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Affin Bank Berhad: Interim Financial Statements - 30 September 2020

IM Insights
By IM Insights
5 years ago
Affin Bank Berhad: Interim Financial Statements - 30 September 2020

Islamic banking, Murabahah, Sukuk, Wakalah, Zakat, Credit Risk, Provision, Receivables, Reserves, Sales

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  1. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Unaudited Statements of Financial Position as at 30 September 2020 GROUP Note 30/9/2020 RM'000 BANK 31/12/2019 RM'000 30/9/2020 RM'000 31/12/2019 RM'000 ASSETS Cash and short-term funds Deposits and placements with banks and other financial institutions Investment accounts due from designated financial institutions Financial assets at fair value through profit or loss ("FVTPL") Derivative financial assets Financial investments at fair value through other comprehensive income ("FVOCI") Financial investments at amortised cost (''AC'') Loans, advances and financing Trade receivables Other assets Amount due from subsidiaries Amount due from joint ventures Amount due from associates Tax recoverable Deferred tax assets Statutory deposits with Bank Negara Malaysia Investment in subsidiaries Investment in joint ventures Investment in associates Property and equipment Right-of-use assets Intangible assets 7,856,760 4,605,357 3,444,353 2,317,369 175,324 - 216,939 41,368 - - 1,973,596 1,912,415 A9 A29 597,558 267,149 662,132 164,868 221,536 153,364 170,216 118,225 A10 A11 A12 A13 A14 11,337,046 145,057 45,132,134 934,923 383,150 18,689 30,887 87,280 87,801 49,835 165,841 692,239 774,302 51,448 908,811 12,496,846 145,066 45,387,865 534,388 159,950 28,402 31,787 121,595 22,520 1,534,777 171,913 659,527 641,867 57,709 914,693 5,646,470 101,947 24,952,817 164,493 83,270 30,887 78,939 46,228 38,532 3,053,899 178,940 548,482 743,029 32,554 206,073 6,373,844 100,499 25,730,059 60,883 1,318 30,887 67,940 12,690 857,377 3,053,899 178,940 548,482 607,322 43,416 202,670 69,696,234 68,341,262 41,916,348 42,429,819 B7 49,504,857 2,505 51,088,962 1,447 27,720,514 - 30,135,250 - B7 A29 4,048,815 312,813 33,967 1,174,427 52,654 1,305,841 34,907 2,080 3,586,778 1,763,252 186,791 32,903 787,563 58,650 1,398,837 41 19,080 3,607,143 2,417,093 204,445 33,967 32,574 533,344 2,151 2,514,516 646,085 136,439 32,903 44,219 418,548 55,899 2,548,379 60,059,644 58,944,669 33,458,604 34,017,722 TOTAL ASSETS LIABILITIES AND EQUITY Deposits from customers Investment accounts of customers Deposits and placements of banks and other financial institutions Derivative financial liabilities Bills and acceptances payable Trade payables Lease liabilities Other liabilities Amount due to subsidiaries Provision for taxation Deferred tax liabilities Borrowings TOTAL LIABILITIES B7 A15 B7 The Condensed Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2019. 1
  2. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Unaudited Statements of Financial Position as at 30 September 2020 GROUP Note 30/9/2020 RM'000 BANK 31/12/2019 RM'000 30/9/2020 RM'000 31/12/2019 RM'000 EQUITY Share capital Reserves:FVOCI revaluation reserves Regulatory reserves Other reserves Foreign exchange reserves Retained profits A16 A16 A16 A16 A16 Equity attributable to equity holders of the Bank Non-controlling interest TOTAL EQUITY TOTAL LIABILITIES AND EQUITY COMMITMENTS AND CONTINGENCIES A28 CAPITAL ADEQUACY RATIOS A31 4,902,300 4,774,772 4,902,300 4,774,772 268,055 443,249 (61,010) 135 4,030,028 250,661 732,539 (61,010) 135 3,640,073 166,480 273,720 3,115,244 148,173 471,925 3,017,227 9,582,757 9,337,170 8,457,744 8,412,097 53,833 59,423 - - 9,636,590 9,396,593 8,457,744 8,412,097 69,696,234 68,341,262 41,916,348 42,429,819 35,323,154 30,851,233 21,201,169 19,679,897 Before deducting proposed dividends : CET 1 capital ratio Tier 1 capital ratio Total capital ratio 15.014% 16.760% 23.636% 14.503% 16.284% 23.306% 13.675% 15.375% 23.067% 13.026% 14.713% 22.349% After deducting proposed dividends : CET 1 capital ratio Tier 1 capital ratio Total capital ratio 15.014% 16.760% 23.636% 14.441% 16.223% 23.245% 13.675% 15.375% 23.067% 12.931% 14.617% 22.253% Net assets per share attributable to equity holders of the Bank (RM) 4.61 4.70 4.07 4.24 The Condensed Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2019. 2
  3. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Unaudited Income Statements for the Financial Quarter Ended 30 September 2020 GROUP Note Interest income Interest expense A17 Individual Quarter Ended 30/9/2020 30/9/2019 RM'000 RM'000 Cumulative Quarter Ended 30/9/2020 30/9/2019 RM'000 RM'000 428,296 (235,465) 541,671 (361,037) 1,350,335 (826,824) Net interest income 192,831 180,634 523,511 556,002 Income from Islamic banking business 113,083 98,078 350,107 300,195 - - 305,914 278,712 793,890 856,197 Modification loss A18 A18 (a) 1,707,546 (1,151,544) (79,728) - Fee and commission income A19 (a) 194,439 155,464 514,289 434,960 Fee and commission expense A19 (b) (58,700) (46,861) (144,035) (114,055) Net fee and commission income A19 135,739 108,603 370,254 320,905 Net gains on financial instruments A20 241,060 76,673 635,935 232,050 Other income A21 11,486 10,272 37,453 35,551 694,199 474,260 1,837,532 1,444,703 A22 (475,818) (317,304) (1,190,640) (932,420) 218,381 156,956 646,892 512,283 (112,311) (11,265) (43,112) (1,933) (283,235) (12,280) (6,984) (1,933) Operating profit 94,805 111,911 351,377 Share of results of a joint venture (2,673) (4,793) 6,787 4,617 18,383 17,168 Profit before zakat and taxation 98,919 111,735 370,011 516,061 Zakat (3,598) Profit before taxation 95,321 110,729 363,248 510,745 (37,806) (33,178) (100,375) (126,371) 57,515 77,551 262,873 384,374 48,718 72,399 239,686 365,661 8,797 5,152 23,187 18,713 57,515 77,551 262,873 384,374 2.38 3.65 11.66 18.44 Net income Other operating expenses Operating profit before allowances Allowances for credit impairment losses Allowances for impairment losses on other assets A23 A24 Share of results of associates Taxation B5 Net profit after zakat and taxation (1,006) 251 (6,763) 503,366 (4,473) (5,316) Attributable to :Equity holders of the Bank Non-controlling interest Earnings per share attributable to equity holders of the Bank (sen) :Basic/fully diluted B10 The Condensed Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2019. 3
  4. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Unaudited Statements of Comprehensive Income for the Financial Quarter Ended 30 September 2020 GROUP Profit after zakat and taxation Individual Quarter Ended 30/9/2020 30/9/2019 RM'000 RM'000 Cumulative Quarter Ended 30/9/2020 30/9/2019 RM'000 RM'000 57,515 77,551 262,873 384,374 157,973 82,046 422,169 421,443 8,323 1,152 15,269 - Net gain on financial investments measured at FVOCI reclassified to profit or loss on disposal (debt instruments) (76,597) (82,092) (442,512) (219,649) - Deferred tax on financial investments at FVOCI (12,733) (106) 11,679 (49,210) - Share of other comprehensive income/(loss) of a joint venture 1,202 (158) (6,323) 2,001 - Share of other comprehensive income of associates 7,929 4,006 14,861 11,500 660 7,911 2,230 18,116 - 532 21 86,757 13,291 17,394 178,186 144,272 90,842 280,267 562,560 135,475 85,690 257,080 543,847 8,797 5,152 23,187 18,713 144,272 90,842 280,267 562,560 Other comprehensive income/(losses): Items that may be reclassified subsequently to profit or loss : - Net fair value change in financial investments at FVOCI (debt instruments) - Net credit impairment loss change in financial investments at FVOCI (debt instruments) (4,098) Items that may not be reclassified subsequently to profit or loss : - Net fair value change in financial investments designated at FVOCI (equity instruments) - Deferred tax on financial investments at FVOCI Other comprehensive income for the financial period, net of tax Total comprehensive income for the financial period (1,917) Total comprehensive income for the financial period attributable to :Equity holders of the Bank Non-controlling interest The Condensed Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2019. 4
  5. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Unaudited Income Statements for the Financial Quarter Ended 30 September 2020 BANK Note Interest income Interest expense A17 A18 Net interest income Modification loss A18 (a) Individual Quarter Ended 30/9/2020 30/9/2019 RM'000 RM'000 Cumulative Quarter Ended 30/9/2020 30/9/2019 RM'000 RM'000 387,945 (211,375) 488,076 (326,124) 1,225,212 (746,585) 176,570 161,952 478,627 - - 176,570 161,952 428,353 503,389 (50,274) 1,533,378 (1,029,989) 503,389 - Fee and commission income A19 (a) 25,369 24,947 67,200 76,749 Fee and commission expense A19 (b) (1,588) (2,259) (4,149) (6,094) Net fee and commission income A19 23,781 22,688 63,051 70,655 Net gains on financial instruments A20 54,751 34,584 186,784 106,834 Other income A21 8,244 67,814 66,571 87,023 263,346 287,038 744,759 767,901 (168,380) (148,737) (506,046) (444,863) 94,966 138,301 238,713 323,038 (79,418) (31,180) (184,433) 11,547 15,548 107,121 54,280 334,585 - - - - 15,548 107,121 54,280 334,585 (13,134) (15,775) (15,447) (70,261) 2,414 91,346 38,833 264,324 0.12 4.61 1.89 13.33 Net income Other operating expenses A22 Operating profit before allowances (Allowances for)/write-back of credit impairment losses A23 Profit before zakat and taxation Zakat Profit before taxation Taxation B5 Net profit after zakat and taxation Earnings per share attributable to equity holders of the Bank (sen) :Basic/fully diluted B10 The Condensed Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2019. 5
  6. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Unaudited Statements of Comprehensive Income for the Financial Quarter Ended 30 September 2020 BANK Profit after zakat and taxation Individual Quarter Ended 30/9/2020 30/9/2019 RM'000 RM'000 Cumulative Quarter Ended 30/9/2020 30/9/2019 RM'000 RM'000 2,414 91,346 38,833 264,324 93,843 16,690 201,266 162,933 Other comprehensive income/(losses): Items that may be reclassified subsequently to profit or loss : - Net fair value change in financial investments at FVOCI (debt instruments) - Net credit impairment loss change in financial investments at FVOCI (debt instruments) 6,197 (243) 12,769 (1,320) - Net gain on financial investments measured at FVOCI reclassified to profit or loss on disposal (debt instruments) (52,131) (37,404) - Deferred tax on financial investments at FVOCI (3,214) 4,972 7,194 8,946 - 8,946 (202,922) (102,386) (14,531) Items that may not be reclassified subsequently to profit or loss : - Net fair value change in financial investments designated at FVOCI (equity instruments) - Other comprehensive income/(loss) for the financial period, net of tax 44,695 (7,039) 18,307 53,642 Total comprehensive income for the financial period 47,109 84,307 57,140 317,966 The Condensed Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2019. 6
  7. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Unaudited Condensed Consolidated Statements Of Changes In Equity for the Financial Quarter Ended 30 September 2020 GROUP At 1 January 2020 <------------------------------- Attributable to Equity Holders of the Bank ---------------------------------> Total FVOCI Foreign NonShare revaluation Regulatory exchange Stock option Other Retained shareholders' controlling equity capital reserves reserves reserves reserves* reserves profits interest RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 4,774,772 250,661 732,539 135 - 3,640,073 9,337,170 59,423 9,396,593 Net profit for the financial period - - - - - - 239,686 239,686 23,187 262,873 Other comprehensive income (net of tax) : - Financial investments at FVOCI - Share of other comprehensive loss of a joint venture - Share of other comprehensive income of associates - 8,856 (6,323) 14,861 - - - - - Total comprehensive income - 17,394 - - - - 239,686 257,080 23,187 280,267 127,528 - - - - - 289,290 (139,021) 127,528 (139,021) (28,777) 127,528 (167,798) At 30 September 2020 4,902,300 268,055 443,249 135 - At 1 January 2019 4,684,752 110,371 939,055 593 8,328 - - - - - 164,685 - - 3,249 2,001 11,500 181,435 90,020 - Issuance of new shares Transfer from regulatory reserves Dividends Net profit for the financial period Other comprehensive income (net of tax) : - Financial investments at FVOCI - Net loss on disposal of financial investments designated at FVOCI (equity instruments) - Share of other comprehensive income of a joint venture - Share of other comprehensive income of associates Total comprehensive income Issuance of new shares Dilution of interest in subsidiaries Transfer to regulatory reserves Issuance of new shares from exercise of employee stock option incentive scheme ** Dividends At 30 September 2019 (289,290) - (61,010) Total equity RM'000 - 8,856 (6,323) 14,861 4,030,028 9,582,757 53,833 9,636,590 - 2,928,584 8,671,683 69,553 8,741,236 - - 365,661 365,661 18,713 384,374 - - - - 164,685 - 164,685 - - - - (3,249) 362,412 2,001 11,500 543,847 18,713 2,001 11,500 562,560 - 8,937 - - - 12,807 (8,937) 90,020 12,807 - 31,967 - 90,020 44,774 - - - - - - 8,328 - - (18,500) (18,500) 4,774,772 291,806 947,992 593 - 3,303,194 9,318,357 (8,328) - (61,010) 8,856 (6,323) 14,861 101,733 9,420,090 * The stock option reserves represents the fair value of the options of a subsidiary's employee stock option incentive scheme. ** On 8 March 2019, the option holders have fully exercised the employee stock option incentive scheme. The Condensed Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2019. 7
  8. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Unaudited Condensed Consolidated Statements Of Changes In Equity for the Financial Quarter Ended 30 September 2020 <--------Non-distributable------> BANK At 1 January 2020 Share capital RM'000 FVOCI revaluation reserves RM'000 Regulatory reserves RM'000 < Distributable > Retained profits RM'000 Total equity RM'000 4,774,772 148,173 471,925 3,017,227 8,412,097 Comprehensive income : Net profit for the financial period - - - 38,833 38,833 Other comprehensive income (net of tax) : - Financial investments at FVOCI Total comprehensive income - 18,307 18,307 - 38,833 18,307 57,140 Issuance of new shares Transfer from regulatory reserves Dividends At 30 September 2020 127,528 4,902,300 166,480 (198,205) 273,720 198,205 (139,021) 3,115,244 127,528 (139,021) 8,457,744 At 1 January 2019 4,684,752 111,161 716,313 2,408,718 7,920,944 Net profit for the financial period - - - 264,324 264,324 Other comprehensive income (net of tax) : - Financial investments at FVOCI Total comprehensive income - 53,642 53,642 - 264,324 53,642 317,966 90,020 -4,774,772 -164,803 14,2022,687,244 90,020 -8,328,930 Issuance of new shares Transfer from regulatory reserves At 30 September 2019 (14,202) 702,111 The Condensed Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2019. 8
