Financial Statements - Affin Bank · 2015. 10. 5. · 42 Afﬁn Bank Berhad Annual Report 2014...

42 Affin Bank Berhad Annual Report 2014

FINANCIAL STATEMENTS43 Directors’ Report

60 Statements of Financial Position

61 Income Statements

62 Statements of Comprehensive Income

63 Statements of Changes in Equity

65 Statements of Cash Flows

68 Summary of Significant Accounting Policies

85 Notes to the Financial Statements

184 Statement by Directors

184 Statutory Declaration

185 Independent Auditors’ Report

187 Basel II Pillar 3 Disclosures

43Affin Bank Berhad Annual Report 2014

DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014

The Directors hereby submit their report together with the audited �nancial statements of the Group and the Bank for the

�nancial year ended 31 December 2014.

PRINCIPAL ACTIVITIES

The principal activities of the Bank during the �nancial year are banking and related �nancial 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 �nancing under the Shariah principles. There were no

signi�cant changes in the nature of these activities during the �nancial year.

FINANCIAL RESULTS

The Group The Bank

RM’000 RM’000

Pro�t before zakat and taxation 720,130 627,700

Zakat (4,772) -

Pro�t before taxation 715,358 627,700

Taxation (171,631) (151,221)

Net profit for the financial year 543,727 476,479

DIVIDENDS

The dividends on ordinary shares paid or declared by the Bank since 31 December 2013 were as follows:

In respect of the �nancial year ended 31 December 2013 as shown in the Directors’ report for that �nancial year:

RM’000

Final single-tier dividend of 6 sen per share paid on 31 March 2014 91,100

In respect of the �nancial year ended 31 December 2014:

Single-tier interim dividend of 10 sen per share paid on 22 December 2014 168,877

The Directors now recommend the payment of a �nal single-tier dividend of 3.91 sen per share on the Bank’s issued and paid

up capital of RM1,688,769,616 comprising of 1,688,769,616 shares amounting to RM66,030,892 for the �nancial year ended

31 December 2014 which is subject to the approval of members at the forthcoming Annual General Meeting of the Bank.



RESERVES AND PROVISIONS

All material transfers to or from reserves or provisions during the �nancial year are shown in the �nancial statements and notes

to the �nancial statements.

BAD AND DOUBTFUL DEBTS AND FINANCING

Before the �nancial 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 �nancing and the making of allowance for bad

and doubtful debts and �nancing, and satis�ed themselves that all known bad debts and �nancing had been written off and

adequate allowances made for doubtful debts and �nancing.

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 �nancing, or the amount of the allowance for doubtful debts and �nancing, in the �nancial statements of the Group

and the Bank inadequate to any substantial extent.

CURRENT ASSETS

Before the �nancial 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 �nancing, 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 �nancial 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 �nancial 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 �nancial 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 �nancial year other than in

the ordinary course of banking business or activities of the Group.

No contingent or other liability of the Group or the Bank has become enforceable, or is likely to become enforceable within the

period of twelve months after the end of the �nancial 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

�nancial statements of the Group and the Bank that would render any amount stated in the �nancial statements misleading.

ITEMS OF AN UNUSUAL NATURE

The results of the operations of the Group and the Bank during the �nancial 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 �nancial 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 �nancial year in which this report is made.

SIGNIFICANT EVENT DURING THE FINANCIAL YEAR

There is no signi�cant event during the �nancial year.

SUBSEQUENT EVENTS

There were no material events subsequent to the reporting date that require disclosure or adjustments to the �nancial

statements.

DIRECTORS

The Directors of the Bank who have held of�ce since the date of the last report and at the date of this report are:

Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)

Chairman / Non-Independent Non-Executive Director

Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin

Non-Independent Non-Executive Director

Dr Raja Abdul Malek Bin Raja Jallaludin

Independent Non-Executive Director

(Retired w.e.f. 29.3.2014)

Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman


Tan Sri Dato’ Seri Mohamed Jawhar


Tan Sri Mohd Ghazali Bin Mohd Yusoff


(Appointment w.e.f. 20.6.2014)

En. Mohd Suf�an Bin Haji Haron




DIRECTORS (continued)

Mr Aubrey Li Kwok-Sing

Non-Independent Non-Executive Director

Mr Gary Cheng Shui Hee

Non-Independent Non-Executive Director (Alternate Director to Mr Aubrey Li Kwok-Sing)

(Resigned w.e.f. 17.3.2014)

Mr Tang Peng Wah

Non-Independent Non-Executive Director (Alternate Director to Mr Aubrey Li Kwok-Sing)


RESPONSIBILITY STATEMENT BY BOARD OF DIRECTORS

In the course of preparing the annual �nancial statements of the Group and of the Bank, the Directors are collectively responsible

in ensuring that these �nancial statements are drawn up in accordance with Malaysian Financial Reporting Standards,

International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

It is the responsibility of the Directors to ensure that the �nancial reporting of the Group and of the Bank present a true and fair

view of the state of affairs of the Group and of the Bank as at 31 December 2014 and of the �nancial results and cash !ows of

the Group and of the Bank for the �nancial year then ended.

The �nancial statements are prepared on the going concern basis and the Directors have ensured that proper accounting

records are kept, applied the appropriate accounting policies on a consistent basis and made accounting estimates that are

reasonable and fair so as to enable the preparation of the �nancial statements of the Group and of the Bank with reasonable

accuracy.

The Directors have also taken the necessary steps to ensure that appropriate systems are in place for the assets of the Group

and of the Bank to be properly safeguarded for the prevention and detection of fraud and other irregularities. The systems, by

their nature, can only provide reasonable and not absolute assurance against material misstatements, whether due to fraud

or error.

The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set out on page 184 of the �nancial

statements.



DIRECTORS’ INTERESTS

According to the register of Directors’ shareholdings, the interest of Directors in of�ce at the end of the �nancial year in shares,

warrants and options of related companies are as follows:

Ordinary shares of RM1 each

As at As at

1.1.2014 Bought Sold 31.12.2014

AFFIN Holdings Berhad

Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin * 808,714 ^ 242,614 - * 1,051,328

Boustead Heavy Industries Corporation Berhad

Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin * 2,000,000 - - * 2,000,000

Boustead Petroleum Sdn Bhd

Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin 5,916,465 - - 5,916,465

Al-Hadharah Boustead REIT

Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin * 250,000 - ^^ 250,000 -

* Shares held in trust by nominee company^ Rights shares issued on 4 July 2014^^ Privatisation of Al-Hadharah Boustead REIT on 29 January 2014

Ordinary shares of 50 sen each

As at As at

1.1.2014 Bought Sold 31.12.2014

Pharmaniaga Berhad


Ordinary shares of RM10 each; RM5 uncalled

As at As at

1.1.2014 Bought Transfer 31.12.2014

ABB Trustee Berhad **

Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) 20,000 - - 20,000

** Shares held in trust for the Bank

Ordinary shares of 50 sen each

As at As at

1.1.2014 Bought Sold 31.12.2014

Boustead Holdings Berhad


Boustead Plantation Berhad ***

Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin - + 31,381,600 - 31,381,600

+ IPO on 26 June 2014

*** Shares held in trust by nominee company - 30,941,600 Shares held under own name - 440,000

Other than the above, the Directors in of�ce at the end of the �nancial year did not have any other interest in shares, warrants

and options over shares in the Bank or its related corporations during the �nancial year.



DIRECTORS’ BENEFITS

During and at the end of the �nancial 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 bene�ts by means of the

acquisition of shares in, or debenture of, the Bank or any other body corporate.

Since the end of the previous �nancial year, no Director of the Bank has received or become entitled to receive a bene�t (other

than the fees and other emoluments shown in the Note 31 to the �nancial statements) by reason of a contract made by the

Bank or by a related corporation with the Director or with a �rm of which he is a member or with a company in which he has a

substantial �nancial interest.

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 �nancial

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 �nancial year. The Bank is also required to comply with BNM’s Guidelines on Corporate

Governance for Licensed Institutions.

(i) Board of Directors Responsibility and Oversight

The Board of Directors

The direction and control of the Bank rest �rmly 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 Of�cer (‘MD/

CEO’) to ensure that there is a balance of power and authority. The Board is responsible for reviewing and approving the

longer-term strategic plans of the Bank as well as the business strategies. It is also responsible for identifying the principal

risks and implementation of appropriate systems to manage those risks as well as reviewing the adequacy and integrity of

the Bank’s internal control systems, management information systems, including systems for compliance with applicable

laws, regulations and guidelines.

Whilst, the Management Committee, headed by the MD/CEO, is responsible for the implementation of the strategies and

internal control as well as monitoring performance. The Committee is also a forum to deliberate issues pertaining to the

Bank’s business, strategic initiatives, risk management, manpower development, supporting technology platform and

business processes.

The Board Meetings

The Board meets on a monthly basis, to review the Bank’s �nancial 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 12 times

during the �nancial year.

Board Balance

The Board of Directors comprises of seven Non-Executive Directors and one alternate Non-Executive Director. There are four

Independent Non-Executive Directors and four Non-Independent Non-Executive Directors. The Board of Directors meetings are

presided by a Non-Independent Non-Executive Chairman whose role is clearly separated from the role of the MD/CEO.

In 2014, the Bank continues to have a strong and experienced Board, be�tting its aspiration to become a mid size Bank

of prominence. It consists of representatives from the private sector with suitable quali�cations and experience in relevant

areas particularly in banking.




(i) Board of Directors Responsibility and Oversight (continued)

Board Balance (continued)

The composition of the Board and the number of meetings attended by each director are as follows:

Directors Total Meetings Attended

Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) 13 / 14


Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin 14 / 14

Member / Non-Independent Non-Executive Director

Dr Raja Abdul Malek Bin Raja Jallaludin 4 / 4

Member / Independent Non-Executive Director

(Retired w.e.f. 29.3.2014)

Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman 13 / 14


Tan Sri Dato’ Seri Mohamed Jawhar 14 / 14


Tan Sri Mohd Ghazali Bin Mohd Yusoff 8 / 8



En. Mohd Suf�an Bin Haji Haron 14 / 14


Mr Aubrey Li Kwok-Sing 9 / 14


Mr Gary Cheng Shui Hee 0 / 3


(Alternate Director to Mr Aubrey Li Kwok-Sing)


Mr Tang Peng Wah 3 / 8


(Alternate Director to Mr Aubrey Li Kwok-Sing)






Board Committees

Nomination Committee

Nominating Committee was established to provide a formal and transparent procedure for the appointment of Directors

and MD/CEO. The committee also assesses the effectiveness of the Board as a whole, contribution of each Director,

contribution of the Board’s various committees and the performance of MD/CEO and key senior management of�cers.

During the �nancial year ended 31 December 2014, a total of 6 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 �nancial year are as follows:

Members Total Meetings Attended


Chairman / Independent Non-Executive Director





(Retired w.e.f. 29.3.2014)





Tan Sri Mohd Ghazali bin Mohd Yusoff 3 / 3







Board Committees (continued)

Remuneration Committee

Remuneration Committee was established to evaluate and recommend a framework of remuneration for Directors, the

MD/CEO and key senior management of�cers that is competitive and consistent with the Bank’s culture, objectives and

strategy.

During the �nancial year ended 31 December 2014, a total of 3 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 �nancial year are as follows:







(Retired w.e.f. 29.3.2014)










Board Committees (continued)

Shariah Committee

AFFIN Islamic Bank Berhad’s business activities are subject to Shariah compliance and conformation by the Shariah

Committee. The Shariah Committee is formed as legislated under the Islamic Financial Services Act 2013 and as per

Shariah Governance Framework for Islamic Financial Institutions.

The main duties and responsibilities of the Shariah Committee are as follows:

• To advise the Board on Shariah matters in order to ensure that the business operations of the Bank comply with the

Shariah principles at all times;

• To endorse and validate relevant documentations of the Bank’s products to ensure that the products comply with

Shariah principles; and

• To advise the AFFIN Islamic Bank Berhad on matters to be referred to the Shariah Advisory Council.

The Shariah Committee was established in December 1995. During the year, a total of 9 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:


Associate Professor Dr. Said Bouheraoua 9 / 9

Chairman


Dr. Asyraf Wajdi Bin Dato’ Dusuki 4 / 4

Chairman


Assistant Professor Dr. Ahmad Azam Bin Othman 9 / 9

Member

Dr. Yasmin Hanani Binti Mohd Sa�an 9 / 9

Member

Dr. Zulki!i Bin Hasan 7 / 9

Member

Ustaz Mohammad Mahbubi Bin Ali 4 / 4

Member





(ii) Group Risk Management

The Group 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 Group Risk Management function provides support to the Board Risk Management Committee (‘BRMC’). Committees

namely Board Loan Review and Recovery Committee (‘BLRRC’), Management Committee (‘MCM’), Group Management

Loan Committee (‘GMLC’), Asset and Liability Management Committee (‘ALCO’), Liquidity Management Committee

(‘LMC’), Group Operational Risk Management Committee (‘GORMC’) and Group Early Alert Committee (‘GEAC’) assist the

BRMC in managing credit, market, liquidity and operational risks respectively.

Responsibilities of these committees include:

• risk identi�cation

• risk assessment and measurement

• risk control and mitigation

• risk monitoring

Board Risk Management Committee (‘BRMC’)

The main function of Board Risk Management Committee (‘BRMC’) is to assist the Board in its supervisory role in the management

of risk in the Bank. It has responsibility for approving and reviewing all risk management policies and methodologies of the Bank.

BRMC also reviews guidelines and portfolio management reports including risk exposure information.

BRMC provides 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 �nancial statements.

The BRMC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during the �nancial year ended 31

December 2014, 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 �nancial year are as follows:








(Retired w.e.f. 29.3.2014)



(Represent AFFIN Islamic Bank Berhad)







(ii) Group Risk Management (continued)

Board Loan Review and Recovery Committee (‘BLRRC’)

Board Loan Review and Recovery Committee (‘BLRRC’) critically reviews loans and other credit facilities with higher

risk implications, after due process of checking, analysis, review and recommendation by the Credit Risk Management

function, and if found necessary, exercise the power to veto loan applications that have been accepted by the Group

Management Loan Committee (‘GMLC’). The Committee is also responsible to review the impaired loans presented by

Management.

The BLRRC meeting for the Bank were jointly held with AFFIN Islamic Bank and during the �nancial year ended 31

December 2014, a total of 12 meetings were held. The BLRRC comprises the following members and details of attendance

of each member at the BLRRC meetings held during the �nancial year are as follows:


Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) 12 / 12




Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Mohd Nor (Bersara) 12 / 12





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 the Bank’s

overall performance, and ensures that the activities are in accordance with corporate objectives, strategies, policies and

annual business plan and budget.




(ii) Group Risk Management (continued)

Group Management Loan Committee (‘GMLC’)

Group Management Loan Committee (‘GMLC’) 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

Credit authority is delegated based on skills, experience and track record of the of�cer assuming an approver’s position.

Delegation of credit authority is subject to credit checks to ensure approvers have a clean disciplinary record and not be

in a �nancially embarrassed position.

Asset and Liability Management Committee (‘ALCO’)

ALCO comprising the senior management team chaired by the MD/CEO, manages the Bank’s asset liability position and

oversees the Bank’s capital management to ensure that the Bank is adequately capitalised on an economic and regulatory

basis.

Liquidity Management Committee (‘LMC’)

LMC is a sub-committee of the ALCO and its role is to augment the functions of the ALCO by directing its focus speci�cally

to liquidity issues.

Group Operational Risk Management Committee (‘GORMC’)

Responsibilities of the committee include:

• To evaluate operational risks issues of 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 make recommendation/approve on changes, if necessary;

• To review/approve recommendation of operational risk management groups set up to address speci�c area;

• To take the lead in inculcating an operational risks awareness culture;

• To approve operational risk management methodologies/measurements tools;

• To review and approve the strategic operational risk management initiatives/plans and to endorse for BRMC’s approval

if necessary;

• To update BRMC on loss events and relevant key issues that may adversely impact core processes, system defects

and any changes to critical business or system related processes; and

• To effectively manage reputational risk in relation to environmental, social, business and regulatory issues across the

Bank.

Group Early Alert Committee (‘GEAC’)

Group Early Alert Committee (‘GEAC’) is established within senior management to monitor credit quality through monthly

review of the Early Alert, Watchlist and Exit Accounts and review the actions taken to address the emerging risks and

issues in these accounts.




(iii) Internal Audit and Internal Control Activities

In accordance with Bank Negara Malaysia’s Guidelines on Corporate Governance for Licensed Institutions, the Group

Internal Audit Division (‘GIA’) conducts continuous reviews on auditable areas within the Bank. The continuous reviews

by GIA are focused on areas of signi�cant 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 Of�ce, 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 suf�cient staff and resources to carry out control

responsibilities.

• Perform risk assessments to identify risk and evaluate actions taken to provide reasonable assurance that procedures

and controls exist to contain those risks.

• Maintain strong control activities including documented processes and system incorporating adequate controls to

produce accurate �nancial data and provide for the safeguarding of assets, and a documented review of reported

results.

• Ensure effective information !ows and communication, including:

- training and the dissemination of standards and requirements;

- an information system to produce and convey complete, accurate and timely data including �nancial 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 �nding until its full resolution.

Based on GIA’s review, identi�cation and assessment of risk, testing and evaluation of controls, GIA will provide an opinion

on the effectiveness of internal controls maintained by each entity.

Audit and Examination Committee (‘AEC’)

The AEC comprises members of the Bank’s Board of Directors whose primary function is to assist the Board of Directors

in its supervision over:

• The reliability and integrity of accounting policies and �nancial reporting and disclosure practices;

• The provision of advice to the Board with regards to the �nancial statements and business risks to enable the Board

to ful�ll its �duciary duties and obligations; and

• The establishment and maintenance of processes to ensure that they:

- are in compliance with all applicable laws, regulations and policies; and

- have adequately addressed the risk relating to internal controls and system, management of inherent and business

risks, and ensuring that the assets are properly managed and safeguarded.




(iii) Internal Audit and Internal Control Activities (continued)

Audit and Examination Committee (‘AEC’) (continued)

The AEC is made up of at least three but not more than �ve members appointed by the Board of Directors from among its

non-executive directors.

The AEC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during the �nancial year ended 31

December 2014, a total of 7 meetings were held. The AEC comprises the following members and details of attendance of

each member at the AEC meetings held during the �nancial year are as follows:









(Retired w.e.f. 29.3.2014)

Dr. Asyraf Wajdi Bin Dato’ Dusuki 2 / 3



Tan Sri Mohd Ghazali bin Mohd Yusoff 3 / 3



Associate Professor Dr. Said Bouheraoua 3 / 3







(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 �nancial 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 ful�ll their duties and speci�c responsibilities.

BUSINESS PLAN AND STRATEGY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014

In �nancial year 2014, the Bank was able to sustain its business growth despite challenging economic environment. The

Bank’s continuous efforts to increase pro�table loans, with strong focus in SME market has led to 8.9% growth in net loans

and advances. The Bank also performed well in the consumer banking segment by registering consumer deposits growth

exceeding 11% despite stiff competition. Our cost to income ratio of 45.4% is also within the industry average of 48.0%.

One of our key focuses in 2014 given the challenging economic climate was preservation of asset quality. Proactive account

management allows us to identify potential distress assets thus allowing the Bank to take necessary remedial/preventive

measures. As at 31 December 2014, our gross and net impaired loans ratios stood at 1.8% and 0.8% respectively, as compared

to the industry average of 1.7% and 1.3% respectively.

Management will continue to remain prudent to ensure business sustainability and pro�tability growth in the next �nancial year.

BUSINESS OUTLOOK FOR 2015

Moving forward, the Bank expects the upcoming �nancial year to present many challenges but we also see huge opportunities

ahead. Recent economic development on oil prices, Ringgit depreciation, subsidy rationalisation as well as the implementation

of Goods and Services Tax (‘GST’) in the second quarter of 2015, will give an impact to the Banking industry as a whole.

We would also expect a moderation in household demand and potential stress in asset quality.

Under the current environment, the Bank will be stepping up efforts to improve ef�ciency and productivity in delivering our

products and services. In consumer segment, the Bank will be more active in secondary mortgage market and will also take

advantage of the government’s affordable housing schemes.

In the auto �nancing segment, we see opportunities in the national car segment, where yield is expected to be better.

Opportunities in commercial vehicle �nancing will also be our focus area. For business banking, we will continue to focus on

SME lending and target �nancing to bankable sectors aligned with the Economic Transformation Programme (‘ETP’) projects.

The Bank will also continue to focus on transactional banking as a major source of fee income.

As we explore new collaboration and opportunities within the Group, the Bank is in a solid position to deliver another year

of business growth. The Bank is also continuously enhancing our network presence for better customer service and actively

seeking out for new growth opportunities domestically or beyond Malaysian shore.



RATING BY EXTERNAL AGENCIES

The Bank has been rated by the following external rating agency:

Name of rating agency: RATING AGENCY MALAYSIA BERHAD (‘RAM’)

Date of rating: 24 July 2014

Rating classi�cations:

- Long term: AA3

- Short term: P1

RAM has reaf�rmed the Bank’s long-term and short-term �nancial institution ratings, at AA3 and P1, respectively, with a stable

outlook.

‘AA’ rating is de�ned by RAM as an entity has a strong capacity to meet its �nancial obligations and is resilient against adverse

changes in circumstances, economic condition and/or operating environments. The subscript 3 in this category indicates as

the lower end of its generic rating in the AA category.

A P1 rating is de�ned by RAM as obligations which are supported by superior ability with regards to timely payment of

obligations.

ZAKAT

The Bank’s subsidiary, AFFIN Islamic Bank Berhad (‘AFFIN Islamic’) is obliged to pay zakat to comply with the principles of

Shariah. AFFIN Islamic does not pay zakat on behalf of its depositors.

HOLDING COMPANY AND ULTIMATE HOLDING CORPORATE BODY

The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the

ultimate holding corporate body is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung

Angkatan Tentera Act, 1973.

AUDITORS

The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in of�ce.

In accordance with resolution of the Board of Directors dated 6 March 2015.

Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)

Chairman

En. Mohd Suffian Bin Haji Haron

Director



The Group The Bank

Note

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

ASSETS

Cash and short-term funds 2 6,938,912 9,401,701 3,777,042 4,987,696

Deposits and placements with banks and

other �nancial institutions 3 238,222 482,597 962,050 1,106,756

Financial assets held-for-trading 4 149,904 149,544 149,904 149,544

Derivative �nancial assets 5 88,658 56,274 88,672 56,274

Financial investments available-for-sale 6 9,947,911 7,614,537 8,415,411 6,331,414

Financial investments held-to-maturity 7 476,155 500,336 393,401 415,271

Loans, advances and �nancing 8 39,456,172 36,227,785 32,292,551 30,178,910

Other assets 9 223,406 220,097 174,655 176,555

Amount due from subsidiaries 10 - - 438 60,723

Amount due from joint ventures 14,855 4,185 - -

Tax recoverable 20 17 - -

Deferred tax assets 11 3,118 9,945 218 6,985

Statutory deposits with Bank Negara Malaysia 12 1,696,550 1,459,350 1,398,550 1,226,350

Investment in subsidiaries 13 - - 389,074 389,088

Property and equipment 15 149,131 158,740 141,031 150,803

Intangible assets 16 147,688 152,005 150,690 154,232

TOTAL ASSETS 59,530,702 56,437,113 48,333,687 45,390,601

LIABILITIES AND EQUITY

Deposits from customers 17 48,047,224 46,088,082 38,180,212 36,800,728

Deposits and placements of banks and

other �nancial institutions 18 4,849,676 4,065,544 3,699,386 2,659,535

Derivative �nancial liabilities 19 237,426 94,522 237,419 94,522

Bills and acceptances payable 94,308 90,208 94,308 90,208

Recourse obligation on loans

sold to Cagamas Berhad 20 139,147 397,790 139,147 397,790

Other liabilities 21 359,644 391,977 328,063 359,837

Amount due to subsidiaries 22 - - 296,781 53,559

Provision for taxation 28,029 36,402 23,939 34,351

Subordinated term loan 23 604,310 904,964 604,310 904,964

TOTAL LIABILITIES 54,359,764 52,069,489 43,603,565 41,395,494

Share capital 24 1,688,770 1,518,337 1,688,770 1,518,337

Reserves 25 3,482,168 2,849,287 3,041,352 2,476,770

TOTAL EQUITY 5,170,938 4,367,624 4,730,122 3,995,107

TOTAL LIABILITIES AND EQUITY 59,530,702 56,437,113 48,333,687 45,390,601

COMMITMENTS AND CONTINGENCIES 37 23,427,860 21,863,606 21,359,914 20,196,417

STATEMENTS OF FINANCIAL POSITIONas at 31 December 2014


INCOME STATEMENTSfor the �nancial year ended 31 December 2014

The Group The Bank

Note

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Interest income 26 2,270,988 2,121,127 2,299,786 2,150,845

Interest expense 27 (1,451,528) (1,308,068) (1,451,595) (1,308,113)

Net interest income 819,460 813,059 848,191 842,732

Income from Islamic banking business 28 244,223 220,745 - -

1,063,683 1,033,804 848,191 842,732

Other operating income 29 223,222 237,366 222,544 234,862

Net income 1,286,905 1,271,170 1,070,735 1,077,594

Other operating expense 30 (584,693) (565,186) (465,228) (461,133)

Operating profit before allowances 702,212 705,984 605,507 616,461

Write-back of allowances for losses on

loans, advances and �nancing 32 18,468 56,937 22,193 56,567

Impairment losses on securities (550) (499) - (499)

720,130 762,422 627,700 672,529

Share of joint venture’s results - (210) - -

Profit before zakat and taxation 720,130 762,212 627,700 672,529

Zakat (4,772) (8,583) - -

Profit before taxation 715,358 753,629 627,700 672,529

Taxation 34 (171,631) (183,807) (151,221) (163,930)

Net profit after zakat and taxation 543,727 569,822 476,479 508,599

Attributable to:

Equity holders of the Bank 543,727 569,822 476,479 508,599

Earnings per share (sen):

- Basic 35 33.3 37.5 29.2 33.5

The accounting policies on pages 68 to 84 and the notes on pages 85 to 183 form an integral part of these �nancial statements.


STATEMENTS OF COMPREHENSIVE INCOMEfor the �nancial year ended 31 December 2014

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Profit after zakat and taxation 543,727 569,822 476,479 508,599

Other comprehensive income:

Items that may be reclassi�ed subsequently to

pro�t and loss:

Net fair value change in �nancial

investments available-for-sale 25,742 (102,027) 24,360 (86,770)

Deferred tax on �nancial

investments available-for-sale (Note 11) (6,178) 24,811 (5,847) 21,758

Other comprehensive income/(expense) for the

�nancial year, net of tax 19,564 (77,216) 18,513 (65,012)

Total comprehensive income for

the financial year 563,291 492,606 494,992 443,587

Attributable to equity holders of the Bank:

- Total comprehensive income 563,291 492,606 494,992 443,587



Attributable to Equity Holders of the Bank

AFS

revaluation

reserves

RM’000

Share

capital

RM’000

Share

premium

RM’000

Statutory

reserves

RM’000

Regulatory

reserves

RM’000

Retained

profits

RM’000

Total

RM’000 The Group

At 1 January 2014 1,518,337 529,337 1,317,376 (1,960) - 1,004,534 4,367,624

Net pro�t for the �nancial

year - - - - - 543,727 543,727

Other comprehensive

income (net of tax)

- Financial investments

available-for-sale - - - 19,564 - - 19,564

Total comprehensive

income - - - 19,564 - 543,727 563,291

Shares issued during the

�nancial year (Note 24) 170,433 329,567 - - - - 500,000

Dividends paid (Note 36) - - - - - (259,977) (259,977)

Transfer to statutory

reserves / regulatory

reserves - - 152,418 - 184,366 (336,784) -

At 31 December 2014 1,688,770 858,904 1,469,794 17,604 184,366 951,500 5,170,938

At 1 January 2013 1,518,337 529,337 1,160,651 75,256 - 834,371 4,117,952


year - - - - - 569,822 569,822

Other comprehensive

income (net of tax)


available-for-sale - - - (77,216) - - (77,216)

Total comprehensive

income - - - (77,216) - 569,822 492,606



reserves - - 156,725 - - (156,725) -

At 31 December 2013 1,518,337 529,337 1,317,376 (1,960) - 1,004,534 4,367,624

STATEMENTS OF CHANGES IN EQUITYfor the �nancial year ended 31 December 2014


Non-distributable Distributable

AFS

revaluation

reserves

RM’000

Share

capital

RM’000

Share

premium

RM’000

Statutory

reserves

RM’000

Regulatory

reserves

RM’000

Retained

profits

RM’000

Total

RM’000 The Bank

At 1 January 2014 1,518,337 529,337 1,144,350 4,965 - 798,118 3,995,107


year - - - - - 476,479 476,479

Other comprehensive

income (net of tax)


available-for-sale - - - 18,513 - - 18,513

Total comprehensive

income - - - 18,513 - 476,479 494,992

Shares issued during the

�nancial year (Note 24) 170,433 329,567 - - - - 500,000



reserves / regulatory

reserves - - 119,120 - 135,347 (254,467) -

At 31 December 2014 1,688,770 858,904 1,263,470 23,478 135,347 760,153 4,730,122

At 1 January 2013 1,518,337 529,337 1,017,200 69,977 - 659,603 3,794,454


year - - - - - 508,599 508,599

Other comprehensive

income (net of tax)


available-for-sale - - - (65,012) - - (65,012)

Total comprehensive

income - - - (65,012) - 508,599 443,587



reserves - - 127,150 - - (127,150) -

At 31 December 2013 1,518,337 529,337 1,144,350 4,965 - 798,118 3,995,107

STATEMENTS OF CHANGES IN EQUITYfor the �nancial year ended 31 December 2014



STATEMENTS OF CASH FLOWSfor the �nancial year ended 31 December 2014

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 715,358 753,629 627,700 672,529

Adjustments for items not involving the movement

of cash and cash equivalents:

Interest income:

- �nancial assets held-for-trading (155,606) (94,163) (155,606) (94,163)

- �nancial investments available-for-sale (234,629) (202,084) (234,629) (201,936)

- �nancial investments held-to-maturity (20,062) (19,984) (20,062) (19,984)

Dividend income:


Accretion of discount less amortisation of premium


- �nancial investments held-to-maturity (1,092) (1,024) (1,092) (1,024)

Gain on sale:

- �nancial assets held-for-trading (347) (366) (347) (366)


Gain on redemption of �nancial investments

held-to-maturity (3,500) (6,144) (3,500) (6,144)

Unrealised (gain)/loss on revaluation

- �nancial assets held-for-trading (219) (455) (219) (455)

- derivatives (7,302) (5,282) (7,302) (5,282)

- foreign exchange 122,129 54,118 122,129 54,118

Allowance for impairment loss

- �nancial investments available-for-sale 550 499 - 499

Depreciation of property and equipment 14,951 16,019 13,954 15,166

Property and equipment written-off 114 91 110 91

Gain on sale of property and equipment (6,319) (3,910) (6,319) (3,910)

Amortisation of intangible assets 6,304 7,989 5,529 7,197

Gain on sale of foreclosed properties (3,329) (11,041) (2,937) (11,041)

Net individual impairment 83,225 43,872 85,498 43,615

Net collective impairment 35,666 15,253 29,283 15,011

Bad debt and �nancing written-off 4,380 4,583 4,370 4,509

Interest expense - subordinated term loan 29,879 41,473 29,879 41,473

Zakat 4,772 8,583 - -

Subsidiaries - writeback of allowances for

impairment losses - - - (1,707)

Share of joint venture’s results - 210 - -

Operating profit before changes

in working capital 536,949 563,435 438,465 473,240



The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

CASH FLOWS FROM OPERATING

ACTIVITIES (continued)

Decrease/(increase) in operating assets:

Reverse repurchase agreements with

�nancial institutions - 20,057 - 20,057


other �nancial institutions 244,375 113,855 144,706 (62,931)

Financial assets held-for-trading 155,812 111,032 155,812 111,032

Loans, advances and �nancing (3,351,658) (2,808,867) (2,232,792) (1,902,776)

Other assets (166,316) 18,210 (158,609) (2,818)

Derivative �nancial instruments 110,520 47,457 110,499 47,457

Statutory deposits with Bank Negara Malaysia (237,200) (46,050) (172,200) (14,550)

Amount due from subsidiaries - - 303,507 98,257

Amount due from joint ventures (10,670) (1,440) - -

Increase/(decrease) in operating liabilities:

Deposits from customers 1,959,142 4,824,546 1,379,484 4,575,911


other �nancial institutions 784,132 (743,779) 1,039,851 (1,068,728)

Bills and acceptances payable 4,100 (62,192) 4,100 (62,192)

Recourse obligation on loans sold to

Cagamas Berhad (258,643) (15,759) (258,643) (15,759)

Other liabilities (26,221) 86,746 (29,639) 78,172

Cash (used in)/generated from operations (255,678) 2,107,251 724,541 2,274,372

Zakat paid (10,885) (7,616) (2,134) -

Tax refund 2,016 510 - 480

Tax paid (181,372) (210,386) (160,713) (182,778)

Net cash (used in)/generated from

operating activities (445,919) 1,889,759 561,694 2,092,074



The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in associate - 30 - 30

Investment in joint ventures - (150) - -

Interest received:

- �nancial investments available-for-sale 234,629 202,084 234,629 201,936

- �nancial investments held-to-maturity 20,062 19,984 20,062 19,984

Dividend income:

- �nancial investments available-for-sale 2,589 4,058 2,589 4,058

Redemption of �nancial investments

held-to-maturity net of purchase 28,773 (41,497) 26,464 43,568

Net purchase of �nancial investments

available-for-sale (2,262,796) (42,036) (2,014,252) (729,623)

Proceeds from disposal of

- property and equipment 13,009 7,377 13,009 7,377

- foreclosed properties 10,055 21,961 9,075 21,961

Purchase of property and equipment (13,898) (17,443) (12,734) (16,624)

Purchase of intangible assets (236) (1,236) (236) (1,236)

Net cash (used in)/generated from

investing activities (1,967,813) 153,132 (1,721,394) (448,569)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of shares 500,000 - 500,000 -

Repayment of subordinated term loan (330,534) (41,469) (330,534) (41,469)

Payment of dividend (259,977) (242,934) (259,977) (242,934)

Net cash used in financing activities (90,511) (284,403) (90,511) (284,403)

Net (decrease)/increase in cash and

cash equivalents (2,504,243) 1,758,488 (1,250,211) 1,359,102

Net increase/(decrease) in foreign exchange 41,454 (5,691) 39,557 (5,248)

Cash and cash equivalents at beginning of

the �nancial year 9,401,701 7,648,904 4,987,696 3,633,842

CASH AND CASH EQUIVALENTS AT

END OF THE FINANCIAL YEAR (Note 2) 6,938,912 9,401,701 3,777,042 4,987,696



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014

The following accounting policies have been used consistently in dealing with items which are considered material in relation

to the �nancial statements. These policies have been consistently applied to all the �nancial years presented, unless otherwise

stated.

