ANALYSTS/FUND MANAGERS BRIEFING FY2016 RESULTS. 1 March

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Terence Morton
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1 ANALYSTS/FUND MANAGERS BRIEFING FY2016 RESULTS 1 March 2017

2 KEY HIGHLIGHTS & RATIOS PROFIT BEFORE TAX BY SEGMENTS STRATEGIC DIRECTION AFFINITY PROGRAM PROPOSED REORGANIZATION

Summary of Key Highlights TOTAL ASSETS INCREASED TO RM68.9 BILLION 2.2% YoY increase TOTAL EQUITY INCREASED TO RM8.7 BILLION 4.9% YoY increase TOTAL DEPOSIT INCREASED MARGINALLY TO RM55.4 BILLION 2.

3 Summary of Key Highlights TOTAL ASSETS INCREASED TO RM68.9 BILLION 2.2% YoY increase TOTAL EQUITY INCREASED TO RM8.7 BILLION 4.9% YoY increase TOTAL DEPOSIT INCREASED MARGINALLY TO RM55.4 BILLION 2.7% YoY increase GROSS LOANS INCREASED TO RM44.2 BILLION 0.62% YoY increase PROFIT BEFORE TAX & AFTER ZAKAT INCREASED TO RM737.7 MILLION 43.4% YoY increase TOTAL CAPITAL RATIO INCREASED TO 14.23% 2015:14.01% NET INTEREST MARGIN INCREASED MARGINALLY TO 1.98% 2015:1.92% GROSS IMPAIRED LOAN RATIO DECREASED TO 1.67% 2015:1.90% Page 1

Key Highlights Income Statement ( RM mil ) FY2015 FY2016 Change (%) Profit Before Tax and After Zakat 514.4 737.7 43.4 Net Profit 382.2 579.8 51.7 Earnings per share ( sen ) 19.01 29.03 52.

4 Key Highlights Income Statement ( RM mil ) FY2015 FY2016 Change (%) Profit Before Tax and After Zakat Net Profit Earnings per share ( sen ) Balance Sheet ( RM mil) FY2015 FY2016 Change (%) Total Assets 67, , Gross Loans, advances & financing 43, , Deposits from customers 50, , Key Financial Indicators FY2015 FY2016 Change (%) Cost-to-income ratio (1.19) Gross impaired loans ratio (0.23) Loan Loss Reserve (including regulatory reserve) (3.75) Loan to deposits ratio (1.09) Page 2

Key Highlights Capital Adequacy (%) CET 1 / Tier 1 / CCR FY2015* FY2016 Industry average (4Q2016) AFFIN Bank Berhad 11.93 12.59 12.92 AFFIN Islamic Bank Berhad 13.20 12.42 12.

5 Key Highlights Capital Adequacy (%) CET 1 / Tier 1 / CCR FY2015* FY2016 Industry average (4Q2016) AFFIN Bank Berhad AFFIN Islamic Bank Berhad AFFIN Hwang Investment Bank Berhad Total Capital Ratio FY2015* FY2016 Industry average (4Q2016) AFFIN Bank Berhad AFFIN Islamic Bank Berhad AFFIN Hwang Investment Bank Berhad * After Proposed Dividend Page 3

6 Steady Increase in Regulatory Capital (Affin Bank) 18.3% 16.2% 13.3% 11.3% 11.0% 12.6% 13.6% 12.3% 11.9% 14.3% 12.6% 12.2% Proforma* CET1 Total Capital Ratio AFFIN Bank places strong emphasis on the quality of its capital in order to support business growth and risks undertaken. The Bank holds a significant amount of its capital in the form of common equity which is permanent and has the highest loss absorption capability on a going concern basis. Proforma After RM1bln Sub MTN s Program Before Proposed Dividend Page 4

7 Total Income Composition RM Million Total Income (RM million) 2, , Gross Interest income Islamic Banking income Fees & brokerage income Income from financial instruments Other income FY2015 FY2016 Page 5

Key Ratios Net Interest Margin (%) Net Credit Cost (bps)* 1.92 1.98 44.4 4.

