financial results for financial year ended 31 …
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ANALYSTS/FUND MANAGERS PRESENTATION
FINANCIAL RESULTS FOR FINANCIAL YEAR ENDED
31 DECEMBER 2019
Kamarul Ariffin bin Mohd JamilGroup CEO, AFFIN BANK BERHAD
2 March 2020
CONTENTS
Key Performance Highlights
Guidance & Economic Outlook
1
2
3
4
Strategic Initiatives and Moving Forward
Financial Performance
KEY PERFORMANCE HIGHLIGHTS
Financial Highlights for financial year ended 31 December 2019
Profit Before Tax
RM677.0 million
[FY2018 : RM675.0 million]
Net Loans, Advances & Financing
RM45.4 billion
[Dec 2018 : RM48.4 billion]
Net Income
RM1.93 billion
[FY2018 : RM1.92 billion]
Deposits from Customers
RM51.1 billion
[Dec 2018 : RM57.3 billion]
Total Assets
RM68.3 billion
[Dec 2018 : RM76.0 billion]
Earnings Per Share
24.59 sen
[FY2018 :25.89 sen]
Shareholders Equity
RM9.3 billion
[Dec 2018 :RM8.7 billion]
3
Financial Performance - Key Financial Metrics
Profitability FY2018 (%) FY2019 (%)Increase/
(decrease) (%)
Profit before Tax after Zakat (RM million) 675.0 677.0 2.0
Return on Equity (After Tax) 5.94 5.42 (0.52)
Net Interest Margin 1.83 1.72 (0.11)
Cost to Income Ratio 63.39 63.36 (0.03)
Liquidity
Liquidity Coverage Ratio (LCR) 169.32 171.72 2.40
Net Stable Funding Ratio (NSFR) 86.94 115.60 28.66
Asset Quality
Gross Impaired Loans Ratio 3.25 3.00 (0.25)
Net Impaired Loans Ratio 2.59 2.28 (0.31)
Loans Loss Reserve Ratio 97.08 96.88 (0.20)
Capital Adequacy (after proposed dividend)
CET 1 Capital Ratio 11.92 14.44 2.52
Tier 1 Capital Ratio 13.56 16.22 2.66
Total Capital Ratio 19.00 23.24 4.24
4
Financial Performance - Profitability
1,920.6 1,931.8
2018 2019
NET INCOME (RM’ million)
For FY 2019, the increase in gain on financial instruments of RM141.1 million was offset by thedrop in net interest income, fee-based income and other income of RM102.3 million, RM15.5million and RM24.7 million respectively. The reduction in net interest income is in line with thereduction in loans, advances and financing portfolio of RM3.0 billion and financial investments atFVOCI of RM2.9 billion.
1,217.5
1,223.9
2018 2019
OPERATING EXPENSES (RM’ million)
Overall, achieved a slightly higher PBT after Zakat of RM677.0 million for FY2019 as comparedto RM675.0 million for FY2018.
675.0 677.0
2018 2019
PROFIT BEFORE TAX (RM’ million)
+0.58%
+0.52%
+0.29%
5
Operating expenses were at RM1,223.9 million for FY2019, higher by RM6.4 million or 0.5%as compared to RM1,217.5 million for FY2018, mainly due to higher personnel costs.
