Alliance Bank: Annual Report 2019

Transcription

1. Building Alliances To Improve Lives 2019 ANNUAL REPORT
2. CORPORATE PROFILE Alliance Bank Malaysia Berhad (Alliance Bank) was incorporated in Malaysia on 3 August 1982 under the name of Malaysian French Bank Berhad. In 1996, it assumed the name of Multi-Purpose Bank Berhad. Following the successful merger of seven financial institutions in January 2001, the Bank assumed its present name. On 26 September 2017, the Bank was listed on the Official List of the Main Market of Bursa Malaysia Securities Berhad by assuming the listing status of its then holding company, Alliance Financial Group Berhad upon the completion of a corporate re-organisation exercise. Today, Alliance Bank and its two principal subsidiaries, Alliance Investment Bank Berhad and Alliance Islamic Bank Berhad, is a dynamic, integrated financial services group offering banking and financial solutions through its consumer banking, SME banking, corporate and commercial banking, Islamic banking, investment banking, and stockbroking businesses. Our Vision Our Brand Attributes Building Alliances to Improve Lives • Innovative • Fast, Simple & Responsive • Aligned to Customers’ Needs Our Key Behaviours Commit to Excellence Take Ownership Understand & Act Collaborate Innovate & Simplify The Bank provides fast, simple and responsive services that meet the needs of its customers via multi-pronged delivery channels which include retail branches, Privilege Banking Centres, Business Centres, and Investment Bank branches located nationwide, as well as mobile and Internet banking. VIEW OUR REPORT ONLINE Our Annual Report, Accounts and other information about Alliance Bank Malaysia Berhad can be found at https://www.alliancebank.com.my Indicates a page or note where more information can be found. Indicates a website reference where more information can be found.
3. CONTENTS SECTION SECTION SECTION CORPORATE PERSPECTIVES GOVERNANCE 1 2 4 5 10 Corporate Profile Our Vision , Key Behaviours & Brand Attributes Corporate Information Corporate Structure Products and Services Financial Highlights 2 12 14 27 50 Statement by Chairman of Alliance Bank Malaysia Berhad Management Discussion & Analysis Sustainability Statement Calendar of Significant Events 3 62 Corporate Governance Overview Statement • Leadership and Effectiveness - Board of Directors - Senior Management • Audit and Risk Management - Group Audit Committee Report - Shariah Committee of Alliance Islamic Bank Berhad • Relations with Shareholders 96 Statement on Risk Management and Internal Control 97 Risk Management 104 Additional Compliance Information SECTION SECTION SECTION FINANCIAL ADDITIONAL INFORMATION NOTICE AND FORM 4 106 Statement of Board of Directors’ Responsibilities 107 Financial Statements - Directors’ Report - Statement by Directors - Statutory Declaration - Independent Auditors’ Report - Statements of Financial Position - Statements of Income - Statements of Comprehensive Income - Statements of Changes in Equity - Statements of Cash Flows - Notes to the Financial Statements 285 Basel II Pillar 3 Report Disclosure 5 340 342 347 349 349 350 List of Properties Directory Analysis of Shareholdings Substantial Shareholders Directors’ Shareholdings Senior Management’s Shareholdings 6 351 Notice of 37th Annual General Meeting Form of Proxy
4. 2 Alliance Bank Malaysia Berhad (88103-W) CORPORATE INFORMATION as at 31 May 2019 BOARD OF DIRECTORS EXECUTIVE COMMITTEE GROUP AUDIT COMMITTEE* TAN SRI DATO’ AHMAD BIN MOHD DON Chairman of the Board, Independent Non-Executive Director LEE AH BOON (Chairman) Non-Independent Non-Executive Director THAYAPARAN S. SANGARAPILLAI (Chairman) Independent Non-Executive Director KUAH HUN LIANG Senior Independent Non-Executive Director OU SHIAN WAEI Independent Non-Executive Director LEE AH BOON Non-Independent Non-Executive Director DATUK WAN AZHAR BIN WAN AHMAD Independent Non-Executive Director LEE BOON HUAT Independent Non-Executive Director HO HON CHEONG Non-Independent Non-Executive Director THAYAPARAN S. SANGARAPILLAI Independent Non-Executive Director TAN CHIAN KHONG Independent Non-Executive Director SUSAN YUEN SU MIN Independent Non-Executive Director (Appointed on 15 October 2018) DATUK WAN AZHAR BIN WAN AHMAD Independent Non-Executive Director LEE BOON HUAT Independent Non-Executive Director OU SHIAN WAEI Independent Non-Executive Director TAN CHIAN KHONG Independent Non-Executive Director (Appointed on 1 April 2019) GROUP NOMINATION & REMUNERATION COMMITTEE* OU SHIAN WAEI (Chairman) Independent Non-Executive Director TAN SRI DATO’ AHMAD BIN MOHD DON Independent Non-Executive Director DATUK WAN AZHAR BIN WAN AHMAD Independent Non-Executive Director KUAH HUN LIANG Independent Non-Executive Director DATUK WAN AZHAR BIN WAN AHMAD Independent Non-Executive Director HO HON CHEONG Non-Independent Non-Executive Director TAN CHIAN KHONG Independent Non-Executive Director GROUP RISK MANAGEMENT COMMITTEE* LEE BOON HUAT (Chairman) Independent Non-Executive Director HO HON CHEONG Non-Independent Non-Executive Director THAYAPARAN S. SANGARAPILLAI Independent Non-Executive Director LEE AH BOON Non-Independent Non-Executive Director TUAN HAJI IBRAHIM BIN HASSAN Independent Non-Executive Director of Alliance Islamic Bank Berhad SUSAN YUEN SU MIN Independent Non-Executive Director (Appointed on 1 April 2019) MAZIDAH BINTI ABDUL MALIK Independent Non-Executive Director of Alliance Investment Bank Berhad SHARIAH COMMITTEE^ ASSOCIATE PROFESSOR DR BADRUDDIN BIN HJ IBRAHIM (Chairman) TUAN HAJI MD ALI BIN MD SARIF USTAZ ZAHARUDIN BIN MUHAMMAD DR AZRUL AZLAN BIN ISKANDAR MIRZA USTAZ AHMAD FAUWAZ BIN ALI @ FADZIL Notes: * Operate on a Group basis covering the Bank and its principal subsidiaries, namely Alliance Islamic Bank Berhad and Alliance Investment Bank Berhad. ^Resides in Alliance Islamic Bank Berhad.
5. 2019 Annual Report GROUP CHIEF EXECUTIVE OFFICER JOEL KORNREICH GROUP COMPANY SECRETARY LEE WEI YEN (MAICSA 7001798) REGISTERED OFFICE 3rd Floor, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur, Malaysia Tel Fax Website Email : 03-2604 3333 : 03-2694 6200 : www.alliancebank.com.my : enquiry@alliancefg.com REGISTRAR ShareWorks Sdn Bhd No. 2-1, Jalan Sri Hartamas 8 Sri Hartamas 50480 Kuala Lumpur, Malaysia Tel Fax : 03-6201 1120 : 03-6201 3121 AUDITORS PricewaterhouseCoopers PLT Level 10, 1 Sentral, Jalan Rakyat Kuala Lumpur Sentral 50706 Kuala Lumpur, Malaysia PRINCIPAL BANKER Alliance Bank Malaysia Berhad BURSA MALAYSIA STOCK NAME/CODE ABMB/2488 INTERNATIONAL SECURITIES IDENTIFICATION NUMBER (ISIN) MYL2488OO004 3
6. 4 Alliance Bank Malaysia Berhad (88103-W) CORPORATE STRUCTURE as at 31 May 2019 100% Alliance Islamic Bank Berhad 100% Alliance Investment Bank Berhad 51% AllianceDBS Research Sdn Bhd 100% Alliance Direct Marketing Sdn Bhd 100% AllianceGroup Nominees (Tempatan) Sdn Bhd 100% AllianceGroup Nominees (Asing) Sdn Bhd 100% Alliance Trustee Berhad* This chart features the main operating companies and does not include inactive companies and companies that are under members’ voluntary liquidation. * 20% shares are held by Alliance Bank Malaysia Berhad and the remaining 80% are held by its wholly-owned subsidiaries namely, Alliance Investment Bank Berhad (20%), Alliance Direct Marketing Sdn Bhd (20%), AllianceGroup Nominees (Asing) Sdn Bhd (20%) and AllianceGroup Nominees (Tempatan) Sdn Bhd (20%).
7. 2019 Annual Report PRODUCTS AND SERVICES ALLIANCE BANK MALAYSIA BERHAD PERSONAL BANKING Wealth Management allianceonline Bancassurance • Elite Cash Saver • Elite Credit Shield • Elite Income Saver • Elite Legacy Builder • Elite Life Guard • Elite Max Saver • Elite Smart Kids • Fire/House Owner (Conventional & Takaful) • Home Content • Mortgage Level Term Assurance • Mortgage Level Term Takaful • Mortgage Reducing Term Assurance • Mortgage Reducing Term Takaful • Motor Insurance (Conventional & Takaful) • Personal Accident • Personal Loan – Group Credit Family Takaful • Personal Loan Reducing Term Assurance • Safe Deposit Box Insurance • Travel Insurance allianceonline Internet Banking (24x7 service availability) • Account Overview • Alliance SavePlus Account Opening • Bill Payment (JomPAY) • Credit Card Balance Transfer & Fast Cash • Credit Card Payment (Pay to Alliance Bank/Interbank/DuitNow/GIRO) •eFD • E-Foreign Telegraphic Transfer •eIPO •e-Statement • Foreign Remittance • FPX Payment • Fund Transfer (Pay to Alliance Bank/Interbank/DuitNow/GIRO) • Loan Payment (Pay to Alliance Bank/Interbank/DuitNow/GIRO) • Prepaid Reload • Stock Trading Sign On • Transaction History allianceonline Mobile Banking (24x7 service availability) • Account Overview • Alliance SavePlus Account Opening • Bill Payment (JomPAY) • Credit Card Payment (Pay to Alliance Bank/Interbank/DuitNow/GIRO) •eFD • Fund Transfer (Pay to Alliance Bank/Interbank/DuitNow/GIRO) • Loan Payment (Pay to Alliance Bank/Interbank/DuitNow/GIRO) • Mobile Signing Approval (MSA) & Mobile Signing Code (MSC) Transaction Authorisation • Prepaid Reload • Transaction History • Transaction Push Notification allianceonline Cash2Home (24x7 service availability) • Account Overview • Foreign Remittance • Prepaid Reload • Transaction History Deposits • Alliance Buddy • Alliance FDGold • Alliance Hybrid Account/Alliance Premium Hybrid Account • Alliance My eSaving Account • Alliance SavePlus Account • Alliance Senior Savers • Alliance Xchange Account/Fixed Deposit •AllianceSave • AllianceSave Pendidikan • Current Account/Basic Current Account • Fixed Deposit • Foreign Currency Current Account • Foreign Currency Fixed Deposit • Savings Account/Basic Savings Account Unit Trust • Balanced Funds • Bond Funds • Equity Funds • Money Market Funds 5
8. 6 Alliance Bank Malaysia Berhad (88103-W) PRODUCTS AND SERVICES (Cont’d) Retail Broking & Investment Lending • Alliance One Invest stock trading platform for retail clients (available on web and mobile app) • Dedicated Omni-Channels to serve our customers – Call N Trade through Alliance Bank’s Share Trading Centres (STC), relationship managed and serviced by Equity Specialists – Daily research reports, stock trading ideas & Model Portfolio from ADBS Research – Online share trading via Internet & Mobile • Share Margin Financing – ESOS/IPO/Placement Financing Account – External Margin Account – Foreign Share Margin – Portfolio Financing Account – Share Margin + Trading 2-in-1 Account • Share Trading Account – Cash Upfront Trading Account – Collateralised Trading Account – Flexi 7 Account (i.e.T+7 Trading Account) • Foreign Share Trading Retail Securities • Foreign Currency Retail Bond • MYR-denominated Retail Bond Structured Investment • Basket Equity-Linked Knock-In Knock-Out Structured Investment • Dual Currency Investment • Equity Linked Convertible Structured Investment • Equity Linked Structured Investment • Fund-Linked Structured Investment • Interest-rate Linked Structured Investment Conventional Loans • • • • • Alliance CashFirst Personal Loan Alliance Conventional Commercial Property Loan Alliance Conventional Home Loan Alliance Conventional Oil Palm Plantation Financing Alliance One Account Cards Credit Cards • Alliance Basic Credit Card • Alliance Business Platinum Credit Card • Alliance Gold and Classic Credit Cards • Alliance Platinum Credit Card • Alliance Visa Infinite Business Credit Card • Alliance Visa Infinite Credit Card • Alliance You:nique Rates Credit Card • Alliance You:nique Rebates Credit Card • Alliance You:nique Rewards Credit Card Debit Cards • Alliance EcoWorld Debit Card • Alliance Hybrid AP Platinum Debit Card • Alliance Hybrid PB Platinum Debit Card • Alliance Hybrid Standard Debit Card • Alliance My eSaving Debit Card BUSINESS BANKING SME Bancassurance • Business Credit Life Insurance/Refund of Premium (ROP) • Business Shield for Merchant • General Insurance Products Business Credit Card • Business Platinum Credit Card • Visa Infinite Business Credit Card Cash Management • Account Management (via Alliance BizSmart) – Consolidated Account Overview –e-Statement – Tax Invoice/Merchant Report – Transaction History Download • Alliance BizSmart Online Banking • Collection Management – Auto Debit Service – Biz-Xpress Card: With functions such as Deposit, Local Cash, Withdrawal, mydebit (local purchases) and overseas cash withdrawal via Cirrus network – JomPAY Collection – Payee Corporation Service (FPX Payment) • Deposit Account Offering – Business Current Account – Business Fixed Deposit – Business Foreign Currency Current Account – Business Foreign Currency Fixed Deposit • Liquidity Management – Auto Sweeping Service – Business Rewards Services • Payment Management (via Alliance BizSmart) – Bill Payment (JomPAY/Direct Bill) – Bulk Payment • Deposit Account Offering – Bulk Payment with Payment Advice – Business Current Account – Business Fixed Deposit – DuitNow/Instant Transfer – E-Dividend Payment – Foreign Telegraphic Transfer – Fund Transfer (Pay to Alliance Bank/Interbank GIRO/RENTAS) – MyGST Payment – Payroll (Salary/EPF/SOCSO/SOCSO-EIS/Monthly Contribution/ PCB-LHDN Payment) – Prepaid Reload – Zakat Selangor
9. 2019 Annual Report Credit Facilities • Business Premises Financing • Equipment Financing • Foreign Exchange • Oil Palm Plantation Financing • Schemes promoted by CGC/BNM/Government • SME Express Cash • Working Capital Financing Employee Account Opening • Employee Account Opening for Local and Foreign Workers (via BizSmart) Trade Facilities • Bank Guarantees (BGs) • Bankers Acceptances • Collection Bills • Export Bills Purchased/Discounting • Export Credit Refinancing • Export LC Advising/Confirmation • Export LC Negotiation • Foreign Currency Trade Loan • Letter of Credits • Promissory Notes • Shipping Guarantees • Trust Receipts • Vendor Financing • Liquidity Management – Auto Sweeping Service – Business Rewards Services • Payment Management (via Alliance BizSmart) – Bill Payment (JomPAY/Direct Bill) – Bulk Payment – Bulk Payment with Payment Advice – DuitNow/Instant Transfer – E-Dividend Payment – Foreign Telegraphic Transfer – Fund Transfer (Pay to Alliance Bank/Interbank GIRO/RENTAS) – MyGST Payment – Payroll (Salary/EPF/SOCSO/SOCSO-EIS/Monthly Contribution/ PCB-LHDN Payment) – Prepaid Reload – Zakat Selangor Credit Facilities • Bridging Loan • Business Premises Financing • Foreign Currency Loan • Syndicated Loan • Term Loan • Working Capital Financing Foreign Exchange Interest Rate Swap Corporate & Commercial Bancassurance • Business Credit Life Insurance/Refund of Premium (ROP) • General Insurance Products Business Credit Card • Business Platinum Card • Visa Infinite Business Credit Card Cash Management • Account Management (via Alliance BizSmart) – Consolidated Account Overview –e-Statement – Tax Invoice/Merchant Report – Transaction History Download • Alliance BizSmart Online Banking • Collection Management – Auto Debit Service – Biz-Xpress Card: Deposit cum Withdrawal function via Self-Service Terminals (ATM/CDM/CES) – Bank Cheque Collection Service – Cash Concentration Solution – Cash in Transit – JomPAY Collection – Payee Corporation Service (FPX Payment) – Business Foreign Currency Current Account – Business Foreign Currency Fixed Deposit 7 Trade Facilities • Bank Guarantees (BGs) • Bankers Acceptances • Collection Bills • Export Bills Purchased/Discounting • Export Credit Refinancing • Export LC Advising/Confirmation • Export LC Negotiation • Foreign Currency Trade Loan • Letter of Credits • Promissory Notes • Shipping Guarantees • Trust Receipts • Vendor Financing FINANCIAL MARKETS • • • • Banker Acceptances Equity Linked Investments Foreign Exchange Transactions Hedging Solution – Cross-currency Swap – Currency options – Interest Rate Swap • Money Market Deposit • Negotiable Instrument of Deposit • Structured Investments
10. 8 Alliance Bank Malaysia Berhad (88103-W) PRODUCTS AND SERVICES (Cont’d) ALLIANCE ISLAMIC BANK BERHAD Bancatakaful • i-Great Bakti • Takaful Optimuz Business Financing • Business Premise Financing-i • Cashline Facility-i • Commodity Murabahah Revolving Credit-i • Commodity Murabahah Term Financing-i • Industrial Hire Purchase-i • Revolving Credit Facility-i • Schemes promoted by CGC/BNM/SME Corp/Government Cards • Alliance Hybrid AP Platinum Debit Card-i • Alliance Hybrid PB Platinum Debit Card-i • Alliance Hybrid Standard Debit Card-i • Alliance Junior Debit Card-i • Alliance My eSavings Debit Card-i Consumer Financing • Alliance One Account • Cashline Facility-i • CashVantage Financing-i • i-Wish Home Financing-i • Term Financing-i Deposits • Alliance Cash2Home • Alliance Hybrid Account-i • Alliance My eSavings Account-i • Alliance SavePlus Account-I (via allianceonline) • Alliance Term Deposit-i • allianceonline Banking • • • • • • • Basic Current Account-i Basic Savings Account-i Current Account-i e-Alliance Term Deposit-i (via allianceonline) Junior Smart Saver-i Junior Smart Term Deposit-i Savings Account-i Financial Markets • IPRS Murabahah-i • Islamic Acceptance of Bills • Money Market Deposit-i • Negotiable Islamic Deposits Certificate Trade Financing and Services • Accepted Bills-i • Bank Guarantee-i • Export Bills for Collection-i • Export Bills Negotiated-i • Export Bills Purchased-i/Discounted-i • Export Credit Refinancing-I (Pre-shipment/Post-shipment) • Export LC-I (Advising/Confirmation/Transferring) • Import Bills for Collection-i • Letter of Credit-i • Murabahah Trust Receipt-i • Murabahah Working Capital Financing-i • Shipping Guarantee-i Unit Trust • ASNB Fixed Price Funds • ASNB Variable Price Funds • Islamic Balanced Funds • Islamic Equity Funds • Islamic Money Market Funds ALLIANCE INVESTMENT BANK BERHAD Corporate Banking • Credit Facilities – Bridging Loan – Foreign Currency Loan – Syndicated Loan – Term Loan – Working Capital Financing • Trade Facilities – Bank Guarantees – Bankers Acceptances Corporate Finance • Independent Advice to Minority Shareholders for related party transactions, General Offers and General Offer Exemption • Initial Public Offerings – Involving public issues of new securities and/or offers for sale of existing securities in companies seeking listing and quotation on the Main Market, the ACE Market and the LEAP Market of Bursa Malaysia Securities Berhad • Merger, Takeover, Acquisition and Corporate Restructuring Advisory • Other General Corporate Advisory such as bonus issue, share split and employee share option scheme
11. 2019 Annual Report • Secondary Offerings – Involving raising of funds subsequent to the initial public offerings through rights issues, restricted issues, private placements and special issues of both equity and equity linked instruments 9 Islamic Banking • Islamic Accepted Bills • Kafalah Bank Guarantee • Murabahah Working Capital Financing Stockbroking Debt Capital Markets • Advisory and arrangement of Corporate Bonds and Sukuk (CBS) involving: – Asset Securitisation – Commercial Papers Programmes – Guaranteed Bonds and Sukuk – Medium Term Notes Programmes – Project Financing – Structured Financing – Unrated Bonds and Sukuk • Arrangement of Syndicated Corporate Loans and Financing Equity Syndication • Book-Building/Accelerated Book-Building of Equity and EquityLinked Instruments • Primary and Secondary Private Placements of Equity and EquityLinked Instruments • Underwriting and Private Placements of Real Estate Investment Trusts (REITs) • Underwritings and Private Placements of Initial Public Offerings • Underwritings of Rights Issues Financial Markets • Cross-currency Swap • Currency Options • Equity Linked Investments • Hedging Solution • Interest Rate Swap • Money Market Deposit • Negotiable Instrument of Deposit ALLIANCEDBS RESEARCH SDN BHD • • • • • Corporate Research Economic Research Equity Research Industry Research Investment Advisory Services ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD ALLIANCEGROUP NOMINEES (ASING) SDN BHD Alliance Retail Broking • Alliance One Invest stock trading platform for retail clients (available on web and mobile app) • Corporate Action Services • Dedicated Omni-Channels to serve our customers – Call N Trade through Alliance Investment Bank’s Branches, relationship managed and serviced by Trading Representatives such as Dealers or Remisiers – Self Directed clients are supported by Centralised Dealing Team – Online share trading via Internet & Mobile – Daily research reports, stock trading ideas & Model Portfolio from ADBS Research • Share Margin Financing • Share Trading Account – Cash Upfront Trading Account – Collateralised Trading Account – Flexi 7 Account (i.e. T+7 Trading Account) – Foreign Share Trading •e-Services – Direct Credit –e-Dividend Institutional Stockbroking • Institutional Share Trading • Inter-broke Services • Direct Market Access (“DMA”)
12. 10 Alliance Bank Malaysia Berhad (88103-W) FINANCIAL HIGHLIGHTS FINANCIAL YEAR ENDED 31 MARCH 2019 2018 2017 2016 2015 1,622 708 538 1,572 685 493 1,469 681 512 1,424 695 522 1,383 703 531 56,521 42,730 50,788 45,018 1,548 5,733 24,182 53,938 40,307 48,479 42,740 1,548 5,460 22,641 54,089 39,336 48,975 45,228 1,548 5,114 26,494 55,627 38,748 50,785 46,025 1,548 4,842 21,832 53,142 36,923 48,646 44,607 1,548 4,495 22,746 34.7 34.7 16.7 3.70 4.09 6,332 31.9 31.9 15.3 3.53 4.37 6,765 33.5 33.5 16.0 3.30 4.08 6,316 34.2 34.2 14.5 3.13 4.15 6,425 34.8 34.8 15.4 2.90 4.79 7,415 4.08 48.1 11.8 1.1 3.50 48.0 13.7 1.2 3.92 48.4 12.2 1.2 3.49 43.0 12.1 1.3 3.22 45.0 13.8 1.6 2.5 9.9 1.0 1.5 47.8 2.4 9.5 0.9 1.4 50.5 2.2 10.5 0.9 1.5 47.1 2.1 11.2 1.0 1.5 48.4 2.2 12.3 1.0 1.6 46.8 142.91 1.1 0.6 96.71 1.4 1.0 136.71 1.0 0.6 109.11 1.3 0.8 102.7 1.0 0.6 35.5 94.9 86.6 37.3 94.3 85.3 34.2 87.0 83.8 32.1 84.2 80.1 33.6 82.8 81.6 13.39 14.07 18.51 13.39 13.82 18.34 12.55 12.55 17.18 11.78 11.78 17.36 11.11 11.11 12.97 OPERATING RESULTS (RM MILLION) Net income Profit before taxation Net profit after taxation KEY BALANCE SHEET DATA (RM MILLION) Total assets Gross loans, advances and financing Total liabilities Deposits from customers Paid-up capital Shareholders’ equity Commitments and contingencies SHARE INFORMATION AND VALUATIONS Share Information Earnings per share (sen) Diluted earnings per share (sen) Dividend per share (sen) Net assets per share (RM) Share price as at 31 March (RM) Market capitalisation (RM million) Share Valuations Dividend yield (%) Dividend payout ratio (%) Price to earnings multiple (times) Price to book multiple (times) FINANCIAL RATIOS (%) Profitability Ratios Net interest margin on average interest-earning assets Net return on average equity Net return on average assets Net return on average risk-weighted assets Cost to income ratio Asset Quality Ratios Loan loss coverage Gross impaired loans ratio Net impaired loans ratio Liquidity Ratios CASA ratio Loan to Deposit ratio Loan to Funds ratio Capital Adequacy Ratios Common Equity Tier I (CET I) capital ratio Tier I capital ratio Total capital ratio 1 Including Regulatory Reserve provision.
13. 11 2019 Annual Report Improved Earnings Steady Balance Sheet Growth Profit After Taxation (RM million) Total Assets (RM million) Enhanced Shareholders Value Dividend Per Share (sen) 538 493 512 522 531 56,521 53,938 54,089 55,627 53,142 16.7 15.3 16.0 14.5 15.4 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 Net Return on Average Equity (%) Gross Loans, Advances and Financing (RM million) Market Capitalisation (RM million) 9.9 9.5 10.5 11.2 12.3 42,730 40,307 39,336 38,748 36,923 6,332 6,765 6,316 6,425 7,415 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 Earnings Per Share (sen) Deposits from Customers (RM million) Net Assets Per Share (RM) 34.7 31.9 33.5 34.2 34.8 45,018 42,740 45,228 46,025 44,607 3.7 3.5 3.3 3.1 2.9 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015 2019 2018 2017 2016 2015
14. 12 Alliance Bank Malaysia Berhad (88103-W) STATEMENT BY CHAIRMAN OF ALLIANCE BANK MALAYSIA BERHAD Alliance ONE Account continues to be popular among customers seeking to consolidate their loans and strengthen their financial position. We enhanced our SME Banking portfolio to help business owners grow their businesses with solutions such as the SME Express Loan and programme lending. We have also launched digital local employee onboarding for Alliance@Work, which is a fully paperless process. We also enhanced training and onboarding programmes for new front-liners (e.g. AOA, SME Banking, Alliance@Work), covering technical skills, sales and service, soft skills, and compliance. Building on our Transformation initiatives are our digitisation efforts, which help streamline and automate our processes bank-wide. This enables us to offer better, faster and simpler service. During the financial year, we continued to strengthen our business resilience with proactive risk management. Mr Joel Kornreich, our Group Chief Executive Officer, presents more of our initiatives and outcomes for the financial year in his Management Discussion and Analysis on pages 14 to 26 of this Annual Report. TAN SRI DATO’ AHMAD BIN MOHD DON Chairman, Alliance Bank Malaysia Berhad Dear Shareholders, It is my pleasure to present to you our Annual Report for the financial year ended 31 March 2019 (FY2019). The Bank recorded stronger performance for the year under review, delivering on our commitment to create greater shareholder value. This has been the result of our focus on executing our Transformation initiatives, while we are digitising products and processes to enhance operational efficiency. Despite the Malaysian banking sector’s subdued growth in FY2019, our revenue was one of the fastest growing in the industry. Our capital levels and asset quality remained among the sector’s strongest. LEVERAGING ON OUR UNIQUE STRENGTHS TO DRIVE GROWTH We remained on track with our strategy to be the most important relationship for the financial success of business owners, in line with our vision of building alliances to improve lives. With SMEs and consumers as our key customer segments, the Bank has been laying a stronger foundation for future growth and accelerating core businesses. To communicate our brand attributes of Innovative, Fast, Simple, Responsive and Aligned to Customers’ Needs, we launched a new brand campaign in early 2019. Complementing that, we accelerated momentum for our Transformation initiatives, i.e. Alliance ONE Account (AOA), SME Banking, and Alliance@Work. We supported our market expansion efforts with a strong customer service culture which focused on improving customer experiences and offering better financial advice. Consequently, our Net Promoter Score improved across all touchpoints, and is among the highest in the industry. As a result of our efforts, the Bank recorded revenue growth of 3.2% to RM1.62 billion, which puts us among the Top 3 in the industry. Our net interest margin continued to register strong improvement, up 10 basis points year-on-year (YOY) to 2.50%. Net profit after tax grew by 9.0% YOY to a five-year high of RM537.6 million. ENHANCING SHAREHOLDER VALUE The Bank’s earnings per share for FY2019 was 34.7 sen with a return on equity of 9.9%. Our capital position remains one of the sector’s strongest, with a Common Equity Tier 1 (CET 1) ratio at 13.4%, and total capital ratio at 18.5%. We maintained our approach of conserving CET 1 capital through earnings retention net of dividend, and managing Additional Tier 1 and total capital through capital programmes to support future business expansion. In FY2019, we issued RM100 million Additional Tier-1 Capital Securities, and Alliance Islamic Bank Berhad (AIS) issued RM100 million
15. 2019 Annual Report Islamic Additional Tier-1 Sukuk Wakalah . This helped to strengthen the Bank’s and AIS’ Tier-1 capital ratio to 14.1% and 12.6% respectively. Syariah, and supports three of the 17 United Nations’ Sustainable Development Goals of poverty eradication, decent work and economic growth, and partnerships for the goals. For FY2019, the Board of Directors has declared a second interim dividend of 8.2 sen. Together with the first interim dividend of 8.5 sen per share paid out on 28 December 2018, the total dividend for FY2019 amounts to 16.7 sen per share. This amounts to a total dividend payment ratio of 48% or RM258.5 million. Our Sustainability Statement which has been prepared in accordance with Bursa Malaysia Securities Berhad’s (Bursa Malaysia) business sustainability reporting framework, provides details of our EES initiatives and outcomes for the year. More information can be found on pages 27 to 49. STRENGTHENING OUR SUSTAINABILITY COMMITMENT OUR STRATEGIC COURSE FOR FY2020 The Bank views Economic, Environmental and Social (EES) sustainability matters as important components of our long-term business sustainability. We create real value for our stakeholders by integrating EES into the Bank’s product and service portfolio, as well as our customer service and public outreach programmes. Our signature sustainability programmes serve different community segments, and reflect our vision of “Building Alliances to Improve Lives”. We help empower people with the right financial skills and knowledge through our AEIOU programme for school children and Program Bimbingan Kewangan for civil service employees. Our SME-oriented initiatives include the entrepreneurial-driven BizSmart Challenge and environmentally themed Eco-Biz Dream Project. Our plans for the year ahead will focus on enhancing customer propositions to offer them faster, simpler, more responsive and innovative products and services, which are aligned with their business and personal financial goals. We will continue to drive growth in our core Transformation initiatives of Alliance ONE Account, SME Banking, and Alliance@Work, by offering unique value-added propositions which differentiate us in the market place. The new focus will be on broad-basing customer acquisition through strategic ecosystem partnerships and new digital propositions. More information can be found on pages 14 to 26. ACKNOWLEDGEMENTS Continuing with our vision of building alliances to improve lives, in May 2019, our Islamic banking arm, AIS, launched a new social crowdfunding digital platform known as SocioBiz. To do this, AIS partnered with three charity organisations, namely Yayasan Kebajikan Negara, Yayasan Noor Al-Syakur and Pertubuhan Kebajikan Islam Malaysia, as well as a FinTech company, Ethis Ventures. Open to all members of the society, and not just Muslims, SocioBiz provides the public with the opportunity to channel their donations to help the financial disadvantaged segment start or expand a business, or learn a skill to earn a sustainable livelihood. AIS will match all contributions raised on SocioBiz dollarfor-dollar. SocioBiz abides by the Islamic principles encapsulated within Maqasid On behalf of the Board, I wish to express our deepest gratitude to our valued shareholders, customers and business partners. I also wish to extend our appreciation to Bank Negara Malaysia, the Securities Commission Malaysia, Bursa Malaysia, and other regulatory authorities for their guidance and assistance. Thank you to my fellow Board members for their efforts to drive the growth of the Bank by sharing their industry insights and contributing to our strategies. On behalf of the Board, I wish to thank Mr Kung Beng Hong who has retired as Director of Alliance Bank and Chairman of Alliance 13 Investment Bank Berhad (AIBB) effective 1 January 2019. We are indebted to him for his 12 and a half years of service, having been a Board member since April 2006. We also thank Dato’ Albert Yeoh Beow Tit for his service as Director of AIBB. Dato’ Albert retired on 16 May 2019, having joined AIBB in May 2016. Our collective gratitude also goes to Dato’ Majid Mohamed, a Director of AIBB who retired on 28 February 2018 and a Director of AIS who resigned on 31 December 2018. We thank him for his strategic guidance in steering our Group’s direction. Dato’ Majid has taken on a significant role on the Board of another financial institution, and we wish him all the best in his future endeavours. On the new directors who have joined us in FY2019, I would like to welcome Ms Susan Yuen Su Min who was appointed as Independent Director of Alliance Bank Malaysia Berhad on 15 October 2018, Datin Ooi Swee Lian who was appointed as Independent Director of AIBB on 1 November 2018, and Dato’ Ahmad Hisham Kamaruddin who was appointed as an Independent Director of AIS on 15 February 2019. We look forward to working with them, and the strategic insights and wisdom they have to share with us. On behalf of the Board, I wish to thank the Group’s Senior Management for effectively leading and implementing our strategic priorities. I also thank all our staff members for their hard work and commitment in delivering results and values. Lastly, I wish to extend our gratitude to our customers and shareholders for their continued support and faith in the Bank. As we continue with our business journey, I am confident that together we will create long-term growth and value. To all our shareholders and stakeholders, we re-affirm our commitment to continue pursuing excellence in all our efforts. Thank you. AHMAD BIN MOHD DON Chairman, Alliance Bank Malaysia Berhad
16. 14 Alliance Bank Malaysia Berhad (88103-W) MANAGEMENT DISCUSSION & ANALYSIS Dear Shareholders, Alliance Bank Malaysia Berhad recorded strong performance for the financial year ended 31 March 2019 (FY2019), with a profit growth of 9% to RM537.6 million from RM493.2 million in FY2018. We have enhanced our sales capacities, scaled up digital efforts, and restructured for greater efficiencies as part of our Transformation initiatives. We are on track with our Transformation strategy, and are constantly refining it to obtain greater growth and profitability in the medium to long-term. This Management Discussion and Analysis provides an account of our strategies, initiatives and outcomes of our growth journey in FY2019. MARKET ENVIRONMENT In the past few years, the banking sector has faced several external factors which will continue to shape the industry in the foreseeable future. These factors come with both challenges and opportunities for growth. Digital adoption by consumers who seek the convenience of digitalised lifestyles is accelerating. Consequently, digital banking penetration has grown from 41% three years ago to 64% this year. There is, however, still significant upside for digital banking sales, with the current proportion of digital sales standing at 10%, compared to e-commerce penetration of 46%. Banking institutions and FinTech companies have expanded their digital propositions to capture growth opportunities. Banks are pursuing digitisation initiatives within areas such as payments and lending, while over 160 FinTechs are currently operating in Malaysia, with more than 35% of them focusing on payments. MR JOEL KORNREICH Group Chief Executive Officer There is also a growing affluent and emerging affluent population in Malaysia. This segment is earning enough to both save and invest, and have more discerning investment objectives and needs. The affluent and emerging affluent segments of the population are expected to increase from approximately 8.9 million in 2015, to around 11.6 million by 2020. SME’s contribution to Malaysia’s Gross Domestic Product (GDP) has also increased significantly in recent years. Between 2011 and 2016, SMEs in Malaysia grew at 7% per annum. SME’s contribution to GDP could reach 41% by 2020. IMPLEMENTING OUR STRATEGY, VISION AND BRAND PROMISE – “BUILDING ALLIANCES TO IMPROVE LIVES” The Group’s strategy is To Be the Most Important Relationship for the Financial Success of Business Owners with a vision of Building Alliances to Improve Lives. We focus on the needs of business owners. This enables us to identify and provide them with the financial products and services they require to finance and grow their business, and improve their competitiveness. The Bank also seeks to answer the needs of the business owners’ stakeholders, namely their families, employees and retail clients. In FY2019, we launched a new brand campaign to communicate our four key attributes of speed, simplicity, responsiveness, and innovation. Bearing in mind current digital lifestyles, we increased the weight of marketing and branding activities in social media and digital channels. By expanding our media engagement, we were able to amplify our brand presence. We employed a financial education approach for the content in our marketing campaigns, to increase consumer awareness on how they can use the Bank’s product and service portfolio to drive business growth, and increase their financial wealth. We also engaged with different consumer segments by leveraging on our various Corporate
17. 2019 Annual Report Responsibility initiatives as a reflection of our brand promise to create value in their lives . Our efforts resulted in the Bank increasing its brand awareness, with spontaneous awareness rising from 20% in FY2017 to 27% in FY2019. ENSURING A STRONG FOUNDATION Efficient Balance Sheet Management We continued to practise efficient balance sheet management which led to healthy funding and liquidity positions. Customerbased funding based on total customer deposits and structured investments grew 5.3% for the year to RM46 billion. We used fixed deposit growth from the consumer segment to fund growth in better Risk Adjusted Return (RAR) loans portfolio such as Alliance ONE Account (AOA) and personal financing. Our proportion of better RAR loans have improved from 27% to 43% since FY2015. Our Liquidity Coverage Ratio (LCR) and loan to fund ratio remained healthy at 154.3% and 86.6% respectively. margins of finance and a strict focus on repayments from major business accounts within business premises financing led to the GIL ratio improving to 2.1%. In the mortgage business, which includes Alliance ONE Account, we continued with our proactive collection programme, while ensuring the Debt-Service-Ratio (DSR) is comfortable enough for consumers to manage their obligations. This resulted in GIL ratio improving to 1.3%. The delinquency within business premises financing continued on a downtrend, and stabilised for the mortgage and AOA portfolios. In the corporate and commercial segment, impairment continued to improve, with a GIL ratio of 0.7%. We continue to review our underwriting standards for real estate and practise a selective approach in new property proposals. The delinquency and impairment trend within the SME programme stabilised with the implementation of a new SME scorecard. GIL ratio improved to 1.7% in FY2019, from 2.2% in FY2018. For our personal financing portfolio, we recorded GIL ratio of 2.2% due to our stringent underwriting policies for higher risk segments. Practising Proactive Credit Management Enhancing Customer Service We stabilised credit cost in line within our guidance of <35.0 bps, coming in at 31.5 bps for the year. Personal financing and mortgage portfolios were the main drivers of credit cost, partially mitigated by write backs from major business accounts in SME, corporate, and commercial segments, as we continue to implement measures to keep loans well under control. The Bank’s Gross Impaired Loan (GIL) ratio of 1.12% is one of the lowest in the industry. The ongoing regularisation of residential properties portfolio through proactive collection efforts and several repayments in the non-residential properties portfolio contributed to the lower GIL in FY2019. We improved our credit policy by enhancing our early warning system, automating reports, and improving process for both credit collection and remedial. Tightened Providing excellent and consistent customer service has been one of the key drivers of growth within our various business segments. To strengthen our relationship managers’ product knowledge and client service management capabilities, we enhanced our staff onboarding and credit training programmes, as well as maintained continuous learning programmes. In the SME segment, we improved customer experience by providing better advisory services. In this respect, the Bank implemented a systematic method known as the SME Alliance Way. For example, we launched our Financial Health Calculator in the fourth quarter of FY2019. Complementing that were initiatives that focused on improving the speed of complaints resolution at first point of contact. 15 Leveraging on automation and digitisation, the Bank improved processes in our different business segments. To enhance service at our branches, we focus on service rituals such as daily briefings and staff coaching to cultivate a strong service culture. We also introduced the Branch Recognition Programme to motivate branches to embed the delivery of excellent customer experience in their daily engagements with customers. Two years ago, we implemented a bank-wide Customer Service Council as a platform for all key internal stakeholders to significantly improve our Net Promoter Score (NPS) results, and improve customer service levels. We have implemented enhanced contact strategies in both the consumer and SME segments to improve engagements with our customers. As a result, by the fourth quarter of FY2019, NPS has improved substantially across all nine touch points we measure from a FY2018 baseline. Highlights of our NPS achievements within our different touch points are as follows: • Improving contact centre engagements, supported by customercentric contact centre vision, service promise and culture resulted in NPS of 26, from 17 in FY2018. • Quicker turnaround time on Current Account/Savings Account (CASA) openings and improvements in service levels at branches resulted in NPS of 27, compared to NPS of 8 in FY2018. • Structured SME onboarding and engagement programmes, as well as quicker turnaround on loan disbursements through a new loan origination system led to SME Borrowing NPS improving to 30, from 20 in FY2018. More information on our customerfacing initiatives can be found in our Sustainability Statement on page 27 of this Annual Report.
18. 16 Alliance Bank Malaysia Berhad (88103-W) MANAGEMENT DISCUSSION & ANALYSIS (Cont’d) Embedding an Innovation Culture In January 2019, we set up rotating innovation teams made up of Management Trainee graduates called Innovation Marvels. The Innovation Marvel teams champion ideas generated by our staff in our weekly bank-wide huddle. They seek to identify and implement new approaches to improve processes in line with our growth ambition. One of the ideas implemented is the introduction of the Alliance Remedial Collection Sharing Portal. The new proposed solution consolidates data from three external applications onto one screen, thus reducing work duplication. This helps to increase productivity per staff by 30%, and considerably improve client experience by ensuring a unified approach. Another initiative is the Alliance ONE Account (AOA) referral campaign. This is being done through a staff onboarding and awareness programme utilising mobile phones as the communication platform to enhance our staff’s product knowledge, and also serves to increase the number of Alliance Mortgage Partner-in-Sales. More information on our innovation efforts can be found in our Sustainability Statement on page 27 of this Annual Report. PROGRESSING WITH OUR TRANSFORMATION TO ACCELERATE BUSINESS GROWTH Alliance ONE Account Alliance ONE Account (AOA) is our consumer refinancing product which offers customers the simplicity and convenience that comes with a hassle-free loan consolidation service. By consolidating their various loans into one mortgage account consisting of part term loan and part overdraft, our customers enjoy greater savings on interest rate per annum, and more flexibility to make investments and cater to family needs with the cash they have in hand. AOA’s volume tripled during the year, with loan balances exceeding RM3.2 billion as at end FY2019, compared to RM1.0 billion the previous year. Its risk adjusted return improved by 27.3%, with improvements in the loan mix. Growth is attributable to the efforts of our Mortgage Specialist team, our digital marketing channel, and the expansion of our Alliance Mortgage Partner-in-Sales programme. The Alliance Mortgage Partner-in-Sales programme is a fast and simple online mortgage referral platform for business associates comprising solicitors, real estate agents, mortgage brokers and developers. Launched in FY2018, it has become a valuable source of leads for the growth of AOA. In FY2019, we increased our Partnerin-Sales to 1,157 by the fourth quarter of FY2019, from 455 in the first quarter of the year. Digital marketing efforts accounted for 17% of AOA approvals for the year, the result of renewed focus on digital channels to engage with potential customers. Efforts from the Alliance Mortgage Partner-in-Sales contributed 32%. Year-on-year (YOY), we recorded 36% growth in loan approvals and 102% in loan disbursements. In total, 89% of AOA customers were new to the bank. More information on AOA can be found in our Sustainability Statement on page 27 of this Annual Report. SME Banking Our efforts to expand the SME Banking business has resulted in 11% YOY growth in SME loan balances despite a loan contraction in the overall SME market. We launched a new system, the Alliance Origination System (AOS) in July 2018. We now register 95% of our new SME loan applications in FY2019 on this new system. The new loan origination system allows for
19. 2019 Annual Report most of the data fields to be automatically populated from validated external sources . As part of our digitisation efforts, AOS has simplified the loan disbursement process allowing for faster turnaround time. Additionally, our SME Express Loan product provides short-term loans which SMEs can use to cover any gaps in working capital. The product reduces the bureaucracy of the loan process and offers SMEs a simpler loan application method. These efforts led to SME loan disbursements growing by 39% to RM2.35 billion in FY2019. In FY2019, we piloted a digital onboarding process for Business CASA accounts. The aim is to activate Business CASA within a day, from an average of two weeks, by the end of FY2020. We also launched the Credit Guarantee Corporate (CGC) scheme in November 2018 with a portfolio of RM50 million, and quickly utilised the portfolio limit. The CGC assists SME entrepreneurs who have viable businesses but lack the collateral to obtain the required credit facility for funds to expand their business by offering a guarantee on a portfolio basis. Due to its success, we extended the scheme with an additional portfolio of RM100 million. Alliance@Work Alliance@Work, which was launched in FY2017, provides payroll services to companies by onboarding their local employees and foreign workers, and providing them with the Bank’s products and services. In FY2019, we opened 1,392 company payroll accounts (FY2018: 471). The number of individual payroll accounts increased to 35,841 in FY2019, as compared to 10,709 in FY2018. This was driven by improved referrals from our business banking units in the SME, corporate, and commercial segments, the consumer banking unit, as well as from other external sources. During the year, we also rolled out our digital local employee (LEO) application to enable a completely paperless onboarding process. This helped us grow Alliance@Work employee CASA to RM105 million in FY2019, compared to RM24.8 million the previous year. The foreign workers’ onboarding process is managed through our Cash2Home mobile app, a digital tool which uses biometric facial recognition and optical character recognition technology for faster turnaround time. In addition to the simple and paperless on-site mass onboarding in less than an hour, foreign workers can also activate their ATM card at the companies’ premises. The app has proven to be popular within the foreign worker segment as it addresses their financial needs and encourages cashless transactions. It also provides remittance services for workers to transfer money back home. The app is available in five languages, and can be downloaded on both Android and iPhone. 17 We also extended the Cash2Home app to domestic helpers via our partnership with a foreign embassy. This proposition has benefited the industry as it provides transparency and flexibility. Local employees and foreign workers enjoy preferential rates for remittance, credit cards, deposits, and more. There is no fee for using the Malaysian Electronic Payment System (MEPS), and they receive waivers on initial deposit requirements. Business owners are able to enjoy preferential rates on services provided by our partners when they log on to our partner portal. The portal was created via our cash management system, BizSmart, and includes services related to accounting software, human resource systems, intellectual property registration, and tax advisory services.
20. 18 Alliance Bank Malaysia Berhad (88103-W) MANAGEMENT DISCUSSION & ANALYSIS (Cont’d) During the year, we implemented a Customer Journey map to keep our customers informed on the Bank’s latest products and services, campaigns, and required regulatory information. For FY2020, we plan to enhance our value proposition to business owners, and their local employees and foreign workers, by simplifying and digitising processes for faster turnaround time, and strengthening our product line-up. More information on Alliance@Work and Cash2Home can be found in our Sustainability Statement on page 27 of this Annual Report. Digitisation of Processes Digitisation of our processes enables us to provide faster, simpler, and more responsive service to our customers. Examples of how we did this in FY2019 can be seen throughout all our business segments. Customer-facing initiatives include individual CASA opening which can now be completed in less than 20 minutes, from 45 minutes previously, while Business current account openings can be done within the day through a pilot project launched during the year. Backroom processes include AOS for loan applications which has freed up our relationship managers’ time by allowing data fields to be automatically populated from sources such as CTOS and Company Registry. As a result, our relationship managers now have more time to focus on valuable engagement with customers, in line with customer service enhancements conducted during the year. Quicker turnaround times supported a 39% growth in loan disbursements. Digital marketing has become an increasingly important component of our marketing efforts, focusing on performance marketing to generate leads and a digital branding campaign to expand our market reach. Our partnership with a FinTech firm for lead generation targets non-borrowing customers using propensity modelling and machine learning. We are able to identify opportunities for existing SME non-borrowing customers to offer relevant credit facilities. As a result of our sustained efforts in social media and digital channels since July 2018, we have increased our social media engagement rate. We now have a digital Share of Voice of almost 30% based purely on key banking product segments – AOA, Personal Loans, and Alliance SavePlus Account. Our mobile banking app, allianceonline Mobile, which we launched in April 2018, has simplified and enhanced our customers overall banking experience, by offering access to online banking services including viewing account balances, transaction flows and e-deposit payments in a hassle-free manner. As at the end of FY2019, there were more than 52,000 sign-ups. Our plans for FY2020 include launching a mobile BizSmart app to enable SMEs to make faster decisions on time-sensitive payments and transactions at their convenience. We will also be enabling paperless branches in the near future, while continuing to streamline our back office processes to accelerate growth. More information on our digitisation initiatives can be found in our Sustainability Statement on page 27 of this Annual Report. PERFORMANCE HIGHLIGHTS The Bank recorded strong performance in FY2019. Net interest income grew 8.9% due to the expansion of total loans and improved loan mix from better risk adjusted return loans. The Bank recorded growth in net profit after tax of 9% to RM537.6 million. FY2019 RM million FY2018 RM million Growth RM million Growth % Net Interest Income 998.1 925.2 72.9 8 Net Income from Islamic Banking business 359.1 318.2 40.8 13 265 328.6 (63.7) (19) Summarised Income Statement Other Operating Income 1,622.1 1,572 50.1 3 Other Operating Expenses (774.9) (794) (19.1) (2) Allowance for Loans & Impairment (139.2) (93.4) (45.8) 49 Net Income 708 684.6 23.4 3 Taxation (170.4) (191.4) 20.9 (11) Net Profit after Taxation 537.6 493.2 44.4 9 Profit before Taxation
21. 2019 Annual Report 19 FY2019 RM million FY2018 RM million Growth RM million Growth % Net Loans, Advances and Financing 42,320.3 39,989.5 2,330.8 6 Investment and Dealing Securities 9,944.6 8,862.6 1,082.8 12 Summarised Balance Sheet Total Assets 56,520.9 53,938.3 2,582.6 5 Deposits from Customers 45,017.6 42,740.5 2,277.1 5 of which: CASA 15,960.9 15,953.8 7.1 0 Shareholders’ Funds 5,732.8 5,459.6 273.3 5 Creation of Value for Business Owners and Stakeholders PERFORMANCE BY BUSINESS SEGMENTS Consumer Banking As part of our continuous proactive capital management to support the future business expansion of all our entities, we completed our Additional Tier-1 Capital Securities issuance of RM100 million out of the existing RM1 billion Additional Tier-1 Capital Securities programme for Alliance Bank Malaysia Berhad in March 2019. Together with the previous issuance of RM150 million, the Bank has a total RM250 million Additional Tier-1 Capital Securities. This strengthened our Tier-1 capital ratio to 14.1%. We maintained our strong capital levels with Common Equity Tier-1 (CET 1) ratio at 13.4% and total capital ratio at 18.5%, which is among the strongest in the sector. To support our Islamic Banking business, Alliance Islamic Bank Berhad (AIS) has also successfully completed its first Additional Tier-1 Sukuk Wakalah of RM100 million out of the newly-established RM500 million Additional Tier-1 Sukuk Wakalah programme. This strengthened AIS Tier-1 capital ratio to 12.6%. Our net asset per share has grown with a four-year Compound Annual Growth Rate (CAGR) of 6.3% to RM3.70. For FY2019, the Bank declared a second interim dividend of 8.2 sen per share. Together with the first interim dividend of 8.5 sen per share paid out on 28 December 2018, the total dividend for FY2019 amounting to 16.7 sen per share. This represents a dividend payout ratio of 48% or RM258.5 million. The Bank has been maintaining its dividend payout ratio of 48% over the last three years. In the consumer banking segment, the Bank recorded incremental improvement in revenue by 1.5% to RM563 million, compared to RM555 million in FY2018. Net interest margin improved by 16 basis points. Customer-based funding grew 4.4% YOY, with CASA ratio at 31.9%. We significantly improved the CASA opening process to 20 minutes using digital onboarding. This formed the first phase of our paperless branch initiative, where the Bank is aiming to drive efficiencies through the digitisation of product applications and services. The Alliance SavePlus account which was launched in FY2018, performed well during the year. The product’s value proposition of offering enhanced interest rates has proven attractive within the emerging affluent customer segment. In FY2019, we acquired more than RM1 billion in deposits, with more than 60% being fresh funds. Having a chat with our business partner, CompareHero.my With our business partner, RinggitPlus
22. 20 Alliance Bank Malaysia Berhad (88103-W) MANAGEMENT DISCUSSION & ANALYSIS (Cont’d) Our Alliance@Work proposition broadened our consumer banking segment customer base, and we acquired more than 20,000 new-tobank CASA. Our mortgage portfolio comprising Alliance ONE Account (AOA) and traditional mortgages grew 5.5% to more than RM18 billion in ending net receivables. AOA doubled its YOY disbursements to RM2.45 billion, driven by its value proposition of loan consolidation to provide the convenience of one consolidated account, lower monthly payments, more cash in hand, and lower rates to our customers. To accelerate AOA growth, we embarked on our Alliance Mortgage Partner-In-Sales channels involving partnerships with real estate agents, independent financial consultants and insurance agents. This resulted in more quality leads and an increase in lead conversion. As a result, contributions from the Partner-In-Sales channel improved to 32% in the fourth quarter of FY2019. Our personal loans business has grown faster than industry over the past two years. In FY2019, we recorded YOY loan disbursement growth of 40% with a total of RM938 million in loan disbursements in FY2019, compared to RM664 million the previous year. New-tobank customers increased to 14,270 from 11,786 previously. This was primarily due to the increase in sales capacity and productivity, thanks to better leads management, training, and sales planning. We continued our partnership with CTOS Data System (CTOS) and launched Version 2 of the CTOS scorecard which offers better predictive analytics for unsecured loans and credit card. This has helped strengthen our credit business. knowledge, so they could offer customers advice and guidance on how they should invest despite the economic downturn. By the end of FY2019, we began seeing an upturn in customer investments. We expect this trend to continue in the year ahead. Within the bancassurance business, we worked with Manulife Insurance Berhad on a review to improve our product range and suitability to our clients’ current needs. We explored propensity models to identify customers with a higher likelihood of purchasing insurance products, to better serve our existing customer base, and crosssell our other banking products such as wealth management. Complementing this, we also enhanced training for our relationship managers. At our client’s premises, Modu System (M) Sdn Bhd Due to downtrends in the macroeconomic outlook, the majority of our customers took a cautious approach in their investment decisions. As a result, our client-based fee income declined in FY2019. Wealth management fees were lower by RM14.4 million. Nevertheless, we implemented a number of initiatives to improve our investment services. This included a renewed focus on enhancing our sales staff’s soft skills and product With our client, OEM Autoseats Malaysia Sdn Bhd FY2019 has been a year of rebuilding towards accelerating acquisition of new CASA via Alliance@Work and Alliance SavePlus, as well as expanding the wealth management business. We launched the Wealth Academy, a structured programme conducted on a quarterly basis for our relationship managers. We improved sales performance management through a daily process. As a result, our staff productivity increased by 18%. We had embarked on the first phase of our digital marketing channel roadmap the previous year by activating multiple digital marketing channels on social media. In FY2019, we progressed into the second phase which employs a refined approach of targeting the emerging affluent segment, and creating
23. 2019 Annual Report more awareness in the marketplace through above-the-line and digital campaigns . We are on track with our digital marketing strategy, having increased our leads conversion success rate by 13%. FY2020 Outlook Our focus for FY2020 is to modernise and digitise our processes by enabling our branchin-a-tablet initiative. With this, we will be able to offer digital CASA account openings and electronic service requests. More information on the Wealth Academy can be found in our Sustainability Statement on page 27 of this Annual Report. We implemented AOS as planned in FY2019, which embedded company data into a digital application to improve credit workflow processes. By streamlining data input and automating processes, we reduced the turnaround time for SME loan approvals to nine days from up to 20 days previously. To ensure consistent levels of service among our relationship managers, we launched Alliance SME Way in March 2019, a sales and service programme to deliver a structured and meaningful customer experience. It complements our digital value-add efforts such as offering financial advice with the Financial Health Calculator, and offering free SME Banking The SME Banking segment continued with strong growth in FY2019, contributing more than 25% to Group’s profit before tax. SME loans comprised 26% of the Bank’s total loans. This was driven by our value proposition of providing products in the right loan quantum and competitive value. Along with this, we offered better business advisory, as well as speedier processes based on our digitisation efforts. Our SME loans grew 8.8% to RM11.1 million YOY. Profit before tax improved by 37% to RM183 million, due to better pricing and focus on better RAR loans. Net interest margin improved by 11 bps in FY2019. With our customer, Glocomp Systems (M) Sdn Bhd In April 2018, the Bank set up a new acquisition team targeting emerging businesses. Existing team productivity improved by approximately 33%, as a result of our focused training programmes for relationship managers, in particular the Alliance SME Way. The fifth iteration of the BizSmart Challenge debuted as a reality TV business challenge programme, the first by a financial institution in Malaysia, with 1.5 million viewers nationwide. The Bank’s flagship programme continues to help SMEs take their businesses to the next level through business training, coaching, mentoring, and networking opportunities. The programme helps young entrepreneurs and brands gain more prominence, and increases the Bank’s brand awareness. At Ann Joo Resources Berhad office 21 or subsidised tools and apps such as human resource apps for our SME customer segment. FY2020 Outlook For FY2020, our plan is to enhance the competitiveness of our credit programme and increase our efforts in digitising processes for better customer experience. We also plan to expand into sectoral-based lending, and offer tailored programmes. More information on Alliance SME Way and BizSmart Challenge can be found in our Sustainability Statement on page 27 of this Annual Report.
24. 22 Alliance Bank Malaysia Berhad (88103-W) MANAGEMENT DISCUSSION & ANALYSIS (Cont’d) Corporate, Commercial and Transaction Banking In FY2019, the Corporate, Commercial and Transaction Banking segment recorded marginal growth of 1.2% in net profit before tax, driven by loan assets growth of 3.6%. We maintained our momentum in trade finance within the Transaction Banking segment and achieved growth of 10% YOY. In line with the Bank’s Transformation priority of enhancing customer service, we conducted a series of trade and foreign exchange seminars nationwide. At these seminars, we shared our industry insights and provided updates on the economic climate and global foreign exchange (FX) trends. These efforts have helped to strengthen relationships with our clients, and secure a pipeline of new clients. As a result, the Bank recorded a robust trade assets growth of 10% YOY, and maintained our trade facility utilisation at above 65%. FY2020 Outlook We are currently piloting digital onboarding for BizSmart accounts, which will enable same day account opening. We plan to rollout the solution nationwide in FY2020. We will also be digitising other front-end interactions with our customers, towards delivering faster turnaround time. Continuing with our digitisation journey, we plan to introduce the Mobile BizSmart app in FY2020 to enable SMEs to make faster decisions on time-sensitive payments. The app will be a valuable addition to our digital product portfolio and enables us to increase our digital engagement by driving wider adoption among smaller SMEs. GROUP FINANCIAL MARKETS The Bank’s Group Financial Markets (GFM) segment cuts across four core areas of funding and investment, trading and marketmaking, client-based activities, and asset and liability management. In FY2019, a number of geo-political and macroeconomic factors impacted the GFM segment. The trade war between the United States and China, as well as postBrexit implications contributed towards uncertainties in global and local financial markets. The normalisation of interest rates towards the end of the year 2018, along with volatility in the international equity market led to fund flows being diverted, especially within emerging markets. These had a knock-on effect on trading and sales orientation, leading to investment portfolio adjustments. Within Malaysia, the inevitable adjustments post-General Election 14 led to cautious market sentiment, as investors sought clarity in the market outlook. To mitigate the impact these uncertainties had on the GFM segment, we led with a light trading portfolio which focused on client-based activities. We also created awareness among our clients on the need to hedge within both foreign exchange (FX) and derivatives to protect their assets and investments. This effectively translated to greater business opportunities for the GFM segment. However, this was offset by margin compression as a result of stiffer competition in the marketplace. Consequently, our revenue trajectory was impacted, and YOY revenue improved marginally by 2.3%. While the overall trading portfolio recorded flat growth, active portfolio rebalancing led to greater revenue from investment income. Consequently, the segment recorded revenue of RM289 million in FY2019, compared to RM282 million in FY2018. Liquidity and Funding The Bank maintained a healthy liquidity position for FY2019. Our liquidity ratios have consistently recorded above the regulatory threshold for Liquidity Coverage Ratio (LCR) with a minimum of 100% and net stable funding ratio (NSFR) at above 105%. We maintained our loan to fund ratio at below 88%. FY2020 Outlook Our focus for the year ahead is to grow the non-interest income space, particularly within client-facing activities such as consumer wealth management and SME Banking activities. While traditional FX hedging activities continue to face margin compression, we will put in place innovative structured solutions to provide more hedging instruments to our clients. INVESTMENT BANKING Our investment banking arm, Alliance Investment Bank Berhad (AIBB), provides a spectrum of services covering stock broking, corporate advisory, underwriting and placement of equity securities, corporate bonds and sukuk, loan syndication, as well as corporate banking and treasury services. We also offer equity research through our 51%-owned joint-venture with DBS Vickers Securities Pte Ltd, AllianceDBS Research Sdn Bhd. In FY2019, AIBB registered a net profit after tax of RM1.4 million. Net interest margin grew marginally to 2.2%. Other operating income reduced marginally to RM35.4 million, yielding a total revenue of RM72.6 million. Operating expenses decreased to RM41.5 million. Stockbroking The bullish trend which marked the first half of FY2019 as a result of robust trading in the securities market took a downturn and was more subdued by the second half of the year. This was due to prevailing market uncertainties based on global macroeconomic challenges, coupled with ongoing domestic policy reforms. By year end FY2019, trading on Bursa Malaysia had settled lower, pressured by weak corporate earnings and profit-taking activities resulting in declining Small Cap and ACE market indices.
25. 2019 Annual Report Consequently , trading value on Bursa Malaysia declined by 7.4% to RM1,178.2 billion (FY2018: RM1,272.6 billion). Institutional trading value reduced by 6.0% to RM801.8 billion (FY2018: RM853.2 billion), while retail trading value reduced by 10.2% to RM376.4 billion (FY2018: RM419.4 billion)1. As a result, stockbroking net income contracted by 16.6% YOY mainly attributed to the lower brokerage income by 16.0%, and net interest income of share financing reduced by 11.5%. Corporate Advisory In FY2019, fundraising activities in the Malaysian capital market moderated in comparison to the previous year. A total of RM105.4 billion was raised in the corporate bond and sukuk market in 2018 (2017: RM124.9 billion), while only RM9.2 billion was raised in the equity market in 2018 (2017: RM21.7 billion)2. Despite this, we completed one bond deal and two syndicated loan transactions during the year. In July 2018, AIBB successfully listed Radiant Globaltech Berhad on the ACE Market of Bursa Malaysia Securities Berhad, with an IPO market capitalisation of RM120.8 million. Additionally, we completed 10 non-IPO deals, as well as the privatisation of MWE Holdings Berhad via the selective capital repayment method. We maintained our strong performance despite capital market challenges to grow our revenue by 20.4% or RM1.12 million to RM6.5 million (2018: RM5.4 million). domestic demand will continue as the main driver of growth, underpinned by continued expansion in private sector activity. Bearing in mind these external challenges, AIBB will capitalise on revenue opportunities by focusing on core business activities and client segments. We will continue to drive growth in the corporate finance and debt capital markets business through intra-Bank collaborations with the Group Corporate, Commercial and Transactions department. We will maintain our operations review to ensure efficiencies and productivity gains. These include expanding our digital stockbroking capabilities to enhance our customers’ onboarding experience and improve activation rates for new accounts. We will be selectively adding loans on to our balance sheet which meet risk adjusted returns in line with the Bank’s risk appetite. ISLAMIC BANKING Our Islamic Banking arm, Alliance Islamic Bank Berhad (AIS), has a portfolio of Shariahbased financing, deposits and transaction Key Highlights services aimed at fulfilling the needs of our consumer and business customer segments. These are compliant with the Islamic Financial Services Act 2013, Bank Negara Malaysia’s (BNM) Shariah Governance Framework, and Shariah standards and regulations. AIS’ portfolio focuses on enabling SMEs drive their business growth with Halal solutions and advisory. A total of 21% of AIS customers comprise SMEs, while the bulk of clients consist of consumers. In FY2019, AIS’ focused execution of its growth strategies resulted in its excellent performance. Net profit after tax recorded double-digit growth of 35.4% YOY, while its other operating income ratio increased to 8.7%. AIS recorded a return on equity of 13%. In FY2019, AIS contributed RM280.4 million in Islamic net finance income, and RM26.6 million in Islamic other operating income towards the Bank’s income base. This represents a YOY increase of 14.9% in Islamic net financing and 21.4% in Islamic non-financing income from the previous year. FY2019 vs FY2018 Growth Drivers Revenue +15.5% • Driven by financing growth (+15.9%) and other operating income (+21.4%) Net Profit Margin Declined to 2.48% from 2.51% • Impacted by higher cost of funds (+31bps) due to SavePlus-i and a large volume of term deposits Cost-to-income ratio Improved to 38.4% from 38.7% • Improvements in cost efficiency Financing +15.9% • Growth in AOA-i CASA +10.7% • Growth in SavePlus-i CASA Ratio Improved to 30.7% from 29.1% • Growth in SavePlus-i Total Capital Improved to 15.4% from 15.1% • Issuance of RM100 million Additional Tier-1 Sukuk Wakalah on 29 March 2019 Profit & Loss FY2020 Outlook Balance Sheet We expect capital market challenges to continue in FY2020 as dampened external demand, slowing global growth and domestic political uncertainties continue to weigh in on the Malaysian economy. Factors related to trade policy uncertainties and weakening market sentiment are risks to global economic growth. Within Malaysia, 1 2 23 Bursa Malaysia website, Market Statistics, Key Indicators and Trading Participation by Category of Investors. Annual Report 2018, Securities Commission Malaysia, Part 4: Capital Market Review and Outlook.
26. 24 Alliance Bank Malaysia Berhad (88103-W) MANAGEMENT DISCUSSION & ANALYSIS (Cont’d) In FY2018, AIS embarked on a three-year plan to drive its business growth within the Islamic finance sector. Its strong performance in FY2019 was the result of the successful execution of its plan over the past two years. As part of its plan, AIS strengthened its brand by executing unique Halal-themed programmes, support for social enterprises, and social funding platforms. In FY2019, AIS’ gross financing growth exceeded RM1 billion. Alliance SavePlus Account-í’s growth doubled to RM426 million. AIS’ unaided brand awareness doubled to 6% in FY2019, from a FY2018 baseline of 3%. The primary drivers of its branding activities, namely the AIS Zakat programme and Eco-Biz Dream Project 3, successfully communicated AIS’ brand attributes through increased media coverage. AIS improved its operations by incorporating a granular Management Information System (MIS) which allows for better performance management and interventions when necessary. To motivate employees, it rolled out a rewards and recognition programme for top Islamic sales performers, and initiated the Alliance Islamic Banking Fundamentals (ALIF) training which enhances staff capabilities by providing them in-depth knowledge of the Islamic banking system, processes and products. New Business Initiatives Solution. We also hold Halal Talks to provide SMEs with the knowledge and support they require to advance into the Halal business sector. Our Shariah-compliant Portfolio AIS focused on generating growth by aligning its propositions to the Bank’s Transformation priorities of Alliance ONE Account, SME Banking expansion, Alliance@Work, and deposits. In FY2018, AIS introduced the Shariah-compliant Alliance One Account-i (AOA-i), Alliance SavePlus Account-i (ASA-i), restricted investment account to cater for large Shariah-compliant financing requirements, and Alliance Cash2Home-i for blue-collar foreign workers. Diversified Islamic Wealth Management Within the Islamic Wealth Management segment, AIS launched three new funds, namely the Amanah Saham Nasional Berhad (ASNB) Funds and, in line with the bank’s open platform concept, two awardwinning Bank Islam Malaysia Berhad (BIMB) Investment Management Funds of BIMBArabesque iGlobal Dividend Fund 1, and BIMB-Arabesque Malaysia Shariah ESG Equity Fund. Sukuk Programme During the year, AIS put in place the mechanism to roll out its sukuk programme, in line with its expectations that growth in Islamic business will outpace conventional business within the next three years. in place a certification support platform for SMEs seeking to obtain Halal certification. In May 2019, AIS launched its social crowdfunding platform, SocioBiz. Through this platform, AIS will help financially disadvantaged individuals seeking to raise funds to start or expand a business, or learn a skill to earn a sustainable livelihood. SocioBiz’s beneficiary partners are Yayasan Kebajikan Negara, Yayasan Noor Al-Syakur, and Pertubuhan Kebajikan Islam Malaysia. AIS has committed to bearing 100% of the administration fees, as well as help raise up to RM150,000 for individuals seeking funds. Also in the pipeline are plans to launch Do-Good-As-You-Go (DGAYG), a unique proposition which gives customers the opportunity to create a positive impact on society through their daily banking transactions. DGAYG is a fixed deposit campaign where customers have the option of donating a portion of their interest to a charity of their choice, for which AIS will match the amount. More information on employee training and development, the Zakat programme, Eco-Biz Dream Project 3, One-Stop Halal Business Solutions, financial outreach programmes, and SocioBiz can be found in our Sustainability Statement on page 27 of this Annual Report. BUSINESS RISKS AIS differentiated itself from other players in the Islamic financing sector by adding financial outreach programmes such as Health and Wealth (Program Bimbingan Kewangan) events for civil service officers, and Halal Talks for SMEs to its existing community engagement efforts. Following on from AIS’ status as an emergent Value-Based Intermediation (VBI) practitioner validated by BNM, it conducted the VBI Scorecard assessment in August 2018. In March 2019, AIS made its maiden issuance of RM100 million Islamic Additional Tier-1 Sukuk Wakalah (AT1 sukuk) under this programme. AIS will utilise the proceeds of the AT1 sukuk to fund the growth of its Shariah-compliant portfolio and future plans in the Halal and VBI space. FY2020 Outlook In FY2019, we continued to strengthen our risk management controls and processes. We reviewed our products, policies and limits, as well as changes in our business and regulatory landscape. Our thematic and portfolio reviews centred on areas such as post-election sectoral impact, and SME business and property sector reviews. The results were shared with Senior Management and the Board of Directors (Board). To help SMEs grow their business, we offer business advisory, halal certification, and opportunities to tap into larger customer base with our One-Stop Halal Business For FY2020, AIS will focus on expanding its One-Stop Halal Business Solutions offerings by partnering with Jabatan Kemajuan Islam Malaysia (JAKIM) and other agencies to put The Bank took into account requirements of the Malaysian Financial Reporting Standards (MFRS) 9 which were introduced during the year. We realigned our policies and financial
27. 2019 Annual Report models to suit these new accounting requirements . Within the Bank’s product and service portfolio, we looked into new service offerings for our customers. These focused on more efficient mediums such as mobile banking, without compromising on key controls. In implementing these measures, our aim was to ensure that our business activities were aligned to our risk appetite. These were balanced against our goal of driving sustainable growth, while continuing to provide excellent customer service. • The Bank faces a multitude of risks in its day-to-day operational activities. These include risks pertaining to credit, market, liquidity, operations, regulatory, and Shariah compliance. Improper management of these risks could have a major impact on the Bank’s reputation. To ensure that we maintain our organisational and business sustainability, we employ a multi-pronged strategy: • • We strongly emphasise good governance by setting the right “tone from the top”. This is actualised through our Code of Conduct guidelines. Both the Management and the Board reinforce this through frequent internal communication messages. • We supplement these measures by providing our employees with orientation and motivation training, • 2018 Asian Institute of Chartered Bankers Graduates as well as skillset training. Our talent management initiatives to upskill our current managers, and groom our next generation of leaders and supervisors, extend to providing further skills training to staff we have identified as having good potential. A good example of this is the Alliance Leaders’ Programme. We have in place a structured check and balance system. We practise good governance by ensuring active Board oversight. Board oversight is complemented with assistance from designated Board and Senior Management committees. All our governance processes emphasise close monitoring, supervision and guidance. We establish appropriate layers of physical security, dual controls, limit controls and a mix of automated and semi-automated controls, within our on-the-ground operational activities. We proactively manage our business and risks, bearing in mind the need to maintain a good balance between risks and controls. We conduct ongoing reviews of our lending policies and operational practices, which take into consideration evolving business conditions, emerging risks and business trends. We promote an innovation-led culture by adopting new technologies into our processes. Our dual aim is to improve • • 25 our efficiency and enhance the way we do business, as well as improve the lives of our customers through seamless and simple processes. Underlying these are controls we have established to protect our customers’ data and privacy. Our efforts to build and grow our customer base are focused on providing suitable value-added products and services. Our investment products take into account our customers’ assessed risk profiles. With regards to our financing products, we conduct affordability assessments. We diligently monitor the health of our credit portfolios and balance sheet. This is conducted through continuous tracking of key ratios and early warning indicators. Results are then reported to Senior Management and the Board. More information on employee training and development programmes can be found in our Sustainability Statement on page 27 of this Annual Report. For full details of the Bank’s risk management process and mitigations, please refer to the Statement on Risk Management and Internal Controls on page 96, as well as Risk Management on page 97 of this Annual Report.
28. 26 Alliance Bank Malaysia Berhad (88103-W) MANAGEMENT DISCUSSION & ANALYSIS (Cont’d) OUTLOOK AND PROSPECTS Global economic growth is expected to moderate slightly from 3% to 2.9% in 2019 due to intensifying trade tensions and tightening financial conditions in emerging markets. Within advanced economies, a growth of 2% is forecast due to slowing external demand, rising borrowing costs and persistent policy uncertainties. Global macroeconomic and geo-political headwinds are expected to persist, namely the trade war between the United States and China, Brexit, and the weakening Chinese economy. These would dampen external demand for Malaysia’s manufacturing exports, especially within the electrical and electronics manufacturing, and the oil and gas sectors. Weaker global growth and declining international trade activities will affect Malaysia’s GDP. For the year ahead, Bank Negara Malaysia (BNM) has projected steady GDP growth of between 4.3% and 4.8% (2018: 4.7%). Growth will primarily be driven by private sector spending, underpinned by steady private consumption due to stable labour market conditions. Private investment is expected to be supported by ongoing and new capital investment, especially within the manufacturing and services sector, as well as the repayment of corporate tax refunds. Export growth is projected at 3.4%, compared to 6.8% in FY2018 as a result of weaker demand from trade partners and the impact of ongoing global trade tensions. BNM’s monetary policy for FY2020 will focus on ensuring sufficient liquidity to support financial intermediation activity. Despite the uncertain outlook, we are confident that our Transformation initiatives have put us on a stronger footing to accelerate our growth. We will also focus on widening our franchise through strategic ecosystem partnerships. In addition, we will continue to amplify the brand through various media channels, and increase the weight of digital channels to support our sales and marketing activities throughout the Bank. Our focus will remain on Business Owners as our key area of growth, and extending our financial products and services to their stakeholder base of families, employees, business partners, and retail clients. Underscoring all our efforts is our brand promise to deliver Fast, Simple, Responsive, and Innovative products and services that are Aligned to Our Customers’ Needs. APPRECIATION Our sustained growth trajectory in FY2019 would not have been possible without the hard work and efforts of our Board, Management team and employees. To our employees and Management team, thank you for your unfailing dedication and commitment to keep the Bank on track with our value creation efforts. We are indebted to our Board of Directors for sharing their insightful advice and perspectives, which have steered us through the challenges of the past year. In particular, I would like to thank our Chairman, Tan Sri Dato’ Ahmad Bin Mohd Don for his support, wisdom, and guidance in keeping us on course with achieving our Vision. We would like to extend our appreciation to the regulators, policymakers and corporate governance custodians for their continued guidance and support of the Bank’s business activities. I would especially like to thank BNM, the Securities Commission Malaysia, and Bursa Malaysia Securities Berhad for their co-operation and assistance. On behalf of everyone here at the Bank, I would like to express our sincere appreciation to our customers and business partners, for the sustained faith in our brand promise and continuing their journey of growth with us. We affirm our commitment to continue to create value for all our stakeholders, as we continue with our vision of Building Alliances to Improve Lives. Thank you. JOEL KORNREICH Group Chief Executive Officer
29. 2019 Annual Report 27 SUSTAINABILITY STATEMENT At the Grand Finale of BizSmart Challenge 2018 We believe that embedding sustainability into our business strategies ensures our long-term business resilience . We take into account Economic, Environmental and Social (EES) risks and opportunities, as well as financial implications. Our sustainability initiatives reflect our vision of Building Alliances to Improve Lives. Our efforts differentiate us in the marketplace, as we seek to create meaningful impacts in our stakeholders’ lives. SCOPE This Sustainability Statement provides an account of our EES initiatives and outcomes across our various business segments for the period covering 1 April 2018 to 31 March 2019 (FY2019). Our Sustainability Statement is in compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (Bursa Malaysia) relating to Sustainability Statements in Annual Reports published in 2016. The Bank’s corporate responsibility strategy is also aligned with the requirements of Bank Negara Malaysia (BNM). Additionally, it takes into account our position as a constituent of the FTSE4Good Bursa Malaysia Index (FTSE4Good). This Sustainability Statement has been prepared in accordance to the Second Edition of Bursa Malaysia’s Sustainability Reporting Guide published in 2018.
30. 28 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) HOW WE GOVERN SUSTAINABILITY Our Corporate Responsibility (CR) initiatives are planned, implemented and managed by the Bank’s Corporate Responsibility and Event Management (CREM) unit, which reports to the Group Chief Marketing and Customer Experience Officer. Our sustainability agenda is incorporated into the Bank’s Transformation initiatives. This is evident from the various enhanced product and service propositions we have introduced since embarking on our Transformation journey in FY2016. These products and services have been referred to in the Management Discussion and Analysis on page 14 of this Annual Report. We have provided further elaborations within the relevant sections in this Sustainability Statement. In FY2019, we identified the following sustainability matters as being the most relevant to us and our stakeholders: 1. Economic Performance 2.Digitisation 3. Customer Data Privacy 4. Corporate Responsibility 5. Talent Attraction and Retention 6. Employee Engagement and Wellness 7. Customer Experience MATERIALITY MATRIX Most Influential The outcomes of our materiality assessment and stakeholder engagements were also used to refine our existing EES initiatives. In FY2019, we rolled out new programmes in response to issues identified. MATERIALITY MATRIX 1 Economic Performance 3 2 Customer Data Privacy Digitisation 6 7 Employee Engagement & Wellness Customer Experience 4 Very Influential Our EES initiatives have been created and implemented to address issues that are important to our stakeholder groups. Our materiality assessment and stakeholder engagements conducted in FY2019 form the basis of our report. Corporate Responsibility 5 Talent Attraction & Retention Influential Given the role of the Bank as a financial institution, we believe we are able to contribute to the empowerment and wellbeing of our various stakeholder groups through our EES initiatives. Towards the end of FY2019, we appointed an external independent sustainability consultant to advise us on enhancing our sustainability framework, governance and management. This exercise will enable us to identify an appropriate sustainability governance structure which will be implemented in FY2020 and beyond. We will also assess gaps in compliance with FTSE4Good requirements and identify areas for improvement, as well as develop a three-year sustainability roadmap. All these improvements will be rolled out in the years ahead. Influence of Sustainability Matters on Alliance Bank’s Stakeholders OUR APPROACH TO SUSTAINABILITY Significant Very Significant Most Significant Significance of Sustainability Matters to Alliance Bank Economic Social
31. 2019 Annual Report 29 STAKEHOLDER ENGAGEMENT We conduct our stakeholder engagement activities through inclusive interactions . In all our communications with our stakeholders, we aim to further our strategy to be the most important relationship for the financial success of business owners. This also encompasses our customers’ stakeholders comprising their families, employees and retail clients. In FY2019, we held the following stakeholder engagement activities: Stakeholder Key Areas of Focus Platforms and Tools Utilised Shareholders/ Bankers and Investors Business direction of the Bank and key corporate developments and relationship building • Regular shareholder communications and announcements to Bursa Malaysia and on the Bank’s corporate website • Annual General Meeting • Quarterly and annual financial statements • Periodic engagements with equity analysts and fund managers Government/ Regulators and Policy Makers Regulation, compliance and relationship building • Frequent dialogues between BNM and Compliance Officers Networking Group to discuss issues related to regulations and new requirements • Participation in BNM’s Compliance Conference by Board of Directors, Senior Management and Group Chief Compliance Officer to keep abreast of latest development, or emerging threats in the industry •Frequent dialogues with BNM, Bursa Malaysia, Securities Commission, Personal Data Protection Commissioner, and Inland Revenue Board Malaysia by Senior Management and Compliance Officers via forums organised by The Association of Banks in Malaysia (ABM), Association of Islamic Banking Institutions Malaysia (AIBIM), Malaysian Investment Banking Association (MIBA), and Association of Stockbroking Companies Malaysia (ASCM) • Alliance Investment Bank Berhad (AIBB) participated in the Annual Securities Commission Dialogue with Members of MIBA to discuss issues affecting the Capital Markets and Stockbroking industry Customers, Suppliers and Partners Innovative products and services, business direction, knowledge sharing, business guidelines and relationship building • Innovative customer-oriented solutions that are fast, simple and responsive; product or service-specific communications on the Bank and its subsidiaries’ websites •Customer or industry meetings, talks, exhibitions, tradeshows, roadshows, networking events and appreciation events •Regulatory reminders highlighting anti-money laundering, personal data protection and procurement guidelines Employees Human capital development, safety, governance, corporate developments and relationship building • Regular communications via email •Training and development initiatives such as Alliance Bank Leadership Excellence (ABLE) Academy, Alliance Leaders’ Programme, Alliance Impactful Managers programme, Management Trainee Programme, Accelerated Strengths Coaches initiative, Train the Trainer programmes, G.R.E.A.T @ Alliance, Working with Strengths programme, Alliance Islamic Banking Fundamentals (ALIF), Wealth Academy, Alliance SME Way, and Global Leaders Talkshop •e-learning modules covering Anti-Money Laundering (AML), Code of Conduct, Information Risk Management and Cyber Security, and Personal Data Protection Act (PDPA) 2010 •Social activities and work-life balance initiatives via the AFG Recreational and Sports Club and Fit@ Alliance • Rewards and recognition programmes • Voluntary participation in corporate responsibility programmes for the community • Weekly and quarterly employee engagement activities, e.g. Huddles and department meetings • Allies of Alliance microsite as a platform for employees to contribute and discuss new ideas to improve products and processes, as well as the work environment at the Bank •Innovation Marvels, the employee innovation platform that empowers staff to conceptualise and implement innovative ideas •inAlliance portal, an internal channel that allows for sharing of information and knowledge between departments, and repository of manuals and procedures Local Communities Education, and community-building initiatives • Financial literacy outreach programmes, e.g. AEIOU Challenge, Buku Wang Saku, and Program Bimbingan Kewangan • Digital financial inclusion and empowerment such as the Cash2Home app • Supporting the SME community through platforms such as Alliance BizSmart Challenge, One-Stop Halal Business Solutions, and Credit Guarantee Corporate (CGC) scheme •Advocating social enterprise initiatives that have a positive impact on communities via the Eco-Biz Dream Project and social crowdfunding platform, SocioBiz
32. 30 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) THE THREE PILLARS OF SUSTAINABILITY We believe we play an important role in contributing to the EES sustainability of our communities, as we help people sustain their lives and livelihoods. ECONOMIC Our economic sustainability initiatives are centred on contributing towards more equitable wealth distribution in society. It comprises programmes that support the growth of SMEs, providing impact investment funds which are aligned with Environmental, Social and Governance (ESG) objectives, and helping to reduce Malaysian household debt. Our digitisation efforts provide our customers with accessible and speedier platforms to manage their financial needs. The Bank’s commitment to customer data privacy ensures that we maintain our customers’ trust in protecting their personal and financial information. Stable Financial Operations The Bank’s product and service portfolio provides both businesses and individuals with the financial tools to grow their business and personal wealth. The Bank’s economic contributions are conducted through the taxes we pay to the government, dividends to our shareholders for their investment, community investments, and salaries paid to our employees. Our lending and investment activities cover our business and personal loans portfolio, as well as the CGC scheme which was launched in FY2019. To ensure that we are able to deliver on our financial duties to our customers, we maintain adequate capital and liquidity to support these activities. Our capital and liquidity management is guided by BNM’s Capital Adequacy Framework (Capital Components) and the Capital Adequacy Framework (Basel II – Risk Weighted Assets). The Group maintains a strong capital base to support current activities and future growth, to meet regulatory capital requirements at all times, and to buffer against potential losses. The capital management process involves monitoring of capital levels, estimation of capital requirements based on annual budgeting process, and regular reporting of the capital position to senior management and the Board. We implement stress testing to estimate the potential impact of extreme but plausible events on our earnings, balance sheet, and capital. The results of these stress tests help us formulate the necessary contingency plans. We maintain our liquidity coverage ratio in compliance with BNM’s Basel III requirements. The Group continues to maintain sufficient liquidity to fund daily operations and mitigate contingencies. To ensure a strong balance sheet which optimises value for our shareholders, we have in place ongoing management reviews as follows: • Weekly and monthly production management with all our business segments, with action plans to address identified gaps • Updating the Board of Directors on a monthly basis on business performance. FY2019 RM Million Direct economic value generated: Revenue 1,662.1 Economic value distributed: i. Operating costs (excluding personnel expenses and community investments) 285.3 ii. Employee wages and benefits 489.6 iii. Payments to providers of capital – cash dividends paid to shareholders 236.9 iv. Payments to Government – taxation and zakat 170.4 v. Community investments (administration expenses – donation) vi. Net bad debts Sub-total Economic value retained 0.4 139.2 1,321.8 300.3
33. 2019 Annual Report 31 Supporting the Growth of SMEs Our purpose as a responsible financial organisation is to contribute to the renewal and growth of enterprises , as well as the greater Malaysian economy. This is achieved through our efforts to support SMEs through our various financial products and services. SMEs provide jobs for an estimated 66%1 of the population, and contribute more than 37%1 to the national Gross Domestic Product (GDP). Considering that SMEs comprise our main customer segment, the Bank is committed to offer SME businesses the financial advice and support they require to grow their business. ALLIANCE BANK BIZSMART CHALLENGE Total TV viewership of Ranked as one of the million across Astro Awani and AXN shows on AXN 1.5 Top 10 Alliance Bank BizSmart Challenge Our flagship programme, the Alliance Bank BizSmart Challenge, was launched in 2013 as a programme to champion the cause of Malaysian SMEs with high development potential. SMEs participating in the Challenge are given business training, coaching and mentoring to help them achieve their growth ambitions. Participants also have access to industry icons, as well as networking opportunities. The programme involves giving SME owners business challenges to tackle, with winners receiving attractive prizes. Since its inception, we have received more than 1,300 submissions from SMEs nationwide, signifying its popularity and relevance to the SME business community. More than 110 young SMEs have been discovered and groomed to achieve greater heights in their businesses, both in Malaysia as well as abroad. Total press public relations value of RM2.5 million 7.7 Strong social media buzz, with total reach of 3.9 million million social media impressions In FY2019, the Alliance Bank BizSmart Challenge became the first reality TV business programme in Malaysia by a financial institution. Over 400 SMEs from a cross-section of industries applied for the programme. Winners received a total of RM1 million in cash and media coverage prizes. To help these SMEs grow their business, the Bank extended up to RM5 million in unsecured loans to the Top 20 finalists of the BizSmart Challenge. The Bank leveraged on social media channels to engage viewers, and encourage a loyal following for the programme. Our efforts have resulted in participating SMEs receiving the exposure they need to drive their business growth. Through the structured business coaching programme, we have been able to nurture and grow the Malaysian SME sector. The programme has also inspired other young SME owners to stay on course to achieve their business ambitions. Nurturing Young SMEs The aim of the Alliance Bank BizSmart Challenge is to create a sustainable platform for young businesses to advance within their sectors, and thus contribute to the Malaysian economy. We put in place new partnerships for the Challenge in FY2019, which has strengthened its proposition for young SMEs. The Bank co-partnered with Eco World Development Group Berhad. Other programme partners included Manulife Insurance Berhad, Visa Malaysia, BFM89.9 – The Business Station, and Astro Malaysia Holdings Berhad. The Challenge is open to Malaysian SMEs which have been in operations between 18 months and 5 years. Of the 400 applications received, 20 were shortlisted to undergo structured business coaching. We also provided them mentoring sessions and networking opportunities. Of these 20, a final 12 were selected to be featured in the seven-episode series which began airing in early October 2018. In the FY2019 Challenge, a number of alumni from past Challenges returned as advisors to the Top 12 finalists. Our alumni provided positive feedback on how participating in the Challenge gave them greater business knowledge and insight, as well as brand exposure. It also enabled access to networking opportunities to further their business ambitions. Source: Department of Statistics Malaysia, August 2018. 1
34. 32 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) WINNERS OF THE ALLIANCE BANK BIZSMART CHALLENGE 2018 Brand Type of Business Awards Chriszen Malaysia Sdn Bhd Local beauty and skincare brand • Grand Prize – RM250,000 cash • Astro Media Award – RM200,000 in media coverage Klezcar Car rental service company • First runner-up – RM200,000 cash OhMostWanted Cosmeceutical brand (products that combine cosmetics • Second runner-up – RM150,000 cash with pharmaceutical properties) Homegrown Farms Semenyih Sustainable farming service provider • Manulife Sustainability Award – RM100,000 cash IGL Coatings • Visa Retail Award – RM100,000 cash Eco-friendly cleaning and protection products for cars, household and industrial use Winners, Judges, and sponsors of BizSmart Challenge 2018 Bridging Businesses into the Halal Space In FY2019, our Islamic Banking business, Alliance Islamic Bank Berhad (AIS), introduced the concept of One-Stop Halal Business Solutions. The objective is to help SMEs grow their business in the Halal segment. The Halal economy in Malaysia is currently ranked number one in the world, with a comprehensive ecosystem in place. Malaysia’s Halal business sector has huge growth potential. The Government has announced its intention to position the country as the Halal hub in the Asian region. Support is available in the form of Halal certifications by Jabatan Kemajuan Islam Malaysia (JAKIM), and the Malaysia External Trade Development Corporation (Matrade) marketing the industry globally. Prior to setting up our One-Stop Halal Business Solutions, we had conducted a Halal market insight research. Our research revealed that many SMEs needed help obtaining Halal certification as they are unfamiliar with the application process and certification requirements. To help address this, we piloted Halal Talks in partnership with JAKIM, Halal trading Business-to-Business portal DagangHalal, and the International Institute for Halal Research and Training (INHART) during the year. The talks provided SMEs with the right knowledge, and helped them to establish relationships with key Halal agencies and partners. We plan to continue with the Halal Talks in FY2020, and will be putting in place a support platform for SMEs seeking to obtain Halal certification. Assisting SMEs through the Credit Guarantee Corporate Scheme In November 2018, we collaborated with CGC to launch a Portfolio Guarantee scheme offering unsecured loans to SMEs with promising growth prospects. The scheme reaches out to the underserved SME segment which lacks the necessary collateral to secure credit facilities. The initial portfolio size of RM50 million was quickly fully utilised. In February 2019, we extended the scheme with an additional portfolio limit of RM100 million.
