bank of tokyo-mitsubishi ufj (malaysia) … · amendments to mfrs 140, investment property –...

BANK OF TOKYO-MITSUBISHI UFJ (MALAYSIA) BERHAD

(Incorporated in Malaysia)

Company No : 302316-U

UNAUDITED INTERIM FINANCIAL REPORT

FOR THE QUARTER ENDED

31 DECEMBER 2017



Company No : 302316-U

UNAUDITED INTERIM FINANCIAL REPORT

FOR THE QUARTER ENDED

31 DECEMBER 2017

Contents Page

Unaudited Statement of Financial Position 1

Unaudited Statement of Comprehensive Income 2

Unaudited Statement of Changes in Equity 3

Unaudited Statement of Cash Flows 4 - 5

Notes to the Unaudited Interim Financial Report 6 - 22



UNAUDITED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2017

2017 December 2017 March

RM'000 RM'000

ASSETS

Cash and short-term funds 6,411,528 7,398,702

Securities available-for-sale 450,551 686,869

Loans and advances 18,705,904 18,838,262

Purchased receivables 534,516 51,095

Derivative financial assets 1,963,498 2,775,724

Statutory deposits with Bank Negara Malaysia 3,268 3,268

Amount due from holding company 329,932 480,344

Amount due from related companies 11,734 6,256

Other assets 94,235 31,046

Property, plant and equipment 21,330 23,441

Intangible assets 36,751 34,830

Tax recoverable - 39,275

TOTAL ASSETS 28,563,247 30,369,112

LIABILITIES AND SHAREHOLDER'S FUNDS

Deposits from customers 8,748,259 9,062,320

Deposits and placements of banks and other

financial institutions 3,280 2,580

Collateral deposits 14,879,144 12,531,310

Derivative financial liabilities 1,742,399 2,555,888

Amount due to holding company 487,731 3,750,338

Amount due to related company 1 1

Other liabilities 122,889 118,659

Deferred tax liabilities 803 803

Tax payable 2,614 -

TOTAL LIABILITIES 25,987,120 28,021,899

SHARE CAPITAL 200,000 200,000

RESERVES 2,376,127 2,147,213

SHAREHOLDER'S FUNDS 2,576,127 2,347,213

TOTAL LIABILITIES AND SHAREHOLDER'S FUNDS 28,563,247 30,369,112

COMMITMENTS AND CONTINGENCIES 68,698,668 64,826,256

1



UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

FOR THE QUARTER ENDED 31 DECEMBER 2017

3rd Quarter Ended 4th Quarter Ended Nine Months Ended Twelve Months Ended

2017 December 2016 December 2017 December 2016 December

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

Operating revenue 124,065 114,456 418,541 452,300

Interest income 167,691 136,517 489,685 500,786

Interest expense (100,600) (67,541) (281,395) (243,125)

Net interest income 67,091 68,976 208,290 257,661

Other operating income 56,974 45,480 210,251 194,682

Operating income 124,065 114,456 418,541 452,343

Other operating expenses (43,346) (44,534) (129,986) (185,467)

Profit before allowance for losses on loans and advances 80,719 69,922 288,555 266,876

Allowance for impairment on loans and advances (203) (22,034) (254) (19,631)

Allowance for impairment on other assets - (237) - (293)

Profit before tax 80,516 47,651 288,301 246,952

Tax expense (34,698) (59,439) (61,298) (63,475)

Profit/(loss) for the period 45,818 (11,788) 227,003 183,477

Other comprehensive income net of tax

Change in fair value of securities available-for-sale (1,842) (2,139) 1,911 (3,690)

Total comprehensive income for the period 43,976 (13,927) 228,914 179,787

Profit attributable to :

Owner of the Bank 45,818 (11,788) 227,003 183,477

Total comprehensive income attributable to :

Owner of the Bank 43,976 (13,927) 228,914 179,787

Basic earnings per share (sen) 22.9 (5.9) 113.5 91.7

2

BANK OF TOKYO-MITSUBISHI UFJ (MALAYSIA) BERHAD(Incorporated in Malaysia)

UNAUDITED STATEMENT OF CHANGES IN EQUITY


<---------------- Attributable to Shareholder of the Bank ---------------->

Distributable

Share Statutory Regulatory Defined Fair value Retained

capital reserve reserve benefit reserve profits Total

reserve

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

2017 December

At beginning of the period 200,000 204,187 164,349 (5,527) 1,012 1,783,192 2,347,213

