AFFIN Bank Berhad - AFFINBANK - Home Bank Berhad (Incorporated in Malaysia) INTERIM FINANCIAL...

Company No: 25046 T

AFFIN Bank Berhad(Incorporated in Malaysia)

INTERIM FINANCIAL STATEMENTS

UNAUDITED STATEMENTS OF FINANCIAL POSITION as at 30 September 2017

Current Previous Current Previous

Financial Financial Financial Financial

Quarter Year-End Quarter Year-End

Note 30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

ASSETS

Cash and short-term funds 5,279,229 4,364,490 3,396,598 3,337,831

Deposits and placements with banks

and other financial institutions 233,129 152,234 253,210 406,075

Investment accounts due from

designated financial institutions 13 - - 2,222,292 2,110,079

Derivative financial assets 14 62,035 167,304 62,585 166,240

Financial investments available-for-sale 15 10,843,234 10,279,997 8,691,947 8,446,589

Financial investments held-to-maturity 16 189,229 373,524 121,944 301,402

Loans, advances and financing 17 43,562,151 42,668,297 29,737,551 30,753,354

Other assets 18 92,210 61,932 59,625 53,941

Amount due from subsidiaries - - - 196,839

Amount due from joint ventures 50,636 46,725 - -

Amount due from associate 500 500 - -

Tax recoverable 7,539 15,492 7,539 15,462

Deferred tax assets 2,609 8,056 - -

Statutory deposits with

Bank Negara Malaysia 1,627,507 1,482,000 1,175,167 1,150,000

Investment in subsidiaries - - 774,724 575,224

Investment in associate 750 750 - -

Property and equipment 421,921 401,799 414,996 394,717

Intangible assets 168,614 164,089 172,506 167,982

TOTAL ASSETS 62,541,293 60,187,189 47,090,684 48,075,735

LIABILITIES AND EQUITY

Deposits from customers 19 48,080,503 47,633,056 34,972,160 37,106,463

Investment accounts of customers 579 - - -

Deposits and placements of banks and

other financial institutions 20 4,024,435 3,547,203 2,239,286 2,583,235

Obligation on securities sold

under repurchase agreements 1,016,652 999,740 1,016,652 999,740

Derivative financial liabilities 21 180,582 402,772 180,806 409,283

Bills and acceptances payable 51,576 37,726 51,576 37,726

Other liabilities 22 505,599 439,488 476,545 402,445

Amount due to subsidiairies - - 184,023 41,395

Provision for taxation 1,466 6,022 - -

Deferred tax liabilities 19,347 12,884 19,347 12,884

Subordinated term loan and Medium Term Note 2,611,413 1,304,592 2,611,413 1,304,592

TOTAL LIABILITIES 56,492,152 54,383,483 41,751,808 42,897,763

Share capital 2,547,674 1,688,770 2,547,674 1,688,770

Reserves 23 3,501,467 4,114,936 2,791,202 3,489,202

TOTAL EQUITY 6,049,141 5,803,706 5,338,876 5,177,972

TOTAL LIABILITIES AND EQUITY 62,541,293 60,187,189 47,090,684 48,075,735

COMMITMENTS AND

CONTINGENCIES 30 21,411,562 22,483,498 18,749,913 21,185,728

Capital Adequacy

CET1 capital ratio 34 11.547% 12.026% 11.339% 12.378%

Tier 1 capital ratio 34 11.547% 12.026% 11.339% 12.378%

Total capital ratio 34 19.077% 15.685% 20.285% 15.986%

The Group The Bank

1

Company No: 25046 T



UNAUDITED INCOME STATEMENTS for the financial quarter ended 30 September 2017

Current Preceding Year Current Preceding Year

Financial Corresponding Financial Corresponding

Quarter Quarter Quarter Quarter

Note 30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Interest income 24 576,517 580,814 1,739,391 1,764,805

Interest expense 25 (370,235) (367,343) (1,109,879) (1,142,967)

Net interest income 206,282 213,471 629,512 621,838

Income from Islamic banking business 26 84,557 69,048 235,782 193,313

290,839 282,519 865,294 815,151

Other operating income 27 37,115 60,774 160,458 150,594

Net income 327,954 343,293 1,025,752 965,745

Other operating expense 28 (240,642) (171,098) (624,269) (521,722)

Operating profit before allowances 87,312 172,195 401,483 444,023

Allowances for impairment losses on

loans, advances and financing 29 (28,885) (3,664) (71,268) (5,040)

Allowance for impairment losses on

securities - (3,537) - (3,537)

58,427 164,994 330,215 435,446

Share of joint venture's results - - - -

Profit before zakat and taxation 58,427 164,994 330,215 435,446

Zakat (3,000) - (3,000) (2,887)

Profit before taxation 55,427 164,994 327,215 432,559

Taxation (15,525) (35,883) (78,896) (98,381)

Net profit after zakat and taxation 39,902 129,111 248,319 334,178

Attributable to:

Equity holder of the Bank 39,902 129,111 248,319 334,178

Earnings per share (sen):

- Basic 2.4 7.6 14.7 19.8

Individual Quarter Cumulative Quarter

The Group The Group

2

Company No: 25046 T



UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME for the financial quarter

ended 30 September 2017 (continued)




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Profit after zakat and taxation 39,902 129,111 248,319 334,178

Other comprehensive income:

Items that may be reclassified subsequently

to profit and loss:

Net fair value change in financial

investments available-for-sale 19,522 43,998 96,600 171,108

Deferred tax on financial investments

available-for-sale (4,685) (10,608) (23,184) (40,864)

Other comprehensive income for

the financial period, net of tax 14,837 33,390 73,416 130,244

Total comprehensive income for the

financial period 54,739 162,501 321,735 464,422

Attributable to equity holder of

the Bank:

- Total comprehensive income 54,739 162,501 321,735 464,422


The Group The Group

3

Company No: 25046 T



UNAUDITED INCOME STATEMENTS for the financial quarter ended 30 September 2017

(continued)




Note 30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Interest income 24 574,946 579,941 1,735,053 1,762,528

Interest expense 25 (370,235) (367,346) (1,109,879) (1,142,974)

Net interest income 204,711 212,595 625,174 619,554

Income from Islamic banking business - - - -

204,711 212,595 625,174 619,554

Other operating income 27 36,919 60,526 160,155 150,153

Net income 241,630 273,121 785,329 769,707

Other operating expense 28 (196,034) (136,948) (497,985) (424,515)

Operating profit before allowances 45,596 136,173 287,344 345,192

Allowances for impairment losses on

loans, advances and financing 29 (21,920) 3,437 (47,802) (6,812)

Allowance for impairment losses on

securities - (3,537) - (3,537)

Profit before zakat and taxation 23,676 136,073 239,542 334,843

Zakat - - - -


Taxation (7,059) (27,975) (57,566) (76,508)

Net profit after zakat and taxation 16,617 108,098 181,976 258,335

Attributable to:

Equity holder of the Bank 16,617 108,098 181,976 258,335

Earnings per share (sen):

- Basic 1.0 6.4 10.8 15.3

The Bank The Bank


4

Company No: 25046 T



UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME for the financial quarter





30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Profit after zakat and taxation 16,617 108,098 181,976 258,335

Other comprehensive income:

Items that may be reclassified subsequently

to profit and loss:

Net fair value change in financial

investments available-for-sale 15,543 33,957 72,669 139,231

Deferred tax on financial investments

available-for-sale (3,731) (8,197) (17,441) (33,213)

Other comprehensive income for

the financial period, net of tax 11,812 25,760 55,228 106,018

Total comprehensive income for the

financial period 28,429 133,858 237,204 364,353

Attributable to equity holder of

the Bank:

- Total comprehensive income 28,429 133,858 237,204 364,353

The Bank The Bank


5

Company No: 25046 T



UNAUDITED STATEMENTS OF CHANGES IN EQUITY for the financial quarter

ended 30 September 2017

AFS

Share Share Statutory revaluation Regulatory Retained

capital premium reserves reserves reserves profits Total

The Group RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At 1 January 2017 1,688,770 858,904 1,721,637 75,229 280,204 1,178,962 5,803,706

Net profit for the financial period - - - - - 248,319 248,319

Other Comprehensive income

(net of tax)

- Financial investments available

-for-sale - - - 73,416 - - 73,416

Total comprehensive income - - - 73,416 - 248,319 321,735

Dividend paid - - - - - (76,300) (76,300)

Pursuant to Companies Act 2016 858,904 (858,904) - - - - -

Transfer to regulatory reserves - - - - 340,005 (340,005) -

Transfer to retained profits - - (1,721,637) - - 1,721,637 -

At 30 September 2017 2,547,674 - - 148,645 620,209 2,732,613 6,049,141

At 1 January 2016 1,688,770 858,904 1,577,509 68,945 278,547 1,029,155 5,501,830



(net of tax)


-for-sale - - - 130,244 - - 130,244


Dividend paid - - - - - (104,366) (104,366)

- - 83,440 - (35,094) (48,346) -

At 30 September 2016 1,688,770 858,904 1,660,949 199,189 243,453 1,210,621 5,861,886

Attributable to Equity Holder of the Bank

Transfer to statutory reserve/from

regulatory reserves

6

Company No: 25046 T



UNAUDITED STATEMENTS OF CHANGES IN EQUITY for the financial quarter


Distributable

AFS

Share Share Statutory revaluation Regulatory Retained

capital premium reserves reserves reserves profits Total

The Bank RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

At 1 January 2017 1,688,770 858,904 1,416,621 93,292 207,026 913,359 5,177,972



(net of tax)


-for-sale - - - 55,228 - - 55,228


Dividend paid - - - - - (76,300) (76,300)

Pursuant to Companies Act 2016 858,904 (858,904) - - - - -

Transfer to regulatory reserves - - - - 323,612 (323,612) -

Transfer to retained profits - - (1,416,621) - - 1,416,621 -

At 30 September 2017 2,547,674 - - 148,520 530,638 2,112,044 5,338,876

At 1 January 2016 1,688,770 858,904 1,328,792 76,852 220,148 805,289 4,978,755



(net of tax)


-for-sale - - - 106,018 - - 106,018


Dividend paid - - - - - (104,366) (104,366)

