CHAIRMAN’S STATEMENT
Dear Shareholders,
It has been a challenging year for the banking industry in 2014 amid the margin compression due to intense competition, and the introduction of various guidelines by the regulators to tighten household lending, and to strengthen liquidity and capital of the banks. Despite this, AFFINBANK continue to focus on strategic initiatives to grow the business and achieved a profit before zakat and taxation of RM720.1 million, while increasing the total assets by 5.5% to RM59.5 billion. Throughout the year, the Bank focused on enhancing our balance sheet by improving our loans portfolio, but also grew deposits with new products and promotions offered to targeted customer segments. Our business growth, however, is undertaken with caution so as to preserve the asset quality and the capital of the Bank. As the Chairman of AFFINBANK, I would like to take this opportunity to underline the importance placed by the Board in delivering maximum shareholder value.“For the year under
review, AFFINBANK
achieved a profit
before zakat and
taxation of
RM720.1 million,
while increasing
the total assets
by 5.5% to
RM59.5 billion.”
Jen. Tan Sri Dato’ Seri Ismail
Bin Haji Omar (Bersara)
ChairmanFor the year ending 2014, the Bank declared an interim and final dividend of 13.9 sen amounting to RM235 million which represent a payout of 49.3% of the profit after zakat and taxation.
GOING OUT TO THE COMMUNITY
As we grow our business, we also constantly remember our responsibility to the society and community at large. Each year, we continue to plan and participate in a range of activities and programmes that enrich the nation either socially, religiously / ethically, through the promotion of sports and education, or simply to reach out to help those in need.
In 2014, we continue to participate in the “Sahabat Korporat” initiative organised by Lembaga Tabung Haji where we sponsored the publication of a prayer book for Hajj pilgrims. The Bank continue to support Malaysians in need via collaboration with BHPetrol in two (2) of their CSR initiatives - Di Celah-Celah Kehidupan, a TV series which features hardcore poor individuals and raise funds for them; and the BHPetrol Orange Run 2014, an annual fun charity run.
PROFIT BEFORE ZAKAT AND TAXATION
RM720.1
million
TOTAL ASSETS
RM59.5
billion
CHAIRMAN’S STATEMENT
Several of our community activities were carried out during the festive seasons. During the month of Ramadan, we once again feted orphans to a “buka puasa” (breaking of fast) dinner at our head office. In conjunction with Hari Raya, we contributed RM100,000 to the Welfare Fund of Malaysian Armed Forces to provide festive gift packages as a mark of honour for their services and sacrifice. Volunteers from the Bank also visited an old folks’ home to bring cheer to the residents during Chinese New Year.
During the year, we pooled our resources with our subsidiary, AFFIN ISLAMIC, to be the Official Bank and Strategic Partner for the Global Economic Symposium (GES) held in Kuala Lumpur. GES is organised by the Kiel Institute for the World Economy, and attracts world leaders to generate solutions for current issues such as the financial crisis, unemployment, demographic change, brain drain, poverty, cybercrime and terrorism. Motivated by our belief in the power of education to uplift lives, we continued to sponsor The Star Newspaper-in-Education Programme and supported Utusan Malaysia’s Tutor Pullout, which provides the teachers an alternative but creative approach to education in schools. The Bank also maintained our annual contribution of RM1 million cash to Yayasan Warisan Perajurit, a foundation established by our parent company, Lembaga Tabung Angkatan Tentera (LTAT) to provide scholarships and assistance to the children of Malaysian Armed Forces personnel. Through our own AFFIN Education Excellence Award, in 2014 we provided aid to 127 children of our staff who had excelled in their SPM, STPM or A-level examinations. Since the award was launched in 2004, we have disbursed a total of RM1.7 million to more than 600 deserving students. Under the award programme, we also present scholarships worth RM60,000 each to students pursuing tertiary education in local universities.
In the sporting arena, AFFINBANK presented RM250,000 to the Raja Ashman Shah Asian Hockey Federation - Malaysian Hockey Confederation Academy; and RM1.25 million to the Football Club of the Malaysian Armed Forces for the 2014 Season.
We also continued to sponsor TrEES in the Young Voices for Conservation Programme for the fourth year. The programme is targeted at secondary school students and focuses on producing a generation of “eco-warriors” equipped with the knowledge and skills to protect the environment.
