Kompleks Kementerian Kewangan,
No. 1, Persiaran Perdana,
Presint 2,
62594 Putrajaya,
Wilayah Persekutuan.
Tel : 03-8888 3814/ 8889 1784/
92927/ 93095
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/ 960
Fax : 087-411 973
44
Annual Report 2010
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 35th 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 Wednesday, 15
March 2011 at 11.00 a.m. for the transaction of the following business:-
Agenda:
1.
To receive the Statutory Statements of Accounts for the year ended 31 December 2010 together with the
Directors' and Auditors' Reports thereon
2.
To declare a final tax exempted dividend of 5.0% amounting to RM71,964,269.10 for the financial year
ended 31 December 2010.
3.
To approve Directors’ fees for 2010.
4.
To re-elect the following Directors who retire pursuant to Article 91(a) of the Articles of Association and who,
being eligible, offer themselves for re-election:a.
YBhg. Jen. Tan Sri Dato’ Seri Ismail bin Hj. Omar (Bersara);
b.
YM. Dr. Raja Abdul Malek bin Raja Jallaludin; and
c.
YBhg. Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli bin Mohd Nor (Bersara).
5.
To appoint Messrs PricewaterhouseCoopers as Auditors for the financial year ending 31 December 2011
and to authorise the Directors to fix their remuneration
6.
To transact any other ordinary business.
BY ORDER OF THE BOARD
NIMMA SAFIRA KHALID
AZIZAH SHUKOR
Secretaries
NOTE:
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 of 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 fortyeight (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
Directors' Report 46
Statements of Financial Position 59
Income Statements 60
Statements of Comprehensive Income 61
Statement of Changes in Equity 62
Statements of Cash Flows 64
Summary of Significant Accounting Policies 67
Notes to the Financial Statements 82
Statement by Directors 164
Statutory Declaration 164
Independent Auditors’ Report 165
Basel II Pillar 3 Disclosures 166
Annual Report 2010
46
DIRECTORS’ REPORT
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010
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 2010.
PRINCIPAL ACTIVITIES
The principal activities of the Bank during the financial year are banking and related financial services. The principal activities of the
subsidiaries are Islamic banking business, property management services, nominee and trustee services. Islamic banking business
refers generally to the acceptance of deposits and granting of financing under the Shariah principles. There were no significant changes
in the nature of these activities during the financial year.
FINANCIAL RESULTS
The Group
RM'000
The Bank
RM'000
Profit before taxation and zakat
Taxation and zakat
521,904
(140,667)
474,794
(128,089)
Net profit for the financial year
381,237
346,705
DIVIDENDS
The dividends on ordinary shares paid or declared by the Bank since 31 December 2009 were as follows:
In respect of the financial year ended 31 December 2009 as shown in the directors' report for that financial year :RM'000
Final gross dividend of 5.00 sen per share, less income tax of 25% paid on 25 March 2010
53,973
In respect of the financial year ended 31 December 2010 :Interim gross dividend of 5.28 sen per share, less income tax of 25% paid on 6 December 2010
57,000
The Directors now recommend the payment of a final tax exempt dividend of 5 sen per share amounting to RM71,964,269 which is
subject to the approval of members at the forthcoming Annual General Meeting of the Bank.
RESERVE 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.
47
AFFIN BANK BERHAD
(25046-T)
DIRECTORS’ REPORT
CURRENT ASSETS
Before the financial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain that any
current assets, other than debts and financing, which were unlikely to realise in the ordinary course of business, their values as shown
in the accounting records of the Group and the Bank, have been written down to an amount which they might expected so to realise.
At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current
assets in the financial statements of the Group and the Bank misleading.
VALUATION METHODS
At the date of this report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing
methods of valuation of assets or liabilities in the Group's and the Bank's financial statements misleading or inappropriate.
CONTINGENT AND OTHER LIABILITIES
At the date of this report there does not exist:
(a)
any charge on the assets of the Group or the Bank which has arisen since the end of the financial year which secures the liabilities
of any other person; or
(b) any contingent liability in respect of the Group or the Bank that has arisen since the end of the financial year other than in the
ordinary course of banking business or activities of the Group.
No contingent or other liability of the Group or the Bank has become enforceable, or is likely to become enforecable within the period
of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of
the Group or the Bank to meet their obligation as and when they fall due.
CHANGE OF CIRCUMSTANCES
At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial
statements of the Group and the Bank that would render any amount stated in the financial statements misleading.
ITEMS OF AN UNUSUAL NATURE
The results of the operations of the Group and the Bank during the financial year were not, in the opinion of the Directors, substantially
affected by any item, transaction or event of a material and unusual nature.
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a
material and unusual nature likely, in the opinion of the Directors, to affect substantially the results of the operations of the Group or the
Bank for the current financial year in which this report is made.
SIGNIFICANT EVENT DURING THE FINANCIAL YEAR
There is no significant event during the financial year.
SUBSEQUENT EVENTS
There were no material events subsequent to the reporting date that require disclosure or adjustments to the financial statements.
Annual Report 2010
48
DIRECTORS’ REPORT
DIRECTORS
The Directors of the Bank who have held office during the period since the date of the last report are:
Jen Tan Sri Dato' Seri Ismail bin Haji Omar (Bersara)
Chairman
Dato' Zulkiflee Abbas bin Abdul Hamid
Managing Director/Chief Executive Officer
Tan Sri Dato' Lodin bin Wok Kamaruddin
(Reappointed as Director w.e.f. 4 October 2010)
Dr Raja Abdul Malek bin Raja Jallaludin
Laksamana Madya Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor (Bersara)
Dato' Sri Abdul Aziz bin Abdul Rahman
Mr Aubrey Li Kwok-Sing
Mr Brian Li Man-Bun
(Alternate Director to Mr Aubrey Li Kwok-Sing)
Mr Stephen Charles Li
Mr Eric Koh Thong Hau
(Alternate Director to Mr Stephen Charles Li)
49
AFFIN BANK BERHAD
(25046-T)
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 are as follows:
Ordinary shares of RM1 each
As at
1.1.2010
Bought
Sold
As at
31.12.2010
808,714*
7,000
200,000
-
-
808,714*
7,000
200,000
Boustead Heavy Industries Corporation Berhad
2,000,000
-
-
2,000,000
Boustead Petroleum Sdn Berhad
5,766,465
-
5,916,465
Al-Hadharah Boustead REIT
200,000
-
250,000
AFFIN Holdings Berhad
Dato' Dr. Lee Chee Kuon
Dato' Sri Abdul Hamidy bin Abdul Hafiz
150,000^
50,000^^
* Shares held in trust by nominee company
^ Acquisition of REIT on 21 April 2010
^^ Single tier dividend Redeemable Preference Shares for financial year ended 31 December 2010 received on 24 December 2010
Number of warrants 2000/2010
AFFIN Holdings Berhad
As at
1.1.2010
Bought
Expired
As at
31.12.2010
1,500
-
1,500
-
Each warrant of the holding company ('AFFIN Warrants 2000/2005') entitles the registered holder to subscribe one new ordinary share
of RM 1.00 each in AFFIN Holdings Berhad at any time from the date of issue of 8 July 2000 at the exercise price of RM 3.10 per share.
The original exercise period of the AFFIN Warrants 2000/2005 was to expire on 7 July 2005. During the financial year 2005, the AFFIN
Warrants 2000/2005 was extended for another five years and expired on 7 July 2010 ('AFFIN Warrants 2000/2010').
Ordinary shares of RM10 each; RM5 uncalled
ABB Trustee Berhad ***
Laksamana Madya Tan Sri Dato' Seri
Ahmad Ramli bin Mohd Nor (Bersara)
*** Shares held in trust for the Bank
As at
1.1.2010
Bought
Transfer
As at
31.12.2010
20,000
20,000
-
-
20,000
20,000
20,000
-
-
20,000
Annual Report 2010
50
DIRECTORS’ REPORT
DIRECTORS' INTERESTS (continued)
Ordinary shares of 50 sen each
Boustead Holdings Berhad
As at
1.1.2010
Bought
Sold
As at
31.12.2010
26,122,599
-
-
26,122,599
Redeemable preference shares of RM1 each
Boustead Petroleum Sdn Berhad
As at
1.1.2010
Bought
Sold
As at
31.12.2010
50
-
-
50
Other than the above, the Directors in office at the end of the financial year did not have any other interest in shares, warrants and options
over shares in the Bank or its related corporations during the financial year.
DIRECTORS' BENEFITS
During and at the end of the financial year, no other arrangements subsisted to which the Bank or any of its subsidiaries is a party with
the object or objects of enabling Directors of the Bank or any of its subsidiaries to acquire benefits by means of the acquisition of
shares in, or debenture of, the Bank or any other body corporate, except for the share options granted to directors of the Bank by AFFIN
Holdings Berhad, Boustead Holdings Berhad and Lembaga Tabung Angkatan Tentera.
Since the end of the previous financial year, no Director of the Bank has received or become entitled to receive a benefit (other than
the fees and other emoluments shown in the Note 31 to the financial statements) by reason of a contract made by the Bank or by a
related corporation with the Director or with a firm of which he is a member or with a company in which he has a substantial financial
interest except that certain Directors received remuneration as directors/executives of related corporations, share options granted to
Directors of the Bank pursuant to the holding company's Employee Share Option Scheme and share options granted by the ultimate
holding corporate body and Boustead Holdings Berhad.
CORPORATE GOVERNANCE
The Board of Directors is committed to ensure the highest standards of corporate governance throughout the organisation with the
objectives of safeguarding the interests of all stakeholders and enhancing the shareholders' value and financial performance of the Bank.
The Board considers that it has applied the Best Practices as set out in the Malaysian Code of Corporate Governance throughout the
financial year. The Bank is also required to comply with BNM's Guidelines on Directorship in the banking institutions ('BNM/GP1').
(i)
Board of Directors Responsibility and Oversight
The Board of Directors
The direction and control of the Bank rest firmly with the Board as it effectively assumes the overall responsibility for corporate
governance, strategic direction, formulation of policies and overseeing the investments and operations of the Bank. The Board
exercises independent oversight on the management and bears the overall accountability for the performance of the Bank and
compliance with the principle of good governance.
There is a clear division of responsibility between the Chairman and the Managing Director/Chief Executive Officer to ensure that
there is a balance of power and authority. The Board is responsible for reviewing and approving the longer-term strategic plans of
the Bank as well as the business strategies. It is also responsible for identifying the principal risks and implementation of appropriate
systems to manage those risks as well as reviewing the adequacy and integrity of the Bank's internal control systems, management
information systems, including systems for compliance with applicable laws, regulations and guidelines.
51
AFFIN BANK BERHAD
(25046-T)
DIRECTORS’ REPORT
CORPORATE GOVERNANCE (continued)
(i)
Board of Directors Responsibility and Oversight (continued)
The Board of Directors (continued)
Whilst, the Management Committee, headed by the Managing Director/Chief Executive Officer, is responsible for the
implementation of the strategies and internal control as well as monitoring performance. The Committee is also a forum to deliberate
issues pertaining to the Bank's business, strategic initiatives, risk management, manpower development, supporting technology
platform and business processes.
The Board Meetings
The Board meets on a monthly basis, to review the Bank's financial and business performance, to oversee the conduct of the
Bank's business as well as to ensure that adequate internal control systems are in place. The Board met 18 times during the
financial year.
Board Balance
The Board of Directors comprises of Managing Director/Chief Executive Officer, eight Non-Executive Directors and two alternate
Non-Executive Directors. There are three Independent Non-Executive Directors, five Non-Independent Non-Executive Directors
and one Non-Independent Executive Director. The Board of Directors meetings are presided by a Non-Independent Non-Executive
Chairman whose role is clearly separated from the role of the Managing Director/Chief Executive Officer.
In 2010, 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 composition of the Board and the number of meetings attended by each director are as follows:
Directors
Total Meetings Attended
Chairman
18 / 18
18 / 18
(Reappointment as Director w.e.f. 4 October 2010)
2/3
17 / 18
16 / 18
18 / 18
11 / 18
Mr Brian Li Man-Bun
(Alternate Director to Mr Aubrey Li Kwok-Sing)
0 / 18
Annual Report 2010
52
DIRECTORS’ REPORT
(i)
Board Balance (continued)
Directors
8 / 18
Mr Eric Koh Thong Hau
(Alternate Director to Mr Stephen Charles Li)
10 / 18
18 / 18
Tan Sri Mohamed Jawhar
(Attended AFFIN Bank's Board Meeting by invitation)
1/1
Board Committees
Nomination Committee
Nominating Committee was established to provide a formal and transparent procedure for the appointment of Directors and
Managing Director/Chief Executive Officer. The committee also assesses the effectiveness of the Board as a whole, contribution
of each Director, contribution of the Board's various committees and the performance of Managing Director/Chief Executive Officer
and key senior management officers.
During the financial year ended 31 December 2010, a total of 4 meetings were held. The Nominating Committee comprises the
following members and the details of attendance of each member at the Nominating Committee meetings held during the financial
year are as follows:
Members
Chairman/Independent Non-Executive Director
4/4
Member/Non-Independent Executive Director
4/4
Member/Non-Independent Non-Executive Director
4/4
Member/Independent Non-Executive Director
4/4
4/4
53
AFFIN BANK BERHAD
(25046-T)
DIRECTORS’ REPORT
(i)
Board Committees (continued)
Remuneration Committee
Remuneration Committee was established to evaluate and recommend a framework of remuneration for Directors, the Chief
Executive Officer and key senior management officers that is competitive and consistent with the Bank's culture, objectives and
strategy.
During the financial year ended 31 December 2010, 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
6/7
7/7
Shariah Committee
The Bank's business activities are subject to Shariah compliance and conformation by the Shariah Committee. The Shariah
Committee is formed as legislated under Section 3(5)(b) of the Islamic Banking Act, 1983 and as per Guidelines on the Governance
of Shariah Committee for the Islamic Financial Institutions ('BNM/GPS-i').
The duties and responsibility of the Shariah Committee are as follow:
•
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 product comply with Shariah
principles; and
•
To advice the Bank on matters to be referred to the Shariah Advisory Council.
The Shariah Committee was established in December 1995. During the year, a total of 8 meetings were held. The Shariah
Committee comprises the following members and the details of attendance of each member at the Shariah Committee meetings
held are as follows:
Members
Associate Professor Dr. Asyraf Wajdi bin Dato' Dusuki
Chairman
8/8
Associate Professor Dr. Said Bouheraoua
Member
8/8
Associate Professor Dr. Md Khalil bin Ruslan
Member
6/8
Annual Report 2010
54
DIRECTORS’ REPORT
(ii) Risk Management
The Risk Management function, operating in an independent capacity, is part of the Bank's senior management structure which
works closely as a team in managing risks to enhance stakeholders' value.
The Risk Management function provides support to the Board Risk Management Committee ('BRMC'). Committees namely Board
Loan Recovery Committee ('BLRC'), Management Loan Committee ('MLC'), Asset and Liability Management Committee ('ALCO')
and Operational Risk Management Committee assist the BRMC in managing credit, liquidity and operational risk respectively.
Responsibilities of these committees include:
•
•
•
•
risk identification
risk assessment and measurement
risk control and migration
risk monitoring
Board Risk Management Committee ('BRMC')
The main function of Board Risk Management Committee is to assist the Board in its supervisory role in the management of risk in the
Bank. It has responsibility for approving and reviewing the credit risk strategy, credit risk framework and credit policies of the Bank.
BRMC was established to provide oversight and management of all risks in the Bank. The Committee also ensures that the
procedures and framework in relation to identifying, measuring, monitoring and controlling risk are operating effectively. The Bank's
risk management framework is set out in Note 38 to the financial statements.
The BRMC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during the financial year ended 31
December 2010, a total of 5 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
5/5
5/5
Member/Independent Non-Executive Director (Representative from AFFIN Islamic Bank Berhad)
5/5
Board Loan Review and Recovery Committee ('BLRC')
Board Loan Review Committee critically reviews loans and other credit facilities with higher risk implications, after due process of
checking, analysis, review and recommendation by the Credit Risk Management function, and if found necessary, exercise the
power to veto loan applications that have been accepted by the Management Loan Committee. The Committee is also responsible
to review on the impaired loans presented by Management.
During the financial year ended 31 December 2010, a total of 14 meetings were held. The BLRC comprises the following members
and details of attendance of each member at the BLRC meetings held during the financial year are as follows:
Members
Chairman/Non-Independent Non-Executive Director
14 / 14
13 / 14
14 / 14
55
AFFIN BANK BERHAD
(25046-T)
DIRECTORS’ REPORT
(ii) Risk Management (continued)
Management Loan Committee ('MLC')
Management Loan Committee approves complex and larger loans and workout/recovery proposals beyond the delegated authority
of the concerned individual senior management personnel of the Bank.
Individual approvers
For the delegated authority, a dual sign-off approval system is in place, independent of business imperatives.
Asset and Liability Management Committee ('ALCO')
•
•
•
•
•
•
Manage the asset liability of the Bank through coordination of the Bank's overall planning process including strategic planning,
budgeting and asset liability management process;
Direct the Bank's overall acquisition and allocation of funds;
Prudently manage the Bank's interest rate exposure;
Determine the overall Balance Sheet strategy and ensuring policy compliance;
Determined the type and scope of derivative activities, approve individual derivative transactions as well as control over the
level of exposure in derivatives; and
Review of market risks in Bank's trading portfolios.
Operational Risk Management Committee
•
•
•
•
•
•
•
To evaluate operational risks issues on escalating importance/strategic risk exposure;
To review and recommend on broad operational risks management policies best practices for adoption by the Bank's
operating units;
To review the effectiveness of broad internal controls and making recommendation on changes if necessary;
To review/approve recommendation on operational risk management groups section up to address specific issue;
To take the lead in inculcating an operational risks awareness culture;
To approve operational risk management methodologies/measurements tools; and
To review and approve the strategic operational risk management initiatives/plans and to endorse for BRMC's approval
if necessary.
(iii) Internal Audit and Internal Control Activities
In accordance with Bank Negara Malaysia's GP10 guidelines, the Group Internal Audit Division ('GIA') conducts continuous reviews
on auditable areas within the Bank. The continuous reviews by GIA are focused on areas of significant risks and effectiveness of
internal control in accordance to the audit plan approved by the Audit and Examination Committee ('AEC'). The risk highlighted
on the respective auditable areas as well as recommendation made by the GIA are addressed at AEC and Management meetings
on bi-monthly basis. The AEC also conduct annual reviews on the adequacy of internal audit function, scope of work, resources
and budget of GIA.
At present, GIA consists of Operational Audit, IS Audit, Credit Review, Investigation and Compliance. Audit activities include these
key components:
•
Conduct audit on all auditable entities (Head Office, branches and subsidiaries) processes, services, products, system and
provide an independent assessment to the Board of Directors, AEC and Management that appropriate control environment
is maintained with clear authority and responsibility with sufficient staff and resources to carry out control responsibilities.
•
Perform risk assessments to identify risk and evaluate actions taken to provide reasonable assurance that procedures and
controls exist to contain those risks.
Annual Report 2010
56
DIRECTORS’ REPORT
(iii) Internal Audit and Internal Control Activities (continued)
•
Maintain strong control activities including documented processes and system incorporating adequate controls to produce
accurate financial data and provide for the safeguarding of assets, and a documented review of reported results.
•
Ensure effective information flows and communication, including:
-
•
training and the dissemination of standards and requirements;
an information system to produce and convey complete, accurate and timely data including financial data;
the upward communication of trends, developments and emerging issues.
Monitor controls, including procedures to verify that controls are in place and functioning, follow up on corrective action on
control finding until its full resolution.
Based on GIA's review, identification and assessment of risk, testing and evaluation of controls, GIA will provide an opinion
on the effectiveness of internal controls maintained by each entity.
The AEC comprises members of the Bank's Board of Directors whose primary function is to assist the Board of Directors in its
supervision over:
•
The reliability and integrity of accounting policies and financial reporting and disclosure practices,
•
The provision of advice to the Board with regards to the financial statements and business risks to enable the Board to fulfill
its fiduciary duties and obligations, and
•
The establishment and maintenance of processes to ensure that they:
-
are in compliance with all applicable laws, regulations and company policies; and
have adequately addressed the risk relating to internal controls and system, management of inherent and business risks,
and ensuring that the assets are properly managed and safeguarded.
The AEC is made up of at least three but not more than five members appointed by the Board of Directors from among its nonexecutive directors.
The AEC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during the financial year ended 31 December
2010, a total of 9 meetings were held. The Audit and Examination Committee comprises the following members and details of
attendance of each member at the Audit and Examination Committee meetings held during the financial year are as follows:
Members
9/9
9/9
Tan Sri Mohamed Jawhar
(Representative from AFFIN Islamic Bank Berhad)
9/9
57
AFFIN BANK BERHAD
(25046-T)
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 fulfil their duties and specific responsibilities.
BUSINESS PLAN AND STRATEGY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 AND FUTURE OUTLOOK
As global economy began to improve in 2010, the pre-emptive measures such as fiscal stimulus packages and easing of monetary
policies introduced by the Government in 2009 helped push Malaysian economy toward speedier recovery.
In 2010, AFFIN Bank was able to ride on Malaysia’s economic recovery in its lending activities without compromising the existing
prudent risk management policies and practices.
For 2010, the Bank posted a strong growth in operating profit by RM11.2 million (1.8%) as compared to the previous year. As indicators
to sustainable business growth, net loans & advances grew year-to-year by RM4.0 billion (18.1% ) while asset quality continues to
improve further as the Bank’s impaired loan ratio stood at 3.66%. The Bank was able to register Profit Before Tax growth of RM96.8
million (22.8% ) as compared to the previous year.
In 2010, the Bank was able to ensure sustainable business growth through :
•
•
•
•
Further develop the deposits business sector especially the retail segment
Improving customer touchpoints to ensure excellent and efficient customer service
Continuous improvement on risk management practices to be abreast with prevailing economic climate
Human capital development
BUSINESS OUTLOOK FOR 2011
Building on the momentum created in 2010, the Bank will continue to focus on “sustainable business growth” in both Business Banking
as well as Consumer Banking segment.
For Business Banking, the Bank will be leveraging on business opportunities arising from the 10th Malaysia Plan as well as the Economic
Transformation Programs ('ETP') while Consumer Banking will be developing specific products and packages that suit a particular
market segments.
Annual Report 2010
58
DIRECTORS’ REPORT
RATING BY EXTERNAL AGENCIES
The Bank has been rated by the following external rating agency:
Name of rating agency:
Date of rating:
Rating classifications:
-Long term:
-Short term:
RATING AGENCY MALAYSIA BERHAD
26 July 2010
A1
P1
RAM has reaffirmed the Bank's long-term and short-term financial institution ratings, at A1 and P1, respectively, with a stable outlook.
'A' rating is defined by RAM as being able to offer adequate safety for timely payment of interest and principal, and has adequate credit
profile but possess one or more problem areas, giving rise to the possibility of future riskiness. Entities rated in this category have
generally performed at industry average and are considered to be more vulnerable to changes in economic condition than those rated
in the higher categories. The subscript 1 in this category indicates as higher end of its generic rating in the A category. A P1 rating is
defined by RAM as obligations which are supported by superior ability with regards to timely payment of obligations.
ZAKAT
The Bank did not pay on behalf of its depositors or shareholder. The Bank only pays zakat on its business.
HOLDING COMPANY AND ULTIMATE HOLDING CORPORATE BODY
The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the ultimate holding
corporate body is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung Angkatan Tentera Act, 1973.
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
In accordance with resolution of the Board of Directors dated 28 February 2011.
Chairman
59
AFFIN BANK BERHAD
(25046-T)
STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2010
Note
ASSETS
Cash and short-term funds
Deposits and placements with banks and
other financial institutions
Financial assets held-for-trading
Financial investments available-for-sale
Financial investments held-to-maturity
Loans, advances and financing
Other assets
Derivative financial assets
Tax recoverable
Deferred tax assets
Statutory deposits with Bank Negara Malaysia
Investment in subsidiaries
Investment in jointly controlled entity
Amount due from subsidiaries
Amount due from jointly controlled entity
Property and equipment
Intangible assets
8,629,563
6,132,889
6,102,307
4,176,945
3
4
5
6
7
8
9
192,335
149,853
5,766,053
431,159
25,974,847
246,202
46,155
49,930
4,291
245,130
500
2,745
170,722
154,436
142,777
150,000
5,627,371
481,474
21,989,304
415,290
29,727
31
54,789
219,600
500
1,057
187,758
166,070
559,533
149,853
4,428,260
431,159
22,419,251
233,619
46,155
46,072
245,130
287,429
185,271
162,760
156,868
623,271
150,000
4,239,770
480,899
19,108,595
384,271
29,727
54,390
219,600
287,429
231,285
177,698
169,236
42,063,921
35,598,637
35,453,667
30,333,116
17
30,845,248
26,440,319
25,313,874
21,815,054
18
6,605,348
110,161
5,023,663
94,265
5,735,422
110,161
4,521,228
94,265
19
20
21
286,370
521,276
57,560
22
24,932
300,000
297,216
431,745
41,684
2,726
1
300,000
286,370
464,622
57,560
47,926
24,932
300,000
297,216
404,055
41,684
1,118
47,730
300,000
38,750,917
32,631,619
32,340,867
27,522,350
1,439,285
1,873,719
1,439,285
1,527,733
1,439,285
1,673,515
1,439,285
1,371,481
3,313,004
2,967,018
3,112,800
2,810,766
42,063,921
35,598,637
35,453,667
30,333,116
18,844,780
17,918,128
16,821,892
15,760,619
10
11
12
13
14
15
16
22
10
23
TOTAL LIABILITIES
EQUITY
Share capital
Reserves
24
25
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
COMMITMENTS AND CONTINGENCIES
The Bank
2010
2009
RM'000
RM'000
2
TOTAL ASSETS
LIABILITIES
Deposits from customers
Deposits and placements of banks and
Bills and acceptances payable
Recourse obligation on loans
sold to Cagamas Berhad
Other liabilities
Derivative financial liabilities
Provision for taxation
Amount due to subsidiaries
Deferred tax liabilities
Subordinated term loan
The Group
2010
2009
RM'000
RM'000
37
The accounting policies on pages 67 to 81 and the notes on pages 82 to 163 form an integral part of these financial statements.
Annual Report 2010
60
INCOME STATEMENTS
Note
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
Interest income
Interest expense
26
27
1,511,835
(760,848)
1,341,088
(605,111)
1,523,568
(760,881)
1,348,136
(605,336)
Net interest income
Islamic Banking income
28
750,987
177,783
735,977
162,637
762,687
-
742,800
-
Other operating income
29
928,770
227,351
898,614
221,928
762,687
226,904
742,800
230,284
Net income
Other operating expenses
30
1,156,121
(530,911)
1,120,542
(506,487)
989,591
(440,145)
973,084
(429,032)
625,210
614,055
549,446
544,052
(95,394)
(7,912)
(187,534)
(1,374)
(66,740)
(7,912)
(157,539)
(1,374)
521,904
(136,041)
(4,626)
425,147
(104,087)
(3,308)
474,794
(128,089)
-
385,139
(89,899)
-
Net profit after taxation and zakat
381,237
317,752
346,705
295,240
Attributable to:
Equity holders of the Bank
381,237
317,752
346,705
295,240
26.5
22.1
24.1
20.5
Operating profit
Allowances for losses on loans,
advances and financing
Impairment losses on securities
Profit before taxation and zakat
Taxation
Zakat
Earnings per share
- basic/fully diluted (sen)
32
34
35
61
AFFIN BANK BERHAD
(25046-T)
STATEMENTS OF COMPREHENSIVE INCOME
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
381,237
317,752
346,705
295,240
16,474
46,149
11,334
40,934
(4,115)
(11,105)
(2,834)
(10,234)
12,359
35,044
8,500
30,700
Total comprehensive income for the financial year
393,596
352,796
355,205
325,940
Equity holders of the Group:
Total comprehensive income
393,596
352,796
355,205
325,940
Net profit after taxation and zakat
Other comprehensive income:
Income and expense recognised directly in equity
Deferred tax on financial investments
available-for-sale
Other comprehensive income for the
financial year, net of tax
Annual Report 2010
62
STATEMENT OF CHANGES IN EQUITY
Non-distributable Distributable
Share
capital
RM'000
Share
premium
RM'000
Statutory
reserve
RM'000
Investment
fluctuation
reserve
RM'000
Retained
profits
RM'000
Total
RM'000
1,439,285
-
408,389
-
789,221
-
(1,880)
43,770
332,003
19,593
2,967,018
63,363
1,439,285
408,389
789,221
41,890
351,596
3,030,381
-
-
-
-
381,237
381,237
-
-
-
16,474
-
16,474
-
-
-
(4,115)
-
(4,115)
-
-
-
12,359
381,237
393,596
Dividend paid
Transfer to statutory reserve
-
-
99,689
-
(110,973)
(99,689)
(110,973)
-
At 31 December 2010
1,439,285
408,389
888,910
54,249
522,171
3,313,004
At 1 January 2009
Comprehensive income:
Income and expense
recognised directly in equity
Deferred tax on financial
investments available-for-sale
1,439,285
408,389
625,209
(36,924)
273,579
2,709,538
-
-
-
-
317,752
317,752
-
-
-
46,149
-
46,149
-
-
-
(11,105)
-
(11,105)
-
-
-
35,044
317,752
352,796
Dividend paid
-
-
164,012
-
(95,316)
(164,012)
(95,316)
-
1,439,285
408,389
789,221
(1,880)
332,003
2,967,018
The Group
At 1 January 2010
As previously reported
Adoption of FRS 139 (Note 45)
Comprehensive income:
Income and expense
At 31 December 2009
63
AFFIN BANK BERHAD
(25046-T)
STATEMENT OF CHANGES IN EQUITY
Non-distributable Distributable
Share
capital
RM'000
Share
premium
RM'000
Statutory
reserve
RM'000
Investment
fluctuation
reserve
RM'000
Retained
profits
RM'000
Total
RM'000
1,439,285
-
408,389
-
720,824
-
(6,853)
44,148
249,121
13,654
2,810,766
57,802
1,439,285
408,389
720,824
37,295
262,775
2,868,568
-
-
-
-
346,705
346,705
-
-
-
11,334
-
11,334
-
-
-
(2,834)
-
(2,834)
-
-
-
8,500
346,705
355,205
Dividend paid
-
-
86,676
-
(110,973)
(86,676)
(110,973)
-
At 31 December 2010
1,439,285
408,389
807,500
45,795
411,831
3,112,800
At 1 January 2009
Comprehensive income :
Income and expense
1,439,285
408,389
573,204
(37,553)
196,817
2,580,142
-
-
-
-
295,240
295,240
-
-
-
40,934
-
40,934
-
-
-
(10,234)
-
(10,234)
-
-
-
30,700
295,240
325,940
Dividend paid
-
-
147,620
-
(95,316)
(147,620)
(95,316)
-
1,439,285
408,389
720,824
(6,853)
249,121
2,810,766
The Bank
At 1 January 2010
Adoption of FRS 139 (Note 45)
Comprehensive income :
Income and expense
At 31 December 2009
Annual Report 2010
64
STATEMENTS OF CASH FLOWS
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
521,904
425,147
474,794
385,139
(311)
(116,495)
(15,522)
(950)
(103,621)
(21,705)
(311)
(116,347)
(15,522)
(950)
(103,621)
(19,708)
(8)
(2,901)
-
(150)
(5,704)
-
(8)
(2,901)
-
(150)
(5,704)
(16,102)
(30,938)
(664)
(12,744)
-
(30,938)
(664)
(12,744)
-
(1,217)
(23,733)
(2,053)
(1,646)
(7,002)
(1,633)
(1,217)
(23,635)
(2,053)
(1,646)
(6,960)
(1,633)
(137)
(6,303)
9,549
69
(11,716)
10,072
(137)
(6,303)
9,549
69
(11,716)
10,072
4,012
3,900
20,071
514
2,440
(219)
16,474
(6,330)
177,354
(3,044)
15,810
78,000
1,374
21,862
455
1,798
(168)
(1,185)
20,502
241
(18,918)
275,593
37,135
12,237
-
4,012
3,900
19,297
513
2,422
(219)
15,658
(6,330)
161,938
(16,409)
15,628
78,000
1,374
21,092
421
1,798
(168)
(1,185)
19,999
234
(18,918)
252,137
30,378
12,137
-
640,153
619,343
562,717
533,645
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation
Adjustments for items not involving the movement
of cash and cash equivalents:
Interest income
- financial assets held-for-trading
- financial investments available-for-sale
- financial investments held-to-maturity
Dividend income
Dividend income from subsidiaries
Amortisation of premium less accretion of discount
Gain on sale
- financial assets held-for-trading
Unrealised (gain)/loss on revaluation
- trading
- derivatives
- foreign exchange
Allowance for impairment loss
Depreciation of property and equipment
Property and equipment written-off
Foreclosed properties - dimunition in value
Gain on sale of property and equipment
Gain on sale of leasehold properties
Amortisation of intangible assets
Lease rental - leasehold properties
Gain on sale of foreclosed properties
Net specific allowance for bad and doubtful debts and financing
Charge of general allowance
Net individual impairment
Net collective impairment
Bad debt and financing written-off
Other provision
Operating profit before changes in working capital
65
AFFIN BANK BERHAD
(25046-T)
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
CASH FLOWS FROM OPERATING ACTIVITIES (continued)
(Increase)/decrease in operating assets:
Interest income from financial assets held-for-trading
Foreign exchange transaction
Other assets
Derivative financial instruments
Statutory deposits with Bank Negara Malaysia
(49,558)
1,501
311
(48,511)
(4,148,877)
164,799
(552)
(25,530)
(1,688)
(32,561)
(9,579)
950
1,733
(2,798,014)
82,863
(1,526)
545,000
(307)
63,738
1,501
311
(48,921)
(3,450,614)
144,152
(552)
(25,530)
46,210
-
(168,495)
(9,579)
950
2,018
(2,343,274)
67,481
(1,526)
438,600
46,144
-
Deposits and placements of banks and
Recourse obligation on loans sold to Cagamas Berhad
Other liablilities
4,404,929
1,212,530
3,498,821
835,486
1,581,685
15,896
(10,846)
10,364
1,202,776
(41,978)
286,128
(52,045)
1,214,194
15,896
(10,846)
(17,466)
1,599,187
(41,978)
286,128
(42,469)
Cash generated from operations
Tax paid
Zakat paid
2,534,076
(138,418)
(3,493)
1,015,313
(141,313)
(2,314)
1,993,611
(118,028)
-
1,202,318
(132,200)
(91)
Net cash generated from operating activities
2,392,165
871,686
1,875,583
1,070,027
Increase/(decrease) in operating liabilities:
Annual Report 2010
66
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
116,495
15,522
103,621
21,705
116,347
15,522
103,621
19,708
8
2,901
-
150
5,704
-
8
2,901
-
150
5,704
16,102
23,853
83,172
23,853
76,875
12,090
(1,374,836)
(43,027)
(1,065,790)
2,480
24,941
(9,608)
(1,043)
22,701
45,870
(14,552)
(786)
2,480
24,941
(9,482)
(1,043)
7,701
45,870
(12,938)
(948)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Dividend income
Dividend income from subsidiaries
Redemption of financial investments
held-to-maturity net of purchase
Net sale/(purchase) of financial investments
available-for-sale
Proceeds from disposal of
- property and equipment
- foreclosed properties
Purchase of property and equipment
Purchase of intangible assets
Net cash generated/(used in) from investing activities
187,639
(1,107,251)
132,500
(803,945)
Investment in subsidiary
Repayment of subordinated term loan
Proceeds from issuance of subordinated term loan
Payment of dividend
(110,973)
(500,000)
300,000
(95,316)
(110,973)
(100,000)
(500,000)
300,000
(95,316)
Net cash used in financing activities
(110,973)
(295,316)
(110,973)
(395,316)
Net increase/(decrease) in cash and cash equivalents
Amount vested from subsidiary
Net increase/(decrease) in foreign exchange
Cash and cash equivalents at beginning of the financial year
2,468,831
27,843
6,132,889
(530,881)
(13,312)
6,677,082
1,897,110
28,252
4,176,945
(129,234)
843
(13,598)
4,318,934
CASH AND CASH EQUIVALENTS AT END OF THE
FINANCIAL YEAR (Note 2)
8,629,563
6,132,889
6,102,307
4,176,945
CASH FLOWS FROM FINANCING ACTIVITIES
67
AFFIN BANK BERHAD
(25046-T)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been used consistently in dealing with items which are considered material in relation to the
financial statements. These policies have been consistently applied to all the financial years presented, unless otherwise stated.