Profit for the period - - - - - 227,003 227,003

Other comprehensive income - - - - 1,911 - 1,911

Total comprehensive income - - - - 1,911 227,003 228,914

Transfer to retained earnings - (204,187) - - - 204,187 -

At end of the period 200,000 - 164,349 (5,527) 2,923 2,214,382 2,576,127

2016 December

At beginning of the period 200,000 204,187 150,388 (5,362) 2,378 1,493,454 2,045,045

Profit for the period - - - - - 183,477 183,477

Other comprehensive income - - - - (3,690) - (3,690)

Total comprehensive income - - - - (3,690) 183,477 179,787

Transfer to regulatory reserve - - 13,961 - - (13,961) -

At end of the period 200,000 204,187 164,349 (5,362) (1,312) 1,662,970 2,224,832

<-------------------- Non-distributable -------------------->

3



UNAUDITED STATEMENT OF CASH FLOWS


2017 December 2016 December

RM'000 RM'000

Cash Flows From Operating Activities

Profit before tax 288,301 246,952

Adjustments for:

Loss on disposal of property, plant and equipment 106 (13)

Depreciation of property, plant and equipment 3,597 4,860

Amortisation of intangible assets 7,341 5,882

Provision for retirement benefits 2,555 3,313

Dividend income (221) (274)

Interest income from securities available-for-sale (14,330) (4,828)

Amortisation and accretion of securities AFS 683 173

Profit on disposal of property, plant and equipment (1,434) -

Allowance for impairment on loan and advances (69) 21,957

Allowance for impairment on purchased receivables - 293

Writeback of provisionfor diminution in value of

securities AFS (2) (12)

Unrealised loss on changes in fair value

of derivative financial instruments (104,306) (9,069)

Operating profit before changes in working capital 182,221 269,234

(Increase)/Decrease in operating assets:

Loans and advances 132,428 (433,022)

Purchased receivables (483,421) (117,423)

Statutory deposits with Bank Negara Malaysia - -

Derivative financial assets 1,070,002 135,974

Other assets (44,745) (219,899)

Increase/(Decrease) in operating liabilities:

Deposits from customers (314,061) 1,208,994

Deposits and placements of banks and

other financial institutions 700 (1,720)

Collateral deposits 2,347,834 2,291,443

Net movement in inter-company balances (3,262,647) (3,092,007)

Derivative financial liabilities (966,959) (95,230)

Other liabilities 1,870 (9,609)

Cash used in operations (1,336,778) (63,265)

Income taxes paid (19,411) (53,702)

Payment of staff gratuties (194) (1,562)

Net cash used in operating activities (1,356,383) (118,529)

4




FOR THE QUARTER ENDED 31 DECEMBER 2017 (CONTD.)


RM'000 RM'000

Cash Flows From Investing Activities

Purchase of property, plant and equipment (1,638) (1,166)

Purchase of intangible assets (9,262) (13,948)

Proceeds from sale of securities available-for-sale 281,911 90,000

Proceeds from disposal of property, plant and equipment 46 15

Purchase of securities available-for-sale (61,455) (381,445)

Dividend received 221 274

Interest income from securities available-for-sale 14,412 3,975

Net cash generated from/(used in) investing activities 224,235 (302,295)

Net decrease in cash and cash equivalents (1,132,148) (420,824)

Cash and cash equivalents at

beginning of quarter 7,884,884 7,885,450

Cash and cash equivalents at

end of quarter 6,752,736 7,464,626

Analysis of cash and cash equivalents

Cash and short term funds 6,411,528 7,301,435

Amount due from holding and related companies

- current accounts 341,665 163,694

Amount due to holding and related companies

- current accounts (458) (503)

6,752,735 7,464,626

5



NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT


1 BASIS OF PREPARATION

�

�

�

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2018

� MFRS 9, Financial Instruments (2014)

� MFRS 15, Revenue from Contracts with Customers

� Clarifications to MFRS 15, Revenue from Contracts with Customers

� IC Interpretation 22, Foreign Currency Transactions and Advance Consideration

�

�

�

�

� Amendments to MFRS 140, Investment Property – Transfers of Investment Property

� MFRS 16, Leases

�

The Bank plans to apply the abovementioned accounting standards, amendments and interpretations:

�

�

�

MFRS 9, Financial Instruments

The Bank is currently assessing the financial impact that may arise from the adoption of MFRS 9.