OUTLOOK
At AFFINBANK, we will continue to be guided by our focused goals and plans to retain our competitive edge by targeting selected customer segments, understanding their needs and expanding our range of innovative products to grow our business within well-defined risk parameters. We also aim to further enhance our brand value and visibility by increasing our domestic footprint with a greater focus on dedicated Islamic branches. At the same time, we will explore the regional
Jen. Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)
Chairman
market and prepare the groundwork to establish an international presence.
ACKNOWLEDGEMENTS
On behalf of our Board of Directors, I would like to acknowledge all our stakeholders for your continuous support and belief in us.
I would also like to acknowledge my fellow colleagues on the Board for their wise counsel that has guided AFFINBANK through the peaks and troughs of a very dynamic and demanding industry. Our management has played a critical role in taking the Bank to where we are today. My sincere appreciation goes to this team for their effective leadership. Most of all, I would like to express my heartfelt gratitude to all our employees who have demonstrated a high level of integrity and commitment in their daily actions and performance. Keep up the fantastic work, and together we will fulfil our objectives as well as that of our customers’ ambitions.
Affin Education Excellence Award 2014.
MD/CEO’S PERFORMANCE REVIEW
The year 2014 was challenging for the banking sector in Malaysia given a generally softer economic environment; reduced consumer loan growth as a result of Bank Negara Malaysia’s prudent lending guidelines and ongoing net interest margin compression. Despite the challenges, AFFINBANK produced encouraging results due to its focused business direction, proactive risk management and focus on attracting quality assets.
FINANCIAL PERFORMANCE
In 2014, we achieved a 9.1% increase in net loans, advances and financing from RM36.2 billion (2013) to RM39.5 billion. This increase was achieved at the back of an improved gross impaired loans ratio from 1.92% to 1.78%, and similarly in net impaired loans ratio from 0.90% to 0.84%. Total assets grew by 5.5% from RM56.4 billion to RM59.5 billion.
Despite the intense competition, the Bank increased its deposits by 4.1% to RM48.0 billion. Amid the ongoing margin compression, I am pleased to report that our net interest income improved from RM813.1 million to RM819.5 million. At the same time, net income increased 1.2% to RM1.3 billion in 2014.
On the back of these key parameters, the Bank achieved a profit after zakat and taxation of RM543.7 million.
BUSINESS INITIATIVES
Realising the need to differentiate ourselves in a competitive marketplace, the Bank identified target market segments for which we customised products and services that would help our customers to fulfil their needs and ambitions.
For the individual customers, we grew retail deposits through special promotions designed for the various segment of customers. These included the Chinese New Year promotion offering special fixed deposit rates at the start of the year, and subsequently our popular OMG campaign, called
“Within a challenging
environment, we
achieved a
9.1% increase in
net loans, advances
and financing.”
4.1
%
GROWTH IN DEPOSITS
FROM CUSTOMERS
9.1
%
GROWTH IN NET LOANS,
ADVANCES & FINANCING
the One Million Giveaway. Towards the last quarter, AFFINBANK also started leveraging on the recently acquired Affin Hwang Investment Bank to acquire and grow the retail deposits further. For the affluent customer segment, we launched our AFFINBANK World MasterCard which provides a world of privileges and benefits befitting their lifestyle.
For the SME segment, besides existing products to facilitate SME financing, we collaborated with the Credit Guarantee Corporation Malaysia to launch portfolio guarantee financing at competitive rates which will allow local SMEs greater access to financing.
Finally, we embarked on an e-Payment campaign for our retail internet banking service (affinOnline) to encourage online banking in view of the 50 sen cheque processing fee which will be imposed from January 2015 following a directive by BNM.
IT & OPERATIONS HIGHLIGHTS
The year 2014 saw us embarked on various projects to enhance IT systems and operational processes that will support the business and for compliance to new or revised regulatory guidelines. Treasury system was upgraded to accommodate increasing transactions, and additional services were added to the ATM system adding to greater convenience to customers. A project to implement new grading models is in progress and, when implemented, will enable better assessment of customers for more effective loan management and further improve asset quality.
The Bank will continuously leverage on IT to further improve productivity as well as efficiency to service our customers.