(A) BASIS OF PREPARATION

The �nancial statements of the Group and the Bank have been prepared in accordance with Malaysian Financial Reporting

Standards (‘MFRS’), International Financial Reporting Standards and the requirements of the Companies Act 1965 in

Malaysia. The �nancial 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 �nancing under the Shariah principles.

The �nancial statements of the Group and the Bank have been prepared under the historical cost convention, unless

otherwise indicated in this summary of signi�cant accounting policies.

The preparation of �nancial statements in conformity with MFRS requires the use of certain critical accounting estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities

at the date of the �nancial statements, and the reported amounts of revenues and expenses during the reported period.

It also requires Directors to exercise their judgment in the process of applying the Group and Bank’s accounting policies.

Although these estimates and judgment are based on the Directors’ best knowledge of current events and actions,

actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and

estimates are signi�cant to the �nancial statements are disclosed in Note 44.

Standards, amendments to published standards and interpretations that are effective

The new accounting standards, amendments and improvements to published standards and interpretations that are

effective for the Group and the Bank’s �nancial year beginning on or after 1 January 2014 are as follows:

• Amendments to MFRS 132 ‘Offsetting Financial Assets and Financial Liabilities’

• Amendments to MFRS 136 ‘Recoverable Amount Disclosures for Non-Financial Assets’

• Amendments to MFRS 139 ‘Novation of Derivatives and Continuation of Hedge Accounting’

• Amendments to MFRS 10, MFRS 12 and MFRS 127 ‘Investment entities’

• IC Interpretation 21 ‘Levies’

The adoption of the above accounting standards, amendments and improvements to published standards and

interpretations did not have any signi�cant impact to the results of the Group and the Bank.

Standards, amendments to published standards and interpretations to existing standards that are applicable to the

Group and the Bank but not yet effective

The new accounting standards and amendments to standards and interpretations are effective for annual periods beginning

after 1 January 2015 are as follows:

• Amendment to MFRS 11 ‘Joint arrangements’ (effective from 1 January 2016) requires an investor to apply the

principles of MFRS 3 ‘Business Combination’ when it acquires an interest in a joint operation that constitutes a

business. The amendments are applicable to both the acquisition of the initial interest in a joint operation and the

acquisition of additional interest in the same joint operation. However, a previously held interest is not re-measured

when the acquisition of an additional interest in the same joint operation results in retaining joint control.


(A) BASIS OF PREPARATION

Standards, amendments to published standards and interpretations to existing standards that are applicable to the

Group and the Bank but not yet effective (continued)

• Amendments to MFRS 116 ‘Property, plant and equipment’ and MFRS 138 ‘Intangible assets’ (effective from 1

January 2016) clarify that the use of revenue-based methods to calculate the depreciation and amortisation of an item

of property, plant and equipment and intangible are not appropriate. This is because revenue generated by an activity

that includes the use of an asset generally re!ects factors other than the consumption of the economic bene�ts

embodied in the asset.

The amendments to MFRS 138 also clarify that revenue is generally presumed to be an inappropriate basis for

measuring the consumption of the economic bene�ts embodied in an intangible asset. This presumption can be

overcome only in the limited circumstances where the intangible asset is expressed as a measure of revenue or where

it can be demonstrated that revenue and the consumption of the economic bene�ts of the intangible asset are highly

correlated.

• Amendments to MFRS 10 and MFRS 128 regarding sale or contribution of assets between an investor and its

associate or joint venture (effective from 1 January 2016) resolve a current inconsistency between MFRS 10 and MFRS

128. The accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or

joint venture constitute a ‘business’. Full gain or loss shall be recognised by the investor where the non-monetary

assets constitute a ‘business’. If the assets do not meet the de�nition of a business, the gain or loss is recognised

by the investor to the extent of the other investors’ interests. The amendments will only apply when an investor sells

or contributes assets to its associate or joint venture. They are not intended to address accounting for the sale or

contribution of assets by an investor in a joint operation.

• MFRS 9 ‘Financial Instruments’ (effective from 1 January 2018) will replace MFRS 139 “Financial Instruments:

Recognition and Measurement”. The complete version of MFRS 9 was issued in November 2014.

MFRS 9 retains but simpli�es the mixed measurement model in MFRS 139 and establishes three primary

measurement categories for �nancial assets: amortised cost, fair value through pro�t or loss and fair value through

other comprehensive income (“OCI”). The basis of classi�cation depends on the entity’s business model and the

contractual cash !ow characteristics of the �nancial asset. Investments in equity instruments are always measured at

fair value through pro�t or loss with a irrevocable option at inception to present changes in fair value in OCI (provided

the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it

to collect contractual cash !ows and the cash !ows represent principal and interest.

For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for

most �nancial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair

value option is taken for �nancial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded

in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.

There is now a new expected credit losses model on impairment for all �nancial assets that replaces the incurred loss

impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need

for a trigger event to have occurred before credit losses are recognised.

• MFRS 15 ‘Revenue from contracts with customers’ (effective from 1 Jan 2017) deals with revenue recognition and

establishes principles for reporting useful information to users of �nancial statements about the nature, amount, timing

and uncertainty of revenue and cash !ows arising from an entity’s contracts with customers. Revenue is recognised

when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the bene�ts

from the good or service. The standard replaces MFRS 118 ‘Revenue’ and MFRS 111 ‘Construction contracts’ and

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 signi�cant impact on the

�nancial statements of the Group and the Bank except for MFRS 9. The �nancial effect of adoption of MFRS 9 is still being

assessed by the Group and the Bank.



(B) CONSOLIDATION

The consolidated �nancial statements include the �nancial statements of the Bank, subsidiaries and a joint venture, made

up to the end of the �nancial year.

(i) Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an

entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the

ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on

which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for

the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners

of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of

any asset or liability resulting from a contingent consideration arrangement. Identi�able assets acquired and liabilities

and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition

date. The Group recognises any non-controlling interest in the acquiree on the acquisition-by-acquisition basis, either

at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identi�able

net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the

acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identi�ed net assets

acquired is recorded as goodwill. If the total of the consideration transferred, non-controlling interest recognised and

previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of

a bargain purchase, the difference is recognised directly in the income statement.

Acquisition related cost are expensed as incurred.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity

interest in the acquiree is remeasured to fair value at the acquisition date, any gains or losses arising from such re-

measurement are recognised in pro�t or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date.

Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is

recognised in accordance with MFRS 139 either in pro�t or loss or as a change to other comprehensive income.

Contingent consideration that is classi�ed as equity is not remeasured, and its subsequent settlement is accounted

for within equity.

The Group applies predecessor accounting to account for business combinations under common control. Under

the predecessor accounting, assets and liabilities acquired are not restated to their respective fair values but at the

carrying amounts from the consolidated �nancial statements of the ultimate holding company of the Group and

adjusted to ensure uniform accounting policies of the Group. The difference between any consideration given and

the aggregate carrying amounts of the assets and liabilities (as of the date of the transaction) of the acquired entity is

recorded as an adjustment to retained earnings. No additional goodwill is recognised.

The acquired entity’s results, assets and liabilities are consolidated from the date on which the business combination

between entities under common control occurred. Consequently, the consolidated �nancial statements do not re!ect

the results of the acquired entity for the period before the transaction occurred. The corresponding amounts for the

previous year are not restated.

Inter-company transactions, balances, unrealised gains and losses on transactions between group companies are

eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the

policies adopted by the Group.



(B) CONSOLIDATION

(ii) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions,

that is, as transactions with the owners in their capacity as owners. The difference between fair value of any

consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in

equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(iii) Disposal of subsidiaries

When the Group ceases to have control over a subsidiary, any retained interest in the entity is re-measured to its fair

value at the date when control is lost, with the change in carrying amount recognised in pro�t or loss. The fair value is

the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint

venture or �nancial asset. In addition, any amounts previously recognised in other comprehensive income in respect

of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean

that amounts previously recognised in other comprehensive income are reclassi�ed to pro�t or loss.

(iv) Joint arrangements

A joint arrangement is an arrangement of which there is contractually agreed sharing of control by the Group with

one or more parties, where decisions about the relevant activities relating to the joint arrangement require unanimous

consent of the parties sharing control. The classi�cation of a joint arrangement as a joint operation or a joint venture

depends upon the rights and obligations of the parties to the arrangement. A joint venture is a joint arrangement

whereby the joint venturers have rights to the net assets of the arrangement. A joint operation is a joint arrangement

whereby the joint operators have rights to the assets and obligations for the liabilities, relating to the arrangement.

The Group’s interest in joint ventures are accounted for in the �nancial statements by the equity method of accounting.

Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter

to recognise the Group’s share of the post-acquisition pro�ts or losses and movements in other comprehensive

income. When the Group’s share of losses in a jointly controlled entities equals or exceeds its interests in the joint

venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint

ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf

of the joint ventures.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s

interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an

impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to

ensure consistency with the policies adopted by the Group.

(C) INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURES

In the Bank’s separate �nancial statements, investments in subsidiaries and joint ventures are carried at cost less

accumulated impairment losses. On disposal of investments in subsidiaries and joint ventures, the difference between

disposal proceeds and carrying amounts of the investments are recognised in pro�t or loss.




(D) INTANGIBLE ASSETS

Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the aggregate of the acquisition date fair

value of consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair

value of any previous equity interest in the acquiree over the net of the acquisition date fair value of the identi�able assets

acquired and liabilities assumed. If the fair value of consideration transferred, the amount of non-controlling interest and

the fair value of previously held interest in the acquiree are less than the fair value of the net identi�able assets of the

acquiree, the resulting gain is recognised in the pro�t or loss.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash

generating units (“CGUs”), or groups of CGUs, that is expected to bene�t from the synergies of the combination. Each

unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill

is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a

potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in

use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently

reversed.

Computer software

Acquired computer software are capitalised on the basis of the cost incurred to acquire and bring to use the speci�c

software. These costs are amortised over their estimated useful lives of �ve years. Computer software classi�ed as

intangible asset are stated at cost less accumulated amortisation and accumulated impairment losses, if any.

(E) IMPAIRMENT OF NON-FINANCIAL ASSETS

Assets that have an inde�nite useful life, for example goodwill, are not subject to amortisation and are tested annually

for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in

circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of

assessing impairment, assets are grouped at the lowest levels for which there are separately identi�able cash !ows (cash-

generating units). Non-�nancial assets other than goodwill that suffered impairment are reviewed for possible reversal of

the impairment at each reporting date.

The impairment loss is charged to the income statement unless it reverses a previous revaluation in which case it is charged

to the revaluation surplus. Impairment losses on goodwill are not reversed. In respect of other assets, any subsequent

increase in recoverable amount is recognised in the income statement unless it reverses an impairment loss on a revalued

asset in which case it is taken to revaluation surplus reserve.


(F) RECOGNITION OF INTEREST AND FINANCING INCOME AND EXPENSE

Interest and �nancing income and expense for all interest/pro�t-bearing �nancial instruments are recognised within

“interest income”, “interest expense” and “income from Islamic banking business” respectively in the income statement

using the effective interest/pro�t method.

The effective interest/pro�t method is a method of calculating the amortised cost of a �nancial asset or a �nancial liability

and of allocating the interest and �nancing income or expense over the relevant period. The effective interest/pro�t rate

is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the �nancial

instruments or, when appropriate, a shorter period to the net carrying amount of the �nancial asset or �nancial liability.

When calculating the effective interest/pro�t rate, the Group and the Bank take into account all contractual terms of the

�nancial instrument and includes any fees or incremental costs that are directly attributable to the instrument and are an

integral part of the effective interest rate, but not future credit losses.

Interest or income on impaired �nancial assets is recognised using the rate of interest/pro�t used to discount the future

cash !ows for the purpose of measuring the impairment loss. A �nancial asset or a group of �nancial assets is deemed to

be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred

after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the

estimated future cash !ows of the �nancial asset or the group of �nancial assets that can be reliably estimated.

When a loan/�nancing receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being

the estimated future cash !ow discounted at the original effective interest/pro�t rate of the instrument, and continues

unwinding the discount as interest/pro�t income. Interest/pro�t income on impaired loans/�nancing and receivables are

recognised using the original effective interest/pro�t rate.

(G) RECOGNITION OF FEES AND OTHER INCOME

Fees and commissions are recognised as income when all conditions precedent are ful�lled. Commitment fees for loans,

advances and �nancing that are likely to be drawn down are deferred (together with related direct costs) and income which

forms an integral part of the effective interest/pro�t rate of a �nancial instrument is recognised as an adjustment to the

effective interest/pro�t rate on the �nancial instrument.

Commitment fees and guarantee fees which are material are recognised as income based on a time apportionment

method.

Dividends are recognised when the right to receive payment is established.

Net pro�t from �nancial assets held at fair value through pro�t or loss and �nancial investments available-for-sale are

recognised upon disposal of the assets, as the difference between net disposal proceeds and the carrying amount of the

assets.

(H) FINANCIAL ASSETS

Classification

The Group classi�es its �nancial assets in the following categories: at fair value through pro�t or loss, loans and receivables,

available-for-sale and held-to-maturity. The classi�cation depends on the purpose for which the �nancial assets were

acquired. Management determines the classi�cation at initial recognition.





Classification (continued)

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through pro�t or loss are �nancial assets held-for-trading. A �nancial asset is classi�ed

in this category if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term.

Derivatives are also categorised as held for trading unless they are designated as hedges (see Note O)

(ii) Loans and receivables

Loans and receivables are non-derivative �nancial assets with �xed or determinable payments that are not quoted in

an active market.

(iii) Financial investments available-for-sale

Financial investments available-for-sale are non-derivatives that are either designated in this category or not classi�ed

in any of the other categories.

(iv) Financial investments held-to-maturity

Financial investments held-to-maturity are non-derivative �nancial assets with �xed or determinable payments and

�xed maturities that the Group’s and the Bank’s management has the positive intention and ability to hold to maturity.

If the Group and the Bank were to sell other than an insigni�cant amount of held-to-maturity �nancial assets, the whole

category would be tainted and reclassi�ed as available for sale.

Recognition and initial measurement

Regular purchases and sales of �nancial assets are recognised on the settlement date, the date that an asset is delivered

to or by the Group and the Bank.

Financial assets are initially recognised at fair value plus transaction costs for all �nancial assets not carried at fair value

through pro�t or loss. Financial assets carried at fair value through pro�t or loss are initially recognised at fair value, and

transaction costs are expensed in pro�t or loss.

Subsequent measurement – gains and losses

Financial investments available-for-sale and �nancial assets at fair value through pro�t or loss are subsequently carried at

fair value. Loans and receivables and held-to-maturity �nancial assets are subsequently carried at amortised cost using

the effective interest/pro�t method.

Changes in the fair values of �nancial assets at fair value through pro�t or loss, including the effects of currency translation,

interest and dividend income are recognised in income statement in the period in which the changes arise.

Changes in the fair value �nancial investments available-for-sale are recognised in other comprehensive income, except for

impairment losses (see accounting policy Note I) and foreign exchange gains and losses on monetary assets (Note N).

Interest and dividend income on �nancial investments available-for-sale are recognised separately in income statements.

Interest on �nancial investments available-for-sale calculated using the effective interest/ pro�t method is recognised in

income statements. Dividend income on available-for-sale equity instruments are recognised in income statements when

the Group’s right to receive payments is established.



De-recognition

Financial assets are de-recognised when the rights to receive cash !ows from the investments have expired or have been

transferred and the Group has transferred substantially all risks and rewards of ownership.

Loans and receivables that are factored out to banks and other �nancial institutions with recourse to the Group are

not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully

transferred. The corresponding cash received from the �nancial institutions is recorded as borrowings.

When �nancial investments available-for-sale are sold, the accumulated fair value adjustments recognised in other

comprehensive income are reclassi�ed to pro�t or loss.

Reclassification of financial assets

The Group and the Bank may choose to reclassify non-derivative �nancial assets held-for-trading out of the held-for-

trading 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 de�nition of a loan and receivable on initial classi�cation

and the Group and the Bank have the intention and ability to hold it for the foreseeable future or until maturity at the

date of reclassi�cation.

Reclassi�cations are made at the fair value at the date of reclassi�cation.

(I) IMPAIRMENT OF FINANCIAL ASSETS

Assets carried at amortised cost

The Group assesses at the end of the reporting period whether there is objective evidence that a �nancial asset or group of

�nancial assets is impaired. A �nancial asset or a group of �nancial assets is impaired and impairment losses are incurred

only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition

of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash !ows of the �nancial

asset or group of �nancial assets that can be reliably estimated.

The criteria that the Group and the Bank use to determine that there is objective evidence of an impairment loss include

among others:

• past due contractual payments;

• signi�cant �nancial dif�culties of the borrower;

• probability of bankruptcy or other �nancial re-organisation;

• default of related borrower;

• measurable decrease in estimated future cash!ow than was originally envisaged; and

• signi�cant deterioration in issuer’s credit rating.





Assets carried at amortised cost (continued)

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of

estimated future cash !ows (excluding future credit losses that have not been incurred) discounted at the �nancial asset’s

original effective interest/pro�t rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is

recognised in income statements. If ‘loans and receivables’ or a ‘held-to-maturity investment’ has a variable interest/pro�t

rate, the discount rate for measuring any impairment loss is the current effective interest/pro�t rate determined under the

contract.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an

event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal

of the previously recognised impairment loss is recognised in income statements.

When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all

the necessary procedures have been completed and the amount of the loss has been determined.

For loans, advances and �nancing, the Group and the Bank �rst assess whether objective evidence of impairment exists

individually for loans, advances and �nancing that are individually signi�cant, and individually or collectively for loans,

advances and �nancing that are not individually signi�cant. If the Group and the Bank determine that no objective evidence

of impairment exists for individually assessed loans, advances and �nancing, whether signi�cant or not, it includes the

asset in a group of loans, advances and �nancing with similar credit risk characteristics and collectively assesses them for

impairment.

(i) Individual impairment allowance

Loans, advances and �nancing 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/�nancings 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/�nancing’s carrying amount and the present

value of estimated future cash !ows (excluding future credit losses that have not been incurred) discounted at the loan/

�nancing’s original effective interest/pro�t rate. The carrying amount of the loan/�nancing is reduced through the use of

an allowance account and the amount of the loss is recognised in the income statement. If a loan/�nancing has a variable

interest rate, the discount rate for measuring any impairment loss is the current effective interest/pro�t rate determined

under the contract.

The calculation of the present value of the estimated future cash !ows of a collateralised loan re!ects the cash !ows

that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is

probable.



(ii) Collective impairment allowance

For the purposes of a collective evaluation of impairment, loans, advances and �nancing are grouped on the basis of

similar credit risk characteristics. Those characteristics are relevant to the estimation of future cash !ows for groups

of such loans, advances and �nancing by being indicative of the borrowers’ ability to pay all amounts due according

to the contractual terms of the loans being evaluated.

Future cash !ows in a group of loans that are collectively evaluated for impairment are estimated on the basis of the

contractual cash !ows 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 re!ect

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 !ows for groups of loans should re!ect 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 !ows are reviewed regularly

by the Group and the Bank to reduce any differences between loss estimates and actual loss experience.

Pursuant to Paragraph 13 of the Guideline on Classi�cation and Impairment Provisions for Loans/Financing, Bank

Negara Malaysia (‘BNM’) had issued a letter on 4 February 2014, which require banking institutions to maintain, in

aggregate collective impairment provisions and regulatory reserves of no less than 1.2% of total outstanding loans/

�nancing (excluding loans/�nancing with an explicit guarantee from the Federal Government of Malaysia), net of

individual impairment provisions. Banking institutions are required to comply with the requirement by 31 December

2015.

As at reporting date, the Group and the Bank have maintained the collective impairment provisions and regulatory

reserves of no less than 1.2% in the books by transferring from retained pro�ts to regulatory reserves (Group: RM184.4

million, Bank: RM135.3 million).

Assets classified as available-for-sale

The Group and the Bank assess at the end of the reporting period whether there is objective evidence that a �nancial asset

or a group of �nancial assets is impaired.

For debt securities, the Group and the Bank assess at each date of the statement of �nancial position whether there is

any objective evidence that a �nancial investment or group of �nancial investments is impaired. The criteria the Group and

the Bank use to determine whether there is objective evidence of impairment include non-payment of coupon or principal

redemption, signi�cant �nancial dif�culty of issuer or obligor and signi�cant drop in rating. In the case of equity securities

classi�ed as available-for-sale, in addition to the criteria above, a signi�cant or prolonged decline in the fair value of the

security below its cost is also considered as an indicator that the assets are impaired.

If any such evidence exists for available-for-sale �nancial assets, the cumulative loss that had been recognised directly

in equity is removed from equity and recognised in income statements. The amount of cumulative loss reclassi�ed to

pro�t or loss is the difference between the acquisition cost and the current fair value, less any impairment loss on that

�nancial asset previously recognised in income statements. Impairment losses recognised in income statements on equity

instruments classi�ed as available-for-sale are not reversed through income statements.

If, in a subsequent period, the fair value of a debt instrument classi�ed as available-for-sale increases and the increase

can be objectively related to an event occurring after the impairment loss was recognised in income statements, the

impairment loss is reversed through income statements.




(J) FINANCIAL LIABILITIES

All �nancial liabilities which include derivative �nancial instruments have to be recognised in the statement of �nancial

position and measured in accordance with their assigned category.

The Group and the Bank’s holding in �nancial liabilities are in �nancial liabilities at fair value through pro�t or loss (including

�nancial liabilities held-for-trading and those that designated at fair value) and �nancial liabilities at amortised cost.

Financial liabilities are initially recognised at fair value plus transaction costs for all �nancial liabilities not carried at fair

value through pro�t or loss.

Financial liabilities at fair value through profit or loss

This category comprises two sub-categories: �nancial liabilities classi�ed as held-for-trading, and �nancial liabilities

designated by the Group and the Bank as at fair value through pro�t or loss upon initial recognition. The Group and the

Bank do not have any non-derivative �nancial liabilities designated at fair value through pro�t or loss.

A �nancial liability is classi�ed 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 identi�ed �nancial instruments that are managed together

and for which there is evidence of a recent actual pattern of short-term pro�t-taking. Derivatives are also categorised as

held-for-trading unless they are designated and effective as hedging instruments.

Financial liabilities classi�ed as held-for-trading are initially recognised at fair value, and transaction costs are expensed

in pro�t or loss. Gains and losses arising from changes in fair value of �nancial liabilities classi�ed held-for-trading are

included in the income statement.

Other liabilities measured at amortised cost

Financial liabilities that are not classi�ed as at fair value through pro�t or loss fall into this category and are measured at

amortised cost.

De-recognition

Financial liabilities are de-recognised when they have been redeemed or otherwise extinguished.

(K) OFFSETTING FINANCIAL INSTRUMENTS

Financial assets and liabilities are offset and the net amount presented in the statement of �nancial position when there is

a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the

assets and settle the liability simultaneously.

The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of

business and in the event of default, insolvency or bankruptcy.


(L) PROPERTY AND EQUIPMENT AND DEPRECIATION

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. 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 bene�ts associated with the item will !ow to the Group and the cost of the item

can be measured reliably. The carrying amount of the replaced part is de-recognised. All other repairs and maintenance

are charged to the income statement during the �nancial period in which they are incurred.

Freehold land is not depreciated as it has an in�nite 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 50 years

Leasehold buildings 50 years or over the remaining lease period, whichever is shorter

Renovation and leasehold premises 5 years or the period of the lease whichever is greater

Of�ce equipment and furniture 10 years

Computer equipment and software 5 years

Motor vehicles 5 years

Depreciation on capital work in progress commences when the assets are ready for their intended use.

Residual value and useful lives of assets are reviewed, and adjusted if appropriate, at each reporting date.

At each reporting date, the Group assesses whether there is any indication of impairment or whenever events or changes in

circumstances indicate the carrying amount may not be recoverable. A write down is made if the carrying amount exceeds

the recoverable amount. Any subsequent increase in the recoverable amount is recognised in the income statement (refer

to accounting policy E on impairment of non-�nancial 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.

(M) LEASES

Accounting by lessee

Finance leases

Leases of property and equipment where the Group assumes substantially all the bene�ts and risks of ownership are

classi�ed as �nance 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 �nance charges so as to achieve a periodic constant rate on

the �nance balance outstanding. The corresponding rental obligations, net of �nance charges, are included in borrowings.

The interest element of the �nance 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 �nance 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 �nance 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.




(M) LEASES

Accounting by lessee (continued)

Operating leases

Leases of assets where a signi�cant portion of the risks and rewards of ownership are retained by the lessor are classi�ed

as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged

to the income statement on the straight-line basis over the lease period.

Initial direct costs incurred by the Group in negotiating and arranging operating leases are recognised in income statement

when incurred.

(N) FOREIGN CURRENCY TRANSLATIONS

Functional and presentation currency

Items included in the �nancial 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 �nancial statements are presented in

Ringgit Malaysia, which is the Bank’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchanges rate prevailing at the dates

of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the

translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised

in the income statement, except when deferred in other comprehensive income as qualifying cash !ow hedges and

qualifying net investment hedges.

Changes in the fair value of monetary �nancial assets denominated in foreign currency classi�ed as available-for-sale are

analysed between translation differences resulting from changes in the amortised cost of the �nancial asset and other

changes in the carrying amount of the �nancial 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 �nancial assets and liabilities such as equities held at fair value through pro�t and

loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary �nancial assets such as

equities classi�ed as available-for-sale are included in other comprehensive income.


(O) DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives are initially recognised at fair values on the date on which derivative contracts are entered into and are

subsequently remeasured at their fair values. Fair values are obtained from quoted market prices in active markets,

including recent market transactions, and valuation techniques, including discounted cash !ow 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 modi�cation or repackaging) or based on a valuation

technique whose variables include only data from observable markets.

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.

As at reporting date, the Group and the Bank have not designated any derivative as hedging instruments.

Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately

in the income statement.

Gains and losses on interest rate swaps, futures, forward and option contracts that do not qualify as hedges are recognised

in the current �nancial year using the mark-to-market method and are included in the income statement.

(P) CURRENT AND DEFERRED INCOME TAXES

Current tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in income statement, except to the

extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also

recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of

the reporting period where the Group’s subsidiaries and branch operate and generate taxable income.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax

regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be

paid to the tax authorities. This liability is measured using the single best estimate of the most likely outcome.

Deferred tax

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts

attributed to assets and liabilities for tax purposes and their carrying amounts in the �nancial 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 pro�t or loss.

Deferred tax assets are recognised to the extent that it is probable that taxable pro�t 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 substantively enacted by

the end of the reporting period and are expected to apply when the related deferred tax assets is realised or the deferred

tax liability is settled.




(P) CURRENT AND DEFERRED INCOME TAXES

Deferred tax (continued)

Deferred tax is recognised on temporary differences arising on investment in subsidiaries and joint venture except where

the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary

difference will not reverse in the foreseeable future.

Deferred income tax amounts are recognised on deductible temporary differences arising from investment in subsidiaries

and joint arrangements only to the extent that it is probable the temporary difference will reverse in future and there is

suf�cient taxable pro�t available against which the deductible temporary difference can be utilised.

Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets

against current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied by the same

taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances

on net basis.

(Q) ZAKAT

Zakat represents business zakat payable by the Group to comply with the principles of Shariah and as approved by the

Shariah Committee. The Bank’s subsidiary, AFFIN Islamic Bank Berhad only pays zakat on its business and does not pay

zakat on behalf of depositors. Zakat provision is calculated based on 2.5775% of the prior year’s net asset method.

(R) CASH AND CASH EQUIVALENTS

Cash and cash equivalents consists of cash in hand, bank balances and deposits and placements maturing within one

month which are held for the purpose of meeting short term commitments and are readily convertible to cash without

signi�cant risk of changes in value.

(S) FORECLOSED PROPERTIES

Foreclosed properties are stated at the lower of their carrying amount and fair value less cost to sell.

(T) CONTINGENT LIABILITIES AND CONTINGENT ASSETS

The Group and the Bank do not recognise contingent assets and liabilities other than those arising from business

combination, but disclose its existence in the �nancial statements. A contingent liability is possible obligation that arises

from past events whose existence will be con�rmed by the occurrence or non-occurrence of one or more uncertain

future events beyond the control of the Group and the Bank or a present obligation that is not recognised because it is

not probable that an out!ow of resources will be required to settle the obligation. A contingent liability also arises in the

extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably. However,

contingent liabilities do not include �nancial guarantee contracts.

