Company No. 923693 H MIZUHO BANK (MALAYSIA) BERHAD UNAUDITED INTERIM FINANCIAL STATEMENTS
UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017 Note ASSETS Cash and short-term funds 1,905,876 2,475,174 Deposits and placements with financial institutions 828,796 1,176,891 Financial investments available-for-sale 11 349,652 300,024 Loans, advances and financing 12 4,917,027 3,645,254 Derivative financial assets 498,509 593,387 Other assets 29,073 13,101 Property and equipment 8,597 8,651 Intangible assets 13,626 13,867 TOTAL ASSETS 8,551,156 8,226,349 LIABILITIES AND EQUITY Deposits from customers 13 2,576,965 2,636,143 Deposits and placements from financial institutions 14 4,274,983 3,686,803 Derivative financial liabilities 474,366 565,168 Other liabilities 454,539 587,846 Deferred tax liabilities 2,325 1,870 TOTAL LIABILITIES 7,783,178 7,477,830 Share capital 700,000 700,000 Retained profits 17,772 18,222 Other reserves 50,206 30,297 TOTAL EQUITY 767,978 748,519 TOTAL LIABILITIES AND EQUITY 8,551,156 8,226,349 COMMITMENTS AND CONTINGENCIES 20 11,039,946 11,641,250 The unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for the Bank for the year ended 31 March 2017. 1
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 1st Quarter ended Three months ended 30 June 30 June 30 June 30 June 2017 2016 2017 2016 Note Interest income 15 48,366 26,518 48,366 26,518 Interest expense 16 (25,402) (13,784) (25,402) (13,784) Net interest income 22,964 12,734 22,964 12,734 Other operating income 17 10,170 16,009 10,170 16,009 Net operating income 33,134 28,743 33,134 28,743 Other operating expenses 18 (16,865) (14,687) (16,865) (14,687) Operating profit 16,269 14,056 16,269 14,056 Allowance for impairment on loans, advances and financing 19 4,486 (9,076) 4,486 (9,076) Profit before taxation 20,755 4,980 20,755 4,980 Taxation (1,512) (1,618) (1,512) (1,618) Profit for the financial period 19,243 3,362 19,243 3,362 Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Unrealised loss on financial investments 284 (207) 284 (207) Income tax effect (68) 50 (68) 50 Other comprehensive loss for the period 216 (157) 216 (157) Total comprehensive income for the financial period 19,459 3,205 19,459 3,205 Profit attributable to: Owner of the Bank 19,243 3,362 19,243 3,362 Total comprehensive income attributable to: Owner of the Bank 19,459 3,205 19,459 3,205 The unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for the Bank for the year ended 31 March 2017. 2
UNAUDITED STATEMENT OF CHANGES IN EQUITY Non-distributable Distributable Available Share Statutory Regulatory for-sale Retained capital reserve reserve reserve profits Total 2017 June At 1 April 2017 700,000 25,680 4,889 (272) 18,222 748,519 Profit for the period - - - - 19,243 19,243 Other comprehensive gain - - - 216-216 Transfer to regulatory reserve - - 19,693 - (19,693) - At 30 June 2017 700,000 25,680 24,582 (56) 17,772 767,978 2016 June At 1 April 2016 700,000 17,065 5,784 157 8,712 731,718 Profit for the period - - - - 3,362 3,362 Other comprehensive loss - - - (157) - (157) Transfer to retained profits - - (5,217) - 5,217 - At 30 June 2016 700,000 17,065 567-17,291 734,923 The unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for the Bank for the year ended 31 March 2017. 3
Cash flows from operating activities 30 June 30 June 2017 2016 Profit before taxation 20,755 4,980 Adjustments for non-operating and non-cash items (4,131) (911) Operating profit before working capital changes 16,624 4,069 Changes in working capital: Increase in operating assets (1,622,957) (352,820) Increase/(Decrease) in operating liabilities 395,694 (141,152) Taxation paid (1,125) (1,125) Net cash used in operating activities (1,211,764) (491,028) Net cash used in investing activities (992) (1,374) Net decrease in cash and cash equivalents (1,212,756) (492,402) Cash and cash equivalents at beginning of financial year 3,420,998 2,803,814 Cash and cash equivalents at end of financial period 2,208,242 2,311,412 Analysis of cash and cash equivalents MIZUHO BANK (MALAYSIA) BERHAD (923693-H) UNAUDITED STATEMENT OF CASH FLOWS Cash and short-term funds 1,905,876 2,323,247 Deposits and placements with financial institutions 828,796 47,984 Less: Deposits and placements with financial institutions with contractual maturity more than 3 months (526,430) (59,819) 2,208,242 2,311,412 The unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for the Bank for the year ended 31 March 2017. 4