MFRS 15, Revenue from Contracts with Customers

The unaudited interim financial report for the quarter ended 31 December 2017 have been prepared under the historical cost

convention except for securities available-for-sale and derivative financial instruments which are stated at fair value.

The unaudited condensed interim financial report have been prepared in accordance with MFRS 134 : Interim Financial

Reporting issued by the Malaysian Accounting Standard Board ("MASB") and Bank Negara Malaysia's Guidelines on

Financial Reporting. The unaudited interim financial report should be read in conjunction with the audited financial

statements of the Bank for the financial period ended 31 March 2017. The explanatory notes attached to the interim financial

report provide an explanation of events and transactions that are significant to an understanding of the changes in the

financial position and performance of the Bank since the period ended 31 March 2017.

The following are accounting standards, amendments and interpretations that have been issued by the Malaysian Accounting

Standards Board (“MASB”) but have not been adopted by the Bank:


Amendments to MFRS 12, Disclosure of Interests in Other Entities (Annual Improvements to MFRS Standards 2014-

2016 Cycle)

Amendments to MFRS 107, Statement of Cash Flows – Disclosure Initiative

Amendments to MFRS 112, Income Taxes – Recognition of Deferred Tax Assets for Unrealised Losses

Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements to

MFRS Standards 2014-2016 Cycle)

Amendments to MFRS 2, Share-based Payment – Classification and Measurement of Share-based Payment

Transactions

Amendments to MFRS 4, Insurance Contracts – Applying MFRS 9 Financial Instruments with MFRS 4 Insurance

Contracts

The Bank is currently assessing the financial impact that may arise from the adoption of MFRS 15.

Amendments to MFRS 128, Investments in Associates and Joint Ventures (Annual Improvements to MFRS Standards

2014-2016 Cycle)

Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint

Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

from the annual period beginning on 1 April 2017 for those amendments that are effective for annual periods beginning

on or after 1 January 2017, except for Amendments to MFRS 12, Disclosure of Interests in Other Entities (Annual

Improvements to MFRS Standards 2014-2016 Cycle) which is not applicable to the Bank.

from the annual period beginning on 1 April 2018 for those accounting standards, amendments and interpretation that

are effective for annual periods beginning on or after 1 January 2018, except for Amendments to MFRS 2, Share-based

Payment – Classification and Measurement of Share-based Payment Transactions , Amendments to MFRS 4, Insurance

Contracts – Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts , Amendments to MFRS 128,

Investments in Associates and Joint Ventures (Annual Improvements to MFRS Standards 2014-2016 Cycle) and

Amendments to MFRS 140, Investment Property – Transfers of Investment Property which are not applicable to the

Bank.

from the annual period beginning on 1 April 2019 for the accounting standard that is effective for annual periods

beginning on or after 1 January 2019.


MFRSs, Interpretations and amendments effective for date yet to be confirmed

The initial application of the accounting standards, amendments or interpretations are not expected to have any material

financial impacts to the current period and prior period financial statements of the Bank except as mentioned below:

MFRS 9 replaces the guidance in MFRS 139, Financial Instruments: Recognition and Measurement on the classification

and measurement of financial assets and financial liabilities, and on hedge accounting.

MFRS 15 replaces the guidance in MFRS 111, Construction Contracts , MFRS 118, Revenue , IC Interpretation 13,

Customer Loyalty Programmes , IC Interpretation 15, Agreements for Construction of Real Estate , IC Interpretation 18,

Transfers of Assets from Customers and IC Interpretation 131, Revenue – Barter Transactions Involving Advertising

Services .

6





2 AUDIT REPORT

3 CHANGE IN FINANCIAL YEAR END

4 SEASONAL OR CYCLICAL FACTORS

The business operations of the Bank have not been affected by any material seasonal cyclical factors.

5 EXCEPTIONAL OR EXTRAORDINARY ITEMS

6 CHANGES IN ESTIMATES

7 CHANGES IN DEBT AND EQUITY SECURITIES

8 DIVIDEND PAID

No dividend was paid during the financial period ended 31 December 2017.

9 SUBSEQUENT EVENTS

10 REVIEW OF PERFORMANCE

There were no significant changes in estimates of amounts reported in prior financial years that have a material effects on

the financial results and position of the Bank for the financial period ended 31 December 2017.

The audit report on the audited financial statements for the financial period ended 31 March 2017 was not subject to any

qualification.