35. 2019 Annual Report SUPPORTING SOCIAL ENTREPRENEURS Social entrepreneurs use private sector business models to bring about positive social , cultural and environmental change. It is a relatively new sector in Malaysia, with tremendous potential for growth. Eco-Biz Dream Project Eco-Biz Dream Project is Malaysia’s first environmental-themed business plan competition. It is designed to help nurture forward-looking social entrepreneurs who can create positive impact for the economy, environment and community. The challenge is open to public and private university students in Malaysia to propose sound and sustainable business solutions to address socio-economic and environmental issues. The contest in FY2019 was the third season. We have enhanced the challenge by helping the winners create a live proof of concept of their business plan. To facilitate viable ideas, we had a specific theme for Eco-Biz Dream Project 3, namely to help revitalise the Kerayong River corridor in the Klang Valley. Kerayong River is one of the eight rivers identified under the national River of Life (ROL) initiative. The objective of the ROL programme is to improve the water quality of rivers, and ensure that it is safe for recreational purposes. To turn the challenge from an academic exercise into a real-life application, we introduced a new framework comprising a series of structured activities to help students progress with their ideas. In the initial Ideation Phase, participating students from local universities came up with practical business solutions to address environmental concerns associated with the Kerayong River. The Green Team from Universiti Malaysia Sarawak 33 Students and their professors attended a one-day Design Thinking Workshop where they learnt ideation and creative thinking. The workshop was conducted by the Asia School of Business (ASB), in collaboration with MIT Sloan Management. The teams also met the Kerayong River community to gain a better understanding of issues faced. After the workshop, the teams used their knowledge to fine tune their ideas and present their proposals to the Eco-Biz Dream Project panel of judges. A total of 10 teams were then selected to advance to the final round. The finalists selected were given business coaching and mentoring by experts from Malaysian Green Technology Corporation (GreenTech Malaysia) and ASB. Winners were selected based on a number of different criteria. These included the creativity and purposefulness of the business solution, social impact, strength of the business plan and execution strategy, and entrepreneurial awareness and teamwork capabilities. In January 2019, the Green Team from Universiti Malaysia Sarawak (UNIMAS) won the Eco-Biz Dream Project 3. Today, we are helping the Green Team, now known as GT Envirosentry Sdn Bhd, bring their idea to life through a strategic alliance made up of civic and corporate enterprises. In addition to the winning prize of RM10,000 cash, we have set aside RM200,000 in seed funding to execute the winner’s business plan. Complementing this, the winning team will be provided business and financial management training to help them actualise their plan effectively. We have established an Implementation Steering Committee which will oversee the team’s performance. The RM200,000 funding will be disbursed in tranches based on performance-based milestones. Throughout the challenge, we maintained a high profile on social media channels and through public relations activities. These showcased the students and their environmental business solutions.
36. 34 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) ECO-BIZ DREAM PROJECT 3 WINNERS Team School Winning Prize Green Team Universiti of Malaysia Sarawak (UNIMAS) Winner: RM10,000 cash + trophy + certificate Monash Green Lab Monash University First runner-up: RM5,000 cash + trophy + certificate Aqua Plethora Universiti Putra Malaysia (UPM) Second runner-up: RM3,000 cash + trophy + certificate Sungai Savers Xiamen University Malaysia Consolation Prizes: RM1,000 cash + trophy + certificate Adiawangsa Universiti Kebangsaan Malaysia Consolation Prizes: RM1,000 cash + trophy + certificate Bringing Green Solutions to Life Eco-Biz Dream Project 3 is a unique social entrepreneurship activation initiative conducted in collaboration with the Bank’s partners. The winning project came from UNIMAS’ Green Team comprising team leader Norzafirah Azriah Mohd Fadzli (25), Mohd Fakharuddin Muhamad (25), Dayang Siti Herdawati Abang Hardin (24), and Lennevey Kinidi (25). The students worked on their idea with guidance from Professor Madya Dr Shanti Faridah Salleh, Director of Centre for Academic Assurance and Academic Development at UNIMAS. They were inspired to develop a sustainable solution to tackle pollution. Their end goal is to inspire behavioural change within the Kerayong River community. The team proposed a simple yet innovative solution using BioChar, in a plug-and-clean filter that will be used at wet markets situated at the Kerayong River. The aim is to reduce the amount of untreated effluents associated with high Chemical Oxygen Demand and nutrients going into the river. The waste collected is then recycled as fertiliser, thus bringing value back to the environment. Since they were awarded the prize, the team has been given training in business and financial management. These included providing them support for Intellectual Patent filings. They also conducted a field investigation and lab analysis of samples collected. Upon completing the planning stage, they then proceeded with business set up. Future plans in the pipeline involve constructing, installing and commissioning the plug-and-clean filter. Throughout this process, the Bank’s alliance of partners are providing the team with the support they need to take their idea to the next level. Should more funding be required which exceeds the RM200,000 set aside, the Bank will help them explore crowdfunding platforms alternatives as a source of working capital funds. External parties have also expressed interest in the technology utilised for the project, which has the potential to be used throughout the country should it be successful. SocioBiz In FY2019, Alliance Islamic Bank Berhad (AIS) collaborated with FinTech company, Ethis Ventures, to set up a social crowdfunding platform named SocioBiz. This platform provides the public with the means to donate funds to individuals who want to start a new business, expand an existing business, or learn a new life skill so they can attain economic empowerment. SocioBiz’s beneficiary partners are Yayasan Kebajikan Negara (YKN), Yayasan Noor Al-Syakur (YANAS), and Pertubuhan Kebajikan Islam Malaysia (PERKIM). For 2019, AIS has committed to bearing all administrative costs, ensuring that 100% of the funds collected are channelled to the recipients. At the launch of SocioBiz
37. 2019 Annual Report 35 PROVIDING CUSTOMERS WITH IMPACT INVESTMENT OPTIONS allianceonline Mobile In line with its BNM validated status as an emergent Value-Based Intermediation (VBI) practitioner, AIS launched two impact investment funds in FY2019. These comprised two BIMB-Arabesque Shariah ESG equity funds, namely the BIMB-Arabesque iGlobal Dividend Fund 1 and the BIMB-Arabesque Malaysia Shariah ESG Equity Fund. These awardwinning funds integrate ESG elements with financial and momentum analysis. In the first quarter of FY2019, we strengthened our digital banking presence by launching our first mobile banking application, allianceonline Mobile. The aim was to simplify and enhance our customers’ overall banking experience. The app offers our customers convenient and easy access to online banking services including viewing account balances, transaction flows and e-deposit placements. Both these funds integrate the United Nations Global Compact (UNGC) principles and values, and prioritise capital preservation as their main objective. HELPING TO REDUCE MALAYSIAN HOUSEHOLD DEBT As at December 2018, Malaysian household debt accounted for 83.0% of the country’s nominal Gross Domestic Product2. Factors such as debt repayment capacity and financial resilience have a huge impact on the well-being of the average family. In many cases, households have a variety of loans to service such as personal loans, hire purchases, credit card payments, and mortgages. This results in the average household making multiple loan repayments to different banks, resulting in having less cash in hand for their daily needs. Our Alliance ONE Account (AOA) and the Shariah-compliant Alliance ONE Account-i were designed to help alleviate the financial burden of households with multiple loan repayments. AOA consolidates all our customer’s loans into a single mortgage loan. It is a more prudent way to pay off high interest loans. Among other worry-free propositions they can enjoy is the greater savings on interest or profit rate per annum, or having cash in hand when faced with family emergencies. DIGITISATION The Bank’s digitisation initiatives are part of its Transformation strategy. Through our various initiatives, we aim to provide our customers with digital value propositions in line with the increasingly mobile lifestyle of tech-savvy Malaysians. Our digitisation efforts reflect our brand attributes of Innovative, Fast, Simple, Responsive, and Aligned to Customers’ Needs. Aimed at moving the Bank towards a paperless branch offering higher efficiencies, they comprise of two primary thrusts: • Customer-facing digitisation initiatives to migrate customers from traditional over-the-counter transactions to digital channels • Digitisation of back-end processes and systems to ensure simpler and speedier processes 2 Source: CEIC Data The app features cutting edge technologies to enable a more user-friendly banking experience. These include: • Smart Reminder – the first-of-its-kind feature within a mobile banking app in Malaysia, which uses machine learning to identify users’ payment behaviours. Smart Reminder serves as a personalised payment assistant that reminds customers of payments due. It allows our customers to track their payments for bills, transfers, credit cards, loans, and top-ups • Easy Search – a search facility that helps customers with recurring payments look up past transactions based on name, account number, or purpose of payment. It eliminates the need to recall lengthy payment details when conducting a transaction • Mobile Secure Approval – strengthens the security of web and mobilebased transactions by turning customers’ mobile phones into a security token unique to them via push notifications
38. 36 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) Alliance BizSmart SME Solution • We launched the Alliance BizSmart SME solution to provide our business customers with an online banking portal which business owners can adapt to suit their business needs. Business owners can access the range of secured banking services at their convenience anytime, anywhere. The solution addresses the challenges faced by businesses of all sizes in various sectors and industries. • Alliance BizSmart’s innovative features have won several regional awards including “Best Digital Sales Initiative, Application or Programme” at the prestigious Asian Banker’s International Excellence in Retail Services Awards 2018. It also won the “Excellence in Service Innovation” and “Excellence in Business Model Innovation” awards at the RBI Asia Trailblazer Awards 2018. Individual Current Account/Savings Account (CASA) – utilising a tablet, our staff can assist customers with the onboarding process quickly. Digital Know-Your-Customer (e-KYC) process leverages on facial recognition and optical character recognition (OCR) technologies to capture customer information. This has shortened individual CASA openings to under 20 minutes, compared to 45 minutes previously Business CASA accounts – a pilot programme was launched in April 2019 using a number of different digital technologies. The system automatically identifies the company and populates the data fields with verified data from third party databases. OCR technology captures customer information, while e-KYC utilises facial recognition technology for identity card information, selfie images, declarations and e-signatures. The process reduces the number of signatories required from seven to only one. Also, the number of documents required has halved from six to three. The digitised process will improve Business CASA activations to within a day, from two weeks previously Reaping the Benefits of Robotic Process Automation Our purpose in digitising our processes is to provide our customers with faster and more efficient turnaround time. We also provide them more accurate reports and data. One of the initiatives we successfully launched in August 2018 was Phase One of the Robotic Process Automation (RPA). RPA uses software robots that captures repetitive processes which it then automates by repeating those tasks within existing interfaces, software applications and structures. Among the processes automated are updating real-time information, navigating multiple systems to retrieve information, copying, and auto-printing reports and files. Alliance Origination System In July 2018, the Bank launched the Alliance Origination System (AOS) to simplify its credit workflow process. AOS streamlines data input from third party databases, allowing for most of its data fields to be automatically populated. AOS significantly reduces paperwork, freeing up our relationship managers’ time to focus on serving our customers better. Its automated processes also enable faster turnaround time on loan disbursements. Digital Onboarding During the year, we launched digital onboarding for three of our key product lines to speed up turnaround time: • Alliance@Work’s Local Employee Onboarding (LEO) enables payroll account opening at the workplace with immediate activation of ATM/debit card and allianonceline Mobile account Using RPA has freed up a substantial portion of our staff’s time which was previously spent doing these same processes manually. With the extra time on their hands, our employees have been able to be more productive on their jobs, by focusing on more complex matters. RPA also saves on costs, increases process efficiency and optimises business processes. Additionally, it reduces turnaround time and human error, as well as improves accuracy and quality of output. Outcomes achieved in the Phase One launch include: • Improved processing time from two hours to five minutes • Reduced turnaround time from two days to same-day fulfilment • Reduced human error, and repetitive work and actions In Phase Two, RPA will be expanded to units such as the Centralised Process Centre, e-banking, Remittance, and System Access Control. By automating manual processes within these areas, the Bank will be able to further improve its efficiencies.
39. 2019 Annual Report 37 CUSTOMER DATA PRIVACY ENERGY MANAGEMENT We take our duty and responsibility to protect our customers ’ financial information and personal data seriously. Towards ensuring that Customer Data Privacy is protected at all times, we have in place a Privacy Policy in relation to the collection, use, and management of our customers’ personal data. Our policy is in compliance with prevailing legislation, namely the Personal Data Protection Act (PDPA) 2010, Financial Services Act (FSA) 2013 and the Islamic Financial Services Act (IFSA) 2013. We manage our energy consumption at our headquarters and branches to ensure efficient energy use. A significant portion of electricity is consumed by air conditioning systems at all our premises. Our measures in reducing energy consumption in air-conditioning comprise the following: • We have upgraded our cyber protection systems in line with our digitisation drive. Our enhanced systems reduce the risk of cyber-attacks in the form of unauthorised access, security breaches and information leaks. Customer data is available in printed form, or as digital information within our system. We restrict access to printed data to authorised personnel only. These are kept in locked cabinets in a secured storage area. Printed data which is not used is destroyed in a paper shredder. We strictly control data available in digital form. System access is only granted according to job function, with requests requiring approval from the relevant authority. We inculcate a culture which prioritises customer data. This includes advising employees to lock their personal computers when they are not at their desk, and to treat customers’ personal data with integrity and as their own. • Temperature setting optimisation of Computer Room AirConditioning (CRAC) - Our target is to reduce energy consumption by 5% by setting the temperature one degree Celsius higher on CRAC units - Initiated in 2015, it covers all CRAC units located at communications and server rooms located at the Bank’s headquarters in Capital Square, Cyberjaya, and Strateq Not increasing the number of split air-conditioning units at offices with centralised air-conditioning - Since 2014, we have maintained strict control on new airconditioning split units installed by getting Group Heads to approve all requests - Exceptions are only made if non-installations will significantly impair operations Lighting at all our premises is another large source of electricity consumption. We have set a target to reduce lighting energy consumption by 10%. Since 2016, we have been working towards this by fitting LED lights at all our new offices and branches. We have also expanded this effort to renovations we conduct. ENVIRONMENTAL 10% The Bank’s environmental initiatives reflect our commitment to uphold our environmental stewardship obligations as a responsible corporate citizen. We have in place a range of internal workplace initiatives at the Bank’s offices which help reduce our carbon footprint. reduction in electricity consumption for light fittings Using Environmentally-Friendly Materials Prohibitive Lending Policies The Bank’s policy prohibits lending to illegal business activities that will cause environmental harm. Since 2016, we have been using eco-friendly materials as much as possible within our organisation as follows: • Internal Workplace Initiatives to Reduce Carbon Footprint We have in place internal programmes which we monitor on an ongoing basis to ensure that we minimise our environmental impact. • Replacing R20 refrigerant equipment for air-conditioning units with more environmentally friendly substitutes, such as R22, R410, or R32 Within all our office renovation projects, using eco-friendly materials for renovation, in compliance with US-based Leadership in Energy and Environmental Design (LEED), UL Environment’s GREENGUARD Green Certified products, Australian-based GECA standards or equivalent certifications. This extends to using environmentally-friendly furnishing such as workstations, chairs and carpets.
40. 38 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) Reducing Paper Use Our Human Capital Base We believe in doing our part to aid in conserving our planet’s trees by carrying out paper recycling programmes and reducing paper use. Since 2016, we have been recycling used paper at our offices. To responsibly manage our paper use, we encourage our employees to reduce printing. Measures we have in place include password controls on our paper copier machines, and generating a monthly report on printing volume sent to the respective businesses. The Bank has in place a range of policies to ensure a conducive work environment, which respects its employees’ rights. Annual printing reduced to 2.8 million copies in FY2019, from 3.3 million copies in FY2018 SOCIAL The Bank’s social initiatives and programmes are centred on our workforce, customers and communities. We provide our employees a supportive and conducive work environment through a range of policies, workplace initiatives, and talent development platforms. Our customer engagement programmes are designed to offer excellent service, as well as provide customers with the information they require to grow their financial wealth. In our engagements with society at large, our aim is to empower communities through financial literacy programmes, as well as digital financial inclusion and empowerment initiatives. Workforce Diversity, Equal Opportunities and the Bar on Discrimination at the Workplace We believe in a diversified and inclusive workforce and practise equal employment opportunity. We support the TalentCorp Career Comeback programme, as our commitment to aid in national economic transformation. The programme encourages women to return to the workforce after career breaks, and assists in the transition process. Under this programme, we have successfully recruited several female employees. In pursuit of diversity and equal gender participation in our workforce, 61% of our employees are women. Of the total female workforce, 79% hold management positions (Senior Executives and above) and 16% of that hold Senior Management positions (Senior Vice President and above). The Bank promotes a culture of tolerance and mutual respect, beginning with the recruitment process. Each candidate is assessed and evaluated in a fair manner. We reject all forms of discrimination based on gender, race, religion, age, or sexual orientation. We practise this same culture in staff career advancement. We assess our staff on behavioural and professional criteria for career progression. Decisions on promotions and financial compensation are made by a varied and diverse senior management committee. Complaints of discrimination of any kind are investigated thoroughly via the Bank’s disciplinary processes and consequence management is applied accordingly. EMPLOYEES The labour market is defined by a continuously evolving workforce, with dynamic employment sentiment. Employees, especially the Millennial generation, are looking for employers who offer them a supportive and conducive workplace environment. The Bank has streamlined its efforts and initiatives to ensure that the workforce, being the most important intangible asset, remains dynamic and relevant. We place great importance on employee engagement, and support our people’s professional and personal growth. Underscoring this is our aim to cultivate a highly ethical workforce and sustainable business practices. WOMEN IN THE WORKFORCE 79% of our female employees hold management positions; 16% hold Senior Management positions
41. 39 2019 Annual Report Addressing Bullying and Harassment at the Workplace on our corporate website . Managers and employees alike are educated on the importance and utilisation of the Whistle Blower platform via staff induction programmes, staff communications, and Huddle letters. The Bank’s strong stand on this extends to the inclusion of a whistle blowing and complaints reporting clause in all third-party contracts and agreements which the Bank is party to. We continuously enhance and revise our Whistle Blower Policy in response to industry and situational changes. Our most recent revision was conducted in March 2018. The Bank’s Whistle Blower Policy and the Speak Up Statement is positioned to highlight instances of unethical conduct, harassment, and unreasonable behaviour by all parties. Aggrieved individuals have recourse to internal and external reporting channels. Our Whistle Blower Policy has an in-built mechanism which maintains the strictest of confidence with regards to all complaints made in good faith. Employee Composition & Workforce Strength The Bank believes in the importance of a diverse workforce which offers us the benefits of a spectrum of different perspectives and insights. As at 30 April 2019, we have a total of 3,590 employees of differing age groups and varying backgrounds. The Whistle Blower Policy can be accessed by staff on the Bank’s inAlliance intranet portal, while the Speak Up Statement can be found WORKFORCE STATISTICS AT A GLANCE EMPLOYEE AGE PROFILE GENDER COMPOSITION EMPLOYMENT STATUS 43% 98% 38% Male 61% 11% 8% 20-25 Yrs Female 39% Permanent staff 26-35 Yrs 36-50 Yrs 2% >50 Yrs DIVERSITY IN TENURE RECRUITMENT BY AGE AND GENDER Contract staff TURNOVER BY AGE AND GENDER FY2019 54% 162 179 27% 71 76 11% 201 7% 103 6-10 yrs 26-35 yrs >16 yrs 11-15 yrs 36-50 yrs Male 183 30 6 7 55 ≥25 yrs <5 yrs 88 >50 yrs 20-25 yrs Female 18 20 85 43 26-35 yrs 36-50 yrs Male >50 yrs Female RECRUITMENT BY STATE FY2019 412 187 Wilayah Persekutuan Selangor 37 26 23 15 7 4 2 1 1 Pulau Pinang Johor Sabah Sarawak Kedah Melaka Perlis Negeri Sembilan Pahang
42. 40 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) Employee Engagement and Wellness We proactively engage with our employees on a variety of platforms to ensure a sustainable and engaging experience at the workplace. Voice of Employee The Bank’s annual employee engagement survey, “Voice of Employee” (VOE), has been instrumental in providing honest feedback from employees at all levels within the organisation. We have used employee feedback to guide our initiatives and management decisions. Our approach has resulted in significant improvement in employee engagement and sentiment as follows: • Sustainable Engagement Index improved by 1 point to 88% in FY2019 from 87% in FY2018 • Performance Management improved significantly to 79% in FY2019 from 74% in FY2018 • The Bank’s Image and Competitive Position rose to 54% in FY2019 from 50% in FY2018 • Net Promoter Score (NPS) in terms of recommending others to be customers of the Bank improved from -6 to 0 • The Bank’s internal NPS improved from -13 to -7 in terms of recommending others to be employees of the Bank In addition to the annual VOE, the Bank carries out quarterly VOE Surveys to gauge employee engagement regularly. FY2019 COMMUNICATION AND ENGAGEMENT INDEX – ABOVE INDUSTRY BENCHMARKS COMMUNICATION INDEX @ BANK LEVEL SUSTAINABILITY ENGAGEMENT @ BANK LEVEL 85% 84% 80% 78% 88% 87% 86% 86% 2019 2018 2017 Malaysia Bank Average 2019 2018 2017 Malaysia Bank Average Both Indexes above all Benchmarks Total Global Financial Services Favourable Norm 2019 Score (%) Global High Performance Norm 2019 Malaysia National Norm 2019 Malaysia Financial Services Norm 2019 Malaysia Banking Norm 2019 Communication Index 85 +19* +9* +7* +8* +6* Sustainable Engagement Index 88 +5* +0* +2* +3* +3* Note: * +/- represents the improvement or decline of Bank’s Scores against benchmark.
43. 2019 Annual Report Employee Engagement Initiatives Upon completion of the annual VOE survey , the Bank conducts “Skip” sessions between management levels to obtain clarity and feedback on gaps, identify opportunities for improvements, and positive initiatives to repeat. At divisional level, we have allocated funds for engagement activities designed to strengthen bonds within the team. Our annual townhall and Leaders Conference are held to align the whole organisation with the Bank’s strategic direction and key initiatives. These conferences also serve as platforms for employees to clarify the ambitions of the Bank for the coming financial year. During the year, we held a competition for our employees to refresh the staff ID card and lanyard with a new design. The final design selection was made by the employees themselves through an online voting system. The “Alliance at Heart” initiative, collaboratively driven by the Group Marketing and Customer Experience Office and Group Human Resource (GHR), was introduced to create awareness and reinforce the Bank’s vision, strategies, brand attributes, key behaviours, and financial goals. These are interactively communicated through a series of educational cards, online quizzes, and challenges. Allies of Alliance Portal Introduced in FY2017, the “Allies of Alliance” portal and its Ideas Bank have resulted in the activation of ideas originating from all levels of employees. A total of 37 business-related initiatives and 16 employee engagement related-initiatives were activated based on ideas collated from the Ideas Bank and weekly Huddle sessions. These include proposals on simplification of processes. We received an enviable final placement of Second Most Active Employer in the large corporate category. Six of our employees were placed among the Top 10 Most Active Employee nationwide out of 100,000 participants. their colleagues throughout the Bank. Additionally, the Recreational and Sports Club also presented talks on Health and Sports Safety. Rewards and Recognition Programmes Throughout the year, employees can join in the various physical activities organised by the Bank. These include vertical challenges, walk hunts, hikes, and Zumba sessions. It also extends to talks and programmes on healthy lifestyle topics such as good diet, “Getting Fit in the Office”, “Happiness at Work”, and “Understanding and Living with Diabetes”, all organised under the Fit@Alliance banner. Recognising that wellness is not just limited to physical aspects, the Fit@Alliance committee actively pursues mental and financial wellness initiatives. Talks on Stress Management and the Financial Wellness series featured seminars on “Personal Budget“, “Cash Flow Management“, “Managing Credit“, “Investing Done Right“, “Early Retirement Planning“, bank-wide quizzes, contests, and complimentary Financial Planning sessions for employees have been well received for their creative take on wellness. The use of infographics and quizzes allowed all staff to reap the benefits of the financial literacy programme, which recorded a 40% participation rate. Recreational and Sports Club The Bank’s Recreational and Sports Club continued to engage employees with activities such as the Treasure Hunt, Family Day and Fun Run, the Inter-Bank Badminton Competition, Durian Fiesta, Movie Nights, and Futsal matches. These activities provide a platform for employees to engage and collaborate with Fit@Alliance Since its inception in 2017, Fit@Alliance has been promoting physical, mental and financial wellness among employees. In FY2019, Fit@ Alliance organised a series of physical activities targeted at enhancing and promoting active lifestyles and camaraderie among employees. During the year, the Bank also participated in the Perkeso’s nationwide Activ@Work challenge, with more than 600 of our staff participating. 41 AFG Recreational and Sports Club Family Day We believe in recognising and appreciating the hard work and efforts of our employees to keep them motivated. During the year, we launched the “ManCo Appreciates You” page on the inAlliance Portal. The portal is a conduit for Management to showcase their appreciation for employees who portray positive attitudes and exemplary work ethics. Our Monthly Celebrations showcase businesses that achieved or exceeded their business goals to maintain employee enthusiasm. Branches are not left behind in these endeavours. We present the Monthly Service Awards to branches that meet service standards. During the year, we introduced the Branch Recognition Programme to motivate the Bank’s branches by recognising and rewarding top performing branches that delivered excellent customer experiences. Launched in August 2018, the programme is aligned with our Transformation priority of ensuring excellent customer service, and provides an avenue to learn from each other by sharing success stories. Monthly awards are given to the top 10 performing branches that meet the minimum set service standards, quarterly awards to the top performing branch, and a special award to the most improved branch.
44. 42 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) Work Life Balance Initiatives With evolving employee sentiments, the Bank understands the importance of work life balance in promoting our people’s personal growth and health. TRAINING AND DEVELOPMENT Career Break Option One of our sustainable long-term initiatives is the Career Break option. This option is offered to exemplary performers occupying critical positions, who wish or need to take an extended break from work for personal reasons and is exercised at the Bank’s discretion. Through this option, we hope to retain talent in the long run. Employees on a career break have the assurance of job security upon their return to the workforce. Contributed Parental Leave to Staff Training Fund to upskill employees The Bank provides both maternity and paternity leave to our staff to allow them to fulfill their family responsibilities. Paternal Leave Male Female Entitled 39% 61% 3% 3% 100% 98% Utilisation Rate Staff that return to work after parental leave Promoting a Culture of Innovation Employee-driven innovation is a critical enabler in driving through our brand attributes of Innovative, Fast, Simple, Responsive, and Aligned to Customers’ Needs. In FY2019, we introduced Innovation Marvels (IM), a programme that champions the ideas contributed by the various Huddle groups within the Bank. The IM team, comprising Management Trainee graduates, identifies the ideas to be worked on and recommends strategic actions to improve processes. Among the initiatives that were successfully implemented are the Alliance Remedial Collection Sharing portal, an online resource centre to help our employees prepare for the Asian Institute of Chartered Bankers certification, and the Alliance ONE Account (AOA) referral campaign. Ideas being explored for implementation in FY2020 include digitising approval processes to increase efficiencies, and providing customers with faster and more responsive service. Training and Development We believe that talent development is a crucial component of the Bank’s success. It ensures we have a sustainable pipeline of ready and industry-relevant talents at the Bank. We have introduced new initiatives in FY2019 with a wide range of talent development programmes. All our talent development initiatives are aligned with our strategic vision and Transformation initiatives. RM4.2 million Invested RM10 million on employee training and development in FY2019 34 hours or 4.25 days per employee spent on employee development training 414 face-to-face development programmes 19 e-learning programmes
45. 2019 Annual Report Internship and Management Trainee Programmes The Bank strongly advocates early work exposure to students from a diverse range of fields . We launched our inaugural Decision Management Structured Internship Programme (DMSIP) to provide students with insights into data management and analytics in a banking environment. Additionally, we support and facilitate direct internships into various departments, with a total of 24 intern students benefiting from early work exposure in FY2019. Alliance Bank Leadership Excellence (ABLE) Academy The award-winning Alliance Bank Management Trainee Programme (MTP), now in its seventh year, has been successfully developing and nurturing young graduates into holistic young leaders. We continuously improve our strategies to develop and manage young talents to be well-rounded future leaders at the Bank. The MTP is the first step in the Alliance Bank Leadership Excellence (ABLE) Academy. The purpose of the ABLE Academy is to develop a channel of potential leaders with breadth and depth of knowledge. It is also a platform for young aspirants to gain relevant knowledge, skills, and experience in the financial industry so they can assume future leadership roles. We continue to innovate the MTP based on the needs of young graduates and organic changes in the industry. Since its inception in 2012, 181 management trainees have benefited from the programme. In FY2019, 25 management trainees joined the ranks at ABLE Academy. Alliance Leaders Programme Alliance Leaders Programme is a flagship initiative aimed at building a strong foundation of leadership knowledge, skills and experience to cultivate successful leaders in the Bank. During the year, our pioneering batch of 15 graduates completed their 10-month long journey of self-development. 43 Alliance Impactful Managers Programme Working with Strengths Programme This programme aims to inculcate positive workplace environment and build high performing teams. To date, more than 500 employees have benefited from this programme with 82 managers trained by our own internal Accelerated Strengths Coaches in FY2019. The programme benefits from the innovative concept of strengths-based approach. Workshops conducted provide participants with fundamental concepts and tools to champion a culture of change and drive performance at work. In FY2019, 292 employees participated in the workshops. OUR LEADERSHIP DEVELOPMENT PROGRAMMES 77 leaders have been identified as Mentors 24 leaders have been certified as Strengths Coaches 37 bank-wide leaders are part of our training team G.R.E.A.T. @ Alliance As one of the Bank’s customer-based programmes, G.R.E.A.T. @ Alliance is designed to support our strategy “To Be the Most Important Relationship for the Financial Success of Business Owners”. In FY2019, we organised 22 classes for 880 participants under the programme. Global Leaders Talkshop To accelerate our employees’ leadership insights and learning, we invite global leaders to speak to our own homegrown talents. In FY2019, our employees accessed talks by leaders sharing their experiences on the following themes: • “Leading in the Age of Disruption” • “Leading from the Edge” • “Resilient Leadership” • “Sustaining the Passion Within” • “The Pillars of Innovation” Accelerated Strengths Coaching Career Development Paths We are continuously creating a base of certified Accelerated Strengths Coaches who in turn are coaching other employees, thus creating a multiplier effect. They focus on new and innovative approaches to enhance team effectiveness and maximise employee potential. In FY2019, more than 300 employees were coached by our pool of 24 certified coaches. Our Internal Job Opportunities platform encourages employees to take a proactive role in their career development. This helps to mitigate workforce stagnation by empowering our employees to participate in their own career development path. Individual Development Plans are formulated and utilised as key components of our workforce performance management. This is complemented by experiential learning through internal and external learning programmes, coaching, mentoring, and networking.
46. 44 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) Enhancing Staff Awareness on Banking Regulations We hold regular in-house training to ensure our staff are up-to-date with current regulatory guidelines and requirements. This comprises in-house training on Law, Banking, AntiMoney Laundering (AML), and Combating the Financing of Terrorism (CFT). During the year, 784 employees participated in these trainings. To gauge awareness levels and effectiveness of training, we conducted pre- and post-training tests. Alliance Islamic Banking Fundamentals Training Future Proofing Our Workforce Staff Education Events To ensure that our employees are kept updated on the latest regulations governing the financial services industry, we provide them e-learning modules such as Anti-Money Laundering (AML), Code of Conduct, Information Risk Management and Cyber Security, and Personal Data Protection Act (PDPA) 2010. The Bank regularly holds staff education events to provide additional exposure to our employees on areas relevant to their jobs. An example is the quarterly staff investment talk, where employees are informed of the advantages of share trading, and our online share trading platform, Alliance ONE Invest (AOI). To keep up with digital trends, we are developing programmes relating to Big Data Analytics, Data Science, Artificial Intelligence, Cyber Security, Robotic Process Automation, Chatbot, the Digital Economy, and Digital Marketing. From August 2018 till March 2019, Alliance Islamic Bank Berhad (AIS) held monthly Alliance Islamic Banking Fundamentals (ALIF) training for front line staff who are the first point of contact for customers. The training focused on the different types and nature of Islamic contracts, financial system, transparent disclosure of wealth products, and coverage of Shariah Non-Compliant Event and risk areas. In FY2019, 154 employees attended the ALIF training. Wealth Academy In FY2019, we took steps to strengthen our wealth management advisory team by collaborating with business management institutions to offer Wealth Management certification to our employees. Alliance SME Way Another new initiative introduced in FY2019 was Alliance SME Way, a structured sales and advisory approach in delivering excellent customer experience for our SME clients. Launched in March 2019, the Alliance SME Way covers customer contact strategy, sales interaction model, and tools our relationship managers can use to advise SME clients on business and finance matters. CUSTOMERS In FY2018, we set up a comprehensive internal communication system with a defined set of service rituals that would help us deliver excellent customer service. Several of our training and development programmes focus on enhancing our relationship managers’ capabilities in delivering our brand promise such as the Wealth Academy, Alliance SME Way, and ALIF training. Our rewards and recognition programmes are meant to motivate our employees to continue to create great customer experience. In FY2018, we began tracking our Net Promoter Score (NPS) across nine touch points on a monthly basis. We also initiated a Service Council where key stakeholders Bank-wide meet to share our NPS results for the month. Collaboratively, we performed a deep dive into the results, identified areas for improvement, and implemented the action items. We closely track and monitor these projects to ensure that we remain on track.
47. 45 2019 Annual Report One of the areas we have been improving on is responding to customer enquiries and complaints in a timely manner through our Voice of Customers (VOC) initiatives. This focuses on improving the speed of resolution of enquiries and complaints at first contact point. We enhanced service levels at branches by setting up the Branch Service Council to review and identify action plans on branch issues to close the service gap. Digitisation initiatives such as automation are executed to improve customer experience by offering quicker service with a shorter turnaround time. As a result of our focused approach, we recorded significant improvement in our NPS scores from FY2018 baseline. FOURTH QUARTER FY2019 NET PROMOTER SCORE 43 39 34 30 27 26 21 20 17 12 8 7 17 4 Complaints Contact Centre Privilege Banking Privilege Banking Relationship Manager Relationship Manager Product Sales Relationship Call Alliance Direct Marketing Product Sales Branch Account Opening -19 SME Borrowing SME Non-Borrowing -9 Baseline FY2018 FY2019 (Jan-Mar 2019) Helping Customers Make Informed Financial Decisions Alliance Retail Broking In FY2019, Alliance Retail Broking (ARB), a collaboration between the conventional and investment banks, carried out several initiatives to help simplify share trading for Malaysians. We: • Launched an educational video series that uses fun and simplified explanations to tackle complex propositions • Published articles in English and Mandarin on how one can build one’s wealth through share trading • Went on air on BFM89.9 to help Malaysians demystify the barriers to starting an investment portfolio • Participated in the InvestSmart Fest 2018 organised by Securities Commission Malaysia held from 12-14 October 2018 • Hosted Customer Investment Talks in partnership with Bursa Malaysia and Affin Hwang Asset Management in February and March 2019 at four different locations in the country Since FY2018, we have been disseminating our Daily Research Summary via mobile, and sharing the Alliance Monthly Model Portfolio with retailers. The information is shared in both English and Mandarin. Our efforts have received positive feedback from remisiers and customers, especially with the Mandarin version.
48. 46 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) COMMUNITY We have extended our role as a financial institution to provide support for our communities by leveraging on our abilities and skills. Our Corporate Responsibility (CR) activities are centred on promoting financial literacy, and enabling financial inclusion and empowerment. Our efforts ensure that we are able to create meaningful social impact. This is in line with our organisational ethos of conducting our business to the highest standards of responsibility, trustworthiness, transparency, and sustainability. Our CR activities have been conceptualised and implemented in accordance to Bursa Malaysia’s Corporate Social Responsibility Framework for financial institutions. Our CR programmes feature engagements with strategic partners to create positive outcomes in society through financial education, corporate projects, philanthropic works, and staff engagement. FINANCIAL LITERACY PROGRAMMES The Bank’s financial literacy programmes are based on our belief in equipping communities with the right financial tools. The AEIOU Programme The fourth cycle of the AEIOU Financial Comic Strip Challenge saw us continuing to financially educate school children through the fun and interactive approach of a comic-drawing competition with the theme “Smart Financial Habits”. Open to students in Primary Four, Five and Six, the challenge encourages children to practise saving, planning, and prudent spending habits from a young age. extends beyond the AEIOU Challenge. We held four AEIOU Teachers’ Briefing sessions which were attended by 193 teachers in the states of Perak, Melaka, Sabah, and Selangor. We introduced a new element to the challenge in FY2019, i.e. the AEIOU Save and Snap Challenge. Our intent was to assess the impact of savings through tangible actions and create visible online peer-to-peer influence among schoolchildren. The Save and Snap Challenge was conducted as an online competition where parents and teachers posted creative photo submissions of the children exhibiting saving habits on the social media platforms of Facebook and Instagram. The challenge ran for two months, and received 50 submissions. Ten winners were announced on the Bank’s Facebook and Instagram channels. Each winner received a RM100 cash prize. To complement the AEIOU Programme, we continued with our AEIOU Rural School Initiative for the second year. Through this programme, the Bank helped to restore five schools in Sabah that had suffered infrastructure damage as a result of natural disasters. The restoration included repairs to the schools’ roofs, walls and doors, as well as classrooms, canteens, and toilets. We also contributed teaching aids such as projectors to help with learning activities towards creating a conducive education environment. The five schools under AEIOU Rural School Initiative were SK Sugud, SK Tampasak, SK Koporingan, SK St Theresa, and SK Bantayan, which are also the Bank’s adopted schools under the BNM School Adoption Programme. 13,065 students participated in the AEIOU roadshow nationwide 193 teachers participated in AEIOU Teachers’ Briefing sessions 15,000 students took part in the AEIOU Drawing Challenge, an increase of 42.6% from FY2018 About 1,000 schoolchildren benefited from the AEIOU Rural School Initiative Invested RM286,600 on the AEIOU Roadshow and Comic Strip Challenge, and RM48,000 on the AEIOU Rural School Initiative Since its inception, we have reached out to more than 7,500 primary schools nationwide, and to more than 365,000 students. The success of the programme has resulted in it being a twotime award winner for Best Financial Literacy Programme for Primary Schools by BNM. For AEIOU Challenge 4, the Bank organised a teacher-led workshop to assist teachers to conduct their own AEIOU workshops at their respective schools. This approach also empowers teachers to be ambassadors of financial education. It ensures that instilling financial management knowledge in children AEIOU PROGRAMME With the top 40 finalists of the AEIOU Challenge 4
49. 2019 Annual Report Inculcating Winning Financial Habits On 1 November 2018 , we held the Grand Finale and Closing Ceremony for the AEIOU Challenge at HGH Convention Centre, Sentul, Kuala Lumpur. The top 40 contestants competed for the last time after being shortlisted from more than 15,000 entries. At the end of that session, nine lucky contestants were selected to enter a bonus round, the Buzzer Challenge, that offers a cash prize of RM1,000. Khor Joo Ching, 12, from SJK (C) Yik Nam in Sabah was named champion of the Alliance Bank AEIOU Financial Comic Strip Challenge 4. She took home RM5,000 in cash, a trophy and a participation certificate. Tan Yen Zhi, 12, from SJK (C) Sentul, and Foo Qiao Ying, 12, from SJK (C) Chong Hwa in Setapak were named first and second runner-up in that order. Each won RM3,000 cash and RM1,000 cash respectively, as well as a trophy and certificate of participation. SK Sg Binjai won the School with Highest Participation Award, which entitled them to RM5,000 in school development fund. SK Talungan Telipok won the Smart Financial School Challenge, giving them a RM3,000 school development fund. The runners-up for the Smart Financial School Challenge, SK Pulau Nyior and SK Antara Gapi, won RM1,000 for their school development fund. Buku Wang Saku Programme Health and Wealth Programme We are a strong supporter of BNM’s Buku Wang Saku Programme that helps instil sound financial management in schoolchildren. Through this initiative, we helped schoolchildren at 329 adopted schools nationwide to effectively manage their pocket money by monitoring their spending. It inculcates the habit of saving, and creates awareness on the importance of smart financial management and planning. By teaching young children these skills, we are helping to put in place the building blocks for a financially savvy future generation. In November 2018, AIS rolled out a Heath and Wealth programme for civil servants called Program Bimbingan Kewangan. The programme offers physical and financial health check to public servants. Last year, two workshops were held at the government agencies’ offices in Putrajaya. Invested RM31,193 to produce 329,000 Buku Wang Saku RM16,825 were spent to deliver the books to 329 schools nationwide More than just a convenient, safe and secure way to manage finances and perform online remittance transactions, Alliance Cash2Home promotes financial inclusiveness especially the unbanked segment. Since the groundbreaking app was launched in FY2018, it has received numerous regional accolades including “Best Digital Banking Initiative” at the Retail Banker International Asia Trailblazer 2019, “Outstanding Client On-Boarding & Account Opening” at the Global Retail Banking Innovation Awards 2018, “Financial Inclusion Initiative of the Year – Malaysia” at the Asian Banking and Finance Retail Banking Awards 2018, as well as “Best Digital Experience” and “Best Omni-Channel Experience” at the Customer Experience Asia Excellence Awards 2018. BENEFITS OF ALLIANCE CASH2HOME APP • • • • • ENABLING FINANCIAL INCLUSION AND EMPOWERMENT Our Forward Position Research conducted in FY2016 gave us insights into how we could help business owners by offering their stakeholders, i.e. employees, family, and customers, access to useful and affordable financial products and services. A key finding resulted in us carving out a foothold in the niche segment of digital financial inclusion and empowerment. One such endeavour is our Alliance Cash2Home app for foreign workers. It offers paperless account opening at the workplace utilising facial recognition biometrics technology, and mobile remittance service for foreign workers from the lower income segment. 47 Helps business owners manage operational costs, productivity and efficiency Mitigates cash handling risks Accelerate the shift towards a cashless society Advocates transparency and accountability Encourage legalisation of foreign workers COMMUNITY ENGAGEMENT PROGRAMMES The Bank’s community engagement programmes provide our employees with the opportunity to give back to society. Breaking Fast with Asnaf In conjunction with the holy month of Ramadan in May 2018, we held a breaking fast event at the residence of Pertubuhan Baitul Ehsan Al-Khairi (PBEA) in Taman Maluri, Kuala Lumpur. During our visit, we donated items worth RM15,000 – RM5,000 in zakat contributions, and duit raya (cash gifts) to 80 children at the home. Our employees also contributed additional household and grocery items to help the home prepare for Hari Raya celebration.
50. 48 Alliance Bank Malaysia Berhad (88103-W) SUSTAINABILITY STATEMENT (Cont’d) Hari Raya Appreciation Dinner Charity Golf Tournaments At last year’s Hari Raya event, we invited 50 orphans and underprivileged children to join us at our annual Hari Raya Appreciation Dinner at the Connexion@Nexus, Bangsar, and Pacific Sutera Harbour, Kota Kinabalu. The children were treated to a specially catered dinner and presented with duit raya of RM50 each while being entertained with stage performances. In FY2019, the Bank participated in two charity golf tournaments: • The Bank donated RM20,000 to MyKasih Foundation at the MyKasih Charity Golf Tournament, to help provide food, education and training programmes to the underprivileged. • We also contributed RM8,000 to the Estee Lauder Breast Cancer Awareness (BCA) Campaign Charity Golf in support of cancer awareness and research by Cancer Research Malaysia, The National Cancer Society, The College of Radiology Malaysia, and the Breast Cancer Welfare Association. Earth Day AIS also presented zakat contributions totalling RM92,000 to eligible recipients and asnaf, including seven individuals and three organisations from welfare centres, education centres, and non-governmental organisations. In conjunction with Earth Day, we partnered with the Forest Research Institute Malaysia (FRIM) to shed some light on sustainable management and best practices in optimising forest resources through research, education and technology. We were able to get hundreds of pledges to “Go Green Everyday”. Due to the positive reception, FRIM has agreed to collaborate with us for another two years. Blood Donation We joined forces with Huaren Resources Sdn Bhd (Huaren Resources), Lulu Hypermarket, and University Malaya Medical Centre, to set up blood donation booths at 3Alliance and at our headquarters at Menara Multi-Purpose. Close to 260 people donated about 189 pints of blood at our blood donation drive. Keeping Your Kidney Healthy We collaborated with Davita Malaysia Sdn Bhd and Huaren Resources to provide complimentary health screenings and consultation for the public, and shared informative health tips emphasising the importance of kidney care. Movie Day with the Disabled With our partner for Earth Day, representatives from FRIM Beach Cleaning Working with the Malaysian Nature Society (Kuala Selangor Nature Park), we organised a oneday beach cleaning campaign at Pantai Remis in Jeram, Selangor. By the end of the day, our Bank employees and their family members collected close to 300 kg of rubbish. In conjunction with the International Day of People with Disability, we organised a movie outing for residents from the Selangor Cheshire Home and our staff volunteers. The residents enjoyed themselves at the theatre, and had lunch with our volunteers after the movie. Christmas Carolling On 14 December 2018, the Bank invited residents of Yayasan Sunbeams Home to help spread Christmas cheer together with our staff. Our young guests sang Christmas favourites such as “Joy to the World”, “Jingle Bells” and “Feliz Navidad” during the carolling session. Cleaning the beach with the Malaysian Nature Society
51. 2019 Annual Report 49 PARTNERSHIP TO CHANNEL ZAKAT CONTRIBUTIONS Each year , AIS contributes zakat (Islamic tithes) in accordance with Islamic principles and Shariah conventions. In FY2019, we contributed close to RM500,000 in zakat. AIS has a strategic partnership with YKN which enables it to channel zakat contributions to the economically disenfranchised. These comprise single mothers with aspirations to start their own home businesses, but lack the working capital and equipment to do so. YKN assists these women by distributing funds for them to commence with their start-ups. Our partnership with YKN enables us to channel funds to those that need it the most, thus contributing towards strengthening the socio-economic fabric of the country. Best Omni-Channel Experience (Gold) Customer Experience (CX) Asia Excellence Awards 2018 Best Digital Experience (Gold) Customer Experience (CX) Asia Excellence Awards 2018 Best Digital Banking Initiative (Winner) Retail Banker International (RBI) Asia Trailblazer Awards 2019 Outstanding Financial Inclusion Initiative (Highly Acclaimed) Global Retail Banking Innovation Awards 2018 Best App for Customer Experience (Highly Commended) Retail Banker International (RBI) Asia Trailblazer Awards 2019 Financial Inclusion Initiative of the Year Malaysia Asian Banking & Finance Retail Banking Awards 2018 CONCLUSION The Bank’s sustainability initiatives are centred on creating greater value for our stakeholders and customers in line with our vision of Building Alliances to Improve Lives. We will maintain our efforts to monitor and report on the progress of our sustainability programmes, in line with our commitment to provide transparent and accountable disclosures to our stakeholders and shareholders. Our end goal is to support and enhance the lives of our customers and communities towards achieving socio-economic progress in their lives.
52. 50 Alliance Bank Malaysia Berhad (88103-W) CALENDAR OF SIGNIFICANT EVENTS Financial Calendar for the financial year ended 31 March 2019 ACTIVITIES DATE Announcement of Financial Results - First Financial Quarter ended 30 June 2018 30 August 2018 - Second Financial Quarter ended 30 September 2018 29 November 2018 - Third Financial Quarter ended 31 December 2018 28 February 2019 - Fourth Financial Quarter ended 31 March 2019 29 May 2019 Dividend - First Interim single tier dividend of 8.5 sen per share • Payment Date 28 December 2018 - Second Interim single tier dividend of 8.2 sen per share • Payment Date 27 June 2019 General Meeting - Notice of 37th Annual General Meeting 25 June 2019 - 37th Annual General Meeting 25 July 2019
53. 2019 Annual Report 51 CALENDAR OF SIGNIFICANT EVENTS for the financial year ended 31 March 2019 2018 Launch of BizSmart Challenge 2018 12 APR 14 APR Alliance Bank launched its annual flagship BizSmart Challenge 2018 in partnership with EcoWorld Development Group Berhad at the Bukit Bintang City Centre , Kuala Lumpur. In its fifth year, the BizSmart Challenge 2018 offers RM1 million cash and media coverage prizes and up to RM5 million in collateralfree financing to the Top 20 finalists. As the first reality TV business programme in Malaysia by a financial institution, the Challenge provides opportunities for Malaysian businesses to accelerate their business growth and achieve long-term success. Alliance Investment Bank Won Bronze in the MIBA Badminton Tournament 2018 Alliance Investment Bank Berhad (AIBB) won the Bronze medal in the annual Malaysian Investment Banking Association (MIBA) Badminton Tournament 2018. This was a milestone achievement after securing 7th place in 2017. 19 APR Earth Day Celebration Charity Sale for Beautiful Gate Foundation for The Disabled Alliance Bank collaborated with Huaren Resources Sdn Bhd and the Forest Research Institute Malaysia (FRIM) to celebrate Earth Day as part of its corporate responsibility initiative. Alliance Bank organised a charity sale at its headquarters, in support of the Beautiful Gate Foundation for The Disabled. The foundation’s mission is to raise funds for people with disabilities in its efforts to improve their lives. Residents of the foundation showcased and sold handicrafts made from recycled items. Other contributions include medication and clothing. 25 APR 26 APR Launch of allianceonline Mobile app Alliance Bank launched allianceonline Mobile app to simplify and enhance its customers’ overall banking experience. The app offers customers access to online banking services, including viewing of account balances, transactions, and e-deposits placements, in a hasslefree manner.
54. 52 Alliance Bank Malaysia Berhad (88103-W) CALENDAR OF SIGNIFICANT EVENTS (Cont’d) for the financial year ended 31 March 2019 2018 MIBA Men’s Veteran Futsal Tournament 12 MAY 15 MAY AIBB’s futsal team won the gold medal at the MIBA Men’s Veteran Futsal Tournament 2018. This marked the first gold medal won by AIBB since the Bank’s participation in the tournament in 2015. Program Sekampit Beras 22 MAY 30 MAY Kidney Care Awareness Programme The Bank’s Corporate Responsibility and Event Management (CREM) team collaborated with Huaren Resources Sdn Bhd and Davita to raise awareness on the importance of kidney care to help people make healthier lifestyle choices. A complimentary health screening on glucose level, body mass index, health counselling and blood pressure was held at Menara Multi-Purpose, Capital Square. Majlis Berbuka Puasa with Rumah Pertubuhan Baitul Ehsan AL-Khairi AIS organised the Program Sekampit Beras in collaboration with the Association of Islamic Banking Institutions Malaysia (AIBIM) and Angkatan Belia Islam Malaysia (ABIM). A contribution of RM10,000 was made to asnaf recipients from Projek Perumahan Rumah Termiskin. Projek Pelangi – Contribution of Baju Raya 9 JUNE AIS organised a Majlis Berbuka Puasa with orphans from Rumah Pertubuhan Baitul Ehsan AL-Khairi. AIS also donated RM5,000 in zakat to the home. AIS contributed to Projek Pelangi initiative by purchasing baju raya for the residents of Pertubuhan Anak Yatim dan Kebajikan Darul Izzah, Pusat Jagaan Pertubuhan Kebajikan Islam Peribadi Mulia and Rumah Pengasih Warga Prihatin.
55. 2019 Annual Report 53 2018 Zakat Contribution to Al Fikrah Welfare Association 11 JUNE 11 JUNE Zakat Contribution to Rumah Asnaf Al-Barakh AIS contributed RM5 ,000 in zakat to the old folks home Al Fikrah Welfare Association, as part of its annual zakat distribution programme. Hari Raya Customer Appreciation Dinner 2018 in Kuala Lumpur A zakat contribution of RM5,000 was made to the orphanage Rumah Asnaf Al-Barakh, as part of AIS’ annual zakat distribution programme. 28 JUNE 1 JUL 30 SEP Alliance Bank organised a Hari Raya Customer Appreciation Dinner for its customers and business partners at Connexion@Nexus, Bangsar. AIS presented zakat contributions to seven eligible asnaf recipients, an education centre, a non-governmental organisation, and a welfare centre. 1 JUL AIBB Wins Best Structured Finance Sukuk Award AIBB received the Best Structured Finance Sukuk award at The Asset Triple A Islamic Finance Awards 2018 for its role as a Lead Manager and Underwriter for SkyWorld Capital Sdn Bhd’s inaugural sukuk issuance. 30 SEP 10 JUL Launch of AEIOU Challenge 4 Now in its fourth year, the AEIOU Challenge is an initiative by Alliance Bank to help improve the younger generation’s financial literacy. The Challenge has been recognised as the Best Financial Literacy Programme for Primary Schools by Bank Negara Malaysia. The AEIOU Challenge 4 featured new components such as the Buzzer Challenge, Save and Snap Challenge, and Smart School Challenge. AEIOU Challenge 4: Save and Snap Challenge The AEIOU Challenge 4: Save and Snap Challenge is a photo contest on the Bank’s social media platforms. The aim is to increase the younger generation’s awareness on the importance of financial literacy. The initiative comprised students from the ages of nine to 12 years old, with photographs depicting creative ways to save money.
56. 54 Alliance Bank Malaysia Berhad (88103-W) CALENDAR OF SIGNIFICANT EVENTS (Cont’d) for the financial year ended 31 March 2019 2018 AEIOU Challenge 4 Roadshows JUL 10 JUL AUG As part of its AEIOU Challenge 4 initiative, the Bank visited 50 primary school nationwide to help improve school children’s financial literacy. Students were educated on good financial habits during the fun and interactive sessions. Hari Raya Customer Appreciation Dinner 2018 in Sabah AIS contributed RM100,000 and donated a dialysis machine worth RM42,000 to Yayasan Kebajikan Negara (YKN). Part of the contribution is used to help underprivileged Malaysians receive free dialysis treatments at YKN dialysis centres. 12 JUL Alliance Bank Wins Financial Inclusion Initiative of the Year – Malaysia Award 13 JUL Alliance Bank won the Financial Inclusion Initiative of the Year – Malaysia award at the Asian Banking and Finance Retail Banking Awards 2018. The ceremony was held at the Shangri-La Hotel, Singapore. The award recognised Alliance Cash2Home as an innovative first-in-the-market digital solution that delivers an effortless, seamless, and high quality banking experience to business customers and their foreign employees. Alliance Bank hosted a celebratory Hari Raya dinner for its customers and business partners in Sabah. Close to 50 orphans and people with disabilities were also invited. A zakat contribution of RM11,125.00 was presented by AIS to Yayasan Kebajikan Negara Cawangan Sabah. Alliance Bank Durian Fiesta AIS Contributes to Yayasan Kebajikan Negara 19 JUL Alliance Bank Golf Tournament for Corporate and Commercial Customers 26 JUL GROUP SME BANKING 10 AUG GROUP CORPORATE, COMMERCIAL AND TRANSACTIONS The Bank hosted its annual durian fiesta for over 800 Corporate, Commercial and SME customers at TPC Kuala Lumpur. The Bank organised a golf tournament for its corporate and commercial customers in appreciation of their long standing support. The tournament was held at the Kota Permai Golf and Country Club.
57. 2019 Annual Report 55 2018 AEIOU Challenge 4 Teacher ’s Briefing 10 AUG MELAKA 16 AUG Blood Donation Drive PERAK 13 SEP SABAH KUALA LUMPUR In collaboration with selected state education ministries, the Bank organised a Teacher’s Briefing in conjunction with the AEIOU Challenge 4 programme. A total of 193 teachers nationwide participated in this initiative. The aim was to encourage more teachers to be advocates of smart financial habits. Launch of Eco-Biz Dream Project 3 16 AUG 3ALLIANCE, SUBANG JAYA 5 SEP MENARA MULTIPURPOSE, CAPITAL SQUARE 18 SEP 26 SEP Alliance Bank launched the Eco-Biz Dream Project 3, an environmental-themed business pitch for university students. The Programme provides a platform to help nurture the next generation of social entrepreneurs. The third installment of the programme revolves around the revitalisation and protection of the Kerayong River corridor in the Klang Valley. Alliance Bank held its annual blood donation drive in partnership with Huaren Resources Sdn Bhd, Lulu Hypermarket, and University Malaya Medical Centre at Menara Multi-Purpose. More than 180 people took part in the blood donation drive. Alliance Bank Wins Gold for Best Digital Experience and Best OmniChannel Experience Alliance Bank’s Cash2Home solution won two Gold awards for Best Digital Experience and Best OmniChannel Experience at the Customer Experience (CX) Asia Excellence Awards 2018.
58. 56 Alliance Bank Malaysia Berhad (88103-W) CALENDAR OF SIGNIFICANT EVENTS (Cont’d) for the financial year ended 31 March 2019 2018 Alliance Bank Wins Outstanding Client On-Boarding & Account Opening Award 27 SEP 2 OCT Alliance Bank’s Cash2Home solution won the award for Outstanding Client On-Boarding and Account Opening, and was Highly Acclaimed for Outstanding Financial Inclusion Initiative at the Global Retail Banking Innovation Summit and Awards Ceremony 2018. Market Insight Seminar 2018 11 OCT 26 OCT The Bank organised a Market Insight Seminar for its business customers and partners to share insights on Malaysia and the global economic outlook. The seminar included tips on how businesses can make sound investments decisions and featured speakers from the Socio-Economic Research Centre, and DBS Bank. AEIOU Rural School Initiative Under AEIOU Challenge 4, the Bank refurbished five rural schools in Sabah which had suffered damages from multiple natural disasters over the years. The infrastructure restoration included repairs of the walls and doors of classrooms, roofs, toilets, and canteen areas. The Bank also donated electrical items such as projectors to aid in the students’ learning. BizSmart Challenge Alumni Bazaar 2018 In celebration of Alliance Bank’s inaugural TV debut of BizSmart Challenge 2018, the Bank organised a BizSmart Challenge Alumni Bazaar at Menara Multi-Purpose. The event provided an opportunity for former finalists of the BizSmart Challenge to showcase their products and services. Participating BizSmart Alumni included Christy Ng Shoes, CatchThatBus, Amazin’ Graze, Happy Bunch, NutriBrown Rice, The Tapping Tapir, Biji-biji Initiative, and Little Fat Duck.
59. 2019 Annual Report 57 2018 Beach Cleaning Programme 27 OCT 29 OCT A total of 80 Alliance Bank employees and their family members came together to help clean Pantai Remis at Jeram , Kuala Selangor. The initiative was organised in collaboration with Kuala Selangor Nature Park managed by the Malaysian Nature Society. AEIOU Challenge 4 Awards and Closing Ceremony Under Eco-Biz Dream Project 3, 25 teams were selected to attend a Design Thinking Workshop held at the InterContinental Kuala Lumpur. The workshop taught the students problem solving skills through dynamic discussions, relevant readings, and team exercises. It was also an opportunity for the students to delve deeper into environmental problems concerning the Kerayong River. 1 NOV 13 NOV The AEIOU Challenge 4 Awards and Closing Ceremony was witnessed by YB Puan Teo Nie Ching, the Deputy Minister of Education and attended by some 300 students and 50 teachers from selected participating schools. The AEIOU Programme reached more than 7,000 schools and delivered financial lessons at more than 300 schools nationwide. Submissions for the AEIOU Challenge increased from more than 5,000 in the first year, to over 15,000 in 2018. Eco-Biz Dream Project 3 Design Thinking Workshop Luncheon Speaker Series Update on the Plantation Sector AIBB hosted a luncheon series that provided an update on the latest developments pertaining to the local plantation sector for its corporate clients and business partners. The event was attended by YB Teresa Kok, Minister of Primary Industries, senior representatives from the Malaysian Palm Oil Council, and close to 70 fund managers.
60. 58 Alliance Bank Malaysia Berhad (88103-W) CALENDAR OF SIGNIFICANT EVENTS (Cont’d) for the financial year ended 31 March 2019 2018 Eco-Biz Dream Project 3 Business Model Canvas Boot Camp 17-18 NOV 15 NOV KUALA LUMPUR National Budget Seminar for SME and Commercial Banking Customers 21 NOV JOHOR 23 NOV PENANG The top 10 teams of the Eco-Biz Dream Project 3 continued with the challenge in a two-day boot camp. During the session, the students learned about business, sustainability, and social entrepreneurship from the Asia School of Business in collaboration with MIT Sloan School of Management. The boot camp also included a field visit to the Kerayong River. Movie Screening for Alliance Bank Trade Customers 18 NOV Alliance Bank’s Trade customers were treated to a movie screening of the blockbuster hit, Fantastic Beasts: The Crimes of Grindelwald in Johor, Penang, and Sabah. Over 300 customers and business partners attended the screening. 25 NOV CTOS Sweatplus Inter-Financial Institutions Badminton Championship Alliance Bank emerged as the overall champion in the CTOS Sweatplus Inter-Financial Institutions Badminton Championship 2018 held at Sports Arena Sentosa, Kuala Lumpur. The Championship saw high participation from 12 financial institutions. Each institution had a team competing in five categories - Men’s Singles, Women’s Doubles, Mixed Doubles, Men’s Doubles, and Men’s Veteran Doubles. Alliance Bank hosted the annual National Budget Seminar in Kuala Lumpur, Johor, and Penang for our SME and Commercial Banking customers. The seminar featured topics on the Malaysian economic outlook, opportunities for SMEs and corporates under the Budget 2019, tips for business owners to access business financing, the latest updates on income tax, and sales and services tax (SST). AIS Contributes zakat to Program Bantuan Pendidikan Perdana Lembaga Zakat Selangor 1-2 DEC AIS contributed RM37,500 in the form of customised school bags to 800 children from low income families, in conjunction with the Program Bantuan Pendidikan Perdana Lembaga Zakat Selangor 2018. The initiative helps reduce back-to-school expenses for low income families.
61. 2019 Annual Report 59 2018 Malaysia Investor Relations Association (MIRA) Awards Ceremony 2018 5 DEC Alliance Bank won the Best Company for Investor Relations – Mid Cap, and Mr Tan Hong Ian, Head of Investor Relations, Alliance Bank won the Best Investor Relations Professional – Mid Cap at the MIRA Awards Ceremony 2018. BizSmart Challenge 2018 Grand Finale 8 DEC Movie Day with Residents of Selangor Cheshire Home 8 DEC In conjunction with the International Day of People with Disability 2018, Alliance Bank staff volunteered their time for a movie and lunch date with residents of the Selangor Cheshire Home. Ms Mandy Leong, founder and owner of local beauty and skincare brand Chriszen Malaysia Sdn Bhd, was named the grand prize winner of the BizSmart Challenge 2018 during a live televised event held at Eco Majestic Semenyih, Selangor. Chriszen won RM250,000 cash along with the Astro Media Award, which comes with media coverage worth RM200,000. The first and second runner-ups were Klezcar, a car rental service company, and OhMostWanted, a cosmeceutical brand that combines cosmetics and pharmaceutical properties. The brands won RM200,000 and RM150,000 cash respectively. Homegrown Farms Semenyih, a sustainable farming service provider, won the Manulife Sustainability Award, while Carput, an on-demand car breakdown assistance app, took home the Visa Retail Award. Both brands won RM100,000 cash each. 14 DEC Christmas Joy with the Children of Yayasan Sunbeams Home In the spirit of Christmas, Alliance Bank and Huaren Resources Sdn Bhd hosted the children from Yayasan Sunbeams Home to help spread the season’s cheer at Menara Multi-Purpose, Capital Square. The Home also had a bake sale with a selection of homemade festive delights.
62. 60 Alliance Bank Malaysia Berhad (88103-W) CALENDAR OF SIGNIFICANT EVENTS (Cont’d) for the financial year ended 31 March 2019 2019 Eco-Biz Dream Project 3 Awards and Closing Ceremony 9 JAN 9 JAN The Green Team from University of Malaysia Sarawak (UNIMAS) was named the winner of Eco-Biz Dream Project 3 at its Awards and Closing Ceremony. The team was among the top 10 finalists who presented their business pitch on the revitalisation of Kerayong River. The winning pitch revolved around the idea of developing a simple solution, a Plug-and-Clean BioChar filter. This solution reduces the amount of untreated effluents associated with high Chemical Oxygen Demand and nutrients going into the river. The Green Team was awarded with RM10,000 in cash. In addition, AIS committed up to RM200,000 as seed funding to bring the winning proposition to life. AIBB Corporate Day AIS presented a RM50,000 zakat contribution to Yayasan Kebajikan Negara Palestine People’s Fund, in support of the foundation’s humanitarian initiatives. 15 JAN 18 JAN AIBB and AllianceDBS Research hosted the 2019 Corporate Day Conference for the local fund management community. More than 150 fund managers, analysts, and corporate representatives attended the event which showcased nine public listed companies. Datuk Isham Ishak, the then-Secretary General, Ministry of International Trade and Industry, was the keynote speaker. AIS Contributes zakat to Yayasan Kebajikan Negara Palestine People’s Fund Pre-Chinese New Year Customer Appreciation Dinner for Business Clients Over 800 of Alliance Bank’s Corporate, Commercial and SME customers were invited to attend the Alliance Bank’s Pre-Chinese New Year Customer Appreciation Dinner. The event provided networking opportunities, and a platform for the Bank to share its achievements with customers and business partners.
63. 2019 Annual Report 61 2019 Alliance Bank Chinese New Year Customer Appreciation Dinner 2019 18 FEB 23 FEB 14 MAR 5 MAR The Bank ’s annual Chinese New Year Customer Appreciation Dinner 2019 brought together more than 700 guests comprising customers, business partners, media, and staff. Alliance Bank Wins Best Digital Banking Initiative Alliance Bank, in collaboration with its partners, SQL, Insure Savvy, and the Federation of Malaysian Manufacturers (FMM), organised a Tea Talk on “Voluntary Tax Disclosure”. The event attracted over 350 SME participants, and featured speakers from Alliance Bank, Inland Revenue Board (IRB), ANC Hub Consultants Pte Ltd, and Insure Savvy. AIBB collaborated with Bursa Malaysia Berhad and Affin Hwang Asset Management Berhad to host a series of customer investment talks in Kedah, Pahang, Johor, and Kuala Lumpur. Over 400 customers and business partners attended the talks. Alliance Bank Wins Second Place at Activ@Work Challenge 2018 7 MAR Alliance Bank won second place at the Activ@Work Challenge 2018 Award Ceremony, while seven Bank employees were placed in the Top 10 Most Active Employee category. A total of 619 Bank employees participated in the challenge, which was organised by PERKESO and Bookdoc. The three-month challenge, which ran from September to November 2018, helped participants keep track of their fitness through a mobile app. Alliance Bank’s Cash2Home won the Best Digital Banking Initiative and was Highly Commended for Best App for Customer Experience at the Retail Banker International (RBI) Asia Trailblazer Awards 2019. Tea Talk on Voluntary Tax Disclosure Alliance Customer Investment Talks Northern Region Customer Appreciation Dinner 15 MAR 18 MAR A total of 210 Alliance Bank customers and business partners from the Northern Region attended a Customer Appreciation Dinner at Shangri-La’s Rasa Sayang Resort and Spa, Penang. The Bank took the opportunity to thank its customers for their continuous support.
64. 62 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT GUIDANCE ADHERED TO Code of Conduct • Alliance Bank is guided by the Code of Conduct established by the Board which outlines the conduct required of the Board members and the employees individually in order for them to discharge their duties in a professional, honest and ethical manner. • • • Malaysian Code on Corporate Governance issued in 2017 (the Code) Bursa Malaysia Securities Berhad (Bursa Securities) Main Market Listing Requirements (MMLR) Bursa Malaysia Corporate Governance Guide Bank Negara Malaysia’s (BNM) Policy Document on Corporate Governance (BNM CG Policy) The Code of Conduct is available on the Bank’s corporate website at: The following governance overview statement is to be read in conjunction with the Corporate Governance Report which is accessible online at: www.alliancebank.com.my Board Charter The Board of Directors (Board) of Alliance Bank Malaysia Berhad (Alliance Bank or the Bank) has adopted a Board Charter that sets out the mandate, responsibilities and procedures of the Board and the Board Committees, including matters reserved for the Board’s decision. The Board Charter is reviewed by the Board at every two years interval or as and when necessary in line with development in corporate governance requirements and practices to ensure its continued relevance to the Board. The Board Charter was reviewed and revised by the Board on 28 November 2018 and 19 March 2019 with, among others, the changes: (a) Limiting the tenure of independent directors to a maximum cumulative term of 9 years and removal of the option for an independent director to continue serving on the Board as a non-independent director upon completion of the 9 years term. (b) Introduced a new policy by limiting the tenure of nonindependent non-executive directors to a maximum cumulative term of 12 years. The Board Charter is available on the Bank’s corporate website at: www.alliancebank.com.my www.alliancebank.com.my The Directors also adhere to the Code of Ethics for Company Directors established by the Companies Commission of Malaysia and the Group’s Conflict of Interest Policy for Directors. Leadership The Board has clear divisions of responsibility and is collectively responsible for the long-term success of the Bank. More information can be found on pages 63 to 80. Effectiveness We evaluate the balance of experience, skills, knowledge and independence elements of the Board to ensure we are effective. More information can be found on pages 81 to 86. Audit and Risk Management We present a fair, balanced and easy to understand assessment of the Bank’s position and prospects. Our decisions are discussed within the context of the risks involved. More information can be found on pages 87 to 94. Relations with Shareholders Strong relationships with our shareholders are crucial for the successful execution of our strategy. More information can be found on page 95.
65. 2019 Annual Report 63 CREATING THE RIGHT CULTURE THROUGH OUR GOVERNANCE FRAMEWORK The Board of Alliance Bank considers good corporate governance to be the foundation of a well-managed institution . The Board is fully committed to integrity and fair dealing in all its activities, and has endeavoured to adopt the best practice of corporate governance in all areas of its business towards enhancing business prosperity and corporate accountability with the ultimate objective of safeguarding the interests of all stakeholders and enhancing shareholder value. The Bank’s approach to corporate governance practices is in conformity with BNM CG Policy and is guided by the principles and practices set out in the Code. The Role of the Board The Board has the overall responsibility for promoting the sustainable growth and financial soundness of the Bank and for ensuring reasonable standards of fair dealing, without undue influence from any party. This includes a consideration of the long-term implications of the Board’s decisions on the Bank and its customers, officers and the general public. The key responsibilities of the Board are set out below: (a) (b) (c) (d) (e) (f) (g) approve the risk appetite, business plans and other initiatives which would, singularly or cumulatively, have a material impact on the Bank’s risk profile; oversee the selection, performance, remuneration and succession plans of the Chief Executive Officer (CEO), control function heads and other members of senior management, such that the Board is satisfied with the collective competence of senior management to effectively lead the operations of the Bank; oversee the implementation of the Bank’s governance framework and internal control framework, and periodically review whether these remain appropriate in light of material changes to the size, nature and complexity of the Bank’s operations; promote, together with senior management, a sound corporate culture within the Bank which reinforces ethical, prudent and professional behaviour; promote sustainability through appropriate environmental, social and governance considerations in the Bank’s business strategies; oversee and approve the recovery and resolution as well as business continuity plans for the Bank to restore its financial strength, and maintain or preserve critical operations and critical services when it comes under stress; and promote timely and effective communication between the Bank and BNM on matters affecting or that may affect the safety and soundness of the Bank. Operation of the Board We schedule Board meetings at least eight times a year. Matters which require decisions outside the scheduled meetings are dealt with through additional ad hoc meetings. At each scheduled meeting, the Board regularly receives progress reports from the Group CEO and Group Chief Financial Officer on the business and financial performance of Alliance Bank. The Heads of Business units of the Bank regularly update the Board on the performance, strategic developments and initiatives in their respective segment throughout the year. The Board also receives regular updates on internal control, risk management, legal, compliance, internal audit, human resources, sustainability and governance matters. There is an annual schedule of rolling agenda items to ensure that all matters are given due consideration and reviewed at the appropriate point in the financial and regulatory cycle, although this is flexible to enable pressing matters, when they arise, to be dealt with in a timely manner. The Chairman and Group CEO maintain frequent contact (in person or otherwise) with each other and the other Board members throughout the year outside of the formal meetings.
66. 64 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Leadership The Board Responsible for the overall conduct of Alliance Bank’s business including our long-term success; setting our values, standards and strategic objectives; reviewing our performance; and ensuring an effective communication with our shareholders/stakeholders. Chairman (a) (b) (c) Ensures that appropriate procedures are in place to govern the Board’s processes; Ensures that decisions are taken on a sound and well-informed basis, including by ensuring that all strategic and critical issues are considered by the Board, and that Directors receive the relevant information on a timely basis; and Encourages healthy discussion and ensures that dissenting views can be freely expressed and discussed. Senior Independent Director (a) (b) (c) Acts as a sounding board to the Chairman; Serves as an intermediary for other Directors when necessary; and Acts as the point of contact for shareholders and other stakeholders. Non-Executive Directors (a) (b) (c) Contribute to developing our strategy; Scrutinise and constructively challenge the performance of management in the execution of our strategy; and Provide check and balance and ensure that high standards of corporate governance are applied. Group Chief Executive Officer (a) (b) (c) (d) (e) (f) (g) Develops the strategic direction of the Bank; Ensures that the Bank’s strategies and corporate policies are effectively implemented; Ensures that Board decisions are implemented and Board directions are responded to; Provides directions in the implementation of short and long term business plans; Provides strong leadership; i.e. effectively communicating a vision, management philosophy and business strategy to the employees; Keeps the Board fully informed of all important aspects of the Bank’s operations and ensures that sufficient and adequate information is provided to Board members; and Ensures the day-to-day business affairs of the Bank are effectively managed.
67. 2019 Annual Report 65 Board Committees Delegated to by the Board and responsible for overseeing implementation of strategies and policies ; and maintaining effective governance in the following areas: business decisions, audit and risk, remuneration, Board composition, succession planning and corporate governance. The Board has four (4) Board Committees, which composed solely of Non-Executive Directors: Executive Committee (EXCO), Group Nomination & Remuneration Committee (Group NRC), Group Audit Committee (Group AC) and Group Risk Management Committee (Group RMC). Among these Board Committees, the Group NRC, Group AC and Group RMC operate on a Group basis covering the Bank and its two principal subsidiaries, namely Alliance Islamic Bank Berhad (AIS) and Alliance Investment Bank Berhad (AIBB) (collectively, the Group). Each Board Committee has agreed Terms of Reference, which are approved by the Board and reviewed at every two years interval or as and when necessary. Any proposed changes to the Terms of Reference of the Board Committees are subject to the approval of the Board. The Terms of Reference of the Board Committees are available on the Bank’s website at: www.alliancebank.com.my The Chairman of each Board Committee reports to the Board on salient matters discussed at the respective Board Committee meetings. EXCO The EXCO reviews/vetoes loan/financing applications with total group exposure which are within its approval limits set by the Board and approves credit transactions/exposures with connected parties classified under BNM Guidelines on Credit Transactions and Exposures with Connected Parties (BNM/GP 6). It also reviews and recommends strategies and business plans for the Board’s approval and oversees their implementation. Group NRC The Group NRC supports the Boards in carrying out their functions in the following matters concerning the Boards, Shariah Committee, Senior Management and Company Secretary: • • • • Appointment and removals; Composition of the Boards; Performance evaluation and development; and Fit and proper assessments, and actively oversees the design and operation of the Bank’s remuneration system. Group NRC also periodically reviews the remuneration of Directors on the Board, and on whether remuneration remains appropriate to each Director’s contribution, taking into account the level of expertise, commitment and responsibilities undertaken. Group AC Group AC assists the Boards in relation to the oversight of the Group’s financial and reporting processes. It monitors the integrity of the financial statements and supervises both the internal and external audit processes, reporting back to the Board. It reviews the effectiveness of the policies, procedures and systems in place related to, among others, operational risks, compliance, IT and Information Systems (including cyber security) and works closely with the Group RMC in connection with assessing the effectiveness of the risk management and internal control framework. Group RMC Group RMC oversees the Senior Management’s activities in managing credit, market, liquidity, operational, compliance, legal, IT/Cyber and other risks as well as to ensure that the risk strategy is sound and the risk management framework is in place and functioning effectively according to its purposes. It also actively promotes a consistent culture of compliance, risk awareness and risk management within the Group.
68. 66 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Leadership - Board of Directors TAN SRI DATO’ AHMAD BIN MOHD DON KUAH HUN LIANG Chairman of the Board Independent Non-Executive Director of Alliance Bank Member of Group Nomination & Remuneration Committee Senior Independent Non-Executive Director of Alliance Bank Chairman of the Board of Alliance Investment Bank Berhad Member of Group Audit Committee 71 | Malaysian | Male 57 | Malaysian | Male Date of Appointment to the Board of Alliance Bank Malaysia Berhad: 1 February 2017 Date of Appointment to the Board of Alliance Bank Malaysia Berhad: 15 December 2011 Academic/Professional Qualifications: • Bachelor of Science in Economics and Business, summa cum laude, Aberystwyth University, United Kingdom • Fellow of the Institute of Chartered Accountants in England and Wales • Member of the Malaysian Institute of Certified Public Accountants Tan Sri Dato’ Ahmad Bin Mohd Don is the Chairman of Alliance Bank Malaysia Berhad’s Board of Directors. He has extensive experience in finance and banking. His work experience covers various capacities with Pernas Securities Sdn Bhd, Permodalan Nasional Berhad, and Malayan Banking Berhad. He served as Group Managing Director and Chief Executive Officer of Malayan Banking Berhad from 1991 to 1994. Between May 1994 and August 1998, Tan Sri Dato’ Ahmad was the Governor of Bank Negara Malaysia. Tan Sri Dato’ Ahmad is also the Chairman on the Board of Sunway REIT Management Sdn Bhd (manager of Sunway Real Estate Investment Trust listed on Bursa Malaysia) and a Director on the Board of United Malacca Berhad (listed on Bursa Malaysia). Academic/Professional Qualifications: • Bachelor of Science (Honours) in Applied Economics, University of East London, United Kingdom Mr Kuah Hun Liang has over 30 years of experience in the financial services industry. He began his career at Public Bank in 1983, and thereafter joined Deutsche Bank AG (Deutsche Bank) in 1989 as Treasurer. He was promoted as Head of Global Markets when Deutsche Bank ventured into investment banking. In 2000, he was appointed as an Executive Director of Deutsche Bank (M) Berhad. In 2002, he was promoted to Managing Director and Chief Executive Officer, and held both positions until 2006. Mr Kuah is the Chairman of Alliance Investment Bank Berhad. He also holds directorships in public companies listed on Bursa Malaysia namely, Rexit Berhad and MPHB Capital Berhad. In addition, he serves as a Director on the Board of Multi-Purpose Capital Holdings Berhad.
69. 2019 Annual Report OU SHIAN WAEI LEE AH BOON Independent Non-Executive Director of Alliance Bank Chairman of Group Nomination & Remuneration Committee Member of Executive Committee Non-Independent Non-Executive Director of Alliance Bank Non-Independent Non-Executive Director of Alliance Investment Bank Berhad Chairman of Executive Committee Member of Group Nomination & Remuneration Committee 68 | Malaysian | Male 68 | Singaporean | Male Date of Appointment to the Board of Alliance Bank Malaysia Berhad: 8 December 2010 Date of Appointment to the Board of Alliance Bank Malaysia Berhad: 18 April 2012 Academic/Professional Qualifications: • Bachelor of Science in Chemistry, University of Malaya Mr Ou Shian Waei began his career with a local bank as a management trainee in 1976 and remained till 1980. In 1981, he moved to IBM Malaysia as a trainee System Engineer. At IBM, he held various technical and management positions. He retired as Managing Director of IBM Malaysia in January 2010 after almost 30 years of service. Mr Ou was the PIKOM (Association of Malaysia Computer Industry) Councillor from 1997 to 1998. In 2006, he was awarded the ‘Key Industry Leader Award’ by PIKOM (now known as The National ICT Association of Malaysia) for his contributions to Malaysia’s IT industry. He was also the Chairman of the National International Technology Council (NITC) Taskforce for IT literacy in 1997. Additionally, Mr Ou was Adjunct Professor for the Department of Economics and Business Administration at Universiti Putra Malaysia from 1998 to 1999. He serves as the Chairman of AIG Malaysia Insurance Berhad. He is also a Director of FIDE Forum and Public Interest Director of Private Pension Administrator Malaysia. 67 Academic/Professional Qualifications: • Bachelor of Accounting (Honours), National University of Singapore Mr Lee Ah Boon joined Citibank in 1990 and held various Consumer Banking roles in Singapore including that of Chief Financial Officer, Senior Operations Officer, Head of Credit Card business and Business Manager. In 2005, he started up Citibank’s Consumer Business in China and returned to Singapore as Regional Operations Head of Citibank. He then moved to Barclays Bank in early 2009 as its International Technology Head for the Global Retail and Consumer Bank Business. In September 2010, Mr Lee left Barclays Bank and joined Fullerton Financial Holdings (International) Pte Ltd, a subsidiary of Temasek Holdings (Private) Limited, as its Chief Operating Officer. He remained for three years until his retirement in November 2013. Mr Lee is currently an Advisor of Fullerton Financial Holdings (International) Pte Ltd. He also serves as a Director on the Board of Alliance Investment Bank Berhad.
70. 68 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Leadership - Board of Directors DATUK WAN AZHAR BIN WAN AHMAD LEE BOON HUAT Independent Non-Executive Director of Alliance Bank Chairman of the Board of Alliance Islamic Bank Berhad Member of Group Nomination & Remuneration Committee Member of Group Audit Committee Member of Executive Committee Independent Non-Executive Director of Alliance Bank Chairman of Group Risk Management Committee Member of Executive Committee 60 | Malaysian | Male 61 | Singaporean | Male Date of Appointment to the Board of Alliance Bank Malaysia Berhad: 7 April 2015 Date of Appointment to the Board of Alliance Bank Malaysia Berhad: 7 April 2015 Academic/Professional Qualifications: • Bachelor in Business Administration (Finance), University of Pacific, Stockton, California, USA • Master in Business Administration (International Business), National University San Diego, California, USA Datuk Wan Azhar Bin Wan Ahmad was the Chief Executive Officer of Credit Guarantee Corporation Malaysia Berhad (CGC) from 1997 until his retirement in December 2014. He began his career in banking as a Loans Executive of Hong Leong Bank in 1985 and left the bank as Head of Branches Operations in 1993. He then joined CGC as Head of Credit. In 1995, he was promoted to Assistant General Manager and subsequently to Chief Executive Officer in 1997. In 2000, he was appointed to the Board of Directors and assumed the role of Managing Director. One of the highlights of his career was the transformation of CGC from a traditional credit guarantee provider into a market-driven and financially sustainable SME-support institution. He was instrumental in the setting up of Credit Bureau Malaysia (CBM) where he was the Chairman for six years from 2008 to 2014. On the international front, he was also Chairman of the Association of Development Financial Institutions for Asia Pacific region (ADFIAP) from 2012 to 2014. Upon his retirement, he was appointed as Consultant to the World Bank from 2015 to 2016, undertaking projects relating to SME financing in the Middle East. Datuk Wan Azhar is currently the Chairman of Alliance Islamic Bank Berhad. He serves on the Board of Trustees of NAMA Foundation. He is also the Chairman of the Small Debt Resolution Committee (SDRC) at Bank Negara Malaysia. Academic/Professional Qualifications: • Bachelor of Business (Accounting), Western Australia Institute of Technology, Australia Mr Lee Boon Huat has extensive experience in the financial services industry. He has served with the Monetary Authority of Singapore, Hong Kong and Shanghai Banking Corporation, Canadian Imperial Bank of Commerce and Chemical Bank. He held several posts at Standard Chartered Bank including Head of Global Markets (South East Asia), Head of Global Markets (Middle East), and Chief Operating Officer (South East Asia) from 1998 to 2012. Mr Lee serves on the Boards of British and Malayan Trustees Limited, British and Malayan Holdings Limited (listed on the Singapore Stock Exchange), Technological and Commercial Joint-stock Bank, Vietnam (listed on the Vietnam Stock Exchange), and several other private corporations.
71. 2019 Annual Report HO HON CHEONG THAYAPARAN S . SANGARAPILLAI Non-Independent Non-Executive Director of Alliance Bank Member of Group Audit Committee Member of Group Risk Management Committee Independent Non-Executive Director of Alliance Bank Chairman of Group Audit Committee Member of Group Risk Management Committee 64 | Malaysian | Male 64 | Malaysian | Male Date of Appointment to the Board of Alliance Bank Malaysia Berhad: 26 August 2015 Date of Appointment to the Board of Alliance Bank Malaysia Berhad: 10 May 2016 Academic/Professional Qualifications: • Bachelor of Engineering (Honours), University of Malaya • Master of Business Administration in Finance and Accounting, McGill University, Canada Mr Ho Hon Cheong began his banking career with Citibank Malaysia in 1981. Since then, he has held various senior positions with Citibank in Asia Pacific and the Middle East including Country Risk Officer of Citibank Malaysia, Pan Asia Corporate Head of Citibank Asia Pacific in Singapore, and Chief Executive Officer of Citibank Thailand. He also served as General Manager and Group Head of Corporate and Investment Banking with Saudi American Bank in Saudi Arabia. In 2004, Mr Ho was appointed President Director and Chief Executive Officer of PT Bank International Indonesia TBK. Thereafter he joined Temasek Holdings (Private) Limited in 2009. He returned to Indonesia in 2010 as the President Director and Chief Executive Officer of PT Bank Danamon Indonesia TBK until his retirement in February 2015. Mr Ho is a Director of AIA Singapore Pte Ltd and a Commissioner of PT Chandra Asri Petrochemical Tbk, which is listed on the Indonesia Stock Exchange. He is also the Non-Executive Chairman of Frasers Logistics and Industrial Trust, listed on the Singapore Stock Exchange. 69 Academic/Professional Qualifications: • Fellow of the Institute of Chartered Accountants in England and Wales • Member of the Malaysian Institute of Certified Public Accountants • Member of the Malaysian Institute of Accountants Mr Thayaparan S. Sangarapillai has over 30 years of experience in audit and business advisory services for a wide range of industries. His portfolio of clients included major public listed companies in the power, telecommunications, automotive, property development, plantation and manufacturing sectors. Mr Thayaparan also led cross border assignments. Other than statutory audits, Mr Thayaparan has led assignments on financial due diligences, mergers and acquisitions, initial public offerings, finance function effectiveness reviews and other advisory work. Mr Thayaparan joined Price Waterhouse (now known as PricewaterhouseCoopers PLT) in Kuala Lumpur in 1983. He was a Partner in the Assurance Services division of PricewaterhouseCoopers Malaysia from 1994 until his retirement as a Senior Partner in 2015. He serves as a Director on the Board of Sime Darby Berhad which is listed on Bursa Malaysia. He also sits on the Boards of AIG Malaysia Insurance Berhad, edotco Group Sdn Bhd and Robi Axiata Limited.
72. 70 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Leadership - Board of Directors TAN CHIAN KHONG SUSAN YUEN SU MIN Independent Non-Executive Director of Alliance Bank Member of Group Audit Committee Member of Executive Committee Independent Non-Executive Director of Alliance Bank Member of Group Nomination & Remuneration Committee 63 | Singaporean | Male 59 | Malaysian | Female Date of Appointment to the Board of Alliance Bank Malaysia Berhad: 26 September 2017 Date of Appointment to the Board of Alliance Bank Malaysia Berhad: 15 October 2018 Academic/Professional Qualifications: • Bachelor of Accountancy, National University of Singapore • Master of Business Administration, University of South Australia • Master of International Environmental Management, University of Adelaide, Australia • Member of the American Institute of Certified Public Accountants • Fellow of the Institute of Singapore Chartered Accountants and of CPA Australia Mr Tan Chian Khong has 35 years of experience in the audit industry. He was a partner at Ernst & Young LLP from July 1996 till his retirement in June 2016. Mr Tan currently holds directorships in a number of companies listed on the Singapore Stock Exchange namely, CSE Global Limited, Hong Leong Asia Ltd and The Straits Trading Company Ltd. He also sits on the Board of Xinghua Port Holdings Ltd, listed on the Hong Kong Stock Exchange. Mr Tan is a Board member of the Casino Regulatory Authority of Singapore, a statutory board in Singapore. He is a member of Rules Change Panel of Energy Market Company Pte Ltd and volunteers as an Honorary Executive Director of Trailblazer Foundation Ltd. Academic/Professional Qualifications: • Bachelor of Computer Science (Honours), University of London, United Kingdom Ms Susan Yuen Su Min has over 30 years of working experience in the banking industry. She has served in a number of banking establishments including Maybank and HSBC Malaysia. She was also previously attached to the National Bank of Abu Dhabi Malaysia Berhad (NBAD) where she was the Regional CEO Asia and Country CEO Malaysia from 2014 to 2018. Prior to joining NBAD, she served as CEO of ANZ Banking Group in Hong Kong from 2009 to 2014. Ms Susan Yuen serves as an Independent Director on the Board of Chubb Insurance Malaysia Berhad.