  9. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Unaudited Condensed Consolidated Statements of Cash Flow for the Financial Quarter Ended 30 September 2020 GROUP BANK 30/9/2020 RM'000 30/9/2019 RM'000 30/9/2020 RM'000 30/9/2019 RM'000 363,248 510,745 54,280 334,585 (401,606) (345,670) (49,947) (225,742) CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Adjustments for items not involving the movement of cash and cash equivalents Operating profit before changes in working capital (38,358) 165,075 4,333 108,843 Net changes in operating assets Net changes in operating liabilities Tax and zakat paid 1,258,132 762,533 (104,492) 2,413,690 (4,504,670) (107,630) 950,934 (518,825) (52,791) 3,018,632 (4,827,324) (51,252) Net cash generated/(used in) from operating activities 1,877,815 (2,033,535) 383,651 (1,751,101) CASH FLOWS FROM INVESTING ACTIVITIES Interest received : - financial investments at FVOCI - financial investments at AC Dividend income : - financial assets at FVTPL - financial investments at FVOCI - subsidiaries Net disposal/(purchase) of : - financial investments at FVOCI - financial investments at AC Purchase of : - property and equipment - intangible assets Proceeds from disposal of : - property and equipment - intangible assets - foreclosed properties Issuance of new shares Subscription of shares in a joint venture Exercise of employee stock option incentive scheme Net cash generated from investing activities 1,667,799 232,930 6,114 329,742 6,228 195,993 2,870 216,068 4,282 5,386 609 - 2,586 - 732 309 41,500 232 61,000 1,482,091 - 5,142,418 16,223 896,480 - 4,027,317 12,993 (184,834) (3,280) 235 1,020 127,528 - (131,536) (2,947) 326 1,860 90,020 (15,300) 44,774 5,484,394 (178,263) (1,340) 1,020 127,528 1,086,829 (124,926) (1,578) 231 4,080 90,020 (15,300) 4,274,419 CASH FLOWS FROM FINANCING ACTIVITIES Drawdown of borrowings Interest payment on borrowings Payment of dividend to the equity holders of the Bank Payment of dividend to non-controlling interest Lease payments (107,046) (139,021) (28,777) (28,349) - 600,000 (113,861) (18,500) (18,193) - (120,544) (139,021) (20,636) - (133,800) (18,193) - Net cash (used in)/generated from financing activities (303,193) 449,446 (280,201) (151,993) Net increase in cash and cash equivalents Effects of foreign exchange Cash and cash equivalents at beginning of the financial period 3,242,421 (22,646) 4,605,357 3,900,305 6,213 6,324,663 1,190,279 (3,190) 2,288,797 2,371,325 1,008 2,569,003 Cash and cash equivalents at end of the financial period 7,825,132 10,231,181 3,475,886 4,941,336 Cash and cash equivalents comprise the following: Cash and short-term funds Deposits and placements of banks and other financial institutions 7,856,760 175,324 10,275,252 11,957 3,444,353 216,939 4,970,592 42,352 8,032,084 10,287,209 3,661,292 5,012,944 - - Less: Amount held on behalf of commissioned dealer's representatives Cash and short-term funds and deposits and placements with banks and other financial institutions with original maturity of more than three months (63,162) (46,793) (143,790) (9,235) 7,825,132 10,231,181 (185,406) 3,475,886 (71,608) 4,941,336 The Condensed Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2019. 9
  10. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A1. BASIS OF PREPARATION The unaudited condensed interim financial statements for the financial period under review have been prepared under the historical cost convention except for the following assets and liabilities which are stated at fair values : (i) financial assets at FVTPL, (ii) financial investments at FVOCI, and (iii) derivative financial instruments. The unaudited condensed interim financial statements have been prepared in accordance with MFRS134 Interim Financial Reporting issued by the Malaysian Accounting Standards Board ("MASB"), Chapter 9, part K of the Listing Requirements of the Bursa Malaysia Securities Berhad and Policy Document on Financial Reporting issued by Bank Negara Malaysia ("BNM"). The unaudited condensed interim financial statements should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2019. The explanatory notes 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 Group and the Bank since the financial year ended 31 December 2019. A2. ACCOUNTING POLICIES AND METHODS OF COMPUTATIONS The significant accounting policies and methods of computation applied in the condensed interim financial statements are consistent with those applied in the annual financial statements for the financial year ended 31 December 2019, except for the adoption of the following during the current financial period: (a) Accounting standards, annual improvements and amendments to MFRS which are effective for the Group and the Bank for the financial period beginning on or after 1 January 2020: (i) (ii) (iii) (iv) (v) (vi) (vii) Amendments to the Conceptual Framework for Financial Reporting Amendments to MFRS 101 and MFRS 108 "Definition of Material" Amendments to MFRS 3 "Definition of a Business" Amendments to MFRS 16 "Covid-19 Related Rent Concessions" Amendments to MFRS 123 "Borrowing Costs" Amendments to MFRS 7, MFRS 9 and MFRS 139 "Interest Rate Benchmark Reform" Amendments to MFRS 10 "Consolidated Financial Statements" and MFRS 128 "Investments in Associates and Joint Ventures". The adoption of the above accounting standards, annual improvements and amendments do not give rise to any material financial impact to the Group and the Bank. (b) Additional Measures to Assist Borrowers/Customers Affected by the Covid-19 Outbreak by BNM On 24 March 2020, BNM announced the additional measures to assist borrowers/customers experiencing temporary financial constraints due to the Covid-19. The measures which are aimed at ensuring the financial intermediation function of the financial sector remains intact, access to financing continues to be available, and banking institutions remain focused on supporting the economy during these exceptional circumstances are set out as follows: (i) Banking institutions will grant an automatic moratorium on all loan/financing repayments/payments, both principal and interest (except for credit card balances) by individuals and small-medium enterprises ('SMEs') borrowers/customers for a period of 6 months effective 1 April 2020. This automatic moratorium is applicable to loan/financing that are not in arrears exceeding 90 days as at 1 April 2020 and denominated in Malaysian Ringgit; (ii) For credit card balances, banking institutions shall offer customers the options of converting their outstanding balances into a term loan/financing of a tenure of not more than 3 years with an effective interest/profit rate capped at 13% per annum. However, for customers who have not met the minimum repayment of 3 consecutive months, banking institutions shall automatically convert their credit card balances into term loans with the abovementioned terms; (iii) For corporate customers, banking institutions will facilitate customers' requests for a moratorium on loan/financing repayment/payment, additional financing to support cashflows or may reschedule and restructure existing facilities in an effort to assist the corporations to preserve jobs and slowly resume economic activities when conditions improve; (iv) Banking institutions are given a prudential buffer with immediate effect to drawdown the capital conservation buffer of 2.5%, to operate below the minimum liquidity coverage ratio ('LCR') of 100%. This buffer will need to be restored to the minimum regulatory requirements by 30 September 2021; (v) Banking institutions are also allowed to implement a lower minimum Net Stable Funding Ratio ('NSFR') of 80% effective 1 July 2020. The financial impact of the moratorium to interest and profit income are disclosed in Note A18(a) and Note A32(ii). 10
  11. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A3. AUDITORS' REPORT ON PRECEDING ANNUAL FINANCIAL STATEMENTS The auditors' report on the audited financial statements for the financial year ended 31 December 2019 was not subjected to any qualification. A4. SEASONAL OR CYCLICAL FACTORS The operations of the Group and the Bank are generally not affected by any seasonal or cyclical factors but in tandem with the country’s economic situation. A5. ITEMS OF UNUSUAL NATURE, SIZE AND INCIDENCE AFFECTING NET ASSETS, EQUITY, NET INCOME OR CASH FLOWS There were no unusual items affecting the assets, liabilities, equity, net income or cash flows of the Group and the Bank during the financial period under review. A6. CHANGES IN ESTIMATES There were no material changes in estimates of amounts reported in prior financial period that have a material effect during the financial period under review. A7. DEBT AND EQUITY SECURITIES There were no shares issuance or cancellations, share buy-backs, resale of shares bought back and repayment of debts and equity securities by the Group and the Bank during the financial period under review. A8. DIVIDENDS PAID A single-tier interim dividend of 7.0 sen per share in respect of the previous financial year ended 31 December 2019 amounting to RM139,021,409 was paid on 9 September 2020. 11
  12. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS ("FVTPL") At fair value Money market instruments Malaysian Government Securities Malaysian Government Investment Issues Negotiable Instruments of Deposit Quoted Securities Exchange traded fund Shares, warrants and REITs in Malaysia Shares, warrants and REITs outside Malaysia Unit Trusts in Malaysia Unquoted Securities Shares in Malaysia Corporate Bonds/Sukuk in Malaysia Corporate Bonds/Sukuk outside Malaysia Group 30/9/2020 31/12/2019 RM’000 RM’000 Bank 30/9/2020 RM’000 31/12/2019 RM’000 32,577 21,920 111,917 166,414 137,242 60,977 198,219 111,917 111,917 60,977 60,977 1,939 33,050 35,616 217,585 288,190 5,006 49,478 35,101 231,777 321,362 - - 94,207 22,261 26,486 142,954 94,207 21,857 26,487 142,551 94,207 15,412 109,619 94,207 15,032 109,239 597,558 662,132 221,536 170,216 A10. FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME ("FVOCI") Group 30/9/2020 31/12/2019 RM’000 RM’000 Bank 30/9/2020 RM’000 31/12/2019 RM’000 At fair value Money market instruments Malaysian Government Securities Malaysian Government Investment Issues Cagamas Bonds/Sukuk Negotiable Instruments of Deposit and Islamic Debt Certificates Khazanah Bonds/Sukuk Unquoted Securities Shares in Malaysia Corporate bonds/Sukuk in Malaysia Corporate Bonds/Sukuk outside Malaysia 1,568,207 2,842,673 16,684 257,169 4,684,733 731,623 2,948,863 25,965 7,073 309,411 4,022,935 932,461 1,035,460 5,440 412,122 2,385,483 182,017 989,435 1,016,287 256,336 2,444,075 211,468 6,254,737 186,108 6,652,313 180,881 8,031,818 261,212 8,473,911 186,135 2,917,369 157,483 3,260,987 157,818 3,638,627 133,324 3,929,769 11,337,046 12,496,846 5,646,470 6,373,844 12
  13. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A10. FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME ("FVOCI") (Cont.) Movement in allowances for impairment which reflect the ECL model on impairment are as follows : Group 30/9/2020 At beginning of the financial period Lifetime ECL not credit impaired (Stage 2) RM'000 12-Month ECL (Stage 1) RM'000 4,388 595 Lifetime ECL credit impaired (Stage 3) RM'000 12,166 17,149 - Total transfer between stages due to change in credit risk : 188 (188) - - Transfer to 12-month ECL (Stage 1) - Transfer to Lifetime ECL not credit impaired (Stage 2) - Transfer to Lifetime ECL credit impaired (Stage 3) Financial assets derecognised (other than write-offs) New financial assets originated or purchased Changes due to change in credit risk Changes in models/risk parameters Other adjustments : - Foreign exchange and other movements 188 - (188) - - At end of the financial period Group 31/12/2019 At beginning of the financial year Total transfer between stages due to change in credit risk : - Transfer to 12-month ECL (Stage 1) - Transfer to Lifetime ECL not credit impaired (Stage 2) - Transfer to Lifetime ECL credit impaired (Stage 3) Financial assets derecognised (other than write-offs) New financial assets originated or purchased Changes due to change in credit risk Changes in models/risk parameters Other adjustments : - Foreign exchange and other movements At end of the financial year (2,398) 3,752 13,456 - (1) 466 - 20 (1) 19,406 871 Lifetime ECL not credit impaired (Stage 2) RM'000 12-Month ECL (Stage 1) RM'000 5,307 Total RM'000 (25) - (2,399) 3,752 13,897 - - 19 12,141 32,418 Lifetime ECL credit impaired (Stage 3) RM'000 Total RM'000 39 17,515 22,861 (34) 34 - - (34) (1,948) 566 464 35 34 550 (29) (2) 4,388 (7,073) 1,724 - 1 - 595 12,166 (9,021) 566 2,738 6 (1) 17,149 . 13
  14. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A10. FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME ("FVOCI") (Cont.) Movement in allowances for impairment which reflect the ECL model on impairment are as follows : Bank 30/9/2020 At beginning of the financial period 12-Month ECL (Stage 1) RM'000 Lifetime ECL not credit impaired (Stage 2) RM'000 Lifetime ECL credit impaired (Stage 3) RM'000 3,607 557 Total transfer between stages due to change in credit risk : (10) 10 - - Transfer to 12-month ECL (Stage 1) - Transfer to Lifetime ECL not credit impaired (Stage 2) - Transfer to Lifetime ECL credit impaired (Stage 3) Financial assets derecognised (other than write-offs) New financial assets originated or purchased Changes due to change in credit risk Other adjustments : - Foreign exchange and other movements (10) - 10 - - (1,949) 2,060 12,336 304 - At end of the financial period Bank 31/12/2019 At beginning of the financial year Total transfer between stages due to change in credit risk : - Transfer to 12-month ECL (Stage 1) - Transfer to Lifetime ECL not credit impaired (Stage 2) - Transfer to Lifetime ECL credit impaired (Stage 3) Financial assets derecognised (other than write-offs) New financial assets originated or purchased Changes due to change in credit risk Changes in models/risk parameters Other adjustments : - Foreign exchange and other movements At end of the financial year 19 16,063 12-Month ECL (Stage 1) RM'000 5,399 (1) 870 Lifetime ECL not credit impaired (Stage 2) RM'000 - Total RM'000 4,164 (1,949) 2,060 12,640 - 18 - 16,933 Lifetime ECL credit impaired (Stage 3) RM'000 Total RM'000 - - 5,399 (34) 34 - - (34) (1,421) 292 (684) 57 34 - - 550 (27) - (2) 3,607 - - 557 - (1,421) 292 (134) 30 (2) 4,164 14
  15. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A11. FINANCIAL INVESTMENTS AT AMORTISED COST (''AC'') Group 30/9/2020 31/12/2019 RM’000 RM’000 Bank 30/9/2020 RM’000 31/12/2019 RM’000 At amortised cost Unquoted Securities Corporate Bonds/Sukuk in Malaysia Loan Stock in Malaysia Less : ECL 143,133 15,000 158,133 (13,076) 141,119 15,000 156,119 (11,053) 102,049 102,049 (102) 100,622 100,622 (123) 145,057 145,066 101,947 100,499 Movement in ECL for financial investments at AC 30/9/2020 Group At beginning of the financial period Changes due to change in credit risk Lifetime ECL not credit 12-Month ECL impaired (Stage 1) (Stage 2) RM’000 RM’000 Lifetime ECL credit impaired (Stage 3) RM’000 Total RM’000 273 (119) - 10,780 2,142 11,053 2,023 154 - 12,922 13,076 At beginning of the financial period Changes due to change in credit risk 123 (21) - - 123 (21) At end of the financial period 102 - - 102 Lifetime ECL not credit 12-Month ECL impaired (Stage 1) (Stage 2) RM’000 RM’000 Lifetime ECL credit impaired (Stage 3) RM’000 Total RM’000 At end of the financial period Bank 31/12/2019 Group At beginning of the financial year Changes due to change in credit risk Changes in models/risk parameters Write-offs At end of the financial year 578 (323) 18 - - 11,945 3,830 (4,995) 12,523 3,507 18 (4,995) 273 - 10,780 11,053 412 (302) 13 - - 4,995 (4,995) 5,407 (302) 13 (4,995) 123 - - 123 Bank At beginning of the financial year Changes due to change in credit risk Changes in models/risk parameters Write-offs At end of the financial year 15
  16. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A12. LOANS, ADVANCES AND FINANCING Group 30/9/2020 31/12/2019 RM’000 RM’000 (a) Overdrafts Term loans/financing : - Housing loans/financing - Hire purchase receivables - Syndicated financing - Business term loans/financing - Other term loans/financing Bills receivables Trust receipts Claims on customers under acceptances credits Staff loans/financing (of which RM Nil to Directors) Credit cards Revolving credits Margin financing Factoring Gross loans, advances and financing Less : ECL 2,109,798 1,855,094 1,590,460 1,385,715 12,142,692 10,441,469 1,414,307 12,883,485 189,332 172,819 156,565 1,640,553 206,968 185,469 3,817,255 574,048 1,149 45,935,909 (803,775) 11,708,126 10,649,579 1,526,987 12,968,923 341,452 118,753 172,125 1,766,513 191,604 178,991 3,971,565 503,486 8,696 45,961,894 (574,029) 4,487,291 6,548,125 604,626 7,787,077 169,362 141,342 1,163,686 122,970 151,679 2,736,303 1,149 25,504,070 (551,253) 4,356,953 6,829,179 630,179 8,083,567 107,085 141,893 1,319,027 122,788 148,162 2,980,764 8,696 26,114,008 (383,949) Total net loans, advances and financing 45,132,134 45,387,865 24,952,817 25,730,059 Bank 30/9/2020 RM’000 31/12/2019 RM’000 BY MATURITY STRUCTURE Maturing within one year One year to three years Three years to five years Over five years (c) 31/12/2019 RM’000 BY TYPE Group 30/9/2020 31/12/2019 RM’000 RM’000 (b) Bank 30/9/2020 RM’000 9,158,768 3,739,990 6,761,775 26,275,376 45,935,909 9,265,484 3,899,297 6,424,181 26,372,932 45,961,894 6,210,998 3,109,214 3,932,714 12,251,144 25,504,070 6,422,116 3,062,584 4,521,683 12,107,625 26,114,008 6,001 - 6,001 - 424,427 527,411 175,210 445,100 7,544,391 13,742,751 764,010 22,925,501 1,047 527,781 7,704,132 13,796,119 797,185 22,544,174 1,324 591,549 45,961,894 5,630,349 8,920,779 39,847 10,525,180 498 206,206 5,696,493 8,953,138 31,018 10,731,724 533 256,002 26,114,008 BY TYPE OF CUSTOMER Domestic banking financial institutions Domestic non-banking institutions : - Others Domestic business enterprises : - Small medium enterprises - Others Government and statutory bodies Individuals Other domestic entities Foreign entities 45,935,909 25,504,070 16