(A) BASIS OF PREPARATION
The financial statements of the Group and the Bank have been prepared in accordance with Malaysian Accounting Standards
Board ('MASB') Approved Accounting Standards in Malaysia for Entities Other Than Private Entities, Bank Negara Malaysia ('BNM')
Guidelines and the provisions of the Companies Act, 1965. The financial statements incorporate those activities relating to Islamic
banking business which have been undertaken by AFFIN Islamic Bank Berhad, a wholly owned subsidiary of the Bank. Islamic
banking business refers generally to the acceptance of deposits and granting of financing under the Shariah principles.
The financial statements of the Group and the Bank have been prepared under the historical cost convention, unless otherwise
indicated in this summary of significant accounting policies.
The preparation of financial statements in conformity with MASB Approved Accounting Standards in Malaysia for Entities Other
Than Private Entities and BNM Guidelines requires the use of certain critical accounting estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenue and expenses during the reported period. It also requires Directors to exercise judgement
in the process of applying the Bank's accounting policies. Although these estimates are based on the Directors' best knowledge
of current events and actions, actual results may differ.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in Note 44.
Standards, amendments to published standards and interpretations that are applicable to the Group and are effective
The new accounting standards, amendments and improvements to published standards and interpretations that are effective for
the Group and the Bank’s financial year beginning on or after 1 January 2010 are as follows:
•
FRS 7 "Financial Instruments: Disclosures" and the related Amendments
•
FRS 101 (revised) "Presentation of Financial Statements"
•
FRS 123 "Borrowing Costs"
•
FRS 139 "Financial Instruments: Recognition and Measurement" and the related Amendments
•
Amendment to FRS 1 "First-time Adoption of Financial Reporting Standards" and FRS 127 "Consolidated and Separate
Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate"
•
Amendment to FRS 2 "Share-based Payment: Vesting Conditions and Cancellations"
•
Amendments to FRS 132 "Financial Instruments: Presentation" and FRS 101 (revised) "Presentation of Financial Statements"
- Puttable financial instruments and obligations arising on liquidation
•
IC Interpretation 9 "Reassessment of Embedded Derivatives" and the related Amendments
•
IC Interpretation 10 "Interim Financial Reporting and Impairment"
•
IC Interpretation 11 "FRS 2 Group and Treasury Share Transactions"
•
IC Interpretation 13 "Customer Loyalty Programmes"
•
Improvements to FRSs (2009)
A summary of the impact of the new accounting standards, amendments and improvements to published standards and
interpretations on the financial statements of the Group and Bank are set out in Note 45.
Annual Report 2010
68
(A) BASIS OF PREPARATION (continued)
Standards, amendments to published standards and interpretations to existing standards that are applicable to the
Group but not yet effective
•
The revised FRS 3 "Business combinations" (effective prospectively from 1 July 2010) continues to apply the acquisition
method to business combinations, with some significant changes. For example, all payments to purchase a business are to
be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured
through profit or loss. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisitionrelated costs should be expensed.
•
The revised FRS 124 "Related party disclosures" (effective from 1 January 2012) removes the exemption to disclose
transactions between government-related entities and the government, and all other government-related entities. The following
new disclosures are now required for government related entities:
-
The name of the government and the nature of their relationship;
The nature and amount of each individually significant transactions; and
The extent of any collectively significant transactions, qualitatively or quantitatively.
•
The revised FRS 127 "Consolidated and separate financial statements" (applies prospectively to transactions with noncontrolling interests from 1 July 2010) requires the effects of all transactions with non-controlling interests to be recorded in
equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. When this
standard is effective, all earnings and losses of the subsidiary are attributed to the parent and the non-controlling interest, even
if the attribution of losses to the non-controlling interest results in a debit balance in the shareholders’ equity. Profit or loss
attribution to non-controlling interests for prior years is not restated. The standard also specifies the accounting when control
is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss.
•
Amendment to FRS 2 "Share-based payment: Group cash-settled share-based payment transactions" (effective from 1
January 2011) clarifies that an entity that receives goods or services in a share-based payment arrangement must account
for those goods or services no matter which entity in the group settles the transaction, and no matter whether the transaction
is settled in shares or cash. The amendments also incorporate guidance previously included in IC Interpretation 8 "Scope of
FRS 2" and IC Interpretation 11 "FRS 2 – group and treasury share transactions", which shall be withdrawn upon application
of this amendment.
•
Amendments to FRS 7 "Financial instruments: Disclosures" and FRS 1 "First-time adoption of financial reporting standards"
(effective from 1 January 2011) requires enhanced disclosures about fair value measurement and liquidity risk. In particular,
the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy.
The Group has applied the transitional provision which exempts entities from disclosing the possible impact arising from the
initial application of this amendment on the financial statements of the Group and Bank.
•
Amendment to FRS 132 "Financial instruments: Presentation" on classification of rights issues (effective from 1 March 2010)
addresses accounting for rights issues that are denominated in a currency other than the functional currency of the issuer.
Provided certain conditions are met, such rights issues are now classified as equity instruments instead of as derivative
liabilities, regardless of the currency in which the exercise price is denominated. Currently, these issues are accounted for as
derivative liabilities.
•
IC Interpretation 4 "Determining whether an arrangement contains a lease" (effective from 1 January 2011) requires the Group
to identify any arrangement that does not take the legal form of a lease, but conveys a right to use an asset in return for a
payment or series of payments. This interpretation provides guidance for determining whether such arrangements are, or
contain, leases. The assessment is based on the substance of the arrangement and requires assessment of whether the
fulfillment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset.
If the arrangement contains a lease, the requirements of FRS 117 "Leases" should be applied to the lease element of the
arrangement.
69
AFFIN BANK BERHAD
(25046-T)
(A) BASIS OF PREPARATION (continued)
Standards, amendments to published standards and interpretations to existing standards that are applicable to the
Group but not yet effective (continued)
•
IC Interpretation 17 "Distribution of non-cash assets to owners" (effective from 1 July 2010) provides guidance on accounting
for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as
dividends. FRS 5 has also been amended to require that assets are classified as held for distribution only when they are
available for distribution in their present condition and the distribution is highly probable.
•
IC Interpretation 19 "Extinguishing financial liabilities with equity instruments” (effective from 1 July 2011) provides clarification
when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity’s
shares or other equity instruments to settle the financial liability fully or partially. A gain or loss, being the difference between
the carrying value of the financial liability and the fair value of the equity instruments issued, shall be recognised in profit or
loss. Entities are no longer permitted to reclassify the carrying value of the existing financial liability into equity with no gain or
loss recognised in profit or loss.
Improvements to FRSs:
•
FRS 2 (effective from 1 July 2010) clarifies that contributions of a business on formation of a joint venture and common control
transactions are outside the scope of FRS 2.
•
FRS 3 (effective from 1 January 2011)
-
Clarifies that the choice of measuring non-controlling interests at fair value or at the proportionate share of the acquiree’s
net assets applies only to instruments that represent present ownership interests and entitle their holders to a
proportionate share of the net assets in the event of liquidation. All other components of non-controlling interest are
measured at fair value unless another measurement basis is required by FRS.
-
Clarifies that the amendments to FRS 7, FRS 132 and FRS 139 that eliminate the exemption for contingent consideration,
do not apply to contingent consideration that arose from business combinations whose acquisition dates precede the
application of FRS 3 (2010). Those contingent consideration arrangements are to be accounted for in accordance with
the guidance in FRS 3 (2005).
•
FRS 5 "Non-current assets held for sale and discontinued operations" (effective from 1 July 2010) clarifies that all of a
subsidiary's assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant
disclosure should be made for this subsidiary if the definition of a discontinued operation is met.
•
FRS 101 "Presentation of financial statements" (effective from 1 January 2011) clarifies that an entity shall present an analysis
of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to
the financial statements.
•
FRS 138 "Intangible Assets" (effective from 1 July 2010) clarifies that a group of complementary intangible assets acquired
in a business combination may be recognised as a single asset if each asset has similar useful lives.
•
IC Interpretation 9 (effective from 1 July 2010) clarifies that this interpretation does not apply to embedded derivatives in
contracts acquired in a business combination, businesses under common control or the formation of a joint venture.
The Group will apply these standards when effective. The adoption of these standards and amendments will not have significant
impact on the results of the Group and the Bank.
Annual Report 2010
70
(B) ECONOMIC ENTITIES IN THE GROUP
The consolidated financial statements include the financial statements of the Bank, subsidiaries and jointly controlled entities,
made up to the end of the financial year.
Subsidiaries
Subsidiaries are all those corporations, partnerships, or other entities in which the Group has power to exercise control over the
financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than
one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group and de-consolidated from the date
that control ceases. The Group uses the purchase method of accounting to account for the acquisition of subsidiaries. The cost
of an acquisition is measured as fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the
date of exchange, plus costs directly attributable to the acquisition.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the
fair value of the Group’s share of identifiable net assets acquired at the date of acquisition is reflected as goodwill (refer to
accounting policy Note C on goodwill). If the cost of acquisition is less than the fair value of the net assets of the subsidiary
acquired, the difference is recognised directly in the income statement.
Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised
losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary, to ensure consistency with the policies adopted by the Group.
The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group’s share of its net
assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary is
recognised in the consolidated income statement.
Jointly controlled entity
Jointly controlled entities are corporations, partnerships or other entities over which there is contractually agreed sharing of control
by the Group with one or more parties where the strategic financial and operating decisions relating to the entities require
unanimous consent of the parties sharing control.
Investment in jointly controlled entities are accounted for in the consolidated financial statements using the equity method of
accounting and are initially recognised at cost. The Group's investment in jointly controlled entities includes goodwill identified on
acquisition, net of any accumulated impairment loss.
The Group's share of the post-acquisition profits or losses of the jointly controlled entities are recognised in the income statement,
and its share of the post-acquisition movements in reserves are recognised in reserves. The cummulative post-acquisition
movements are adjusted against the carrying amount of the investment. When the Group's share of losses in a jointly controlled
entities equals or exceeds its interest in the jointly controlled entity, including any other unsecured receivables, the Group's interest
is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the jointly controlled entity.
Where neccessary, adjustments have been made to the financial statements of jointly controlled entities to ensure consistency of
accounting policies with those of the Group.
Dilution gains and losses in jointly controlled entities are recognised in the income statement.
For incremental interest in a jointly controlled entity, the date of acquisition is purchase date at each stage and goodwill is calculated
at each purchase date based on the fair value of assets and liabilities identified. There is no "step up to fair value" of net assets of
previously acquired stake and the share of profits and equity movements for the previously acquired stake is recorded directly
through equity.
71
AFFIN BANK BERHAD
(25046-T)
(B) ECONOMIC ENTITIES IN THE GROUP (continued)
Jointly controlled entity (continued)
When the Group ceases to have control or joint control over an entity, the carrying amount of the investment at the date control,
joint control or significant influence ceases become its cost on initial measurement as a financial asset in accordance with FRS
139. Any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group
had directly disposed of the related assets or liabilities.
In the Bank's financial statements, the investment in subsidiaries and jointly controlled entity is stated at cost less impairment
losses. At each reporting date, the Bank assesses whether there is any indication of impairment. If such indication exist, an analysis
is performed to assess whether the carrying amount of the investment is fully recoverable. A write-down is made if the carrying
amount exceeds the recoverable amount. Any subsequent increase in recoverable amount is recognised in the income statement
(refer to accounting policy D for impairment of non-financial assets).
(C) INTANGIBLE ASSET
Goodwill
Goodwill represents the excess of the cost of acquisition of subsidiaries, jointly controlled entities and associated company over
the fair value of the Group’s share of the identifiable net assets at the date of acquisition.
Goodwill on acquisition of subsidiaries are included in the statement of financial position as intangible assets. Goodwill is tested
for impairment annually or more frequently if events or changes in circumstances indicated that the goodwill may be impaired. The
amount retained in the consolidated financial statements is stated at cost less accumulated impairment losses. Impairment losses
on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the
entity sold.
Goodwill is allocated to cash-generating units ('CGU') for the purpose of impairment testing. The allocation is made to those
CGUs that are expected to benefit from the synergies of the business combination in which goodwill arose. The Group allocates
its goodwill between the enterprise and consumer banking segment.
Computer software
Acquired computer software are capitalised on the basis of the cost incurred to acquire and bring to use the specific software.
These costs are amortised over their estimated useful lives (five years). Computer software classified as intangible asset are stated
at cost less accumulated amortisation and accumulated impairment losses, if any.
Costs associated with developing or maintaining computer software programmes are recognised as an expense when incurred.
Costs that are directly associated with identifiable and unique software products controlled by the Group, and that will probably
generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software
development employee costs and appropriate portion of relevant overhead.
(D) IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the assets's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
The impairment loss is charged to the income statement unless it reverses a previous revaluation in which case it is charged to
the revaluation surplus. Any subsequent increase in recoverable amount is recognised in the income statement unless it reverses
an impairment loss on a revalued asset in which case it is taken to revaluation surplus.
Annual Report 2010
72
(E) RECOGNITION OF INTEREST / FINANCING INCOME
FRS 139 prescribes that financial assets classified as held-to-maturity and loans and receivables are measured at amortised cost
using effective interest method. Whilst the Group and the Bank's financial investments held-to-maturity are already measured on
this basis under the requirements of BNM's revised BNM/GP8 effective from 1 January 2005, interest income on its loans and
receivables continued to be recognised based on contractual interest rates. Upon the full adoption of FRS 139 on 1 January 2010,
interest income is recognised using effective interest rates ('EIR'), which is the rate that exactly discounts estimated future cash
receipts through the expected life of the loan or, when appropriate, a shorter period to the net carrying amount of the loan.
Prior to the adoption of FRS 139, interest accrued and recognised as income prior to the date that a loan is classified as impaired
is reversed out of income and set-off against the interest receivable account in the statement of financial position. Thereafter,
interest on the impaired loan is recognised as income on a cash basis. Upon adoption of FRS 139, once a loan has been written
down as a result of an impairment loss, interest income is thereafter recognised using the rate of interest used to discount the future
cash flows for the purpose of measuring impairment loss.
The effects of the changes are disclosed in Note 45.
Islamic financing income is recognised on an accrual basis in accordance with the Shariah principles and Guidelines on Financial
Reporting for Licensed Islamic Banks ('BNM/GP8-i'). Al-Ijarah Thumma Al-Bai' ('AITAB') financing income recognised using the
effective income rates method over the lease terms, whilst Al-Bai' Bithaman Ajil ('BBA'), Al-Murabahah, Al-Istisna' and Bai'-Inah
financing income is recognised on a monthly basis over the period of the financing contracts, based on an agreed profit at the
inception of such contracts.
Interest income from securities portfolio is recognised on an accrual basis using the effective interest method. The interest income
includes coupons earned/accrued and accretion/amortisation of discount/premium on these securities.
(F) RECOGNITION OF FEES, OTHER INCOME AND INTEREST EXPENSE
Loan arrangement fees and commissions are recognised as income when all conditions precedent are fulfilled.
Commitment fees and guarantee fees which are material are recognised as income based on time apportionment.
Dividends from subsidiaries are recognised when the shareholders' right to receive payment is established.
Dividends from securities portfolio are recognised when received.
Fees and other profit from Islamic banking business are recognised on an accrual basis in accordance with the principles of
Shariah.
Interest expense and attributable profit payable on deposits and borrowings are recognised on an accrual basis.
(G) FINANCIAL ASSETS
The Group and the Bank have changed its accounting policy for recognition and measurement of financial assets upon adoption
of FRS 139 "Financial Instruments: Recognition and Measurement" on 1 January 2010. The Group and the Bank have applied the
new policy according to the transitional provision of FRS 139 by re-measuring all financial assets, as appropriate, and recording
and adjustments to the previous carrying amounts to opening retained earnings. Refer to Note 45 for the impact of this change
in accounting policy.
In accordance with FRS 139, all financial assets which include derivative financial instruments have to be recognised in the
statement of financial position and measured in accordance with their assigned category.
The Group and the Bank allocates financial assets to the following FRS 139 categories: loans, advances and financing; financial
assets at fair value through profit or loss, financial investment available-for-sale; and financial investments held-to-maturity.
Management determines the classification of its financial instruments at initial recognition.
73
AFFIN BANK BERHAD
(25046-T)
(G) FINANCIAL ASSETS (continued)
Loans, advances and financing are non-derivative financial assets with fixed or determinable payments that are not quoted in
active market.
Loans, advances and financing are initially recognised at fair value which is the cash consideration to originate or purchase the
loan including any transaction costs and measured subsequently at amortised cost using the effective interest rate method, less
impairment allowance.
An uncollectible loan, advance and financing or portion of a loan, advance and financing classified as bad is written off after taking
into consideration the realisable value of collateral, if any, when in the judgement of the management, there is no prospect of
recovery.
The adoption of FRS 139 has resulted in a change in accounting policy relating to the assessment for impairment of loans,
advances and financing. The existing accounting policies relating to the assessment of impairment of other financial assets of the
Group and the Bank are already largely in line with those of FRS 139. Prior to the adoption of FRS 139, allowances for impaired
loans, advances and financing (previously referred to as non-performing loans) were computed in conformity with the BNM/GP3
-Guidelines on Classification of Non-Performing Loans and Provision for Substandard, Bad and Doubtful Debts.
Upon the adoption of FRS 139, the Group and the Bank assess at each reporting date whether there is objective evidence that
a loan or group of loans is impaired. A loan or a group of loans is impaired and impairment losses are incurred only if there is
objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the loan (a ‘loss
event’) and that loss event (or events) has an impact on the estimated future cash flows of the loan or group of loans that can be
reliably estimated.
The criteria that the Group and the Bank use to determine that there is objective evidence of an impairment loss include among
others:
•
•
•
•
past due contractual payments;
significant financial difficulties of borrower;
probability of bankruptcy or other financial re-organisation;
default of related borrower.
The estimated period between a loss occurring and its identification for credit cards is six months and for all other loans are twelve
months.
The Group and the Bank first assess whether objective evidence of impairment exists individually for loans that are individually
significant, and individually or collectively for loans that are not individually significant. If the Group and the Bank determine that no
objective evidence of impairment exists for an individually assessed loan, whether significant or not, it includes the loan in a group
of loans with similar credit risk characteristics and collectively assesses them for impairment. Loans that are individually assessed
for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of
impairment. Loans that are individually assessed for impairment and for which no impairment loss is required (over collateralised
loans) are collectively assessed as a separate segment.
The amount of the loss is measured as the difference between the loan’s carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been incurred) discounted at the loan’s original effective interest rate. The
carrying amount of the loan is reduced through the use of an allowance account and the amount of the loss is recognised in the
income statement. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract.
The calculation of the present value of the estimated future cash flows of a collateralised loan reflects the cash flows that may result
from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
Annual Report 2010
74
Loans, advances and financing (continued)
For the purposes of a collective evaluation of impairment, loans are grouped on the basis of similar credit risk characteristics.
Those characteristics are relevant to the estimation of future cash flows for groups of such loans by being indicative of the
borrowers’ ability to pay all amounts due according to the contractual terms of the loans being evaluated.
Future cash flows in a group of loans that are collectively evaluated for impairment are estimated on the basis of the contractual
cash flows of the loans in the Bank and historical loss experience for loans with credit risk characteristics similar to those in the
Bank. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that
did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical
period that do not currently exist.
Estimates of changes in future cash flows for groups of loans should reflect and be directionally consistent with changes in related
observable data from period to period (for example, changes in unemployment rates, property prices, payment status, or other
factors indicative of changes in the probability of losses in the Group and the Bank and their magnitude). The methodology and
assumptions used for estimating future cash flows are reviewed regularly by the Group and the Bank to reduce any differences
between loss estimates and actual loss experience.
The collective assessment is also subject to the transitional arrangement prescribed in BNM's guidelines on Classification and
Impairment Provisions for Loans/Financing issued on 17 December 2010.
Financial assets at fair value through profit or loss
This category comprises two sub-categories: financial assets classified as held-for-trading and financial assets designated by the
Group and the Bank as at fair value through profit or loss upon initial recognition.
A financial asset is classified as held-for-trading if it is acquired or incurred principally for the purpose of selling or repurchasing it
in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is
evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorised as held-for trading unless they are
designated and effective as hedging instruments. Derivative are recognised in the statement of financial position as ‘Derivative
financial assets’ when their fair values are positive. Financial assets held-for-trading consist of debt instruments, including moneymarket paper, traded corporate and bank loans, and equity instruments, as well as financial assets with embedded derivatives.
They are recognised in the consolidated statement of financial position as 'Financial assets held-for-trading'.
Financial instruments included in this category are recognised intially at fair value; transaction costs are taken directly to the income
statement. Gains and lossess arising from changes in fair value are included directly in the income statement.
The Group and the Bank may designate certain financial assets upon initial recognition as at fair value through profit or loss (fair
value option). This designation cannot subsequently be changed. According to FRS 139, the fair value option is only applied when
the following conditions are met:
•
•
•
the application of the fair value option reduces or eliminates an accounting mismatch that would otherwise arise or
the financial assets are part of a portfolio of financial instruments which is risk managed and reported to senior management
on a fair value basis or
the financial assets consists of debt host and an embedded derivatives that must be separated.
Financial assets for which the fair value option is applied are recognised in the statement of financial position as 'Financial assets
designated at fair value'. Fair value changes relating to financial assets designated at fair value through profit or loss are recognised
in the income statement.
The Group and the Bank may choose to reclassify a non-derivative financial assets held-for-trading out of this category where:
•
•
in rare circumstances, it is no longer held for the purpose of selling or repurchasing in the near term or
it is no longer held for purpose of trading, it would have met the definition of a loan and receivable on initial classification and
the Group and the Bank have the intention and ability to hold it for the foreseeable future or until maturity.
75
AFFIN BANK BERHAD
(25046-T)
Financial investments available-for-sale are non-derivative financial assets that are either designated in this category or not classified
as held-for-trading or held-to-maturity investments.
Investments in equity instruments where there is no quoted market price in an active market and whose fair value cannot be
reliably measured, will be stated at cost.
Any gains or losses arising from the change in fair value adjustments are recognised directly in statement of comprehensive income
except for impairment losses and foreign exchange gains or losses. When the financial asset is derecognised, the cumulative
gains or loss previously recognised in statement of comprehensive income shall be transferred to the income statement.
A financial investments available-for-sale that would have met the definition of loans and receivables may only be transferred from
the available-for-sale classification where the Group and the Bank have the intention and the ability to hold the asset for the
foreseeable future or until maturity.
Impairment of financial investments available-for-sale is assessed when there is an objective evidence of impairment. Cumulative
unrealised losses that had been recognised directly in equity shall be removed and recognised in income statement even though
the securities have not been derecognised. Impairment loss in addition to the above unrealised losses is also recognised in the
income statement. Subsequent reversal of impairment on debt instrument in the income statement is allowed when the decrease
in impairment can be related objectively to an event occuring after the impairment was recognised.
In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security
below its cost is objective evidence of impairement resulting in the recognition of an impairement loss. Impairment losses recognised
in the income statement on equity instruments shall not be reversed.
Financial investments held-to-maturity are non-derivative financial assets with fixed or determinable payments and fixed maturity
that the Group and the Bank have the positive intention and ability to hold to maturity.
Financial investments held-to-maturity are measured at amortised cost using the effective interest method. Gains or losses are
recognised in income statement when the securities are derecognised or impaired and through the amortisation process.
If, as a result of a change in intention or ability, it is no longer appropriate to calssify a financial investment as held-to-maturity, the
Group and the Bank shall reclassify the investment as available-for-sale and remeasured at fair value, and the difference between
its carrying amount and fair value shall be recognised in other comprehensive income, except for impairment losses and foreign
exchange gains and losses.
Any sale or reclassification of a significant amount of financial investments held-to-maturity before maturity during the current
financial year or last two preceding financial years will “taint” the entire category and result in the remaining financial investments
held-to-maturity being reclassified to available-for-sale except for sales or reclassification that:
•
•
•
are so close to maturity or call date that changes in the market rate of interest would not have significant effect on the financial
asset's fair value;
occur after the Group and the Bank have collected substantially all of the financial asset's original principal; or
are attributable to an isolated event that is beyond the Group and the Bank's control are non-recurring and could not have
been reasonably anticipated by the Group and the Bank.
Impairment of financial investments held-to-maturity is assessed when there is an objective evidence of impairment. The impairment
loss is measured as the difference between the financial investments' carrying amount and the present value of estimated future
cash flows discounted at the financial investments' original effective interest rate. Subsequent reversal of impairment is allowed in
the event of an objective decrease in impairment. Recognition of impairment losses and its reversal is made through the income
statement.
Annual Report 2010
76
Recognition
The Group and the Bank use trade date accounting for regular way contracts when recording financial asset transactions. Financial
assets that are transferred to a third party but do not qualify for derecognition are presented in the statement of financial position
as 'Assets pledged as collateral', if the transferee has the right to sell or repledge them.
(H) FINANCIAL LIABILITIES
In accordance with FRS 139, all financial liabilities which include derivative financial instruments have to be recognised in the
statement of financial position and measured in accordance with their assigned category.
The Group and the Bank's holding in financial liabilities are in financial liabilities at fair value through profit or loss (including financial
liabilities held for trading and those that designated at fair value) and financial liabilities at amortised cost. Financial liabilities are
derecognised when extinguished.
Financial liabilities at fair value through profit or loss
This category comprises two sub-categories: financial liabilities classified as held-for-trading, and financial liabilities designated by
the Group and the Bank as at fair value through profit or loss upon initial recognition.
A financial liability is classified as held-for-trading if it is acquired or incurred principally for the purpose of selling or repurchasing
it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is
evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorised as held-for trading unless they are
designated and effective as hedging instruments. Derivative are recognised in the statement of financial position as ‘Derivative
financial liabilities’ when their fair values are negative. Financial liabilities held-for-trading also include obligations to deliver financial
assets borrowed by a short seller. Those financial instruments are recognised in the statement of financial position as 'Financial
liabilities held-for-trading'.
Gains and losses arising from changes in fair value of financial liabilities classified held-for-trading are included in the income
statement.
The Group and the Bank measure all financial liabilities at amortised cost using the effective interest method except for:
•
•
•
•
•
derivatives that are liabilities, which shall be measured at fair value. For derivative liabilities that are linked to and settled by
delivery of unquoted equity instruments whose fair value cannot be realiably measured, the derivatives shall be measured at
cost;
financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing
involvement approach applies;
financial guarantee contracts;
commitments to provide a loan at below-market interest rate; and
financial liabilities that designated as hedged items and subject to hedge accounting requirements under the applicable FRS.
Financial liabilities for which the fair value option is applied are recognised in the statement of financial position as 'Financial liabilities
designated at fair value'. Fair value changes relating to financial liabilities designated at fair value through profit or loss are recognised
in income statement.
Other liabilities measured at amortised cost
Financial liabilities that are not classified as at fair value through profit or loss fall into this category and are measured at amortised
cost. All the financial liabilities of the Group and the Bank are measured at amortised cost.
Derecognition
Financial assets are derecognised when the contractual rights to receive the cash flows from these assets have ceased to exist
or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred (that
is, if substantially all the risks and rewards have not been transferred, the Group and the Bank test control to ensure that continuing
involvement on the basis of any retained powers of control does not prevent derecognition). Financial liabilites are derecognised
when they have been redeemed or otherwise extinguished.
77
AFFIN BANK BERHAD
(25046-T)
(I)
PROPERTY AND EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Freehold land is not depreciated as it has an infinite life. Other property and equipment are depreciated on the straight line basis
to write off the cost of the assets or their revalued amounts, to their residual values over their estimated useful lives, summarised
as follows:
Buildings
Leasehold buildings
Renovation and leasehold premises
Office equipment and furniture
Computer equipment and software
Motor vehicles
50 years
Over the remaining lease period
5 years or the period of the lease whichever is greater
10 years
5 years
5 years
Residual value and useful lives of assets are reviewed, and adjusted if appropriate, at each reporting date.
At each reporting date, the Group assesses whether there is any indication of impairment. If such indications exist, an analysis is
performed to assess whether the carrying amount of the asset is recoverable. A write down is made if the carrying amount exceeds
the recoverable amount. Any subsequent increase in the recoverable amount is recognised in the income statement (refer to
accounting policy D on impairment of non-financial assets).
Gains and losses on disposal are determined by comparing proceeds with carrying amount and are recognised within other
operating income in the income statement.
(J) LAND HELD FOR SALE
Land held for sale is stated at cost less accumulated impairment losses. Where an indication of impairment exists, an analysis is
performed to assess whether the carrying amount of the land is fully recoverable. A write-down would be made if the carrying
amount exceeded the recoverable amount. Any subsequent increase in recoverable amount would be recognised in the income
statement.
(K) LEASES
Accounting by lessee
Finance leases
Leases of property and equipment where the Group assumes substantially all the benefits and risks of ownership are classified
as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property
and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges so as to achieve a periodic constant rate on the finance
balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element
of the finance charge is charged to the income statement over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period. Property and equipment acquired under finance leases are
depreciated over the shorter of the estimated useful life of the asset and the lease term.
Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the
leased assets and recognised as an expense in income statement over the lease term on the same basis as the lease expense.
Annual Report 2010
78
(K) LEASES (continued)
Accounting by lessee (continued)
Operating leases
Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the
income statement on the straight line basis over the lease period.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are recognised in income statement when
incurred.
Following the adoption of the improvement to FRS 117 “Leases”, leasehold land in which the Group has substantially all the risks
and rewards incidental to ownership has been reclassified retrospectively from operating lease to finance lease. Previously,
leasehold land was classified as an operating lease unless title is expected to pass to the lessee at the end of the lease term.
Refer to Note 45 for the impact of this change in accounting policy.
Accounting by lessor
Finance leases
When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The
difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease
income is recognised over the term of the lease using the net investment method so as to reflect a constant periodic rate of return.
Operating leases
When assets are leased out under an operating lease, the asset is included in the statement of financial position based on the nature
of the asset. Lease income is recognised over the term of the lease on a straight-line basis.