- - 64,584 - (39,203) (25,381) -

At 30 September 2016 1,688,770 858,904 1,393,376 182,870 180,945 933,877 5,238,742

Non-distributable

Transfer to statutory

reserves/from regulatory reserves

7

Company No: 25046 T



UNAUDITED STATEMENTS OF CASH FLOWS for the financial quarter ended 30 September 2017

30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

CASH FLOWS FROM OPERATING ACTIVITIES


Adjustments for items not involving the movement

of cash and of cash and cash equivalents:

Interest income:

- financial assets held-for-trading - (230) - (230)

- financial investments available-for-sale (233,195) (229,720) (233,195) (229,720)

- financial investments held-to-maturity (20,627) (14,736) (20,627) (14,736)

Dividend income:

- financial investments available-for-sale (931) (2,473) (931) (2,473)

Gain on sale:

- financial assets held-for-trading (135) (372) (135) (372)

- financial investments available-for-sale (8,789) (26,612) (8,789) (26,612)

Gain on redemption of financial investments

held-to-maturity (39,784) - (39,784) -

Unrealised (gains)/loss on revaluation:

- financial assets held-for-trading - (2) - (2)

- derivatives 21 1,583 21 1,583

- foreign exchange (77,994) (87,998) (77,994) (87,998)

Allowance for impairment loss:

- financial investments held-to-maturity - 3,537 - 3,537

Depreciation of property and equipment 11,365 11,307 10,689 10,510

Property and equipment written off 116 38 110 38

Foreclosed properties - diminution in value - 59 - 59

(Gain)/loss on sale of property and equipment (752) 48 (752) 48

Amortisation of intangible assets 7,931 7,229 7,931 6,880

Gain on sale of foreclosed properties - (153) - (153)

Net individual impairment 52,135 13,911 42,891 23,233

Net collective impairment 48,856 31,734 33,834 23,106

Bad debt and financing written-off 621 1,645 620 1,634

Interest expense - subordinated term loan 31,958 34,806 31,958 34,806

Interest expense - Medium Term Note 36,754 - 36,754 -

Zakat 3,000 2,887 - -

Gain on disposal of subsidiary - - (162) -

Operating profit before changes in working capital 137,765 179,047 21,981 77,981

(Increase)/decrease in operating assets:

Deposits and placements with banks and other financial institutions (80,895) 130,672 152,865 150,866

Investment accounts due from designated financial institutions - - (112,213) (781,222)

Financial assets held-for-trading 135 150,725 135 150,725

Loans, advances and financing (995,466) 481,567 938,458 2,333,013

Other assets 35,036 622,677 55,573 627,690

Derivative financial instruments (116,921) (102,057) (124,822) (102,188)

Statutory deposits with Bank Negara Malaysia (145,507) 108,100 (25,167) 176,000

Amount due from subsidiaries - - 339,467 (181,392)

Amount due from joint ventures (3,911) (5,896) - -

The Group The Bank

8

Company No: 25046 T



UNAUDITED STATEMENTS OF CASH FLOWS for the financial quarter ended 30 September 2017

(continued)

30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

CASH FLOWS FROM OPERATING ACTIVITIES

(continued)

Increase/(decrease) in operating liabilities:

Deposits from customers 447,447 (2,145,998) (2,134,303) (2,413,775)

Investment accounts of customers 579 - - -

Deposits and placements of banks and other financial institutions 477,232 1,377,968 (343,949) 888,736

Obligation on securities sold under repurchase agreements 16,912 (658,966) 16,912 (658,966)

Bills and acceptances payable 13,850 (31,778) 13,850 (31,778)

Recourse obligation on loans sold to Cagamas Berhad - (4,016) - (4,016)

Other liabilities 64,932 120,079 74,101 65,060

Cash generated from operations (148,812) 222,124 (1,127,112) 296,734

Zakat paid (1,819) (1,671) - -

Tax refund 3 5,459 - 5,440

Tax paid (86,797) (110,380) (60,621) (86,687)

Net cash (used in)/generated from operating activities (237,425) 115,532 (1,187,733) 215,487

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received:

- financial investments available-for-sale 233,195 229,720 233,195 225,901

- financial investments held-to-maturity 20,627 14,736 20,627 14,736

Dividend income:

- financial investments available-for-sale 931 2,473 931 2,473

Redemption of financial investmentrs held-to-maturity net of purchase 224,077 (68,848) 219,242 (71,729)

Net (purchase)/sale of financial investments available-for-sale (457,847) 1,320,196 (163,900) 1,448,463

Proceeds from disposal of:

- property and equipment 2,487 (48) 2,487 (48)

- foreclosed properties - 588 - 588

Purchase of property and equipment (41,326) (21,233) (40,816) (20,701)

Purchase of intangible assets (4,468) (2,730) (4,467) (2,730)

Net cash (used in)/generated from investing activities (22,324) 1,474,854 267,299 1,596,953

CASH FLOWS FROM FINANCING ACTIVITES

Proceed from disposal of subsidiary - - 662 -

Investment in subsidiary - - (200,000) -

Interest payment on subordinated term loan (61,891) (35,225) (61,891) (35,225)

Repayment of subordinated term loan (700,000) - (700,000) -

Drawndown of Medium Term Note 2,000,000 - 2,000,000 -

Payment of dividend (76,300) (104,366) (76,300) (104,366)

Net cash generated from/(used in) financing activities 1,161,809 (139,591) 962,471 (139,591)

Net increase in cash and cash equivalents 902,060 1,450,795 42,037 1,672,849

Net increase/(decrease) in foreign exchange 12,679 (539,579) 16,730 (541,551)

Cash and cash equivalents at beginning of

the financial period 4,364,490 4,070,710 3,337,831 2,203,022

CASH AND CASH EQUIVALENTS AT END OF THE

FINANCIAL PERIOD 5,279,229 4,981,926 3,396,598 3,334,320

The Group The Bank

9

Company No: 25046 T


MFRS134 INTERIM FINANCIAL REPORTING - 30 September 2017

1 BASIS OF PREPARATION

2 ACCOUNTING POLICIES

3 QUALIFICATION OF PRECEDING ANNUAL FINANCIAL STATEMENTS

4 SEASONAL OR CYCLICAL FACTORS

5 EXCEPTIONAL ITEMS

This unaudited condensed interim financial information for the 9 months ended 30 September 2017 has been prepared in

accordance with MFRS 134 "Interim Financial Reporting" issued by the Malaysian Accounting Standards Board ('MASB'), Bank

Negara Malaysia ('BNM') Guidelines and the requirements of the Companies Act, 2016 in Malaysia.

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 unaudited condensed interim financial information should be read in conjunction with the annual financial statements for the

year ended 31 December 2016, which have been prepared in accordance with the Malaysian Financial Reporting Standards

('MFRS'). The explanatory notes to this interim financial statements provide an explanation of events and transactions that are

significant to an understanding of the changes in the Group and the Bank since the year ended 31 December 2016.

The consolidated financial statements include the financial statements of the Bank, subsidiaries and joint ventures, made up to the

quarter ended 30 September 2017.

The presentation of the comparative financial statements of the Group and the Bank have been restated to conform with the current

period's pesentation. The new and revised Malaysian Financial Reporting Standards ('MFRS') which became effective for the

financial period beginning on or after 1 January 2017 are as follows:

Amendments to MFRS 107 „Statement of Cash Flows – Disclosure Initiative‟ (effective from 1 January 2017) ;

Amendments to MFRS 112 „Income Taxes - Recognition of Deferred Tax Assets for Unrealised Losses‟ (effective from 1

January 2017);

MFRS 9 'Financial Instruments' (effective from 1 January 2018) will replace MFRS 139 'Financial instruments: Recognition and

Measurement';

MFRS 15 'Revenue from contracts with customers' (effective from 1 January 2018) replaces MFRS 118 'Revenue' and MFRS 111

'Construction contracts' and related interpretations;

MFRS 16 „Leases‟ (effective from 1 January 2019) supersedes MFRS 117 „Leases‟ and the related interpretations.

The Group and the Bank will apply these standards when effective. The adoption of the above standards, amendments to

published standards and interpretations to existing standards are not expected to have any significant impact on the financial

statements of the Group and the Bank except for MFRS 9. The financial effect of adoption of MFRS 9 is still being assessed by

the Group and the Bank.

The auditors' report on the audited annual financial statements for the financial year ended 31 December 2016 was not qualified.

The business operations of the Group and the Bank are not subject to material seasonal or cyclical fluctuation.

There was no exceptional items for the quarter ended 30 September 2017.

10

Company No: 25046 T



6 CHANGES IN ACCOUNTING POLICIES AND ADJUSTMENT

Refer to Note 2.

7 CHANGES IN DEBTS AND EQUITY SECURITIES

8 DIVIDENDS

9 SUBSEQUENT MATERIAL EVENT

(i) Transfer by AHB of the following identified companies to ABB:

▪ AHIB, a wholly-owned subsidiary of AHB;

▪ AFFIN Moneybrokers Sdn Bhd, a wholly-owned subsidiary of AHB (“AMB”);

▪ AXA AFFIN Life Insurance Berhad, a 51.00%-owned joint venture company of AHB (“AALI”); and

▪ AXA AFFIN General Insurance Berhad, a 37.07%-owned associate company of AHB (“AAGI”),

(AHIB, AMB, AALI and AAGI shall collectively be referred to as the “Identified Companies” and item (i) above shall now

be referred to as the “Reorganisation”);

(ii)

▪

▪ the retained profits of AHB,

(item (ii) above shall be referred to as the “Proposed Distribution”);

(iii)

(iv)

(v)

(vi)

(the above shall collectively be referred to as the “Proposals”).

Proposed subscription by ABB of 2 new ordinary shares in AHB (“AHB Shares”) which will be undertaken simultaneously

with the Proposed Distribution (“Proposed Subscription”);

Proposed amendments to the Constitutions of AHB and ABB to facilitate the Proposed Transfer of Listing Status (as defined

below) (“Proposed Amendments”);

Proposed transfer of the listing status from AHB to ABB on the Main Market of Bursa Malaysia Securities Berhad (“Bursa

Securities”) (“Proposed Transfer of Listing Status”); and

Proposed members‟ voluntary winding-up of AHB in accordance with the Companies Act, 2016 (“Act”) (“Proposed

Winding-Up”),

the entire consolidated capital of AHB (which includes the entire issued and paid-up share capital of AHB and the

entire share premium account of AHB); and

There were no purchases or disposal of quoted securities for the quarter ended 30 September 2017 other than in the ordinary

course of business.

