Maybank Annual Report 2017

Transcription

3. INSIDE THIS REPORT 2-8 10-287 288-351 2 3 4 10 Statement of Directors ’ Responsibility 11 Analysis of Financial Statements 16 Financial Statements 288 Basel II Pillar 3 Disclosure OUR PERFORMANCE Delivering Value Across Asean Highlights of 2017 Financial Performance 4Five-Year Group Financial Summary 6Simplified Group Statements of Financial Position 6Group Quarterly Financial Performance 7Key Interest Bearing Assets and Liabilities 7 Statement of Value Added 7 Distribution of Value Added 8 Segmental Information THE FINANCIALS BASEL II PILLAR 3
4. MAYBANK ANNUAL REPORT 2017 DELIVERING VALUE ACROSS ASEAN Maybank Group is a leading provider of financial services in Asia and an essential part of the ASEAN landscape for almost 60 years . Our strong foundation – robust financial strength, prudence, integrity, innovation and excellence - supports us in delivering our mission of Humanising Financial Services. This mission embodies our commitment to effectively deploy our five sources of capital; financial capital, intellectual capital, manufactured capital, human capital and social & relationship capital, to create value for our stakeholders. RM65 million We currently operate in over 2,400 branches across 20 countries including all 10 ASEAN countries. Our broad physical and digital reach enables us to offer an array of unique financial solutions and innovative services, based on cutting-edge technology and at fair terms and pricing, to our customers. And, to reach our goal of becoming the ‘Digital Bank of Choice’ in the region, we remain steadfast in our focus to deliver the next-generation customer experience to our growing clientele across ASEAN and around the world. To ensure sustainability of the Maybank Group, we are cognisant of our commitment to environmental, social and governance (ESG) as we strive towards meeting our business targets and delivering on our mission. ESG best practices are embedded in our operations and our progress towards meeting our 20/20 Sustainability Plan is tracked and reported every year. in community investment We channel about 1% of net profit to community programmes through Maybank Foundation. 130,209 volunteer hours Completed through our Cahaya Kasih (CK), which is our main employee volunteerism platform, as well as other external initiatives. We also remain deeply committed to the communities where we operate. Maybank Foundation formulates and drives our corporate responsibility initiatives around the region. Through this foundation, Maybank Group and Maybankers actively support initiatives that address some of the region’s most pressing environmental needs and most needy communities. These initiatives, which consist of social investments, volunteer efforts and long-term programmes, aim to make the biggest positive impact on its beneficiaries and further entrenches our position at the heart of the communities that we serve. RM27 million disbursed in scholarships Supporting access to education across the region to foster academic and non-academic excellence. 11 million registered M2U users Moving towards embracing the Fourth Industrial Revolution (IR 4.0) with our regional customers. Also, our online crowd funding platform, Maybank Heart, has benefitted 61 beneficiaries and received public donations of over RM1 million. RM124 million spent on training & development Upskilling of our employees to help ensure that we are future-proofing our people while promoting a culture of innovation and mobility for the sustainability of the organisation and our people. 2