73. 2019 Annual Report MAZIDAH BINTI ABDUL MALIK DATIN OOI SWEE LIAN Independent Non-Executive Director of Alliance Investment Bank Berhad Member of Group Risk Management Committee Independent Non-Executive Director of Alliance Investment Bank Berhad 60 | Malaysian | Female 58 | Malaysian | Female Date of Appointment to the Board of Alliance Investment Bank Berhad: 18 January 2016 Date of Appointment to the Board of Alliance Investment Bank Berhad: 1 November 2018 Academic/Professional Qualifications: • Bachelor in Business Administration, Ohio University, USA • Master of Law Executive (Banking Law), International Islamic University, Malaysia • Certificate in Islamic Financial Planning, Islamic Banking and Finance Institute, Malaysia Puan Mazidah Binti Abdul Malik served for more than 30 years with Bank Negara Malaysia, with stints at the Representative Office in New York and London, Labuan Offshore Financial Services Authority and the International Centre for Education in Islamic Finance. She has experience in money market and investment operations, as well as exposure on issues relating to macroeconomic policy, risk management, communications and international relations. Puan Mazidah serves on the Boards of Prudential BSN Takaful Berhad, Bursa Malaysia Securities Berhad and Bursa Malaysia Securities Clearing Sdn Bhd. 71 Academic/Professional Qualifications: • Bachelor of Economics (Honours) in Business Administration, University of Malaya Datin Ooi Swee Lian has over 30 years of working experience in the banking industry including seven years overseas. She began her banking career in the Lending Division of Malayan Banking Berhad in 1983. In 1986, she went abroad and furthered her banking exposure with Llyods Bank, Hong Kong and Indover Asia Limited, Hong Kong. Datin Ooi joined RHB Bank Berhad in 1994 and has held various senior positions in commercial/corporate and transaction banking. She was appointed as the Executive Vice President and Head of Group Business Banking and Transaction Banking in 2014, and held the position till December 2017.
74. 72 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Leadership - Board of Directors TUAN HAJI MD ALI BIN MD SARIF TUAN HAJI IBRAHIM BIN HASSAN Independent Non-Executive Director of Alliance Islamic Bank Berhad Member of Shariah Committee Independent Non-Executive Director of Alliance Islamic Bank Berhad Member of Group Risk Management Committee 65 | Malaysian | Male 63 | Malaysian | Male Date of Appointment to the Board of Alliance Islamic Bank Berhad: 23 March 2011 Date of Appointment to the Board of Alliance Islamic Bank Berhad: 1 September 2016 Academic/Professional Qualifications: • Bachelor of Economics, University of Malaya • Master of Business Administration in Finance, Universiti Kebangsaan Malaysia (UKM) • Diploma in Islamic Studies, UKM • Post-Graduate Diploma in Islamic Law, UKM Academic/Professional Qualifications: • Bachelor of Economics (Hons), University of Malaya Tuan Haji Md Ali Bin Md Sarif was with the Maybank Group from 1976, holding various senior positions until his retirement in 2008 as Head of Planning, Maybank Islamic Berhad. He has extensive experience in the areas of Islamic banking, corporate planning, asset and liability management, as well as banking operations. He began his illustrious career in the banking industry in the dealing rooms of three Maybank International Offices in Hong Kong, New York, and London for more than 10 years. Upon returning to Malaysia, he was instrumental in strengthening the treasury operations of the Maybank Group. He was subsequently appointed as the Chief Executive Officer of Maybank Discount from 1996 to 1998. Thereafter, he became the head of the market risk division where he developed the market risk management policies and model for the Maybank Group. Tuan Haji Md Ali was a Distinguished Academic Fellow of the Institute of Islamic Banking and Finance (IIBF) at International Islamic University Malaysia from 2008 to 2014. Tuan Haji Ibrahim Bin Hassan has over 30 years of banking experience. He was the Managing Director/Chief Executive Officer of RHB Islamic Bank Berhad from 2 September 2013 to 1 August 2016. Tuan Haji Ibrahim was promoted as Head of International Banking in 2001 to oversee the operations of Maybank’s international branches and subsidiaries in 14 countries. In 2007, he was reassigned to lead a team to de-merge the operations of Maybank’s Islamic window operations into a separate full-fledged Islamic banking subsidiary of Maybank Group. He was appointed as Chief Executive Officer of Maybank Islamic when it began operations in January 2008. He was the president director of Maybank Syariah Indonesia, previously known as Maybank Indocorp, which commenced operations in October 2010. Tuan Haji Ibrahim serves on the Board of Bank Pertanian Malaysia Berhad.
75. 2019 Annual Report 73 ADDITIONAL INFORMATION OF DIRECTORS OF ALLIANCE BANK (i) Directors’ Interest in the shares of the Bank as at 31 March 2019 Save as disclosed below, none of the other Directors have any interest in the shares of the Bank as at 31 March 2019: No. of Alliance Bank shares Name Ho Hon Cheong DATO’ AHMAD HISHAM BIN KAMARUDDIN Dato’ Ahmad Hisham Bin Kamaruddin was the founding and senior partner of Messrs Hisham & Associates. His career spans over 36 years in various areas of law including banking law, commercial agreements, corporate law and extensive experience in corporate banking and finance, loan and securities documentations as well as corporate matters. He focuses on complex joint-venture agreements between Malaysian entities and foreign investors. His other areas of expertise include cross-border estate planning, intellectual property and aviation law. Dato’ Ahmad Hisham previously served as Tribunal President for the Consumer Court in Malaysia, Council Member of the Malaysia Competition Commission and Council Member of the Malaysian Heritage Council. He is a duly registered Trademark and Industrial Design Agent with the Ministry of Domestic Trade, Co-Operatives and Consumerism and is a Notary Public. - - Indirect 1,000^ % * (ii) Family relationship None of the Directors have any family relationship with other Directors and/or major shareholders of the Bank. 62 | Malaysian | Male Academic/Professional Qualifications: • Bachelor of Laws (LLB), University of Malaya % Notes: * Negligible ^ Indirect interest in the Bank’s shares by virtue of Section 59(11) (c) of the Companies Act 2016 Independent Non-Executive Director of Alliance Islamic Bank Berhad Date of Appointment to the Board of Alliance Islamic Bank Berhad: 15 February 2019 Direct (iii) Conflict of interests None of the Directors have any personal pecuniary interests which are in conflict with the Bank or its subsidiaries. (iv) List of convictions for offences and public sanction or penalty None of the Directors have been convicted of any offences within the past 5 years (other than traffic offences) nor have they been imposed any public sanction or penalty by the relevant regulatory bodies during the FY2019.
76. 74 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Leadership - Senior Management 1 JOEL KORNREICH 2 KONG KIM YIHE 3 MANUEL BULENS Group Chief Executive Officer Non-Independent Executive Director of Alliance Islamic Bank Berhad (AIS) Group Chief Operating Officer Head, Group Consumer Banking – Retail Banking 53 | Belgian | Male 55 | Malaysian | Male 41 | Belgian | Male Joined: 1 January 2015 Joined: 23 March 2016 Joined: 1 December 2015 Appointment to Current Positions: 1 January 2015 (Group Chief Executive Officer) 10 October 2017 (Director of AIS) Appointment to Current Position: 23 March 2016 Appointment to Current Position: 1 November 2018 Academic/Professional Qualifications: • Masters of Science in Business Engineering, magna cum laude, Solvay Business School, Brussels, Belgium Academic/Professional Qualifications: • Master of Business Administration, National University of Singapore • Fellow, Life Management Institute, USA Academic/Professional Qualifications: • Degree in Commercial and Finance Science, Institute Catholique Des Hautes Etudes Commerciales (ICHEC), Belgium Mr Kornreich has over 28 years of experience in the financial services industry. Before joining Alliance Bank, he spent 20 years with Citigroup in various roles around the world. His last position with Citigroup was as Country Business Manager of Citibank Global Consumer Group, South Korea. Previously, he had served as the Chief Executive Officer for Spain, Belgium and Greece, and managed Citigroup’s Consumer Banking businesses in Indonesia and Russia. Prior to this, Mr Kornreich was Citigroup’s Marketing Director, and Head of Mortgages and Liabilities for Asia Pacific, as well as Retail Banking Head for Singapore. Earlier in his career, he was with ABN AMRO Bank’s Consumer Banking business as Head of Sales and Distribution for Asia, and Consumer Banking business manager for Indonesia and Hong Kong. Mr Kong has more than 30 years of experience in technology-related operations in the financial services industry. He previously served with CIMB Bank and Phileo Allied Bank. He has also worked in non-financial services sectors with a global IT company and a multinational insurance company. Prior to joining Alliance Bank, Mr Kong was the Group Chief Technology Officer of The Edge Media Group. Mr Bulens was previously the Relief Officer, Group Consumer Banking. He had initially joined Alliance Bank as Group Chief Administrative Officer. Presently, he is leading the strategic execution of Retail Banking and the strengthening of branch banking processes, controls, governance, and customer experience. Mr Bulens has more than 17 years of experience in the financial services industry, including financial consulting and banking. He began his career as an auditor at one of the big four consulting firms before moving to a Regional Audit function with Citibank, Brussels. His experience at Citibank covers audit, risk, internal controls, compliance and general governance. His international experience covers posts in Belgium, Russia, Spain and Korea, where he last served as Consumer Chief Administrative Officer. In his role as Group Chief Executive Officer, Mr Kornreich’s key responsibilities are to develop the strategic direction of the Banking group, and ensure that the Bank’s strategies and corporate policies are effectively implemented. He also ensures that the Board’s directions are implemented, and together with the Board, promote a sound corporate culture which reinforces ethical, prudent and professional behaviour. In his function as Group Chief Operating Officer, Mr Kong oversees areas related to banking operations and information technology. As Head of Retail Banking, Mr Bulens oversees Branch Distribution, Wealth Management, Retail Broking and Liabilities. His responsibilities include ensuring a high performance branch distribution network with sustainable wealth, bancassurance, retail broking and deposits sales via excellent customer service. In leading the strategic execution of Retail Banking, he is strengthening branch banking processes, controls, governance and customer experience.
77. 2019 Annual Report 4 ERNEST KWONG KAH WAH 5 JEFF THAM KOK KUEN 6 75 TAN ENG KIANG Head , Group SME Banking Head, Group Corporate, Commercial and Transactions Head, Group Financial Markets 45 | Malaysian | Male 50 | Malaysian | Male 55 | Malaysian | Male Joined: 10 November 2006 Joined: 6 July 2015 Joined: 14 July 2014 Appointment to Current Position: 12 November 2016 Appointment to Current Position: 6 July 2015 Appointment to Current Position: 25 November 2014 Academic/Professional Qualifications: • Bachelor of Business Administration (Hons) majoring in Finance, University Utara Malaysia Academic/Professional Qualifications: • Bachelor’s Degree in Business (Distinction), Curtin University of Technology, Australia Academic/Professional Qualifications: • Associate Member, Chartered Institute of Management Accountants, UK Mr Kwong joined Alliance Bank as Head of Remedial Management before moving on to several other roles within the business banking segment. He has over 22 years of experience in the SME and Commercial segments at both local and international financial institutions. Prior to his current appointment, Mr Kwong was the Head of Commercial Banking. Mr Tham has over 25 years of experience in the financial services industry. He was previously attached to HSBC Malaysia and UOB Malaysia. His previous experience covered various roles encompassing commercial and corporate banking, credit underwriting, trade services and business management. He was instrumental in revamping the Bank’s financial programmes, where he led a team to assess the viability and relevance of SME programmes at every business life stage. He has also worked in credit, recovery and sales roles. As Head of Group SME Banking, Mr Kwong oversees all SME Banking operations. As Head of Group Corporate, Commercial and Transactions, Mr Tham is responsible for driving growth in the balance sheet and revenues of the Group Corporate, Commercial and Transactions division. He also leads the Trade Finance and Digital BizSmart initiatives that will be introduced in the near future. Mr Tan initially joined Alliance Bank as Deputy Head, Financial Markets. He brings with him more than 25 years of experience in financial markets. He has worked in several large banking groups and regional banks in various capacities including treasury operations, sales, trading, funding, and liquidity management. In his role as Head of Group Financial Markets, Mr Tan oversees four core financial market activities namely funding/liquidity management and investment, trading, clientfacing sales activities, and asset/liability management for the Bank.
78. 76 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Leadership - Senior Management 7 MAHESH S/O SHRI PRANLAL RUPAWALLA 8 RIZAL IL-EHZAN FADIL AZIM 9 FOZIAKHATOON BINTI AMANULLA KHAN Chief Executive Officer, Alliance Investment Bank Berhad Chief Executive Officer, Alliance Islamic Bank Berhad Chief Business Development Officer 58 | Singaporean | Male 47 | Malaysian | Male 50 | Malaysian | Female Joined: 21 April 2014 Joined: 12 November 2012 Joined: 24 September 2012 Appointment to Current Position: 21 April 2014 Appointment to Current Position: 1 August 2017 Appointment to Current Position: 1 August 2017 Academic/Professional Qualifications: • Bachelor of Business Administration, National University of Singapore • Master of Finance, Royal Melbourne Institute of Technology, Australia • Chartered Banker, Asian Institute of Chartered Bankers (AICB) Academic/Professional Qualifications: • Bachelor of Science (Hons), University of Warwick, UK Academic/Professional Qualifications: • Degree in Accounting and Finance from Humberside University in Hull, UK • Chartered Banker, Asian Institute of Chartered Bankers (AICB) Mr Rupawalla has more than 27 years of experience in the financial services industry. He began his career with the Monetary Authority of Singapore (MAS) and held the position of Assistant Director, Securities Industry Department when he left nine years later. He subsequently spent the next 11 years of his career with DBS Bank Ltd., Singapore, rising to the position of Regional Managing Director, Mergers and Acquisitions Advisory. Thereafter, he established a consultancy firm offering corporate finance, acquisition and fund raising advisory to clients in South East Asia. Prior to joining Alliance Investment Bank Berhad, he was the Chief Executive Officer of HwangDBS Investment Bank for three years. As Chief Executive Officer of Alliance Investment Bank Berhad, Mr Rupawalla is responsible for establishing the investment bank’s business direction and priorities. This includes driving the execution of business and operational strategies, with effective control functions to achieve financial and corporate objectives. Prior to his current role as Chief Executive Officer of Alliance Islamic Bank Berhad (AIS), En Rizal was the Deputy Chief Executive Officer and Senior Vice President, Strategy and Business Performance of AIS. He has over 24 years of experience in business advisory, banking and finance, including Islamic Banking. Before joining AIS, he served at Hong Leong Islamic Bank, EONCAP Islamic Bank, The Boston Consulting Group and Bank Negara Malaysia. As Chief Executive Officer of AIS, he is responsible to provide leadership to drive a steady, sustainable and profitable growth in Islamic Banking business for the Group, while exploring new business opportunities under the Islamic Financial Services Act 2013 with appropriate risk management framework emplaced. Puan Foziakhatoon initially joined Alliance Bank as the Chief Executive Officer of its subsidiary, Alliance Islamic Bank Berhad (AIS), before being appointed to her current position. She sits on the Board of AllianceDBS Research Sdn Bhd. She is also a Grand Council member for the Chartered Institute of Islamic Finance Professionals (CIIF). She has over 24 years of experience in the banking industry, covering Corporate and Investment Banking, and Commercial and Islamic Banking. Prior to joining Alliance Bank and AIS, she was the Chief Executive Officer and Executive Director of another local Islamic bank. As Chief Business Development Officer, she plays a crucial role in the Bank’s Transformation strategy. This entails overseeing the development of new business relationships through strategic partnerships to enable the Bank to venture into an e-commerce point of sale platform. As part of her responsibilities, she addresses the needs of the Bank’s customers on a holistic basis, by leveraging on digital technologies.
79. 2019 Annual Report 10 RAYMOND WONG LAI LOONG 11 DR AARON SUM WEI WERN 12 PETER FONG SEOW LOONG Group Chief Financial Officer Head , Group Strategy and Performance Management Group Chief Credit Officer 58 | Malaysian | Male 41 | Malaysian | Male 52 | Malaysian | Male Joined: 1 December 2015 Joined: 6 December 2010 Joined: 10 February 2014 Appointment to Current Position: 1 December 2015 Appointment to Current Position: 1 April 2015 Appointment to Current Position: 1 October 2014 Academic/Professional Qualifications: • Fellow Member, Chartered Institute of Management Accountants • Fellow Member, Chartered Global Management Accountants • Certified Member, Financial Planning Association of Malaysia Academic/Professional Qualifications: • PhD in Engineering, University of Nottingham, UK • Bachelor of Engineering, University of Manchester, UK Academic/Professional Qualifications: • Bachelor’s Degree in Economics, University of Leicester, UK Mr Wong has more than 30 years of experience in the banking industry. His previous experience includes roles as Chief Financial Officer, Financial Controller, and other positions in Credit Portfolio Review and Asset Liability Management at two leading global and regional banks in Malaysia. Prior to joining Alliance Bank, he was the Chief Financial Officer of Standard Chartered Bank Malaysia. His primary responsibilities as Group Chief Financial Officer are overseeing, managing and optimising the Bank’s financial resources. This includes financial planning, forecasting and budgeting, management of financial liquidity and capital risks, record-keeping, as well as ensuring integrity in the Bank’s financial and regulatory reporting. Dr Sum has more than 19 years of combined management consulting, research and industry experience. His key expertise is in business strategy, operating model design, customer experience transformation and process optimisation. In his current role as Head of Group Strategy and Performance Management, Dr Sum is responsible for strategic planning, business performance management, decision management (business analytics) and market insights (research). He also oversees the execution of the Bank’s key strategic initiatives. 77 Mr Fong first joined Alliance Bank as Head, Group Corporate Credit. He has over 28 years of experience in the local and regional banking industry. He began his career with HSBC Bank where he was involved in various banking functions including corporate risk, recovery, credit assessment, corporate policy and portfolio management. His stint at HSBC included two years at HSBC Hong Kong as Senior Manager, Asia Pacific Risk. Prior to joining Alliance Bank, Mr Fong was the Head of Wholesale Credit for a local financial institution, where he was responsible for its corporate, commercial and SME credit evaluation activities. As Group Chief Credit Officer, Mr Fong oversees the areas of credit risk and approval. He is also responsible for early warning, remedial, collections and special assets for the Bank.
80. 78 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Leadership - Senior Management 13 PANG CHOON HAN 14 GIUSEPPE TAIBI 15 CHEW SIEW SUAN Group Chief Risk Officer Group Chief Marketing and Customer Experience Officer Head, Group Human Resource 54 | Malaysian | Male 56 | Italian | Male 60 | Malaysian | Female Joined: 1 November 2006 Joined: 15 August 2016 Joined: 3 October 2011 Appointment to Current Position: 27 October 2010 Appointment to Current Position: 15 August 2016 Appointment to Current Position: 3 October 2011 Academic/Professional Qualifications: • Associate Member, Chartered Institute of Management Accountants, UK • Chartered Banker, Asian Institute of Chartered Bankers (AICB) • Chartered Banker, Chartered Banker Institute (UK) Academic/Professional Qualifications: • Master of Science in Business Engineering, IAG, Louvain-La-Neuve, Belgium Academic/Professional Qualifications: • Bachelor of Economics, University of Malaya Mr Pang first joined Alliance Bank as Head of Group Market Risk. He has more than 28 years of experience in the banking industry. He began his career with Resorts World Berhad, before joining Malayan Banking Berhad. Mr Pang started off in internal audit, before switching to risk management. His previous responsibilities include reviewing controls across head office business and support functions, overseas branches and banking subsidiaries, establishing risk frameworks, policies and limits, supplementing supervisory controls, and monitoring risk exposure. In his current role as Group Chief Risk Officer, Mr Pang is responsible for overall Group risk monitoring and management. This covers the commercial bank, investment bank and Islamic bank. His areas of responsibility includes credit, operation, market and liquidity risk functions. Mr Taibi has over 28 years of international banking experience. He has worked in nine countries within various sectors including marketing, customer experience, digital banking, decision management, business and sales, as well as technology, compliance and control. Prior to his appointment at Alliance Bank, Mr Taibi was the Customer Franchise Head at Citibank Thailand, where he developed and implemented a customerfocused strategy to align customer promise with actual delivery. As Group Chief Marketing and Customer Experience Officer, Mr Taibi oversees all marketing and communications activities. These span areas such as branding, public relations, online media, and corporate responsibility and event management. He is also in charge of customer experience and contact centre activities. Ms Chew has over 32 years of experience in the areas of Human Resource (HR) Management and Development. She began her career in a manufacturing company with local and overseas outfits. She later joined Hong Leong Bank Berhad as Head of Human Resource where she managed the entire HR functions for the banking and finance entities. Prior to joining Alliance Bank, she spent over 10 years with PricewaterhouseCoopers (PwC) where she last held the position of Executive Director for Human Capital, covering Regional Human Capital functions for Malaysia, Vietnam and Cambodia. As Head of Group Human Resource, Ms Chew partners with business leaders and division heads to embed the Group’s key behaviours. She develops initiatives and action plans to build the Bank’s employees’ capabilities and strengths. Additionally, she ensures a strong pipeline of talents for succession planning. In order to meet the Bank’s business needs, Ms Chew oversees an effective resourcing and selection process, as well as the execution of a robust performance management system.
81. 2019 Annual Report 16 LEONG SOW YOKE 17 JAMES TEH CHYE SEONG 18 79 LEE WEI YEN Group Chief Internal Auditor Group Chief Compliance Officer Group Company Secretary 58 | Malaysian | Female 40 | Malaysian | Male 54 | Malaysian | Male Joined: 8 December 2010 Joined: 1 November 2018 Joined: 1 April 2004 Appointment to Current Position: 8 December 2010 Appointment to Current Position: 1 February 2019 Appointment to Current Position: 1 December 2004 Academic/Professional Qualifications: • Chartered Accountant (CA) • Fellow of the Association of Chartered Certified Accountants (FCCA) • Certified Information Systems Auditor (CISA) • Certified in Risk and Information Systems Control (CRISC) • Chartered Banker, Asian Institute of Chartered Bankers (AICB) • Chartered Banker, Chartered Banker Institute (UK) Academic/Professional Qualifications: • Bachelor of Jurisprudence (Hons), University of Malaya Academic/Professional Qualifications: • Master of Business Administration in Finance, University Putra Malaysia • Master of Advanced Business Practice, University of South Australia • Associate Member, Malaysian Institute of Chartered Secretaries and Administrators Ms Leong has more than 31 years of external and internal audit experience that includes both general and information systems audits. She was an auditor with an audit firm and a large conglomerate before joining the banking sector. Prior to joining Alliance Bank, she was the Head of Internal Audit at UOB Malaysia Berhad. As Group Chief Internal Auditor, Ms Leong is responsible for the internal audit function of the Group. She reports functionally to the Group Audit Committee and administratively to the Group Chief Executive Officer. In her role, Ms Leong leads the Group Internal Audit (GIA) to provide independent, objective assurance and consulting services designed to add value and improve the operations of the Group. GIA’s mission is to enhance and protect organisational value by providing risk-based and objective assurance, advice and insight. Mr Teh initially joined Alliance Bank as the Head of Business Compliance and Control for Group Consumer Banking, where he managed the overall business compliance, risk and control, business efficiency and sales surveillance functions. His experience over the past 15 years include various compliance and supervisory roles at several financial institutions and at a regulatory organisation. He was also attached to a locally based foreign bank, where he was responsible for the development and implementation of the overall compliance strategy and framework including policies, process, programmes, tools and controls. In his capacity as Group Chief Compliance Officer, Mr Teh leads the Group Compliance function. He is responsible for the identification, assessment, monitoring and reporting of compliance risk across the Group. With over 26 years of experience in the corporate secretarial function, Mr Lee has a strong background in corporate actions of public listed companies and a wide exposure in the management and financial services industry. Mr Lee’s responsibilities as Group Company Secretary encompass providing counsel to the Boards of Directors (Boards) and Board Committees (Committees) on governance matters and ensures that the Group is fully compliant with the required corporate disclosure requirements, and that all decisions by the Boards adhere to applicable rules and regulations. He facilitates the annual Board performance assessment for Board effectiveness and effective flow of information between the Boards and Senior Management. Mr Lee ensures that Board procedures are followed, to support the effective function of the Boards. In his role, he organises and facilitates the induction of new Directors, and maintains a schedule for the continuous training and development of Directors.
82. 80 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Leadership - Senior Management Notes: None of our Senior Management Team has: • Any family relationship with any Directors and/or major shareholders of the Bank • Any personal pecuniary interests which are in conflict with the Bank or its subsidiaries • Any conviction of any offences within the past five years (other than traffic offences) as at 31 March 2019 • Any public sanction or penalty imposed upon him/her by the relevant regulatory bodies during the FY2019 Save as disclosed below, none of the other Senior Management has any interest in the shares of the Bank as at 31 March 2019: No. of Alliance Bank shares held as at 1 April 2018 Name No. of Alliance Bank shares held as at 31 March 2019 Direct % Indirect % Direct % Indirect % Aaron Sum Wei Wern 146,200 0.01 - - 146,200 0.01 - - Chew Siew Suan 197,900 0.01 - - 197,900 0.01 - - Ernest Kwong Kah Wah 122,300 0.01 - - 122,300 0.01 - - 92,400 0.01 - - 92,400 0.01 - - Lee Wei Yen 219,800 0.01 - - 219,800 0.01 - - Leong Sow Yoke 303,500 0.02 - - 303,500 0.02 - - 56,400 * - - 56,400 * - - 501,200 0.03 - - 501,200 0.03 - - Peter Fong Seow Loong 69,500 * - - 69,500 * - - Rizal IL-Ehzan Fadil Azim 47,500 * - - 47,500 * - - Tan Eng Kiang 79,600 0.01 - - 79,600 0.01 - - Foziakhatoon Binti Amanulla Khan Mahesh S/O Shri Pranlal Rupawalla Pang Choon Han Note: *Negligible
83. 2019 Annual Report 81 Effectiveness Board Size , Composition, Tenure and Independence The Board has 10 members, comprising entirely of Non-Executive Directors, eight of whom are Independent Directors. The current Board comprises of individuals of high calibre with diverse experience which collectively has the necessary skills, experience and qualifications to effectively manage the Bank and to discharge the responsibilities of the Board. The diversity of business backgrounds in the composition of the Board ensures good use of their different and wide-ranging skills, regional as well as industry experience and other attributes of the Directors. The Board considers a strong element of independence on the Board vital for good corporate governance. Independent Directors of the Bank exercise independent judgement and participated in the deliberations of the Board objectively with no individual or small group of individuals dominating the Board’s decision making process. The number of Independent Directors on the Board of the Bank has well exceeded the requirement laid down in BNM CG Policy to have a majority of independent directors at all times and the requirements under MMLR to ensure that at least two (2) directors or one-third of the Board are independent directors. The Board through the Group NRC assess Independent Directors’ independence annually. In the annual assessment of the Independent Directors of the Bank in respect of FY2019, the Board was satisfied that each of the Independent Directors of the Bank continues to be independent and free from any business or other relationship that could interfere with the exercise of independent judgement or the ability to act in the best interest of the Bank, and that each of them continues to fulfil the definition of independence as set out in Paragraph 11.7 of BNM CG Policy. The Board, through the Group NRC, has taken steps to ensure that women candidates are given priority consideration in the selection and recruitment process for directors towards achieving the gender diversity target of 30% women participation. During FY2019, a woman director was appointed to the Board on 15 October 2018. The Board will continue its endeavour to meet the gender diversity target of 30% women participation. New Appointment and Re-Appointment of Director Any proposed appointment of new Directors or proposed re-appointment of Directors to the Board will be assessed by the Group NRC. The Group NRC is guided by the Group Board Succession Plan and the Board Gender Diversity Policy in identifying potential candidates for nomination as Directors. The Group Board Succession Plan entails the guiding principles for effective succession planning as well as the procedure in ensuring a smooth transition in the Board’s succession process as existing Directors leave the Board and new ones come on board. The Group NRC identifies potential candidates for nomination as Directors from various sources such as referrals from existing Directors or officers and Directors Register maintained by FIDE Forum and other leadership development and consulting organisations. The Group Board Succession Plan was last reviewed and updated by the Board in November 2018 to ensure alignment with the strategic direction of the Bank. Assessment Criteria and Process for Board Candidates The Group NRC takes into account the strategic directions of the Group when evaluating candidates to fill any Board vacancy. In assessing candidates for new Board appointment, the Group NRC looks for diversity of skills, knowledge, experience and gender of the candidates. The Bank has adopted a 9-year policy for tenure of Independent Directors and a 12-year policy for tenure of Non-Independent Non-Executive Directors. To ensure a candidate has the character, experience, integrity and competency to effectively discharge his/her role as a Director, the Group NRC will assess the candidates on the following criteria: As at the date of this Statement, none of the Bank’s Independent Directors have served for a cumulative period of more than 9 years. Mr Ou Shian Waei will retire as a Director of the Bank on 1 July 2019 upon expiry of his current term of office after serving the Group for 9 years as an Independent Director. (a) Board Gender Diversity The Board has adopted a Board Gender Diversity Policy in July 2018. The Board Gender Diversity Policy provides that women candidates will be given priority consideration in the selection and recruitment process of identifying suitable board candidates towards achieving the gender diversity target of 30% women participation on the Board. While it is important to promote board gender diversity, the normal selection criteria based on an effective blend of competencies, skills, extensive experience and knowledge to strengthen the Board remain a priority. (b) (c) (d) (e) (f) not be disqualified under section 59(1) of the Financial Services Act, 2013; comply with the fit and proper requirements of the Bank; not have any competing time commitments that impair his/her ability to discharge his/her duties effectively; not be an active politician; not be a partner of a firm which has been appointed as the external auditors of the Bank or any of the firm’s officers directly involved in the engagement until at least two years after – (a) he/ she ceases to be an officer or partner of that firm; or (b) the firm last served as an auditor of the Bank; and preferably at a minimum holds a degree qualification and/or other equivalent qualification(s) and at least 5 years senior managerial position. The Group NRC will, upon its assessment, submit its recommendation to the Board for approval. The final decision on the appointment of a candidate recommended by the Group NRC rests with the whole Board before the application is submitted to BNM for approval.
84. 82 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Effectiveness Board and Committee Meetings The Board meets on a scheduled basis at least eight times a year to review progress reports on the Bank’s business and financial performance, approve budget, strategies, business plans and significant policies as well as to consider business and other proposals which require the Board’s approval. All Directors are informed of these scheduled Board meetings before the start of the financial year. Ad hoc Board meetings may be called to deliberate and assess issues that require the Board’s immediate consideration/decision. Directors are required to attend at least 75% of all the Board/Board Committee meetings during each financial year. The attendance of Directors at a Board/Board Committee meeting, by way other than physical presence, remains the exception rather than the norm and is subject to appropriate safeguards to preserve the confidentiality of deliberation. The Board’s approval for urgent and straight forward matters may be obtained through written resolutions approved via circulation. All Directors are supplied with information on a timely manner. The agenda for each Board/Board Committee meeting, together with detailed reports and proposal papers to be tabled, are circulated to the Directors for their prior reading well in advance of the date of the meeting. The Directors may request to be furnished with additional information for clarification. Relevant Senior Management Officers are invited to attend Board/Board Committee meetings to provide the Board/Board Committees with detailed explanations and clarifications on proposals tabled to enable the Board/Board Committees to make informed decisions. The Group has implemented paperless meetings where board materials are uploaded to a secured board portal for the Directors to download to their tablets or laptops. This initiative has made the process of creating, distributing and reviewing confidential board materials more efficient and secure. It speeds up the process of board pack dissemination and removes the need for hard copy papers. The initiative also enhances the Group’s corporate responsibility in line with environmental initiatives by reducing its paper consumption. In total, the Board met formally 15 times during FY2019. 10 meetings were scheduled meetings while 5 meetings were ad hoc meetings to consider exigency matters. In addition, the Board had 2 offsite meetings on Strategy and Budget respectively during FY2019. All Directors have demonstrated that they are able to allocate sufficient time to the Bank in discharging their duties and responsibilities, and their commitment is affirmed by their attendance at the Board and Board Committees meetings held during FY2019, as reflected below: Alliance Bank Board Attendance Board Committee Group Group EXCO AC RMC Group NRC Directors Designation/Independence Tan Sri Dato’ Ahmad Bin Mohd Don Chairman of the Board Independent Non-Executive Director 15/15 - - - 14/14 Kuah Hun Liang(1) Senior Independent Non-Executive Director 15/15 - 20/21 21/21 - Ou Shian Waei Independent Non-Executive Director 15/15 13/13 - - 14/14 Lee Ah Boon Non-Independent Non-Executive Director 13/15 13/13 - - 14/14 Datuk Wan Azhar Bin Wan Ahmad Independent Non-Executive Director 15/15 13/13 21/21 - 14/14 Lee Boon Huat(2),(3) Independent Non-Executive Director 13/15 12/13 - 20/23 6/6 Ho Hon Cheong Non-Independent Non-Executive Director 15/15 - 21/21 23/23 - Thayaparan S. Sangarapillai(4) Independent Non-Executive Director 15/15 - 21/21 2/2 - Tan Chian Khong Independent Non-Executive Director 15/15 - 20/21 - Susan Yuen Su Min(5) Independent Non-Executive Director 5/5 - - - - Kung Beng Hong(6) Non-Independent Non-Executive Director 9/10 - - 11/11 Tuan Haji Ibrahim Bin Hassan Independent Non-Executive Director of Alliance Islamic Bank Berhad - - - 22/23 - Mazidah Binti Abdul Malik Independent Non-Executive Director of Alliance Investment Bank Berhad - - - 23/23 - 12/12 Notes: (1) Chairman/Member of Group RMC until 31 December 2018. Appointed as Senior Independent Non-Executive Director with effect from 1 April 2019 (2) Re-designated as Chairman of Group RMC with effect from 1 January 2019 (3) Member of Group NRC until 31 July 2018 (4) Appointed as a member of Group RMC with effect from 1 January 2019 (5) Appointed to the Board on 15 October 2018 (6) Retired from the Board with effect from 1 January 2019
85. 2019 Annual Report 83 WHAT THE BOARD DID THIS YEAR Board activities are structured to develop the Group ’s strategy and to enable the Board to provide the necessary oversight and support executive management on the delivery of the Group’s strategy within a transparent governance framework. KEY ACTIVITIES OF THE BOARD DURING FY2019 Strategy - - - - Reviewed and approved the strategic directions and business plans proposed by Management Reviewed and approved the Annual Budget Reviewed and approved the specific financial and nonfinancial objectives proposed by Management Reviewed and approved the Capital Management Plan People - - - - - - Performance - - - - - - Reviewed business and financial performance against targets and objectives Reviewed and approved the quarterly financial results and Annual Audited Financial Statements of Alliance Bank Reviewed the Internal Capital Adequacy and Assessment Process (ICAAP) Reporting and Basel II Pillar 3 Report Reviewed and approved the Group Dividend Proposals Reviewed and approved Group Corporate Scorecard and Group CEO Scorecard Assessment Reviewed and deliberated the results of the annual Board Effectiveness Assessment for the Board as a whole, Board Committees and the contribution of each Individual Director Approved appointment/re-appointment to the Board Received regular updates on recruitment and resignation of Key Management Staff Reviewed and assessed the fitness and propriety of Key Responsible Persons Reviewed and approved the human capital policies and strategies of the Group Reviewed and approved the Group Annual Compensation and the Compensation Review for Group CEO Reviewed remuneration for Non-Executive Directors Governance - - - - - - - - - - Reviewed Monthly Group Compliance Dashboard and Monthly Integrated Risk Dashboard Reviewed and/or approved the Risk Appetite Statement, the Stress Test Results and the Contingency Funding Plan Drill Results Reviewed and approved BNM Composite Risk Rating Action Plans and the reply to BNM Received the quarterly legal updates Reviewed and approved regulatory reporting Reviewed and approved Board governance related proposals including Board Gender Diversity Policy, Board Development Plan, Group Board Succession Plan, revisions to Board Charter and Board Committees’ Terms of Reference, etc Reviewed and recommended the proposed amendments to the Constitution of the Bank for shareholders’ consideration Reviewed and approved the Group Internal Audit Charter Reviewed Internal Audit Reports Reviewed IT Independent Assessment Report
86. 84 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Effectiveness Key activities of Board Committees during FY2019 EXCO During FY2019, the EXCO had carried out the following key activities: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Reviewed/vetoed the new/incremental loans/financing with total group exposure which is within EXCO’s approval limits set by the Board. Approved credit transactions/exposures with connected parties classified under BNM/GP6 Guidelines. Reviewed early warning accounts and restructuring & rescheduling (performing & impaired) accounts. Reviewed recovery/restructuring plans as per limits in the Approval Authorities of Group Special Assets set by the Board. Reviewed and recommended strategies and business plans for the Board’s approval and oversees their implementation. Reviewed the loan loss provisioning under MFRS 9. Approved non-credit expenditures as per limits in the Approval Authorities set by the Board. Reviewed the quarterly updates of Group Information System and Voice of Customers. Reviewed and approved revisions to terms of reference of Group Management Credit Committee. Reviewed and recommended the revisions to terms of reference of EXCO for the Board’s approval. 7. Conducted Exit Interview with Senior Management who tendered their resignation. 8. Assessed and recommended to the Board the performance of the Group CEO. 9. Recommended to the Board the compensation proposals, including Corporate Bonus Pool, Annual Salary Review for employees and Compensation for Group CEO and CEOs of subsidiaries. 10. Approved the proposal on Compensation for the members of Group Management Committee and Other Material Risk Takers, including Deferral Award. 11. Recommended to the Board the Group Corporate Scorecard and Group CEO Scorecard. 12. Assessed and recommended to the Board the performance score of the Group Corporate Scorecard. 13. Reviewed internal policies and procedures in relation to fit and proper assessment and Group Board Succession Plan. 14. Reviewed the Bank’s organisation structure and human capital policies and strategies of the Group including Rewards Framework, Training and Education Sponsorship Scheme, Disciplinary Management Policy and Sales Penalty Framework. Group AC The Group AC’s activities during FY2019 are summarised in the Group AC Report. More information can be found on pages 89 to 90. Group NRC Group RMC The Group NRC had carried out the following key activities during FY2019: 1. 2. 3. 4. 5. 6. Reviewed the Board and Board Committees Composition of the Bank and its principal subsidiaries, including board and board committee size, criteria and skill sets required of Directors, development plan for Directors and gender diversity for the Bank. Recommended the appointment and re-appointment of Directors, Senior Independent Director, Chief Executive Officer and Shariah Committee members to the entity Boards of the Bank and its principal subsidiaries. Reviewed and deliberated the results of the annual Board Effectiveness Assessment for the Board as a whole, Board Committees and the contribution of each Individual Director. Carried out annual Fit and Proper Assessment of Key Responsible Persons and annual review of Directors’ fitness and propriety, including the independence of Independent Directors. Engaged an independent consultant to review the remuneration of Non-Executive Directors and recommended a revised remuneration to the Board. Approved the appointment of Senior Management including extension of employment of Senior Management under fixed term contract. During FY2019, the Group RMC had considered and deliberated on, among others, the following: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Compliance Culture Capital Management Plan Embedded Risk Function Group RMC Future Direction Credit Risk Strategy for the Group Top 5 Risks for the Group Group Compliance Way Forward IT Governance and Management Risk and compliance related frameworks and policies, including BNM Review of Composite Risk Rating, review of Credit Risk Management Framework, EndPoint Security Policy, etc. Regular reports such as Compliance Dashboard, Integrated Risk Management Dashboard, Regulatory Stress Test Result and ICAAP Report for submission to BNM. Compensation, and Annual Fit and Proper Assessment of Group Chief Risk Officer and Group Chief Compliance Officer.
87. 2019 Annual Report 85 BOARD EFFECTIVENESS REVIEW The Board recognises that it continually needs to assess and improve its performance . This is achieved through the Board’s annual performance evaluation, induction of new Board members and ongoing Board development activities. Board Effectiveness Assessment The Board has implemented an annual Board Effectiveness Assessment process, carried out by the Group NRC, to assess the effectiveness of the Board as a whole, the Committees of the Board and the contribution of each individual Director. Step 1: Completion of Comprehensive Questionnaire I. Assessment of the Board by Board Members Each Director evaluates the performance of the Board as a whole by way of a Self-Assessment Questionnaire by Individual Board Members. The assessments are made against the pre-established criteria as follows: A. B. C. D. Board Composition/Structure Board Process Board Governance Major Responsibilities of the Board II. Individual Director Self-Assessment For individual Directors’ assessments, Self-Assessment Forms by Individual Directors are completed individually by every Director. III. Peer Assessment of Individual Directors The performance of each Board Member is also assessed by their fellow Board members based on similar criteria of the Individual Director Self-Assessment. IV. Assessment of the Board Committees Each Member of the Board Committees completes the Self-Assessment Form in respect of the Board Committees in which he/she is a member. The effectiveness of the Board Committees is assessed against the following pre-established criteria: A. B. Committee Governance Accountability and Responsibilities Step 2: Reporting and Discussion with the Group NRC and the Board The results of the annual Board Effectiveness Assessment for the Board as a whole, Board Committees and the contribution of each Individual Director are compiled for deliberation by the Group NRC, respective Board Committees and the Board for improvement, where necessary. For FY2019, the Board was satisfied with the results of the annual Board Effectiveness Assessment and would take the necessary steps to address areas for improvement suggested by the Directors. The Board also periodically engages external consultants to assist in and lend objectivity to the annual board assessment. For FY2018, an external consultant, the Institute of Corporate Directors Malaysia (ICDM) was engaged to undertake the Board Effectiveness Assessment and Individual Director Evaluation for the Bank.
88. 86 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Effectiveness Fit and Proper Assessment The Board, through the Group NRC, assessed the fitness and propriety of the Directors in accordance with the Group’s Policy on Fit and Proper as part of the annual Board Effectiveness Assessment exercise. All Directors are required to complete a Fit & Proper Declaration annually. The Fit & Proper Declarations by the Directors are verified against independent sources. For FY2019, the Board was satisfied that each of the Directors had met the required standard of fitness and propriety. digitisation and Blockchain which are relevant to the financial services industry to enable them to keep abreast with the latest developments in the industry. All Directors are also regularly being updated on new requirements affecting their responsibility and are constantly reminded of their obligations. The Directors have attended various training programmes during FY2019. The list of training programmes attended by the Directors is disclosed under Section B of the Corporate Governance Report, which is available on our website: www.alliancebank.com.my BOARD TRAINING AND DEVELOPMENT REMUNERATION Continuous training is vital for the Directors to gain insight and keep abreast with the development in the industry to further enhance their skills and knowledge in discharging their roles and responsibilities effectively. While the Directors are expected to have personal development skills to improve themselves, they are encouraged to attend a minimum of three days of training programmes relating to the relevant areas within a financial year taking into consideration emerging trends in the financial services industry. In addition, each Board Committee member is encouraged to attend a minimum of two days of training programmes relevant to the respective areas of the Board Committees in each financial year to keep abreast with the latest developments in the industry. The Bank has in place an In-house Directors’ Orientation Programme for newly appointed Directors to familiarise themselves with the Bank’s operations in addition to the regulatory mandatory training programmes such as Bursa Mandatory Accreditation Programme and Financial Institutions Directors’ Education (FIDE) Core Programme. Upon appointment, a new Director will attend an in-house orientation programme within three months of the appointment where he/she will be briefed on the operations and business strategies by the Senior Management to familiarise him/her with the Bank and the Group. Directors also received guidance from the Company Secretary on the Bank’s governance framework and associated policies, as well as their duties as Directors of the Bank. The Directors are provided with the opportunity to attend relevant training programmes on an ongoing basis in areas relating to Islamic banking, corporate governance and compliance, board leaderships, risk management, anti-money laundering, strategic issues and latest development and innovation in the marketplace such as FinTech, Board of Directors The Bank’s Policy on Directors’ remuneration is disclosed under Practice 6.1 of Section A of the Corporate Governance Report, which is available on our website: www.alliancebank.com.my The details of remuneration of each Director of the Bank received/receivable from the Bank and the Group in respect of FY2019 are disclosed on pages 213 to 216 of the 2019 Annual Report. For FY2019, the Board has engaged an independent consultant to carry out a review on the remuneration of the Non-Executive Directors to determine if the Bank’s remuneration for the Non-Executive Directors continues to be in line with the industry taking into consideration the complexities of the Bank’s business and operations. The proposed remuneration of the Non-Executive Directors will be tabled to the shareholders of the Bank for approval at the forthcoming Annual General Meeting to be held on 25 July 2019. Senior Management The Bank’s Group Compensation Policy and employee performance management are disclosed under Section B of the Corporate Governance Report, which is available on our website: www.alliancebank.com.my
89. 2019 Annual Report 87 Audit and Risk Management DIRECTORS ’ RESPONSIBILITIES FOR THE PREPARATION OF THE ANNUAL AUDITED FINANCIAL STATEMENTS Statements explaining the responsibilities of the Directors for the preparation of the Annual Audited Financial Statements for inclusion in the Annual Report can be found on page 106. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK The Board is ultimately responsible for the Bank’s risk management and internal control framework. The Board, which is assisted by the Group RMC and Group AC, confirms that it monitors the Bank’s risk management and internal control systems and carries out a review of their effectiveness, at least annually. The monitoring and review covers all material controls, including financial, operational and compliance controls. Since the Bank is the Group’s largest business and operates in the complex financial services sector, its risk management framework and internal control processes are key to that of the Group. The Board, through the Group RMC, has carried out a robust assessment of the principal risks facing the Bank, including those that would threaten its business model, future performance, solvency and liquidity. Further details of the Bank’s Risk Management Framework and Internal Control System are explained in the Statement on Risk Management and Internal Control and Risk Management Report on pages 96 to 103.
90. 88 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Audit and Risk Management GROUP AUDIT COMMITTEE REPORT COMPOSITION AND TERMS OF REFERENCE CHAIRMAN Thayaparan S. Sangarapillai Independent Non-Executive Director MEMBERS Kuah Hun Liang Independent Non-Executive Director Datuk Wan Azhar Bin Wan Ahmad Independent Non-Executive Director Ho Hon Cheong Non-Independent Non-Executive Director Tan Chian Khong Independent Non-Executive Director The Group AC which comprises four Independent Non-Executive Directors and a Non-Independent Non-Executive Director, is in compliance with Paragraph 15.09(1)(a) and (b) of the MMLR of Bursa Securities which states that the audit committee must be composed of no fewer than 3 members; and that all the audit committee members must be non-executive directors, with a majority of them being independent directors. The Terms of Reference (TOR) of the Group AC which deals with its authority and duties is made available on the Bank’s corporate website at: www.alliancebank.com.my In the annual assessment of the effectiveness of Board Committees for FY2019, the Board was satisfied that the Group AC and its members have discharged their function, duties and responsibilities in accordance with the Group AC’s TOR to provide independent oversight of the Bank’s internal and external audit functions, internal controls and ensuring checks and balances within the Bank. During the FY2019, a total of 21 Group AC meetings were held. 11 were regular meetings scheduled before the start of the financial year while 10 meetings were ad hoc meetings convened to consider exigency matters. The details of attendance of the Group AC members are as follows: Name of Committee Members Attendance Percentage Thayaparan S. Sangarapillai (Chairman) 21/21 100% Kuah Hun Liang 20/21 95% Datuk Wan Azhar Bin Wan Ahmad 21/21 100% Ho Hon Cheong 21/21 100% Tan Chian Khong 20/21 95% The Group AC meetings were also attended by Group Chief Internal Auditor together with the Audit Department Heads while the attendance of other Management staff is by invitation depending on the matters deliberated by the Group AC.
91. 2019 Annual Report 89 SUMMARY OF GROUP AC ’S WORKS • The Group AC is principally responsible to support the Board in ensuring that there is a reliable and transparent financial reporting process within the Bank and its principal subsidiaries. During FY2019, the Group AC in discharging its functions, duties and responsibilities had carried out the following works: Reviewed the non-audit services rendered by the external auditors and their proposed fees taking into consideration the fees threshold established under the Group’s policy to ensure that the external auditors’ independence and objectivity are not compromised. The details of the statutory audit, audit related and non-audit fees paid/payable to the external auditors, PricewaterhouseCoopers PLT for FY2019 and its affiliates are set out below: 1. Financial Reporting • Reviewed and discussed the unaudited quarterly consolidated financial results and the annual audited consolidated financial statements of the Bank and its subsidiaries (the Group) with the Management before recommending the same for approval by the Board. In reviewing the financial reporting of the Group, the Group AC discussed and made enquiries on, among others: (i) changes in or implementation of major accounting policy changes; (ii) significant matters highlighted including financial reporting issues, significant judgements made by Management, significant and unusual events or transactions, and how these matters are addressed; and (iii) compliance with accounting standards and other legal requirements. 2. External Audit • Reviewed the audit plan of the external auditors, which encompassed the detailed terms of the external auditors’ responsibilities and affirmation of their independence as external auditors, audit strategy, the engagement team, risk assessment, areas of audit emphasis for the financial year and additional disclosures in the auditors’ report in line with the new and amended international standards on auditing, including disclosure on Key Audit Matters. • Reviewed with the external auditors, the results of their audit together with their recommendations and Management’s responses as detailed in the following reports: (i) (ii) (iii) • Audit Report in respect of the Group Statutory Audit for Financial Year Ended 31 March 2018; Limited Review Report of the Group for the Half-Year Ended 30 September 2018; and Audit Committee Report for FY2019. Met twice with the external auditors on 23 October 2018 and 24 April 2019 without the presence of Management for open discussions between the Group AC and external auditors on any issues of concern of the external auditors arising from their audits. RM’000 Description Bank Group Statutory audit and audit related services 1,436 2,087 Non-audit related services 1,666 2,432 The total non-audit fees incurred as a percentage of the total statutory audit and other audit related services fees for the Group in respect of FY2019 was 16.5%. • Assessed and satisfied itself with the performance, effectiveness and independence of the external auditors based on the criteria set out in BNM’s Policy Document on External Auditors and recommended to the Board for the reappointment of the external auditors for the next financial year. Among the assessment criteria taken into account by the Group AC were: (i) (ii) Qualification criteria; Level of knowledge, capabilities, experience and quality of previous work; (iii) Level of engagement with the Board and Audit Committee; (iv) Ability to provide constructive observations, implications and recommendations in areas which require improvements; (v) Appropriateness of audit approach and the effectiveness of audit planning; (vi) Ability to perform the audit work within the agreed duration given; (vii)Independence, Objectivity and Professional Scepticism; and (viii) Ability to demonstrate unbiased stance when interpreting the standards/policies adopted by the licensed institutions.
92. 90 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Audit and Risk Management 3. Internal Audit • • • • • 4. Related Party Transactions • • 5. Reviewed with Group Internal Audit the internal audit plan to ensure adequacy of scope, coverage and resources required to perform audits for the identified auditable areas. Met with Group Chief Internal Auditor on 13 April 2018 without the presence of Management for open discussion between the Group AC and Group Chief Internal Auditor on any issues of concern arising from internal audits. Reviewed and assessed the half-yearly and full year performance of Group Chief Internal Auditor. Performed fit and proper assessment of the Group Chief Internal Auditor to ensure that she satisfies the fitness and propriety criteria set out in the Group Policy on Fit and Proper for Key Responsible Persons on a continuous basis. Reviewed and endorsed the appointment of external consultant under co-sourcing arrangement to conduct one audit assignment which is specialised and technical in nature. Reviewed related party transactions entered into by the Bank and its subsidiaries, covering the nature and amount of the transactions so as to ensure that related party transactions are undertaken on an arm’s length basis, on normal commercial terms and on terms that are not more favourable to the related parties than those generally available to the non-related parties. Reviewed audit reports on recurrent related party transactions (RRPTs) on a quarterly basis. The reports covered the aggregate consideration of RRPTs tracked against the limit of thresholds set to ensure proper reporting and disclosures in accordance with the requirements of the Bank’s internal policy and the Main Market Listing Requirements of Bursa Securities. Other Works • • Provided oversight over the preparation and implementation of the Malaysian Financial Reporting Standard 9 (MFRS 9), which is effective for the Group and the Bank for the financial year beginning on 1 April 2018, including the review of the gap analysis and the potential impact to the Group. Reviewed the Audit Committee Report and the Statement on Risk Management and Internal Control for the Board’s approval to be included in the Annual Report. GROUP INTERNAL AUDIT FUNCTION The Group Internal Audit’s (GIA) primary role is to assist the Group AC to discharge its duties and responsibilities by independently reviewing and reporting on the adequacy and effectiveness of the systems of internal controls and the overall control environment. The GIA provides reasonable assurance that the system of internal controls continue to operate satisfactorily and effectively. The audits cover the review of the adequacy of risk management, operational controls, compliance with established procedures, guidelines and statutory requirements, quality of assets, application systems and management efficiency, among others. GIA is headed by Ms Leong Sow Yoke, the Group Chief Internal Auditor (GCIA). She has more than 30 years of external and internal audit experience that includes general and information systems audit. Ms Leong is a Fellow of the Association of Chartered Certified Accountants (FCCA), a Chartered Accountant with the Malaysian Institute of Accountants, a Certified Information Systems Auditor (CISA) and Certified in Risk and Information Systems Control (CRISC). In 2015, Ms Leong was conferred the title “Chartered Banker” by the Asian Institute of Chartered Banker and the Chartered Banker Institute (UK). The GIA function is guided by the Internal Audit Charter, which sets out its purpose, authority, scope, independence and responsibilities. To maintain objectivity and independence, the GCIA is responsible to the Group AC and Board. The appointment, remuneration, performance appraisal, transfer and dismissal of the GCIA are to be decided by the Group AC. GIA personnel do not have any authority or responsibility for the activities they audit. They are required to report to the GCIA any situation in which a conflict of interest or bias is present or may reasonably be inferred. Assignments are allocated so that potential and actual conflicts and bias are avoided. GIA’s processes and activities are governed by policies established by the Group AC and regulatory guidelines as well as the International Standards for the Professional Practices Framework (Standards) issued by the Institute of Internal Auditors (IIA) Malaysia. In line with best practices, GIA adopts a risk-based approach that deploys audit resources to focus on significant risk areas which prioritises the audits to areas that have been assessed as having potentially higher risks. GIA also plays a consultative role in the development of major systems or projects to ensure that the necessary control features are incorporated.
93. 2019 Annual Report 91 GIA works collaboratively with Group Risk Management and evaluates the risk governance framework and the risk management processes that are applied to ensure an acceptable level of risk exposure which is consistent with the risk management policy of the Group . GIA also works with the external auditors to resolve any control issues raised by them to ensure that significant issues are duly acted upon by Management. GIA continues with its initiatives to optimise the use of technology and increase the usage of data analytics tools to achieve audit effectiveness and efficiency. The upskilling of internal auditors through continuous learning and development remains a key focus. This is achieved through structured and formalised training programmes on themed subject matters as well as on the job exposure via intra-department resource pooling programmes, aimed at expanding the breadth of knowledge and experiences of internal auditors as they build depth. GIA continues to host the Guest Auditor Programme where selected line managers and candidates are invited to join as guest auditors for audit assignments. During these short attachments to GIA, guest auditors gain useful insights into the internal audit process and a deeper appreciation of the risks and controls while GIA will benefit from their functional or business unit knowledge. This pooling of talents and experiences allows the sharing of best practices across the Group. As at 31 March 2019, GIA has 35 audit personnel. During FY2019, the GIA function incurred costs amounting to RM9.4 million. The activities undertaken by GIA in FY2019 include: 1. 2. 3. 4. 5. 6. Established the annual audit plan for FY2019, which included key focus areas and manpower requirements, using a risk-based approach and taking into consideration the Group’s business strategic plans, regulatory requirements and Management’s inputs. Revised the audit plan during the half-year review of the plan to take into account changes in business environment, audit priorities and ad hoc requests from regulators. Conducted audits as per the approved audit plan, as well as ad hoc reviews as requested by regulators or Management. Attended meetings of the various management and working committees as a permanent invitee in a consultative capacity to provide independent feedback on internal control and governance aspects; such as Group Operational Risk Management Committee, Executive Risk Management Committee, Group Information Technology Steering Committee, MFRS 9 Project Steering Committee, Product Review Group, Sales Surveillance Committee and Product Operational Readiness Team. Monitored and validated the completion of management action plans to address audit findings, and reported to the Group AC the status of overdue management actions plans. Involved as observers in major functional testing of Business Continuity Plan and Disaster Recovery Plan to provide an independent evaluation of the testing preparation and exercise performance.
94. 92 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Shariah Committee SHARIAH COMMITTEE OF ALLIANCE ISLAMIC BANK BERHAD COMPOSITION AND TERMS OF REFERENCE CHAIRMAN Associate Professor Dr Badruddin Bin Hj Ibrahim MEMBERS Tuan Haji Md Ali Bin Md Sarif The Board of Alliance Islamic Bank Berhad (AIS) has established a Shariah Committee which comprises five members who have the necessary qualifications, knowledge, expertise and experience in Islamic banking industry. Four of the Shariah Committee members have the necessary qualification in Shariah law whilst one member has the qualification in Finance and experience in banking industry. Ustaz Zaharudin Bin Muhammad The primary roles and responsibilities of the Shariah Committee are as follows: Dr Azrul Azlan Bin Iskandar Mirza • • • Ustaz Ahmad Fauwaz Bin Ali @ Fadzil • • • • • • • Advising the Board and Management on Shariah related matters; Reviewing and endorsing Shariah related policies and guidelines; Endorsing new products and services including contract, agreement or other legal documentation used for Islamic banking transactions; Endorsing and validating product guidelines, marketing advertisements, sales illustrations and brochures related to AIS’s products, services and activities; Reviewing the work carried out by Shariah Review and Shariah Audit as the AIS’s second line and third line of defense providing assurance on the state of the Bank’s Shariah governance; Endorsing AIS’s zakat computation and distribution; Assisting and advising related parties such as AIS’s legal counsel, auditor or consultant on Shariah matters upon request; Advising AIS in consultation with the Shariah Advisory Council of BNM (SAC) on any Shariah matters which have not been resolved or endorsed by the SAC; Monitoring AIS’s compliance with all SAC’s decisions; and Reviewing the potential Shariah Non-Compliance events determined by the Qualified Shariah Officer whether or not they are actual Shariah related events. During the FY2019, 9 meetings were held. The attendance of members of the Shariah Committee is as follows: Shariah Committee Members Attendance Percentage Associate Professor Dr Badruddin Bin Hj Ibrahim (Chairman) 9/9 100% Tuan Haji Md Ali Bin Md Sarif 9/9 100% Ustaz Zaharudin Bin Muhammad 9/9 100% Dr Azrul Azlan Bin Iskandar Mirza 9/9 100% Ustaz Ahmad Fauwaz Bin Ali @ Fadzil 9/9 100%
95. 2019 Annual Report 93 ASSOCIATE PROFESSOR DR BADRUDDIN BIN HJ IBRAHIM Chairman of Shariah Committee Associate Professor Dr Badruddin was appointed as a Shariah Committee member of AIS on 15 June 2009 . He currently serves as a lecturer at Ahmad Ibrahim Kulliyah of Law, International Islamic University of Malaysia (IIUM). While he specialises in the Islamic Law of Trust, and Islamic Law of Property, he is also experienced in Islamic Jurisprudence and Islamic Family Law, having taught such subjects in IIUM for over a decade. As an academia, he actively pursues his thirst for knowledge by conducting many research activities under IIUM, his most recent research project being “Transaction Involving Unlawful Wealth Under Islamic Law”. Much of his work has been presented publicly in academic institutions and conferences in Malaysia, the UK, Indonesia and Russia. In recent years, he has channelled his expertise and passion into organising a myriad of Islamic Law-related conferences, conventions, and seminars. He possesses a PhD in Islamic Law of Trust, Islamic Law of Property from IIUM, Malaysia. His Masters and Degree in Shariah and Law were obtained from the International Islamic University of Islamabad, Pakistan. TUAN HAJI MD ALI BIN MD SARIF Member of Shariah Committee Tuan Haji Md Ali was appointed as a Shariah Committee member of AIS on 1 April 2011. He was a Distinguished Academic Fellow of the Institute of Islamic Banking and Finance (IIBF) at International Islamic University Malaysia from 2008 to 2014. Prior to joining IIBF in 2008, he was with Maybank Group from 1976, holding various senior positions until his retirement as Head of Planning, Maybank Islamic Berhad. He has extensive experience in the areas of Islamic Banking, Corporate Planning, Asset & Liability Management as well as Banking Operations. He holds a Bachelor’s Degree in Economics from University Malaya and a Masters of Business Administration (MBA) in Finance from University Kebangsaan Malaysia. Tuan Haji Md Ali is also a member of the AIS Board and serves as a bridge between the Board and the Shariah Committee. The presence of a Director with sound Shariah knowledge would foster greater understanding and appreciation among the Board members on the decisions made by the Shariah Committee. USTAZ ZAHARUDIN BIN MUHAMMAD Member of Shariah Committee Ustaz Zaharudin was appointed as a Shariah Committee member of AIS on 1 April 2009. He is currently the sole proprietor for ASZA-HT Trading Sdn Bhd. He obtained his Masters in Islamic Economy and Jurisprudence from the University of Cairo, Egypt (1st class, graduated in top 10). He has also obtained a Bachelor in Islamic Jurisprudence from the Al-Azhar University Cairo with 1st class among foreign students. Furthermore, he has written several books and articles related to his specialised field of Islamic Jurisprudence. He has since published five more field-related books. His previous working experience was as a researcher at the International Shariah Research Academy and Chief Religious Officer of Kumpulan Perangsang Sdn Bhd. He was also a Shariah Committee member of Prudential BSN Takaful Berhad and HSBC Amanah Takaful (Malaysia) Berhad.
96. 94 Alliance Bank Malaysia Berhad (88103-W) CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d) Shariah Committee DR AZRUL AZLAN BIN ISKANDAR MIRZA Member of Shariah Committee Dr Azrul Azlan was appointed as a member of Shariah Committee of AIS on 1 April 2015. He studied at the Al-Azhar University (Egypt) where he obtained a Bachelor in Shariah. He holds a Masters in Management from the International Islamic University of Malaysia and PhD in Islamic Finance from the International Centre for Islamic Finance. He is currently attached to the Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia as Head of Islamic Banking & Finance Program. His fields of specialisation are Shariah, Islamic finance and investment analysis. He is also a Shariah Committee member of HSBC Amanah Takaful (Malaysia) Berhad, Shariah Adviser of Alliance Investment Bank Islamic Stockbroking Services and a committee member of State Fatwa Council, Negeri Sembilan. Previously he was a Shariah Committee member for KAF Investment Bank Berhad and OSK Investment Berhad. USTAZ AHMAD FAUWAZ BIN ALI @ FADZIL Member of Shariah Committee Ustaz Fauwaz was appointed as a Shariah Committee member of AIS on 1 April 2018. He is currently a Shariah Consultant of Telaga Biru Sdn Bhd. He holds Bachelor of Shariah from Al-Azhar University, Egypt and Master of Shariah from University of Malaya. He also trained in fatwa methodology from Dar al-Ifta al-Misriyyah, Egypt. He was attached with Telaga Biru Sdn Bhd as a Chief Editor of a religious magazine and author of contemporary fiqh books. One of his books entitled Fiqh Wanita (Islamic Jurisprudence for ladies) has won the award for the best fiqh book by Yayasan Pembangunan Buku Negara. Given his forte is fatwa methodology, he has been giving training to Shariah officers at Islamic financial institutions as well as state religious authorities. He also gives talks in local radio and television stations. Ustaz Fauwaz was attached with Kolej University Insaniah, Kedah before his involvement in publication.
97. 2019 Annual Report 95 Relations with Shareholders INVESTOR RELATIONS AND SHAREHOLDERS COMMUNICATION The Bank acknowledges the importance of regular communication with shareholders and investors . The Bank endeavours to maintain constant and effective communication with shareholders through timely and comprehensive announcements. The Board regards the Annual General Meeting (AGM) as an opportunity to communicate directly with shareholders and encourages attendance and participation. The notice of AGM is despatched to shareholders, together with explanatory notes or circulars on items of special business, at least 28 days prior to the meeting date. At the forthcoming 37th AGM to be held on 25 July 2019, other than the proposed amendments to the Constitution of the Bank, no other substantive resolutions or resolutions on related party transactions will be put forth for shareholders’ approval. In line with the MMLR of Bursa Securities, voting at general meetings of the Bank will be conducted by poll with an independent scrutineer appointed to validate the votes cast at the general meetings. channel of communication with shareholders. All correspondence to the Senior Independent Non-Executive Director can be sent via email to sid@alliancefg.com or by mail to the registered office of the Bank at 3rd Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia. Corporate Disclosure The Corporate Disclosure Policies and Procedures (CDPP) provides timely, consistent and fair disclosure of corporate information to enable informed decision making by investors. The objectives of the CDPP are: • • • The Investor Relations team engages the financial community, stakeholders and other key constituencies of the Bank to provide consistent, accurate, transparent and timely information. Briefings for analysts are conducted every quarter in conjunction with the release of the quarterly financial results to facilitate consistent dialogue between the Bank’s Key Senior Management and the investment community. The Bank also participates in one-on-one and group meetings conferences and roadshows to share the latest updates and pertinent information on the Bank’s progress with the investment community. These platforms enable the investment community to express their views on the Bank’s performance and in turn, the Bank had the opportunity to manage investors’ expectations and strengthen their understanding of the Bank. Shareholders, potential investors and members of the public can access the Bank’s corporate website at www.alliancebank.com.my for information on the Bank. There is a dedicated section for corporate governance on the Bank’s corporate website where information such as the Board Charter, Code of Conduct, Annual Reports, Minutes of General Meetings, Constitution and Terms of Reference of the Board Committees are made available to the public. A corporate calendar on material events such as entitlement dates, ex-dividend dates and payment dates for dividend payment; all announcements made by the Bank to Bursa Securities including quarterly results and dividend information; and presentation slides for analyst briefings are also available on the Bank’s corporate website under the Investor Relations section for the benefit of the investing public. The investing public can contact the Head, Investor Relations & Corporate Treasury, Mr Tan Hong Ian at 03-2604 3370 or investor_relations@alliancefg.com, for any investor relations matters. Shareholders may also convey any of their concern and enquiries to the Senior Independent Non-Executive Director, Mr Kuah Hun Liang who serves as the designated contact for any shareholders’ concerns and enquiries that may be raised, as an alternative to the formal raising awareness of Directors, Management and employees on disclosure requirements and practices; providing guidance in disseminating corporate information to, and in dealing with investors, analysts, media representatives and the public; and ensuring compliance with the disclosure obligations under the MMLR of Bursa Securities and other applicable laws. The Group Company Secretary being the Corporate Disclosure Manager (CDM), serves as the primary contact person for all material corporate-related matters referenced in the CDPP. He oversees and co-ordinates the disclosure of material information to Bursa Securities. The CDM also ensures compliance with the CDPP and undertakes reviews of any violations, including assessment and implementation of appropriate consequences and remedial action. The Chairman of the Bank and the Group CEO are the primary authorised spokespersons responsible for communicating Group information to the investing public. These primary authorised spokespersons may, from time to time, designate other officers (designated officers) of the Bank to speak on behalf of the Group or to respond to specific inquiries, where doing so facilitate effective communication with the investing public. The authorised spokespersons and designated officers are regularly reminded of their responsibility to exercise due diligence in making sure that the information to be disseminated to the investing public is accurate, clear, timely and complete, and that due care is observed when responding to analysts, the media and the investing public. KEY FOCUS AREAS AND FUTURE PRIORITIES The Board will continue to improve the Bank’s corporate governance practices and procedures and enhance the corporate disclosures practices towards promoting transparency, business prosperity and corporate accountability with the ultimate objective of realising long term shareholder value while taking into account the interest of other stakeholders. This Corporate Governance Overview Statement was approved by the Board of Directors on 30 May 2019.
98. 96 Alliance Bank Malaysia Berhad (88103-W) STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL RESPONSIBILITY SYSTEM OF INTERNAL CONTROLS The Board acknowledges its overall responsibility for the Group’s system of risk management and internal controls, and for reviewing its adequacy and integrity. The system is designed to manage the Group’s risks within an acceptable risk profile, rather than to totally avoid or eliminate the risks that are inherent to the Group’s activities. It can therefore only provide a reasonable but not absolute assurance of effectiveness against material misstatement of financial/management information; or against financial losses and fraud. The preparation of this statement has been guided by the “Statement on Risk Management and Internal Controls: Guidelines for Directors of Listed Issuers” issued by Industry led Task Force. To ensure that a sound system of controls is in place, the Board has established primary processes in reviewing the adequacy and integrity of the system of internal controls. The primary processes include: The Board regularly receives and reviews reports on internal control; and is of the view that the system of internal controls that has been instituted throughout the Group is sound and adequate to safeguard the shareholders’ investments and the Group’s assets. The Group has instituted an on-going process for identifying, evaluating and managing the significant risks faced by the Group. This process includes updating the system when there are changes to the business environment or regulatory guidelines. The process has been in place during the year under review and up to the date of approval of this statement; and is regularly reviewed by the Board. The role of Management is to implement the Board’s policies, procedures and guidelines on risks and controls, to identify and evaluate the risks faced, and to design, operate and monitor a suitable system of internal controls to manage these risks. The Board has extended the responsibilities of the Group Audit Committee (“GAC”) to include the role of oversight on internal controls on behalf of the Board, including identifying risk areas and communicating critical risk issues to the Board. The GAC is supported by an independent Group Internal Audit function which reports directly to it. The internal auditors have performed their duties with impartiality, competency and due professional care. RISK MANAGEMENT FRAMEWORK The Board, through its Group Risk Management Committee (“GRMC”) provides oversight on risk management strategies, methodologies, policies and guidelines, risk tolerance and other risk related matters of the Group. Approval of risk policies by the Board is obtained where necessitated by regulatory requirements. In addition, the GRMC also oversees the functions of management committees such as the Executive Risk Management Committee, Group Assets and Liabilities Management Committee and Group Operational Risk Management Committee, which assume the responsibility of monitoring specific areas of risks pertaining to the Group’s business activities and implement various risk management policies and procedures. For further information on the Group’s risk management framework, please refer to the Risk Management report on pages 97 to 103 of this Annual Report. Major risks arising from the Group’s day-to-day activities in the financial services industry comprise credit risk, liquidity risk, market risk and operational risk. For more information on the risks and relevant guidelines and policies, please refer to Note 45 under the Financial Statement. • Regular and comprehensive management reports are made available to the Board on a monthly basis, covering financial performance and key business indicators, which allow for effective monitoring of significant variances between actual performance against budgets and plans; • Clearly defined delegation of responsibilities to committees of the Board and to Management including organisation structures and appropriate authority levels; • An operational risk management framework, business continuity management framework, code of conduct, human resource policies and performance reward system to support business objectives, risk management and the system of internal control; • Defined policies and procedures to control applications and the environment of computer information systems; • Regular updates of internal policies and procedures, to adapt to changing risk profiles and address operational deficiencies; • Regular reviews of the Group’s activities to assess the adequacy and effectiveness of the risk management and internal control system; • Documentation and periodic assessment of controls and processes by all business and support units for managing key risks; and • Regular senior management meetings to review, identify, discuss and resolve strategic, operational, financial and key management issues. ASSESSMENT OF RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM The Board, through the GRMC and GAC has assessed the adequacy and effectiveness of the risk management and internal control system. Based on the results of these reviews as well as the assurance it has received from the Group Chief Executive Officer and Group Chief Financial Officer, the Board is of the view that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects. REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS As required by Paragraph 15.23 of the Bursa Malaysia Securities Berhad Main Market Listing Requirements, the external auditors have reviewed this Statement on Risk Management and Internal Control. Their limited assurance review was performed in accordance with Audit and Assurance Practice Guide ("AAPG") 3 issued by the Malaysian Institute of Accountants. AAPG 3 does not require the external auditors to form an opinion on the adequacy and effectiveness of the risk management and internal control systems of the Group.
99. 2019 Annual Report 97 RISK MANAGEMENT The Board and Management of Alliance Bank are committed towards ensuring that the Bank ’s corporate objectives are supported by a sound risk strategy with an effective risk management framework that is appropriate to the nature, scale and complexity of the Bank’s activities. BOARD RESPONSIBILITY The Board is responsible for: a. Reviewing and approving the Bank’s overall risk strategy, including the risk appetite and overseeing its implementation to support the sustainability of the Bank. b. Ensuring that the Bank establishes comprehensive risk management frameworks, policies, processes and infrastructure to manage risks arising from the Bank’s business activities. With these objectives, the Board has established specialized Committees to oversee and review major functional areas and ensure critical issues and relevant matters are appropriately addressed in a timely and strategic manner. While the Board has assigned these duties to these specialized Committees, the Board in the overall remains responsible and accountable for the policies and decisions recommended and approved by the Committees. ROLES AND RESPONSIBILITIES OF THE GROUP RISK MANAGEMENT COMMITTEE (GRMC) The scope of the GRMC focuses on risk-related and compliance-related frameworks, strategies, policies and methodologies. In line with the above scope, the GRMC is responsible for overseeing the risk management and compliance related subjects, as follows: a. Reviewing risk management strategies, policies and risk tolerance and ensure these are in alignment and compliance of regulations and requirements from Bank Negara Malaysia, and all other relevant authorities. b. Reviewing and assessing the adequacy of risk management framework, policies and controls, including Information Technology (IT) risk management matters, with regard to identifying, measuring, evaluating, monitoring, controlling and reporting on the extent to which these are operating effectively, prudently and in compliance with regulatory guidelines. c. Ensuring that appropriate infrastructure, resources and systems are in place for risk management and compliance functions; and ensuring that the staff responsible for implementing risk management and compliance systems perform those duties independently of the Bank’s risk-taking activities. d. Reviewing periodic reports on risk exposures, risk portfolio composition and risk management activities to ensure that these risk reports facilitate understanding; and determination of appropriate risk responses. e. Ensuring that the effectiveness of the Bank’s overall management of compliance risk is evaluated at least annually, and that adequate time and priority is provided in the agenda to deliberate compliance issues, to ensure that such issues are resolved effectively and expeditiously. f. Supporting the Board in meeting regulatory expectations on risk management, as set out under BNM’s policy document on Risk Governance and on Compliance. g. Assisting in the implementation of a sound remuneration framework that promotes a culture of prudent risk-taking while deterring inappropriate or excessive risk-taking within the Bank. MANAGEMENT RESPONSIBILITY Key responsibilities of the management are as follows: a. b. c. d. Formulating and implementing risk framework, risk strategy, risk appetite and risk management policies. Ensuring that business operation is aligned with the Bank’s strategies and risk strategy. Ensuring that all relevant material risks and emerging risks are adequately identified, assessed and subsequently reported to the Board. Ensuring that the Executive Risk Management Committee (ERMC) oversees and advises the Management on the risk-related matters, to support the sustainability of the Bank.
100. 98 Alliance Bank Malaysia Berhad (88103-W) RISK MANAGEMENT (Cont’d) RISK MANAGEMENT FRAMEWORK An efficient risk management framework is a perquisite to establishing stakeholders’ confidence in the Bank. The Bank’s Risk Management Framework is embedded in our respective business activities in order to integrate risk-taking and decision-making with risk management. It provides a structured approach for the Bank to form a consolidated and aggregated view of all risks identified at entity, business segment and product levels; and to manage these risks in a holistic manner alongside business objectives and compliance requirements. The Bank’s Risk Management Framework is comprised of the following elements: Risk Governance and Organisation Risk Management Techniques RISK MANAGEMENT FRAMEWORK Risk and Compliance Culture Risk Strategy and Risk Appetite Risk Management Process Risk Governance and Organisation The Bank adopts the model of Three Lines of Defence in managing risks collectively based on their respective role as reflected below: 1st Line of Defence Risk-Taking Business units are the primary owners of the risk, responsible for managing risks within the Bank’s business activities, aided by Business Support functions. 2nd Line of Defence Risk Control The risk control functions are represented by three independent Risk Control Units, i.e. Group Risk Management, Group Compliance and the Shariah Review Team. Group Risk Management is responsible for formulating, implementing and reviewing Risk Management frameworks, as well as recommending risk policies, risk appetite parameters, risk methodologies and risk control measures. Group Compliance is responsible for ensuring the Bank’s compliance to applicable laws and regulations; and to minimize the risk of regulatory non-compliance. Shariah Review Team is responsible for ensuring Bank’s compliance to Shariah laws and rulings, and to minimize the risk of Shariah non-compliance. 3rd Line of Defence Risk Assurance Group Internal Audit is responsible for conducting independent assessment and providing assurance on the adequacy and effectiveness of the Bank’s internal controls related to processes, risks and governance functions.
101. 2019 Annual Report 99 Governance Structure Everyone plays a crucial risk management role in the Bank . The chart below illustrates the governance structure and committees responsible for effective governance and supervision over risk-related functions. BOARDS ABMB Board AISB Board AIBB Board BOARD-LEVEL COMMITTEES Executive Committee Shariah Committee Group Risk Management Committee Group Audit Committee MANAGEMENT-LEVEL CIMMITTEES Group Management Committee Group Management Credit Committee Legal & Compliance Committee Executive Risk Management Committee Credit Portfolio Review Committees Management Group IT Steering Committee Group Operational Risk Management Committee Group Asset & Liability Management Committee The Bank places high priority on the risk management across our three banking entities. The Board is assisted by the GRMC, to provide oversight on compliance and risk management policies, limits and parameters; as well as to ensure adequate infrastructure are in place for effective compliance and risk management. The Board-level GRMC is assisted by the Management-level Executive Risk Management Committee (ERMC). The ERMC represents the central conduit for several other Management-level risk committees, as depicted above. Risk Strategy The Bank establishes appropriate risk governance, processes and controls in order to pursue its strategic business objectives with confidence, to protect its Balance Sheet and stakeholders’ interest; and to deliver sustainable profitability. While it may not be possible or feasible to eliminate all inherent risks within the Bank, a set of risk mitigation techniques has been established to reduce the impact of these risks. The Bank seeks to accomplish its risk strategy by: • • • • • • ensuring that all identified material risks are adequately managed; establishing risk appetite parameters to manage Bank’s risk-taking activities; identifying and allocating clear roles and responsibilities for the control of risks within the Bank; avoiding unjustified risk concentrations; inculcating a prudent risk and compliance culture; ensuring risk-based remuneration is applied to material risk-takers.
102. 100 Alliance Bank Malaysia Berhad (88103-W) RISK MANAGEMENT (Cont’d) Risk Appetite Risk Appetite describes the high-level risk parameters and thresholds the Bank is willing to assume in pursuit of its strategic business objectives. These high level thresholds are then cascaded, where appropriate, into more granular limits and targets across the various portfolios and business units. The Bank strives for balanced, sustainable growth by performing business activities in accordance with approved strategic plans, policies and limits; balancing between risks and rewards; and protecting the interest of our various stakeholders. These are supported by ensuring strong risk management practices, active liquidity management and a healthy capital position. Risk Management Process The Bank’s risk management process embeds the Bank’s cultures and practices. It starts with risk identification, followed by risk assessment, risk mitigation and control, risk monitoring, risk reporting, escalation and disclosure, as illustrated below: 1 IDENTIFY • Identify the various risks inherent to each product or activity. • Identify adverse trends of risk parameters. 6 DISCLOSE • Provide regular risk disclosure to investors and regulators through Pillar 3 disclosure report and regulatory reports. 3 MITIGATE & CONTROL 2 ASSESS • Adopt quantitative and qualitative approaches to measure and assess these risks, in terms of quantum, impact severity and occurrence probability. 5 REPORT 4 MONITOR • Present periodic risk reports to Senior Management and the Board. • Highlight new/emerging risk areas and the controls in place. Risk Culture & Staff Development Risk management is not merely confined to inanimate policies, procedures, limits and risk models. Effective risk management also requires a strong risk culture. Risk culture comprises the set of values and behaviours within the Bank that shapes our day-to-day activities and interactions. Our Board members, senior management and staff are all ambassadors of the Bank’s risk culture. Hence, leadership, supervision, guidance, counselling and communication, represent key elements in shaping and cultivating a desirable risk culture. For example, the Bank convenes regular staff huddles, which serves as a reminder on the Bank’s vision, strategy, key behaviours and brand attributes. For added training effect, both good and bad examples are highlighted in our case studies. Added to this, the Bank applies a variety of approaches, ranging from classroom sessions, external courses, on-the-job training and ad hoc • Examine various measures to mitigate and monitor these risks. • Implement an appropriate set of risk mitigating and control measures. • Continuously monitor the identified risks and their control in place. • Monitor the potential impact to business strategies and propose corrective measures, where necessary. project-based assignments; to equip our staff with the right knowledge and skills to carry out their duties properly and professionally. Such training is not merely confined to technical skills training; the Bank devotes much effort towards embedding risk culture and instilling our set of values in our staff, with emphasis on leadership, conduct/ethics and stakeholder-centricity. Talent management and succession planning are also integral for identifying and developing our next generation of supervisors and leaders. Additional leadership and skills competency training and development programmes have been designed; and applied to staff with identified potential. The Bank employs a carrot-and-stick approach with regard to good vs. bad behaviour. For the former, we provide various benefits, rewards and incentives. Whereas the latter is subject to the Bank’s disciplinary and consequence management process.
103. 2019 Annual Report 101 Compliance Culture The compliance culture of the Bank is driven with a strong tone from the top to ingrain the expected values and principles of conduct that shape the behaviour and attitude of employees at all level of business and activities across the Bank . Compliance culture goes beyond complying with laws, we expect all staff to conduct their commitments with integrity and business ethics. The Bank has instilled a compliance culture where the Board, Senior Management and every employee of the Bank are committed to adhere to relevant regulatory standards. This commitment is clearly demonstrated through the establishment of strong compliance policies and guidelines to ensure that compliance risks are effectively managed. The Bank noted a satisfactorily level of increase in compliance awareness among the staff. Among the key initiatives implemented to promote compliance awareness are: • • • • • • Encouraging staff to report any situation that exposes the Bank to compliance risk Raising compliance awareness through team huddles, ethics week, online quiz, establishment of the Compliance Guide and Code of Conduct Ensuring robust compliance monitoring Introduction of self-raise concept for risk, control and compliance issues that are tracked at management committee Enhancement of staffs’ performance scorecard (i.e. KPI) with emphasis on governance and risk control Compliance-related e-learning modules such as AML/CFT, Code of Conduct and PDPA The Bank strives to ensure compliance to regulatory requirements and business ethics to maintain high standard of professionalism in business conducts at all times. Risk Management Techniques The Risk Management Framework defines the Bank’s key risk activities according to risk categories. To manage risk identified, Framework and Policies are in place and various risk management techniques and tools are used. The table below provides examples of some of these techniques/tools: Risk Category Risk Definition Risk Management Techniques/Tools Credit Risk The risk of loss due to failure by customers/ counterparties to fulfil their financial or contractual obligations, when due. • Credit risk management framework, strategy, policies & procedures • Risk Acceptance Criteria • Financing/product programs • Product/portfolio risk limits, triggers and parameters • Credit concentration limits • Credit ratings/scorecards • Credit authorization • Risk dashboards • Early Warning triggers and Watch Lists • Risk-based pricing • Stress tests • Thematic/portfolio reviews • Independent credit reviews Market Risk The risk of loss arising from volatile changes in market variables such as interest rates, profit rates, foreign exchange rates, equity prices and commodity prices. • • • • • • Market risk management framework and policies Risk measurement/valuation tools Product/portfolio risk limits Risk Sensitivity limits and Value-at-Risk limits Stress testing & simulations Risk dashboards Liquidity Risk • The risk of loss resulting from the Bank’s inability to meet its financial obligations, when due. • Risk of incurring losses when attempting to liquidate assets, due to market disruptions and/or illiquid market situations. • • • • • Liquidity risk management framework and policies Liquidity risk limits and triggers Liquidity stress testing & simulations Contingency funding plan Deposit concentration monitoring & reporting
104. 102 Alliance Bank Malaysia Berhad (88103-W) RISK MANAGEMENT (Cont’d) Risk Category Risk Definition Risk Management Techniques/Tools Operational Risk The risk of loss resulting from failures of processes, people and systems; or from external events which are neither market-related nor credit-related. • • • • • • • • • Regulatory Non-Compliance Risk The risk of loss or imposition of penalties, fines, or other liabilities arising from breaches of applicable laws, regulations, or contractual obligations. • Compliance framework, Legal manual and AML/CFT policy • Group-wide education and programme on compliance and risk awareness Shariah Non-Compliance Risk The risk of loss arising from failure to comply with Shariah rules and principles. • Shariah governance framework • Shariah non-compliance monitoring and reporting • Independent Shariah compliance reviews Strategic Risk The risk of loss arising from adopting the wrong business strategy, failure to properly execute business strategies, or failure to effectively respond to changes in the industry/economy. • • • • • • Strategic risk management framework Annual strategy and budget setting exercise Capital management framework and initiatives Stress tests/Reverse stress tests Strategic project initiatives Business reviews and production meetings Reputational Risk The risk of loss arising from negative perception by customers, counterparties, shareholders and other relevant key stakeholders. • • • • • Reputational Risk Management Framework Code of Conduct guidelines Corporate risk rating exercise Managing investor relations Corporate Social Responsibility programmes Model Risk The risk of loss arising from inappropriate reliance on risk models. • Independent Model Validation Framework • Back-testing and independent model validation exercises Operational risk management framework and policies IT risk management framework and policies Risk and Control Self-Assessment Control Self-Assessment Key Risk Indicators Loss Event Data collection Scenario Analysis Business Continuity Plan/Drills Risk dashboards EMERGING RISK The Bank identifies the emerging risks in order to assess risk trends that may have significant impact on the Bank’s business strategies and earnings. Regulatory non-Compliance Risk Banks operate under a highly regulated environment, with stringent regulatory and supervisory requirements, particularly in the areas of effective governance, risk management, liquidity management as well as technology risk. Failure to meet regulatory compliance would attract punitive action, including monetary fines. The Bank reviews policies, procedures and risk practices periodically to ensure effective compliance with the evolving regulatory landscape. Furthermore, the Bank monitors industry and regulatory developments in order to identify potential consequential impact to the Bank. Conduct Risk In recent years, a greater emphasis has been placed on ensuring that customers are treated fairly. Banks are expected to embed a culture of customercentricity; to reduce the risk of wrong-doing arising from conduct risk. Examples of conduct risk, includes the following: • • • Mis-selling unsuitable products to customers, potentially leading to bad customer experience. Pursuit of rapid growth/staff remuneration at the expense of customers’ needs and fiduciary duties. Insider trading, information leakage and market abuse. In our context, the Bank continues to emphasize on ethical business and compliance culture. We review our business conduct, activities and governing policies to ensure compliance with the “spirit of the law”, beyond mere adherence to regulatory requirements.
105. 2019 Annual Report 103 Economic Headwinds Economic headwinds largely attributable to geopolitical and economic developments , may negatively impact the Bank’s earnings. In our effort to safeguard our shareholders and depositors, the Bank continuously reviews the health of our various financing portfolios; and provide updates to Senior Management and the Board. In addition, the Bank also reviews and aligns its business strategies to address other challenges faced. Technology Risk The emergence of fast-paced digital technologies has paved the way for many organisations to achieve tangible benefits in a short time span. Technology leveraging on the ubiquitous mobile devices, social media, robotic process automation, and cloud computing has made it possible for the Bank to introduce fast, simple-to-use and innovative products and services. This inevitably carries other risks associated with the use of such technology. Cyber-attacks, system disruptions, data breaches and intensified regulatory requirements challenge certain conventions in the way we do business. It requires a higher level of commitment, greater effort and added investment to offer value-added products and services, while safeguarding the interests of our customers and stakeholders. The Bank has put in place a formalized Technology Risk Management Framework that drives our security policies, to ensure that risks arising from the use of technology are properly identified, assessed, managed and reported. Appropriate controls are in place to ensure confidentiality, integrity, and availability of information. The Bank also raises staff awareness on technology risks through its continuous education programmes, encompassing Information Risk and Cyber Security, conducted classroom style and via our e-learning modules. Additionally, reminders on IT-security and Cyber security safe practices are disseminated periodically to both customers and employees via various communication channels. Environmental and Social Risk In pursuit of delivering business goals, banks are now put in the spotlight on the way businesses are run in tandem with the pursuit of financial goals, with greater attention focused on the impact to the environment and society at large. The underlying themes/principles shall focus on sustainable business practices, conservation of scarce resources and generating benefits to society and future generations. The Bank is developing a robust framework to incorporate the principles of environmental and social responsibility plus good governance across our various activities.
106. 104 Alliance Bank Malaysia Berhad (88103-W) ADDITIONAL COMPLIANCE INFORMATION POLICY AND PROCEDURES ON RELATED PARTY TRANSACTIONS The Bank has established an internal policy and procedures on Related Party Transactions (RPTs) and recurrent RPTs to ensure all RPTs are undertaken on an arm’s length basis and on normal commercial terms not more favourable to the related parties than those generally available to the non-related parties. Generally, a comparison of the terms offered by the related party with at least three non-related parties providing similar services/products will be made, taking into consideration stipulated criteria such as pricing/cost, quality of service/product, level of efficiency, etc. to establish whether the terms offered by the related party are fair and reasonable and in the commercial interests of the Bank and comparable with those offered by the non-related parties. The Group Audit Committee reviews all RPTs and Recurrent RPTs where the amounts of consideration in aggregate for a 12-month period equal to or exceed the minimum threshold set by the Board before recommending to the Board for approval, if thought fit. CREDIT TRANSACTIONS AND EXPOSURES WITH CONNECTED PARTIES POLICY Bank Negara Malaysia Guidelines on Credit Transactions and Exposures with Connected Parties (“BNM Guidelines”) outlines standards and guidelines for banking institutions to extend credit in the ordinary course of business to connected parties which are of good credit standing, while ensuring an appropriate level of prudence based on sound credit risk management practices. The Bank has established an internal policy on credit transactions and exposures with connected parties to ensure the connected parties do not inappropriately benefit from such transactions to the detriment of the Bank, and in compliance with BNM Guidelines. MATERIAL CONTRACTS INVOLVING DIRECTORS OR MAJOR SHAREHOLDERS There were no material contracts (not being contracts entered into in the ordinary course of business) entered into by the Bank and/or its subsidiaries involving the interests of the Directors, Group Chief Executive Officer and major shareholders, either still subsisting at the end of the financial year or, if not then subsisting, entered into since the end of the previous financial year.