  17. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A12. LOANS, ADVANCES AND FINANCING (Cont.) (d) (e) BY INTEREST / PROFIT RATE SENSITIVITY Bank 30/9/2020 RM’000 31/12/2019 RM’000 Fixed rate : - Housing loans/financing - Hire purchase receivables - Other fixed rate loans/financing 331,986 10,443,936 1,942,686 339,073 10,652,049 2,106,359 285,997 6,548,125 641,358 292,374 6,829,178 751,957 Variable rate : - Base rate/base lending rate plus - Cost plus - Other variable rates 23,727,816 9,456,118 33,367 23,258,002 9,570,276 36,135 11,882,942 6,144,152 1,496 11,544,901 6,695,598 - 45,935,909 45,961,894 25,504,070 26,114,008 1,592,952 10,997,522 1,512,781 11,161,312 575,991 7,011,607 612,250 7,247,930 11,844,359 6,383,943 236,817 873,314 185,470 85 2,527,847 60,012 10,220,518 1,013,070 45,935,909 11,502,926 6,339,626 334,695 833,904 178,991 108 2,706,006 64,054 10,277,342 1,050,149 45,961,894 4,030,167 3,917,166 158,432 734,488 151,679 66 1,478,993 60,012 6,864,377 521,092 25,504,070 4,006,366 4,041,513 247,367 742,358 148,162 105 1,506,381 64,054 7,082,634 414,888 26,114,008 1,456,749 328,881 2,833,403 459,789 2,032,404 6,077,474 3,646,982 1,725,363 2,019,636 2,302,570 23,052,658 - 1,577,980 339,360 2,539,605 562,189 2,012,826 6,653,855 3,402,916 1,721,650 2,227,531 2,199,982 22,677,326 46,674 637,036 58,881 1,974,513 62,928 1,348,903 4,106,021 2,975,120 1,318,361 1,410,392 1,016,424 10,595,491 - 590,752 42,254 1,832,096 156,068 1,354,803 4,423,255 2,795,481 1,316,332 1,797,562 997,278 10,808,127 - 45,935,909 45,961,894 25,504,070 26,114,008 BY ECONOMIC PURPOSE Purchase of securities Purchase of transport vehicles Purchase of landed property of which : - Residential - Non-residential Fixed assets other than land and building Personal use Credit card Consumer durable Construction Merger and acquisition Working capital Others (f) Group 30/9/2020 31/12/2019 RM’000 RM’000 BY ECONOMIC SECTOR Primary agriculture Mining and quarrying Manufacturing Electricity, gas and water supply Construction Real estate Wholesale, retail trade, hotels and restaurants Transport, storage and communication Finance, insurance and business services Education, health and others Household Others 17
  18. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A12. LOANS, ADVANCES AND FINANCING (Cont.) (g) BY GEOGRAPHICAL DISTRIBUTION Perlis Kedah Pulau Pinang Perak Selangor Wilayah Persekutuan Negeri Sembilan Melaka Johor Pahang Terengganu Kelantan Sarawak Sabah Labuan Outside Malaysia (h) IMPAIRED LOANS, ADVANCES AND FINANCING (i) Movements of impaired loans, advances and financing At beginning of the financial period/year Classified as impaired Reclassified as non-impaired Amount written-back Amount written-off At end of the financial period/year Ratio of gross impaired loans, advances and financing to gross loans, advances and financing (*) Group 30/9/2020 31/12/2019 RM’000 RM’000 176,334 1,328,190 2,529,685 1,511,829 14,101,758 10,742,964 1,551,863 895,191 5,944,706 1,423,481 942,531 297,599 2,243,113 2,091,265 55,455 99,945 45,935,909 216,197 1,363,555 2,545,147 1,517,296 13,973,439 10,982,619 1,524,855 879,939 5,869,188 1,396,971 941,221 262,813 2,201,225 2,062,110 43,890 181,429 45,961,894 Bank 30/9/2020 RM’000 17,426 523,755 1,582,618 912,851 7,298,244 6,232,993 569,682 627,285 3,519,978 774,492 414,939 57,517 1,628,485 1,257,313 28,506 57,986 25,504,070 31/12/2019 RM’000 18,817 557,738 1,639,084 932,493 7,549,256 6,448,886 575,543 606,936 3,456,325 747,361 418,330 58,249 1,662,405 1,314,711 16,239 111,635 26,114,008 1,379,152 349,303 (265,380) (98,693) (52,511) 1,311,871 1,589,897 791,557 (747,009) (168,790) (86,503) 1,379,152 673,058 164,066 (121,199) (55,121) (18,763) 642,041 978,218 434,820 (551,848) (121,876) (66,256) 673,058 2.86% 3.00% 3.03% 3.08% (*) For the Bank, Restricted Investment Accounts ("RIA") included in the ratio calculation amounting to RM1,994.3 million (2019: RM1,919.3 million). (ii) Impaired loans, advances and financing by economic purpose Purchase of securities Purchase of transport vehicles Purchase of landed property of which : - Residential - Non-residential Fixed assets other than land and building Personal use Credit card Construction Working capital Others 26,253 57,524 90 60,975 13 39,791 51 42,355 292,509 332,692 3,313 14,970 356 284,448 287,665 12,141 340,382 317,923 3,692 17,589 878 287,934 330,709 18,980 1,379,152 139,936 120,548 3,313 13,966 314 164,682 156,609 2,869 174,198 102,381 3,692 16,387 615 166,321 162,201 4,857 673,058 1,311,871 642,041 18
  19. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A12. LOANS, ADVANCES AND FINANCING (Cont.) (h) IMPAIRED LOANS, ADVANCES AND FINANCING (Cont.) (iii) Impaired loans, advances and financing by economic sector Primary agriculture Mining and quarrying Manufacturing Electricity, gas and water supply Construction Real estate Wholesale, retail trade, hotels and restaurants Transport, storage and communication Finance, insurance and business services Education, health and others Household (iv) Group 30/9/2020 31/12/2019 Bank 30/9/2020 31/12/2019 RM’000 RM’000 RM’000 RM’000 15,992 7,691 76,063 113 160,353 349,743 45,870 157,617 63,255 94,558 340,616 16,082 7,896 90,844 105 164,948 343,127 40,012 170,710 63,845 84,024 397,559 15,950 5,319 8,320 68 120,759 67,904 45,111 73,902 62,755 73,761 168,192 16,041 5,315 13,248 58 119,790 56,048 38,195 85,055 62,806 63,180 213,322 1,311,871 1,379,152 642,041 673,058 2,835 114,943 42,864 175,807 283,905 329,072 81,050 16,698 38,906 32,370 67,655 6,845 55,676 21,288 41,957 1,311,871 2,997 126,192 38,602 178,887 284,131 342,922 81,863 13,990 49,416 34,616 69,522 6,149 56,628 23,461 69,776 1,379,152 383 108,519 37,511 73,906 143,394 44,581 64,407 13,364 18,753 30,243 64,561 3,838 18,788 19,793 642,041 455 118,113 30,558 75,901 146,530 56,026 65,086 9,096 29,505 32,086 64,856 3,782 19,502 21,562 673,058 Impaired loans, advances and financing by geographical distribution Perlis Kedah Pulau Pinang Perak Selangor Wilayah Persekutuan Negeri Sembilan Melaka Johor Pahang Terengganu Kelantan Sarawak Sabah Outside Malaysia 19
  20. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A12. LOANS, ADVANCES AND FINANCING (Cont.) (v) Movement in ECL for loans, advances and financing Group 30/9/2020 At beginning of the financial period Total transfer between stages due to change in credit risk : 12-Month ECL (Stage 1) RM'000 139,326 94,359 Lifetime ECL credit impaired (Stage 3) RM'000 340,344 Total RM'000 574,029 (841) (45,281) - Transfer to 12-month ECL (Stage 1) - Transfer to Lifetime ECL not credit impaired (Stage 2) - Transfer to Lifetime ECL credit impaired (Stage 3) Loans/financing derecognised (other than write-offs) New loans/financing originated or purchased Changes due to change in credit risk Write-offs Other adjustments 56,772 (10,630) (20) (50,975) 59,607 (9,473) (5,797) (48,977) 9,493 (37,799) 39,230 (1,022) - (2,109) 857 107,466 - (17,129) 7,940 184,836 (51,358) (1,166) (57,037) 48,027 291,280 (51,358) (1,166) At end of the financial period 185,857 199,732 418,186 803,775 Group 31/12/2019 At beginning of the financial year 46,122 Lifetime ECL not credit impaired (Stage 2) RM'000 12-Month ECL (Stage 1) RM'000 Lifetime ECL not credit impaired (Stage 2) RM'000 Lifetime ECL credit impaired (Stage 3) RM'000 - Total RM'000 194,335 47,629 338,828 48,598 116,925 (165,523) - Transfer to 12-month ECL (Stage 1) - Transfer to Lifetime ECL not credit impaired (Stage 2) - Transfer to Lifetime ECL credit impaired (Stage 3) Loans/financing derecognised (other than write-offs) New loans/financing originated or purchased Changes due to change in credit risk Changes in model/risk parameters Write-offs Other adjustments 63,693 (14,568) (527) (72,944) 60,887 (99,360) 7,810 - (59,983) 184,880 (7,972) (7,915) 2,757 (67,430) 2,393 - (3,710) (170,312) 8,499 (83,106) 83,701 242,858 9,005 (82,488) (2,931) (163,965) 147,345 76,068 19,208 (82,488) (2,931) At end of the financial year 139,326 94,359 340,344 574,029 Total transfer between stages due to change in credit risk : 580,792 - 20
  21. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A12. LOANS, ADVANCES AND FINANCING (Cont.) (v) Movement in ECL for loans, advances and financing Bank 30/9/2020 At beginning of the financial period Lifetime ECL not credit impaired (Stage 2) RM'000 Lifetime ECL credit impaired (Stage 3) RM'000 86,276 35,117 76,512 (9,453) 221,161 (25,664) 12-Month ECL (Stage 1) RM'000 Total RM'000 383,949 Total transfer between stages due to change in credit risk : - Transfer to 12-month ECL (Stage 1) - Transfer to Lifetime ECL not credit impaired (Stage 2) - Transfer to Lifetime ECL credit impaired (Stage 3) Loans/financing derecognised (other than write-offs) New loans/financing originated or purchased Changes due to change in credit risk Write-offs Other adjustments 42,347 (7,221) (9) (40,398) 37,846 (6,901) (1,949) (30,625) 6,910 (18,305) 18,380 (7,554) - (1,157) 154 96,636 - (15,452) 7,838 105,220 (17,754) (702) (34,914) 26,372 194,302 (17,754) (702) At end of the financial period 113,914 274,647 551,253 Bank 31/12/2019 12-Month ECL (Stage 1) RM'000 162,692 Lifetime ECL not credit impaired (Stage 2) RM'000 Lifetime ECL credit impaired (Stage 3) RM'000 Total RM'000 At beginning of the financial year 139,978 36,542 265,394 441,914 Total transfer between stages due to change in credit risk : - Transfer to 12-month ECL (Stage 1) - Transfer to Lifetime ECL not credit impaired (Stage 2) - Transfer to Lifetime ECL credit impaired (Stage 3) Loans/financing derecognised (other than write-offs) New loans/financing originated or purchased Changes due to change in credit risk Changes in model/risk parameters Write-offs Other adjustments 42,553 54,559 (11,567) (439) (41,139) 30,624 (88,182) 2,442 - 91,485 (52,603) 148,555 (4,467) (5,050) 1,055 (48,263) 743 - (134,038) (1,956) (136,988) 4,906 (81,197) 73,020 160,854 2,200 (62,994) (2,078) (127,386) 104,699 24,409 5,385 (62,994) (2,078) 86,276 76,512 221,161 383,949 At end of the financial year 21
  22. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A13. TRADE RECEIVABLES Group 30/9/2020 31/12/2019 RM’000 RM’000 Amount due from stock-broking clients : - performing accounts - impaired accounts (a) Amount due from brokers Amount due from Bursa Securities Clearing Sdn Bhd Management fees receivable on fund management Others 403,241 397 33,786 110,664 51 387,334 935,473 (550) Less: ECL (b) 934,923 231,679 139 59,478 243,249 51 534,596 (208) 534,388 (a) Movements of impaired trade receivables At beginning of the financial period/year Classified as impaired Amount written-back At end of the financial period/year 139 560 (302) 424 419 (704) 397 139 Lifetime ECL 30/9/2020 31/12/2019 RM’000 RM’000 (b) Movements in ECL At beginning of the financial period/year Allowance made Amount written-back At end of the financial period/year 208 837 (495) 468 505 (765) 550 208 A14. OTHER ASSETS Other debtors Prepayments and deposits Cheque clearing accounts Foreclosed properties (a) Collaterals pledged for derivative transactions Clearing guarantee fund Less: ECL (b) (a) Foreclosed properties At beginning of the financial period/year Purchased Disposal At end of the financial period/year (b) Movements in ECL Group 30/9/2020 31/12/2019 RM’000 RM’000 240,308 77,125 21,861 22,108 87,989 42,653 16,962 17,817 17,727 33 2,228 2,272 387,075 162,008 (3,925) (2,058) 383,150 159,950 Bank 30/9/2020 31/12/2019 RM’000 RM’000 125,074 12,603 21,291 21,425 6,039 13,911 12,089 12,944 164,493 60,883 - Group 30/9/2020 31/12/2019 RM’000 RM’000 Bank 30/9/2020 31/12/2019 RM’000 RM’000 17,817 (855) 16,962 26,051 726 (8,960) 17,817 164,493 60,883 12,944 (855) 21,178 726 (8,960) 12,089 12,944 Group Lifetime ECL 30/9/2020 31/12/2019 RM’000 RM’000 At beginning of the financial period/year Allowance made Amount written-back Amount written-off 2,058 2,445 (518) (60) 1,669 1,489 (562) (538) At end of the financial period/year 3,925 2,058 22
  23. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A15. OTHER LIABILITIES Group 30/9/2020 31/12/2019 RM’000 RM’000 BNM and CGC Funding programmes Margin and collateral deposits Other creditors and accruals Sundry creditors Treasury and cheque clearing accounts Provision for zakat Defined contribution plan Accrued employee benefits Unearned income Commissioned dealer's representatives trust balances Collaterals pledged for derivative transactions Securities borrowings and lending - borrow Amounts payable to commissioned and salaried dealer's representatives Puttable liabilities ECL (a) : - loan/financing commitments and financial guarantees (a) Movement in ECL At beginning of financial period/year Net remeasurement of loss allowance New loan commitments and financial guarantees issued Changes in models/risk parameters At end of the financial period/year Bank 30/9/2020 31/12/2019 RM’000 RM’000 113,145 97,676 188,979 230,783 9,437 8,559 18,364 130,271 23,428 63,162 58,429 204,076 128,708 21,012 100,180 140,022 231,666 342,244 3,082 20,008 110,661 27,375 47,483 2,830 160,358 37,854 124,452 111,524 84,145 62,676 169,575 9,437 7 17,300 52,895 17,320 - 19,373 83,202 37,737 187,374 260 18,777 42,480 20,816 - 30,824 1,305,841 29,610 1,398,837 8,465 533,344 8,529 418,548 Group 30/9/2020 31/12/2019 RM’000 RM’000 29,610 27,454 (7,965) (3,285) 4,499 10,205 (84) 30,824 29,610 Bank 30/9/2020 31/12/2019 RM’000 RM’000 8,529 15,287 (4,133) (13,672) 4,069 7,535 (621) 8,465 8,529 Group 30/9/2020 31/12/2019 RM’000 RM’000 268,055 250,661 443,249 732,539 (61,010) (61,010) 135 135 4,030,028 3,640,073 4,680,457 4,562,398 Bank 30/9/2020 31/12/2019 RM’000 RM’000 166,480 148,173 273,720 471,925 3,115,244 3,017,227 3,555,444 3,637,325 A16. RESERVES FVOCI revaluation reserves (a) Regulatory reserves (b) Other reserves (c) Foreign exchange reserves Retained profits (a) The FVOCI revaluation reserves represent the unrealised gains or losses arising from a change in the fair value of investments classified as financial investments at FVOCI, as well as the expected credit loss allowance for financial investments FVOCI. The gains or losses are transferred to the income statement upon disposal or when the securities becomes impaired. (b) Pursuant to BNM Financial Reporting policy dated 27 September 2019, the Group and the Bank must maintain, in aggregate, loss allowance for non credit impaired exposures and regulatory reserves of no less than 1% of all credit exposures, net of loss allowance for credit impaired exposures. (c) This represents corresponding debit arising from the Group's obligation to purchase the subsidiary's share held by non-contolling interest. On 8 March 2019, the options holders have fully exercised the 1000 employee stock option incentive scheme at exercise price of RM40.30 per share. As a result, the employee stock option holder(s) were allotted a total of 1,111,000 units of new ordinary shares for a total consideration of RM44.77 million. Pursuant to the exercise of the employee stock option incentive scheme, there is a Selective Capital Reduction ("SCR") provision within the scheme which requires AHAM to buy back the ordinary shares issued to the option holders from 1 March 2021 to 1 March 2023 at a certain price, if the conditions within the SCR provision are not met by 31 December 2020. The SCR provision represents a purchase of the subsidiary's own equity instrument and a liability equal to the present value of the estimated future redemption amount is reclassified from equity on initial recognition. The liability is then subsequently measured at amortised cost with the unwinding of the present value of the redemption amount to be recognised as finance costs within the income statement. 23