Reorganisation of the AFFIN Holdings Berhad ("AHB") Group of Companies

AFFIN Holdings Berhad ("AHB") and its wholly-owned subsidiary, AFFIN Bank Berhad ("ABB") announced on 16 February 2017

that both companies intended to undertake an internal reorganisation which includes the followings:-

Proposed distribution of the entire shareholdings in ABB held by AHB to the entitled shareholders of AHB whose names

appear in AHB‟s Record of Depositors on an entitlement date to be determined and announced by the Board at a later date

“Entitlement Date”) (“Entitled Shareholders”), on the Entitlement Date by way of a distribution-in-specie via a reduction

of the following:

A proposed single-tier interim dividend of 2.34 sen per share amounting to RM45.5 million. The dividend declaration is based

on the new number of shares after reorganization i.e. from 1,688.8 million to 1,942.9 million.

11

Company No: 25046 T



9 SUBSEQUENT MATERIAL EVENT (continued)

Transfer

Consideration

based on the

carrying value

of the

Identified

Companies as

at 30

September

2017

(RM’000)

1,966,460

22,278

148,340

367,945

2,505,023

10 CHANGES IN THE COMPOSITION OF THE GROUP

11 PURCHASE AND SALE OF QUOTED SECURITIES

12 STATUS OF CORPORATE PROPOSAL

RM367.95 million

Total

ABB has satisfied the Transfer Consideration partly in cash and partly in shares as follows:-

Identified

CompaniesMode of satisfaction

(New ABB Shares/Cash)

AHIB 233,886,035

AMB 2,649,692

AALI 17,643,204

AAGI

There is no change in the composition of the Group between now and 31 December 2016 audited account.

There were no purchases or disposals of quoted securities for the quarter ended 30 September 2017 other than in the ordinary

course of business.

There were no corporate proposals announced but not completed during the period ended 30 September 2017.

On 2 October 2017, AHB had entered into a share sale agreement ("SSA") with ABB in relation to the Reorganisation. The

transfer Consideration for the Identied Companies has been finalised to be RM2.505 billion.

The consideration for the purchase by ABB were based on the carrying value of AHIB, AMB, AALI and AAGI set out in the

unaudited management accounts of the respective Companies, as at 30 September 2017, being the last day of the calendar month

immediately prior to the calendar month in which all the conditions precedent set out in Section 4.2 of the Share Sale Agreement

are fulfilled. The carrying value comprises AHB‟s cost of investment in the Identified Companies and its share of post-acquisition

profits recorded by the respective Identified Companies, as reasonably determined by AHB.

With the completion of the Group Internal Reorganisation on 16 October 2017, the Bank is effectively the new group holding

company which will spearhead the Group' future growth and is expected to achieve greater synergy and efficiency. AFFIN Bank

is now the bank holding company of AFFIN Hwang Investment Bank Berhad, AFFIN Moneybrokers Sdn Bhd and AXA AFFIN

Life Insurance Berhad, whereas AXA AFFIN General Insurance Berhad will be an associate company of AFFIN Bank.

12

Company No: 25046 T



13 INVESTMENT ACCOUNTS DUE FROM DESIGNATED FINANCIAL INSTITUTIONS

Current Previous

Financial Financial

Quarter Year-End

30/9/2017 31/12/2016

RM'000 RM'000

Licensed banks 2,222,292 2,110,079

14 DERIVATIVE FINANCIAL ASSETS

The Group The Group

Contract/ Contract/

notional notional

amount Assets amount Assets

RM'000 RM'000 RM'000 RM'000

At fair value

Foreign exchange derivatives:

Currency forwards 685,415 3,773 1,764,528 113,263

Cross currency swaps 1,709,070 38,169 1,963,860 36,441

Currency options 23,025 (21) - -

Interest rate derivatives:

Interest rate swap 911,000 20,114 1,013,500 17,600

3,328,510 62,035 4,741,888 167,304

The Bank The Bank

Contract/ Contract/

notional notional

amount Assets amount Assets

RM'000 RM'000 RM'000 RM'000

At fair value


Currency forwards 595,624 3,242 1,738,521 111,513


Currency options 23,025 (21) - -


Interest rate swap 911,000 20,114 1,013,500 17,600

3,367,206 62,585 4,812,625 166,240

30/9/2017

30/9/2017

31/12/2016

31/12/2016

The Bank

13

Company No: 25046 T



15 FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

At fair value

Malaysian Government treasury bills 12,424 - - -

Malaysian Government securities 40,368 90,237 40,368 90,237

Malaysian Government investment issues 1,667,371 1,527,767 981,594 898,982

Sukuk Perumahan Kerajaan 369,912 406,288 280,204 276,858

Negotiable Instruments of Deposit and

Islamic Debt Certificates 2,069,231 2,514,468 2,069,231 2,514,468

Khazanah Bonds/Sukuk 455,368 439,219 275,770 265,931

4,614,674 4,977,979 3,647,167 4,046,476

Unquoted securities:

Shares in Malaysia 216,948 216,948 216,948 216,948

Corporate bonds/Sukuk

- in Malaysia 5,724,474 4,663,751 4,540,694 3,761,846

- outside Malaysia 287,494 421,675 287,494 421,675

10,843,590 10,280,353 8,692,303 8,446,945

Allowance for impairment losses (356) (356) (356) (356)

10,843,234 10,279,997 8,691,947 8,446,589




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Movement in allowance for impairment losses

At beginning of the financial period 356 1,301 356 269

Allowance made during the financial period - 318 - 318

Amount written-off - (1,263) - (231)

At end of the financial period 356 356 356 356

The Bank The Group

The Group The Bank

Included in the Group and the Bank's financial investments available-for-sale are corporate bonds amounting to RM1,055.0 million

(31 December 2016: RM1,057.7 million) which are pledged as collateral for obligation on the securities sold under repurchase

agreements.

14

Company No: 25046 T



16 FINANCIAL INVESTMENTS HELD-TO-MATURITY




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

At amortised cost

Unquoted securities:

Corporate bonds/Sukuk in Malaysia 192,766 377,061 125,481 304,939

Allowance for impairment losses (3,537) (3,537) (3,537) (3,537)

189,229 373,524 121,944 301,402

Movement in allowance for impairment losses

At beginning of the financial period 3,537 178 3,537 178

Allowance made during the financial period - 3,537 - 3,537

Amount written-off - (178) - (178)

At end of the financial period 3,537 3,537 3,537 3,537

The Bank The Group

15

Company No: 25046 T



17 LOANS, ADVANCES AND FINANCING

(i) By type




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Overdrafts 1,859,096 1,919,668 1,568,849 1,640,789

Term loans/financing

- Housing loans/financing 8,029,290 6,964,223 4,081,396 4,106,693

- Hire purchase receivables 12,335,261 11,920,683 8,575,548 8,739,325

- Syndicated financing 2,051,270 2,079,384 1,381,924 1,496,645

- Business term loans/financing 13,645,225 13,440,419 9,728,248 9,898,640

Bills receivables 29,355 30,113 19,694 8,738

Trust receipts 137,486 297,955 123,937 291,017

Claims on customers under

acceptances credits 1,097,980 1,082,209 925,466 907,586

Staff loans/financing (of which

RM Nil to Directors) 164,603 155,172 139,217 142,063

Credit/charge cards 103,460 91,091 103,460 91,091

Revolving credits 4,445,190 5,069,950 3,348,166 3,750,341

Factoring 7,469 1,560 7,469 1,560

Gross loans, advances and financing 43,905,685 43,052,427 30,003,374 31,074,488

Less:

Allowance for impairment losses

- Individual (106,031) (149,499) (80,116) (131,497)

- Collective (237,503) (234,631) (185,707) (189,637)

Total net loans, advances and financing 43,562,151 42,668,297 29,737,551 30,753,354

-

The Bank The Group

Included in Group's business term loans/financing as at reporting date is RM53.7 million (31 December 2016: RM53.7

million) and RM55.6 million (31 December 2016: RM78.0 million) of term financing disbursed by AFFIN Islamic Bank Bhd

to joint ventures AFFIN-i Nadayu Sdn Bhd and KL South Development Sdn Bhd respectively.

16

Company No: 25046 T



17 LOANS, ADVANCES AND FINANCING (continued)

(ii) By maturity structure




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Maturing within one year 7,814,300 8,828,952 6,132,825 6,790,065

One year to three years 4,720,674 4,700,048 3,822,255 3,690,330

Three years to five years 6,982,384 7,072,074 5,414,372 5,696,213

Over five years 24,388,327 22,451,353 14,633,922 14,897,880

43,905,685 43,052,427 30,003,374 31,074,488

(iii) By type of customer




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Domestic banking institutions 388 3,033 388 3,033

- Others 642,489 814,693 454,193 605,194

Domestic business enterprises

- Small medium enterprises 11,928,548 12,504,565 9,916,309 10,729,868

- Others 10,575,679 10,225,035 7,654,126 7,708,023

Government and statutory bodies 1,062,272 1,467,488 25,722 85,570

Individuals 19,245,584 17,663,433 11,634,998 11,696,882

Other domestic entities 13,946 88,036 4,465 78,346

Foreign entities 436,779 286,144 313,173 167,572

43,905,685 43,052,427 30,003,374 31,074,488

(iv) By interest/profit rate sensitivity




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Fixed rate

- Housing loans/financing 391,128 403,899 347,027 357,962

- Hire purchase receivables 12,335,261 11,920,683 8,575,548 8,739,326

- Other fixed rate loans/financing 3,474,430 3,434,446 1,872,135 2,079,862

Variable rate

- BR and BLR 17,795,762 16,749,266 11,222,423 11,359,696

- Cost - plus 9,909,104 10,544,133 7,986,241 8,537,642

43,905,685 43,052,427 30,003,374 31,074,488

The Group

The Group

The Group The Bank

The Bank

The Bank

17

Company No: 25046 T




(v) By economic sectors




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Primary agriculture 789,648 896,922 621,114 494,803