A contingent asset is a possible asset that arises from past events whose existence will be con�rmed by the occurrence

or non-occurrence of one or more uncertain future events beyond the control of the Group and the Bank. The Group and

the Bank do not recognise contingent assets but discloses its existence where in!ows of economic bene�ts are probable,

but not virtually certain.


(U) BILLS AND ACCEPTANCES PAYABLE

Bills and acceptances payable, which are �nancial liabilities, represent the Bank’s own bills and acceptances rediscounted

and outstanding in the market. (See Note J)

(V) PROVISIONS

Provisions are recognised by the Group and the Bank when all of the following conditions have been met:

• the Group and the Bank have a present legal or constructive obligation as a result of past events;

• it is probable that an out!ow of resources to settle the obligation will be required; and

• a reliable estimate of the amount of obligation can be made.

Where the Group and the Bank expect a provision to be reimbursed (for example, under an insurance contract), the

reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are

recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an out!ow will be required in settlement is determined

by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an out!ow with

respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a

pre-tax rate that re!ects current market assessments of the time value of money and the risks speci�c to the obligation.

The increase in the provision due to passage of time is recognised as �nance cost expense.

(W) EMPLOYEE BENEFITS

Short-term employee benefits

Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary bene�ts are accrued in the period in which

the associated services are rendered by employees of the Group.

Defined contribution plan

The de�ned contribution plan is a pension plan under which the Group pays �xed 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 suf�cient assets to pay all employee bene�ts relating to employee service in the current and prior

periods.

The Group’s contribution to de�ned 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 bene�ts 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 bene�ts. The Group recognises termination

bene�ts 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 bene�ts as a result of an offer made to

encourage voluntary redundancy.




(X) FINANCIAL GUARANTEE CONTRACTS

Financial guarantee contracts are contracts that require the Group or Bank to make speci�ed payments to reimburse the

holder for a loss it incurs because a speci�ed debtor fails to make payments when due, in accordance with the terms of

a debt instrument. Such �nancial guarantees are given to �nancial institutions and other bodies on behalf of customers to

secure loans, overdrafts and other banking facilities.

Financial guarantee contracts are recognised as a �nancial liability at the time the guarantee is issued. The fair value of a

�nancial guarantee at the time of signature is zero because all guarantees are agreed on arm’s length terms and the value

of the premium agreed corresponds to the value of the guarantee obligation. No receivable for the future premiums is

recognised.

The liability is subsequently recognised at the higher of the amount determined in accordance with MFRS 137 “Provisions,

contingent liabilities and contingent assets” and the amount initially recognised less cumulative amortisation, where

appropriate.

The fair value of �nancial guarantees is determined as the present value of the difference in net cash !ows between the

contractual payments under the debt instrument and the payments that would be required without the guarantee, or the

estimated amount that would be payable to a third party for assuming the obligations.

Where �nancial guarantees in relation to loans or payables of subsidiaries are provided by the Group for no compensation,

the fair values are accounted for as contributions and recognised as part of the cost of investment in subsidiaries.

(Y) SALE AND REPURCHASE AGREEMENTS

Securities purchased under resale agreements are securities which the Group and the Bank have purchased with a

commitment to resell at future dates. The commitment to resell the securities is re!ected as an asset on the statements of

�nancial position.

Conversely, obligations on securities sold under repurchase agreements are securities which the Group and the Bank have

sold from its portfolio, with a commitment to repurchase at future dates. Such �nancing and the obligation to repurchase

the securities is re!ected as a liability on the statement of �nancial position.

The difference between sale and repurchase price as well as purchase and resale price are amortised as interest income

and interest expense respectively on an effective yield method.

(Z) SHARE CAPITAL

Classification

Ordinary shares are classi�ed as equity. Other shares are classi�ed as equity and/or liability according to the economic

substance of the particular instrument.

Share issue costs

Incremental costs directly attributable to the issue of new shares or options are deducted against share premium account.

Dividend distribution

Distributions to holders of an equity instrument is recognised directly in equity and the corresponding liability is recognised

in the period in which the dividends are approved.

85Affin Bank BerhadAnnual Report 2014

NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014

1 GENERAL INFORMATION

The Bank is principally engaged in all aspects of banking and related �nancial services. The principal activities of the

Bank’s subsidiaries are Islamic banking business, property management services, nominee and trustee services. There

have been no signi�cant changes in these principal activities during the �nancial year.

The number of employees in the Group and the Bank as at 31 December 2014 was 3,499 (2013: 3,417) and 3,250 (2013:

3,187) employees respectively.

The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the

ultimate holding corporate body is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung

Angkatan Tentera Act, 1973.

The Bank is a limited liability company, incorporated and domiciled in Malaysia.

2 CASH AND SHORT-TERM FUNDS

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Cash and bank balances with banks

and other �nancial institutions 265,430 207,501 258,390 202,529

Money at call and deposit placements

maturing within one month 6,673,482 9,194,200 3,518,652 4,785,167

6,938,912 9,401,701 3,777,042 4,987,696

3 DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Licensed banks 238,222 359,040 962,050 983,199

Licensed investment banks - 123,557 - 123,557

238,222 482,597 962,050 1,106,756

4 FINANCIAL ASSETS HELD-FOR-TRADING

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

At fair value

Bank Negara Malaysia Monetary Notes 149,904 149,544 149,904 149,544

149,904 149,544 149,904 149,544



5 DERIVATIVE FINANCIAL ASSETS

The Group

2014

The Group

2013

Contract/

notional

amount

RM’000

Contract/

notional

amount

RM’000

Assets

RM’000

Assets

RM’000

At fair value

Foreign exchange derivatives:

Currency forwards 911,475 41,850 312,991 6,979

Cross currency swaps 1,670,492 24,710 1,230,649 19,660

Interest rate derivatives:

Interest rate swaps 2,461,000 22,098 1,920,713 29,635

5,042,967 88,658 3,464,353 56,274

The Bank

2014

The Bank

2013

Contract/

notional

amount

RM’000

Contract/

notional

amount

RM’000

Assets

RM’000

Assets

RM’000

At fair value





Interest rate swaps 2,461,000 22,098 1,920,713 29,635

5,052,497 88,672 3,464,353 56,274



6 FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

At fair value

Money market instruments:

Malaysian Government treasury bills 225,782 - 200,778 -

Malaysian Government securities 50,663 - 50,663 -

Malaysian Government investment issues 2,180,038 1,759,211 1,678,503 1,142,371

Sukuk Perumahan Kerajaan 351,735 337,661 272,595 269,361

Bank Negara Malaysia Monetary Notes 1,387,284 629,674 1,102,406 571,160

Negotiable Instruments of Deposit and

Islamic Debt Certi�cates 1,331,452 882,314 1,331,452 882,314

Bankers’ acceptances and Islamic accepted bills - 196,522 - 196,522

Khazanah Bonds/Sukuk 353,165 237,441 232,996 207,756

5,880,119 4,042,823 4,869,393 3,269,484

Quoted securities:

Shares in Malaysia 13,487 13,604 13,005 13,122

Private debt securities in Malaysia 2,167 2,167 2,167 2,167

Unquoted securities:

Shares in Malaysia 160,379 148,155 159,804 148,086

Private debt securities

- in Malaysia 3,406,335 2,947,839 2,884,586 2,438,124

- outside Malaysia 530,746 504,721 530,746 504,721

9,993,233 7,659,309 8,459,701 6,375,704

Allowance for impairment losses (45,322) (44,772) (44,290) (44,290)

9,947,911 7,614,537 8,415,411 6,331,414

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Movement in allowance for impairment losses

At beginning of the �nancial year 44,772 48,031 44,290 45,781

Transfer from allowance for impairment losses

on loans, advances and �nancing 6,157 - 6,157 -

Allowance made during the �nancial year 550 499 - 499

Amount written-off (6,505) (3,758) (6,505) (1,990)

Exchange differences 348 - 348 -

At end of the financial year 45,322 44,772 44,290 44,290



7 FINANCIAL INVESTMENTS HELD-TO-MATURITY

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

At amortised cost

Quoted securities:


Unquoted securities:


520,433 556,700 437,679 471,635

Allowance for impairment losses (44,278) (56,364) (44,278) (56,364)

476,155 500,336 393,401 415,271

Movement in allowance for impairment losses

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000






8 LOANS, ADVANCES AND FINANCING

(i) By type

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Overdrafts 1,943,124 1,752,882 1,739,162 1,569,936

Term loans/�nancing

- Housing loans/�nancing 5,777,114 5,510,534 3,944,934 3,797,843

- Hire purchase receivables 10,963,715 10,524,044 8,919,007 8,728,354

- Syndicated �nancing 1,488,044 1,520,412 1,226,013 1,252,340

- Business term loans/�nancing 13,424,503 12,540,363 11,505,061 10,929,608

Bills receivables 1,194,884 318,677 1,182,694 286,417

Trust receipts 244,117 435,591 224,268 409,889

Claims on customers under

acceptances credits 1,120,038 986,666 998,621 919,192

Staff loans/�nancing (of which

RM Nil to Directors) 133,166 138,769 123,537 127,888

Credit cards 81,870 82,137 81,870 82,137

Revolving credits 3,612,801 2,934,652 2,805,676 2,523,945

Factoring 4,674 7,073 4,674 7,073

Gross loans, advances and financing 39,988,050 36,751,800 32,755,517 30,634,622

Less:

Allowance for impairment losses

- Individual (239,259) (223,701) (207,740) (189,117)

- Collective (292,619) (300,314) (255,226) (266,595)

Total net loans, advances and financing 39,456,172 36,227,785 32,292,551 30,178,910

- Included in the Group and the Bank’s term loans are housing loans sold to Cagamas Berhad with recourse

amounting to RM139,147,000 (2013: RM397,790,000).

- Included in the Group’s business term loans/�nancing as at reporting date is RM53.7 million (2013: RM47.4

million) and RM62.9 million (2013: RM68.9 million) of term �nancing disbursed by AFFIN Islamic Bank Berhad to

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




(ii) By maturity structure

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Maturing within one year 9,259,050 7,183,104 8,051,792 6,433,997

One year to three years 4,439,970 4,955,354 3,923,647 4,394,607

Three years to �ve years 6,508,671 6,498,822 5,573,588 5,727,883

Over �ve years 19,780,359 18,114,520 15,206,490 14,078,135

39,988,050 36,751,800 32,755,517 30,634,622

(iii) By type of customer

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Domestic non-banking institutions

- Stockbroking companies 231 241 231 241

- Others 1,304,372 1,622,525 1,092,416 1,449,099

Domestic business enterprises

- Small medium enterprises 7,706,811 5,900,985 7,068,567 5,421,258

- Others 13,952,430 13,234,095 11,608,972 11,649,365

Government and statutory bodies 92,725 162,591 33,298 108,756

Individuals 15,521,321 14,939,353 11,671,052 11,475,917

Other domestic entities 13,634 251,166 9,442 8,567

Foreign entities 1,396,526 640,844 1,271,539 521,419

39,988,050 36,751,800 32,755,517 30,634,622

(iv) By interest/profit rate sensitivity

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Fixed rate

- Housing loans/�nancing 357,709 309,977 295,427 237,886

- Hire purchase receivables 10,963,715 10,524,043 8,919,007 8,728,354

- Other �xed rate loans/�nancing 3,823,161 4,178,246 3,180,638 3,556,430

Variable rate

- BLR plus 16,064,029 14,098,831 12,972,290 11,458,345

- Cost plus 8,779,436 7,640,703 7,388,155 6,653,607

39,988,050 36,751,800 32,755,517 30,634,622




(v) By economic sectors

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Primary agriculture 684,340 478,281 417,288 470,268

Mining and quarrying 622,359 649,621 621,563 648,488

Manufacturing 2,049,476 2,516,273 1,814,510 2,297,207

Electricity, gas and water supply 254,771 290,994 201,658 253,405

Construction 3,990,973 3,277,346 3,411,861 2,772,575

Real estate 6,045,231 4,623,807 5,441,854 4,192,630

Wholesale & retail trade and

restaurants & hotels 2,117,173 2,140,392 1,915,945 1,993,533

Transport, storage and communication 2,037,263 1,965,627 1,902,028 1,858,700

Finance, insurance and business services 4,853,095 4,360,854 4,099,442 3,837,340

Education, health and others 1,663,541 1,358,801 1,140,497 711,807

Household 15,659,678 15,082,264 11,781,844 11,593,915

Others 10,150 7,540 7,027 4,754

39,988,050 36,751,800 32,755,517 30,634,622

(vi) By economic purpose

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Purchase of securities 290,047 326,463 287,098 326,450

Purchase of transport vehicles 11,444,211 11,232,452 9,391,932 9,438,264

Purchase of landed property of which:

- Residential 5,733,144 5,948,524 3,890,037 4,219,088

- Non-residential 5,771,894 5,009,095 4,864,336 4,161,066

Fixed assets other than land and building 326,163 238,059 259,089 158,411

Personal use 886,926 933,727 852,043 899,671

Credit card 81,870 82,137 81,870 82,137

Consumer durable 803 868 803 860

Construction 3,117,428 1,996,832 2,434,105 1,417,340

Merger and acquisition 340,771 312,667 340,771 312,667

Working capital 11,478,251 9,945,383 9,981,580 8,928,713

Others 516,542 725,593 371,853 689,955

39,988,050 36,751,800 32,755,517 30,634,622




(vii) By geographical distribution

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Perlis 130,950 85,125 32,923 33,470

Kedah 1,216,316 1,088,305 791,638 754,925

Pulau Pinang 1,985,420 1,825,875 1,828,526 1,698,009

Perak 1,169,769 1,163,213 835,636 848,478

Selangor 12,530,054 11,281,264 9,927,910 9,140,199

Wilayah Persekutuan 11,127,076 10,529,110 9,201,666 8,901,544

Negeri Sembilan 894,089 813,316 674,051 676,394

Melaka 982,343 869,233 879,071 782,055

Johor 3,145,860 3,207,965 2,825,710 2,946,869

Pahang 824,164 755,143 549,200 504,854

Terengganu 989,058 989,295 589,445 609,267

Kelantan 230,819 244,022 63,553 49,906

Sarawak 1,270,558 1,117,347 1,246,449 1,088,646

Sabah 1,704,712 1,692,677 1,620,334 1,604,644

Labuan 520,747 553,770 520,677 553,682

Outside Malaysia 1,266,115 536,140 1,168,728 441,680

39,988,050 36,751,800 32,755,517 30,634,622

(viii) Movements of impaired loans

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000


Amount converted to �nancial investments

available-for-sale (16,865) - (16,865) -

Classi�ed as impaired 543,093 432,629 452,130 363,583

Reclassi�ed as non-impaired (289,556) (298,268) (234,726) (252,304)

Amount recovered (134,856) (130,527) (100,780) (110,745)



Ratio of gross impaired loans, advances

and �nancing to gross loans, advances and

�nancing 1.78% 1.92% 1.78% 1.88%




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

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Individual impairment


Amount converted to �nancial investments

available-for-sale (6,157) - (6,157) -

Transfer from collective impairment 12,314 - 12,314 -

Allowance made during the �nancial year 75,297 47,903 73,788 47,213

Amount recovered (4,386) (4,031) (604) (3,598)


Unwinding of income (12,432) (17,825) (11,669) (16,780)

Exchange differences 1,792 256 8 (21)


The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Collective impairment


Transfer to individual impairment (12,314) - (12,314) -

Net allowance made during the �nancial year 47,980 15,253 41,597 15,011






(x) Impaired loans by economic sectors

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000


Manufacturing 31,450 40,414 28,747 18,373

Electricity, gas and water supply 246 118 246 118

Construction 258,070 193,447 187,791 127,471

Real estate 323 190 323 190

Wholesale & retail trade and

restaurants & hotels 30,344 31,222 29,986 29,213

Transport, storage and communication 5,099 9,542 4,805 9,477

Finance, insurance and business services 38,442 60,065 37,816 59,483

Education, health and others 1,607 1,868 1,607 1,868

Household 330,511 362,984 275,731 322,140

713,648 706,185 584,491 574,555

(xi) Impaired loans by economic purpose

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Purchase of securities 10,298 11,641 10,298 11,641

Purchase of transport vehicles 86,409 75,350 74,189 66,780

Purchase of landed property of which:

- Residential 231,048 272,103 188,967 241,357

- Non-residential 31,278 23,707 30,192 21,762

Fixed assets other than land and building 282 282 282 282

Personal use 7,826 7,937 7,346 7,742

Credit card 326 476 326 476

Consumer durable 13 14 13 14

Construction 77,071 65,797 7,041 141

Working capital 252,663 234,766 249,403 210,248

Others 16,434 14,112 16,434 14,112

713,648 706,185 584,491 574,555




(xii) Impaired loans by geographical distribution

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Perlis 901 472 649 460

Kedah 22,141 23,005 20,841 21,182

Pulau Pinang 35,458 18,781 33,462 17,309

Perak 15,193 14,081 11,156 11,015

Selangor 277,204 318,270 248,105 276,443

Wilayah Persekutuan 105,792 117,805 100,721 114,492

Negeri Sembilan 24,258 28,827 21,392 26,196

Melaka 8,575 8,368 8,401 8,011

Johor 49,319 46,552 46,620 43,939

Pahang 48,236 12,038 44,789 8,670

Terengganu 17,139 5,465 12,830 2,985

Kelantan 5,152 4,124 1,790 1,803

Sarawak 14,407 6,290 14,082 5,794

Sabah 12,384 11,298 12,195 11,100

Outside Malaysia 77,489 90,809 7,458 25,156

713,648 706,185 584,491 574,555

9 OTHER ASSETS

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Other debtors, deposits and prepayments 34,596 35,131 33,456 34,288

Cheque clearing accounts 179,711 169,141 132,691 127,621

Foreclosed properties (a) 9,099 15,825 8,508 14,646

223,406 220,097 174,655 176,555

(a) Foreclosed properties


Disposal during the �nancial year (6,726) (10,920) (6,138) (10,920)




10 AMOUNT DUE FROM SUBSIDIARIES

The Bank

2014

RM’000

2013

RM’000

Advances to AFFIN Islamic Bank Berhad - 60,115

Advances to other subsidiaries 438 608

438 60,723

The advances to subsidiaries are unsecured, bear no interest rate (2013: 3.00%) and repayable on demand.

11 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 �nancial position:

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Deferred tax assets:

- settled more than 12 months - - - -

- settled within 12 months 17,904 20,730 14,479 17,062

17,904 20,730 14,479 17,062

Deferred tax liabilities:

- settled more than 12 months (4,188) (5,531) (3,968) (5,263)

- settled within 12 months (10,598) (5,254) (10,293) (4,814)

(14,786) (10,785) (14,261) (10,077)

Deferred tax assets/(liabilities) 3,118 9,945 218 6,985

At beginning of the �nancial year 9,945 (13,365) 6,985 (13,099)

(Charged)/credited to income

statement (Note 34) (649) (1,501) (920) (1,674)

- property and equipment 809 471 813 532

- intangible assets 1,036 (703) 850 (917)

- provision for other liabilities (2,494) (1,269) (2,583) (1,289)

(Charged)/credited to equity

- �nancial investments available-for-sale (6,178) 24,811 (5,847) 21,758

At end of the financial year 3,118 9,945 218 6,985



11 DEFERRED TAX ASSETS / (LIABILITIES)

The movements in deferred tax assets and liabilities during the �nancial year are as follows:

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Subject to income tax

Deferred tax assets (before offsetting)

AFS revaluation reserves 1,855 2,187 - -

Provision for other liabilities 16,049 18,543 14,479 17,062

17,904 20,730 14,479 17,062

Offsetting (14,786) (10,785) (14,261) (10,077)

Deferred tax assets (after offsetting) 3,118 9,945 218 6,985

Deferred tax liabilities (before offsetting)

Property and equipment (3,950) (4,759) (3,638) (4,451)

Intangible assets (3,422) (4,458) (3,208) (4,058)

AFS revaluation reserves (7,414) (1,568) (7,415) (1,568)

(14,786) (10,785) (14,261) (10,077)

Offsetting 14,786 10,785 14,261 10,077

Deferred tax liabilities (after offsetting) - - - -

The amount of unused tax losses for which no deferred tax asset is recognised in the statement of �nancial position are

as follows:

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Tax losses 98,860 99,209 - -

12 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.



13 INVESTMENT IN SUBSIDIARIES

The Bank

2014

RM’000

2013

RM’000

Unquoted shares, at cost 419,509 419,549

Less: Allowance for impairment losses (30,435) (30,461)

389,074 389,088

The subsidiaries of the Bank, all of which are incorporated in Malaysia, are as follows:

Percentage of equity held

Name Principal Activities 2014

%

2013

%

AFFIN Islamic Bank Bhd Islamic banking business 100 100

PAB Properties Sdn Bhd Property management services 100 100

ABB Nominee (Tempatan) Sdn Bhd Share nominee services 100 100

ABB Trustee Berhad * Trustee management services 100 100

AFFIN Recoveries Bhd Recovery of impaired loans 100 100

AFFIN Factors Sdn Bhd Dormant 100 100

AFFIN Futures Sdn Bhd Dormant 100 100

ABB Nominee (Asing) Sdn Bhd Dormant 100 100

ABB IT & Services Sdn Bhd Dormant 100 100

BSNCB Nominees (Tempatan) Sdn Bhd Dormant 100 100

BSNC Nominees (Tempatan) Sdn Bhd (#) Dormant 100 100

PAB Property Development Sdn Bhd (#) Dormant 100 100

AFFIN-ACF Nominees (Tempatan)

Sdn Bhd (#) Dormant 100 100

ABB Venture Capital Sdn Bhd (@) Dormant - 100

PAB Property Management Services

Sdn Bhd (@) Dormant - 100

* 80% held by Directors of the Bank, in trust for the Bank.

# The Bank has �led application to strike-off company at Suruhjaya Syarikat Malaysia (‘SSM’).

@ Struck off and gazetted on 2 September 2014.



14 INVESTMENT IN JOINT VENTURES

The Group

2014

RM’000

2013

RM’000

Unquoted shares at cost 650 650

Group’s share of post acquisition retained losses (650) (650)

- -

The summarised �nancial information of joint ventures are as follows:

Revenue 4,920 16,781

Loss after tax (3,515) (3,050)

Total assets 216,417 181,084

Total liabilities 222,420 183,572

AFFIN-i KLSD

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Net liabilities

At beginning of the �nancial year (1,142) (880) (2,789) -

Loss for the �nancial year (1,572) (262) (1,943) (2,789)

At end of the financial year (2,714) (1,142) (4,732) (2,789)

Issued and paid up share capital 1,000 1000 500 500

Interest in joint venture (%) 50 50 30 30

Interest in joint venture (RM’000) (1,357) (571) (1,420) (837)

Both the joint ventures’ principal activities are property development.

As the Group’s share of cumulative losses of RM2.1 million (2013: RM0.8 million) as at 31 December 2014 has exceeded

its interest in the joint ventures, the Group does not recognise further losses in its �nancial statements.



14 INVESTMENT IN JOINT VENTURES

AFFIN-i Nadayu Sdn Bhd (‘AFFIN-i’)

On 1 April 2008, AFFIN Islamic Bank Berhad (‘AiBB’) and Jurus Positif Sdn Bhd, a subsidiary of Nadayu Properties

Berhad entered into a Musharakah Joint Venture Agreement under the Shariah principles (‘Musharakah Agreement’) to

joint develop a land into a housing scheme at Bukit Gambir, Pulau Pinang.

The Musharakah Agreement also includes an arrangement whereby Jurus Positif Sdn Bhd may acquire the AiBB’s shares

upon the completion of the project at a mutually agreed price, unless if both shareholders decide to continue the joint

venture for subsequent projects.

Major strategic operation and �nancial decisions relating to the activities of AFFIN-i Nadayu requires unanimous consent

by both joint venture parties. The Group’s interest in AFFIN-i Nadayu Sdn Bhd has been treated as investment in joint

venture, which has been accounted for in the consolidated �nancial statements using the equity method of accounting.

KL South Development Sdn Bhd (‘KLSD’)

On 2 January 2013, AiBB entered into a Musharakah Joint Venture Agreement (‘Musharakah Agreement’) with Albatha

Bukit Kiara Holdings Sdn Bhd (‘Albatha’), a subsidiary of Bukit Kiara Capital Sdn Bhd, to joint develop a property project

namely “VERVE Suites KL South” at Jalan Klang Lama, Kuala Lumpur.

Pursuant to the Musharakah Agreement, AiBB acquired 30% stake in the joint venture company namely KL South

Development Sdn Bhd (‘KL South’) by way of subscription of 150,000 shares of RM1.00 each in KL South at par. The

remaining stake of 70% in KL South is held by Albatha.

Under the Musharakah structure, AiBB would be the sole banker to KL South, providing �nancing using the Islamic

concept such as Ijarah for the purchase of building and Istisna’ for the bridging �nancing.

Major strategic operation and �nancial decisions relating to the activities of KL South requires consent by both joint venture

parties. The Group’s interest in KL South has been treated as investment in joint venture, which has been accounted for in

the consolidated �nancial statements using the equity method of accounting.

KL South has commenced operations and the project is scheduled for completion by mid 2016.

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15 PROPERTY AND EQUIPMENT

Buildings

on

freehold

land

RM’000

Buildings

on

leasehold

land

RM’000

Office

equipment

and

furniture

RM’000

Computer

equipment

and

software

RM’000

<---Leasehold land-->

Capital

work in

progress

RM’000

Freehold

land

RM’000

50 years

or more

RM’000

Less than

50 years

RM’000

Motor

vehicles

RM’000

The Group Renovation

RM’000

Total

RM’0002014

Cost

At beginning of the �nancial year 19,676 12,862 5,380 26,803 89,069 114,084 59,427 70,560 5,354 2,698 405,913

Additions - - - - - 2,354 1,561 1,757 9 8,217 13,898

Disposals (440) (520) - (435) (8,087) (2,408) (40) - (1,713) - (13,643)

Write-off - - - - - (1,890) (1,910) (4) - - (3,804)

Reclassi�cation to intangible assets

(Note 16) - - - - - - - - - (1,751) (1,751)

At end of the financial year 19,236 12,342 5,380 26,368 80,982 112,140 59,038 72,313 3,650 9,164 400,613

Accumulated depreciation and

impairment losses

At beginning of the �nancial year 140 2,146 1,693 12,273 25,160 98,526 41,001 63,037 3,197 - 247,173

Charge for the �nancial year - 106 120 438 1,491 5,707 3,386 3,110 593 - 14,951

Disposal - (110) - (326) (2,369) (2,407) (27) - (1,713) - (6,952)

Write-off - - - - - (1,884) (1,802) (4) - - (3,690)

At end of the financial year 140 2,142 1,813 12,385 24,282 99,942 42,558 66,143 2,077 - 251,482

Net book value at end of the financial year 19,096 10,200 3,567 13,983 56,700 12,198 16,480 6,170 1,573 9,164 149,131

102

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4



Buildings

on

freehold

land

RM’000

Buildings

on

leasehold

land

RM’000

Of�ce

equipment

and

furniture

RM’000

Computer

equipment

and

software

RM’000

<---Leasehold land-->

Capital

work in

progress

RM’000

Freehold

land

RM’000

50 years

or more

RM’000

Less than

50 years

RM’000

Motor

vehicles

RM’000

The Group Renovation

RM’000

Total

RM’0002013

Cost


Additions - - - - - 5,146 2,438 1,785 2,077 5,997 17,443

Disposals (1,450) - - (3,147) - (1,238) (1) - (332) - (6,168)

Write-off - - - - - (755) (572) - - - (1,327)


(Note 16) - - - - - 89 1 - - (11,138) (11,048)

At end of the �nancial year 19,676 12,862 5,380 26,803 89,069 114,084 59,427 70,560 5,354 2,698 405,913


impairment losses

At beginning of the �nancial year 140 2,034 1,572 12,962 23,371 94,065 38,232 59,630 3,085 - 235,091


Disposal - - - (1,131) - (1,238) (1) - (331) - (2,701)

Write-off - - - - - (750) (486) - - - (1,236)

At end of the �nancial year 140 2,146 1,693 12,273 25,160 98,526 41,001 63,037 3,197 - 247,173

Net book value at end of the �nancial year 19,536 10,716 3,687 14,530 63,909 15,558 18,426 7,523 2,157 2,698 158,740

103

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Buildings

on

freehold

land

RM’000

Buildings

on

leasehold

land

RM’000

Office

equipment

and

furniture

RM’000

Computer

equipment

and

software

RM’000

<---Leasehold land-->Capital

work in

progress

RM’000

Freehold

land

RM’000

50 years

or more

RM’000

Less than

50 years

RM’000

Motor

vehicles

RM’000

The Bank Renovation

RM’000

Total

RM’0002014

Cost


Additions - - - - - 1,787 1,219 1,501 10 8,217 12,734

Disposals (440) (520) - (435) (8,087) (2,408) (40) - (1,255) - (13,185)

Write-off - - - - - (1,889) (1,894) (4) - - (3,787)


(Note 16) - - - - - - - - - (1,751) (1,751)

At end of the financial year 16,728 10,452 5,380 25,069 80,074 107,674 56,565 69,541 3,152 9,164 383,799


impairment losses

At beginning of the �nancial year - 1,903 1,693 11,481 24,621 95,485 40,034 61,082 2,686 - 238,985


Disposal - (110) - (326) (2,369) (2,408) (26) - (1,255) - (6,494)

Write-off - - - - - (1,883) (1,790) (4) - - (3,677)

At end of the financial year - 1,891 1,813 11,567 23,725 96,525 41,382 63,939 1,926 - 242,768

Net book value at end of the financial year 16,728 8,561 3,567 13,502 56,349 11,149 15,183 5,602 1,226 9,164 141,031

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Buildings

on

freehold

land

RM’000

Buildings

on

leasehold

land

RM’000

Of�ce

equipment

and

furniture

RM’000

Computer

equipment

and

software

RM’000

<---Leasehold land-->Capital

work in

progress

RM’000

Freehold

land

RM’000

50 years

or more

RM’000

Less than

50 years

RM’000

Motor

vehicles

RM’000

The Bank Renovation

RM’000

Total

RM’0002013

Cost


Additions - - - - - 4,999 2,367 1,680 1,581 5,997 16,624

Disposals (1,450) - - (3,147) - (1,238) (1) - (332) - (6,168)

Write-off - - - - - (755) (571) - - - (1,326)


(Note 16) - - - - - 89 1 - - (11,138) (11,048)

Transfer from subsidiary - - - - - - 2 - - - 2

At end of the �nancial year 17,168 10,972 5,380 25,504 88,161 110,184 57,280 68,044 4,397 2,698 389,788


impairment losses

At beginning of the �nancial year - 1,800 1,572 12,196 22,850 91,329 37,456 57,911 2,639 - 227,753


Disposal - - - (1,131) - (1,238) (1) - (331) - (2,701)

Write-off - - - - - (750) (485) - - - (1,235)

Transfer from subsidiary - - - - - - 2 - - - 2

At end of the �nancial year - 1,903 1,693 11,481 24,621 95,485 40,034 61,082 2,686 - 238,985

Net book value at end of the �nancial year 17,168 9,069 3,687 14,023 63,540 14,699 17,246 6,962 1,711 2,698 150,803



16 INTANGIBLE ASSETS

Computer

Software

RM’000

The Group Goodwill

RM’000

Total

RM’000 2014

Cost

At beginning of the �nancial year 133,430 132,492 265,922

Additions - 236 236

Reclassi�cation from property and equipment (Note 15) - 1,751 1,751

At end of the financial year 133,430 134,479 267,909

Less: Accumulated amortisation

At beginning of the �nancial year - (113,917) (113,917)

Amortised during the �nancial year - (6,304) (6,304)

At end of the financial year - (120,221) (120,221)

Net book value at end of the financial year 133,430 14,258 147,688

2013

Cost


Additions - 1,236 1,236

Write-off - (9) (9)


Adjustment - (742) (742)

At end of the �nancial year 133,430 132,492 265,922




Write-off - 9 9

At end of the �nancial year - (113,917) (113,917)

Net book value at end of the �nancial year 133,430 18,575 152,005




Computer

Software

RM’000

The Bank Goodwill

RM’000

Total

RM’000 2014

Cost


Additions - 236 236


At end of the financial year 137,323 128,077 265,400




At end of the financial year - (114,710) (114,710)

Net book value at end of the financial year 137,323 13,367 150,690

2013

Cost


Additions - 1,236 1,236

Write-off - (9) (9)


Adjustment - (742) (742)

At end of the �nancial year 137,323 126,090 263,413




Write-off - 9 9

At end of the �nancial year - (109,181) (109,181)

Net book value at end of the �nancial year 137,323 16,909 154,232




Goodwill

The carrying amount of the Group’s and the Bank’s goodwill has been allocated to the following business segments, which

represent the Bank’s cash-generating units (‘CGUs’):

2014

RM’000

2013

RM’000

Business banking 123,591 123,591

Consumer banking 13,732 13,732

137,323 137,323

Goodwill is allocated to the Bank’s CGU which are expected to bene�t 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 !ow projections based on the 2015 �nancial budgets approved by the Directors, covering a period of 5

years based on the historical internal growth rate, revised for current economic conditions. The cash !ow beyond the

�fth year are projected based on the assumption that the Year 5 operating cash !ow will be generated by the respective

CGUs at a growth rate of 5% (2013: 5%), based on historical Gross Domestic Product (‘GDP’) growth rate of Malaysia, on

perpetual basis.