5. 14 .773% Etiqa’s highest PBT ever at RM1.01 billion Total dividend per share This translates to a dividend payout ratio (DPR) of 78.5%, well above our policy rate of 40.0% to 60.0%; with a cash component of 42%, the highest since we introduced the DRP in 2010. Common Equity Tier 1 (CET1) ratio We remain one of the strongest capitalised financial services groups in the region with a CET1 ratio of 14.773%, up 78 bps YoY. Total Capital Ratio also improved to 19.383%. Etiqa delivered its highest ever profit before tax (PBT) of RM1.01 billion for FY2017, driven by strong premiums growth. Capital & Liquidity Management, page 43 Our Performance pg. 4-8  eflections from Our Chief Financial Officer, R page 41 Group Insurance & Takaful, page 64 First to break Basel II Pillar 3 pg. 288-351 55.0 sen The Financials pg. 10-287 HIGHLIGHTS OF 2017 Enhanced RM100 Maybank2u app billion market cap Maybank is the first company on Bursa Malaysia to achieve a market capitalisation of over RM100 billion. Empowering Women Improved user friendliness and enhanced security features such as Secure2u and three biometric login options (face ID, voice ID and fingerprint). The first app to offer three personalised security features in Malaysia. Group Human Capital, page 86 The Digital Bank of Choice, page 69 Key Awards & Recognition, page 149 Our new Chairman, Datuk Mohaiyani, is the first woman to lead Maybank’s Board. We are also the first bank to implement extended maternity leave for female employees. CREATING SHAREHOLDER VALUE Net Profit (RM billion) Earnings per Share (sen) Return on Equity (%) Share Price (RM) RM7.52 72.0 sen 10.9% RM9.80 billion 6.72 6.84 6.74 7.52 FY2017 FY2016 FY2015 FY2014 FY2013 6.55 74.2 72.0 67.8 72.0 FY2017 FY2016 FY2015 FY2014 FY2013 75.8 13.8 12.2 10.6 10.9 FY2017 FY2016 FY2015 FY2014 FY2013 15.1 8.40 8.20 9.80 FY2017 FY2016 FY2015 FY2014 FY2013 9.94 9.17 3
6. MAYBANK ANNUAL REPORT 2017 FINANCIAL PERFORMANCE FIVE-YEAR GROUP FINANCIAL SUMMARY Group FY 31 Dec OPERATING RESULT (RM' million) Operating revenue Pre-provisioning operating profit ("PPOP")1 Operating profit Profit before taxation and zakat Profit attributable to equity holders of the Bank KEY STATEMENTS OF FINANCIAL POSITION DATA (RM' million) Total assets Financial investments portfolio2 Loans, advances and financing Total liabilities Deposits from customers Investment accounts of customers Commitments and contingencies Paid-up capital/Share capital3 Share Premium3 Shareholders' equity SHARE INFORMATION Per share (sen) Basic earnings Diluted earnings Gross dividend Net assets (sen) Share price as at 31 Dec (RM) Market capitalisation (RM' million) FINANCIAL RATIOS (%) Profitability Ratios/Market Share Net interest margin on average interest-earning assets Net interest on average risk-weighted assets Net return on average shareholders' funds Net return on average assets Net return on average risk-weighted assets Cost to income ratio4 Domestic market share in: Loans, advances and financing Deposits from customers – Savings Account Deposits from customers – Current Account CAPITAL ADEQUACY RATIOS (%) CET1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio ASSET QUALITY RATIOS Net impaired loans (%) Loan loss coverage (%) Loan-to-deposit ratio (%)5 Deposits to shareholders' fund (times)6 VALUATIONS ON SHARE Gross dividend yield (%) Dividend payout ratio (%) Price to earnings multiple (times) Price to book multiple (times) 1 2 3 4 5 4 6 2013 2014 2015 2016 2017 33,251 9,610 8,730 8,870 6,552 35,712 9,419 8,948 9,112 6,716 40,556 10,953 8,940 9,152 6,836 44,658 11,686 8,671 8,844 6,743 45,580 11,911 9,883 10,098 7,521 560,319 107,672 355,618 512,576 395,611 – 433,829 8,862 19,030 45,997 640,300 115,911 403,513 585,559 