(L) FOREIGN CURRENCY TRANSLATIONS
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Ringgit
Malaysia, which is the Group and the Bank’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchanges rate prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement,
except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
Changes in the fair value of monetary financial assets denominated in foreign currency classified as available-for-sale are analysed
between translation differences resulting from changes in the amortised cost of the financial asset and other changes in the carrying
amount of the financial asset. Translation differences related to changes in the amortised cost are recognised in income statement,
and other changes in the carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit and loss,
are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified
as available-for-sale are included in the fair value reserve in other comprehensive income.
79
AFFIN BANK BERHAD
(25046-T)
(M) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
Derivatives are initially recognised at fair values on the date on which derivative contracts are entered into and are subsequently
remeasured at their fair values. Fair values are obtained from quoted market prices in active markets, including recent market
transactions, and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. All
derivatives are carried as assets when fair values are positive and as liabilities when fair values are negative.
The best evidence of fair value of a derivative at initial recognition is the transaction price (i.e the fair value of the consideration given
or received) unless fair value of the instrument is evidenced by comparison with other observable current market transactions in
the same instrument (i.e without modification or repackaging) or based on a valuation technique whose variables include only
data from observable markets. When such evidence exists, the Group and the Bank recognise profits immediately.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: (1) hedges of the
fair value of recognised assets or liabilities or firm commitments (fair value hedge); or (2) hedges of highly probable future cash flows
attributable to a recognised asset or liability, or a forecasted transaction (cash flow hedge). Hedge accounting is used for designated
derivatives in this way provided certain criterias are met.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and an on-going basis, of whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flows of hedged items.
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement,
together with any changes in the fair value of the hedged assets or liabilities that are attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which
the effective interest method is used, is amortised to income statement over the period to maturity. The adjustment to the carrying
amount of a hedged equity security remains in retained earnings until the disposal of the equity security.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised
in other comprehensive income. The gain and loss relating to the ineffective portion is recognised immediately in the income
statement.
Amounts accumulated in other comprehensive income are recycled to the income statement in the periods in which the hedged
item will affect income statement (for example, when the forecast sale that is hedged take place).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing at that time remains in other comprehensive income and is recognised when the forecast transaction is
ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cummulative gain
or loss that was reported in other comprehensive income is immediately transferred to the income statement.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does
not qualify for hedge accounting are recognised immediately in the income statement.
Gains and losses on interest rate swaps, futures, forward and option contracts that qualify as hedges are deferred and amortised
over the life of hedged assets or liabilities as adjustments to interest income or interest expense. Gains and losses on interest rate
swaps, futures, forward and option contracts that do not qualify as hedges are recognised in the current financial year using the
mark-to-market method and are included in the income statement.
Annual Report 2010
80
(N) INCOME TAX
Current tax
Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and include all taxes
based upon the taxable profits for the financial year.
Deferred tax
Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to
assets and liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profit or loss.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences or unused tax losses can be utilised.
Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by end of the reporting
date and are expected to apply when the related deferred tax assets is realised or the deferred tax liability is settled.
Deferred tax is recognised on temporary differences arising principally arising from depreciation of property and equipment,
amortisation of intangible assets, foreign exchange and derivatives, provision for other liabilities and unused tax losses carried
forward.
Deferred tax related to fair value re-measurement of financial investment available-for-sale, which are charged or credited directly
to other comprehensive income and is subsequently recognised in the income statement together with the deferred gain or loss.
(O) ZAKAT
Zakat represents business zakat payable by the Group to comply with the principles of Shariah and as approved by the Shariah
Committee. The Bank's subsidiary, AFFIN Islamic Bank Berhad only pays zakat on its business and does not pay zakat on behalf
of depositors or shareholders. Zakat provision is calculated based on 2.5% of the net asset method.
(P) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of cash in hand, bank balances and deposits and placements maturing within one month
which are held for the purpose of meeting short term commitments and are readily convertible to cash without significant risk of
changes in value.
(Q) FORECLOSED PROPERTIES
Foreclosed properties are stated at the lower of cost and net realisable value.
(R) CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The Group and the Bank does not recognise a contingent liability but discloses its existence in the financial statements. A
contingent liability is possible obligation that arises from past events whose existence will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events beyond the control of the Group and the Bank or a present obligation that is
not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability
also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events beyond the control of the Group and the Bank. The Group and the Bank does
not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually
certain.
81
AFFIN BANK BERHAD
(25046-T)
(S) BILLS AND ACCEPTANCES PAYABLE
Bills and acceptances payable represent the Bank's own bills and acceptances rediscounted and outstanding in the market.
(T) OTHER PROVISIONS
Provisions are recognised by the Group and the Bank when all of the following conditions have been met:
•
•
•
the Group and the Bank has a present legal or constructive obligation as a result of past events;
it is probable that an outflow of resources to settle the obligation will be required; and
a reliable estimate of the amount of obligation can be made.
(U) EMPLOYEE BENEFITS
Short term employee benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in which the
associated services are rendered by employees of the Group.
Defined contribution plan
The defined contribution plan is a pension plan under which the Group pays fixed contributions to the National Pension Scheme,
the Employees' Provident Fund ('EPF') and will have no legal or constructive obligations to pay further contributions if the fund does
not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.
The Group's contribution to defined contribution plans are charged to the income statement in the period to which they relate.
Once the contributions have been paid, the Group has no further payment obligations.
Termination benefits
Termination benefits are payable whenever an employee's employment is terminated before the normal retirement date or whenever
an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is
demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without any
possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy.
Annual Report 2010
82
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 2010 was 3,113 (2009: 3,065) and 2,933 (2009: 2,900)
employees respectively.
The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the ultimate
holding corporate body is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung Angkatan Tentera
Act, 1973.
The Bank is a limited liability company, incorporated and domiciled in Malaysia.
2
CASH AND SHORT-TERM FUNDS
Cash and bank balances with banks
and other financial institutions
Money at call and deposit placements
maturing within one month
3
The Bank
2010
2009
RM'000
RM'000
172,530
138,525
169,157
134,582
8,457,033
5,994,364
5,933,150
4,042,363
8,629,563
6,132,889
6,102,307
4,176,945
DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS
Licensed banks
Licensed investment banks
4
The Group
2010
2009
RM'000
RM'000
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
15,681
176,654
142,777
382,879
176,654
480,494
142,777
192,335
142,777
559,533
623,271
FINANCIAL ASSETS HELD-FOR-TRADING
The Group
2010
2009
RM'000
RM'000
At fair value
Bank Negara Malaysia Monetary Notes
Negotiable Instruments of Deposit
The Bank
2010
2009
RM'000
RM'000
99,853
50,000
150,000
99,853
50,000
150,000
149,853
150,000
149,853
150,000
83
AFFIN BANK BERHAD
(25046-T)
5
FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE
The Group
2010
2009
RM'000
RM'000
At fair value
Malaysian Government treasury bills
Malaysian Government securities
Malaysian Government investment issues
BNM Sukuk
Bank Negara Malaysia Monetary Notes
Negotiable Instruments of Deposit and
Islamic Debt Certificates
Bankers' acceptances and Islamic accepted bills
Khazanah bonds
6
The Bank
2010
2009
RM'000
RM'000
166,566
756,181
1,398,095
31,712
1,006,592
151,098
1,632,607
877,623
638,548
137,730
756,181
668,411
849,557
93,392
1,632,607
235,469
408,072
140,057
556,994
13,250
460,002
36,580
24,961
140,057
556,994
-
460,002
-
4,069,447
3,821,419
3,108,930
2,829,542
51,375
2,167
65,059
2,253
40,920
2,167
54,617
2,253
Quoted securities:
Shares in Malaysia
Private debt securities in Malaysia
Unquoted securities:
Shares in Malaysia
Private debt securities
- in Malaysia
- outside Malaysia
93,173
-
93,101
-
1,253,121
336,775
1,495,913
312,425
890,568
325,834
1,131,828
284,483
Allowance for impairment of securities
5,806,058
(40,005)
5,697,069
(69,698)
4,461,520
(33,260)
4,302,723
(62,953)
5,766,053
5,627,371
4,428,260
4,239,770
FINANCIAL INVESTMENTS HELD-TO-MATURITY
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
At amortised cost
Quoted securities:
38,123
38,123
38,123
38,123
Unquoted securities:
480,788
478,915
480,620
478,747
-
54,393
-
53,818
518,911
(87,752)
571,431
(89,957)
518,743
(87,584)
570,688
(89,789)
431,159
481,474
431,159
480,899
At cost
Unquoted shares in Malaysia
Allowance for impairment of securities
Annual Report 2010
84
7
LOANS, ADVANCES AND FINANCING
The Group
2010
2009
RM'000
RM'000
(i)
The Bank
2010
2009
RM'000
RM'000
By type
Overdrafts
Term loans/financing
- Housing loans/financing
- Hire purchase receivables
- Syndicated financing
- Other term loans/financing
Bills receivables
Trust receipts
Claims on customers under acceptances credits
Staff loans/financing (of which RM Nil to Directors)
Credit/charge cards
Revolving credits
Factoring
1,971,364
1,936,567
1,747,438
1,718,354
3,885,327
7,835,986
1,371,964
7,784,898
39,077
266,050
659,074
151,146
101,682
2,476,644
3,185
3,248,631
6,592,317
1,099,161
6,363,775
39,727
316,033
603,804
151,565
96,468
2,148,317
3,532
2,831,771
6,774,821
1,254,969
6,850,106
37,688
222,092
601,137
143,110
101,682
2,334,181
3,185
2,415,866
5,729,092
920,137
5,811,261
31,856
239,571
508,763
143,702
96,468
2,029,715
3,532
Gross loans, advances and financing
Less:
Allowance for bad and doubtful debts and financing
- General
- Specific
Allowance for impairment
- Individual
- Collective
26,546,397
22,599,897
22,902,180
19,648,317
-
(335,067)
(275,526)
-
(291,000)
(248,722)
(175,849)
(395,701)
-
(139,709)
(343,220)
-
Total net loans, advances and financing
25,974,847
21,989,304
22,419,251
19,108,595
-
Included in term loans are housing loans sold to Cagamas Berhad with recourse amounting to RM286,370,000 (2009:
RM297,216,000).
-
Included in Group's other term loan/financing as at reporting is RM13.5 million (2009: RM13.5 million) of term financing
disbursed by AFFIN Islamic Bank Bhd to jointly controlled entity, AFFIN-i Goodyear Sdn Bhd.
(ii) By maturity structure
The Group
2010
2009
RM'000
RM'000
Maturing within one year
One year to three years
Three years to five years
Over five years
The Bank
2010
2009
RM'000
RM'000
6,552,073
2,748,818
4,411,920
12,833,586
6,032,892
2,624,066
3,450,201
10,492,738
5,989,754
2,581,046
3,906,606
10,424,774
5,432,079
2,410,452
3,214,452
8,591,334
26,546,397
22,599,897
22,902,180
19,648,317
85
AFFIN BANK BERHAD
(25046-T)
7
LOANS, ADVANCES AND FINANCING (continued)
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
(iii) By type of customer
Domestic non-bank financial institutions
- Stockbroking companies
- Others
Domestic business enterprises
- Small and medium enterprises
- Others
Government and statutory bodies
Individuals
Other domestic entities
Foreign entities
270
2,146,330
1,519,286
270
1,724,629
1,333,982
6,789,502
5,785,703
75,394
11,473,630
45,584
229,984
6,182,392
4,628,530
93,267
9,909,813
20,117
246,492
6,311,415
5,265,662
75,394
9,369,378
43,749
111,683
5,670,572
4,245,440
84,326
8,191,403
19,297
103,297
26,546,397
22,599,897
22,902,180
19,648,317
286,138
7,834,034
3,934,311
357,071
6,589,445
3,779,761
183,375
6,773,029
3,400,299
163,641
5,726,220
3,208,943
10,210,602
4,281,312
8,969,682
2,903,938
8,596,943
3,948,534
7,776,326
2,773,187
26,546,397
22,599,897
22,902,180
19,648,317
482,204
373,899
1,790,610
194,137
2,367,389
2,328,423
1,213,751
921,590
4,396,591
855,655
11,579,272
42,876
528,113
254,864
1,681,203
155,944
2,412,212
1,444,968
1,166,009
925,398
3,298,676
698,097
10,004,551
29,862
385,200
373,664
1,660,682
193,273
2,027,689
2,283,744
1,164,859
915,146
3,809,129
584,559
9,461,991
42,244
410,454
254,665
1,570,652
155,671
1,929,928
1,403,443
1,090,258
898,675
3,016,548
622,075
8,271,706
24,242
26,546,397
22,599,897
22,902,180
19,648,317
(iv) By interest/profit rate sensitivity
Fixed rate
- Housing loans/financing
- Hire purchase receivables
- Other fixed rate loans/financing
Variable rate
- BLR plus
- Cost plus
(v) By economic sector
Primary agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water supply
Construction
Real estate
Wholesale & retail trade and restaurants & hotels
Transport, storage and communication
Finance, insurance and business services
Education, health and others
Household
Others
Annual Report 2010
86
7
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
(vi) By economic purpose
Purchase of securities
Purchase of transport vehicles
Purchase of landed property of which:
- Residential
- Non-residential
Fixed assets other than land and building
Personal use
Credit card
Consumer durable
Construction
Merger and acquisition
Working capital
Others
268,145
7,869,187
171,054
6,619,191
254,706
6,807,263
150,042
5,751,834
3,982,258
2,637,636
339,184
721,877
101,682
1,067
772,577
4,867
9,635,096
212,821
3,473,593
1,605,207
274,654
746,550
96,468
1,365
652,128
14,598
8,519,822
425,267
2,913,043
2,211,785
329,088
689,560
101,682
1,033
648,490
4,867
8,739,309
201,354
2,579,015
1,430,102
270,145
721,970
96,468
1,324
518,311
14,598
7,729,265
385,243
26,546,397
22,599,897
22,902,180
19,648,317
27,648
902,980
1,271,331
853,633
7,602,382
8,720,586
721,564
663,856
2,027,324
623,000
567,382
256,176
732,788
1,173,362
277,901
124,484
17,882
954,969
1,110,256
726,315
6,552,003
7,060,962
635,459
575,803
1,849,159
416,548
521,026
232,161
572,920
1,048,697
177,666
148,071
25,762
691,342
1,176,306
689,294
6,423,997
7,876,473
660,393
623,077
1,889,371
368,284
277,903
58,335
707,464
1,137,077
277,889
19,213
16,255
743,340
1,027,779
597,903
5,582,084
6,425,087
585,102
550,692
1,711,981
313,620
293,468
48,822
555,644
999,578
177,651
19,311
26,546,397
22,599,897
22,902,180
19,648,317
(vii) By geographical distribution
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Sarawak
Sabah
Labuan
Abroad
87
AFFIN BANK BERHAD
(25046-T)
7
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
774,886
264,897
1,086,173
-
714,430
194,513
1,035,778
-
Acquisition from subsidiary
Classified as impaired
Reclassified as non-impaired
Amount recovered
Amount written-off
1,039,783
689,486
(313,791)
(221,338)
(223,017)
1,086,173
780,474
(379,573)
(254,944)
(457,244)
908,943
596,797
(271,704)
(198,624)
(216,890)
1,035,778
296
697,126
(336,133)
(238,824)
(443,813)
At end of the financial year
971,123
774,886
818,522
714,430
The Group
2010
RM'000
The Bank
2010
RM'000
Individual impairment
At beginning of the financial year
Adoption of FRS 139
175,953
152,725
Provision for loan impairment
Amount recovered
Amount written-off
Unwind of discount of allowance
175,953
198,023
(20,669)
(170,906)
(6,552)
152,725
172,716
(10,778)
(169,730)
(5,224)
175,849
139,709
Collective impairment
Adoption of FRS 139
449,893
405,968
Provision for loan impairment/(recovered)
Amount written-off
449,893
(3,044)
(51,148)
405,968
(16,409)
(46,339)
395,701
343,220
(viii) Movements of impaired loans
Adoption of FRS 139
(ix) Movements in allowance for impairment
Annual Report 2010
88
7
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
(x) Movements in allowance for bad and
doubtful debts and financing
General allowance
Adoption of FRS 139
Allowance made during the financial year
Amount written-back
335,067
(335,067)
-
297,932
37,182
(47)
291,000
(291,000)
-
260,443
179
30,378
-
-
335,067
-
291,000
As % of gross loans, advances and
financing less specific allowance
-
1.50%
-
1.50%
275,526
(275,526)
-
448,783
322,570
9,843
(1,626)
(46,977)
(457,067)
248,722
(248,722)
-
431,746
257
297,631
9,843
(1,626)
(45,494)
(443,635)
-
275,526
-
248,722
11,937
50
99,831
2,360
252,660
8,263
48,103
4,633
15,108
8,301
519,877
-
5,443
985
81,803
2,154
140,963
28,820
21,538
3,768
15,498
9,021
460,095
4,798
11,874
78,707
2,066
175,208
8,263
45,555
4,633
14,469
8,301
469,446
-
5,345
985
57,120
2,125
140,798
28,820
19,695
3,768
14,911
9,021
427,044
4,798
971,123
774,886
818,522
714,430
Specific allowance
Adoption of FRS 139
Allowance made during the financial year
Transferred to allowance from impairment of securities
Transferred to debt conversion
Amount recovered
Amount written-off
(xi) Impaired loans by economic sectors
Primary agriculture
Manufacturing
Construction
Real estate
Household
Others
89
AFFIN BANK BERHAD
(25046-T)
7
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
(xii) Impaired loans by economic purposes
Purchase of securities
Purchase of transport vehicles
Purchase of landed property of which:
- Residential
- Non-residential
Fixed assets other than land and building
Personal use
Credit card
Consumer durable
Construction
Working capital
Others
2,741
81,586
3,614
86,447
2,741
73,743
3,614
80,252
407,763
44,744
3,633
16,373
636
34
197,713
215,683
217
341,928
51,691
4,639
18,946
865
33
33,127
224,587
9,009
365,321
44,119
3,185
16,170
636
34
136,000
176,360
213
314,856
48,411
4,191
18,927
865
33
33,127
203,383
6,771
971,123
774,886
818,522
714,430
840
40,612
30,120
16,202
426,852
185,642
37,483
15,854
88,097
17,013
8,009
6,171
6,614
14,387
45
77,182
563
27,157
30,702
15,372
310,686
178,535
36,656
17,717
113,682
11,596
4,462
5,147
7,075
15,497
39
-
840
39,228
27,892
14,559
382,454
173,975
35,466
15,356
85,252
13,368
6,529
3,011
6,387
14,160
45
-
563
26,525
27,896
14,414
274,721
169,880
34,871
17,594
110,807
9,019
3,589
2,329
6,814
15,369
39
-
971,123
774,886
818,522
714,430
(xiii) Impaired loans by geographical distribution
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Sarawak
Sabah
Labuan
Abroad
Annual Report 2010
90
8
OTHER ASSETS
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
27,273
4,160
60,301
160,648
(6,180)
22,285
153,097
57,437
180,329
2,142
26,606
4,077
49,593
160,253
(6,910)
21,707
129,236
51,273
179,916
2,139
246,202
415,290
233,619
384,271
19,164
(19,164)
20,167
(20,167)
17,274
(17,274)
18,277
(18,277)
-
-
-
-
2,984
(2,984)
2,820
(2,820)
2,774
(2,774)
2,617
( 2,617)
As restated/At end of the financial year
-
-
-
-
Net book value at end of financial year
-
-
-
-
Amount arising during the financial year
Disposal during the financial year
180,329
1,370
(18,611)
187,422
21,657
(26,952)
179,916
1,370
(18,611)
187,009
21,657
(26,952)
Foreclosed properties - dimunition in value
163,088
(2,440)
182,127
(1,798)
162,675
(2,422)
181,714
(1,798)
160,648
180,329
160,253
179,916
Other debtors, deposits and prepayments
Clearing accounts
Accrued interest/income receivable
Prepaid lease rental (a)
Foreclosed properties (b)
Others
(a) Prepaid lease rental
Cost
Reclassified to property and equipment (Note 15)
As restated/At end of the financial year
Less: Accumulated amortisation
Reclassified to property and equipment (Note 15)
(b) Foreclosed properties
91
AFFIN BANK BERHAD
(25046-T)
9
DERIVATIVE FINANCIAL ASSETS
At fair value
Foreign exchange derivatives:
Currency forwards
Currency swaps
Interest rate derivatives:
Interest rate swap
The Group and The Bank
2010
Contract/
notional
amount
Assets
RM'000
RM'000
2009
Contract/
notional
amount
Assets
RM'000
RM'000
240,549
1,347,158
2,381
34,031
338,607
1,037,690
4,134
17,530
576,120
9,743
375,635
8,063
2,163,827
46,155
1,751,932
29,727
10 DEFERRED TAX ASSETS / (LIABILITIES)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts determined after appropriate
offsetting, are shown in the statement of financial position:
The Group
2010
2009
RM'000
RM'000
Deferred tax assets:
- to be recovered after more than 12 months
- to be recovered within 12 months
The Bank
2010
2009
RM'000
RM'000
5,221
(930)
47,681
7,108
-
47,171
7,219
4,291
54,789
-
54,390
(2,876)
(22,056)
(1)
(2,876)
(22,056)
-
(24,932)
(1)
(24,932)
-
54,788
(21,123)
62,415
-
54,390
(19,269)
62,803
-
33,665
62,415
35,121
62,803
(Charged)/credited to income statement (Note 34)
- property and equipment
- intangible assets
- general allowance on bad and doubtful debts
- collective allowances (transitional provision) for bad
and doubtful financing
- revaluation gain/(losses) on forex
- revaluation gain/(losses) on derivatives
- others
Charged to equity
(50,191)
913
2,908
(83,767)
3 ,478
2,335
1,638
9,284
(57,219)
844
3,092
(72,750)
1,821
2,374
1,499
7,639
6,785
13,507
2,929
6,534
(4,115)
1,262
(10,233)
(808)
(11,105)
267
11,879
2,929
(3,480)
(2,834)
(1,700)
(10,233)
2,242
(10,234)
(20,641)
54,788
(24,932)
54,390
Deferred tax liabilities:
- to be recovered after more than 12 months
- to be recovered within 12 months
Adoption of FRS 139
Annual Report 2010
92
10 DEFERRED TAX ASSETS / (LIABILITIES) (continued)
The movements in deferred tax assets and liabilities during the financial year are as follows:
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
Subject to income tax
Deferred tax assets (before offsetting)
General allowance on bad and doubtful debts
Collective allowances (transitional provision)
for bad and doubtful financing
Investment fluctuation reserve for financial
Others
-
83,767
-
72,750
6,785
-
267
-
12
2,285
12
12
2,284
8,045
Offsetting
6,797
(2,506)
86,064
(31,275)
279
(279)
83,079
(28,689)
Deferred tax assets (after offsetting)
4,291
54,789
-
54,390
Deferred tax liabilities (before offsetting)
Intangible assets
Revaluation gain on forex
Revaluation gain on derivatives
Investment fluctuation reserve for financial
(5,340)
(5,252)
-
(6,255)
(8,160)
(13,507)
(2,929)
(5,059)
(4,886)
-
(5,903)
(7,978)
(11,879)
(2,929)
(16,846)
(425)
(15,266)
-
Offsetting
(27,438)
2,506
(31,276)
31,275
(25,211)
279
(28,689)
28,689
Deferred tax liabilities (after offsetting)
(24,932)
(1)
(24,932)
-
The amount of unused tax losses for which no deferred tax asset is recognised in the statement of financial position are as follows:
Tax losses
105,260
105,507
-
-
11 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.
The appointment of AFFIN Islamic Bank Berhad ('AIBB') as an Islamic principal dealer from 1 July 2009 to 31 December 2012 by
Bank Negara Malaysia has in turn accorded AIBB to maintain the 1% Statutory Reserve Requirement ('SRR') balances in the form
of Malaysian Government securities and/or Government Investment issues holdings instead of cash. As at reporting date,
RM40,000,000 (2009: RM30,000,000) of Malaysian Government securities and/or Government Investment issues has been
maintained by AIBB to comply with the SRR.
93
AFFIN BANK BERHAD
(25046-T)
12 INVESTMENT IN SUBSIDIARIES
The Bank
2010
2009
RM'000
RM'000
Unquoted shares, at cost
Less: Allowance for impairment losses
319,557
(32,128)
319,557
(32,128)
287,429
287,429
The subsidiaries of the Bank, all of which are incorporated in Malaysia, are as follows:
Name
Principal Activities
AFFIN Islamic Bank Bhd
PAB Properties Sdn Bhd
ABB Nominee (Tempatan) Sdn Bhd
ABB Nominee (Asing) Sdn Bhd
ABB Trustee Berhad *
AFFIN Factors Sdn Bhd
AFFIN Futures Sdn Bhd
PAB Property Management Services Sdn Bhd
PAB Property Development Sdn Bhd
ABB Venture Capital Sdn Bhd
ABB IT & Services Sdn Bhd
BSNCB Nominees (Tempatan) Sdn Bhd
BSNC Nominees (Tempatan) Sdn Bhd
ABB Asset Management (M) Bhd
AFFIN Recoveries Bhd
BSN Merchant Nominees (Tempatan) Sdn Bhd
BSN Merchant Nominees (Asing) Sdn Bhd
AFFIN-ACF Nominees (Tempatan) Sdn Bhd
Islamic banking business
Property management services
Share nominee services
Share nominee services
Trustee management services
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
*
80% held by Directors of the Bank, in trust for the Bank.
Percentage of equity held
2010
2009
%
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Annual Report 2010
94
13 INVESTMENT IN JOINTLY CONTROLLED ENTITY
The Group
2010
2009
RM'000
RM'000
Unquoted shares at cost
Group's share of post acquisition retained losses
500
-
500
-
500
500
The Group did not account for the share of post acquisition retained losses as it is immaterial and has not commenced the
development of land.
The summarised financial information of jointly controlled entity are as follows:
Revenue
Loss after tax
Total assets
Total liabilities
2
(792)
20,816
20,621
1
(3)
16,813
15,820
The jointly controlled entity was incorporated on 1 April 2008 and the details are as follows:
Name
Principal activites
AFFIN-i Goodyear Sdn Bhd
Land development project
Issued and
paid up
share capital
RM'000
1,000
Percentage of
equity held
2010
2009
%
%
50
50
On 1 April 2008, AFFIN Islamic Bank Berhad and Jurus Positif Sdn Bhd, a subsidiary of Mutiara Goodyear Development Berhad,
entered into a joint venture agreement under the Shariah principles ('Musharakah Agreement') to develop a land into a housing
scheme at Bukit Gambir, Pulau Pinang.
The agreement also includes an arrangement where Jurus Positif Sdn Bhd may acquire the Bank's shares upon the completion
of the project at a mutually agreed price, unless if both shareholders decide to continue the joint venture for subsequent projects.
Major strategic operation and financial decisions relating to the activities of AFFIN-i Goodyear Sdn Bhd requires unanimous consent
by both joint venture parties. The Group's interest in AFFIN-i Goodyear Sdn Bhd has been treated as investment in jointly controlled
entity, which has been accounted for in the consolidated financial statements using the equity method of accounting.
14 AMOUNT DUE FROM SUBSIDIARIES
The Bank
2010
2009
RM'000
RM'000
Advances to a subsidiary
Other receivables
183,541
1,730
229,364
1,921
185,271
231,285
The advances of RM183,541,000 (2009: RM229,364,000) to subsidiary is unsecured, bear interest at 2.62% per annum (2009:
2.14%) and have no fixed terms of repayment.
24,287
-
At 31 December 2010
Net book value as at 31 December 2010
-
As restated
Charge for the financial year
Disposal
Write-off
Reclassification
24,287
At 31 December 2010
-
25,087
(800)
-
As restated
Additions
Disposals
Write-off
Reclassification
Transfer to intangible assets (Note 16)
Accumulated depreciation and
impairment losses
At 1 January 2010
Reclassified from other assets (Note 8)
25,087
-
Freehold
land
RM'000
At 1 January 2010
Cost
The Group
2010
15 PROPERTY AND EQUIPMENT
11,051
1,811
1,757
111
(57)
-
1,757
12,862
13,470
(608)
-
13,470
50 years
or more
RM'000
4,048
1,332
1,227
122
(17)
-
1,227
5,380
5,694
(314)
-
5,694
Less than
50 years
RM'000
Leasehold land
19,938
13,273
12,810
552
(89)
-
12,810
-
33,211
33,480
(269)
-
33,480
-
Buildings
on
freehold
land
RM'000
69,276
19,793
18,078
1,789
(74)
-
18,078
-
89,069
89,549
(480)
-
89,549
-
Buildings
on
leasehold
land
RM'000
12,888
83,184
77,346
6,011
(137)
(36)
-
77,346
-
96,072
94,572
1,653
(154)
(52)
53
-
94,572
Renovation
RM'000
16,087
33,925
32,390
3,078
(37)
(1,511)
5
32,390
-
50,012
50,262
1,358
(47)
(1,648)
87
-
50,262
-
Office
equipment
and
furniture
RM'000
10,732
54,638
47,036
8,091
(484)
(5)
47,036
-
65,370
63,359
2,601
(554)
(36)
-
63,359
-
Computer
equipment
and
software
RM'000
798
2,766
2,780
317
(317)
(14)
-
2,780
-
3,564
3,458
437
(317)
(14)
-
3,458
-
Motor
vehicles
RM'000
1,617
-
-
-
1,617
2,251
3,559
(104)
(4,089)
2,251
-
Capital
work-in
progress
RM'000
170,722
210,722
193,424
20,071
(728)
(2,045)
-
190,440
2,984
381,444
381,182
9,608
(2,989)
(2,268)
(4,089)
362,018
19,164
Total
RM'000
95
AFFIN BANK BERHAD
(25046-T)
25,087
-
At 31 December 2009
-
As restated
Disposal
Write-off
25,087
At 31 December 2009
-
28,630
(3,543)
-
As restated
Additions
Disposals
Write-off
Reclassification
impairment losses
At 1 January 2009
28,630
-
At 1 January 2009
Cost
The Group
2009
Freehold
land
RM'000
15 PROPERTY AND EQUIPMENT (continued)
11,713
1,757
1,662
117
(22)
-
1,662
13,470
14,039
(569)
-
14,039
50 years
or more
RM'000
4,467
1,227
1,158
124
(55)
-
1,158
5,694
6,128
(434)
-
6,128
Less than
50 years
RM'000
Leasehold land
20,670
12,810
13,383
556
(1,129)
-
13,383
-
33,480
35,616
(2,136)
-
35,616
-
Buildings
on
freehold
land
RM'000
71,471
18,078
16,343
1,799
(64)
-
16,343
-
89,549
90,095
(546)
-
90,095
-
Buildings
on
leasehold
land
RM'000
17,226
77,346
73,766
5,784
(92)
(2,112)
73,766
-
94,572
91,703
4,806
(93)
(2,286)
442
-
91,703
-
Renovation
RM'000
17,872
32,390
30,306
4,015
(52)
(1,879)
30,306
-
50,262
48,665
3,639
(59)
(2,115)
132
-
48,665
-
Office
equipment
and
furniture
RM'000
16,323
47,036
42,219
9,317
(4,500)
42,219
-
63,359
65,230
2,425
(4,545)
249
-
65,230
-
Computer
equipment
and
software
RM'000
678
2,780
2,508
391
(76)
(43)
2,508
-
3,458
3,947
12
(458)
(43)
-
3,947
-
Motor
vehicles
RM'000
2,251
-
-
-
2,251
5,116
3,670
(823)
(5,712)
5,116
-
Capital
work-in
progress
RM'000
187,758
193,424
181,345
22,103
(1,490)
(8,534)
178,525
2,820
381,182
389,169
14,552
(7,838)
(8,989)
(5,712)
369,002
20,167
Total
RM'000
Annual Report 2010
96
21,290
-
At 31 December 2010
-
As restated
Disposal
Write-off
Reclassification
Transfer to subsidiary
21,290
At 31 December 2010
-
22,090
(800)
-
As restated
Additions
Disposals
Write-off
Reclassification
impairment losses
At 1 January 2010
22,090
-
At 1 January 2010
Cost
The Bank
2010
Freehold
land
RM'000
9,379
1,593
1,547
103
(57)
-
1,547
10,972
11,580
(608)
-
11,580
50 years
or more
RM'000
4,048
1,332
1,227
122
(17)
-
1,227
5,380
5,694
(314)
-
5,694
Less than
50 years
RM'000
Leasehold land
19,191
12,384
11,954
519
(89)
-
11,954
-
31,575
31,844
(269)
-
31,844
-
Buildings
on
freehold
land
RM'000
68,852
19,309
17,612
1,771
(74)
-
17,612
-
88,161
88,641
(480)
-
88,641
-
Buildings
on
leasehold
land
RM'000
12,320
81,328
75,760
5,741
(137)
(36)
-
75,760
-
93,648
92,153
1,647
(154)
(52)
54
-
92,153
-
Renovation
RM'000
15,373
33,457
32,023
2,978
(37)
(1,511)
4
32,023
-
48,830
49,103
1,338
(47)
(1,648)
87
(3)
49,103
-
Office
equipment
and
furniture
RM'000
10,090
52,505
45,156
7,837
(482)
(6)
45,156
-
62,595
60,782
2,501
(550)
(36)
(102)
60,782
-
Computer
equipment
and
software
RM'000
600
2,501
2,606
226
(317)
(14)
-
2,606
-
3,101
2,995
437
(317)
(14)
-
2,995
-
Motor
vehicles
RM'000
1,617
-
-
-
1,617
701
3,559
(105)
(2,538)
-
701
-
Capital
work-in
progress
RM'000
162,760
204,409
187,885
19,297
(728)
(2,043)
(2)
185,111
2,774
367,169
365,583
9,482
(2,989)
(2,264)
(2,538)
(105)
348,309
17,274
Total
RM'000
97
AFFIN BANK BERHAD
(25046-T)
22,090
-
At 31 December 2009
-
As restated
Disposal
Write-off
22,090
At 31 December 2009
-
25,633
(3,543)
-
As restated
Additions
Disposals
Write-off
Reclassification
impairment losses
At 1 January 2009
25,633
-
At 1 January 2009
Cost
The Bank
2009
Freehold
land
RM'000
10,033
1,547
1,459
110
(22)
-
1,459
11,580
12,149
(569)
-
12,149
50 years
or more
RM'000
4,467
1,227
1,158
124
(55)
-
1,158
5,694
6,128
(434)
-
6,128
Less than
50 years
RM'000
Leasehold land
19,890
11,954
12,560
523
(1,129)
-
12,560
-
31,844
33,980
(2,136)
-
33,980
-
Buildings
on
freehold
land
RM'000
71,029
17,612
15,895
1,781
(64)
-
15,895
-
88,641
89,187
(546)
-
89,187
-
Buildings
on
leasehold
land
RM'000
16,393
75,760
72,444
5,509
(92)
(2,101)
-
72,444
-
92,153
89,260
4,788
(92)
(2,245)
442
-
89,260
-
Renovation
RM'000
17,080
32,023
30,043
3,907
(52)
(1,854)
(21)
30,043
-
49,103
47,520
3,621
(59)
(2,087)
132
(24)
47,520
-
Office
equipment
and
furniture
RM'000
15,626
45,156
40,350
9,073
(4,267)
-
40,350
-
60,782
62,447
2,397
(4,311)
249
-
62,447
-
Computer
equipment
and
software
RM'000
389
2,606
2,383
299
(76)
-
2,383
-
2,995
3,441
12
(458)
-
3,441
-
Motor
vehicles
RM'000
701
-
-
-
701
5,116
2,120
(823)
(5,712)
-
5,116
-
Capital
work-in
progress
RM'000
177,698
187,885
176,292
21,326
(1,490)
(8,222)
(21)
173,675
2,617
365,583
374,861
12,938
(7,837)
(8,643)
(5,712)
(24)
356,584
18,277
Total
RM'000
Annual Report 2010
98
99
AFFIN BANK BERHAD
(25046-T)
16 INTANGIBLE ASSETS
Goodwill
RM'000
Computer
Software
RM'000
Total
RM'000
Cost
At 1 January 2010
Additions
Write-off
Reclassification from property and equipment (Note 15)
133,430
-
104,501
1,043
(618)
4,089
237,931
1,043
(618)
4,089
At 31 December 2010
133,430
109,015
242,445
At 1 January 2010
Amortised during the financial year
Write-off
-
(71,861)
(16,474)
326
(71,861)
(16,474)
326
At 31 December 2010
-
(88,009)
(88,009)
133,430
21,006
154,436
Cost
At 1 January 2009
Additions
133,430
-
98,003
786
5,712
231,433
786
5,712
At 31 December 2009
133,430
104,501
237,931
At 1 January 2009
-
(51,359)
(20,502)
(51,359)
(20,502)
At 31 December 2009
-
(71,861)
(71,861)
133,430
32,640
166,070
The Group
Annual Report 2010
100
16 INTANGIBLE ASSETS (continued)
Goodwill
RM'000
Computer
Software
RM'000
Total
RM'000
Cost
At 1 January 2010
Additions
Write-off
137,323
-
101,973
1,043
(618)
2,539
239,296
1,043
(618)
2,539
At 31 December 2010
137,323
104,937
242,260
At 1 January 2010
Write-off
-
(70,060)
(15,658)
326
(70,060)
(15,658)
326
At 31 December 2010
-
(85,392)
(85,392)
137,323
19,545
156,868
Cost
At 1 January 2009
Additions
137,323
-
95,313
948
5,712
232,636
948
5,712
At 31 December 2009
137,323
101,973
239,296
At 1 January 2009
-
(50,061)
(19,999)
(50,061)
(19,999)
At 31 December 2009
-
(70,060)
(70,060)
137,323
31,913
169,236
The Bank
101
AFFIN BANK BERHAD
(25046-T)
16 INTANGIBLE ASSETS (continued)
Goodwill
The carrying amount of the Bank's goodwill have been allocated to the following business segments, which represents the Bank's
cash-generating units ('CGUs'):
Enterprise banking
Consumer banking
2010
RM'000
2009
RM'000
123,591
13,732
123,591
13,732
137,323
137,323
Goodwill is allocated to the Bank's CGU which are expected to benefits from the synergies of the acquisitions. For annual
impairment testing purposes, the recoverable amount of the CGUs are determined based on value-in-use calculations using the
cash flow projections based on the 2010 financial budgets approved by the Directors, covering a period of 5 years. The cash flow
beyond the fifth year are projected based on the assumption that the Year 5 operating cash flow will be generated by the respective
CGUs at a growth rate of 5% (2009: 5%) to infinity.