107. FINANCIAL STATEMENTS CONTENTS 106 Statement of Board of Directors ’ Responsibilities 107 Directors’ Report 115 Statement by Directors 115 Statutory Declaration 116 Independent Auditors’ Report 121 Statements of Financial Position 122 Statements of Income 123 Statements of Comprehensive Income 124 Statements of Changes in Equity 127 Statements of Cash Flows 132 Notes to the Financial Statements More on this subject: https://www.alliancebank.com.my/
108. 106 Alliance Bank Malaysia Berhad (88103-W) STATEMENT OF BOARD OF DIRECTORS’ RESPONSIBILITIES For preparation of the Annual Audited Financial Statements The Companies Act, 2016 requires Directors to prepare financial statements for each financial year, which give a true and fair view of the financial position as at the end of the financial year and the financial performance for the financial year of the Group and the Bank. In preparing the financial statements, the Directors are responsible for the adoption of suitable accounting policies that comply with the provisions of the Companies Act, 2016, the Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Directors are also responsible to ensure their consistent use in the financial statements, supported where necessary by reasonable and prudent judgments. The Directors hereby confirm that suitable accounting policies have been consistently applied in the preparation of the financial statements. The Directors also confirm that the Group and the Bank maintains adequate accounting records and an effective system of internal control to safeguard the assets of the Group and the Bank and prevent and detect fraud or any other irregularities.
109. 107 2019 Annual Report DIRECTORS ’ REPORT DIRECTORS’ REPORT The Directors present their report together with the audited financial statements of the Group and of the Bank for the financial year ended 31 March 2019. PRINCIPAL ACTIVITIES The Bank is principally engaged in all aspects of banking business and the provision of related financial services. The principal activities of the subsidiaries are Islamic banking, investment banking including stockbroking services, nominees services, investment advisory services and related financial services. There have been no significant changes in the nature of these activities during the financial year. FINANCIAL RESULTS GROUP RM’000 BANK RM’000 Profit before taxation 708,023 614,012 Taxation (170,426) (128,060) Net profit for the financial year 537,597 485,952 RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. DIVIDENDS The amount of dividends declared and paid by the Group and the Bank since 31 March 2018 were as follows: RM’000 (i) (ii) A single tier second interim dividend of 6.8 sen per share, on 1,548,105,929 ordinary shares in respect of the financial year ended 31 March 2018, was paid on 28 June 2018. 105,271 A single tier first interim dividend of 8.5 sen per share, on 1,548,105,929 ordinary shares in respect of the financial year ending 31 March 2019, was paid on 28 December 2018. 131,589 236,860 Subsequent to the financial year end, on 29 May 2019, the Directors declared a single tier second interim dividend of 8.2 sen per share, on 1,548,105,929 ordinary shares amounting to approximately RM126,945,000 in respect of current financial year. The accompanying financial statements do not reflect this dividend. The dividend will be accounted for in shareholders’ equity as an appropriation of retained profits in the financial year ending 31 March 2020. The Directors do not propose any final dividend in respect of the financial year ended 31 March 2019.
110. 108 Alliance Bank Malaysia Berhad (88103-W) DIRECTORS’ REPORT (Cont’d) BUSINESS REVIEW FOR FINANCIAL YEAR ENDED (“FYE”) 31 MARCH 2019 Improved Profitability: For the FYE 31 March 2019 (“FYE2019”), the Group recorded strong financial performance as a result of the successful execution of its Transformation initiatives to scale up its core businesses in the SME and consumer segments. Net profit after taxation increased by RM44.4 million or 9.0% to RM537.6 million. Return on equity (“ROE”) improved to 9.9% from 9.5% in the previous year. Net income grew by RM50.1 million or 3.2% to an all-time record high of RM1.62 billion. This was driven by net interest income growth of 8.9% year on year (“YOY”) from the expansion of total loans and the improved loan mix from better risk adjusted return loans. Net interest margin (“NIM”) improved by 10bps YOY to 2.50%. Better Loans Growth: Gross loans and advances grew 6.0% YOY to RM42.7 billion outpacing the industry loan growth of 4.9% YOY. The Group’s loan origination efforts continued to focus on better risk adjusted return loans from SME, commercial, consumer unsecured lending and Alliance ONE Account (“AOA”) segments. SME and commercial loans expanded 12.9% YOY, while consumer unsecured loans grew 21.4% YOY. AOA loan balances tripled to RM3.2 billion from RM1.0 billion the previous year. The loan mix continued to improve with better risk adjusted return loans making up 43% of the portfolio as compared to 36% in the previous year. Other Operating Income: The Group recorded other operating income of RM265.0 million amid the challenging external environment. Wealth management fee income for FYE2019 was lower by RM15.2 million due to lower structured investment fee income and lower brokerage/share trading fee income. Lower credit card fee income by RM8.3 million was mainly due to lower regulatory interchange fees and higher redemption from the improved rewards programme proposition. The Group continues to expand its initiatives to increase the fee income business through its new exclusive general insurance partnership with Zurich Insurance, enhancing relationship managers’ capabilities through the Wealth Academy and expanding cross-selling efforts for wealth management products. Operating Expenses: Operating expenses improved by RM19.1 million or 2.4% YOY. Excluding restructuring costs, operating expenses grew 3.1% YOY mainly due to transformation sales force investment and IT infrastructure costs. The investment of RM32.4 million in transformation sales force has generated revenue of RM58.7 million in FYE2019. Cost to income ratio (“CIR”) was at 47.8%. Better Asset Quality: FYE2019 net credit cost was at 31.5 bps excluding a one-off write back from credit rating scale alignment for corporates in 3QFYE18 and a one-off debt-sale in 1QFYE2019, normalised FYE2019 net credit cost increased marginally by 0.8bps YOY to 33.2 bps from 32.4 bps in FYE2018. The marginal increase in credit cost was mainly due to the growth of the personal financing portfolio offset by write backs from repayment of several major business accounts. The gross impaired loans ratio improved 31bps to 1.12% from 1.43% in FYE2018. The ongoing regularisation of the residential properties portfolio through proactive collection efforts and the repayments in the non-residential properties portfolio from several major business accounts, have contributed to the lower GIL in FYE2019. Loan loss coverage (including Regulatory Reserve) improved to 142.9% from 96.7% in FYE2018. Healthy Funding and Liquidity Position: Our funding position continues to be healthy despite the intense competition for deposits. Customer based funding grew 5.3% YOY to RM45.9 billion from RM43.6 billion a year ago, mainly driven by consumer deposits. The Group was able to maintain high Current Account/Savings Account (“CASA”) ratio of 35.5% mainly due to the expansion of Alliance SavePlus and contribution from the Alliance@Work channel. Fixed deposits growth of RM1.5 billion YOY was utilised to fund the growth in better risk adjusted return loans portfolio such as AOA and personal financing. The Group continues to focus on growing company payroll deposits and employee CASA under Alliance@Work. Our liquidity coverage ratio and loan to fund ratio remained healthy at 154.3% and 86.6% respectively.
111. 2019 Annual Report 109 BUSINESS REVIEW FOR FINANCIAL YEAR ENDED (“FYE”) 31 MARCH 2019 (CONT’D) Proactive Capital Management: As part of our continuous proactive capital management to support the future business expansion in all our entities, Alliance Bank Malaysia Berhad completed an Additional Tier-1 Capital Securities issuance of RM100 million in March 2019. This strengthened our Tier-1 Capital ratio to 14.1%. With Common Equity Tier-1 (“CET 1”) ratio at 13.4% and total capital ratio at 18.5%, we continue to maintain our capital levels among the strongest in the sector. Our Islamic Banking entity, Alliance Islamic Bank Berhad (“AIS”) also successfully completed its maiden Additional Tier-1 Sukuk Wakalah of RM100 million issuance out of the newly-established RM500 million Additional Tier-1 Sukuk Wakalah programme. This strengthened AIS’ Tier-1 Capital ratio to 12.6%. Sustainability: The Group continues to prioritise Economic, Environmental and Social (“EES”) sustainability matters as important components of long-term business sustainability. We continue to maintain our inclusion in the FTSE4Good Bursa Malaysia Index with improvement in our Environment, Social, Governance (“ESG”) rating. Our ranking in Minority Shareholders Watch Group (“MSWG”) Corporate Governance & Performance improved to 28th position in November 2017, as compared to 58th position a year ago. Helping SMEs: As part of our sustainability efforts, we continue to help businesses especially SMEs, thanks to our SME Banking expansion initiatives. These initiatives include our collaboration with Credit Guarantee Corporation Malaysia Berhad (“CGC”) to offer a Portfolio Guarantee scheme of RM50 million in November 2018 to assist viable SMEs that may lack the necessary collateral to secure credit facilities. In February 2019, we extended the scheme with an additional portfolio limit of RM100 million. In addition, the SME Unsecured Express Loan is extended to businesses to finance their general working capital with a financing limit of up to RM500,000. These initiatives contributed to our SME loans expansion. The Group’s flagship programme for young businesses, the BizSmart Challenge 2018, has awarded RM1 million in cash and media prizes to its winners. We have also extended up to RM5 million in unsecured loans to the BizSmart Top 20 finalists to help expand their business. Since the programme’s inception in 2013, we have received more than 1,300 submissions from SMEs nationwide, signifying its popularity and relevance to the SME business community. More than 110 young SMEs have been discovered and groomed to achieve greater heights in their businesses, both in Malaysia as well as abroad. Alliance@Work addresses business owners’ business needs with its paperless employee onboarding, as well as the mobile banking needs of their employees and business partners with Cash2Home and mobile banking. Alliance@Work has acquired more than 25,000 local employee CASA accounts and 1,392 company payroll accounts in FYE2019. Performance by business segment The Group’s businesses segments comprise Consumer Banking, Business Banking, Financial Markets and Stockbroking and Corporate Advisory Services. Please refer to Note 53 on Segment Information for the composition of each business segment. Profit before tax within the Consumer Banking segment stood at RM80.5 million, with net income increasing by RM8.4 million or 1.5%, mainly due to higher net interest income from the success of the AOA segment. Operating expenses grew by RM36.5 million or 11.0% compared to the previous year. Allowance for expected credit losses for loans, advances and financing increased by RM33.7 million. Segment asset increased by RM0.7 billion or 3.3%. The Business Banking segment’s profit before tax recorded growth of 14.6% or RM52.3 million to RM409.4 million in FYE2019. Net income improved by RM42.6 million or 6.3% mainly due to higher net interest income from the successful SME banking expansion and other operating income. Operating expenses improved by RM14.2 million or 4.6% compared to the previous year. Allowance for expected credit losses for loans, advances and financing increased by RM4.7 million. Segment asset registered a growth of RM2.0 billion or 11.1%. Profit before tax in the Financial Markets segment increased by 2.1% or RM4.7 million to RM232.7 million. Net income was higher by RM6.5 million or 2.3%. Operating expenses grew by RM2.8 million or 5.2%. Segment asset was at RM15.3 billion, a reduction of 2.4% compared to the previous year. The Stockbroking and Corporate Advisory Services segment recorded higher loss before tax by RM32.5 million compared to FYE2018 due to lower brokerage income and goodwill impairment arising from lower projected cash flows from the reassessment of expected future business performance in the light of current trading and economic conditions.
112. 110 Alliance Bank Malaysia Berhad (88103-W) DIRECTORS’ REPORT (Cont’d) ECONOMIC OUTLOOK AND PROSPECTS FOR FYE 31 MARCH 2020 For FY2020, Bank Negara Malaysia (“BNM”) has projected steady Malaysian Gross Domestic Product (GDP) growth at between 4.3% and 4.8% YOY, compared to 4.7% in 2018. Malaysia’s domestic activity will be negatively affected by the persisting slowdown in global growth, and declining global trade activity. Private sector spending will remain the key driver of growth, underpinned by steady private consumption. This will likely be supported by steady labour market conditions, while private investment is expected to be backed by ongoing and new capital spending in the manufacturing and services sectors, as well as the repayment of corporate tax refunds. BNM expects inflation to trend lower between 0.7% and 1.7% in FY2020, due to the impact of tax cost pass-through from a muted Sales and Services Tax (SST) impact, as well as lower global oil prices that will help reduce domestic fuel prices. On 7 May 2019, BNM announced a cut in Overnight Policy Rate by 25bps to 3.00%. On the external sector, gross exports growth is forecasted at 3.4%, compared to a 6.8% in FY2018. This is due to weaker demand from trade partners and the impact of ongoing trade tensions. Overall, external risks from global headwinds such as a potential no-deal on trade war negotiations between the US and China; delay in Brexit; and a potential slowdown of the Chinese economy could be stress points that may dampen external demand for Malaysia’s electrical and electronics manufacturing, and oil and gas sectors. BUSINESS OUTLOOK FOR NEXT FINANCIAL YEAR For the financial year ending 31 March 2020 (“FYE2020”), the Group will continue to focus on accelerating momentum in our core businesses of AOA and SME despite the uncertain outlook. Leveraging on our strong collaborative culture across the Group, we will focus on cross-selling higher value propositions using a targeted and segmented approach which responds to our customers’ financial needs. In particular, Alliance@Work will continue to contribute to new consumer CASA and work closely with Group SME, Group Corporate and Commercial, and Branches for acquisition of new company payroll accounts. Continuing on our digitisation journey, we will modernise and streamline the processes and workflows to bring simple, fast and responsive solutions to our customers. In Consumer Banking, we will be digitising personal loans application to enable faster loan disbursement. We will continue to accelerate client acquisition through our innovative proposition such as Alliance ONE Account, Alliance SavePlus, Alliance Cash2Home as well as digital marketing, multiple referral channels and Alliance@Work. In SME Banking, we will be piloting a digital onboarding for Alliance BizSmart accounts which will enable same day account opening as well as introducing the Mobile BizSmart app to enable SMEs to make faster decisions on time sensitive payments. Our goal is to provide a comprehensive financial advisory and funding support to help SMEs and the community grows to their full potential. We will also focus on broadening our franchise through strategic ecosystem partnerships. In addition, we will continue to amplify the brand through various media channel, and increase the weight of digital channels to support our sales and marketing activities throughout the Bank. Our focus will remain on business owners as our key area of growth, and extending our financial products and services to their stakeholder base of families, employees, business partners, and retail clients. Underscoring all our efforts is our brand promise to deliver Fast, Simple, Responsive, and Innovative products and services that are Aligned to Customers’ Needs. We remain confident that our continued focus on our strategic transformation initiatives will generate positive financial returns in the year ahead, and expect profitability to improve further.
113. 2019 Annual Report 111 RATING BY EXTERNAL RATING AGENCY The Bank is rated by Rating Agency Malaysia Berhad (“RAM”). Based on RAM’s rating in January 2019, the Bank’s short-term and long-term ratings are reaffirmed at P1 and A1 respectively. RAM has classified these rating categories as follows: P1 – Financial institutions in this category have superior capacities for timely payments of obligations. A1 – Financial institutions rated in this category are adjudged to offer adequate safety for timely payments of financial obligations. This level of rating indicates financial institutions with adequate credit profiles, but possess one or more problem areas, giving rise to the possibility of future riskiness. Financial institutions rated in this category have generally performed at industry average and are considered to be more vulnerable to changes in economic conditions than those rated in the higher categories. DIRECTORS The Directors of the Bank in office during the financial year and during the period from the end of the financial year to the date of this report are: Tan Sri Dato’ Ahmad Bin Mohd Don (Chairman) Ou Shian Waei Lee Ah Boon Kuah Hun Liang Datuk Wan Azhar Bin Wan Ahmad Lee Boon Huat Ho Hon Cheong Thayaparan S Sangarapillai Tan Chian Khong Susan Yuen Su Min (appointed on 15 October 2018) Kung Beng Hong (retired with effect from 1 January 2019) DIRECTORS’ REMUNERATION Details of Directors’ Remuneration are set out in Note 44 to the financial statements. DIRECTORS’ BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangements to which the Bank is a party, whereby the Directors might acquire benefits by means of the acquisition of shares in, or debentures of, the Bank or any other body corporate. Since the end of the previous financial year, no Director of the Bank has received or become entitled to receive any benefit (other than benefits shown under Directors’ Remuneration in Note 44 to the financial statements) by reason of a contract made by the Bank or its subsidiary with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.
114. 112 Alliance Bank Malaysia Berhad (88103-W) DIRECTORS’ REPORT (Cont’d) DIRECTORS’ INTERESTS According to the Register of Directors’ shareholdings required to be kept under Section 59 of the Companies Act, 2016, none of the Directors in office at the end of the financial year had any interest in shares of the Bank or its subsidiaries or its related corporations during the financial year, except as stated below: Number of Ordinary Shares As at 1.4.2018 Acquired Sold As at 31.3.2019 - 1,000* - 1,000 Ho Hon Cheong Note: * Indirect interest in the Bank shares held by virtue of Section 59(11)(c) of the Companies Act 2016. ISSUE OF SHARES AND DEBENTURES The Bank has completed the second issuance of Additional Tier 1 Capital Securities (“ATICS”) pursuant to its existing ATICS Programme of up to RM1.0 billion in nominal value as below: Issuance Date Nominal Amount Tenure 8 March 2019 Perpetual Non-callable Five (5) years 8 March 2024 and thereafter on every 5.95% per annum distribution payment date RM100.0 million Call Date Distribution Rate BAD AND DOUBTFUL DEBTS Before the financial statements of the Group and of the Bank were prepared, the Directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and adequate allowances have been made for doubtful debts. At the date of this report, the Directors are not aware of any circumstances which would render the amount written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Bank inadequate to any substantial extent. CURRENT ASSETS Before the financial statements of the Group and of the Bank were prepared, the Directors took reasonable steps to ascertain that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business, had been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and of the Bank misleading. VALUATION METHOD At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Bank misleading or inappropriate.
115. 2019 Annual Report 113 CONTINGENT AND OTHER LIABILITIES At the date of this report , there does not exist: (i) any charge on the assets of the Group or of the Bank which has arisen since the end of the financial year which secures the liabilities of any other person; or (ii) any contingent liability in respect of the Group or of the Bank which has arisen since the end of the financial year other than in the ordinary course of banking business. No contingent or other liability of the Group or of the Bank has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group or of the Bank to meet their obligations as and when they fall due. CHANGE OF CIRCUMSTANCES At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and of the Bank, which would render any amount stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE In the opinion of the Directors: (i) the results of the operations of the Group and of the Bank during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and (ii) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature which is likely to affect substantially the results of the operations of the Group and of the Bank for the financial year in which this report is made. SUBSIDIARIES Details of subsidiaries are set out in Note 16 to the financial statements. AUDITORS’ REMUNERATION Details of auditors’ remuneration are set out in Note 35 to the financial statements. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR The significant events during the financial year are disclosed in Note 54 to the financial statements. SUBSEQUENT EVENTS There were no material events subsequent to the end of the financial reporting period that require disclosure or adjustment to the financial statements.
116. 114 Alliance Bank Malaysia Berhad (88103-W) DIRECTORS’ REPORT (Cont’d) AUDITORS The auditors, PricewaterhouseCoopers PLT (LLP0014401-LCA & AF1146), have expressed their willingness to accept reappoinment as auditors. This report was approved by the Board of Directors on 31 May 2019. Signed on behalf of the Board of Directors. Tan Sri Dato’ Ahmad Bin Mohd Don Kuala Lumpur, Malaysia Kuah Hun Liang
117. 2019 Annual Report 115 STATEMENT BY DIRECTORS Pursuant To Section 251 (2) of the Companies Act, 2016 We, Tan Sri Dato’ Ahmad Bin Mohd Don and Kuah Hun Liang, being two of the Directors of Alliance Bank Malaysia Berhad, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 121 to 284 are drawn up so as to give a true and fair view of the financial position of the Group and of the Bank as at 31 March 2019 and financial performance of the Group and of the Bank for the financial year ended 31 March 2019 in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia. Signed on behalf of the Board in accordance with a resolution of the Directors dated 31 May 2019. Tan Sri Dato' Ahmad Bin Mohd Don Kuah Hun Liang Kuala Lumpur, Malaysia STATUTORY DECLARATION Pursuant To Section 251(1) of the Companies Act, 2016 I, Wong Lai Loong, being the officer primarily responsible for the financial management of Alliance Bank Malaysia Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 121 to 284 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the abovenamed Wong Lai Loong at Kuala Lumpur in the Federal Territory on 31 May 2019 Before me, M. Sivanason Commissioner for Oaths Kuala Lumpur, Malaysia 31 May 2019 Wong Lai Loong MIA Membership No. (CA 29328)
118. 116 Alliance Bank Malaysia Berhad (88103-W) INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ALLIANCE BANK MALAYSIA BERHAD (Incorporated in Malaysia) (Company No: 88103-W) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Our opinion   In our opinion, the financial statements of Alliance Bank Malaysia Berhad (“the Bank”) and its subsidiaries (“the Group”) give a true and fair view of the financial position of the Group and of the Bank as at 31 March 2019, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia.   What we have audited   We have audited the financial statements of the Group and of the Bank, which comprise the statements of financial position as at 31 March 2019 of the Group and of the Bank, and the statements of income, statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Bank for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 121 to 284.   Basis for opinion   We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the financial statements” section of our report.   We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.   Independence and other ethical responsibilities   We are independent of the Group and of the Bank in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Our audit approach   As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements of the Group and the Bank. In particular, we considered where the Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.   We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group and of the Bank, the accounting processes and controls, and the industry in which the Group and the Bank operate.
119. 2019 Annual Report 117 REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D) Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Bank for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Bank as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters How our audit addressed the key audit matters Allowance for impairment on loans, advances and financing Refer to accounting policy 2(k)(i) and 2(a)(ii), Note 13 and 36 of the Financial Statements of the Group and the Bank. The Group adopted MFRS 9 “Financial Instruments” with a date of transition of 1 April 2018. MFRS 9 introduces an expected credit loss (“ECL”) impairment model, which requires the use of complex models and significant assumptions about future economic conditions and credit behaviour. This is a new and complex accounting standard which has required considerable judgement and interpretation in its implementation. In particular, the significant judgements in applying the accounting requirements for measuring ECL include the following: • Building the appropriate models used to calculate ECL. The models are inherently complex and judgement is applied in determining the appropriate construct of the model; • Identification of loans, advances and financing that have experienced a significant increase in credit risk; and • Assumptions used in the ECL models such as expected future cash flows, forward-looking macroeconomic factors and data sets to be used as inputs to the models. We obtained an understanding and tested management’s controls over identification of loans, advances and financing that have experienced significant increase in credit risk or objective evidence of impairment in accordance with the Group’s policy and procedures, and the calculation of ECL provisions. We tested a sample of loans, advances and financing and assessed the reasonableness of management’s judgement that there was no significant increase in credit risk or objective evidence of impairment for these loans. Where objective evidence of impairment was identified by the Group and impairment loss was individually calculated, we examined both the quantum and timing of future cash flows used by the Group in the impairment loss calculation, challenged the assumptions and compared estimated to external evidence where available. Calculations of the discounted cash flows were also re-performed. To determine the appropriateness of models implemented by the Group, we have: • Assessed the methodologies inherent within the ECL models applied against the requirements of MFRS 9; • Tested the design and operating effectiveness of the controls relating to: - Governance over ECL methodology, model development and model validation; - Data used to determine the allowances for credit losses; and - Calculation, review and approval of the ECL calculation. • Assessed and tested the significant modelling assumptions; • Assessed and considered reasonableness of forward-looking forecasts assumptions; and • Checked the accuracy of data and calculation of the ECL amount, on a sample basis. Based on the procedures performed, we did not find any material exceptions to the Group’s assessment on impairment of loans, advances and financing.
120. 118 Alliance Bank Malaysia Berhad (88103-W) INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ALLIANCE BANK MALAYSIA BERHAD (Cont’d) (Incorporated in Malaysia) (Company No: 88103-W) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D) Key audit matters (cont’d) Key audit matters How our audit addressed the key audit matters Impairment testing of goodwill Refer to accounting policy 2(k)(ii)(a), and 2(a)(i), and Note 20 of the Financial Statements of the Group and the Bank. Management performed annual impairment review on the goodwill balance. The recoverable amount of each cash generating units (“CGU”) of which goodwill has been allocated was determined based on the value-in-use method. The value-in-use was determined using cash flow projections based on the financial budget and business plans approved by the Board of Directors. In particular, we focused on the following key assumptions that requires significant judgement, for each CGU: • The annual growth rates in the cash flow projections; • The terminal growth rate; and • The discount rate. We tested management’s impairment assessment of goodwill as follows: • Compared the cash flows projection of each CGU to approved budgets and business plans for each CGU. • Compared historical cash flows projections to actual results of each CGU to assess the reasonableness of forecasting. • Assessed the reasonableness of the annual growth rates used in the cash flow projections of each CGU. • Assessed the reasonableness of the applied discount rates by comparing to external and industry information. The applied discount rates reflect the specific risks relating to each CGU where the risk associated to each CGU is determined based on the CGU’s business and operating model. • Evaluated reasonableness of terminal growth rates used by comparing to Malaysia’s forecasted GDP rate. •Independently performed sensitivity analysis to assess the potential impact of a reasonable possible change of the key assumptions on the recoverable amount of each CGUs. • Reviewed the adequacy of the Group’s and the Bank’s disclosures within the financial statements about these assumptions to which the outcome of the impairment test is most sensitive. Based on the evidence obtained, we found that the assumptions used by management in the value-in-use calculation were within a reasonable range. Information other than the financial statements and auditors’ report thereon   The Directors of the Bank are responsible for the other information. The other information comprises: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) Financial Highlights Statement by Chairman of Alliance Bank Group Management Discussion and Analysis Statement on Corporate Governance Sustainability Statement Audit Committee Report Statement on Risk Management and Internal Control Risk Management Directors’ Report Basel II Pillar 3 Report Disclosure
121. 2019 Annual Report 119 REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D) Information other than the financial statements and auditors’ report thereon (cont’d) but does not include the financial statements of the Group and of the Bank and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Bank does not cover the other information and we do not express any form of assurance conclusion thereon.   In connection with our audit of the financial statements of the Group and of the Bank, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Bank or our knowledge obtained in the audit or otherwise appears to be materially misstated.   If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.   Responsibilities of the Directors for the financial statements   The Directors of the Bank are responsible for the preparation of the financial statements of the Group and of the Bank that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Bank that are free from material misstatement, whether due to fraud or error.   In preparing the financial statements of the Group and of the Bank, the Directors are responsible for assessing the Group’s and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Bank or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements   Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Bank as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (a) Identify and assess the risks of material misstatement of the financial statements of the Group and of the Bank, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Bank’s internal control. (c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
122. 120 Alliance Bank Malaysia Berhad (88103-W) INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ALLIANCE BANK MALAYSIA BERHAD (Cont’d) (Incorporated in Malaysia) (Company No: 88103-W) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D) Auditors’ responsibilities for the audit of the financial statements (cont’d) (d) Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Bank or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Bank to cease to continue as a going concern. (e) Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Bank, including the disclosures, and whether the financial statements of the Group and of the Bank represent the underlying transactions and events in a manner that achieves fair presentation. (f) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.   We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.   From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Bank for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. OTHER MATTERS   This report is made solely to the members of the Bank, as a body, in accordance with Section 266 of the Companies Act, 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS PLT (No. LLP0014401-LCA & AF1146) Chartered Accountants Kuala Lumpur 31 May 2019 SOO HOO KHOON YEAN (No. 2682/10/2019 (J)) Chartered Accountant
123. 2019 Annual Report 121 STATEMENTS OF FINANCIAL POSITION as at 31 March 2019 Note ASSETS Cash and short-term funds Deposits and placements with banks and other financial institutions Amounts due from clients and brokers Financial assets at fair value through profit or loss Financial investments at fair value through other comprehensive income Financial investments at amortised cost Financial assets held-for-trading Financial investments available-for-sale Financial investments held-to-maturity Derivative financial assets Loans , advances and financing Other assets Tax recoverable Statutory deposits Investments in subsidiaries Investment in joint venture Property, plant and equipment Deferred tax assets Intangible assets TOTAL ASSETS LIABILITIES AND EQUITY Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Amounts due to clients and brokers Derivative financial liabilities Recourse obligations on loans and financing sold to Cagamas Other liabilities Provision for taxation Provision for zakat Deferred tax liabilities Subordinated obligations TOTAL LIABILITIES GROUP 2019 RM’000 2018 RM’000 BANK 2019 RM’000 2018 RM’000 3 1,804,734 2,768,758 1,571,995 1,715,961 4 5 6 500 77,008 230,440 77,283 101,305 - 169,656 77,283 - 7 8 9 10 11 12 13 14 9,478,462 235,720 55,442 42,320,301 199,138 20,282 1,521,592 802 70,497 72,972 432,961 56,520,851 63,750 8,505,189 293,612 84,455 39,989,515 141,949 2,004 1,408,316 693 69,373 22,664 409,402 53,938,268 6,852,866 311,930 55,442 32,622,976 320,794 5,501 1,142,108 989,102 69,178 50,116 323,804 44,485,468 48,771 6,406,448 344,703 84,455 31,546,564 176,948 1,092,566 989,102 67,834 9,223 292,981 42,852,839 45,017,632 858,708 778,423 51,164 57,545 800,669 1,740,797 686 2,163 1,480,222 50,788,009 42,740,460 873,871 682,238 75,103 154,686 1,102,363 1,435,523 22,661 252 11,907 1,379,614 48,478,678 34,982,862 344,835 778,423 57,545 300,076 1,572,308 1,479,580 39,515,629 33,508,370 439,238 682,238 154,686 601,696 1,319,698 23,190 1,379,024 38,108,140 15 16 17 18 19 20 21 22 23 24 12 25 26 19 27 Share capital Reserves TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 28 29 1,548,106 4,184,736 5,732,842 56,520,851 1,548,106 3,911,484 5,459,590 53,938,268 1,548,106 3,421,733 4,969,839 44,485,468 1,548,106 3,196,593 4,744,699 42,852,839 COMMITMENTS AND CONTINGENCIES Net assets per share attributable to equity holders of the Bank (RM) 48 24,181,704 3.70 22,641,134 3.53 21,570,720 20,272,725 The accompanying notes form an integral part of these financial statements.
124. 122 Alliance Bank Malaysia Berhad (88103-W) STATEMENTS OF INCOME for the financial year ended 31 March 2019 GROUP Note BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Interest income 31 2,010,662 1,897,878 1,982,830 1,875,037 Interest expense 32 (1,012,579) (972,727) (984,350) (941,905) 998,083 925,151 998,480 933,132 359,057 318,245 - - 1,357,140 1,243,396 998,480 933,132 Fee and commission income 276,746 303,464 238,120 259,228 Fee and commission expense (86,488) (96,677) (76,945) (84,373) Investment income 45,077 94,117 120,271 126,433 Other income 29,626 27,723 29,878 27,222 Net interest income Net income from Islamic banking business Other operating income 33 34 Net income Other operating expenses 35 Operating profit before allowances 264,961 328,627 311,324 328,510 1,622,101 1,572,023 1,309,804 1,261,642 (774,947) (794,021) (601,771) (635,229) 847,154 778,002 708,033 626,413 Allowance for expected credit losses/impairment losses on loans, advances and financing and other financial assets 36 (130,849) (93,386) (94,618) (43,107) Write-back of expected credit losses on financial investments 37 201 - 449 - (Allowance for)/write-back of impairment losses on non-financial assets 38 (8,592) (62) 148 (62) 707,914 684,554 614,012 583,244 109 43 - - 708,023 684,597 614,012 583,244 (170,426) (191,369) (128,060) (156,334) 537,597 493,228 485,952 426,910 537,597 493,228 485,952 426,910 - Basic (sen) 34.7 31.9 - Diluted (sen) 34.7 31.9 Operating profit after allowances Share of results of joint venture 17 Profit before taxation Taxation 39 Net profit for the financial year Net profit for the financial year attributable to: Equity holders of the Bank Earnings per share attributable to 40 Equity holders of the Bank The accompanying notes form an integral part of these financial statements.
125. 2019 Annual Report 123 STATEMENTS OF COMPREHENSIVE INCOME for the financial year ended 31 March 2019 GROUP Note Net profit for the financial year BANK 2019 RM ’000 2018 RM’000 2019 RM’000 2018 RM’000 537,597 493,228 485,952 426,910 84,754 - 38,489 - Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Revaluation reserve on financial investments at fair value through other comprehensive income - Net gain from change in fair values - Realised gain transferred to statement of income on disposal (2,684) - (2,119) - (19,697) - (8,729) - (783) - (624) - 61,590 - 27,017 - - Net gain from change in fair values - 25,539 - 16,134 - Realised gain transferred to statement of income on disposal - (4,857) - (2,987) - Transfer to deferred tax - Changes in expected credit losses Revaluation reserve on financial investments available-for-sale: - Transfer to deferred tax Other comprehensive income, net of tax Total comprehensive income for the financial year - (4,963) - (3,156) - 15,719 - 9,991 61,590 15,719 27,017 9,991 599,187 508,947 512,969 436,901 599,187 508,947 512,969 436,901 Total comprehensive income for the financial year attributable to: Equity holders of the Bank The accompanying notes form an integral part of these financial statements.
126. 124 Alliance Bank Malaysia Berhad (88103-W) STATEMENTS OF CHANGES IN EQUITY for the financial year ended 31 March 2019 Attributable to Equity holders of the Bank Ordinary shares RM’000 Regulatory reserves RM’000 Capital reserves RM’000 FVOCI reserves RM’000 Revaluation reserves RM’000 Retained profits RM’000 Total equity RM’000 1,548,106 186,064 100,150 - 114,987 3,510,283 5,459,590 Effects of adoption of MFRS 9 - (17,330) - 16,923 (114,987) 41,819 (73,575) Effects of adoption of MFRS 15 - - - - - (15,500) (15,500) 1,548,106 168,734 100,150 16,923 - 3,536,602 5,370,515 - - - - - 537,597 537,597 GROUP At 1 April 2018 As previously stated As restated Net profit for the financial year Other comprehensive income - - - 61,590 - - 61,590 Total comprehensive income - - - 61,590 - 537,597 599,187 Transfer to regulatory reserves - 9,663 - - - (9,663) - Dividends paid to shareholders [Note 41] - - - - - (236,860) (236,860) 1,548,106 178,397 100,150 78,513 - 3,827,676 5,732,842 At 31 March 2019 The accompanying notes form an integral part of these financial statements.
127. - - - - - - - 1 ,548,106 401,517 (401,517) - 796,517 751,589 1,548,106 - Share premium RM’000 The accompanying notes form an integral part of these financial statements. At 31 March 2018 At 1 April 2017 As previously stated Effects of group reorganisation As restated Net profit for the financial year Other comprehensive income Total comprehensive income Share-based payment under ESS ESS on shares lapsed: - employees of subsidiaries - bank employees ESS shares grant vested to: - employees of subsidiaries - employees of joint ventures - bank employees ESS shares option exercised by: - employees of subsidiaries - bank employees Proceeds from share options exercised Transfer of ESS recharged difference on shares vested Disposal of ESS share Gain from disposal of ESS share Transfer (from)/to reserves Dividends paid to shareholders [Note 41] Dividends added back for shares held in ESS trust GROUP Ordinary shares RM’000 - - (1,223,525) - - - - 1,223,525 1,223,525 - Statutory reserve RM’000 186,064 - 28,164 - - - - 157,900 157,900 - Regulatory reserves RM’000 100,150 - 10,140 - - - - 10,018 79,992 90,010 - 114,987 - - - - - 99,268 99,268 15,719 15,719 - - - - - - - 6,062 (6,062) - Equity contribution Capital Revaluation from former parent reserves reserves RM’000 RM’000 RM’000 Attributable to Equity holders of the Bank - - (1,638) - (22) (96) - (488) (111) (3,099) (157) (1,037) 6,444 6,444 204 - - 65,989 - 22 96 4,032 488 111 3,099 - (73,837) (73,837) - Employees’ share scheme (“ESS”) Shares held for ESS reserve RM’000 RM’000 3,510,283 2,670 1,638 11,247 1,185,221 (247,697) - - 157 1,037 2,306,158 (243,376) 2,062,782 493,228 493,228 - Retained profits RM’000 5,459,590 2,670 65,989 11,247 (247,697) 4,032 - - 5,000,965 113,233 5,114,198 493,228 15,719 508,947 204 Total equity RM’000 2019 Annual Report 125
128. 1 ,548,106 1,548,106 1,548,106 796,517 100,000 651,589 1,548,106 BANK At 1 April 2018 As previously reported Effects of adoption of MFRS 9 Effects of adoption of MFRS 15 As restated Net profit for the financial year Other comprehensive income Total comprehensive income Transfer to regulatory reserves Dividends paid [Note 41] At 31 March 2019 At 1 April 2017 Net profit for the financial year Other comprehensive income Total comprehensive income Issuance of shares to former holding company Bonus issue Acquisition of subsidiary under group reorganisation Share-based payment under ESS Payment for ESS recharged from former holding company Transfer of ESS recharged difference on shares vested ESS on share options lapsed Transfer (to)/from retained profits Dividends paid [Note 41] At 31 March 2018 The accompanying notes form an integral part of these financial statements. Ordinary shares RM’000 for the financial year ended 31 March 2019 401,517 (401,517) - - Share premium RM’000 835,401 (835,401) - - Statutory reserve RM’000 144,349 15,680 160,029 160,029 327 160,356 442 160,798 Regulatory reserves RM’000 95,515 95,515 95,515 95,515 95,515 Capital reserve RM’000 Non-distributable reserves STATEMENTS OF CHANGES IN EQUITY (Cont’d) - 9,814 9,814 27,017 27,017 36,831 64,916 9,991 9,991 74,907 74,907 (74,907) 5,523 188 (3,195) (1,479) (1,037) - - Equity contribution from former holding FVOCI Revaluation company reserves reserves RM’000 RM’000 RM’000 Total equity RM’000 2,115,505 4,363,728 426,910 426,910 9,991 426,910 436,901 100,000 (250,072) 95,515 188 (3,195) 1,479 1,037 819,721 (248,438) (248,438) 2,866,142 4,744,699 2,866,142 4,744,699 29,297 (35,469) (15,500) (15,500) 2,879,939 4,693,730 485,952 485,952 27,017 485,952 512,969 (442) (236,860) (236,860) 3,128,589 4,969,839 Retained profits RM’000 Distributable reserves 126 Alliance Bank Malaysia Berhad (88103-W)
129. 2019 Annual Report 127 STATEMENTS OF CASH FLOWS for the financial year ended 31 March 2019 GROUP BANK 2019 RM ’000 2018 RM’000 2019 RM’000 2018 RM’000 708,023 684,597 614,012 583,244 Accretion of discount less amortisation of premium of financial investments (84,578) (77,535) (83,707) (75,417) Allowance for expected credit losses/impairment losses on loans, advances and financing 147,238 105,575 97,909 54,703 (Write-back of)/allowance for expected credit losses on commitment and contingencies (11,377) - 1,304 - (201) - (449) - (1) 5 - - CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Adjustments for: Write-back of expected credit losses on financial investments (Write-back of)/allowance for expected credit losses/impairment losses on amounts due from clients and brokers Allowance for expected credit losses/impairment losses on other receivables and cash and short term funds 2,856 4,047 2,514 3,169 Amortisation of computer software 30,206 24,161 29,117 23,346 Depreciation of property, plant and equipment 23,333 20,731 22,674 19,986 Dividends from financial assets at fair value through profit or loss (1,299) - (749) - Dividends from financial investments available-for-sale - (1,861) - (1,311) Dividends from subsidiaries - - (80,154) (33,913) 25,182 24,142 25,182 24,142 Interest expense on recourse obligation on loans and financing sold to Cagamas - 167 - 167 78,732 72,617 78,915 72,735 (260,639) - (249,720) - (14,174) - (18,176) - Interest income from financial investments available-for-sale - (267,241) - (260,478) Interest income from financial investments held-to-maturity - (17,593) - (17,242) 8,592 62 (148) 62 (8) 105 (8) (1) Interest expense on other borrowings Interest expense on subordinated obligations Interest income from financial investments at fair value through other comprehensive income Interest income from financial investments at amortised cost Allowance for/(write-back of) impairment losses on non-financial assets (Gain)/loss on disposal of property, plant and equipment - - - 675 42 291 43 277 Computer software written-off 1,822 372 1,724 284 Net gain from sale of financial assets at fair value through profit or loss (3,378) - (3,377) - Loss on disposal of computer software Property, plant and equipment written-off Net gain from sale of financial investments at fair value through other comprehensive income Cash flow from operating activities carried forward (2,684) - (2,119) - 647,687 572,642 434,787 394,428
130. 128 Alliance Bank Malaysia Berhad (88103-W) STATEMENTS OF CASH FLOWS (Cont’d) for the financial year ended 31 March 2019 GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 647,687 572,642 434,787 394,428 Net gain from sale of financial assets held-for-trading - (761) - (761) Net gain from sale of financial investments available-for-sale - (21,863) - (21,331) CASH FLOWS FROM OPERATING ACTIVITIES (CONT’D) Cash flow from operating activities brought forward Unrealised gain arising from financial assets at fair value through profit or loss (12,092) - (8,248) - Unrealised (gain)/loss arising from derivative instruments (18,276) 113,094 (18,276) 113,094 Unrealised loss/(gain) arising from financial liabilities designated at fair value through profit or loss 12,809 (25,555) 12,809 (25,555) - (5,813) - (5,298) Unrealised gain arising from financial assets held-for-trading - 189 - 191 Share of results of joint venture (109) (43) - - Zakat 590 150 - - 630,609 632,040 421,072 454,768 2,277,172 (1,705,260) 1,474,492 (2,604,131) Deposits and placements of banks and other financial institutions (15,163) 10,967 (94,403) (210,491) Other liabilities Share options/grants under Employees’ Share Scheme Cash flow from operating activities before working capital changes Changes in working capital: Deposits from customers 258,213 55,187 208,529 86,271 Deposits and placements with banks and other financial institutions 76,783 (77,283) 77,283 (77,283) Financial liabilities designated at fair value through profit or loss 83,376 305,059 83,376 305,059 - 272,407 - 211,887 Financial assets held-for-trading Financial assets at fair value through profit or loss Loans, advances and financing Other assets Amounts due from clients and brokers 16,668 - 10,827 - (2,801,062) (1,103,401) (1,400,892) (229,360) (60,506) 662 (146,823) (38,666) 358 17,749 - - Statutory deposits (113,276) 29,128 (49,542) 36,800 Cash generated from/(used in) operating activities 353,172 (1,562,745) 583,919 (2,065,146) Taxation paid (219,123) (196,351) (167,520) (159,931) (156) (104) - - 133,893 (1,759,200) 416,399 (2,225,077) Zakat paid Net cash generated from/(used in) operating activities
131. 2019 Annual Report GROUP 129 BANK 2019 RM ’000 2018 RM’000 2019 RM’000 2018 RM’000 1,299 - 749 - Dividends from financial investments available-for-sale - 1,861 - 1,311 Dividends from subsidiaries - - 80,154 33,913 CASH FLOWS FROM INVESTING ACTIVITIES Dividend from financial assets at fair value through profit or loss Capital injection into subsidiaries Interest received from financial assets at fair value through profit or loss Interest received from financial investments at fair value through other comprehensive income Interest received from financial investments at amortised costs - - - (537) 1,547 - 1,547 - 239,129 - 241,980 - 13,071 - 17,362 - Interest received from financial investments assets held-for-trading - 5,677 - 5,102 Interest received from financial investments available-for-sale - 260,342 - 257,081 Interest received from financial investments held-to-maturity - 20,760 - 18,934 Net interest expense for derivative instruments (49,852) (38,501) (49,852) (38,501) Purchase of property, plant and equipment (24,560) (16,670) (24,122) (16,291) Purchase of computer software (64,327) (56,574) (61,664) (55,300) Proceeds from redemption/disposal of financial investment at amortised cost (net of purchase) 368,791 - 302,126 - Proceeds from redemption/disposal financial investments at fair value through other comprehensive income (net of purchase) (1,041,224) - (526,693) - Proceeds from redemption/disposal of financial investments held-tomaturity (net of purchase) - 699,136 - 389,106 Proceeds from redemption/disposal of financial investments available-for-sale (net of purchase) - 1,782,543 - 1,728,991 69 56 69 16 (556,057) 2,658,630 (18,344) 2,323,825 (236,860) (245,027) (236,860) (248,438) (26,872) (24,490) (26,791) (25,152) - (237) - (237) (78,124) (68,654) (78,359) (68,654) (341,856) (338,408) (342,010) (342,481) Proceeds from disposal of property, plant and equipment Net cash (used in)/generated from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid to shareholders of the company Interest paid on recourse obligation on loans and financing sold to Cagamas Interest on other borrowings Interest paid on subordinated obligations Cash flow from financing activities carried forward
132. 130 Alliance Bank Malaysia Berhad (88103-W) STATEMENTS OF CASH FLOWS (Cont’d) for the financial year ended 31 March 2019 GROUP BANK 2019 RM'000 2018 RM'000 2019 RM'000 2018 RM'000 Cash flow from financing activities brought forward (341,856) (338,408) (342,010) (342,481) (Repayment of)/proceeds from recourse obligations on loans and financing sold to Cagamas (300,004) 599,998 (300,011) 99,993 - (5,000) - (5,000) CASH FLOWS FROM FINANCING ACTIVITIES (CONT’D) Settlement on other borrowings 100,000 150,000 100,000 150,000 Proceeds from ESS exercised by employees/joint venture - 4,150 - - Proceeds from disposal of share held in trust - 77,236 - - Payment for ESS recharged from former parent - - - (3,195) Subscription of shares from former holding company - - - 100,000 Transaction costs paid on issuance of subordinated notes - (427) - (721) Net cash (used in)/generated from financing activities (541,860) 487,549 (542,021) (1,404) NET CHANGE IN CASH AND CASH EQUIVALENTS (964,024) 1,386,979 (143,966) 97,344 CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR 2,768,758 1,381,779 1,715,961 1,618,617 CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 1,804,734 2,768,758 1,571,995 1,715,961 1,804,734 2,768,758 1,571,995 1,715,961 Proceeds from issuance of subordinated notes Cash and cash equivalents comprise the following: Cash and short-term funds
133. 2019 Annual Report 131 A reconciliation of liabilities from financing activities to the statement of financial position and statement of cash flows as follows : Recourse obligations on loans and financing sold to Cagamas RM’000 Subordinated obligations RM’000 Other borrowings RM’000 502,713 1,226,078 5,070 -Issuance/redemption 599,998 150,000 (5,000) - Interest payment (24,490) (68,654) (237) - Transaction costs - (427) - 24,142 72,617 167 1,102,363 1,379,614 - (300,004) 100,000 - (26,872) (78,124) - 25,182 78,732 - 800,669 1,480,222 - Recourse obligations on loans and financing sold to Cagamas RM’000 Subordinated obligations RM’000 Other borrowings RM’000 502,713 1,225,664 5,070 -Issuance/redemption 99,993 150,000 (5,000) - Interest payment (25,152) (68,654) (237) - Transaction costs - (721) - GROUP As at 1 April 2017 Cash flow Non cash changes - Interest accrued As at 31 March/1 April 2018 Cash flow -(Redemption)/issuance - Interest payment Non cash changes - Interest accrued As at 31 March 2019 BANK As at 1 April 2018 Cash flow Non cash changes - Interest accrued As at 31 March/1 April 2018 24,142 72,735 167 601,696 1,379,024 - (300,011) 100,000 - (26,791) (78,359) - 25,182 78,915 - 300,076 1,479,580 - Cash flow -(Redemption)/issuance - Interest payment Non cash changes - Interest accrued As at 31 March 2019
134. 132 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 March 2019 1. PRINCIPAL ACTIVITIES AND GENERAL INFORMATION The Bank is principally engaged in all aspects of banking business and the provision of related financial services. The principal activities of the subsidiaries are Islamic banking, investment banking including stockbroking services, nominees services, investment advisory services and related financial services. The Bank is a public limited liability company, incorporated and domiciled in Malaysia. The registered office is located at 3rd Floor, Menara Multi-Purpose, Capital Square, No 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 31 May 2019. 2. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation Malaysian Financial Reporting Standards (“MFRS”) Framework The financial statements of the Group and the Bank have been prepared in accordance with the Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia. The financial statements of the Group and the Bank have been prepared under the historical cost convention, as modified by the financial investments at fair value through other comprehensive income and financial assets/liabilities (including derivative instruments) at fair value through profit or loss. The financial statements incorporate all activities relating to the Islamic banking business which have been undertaken by the Group. Islamic banking business refers generally to the acceptance of deposits and granting of financing under the Shariah principles. The financial statements are presented in Ringgit Malaysia (“RM”) and all numbers are rounded to the nearest thousand (RM’000), unless otherwise stated. The preparation of the financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgment in the process of applying the Group’s and the Bank’s accounting policies. Although these estimates and judgment are based on the Directors’ best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are described in the following notes: (i) Annual testing for impairment of goodwill (Note 20) – the measurement of the recoverable amount of cash-generating units are determined based on the value-in-use method, which requires the use of estimates for cash flow projections approved by the Board of Directors covering a 4-year period, estimated growth rates for cash flows beyond the fourth year are extrapolated in perpetuity and discount rates are applied to the cash flow projections.
135. 2019 Annual Report 2 . 133 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (a) Basis of Preparation (cont’d) Malaysian Financial Reporting Standards (“MFRS”) Framework (cont’d) The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are described in the following notes: (cont’d) (ii)   The measurement of allowance for expected credit losses for financial assets measured at amortised cost and at fair value through comprehensive income is an area that requires the use of significant assumptions about future economic conditions and credit behaviour. The allowance for expected credit losses are recognised using forward-looking information including macroeconomic factors. By using forward-looking information will increase the level of judgement as to how changes in these macroeconomic factors will affect allowance for credit losses. The methodology and assumptions including any forecasts of future economic conditions are reviewed regularly. Some of the areas of significant judgements involved in the measurement of ECL are detailed as follows: • • • • Significant increase in credit risk Development of ECL models and assumption for the measurement of ECL Determining the number and relative weightings of forward-looking scenarios Establishing groups of similar financial assets for the purpose of measuring the ECL on collective basis The sensitivity effect on the macroeconomic factor is further disclosed in Note 45. Standards, amendments to published standards and interpretations that are effective The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Group and the Bank for the financial year beginning on 1 April 2018 are as follows: • • • • MFRS 9 “Financial Instruments” MFRS 15 “Revenue from Contracts with Customers” IC Interpretation 22 “Foreign Currency Transactions and Advance Consideration” Annual Improvements to MFRSs 2014-2016 Cycles - Amendments to MFRS 1 “First-time Adoption of Malaysian Financial Reporting Standards” - Amendments to MFRS 128 “Investments in Associates and Joint Ventures” The adoption of the above standards, amendments to published standards and interpretation to existing standards did not have any significant impact on the financial statements of the Group and the Bank other than the adoption of MFRS 9 and MFRS 15, which resulted in changes in accounting policies. The Group and the Bank have applied MFRS 9 retrospectively with the date of initial application of 1 April 2018. In accordance with the transitional provisions provided in MFRS 9, comparative information for 31 March 2018 was not restated and continued to be reported under the previous accounting policies governed under MFRS 139. The cumulative effects of initially applying MFRS 9 were recognised as an adjustment to the opening balance of retained profits as at 1 April 2019. The Group and the Bank have applied MFRS 15 with the date of initial application of 1 April 2018 by using the modified retrospective transition method. Under the modified retrospective transition method, the Group and the Bank apply the new standards retrospectively only to contracts that are not completed contracts at the date of initial application. Accordingly, the 31 March 2018 comparative information was not restated and the cumulative effects of initial application of MFRS 15 were recognised as an adjustment to the opening balance of retained profits as at 1 April 2018. The comparative information continued to be reported under the previous accounting policies governed under MFRS 118 and MFRS 111. The detailed impact of change in accounting policies are set out in Note 56.
136. 134 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (a) Basis of Preparation (cont’d) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Bank but not yet effective The Group and the Bank will apply the new standards, amendments to standards and interpretations in the following period: Financial year beginning on/after 1 April 2019 (a) MFRS 16 “Leases” supersedes MFRS 117 “Leases” and the related interpretations. Under MFRS 16, a lease is a contract (or part of a contract) that conveys the right to control the use of an identified asset for a period of time in exchange for consideration.           MFRS 16 eliminates the classification of leases by the lessee as either finance leases (on balance sheet) or operating leases (off balance sheet). MFRS 16 requires a lessee to recognise a “right-of-use” of the underlying asset and a lease liability reflecting future lease payments for most leases. The right-of-use asset is depreciated in accordance with the principle in MFRS 116 “Property, Plant and Equipment” and the lease liability is accreted over time with interest expense recognised in the income statement. For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue to classify all leases as either operating leases or finance leases and account for them differently. The Group and the Bank have set up a project team which has reviewed all of the leasing arrangements over the last year in light of the new lease accounting rules in MFRS 16. The standard will affect primarily the accounting for the Group’s and the Bank’s operating leases. The Group and the Bank will apply the standard from its mandatory adoption date of 1 April 2019. The Group and the Bank intend to apply the simplified transition approach and will not restate comparative amounts for the year prior to first adoption. Right-of-use assets will be measured on transition as if the new rules had always been applied. The Group and the Bank are now progressing to finalise the right-of-use assets and the lease liability and will complete this prior to releasing the interim results for the financial period ending 30 June 2019. (b) Amendments to MFRS 9 “Prepayment features with negative compensation” allow companies to measure some prepayable financial assets with negative compensation at amortised cost. Negative compensation arises where the contractual terms permit the borrower to prepay the instrument before its contractual maturity, but the prepayment amount could be less than the unpaid amounts of principal and interest. To qualify for amortised cost measurement, the negative compensation must be reasonable compensation for early termination of the contract, and the asset must be held within a ‘held to collect’ business model. The amendments will be applied retrospectively.
137. 2019 Annual Report 2 . 135 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (a) Basis of Preparation (cont’d) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Bank but not yet effective (cont’d) The Group and the Bank will apply the new standards, amendments to standards and interpretations in the following period: (cont’d) Financial year beginning on/after 1 April 2019 (cont’d) (c) Amendments to MFRS 128 “Long-term Interest in Associates and Joint Ventures” clarify that an entity should apply MFRS 9 “Financial Instruments” (including the impairment requirements) to long-term interests in an associate or joint venture, which are in substance form part of the entity’s net investment, for which settlement is neither planned nor likely to occur in the foreseeable future. In addition, such long-term interest are subject to loss allocation and impairment requirements in MFRS 128. The amendments shall be applied retrospectively. (d) Annual Improvements to MFRSs 2015 - 2017 Cycles: (e)     • Amendments to MFRS 3 “Business Combinations” clarify that when a party obtains control of a business that is a joint operation, the acquirer should account the transaction as a business combination achieved in stages. Accordingly it should remeasure its previously held interest in the joint operation (rights to the assets and obligations for the liabilities) at fair value on the acquisition date. • Amendments to MFRS 11 “Joint Arrangements” clarify that when a party obtains joint control of a business that is a joint operation, the party should not remeasure its previously held interest in the joint operation. • Amendments to MFRS 112 “Income Taxes” clarify that where income tax consequences of dividends on financial instruments classified as equity is recognised (either in profit or loss, other comprehensive income or equity) depends on where the past transactions that generated distributable profits were recognised. Accordingly, the tax consequences are recognised in profit or loss when an entity determines payments on such instruments are distribution of profits (that is, dividends). Tax on dividend should not be recognised in equity merely on the basis that it is related to a distribution to owners. • Amendments to MFRS 123 “Borrowing Costs” clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use or sale, it becomes part of general borrowings. IC Interpretation 23 “Uncertainty over Income Tax Treatments” (effective 1 January 2019) provides guidance on how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. If an entity concludes that it is not probable that the tax treatment will be accepted by the tax authority, the effect of the tax uncertainty should be included in the period when such determination is made. An entity shall measure the effect of uncertainty using the method which best predicts the resolution of the uncertainty. IC Interpretation 23 will be applied retrospectively. The above standards, amendments to published standards and interpretations to existing standards are not anticipated to have any significant impact on the financial statements of the Group and the Bank in the year of initial application.
138. 136 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (a) Basis of Preparation (cont’d) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Bank but not yet effective (cont’d) The Group and the Bank will apply the new standards, amendments to standards and interpretations in the following period: (cont’d) Financial year beginning on/after 1 April 2020 Amendments to MFRS 3 “Definition of a Business”       Amendments to MFRS 3 “Definition of a Business” revise the definition of a business. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. The amendments provide guidance to determine whether an input and a substantive process are present, including situation where an acquisition does not have outputs. To be a business without outputs, there will now need to be an organised workforce. It is also no longer necessary to assess whether market participants are capable of replacing missing elements or integrating the acquired activities and assets. In addition, the revised definition of the term ‘outputs’ is narrower, focusses on goods or services provided to customers, generating investment returns and other income but excludes returns in the form of cost savings. The amendments introduce an optional simplified assessment known as ‘concentration test’ that, if met, eliminates the need for further assessment. Under this concentration test, if substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset (or a group of similar assets), the assets acquired would not represent a business.   The amendments shall be applied prospectively. (b) Economic Entities in the Group (i)Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at the end of the reporting period. The financial statements of the subsidiaries are prepared for the same reporting date as the Bank. Subsidiaries are consolidated using the acquisition method of accounting. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement and fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.
139. 2019 Annual Report 2 . 137 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (b) Economic Entities in the Group (cont’d) (i) Subsidiaries (cont’d) The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recognised as goodwill (Note 2(d)(i)). If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of income. If the business combination is achieved in stages, the carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date, any gains or losses arising from such re-measurement are recognised in statement of income. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with MFRS 9 in statement of income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. In a group reorganisation, the assets and liabilities of the acquired entity are included in the consolidated financial statements of the Group at their existing carrying amounts without fair value uplift. The difference between the consideration given and the aggregate carrying amounts of the assets and liabilities (as of the date of the transaction) is recognised in equity. No goodwill is recognised. The acquired entity’s assets and liabilities are incorporated in the consolidated financial statements of the Group as if the entity had always been, prior to the group reorganisation. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transfer assets. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. (ii) Changes in Ownership Interests in Subsidiaries Without Change of Control Transactions with non-controlling interests that do not result in loss of control are accounted for as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and noncontrolling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in equity attributable to owners of the Group. (iii) Disposal of Subsidiaries When the Group ceases to consolidate because of a loss of control, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in statement of income. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Gains or losses on the disposal of subsidiaries include the carrying amount of goodwill relating to the subsidiaries sold.
140. 138 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (b) Economic Entities in the Group (cont’d) (iv)Associates Associates are all entities over which the Group has significant influence, but not control or joint control, generally accompanying a shareholding of between 20% and 50% of voting rights. Significant influence is the power to participate in financial and operating policy decisions of associates but not power to exercise control over those policies. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment in an associate is initially recognised at cost, and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the associate in profit or loss, and the Group’s share of movements in other comprehensive income of the associate in other comprehensive income. Dividends received or receivable from an associate are recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interests in the associate, including any long-term interests that, in substance, form part of the Group’s net investment in the associate, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The Group’s investment in associates includes goodwill identified on acquisition. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. An impairment loss is recognised for the amount by which the carrying amount of the associate exceeds its recoverable amount. Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates, unrealised losses are also eliminated unless the transaction provides evidence on impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group. When the Group ceases to equity account its associate because of a loss of significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as a financial asset. In addition, any amount previously recognised in other comprehensive income in respect of the entity is accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. Dilution gains and losses arising in investments in associates are recognised in the statements of income. (v) Joint Arrangements A joint arrangement is an arrangement of which there is contractually agreed sharing of control by the Group with one or more parties, where decisions about the relevant activities relating to the joint arrangement require unanimous consent of the parties sharing control. The classification of a joint arrangement as a joint operation or a joint venture depends upon the rights and obligations of the parties to the arrangement. A joint venture is a joint arrangement whereby the joint venturers have rights to the net assets of the arrangement. A joint operation is a joint arrangement whereby the joint operators have rights to the assets and obligations for the liabilities, relating to the arrangement.
141. 2019 Annual Report 2 . 139 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (b) Economic Entities in the Group (cont’d) (v) Joint Arrangements (cont’d) Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost in the consolidated statement of financial position. Under the equity method, the investment in a joint venture is initially recognised at cost, and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the joint venture in profit or loss, and the Group’s share of movements in other comprehensive income of the joint venture in other comprehensive income. Dividends received or receivable from a joint venture are recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint venture, including any long-term interests that, in substance, form part of the Group’s net investment in the joint venture, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the joint venture.   The Group determines at each reporting date whether there is any objective evidence that the investment in the joint venture is impaired. An impairment loss is recognised for the amount by which the carrying amount of the joint venture exceeds its recoverable amount. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. When the Group ceases to equity account its joint venture because of a loss of joint control, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate or financial asset. In addition, any amount previously recognised in other comprehensive income in respect of the entity is accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. (c) Investments in Subsidiaries, Joint Ventures and Associates in separate financial statements In the Bank’s separate financial statements, investments in subsidiaries, joint ventures and associates are carried at cost less accumulated impairment losses. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(ii)(b). On disposal of investments in subsidiaries, joint ventures and associates, the difference between disposal proceeds and the carrying amounts of the investments are recognised in the statement of income. (d) Intangible Assets (i)Goodwill Goodwill arises from a business combination and represents the excess of the aggregate of fair value of consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired and liabilities assumed on the acquisition date. If the fair value of consideration transferred, the amount of non-controlling interest and the fair value of previously held interest in the acquiree are less than the fair value of the net identifiable assets of the acquiree, the resulting gain is recognised in profit or loss.
142. 140 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (d) Intangible Assets (cont’d) (i) Goodwill (cont’d) Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and carried at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at operating segments level. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed. (ii) Computer software Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring the specific software to use. The costs are amortised over their useful lives of five years and are stated at cost less accumulated amortisation and accumulated impairment, if any. Computer software is assessed for impairment whenever there is an indication that it may be impaired. The amortisation period and amortisation method are reviewed at least at the end of each reporting period. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(ii)(b). Costs associated with maintaining computer software programmes are recognised as expenses as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. These costs include software development employee costs and appropriate portion of relevant overheads. (e) Property, Plant and Equipment and Depreciation Property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are recognised as expenses in the statement of income during the financial year in which they are incurred. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Subsequent to initial recognition, property, plant and equipment except for freehold land are stated at cost less accumulated depreciation and accumulated impairment, if any. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(ii)(b). Freehold land has an unlimited useful life and therefore is not depreciated. Other property, plant and equipment are depreciated on the straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, summarised as follows: Buildings2% Office equipment, furniture and fixtures 10% - 20% Motor vehicles 20% Renovations20% Computer equipment 20% - 33.3%
143. 2019 Annual Report 2 . 141 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (e) Property, Plant and Equipment and Depreciation (cont’d) Depreciation on assets under construction commences when the assets are ready for their intended use. The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in the statement of income. (f) Financial Assets Accounting policies applicable with effective from 1 April 2018 (i)Classification With effective from 1 April 2018, the Group and the Bank classify the financial assets in the following measurement categories: • • • Fair value through other comprehensive income (“FVOCI”); Fair value through profit or loss (“FVTPL”); and Amortised cost. For financial assets measured at fair value, gains and losses will either be recorded in statement of income or statement of other comprehensive income. For investment in debt instruments, this will depend on the business model in which the investment is held. For investment in equity instruments, it is determined by the irrevocable election at the time of initial recognition to account for the equity investment at FVTPL by the Group and the Bank. (i) Financial assets at FVOCI comprise of: Debt securities where the contractual cash flows are solely principal and interest and the objective of the Group’s and the Bank’s business model is achieved both by collecting contractual cash flows and selling financial assets. (ii) The Group and the Bank classify the following financial assets at FVTPL: (iii) • Debt investments that do not qualify for measurement at either amortised cost or fair value through comprehensive income, and • Equity investments for which the entity has not elected to recognise at fair value through other comprehensive income. The Group and the Bank classify their financial assets at amortised cost only if both of the following criteria are met: • The asset is held within a business model with the objective of collecting the contractual cash flows; and • The contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The policy of the recognition of impairment is in accordance with Note 2(k)(i). (ii) Recognition and initial measurement Regular way purchases and sales of financial assets are recognised on settlement date, the date on which the Group and the Bank settle to purchase or sell the asset. At initial recognition, the Group and the Bank measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss.
144. 142 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (f) Financial Assets (cont’d) Accounting policies applicable with effective from 1 April 2018 (cont’d) (ii) Recognition and initial measurement (cont’d) Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest (“SPPI”). (iii) Subsequent measurement Debt instruments There are three measurement categories into which the Group and the Bank classify its debt instruments: (i) Amortised cost Assets that are held for collection of contractual cash flows where those cash flows represent SPPI are measured at amortised cost. Interest/profit income from these financial assets is included in gross interest/profit income using the effective interest/ profit method. Any gain or loss arising on derecognition is recognised directly in statement of income and presented in other operating income. Impairment losses are presented as separate line item in the statement of income. (ii)FVOCI Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent SPPI, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest/profit income and foreign exchange gains and losses which are recognised in statement of income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to statement of income and recognised in other operating income. Interest/profit income from these financial assets is included in gross interest income using the effective interest. Foreign exchange gains and losses are presented in other operating income and impairment expenses are presented as separate line item in the statement of income and statement of comprehensive income. (iii)FVTPL Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. The Group and the Bank may also irrevocably designate financial assets at FVTPL if doing so significantly reduces or eliminates a mismatch created by assets and liabilities being measured on different bases. Fair value changes is recognised in statement of income and presented net within other operating income in the period which it arises. Equity instruments The Group and the Bank subsequently measures all equity investments at fair value. Where the Group’s and the Bank’s management has elected to present fair value gains and losses on equity investments through profit and loss. Changes in the fair value of financial assets at FVTPL are recognised in other operating income in the statement of income. Dividends from such investments continue to be recognised in profit or loss as other operating income when the Group’s and the Bank’s right to receive payments is established.
145. 2019 Annual Report 2 . 143 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (f) Financial Assets (cont’d) Accounting policies applicable with effective from 1 April 2018 (cont’d) (iv)De-recognition Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group and the Bank have transferred substantially all risks and rewards of ownership. Receivables that are factored out to banks and other financial institutions with recourse to the Group and the Bank are not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully transferred. The corresponding cash received from the financial institutions is recorded as amount due to Cagamas Berhad. When financial investments at FVOCI are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to statement of income. Accounting policies applicable prior to 1 April 2018 (v)Classification The Group and the Bank classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, available-for-sale and held-to-maturity. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at the end of each reporting period. The policy of the recognition and measurement of impairment is in accordance with Note 2(k). Financial assets at fair value through profit or loss The Group and the Bank classifies financial assets at fair value through profit or loss if they are acquired principally for the purpose of selling in the short term, i.e. are held-for-trading. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group and the Bank’s loans and receivables comprise cash and short-term funds, deposits and placements with bank and other financial institutions, loans, advances and financing and other assets, in the statement of financial position.  Financial investments available-for-sale Financial investments available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. Financial investments held-to-maturity Financial investments held-to-maturity are non-derivative quoted financial assets with fixed or determinable payments and fixed maturities that the Group and the Bank’s management has the positive intention and ability to hold to maturity. If the Group and the Bank were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as financial investments available for sale.
146. 144 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (f) Financial Assets (cont’d) Accounting policies applicable prior to 1 April 2018 (cont’d) (vi)Reclassification The Group and the Bank may choose to reclassify a non-derivative trading financial asset out of the held for trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassified out of the held for trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In addition, the Group and the Bank may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held for trading or available-for-sale categories if the Group and the Bank has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification. Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest/profit rates for financial assets reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date. (vii) Recognition and initial measurement Regular purchases and sales of financial assets are recognised on the settlement date. Financial assets are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset for all financial assets not carried at fair value through profit or loss. Financial assets at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in statement of income. (viii) Subsequent measurement – gains and losses Financial investments available-for-sale and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and financial investments held-to-maturity are subsequently carried at amortised cost using the effective interest method. Changes in the fair values of financial assets at fair value through profit or loss, including the effects of currency translation, interest and dividend income are recognised in profit or loss in the period in which the changes arise. Changes in the fair value of financial investments available-for-sale are recognised in other comprehensive income, except for impairment losses Note 2(k) and foreign exchange gains and losses Note 2(u). (ix)De-recognition Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group and the Bank have transferred substantially all risks and rewards of ownership. Receivables that are factored out to banks and other financial institutions with recourse to the Group and the Bank are not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully transferred. The corresponding cash received from the financial institutions is recorded as amount due to Cagamas Berhad. When financial investments available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to statement of income.
147. 2019 Annual Report 2 . 145 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (g) Derivative Financial Instrument and Hedge Accounting Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Derivatives that do not qualify for hedge accounting are classified as held for trading and accounted for at fair value through profit or loss. Changes in the fair value are recognised immediately in profit or loss. Derivatives that qualify for hedge accounting are designated as either: (a) (b) (c) Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); Hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge); or Hedges of a net investment in a foreign operation (net investment hedge). The Group and the Bank documents at the inception of the hedge relationship, the economic relationship between hedging instruments and hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged items. The Group and the Bank documents its risk management objective and strategy for undertaking its hedge transactions. (i) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The Group applies fair value hedge accounting for hedging fixed interest risk on securities. The gain or loss relating to the effective portion of interest rate swaps hedging fixed rate securities is recognised in profit or loss. The gain or loss relating to the ineffective portion is recognised in profit or loss within the other operating income. Changes in the fair value of the hedge fixed rate securities attributable to interest rate risk are recognised in equity. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used to amortised to profit or loss over the period to maturity. (ii) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated in reserves within equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. When the forecast transaction that is hedged results in the recognition of a non-financial asset (for example property, plant and equipment), the gains or losses previously deferred in equity are reclassified from equity and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in depreciation of property, plant and equipment. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in statement of changes in equity and is recognised in the periods when the hedged item affects profit or loss. When hedged future cash flows or forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred cost of hedging that was reported in equity is immediately reclassified to profit or loss.
148. 146 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (g) Derivative Financial Instrument and Hedge Accounting (cont’d) (iii) Net investment hedge Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated in reserves within equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Gains and losses accumulated in equity are reclassified to profit or loss when the foreign operation is disposed or partially disposed. (h) Offsetting Financial Instruments Financial assets and liabilities are offset and the net amount presented in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy.  (i) Amounts Due from Clients and Brokers Amounts due from clients and brokers are recognised at amortised cost less impairment allowances. Impairment allowances are made based on simplified approach for balances overdue from clients and brokers, after taking into consideration collateral held by the Group and deposits of and amounts due to dealer representative in accordance with the Rules of Bursa Securities. Bad debts are written off when all recovery actions have been fully exhausted. (j) Other Assets Other receivables, deposits, trade receivables, balances due from subsidiaries and related party included in other assets are carried at amortised cost using the effective yield method, less impairment allowance. Bad debts are written-off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the end of the reporting period. (k) Impairment of Assets (i) Impairment of financial assets Accounting policies applicable with effective from 1 April 2018 The Group and the Bank assess on a forward looking basis the expected credit loss (“ECL”) associated with its financial assets carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The Group and the Bank have four types of financial assets that are subjected to the ECL model includes financial assets classified at amortised cost, debt instruments measured at FVOCI, loans commitments, financial guarantee contracts and other commitments.
149. 2019 Annual Report 2 . 147 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (k) Impairment of Assets (cont’d) (i) Impairment of financial assets (cont’d) Accounting policies applicable with effective from 1 April 2018 (cont’d) (a) General 3-stage approach At each reporting date, the Group and the Bank measures ECL through loss allowance at an amount equal to 12 month ECL if credit risk on a financial instrument or a group of financial instruments has not increased significantly since initial recognition. For all other financial instruments, a loss allowance at an amount equal to lifetime ECL is required. Impairment will be measured on each reporting date according to a three-stage expected credit loss impairment model: Stage 1 – from initial recognition of a financial assets to the date on which the credit risk of the asset has increased significantly relative to its initial recognition, a loss allowance is recognised equal to the credit losses expected to result from defaults occurring over the next 12 months (12-month ECL).    Stage 2 – following a significant increase in credit risk relative to the initial recognition of the financial assets, a loss allowance is recognised equal to the credit losses expected over the remaining life of the asset (Lifetime ECL). Stage 3 – when a financial asset is considered to be credit-impaired, a loss allowance equal to full lifetime expected credit losses is to be recognised (Lifetime ECL). This includes exposures which have triggered obligatory impairment criterion or judgmentally impaired. Measurement of ECL is set out in Note 45. (b) Simplified approach for other receivables The Group applies the MFRS 9 simplified approach to measure ECL which uses probability default ratio (“PD”) and loss given default (“LGD”) for the due amount. The PD methodology is derived based on net flow rate model as a simplified approach in view of it’s low credit risk and non-maturity profile on due amount. LGD deem to be in full at any point in time as accounts are short term repayment and forward looking element will not be considered. (c)Write-off The Group and the Bank write-off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The assessment of no reasonable expectation of recovery is based on unavailability of borrower’s sources of income or assets to generate sufficient future cash flows to repay the amount. The Group and the Bank may write-off financial assets that are still subject to enforcement activity. Subsequent recoveries of amounts previously written-off will result in impairment gains.
150. 148 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (k) Impairment of Assets (cont’d) (i) Impairment of financial assets (cont’d) Accounting policies applicable prior to 1 April 2018 (d) Assets carried at amortised cost The Group and the Bank assess at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Group and the Bank uses to determine that there is objective evidence of an impairment include: (1) (2) (3) (4) (5) significant financial difficulty of the obligor; a breach of contract, such as a default or delinquency in interest or principal payments; it becomes probable that the borrower will enter bankruptcy or winding up petition is served on the borrower, significant shareholder or significant guarantor; adverse Center Credit Reference Information System (“CCRIS”) findings or unfavorable industry developments for that borrower; and observable data indicating that there is a measurable decrease in the estimated future cash flows including adverse changes in the repayment behavior of the borrower or downgrade of the borrower’s credit ratings. The Group and the Bank first assesses individually whether objective evidence of impairment exists for all financial assets deemed to be individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset whether significant or not, the loan is then collectively assessed for impairment. The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment is the current effective interest rate determined under the contract. Financial assets which are not individually assessed, are grouped together for collective impairment assessment. These financial assets are grouped according to their credit risk characteristics for the purposes of calculating an estimated collective loss. These characteristics are relevant to the estimation of future cash flows for groups of such loans by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being assessed. Future cash flows on a group of financial assets that are collectively assessed for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the Group and the Bank. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined.
151. 2019 Annual Report 2 . 149 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (k) Impairment of Assets (cont’d) (i) Impairment of financial assets (cont’d) Accounting policies applicable prior to 1 April 2018 (cont’d) (ii) (e) Assets classified as financial investments available-for-sale The Group and the Bank assesses at the end of the reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Group and the Bank uses criteria and measurement of impairment loss applicable for ‘assets carried at amortised cost’ above. If, in a subsequent period, the fair value of a debt instrument classified as financial investments available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the profit or loss. In the case of equity securities classified as financial investments available-for-sale, in addition to the criteria for ‘assets carried at amortised cost’ above, a significant or prolonged decline in the fair value of the security below its cost is also considered as an indicator that the assets are impaired. If any such evidence exists for financial investments available-forsale, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in profit or loss. The amount of cumulative loss reclassified to profit or loss is the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments classified as financial investments available-for-sale are not reversed through profit or loss in subsequent periods. Impairment of non-financial assets (a) Goodwill/Intangible assets Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill from business combinations or intangible assets are allocated to cash-generating units (“CGU”) which are expected to benefit from the synergies of the business combination or the intangible asset. The recoverable amount is determined for each CGU based on its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment is recognised in the statements of comprehensive income when the carrying amount of the CGU, including the goodwill or intangible asset, exceeds the recoverable amount of the CGU. The total impairment is allocated, first, to reduce the carrying amount of goodwill or intangible assets allocated to the CGU and then to the other assets of the CGU on a pro-rata basis. An impairment on goodwill is not reversed in subsequent periods. An impairment for other intangible assets is reversed if, and only if, there has been a change in the estimates used to determine the intangible asset’s recoverable amount since the last impairment was recognised and such reversal is through the statement of income to the extent that the intangible asset’s carrying amount does not exceed the carrying amount that would have been determined, net of amortisation, if no impairment had been recognised.
152. 150 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (k) Impairment of Assets (cont’d) (ii) Impairment of non-financial assets (cont’d) (b) Other non-financial assets Other non-financial assets such as property, plant and equipment, computer software, foreclosed properties and investments in subsidiaries and associates are reviewed for objective indications of impairment at the end of each reporting period or whenever there is any indication that these assets may be impaired. Where such indications exist, impairment is determined as the excess of the asset’s carrying value over its recoverable amount (greater of value in use or fair value less costs to sell) and is recognised in the statement of income. An impairment for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment was recognised. The carrying amount is increased to its revised recoverable amount, provided that the amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment been recognised for the asset in prior years. A reversal of impairment for an asset is recognised in the statement of income. (l) Financial Liabilities Financial liabilities are initially recognised at the fair value of consideration received less directly attributable transaction costs. Subsequent to initial recognition, financial liabilities are measured at amortised cost. Certain financial liabilities are designated at initial recognition at fair value through profit or loss when one of the designation criteria is met: (i) Designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or (ii) Its performance is evaluated on a fair value basis, in accordance with a documented with management or investment strategy. A financial liability which does not meet any of these criteria may still be designated as measured at FVTPL when it contains one or more embedded derivatives that sufficiently modify the cash flows of the liability and are not clearly closely related. Interest payables are now classified into the respective class of financial liabilities. (m) Repurchase Agreements Financial instruments purchased under resale agreements are instruments which the Group and the Bank have purchased with a commitment to resell at future dates. The commitment to resell the instruments are reflected as an asset in the statement of financial position. Conversely, obligations on financial instruments sold under repurchase agreements are instruments which the Group and the Bank have sold from their portfolio, with a commitment to repurchase at future dates. Such financing transactions and the obligations to repurchase the instruments are reflected as a liability in the statement of financial position. (n) Bills and Acceptances Payable Bills and acceptances payable represent the Group and Bank’s own bills and acceptances rediscounted and outstanding in the market. Refer to 2(l).
153. 2019 Annual Report 2 . 151 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (o) Subordinated Obligations and Other Borrowings The interest-bearing instruments are classified as liabilities in the statement of financial position as there is a contractual obligation by the Group and the Bank to make cash payments of either principal or interest or both to holders of the debt securities and the Group and the Bank are contractually obliged to settle the financial instrument in cash or another financial instrument. Subsequent to initial recognition, debt securities issued are recognised at amortised cost, with any difference between proceeds net of transaction costs and the redemption value being recognised in the statement of income over the period of the borrowings on an effective interest/profit method. (p)Provisions Provisions are recognised when the Group and the Bank have a present legal or constructive obligation as a result of past events. It is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Where the Group and the Bank expect a provision to be reimbursed by another party (for example, under an insurance contract), the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as finance cost expense. (q)Leases A lease is recognised as a finance lease if it transfers substantially to the Group and the Bank all the risks and rewards incidental to ownership. All leases that do not transfer substantially all the risks and rewards are classified as operating leases. (i) Finance Leases Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment. The corresponding liability is included in the statement of financial position as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Group’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets. Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the statement of income over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 2(e). The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(ii)(b).
154. 152 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (q) (r) Leases (cont’d) (ii) Operating Leases Operating lease payments are recognised in the statement of income on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expenses over the lease term on a straight-line basis. The land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. Leasehold land that normally has an indefinite economic life and where title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted for as prepaid lease payments at the end of the reporting period. In the case of a lease of land and buildings, the prepaid lease payments or the upfront payments made are allocated, whenever necessary, between the land and buildings elements in proportion to the relative fair values for leasehold interest in the land element and buildings element of the lease at the inception of the lease. The prepaid lease payments are amortised over the lease term in accordance with the pattern of benefits provided. Share Capital (i)Classification Ordinary shares with discretionary dividends are classified as equity. (ii) Share issue costs Incremental costs directly attributable to the issue of new shares or options are deducted against equity. (iii) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing: • • the profit attributable to owner of the Group and the Bank, excluding any costs of servicing equity other than ordinary shares. by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. Diluted earnings per share Diluted earnings per share adjusts the figures in the determination of basic earnings per share to take into account: • • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
155. 2019 Annual Report 2 . 153 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (s) Revenue Recognition (i) Recognition of interest and financing income Interest income and financing income are recognised using effective interest/profit rates, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the loans/financing or, where appropriate, a shorter period to the net carrying amount of the loan/financing. When calculating the effective interest/profit rate, the Group and the Bank estimates cash flows considering all contractual terms of the loans/financing but does not consider future credit losses. The calculation includes significant fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Interest income and financing income are recognised in the statement of income and statement of comprehensive income for all interest/profit-bearing assets on an accrual basis. Interest income and financing income include the amortisation of premium or accretion of discount. Income from the Islamic banking business is recognised on an accrual basis in accordance with the Shariah principles. For impaired loans/financing where the value has been reduced as a result of impairment loss, interest/financing income continues to be accrued using the rate of interest/profit used to discount the future cash flows for the purposes of measuring the impairment. (ii) Recognition of fees and other income Loan arrangement fees and commissions, management and participation fees and underwriting commissions are recognised as income when all conditions precedents are fulfilled. Commitment, guarantee and portfolio management fees which are material are recognised as income based on time apportionment basis. Corporate advisory fees are recognised as income base on fulfilment of the performance obligation. Dividends are recognised when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. From 1 April 2018, dividend that clearly represents a recovery of part of the cost of an investment is recognised in other comprehensive income if it relates to an investment in equity investment measured at FVOCI. Income from bancassurance agreements are based on time apportionment method throughout the exclusive service agreement period. Brokerage charged to clients is recognised on the day when the contracts are executed. (t) Recognition of Interest and Financing Expenses Interest expense and attributable profit (on activities relating to Islamic banking business) on deposits and borrowings of the Group and of the Bank are recognised on an accrual basis. (u) Foreign Currencies (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Ringgit Malaysia, which is the Bank’s functional and presentation currency.
156. 154 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (u) Foreign Currencies (cont’d) (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Changes in the fair value of monetary securities denominated in foreign currency classified as debt instruments classified as FVOCI (2018: financial investments available-for-sale) are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as FVOCI (2018: financial investments available-for-sale), are included in other comprehensive income. (v) Current and Deferred Income Tax Income tax on the profit or loss for the financial year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the end of the reporting date. In the event of uncertain tax position, the tax is measured using the single best estimate of the most likely outcome. Tax is recognised in the profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively. Deferred tax is provided in full, using the liability method, on temporary differences at the end of the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the end of the reporting period. Deferred tax is recognised as income or an expense in the statement of comprehensive income for the period, except when it arises from a transaction which is recognised directly in other comprehensive income or directly in equity, in which case the deferred tax is also charged or credited to other comprehensive income or to equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill. Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when deferred income tax assets and liabilities relate to taxes levied by the same tax authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
157. 2019 Annual Report 2 . 155 SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (w) Foreclosed Properties Foreclosed properties are stated at the lower of carrying amount and fair value less costs to sell. (x) Cash and Cash Equivalents Cash and cash equivalents as stated in the statements of cash flows comprise cash and bank balances and short-term deposits maturity within one month that are readily convertible into cash with insignificant risk of changes in value. (y) Employee Benefits (i) Short-term employee benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group and the Bank. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur. (ii) Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group and the Bank pay fixed contributions into separate entities or funds and will have no legal or constructive obligations to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in the statement of comprehensive income as incurred. As required by law, companies in Malaysia make contributions to the Employees Provident Fund (“EPF”). (iii) Equity compensation benefits The former holding company operates a number of equity-settled share-based compensation plan under which the Bank receives services from employees as consideration for equity instruments (options/grants) of the Bank. The award is treated as equity settled in the Bank’s financial statements. The fair value of the employee services received in exchange for the grant of the options/grants is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options/grants granted: • • • including any market performance conditions (for example, an entity’s share price); excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and including the impact of any non-vesting conditions (for example, the requirement for employees to save or holding of shares for a specific period of time). Non-market vesting conditions and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of the reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to ESS reserves in equity.
158. 156 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (y) Employee Benefits (cont’d) (iii) Equity compensation benefits (cont’d) In circumstances where employees provide services in advance of the grant date, the grant date fair value is estimated for the purposes of recognising the expense during the period between service commencement period and grant date. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. When options are not exercised and lapsed, the ESS reserves is transferred to retained profits. (z) Contingent Assets and Contingent Liabilities The Group and the Bank do not recognise contingent assets and liabilities other than those from business combination, but disclose its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or the Bank or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably. However, contingent liabilities do not include financial guarantee contracts. A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group and the Bank. The Group and the Bank do not recognise contingent assets but disclose its existence where inflows of economic benefits are probable, but not virtually certain. (aa) Financial Guarantee Contract     Financial guarantee contracts are contracts that require the Group and the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations. Financial guarantee contracts are subsequently measured at the higher of the amount determined in accordance with the expected credit loss model under MFRS 9 “Financial instruments” and the amount initially recognised less cumulative amount of income recognised in accordance with the principles of MFRS 15 “Revenue from Contracts with Customers”, where appropriate. Prior to 1 April 2018, the liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with MFRS 137 “Provisions, Contingent Liabilities and Contingent Assets” and the amount initially recognised less cumulative amortisation, where appropriate. (ab) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments. The Management Committee of the Group is identified as the chief operating decision-maker.