  24. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A17. INTEREST INCOME Individual Quarter Ended Group Loan, advances and financing Money at call and deposits placements with financial institutions Financial investments at FVOCI Financial investments at AC Others of which :Interest income earned on impaired loans, advances and financing 30/9/2020 RM’000 30/9/2019 RM’000 339,546 20,986 63,237 2,060 2,467 428,296 Cumulative Quarter Ended 30/9/2020 RM’000 30/9/2019 RM’000 417,713 25,556 94,691 2,131 1,580 541,671 1,063,573 52,598 223,039 6,114 5,011 1,350,335 1,292,043 75,473 329,742 6,228 4,060 1,707,546 1,790 1,441 3,700 4,911 304,333 37,006 44,657 1,443 506 374,299 53,127 58,267 1,443 940 951,733 104,870 162,803 4,298 1,508 1,156,859 153,377 216,069 4,282 2,791 387,945 488,076 1,225,212 1,533,378 316 9 255 1,323 207,371 5,912 66 19,964 707 1,445 235,465 303,831 21,415 1 33,725 15 780 1,270 361,037 717,740 14,796 802 86,681 57 1,935 4,813 826,824 994,216 51,181 791 100,075 303 1,916 3,062 1,151,544 179,564 11,344 66 19,964 381 56 283,397 8,407 33,725 504 91 628,204 29,507 802 86,681 1,212 179 861,317 66,911 100,075 1,402 284 211,375 326,124 746,585 1,029,989 Bank Loan, advances and financing Money at call and deposits placements with financial institutions Financial investments at FVOCI Financial investments at AC Others of which :Interest income earned on impaired loans, advances and financing A18. INTEREST EXPENSE Group Deposits from customers Deposits and placements of banks and other financial institutions Obligation on securities sold under repurchase agreements Subordinated medium term notes Foreign currency borrowing Interest expense on the lease liability Others Bank Deposits from customers Deposits and placements of banks and other financial institutions Obligation on securities sold under repurchase agreements Subordinated medium term notes Interest expense on the lease liability Others 24
  25. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A18 (a). MODIFICATION LOSS Individual Quarter Ended Group Modification loss 30/9/2020 RM’000 30/9/2019 RM’000 Cumulative Quarter Ended 30/9/2020 RM’000 30/9/2019 RM’000 - - 79,728 - - - 50,274 - Bank Modification loss The modification loss represents the cost of deferring cashflows of the loans impacted by the payment moratorium. The recalculated gross carrying amount of the loan is recognised in profit or loss as a modification loss. The modification loss is shown net of benefits from various government financing schemes to support measures to assist SMEs that are adversely impacted by Covid-19 in order to sustain their business operations. The moratorium does not automatically result in stage transfer under MFRS 9 in the absence of other factors relevant to the assessment. A19. NET FEE AND COMMISSION INCOME Individual Quarter Ended Group (a) Fee and commission income : Net brokerage Portfolio management fees Corporate advisory fees Commission Service charges and fees Guarantee fees Arrangement fees Initial service charges Other fee income (b) Fee and commission expenses : Commission and referral expense Net fee and commission income Cumulative Quarter Ended 30/9/2020 RM’000 30/9/2019 RM’000 30/9/2020 RM’000 30/9/2019 RM’000 32,159 88,551 1,446 8,928 11,200 4,781 120 41,756 5,498 194,439 17,364 75,345 2,214 6,196 12,506 6,499 623 30,457 4,260 155,464 81,994 245,758 5,064 21,214 31,344 13,956 240 98,600 16,119 514,289 51,823 219,421 7,952 18,568 38,398 22,554 1,693 63,625 10,926 434,960 (58,700) 135,739 (46,861) 108,603 (144,035) 370,254 (114,055) 320,905 9,564 11,024 4,781 25,369 6,306 12,557 6,084 24,947 22,416 30,828 13,956 67,200 18,860 38,267 19,622 76,749 Bank (a) Fee and commission income : Commission Service charges and fees Guarantee fees (b) Fee and commission expense : Commission and referral expense Net fee and commission income (1,588) (2,259) (4,149) (6,094) 23,781 22,688 63,051 70,655 25
  26. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A20. NET GAINS ON FINANCIAL INSTRUMENTS Individual Quarter Ended Group 30/9/2020 RM’000 30/9/2019 RM’000 Cumulative Quarter Ended 30/9/2020 RM’000 30/9/2019 RM’000 Income from financial instruments: Gains/(loss) arising on financial assets at FVTPL : - net gain on disposal - unrealised gain - interest income - gross dividend income 179,505 1,079 5,867 1,961 13,368 2,166 5,148 2,814 282,387 1,598 16,614 5,386 42,520 2,667 19,786 5,918 520 (3,226) 897 Gains/(loss) on derivatives instruments : - realised - unrealised - interest (expense)/income 477 (1,882) (1,099) 221 (3,552) 292 708 (18,331) (1,673) Gains arising on financial investments at FVOCI : - net gain on disposal - gross dividend income 54,656 496 56,535 (319) 348,637 609 160,382 2,586 241,060 76,673 635,935 232,050 Bank Income from financial instruments: Gains arising on financial assets at FVTPL : - net gain on disposal - unrealised (loss)/gain - interest income - gross dividend income 1,221 (98) 1,415 183 (277) 295 732 2,162 855 3,822 732 (93) 5,509 732 Gains/(loss) on derivatives instruments : - realised - unrealised - interest (expense)/income 477 (1,761) (1,528) 221 (2,787) 184 708 (23,527) (2,229) 520 (2,513) 632 Gains arising on financial investments at FVOCI : - net gain on disposal - gross dividend income 54,533 309 36,640 (424) 203,952 309 101,815 232 54,751 34,584 186,784 106,834 26
  27. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A21. OTHER INCOME Individual Quarter Ended Group Foreign exchange gain/(loss) : - realised - unrealised Rental income Gain/(loss) on disposal of property and equipment Gain on disposal of foreclosed properties Other non-operating income Total other income 30/9/2020 RM’000 30/9/2019 RM’000 Cumulative Quarter Ended 30/9/2020 RM’000 30/9/2019 RM’000 36,073 (26,096) 59 89 1,361 7,598 556 5 8 240 1,865 53,522 (22,646) 99 165 6,313 21,568 6,213 9 (32) 500 7,293 11,486 10,272 37,453 35,551 12,057 (6,405) 23 (27) 89 1,500 1,007 8,244 10,101 (3,498) 28 (80) 240 60,000 1,023 67,814 23,231 (3,190) 70 (102) 165 41,500 4,897 66,571 19,745 1,008 79 (234) 500 61,000 4,925 87,023 Bank Foreign exchange gain/(loss) : - realised - unrealised Rental income Loss on disposal of property and equipment Gain on disposal of foreclosed properties Gross dividend received from subsidiaries Other non-operating income Total other income 27
  28. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A22. OTHER OPERATING EXPENSES Individual Quarter Ended Group Cumulative Quarter Ended 30/9/2020 RM’000 30/9/2019 RM’000 30/9/2020 RM’000 30/9/2019 RM’000 307,900 29,610 26,745 364,255 151,142 25,417 29,724 206,283 680,398 84,606 80,910 845,914 452,250 74,367 79,793 606,410 4,027 1,726 967 3,833 1,591 12,144 6,625 609 2,120 3 1,622 1,275 12,254 13,027 5,150 3,280 1 7,488 4,220 33,166 19,250 4,448 6,635 603 8,488 4,059 43,483 688 1,015 16,312 7,864 8,981 9,842 15,759 4,257 5,417 3,104 1,774 1,402 76,415 874 743 18,733 6,847 8,874 8,311 10,081 5,699 6,007 3,386 5,156 988 75,699 2,121 2,830 45,763 23,017 27,183 28,311 47,715 15,258 14,532 9,714 12,576 3,811 232,831 3,171 2,215 44,679 19,696 26,751 23,766 29,903 16,372 15,087 9,709 12,306 3,256 206,911 4,568 3,477 13,406 11,530 777 10 84 1,918 79 953 3,202 712 (150) 3,777 298 (5) 3,292 3,489 23,004 775 90 (3) 300 3,517 9 869 2,292 815 217 4,076 35 158 3,080 3,361 23,068 2,313 8 31 374 16,634 176 2,678 7,301 2,553 2,643 11,608 384 (18) 9,471 9,167 78,729 2,293 125 5 779 14,400 25 2,612 8,479 2,385 1,584 11,745 158 2,209 8,833 358 8,096 75,616 Personnel costs Wages, salaries and bonus Defined contribution plan Other personnel costs Promotion and marketing-related expenses Business promotion and advertisement Entertainment Travelling and accommodation Dealers' handling fees Commission and brokerage expenses Others marketing expenses Establishment expenses Rental of premises Equipment rental Repair and maintenance Depreciation of property and equipment Depreciation of right-of-use assets Amortisation of intangible assets IT consultancy fee Dataline rental Security services Electricity, water and sewerage Insurance/Takaful and indemnities Other establishment costs General and administrative expenses Telecommunication expenses Auditors' remuneration : (i) Statutory audit fees (ii) Over provision in prior year (ii) Regulatory related fees (iii) Tax fees (iv) Non-audit fees Professional fees Property and equipment written-off Mail and courier charges Stationery and consumables Directors' fees and allowances Donations Settlement, clearing and bank charges Stamp duties Operational and litigation write-off expenses Subscription fees GST input tax-non recoverable Other administration and general expenses Total other operating expenses 475,818 317,304 1,190,640 932,420 28
  29. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A22. OTHER OPERATING EXPENSES (Cont.) Individual Quarter Ended Bank 30/9/2020 RM’000 30/9/2019 RM’000 Cumulative Quarter Ended 30/9/2020 RM’000 30/9/2019 RM’000 231,544 39,662 38,083 309,289 193,350 32,147 36,000 261,497 Personnel costs Wages, salaries and bonus Defined contribution plan Other personnel costs 80,165 13,500 11,672 105,337 64,964 10,719 12,065 87,748 Promotion and marketing-related expenses Business promotion and advertisement Entertainment Travelling and accommodation Commission and brokerage expenses Others marketing expenses 2,132 694 336 3,557 627 7,346 3,270 (522) 959 1,592 415 5,714 5,948 2,321 1,061 6,534 1,443 17,307 9,777 1,301 2,590 7,067 1,401 22,136 733 6,552 4,784 6,213 6,083 11,429 2,840 4,687 1,044 1,563 824 46,752 412 12,868 4,208 6,263 4,612 5,453 2,625 2,781 1,213 4,468 (20) 44,883 1,981 17,006 13,800 18,574 17,086 34,699 10,997 12,312 3,541 9,774 2,077 141,847 1,317 27,800 11,838 18,835 12,719 17,374 8,366 6,752 3,731 9,804 2,097 120,633 2,781 2,318 1,215 350 11,119 27 2,006 3,581 2,304 1,424 9,000 357 (18) 3,457 37,603 1,246 603 9,953 19 1,853 5,568 1,914 1,533 9,112 122 2,209 349 3,798 40,597 Establishment expenses Equipment rental Repair and maintenance Depreciation of property and equipment Depreciation of right-of-use assets Amortisation of intangible assets IT consultancy fee Dataline rental Security services Electricity, water and sewerage Insurance/Takaful and indemnities Other establishment costs General and administrative expenses Telecommunication expenses Auditors' remuneration : (i) Statutory audit fees (ii) Non-audit fees Professional fees Property and equipment written-off Mail and courier charges Stationery and consumables Directors' fees and allowances Donations Settlement, clearing and bank charges Stamp duties Operational and litigation write-off expenses GST input tax-non recoverable Other administration and general expenses Total other operating expenses 860 402 120 160 27 725 1,246 713 2 2,931 291 (5) 1,473 8,945 168,380 312 426 186 1,829 7 626 1,431 655 180 3,191 30 158 1,361 10,392 148,737 506,046 444,863 29
  30. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A23. ALLOWANCE FOR CREDIT IMPAIRMENT LOSSES Individual Quarter Ended Group ECL (written-back)/made on : - loans, advances and financing - trade receivables - securities and placements - loan and financing commitments and financial guarantee Bad debts and financing : - recovered - written-off Cumulative Quarter Ended 30/9/2020 RM’000 30/9/2019 RM’000 30/9/2020 RM’000 30/9/2019 RM’000 110,199 250 11,529 (941) 50,876 (164) 1,442 (3,529) 282,270 342 20,176 1,214 38,857 52 515 (10,561) (9,202) 476 112,311 (7,425) 1,912 43,112 (23,279) 2,512 283,235 (25,476) 3,597 6,984 79,068 7,597 164 38,205 (250) (2,227) 185,760 15,464 (64) 15,058 (1,522) (5,884) (7,836) 425 79,418 (6,377) 1,829 31,180 (18,905) 2,178 184,433 (22,577) 3,378 (11,547) Bank ECL (written-back)/made on : - loans, advances and financing - securities and placements - loan and financing commitments and financial guarantee Bad debts and financing : - recovered - written-off A24. ALLOWANCES FOR IMPAIRMENT LOSSES ON OTHER ASSETS Individual Quarter Ended Group ECL made on : - amount due from joint ventures 30/9/2020 RM’000 11,265 30/9/2019 RM’000 1,933 Cumulative Quarter Ended 30/9/2020 RM’000 12,280 30/9/2019 RM’000 1,933 30
  31. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A25. SEGMENTAL INFORMATION ON REVENUE AND PROFIT The segment analysis by activity for the individual and cumulative quarters ended 30 September 2020 and 30 September 2019 are as follows: <------------------- Current year's individual quarter ended 30 September 2020---------------------> Commercial Investment Banking Banking Insurance Others Elimination Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 378,946 (119) 378,827 312,246 2,305 314,551 - 3,007 229 3,236 (2,415) (2,415) 694,199 694,199 Operating expenses of which :Depreciation of property and equipment Depreciation of right-of-use assets Amortisation of intangible assets (228,403) (4,956) (6,463) (6,136) (245,536) (2,870) (2,430) (3,701) - (2,794) (38) (88) (5) 915 - (475,818) (7,864) (8,981) (9,842) (Allowances for)/write-back of credit impairment losses on loans, advances, financing and trade receivables/securities/other assets Segment results (118,508) 31,916 (6,436) 62,579 - 442 1,368 (132) (123,576) 94,805 31,916 (2,540) 29,376 62,579 (1,058) 61,521 (2,673) 6,787 4,114 4,114 442 442 (132) (132) (2,673) 6,787 98,919 (3,598) 95,321 (37,806) 57,515 Revenue External revenue Intersegment revenue Segment revenue Share of results of a joint venture (net of tax) Share of results of associates (net of tax) Profit before zakat and taxation Zakat Profit before taxation Taxation Net profit for the individual quarter <------------------ Preceding year's individual quarter ended 30 September 2019 -------------------> Commercial Investment Banking Banking Insurance Others Elimination Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 357,288 30,500 387,788 113,719 29,599 143,318 - 3,253 281 3,534 (60,380) (60,380) 474,260 474,260 Operating expenses of which :Depreciation of property and equipment Depreciation of right-of-use assets Amortisation of intangible assets (220,186) (4,403) (6,599) (4,657) (94,748) (2,408) (2,275) (3,642) - (2,750) (36) (12) 380 - (317,304) (6,847) (8,874) (8,311) Allowances for credit impairment losses on loans, advances, financing and trade receivables/securities/other assets Segment results (42,910) 124,692 (2,082) 46,488 - 784 (53) (60,053) (45,045) 111,911 124,692 (3,000) 121,692 46,488 1,994 48,482 (4,793) 4,617 (176) (176) 784 784 (60,053) (60,053) (4,793) 4,617 111,735 (1,006) 110,729 (33,178) 77,551 Revenue External revenue Intersegment revenue Segment revenue Share of results of a joint venture (net of tax) Share of results of associates (net of tax) Profit before zakat and taxation Zakat Profit before taxation Taxation Net profit for the individual quarter 31