8 Key Ratios Net Interest Margin (%) Net Credit Cost (bps)* Cost of funds (%) * Gross Credit Cost 15bps (FY16) vs 64bps (FY15) Page 6

9 Operating Expenses RM 000 FY2015 FY2016 Percentage Growth (%) Personnel cost 595, , Promotion & marketing related expenses 132, , Establishment-related expenses 255, , General & administrative expenses 101, , TOTAL 1,085,718 1,142, Cost to Income Ratio (%) Page 7

Gross Loans Advances & Financing Growth Total Gross Loans (RM bil)* Gross Loans by Customer Type (FY16) 0% 2% 4% Domestic non-banking institution Domestic business enterprise 39% Government &

10 Gross Loans Advances & Financing Growth Total Gross Loans (RM bil)* Gross Loans by Customer Type (FY16) 0% 2% 4% Domestic non-banking institution Domestic business enterprise 39% Government & statutory bodies 52% Individuals Other domestic entities Foreign entities 3% Loan Loss Reserve (%) Loans by Business Segment (RM bil) % % % % % % * Inclusive of Regulatory Reserves Consumer Corporate SMEs * Rebalancing of Loan Portfolio in FY16 Page 8

11 Deposits from Customers Deposits from Customers (RM Bil) Type of Deposits (FY16) % 1% 14% 16% 4% Demand deposits Savings deposits Fixed deposits Commodity Murabahah % Money market deposits Negotiable instruments of deposits ("NID") Gross Loans/Deposit Ratio (%) Deposits ( RM Bil) % % AFFIN Industry % % Consumer Corporate & SMEs Page 9

12 Timely Monitoring Impaired Loans Gross Impaired Loan (RM Mil) Gross Impaired Loan by Purpose (FY16) Gross NPL/Impaired Loans * 44% 3% 11% 23% Purchase of transport vehicles Purchase of Residential property Purchase of Nonresidential property Personal use Construction % 3% 3% Working capital Others Gross Impaired Loan Ratio (%) Net Impaired Loan Ratio (%) Gross Impaired Loan ratio (%) Gross Impaired Loan ratio - industry (%) Net Impaired Loan ratio (%) Net Impaired Loan ratio (industry) Page 10

13 Allowance for Impairment Losses on Loans, Advances and Financing FY 2015 RM 000 FY2016 RM 000 Collective impairment - made/(written-back) during the financial year Individual impairment - Made during the financial year - Written-back during the financial year Bad debts - Recovered - Written-off 17,646 43, ,762 (7,361) (84,515) 3,603 83,130 (60,297) (51,358) 2,840 Additional allowance for impairment losses - Other debtors Net Charge 188,378 18,420 Page 11

14 KEY HIGHLIGHTS & RATIOS PROFIT BEFORE TAX BY SEGMENTS STRATEGIC DIRECTION AFFINITY PROGRAM PROPOSED REORGANIZATION

AFFIN Bank Group (ABG) Net Income (RM million) PBT after zakat (RM million) ABG s PBT after zakat increase 31.1% to RM599.9 million, compared to 457.

15 AFFIN Bank Group (ABG) Net Income (RM million) PBT after zakat (RM million) ABG s PBT after zakat increase 31.1% to RM599.9 million, compared to million recorded in 2015 compounded by higher income from Islamic banking business by 14.2%, higher income from other operating income by 18.9% and lower allowances for loan impairment. ROE (after tax) improved from 6.74% to 8.45% and improvement in Gross Impaired Loan Ratio from 1.80% to 1.60%. Total Assets continued to grow by 0.5% to RM 60.2 billion. Gross Loans, advances and financing stood at RM 43.1 billion whilst Deposits from customers at RM 47.6 billion. The Bank has launched its Priority Islamic Policy ( PIP ) which is the Bank s strategic move to enhance its Islamic financing portfolio to 40% in It has shown progress as the Bank s Islamic portfolio has increased to 27.8% (as at December 2016) of the Bank s total banking assets. The Bank has also won the JomPay Award being the highest biller acquired within Group B consisting of local and foreign banks. Page 12

AFFIN HWANG Investment Bank Group PBT after zakat (RM million) Net Income Contribution (RM million) Key Highlights PBT after zakat improved by 91% from RM68.0m to RM129.8m Net Income grew 7.