159. 2019 Annual Report 3 . 157 CASH AND SHORT-TERM FUNDS GROUP Cash and balances with banks and other financial institutions Money at call and deposit placements maturing within one month Less: Allowance for expected credit losses BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 661,540 611,394 591,842 524,088 1,143,232 2,157,364 980,191 1,191,873 1,804,772 2,768,758 1,572,033 1,715,961 (38) - (38) - 1,804,734 2,768,758 1,571,995 1,715,961 Included in the cash and short-term funds of the Group are accounts held-in-trust for remisiers amounting to RM6,122,000 (2018: RM5,866,000). Movements in allowance for expected credit losses are as follows: GROUP/BANK 12-Month ECL (Stage 1) RM’000 Lifetime ECL Not-credit Impaired (Stage 2) RM’000 Total RM’000 - - - 42 459 501 At 1 April 2018 As previously stated Effects of adoption of MFRS 9 42 459 501 New financial assets originated or purchased 111 423 534 Financial assets derecognised other than write-off (103) (896) (999) (13) - (13) As restated Changes due to change in credit risk 1 14 15 Total write-back from income statement (4) (459) (463) At 31 March 2019 38 - 38 Other adjustments 4. DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS GROUP Licensed banks BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 500 77,283 - 77,283
160. 158 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 5. AMOUNTS DUE FROM CLIENTS AND BROKERS GROUP Due from clients Due from brokers Less: Allowance for expected credit losses/impairment losses 2019 RM’000 2018 RM’000 77,182 101,475 665 670 77,847 102,145 (839) (840) 77,008 101,305 These represent amounts receivable by Alliance Investment Bank Berhad (“AIBB”) from non-margin clients and outstanding contracts entered into on behalf of clients where settlement via the Bursa Malaysia Securities Clearing Sdn. Bhd. has yet to be made. AIBB’s normal trade credit terms for non-margin clients is three (3) market days in accordance with the Bursa Malaysia Securities Berhad’s (“Bursa”) Fixed Delivery and Settlement System (“FDSS”) trading rules. The movements in allowance for expected credit losses/impairment losses are as follows: GROUP 2019 RM’000 2018 RM’000 840 835 - - 840 835 (1) 5 839 840 At beginning of financial year As previously stated Effects of adoption of MFRS 9 As restated (Write-back of)/allowance made during the financial year (net) At end of financial year As at 31 March 2019, the Group’s and the Bank’s gross exposure of amounts due from clients and brokers that are credit impaired is of RM875,000 (2018: RM851,000). 6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (“FVTPL”) GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 41,002 - 41,002 - 41,002 - 41,002 - 187,517 - 126,733 - At fair value Money market instrument: Malaysian Government investment issues Unquoted securities: Shares Corporate bonds and sukuk Total financial assets at FVTPL 1,921 - 1,921 - 189,438 - 128,654 - 230,440 - 169,656 -
161. 2019 Annual Report 7 . 159 FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”) GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Malaysian Government securities 2,137,524 - 1,914,515 - Malaysian Government investment certificates 3,064,770 - 1,710,316 - - - 732,211 - At fair value – debt instruments Money market instruments: Negotiable instruments of deposits Commercial papers 87,001 - 48,318 - 5,289,295 - 4,405,360 - 8 - 8 - 8 - 8 - 4,189,159 - 2,447,498 - 4,189,159 - 2,447,498 - 9,478,462 - 6,852,866 - Quoted securities: Shares Unquoted securities: Corporate bonds and sukuk Total financial investments at FVOCI Movements in allowance for expected credit losses are as follows: GROUP 12-Month ECL (Stage 1) RM’000 Lifetime ECL Lifetime ECL Not-credit Impaired Credit Impaired (Stage 3) (Stage 2) RM’000 RM’000 Total RM’000 At 1 April 2018 - - - - Effects of adoption of MFRS 9 241 1,106 9,409 10,756 As restated 241 1,106 9,409 10,756 As previously stated New financial investments originated or purchased 20 - - 20 Changes due to change in credit risk (80) (662) - (742) Financial investments derecognised other than write-off (61) - - (61) Total write-back from income statement (121) (662) - (783) At 31 March 2019 120 444 9,409 9,973
162. 160 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 7. FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”) (CONT’D) Movements in allowance for expected credit losses are as follows: (cont’d) BANK 12-Month ECL (Stage 1) RM’000 Lifetime ECL Lifetime ECL Not-credit Impaired Credit Impaired (Stage 3) (Stage 2) RM’000 RM’000 Total RM’000 At 1 April 2018 - - - - Effects of adoption of MFRS 9 134 872 - 1,006 As restated 134 872 - 1,006 8 - - 8 Changes due to change in credit risk (45) (545) - (590) Financial investments derecognised other than write-off (42) - - (42) Total write-back from income statement (79) (545) - (624) 55 327 - 382 As previously stated New financial investments originated or purchased At 31 March 2019 As at 31 March 2019, the Group’s and the Bank’s gross exposure of financial investments at FVOCI that are credit impaired is at RM9,409,000 and RM Nil respectively. There is no movement during the financial year. 8. FINANCIAL INVESTMENTS AT AMORTISED COST GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 121,789 - 101,446 - At amortised cost Money market instruments: Malaysian Government securities 38,686 - 34,880 - 160,475 - 136,326 - Corporate bonds and sukuk 90,020 - 177,498 - Allowance for expected credit losses (14,775) - (1,894) - 75,245 - 175,604 - 235,720 - 311,930 - Commercial papers Unquoted securities: Total financial investments at amortised cost
163. 2019 Annual Report 8 . FINANCIAL INVESTMENTS AT AMORTISED COST (CONT’D) Movements in allowance for expected credit losses are as follows: 12-Month ECL (Stage 1) RM’000 Lifetime ECL Lifetime ECL Not-credit Impaired Credit Impaired (Stage 3) (Stage 2) RM’000 RM’000 161 Total RM’000 GROUP At 1 April 2018 As previously stated - - - - Effects of adoption of MFRS 9 - - 14,193 14,193 As restated - - 14,193 14,193 New financial investments originated or purchased 42 540 - 582 Total charge to income statement 42 540 - 582 At 31 March 2019 42 540 14,193 14,775 - - - - Effects of adoption of MFRS 9 425 - 1,294 1,719 As restated 425 - 1,294 1,719 BANK At 1 April 2018 As previously stated 42 270 - 312 (137) - - (137) Total (write-back from)/charge to income statement (95) 270 - 175 At 31 March 2019 330 270 1,294 1,894 New financial investments originated or purchased Changes due to change in credit risk As at 31 March 2019, the Group’s and the Bank’s gross exposure of financial investments at amortised cost that are credit impaired is at RM18,565,000 and RM1,294,000 respectively. There is no movement during the financial year. 9. FINANCIAL ASSETS HELD-FOR-TRADING GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 - 40,905 - 25,926 - 22,845 - 22,845 - 63,750 - 48,771 At fair value Money market instruments: Commercial papers Unquoted securities: Corporate bonds and sukuk
164. 162 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 10. FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Malaysian Government securities - 1,698,601 - 1,586,503 Malaysian Government investment issues - 2,063,704 - 1,196,560 Negotiable instruments of deposits - 398,898 - 1,058,671 Commercial papers - 14,978 - 14,978 Khazanah bonds - 113,549 - 113,549 - 4,289,730 - 3,970,261 At fair value Money market instruments: Quoted securities in Malaysia: Shares - 21 - 21 Allowance for impairment losses - (11) - (11) - 10 - 10 Unquoted securities: Shares - 178,846 - 121,634 Corporate bonds and sukuk - 4,046,012 - 2,314,543 Allowance for impairment losses - (9,409) - - - 4,036,603 - 2,314,543 - 8,505,189 - 6,406,448 The table below shows the movements in allowance for impairment losses during the financial year: GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 9,420 233,362 11 135,692 (9,420) - (11) - - 233,362 - 135,692 Written-off during the financial year - (223,942) - (135,681) At end of financial year - 9,420 - 11 At beginning of financial year Effects of adoption of MFRS 9 As restated
165. 2019 Annual Report 11 . 163 FINANCIAL INVESTMENTS HELD-TO-MATURITY GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Malaysian Government securities - 141,686 - 121,271 Khazanah bonds - 147,181 - 93,036 - 288,867 - 214,307 Corporate bonds and sukuk - 18,938 - 131,690 Allowance for impairment losses - (14,193) - (1,294) - 4,745 - 130,396 - 293,612 - 344,703 At amortised cost Money market instruments: Unquoted securities: The table below shows the movements in allowance for impairment losses during the financial year: GROUP BANK 2019 RM’000 2018 RM’000 At beginning of financial year 14,193 Effects of adoption of MFRS 9 (14,193) - As restated/At end of financial year 2019 RM’000 2018 RM’000 14,193 1,294 1,294 - (1,294) - 14,193 - 1,294
166. 164 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 12. DERIVATIVE FINANCIAL ASSETS/(LIABILITIES) Derivative financial instruments are financial instruments whose values change in response to changes in prices or rates (such as foreign exchange rates, interest rates and equity prices) of the underlying instruments. These instruments allow the Group and the Bank and the banking customers to transfer, modify or reduce their foreign exchange and interest rate risk via hedge relationships. The Group and the Bank also transact in these instruments for proprietary trading purposes. The risks associated with the use of derivative financial instruments, as well as management’s policy for controlling these risks are set out in Note 45. The table below shows the Group’s and the Bank’s derivative financial instruments as at the end of the financial year. The contractual or underlying notional amounts of these derivative financial instruments and their corresponding gross positive (derivative financial asset) and gross negative (derivative financial liability) fair values as at the end of financial year are analysed below. 2019 2018 Fair Value Fair Value Liabilities RM’000 Contract/ Notional Amount RM’000 Assets RM’000 Liabilities RM’000 9,238 (14,131) 1,540,435 8,365 (96,062) 2,960,820 10,003 (10,326) 3,240,897 47,110 (13,774) - Currency spots 190,594 246 (200) 167,965 245 (185) - Currency options 133,034 420 (106) 198,450 1,449 (1,616) 6,318,009 34,489 (13,258) 5,342,800 26,882 (26,667) 109,768 1,046 (19,524) 106,485 404 (16,382) 11,158,668 55,442 (57,545) 10,597,032 84,455 (154,686) Contract/ Notional Amount RM’000 Assets RM’000 - Currency forwards 1,446,443 - Currency swaps GROUP/BANK Trading Derivatives Foreign exchange contracts: Interest rate related contracts: - Interest rate swaps Equity related contracts: -Options Total derivative assets/ (liabilities)
167. 2019 Annual Report 13 . 165 LOANS, ADVANCES AND FINANCING GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 4,254,342 3,410,188 2,811,642 2,544,606 14,169,222 14,013,987 11,220,949 11,568,619 - Syndicated term loans/financing 542,646 328,508 400,597 183,539 - Hire purchase receivables 997,023 1,160,135 700,548 728,742 - Other term loans/financing Overdrafts Term loans/financing - Housing loans/financing 15,144,370 13,838,846 11,726,939 10,807,750 Bills receivables 416,944 345,530 404,862 340,283 Trust receipts 238,682 215,712 199,118 187,088 3,262,886 3,041,120 2,492,765 2,282,838 23,217 26,123 6,233 7,744 628,329 604,110 628,329 604,110 1,842,108 2,069,989 1,333,991 1,510,347 Claims on customers under acceptance credits Staff loans (Loans to Directors: RM Nil) Credit/charge card receivables Revolving credits Share margin financing Gross loans, advances and financing Add: Sales commissions and handling fees 1,210,678 1,253,125 957,244 1,004,670 42,730,447 40,307,373 32,883,217 31,770,336 92,517 54,591 102,848 61,630 Less: Allowance for expected credit losses/impairment losses on loans, advances and financing (502,663) - (363,089) - - Individual assessment allowance - (75,733) - (64,967) - Collective assessment allowance - (296,716) - (220,435) 42,320,301 39,989,515 32,622,976 31,546,564 - Expected credit losses Total net loans, advances and financing The Bank has entered into an arrangement on Commodity Murabahah Term Financing (“CMTF”) with Alliance Islamic Bank Berhad (“AIS”), the Bank’s wholly owned subsidiary. The contract is based on Wakalah principle where the Bank will provide the funds, while the assets are managed by AIS (as the Wakeel or agent). The risk and rewards of the underlying assets are recognised and borne by the Bank. Hence, the underlying assets and allowances for expected credit losses/impairment losses are recognised and accounted for by the Bank. The total loans, advances and financing for CMTF was at RM179,795,000 as at 31 March 2019. (i) By maturity structure: GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 11,948,217 11,169,395 8,882,437 8,623,585 One year to three years 2,028,957 1,320,249 1,596,836 951,258 Three years to five years 2,507,701 2,475,345 1,734,480 1,882,787 Within one year Over five years 26,245,572 25,342,384 20,669,464 20,312,706 Gross loans, advances and financing 42,730,447 40,307,373 32,883,217 31,770,336
168. 166 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 13. LOANS, ADVANCES AND FINANCING (CONT’D) (ii) By type of customer: GROUP Domestic non-bank financial institutions BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 454,420 451,720 397,339 374,409 11,134,591 10,232,690 8,715,301 8,040,287 8,378,248 8,005,100 6,462,979 6,065,223 62,011 3,667 62,011 3,667 21,940,809 20,690,312 16,586,050 16,455,658 18,154 164,843 2,087 162,138 Domestic business enterprises - Small and medium enterprises -Others Government and statutory bodies Individuals Other domestic entities Foreign entities Gross loans, advances and financing (iii) 742,214 759,041 657,450 668,954 42,730,447 40,307,373 32,883,217 31,770,336 By interest/profit rate sensitivity: GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 30,924 18,387 3,819 12,488 975,868 1,131,382 679,421 699,989 6,680,657 5,451,667 4,632,043 4,023,034 26,180,959 25,722,537 20,862,144 21,273,098 4,659,660 3,268,524 3,485,583 2,533,620 Fixed rate - Housing loans/financing - Hire purchase receivables - Other fixed rate loans/financing Variable rate - Base lending rate plus - Base rate plus - Cost plus Gross loans, advances and financing 4,202,379 4,714,876 3,220,207 3,228,107 42,730,447 40,307,373 32,883,217 31,770,336
169. 2019 Annual Report 13 . 167 LOANS, ADVANCES AND FINANCING (CONT’D) (iv) By economic purposes: GROUP 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 1,204,373 1,245,600 950,940 997,145 777,449 933,698 496,279 525,290 Purchase of landed property 22,319,389 22,079,479 18,002,032 18,335,356 of which: - Residential 15,172,297 15,051,340 12,160,606 12,566,335 7,147,092 7,028,139 5,841,426 5,769,021 322,933 302,307 283,977 256,498 4,624,412 3,309,928 2,575,790 1,938,753 Purchase of securities Purchase of transport vehicles -Non-residential Purchase of fixed assets excluding land and buildings Personal use Credit card 628,329 604,110 628,329 604,110 Construction 598,923 451,297 542,695 433,393 - 117,705 - 117,705 Mergers and acquisitions Working capital 9,673,428 8,832,929 7,455,372 6,774,400 Others 2,581,211 2,430,320 1,947,803 1,787,686 42,730,447 40,307,373 32,883,217 31,770,336 Gross loans, advances and financing (v) BANK By geographical distribution: GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Northern region 3,099,338 2,835,527 2,231,147 2,139,991 Central region 30,518,935 28,946,946 23,759,896 23,158,486 Southern region 5,273,067 4,951,821 3,989,423 3,820,900 Sabah region 2,867,868 2,606,218 2,174,295 1,992,524 971,239 966,861 728,456 658,435 42,730,447 40,307,373 32,883,217 31,770,336 Sarawak region Gross loans, advances and financing
170. 168 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 13. LOANS, ADVANCES AND FINANCING (CONT’D) (vi) Movements in credit impaired loans, advances and financing (“impaired loans”) in Stage 3: GROUP 2019 RM’000 BANK 2019 RM’000 As previously stated under MFRS 139 577,519 470,646 Effects of adoption of MFRS 9 (16,386) (15,008) As restated 561,133 455,638 Impaired during the financial year 722,929 533,179 Recovered during the financial year (100,684) (75,340) Reclassified as unimpaired during the financial year (484,529) (379,515) (85,352) (75,194) Amount written-off (136,895) (89,644) At 31 March 2019 476,602 369,124 1.1% 1.1% GROUP 2018 RM’000 BANK 2018 RM’000 At 1 April 2017 393,349 339,580 Impaired during the financial year 848,111 635,366 Reclassified as unimpaired during the financial year (352,268) (271,181) Recovered during the financial year (198,592) (165,034) Amount written-off (113,081) (68,085) At 31 March 2018 577,519 470,646 1.4% 1.5% At 1 April 2018 Financial assets derecognised other than write-off during the financial year Gross impaired loans as % of gross loans, advances and financing (vii) Movements in impaired loans, advances and financing under MFRS 139: Gross impaired loans as % of gross loans, advances and financing
171. 2019 Annual Report 13 . 169 LOANS, ADVANCES AND FINANCING (CONT’D) (viii) Credit impaired loans analysed by economic purposes: GROUP 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 - 50 - 50 17,088 13,671 14,777 10,131 Purchase of landed property 234,412 347,159 184,647 281,386 of which: - Residential 153,789 188,970 129,916 155,226 80,623 158,189 54,731 126,160 Purchase of fixed assets excluding land and buildings 21,220 5,635 20,579 4,754 Personal use 81,293 56,852 47,995 35,527 Purchase of securities Purchase of transport vehicles -Non-residential Credit card 9,045 9,074 9,045 9,074 Construction 8,429 11,771 8,429 11,771 79,382 98,433 60,685 89,864 Working capital Others Gross impaired loans (ix) BANK 25,733 34,874 22,967 28,089 476,602 577,519 369,124 470,646 Credit impaired loans by geographical distribution: GROUP 2019 RM’000 BANK 2018 RM’000 2019 RM’000 2018 RM’000 Northern region 49,667 42,540 39,874 34,658 Central region 326,982 417,859 246,940 336,653 Southern region 63,370 78,417 49,183 65,560 Sabah region 25,316 28,145 22,554 24,263 Sarawak region Gross impaired loans 11,267 10,558 10,573 9,512 476,602 577,519 369,124 470,646
172. 170 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 13. LOANS, ADVANCES AND FINANCING (CONT’D) (x) Movements in the allowance for expected credit losses on loans, advances and financing are as follows: 2019 12-Month ECL (Stage 1) RM’000 Lifetime ECL Lifetime ECL Not-credit Impaired Credit Impaired (Stage 3) (Stage 2) RM’000 RM’000 Total RM’000 GROUP At 1 April 2018 372,449 As previously stated under MFRS 139 90,879 Effects of adoption of MFRS 9 66,941 203,691 192,696 463,328 Transfer to Stage 1 24,268 (132,004) (7,270) (115,006) Transfer to Stage 2 (40,020) 232,846 (103,159) 89,667 As restated (181) (114,361) 254,377 139,835 New financial assets originated or purchased 70,774 154,861 15,818 241,453 Changes due to change in credit risk (9,934) 20,361 (7,814) 2,613 (39,199) (152,890) (19,415) (211,504) 30 150 - 180 5,738 8,963 132,537 147,238 - - (6,941) (6,941) 5,738 8,963 125,596 140,297 - (135) (100,827) (100,962) 72,679 212,519 217,465 502,663 Transfer to Stage 3 Financial assets derecognised other than write-off Other adjustment Unwinding of discount Total charge to income statement Write-off At 31 March 2019 BANK At 1 April 2018 285,402 As previously stated under MFRS 139 52,797 Effects of adoption of MFRS 9 43,894 137,652 156,653 338,199 Transfer to Stage 1 15,264 (90,649) (5,930) (81,315) Transfer to Stage 2 (24,760) 154,042 (71,881) 57,401 As restated (148) (65,538) 178,889 113,203 New financial assets originated or purchased 46,449 120,924 7,800 175,173 Changes due to change in credit risk (5,213) 5,001 (4,699) (4,911) (26,381) (118,951) (16,490) (161,822) Transfer to Stage 3 Financial assets derecognised other than write-off Other adjustment Unwinding of discount Total charge to income statement Write-off At 31 March 2019 30 150 - 180 5,241 4,979 87,689 97,909 - - (5,408) (5,408) 5,241 4,979 82,281 92,501 - (9) (67,602) (67,611) 49,135 142,622 171,332 363,089
173. 2019 Annual Report 13 . 171 LOANS, ADVANCES AND FINANCING (CONT’D) (x) Movements in the allowance for impairment losses on loans, advances and financing are as follows: (cont’d) Stage 1 expected credit losses (“ECL”) for the Group and the Bank increased by RM5.7 million and RM5.2 million during the financial year mainly due to: • • Newly originated loans, advances and financing for the Group’s and the Bank’s amounting to RM23.2 billion and RM15.2 billion; Transfer of the Group’s and the Bank’s gross carrying amount from Stage 2 and 3 to Stage 1 by RM4.3 billion and RM3.4 billion; Offset by • • Settlement of the Group’s and the Bank’s gross carrying amount of RM17.5 billion and RM11.9 billion; and Transfer of the Group’s and the Bank’s gross carrying amount from Stage 1 to Stage 2 by RM5.3 billion and RM4.1 billion. Stage 2 ECL for the Group and the Bank increased by RM9.0 million and RM4.9 million mainly due to: • • Transfer of the Group’s and the Bank’s gross carrying amount from Stage 1 and 3 to Stage 2 by RM5.6 billion and RM4.3 billion; Newly originated loans, advances and financing for the Group’s and the Bank’s amounting to RM4.8 billion and RM3.2 billion; Offset by • • Transfer of the Group’s and the Bank’s gross carrying amount from Stage 2 to Stage 1 and 3 by RM5.0 billion and RM3.8 billion; and Settlement of the Group’s and the Bank’s gross carrying amount of RM4.5 billion and RM3.2 billion. Stage 3 ECL for the Group and the Bank increased by RM132.5 million and RM87.7 million mainly due to: • Transfer of the Group’s and the Bank’s gross carrying amount from Stage 1 and 2 to Stage 3 by RM0.7 billion and RM0.5 billion; Offset by • Transfer of the Group’s and the Bank’s gross carrying amount from Stage 3 to Stage 2 by RM0.4 billion and RM0.3 billion. The gross carrying amount of the Group and the Bank were written-off by RM137.3 million and RM89.6 million had resulted in the reduction of Stage 3 and 2.
174. 172 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 13. LOANS, ADVANCES AND FINANCING (CONT’D) GROUP 2018 RM’000 BANK 2018 RM’000 66,627 64,147 Individual assessment allowance At 1 April 2017 Net allowance made during the financial year (net) 31,876 24,085 Amount written-off (25,229) (24,617) Transfers from collective assessment allowance At 31 March 2018 2,459 1,352 75,733 64,967 313,328 234,637 Collective assessment allowance At 1 April 2017 Net allowance made during the financial year (net) 73,699 30,618 Amount written-off (87,852) (43,468) Transfers to individual assessment allowance At 31 March 2018 14. (2,459) (1,352) 296,716 220,435 OTHER ASSETS GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Other receivables 86,513 68,394 72,185 54,502 Collateral pledged for derivative transactions 23,292 37,136 23,056 36,902 Settlement account 94,606 42,924 94,606 42,924 8,775 8,690 8,122 8,020 Deposits 20,038 16,430 18,573 14,992 Amounts due from subsidiaries [Note (a)] - - 133,557 46,794 Amount due from joint venture [Note (a)] 299 392 299 392 233,523 173,966 350,398 204,526 Prepayment Allowance for expected credit losses/impairment losses on other receivables [Note (b)] (34,385) (32,017) (29,604) (27,578) 199,138 141,949 320,794 176,948 Note: (a) Amounts due from subsidiaries and joint venture GROUP Non-interest bearing BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 299 392 133,856 47,186 The amounts due from subsidiaries and joint venture are unsecured, interest-free and repayable upon demand.
175. 2019 Annual Report 14 . 173 OTHER ASSETS (CONT’D) Note: (cont’d) (b) Movements for allowance for expected credit losses/impairment losses on other receivables are as follows: Lifetime ECL RM’000 GROUP At 1 April 2018 32,017 As previously stated - Effects of adoption of MFRS 9 32,017 As restated New financial assets originated or purchased 1,174 Financial assets derecognised other than write-off (1,382) Changes due to change in credit risk 3,527 Total charge to income statement 3,319 (951) Write-off 34,385 At 31 March 2019 BANK At 1 April 2018 27,578 As previously stated - Effects of adoption of MFRS 9 27,578 As restated Changes due to change in credit risk 2,977 Total charge to income statement 2,977 (951) Write-off 29,604 At 31 March 2019 GROUP 2018 RM’000 BANK 2018 RM’000 29,535 24,409 Allowance made during the financial year net of write-back 4,047 3,169 Amount written-off (1,565) - At 31 March 2018 32,017 27,578 At 1 April 2017
176. 174 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 15. 16. STATUTORY DEPOSITS (a) Non-interest bearing statutory deposits for the Group and the Bank of RM1,521,492,000 and RM1,142,108,000 (2018: RM1,408,216,000 and RM1,092,566,000) respectively are maintained with Bank Negara Malaysia in compliance with Section 26(2)(c) of the Central Bank of Malaysia Act, 2009, the amounts of which are determined as a set percentage of total eligible liabilities. (b) Interest bearing statutory deposits of RM100,000 (2018: RM100,000) relating to a subsidiary, Alliance Trustee Berhad which is maintained with Accountant-General in compliance with Section 3(f) of the Trust Companies Act, 1949. INVESTMENTS IN SUBSIDIARIES BANK 2019 RM’000 2018 RM’000 989,102 892,820 - 95,745 Unquoted shares, at cost At beginning of financial year Acquisition via group reorganisation Subscription of ordinary shares in subsidiaries At end of financial year - 537 989,102 989,102 The Bank’s subsidiaries, all of which incorporated in Malaysia, are: Name Principal activities Effective equity interest 2019 % 2018 % Alliance Investment Bank Berhad Investment banking business including Islamic banking, provision of stockbroking services and related financial services 100 100 Alliance Islamic Bank Berhad Islamic banking, finance business and the provision of related financial services 100 100 Alliance Direct Marketing Sdn. Bhd. Dealing in sales and distribution of consumer and commercial banking products 100 100 AllianceGroup Nominees (Asing) Sdn. Bhd. Nominee services 100 100 AllianceGroup Nominees (Tempatan) Sdn. Bhd. Nominee services 100 100 Alliance Trustee Berhad [Note (a)] Trustee services 100 100 Alliance Financial Group Berhad (under members’ voluntary winding up) Dormant 100 100
177. 175 2019 Annual Report 16 . INVESTMENTS IN SUBSIDIARIES (CONT’D) The Bank’s subsidiaries, all of which incorporated in Malaysia, are: (cont’d) Name Principal activities Effective equity interest 2019 % 2018 % Subsidiaries of Alliance Investment Bank Berhad ARSB Alliance Sdn. Bhd. (under members’ voluntary winding up) Dormant 100 100 KLCS Sdn. Bhd. (under members’ voluntary winding up) Dormant 100 100 AIBB Nominees (Tempatan) Sdn. Bhd. (dissolved on 16.4.2018) Liquidated - 100 Subsidiaries of Alliance Financial Group Berhad Hijauan Setiu Sdn. Bhd. (under members’ voluntary winding up) Dormant 100 100 Setiu Intergrated Resort Sdn. Bhd. (under members’ voluntary winding up) Dormant 100 100 Kota Indrapura Development Corporation Berhad (under members’ voluntary winding up) Dormant 100 100 Note: (a) Alliance Trustee Berhad is jointly held by the following subsidiaries: Name Effective equity interest 2019 % 2018 % Alliance Investment Bank Berhad 20 20 Alliance Direct Marketing Sdn. Bhd. 20 20 AllianceGroup Nominees (Asing) Sdn. Bhd. 20 20 AllianceGroup Nominees (Tempatan) Sdn. Bhd. 20 20
178. 176 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 17. INVESTMENT IN JOINT VENTURE GROUP 2019 RM’000 2018 RM’000 At beginning of financial year 693 650 Share of results 109 43 802 693 - 113 As restated - 113 Employees’ Shares Scheme vested during the financial year - (113) - - 802 693 802 693 Unquoted shares Employees’ Share Scheme [Note (a)] At beginning of financial year Effects of group reorganisation Net Carrying Amount Represented by: Share of net tangible assets Note: (a) This amount is in respect of the services rendered by the employees of the Bank’s joint venture, pursuant to the Employees’ Share Scheme. Details of the joint venture, which is incorporated in Malaysia, are as follows: Name AllianceDBS Research Sdn. Bhd. Principal activities Research and stock analysis Effective equity interest 2019 % 2018 % 51 51 Investment in AllianceDBS Research Sdn. Bhd. (“ADBS”) is accounted for as an investment in joint venture in accordance with MFRS 128 “Investment in Associates and Joint Ventures” because both of the Group and the other joint venturer have joint control over the decision making of the entity and rights to net assets of the entity.
179. 2019 Annual Report 17 . INVESTMENT IN JOINT VENTURE (CONT’D) The summarised financial information of the joint venture are as follows: 177 GROUP 2019 RM’000 2018 RM’000 2,377 2,223 Assets and Liabilities Current assets Cash and short term funds 546 565 2,923 2,788 509 409 3,432 3,197 Other liabilities (non-trade) 1,860 1,838 Total liabilities 1,860 1,838 Net assets 1,572 1,359 6,585 6,570 Profit before tax for the financial year 284 281 Profit after tax for the financial year 213 84 Depreciation and amortisation (31) (18) Taxation (71) (197) 1,359 1,275 213 84 1,572 1,359 802 693 Other current assets Total current assets Non-current assets Total assets Current liabilities The summarised statement of comprehensive income is as follow: Revenue The above profit includes the following: Reconciliation of summarised financial information: Net assets At beginning of financial year Profit for the financial year At end of financial year Carrying value at 51% share of the equity interest of a joint venture
180. 18 . 11,673 - 1,953 Written-off 3,195 - At 31 March 2019 Net Carrying Amount At 1 April 2018/31 March 2019 1,953 8,441 37 - - Written-off - - Accumulated Impairment Losses 118 - - Charge for the financial year Disposals 3,077 - At 1 April 2018 Accumulated Depreciation At 31 March 2019 - - - Additions 11,673 50 years or more RM’000 1,953 Freehold land RM’000 807 - 1,043 - - 19 1,024 1,850 - - - 1,850 Less than 50 years RM’000 Leasehold land Disposals At 1 April 2018 Cost 2019 GROUP PROPERTY, PLANT AND EQUIPMENT 17,388 25 12,919 - - 587 12,332 30,332 - - - 30,332 Buildings RM’000 6,859 - 118,925 (383) - 6,099 113,209 125,784 (387) - 1,951 124,220 Renovations RM’000 NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 16,347 - 40,408 (4,042) (1,348) 6,876 38,922 56,755 (4,065) (1,352) 5,876 56,296 Office equipment and furniture RM’000 18,040 - 59,395 (1,296) - 9,496 51,195 77,435 (1,311) (57) 16,733 62,070 Computer equipment RM’000 662 - 208 - - 138 70 870 - - - 870 Motor vehicles RM’000 70,497 62 236,093 (5,721) (1,348) 23,333 219,829 306,652 (5,763) (1,409) 24,560 289,264 Total RM’000 178 Alliance Bank Malaysia Berhad (88103-W)
181. 18 . Net Carrying Amount 1,953 37 - - At 31 March 2018 8,559 37 - - 3,077 Accumulated Impairment Losses At 1 April 2017 Impaired during the financial year [Note 38] - At 31 March 2018 - - - - Disposals 118 2,959 - - - 2,959 11,673 11,673 11,673 50 years or more RM’000 826 - - - 1,024 - - 19 1,005 - 1,005 1,850 1,850 1,850 Less than 50 years RM’000 Leasehold land - - 1,953 1,953 1,953 Written-off Charge for the financial year As restated Effect of group reorganisation At 1April 2017 Accumulated Depreciation 2018 Cost At 1 April 2017 As previously stated Effect of group reorganisation As restated Additions Disposals Written-off At 31 March 2018 GROUP Freehold land RM’000 PROPERTY, PLANT AND EQUIPMENT (CONT’D) 17,975 25 25 - 12,332 - - 587 11,745 - 11,745 30,332 30,332 30,332 Buildings RM’000 11,011 - - - 113,209 (782) - 7,385 106,606 620 105,986 122,407 631 123,038 2,032 (850) 124,220 Renovations RM’000 17,374 - - - 38,922 (9,349) (40) 6,362 41,949 411 41,538 57,010 416 57,426 8,475 (47) (9,558) 56,296 Office equipment and furniture RM’000 10,875 - - - 51,195 (11,158) (9) 6,123 56,239 168 56,071 66,955 165 67,120 6,139 (17) (11,172) 62,070 Computer equipment RM’000 800 - - - 70 (15) (381) 137 329 355 (26) 887 501 1,388 24 (527) (15) 870 Motor vehicles RM’000 69,373 62 62 - 219,829 (21,304) (430) 20,731 220,832 1,554 219,278 293,067 1,713 294,780 16,670 (591) (21,595) 289,264 Total RM’000 2019 Annual Report 179
182. 18 . 11,673 - 1,953 Written-off 3,195 - At 31 March 2019 Net Carrying Amount At 1 April 2018/31 March 2019 1,953 8,441 37 - - Written-off - - Accumulated Impairment Losses 118 - - Charge for the financial year Disposals 3,077 - At 1 April 2018 Accumulated Depreciation At 31 March 2019 - - - Additions 11,673 1,953 50 years or more RM’000 807 - 1,043 - - 19 1,024 1,850 - - - 1,850 Less than 50 years RM’000 Leasehold land Disposals At 1 April 2018 Cost 2019 BANK Freehold land RM’000 PROPERTY, PLANT AND EQUIPMENT (CONT’D) 17,389 25 11,959 - - 587 11,372 29,373 - - - 29,373 Buildings RM’000 6,171 - 115,717 (383) - 5,694 110,406 121,888 (387) - 1,592 120,683 Renovations RM’000 NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 15,710 - 41,803 (4,042) (1,348) 6,710 40,483 57,513 (4,066) (1,352) 5,851 57,080 Office equipment and furniture RM’000 18,006 - 54,400 (1,296) - 9,408 46,288 72,406 (1,311) (57) 16,679 57,095 Computer equipment RM’000 701 - 243 - - 138 105 944 - - - 944 Motor vehicles RM’000 69,178 62 228,360 (5,721) (1,348) 22,674 212,755 297,600 (5,764) (1,409) 24,122 280,651 Total RM’000 180 Alliance Bank Malaysia Berhad (88103-W)
183. 18 . 8,559 37 37 - 1,953 - 2,959 118 3,077 11,673 11,673 - - 1,953 1,953 50 years or more RM’000 826 - - 1,005 19 1,024 1,850 1,850 Less than 50 years RM’000 Leasehold land 17,976 25 25 - 10,785 587 11,372 29,373 29,373 Buildings RM’000 10,277 - - 104,181 6,920 (695) 110,406 119,667 1,770 (754) 120,683 Renovations RM’000 16,597 - - 43,313 6,196 (40) (8,986) 40,483 57,864 8,456 (47) (9,193) 57,080 Office equipment and furniture RM’000 10,807 - - 49,234 6,009 (9) (8,946) 46,288 60,028 6,041 (17) (8,957) 57,095 Computer equipment RM’000 839 Details of the finance lease arrangment is disclosed in Note 26. - - 10 137 (27) (15) 105 962 24 (27) (15) 944 Motor vehicles RM’000 Included in property, plant and equipment of the Group and the Bank are computer equipment under finance lease with a carrying amount of RM688,000 (2018: RM3,329,000). Note: Net Carrying Amount Accumulated Impairment Losses At 1 April 2017 Impaired during the financial year [Note 38] At 31 March 2018 Accumulated Depreciation At 1 April 2017 Charge for the financial year Disposals Written-off At 31 March 2018 2018 Cost At 1 April 2017 Additions Disposals Written-off At 31 March 2018 BANK Freehold land RM’000 PROPERTY, PLANT AND EQUIPMENT (CONT’D) 67,834 62 62 - 211,487 19,986 (76) (18,642) 212,755 283,370 16,291 (91) (18,919) 280,651 Total RM’000 2019 Annual Report 181
184. 182 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 19. DEFERRED TAX Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The net deferred tax assets and liabilities shown in the statement of financial position after appropriate offsetting are as follows: GROUP Deferred tax assets Deferred tax liabilities BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 72,972 22,664 50,116 9,223 (2,163) (11,907) - - 70,809 10,757 50,116 9,223 GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 10,757 4,073 9,223 4,088 - 705 - - At beginning of financial year As previously stated Effects of group reorganisation Effects of adoption of MFRS 9 34,364 - 20,873 - As restated 45,121 4,778 30,096 4,088 Recognised in statement of income 45,385 10,942 28,749 8,291 Recognised in equity (19,697) (4,963) (8,729) (3,156) At end of financial year 70,809 10,757 50,116 9,223
185. 2019 Annual Report 19 . DEFERRED TAX (CONT’D) The components and movements of deferred tax assets and liabilities during the financial year are as follows: GROUP Allowance for expected credit losses RM’000 Other liabilities RM’000 Financial investments availablefor-sale RM’000 183 Financial investments at fair value through other comprehensive income RM’000 Property, plant and equipment RM’000 Total RM’000 Deferred tax assets/(liabilities) At 1 April 2017 As previously stated - 42,389 (31,348) - (6,968) 4,073 Effects of group reorganisation - 699 - - 6 705 As restated - 43,088 (31,348) - (6,962) 4,778 - 6,557 - - 4,385 10,942 Recognised in statement of income Recognised in equity - - (4,963) - - (4,963) At 31 March 2018/1 April 2018 - 49,645 (36,311) - (2,577) 10,757 Effects of adoption of MFRS 9 - - 36,311 (1,947) - 34,364 As restated - 49,645 - (1,947) (2,577) 45,121 46,878 (651) - - (842) 45,385 - - - (19,697) - (19,697) 46,878 48,994 - (21,644) (3,419) 70,809 Financial investments at fair value through other comprehensive income RM’000 Property, plant and equipment RM’000 Total RM’000 Recognised in statement of income Recognised in equity At 31 March 2019 Allowance for expected credit losses RM’000 Other liabilities RM’000 Financial investments availablefor-sale RM’000 At 1 April 2017 - 31,240 (20,499) - (6,653) 4,088 Recognised in statement of income - 3,996 - - 4,295 8,291 BANK Deferred tax assets/(liabilities) Recognised in equity - - (3,156) - - (3,156) At 31 March 2018/1 April 2018 - 35,236 (23,655) - (2,358) 9,223 Effects of adoption of MFRS 9 - - 23,655 (2,782) - 20,873 As restated - 35,236 - (2,782) (2,358) 30,096 32,163 (2,813) - - (601) 28,749 - - - (8,729) - (8,729) 32,163 32,423 - (11,511) (2,959) 50,116 Recognised in statement of income Recognised in equity At 31 March 2019
186. 184 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 20. INTANGIBLE ASSETS GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 301,997 301,997 186,272 186,272 At beginning of financial year 3,292 3,292 45 45 Impaired during the financial year 8,740 - - - At end of financial year 12,032 3,292 45 45 Net carrying amount 289,965 298,705 186,227 186,227 244,736 203,836 236,710 198,008 Additions 64,327 56,574 61,664 55,300 Disposal - - - (1,077) (1,850) (15,674) (1,752) (15,521) 307,213 244,736 296,622 236,710 At beginning of financial year 134,039 125,180 129,956 122,249 Charge for the financial year 30,206 24,161 29,117 23,346 - - - (402) (28) (15,302) (28) (15,237) At end of financial year 164,217 134,039 159,045 129,956 Net carrying amount 142,996 110,697 137,577 106,754 Total carrying amount 432,961 409,402 323,804 292,981 Goodwill Cost: At beginning of financial year/end of financial year Impairment: Computer software Cost: At beginning of financial year Written-off At end of financial year Accumulated amortisation: Disposal Written-off Note: Computer software of the Group and of the Bank includes work in progress of RM35,819,000 and RM35,549,000 (2018: RM43,146,000 and RM42,774,000) respectively which is not amortised until ready for use.
187. 2019 Annual Report 20 . 185 INTANGIBLE ASSETS (CONT’D) (a) Impairment Test on Goodwill Goodwill is reviewed annually for impairment, or more frequently when there are indications that impairment may have occurred. Goodwill has been allocated to the Group’s cash-generating units (“CGU”) that are expected to benefit from the synergies of the acquisitions, identified according to the business segments as follows: GROUP 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Consumer banking 101,565 101,565 67,513 67,513 Business banking 100,822 100,822 81,448 81,448 Financial markets 83,261 83,261 36,960 36,960 Corporate finance and capital market Stockbroking business BANK 630 630 40 40 3,687 12,427 266 266 289,965 298,705 186,227 186,227 For annual impairment testing purposes, the recoverable amount of the CGUs, which are reportable business segments, are determined based on their value-in-use. The value-in-use calculations uses pre-tax cash flow projections based on financial budget and business plans approved by the Board of Directors. The key assumptions for the computation of value-in-use include the discount rates, cash flow projection and growth rates applied are as follows: (i) Discount rate The discount rate used are pre-tax and reflect specific risks relating to the CGUs. The discount rate used in determining the recoverable amount are as follows: GROUP 2019 % 2018 % Consumer banking 7.92 10.56 Business banking 7.93 10.86 Financial markets 6.47 6.18 Corporate finance and capital market 7.92 9.92 Stockbroking business 7.87 9.80 (ii) Cash flow projections and growth rate Cash flow projections are based on four-year financial budget and business plans approved by the Board of Directors. The cash flow projections are derived based on a number of key factors including past performance and management’s expectation of market developments. Cash flows beyond the fourth year are extrapolated in perpetuity using terminal growth rate at 4.6% (2018: 5.2%), representing the forecasted GDP growth rate of the country for the CGUs.
188. 186 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 20. INTANGIBLE ASSETS (CONT’D) (a) Impairment Test on Goodwill (cont’d) (iii)Impairment 21. During the financial year, an impairment loss of RM8,740,000 has been recognised in respect of the stockbroking business. The impairment loss is driven by lower projected cash flows resulting from the reassessment of expected future business performance in the light of current trading and economic condition. (b) Sensitivity to Changes in Assumptions Management is of a view that any reasonable change key assumptions would not cause the carrying amount of the goodwill to exceed the recoverable amount of the CGUs except for Stockbroking business. DEPOSITS FROM CUSTOMERS GROUP Demand deposits Savings deposits Fixed/investment deposits Money market deposits Negotiable instruments of deposits (i) BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 14,207,328 14,161,040 11,510,890 11,752,631 1,753,526 1,792,710 1,432,970 1,468,774 25,676,643 24,142,700 19,430,211 18,393,938 2,917,200 2,277,386 2,206,407 1,716,143 462,935 366,624 402,384 176,884 45,017,632 42,740,460 34,982,862 33,508,370 The maturity structure of fixed deposits, money market deposits and negotiable instruments of deposits are as follows: GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Due within six months 19,128,642 17,234,419 14,877,446 13,695,607 Six months to one year 8,833,425 8,371,649 6,994,821 5,709,738 One year to three years 730,686 1,018,884 157,981 869,862 Three years to five years 364,025 161,758 8,754 11,758 29,056,778 26,786,710 22,039,002 20,286,965
189. 2019 Annual Report 21 . DEPOSITS FROM CUSTOMERS (CONT’D) (ii) The deposits are sourced from the following types of customers: GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 306,199 358,990 390,046 190,812 Domestic non-bank financial institutions 2,516,834 2,676,350 1,769,027 1,854,863 Government and statutory bodies 5,450,441 4,312,577 2,975,054 2,106,387 Domestic financial institutions 22. 187 Business enterprises 16,909,336 16,354,335 12,894,883 12,945,816 Individuals 18,637,918 17,941,780 15,917,675 15,432,649 Foreign entities 630,733 596,011 559,770 534,617 Others 566,171 500,417 476,407 443,226 45,017,632 42,740,460 34,982,862 33,508,370 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS GROUP Licensed banks Licensed investment banks Bank Negara Malaysia BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 252,558 203,995 12,467 63,619 30,051 22,004 - - 576,099 619,467 332,368 375,619 - 28,405 - - 858,708 873,871 344,835 439,238 Others 23. FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS Structured investments designated at fair value for the Group and the Bank include investments with embedded equity linked options, interest rate index linked options and foreign currency options. The Group and the Bank designated certain structured investments at fair value through profit or loss. The structured investments are recorded at fair value. The fair value changes of the structured investments that are attributable to the changes in own credit risk are not significant. GROUP/BANK 2019 RM’000 2018 RM’000 Structured investments 815,079 731,703 Fair value changes arising from designation at fair value through profit or loss (36,656) (49,465) 778,423 682,238
190. 188 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 24. AMOUNTS DUE TO CLIENTS AND BROKERS GROUP Due to clients 2019 RM’000 2018 RM’000 51,164 75,103 51,164 75,103 These mainly relate to amounts payable to non-margin clients and outstanding contracts entered into on behalf of clients where settlement via the Bursa Malaysia Securities Clearing Sdn. Bhd. has yet to be made. The Group’s normal trade credit terms for non-margin clients is three (3) market days according to the Bursa’s FDSS trading rules. Following the issuance of FRSIC Consensus 18, the Group no longer recognises trust monies balances in the statement of financial position, as the Group does not have any control over the trust monies to obtain the future economic benefits embodied in the trust monies. The trust monies maintained by the Group amounting to RM56,655,000 (2018: RM71,652,000) have been excluded accordingly. 25. RECOURSE OBLIGATIONS ON LOANS AND FINANCING SOLD TO CAGAMAS This relates to proceeds received from housing loans/financing and hire purchase loans/financing sold directly to Cagamas Berhad with recourse to the Group and the Bank. Under the agreement, the Group and the Bank undertakes to administer the loans/financing on behalf of Cagamas Berhad and to buy back any loans/financing which are regarded as defective based on pre-determined and agreed upon prudential criteria set by Cagamas Berhad. 26. OTHER LIABILITIES GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 488,686 292,226 406,233 243,477 8,456 32,751 8,456 32,751 175,095 157,335 166,622 143,126 80,059 53,882 80,059 53,882 Clearing account 224,575 199,469 174,407 160,002 Sundry deposits 40,962 54,924 35,705 47,306 129,763 131,282 117,929 131,534 6,122 5,866 - - 32,604 148 28,582 148 688 3,329 688 3,329 553,627 504,143 553,627 504,143 Other payables Collateral pledged for derivative transactions Bills payable Settlement account Provision and accruals Remisiers accounts Allowance for expected credit losses/impairment losses on commitment and contingencies Finance lease liabilities [Note (a)] Structured investments Amount due to joint venture [Note (b)] 160 168 - - 1,740,797 1,435,523 1,572,308 1,319,698
191. 2019 Annual Report 26 . 189 OTHER LIABILITIES (CONT’D) Note: (a) Finance lease liabilities of the Group and the Bank are as follows: GROUP/BANK Future minimum lease payments RM’000 Future finance charges RM’000 Present value of finance lease liabilities RM’000 At 31 March 2019 Within one year 695 (7) 688 695 (7) 688 2,780 (139) 2,641 695 (7) 688 3,475 (146) 3,329 At 31 March 2018 Within one year One year to five years The Group and the Bank lease computer equipment under finance lease. At the end of the lease term, the Group and the Bank have the option to acquire the assets at a nominal price deemed to be a bargain purchase option. There are no restrictive covenants imposed by the lease agreement and no arrangements have been entered into for contingent rental payments. (b) The amounts due to joint venture are unsecured, interest-free, and repayable upon demand. Movements for allowance for expected credit losses on commitments and contingencies are as follows: 2019 GROUP At 1 April 2018 As previously stated Effects of adoption of MFRS 9 As restated Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 New financial assets originated or purchased Changes due to change in credit risk Financial assets derecognised other than write-off Other adjustments Unwinding of discount Total write-back from income statement At 31 March 2019 12-Month ECL (Stage 1) RM’000 8,562 8,562 1,023 (1,396) 5,696 (3,330) (3,728) 6 (1,729) (1,729) 6,833 Lifetime ECL Lifetime ECL Not-credit Impaired Credit Impaired (Stage 3) (Stage 2) RM’000 RM’000 21,295 21,295 (10,403) 11,958 (1,058) 5,704 (2,786) (8,063) 17 (4,631) (4,631) 16,664 14,143 14,143 (401) 7,298 73 161 (12,148) (5,017) (19) (5,036) 9,107 Total RM’000 44,000 44,000 (9,380) 10,161 6,240 11,473 (5,955) (23,939) 23 (11,377) (19) (11,396) 32,604
192. 190 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 26. OTHER LIABILITIES (CONT’D) (b) The amounts due to joint venture are unsecured, interest-free, and repayable upon demand. (cont’d) Movements for allowance for expected credit losses on commitments and contingencies are as follows: (cont’d) 12-Month ECL (Stage 1) RM’000 2019 BANK Lifetime ECL Lifetime ECL Not-credit Impaired Credit Impaired (Stage 3) (Stage 2) RM’000 RM’000 Total RM’000 At 1 April 2018 - - - - Effects of adoption of MFRS 9 7,520 15,587 4,183 27,290 As restated 7,520 15,587 4,183 27,290 Transfer to Stage 1 867 (8,597) - (7,730) Transfer to Stage 2 (1,257) 10,651 (395) 8,999 Transfer to Stage 3 - (1,046) 7,069 6,023 5,120 4,157 73 9,350 As previously stated New financial assets originated or purchased Changes due to change in credit risk (3,011) (987) 538 (3,460) Financial assets derecognised other than write-off (3,148) (6,291) (2,454) (11,893) 6 9 - 15 (1,423) (2,104) 4,831 1,304 Other adjustments - - (12) (12) Total (write-back from)/charge to income statement (1,423) (2,104) 4,819 1,292 At 31 March 2019 6,097 13,483 9,002 28,582 Unwinding of discount 27. As at 31 March 2019, the Group’s and the Bank’s gross exposure of commitment and contingencies that are credit impaired was at RM16,460,000 and RM14,481,000 respectively. SUBORDINATED OBLIGATIONS GROUP BANK Note 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 RM900 million Sub-MTNs (a) 921,510 921,793 921,300 921,295 RM300 million Sub-MTNs (b) 304,830 304,829 304,745 304,714 RM150 million Additional Tier I Capital Securities (c) 153,491 152,992 153,144 153,015 RM100 million Additional Tier I Capital Securities (d) 100,391 - 100,391 - 1,480,222 1,379,614 1,479,580 1,379,024 Subordinated Medium Term Notes (“Sub-MTNs”)
193. 2019 Annual Report 27 . 191 SUBORDINATED OBLIGATIONS (CONT’D) (a) RM900 million Sub-MTNs On 27 October 2015, the Bank issued RM900 million Sub-MTNs under the RM2.0 billion Sub-MTN Programme. GROUP At cost Accumulated unaccreted discount Interest accrued BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 900,000 900,000 900,000 900,000 (324) (325) (534) (823) 21,834 22,118 21,834 22,118 921,510 921,793 921,300 921,295 The Subordinated Notes have been assigned a long term rating of A2 by RAM Rating Services Berhad with tenure of 10 years, callable five (5)-years after issue date. The coupon rate for the Sub-MTNs is fixed at 5.75% per annum, payable semi-annually throughout the entire tenure. The main features of the Sub-MTNs are as follows: (b) (i) Issue date : 27 October 2015 (ii) Tenure of the facility/issue : 10 years from the issue date and callable five (5) years after issue date (iii) Maturity date : 27 October 2025 (iv) Interest rate/coupon : 5.75% per annum, payable semi-annually in arrears (v) Call date : 27 October 2020 and thereafter on every coupon payment date (vi) The Sub-MTNs constitutes direct and unsecured obligations of the issuer, subordinated in right and priority of payment, to the extent and in the manner provided in the Sub-MTNs, ranking pari passu among themselves. (vii) In the event of winding up or liquidation of the issuer, be subordinated in right of payment to all deposit liabilities and other liabilities of the issuer, except in each case to those liabilities which by their terms rank equally in right of payment or which are subordinated to the Sub-MTNs. RM300 million Sub-MTNs On 18 December 2015, the Bank issued RM300 million Sub-MTNs under the RM2.0 billion Sub-MTN Programme. GROUP At cost Accumulated unaccreted discount Interest accrued BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 300,000 300,000 300,000 300,000 - - (85) (115) 4,830 4,829 4,830 4,829 304,830 304,829 304,745 304,714
194. 192 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 27. SUBORDINATED OBLIGATIONS (CONT’D) (b) RM300 million Sub-MTNs (cont’d) The Sub-MTNs have been assigned a long term rating of A2 by RAM Rating Services Berhad with tenure of 10 years, callable five (5)-years after issue date. The coupon rate for the Sub-MTNs is fixed at 5.65% per annum, payable semi-annually throughout the entire tenure. The main features of the Sub-MTNs are as follows: (i) Issue date : 18 December 2015 (ii) Tenure of the facility/issue : 10 years from the issue date and callable five (5) years after issue date (iii) Maturity date : 18 December 2025 (iv) Interest rate/coupon : 5.65% per annum, payable semi-annually in arrears (v) Call date : 18 December 2020 and thereafter on every coupon payment date (vi) The Sub-MTNs constitutes direct and unsecured obligations of the issuer, subordinated in right and priority of payment, to the extent and in the manner provided in the Sub-MTNs, ranking pari passu among themselves. (vii) In the event of winding up or liquidation of the issuer, be subordinated in right of payment to all deposit liabilities and other liabilities of the issuer, except in each case to those liabilities which by their terms rank equally in right of payment or which are subordinated to the Sub-MTNs. (c) RM150 million Additional Tier 1 Capital Securities On 8 November 2017, the Bank issued RM150 million Additional Tier 1 Capital Securities under the RM1.0 billion Additional Tier 1 Capital Securities Programme. GROUP At cost Accumulated unaccreted discount Interest accrued BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 150,000 150,000 150,000 150,000 (208) (707) (555) (684) 3,699 3,699 3,699 3,699 153,491 152,992 153,144 153,015 Capital Securities have been assigned a long term rating of BBB1 by RAM Rating Services Berhad. The coupon rate for the capital securities is fixed at 6.25% per annum, payable semi-annually throughout the entire tenure.
195. 2019 Annual Report 27 . 193 SUBORDINATED OBLIGATIONS (CONT’D) (c) RM150 million Additional Tier 1 Capital Securities (cont’d) The main features of the capital securities are as follows: (i) Issue date : 8 November 2017 (ii) Tenure of the facility/issue : Perpetual Non-callable five (5) years (iii) Interest rate/coupon : 6.25% per annum, payable semi-annually in arrears (iv) Call date : 8 November 2022 and thereafter on every coupon payment date (v) The Capital Securities constitutes direct and unsecured obligations of the issuer and are subordinated in right and priority of payment, to the extent and in the manner provided in the Capital Securities and the Transaction Documents, ranking pari passu among themselves. (vi) Upon the occurrence of any winding up proceeding, the amount payable on the Capital Securities will be subordinated in right of payment to all deposit liabilities and other liabilities of the issuer, except in each case to those liabilities which by their terms rank equally with or junior to the Capital Securities. (d) RM100 million Additional Tier 1 Capital Securities On 8 March 2019, the Bank issued RM100 million Additional Tier 1 Capital Securities under the RM1.0 billion Additional Tier 1 Capital Securities Programme. GROUP At cost Interest accrued BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 100,000 391 100,391 - 100,000 391 100,391 - Capital Securities have been assigned a long term rating of BBB1 by RAM Rating Services Berhad. The coupon rate for the capital securities is fixed at 5.95% per annum, payable semi-annually throughout the entire tenure. The main features of the capital securities are as follows: (i) Issue date : 8 March 2019 (ii) Tenure of the facility/issue : Perpetual Non-callable five (5) years (iii) Interest rate/coupon : 5.95% per annum, payable semi-annually (iv) Call date : 8 March 2024 and thereafter on every distribution payment date (v) The Capital Securities constitutes direct and unsecured obligations of the issuer and are subordinated in right and priority of payment, to the extent and in the manner provided in the Capital Securities and the Transaction Documents, ranking pari passu among themselves. (vi) Upon the occurrence of any winding up proceeding, the amount payable on the Capital Securities will be subordinated in right of payment to all deposit liabilities and other liabilities of the issuer, except in each case to those liabilities which by their terms rank equally with or junior to the Capital Securities.
196. 194 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 28. SHARE CAPITAL 2019 2018 RM’000 Number of ordinary shares ’000 RM’000 1,548,106 1,548,106 796,517 796,517 - - 751,589 751,589 1,548,106 1,548,106 1,548,106 1,548,106 Number of ordinary shares ’000 GROUP Ordinary shares issued and fully paid: At beginning of the financial year Effects of group reorganisation At end of financial year BANK Ordinary shares issued and fully paid: 1,548,106 1,548,106 796,517 796,517 Issuance of shares to former holding company - - 100,000 100,000 Bonus issue - - 651,589 651,589 1,548,106 1,548,106 1,548,106 1,548,106 At beginning of the financial year At end of financial year 29.RESERVES GROUP Note BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Non-distributable: Statutory reserve (a) - - - - Share premium (b) - - - - Regulatory reserves (c) 178,397 186,064 160,798 160,029 Capital reserves (d) 100,150 100,150 95,515 95,515 FVOCI reserves (e) 78,513 - 36,831 - Revaluation reserves (f) - 114,987 - 74,907 Equity contribution from former parent (g) - - - - Employees’ Share Scheme (“ESS”) reserves (g) - - - - 357,060 401,201 293,144 330,451 3,827,676 3,510,283 3,128,589 2,866,142 4,184,736 3,911,484 3,421,733 3,196,593 Distributable: Retained profits
197. 2019 Annual Report 29 . 195 RESERVES (CONT’D) Notes: (a) The requirement to maintain a statutory reserve fund is no longer required pursuant to BNM’s Capital Fund Policy with effect from 3 May 2017. (b) Share premium is used to record premium arising from new shares issued by the Bank. Prior to 31 January 2017, the application of the share premium account was governed by Section 60 and 61 of the Companies Act 1965. In accordance with the transitional provisions set out in Section 618 (2) of the Companies Act, 2016, on 31 January 2017 any amount standing to the credit of the Group’s and the Bank’s share premium account have been aggregated as part of the Group’s and the Bank’s share capital (refer to Note 28). Notwithstanding this provision, the Group and the Bank may within 24 months from the commencement of the Companies Act, 2016, use the amount standing to the credit of its share premium account for purposes as set out in Section 618 (3) of the Companies Act, 2016. (c) Regulatory reserves represent the Group’s and the Bank’s compliance with BNM Revised Policy Documents in Financial Reporting and Financial Reporting for Islamic Banking Institutions effective 1 April 2018 whereby the Bank and its banking subsidiaries must maintain in aggregate, loss allowance for non-credit-impaired exposures and regulatory reserves of no less than 1% of total credit exposures, net of loss allowance for credit-impaired exposures. Prior to 1 April 2018, the Group is required to maintain in aggregate collective impairment allowances of no less than 1.2% of the total outstanding loans, advances and financing, net of individual impairment allowances, in accordance with the BNM guideline dated 6 April 2015 on “Classification and Impairment Provisions for Loans/Financing”. (d) Capital reserves are in respect of retained profits capitalised for a bonus issue by a subsidiary. (e) FVOCI reserves are the cumulative gains and losses arising on the revaluation of debt instruments measured at FVOCI, net off cumulative gains and losses transferred to profit or loss upon disposal and the cumulative allowance for expected credit losses on these investments. (f) The revaluation reserves are in respect of unrealised fair value gains and losses on financial investments available-for-sale, net off cumulative gains and losses transferred to profit or loss upon disposal and impairment. (g) The ESS reserves and equity contribution from former parent relate to the equity-settled share options/share grants to former Executive Directors and employees. This reserve is made up of the estimated fair value of the share options/share grants based on the cumulative services received from former Executive Directors and employees over the vesting period. The scheme ended on 2 December 2017. 30. ALLIANCE FINANCIAL GROUP BERHAD EMPLOYEES’ SHARE SCHEME The Alliance Financial Group Berhad Employees’ Share Scheme (“AFG Bhd ESS”) is governed by the By-Laws approved by the shareholders at an Extraordinary General Meeting held on 28 August 2007. The AFG Bhd ESS which comprises the Share Option Plan, the Share Grant Plan and the Share Save Plan took effect on 3 December 2007 and is in force for a period of 10 years. The salient features of the AFG Bhd ESS are as follows: (i) The AFG Bhd ESS is implemented and administered by the Employees’ Share Participating Scheme Committee (“ESPS Committee”) in accordance with the By-Laws. (ii) The total number of shares which may be available under the AFG Bhd ESS shall not exceed in aggregate 10% of the total issued and paid-up share capital of AFG Bhd at any one time during the existence of the AFG Bhd ESS and out of which not more than 50% of the shares available under the AFG Bhd ESS shall be allocated, in aggregate, to Directors and senior management. In addition, not more than 10% of the shares available under the AFG Bhd ESS shall be allocated to any individual Director or employee who, either singly or collectively through his/her associates, holds 20% or more in the issued and paid-up capital of AFG Bhd.
198. 196 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 30. ALLIANCE FINANCIAL GROUP BERHAD EMPLOYEES’ SHARE SCHEME (CONT’D) (iii) The subscription price for each share under the Share Option Plan, Share Grant Plan and Share Save Plan may be at a discount (as determined by the ESPS Committee or such other pricing mechanism as may from time to time be permitted by Bursa Malaysia Securities Berhad or such other relevant regulatory authorities), provided that the discount shall not be more than 10% from the 5-day weighted average market price of the Bank’s shares transacted on Bursa Malaysia Securities Berhad immediately preceding the date on which an offer is made or at par value of the shares, whichever is higher. (iv) The ESPS Committee may at its discretion offer to any Director or employee of a corporation in the Group to participate in the AFG Bhd ESS if the Director or employee: (a) (b) (c) (d) has attained the age of 18 years; in the case of a Director, is on the board of directors of a corporation in the Group; in the case of an employee, is employed by a corporation in the Group; and is not a participant of any other employee share option scheme implemented by any other corporation within the Group which is in force for the time being. Provided that the non-executive directors of the Group who are not employed by a corporation in the Group shall not be eligible to participate in the Share Save Plan. (v) Under the Share Option Plan and Share Grant Plan, the ESPS Committee may stipulate the performance targets, performance period, value and/or other conditions deemed appropriate. (vi) Under the Share Save Plan, the ESPS Committee may at its discretion offer Share Save Option(s) to any employees of the Group to subscribe for the Bank’s shares and the employee shall authorise deductions to be made from his/her salary. (vii) AFG Bhd may decide to satisfy the exercise of options/awards of shares under the AFG Bhd ESS through the issue of new Bank’s shares, transfer of existing shares or a combination of both new and existing shares. (viii) AFG Bhd may appoint or authorise the trustee of the AFG Bhd ESS to acquire its shares from the open market to give effect to the AFG Bhd ESS. The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and movements in, share grants: 2018 Share Grants Number of Share Grants 2019 Share Grants Number of Share Grants Vested ’000 Lapsed/ forfeited ’000 At end of financial year ’000 At beginning of financial year ’000 - - - - 2015 Share Scheme (2nd grant) - - - 2016 Share Scheme - - - At beginning of financial year ’000 2015 Share Scheme (1st grant) GROUP WAEP Vested ’000 Lapsed/ forfeited ’000 At end of financial year ’000 356 (325) (31) - - 12 (12) - - - - 773 (725) (48) - - - - 1,141 (1,062) (79) - - - - - - - -
199. 2019 Annual Report 30 . 197 ALLIANCE FINANCIAL GROUP BERHAD EMPLOYEES’ SHARE SCHEME (CONT’D) 2018 Share Grants Number of Share Grants 2019 Share Grants Number of Share Grants Vested ’000 Lapsed/ forfeited ’000 At end of financial year ’000 At beginning of financial year ’000 - - - - 2015 Share Scheme (2nd grant) - - - 2016 Share Scheme - - - At beginning of financial year ’000 2015 Share Scheme (1st grant) BANK WAEP (a) Vested ’000 Lapsed/ forfeited ’000 At end of financial year ’000 298 (279) (19) - - 12 (12) - - - - 640 (598) (42) - - - - 950 (889) (61) - - - - - - - - Details of share grants at the end of financial year: Vesting Schedule 2015 Share Grants (1st grant) 2015 Share Grants (2nd grant) 2016 Share Grants Vesting Dates - First 33.3% of the share grants 23.06.2015 - Second 33.3% of the share grants 23.06.2016 - Third 33.4% of the share grants 23.06.2017 - First 33.3% of the share grants 26.01.2016 - Second 33.3% of the share grants 26.01.2017 - Third 33.4% of the share grants 26.11.2017 - First 33% of the share grants 22.06.2016 - Second 67% of the share grants 22.06.2017
200. 198 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 30. ALLIANCE FINANCIAL GROUP BERHAD EMPLOYEES’ SHARE SCHEME (CONT’D) (b) Fair value of share grants offered/awarded: The fair value of share grants under the Share Grant Plan was estimated by an external valuer using a binomial model, taking into account the terms and conditions upon which the share options/share grants were offered/awarded. The rates are based on observable prices. The fair value of share options and share grants measured at offer/award date and the assumptions are as follows: Share Grants 2015 (1st grant) 2015 (2nd grant) 2016 4.3400 - - - 4.3500 - Fair value of the shares as at grant date, - 23 June 2014 (RM) - 26 January 2015 (RM) - 22 June 2015 (RM) - - 4.0600 Weighted average share price (RM) 4.7400 4.7430 4.3700 Expected volatility (%) 0.2418 0.1884 0.1736 3.17 to 4.43 3.36 to 4.39 2.99 to 4.29 4.36 4.31 4.31 Risk free rate (%) Expected dividend yield (%) 31. The expected life of the share options is based on the exercisable period of the option and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of the share option/share grant were incorporated into the measurement of fair value. The risk-free rate is employed using a range of risk-free rates for Malaysian Government Securities (“MGS”) tenure from 1-year to 20-year MGS. INTEREST INCOME GROUP 2019 RM’000 2018 RM’000 BANK 2019 RM’000 2018 RM’000 1,637,738 1,522,604 1,608,250 1,504,903 Money at call and deposit placements with financial institutions 12,782 12,546 22,226 16,640 Financial investments at fair value through other comprehensive income Loans, advances and financing 260,639 - 249,720 - Financial investments at amortised cost 14,174 - 18,176 - Financial investments available-for-sale - 267,241 - 260,478 Financial investments held-to-maturity Others Accretion of discount less amortisation of premium - 17,593 - 17,242 751 359 751 357 1,926,084 1,820,343 1,899,123 1,799,620 84,578 77,535 83,707 75,417 2,010,662 1,897,878 1,982,830 1,875,037 Included in interest income on loans, advances and financing for the current financial year is interest/profit accrued on impaired loans/financing of the Group and the Bank of RM5,465,000 (2018: RM3,722,000 and RM3,487,000 respectively).
201. 2019 Annual Report 32 . INTEREST EXPENSE GROUP Deposits and placements of banks and other financial institutions Deposits from customers Recourse obligations on loans and financing sold to Cagamas Other borrowings Subordinated obligations Others 33. 199 BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 17,056 887,040 25,182 78,732 4,569 1,012,579 25,294 846,632 24,142 167 72,617 3,875 972,727 9,787 865,897 25,182 78,915 4,569 984,350 13,833 827,153 24,142 167 72,735 3,875 941,905 NET INCOME FROM ISLAMIC BANKING BUSINESS GROUP Income derived from investment of depositors’ funds and others Income derived from investment of Islamic Banking funds Income attributable to the depositors and financial institutions 2019 RM’000 2018 RM’000 593,548 60,588 (295,079) 359,057 488,710 54,332 (224,797) 318,245 Note: Net income from Islamic banking business comprises income generated from Alliance Islamic Bank Berhad (“AIS”), and Islamic banking business of Alliance Investment Bank Berhad (“AIBB”). Both AIS and AIBB are wholly-owned subsidiaries of the Bank.
202. 200 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 34. OTHER OPERATING INCOME (a) 2018 RM’000 80,064 29,322 3,214 520 30,178 15,131 10,962 17,404 83,950 6,001 276,746 89,165 31,076 3,221 472 36,811 15,807 11,368 16,413 96,130 3,001 303,464 80,064 28,851 14,696 7,407 17,358 83,950 5,794 238,120 89,165 30,242 15,807 8,508 16,376 96,130 3,000 259,228 (1,398) (9,552) (225) (75,313) (86,488) (1,624) (12,311) (461) (82,281) (96,677) (1,398) (9) (225) (75,313) (76,945) (1,624) (7) (461) (82,281) (84,373) 3,378 - 3,377 - 2,684 20,157 761 21,863 151,358 2,119 20,157 761 21,331 151,358 12,092 18,276 5,813 (113,094) 8,248 18,276 5,298 (113,094) (12,809) 25,555 (12,809) 25,555 1,299 45,077 1,861 94,117 749 80,154 120,271 1,311 33,913 126,433 2,101 8 27,517 29,626 264,961 1,163 (105) 26,665 27,723 328,627 1,689 711 8 27,470 29,878 311,324 804 680 1 25,737 27,222 328,510 Investment income: Realised gain arising from sale/redemption of: - Financial assets at fair value through profit or loss - Financial investments at fair value through other comprehensive income - Financial assets held-for-trading - Financial investments available-for-sale - Derivative instruments Marked-to-market revaluation gain/(loss): - Financial assets at fair value through profit or loss - Financial assets held-for-trading - Derivative instruments - Financial liabilities designated at fair value through profit or loss Gross dividend income from: - Financial assets at fair value through profit or loss - Financial investments available-for-sale -Subsidiaries (d) BANK 2019 RM’000 Fee and commission expense: Commissions expense Brokerage fees expense Guarantee fees expense Cards related expense (c) 2018 RM’000 Fee and commission income: Commissions Service charges and fees Corporate advisory fees Underwriting commissions Brokerage fees Guarantee fees Processing fees Commitment fees Cards related income Other fee income (b) GROUP 2019 RM’000 Other income: Foreign exchange gain Rental income Gain/(loss) on disposal of property, plant and equipment Others Total other operating income
203. 2019 Annual Report 35 . 201 OTHER OPERATING EXPENSES GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 380,786 354,861 292,799 272,572 60,223 55,857 46,439 43,188 - Share options/grants under ESS - 189 - 191 - Termination benefits - 42,365 - 42,225 Personnel costs - Salaries, allowances and bonuses - Contribution to EPF 48,625 51,028 38,904 42,470 489,634 504,300 378,142 400,646 - Depreciation of property, plant and equipment 23,333 20,731 22,674 19,986 - Amortisation of computer software 30,206 24,161 29,117 23,346 - Rental of premises 29,573 29,648 23,233 23,104 - Water and electricity 7,818 7,991 5,664 5,905 - Repairs and maintenance 9,747 9,980 7,384 7,947 - Information technology expenses 58,628 50,010 47,552 40,538 -Others 15,855 13,982 6,333 5,480 175,160 156,503 141,957 126,306 - Promotion and advertisement 12,518 14,193 10,796 13,437 - Branding and publicity 13,233 13,160 9,167 11,633 8,270 7,096 5,140 4,340 34,021 34,449 25,103 29,410 11,601 10,708 8,609 8,197 2,676 2,829 2,070 2,277 -Insurance 11,182 11,345 10,033 10,384 - Professional fees 23,485 27,853 18,392 20,838 -Others 27,188 46,034 17,465 37,171 76,132 98,769 56,569 78,867 774,947 794,021 601,771 635,229 -Others Establishment costs Marketing expenses -Others Administration and general expenses - Communication expenses - Printing and stationery Total other operating expenses
204. 202 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 35. OTHER OPERATING EXPENSES (CONT’D) Included in the other operating expenses are the following: GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 1,351 1,239 978 850 - audit related fees 726 1,349 458 1,067 - tax compliance fees 100 113 53 53 - tax related services 60 116 52 - 185 510 125 440 2,447 2,994 2,447 2,994 42 291 43 277 1,822 372 1,724 284 Auditors’ remuneration - statutory audit fees - non-audit related services Hire of equipment Property, plant and equipment written-off Computer software written-off 36. ALLOWANCE FOR EXPECTED CREDIT LOSSES/IMPAIRMENT LOSSES ON LOANS, ADVANCES AND FINANCING AND OTHER FINANCIAL ASSETS GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 147,238 - 97,909 - - 31,876 - 24,085 - 73,699 - 30,618 (44,304) (37,099) (29,192) (25,698) Allowance for expected credit losses/impairment losses on loans, advances and financing (a) Expected credit losses - Made during the financial year (net) (b) Individual assessment allowance - Made during the financial year (net) (c) Collective assessment allowance - Made during the financial year (net) (d) Bad debts on loans and financing -Recovered -Written-off (e) Commitment and contingencies 36,437 20,858 22,083 10,933 (11,377) - 1,304 - 127,994 89,334 92,104 39,938 (1) 5 - - 3,319 4,047 2,977 3,169 (463) - (463) - 130,849 93,386 94,618 43,107 (Write-back of)/allowance for expected credit losses/impairment losses on: - Amounts due from clients and brokers - Other receivables - Cash and short-term funds
205. 203 2019 Annual Report 37 . (WRITE-BACK OF)/ALLOWANCE FOR EXPECTED CREDIT LOSSES ON FINANCIAL INVESTMENTS GROUP 2019 RM’000 BANK 2018 RM’000 2019 RM’000 2018 RM’000 (Write-back of)/allowance for expected credit losses on: 38. - Financial investments at FVOCI (783) - (624) - - Financial investment at amortised cost 582 - 175 - (201) - (449) - ALLOWANCE FOR/(WRITE-BACK OF) IMPAIRMENT LOSSES ON NON-FINANCIAL ASSETS GROUP Commitment and contingencies Intangible assets – Goodwill Property, plant and equipment BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 (148) - (148) - 8,740 - - - - 62 - 62 8,592 62 (148) 62 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 222,893 191,044 163,354 153,605 39.TAXATION GROUP BANK Income tax: Provision for current financial year (Over)/under provision in prior years Deferred tax [Note 19] (7,082) 11,267 (6,545) 11,020 215,811 202,311 156,809 164,625 (45,385) (10,942) (28,749) (8,291) 170,426 191,369 128,060 156,334 Income tax is calculated at the Malaysian statutory tax rate of 24% (2018: 24%) on the estimated assessable profit for the financial year.
206. 204 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 39. TAXATION (CONT’D) A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Bank is as follows: GROUP 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Profit before taxation 708,023 684,597 614,012 583,244 Taxation at Malaysian statutory tax rate of 24% (2018: 24%) 169,926 164,303 147,363 139,979 (3,028) (398) (21,407) (8,455) Expenses not deductible for tax purposes 9,519 12,204 6,971 10,190 (Over)/under provision of tax expense in prior years (5,991) 15,260 (4,867) 14,620 170,426 191,369 128,060 156,334 Income not subject to tax Tax expense for the financial year 40. BANK EARNINGS PER SHARE (a)Basic Basic earnings per share is calculated by dividing profit for the year attributable to Equity holders of the Bank by the weighted average number of ordinary shares in issue during the financial year. GROUP Profit for the year attributable to Equity holders of the Bank BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 537,597 493,228 485,952 426,910 GROUP Weighted average numbers of ordinary shares in issue BANK 2019 ’000 2018 ’000 2019 ’000 2018 ’000 1,548,106 1,548,106 1,548,106 1,506,439 GROUP Basic earnings per share BANK 2019 sen 2018 sen 2019 sen 2018 sen 34.7 31.9 31.4 28.3 (b)Diluted For the purpose of calculating diluted earning per share, the profit for the year attributable to Equity holders of the Bank and the weighted average number of ordinary shares in issue during the financial year have been adjusted for the dilutive effects of all potential ordinary shares, (non-cumulative). There were no dilutive potential ordinary shares outstanding as at 31 March 2019 and 31 March 2018 respectively. As a result, the dilutive earnings per share equal to basic earnings per share for financial year ended 31 March 2019 and 31 March 2018.
207. 2019 Annual Report 205 41 .DIVIDENDS Dividends on Ordinary Shares: Dividend recognised during the financial year GROUP BANK 2019 2018 2019 RM’000 RM’000 RM’000 2018 RM’000 Former Holding Company Second interim dividend 7.5 sen per share, on 1,548,105,929 ordinary shares, declared in financial year ended 31 March 2017, was paid on 22 June 2017 by the former holding company of the Bank to shareholders - 116,108 - - 8.5 sen per share, on 1,548,105,929 ordinary shares, declared in financial year ending 31 March 2019, was paid on 28 December 2018 to the shareholders 131,589 - 131,589 - 8.5 sen per share, on 1,548,105,929 ordinary shares, declared in financial year ended 31 March 2018, was paid on 28 December 2017 to the shareholders - 131,589 - 131,589 105,271 - 105,271 - 236,860 247,697 236,860 116,849 248,438 Bank First interim dividend Second interim dividend 6.8 sen per share, on 1,548,105,929 ordinary shares, declared in the financial year ended 31 March 2018, was paid on 28 June 2018 to the shareholders 14.67 sen per share, on 796,517,043 ordinary shares, declared in financial year ended 31 March 2017, was paid on 20 June 2017 to the former holding company, and was eliminated at the Group
208. 206 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 41. DIVIDENDS (CONT’D) Dividends paid on the shares held in Trust pursuant to the Group’s ESS which are classified as shares held for ESS are not accounted for in the total equity where RM1,121,000 for the first interim dividend and RM1,549,000 for second interim dividend being dividends paid for those shares were added back to the appropriation of retained profits in respect of the dividends as at 31 March 2018. The dividend paid by the Bank to the former holding company, Alliance Financial Group Berhad (“AFG”) prior to group reorganisation exercise, is eliminated at the Group level. Upon the completion of group reorganisation exercise on 26 September 2017, the Bank is now the holding company of AFG. Dividends paid by the Bank after the group reorganisation will be reflected both in the Group and the Bank. Subsequent to the financial year end, on 29 May 2019, the Directors declared a second interim dividend of 8.2 sen per share, on 1,548,105,929 ordinary shares amounting to approximately RM126,945,000 in respect of current financial year. The accompanying financial statements do not reflect these dividend. The dividend will be accounted for in shareholders’ equity as an appropriation of retained profits in the financial year ending 31 March 2020. The Directors do not propose any final dividend in respect of the financial year ended 31 March 2019. 42. SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are the Group’s and the Bank’s other significant related party transactions and balances: The related parties of, and their relationship with the Group and the Bank are as follows: Relationship Related parties - Key management personnel Key management personnel refer to those persons having authority and responsibility for planning, directing and controlling the activities of the Group and the Bank, directly or indirectly, including Executive Directors and Non-Executive Directors of the Group and the Bank (including close members of their families). Other members of key management personnel of the Group and the Bank are the Business Support Heads who report directly to Group Chief Executive Officer or to the Board Committees (including close members of their families). - Substantial shareholders Substantial shareholders refer to those entities or persons having significant voting power in the Group and/or the Bank, directly or indirectly, resides with certain Directors of the Group and/or the Bank. -Subsidiaries Subsidiaries of the Bank as disclosed in Note 16. - Joint venture Joint venture of the Bank as disclosed in Note 17.
209. 2019 Annual Report 42 . 207 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONT’D) Significant related party transactions and balances as follows: GROUP (a) BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 37 26 46,607 20 38,800 26 Dividend income -subsidiaries - - 80,154 33,913 Management fees -subsidiaries - - 154 336 Rental income -subsidiaries - joint venture - 1 717 - 680 1 Other operating expenses recharged -subsidiaries - joint venture 221 203 113,451 221 102,052 203 Interest expenses -subsidiaries - joint venture - key management personnel - substantial shareholders (39) (550) (2) (32) (314) - (42) (502) (2) (47) (281) - (1) - (1) (89) - (3,011) (84) (3,052) (785) (205) (1,198) (84) (2,676) (936) (785) Commission paid -subsidiaries - - (18,247) (6,267) Dividend paid - former holding company - - - (117,971) Transactions Interest income -subsidiaries - key management personnel Rental expenses -subsidiaries - joint venture Other operating expenses -subsidiaries - joint venture/other related company [Note (a)] - substantial shareholders [Note (b)]
210. 208 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 42. SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONT’D) Significant related party transactions and balances as follows: (cont’d) Note: As at 31 March 2019: (a) The Group and the Bank have paid RM2,895,000 and RM1,149,000 respectively (2018: RM3,213,000 and RM974,000) to the joint venture/ other related company for the research services provided, where the joint venture/other related company was jointly held by Alliance Investment Bank Berhad and DBS Vickers Securities Pte. Ltd., a company incorporated in Singapore. (b) The Group and the Bank have paid RM260,000 (2018: RM784,000) for staff secondment to an indirect shareholder, Fullerton Financial Holdings (International) Pte. Ltd., a company incorporated in Singapore. (c) Other than transactions with joint venture company and Fullerton Financial Holdings (International) Pte. Ltd., all intercompany transactions are conducted in Malaysia. GROUP (b) BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 (2,377) (20,269) (645) (2,223) (15,376) - (34,831) (375) (19,005) (645) (24,844) (721) (13,925) - Financial investments at fair value through other comprehensive income -subsidiaries - - 745,432 754,750 Financial investments at amortised cost -subsidiaries - - 130,666 130,059 5,131 4,875 3,063 3,210 - - 119,852 300,054 Other assets -subsidiaries - joint venture 299 392 133,557 299 46,794 392 Other liabilities - joint venture (160) (168) - - Balances Deposits from customers -subsidiaries - joint venture - key management personnel - substantial shareholders Loans, advances and financing - key management personnel Money at call and deposit placements with financial institutions -subsidiaries
211. 2019 Annual Report 42 . 209 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONT’D) (c) Compensation of key management personnel Remuneration of Chief Executive Officers (“CEO”), Non-executive Directors and other members of key management excluding past CEO and Directors for the financial year is as follows: GROUP CEO and other Key Management: - Salary and other remuneration - Contribution to EPF -Benefits-in-kind Non-executive Directors: - Fees payables -Allowances -Benefits-in-kind BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 30,742 4,177 309 35,228 30,145 4,080 309 34,534 27,909 3,791 266 31,966 27,714 3,772 266 31,752 2,698 973 31 3,702 2,820 790 34 3,644 1,897 714 31 2,642 1,530 496 34 2,060 14,305 13,272 9,983 8,907 Included in the total key management personnel are: CEO and Directors’remuneration, excluding past CEO and Directors [Note 44] Key management personnel of the Group and the Bank have been offered/awarded the following number of share grants under the AFG Bhd ESS: Share Grants GROUP At beginning of financial year As restated Vested At the end of financial year BANK At beginning of financial year Key management personnel appointed during the financial year Vested At the end of financial year 2019 ’000 2018 ’000 - 415 (415) - Share Grants 2019 ’000 - 2018 ’000 300 43 (343) - The above share grants were offered/awarded on the same terms and conditions as those offered to other employees of the Group and the Bank.
212. 210 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 42. SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONT’D) (c) Compensation of key management personnel (cont’d) GROUP Total value of remuneration and numbers of officers with variable remuneration for the financial year are as follow: 2019 GROUP Number Unrestricted RM’000 2018 Number Deferred RM’000 Number Unrestricted RM’000 Number Deferred RM’000 Fixed remuneration Cash 25,709 - 25,512 - 25,709 - 25,512 - Variable remuneration Cash 19 8,663 19 4,558 19 19 3,077 8,663 4,558 9,589 3,077 34,372 4,558 35,101 3,077 Deferred RM’000 Unrestricted Number RM’000 22,463 - 22,025 - 22,463 - 22,025 - 2019 BANK 9,589 Unrestricted Number RM’000 2018 Number Number Deferred RM’000 Fixed remuneration Cash Variable remuneration Cash 17 7,938 17 4,207 17 8,929 17 2,858 7,938 4,207 8,929 2,858 30,401 4,207 30,954 2,858
213. 2019 Annual Report 43 . 211 CREDIT TRANSACTIONS AND EXPOSURES WITH CONNECTED PARTIES BANK 2019 RM’000 2018 RM’000 43,641 44,698 8 - 46,311,419 44,389,189 - as a proportion of total credit exposures 0.09% 0.10% - which is impaired or in default 0.00% 0.00% Outstanding credit exposures with connected parties of which: Total credit exposure which is impaired or in default Total credit exposures Percentage of outstanding credit exposures to connected parties The disclosure on Credit Transactions and Exposures with Connected Parties above is presented in accordance with paragraph 9.1 of Bank Negara Malaysia’s Guidelines on Credit Transactions and Exposures with Connected Parties, which became effective on 1 January 2008. Based on these guidelines, a connected party refers to the following: (i) Directors of the Bank and their close relatives; (ii) Controlling shareholder and his close relatives; (iii) Executive officer, being a member of management having authority and responsibility for planning, directing and/or controlling the activities of the Bank, and his close relatives; (iv) Officers who are responsible for or have the authority to appraise and/or approve credit transactions or review the status of existing credit transactions, either as a member of a committee or individually, and their close relatives; (v) Firms, partnerships, companies or any legal entities which control, or are controlled by any person listed in (i) to (iv) above, or in which they have an interest, as a director, partner, executive officer, agent or guarantor, and their subsidiaries or entities controlled by them; (vi) Any person for whom the persons listed in (i) to (iv) above is a guarantor; and (vii) Subsidiary of or an entity controlled by the Bank and its connected parties. Credit transactions and exposures to connected parties as disclosed above includes the extension of credit facilities and/or off-balance sheet credit exposures such as guarantees, trade-related facilities and loan commitments. It also includes holdings of equities and private debt securities issued by the connected parties.
214. 212 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 44. CEOs AND DIRECTORS’ REMUNERATION Remuneration in aggregate for CEO/Directors charged to the statement of income for the year is as follows: GROUP BANK 2019 RM'000 2018 RM’000 2019 RM’000 2018 RM’000 - Salary and other remuneration 6,072 5,295 3,964 3,525 -Bonuses 3,175 3,131 2,449 2,471 - Contribution to EPF 1,201 1,080 815 771 155 122 113 80 10,603 9,628 7,341 6,847 2,698 2,820 1,897 1,530 973 790 714 496 31 34 31 34 Chief Executive Officers: -Benefits-in-kind Non-executive Directors: - Fees payables -Allowances -Benefits-in-kind 3,702 3,644 2,642 2,060 14,305 13,272 9,983 8,907 - Salary and other remuneration, including meeting allowance 103 336 63 - -Fees 357 146 143 - - 49 - - 20 51 10 - Past Chief Executive Officer/Directors: - Contribution to EPF -Benefits-in-kind Total Directors’ remuneration excluding benefits-in-kind 480 582 216 - 14,785 13,854 10,199 8,907 14,579 13,647 10,045 8,793 Notes: (a) Other than Directors fees and allowances, there were no amount paid or payable for services rendered by any Directors of the Group and the Bank during the financial year. (b) The Directors of the Group and the Bank are covered under the Directors’ & Officers’ Liability Insurance in respect of liabilities arising from acts committed in their capacity as Directors of the Group and the Bank, provided that such Director has not acted negligently, fraudulently or dishonestly, or is in breach of his or her duty of trust. The total apportioned amount of insurance effected for Directors under the Group and the Bank was at RM130,000 and RM118,000 (2018: RM134,000 and RM121,000) respectively.
215. 2019 Annual Report 213 44 .CEOs AND DIRECTORS’ REMUNERATION (CONT’D) The total remuneration (including benefits-in-kind) of the CEO and Directors of the Group and the Bank are as follows: GROUP 2019 Salary Contribution and other to EPF remuneration Bonuses RM’000 RM’000 RM’000 Share options/ grants Fees payables Allowances under ESS RM’000 RM’000 RM’000 Benefitsin-kind Total RM’000 RM’000 Chief Executive Officers: Joel Kornreich 3,964 2,449 815 - - - 113 7,341 Mahesh s/o Shri Pranlal Rupawalla 1,464 390 251 - - - 42 2,147 Rizal IL-Ehzan Bin Fadil Azim 644 336 135 - - - - 1,115 6,072 3,175 1,201 - - - 155 10,603 Non-executive Directors: Tan Sri Dato’ Ahmad Bin Mohd Don - - - 285 53 - 31 369 Ou Shian Waei - - - 205 70 - - 275 Kuah Hun Liang - - - 312 118 - - 430 Lee Ah Boon - - - 217 68 - - 285 Datuk Wan Azhar Bin Wan Ahmad - - - 405 124 - - 529 Lee Boon Huat - - - 205 91 - - 296 Ho Hon Cheong - - - 190 95 - - 285 Thayaparan S Sangarapillai - - - 179 68 - - 247 Tan Chian Khong - - - 155 64 - - 219 Susan Yuen Su Min - - - 55 9 - - 64 Datin Amy Ooi Swee Lian - - - 37 15 - - 52 Mazidah Binti Abdul Malik - - - 137 71 - - 208 Dato’ Yeoh Beow Tit - - - 90 30 - - 120 Hj Md Ali Bin Md Sarif - - - 90 28 - - 118 Dato’ Ahmad Hisham Bin Kamaruddin - - - 11 2 - - 13 - - - 125 67 - - 192 - - - 2,698 973 - 31 3,702 Dato’ Majid Bin Mohamad - - - 67 18 - 10 95 Kung Beng Hong - - - 290 85 - 10 385 - - - 357 103 - 20 480 6,072 3,175 1,201 3,055 1,076 - 206 14,785 Ibrahim Bin Hassan Past Non-executive Directors: Total CEOs and Directors’ remuneration
216. 214 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 44.CEOs AND DIRECTORS’ REMUNERATION (CONT’D) The total remuneration (including benefits-in-kind) of the CEOs and Directors of the Group and the Bank are as follows: (cont’d) Salary and other remuneration RM’000 Bonuses RM’000 Contribution to EPF RM’000 Fees payables RM’000 Allowances RM’000 Benefitsin-kind RM’000 Total RM’000 Joel Kornreich 3,525 2,471 771 - - 80 6,847 Mahesh s/o Shri Pranlal Rupawalla 1,385 436 246 - - 42 2,109 385 224 63 - - - 672 5,295 3,131 1,080 - - 122 9,628 Tan Sri Dato’ Ahmad Bin Mohd Don - - - 211 32 34 277 Kung Beng Hong - - - 404 89 - 493 GROUP 2018 Chief Executive Officers: Rizal IL-Ehzan Bin Fadil Azim Non-executive Directors: Ou Shian Waei - - - 242 68 - 310 Kuah Hun Liang - - - 273 91 - 364 Lee Ah Boon - - - 234 55 - 289 Datuk Wan Azhar Bin Wan Ahmad - - - 319 88 - 407 Lee Boon Huat - - - 167 58 - 225 Ho Hon Cheong - - - 142 62 - 204 Thayaparan S Sangarapillai - - - 132 50 - 182 Tan Chian Khong - - - 191 33 - 224 Dato’ Majid Bin Mohammad - - - 164 56 - 220 Mazidah Binti Abdul Malik - - - 107 36 - 143 Dato’ Yeoh Beow Tit - - - 76 19 - 95 Hj Md Ali Bin Md Sarif - - - 76 23 - 99 Ibrahim Bin Hassan - - - 82 30 - 112 - - - 2,820 790 34 3,644 310 - 49 - - - 359 310 - 49 - - - 359 Shaharuddin Bin Zainuddin - - - 37 15 - 52 Datuk Oh Chong Peng - - - 109 11 51 171 - - - 146 26 51 223 5,605 3,131 1,129 2,966 816 207 13,854 Past Chief Executive Officer: Foziakhatoon Binti Amanulla Khan Past Non-executive Directors: Total CEOs and Directors’ remuneration
217. 2019 Annual Report 215 44 .CEOs AND DIRECTORS’ REMUNERATION (CONT’D) The total remuneration (including benefits-in-kind) of the CEOs and Directors of the Group and the Bank are as follows: (cont’d) BANK 2019 Salary and other remuneration RM’000 Bonuses RM’000 Contribution to EPF RM’000 Fees payables RM’000 Allowances RM’000 Benefitsin-kind RM’000 Total RM’000 3,964 2,449 815 - - 113 7,341 3,964 2,449 815 - - 113 7,341 - - - 285 53 31 369 Chief Executive Officer: Joel Kornreich Non-executive Directors: Tan Sri Dato’ Ahmad Bin Mohd Don Ou Shian Waei - - - 205 70 - 275 Kuah Hun Liang - - - 193 91 - 284 Lee Ah Boon - - - 205 68 - 273 Datuk Wan Azhar Bin Wan Ahmad - - - 225 105 - 330 Lee Boon Huat - - - 205 91 - 296 Ho Hon Cheong - - - 190 95 - 285 Thayaparan S Sangarapillai - - - 179 68 - 247 Tan Chian Khong - - - 155 64 - 219 Susan Yuen Su Min - - - 55 9 - 64 - - - 1,897 714 31 2,642 - - - 143 63 10 216 3,964 2,449 815 2,040 777 154 10,199 Past Non-executive Director: Kung Beng Hong Total CEOs and Directors’ remuneration
218. 216 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 44.CEOs AND DIRECTORS’ REMUNERATION (CONT’D) The total remuneration (including benefits-in-kind) of the Directors of the Group and the Bank are as follows: (cont’d) BANK 2018 Salary and other remuneration RM’000 Bonuses RM’000 Contribution to EPF RM’000 Fees payables RM’000 Allowances RM’000 Benefitsin-kind RM’000 Total RM’000 3,525 2,471 771 - - 80 6,847 3,525 2,471 771 - - 80 6,847 - - - 211 32 34 277 Chief Executive Officer: Joel Kornreich Non-executive Directors: Tan Sri Dato’ Ahmad Bin Mohd Don Kung Beng Hong - - - 142 48 - 190 Ou Shian Waei - - - 157 55 - 212 Kuah Hun Liang - - - 157 66 - 223 Lee Ah Boon - - - 157 45 - 202 Datuk Wan Azhar Bin Wan Ahmad - - - 167 69 - 236 Lee Boon Huat - - - 167 58 - 225 Ho Hon Cheong - - - 142 62 - 204 Thayaparan S Sangarapillai - - - 132 50 - 182 Tan Chian Khong - - - 98 11 - 109 - - - 1,530 496 34 2,060 3,525 2,471 771 1,530 496 114 8,907 Total CEO and Directors’ remuneration
219. 2019 Annual Report 217 45 . FINANCIAL RISK MANAGEMENT POLICIES The Group engages in business activities which entail risk taking and types of risk involved include credit, market and liquidity, operational and technology, regulatory and compliance (including Shariah compliance), and strategic risks. Risk management in the Group is governed by Risk Management Framework which covers governance, appetite, strategy, policies and processes to manage risks. The objective of risk management is to ensure that the Group conducts business in a responsible manner and to achieve sustainable growth for the Group’s balance sheet and capital. The Group manages risk within clearly defined guidelines that are approved by the Directors. In addition, the Board of Directors of the Group provides independent oversight to ensure that risk management policies are complied with, through a framework of established controls and reporting processes.   The guidelines and policies adopted by the Group to manage the main risks that arise in the conduct of its business activities are as follows: (a) Credit Risk Credit risk is the risk of financial loss resulting from the failure of the Group’s borrowers or counterparties to fulfil their contractual obligations to repay their loans or settle commitments. This arises from loans/financing, advances, investment in securities, amongst others. The amount of credit exposure is represented by the carrying amount of loans/financing, advances and investment securities in the statements of financial position. The lending/financing activities in the Group are guided by the Group’s Credit Risk Management Framework, in line with regulatory guidelines and best practices.     Also, credit risk arises from financial transactions with counterparties (including interbank market activities, derivative instruments used for hedging and debt instruments), of which the amount of credit exposure in respect of these instruments is equal to the carrying amount of these assets in the statements of financial position. This exposure is monitored on an on-going basis against predetermined counterparty limits. The credit exposure arising from off-balance sheet activities, i.e. commitments and contingencies is set out in Note 48 to the financial statements. (i) Maximum exposure to credit risk The following table presents the Group’s and the Bank’s maximum exposure to credit risk of on balance sheet and off-balance sheet financial instruments, before taking into account any collateral held or other credit enhancements and after allowance for expected credit losses/impairment losses, where appropriate.   For on-balance sheet financial assets, the maximum exposure to credit risk equals their carrying amount. For financial guarantees and similar contracts granted, the maximum exposure to credit risk is the maximum amount that would have to be paid if the guarantees were to be called upon. For credit related commitments and contingencies that are irrevocable over the life of the respective facilities, the maximum exposure to credit risk is the full amount of the credit facilities granted to customers.