There were no issuance and repayment of debt and equity securities during the financial period ended 31 December

2017.

There were no material events subsequent to the balance sheet date that require disclosure or adjustments to the

unaudited condensed interim financial report.

There were no exceptional or extraordinary items for the financial period ended 31 December 2017.

The Bank's profit before taxation for the financial period ended 31 December 2017 was RM288.3 million, an increase of

16.74% or RM41.3 million compared to the corresponding period last year. Operating income decreased by RM33.8

million from RM452.4 million to RM418.5 million whilst operating expenses decreased by RM55.5 million, mainly

attributed to lower cash collateral fees during the financial period.

Total assets decreased by RM1.8 billion, from RM30.4 billion to RM25.7 billion compared to 31 March 2017. The

Bank's CET 1/Tier 1 capital ratio and total capital ratio remained strong at 17.054% and 18.099% respectively.

In the comparatives, the audited financial statements are prepared for a period of 15 months from 1 January 2016 to 31

March 2017, as a result of Bank changed its financial year end from 31 December to 31 March.

7





11 PROSPECTS

12 SECURITIES AVAILABLE-FOR-SALE


RM'000 RM'000

At fair value

Money market instruments

• Malaysian Government Securities 244,306 462,371

• Sukuk 203,252 221,505

At cost

Unquoted bonds # 27 27

Unquoted shares 2,966 2,966

450,551 686,869

# Unquoted bonds are stated net of impairment loss amounting to RM2,429,000 (2017 March : RM2,429,000).

The Bank's business strategies going forward is to provide various solutions to all types of customer segments

including aggressive participation in major finance deals of Government Linked Companies ("GLCs"). This is

realised by proposing and utilising Debt Capital Market ("DCM") tools and solutions in collaboration with the

Regional Office in Singapore, the holding company and affiliates for their financials needs.

The collaboration with the holding company will also be extended to participation in sizeable deals with

regards to overseas investments of large Malaysian corporations while commencement of business relationship

with other new local customers would be undertaken based on market demands. In enhancing our Islamic

finance business, continuous support from the holding company has enabled us to strive towards enhancing

greater financial cooperation in the area of Islamic finance between Malaysia and Japan.

The Bank will continue to grow its Islamic banking business through the International Currency Business Unit

("ICBU") and Islamic Banking Window ("IBW") by introducing innovative Islamic banking products and

expanding on the Bank’s network while continuously tapping onto other business opportunities provided under

the Malaysian International Islamic Financial Centre ("MIFC").

The Bank will continue to focus on new corporate loans, syndicated loan deals, bilateral deals and in

promoting Islamic financing facilities, while maintaining our strong relationship with existing customers. This

will further enhance the Bank's corporate banking services, improve cash management business, investment

banking and Islamic banking services. Going forward, the Bank expects customers’ keen interest in eco-

friendly schemes and strong support for green technology financing.

On deposit-taking, the Bank will continue to enhance its deposits products by offering attractive features and

competitive interest rates. The Bank will also step up its efforts to tap on potential new segments particularly

the telecommunications and healthcare business sectors.

In terms of conventional products, the Bank will revamp its approach to reduce over-dependence on the

balance sheet by not only diversifying but through cross-selling and expanding on strategies to increase

deposits from customers.

8






RM'000 RM'000

13 LOANS AND ADVANCES

(a) By type

At amortised cost

Overdrafts 5,341 9,458

Term loans

� Housing loans 12,656 13,490

� Other term loans 15,239,214 14,081,108

Revolving credits 3,512,604 4,764,994

Bills receivable 31,306 57,299

Claims on customers under acceptance credits 3,063 10,494

Staff loans 6,004 5,600

18,810,188 18,942,443

Unearned interest (10) (83)

Gross loans and advances 18,810,178 18,942,360

Impairment allowances on loans and advances

� Individual assessment (3,519) (3,343)

� Collective assessment (100,755) (100,755)

Net loans and advances 18,705,904 18,838,262

(b) By maturity structure

Maturing within one year 7,623,242 7,097,742

More than one year to three years 3,792,346 7,756,692

More than three years to five years 4,919,897 2,200,285

More than five years 2,474,693 1,887,641

18,810,178 18,942,360

(c) By type of customer

Domestic non-bank financial institutions 6,069,076 5,918,234

Domestic business enterprises

� Small medium enterprises 1,722,371 1,848,638

� Others 8,409,255 7,904,658

Individuals 18,488 66,780

Foreign entities 2,590,988 3,204,050

18,810,178 18,942,360

Loans and advances to customers amounting to RM10,905,111,000 (2017 March:

RM9,897,578,000) contain embedded derivatives. The carrying amounts of the embedded

derivatives are separately recognised as derivative financial assets and derivative financial liabilities

as appropriate.