  32. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A25. SEGMENTAL INFORMATION ON REVENUE AND PROFIT (Cont.) The segment analysis by activity for the individual and cumulative quarters ended 30 September 2020 and 30 September 2019 are as follows (Cont.): < ----------------- Current year's cumulative quarter ended 30 September 2020 ---------------------> Commercial Investment Banking Banking Insurance Others Elimination Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue External revenue Intersegment revenue Segment revenue 1,035,688 35,533 1,071,221 792,671 7,171 799,842 - 9,173 710 9,883 (43,414) (43,414) 1,837,532 1,837,532 Operating expenses of which :Depreciation of property and equipment Depreciation of right-of-use assets Amortisation of intangible assets (690,497) (14,358) (19,478) (17,245) (493,792) (8,551) (7,441) (11,044) - (8,265) (108) (264) (22) 1,914 - (1,190,640) (23,017) (27,183) (28,311) (Allowances for)/write-back of credit impairment losses on loans, advances, financing and trade receivables/securities/other assets Segment results (260,306) 120,418 (38,484) 267,566 - 1,618 3,275 (38,225) (295,515) 351,377 (750) 119,668 (2,540) 117,128 267,566 (4,223) 263,343 251 19,133 19,384 19,384 1,618 1,618 (38,225) (38,225) 251 18,383 370,011 (6,763) 363,248 (100,375) 262,873 Share of results of a joint venture (net of tax) Share of results of an associate (net of tax) Profit before zakat and taxation Zakat Profit before taxation Taxation Net profit for the cumulative quarter < ----------------- Preceding year's cumulative quarter ended 30 September 2019 ----------------- > Commercial Investment Banking Banking Insurance Others Elimination Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue External revenue Intersegment revenue Segment revenue 1,034,069 41,173 1,075,242 401,163 20,202 421,365 - 9,471 1,004 10,475 (62,379) (62,379) 1,444,703 1,444,703 Operating expenses of which :Depreciation of property and equipment Depreciation of right-of-use assets Amortisation of intangible assets (642,953) (12,461) (19,846) (12,849) (282,686) (7,114) (6,905) (10,879) - (8,160) (121) (38) 1,379 - (932,420) (19,696) (26,751) (23,766) (9,137) 423,152 (17) 138,662 - 2,315 237 (60,763) (8,917) 503,366 423,152 (3,000) 420,152 138,662 (2,316) 136,346 (4,473) 17,168 12,695 12,695 2,315 2,315 (60,763) (60,763) (4,473) 17,168 516,061 (5,316) 510,745 (126,371) 384,374 (Allowances for)/write-back of credit impairment losses on loans, advances, financing and trade receivables/securities/other assets Segment results Share of results of a joint venture (net of tax) Share of results of an associate (net of tax) Profit before zakat and taxation Zakat Profit before taxation Taxation Net profit for the cumulative quarter 32
  33. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A26. SUBSEQUENT MATERIAL EVENT There were no material events subsequent to the balance sheet date that require disclosure or adjustments to the unaudited condensed interim financial statements. A27. CHANGES IN THE COMPOSITION OF THE GROUP There were no significant changes in the composition of the Group during the financial period under review. A28. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Group and the Bank make various commitments and incur certain contingent liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions. The commitments and contingencies are not secured over the assets of the Group and the Bank. The notional amounts of the commitments and contingencies of the Group and the Bank are as follows : Group Principal Amount 30/9/2020 31/12/2019 RM’000 RM’000 Direct credit substitutes * Transaction-related contingent items Short-term self-liquidating trade-related contingencies Irrevocable commitments to extend credit - Maturity less than one year - Maturity more than one year Foreign exchange related contracts # - Less than one year - One year to less than five years Interest rate related contracts # - Less than one year - One year to less than five years - Five years and above Any commitments that are unconditionally cancelled at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrowers' creditworthiness Unutilised credit card lines Bank Principal Amount 30/9/2020 31/12/2019 RM’000 RM’000 501,529 1,704,486 416,664 556,462 1,969,168 454,792 436,083 1,248,285 175,297 445,758 1,494,531 175,032 5,459,603 1,555,172 6,020,758 1,913,716 3,781,605 784,402 4,556,911 797,622 17,628,729 1,105,480 13,000,360 927,491 11,752,728 208,213 9,812,356 207,100 497,000 4,263,000 545,000 873,148 3,710,000 300,000 27,000 1,543,000 545,000 23,148 1,480,000 270,000 892,300 754,191 578,072 547,266 152,679 546,877 37,322 380,117 35,323,154 30,851,233 21,201,169 19,679,897 * Included in direct credit substitutes are financial guarantee contracts of RM501.5 million and RM436.1 million at the Group and the Bank respectively (2019: RM556.5 million and RM445.8 million at the Group and the Bank respectively), of which fair value at the time of issuance is zero. # The fair value of these derivatives have been recognised as “derivative financial assets” and “derivative financial liabilities” in the statement of financial position. 33
  34. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A29. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments measured at their fair values together with their corresponding contract/notional amounts and classified by remaining period to maturity/repricing date (whichever is earlier) as at reporting date are as follows:< --------------- Contract/Notional Amount -------------- > GROUP Up To 1 Year > 1 - 3 Years RM’000 RM’000 > 3 Years RM’000 < ------------------- Positive Fair Value ------------------- > Total Up To 1 Year > 1 - 3 Years RM’000 RM’000 RM’000 > 3 Years RM’000 < ------------------- Negative Fair Value ---------------- > Total Up To 1 Year > 1 - 3 Years RM’000 RM’000 RM’000 > 3 Years RM’000 Total RM’000 As at 30 September 2020 Trading derivatives Foreign exchange contracts : - Currency forwards - Cross currency swaps - Currency swaps - Currency options Interest rate contracts : - Interest rate swaps 6,685,578 7,946,294 2,978,612 18,246 146,719 207,100 95,960 - 327,727 327,973 - 7,160,024 8,153,394 3,402,545 18,246 16,133 104,350 29,405 (2) 4,303 1,129 4,387 - 264 6,311 - 20,700 105,479 40,103 (2) 102,602 57,041 14,786 150 6,671 811 183 - 6,124 226 - 115,397 57,852 15,195 150 497,000 2,355,000 2,453,000 5,305,000 2,046 40,794 58,029 100,869 1,874 46,673 75,672 124,219 18,125,730 2,804,779 3,108,700 24,039,209 151,932 50,613 64,604 267,149 176,453 54,338 82,022 312,813 4,183,708 7,078,996 1,737,656 256,333 207,100 198,786 132,600 132,672 4,572,641 7,286,096 2,069,114 4,795 85,992 21,441 5,566 1,456 4,458 58 2,605 10,419 87,448 28,504 73,118 58,768 3,040 7,076 626 2,548 52 82,742 58,768 3,718 873,148 1,532,000 2,478,000 4,883,148 918 6,648 30,931 38,497 1,099 11,270 29,194 41,563 13,873,508 2,194,219 2,743,272 18,810,999 113,146 18,128 33,594 164,868 136,025 18,972 31,794 186,791 As at 31 December 2019 Trading derivatives Foreign exchange contracts : - Currency forwards - Cross currency swaps - Currency swaps Interest rate contracts : - Interest rate swaps 34
  35. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A29. DERIVATIVE FINANCIAL INSTRUMENTS (Cont.) Derivative financial instruments measured at their fair values together with their corresponding contract/notional amounts and classified by remaining period to maturity/repricing date (whichever is earlier) as at reporting date are as follows: (continued) < --------------- Contract/Notional Amount -------------- > BANK Up To 1 Year > 1 - 3 Years RM’000 RM’000 > 3 Years RM’000 < ------------------- Positive Fair Value ------------------- > Total Up To 1 Year > 1 - 3 Years RM’000 RM’000 RM’000 > 3 Years RM’000 < ------------------- Negative Fair Value ---------------- > Total Up To 1 Year > 1 - 3 Years RM’000 RM’000 RM’000 > 3 Years RM’000 Total RM’000 As at 30 September 2020 Trading derivatives Foreign exchange contracts : - Currency forwards - Cross currency swaps - Currency options Interest rate contracts : - Interest rate swaps 3,788,188 7,946,294 18,246 1,113 207,100 - - 3,789,301 8,153,394 18,246 2,192 106,528 (2) 19 1,129 - - 2,211 107,657 (2) 74,611 57,453 150 811 - - 74,611 58,264 150 27,000 665,000 1,423,000 2,115,000 76 9,380 34,042 43,498 476 17,566 53,378 71,420 11,779,728 873,213 1,423,000 14,075,941 108,794 10,528 34,042 153,364 132,690 18,377 53,378 204,445 2,733,359 7,078,997 207,100 - 2,733,359 7,286,097 1,279 92,334 1,456 - 1,279 93,790 51,418 59,325 - - 51,418 59,325 23,148 462,000 1,288,000 1,773,148 353 3,247 19,556 23,156 571 4,810 20,315 25,696 9,835,504 669,100 1,288,000 11,792,604 93,966 4,703 19,556 118,225 111,314 4,810 20,315 136,439 As at 31 December 2019 Trading derivatives Foreign exchange contracts : - Currency forwards - Cross currency swaps Interest rate contracts : - Interest rate swaps 35
  36. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A29. DERIVATIVE FINANCIAL INSTRUMENTS (Cont.) Foreign exchange and interest rate related contracts are subject to market risk, credit risk and liquidity risk. Market risk Market risk is the potential change in value caused by movement in market rates or prices. The contractual amounts stated above provide only a measure of involvement in these types of transactions and do not represent the amount subject to market risk. Exposure to market risk may be reduced through offsetting on and off-balance sheet positions. As at the reporting date, the notional amount of foreign exchange exposure which was not hedged and hence, exposed to market risk was RM29.9 million (2019 : RM50.1 million), while the notional amount of interest rate contract was RM892.0 million (2019 : RM763.1 million). Credit risk Credit risk arises from the possibility that a counter-party may be unable to meet the terms of a contract in which the commercial bank has a gain position. As at the reporting date, the amounts of foreign exchange and interest rate credit risk, measured in terms of the cost to replace the profitable contracts, was RM342.0 million (2019 : RM279.8 million) and RM167.9 million (2019 : RM91.6 million) respectively. This amount will increase or decrease over the life of the contracts, mainly as a function of maturity dates and market rates or prices. Liquidity risk Liquidity risk on derivatives is the risk that the derivative position cannot be closed out promptly. The exposure to liquidity risk is mitigated by entering into transactions where the underlying financial instruments are widely traded and also easily closed out through alternative markets. Cash Requirement of the Derivatives Cash requirements of the derivatives may arise from margin requirements to post cash collateral with counterparties as the fair value moves beyond the agreed upon threshold limits in the counterparties’ favour, or upon downgrade in the Bank’s credit ratings. As at the reporting date, there is no requirement for the Group to post any additional cash collateral on its derivative contracts. Related Accounting Policies The related accounting policies for off-balance sheet financial instruments applied in the condensed interim financial statements are consistent with those applied in the annual financial statements for the year ended 31 December 2019. 36
  37. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A30. FAIR VALUE MEASUREMENTS The following table presents assets and liabilities measured at fair value and classified by level of the following fair value measurement hierarchy:(a) Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities (b) Level 2 - quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. (c) Level 3 - valuations derived from valuation techniques in which one or more significant inputs are not based on observable market data. Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 288,190 - 166,414 33,335 94,207 15,412 166,414 382,397 48,747 Derivative financial assets - 267,149 - 267,149 Financial investments at FVOCI : - Money market instruments - Shares, unit trusts and REITs - Corporate bonds/Sukuk - 5,089,823 6,035,755 211,468 - 5,089,823 211,468 6,035,755 288,190 11,592,476 321,087 12,201,753 27,817 312,813 - - 312,813 27,817 27,817 312,813 - 340,630 321,362 - 198,219 33,312 94,207 15,032 198,219 415,569 48,344 Derivative financial assets - 164,868 - 164,868 Financial investments at FVOCI : - Money market instruments - Shares, unit trusts and REITs - Corporate bonds/Sukuk - 4,022,935 61 8,293,030 180,820 - 4,022,935 180,881 8,293,030 321,362 12,712,425 290,059 13,323,846 20,917 4,282 186,791 - - 186,791 20,917 4,282 25,199 186,791 - 211,990 Group 30 September 2020 Assets Financial assets at FVTPL : - Money market instruments - Shares and unit trusts - Corporate bonds/Sukuk Liabilities Derivative financial liabilities Puttable liability - investment in funds 31 December 2019 Assets Financial assets at FVTPL : - Money market instruments - Shares and unit trusts - Corporate bonds/Sukuk Liabilities Derivative financial liabilities Puttable liability - investment in funds Other liabilities - equities trading 37
  38. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A30. FAIR VALUE MEASUREMENTS (Cont.) Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 - 111,917 - 94,207 15,412 111,917 94,207 15,412 Derivative financial assets - 153,364 - 153,364 Financial investments at FVOCI : - Money market instruments - Unquoted shares - Corporate bonds/Sukuk - 2,385,483 3,074,852 186,135 - 2,385,483 186,135 3,074,852 Bank 30 September 2020 Assets Financial assets at FVTPL : - Money market instruments - Unquoted shares - Corporate bonds/Sukuk - 5,725,616 295,754 6,021,370 Liabilities Derivative financial liabilities - 204,445 - 204,445 31 December 2019 Assets Financial assets at FVTPL : - Money market instruments - Unquoted shares - Corporate bonds/Sukuk - 60,977 - 94,207 15,032 60,977 94,207 15,032 Derivative financial assets - 118,225 - 118,225 Financial investments at FVOCI : - Money market instruments - Unquoted shares - Corporate bonds/Sukuk - 2,444,075 3,771,951 157,818 - 2,444,075 157,818 3,771,951 - 6,395,228 267,057 6,662,285 - 136,439 - 136,439 Liabilities Derivative financial liabilities Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted prices is readily available, and the price represents actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an on-going basis. These would include actively traded listed equites and actively exchange-traded derivatives. Where fair value is determined using unquoted market prices in less active markets or quoted prices for similar assets and liabilities, such instruments are generally classified as Level 2. In cases where quoted prices are generally not available, the Group and the Bank then determine fair value based upon valuation techniques that use as inputs, market parameters including but not limited to yield curves, volatilities and foreign exchange rates. The majority of valuation techniques employ only observable market data and so reliability of the fair value measurement is high. Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). Such inputs are generally determined based on observable inputs of a similar nature, historical observations on the level of the input or other analytical techniques. 38
  39. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A30. FAIR VALUE MEASUREMENTS (Cont.) This category includes unquoted shares held for socio economic reasons. Fair values for shares held for socio economic reasons are based on the net tangible assets of the affected companies. The Group's and the Bank's exposure to financial instruments classified as Level 3 comprised a small number of financial instruments which constitute an insignificant component of the Group's and the Bank's portfolio of financial instruments. Hence, changing one or more of the inputs to reasonable alternative assumptions would not change the value significantly for the financial assets in Level 3 of the fair value hierarchy. The Group and the Bank recognise transfers between levels of the fair value hierarchy at the end of the reporting period during which the transfer has occurred. Transfers between fair value hierarchy primarily due to change in the level of trading activity, change in observable market activity related to an input, reassessment of available pricing information and change in the significance of the unobservable input. There were no transfers between Level 1, 2 and 3 of the fair value hierarchy during the financial period (2019: Nil). The following table presents the changes in Level 3 instruments for the financial year ended:Group 31/12/2019 30/9/2020 RM’000 RM’000 At beginning of the financial period/year Sales Net changes in income accrued Total gains recognised in other comprehensive income At end of the financial period/year 290,059 335 30,693 321,087 290,300 (15,629) (18) 15,406 290,059 Bank 30/9/2020 RM’000 267,057 321 28,376 295,754 31/12/2019 RM’000 268,479 (15,629) (18) 14,225 267,057 Effect of changes in significant unobservable assumptions to reasonably possible alternative As at reporting date, financial instruments measured with valuation techniques using significant unobservable inputs (Level 3) mainly include unquoted shares held for socio economic purposes. 39