220. 218 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (i) Maximum exposure to credit risk (cont’d) GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 1,549,624 2,503,354 1,316,885 1,450,557 Credit risk exposure: on-balance sheet Cash and short-term funds (exclude cash in hand) Deposits and placements with banks and other financial institutions 500 77,283 - 77,283 Amounts due from clients and brokers 77,008 101,305 - - Financial assets at fair value through profit or loss (exclude equity securities) 42,923 - 42,923 - 9,478,454 - 6,852,858 - 235,720 - 311,930 - - 48,771 Financial investments at fair value through other comprehensive income (exclude equity securities) Financial investments at amortised cost - 63,750 Financial investments available-for-sale (exclude equity securities) - 8,326,333 - 6,284,804 Financial investments held-to-maturity - 293,612 - 344,703 55,442 84,455 55,442 84,455 42,227,784 39,934,924 32,520,128 31,484,934 1,521,592 1,408,316 1,142,108 1,092,566 Financial assets held-for-trading Derivative financial assets Loans, advances and financing (exclude sales commissions and handling fees) Statutory deposits Other assets (exclude prepayment) 179,100 125,519 302,221 161,956 55,368,147 52,918,851 42,544,495 41,030,029 Credit risk exposure: off-balance sheet Financial guarantees Credit related commitments and contingencies Total maximum exposure 721,500 730,771 518,066 556,701 12,301,536 11,313,331 9,893,986 9,118,992 13,023,036 12,044,102 10,412,052 9,675,693 68,391,183 64,962,953 52,956,547 50,705,722
221. 45 . (a) Total credit risk Financial guarantees Credit related commitments and contingencies Cash and short-term funds (exclude cash in hand) Deposits and placements with banks and other financial institutions Amounts due from clients and brokers Financial assets at fair value through profit or loss (exclude equity securities) Financial investments at fair value through other comprehensive income (exclude equity securities) Financial investments at amortised cost Derivative financial assets Loans, advances and financing (exclude sales commissions and handling fees) Statutory deposits Other assets (exclude prepayment) GROUP 2019 508,698 500 665 1,909 2,520,795 43,404 35,438 4,435,835 299 7,547,543 79,794 1,540,262 1,620,056 9,167,599 1,040,926 41,002 5,293,442 121,789 1,521,592 8,018,751 141,985 141,985 8,160,736 Government and Central Bank RM’000 33,041 125,463 158,504 1,996,110 688,241 1,837,606 1,149,358 - 7 - - 542,131 5,141,861 5,683,992 18,823,498 12,844,254 13,139,506 245,233 50,015 - 4 - - 52,123 1,611,172 1,663,295 3,324,273 1,391,351 1,660,978 269,626 - 1 - - 4,586 3,356,111 3,360,697 25,786,236 22,425,539 22,425,539 - - - - Household RM’000 9,825 384,682 394,507 1,132,731 442,564 178,801 738,224 20,512 20,004 - 76,343 - Others RM’000 721,500 12,301,536 13,023,036 68,391,183 42,227,784 1,521,592 179,100 55,368,147 9,478,454 235,720 55,442 42,923 500 77,008 1,549,624 Total RM’000 A concentration of credit risk exists when a number of counterparties are engaged in similar activities and have similar economic characteristics that cause their ability to meet contractual obligations to be similarly affected by changes in economic and other conditions. The analysis of credit risk concentration presented below relates only to financial assets subject to credit risk and are based on the industry in which the counterparty is engaged. Financial, Transport, Agriculture, Insurance, Storage and Manufacturing, Business Services and Communication Wholesale & Services Retail Trade Construction Real Estate RM’000 RM’000 RM’000 RM’000 Credit risk concentrations (ii) Credit Risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) 2019 Annual Report 219
222. (a) Total credit risk Financial guarantees Credit related commitments and contingencies Cash and short-term funds (exclude cash in hand) Deposits and placements with banks and other financial institutions Amounts due from clients and brokers Financial assets held-for-trading Financial investments available-for-sale (exclude equity securities) Financial investments held-to-maturity Derivative financial assets Loans, advances and financing (exclude sales commissions and handling fees) Statutory deposits Other assets (exclude prepayment) GROUP 2018 2,806,383 151,926 56,969 4,930,498 392 8,703,184 3,853,262 141,686 1,408,316 7,281,082 36,669 1,453,597 1,490,266 10,193,450 77,283 670 53,527 - 7,281,082 625,536 1,877,818 Government and Central Bank RM’000 31,573 128,259 159,832 1,829,185 497,730 1,669,353 1,161,400 - 10,223 - 576,904 4,495,893 5,072,797 16,599,710 11,318,771 11,526,913 208,142 - - - 57,355 1,515,553 1,572,908 3,231,150 1,361,096 1,658,242 297,146 - - - 7,680 2,900,735 2,908,415 24,222,045 21,313,630 21,313,630 - - - Household RM’000 20,590 819,294 839,884 1,606,331 513,199 125,127 766,447 27,486 100,635 - - Others RM’000 730,771 11,313,331 12,044,102 64,962,953 39,934,924 1,408,316 125,519 52,918,851 8,326,333 293,612 84,455 77,283 101,305 63,750 2,503,354 Total RM’000 A concentration of credit risk exists when a number of counterparties are engaged in similar activities and have similar economic characteristics that cause their ability to meet contractual obligations to be similarly affected by changes in economic and other conditions. The analysis of credit risk concentration presented below relates only to financial assets subject to credit risk and are based on the industry in which the counterparty is engaged. (cont’d) Financial, Transport, Agriculture, Insurance, Storage and Manufacturing, Business Services and Communication Wholesale & Services Retail Trade Construction Real Estate RM’000 RM’000 RM’000 RM’000 Credit risk concentrations (cont’d) (ii) Credit Risk (cont’d) 45.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 220 Alliance Bank Malaysia Berhad (88103-W)
223. (a) 41,002 Financial assets at fair value through profit or loss (exclude equity securities) 164,961 35,438 3,467,388 133,856 6,526,365 77,195 1,285,169 1,362,364 7,888,729 101,446 1,142,108 5,682,901 141,985 141,985 5,824,886 Derivative financial assets Loans, advances and financing (exclude sales commissions and handling fees) Total credit risk Credit related commitments and contingencies Financial guarantees Other assets (exclude prepayment) Statutory deposits Financial investments at amortised cost 2,098,405 1,909 624,408 3,705,868 Financial investments at fair value through other comprehensive income (exclude equity securities) 692,477 Cash and short-term funds (exclude cash in hand) BANK 2019 Government and Central Bank RM’000 1,404,433 148,629 120,734 27,895 1,255,804 - - 511,905 - - 743,892 7 - 14,572,553 4,398,699 4,014,944 383,755 10,173,854 - - 9,975,830 - 25,011 173,009 4 - 2,785,660 1,464,076 1,448,995 15,081 1,321,584 - - 1,189,899 - - 131,684 1 - 19,620,374 2,540,557 2,536,013 4,544 17,079,817 - - 17,079,817 - - - - - Household RM’000 859,912 355,742 346,146 9,596 504,170 168,365 - 295,289 20,004 20,512 - - - Others RM’000 52,956,547 10,412,052 9,893,986 518,066 42,544,495 302,221 1,142,108 32,520,128 55,442 311,930 6,852,858 42,923 1,316,885 Total RM’000 A concentration of credit risk exists when a number of counterparties are engaged in similar activities and have similar economic characteristics that cause their ability to meet contractual obligations to be similarly affected by changes in economic and other conditions. The analysis of credit risk concentration presented below relates only to financial assets subject to credit risk and are based on the industry in which the counterparty is engaged. (cont’d) Financial, Transport, Agriculture, Insurance, Storage and Manufacturing, Business Services and Communication Wholesale & Services Retail Trade Construction Real Estate RM’000 RM’000 RM’000 RM’000 Credit risk concentrations (cont’d) (ii) Credit Risk (cont’d) 45.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) 2019 Annual Report 221
224. (a) Total credit risk Financial guarantees Credit related commitments and contingencies Cash and short-term funds (exclude cash in hand) Deposits and placements with banks and other financial institutions Financial assets held-for-trading Financial investments available-for-sale (exclude equity securities) Financial investments held-to-maturity Derivative financial assets Loans, advances and financing (exclude sales commissions and handling fees) Statutory deposits Other assets (exclude prepayment) BANK 2018 2,453,110 223,432 56,969 3,917,597 47,186 7,677,476 2,863,925 121,271 1,092,566 4,664,969 31,839 1,292,655 1,324,494 9,001,970 77,283 38,549 - 4,664,969 863,350 587,207 Government and Central Bank RM’000 26,419 122,364 148,783 1,188,761 349,960 1,039,978 679,796 - 10,222 - 432,615 3,509,320 3,941,935 12,834,670 8,710,547 8,892,735 182,188 - - - 37,837 1,382,911 1,420,748 2,592,100 1,065,567 1,171,352 105,785 - - - 7,638 2,302,406 2,310,044 19,348,508 17,038,464 17,038,464 - - - Household RM’000 20,353 509,336 529,689 1,074,744 402,799 114,770 545,055 27,486 - - Others RM’000 556,701 9,118,992 9,675,693 50,705,722 31,484,934 1,092,566 161,956 41,030,029 6,284,804 344,703 84,455 77,283 48,771 1,450,557 Total RM’000 A concentration of credit risk exists when a number of counterparties are engaged in similar activities and have similar economic characteristics that cause their ability to meet contractual obligations to be similarly affected by changes in economic and other conditions. The analysis of credit risk concentration presented below relates only to financial assets subject to credit risk and are based on the industry in which the counterparty is engaged. (cont’d) Financial, Transport, Agriculture, Insurance, Storage and Manufacturing, Business Services and Communication Wholesale & Services Retail Trade Construction Real Estate RM’000 RM’000 RM’000 RM’000 Credit risk concentrations (cont’d) (ii) Credit Risk (cont’d) 45.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 222 Alliance Bank Malaysia Berhad (88103-W)
225. 223 2019 Annual Report 45 . FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (iii)Collaterals The main types of collateral obtained by the Group and the Bank are as follows: - - - Where property is provided as collateral, legal charge over the title; For hire purchase, ownership rights over the vehicles or equipment financed; and For other loans/financing, charges over business assets such as premises, financial/trade receivables, or deposits. GROUP Gross loans, advances and financing Less: Allowance for expected credit losses/ impairment losses Net loans, advances and financing Percentage of collateral held for loans, advances and financing (iv) BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 42,730,447 40,307,373 32,883,217 31,770,336 (502,663) (372,449) (363,089) (285,402) 42,227,784 39,934,924 32,520,128 31,484,934 70.9% 72.0% 71.8% 73.9% Credit risk measurement The Group and the Bank adopt the following judgements and assumptions on measurement of expected credit loss (“ECL”): (a) Definition of significant increase in credit risk The Group and the Bank consider the probability of default upon initial recognition of financial asset and whether there has been a significant increase in credit risk on an ongoing basis. To assess whether there is a significant increase in credit risk, the Group and the Bank compare the risk of a default occurring on the financial asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportable forward-looking information. The following events are taken into consideration during the assessment: • • • • • Contractual payment is in arrears for 30 days or more; Significant downgrade of credit rating or internal rating; Modified exposure placed under Agensi Kaunseling dan Pengurusan Kredit (“AKPK”) status; Exposure being monitored under watchlist; or Restructured and rescheduled exposure with increase in credit risk. (b) Definition of credit impaired financial assets An exposure is classified as credit impaired when one or more events that have a detrimental impact to the estimated future cash flows of that financial assets have occurred. Evidence that a financial asset is credit impaired includes observable data about the following events:  Quantitative criteria: A financial asset is classified as credit impaired, when the counterparty fails to make contractual payment within 90 days or 3 months from when they fall due.
226. 224 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (iv) Credit risk measurement (cont’d) (b) Definition of credit impaired financial assets (cont’d) Evidence that a financial asset is credit impaired includes observable data about the following events: Qualitative criteria: • • • • • • (c) Significant financial difficulty of the issuer or the borrower; Breach of contract, such as a default of past due event; Concessions have been made by the lender relating to the borrower’s financial difficulty; Indications that borrower will enter into bankruptcy/winding up or other financial restructuring; Disappearance of an active market for that financial asset; or Purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses. Measurement of ECL ECL is measured by three components, i.e. exposure at default, probability of default and loss given default. Exposure at default (“EAD”) EAD for non-retail portfolio is calculated based upon the contractual amortisation amount up to the point prior to the default event. Repayments are then assumed to cease, with only interest accrued on the outstanding balance from this point. Since the non-retail portfolio contains a variety of products with different interest accrual methods, amortisation types and repayment methods, the approaches employed to calculate EAD varies accordingly. EAD for retail portfolio is calculated based upon either: (i) (ii) (iii) Simple equation based calculation approach – where the outstanding balance follows a predictable trend across the amount and tenure. Utilisation curve model. These curves provide a view of percent drawn down at the point of default, expressed as a percentage of the customer credit limit at observation. Mechanical equation based approach – which was utilised to forecast monthly default balances as per an amortisation profile and adjusted for different paths to default using an adjustment factor. Probability at default (“PD”) A PD is assigned to each risk measure and represents a percentage of the likelihood of default. For non-retail portfolio, the PD is measured from the internal or external rating of the borrower or issuer to determine the level of default risk. For retail portfolio, a signature curve approach forecasted the lifetime PD and PD at any given time within the lifetime horizon. This is based upon historic default data using a chain ladder methodology to construct a lifetime default emergence curve. Loss given default (“LGD”) This is on a time series of probability weighted loss rate relative to the monthly exposure at default where the probabilities and loss rates are estimated by key risk driver segments such as exposure migration status (e.g. loss given cure & loss given charge off), collateral type, defaulted exposure relative to original exposure amount and months in default.
227. 2019 Annual Report 45 . 225 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (iv) Credit risk measurement (cont’d) (d) Forward-looking information Three economic scenarios using different probability weightage are applied to the ECL: • • • Base Case – based upon current economic outlook or forecast. Positive Case – based upon a projected optimistic or positive economic outlook or forecast. Negative Case – based upon a projected pessimistic or negative economic outlook or forecast. Projection of economic scenario and the probability of each scenario happening in future shall be carried out and shall contain all macroeconomic variables (“MEV”) which are applied in the ECL models as they are found to have significant correlation to increase of credit risk via the modelling exercise. For forward looking estimates, analysis was carried out to determine how the estimates were affected by macroeconomic trends. Factors such as unemployment rate or GDP growth rate were analysed to identify the level of correlation with the observed trends. Given the statistically strong correlation, the estimates were adjusted to reflect macroeconomic trends. (e) Grouping of exposure for ECL measured on collective basis For expected credit loss provisions modelled on a collective basis, a grouping of exposures is performed on the basis of shared risk characteristics, such that risk exposures within a group are homogeneous. The appropriateness of groupings is monitored and reviewed on a periodic basis. (f) Modification of loans The Group and the Bank sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the Group and the Bank assess whether or not the new terms are substantially different to the original terms. When the modification is not substantial and so does not result in derecognition of the original loans, the Group and the Bank recalculate the gross carrying amount based on the revised cash flow of the financial asset and recognises a modification gain or loss in the statement of income. The new gross carrying amount is recalculated by discounting the modified cash flow at the original effective interest/profit rate. The Group and the Bank monitor the subsequent performance of modified assets. The risk of default of such loans after modification is assessed and compared with the risk under the original terms at initial recognition. The Group and the Bank may determine that the credit risk has significantly improved after restructuring, so that the assets are moved from Stage 3 or Stage 2 (Lifetime ECL) to Stage 1 (12-month ECL). This is only the case for assets which have performed in accordance with the new terms for six consecutive months or more. If the terms are substantially different from the original terms, the Group and the Bank derecognised the original financial asset and recognised a new asset and recalculates a new effective interest/profit rate for asset. The date of renegotiation is consequently considered to be the date of initial recognition for impairment calculation purposes, including the purpose of determining whether a significant increase in credit risk has occurred. However, the Group and the Bank also assess whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed payments. Differences in the carrying amount are recognised in statement of income as gain or loss on derecognition.
228. 226 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality Upon the adoption of MFRS 9, the Group and the Bank assess the credit quality for amounts due from clients and brokers and loans, advances and financing by the below categories: Credit Quality Credit Grading Low Medium High Unrated Credit impaired Definition Non-retail Retail (1) (2) Low risk score 1 - 12 (AAA to BB) Borrowers with good capacity to meet financial commitments. Medium risk score 13 - 16 (BB- to B-) Borrower which is in a fairly acceptable capacity to meet financial commitments. High risk score 17 - 19 (CC+ to CC-) Borrower which is in an uncertain capacity to meet financial commitments but have not been impaired. Unrated Unrated Credit impaired Credit impaired Borrower which is unrated. Defaulted, or judgmentally impaired due to lack of capacity to fulfil financial commitments. Notes: (1) (2) Retail refers to Consumer Banking Non-retail refers to Business Banking Other financial assets are categorised in the following manner: Credit Quality Investment graded Non-investment graded Sovereign/Government backed Unrated Credit impaired Credit Grading AAA to BBBLower than BBB- – Unrated Credit impaired Definition Issuer with low risk of defaulting principal or interest payment. Issuer with medium or high risk of defaulting principal or interest payment. Issued or guaranteed by Malaysian government. Issuer where rating is unavailable. Defaulted.
229. 2019 Annual Report 45 . 227 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality (cont’d) The following table shows an analysis of the credit quality by stages and the allowance for expected credit losses of the financial assets: GROUP 2019 Stage 1 RM’000 Stage 2 RM’000 Stage 3 RM’000 Total RM’000 Cash and short-term funds (exclude cash in hand) 508,730 - - 508,730 6 - - 6 Sovereign/Government backed 1,040,926 - - 1,040,926 Gross carrying amount 1,549,662 - - 1,549,662 Investment graded Non-investment graded (38) - - (38) 1,549,624 - - 1,549,624 Investment graded 500 - - 500 Gross carrying amount 500 - - 500 Expected credit losses - - - - 500 - - 500 Investment graded 2,708,219 62,478 - 2,770,697 Sovereign/Government backed 6,698,348 - - 6,698,348 Expected credit losses Net carrying amount Deposits and placements with banks and other financial institutions Net carrying amount Financial investments at fair value through other comprehensive income (exclude equity securities) Credit impaired Gross carrying amount Expected credit losses [Note a] - - 9,409 9,409 9,406,567 62,478 9,409 9,478,454 (120) (444) (9,409) (9,973) 121,790 - - 121,790 59,586 50,554 - 110,140 - - 18,565 18,565 181,376 50,554 18,565 250,495 (42) (540) (14,193) (14,775) 181,334 50,014 4,372 235,720 Financial investments at amortised cost Sovereign/Government backed Unrated Credit impaired Gross carrying amount Expected credit losses Net carrying amount
230. 228 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality (cont’d) The following table shows an analysis of the credit quality by stages and the allowance for expected credit losses of the financial assets: (cont’d) GROUP 2019 Stage 1 RM’000 Stage 2 RM’000 Stage 3 RM’000 Total RM’000 Loans, advances and financing 26,899,181 650,501 - 27,549,682 Medium 7,396,792 2,855,264 - 10,252,056 High 1,836,349 1,681,048 - 3,517,397 510,925 423,785 - 934,710 Low Unrated - - 476,602 476,602 Gross carrying amount 36,643,247 5,610,598 476,602 42,730,447 Expected credit losses (72,679) (212,519) (217,465) (502,663) 36,570,568 5,398,079 259,137 42,227,784 1,521,492 - - 1,521,492 Credit impaired Net carrying amount Statutory deposit Sovereign/Government backed 100 - - 100 Gross carrying amount 1,521,592 - - 1,521,592 Expected credit losses - - - - 1,521,592 - - 1,521,592 Low 9,031,633 268,268 - 9,299,901 Medium 1,583,967 923,861 - 2,507,828 High 356,419 83,720 - 440,139 Unrated 757,265 1,443 - 758,708 - - 16,460 16,460 Gross carrying amount 11,729,284 1,277,292 16,460 13,023,036 Expected credit losses (6,833) (16,664) (9,107) (32,604) Unrated Net carrying amount Credit related commitments and contingencies Credit impaired Note a: The ECL is recognised in other comprehensive income reserves instead of in the statement of financial position as the carrying amount of debt instruments at FVOCI is equivalent to fair value.
231. 2019 Annual Report 45 . 229 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality (cont’d) Simplified approach Current to less than 16 days past due RM’000 16 days to 30 days past due RM’000 More than 30 days past due RM’000 Total RM’000 Gross carrying amount 76,941 31 875 77,847 Expected credit losses - - (839) (839) 76,941 31 36 77,008 Current RM’000 More than 90 days past due RM’000 Total RM’000 Gross carrying amount 179,100 34,385 213,485 Expected credit losses - (34,385) (34,385) 179,100 - 179,100 GROUP 2019 Amounts due from clients and brokers Net carrying amount Other assets (exclude prepayment) Net carrying amount
232. 230 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality (cont’d) BANK 2019 Stage 1 RM’000 Stage 2 RM’000 Stage 3 RM’000 Total RM’000 624,441 - - 624,441 Cash and short-term funds (exclude cash in hand) Investment graded 6 - - 6 692,476 - - 692,476 Gross carrying amount 1,316,923 - - 1,316,923 Expected credit losses (38) - - (38) 1,316,885 - - 1,316,885 2,428,480 47,617 - 2,476,097 Non-investment graded Sovereign/Government backed Net carrying amount Financial investments at fair value through other comprehensive income (exclude equity securities) Investment graded Sovereign/Government backed 4,376,761 - - 4,376,761 Gross carrying amount 6,805,241 47,617 - 6,852,858 (55) (327) - (382) Investment graded 130,058 - - 130,058 Sovereign/Government backed 101,446 - - 101,446 55,745 25,281 - 81,026 - - 1,294 1,294 Gross carrying amount 287,249 25,281 1,294 313,824 Expected credit losses (330) (270) (1,294) (1,894) 286,919 25,011 - 311,930 Expected credit losses [Note a] Financial investments at amortised cost Unrated Credit impaired Net carrying amount Note a: The ECL is recognised in other comprehensive income reserves instead of in the statement of financial position as the carrying amount of debt instruments at FVOCI is equivalent to fair value.
233. 2019 Annual Report 45 . 231 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality (cont’d) BANK 2019 Stage 1 RM’000 Stage 2 RM’000 Stage 3 RM’000 Total RM’000 Loans, advances and financing Low Medium High Unrated Credit impaired Gross carrying amount Expected credit losses Net carrying amount 21,420,465 5,336,079 1,184,084 390,699 28,331,327 (49,135) 28,282,192 500,842 2,242,286 1,308,235 131,403 4,182,766 (142,622) 4,040,144 369,124 369,124 (171,332) 197,792 21,921,307 7,578,365 2,492,319 522,102 369,124 32,883,217 (363,089) 32,520,128 Statutory deposit Sovereign/Government backed Unrated Gross carrying amount Expected credit losses Net carrying amount 1,142,008 100 1,142,108 1,142,108 - - 1,142,008 100 1,142,108 1,142,108 Credit related commitments and contingencies Low Medium High Unrated Credit impaired Gross carrying amount 7,457,146 1,222,599 218,882 497,553 9,396,180 224,376 704,447 71,135 1,433 1,001,391 14,481 14,481 7,681,522 1,927,046 290,017 498,986 14,481 10,412,052 (6,097) (13,483) (9,002) (28,582) BANK 2019 Current RM’000 More than 90 days past due RM’000 Total RM’000 Other assets (exclude prepayment) Gross carrying amount Expected credit losses Net carrying amount 302,221 302,221 29,604 (29,604) - 331,825 (29,604) 302,221 Expected credit losses Simplified Approach Under MFRS 139, all loans, advances and financing are categorised as either: - Neither past due nor impaired; - Past due but not impaired; or -Impaired. Past due loans/financing, advances and financing refer to loans that are overdue by one day or more. Impaired loans/financing are classified in accordance to the BNM Revised Policy Document on Financial Reporting and Financial Reporting for Islamic Banking Institutions.
234. 232 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality (cont’d) Distribution of loans, advances and financing by credit quality Neither past due nor impaired Past due but not impaired Impaired Gross loans, advances and financing GROUP 2018 RM’000 BANK 2018 RM’000 38,368,245 30,283,493 1,361,609 1,016,197 577,519 470,646 40,307,373 31,770,336 Less: Allowance for impairment losses - Individual assessment (75,733) (64,967) - Collective assessment (296,716) (220,435) 39,934,924 31,484,934 Net loans, advances and financing Loans, advances and financing that are neither past due nor impaired Analysis of loans, advances and financing that are neither past due nor impaired analysed based on the Group’s internal credit grading system is as follows: GROUP 2018 RM’000 BANK 2018 RM’000 -Good 37,096,620 29,271,361 -Fair 1,271,625 1,012,132 38,368,245 30,283,493 Grading classification The definition of the grading classification can be summarised as follows: Good: Refers to loans, advances and financing which have never been past due in the last 6 months and have never undergone any restructuring or rescheduling exercise previously. Fair: Refers to loans, advances and financing which have been past due at some point within the last 6 months, or have undergone restructuring or rescheduling exercise previously. Loans, advances and financing that are past due but not impaired An aging analysis of loans, advances and financing that are past due but not impaired is set out below. For the purpose of this analysis an asset is considered past due and included below when any payment due under strict contractual terms is received late or missed. The amount included is the entire financial asset, not just the payment of principal or interest/profit or both overdue.
235. 2019 Annual Report 45 . 233 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality (cont’d) Loans, advances and financing that are past due but not impaired (cont’d) GROUP 2018 RM’000 BANK 2018 RM’000 1,105,247 836,874 Past due > 1 - 2 months 221,479 159,159 Past due > 2 - 3 months 34,883 20,164 1,361,609 1,016,197 Past due up to 1 month Loans, advances and financing assessed as impaired An analysis of the gross amount of loans, advances and financing individually assessed as impaired by the Group and the Bank is as follows: GROUP 2018 RM’000 BANK 2018 RM’000 Gross impaired loans 577,519 470,646 Gross individually assessed impaired loans [Note] 209,987 154,629 - Individual assessment (75,733) (64,967) Net individually assessed impaired loans 134,254 89,662 Less: Allowance for impairment losses Note: Exclude individually assessed impaired loans which were fully collateralised and subsequently assessed under collective allowance for the Group and the Bank at RM128,035,000 and RM126,404,000 respectively in prior year. Other financial assets Other financial assets include cash and short term funds, deposits and placements with other financial institutions, amounts due from clients and brokers, debt securities, derivative financial assets, statutory deposits with BNM and other assets. Cash and short term funds herein exclude cash in hand. Debt securities include financial assets held-for-trading, financial investments available-for-sale and financial investments held-to-maturity. Financial assets held-for-trading and financial investments available-for-sale are measured at fair value. The fair value will reflect the credit risk of the issuer.
236. 234 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality (cont’d) Other financial assets (cont’d) Distribution of other financial assets by credit quality are summarised as below: GROUP 2018 Cash and short-term funds (exclude cash in hand) Deposits and placements with banks and other financial institutions Amounts due from clients and brokers Financial assets held-for-trading Financial investments available-for-sale (exclude equity securities) Financial investments held-to-maturity Derivative financial assets Neither past due nor impaired RM’000 2,503,354 Impaired RM’000 Allowance for impairment losses RM’000 Total RM’000 - - 2,503,354 77,283 - - 77,283 101,066 1,079 (840) 101,305 63,750 - - 63,750 8,326,333 9,420 (9,420) 8,326,333 289,240 18,565 (14,193) 293,612 84,455 - - 84,455 1,408,316 - - 1,408,316 125,519 32,017 (32,017) 125,519 12,979,316 61,081 (56,470) 12,983,927 Neither past due nor impaired RM’000 Impaired RM’000 Allowance for impairment losses RM’000 Total RM’000 1,450,557 - - 1,450,557 Deposits and placements with banks and other financial institutions 77,283 - - 77,283 Financial assets held-for-trading 48,771 - - 48,771 6,284,804 11 (11) 6,284,804 344,703 1,294 (1,294) 344,703 84,455 - - 84,455 1,092,566 - - 1,092,566 161,956 27,578 (27,578) 161,956 9,545,095 28,883 (28,883) 9,545,095 Statutory deposits Other assets (exclude prepayment) BANK 2018 Cash and short-term funds (exclude cash in hand) Financial investments available-for-sale (exclude equity securities) Financial investments held-to-maturity Derivative financial assets Statutory deposits Other assets (exclude prepayment)
237. 2019 Annual Report 45 . 235 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality (cont’d) Other financial assets (cont’d) Most listed and some unlisted securities are rated by external rating agencies. The Group and the Bank use external credit ratings provided by RAM, MARC, FITCH, Moody’s and S&P. The table below presents an analysis of other financial assets by rating agency: Deposits and placements with banks Financial Financial Financial assets investments investments Derivative held-for- available-for held-to- financial Statutory trading sale maturity assets deposits Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 103,496 105,868 50,009 59,250 - 77,283 - 12,623 40,904 1,508,539 288,265 386,986 380,297 73,250 14,978 - 28,948 842 24,556 324 34 - - 1,718,266 289,107 517,410 430,630 145,157 55,882 MARC AA AAA AAA - - - 151,794 354,440 100,280 - - 5 - 151,794 354,440 100,280 5 FITCH AA BBB+ 84 947 - - - - - - 84 947 397 154,649 - - - - 48 210 - - 48 607 154,649 1,783 1,132 1,530 - - - - 743 - - 2,526 1,132 1,530 1,877,818 146,391 2,503,354 77,283 10,223 63,750 5,067,504 8,326,333 288,867 4,745 293,612 28,745 84,455 1,408,316 1,408,316 8,652,728 179,881 12,757,103 GROUP 2018 Cash and and other short-term financial funds institutions RM’000 By rating agencies RAM AAA AA1 AA2 AA3 A1 A2 P1 Moody’s AA1 AA2 AA3 A1 A3 S&P AAA BBB+ Goverment backed Unrated [Note]
238. 236 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (v) Credit quality (cont’d) Other financial assets (cont’d) Most listed and some unlisted securities are rated by external rating agencies. The Group and the Bank use external credit ratings provided by RAM, MARC, FITCH, Moody’s and S&P. The table below presents an analysis of other financial assets by rating agency: (cont’d) Deposits and placements with banks Financial Financial Financial assets investments investments Derivative held-for- available-for held-to- financial Statutory trading sale maturity assets deposits Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 100,506 105,868 50,009 300,054 - 77,283 - 12,622 25,926 1,107,723 201,941 336,535 82,194 817,003 14,978 130,059 - 28,948 842 24,556 324 34 - - 1,314,460 202,783 466,959 132,527 1,259,772 40,904 MARC AA AAA AAA - - - 45,852 307,873 80,206 - - 5 - 45,852 307,873 80,206 5 FITCH AA BBB+ 84 947 - - - - - - 84 947 397 154,649 - - - - 48 210 - - 48 607 154,649 1,783 1,132 1,530 - - - - 743 - - 2,526 1,132 1,530 587,207 146,391 1,450,557 77,283 10,223 48,771 3,290,499 6,284,804 214,307 337 344,703 28,745 84,455 1,092,566 1,092,566 5,194,802 175,473 9,383,139 BANK 2018 Cash and and other short-term financial funds institutions RM’000 By rating agencies RAM AAA AA1 AA2 AA3 A1 P1 Moody’s AA3 A1 A3 S&P AAA BBB+ Goverment backed Unrated [Note] Note: Unrated financial instruments comprise of placement with financial institutions where credit rating is not available, investments in bankers’ acceptances, negotiable instruments of deposits and debt securities that are no longer rated, or are exempted from credit rating.
239. 2019 Annual Report 45 . 237 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Credit Risk (cont’d) (vi) Sensitivity test The Group and the Bank have performed expected credit losses sensitivity assessment on financial assets based on the changes in key variables as below while all other variables remain unchanged. The sensitivity factors used are assumptions based on parallel shifts in the key variables to project the impact on the expected credit losses of the Group and the Bank. The table below outlines the effect of the changes in major key variables used on expected credit losses while other variables remain constant: 2019 GROUP MEV Change (%) + RM’000 RM’000 Measurement variables Retail Consumption credit 3.3 6,382 (6,313) House price index 7.1 (4,551) 6,241 Unemployment rate 0.2 3,564 (3,588) 0.4 16,772 (9,963) MEV Change (%) + RM’000 RM’000 Non-retail 3 months KLIBOR 2019 BANK Measurement variables Retail Consumption credit 3.3 5,394 (5,353) House price index 7.1 (3,582) 4,904 Unemployment rate 0.2 2,565 (2,582) 0.4 13,936 (8,278) Non-retail 3 months KLIBOR (b) Market Risk Market Risk is the risk of loss of earnings arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices and their implied volatilities. The Group has established a framework of risk policies, measurement methodologies and risk limits as approved by the Group Risk Management Committee (“GRMC”) to manage market risk. Market risk arising from the trading activities is controlled via position limits, loss limits sensitivity limits and regular revaluation of positions versus market prices, where available. The Group is also susceptible to exposure to market risk arising from changes in prices of the shares quoted on Bursa Malaysia, which will impact on the Group’s amount due from clients and brokers. The risk is controlled by application of credit approvals, limits and monitoring procedures.
240. 238 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (b) Market Risk (cont’d) (i) Interest rate/profit rate risk As a subset of market risk, interest/profit rate risk refers to the volatility in net interest/profit income as a result of changes in interest/profit rate of return and shifts in the composition of the assets and liabilities. Interest rate/rate of return risk is managed through interest/profit rate sensitivity analysis. The sensitivity in net interest/profit income from interest/profit rate movement is monitored and reported to Management. In addition to pre-scheduled meetings, Group Assets and Liabilities Management Committee (“GALCO”) will also deliberate on revising the Group’s and the Bank’s lending/financing and deposit rates in response to changes in the benchmark rates set by the central bank. The effects of changes in the levels of interest rates/rates of return on the market value of securities are monitored closely and mark-to-market valuations are regularly reported to Management. The Group and the Bank are exposed to various risks associated with the effects of fluctuations in the prevailing levels of interest/ profit rates on its financial position and cash flows. The effects of changes in the levels of interest rates/rates of return on the market value of securities are monitored regularly and the outcomes of mark-to-market valuations are escalated to Management regularly. The table below summarises the effective interest/profit rates at the end of the reporting period and the periods in which the financial instruments will re-price or mature, whichever is the earlier.
241. 45 . (b) (i) Total assets Other financial assets** Loans, advances and financing Derivative financial assets 1,751,903 - - 37,031,799 1,557,935 - 35,649,421 3,790 34,867 Financial investments at amortised cost 190,178 135,035 - - - - >1-3 months RM’000 Financial investments at fair value through other comprehensive income - 3,338 Amounts due from clients and brokers Financial assets at fair value through profit or loss 500 1,208,638 Up to 1 month RM’000 Deposits and placements with banks and other financial institutions Cash and short-term funds Assets GROUP 2019 Interest rate/profit rate risk (cont’d) Market Risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) 1,071,021 - 701,796 - 5,000 364,225 - - - - 1,813,469 - 1,190,989 - 119,816 502,664 - - - - >3-6 months >6-12 months RM’000 RM’000 Non-trading book 7,443,756 - 1,899,093 - 65,000 5,479,663 - - - - >1-5 years RM’000 4,035,418 - 1,347,128 - - 2,688,290 - - - - 2,657,568 1,700,692 (26,061)* - 7,247 118,407 187,517 73,670 - 596,096 Non-interest/ Over 5 years profit sensitive RM’000 RM’000 98,365 - - 55,442 - - 42,923 - - - Trading book RM’000 55,903,299 1,700,692 42,320,301 55,442 235,720 9,478,462 230,440 77,008 500 1,804,734 Total RM’000 2019 Annual Report 239
242. 45 . (b) (i) 10,894 - 36,410 5,373,824 5,862 - 77,313 15,388,830 21,642,969 On-balance sheet interest sensitivity gap * ** Note: 22,342 274,173 (3,421,919) 695 4,492,940 - 25,242 17,922 4,449,081 (6,971,054) 8,784,523 - 30,375 67,071 8,687,077 >3-6 months >6-12 months RM’000 RM’000 Non-trading book (7,390,557) 800,013 1,449,468 382,720 14,834,313 - 574,847 474,929 11,152,336 >1-5 years RM’000 3,854,646 54,670 180,772 - 126,102 - - 1,114,918 656 30,754 1,059,226 1,542,650 51,164 - 5,101 2,271 393,478 Non-interest/ Over 5 years profit sensitive RM’000 RM’000 40,820 57,545 57,545 - - - Trading book RM’000 5,247,902 800,669 1,480,222 1,611,034 50,655,397 51,164 57,545 778,423 858,708 45,017,632 Total RM’000 Impaired loans/financing, expected credit losses and collective assessment allowance of the Group and the Bank are classified under the non-interest/profit sensitive column. Included statutory deposit and other assets. (3,621,921) 5,304,178 >1-3 months RM’000 15,031,482 Up to 1 month RM’000 Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Amounts due to clients and brokers Derivative financial liabilities Recourse obligations on loans and financing sold to Cagamas Subordinated obligations Other financial liabilities Total liabilities GROUP 2019 Interest rate/profit rate risk (cont’d) Market Risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 240 Alliance Bank Malaysia Berhad (88103-W)
243. 45 . (b) (i) Total assets Other financial assets** 35,130,631 2,014,934 - 1,612,546 - 32,947,800 - Loans, advances and financing Derivative financial assets - - Financial investments held-to-maturity 325,123 24,978 - - 77,265 - >1-3 months RM’000 Financial investments available-for-sale - 1,302 Amounts due from clients and brokers Financial assets held-fortrading - 2,156,551 Up to 1 month RM’000 Deposits and placements with banks and other financial institutions Cash and short-term funds Assets GROUP 2018 Interest rate/profit rate risk (cont’d) Market Risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) 1,027,559 - 450,341 - 84,356 492,862 - - - - 1,061,864 - 358,424 - 82,818 620,622 - - - - >3-6 months >6-12 months RM’000 RM’000 Non-trading book 7,931,131 - 2,626,983 - 119,713 5,184,435 - - - - >1-5 years RM’000 3,379,184 - 1,788,351 - - 1,590,833 - - - - 2,724,194 1,533,835 205,070* - 6,725 266,336 - 100,003 18 612,207 Non-interest/ Over 5 years profit sensitive RM’000 RM’000 148,205 - - 84,455 - - 63,750 - - - Trading book RM’000 53,417,702 1,533,835 39,989,515 84,455 293,612 8,505,189 63,750 101,305 77,283 2,768,758 Total RM’000 2019 Annual Report 241
244. 45 . (b) (i) 12,644 - 4,077,939 5,686 - 32,913 17,086,835 18,043,796 On-balance sheet interest sensitivity gap * ** Note: 13,117 249,495 (3,330,525) 13,835 4,358,084 - 14,160 13,944 4,316,145 (7,612,957) 300,011 20,419 8,674,821 - 2,532 22,649 8,329,210 >3-6 months >6-12 months RM’000 RM’000 Non-trading book 3,502,385 800,006 1,348,909 283,264 4,428,746 - 260,227 571,472 1,164,868 >1-5 years RM’000 2,844,324 151,400 534,860 - 383,460 - - (6,272,411) 2,346 30,705 802,410 8,996,605 75,103 - 3,529 3,194 8,079,318 Non-interest/ Over 5 years profit sensitive RM’000 RM’000 (6,481) 154,686 154,686 - - - Trading book RM’000 5,105,126 1,102,363 1,379,614 1,304,241 48,312,576 75,103 154,686 682,238 873,871 42,740,460 Total RM’000 Impaired loans/financing, expected credit losses and collective assessment allowance of the Group and the Bank are classified under the non-interest/profit sensitive column. Included statutory deposit and other assets. (2,063,005) 4,052,178 16,798,741 >1-3 months RM’000 Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Amounts due to clients and brokers Derivative financial liabilities Recourse obligations on loans and financing sold to Cagamas Subordinated obligations Other financial liabilities Total liabilities GROUP 2018 Up to 1 month RM’000 Interest rate/profit rate risk (cont’d) Market Risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 242 Alliance Bank Malaysia Berhad (88103-W)
245. 45 . (b) (i) - - Other financial assets** Total assets 1,360,116 1,184,947 27,900,278 Loans, advances and financing 28,964,799 - - Derivative financial assets - 34,868 Financial investments at amortised cost 175,169 - - >1-3 months RM’000 25,009 - 1,004,644 Up to 1 month RM’000 Financial investments at fair value through other comprehensive income Financial assets at fair value through profit or loss Cash and short-term funds Assets BANK 2019 Interest rate/profit rate risk (cont’d) Market Risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) 835,372 - 523,683 - 2,500 309,189 - - 1,751,131 - 1,162,718 - 99,770 488,643 - - >3-6 months >6-12 months RM’000 RM’000 Non-trading book 5,709,008 - 1,159,138 - 172,500 4,377,370 - - >1-5 years RM’000 2,089,678 - 686,178 - - 1,403,500 - - 2,220,725 1,444,329 6,034* - 2,292 73,986 126,733 567,351 Non-interest/ Over 5 years profit sensitive RM’000 RM’000 98,365 - - 55,442 - - 42,923 - Trading book RM’000 43,029,194 1,444,329 32,622,976 55,442 311,930 6,852,866 169,656 1,571,995 Total RM’000 2019 Annual Report 243
246. 45 . (b) (i) 10,894 - 36,410 4,177,320 5,862 - 77,313 11,553,519 17,411,280 On-balance sheet interest sensitivity gap * ** Note: 15,674 3,223 (2,607,692) 695 3,443,064 25,242 - 8,151 3,408,976 (5,282,412) 7,033,543 30,375 - 45,671 6,957,497 >3-6 months >6-12 months RM’000 RM’000 Non-trading book (6,069,998) 300,000 1,448,826 382,720 11,779,006 574,847 - 270,889 8,801,724 >1-5 years RM’000 1,908,906 54,670 180,772 126,102 - - - 1,047,794 76 30,754 902,571 1,172,931 5,101 - 1,227 233,202 Non-interest/ Over 5 years profit sensitive RM’000 RM’000 40,820 57,545 57,545 - - Trading book RM’000 3,631,494 300,076 1,479,580 1,454,379 39,397,700 778,423 57,545 344,835 34,982,862 Total RM’000 Impaired loans/financing, expected credit losses and collective assessment allowance of the Group and the Bank are classified under the non-interest/profit sensitive column. Included statutory deposit and other assets. (2,817,204) 4,114,342 11,467,121 >1-3 months RM’000 Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Derivative financial liabilities Recourse obligations on loans and financing sold to Cagamas Subordinated obligations Other financial liabilities Total liabilities BANK 2019 Up to 1 month RM’000 Interest rate/profit rate risk (cont’d) Market Risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 244 Alliance Bank Malaysia Berhad (88103-W)
247. 45 . (b) (i) Total assets Other financial assets** 28,297,029 - 27,070,544 Derivative financial assets Loans, advances and financing - Financial investments held-tomaturity 34,978 - Financial investments available-for-sale - Financial assets held-fortrading 1,191,507 Deposits and placements with banks and other financial institutions Cash and short-term funds Assets BANK 2018 Up to 1 month RM’000 Interest rate/profit rate risk (cont’d) Market Risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) 1,500,115 - 1,167,774 - - 255,076 - 77,265 - >1-3 months RM’000 802,689 - 283,597 - 49,698 469,394 - - - 818,286 - 299,478 - 63,330 455,478 - - - >3-6 months >6-12 months RM’000 RM’000 Non-trading book 6,412,717 - 1,721,997 - 229,596 4,461,124 - - - >1-5 years RM’000 1,360,447 - 817,930 - - 542,517 - - - 2,154,198 1,254,522 185,244* - 2,079 187,881 - 18 524,454 Non-interest/ profit sensitive Over 5 years RM’000 RM’000 133,226 - - 84,455 - - 48,771 - - Trading book RM’000 41,478,707 1,254,522 31,546,564 84,455 344,703 6,406,448 48,771 77,283 1,715,961 Total RM’000 2019 Annual Report 245
248. 45 . (b) (i) * ** Note: (1,841,033) 3,341,148 - - - - 12,644 13,117 3,315,387 >1-3 months RM’000 (2,569,668) 3,372,357 13,835 - - - 14,160 12,774 3,331,588 (5,203,127) 6,021,413 20,419 - 300,011 - 2,532 18,597 5,679,854 >3-6 months >6-12 months RM’000 RM’000 Non-trading book 3,021,131 3,391,586 283,264 1,348,378 300,000 - 260,227 333,872 865,845 >1-5 years RM’000 825,587 534,860 151,400 - - - 383,460 - - (6,225,380) 8,379,578 686,333 30,646 1,685 - 3,529 2,291 7,655,094 Non-interest/ Over 5 years profit sensitive RM’000 RM’000 (21,460) 154,686 - - - 154,686 - - - Trading book RM’000 3,525,291 37,953,416 1,188,164 1,379,024 601,696 154,686 682,238 439,238 33,508,370 Total RM’000 Impaired loans/financing, expected credit losses and collective assessment allowance of the Group and the Bank are classified under the non-interest/profit sensitive column. Included statutory deposit and other assets. 15,539,241 On-balance sheet interest sensitivity gap - 32,913 Subordinated obligations Other financial liabilities 12,757,788 - Recourse obligations on loans and financing sold to Cagamas Total liabilities - 5,686 Financial liabilities designated at fair value through profit or loss Derivative financial liabilities 58,587 12,660,602 Up to 1 month RM’000 Deposits and placements of banks and other financial institutions Deposits from customers Liabilities BANK 2018 Interest rate/profit rate risk (cont’d) Market Risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 246 Alliance Bank Malaysia Berhad (88103-W)
249. 2019 Annual Report 45 . 247 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (b) Market Risk (cont’d) (ii) Foreign exchange risk Foreign exchange risk refers to the risk that fair value or future cash flows of financial instruments will fluctuate because of the movements in the exchange rates for foreign exchange positions taken by the Group and the Bank from time to time. Foreign currency exchange risk is managed via approved risk limits and open positions are regularly revalued against current exchange rates and reported to Management and Board. The following table summarises the assets, liabilities and net open position by currency as at the end of the financial reporting date, which are mainly in US Dollars, Pound Sterling, Euro Dollars, Australian Dollars and Singapore Dollars. Other foreign exchange exposures include exposure to Japanese Yen, Chinese Yuan and New Zealand Dollars. The exposure was calculated only for monetary balances denominated in currencies other than the functional currency of the Group and the Bank. US Dollars RM’000 Pound Sterling RM’000 Euro Dollars RM’000 Australian Dollars RM’000 Singapore Dollars RM’000 Others RM’000 Total RM’000 Cash and short-term funds 290,207 908 - 1,170 2,585 9,180 304,050 Loans, advances and financing 287,023 94 26,098 - 1,204 306 314,725 Other financial assets 23,246 4 4 220 2 (7) 23,469 Total financial assets 600,476 1,006 26,102 1,390 3,791 9,479 642,244 389,749 36,100 36,159 227,204 44,474 22,654 756,340 - - 289 - - 1,003 1,292 Other financial liabilities 16,336 1,649 2,039 40,830 63 2,306 63,223 Total financial liabilities 406,085 37,749 38,487 268,034 44,537 25,963 820,855 On-balance sheet open position 194,391 (36,743) (12,385) (266,644) (40,746) (16,484) (178,611) Off-balance sheet open position (278,254) 34,755 10,360 252,142 18,716 28,059 65,778 Net open position (83,863) (1,988) (2,025) (14,502) (22,030) 11,575 (112,833) GROUP/BANK 2019 Assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions
250. 248 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (b) Market Risk (cont’d) (ii) Foreign exchange risk (cont’d) US Dollars RM’000 Pound Sterling RM’000 Euro Dollars RM’000 Australian Dollars RM’000 Singapore Dollars RM’000 Others RM’000 Total RM’000 247,253 1,502 948 178 1,929 10,463 262,273 Deposits and placements with banks and other financial institutions 77,283 - - - - - 77,283 Loans, advances and financing 332,833 - 5,220 - 32,237 1,199 371,489 Other financial assets 39,817 - - 6 19 120 39,962 Total financial assets 697,186 1,502 6,168 184 34,185 11,782 751,007 501,381 52,496 33,618 125,844 41,470 36,923 791,732 19,318 - - - - 21,864 41,182 GROUP/BANK 2018 Assets Cash and short-term funds Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value - - - - - 911 911 Other financial liabilities 13,530 431 2,463 6,071 - 1,804 24,299 Total financial liabilities 534,229 52,927 36,081 131,915 41,470 61,502 858,124 On-balance sheet open position 162,957 (51,425) (29,913) (131,731) (7,285) (49,720) (107,117) Off-balance sheet open position (190,218) 50,042 27,941 104,387 (11,117) 56,264 37,299 Net open position (27,261) (1,383) (1,972) (27,344) (18,402) 6,544 (69,818)
251. 2019 Annual Report 45 . 249 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (b) Market Risk (cont’d) (iii) Value at risk (“VaR”) Value-at-risk (“VaR”) reflects the maximum potential loss of value of a portfolio resulting from market movements within a specified probability of occurrence (level of confidence); for a specific period of time (holding period). For the Group and the Bank, VaR is computed based on the historical simulation approach with parameters in accordance with BNM and Basel requirements. Backtesting is performed daily to validate and reassess the accuracy of the VaR model. This involves the comparison of the daily VaR values against the hypothetical profit and loss over the corresponding period. The table below sets out a summary of the Group’s and the Bank’s VaR profile by financial instrument types for the Trading Portfolio: Balance RM’000 Average for the year RM’000 Minimum RM’000 Maximum RM’000 GROUP 2019 (162) (317) (162) (462) Government securities (10,364) (8,148) (6,705) (10,364) Private debt securities (4,406) (5,141) (3,873) (6,648) FX related derivatives BANK 2019 (162) (317) (162) (462) Government securities (5,826) (4,467) (3,114) (5,826) Private debt securities (4,406) (4,935) (3,873) (6,648) (578) (1,179) (461) (2,706) Government securities (4,093) (14,646) (4,093) (41,511) Private debt securities (3,391) (8,761) (3,391) (14,624) (578) (1,179) (461) (2,706) Government securities (3,017) (11,387) (3,015) (32,749) Private debt securities (1,308) (2,515) (1,070) (4,359) FX related derivatives GROUP 2018 FX related derivatives BANK 2018 FX related derivatives
252. 250 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (b) Market Risk (cont’d) (iv) Interest rate risk/rate of return risk in the banking book The following tables present the Group’s and the Bank’s projected sensitivity to a 100 basis point parallel shock to interest rates across all maturities applied on the Group’s and the Bank’s interest sensitivity gap as at reporting date. 2019 GROUP - 100 bps 2019 BANK + 100 bps Increase/(Decrease) - 100 bps + 100 bps Increase/(Decrease) RM’000 RM’000 RM’000 RM’000 Impact on net profit after tax (90,574) 90,574 (74,614) 74,614 Impact on equity 267,440 (237,670) 161,525 (146,837) 2018 GROUP - 100 bps 2018 BANK + 100 bps Increase/(Decrease) - 100 bps + 100 bps Increase/(Decrease) RM’000 RM’000 RM’000 RM’000 Impact on net profit after tax (95,584) 95,584 (78,216) 78,216 Impact on equity 198,551 (173,091) 128,578 (109,818) Note: The foreign currency impact on net profit is considered insignificant as the individual exposure is less than 5% of Banking Book assets/liabilities.
253. 2019 Annual Report 45 . FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (b) Market Risk (cont’d) (v) 251 Other risk measures (i) Stress test Stress testing is normally used by banks to gauge their potential vulnerability to exceptional but plausible events. The Group performs stress testing regularly to measure and alert the Board and Management on the effects of potential political, economic or other disruptive events on our exposures. The Group’s stress testing process is governed by the Stress Testing Framework as approved by the Board. Stress testing is conducted on a bank-wide basis as well as on specific portfolios. The Group’s bank-wide stress testing exercise uses a variety of broad macroeconomic indicators that are then translated into stress impacts on the various business units. The results are then consolidated to provide an overall impact on the Group’s financial results and capital requirements. Stress testing results are reported to the Board and Management to provide them with an assessment of the financial impact of such events would have on the Group’s profitability and capital levels. (ii) Sensitivity analysis Sensitivity analysis is used to measure the impact of changes in individual stress factors such as interest/profit rates or foreign exchange rates. It is normally designed to isolate and quantify exposure to the underlying risk. The Group and the Bank perform sensitivity analysis such as parallel shifts of interest/profit rates on its exposures, primarily on the banking and trading book positions. (c) Liquidity Risk Liquidity risk is the inability of the Group and the Bank to meet financial commitments when due. The Group’s and the Bank’s liquidity risk profile is managed using liquidity risk management strategies set in the Liquidity Risk Management Policy. Liquidity Risk Measures are monitored against approved thresholds by GALCO and GRMC. A contingency funding plan is also established by the Group and the Bank as a forward-looking measure to ensure that liquidity risk can be addressed according to the degrees of key risk indicators, and which incorporates alternative funding strategies which are ready to be implemented on a timely basis to mitigate the impact of unforeseen adverse changes in liquidity in the market place.
254. 252 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (c) Liquidity risk (cont’d) (i) Liquidity risk for assets and liabilities based on remaining contractual maturities The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-guarantees are important factors in assessing the liquidity of the Group and the Bank. The table below provides analysis of assets and liabilities into relevant maturity terms based on remaining contractual maturities: GROUP 2019 Up to 1 month RM’000 >1-3 months RM’000 >3-6 months RM’000 >6-12 months RM’000 >1 year RM’000 Total RM’000 1,804,734 - - - - 1,804,734 500 - - - - 500 Assets Cash and short-term funds Deposits and placements with banks and other financial institutions 77,008 - - - - 77,008 379 - 118 - 229,943 230,440 180,003 230,448 387,975 502,664 8,177,372 9,478,462 37,164 4,549 4,994 119,816 69,197 235,720 8,681,232 2,125,500 883,666 136,537 30,493,366 42,320,301 192,956 19,453 5,812 2,791 2,152,674 2,373,686 10,973,976 2,379,950 1,282,565 761,808 41,122,552 56,520,851 25,836,029 5,376,065 4,509,248 8,733,406 562,884 45,017,632 278,226 22,342 17,922 66,661 473,557 858,708 Financial liabilities designated at fair value through profit or loss 9,446 17,970 34,361 29,644 687,002 778,423 Amounts due to clients and brokers 51,164 - - - - 51,164 Recourse obligations on loans and financing sold to Cagamas - 656 - - 800,013 800,669 Subordinated obligations - - - - 1,480,222 1,480,222 Amounts due from clients and brokers Financial assets at FVTPL Financial investments at FVOCI Financial investments at amortised cost Loans, advances and financing Other financial and non-financial assets Total assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Other financial and non-financial liabilities 941,843 13,381 17,255 6,486 822,226 1,801,191 Total liabilities 27,116,708 5,430,414 4,578,786 8,836,197 4,825,904 50,788,009 Net maturity mismatch (16,142,732) (3,050,464) (3,296,221) (8,074,389) 36,296,648 5,732,842
255. 2019 Annual Report 45 . 253 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (c) Liquidity risk (cont’d) (i) Liquidity risk for assets and liabilities based on remaining contractual maturities (cont’d) The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-guarantees are important factors in assessing the liquidity of the Group and the Bank. The table below provides analysis of assets and liabilities into relevant maturity terms based on remaining contractual maturities: (cont’d) GROUP 2018 Up to 1 month RM’000 >1-3 months RM’000 >3-6 months RM’000 >6-12 months RM’000 >1 year RM’000 Total RM’000 2,768,758 - - - - 2,768,758 - 77,283 - - - 77,283 Assets Cash and short-term funds Deposits and placements with banks and other financial institutions Amounts due from clients and brokers 101,305 - - - - 101,305 Financial investment held-for-trading 14,978 25,926 167 - 22,679 63,750 Financial investment available-forsale 61,848 355,038 519,110 619,793 6,949,400 8,505,189 1,228 744 84,423 82,636 124,581 293,612 7,889,140 1,974,013 995,242 187,093 28,944,027 39,989,515 113,465 37,283 7,211 15,060 1,965,837 2,138,856 10,950,722 2,470,287 1,606,153 904,582 38,006,524 53,938,268 24,747,374 4,098,867 4,396,044 8,391,457 1,106,718 42,740,460 250,481 13,118 16,150 22,650 571,472 873,871 Financial liabilities designated at fair value through profit or loss 1,759 1,869 21,315 15,600 641,695 682,238 Amounts due to clients and brokers 75,103 - - - - 75,103 - 2,346 - 300,011 800,006 1,102,363 22,118 8,528 59 - 1,348,909 1,379,614 Financial investment held-to-maturity Loans, advances and financing Other financial and non-financial assets Total assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Recourse obligations on loans and financing sold to Cagamas Subordinated obligations Other financial and non-financial liabilities 560,648 17,982 52,857 47,094 946,448 1,625,029 Total liabilities 25,657,483 4,142,710 4,486,425 8,776,812 5,415,248 48,478,678 Net maturity mismatch (14,706,761) (1,672,423) (2,880,272) (7,872,230) 32,591,276 5,459,590
256. 254 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (c) Liquidity risk (cont’d) (i) Liquidity risk for assets and liabilities based on remaining contractual maturities (cont’d) The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-guarantees are important factors in assessing the liquidity of the Group and the Bank. The table below provides analysis of assets and liabilities into relevant maturity terms based on remaining contractual maturities: (cont’d) Up to 1 month RM’000 >1-3 months RM’000 >3-6 months RM’000 >6-12 months RM’000 >1 year RM’000 Total RM’000 1,571,995 - - - - 1,571,995 379 - 118 - 169,159 169,656 Financial investments at FVOCI 58,511 199,629 325,205 488,643 5,780,878 6,852,866 Financial investments at amortised cost 36,891 446 2,556 99,771 172,266 311,930 6,492,380 1,527,109 669,257 106,285 23,827,945 32,622,976 267,702 18,497 5,812 2,791 2,661,243 2,956,045 8,427,858 1,745,681 1,002,948 697,490 32,611,491 44,485,468 BANK 2019 Assets Cash and short-term funds Financial assets at FVTPL Loans, advances and financing Other financial and non-financial assets Total assets Liabilities 20,197,348 4,169,377 3,454,002 6,994,865 167,270 34,982,862 Deposits and placements of banks and other financial institutions 3,224 15,674 9,378 45,260 271,299 344,835 Financial liabilities designated at fair value through profit or loss 9,446 17,970 34,361 29,644 687,002 778,423 - 76 - - 300,000 300,076 21,835 8,919 - - 1,448,826 1,479,580 549,997 49,614 16,871 5,795 1,007,576 1,629,853 Total liabilities 20,781,850 4,261,630 3,514,612 7,075,564 3,881,973 39,515,629 Net maturity mismatch (12,353,992) (2,515,949) (2,511,664) (6,378,074) 28,729,518 4,969,839 Deposits from customers Recourse obligations on loans and financing sold to Cagamas Subordinated obligations Other financial and non-financial liabilities
257. 2019 Annual Report 45 . 255 FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (c) Liquidity risk (cont’d) (i) Liquidity risk for assets and liabilities based on remaining contractual maturities (cont’d) The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-guarantees are important factors in assessing the liquidity of the Group and the Bank. The table below provides analysis of assets and liabilities into relevant maturity terms based on remaining contractual maturities: (cont’d) Up to 1 month RM’000 >1-3 months RM’000 >3-6 months RM’000 >6-12 months RM’000 >1 year RM’000 Total RM’000 1,715,961 - - - - 1,715,961 Deposits and placements with banks and other financial institutions - 77,283 - - - 77,283 Financial investment held-for-trading - 25,926 167 - 22,678 48,771 61,449 274,130 489,924 455,660 5,125,285 6,406,448 1,229 446 49,764 63,149 230,115 344,703 6,209,355 1,484,709 696,125 127,651 23,028,724 31,546,564 BANK 2018 Assets Cash and short-term funds Financial investment available-forsale Financial investment held-to-maturity Loans, advances and financing Other financial and non-financial assets Total assets 132,875 29,877 7,173 14,735 2,528,449 2,713,109 8,120,869 1,892,371 1,243,153 661,195 30,935,251 42,852,839 20,217,072 3,354,730 3,391,908 5,730,196 814,464 33,508,370 59,539 13,117 14,113 18,598 333,871 439,238 1,759 1,869 21,315 15,600 641,695 682,238 Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Recourse obligations on loans and financing sold to Cagamas - 1,685 - 300,011 300,000 601,696 22,118 8,528 - - 1,348,378 1,379,024 460,982 17,012 52,630 46,640 920,310 1,497,574 Total liabilities 20,761,470 3,396,941 3,479,966 6,111,045 4,358,718 38,108,140 Net maturity mismatch (12,640,601) (1,504,570) (2,236,813) (5,449,850) 26,576,533 4,744,699 Subordinated obligations Other financial and non-financial liabilities
258. 45 . (c) Derivatives settled on a gross basis Outflow Inflow Derivatives financial liabilities Derivatives settled on a net basis Interest rate derivatives and equity option Net outflow Items not recognised in the statements of financial position Financial guarantees Credit related commitments and contingencies Non derivative financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Recourse obligations on loans and financing sold to Cagamas Subordinated obligations Other financial liabilities GROUP 2019 (1,190,844) 1,187,151 (3,693) (461) (461) 130,379 9,954,752 10,085,131 25,875,927 274,355 60,769 25,875 1,154,277 27,391,203 (730,886) 723,433 (7,453) (301) (301) 134,969 115,655 250,624 5,423,059 26,629 18,154 8,882 12,938 470 5,490,132 >1-3 months RM’000 (693,948) 687,341 (6,607) (777) (777) 89,245 45,497 134,742 4,602,190 17,922 34,495 5,494 3,125 995 4,664,221 (72,416) 70,461 (1,955) (1,031) (1,031) 266,040 93,651 359,691 8,961,760 71,136 30,568 21,265 41,938 2,078 9,128,745 >3-6 months >6-12 months RM’000 RM’000 (135,742) 130,687 (5,055) (1,431) (1,431) 89,882 1,826,460 1,916,342 609,354 484,833 722,841 878,453 1,894,050 887,849 5,477,380 >1-5 years RM’000 - 119 119 10,985 265,521 276,506 183,570 281,263 464,833 Over 5 years RM’000 (2,823,836) 2,799,073 (24,763) (3,882) (3,882) 721,500 12,301,536 13,023,036 45,472,290 874,875 1,050,397 914,094 2,259,189 2,045,669 52,616,514 Total RM’000 The table below presents the cash flows payable by the Group and the Bank under financial liabilities by remaining contractual maturities at the end of the reporting period. The amounts disclosed in the table are the contractual undiscounted cash flows of all financial liabilities. Up to 1 month RM’000 Contractual maturity of financial liabilities on an undiscounted basis (ii) Liquidity risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 256 Alliance Bank Malaysia Berhad (88103-W)
259. 45 . (c) Derivatives settled on a gross basis Outflow Inflow Derivatives financial liabilities Derivatives settled on a net basis Interest rate derivatives and equity option Net outflow Items not recognised in the statements of financial position Financial guarantees Credit related commitments and contingencies Non derivative financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Amounts due to clients and brokers Recourse obligations on loans and financing sold to Cagamas Subordinated obligations Other financial liabilities (2,056,306) 2,028,453 (27,853) (236) (236) 84,641 9,366,683 9,451,324 24,728,020 250,504 6,351 75,103 25,875 449,648 25,535,501 Up to 1 month RM’000 (419,572) 406,649 (12,923) (2,610) (2,610) 244,156 51,452 295,608 4,138,871 6,197 14,222 10,661 13,163 656 4,183,770 >1-3 months RM’000 (461,162) 428,965 (32,197) (2,352) (2,352) 102,040 77,569 179,609 4,453,018 13,944 15,935 10,661 17,534 4,511,092 (296,537) 276,566 (19,971) (2,942) (2,942) 167,005 350,202 517,207 8,618,218 27,105 2,567 321,207 39,038 26,255 9,034,390 >3-6 months >6-12 months RM’000 RM’000 (97,443) 86,689 (10,754) (8,735) (8,735) 121,920 1,442,650 1,564,570 1,249,501 587,990 284,895 901,218 462,300 645,717 4,131,621 >1-5 years RM’000 (5,778) 4,972 (806) 232 232 11,009 24,775 35,784 423,084 1,406,100 142,202 1,971,386 Over 5 years RM’000 (3,336,798) 3,232,294 (104,504) (16,643) (16,643) 730,771 11,313,331 12,044,102 43,187,628 885,740 747,054 75,103 1,243,747 1,946,476 1,282,012 49,367,760 Total RM’000 The table below presents the cash flows payable by the Group and the Bank under financial liabilities by remaining contractual maturities at the end of the reporting period. The amount disclosed in the table are the contractual undiscounted cash flows of all financial liabilities. (cont’d) GROUP 2018 Contractual maturity of financial liabilities on an undiscounted basis (cont’d) (ii) Liquidity risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) 2019 Annual Report 257
260. 45 . (c) Derivatives settled on a gross basis Outflow Inflow Derivatives financial liabilities Derivatives settled on a net basis Interest rate derivatives and equity option Net outflow Items not recognised in the statements of financial position Financial guarantees Credit related commitments and contingencies Non derivative financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Recourse obligations on loans and financing sold to Cagamas Subordinated obligations Other financial liabilities BANK 2019 (1,190,844) 1,187,151 (3,693) (461) (461) 108,481 8,101,228 8,209,709 20,208,190 3,223 9,604 25,875 544,206 20,791,098 (730,886) 723,433 (7,453) (301) (301) 96,364 66,521 162,885 4,208,228 18,146 18,154 3,388 12,938 36,561 4,297,415 >1-3 months RM’000 (693,948) 687,341 (6,607) (777) (777) 78,426 34,918 113,344 3,527,523 8,151 34,495 3,125 226 3,573,520 (72,416) 70,461 (1,955) (1,031) (1,031) 160,654 87,485 248,139 7,156,724 48,045 30,568 10,276 41,938 694 7,288,245 >3-6 months >6-12 months RM’000 RM’000 (135,742) 130,687 (5,055) (1,431) (1,431) 74,141 1,363,401 1,437,542 175,420 275,962 722,841 337,383 1,785,500 990,612 4,287,718 >1-5 years RM’000 - 119 119 240,433 240,433 183,570 461,313 644,883 Over 5 years RM’000 (2,823,836) 2,799,073 (24,763) (3,882) (3,882) 518,066 9,893,986 10,412,052 35,276,085 353,527 999,232 351,047 2,330,689 1,572,299 40,882,879 Total RM’000 The table below presents the cash flows payable by the Group and the Bank under financial liabilities by remaining contractual maturities at the end of the reporting period. The amount disclosed in the table are the contractual undiscounted cash flows of all financial liabilities. (cont’d) Up to 1 month RM’000 Contractual maturity of financial liabilities on an undiscounted basis (cont’d) (ii) Liquidity risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 258 Alliance Bank Malaysia Berhad (88103-W)
261. 45 . (c) Derivatives settled on a gross basis Outflow Inflow Derivatives financial liabilities Derivatives settled on a net basis Interest rate derivatives and equity option Net outflow Items not recognised in the statements of financial position Financial guarantees Credit related commitments and contingencies Non derivative financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Recourse obligations on loans and financing sold to Cagamas Subordinated obligations Other financial liabilities (2,056,306) 2,028,453 (27,853) (236) (236) 76,226 7,549,654 7,625,880 20,194,470 59,544 6,351 25,875 389,938 20,676,178 Up to 1 month RM’000 (419,572) 406,649 (12,923) (2,610) (2,610) 220,820 45,861 266,681 3,388,950 4,376 14,222 6,726 13,163 656 3,428,093 >1-3 months RM’000 (461,162) 428,965 (32,197) (2,352) (2,352) 90,046 72,315 162,361 3,437,874 12,774 15,935 6,688 17,534 3,490,805 (296,537) 276,566 (19,971) (2,942) (2,942) 137,873 338,040 475,913 5,865,455 21,241 2,567 313,377 39,038 26,255 6,267,933 >3-6 months >6-12 months RM’000 RM’000 (97,443) 86,689 (10,754) (8,735) (8,735) 31,736 1,088,876 1,120,612 916,250 343,095 284,895 351,047 462,300 589,350 2,946,937 >1-5 years RM’000 (5,778) 4,972 (806) 232 232 24,246 24,246 423,084 1,406,100 142,202 1,971,386 Over 5 years RM’000 (3,336,798) 3,232,294 (104,504) (16,643) (16,643) 556,701 9,118,992 9,675,693 33,802,999 441,030 747,054 677,838 1,946,476 1,165,935 38,781,332 Total RM’000 The table below presents the cash flows payable by the Group and the Bank under financial liabilities by remaining contractual maturities at the end of the reporting period. The amount disclosed in the table are the contractual undiscounted cash flows of all financial liabilities. (cont’d) BANK 2018 Contractual maturity of financial liabilities on an undiscounted basis (cont’d) (ii) Liquidity risk (cont’d) FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) 2019 Annual Report 259
262. 260 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 45. 46. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (d) Operational and Shariah Compliance Risk Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. The definition of Operational Risk includes legal risk, but excludes strategic and reputational risk. Operational risk includes Shariah non-compliance risk which arises from the Group’s failure to comply with the Shariah rules and principles determined by the relevant Shariah advisory councils. Group Operational Risk of Group Risk Management formulates and implements operational risk framework within the Group while the line of businesses in conjunction with the Risk Control Officers are responsible for the management of their day-to-day operational and Shariah non-compliance risks. Operational and Shariah non-compliance risk management is a continual cyclic process which includes risk identification, assessment, control, mitigation and monitoring. This includes analysing the risk profile of the Group, determining control gaps, assessing potential loss and enhancing controls to mitigate the risks. The main activities undertaken by the Group and the Bank in managing operational and Shariah non-compliance risks include the identification of risks and controls, monitoring of key risk indicators, reviews of policies and procedures, operational risk and Shariah noncompliance risk awareness training, and business continuity management. The Group and the Bank apply the Basic Indicator Approach for operational risk capital charge computation. CAPITAL COMMITMENTS GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 46,839 56,026 45,925 55,198 123,701 113,418 121,441 111,664 170,540 169,444 167,366 166,862 Capital expenditure: Authorised and contracted for Authorised but not contracted for 47. LEASE COMMITMENTS The Group and the Bank have lease commitments in respect of equipment on hire and premises, all of which are classified as operating leases. A summary of the non-cancellable lease commitments are as follows: GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Within one year 35,708 29,719 33,765 27,933 Between one to five years 43,506 40,510 42,241 37,810 79,214 70,229 76,006 65,743 The operating leases of the Group’s and the Bank’s premises typically cover for an initial period of two to three years with options for renewal. These leases are cancellable but are usually renewed upon expiry or replaced by leases on other properties.
263. 2019 Annual Report 261 48 . 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 off-balance sheet notional exposures of the Group and the Bank are as follows: GROUP BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 Direct credit substitutes [Note a] 650,663 719,148 490,085 564,446 Transaction-related contingent items [Note a] 680,097 739,535 609,843 651,896 Short-term self-liquidating trade-related contingencies 179,994 235,056 133,405 215,445 Forward assets purchase 236,985 - 211,985 - 46,154 - - - - maturity exceeding one year 1,319,483 1,056,899 904,181 744,972 - maturity not exceeding one year 8,308,840 7,543,400 6,461,733 5,748,870 Credit-related exposures Obligations under an on-going underwriting agreement Irrevocable commitments to extend credit: 1,600,820 1,750,064 1,600,820 1,750,064 13,023,036 12,044,102 10,412,052 9,675,693 4,561,102 5,057,347 4,561,102 5,057,347 159,580 73,015 159,580 73,015 10,209 17,385 10,209 17,385 - one year or less 2,034,786 1,206,130 2,034,786 1,206,130 - over one year to three years 1,779,255 1,990,360 1,779,255 1,990,360 - over three years 2,503,968 2,146,310 2,503,968 2,146,310 - one year or less 78,958 38,825 78,958 38,825 - over one year to three years 30,810 67,660 30,810 67,660 11,158,668 10,597,032 11,158,668 10,597,032 24,181,704 22,641,134 21,570,720 20,272,725 Unutilised credit card lines Derivative financial instruments [Note b] Foreign exchange related contracts: - one year or less - over one year to three years - over three years Interest rate related contracts: Equity related contracts: Notes: (a) Included in direct credit substitutes and transaction-related contingent item are financial guarantee contracts of RM721,500,000 and RM518,066,000 (2018: RM730,771,000 and RM556,701,000) for the Group and the Bank respectively, of which the fair value at the time of issuance is RM Nil. (b) These derivatives are valued on gross position basis and the unrealised gains or losses have been reflected in the statements of income and statements of financial position as derivatives financial assets and derivatives financial liabilities. The fair value of derivatives are disclosed under Note 12.
264. 262 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 49. CAPITAL ADEQUACY The capital adequacy ratios of the Group and the Bank are computed in accordance with Bank Negara Malaysia’s Capital Adequacy Framework. The Framework sets out the approach for computing regulatory capital adequacy ratios, as well as the levels of those ratios at which banking institutions are required to operate. The framework is to strengthen capital adequacy standards, in line with the requirements set forth under Basel III. The risk-weighted assets of the Group and the Bank are computed using the Standardised Approach for credit risk and market risk, and the Basic Indicator Approach for operational risk. The capital adequacy ratios of the Group and the Bank are as follows: GROUP 2019 BANK 2019 2018 2018 Before deducting proposed dividends CET 1 capital ratio Tier 1 capital ratio Total capital ratio 13.736% 14.423% 18.856% 13.695% 14.123% 18.638% 12.061% 12.940% 17.841% 11.680% 12.217% 17.122% After deducting proposed dividends CET 1 capital ratio Tier 1 capital ratio Total capital ratio 13.388% 14.074% 18.508% 13.393% 13.821% 18.337% 11.614% 12.493% 17.394% 11.302% 11.839% 16.744% (a) Components of Common Equity Tier I (“CET I”), Tier I and Tier II capital under the revised Capital Adequacy Framework are as follows: GROUP 2019 RM’000 CET I Capital Paid-up share capital Retained profits Regulatory reserves FVOCI reserve/revaluation reserves Capital reserves Less: Regulatory adjustment - Goodwill and other intangibles - Deferred tax assets - 55% of revaluation reserves - Regulatory reserves - Investment in subsidiaries, associate and joint venture Total CET I Capital Additional Tier 1 Capital Securities Total Additional Tier 1 Capital Total Tier I Capital 2018 RM’000 BANK 2019 RM’000 2018 RM’000 1,548,106 3,827,676 178,397 68,540 100,150 5,722,869 1,548,106 3,510,283 186,064 114,987 100,150 5,459,590 1,548,106 3,128,589 160,798 36,449 95,515 4,969,457 1,548,106 2,866,142 160,029 74,907 95,515 4,744,699 (432,961) (72,972) (37,697) (178,397) (802) 5,000,040 (409,402) (22,664) (63,243) (186,064) (693) 4,777,524 (323,804) (50,116) (20,047) (160,798) (989,102) 3,425,590 (292,981) (9,223) (41,199) (160,029) (989,102) 3,252,165 249,792 249,792 149,293 149,293 249,445 249,445 149,316 149,316 5,249,832 4,926,817 3,675,035 3,401,481 1,199,676 1,199,675 1,199,381 1,199,062 Tier II Capital Subordinated obligations Expected credit losses/collective assessment allowance and regulatory reserves Less: Regulatory adjustment - Investment in Tier 2 capital instruments Total Tier II Capital 414,258 375,710 322,740 296,765 1,613,934 1,575,385 (130,000) 1,392,121 (130,000) 1,365,827 Total Capital 6,863,766 6,502,202 5,067,156 4,767,308
265. 2019 Annual Report 49 . 263 CAPITAL ADEQUACY (CONT’D) (b) The breakdown of risk-weighted assets (“RWA”) by exposures in each major risk category are as follows: GROUP Credit risk Market risk Operational risk Total RWA and capital requirements BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 33,140,642 31,973,585 25,819,184 25,299,261 274,942 110,857 274,942 110,389 2,984,529 2,801,473 2,307,070 2,433,159 36,400,113 34,885,915 28,401,196 27,842,809 Detailed information on the risk exposures above is presented in the Bank’s Pillar 3 Report. (c) The capital adequacy ratios of the banking subsidiaries are as follows: Alliance Islamic Bank Berhad Alliance Investment Bank Berhad CET I capital ratio 11.690% 78.200% Tier I capital ratio 12.950% 78.200% Total capital ratio 15.762% 79.196% CET I capital ratio 11.339% 78.200% Tier I capital ratio 12.599% 78.200% Total capital ratio 15.411% 79.196% CET I capital ratio 12.569% 86.830% Tier I capital ratio 12.569% 86.830% Total capital ratio 15.421% 87.642% CET I capital ratio 12.198% 85.079% Tier I capital ratio 12.198% 85.079% Total capital ratio 15.050% 85.892% 2019 Before deducting proposed dividends After deducting proposed dividends 2018 Before deducting proposed dividends After deducting proposed dividends
266. 264 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 50.CAPITAL In managing its capital, the Group’s objectives are: - to maintain sufficient capital resources to meet the regulatory capital requirements as set forth by Bank Negara Malaysia; - to maintain sufficient capital resources to support the Group’s risk appetite and to enable future business growth; and - to meet the expectations of key stakeholders, including shareholders, investors, regulators and rating agencies. In line with this, the Group aims to maintain capital adequacy ratios that are comfortably above the regulatory requirement, while balancing shareholders’ desire for sustainable returns and high standards of prudence. The Group carries out stress testing to estimate the potential impact of extreme, but plausible, events on the Group’s earnings, balance sheet and capital. The results of the stress test are to facilitate the formation of action plan(s) in advance if the stress test reveals that the Group’s capital will be adversely affected. The results of the stress test are tabled to the Group Risk Management Committee for approval. The Group’s and the Bank’s regulatory capital are determined under Bank Negara Malaysia’s Capital Adequacy Framework and their capital ratios complied with the prescribed capital adequacy ratios. 51. FAIR VALUE MEASUREMENTS (a) Determination of fair value and the fair value hierarchy MFRS 13 Fair Value Measurement requires disclosure of financial instruments measured at fair value to be categorised according to a hierarchy of valuation techniques, whether the inputs used are observable or unobservable. The following level of hierarchy are used for determining and disclosing the fair value of the financial instruments: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). 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. The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer. (i) Financial instruments in Level 1 The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange and those prices represent actual and regularly occurring market transactions on an arm’s length basis. This includes listed equities and corporate debt securities which are actively traded.
267. 2019 Annual Report 51 . 265 FAIR VALUE MEASUREMENTS (CONT’D) (a) Determination of fair value and the fair value hierarchy (cont’d) (ii) Financial instruments in Level 2 Where fair value is determined using quoted 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. These would include government securities, corporate private debt securities, corporate notes and most of the Group’s and the Bank’s derivatives. (iii) Financial instruments in Level 3 The Group and the Bank classify financial instruments as Level 3 when there is reliance on unobservable inputs to the valuation model attributing to a significant contribution to the instrument value. Valuation reserves or pricing adjustments where applicable will be used to converge to fair value. The valuation techniques and inputs used generally depend on the contractual terms and the risks inherent in the instrument as well as the availability of pricing information in the market. Principal techniques used include net tangible assets, net asset value, discounted cash flows, and other appropriate valuation models. These includes private equity investments.
268. 266 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 51. FAIR VALUE MEASUREMENTS (CONT’D) (b) Financial instruments measured at fair value and the fair value hierarchy The following tables show the Group’s and the Bank’s financial instruments which are measured at fair value at the reporting date analysed by the various levels within the fair value hierarchy: Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 - Money market instruments - 41,002 - 41,002 - Unquoted securities - 1,921 187,517 189,438 - Money market instruments - 5,289,295 - 5,289,295 - Quoted securities in Malaysia 8 - - 8 - Unquoted securities - 4,189,159 - 4,189,159 Derivative financial assets - 55,442 - 55,442 Financial liabilities designated at fair value through profit or loss - 778,423 - 778,423 Derivative financial liabilities - 57,545 - 57,545 Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 - Money market instruments - 40,905 - 40,905 - Unquoted securities - 22,845 - 22,845 GROUP 2019 Assets Financial assets at FVTPL Financial investments at FVOCI Liabilities GROUP 2018 Assets Financial assets held-for-trading Financial investments available-for-sale - Money market instruments - 4,289,730 - 4,289,730 10 - - 10 - Unquoted securities - 4,036,603 178,846 4,215,449 Derivative financial assets - 84,455 - 84,455 Financial liabilities designated at fair value through profit or loss - 682,238 - 682,238 Derivative financial liabilities - 154,686 - 154,686 - Quoted securities in Malaysia Liabilities
269. 2019 Annual Report 51 . 267 FAIR VALUE MEASUREMENTS (CONT’D) (b) Financial instruments measured at fair value and the fair value hierarchy (cont’d) The following tables show the Group’s and the Bank’s financial instruments which are measured at fair value at the reporting date analysed by the various levels within the fair value hierarchy: (cont’d) Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 - Money market instruments - 41,002 - 41,002 - Unquoted securities - 1,921 126,733 128,654 - Money market instruments - 4,405,360 - 4,405,360 - Quoted securities in Malaysia 8 - - 8 - Unquoted securities - 2,447,498 - 2,447,498 Derivative financial assets - 55,442 - 55,442 Financial liabilities designated at fair value through profit or loss - 778,423 - 778,423 Derivative financial liabilities - 57,545 - 57,545 - Money market instruments - 25,926 - 25,926 - Unquoted securities - 22,845 - 22,845 - 3,970,261 - 3,970,261 10 - - 10 - Unquoted securities - 2,314,543 121,634 2,436,177 Derivative financial assets - 84,455 - 84,455 Financial liabilities designated at fair value through profit or loss - 682,238 - 682,238 Derivative financial liabilities - 154,686 - 154,686 BANK 2019 Assets Financial assets at FVTPL Financial investments at FVOCI Liabilities BANK 2018 Assets Financial assets held-for-trading Financial investments available-for-sale - Money market instruments - Quoted securities in Malaysia Liabilities There were no transfers between levels of the fair value hierarchy for the Group and the Bank during the financial year ended 31 March 2019 and 31 March 2018.
270. 268 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 51. FAIR VALUE MEASUREMENTS (CONT’D) (b) Financial instruments measured at fair value and the fair value hierarchy (cont’d) Reconciliation of movements in Level 3 financial instruments: GROUP At beginning of financial year Disposal Partial distribution on liquidity shares BANK 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 178,846 170,239 121,634 111,377 - (4,970) - - (195) - (195) - - 13,607 - 10,257 - (30) - - Total gains/(losses) recognised in: - Other comprehensive income (i) Revaluation reserves - Statement of income (i) Loss arising from sales of financial investments available-for-sale (ii) Revaluation gain from financial assets at FVTPL At end of financial year 8,866 - 5,294 187,517 178,846 126,733 121,634 The Group’s and the Bank’s exposure to financial instruments measured using unobservable inputs (Level 3) constitutes a small component of the Group’s and the Bank’s portfolio of financial instruments. Changing one or more of the inputs to reasonable alternative assumptions would not change the value significantly for the Level 3 financial instruments. (c) Fair values of financial instruments not carried at fair value The following table summarises the carrying amounts and the fair values of financial instruments of the Group and the Bank which are not carried at fair value in the statement of financial position. It does not include those short term/on demand financial assets and liabilities where the carrying amounts are reasonable approximate to their fair values. Fair value Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 Carrying amount RM’000 Deposits and placements with banks and other financial institutions - 485 - 485 500 Financial investments at amortised cost - 200,268 - 200,268 235,720 Loans, advances and financing - - 42,861,780 42,861,780 42,320,301 Deposits from customers - 45,021,243 - 45,021,243 45,017,632 Deposits and placements of banks and other financial institutions - 833,871 - 833,871 858,708 GROUP 2019 Financial assets Financial liabilities Recourse obligations on loans and financing sold to Cagamas - 886,480 - 886,480 800,669 Subordinated obligations - 1,449,360 - 1,449,360 1,480,222
271. 2019 Annual Report 51 . 269 FAIR VALUE MEASUREMENTS (CONT’D) (c) Fair values of financial instruments not carried at fair value (cont’d) GROUP 2018 Financial assets Financial investments held-to-maturity Loans, advances and financing Financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions Recourse obligations on loans and financing sold to Cagamas Subordinated obligations BANK 2019 Financial assets Financial investments at amortised cost Loans, advances and financing Financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions Recourse obligations on loans and financing sold to Cagamas Subordinated obligations BANK 2018 Financial assets Financial investments held-to-maturity Loans, advances and financing Financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions Recourse obligations on loans and financing sold to Cagamas Subordinated obligations Level 1 RM’000 Fair value Level 2 RM’000 Level 3 RM’000 Total RM’000 Carrying amount RM’000 - 306,490 - 40,423,458 306,490 40,423,458 293,612 39,989,515 - 42,742,783 - 42,742,783 42,740,460 - 855,375 - 855,375 873,871 - 1,219,264 1,184,048 - 1,219,264 1,184,048 1,102,363 1,379,614 Level 3 RM’000 Total RM’000 Carrying amount RM’000 Level 1 RM’000 Fair value Level 2 RM’000 - 276,582 - 32,965,110 276,582 32,965,110 311,930 32,622,976 - 34,983,732 - 34,983,732 34,982,862 - 342,774 - 342,774 344,835 - 323,433 1,448,826 - 323,433 1,448,826 300,076 1,479,580 Level 3 RM’000 Total RM’000 Carrying amount RM’000 Level 1 RM’000 Fair value Level 2 RM’000 - 357,020 - 31,802,940 357,020 31,802,940 344,703 31,546,564 - 33,508,377 - 33,508,377 33,508,370 - 433,145 - 433,145 439,238 - 642,664 1,172,415 - 642,664 1,172,415 601,696 1,379,024
272. 270 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 51. FAIR VALUE MEASUREMENTS (CONT’D) (c) Fair values of financial instruments not carried at fair value (cont’d) The methods and assumptions used in estimating the fair values of financial instruments are as follows: (i) Financial investments at amortised cost The fair values are estimated based on quoted or observable market prices at the end of the reporting period. Where such quoted or observable market prices are not available, the fair values are estimated using pricing models or discounted cash flow techniques. Where discounted cash flow technique is used, the expected future cash flows are discounted using prevailing market rates for a similar instrument at the end of the reporting period. (ii) Loans, advances and financing The fair values of fixed rate loans with remaining maturity of less than one year and variable rate loans are estimated to approximate their carrying values. For fixed rate loans and Islamic financing with remaining maturity of more than one year, the fair values are estimated based on expected future cash flows of contractual instalment payments and discounted at applicable prevailing rates at end of the reporting period offered to new borrowers with similar credit profiles. In respect of impaired loans, the fair values represented by their carrying values, net of impairment allowances, being the expected recoverable amount. (iii) Deposits from customers, deposits and placements of banks and other financial institutions The fair values of deposit liabilities payable on demand (demand and savings deposits), or deposits with maturity of less than one year are estimated to approximate their carrying amounts. The fair values of fixed deposits with remaining maturities of more than one year are estimated based on expected future cash flows discounted at applicable prevailing rates offered for deposits of similar remaining maturities. For negotiable instruments of deposits, the fair values are estimated based on quoted or observable market prices as at the end of the reporting period. Where such quoted or observable market prices are not available, the fair values of negotiable instruments of deposits are estimated using the discounted cash flow technique. (iv) Recourse obligations on loans and financing sold to Cagamas The fair values of recourse obligations on loans and financing sold to Cagamas are determined based on the discounted cash flows of future instalment payments at applicable prevailing Cagamas rates as at the end of the reporting period. (v) Other borrowings and subordinated obligations The fair value of the other borrowings and subordinated bonds/notes is estimated based on the discounted cash flows techniques using the current yield curve appropriate for the remaining term to maturity.