The cash flow projections are derived based on a number of key factors including past performance and management’s
expectations of the market developments. The discount rates used are based on the pre-tax weighted average cost of capital plus
an appropriate risk premium where applicable ('WACC'), at the date of assessment of the CGUs.
Pre-tax discount rate
2010
Enterprise
banking
%
2010
Consumer
banking
%
2009
Enterprise
banking
%
2009
Consumer
banking
%
14.29
14.21
10.89
10.83
No impairment charge was required for goodwill arising from all the business segments. Management views that any reasonable
possible change to the assumptions applied is not likely to cause the recoverable amount of all the business segments to be
lower than its carrying amount.
17 DEPOSITS FROM CUSTOMERS
(i)
By type of deposit
Demand deposits
Savings deposits
Fixed deposits
Special investment deposits
Money market deposits
Negotiable instruments of deposit ('NID')
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
5,063,155
1,400,535
19,913,674
641,673
706,697
3,119,514
4,399,413
1,030,103
15,883,534
706,577
401,391
4,019,301
3,565,188
1,142,332
16,780,143
706,697
3,119,514
3,208,959
824,129
13,670,901
401,391
3,709,674
30,845,248
26,440,319
25,313,874
21,815,054
Annual Report 2010
102
17 DEPOSITS FROM CUSTOMERS (continued)
(i)
Maturity structure of fixed deposit and NID
Due within six months
Six months to one year
One year to three years
Three years to five years
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
19,879,571
3,106,639
24,026
22,952
17,303,056
2,500,457
74,881
24,441
17,139,965
2,716,939
20,738
22,015
14,974,939
2,311,196
70,847
23,593
23,033,188
19,902,835
19,899,657
17,380,575
4,749,240
9,744,742
5,003,875
11,347,391
3,630,291
9,286,822
3,969,168
9,554,038
2,954,953
8,158,218
4,568,915
9,631,788
2,057,628
7,881,652
3,607,557
8,268,217
30,845,248
26,440,319
25,313,874
21,815,054
(iii) By type of customer
Government and statutory bodies
Business enterprise
Individuals
Others
18 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS
The Group
2010
2009
RM'000
RM'000
Licensed banks
Licensed investment banks
Bank Negara Malaysia
Other financial institutions
Maturity structure of deposits
Due within six months
Six months to one year
The Bank
2010
2009
RM'000
RM'000
5,012,341
226,253
308,350
1,058,404
3,403,799
695,015
924,849
4,296,841
226,253
308,350
903,978
3,238,564
592,250
690,414
6,605,348
5,023,663
5,735,422
4,521,228
6,537,162
68,186
5,019,439
4,224
5,667,236
68,186
4,517,004
4,224
6,605,348
5,023,663
5,735,422
4,521,228
19 RECOURSE OBLIGATION ON LOANS SOLD TO CAGAMAS BERHAD
In the normal course of banking operations, the Bank sells loans to Cagamas Berhad with recourse at values equivalent to the
unpaid principal balances of loans and advances due from the borrowers.
The Bank is liable in respect of housing loans and hire purchase portfolio sold directly and indirectly to Cagamas Berhad, under
the condition that the Bank undertakes to administer these loans on behalf of Cagamas Berhad and to buy back any loans which
are regarded as defective based on an agreed prudential criteria. Such financing transactions and the obligations to buy back the
loans are reflected as a liability on the financial position.
103
AFFIN BANK BERHAD
(25046-T)
20 OTHER LIABILITIES
Bank Negara Malaysia and Credit Guarantee
Corporation Funding programmes
Margin and collateral deposits
Accrued interest payable
Sundry creditors
Clearing accounts
Defined contribution plan (a)
Accrued employee benefits (b)
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
43,002
65,191
167,391
188,983
44,616
11,968
125
71,768
57,325
123,487
169,985
9,055
125
43,002
62,552
147,627
172,182
27,706
11,448
105
71,768
55,447
113,562
154,416
8,757
105
521,276
431,745
464,622
404,055
(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.
21 DERIVATIVE FINANCIAL LIABILITIES
2010
Contract/
notional
amount
Liabilities
RM'000
RM'000
2009
Contract/
notional
amount
Liabilities
RM'000
RM'000
At fair value
Foreign exchange derivatives:
Currency forwards
Currency swaps
487,922
340,846
19,025
21,087
365,393
473,155
7,040
7,698
Interest rate derivatives:
Interest rate swap
919,193
17,448
1,039,363
26,946
1,747,961
57,560
1,877,911
41,684
22 AMOUNT DUE TO SUBSIDIARIES
The amount due to subsidiaries is unsecured, interest-free and have no fixed terms of repayment.
Annual Report 2010
104
23 SUBORDINATED TERM LOAN
On 10 March 2009, the Bank prepaid its 10 years subordinated term loan of RM500 million with Employee Provident Fund ('EPF').
On the same day a new 10 year subordinated loan amounting to RM300 million was taken with the Bank's Holding Company.
The subordinated loan was constituted by Trust Deed dated 6 March 2009 and were issued on 10 March 2009.
The subordinated loan has 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 loan in whole or in
part.
Interest on subordinated loan payable semi annually.
The nominal value and interest rate of the subordinated loan payable semi-annually are as follows:
Value
: RM300 million
Interest rate : Cost of Fund ('COF') plus 0.75% per annum for period of thirty six months from the issue date, COF plus
1.75% per annum for the next twenty four months and thereafter COF plus 2.00% for the next 5 years.
COF refers to rate determined by the lender on an interest determination date falling within the interest duration.
24 SHARE CAPITAL
Number of ordinary
shares of RM1 each
2010
2009
'000
'000
The Group &The Bank
2010
2009
RM'000
RM'000
Authorised
At beginning/End of the financial year
2,000,000
2,000,000
2,000,000
2,000,000
Issued and fully paid
At beginning/End of the financial year
1,439,285
1,439,285
1,439,285
1,439,285
25 RESERVES
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
Distributable
Retained profits
522,171
332,003
411,831
249,121
Non-distributable
Share premium
Investment fluctuation reserve
Statutory reserve
408,389
54,249
888,910
408,389
(1,880)
789,221
408,389
45,795
807,500
408,389
(6,853)
720,824
1,873,719
1,527,733
1,673,515
1,371,481
105
AFFIN BANK BERHAD
(25046-T)
25 RESERVES (continued)
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
Statutory reserve
Transfer from retained profits
789,221
99,689
625,209
164,012
720,824
86,676
573,204
147,620
888,910
789,221
807,500
720,824
(a)
The statutory reserves of the Group and the Bank are maintained in compliance with the provisions of the Banking and
Financial Institutions Act, 1989 and are not distributable as cash dividends.
(b)
Investment fluctuation 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.
26 INTEREST INCOME
The Group
2010
2009
RM'000
RM'000
Money at call and deposit placements
with financial institutions
Financial assets/investments
- Held-for-trading
- Available-for-sale
- Held-to-maturity
Interest rate derivatives
Others
Amortisation of premium less accretion of discount
of which:
Interest income earned on impaired loans,
advances and financing
The Bank
2010
2009
RM'000
RM'000
1,190,417
1,071,593
1,190,417
1,071,593
108,787
77,082
117,260
83,714
311
116,495
15,522
48,701
-
950
103,621
21,705
53,393
-
311
116,347
15,522
48,701
3,408
950
103,621
19,708
53,393
2,413
1,480,233
31,602
1,328,344
12,744
1,491,966
31,602
1,335,392
12,744
1,511,835
1,341,088
1,523,568
1,348,136
(382)
-
(382)
-
Annual Report 2010
106
27 INTEREST EXPENSE
Deposits and placements of banks
Loan sold to Cagamas Berhad
Others
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
110,572
552,448
10,633
14,559
66,152
6,484
66,595
447,550
13,036
6,477
70,354
1,099
110,579
552,474
10,633
14,559
66,152
6,484
66,797
447,573
13,036
6,477
70,354
1,099
760,848
605,111
760,881
605,336
28 ISLAMIC BANKING INCOME
The Group
2010
2009
RM'000
RM'000
Income derived from investment of depositors' funds and others
Income derived from investment of shareholders' funds
287,402
18,052
242,605
14,283
Total distributable income
Income attributable to depositors
305,454
(127,671)
256,888
(94,251)
177,783
162,637
29 OTHER OPERATING INCOME
The Group
2010
2009
RM'000
RM'000
Fee income
Commission
Service charges and fees
Guarantee fees
Income from financial instruments
Gain arising on financial assets held-for-trading:
- net gain on disposal
- unrealised gains/(losses)
Gains on derivatives:
- realised
- unrealised
The Bank
2010
2009
RM'000
RM'000
12,421
47,815
27,392
12,894
47,135
32,998
12,421
47,815
27,392
12,894
47,135
32,998
87,628
93,027
87,628
93,027
1,217
137
1,646
(69)
1,217
137
1,646
(69)
1,354
1,577
1,354
1,577
1,089
6,303
951
11,716
1,089
6,303
951
11,716
7,392
12,667
7,392
12,667
107
AFFIN BANK BERHAD
(25046-T)
29 OTHER OPERATING INCOME (continued)
The Group
2010
2009
RM'000
RM'000
Income from financial instruments (continued)
Gain arising on financial investments available-for-sale:
- net gain on disposal
- gross dividend income
Gain arising on financial investments held-to-maturity:
- net gain on redemption
- gross dividend income
Other income
Foreign exchange gains/(losses):
- realised
- unrealised
Rental income
Gain on sale of property and equipment
Gain on disposal of foreclosed properties
Dividend from subsidiaries
Other non-operating income
The Bank
2010
2009
RM'000
RM'000
23,733
8
7,002
150
23,635
8
6,960
150
23,741
7,152
23,643
7,110
2,053
2,901
1,633
5,704
2,053
2,901
1,633
5,704
4,954
7,337
4,954
7,337
82,790
(9,549)
1,834
219
6,330
20,658
71,810
(10,072)
1,490
1,353
18,918
16,669
82,790
(9,549)
1,780
219
6,330
20,363
71,810
(10,072)
1,441
1,353
18,918
16,102
9,014
102,282
100,168
101,933
108,566
227,351
221,928
226,904
230,284
30 OTHER OPERATING EXPENSES
Personnel costs (a)
Establishment costs (b)
Marketing expenses (c)
Administrative and general expenses (d)
(a)
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
295,053
167,973
11,553
56,332
251,671
170,400
34,637
49,779
240,585
143,342
9,633
46,585
208,655
147,957
29,844
42,576
530,911
506,487
440,145
429,032
228,427
35,770
30,856
196,676
30,810
24,185
186,516
29,223
24,846
163,605
25,560
19,490
295,053
251,671
240,585
208,655
Personnel costs
Wages, salaries and bonuses
Defined contribution plan ('EPF')
Other personnel costs
Annual Report 2010
108
30 OTHER OPERATING EXPENSES (continued)
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
(b) Establishment costs
Rental of premises
Equipment rental
Repair and maintenance
Depreciation
IT Consultancy fees
Dataline rental
Security services
Electricity, water and sewerage
Other establishment costs
(c)
18,985
741
24,849
20,071
16,474
54,659
5,014
9,228
8,118
9,834
18,450
599
23,917
22,103
20,502
51,292
4,214
8,991
7,943
12,389
15,980
718
21,061
19,297
15,658
47,348
4,313
7,679
6,858
4,430
15,766
567
20,708
21,326
19,999
45,071
3,708
7,588
6,848
6,376
167,973
170,400
143,342
147,957
4,701
2,048
3,511
1,293
25,271
3,454
1,347
3,259
1,306
4,330
1,819
2,490
994
22,085
3,145
1,150
2,452
1,012
11,553
34,637
9,633
29,844
4,665
2,180
21,958
514
4,456
6,897
15,662
5,119
1,162
20,734
455
3,942
6,673
11,694
3,965
1,859
16,739
513
3,798
5,360
14,351
4,381
890
17,233
421
3,411
5,451
10,789
56,332
49,779
46,585
42,576
Marketing expenses
Dealers' handling charges
Business promotion and advertisement
Entertainment
Travelling and accommodation
Other marketing expenses
(d) Administration and general expenses
Telecommunication expenses
Auditors' remuneration
Professional fees
Property and equipment written off
Mail and courier charges
Stationery and consumables
Other administration and general expenses
109
AFFIN BANK BERHAD
(25046-T)
30 OTHER OPERATING EXPENSES (continued)
The expenditure includes the following statutory disclosure:
The Group
2010
2009
RM'000
RM'000
Directors' remuneration (Note 31)
Rental of premises
Equipment rental
Auditors' remuneration
- statutory audit fees
- under/(over) provision prior year
- audit related fees
- non audit fees
Depreciation of property and equipment
Property and equipment written off
The Bank
2010
2009
RM'000
RM'000
6,079
18,985
741
7,504
18,450
599
5,477
15,980
718
7,099
15,766
567
707
12
264
1,197
20,071
16,474
514
672
(11)
125
376
21,862
20,502
455
569
168
1,122
19,297
15,658
513
535
81
274
21,092
19,999
421
31 DIRECTORS' REMUNERATION
The Directors of the Bank who have held office during the financial year are as follows:
Executive Director
Tan Sri Dato' Lodin bin Wok Kamaruddin (Reappointed as Director w.e.f. 4 October 2010)
Dr. Raja Abdul Malek bin Raja Jallaludin
Mr Brian Li Man-Bun (Alternate director to Mr Aubrey Li Kwok-Sing)
Mr Eric Koh Thong Hau (Alternate director to Mr Stephen Charles Li)
Annual Report 2010
110
31 DIRECTORS' REMUNERATION (continued)
The aggregate amount of remuneration for the Directors of the Bank for the financial years were as follows:
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
Executive Directors
Salaries
Bonuses
Other employee benefits
Benefits-in-kind
1,260
2,236
569
62
98
1,542
3,457
828
71
304
1,260
2,236
569
62
98
1,542
3,457
828
71
304
Fees
Benefits-in-kind
1,828
26
1,274
28
1,226
26
869
28
Directors' remuneration (Note 30)
Shariah Committee fees
6,079
188
7,504
156
5,477
-
7,099
-
6,267
7,660
5,477
7,099
The remuneration attributable to the Managing Director/Chief Executive Officer of the Bank, including benefits-in-kind during the
financial year amounted to RM4,225,000 (2009: RM6,202,000).
A summary of the total remuneration of the Directors, distinguishing between Executive and Non-Executive Directors.
The Bank
2010
Executive Directors
Non-executive Directors
Jen Tan Sri Dato' Seri Ismail
bin Haji Omar (Bersara)
Mr Brian Li Man-Bun (Alternate director
to Mr Aubrey Li Kwok-Sing)
Mr Eric Koh Thong Hau (Alternate director
to Mr Stephen Charles Li)
Total
Salaries
RM'000
Bonuses
RM'000
Directors'
Fees
RM'000
*Other
emoluments
RM'000
Benefits in-kind
RM'000
Total
RM'000
1,260
2,236
-
631
98
4,225
1,260
2,236
-
631
98
4,225
-
-
169
22
202
96
-
26
-
291
22
202
-
-
163
192
91
-
-
163
192
91
-
-
88
-
-
88
-
-
10
193
-
-
10
193
-
-
1,130
96
26
1,252
1,260
2,236
1,130
727
124
5,477
111
AFFIN BANK BERHAD
(25046-T)
31 DIRECTORS' REMUNERATION (continued)
A summary of the total remuneration of the Directors, distinguishing between Executive and Non-Executive Directors
The Bank
2009
Executive Directors
Dato' Sri Abdul Hamidy bin Adbul Hafiz
Non-executive Directors
Jen Tan Sri Dato' Seri Ismail
bin Haji Omar (Bersara)
Mr Brian Li Man-Bun (Alternate director
to Mr Aubrey Li Kwok-Sing)
Mr Eric Koh Thong Hau (Alternate director
to Mr Stephen Charles Li)
Datuk Razman Md. Hashim bin Che Din
Md.Hashim (Retired as Director
w.e.f 21 May 2009)
Dato' Dr Lee Chee Kuon (Retired as
Director w.e.f 21 May 2009)
Total
*
Salaries
RM'000
Bonuses
RM'000
Directors'
Fees
RM'000
*Other
emoluments
RM'000
Benefits in-kind
RM'000
Total
RM'000
810
732
90
3,368
-
197
702
78
225
1,175
5,027
1,542
3,458
-
899
303
6,202
-
-
129
116
96
-
28
-
253
116
-
-
107
112
79
-
-
107
112
79
-
-
71
-
-
71
-
-
15
38
-
-
15
38
-
-
49
-
-
49
-
-
57
-
-
57
-
-
773
96
28
897
1,542
3,458
773
995
331
7,099
Executive Director' Other emoluments include allowance and EPF
Annual Report 2010
112
32 ALLOWANCES FOR LOSSES ON LOANS, ADVANCES AND FINANCING
The Group
2010
2009
RM'000
RM'000
Allowance for bad and doubtful debts
on loans and financing:
Specific allowance
- made in the financial year
- written-back
General allowance
- written-back
- written-back
- made/(written-back)
Bad debts and financing
- recovered
- written-off
Litigation losses arising from loans *
*
The Bank
2010
2009
RM'000
RM'000
-
322,570
(46,977)
-
297,631
(45,494)
-
37,182
(47)
-
30,378
-
198,023
(20,669)
-
172,716
(10,778)
-
(3,044)
-
(16,409)
-
(172,726)
15,810
78,000
(137,431)
12,237
-
(172,417)
15,628
78,000
(137,113)
12,137
-
95,394
187,534
66,740
157,539
Litigation losses arising from loans made during the financial year is in relation to litigation claims against the Bank as stated
in Note 43(a) and (b).
113
AFFIN BANK BERHAD
(25046-T)
33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
Related parties that have transactions and their relationship with the Bank are as follows:
Related parties
Relationship
Lembaga Tabung Angkatan Tentera ('LTAT')
Ultimate holding corporate body
AFFIN Holdings Berhad ('AHB')
Holding company
Subsidiaries and associates of LTAT
Subsidiary and associate companies of the ultimate
holding corporate body
Subsidiaries and associates of AHB as disclosed in its
financial statements
Subsidiary and associate companies of the holding company
Subsidiaries of AFFIN Bank Berhad as disclosed in Note 12
Subsidiaries
Joint controlled entity as disclosed in Note 13
Joint controlled entity of subsidiary
Voting shares in body corporate not less than 15% of votes
Other related companies
Key management personnel
The key management personnel of the Bank consist of:
- Chief Executive Officer
- Members of Senior Management team and the
company secretary
Related parties of key management personnel (deemed as
related to the Bank)
- Close family members and dependents of key
management personnel
- Entities that are controlled, jointly controlled or
significantly influenced by, or for which significant
voting power in such entity resides with, directly or
indirectly by key management personnel or its close
family members
Key management personnel includes the directors of the company in office during the year and their remuneration for the financial
year are disclosed in Note 33(b).
(a)
Expenditure
Interest on fixed deposits
Interest on Negotiable Instruments of Deposit
Interest on deposits and placements of banks
Interest on special investment account
Interest on money market deposits
Interest on repurchase agreements
Brokerage fees
Rental
Others
Interest on private debt securities
Interest on advances
Interest on deposits and placements with
banks and other financial institutions
Other income
Income
Group
Related parties balances
135
2,778
613
5,857
135
326
1
613
5,496
-
-
2,331
-
-
-
4,421
-
-
-
Ultimate holding
corporate body
2010
2009
RM'000
RM'000
33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (continued)
16,011
109
10,633
5,269
-
-
-
-
12,265
17
7,447
4,801
-
-
-
-
Holding
company
2010
2009
RM'000
RM'000
23,465
15
671
1,891
526
11,449
2,715
4,766
1,432
27,403
808
5,813
3,149
17,633
25,959
18
729
1,610
467
11,203
1,748
7,019
3,165
23,309
2,360
4,153
3,386
13,410
Other related
companies
2010
2009
RM'000
RM'000
-
-
-
1
-
1
9
5
4
-
-
4
-
4
Companies in
which certain
Directors have
substantial interest
2010
2009
RM'000
RM'000
Annual Report 2010
114
(a)
Amount due to
Demand and fixed deposits
Deposits and placement of banks and
Special investment account
Interest payable
Other payables
Amount due from
Advances
Deposits and placement with banks and
Interest receivable on private debt securities
Intercompany balances
Security deposits
Group
Related parties balances (continued)
154
197,468
439
528,215
200
98
197,314
-
200
98
527,776
-
-
-
Ultimate holding
corporate body
2010
2009
RM'000
RM'000
601,140
300,000
1,035
76
300,029
-
3,674
3,600
74
-
543,588
300,000
315
242
544
242,487
-
3,628
3,600
28
-
-
Holding
company
2010
2009
RM'000
RM'000
510,425
4,157
17,394
153,008
1,807
97
333,962
-
783,038
190,490
1,096
2,745
2,983
66,107
519,617
587,994
44,515
40,337
1,621
86
351,435
150,000
1,021,960
142,777
1,306
1,058
3,180
415,281
458,358
Other related
companies
2010
2009
RM'000
RM'000
6
-
6
-
-
-
-
621
453
138
-
30
-
104
-
104
Companies in
which certain
Directors have
2010
2009
RM'000
RM'000
115
AFFIN BANK BERHAD
(25046-T)
(a)
Expenditure
Interest on short term advances
Interest on fixed deposits
Interest on Negotiable Instruments
of Deposit
Interest on money market deposits
Brokerage fees
Rental
Others
Income
Interest on special investment account
Interest on private debt securities
Interest on advances
Interest on deposits and placements with
banks and other financial institutions
Other income
Bank
2,778
613
5,722
326
613
5,263
-
-
2,331
-
-
4,324
-
-
Ultimate holding
corporate body
2010
2009
RM'000
RM'000
16,011
109
10,633
5,269
-
-
-
12,265
17
7,447
4,801
-
-
-
Holding
company
2010
2009
RM'000
RM'000
476
352
94
7
23
71,466
1,404
63,031
7,031
-
773
333
384
-
34
22
58,344
2,145
51,712
4,487
-
Subsidiaries
2010
2009
RM'000
RM'000
22,343
1,432
1,891
497
11,449
2,410
15
4,649
26,530
808
5,750
3,149
16,823
24,786
3,165
1,610
445
11,203
1,602
17
6,744
22,791
2,360
4,154
3,386
12,891
Other related
companies
2010
2009
RM'000
RM'000
-
-
-
1
-
1
4
4
-
-
4
-
4
Companies in
which certain
Directors have
2010
2009
RM'000
RM'000
Annual Report 2010
116
(a)
154
196,879
439
527,149
200
98
196,725
-
200
98
526,710
-
-
-
Ultimate holding
corporate body
2010
2009
RM'000
RM'000
601,138
300,000
1,035
74
300,029
-
3,674
3,600
74
-
543,588
300,000
315
242
544
242,487
-
3,628
3,600
28
-
-
Holding
company
2010
2009
RM'000
RM'000
49,560
47,954
-
1,606
-
665,101
144,964
5,202
184,738
-
330,197
-
152,560
102,765
3
47,731
-
2,061
-
867,946
457,270
3,390
231,286
-
176,000
-
Subsidiaries
2010
2009
RM'000
RM'000
142,777
1,306
2,878
415,281
444,878
473,957
4,157
153,008
1,776
91
314,925
-
525,181
40,337
1,524
83
333,237
150,000
766,786 1,007,120
190,490
1,096
2,981
66,106
506,113
Other related
companies
2010
2009
RM'000
RM'000
5
-
5
-
-
-
-
168
138
-
30
-
104
-
104
Companies in
which certain
Directors have
2010
2009
RM'000
RM'000
The significant related party transactions and balances described above were carried out on terms and conditions obtainable on transactions with unrelated parties except
for amount due from subsidiaries of RM136.8 million (2009: amount due from subsidiaries of RM183.6 million). Amount due from/(to) subsidiaries are unsecured, interest free
and have no fixed terms of repayment.
Amount due to
Demand and fixed deposits
Deposits and placement of banks and
Interest payable
Other payables
Amount due from
Special investment account
Advances
Interest receivable
Security deposits
Bank
117
AFFIN BANK BERHAD
(25046-T)
Annual Report 2010
118
(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
2010
2009
RM'000
RM'000
Short-term employment benefits
Salaries
Bonuses
Other employee benefits
Benefits-in-kind
The Bank
2010
2009
RM'000
RM'000
6,618
8,695
2,594
1,038
445
6,474
9,257
2,699
1,039
550
5,706
7,683
2,265
890
383
5,694
8,472
2,427
893
463
19,390
20,019
16,927
17,949
Included in the above table are Directors' remuneration as disclosed in Note 31.
34 TAXATION
The Group
2010
2009
RM'000
RM'000
The Bank
2010
2009
RM'000
RM'000
The taxation charge arising in
Malaysia for the financial year
Current tax
Under/(over) provision in prior year
Deferred tax (Note 10)
Tax expense for the year
66,627
19,223
50,191
107,748
(183)
(3,478)
56,599
14,271
57,219
92,183
(508)
(1,776)
136,041
104,087
128,089
89,899
The Group
2010
2009
%
%
The Bank
2010
%
2009
%
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
Others
25.00
25.00
25.00
25.00
1.94
(0.17)
(0.01)
(0.51)
0.99
0.18
(0.12)
(1.10)
2.10
(0.18)
(0.56)
0.29
(0.44)
(1.22)
0.54
3.68
(4.40)
(0.29)
(0.04)
(0.14)
3.01
(2.39)
(0.13)
(0.16)
Average effective tax rate
26.07
24.48
26.98
23.34
Tax savings of the Group during the financial year due to the recognition of previously unrecognised tax losses amounted to
RM62,000 (2009: RM516,000).
119
AFFIN BANK BERHAD
(25046-T)
35 EARNINGS PER SHARE
The basic and fully diluted earnings per ordinary share for the Group and the Bank have been calculated based on the net profit
attributable to equity holders of the Group and the Bank of RM381,237,000 (2009: RM317,752,000) and RM346,705,000 (2009:
RM295,240,000) respectively. The weighted average number of shares in issue during the financial year of 1,439,285,000 (2009:
1,439,285,000) is used for the computation.
36 DIVIDEND PER SHARE
Dividends declared or proposed for the financial year are as follows:
2010
Gross
Amount of
dividend
dividend
per share
net of tax
sen
RM'000
Ordinary shares
Interim dividend paid
Proposed final dividend
Dividends in respect of the financial year
2009
Gross
Amount of
dividend
dividend
per share
net of tax
sen
RM'000
5.28
5.00
57,000
71,964
6.83
5.00
73,727
53,973
10.28
128,964
11.83
127,700
At the forthcoming Annual General Meeting, a final tax exempt dividend in respect of the current financial year of 5 sen per share
amounting to RM71,964,000 will be proposed for shareholder's approval. These financial statements do not reflect this final
dividend which will be accounted for in the shareholder's equity as an appropriation of retained profits in the financial year ending
31 December 2010 when approved by the shareholder.
Dividends recognised as distribution to ordinary equity holders of the Bank:
2010
Gross
Amount of
dividend
dividend
per share
net of tax
sen
RM'000
Ordinary shares
Interim dividend
Final dividend
2009
Gross
Amount of
dividend
dividend
per share
net of tax
sen
RM'000
5.28
5.00
57,000
53,973
6.83
2.00
73,727
21,589
10.28
110,973
8.83
95,316
Direct credit substitutes
Transaction-related contingent items
Short-term self-liquidating
trade-related contingencies
Irrevocable commitments to extend credit:
- maturity less than one year
- maturity more than one year
Foreign exchange related contracts:
- less than one year
- one year to less than five years
Interest rate related contracts:
- more than five years
Unutilised credit card lines
The commitments and contingencies consist of:
36,412
25,842
10,570
9,743
2,664
7,079
46,155
408,608
2,387,456
1,232,752
10,310,068
6,062,519
4,247,549
2,416,479
2,215,359
201,120
1,495,313
93,784
956,256
445,273
594,104
18,844,780
Principal
amount
RM'000
Positive
fair value
of derivative
contracts
RM'000
2,109,313
246,551
70,499
50,821
19,678
71,106
14
32,602
38,490
118,821
408,608
1,193,728
Credit
equivalent
amount*
RM'000
The Group
2010
1,596,123
140,554
28,169
19,952
8,217
16,781
3
7,936
8,842
89,026
299,520
1,022,073
Risk weighted
amount*
RM'000
17,918,128
1,401,193
9,188,099
5,231,059
3,957,040
2,214,845
2,111,158
103,687
1,414,998
385,000
589,721
440,277
555,478
495,326
2,648,189
Principal
amount
RM'000
29,727
21,663
18,440
3,223
8,064
3,981
4,083
-
-
Positive
fair value
of derivative
contracts
RM'000
2,324,802
280,239
56,193
45,883
10,310
57,854
910
18,380
38,564
111,096
495,326
1,324,094
Credit
equivalent
amount*
RM'000
The Group
2009
1,820,017
120,271
24,692
20,345
4,347
14,749
184
6,655
7,910
83,248
470,810
1,106,247
Risk weighted
amount*
RM’000
In the normal course of business, the Group and the Bank make various commitments and incurs certain contingent liabilities with legal recourse to their customers. No material
losses are anticipated as a result of these transactions.