  40. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A31. CAPITAL ADEQUACY The capital adequacy ratios of the Group and the Bank are computed in accordance with BNM's Capital Adequacy Framework (Capital Components). The Group and the Bank are currently adopting Standardised Approach for Credit Risk and Market Risk and the Basic Indicator Approach for Operational Risk. In line with the transitional arrangements under the BNM's Capital Adequacy Framework (Capital Components), the minimum capital adequacy requirement for Common Equity Tier 1 ("CET 1") Capital Ratio, Tier 1 Capital Ratio and Total Capital Ratio are 7.000% (2019: 7.000%), 8.500% (2019: 8.500%) and 10.500% (2019: 10.500%) respectively for the financial period ended 30 September 2020. a) The components of CET 1, Tier 1 and Tier 2 capital : CET 1 Paid-up share capital Retained profits Unrealised gains on FVOCI instruments Other disclosed reserves Foreign exchange reserves Less: Regulatory adjustments : - Goodwill and other intangibles - Deferred tax assets - 55% of cumulative unrealised gains on FVOCI instruments - Investment in subsidiaries, joint ventures and associates Total CET 1 Capital Additional Tier 1 Capital Additional Tier 1 Capital Qualifying capital instruments held by third party Total Tier 1 Capital Tier 2 Capital Subordinated MTNs Qualifying loss provisions ^ Less: Regulatory adjustments : - Investment in capital instruments of unconsolidated financial and insurance entities Total Tier 2 Capital Total Capital Group # 30/9/2020 31/12/2019 RM’000 RM’000 Bank 30/9/2020 31/12/2019 RM’000 RM’000 4,902,300 4,010,240 268,055 (61,010) 135 9,119,720 4,774,772 3,640,073 250,661 (61,010) 135 8,604,631 4,902,300 3,076,411 166,480 8,145,191 4,774,772 3,017,227 148,173 7,940,172 (908,810) (85,721) (147,430) (858,080) 7,119,679 (914,693) (3,440) (137,864) (831,440) 6,717,194 (206,073) (46,228) (91,564) (3,781,321) 4,020,005 (202,670) (12,690) (81,495) (3,781,321) 3,861,996 800,000 27,527 827,527 7,947,206 800,000 25,329 825,329 7,542,523 500,000 500,000 4,520,005 500,000 500,000 4,361,996 2,750,000 541,546 2,750,000 533,058 2,000,000 341,934 2,000,000 344,781 (30,914) 3,260,632 (30,914) 3,252,144 (80,914) 2,261,020 (80,914) 2,263,867 11,207,838 10,794,667 6,781,025 6,625,863 43,323,708 644,827 3,450,238 47,418,773 42,644,676 488,422 3,184,235 46,317,333 27,354,688 407,349 1,635,576 29,397,613 27,582,457 290,399 1,774,869 29,647,725 b) The breakdown of risk-weighted assets : Credit risk Market risk Operational risk Total risk-weighted assets c) Capital adequacy ratios : Before deducting proposed dividends : CET 1 capital ratio Tier 1 capital ratio Total capital ratio 15.014% 16.760% 23.636% 14.503% 16.284% 23.306% 13.675% 15.375% 23.067% 13.026% 14.713% 22.349% After deducting proposed dividends : CET 1 capital ratio Tier 1 capital ratio Total capital ratio 15.014% 16.760% 23.636% 14.441% 16.223% 23.245% 13.675% 15.375% 23.067% 12.931% 14.617% 22.253% # The group comprises banking and non-banking subsidiaries. ^ Qualifying loss provisions are restricted to allowances on the unimpaired portion of the loans, advances and other financing. 40
  41. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A31. CAPITAL ADEQUACY (Cont.) In accordance with BNM's Guidelines on Investment Account, the credit and market risk weighted on the assets funded by the RIA are included in calculation of capital adequacy for the Bank. As at 30 September 2020, RIA assets included in the Total Capital Ratio calculation amounted to RM1,994.3 million (2019 : RM1,919.3 million). The capital adequacy ratios of AFFIN Islamic Bank Berhad are as follows : CET 1 capital ratio Tier 1 capital ratio Total capital ratio Economic Entity 30/9/2020 31/12/2019 11.928% 11.720% 13.944% 13.826% 20.510% 20.631% Bank 30/9/2020 31/12/2019 11.928% 11.720% 13.944% 13.826% 20.510% 20.631% The Group 30/9/2020 31/12/2019 Bank 30/9/2020 31/12/2019 The capital adequacy ratios of AFFIN Hwang Investment Bank Berhad are as follows : Before deducting proposed dividends : CET 1 capital ratio Tier 1 capital ratio Total capital ratio 37.767% 38.576% 39.323% 34.432% 35.186% 35.958% 51.104% 51.104% 51.863% 44.406% 44.406% 45.235% After deducting proposed dividends : CET 1 capital ratio Tier 1 capital ratio Total capital ratio 33.361% 34.170% 34.917% 33.238% 33.991% 34.764% 44.763% 44.763% 45.521% 42.745% 42.745% 43.574% 41
  42. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A32. OPERATIONS OF ISLAMIC BANKING - AFFIN ISLAMIC BANK BERHAD (i) Unaudited Statements of Financial Position Economic Entity 30/9/2020 31/12/2019 RM'000 RM'000 ASSETS Cash and short-term funds Derivative financial assets Financial investments at FVOCI Financing, advances and other financing Other assets Amount due from holding company Amount due from joint ventures Amount due from associate Taxation recoverable Deferred tax assets Statutory deposits with Bank Negara Malaysia Investment in associate Property and equipment Right-of-use assets Intangible assets 3,304,149 1,673 2,726,151 19,237,320 146,689 18,689 6,180 9,078 1,466 800 611 1,588,868 1,000 2,390,806 18,580,253 34,593 53,946 28,402 900 15,550 526,000 750 1,980 1,554 771 TOTAL ASSETS 25,452,806 23,225,373 18,451,164 2,505 1,755,387 1,981,425 5,023 100,317 83,269 1,927 1,125,372 23,506,389 17,306,338 1,447 536,011 1,918,295 6,757 422,685 2,604 1,568 1,111,034 21,306,739 1,060,000 886,417 1,946,417 1,060,000 858,634 1,918,634 25,452,806 23,225,373 4,233,003 4,051,316 LIABILITIES AND ISLAMIC BANKING CAPITAL FUNDS Deposits from customers Investment accounts of customers Deposits and placements of banks and other financial institutions Investment accounts due to designated financial institutions Derivative financial liabilities Other liabilities Amount due to holding company Deferred tax liabilities Lease liabilities Subordinated term financing and medium term notes TOTAL LIABILITIES ISLAMIC BANKING CAPITAL FUNDS Share capital Reserves Total Islamic Banking Capital Funds TOTAL LIABILITIES AND ISLAMIC BANKING CAPITAL FUNDS COMMITMENTS AND CONTINGENCIES 42
  43. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A32. OPERATIONS OF ISLAMIC BANKING - AFFIN ISLAMIC BANK BERHAD (Cont.) (ii) Unaudited Income Statements Economic Entity Individual Quarter Ended Cumulative Quarter Ended 30/9/2020 30/9/2019 30/9/2020 30/9/2019 RM'000 RM'000 RM'000 RM'000 Income derived from investment of depositors' funds and others 236,503 727,171 849,963 Income derived from investment of investment accounts Income derived from investment of shareholders' funds Modification loss Allowances for impairment losses on financing, advances and other financing Allowance for impairment losses on other assets 23,045 22,488 (30,131) (11,265) 26,063 26,177 (9,784) (1,933) 74,895 75,948 (29,454) (68,086) (12,280) 79,382 76,766 (17,245) (1,933) 240,640 (166,588) 328,743 (239,933) 768,194 (522,273) 986,933 (700,193) Total net income Other operating expenses Share of results of an associate 74,052 (60,067) - 88,810 (71,497) - 245,921 (184,591) (750) 286,740 (198,252) - Profit before zakat and taxation Zakat Profit before taxation Taxation Net profit for the financial period 13,985 (2,540) 11,445 (10,093) 1,352 17,313 17,313 (2,854) 14,459 60,580 (2,540) 58,040 (22,121) 35,919 88,488 (3,000) 85,488 (21,139) 64,349 Total distributable income Income attributable to the depositors and others 288,220 (iii) Unaudited Statements of Comprehensive Income Economic Entity Individual Quarter Ended Cumulative Quarter Ended 30/9/2020 30/9/2019 30/9/2020 30/9/2019 RM'000 RM'000 RM'000 RM'000 Net profit for the financial period 1,352 14,459 35,919 64,349 33,098 1,229 29,611 115 84,787 2,472 101,614 272 (24,364) (2,096) 7,867 (25,309) (1,033) 3,384 (98,745) 3,350 (8,136) (57,881) (10,496) 33,509 9,219 17,843 27,783 97,858 Other comprehensive income/(losses) : Items that may be reclassified subsequently to profit or loss : - Net fair value change in financial investments at FVOCI - Net credit impairment loss change in financial investments at FVOCI - Net gain on financial investments measurred at FVOCI reclassified to profit or loss on disposal - Deferred tax on financial investments at FVOCI Other comprehensive income/(loss) for the financial period, net of tax Total comprehensive income for the financial period 43
  44. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A32. OPERATIONS OF ISLAMIC BANKING - AFFIN ISLAMIC BANK BERHAD (Cont.) (iv) Unaudited Condensed Statement Of Changes In Equity Economic Entity At 1 January 2020 Comprehensive income : - Net profit for the financial period Other comprehensive loss (net of tax) : - Financial investments at FVOCI Total comprehensive (loss)/income Transfer (from)/to regulatory reserves <---------------Attributable to Equity Holder of the Bank--------------> FVOCI Total revaluation Regulatory Retained equity Share capital reserves reserves profits RM'000 RM'000 RM'000 RM'000 RM'000 1,060,000 19,492 236,882 602,260 1,918,634 - - - 35,919 35,919 (8,136) 27,783 -- -- (8,136) (8,136) -- (81,445) - 35,919 81,445- At 30 September 2020 1,060,000 11,356 155,437 719,624 1,946,417 At 1 January 2019 1,060,000 3,172 194,384 577,671 1,835,227 - - - 64,349 64,349 - 33,509 33,509 - 33,150 64,349 (33,150) 33,509 97,858 - 1,060,000 36,681 227,534 608,870 Comprehensive income : - Net profit for the financial period Other comprehensive income (net of tax) : - Financial investments at FVOCI Total comprehensive income Transfer (from)/to regulatory reserves At 30 September 2019 1,933,085 44
  45. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A32. OPERATIONS OF ISLAMIC BANKING - AFFIN ISLAMIC BANK BERHAD (Cont.) (v) Financing, advances and other financing By type Cash line Term financing - Housing financing - Syndicated financing - Hire purchase receivables - Business term financing Bills receivables Trust receipts Claims on customers under acceptance credits Staff financing (of which RM Nil to Directors) Credit/charge cards Revolving credit Gross financing, advances and other financing Less : ECL Total net financing, advances and other financing Economic Entity 30/9/2020 31/12/2019 RM’000 RM’000 519,337 469,379 7,655,401 3,893,345 5,743,048 3,457 15,223 476,867 78,105 33,791 1,026,628 19,445,202 7,351,173 746,036 3,820,401 4,885,355 11,668 30,232 447,486 62,760 30,828 897,505 18,752,823 (207,882) 19,237,320 (172,570) 18,580,253 (vi) Movements of impaired financing At beginning of the financial period/year Classified as impaired Reclassified as non-impaired Amount recovered Amount written-off At end of the financial period/year Ratio of gross impaired financing, advances and other financing to gross financing, advances and other financing (excludes RIA). 607,312 88,486 (74,281) (28,629) (33,747) 530,829 315,874 (183,350) (35,889) (20,152) 559,141 607,312 2.11% 2.47% 45
  46. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part A - Explanatory Notes pursuant to Malaysian Financial Reporting Standard ("MFRS") 134 and Policy Document on Financial Reporting issued by Bank Negara Malaysia A32. OPERATIONS OF ISLAMIC BANKING - AFFIN ISLAMIC BANK BERHAD (Cont.) (vii) Movement in expected credit losses for financing, advances and other financing Economic Entity 30/9/2020 At beginning of the financial period Total transfer between stages due to change in credit risk : - Transfer to 12-month ECL (Stage 1) - Transfer to Lifetime ECL not credit impaired (Stage 2) - Transfer to Lifetime ECL credit impaired (Stage 3) Financing, advances and other financing derecognised (other than write-offs) New financing, advances and other financing originated or purchased Changes due to change in credit risk Write-offs Other adjustments At end of the financial period Economic Entity 31/12/2019 At beginning of the financial year Total transfer between stages due to change in credit risk : - Transfer to 12-month ECL (Stage 1) - Transfer to Lifetime ECL not credit impaired (Stage 2) - Transfer to Lifetime ECL credit impaired (Stage 3) Financing, advances and other financing derecognised (other than write-offs) New financing, advances and other financing originated or purchased Changes due to change in credit risk Changes in models/risk parameters Write-offs Other adjustments At end of the financial year 12-Month ECL (Stage 1) RM'000 51,043 10,889 13,150 (2,251) (10) (19,387) 20,830 7,796 1 Lifetime ECL Lifetime ECL not credit credit impaired impaired (Stage 2) (Stage 3) RM'000 RM'000 17,171 104,356 7,577 (18,466) (10,577) (2,573) 19,333 (17,082) (1,179) 1,189 (931) 703 6,900 - Total RM'000 172,570 - (1,677) 102 55,043 (33,604) (464) (21,995) 21,635 69,739 (33,604) (463) 71,172 31,420 105,290 207,882 50,292 6,337 9,134 (2,772) (25) 10,864 25,385 (7,380) 36,096 (3,331) 67,861 (31,722) (1,754) (33,324) 3,356 129,017 - (31,489) 30,171 (9,546) 5,278 - (2,865) 1,702 (19,562) 1,647 - (1,909) 10,681 72,892 6,805 (19,399) (853) (36,263) 42,554 43,784 13,730 (19,399) (853) 51,043 17,171 104,356 172,570 (viii) Deposits from customers Economic Entity 30/9/2020 31/12/2019 RM'000 RM'000 Qard Demand deposits Savings deposits Mudarabah General investment deposits Tawarruq Demand deposit Savings deposits Murabahah term deposits Commodity Murabahah Deposit Total deposits from customers 2,992,646 932,136 3,924,782 2,954,059 647,064 3,601,123 58,793 61,558 48,790 68,650 13,340,617 1,009,532 14,467,589 111 157 13,241,472 401,917 13,643,657 18,451,164 17,306,338 46