1 BASIS OF PREPARATION The unaudited interim financial statements for the quarter ended 30 June 2017 have been prepared under the historical cost convention except for the following assets and liabilities which are stated at fair value: financial investments available-for-sale and derivative financial instruments. The unaudited condensed interim financial statements have been prepared in accordance with MFRS 134, Interim Financial Reporting issued by the Malaysian Accounting Standards Board ("MASB") and Bank Negara Malaysia's Guidelines on Financial Reporting. The unaudited interim financial statements should be read in conjunction with the audited financial statements of the Bank for the financial year ended 31 March 2017. The explanatory notes attached to the interim financial statements 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 financial year ended 31 March 2017. The following are accounting standards and amendments of the MFRS framework that have been issued by MASB but are not yet effective: Amendments to MFRS 107 Amendments to MFRS 112 Amendments to MFRS 2 Amendments to MFRS 4 IC Interpretation 22 Amendments to MFRS 140 Amendments to MFRS 15 MFRS 9 MFRS 16 Statement of Cash Flows - Disclosure (Annual Improvements 2014-2016 Cycle) Recognition of Deferred Tax Assets for Unrealised Losses Share-based Payment - Classification and Measurement of Share-based Payment Transactions Insurance Contracts - Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts Foreign Currency Transactions and Advance Consideration Investment Property - Transfers of Investment Property Revenue from Contracts with Customers Financial Instruments Leases Amendments to MFRS 10 and MFRS 128 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture which was earlier announced to be effective for the financial year ending 31 March 2017 has been deferred to a date to be determined by MASB. The adoption of these amendments is not expected to have any material impact on the financial statements of the Bank. 5
2 AUDIT REPORT The audit report on the audited annual financial statements for the financial year ended 31 March 2017 was not subject to any qualification. 3 SEASONAL OR CYCLICAL FACTORS The business operations of the Bank have not been affected by any material seasonal or cyclical factors. 4 EXCEPTIONAL OR EXTRAORDINARY ITEMS There were no exceptional or extraordinary items for the financial quarter ended 30 June 2017. 5 CHANGES IN ESTIMATES There were no significant changes in estimates of amounts reported in the prior financial years that have a material effect on the financial results and position of the Bank for the financial quarter ended 30 June 2017. 6 CHANGES IN DEBT AND EQUITY SECURITIES There were no issuance and repayment of debt and equity securities during the financial quarter ended 30 June 2017. 7 DIVIDEND PAID No dividend was declared or paid during the financial quarter ended 30 June 2017. 8 SUBSEQUENT EVENTS There were no material events subsequent to the balance sheet date that require disclosure or adjustments to the unaudited condensed interim financial statements. 9 REVIEW OF PERFORMANCE The Bank recorded higher profit before taxation for the financial period ended 30 June 2017 of RM20.8 million compared to RM5.0 million profit before taxation in the previous corresponding period, representing an increase of RM15.8 million or 316.8%. The incresed profit was due to an improvement in allowance for impairment on loans, advances and financing by RM13.6 million or 149.4%. Operating profit increased by RM2.2 million (15.7%) from RM14.1 million to RM16.3 million primarily due to higher net interest income earned compared to June 2016. Operating expenses increased by RM2.2 million (14.8%) from RM14.7 million to RM16.9 million, mainly due to administrative costs. The Bank's total assets stood at RM8,551.16 million as at 30 June 2017, this is higher with compared against 31 March 2017 which stood at RM8,226.35 million. The Bank s total common equity Tier 1 ratio and total capital ratio remained strong at 24.164% and 25.304% respectively. 6