37 COMMITMENTS AND CONTINGENCIES
Annual Report 2010
120
*
36,412
25,842
10,570
9,743
2,664
7,079
46,155
382,080
2,189,031
546,276
9,198,609
5,360,954
3,837,655
2,416,479
2,215,359
201,120
1,495,313
93,784
956,256
445,273
594,104
16,821,892
Positive
fair value
of derivative
contracts
RM'000
1,846,277
109,255
70,499
50,821
19,678
71,106
14
32,602
38,490
118,821
382,080
1,094,516
Credit
equivalent
amount*
RM'000
The Bank
2010
1,451,919
109,027
28,169
19,952
8,217
16,781
3
7,936
8,842
89,026
280,656
928,260
Risk weighted
amount*
RM'000
15,760,619
324,530
8,325,174
4,651,975
3,673,199
2,214,845
2,111,158
103,687
1,414,998
385,000
589,721
440,277
555,478
444,676
2,480,918
Principal
amount
RM'000
29,727
21,663
18,440
3,223
8,064
3,981
4,083
-
-
Positive
fair value
of derivative
contracts
RM'000
1,975,184
64,906
56,193
45,883
10,310
57,854
910
18,380
38,564
111,096
444,676
1,240,459
Credit
equivalent
amount*
RM'000
The Bank
2009
1,647,085
63,881
24,692
20,345
4,347
14,749
184
6,655
7,910
83,248
437,598
1,022,917
Risk weighted
amount*
RM’000
The credit equivalent amount and risk-weighted amount is arrived at using the credit conversion factors as per Bank Negara Malaysia's revised Risk Weighted Capital
Adequacy Framework ("RWCAF") and Capital Adequacy for Islamic Banks ("CAFIB") guidelines.
Direct credit substitutes
Transaction-related contingent items
Short-term self-liquidating
trade-related contingencies
Irrevocable commitments to extend credit:
- maturity less than one year
- maturity more than one year
Interest rate related contracts:
- more than five years
Principal
amount
RM'000
37 COMMITMENTS AND CONTINGENCIES (continued)
121
AFFIN BANK BERHAD
(25046-T)
Annual Report 2010
122
37 COMMITMENTS AND CONTINGENCIES (continued)
FINANCIAL DERIVATIVES
Financial derivatives are financial instruments whose characteristics are derived from the underlying assets, or from interest and
exchange rates or indices. These include forwards, swaps, futures and options. The following outlines the nature and terms of the
most common types of derivatives used by the Bank:
Exchange rate contracts
Forward foreign exchange contracts are agreements to buy or sell fixed amounts of currency at agreed rates of exchange on a
specified future date.
Cross currency swaps are agreements to exchange, and on termination of the swap, re-exchange principal amounts denominated
in different currencies. Cross currency swaps may involve the exchange of interest payments in one specified currency for interest
payments in another specified currency for a specified period.
Currency futures are typically exchange-traded agreements to buy or sell standard amounts of a specified currency at an agreed
exchange rate on a standard future date.
Currency options give the buyer on payment of a premium, the right, but not the obligation, to buy or sell specified amounts of
currency at agreed rates of exchange on or before a specified future date.
Interest rate contracts
Interest rate swaps involve the exchange of interest obligations with counterparties for a specified period without exchanging the
underlying (or notional principal).
Interest rate caps and floors give the buyer the ability to fix the maximum or minimum rate of interest. There is no facility to deposit
of draw down funds; instead the writer pays to the buyer the amount by which the market rate exceeds or is less than the cap
rate or the floor rate respectively. A combination of an interest rate cap and floor is known as an interest rate collar.
Forward rate agreements give the buyer the ability to determine the underlying rate of interest for a specified period commencing
on a specified future date (the settlement date). There is no exchange of principal and settlement is effected on the settlement date.
The settlement amount is calculated by reference to the difference between the contracted rate and the market rate prevailing on
the settlement date.
Swaptions give the buyer the right, but not the obligation, to enter an interest rate swap as either the payer or receiver of the fixed
side of the swap.
The table below analyses the contractual or underlying principal amounts of derivative financial instruments held or issued. In
addition, they also set out the corresponding gross positive credit equivalent of the derivative financial instruments.
2010
Credit
Principal
equivalent
amount
amount
RM’000
RM'000
2009
Credit
Principal
equivalent
amount
amount
RM’000
RM'000
Foreign exchange contracts
Forward contracts
Swaps
728,471
1,688,004
15,115
55,384
704,000
1,510,845
12,554
43,639
Swaps
1,495,313
71,106
1,414,998
57,854
Foreign exchange related contracts and interest rate related contracts are subject to market risk and credit risk.
123
AFFIN BANK BERHAD
(25046-T)
38 FINANCIAL RISK MANAGEMENT
(i)
Credit Risk
Credit risk is the potential financial loss resulting from the failure of the customer or counterparty to settle the financial and
contractual obligations to the Bank. Credit risk emanates mainly from loans, advances and financing, loan commitments
arising from such lending activities, as well as through financial transactions with counterparties including interbank money
market activities, derivative instruments used for hedging and debt securities.
The management of credit in the Bank is governed by a set of credit policies approved by the Board of Directors. Approval
authorities are delegated to Senior Management and Group Management Loan Committee ('GMLC') to implement the credit
policies and ensure sound credit granting standards.
An independent Group Risk Management ('GRM') function with a direct reporting line to Board Risk Management Committee
('BRMC') is in place to ensure adherence to risk standards and discipline. Portfolio management risk reports are submitted
regularly to BRMC.
Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit Plan. New businesses are
governed by the risk acceptance criteria and customer qualifying criteria/fitness standards prescribed in the Credit Plan. The
Credit Plan is reviewed at least annually and approved by the BRMC.
Credit Risk measurement
Credit evaluation is the process of analysing the creditworthiness of the prospective customer against the Bank’s underwriting
criteria and the ability of the Bank to make a return commensurate to the level of risk undertaken. A critical element in the
evaluation process is the assignment of a credit risk grade to the counterparty. This assists in the risk assessment and decision
making process. The Bank has developed internal rating models to support the assessment and quantification of credit risk.
For consumer mass market products, statistically developed application scorecards are used by the Business to assess the
risks associated with the credit application. The scorecards are used as a decision support tool at loan origination.
Over-the-Counter ('OTC') Derivatives
The OTC Derivatives credit exposure is computed using the Current Exposure Method. Under the Current Exposure method,
computation of credit equivalent exposure for interest rate and exchange rate related contracts is derived from the summation
of the two elements; the replacement costs (obtained by marking-to-market) of all contracts and the potential future exposure
of outstanding contracts (Add On charges depending on the specific remaining tenor to maturity).
Risk limit control and mitigation policies
The Bank employs various policies and practices to control and mitigate credit risk.
Lending limits
The Bank establishes internal limits and related lending guidelines to manage large exposures and avoid undue concentration
of credit risk in its credit portfolio. The limits include single customer groupings, connected parties, and geographical and
industry segments. These risks are monitored regularly and the limits reviewed annually or sooner depending on changing
market and economic conditions.
The credit risk exposure for derivative and loan books is managed as part of the overall lending limits with customers together
with potential exposure from market movements.
Annual Report 2010
124
38 FINANCIAL RISK MANAGEMENT (continued)
(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 equities.
Financing covenants (for credit related commitments and loans books)
The primary purpose of these instruments is to ensure that funds are available to a customer when required. Guarantees and
standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit are collaterised by
the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan.
Commitment to extend credit represents unutilised portion of approved credit in the form of loans, guarantees or letters of
credit. In terms of credit risk, the Bank is potentially exposed to loss in an amount equal to the total unutilised commitments.
However, the potential amount of loss is less than the total unutilised commitments, as most commitments to extend credit
are contingent upon customers maintaining specific minimum credit standards.
The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater
degree of credit risk than short-term commitments.
Credit Risk monitoring
Retail credits are actively monitored and managed on a portfolio basis by product type. A new collection management system
has been implemented with a dedicated team in place to promptly identify, monitor and manage delinquent accounts at early
stages of delinquency.
Corporate credits and large individual accounts are reviewed by the Business Units at least once a year against updated
information. This is to ensure that the credit grades remain appropriate and detect any signs of weaknesses or deterioration
in the credit quality. Remedial action is taken where evidence of deterioration exists.
Early Alert Process is in place as part of a means to pro-actively identify, report and manage deteriorating credit quality.
Watchlist accounts are closely reviewed and monitored with corrective measures initiated to prevent them from turning
impaired. As a rule, Watchlist accounts are either worked up or worked out within a period of twelve months.
Credit Risk culture
The Bank recognises that learning is a continuous journey and is committed to enhance the knowledge and required skills
set of its staff. It places strong emphasis in creating and enhancing risk awareness in the organisation.
For effective and efficient staff learning, the Bank has implemented an E–Learning Program with an online Learning
Management System ('LMS'). The LMS provides staff with a progressive self-learning alternative at own pace.
Group Risk Management commenced an Internal Credit Certification ('ICC') Programme for both Business Banking and
Consumer Credit in July 2009 and August 2009 respectively. In October 2010, the Bank introduced ICC-Market Risk with the
Diagnostic Assessment conducted through the LMS.
The aim of the ICCs is to assist the core credit related group of personnel in the Bank achieve a minimum level of knowledge
and analytical skills required to make sound corporate and commercial loans to customers. It is envisaged that the core credit
related group of personnel would all be certified within 2 to 3 years.
125
AFFIN BANK BERHAD
(25046-T)
(i)
Maximum exposure to credit risk
The following table presents the Group and the Bank’s maximum exposure to credit risk of on-balance sheet and off-balance
sheet financial instruments, without taking into account of any collateral held or other credit enhancements. For on-balance
sheet assets, the exposure to credit risk equals their carrying amount. For contingent liabilities, the maximum exposure to credit
risk is the maximum amount that the Group and the Bank would have to pay if the obligations of the instruments issued are
called upon. For credit commitments, the maximum exposure to credit risk is the full amount of the undrawn credit facilities
granted to customers.
The Group
The Bank
Maximum exposure
2010
2010
RM'000
RM'000
Credit risk exposures of on-balance sheet assets:
Cash and short-term funds (exclude cash in hand)
Deposits and placements with banks and other financial institutions
Financial investments available-for-sale (exclude equity securities)
Other assets
Credit risk exposure of off-balance sheet items:
Financial guarantees
Loan commitments and other credit related commitments
Total maximum credit risk exposure
8,523,985
192,335
149,853
5,659,343
431,159
26,370,548
68,348
46,155
5,996,729
559,533
149,853
4,325,332
431,159
22,762,471
56,421
46,155
41,441,726
34,327,653
1,602,338
506,976
1,476,596
369,681
2,109,314
1,846,277
43,551,040
36,173,930
Cash and short-tem funds
Substantially all balances are held with BNM. There is limited credit risk in relation to balances at BNM.
Other assets
There is limited credit risk in relation to items in the course of collection through the clearing system from other banks.
Off-balance sheet
The Group and the Bank apply fundamentally the same risk management policies for off-balance sheet risks as it does for its
on-balance sheet risks. In the case of commitments to lend, customers and counterparties will be subject to the same credit
management policies as for loans, advances and financing. Collateral may be sought depending on the strength of the
counterparty and the nature of the transaction.
(i)
192,335
-
-
8,523,985
192,335
-
247,088
8,276,897
149,853
-
149,853
-
Financial
assets
heldfortrading
RM'000
5,659,343
-
20,268
92,741
29,921
2,157,267
3,359,146
Financial
Investments
availablefor-sale
RM'000
431,159
24,037
330
156,498
207,108
27,000
16,186
Financial
Investments
held-tomaturity
RM'000
Risk concentrations for commitments and contingencies are based on the credit equivalent balances in Note 37.
* Not inclusive of collective allowance amounting to RM396 million.
Total assets
Agriculture
Manufacturing
Electricity, gas and water
Construction
Real estate
Government and government agencies
Wholesale & retail trade and restaurants
& hotels
Others
The Group
2010
Cash and
short-term
funds
RM'000
Deposits and
placements
with banks
and other
financial
institutions
RM'000
26,370,548*
1,198,629
12,443,544
476,425
373,899
1,743,308
192,953
2,274,981
2,323,155
921,590
4,346,670
75,394
Loans,
advances and
financing
RM'000
The credit risk concentrations of the Group and the Bank, by industry concentration, are set out in the following tables:
68,348
8,603
1,279
993
301
25,815
31,357
On
balance
sheet
total
RM'000
46,155 41,441,726
- 1,222,666
- 12,452,477
476,425
373,899
- 1,921,353
286,687
- 2,482,089
- 2,323,155
951,812
46,155 7,192,183
- 11,758,980
Derivative
Other financial
assets
assets
RM'000
RM'000
2,109,313
140,172
486,808
31,535
1,053
207,361
57
652,610
185,829
26,231
241,832
135,825
Commitments
and
contingencies
RM'000
Credit risk is the risk of financial loss from the failure of customers to meet their obligations. Exposure to credit risk is managed through portfolio management. The credit
portfolio's risk profiles and exposures are reviewed and monitored regularly to ensure that an acceptable level of risk diversification is maintained. Exposure to credit risk is
also managed in part by obtaining collateral security and corporate and personal guarantees.
Credit risk concentrations
Annual Report 2010
126
(i)
-
5,623,891
142,777
142,777
409,900
6,033,791
-
-
Deposits and
placements
with banks
and other
financial
institutions
RM'000
150,000
-
-
150,000
-
Financial
assets
heldfortrading
RM'000
5,608,776
30,083
-
3,299,875
2,159,402
4,977
49,922
35,804
28,713
-
Financial
Investments
availablefor-sale
RM'000
456,193
27,937
330
27,124
37,000
150,113
213,689
-
Financial
Investments
held-tomaturity
RM'000
* Not inclusive of general allowance amounting to RM298 million.
Total assets
Agriculture
Manufacturing
Construction
Real estate
Finance, insurance and business
services
Government and government
agencies
& hotels
Others
The Group
2009
Cash and
short-term
funds
RM'000
Credit risk concentrations (continued)
164
166,505
26,801
28,642
22
474
415
323
-
9,070,952
6,252,969
531,896
254,488
1,860,015
190,928
2,560,021
1,444,967
924,177
On
balance
sheet
total
RM'000
29,727 34,968,981
- 1,219,272
- 10,659,296
-
29,727
-
Derivative
Other
financial
assets
assets
RM'000
RM'000
22,324,371* 223,346
1,161,088
10,492,461
93,261
3,295,521
526,897
254,488
1,659,506
154,709
2,317,296
1,444,967
924,177
Loans,
advances and
financing
RM'000
2,324,801
84,394
767,296
15,719
388,271
3,580
19,107
205,868
563
709,607
95,128
35,268
Commitments
and
contingencies
RM'000
127
AFFIN BANK BERHAD
(25046-T)
(i)
-
5,674,968
559,533
559,533
321,761
5,996,729
-
-
Deposits and
placements
with banks
and other
financial
institutions
RM'000
149,853
-
-
149,853
-
Financial
assets
heldfortrading
RM'000
4,325,332
-
2,411,879
1,795,453
20,268
92,741
4,991
Financial
Investments
availablefor-sale
RM'000
431,159
24,037
330
16,186
27,000
156,498
207,108
-
Financial
Investments
held-tomaturity
RM'000
* Not inclusive of collective allowance amounting to RM343 million.
Total assets
Agriculture
Manufacturing
Construction
Real estate
services
agencies
& hotels
Others
The Bank
2010
Cash and
short-term
funds
RM'000
22,762,471*
1,150,259
10,055,570
75,394
3,759,208
379,421
373,664
1,620,577
192,089
1,962,667
2,278,476
915,146
Loans,
advances and
financing
RM'000
56,421
7,384
19,379
27,315
1,279
993
71
8,197,806
6,686,278
379,421
373,664
1,798,622
285,823
2,169,775
2,278,476
920,208
On
balance
sheet
total
RM'000
46,155 34,327,653
- 1,174,296
- 10,063,284
-
46,155
-
Derivative
Other financial
assets
assets
RM'000
RM'000
1,846,277
136,037
483,002
3,859
209,594
6,267
1,032
203,874
57
590,495
185,829
26,231
Commitments
and
contingencies
RM'000
Annual Report 2010
128
(i)
-
3,670,807
623,271
623,271
407,040
4,077,847
-
-
Deposits and
placements
with banks
and other
financial
institutions
RM'000
150,000
-
-
150,000
-
Financial
assets
heldfortrading
RM'000
4,224,874
-
2,369,539
1,785,812
15,150
35,804
18,569
-
Financial
Investments
availablefor-sale
RM'000
456,193
27,937
330
27,124
37,000
150,113
213,689
-
Financial
Investments
held-tomaturity
RM'000
* Not inclusive of general allowance amounting to RM260 million.
Total assets
Agriculture
Manufacturing
Construction
Real estate
services
agencies
& hotels
Others
The Bank
2009
Cash and
short-term
funds
RM'000
142,351
20,536
29,601
124
415
-
1,113,857
8,835,116
6,172,326
6,076,419
409,266
254,289
1,721,416
190,656
2,080,294
1,403,442
897,454
On
balance
sheet
total
RM'000
29,727 29,154,535
-
-
29,727
-
Derivative
Other
financial
assets
assets
RM'000
RM'000
19,399,596* 193,027
1,085,920
8,692,435
84,320
3,013,968
409,266
254,289
1,556,029
154,437
1,848,036
1,403,442
897,454
Loans,
advances and
financing
RM'000
1,976,184
74,009
560,098
22
346,631
681
19,086
204,140
563
641,304
95,128
34,522
Commitments
and
contingencies
RM'000
129
AFFIN BANK BERHAD
(25046-T)
Annual Report 2010
130
(i)
Collaterals
The main types of collateral obtained by the Group and the Bank are as follows:
-
for personal housing loans, mortgages over residential properties;
for commercial property loans, charges over the properties being financed;
for hire purchase, charges over the vehicles or plant and machineries financed; and
for other loans, charges over business assets such as premises, inventories, trade receivables or deposits.
Total loans, advances and financing - credit quality
All loans, advances and financing are categorised into “neither past due nor impaired”, “past due but not impaired” and
“impaired”. Past due loans refer to loans that are overdue by one day or more. Impaired loans are loans with months-inarrears more than 90 days or with impairment allowances.
Distribution of loans, advances and financing by credit quality
The Group
2010
RM'000
The Bank
2010
RM'000
Neither past due nor impaired (a)
Past due but not impaired (b)
Impaired (c)
22,362,063
3,213,211
971,123
19,340,931
2,742,727
818,522
Gross loans, advances and financing
less: Allowance for impairment
- Individual
- Collective
26,546,397
22,902,180
(175,849)
(395,701)
(139,709)
(343,220)
Net loans, advances and financing
25,974,847
22,419,251
Past due but not impaired includes accounts within grace period amounting to RM1.2 billion (The Group) and RM1.1 billion
(The Bank).
(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
2010
RM'000
The Bank
2010
RM'000
18,598,272
3,763,791
15,964,665
3,376,266
22,362,063
19,340,931
Quality classification
Satisfactory
Special mention
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.
131
AFFIN BANK BERHAD
(25046-T)
(i)
(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:
Past due up to 30 days
Past due 30-60 days
Past due 60-90 days
The Group
2010
RM'000
The Bank
2010
RM'000
1,730,084
996,340
486,787
1,542,944
849,976
349,807
3,213,211
2,742,727
The Group and the Bank do not disclose the fair value of collateral held as security on assets past due but not impaired
as it is not practicable to do so.
(c)
Loans impaired
The Group
2010
RM'000
The Bank
2010
RM'000
Gross amount
971,123
818,522
Individually impaired loans
439,997
329,510
1,250,955
1,178,242
Analysis of individually impaired assets
Fair value of collateral
Collateral and other credit enhancements obtained
During the year, the Bank obtained assets by taking possession of collateral held as security or calling upon other credit
enhancements as follows:
The Group
The Bank
2010
2010
RM'000
RM'000
Carrying amount
Nature of assets
Vacant Industrial Land
1,370
1,370
1,370
1,370
Foreclosed properties are sold as soon as practicable, with the proceeds used to reduce the outstanding indebtedness. The
carrying amount of foreclosed properties held by the Group and the Bank as at reporting date has been classified as Other
assets as disclosed in Note 8.
Annual Report 2010
132
(i)
Renegotiated financial assets
Restructuring activities include extended payment arrangements, approved external management plans, modification and
deferral of payments. Restructuring policies and practices are based on indicators or criteria that, in the judgement of
management indicate that payment will most likely continue. These policies are kept under continous review. Restructuring
is most commonly applied to term loans - in particular, customer finance loans.
The Group
2010
RM'000
The Bank
2010
RM'000
14,869
487,387
14,412
420,954
502,256
435,366
Renegotiated loans, advances and financing
Continuing to be impaired after restructuring
Non-impaired after restructuring-would otherwise have been impaired
Private debt securities, treasury bills and derivatives
Private debt securities, treasury bills and other eligible bills included in financial assets held-for-trading and financial
investments available-for-sale are measured on a fair value basis. The fair value will reflect the credit risk of the issuer.
Most listed and some unlisted securities are rated by external rating agencies. The Group and the Bank mainly uses external
credit ratings provided by RAM, MARC, Standard & Poors' or Moody's.
The table below presents an analysis of debt securities, treasury bills and other eligible bills by rating agency :
The Group
2010
AAA
RM'000
AA- to AA+
RM'000
A- to A+ Lower than ARM'000
RM'000
Unrate
RM'000
Total
RM'000
Financial asset held-for-trading
712,749
-
233,762
-
455,613
149,853
149,853
133,094 4,230,835 5,766,053
27,000
404,159
431,159
712,749
233,762
455,613
160,094 4,784,847 6,347,065
393,841
-
220,031
-
455,613
-
149,853
149,853
92,240 3,266,535 4,428,260
27,000
404,159
431,159
393,841
220,031
455,613
119,240 3,820,547 5,009,272
The Bank
2010
Financial asset held-for-trading
Included in the above, there are impaired financial investments available-for-sale with a carrying value for the Group and the
Bank of RM40,005 (2009: RM69,698) and RM33,260 (2009: RM62,953) respectively and financial investments held-tomaturity for the Group and the Bank of RM87,752 (2009: RM89,957) and RM87,584 (2009: RM89,789) respectively.
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.
133
AFFIN BANK BERHAD
(25046-T)
(ii)
Market risk
Market risk is defined as the risk of losses to the Bank’s portfolio positions arising from movements in market prices. The
Bank’s market risk management objective is to ensure that market risk is appropriately identified, measured, controlled,
managed and reported.
The Bank’s exposure to market risk stems primarily from interest rate risk and foreign exchange rate risk. Interest rate risk
arises mainly from differences in timing between the maturities or repricing of assets, liabilities and derivatives. The Bank is
also exposed to basis risk when there is a mismatch between the change in price of a hedge and the change in price of the
assets it hedges. Foreign exchange rate risk arises from unhedged positions of customers' requirements and proprietary
positions.
Market risk is primarily controlled through the imposition of Cut-loss, Value-at-Risk (VaR) and Net Open Position Limits which
are approved by both the Asset Liability Management Committee ('ALCO') and Board Risk Management Committee (‘BRMC’)
in accordance with the Bank's risk appetite. These limits are set and reviewed regularly according to a number of factors,
including liquidity and the Bank's business strategy. In addition, the Bank conducts periodic stress test of its respective
portfolios to ascertain the market risk under abnormal market conditions. For the asset liability mismatch position in the
statement of financial position, the risk is measured using Net Interest Income simulations based on projected interest rate
scenarios managed through limits set over time buckets together with an Overall Risk Tolerance Limit.
The Bank's Management, ALCO and BRMC are regularly kept informed of its risk profile and positions.
Value at risk ('VaR')
Value-at-Risk ('VaR') is used to compute the maximum potential loss amount over a specified holding period of a trading
portfolio. It measures the risk of losses arising from potential adverse movements in interest rates and foreign exchange rates
that could affect values of financial instruments.
The Variance-Covariance Parametric methodology is adopted to compute the potential loss amount. This is a statistically
defined, probability-based approach that uses volatilities and correlations to quantify price risks. Under this methodology, a
matrix of historical volatilities and correlations is computed from the past 100 business days’ market data. VaR is then
computed by applying these volatilities and correlations to the outstanding trading portfolio valued at current price levels.
The table below sets out a summary of the Bank’s VaR profile by financial instrument types for the trading portfolio:
The Group
2010
Instruments
FX swap
Government securities
Balance
RM'000
Average
for the year
RM'000
Minimum
RM'000
Maximum
RM'000
201
-
241
1
1
134
-
437
11
18
201
-
241
1
1
134
-
437
11
18
The Bank
2010
Instruments
FX swap
Government securities
Annual Report 2010
134
(ii)
Market risk (continued)
Other Risk Measures
•
Mark-to-market
Mark-to-Market valuation tracks the current market value of the outstanding financial instruments.
•
Stress testing
Stress tests are conducted to attempt to quantify market risk arising from low probability, abnormal market movements.
The stress test measure the change in value arising from range of extreme movements in the interest rates and foreign
exchange rates based on past experience and simulated stress scenarios.
•
Sensitivity/Dollar Duration
Sensitivity/Dollar Duration is an additional measure of interest rate risk that is computed on a daily basis. It measures the
change in value of a portfolio resulting from a 0.01% increase in interest rates. This measure identifies the Bank’s interest
rate exposures that are most vulnerable to interest rate changes and it facilitates the implementation of hedging strategies.
Net interest income sensitivity
The table below shows the pre-tax net interest income sensitivity for the non-trading financial assets and financial liabilities
held at 31 December 2010. The sensitivity has been measured using the Repricing Gap Simulation methodology based on
parallel shifts in the interest rate.
The Group
2010
Impact on net interest income
As percentage of net interest income
+100
basis point
RM million
-100
basis point
RM million
(25.7)
-2.8%
25.7
2.8%
(21.2)
-2.8%
21.2
2.8%
The Bank
2010
Impact on net interest income
As percentage of net interest income
135
AFFIN BANK BERHAD
(25046-T)
(ii)
Foreign exchange risk sensitivity analysis
Open position
The Group
2010
US
Dollar
equivalent
amount
'000
Ringgit
Malaysia
equivalent
amount
'000
Ringgit
Malaysia
equivalent
amount for
1% fall in
US Dollar
'000
(4,453)
(1,290)
(13,730)
(3,977)
(13,592)
(3,936)
(137)
(39)
(5,944)
(984)
(18,329)
(3,034)
(18,145)
(3,003)
(183)
(30)
US Dollar
Others
Impact of
1% fall in
US
Dollar
exchange
rate
'000
The Bank
2010
US Dollar
Others
The impact on the outstanding foreign exchange position as at 31 December 2010 for a one percent change in USD
exchange rate from 3.0835 to 3.0527 was a decrease of about RM176,000 (The Group) and RM213,000 (The Bank).
Foreign exchange risk
The Bank takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial
position and cash flows. The Board sets limits on the level of exposure by currency and in aggragate for both overnight and
intra-day positions, which are monitored daily. The table summarises the Bank's exposure to foreign currency exchange rate
risk at 31 December 2010. Included in the table are the Bank's financial instruments at carrying amounts, categorised by
currency.
The Group
2010
Assets
Deposits and placements with banks
Loan, advances and financing
Other assets
Total financial assets
Euro
RM'000
United
States
Dollar
RM'000
Australian
Dollar
RM'000
Great
Britain
Pound
RM'000
Others
RM'000
Total
RM'000
3,205
163,867
2,049
2,058
36,513
207,692
271
-
147,057
191,793
748,162
4,174
15,680
39,548
376
46,067
113
846
29,597
59,367
1,503
1,986
192,334
336,775
750,049
7,382
3,476
1,255,053
57,653
49,084
128,966 1,494,232
Annual Report 2010
136
(ii)
Foreign exchange risk (continued)
The Group
2010
Liabilities
Other liabilities
Total financial liabilities
Net on-balance sheet financial position
Off balance sheet credit commitments
The Bank
2010
Assets
Loan, advances and financing
Other assets
Total financial assets
Liabilities
Other liabilities
Total financial liabilities
Net on-balance sheet financial position
Euro
RM'000
United
States
Dollar
RM'000
Australian
Dollar
RM'000
Great
Britain
Pound
RM'000
Others
RM'000
Total
RM'000
7,660
208,366
9,941
8,487
29,784
264,238
-
505,694
12,436
4,157
173
3,411
431
509,851
16,451
7,660
726,496
14,271
11,898
30,215
790,540
(4,184)
1,093,230
528,557
2,051,238
43,382
25,235
37,186
65,866
Euro
RM'000
United
States
Dollar
RM'000
Australian
Dollar
RM'000
Great
Britain
Pound
RM'000
Others
RM'000
Total
RM'000
2,988
239,581
1,765
1,899
36,132
282,365
271
-
184,059
180,852
590,207
4,014
15,680
39,548
376
46,067
113
846
29,597
59,367
1,503
1,986
229,336
325,834
592,094
7,222
3,259
1,198,713
57,369
48,925
7,564
208,306
9,941
8,484
29,784
264,079
-
505,694
12,412
4,157
173
3,411
431
509,851
16,427
7,564
726,412
14,271
11,895
30,215
790,357
(4,305)
1,093,230
472,301
2,051,238
43,098
25,235
37,030
65,866
98,751
703,692
396,827 3,632,396
128,585 1,436,851
98,370
646,494
396,827 3,632,396
(ii)
132,468
930,603
207,108
1,031,672
-
29,597
395,268
24,037
12,062,771
20,968,706
Total assets
7,527,074
-
3,260,546
113,955
-
>1-5
years
RM'000
3,167,757 10,901,575
2,466,714
-
30,270
670,773
-
-
>3-12
months
RM'000
2,889,197
2,487,043
-
402,154
-
-
Over 5
years
RM'000
1,675,239
(395,701)*
795,274#
873,956
36,412
106,709
86,059
172,530
159,596
9,743
149,853
-
-
Trading
book
RM'000
42,063,921
25,179,573
795,274
873,956
46,155
192,335
149,853
5,766,053
431,159
8,629,563
4.94
2.62
2.81
3.67
4.95
2.76
Effective
interest
Total
rate
RM'000
%
*
The negative balance represents collective allowance for loans, advances and financing
# Net of individual allowance.
(1) Others include property and equipment, intangible assets, statutory deposits with Bank Negara Malaysia, tax recoverable, deferred tax assets, subsidiaries, other assets,
investment in jointly controlled entity and amount due from jointly controlled entity.
2,301,851
-
8,457,033
>1-3
months
RM'000
Assets
Financial investment held-to-maturity
- non-impaired
- impaired
Others (1)
The Group
2010
Up to 1
month
RM'000
Non
interest/
profit
sensitive
RM'000
Non-trading book
The following table represents the Group’s and the Bank’s assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates as at
31 December 2010.
Sensitivity to interest rates arises from mismatches in the interest rate characteristics of the assets and their corresponding liability funding. One of the major causes of these
mismatches is timing differences in the repricing of the assets and liabilities. These mismatches are actively managed as part of the overall interest rate risk management process
which is conducted in accordance with Group policy guidelines.
Interest/profit rate risk
137
AFFIN BANK BERHAD
(25046-T)
(ii)
3,437,614
-
3,099,548
300,000
-
-
2,338,039
Total interest sensitivity gap
401,535
-
401,535
286,370
-
68,186
-
46,979
>1-5
years
RM'000
(8,552,300) (2,041,298)
9,795,582
(9,007,605) (2,036,105) 10,500,040
455,305
(5,193)
(704,458)
5,203,862
-
5,203,862
-
-
5,203,862
>3-12
months
RM'000
2,843,906
2,889,197
(45,291)
-
-
-
-
-
-
Over 5
years
RM'000
(4,526,077)
(4,526,077)
-
6,201,316
3,313,004
2,888,312
546,230
40,112
110,161
2,191,809
Non
interest/
profit
sensitive
RM'000
Non-trading book
(2) Other liabilities include provision for taxation, deferred tax liabilities and other liabilities.
(3) The off-balance sheet gap represents the net notional amounts of all interest rate sensitive derivative financial instruments.