16 AFFIN HWANG Investment Bank Group PBT after zakat (RM million) Net Income Contribution (RM million) Key Highlights PBT after zakat improved by 91% from RM68.0m to RM129.8m Net Income grew 7.9% from RM509.1m to RM549.1m, driven by 8.3% growth in Fee Income Operating Expenses also improved by RM7.7m. Personnel costs were lowered by 10.9% following completion of rationalization No. 1 Bursa ranking for Value & Volume traded, for three years running No. 3 Unit Trust industry ranking with RM23.7 billion in AUM Assets Under Administration grew to RM36.3 billion Page 13

17 AXA AFFIN Life Insurance Berhad Gross Premium (RM Million) Loss Before Tax (RM Million) Gross Premium grew 7% to RM386m Lower Pre-tax loss Renewal Premium +12% Renewal Premium First Year Premium First Year Premium Single Premium Single Premium Key highlights 2016 pre-tax loss lower due to higher investment income and lower expenses. Protection and health gross premium growth accelerated +15% vs Value of new business +18% vs on comparable basis. Page 14

AXA AFFIN General Insurance Berhad Gross Written Premium (RM million) 1,465.8 Profit Before Tax (RM million) 181.2 114.

2 million is significantly higher than FY2015 of RM114.

18 AXA AFFIN General Insurance Berhad Gross Written Premium (RM million) 1,465.8 Profit Before Tax (RM million) ,334.9 FY2015 FY2016 FY2015 FY2016 Key highlights FY2016 PBT of RM181.2 million is significantly higher than FY2015 of RM114.9 million Growth in health and motor insurance businesses Improvement in net underwriting results and higher investment income GWP increased by RM130.9 million (9.8%) in FY2016 vs FY2015 NWP increased by RM125.9 million (11.5%) in FY2016 vs FY2015 Page 15

19 KEY HIGHLIGHTS & RATIOS PROFIT BEFORE TAX BY SEGMENTS STRATEGIC DIRECTION AFFINITY PROGRAM PROPOSED RE-ORGANIZATION

20 Affinity Transformation Pillars 32 New Transformation Projects under 8 Pillars targeted full completion in 2019 Pillar 8 Risk & Compliance Governance Business Scope Components: Addresses strategic questions on who are our customers, what do they need and how do we reach them Pillar 1 Target Customer Segments Pillar 2 Distribution Channels Pillar 6 People & Organization Pillar 3 Products & Solutions Pillar 5 Technology Pillar 4 Operations Pillar 7 Performance Management Performance Management Components: Ensures goals and model discipline through a comprehensi ve set of metrics Operations Enablers: Links and supports the execution and delivery capability with the business model goals around Operations, Technology and People Page 16

21 Affinity Transformation Projects 32 New Transformation Projects BENEFIT IMPACT Direct Financial Impact: Revenue Growth Cost Savings Strategic Foundation Building Operational Foundation Building BAU Projects I Target Customer Segments P1.1 CE Organization P1.2 Segments Detailing P1.3 CE Model & Framework II Delivery Channels P2.2 New RM Model P2.5 Call Center for Sales P2.6 Intensify Branches P2.7 Manage Cost-to-Serve P2.8 SME Sales Organization Setup P2.9 Launch e-wallet P2.1 RIB/MIB Implementation P2.4 Digital Banking Strategy P2.3 Branch-Hub Mgmt FRW III Products & Solutions P3.2 Relaunch Credit Card Biz P3.3 Product Economics FRW P3.4 Product Dev Organization P3.5 R&D Solutions P3.6 Iconic Segment Brand P3.1 Complete Core Products PILLAR IV Operations P4.3 SME Credit Scorecard P4.4 SME Credit Process P4.1 Credit Management Model P4.2 Group Operations Model V Technology P5.1 Tech Refresh Review P5.4 BI & CRM Infrastructure P5.2 Re-invigorate IT-Biz P5.3 Solution Architecture IT Sourcing InsiteMy OCS Batch Scheduler Business Productivity Monitor CIB Trade Finance Module VI People & Organization P6.1 WF Transformation: BR P6.2 Leadership Agenda VII Performance Management P7.1 Performance Mgmt FRW P7.2 Biz Performance FRW P7.3 Data Mgnt FRW & Governance Risk & Compliance Governance Ethics, Risk & Compliance Culture Awareness 9 Cards Projects 3 Credit/SIBS Projects 1 Payments Project 3 Disaster Recovery Projects 3 BNM/ITIS Projects 5 NSRS Projects 2 Risk Projects 1 MFRS 9 Project Legend Direct Financial Impact Strategic Foundation Building Operational Foundation Building BAU Projects Page 17