The cash !ow projections are derived based on a number of key factors including past performance and management’s

expectations of the market developments. The discount rates used are based on the pre-tax weighted average cost of

capital plus an appropriate risk premium where applicable, at the date of assessment of the CGUs. The pre-tax discount

rates below re!ect the speci�c risks relating to the CGUs.

2014

Business

banking

%

2014

Consumer

banking

%

2013

Business

banking

%

2013

Consumer

banking

%

Pre-tax discount rate 11.44 11.44 9.90 9.82

No impairment charge was required for goodwill arising from all the business segments. Management views that any

reasonable possible change to the assumptions applied is not likely to cause the recoverable amount of all the business

segments to be lower than its carrying amount.



17 DEPOSITS FROM CUSTOMERS

The Group The Bank

(i) By type of deposit 2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Demand deposits 8,096,462 8,202,749 5,434,453 5,449,295

Savings deposits 2,047,242 2,004,242 1,651,904 1,639,656

Fixed deposits 28,592,534 27,693,589 23,063,094 22,098,467

Special investment deposits - 574,192 - -

Commodity Murabahah 1,030,814 - - -

Money market deposits 1,177,702 1,050,233 1,177,703 1,050,233

Negotiable instruments of deposit (‘NID’) 7,102,470 6,563,077 6,853,058 6,563,077

48,047,224 46,088,082 38,180,212 36,800,728

The Group The Bank

(ii) Maturity structure of fixed deposits

and NID

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Due within six months 29,384,792 27,809,157 24,816,632 23,574,338

Six months to one year 5,641,216 6,287,140 4,667,425 4,929,588

One year to three years 621,587 118,705 385,335 116,227

Three years to �ve years 37,090 31,344 36,441 31,071

Five years and above 10,319 10,320 10,319 10,320

35,695,004 34,256,666 29,916,152 28,661,544

The Group The Bank

(i) By type of customer 2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Government and statutory bodies 8,715,204 8,747,406 5,315,859 5,438,276

Business enterprise 13,771,604 14,007,892 9,993,760 10,327,724

Individuals 13,062,614 11,660,423 11,869,711 10,603,679

Domestic banking institutions 6,903,478 5,792,563 6,654,065 5,792,553

Domestic non-banking �nancial institutions 4,347,937 4,485,465 3,370,981 3,608,966

Foreign entities 381,967 328,666 321,512 279,382

Other entities 864,420 1,065,667 654,324 750,148

48,047,224 46,088,082 38,180,212 36,800,728



18 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Licensed banks 2,018,521 3,042,849 1,467,113 1,847,213

Licensed investment banks 401,518 597,792 401,518 567,761

Bank Negara Malaysia 47,898 - 47,898 -

Other �nancial institutions 2,381,739 424,903 1,782,857 244,561

4,849,676 4,065,544 3,699,386 2,659,535

Maturity structure of deposits

Due within six months 4,801,778 4,057,599 3,651,488 2,651,590

Six months to one year 47,898 7,945 47,898 7,945

4,849,676 4,065,544 3,699,386 2,659,535

19 DERIVATIVE FINANCIAL LIABILITIES

The Group

2014

The Group

2013

Contract/

notional

amount

RM’000

Liabilities

RM’000

Contract/

notional

amount

RM’000

Liabilities

RM’000

At fair value





Interest rate swaps 966,552 20,312 2,033,725 38,405

4,042,922 237,426 4,816,536 94,522

The Bank

2014

The Bank

2013

Contract/

notional

amount

RM’000

Liabilities

RM’000

Contract/

notional

amount

RM’000

Liabilities

RM’000

At fair value





Interest rate swaps 966,552 20,312 2,033,725 38,405

4,054,335 237,419 4,816,536 94,522



20 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 �nancing transactions and the

obligations to buy back the loans are re!ected as a liability on the statement of �nancial position.

21 OTHER LIABILITIES

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Bank Negara Malaysia and Credit

Guarantee Corporation Funding programmes 33,602 27,897 33,602 27,897

Margin and collateral deposits 145,430 108,258 134,435 103,428

Other creditors and accruals 74,325 88,341 65,889 80,457

Sundry creditors 89,430 143,282 82,046 132,608

Provision for zakat 4,040 10,152 - 2,134

De�ned contribution plan (a) 12,588 13,818 11,885 13,107

Accrued employee bene�ts (b) 229 229 206 206

359,644 391,977 328,063 359,837

(a) The Group and the Bank contributes to the Employee Provident Fund (‘EPF’), the national de�ned 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 bene�ts 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.

22 AMOUNT DUE TO SUBSIDIARIES

The amount due to subsidiaries is unsecured, interest-free and repayable on demand.



23 SUBORDINATED TERM LOAN

On 10 March 2009, the Bank has taken the �rst 10 year subordinated loan (‘Subordinated loan I’) amounting to RM300

million. The �rst subordinated loan was constituted by agreement date 6 March 2009 and were issued on 10 March 2009.

On 10 March 2014, the Bank prepaid the 10 year subordinated loan with the Bank’s holding company.

On 26 May 2011, the Bank has taken the second 10 year subordinated loan (‘Subordinated loan II’) amounting to RM300

million. The second subordinated loan was constituted by agreement date 20 May 2011 and were issued on 26 May 2011.

On 16 January 2012, the Bank has taken the third 10 year subordinated loan (‘Subordinated loan III’) amounting to RM300

million. The third subordinated loan was constituted by agreement date 3 January 2012 and were issued on 16 January 2012.

All the subordinated loans were taken with the Bank’s holding company.

The subordinated loans have a prepayment option on the �rst prepayment date or any interest payment date subsequent

to the �rst prepayment date, giving the Bank the right, subject to Bank Negara Malaysia (‘BNM’) approval, to prepay the

loans in whole or in part.

Interest on subordinated loans payable by quarterly.

Subordinated loan II and Subordinated loan III

Value : RM300 million each

Interest rate : Cost of Fund (‘COF’) plus 1.00% per annum for the 10 years.

Maturity date : 26 May 2021 (Subordinated loan II)

16 January 2022 (Subordinated loan III)

COF refers to rate determined by the lender on an interest determination date falling within the interest duration.

Both subordinated loans are unsecured and also qualify for tier 2 capital for the purposes of determine the risk-weighted

capital ratio of the Bank.

24 SHARE CAPITAL

Number of ordinary

shares of RM1 each The Group and The Bank

2014

‘000

2013

‘000

2014

RM’000

2013

RM’000

Authorised

At beginning/end of the �nancial year 2,000,000 2,000,000 2,000,000 2,000,000

Issued and fully paid

At beginning of the �nancial year 1,518,337 1,518,337 1,518,337 1,518,337

Issued during the �nancial year 170,433 - 170,433 -

At end of the financial year 1,688,770 1,518,337 1,688,770 1,518,337

During the �nancial year, the Bank’s issued and paid-up capital increased from RM1,518,337,000 to RM1,688,770,000 by

way of issuance of non-renounceable rights issue to the Bank’s holding company via:

(i) Issuance of 103,092,784 of new ordinary shares of RM1.00 each at an issue price of RM2.91 each amounting to

RM300 million; and

(ii) Issuance of 67,340,067 of new ordinary shares of RM1.00 each at an issue price of RM2.97 each amounting to RM200

million.



25 RESERVES

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Retained pro�ts 951,500 1,004,534 760,153 798,118

Share premium 858,904 529,337 858,904 529,337

AFS revaluation reserves 17,604 (1,960) 23,478 4,965

Statutory reserves 1,469,794 1,317,376 1,263,470 1,144,350

Regulatory reserves 184,366 - 135,347 -

3,482,168 2,849,287 3,041,352 2,476,770

Statutory reserves

At beginning of the �nancial year 1,317,376 1,160,651 1,144,350 1,017,200

Transfer from retained pro�ts 152,418 156,725 119,120 127,150

At end of the �nancial year 1,469,794 1,317,376 1,263,470 1,144,350

(a) As at 31 December 2014, the Bank has a tax exempt account balance of RM10,931,988 (2013: RM10, 931,988) under

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

(b) The statutory reserves of the Group and the Bank are maintained in compliance with Section 47(2)(f) of the Financial

Services Act 2013 and Section 57(2)(f) of the Islamic Financial Services Act 2013 and is not distributable as cash

dividends.

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

classi�ed as �nancial investment available-for-sale. The gains or losses are transferred in the income statement upon

disposal or when the securities become impaired.

(d) The Group and the Bank are required to maintain in aggregate collective impairment allowances and regulatory reserves

of no less than 1.2% of total outstanding loans, advances and �nancing, net of individual impairment allowances.



26 INTEREST INCOME

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Loans, advances and �nancing 1,681,044 1,612,728 1,681,044 1,612,728

Money at call and deposit placements

with �nancial institutions 142,913 178,906 171,320 204,769

Reverse repurchase agreements with

�nancial institutions - 234 - 234

Financial assets

- Held-for-trading 155,606 94,163 155,606 94,163

- Available-for-sale 234,629 202,084 234,629 201,936

- Held-to-maturity 20,062 19,984 20,062 19,984

Others - - 391 4,003

2,234,254 2,108,099 2,263,052 2,137,817

Accretion of discount less amortisation of premium 36,734 13,028 36,734 13,028

2,270,988 2,121,127 2,299,786 2,150,845

of which:

Interest income earned on impaired

loans, advances and �nancing 7,933 10,957 7,933 10,957

27 INTEREST EXPENSE

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Deposits and placements of banks

and other �nancial institutions 92,204 119,487 92,235 119,498

Deposits from customers 1,163,362 1,025,610 1,163,398 1,025,644

Subordinated term loan 29,879 41,473 29,879 41,473

Loan sold to Cagamas Berhad 13,263 19,164 13,263 19,164

Interest rate derivatives 148,395 99,226 148,395 99,226

Others 4,425 3,108 4,425 3,108

1,451,528 1,308,068 1,451,595 1,308,113

28 INCOME FROM ISLAMIC BANKING BUSINESS

The Group

2014

RM’000

2013

RM’000

Income derived from investment of depositors’ funds and others 472,995 428,386

Income derived from investment of shareholders’ funds 33,586 29,781

Total distributable income 506,581 458,167

Income attributable to depositors (262,358) (237,422)

244,223 220,745

of which:

Financing income earned on impaired �nancing, advances and other �nancing 1,345 549



29 OTHER OPERATING INCOME

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Fee income

Commission 16,428 14,046 16,428 14,046

Service charges and fees 59,267 62,785 59,267 62,785

Guarantee fees 22,673 20,615 22,673 20,615

98,368 97,446 98,368 97,446

Income from financial instruments

Gain arising on �nancial assets

held-for-trading:

- net gain on disposal 347 366 347 366

- unrealised gains 219 455 219 455

566 821 566 821

Gains on derivatives:

- realised 6,789 3,156 6,789 3,156

- unrealised 7,302 5,282 7,302 5,282

14,091 8,438 14,091 8,438

Gain arising on �nancial investments

available-for-sale:

- net gain on disposal 9,743 22,369 9,743 18,894

- gross dividend income 2,589 4,058 2,589 4,058

12,332 26,427 12,332 22,952

Gain arising on �nancial investments

held-to-maturity:

- net gain on redemption 3,500 6,144 3,500 6,144

3,500 6,144 3,500 6,144

Other income

Foreign exchange gains 63,968 66,975 63,968 66,975

Rental income 1,646 1,673 1,635 1,631

Gain on sale of property and equipment 6,319 3,910 6,319 3,910

Gain on disposal of foreclosed properties 3,329 11,041 2,937 11,041

Other non-operating income 19,103 14,491 18,828 13,788

Subsidiaries - writeback of allowances for

impairment losses - - - 1,707

94,365 98,090 93,687 99,052

223,222 237,366 222,544 234,853



30 OTHER OPERATING EXPENSES

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Personnel costs (a) 341,999 335,200 266,659 269,727

Establishment costs (b) 179,066 169,429 147,167 142,300

Marketing expenses (c) 16,843 16,485 14,068 13,332

Administrative and general expenses (d) 46,785 44,072 37,334 35,774

584,693 565,186 465,228 461,133

(a) Personnel costs

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Wages, salaries and bonuses 264,862 259,313 205,763 208,440

De�ned contribution plan (‘EPF’) 43,298 42,198 33,669 33,929

Other personnel costs 33,839 33,689 27,227 27,358

341,999 335,200 266,659 269,727

(b) Establishment costs

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Rental of premises 23,430 21,496 18,933 17,723

Equipment rental 1,099 898 974 782

Repair and maintenance 31,228 26,337 25,517 21,942

Depreciation of property and equipment 14,951 16,019 13,954 15,166

Amortisation of intangible assets 6,304 7,989 5,529 7,197

IT Consultancy fees 61,746 61,893 51,989 53,231

Dataline rental 4,523 3,890 3,799 3,372

Security services 17,652 13,566 13,867 10,899

Electricity, water and sewerage 10,521 9,566 8,597 7,994

Insurance and indemnities 3,890 3,853 3,870 3,731

Other establishment costs 3,722 3,922 138 263

179,066 169,429 147,167 142,300



30 OTHER OPERATING EXPENSES

(c) Marketing expenses

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Business promotion and advertisement 8,551 7,860 7,532 6,660

Entertainment 2,984 2,628 2,559 2,244

Traveling and accommodation 3,641 4,494 2,802 3,328

Other marketing expenses 1,667 1,503 1,175 1,100

16,843 16,485 14,068 13,332

(d) Administration and general expenses

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Telecommunication expenses 5,522 5,558 4,353 4,655

Auditors’ remuneration 1,778 1,433 1,285 1,036

Professional fees 6,686 6,142 5,640 5,154

Property and equipment written-off 114 91 110 91

Mail and courier charges 3,432 2,777 2,716 2,310

Stationery and consumables 8,569 8,902 6,126 6,566

Commissions expenses 3,110 3,215 2,851 2,996

Brokerage expenses 1,662 1,368 974 1,242

Directors’ fees and allowances 1,927 1,873 1,472 1,480

Donations 3,662 1,706 3,430 1,619

Settlement, clearing and bank charges 7,388 7,131 6,816 6,779

Stamp duties 177 198 173 196

Operational and litigation write-off expenses 19 - 19 -

Other administration and general expenses 2,739 3,678 1,369 1,650

46,785 44,072 37,334 35,774

The expenditure includes the following statutory disclosure:

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Directors’ remuneration (Note 31) 8,621 8,281 8,166 7,888

Auditors’ remuneration

- statutory audit fees 926 850 729 682

- audit related fees 391 465 245 297

- non audit fees 461 118 311 57



31 CEO AND DIRECTORS’ REMUNERATION

The MD/CEO and Directors of the Bank who have held of�ce during the �nancial year are as follows:

Managing Director/Chief Executive Officer

Dato’ Zulki!ee Abbas Bin Abdul Hamid

Non-Executive Directors

Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) (Chairman)

Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin

Dr Raja Abdul Malek Bin Raja Jallaludin (Retired w.e.f. 29.3.2014)

Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman

Tan Sri Dato’ Seri Mohamed Jawhar

Tan Sri Mohd Ghazali bin Mohd Yusoff (Appointment w.e.f. 20.6.2014)

En. Mohd Suf�an Bin Haji Haron

Mr Aubrey Li Kwok-Sing

Mr Gary Cheng Shui Hee (Alternate Director to Mr Aubrey Li Kwok-Sing) (Resigned w.e.f. 17.3.2014)

Mr Tang Peng Wah (Alternate Director to Mr Aubrey Li Kwok-Sing) (Appointment w.e.f. 23.6.2014)

The aggregate amount of remuneration for the Directors of the Bank for the �nancial year were as follows:

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Managing Director/Chief Executive Officer

Salaries 1,980 1,935 1,980 1,935

Bonuses 3,418 3,315 3,418 3,315

De�ned contribution plan (‘EPF’) 1,044 907 1,044 907

Other employee bene�ts 99 99 99 99

Bene�ts-in-kind 153 152 153 152

Non-Executive Directors

Fees 1,899 1,844 1,444 1,451

Bene�ts-in-kind 28 29 28 29

Directors’ remuneration (Note 30) 8,621 8,281 8,166 7,888




A summary of the total remuneration of the MD/CEO and Directors, distingushing between Executive and Non-Executive

Directors.

Directors’

Fees

RM’000

* Other

emoluments

RM’000

Benefits-

in-kind

RM’000

The Group

2014

Salaries

RM’000

Bonuses

RM’000

Total

RM’000

Managing Director/

Chief Executive Officer

Dato’ Zulki!ee Abbas Bin

Abdul Hamid 1,980 3,418 - 1,143 153 6,694

Total 1,980 3,418 - 1,143 153 6,694

Non-executive Directors

Jen Tan Sri Dato’ Seri Ismail Bin

Haji Omar (Bersara) - - 338 96 26 460

Tan Sri Dato’ Seri Lodin Bin

Wok Kamaruddin - - 355 - - 355

Tan Sri Dato’ Sri Abdul Aziz Bin

Abdul Rahman - - 363 - 2 365

Tan Sri Dato’ Seri Mohamed Jawhar - - 378 - - 378

En. Mohd Suf�an Bin Haji Haron - - 369 - - 369

Total - - 1,803 96 28 1,927

Grand total 1,980 3,418 1,803 1,239 181 8,621

2013

Managing Director/

Chief Executive Of�cer


Abdul Hamid 1,935 3,315 - 1,006 152 6,408

Total 1,935 3,315 - 1,006 152 6,408


Jen Tan Sri Dato’ Seri Ismail Bin Haji

Omar (Bersara) - - 338 96 29 463

Tan Sri Dato’ Seri Lodin Bin Wok

Kamaruddin - - 342 - - 342


Abdul Rahman - - 351 - - 351



Total - - 1,748 96 29 1,873

Grand total 1,935 3,315 1,748 1,102 181 8,281

* Executive Director’s other emoluments include allowance and EPF.




Directors’

Fees

RM’000

* Other

emoluments

RM’000

Benefits-

in-kind

RM’000

The Bank

2014

Salaries

RM’000

Bonuses

RM’000

Total

RM’000

Managing Director/

Chief Executive Officer


Abdul Hamid 1,980 3,418 - 1,143 153 6,694

Total 1,980 3,418 - 1,143 153 6,694


Jen Tan Sri Dato’ Seri Ismail

Bin Haji Omar (Bersara) - - 187 96 26 309

Tan Sri Dato’ Seri Lodin

Bin Wok Kamaruddin - - 195 - - 195

Dr. Raja Abdul Malek

Bin Raja Jallaludin - - 59 - - 59

Tan Sri Mohd Ghazali

Bin Mohd Yusoff - - 124 - - 124

Tan Sri Dato’ Sri Abdul Aziz

Bin Abdul Rahman - - 218 - 2 220



Mr Aubrey Li Kwok-Sing - - 125 - - 125

Mr Tang Peng Wah - - 3 - - 3

Total - - 1,348 96 28 1,472

Grand total 1,980 3,418 1,348 1,239 181 8,166





Directors’

Fees

RM’000

* Other

emoluments

RM’000

Bene�ts-

in-kind

RM’000

The Bank

2013

Salaries

RM’000

Bonuses

RM’000

Total

RM’000

Managing Director/

Chief Executive Of�cer


Abdul Hamid 1,935 3,315 - 1,006 152 6,408

Total 1,935 3,315 - 1,006 152 6,408


Jen Tan Sri Dato’ Seri Ismail Bin

Haji Omar (Bersara) - - 188 96 29 313

Tan Sri Dato’ Seri Lodin Bin

Wok Kamaruddin - - 188 - - 188

Dr. Raja Abdul Malek Bin

Raja Jallaludin - - 226 - - 226


Abdul Rahman - - 212 - - 212



Mr Aubrey Li Kwok-Sing - - 112 - - 112

Mr Gary Cheng Shui Hee - - 7 - - 7

Total - - 1,355 96 29 1,480

Grand total 1,935 3,315 1,355 1,102 181 7,888




32 WRITE-BACK OF ALLOWANCES FOR LOSSES ON LOANS, ADVANCES AND FINANCING

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000


- made during the �nancial year 87,611 47,903 86,102 47,213

- written-back (4,386) (4,031) (604) (3,598)


- net allowance made during the �nancial year 35,666 15,253 29,283 15,011

Bad debts and �nancing

- recovered (141,739) (120,645) (141,344) (119,702)

- written-off 4,380 4,583 4,370 4,509

(18,468) (56,937) (22,193) (56,567)

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, which is Government-

Linked Investment Company (‘GLIC’) of the Government

of Malaysia

AFFIN Holdings Berhad (‘AHB’) Holding company

Subsidiaries and associates of LTAT Subsidiary and associate companies of the ultimate holding

corporate body

Subsidiaries and associates of AHB as disclosed in its

�nancial statements

Subsidiary and associate companies of the holding

company

Subsidiaries of AFFIN Bank Berhad as disclosed in Note 13 Subsidiaries

Joint ventures as disclosed in Note 14 Joint ventures

Key management personnel The key management personnel of the Group and the Bank

consist of:

- Directors

- Managing Director/Chief Executive Of�cer - Members of Senior Management team and the company

secretary

Related parties of key management personnel (deemed

as related to the Bank)

- Close family members and dependents of key management personnel

- Entities that are controlled, jointly controlled or for which

signi�cant voting power in such entity resides with,

directly or indirectly by key management personnel or its

close family members

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling

the activities of the Group and the Bank either directly or indirectly. Key management personnel includes the Managing

Director/Chief Executive Of�cer of the Bank in of�ce during the �nancial year and his remuneration for the �nancial year

are disclosed in Note 31.

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The Group and the Bank do not have any individually or collectively signi�cant transaction outside the ordinary course of business with the Government of Malaysia

and government-related entities. In addition to related party disclosures mentioned elsewhere in the �nancial statements, set out below are other signi�cant related

party transactions and balances.

(a) Related parties transactions and balances

Companies in which

certain Directors

have substantial

interest

Ultimate holding

corporate body Holding company

Other related

companies

Key management

personnel

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000The Group

Income

Interest on private debt securities - - - - 26,889 27,296 - - - -

Interest on loans, advances and �nancing - - - - 75,852 41,151 - - 86 81

Interest on deposits and placements with

banks and other �nancial institutions - - - - 3,851 8,401 - - - -

Other income - - - - 8,508 7,590 - - - -

- - - - 115,100 84,438 - - 86 81

Expenditure

Interest on �xed deposits 1,389 5,448 4,331 5,989 15,184 11,325 - - 199 242

Interest on Negotiable instruments of deposit - - - - 5,489 838 - - - -

Interest on deposits and placements of banks

and other �nancial institutions - - - - 6,562 9,165 - - - -

Hibah/pro�t paid on special investment deposits - 1 - - 1,400 1,565 - - - -

Hibah/pro�t paid on commodity murabahah - - - - 1,524 - - - - -

Interest on money market deposits 8,395 9,911 2,043 93 1,708 2,004 - - - -

Interest on subordinated term loan - - 29,879 41,473 - - - - - -

Brokerage fees - - - - 563 431 - - - -

Rental 239 239 - - 12,107 11,426 - - - -

Others - - - - 5,707 5,877 - 638 - -

10,023 15,599 36,253 47,555 50,244 42,631 - 638 199 242




(a) Related parties transactions and balances (continued)

Ultimate holding

corporate body

Holding

company

Other related

companies

The Group

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Amount due from

Private debt securities - - - - 787,747 782,076

Loans, advances and �nancing - - - - 2,258,158 1,334,698

Deposits and placement with banks

and other �nancial institutions - - - 3,852 56,000 213,447

Intercompany balances - - - - 14,855 4,185

Security deposits - - 7 - 2,993 2,992

- - 7 3,852 3,119,753 2,337,398

Amount due to

Demand and saving deposits 97,771 160,122 4,218 3,328 272,486 410,447

Fixed deposits 22,114 201,452 117,684 133,184 522,394 393,664

Negotiable instruments of deposit - - - - 120,370 120,656

Deposits and placement of banks

and other �nancial institutions - - - - 332,004 211,042

Special investment deposits - - - - - 68,726

Money market deposits 300,423 399,838 485 300 66,988 129,938

Subordinated term loan - - 604,310 904,964 - -

420,308 761,412 726,697 1,041,776 1,314,242 1,334,473

Commitments and contingencies - - - - 1,977,952 1,668,959

Companies in which

certain Directors have

substantial interest

Key management

personnel

The Group

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Amount due from

Loans, advances and �nancing - - 2,540 2,812

- - 2,540 2,812

Amount due to

Demand and saving deposits 145 45 6,519 6,002

Fixed deposits - - 4,520 11,123

145 45 11,039 17,125

Commitments and contingencies - - - -

No impairment allowances were required at the Group and the Bank in 2014 and 2013 for loans, advances and

�nancing made to key management personnel.

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Ultimate holding

corporate body

Holding

company Subsidiaries

Other related

companies

Companies which



Key management

personnel

The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Income

Interest on special investment

deposits - - - - 27,917 25,311 - - - - - -

Interest on private debt securities - - - - - - 26,889 27,296 - - - -

Interest on loans, advances and

�nancing - - - - - - 68,804 38,336 - - 86 81

Interest on deposits and

placements with banks and

other �nancial institutions - - - - 487 576 3,851 5,552 - - - -

Other income - - - - 81,851 71,745 8,508 7,590 - - - -

- - - - 110,255 97,632 108,052 78,774 - - 86 81

Expenditure

Interest on �xed deposits 1,383 5,371 4,331 5,989 36 35 6,562 9,754 - - 125 202

Interest on negotiable instruments

of deposit - - - - - - 9,119 838 - - - -

Interest on deposits and

placements with banks and

other �nancial institutions - - - - 12 14 5,489 9,165 - - - -

Interest on money market deposits 8,395 9,911 2,043 93 - - 1,708 2,004 - - - -

Interest on subordinated term loan - - 29,879 41,473 - - - - - - - -

Brokerage fees - - - - - - 563 431 - - - -

Rental 239 239 - - 407 407 12,107 11,426 - - - -

Others - - - - - - 5,636 5,738 - 638 - -

10,017 15,521 36,253 47,555 455 456 41,184 39,356 - 638 125 202





Ultimate holding

corporate body Holding company Subsidiaries

The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Amount due from

Special investment account - - - - 826,689 715,807

Deposits and placements with

banks and other �nancial

institutions - - - 3,852 68,741 93,945

Intercompany balances - - - - 438 60,723

Security deposits - - 7 - - -

- - 7 3,852 895,868 870,475

Amount due to

Demand and saving deposits 96,169 158,706 4,218 3,328 849 1,898

Fixed deposits 22,114 156,545 117,684 133,184 390 1,826


and other �nancial institutions - - - - - 26,720

Money market deposits 300,423 399,838 485 300 - -

Intercompany balances - - - - 296,781 53,559

Subordinated term loan - - 604,310 904,964 - -

418,706 715,089 726,697 1,041,776 298,020 84,003

Commitments and contingencies - - - - - -

Other related companies

Companies which



Key management

personnel

The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Amount due from

Private debt securities 787,747 782,076 - - - -

Loans, advances and �nancing 1,824,678 1,235,568 - - 2,540 2,812


and other �nancial institutions 56,000 213,447 - - - -

Security deposits 2,993 2,992 - - - -

2,671,418 2,234,083 - - 2,540 2,812

Amount due to

Demand and saving deposits 255,969 394,704 - - 4,656 4,531

Fixed deposits 335,147 346,665 - - 1,626 9,436

Negotiable instruments of deposit 120,370 120,656 - - - -


and other �nancial institutions 332,004 211,042 - - - -

Money market deposits 66,988 129,938 - - - -

1,110,478 1,203,005 - - 6,282 13,967

Commitments and contingencies 1,910,887 1,550,779 - - - -

No impairment allowances were required at the Bank in 2014 and 2013 for loans, advances and �nancing made to

key management.




(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 The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Directors’ fees and allowances

Fees 1,899 1,844 1,444 1,451

Bene�ts-in-kind 28 29 28 29

1,927 1,873 1,472 1,480

Short-term employment benefits

Salaries 7,870 7,681 7,225 7,081

Bonuses 10,133 10,852 9,455 10,072

De�ned contribution plan (‘EPF’) 3,197 3,177 2,979 2,949

Other employee bene�ts 1,111 1,168 1,068 1,125

Bene�ts-in-kind 428 512 340 442

22,739 23,390 21,067 21,669

Included in the above table is the CEO and directors’ remuneration as disclosed in Note 31.

34 TAXATION

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

The taxation charge arising in

Malaysia for the financial year

Current tax 172,347 180,425 149,819 159,936

(Over)/under provision in prior year (1,365) 1,881 482 2,320

Deferred tax (Note 11) 649 1,501 920 1,674

Tax expense for the year 171,631 183,807 151,221 163,930



34 TAXATION

The Group The Bank

2014

%

2013

%

2014

%

2013

%

Statutory tax rate in Malaysia 25.00 25.00 25.00 25.00

Tax effect in respect of:

Non allowable expenses 0.26 0.41 0.18 0.23

Non taxable income (0.31) (0.18) (0.35) (0.27)

Utilisation of previously unrecognised tax losses (0.01) (0.12) - -

Effect of different tax rate (0.71) (0.86) (0.81) (0.97)

Tax savings arising from income exempt from tax

for International Currency Business Unit (‘ICBU’) (0.05) (0.17) - -

(Over)/under accrual in prior years (0.19) 0.25 0.08 0.34

Change in tax rate - 0.05 (0.01) 0.05

Average effective tax rate 23.99 24.38 24.09 24.38

Tax savings of the Group as a result of utilisation of tax losses brought forward from previous years from which the related

credit is recognised during the �nancial year amounted to RM87,000 (2013: RM922,320).

35 EARNINGS PER SHARE

The basic earnings per ordinary share for the Group and the Bank have been calculated based on the net pro�t attributable

to equity holders of the Group and the Bank of RM543,727,000 (2013: RM569,822,000) and RM476,479,000 (2013:

RM508,599,000) respectively. The weighted average number of shares in issue during the �nancial year of 1,633,403,000

(2013: 1,518,337,000) is used for the computation.