Financial Performance – Asset Quality
Net impaired loan ratio also improved to 2.28% (31/12/2018: 2.59%). Excluding the R&R accounts, the Net Impaired Loan Ratio stood at 2.00% (31/12/2018 : 2.59%)
Loan Loss Reserve remained strong/healthy at 96.88% as at 31/12/2019 (31/12/2018:97.08%)
Gross Impaired Loans ratio was lower at 3.00% (31/12/2018: 3.25%). Excluding theR & R accounts, the Gross Impaired Loan Ratio stood at 2.73% (31/12/2018: 3.22%)
94.34 98.47 97.08 96.88
2016 2017 2018 2019
LOAN LOSS RESERVE (%)
6
1.9 1.67
2.533.25 3.00
2015 2016 2017 2018 2019
GROSS IMPAIRED LOAN RATIO (%)
Gross Impaired Loan Ratio
0.95 1.03
2.102.59
2.28
2015 2016 2017 2018 2019
NET IMPAIRED LOANS RATIO (%)
Net Impaired Loans Ratio
Financial Performance – Capital Adequacy
CET 1Dec 2019
CET 1Dec 2018
Tier 1Dec 2019
Tier 1Dec 2018
Total Capital
Dec 2019
Total Capital
Dec 2018
AFFIN BANK BERHAD
Group 14.44% 11.92% 16.22% 13.56% 23.24% 19.00%
Bank 12.93% 9.79% 14.62% 11.31% 22.25% 16.56%
AFFIN ISLAMIC BANK BERHAD
Bank 11.72% 10.87% 13.83% 12.88% 20.63% 19.44%
AFFIN HWANG INVESTMENT
BANK BERHAD
Group 33.24% 30.64% 33.99% 31.19% 34.76% 32.01%
Bank 42.75% 34.18% 42.75% 34.18% 43.57% 35.10%
Total Capital Ratio, Common Equity Tier 1 (“CET 1”) Capital Ratio and Tier 1 (“Tier 1”) Capital Ratio of all banking entitieswithin the Group remained at above the minimum regulatory requirements.
7
The improved CET1 and Tier 1 capital ratios were mainly due to capitalisation of Profit After Tax of RM487.8 million for the FY2019.
Total capital ratio also improved as Affin Bank disposed its entire holding of Tier II Sukuk Murabahah of Affin Islamic Bank during the year.
Highlights of financial performance by entities - Profit Before Tax after Zakat (PBT)
EntityFY2018
(RM million)FY2019
(RM million)Variance
(RM million)Commentary
AFFIN Bank Berhad(Bank Level)
674.9 460.1 (214.8)
In 2018, there were special dividends declared by thesubsidiaries, i.e Affin Hwang Investment Bank Berhad and AffinHoldings Berhad totaling RM323.0 million which are notrecurring.
AFFIN Islamic Bank Berhad 155.4 93.2 (62.2)The higher net gain on financial instruments by RM76.0 million,was not sufficient to cushion lower net finance income, higheroverhead expenses and allowance for credit impairment losses
Affin Hwang Investment Bank Group
160.5 174.5 14.0Increase in net gain on financial instruments but partially offsetby the reduction in both net fee, commission income and netinterest income.
AXA Affin Life Insurance Berhad (3.1) (3.9) (0.8)Higher share of losses due to higher reserves for futurepolicyholders’ liabilities as a result of downward movement inMGS rate
AXA Affin General Insurance Berhad
50.0 34.0 (16.0)Lower earned premium and higher net claims incurred attributedlargely to Motor and Personal Accident policies
Affin MoneybrokersSdn Bhd
1.5 2.5 1.0
Higher brokerage income
AFFIN Bank Berhad Group 675.0 677.0 2.0
Group PBT and contribution by Subsidiaries, Joint Venture and Associate Company
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Gross Credit Cost (bps)
Key drivers for improvement in Operating Performance
1.98 1.84 1.83 1.72
2016 2017 2018 2019
Net Interest Margin (%)
Net Credit Cost (bps)
5.0
16.0
9.011.0
2016 2017 2018 2019
❖ NIM declined by 11 bps year-to-date to 1.72%, mainly due to higher fundingcost.
❖ The Group will continue to pursue an efficient funding mix to mitigate theimpact on the NIM. The NIM for FY2020 is expected to be between 1.6% to1.8%.