  47. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part B - Explanatory Notes pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad B1. REVIEW OF PERFORMANCE OF THE COMPANY AND ITS PRINCIPAL SUBSIDIARIES Table 1 : Financial review for individual and cumulative quarter for current against preceding year's corresponding quarter Individual Quarter Ended 30/9/2020 30/9/2019 RM'000 RM'000 Net Income Operating Profit Profit Before Zakat and Tax Profit Before Tax Profit After Tax Profit attributable to equity holders of the Bank RM'000 % Cumulative Quarter Ended 30/9/2020 30/9/2019 RM'000 RM'000 Changes Changes RM'000 % 694,199 94,805 98,919 95,321 57,515 474,260 111,911 111,735 110,729 77,551 219,939 (17,106) (12,816) (15,408) (20,036) 46.4 (15.3) (11.5) (13.9) (25.8) 1,837,532 351,377 370,011 363,248 262,873 1,444,703 503,366 516,061 510,745 384,374 392,829 (151,989) (146,050) (147,497) (121,501) 27.2 (30.2) (28.3) (28.9) (31.6) 48,718 72,399 (23,681) (32.7) 239,686 365,661 (125,975) (34.5) (i) Current Period-to-Date vs Previous Corresponding Period-to-Date The Group posted a profit before tax of RM363.2 million for the nine-month financial period ended 30 September 2020, a decrease of RM147.5 million or 28.9% as compared to the previous corresponding nine-month period ended 30 September 2019 of RM510.7 million. The Group’s allowances for impairment losses on loans, advances, financing and other assets increased by RM286.6 million to RM295.5 million as compared to the previous corresponding nine-month financial period ended 30 September 2019 of RM8.9 million. The Group provided a one-off modification loss related to Covid-19 relief measures by BNM amounting to RM79.7 million. The Group’s net interest income for the nine-month financial period ended 30 September 2020 decreased by RM32.5 million or 5.8% to RM523.5 million for the nine-month financial period ended 30 September 2020 as compared to the previous corresponding nine-month financial period ended 30 September 2019 of RM556.0 million. Income from Islamic Banking operations increased by RM49.9 million or 16.6% to RM350.1 million for the nine-month financial period ended 30 September 2020 as compared to the previous corresponding nine-month financial period ended 30 September 2019 of RM300.2 million. The non-interest income of the Group for the nine-month financial period ended 30 September 2020 was RM1,043.6 million, a significant increase of RM455.1 million or 77.3% from RM588.5 million in the previous corresponding nine-month financial period ended 30 September 2019. The main contributor for the increase was higher net gain on sales of financial instruments of RM403.9 million and higher fees and commission income of RM49.3 million. The Group’s overhead expenses for the nine-month financial period ended 30 September 2020 recorded an increase of RM258.2 million or 27.7% to RM1,190.6 million as compared to RM932.4 million in the previous corresponding nine-month financial period ended 30 September 2019. The increase in overhead expenses was mainly attributable to higher personnel expenses, establishment expenses and general and administration expenses of RM239.5 million, RM25.9 million and RM3.1 million respectively, offset by lower marketing expenses of RM10.3 million. The Group’s profit before tax for the nine-month financial period ended 30 September 2020 as compared to the previous corresponding ninemonth financial period ended 30 September 2019 is further segmented based on the operating segments of the Group as follows: Commercial Banking AFFIN Bank Berhad’s profit before tax decreased by RM280.3 million or 83.8% to RM54.3 million for the nine-month financial period ended 30 September 2020 from RM334.6 million for the previous corresponding nine-month financial period ended 30 September 2019. The decrease was mainly due to higher net allowance for impairment losses on loans, advances and financing and overhead expenses of RM196.0 million and RM61.1 million respectively, lower net interest income of RM24.8 million, lower other income of RM20.5 million and lower net fee and commission income of RM7.6 million coupled with one-off modification loss arising from the moratorium given to borrowers of RM50.3 million. The decreases were, however, mitigated by higher net gain on sales of financial instruments of RM80.0 million. AFFIN Islamic Bank Berhad’s profit before tax decreased by RM27.4 million or 32.1% to RM58.0 million for the nine-month financial period ended 30 September 2020 from RM85.4 million for the previous corresponding nine-month financial period ended 30 September 2019. The decrease was mainly due to higher net allowance for impairment losses on financing, advances and other assets of RM61.2 million, recognition of one-off modification loss of RM29.5 million and lower other income of RM7.4 million. The decreases were, however, cushioned by higher net gain on sales of financial instruments of RM38.3 million, higher net interest income of RM17.8 million and lower overhead expenses of RM13.7 million. 47
  48. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part B - Explanatory Notes pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad B1. REVIEW OF PERFORMANCE OF THE COMPANY AND ITS PRINCIPAL SUBSIDIARIES (Cont.) (i) Current Period-to-Date vs Previous Corresponding Period-to-Date (Cont.) The Group’s profit before tax for the nine-month financial period ended 30 September 2020 as compared to the previous corresponding ninemonth financial period ended 30 September 2019 is further segmented based on the operating segments of the Group as follows (cont.): Investment Banking AFFIN Hwang IB Group’s profit before tax increased by RM127.0 million or 87.4% to RM272.3 million for the nine-month financial period ended 30 September 2020 from RM145.3 million for the previous corresponding nine-month financial period ended 30 September 2019. The improved performance was attributable to higher net gain on sales of financial instruments of RM323.9 million and higher fee and commission income of RM58.1 million. These were offset by higher overhead expenses of RM211.1 million, higher net allowance for impairment losses on loans, advances and financing of RM38.5 million and lower net interest income of RM7.3 million. The 63%-owned subsidiary namely AFFIN Hwang Asset Management Berhad’s profit before tax increased by RM10.1 million or 13.6% to RM84.2 million for the nine-month financial period ended 30 September 2020 from RM74.1 million for the previous corresponding nine-month financial period ended 30 September 2019. The increase was mainly due to higher fee and commission income of RM29.2 million, offset by higher overhead expenses of RM19.4 million. Insurance The results of the insurance segment was made up of share of after tax results in AXA AFFIN Life Insurance Berhad ("AALI") and AXA AFFIN General Insurance Berhad ("AAGI"). AALI reported a profit before tax of RM6.9 million for the nine-month financial period ended 30 September 2020 as compared to loss before tax of RM9.6 million for the previous corresponding nine-month financial period ended 30 September 2019. The improved performance was mainly due to the gain on disposal of equities of RM11.9 million, higher earned premium of RM8.8 million and lower net claims incurred of RM3.8 million, offset by higher overhead expenses of RM5.8 million and lower investment income of RM2.3 million. AAGI’s profit before tax increased by RM1.1 million or 2.4% to RM44.1 million for the nine-month financial period ended 30 September 2020 from RM43.0 million for the previous corresponding nine-month financial period ended 30 September 2019. The increase was mainly due to improvement in underwriting results by RM10.6 million and lower interest expense by RM3.1 million, offset by lower investment income by RM12.1 million. Other business segment AFFIN Moneybrokers Sdn Bhd’s profit before tax decreased by RM0.4 million or 20.0% to RM1.6 million for the nine-month financial period ended 30 September 2020 from RM2.0 million for the previous corresponding nine-month financial period ended 30 September 2019. The decrease was mainly due to lower net brokerage income of RM0.3 million and higher overhead expenses of RM0.1 million. (ii) Current Quarter vs Previous Period Corresponding Quarter The Group recorded a profit before tax of RM95.3 million for the quarter ended 30 September 2020, representing a decrease of RM15.4 million or 13.9% as compared to the previous period corresponding quarter ended 30 September 2019 of RM110.7 million. The Group’s allowance for impairment losses on loans, advances, financing and other assets increased by RM78.6 million to RM123.6 million as compared to the previous period corresponding quarter ended 30 September 2019 of RM45.0 million. The Group’s net interest income and Islamic Banking income for quarter ended 30 September 2020 increased by RM27.2 million or 9.8% to RM305.9 million as compared to the previous period corresponding quarter ended 30 September 2019 of RM278.7 million. The Group’s non-interest income increased by RM192.8 million to RM388.3 million for the quarter ended 30 September 2020 as compared to the previous period corresponding quarter ended 30 September 2019 of RM195.5 million. The increase was mainly due to higher net gain on sales of financial instruments of RM164.4 million and higher fee and commission income of RM27.1 million. The Group incurred higher overhead expenses for the quarter ended 30 September 2020 of RM475.8 million, an increase of RM158.5 million or 50.0% from RM317.3 million in the previous period corresponding quarter ended 30 September 2019. The increase in overhead expenses was mainly due to higher personnel expenses. 48
  49. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part B - Explanatory Notes pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad B1. REVIEW OF PERFORMANCE OF THE COMPANY AND ITS PRINCIPAL SUBSIDIARIES (Cont.) (ii) Current Quarter vs Previous Period Corresponding Quarter (Cont.) The Group’s profit before tax for the quarter ended 30 September 2020 as compared to the previous corresponding quarter ended 30 September 2019 is further segmented based on the operating segments of the Group as follows: Commercial Banking AFFIN Bank Berhad’s profit before tax decreased by RM91.6 million or 85.5% to RM15.5 million for the quarter ended 30 September 2020 from RM107.1 million for the previous corresponding quarter ended 30 September 2019. The decrease was mainly due to lower other income of RM59.6 million and higher overhead expenses and net allowance for impairment losses on loans, advances and financing of RM19.6 million and RM48.2 million respectively. The decreases were, however mitigated by higher net gain on sales of financial instruments of RM20.2 million, higher net interest income of RM14.6 million and higher net fee and commission income of RM1.0 million. AFFIN Islamic Bank Berhad’s profit before tax decreased by RM5.9 million or 33.9% to RM11.4 million for the quarter ended 30 September 2020 from RM17.3 million for the previous corresponding quarter ended 30 September 2019. The decrease was mainly due to higher net allowance for impairment losses on financing, advances and other assets of RM29.7 million, higher zakat of RM2.5 million, lower net gain on sales of financial instruments of RM1.7 million and lower other income of RM1.3 million. These were cushioned by lower overhead expenses of RM11.4 million, higher net interest income of RM17.0 million and higher net fee and commission income of RM0.9 million. Investment Banking AFFIN Hwang IB Group’s profit before tax increased by RM16.0 million or 33.1% to RM64.5 million for the quarter ended 30 September 2020 from RM48.5 million for the previous corresponding quarter ended 30 September 2019. The increase was mainly due to higher net gain on sales of financial instruments of RM144.2 million and higher fee and commission income of RM26.8 million, offset by higher overhead expenses of RM150.8 million and higher net allowance for impairment losses on loans, advances and financing of RM4.4 million. The 63%-owned subsidiary namely AFFIN Hwang Asset Management Berhad’s profit before tax increased by RM8.2 million or 34.5% to RM32.1 million for the quarter ended 30 September 2020 from RM23.9 million for the previous corresponding quarter ended 30 September 2019. The increase was mainly due to higher fee and commission income of RM11.3 million and higher net gain on sales of financial instruments of RM3.6 million, offset by higher overhead expenses of RM5.7 million and lower other income of RM1.2 million. Insurance The results of the insurance segment was made up of share of after tax results in AXA AFFIN Life Insurance Berhad ("AALI") and AXA AFFIN General Insurance Berhad ("AAGI"). AALI’s loss before tax improved by RM7.7 million or 61.2% to RM4.9 million for the quarter ended 30 September 2020 from RM12.6 million for the previous corresponding quarter ended 30 September 2019. The improved performance was mainly due to higher underwriting profit of RM13.0 million, offset by higher reserves for future policyholders’ liabilities of RM3.3 million and lower investment income of RM2.3 million. AAGI’s profit before tax increased by RM3.9 million or 32.3% to RM16.1 million for the quarter period ended 30 September 2020 from RM12.2 million for the previous corresponding quarter ended 30 September 2019. The increase was mainly due to improvement in underwriting results by RM9.4 million, lower interest expense by RM1.0 million and higher realised gains on disposal of investments of RM0.8 million, offset by lower investment income by RM7.3 million. Other business segment AFFIN Moneybrokers Sdn Bhd’s profit before tax decreased by RM0.3 million or 37.5% to RM0.4 million for the quarter ended 30 September 2020 from RM0.7 million for the previous corresponding quarter ended 30 September 2019. The decrease was mainly due to lower net brokerage income of RM0.2 million and higher overhead expenses of RM0.1 million. 49
  50. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part B - Explanatory Notes pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad B2. COMMENTS ON CURRENT PERFORMANCE AGAINST THE PRECEDING QUARTER'S RESULTS Net income Operating Profit Profit Before Zakat and Tax Profit Before Tax Profit After Tax Profit attributable to equity holders of the Bank Current Financial Quarter Preceding Financial Quarter 30/9/2020 RM'000 30/6/2020 RM'000 694,199 94,805 98,919 95,321 57,515 48,718 512,958 76,354 94,600 93,638 76,253 67,399 Changes RM'000 181,241 18,451 4,319 1,683 (18,738) (18,681) % 35.3 24.2 4.6 1.8 -24.6 -27.7 The Group’s profit before tax for the quarter ended 30 September 2020 increased by RM1.7 million or 1.8% to RM95.3 million against the preceding quarter ended 30 June 2020 of RM93.6 million. The one-off modification loss related to Covid-19 relief measures by BNM amounting to RM79.7 million was recognized in the preceding quarter ended 30 June 2020. The Group’s net interest income for quarter ended 30 September 2020 increased by RM35.6 million or 22.6% to RM192.8 million against the preceding quarter ended 30 June 2020 of RM157.2 million. Income from Islamic Banking operations decreased by RM4.3 million or 3.6% to RM113.1 million against the preceding quarter ended 30 June 2020 of RM117.4 million. The non-interest income of the Group for the quarter ended 30 September 2020 increased by RM70.2 million or 22.1% to RM388.3 million as compared to RM318.1 million in the preceding quarter ended 30 June 2020. The increase was mainly due to higher net gain on sales of financial instruments of RM53.8 million and higher fees and commission income of RM17.5 million. The Group’s overhead expenses for quarter ended 30 September 2020 increased by RM93.0 million or 24.3% to RM475.8 million as compared to RM382.8 million in the preceding quarter ended 30 June 2020. The increase in overhead expenses was mainly attributable to higher personnel expenses of RM96.6 million and higher marketing expenses of RM3.4 million, offset by lower general and administration expenses of RM4.1 million and lower establishment expenses of RM2.9 million. 50