9






RM'000 RM'000

13 LOANS AND ADVANCES (CONTD.)

(d) By interest rate sensitivity:

Fixed rate

� Staff loans 5,236 5,600

Variable rates 18,804,942 18,936,760

18,810,178 18,942,360

(e) By economic sector:

Agricultural, hunting, forestry and fishing 1,106,524 727,883

Mining and quarrying 42,057 205,875

Manufacturing 2,561,858 2,716,265

Electricity, gas and water 2,383,619 2,496,031

Construction 2,141,520 1,385,430

Wholesale and retail trade and restaurants and hotels 782,607 984,824

Transport, storage and communication 1,628,140 1,060,190

Finance, insurance, real estate and business services 8,132,299 9,330,971

Households 18,660 19,090

Others 12,893 15,801

18,810,178 18,942,360

(f) By geographical location:

Malaysia 17,733,409 17,509,927

Other countries 1,076,769 1,432,433

18,810,178 18,942,360

(g) Movements in impaired loans and advances are as follows:

At beginning of the period 4,562 4,429

Impaired during the period 820 1,178

Amount recovered (16) (77)

Reclassified as non-impaired (429) (948)

Amount written off (273) (20)

At end of the period 4,664 4,562 10






RM'000 RM'000

13 LOANS AND ADVANCES (CONTD.)

(h) Impaired loans according to economic sectors are as follows:

Finance, insurance and business services 3,805 3,635

Household 859 927

4,664 4,562

(i) Impaired loans by geographical location are as follows:

Malaysia 4,664 4,429

(j) Movements in impairment allowances on loans and advances are as follows:

(i) Allowance for individual assessment


Allowance made during the period 176 306

At end of the period 3,519 3,343

(ii) Allowance for collective assessment


Allowance made during the period - 25,688

At end of the period 100,755 100,755

14 PURCHASED RECEIVABLES

2017 December 2017 MarchRM'000 RM'000

Purchased receivables 534,701 51,280 Allowance for individual assessment - - Allowance for collective assessment (185) (185)

534,516 51,095

(a) Movements in impairment allowances on purchased receivables

2017 December 2017 MarchRM'000 RM'000

(i) Allowance for individual assessmentAt beginning of the period - - Allowance made during the period - -

At end of the period - -

(ii) Allowance for collective assessment

At beginning of the period 185 365

Allowance made during the year - (180) At end of the period 185 185

Purchased receivables relate to receivables acquired by the Bank under the account receivables

purchasing and vendors financing product. These amounts owing from obligors have a tenure of one to

two months. Included in purchased receivables are non-recourse bills receivable amounting to

RM497,100,000 (2017 March: RM19,312,000).

11






RM'000 RM'000

15 DEPOSITS FROM CUSTOMERS

At amortised cost

Demand deposits 4,081,349 4,560,342

Money market deposits 772,857 779,548

Savings deposits 20,123 20,779

Fixed deposits 3,873,930 3,701,651

8,748,259 9,062,320

(a) The maturity structure of fixed deposits are as follows:

Due within six months 3,663,709 3,634,833

Six months to one year 206,214 54,462

Above one year 4,007 12,356

3,873,930 3,701,651

(b) The deposits are sourced from the following customers:

Business enterprises 8,659,943 8,969,100

Individuals 88,316 93,220

8,748,259 9,062,320

16 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS


RM'000 RM'000

At amortised cost

Non-bank financial institutions 3,280 2,580

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

18 INTEREST INCOME

Loans and advances 110,996 85,304 322,748 301,730

Money at call and deposit placements with financial institutions 51,282 47,777 149,259 193,024

Securities available-for-sale 5,413 3,436 17,678 6,032

167,691 136,517 489,685 500,786

19 INTEREST EXPENSE

Deposits and placements of banks and other financial institutions 62,472 39,775 176,928 130,703