22 PERFORMANCE GOALS GO-TO- MARKET Affinity Transformation Target Financial ROE 8.45% 14-15% Targeted Customers Ops Profit 630m 1120m CIR* Fee : Total Income 18-20% 25-30% 1.Tertiary Students 2.Families Newly Weds With Growing Children With College-going Children 3.SMEs Delivery Channels 1. Consistent and Unique Customer Experience 2. Sales and Service Focus 3. Brick & Mortar AND Digital 4. Productivity Driven Products & Solutions 1.Core Banking Products 2.Utility Solutions 3.Life-Stage Financing 4.Wealth Solutions Competitive Differentiation Possesses a unique customer experience that drives customer loyalty and deepens relationships Leverages its size advantage to be nimble and responsive to the market place * Based on estimation for Bank only Core Competencies Ability to identify and understand unique customer insights that shape relevant financial services solutions Ability to use & apply new or emerging technologies Operating Principles Increasing digitalization of the business to create greater straight through processing Tight coupling of front and back office for seamless customer experience Organization Principles Leadership driven organization with clear accountability Enabled by a robust performance management framework to encourage the right behaviors Page 18

23 KEY HIGHLIGHTS & RATIOS PROFIT BEFORE TAX BY SEGMENTS STRATEGIC DIRECTION AFFINITY PROGRAM PROPOSED REORGANIZATION

24 Proposed Reorganization 16 February 2017 AFFIN announced that it will be undertaking a series of corporate exercises that will essentially entail a reorganisation of the AFFIN Group AFFIN s listing status will ultimately be transferred to AFFIN Bank 20 February 2017 AFFIN and AFFIN Bank submitted the relevant applications to BNM Page 19

25 Our current group structure 100% 100% 100% 100% 1. AFFIN Hwang IB 2. AFFIN Hwang Asset Management (70%) 3. AIIMAN (100%) 1. AXA AFFIN General Insurance (37.07%) 2. AXA AFFIN Life Insurance (51%) Step 1 Step 2 Step 3 Step 4 Material companies will be transferred to AFFIN Bank AFFIN will distribute its AFFIN Bank shares to its shareholders AFFIN s listing status will be transferred to AFFIN Bank AFFIN Bank will be the Bank Holding Company of the Group Page 20

26 Introducing the new AFFIN Banking Group 1. Positioned to spearhead the Group s future growth 2. Will have direct access to capital 3. Enlarged capital base and CAR ratio improves resilience 4. Profile will improve due to its listing status 100% 100% 100% 1. AFFIN Hwang IB 2. AFFIN Hwang Asset Management (70%) 3. AIIMAN (100%) 1. AXA AFFIN General Insurance (37.07%) 2. AXA AFFIN Life Insurance (51%) Page 21

27 Expected Timeline Announcement Submission of the application to BNM/MOF/SC EGM Submit application to High Court Listing of AFFIN Bank on the Main Market of Bursa Securities 6 months* 9 months 8 months 10 months Subject to Receipt of BNM/MOF/SC s approval Submit Circular to Bursa Securities Subject to Receipt of confirmation from High Court Delisting of AFFIN Holdings Entitlement date for the share swap Q Q Q Q Note: * Subject to BNM approval obtained within 6 months from the submission of AHB and ABB s application on the Proposed Reorganisation Page 22

28 THANK YOU

ANALYSTS/FUND MANAGERS BRIEFING 1QFY17 RESULTS 30 MAY

ANALYSTS/FUND MANAGERS BRIEFING 1QFY17 RESULTS 30 MAY 2017 KEY HIGHLIGHTS & RATIOS PROFIT BEFORE TAX BY SEGMENTS AFFINITY STRATEGIC TRANSFORMATION PROGRAM PROPOSED REORGANIZATION Summary of Key Highlights