36 DIVIDENDS

Dividends recognised as distribution to ordinary equity holders of the Bank:

The Group and The Bank

2014


2013

Dividend

per share

sen

Amount of

dividend

RM’000

Dividend

per share

sen

Amount of

dividend

RM’000

Ordinary shares

Single tier dividend:

- Interim dividend 10.00 168,877 10.00 151,834

- Final dividend 6.00 91,100 6.00 91,100

16.00 259,977 16.00 242,934

At the forthcoming Annual General Meeting, a single-tier �nal dividend in respect of the current �nancial year of 3.91 sen

per share amounting to RM66,030,892 will be proposed for shareholders’ approval. These �nancial statements do not

re!ect this �nal dividend which will be accounted for in the shareholder’s equity as an appropriation of retained pro�ts in

the �nancial year ending 31 December 2015 when approved by the shareholder.



37 COMMITMENTS AND CONTINGENCIES

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

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

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

The commitments and contingencies consist of:

The Group The Bank

2014 2013 2014 2013

Principal

amount

RM’000

Principal

amount

RM’000

Principal

amount

RM’000

Principal

amount

RM’000

Direct credit substitutes (*) 679,779 1,410,611 669,843 1,402,157

Transaction-related contingent items 2,043,704 1,974,804 1,891,540 1,849,237

Short-term self-liquidating trade-related

contingencies 746,576 573,412 345,057 353,020

Irrevocable commitments to extend credit: 10,663,047 9,444,689 9,137,777 8,131,913

- maturity less than one year 8,641,021 7,263,403 7,428,229 6,285,251

- maturity more than one year 2,022,026 2,181,286 1,709,548 1,846,662

Foreign exchange related contracts (#): 5,658,337 4,326,451 5,679,280 4,326,451

- less than one year 5,110,352 3,636,267 5,131,295 3,636,267

- one year to less than �ve years 451,955 594,154 451,955 594,154

- more than �ve years 96,030 96,030 96,030 96,030

Interest rate related contracts (#): 3,427,552 3,954,438 3,427,552 3,954,438

- less than one year 1,256,279 809,068 1,256,279 809,068

- one year to less than �ve years 1,781,125 2,442,222 1,781,125 2,442,222

- more than �ve years 390,148 703,148 390,148 703,148

Unutilised credit card lines 208,865 179,201 208,865 179,201

23,427,860 21,863,606 21,359,914 20,196,417

* Included in direct credit substitutes as above are �nancial guarantee contracts of RM454.7 million and RM444.8

million at the Group and the Bank, respectively (2013: RM336.6 million and RM328.1 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 �nancial assets” and “derivative �nancial

liabilities” in the statement of �nancial position and disclosed in Note 5 and 19 to the �nancial statements.



38 FINANCIAL RISK MANAGEMENT

(i) Credit risk

Credit risk is the potential �nancial loss resulting from the failure of the customer or counterparty to settle the

�nancial and contractual obligations to the Bank. Credit risk emanates mainly from loans, advances and �nancing,

loan commitments arising from such lending activities, as well as through �nancial transactions with counterparties

including interbank money market activities, derivative instruments used for hedging and debt securities.

The management of credit risk in the Bank is governed by a set of approved credit policies, guidelines and procedures.

Approval authorities are delegated to Senior Management and Group Management Loan Committee (‘GMLC’) to

implement the credit policies and ensure sound credit granting standards.

An independent Group Risk Management (‘GRM’) function, headed by Group Chief Risk Of�cer (‘GCRO’), with direct

reporting line to Board Risk Management Committee (‘BRMC’) is in place to ensure adherence to risk standards and

discipline. Portfolio management risk reports are submitted regularly to BRMC.

Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit Plan. New businesses

are governed by the risk acceptance criteria and customer qualifying criteria/�tness standards prescribed in the

Annual Credit Plan. The Annual Credit Plan is reviewed at least annually and approved by the BRMC.

Credit risk measurement

Loans, advances and financing

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 quanti�cation 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 speci�c 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, large exposures,

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.




(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 �nanced;

- charges over business assets such as business premises, inventory and accounts receivable; and

- charges over �nancial instruments such as marketable equities.

Documentary and commercial letters of credit are collateralised by the underlying shipments of goods to which they

relate and therefore carry less risk than a direct loan.

Credit related commitments

Commitment to extend credit represents unutilised portion of approved credit in the form of loans, guarantees

or letters of credit. In terms of credit risk, the Bank is potentially exposed to loss in an amount equal to the total

unutilised commitments. However, the potential amount of loss is less than the total unutilised commitments, as most

commitments to extend credit are contingent upon customers maintaining speci�c minimum credit standards.

The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a

greater degree of credit risk than short-term commitments.

Credit risk monitoring

Retail credits are actively monitored and managed on a portfolio basis by product type. A collection management

system is in place to promptly identify, monitor and manage delinquent accounts at early stages of delinquency.

Corporate credits and large individual accounts are reviewed by the Business Units at least once a year against

updated information. This is to ensure that the credit grades remain appropriate and 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.

Active portfolio monitoring enables the Bank to understand the overall risk pro�le and identify any adverse trends or

areas of risk concentrations affecting asset quality so that appropriate actions are adopted to manage and mitigate risks.





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 ef�cient staff learning, an E-Learning Program is implemented with an online Learning Management

System (‘LMS’). The LMS provides staff with a progressive self-learning alternative at own pace.

Group Risk Management implements an Internal Credit Certi�cation (‘ICC’) Programme for both Business Banking

and Consumer Credit.

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.

Maximum exposure to credit risk

For �nancial assets recognised on the statement of �nancial position, the exposure to credit risk equals their carrying

amount. For �nancial guarantees granted, the maximum exposure to credit risk is the maximum amount that the Group

and the Bank would have to pay if guarantee were to be called upon. For loan commitments and other commitments,

the maximum exposure to credit risk is the full amount of the undrawn credit facilities granted to customers.

All �nancial assets of the Group and the Bank are subject to credit risk except for cash in hand, equity securities held

as �nancial assets held-for-trading or �nancial investments available-for-sale, as well as non-�nancial assets.

The exposure to credit risk of the Group and the Bank equals their carrying amount in the statement of �nancial

position as at reporting date, except for the followings:

The Group The Bank

2014 2014 2014 2014

Carrying

Value

RM’000

Maximum

Credit

Exposure

RM’000

Carrying

Value

RM’000

Maximum

Credit

Exposure

RM’000

Credit risk exposures of

on-balance sheet assets:

Cash and short-term funds * 6,938,912 6,770,321 * 3,777,042 3,608,451

Financial investments available-for-sale # 9,947,911 9,817,200 # 8,415,411 8,284,726

Other assets @ 223,406 200,875 @ 174,655 153,014

Credit risk exposure of

off-balance sheet items:

Financial guarantees ^ 454,742 454,742 ^ 444,806 444,806

Loan commitments and other

credit related commitments ^ 13,887,229 4,177,194 ^ 11,808,276 3,622,011

Total maximum credit risk exposure 31,452,200 21,420,332 24,620,190 16,113,008





Maximum exposure to credit risk (continued))

The Group The Bank

2013 2013 2013 2013

Carrying

Value

RM’000

Maximum

Credit

Exposure

RM’000

Carrying

Value

RM’000

Maximum

Credit

Exposure

RM’000

Credit risk exposures of

on-balance sheet assets:

Cash and short-term funds * 9,401,701 9,234,368 * 4,987,696 4,820,362

Financial investments available-for-sale # 7,614,537 7,495,386 # 6,331,414 6,212,331

Other assets @ 220,097 191,679 @ 176,555 148,663

Credit risk exposure of

off-balance sheet items:

Financial guarantees ^ 336,577 336,577 ^ 328,123 328,123

Loan commitments and other

credit related commitments ^ 13,246,140 4,755,283 ^ 11,587,405 4,285,478

Total maximum credit risk exposure 30,819,052 22,013,293 23,411,193 15,794,957

The following have been excluded for the purpose of maximum credit risk exposure calculation:

* cash in hand# investment in quoted and unquoted shares@ prepayment^ amount stated at notional value

Whilst the Group and the Bank’s maximum exposure to credit risk is the carrying value of the assets, or in the case of

off-balance sheet items, the amount guaranteed, committed or accepted, in most cases the likely exposure is far less

due to collateral, credit enhancements and other actions taken to mitigate the credit exposure.

The �nancial effect of collateral held for loans, advances and �nancing of the Group and the Bank are 67% (2013: 68%)

and 66% (2013: 66%) respectively. The �nancial effects of collateral for the other �nancial assets are insigni�cant.

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Credit risk concentrations

Credit risk is the risk of �nancial loss from the failure of customers to meet their obligations. Exposure to credit risk is managed through portfolio management.

The credit portfolio’s risk pro�les and exposures are reviewed and monitored regularly to ensure that an acceptable level of risk diversi�cation is maintained.

Exposure to credit risk is also managed in part by obtaining collateral security and corporate and personal guarantees.

The credit risk concentrations of the Group and the Bank, by industry concentration, are set out in the following tables:

The Group

2014

Cash and

short-term

funds

RM’000

Deposits and

placements

with banks

and other

financial

institutions

RM’000

Financial

assets

held-for-

trading

RM’000

Derivative

financial

assets

RM’000

Financial

investments

available-

for-sale

RM’000

Financial

investments

held-to-

maturity

RM’000

Loans,

advances

and

financing

RM’000

Other

assets

RM’000

On

balance

sheet

total

RM’000

Commitments

and

contingencies

RM’000

Agriculture - - - 119 - - 679,067 - 679,186 74,395

Mining and quarrying - - - 1,132 - - 620,990 - 622,122 84,463

Manufacturing - - - 3,620 55,077 60,040 2,019,420 - 2,138,157 632,111

Electricity, gas and water

supply - - - 37 167,170 - 253,948 - 421,155 1,455

Construction - - - - 90,569 190,155 3,784,234 - 4,064,958 1,325,891

Real estate - - - - 5,006 - 6,027,509 - 6,032,515 469,141

Transport, storage and

communication - - - 35 220,459 - 2,028,262 - 2,248,756 204,217

Finance, insurance and

business services 752,780 238,222 - 81,880 3,455,064 202,521 4,794,881 - 9,525,348 425,008

Government and

government agencies 6,017,541 - 149,904 - 5,778,549 - 92,404 - 12,038,398 213,748

Wholesale & retail trade

and restaurants & hotels - - - 372 45,306 23,439 2,095,396 - 2,164,513 426,421

Others - - - 1,463 - - 17,060,061 200,875 17,262,399 775,086

Total assets 6,770,321 238,222 149,904 88,658 9,817,200 476,155 39,456,172 200,875 57,197,507 4,631,936

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Credit risk concentrations (continued)

The Group

2013

Cash and

short-term

funds

RM’000

Deposits and

placements

with banks

and other

�nancial

institutions

RM’000

Financial

assets

held-for-

trading

RM’000

Derivative

�nancial

assets

RM’000

Financial

investments

available-

for-sale

RM’000

Financial

investments

held-to-

maturity

RM’000

Loans,

advances

and

�nancing

RM’000

Other

assets

RM’000

On

balance

sheet

total

RM’000

Commitments

and

contingencies

RM’000

Agriculture - - - 78 - - 472,912 - 472,990 98,156

Mining and quarrying - - - - - - 648,276 - 648,276 121,024

Manufacturing - - - 2,446 19,500 120,058 2,485,248 - 2,627,252 555,901


supply - - - 308 163,109 - 290,400 - 453,817 11,153

Construction - - - - 74,578 195,105 3,112,399 - 3,382,082 1,084,015

Real estate - - - - 41,345 1,525 4,609,643 - 4,652,513 414,212


communication - - - - 55,259 - 1,953,907 - 2,009,166 206,558


business services 1,274,635 482,597 - 53,351 3,072,400 159,741 4,308,662 - 9,351,386 476,028

Government and



and restaurants & hotels - - - 91 45,377 23,907 2,119,218 - 2,188,593 1,189,137

Others - - - - - - 16,109,907 191,679 16,301,586 777,037

Total assets 9,234,368 482,597 149,544 56,274 7,495,386 500,336 36,227,785 191,679 54,337,969 5,091,860

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The Bank

2014

Cash and

short-term

funds

RM’000

Deposits and

placements

with banks

and other

financial

institutions

RM’000

Financial

assets

held-for-

trading

RM’000

Derivative

financial

assets

RM’000

Financial

investments

available-

for-sale

RM’000

Financial

investments

held-to-

maturity

RM’000

Loans,

advances

and

financing

RM’000

Other

assets

RM’000

On

balance

sheet

total

RM’000

Commitments

and

contingencies

RM’000

Agriculture - - - 119 - - 412,662 - 412,781 67,615

Mining and quarrying - - - 1,132 - - 620,198 - 621,330 84,463

Manufacturing - - - 3,620 55,077 60,040 1,787,978 - 1,906,715 552,369


supply - - - 37 167,170 - 200,989 - 368,196 1,455

Construction - - - - 90,569 190,155 3,235,572 - 3,516,296 1,169,856

Real estate - - - - 5,006 - 5,425,234 - 5,430,240 438,337


communication - - - 35 165,971 - 1,893,563 - 2,059,569 173,656


business services 438,296 962,050 - 81,897 3,151,547 119,767 4,043,701 - 8,797,258 402,052

Government and



and restaurants & hotels - - - 369 35,089 23,439 1,894,966 - 1,953,863 412,208

Others - - - 1,463 - - 12,744,460 153,014 12,898,937 697,443

Total assets 3,608,451 962,050 149,904 88,672 8,284,726 393,401 32,292,551 153,014 45,932,769 4,066,817

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The Bank

2013

Cash and

short-term

funds

RM’000

Deposits and

placements

with banks

and other

�nancial

institutions

RM’000

Financial

assets

held-

for-

trading

RM’000

Derivative

�nancial

assets

RM’000

Financial

investments

available-

for-sale

RM’000

Financial

investments

held-to-

maturity

RM’000

Loans,

advances

and

�nancing

RM’000

Other

assets

RM’000

On

balance

sheet

total

RM’000

Commitments

and

contingencies

RM’000

Agriculture - - - 78 - - 465,022 - 465,100 92,900

Mining and quarrying - - - - - - 647,148 - 647,148 121,024

Manufacturing - - - 2,446 19,500 120,058 2,273,269 - 2,415,273 528,050


supply - - - 308 163,109 - 252,920 - 416,337 11,153

Construction - - - - 74,578 195,105 2,636,379 - 2,906,062 907,811

Real estate - - - - 41,345 1,525 4,179,469 - 4,222,339 384,572


communication - - - - 55,259 - 1,847,243 - 1,902,502 194,257


business services 1,115,964 1,106,756 - 53,351 2,771,996 74,676 3,786,540 - 8,909,283 437,521

Government and



and restaurants & hotels - - - 91 35,104 23,907 1,974,904 - 2,034,006 1,163,264

Others - - - - - - 12,020,369 148,663 12,169,032 695,038

Total assets 4,820,362 1,106,756 149,544 56,274 6,212,331 415,271 30,178,910 148,663 43,088,111 4,613,601





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 �nanced;

- for hire purchase, charges over the vehicles or plant and machineries �nanced; 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 �nancing are categorised into “neither past due nor impaired”, “past due but not impaired”

and “impaired”. Past due loans refer to loans that are overdue by one day or more. Impaired loans are loans with

months-in-arrears more than 3 months (i.e. 90 days) or with impairment allowances.

Distribution of loans, advances and financing by credit quality

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Neither past due nor impaired (a) 36,629,306 33,612,968 30,006,363 28,026,769

Past due but not impaired (b) 2,645,096 2,432,647 2,164,663 2,033,298

Impaired (c) 713,648 706,185 584,491 574,555

Gross loans, advances and �nancing 39,988,050 36,751,800 32,755,517 30,634,622

less: Allowance for impairment

- Individual (239,259) (223,701) (207,740) (189,117)

- Collective (292,619) (300,314) (255,226) (266,595)

Net loans, advances and financing 39,456,172 36,227,785 32,292,551 30,178,910





Total loans, advances and financing - credit quality (continued)

(a) Loans neither past due nor impaired

Analysis of loans, advances and �nancing 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 The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Quality classification

Satisfactory 33,065,493 30,400,612 26,834,857 25,143,738

Special mention 3,563,813 3,212,356 3,171,506 2,883,031

36,629,306 33,612,968 30,006,363 28,026,769

Quality classi�cation de�nitions

Satisfactory: Exposures demonstrate a strong capacity to meet �nancial commitments, with negligible or low

probability of default and/or levels of expected loss.

Special mention: Exposures require varying degrees of special attention and default risk is of greater concern.

(b) Loans past due but not impaired

Certain loans, advances and �nancing are past due but not impaired as the collateral values of these loans are in

excess of the principal and pro�t outstanding. Allowances for these loans may have been set aside on a portfolio

basis. The Bank’s loans, advances and �nancing which are past due but not impaired are as follows:

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Past due up to 30 days 1,510,507 1,312,337 1,298,568 1,165,696

Past due 31-60 days 801,073 767,638 607,415 595,137

Past due 61-90 days 333,516 352,672 258,680 272,465

2,645,096 2,432,647 2,164,663 2,033,298





Total loans, advances and financing - credit quality (continued)

(c) Loans impaired

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Analysis of impaired assets:

Gross impaired loans 713,648 706,185 584,491 574,555

Individually impaired loans 407,907 367,220 324,945 272,043

Collateral and other credit enhancements obtained

During the year, the Bank has obtained the following assets by taking possession of collateral held as security or

calling upon other credit enhancements.

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Nature of assets

Industrial and residential properties 9,099 15,825 8,508 14,646

Deposits and short-term funds, private debt securities, treasury bills and derivatives - credit quality

Private debt securities, treasury bills and other eligible bills included in �nancial assets held-for-trading and �nancial

investments available-for-sale are measured on a fair value basis. The fair value will re!ect the credit risk of the issuer.

Most listed and some unlisted securities are rated by external rating agencies. The Group and the Bank mainly uses

external credit ratings provided by RAM, MARC, Standard & Poors’ or Moody’s.

The table below presents the deposits and short-term funds, private debt securities, treasury bills and other eligible

bills by that neither past due nor impaired, analysed by rating.

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The table below presents the deposits and short-term funds, private debt securities, treasury bills and other eligible bills that neither past due nor impaired and

impaired, analysed by rating:

The Group

2014

Sovereigns

RM’000

AAA

RM’000

AA- to AA+

RM’000

A- to A+

RM’000

Lower

than A-

RM’000

Unrated

RM’000

* Impaired

RM’000

Total

RM’000

Short-term funds 6,017,541 353,896 375,483 21,860 1,541 - - 6,770,321


other �nancial institutions - 116,739 121,483 - - - - 238,222

Financial assets held-for-trading Bank Negara Malaysia

Monetary Notes 149,904 - - - - - - 149,904

Derivative �nancial assets - 24,462 11,737 309 912 51,238 - 88,658

Financial investments available-for-sale

Malaysian Government treasury bills 225,782 - - - - - - 225,782

Malaysian Government securities 50,663 - - - - - - 50,663

Malaysian Government investment issues 2,180,038 - - - - - - 2,180,038

Sukuk Perumahan Kerajaan 351,735 - - - - - - 351,735

Bank Negara Malaysia Monetary Notes 1,387,284 - - - - - - 1,387,284


Islamic Debt Certi�cates - - 1,331,452 - - - - 1,331,452

Khazanah Bonds/Sukuk 353,165 - - - - - - 353,165

Private debt securities 1,229,882 1,166,778 1,092,663 304,817 112,895 30,046 - 3,937,081

Financial investments held-to-maturity

Private debt securities - - - - - 408,716 67,439 476,155

11,945,994 1,661,875 2,932,818 326,986 115,348 490,000 67,439 17,540,460

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The Group

2013

Sovereigns

RM’000

AAA

RM’000

AA- to AA+

RM’000

A- to A+

RM’000

Lower

than A-

RM’000

Unrated

RM’000

* Impaired

RM’000

Total

RM’000

Short-term funds 7,959,732 776,161 217,858 196,840 75,073 8,704 - 9,234,368


other �nancial institutions - 177,049 181,991 - 123,557 - - 482,597

Financial assets held-for-trading

Bank Negara Malaysia Monetary Notes 149,544 - - - - - - 149,544

Derivative �nancial assets - 16,693 28,185 1,865 250 9,281 - 56,274






Islamic Debt Certi�cates - - - 100,569 781,745 - - 882,314

Bankers’ acceptances and Islamic accepted bills - - - - - 196,522 - 196,522


Private debt securities 1,059,831 1,218,999 697,306 369,074 59,071 48,282 - 3,452,563



12,133,094 2,188,902 1,125,340 668,348 1,039,696 695,218 67,907 17,918,505

* Net of allowance for impairment.

Collateral is not generally obtained directly from the issuers of debt securities. Certain debt securities may be collateralised by speci�cally identi�ed assets that

would be obtainable in the event of default.

Deposits and short-term funds, private debt securities, treasury bills and derivatives which are past due but not impaired is not signi�cant.

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38 FINANCIAL RISK MANAGEMENT (continued)


The table below presents the deposits and short-term funds, private debt securities, treasury bills and other eligible bills that neither past due nor impaired and

impaired, analysed by rating:

The Bank

2014

Sovereigns

RM’000

AAA

RM’000

AA- to AA+

RM’000

A- to A+

RM’000

Lower

than A-

RM’000

Unrated

RM’000

* Impaired

RM’000

Total

RM’000

Short-term funds 3,170,155 73,871 173,225 18,056 1,541 171,603 - 3,608,451


other �nancial institutions - 116,738 121,484 - - 723,828 - 962,050



Derivative �nancial assets - 24,462 11,737 309 928 51,236 - 88,672


Malaysian Government treasury bills 200,778 - - - - - - 200,778

Malaysian Government securities 50,663 - - - - - - 50,663



Bank Negara Malaysia Monetary Notes 1,102,406 - - - - - - 1,102,406


Islamic Debt Certi�cates - - 1,331,452 - - - 1,331,452


Private debt securities 1,076,356 893,559 997,660 304,817 112,895 30,046 - 3,415,333



7,934,356 1,108,630 2,635,558 323,182 115,364 1,302,675 67,439 13,487,204

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The Bank

2013

Sovereigns

RM’000

AAA

RM’000

AA- to AA+

RM’000

A- to A+

RM’000

Lower

than A-

RM’000

Unrated

RM’000

* Impaired

RM’000

Total

RM’000

Short-term funds 3,704,398 776,161 174,696 15,755 75,073 74,280 - 4,820,363


other �nancial institutions - 117,039 121,985 - 123,557 744,175 - 1,106,756



Derivative �nancial assets - 16,693 28,185 1,865 250 9,281 - 56,274






Islamic Debt Certi�cates - - - 100,569 781,745 - - 882,314

Bankers’ acceptances and Islamic accepted bills - - - - - 196,522 - 196,522


Private debt securities 860,792 918,595 687,033 369,074 59,071 48,282 - 2,942,847



6,905,382 1,828,488 1,011,899 487,263 1,039,696 1,419,904 67,907 12,760,539


Collateral is not generally obtained directly from the issuers of debt securities. Certain debt securities may be collateralised by speci�cally identi�ed assets that

would be obtainable in the event of default.

Deposits and short-term funds, private debt securities, treasury bills and derivatives which are past due but not impaired is not signi�cant.





Other financial assets - credit quality

Other �nancial assets of the Group and the Bank are neither past due nor impaired are summarised as below:

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Other assets 200,875 191,679 153,014 148,663

Amount due from subsidiaries - - 438 60,723

Amount due from joint ventures 14,855 4,185 - -

Other �nancial assets that are past due but not impaired or impaired are not signi�cant.

(ii) Market risk

Market risk is de�ned as the risk of losses to the Bank’s portfolio positions arising from movements in market factors

such as interest rates, foreign exchange rates and changes in volatility. The Bank is exposed to market risks from

its trading and investment activities. The Bank’s market risk management objective is to ensure that market risk is

appropriately identi�ed, 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.

The Bank’s market risk management control strategy is established based on its risk appetite, market liquidity and

business strategies as well as macroeconomic conditions. These limits are reviewed at least on an annual basis.

Market risk arising from the Bank’s trading book is primarily controlled through the imposition of Cut-loss and Value-

at-Risk (‘VaR’) Limits.

The Bank quanti�es interest rate risk by analysing the repricing mismatch between the rate sensitive assets and rate

sensitive liabilities. It also conducts Net Interest Income simulations to assess the variation in earnings under various

rates scenarios. The potential long term effects of the Bank’s overall exposure is also tracked by assessing the impact

on economic value of equity (‘EVE’).

The Bank’s interest rate risk is managed through Earnings-at-Risk (‘EaR’) and Economic Value-at-Risk (‘EVaR’) limits.

In addition, the Bank conducts periodic stress test of its respective business portfolios to ascertain market risk under

abnormal market conditions.

The Bank’s Management, ALCO and BRMC are regularly kept informed of its risk pro�le and positions.




(ii) Market risk (continued)

Value-at-risk (‘VaR’)

Value-at-Risk (‘VaR’) is used to compute the maximum potential loss amount over a speci�ed 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 �nancial instruments.

In May 2014, arising from the Bank’s Treasury Management System Upgrade project, the Bank changed its methodology

of computing potential loss amount or Value-at-Risk (‘VaR’) to Historical Pricing Simulation Method (‘HPS’) from the

current Variance Co-variance (‘VCV’) approach. HPS was chosen because it is a robust methodology able to cater for

a spectrum of �nancial instruments.

The Historical Pricing Method uses the relative change of historical prices to estimate future potential changes in

the market value of outstanding positions. The Bank currently adopts 250 simulated business days for its HPS VaR

computation. After applying these price changes to the outstanding portfolios, 250 simulated market values for the

portfolio are generated and the change in the day-to-day market value is taken as simulated Pro�t & Loss (‘P&L’)

for the portfolio. Since VaR calculates the worst expected loss over a given day horizon and con�dence level under

normal market condition, simulated 250 values are sorted from the lowest to the highest simulated P&L. The VaR

focuses on the tail of the distribution (i.e the loss �gures).

The table below sets out a summary of the Bank’s VaR pro�le by �nancial instrument types for the trading portfolio:


2014

Balance

RM’000

Average

for the

financial year

RM’000

Minimum

RM’000

Maximum

RM’000

Instruments

FX swap 668 432 6 2,400

FX spot (Metro Desk) 138 222 31 776

FX option 5 206 5 550

Government securities 1 - - 3


2013

Balance

RM’000

Average

for the

�nancial year

RM’000

Minimum

RM’000

Maximum

RM’000

Instruments

FX swap 713 607 252 1,375

FX spot (Metro Desk) 88 150 6 678

Government securities 2 - - 2

Private debt securities - - - 60





Other risk measures

• Mark-to-market

Mark-to-market valuation tracks the current market value of the outstanding �nancial instruments.

• Stress testing

Stress tests are conducted to attempt to quantify market risk arising from low probability, abnormal market

movements. Stress tests measure the changes in values arising from extreme movements in interest rates and

foreign exchange rates based on past experience and simulated stress scenarios.

Interest/profit rate sensitivity

The table below shows the sensitivity for the �nancial assets and �nancial liabilities held at reporting date.

Impact on pro�t after tax is measured using Repricing Gap Simulation Methodology based on 100 basis point parallel

shifts in interest/pro�t rate.

Impact on equity represents the changes in fair values of �xed income instruments held in available-for-sale portfolio

arising from the shift in interest/pro�t rate.

The Group The Bank

2014 2014 2014 2014

+100

basis point

RM million

-100

basis point

RM million

+100

basis point

RM million

-100

basis point

RM million

Impact on profit after tax (18.8) 18.8 (26.4) 26.4

Impact on equity (206.8) 217.1 (176.2) 184.9

The Group The Bank

2013 2013 2013 2013

+100

basis point

RM million

-100

basis point

RM million

+100

basis point

RM million

-100

basis point

RM million

Impact on pro�t after tax (13.9) 13.9 (16.1) 16.1

Impact on equity (186.7) 199.2 (163.2) 174.4





Foreign exchange risk sensitivity analysis

An analysis of the exposure to assess the impact of a one per cent change in exchange rate to the pro�t after tax are

as follows:

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

+1%

Euro 1,206 1,966 886 1,551

United States Dollar 35,418 39,858 33,763 38,156

Great Britain Pound 33 1,165 36 1,155

Australian Dollar 211 1,173 217 1,167

Japanese Yen 45 14 42 16

Others 10,926 3,808 9,929 3,800

47,839 47,984 44,873 45,845

-1%

Euro (1,206) (1,966) (886) (1,551)

United States Dollar (35,418) (39,858) (33,763) (38,156)

Great Britain Pound (33) (1,165) (36) (1,155)

Australian Dollar (211) (1,173) (217) (1,167)

Japanese Yen (45) (14) (42) (16)

Others (10,926) (3,808) (9,929) (3,800)

(47,839) (47,984) (44,873) (45,845)

Foreign exchange risk

The Bank is exposed to the effects of !uctuations in the prevailing foreign currency exchange rates on its �nancial

position and cash !ows. Limits are set on the level of exposure by currency and in aggregate for both overnight

and intra-day positions, which are monitored daily. The following table summarises the Bank’s exposure to foreign

currency exchange rate risk at reporting date. Included in the table are the Bank’s �nancial instruments at carrying

amounts, categorised by currency.

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38 FINANCIAL RISK MANAGEMENT (continued)


Foreign exchange risk (continued)

The Group

2014

Euro

RM’000

United

States

Dollar

RM’000

Great

Britain

Pound

RM’000

Australian

Dollar

RM’000

Japanese

Yen

RM’000

Others

RM’000

Total

RM’000

Assets

Cash and short-term funds 4,814 142,377 5,415 14 1,415 8,623 162,658

Derivative �nancial assets 373 63,987 15 38 75 663 65,151

Financial investments available-for-sale 42,439 216,024 - 31,439 - 240,844 530,746

Loans, advances and �nancing 195 1,255,095 - - - 962,170 2,217,460

Other assets - 1,317 - - - - 1,317

Total financial assets 47,821 1,678,800 5,430 31,491 1,490 1,212,300 2,977,332

Liabilities

Deposits from customers 80,243 250,865 6,305 7,187 3,952 9,570 358,122

Deposits and placements of banks and other

�nancial institutions - 119,269 - 2,200 - 47,898 169,367

Derivative �nancial liabilities 562 2,509 - 3 - 1,127 4,201

Other liabilities 29 3,138 - - - - 3,167

Total financial liabilities 80,834 375,781 6,305 9,390 3,952 58,595 534,857

Net on-balance sheet �nancial position (33,013) 1,303,019 (875) 22,101 (2,462) 1,153,705 2,442,475

Off balance sheet commitments 193,781 3,419,439 5,319 6,006 8,470 303,161 3,936,176

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The Group

2013

Euro

RM’000

United

States

Dollar

RM’000

Great

Britain

Pound

RM’000

Australian

Dollar

RM’000

Japanese

Yen

RM’000

Others

RM’000

Total

RM’000

Assets


Deposits and placements with banks and other


Derivative �nancial assets - 1,121 - - - 213 1,334


Loans, advances and �nancing 207 1,294,883 107,860 - 422 264,128 1,667,500

Other assets - 892 - - - 928 1,820

Total �nancial assets 54,353 1,864,085 112,497 85,755 1,821 470,860 2,589,371

Liabilities



�nancial institutions - - - 11,319 - 45 11,364

Derivative �nancial liabilities - 4,597 - - - 1,077 5,674

Other liabilities - 2,904 - - - - 2,904

Total �nancial liabilities 77,562 228,979 14,962 17,329 9,839 17,642 366,313

Net on-balance sheet �nancial position (23,209) 1,635,106 97,535 68,426 (8,018) 453,218 2,223,058


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The Bank

2014

Euro

RM’000

United

States

Dollar

RM’000

Great

Britain

Pound

RM’000

Australian

Dollar

RM’000

Japanese

Yen

RM’000

Others

RM’000

Total

RM’000

Assets


Derivative �nancial assets 373 63,994 15 44 75 662 65,163


Loans, advances and �nancing 195 1,109,123 - - - 962,171 2,071,489

Other assets - 1,290 - - - - 1,290

Total financial assets 47,240 1,529,811 4,623 31,497 1,081 1,211,542 2,825,794

Liabilities




Derivative �nancial liabilities 563 2,514 - 3 - 1,131 4,211

Other liabilities 29 3,227 - - - - 3,256

Total financial liabilities 80,818 307,021 6,295 9,875 3,949 58,600 466,558

Net on-balance sheet �nancial position (33,578) 1,222,790 (1,672) 21,622 (2,868) 1,152,942 2,359,236


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The Bank

2013

Euro

RM’000

United

States

Dollar

RM’000

Great

Britain

Pound

RM’000

Australian

Dollar

RM’000

Japanese

Yen

RM’000

Others

RM’000

Total

RM’000

Assets



other �nancial institutions - 95,667 - 29,289 - 26,969 151,925

Derivative �nancial assets - 1,121 - - - 213 1,334


Loans, advances and �nancing 207 1,158,914 107,860 - 422 264,129 1,531,532

Other assets - 892 - - - 928 1,820

Total �nancial assets 52,848 1,821,289 112,241 85,755 1,777 470,018 2,543,928

Liabilities



other �nancial institutions - 26,720 - 12,046 - 45 38,811

Derivative �nancial liabilities - 4,597 - - - 1,077 5,674

Other liabilities - 2,987 - - - - 2,987

Total �nancial liabilities 77,544 255,183 14,955 18,049 9,835 17,641 393,207

Net on-balance sheet �nancial position (24,696) 1,566,106 97,286 67,706 (8,058) 452,377 2,150,721


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Interest/profit rate risk

Interest/ pro�t rate risk is the risk to earnings and capital arising from exposure to adverse movements in interest/pro�t rates mainly due to mismatches in timing repricing

of assets and liabilities. These mismatches are actively managed from an earnings and economic value perspective, Interest/pro�t rate risk limits are established and

approved in line with the Group’s strategy and risk appetite. These limits are reviewed regularly to ensure relevance in the context of prevailing market conditions.