  51. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part B - Explanatory Notes pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad B3. ECONOMIC AND BUSINESS OUTLOOK FOR 2020 The Malaysian economy contracted sharply by -17.1% in 2Q2020, the lowest recorded GDP since the financial crisis in 1998 as containment measures and lockdowns to control the spread of the Covid-19 virus impacted almost all business activities. Following from this, BNM recently revised its real GDP growth projection for 2020 down to a range of -3.5% to -5.5% from -2.0% to +0.5% earlier. Similarly, the World Bank had forecasted that Malaysia's real GDP for 2020 would contract by -4.9% instead of its earlier forecasted -3.1%. Despite the downward revision of these forecasts, Malaysia could see a return to growth in 4Q2020 if containment efforts are successful, it will translate into improvements in consumption, external trade and overall employment rate. The domestic economy was given a further boost on 23 September 2020, when the Prime Minister announced an additional stimulus measure named KITA PRIHATIN worth RM10 billion to support the economy and safeguard the people's well-being. This was in addition to the earlier stimulus announced, PRIHATIN Stimulus Package of RM260 billion and PENJANA of RM35 billion. In total, the stimulus measures introduced by the Government amounted to RM305 billion or about 20.7% of GDP. All this will provide some support to domestic demand and assist the labour market conditions in the near term. On the fiscal front, the government raised its debt ceiling rate from 55% of GDP to 60% of GDP starting from February 2020 until 31 December 2022. This will enable the government to finance the economic stimulus packages needed to mitigate the impact of the pandemic on the domestic economy which in turn will help the businesses and individuals suffering from the impact of the pandemic. STRATEGY MOVING FORWARD During these unprecedented times, the Bank is focused on ensuring business continuity and providing support to its customers most affected by this situation by providing them financial relief where required. At the same time, the Bank is closely monitoring its overall health of its loan portfolio and is taking proactive measures to address any potential increase in impaired loans. The Bank is constantly striving to remain agile and is committed to fulfilling stakeholders’ needs. The Community Banking Division continues to grow its loan base through new product offerings such as our newly launched AFFIN Duo credit card and targeted personal financing loan options. At the same time, it is focused on growing its current account and savings account base through its retail internet banking offering, payroll acquisitions and cross selling efforts. All have contributed to its increasing loan book, deposit base and net interest income. Efforts are also expanded to increase the division’s fee-based income by diversifying its wealth management services and expanding its customer base via a segment-based approach and improved customer experience via digitalisation. SMEs remain one of the hardest hit segments during this period and our Enterprise Banking Division is working to support its customers through the implementation of the Financial Assistance and Instalment Relief (“FAIR”) program. The FAIR program is designed to assist individuals and companies impacted by the Covid-19 pandemic by providing some relief and indulgence on existing financing obligations. Aside from assisting its customers, the division continues to grow its loan and deposit portfolio in targeted areas through customer engagement activities and campaigns. The Corporate Banking Division will continue to grow loans and financing while keeping a prudent approach towards asset quality. The Division will use digital tools and analytics to accurately identify the customers' needs in addition to its usual account planning exercise. The new cash management offering, AFFINMAX is expected to enhance its user experience and assist with the growth in CASA. AFFIN Islamic Bank Berhad is set to strengthen its balance sheet management to manage its liquidity and funding cost effectively while complying with all regulatory requirements. Sustaining profitability, preserving asset quality as well as maintaining an effective cost structure shall remain as key considerations of the Bank to navigate through the challenging economic landscape of 2020. AFFIN Hwang IB Group will continue to identify and capitalise on the opportunities within the Malaysian Capital Market despite a challenging global economic outlook amidst the Covid-19 pandemic crisis. The Group will focus on diversifying its revenue base to complement its Capital Market activities by expanding and strengthening its product and service offerings with the aim of delivering value added proposition to its clients and stakeholders. In an effort to further strengthen the clients "end-to-end journey", the Group will continue to develop best practices to be adopted with the aim of delivering a seamless investment experience for customers. AAGI's focus is on building a sustainable business portfolio to ensure profitability and on expanding its market share in the preferred segments amidst challenges faced by markets locally and globally due to the impact of the Covid-19 pandemic. Strategies and plans are in place with the key objective of attaining sustainable growth with a focus on profitability, customer experience and efficiency. AAGI will find ways to adapt and adopt this new normal and at the same time, protecting the health and safety of its employees. 51
  52. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part B - Explanatory Notes pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad B4. VARIANCE OF ACTUAL PROFIT FROM FORECAST PROFIT There were no profit forecast and profit guarantee issued by the Group and the Bank. B5. TAXATION Group Malaysian income tax Under/(over) provision in prior years Deferred tax (income)/expense : - Relating to originating temporary differences Individual Quarter Ended 30/9/2020 30/9/2019 RM’000 RM’000 76,697 47,221 114 (56,713) Cumulative Quarter Ended 30/9/2020 30/9/2019 RM’000 RM’000 170,840 112,754 117 (56,691) (39,005) 42,670 (70,582) 70,308 37,806 33,178 100,375 126,371 For the current and the preceding year's corresponding period, the Group's effective tax rates was higher than the statutory tax rate, mainly due to certain expenses not deductible for tax purposes, net of certain income not subject to tax or subject to lower tax rate. Bank Malaysian income tax (Over)/under provision in prior years Deferred tax (income)/expense : - Relating to originating temporary differences 25,481 1 28,156 (42,577) 41,790 1 63,635 (42,577) (12,348) 30,196 (26,344) 49,203 13,134 15,775 15,447 70,261 For the current and the preceding year's corresponding period, the Bank's effective tax rates was higher than the statutory tax rate, mainly due to certain expenses not deductible for tax purposes, net of certain income not subject to tax or subject to lower tax rate. 52
  53. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part B - Explanatory Notes pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad B6. STATUS OF CORPORATE PROPOSALS There were no changes in status of corporate proposals reported during the financial period under review. B7. DEPOSITS, LEASE LIABILITIES AND BORROWINGS (i) Deposits from Customers By Type of Deposit : Demand Deposits Savings Deposits Fixed Deposits Commodity Murabahah Deposits Money Market Deposits Negotiable Instruments of Deposits ("NID") Others By Maturity structure of fixed deposits, NID and others : Due within six months Six months to one year One year to three years Three years to five years By Type of Customer : Government and statutory bodies Business enterprises Individuals Domestic banking institutions Domestic non-banking financial institutions Foreign entities Others Group 30/9/2020 31/12/2019 RM’000 RM’000 Bank 30/9/2020 31/12/2019 RM’000 RM’000 7,273,558 2,959,681 36,211,651 1,009,532 599,248 1,328,994 122,193 49,504,857 7,417,574 2,334,653 39,137,401 402,074 1,278,950 485,021 33,289 51,088,962 4,232,647 1,958,895 20,213,747 599,248 715,977 27,720,514 4,468,875 1,687,588 22,194,938 1,278,950 504,899 30,135,250 27,956,157 8,082,053 1,404,083 220,545 37,662,838 20,975,454 16,480,637 1,886,591 313,029 39,655,711 14,951,437 4,910,690 1,035,474 32,123 20,929,724 10,939,740 10,245,509 1,477,277 37,311 22,699,837 7,866,522 10,601,234 25,207,650 1,325,496 3,213,090 562,805 728,060 49,504,857 8,022,642 12,585,286 23,504,126 494,213 5,060,498 716,175 706,022 51,088,962 789,456 6,160,571 18,577,322 711,097 555,070 402,964 524,034 27,720,514 1,024,448 7,284,828 18,197,263 513,669 2,050,604 567,667 496,771 30,135,250 740,835 166,244 3,141,736 4,048,815 614,958 395,889 4,675 747,730 1,763,252 271,909 166,244 1,978,940 2,417,093 227,497 4,675 413,913 646,085 3,948,490 100,325 1,763,252 - 2,417,093 - 646,085 - 4,048,815 1,763,252 2,417,093 646,085 (ii) Deposits and Placements of Banks and Other Financial Institutions By Type of Institution : Licensed banks Licensed investment banks Bank Negara Malaysia Other financial institutions By Maturity structure of deposits : Due within six months Six months to one year (iii) Lease Liabilities At beginning of financial period/year, on adoption of MFRS 16 Additions Termination of contracts Interest/Profit expense Lease payment At end of the financial period/year 58,650 20,432 (7) 2,007 (28,428) 52,654 70,741 22,762 (104) 2,512 (37,261) 58,650 44,219 6,568 1,212 (19,425) 32,574 57,893 10,610 1,885 (26,169) 44,219 53
  54. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part B - Explanatory Notes pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad B7. DEPOSITS, LEASE LIABILITIES AND BORROWINGS (Cont.) (iv) Borrowings (a) (b) (c) (d) Tier-2 Subordinated Medium Term Notes ('MTN') Additional Tier-1 Capital Securities ('AT1CS') Additional Tier-1 Sukuk Wakalah ('AT1S') MTN Tier-2 Sukuk Murabahah Group 30/9/2020 31/12/2019 RM’000 RM’000 Bank 30/9/2020 31/12/2019 RM’000 RM’000 2,009,590 504,926 307,662 764,600 2,036,143 512,236 303,425 755,339 2,009,590 504,926 - 2,036,143 512,236 - 3,586,778 3,607,143 2,514,516 2,548,379 (a) Tier-2 Subordinated Medium Term Notes ("Subordinated MTNs") ABB had, on 7 February 2017 and 20 September 2017, issued 2 tranches of Tier-2 Subordinated MTNs of RM1.0 billion each out of its approved BASEL III Compliant MTN programme of up to RM6.0 billion in nominal value. The Subordinated MTNs were issued for a tenure of 10 years from the issue date on a 10-year non-callable 5-year basis, at a coupon rate of 5.45% and 5.03% respectively. The MTNs were issued for the purpose of general banking business and working capital requirements of ABB. (b) Additional Tier-1 Capital Securities ("AT1CS") ABB had, on 31 July 2018, issued AT1CS of RM500 million out of its approved BASEL III Compliant AT1CS programme of up to RM3.0 billion in nominal value. The AT1CS was on perpetual non-callable 5-year basis, at a coupon rate of 5.80%. The AT1CS was issued for the purpose of general banking business and working capital requirements of the Bank. (c) Additional Tier 1 Sukuk Wakalah ("AT1S") AiBB had, on 18 October 2018, issued first tranche of AT1S of RM300.0 million out of its approved BASEL III Complaint Islamic Medium Term Notes Programme ('Sukuk Programme') of up to RM5.0 billion in nominal value. The Sukuk Wakalah was on a perpetual non-callable 5 years, at a coupon rate of 5.65%. The Sukuk Wakalah was issued for the purpose of general banking business and working capital requirements of AiBB. (d) MTN Tier-2 Sukuk Murabahah AiBB had, on 23 October 2018, issued a MTN Tier-2 Sukuk Murabahah of RM800.0 million out of its Sukuk Programme. The Sukuk Murabahah was issued for a tenure of 10 years from the issue date on a 10-year non-callable 5-year basis, at a coupon rate of 5.05%. The Sukuk Murabahah was issued for the purpose of general banking business and working capital requirements of AiBB. 54
  55. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part B - Explanatory Notes pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad B8. MATERIAL LITIGATION a) A claim by the Plaintiff against the Bank vide Writ of Summons and Statement of Claim dated 22 January 2016 ("Writ") for the following:i) RM56,885,317.82 together with interest at 5% per annum from 1999 till full settlement as alleged damages; ii) SGD9,928,473.75 together with interest at 5% per annum from 2013 till full settlement as alleged losses; iii) RM776,331.00 being alleged losses of Plaintiff's shares in Berlian Ferries Pte. Ltd which was transferred out as a result of his bankruptcy in 2013 with interest at 5% per annum from 2013 till full settlement as alleged losses; iv) RM500,000 as cost in respect of legal proceedings in Singapore. The Bank had on 25 January 1996 given Suria Barisan (M) Sdn Bhd ("Suria") a credit facility of RM21.6 million ("Facility") against security of unquoted shares belonging to Naval Dockyard Sdn Bhd and guaranteed by the Plaintiff and Puan Norashikin Binti Abdul Latiff ("Guarantor"). Suria, the Plaintiff and the Guarantor ("All") defaulted on the Facility which led to the Bank filing a debt recovery action against All in 1999. Judgement was obtained against All on 8 July 2004. The Plaintiff was made bankrupt on 17 January 2013. The bankruptcy was set aside in September 2015 on the grounds that he was solvent due to a third party, Chenet Finance Ltd ("Chenet") being ordered by a Singapore Court to pay damages to the Director General of Insolvency Malaysia ("DGI") as receiver of Plaintiff's Estate. The Federal Court reinstated the Plaintiff's bankruptcy on 26 August 2019 and the hearings at the High Court could only proceed on receipt of the sanction from the DGI which was obtained on 6 December 2019. The next Case Management was fixed on 22 January 2020. However, trial was vacated due to the MCO. The Security For Cost application is now fixed for hearing on 14 December 2020. The Plaintiff's claim ("Claim") is premised on alleged wrongful acts by the Bank as follows:• failure to sell 7.2 million shares in Naval Dockyard Sdn Bhd ("NDSB shares") which was pledged by Suria to the Bank as security for the Facility on a timely basis. On this claim, Plaintiff claims damages under (i) above; Fa • allowed the release of the Guarantor from her liability upon payment of a certain sum pursuant to her Guarantee without giving the same opportunity to the Plaintiff; op • the Bank had corresponded with the opponent of Plaintiff in Singapore to prevent the Plaintiff from claiming his assets in Singapore. Plaintiff has alleged conspiracy between the Bank and the opponent of the Plaintiff in Singapore. On this claim, Plaintiff claims losses under (ii) above; • the Bank had wrongfully made Plaintiff a bankrupt in 2013 which bankruptcy was set aside in 2015. On this claim, Plaintiff claims losses under (iii) above; un • the Plaintiff is also claiming the amount of (iv) above being cost of proceedings incurred by him in Singapore. The Bank has a good defence ("Defence") with regards to each of the alleged wrongful act on the following merits:• the sale of NDSB Shares was subject to the approval from the relevant authorities as per the terms of the Facility Agreement and the price has to be based on the offer from the approved prospective buyer; • the release of the Guarantor is the prerogative of the Bank pursuant to the terms of the Guarantee Agreement; • the Plaintiff's bankruptcy is based on a judgement of Court; • the Bank's legal firm has corresponded with the legal firm of the Plaintiff's opponent in Singapore only to inform the status of the Plaintiff proceedings in Malaysia and any alleged conspiracy is denied; • the Claim for cost is unreasonable as the Bank was not in any way involved in the Singapore proceedings. The above Claim against the Bank by the Plaintiff is as a result of the Debt Recovery Action against the Plaintiff which was commenced in the ordinary course of business. The Board of Directors of the Bank are of the view that save for the orders, cost and other relief sought by the Plaintiff, which will only materialize if the Court rules in the Plaintiff's favour, the Writ and Statement of Claim is not expected to result in any immediate losses, material, financial and operational impact on the Bank for the period under review. b) There are various legal suits against ABB in respect of claims and counter claims of approximately RM15.0 million (2019: RM19.1 million). Based on legal advice, the Directors are of the opinion that no provision for damages need to be made in the financial statements, as the probability of adverse adjudication against ABB is remote. 55
  56. AFFIN BANK BERHAD Company no . 197501003274 (25046-T) Condensed Interim Financial Statements Explanatory Notes - Financial Quarter Ended 30 September 2020 Part B - Explanatory Notes pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad B9. DIVIDENDS No dividend has been proposed for the quarter ended 30 September 2020. B10. EARNINGS PER SHARE Basic The basic earnings per ordinary share for the Group and the Bank have been calculated by dividing the net profit attributable to equity holders of the Group and the Bank by the weighted average number of ordinary shares in issue during the financial period. Group Net profit attributable to equity holders of the Bank (RM'000) Weighted average number of ordinary shares in issue Basic earnings per share (sen) Bank Net profit attributable to equity holders of the Bank (RM'000) Weighted average number of ordinary shares in issue Basic earnings per share (sen) Individual Quarter Ended 30/9/2020 30/9/2019 Cumulative Quarter Ended 30/9/2019 30/9/2020 48,718 72,399 239,686 365,661 2,054,785,504 1,982,706,925 2,054,785,504 1,982,706,925 2.38 3.65 11.66 18.44 Individual Quarter Ended 30/9/2020 30/9/2019 Cumulative Quarter Ended 30/9/2019 30/9/2020 2,414 91,346 38,833 264,324 2,054,785,504 0.12 1,982,706,925 4.61 2,054,785,504 1.89 1,982,706,925 13.33 56