2,038,402
299,637
18,930,304 11,309,456
-
18,930,304 11,309,456
7,871,842
>1-3
months
RM'000
15,530,756
Up to 1
month
RM'000
On-balance sheet interest sensitivity gap
Off-balance sheet interest sensitivity gap (3)
Total liabilities and equity
Equity
Total liabilities
Liabilities
Recourse obligation on loans sold
to Cagamas Berhad
Other liabilities (2)
The Group
2010
Interest/profit rate risk (continued)
142,148
142,148
-
17,448
-
17,448
17,448
-
-
Trading
book
RM'000
42,063,921
3,313,004
38,750,917
286,370
300,000
546,230
57,560
6,605,348
110,161
30,845,248
5.00
3.52
2.86
2.99
Effective
interest
Total
rate
RM'000
%
Annual Report 2010
138
(ii)
72,259
489,648
2,461,621
-
8,563
877,180
236,035
11,322,040
18,438,181
Total assets
3,872,169
2,219,502
-
61,955
1,564,182
26,530
-
>3-12
months
RM'000
6,254,528
4,242,502
-
1,968,840
43,186
-
>1-5
years
RM'000
2,256,792
1,566,346
-
690,446
-
-
Over 5
years
RM'000
1,595,376
(335,067)*
512,360#
1,045,095
21,664
37,075
175,723
138,526
Non
interest/
profit
sensitive
RM'000
Non-trading book
158,063
8,063
150,000
-
-
Trading
book
RM'000
35,598,637
21,476,944
512,360
1,045,095
29,727
142,777
150,000
5,627,371
481,474
6,132,889
Total
RM'000
4.71
1.27
2.18
3.41
4.73
1.96
Effective
interest
rate
%
*
The negative balance represents general allowance for loans, advances and financing
# Net of specific allowance.
(1) Others include property and equipment, intangible assets, statutory deposits with Bank Negara Malaysia, tax recoverable, deferred tax assets, subsidiaries and other assets
3,023,528
-
>1-3
months
RM'000
5,994,363
Up to 1
month
RM'000
Assets
- performing
- non-performing
Others (1)
The Group
2009
139
AFFIN BANK BERHAD
(25046-T)
(ii)
-
300,000
-
7,298,464
6,001,373
-
(6,697,422) (2,468,928)
(6,896,958) (2,129,204)
199,536
(339,724)
9,920,486
-
6,001,373
-
421,702
-
5,579,671
>3-12
months
RM'000
5,564,879
5,857,985
(293,106)
396,543
-
396,543
297,216
-
-
99,327
>1-5
years
RM'000
2,161,008
2,256,792
(95,784)
-
-
-
-
-
-
Over 5
years
RM'000
(5,989,118)
(5,989,118)
-
7,584,494
2,967,018
4,617,476
434,472
14,738
94,265
4,074,001
Non
interest/
profit
sensitive
RM'000
Non-trading book
(2) Other liabilities include provision for taxation deferred tax liabilities and other liabilities.
6,769,386
529,078
11,668,795
-
9,920,486
2,575,982
-
2,025,979
-
11,668,795
7,344,504
>1-3
months
RM'000
9,342,816
Up to 1
month
RM'000
Equity
Total liabilities
Liabilities
to Cagamas Berhad
The Group
2009
131,117
131,117
-
26,946
-
26,946
26,946
-
-
Trading
book
RM'000
35,598,637
2,967,018
32,631,619
297,216
300,000
434,472
41,684
5,023,663
94,265
26,440,319
Total
RM'000
5.00
2.90
2.09
2.28
Effective
interest
rate
%
Annual Report 2010
140
(ii)
462,664
734,627
207,108
914,913
-
29,597
333,650
24,037
10,293,638
183,541
16,797,613
Total assets
2,864,508
2,136,368
-
67,272
660,868
-
-
>3-12
months
RM'000
9,076,119
6,715,183
-
2,246,981
113,955
-
>1-5
years
RM'000
2,372,762
2,023,556
-
349,206
-
-
Over 5
years
RM'000
1,863,757
(343,220)*
678,813#
1,131,878
36,412
1,730
102,928
86,059
169,157
Non
interest/
profit
sensitive
RM'000
Non-trading book
159,596
9,743
-
149,853
-
-
Trading
book
RM'000
35,453,667
21,740,438
678,813
1,131,878
46,155
185,271
559,533
149,853
4,428,260
431,159
6,102,307
2.62
4.95
2.76
2.81
3.74
4.95
2.70
Effective
interest
Total
rate
RM'000
%
*
The negative balance represents collective allowance for loans, advances and financing
# Net of individual allowance.
(1) Others include property and equipment, intangible assets, statutory deposits with Bank Negara Malaysia, tax recoverable, deferred tax assets, subsidiaries, other assets,
investment in jointly controlled entity and amount due from jointly controlled entity.
2,319,312
-
>1-3
months
RM'000
5,933,150
Up to 1
month
RM'000
Assets
- non-impaired
- impaired
Others (1)
The Bank
2010
141
AFFIN BANK BERHAD
(25046-T)
(ii)
-
300,000
-
2,170,111
4,445,106
-
(6,966,951) (1,585,791)
(7,422,256) (1,580,598)
455,305
(5,193)
9,741,568
-
4,445,106
-
68,186
-
4,376,920
>3-12
months
RM'000
8,042,537
8,746,995
(704,458)
329,124
-
329,124
286,370
-
-
42,754
>1-5
years
RM'000
2,327,471
2,372,762
(45,291)
-
-
-
-
-
-
Over 5
years
RM'000
(4,146,973)
(4,146,973)
-
6,010,730
3,112,800
2,897,930
489,554
57,560
47,926
110,161
2,192,729
Non
interest/
profit
sensitive
RM'000
Non-trading book
(2) Other liabilities include other liabilities.
1,870,474
299,637
14,927,139
-
9,741,568
3,187,614
-
2,479,622
-
14,927,139
6,553,954
>1-3
months
RM'000
12,147,517
Up to 1
month
RM'000
Equity
Total liabilities
Liabilities
to Cagamas Berhad
The Bank
2010
159,596
159,596
-
-
-
-
-
-
-
Trading
book
RM'000
35,453,667
3,112,800
32,340,867
286,370
300,000
489,554
57,560
47,926
5,735,422
110,161
25,313,874
5.00
3.52
2.86
3.02
Effective
interest
Total
rate
RM'000
%
Annual Report 2010
142
(ii)
526,136
333,128
2,255,261
-
8,563
621,336
236,035
10,202,241
229,364
15,339,902
Total assets
3,319,692
1,903,848
-
88,572
1,300,742
26,530
-
>3-12
months
RM'000
4,862,052
3,489,151
-
1,329,715
43,186
-
>1-5
years
RM'000
1,704,857
1,083,386
-
621,471
-
-
Over 5
years
RM'000
1,834,025
(291,000)*
465,708#
1,292,624
21,664
1,921
33,378
175,148
134,582
Non
interest/
profit
sensitive
RM'000
Non-trading book
158,063
8,063
-
150,000
-
-
Trading
book
RM'000
30,333,116
18,642,887
465,708
1,292,624
29,727
231,285
623,271
150,000
4,239,770
480,899
4,176,945
Total
RM'000
*
The negative balance represents general allowance for loans, advances and financing.
# Net of specific allowance.
(1) Others include property and equipment, intangible assets, statutory deposits with Bank Negara Malaysia, deferred tax assets, subsidiaries and other assets.
3,114,525
-
>1-3
months
RM'000
4,042,363
Up to 1
month
RM'000
Assets
- performing
- non-performing
Others (1)
The Bank
2009
2.14
4.71
1.93
2.18
3.50
4.73
1.92
Effective
interest
rate
%
143
AFFIN BANK BERHAD
(25046-T)
(ii)
-
300,000
-
5,769,628
529,078
6,298,706
5,391,071
-
(5,382,877) (2,411,103)
(5,582,413) (2,071,379)
199,536
(339,724)
8,696,938
-
5,391,071
-
421,703
-
4,969,368
>3-12
months
RM'000
4,177,285
4,470,391
(293,106)
391,661
-
391,661
297,216
-
-
94,445
>1-5
years
RM'000
1,609,073
1,704,857
(95,784)
-
-
-
-
-
-
Over 5
years
RM'000
(4,422,201)
(4,422,201)
-
6,256,226
2,810,766
3,445,460
405,173
14,738
47,730
94,265
2,883,554
Non
interest/
profit
sensitive
RM'000
Non-trading book
(2) Other liabilities include provision for taxation and other liabilities.
9,570,274
-
8,696,938
2,395,542
-
1,703,983
-
9,570,274
6,301,396
>1-3
months
RM'000
7,566,291
Up to 1
month
RM'000
Equity
Total liabilities
Liabilities
to Cagamas Berhad
Deivative financial liabilities
The Bank
2009
131,117
131,117
-
26,946
-
26,946
26,946
-
-
-
Trading
book
RM'000
30,333,116
2,810,766
27,522,350
297,216
300,000
405,173
41,684
47,730
4,521,228
94,265
21,815,054
Total
RM'000
5.00
2.90
2.09
2.23
Effective
interest
rate
%
Annual Report 2010
144
145
AFFIN BANK BERHAD
(25046-T)
(iii) Liquidity Risk
Liquidity risk is the risk of loss due to failure to access funds at reasonable cost to fund the Bank's operations and meet its
liabilities when they fall due. Liquidity risk arises from the Bank's funding activities and the management of its assets.
To measure and manage net funding requirements, the Bank adopts BNM's New Liquidity Framework ('NLF'). The NLF
ascertains the liquidity condition based on the contractual and behavioral cash-flow of assets, liabilities and off-balance sheet
commitments, taking into consideration the realisable cash value of the eligible liquefiable assets.
The Bank employs liquidity risk indicators as an early alert of any structural change for liquidity risk management. The risk is
measured monthly using internal and external qualitative and quantitative liquidity risk indicators. The Bank also conducts
liquidity stress tests to gauge the Bank’s resilience in the event of a funding crisis. In addition, the Bank has in place the
Contingency Funding Plan to deal with liquidity crisis and emergencies.
The BRMC is responsible for the Bank's liquidity policy although the strategic management of liquidity has been delegated
to the ALCO. The BRMC is however, informed regularly of the liquidity situation in the Bank.
Liquidity risk disclosure table which is based on contractual undiscounted cash flow:
The Group
2010
to Cagamas Berhad
Other liabilities
Subordinate term loan
Up to 1
month
RM'000
>1-3
months
RM'000
>3-12
months
RM'000
>1-5
years
RM'000
Over 5
years
RM'000
Total
RM'000
17,722,567
7,871,842
5,203,861
46,978
-
30,845,248
3,099,548
110,161
3,437,614
-
68,186
-
-
-
6,605,348
110,161
1,441
68,860
-
1,312
114,327
-
8,491
524,760
-
275,126
113,683
-
55,250
300,000
286,370
876,880
300,000
21,002,577
11,425,095
5,805,298
435,787
355,250
39,024,007
14,340,248
6,553,953
4,376,920
42,753
-
25,313,874
2,479,621
110,161
3,187,614
-
68,187
-
-
-
5,735,422
110,161
1,441
60,248
47,926
-
1,312
94,583
-
8,491
461,233
-
275,126
113,198
-
55,250
300,000
286,370
784,512
47,926
300,000
17,039,645
9,837,462
4,914,831
431,077
355,250
32,578,265
The Bank
2010
to Cagamas Berhad
Other liabilities
Amount due to holding company
Subordinate term loan
Annual Report 2010
146
(iii) Liquidity Risk (continued)
Derivatives financial liabilities
Derivatives 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
(1,098)
(1,353)
(9,658)
(33,596)
(12,799)
(58,504)
The Group/The Bank
2010
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
(278,479)
278,466
(207,640)
205,907
(229,901)
229,397
(115,560)
115,560
-
(831,580)
829,330
(13)
(1,733)
(504)
-
-
(2,250)
The Group/The Bank
2010
Derivatives settled on a net basis
Derivatives settled on a gross basis
Foreign exchange derivatives
Outflow
Inflow
Assets
Other assets
Other non-financial assets (1)
The Group
2010
14,590
579,919
668,789
9,675
3,604
1,276,577
112,440
149,853
1,339,407
110,096
3,174,354
58,806
22,129
2,745
245,130
13,844,523
>3-6
months
RM'000
8,629,563
Up to 3
months
RM'000
1,041,451
15,680
184,027
780,775
10,930
109
49,930
-
>6-12
months
RM'000
-
>1-3
years
RM'000
5,382,846
2,168,054
113,955
3,085,018
5,127
10,692
-
Maturities of assets and liabilities of the Group and the Bank by remaining contractual maturities profile are as follows:
5,511,590
49,625
1,092,492
4,366,931
2,542
-
-
>3-5
years
RM'000
15,006,934
402,154
207,108
13,898,980
161,664
7,079
329,949
-
Over 5
years
RM'000
42,063,921
192,335
149,853
5,766,053
431,159
25,974,847
246,202
46,155
2,745
625,009
8,629,563
Total
RM'000
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. The table below provides analysis of assets and liabilities into relevant maturity tenures based on remaining contractual maturities.
Liquidity risk for assets and liabilities based on remaining contractual maturities
147
AFFIN BANK BERHAD
(25046-T)
3,278,651
19,412
602
22
-
(544,780) 11,439,911
5,310,696
5,340,696
(30,000)
42,150
295
17,828
-
-
24,027
>1-3
years
RM'000
5,194,933
5,194,933
-
316,657
286,370
7,336
-
-
22,951
>3-5
years
RM'000
14,675,081
14,675,081
-
331,853
300,000
6,921
24,932
-
-
Over 5
years
RM'000
17,564,598
3,313,004
13,700,237
551,357
38,750,917
286,370
300,000
521,276
57,560
22
24,932
6,605,348
110,161
30,845,248
Total
RM'000
(1) Other non-financial assets include tax recoverable, statutory deposits with BNM, deferred tax assets, investment in jointly controlled entity, property and equipment and
intangible assets.
(18,511,243)
2,040,242
32,741,364
Net maturity mismatch
14,144
12,666
-
487,425
12,207
-
68,186
-
3,190,429
>6-12
months
RM'000
(763,665) (2,237,200)
- 13,700,237
218,885
(23,126)
-
6,537,162
110,161
(18,896,841)
385,598
2,013,432
>3-6
months
RM'000
25,594,409
Up to 3
months
RM'000
On balance sheet gap
Derivatives
Liabilities
to Cagamas Berhad
Other liabilities
Provision for taxation
The Group
2010
Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)
Annual Report 2010
148
Assets
Other assets
Other non-financial assets (1)
The Bank
2010
42,341
579,919
526,876
8,108
3,604
1,160,848
442,636
149,853
1,078,104
110,096
2,950,236
48,443
22,129
185,271
245,130
11,334,205
>3-6
months
RM'000
6,102,307
Up to 3
months
RM'000
995,317
15,680
174,050
748,576
10,830
109
46,072
-
>6-12
months
RM'000
4,548,289
1,496,103
113,955
2,922,556
4,983
10,692
-
-
>1-3
years
RM'000
4,685,616
58,876
750,878
3,873,320
2,542
-
-
>3-5
years
RM'000
12,729,392
349,206
207,108
11,397,687
161,255
7,079
607,057
-
Over 5
years
RM'000
35,453,667
559,533
149,853
4,428,260
431,159
22,419,251
233,619
46,155
185,271
898,259
6,102,307
Total
RM'000
149
AFFIN BANK BERHAD
(25046-T)
2,878,787
17,117
602
-
(228,626) 10,338,924
4,479,452
4,509,452
(30,000)
38,837
270
17,828
-
-
20,739
>1-3
years
RM'000
4,369,896
4,369,896
-
315,720
286,370
7,336
-
-
22,014
>3-5
years
RM'000
12,397,539
12,397,539
-
331,853
300,000
6,921
24,932
-
-
Over 5
years
RM'000
Total
RM'000
15,909,677
3,112,800
12,245,520
551,357
32,340,867
286,370
300,000
464,622
57,560
47,926
24,932
5,735,422
110,161
25,313,874
(1) Other non-financial assets include tax recoverable, statutory deposits with BNM, investment in subsidiairies, property and equipment and intangible assets.
(15,447,508)
1,608,359
27,167,311
Net maturity mismatch
11,655
12,666
-
435,580
12,207
47,926
-
68,186
-
2,792,882
>6-12
months
RM'000
(447,511) (1,883,470)
- 12,245,520
218,885
(23,126)
-
5,667,236
110,161
(15,833,106)
385,598
1,584,038
>3-6
months
RM'000
20,894,201
Up to 3
months
RM'000
On balance sheet gap
Derivatives
Liabilities
to Cagamas Berhad
Other liabilities
The Bank
2010
Annual Report 2010
150
151
AFFIN BANK BERHAD
(25046-T)
(iv) Operational Risk Management
Operational risk is the risk of loss due to action on or by people, processes, infrastructure or technology or similar events which
have an operational impact, including fraudulent activities.
The Bank manages such risk through a control based environment in which policies and procedures are formulated after taking
into account individual unit's business activities, the environment and market in which it is operating and any regulatory
requirement in force. Risk is identified through the use of assessment tools and measured using threshold/limits mapped
against risk matrix. Monitoring and control procedures include the use of key control standards, independent tracking of risk,
back-up procedures and contingency plans, including disaster recovery and business continuity plans. This is supported by
periodic reviews undertaken by Group Internal Audit to ensure adequacy and effectiveness of the Group Operational Risk
Management process.
The Bank gathers and reports operational risk loss and 'near miss' events to Group Operational Risk Management Committee
and Board Risk Management Committee. Appropriate remedial actions are reviewed and implemented to minimize the
recurrence of such events.
Group Risk Management commenced an internal operational risk (including anti-money laundering/counter financing of
terrorism and business continuity management) Certification Program in November 2009.
Since October 2010, this certification programme is being conducted vide an e-learning portal. Operational Risk coordinators
will first go through an on-line self learning exercise before attempting on-line assessments to measure their skills and
knowledge level. This will enable Group Risk Management to prescribe appropriate training and development activities for the
coordinators. It is a requirement that all Operational Risk coordinators and staff engaged in operational risk work are all duly
certified.
(v)
Fair Value of Financial Instruments
Financial instruments comprise financial assets, financial liabilities and also off balance sheet financial instruments. The fair
value of a financial instrument is the amount at which the instruments could be exchanged or settled between knowledgeable
and willing parties in an arm’s length transaction. The information presented herein represents estimates of fair values as at
reporting date.
Quoted market prices, when available, are used as the measure of fair values. For financial instruments, without quoted
market prices, fair values are estimated using net present value or other valuation techniques. These techniques involve a
certain degree of uncertainty depending on the assumptions used and judgements made regarding risk characteristics of
various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors.
Changes in these assumptions could materially affect these estimates and the resulting fair value.
Fair value information for non-financial assets and liabilities are excluded as they do not fall within the scope of FRS 132
which requires fair values to be disclosed. This includes property and equipment, statutory deposits with Bank Negara
Malaysia, investment in subsidiaries, other assets, tax recoverable, deferred tax and intangible assets.
Annual Report 2010
152
(v)
Fair Value of Financial Instruments (continued)
The fair values of the financial assets and financial liabilities of the Group and the Bank approximated to their respective
carrying value as at the reporting date, except for the following:
The Group
2010
Carrying
Fair
value
value
RM’000
RM'000
Financial assets
Financial liabilities
431,159
25,974,847
646,941
26,270,051
431,159
22,419,251
646,941
22,690,852
26,406,006
26,916,992
22,850,410
23,337,793
30,845,248
30,834,587
25,313,874
25,306,320
286,370
303,270
286,370
303,270
31,131,618
31,137,857
25,600,244
25,609,590
The Group
2009
Carrying
Fair
value
value
RM’000
RM'000
Financial assets
Financial liabilities
The Bank
2010
Carrying
Fair
value
value
RM’000
RM'000
The Bank
2009
Carrying
Fair
value
value
RM’000
RM'000
481,474
21,989,304
502,532
22,313,398
480,899
19,108,595
501,957
19,320,106
22,470,778
22,815,930
19,589,494
19,822,063
26,440,319
26,431,631
21,815,054
21,804,882
297,216
313,077
297,216
313,077
26,737,535
26,744,708
22,112,270
22,117,959
153
AFFIN BANK BERHAD
(25046-T)
(v)
The fair values of derivative financial instruments at the reporting date are as follows:
The Group and the Bank
2010
Underlying
notional
Asset
Liability
RM'000
RM'000
RM'000
The Group and the Bank
2009
Underlying
notional
Asset
Liability
RM'000
RM'000
RM'000
Foreign exchange contracts
- forward contracts
- swaps
728,471
1,688,004
2,381
34,031
19,025
21,087
704,000
1,510,845
4,134
17,530
7,040
7,698
- swap
1,495,313
9,743
17,448
1,414,998
8,063
26,946
The derivative financial instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuation in market
interest rates or foreign exchange rates relative to their terms. The extent to which instruments are favourable or unfavourable
and the aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time.
The fair value estimates were determined by application of the methodologies and assumptions described below.
Short-term funds and placements with banks and other financial institutions
For short-term funds and placements with banks and other financial institutions with maturity of less than six months, the
carrying amount is a reasonable estimate of fair value.
For amounts with maturities of six months or more, fair values have been estimated by reference to current rates at which
similar deposits and placements would be made to banks with similar credit ratings and maturities.
Financial assets held-for-trading, financial investments available-for-sale and held-to-maturity
The fair values of financial assets held-for-trading, financial investments available-for-sale and financial investments held-tomaturity are reasonable estimates based on quoted market prices. In the absence of such quoted prices, the fair values are
based on the expected cash flows of the instruments discounted by indicative market yields for the similar instruments as at
reporting date or the audited net tangible asset of the invested company.
Loans, advances and financing of the Group comprise of floating rate loans and fixed rate loans. For performing floating rate
loans, the carrying amount is a reasonable estimate of their fair values.
The fair values of performing fixed rate loans are arrived at using the discounted cash flows based on the prevailing market
rates of loans and advances with similar credit ratings and maturities.
The fair values of impaired loans and advances, whether fixed or floating are represented by their carrying values, net of
individual and collective allowances, being the reasonable estimate of recoverable amount.
Other assets and liabilities
The carrying value less any estimated allowance for financial assets and liabilities included in other assets and other liabilities
are assumed to approximate their fair values as these items are not materially sensitive to the shift in market interest rates.
Annual Report 2010
154
(v)
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.
Recourse obligation on loans sold to Cagamas Berhad
For floating rate loans sold to Cagamas Berhad, the carrying value is generally a reasonable estimate of their fair values.
The fair values of fixed rate loans sold to Cagamas Berhad are arrived at using the discounted cash flow methodology at
prevailing market rates of similarly profiled loans.
For fixed rate borrowings, the estimate of fair value is based on discounted cash flow model using prevailing lending rates for
borrowings with similar risks and remaining term to maturity.
For floating rate borrowings, the carrying value is generally a reasonable estimate of their fair values.
Derivative financial instruments
The fair value of exchange rate and interest rate contracts is the estimated amount the Group would receive or pay to terminate
the contracts at the reporting date.
39 LEASE COMMITMENTS
The Bank has lease comitments in respect of rented premises and hired equipment, all of which are classified as operating leases.
A summary of the non-cancellable long-term commitments, net of sub-leases are as follows:
2010
2009
RM’000
RM'000
Within one year
One year to five years
19,771
79,084
18,776
75,104
155
AFFIN BANK BERHAD
(25046-T)
40 CAPITAL AND OPERATING COMMITMENTS
Capital commitments
Capital expenditure approved by the Directors but not provided for in the financial statements amounted to approximately:
2010
2009
RM’000
RM'000
Authorised and contracted for
Authorised but not contracted for
Analysed as follows:
4,163
-
3,188
-
4,163
3,188
4,163
3,188
Operating commitments
Operating expenditure approved by the Directors but not provided for in the financial statements amounted to approximately:
2010
2009
RM’000
RM'000
Authorised and contracted for
320,852
375,383
41 CAPITAL MANAGEMENT
The Group and the Bank's objectives when managing capital are:
•
To comply with the capital requirements set by the regulators of the banking markets where the entities within the Group and
the Bank operates;
•
To safeguard the Group and the Bank's ability to continue as a going concern so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
•
To maintain a strong capital base to support the development of its business.
The Group and the Bank maintain a ratio of total regulatory capital to its risk-weighted assets above a minimum level agreed with
the management which takes into account the risk profile of the Group and the Bank.
The table in note 42 summarises the composition of regulatory capital and the ratios of the Group and the Bank for the year ended
31 December 2010.
Annual Report 2010
156
42 CAPITAL ADEQUACY
The capital adequacy ratios are as follows:
The Group#
Basel II
Basel II
2010
2009
RM'000
RM'000
Tier I capital
Paid-up share capital
Share premium
Retained profits
Statutory reserve
The Bank
Basel II
Basel II
2010
2009
RM'000
RM'000
1,439,285
408,389
499,179
888,910
1,439,285
408,389
317,517
789,221
1,439,285
408,389
411,831
807,500
1,439,285
408,389
249,121
720,824
3,235,763
2,954,412
3,067,005
2,817,619
(137,323)
-
(137,323)
(60,961)
(137,323)
-
(137,323)
(52,105)
3,098,440
2,756,128
2,929,682
2,628,191
Tier II capital
General allowance for bad and doubtful debts and financing
Collective impairment @
300,000
153,538
300,000
335,067
-
300,000
111,304
300,000
291,000
-
Total Tier II capital
453,538
635,067
411,304
591,000
Less:
Investment in capital instruments of other banking institutions
(39,858)
(27,429)
(217,056)
(27,429)
(39,858)
(287,429)
(200,898)
(287,429)
3,484,691
3,146,710
3,013,699
2,730,864
11.51%
12.94%
11.24%
12.67%
11.42%
13.04%
11.19%
12.81%
12.35%
12.71%
12.05%
12.40%
12.35%
12.83%
12.09%
12.58%
Risk-weighted assets for credit risk
Risk-weighted assets for market risk
Risk-weighted assets for operational risk
24,768,236
96,572
2,062,578
22,071,130
92,319
1,976,470
21,849,466
91,973
1,776,655
19,478,147
84,589
1,721,636
Total risk-weighted assets
26,927,386
24,139,919
23,718,094
21,284,372
Less:
Goodwill
Deferred tax assets *
Total Tier I capital
Capital base
Core capital ratio
Risk-weighted capital ratio
Core capital ratio (net of proposed dividends) ^
Risk-weighted capital ratio (net of proposed dividends) ^
*
#
@
^
Deferred tax assets exclude deferred tax arising from investment fluctuation reserves.
The Group comprises the Bank and the Bank's subsidiary, AFFIN Islamic Bank Berhad.
Qualifying collective impairment is restricted to allowances on unimpaired portion of the loans, advances and financing.
Net proposed dividends of RM71,964,000 (2009: RM53,973,000).
Pursuant to Bank Negara Malaysia’s circular, ‘Recognition of Deferred Tax Asset ('DTA') and Treatment of DTA for RWCR Purposes’
dated 8 August 2003, deferred tax income/(expenses) is excluded from the calculation of Tier I capital and DTA is excluded from
the calculation of risk-weighted assets.
157
AFFIN BANK BERHAD
(25046-T)
43 LITIGATIONS AGAINST THE BANK
(a)
As part of a merger of banking businesses, by an Agreement dated 30 August 2000 ('the Acquisition Agreement') between
AFFIN Holdings Berhad ('AHB') , AFFIN Bank Berhad ('ABB'), BSN Commercial Bank (Malaysia) Berhad ('BSNC') and Bank
Simpanan Nasional Berhad ('BSN'), it was agreed that all banking assets and liabilities of BSNC would be sold to ABB in
consideration of a purchase price of RM338,560,000 to be paid partly in cash and partly in shares ('the Purchase Price').
Pursuant to clause 2.1.5 of the Acquisition Agreement, BSNC and BSN undertook to ABB that debts other than those
reflected as bad or doubtful debts in the audited financial statements of BSNC will be recoverable in the ordinary course of
business. For the debts not recoverable, BSNC undertook to pay ABB within 30 days from the date of receipt of the Bank’s
letter of demand, the amounts claimed subject to a limit of 30% of the Purchase Price amounting to RM101,568,000.
Subsequent to the merger, an audit was conducted and it was found that there had been significant under-provisioning of bad
and doubtful debts by BSNC. AHB, ABB and BSN agreed that the purchase price payable to BSNC would be reduced to
compensate for this under-provisioning ('the Settlement Agreement'). In return, it was agreed that ABB would assign the bad
and doubtful debts to BSNC under clause 2.1.5 of the Acquisition Agreement, subject to approval being given to both parties
by regulatory authorities for the reassignment. However, the accounts to be reassigned to BSNC were not identified then.
Dispute arose when ABB subsequently did not agree with BSNC on the assignment of 106 non-performing accounts with gross
amount of RM988,000,000 or net amount of RM578,000,000 which have been identified unilaterally by BSNC. In 2005, BSNC
issued an Originating Summons against AHB and ABB seeking an order for ABB to reassign the 106 accounts to BSNC.
On 30 November 2009, the Court has fixed the matter for further case management where filing of documents, statement of
agreed/non-agreed facts and statements of issues will be tried accordingly. On 20 August 2010 where the matter came up for
case management before the Judge, both counsels briefed the Judge on the facts of this case. The Judge suggested for both
parties to come to a settlement, in the event that there is still room for negotiation.
On 8 September 2010, the Plaintiff's solicitors requested for an adjournment at the trial. The Judge vacated the trial dates
and set the matter down for case management on 8 October 2010 which was further postponed to 10 December 2010. On
10 December 2010 the matter was fixed for trial on 4, 5 , 6 ,7 and 8 April 2011.
(b) There was a legal suit between Malayan Banking Berhad's ('MBB') predecessor-in-title, PhileoAllied Bank (Malaysia) Berhad
and AFFIN Bank Berhad's ('ABB') predecessor-in-title, BSN Commercial Bank (Malaysia) Berhad with regards to who has prior
charge over the shares of Kuo Shinn Sdn Bhd (the 'Shares').
The suit was initiated by PhileoAllied Bank (Malaysia) Berhad vide an Originating Summons dated 28 January 2000 against
BSN Commercial Bank (Malaysia) Berhad for inter alia the return of the Shares or its equivalent value if the Shares had been
sold by BSN Commercial Bank (Malaysia) Berhad.
Subsequently, the High Court allowed MBB's claim on 25 November 2002 wherein the High Court ordered for the return of
the Shares within 7 days from the date of the Order or in the event the Shares had been sold, the sale proceeds of the Shares
to be paid to MBB ('25 November 2002 Order'). ABB had filed an appeal to the Court of Appeal against the 25 November
2002 Order which was dismissed on 27 November 2008. Further thereto, ABB had applied for leave to appeal to the Federal
Court but the leave application was dismissed with costs by the Federal Court on 8 July 2009.
Following the decision of the Federal Court, ABB had delivered the share certificates to MBB in August 2009. However, MBB
refused to accept the share certificates, with the view that the shares had been disposed. MBB then proceeded to enforce
the 25 November 2002 Order vide an application for a monetary judgement in the Kuala Lumpur High Court.
On 31 May 2010, the High Court allowed MBB's application for monetary judgement wherein the High Court ordered ABB
to pay the sum of RM30 million together with 8% interest thereon from 2 December 2002 until the date of payment and
payment to be made within 14 days of the Order dated 31 May 2010 (the 'Judgement Sum')('31 May 2010 Order').
Pursuant thereto, ABB had applied for a stay of execution of the 31 May 2010 Order pending appeal to the Court of Appeal.
The stay of execution was dismissed by the Kuala Lumpur High Court on 18 June 2010 and ABB was ordered to pay the
Judgement Sum within 21 days from 18 June 2010. Thereafter, ABB filed an application for stay of execution of the 31 May
2010 Order to the Court of Appeal which was subsequently dismissed on 5 July 2010 with costs in the sum of RM2,000 to
be paid to MBB.
Annual Report 2010
158
43 LITIGATIONS AGAINST THE BANK (continued)
The Court of Appeal had fixed the hearing of ABB’s appeal on 25 August 2010 and parties were required to file in their
respective written submission on or before 11 August 2010. On 8 October 2010, the appeal was however dismissed.
On 8 November 2010, the Bank filed the Notice for Motion together with the Affidavit pertaining to the application for leave
to appeal to the Federal Court against decision of the Court of Appeal. The Federal Court however dismissed ABB’s
application for leave to appeal on 22 February 2011.
(c)
Other than above, there are various legal suits against the Bank in respect of claims and counter claims of approximately
RM86.3 million (2009: RM68.7 million). Based on legal advice, the Directors are of the opinion that no provision for damages
need to be made in the financial statements, as the probability of adverse adjudication against the Bank is remote.
44 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group and the Bank makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. To enhance the information content of the estimates, certain variables that are
anticipated to have material impact to the Group’s and the Bank’s results and financial position are tested for sensitivity to changes
in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial year are discussed below.
Allowance for losses on loans, advances and financing
The accounting estimates and judgments related to the impairment of loans and provision for off-balance sheet positions is a
critical accounting estimate for because the underlying assumptions used for both the individually and collectively assessed
impairment can change from period to period and may significantly affect the Group and the Bank’s results of operations.