The following table represents the Group’s and the Bank’s assets and liabilities at carrying amount, categorised by the earlier of contractual repricing or maturity

dates as at reporting date.

Non-trading book

The Group

2014

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

Non-

interest /

profit

sensitive

RM’000

Trading

book

RM’000

Total

RM’000

Assets

Cash and short-term funds 6,667,893 - - - - 271,019 - 6,938,912


�nancial institutions - - - 195,000 40,000 3,222 - 238,222

Financial assets held-for-trading - - - - - - 149,904 149,904

Derivative �nancial assets - - - - - - 88,658 88,658

Financial investments available-for-sale 814,505 890,031 1,398,421 4,323,531 2,320,409 201,014 - 9,947,911

Financial investment held-to-maturity - 321,985 82,690 - - 71,480 - 476,155

Loans, advances and �nancing

- non-impaired 22,603,483 2,299,560 3,814,294 8,331,073 2,225,992 (292,619) * - 38,981,783

- impaired - - - - - 474,389 # - 474,389

Others (1) - - - - - 229,162 - 229,162

Statutory deposits with Bank Negara Malaysia - - - - - 1,696,550 - 1,696,550

Total assets 30,085,881 3,511,576 5,295,405 12,849,604 4,586,401 2,654,217 238,562 59,221,646

* The negative balance represents collective impairment allowance for loans, advances and �nancing.

# Net of individual impairment allowance.

(1) Others include other assets and amount due from joint ventures.

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Interest/profit rate risk (continued)

Non-trading book

The Group

2014

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

Non-

interest

sensitive

RM’000

Trading

book

RM’000

Total

RM’000

Liabilities

Deposits from customers 18,948,297 12,454,090 12,673,829 656,015 10,000 3,304,993 - 48,047,224

Deposits and placements of banks and other �nancial

institutions 2,052,022 2,321,073 464,273 - - 12,308 - 4,849,676

Derivative �nancial liabilities - - - - - - 237,426 237,426

Bills and acceptances payable - - - - - 94,308 - 94,308

Recourse obligation on loans sold to Cagamas Berhad - - - 138,313 - 834 - 139,147

Subordinated term loan 600,000 - - - - 4,310 - 604,310

Other liabilities - - - - - 359,644 - 359,644

Total liabilities 21,600,319 14,775,163 13,138,102 794,328 10,000 3,776,397 237,426 54,331,735

Net interest sensivity gap 8,485,562 (11,263,587) (7,842,697) 12,055,276 4,576,401

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Non-trading book

The Group

2013

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

Non-

interest /

pro�t

sensitive

RM’000

Trading

book

RM’000

Total

RM’000

Assets



�nancial institutions 90,000 286,741 101,437 - - 4,419 - 482,597




Financial investment held-to-maturity 1,525 268,102 85,000 73,658 - 72,051 - 500,336


- non-impaired 19,430,962 2,113,869 3,518,151 8,648,969 2,333,664 (300,314) * - 35,745,301

- impaired - - - - - 482,484 # - 482,484

Others (1) - - - - - 208,457 - 208,457


Total assets 28,911,160 3,436,710 5,023,350 11,778,938 4,421,004 2,323,601 205,818 56,100,581



(1) Others include other assets and amount due from joint ventures.

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Non-trading book

The Group

2013

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

Non-

interest /

pro�t

sensitive

RM’000

Trading

book

RM’000

Total

RM’000

Liabilities

Deposits from customers 18,347,659 9,935,597 14,499,590 119,512 - 3,185,724 - 46,088,082


institutions 2,263,614 1,517,415 274,925 - - 9,590 - 4,065,544



Recourse obligation on loans sold to Cagamas Berhad - - - 394,708 - 3,082 - 397,790



Total liabilities 21,511,273 11,453,012 14,774,515 514,220 - 3,685,545 94,522 52,033,087

Net interest/pro�t sensivity gap 7,399,887 (8,016,302) (9,751,165) 11,264,718 4,421,004

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Non-trading book

The Bank

2014

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

Non-

interest

sensitive

RM’000

Trading

book

RM’000

Total

RM’000

Assets



�nancial institutions - 315,164 67,233 492,210 40,000 47,443 - 962,050




Financial investment held-to-maturity - 321,985 - - - 71,416 - 393,401


- non-impaired 18,563,002 2,061,238 3,193,231 6,828,808 1,524,747 (255,226) * - 31,915,800

- impaired - - - - - 376,751 # - 376,751

Others - - - - - 166,147 - 166,147

Amount due from subsidiaries - - - - - 438 - 438


Total assets 22,891,837 3,449,192 4,337,547 10,874,787 3,591,962 2,260,265 238,576 47,644,166



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Non-trading book

The Bank

2014

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

Non-

interest

sensitive

RM’000

Trading

book

RM’000

Total

RM’000

Liabilities

Deposits from customers 13,174,947 10,694,447 10,627,244 419,653 10,000 3,253,921 - 38,180,212


institutions 1,349,550 2,121,073 219,720 - - 9,043 - 3,699,386



Recourse obligation on loans sold to Cagamas Berhad - - - 138,313 - 834 - 139,147



Amount due to subsidiaries - - - - - 296,781 - 296,781

Total liabilities 15,124,497 12,815,520 10,846,964 557,966 10,000 3,987,260 237,419 43,579,626


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Non-trading book

The Bank

2013

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

Non-

interest

sensitive

RM’000

Trading

book

RM’000

Total

RM’000

Assets



�nancial institutions 90,000 520,155 163,679 197,210 100,000 35,712 - 1,106,756



Financial investments available-for-sale 210,041 702,959 904,603 2,466,357 1,884,482 162,972 - 6,331,414

Financial investment held-to-maturity 1,525 268,101 - 73,658 - 71,987 - 415,271


- non-impaired 16,143,542 1,904,549 3,003,968 7,313,314 1,694,694 (266,595) * - 29,793,472

- impaired - - - - - 385,438 # - 385,438

Others - - - - - 161,909 - 161,909

Amount due from subsidiaries 60,115 - - - - 608 - 60,723


Total assets 21,282,405 3,395,764 4,072,250 10,050,539 3,679,176 1,988,895 205,818 44,674,847



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Non-trading book

The Bank

2013

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

Non-

interest

sensitive

RM’000

Trading

book

RM’000

Total

RM’000

Liabilities

Deposits from customers 13,043,316 8,579,819 11,940,823 116,771 - 3,119,999 - 36,800,728


institutions 955,762 1,517,415 179,392 - - 6,966 - 2,659,535



Recourse obligation on loans sold to Cagamas Berhad - - - 394,708 - 3,082 - 397,790



Amount due to subsidiaries - - - - - 53,559 - 53,559

Total liabilities 14,899,078 10,097,234 12,120,215 511,479 - 3,638,615 94,522 41,361,143





(iii) Liquidity risk

Liquidity risk is the current and prospective risk to earnings or capital arising from a bank’s inability to meet its

obligations when they fall due. Liquidity risk includes the inability to manage sudden decreases or changes in funding

sources. Liquidity risk also arises from the failure to recognise changes in market conditions that affect the ability to

liquidate assets quickly and with minimal loss in value.

Liquidity risk management is managed on Group basis. The objective of liquidity risk management is to ensure that

there are suf�cient funds to meet contractual and regulatory obligations without incurring unacceptable losses as

well as to undertake new transactions. The Group’s liquidity management process involves establishing liquidity risk

management policies and limits, liquidity risk limits monitoring, stress testing and establishing contingency funding

plans. These building blocks of liquidity risk management are subject to regular reviews to ensure relevance in the

context of prevailing market conditions.

Liquidity monitoring is performed via projection of contractual and behavioral cash !ows, which are built upon from

BNM’s Liquidity Framework (‘LF’). The LF ascertains the liquidity condition based on the contractual and behavioral

cash-!ow of assets, liabilities and off-balance sheet commitments, taking into consideration the realisable cash value

of the eligible lique�able assets. The LF is also supported by indicative ratios on the Bank’s funding structure to

monitor the reliance on particular funding sources. Liquid assets in excess of regulatory requirements are maintained

for contingency in the event of a liquidity crisis.

The Bank employs liquidity risk indicators as an early alert of any structural change for liquidity risk management.

Liquidity risk is tracked using internal and external qualitative and quantitative indicators. Liquidity positions in the

major currencies are being closely monitored by tracking the availability of medium to long term foreign currency

funding and adhering to the guiding principles for foreign currency assets creations.

The Bank also conducts liquidity stress test to gauge its resilience in the event of a liquidity crisis. A Contingency

Funding Plan is in place to alert and enable Management to act effectively and ef�ciently in handling liquidity disruption.

The document encompasses early warning system, strategies, decision-making authorities, and courses of actions to

be taken in the event of liquidity crisis and emergencies.

Basel III Liquidity Standards

The Basel Committee developed the Liquidity Coverage Ratio (‘LCR’) and Net Stable Funding Ratio (‘NSFR’) with the

goal of strengthening the resilience of banking systems. The LCR and NSFR are tracked monthly to assess the short

term and long term liquidity risk pro�le of the Bank, in line with BNM observation period reporting for Basel III liquidity

ratios which commenced in June 2012.

The BRMC is responsible for the Bank’s liquidity policy although the strategic management of liquidity has been

delegated to the ALCO. The BRMC is informed regularly on the liquidity situation in the Bank.




(iii) Liquidity risk (continued)

Liquidity risk disclosure table which is based on contractual undiscounted cash flow

The table below provides analysis of cash !ow payables for �nancial liabilities based on remaining contractual

maturities on undiscounted basis. The balances in the table below do not agree directly to the balances reported

in the statement of �nancial position as the table incorporates all contractual cash !ows, on an undiscounted basis,

relating to both principal and interest payments.

The Group

2014

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

Deposits from customers 22,031,100 12,648,427 13,058,333 700,615 10,347 48,448,822


and other �nancial institutions 2,101,968 2,337,475 472,699 - - 4,912,142

Bills and acceptances payable 94,308 - - - - 94,308


Cagamas Berhad - 2,572 7,729 139,712 - 150,013

Other liabilities 359,644 - - - - 359,644

Subordinated term loan 1,175 2,236 20,764 110,716 651,190 786,081

24,588,195 14,990,710 13,559,525 951,043 661,537 54,751,010

The Group

2013

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






Cagamas Berhad 2,791 5,312 263,436 150,442 - 421,981


Subordinated term loan 3,526 305,835 19,777 105,072 671,474 1,105,684

24,121,389 11,947,708 15,459,184 423,061 682,507 52,633,849





Liquidity risk disclosure table which is based on contractual undiscounted cash flow (continued)

The Bank

2014

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






Cagamas Berhad - 2,572 7,729 139,712 - 150,013


Amount due to subsidiaries 296,781 - - - - 296,781

Subordinated term loan 1,175 2,236 20,764 110,716 651,190 786,081

18,315,002 13,002,644 11,201,620 701,352 661,537 43,882,155

The Bank

2013

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



and other �nancial institutions 958,535 1,527,301 182,527 - - 2,668,363



Cagamas Berhad 2,791 5,312 263,436 150,442 - 421,981



Subordinated term loan 3,526 305,835 19,777 105,072 671,474 1,105,684

17,424,569 10,560,578 12,721,291 420,107 682,507 41,809,052





Derivative financial liabilities

Derivative �nancial liabilities based on contractual undiscounted cash !ow:

The Group

2014

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

Derivatives settled on net basis

Interest rate derivatives (118) (1,038) (1,679) (4,221) (1,400) (8,456)

Derivatives settled on gross basis


Out!ow (954,124) (591,013) (1,391,627) 79,230 (105,145) (2,962,679)

In!ow 954,362 592,492 1,396,306 417,974 98,789 3,459,923

238 1,479 4,679 497,204 (6,356) 497,244

The Bank

2014

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


Interest rate derivatives (118) (1,038) (1,679) (4,221) (1,400) (8,456)



Out!ow (943,045) (591,013) (1,391,627) 79,230 (105,145) (2,951,600)

In!ow 943,290 592,492 1,396,306 417,974 98,789 3,448,851

245 1,479 4,679 497,204 (6,356) 497,251





Derivative financial liabilities (continued)

Derivative �nancial liabilities based on contractual undiscounted cash !ow:


2013

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


Interest rate derivatives (1,204) (1,472) (3,275) 2,242 6,142 2,433



Out!ow (509,833) (674,028) (911,963) (594,154) (96,030) (2,786,008)

In!ow 509,931 673,695 909,002 594,154 96,030 2,782,812

98 (333) (2,961) - - (3,196)





Liquidity risk for assets and liabilities based on remaining contractual maturities

The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities,

commitments and 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 pro�le are as follows:

The Group

2014

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

Assets

Cash and short-term funds 6,938,912 - - - - 6,938,912

Deposits and placements with banks

and other �nancial institutions - - - 196,937 41,285 238,222

Financial assets held-for-trading 149,904 - - - - 149,904

Derivative �nancial assets 13,892 22,322 44,429 5,040 2,975 88,658

Financial investments available-for-sale 795,662 838,305 1,518,997 4,474,538 2,320,409 9,947,911

Financial investments held-to-maturity 70,359 75,807 16,064 70,331 243,594 476,155

Loans, advances and �nancing 3,014,294 1,867,264 2,305,986 10,573,753 21,694,875 39,456,172

Other assets 194,602 - 13,467 5,363 9,974 223,406

Amount due from joint ventures 14,855 - - - - 14,855

Statutory deposits with Bank Negara

Malaysia 1,696,550 - - - - 1,696,550

Other non-�nancial assets (1) 3,117 - 20 - 296,820 299,957

12,892,147 2,803,698 3,898,963 15,325,962 24,609,932 59,530,702

Liabilities



other �nancial institutions 2,058,948 2,325,072 465,656 - - 4,849,676

Derivative �nancial liabilities 35,500 42,356 100,581 45,569 13,420 237,426



Cagamas Berhad - 834 - 138,313 - 139,147

Subordinated term loan 2,940 1,370 - - 600,000 604,310


Provision for taxation - - 28,029 - - 28,029

24,564,419 14,940,864 13,388,555 842,506 623,420 54,359,764

Net liquidity gap (11,672,272)(12,137,166) (9,489,592) 14,483,456 23,986,512

(1) Other non-�nancial assets include tax recoverable, deferred tax assets, property and equipment and intangible

assets.





Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)

The Group

2013

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

Assets



and other �nancial institutions - 201,906 41,668 197,738 41,285 482,597






Other assets 186,368 - 12,277 5,341 16,111 220,097

Amount due from joint ventures 4,185 - - - - 4,185


Malaysia 1,459,350 - - - - 1,459,350

Other non-�nancial assets (1) 9,944 - 17 - 310,746 320,707

13,113,111 2,513,539 3,523,365 11,301,104 25,985,994 56,437,113

Liabilities







Cagamas Berhad 1,297 1,786 123,243 271,464 - 397,790




24,019,942 11,904,489 15,072,103 445,025 627,930 52,069,489

Net liquidity gap (10,906,831) (9,390,950) (11,548,738) 10,856,079 25,358,064

(1) Other non-�nancial assets include tax recoverable, deferred tax assets, property and equipment and intangible

assets.






The Bank

2014

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

Assets

Cash and short-term funds �nancial

institutions 3,777,042 - - - - 3,777,042


and other �nancial institutions - 321,335 67,503 531,927 41,285 962,050






Other assets 146,749 - 12,991 5,363 9,552 174,655

Amount due from subsidiaries 438 - - - - 438


Malaysia 1,398,550 - - - - 1,398,550

Other non-�nancial assets (1) 218 - - - 680,795 681,013

8,833,714 2,828,233 3,332,145 13,503,625 19,835,970 48,333,687

Liabilities







Cagamas Berhad - 834 - 138,313 - 139,147





18,336,430 12,966,429 11,071,681 605,605 623,420 43,603,565


(1) Other non-�nancial assets include deferred tax assets, investment in subsidiaries, property and equipment and

intangible assets.






The Bank

2013

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

Assets



and other �nancial institutions - 441,606 104,090 417,622 143,438 1,106,756






Other assets 143,359 - 12,166 5,341 15,689 176,555

Amount due from subsidiaries 60,723 - - - - 60,723


Malaysia 1,226,350 - - - - 1,226,350

Other non-�nancial assets (1) 6,985 - - - 694,123 701,108

8,288,489 2,556,493 2,928,793 9,496,895 22,119,931 45,390,601

Liabilities



other �nancial institutions 957,882 1,521,311 180,342 - - 2,659,535




Cagamas Berhad 1,297 1,786 123,243 271,464 - 397,790





17,418,969 10,524,382 12,381,940 442,273 627,930 41,395,494


(1) Other non-�nancial assets include deferred tax assets, investment in subsidiaries, property and equipment and

intangible assets.




(iv) Operational risk management

Operational risk is the risk of loss arising from inadequate or failed internal processes, action on or by people,

infrastructure or technology or events which are beyond the Bank’s immediate control which have an operational

impact, including natural disaster, fraudulent activities and money laundering/�nancing of terrorism.

The Bank manages operational risk through a control based environment in which policies and procedures are

formulated after taking into account individual unit’s business activities, the market in which it is operating and

regulatory requirement in force.

The Bank adopts the Basic Indicator Approach for the purpose of calculating the capital requirement for operational

risk. The capital requirement is calculated by taking 15% of the Bank’s average annual gross income over the previous

three years.

Risk is identi�ed through the use of assessment tools and measured using threshold/limits mapped against risk matrix.

Monitoring and control procedures include the use of key control standards, independent tracking of risk, back-up

procedures and contingency plans, including disaster recovery and business continuity plans. This is supported by

periodic reviews undertaken by Group Internal Audit to ensure adequacy and effectiveness of the Group Operational

Risk Management process.

The Bank gathers, analyses and reports operational risk loss and ‘near miss’ events to Group Operational Risk

Management Committee and Board Risk Management Committee. Appropriate preventive and remedial actions are

reviewed for effectiveness and implemented to minimise the recurrence of such events.

As a matter of requirement, all Operational Risk Coordinators must satisfy an Internal Operational Risk (including

anti-money laundering/counter �nancing of terrorism and business continuity management) Certi�cation Program.

These coordinators will �rst 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.




(v) Fair value of financial instruments

Fair value is de�ned 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 re!ects the signi�cance 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 signi�cant inputs are not based on

observable market data.

Financial instruments are classi�ed 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 suf�cient 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 classi�ed 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 classi�ed as Level 3 if their valuation incorporates signi�cant 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

�nancial instruments classi�ed as Level 3 comprised a small number of �nancial instruments which constitute an

insigni�cant component of the Group’s and the Bank’s portfolio of �nancial instruments. Hence, changing one or more

of the inputs to reasonable alternative assumptions would not change the value signi�cantly for the �nancial assets in

Level 3 of the fair value hierarchy.

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

period during which the transfer has occurred. Transfers between fair value hierarchy primarily due to change in the

level of trading activity, change in observable market activity related to an input, reassessment of available pricing

information and change in the signi�cance of the unobservable input. There were no transfers between Level 1, 2 and

3 of the fair value hierarchy during the �nancial year (2013: Nil).




(v) Fair value of financial instruments (continued)

The following table presents assets and liabilities measured at fair value and classi�ed by level of the following fair

value measurement hierarchy:

Level 1

RM’000

Level 2

RM’000

Level 3

RM’000

Total

RM’000

The Group

2014

Assets

Financial assets held-for-trading - 149,904 - 149,904

Derivative �nancial assets - 88,658 - 88,658

Financial investments available-for-sale *

- Money market instruments - 5,880,119 - 5,880,119

- Equity securities 33 - 130,678 130,711

- Private debt securities - 3,937,081 - 3,937,081

Total 33 10,055,762 130,678 10,186,473

Liabilities

Derivative �nancial liabilities - 237,426 - 237,426

Total - 237,426 - 237,426

Level 1

RM’000

Level 2

RM’000

Level 3

RM’000

Total

RM’000

The Group

2013

Assets







Total 150 7,701,202 119,003 7,820,355

Liabilities


Total - 94,522 - 94,522

* Net of allowance for impairment





Level 1

RM’000

Level 2

RM’000

Level 3

RM’000

Total

RM’000

The Bank

2014

Assets







Total 33 8,523,302 130,652 8,653,987

Liabilities


Total - 237,419 - 237,419

Level 1

RM’000

Level 2

RM’000

Level 3

RM’000

Total

RM’000

The Bank

2013

Assets







Total 150 6,418,148 118,934 6,537,232

Liabilities


Total - 94,522 - 94,522






The following table present the changes in Level 3 instruments for the �nancial year ended:

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000


Purchases 9,674 - 9,674 -

Sales (10,221) - (10,221) -

Exchange differences 548 - 548 -

Total gains recognised in other

comprehensive income 12,224 12,559 11,717 12,559

Allowance for impairment losses (550) - - -


Effect of changes in significant unobservable assumptions to reasonably possible alternatives

As at reporting date, �nancial instruments measured with valuation techniques using signi�cant unobservable inputs

(Level 3) mainly include unquoted shares held for socio economic purposes.

Qualitative information about the fair value measurements using signi�cant unobservable inputs (Level 3):

Description

Valuation

techniques

Unobservable

inputs

Inter-relationship

between significant

unobservable inputs and

fair value measurement

Fair value assets

2014

RM’000

2013

RM’000

Financial investments

available-for-sale

The Group

Unquoted shares 130,678 119,003

Net tangible

assets

Net tangible

assets

Higher net tangible assets

results in higher fair value

The Bank

Unquoted shares 130,652 118,934

Net tangible

assets

Net tangible

assets

Higher net tangible assets

results in higher fair value

In estimating its signi�cance, the Group and the Bank used an approach that is currently based on methodologies

used for fair value adjustments. These adjustments re!ects the values that the Group and the Bank estimate are

appropriate to adjust from the valuations produced to re!ect for uncertainties in the inputs used. The methodologies

used can be a statistical or other relevant approved techniques.





The following tables analyse within the fair value hierarchy of the Group’s and the Bank’s assets and liabilities not

measured at fair value as at reporting date but for which fair value is disclosed:

Carrying

value

RM’000

Fair value

Level 1

RM’000

Level 2

RM’000

Level 3

RM’000

Total

RM’000

The Group

2014

Financial assets

Financial investments held-to-maturity 476,155 - 472,887 - 472,887

Loans, advances and �nancing 39,456,172 - 39,172,438 - 39,172,438

39,932,327 - 39,645,325 - 39,645,325

Financial liabilities

Deposits from customers 48,047,224 - 48,052,332 - 48,052,332


�nancial institutions 4,849,676 - 4,849,314 - 4,849,314


Cagamas Berhad 139,147 - 140,764 - 140,764

53,036,047 - 53,042,410 - 53,042,410

Carrying

value

RM’000

Fair value

Level 1

RM’000

Level 2

RM’000

Level 3

RM’000

Total

RM’000

The Group

2013

Financial assets



36,728,121 - 36,426,270 - 36,426,270






Cagamas Berhad 397,790 - 406,113 - 406,113

50,551,416 - 50,552,220 - 50,552,220





Carrying

value

RM’000

Fair value

Level 1

RM’000

Level 2

RM’000

Level 3

RM’000

Total

RM’000

The Bank

2014

Financial assets


other �nancial institutions 962,050 - 959,983 - 959,983



33,648,002 - 33,394,534 - 33,394,534






Cagamas Berhad 139,147 - 140,764 - 140,764

42,018,745 - 42,023,348 - 42,023,348

Carrying

value

RM’000

Fair value

Level 1

RM’000

Level 2

RM’000

Level 3

RM’000

Total

RM’000

The Bank

2013

Financial assets


other �nancial institutions 1,106,756 - 1,111,105 - 1,111,105



31,700,937 - 31,437,067 - 31,437,067






Cagamas Berhad 397,790 - 406,113 - 406,113

39,858,053 - 39,861,255 - 39,861,255





Other than as disclosed above, the total fair value of each �nancial assets and liabilities presented on the statements

of �nancial position as at reporting date of the Group and the Bank approximates the total carrying amount.

The fair value estimates were determined by application of the methodologies and assumptions described below.

Short-term funds and placements with banks and other financial institutions

For short-term funds and placements with banks and other �nancial institutions with maturity of less than six months,

the carrying amount is a reasonable estimate of fair value.

For amounts with maturities of six months or more, fair values have been estimated by reference to current rates at

which similar deposits and placements would be made to banks with similar credit ratings and maturities.


The fair values of �nancial investments held-to-maturity are reasonable estimates based on quoted market prices.

In the absence of such quoted prices, the fair values are based on the expected cash !ows 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 �nancing of the Group comprise of !oating rate loans and �xed rate loans. For performing

!oating rate loans, the carrying amount is a reasonable estimate of their fair values.

The fair values of performing �xed rate loans are arrived at using the discounted cash !ows based on the prevailing

market rates of loans, advances and �nancing with similar credit ratings and maturities.

The fair values of impaired loans, advances and �nancing, whether �xed or !oating 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 �nancial assets and liabilities included in other assets and other

liabilities are assumed to approximate their fair values.

Deposits from customers, banks and other financial institutions, bills and acceptances payable

The carrying values of deposits and liabilities with maturities of six months or less are assumed to be reasonable

estimates of their fair values. Where the remaining maturities of deposits and liabilities are above six months, their

estimated fair values are arrived at using the discounted cash !ows 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 !oating rate loans sold to Cagamas Berhad, the carrying value is generally a reasonable estimate of their fair

values.

The fair values of �xed rate loans sold to Cagamas Berhad are arrived at using the discounted cash !ow methodology

at prevailing market rates of similarly pro�led loans.

Subordinated term loan

For �xed rate borrowings, the estimate of fair value is based on discounted cash !ow model using prevailing lending

rates for borrowings with similar risks and remaining term to maturity.

For !oating rate borrowings, the carrying value is generally a reasonable estimate of their fair values.

39 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES

In accordance with MFRS 132 “Financial Instruments: Presentation”, the Group and the Bank report �nancial assets and

�nancial liabilities on a net basis on the statements of �nancial position only if there is a legally enforceable right to set

off the recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the liability

simultaneously. The following table shows the impact of netting arrangement on:

• All �nancial assets and liabilities that are reported net on statements of �nancial position; and

• All derivative �nancial instruments and reverse repurchase and repurchased agreements and other similar secured

lending and borrowing agreements that are subject to enforceable master netting arrangements or similar agreements,

but do not qualify for statements of �nancial position netting.

The table identi�es the amounts that have been offset in the statements of �nancial position and also those amounts that

are covered by enforeable netting arrangements (offsetting arrangements and �nancial collateral) but do not qualify for

netting under the requirements of MFRS 132 described above.

The “Net amounts” presented below are not intended to represent the Group’s and the Bank’s actual exposure to credit

risk, as a variety of credit mitigation strategies are employed in addition to netting and collateral arrangements.

Related amount not offset

Derivative financial assets and liabilities

The ‘Financial instruments’ column identi�es �nancial assets and liabilities that are subject to set off under netting

agreements, such as the ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby

all outstanding transactions with the same counterparty can be offset and close-out netting applied across all outstanding

transaction covered by the agreements if an event of default or other predetermined events occur.

Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure

between counterparties by enabling the collateral to be realised in an event of default or if other predetermined events

occur.




Effects of offsetting on the statements

of financial position Related amounts not offset

The Group

2014

Gross

amount

RM’000

Amount

offset

RM’000

Net amount

reported on

statement

of financial

position

RM’000

Financial

instruments

RM’000

Financial

collateral

RM’000

Net

amount

RM’000

Financial assets

Derivative �nancial assets 88,658 - 88,658 (33,932) - 54,726

Total assets 88,658 - 88,658 (33,932) - 54,726


Derivative �nancial liabilities 237,426 - 237,426 (33,932) - 203,494

Total liabilities 237,426 - 237,426 (33,932) - 203,494


of �nancial position Related amounts not offset

The Group

2013

Gross

amount

RM’000

Amount

offset

RM’000

Net amount

reported on

statement

of �nancial

position

RM’000

Financial

instruments

RM’000

Financial

collateral

RM’000

Net

amount

RM’000

Financial assets


Total assets 56,274 - 56,274 (42,186) - 14,088








of financial position Related amounts not offset

The Bank

2014

Gross

amount

RM’000

Amount

offset

RM’000

Net amount

reported on

statement

of financial

position

RM’000

Financial

instruments

RM’000

Financial

collateral

RM’000

Net

amount

RM’000

Financial assets


Total assets 88,672 - 88,672 (33,922) - 54,750




Effects of offsetting on the statements of

�nancial position Related amounts not offset

The Bank

2013

Gross

amount

RM’000

Amount

offset

RM’000

Net amount

reported on

statement

of �nancial

position

RM’000

Financial

instruments

RM’000

Financial

collateral

RM’000

Net

amount

RM’000

Financial assets


Total assets 56,274 - 56,274 (42,186) - 14,088






40 LEASE COMMITMENTS

The Group and the Bank have lease commitments in respect of rented premises and hired equipment, all of which are

classi�ed as operating leases. A summary of the future minimum lease payments under non-cancelable operating leases

commitments are as follows:

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Within one year 22,689 11,270 21,906 10,612

One year to �ve years 47,476 7,912 46,926 7,224

41 CAPITAL AND OPERATING COMMITMENTS

Capital commitments

Capital expenditure approved by the Directors but not provided for in the �nancial statements amounted to approximately:

The Bank

2014

RM’000

2013

RM’000

Authorised and contracted for 13,859 7,541

Analysed as follows:

Property and equipment 13,859 7,541

Operating commitments

Operating expenditure approved by the Directors but not provided for in the �nancial statements amounted to approximately:

The Bank

2014

RM’000

2013

RM’000

Authorised and contracted for 138,051 201,823



42 CAPITAL MANAGEMENT

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

accordance with Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components) dated 28 November 2012.