Mining and quarrying 753,869 861,542 752,050 850,194

Manufacturing 1,857,622 2,102,831 1,538,404 1,768,086

Electricity, gas and water supply 146,110 182,805 67,269 118,436

Construction 2,630,996 2,509,215 1,892,330 1,986,124

Real estate 7,942,019 7,845,338 6,329,576 6,389,929

Wholesale & retail trade and

restaurants & hotels 2,785,344 2,791,557 2,330,916 2,383,908

Transport, storage and communication 2,316,296 2,082,979 1,534,600 1,798,763

Finance, insurance and business services 2,535,727 2,835,367 2,100,125 2,374,384

Education, health and others 2,766,023 3,077,832 1,112,022 1,046,112

Household 19,379,571 17,795,793 11,723,047 11,793,554

Others 2,460 70,246 1,921 70,195

43,905,685 43,052,427 30,003,374 31,074,488

(vi) By economic purpose




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Purchase of securities 715,211 664,778 450,620 389,262

Purchase of transport vehicles 12,615,854 12,281,400 8,783,918 9,030,869

Purchase of landed property of which:

- Residential 8,018,462 7,078,070 3,943,677 4,134,200

- Non-residential 6,451,260 5,991,465 4,983,990 4,879,275

Fixed assets other than land and building 306,517 325,485 230,438 253,064

Personal use 713,650 691,241 670,454 637,648

Credit card 103,460 91,091 103,460 91,091

Consumer durable 710 879 705 879

Construction 3,056,253 3,215,672 2,228,255 2,319,987

Merger and acquisition 90,404 97,992 90,404 97,992

Working capital 11,271,767 12,251,552 8,388,567 9,114,083

Others 562,137 362,802 128,886 126,138

43,905,685 43,052,427 30,003,374 31,074,488

The Bank The Group

The Group The Bank

18

Company No: 25046 T




(vii) By geographical distribution




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Perlis 158,351 195,079 29,437 47,641

Kedah 1,467,213 1,434,211 809,463 772,318

Pulau Pinang 2,510,553 2,369,676 2,011,717 2,007,416

Perak 1,518,952 1,416,128 946,792 973,397

Selangor 12,397,302 12,411,054 8,508,699 8,950,162

Wilayah Persekutuan 12,858,919 12,986,958 8,145,794 8,752,844

Negeri Sembilan 1,248,185 1,216,093 662,501 767,492

Melaka 1,026,257 1,030,455 791,304 831,300

Johor 4,656,360 4,046,707 3,325,350 3,212,336

Pahang 994,759 897,686 633,073 595,356

Terengganu 830,079 743,413 444,679 347,503

Kelantan 225,897 216,290 60,610 63,115

Sarawak 1,900,764 1,710,795 1,767,009 1,578,664

Sabah 1,590,905 1,626,472 1,494,920 1,570,576

Labuan 426,962 664,510 355,640 600,536

Outside Malaysia 94,227 86,900 16,386 3,832

43,905,685 43,052,427 30,003,374 31,074,488

(viii)Movements of impaired loans




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

At beginning of the financial period 687,946 767,847 590,447 626,139

Classified as impaired 806,002 679,669 426,283 515,330

Reclassified as non-impaired (290,277) (383,917) (229,127) (272,326)

Amount recovered (117,200) (197,704) (97,989) (110,492)

Amount written-off (139,677) (177,949) (131,419) (168,204)


Ratio of gross impaired loans, advances

and financing to gross loans, advances and

financing (*) 2.16% 1.60% 2.48% 1.78%

* For the Bank, RIA assets included in the ratio calculation.

The Group

The Group The Bank

The Bank

19

Company No: 25046 T




(ix) Movements allowance for impairment on loans, advances and financing




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Individual impairment


Allowance made during the financial period 72,813 81,349 58,937 62,010

Amount recovered (20,678) (59,431) (16,046) (23,569)


Unwinding of income (3,645) (10,324) (3,174) (10,125)

Exchange differences (860) 357 - -


Collective impairment


Net allowance made during the financial period 48,856 49,832 33,834 35,935



The Group The Bank

20

Company No: 25046 T




(x) Impaired loans by economic sectors




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Primary agriculture 13,949 14,331 13,917 14,288

Mining and quarrying 13,411 120 13,348 63

Manufacturing 30,889 20,434 29,714 19,406

Electricity, gas and water supply 291 207 53 96

Construction 112,746 102,416 90,319 97,335

Real estate 348,783 56,931 65,717 23,296

Wholesale & retail trade and

restaurants & hotels 56,413 46,878 54,959 46,289

Transport, storage and communication 2,601 2,106 2,488 1,799

Finance, insurance and business services 70,837 128,829 70,279 128,337

Education, health and others 488 732 429 570

Household 296,386 314,962 216,972 258,968

946,794 687,946 558,195 590,447

(xi) Impaired loans by economic purpose




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Purchase of securities 44 158 44 158

Purchase of transport vehicles 85,336 86,062 66,223 69,732

Purchase of landed property of which:

- Residential 205,011 203,075 137,647 161,680

- Non-residential 285,095 54,715 64,704 48,562

Fixed assets other than land and building 490 878 260 651

Personal use 17,609 28,441 16,961 27,616

Credit card 363 408 363 408

Consumer durable 16 17 16 17

Construction 101,113 39,998 53,191 39,998

Working capital 247,206 267,187 214,356 234,618

Others 4,511 7,007 4,430 7,007

946,794 687,946 558,195 590,447

The Bank The Group

The Group The Bank

21

Company No: 25046 T




(xii) Impaired loans by geographical distribution




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Perlis 5,458 5,245 566 443

Kedah 63,417 48,834 50,177 45,818

Pulau Pinang 88,940 41,022 32,709 38,916

Perak 14,676 18,490 10,482 14,165

Selangor 232,702 264,698 181,856 233,730

Wilayah Persekutuan 297,604 79,564 89,234 76,894

Negeri Sembilan 80,430 79,423 74,288 74,573

Melaka 4,675 16,091 3,390 15,153

Johor 32,492 27,974 29,199 26,457

Pahang 18,959 9,574 18,006 7,880

Terengganu 7,518 6,245 995 1,229

Kelantan 3,929 5,337 1,379 1,694

Sarawak 22,184 7,951 21,857 7,753

Sabah 44,367 45,914 44,057 45,742

Outside Malaysia 29,443 31,584 - -

946,794 687,946 558,195 590,447

18 OTHER ASSETS




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Other debtors 15,801 21,343 13,668 19,424

Prepayments and deposits 21,180 21,898 20,436 21,429

Cheque clearing accounts 35,271 10,721 8,204 7,759

Foreclosed properties (a) 19,958 7,970 17,317 5,329

92,210 61,932 59,625 53,941

(a) Foreclosed properties


Amount arising during the financial period 11,988 3,558 11,988 1,508

Disposal during the financial period - (435) - (435)

19,958 8,029 17,317 5,388

Foreclosed properties - dimunition in value - (59) - (59)


The Bank

The Group The Bank

The Group

22

Company No: 25046 T



19 DEPOSITS FROM CUSTOMERS

(i) By type of deposit




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Demand deposits 6,693,911 7,608,648 4,367,289 5,037,616

Savings deposits 2,101,546 2,043,157 1,568,385 1,565,872

Fixed deposits 32,274,447 26,549,515 23,123,120 19,839,651

Commodity Murabahah 1,097,233 768,412 - -

Money market deposits 863,451 518,016 863,451 518,016

Negotiable instruments of deposit ('NID') 5,049,915 10,145,308 5,049,915 10,145,308

48,080,503 47,633,056 34,972,160 37,106,463

(ii) Maturity structure of fixed deposits and NID




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Due within six months 26,891,996 29,695,766 21,038,219 24,967,259

Six months to one year 7,925,701 6,283,803 5,097,911 4,490,502

One year to three years 2,228,038 544,151 2,020,426 512,720

Three years to five years 278,627 171,103 16,479 14,478

37,324,362 36,694,823 28,173,035 29,984,959

(iii) By type of customer




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Government and statutory bodies 7,783,985 6,970,831 3,255,014 3,766,293

Business enterprise 13,298,842 12,855,326 9,313,214 8,536,353

Individuals 14,306,795 12,922,185 12,727,108 11,601,961

Domestic banking institutions 5,096,056 7,399,892 5,092,939 7,399,775

Domestic non-banking financial institutions 6,443,052 6,332,943 3,756,463 5,052,773

Foreign entities 511,147 499,655 430,989 425,962

Other entities 640,626 652,224 396,433 323,346

48,080,503 47,633,056 34,972,160 37,106,463

The Bank The Group

The Group The Bank

The Bank The Group

23

Company No: 25046 T



20 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Licensed banks 2,473,580 2,211,825 1,024,142 1,611,023

Licensed investment banks 4,821 165,173 4,000 165,172

Bank Negara Malaysia 353,542 63,235 353,542 63,235

Other financial institutions 1,192,492 1,106,970 857,602 743,805

4,024,435 3,547,203 2,239,286 2,583,235

Maturity structure of deposits

Due within six months 4,024,435 3,499,664 2,239,286 2,583,235

Six months to one year - 47,539 - -

4,024,435 3,547,203 2,239,286 2,583,235

21 DERIVATIVE FINANCIAL LIABILITIES

The Group The Group

Contract/ Contract/

notional notional

amount Liabilities amount Liabilities

RM'000 RM'000 RM'000 RM'000

At fair value


Currency forwards 1,400,178 29,166 411,616 15,223



Interest rate swap 1,561,148 19,146 1,596,773 16,533

4,204,895 180,582 4,961,062 402,772

The Bank

31/12/201630/9/2017

The Group

24

Company No: 25046 T



21 DERIVATIVE FINANCIAL LIABILITIES (continued)

The Bank The Bank

Contract/ Contract/

notional notional

amount Liabilities amount Liabilities

RM'000 RM'000 RM'000 RM'000

At fair value


Currency forwards 1,310,237 28,663 404,467 14,510



Interest rate swap 1,561,148 19,146 1,596,773 16,533

4,189,835 180,806 5,860,161 409,283

22 OTHER LIABILITIES




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Bank Negara Malaysia and Credit

Guarantee Corporation Funding

programmes 39,344 38,563 39,344 38,563

Margin and collateral deposits 136,886 149,616 128,922 141,203

Other creditors and accruals 108,007 52,647 103,618 49,165

Sundry creditors 151,304 128,000 142,110 108,502

Cheque clearing accounts 5,500 19,272 5,500 19,272

Provision for zakat 3,513 2,332 - -

Defined contribution plan (a) 14,691 15,437 13,701 14,380

Accrued employee benefits (b) 46,354 33,621 43,350 31,360

505,599 439,488 476,545 402,445

(a)

(b)

The Bank

31/12/2016

The Group

30/9/2017

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.