9
17.0
25.0
16.018.0
2016 2017 2018 2019
Group Income Statement at a glance
Profit Before Tax after Zakat (RM million)
677.0737.7 693.2 675.0 677.0
2016 2017 2018 2019
Profit After Tax(RM million)
516.1579.8 534.9 527.4 516.1
2016 2017 2018 2019
Operating Expenses(RM million)
1,223.91,142.9 1,223.5 1,217.5 1,223.9
2016 2017 2018 2019
Earnings Per Share (sen)
24.629.0 26.5 25.9 24.6
2016 2017 2018 2019
Net Fee and Commission Income(RM million)
441.4496.1 451.6 456.9 441.4
2016 2017 2018 2019
Net Interest Income(RM million)
743.1
Share of Profit in Joint Venture /Associate(RM million)
30.2
892.9 895.7 845.4 743.1
2016 2017 2018 2019
48.9 40.9 46.930.2
2016 2017 2018 2019
Net Income(RM million)
1,931.8
Islamic Banking Income(RM million)
410.7272.8
334.3398.2 410.7
2016 2017 2018 2019
1,324.4 1,560.51,920.6 1,931.8
2016 2017 2018 2019
10
RM’ 000ABB GROUP
FY2018 ABB GROUP
FY2019Variance Comments
Net interest income 845,400 743,117 (102,283)
Lower net interest income is in line with the reduction in loans, advances and financing portfolio of RM3.0 billion as well as the reduction in financial investments at FVOCI of RM2.9 billion to realise the gain upon disposal.
Islamic banking income 398,190 410,683 12,493Islamic banking income increased due to higher gain from the disposal of FVOCI assets
Net fee and commission income 456,865 441,407 (15,458)Net fee and commission income reduced by RM15.5 million due to lower net brokerage income and lower service charges.
Net gains on financial instruments 146,037 287,088 141,051Higher net gains mainly attributable to the sale of financial investments at FVOCI during the year.
Other income 74,110 49,455 (24,655) The reduction in other income was mainly due to lower forex gains in FY2019
Net income 1,920,602 1,931,750 11,148
Operating expenses (1,217,509) (1,223,933) (6,424)Increase in operating expenses due to higher personnel cost
Operating profit before allowances 703,093 707,817 4,724
Allowances for impairment losses (70,911) (55,476) 15,435 Lower impairment losses in FY2019
Operating profit 632,182 652,341 20,159
Share of results of a joint venture and associate 46,927 30,160 (16,767) Lower share of results in associate (AXA Affin General)
Profit before zakat and taxation 679,109 682,501 3,392
Zakat (4,113) (5,530) (1,417)
Profit before taxation 674,996 676,971 1,975
Taxation (147,576) (160,880) (13,304)
Net profit for the financial period 527,420 516,091 (11,329)
Summary of Group Profit & Loss
11
RM’000ABB Group
FY2018ABB Group
FY2019Variance Comments
Personnel cost 782,765 806,981 24,216The personnel cost increased slightly by 3.1% mainly due to annual increment to staff
Promotion & marketing related expenses 59,995 53,842 (6,153)Due to lower entertainment, travelling and accommodation and commission and brokerage expenses
Establishment-related expenses 262,276 271,025 8,749Due to higher cost of repair and maintenance in FY2019
General & administrative expenses 112,473 92,085 (20,388) Due to lower professional fees.