273. 2019 Annual Report 271 52 . OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES In accordance with MFRS 132 Financial Instruments: Presentation, the Group and the Bank report financial assets and financial liabilities on a net basis on the statement of financial position, only if there is a legally enforceable right to set off the recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The following table shows the impact of netting arrangements on: (i) all financial assets and liabilities that are reported net on the statement of financial position; and (ii) all financial assets and liabilities that are subject to enforceable master netting arrangements or similar agreements, but do not qualify for statement of financial position netting. (a) Financial assets Gross amounts of recognised financial assets RM’000 Net amounts of Gross amounts of financial recognised assets financial liabilities set off in the presented in the statement of statement of financial position financial position RM’000 RM’000 Related amounts not set off in the statement of financial position Financial Cash collateral received instruments RM’000 RM’000 Net amount RM’000 GROUP 2019 Derivative financial assets 55,442 - 55,442 (14,492) (8,105) 32,845 Amount due from clients and brokers 144,882 (67,874) 77,008 - - 77,008 Total 200,324 (67,874) 132,450 (14,492) (8,105) 109,853 84,455 - 84,455 (6,271) (32,751) 45,433 GROUP 2018 Derivative financial assets Amount due from clients and brokers 188,129 (86,824) 101,305 - - 101,305 Total 272,584 (86,824) 185,760 (6,271) (32,751) 146,738 55,442 - 55,442 (14,492) (8,105) 32,845 84,455 - 84,455 (6,271) (32,751) 45,433 BANK 2019 Derivative financial assets BANK 2018 Derivative financial assets
274. 272 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 52. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONT’D) (b) Financial liabilities Gross amounts of recognised financial liabilities RM’000 Net amounts of Gross amounts of financial recognised liabilities financial assets set off in the presented in the statement of statement of financial position financial position RM’000 RM’000 Related amounts not set off in the statement of financial position Financial Cash collateral pledged instruments RM’000 RM’000 Net amount RM’000 GROUP 2019 Derivative financial liabilities 57,545 - 57,545 (14,492) (22,541) 20,512 Amount due to clients and brokers 119,038 (67,874) 51,164 - - 51,164 Total 176,583 (67,874) 108,709 (14,492) (22,541) 71,676 Derivative financial liabilities 154,686 - 154,686 (6,271) (36,901) 111,514 Amount due to clients and brokers 161,927 (86,824) 75,103 - - 75,103 Total 316,613 (86,824) 229,789 (6,271) (36,901) 186,617 57,545 - 57,545 (14,492) (22,541) 20,512 154,686 - 154,686 (6,271) (36,901) 111,514 GROUP 2018 BANK 2019 Derivative financial liabilities BANK 2018 Derivative financial liabilities For the financial assets and liabilities subject to enforceable master netting arrangements or similar arrangements, each agreement between the Group and the Bank and the counterparty allows for net settlement of the relevant financial assets and liabilities when both elect to settle on a net basis. In the absence of such an election, financial assets and liabilities will be settled on a gross basis, however, each party to the master netting agreement or similar agreement will have the option to settle all such amounts on a net basis in the event of default of the other party.
275. 2019 Annual Report 273 53 . SEGMENT INFORMATION The following segment information has been prepared in accordance with MFRS 8 Operating Segments, which defines the requirements for the disclosure of financial information of an entity’s operating segments. The operating segments results are prepared based on the Group’s internal management reporting reflective of the organisation’s management reporting structure. Funds are allocated between segments and inter-segment funding cost transfers are reflected in net interest income. In addition to the operating segments, the segment information disclosed also includes inter-segment eliminations. Transactions between reportable segments are eliminated based on principles of consolidation as described in accounting policy. Intercompany transactions, balances and unrealised gains and losses on transactions between Group’s companies are eliminated in inter-segment eliminations. The Group is organised into the following key operating segments: (i) Consumer Banking Consumer Banking provides a wide range of personal banking solutions covering mortgages, term loans, personal loans, hire purchase facilities, credit cards and wealth management (cash management, investment services, share trading, bancassurance and will writing). Consumer Banking customers are serviced via branch network, call centre, electronic/internet banking channels, and direct sales channels. (ii) Business Banking Business Banking segment covers Small and Medium Enterprise (“SME”), Corporate and Commercial Banking. SME Banking customers comprise self-employed, small and medium scale enterprises. Corporate and Commercial Banking serves public-listed and large corporate business customers including family-owned businesses. Business Banking provides a wide range of products and services including loans, trade finance, cash management, treasury and structured solutions. (iii) Financial Markets Financial Markets provide foreign exchange, money market, hedging and investment (capital market instruments) solutions for banking customers. It also manages the assets and liabilities, liquidity and statutory reserve requirements of the banking entities in the Group. (iv) Stockbroking and Corporate Advisory Stockbroking and Corporate Advisory covers stockbroking activities and corporate advisory which includes initial public offering, equity fund raising, debt fund raising, mergers and acquisitions and corporate restructuring. (v)Others Others refer to mainly other business operations such as unit trust, asset management, alternative distribution channels, trustee services and head office.
276. 53 . Segment assets Reconciliation of segment assets to consolidated assets: Investment in joint venture Property, plant and equipment Tax recoverable and deferred tax assets Intangible assets Total assets Net income from Islamic banking business Other operating income Net income Other operating expenses Depreciation and amortisation Operating profit (Allowance for)/write-back of expected credit losses on loans, advances and financing and other financial assets Write-back of expected credit losses on financial assets Write-back of/(allowance for) impairment losses on nonfinancial assets Segment results Share of results of joint venture Taxation Net profit for the financial year Net interest income - External income -Inter-segment Group As at 31 March 2019 SEGMENT INFORMATION (CONT’D) 335,707 104,394 440,101 112,055 165,526 717,682 (259,262) (32,625) 425,795 (16,578) 148 409,365 20,476,010 (115,018) 80,543 22,149,320 Business Banking RM’000 465,822 (127,640) 338,182 139,378 85,400 562,960 (361,087) (6,312) 195,561 Consumer Banking RM’000 15,345,234 232,720 871 115 215,349 33,032 248,381 59,636 (19,017) 289,000 (44,116) (13,150) 231,734 349,018 (27,337) (33,377) (125) - 14,490 (9,786) 4,704 28,727 33,431 (38,060) (1,286) (5,915) Stockbroking Financial and Corporate Advisory Markets RM’000 RM’000 NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 38,299 5,471 - 399 399 1,087 23,525 25,011 (19,374) (166) 5,471 Others RM’000 58,357,881 (27,189) 694,722 (130,850) 115 1,031,767 1,031,767 312,156 284,161 1,628,084 (721,899) (53,539) 852,646 (2,434,544) 18,597 13,192 1 86 (33,684) (33,684) 46,901 (19,200) (5,983) 491 (5,492) Total Inter-segment Elimination Operations RM’000 RM’000 802 70,497 93,254 432,961 56,520,851 55,923,337 (8,592) 707,914 109 (170,426) 537,597 (130,849) 201 998,083 998,083 359,057 264,961 1,622,101 (721,408) (53,539) 847,154 Total RM’000 274 Alliance Bank Malaysia Berhad (88103-W)
277. 53 . 223,671 (81,284) - Operating profit/(loss) before allowance (Allowance for)/write-back of impairment losses on loans, advances and financing and other financial assets Allowance for impairment losses on non-financial assets 51,675 126,171 (43,712) - (341) (43,371) (6) (68,500) 55,775,884 682,976 (62) (93,386) 776,424 (44,892) (753,589) 1,574,905 352,442 270,248 952,215 - 952,215 (2,341,752) 1,578 - - 1,578 - 4,460 (2,882) (23,815) 47,997 (27,064) - (27,064) 43 684,554 (62) (93,386) 778,002 (44,892) (749,129) 1,572,023 328,627 318,245 925,151 - 925,151 Total RM’000 409,402 Intangible assets 53,938,268 24,668 Total assets 69,373 Tax recoverable and deferred tax assets 693 53,434,132 Property, plant and equipment Investment in joint venture Reconciliation of segment assets to consolidated assets: Segment assets 493,228 15,724,317 (837) - 58 (895) (1,194) (37,404) 25,135 22,553 - 2,582 - 2,582 Total Inter-segment Elimination Operations RM’000 RM’000 Net profit for the financial year 18,433,988 228,028 (62) 36 228,054 (2,657) (51,790) 37,703 32,423 - 5,280 (7,725) 13,005 Others RM’000 (191,369) 21,439,733 357,110 - (11,855) (290,864) 282,501 18,602 56,929 206,970 16,222 190,748 Stockbroking Financial and Corporate Advisory Markets RM’000 RM’000 Taxation Share of results of joint venture 142,387 368,965 (25,830) Depreciation and amortisation Segment result (15,205) (305,031) Other operating expenses 166,369 675,034 112,495 554,532 Other operating income 99,461 Net income 113,858 80,102 409,204 (88,599) 328,179 -Inter-segment Net income from Islamic banking business 329,102 Business Banking RM’000 416,778 Consumer Banking RM’000 - External income Net interest income Group As at 31 March 2018 SEGMENT INFORMATION (CONT’D) 2019 Annual Report 275
278. 276 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 54. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR On 8 March 2019, the Bank issued RM100 million Additional Tier 1 Capital Securities under the RM1.0 billion Additional Tier 1 Capital Securities Programme. The details of issuance of new debts are disclosed in Note 27. 55. SUBSEQUENT EVENTS There were no material event subsequent to the end of the financial year that require disclosure or adjustment. 56. CHANGES IN ACCOUNTING POLICIES (a) Adoption of MFRS 9 “Financial Instruments” The Group and the Bank have adopted MFRS 9 retrospectively with the date of initial application of 1 April 2018. In accordance with the transition provision provided in MFRS 9, comparative for 2018 was not restated and continue to be reported under the previous accounting policies governed under MFRS 139. The cumulative effect of initially applying MFRS 9 were recorded as an adjustment to the opening balances of the retained profits as at 1 April 2018. (i) Classification and Measurement MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss (“FVTPL”) and fair value through other comprehensive income (“OCI”). The basis of classification depends on the entity’s business model and the cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. The combined application of the entity’s business model and cash flow characteristics of the financial assets do not result in the significant change in the classification of financial asset other than the unquoted equity instruments which was previously classified as available-for-sale, is now reclassified to financial assets at FVTPL. The reclassification has resulted in an increase of RM143,184,000 and RM86,972,000 in the Group’s and the Bank’s opening retained profits respectively due to the transfer of related fair value gains from financial instruments available-for-sale revaluation reserves to retained profits. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main changes are: (i) For financial liabilities classified as FVTPL, the fair value changes due to own credit risk should be recognised directly to OCI. There is no subsequent recycling to profit or loss. (ii) When a financial liability measured at amortised cost is modified without this resulting in derecognition, a gain or loss, being the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate, should be recognised immediately in profit or loss. There will be no changes to the Group’s and the Bank’s accounting for financial liabilities. All the financial liabilities, except for financial liabilities designated at fair value and derivatives financial liabilities which are at FVTPL, will remain as amortised cost as there has not been significant change in the requirements for financial liabilities under MFRS 9.
279. 2019 Annual Report 56 . 277 CHANGES IN ACCOUNTING POLICIES (CONT’D) (a) Adoption of MFRS 9 “Financial Instruments” (cont’d) (ii) Impairment of Financial Assets MFRS 9 introduces an ECL model on impairment that replaces the incurred loss impairment model used in MFRS 139. The ECL model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The level of allowances for expected credit losses is explained under the significant accounting policies. As a result of the adoption of the MFRS 9 ECL model in determining the allowances for ECL, the total ECL allowances computed under MFRS 9 is higher by RM86,475,000 and RM62,658,000 for the Group and the Bank respectively, than the total allowances of impairment losses on financial assets under MFRS 139. (b) Adoption of MFRS 15 “Revenue from Contracts with Customers” Effective from the financial year beginning on 1 April 2018, the Group and the Bank adopt MFRS 15 “Revenue from Contracts with Customers” which replaces MFRS 118 “Revenue” and MFRS 111 “Construction Contracts” and related interpretations. The core principle in MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognised when a customer obtains control of goods or services, i.e. when the customer has the ability to direct the use of and obtain the benefits from the goods or services. The Group and the Bank have applied MFRS 15 with the date of initial application of 1 April 2018 by using the modified retrospective transition method. Under this method, the Group and the Bank apply the new policy retrospectively only to contracts that are not completed contracts at the date of initial application. Accordingly the comparative information was not restated and the cumulative effects of initial application of MFRS 15 were recognised as an adjustment to the opening retained profits as at 1 April 2018. The comparative information continued to be reported under the previous accounting policies governed under MFRS 118 and MFRS 111. The adoption of the MFRS 15 has resulted in a decrease of RM15,500,000 in the Group’s and the Bank’s retained profits as at 1 April 2018. 
280. 56 . ASSETS Cash and short-term funds Deposits and placements with banks and other financial institutions Amounts due from clients and brokers Financial investments at FVTPL Financial investments at FVOCI Financial investments at amortised cost Financial assets held-for-trading (“HFT”) Financial investments available-for-sale (“AFS”) - Debt instrument - Quoted equity instrument - Unquoted equity instrument Financial investments held-to-maturity (“HTM”) Derivative financial assets Loans, advances and financing Other assets Tax recoverable Statutory deposits Investment in joint venture Property, plant and equipment Deferred tax assets Intangible assets TOTAL ASSETS GROUP Amortised Cost Amortised Cost Amortised Cost FVTPL FVOCI Amortised Cost NA NA NA NA NA NA FVTPL Amortised Cost Amortised Cost Amortised Cost Loans and receivables Loans and receivables NA NA NA HFT AFS AFS AFS AFS HTM FVTPL Loans and receivables Loans and receivables Loans and receivables MFRS 9 measurement category Loans and receivables MFRS 139 measurement category 77,283 101,305 63,750 8,505,189 8,326,333 10 178,846 293,612 84,455 39,989,515 141,949 2,004 1,408,316 693 69,373 22,664 409,402 53,938,268 2,768,758 242,596 8,335,752 514,106 (63,750) (8,505,189) (8,326,333) (10) (178,846) (293,612) (220,494) 22,457 31,866 (19,592) (19,592) - Reclassification Remeasurement RM’000 RM’000 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2018 2,768,257 77,283 101,305 242,596 - 8,335,752 514,106 84,455 (90,879) 39,658,550 141,949 14,963 16,967 - 1,408,316 693 69,373 45,121 409,402 (76,417) 53,874,125 (501) 2,768,257 77,283 101,305 242,596 - 8,335,752 514,106 84,455 - 39,658,550 141,949 16,967 - 1,408,316 693 69,373 45,121 409,402 - 53,874,125 - MFRS 9 Expected carrying credit amount MFRS 15 Restated losses 1 April 2018 adjustments 1 April 2018 RM’000 RM’000 RM’000 RM’000 A reconciliation of the statement of financial position of the Group and the Bank upon adoption of MFRS 9 and MFRS 15 as at 1 April 2018 are as follow: MFRS 139 carrying amount 31 March 2018 RM’000 Financial effect (c) CHANGES IN ACCOUNTING POLICIES (CONT’D) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 278 Alliance Bank Malaysia Berhad (88103-W)
281. 56 . Amortised Cost Amortised Cost Amortised Cost Amortised Cost Amortised Cost Amortised Cost 1,102,363 1,435,523 22,661 252 11,907 1,379,614 48,478,678 682,238 75,103 154,686 53,938,268 FVTPL Amortised Cost FVTPL FVTPL Amortised Cost FVTPL 873,871 TOTAL LIABILITIES AND EQUITY Amortised Cost Amortised Cost 42,740,460 1,548,106 3,911,484 186,064 114,987 3,510,283 100,150 5,459,590 Amortised Cost Amortised Cost MFRS 9 measurement category Share capital Reserves - Regulatory reserve - FVOCI reserve - Revaluation reserve - Retained profits - Capital reserve TOTAL EQUITY LIABILITIES AND EQUITY Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Amounts due to clients and brokers Derivative financial liabilities Recourse obligations on loans and financing sold to Cagamas Other liabilities Provision for taxation Provision for zakat Deferred tax liabilities Subordinated obligations TOTAL LIABILITIES GROUP MFRS 139 measurement category 31,866 43,773 15,576 (114,987) 143,184 43,773 (11,907) (11,907) - - - (19,592) (14,890) (14,890) (14,890) (4,702) (4,702) - - - Reclassification Remeasurement RM’000 RM’000 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2018 682,238 75,103 154,686 873,871 1,548,106 3,837,909 168,734 16,923 3,552,102 100,150 5,386,015 (76,417) 53,874,125 (102,458) (17,330) 1,347 (86,475) (102,458) - 1,102,363 44,000 1,479,523 (17,959) 252 - 1,379,614 26,041 48,488,110 - - - 42,740,460 682,238 75,103 154,686 873,871 1,548,106 3,822,409 168,734 16,923 3,536,602 100,150 5,370,515 - 53,874,125 (15,500) (15,500) (15,500) - 1,102,363 15,500 1,495,023 252 - 1,379,614 15,500 48,503,610 - - - 42,740,460 MFRS 9 Expected carrying MFRS 15 credit amount Restated adjustments losses 1 April 2018 1 April 2018 RM’000 RM’000 RM’000 RM’000 A reconciliation of the statement of financial position of the Group and the Bank upon adoption of MFRS 9 and MFRS 15 as at 1 April 2018 are as follow: (cont’d) MFRS 139 carrying amount 31 March 2018 RM’000 Financial effect (cont’d) (c) CHANGES IN ACCOUNTING POLICIES (CONT’D) 2019 Annual Report 279
282. 56 . ASSETS Cash and short-term funds Deposits and placements with banks and other financial institutions Financial investments at FVTPL Financial investments at FVOCI Financial investments at amortised cost Financial assets held-for-trading Financial investments available-for-sale - Debt instrument - Quoted equity instrument - Unquoted equity instrument Financial investments held-to-maturity Derivative financial assets Loans, advances and financing Other assets Statutory deposits Investment in joint venture Property, plant and equipment Deferred tax assets Intangible assets TOTAL ASSETS BANK Amortised Cost Amortised Cost FVTPL FVOCI Amortised Cost NA NA NA NA NA NA FVTPL Amortised Cost Amortised Cost Amortised Cost Loans and receivables NA NA NA HFT AFS AFS AFS AFS HTM FVTPL Loans and receivables Loans and receivables Loans and receivables MFRS 9 measurement category Loans and receivables MFRS 139 measurement category 77,283 48,771 6,406,448 6,284,804 10 121,634 344,703 84,455 31,546,564 176,948 1,092,566 989,102 67,834 9,223 292,981 42,852,839 1,715,961 170,405 6,284,814 525,035 (48,771) (6,406,448) (6,284,804) (10) (121,634) (344,703) (180,332) 20,873 20,873 6,557 6,557 - Reclassification Remeasurement RM’000 RM’000 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2018 1,715,460 77,283 170,405 - 6,284,814 (425) 524,610 84,455 (52,797) 31,319,992 176,948 - 1,092,566 989,102 67,834 30,096 292,981 (53,723) 42,826,546 (501) 1,715,460 77,283 170,405 - 6,284,814 524,610 84,455 - 31,319,992 176,948 - 1,092,566 989,102 67,834 30,096 292,981 - 42,826,546 - MFRS 9 Expected carrying credit amount MFRS 15 Restated losses 1 April 2018 adjustments 1 April 2018 RM’000 RM’000 RM’000 RM’000 A reconciliation of the statement of financial position of the Group and the Bank upon adoption of MFRS 9 and MFRS 15 as at 1 April 2018 are as follow: (cont’d) MFRS 139 carrying amount 31 March 2018 RM’000 Financial effect (cont’d) (c) CHANGES IN ACCOUNTING POLICIES (CONT’D) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) 280 Alliance Bank Malaysia Berhad (88103-W)
283. 56 . Amortised Cost Amortised Cost Amortised Cost Amortised Cost Amortised Cost Amortised Cost 601,696 1,319,698 23,190 1,379,024 38,108,140 682,238 154,686 42,852,839 FVTPL FVTPL FVTPL FVTPL 439,238 TOTAL LIABILITIES AND EQUITY Amortised Cost Amortised Cost 33,508,370 1,548,106 3,196,593 160,029 74,907 2,866,142 95,515 4,744,699 Amortised Cost Amortised Cost MFRS 9 measurement category Share capital Reserves - Regulatory reserve - FVOCI reserve - Revaluation reserve - Retained profits - Capital reserve TOTAL EQUITY LIABILITIES AND EQUITY Deposits from customers Deposits and placements of banks and other financial institutions Financial liabilities designated at fair value through profit or loss Derivative financial liabilities Recourse obligations on loans and financing sold to Cagamas Other liabilities Provision for taxation Subordinated obligations TOTAL LIABILITIES BANK MFRS 139 measurement category 20,873 20,873 8,808 (74,907) 86,972 20,873 - - - - 6,557 4,983 4,983 4,983 1,574 1,574 - - - Reclassification Remeasurement RM’000 RM’000 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2018 682,238 154,686 439,238 1,548,106 3,161,124 160,356 9,814 2,895,439 95,515 4,709,230 (53,723) 42,826,546 (61,325) 327 1,006 (62,658) (61,325) 601,696 27,290 1,346,988 (19,688) 5,076 - 1,379,024 7,602 38,117,316 - - - 33,508,370 682,238 154,686 439,238 1,548,106 3,145,624 160,356 9,814 2,879,939 95,515 4,693,730 - 42,826,546 (15,500) (15,500) (15,500) 601,696 15,500 1,362,488 5,076 - 1,379,024 15,500 38,132,816 - - - 33,508,370 MFRS 9 Expected carrying credit amount MFRS 15 Restated losses 1 April 2018 adjustments 1 April 2018 RM’000 RM’000 RM’000 RM’000 A reconciliation of the statement of financial position of the Group and the Bank upon adoption of MFRS 9 and MFRS 15 as at 1 April 2018 are as follow: (cont’d) MFRS 139 carrying amount 31 March 2018 RM’000 Financial effect (cont’d) (c) CHANGES IN ACCOUNTING POLICIES (CONT’D) 2019 Annual Report 281
284. 282 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 56. CHANGES IN ACCOUNTING POLICIES (CONT’D) (c) Financial effect (cont’d) The following table reconciles the prior year’s allowance for impairment losses measured in accordance with MFRS 139 incurred loss model to the new expected credit losses measured in accordance with MFRS 9 as at 1 April 2018: GROUP Cash and short-term funds Amounts due from clients and brokers MFRS 9 carrying amount 1 April 2018 Remeasurement RM’000 RM’000 MFRS 139 carrying amount 31 March 2018 RM’000 Reclassification RM’000 - - 501 501 840 - - 840 Financial investments at amortised cost - 14,193 - 14,193 Financial investments available-for-sale 9,409 (9,409) - - Financial investments held-to-maturity 14,193 (14,193) - - 372,449 - 90,879 463,328 32,017 - - 32,017 - - 44,000 44,000 - 9,409 1,347 10,756 428,908 - 136,727 565,635 Loans, advances and financing Other assets Other liabilities FVOCI reserve MFRS 9 carrying amount 1 April 2018 Remeasurement RM’000 RM’000 MFRS 139 carrying amount 31 March 2018 RM’000 Reclassification RM’000 Cash and short-term funds - - 501 501 Financial investments at amortised cost - 1,294 425 1,719 BANK Financial investments held-to-maturity Loans, advances and financing Other assets Other liabilities FVOCI reserve 1,294 (1,294) - - 285,402 - 52,797 338,199 27,578 - - 27,578 - - 27,290 27,290 - - 1,006 1,006 314,274 - 82,019 396,293
285. 2019 Annual Report 56 . 283 CHANGES IN ACCOUNTING POLICIES (CONT’D) (c) Financial effect (cont’d) The following table reconciles the Statement of Changes in Equity as at 31 March 2018 and 1 April 2018 arising from the adoption of MFRS 9 and MFRS 15: GROUP RM’000 BANK RM’000 Closing balance under MFRS 139 as at 31 March 2018 186,064 160,029 - Transfer (to)/from retained profits (17,330) 327 Opening balance under MFRS 9 as at 1 April 2018 168,734 160,356 - - - Transfer from revaluation reserve 114,987 74,907 - Effects of reclassification from financial investments available-for-sale to financial assets at fair value through profit and loss (108,820) (66,099) - Recognition of expected credit losses under MFRS 9 10,756 1,006 Opening balance under MFRS 9 as at 1 April 2018 16,923 9,814 Closing balance under MFRS 139 as at 31 March 2018 114,987 74,907 - Transfer to FVOCI reserve (114,987) (74,907) - - Regulatory reserve FVOCI reserve Closing balance under MFRS 139 as at 31 March 2018 Revaluation reserve Opening balance under MFRS 9 as at 1 April 2018 Retained profits Closing balance under MFRS 139 as at 31 March 2018 3,510,283 2,866,142 - Effects of reclassification from financial investments available-for-sale to financial assets at fair value through profit and loss 108,820 66,099 - Tax effects arising from reclassification from financial investments available-for-sale to financial assets at fair value through profit and loss 34,364 20,873 - Remeasurement of financial assets (19,592) 6,557 - Tax effects arising from remeasurement of financial assets - Recognition of expected credit losses under MFRS 9 - Tax effects arising from recognition of expected credit losses under MFRS 9 - Transfer from/(to) regulatory reserve Opening balance under MFRS 9 as at 1 April 2018 - Effects of adoption of MFRS 15 Opening balance under MFRS 9 and MFRS 15 as at 1 April 2018 4,702 (1,574) (136,727) (82,019) 32,922 19,688 17,330 (327) 3,552,102 2,895,439 (15,500) (15,500) 3,536,602 2,879,939
286. 284 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 57.COMPARATIVES (a) Interest income and interest expense on financial instruments that are measured at fair value through profit and loss are reclassified to investment income in accordance to amendment to MFRS 101, where interest income on items that are not measured at amortised cost or fair value through other comprehensive income will no longer be able to be included in interest revenue. The financial effects to the statements of Income for the financial year ended 31 March 2018 are as follows: As previously stated Reclassification As restated RM’000 RM’000 RM’000 Interest income 1,921,697 (23,819) 1,897,878 Interest expense GROUP (1,029,186) 56,459 (972,727) Other operating income: 361,267 (32,640) 328,627 - Investment income 126,757 (32,640) 94,117 1,898,299 (23,262) 1,875,037 Interest expense (998,364) 56,459 (941,905) Other operating income: 361,707 (33,197) 328,510 - Investment income 159,630 (33,197) 126,433 BANK Interest income (b) The following figures have been reclassified to conform with the presentation of the current financial year: As previously stated Reclassification As restated RM’000 RM’000 RM’000 105,728 36,221 141,949 GROUP Other assets - Other receivables Other liabilities 32,173 36,221 68,394 (1,399,302) (36,221) (1,435,523) - Other payables (254,276) (37,950) (292,226) - Clearing account (201,208) 1,739 (199,469) - Provision and accrual (131,272) (10) (131,282) 140,727 36,221 176,948 18,281 36,221 54,502 (1,283,477) (36,221) (1,319,698) BANK Other assets - Other receivables Other liabilities - Other payables (205,527) (37,950) (243,477) - Clearing account (161,741) 1,739 (160,002) - Provision and accrual (131,524) (10) (131,534)
287. 2019 Annual Report BASEL II PILLAR 3 REPORT DISCLOSURE CONTENTS 286Overview 287 Scope of Application 287Capital 2 .1 Capital Adequacy Ratios 2.2 Capital Structure 2.3 Risk-Weighted Assets and Capital Requirements 294 Credit Risk 3.1 Distribution of Credit Exposures 3.2 Past Due Loans, Advances and Financing Analysis 3.3 Impaired Loans, Advances and Financing Analysis 3.4 Assignment of Risk-Weights for Portfolios Under the Standardised Approach 3.5 Credit Risk Mitigation 3.6 Off-Balance Sheet Exposures and Counterparty Credit Risk 333 Market Risk 335 Operational Risk 336 Equity Exposures in Banking Book 337 Interest Rate Risk/Rate of Return Risk in the Banking Book 339 Shariah Governance Disclosures More on this subject: https://www.alliancebank.com.my/ 285
288. 286 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE for the financial year ended 31 March 2019 OVERVIEW Bank Negara Malaysia’s (“BNM”) guidelines on capital adequacy require Alliance Bank Malaysia Berhad (“the Bank”) and its subsidiaries (“the Group”) to maintain an adequate level of capital to withstand potential losses arising from its operations. BNM’s capital adequacy guidelines cover three main aspects: (a) Pillar 1 –covers the calculation of risk-weighted assets for credit risk, market risk and operational risk. (b) Pillar 2 –involves assessment of other risks (e.g. interest rate risk in the banking book, liquidity risk and concentration risk) not covered under Pillar 1. This promotes the adoption of forward-looking approaches to capital management and stress testing/risk simulation techniques. (c) Pillar 3 –covers disclosure and external communication of risk and capital information by banks. The Group maintains a strong capital base to support its current activities and future growth to meet regulatory capital requirements at all times and buffer against potential losses. To ensure that risks and returns are appropriately balanced, the Group has implemented a Group-wide Integrated Risk Management Framework, with guidelines for identifying, measuring, and managing risks. This process includes quantifying and aggregating various risks in order to ensure the Group and each entity has sufficient capital to cushion against unexpected losses and remain solvent. In summary, the capital management process involves the following: (i) Monitoring of regulatory capital and ensuring that the minimum regulatory requirements and approved internal ratios are adhered to; (ii) Estimation of capital requirements based on ongoing forecasting and budgeting process; and (iii) Regular reporting of regulatory and internal capital ratios to senior management and the Board. In addition, the Group’s capital adequacy under extreme but plausible stress scenarios are periodically assessed via a Group-wide stress test exercise. The results of the stress tests are reported to senior management, to provide them with an assessment of the financial impact of such events on the Group’s earnings and capital. The Group’s Pillar 3 Disclosure is governed by the Bank’s Pillar 3 Disclosure. This policy outlines the minimum disclosure standards, approach for determining the appropriateness of information disclosed and the internal controls over the disclosure process.
289. 2019 Annual Report 287 1 .0 SCOPE OF APPLICATION The Pillar 3 Disclosure was prepared on a consolidated basis comprises information on Alliance Bank Malaysia Berhad (“the Bank”), its subsidiaries, associate companies and joint venture. The Group offers Conventional and Islamic banking services. The latter includes accepting deposits and providing financing under Shariah principles via the Bank’s wholly-owned subsidiary, Alliance Islamic Bank Berhad. The basis of consolidation for the use of regulatory capital purposes is similar to that for financial accounting purposes. Investments in subsidiaries, associate companies and joint venture are deducted from regulatory capital. There were no significant restrictions or other major impediments on transfer of funds or regulatory capital within the Group. There were no capital deficiencies in any of the subsidiaries of the Group as at the financial year end. The capital adequacy information was computed in accordance with BNM’s Capital Adequacy Framework. The Group has adopted the Standardised Approach for credit risk and market risk; and the Basic Indicator Approach for operational risk. 2.0CAPITAL In managing its capital, the Group’s objectives are: (i) To maintain sufficient capital to meet the regulatory capital requirements as set forth by BNM; (ii) To maintain sufficient capital to support the Group’s risk appetite and facilitate future business growth; and (iii) To meet the expectations of key stakeholders, including shareholders, investors, regulators and rating agencies. In line with this, the Group aims to maintain capital adequacy ratios that are above the regulatory requirements, while balancing shareholders’ desire for sustainable returns and prudential standards. The Group carries out stress testing to estimate the potential impact of extreme but plausible events on the Group’s earnings, balance sheet and capital. The results of the stress tests are to facilitate the formulation of contingency plan(s) where warranted. The results of the stress tests are tabled to the Group Risk Management Committee for approval.
290. 288 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 2.0 CAPITAL (CONT’D) 2.1 Capital Adequacy Ratios (a) The capital adequacy ratios of the Bank and the Group are as follows: BANK GROUP 2019 2018 2019 2018 CET I Capital Ratio 12.061% 11.680% 13.736% 13.695% Tier I Capital Ratio 12.940% 12.217% 14.423% 14.123% Total Capital Ratio 17.841% 17.122% 18.856% 18.638% CET I Capital Ratio 11.614% 11.302% 13.388% 13.393% Tier I Capital Ratio 12.493% 11.839% 14.074% 13.821% Total Capital Ratio 17.394% 16.744% 18.508% 18.337% Alliance Islamic Bank Berhad Alliance Investment Bank Berhad CET I Capital Ratio 11.690% 78.200% Tier I Capital Ratio 12.950% 78.200% Total Capital Ratio 15.762% 79.196% CET I Capital Ratio 11.339% 78.200% Tier I Capital Ratio 12.599% 78.200% Total Capital Ratio 15.411% 79.196% CET I Capital Ratio 12.569% 86.830% Tier I Capital Ratio 12.569% 86.830% Total Capital Ratio 15.421% 87.642% CET I Capital Ratio 12.198% 85.079% Tier I Capital Ratio 12.198% 85.079% Total Capital Ratio 15.050% 85.892% Before deducting proposed dividends After deducting proposed dividends (b) The capital adequacy ratios of the banking subsidiaries are as follows: 2019 Before deducting proposed dividends After deducting proposed dividends 2018 Before deducting proposed dividends After deducting proposed dividends The Group’s and the Bank’s capital ratios comply with the prescribed capital adequacy ratios under BNM’s Capital Adequacy Framework.
291. 2019 Annual Report 2 .0 289 CAPITAL (CONT’D) 2.2 Capital Structure The following tables present the components of Common Equity Tier I (“CET I”), Tier I and Tier II capital. BANK 2019 RM’000 GROUP 2018 RM’000 2019 RM’000 2018 RM’000 CET I Capital Paid-up share capital 1,548,106 1,548,106 1,548,106 1,548,106 Retained profits 3,128,589 2,866,142 3,827,676 3,510,283 Regulatory reserves 160,798 160,029 178,397 186,064 Revaluation reserves 36,449 74,907 68,540 114,987 Capital reserves 95,515 95,515 100,150 100,150 4,969,457 4,744,699 5,722,869 5,459,590 Less: Regulatory adjustment (323,804) (292,981) (432,961) (409,402) - Deferred tax assets (50,116) (9,223) (72,972) (22,664) - 55% of revaluation reserves (20,047) (41,199) (37,697) (63,243) (160,798) (160,029) (178,397) (186,064) - Goodwill and other intangibles - Regulatory reserves (989,102) (989,102) (802) (693) 3,425,590 3,252,165 5,000,040 4,777,524 249,445 149,316 249,792 149,293 3,675,035 3,401,481 5,249,832 4,926,817 1,199,381 1,199,062 1,199,676 1,199,675 322,740 296,765 414,258 375,710 (130,000) (130,000) - - Total Tier II Capital 1,392,121 1,365,827 1,613,934 1,575,385 Total Capital 5,067,156 4,767,308 6,863,766 6,502,202 - Investment in subsidiaries, associate and joint venture Total CET I Capital Additional Tier 1 Capital Securities1 Total Tier I Capital Tier II Capital Subordinated obligations Expected credit loss*/collective assessment allowance and regulatory reserves Less: Regulatory adjustment - Investment in Tier 2 capital instruments * Expected credit loss for Stage 1 and Stage 2 only. Note: 1 On 8 March 2019, the Bank issued RM100.0 million Additional Tier 1 Capital Securities in nominal value under Additional Tier 1 Capital Securities Programme up to RM1.0 billion.
292. 290 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 2.0 CAPITAL (CONT’D) 2.3 Risk-Weighted Assets (“RWA”) and Capital Requirements Regulatory Capital Requirements The following tables present the minimum regulatory capital requirements of the Bank and the Group: (i) RiskWeighted Assets RM’000 Capital Requirements RM’000 Gross Exposures RM’000 Net Exposures RM’000 5,596,654 5,596,654 - - 69,280 69,280 13,856 1,108 1,715,604 1,715,604 568,061 45,445 28,494 28,494 28,494 2,280 14,760,638 13,523,216 11,591,934 927,355 7,519,108 6,845,343 5,286,525 422,922 12,335,936 12,326,574 5,320,900 425,672 9,472 9,466 14,200 1,136 Other assets 616,262 616,262 361,152 28,892 Equity exposures 126,741 126,741 126,743 10,139 Defaulted exposures 200,941 199,593 209,263 16,741 42,979,130 41,057,227 23,521,128 1,881,690 3,091,073 2,647,418 2,187,138 174,971 239,854 239,854 109,148 8,732 BANK 2019 Exposure Class Credit Risk On-balance sheet exposures: Sovereigns/Central banks Public sector entities Banks, Development Financial Institutions (“DFIs”) and Multilateral Development Banks Insurance companies, securities firms and fund managers Corporates Regulatory retail Residential mortgages Higher risk assets Total on-balance sheet exposures Off-balance sheet exposures: Credit-related off-balance sheet exposures Derivative financial instruments Defaulted exposures Total off-balance sheet exposures Total on and off-balance sheet exposures (ii) 1,360 860 1,770 142 3,332,287 2,888,132 2,298,056 183,845 46,311,417 43,945,359 25,819,184 2,065,535 Market Risk (Note 4.0) Interest rate risk Foreign currency risk Option risk Long Position Short Position 149,542 11,963 5,598,049 (5,562,082) 124,410 9,953 11,575 (124,410) 5,609,624 (5,686,492) Total (iii) Operational Risk Total 990 79 274,942 21,995 - - 2,307,070 184,566 46,311,417 43,945,359 28,401,196 2,272,096
293. 2019 Annual Report 2 .0 291 CAPITAL (CONT’D) 2.3 RWA and Capital Requirements (cont’d) Regulatory Capital Requirements (cont’d) The following tables present the minimum regulatory capital requirements of the Bank and the Group (cont’d): GROUP 2019 Exposure Class (i) Gross Exposures RM’000 Net Exposures RM’000 RiskWeighted Assets RM’000 Capital Requirements RM’000 Credit Risk On-balance sheet exposures: 8,186,546 8,186,546 - - Public sector entities 196,261 196,261 39,253 3,140 Banks, DFIs and Multilateral Development Banks 829,576 829,576 164,010 13,121 Sovereigns/Central banks Insurance companies, securities firms and fund managers 35,557 35,557 35,556 2,844 19,580,592 17,950,144 14,854,259 1,188,340 9,999,499 9,245,382 7,256,654 580,532 16,073,138 16,062,759 6,981,541 558,523 11,086 11,080 16,621 1,330 Other assets 694,371 694,371 438,729 35,098 Equity exposures 187,525 187,525 187,525 15,002 Defaulted exposures 262,387 259,915 271,190 21,695 56,056,537 53,659,116 30,245,338 2,419,627 3,920,784 3,400,266 2,783,856 222,708 239,854 239,854 109,148 8,732 Corporates Regulatory retail Residential mortgages Higher risk assets Total on-balance sheet exposures Off-balance sheet exposures: Credit-related off-balance sheet exposures Derivative financial instruments Defaulted exposures Total off-balance sheet exposures Total on and off-balance sheet exposures (ii) 1,718 1,218 2,300 184 4,162,356 3,641,339 2,895,304 231,624 60,218,893 57,300,455 33,140,642 2,651,251 Market Risk (Note 4.0) Interest rate risk Foreign currency risk Option risk Long Position Short Position 149,542 11,963 5,598,049 (5,562,082) 124,410 9,953 11,575 (124,410) 5,609,624 (5,686,492) 990 79 274,942 21,995 Total (iii) Operational Risk Total - - 2,984,529 238,762 60,218,893 57,300,455 36,400,113 2,912,008
294. 292 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 2.0 CAPITAL (CONT’D) 2.3 RWA and Capital Requirements (cont’d) Regulatory Capital Requirements (cont’d) The following tables present the minimum regulatory capital requirements of the Bank and the Group (cont’d): BANK 2018 Exposure Class (i) Gross Exposures RM’000 Net Exposures RM’000 RiskWeighted Assets RM’000 4,800,900 4,800,900 - - 59,446 59,446 11,889 951 2,212,038 2,212,038 671,377 53,710 37,884 37,851 37,851 3,028 13,887,523 12,773,551 10,997,016 879,762 7,451,752 6,732,624 5,147,926 411,834 11,911,755 11,902,044 5,295,448 423,636 Capital Requirements RM’000 Credit Risk On-balance sheet exposures: Sovereigns/Central banks Public sector entities Banks, DFIs and Multilateral Development Banks Insurance companies, securities firms and fund managers Corporates Regulatory retail Residential mortgages Higher risk assets 2,801 2,795 4,192 335 Other assets 529,608 529,608 264,204 21,136 Equity exposures 121,644 121,644 121,646 9,732 Defaulted exposures Total on-balance sheet exposures 313,098 311,149 404,843 32,387 41,328,449 39,483,650 22,956,392 1,836,511 2,800,489 2,406,616 2,212,069 176,966 254,986 254,986 122,904 9,832 5,267 5,267 7,896 632 Off-balance sheet exposures: Credit-related off-balance sheet exposures Derivative financial instruments Defaulted exposures Total off-balance sheet exposures Total on and off-balance sheet exposures (ii) 3,060,742 2,666,869 2,342,869 187,430 44,389,191 42,150,519 25,299,261 2,023,941 Market Risk (Note 4.0) Interest rate risk Foreign currency risk Option risk Long Position Short Position 15,289 1,223 76,686 (70,016) 94,541 7,563 7,016 (94,542) 83,702 (164,558) 559 45 110,389 8,831 Total (iii) Operational Risk Total - - 2,433,159 194,653 44,389,191 42,150,519 27,842,809 2,227,425
295. 2019 Annual Report 2 .0 293 CAPITAL (CONT’D) 2.3 RWA and Capital Requirements (cont’d) Regulatory Capital Requirements (cont’d) The following tables present the minimum regulatory capital requirements of the Bank and the Group (cont’d): Gross Exposures RM’000 Net Exposures RM’000 RiskWeighted Assets RM’000 On-balance sheet exposures: Sovereigns/Central banks Public sector entities 7,715,107 211,083 7,715,107 211,083 42,217 3,377 Banks, DFIs and Multilateral Development Banks 1,315,416 1,315,416 261,255 20,900 Insurance companies, securities firms and fund managers Corporates Regulatory retail Residential mortgages Higher risk assets Other assets Equity exposures Defaulted exposures Total on-balance sheet exposures 63,080 18,530,955 10,019,382 14,354,700 3,195 639,421 178,856 385,914 53,417,109 63,047 17,092,449 9,229,348 14,343,762 3,189 639,421 178,856 383,181 51,174,859 63,047 14,147,528 7,164,075 6,356,377 4,783 374,017 178,858 494,731 29,086,888 5,044 1,131,801 573,127 508,510 383 29,921 14,309 39,578 2,326,950 Off-balance sheet exposures: Credit-related off-balance sheet exposures Derivative financial instruments Defaulted exposures Total off-balance sheet exposures Total on and off-balance sheet exposures 3,511,989 254,986 11,080 3,778,055 57,195,164 3,039,708 254,986 10,217 3,304,911 54,479,770 2,748,471 122,904 15,322 2,886,697 31,973,585 219,878 9,832 1,226 230,936 2,557,886 15,757 94,541 1,261 7,563 559 110,857 45 8,869 2,801,473 34,885,915 224,118 2,790,873 GROUP 2018 Exposure Class (i) (ii) Credit Risk Market Risk (Note 4.0) Long Position Short Position 91,664 (70,016) Option risk Total 7,016 (94,542) 98,680 (164,558) Operational Risk Total 57,195,164 Interest rate risk Foreign currency risk (iii) Capital Requirements RM’000 54,479,770 Note: Under Islamic banking, the Group does not use Profit-sharing Investment Account (“PSIA”) as a risk absorbent mechanism. The Bank and the Group do not have exposure to any Large Exposure Risk for equity holdings as specified under BNM’s Guidelines on Investment in Shares, Interest-in-Shares and Collective Investment Schemes.
296. 294 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK Credit risk is the risk of financial loss resulting from the failure of the Bank’s borrowers or counterparties to fulfil their contractual obligations to repay their loans or to settle financial commitments. Credit Risk Management The Board, via the Group Risk Management Committee (“GRMC”), established a Credit Risk Management Framework (“CRMF”) which outlines the broad principles for managing credit risk of the Group. Credit approval is under the purview of the Executive Committee, Group Management Credit Committee and Credit Underwriters, depending on the size and complexity of the loans. Retail loans are subject to portfolio reviews and corporate loans are subject to periodic individual borrower or group reviews. The Portfolio Review Committee for the respective lines of business, assisted by embedded risk units, helps to manage the portfolio quality. The process also ensures alignment of business strategy with the Bank’s risk appetite. Potential problem loans or issues on portfolio are identified through our Early Warning Framework and thematic reviews, where applicable. Recovery of impaired loans are carried out internally or through authorised agents. The Portfolio Review Committees for the respective lines of business, assisted by embedded risk units, helps to manage the portfolio quality.  Portfolio risk reports are reviewed and action plans are formulated to manage identified risks.  Entity level Risk Dashboards are escalated to the Executive Risk Management Committee (Senior Management Level), Group Risk Management Committee (Board Level) and the Board for deliberation and strategic direction. Group Risk Management is responsible for assessing the adequacy and effectiveness of the risk management framework, policies and guidelines. Embedded risk units are responsible for monitoring business activities and ensuring that they are carried out within the approved policies and business models. Stress testing is used to identify potential vulnerable risk areas of the Bank’s portfolios to stress events and assess the impact to earnings and capital. Stress tests are performed using a variety of market and economic assumptions to assess possible vulnerability and formulate effective mitigation actions when required. Sensitivity analysis are conducted to assess potential effect of individual risk factors. Group Internal Audit reviews the Bank’s credit processes regularly and recommends corrective measures or enhancements. These reviews provide senior management with assurance that the policies, processes and guidelines are adhered to. Impaired Loans and Provisions Past due accounts are loan accounts with any payment of principal and/or interest due and not paid, but are not classified as impaired. Loans are classified as impaired if the mandatory impairment thresholds are exceeded or judgmentally impaired when there are reasonable grounds to believe that the borrower may not be able to repay the entire loan amount. Provisions for expected credit losses are carried out based on the MFRS 9 approach, loans with defined risk characteristics are transferred to Stage 2 and provisions are estimated based on potential losses for the remaining lifetime of the exposures. Impaired loans are classified as Stage 3 under MFRS 9. Loans that are not classified as Stage 2 or 3 will remain in Stage 1 where provisions will be estimated based on probability of default over the next 12 months. Please refer to Note 2(k)(i) of the audited financial statements for accounting policies on impairment of financial assets.
297. 2019 Annual Report 3 .0 295 CREDIT RISK (CONT’D) 3.1 Distribution of Credit Exposures (a) Geographical Distribution The following tables represent the Bank’s and the Group’s major types of gross credit exposure by geographical distribution. Exposures are allocated to the region in which the branch is located and are disclosed before taking into account of any collateral held or other credit enhancements and after allowance for impairment, where appropriate. Geographical region Northern RM’000 Central RM’000 Southern RM’000 Sabah RM’000 Sarawak RM’000 Outside Malaysia RM’000 Total RM’000 Cash and short-term funds - 1,292,132 - - - 24,753 1,316,885 Financial assets at fair value through profit or loss - 42,923 - - - - 42,923 Financial investments at fair value through other comprehensive income - 6,852,858 - - - - 6,852,858 Financial investments at amortised cost - 311,930 - - - - 311,930 Derivative financial assets - 55,442 - - - - 55,442 2,206,689 23,649,545 3,966,339 2,166,621 722,691 - 32,711,885 Statutory deposits - 1,142,108 - - - - 1,142,108 Total on-balance sheet 2,206,689 33,346,938 3,966,339 2,166,621 722,691 24,753 42,434,030 Financial guarantees 71,471 354,069 42,526 38,622 11,378 - 518,066 Credit-related commitments and contingencies 853,568 7,096,695 1,013,416 624,008 306,300 - 9,893,986 BANK 2019 Loans, advances and financing Total off-balance sheet Total credit exposure 925,039 7,450,763 1,055,942 662,630 317,677 - 10,412,052 3,131,728 40,797,701 5,022,281 2,829,251 1,040,368 24,753 52,846,082
298. 296 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.1 Distribution of Credit Exposures (cont’d) (a) Geographical Distribution (cont’d) The following tables represent the Bank’s and the Group’s major types of gross credit exposure by geographical distribution. Exposures are allocated to the region in which the branch is located and are disclosed before taking into account of any collateral held or other credit enhancements and after allowance for impairment, where appropriate (cont’d): Geographical region Northern RM’000 Central RM’000 Southern RM’000 Sabah RM’000 Sarawak RM’000 Outside Malaysia RM’000 Total RM’000 Cash and short-term funds - 1,524,871 - - - 24,753 1,549,624 Deposits and placements with banks and other financial institutions GROUP 2019 - 500 - - - - 500 Amounts due from clients and brokers 11,527 55,322 10,159 - - - 77,008 Financial assets at fair value through profit or loss - 42,923 - - - - 42,923 Financial investments at fair value through other comprehensive income - 9,478,454 - - - - 9,478,454 Financial investments at amortised cost - 235,720 - - - - 235,720 Derivative financial assets - 55,442 - - - - 55,442 3,071,510 30,376,554 5,240,640 2,859,102 965,175 - 42,512,982 - 1,521,592 - - - - 1,521,592 3,083,037 43,291,377 5,250,800 2,859,102 965,175 24,753 55,474,245 Financial guarantees 80,179 519,451 57,431 52,646 11,793 - 721,500 Credit-related commitments and contingencies 1,203,797 8,500,343 1,349,365 788,017 460,014 - 12,301,536 Loans, advances and financing Statutory deposits Total on-balance sheet Total off-balance sheet 1,283,976 9,019,794 1,406,796 840,663 471,807 - 13,023,036 Total credit exposure 4,367,013 52,311,172 6,657,596 3,699,765 1,436,982 24,753 68,497,280 Note: The classification of financial instruments under MFRS9 was adopted with effect from 1 April 2018. Please refer to Note 56 of the financial statement.
299. 2019 Annual Report 3 .0 297 CREDIT RISK (CONT’D) 3.1 Distribution of Credit Exposures (cont’d) (a) Geographical Distribution (cont’d) The following tables represent the Bank’s and the Group’s major types of gross credit exposure by geographical distribution. Exposures are allocated to the region in which the branch is located and are disclosed before taking into account of any collateral held or other credit enhancements and after allowance for impairment, where appropriate (cont’d): Geographical region Northern RM’000 Central RM’000 Southern RM’000 Sabah RM’000 Sarawak RM’000 Outside Malaysia RM’000 Total RM’000 Cash and short-term funds - 1,428,981 - - - 21,576 1,450,557 Deposits and placements with banks and other financial institutions - 77,283 - - - - 77,283 Financial assets heldfor-trading - 48,771 - - - - 48,771 Financial investments available-for-sale - 6,284,804 - - - - 6,284,804 Financial investments held-to-maturity - 344,703 - - - - 344,703 Derivative financial assets - 84,455 - - - - 84,455 2,122,103 23,064,355 3,794,976 1,985,937 654,300 - 31,621,671 Statutory deposits - 1,092,566 - - - - 1,092,566 Total on-balance sheet 2,122,103 32,425,918 3,794,976 1,985,937 654,300 21,576 41,004,811 Financial guarantees 55,509 398,635 42,934 45,088 14,535 - 556,701 Credit-related commitments and contingencies 828,695 6,569,110 829,182 618,932 273,075 - 9,118,992 BANK 2018 Loans, advances and financing Total off-balance sheet Total credit exposure 884,204 6,967,745 872,115 664,019 287,610 - 9,675,693 3,006,307 39,393,663 4,667,091 2,649,956 941,910 21,576 50,680,504
300. 298 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.1 Distribution of Credit Exposures (cont’d) (a) Geographical Distribution (cont’d) The following tables represent the Bank’s and the Group’s major types of gross credit exposure by geographical distribution. Exposures are allocated to the region in which the branch is located and are disclosed before taking into account of any collateral held or other credit enhancements and after allowance for impairment, where appropriate (cont’d): Geographical region Northern RM’000 Central RM’000 Southern RM’000 Sabah RM’000 Sarawak RM’000 Outside Malaysia RM’000 Total RM’000 Cash and short-term funds - 2,481,778 - - - 21,576 2,503,354 Deposits and placements with banks and other financial institutions - 77,283 - - - - 77,283 Amounts due from clients and brokers 13,920 83,873 3,512 - - - 101,305 Financial assets heldfor-trading - 63,750 - - - - 63,750 Financial investments available-for-sale - 8,326,333 - - - - 8,326,333 Financial investments held-to-maturity - 293,612 - - - - 293,612 Derivative financial assets - 84,455 - - - - 84,455 GROUP 2018 Loans, advances and financing 2,815,996 28,829,752 4,918,978 2,598,098 961,745 - 40,124,570 Statutory deposits - 1,408,316 - - - - 1,408,316 Total on-balance sheet 2,829,916 41,649,153 4,922,490 2,598,098 961,745 21,576 52,982,979 Financial guarantees 63,441 550,533 55,015 47,209 14,574 - 730,771 Credit-related commitments and contingencies 1,118,225 7,775,286 1,073,320 1,036,449 310,051 - 11,313,331 Total off-balance sheet 1,181,666 8,325,819 1,128,335 1,083,657 324,625 - 12,044,102 Total credit exposure 4,011,582 49,974,972 6,050,825 3,681,756 1,286,370 21,576 65,027,081
301. 3 .0 3.1 6,405,171 77,195 5,682,900 - Total on-balance sheet 5,824,885 Total off-balance sheet Total credit risk 141,985 141,985 Credit-related commitments and contingencies 7,767,534 1,362,364 1,285,169 - Financial guarantees 3,480,049 - Loans, advances and financing 1,142,108 35,438 - Derivative financial assets Statutory deposits 164,961 2,098,405 1,909 624,408 101,446 Financial investments at amortised cost 3,705,868 41,002 Financial assets at fair value through profit or loss Financial investments at fair value through other comprehensive income 692,477 Cash and short-term funds BANK 2019 Government & Central Bank RM’000 1,410,040 148,629 120,734 27,895 1,261,411 - 517,512 - - 743,892 7 - 14,662,966 4,398,699 4,014,944 383,755 10,264,267 - 10,066,243 - 25,011 173,009 4 - 2,798,791 1,464,076 1,448,995 15,081 1,334,715 - 1,203,030 - - 131,684 1 - Construction RM’000 19,687,990 2,540,557 2,536,013 4,544 17,147,433 - 17,147,433 - - - - - Household RM’000 693,875 355,742 346,146 9,596 338,134 - 297,618 20,004 20,512 - - - Others RM’000 52,846,082 10,412,052 9,893,986 518,066 42,434,030 1,142,108 32,711,885 55,442 311,930 6,852,858 42,923 1,316,885 Total RM’000 The following tables represent the Bank’s and the Group’s major types of gross credit exposure by sector. The analysis is based on the sector in which the customers are engaged: Financial, Agriculture, Insurance, Transport, Manufacturing, Business Wholesale & Storage & Services & Retail Trade Real Estate Communication RM’000 RM’000 RM’000 Industry Distribution (b) Distribution of Credit Exposures (cont’d) CREDIT RISK (CONT’D) 2019 Annual Report 299
302. 3 .0 3.1 Financial guarantees Credit-related commitments and contingencies Total off-balance sheet Total credit risk Cash and short-term funds Deposits and placements with banks and other financial institutions Amounts due from clients and brokers Financial assets at fair value through profit or loss Financial investments at fair value through other comprehensive income Financial investments at amortised cost Derivative financial assets Loans, advances and financing Statutory deposits Total on-balance sheet GROUP 2019 508,698 500 665 1,909 2,520,795 43,404 35,438 4,451,999 7,563,409 79,794 1,540,262 1,620,056 9,183,465 1,040,926 41,002 5,293,442 121,789 1,521,592 8,018,750 141,985 141,985 8,160,735 Government & Central Bank RM’000 125,463 158,504 2,003,649 33,041 695,780 1,845,145 1,149,358 7 - - - 5,141,861 5,683,992 18,932,226 542,131 50,015 12,952,982 13,248,234 245,233 4 - - - 1,611,172 1,663,295 3,339,102 52,123 1,406,180 1,675,807 269,626 1 - - - Construction RM’000 3,356,111 3,360,697 25,921,113 4,586 22,560,416 22,560,416 - - - - - Household RM’000 384,682 394,507 956,991 9,825 20,512 20,004 445,625 562,484 - - 76,343 - - Others RM’000 12,301,536 13,023,036 68,497,280 721,500 235,720 55,442 42,512,982 1,521,592 55,474,245 9,478,454 42,923 77,008 500 1,549,624 Total RM’000 The following tables represent the Bank’s and the Group’s major types of gross credit exposure by sector. The analysis is based on the sector in which the customers are engaged (cont’d): Financial, Agriculture, Insurance, Transport, Manufacturing, Business Wholesale & Storage & Services & Retail Trade Real Estate Communication RM’000 RM’000 RM’000 Industry Distribution (cont’d) (b) Distribution of Credit Exposures (cont’d) CREDIT RISK (CONT’D) for the financial year ended 31 March 2019 BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) 300 Alliance Bank Malaysia Berhad (88103-W)
303. 3 .0 3.1 Financial guarantees Credit-related commitments and contingencies Total off-balance sheet Total credit risk Cash and short-term funds Deposits and placements with banks and other financial institutions Financial assets held-for-trading Financial investments availablefor-sale Financial investments held-tomaturity Derivative financial assets Loans, advances and financing Statutory deposits Total on-balance sheet BANK 2018 1,292,655 1,324,494 8,974,149 223,432 56,969 3,936,962 7,649,655 121,271 1,092,566 4,664,969 4,664,969 2,453,110 2,863,925 31,839 77,283 38,549 - - 863,350 587,207 Government & Central Bank RM’000 122,364 148,783 1,192,253 26,419 353,452 1,043,470 679,796 10,222 - 3,509,320 3,941,935 12,907,196 432,615 8,783,073 8,965,261 182,188 - - 1,382,911 1,420,748 2,599,934 37,837 1,073,400 1,179,186 105,785 - - Construction RM’000 2,302,406 2,310,044 19,379,917 7,638 17,069,873 17,069,873 - - - Household RM’000 509,336 529,689 962,085 20,353 27,486 404,911 432,397 - - - Others RM’000 9,118,992 9,675,693 50,680,503 556,701 344,703 84,455 31,621,671 1,092,566 41,004,811 6,284,804 77,283 48,771 1,450,557 Total RM’000 The following tables represent the Bank’s and the Group’s major types of gross credit exposure by sector. The analysis is based on the sector in which the customers are engaged (cont’d): Financial, Agriculture, Insurance, Transport, Manufacturing, Business Wholesale & Storage & Services & Retail Trade Real Estate Communication RM’000 RM’000 RM’000 Industry Distribution (cont’d) (b) Distribution of Credit Exposures (cont’d) CREDIT RISK (CONT’D) 2019 Annual Report 301
304. 3 .0 3.1 Financial guarantees Credit-related commitments and contingencies Total off-balance sheet Total credit risk Cash and short-term funds Deposits and placements with banks and other financial institutions Amounts due from clients and brokers Financial assets held-for-trading Financial investments availablefor-sale Financial investments held-tomaturity Derivative financial assets Loans, advances and financing Statutory deposits Total on-balance sheet GROUP 2018 151,926 56,969 4,954,492 8,726,856 141,686 1,408,316 7,281,013 1,453,597 1,490,266 10,217,122 2,806,383 3,853,263 7,281,013 670 53,527 - 36,669 77,283 - - 625,606 1,877,748 Government & Central Bank RM’000 128,259 159,831 1,833,442 31,573 501,987 1,673,610 1,161,400 10,223 - - 4,495,893 5,072,797 16,688,970 576,904 11,408,031 11,616,173 208,142 - - - 1,515,553 1,572,909 3,241,047 57,355 1,370,993 1,668,138 297,146 - - - Construction RM’000 2,900,735 2,908,415 24,281,570 7,680 21,373,155 21,373,155 - - - - Household RM’000 819,294 839,884 1,483,917 20,590 27,486 515,912 644,033 - 100,635 - - - Others RM’000 11,313,331 12,044,102 65,027,081 730,771 293,612 84,455 40,124,570 1,408,316 52,982,979 8,326,333 101,305 63,750 77,283 2,503,354 Total RM’000 The following tables represent the Bank’s and the Group’s major types of gross credit exposure by sector. The analysis is based on the sector in which the customers are engaged (cont’d): Financial, Agriculture, Insurance, Transport, Manufacturing, Business Wholesale & Storage & Services & Retail Trade Real Estate Communication RM’000 RM’000 RM’000 Industry Distribution (cont’d) (b) Distribution of Credit Exposures (cont’d) CREDIT RISK (CONT’D) for the financial year ended 31 March 2019 BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) 302 Alliance Bank Malaysia Berhad (88103-W)
305. 2019 Annual Report 3 .0 303 CREDIT RISK (CONT’D) 3.1 Distribution of Credit Exposures (cont’d) (c) Residual Contractual Maturity The following tables represent the residual contractual maturity for major types of gross credit exposure for on-balance sheet financial assets of the Bank and the Group: Up to 1 month RM’000 >1-3 months RM’000 >3-6 months RM’000 >6-12 months RM’000 >1 year RM’000 Total RM’000 1,316,885 - - - - 1,316,885 379 - 118 - 42,425 42,923 Financial investments at fair value through other comprehensive income 58,511 199,629 325,205 488,643 5,780,869 6,852,858 Financial investments at amortised cost 36,891 446 2,556 99,771 172,266 311,930 6,554,099 1,545,631 677,178 105,355 23,829,622 32,711,885 - - - - 1,142,108 1,142,108 BANK 2019 Cash and short-term funds Financial assets at fair value through profit or loss Loans, advances and financing Statutory deposits Derivative financial assets Total on-balance sheet exposure 8,010 5,003 5,812 2,791 33,826 55,442 7,974,775 1,750,709 1,010,870 696,560 31,001,116 42,434,030 GROUP 2019 1,549,624 - - - - 1,549,624 Deposits and placements with banks and other financial institutions 500 - - - - 500 Amounts due from clients and brokers 77,008 - - - - 77,008 Financial assets at fair value through profit or loss 379 - 118 - 42,425 42,923 Financial investments at fair value through other comprehensive income 180,003 230,448 387,975 502,664 8,177,363 9,478,454 Financial investments at amortised cost 37,164 4,549 4,994 119,816 69,196 235,720 8,755,066 2,146,717 892,728 135,785 30,582,686 42,512,982 - - - - 1,521,592 1,521,592 Cash and short-term funds Loans, advances and financing Statutory deposits Derivative financial assets Total on-balance sheet exposure 8,010 5,004 5,812 2,791 33,825 55,442 10,607,754 2,386,718 1,291,628 761,056 40,427,087 55,474,245
306. 304 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.1 Distribution of Credit Exposures (cont’d) (c) Residual Contractual Maturity (cont’d) The following tables represent the residual contractual maturity for major types of gross credit exposure for on-balance sheet financial assets of the Bank and the Group (cont’d): Up to 1 month RM’000 >1-3 months RM’000 >3-6 months RM’000 >6-12 months RM’000 >1 year RM’000 Total RM’000 1,450,557 - - - - 1,450,557 Deposits and placements with banks and other financial institutions - 77,283 - - - 77,283 Financial assets held-for-trading - 25,926 167 - 22,678 48,771 Financial investments available-for-sale 61,449 274,130 489,924 455,660 5,003,641 6,284,804 Financial investments held-to-maturity 1,229 446 49,764 63,149 230,115 344,703 6,240,348 1,494,915 700,136 127,353 23,058,919 31,621,671 - - - - 1,092,566 1,092,566 17,806 25,115 4,083 11,223 26,229 84,455 7,771,389 1,897,814 1,244,074 657,385 29,434,149 41,004,811 2,503,354 - - - - 2,503,354 Deposits and placements with banks and other financial institutions - 77,283 - - - 77,283 Amounts due from clients and brokers BANK 2018 Cash and short-term funds Loans, advances and financing Statutory deposits Derivative financial assets Total on-balance sheet exposure GROUP 2018 Cash and short-term funds 101,305 - - - - 101,305 Financial assets held-for-trading 14,978 25,926 167 - 22,678 63,750 Financial investments available-for-sale 61,848 355,038 519,110 619,793 6,770,545 8,326,333 Financial investments held-to-maturity 1,229 744 84,422 82,636 124,581 293,612 7,927,745 1,986,359 1,000,365 187,192 29,022,910 40,124,570 - - - - 1,408,316 1,408,316 Loans, advances and financing Statutory deposits Derivative financial assets Total on-balance sheet exposure 17,806 25,115 4,083 11,223 26,229 84,455 10,628,265 2,470,464 1,608,147 900,843 37,375,260 52,982,979
307. 2019 Annual Report 3 .0 305 CREDIT RISK (CONT’D) 3.2 Past Due Loans, Advances and Financing Analysis Past due but not impaired loans, advances and financing are loans where the customers have failed to make a principal and/or interest payment when contractually due, and include loans which are due one or more days after the contractual due date but not more than three months. For loans that are structured to pay principal and/or interest at quarterly interval or longer, a default of payment will trigger an impairment immediately. Under MFRS 9, exposures more than 30 days past due are transferred to Stage 2. The following tables represent the past due loans, advances and financing analysed by sector: BANK 2018 RM’000 2019 RM’000 2018 RM’000 Financial, insurance & business services and real estate 66,885 39,321 77,853 44,396 Transport, storage & communication 23,510 12,370 30,506 12,922 Agriculture, manufacturing, wholesale & retail trade 380,443 107,956 522,877 127,504 Construction 214,987 37,965 224,120 42,113 Household 956,887 814,802 1,360,089 1,130,620 3,192 3,783 28,584 4,054 1,645,903 1,016,197 2,244,029 1,361,609 Others GROUP 2019 RM’000 Past due loans, advances and financing analysed by significant geographical areas: BANK 2019 RM’000 GROUP 2018 RM’000 2019 RM’000 2018 RM’000 127,766 75,634 180,081 107,468 1,200,186 700,806 1,626,610 926,597 Southern region 177,217 134,561 256,933 194,492 Sabah region 113,043 85,781 148,531 110,336 Northern region Central region Sarawak region 27,691 19,415 31,874 22,716 1,645,903 1,016,197 2,244,029 1,361,609
308. 306 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.2 Past Due Loans, Advances and Financing Analysis (cont’d) The following tables represent the loans, advances and financing by sector, where past due exposures are included under Stage 2 and Stage 3: 31 March 2019 31 March 2018 Total Non-credit impaired 12 months ECL (Stage 1) RM’000 Lifetime ECL (Stage 2) RM’000 Lifetime ECL (Stage 3) RM’000 RM’000 Collectively Assessed RM’000 Individually Assessed RM’000 2,930,949 530,927 24,264 3,486,140 - - Transport, storage & communication 415,838 101,592 3,027 520,457 - - Agriculture, manufacturing, wholesale & retail trade 7,688,544 2,328,371 114,135 10,131,050 - - Non-credit Impaired Sector Credit Impaired Credit impaired BANK Financial, insurance & business services and real estate 870,175 330,024 21,786 1,221,985 - - 16,190,136 836,086 197,271 17,223,493 - - 235,685 55,766 8,641 300,092 - - 28,331,327 4,182,766 369,124 32,883,217 - - 3,762,480 670,415 25,503 4,458,398 - - 564,253 131,380 3,394 699,027 - - Agriculture, manufacturing, wholesale & retail trade 9,840,739 3,035,916 155,162 13,031,817 - - Construction 1,041,903 360,673 27,515 1,430,090 - - 21,056,625 1,350,005 256,386 22,663,015 - - 377,250 62,208 8,643 448,100 - - 36,643,249 5,610,597 476,602 42,730,447 - - Construction Household Others GROUP Financial, insurance & business services and real estate Transport, storage & communication Household Others
309. 2019 Annual Report 3 .0 307 CREDIT RISK (CONT’D) 3.2 Past Due Loans, Advances and Financing Analysis (cont’d) The following tables represent the loans, advances and financing by geographical region, where past due exposures are included under Stage 2 and Stage 3: 31 March 2019 31 March 2018 Total Non-credit impaired 12 months ECL (Stage 1) RM’000 Lifetime ECL (Stage 2) RM’000 Lifetime ECL (Stage 3) RM’000 RM’000 Collectively Assessed RM’000 Individually Assessed RM’000 Northern region 1,787,685 403,588 39,874 2,231,147 - - Central region Non-credit Impaired Credit Impaired Credit Impaired BANK Geographic Distribution 20,640,286 2,872,670 246,940 23,759,896 - - Southern region 3,588,410 351,830 49,183 3,989,423 - - Sabah region 1,785,547 366,194 22,554 2,174,295 - - 529,399 188,484 10,573 728,456 - - 28,331,327 4,182,766 369,124 32,883,217 - - Northern region 2,482,149 567,523 49,667 3,099,338 - - Central region 26,358,419 3,833,533 326,983 30,518,935 - - Southern region 4,709,670 500,028 63,369 5,273,067 - - Sabah region 2,389,205 453,346 25,317 2,867,868 - - 703,806 256,166 11,267 971,239 - - 36,643,249 5,610,597 476,602 42,730,447 - - Sarawak region GROUP Geographic Distribution Sarawak region
310. 308 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.3 Impaired Loans, Advances and Financing Analysis Impaired loans, advances and financing are exposures where the customers have failed to make a principal and/ or interest payment for more than three months. In addition, where customers are deemed incapable of continuing repayment obligations, the exposures will be judgmentally impaired. Where exposures are restructured or rescheduled due to increase in credit risk, the exposures are also classified as impaired. Impaired loans, advances and financing analysed by sectors: BANK 2018 RM’000 2019 RM’000 2018 RM’000 24,264 103,133 25,503 106,333 3,027 5,028 3,394 5,991 114,135 127,274 155,162 169,844 21,786 11,450 27,515 13,271 197,271 212,935 256,386 271,254 8,641 10,826 8,643 10,826 369,124 470,646 476,602 577,519 Financial, insurance & business services and real estate Transport, storage & communication Agriculture, manufacturing, wholesale & retail trade Construction Household Others GROUP 2019 RM’000 Credit provisions on loans, advances and financing analysed by sectors: Non-credit Impaired BANK 2019 Financial, insurance & business services and real estate Transport, storage & communication Agriculture, manufacturing, wholesale & retail trade Construction Household Others Credit Impaired 12 months ECL (Stage 1) RM’000 Lifetime ECL (Stage 2) RM’000 Lifetime ECL (Stage 3) RM’000 ECL charged/ (write-back) for the year (net) RM’000 Stage 3 write-off for the year RM’000 3,572 9,090 6,091 3,879 (619) 956 4,650 2,946 (457) (469) 15,854 74,557 64,807 20,102 (24,079) 1,562 11,568 18,955 15,964 (236) 26,543 41,073 76,059 48,007 (41,612) 647 1,683 2,475 194 (587) 49,135 142,622 171,332 87,689 (67,602)
311. 2019 Annual Report 3 .0 309 CREDIT RISK (CONT’D) 3.3 Impaired Loans, Advances and Financing Analysis (cont’d) Credit provisions on loans, advances and financing analysed by sectors (cont’d): Non-credit Impaired Credit Impaired Lifetime ECL (Stage 3) RM’000 ECL charged/ (write-back) for the year (net) RM’000 12 months ECL (Stage 1) RM’000 Lifetime ECL (Stage 2) RM’000 Financial, insurance & business services and real estate 4,598 11,603 6,400 3,191 (647) Transport, storage & communication 1,130 6,405 3,247 (1,095) (469) 19,728 88,997 78,835 25,609 (24,586) 1,897 12,934 23,909 20,030 (262) 44,317 90,524 102,598 84,607 (74,276) GROUP 2019 Agriculture, manufacturing, wholesale & retail trade Construction Household Others Stage 3 write-off for the year RM’000 1,009 2,055 2,476 195 (587) 72,679 212,519 217,465 132,537 (100,827) Individual assessment made for/ write-back during the year (net) RM’000 Individual assessment write-off for the year RM’000 Individual assessment allowance RM’000 Collective assessment allowance RM’000 Financial, insurance & business services and real estate 1,992 29,353 1,044 - Transport, storage & communication 2,510 4,667 1,930 (9,561) 47,416 96,493 12,928 (3,953) BANK 2018 Agriculture, manufacturing, wholesale & retail trade Construction 2,665 8,980 3,888 (8,663) Household 7,523 78,624 2,432 (2,440) Others 2,861 2,318 1,863 - 64,967 220,435 24,085 (24,617) Financial, insurance & business services and real estate 2,904 34,075 1,957 - Transport, storage & communication 2,510 6,300 1,930 (9,561) GROUP 2018 55,267 115,199 18,954 (3,953) Construction Agriculture, manufacturing, wholesale & retail trade 3,265 11,425 3,968 (8,708) Household 8,926 126,796 3,204 (3,007) Others 2,861 2,921 1,863 - 75,733 296,716 31,876 (25,229)
312. 310 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.3 Impaired Loans, Advances and Financing Analysis (cont’d) Impaired loans, advances and financing and credit provisions analysed by significant geographical areas: BANK 2019 Northern region Central region Southern region Sabah region Sarawak region Impaired loans, advances and financing RM’000 Non-credit Impaired 12 months ECL (Stage 1) RM’000 Lifetime ECL (Stage 2) RM’000 Credit Impaired Lifetime ECL (Stage 3) RM’000 39,874 246,940 49,183 22,554 10,573 369,124 4,097 37,056 4,531 2,110 1,342 49,135 17,596 97,747 12,249 8,326 6,704 142,622 24,458 110,352 23,082 7,673 5,765 171,332 49,667 326,982 63,370 25,316 11,267 476,602 6,430 53,944 7,688 3,039 1,577 72,679 24,795 149,923 19,785 10,403 7,613 212,519 27,829 142,380 32,427 8,766 6,064 217,465 Impaired loans, advances and financing RM’000 Individual assessment allowance RM’000 Collective assessment allowance RM’000 34,658 336,653 65,560 24,263 9,512 470,646 7,299 42,378 11,848 645 2,797 64,967 26,602 144,320 27,381 16,431 5,701 220,435 42,540 417,859 78,417 28,145 10,558 577,519 7,863 48,402 15,284 1,387 2,797 75,733 33,287 197,424 37,739 20,620 7,646 296,716 GROUP 2019 Northern region Central region Southern region Sabah region Sarawak region BANK 2018 Northern region Central region Southern region Sabah region Sarawak region GROUP 2018 Northern region Central region Southern region Sabah region Sarawak region
313. 311 2019 Annual Report 3 .0 CREDIT RISK (CONT’D) 3.3 Impaired Loans, Advances and Financing Analysis (cont’d) Movements in the credit provisions for impairment on loans, advances and financing are as follows: 31 March 2019 31 March 2018 Non-credit Impaired BANK Credit Impaired Collectively Assessed Collectively Assessed Lifetime 12 months Lifetime ECL ECL ECL (Stage 2) (Stage 1) (Stage 3) RM’000 RM’000 RM’000 Total RM’000 Collectively Assessed RM’000 Individually Assessed RM’000 285,402 234,637 64,147 52,797 - - At 1 April 2018 As previously stated Effect of adoption of MFRS 9 43,894 137,652 156,653 338,199 234,637 64,147 Transfer to Stage 1 15,264 (90,649) (5,930) (81,315) - - Transfer to Stage 2 (24,760) 154,042 (71,881) 57,401 - - Transfer to Stage 3 (148) (65,538) 178,889 113,203 - - As restated Financial assets derecognised other than write-off (26,381) (118,951) (16,490) (161,822) - - Changes due to change in credit risk (5,213) 5,001 (4,699) (4,911) 30,618 24,085 New financial assets originated or purchased 46,449 120,924 7,800 175,173 - - 30 150 - 180 - - 5,241 4,979 87,689 97,909 30,618 24,085 Other adjustment Total charge to income statement on allowance Unwind of discount - - (5,408) (5,408) - - Write-off - (9) (67,602) (67,611) (43,468) (24,617) Transfer (to)/from collective assessment allowance to individual assessment allowance At the end of the financial year - - - - (1,352) 1,352 49,135 142,622 171,332 363,089 220,435 64,967
314. 312 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.3 Impaired Loans, Advances and Financing Analysis (cont’d) Movements in the credit provisions for impairment on loans, advances and financing are as follows (cont’d): 31 March 2019 31 March 2018 Non-credit Impaired GROUP Credit Impaired Collectively Assessed Collectively Assessed Lifetime 12 months Lifetime ECL ECL ECL (Stage 2) (Stage 1) (Stage 3) RM’000 RM’000 RM’000 Total RM’000 Collectively Assessed RM’000 Individually Assessed RM’000 372,449 313,328 66,627 90,879 - - At 1 April 2018 As previously stated Effect of adoption of MFRS 9 66,941 203,691 192,696 463,328 313,328 66,627 Transfer to Stage 1 24,268 (132,004) (7,270) (115,006) - - Transfer to Stage 2 (40,020) 232,846 (103,159) 89,667 - - Transfer to Stage 3 (181) (114,361) 254,377 139,835 - - (39,199) (152,890) (19,415) (211,504) - - As restated Financial assets derecognised other than write-off Changes due to change in credit risk (9,934) 20,361 (7,814) 2,613 73,699 31,876 New financial assets originated or purchased 70,774 154,861 15,818 241,453 - - 30 150 - 180 - - 5,738 8,963 132,537 147,238 73,699 31,876 Unwind of discount - - (6,941) (6,941) - - Write-off - (135) (100,827) (100,962) (87,852) (25,229) Other adjustment Total charge to income statement on allowance Transfer (to)/from collective assessment allowance to individual assessment allowance At the end of the financial year - - - - (2,459) 2,459 72,679 212,519 217,465 502,663 296,716 75,733
315. 3 .0 - 84,527 - 5,808,639 1,225 - 0% 20% 35% - - 20% 0% Average risk-weight Deduction from Capital base 16,905 245 Risk-weighted assets by exposures 84,527 - - 150% 5,809,864 - - 100% Total exposures - - - 50% 75% BANK 2019 Risk-Weights Public Sector Entities RM’000 Sovereigns/ Central Banks RM’000 - 33% 624,956 1,894,485 - 322 - 822,688 - 1,066,451 5,024 Banks, DFIs & Multilateral Development Banks RM’000 The following tables represent the credit exposures by risk-weights and after credit risk mitigation: 711,113 - 52,337 - 1,495,449 39,761 - 100% - 87% 29,350 13,335,165 29,350 15,248,925 - 29,350 12,950,265 - - - - - - - 542,517 17,145 4,503,977 7,444,373 367 - 77% 5,894,445 - 43% 5,412,969 7,615,323 12,508,379 37,390 637,477 6,922,612 17,844 - - - Insurance Companies, Securities Firms & Regulatory Residential Fund Retail Mortgages Managers Corporates RM’000 RM’000 RM’000 RM’000 Exposures after netting and credit risk mitigation Assignment of Risk-Weights for Portfolios Under the Standardised Approach 3.4 CREDIT RISK (CONT’D) - 150% 17,255 11,503 11,503 - - - - - - Higher Risk Assets RM’000 - 59% 361,152 616,262 - 361,152 - - - - 255,110 Other Assets RM’000 6,779,886 6,939,757 5,396,846 7,444,373 2,648,019 5,204,819 2,698,423 2,605,531 529,604 - Total RiskWeighted Assets RM’000 88,657 132,986 - 100% - 59% 126,743 25,819,184 126,741 43,945,359 25,819,184 3 126,738 14,647,821 14,647,822 - - - - - Total Exposures after Netting & Equity Credit Risk Exposures Mitigation RM’000 RM’000 2019 Annual Report 313
316. 3 .0 - - - - - - 50% 75% 100% 150% - - 20% 0% Average risk-weight Deduction from Capital base 43,102 245 Risk-weighted assets by exposures Total exposures 215,508 215,508 1,225 20% 35% 8,399,757 - 8,398,532 0% GROUP 2019 Risk-Weights Public Sector Entities RM’000 Sovereigns/ Central Banks RM’000 The following tables represent the credit exposures by risk-weights and after credit risk mitigation (cont’d): - 22% 220,849 1,008,343 - 322 - 93,219 - 869,585 45,217 - 69,070 - 2,392,195 1,175,890 53,538 46,624 1,325,366 8,828,371 25,413 - - - - 800,774 17,838 5,791,700 9,779,655 467 - - 100% - 85% 36,462 17,031,677 - 79% 8,029,287 - 44% 7,132,975 36,462 20,129,088 10,225,774 16,390,434 - 36,462 16,438,395 - - - - - Insurance Banks, Companies, DFIs & Securities Firms & Multilateral Regulatory Residential Fund Development Retail Mortgages Banks Managers Corporates RM’000 RM’000 RM’000 RM’000 RM’000 Exposures after netting and credit risk mitigation Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) 3.4 CREDIT RISK (CONT’D) for the financial year ended 31 March 2019 BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) - 150% 19,788 13,192 13,192 - - - - - - Higher Risk Assets RM’000 - 63% 438,730 694,372 - 438,597 - - - 665 255,110 Other Assets RM’000 8,846,209 5,979,402 9,779,655 3,479,645 9,874,749 6,634,658 2,989,700 3,422,879 695,929 - Total RiskWeighted Assets RM’000 113,357 170,036 - 100% - 58% 187,527 33,140,642 187,525 57,300,455 33,140,642 3 187,522 19,227,438 19,227,440 - - - - - Total Exposures after Netting & Equity Credit Risk Exposures Mitigation RM’000 RM’000 314 Alliance Bank Malaysia Berhad (88103-W)
317. 3 .0 - - - 35% - 150% Deduction from Capital base Average risk-weight Risk-weighted assets by exposures - 0% - 4,800,900 - 100% Total exposures - - 50% 75% - 20% 14,892 74,458 - - - - - 74,458 4,800,900 0% 20% BANK 2018 Risk-Weights Public Sector Entities RM’000 Sovereigns/ Central Banks RM’000 - 30% 727,720 2,392,942 - 22 - 830,379 - 1,562,541 - Banks, DFIs & Multilateral Development Banks RM’000 The following tables represent the credit exposures by risk-weights and after credit risk mitigation (cont’d): 383,680 - 68,050 - 1,704,378 110,301 - 100% - 88% 53,466 12,886,549 53,466 14,612,606 - 53,466 12,346,197 - - - - - - - 776,879 17,402 4,468,233 6,739,628 456 - 77% 5,840,560 - 45% 5,383,008 7,557,486 12,002,598 97,790 402,310 7,051,491 5,895 - - - Insurance Companies, Securities Firms & Regulatory Residential Fund Retail Mortgages Managers Corporates RM’000 RM’000 RM’000 RM’000 Exposures after netting and credit risk mitigation Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) 3.4 CREDIT RISK (CONT’D) - 150% 7,217 4,811 4,811 - - - - - - Higher Risk Assets RM’000 - 50% 264,205 529,608 - 264,204 - - - - 265,404 Other Assets RM’000 5,449,984 7,068,893 5,372,557 6,739,628 3,341,833 5,301,670 2,686,279 2,358,870 668,366 - Total RiskWeighted Assets RM’000 212,905 319,357 - 100% - 60% 121,646 25,299,261 121,644 42,150,519 25,299,261 3 121,641 13,964,719 13,964,719 - - - - - Total Exposures after Netting & Equity Credit Risk Exposures Mitigation RM’000 RM’000 2019 Annual Report 315
318. 3 .0 - - - 75% 100% 150% Deduction from Capital base Average risk-weight Risk-weighted assets by exposures - 0% - 7,775,107 - 50% Total exposures - - 20% 35% 7,775,107 0% GROUP 2018 Risk-Weights Sovereigns/ Central Banks RM’000 - 20% 46,019 230,095 - - - - - 230,095 - Public Sector Entities RM’000 The following tables represent the credit exposures by risk-weights and after credit risk mitigation (cont’d): - 21% 317,538 1,496,198 - 22 - 91,034 - 1,359,993 45,149 - 83,423 - 2,532,554 882,250 139,867 113,620 983,255 9,086,689 8,505 - - - - 911,720 18,776 5,343,650 8,198,999 610 - - 100% - 85% 78,661 16,530,331 - 78% 7,972,954 - 45% 6,467,399 78,661 19,410,402 10,192,069 14,473,755 - 78,661 15,772,308 - - - - - Insurance Banks, Companies, DFIs & Securities Firms & Multilateral Regulatory Residential Fund Development Retail Mortgages Banks Managers Corporates RM’000 RM’000 RM’000 RM’000 RM’000 Exposures after netting and credit risk mitigation Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) 3.4 CREDIT RISK (CONT’D) for the financial year ended 31 March 2019 BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) - 150% 7,809 5,206 5,206 - - - - - - Higher Risk Assets RM’000 - 58% 374,017 639,421 - 374,017 - - - - 265,404 Other Assets RM’000 9,105,465 5,526,612 8,198,999 4,123,252 8,967,910 6,829,099 2,763,306 2,869,650 824,650 - Total RiskWeighted Assets RM’000 258,696 388,044 - 100% - 59% 178,858 31,973,585 178,856 54,479,770 31,973,585 3 178,853 18,298,836 18,298,836 - - - - - Total Exposures after Netting & Equity Credit Risk Exposures Mitigation RM’000 RM’000 316 Alliance Bank Malaysia Berhad (88103-W)
319. 317 2019 Annual Report 3 .0 CREDIT RISK (CONT’D) 3.4 Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) For the purpose of determining counterparty risk-weights, the Group uses external credit assessments from Rating Agency Malaysia (“RAM”), Malaysian Rating Corporation (“MARC”), Standard and Poor’s (“S&P”), Moody’s, Fitch, and Rating and Investment (“R&I”). In the context of the Group’s portfolio, external credit assessments are mainly applicable to banks/financial institutions and rated corporations. The Group follows the process prescribed under BNM’s Capital Adequacy Framework to map the ratings to the relevant risk-weights. The ratings are monitored and updated regularly to ensure that the latest and most appropriate risk-weights are applied in the capital computation. The following tables show the rated credit exposures according to ratings by approved Eligible Credit Assessment Institutions (“ECAIs”): BANK 2019 Ratings by Approved ECAIs* Total Aaa to Aa3/ Moody’s P-1 A1 to A3/ P-2 Baa1 to Ba3/ P-3 B1 to C/ Others Unrated S&P AAA to AA-/ A-1 A+ to A-/ A-2 BBB+ to BB-/ A-3 B+ to D/ Others Unrated FITCH AAA to AA-/ F1+, F1 A+ to A-/ A-2 BBB+ to BB-/ F3 B+ to D Unrated RAM AAA to AA3/ P-1 A+ to A3/ P-2 BBB1+ to BB3/ P-3 B to D/ NP Unrated MARC AAA to AA-/ MARC-1 A+ to A-/ MARC-2 BBB+ to BB-/ MARC-3 B+ to D/ MARC-4 Unrated R&I AAA to AA-/ a-1+, a-1 A+ to A-/ a-2 BBB+ to BB-/ a-3 B+ to D/ b, c Unrated RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Sovereigns and Central Banks (See Note 1) - 5,809,864 - - - 5,809,864 Corporates - 711,113 - - - 711,113 Banks, DFIs and Multilateral Development Banks - 5,024 - - - 5,024 - 6,526,001 - - - 6,526,001 410,209 1,204,056 13,482 - 213,397 1,841,144 48,318 - - - - 48,318 458,527 1,204,056 13,482 - 213,397 1,889,462 Exposure Class On and Off Balance-Sheet Exposures (i) Exposures risk-weighted using Sovereigns and Central Banks rating (ii) Exposures risk-weighted using Banking Institutions long-term rating Banks, DFIs and Multilateral Development Banks Exposures risk-weighted using Banking Institutions short-term rating Banks, DFIs and Multilateral Development Banks
320. 318 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.4 Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) The following tables show the rated credit exposures according to ratings by approved Eligible Credit Assessment Institutions (“ECAIs”) (cont’d): BANK 2019 Ratings by Approved ECAIs* Total Moody’s Aaa to Aa3/ P-1 A1 to A3/ P-2 Baa1 to Ba3/ P-3 B1 to C/ Others Unrated S&P AAA to AA-/ A-1 A+ to A-/ A-2 BBB+ to BB-/ A-3 B+ to D/ Others Unrated FITCH AAA to AA-/ F1+, F1 A+ to A-/ A-2 BBB+ to BB-/ F3 B+ to D Unrated RAM AAA to AA3/ P-1 A+ to A3/ P-2 BBB1+ to BB3/ P-3 B to D/ NP Unrated MARC AAA to AA-/ MARC-1 A+ to A-/ MARC-2 BBB+ to BB-/ MARC-3 B+ to D/ MARC-4 Unrated R&I AAA to AA-/ a-1+, a-1 A+ to A-/ a-2 BBB+ to BB-/ a-3 B+ to D/ b, c Unrated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 61,105 - - - 23,422 84,527 1,495,449 47,617 - - 14,484,498 16,027,564 - - - - 29,354 29,354 Public Sector Entities - - - - - - Corporates - - - - - - - - - - - - 1,556,554 47,617 - - 14,537,274 16,141,445 Exposure Class On and Off Balance-Sheet Exposures (cont’d) (iii) Exposures risk-weighted using Corporate long-term rating Public Sector Entities Corporates Insurance Companies, Securities Firms & Fund Managers Exposures risk-weighted using Corporate short-term rating Insurance Companies, Securities Firms & Fund Managers
321. 319 2019 Annual Report 3 .0 CREDIT RISK (CONT’D) 3.4 Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) The following tables show the rated credit exposures according to ratings by approved Eligible Credit Assessment Institutions (“ECAIs”) (cont’d): GROUP 2019 Ratings by Approved ECAIs* Total Moody’s Aaa to Aa3/ P-1 A1 to A3/ P-2 Baa1 to Ba3/ P-3 B1 to C/ Others Unrated S&P AAA to AA-/ A-1 A+ to A-/ A-2 BBB+ to BB-/ A-3 B+ to D/ Others Unrated FITCH AAA to AA-/ F1+, F1 A+ to A-/ A-2 BBB+ to BB-/ F3 B+ to D Unrated RAM AAA to AA3/ P-1 A+ to A3/ P-2 BBB1+ to BB3/ P-3 B to D/ NP Unrated MARC AAA to AA-/ MARC-1 A+ to A-/ MARC-2 BBB+ to BB-/ MARC-3 B+ to D/ MARC-4 Unrated R&I AAA to AA-/ a-1+, a-1 A+ to A-/ a-2 BBB+ to BB-/ a-3 B+ to D/ b, c Unrated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Sovereigns and Central Banks (See Note 1) - 8,399,756 - - - 8,399,756 Corporates - 1,175,891 - - - 1,175,891 Banks, DFIs and Multilateral Development Banks - 45,217 - - - 45,217 - 9,620,864 - - - 9,620,864 427,124 222,121 13,482 - 213,397 876,124 87,001 - - - - 87,001 514,125 222,121 13,482 - 213,397 963,125 Exposure Class On and Off Balance-Sheet Exposures (i) Exposures risk-weighted using Sovereigns and Central Banks rating (ii) Exposures risk-weighted using Banking Institutions long-term rating Banks, DFIs and Multilateral Development Banks Exposures risk-weighted using Banking Institutions short-term rating Banks, DFIs and Multilateral Development Banks
322. 320 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.4 Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) The following tables show the rated credit exposures according to ratings by approved Eligible Credit Assessment Institutions (“ECAIs”) (cont’d): GROUP 2019 Ratings by Approved ECAIs* Total Moody’s Aaa to Aa3/ P-1 A1 to A3/ P-2 Baa1 to Ba3/ P-3 B1 to C/ Others Unrated S&P AAA to AA-/ A-1 A+ to A-/ A-2 BBB+ to BB-/ A-3 B+ to D/ Others Unrated FITCH AAA to AA-/ F1+, F1 A+ to A-/ A-2 BBB+ to BB-/ F3 B+ to D Unrated RAM AAA to AA3/ P-1 A+ to A3/ P-2 BBB1+ to BB3/ P-3 B to D/ NP Unrated MARC AAA to AA-/ MARC-1 A+ to A-/ MARC-2 BBB+ to BB-/ MARC-3 B+ to D/ MARC-4 Unrated R&I AAA to AA-/ a-1+, a-1 A+ to A-/ a-2 BBB+ to BB-/ a-3 B+ to D/ b, c Unrated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 122,437 - - - 93,071 215,508 2,392,195 62,478 - - 18,442,901 20,897,574 - - - - 36,468 36,468 Public Sector Entities - - - - - - Corporates - - - - - - - - Exposure Class On and Off Balance-Sheet Exposures (cont’d) (iii) Exposures risk-weighted using Corporate long-term rating Public Sector Entities Corporates Insurance Companies, Securities Firms & Fund Managers Exposures risk-weighted using Corporate short-term rating Insurance Companies, Securities Firms & Fund Managers - - - - 2,514,632 62,478 - - 18,572,440 21,149,550
323. 321 2019 Annual Report 3 .0 CREDIT RISK (CONT’D) 3.4 Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) The following tables show the rated credit exposures according to ratings by approved Eligible Credit Assessment Institutions (“ECAIs”) (cont’d): BANK 2018 Ratings by Approved ECAIs* Total Moody’s Aaa to Aa3/ P-1 A1 to A3/ P-2 Baa1 to Ba3/ P-3 B1 to C/ Others Unrated S&P AAA to AA-/ A-1 A+ to A-/ A-2 BBB+ to BB-/ A-3 B+ to D/ Others Unrated FITCH AAA to AA-/ F1+, F1 A+ to A-/ A-2 BBB+ to BB-/ F3 B+ to D Unrated RAM AAA to AA3/ P-1 A+ to A3/ P-2 BBB1+ to BB3/ P-3 B to D/ NP Unrated MARC AAA to AA-/ MARC-1 A+ to A-/ MARC-2 BBB+ to BB-/ MARC-3 B+ to D/ MARC-4 Unrated R&I AAA to AA-/ a-1+, a-1 A+ to A-/ a-2 BBB+ to BB-/ a-3 B+ to D/ b, c Unrated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Sovereigns and Central Banks (See Note 1) - 4,800,900 - - - 4,800,900 Corporates - 383,680 - - - 383,680 - 5,184,580 - - - 5,184,580 475,428 1,274,546 403,451 - 224,537 2,377,962 Exposure Class On and Off Balance-Sheet Exposures (i) Exposures risk-weighted using Sovereigns and Central Banks rating (ii) Exposures risk-weighted using Banking Institutions long-term rating Banks, DFIs and Multilateral Development Banks Exposures risk-weighted using Banking Institutions short-term rating Banks, DFIs and Multilateral Development Banks 14,978 - - - - 14,978 490,406 1,274,546 403,451 - 224,537 2,392,940
324. 322 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.4 Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) The following tables show the rated credit exposures according to ratings by approved Eligible Credit Assessment Institutions (“ECAIs”) (cont’d): BANK 2018 Ratings by Approved ECAIs* Total Moody’s Aaa to Aa3/ P-1 A1 to A3/ P-2 Baa1 to Ba3/ P-3 B1 to C/ Others Unrated S&P AAA to AA-/ A-1 A+ to A-/ A-2 BBB+ to BB-/ A-3 B+ to D/ Others Unrated FITCH AAA to AA-/ F1+, F1 A+ to A-/ A-2 BBB+ to BB-/ F3 B+ to D Unrated RAM AAA to AA3/ P-1 A+ to A3/ P-2 BBB1+ to BB3/ P-3 B to D/ NP Unrated MARC AAA to AA-/ MARC-1 A+ to A-/ MARC-2 BBB+ to BB-/ MARC-3 B+ to D/ MARC-4 Unrated R&I AAA to AA-/ a-1+, a-1 A+ to A-/ a-2 BBB+ to BB-/ a-3 B+ to D/ b, c Unrated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 55,778 - - - 18,678 74,456 1,704,377 58,704 - - 13,789,513 15,552,594 - - - - 53,514 53,514 Public Sector Entities - - - - - - Corporates - - - - - - - - - - - - 1,760,155 58,704 - - 13,861,705 15,680,564 Exposure Class On and Off Balance-Sheet Exposures (cont’d) (iii) Exposures risk-weighted using Corporate long-term rating Public Sector Entities Corporates Insurance Companies, Securities Firms & Fund Managers Exposures risk-weighted using Corporate short-term rating Insurance Companies, Securities Firms & Fund Managers
325. 323 2019 Annual Report 3 .0 CREDIT RISK (CONT’D) 3.4 Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) The following tables show the rated credit exposures according to ratings by approved Eligible Credit Assessment Institutions (“ECAIs”) (cont’d): GROUP 2018 Ratings by Approved ECAIs* Total Moody’s Aaa to Aa3/ P-1 A1 to A3/ P-2 Baa1 to Ba3/ P-3 B1 to C/ Others Unrated S&P AAA to AA-/ A-1 A+ to A-/ A-2 BBB+ to BB-/ A-3 B+ to D/ Others Unrated FITCH AAA to AA-/ F1+, F1 A+ to A-/ A-2 BBB+ to BB-/ F3 B+ to D Unrated RAM AAA to AA3/ P-1 A+ to A3/ P-2 BBB1+ to BB3/ P-3 B to D/ NP Unrated MARC AAA to AA-/ MARC-1 A+ to A-/ MARC-2 BBB+ to BB-/ MARC-3 B+ to D/ MARC-4 Unrated R&I AAA to AA-/ a-1+, a-1 A+ to A-/ a-2 BBB+ to BB-/ a-3 B+ to D/ b, c Unrated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Sovereigns and Central Banks (See Note 1) - 7,775,108 - - - 7,775,108 Corporates - 882,250 - - - 882,250 Banks, DFIs and Multilateral Development Banks - 45,149 - - - 45,149 - 8,702,507 - - - 8,702,507 576,166 231,916 403,451 - 224,537 1,436,070 Exposure Class On and Off Balance-Sheet Exposures (i) Exposures risk-weighted using Sovereigns and Central Banks rating (ii) Exposures risk-weighted using Banking Institutions long-term rating Banks, DFIs and Multilateral Development Banks Exposures risk-weighted using Banking Institutions short-term rating Banks, DFIs and Multilateral Development Banks 14,978 - - - - 14,978 591,144 231,916 403,451 - 224,537 1,451,048
326. 324 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.4 Assignment of Risk-Weights for Portfolios Under the Standardised Approach (cont’d) The following tables show the rated credit exposures according to ratings by approved Eligible Credit Assessment Institutions (“ECAIs”) (cont’d): GROUP 2018 Ratings by Approved ECAIs* Total Moody’s Aaa to Aa3/ P-1 A1 to A3/ P-2 Baa1 to Ba3/ P-3 B1 to C/ Others Unrated S&P AAA to AA-/ A-1 A+ to A-/ A-2 BBB+ to BB-/ A-3 B+ to D/ Others Unrated FITCH AAA to AA-/ F1+, F1 A+ to A-/ A-2 BBB+ to BB-/ F3 B+ to D Unrated RAM AAA to AA3/ P-1 A+ to A3/ P-2 BBB1+ to BB3/ P-3 B to D/ NP Unrated MARC AAA to AA-/ MARC-1 A+ to A-/ MARC-2 BBB+ to BB-/ MARC-3 B+ to D/ MARC-4 Unrated R&I AAA to AA-/ a-1+, a-1 A+ to A-/ a-2 BBB+ to BB-/ a-3 B+ to D/ b, c Unrated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 137,353 - - - 92,739 230,092 2,532,552 73,250 - - 17,632,805 20,238,607 - - - - 78,709 78,709 Public Sector Entities - - - - - - Corporates - - - - - - - - Exposure Class On and Off Balance-Sheet Exposures (cont’d) (iii) Exposures risk-weighted using Corporate long-term rating Public Sector Entities Corporates Insurance Companies, Securities Firms & Fund Managers Exposures risk-weighted using Corporate short-term rating Insurance Companies, Securities Firms & Fund Managers - - - - 2,669,905 73,250 - - 17,804,253 20,547,408 Note 1: The Federal Government and Central Bank of Malaysia are accorded 0% risk-weight as provided under the Capital Adequacy Framework. *Upper Range = Long-Term Rating, Lower Range = Short-Term Rating Note: There is no outstanding securitisation contract in the Bank that requires disclosure of ratings and short-term rating of securitisation by approved ECAIs.