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.

25

Company No: 25046 T



23 RESERVES




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Retained profits 2,732,613 1,178,962 2,112,044 913,359

Share premium - 858,904 - 858,904

AFS revaluation reserves 148,645 75,229 148,520 93,292

Statutory reserves - 1,721,637 - 1,416,621

Regulatory reserves 620,209 280,204 530,638 207,026

3,501,467 4,114,936 2,791,202 3,489,202

Statutory reserves

At beginning of the financial period 1,721,637 1,577,509 1,416,621 1,328,792

Transfer (to)/from retained profits (1,721,637) 144,128 (1,416,621) 87,829

At end of the financial period - 1,721,637 - 1,416,621

(a)

(b)

(c)

(d)

(e) The Companies Act 2016 has abolished the concept of nominal value in shares. The share premium account is no longer

relevant. The share premium account is recognised as part of the Bank's share capital.

The Bank The Group

As at reporting date, the Bank has a tax exempt account balance of RM10.9 million (31 December 2016: RM10.9

million) under Section 12 of the Income Tax (Amendment) Act 1999, subject to agreement by the Inland Revenue Board.

The statutory reserves of the Group and the Bank are maintained in compliance with Section 47(2)(f) of the Financial Services Act 2013 and Section 57(2)(f) of the Islamic Financial Services Act 2013 and is not distributable as cash dividends. Based on Bank Negara Malaysia's revised Guidelines on Capital Fund, the Bank no longer required to maintain a reserve fund effective 3 May 2017. The statutory reserves is transferred to retained profits as at reporting date.

AFS revaluation reserves represent the unrealised gains or losses arising from the change in fair value of investments

classified as financial investment available-for-sale. The gains or losses are transferred in the income statement upon

disposal or when the securities become impaired.

The Group and the Bank are required to maintain in aggregate collective impairment allowances and regulatory reserves of no less than 1.2% of total outstanding loans, advances and financing, net of individual impairment allowances.

26

Company No: 25046 T



24 INTEREST INCOME


The Group The Group




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Loans, advances and financing 440,589 450,886 1,317,866 1,367,831

Money at call and deposit placements

with financial institutions 27,512 24,563 87,832 63,303

Reverse repurchase agreements

with financial institutions - - 368 -

Financial assets held-for-trading - 4 - 230

Financial investments:

- Available-for-sale 80,864 72,352 233,195 229,720

- Held-to-maturity 1,443 3,812 20,627 14,736

Interest rate derivatives 26,109 29,197 79,503 88,985

576,517 580,814 1,739,391 1,764,805

of which:

Interest income earned on impaired loans,

advances and financing 695 5,309 843 6,653


The Bank The Bank




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Loans, advances and financing 410,745 425,841 1,231,879 1,299,131

Money at call and deposit placements

with financial institutions 55,785 48,735 169,481 129,726

Reverse repurchase agreements

with financial institutions - - 368 -

Financial assets held-for-trading - 4 - 230

Financial investments:

- Available-for-sale 80,864 72,352 233,195 229,720

- Held-to-maturity 1,443 3,812 20,627 14,736


574,946 579,941 1,735,053 1,762,528

of which:

Interest income earned on impaired loans,

advances and financing 695 5,309 843 6,653

27

Company No: 25046 T



25 INTEREST EXPENSE


The Group The Group




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Deposits from customers 288,639 286,942 866,047 902,078

Deposits and placements of banks


Securities sold under repurchase

agreements 5,133 6,653 16,158 26,892


Loan sold to Cagamas Berhad - 1,419 - 4,301

Subordinated term loan 9,283 11,380 31,958 34,806

Medium Term Note 15,253 - 36,754 -

Others 150 157 438 469

370,235 367,343 1,109,879 1,142,967


The Bank The Bank




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Deposits from customers 288,639 286,945 866,047 902,085



Securities sold under repurchase

agreements 5,133 6,653 16,158 26,892


Loan sold to Cagamas Berhad - 1,419 - 4,301

Subordinated term loan 9,283 11,380 31,958 34,806

Medium Term Note 15,253 - 36,754 -

Others 150 157 438 469

370,235 367,346 1,109,879 1,142,974

28

Company No: 25046 T



26 INCOME FROM ISLAMIC BANKING BUSINESS


The Group The Group




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Income derived from investment

of depositors' funds and others 160,872 121,496 432,531 359,108


of investment account funds 22,818 23,961 67,939 65,193


of shareholders' funds 15,983 11,367 44,278 32,103

Total distributable income 199,673 156,824 544,748 456,404

Income attributable to depositors (115,116) (87,776) (308,966) (263,091)

84,557 69,048 235,782 193,313

of which:

Financing income earned on impaired financing,

advances and other financing 399 290 1,144 391

29

Company No: 25046 T



27 OTHER OPERATING INCOME


The Group The Group




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Fee income

Commission 4,871 4,398 15,045 12,912

Service charges and fees 14,219 16,122 44,575 45,360

Guarantee fees 5,328 5,074 15,869 18,562

24,418 25,594 75,489 76,834

Income from financial instruments

Gain arising on financial assets

held-for-trading:

- net gain on disposal - 291 135 372

- unrealised (loss)/gains - (269) - 2

- 22 135 374

Gain/(loss) on derivatives:

- realised 140 312 662 1,871

- unrealised 44 (4,341) (21) (1,583)

184 (4,029) 641 288

Gain arising on financial investments

available-for-sale:

- net gain on disposal 1,365 20,661 8,789 26,612

- gross dividend income 41 248 931 2,473

1,406 20,909 9,720 29,085

Gain on arising on financial investments

held-to-maturity:

- net gain on redemption - - 39,784 -

- - 39,784 -

Other income

Foreign exchange gains/(losses)

- realised 9,694 18,315 (51,227) (50,678)

- unrealised (662) (2,127) 77,994 87,998

Rental income 497 344 1,652 1,177

(Loss)/gain on sale of property and equipment - (49) 752 (48)

Gain on disposal of foreclosed properties - - - 153

Other non-operating income 1,578 1,795 5,518 5,411

11,107 18,278 34,689 44,013

37,115 60,774 160,458 150,594

30

Company No: 25046 T



27 OTHER OPERATING INCOME (continued)


The Bank The Bank




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Fee income

Commission 4,871 4,398 15,045 12,912

Service charges and fees 14,220 16,122 44,576 45,360

Guarantee fees 5,328 5,074 15,869 18,562

24,419 25,594 75,490 76,834

Income from financial instruments

Gain arising on financial assets

held-for-trading:

- net gain on disposal - 291 135 372

- unrealised (loss)/gains - (269) - 2

- 22 135 374

Gain/(loss) on derivatives:

- realised 140 312 662 1,871

- unrealised 44 (4,341) (21) (1,583)

184 (4,029) 641 288

Gain arising on financial investments

available-for-sale:

- net gain on disposal 1,365 20,661 8,789 26,612

- gross dividend income 41 248 931 2,473

1,406 20,909 9,720 29,085

Gain on arising on financial investments

held-to-maturity:

- net gain on redemption - - 39,784 -

- - 39,784 -

Other income

Foreign exchange gains/(losses)

- realised 9,694 18,315 (51,227) (50,678)

- unrealised (662) (2,127) 77,994 87,998

Rental income 497 344 1,652 1,177

(Loss)/gain on sale of property and equipment - (49) 752 (48)

Gain on disposal of foreclosed properties - - - 153

Other non-operating income 1,381 1,547 5,052 4,970

Gain on disposal of subsidiary - - 162 -

10,910 18,030 34,385 43,572

36,919 60,526 160,155 150,153

31

Company No: 25046 T



28 OTHER OPERATING EXPENSES


The Group The Group




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Personnel costs (a) 164,619 94,550 389,515 288,007

Establishment costs (b) 50,864 57,229 161,516 169,190

Marketing expenses (c) 6,199 3,782 16,472 13,996

Administrative and general expenses (d) 18,960 15,537 56,766 50,529

240,642 171,098 624,269 521,722

(a) Personnel costs


The Group The Group




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Wages, salaries and bonuses 88,050 71,932 258,021 218,579

Defined contribution plan ('EPF') 14,681 12,021 42,844 36,379

Voluntary separation scheme 48,000 - 48,000 -

Other personnel costs 13,888 10,597 40,650 33,049

164,619 94,550 389,515 288,007

(b) Establishment costs


The Group The Group




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Rental of premises 6,283 6,189 18,745 18,653

Equipment rental 438 254 911 909

Repair and maintenance 10,613 11,132 30,378 31,608



IT consultancy fees 8,444 16,064 42,321 48,613

Dataline rental 2,820 2,220 6,740 5,774

Security services 5,238 4,358 14,051 13,090

Electricity, water and sewerage 2,771 2,991 8,042 8,879

Insurance and indemnities 6,213 6,460 17,651 19,299

Other establishment costs 1,257 1,226 3,381 3,829

50,864 57,229 161,516 169,190

32

Company No: 25046 T



28 OTHER OPERATING EXPENSES (continued)

(c) Marketing expenses


The Group The Group




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Business promotion and advertisement 2,984 1,687 8,720 7,732

Entertainment 773 765 1,868 2,045

Traveling and accommodation 1,500 878 3,978 2,819

Other marketing expenses 942 452 1,906 1,400

6,199 3,782 16,472 13,996

(d) Administration and general expenses


The Group The Group




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Telecommunication expenses 1,151 1,303 3,283 3,851