TOTAL 1,217,509 1,223,933 6,424
Cost to Income ratio (%) 63.39 63.36 (0.03)
Summary of Group Operating Expenses
12
RM’000ABB GROUP
FY2018ABB GROUP
FY2019 VarianceComments
Net brokerage 78,131 70,365 (7,766)Lower brokerage income due to weakerstockbroking market in FY2019
Portfolio management fees 293,269 301,149 7,880
Corporate advisory fees 9,883 9,822 (61)
Commission 26,723 31,167 4,444
Service charges and fees 65,378 51,775 (13,603)Lower service charges and fees due to lower processing fees and early settlement fees
Guarantee fees 22,712 29,151 6,439Higher billings in performance guarantee related to facilities in FY2019
Arrangement fees 2,814 1,768 (1,046)
Agency fees 1,199 2,310 1,111
Initial service charges 103,619 88,528 (15,091)Higher contribution by retail funds in FY2018 which have higher direct commission sharing
Other fee income 17,146 8,699 (8,447)Lower fee income due to lower placement fees in FY2019
Subtotal 620,874 594,734 (26,140)
Fee and commission expense (164,009) (153,327) 10,682
NET FEE AND COMMISSION INCOME 456,865 441,407 (15,458)
Summary of Net Fee And Commission Income
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Group Statement of Financial Position at a glance
Total Equity (RM billion)
9.48.7 9.1 8.7 9.4
2016 2017 2018 2019
Gross Loans, Advances and Financing (RM billion)
46.0
Total Deposits from Customers (RM billion)
51.1
Total Assets (RM billion)
68.3
44.2 46.1 49.0 46.0
2016 2017 2018 2019
51.5 50.9 57.3 51.1
2016 2017 2018 2019
68.9 70.8 76.0 68.3
2016 2017 2018 2019
Total Liabilities (RM billion)
58.9
Net Loans, Advances and Financing (RM billion)
45.4
60.2 61.7 67.2 58.9
2016 2017 2018 2019
43.7 45.7 48.4 45.4
2016 2017 2018 2019
Net Assets Per Share(RM)
4.704.47 4.67 4.46 4.70
2016 2017 2018 201914
Loans Portfolio
20.8 22.4 25.0 24.6
19.7 20.1 19.9 17.3
3.7 3.6 4.1 4.1
2016 2017 2018 2019 Consumer Corporate SMEs
Mortgage47.8%
Hire Purchase
43.5%
Credit Card0.7%
Overdraft & personal loans
8.0%
44.2 46.1 49.0
Term Loans60.8%
Overdrafts6.2%
Revolving Credit24.0%
Trade Products9.0%
Term Loans66.6%
Overdrafts17.7%
Revolving Credit1.4%
Trade Products14.3%
46.0
Gross Loans by Composition (RM billion)
Composition of Consumer Loans
FY2019
Composition of Corporate Loans
FY2019
Composition of SME Loans
FY2019
Gross Impaired Loans (RM million)
737.3
1,167.31,589.9
1,379.2
700.3 1,143.1
1,578.7 1,254.7 37.0
24.2
11.2
124.5
2016 2017 2018 2019
Impaired Loans R&R Loans
15
9.1%
36.3%
54.6%
8.4%
44.6%
47.0%
GROSS LOAN BY ECONOMIC PURPOSE FY2019 (%)
GROSS LOAN BY ECONOMIC PURPOSE FY2018 (%)
Gross Loans Portfolio by Economic Purpose
FY2019RM million
Construction 2,706,006
Purchase of residential properties 11,502,926
Purchase of non-residential properties 6,339,626
Purchase of securities 1,512,781
Purchase of transport vehicles 11,161,312
Working Capital 10,277,342
Personal use 833,904
Others 1,627,997
TOTAL 45,961,894
FY2018RM million
Construction 3,459,827
Purchase of residential properties 10,435,105
Purchase of non-residential properties 6,654,767
Purchase of securities 1,615,833
Purchase of transport vehicles 12,799,056
Working Capital 11,354,983
Personal use 776,714
Others 1,876,519
TOTAL 48,972,804
5.9
25.0
13.8
3.3
24.3 22.4
1.8 3.5
Construction Purchase ofresidentialproperties
Purchase ofnon residential
properties
Purchase ofsecurities
Purchase oftransportvehicles
Workingcapital
Personal use Others
7.1
21.3
13.6
3.3
26.1
23.2
1.6
3.8
Construction Purchase ofresidentialproperties
Purchase ofnon
residentialproperties
Purchase ofsecurities
Purchase oftransportvehicles
Workingcapital
Personaluse
Others
16
Gross Impaired Loans Portfolio by Economic Purpose
GROSS IMPAIRED LOANS PORTFOLIO BY ECONOMIC PURPOSE FY2018 (%)
FY2018RM million
Construction 445,679
Purchase of residential properties 252,180
Purchase of non-residential properties 306,676
Purchase of transport vehicles 233,957
Working Capital 317,693
Personal use 19,384
Others 14,328
TOTAL 1,589,897
GROSS IMPAIRED LOANS PORTFOLIO BY ECONOMIC PURPOSE FY2019 (%)