10 PROSPECTS The Bank's strategy is to continue growing its profit sustainably by focusing in the financial year to expand its corporate client portfolio asset base and managing its capital efficiently to support loan growth. The Bank will continue to offer commercial banking services such as deposit, foreign exchange, derivatives, cash management services and Islamic Finance services to both Japanese and non-japanese clients. In addition, the Bank will further leverage on its network of group companies - Mizuho Bank, Mizuho Securities, and Mizuho Trust & Banking - by offering a comprehensive range of high quality financial products and services to the local market. 11 FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE At fair value: Malaysian Government Securities 30,054 30,108 Malaysian Government Treasury Bills - 99,626 Government Investment Issues 179,232 89,913 Government Guaranteed Bond 140,366 80,377 349,652 300,024 12 LOANS, ADVANCES AND FINANCING (a) By type: At amortised cost: Term loans 3,537,530 2,236,952 Revolving credits 1,407,261 1,434,185 Overdraft - - Banker Acceptances 7,119 13,537 4,951,910 3,684,674 Less: Unearned interest (43) (94) Gross loans, advances and financing 4,951,867 3,684,580 Less: Impairment allowance - Collective impairment allowance (34,840) (39,326) Net loans, advances and financing 4,917,027 3,645,254 (b) By geographical distribution: In Malaysia 3,550,344 3,578,355 Outside Malaysia 1,401,523 106,225 4,951,867 3,684,580 7
12 LOANS, ADVANCES AND FINANCING (CONTINUED) (c) By type of customer: Domestic business enterprise 2,438,679 2,385,831 Domestic non-bank financial institutions 1,111,666 1,192,524 Foreign business entity 1,401,522 106,225 4,951,867 3,684,580 (d) By interest/profit rate sensitivity: Fixed rate 1,305,143 1,338,395 Variable rate - cost plus 3,646,724 2,346,185 4,951,867 3,684,580 (e) By economic purpose: Construction 68,128 77,212 Purchase of fixed assets other than land and building 1,018,881 1,100,265 Purchase of non-residential property 41,992 33,659 Working capital 3,822,866 2,473,444 4,951,867 3,684,580 (f) By economic sector: Agriculture 105,714 - Mining and quarrying 77,475 79,981 Manufacturing 1,263,221 1,236,537 Electricity, gas and water supply 77,458 63,816 Construction 146,629 1,803 Wholesale and retail trade, and restaurants and hotels 537,609 614,304 Transport, storage and communication 141,830 145,748 Finance, insurance, real estate and business activities 2,473,914 1,415,609 Education, health and others 19,188 20,557 Others 108,829 106,225 4,951,867 3,684,580 (g) By residual contractual maturity: Maturity within - one year 2,861,919 1,493,484 - one to five years 1,610,580 1,680,129 - over five years 479,368 510,967 4,951,867 3,684,580 8
12 LOANS, ADVANCES AND FINANCING (CONTINUED) (h) Movements in collective impairment allowance for loans, advances and financing: Collective impairment allowance: At 1 April 39,326 21,734 (Writeback) / Allowance made during the period (4,486) 17,592 At end of the reporting period / year 34,840 39,326 As percentage of total loan 0.70% 1.07% The Bank has no impaired loans, advances and financing and no individual impairment allowance was deemed required as at 30 June 2017. 13 DEPOSITS FROM CUSTOMERS (a) By type of deposit: - Demand deposits 697,424 642,178 - Fixed deposits 1,292,159 1,353,471 - Short-term deposits 587,382 640,494 2,576,965 2,636,143 (b) By type of customer: - Domestic non-bank financial institutions 32,511 93,637 - Domestic business enterprises 2,498,498 2,492,058 - Domestic other enterprises 184 - - Foreign business enterprises 45,772 50,448 2,576,965 2,636,143 (c) Maturity structure: - On demand 697,424 642,178 - Due within six months 1,879,171 1,933,977 - Due over six months to one year 370 59,988 2,576,965 2,636,143 14 DEPOSITS AND PLACEMENTS FROM FINANCIAL INSTITUTIONS Licensed banks 4,274,983 3,686,803 9
15 INTEREST INCOME 1st Quarter ended Three months ended 30 June 30 June 30 June 30 June 2017 2016 2017 2016 Loans, advances and financing 25,074 10,158 25,074 10,158 Money at call and deposits and placements with financial institutions 19,971 14,319 19,971 14,319 Net gain from interest rate swap and cross-currency interest rate swap 525 567 525 567 Financial investments available-for-sale 2,786 1,474 2,786 1,474 Others 10-10 - 48,366 26,518 48,366 26,518 16 INTEREST EXPENSE 1st Quarter ended Three months ended 30 June 30 June 30 June 30 June 2017 2016 2017 2016 Deposits and placements from financial institutions 14,364 5,396 14,364 5,396 Deposits from customers 11,038 8,388 11,038 8,388 25,402 13,784 25,402 13,784 17 OTHER OPERATING INCOME 1st Quarter ended Three months ended 30 June 30 June 30 June 30 June 2017 2016 2017 2016 Fee income 1,711 1,389 1,711 1,389 Net unrealised gain/(loss) on revaluation - of derivatives (4,076) 8,854 (4,076) 8,854 Realised foreign exchange gain 7,566 2,649 7,566 2,649 Unrealised foreign exchange gain 4,969 3,116 4,969 3,116 Other income - 1-1 10,170 16,009 10,170 16,009 10