RISK MANAGEMENT
AFFINBANK recognises the various risks within the banking industry and has in place comprehensive systems and processes to manage these. To meet BNM’s Risk-Weighted Capital Adequacy Framework – Internal Capital Adequacy
Dato’ Zulkiflee Abbas
Bin Abdul Hamid
Managing Director / Chief Executive Officer
MD/CEO’S PERFORMANCE REVIEW
Assessment Process (Pillar 2), we have a robust ICAAP Framework that ensures we maintain an adequate level of capital at all times to complement our risk profile and business strategies. Since the introduction of new and more stringent capital requirements under Basel III guidelines, we have been presenting quarterly reports to BNM on our leverage and liquidity positions and are gearing towards full compliance with all the guidelines by 2019, the deadline set by regulatory authorities.
Our Group Risk Management continuously monitors events that could impact the banking sector and our operating environment and recommends appropriate measures to protect the Bank’s position. The team also conducts regular in-depth reviews of our exposure to various industry segments to detect any sign of deterioration in asset quality.
DEVELOPING OUR PEOPLE
The Bank has a structured framework of continuous professional development aimed at enabling our employees to realise their true potential. We run three (3) programmes for fresh graduates that expose them to the banking industry, namely the AFFIN Management Programme, FSTEP and “Skim Latihan 1Malaysia” (SL1M). Each lasts for a year during which the trainees are equipped with technical and soft skills, and given on-the-job exposure via attachments at different departments in the Bank. A total
of 190 trainees have been recruited in this manner since 2005.
Our Human Resources constantly monitors the skills pool and, where deficiencies are identified, programmes are introduced to fill in the gaps. These programmes focused on salesmanship, relationship management, branch operations, customer service and the fundamentals of shariah, among others. Programmes are also tailored for our senior management to keep enhancing their leadership capabilities, as well as to nurture a talent pipeline to support our succession planning.
OUTLOOK
We continue to see opportunities to grow our business in the consumer and SME segment. For the consumer market, we will continue to focus on mortgage loans and hire purchase, and growing customer deposits at the same time with new products and promotions. Initiatives will also be planned to enhance our offering of wealth management products, especially since we can take advantage of the banking group synergies and leverage on our newly formed Affin Hwang Investment Bank.
The Bank will also continue to grow our financing within the SME market and other sectors driven by the government’s Economic Transformation Programme. By growing the corporate and commercial business segments, there
Grand prize winners for “O.M.G” campaign.
will be opportunities to further enhance our transactional banking services. Our main aim is to be more focused in areas in which we excel to help our customers achieve their ambitions. We believe the strong relationships we have built with our customers will stand us in good stead to further grow our business in targeted key segments.
ACKNOWLEDGEMENTS
AFFINBANK is on an exciting journey towards a brighter and better future. We have achieved much that we can be proud of, but are conscious of the need to keep building on our strengths to attain our vision of becoming “a premier partner for financial growth and innovative services”. I believe we have what it takes to turn this vision into reality, given the dedication of our Board of Directors, the leadership of our management team and the commitment to our employees. I would like to acknowledge every single member of the AFFINBANK team for the hard work and perseverance. My appreciation goes to all stakeholders for their belief and trust in us.
We have come a long way, and we intend to go even further. With your continued support, no distance is too far to bridge.
AFFINBANK launched World MasterCard to capture affluent market segment.
Dato’ Zulkiflee Abbas Bin Abdul Hamid
Managing Director / Chief Executive Officer
CORPORATE DIARY
• Jom Karnival for New Branch - Lahad Datu, Sabah
• OMG & AFFINBANK World MasterCard Campaigns - Prize Giving Event
A Mercedes CLA and luxury travel package vouchers were given away to the winners of these 2 campaigns.
• Chinese New Year Charity Activity - Visit to Old Folks Home • Blood Donation Drive
The first of the three blood donation drives was held at Menara Affin in collaboration with the National Blood Centre.
• Sponsorship - Hockey Academy
RM250,000 cash donation to the Raja Ashman Shah AHF-MHC Hockey Academy to develop the Academy in Ipoh, a CSR initiative in support and promotion of sports.
• Sponsorship - Utusan Malaysia’s “Tutor” Pullout • Sponsorship - ATM Football Club
The Football Association of the Malaysian Armed Forces received a financial boost from AFFINBANK with a cash sponsorship of RM1.25 million to the football team for 2014 Season.
• Sponsorship - The Star Newspaper-in-Education
• Jom Karnival for New Branch - Taman Demang, Selangor
JANUARY - FEBRUARY 2014
MARCH - APRIL 2014
• Board of Directors Visits Sarawak Chief Minister
Members of the Board of Directors and Senior Management of AFFINBANK Group paid a courtesy visit to YAB Tan Sri Datuk Amar (Dr.) Haji Adenan Bin Haji Satem, Chief Minister of Sarawak. During the visit, the Bank also presented Zakat of RM400,000 to the Tabung Baitulmal Sarawak.