Deposits from other customers 38,128 27,766 104,467 112,422

100,600 67,541 281,395 243,125

20 OTHER OPERATING INCOME

Fee income

Commission 475 440 1,345 1,153

Guarantee fees 913 1,345 2,931 4,416

Service charges and fees 747 (661) 2,235 2,069

Commitment fees 190 131 566 694

Other fee income 607 6,544 7,636 17,764

2,932 7,799 14,713 26,096

Investment income

Gross dividends 37 37 221 274

Realised (loss)/gain in fair value of derivative financial instruments (4,015) 57,049 (2,856) 71,190

Unrealised gain/(loss) in fair value of derivative financial instruments 47,575 (40,295) 104,306 9,069

Net premium (paid)/received for options (1) (3) (1) (75)

43,596 16,788 101,670 80,458

Other income

Foreign exchange gain/(loss) 8,125 19,967 88,531 82,422

Other operating income 2,321 926 5,337 5,706

10,446 20,893 93,868 88,128

56,974 45,480 210,251 194,682

14







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

21 OTHER OPERATING EXPENSES

Personnel expenses 22,306 21,367 70,051 86,223

Establishment related expenses 5,719 4,515 15,625 17,776

Promotion and marketing related expenses 652 512 1,565 2,061

Administrative and other expenses 14,669 18,140 42,745 79,407

43,346 44,534 129,986 185,467

Personnel expenses

- Wages, salaries and bonus 16,933 16,496 51,727 67,682

- Defined benefit plan 852 825 2,555 3,312

- Defined contribution plan 1,584 1,459 6,426 7,391

- Other employee benefits 2,937 2,587 9,343 7,838

22,306 21,367 70,051 86,223

Establishment related expenses

- Depreciation of property, plant and equipment 1,194 1,185 3,597 4,860

- Amortisation of intangible assets 2,663 1,719 7,341 5,882

- Hire of equipment 170 159 510 764

- Repair and maintenance (86) 81 117 610

- Rental of premises 1,472 1,249 3,380 4,978

- Others 306 122 680 682

5,719 4,515 15,625 17,776

Promotion and marketing related expenses

- Advertising and publicity 157 72 227 259

- Others 495 440 1,338 1,802

652 512 1,565 2,061

Administrative and other expenses

- Collateral deposit fees 8,301 14,395 29,206 59,117

- Communication expenses 230 200 646 1,167

- Legal and professional fees 923 851 1,643 4,431

- Others 5,215 2,694 11,250 14,692

14,669 18,140 42,745 79,407

22 (ALLOWANCE)/WRITEBACK FOR IMPAIRMENT ON LOANS AND ADVANCES

Allowance for impaired loans and advances

- Collective assessment - (22,010) - (22,010)

- Individual assessment (58) (55) (177) 2,326

Impaired loans and advances written off (146) - (146) -

Bad debts written back 1 31 69 53

(203) (22,034) (254) (19,631)

15





23 CAPITAL ADEQUACY

(a)

(b) The capital adequacy ratios of the Bank are as follows:


Common equity Tier 1 ("CET 1") capital ratio 17.054% 16.660%

Tier 1 capital ratio 17.054% 16.660%

Total capital ratio 18.099% 17.718%

(c) The components of Tier 1 and Tier 2 capital of the Bank are as follows:


RM'000 RM'000

CET 1 and Tier 1 capital

· Paid-up share capital 200,000 200,000

· Retained profits 1,987,379 1,783,192

· Other reserves 161,745 364,021

2,349,124 2,347,213

Less

· Deferred tax assets - -

· Intangible assets (36,751) (34,830)

· 55% of fair value reserve (1,608) (557)

· Regulatory reserve (164,349) (164,349)

2,146,416 2,147,477

Tier 2 capital

· Impairment allowance for collective assessment *

and regulatory reserve 131,506 136,333

Total Capital 2,277,922 2,283,810

*

The capital adequacy ratios consist of total capital and risk-weighted assets derived from balances of the Bank.

With effect from 1 January 2013, the capital adequacy ratios are computed in accordance with BNM's Guidelines

on Capital Adequacy Framework (Capital Components and Basel II - Risk Weighted Assets) ("CAF") issued on

28 November 2012. The Bank adopted the Standardised Approach for Credit Risk and Market Risk and the

Basic Indicator Approach for Operational Risk.

Excludes impairment allowance on collective assessment on impaired loans restricted from Tier 2 capital of the Bank of

RM255,000 (2017 March: RM310,000).