18 OTHER OPERATING EXPENSES 1st Quarter ended Three months ended 30 June 30 June 30 June 30 June 2017 2016 2017 2016 Personnel costs: Salaries, allowances and bonuses 6,797 6,330 6,797 6,330 Contribution to Employees Provident Fund 794 726 794 726 Other staff related costs 1,443 1,401 1,443 1,401 Establishment costs: Repair and maintenance 1,466 992 1,466 992 Depreciation of property and equipment 532 812 532 812 Amortisation of intangible asset 756 697 756 697 Rental of premises 554 523 554 523 Information technology expenses 148 202 148 202 Others 314 352 314 352 Marketing expenses: Advertisement and publicity 17 3 17 3 Others 146 259 146 259 Administration and general expenses: Collateral deposit fees 2,359 879 2,359 879 Communication expenses 213 239 213 239 Legal and professional fees 131 255 131 255 Others 1,195 1,017 1,195 1,017 16,865 14,687 16,865 14,687 19 ALLOWANCE FOR IMPAIRMENT ON LOANS, ADVANCES AND FINANCING 1st Quarter ended Three months ended 30 June 30 June 30 June 30 June 2017 2016 2017 2016 Collective impairment allowance - (writeback)/made during the year (4,486) 9,076 (4,486) 9,076 11
20 COMMITMENTS AND CONTINGENCIES * In the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities with legal recourse to customers. No material losses are anticipated as a result of these transactions. The risk-weighted exposures of the Bank are as follows: As at 30 June 2017 Direct credit substitutions 23,554 23,554 23,479 Transaction related contingent items 86,509 43,255 37,688 Short-term self-liquidating trade related contingencies 6,716 1,343 1,343 Foreign exchange related contracts - One year or less 2,451,240 21,709 10,332 - Over one year to five years 106,754 8,069 5,241 Interest related contracts - One year or less 1,007,396 149,999 80,307 - Over one year to five years 4,887,268 769,125 490,911 - Over five years 457,656 98,994 76,757 Other commitments,such as formal standby facilities and credit lines, with an original maturity of over one year 408,167 204,084 204,084 Any cancelled commitments at any time that are without unconditionally prior notice cancelled at any time without prior notice 1,604,686 - - Total 11,039,946 1,320,132 930,142 As at 31 March 2017 Principal amount RM'000 Credit equivalent amount* RM'000 Riskweighted amount* RM'000 Direct credit substitutions 15,593 15,593 15,583 Transaction related contingent items 112,128 56,064 44,208 Short-term self-liquidating trade related contingencies 6,019 1,204 1,204 Foreign exchange related contracts - One year or less 2,318,852 22,117 12,062 - Over one year to five years 117,786 10,357 7,170 Interest related contracts - One year or less 1,447,512 187,631 103,256 - Over one year to five years 5,101,785 869,860 542,628 - Over five years 481,207 98,305 73,961 Other commitments,such as formal standby facilities and credit lines, with an original maturity of over one year 448,390 224,195 224,195 Any cancelled commitments at any time that are without unconditionally prior notice cancelled at any time without prior notice 1,591,978 - - Total 11,641,250 1,485,326 1,024,267 The credit equivalent amount and risk-weighted amount are arrived at using the credit conversion factors and risk-weights respectively as specified by Bank Negara Malaysia for regulatory capital adequacy purposes. 12