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

Indicator Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia’s

Capital Adequacy Framework (Capital Components), the minimum capital adequacy requirement for Common Equity Tier

1 Capital Ratio (‘CET 1’) and Tier 1 Capital Ratio are 4.0% and 5.5% respectively for year 2014. The minimum regulatory

capital adequacy requirement remains at 8.0% (2013: 8.0%) for total capital ratio.

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

• To comply with the capital requirements set by the regulators of the banking markets where the entities within the

Group and the Bank operates;

• To safeguard the Group and the Bank’s ability to continue as a going concern so that it can continue to provide returns

for shareholders and bene�ts 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 pro�le of the Group and the Bank.

The table in Note 43 below summarises the composition of regulatory capital and the ratios of the Group and the Bank for

the �nancial year ended 31 December 2014.

43 CAPITAL ADEQUACY

The capital adequacy ratios are as follows:

The Group (#) The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Paid-up share capital 1,688,770 1,518,337 1,688,770 1,518,337

Share premium 858,904 529,337 858,904 529,337


Retained pro�ts 951,500 1,004,534 760,153 798,118

Unrealised gains and losses on AFS 23,163 (2,579) 30,893 6,533

4,992,131 4,367,005 4,602,190 3,996,675

Less:

Goodwill and other intangibles (147,688) (133,430) (150,690) (137,323)

Deferred tax assets (3,118) (9,326) (218) (8,553)

55% of cumulative unrealised gains of AFS (12,739) - (16,991) (3,593)

Investment in subsidiaries/joint ventures - - (77,815) -

CET1 capital 4,828,586 4,224,249 4,356,476 3,847,206

Tier I capital 4,828,586 4,224,249 4,356,476 3,847,206



43 CAPITAL ADEQUACY

The Group (#) The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000


Collective impairment @ 150,254 143,572 129,134 123,103

Regulatory adjustments 184,366 - 135,347 -

Less:

Investment in subsidiaries/joint ventures - (650) (311,259) (389,088)

Tier II capital 814,620 952,922 433,222 544,015

Total capital 5,643,206 5,177,171 4,789,698 4,391,221

CET1 capital ratio 11.936% 10.811% 12.510% 11.279%

Tier 1 capital ratio 11.936% 10.811% 12.510% 11.279%

Total capital ratio 13.950% 13.250% 13.754% 12.874%

CET1 capital ratio (net of proposed dividends)^ 11.773% 10.578% 12.320% 11.012%

Tier 1 capital ratio (net of proposed dividends)^ 11.773% 10.578% 12.320% 11.012%

Total capital ratio (net of proposed dividends)^ 13.786% 13.017% 13.564% 12.607%

Risk-weighted assets for:

Credit risk 37,845,580 36,529,227 32,586,612 31,911,266

Market risk 286,738 299,677 284,148 296,107

Operational risk 2,322,105 2,243,503 1,954,278 1,902,412

Total risk-weighted assets 40,454,423 39,072,407 34,825,038 34,109,785

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

�nancing.

# The Group comprises the banking and non-banking subsidiaries.

^ Net proposed dividends of RM66,031,000 (2013: RM91,100,000).

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

Economic Entity The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

(Before and after deducting proposed dividend)






44 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The Group and the Bank make estimates and assumptions concerning the future. The resulting accounting estimates

will, by de�nition, 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 �nancial position are

tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a signi�cant risk

of causing a material adjustment to the carrying amount of assets and liabilities within the next �nancial year are discussed

below.

Allowance for impairment losses on loans, advances and financing

The accounting estimates and judgments related to the impairment of loans and provision for off-balance sheet positions is

a critical accounting estimate because the underlying assumptions used for both the individually and collectively assessed

impairment can change from period to period and may signi�cantly 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 signi�cant often requires the use of considerable management

judgment concerning such matters as local economic conditions, the �nancial 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

!ows 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 signi�cant 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 re!ect the current economic circumstances. The probability of default, loss given

defaults, and loss identi�cation 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 !ows expected to arise from continuing operations. Therefore,

in arriving at the recoverable amount, management exercise judgment in estimating the future cash !ows, growth rate and

discount rate.

45 CREDIT EXPOSURES ARISING FROM TRANSACTIONS WITH CONNECTED PARTIES

The following credit exposures are based on Bank Negara Malaysia’s revised Guidelines on Credit Transaction and

Exposures with Connected Parties, which are effective 1 January 2008.

The Bank

2014 2013

(i) The aggregate value of outstanding credit exposures with connected parties

(RM’000) 2,660,459 3,013,895

(ii) The percentage of outstanding credit exposures to connected parties as a pro-

portion of total credit exposures 5% 6%

(iii) The percentage of outstanding credit exposures with connected parties which is

impaired or in default Nil Nil

46 APPROVAL OF FINANCIAL STATEMENTS

The �nancial statements have been approved for issue in accordance with a resolution of the Board of Directors on

6 March 2015.


STATEMENT BY DIRECTORSPURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965

STATUTORY DECLARATIONPURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965

We, JEN TAN SRI DATO’ SERI ISMAIL BIN HAJI OMAR (BERSARA) and EN. MOHD SUFFIAN BIN HAJI HARON, two of the

Directors of AFFIN BANK BERHAD, state that, in the opinion of the Directors, the accompanying �nancial statements set

out on pages 60 to 183 are drawn up so as to give a true and fair view of the state of affairs of the Group and the Bank as at

31 December 2014 and of the results and cash !ows of the Group and the Bank for the �nancial year ended on the date in

accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements

of the Companies Act, 1965 in Malaysia.

In accordance with a resolution of the Board of Directors dated 6 March 2015.

JEN TAN SRI DATO’ SERI ISMAIL BIN HAJI OMAR (BERSARA)

Chairman

EN. MOHD SUFFIAN BIN HAJI HARON

Director

I, RAMANATHAN RAJOO, the of�cer of AFFIN BANK BERHAD primarily responsible for the �nancial management of the

Group and the Bank, do solemnly and sincerely declare that, in my opinion, the accompanying �nancial statements set out on

pages 60 to 183, are correct and I make this solemn declaration conscientiously believing the same to be true, by virtue of the

provisions of the Statutory Declarations Act, 1960.

RAMANATHAN RAJOO

Subscribed and solemnly declared by the abovenamed RAMANATHAN RAJOO at Kuala Lumpur in Malaysia on 6 March 2015,

before me.

Commissioner for Oaths


INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF AFFIN BANK BERHAD (Incorporated in Malaysia)

REPORT ON THE FINANCIAL STATEMENTS

We have audited the �nancial statements of AFFIN Bank Berhad on pages 60 to 183 which comprise the statements of

�nancial position as at 31 December 2014 of the Group and of the Bank, and the statements of income, comprehensive

income, changes in equity and cash !ows of the Group and of the Bank for the year then ended, and a summary of signi�cant

accounting policies and other explanatory notes, as set out on Notes 1 to 46.

Directors’ Responsibility for the Financial Statements

The directors of the Bank are responsible for the preparation of �nancial statements so as to give a true and fair view in

accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements

of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine

are necessary to enable the preparation of �nancial statements that are free from material misstatement, whether due to fraud

or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these �nancial statements based on our audit. We conducted our audit in

accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements

and plan and perform the audit to obtain reasonable assurance about whether the �nancial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the �nancial statements.

The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the �nancial

statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the

entity’s preparation of �nancial statements that give a true and fair view in order to design audit procedures that are appropriate

in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting

estimates made by the directors, as well as evaluating the overall presentation of the �nancial statements.

We believe that the audit evidence we have obtained is suf�cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the �nancial statements give a true and fair view of the �nancial position of the Group and of the Bank as of

31 December 2014 and of their �nancial performance and cash !ows for the year then ended in accordance with Malaysian

Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965

in Malaysia.


INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF AFFIN BANK BERHAD (Incorporated in Malaysia)

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Bank and its

subsidiaries have been properly kept in accordance with the provisions of the Act.

b) We are satis�ed that the �nancial statements of the subsidiaries that have been consolidated with the Bank’s �nancial

statements are in form and content appropriate and proper for the purposes of the preparation of the �nancial statements

of the Group and we have received satisfactory information and explanations required by us for those purposes.

c) Our audit reports on the �nancial statements of the subsidiaries did not contain any quali�cation or any adverse comment

made under Section 174(3) of the Act.

OTHER MATTERS

This report is made solely to the members 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 SOO HOO KHOON YEAN

(No. AF : 1146) (No. 2682/10/15 (J))

Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia

6 March 2015


BASEL II PILLAR 3 DISCLOSURES

1. Introduction

1.1 Background

1.2 Scope of Application

2. 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

3. Capital Management

3.1 Internal Capital Adequacy Assessment Process (‘ICAAP’)

3.2 Capital Structure

3.3 Capital Adequacy

4. Risk Management Objectives and Policies

5. Credit Risk

5.1 Credit Risk Management Objectives And Policies

5.2 Application Of Standardised Approach For Credit Risk

5.3 Credit Risk Measurement

5.4 Risk Limit Control And Mitigation Policies

5.5 Credit Risk Monitoring

5.6 Impairment Provisioning

5.7 Credit Risk Culture

6. Market Risk

6.1 Market Risk Management Objectives and Policies

6.2 Application of Standardised Approach for Market Risk

6.3 Market Risk Measurement, Control and Monitoring

6.4 Value-At-Risk (‘Var’)

6.5 Foreign Exchange Risk

7. Liquidity Risk

7.1 Liquidity Risk Management Objectives and Policies

7.2 Liquidity Risk Measurement, Control and Monitoring

8. Operational Risk

8.1 Operational Risk Management Objectives and Policies

8.2 Application af Basic Indicator Approach for Operational Risk

8.3 Operational Risk Measurement, Control and Monitoring

8.4 Operational Risk Culture

9. Shariah Compliance

Appendices

188

188

188

188

188

189

190

191

192

192

192

192

194

194

194

194

195

195

196

197

197

203

203

203

203

203

204

204

204

204

205

205

205

205

206

206

206

207


BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014

1 Introduction

1.1 Background

AFFIN Bank Berhad (‘the Bank’) adopts Basel II in January 2008 in line with the directive from Bank Negara Malaysia

(‘BNM’). The Basel II framework is structured around three fundamental Pillars.

- Pillar 1 de�nes the minimum capital requirement to ensure that �nancial institutions hold suf�cient capital to cover

their exposure to credit, market and operational risks.

- Pillar 2 requires �nancial institutions to have a process for assessing their overall capital adequacy in relation to

their risk pro�le and a strategy for maintaining their capital levels.

- Pillar 3 requires �nancial institutions to establish and implement an appropriate disclosure policy that promotes

transparency regarding their risk management practices and capital adequacy positions.

The Bank elected to adopt the following approaches under Pillar 1 requirements:

- Standardised Approach for Credit Risk

- Basic Indicator Approach for Operational Risk

- Standardised Approach for Market Risk

1.2 Scope of Application

This document contains the disclosure requirements under Pillar 3 for the Bank for the year ended 31 December 2014.

The disclosures are made in line with the Pillar 3 disclosure requirements under the Basel II framework as laid out by

BNM.

The disclosures should be read in conjunction with the Bank’s 2014 Annual Report for the year ended 31 December

2014.

The Group’s capital requirements are generally based on the principles of consolidation adopted in the preparation

of its �nancial statements. The Group’s consolidated entities comprises the Bank and the Bank’s subsidiary, AFFIN

Islamic Bank Berhad.

2 Risk Governance Structure

2.1 Overview

The Board of Directors of the Bank is ultimately responsible for the overall performance of the Bank. 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 the Bank’s general policies and strategies for the short, medium and long term, approving business

plans, including targets and budgets, and approving major strategic decisions.

The Board has overall responsibility for maintaining the proper management and protection of the Bank’s interests

by ensuring effective implementation of the risk management policy and process, as well as adherence to a sound

system of internal control, 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 �nancial, operational, risk management and compliance with

applicable laws, regulations, policies and guidelines.




2.1 Overview (continued)

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 speci�c responsibilities to other Board Committees,

which operate under approved terms of reference, to assist the Board in discharging their duties. The Chairmen of

the various Committees report on the outcome of their Committee meetings to the Board and any further deliberation

is made at Board level, if required. These reports and deliberations are incorporated into the Minutes of the Board

meetings. The Board meets on a monthly basis.

The Board of the Bank has a balance composition with a strong independent element. It consists of representatives

from the private sector with suitable quali�cations ful�lling the �t and proper criteria as required by BNM/GP1, a

mixture of different skills, competencies, experience and personalities.

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 Of�cer and key senior management of�cers and ensuring that

compensation is competitive and consistent with the Bank’s culture, objectives and strategy.

The Committee obtains advice from experts in compensation and bene�ts, 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 Of�cer, assessing the effectiveness of individual Directors, the Board as a whole

and the performance of the Managing Director/Chief Executive Of�cer 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 (‘GMLC’). BLRRC also reviews the impaired loans reports presented by the Management.




2.2 Board Committees (continued)

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 �nancial statements conducted by external auditors and on representations by Management

based on their control self-assessment of all areas of their responsibility.

Minutes of Audit & Examination Committee meetings, which provide a summary of the proceedings, are circulated to

Board members for notation and discussion. The Bank has an established Group Internal Audit Division (GIA) which

reports functionally to the Audit Committee and administratively to the Managing Director/Chief Executive Of�cer.

Shariah Committee

AFFIN Islamic Bank Berhad’s business activities are subject to Shariah compliance and conformation by the Shariah

Committee. The Shariah Committee is formed as legislated under the Islamic Financial Services Act 2013 and as per

Shariah Governance Framework for Islamic Financial Institutions.

The 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 the Bank comply with

the Shariah principles at all times;

(ii) To endorse and validate relevant documentations of the Bank’s products to ensure that the products comply with

Shariah principles; and

(iii) To advise the AFFIN Islamic Bank Berhad on matters to be referred to the Shariah Advisory Council.

2.3 Management Committees

Management Committee (‘MCM’)

MCM comprising the senior management team chaired by the MD/CEO, assists the Board in managing the day-to-

day operations and ensures its effectiveness. MCM formulates tactical plans and business strategies, monitors the

Bank’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 the Bank.

Asset and Liability Management Committee (‘ALCO’)

ALCO comprising the senior management team chaired by the MD/CEO, manages the Bank’s asset liability position

and oversees the Bank’s capital management to ensure that the Bank is adequately capitalised on an economic and

regulatory basis.




2.3 Management Committees (continued)

Liquidity Management Committee (‘LMC’)

LMC is a sub-committee of the ALCO and its role is to augment the functions of the ALCO by directing its focus

speci�cally to liquidity issues.

Group Operational Risk Management Committee (‘GORMC’)

GORMC is established within senior management chaired by MD/CEO to deliberate and manage operational risks. Its

responsibilities include:

(i) To evaluate operational risks issues of escalating importance/strategic risk exposure;

(ii) To review and recommend on broad operational risks management policies/best practices for adoption by the

Bank’s operating units;

(iii) To review the effectiveness of broad internal controls and make recommendation/approve on changes, if

necessary;

(iv) To review/approve recommendation of operational risk management groups set up to address speci�c area;

(v) To take the lead in inculcating an operational risks awareness culture;

(vi) To approve operational risk management methodologies/measurements tools;

(vii) To review and approve the strategic operational risk management initiatives/plans and to endorse for BRMC’s

approval if necessary;

(viii) To update BRMC on loss events and relevant key issues that may adversely impact core processes, system

defects and any changes to critical business or system related processes; and

(ix) To effectively manage reputational risk in relation to environmental, social, business and regulatory issues across

the Bank.

Group Early Alert Committee (‘GEAC’)

GEAC is established within senior management to monitor credit quality through monthly review of the Early Alert,

Watchlist and Exit Accounts and review the actions taken to address the emerging risks and issues in these accounts.

2.4 Group Risk Management Function

An integrated risk management framework is in place. The Group Risk Management (‘GRM’) function, headed by

Group Chief Risk Of�cer (‘GCRO’) and operating in an independent capacity, is part of the Bank’s senior management

structure which works closely as a team in managing risks to enhance stakeholders’ value.

GRM reports to BRMC. Committees namely BLRRC, MCM, GMLC, ALCO, LMC, GORMC and EAC assist BRMC

in managing credit, market, liquidity and operational risks. The responsibilities of these Committees include risk

identi�cation, risk assessment and measurement, risk control and mitigation; and risk monitoring.




2.5 Internal Audit and Internal Control Activities

In accordance with BNM’s guidelines on Corporate Governance for Licensed Institutions, GIA conducts continuous

reviews on auditable areas within the Bank. The continuous reviews by GIA are focused on areas of signi�cant risks

and effectiveness of internal control in accordance to the audit plan approved by the AEC.

Based on GIA’s review, identi�cation 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 Capital Management

3.1 Internal Capital Adequacy Assessment Process (‘ICAAP’)

In line with the BNM guideline on Risk-Weighted Capital Adequacy Framework - Internal Capital Adequacy Assessment

Process (Pillar 2), the Bank has put in place the ICAAP Framework to assess the capital adequacy to ensure the

level of capital maintained by the Bank is adequate at all times, taking into consideration the Bank’s risk pro�le and

business strategies.

The Bank’s capital management approach is focused on maintaining an appropriate level of capital to meet its business

needs and regulatory requirements as capital adequacy and risk management are closely aligned. The Bank operates

within an agreed risk appetite whilst optimising the use of shareholders’ funds to deliver sustainable returns.

3.2 Capital Structure

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

in accordance with Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components) dated 28 November

2012.

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

Indicator Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia’s

Capital Adequacy Framework (Capital Components), the minimum capital adequacy requirement for Common Equity

Tier 1 Capital Ratio (‘CET 1’) and Tier 1 Capital Ratio are 4.0% and 5.5% respectively for year 2014. The minimum

regulatory capital adequacy requirement remains at 8.0% (2013: 8.0%) for total capital ratio.

The following table sets forth details on the capital resources and capital adequacy ratios for the Group and the Bank

as at 31 December 2014.




3.2 Capital structure (continued)

The Group The Bank

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Paid-up share capital 1,688,770 1,518,337 1,688,770 1,518,337

Share premium 858,904 529,337 858,904 529,337


Retained pro�ts 951,500 1,004,534 760,153 798,118

Unrealised gains and losses on AFS 23,163 (2,579) 30,893 6,533

4,992,131 4,367,005 4,602,190 3,996,675

Less:

Goodwill (147,688) (133,430) (150,690) (137,323)

Deferred tax assets (3,118) (9,326) (218) (8,553)

55% of cumulative unrealised gains of AFS (12,739) - (16,991) (3,593)

Investment in subsidiaries/joint ventures - - (77,815) -

CET1 capital 4,828,586 4,224,249 4,356,476 3,847,206

Tier I capital 4,828,586 4,224,249 4,356,476 3,847,206


Collective impairment 150,254 143,572 129,134 123,103

Regulatory adjustments 184,366 - 135,347 -

Less:

Investment in subsidiaries/joint ventures - (650) (311,259) (389,088)

Tier II capital 814,620 952,922 433,222 544,015

Total capital 5,643,206 5,177,171 4,789,698 4,391,221




CET1 capital ratio (net of proposed dividends) 11.773% 10.578% 12.320% 11.012%

Tier 1 capital ratio (net of proposed dividends) 11.773% 10.578% 12.320% 11.012%

Total capital ratio (net of proposed dividends) 13.786% 13.017% 13.564% 12.607%

Risk-weighted assets for:

Credit risk 37,845,580 36,529,227 32,586,612 31,911,266

Market risk 286,738 299,677 284,148 296,107

Operational risk 2,322,105 2,243,503 1,954,278 1,902,412

Total risk-weighted assets 40,454,423 39,072,407 34,825,038 34,109,785




3.3 Capital Adequacy

The Group and the Bank have in place an internal limit for its CET1 capital ratio, Tier I capital ratio and Total capital

ratio, which is guided by the need to maintain a prudent relationship between available capital and the risks of

its underlying businesses. The capital management process is monitored by senior management through periodic

reviews.

Refer to Appendix I.

4 Risk Management Objectives and Policies

The Bank is principally engaged in all aspects of banking and related �nancial services. The principal activities of the

Bank’s subsidiaries are Islamic banking business, property management services, nominee and trustee services. There

have been no signi�cant changes in these principal activities during the �nancial year.

The Bank’s business activities involve the analysis, measurement, acceptance, and management of risks but it operates

within well de�ned risk acceptance criteria covering customer segments, industries and products. The Bank does not

enter into risk it cannot administer, book, monitor or value, or deal with persons of questionable integrity.

The Bank’s risk management policies are established to identify all the key risks, assess and measure these risks, control

and mitigate these risks, and manage and monitor the risk positions.

The Bank regularly reviews its risk management policies and systems to re!ect changes in markets, products and best

practice in risk management processes. The Bank’s aim is to achieve an appropriate balance between risk and return and

minimise any potential adverse effects.

The key business risks to which the Bank is exposed are credit risk, liquidity risk, market risk and operational risk.

5 Credit Risk

5.1 Credit Risk Management Objectives and Policies

Credit risk is the potential �nancial loss resulting from the failure of the customer or counterparty to settle the �nancial

and contractual obligations to the Bank. Credit risk emanates mainly from loans and advances, loan commitments

arising from such lending activities, as well as through �nancial transactions with counterparties including interbank

money market activities, derivative instruments used for hedging and debt securities.

The management of credit risk in the Bank is governed by a set of approved credit policies, guidelines and procedures.

Approval authorities are delegated to Senior Management and GMLC to implement the credit policies and ensure

sound credit granting standards.

An independent GRM function, headed by Group Chief Risk Of�cer (‘GCRO’) with 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/�tness standards prescribed in the

Annual Credit Plan. The Annual Credit Plan is reviewed at least annually and approved by the BRMC.



5 Credit Risk

5.2 Application of Standardised Approach for Credit Risk

The Bank uses the following External Credit Assessment Institutions (‘ECAIs’) to determine the risk weights for the

rated credit exposures:-

• RAM Rating Services Berhad

• Malaysian Rating Corporation Berhad

• Standard & Poor’s Rating Services

• Moody’s Investors Service

• Fitch Ratings

The external ratings of the ECAIs are used to determine the risk weights of the following types of exposure: sovereigns,

banks, public sector entities and corporates.

The mapping of the rating categories of different ECAIs to the risk weights is in accordance with 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 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 quanti�cation 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 speci�c remaining tenor to

maturity).



5 Credit Risk

5.4 Risk Limit Control and Mitigation Policies

The Bank employs various policies and practices to control and mitigate credit risk.

Lending limits

The Bank establishes internal limits and related lending guidelines to manage large exposures and avoid undue

concentration of credit risk in its credit portfolio. The limits include single customer groupings, connected parties, and

geographical and industry segments. These risks are monitored regularly and the limits reviewed annually or sooner

depending on changing market and economic conditions.

The credit risk exposure for derivative and loan books is managed as part of the overall lending limits with customers

together with potential exposure from market movements.

Collateral

Credits are established against borrower’s capacity to repay rather than rely solely on security. However, collateral

may be taken to mitigate credit risk. The main collateral types accepted and given value by the Bank are:

• Mortgages over residential properties;

• Charges over commercial real estate or vehicles �nanced;

• Charges over business assets such as business premises, inventory and account receivables; and

• Charges over �nancial instruments such as marketable securities

In order to be recognised as security, all items pledged must have value and the Bank must have physical control and/

or legal title thereto, together with the necessary documentation to enable the Bank 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, veri�cation 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 signi�cant 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 the Bank 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 Of�ce.

The Bank adopts standardised Letter of Offer and Legal Documents. Variations/amendments require the approval

from the relevant approving authority in the Bank.

Documentary and commercial letters of credit are collateralised by the underlying shipments of goods to which they

relate and therefore carry less risk than a direct loan.



5 Credit Risk

5.4 Risk Limit Control and Mitigation Policies (continued)

Credit related commitments

Commitment to extend credit represents unutilised portion of approved credit in the form of loans, guarantees

or letters of credit. In terms of credit risk, the Bank is potentially exposed to loss in an amount equal to the total

unutilised commitments. However, the potential amount of loss is less than the total unutilised commitments, as most

commitments to extend credit are contingent upon customers maintaining speci�c minimum credit standards.

The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a

greater degree of credit risk than short-term commitments.

Refer to Appendix IV (a) to (b).

5.5 Credit Risk Monitoring

Retail credits are actively monitored and managed on a portfolio basis by product type. A collection management

system is in place to promptly identify, monitor and manage delinquent accounts at early stages of delinquency.

Corporate credits and large individual accounts are reviewed by the Business Units at least once a year against

updated information. This is to ensure that the credit grades remain appropriate and 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.

Active portfolio monitoring enables the Bank to understand the overall risk pro�le and identify any adverse trends or

areas of risk concentrations affecting asset quality so that appropriate actions are adopted to manage and mitigate

risks.

5.6 Impairment Provisioning

Individual impairment provisioning

Signi�cant 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 !ows discounted at the �nancial assets original effective interest rate. The level of impairment

allowance on signi�cant loans is reviewed regularly, at least quarterly or more often when circumstances require.

Signi�cant loans that are deemed not impaired after individual assessment are included in a group of loans with similar

characteristics and collectively assessed for impairment.



5 Credit Risk

5.6 Impairment Provisioning (continued)

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 !ows of each segment.

Collective provisioning is applicable to all loans not covered under individual assessment as well as signi�cant loans

that are deemed not impaired after individual assessment.

Total loans, advances and financing - credit quality

All loans, advances and �nancing are categorised into “neither past due nor impaired”, “past due but not impaired”

and “impaired”. Past due loans refer to loans that are overdue by one day or more. Impaired loans are loans with

months-in-arrears more than 90 days or with impaired allowances.



5 Credit Risk


Analysed by economic sectors

The Group The Bank

Past due loans

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000



Manufacturing 43,019 26,317 40,237 24,935

Electricity, gas and water supply 1,100 606 588 476

Construction 141,821 108,384 132,880 100,862

Real estate 359,196 205,295 331,607 202,051

Wholesale & retail trade and restaurants

& hotels 77,511 70,751 73,123 65,734




Household 1,800,031 1,792,753 1,380,662 1,417,953

2,645,096 2,432,647 2,164,663 2,033,298

The Group The Bank


2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000


Manufacturing 18,663 15,925 16,305 10,052

Construction 180,242 133,186 151,749 106,396


& hotels 5,531 7,023 5,531 5,210

Transport, storage and communication 540 3,958 540 3,958


Household 4,365 23,421 3,697 23,313

239,259 223,701 207,740 189,117



5 Credit Risk


Analysed by economic sectors (continued)

The Group The Bank

Individual impairment charged

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Primary agriculture 211 1,116 211 1,116

Mining and quarrying 8 - 8 -

Manufacturing 11,177 7,892 11,131 7,708

Electricity, gas and water supply - 4 - 4

Construction 66,730 19,610 66,730 19,447

Real estate - 555 - 555


& hotels 4,996 3,656 4,996 3,463

Transport, storage and communication 640 797 640 797

Finance, insurance and business services 739 1,163 739 1,163

Household 3,110 13,110 1,647 12,960

87,611 47,903 86,102 47,213

The Group The Bank

Individual impairment written-off

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Mining and quarrying 7,226 - 7,226 -

Manufacturing 4,011 3,620 4,011 3,620

Electricity, gas and water supply - 1,119 - 1,119

Construction 21,032 2,582 21,032 2,582


& hotels 1,813 1,005 - 1,005

Transport, storage and communication 3,308 - 3,308 -


Household 9,971 - 9,971 -

50,870 12,974 49,057 12,974



5 Credit Risk


Analysed by economic sectors (continued)

The Group The Bank


2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000



Manufacturing 11,393 15,100 10,227 13,886

Electricity, gas and water supply 823 594 669 485

Construction 26,496 31,761 24,540 29,800

Real estate 17,722 14,164 16,620 13,161

Wholesale & retail trade and restaurants &

hotels 16,246 14,151 15,448 13,419




Household 170,649 192,795 143,573 167,345

292,619 300,314 255,226 266,595

Analysed by geographical area

The Group The Bank

Past due loans

2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Perlis 4,455 4,680 3,750 4,143

Kedah 109,040 101,606 84,534 86,965

Pulau Pinang 87,424 93,554 75,049 81,663

Perak 117,262 115,654 65,279 67,837

Selangor 937,151 585,105 794,410 454,868


Negeri Sembilan 82,301 98,615 67,935 84,127

Melaka 95,668 106,888 86,980 101,945

Johor 254,439 353,076 227,871 333,469

Pahang 64,691 65,105 41,614 43,859

Terengganu 61,163 59,488 5,791 8,303

Kelantan 45,729 40,920 6,465 4,535

Sarawak 135,361 142,309 133,311 139,579

Sabah 234,956 275,810 228,143 269,326

Labuan 18 59 18 54

Outside Malaysia 27,372 246 98 246

2,645,096 2,432,647 2,164,663 2,033,298



5 Credit Risk


Analysed by geographical area (continued)

The Group The Bank


2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Kedah 884 6,114 884 6,114

Pulau Pinang 12,403 1,332 12,403 1,332

Selangor 97,494 114,281 94,494 107,167


Negeri Sembilan 2,245 2,560 2,245 2,560

Johor 10,368 15,051 10,368 15,051

Pahang 38,920 3,396 38,920 3,396

Terengganu 11,569 1,733 11,569 1,733

Kelantan - 18 - 18

Sarawak 101 - 101 -

Sabah - 82 - -

Outside Malaysia 35,369 39,692 6,876 12,984

239,259 223,701 207,740 189,117

The Group The Bank


2014

RM’000

2013

RM’000

2014

RM’000

2013

RM’000

Perlis 833 487 413 320

Kedah 11,681 12,289 10,344 11,140

Pulau Pinang 11,735 11,565 10,890 10,744

Perak 13,706 12,545 9,907 9,562

Selangor 110,202 111,368 97,633 99,103


Negeri Sembilan 12,101 14,345 10,755 12,942

Melaka 8,879 8,337 8,555 8,006

Johor 23,967 28,347 22,364 26,828

Pahang 8,135 6,729 6,598 5,425

Terengganu 6,184 14,818 2,574 12,094

Kelantan 4,210 3,517 906 898

Sarawak 9,277 8,236 9,006 7,928

Sabah 15,219 14,598 14,815 14,126

Labuan 1,273 1,144 1,272 1,144

Outside Malaysia 2,434 - 2,379 -

292,619 300,314 255,226 266,595



5 Credit Risk

5.7 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 ef�cient 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.

GRM implements an Internal Credit Certi�cation (‘ICC’) Programme for both Business Banking and Consumer Credit.

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.

6 Market Risk

6.1 Market Risk Management Objectives and Policies

Market risk is de�ned as the risk of losses to the Bank’s portfolio positions arising from movements in market factors

such as interest rates, foreign exchange rates and changes in volatility. The Bank is exposed to market risks from

its trading and investment activities. The Bank’s market risk management objective is to ensure that market risk is

appropriately identi�ed, 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.

6.2 Application of Standardised Approach for Market Risk

The Bank adopts the Standardised Approach for the purpose of calculating the capital requirement for market risk.

Refer to Appendix I.

6.3 Market Risk Measurement, Control and Monitoring

The Bank’s market risk management control strategy is established based on its risk appetite, market liquidity and

business strategies as well as macroeconomic conditions. These limits are reviewed at least on an annual basis.

Market risk arising from the Bank’s trading book is primarily controlled through the imposition of Cut-loss and Value-

at-Risk (‘VaR’) Limits.