Auditors' remuneration 766 412 1,985 1,310

Professional fees 2,361 1,926 11,329 8,128

Property and equipment written-off 81 12 116 38

Mail and courier charges 989 1,009 2,487 3,122

Stationery and consumables 2,458 2,610 6,564 8,630

Commissions expenses 2,458 2,212 7,286 5,523

Brokerage expenses 496 487 1,463 1,494

Directors' fees and allowances 853 217 1,928 2,085

Donations 346 435 1,615 2,019

Settlement, clearing and bank charges 2,975 2,568 8,427 7,624

Stamp duties 94 38 185 424

Operational and litigation write-off expenses 358 253 358 253

GST input tax-non recoverable 2,748 1,548 7,895 4,710

Other administration and general expenses 826 507 1,845 1,318

18,960 15,537 56,766 50,529

33

Company No: 25046 T





The Bank The Bank




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Personnel costs (a) 135,918 73,642 309,961 228,493

Establishment costs (b) 40,617 48,092 129,698 143,117

Marketing expenses (c) 5,092 3,214 13,629 12,171

Administrative and general expenses (d) 14,407 12,000 44,697 40,734

196,034 136,948 497,985 424,515

(a) Personnel costs


The Bank The Bank




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Wages, salaries and bonus 66,687 55,857 197,526 173,090

Defined contribution plan ('EPF') 11,083 9,322 32,678 28,769

Voluntary separation scheme 47,000 - 47,000 -

Other personnel costs 11,148 8,463 32,757 26,634

135,918 73,642 309,961 228,493

(b) Establishment costs


The Bank The Bank




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Rental of premises 4,759 4,962 14,223 15,148

Equipment rental 396 244 789 829

Repair and maintenance 8,555 9,275 24,385 26,289



IT consultancy fees 6,288 13,485 33,011 41,232

Dataline rental 2,263 1,897 5,559 5,038

Security services 3,921 3,428 10,663 10,262

Electricity, water and sewerage 2,210 2,461 6,515 7,550

Insurance and indemnities and other establishment costs 5,656 6,374 15,933 19,379

40,617 48,092 129,698 143,117

34

Company No: 25046 T




(c) Marketing expenses


The Bank The Bank




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Business promotion and advertisement 2,501 1,474 7,508 7,133

Entertainment 620 676 1,577 1,770

Traveling and accommodation 1,176 700 3,110 2,256

Other marketing expenses 795 364 1,434 1,012

5,092 3,214 13,629 12,171

(d) Administration and general expenses


The Bank The Bank




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000

Telecommunication expenses 909 1,060 2,552 3,150

Auditors' remuneration 542 341 1,539 970

Professional fees 2,256 1,687 10,537 7,329

Property and equipment written-off 76 12 110 38

Mail and courier charges 761 841 1,967 2,623

Stationery and consumables 1,790 2,008 4,632 6,841

Commissions expenses 2,090 1,943 6,321 4,790

Brokerage expenses 231 256 704 688

Directors' fees and allowances 482 (191) 1,009 1,131

Donations 243 173 1,431 1,458

Settlement, clearing and bank charges 2,709 2,331 7,584 6,876

Stamp duties 93 38 181 423

Operational and litigation write-off expenses 241 (8) 241 (8)

GST input tax-non recoverable 1,460 1,079 4,466 3,373

Other administration and general expenses 524 430 1,423 1,052

14,407 12,000 44,697 40,734

35

Company No: 25046 T



29 ALLOWANCES FOR IMPAIRMENT LOSSES ON LOANS, ADVANCES AND FINANCING


The Group The Group




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000


- made during the financial period 25,925 20,817 72,813 46,915

- written-back (3,464) (4,448) (20,678) (33,004)


- net allowance made/(written back)

during the financial period 15,554 (4,573) 48,856 31,734

Bad debts and financing

- recovered (9,245) (8,892) (30,344) (42,250)

- written-off 115 760 621 1,645

28,885 3,664 71,268 5,040


The Bank The Bank




30/9/2017 30/9/2016 30/9/2017 30/9/2016

RM'000 RM'000 RM'000 RM'000


- made during the financial period 19,534 16,916 58,937 41,548

- written-back (3,412) (4,447) (16,046) (18,315)


- net allowance made/(written back)

during the financial period 14,565 (7,862) 33,834 23,106

Bad debts and financing

- recovered (8,882) (8,796) (29,543) (41,161)

- written-off 115 752 620 1,634

21,920 (3,437) 47,802 6,812

36

Company No: 25046 T



30 COMMITMENTS AND CONTINGENCIES

The Group The Bank

30/9/2017 31/12/2016 30/9/2017 31/12/2016

Principal Principal Principal Principal

amount amount amount amount

RM'000 RM'000 RM'000 RM'000

Direct credit substitutes (*) 513,461 423,565 352,761 390,178

Transaction-related contingent items 2,103,036 2,252,924 1,805,342 1,970,056

Short-term self-liquidating trade-related contingencies 511,044 496,339 157,032 183,789

Irrevocable commitments to extend credit: 10,042,131 9,178,584 8,221,745 7,579,320

- maturity less than one year 8,375,332 7,663,856 7,017,174 6,534,578

- maturity more than one year 1,666,799 1,514,728 1,204,571 1,044,742

Foreign exchange related contracts (#): 5,061,257 7,092,677 5,084,893 8,062,513

- less than one year 4,634,469 6,667,157 4,658,105 7,636,993

- one year to less than five years 384,303 383,035 384,303 383,035

- more than five years 42,485 42,485 42,485 42,485

Interest rate related contracts (#): 2,472,148 2,610,273 2,472,148 2,610,273

- less than one year 486,000 593,125 486,000 593,125

- one year to less than five years 1,051,148 1,187,148 1,051,148 1,187,148

- more than five years 935,000 830,000 935,000 830,000

346,637 198,586 294,144 159,049

Unutilised credit card lines 361,848 230,550 361,848 230,550

21,411,562 22,483,498 18,749,913 21,185,728

*

#

Any commitments that are unconditionally cancelled at

any time by the bank without prior notice or that

effectively provide for automatic cancellation due to

deterioration in a borrower's creditworthiness

Included in direct credit substitutes as above are financial guarantee contracts of RM390.4 million and RM352.6 million

at the Group and the Bank, respectively (31 December 2016: RM423.4 million and RM390.0 million at the Group and the

Bank, respectively), of which fair value at the time of issuance is zero.

The fair value of these derivatives have been recognised as "derivative financial assets" and "derivative financial liabilities"

in the statement of financial position and disclosed in Note 14 and 21 to the financial statements.

In the normal course of business, the Group and the Bank make various commitments and incurs certain contingent liabilities

with legal recourse to their customers. No material losses are anticipated as a result of these transactions. These commitment and

contingencies are not secured over the assets of the Group and the Bank.

The commitments and contingencies consist of:

37

Company No: 25046 T



31 LIQUIDITY RISK

Refer Appendix A

32 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

The Group and the Bank measure fair values using the following fair value hierarchy that reflects the significance of the inputs

used in making the measurements:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which

inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs are not based on observable

market data.

Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued by

reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted prices is readily

available, and the price represents actual and regularly occurring market transactions. An active market is one in which

transactions occur with sufficient volume and frequency to provide pricing information on an on-going basis. These would

include actively traded listed equities and actively exchange-traded derivatives.

Where fair value is determined using unquoted market prices in less active markets or quoted prices for similar assets and

liabilities, such instruments are generally classified as Level 2. In cases where quoted prices are generally not available, the

Group and the Bank then determine fair value based upon valuation techniques that use as inputs, market parameters including

but not limited to yield curves, volatilities and foreign exchange rates. The majority of valuation techniques employ only

observable market data and so reliability of the fair value measurement is high.

Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable

market data (unobservable inputs). Such inputs are generally determined based on observable inputs of a similar nature,

historical observations on the level of the input or other analytical techniques.

This category includes unquoted shares held for socio economic reasons. Fair values for shares held for socio economic reasons

are based on the net tangible assets of the affected companies. The Group's and the Bank's exposure to financial instruments

classified as Level 3 comprised a small number of financial instruments which constitute an insignificant component of the

Group's and the Bank's portfolio of financial instruments. Hence, changing one or more of the inputs to reasonable alternative

assumptions would not change the value significantly for the financial assets in Level 3 of the fair value hierarchy.

The Group and the Bank recognise transfers between levels of the fair value hierarchy at the end of the reporting period during

which the transfer has occurred. Transfers between fair value hierarchy primarily due to change in the level of trading activity,

change in observable market activity related to an input, reasessment of available pricing information and change in the

significance of the unobservable input. There were no transfers between Level 1, 2 and 3 of the fair value hierarchy during the

financial period (31 December 2016: Nil).

38

Company No: 25046 T



32 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Level 1 Level 2 Level 3 Total

RM'000 RM'000 RM'000 RM'000

The Group

30/9/2017

Assets

Derivative financial assets - 62,035 - 62,035

Financial investments available-for-sale *

- Money market instruments - 4,614,674 4,614,674

- Equity securities - - 216,592 216,592

- Corporate bonds/Sukuk - 5,981,467 30,501 6,011,968

- 10,658,176 247,093 10,905,269

Liabilities

Derivative financial liabilities - 180,582 - 180,582

- 180,582 - 180,582


RM'000 RM'000 RM'000 RM'000

The Group

31/12/2016

Assets



- Money market instruments - 4,977,979 - 4,977,979



- 10,200,664 246,637 10,447,301

Liabilities


- 402,772 - 402,772

39

Company No: 25046 T





RM'000 RM'000 RM'000 RM'000

The Bank

30/9/2017

Assets






- 8,507,438 247,094 8,754,532

Liabilities


- 180,806 - 180,806


RM'000 RM'000 RM'000 RM'000

The Bank

31/12/2016

Assets






- 8,366,192 246,637 8,612,829

Liabilities


- 409,283 - 409,283

* Net of allowance for impairment.