16





23 CAPITAL ADEQUACY (CONT'D)

(d) The components of risk-weighted assets of the Bank are as follows:

2017 December

Risk-

Gross Net Weighted Capital

Exposure Class Exposures Exposures Assets Requirements

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

(i) Credit Risk

On-Balance Sheet Exposures :

Sovereigns/Central Banks 5,099,114 5,099,114 - -

Public Sector Entities 10,778 10,778 2,156 172

Banks, Development Financial Institutions & MDBs 2,600,342 2,600,303 511,466 40,917

Insurance Cos, Securities Firms & Fund Managers - - - -

Corporates 18,610,733 6,109,455 6,314,078 505,126

Regulatory Retail 1,654 1,654 1,654 132

Residential Mortgages 14,123 14,123 6,437 515

Other Assets 303,727 303,727 305,773 24,462

Equity Exposures 2,993 2,993 2,993 239

Defaulted Exposures 2,965 2,965 2,799 224

Total On-Balance Sheet Exposures 26,646,429 14,145,112 7,147,356 571,787

Off-Balance Sheet Exposures :

Credit-related exposures 559,095 559,095 444,042 35,523

Securitisation exposures 3,000 3,000 2,250 180

Derivatives financial instruments 4,220,835 4,220,835 2,926,818 234,145

Total Off-Balance Sheet Exposures 4,782,930 4,782,930 3,373,110 269,848

Total On and Off-Balance Sheet Exposures 31,429,359 18,928,042 10,520,466 841,635

(ii) Large Exposure Risk Requirement - - - -

Long

Position

Short

Position

(iii) Market Risk

Interest Rate Risk 677,303 (581,743) 1,194,500 95,560

Foreign Exchange Risk 67,306 (1,928) 67,313 5,385

744,609 (583,671) 1,261,813 100,946

(iv) Operational Risk 803,455 64,276

Total RWA and Capital Requirements 31,429,359 18,928,042 12,585,734 1,006,857

17





23 CAPITAL ADEQUACY (CONTD.)

(d) The components of risk-weighted assets of the Bank are as follows:

2017 March

Risk-

Gross Net Weighted Capital

Exposure Class Exposures Exposures Assets Requirements

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

(i) Credit Risk

On-Balance Sheet Exposures:

Sovereigns/Central Banks 6,402,363 6,402,363 - -

Public Sector Entities 23,089 23,089 4,618 369

Banks, Development Financial Institutions & MDBs 2,197,991 1,921,685 526,951 42,156

Insurance Cos, Securities Firms & Fund Managers - - - -

Corporates 18,643,412 7,038,573 7,215,181 577,214

Regulatory Retail 1,786 1,786 1,786 143

Residential Mortgages 14,302 14,302 6,296 504

Equity Exposures 2,993 2,993 2,993 239

Other Assets 325,872 325,872 320,835 25,667

Defaulted Exposures 2,981 2,981 2,815 225

Total On-Balance Sheet Exposures 27,614,789 15,733,644 8,081,475 646,517

Off-Balance Sheet Exposures :

Credit-related exposures 674,591 674,591 440,209 35,217

Securitisation exposures 3,000 3,000 2,250 180

Derivatives financial instruments 3,639,965 3,639,965 2,382,722 190,618

Total Off-Balance Sheet Exposures 4,317,556 4,317,556 2,825,181 226,015

Total On and Off-Balance Sheet Exposures 31,932,345 20,051,200 10,906,656 872,532

(ii) Large Exposure Risk Requirement - - - -

Long

Position

Short

Position

(iii) Market Risk

Interest Rate Risk 644,145 (543,848) 1,253,714 100,297

Foreign Exchange Risk 16,682 (5,203) 16,688 1,335

660,827 (549,051) 1,270,402 101,632

(iv) Operational Risk 712,853 57,028

Total RWA and Capital Requirements 31,932,345 20,051,200 12,889,911 1,031,192

18





24 THE OPERATIONS OF ISLAMIC BANKING

UNAUDITED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2017


RM'000 RM'000

ASSETS

Cash and short-term funds (a) 28,171 27,432

Other assets 7 2

TOTAL ASSETS 28,178 27,434

LIABILITIES AND ISLAMIC BANKING FUNDS

Deposits from customers (b) 3 3

Other liabilities 4,864 4,515

TOTAL LIABILITIES 4,867 4,518

CAPITAL FUND 25,000 25,000

RESERVE (1,689) (2,084)

ISLAMIC BANKING FUNDS 23,311 22,916

TOTAL LIABILITIES AND ISLAMIC BANKING FUNDS 28,178 27,434

COMMITMENTS AND CONTINGENCIES - -

Islamic financing based on Commodity Murabahah (Tawarruq) of RM525,810,966 (2017 March: RM50,168,633) was

financed under an internal Wakalah scheme and is reported under entity level.