In assessing assets for impairment, management judgment is required. The determination of the impairment allowance required
for loans which are deemed to be individually significant often requires the use of considerable management judgment concerning
such matters as local economic conditions, the financial performance of the counterparty and the value of any collateral held, for
which there may not be a readily accessible market. The actual amount of the future cash flows and their timing may differ from
the estimates used by management and consequently may cause actual losses to differ from the reported allowances.
The impairment allowance for portfolios of smaller-balance homogenous loans, such as those to individuals and small business
customers of the private and retail business, and for those loans which are individually significant but for which no objective
evidence of impairment exists, is determined on a collective basis. The collective impairment allowance is calculated on a portfolio
basis using statistical models which incorporate numerous estimates and judgments, and therefore is subject to estimation
uncertainty. The Group and the Bank perform a regular review of the models and underlying data and assumptions as far as
possible to reflect the current economic circumstances. The probability of default, loss given defaults, and loss identification period,
amongst other things, are all taken into account during this review.
Estimated impairment of goodwill
The Group performs an impairment review on an annual basis to ensure that the carrying value of the goodwill does not exceed
its recoverable amounts from cash generating units to which the goodwill is allocated. The recoverable amount represents the
present value of the estimated future cash flows expected to arise from continuing operations. Therefore, in arriving at the
recoverable amount, management exercise judgement in estimating the future cash flows, growth rate and discount rate.
159
AFFIN BANK BERHAD
(25046-T)
45 CHANGES IN ACCOUNTING POLICIES
During the financial year, the Group and the Bank have changed the following accounting policies upon adoption of new accounting
standards, amendments and improvements to published standards and interpretations:
•
•
Financial assets – Note G
Leasehold land – Note K
The following Notes (i) to (ii) disclose the impacts of such changes on the financial statements of the Group and Bank.
Impact on adoption of FRS 139
i)
Impact on The Group and the Bank's statement of financial position
The Group
Assets
Other assets
Deferred tax assets
Liabilities
Other liabilities
Equity
Reserves - investment fluctuation reserve
Reserves - retained profits
Balance as at 1 January 2010
As previously
As
reported
FRS 139
Adjusted
RM'000
RM'000
RM'000
5,627,371
481,474
21,989,304
461,197
54,789
83,639
(25,279)
27,090
(30,691)
29,727
(21,123)
5,711,010
456,195
22,016,394
430,506
29,727
33,666
28,614,135
63,363
28,677,498
473,429
-
(41,684)
41,684
431,745
41,684
473,429
-
473,429
(1,880)
332,003
43,770
19,593
41,890
351,596
330,123
63,363
393,486
Annual Report 2010
160
45 CHANGES IN ACCOUNTING POLICIES (continued)
Impact on adoption of FRS 139 (continued)
i)
Impact on The Group and the Bank's statement of financial position (continued)
The Bank
Assets
Other assets
Deferred tax assets
Liabilities
Other liabilities
Equity
Reserves - investment fluctuation reserve
Reserves - retained profits
Balance as at 1 January 2010
As previously
As
reported
FRS 139
Adjusted
RM'000
RM'000
RM'000
4,239,770
480,899
19,108,595
428,498
54,390
83,568
(24,704)
21,502
(33,022)
29,727
(19,269)
4,323,338
456,195
19,130,097
395,476
29,727
35,121
24,312,152
57,802
24,369,954
473,429
-
(41,684)
41,684
431,745
41,684
473,429
-
473,429
(6,853)
249,121
44,148
13,654
37,295
262,775
242,268
57,802
300,070
The Group and the Bank did not disclose the effect of the adoption of FRS 139 on the current period because it is
impracticable.
161
AFFIN BANK BERHAD
(25046-T)
Impact on adoption of FRS 117
i)
Impact on The Group and the Bank's statements of financial position
The Group
Other assets
Balance as at 31 December 2008
As previously
As
reported
FRS 117
restated
RM'000
RM'000
RM'000
531,026
187,758
(17,347)
17,347
513,679
205,105
As previously
As
reported
FRS 117
restated
RM'000
RM'000
RM'000
Other assets
The Bank
Other assets
431,470
171,578
(16,180)
16,180
415,290
187,758
As previously
As
reported
FRS 117
restated
RM'000
RM'000
RM'000
482,934
182,909
(15,660)
15,660
467,274
198,569
As previously
As
reported
FRS 117
restated
RM'000
RM'000
RM'000
Other assets
398,771
163,198
(14,500)
14,500
384,271
177,698
Annual Report 2010
162
Impact on adoption of FRS 117 (continued)
ii)
Impact on The Group and the Bank's income statement/statement of comprehensive income
The Group
Establishment cost
Depreciation
For the financial year ended
at 31 December 2008
As previously
As
reported
FRS 117
restated
RM'000
RM'000
RM'000
22,514
465
465
(465)
22,979
-
at 31 December 2009
As previously
As
reported
FRS 117
restated
RM'000
RM'000
RM'000
Establishment cost
Depreciation
The Bank
Establishment cost
Depreciation
21,862
241
241
(241)
22,103
-
at 31 December 2008
As previously
As
reported
FRS 117
restated
RM'000
RM'000
RM'000
21,829
457
457
(457)
22,286
-
at 31 December 2009
As previously
As
reported
FRS 117
restated
RM'000
RM'000
RM'000
Establishment cost
Depreciation
21,092
234
234
(234)
21,326
-
163
AFFIN BANK BERHAD
(25046-T)
46 CREDIT EXPOSURES ARISING FROM TRANSACTIONS WITH CONNECTED PARTIES
The following credit exposures are based on Bank Negara Malaysia's revised Guidelines on Credit Transaction and Exposures with
Connected Parties, which are effective 1 January 2008.
(i)
(ii)
The aggregate value of outstanding credit exposures with connected parties (RM'000)
The percentage of outstanding credit exposures to connected parties as a
proportion of total credit exposures
(iii) The percentage of outstanding credit exposures with connected parties which
is impaired or in default
2,677,539
7%
Nil
47 APPROVAL OF FINANCIAL STATEMENTS
The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 28 February
2011.
Annual Report 2010
164
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 DATO' ZULKIFLEE ABBAS BIN ABDUL HAMID, two of the
Directors of AFFIN BANK BERHAD, state that, in the opinion of the Directors, the accompanying financial statements set out on pages
59 to 163 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 2010
and of the results and cash flows of the Group and the Bank for the financial year ended on the date in accordance with the provisions
of the Companies Act, 1965, MASB Approved Accounting Standards for Entities Other Than Private Entities and Bank Negara Malaysia
Guidelines.
In accordance with a resolution of the Board of Directors dated 28 February 2011.
JEN TAN SRI DATO' SERI ISMAIL BIN HAJI OMAR (BERSARA)
Chairman
DATO' ZULKIFLEE ABBAS BIN ABDUL HAMID
STATUTORY DECLARATION
PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965
I, EE KOK SIN, the officer of AFFIN BANK BERHAD primarily responsible for the financial management of the Group and the Bank, do
solemnly and sincerely declare that, in my opinion, the accompanying financial statements set out on pages 59 to 163, are correct and
I make this solemn declaration conscientiously believing the same to be true, by virtue of the provisions of the Statutory Declarations
Act, 1960.
EE KOK SIN
Subscribed and solemnly declared by the abovenamed EE KOK SIN at Kuala Lumpur in Malaysia on 28 February 2011, before me.
Commissioner for Oaths
165
AFFIN BANK BERHAD
(25046-T)
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBER OF AFFIN BANK BERHAD (Incorporated in Malaysia)
REPORT ON THE FINANCIAL STATEMENTS
We have audited the financial statements of AFFIN Bank Berhad, which comprise the statement of financial position as at 31 December
2010 of the Group and the Bank, and the statements of income, comprehensive income, change in equity and cash flows of the Group
and the Bank for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on
pages 59 to 163.
Directors’ Responsibility for the Financial Statements
The directors of the Bank are responsible for the preparation and fair presentation of these financial statements in accordance with
MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities, Bank Negara Malaysia Guidelines and the
Companies Act, 1965. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and
applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
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 whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Bank’s preparation and
fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with MASB Approved Accounting Standards in
Malaysia for Entities Other than Private Entities, Bank Negara Malaysia Guidelines and the Companies Act, 1965 so as to give a true
and fair view of the financial position of the Group and the Bank as of 31 December 2010 and of their financial performance and cash
flows for the year then ended.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:
a)
In our opinion, the accounting and other records and the registers required by the Act to be kept by the Bank and its subsidiaries
have been properly kept in accordance with the provisions of the Act.
b)
We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Bank’s financial statements
are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and
we have received satisfactory information and explanations required by us for those purposes.
c)
Our audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made
under Section 174(3) of the Act.
OTHER MATTERS
This report is made solely to the member of the Bank, as a body, in accordance with Section 174 of the Companies Act, 1965 in
Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
PRICEWATERHOUSECOOPERS
(No. AF : 1146)
Chartered Accountants
Kuala Lumpur, Malaysia
28 February 2011
MOHAMMAD FAIZ BIN MOHAMMAD AZMI
(No. 2025/03/12 (J))
Chartered Accountant
Annual Report 2010
166
BASEL II PILLAR 3 DISCLOSURES
Table of Contents
Page
1.
Introduction
1.1 Background
1.2 Scope of Application
167
167
Risk Governance Structure
2.1 Overview
2.2 Board Committees
2.3 Management Committees
2.4 Group Risk Management Function
2.5 Internal Audit and Internal Control Activities
167
168
169
170
170
Capital
3.1 Capital Structure
3.2 Capital Adequacy
170
171
4.
Risk Management Objectives and Policies
171
5.
Credit Risk
5.1 Credit Risk Management Objectives and Policies
5.2 Application of Standardised Approach for Credit Risk
5.3 Credit Risk Measurement
5.4 Risk Limit Control and Mitigation Policies
5.5 Credit Risk Monitoring
5.6 Impairment Provisioning
5.7 Credit Risk Culture
172
172
172
173
174
174
177
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
6.6 Market Risk Culture
178
178
178
178
178
178
Liquidity Risk
7.1 Liquidity Risk Management Objectives and Policies
7.2 Liquidity Risk Measurement, Control and Monitoring
179
179
Operational Risk
8.1 Operational Risk Management Objectives and Policies
8.2 Application of Basic Indicator approach for Operational Risk
8.3 Operational Risk Measurement, Control and Monitoring
8.4 Operational Risk Culture
179
179
179
179
Shariah Compliance
180
Appendices
181
2.
3.
6.
7.
8.
9.
167
AFFIN BANK BERHAD
(25046-T)
1.0 Introduction
1.1 Background
AFFIN Bank Berhad ('ABB') adopted Basel II in January 2008 in line with the directive from Bank Negara Malaysia ('BNM').
The Basel II framework is structured around three fundamental Pillars.
-
Pillar 1 defines the minimum capital requirement to ensure that financial institutions hold sufficient capital to cover their
exposure to credit, market and operational risks.
-
Pillar 2 requires financial institutions to have a process for assessing their overall capital adequacy in relation to their risk
profile and a strategy for maintaining their capital levels.
-
Pillar 3 requires financial institutions to establish and implement an appropriate disclosure policy that promotes
transparency regarding their risk management practices and capital adequacy positions.
ABB elected to adopt the following approaches under Pillar 1 requirements:
-
Standardised Approach for Credit Risk
Basic Indicator Approach for Operational Risk
Standardised Approach for Market Risk
1.2 Scope of Application
This document contains the disclosure requirements under Pillar 3 for ABB for the year ended 31 December 2010. The
disclosures are made in line with the Pillar 3 disclosure requirements under the Basel II framework as laid out by BNM.
The disclosures should be read in conjunction with ABB’s 2010 Annual Report for the year ended 31 December 2010.
The Group’s capital requirements are generally based on the principles of consolidation adopted in the preparation of its
financial statements. The Group’s consolidated entities comprises the Bank and the Bank’s subsidiary, AFFIN Islamic Bank
Berhad.
2.0 Risk Governance Structure
2.1 Overview
The Board of Directors of ABB is ultimately responsible for the overall performance of ABB. The Board’s responsibilities remain
within the framework of BNM Guidelines. The Board also exercises great care to ensure that high ethical standards are upheld,
and that the interests of stakeholders are not compromised. These include responsibility for determining ABB’s general
policies and strategies for the short, medium and long term, approving business plans, including targets and budgets, and
approving major strategic decisions.
The Board has overall responsibility for maintaining the proper management and protection of ABB’s interests by ensuring
effective implementation of the risk management policy and process, as well as adherence to a sound system of internal
control, and by seeking regular assurance on their effectiveness. The Board also recognises that risks cannot be eliminated
completely. As such, the inherent system of internal control is designed to provide a reasonable though not absolute assurance
against the risk of material errors, fraud or losses occurring. The system of internal controls encompasses controls relating
to financial, operational, risk management and compliance with applicable laws, regulations, policies and guidelines.
The terms of reference of the Board Committees as disclosed in the Annual Report provide an outline of its role and functions.
In carrying out its functions, the Board has delegated specific responsibilities to other Board Committees, which operated
under approved terms of reference, to assist the Board in discharging their duties. The Chairmen of the various Committees
report on the outcome of their Committee meetings to the Board and any further deliberation is made at Board level, if
required. These reports and deliberations are incorporated into the Minutes of the Board meetings. The Board meets on a
monthly basis.
The Board of ABB has a balance composition with a strong independent element. It consists of representatives from the
private sector with suitable qualifications fulfilling the fit and proper criteria as required by BNM/GP1, a mixture of different skills,
competencies, experience and personalities.
Annual Report 2010
168
2.0 Risk Governance Structure (continued)
2.2 Board Committees
Board Remuneration Committee ('BRC')
The BRC is responsible for providing a formal and transparent procedure for developing the remuneration policy for Directors,
Managing Director/Chief Executive Officer and key senior management officers and ensuring that compensation is competitive
and consistent with ABB’s culture, objectives and strategy.
The Committee obtains advice from experts in compensation and benefits, both internally and externally.
Board Nominating Committee ('BNC')
The BNC is responsible for providing a formal and transparent procedure for the appointment of Directors and Managing
Director/Chief Executive Officer, assessing the effectiveness of individual Directors, the Board as a whole and the performance
of the Managing Director/Chief Executive Officer and key senior management personnel.
Board Risk Management Committee ('BRMC')
The BRMC is responsible for overseeing management’s activities in managing credit, market, liquidity, operational, legal and
other risks and to ensure that the risk management process is in place and functioning.
It has responsibility for reviewing and approving all risk management policies and risk management methodologies. BRMC
also reviews guidelines and portfolio management reports including risk exposure information.
The Committee also ensures that the procedures and framework in relation to identifying, measuring, monitoring and
controlling risk are operating effectively.
Board Loan Review and Recovery Committee ('BLRRC')
The BLRRC is responsible in providing critical review of loans and other credit facilities with higher risk implications, after due
process of checking, analysis, review and recommendation by the Credit Risk Management function, and if found necessary,
exercise the power to veto loan applications that have been approved by the Group Management Loan Committee. BLRRC
also reviews the impaired loans reports presented by the Management.
Audit and Examination Committee ('AEC')
The AEC is responsible for providing oversight on reviewing the adequacy and integrity of the internal control systems and
oversees the work of the internal and external auditors.
Reliance is placed on the results of independent audits performed primarily by internal auditors, the outcome of statutory audits
on financial statements conducted by external auditors and on representations by Management based on their control selfassessment of all areas of their responsibility.
Minutes of Audit & Examination Committee meetings, which provide a summary of the proceedings, are circulated to Board
members for notation and discussion. ABB has an established Group Internal Audit Division (GIA) which reports functionally
to the Audit Committee and administratively to the Managing Director/Chief Executive Officer.
Shariah Committee
ABB's business activities are subject to Shariah compliance and conformation by the Shariah Committee. The Shariah
Committee is formed as legislated under Section 3(5)(b) of the Islamic Banking Act, 1983 and as per Guidelines on the
Governance of Shariah Committee for the Islamic Financial Institutions ('BNM/GPS-i').
The duties and responsibility of the Shariah Committee are as follows:
(i)
To advise the Board on Shariah matters in order to ensure that the business operations of ABB comply with the Shariah
principles at all times;
(ii)
To endorse and validate relevant documentations of ABB's products to ensure that the product comply with Shariah
principles; and
(iii) To advice ABB on matters to be referred to the Shariah Advisory Council.
169
AFFIN BANK BERHAD
(25046-T)
2.3 Management Committees
Management Committee ('MCM')
MCM comprising the senior management team chaired by the MD/CEO, assists the Board in managing the day-to-day
operations and ensure its effectiveness. MCM formulates tactical plans and business strategies, monitors ABB’s overall
performance, and ensures that the activities are in accordance with corporate objectives, strategies, policies and annual
business plan and budget.
Group Management Loan Committee ('GMLC')
GMLC is established within senior management chaired by the MD/CEO to approve complex and larger loans and
workout/recovery proposals beyond the delegated authority of the concerned individual senior management personnel of
ABB.
Asset and Liability Management Committee ('ALCO')
ALCO is established within senior management to manage market and liquidity risks. Its responsibilities include:(i)
Manage the asset liability of ABB through coordination of the overall planning process including strategic planning,
budgeting and asset liability management process;
(ii)
Direct ABB's overall acquisition and allocation of funds;
(iii) Prudently manage ABB's interest rate exposure;
(iv) Determine the overall Balance Sheet strategy and ensuring policy compliance;
(v)
Prudently manage ABB's interest rate exposure;
(vi) Determined the type and scope of derivative activities, approve individual derivative transactions as well as control over
the level of exposure in derivatives; and
(vii) Review of market risks in ABB's trading portfolios.
Group Operational Risk Management Committee ('GORMC')
GORMC is established within senior management to manage operational risks. Its responsibilities include:
(i)
To evaluate operational risks issues on escalating importance/strategic risk exposure;
(ii)
To review and recommend on broad operational risks management policies best practices for adoption by ABB's
operating units;
(iii) To review the effectiveness of broad internal controls and making recommendation on changes if necessary;
(iv) To review/approve recommendation on operational risk management groups section up to address specific issue;
(v)
To take the lead in inculcating an operational risks awareness culture;
(vi) To approve operational risk management methodologies/measurements tools; and
(vii) To review and approve the strategic operational risk management initiatives/plans and to endorse for BRMC's approval
if necessary.
Early Alert Committee ('EAC')
EAC is established within senior management chaired by the MD/CEO to monitor credit quality through monthly review of the
Early Alert, Watchlist and Exit Accounts and review the actions taken to address the emerging risks and issues in these
accounts.
Annual Report 2010
170
2.4 Group Risk Management Function
An integrated risk management framework is in place. The Group Risk Management ('GRM') function, headed by Group
Chief Risk Officer ('GCRO') and operating in an independent capacity, is part of ABB's senior management structure which
works closely as a team in managing risks to enhance stakeholders' value.
GRM reports to BRMC. Committees namely BLRRC, GMLC, ALCO and GORMC assist BRMC in managing credit, liquidity
and operational risk. The responsibilities of these Committees include risk identification, risk assessment and measurement,
risk control and mitigation; and risk monitoring.
2.5 Internal Audit and Internal Control Activities
In accordance with BNM's GP10 guidelines, GIA conducts continuous reviews on auditable areas within ABB. The continuous
reviews by GIA are focused on areas of significant risks and effectiveness of internal control in accordance to the audit plan
approved by the AEC.
Based on GIA's review, identification and assessment of risk, testing and evaluation of controls, GIA will provide an opinion
on the effectiveness of internal controls maintained by each entity. The risks highlighted on the respective auditable areas as
well as recommendation made by the GIA are addressed at AEC and Management meetings on bi-monthly basis. The AEC
also conduct annual reviews on the adequacy of internal audit function, scope of work, resources and budget of GIA.
3.0 Capital
3.1 Capital Structure
The following table sets forth details on the capital resources and capital adequacy ratios for the Group as at 31 December
2010. The Group’s Core capital ratio ('CCR') and Risk-weighted capital ratio ('RWCR') as at 31 December 2010 were above
the BNM minimum requirements of 4.0% and 8.0% respectively.
Tier I capital
Paid-up share capital
Share premium
Retained profits
Statutory reserve
Less:
Goodwill
Deferred tax assets
Total Tier I capital
The Group
2010
RM’000
The Bank
2010
RM'000
1,439,285
408,389
499,179
888,910
1,439,285
408,389
411,831
807,500
3,235,763
3,067,005
(137,323)
-
(137,323)
-
3,098,440
2,929,682
171
AFFIN BANK BERHAD
(25046-T)
3.0 Capital (continued)
3.1 Capital Structure (continued)
The Group
2010
RM’000
The Bank
2010
RM'000
300,000
153,538
300,000
111,304
453,538
411,304
(39,858)
(27,429)
(39,858)
(287,429)
3,484,691
3,013,699
11.51%
12.94%
11.24%
12.67%
12.35%
12.71%
12.05%
12.40%
Risk-weighted assets for:
Credit risk
Market risk
Operational risk
24,768,236
96,572
2,062,578
21,849,466
91,973
1,776,655
Total risk-weighted assets
26,927,386
23,718,094
Tier II capital
Total Tier II capital
Less:
Investment in capital instruments of other banking institutions
Capital base
Core capital ratio
Risk-weighted capital ratio
Core capital ratio (net of proposed dividends)
Risk-weighted capital ratio (net of proposed dividends)
3.2 Capital Adequacy
The Group's has in place an internal limit for its CCR and RWCR, which is guided by the need to maintain a prudent
relationship between available capital and the risks of its underlying businesses. The capital management process is monitored
by managements through periodic reviews.
Refer to Appendix I.
4.0 Risk Management Objectives and Policies
ABB is principally engaged in all aspects of banking and related financial services. The principal activities of ABB's subsidiaries
are Islamic banking business, property management services, nominee and trustee services. There have been no significant
changes in these principal activities during the financial year.
ABB’s business activities involve the analysis, measurement, acceptance, and management of risks but it operates within well
defined risk acceptance criteria covering customer segments, industries and products. ABB does not enter into risk it cannot
administer, book, monitor or value, or deal with persons of questionable integrity.
ABB’s risk management policies are established to identify all the key risks, assess and measure these risks, control and mitigate
these risks, and manage and monitor the risk positions.
ABB regularly reviews its risk management policies and systems to reflect changes in markets, products and best practice in risk
management processes. ABB’s aim is to achieve an appropriate balance between risk and return and minimise any potential
adverse effects.
The key business risks to which ABB is exposed are credit risk, liquidity risk, market risk and operational risk.
Annual Report 2010
172
5.0 Credit Risk
5.1 Credit Risk Management Objectives and Policies
Credit risk is the potential financial loss resulting from the failure of the customer or counterparty to settle the financial and
contractual obligations to ABB. Credit risk emanates mainly from loans and advances, loan commitments arising from such
lending activities, as well as through financial transactions with counterparties including interbank money market activities,
derivative instruments used for hedging and debt securities.
The management of credit in ABB is governed by a set of credit policies approved by the Board of Directors. Approval
authorities are delegated to Senior Management and GMLC to implement the credit policies and ensure sound credit granting
standards.
An independent GRM function with a direct reporting line to BRMC is in place to ensure adherence to risk standards and
discipline.
Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit Plan. New businesses are
governed by the risk acceptance criteria and customer qualifying criteria/fitness standards prescribed in the Credit Plan. The
Credit Plan is reviewed as least annually and approved by the BRMC.
5.2 Application of Standardised Approach for Credit Risk
ABB uses the following 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 the guidelines provided by
BNM. In cases where there is no issuer or issue rating, the exposures are treated as unrated and accorded a risk weight
appropriate for unrated exposure in the respective category.
The external ratings are updated in the core banking system, and extracted and matched by the risk system according to
the above rules to determine the appropriate risk weights.
Refer to Appendix II and Appendices III (i) to III (ii).
5.3 Credit Risk Measurement
Credit evaluation is the process of analysing the creditworthiness of the prospective customer against ABB’s underwriting
criteria and the ability of ABB to make a return commensurate to the level of risk undertaken. A critical element in the evaluation
process is the assignment of a credit risk grade to the counterparty. This assists in the risk assessment and decision making
process. ABB has developed internal rating models to support the assessment and quantification of credit risk.
For consumer mass market products, statistically developed application scorecards are used by the Business to assess the
risks associated with the credit application. The scorecards are used as a decision support tool at loan origination.
Over-the-Counter ('OTC') Derivatives
The OTC Derivatives credit exposure is computed using the Current Exposure Method. Under the Current Exposure method,
computation of credit equivalent exposure for interest rate and exchange rate related contracts is derived from the summation
of the two elements; the replacement costs (obtained by marking-to-market) of all contracts and the potential future exposure
of outstanding contracts (Add On charges depending on the specific remaining tenor to maturity).
173
AFFIN BANK BERHAD
(25046-T)
5.0 Credit Risk (continued)
5.4 Risk Limit Control and Mitigation Policies
ABB employs various policies and practices to control and mitigate credit risk.
Lending limits
ABB establishes internal limits and related lending guidelines to manage large exposures and avoid undue concentration of
credit risk in its credit portfolio. The limits include single customer groupings, connected parties, and geographical and industry
segments. These risks are monitored regularly and the limits reviewed annually or sooner depending on changing market and
economic conditions.
The credit risk exposure for derivative and loan books is managed as part of the overall lending limits with customers together
with potential exposure from market movements.
Collateral
Credits are established against borrower’s capacity to repay rather than rely solely on security. However, collateral may be
taken to mitigate credit risk. The main collateral types accepted and given value by ABB are:
•
•
•
•
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;
For other loans, charges over business assets such as premises, inventories, trade receivables or deposits.
In order to be recognised as security, all items pledged must have value and ABB must have physical control and/or legal title
thereto, together with the necessary documentation to enable ABB to realise the asset without the co-operation of the asset
owner. Other items, such as personal or corporate guarantees, may be taken for comfort but will not be treated as security
for approval purposes. Valuations are updated on a regular basis.
Prior to acceptance of any item as security, verification must be done to ensure that the security exists and an accurate and
up-to-date valuation can be placed upon it. A pre-facility disbursement site visit must be undertaken in respect of landed
security of significant value. Where third parties are used to undertake a valuation they must be taken from a list of approved
valuers.
All assets which provide security to ABB must be adequately insured with an insurer from the list of approved insurers.
The security documentation process is centralised in an independent Security Documentation Section at Head Office. ABB
adopts standardised Letter of Offer and Legal Documents. Variations/amendments require the approval from the relevant
approving authority in the Bank.
Master Netting Arrangements
The Bank presently does not have any master netting arrangement with its business counterparties.
Financial covenants (for credit related commitments and loan books)
The primary purpose of these instruments is to ensure that funds are available to a customer when required. Guarantees and
standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit are collaterised by
the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan.
Commitment to extend credit represents unutilised portion of approved credit in the form of loans, guarantees or letters of
credit. In terms of credit risk, ABB is potentially exposed to loss in an amount equal to the total unutilised commitments.
However, the potential amount of loss is less than the total unutilised commitments, as most commitments to extend credit
are contingent upon customers maintaining specific minimum credit standards.
ABB monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree
of credit risk than short-term commitments.
Refer to Appendix IV (a) to (b)
Annual Report 2010
174
5.5 Credit Risk Monitoring
Retail credits are actively monitored and managed on a portfolio basis by product type. A new collection management system
has been implemented with a dedicated team in place to promptly identify, monitor and manage delinquent accounts at early
stages of delinquency.
Corporate credits and large individual accounts are reviewed by the Business Units at least once a year against updated
information. This is to ensure that the credit grades remain appropriate and detect any signs of weaknesses or deterioration
in the credit quality. Remedial action is taken where evidence of deterioration exists.
Early Alert Process is in place as part of a means to pro-actively identify, report and manage deteriorating credit quality.
Watchlist accounts are closely reviewed and monitored with corrective measures initiated to prevent them from turning
impaired. As a rule, Watchlist accounts are either worked up or worked out within a period of twelve months.
Portfolio management risk reports are submitted regularly to EAC and BRMC.
5.6 Impairment Provisioning
Individual impairment provisioning
Significant loans, with or without past due status, are subject to individual assessment for impairment when an evidence of
impairment surfaces or at the very least once annually during the annual review process.
If impaired, the amount of loss is measured as the difference between the asset‘s carrying value and the present value of
estimated future cash flows discounted at the financial assets original effective interest rate. The level of impairment allowance
on significant loans is reviewed regularly, at least quarterly or more often when circumstances require.
Significant loans that are deemed not impaired after individual assessment are included in a group of loans with similar
characteristics and collectively assessed for impairment.
Collective impairment provisioning
All loans are grouped in respective business segments according to similar credit risk characteristics and is generally based
on industry, asset or collateral type, credit grade and past due status grouped based on business segments.
Portfolio provisioning is determined for each segment based on its respective loss probabilities and other information relevant
to estimation of the future cash flows of each segment.
Collective provisioning is applicable to all loans not covered under individual assessment as well as significant loans that are
deemed not impaired after individual assessment.
Total loans, advances and financing - credit quality
All loans, advances and financing are categorised into “neither past due nor impaired”, “past due but not impaired” and
“impaired”. Past due loans refer to loans that are overdue by one day or more. Impaired loans are loans with months-inarrears more than 90 days or with impaired allowances.
175
AFFIN BANK BERHAD
(25046-T)
5.6 Impairment Provisioning (continued)
Analysed by economic sector
Past due loans
Primary agriculture
Manufacturing
Construction
Real estate
Household
Others
The Group
2010
RM’000
The Bank
2010
RM'000
25,065
1,034
55,979
1,701
195,354
183,208
69,846
58,578
271,344
130,868
2,220,092
142
25,000
1,034
53,530
1,580
132,596
181,164
63,909
57,658
222,654
130,467
1,872,993
142
3,213,211
2,742,727
5,778
47,302
1,184
92,408
1,900
15,122
3,368
8,786
5,778
40,105
1,184
65,022
1,900
14,600
3,368
7,752
175,848
139,709
6,039
1,046
45,226
1,191
98,539
2,075
15,588
6,599
3,789
17,931
6,039
1,046
43,262
1,191
75,814
2,075
15,066
6,599
3,789
17,835
198,023
172,716
Primary agriculture
Manufacturing
Construction
Real estate
Individual impairment charged
Primary agriculture
Manufacturing
Construction
Real estate
Annual Report 2010
176
Analysed by economic sector (continued)
Individual impairment written-off
Manufacturing
Construction
Real estate
The Group
2010
RM’000
The Bank
2010
RM'000
1,046
2,677
71,454
7,157
5,271
6,549
63,076
13,675
1,046
1,502
71,454
7,157
5,271
6,549
63,076
13,675
170,905
169,730
2,877
1,350
28,455
716
18,408
8,258
12,352
5,406
15,591
6,658
268,318
27,312
2,642
1,337
27,135
678
16,102
8,035
11,932
5,380
13,891
5,517
249,333
1,238
395,701
343,220
The Group
2010
RM’000
The Bank
2010
RM'000
1,613
150,752
126,917
145,745
909,378
654,069
123,082
134,772
320,955
98,030
65,665
56,413
148,198
277,149
269
204
1,271
89,000
118,361
108,697
795,447
578,597
111,816
131,112
299,750
71,358
14,879
7,026
144,516
270,436
257
204
3,213,211
2,742,727
Primary agriculture
Manufacturing
Construction
Real estate
Household
Others
Analysed by geographical area
Past due loans
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Sarawak
Sabah
Labuan
Abroad
177
AFFIN BANK BERHAD
(25046-T)
Analysed by geographical area (continued)
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Abroad
The Group
2010
RM’000
The Bank
2010
RM'000
6,394
646
2,084
68,011
55,911
2,127
777
2,778
5,968
2,613
1,154
27,386
6,394
640
2,084
60,293
54,881
2,127
777
2,778
5,968
2,613
1,154
-
175,849
139,709
312
11,156
12,111
13,267
128,479
154,491
8,937
9,198
26,892
6,658
4,105
3,129
6,079
9,895
992
303
9,581
11,227
12,138
91,650
150,545
8,103
8,889
25,460
5,266
2,767
734
5,930
9,635
992
395,701
343,220
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Wilayah Persekutuan
Negeri Sembilan
Melaka
Johor
Pahang
Terengganu
Kelantan
Sarawak
Sabah
Labuan
5.7 Credit Risk Culture
ABB recognises that learning is a continuous journey and is committed to enhance the knowledge and required skills set of
its staff. It places strong emphasis in creating and enhancing risk awareness in the organisation.
For effective and efficient staff learning, ABB has implemented an E–Learning Program with an online Learning Management
System ('LMS'). The LMS provides staff with a progressive self-learning alternative at own pace.
GRM commenced an Internal Credit Certification ('ICC') Programme for both Business Banking and Consumer Credit in July
2009 and August 2009 respectively.
The aim of the ICCs is to assist the core credit related group of personnel in ABB achieve a minimum level of knowledge and
analytical skills required to make sound corporate and commercial loans to customers. It is envisaged that the core credit
related group of personnel would all be certified within 2 to 3 years.
Annual Report 2010
178
6.0 Market Risk
6.1 Market Risk Management Objectives and Policies
Market risk is defined as the risk of losses to ABB’s portfolio positions arising from movements in market prices. ABB’s market
risk management objective is to ensure that market risk is appropriately identified, measured, controlled, managed and
reported.