The Bank quanti�es interest rate risk by analysing the repricing mismatch between the rate sensitive assets and rate

sensitive liabilities. It also conducts Net Interest Income simulations to assess the variation in earnings under various

rates scenarios. The potential long term effects of the Bank’s overall exposure is also tracked by assessing the impact

on economic value of equity (‘EVE’).

The Bank’s interest rate risk is managed through Earnings-at-Risk (‘EaR’) and Economic Value-at-Risk (‘EVaR’) limits.

In addition, the Bank conducts periodic stress test of its respective business portfolios to ascertain market risk under

abnormal market conditions.

The Bank’s Management, ALCO and BRMC are regularly kept informed of its risk pro�le and positions.



6 Market Risk

6.4 Value-at-Risk (‘VaR’)

Value-at-Risk (‘VaR’) is used to compute the maximum potential loss amount over a speci�ed 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 �nancial instruments.

In May 2014, arising from the Bank’s Treasury Management System Upgrade project, the Bank changed its

methodology to compute potential loss amount or Value-at-Risk (VaR) to Historical Pricing Simulation Method (HPS)

from the current Variance Co-variance (VCV) approach. HPS was chosen because it is a robust methodology able to

cater for a spectrum of �nancial instruments.

The Historical Pricing Method uses the relative change of historical prices to estimate future potential changes in

the market value of outstanding positions. The Bank currently adopts 250 simulated business days for its HPS VaR

computation. After applying these price changes to the outstanding portfolios, 250 simulated market values for the

portfolio are generated and the change in the day-to-day market value is taken as simulated Pro�t & Loss (P&L) for the

portfolio. Since VaR calculates the worst expected loss over a given day horizon and con�dence level under normal

market condition, simulated 250 values are sorted from the lowest to the highest simulated P&L. The VaR focuses on

the tail of the distribution (i.e the loss �gures).

Other risk measures include the following:

(i) Mark-to-Market valuation tracks the current market value of the outstanding �nancial instruments.

(ii) Stress tests are conducted to attempt to quantify market risk arising from low probability, abnormal market

movements. Stress tests measure the changes in values arising from extreme movements in interest rates and

foreign exchange rates based on past experience and simulated stress scenarios.

6.5 Foreign Exchange Risk

The Bank takes on exposure to the effects of !uctuations in the prevailing foreign currency exchange rates on its

�nancial position and cash !ows. 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.

7 Liquidity Risk

7.1 Liquidity Risk Management Objectives and Policies

Liquidity risk is the current and prospective risk to earnings or capital arising from a bank’s inability to meet its

obligations when they fall due. Liquidity risk includes the inability to manage sudden decreases or changes in funding

sources. Liquidity risk also arises from the failure to recognise changes in market conditions that affect the ability to

liquidate assets quickly and with minimal loss in value.

Liquidity risk management is managed on Group basis. The objective of liquidity risk management is to ensure that

there are suf�cient funds to meet contractual and regulatory obligations without incurring unacceptable losses as

well as to undertake new transactions. The Group’s liquidity management process involves establishing liquidity risk

management policies and limits, liquidity risk limits monitoring, stress testing and establishing contingency funding

plans. These building blocks of liquidity risk management are subject to regular reviews to ensure relevance in the

context of prevailing market conditions.



7 Liquidity Risk

7.2 Liquidity Risk Measurement, Control and Monitoring

Liquidity monitoring is performed via projection of contractual and behavioral cash !ows, which are built upon from

BNM’s Liquidity Framework (‘LF’). The LF ascertains the liquidity condition based on the contractual and behavioral

cash-!ow of assets, liabilities and off-balance sheet commitments, taking into consideration the realisable cash value

of the eligible lique�able assets. The LF is also supported by indicative ratios on the Bank’s funding structure to

monitor the reliance on particular funding sources. Liquid assets in excess of regulatory requirements are maintained

for contingency in the event of a liquidity crisis.

The Bank employs liquidity risk indicators as an early alert of any structural change for liquidity risk management.

Liquidity risk is tracked using internal and external qualitative and quantitative indicators. Liquidity positions in the

major currencies are being closely monitored by tracking the availability of medium to long term foreign currency

funding and adhering to the guiding principles for foreign currency assets creations

The Bank also conducts liquidity stress test to gauge its resilience in the event of a liquidity crisis. A Contingency

Funding Plan is in place to alert and enable Management to act effectively and ef�ciently in handling liquidity disruption.

The document encompasses early warning system, strategies, decision-making authorities, and courses of actions to

be taken in the event of liquidity crisis and emergencies.

Basel III Liquidity Standards

The Basel Committee developed the Liquidity Coverage Ratio (‘LCR’) and Net Stable Funding Ratio (‘NSFR’) with the

goal of strengthening the resilience of banking systems. The LCR and NSFR are tracked monthly to assess the short

term and long term liquidity risk pro�le of the Bank, in line with BNM observation period reporting for Basel III liquidity

ratios which commenced in June 2012.

The BRMC is responsible for the Bank’s liquidity policy although the strategic management of liquidity has been

delegated to the ALCO. The BRMC is informed regularly on the liquidity situation in the Bank.

8 Operational Risk

8.1 Operational Risk Management Objectives and Policies

Operational risk is the risk of loss arising from inadequate or failed internal processes, action on or by people,

infrastructure or technology or events which are beyond the Bank’s immediate control which have an operational

impact, including natural disaster, fraudulent activities and money laundering/�nancing of terrorism.

The Bank manages operational risk through a control based environment in which policies and procedures are

formulated after taking into account individual unit’s business activities, the market in which it is operating and

regulatory requirement in force.

8.2 Application of Basic Indicator Approach for Operational Risk

The Bank adopts the Basic Indicator Approach for the purpose of calculating the capital requirement for operational

risk. The capital requirement is calculated by taking 15% of the Bank’s average annual gross income over the previous

three years.



8 Operational Risk

8.3 Operational Risk Measurement, Control and Monitoring

Risk is identi�ed through the use of assessment tools and measured using threshold/limits mapped against risk matrix.

Monitoring and control procedures include the use of key control standards, independent tracking of risk, back-up

procedures and contingency plans, including disaster recovery and business continuity plans. This is supported by

periodic reviews undertaken by Group Internal Audit to ensure adequacy and effectiveness of the Group Operational

Risk Management process.

The Bank gathers, analyses and reports operational risk loss and ‘near miss’ events to Group Operational Risk

Management Committee and Board Risk Management Committee. Appropriate preventive and remedial actions are

reviewed for effectiveness and implemented to minimize the recurrence of such events.

8.4 Operational Risk Culture

As a matter of requirement, all Operational Risk Coordinators must satisfy an Internal Operational Risk (including

anti-money laundering/counter �nancing of terrorism and business continuity management) Certi�cation Program.

These coordinators will �rst 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.

9 Shariah Compliance

Shariah compliance is the fundamental of Islamic banking and �nance. It gives legitimacy to the practices and business

operations of the Islamic �nancial institutions (‘IFIs’) concerned. Comprehensive compliance with Shariah principles would

also boosts con�dence of shareholders and public that all the practices and activities by the IFIs are in compliance with

the Shariah principles at all times.

Shariah Governance Framework for Islamic Financial Institutions (the ‘Framework’) issued by Bank Negara Malaysia

becomes the main reference to oversee the Shariah governance process within AFFIN Islamic Bank Berhad. In order to

comply with all the requirements in the Framework, Board of Directors of the Bank are very committed to ensure among

others all the required Shariah compliance and research functions include Shariah Risk Management, Shariah Review,

Shariah Research and Shariah Audit are properly established to effectively perform its respective functions.

Continuous training programs are provided to Shariah Committee members to equip them with better understanding

and exposure on banking operations and to Board of Directors, management members and staff for fundamental and

advanced knowledge on Shariah and Islamic commercial law matters.

207

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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)

The Group

2014

Exposure Class

Gross

Exposures/EAD

before CRM

Net

Exposures/

EAD after

CRM

Risk

Weighted

Assets

Total Risk

Weighted

Assets after

Effects of PSIA

Minimum

Capital

Requirements

at 8%

1 CREDIT RISK

On Balance Sheet Exposures

Corporates 23,991,290 23,178,220 18,725,008 18,725,008 1,498,001

Regulatory Retail 12,212,450 12,096,823 9,078,068 9,078,068 726,245

Other Assets 2,837,198 2,837,198 475,704 475,704 38,056

Sovereigns/Central Banks 10,469,658 10,469,658 - - -

Public Sector Entities 4,562 1,149 230 230 18

Banks, Development Financial Institutions & MDBs 3,971,739 3,971,739 1,391,253 1,391,253 111,300

Insurance Companies, Securities Firms & Fund Managers 394,070 394,070 370,383 370,383 29,631

Residential Mortgages 4,636,437 4,615,808 1,807,635 1,807,635 144,610

Higher Risk Assets 256,200 256,200 384,300 384,300 30,744

Equity Exposure 23,472 23,472 23,472 23,472 1,878

Defaulted Exposures 989,177 986,117 1,374,946 1,374,946 109,996

Total for On-Balance Sheet Exposures 59,786,253 58,830,454 33,630,999 33,630,999 2,690,479

Off Balance Sheet Exposures

Off Balance Sheet Exposures other than OTC derivatives or credit derivatives 4,843,323 4,635,439 4,179,391 4,179,391 334,351

Defaulted Exposures 26,932 23,652 35,190 35,190 2,815

Total for Off-Balance Sheet Exposures 4,870,255 4,659,091 4,214,581 4,214,581 337,166

Total for On and Off-Balance Sheet Exposures 64,656,508 63,489,545 37,845,580 37,845,580 3,027,645

2 MARKET RISK Long Position Short Position

Interest Rate Risk 9,177,910 9,178,005 (95) 273,509 - 21,881

Foreign Currency Risk 12,713 10,664 2,049 13,229 - 1,058

3 OPERATIONAL RISK

Operational Risk 2,322,105 185,768

Total RWA and Capital Requirements 40,454,423 37,845,580 3,236,352

PSIA “Pro�t Sharing Investment Account”

OTC “Over The Counter”

Appendix I

208

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The Group

2013

Exposure Class

Gross

Exposures/EAD

before CRM

Net

Exposures/

EAD after

CRM

Risk

Weighted

Assets

Total Risk

Weighted

Assets after

Effects of PSIA

Minimum

Capital

Requirements

at 8%

1 CREDIT RISK


Corporates 21,462,063 20,621,684 17,186,171 17,186,171 1,374,894


Other Assets 2,317,711 2,317,711 434,250 434,250 34,740


Public Sector Entities 34,424 30,344 6,069 6,069 486





Equity Exposure 24,057 24,057 24,057 24,057 1,925

Defaulted Exposures 1,273,511 1,243,940 1,716,941 1,716,941 137,356








Interest Rate Risk 5,236,771 4,512,369 724,402 278,703 - 22,296

Foreign Currency Risk 16,556 17,404 (848) 20,974 - 1,678

3 OPERATIONAL RISK





Appendix I

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The Bank

2014

Exposure Class

Gross

Exposures/EAD

before CRM

Net

Exposures/

EAD after

CRM

Risk

Weighted

Assets

Total Risk

Weighted

Assets after

Effects of PSIA

Minimum

Capital

Requirements

at 8%

1 CREDIT RISK


Corporates 20,732,063 20,117,978 16,385,809 16,385,809 1,310,865


Other Assets 2,449,423 2,449,423 439,722 439,722 35,178


Public Sector Entities 4,562 1,149 230 230 18





Equity Exposure 23,472 23,472 23,472 23,472 1,878

Defaulted Exposures 911,711 908,662 1,271,391 1,271,391 101,711








Interest Rate Risk 9,165,038 9,165,113 (75) 273,484 - 21,879

Foreign Currency Risk 10,147 10,664 (517) 10,664 - 853

3 OPERATIONAL RISK






Appendix I

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The Bank

2013

Exposure Class

Gross

Exposures/EAD

before CRM

Net

Exposures/

EAD after

CRM

Risk

Weighted

Assets

Total Risk

Weighted

Assets after

Effects of PSIA

Minimum

Capital

Requirements

at 8%

1 CREDIT RISK


Corporates 19,071,729 18,305,396 15,317,142 15,317,142 1,225,371


Other Assets 2,063,713 2,063,713 411,610 411,610 32,929


Public Sector Entities 34,424 30,344 6,069 6,069 486





Equity Exposure 24,057 24,057 24,057 24,057 1,925

Defaulted Exposures 1,196,163 1,166,603 1,626,144 1,626,144 130,092








Interest Rate Risk 5,236,771 4,512,369 724,402 278,703 - 22,296

Foreign Currency Risk 12,986 17,404 (4,418) 17,404 - 1,392

3 OPERATIONAL RISK






Appendix I



Disclosure on Capital Adequacy under the Standardised Approach

Market risk is de�ned 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 de�ned 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 �nancial instruments:

a) Foreign Exchange

b) Interest Rate Swap (‘IRS’)

c) Cross Currency Swap (‘CCS’)

d) Fixed Income Instruments (i.e. Private Debt and Government Securities)

Appendix I

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Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM’000)

The Group

2014

Exposures after Netting and Credit Risk Mitigation Total

Exposure

after

Netting &

Credit

Risk

Mitigation

Total Risk

Weighted

Assets

Risk

Weights

Sovereigns

& Central

Banks PSEs

Banks,

MDBs and

FDIs

Insurance

Companies,

Securities

Firms &

Fund

Managers Corporates

Regulatory

Retail

Residential

Mortgages

Higher

Risk

Assets

Other

Assets

Specialised

Financing /

Investment Securitisation Equity

0% 10,528,154 - 79,017 - 1,353,996 - - - 2,075,390 - - - 14,036,557 -

10% - - - - - - - - - - - - - -

20% 64,896 2,759 2,011,544 29,609 3,544,288 1,016 - - 357,630 - - - 6,011,742 1,202,348

35% - - - - - - 4,034,885 - - - - - 4,034,885 1,412,210

50% - - 2,166,784 - 656,010 1,534 371,907 - - - - - 3,196,235 1,598,118

75% - - - - - 12,466,131 12,503 - - - - - 12,478,634 9,358,976

90% - - - - - - - - - - - - - -

100% - - 6,592 370,305 21,480,888 41,588 319,597 - 404,178 - - 23,472 22,646,620 22,646,620

110% - - - - - - - - - - - - - -

125% - - - - - - - - - - - - - -

135% - - - - - - - - - - - - - -

150% - - - - 471,910 210,038 139,652 263,272 - - - - 1,084,872 1,627,308

270% - - - - - - - - - - - - - -

350% - - - - - - - - - - - - - -

400% - - - - - - - - - - - - - -

625% - - - - - - - - - - - - - -

938% - - - - - - - - - - - - - -

1250% - - - - - - - - - - - - - -

Average

Risk Weight- - -

Deduction

from

Capital Base

- - - - - - - - - - - - -

PSE “Public Sector Entities”

MDB “Multilateral Development Banks”

FDI “Financial Development Institutions”


Appendix II

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The Group

2013

Exposures after Netting and Credit Risk Mitigation

Total

Exposure

after

Netting &

Credit Risk

Mitigation

Total Risk

Weighted

Assets

Risk

Weights

Sovereigns

& Central

Banks PSEs

Banks,

MDBs and

FDIs

Insurance

Companies,

Securities

Firms &

Fund

Managers Corporates

Regulatory

Retail

Residential

Mortgages

Higher

Risk

Assets

Other

Assets

Specialised

Financing /


0% 10,973,025 - 34,314 15,039 1,135,377 - - - 1,810,859 - - - 13,968,614 -

10% - - - - - - - - - - - - - -

20% 38,677 31,954 2,508,495 29,583 2,531,860 1,715 - - 90,753 - - - 5,233,037 1,046,607

35% - - - - - - 3,676,431 - - - - - 3,676,431 1,286,751

50% - - 1,531,449 - 641,063 757 481,539 - - - - - 2,654,808 1,327,404

75% - - - - - 12,027,148 26,692 - - - - - 12,053,840 9,040,380

90% - - - - - - - - - - - - - -

100% - - 15,819 498,017 20,335,468 50,336 406,723 3,640 416,100 - - 24,057 21,750,160 21,750,160

110% - - - - - - - - - - - - - -

125% - - - - - - - - - - - - - -

135% - - - - - - - - - - - - - -

150% - - - - 791,707 216,164 74,565 302,847 - - - - 1,385,283 2,077,925

270% - - - - - - - - - - - - - -

350% - - - - - - - - - - - - - -

400% - - - - - - - - - - - - - -

625% - - - - - - - - - - - - - -

938% - - - - - - - - - - - - - -

1250% - - - - - - - - - - - - - -

Average

Risk Weight - - -

Deduction

from Capital

Base

- - - - - - - - - - - - -





Appendix II

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The Bank

2014

Exposures after Netting and Credit Risk Mitigation Total

Exposure

after

Netting &

Credit

Risk

Mitigation

Total Risk

Weighted

Assets

Risk

Weights

Sovereigns

& Central

Banks PSEs

Banks,

MDBs and

FDIs

Insurance

Companies,

Securities

Firms &

Fund

Managers Corporates

Regulatory

Retail

Residential

Mortgages

Higher

Risk

Assets

Other

Assets

Specialised

Financing /


0% 6,727,176 - 59,732 - 1,100,162 - - - 1,728,433 - - - 9,615,503 -

10% - - - - - - - - - - - - - -

20% - 2,759 1,527,255 29,609 2,941,110 1,016 - - 351,586 - - - 4,853,335 970,667

35% - - - - - - 2,659,862 - - - - - 2,659,862 930,952

50% - - 2,342,784 - 656,009 1,391 179,099 - - - - - 3,179,283 1,589,642

75% - - - - - 10,188,567 12,138 - - - - - 10,200,705 7,650,529

90% - - - - - - - - - - - - - -

100% - - 6,592 370,305 18,932,341 37,900 176,926 - 369,405 - - 23,472 19,916,941 19,916,940

110% - - - - - - - - - - - - - -

125% - - - - - - - - - - - - - -

135% - - - - - - - - - - - - - -

150% - - - - 464,634 193,784 108,803 251,367 - - - - 1,018,588 1,527,882

270% - - - - - - - - - - - - - -

350% - - - - - - - - - - - - - -

400% - - - - - - - - - - - - - -

625% - - - - - - - - - - - - - -

938% - - - - - - - - - - - - - -

1250% - - - - - - - - - - - - - -

Average

Risk Weight- - -

Deduction

from Capital

Base

- - - - - - - - - - - - -





Appendix II

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The Bank

2013

Exposures after Netting and Credit Risk Mitigation

Total

Exposure

after

Netting &

Credit Risk

Mitigation

Total Risk

Weighted

Assets

Risk

Weights

Sovereigns

& Central

Banks PSEs

Banks,

MDBs and

FDIs

Insurance

Companies,

Securities

Firms &

Fund

Managers Corporates

Regulatory

Retail

Residential

Mortgages

Higher

Risk

Assets

Other

Assets

Specialised

Financing /


0% 5,952,212 - 15,152 - 941,848 - - - 1,534,725 - - - 8,443,937 -

10% - - - - - - - - - - - - - -

20% - 31,954 2,138,299 29,583 2,201,186 1,715 - - 146,721 - - - 4,549,458 909,892

35% - - - - - - 2,457,225 - - - - - 2,457,225 860,029

50% - - 1,705,649 - 625,906 757 277,171 - - - - - 2,609,483 1,304,741

75% - - - - - 10,027,146 20,574 - - - - - 10,047,720 7,535,790

90% - - - - - - - - - - - - - -

100% - - 15,819 382,880 18,209,564 47,448 237,959 3,435 382,267 - - 24,057 19,303,429 19,303,429

110% - - - - - - - - - - - - - -

125% - - - - - - - - - - - - - -

135% - - - - - - - - - - - - - -

150% - - - - 790,105 198,396 62,192 280,897 - - - - 1,331,590 1,997,385

270% - - - - - - - - - - - - - -

350% - - - - - - - - - - - - - -

400% - - - - - - - - - - - - - -

625% - - - - - - - - - - - - - -

938% - - - - - - - - - - - - - -

1250% - - - - - - - - - - - - - -

Average

Risk Weight - - - - - -

Deduction

from Capital

Base

- - - - - - - - - - - - -




Appendix IIBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014

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(i) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000)

The Group

2014

Exposure Class

Ratings of Corporate by Approved ECAIs

Moodys Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to C Unrated

S&P AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated

Fitch AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated

RAM AAA to AA3 A to A3 BBB1 to BB3 B to D Unrated

MARC AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated

Rating &

Investment Inc AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated

On and Off-Balance-Sheet Exposures

Credit Exposures (using Corporate Risk Weights)

Public Sector Entities (applicable for entities risk weighted based on their

external ratings as corporates) - - - - 6,187

Insurance Cos, Securities Firms & Fund Managers - - - - 399,914

Corporates 1,438,938 529,078 - - 26,528,052

Total 1,438,938 529,078 - - 26,934,153

Appendix IIIBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014

2013

Exposure Class







Rating &







Corporates 636,022 549,081 250 - 25,280,661

Total 636,022 549,081 250 - 25,860,021

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(i) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000)

The Bank

2014

Exposure Class







Rating &







Corporates 1,191,454 529,078 - - 23,158,384

Total 1,191,454 529,078 - - 23,564,485


2013

Exposure Class







Rating &







Corporates 613,923 534,081 250 - 22,563,126

Total 613,923 534,081 250 - 23,011,637

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(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000)

The Group

2014

Exposure Class

Ratings of Sovereigns and Central Banks by Approved ECAIs

Moodys Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated

S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated

Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated

Rating &

Investment Inc AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to C Unrated


Sovereigns and Central Banks - 10,593,053 - - - -

Total - 10,593,053 - - - -

Exposure Class

Ratings of Banking Institutions by Approved ECAIs




RAM AAA to AA3- A1 to A3 BBB1+ to BBB3 BB1 to B3 C1+ to D Unrated

MARC AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- C+ to D Unrated

Rating &



Banks, MDBs and FDIs 691,236 214,489 82,430 6,592 - 3,445,194

Total 691,236 214,489 82,430 6,592 - 3,445,194


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The Group

2013

Exposure Class





Rating &




Total - 11,011,702 - - - -

Exposure Class







Rating &



Banks, MDBs and FDIs 1,563,194 163,635 35,795 21,739 - 2,481,713

Total 1,563,194 163,635 35,795 21,739 - 2,481,713


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The Bank

2014

Exposure Class





Rating &




Total - 6,727,179 - - - -

Exposure Class







Rating &



Banks, MDBs and FDIs 686,961 214,475 82,430 6,592 - 2,945,910

Total 686,961 214,475 82,430 6,592 - 2,945,910


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The Bank

2013

Exposure Class





Rating &




Total - 5,952,212 - - - -

Exposure Class







Rating &



Banks, MDBs and FDIs 1,499,708 136,926 35,795 21,739 - 2,180,752

Total 1,499,708 136,926 35,795 21,739 - 2,180,752


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a) Disclosures on Credit Risk Mitigation (RM’000)

The Group

2014

Exposure Class Exposures

before

CRM

Exposures

Covered by

Guarantees/

Credit

Derivatives

Exposures

Covered by

Eligible

Financial

Collateral

Exposures

Covered by

Other

Eligible

Collateral

Credit Risk

On-Balance Sheet Exposures

Sovereigns/Central Banks 10,469,658 - 3 -

Public Sector Entities 4,562 - 3,428 -

Banks, Development Financial Institutions & MDBs 3,971,739 - 4 -

Insurance Cos, Securities Firms & Fund Managers 394,070 - - -

Corporates 23,991,290 134,021 983,423 -

Regulatory Retail 12,212,450 865 153,135 -

Residential Mortgages 4,636,437 - 20,631 -

Higher Risk Assets 256,200 - - -

Other Assets 2,837,198 - - -

Equity Exposure 23,472 - - -

Defaulted Exposures 989,177 152 6,340 -

Total for On-Balance Sheet Exposures 59,786,253 135,038 1,166,964 -

Off-Balance Sheet Exposures

Off-Balance Sheet exposures other than OTC derivatives or credit derivatives 4,843,323 - - -

Defaulted Exposures 26,932 - - -

Total for Off-Balance Sheet Exposures 4,870,255 - - -

Total On and Off-Balance Sheet Exposures 64,656,508 135,038 1,166,964 -

Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014

223

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The Group

2013


before

CRM

Exposures

Covered by

Guarantees/

Credit

Derivatives

Exposures

Covered by

Eligible

Financial

Collateral

Exposures

Covered by

Other

Eligible

Collateral

Credit Risk


Sovereigns/Central Banks 10,907,154 - - -


Banks, Development Financial Institutions & MDBs 3,591,180 - - -

Insurance Cos, Securities Firms & Fund Managers 504,303 - 673 -

Corporates 21,462,063 131,752 998,947 -

Regulatory Retail 11,713,244 1,567 136,127 -


Higher Risk Assets 294,509 - 387 -

Other Assets 2,317,711 - - -


Defaulted Exposures 1,273,511 149 31,470 -








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The Bank

2014


before

CRM

Exposures

Covered by

Guarantees/

Credit

Derivatives

Exposures

Covered by

Eligible

Financial

Collateral

Exposures

Covered by

Other

Eligible

Collateral

Credit Risk


Sovereigns/Central Banks 6,727,176 - 3 -


Banks, Development Financial Institutions & MDBs 3,648,454 - 4 -


Corporates 20,732,063 130,821 779,105 -

Regulatory Retail 9,995,757 865 135,083 -


Higher Risk Assets 245,386 - - -

Other Assets 2,449,423 - - -


Defaulted Exposures 911,711 152 6,328 -

Total for On-Balance Sheet Exposures 48,068,600 131,838 935,824 -





Total On and Off-Balance Sheet Exposures 52,380,042 131,838 935,824 -


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The Bank

2013


before

CRM

Exposures

Covered by

Guarantees/

Credit

Derivatives

Exposures

Covered by

Eligible

Financial

Collateral

Exposures

Covered by

Other

Eligible

Collateral

Credit Risk


Sovereigns/Central Banks 5,891,212 - - -


Banks, Development Financial Institutions & MDBs 3,381,310 - - -


Corporates 19,071,729 128,552 911,180 -

Regulatory Retail 9,765,977 1,567 128,442 -


Higher Risk Assets 273,390 - 375 -

Other Assets 2,063,713 - - -


Defaulted Exposures 1,196,163 149 31,459 -








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b) Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM’000)

Counterparty Credit Risk is the risk that the counterparty to a transaction could default before the �nal settlement of the transaction’s cash!ows. 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 speci�c ceiling.

The Group

2014

Description

Principal Amount

Positive Fair Value

of Derivative

Contracts

Credit Equivalent

Amount

Risk Weighted

Amount

Direct Credit Substitutes 679,779 679,779 646,882

Transaction related contingent Items 2,043,704 1,021,852 929,517

Short Term Self Liquidating trade related contingencies 746,576 149,315 95,680

Foreign exchange related contracts

One year or less 5,110,352 64,957 151,954 96,708

Over one year to �ve years 451,955 1,195 41,516 13,374

Over �ve years 96,030 360 14,405 7,202

Interest/Pro�t rate related contracts

One year or less 1,256,279 6,041 4,641 1,350

Over one year to �ve years 1,781,125 11,383 47,984 13,161

Over �ve years 390,148 4,722 33,652 9,460

Other commitments, such as formal standby facilities and credit lines, with an original

maturity of over one year 2,022,026 1,011,013 921,555


maturity of up to one year 8,361,676 1,672,335 1,448,611

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 279,345 - -

Unutilised credit card lines 208,865 41,773 31,073

Total 23,427,860 88,658 4,870,219 4,214,573


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The Group

2013

DescriptionPrincipal Amount

Positive Fair Value of

Derivative Contracts

Credit Equivalent

Amount

Risk Weighted

Amount

Direct Credit Substitutes 1,410,611 1,410,611 1,418,056

Transaction related contingent Items 1,974,804 987,402 864,908



One year or less 3,636,267 24,125 73,219 33,250


Over �ve years 96,030 - 16,325 8,163


One year or less 809,068 4,592 2,271 820


Over �ve years 703,148 14,406 66,112 28,314


maturity of over one year 2,181,286 1,090,643 992,549




Total 21,863,606 56,274 5,360,227 4,657,757


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The Bank

2014

Description

Principal Amount

Positive Fair Value

of Derivative

Contracts

Credit Equivalent

Amount

Risk Weighted

Amount

Direct Credit Substitutes 669,843 669,843 639,188




One year or less 5,131,295 64,971 151,966 96,702


Over �ve years 96,030 360 14,405 7,202


One year or less 1,256,279 6,041 4,641 1,350


Over �ve years 390,148 4,722 33,652 9,460


maturity of over one year 1,709,548 854,774 779,957



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 247,693 - -


Total 21,359,914 88,672 4,311,442 3,814,028


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The Bank

2013

DescriptionPrincipal Amount

Positive Fair Value of

Derivative Contracts

Credit Equivalent

Amount

Risk Weighted

Amount

Direct Credit Substitutes 1,402,157 1,402,157 1,411,181




One year or less 3,636,267 24,125 73,219 33,250


Over �ve years 96,030 - 16,325 8,163


One year or less 809,068 4,592 2,271 820


Over �ve years 703,148 14,406 66,112 28,314


maturity of over one year 1,846,662 923,331 840,756




Total 20,196,417 56,274 4,881,968 4,267,841


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c) Disclosures on Market Risk - Interest Rate Risk/Rate of Return Risk in the Banking Book

Interest rate risk is the current and prospective impact to the Bank’s �nancial 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.

2014

Type of Currency (RM million)

The Group The Bank

Impact on Positions

(100 basis points) Parallel Shift

Impact on Positions


Increase/(Decline)

in Earnings

Increase/(Decline)

in Economic Value

Increase/(Decline)

in Earnings

Increase/(Decline)

in Economic Value

Ringgit Malaysia (40.7) 292.8 (51.3) 248.1

US Dollar 8.0 7.1 8.4 7.1

Euro (0.4) - (0.4) -

Great Britain Pound (0.1) - (0.1) -

Australian Dollar (0.1) 2.0 (0.1) 1.9

Singapore Dollar 0.8 (0.6) 0.8 (0.6)

Japanese Yen - - - -

Others (#) 7.5 7.7 7.5 7.7

Total (25.0) 309.0 (35.2) 264.2

# Others comprise of CNH, NZD, HKD and AED currencies where the amount of each currency is relatively small.


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c) Disclosures on Market Risk - Interest Rate Risk/Rate of Return Risk in the Banking Book

2013

Type of Currency (RM million)

The Group The Bank

Impact on Positions


Impact on Positions


Increase/(Decline)

in Earnings

Increase/(Decline)

in Economic Value

Increase/(Decline)

in Earnings

Increase/(Decline)

in Economic Value

Ringgit Malaysia (32.7) 488.0 (36.2) 386.4

US Dollar 12.3 10.7 12.7 10.7

Euro (0.4) - (0.4) -

Great Britain Pound 0.8 0.2 0.8 0.2

Australian Dollar 0.1 2.4 0.1 2.4

Singapore Dollar 0.5 0.8 0.5 0.8

Japanese Yen (0.1) - (0.1) -

Others (#) 1.0 1.5 1.1 1.5

Total (18.5) 503.6 (21.5) 402.0

# Others comprise of CNH, NZD, HKD and AED currencies where the amount of each currency is relatively small.


AFFIN BANK BERHAD (25046-T)

17th Floor, Menara AFFIN,

80, Jalan Raja Chulan,

50200 Kuala Lumpur

T : 03 2055 9000

F : 03 2026 1415

www.af�nbank.com.my



17th Floor, Menara AFFIN,

80, Jalan Raja Chulan,

50200 Kuala Lumpur

T : 03 2055 9000

F : 03 2026 1415

www.affinbank.com.my

Financial Statements - Affin Bank · 2015. 10. 5. · 42 Afﬁn Bank Berhad Annual Report 2014...

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