40

Company No: 25046 T




The following table present the changes in Level 3 instruments for financial period:




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000


Purchases - 30,045 - 30,045

Sales - (25) - -

Reclassify to investment in associate - (500) - -

Net changes in income accrued 456 - 456 -

Total gains recognised in other comprehensive income - 12,012 - 12,012

Allowance for impairment losses - (318) - (318)


Effect of changes in significant unobservable assumptions to reasonably possible alternatives

Inter-

relationship

between

significant

unobservable

inputs and

30/9/2017 31/12/20162013 Valuation Unobservable fair value

Description RM'000 RM'000 techniques inputs measurement

Financial investments

available-for-sale

Higher net

tangible assets

The Group Net tangible Net tangible results in

Unquoted shares 216,592 216,592 assets assets higher fair value

Higher net

tangible assets

The Bank Net tangible Net tangible results in

Unquoted shares 216,592 216,592 assets assets higher fair value

The Bank

Fair value assets

The Group

As at reporting date, financial instruments measured with valuation techniques using significant unobservable inputs (Level 3)

mainly include unquoted shares held for socio economic purposes.

Qualitative information about the fair value measurements using significant unobservable inputs (Level 3):

In estimating its significance, the Group and the Bank used an approach that is currently based on methodologies used for fair

value adjustments. These adjustments reflects the values that the Group and the Bank estimate are appropriate to adjust from the

valuations produced to reflect for uncertainties in the inputs used. The methodologies used can be a statistical or other relevant

approved techniques.

41

Company No: 25046 T



33 CAPITAL MANAGEMENT

The Group and the Bank's objectives when managing capital, are:

•

•

•

With effect from 1 January 2013, the total capital and capital adequacy ratios of the Group and the Bank are computed in

accordance with Bank Negara Malaysia's Capital Adequacy Framework (Capital Components).

The Group and the Bank are currently adopting Standardised Approach for Credit Risk and Market Risk, the Basic Indicator

Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia's Capital Adequacy

Framework (Capital Components), the minimum capital adequacy and capital buffer requirements for Common Equity Tier 1

Capital Ratio ('CET 1') and Tier 1 Capital Ratio are 5.750% (31 December 2016: 5.125%) and 7.250% (31 December 2016:

6.625%) respectively for year 2017. The minimum regulatory capital adequacy and capital buffer requirements remains at

9.250% (31 December 2016: 8.625%) for total capital ratio.

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 34 summarises the composition of regulatory capital and the ratios of the Group and the Bank for the quarter

ended 30 September 2017.

42

Company No: 25046 T



34 CAPITAL ADEQUACY

The Group (#) The Bank




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Paid-up share capital 2,547,674 1,688,770 2,547,674 1,688,770

Share premium - 858,904 - 858,904

Statutory reserves - 1,721,637 - 1,416,621

Retained profits 2,732,613 1,178,962 2,112,044 913,359

Unrealised gains and losses on AFS 195,585 98,985 195,422 122,753

5,475,872 5,547,258 4,855,140 5,000,407

Less:

Goodwill and other intangibles (168,614) (164,089) (172,506) (167,982)

55% of cumulative unrealised gains of AFS (107,572) (54,442) (107,482) (67,514)

Investment in associate/subsidiaries (600) (450) (619,779) (345,134)

CET1 capital 5,199,086 5,328,277 3,955,373 4,419,777

Tier I capital 5,199,086 5,328,277 3,955,373 4,419,777

Subordinated term loan 2,600,000 1,180,000 2,600,000 1,180,000

Collective impairment @

140,411 137,903 109,129 109,362

Regulatory adjustments 620,209 280,204 530,638 207,026

Less:

Investment in associate/subsidiaries (150) (300) (154,945) (230,090)

Tier II capital 3,360,470 1,597,807 3,084,822 1,266,298

Total capital 8,559,556 6,926,084 7,040,195 5,686,075

CET1 capital ratio 11.649% 12.201% 11.471% 12.595%

Tier 1 capital ratio 11.649% 12.201% 11.471% 12.595%

Total capital ratio 19.179% 15.860% 20.417% 16.204%

CET1 capital ratio (net of proposed dividends) 11.547% 12.026% 11.339% 12.378%

Tier 1 capital ratio (net of proposed dividends) 11.547% 12.026% 11.339% 12.378%

Total capital ratio (net of proposed dividends) 19.077% 15.685% 20.285% 15.986%

43

Company No: 25046 T



34 CAPITAL ADEQUACY (continued)

The Group (#) The Bank




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

Risk-weighted assets for:

Credit risk 41,927,841 40,928,681 32,300,401 32,838,523

Market risk 268,072 333,445 253,501 296,191

Operational risk 2,434,843 2,408,896 1,928,528 1,956,481

Total risk-weighted assets 44,630,756 43,671,022 34,482,430 35,091,195

# The Group comprises the Bank and all the Bank's financial and non-financial subsidiaries.

The capital adequacy ratios of the AFFIN Islamic Bank Berhad is as follows:

Economic Entity The Bank




30/9/2017 31/12/2016 30/9/2017 31/12/2016

RM'000 RM'000 RM'000 RM'000

(Before and after deducting proposed dividend)

CET1 capital ratio 13.258% 12.421% 13.260% 12.424%

Tier 1 capital ratio 13.258% 12.421% 13.260% 12.424%

Total capital ratio 14.445% 13.598% 14.445% 13.598%

@ Qualifying collective impairment is restricted to allowances on unimpaired portion of the loans, advances and financing.

In accordance with BNM's Guidelines on Investment Account, the credit and market risk weighted on the assets funded by the

RIA are included in calculation of capital adequacy for the Bank. As at 30 September 2017, RIA assets included in the Total

Capital Ratio calculation amounted to RM2,095.8 million (31 December 2016: RM2,112.2 million).

44

Company No: 25046 T



35 REVIEW OF PERFORMANCE OF THE COMPANY AND ITS PRINCIPAL SUBSIDIARIES

(Analysis of financial performance of current quarter comparing to previous year's corresponding quarter)

i) lower net interest income by RM7.2 million;

ii) lower other operating income by RM23.7 million;

iii) higher other operating expenses by RM69.5 million, mainly due to provision for voluntary separation scheme amounting to

RM48.0 million;

iv) higher allowance for impairment losses on loans, advances and financing by RM25.2 million;

The above was off-setted by:

i) higher Islamic Banking income by RM15.5 million;

ii) lower allowance of impairment losses on securities by RM3.5 million.

36 COMMENT ON FINANCIAL RESULTS

(Analysis of financial performance of current quarter comparing to immediate preceding quarter)

i) lower net interest income by RM12.7 million;

ii) lower other operating income by RM45.5 million;

iii) higher other operating expenses by RM47.0 million, mainly due to provision for voluntary separation scheme of RM48.0 million;

The above was off-setted by:

i) higher Islamic Banking income by RM10.3 million;

ii) lower allowance for impairment losses on loans, advances and financing by RM6.8 million.

Overall the Group registered a profit before zakat and taxation of RM58.4 million for the 3rd quarter of 2017 as compared the

previous year's corresponding quarter profit of RM165.0 million, a decrease of RM106.6 million. This was due to:

The Group's profit before taxation for 3rd quarter of 2017 stood at RM58.4 million as compared to RM146.5 million reported

in the 2nd quarter of 2017, a decrease of RM88.1 million.

Increase in profit before tax as compared to immediate preceding quarter due to:

45

Company No: 25046 T



37 PROSPECT FOR THE CURRENT FINANCIAL YEAR

38 VARIANCE OF ACTUAL PROFIT FROM FORECAST PROFIT

BUSINESS PLAN AND FUTURE OUTLOOK FOR 2017

For 2017, signs of improving and the growth momentum of Malaysia economy is encouraging. Our economy is expected to

inflate to more than 4.8% by year end. The growth is coming from strong export cycle and faster consumption growth. Recent

trends in consumer spending seem to indicate that consumer confidence is also bottoming out. Most analysts predicted that

BNM will maintain its policy rate (OPR) at 3.00% until 2018 as to ease inflation pressures and strengthening our economic

position.

AFFIN Bank Berhad is targeting a loan growth between six and seven percent for the remaining year 2017. The Bank is

expecting stronger loan momentum in 2HFY17 from consumer, corporation and small and medium enterprises. The bank have a

stable growth from Consumer segment and on track in reducing the non- performing loan level to between 1.6 and 1.7 percent

by year end. This supported by the implementation of “Priority Islamic” approach to expand Islamic banking segment. Priority

is also placed on increasing deposits to further strengthen the bank‟s liquidity and funding profile.

The Bank remains optimistic for the year 2017, and will continue to support AFFIN Group‟s strategic vision in providing

excellent banking services to meet our customer needs and expectations The Bank‟s Group had been focusing on AFFINITY

Transformation Program initiatives to improve earnings and operating efficiencies. Meanwhile on the proposed reorganization

exercise, the new corporate structure is expected to enhance the bank‟s capital adequacy ratios and to be concluded by the first

quarter of 2018.

Profit before tax for the Group registered an adverse variance of RM202.7 million. The main contributing factors are as follows:

Net interest income

The net interest income showed an adverse variance of RM34.7 million.

Islamic banking income

Islamic banking income showed a favourable variance of RM6.0 million.

Other operating income

The non interest income showed an adverse variance of RM23.3 million.

Other operating expenses

Operating costs showed an adverse variance of RM64.4 million, mainly due to provision for voluntary separation scheme of

RM48.0 million.

Allowance for impairment losses on loans, advances and financing

Allowance for losses on loans, advances and financing showed an adverse variance of RM86.3 million.

46

Company No: 25046 T



39 MATERIAL LITIGATION

(a)

(b) Other than the above, there are various legal suits against AFFIN Bank Berhad ("ABB") in respect of claims and counter

claims of approximately RM76.7 million (31 December 2016: RM71.8 million). Based on legal advice, the Directors of

the Bank are of the opinion that no provision for damages need to be made in the financial statements, as the probability

of adverse adjudication against ABB is remote.

The Plaintiff was made bankrupt on 17 January 2013. The bankruptcy was set aside in September 2015 on the grounds

that he was solvent due to a third party, Chenet Finance Ltd ('Chenet') being ordered by a Singapore Court to pay damages

to the Director General of Insolvency Malaysia ('DGI') as receiver of Plaintiff's Estate. The Bank has appealed and Case

Management ('CM') has been fixed on 24 June 2016.