19





24 THE OPERATIONS OF ISLAMIC BANKING (CONTD.)

UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME




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

Income attributable to depositors - - - -

- - - -

Income derived from investment of Islamic Banking Capital funds (b) 216 326 647 944

Other operating income (c) 71 - 142 -

Other operating expenses (129) (75) (394) (1,178)

Profit/(Loss) before tax 158 251 395 (234)

Tax expense - - - -

Profit/(Loss) for the period 158 251 395 (234)

UNAUDITED STATEMENT OF CHANGES IN EQUITY


Capital Accumulated Total

Fund Losses

RM '000 RM '000 RM '000

2017 December

At beginning of the period 25,000 (2,084) 22,916

Profit for the period - 395 395

At end of the period 25,000 (1,689) 23,311

2016 December

At beginning of the period 25,000 (2,105) 22,895

Loss for the period - (234) (234)

At end of the period 25,000 (2,339) 22,661




RM'000 RM'000

Cash flows from operating activities

Profit/(Loss) before tax 395 (234)

Operating profit/(loss) before working capital changes 395 (234)

Increase in operating assets/liabilities:

Other assets (5) (2)

Other liabilities 349 1,178

Net cash from operating activities 739 942

Net increase in cash and cash equivalents 739 942

Cash and cash equivalents at beginning of period 27,432 26,150

Cash and cash equivalents at end of period 28,171 27,092

Cash and cash equivalents at end of period 28,171 27,092

20






Shariah Committee

Basis of measurement

(a) Cash and short-term funds


RM'000 RM'000

Cash and balances with banks and other financial institution 28,171 27,432

(b) Deposits from customers


RM'000 RM'000

Current accounts 3 3

(c) Income derived from investment of Islamic Banking Capital funds



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

Money at call and placements with financial institutions 216 326 647 944

(d) Other Operating Income



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

Other fee income 71 - 142 -

(e) Other Operating Expenses

3rd Quarter Ended 4th Quarter Ended Nine Months Ended Twelve Months Ended2017 December 2016 December 2017 December 2016 December

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

Personnel expenses 90 59 324 1,051 Other expenses 39 16 70 127

129 75 394 1,178

The committee comprises: Dr. Luqman bin Haji Abdullah, Assoc. Prof. Dr. Abdul Karim bin Ali, Assoc. Prof. Dr. Syed Musa Syed Jaafar Alhabshi, Dr. Safinar binti Salleh

and Dr. Noor Suhaida Binti Kasri.

The Shariah Committee was established under BNM's "Guidelines on the Governance of Shariah Committee for the Islamic Financial Institutions" ("BNM/GPS1") to advise

the Board of Directors on Shariah matters in its Islamic Banking business operations and to provide technical assistance in ensuring the Islamic Banking products and services

offered by the Bank and the relevant documentation are in compliance with Shariah principles.

The financial statements of the Islamic Banking business have been prepared on the basis consistent with that of the Bank as disclosed in Note 1 to the audited financial

statements of the Bank for financial period ended 31 March 2017.

21






(f) Capital Adequacy

The capital adequacy ratios of the Bank's Islamic Banking business are as follows:


Common equity tier 1 capital ratio 557.943% 744.993%

Tier 1 capital ratio 557.943% 744.993%

Total capital ratio 557.943% 744.993%

The components of Tier 1 and Tier 2 capital of the Bank's Islamic Banking business are as follows:


RM'000 RM'000

CET 1 and Tier 1 capital

· Paid-up share capital 25,000 25,000

· Accumulated losses (1,689) (2,084)

23,311 22,916

Tier 2 capital - -

Total capital 23,311 22,916

The breakdown of the risk-weighted assets by each major risk category is as follows:


RM'000 RM'000

Operational risk 4,107 3,076

The capital adequacy ratios of the Islamic Banking business of the Bank are computed in accordance with the Capital

Adequacy Framework for Islamic Banks ("CAFIB"). The Bank's Islamic Banking business has adopted the

Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach for Operational Risk.

22

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