FY2019RM million
Construction 287,934
Purchase of residential properties 340,382
Purchase of non-residential properties 317,923
Purchase of transport vehicles 60,975
Working Capital 330,709
Personal use 17,589
Others 23,640
TOTAL 1,379,152
20.9 24.7
23.0
4.4
24.0
1.3 1.7
Construction Purchase ofresidentialproperties
Purchase ofnon
residentialproperties
Purchase oftransportvehicles
Workingcapital
Personal use Others
28.0
15.9
19.3
14.7
20.0
1.2 0.9
Construction Purchase ofresidentialproperties
Purchase ofnon
residentialproperties
Purchase oftransportvehicles
Workingcapital
Personaluse
Others
17
51.5 50.9 57.3 51.1
2016 2017 2018 2019
35.4
16.6
5.3
21.224.0
5.9
Corporate Consumer SME
2018 2019
Customers Deposits
Deposits (RM billion)
Y-o-Y - 40.1%
Y-o-Y +44.6%
Y-o-Y +11.3%
Deposits by Sector (RM billion)
Y-o-Y - 1.2% Y-o-Y 12.6%
Industry LTF
FY2018 82.7FY2019 82.2
Industry LTFE
FY2018 72.4FY2019 72.9
Y-o-Y -10.8%
81.1
72.7
84.0
71.7
Loans to Fund Ratio (LTF) Loan to Funds and EquityRatio (LTFE)
2018 2019
18
FY2019FY2018
Deposits from Customers (RM billion)
RM51.1 billionDeposits from Customers (RM billion)
RM57.3 billion
Customers Deposits by Segments
5.6
- -
2.6
2.9 3.4
27.2
2.4
13.2
Corporate SME Consumer Banking
Money Market and Other Deposits CASA Fixed Deposits
2.2 - -
3.2 2.9 3.7
15.8
3.0
20..3
Corporate SME Consumer Banking
Money Market and Other Deposits CASA Fixed Deposits
35.4
5.3
16.6
21.2
5.9
24.0
19
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The Board had proposed a final dividend of 7.0 sen in respect of the financial year ended 31December 2019 (“Proposed Final Dividend”), subject to shareholders’ approval at the annualgeneral meeting to be convened.
Further, the Board had also determined that the DRP be applied to the Proposed Final Dividendand 100% of the Proposed Final Dividend can be elected to be reinvested into new Affin Bankshares.
Proposed Second Dividend Reinvestment Plan (DRP)
2 New Divisions
2016 to 2020
BUILDING A STRONGERAFFIN
4 New Division Heads New Product Development
Methodology
New Integrated Credit
Management Model
4 New Departments Regaining IT Ownership Enhanced Technology
Roadmap & GovernanceNew Data Governance
Strengthening Staff
Force & Skills
Affin Culture Building New Relationship
Management Model
New Branch-Hub
Management Framework
Organization & People Processes & Capabilities
STREAMLINED
ORGANISATIONAL
STRUCTURE
OPTIMISING CUSTOMER
EXPERIENCE
CUSTOMER-CENTRIC
MINDSET
CULTIVATION OF SALES-
CULTURE
MODERNISING DIGITAL
CAPABILITIES
Reinforced Foundations, Positioning for Transformational Growth
22
SME Colony AppTaPay
Retail Internet Banking AffinPay AffinMax Affin Genius Pocket
Comprehensive Digital Ecosystem a Key Enabler
2019
2019 2019 20202Q 2020
2017
23
Recognition of Our Transformation and Digitalisation
▪ #1 best customer relationship management
▪ #2 best new contact centre
▪ #2 best new campaign award
19th Malaysia Contact Centre
Awards 2018
#1
▪ CX Pioneer: Best new customer – breakingsilos
with a fast deployment (small)
2018 Genesys Customer
Innovation Award
#1
▪ Winner of the best growth in new accountsaward
in 2019
#1
2019 Mastercard Malaysia Awards
▪ Best SME Banking Initiative for Start-Ups
(Malaysia)
UK International Finance Magazine
Awards 2019
#1
▪ Category won: Mobile-Banking Industry
Malaysia Technology Excellence
Awards 2019
#1
2018 ASNB Award
Overall Top Performing
Financial Advisor
2017 Runner Up for Best
Cash Management Poll
(Small)
2017 JomPAY National
Biller Acquisition (Mid-
sized Acquirers) Award
2017 Asian Banker’s
Liquidity Risk
Technology
Implementation of the
Year
2015/16 PNB-ASNB
Starz Award for
registering the highest
number of counter
transactions at theUSJ
Taipan branch
▪ Merit Award for Affin Genius Pocket
2019 WITSA Global ICTExcellence
Awards
#1
24
Economic Outlook
26
❖ Malaysia’s economic growth is projected to expand by 4.0% in 2020, lower than 4.3% for 2019, draggedby uncertainties from external front especially the unresolved trade dispute between US and China.