327. 2019 Annual Report 3 .0 325 CREDIT RISK (CONT’D) 3.5 Credit Risk Mitigation (“CRM”) As a practical approach towards mitigating credit risk, the Group accepts a wide range of collaterals. Main types of collateral acceptable to the Group include cash, guarantees, commercial and residential real estate, and physical collateral/financial collateral, e.g. motor vehicles or shares. Guarantees are accepted only when the financial standing of the guarantors have been ascertained. However, for capital computation purposes, the BNM guidelines apply more restrictive rules on collaterals that qualify as credit risk mitigants. As a result, not all of the collaterals accepted by the Group can be used to reduce our capital adequacy requirement. The following tables represent the Bank’s/Group’s credit exposure including off-balance sheet items under the standardised approach, the total exposure (after, where applicable, eligible netting benefits) that is covered by eligible guarantees and credit derivatives; and eligible collateral after haircuts, allowed under the Capital Adequacy Framework. BANK 2019 Exposure Class Exposures before CRM RM’000 Exposures covered by guarantees/ credit derivatives RM’000 Exposures covered by eligible financial collateral RM’000 Exposures covered by other eligible collateral RM’000 5,596,654 - - - Credit Risk On-balance sheet exposures: Sovereigns/Central banks Public sector entities Banks, DFIs and Multilateral Development Banks Insurance companies, securities firms and fund managers Corporates Regulatory retail Residential mortgages Higher risk assets 69,280 - - - 1,715,604 - - - 28,494 - - - 14,760,638 - 1,237,422 - 7,519,108 - 673,765 - 12,335,936 - 9,362 - 9,472 - 5 - Other assets 616,262 - - - Equity exposures 126,741 - - - Defaulted exposures 200,941 - 1,347 - 42,979,130 - 1,921,901 - 3,330,927 - 443,656 - 1,360 - 500 - 3,332,287 - 444,156 - 46,311,417 - 2,366,057 - Total on-balance sheet exposures Off-balance sheet exposures: Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted exposures Total off-balance sheet exposures Total on and off-balance sheet exposures
328. 326 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.5 Credit Risk Mitigation (“CRM”) (cont’d) Exposures before CRM RM’000 Exposures covered by guarantees/ credit derivatives RM’000 Exposures covered by eligible financial collateral RM’000 Exposures covered by other eligible collateral RM’000 8,186,546 - - - Public sector entities 196,261 - - - Banks, DFIs and Multilateral Development Banks 829,576 - - - 35,557 - - - 19,580,592 - 1,630,447 - 9,999,499 - 754,117 - 16,073,138 - 10,379 - 11,086 - 5 - 694,371 - - - GROUP 2019 Exposure Class Credit Risk On-balance sheet exposures: Sovereigns/Central banks Insurance companies, securities firms and fund managers Corporates Regulatory retail Residential mortgages Higher risk assets Other assets Equity exposures 187,525 - - - Defaulted exposures 262,387 - 2,470 - 56,056,537 - 2,397,418 - 4,160,638 - 520,517 - 1,718 - 500 - 4,162,356 - 521,017 - 60,218,893 - 2,918,435 - Total on-balance sheet exposures Off-balance sheet exposures: Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted exposures Total off-balance sheet exposures Total on and off-balance sheet exposures
329. 2019 Annual Report 3 .0 327 CREDIT RISK (CONT’D) 3.5 Credit Risk Mitigation (“CRM”) (cont’d) BANK 2018 Exposure Class Exposures before CRM RM’000 Exposures covered by guarantees/ credit derivatives RM’000 Exposures covered by eligible financial collateral RM’000 Exposures covered by other eligible collateral RM’000 4,800,900 - - - 59,446 - - - Credit Risk On-balance sheet exposures: Sovereigns/Central banks Public sector entities Banks, DFIs and Multilateral Development Banks Insurance companies, securities firms and fund managers Corporates Regulatory retail Residential mortgages Higher risk assets Other assets 2,212,038 - - - 37,884 - 33 - 13,887,523 - 1,113,972 - 7,451,752 - 719,128 - 11,911,755 - 9,711 - 2,801 - 6 - 529,608 - - - Equity exposures 121,644 - - - Defaulted exposures 313,098 - 1,949 - 41,328,449 - 1,844,799 - 3,055,475 - 393,872 - 5,267 - - - 3,060,742 - 393,872 - 44,389,191 - 2,238,671 - Total on-balance sheet exposures Off-balance sheet exposures: Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted exposures Total off-balance sheet exposures Total on and off-balance sheet exposures
330. 328 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.5 Credit Risk Mitigation (“CRM”) (cont’d) GROUP 2018 Exposure Class Exposures before CRM RM’000 Exposures covered by guarantees/ credit derivatives RM’000 Exposures covered by eligible financial collateral RM’000 Exposures covered by other eligible collateral RM’000 7,715,107 - - - 211,083 - - - Credit Risk On-balance sheet exposures: Sovereigns/Central banks Public sector entities Banks, DFIs and Multilateral Development Banks 1,315,416 - - - 63,080 - 33 - Corporates 18,530,955 - 1,438,506 - Regulatory retail 10,019,382 - 790,034 - Residential mortgages 14,354,700 - 10,938 - 3,195 - 6 - 639,421 - - - Insurance companies, securities firms and fund managers Higher risk assets Other assets Equity exposures 178,856 - - - Defaulted exposures 385,914 - 2,733 - 53,417,109 - 2,242,250 - 3,766,975 - 472,280 - 11,080 - 863 - 3,778,055 - 473,143 - 57,195,164 - 2,715,393 - Total on-balance sheet exposures Off-balance sheet exposures: Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted exposures Total off-balance sheet exposures Total on and off-balance sheet exposures 3.6 Off-Balance Sheet Exposures and Counterparty Credit Risk Counterparty Credit Risk (“CCR”) is the risk that the counterparty to a transaction involving financial instruments such as foreign exchange and derivatives, defaults before the final settlement of the transaction’s cash flows. Unlike a loan where the credit risk is unilateral i.e. only the lending bank faces the risk of loss, CCR on derivatives creates bilateral risk of loss. This means either party of the transaction can incur losses depending on the market value of the derivative, which can vary over time with the movement of underlying market factors. For derivatives, the Group is not exposed to credit risk for the full face value of the contracts. The CCR is limited to the potential cost of replacing the cash-flow if the counterparty defaults. As such, the credit equivalent amount will depend, inter alia, on the maturity of the contract and on the volatility of the rates underlying that type of instrument. Derivatives are mainly utilised for hedging purposes with minimal trading exposures. CCR arising from the derivatives is managed via counterparty limits, which is set based on the counterparty’s size and credit rating. These limits are monitored daily by Group Risk Management.
331. 2019 Annual Report 3 .0 329 CREDIT RISK (CONT’D) 3.6 Off-Balance Sheet Exposures and Counterparty Credit Risk (cont’d) CCR is further mitigated via netting agreements, e.g. under the International Swaps and Derivatives Association (“ISDA”) master agreement. The ISDA agreement contractually binds both parties to apply close-out netting across all outstanding transactions covered by this agreement should either party default or other such predetermined credit events occur. CCR is measured via the current exposure method whereby the credit equivalent exposure for derivatives is the sum of the positive mark-to-market exposure plus the potential future exposure which is equivalent to an add-on factor multiplied by the notional amount. The add-on factors are as stipulated by BNM. The off-balance sheet exposures and their related counterparty credit risk of the Bank and the Group are as follows: BANK 2019 Principal Amount RM’000 Positive Fair Value of Derivative Contracts RM’000 Credit Equivalent Amount RM’000 RiskWeighted Assets RM’000 Credit-related exposures Direct credit substitutes 490,085 - 490,010 414,325 Transaction-related contingent items 609,843 - 300,635 189,732 Short-term self-liquidating trade-related contingencies 133,405 - 26,681 22,845 Forward asset purchase 211,985 - 211,985 - - - - - 904,181 - 450,612 379,036 Obligations under an on-going underwriting agreement Irrevocable commitments to extend credit: • maturity exceeding one year 6,461,733 - 1,292,346 935,922 1,600,820 - 320,164 247,048 10,412,052 - 3,092,433 2,188,908 4,561,102 19,668 68,441 29,095 159,580 239 9,852 8,022 10,209 - 868 868 • one year or less 2,034,786 1,649 5,401 1,543 • over one year to three years 1,779,255 7,108 32,711 8,548 • over three years 2,503,968 25,341 114,912 57,257 78,958 97 4,835 2,397 • maturity not exceeding one year Unutilised credit card lines Derivative financial instruments Foreign exchange related contracts: • one year or less • over one year to three years • over three years Interest rate related contracts: Equity related contracts: • one year or less • over one year to three years 30,810 847 2,835 1,418 11,158,669 54,949 239,854 109,148 21,570,721 54,949 3,332,287 2,298,056
332. 330 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.6 Off-Balance Sheet Exposures and Counterparty Credit Risk (cont’d) Principal Amount RM’000 Positive Fair Value of Derivative Contracts RM’000 Credit Equivalent Amount RM’000 RiskWeighted Assets RM’000 Direct credit substitutes 650,663 - 650,588 561,367 Transaction-related contingent items 680,097 - 335,763 212,536 GROUP 2019 Credit-related exposures Short-term self-liquidating trade-related contingencies 179,994 - 35,999 31,609 Forward asset purchase 236,985 - 236,985 - 46,154 - 23,077 23,077 • maturity exceeding one year 1,319,483 - 658,158 509,949 • maturity not exceeding one year 8,308,840 - 1,661,768 1,200,570 1,600,820 - 320,164 247,047 13,023,036 - 3,922,502 2,786,156 4,561,102 19,668 68,441 29,095 159,580 239 9,852 8,022 10,209 - 868 868 • one year or less 2,034,786 1,649 5,401 1,543 • over one year to three years 1,779,255 7,108 32,711 8,548 • over three years 2,503,968 25,341 114,912 57,257 Obligations under an on-going underwriting agreement Irrevocable commitments to extend credit: Unutilised credit card lines Derivative financial instruments Foreign exchange related contracts: • one year or less • over one year to three years • over three years Interest rate related contracts: Equity related contracts: • one year or less 78,958 97 4,835 2,397 • over one year to three years 30,810 847 2,835 1,418 11,158,669 54,949 239,854 109,148 24,181,704 54,949 4,162,356 2,895,304
333. 2019 Annual Report 3 .0 331 CREDIT RISK (CONT’D) 3.6 Off-Balance Sheet Exposures and Counterparty Credit Risk (cont’d) Principal Amount RM’000 Positive Fair Value of Derivative Contracts RM’000 Credit Equivalent Amount RM’000 RiskWeighted Assets RM’000 Direct credit substitutes 564,446 - 564,446 494,530 Transaction-related contingent items 651,896 - 325,948 244,337 Short-term self-liquidating trade-related contingencies 215,445 - 43,089 39,457 744,972 - 372,486 336,606 5,748,870 - 1,149,774 834,826 1,750,064 - 350,013 270,209 9,675,693 - 2,805,756 2,219,965 5,057,347 57,169 94,639 41,707 • over one year to three years 73,015 - 3,964 3,964 • over three years 17,385 - 1,536 1,536 • one year or less 1,206,130 1,050 5,343 1,801 • over one year to three years 1,990,360 7,158 38,427 11,888 • over three years 2,146,310 18,864 102,929 57,951 • one year or less 38,825 - 2,330 1,148 • over one year to three years 67,660 404 5,817 2,909 10,597,032 84,645 254,986 122,904 20,272,725 84,645 3,060,742 2,342,869 BANK 2018 Credit-related exposures Irrevocable commitments to extend credit: • maturity exceeding one year • maturity not exceeding one year Unutilised credit card lines Derivative financial instruments Foreign exchange related contracts: • one year or less Interest rate related contracts: Equity related contracts:
334. 332 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 3.0 CREDIT RISK (CONT’D) 3.6 Off-Balance Sheet Exposures and Counterparty Credit Risk (cont’d) Principal Amount RM’000 Positive Fair Value of Derivative Contracts RM’000 Credit Equivalent Amount RM’000 RiskWeighted Assets RM’000 Direct credit substitutes 719,148 - 719,148 636,319 Transaction-related contingent items 739,535 - 369,768 274,015 Short-term self-liquidating trade-related contingencies 235,056 - 47,011 42,975 • maturity exceeding one year 1,056,899 - 528,450 479,335 • maturity not exceeding one year 7,543,400 - 1,508,680 1,060,940 GROUP 2018 Credit-related exposures Irrevocable commitments to extend credit: Unutilised credit card lines 1,750,064 - 350,013 270,209 12,044,102 - 3,523,069 2,763,793 5,057,347 57,169 94,639 41,707 • over one year to three years 73,015 - 3,964 3,964 • over three years 17,385 - 1,536 1,536 • one year or less 1,206,130 1,050 5,343 1,801 • over one year to three years 1,990,360 7,158 38,427 11,888 • over three years 2,146,310 18,864 102,929 57,951 • one year or less 38,825 - 2,330 1,148 • over one year to three years 67,660 404 5,817 2,909 10,597,032 84,645 254,986 122,904 22,641,134 84,645 3,778,055 2,886,697 Derivative financial instruments Foreign exchange related contracts: • one year or less Interest rate related contracts: Equity related contracts:
335. 2019 Annual Report 333 4 .0 Market Risk Market Risk is defined as the risk of losses in on-balance sheet and off-balance sheet positions arising from movements in market prices. Market Risk Management The Board, via the Group Risk Management Committee (GRMC) provides oversight on market risk management activities. Its responsibilities include reviewing and approving risk management policies, risk exposures and limits whilst ensuring the necessary infrastructure and resources are in place. At senior management level, the Group Assets and Liabilities Management Committee (“GALCO”) manages the Group’s market risk by reviewing and recommending market risk frameworks and policies; ensuring that market risk limits and parameters are within the approved thresholds; and aligning market risk management with business strategy and planning. Organisationally, market risks are managed collectively via the Three Lines of Defence concept. Group Financial Markets, as the risk taking unit assumes ownership of the risk and manages the risk within the approved policies, risk limits and parameters as set by the GRMC or GALCO. The risk control function is undertaken by Group Risk Management which provides independent monitoring, valuation and reporting of the market exposures. This is supplemented by periodic review by Group Internal Audit. For the Group, market risk is managed on an integrated approach which involves the following processes: (i) Identification of market risk in new products and changes in risk profiles of existing exposures; (ii) Assessment of the type and magnitude of market risks which takes into account the activity and market role undertaken; (iii) Adoption of various market risk measurement tools and techniques to quantify market risk exposures; and (iv) Scheduled and exception reporting on market risk exposures. Market risk exists in the Group’s activities in fixed income securities, foreign exchange and financial derivatives, which are transacted primarily by Group Financial Markets (Treasury) department. Trading positions are held intentionally for short-term resale and with the intent of benefiting from actual or expected short-term price movements while banking book positions are held until maturity or as available-for-sale. Hence, these positions are susceptible to market movements. These exposures are governed by approved policies, risk limits and parameters which are set vis-a-vis the Group’s risk appetite and strategy. Besides that, treasury activities are monitored and reported independently by Group Market Risk on a daily basis. Any limit breaches or exceptions are reported to GALCO and GRMC. Hedging Policies and Strategies The Group had established a hedging policy which outlines the broad principles and policies governing hedging activities by the Group. Generally, the Group enters into hedges to manage or reduce risk exposures. All hedging strategies are approved by the GALCO and monitored independently by Group Market Risk Management. Further, all hedging strategies are designated upfront and recorded separately under the hedging portfolios. Hedging positions and effectiveness, if any, are monitored and reported monthly to senior management. Market Risk Capital Charge For the Group, the market risk charge is computed on the standardised approach and the capital charges are mainly on the fixed income securities, foreign exchange and financial derivatives portfolios, if any.
336. 334 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 4.0 MARKET RISK (CONT’D) Regulatory Capital Requirements The risk-weighted assets and capital requirements for the various categories of risk under market risk are as follows: BANK GROUP RiskWeighted Assets RM’000 Capital Requirements RM’000 RiskWeighted Assets RM’000 Capital Requirements RM’000 • General interest rate risk 149,162 11,933 149,163 11,933 • Specific interest rate risk 379 30 379 30 149,542 11,963 149,542 11,963 990 79 990 79 124,410 9,953 124,410 9,953 274,942 21,995 274,942 21,995 • General interest rate risk 11,971 958 11,971 958 • Specific interest rate risk 3,318 265 3,786 303 15,289 1,223 15,757 1,261 559 45 559 45 94,541 7,563 94,541 7,563 110,389 8,831 110,857 8,869 2019 Interest rate risk Option risk Foreign exchange risk 2018 Interest rate risk Option risk Foreign exchange risk
337. 2019 Annual Report 335 5 .0 OPERATIONAL RISK Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. It includes legal risk but excludes strategic and reputation risks. Operational Risk Management Management, escalation and reporting of operational risks are instituted through the Group Operational Risk Management Committee (GORMC), Group Risk Management Committee (GRMC) as well as the Board. The Board, via the GRMC provides oversight on operational risk management activities. At senior management level, GORMC manages the day-to-day operational risk exposures. The roles and responsibilities of GORMC include: (i) (ii) (iii) (iv) Providing strategic guidance on operational issues and monitor the implementation of Operational Risk Management (ORM) framework; Reviewing and monitoring operational risk issues, reports and action plans; Evaluating and agree on initiatives to strengthen operational processes or infrastructure; and Promoting risk awareness and operational risk management culture. The Group practices operational risk management as outlined in the ORM Framework, in accordance with Basel and regulatory guidelines. The Group applies operational risk tools and methodologies in the identification, assessment, measurement, control and monitoring of operational risks. Other efforts by the Group include the ORM awareness training which is given to all staff and regular business continuity and disaster recovery plans. The Group adopts the Basic Indicator Approach for computation of operational Risk-Weighted Asset (RWA).
338. 336 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 6.0 EQUITY EXPOSURES IN BANKING BOOK The Bank and the Group hold equity positions in the banking book as a result of debt to equity conversion, for social-economic purposes, or to maintain strategic relationships. All equities are held at fair value. For quoted equities, fair value is estimated based on quoted or observable market price at the end of the reporting period. For unquoted equities, the fair value is estimated using approved valuation techniques. Any gains and losses arising from the returns and changes in fair value of these equities holdings are reflected in the Statement of Income. The following table shows the equity exposures in banking book: BANK 2019 GROUP Gross credit exposures RM’000 Risk-weighted assets RM’000 Gross credit exposures RM’000 Risk-weighted assets RM’000 8 8 8 8 126,730 126,730 187,514 187,514 3 4 3 4 126,741 126,742 187,525 187,526 10 10 10 10 121,631 121,631 178,843 178,843 3 5 3 5 121,644 121,646 178,856 178,858 Publicly traded Holding of equity investments Privately held For socio-economic purposes Not for socio-economic purposes 2018 Publicly traded Holding of equity investments Privately held For socio-economic purposes Not for socio-economic purposes
339. 2019 Annual Report 6 .0 EQUITY EXPOSURES IN BANKING BOOK (CONT’D) Gains and losses on equity exposures in the banking book The table below present the gains and losses on equity exposures in banking book: BANK 337 GROUP 2019 RM’000 2018 RM’000 2019 RM’000 2018 RM’000 - 18,343 - 18,343 - 18,343 - 18,343 (1) (5) (1) (5) 5,294 (8,086) 8,866 (4,776) 5,293 (8,091) 8,865 (4,781) Realised gains/(losses) recognised in the statement of comprehensive income • Privately held equity investments Unrealised (losses)/gains recognised in revaluation reserve • Publicly traded equity investments • Privately held equity investments 7.0 INTEREST RATE RISK/RATE OF RETURN RISK IN THE BANKING BOOK Interest rate risk/rate of return risk in the banking book (“IRR/RORBB”) is the risk that occurs when movements in interest rates affect a banking organisation’s earnings or economic value. Changes in interest rate/profit rate affects the Group’s earnings by altering interest rate-sensitive income and expenses, affecting its net interest income (NII). It also affects the underlying value of banking assets, liabilities and off-balance sheet instruments as the present value of future cash flows change when interest rate/profit rate change. Risk Governance IRR/RORBB is managed collectively by GALCO, Group Financial Markets, Group Finance and Group Risk Management. Each of the above parties has clearly defined roles and responsibilities to provide oversight and manage IRR/RORBB within the defined framework and structure as approved by the GRMC/Board. GALCO assumes the overall responsibility in managing IRR/RORBB by setting the directions, strategy and risk limits/parameters for the Bank/Group. Group Financial Markets is tasked to execute the approved strategy by managing the assets/liabilities as well as the funding and liquidity needs of the Bank/Group. Group Finance and Group Risk Management provide support in respect of risk monitoring and reporting of the banking book exposures; and ensuring regulatory as well as accounting requirements are met. IRR/RORBB Management The guiding principles in managing IRR/RORBB include: (i) Adopting a prudent approach to manage IRR/RORBB in ways that commensurate with the Group’s size and business activities. This is achieved via establishing robust IRR/RORBB policies, measures and strategies which are complemented by regular monitoring and reporting. (ii) Checking to ensure that IRR/RORBB are accurately measured and any mismatches are identified, reviewed and reported monthly to GALCO. (iii) Setting proper gapping limits and the limits are monitored closely. (iv) Practicing comprehensive IRR/RORBB reporting and review process, with aggregated information and supporting details to facilitate assessment of the Group’s sensitivity to changes in market conditions.
340. 338 Alliance Bank Malaysia Berhad (88103-W) BASEL II PILLAR 3 REPORT DISCLOSURE (Cont’d) for the financial year ended 31 March 2019 7.0 INTEREST RATE RISK/RATE OF RETURN RISK IN THE BANKING BOOK (CONT’D) IRR/RORBB Management (cont’d) The Bank uses a range of tools, including the following primary measures to quantify and monitor IRR/RORBB: (i) Repricing gap analysis to measure interest rate/profit rate from the earnings perspective i.e. impact of interest rate/profit rate changes to earnings in the short-term. (ii) Net interest income/profit income simulation to assess the impact of interest rate/profit rate changes on short term earnings volatility. (iii) Economic value (“EVE”) simulations which measures the asset-liability impact of adverse interest rate/profit rate movements on the economic value of the Bank’s capital. Group Risk Management performs independent monitoring of the interest rate/profit rate benchmarks to ensure compliance. Any exceptions are reported and appropriate remedial actions are taken, where necessary. Schedule reporting via risk dashboards are provided to senior management, GRMC and Board. The risk dashboards provide a gauge on the IRR/RORBB of the Group. The Group is guided by BNM’s guidelines and Basel standards on management of IRR/RORBB. The following tables present the Bank’s projected sensitivity to a 100 basis point parallel shock to interest rates across all maturities applied on the Bank’s interest sensitivity gap as at reporting date. 2019 BANK + 100 bps RM’000 GROUP + 100 bps RM’000 98,176 119,176 (38,605) (125,355) 102,916 125,768 29,042 (24,233) Impact on net interest income (“NII”) Ringgit Malaysia Impact on Economic Value (“EV”) Ringgit Malaysia 2018 Impact on net interest income (“NII”) Ringgit Malaysia Impact on Economic Value (“EV”) Ringgit Malaysia Note: The foreign currency impact on NII/EV are considered insignificant as the exposure is less than 5% of the respective total Banking Book assets and liabilities.
341. 2019 Annual Report 339 8 .0 SHARIAH GOVERNANCE DISCLOSURES Shariah Non-Compliance Risk arises from the risk of failure to comply with Shariah rules and principles as determined by Shariah Advisory Council of Bank Negara Malaysia and Alliance Islamic Bank’s (AIS) Shariah Committee. To manage the risks, AIS has adopted the following guiding principles: (i) A sound Shariah Compliance Framework which governs the operations of AIS and outlines the roles of key functionalities within AIS, including but not limited to the Shariah risk management process. This is in line with the Shariah Governance Framework issued by BNM. (ii) The Board of Directors, assisted by the Shariah Committee and senior management, provide oversight on Shariah compliance aspects of AIS’ overall operations. This amongst others include: - - - - Oversight and implementation of the Shariah Compliance Framework; Regular review of Shariah non-compliant income and issues; Addressing Shariah non-compliance finding; and Ensuring compliance with regulatory and internal requirements including disclosures. (iii) Appointment of a qualified Shariah Committee member who also serves as AIS’ Board member; serving as a ‘bridge’ between the Board and the Shariah Committee. (iv) Ongoing Shariah reviews and training to raise risk awareness and ensure compliance to Shariah rules and principles. This includes: - - - Regular assessment on Shariah compliance in the activities and operations of AIS. The findings of the review are reported to the Shariah Committee for deliberation and decision. Perform research and studies on Shariah issues, including providing day-to-day Shariah advice and consultancy to relevant parties. Conduct Shariah-related training and ongoing engagement with relevant parties to raise awareness on Shariah non-compliance risk. (v) Escalation and reporting processes of Shariah non-compliant income and issues governed through designated escalation channels, which include the Board and the Shariah Committee. (vi) Periodic engagement between the Board and the Shariah Committee to discuss on Shariah research, Shariah compliance and scholar’s view on Islamic banking activities. Shariah Non-Compliant Income and Events During the financial year end, there was one (1) Shariah non-compliance event detected from the ongoing reviews of the Bank’s operational processes. Necessary efforts have been taken to rectify the Shariah non-compliance event, which was tracked and escalated to the Shariah Committee and the Board. There was no Shariah non-compliant income to be disposed off in accordance with Shariah Committee’s decision.
342. 340 Alliance Bank Malaysia Berhad (88103-W) LIST OF PROPERTIES as at 31 March 2019 Year of Purchase1 Tenure Remaining Lease Period (Expiry Year) Age of Property (Years)2 Built-Up Area (Sq Ft)3 Net Book Value (RM'000)4 No Location Current Use 1 1, Jalan Tembaga SD5/2A Bandar Sri Damansara 52100 Kepong, Kuala Lumpur Alliance Bank’s branch/office premises 1991 Freehold - 26 9,179 665 2 150 - 152, Jalan Cerdas Taman Connaught 56000 Kuala Lumpur Alliance Bank’s branch/office premises 1997 Leasehold 99 years 59 years 2078 40 11,704 2,151 3 43 & 45, Jalan Bunga Tanjung 6A Taman Putra 68000 Ampang, Selangor Alliance Bank’s branch/office premises 1998 Leasehold 99 years 62 years 2081 37 8,120 1,076 4 1960 E & F, Jalan Stadium 05100 Alor Setar, Kedah Alliance Bank’s branch/office premises 1979 Leasehold 60 years 20 years 2039 40 4,537 326 5 Alliance Bank’s Ground & Mezzanine Floor branch/office Wisma Malvest premises 20 & 20A Jalan Tun Dr Awang Sungai Nibong Kecil 11900 Bayan Lepas, Pulau Pinang 1994 Freehold - 25 6,103 1,490 6 70 & 71, Block 10 Jalan Laksamana Cheng Ho 93200 Kuching, Sarawak Alliance Bank’s branch/office premises 2007 Leasehold 60 years 50 years 2069 13 9,405 1,939 7 B-400, Jalan Beserah 25300 Kuantan, Pahang Alliance Bank’s branch/office premises 1996 Freehold - 28 6,688 353 8 LG134/LG135/G128/F89 Holiday Plaza Jalan Dato Sulaiman 80250 Johor Bharu, Johor Alliance Bank’s branch/office premises 1984 Freehold - 35 5,414 760 9 Lot 1 & 3 Jalan Permas Jaya 10/2 Bandar Baru Permas Jaya 81750 Johor Bahru, Johor Alliance Bank’s branch/office premises 1994 Freehold - 26 24,334 1,365 10 3 & 5, Jalan Bentara 1 Tun Aminah 81300 Johor Bahru, Johor Alliance Bank’s branch/office premises 1996 Freehold - 36 5,412 818 Alliance Bank’s 11 Unit 01-G & 01-1 branch/office Seremban City premises Jalan Tunku Munawir 70000 Seremban, Negeri Sembilan 1997 Freehold - 20 7,277 1,407 12 101 & 103, Jalan Melaka Raya 24 Taman Melaka Raya 75000 Melaka Alliance Bank’s branch/office premises 1995 Leasehold 99 years 75 years 2094 22 8,640 528 13 Lot 7 & 9, Block D Nountun Industrial Estate 89350 Inanam Kota Kinabalu, Sabah Alliance Bank’s branch/office premises 1995 Leasehold 999 years 904 years 2923 19 7,495 860
343. 2019 Annual Report Year of Purchase1 Tenure Remaining Lease Period (Expiry Year) 341 Age of Property (Years)2 Built-Up Area (Sq Ft)3 Net Book Value (RM'000)4 No Location Current Use 14 Lot 4-6, Block K Sinsuran Complex 88000 Kota Kinabalu, Sabah Alliance Bank’s branch/office premises 1980 Leasehold 99 years 52 years 2071 41 13,979 390 15 Lot 1086, Jalan Utara W.D.T. 127 91009 Tawau, Sabah Alliance Bank’s branch/office premises 1981 Leasehold 99 years 42 years 2061 56 14,948 457 16 Lot 8, Block A Beaufort Jaya Commercial Centre 89808 Beaufort, Sabah Alliance Bank’s branch/office premises 1984 Leasehold 999 years 882 years 2901 33 4,500 208 17 Lot 1, Block C Mile 4 1/2 Jalan Utara Bandar Kim Fung 90307 Sandakan, Sabah Alliance Bank’s branch/office premises 1992 Leasehold 99 years 61 years 2080 34 4,800 364 18 1 & 2, Block A, Jalan Jungkat Pangie Light Industrial Complex 89909 Tenom, Sabah Alliance Bank’s branch/office premises 1993 Leasehold 999 years 905 years 2924 25 7,085 273 19 17, 19 & 21, Jalan USJ 9/5 47620 Subang Jaya, Selangor Alliance Bank’s branch/office premises 1996 Freehold - 23 12,892 2,113 20 2 & 3 Block A, Phase III Luyang Commercial Centre Damai Plaza, Jalan Damai 88300 Kota Kinabalu, Sabah Alliance Bank e-Lobby 1992 Leasehold 99 years 62 years 2081 23 9,667 781 21 59-61, Jalan Tiga 90702 Sandakan, Sabah Alliance Bank’s branch/office premises 1963 Leasehold 999 years 870 years 2889 61 9,900 661 22 MPWPL U 0072 & 0073 Jalan Merdeka 87008 Labuan Alliance Bank’s branch/office premises 1979 Leasehold 99 years 38, 44 years 2057, 2063 53 53 5,800 597 23 Lot 84, Jalan Gaya 88000 Kota Kinabalu, Sabah Alliance Bank’s branch/office premises 1985 Leasehold 999 years 863 years 2882 61 10,040 1,665 24 45, Jalan Sungai Besi Indah 1/21 43300 Balakong, Selangor Alliance Bank’s branch/office premises 2001 Leasehold 99 years 72 years 2091 18 9,706 1,232 25 3, Jalan SS 15/2A, Wisma Projass (3 Alliance) 47500 Subang Jaya, Selangor Alliance Bank’s branch/office premises 2005 - 34 35,926 6,110 Freehold Notes: 1 The Year of Purchase is based on Sale & Purchase Agreement. In the event that Sale & Purchase Agreement is not available, it is based on the date of registration of ownership specified in the title document 2 The Age of Property is based on Certificate of Fitness for Occupation. In the event that the Certificate of Fitness for Occupation is not available, it is based on the issuance date of the title document 3 The Built-Up Area is based on the valuation report conducted in December 2017 4 Net Book Value as at 31 March 2019 (information as provided by Group Finance)
344. 342 Alliance Bank Malaysia Berhad (88103-W) DIRECTORY as at 31 March 2019 PERAK Ipoh 40 & 42, Persiaran Greenhill 30450 Ipoh, Perak Tel : 05-241 2342/3 05-241 2346/8 Fax : 05-241 2355 ALLIANCE BANK MALAYSIA BERHAD ALLIANCE ISLAMIC BANK BERHAD HEAD OFFICE 3rd Floor, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : 03-2604 3333 Fax : 03-2694 6200 HEAD OFFICE 22nd Floor, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : 03-2604 3333 Fax : 03-2698 4691 www.alliancebank.com.my www.alliancebank.com.my/islamic/home BRANCHES KEDAH Alor Setar 1960 E & F, Jalan Stadium 05100 Alor Setar, Kedah Tel : 04-731 0744 Fax : 04-733 8055 Lunas, Kulim 888 & 889, Jalan Aman Taman Sejahtera 09600 Lunas, Kulim, Kedah Tel : 04-484 3275/76/78 Fax : 04-484 3277 Sejati Indah, Sungai Petani Ground Floor, Wisma Uni-Green 18, Jalan Permatang Gedong Taman Sejati Indah 08000 Sungai Petani, Kedah Tel : 04-431 1673/81 04-431 2139 Fax : 04-431 1687 PULAU PINANG Beach Street Ground Floor, Bangunan Barkath 21, Beach Street 10300 Georgetown, Pulau Pinang Tel : 04-262 8100 Fax : 04-261 3300 Bukit Mertajam Ground & 1st Floor Wisma Ng Ah Yan 42, Lebuh Nangka 2 Taman Mutiara 14000 Bukit Mertajam, Pulau Pinang Tel : 04-530 3130 Fax : 04-530 7433 Butterworth 4105-4107, Jalan Bagan Luar 12000 Butterworth, Pulau Pinang Tel : 04-331 4863/64 Fax : 04-323 2824 Sungai Nibong Kecil Ground & Mezzanine Floor Wisma Malvest, 20 & 20A Jalan Tun Dr Awang Sungai Nibong Kecil 11900 Bayan Lepas, Pulau Pinang Tel : 04-642 5918 Fax : 04-642 5924 Sitiawan 23 & 24, Jalan Raja Omar Taman Selamat 32000 Sitiawan, Perak Tel : 05-691 1212 Fax : 05-691 7975 SELANGOR Aman Suria Damansara J-G-23 & J-G-25, Block J Jalan PJU 1/43, PJU1 Aman Suria Damansara 47301 Petaling Jaya, Selangor Tel : 03-7880 8842 Fax : 03-7880 4299 Ampang Point Ground & Mezzanine Floor 65, Jalan Mamanda 9 Ampang Point Taman Dato Ahmad Razali 68000 Ampang, Selangor Tel : 03-4252 3822 Fax : 03-4252 3877 Balakong 45, Jalan Sungai Besi Indah 1/21 Taman Sungai Besi Indah 43300 Seri Kembangan, Selangor Tel : 03-8948 6972 Fax : 03-8948 9530 Bandar Bukit Tinggi 56, Lorong Batu Nilam 4B Bandar Bukit Tinggi 41200 Klang, Selangor Tel : 03-3324 1122 Fax : 03-3324 3311 Bandar Puteri Puchong 11 & 13, Jalan Puteri 2/1 Bandar Puteri Puchong 47100 Puchong, Selangor Tel : 03-8063 2833 Fax : 03-8063 2711
345. 2019 Annual Report SELANGOR (cont’d) CP Tower, Petaling Jaya Unit 1-2, CP Tower 11, Jalan 16/11 46350 Petaling Jaya, Selangor Tel : 03-7957 3366 Fax : 03-7957 3360 Damansara Uptown Unit 102 & 103 Level 1, Uptown 2 2, Jalan SS21/37 Damansara Uptown 47400 Petaling Jaya, Selangor Tel : 03-7660 9798 Fax : 03-7660 9799 Kajang Lot 4 & 5, Jalan Jeloh 3 Off Jalan Bukit 43000 Kajang, Selangor Tel : 03-8733 5966 Fax : 03-8736 4004 Klang Ground Floor 1, Lorong Kasawari 4B Taman Eng Ann 41150 Klang, Selangor Tel : 03-3345 3700 Fax : 03-3345 3733 Kota Damansara 7-G & 9-G, Jalan PJU 5/20 Pusat Perdagangan Kota Damansara PJU 5 Kota Damansara 47810 Petaling Jaya, Selangor Tel : 03-6142 8632 Fax : 03-6142 8732 Pandan Indah Ground & Mezzanine Floor 11 & 13, Jalan Pandan Indah 4/34 Pandan Indah, 55100 Selangor Tel : 03-4295 7300 Fax : 03-4296 4107 Puchong Jaya 11, Jalan Kenari 5 Bandar Puchong Jaya 47100 Puchong Jaya, Selangor Tel : 03-8075 9185 Fax : 03-8075 9200 Rawang 71, Jalan Bandar Rawang 2 Bandar Baru Rawang 48000 Rawang, Selangor Tel : 03-6091 7622 Fax : 03-6091 7922 Seri Kembangan 31-1 & 31-2 Jalan Serdang Perdana 2/1 Taman Serdang Perdana 43300 Seri Kembangan, Selangor Tel : 03-8941 6610 Fax : 03-8941 6620 Shah Alam Ground & 1st Floor 2, Jalan Murni 25/61 Taman Sri Muda, Seksyen 25 40400 Shah Alam, Selangor Tel : 03-5121 9336 Fax : 03-5121 9373 Sri Damansara 1, Jalan Tembaga SD 5/2A Bandar Sri Damansara 52100 Selangor Tel : 03-6275 0144/0529/0684 Fax : 03-6272 1732 SS2, Petaling Jaya 53 & 55, Jalan SS2/55 47300 Petaling Jaya, Selangor Tel : 03-7875 8255 Fax : 03-7874 0973 Subang Jaya 3 Alliance 3, Jalan SS15/2A 47500 Subang Jaya, Selangor Tel : 03-5634 2870 Fax : 03-5634 1128 Taman Putra 43-45, Jalan Bunga Tanjung 6A Taman Putra 68000 Ampang, Selangor Tel : 03-4291 7740 Fax : 03-4296 1250 USJ, Subang Jaya Ground Floor 17, 19 & 21, Jalan USJ 9/5N 47620 UEP Subang Jaya, Selangor Tel : 03-8024 1300 Fax : 03-8023 4379 KUALA LUMPUR Bangsar No. 1, Jalan Telawi 5 Bangsar Baru 59100 Kuala Lumpur Tel : 03-2284 8633 Fax : 03-2284 9616 Capital Square Ground Floor Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : 03-2604 3333 Fax : 03-2694 6867 GTower, Jalan Tun Razak Lot No. G-06, Ground Floor GTower, No. 199, Jalan Tun Razak 50400 Kuala Lumpur Tel : 03-2164 8240 Fax : 03-2168 8390 Jalan Ipoh 41 & 43, Jalan Sultan Azlan Shah 51200 Kuala Lumpur Tel : 03-4041 2288 Fax : 03-4041 3868 Jalan Sultan Ismail Mezzanine Floor Menara Prudential 10, Jalan Sultan Ismail 50250 Kuala Lumpur Tel : 03-2070 4477 Fax : 03-2070 4900 Kepong Ground Floor, 52, Jalan Prima Vista Magna, Metro Prima Kepong 52100 Kuala Lumpur Tel : 03-6257 9997 Fax : 03-6257 9996 Kuchai Entrepreneurs Park 1, Jalan 1/116B Kuchai Entrepreneurs Park 58200 Kuala Lumpur Tel : 03-7984 8800 Fax : 03-7981 6486 Mid Valley 15-G & 15-1 The Boulevard Offices Mid Valley City Lingkaran Syed Putra 59200 Kuala Lumpur Tel : 03-2283 1849 Fax : 03-2282 4430 343
346. 344 Alliance Bank Malaysia Berhad (88103-W) DIRECTORY (Cont’d) as at 31 March 2019 KUALA LUMPUR (cont’d) PUTRAJAYA Mont’Kiara Unit A-0G-02, Block A Plaza Mont’Kiara 2, Jalan Kiara, Mont’Kiara 50480 Kuala Lumpur Tel : 03-6203 1543 Fax : 03-6201 2607 Putrajaya Ground Floor, Menara Ikhlas (Boulevard Plaza) No. 17, Persiaran Perdana Presint 3 62100 Putrajaya Wilayah Persekutuan Putrajaya Tel : 03-8889 1788 Fax : 03-8889 1799 Segambut Ground Floor 22, Wisma Sin Hoh Huat Persiaran Segambut Tengah 51200 Kuala Lumpur Tel : 03-6257 2105 Fax : 03-6257 6186 Selayang 71 & 73, Jalan 2/3A Pusat Bandar Utara Selayang KM 12, Jalan Ipoh 68100 Batu Caves, Kuala Lumpur Tel : 03-6135 1800 Fax : 03-6135 1787 Setapak No. D-1-2, D-2-2 & D-3-2 StarParc Point Taman Danau Ibu Kota Jalan Genting Klang, Setapak 53300 Kuala Lumpur Tel : 03-4143 9643 Fax : 03-4143 9568 Taman Connaught 150-152, Jalan Cerdas Taman Connaught 56000 Kuala Lumpur Tel : 03-9102 3973 Fax : 03-9102 3740 Taman Maluri 254 & 254A, Jalan Mahkota Taman Maluri, Cheras 55100 Kuala Lumpur Tel : 03-9285 4133 Fax : 03-9283 1397 Taman Tun Dr Ismail No. 6-3-0 & 6-3-1 Sinaran TTDI Jalan Tun Mohd Fuad 3 Taman Tun Dr Ismail 60000 Kuala Lumpur Tel : 03-7729 8239 Fax : 03-7729 8237 JOHOR Batu Pahat Ground, 1st & 2nd Floor 2 & 4, Jalan Kundang 3 Taman Bukit Pasir 83000 Batu Pahat, Johor Tel : 07-431 4088 Fax : 07-434 0033 Bukit Bakri, Muar 88, Jalan Tepi Pasar Bukit Bakri 84200 Muar, Johor Tel : 06-986 7633 Fax : 06-986 6721 Holiday Plaza, Johor Bahru Unit G128, Holiday Plaza Jalan Dato Sulaiman Century Garden 80250 Johor Bahru, Johor Tel : 07-331 1200 Fax : 07-331 1207 Johor Jaya 50 & 52, Jalan Dedap 13 Taman Johor Jaya 81100 Johor Bahru, Johor Tel : 07-353 5388 Fax : 07-355 7377 Kelapa Sawit, Kulai 16 & 17, Jalan Susur Satu 26th Mile, Jalan Air Hitam Kelapa Sawit 81030 Kulai, Johor Tel : 07-652 3704/5/7 Fax : 07-652 3706 Kluang No. 73, Ground Floor Jalan Rambutan 86000 Kluang, Johor Tel : 07-772 9911 Fax : 07-772 6611 Permas Jaya 1 & 3, Jalan Permas Jaya 10/2 Bandar Baru Permas Jaya 81750 Johor Bahru, Johor Tel : 07-386 2480 Fax : 07-386 2478 Segamat No. 109A & 109B Jalan Genuang 85000 Segamat, Johor Tel : 07-931 1170 Fax : 07-931 2727 Taman Molek 1 & 1-01, Jalan Molek 1/29 Taman Molek 81100 Johor Bahru, Johor Tel : 07-355 6577 Fax : 07-355 4677 Taman Nusa Bestari 1-G & 1-01, Jalan Bestari 6/2 Taman Nusa Bestari 81300 Skudai, Johor Tel : 07-237 8301 Fax : 07-237 8621 Taman Pelangi Ground Floor, Shoplot Nos. 1 & 3 Jalan Perang, Taman Pelangi 80400 Johor Bahru, Johor Tel : 07-332 4050/1/4 Fax : 07-333 7411 Tun Aminah 3 & 5, Jalan Bentara 1 Taman Ungku Tun Aminah 81300 Skudai, Johor Tel : 07-554 0031 Fax : 07-554 2494 MELAKA Melaka 101 & 103 Jalan Melaka Raya 24 Taman Melaka Raya 75000 Melaka Tel : 06-284 9249 Fax : 06-284 9248
347. 2019 Annual Report NEGERI SEMBILAN Seremban 1G & 1-1, Seremban City Centre Jalan Tuanku Munawir 70000 Seremban, Negeri Sembilan Tel : 06-762 5610/21 Fax : 06-762 5612 PAHANG Kuantan B400, Jalan Beserah 25300 Kuantan, Pahang Tel : 09-567 2508 Fax : 09-567 9044 TERENGGANU Kuala Terengganu Ground & Mezzanine Floor Wisma Kam Choon 101, Jalan Kampong Tiong 20100 Kuala Terengganu, Terengganu Tel : 09-623 5244 Fax : 09-623 6379 SABAH Bandar Kim Fung, Sandakan Lot 1, Block C, Bandar Kim Fung Mile 41/2, Jalan Utara P.O. Box 163 Post Office, Mile 1 1/2, Jalan Utara 90307 Sandakan, Sabah Tel : 089-275 020/21 Fax : 089-275 027 Beaufort Lot B, Block A, Beaufort Jaya Commercial Centre, P.O. Box 220 89808 Beaufort, Sabah Tel : 087-211 721 Fax : 087-212 392 Donggongon Wisma PPS Donggongon New Township W.D.T. No. 56 80509 Penampang, Sabah Tel : 088-713 411/2 088-718 980 Fax : 088-718 634 Federal House, Kingfisher’s Park, KK (Service Centre) Aras 1, Blok A Kompleks Pentadbiran Kerajaan Persekutuan Sabah, Jalan UMS 88400 Kota Kinabalu, Sabah Tel : 088-484 718 Fax : 088-484 712 Inanam, Kota Kinabalu Ground, 1st & 2nd Floor Lot 7 & 9, Block D Nountun Industrial Estate 89350 Inanam, Kota Kinabalu, Sabah Tel : 088-435 761 Fax : 088-435 770 Jalan Gaya 82 & 84, Jalan Gaya 88000 Kota Kinabalu, Sabah Tel : 088-251 177 Fax : 088-223 629 Keningau Lot No. 1, Block B-8 Jalan Arusap 89000 Keningau, Sabah Tel : 087-330 301 Fax : 087-330 294 Kota Marudu Shoplot No. 8, Block E Sedco Shophouses P.O. Box 260 89108 Kota Marudu, Sabah Tel : 088-661 104 Fax : 088-661 106 Kundasang Shoplot No. 6, Block B Sedco Shophouses P.O. Box 152 89308 Ranau, Sabah Tel : 088-889 679 Fax : 088-889 676 Lahad Datu Lot 1 MDLD 4709 Jalan Kastam Lama 91100 Lahad Datu, Sabah Tel : 089-883 911/5 Fax : 089-883 916 Sandakan 59-61 Block 20 Jalan Tiga, Bandar Sandakan 90000 Sandakan, Sabah Tel : 089-275 193 Fax : 089-271 641 345 Sinsuran Lot 4, 5, & 6, Block K Sinsuran Complex 88000 Kota Kinabalu, Sabah Tel : 088-237 762 Fax : 088-212 511 Tambunan Lot 1, Block B Sedco Shophouses, W.D.T. 55 89659 Tambunan, Sabah Tel : 087-771 171 Fax : 087-771 157 Tawau 1086, Jalan Utara, W.D.T. 127 91009 Tawau, Sabah Tel : 089-776 000 Fax : 089-763 287 Tenom Ground & Mezzanine Floor Shoplot Nos 1 & 2, Block A Pangie Light Industrial Complex Jalan Jungkat, Tenom New Township P.O. Box 379 89909 Tenom, Sabah Tel : 087-737 757 Fax : 087-737 762 SARAWAK Bintulu No. 24, Bintulu Parkcity Commerce Square Phase 1, Jalan Tun Ahmad Zaidi 97000 Bintulu, Sarawak Tel : 086-318 626 Fax : 086-318 621 Kuching 178, Jalan Chan Chin Ann 93100 Kuching, Sarawak Tel : 082-257 129 Fax : 082-257 275 Laksamana 70 & 71, Block 10 Jalan Laksamana Cheng Ho 93200 Kuching, Sarawak Tel : 082-230 888 Fax : 082-235 567 Miri Ground & 1st Floor Lot 353, Block 7 Miri Concession Land District (Pelita Commercial Centre) Jalan Miri Pujut 98000 Miri, Sarawak Tel : 085-427 535 Fax : 085-425 362
348. 346 Alliance Bank Malaysia Berhad (88103-W) DIRECTORY (Cont’d) as at 31 March 2019 SARAWAK (cont’d) PULAU PINANG Sibu Ground Floor 32, Jalan Bako Brooke Drive 3 96000 Sibu, Sarawak Tel : 084-317 628 Fax : 084-317 148 Pulau Pinang Ground & Mezzanine Floor Bangunan Barkath 21, Lebuh Pantai 10300 Pulau Pinang Tel : 04-261 1688 Fax : 04-261 6363 LABUAN KUALA LUMPUR Labuan MPWPL U 0072 & 0073 Jalan Merdeka, P.O. Box 396 87008 Labuan FT Tel : 087-412 826 Fax : 087-415 446 Kuala Lumpur 17th Floor, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : 03-2604 3333 Fax : 03-2697 2929 JOHOR ALLIANCEDBS RESEARCH SDN BHD HEAD OFFICE 19th Floor, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : 03-2604 3333 www.allianceinvestmentbank.com.my Kluang No. 73, Ground Floor Jalan Rambutan 86000 Kluang, Johor Tel : 07-771 7922 Fax : 07-777 1079 ALLIANCE INVESTMENT BANK BERHAD (A participating organisation of Bursa Malaysia Securities Berhad) HEAD OFFICE 19th Floor, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : 03-2604 3333 Fax : 03-2692 8787 www.allianceinvestmentbank.com.my BRANCHES KEDAH Alor Setar Lot T-30, 2nd Floor Wisma PKNK Jalan Sultan Badlishah 05000 Alor Setar, Kedah Tel : 04-731 7088 Fax : 04-731 8428 PAHANG Kuantan Ground, Mezzanine & 1st Floor B-400, Jalan Beserah 25300 Kuantan, Pahang Tel : 09-566 0800 Fax : 09-566 0801 TERENGGANU Kuala Terengganu Ground & Mezzanine Floor Wisma Kam Choon 101, Jalan Kampong Tiong 20100 Kuala Terengganu, Terengganu Tel : 09-631 7922 Fax : 09-631 3255 ALLIANCE TRUSTEE BERHAD HEAD OFFICE 18th Floor, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : 03-2604 3333 Fax : 03-2698 0393
349. 2019 Annual Report 347 ANALYSIS OF SHAREHOLDINGS as at 21 May 2019 Class of securities Issued and paid-up share capital Voting rights : : : Ordinary shares RM1,548,105,929 One vote per ordinary share Shareholdings Distribution Schedule No. of Shareholders % of Shareholders No. of Shares Held % of Issued Shares Less than 100 1,945 11.71 36,897 0.01 100 – 1,000 4,013 24.16 3,051,217 0.19 1,001 – 10,000 8,010 48.21 33,787,811 2.18 10,001 – 100,000 2,065 12.43 63,717,316 4.11 578 3.48 833,435,273 53.84 2 0.01 614,077,415 39.67 16,613 100.00 1,548,105,929 100.00 No. of Shares Held % of Issued Shares Size of Shareholdings 100,001 – less than 5% of issued shares 5% and above of issued shares Total Thirty (30) Largest Shareholders Name 1. CIMB Group Nominees (Tempatan) Sdn Bhd – Exempt AN for DBS Bank Ltd (SFS) 449,857,775 29.06 2. Citigroup Nominees (Tempatan) Sdn Bhd – Employees Provident Fund Board 164,219,640 10.61 3. Focus Asia Strategies Ltd 73,528,700 4.75 4. Medimetro (M) Sdn Bhd 56,000,000 3.62 5. Citigroup Nominees (Tempatan) Sdn Bhd – Exempt AN for AIA Bhd 45,581,000 2.94 6. Fields Equity Management Ltd 31,470,900 2.03 7. Citigroup Nominees (Tempatan) Sdn Bhd – Great Eastern Life Assurance (Malaysia) Berhad (Par 1) 31,232,200 2.02 8. Cartaban Nominees (Asing) Sdn Bhd – Exempt AN for State Street Bank & Trust Company (West CLTOD67) 27,328,000 1.77 9. Eden Engineering Sdn Bhd 19,700,000 1.27 10. Cartaban Nominees (Tempatan) Sdn Bhd – PAMB for Prulink Equity Fund 19,458,500 1.26 11. HSBC Nominees (Asing) Sdn Bhd – JPMCB NA for Vanguard Emerging Markets Stock Index Fund 19,364,217 1.25 12. Citigroup Nominees (Asing) Sdn Bhd – Exempt AN for Citibank New York (Norges Bank 14) 18,034,800 1.17 13. HSBC Nominees (Asing) Sdn Bhd – JPMCB NA for Vanguard Total International Stock Index Fund 16,210,753 1.05 14. Citigroup Nominees (Asing) Sdn Bhd – CBNY for Dimensional Emerging Markets Value Fund 15,186,000 0.98 15. Maybank Nominees (Tempatan) Sdn Bhd – Maybank Trustees Berhad for Public Regular Savings Fund (N14011940100) 15,044,700 0.97
350. 348 Alliance Bank Malaysia Berhad (88103-W) ANALYSIS OF SHAREHOLDINGS (Cont’d) as at 21 May 2019 Name No. of Shares Held % of Issued Shares 16. Citigroup Nominees (Asing) Sdn Bhd – Exempt AN for Citibank New York (Norges Bank 1) 12,158,600 0.79 17. Cartaban Nominees (Asing) Sdn Bhd – GIC Private Limited for Government of Singapore (C) 10,111,800 0.65 18. Citigroup Nominees (Tempatan) Sdn Bhd – Employees Provident Fund Board (CIMB PRIN) 10,106,900 0.65 19. HSBC Nominees (Asing) Sdn Bhd – Exempt AN for Bank Julius Baer & Co. Ltd. (Singapore BCH) 9,500,000 0.61 20. Citigroup Nominees (Asing) Sdn Bhd – CBNY for Emerging Market Core Equity Portfolio DFA Investment Dimensions Group Inc 8,272,300 0.53 21. Citigroup Nominees (Tempatan) Sdn Bhd – Employees Provident Fund Board (Aberdeen) 7,978,300 0.52 22. Citigroup Nominees (Tempatan) Sdn Bhd – Great Eastern Life Assurance (Malaysia) Berhad (Par 3) 7,663,500 0.49 23. HSBC Nominees (Asing) Sdn Bhd – HSBC BK PLC for Saudi Arabian Monetary Authority 6,842,800 0.44 24. Citigroup Nominees (Tempatan) Sdn Bhd – Great Eastern Life Assurance (Malaysia) Berhad (LSF) 6,722,600 0.43 25. Citigroup Nominees (Tempatan) Sdn Bhd – Kumpulan Wang Persaraan (Diperbadankan) (Principal EQITS) 6,526,600 0.42 26. Citigroup Nominees (Tempatan) Sdn Bhd – Kumpulan Wang Persaraan (Diperbadankan) (Aberdeen) 6,465,100 0.42 27. DB (Malaysia) Nominee (Asing) Sdn Bhd – BNYM SA/NV for People’s Bank of China (SICL Asia EM) 6,024,400 0.39 28. Permodalan Nasional Berhad 5,932,500 0.38 29. Citigroup Nominees (Tempatan) Sdn Bhd – Employees Provident Fund Board (Affin-HWG) 5,845,300 0.38 30. HSBC Nominees (Asing) Sdn Bhd – JPMCB NA for MSCI Equity Index Fund B - Malaysia 5,499,800 0.36 1,117,867,685 72.21 Total
351. 349 2019 Annual Report SUBSTANTIAL SHAREHOLDERS as at 21 May 2019 No . of Ordinary Shares Direct Interest % of Issued Shares Indirect Interest % of Issued Shares Total % of Issued Shares 449,857,775 29.06 - - 449,857,775 29.06 Langkah Bahagia Sdn Bhd - - 449,857,775 1 29.06 449,857,775 29.06 Duxton Investments Pte Ltd - - 449,857,7751 29.06 449,857,775 29.06 Ong Beng Seng - - 449,857,775 2 29.06 449,857,775 29.06 Ong Tiong Sin - - 449,857,775 2 29.06 449,857,775 29.06 Seow Lun Hoo - - 449,857,775 2 29.06 449,857,775 29.06 Fullerton Financial Holdings Pte Ltd - - 449,857,7753 29.06 449,857,775 29.06 Fullerton Management Pte Ltd - - 449,857,775 4 29.06 449,857,775 29.06 Temasek Holdings (Private) Limited - - 450,030,888 5 29.07 450,030,888 29.07 Singapore Minister for Finance - - 450,030,888 6 29.07 450,030,888 29.07 194,465,740 12.56 - - 194,465,740 12.56 Name of Substantial Shareholder Vertical Theme Sdn Bhd Employees Provident Fund Board Notes: 3 4 5 6 1 2 Deemed interested by virtue of Section 8 of the Companies Act 2016 held through Vertical Theme Sdn Bhd. Deemed interested by virtue of Section 8 of the Companies Act 2016 held through Langkah Bahagia Sdn Bhd. Deemed interested by virtue of Section 8 of the Companies Act 2016 held through Duxton Investments Pte Ltd. Deemed interested by virtue of Section 8 of the Companies Act 2016 held through Fullerton Financial Holdings Pte Ltd. Deemed interested by virtue of Section 8 of the Companies Act 2016 held through Fullerton Management Pte Ltd and Fullerton (Private) Limited. Deemed interested by virtue of Section 8 of the Companies Act 2016 held through Temasek Holdings (Private) Limited. DIRECTORS’ SHAREHOLDINGS as at 21 May 2019 Save as disclosed below, none of the other Directors have any interest in the shares of the Bank or in any of the Bank’s related corporation as at 21 May 2019: No. of Alliance Bank Shares Held Name Ho Hon Cheong Direct % Indirect % - - 1,000^ * Notes: * Negligible ^ Indirect interest in the Bank's shares by virtue of Section 59(11)(c) of the Companies Act 2016
352. 350 Alliance Bank Malaysia Berhad (88103-W) SENIOR MANAGEMENT’S SHAREHOLDINGS as at 21 May 2019 Save as disclosed below, the Group Chief Executive Officer and none of the other Senior Management have any interest in the shares of the Bank or in any of the Bank’s related corporation as at 21 May 2019: No. of Alliance Bank Shares Held Name Direct % Indirect % Aaron Sum Wei Wern (Head, Group Strategy & Performance Management) 146,200 0.01 - - Chew Siew Suan (Head, Group Human Resource) 197,900 0.01 - - Ernest Kwong Kah Wah (Head, Group SME Banking ) 122,300 0.01 - - 92,400 0.01 - - Lee Wei Yen (Group Company Secretary) 219,800 0.01 - - Leong Sow Yoke (Group Chief Internal Auditor) 303,500 0.02 - - 56,400 * - - 501,200 0.03 - - Peter Fong Seow Loong (Group Chief Credit Officer) 69,500 * - - Rizal IL-Ehzan Fadil Azim (Chief Executive Officer, Alliance Islamic Bank Berhad) 47,500 * - - Tan Eng Kiang (Head, Group Financial Markets) 79,600 0.01 Foziakhatoon Binti Amanulla Khan (Chief Business Development Officer) Mahesh S/O Shri Pranlal Rupawalla (Chief Executive Officer, Alliance Investment Bank Berhad) Pang Choon Han (Group Chief Risk Officer) Note: *Negligible
353. 2019 Annual Report 351 NOTICE OF 37TH ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the 37th Annual General Meeting of Alliance Bank Malaysia Berhad (“the Bank”) will be held at Grand Ballroom, Level 2, InterContinental Kuala Lumpur, 165 Jalan Ampang, 50450 Kuala Lumpur on Thursday, 25 July 2019 at 11.00 a.m. for the following purposes: AGENDA As Ordinary Business 1. To receive the Audited Financial Statements for the financial year ended 31 March 2019 together with the Reports of the Directors and Auditors thereon. Please refer to Explanatory Note (i) 2. To approve the payment of Directors’ fees and Board Committees’ fees amounting to RM2,040,083 in respect of the financial year ended 31 March 2019. Ordinary Resolution 1 3. To approve Directors’ benefits (other than Directors’ fees and Board Committees’ fees) payable up to an amount of RM1,200,000 from 26 July 2019 to the next Annual General Meeting of the Bank. Ordinary Resolution 2 4. To re-elect Mr Kuah Hun Liang who retires by rotation pursuant to Article 87 of the Bank’s Constitution. Ordinary Resolution 3 5. To re-elect Mr Lee Ah Boon who retires by rotation pursuant to Article 87 of the Bank’s Constitution. Ordinary Resolution 4 6. To re-elect Tan Sri Dato’ Ahmad Bin Mohd Don who retires by rotation pursuant to Article 87 of the Bank’s Constitution. Ordinary Resolution 5 7. To re-elect Ms Susan Yuen Su Min who retires pursuant to Article 93 of the Bank’s Constitution. Ordinary Resolution 6 8. To re-appoint PricewaterhouseCoopers PLT as Auditors of the Bank and authorise the Directors to fix their remuneration. Ordinary Resolution 7 As Special Business 9. To consider and if thought fit, to pass the following Special Resolution: Proposed Amendments to the Constitution of Alliance Bank Malaysia Berhad “THAT the Constitution of the Bank be altered and/or modified, in the form and manner as set out in Appendix I to the Notice of the 37th Annual General Meeting (“Proposed Amendments”) AND THAT the Board of Directors of the Bank be and is hereby authorised to do all acts and things and take all such steps as may be deemed necessary to give full effect to the Proposed Amendments.” 10. To transact any other business for which due notice shall have been given in accordance with the Bank’s Constitution and/or the Companies Act 2016. BY ORDER OF THE BOARD LEE WEI YEN (MAICSA 7001798) Group Company Secretary Kuala Lumpur 25 June 2019 Special Resolution 1
354. 352 Alliance Bank Malaysia Berhad (88103-W) NOTICE OF 37TH ANNUAL GENERAL MEETING (Cont’d) Notes: 1. 2. 3. 4. 5. 6. 7. 8. A Member entitled to attend, participate, speak and vote at the meeting is entitled to appoint a proxy or proxies to attend, participate, speak and vote in his/her stead. A proxy may but need not be a Member of the Bank. To be valid, the duly completed Form of Proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority must be deposited at the registered office of the Bank at 3rd Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than forty-eight (48) hours before the time set for holding the meeting. A Member who is an Exempt Authorised Nominee which holds ordinary shares in the Bank for multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds. A Member other than an Exempt Authorised Nominee shall be entitled to appoint not more than two (2) proxies to attend, participate, speak and vote at the same meeting. Where a Member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportions of his/her shareholdings to be represented by each proxy. If the appointor is a corporation, the Form of Proxy must be executed under its common seal or under the hand of an officer or attorney duly authorised. A shareholder whose name appears in the General Meeting Record of Depositors as at 18 July 2019 shall be regarded as a Member entitled to attend, participate, speak and vote at the meeting or appoint a proxy or proxies to attend, participate, speak and vote in his/her stead. By submitting the duly executed Form of Proxy, the Member and his/her proxy consent to the Bank (and/or its agents/service providers) collecting, using and disclosing the personal data therein in accordance with the Personal Data Protection Act 2010 for the purposes of this Annual General Meeting and any adjournment thereof. EXPLANATORY NOTES (i) Item 1 on the Agenda – Audited Financial Statements for the financial year ended 31 March 2019 This Agenda item is laid before the Annual General Meeting pursuant to Section 340(1) of the Companies Act 2016, and does not require a formal approval of the shareholders. As such, it is meant for discussion only and not put forward for voting. (ii) Ordinary Resolution 1 – Directors’ fees and Board Committees’ fees The Non-Executive Directors of the Bank are entitled to annual Directors’ fees and annual Board Committees’ fees (if applicable). For the financial year ended 31 March 2019, the Board has engaged an independent consultant to carry out a review on the remuneration of the Non-Executive Directors to determine if the remuneration of Non-Executive Directors of the Bank continues to be in line with the industry taking into consideration the complexities of the Bank’s business and operations. On the recommendation of the Group Nomination & Remuneration Committee, the Board agreed for the proposed revision to the remuneration of Non-Executive Directors as set out in the table below for tabling to the shareholders of the Bank for approval. Proposed for Financial Year Ended 31 March 2019 (RM) Financial Year Ended 31 March 2018 (RM) - Non-Executive Chairman 250,000 200,000 - Non-Executive Director 120,000 92,000 - Chairman 50,000 40,000 - Member 35,000 25,000 Description Annual Directors’ Fees Annual Board Committees’ Fees
355. 2019 Annual Report 353 (iii) Ordinary Resolution 2 – Directors’ benefits (other than Directors’ fees and Board Committees’ fees) The Directors’ benefits (other than Directors’ fees and Board Committees’ fees) comprise sitting allowances and other benefits for Non-Executive Directors, as set out below: (a) Sitting allowance The current meeting sitting allowance of RM1,100 per meeting is proposed to be revised to RM1,500 per meeting effective from the financial year ended 31 March 2019. (b) Other benefits include company car and driver allowance (for Chairman only), insurance coverage and other claimable benefits. The total amount of Directors’ benefits (other than Directors’ fees and Board Committees’ fees) from 26 July 2019 to the next Annual General Meeting of the Bank is estimated based on the proposed meeting sitting allowance and takes into account other related factors including the estimated number of meetings for the Board and Board Committees from this Annual General Meeting up to the next Annual General Meeting in 2020. (iv) Special Resolution 1 – Proposed Amendments to the Constitution of Alliance Bank Malaysia Berhad The Proposed Amendments will bring the Bank’s Constitution to be in line with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The proposed Special Resolution 1, if passed, will give full effect to the Proposed Amendments with immediate effect.
356. 354 Alliance Bank Malaysia Berhad (88103-W) APPENDIX I TO NOTICE OF 37TH ANNUAL GENERAL MEETING PROPOSED AMENDMENTS TO THE CONSTITUTION OF THE BANK Article Existing Provision Proposed Amendments 95. Directors’ Remuneration Directors’ Remuneration The Directors shall be paid by way of fees for their services, such fixed sum (if any) as shall from time to time be determined by the Company in general meeting and such fees shall be divided among the Directors in such proportions and manner as the Directors may determine and in default of agreement equally, except that if a Director has held office for part only of the period in respect of which such fees are payable, such a Director shall be entitled only to that proportion of the fees as is related to the period during which he has held office PROVIDED ALWAYS that:......... The Directors shall be paid by way of fees for their services, such fixed sum (if any) as shall from time to time be determined by the Company in general meeting and such fees shall be divided among the Directors in such proportions and manner as the Directors may determine and in default of agreement equally, except that if a Director has held office for part only of the period in respect of which such fees are payable, such a Director shall be entitled only to that proportion of the fees as is related to the period during which he has held office PROVIDED ALWAYS that:- (c) fees payable to Directors shall not be increased except pursuant to a resolution passed at a general meeting where notice of the proposed increase has been given in the notice convening the meeting; (c) Alternate Directors Alternate Directors A Director may appoint any other person approved by a majority of his co-Directors to act as his alternate provided that any fee paid by the Company to the alternate shall be deducted from that Director’s remuneration. The alternate Director shall not be required to hold any shares in the Company but shall be entitled to receive notices of all meetings and to attend, speak and vote, and be counted for the quorum, and generally to exercise all powers, rights, duties and authorities of the Director appointing him, at any such meeting at which the Director appointing him is not present. For the avoidance of doubt, an alternate Director may not vote nor attend any meeting at which the Director appointing him is present. Any appointment so made may be revoked at any time by the appointor or by a majority of the Directors, and any appointment or revocation under this Article shall be effected by notice in writing to be delivered to the Secretary of the Company. An alternate Director shall ipso facto cease to be an alternate Director if his appointor for any reason ceases to be a Director. A Director may appoint any other person approved by a majority of his co-Directors to act as his alternate provided that such person is not a Director of the Company and does not act as an alternate for more than one Director of the Company. any Any fee paid by the Company to the alternate shall be deducted from that Director’s remuneration. 119(a). Rationale To align with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. ......... fees and any benefits payable to Directors shall not be increased except pursuant to a resolution passed be subject to annual shareholder approval at a general meeting where notice of the proposed increase has been given in the notice convening the meeting; The alternate Director shall not be required to hold any shares in the Company but shall be entitled to receive notices of all meetings and to attend, speak and vote, and be counted for the quorum, and generally to exercise all powers, rights, duties and authorities of the Director appointing him, at any such meeting at which the Director appointing him is not present. For the avoidance of doubt, an alternate Director may not vote nor attend any meeting at which the Director appointing him is present. Any appointment so made may be revoked at any time by the appointor or by a majority of the Directors, and any appointment or revocation under this Article shall be effected by notice in writing to be delivered to the Secretary of the Company. An alternate Director shall ipso facto cease to be an alternate Director if his appointor for any reason ceases to be a Director. To align with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.
357. 2019 Annual Report 355 PROPOSED AMENDMENTS TO THE CONSTITUTION OF THE BANK Article Existing Provision Proposed Amendments 124 . Meeting of Committees Meeting of Committees Unless otherwise determined by the Directors, the quorum for executive committee meetings shall be three (3) members. Decisions made by the executive committee will have to meet unanimous agreement of all its members present at its meetings. Unless otherwise determined by the Directors, the quorum for executive committee meetings shall be three (3) members. Decisions made by the executive committee will have to meet unanimous agreement to be carried by a majority of votes of all its members present at its meetings. In the case of an equality of votes, the chairman of the executive committee meeting shall have a second or casting vote. ....... ....... Service of Notices Service of Notices and/or documents Notice of a meeting of Members shall be in writing and shall be given to the Members either in hard copy, in Electronic Form, or partly in hard copy and partly in Electronic Form. Notice of a meeting of Members or any document required to be sent to Members shall be in writing and shall be given to the Members either in hard copy, in Electronic Form, or partly in hard copy and partly in Electronic Form. (a) (a) 151. In view of the above, a notice: ....... ....... (b) Notice of a meeting of Members shall not be validly given by the Company by means of the Company’s website unless a notification to that effect is given in accordance with this Article. (b) (c) The Company shall notify a Member of the publication of the notice on the website and such notification shall be in writing and shall be given in hard copy or Electronic Form stating: (c) The Company shall notify a Member of the publication of the notice of a meeting of Members or document required to be sent to Members on the website and such notification shall be in writing and shall be given in hard copy or Electronic Form stating, where applicable: (i) (ii) (iii) (d) 152. In view of the above, a notice or any document required to be sent to Members: that it concerns a meeting of Members; the place, date and time of the meeting; and whether the meeting is an annual general meeting. The notice shall be made available on the website throughout the period beginning from the date of the notification referred to in Article 151(c) until the conclusion of the meeting. To align with the functionality of the Board and other Board Committees of the Bank whereby decisions are carried by a majority of votes and in case of an equality of votes, the chairman of the executive committee shall have a second or casting vote. To enable the Bank to send any documents required to be sent to Members of the Bank via Electronic Form, in addition to notice of a meeting of Members which is in line with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. Notice of a meeting of Members or any document required to be sent to Members shall not be validly given by the Company by means of the Company’s website unless a notification to that effect is given in accordance with this Article. (i) (ii) (iii) (d) Rationale that it concerns a meeting of Members; the place, date and time of the meeting; and whether the meeting is an annual general meeting. The notice of a meeting of Members shall be made available on the website throughout the period beginning from the date of the notification referred to in Article 151(c) until the conclusion of the meeting. When service effected When service effected (e) – (i) To renumber as (b) – (f) Administrative changes.
358. 356 Alliance Bank Malaysia Berhad (88103-W) STATEMENT ACCOMPANYING NOTICE OF 37TH ANNUAL GENERAL MEETING (Pursuant to Paragraph 8.27(2) of Bursa Malaysia Securities Berhad Main Market Listing Requirements) The profiles of the Directors who are standing for re-election at the 37th Annual General Meeting are set out below. (i) Profile of Mr Kuah Hun Liang Senior Independent Non-Executive Director Member of Group Audit Committee Malaysian / Male / Aged 57 Mr Kuah Hun Liang was appointed to the Alliance Bank Malaysia Berhad Board of Directors on 15 December 2011. Mr Kuah holds a Bachelor of Science (Honours) degree in Applied Economics from the University of East London, United Kingdom. He has over 30 years of experience in the financial services industry. He began his career at Public Bank in 1983, and thereafter joined Deutsche Bank AG (Deutsche Bank) in 1989 as Treasurer. He was promoted as Head of Global Markets when Deutsche Bank ventured into investment banking. In 2000, he was appointed as an Executive Director of Deutsche Bank (M) Berhad. In 2002, he was promoted to Managing Director and Chief Executive Officer, and held both positions until 2006. Mr Kuah is the Chairman of Alliance Investment Bank Berhad. He also holds directorships in public companies listed on Bursa Malaysia namely, Rexit Berhad and MPHB Capital Berhad. In addition, he serves as a Director on the Board of Multi-Purpose Capital Holdings Berhad. (ii) Profile of Mr Lee Ah Boon Non-Independent Non-Executive Director Chairman of Executive Committee Member of Group Nomination & Remuneration Committee Singaporean / Male / Aged 68 Mr Lee Ah Boon was appointed to the Alliance Bank Malaysia Berhad Board of Directors on 18 April 2012. Mr Lee holds a Bachelor of Accounting (Honours) degree from the National University of Singapore. He joined Citibank in 1990 and held various Consumer Banking roles in Singapore including that of Chief Financial Officer, Senior Operations Officer, Head of Credit Card business and Business Manager. In 2005, he started up Citibank’s Consumer Business in China and returned to Singapore as Regional Operations Head of Citibank. He then moved to Barclays Bank in early 2009 as its International Technology Head for the Global Retail and Consumer Bank Business. In September 2010, Mr Lee left Barclays Bank and joined Fullerton Financial Holdings (International) Pte Ltd, a subsidiary of Temasek Holdings (Private) Limited, as its Chief Operating Officer. He remained for three years until his retirement in November 2013. Mr Lee is currently an Advisor of Fullerton Financial Holdings (International) Pte Ltd. He also serves as a Director on the Board of Alliance Investment Bank Berhad. (iii) Profile of Tan Sri Dato’ Ahmad Bin Mohd Don Chairman of the Board, Independent Non-Executive Director Member of Group Nomination & Remuneration Committee Malaysian / Male / Aged 71 Tan Sri Dato’ Ahmad Bin Mohd Don was appointed as Chairman of the Alliance Bank Malaysia Berhad Board of Directors on 1 February 2017. Tan Sri Dato’ Ahmad is a summa cum laude graduate in Economics and Business from the Aberystwyth University, United Kingdom. He is also a Fellow of the Institute of Chartered Accountants in England and Wales, and a Member of the Malaysian Institute of Certified Public Accountants. Tan Sri Dato’ Ahmad has extensive experience in finance and banking. His work experience covers various capacities with Pernas Securities Sdn Bhd, Permodalan Nasional Berhad, and Malayan Banking Berhad. He served as Group Managing Director and Chief Executive Officer of Malayan Banking Berhad from 1991 to 1994. Between May 1994 and August 1998, Tan Sri Dato’ Ahmad was the Governor of Bank Negara Malaysia. Tan Sri Dato’ Ahmad is Chairman on the Board of Sunway REIT Management Sdn Bhd (manager of Sunway Real Estate Investment Trust listed on Bursa Malaysia) and a Director on the Board of United Malacca Berhad (listed on Bursa Malaysia).
359. 2019 Annual Report 357 (iv) Profile of Ms Susan Yuen Su Min Independent Non-Executive Director Member of Group Nomination & Remuneration Committee Malaysian / Female / Aged 59 Ms Susan Yuen Su Min was appointed to the Alliance Bank Malaysia Berhad Board of Directors on 15 October 2018. Ms Susan Yuen holds a Bachelor of Computer Science (Honours) degree from the University of London, United Kingdom. Ms Susan Yuen has over 30 years of working experience in the banking industry. She has served in a number of banking establishments including Maybank and HSBC Malaysia. She was also previously attached to the National Bank of Abu Dhabi Malaysia Berhad (NBAD) where she was the Regional CEO Asia and Country CEO Malaysia from 2014 to 2018. Prior to joining NBAD, she served as CEO of ANZ Banking Group in Hong Kong from 2009 to 2014. Ms Susan Yuen serves as an Independent Director on the Board of Chubb Insurance Malaysia Berhad. Additional information of the Directors who are standing for re-election at the 37th Annual General Meeting: (i) Directors’ interest in the securities of the Bank and its subsidiaries None of the Directors have any interest in the securities of the Bank and its subsidiaries. (ii) Family Relationship None of the Directors have any family relationship with other Directors and/or major shareholders of the Bank. (iii) Conflict of interest None of the Directors have any personal pecuniary interests which are in conflict with the Bank or its subsidiaries. (iv) List of convictions for offences and public sanction or penalty None of the Directors have been convicted of any offences within the past 5 years (other than traffic offences) nor have they been imposed any public sanction or penalty by the relevant regulatory bodies during the financial year ended 31 March 2019.
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361. FORM OF PROXY CDS Account No . No. of Shares Held I/We (full name in block letters) identity card no./company registration no. of being a Member of ALLIANCE BANK MALAYSIA BERHAD hereby appoint NRIC No. of and/or failing him/her NRIC No. of as my/our proxy/proxies to vote for me/us on my/our behalf at the 37th Annual General Meeting of the Bank to be held at Grand Ballroom, Level 2, InterContinental Kuala Lumpur, 165 Jalan Ampang, 50450 Kuala Lumpur on Thursday, 25 July 2019 at 11.00 a.m. and at any adjournment thereof. NO. RESOLUTIONS *FOR *AGAINST Ordinary Resolutions: 1. To approve the payment of Directors’ fees and Board Committees’ fees amounting to RM2,040,083 in respect of the financial year ended 31 March 2019 2. To approve Directors’ benefits (other than Directors’ fees and Board Committees’ fees) payable up to an amount of RM1,200,000 from 26 July 2019 to the next Annual General Meeting of the Bank 3. To re-elect Mr Kuah Hun Liang who retires by rotation pursuant to Article 87 of the Bank’s Constitution 4. To re-elect Mr Lee Ah Boon who retires by rotation pursuant to Article 87 of the Bank’s Constitution 5. To re-elect Tan Sri Dato’ Ahmad Bin Mohd Don who retires by rotation pursuant to Article 87 of the Bank’s Constitution 6. To re-elect Ms Susan Yuen Su Min who retires pursuant to Article 93 of the Bank’s Constitution 7. To re-appoint PricewaterhouseCoopers PLT as Auditors of the Bank and authorise the Directors to fix their remuneration Special Resolution: 1. Proposed Amendments to the Constitution of Alliance Bank Malaysia Berhad * Please indicate with an “X” on how you wish your vote to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his/her discretion. As witness my/our hand(s) this Signature of Member day of 2019. Shareholding represented by Proxy Proxy 1 % Proxy 2 % Total % Notes: 1. A Member entitled to attend, participate, speak and vote at the meeting is entitled to appoint a proxy or proxies to attend, participate, speak and vote in his/her stead. A proxy may but need not be a Member of the Bank. 2. To be valid, the duly completed Form of Proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority must be deposited at the registered office of the Bank at 3rd Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than forty-eight (48) hours before the time set for holding the meeting. 3. A Member who is an Exempt Authorised Nominee which holds ordinary shares in the Bank for multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds. 4. A Member other than an Exempt Authorised Nominee shall be entitled to appoint not more than two (2) proxies to attend, participate, speak and vote at the same meeting. 5. Where a Member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportions of his/her shareholdings to be represented by each proxy. 6. If the appointor is a corporation, the Form of Proxy must be executed under its common seal or under the hand of an officer or attorney duly authorised. 7. A shareholder whose name appears in the General Meeting Record of Depositors as at 18 July 2019 shall be regarded as a Member entitled to attend, participate, speak and vote at the meeting or appoint a proxy or proxies to attend, participate, speak and vote in his/her stead. 8. By submitting the duly executed Form of Proxy, the Member and his/her proxy consent to the Bank (and/or its agents/service providers) collecting, using and disclosing the personal data therein in accordance with the Personal Data Protection Act 2010 for the purposes of this Annual General Meeting and any adjournment thereof.
362. fold this flap for sealing then fold here Affix Stamp GROUP COMPANY SECRETARY ALLIANCE BANK MALAYSIA BERHAD 3rd Floor , Menara Multi-Purpose Capital Square, No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur, Malaysia. 1st fold here
364. 362 Alliance Bank Malaysia Berhad (88103-W) NOTES TO THE FINANCIAL STATEMENTS (Cont’d) for the financial year ended 31 March 2019 www.alliancebank.com.my AllianceBankMalaysia AllianceBankMY ALLIANCE BANK MALAYSIA BERHAD (88103-W) 3rd Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia. Tel : 03-2604 3333 Fax : 03-2694 6200