ABB’s exposure to market risk stems primarily from interest rate risk and foreign exchange rate risk. Interest rate risk arises
mainly from differences in timing between the maturities or repricing of assets, liabilities and derivatives. ABB is also exposed
to basis risk when there is a mismatch between the change in price of a hedge and the change in price of the assets it
hedges. Foreign exchange rate risk arises from unhedged positions of customers' requirements and proprietary positions.
6.2 Application of Standardised Approach for Market Risk
ABB adopts the Standardised Approach for the purpose of calculating the capital requirement for market risk.
Refer to Appendix I.
6.3 Market Risk Measurement, Control and Monitoring
Market risk is primarily controlled through the imposition of Cut-loss, Value-at-Risk ('VaR') and Net Open Position Limits which
are approved by both ALCO and BRMC in accordance with ABB’s risk appetite. These limits are set and reviewed regularly
according to a number of factors, including liquidity and ABB’s business strategy. In addition, ABB conducts periodic stress
test of its respective portfolios to ascertain the market risk under abnormal market conditions. For the asset liability mismatch
position in the statement of financial position, the risk is measured using Net Interest Income simulations based on projected
interest rate scenarios managed through limits set over time buckets together with an Overall Risk Tolerance Limit.
The Bank's Management, ALCO and BRMC are regularly kept informed of its risk profile and positions.
6.4 Value-at-Risk ('VaR')
Value-at-Risk ('VaR') is used to compute the maximum potential loss amount over a specified holding period of a Trading
portfolio. It measures the risk of losses arising from potential adverse movements in interest rates and foreign exchange rates
that could affect values of financial instruments.
The Variance-Covariance Parametric methodology is adopted to compute the potential loss amount. This is a statistically
defined, probability-based approach that uses volatilities and correlations to quantify price risks. Under this methodology, a
matrix of historical volatilities and correlations is computed from the past 100 business days’ market data. VaR is then
computed by applying these volatilities and correlations to the outstanding Trading portfolio valued at current price levels.
Other risk measures include the following:
(i)
Mark-to-Market valuation tracks the current market value of the outstanding financial instruments.
(ii)
Stress tests are conducted to attempt to quantify market risk arising from low probability, abnormal market movements.
The stress test measure the change in value arising from range of extreme movements in the interest rates and foreign
exchange rates based on past experience and simulated stress scenarios.
(iii) Sensitivity/Dollar Duration is an additional measure of interest rate risk that is computed on a daily basis. It measures the
change in value of a portfolio resulting from a 0.01% increase in interest rates. This measure identifies ABB interest rate
exposures that are most vulnerable to interest rate changes and it facilitates the implementation of hedging strategies.
6.5 Foreign Exchange Risk
ABB takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position
and cash flows. The Board sets limits on the level of exposure by currency and in aggregate for both overnight and intra-day
positions, which are monitored daily.
6.6 Market Risk Culture
In October 2010, ABB introduced ICC-Market Risk with the Diagnostic Assessment conducted through the LMS.
179
AFFIN BANK BERHAD
(25046-T)
7.0 Liquidity Risk
7.1 Liquidity Risk Management Objectives and Policies
Liquidity risk is the risk of loss due to failure to access funds at reasonable cost to fund ABB's operations and meet its liabilities
when they fall due. Liquidity risk arises from ABB's funding activities and the management of its assets.
7.2 Liquidity Risk Measurement, Control and Monitoring
To measure and manage net funding requirements, ABB adopts BNM's New Liquidity Framework ('NLF'). The NLF ascertains
the liquidity condition based on the contractual and behavioral cash-flow of assets, liabilities and off-balance sheet
commitments, taking into consideration the realisable cash value of the eligible liquefiable assets.
ABB employs liquidity risk indicators as an early alert of any structural change for liquidity risk management. The risk is
measured monthly using internal and external qualitative and quantitative liquidity risk indicators. ABB also conducts liquidity
stress tests to gauge ABB’s resilience in the event of a funding crisis. In addition, ABB has in place the Contingency Funding
Plan to deal with liquidity crisis and emergencies.
BRMC is responsible for ABB's liquidity policy although the strategic management of liquidity has been delegated to ALCO.
BRMC is however, informed regularly of the liquidity situation.
8.0 Operational Risk
8.1 Operational Risk Management Objectives and Policies
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external
events. Such risks may result in omissions, errors and breakdowns that can potentially lead to financial loss or other indirect
losses to ABB.
ABB manages operational risk through a control based environment in which policies and procedures are formulated after
taking into account individual unit's business activities, the environment and market in which it is operating and any regulatory
requirement in force.
8.2 Application of Basic Indicator Approach for Operational Risk
ABB adopts the Basic Indicator Approach for the purpose of calculating the capital requirement for operational risk. The
capital requirement is calculated by taking 15% of ABB’s average annual gross income over the previous three years.
8.3 Operational Risk Measurement, Control and Monitoring
Risk is identified through the use of assessment tools and measured using threshold/limits mapped against risk matrix.
Monitoring and control procedures include the use of key control standards, independent tracking of risk, back-up procedures
and contingency plans, including disaster recovery and business continuity plans. This is supported by periodic reviews
undertaken by GIA to ensure adequacy and effectiveness of the Group Operational Risk Management process.
ABB gathers and reports operational risk loss and 'near miss' events to GORMC and BRMC. Appropriate remedial actions
are reviewed and implemented to minimise the recurrence of such events.
8.4 Operational Risk Culture
An Operational Risk Management certification programme is being conducted vide an e-learning portal. Respective
Businesses’ Operational Risk coordinators will first go through an on-line self-learning exercise before attempting on-line
assessments to measure their skills and knowledge level. This will enable GRM to prescribe appropriate training and
development activities for the coordinators. It is a requirement that all Operational Risk coordinators and staff engaged in
operational risk work are all duly certified.
Annual Report 2010
180
9.0 Shariah Compliance
Shariah Compliance and Review ('SCR') officer of the Bank conducts regular Shariah compliance and review to ensure that
documentation, procedures and execution of transactions are in accordance with the Shariah standards issued by AFFIN Group
Shariah Committee ('AGSC') and Shariah Advisory Council ('SAC') of BNM. The results of the review are reported to the AGSC.
Cases of non-Shariah compliance are thoroughly investigated to establish causes of their occurrence and to ensure introduction
of adequate controls to avoid their recurrence in the future.
The AGSC consists of three Shariah Committee members (Chairman and two members). The AGSC meets periodically or as and
when there is a need to hold a meeting. The members received a fixed sum of money as attendance fee for every meeting they
attend, in addition to a fixed amount paid monthly to each member as remuneration, irrespective of the number of meetings held
during the year or the financial results of the Bank.
181
AFFIN BANK BERHAD
(25046-T)
APPENDIX I
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.
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.
Disclosure on Capital Adequacy under the Standardised Approach (RM'000)
Group
2010
Gross
Exposure/
Net
EAD Exposures/
before
EAD
CRM after CRM
Exposure Class
1
CREDIT RISK
On Balance Sheet Exposures
Corporates
Regulatory Retail
Other Assets
Sovereigns/Central Banks
Public Sector Entities
Banks, Development Financial
Institutions & MDBs
Insurance Companies, Securities
Firms & Fund Managers
Residential Real Estate (RRE)
Financing
Higher Risk Assets
Defaulted Exposures
14,018,930 13,151,465 11,707,401
9,990,439 9,878,644 7,408,826
1,007,575 1,007,575
355,022
11,727,290 11,727,290
10,941
51,159
45,199
9,040
Total for On-Balance
Sheet Exposures
936,592
592,706
28,402
875
723
1,970,016
1,970,016
540,152
540,152
43,212
95,362
95,362
95,362
95,362
7,629
1,980,809
389,024
1,275,168
1,978,940
388,597
1,255,513
778,567
582,895
1,683,907
778,567
582,895
1,683,907
62,285
46,632
134,713
42,505,772 41,498,601 23,172,113
23,172,113
1,853,769
2,077,478
31,835
2,043,484
29,289
1,552,189
43,934
1,552,189
43,934
124,175
3,515
Total for Off-Balance
Sheet Exposures
2,109,313
2,072,773
1,596,123
1,596,123
127,690
44,615,085 43,571,374 24,768,236
24,768,236
1,981,459
-
5,549
2,177
MARKET RISK
Interest Rate Risk
Foreign Currency Risk
3
11,707,401
7,408,826
355,022
10,941
9,040
Off Balance Sheet Exposures
other than OTC derivatives
or credit derivatives
Defaulted Exposures
Total for On and Off-Balance
Sheet Exposures
2
Total Risk
Weighted
Minimum
Risk
Assets
Capital
Weighted after Effects Requirements
Assets
of PSIA
at 8%
OPERATIONAL RISK
Operational Risk
Total RWA and Capital Requirements
PSIA "Profit Sharing Investment Account"
OTC "Over The Counter"
Long
Position
Short
Position
2,609,530
8,899
2,473,385
22,612
136,145
(13,713)
69,361
27,211
2,062,578
26,927,386
165,006
24,768,236
2,154,191
Annual Report 2010
182
APPENDIX I
Group
2009
Gross
Exposure/
EAD
before
CRM
Exposure Class
1
CREDIT RISK
Corporates
Regulatory Retail
Other Assets
Institutions & MDBs
Financing
Higher Risk Assets
Equity Exposure
Defaulted Exposures
Sheet Exposures
Minimum
Capital
Requirements
at 8%
9,784,011
6,226,940
329,297
13,964
10,168
9,784,011
6,226,940
329,297
13,964
10,168
782,721
498,155
26,344
1,117
813
2,158,145
2,158,145
602,721
602,721
48,218
95,092
94,445
94,445
94,445
7,556
1,787,181
523,648
42,918
1,248,429
1,787,181
523,648
42,918
1,230,075
708,939
785,471
42,918
1,652,239
708,939
785,471
42,918
1,652,239
56,715
62,838
3,433
132,179
36,085,308 35,290,141 20,251,113
20,251,113
1,620,089
2,289,459
35,343
2,261,016
32,630
1,771,072
48,945
1,771,072
48,945
141,686
3,916
Sheet Exposures
2,324,802
2,293,646
1,820,017
1,820,017
145,602
38,410,110 37,583,787 22,071,130
22,071,130
1,765,691
-
5,321
2,064
MARKET RISK
Interest Rate Risk
3
11,940,769 11,284,642
8,418,717 8,302,885
829,957
829,957
8,985,402 8,985,402
55,050
50,843
Risk
Weighted
Assets
Total Risk
Weighted
Assets
after Effects
of PSIA
Defaulted Exposures
Sheet Exposures
2
Net
Exposure/
EAD
after CRM
OPERATIONAL RISK
Operational Risk
Long
Position
Short
Position
2,219,276
11,055
(2,094,522)
(18,073)
124,754
(7,017)
66,516
25,803
1,976,470
24,139,919
158,118
22,071,130
1,931,194
183
AFFIN BANK BERHAD
(25046-T)
APPENDIX I
(continued)
Bank
2010
Gross
Exposure/
Net
EAD Exposure/
before
EAD
CRM after CRM
Exposure Class
1
CREDIT RISK
Corporates
Regulatory Retail
Other Assets
Institutions & MDBs
Financing
Higher Risk Assets
Defaulted Exposures
12,540,053 11,749,181 10,626,610
8,055,493 7,951,324 5,963,336
1,286,037 1,286,037
525,486
8,186,533 8,186,533
51,159
45,199
9,040
Sheet Exposures
850,129
477,067
42,038
723
1,914,175
1,914,175
528,984
528,984
42,319
306
306
306
306
24
1,859,507
346,361
1,128,386
1,857,981
345,933
1,108,751
726,720
518,901
1,498,164
726,720
518,901
1,498,164
58,138
41,512
119,853
35,368,010 34,445,420 20,397,547
20,397,547
1,631,803
1,814,442
31,835
1,780,448
29,289
1,407,985
43,934
1,407,985
43,934
112,639
3,515
Sheet Exposures
1,846,277
1,809,737
1,451,919
1,451,919
116,154
37,214,287 36,255,157 21,849,466
21,849,466
1,747,957
-
5,549
1,809
MARKET RISK
Interest Rate Risk
3
10,626,610
5,963,336
525,486
9,040
Defaulted Exposures
Sheet Exposures
2
Total Risk
Weighted
Minimum
Risk
Assets
Capital
Weighted after Effects Requirements
Assets
of PSIA
at 8%
OPERATIONAL RISK
Operational Risk
Long
Position
Short
Position
2,609,530
4,300
2,473,385
22,612
136,145
(18,312)
69,361
22,612
1,776,655
23,718,094
142,132
21,849,466
1,897,447
Annual Report 2010
184
APPENDIX I
(continued)
Bank
2009
Gross
Exposure/
EAD
before
CRM
Exposure Class
1
CREDIT RISK
Corporates
Regulatory Retail
Other Assets
Institutions & MDBs
Financing
Higher Risk Assets
Equity Exposure
Defaulted Exposures
Sheet Exposures
Minimum
Capital
Requirements
at 8%
8,842,285
5,069,005
530,773
1,925
10,169
8,842,285
5,069,005
530,773
1,925
10,169
707,383
405,520
42,462
154
813
1,866,036
1,866,036
544,299
544,299
43,544
45
45
45
45
4
1,661,387
395,719
42,918
1,165,717
1,661,387
395,719
42,918
1,147,394
654,555
593,578
42,918
1,541,510
654,555
593,578
42,918
1,541,510
52,364
47,487
3,433
123,321
29,935,409 29,193,547 17,831,062
17,831,062
1,426,485
1,939,841
35,343
1,911,398
32,630
1,598,140
48,945
1,598,140
48,945
127,851
3,916
Sheet Exposures
1,975,184
1,944,028
1,647,085
1,647,085
131,767
31,910,593 31,137,575 19,478,147
19,478,147
1,558,252
-
5,321
1,446
MARKET RISK
Interest Rate Risk
3
10,632,554 10,024,632
6,870,382 6,758,972
1,188,466 1,188,466
6,057,135 6,057,135
55,050
50,843
Risk
Weighted
Assets
Total Risk
Weighted
Assets
after Effects
of PSIA
Defaulted Exposures
Sheet Exposures
2
Net
Exposure/
EAD
after CRM
OPERATIONAL RISK
Operational Risk
Long
Position
Short
Position
2,219,276
3,325
(2,094,522)
(18,073)
124,754
(14,748)
66,516
18,073
1,721,636
21,284,372
137,731
19,478,147
1,702,750
185
AFFIN BANK BERHAD
(25046-T)
APPENDIX I
Disclosure on Capital Adequacy under the Standardised Approach
(continued)
Market risk is defined as the risk of losses in on and off-balance sheet positions arising from movements in market prices. The Bank’s
Capital-at-Risk ('CaR') is defined as the amount of the Bank’s capital that is exposed to the risk of unexpected losses arising particularly
from movements in interest and foreign exchange rates. A CaR Limit is set as a management trigger to ensure that the Bank’s exposure
to such movements do not compromise the Bank’s capital adequacy. The Bank is currently adopting BNM’s Standardised Approach
for the computation of market risk capital charges. The market risk capital charges addresses among others, capital requirement for
market risk which includes the interest rate risk pertaining to the Bank’s exposure in the trading book as well as foreign exchange risk
in the trading and banking books.
The computation of market risk capital charge covers the following outstanding financial instruments:
a)
b)
c)
d)
Foreign Exchange
Interest Rate Swap ('IRS')
Cross Currency Swap ('CCS')
Fixed Income instruments (i.e. Private Debt and Government Securities)
PSE "Public Sector Entities"
MDB "Multilateral Development Banks"
FDI "Financial Development Institutions"
-
39,858
-
-
- 1,104,217
- 1,330,074
105,464 12,189,309
326,319
-
-
875
238
9,997,337
8,703
543,654
-
-
-
1,406,021
572,920
247,982 34,559
1,018 423,216
-
-
601,396
65,973
336,960
3,245
-
Total Risk
Weighted
Assets
APPENDIX II
-
-
-
- 12,320,649
3,099,600
619,920
1,406,021
492,107
2,476,573 1,238,286
9,997,337 7,498,003
- 12,973,742 12,973,742
1,297,452 1,946,178
-
-
-
1,751,344
573,341
39,824
-
Deduction from
Capital Base
45,209
-
PSEs
Higher
Risk
Assets
Total
Exposure
after
Netting &
Other
Credit Risk
Assets Equity Mitigation
-
11,719,253
131,982
10,941
-
Sovereigns &
Central Banks
Banks,
MDBs
and
FDIs
Insurance
Companies,
Securities
Firms
& Fund
Regulatory Residential
Managers Corporates
Retail Mortgages
Exposures after Netting and Credit Risk Mitigation
Average
Risk Weight
0%
10%
20%
35%
50%
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
Risk
Weights
Group
2010
Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM'000)
Annual Report 2010
186
-
217,056
-
-
- 1,218,925
- 1,104,369
103,608 10,404,079
570,664
-
-
720
23,071
8,413,463
42,655
365,113
-
-
-
1,231,008
579,981
188,143
- 529,569
-
Higher
Risk
Assets
Equity
Total Risk
Weighted
Assets
-
-
-
-
470,934
9,434,672
38,131
3,439,602
687,920
1,231,008
430,853
2,312,468 1,156,234
8,413,463 6,310,097
319,334 42,918 11,285,670 11,285,670
1,558
1,466,904 2,200,356
-
Other
Assets
-
-
1,922,669
605,047
172,894
-
Residential
Mortgages
Deduction from
Capital Base
50,853
-
Corporates
Regulatory
Retail
Total
Exposure
after
Netting &
Credit Risk
Mitigation
-
8,963,738
208,304
12,039
-
0%
10%
20%
35%
50%
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
PSEs
Banks,
MDBs
and
FDIs
Insurance
Companies,
Securities
Firms
& Fund
Managers
APPENDIX II
Average
Risk Weight
Sovereigns &
Central Banks
Risk
Weights
Group
2009
(continued)
187
AFFIN BANK BERHAD
(25046-T)
-
39,858
-
-
760,650
- 1,229,250
10,408 11,098,278
326,319
-
-
875
238
8,070,017
3,875
482,009
-
-
-
1,348,467
509,514
232,490
1,018 364,240
-
-
562,902
247,060
476,074
-
Total Risk
Weighted
Assets
-
-
-
8,752,339
2,737,454
547,491
1,348,467
471,963
2,312,343 1,156,172
8,070,017 6,052,513
- 11,860,949 11,860,949
1,173,586 1,760,378
-
-
-
1,683,645
573,341
39,824
-
Deduction from
Capital Base
45,209
-
PSEs
Higher
Risk
Assets
Total
Exposure
after
Netting &
Other
Credit Risk
Assets Equity Mitigation
-
8,189,437
15
-
Sovereigns &
Central Banks
Banks,
MDBs
and
FDIs
Insurance
Companies,
Securities
Firms
& Fund
Regulatory Residential
Managers Corporates
Retail Mortgages
APPENDIX II
Average
Risk Weight
0%
10%
20%
35%
50%
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
Risk
Weights
Bank
2010
(continued)
Annual Report 2010
188
-
200,898
-
9,208
-
-
837,851
1,037,479
9,436,542
554,673
-
-
720
21,804
6,869,550
38,726
319,049
-
-
-
1,174,260
510,464
178,064
- 401,312
-
Higher
Risk
Assets
Equity
Total Risk
Weighted
Assets
-
-
-
-
445,988
6,493,498
264,632
2,794,241
558,848
1,174,260
410,991
2,174,794 1,087,397
6,869,550 5,152,162
477,846 42,918 10,356,198 10,356,198
1,275,034 1,912,551
-
Other
Assets
-
-
1,630,560
605,047
172,894
-
Residential
Mortgages
Deduction from
Capital Base
50,853
-
Corporates
Regulatory
Retail
Total
Exposure
after
Netting &
Credit Risk
Mitigation
-
6,047,510
9,625
-
0%
10%
20%
35%
50%
75%
90%
100%
110%
125%
135%
150%
270%
350%
400%
625%
938%
1250%
PSEs
Banks,
MDBs
and
FDIs
Insurance
Companies,
Securities
Firms
& Fund
Managers
APPENDIX II
Average
Risk Weight
Sovereigns &
Central Banks
Risk
Weights
Bank
2009
(continued)
189
AFFIN BANK BERHAD
(25046-T)
(i)
AAA to AA-
Rating &
Investment Inc
433,081
AAA to AA-
MARC
Total
AAA to AA3
RAM
433,081
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
1,155,313
1,155,313
A+ to A-
A+ to A-
A to A3
A+ to A-
A+ to A-
A1 to A3
3,570
3,570
BBB+ to BB-
BBB+ to BB-
BBB1 to BB3
BBB+ to BB-
BBB+ to BB-
Baa1 to Ba3
-
-
B+ to D
B+ to D
B to D
B+ to D
B+ to D
B1 to C
Ratings of Corporate by Approved ECAIs
Credit Exposures (using Corporate Risk Weights)
Public Sector Entities (applicable for entities risk weighted
based on their external ratings as corporates)
Insurance Cos, Securities Firms & Fund Managers
Corporates
On and Off-Balance-Sheet Exposures
Exposure Class
Group
2010
Disclosures on Rated Exposures according to Ratings by ECAIs (RM'000)
14,341,552
51,184
105,466
14,184,902
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
APPENDIX III
Annual Report 2010
190
(i)
AAA to AA-
Rating &
Investment Inc
427,064
AAA to AA-
MARC
Total
AAA to AA3
RAM
427,064
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
1,054,489
1,054,489
A+ to A-
A+ to A-
A to A3
A+ to A-
A+ to A-
A1 to A3
3,570
3,570
BBB+ to BB-
BBB+ to BB-
BBB1 to BB3
BBB+ to BB-
BBB+ to BB-
Baa1 to Ba3
-
-
B+ to D
B+ to D
B to D
B+ to D
B+ to D
B1 to C
Ratings of Corporate by Approved ECAIs
Credit Exposures (using Corporate Risk Weights)
Public Sector Entities (applicable for entities risk weighted
based on their external ratings as corporates)
Corporates
Exposure Class
Bank
2010
(continued)
12,806,193
51,184
10,410
12,744,599
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
APPENDIX III
191
AFFIN BANK BERHAD
(25046-T)
AAA to AA-
Rating &
Investment Inc
911,685
AAA to AA-
MARC
Total
AAA to AA3-
RAM
911,685
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Banks, MDBs and FDIs
Exposure Class
11,851,234
11,851,234
A+ to A-
A+ to A-
A+ to A-
A1 to A3
-
-
BBB+ to BBB-
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
10,941
10,941
BB+ to B-
BB+ to B-
BB+ to B-
Ba1 to B3
62,276
62,276
A+ to A-
A+ to A-
A1 to A3
A+ to A-
A+ to A-
A1 to A3
116,038
116,038
BBB+ to BBB-
BBB+ to BBB-
BBB1+ to BBB3
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
-
-
BB+ to B-
BB+ to B-
BB1 to B3
BB+ to B-
BB+ to B-
Ba1 to B3
Caa1 to C
157
157
CCC+ to C
C+ to D
C1+ to D
CCC+ to D
CCC+ to D
Caa1 to C
-
-
CCC+ to C
CCC+ to D
1,274,354
1,274,354
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
-
-
Unrated
Unrated
Unrated
Unrated
APPENDIX III
CCC+ to D
Ratings of Banking Institutions by Approved ECAIs
-
Total
AAA to AA-
Rating &
Investment Inc
-
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Ratings of Sovereigns and Central Banks by Approved ECAIs
Sovereigns and Central Banks
Exposure Class
Group
2010
(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM'000)
(continued)
Annual Report 2010
192
(i)
AAA to AA-
Rating &
Investment Inc
899,824
AAA to AA-
MARC
Total
AAA to AA3-
RAM
899,824
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Banks, MDBs and FDIs
Exposure Class
8,189,452
8,189,452
A+ to A-
A+ to A-
A+ to A-
A1 to A3
-
-
BBB+ to BBB-
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
-
-
BB+ to B-
BB+ to B-
BB+ to B-
Ba1 to B3
62,276
62,276
A+ to A-
A+ to A-
A1 to A3
A+ to A-
A+ to A-
A1 to A3
116,038
116,038
BBB+ to BBB-
BBB+ to BBB-
BBB1+ to BBB3
BBB+ to BBB-
BBB+ to BBB-
Baa1 to Baa3
-
-
BB+ to B-
BB+ to B-
BB1 to B3
BB+ to B-
BB+ to B-
Ba1 to B3
157
157
CCC+ to C
C+ to D
C1+ to D
CCC+ to D
CCC+ to D
Caa1 to C
-
-
CCC+ to C
CCC+ to D
CCC+ to D
1,218,515
1,218,515
Unrated
Unrated
Unrated
Unrated
Unrated
Unrated
-
-
Unrated
Unrated
Unrated
Unrated
APPENDIX III
Caa1 to C
Ratings of Banking Institutions by Approved ECAIs
-
Total
AAA to AA-
Rating &
Investment Inc
-
AAA to AA-
AAA to AA-
S&P
Fitch
Aaa to Aa3
Moodys
Ratings of Sovereigns and Central Banks by Approved ECAIs
Sovereigns and Central Banks
Exposure Class
Bank
2010
(continued)
193
AFFIN BANK BERHAD
(25046-T)
Annual Report 2010
194
a)
APPENDIX IV
Disclosures on Credit Risk Mitigation (RM'000)
Group
2010
Exposure Class
Exposures
Exposures
before Covered by
CRM Guarantees/
Credit
Derivatives
Exposures
Covered by
Eligible
Financial
Collateral
Exposures
Covered by
Other
Eligible
Collateral
Credit Risk
On-Balance Sheet Exposures
Banks, Development Financial Institutions & MDBs
Corporates
Regulatory Retail
Residential Mortgages
Higher Risk Assets
Other Assets
Defaulted Exposures
11,727,290
51,159
1,970,016
95,362
14,018,930
9,990,439
1,980,809
389,024
1,007,575
1,275,168
242,210
518
357
5,975
2
901,322
111,915
1,869
427
22,202
-
Total for On-Balance Sheet Exposures
42,505,772
243,085
1,043,712
-
Off-Balance Sheet Exposures
Off-Balance Sheet exposures other than
OTC derivatives or credit derivatives
Defaulted Exposures
2,077,478
31,835
-
-
-
Total for Off-Balance Sheet Exposures
2,109,313
-
-
-
44,615,085
243,085
1,043,712
-
Total On and Off-Balance Sheet Exposures
195
AFFIN BANK BERHAD
(25046-T)
APPENDIX IV
a)
Disclosures on Credit Risk Mitigation (RM'000)
Bank
2010
Exposure Class
Exposures
Covered by
Eligible
Financial
Collateral
Exposures
Covered by
Other
Eligible
Collateral
Credit Risk
On-Balance Sheet Exposures
Banks, Development Financial Institutions & MDBs
Corporates
Regulatory Retail
Residential Mortgages
Higher Risk Assets
Other Assets
Defaulted Exposures
8,186,533
51,159
1,914,175
306
12,540,053
8,055,493
1,859,507
346,361
1,286,037
1,128,386
242,210
518
357
5,975
2
824,732
104,288
1,526
427
22,181
-
Total for On-Balance Sheet Exposures
35,368,010
243,085
959,131
-
Off-Balance Sheet Exposures
Off-Balance Sheet exposures other than
OTC derivatives or credit derivatives
Defaulted Exposures
1,814,442
31,835
-
-
-
Total for Off-Balance Sheet Exposures
1,846,277
-
-
-
37,214,287
243,085
959,131
-
Total On and Off-Balance Sheet Exposures
b)
Exposures
Exposures
before Covered by
CRM Guarantees/
Credit
Derivatives
Disclosure on Off-Balance Sheet and Counterparty Credit Risk
Counterparty Credit Risk is the risk that the counterparty to a transaction could default before the final settlement of the
transaction's cashflows. An economic loss could occur if the transactions with the counterparty has a positive economic value
for the Bank at the time of default.
In contrast to the exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank
faces the risk of loss, Counterparty Credit Risk creates a bilateral risk of loss where the market value for many types of transactions
can be positive or negative to either counterparty.
In respect of off-balance sheet items, the credit risk inherent in each off-balance sheet instrument is translated into an on-balance
sheet exposure equivalent (credit equivalent) by multiplying the nominal principal amount with a credit conversion factor ('CCF')
as prescribed by the Standardised Approach under the Risk Weighted Capital Adequacy Framework. The resulting amount is then
weighted against the risk weight of the counterparty. In addition, counterparty risk weights for over-the-counter ('OTC') derivative
transactions will be determined based on the external rating of the counterparty and will not be subject to any specific ceiling.
Annual Report 2010
196
b)
APPENDIX IV
Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM'000)
(continued)
Group
2010
Description
Direct Credit Substitutes
Transaction related contingent Items
Short Term Self Liquidating trade related contingencies
One year or less
Over one year to five years
Interest/Profit rate related contracts:
One year or less
Over five years
Other commitments, such as formal standby facilities
and credit lines, with an original maturity of over one year
and credit lines, with an original maturity of up to one year
Total
Positive Fair
Value of
Principlal
Derivative
Amount
Contracts
Credit
Equivalent
Amount
Risk
Weighted
Amount
408,608
2,387,456
1,232,752
-
408,609
1,193,728
246,551
299,520
1,022,073
140,554
2,215,359
201,120
25,842
10,570
50,821
19,678
19,952
8,217
93,784
956,256
445,273
2,664
7,079
14
32,602
38,490
3
7,936
8,842
4,247,549
-
-
-
6,062,519
594,104
-
118,821
89,026
18,844,780
46,155
2,109,314
1,596,123
495,326
2,648,189
1,401,193
-
495,326
1,324,094
280,239
470,810
1,106,247
120,271
2,111,158
103,687
18,440
3,223
45,883
10,310
20,345
4,347
385,000
589,721
440,277
3,981
4,083
910
18,380
38,564
184
6,655
7,910
3,957,040
-
-
-
5,231,059
-
-
-
555,478
-
111,096
83,248
17,918,128
29,727
2,324,802
1,820,017
Group
2009
One year or less
One year or less
Over five years
Any commitments that are unconditionally cancelled at
any time by the bank without prior notice
Total
197
AFFIN BANK BERHAD
(25046-T)
APPENDIX IV
b)
Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM'000)
(continued)
Bank
2010
Description
One year or less
One year or less
Over five years
Total
Positive Fair
Value of
Principlal
Derivative
Amount
Contracts
Credit
Equivalent
Amount
Risk
Weighted
Amount
382,080
2,189,031
546,276
-
382,080
1,094,516
109,255
280,656
928,260
109,027
2,215,359
201,120
25,842
10,570
50,821
19,678
19,952
8,217
93,784
956,256
445,273
2,664
7,079
14
32,602
38,490
3
7,936
8,842
3,837,655
-
-
-
5,360,954
594,104
-
118,821
89,026
16,821,892
46,155
1,846,277
1,451,919
444,676
2,480,918
324,530
-
444,676
1,240,459
64,906
437,598
1,022,917
63,881
2,111,158
103,687
18,440
3,223
45,883
10,310
20,345
4,347
385,000
589,721
440,277
3,981
4,083
910
18,380
38,564
184
6,655
7,910
3,673,199
-
-
-
4,651,975
555,478
-
111,096
83,248
15,760,619
29,727
1,975,184
1,647,085
Bank
2009
One year or less
One year or less
Over five years
Total
Annual Report 2010
198
c)
APPENDIX IV
Disclosures on Market Risk - Interest Rate Risk/Rate of Return Risk in the Banking Book
Interest rate risk is the current and prospective impact to the Bank's financial condition due to adverse changes in the interest rates
to which the balance sheet is exposed. The objective is to manage interest rate risk to achieve stable and sustainable net interest
income in the long term which impact can be viewed from the perspectives of (1) earnings in the next 12 months, and (2) economic
value.
(1) Next 12 months' Earnings - Interest rate risk from the earnings perspective is the impact based on changes to the net interest
income over the next 12 months. This risk is measured monthly through sensitivity analysis including the application of an
instantaneous 100 basis point parallel shock in interest rates across the yield curve. The prospective change to the net interest
income is measured using an Asset Liability Management simulation model which incorporates the assessment of both existing
and new business.
(2) Economic Value - Measuring the change in the economic value of equity is an assessment of the long term impact to the
earnings potential. This is assessed through the application of relevant duration factors to capture the net economic value impact
over the long term or total life of all balance sheet assets and liabilities to adverse changes in interest rates.
The above calculations do not take into account loan prepayments and places non-maturity deposits in the overnight bucket.
Type of Currency
RM million
Group
2010
Impact on Positions
(100 basis points) Parallel Shift
Increase/(Decline) Increase/(Decline)
in Earnings in Economic Value
Bank
2010
Impact on Positions
(100 basis points) Parallel Shift
Increase/(Decline) Increase/(Decline)
in Earnings in Economic Value
Ringgit Malaysia
US Dollar
Great Britain Pound
Australian Dollar
Singapore Dollar
Japanese Yen
Others (*)
20.3
4.1
0.4
0.4
0.3
0.3
(0.1)
311.4
7.4
1.1
0.8
2.2
0.8
(0.0)
15.6
4.2
0.4
0.4
0.3
0.3
(0.1)
328.1
7.2
1.1
0.8
2.2
0.8
(0.0)
Total
25.7
323.7
21.1
340.2
*
Others comprise of NZD, EUR, HKD and AED currencies where the amount of each currency is relatively small.

notes to the financial statements - AFFINBANK

Transcription

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