• Blood Donation Drive
• AFFINBANK World MasterCard Launch
• AFFINBANK / AFFIN HOLDINGS Media Golf Meet 2014 • Sponsorship - “Sahabat Korporat” by Lembaga Tabung Haji
CORPORATE DIARY
• “Majlis Berbuka Puasa Bersama Anak-Anak Yatim dan Saudara / Saudari Baru”
AFFINBANK Group hosted a “Buka Puasa” event for a total of 150 guests comprising orphans and new Muslim converts at its corporate head office, Menara Affin.
• Hari Raya Open House - Customers & Business Partners
AFFINBANK Group’s Board of Directors, management and staff hosted its customers and business partners to a warm and delightful Hari Raya celebration with a scrumptious dinner at a prestigious hotel.
• Sponsorship - “Di Celah-celah Kehidupan” CSR Programme by BHPetrol
JULY - AUGUST 2014
SEPTEMBER - OCTOBER 2014
• Sponsorship - BHPetrol Orange Run 2014
AFFINBANK collaborated with BHPetrol in support of their BHPetrol Orange Run 2014, a 12-km long run organised to raise funds for selected charities.
• Participation - The Edge KL Rat Race 2014 • Participation - Bursa Bull Charge 2014 • Blood Donation Drive
• Sponsorship - “Tabung Pahlawan” Campaign
AFFINBANK sponsored the cost of advertising to promote the “Tabung Pahlawan” Campaign, a fund raising campaign that is organised each year to provide a platform for the general public to donate to the fund and to commemorate the sacrifices of the armed forces.
• Sponsorship - Global Economic Symposium (GES) 2014
AFFINBANK Group became the Official Bank and Strategic Partner for the GES 2014, a solution forum attracting world leaders to generate solutions for global issues such as financial crisis, unemployment, demographic change, brain drain, poverty, cybercrime and terrorism.
• Strategic Alliance Portfolio Guarantee - CGC & AFFINBANK
CGC Forms Strategic Alliance with AFFINBANK to offer Portfolio Guarantee Financing to boost the SME industry.
• TrEES “Young Voices for Conservation”
AFFINBANK sponsored the TrEES “Young Voices for Conservation”, a programme targeted at secondary school students to educate them on financial and leadership skills and the importance of protecting the environment.
FINANCIAL HIGHLIGHTS
Earnings Per Share (EPS)
sen
Total Assets
RM’billion
Deposits From Customers
RM’billion
Profit Before Zakat And Taxation
RM’million
Net Loans, Advances & Financing
RM’billion
Shareholders’ Equity
RM’billion
AFFINBANK’s EPS for the financial year ended 31 December 2014 stood at 33.3 sen compared to 37.5 sen the year before.
AFFINBANK’s financial position as at 31 December 2014 continued to remain strong with total assets of RM59.5 billion, an increase of 5.5% compared with RM56.4 billion as at 31 December 2013.
Total deposits increased by 4.1% year-on-year to RM48.0 billion as at 31 December 2014 compared to RM46.1 billion in the year before.
AFFINBANK recorded profit before zakat and taxation of RM720.1 million for the financial year ended 31 December 2014 compared to RM762.2 million in the same period of 2013.
AFFINBANK’s net loans, advances and financing grew by 9.1% to RM39.5 billion compared to RM36.2 billion in 2013.
Total shareholders’ equity of AFFINBANK was RM5.2 billion as at 31 December 2014 compared to RM4.4 billion in 2013. ‘13 37.5 ‘11 ‘10 ‘14 33.3 ‘12 35.0 30.6 26.5 720.1 ‘14 762.2 ‘13 703.2 ‘12 ‘11 613.1 ‘10 521.9 ‘10 42.1 ‘14 59.5 ‘13 56.4 ‘12 52.1 ‘11 49.2 ‘10 39.5 ‘14 36.2 ‘13 33.5 ‘12 ‘11 29.7 ‘12 ‘13 ‘14 ‘10‘10 26.0 ‘10 48.0 46.1 41.3 ‘14 ‘13 ‘12 ‘11 36.5 31.0 ‘14 5.2 ‘13 4.4 ‘12 4.1 ‘11 3.6 ‘10 3.3