21 CAPITAL ADEQUACY The capital ratios are computed in accordance with Bank Negara Malaysia's Capital Adequacy Framework (Capital Components) and Capital Adequacy Framework (Basel II - Risk Weighted Assets) (collectively, the "Framework") issued on 28 November 2012. The Bank has adopted Standardised Approach for credit risk and market risk and the Basic Indicator Approach for operational risk. In line with transitional arrangements under BNM's Capital Adequacy Framework (Capital Components), the minimum regulatory capital adequacy requirement for common equity Tier 1 ("CET1") capital ratio and Tier 1 capital ratio are 4.5% and 6.0% respectively for year 2017. The minimum regulatory capital adequacy requirement remains at 8% for total capital ratio. (i) Based on the above, the capital adequacy ratios of the Bank are as follows: Capital ratios: CET1 Capital Ratio / Total Tier 1 Capital Ratio 24.164% 24.321% Total Capital Ratio 25.304% 25.466% (ii) The components of CET1 capital, Tier-1 and Tier-2 capital of the Bank are as follows: (iii) CET 1 Capital Paid-up share capital 700,000 700,000 Retained profits (1,471) 18,222 Other reserves 26,269 26,563 Total CET1 Capital, representing total Tier 1 Capital 724,798 744,785 Tier 2 Capital Collective impairment allowance and regulatory reserve 34,194 35,066 Total Capital 758,992 779,851 The breakdown of risk-weighted assets ("RWA") by each major risk categories are as follows: Total RWA for Credit risk 2,735,542 2,805,297 Total RWA for Market risk 97,759 104,229 Total RWA for Operational risk 166,173 152,814 Total RWA 2,999,474 3,062,340 13
21 CAPITAL ADEQUACY (CONTINUED) Disclosures relating to credit risk and market risk are as below: As at 30 June 2017 Credit risk On-balance sheet exposures: Sovereigns/central banks 1,508,750 1,508,750 - - Banks, development financial Institutions and Multilateral Development Banks ("MDBs") 1,583,035 1,155,625 231,125 18,490 Corporates 4,951,910 1,501,308 1,501,308 120,105 Other assets 73,017 73,017 72,966 5,837 Total on-balance sheet exposures 8,116,712 4,238,700 1,805,399 144,432 Off-balance sheet exposures: Over-the-counter ("OTC") derivatives 1,047,895 1,047,895 663,549 53,084 Off-balance sheet exposures other than OTC derivatives or credit derivatives 272,235 272,235 266,594 21,327 Total off-balance sheet exposures 1,320,130 1,320,130 930,143 74,411 Total on and off-balance sheet exposures 9,436,842 5,558,830 2,735,542 218,843 Minimum Capital Risk- Require- Gross Net Weighted ments Exposure class Exposures Exposures Assets at 8% Minimum Capital Risk- Require- Long Short Weighted ments Position Position Assets at 8% Market risk Interest rate risk 6,123,474 6,097,989 89,712 7,177 Foreign currency risk 644-8,047 644 Operational risk 166,173 13,294 Total RWA and capital requirements 2,999,474 239,958 14
21 CAPITAL ADEQUACY (CONTINUED) Disclosures relating to credit risk and market risk are as below: As at 31 March 2017 Credit risk On-balance sheet exposures: Sovereigns/central banks 2,290,665 2,290,665 - - Banks, development financial Institutions and Multilateral Development Banks ("MDBs") 1,665,825 1,105,384 221,077 17,686 Corporates 3,684,674 1,493,667 1,493,667 119,493 Other assets 66,311 66,311 66,286 5,303 Total on-balance sheet exposures 7,707,475 4,956,027 1,781,030 142,482 Off-balance sheet exposures: Over-the-counter ("OTC") derivatives 1,188,270 1,188,270 739,077 59,126 Off-balance sheet exposures other than OTC derivatives or credit derivatives 297,056 297,056 285,190 22,815 Total off-balance sheet exposures 1,485,326 1,485,326 1,024,267 81,941 Total on and off-balance sheet exposures 9,192,801 6,441,353 2,805,297 224,423 Minimum Capital Risk- Require- Gross Net Weighted ments Exposure class Exposures Exposures Assets at 8% Minimum Capital Risk- Require- Long Short Weighted ments Position Position Assets at 8% Market risk Interest rate risk 6,803,624 6,774,830 95,379 7,630 Foreign currency risk 8,850 10 8,850 708 Operational risk 152,814 12,225 Total RWA and capital requirements 3,062,340 244,986 15
21 CAPITAL ADEQUACY (CONTINUED) The breakdown of credit risk exposures by risk weights for the respective balance sheet dates are as follows: < ---- Exposures after Netting and Credit Risk Mitigation ----> Banks, Total Development Exposures Total Sovereigns/ Financial after Netting Riskcentral Institutions & Other and Credit Weighted Risk banks MDBs Corporates Assets Risk Mitigation Assets weights As at 30 June 2017 0% 1,508,750 - - 50 1,508,800-20% - 1,173,381 - - 1,173,381 234,676 50% - 751,566 - - 751,566 375,783 100% - - 2,052,117 72,966 2,125,083 2,125,083 1,508,750 1,924,947 2,052,117 73,016 5,558,830 2,735,542 As at 31 March 2017 0% 2,290,665 - - 23 2,290,688-20% - 1,121,937 - - 1,121,937 224,387 50% - 895,636 - - 895,636 447,818 100% - - 2,066,804 66,288 2,133,092 2,133,092 2,290,665 2,017,573 2,066,804 66,311 6,441,353 2,805,297 16