The Plaintiff's claim ('Claim') is premised on alleged wrongful acts by the Bank as follows:

• failure to sell 7.2 million shares in Naval Dockyard Sdn Bhd ('NDSB shares') which was pledged by Suria to the Bank

as security for the Facility on a timely basis. On this claim, Plantiff claims damages under (i) above;

• allowed the release of the Guarantor from her liability upon payment of a certain sum pursuant to her Guarantee

without giving the same opportunity to the Plaintiff;

• the Bank had corresponded with the opponent of Plantiff in Singapore to prevent the Plaintiff from claiming his assets

in Singapore. Plantiff has alleged conspiracy between the Bank and the opponent of the Plantiff in Singapore. On this

claim, Plantiff claims losses under (ii) above;

• the Bank had wrongfully made Plantiff a bankrupt in 2013 which bankruptcy was set aside in 2015. On this claim,

Plantiff claims losses under (iii) above;

• The Plantiff is also claiming the amount of (iv) above being cost of proceedings incurred by him in Singapore.

The Bank has a good defence ('Defence') on the merits with regard to each of the alleged wrongful act as follows:

• the sale of NDSB Shares was subject to the approval from the relevant authorities as per the terms of the Facility

Agreement and the price has to be based on the offer from the approved prospective buyer;

• the release of the Guarantor is the prerogative of the Bank pursuant to the terms of the Guarantee Agreement;

• the Plantiff's bankruptcy is based on a judgement of Court;

• the Bank's legal firm had corresponded with the legal firm of the Plantiff's opponent in Singapore only to inform the

status of the Plantiff proceedings in Malaysia and any alleged conspiracy is denied; and

• the claim for cost is unreasonable as the Bank was not in any way involved in the Singapore proceedings.

The above Claim against the Bank by the Plaintiff is a result of the Debt Recovery Action against the Plaintiff which was

commenced in the ordinary course of business.

The Board of Directors of the Bank are of the view that save for the orders, cost and other relief sought by the Plaintiff,

which will materialize only if the Court rules in the Plaintiff's favour, the Writ and Statement of Claim is not expected to

result in any immediate losses, material, financial and operational impact on the Bank for the current financial period

ended 30 September 2017.

47

Company No: 25046 T Appendix A



31 LIQUIDITY RISK

Liquidity risk for assets and liabilities based on remaining contractual maturities

No

Up to 1 > 1-3 >3-12 >1-5 Over 5 specific

The Group month months months years years maturity Total

30/9/2017 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Assets

Cash and short-term funds 5,279,229 - - - - - 5,279,229


and other financial institutions - 30,036 - 101,549 101,544 - 233,129

Derivative financial assets 14,908 16,565 18,391 1,732 10,439 - 62,035

Financial investments available-for-sale 817,640 821,822 1,078,478 3,441,562 4,467,140 216,592 10,843,234

Financial investments held-to-maturity 21,217 1,952 6,005 148,506 11,549 - 189,229

Loans, advances and financing 2,569,560 1,465,891 1,507,419 11,306,242 26,713,039 - 43,562,151

Other assets 49,342 1,734 13,766 6,277 1,133 19,958 92,210

Amount due from joint ventures 50,636 - - - - - 50,636

Amount due from associate 500 - - - - - 500

Statutory deposits with Bank Negara Malaysia 1,627,507 - - - - - 1,627,507

Other non-financial assets (1) - - - - - 601,433 601,433

10,430,539 2,338,000 2,624,059 15,005,868 31,304,844 837,983 62,541,293

(1) Other non-financial assets include tax recoverable, deferred tax assets, property and equipment and intangible assets.

The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-guarantees are important factors in assessing the liquidity of

the Group and the Bank. The table below provides analysis of assets and liabilities into relevant maturity tenures based on remaining contractual maturities.

Maturities of assets and liabilities of the Group and the Bank by remaining contractual maturities profile are as follows:

48




31 LIQUIDITY RISK

Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)

No



30/9/2017 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Liabilities

Deposits from customers 19,717,625 9,927,845 15,928,443 2,506,590 - - 48,080,503

Investment accounts of customers - - - 579 - - 579


and other financial institutions 2,177,591 1,746,837 100,007 - - - 4,024,435


under repurchase agreements 1,016,652 - - - - - 1,016,652

Derivative financial liabilities 8,601 16,080 22,199 129,665 4,037 - 180,582

Bills and acceptances payable 51,576 - - - - - 51,576

Other liabilities 505,599 - - - - - 505,599

Subordinated term loan 601,685 - 9,728 - 2,000,000 - 2,611,413

Provision for taxation - - - - - 1,466 1,466

Other non-financial liabilities (2) - - - - - 19,347 19,347

24,079,329 11,690,762 16,060,377 2,636,834 2,004,037 20,813 56,492,152

Net liquidity gap (13,648,790) (9,352,762) (13,436,318) 12,369,034 29,300,807 817,170

(2) Other non-financial liabilities include deferred tax liabilities and provision for taxation.

49




31 LIQUIDITY RISK


No



31/12/2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Assets

Cash and short-term funds 4,364,490 - - - - 4,364,490


and other financial institutions - - - 101,507 50,727 - 152,234


Financial investments available-for-sale 836,723 1,407,041 855,418 2,706,274 4,227,949 246,592 10,279,997

Financial investments held-to-maturity 19,902 - 6,676 90,190 256,756 - 373,524


Other assets 30,436 2,102 14,133 6,146 1,145 7,970 61,932

Amount due from joint ventures 46,725 - - - - - 46,725

Amount due from associate 500 - - - - - 500


Other non-financial assets (1) - - - - - 590,186 590,186

10,668,265 3,785,771 2,794,366 14,280,272 27,813,767 844,748 60,187,189

(1) Other non-financial assets include tax recoverable, deferred tax assets, investment in associate, property and equipment and intangible assets.

50




31 LIQUIDITY RISK


No



31/12/2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Liabilities

Deposits from customers 20,539,928 11,849,312 14,528,885 714,931 - - 47,633,056


and other financial institutions 1,971,629 1,307,301 268,273 - - - 3,547,203


under repurchase agreements 878,754 120,986 - - - - 999,740




Subordinated term loan 304,592 - - - 1,000,000 - 1,304,592


24,217,045 13,305,604 14,961,794 874,695 1,005,439 18,906 54,383,483

Net liquidity gap (13,548,780) (9,519,833) (12,167,428) 13,405,577 26,808,328 825,842

(2) Other non-financial liabilities include deferred tax liabilities and provision for taxation.Pursuant to the transitional provisions of MASB 24, the information on the liquidity risk as at 31 December 2001 is not presented. Pursuant to the transitional provisions of MASB 24, the information on the liquidity risk as at 31 December 2001 is not presented.

Pursuant to the transitional provisions of MASB 24, the information on the liquidity risk as at 31 December 2001 is not presented. Pursuant to the transitional provisions of MASB 24, the information on the liquidity risk as at 31 December 2001 is not presented.

51




31 LIQUIDITY RISK


No


The Bank month months months years years maturity Total

30/9/2017 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Assets


Deposits and placements with banks -



designated financial institutions 131,109 - 401,253 698,527 991,403 - 2,222,292


Financial investments available-for-sale 784,744 815,617 974,800 2,724,979 3,175,215 216,592 8,691,947

Financial investments held-to-maturity 21,218 726 - 100,000 - - 121,944

Loans, advances and financing 2,241,199 1,199,792 731,947 8,963,436 16,601,177 - 29,737,551

Other assets 20,850 1,021 13,354 5,978 1,105 17,317 59,625


Other non-financial assets (1) - - - - - 1,369,765 1,369,765

7,786,595 2,083,586 2,139,745 12,596,201 20,880,883 1,603,674 47,090,684

(1) Other non-financial assets include tax recoverable, deferred tax assets, investment in subsidiaries, property and equipment and intangible assets.


52




31 LIQUIDITY RISK


No



30/9/2017 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Liabilities

Deposits from customers 14,082,096 7,695,268 11,157,967 2,036,829 - - 34,972,160


and other financial institutions 1,392,679 796,685 49,922 - - - 2,239,286


under repurchase agreements 1,016,652 - - - - - 1,016,652




Amount due to subsidiaries 184,023 - - - - - 184,023

Subordinated term loan 601,685 - 9,728 - 2,000,000 - 2,611,413


17,814,307 8,507,807 11,239,816 2,166,494 2,004,037 19,347 41,751,808

Net liquidity gap (10,027,712) (6,424,221) (9,100,071) 10,429,707 18,876,846 1,584,327

(2) Other non-financial liabilities include deferred tax liabilities.

53




31 LIQUIDITY RISK


No



31/12/2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Assets





designated financial institutions 7,015 697,210 130,481 439,947 835,426 - 2,110,079


Financial investments available-for-sale 823,164 1,395,251 769,327 2,142,758 3,069,497 246,592 8,446,589

Financial investments held-to-maturity 19,902 - 614 50,000 230,886 - 301,402


Other assets 26,153 1,506 13,982 5,868 1,103 5,329 53,941

Amount due from subsidiaries 196,839 - - - - - 196,839


Other non-financial assets (1) - - - - - 1,153,385 1,153,385

8,824,232 3,720,979 2,704,960 11,794,989 19,625,269 1,405,306 48,075,735

(1) Other non-financial assets include tax recoverable, deferred tax assets, investment in subsidiaries, property and equipment and intangible assets.

54




31 LIQUIDITY RISK


No



31/12/2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Liabilities

Deposits from customers 16,058,046 10,097,111 10,424,430 526,876 - - 37,106,463


and other financial institutions 1,505,555 856,946 220,734 - - - 2,583,235


under repurchase agreements 878,754 120,986 - - - - 999,740




Amount due to subsidiaries 41,395 - - - - - 41,395

Subordinated term loan 304,592 - - - 1,000,000 - 1,304,592


19,279,952 11,103,048 10,809,800 686,640 1,005,439 12,884 42,897,763

Net liquidity gap (10,455,720) (7,382,069) (8,104,840) 11,108,349 18,619,830 1,392,422

(2) Other non-financial liabilities include deferred tax liabilities and provision for taxation.


55

AFFIN Bank Berhad - AFFINBANK - Home Bank Berhad (Incorporated in Malaysia) INTERIM FINANCIAL...

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