❖ The domestic economy will be further impacted by the Covid-19 coronavirus outbreak in China which is stillan evolving situation and creating uncertainty in the mid and long term global economic outlook, thusadding more pressure to Malaysia's economy.
❖ In 2020, the Malaysian banking sector is anticipated to continue operating in a challenging environmentwith the prolonged US-China trade war and global growth moderating across developed and emergingeconomies, coupled with policy uncertainties and geopolitical tensions. The sector will remain stable butsoft going forward with a modest growth outlook.
❖ The loan growth will remain subdued but stable with added headwinds from rising gross impaired loansand margin contractions due to the recent overnight policy rate cut and increase in credit costs. The impactwould be flattish loan growth, compression of net interest margin and risk of deteriorating asset quality.
Guidance for 2020
Loan Growth 4% - 5%
Deposit Growth 4% - 5%
Cost to Income Ratio 58% - 60 %
Gross Credit Cost 15 bps - 20 bps
Non interest income to total income
45%
2020 Guidance for AFFIN Bank Group 2020 Guidance for Malaysia
GDP4.0%
CPI1.8% – 2.0%
OPR2.50%
RM/USD4.20
27
Key strategies moving forward
▪ Managing asset quality▪ Reducing cost to Income ratio▪ Managing cost of Funds▪ Increase CASA franchise▪ Improving ROE
Shareholding Statistics as at 31 January 2020
LTAT 35.33
BHB20.73
BEA23.56
EPF 6.56
OTHERS13.82
Substantial Shareholders (%) Foreign Shareholdings (%)
JAN 2019
FEB2019
MAR2019
APRIL2019
MAY2019
JUNE2019
JULY2019
AUG2019
SEPT2019
OCT2019
NOV2019
DEC2019
JAN 2020
26.61 26.57 26.55 26.56 26.53 26.52 26.52 26.50 26.50 26.50 26.48 26.47 26.48
23.56 23.56 23.56 23.56 23.56 23.56 23.56 23.56 23.56 23.56 23.56 23.56 23.56
3.05 3.01 2.99 3.00 2.97 2.96 2.96 2.94 2.94 2.94 2.92 2.91 2.92
J F M A M J J A S O N D J
BEA Others
28
THANK YOUFor any enquiries, please email [email protected] or call us at
+603-20285441 (Investor Relations Department)
Disclaimer. This presentation has been prepared by AFFIN Bank Berhad (the “Company”) for information purposes only and does not purport to contain all the information that may be required to evaluate the Company or its financialposition. No representation or warranty, express or implied, is given by or on behalf of the Company as to the accuracy or completeness of the information or opinions contained in this presentation. The presentation does not constitute orform part of an offer, solicitation or invitation of any offer, to buy or subscribe for any securities, nor should it or any part of it form the basis of, or be relied in any connection with, any contract, investment decision or commitmentwhatsoever. The Company does not accept any liability whatsoever for any loss howsoever arising from any use of this presentation or their contents or otherwise arising in connection therewith.