439,569 – 551,960 9,319 22,748 52,975 708,345 122,166 453,493 644,831 478,151 17,658 719,952 9,762 25,900 61,695 735,956 130,902 477,775 665,481 485,524 31,545 766,439 10,193 28,879 68,516 765,302 154,373 485,584 690,118 502,017 24,555 811,374 44,250 – 72,989 75.8 75.7 53.5 519.0 9.94 88,088 74.2 74.1 57.0 568.5 9.17 85,455 72.0 72.0 54.0 632.0 8.40 81,999 67.8 67.8 52.0 672.2 8.20 83,584 72.0 72.0 55.0 676.9 9.80 105,671 2.5 4.2 15.1 1.2 2.2 47.8 2.3 3.9 13.8 1.1 2.0 48.9 2.4 4.1 12.2 1.0 1.9 48.2 2.3 4.1 10.6 0.9 1.8 47.1 2.4 4.5 10.9 1.0 2.0 48.7 18.4 27.7 20.4 18.4 27.6 21.1 18.0 25.4 19.9 18.2 25.3 20.4 18.3 25.7 19.4 11.253 13.059 15.664 11.747 13.539 16.235 12.780 14.471 17.743 13.990 15.664 19.293 14.773 16.459 19.383 0.95 107.5 91.3 8.6 1.04 95.6 93.2 8.3 1.43 72.0 92.7 8.0 1.60 72.0 93.9 7.5 1.58 71.5 93.8 7.2 5.4 71.9 13.1 1.9 6.2 78.5 12.4 1.6 6.4 76.3 11.7 1.3 6.3 78.1 12.1 1.2 5.6 78.5 13.6 1.4 PPOP is equivalent to operating profit before impairment losses as stated in the income statements of the financial statements. Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-tomaturity. Pursuant to Companies Act 2016, the share capital will cease to have par or nominal value, and share premium become part of the share capital. Cost to income ratio is computed using total cost over the net operating income. The total cost of the Group is the total overhead expenses, excluding amortisation of intangible assets for PT Bank Maybank Indonesia Tbk and Maybank Kim Eng Holdings Limited. Loan-to-deposit ratio for December 2017, December 2016 and December 2015 is computed using gross loans, advances and financing over deposits from customers and investment accounts of customers. Deposits to shareholders' fund for December 2017, December 2016 and December 2015 is included investment accounts of customers.
7. 2016 2017 26 ,592 9,275 7,347 7,347 6,423 24,841 8,514 7,353 7,353 6,123 496,063 95,467 295,020 439,058 331,878 – 721,130 10,193 28,879 57,005 509,667 114,947 290,998 447,414 328,939 – 761,441 44,250 – 62,253 64.6 64.6 52.0 559.2 – – 58.7 58.6 55.0 577.3 – – 1.8 3.1 12.1 1.3 2.4 36.5 1.9 3.3 10.6 1.2 2.3 40.9 18.2 25.3 20.4 18.3 25.7 19.4 15.881 18.232 19.432 15.853 17.950 19.313 1.57 74.3 90.5 5.8 1.72 72.3 90.2 5.3 – – – – – – – – 9.11 9.15 RM7.52 billion 8.84 10.10 FY2017 FY2016 FY2015 FY2014 FY2013 8.87 6.84 6.72 6.74 7.52 Basel II Pillar 3 pg. 288-351 RM10.10 billion The Financials pg. 10-287 Profit Attributable to Equity Holders of the Bank Profit Before Taxation and Zakat Bank FY 31 Dec Our Performance pg. 4-8 FINANCIAL PERFORMANCE FY2017 FY2016 FY2015 FY2014 FY2013 6.55 Total Liabilities Total Assets RM765.3 billion RM690.1 billion 765.3 690.1 736.0 640.3 665.5 708.3 FY2017 FY2016 FY2015 FY2014 FY2013 560.3 Loans, Advances and Financing 585.6 644.8 FY2017 FY2016 FY2015 FY2014 FY2013 512.6 Deposits from Customers RM485.6 billion RM502.0 billion 477.8 485.6 485.5 453.5 502.0 478.2 403.5 FY2017 355.6 FY2016 FY2015 FY2014 FY2013 439.6 FY2017 FY2016 FY2015 FY2014 FY2013 395.6 Share Capital3 ⁄ Share Premium Shareholders’ Equity RM73.0 billion RM44.3 billion Share Capital3 Share Premium 28.9 53.0 61.7 68.5 73.0 FY2017 FY2016 FY2015 FY2014 FY2013 46.0 25.9 22.7 44.3 19.0 10.2 FY20173 FY2016 FY2015 8.9 FY2014 FY2013 9.3 9.8 5
8. MAYBANK ANNUAL REPORT 2017 FINANCIAL PERFORMANCE SIMPLIFIED GROUP STATEMENTS OF FINANCIAL POSITION Total Assets 63 .4% 64.9% RM765.3 RM736.0 billion as at 31 December 2017 billion 20.2% 2.2% 6.6% 5.6% 2.0% as at 31 December 2016 Cash and short-term funds Deposits and placements with financial institutions Financial investments portfolio 17.8% 1.8% 7.9% 5.5% 2.1% Loans, advances and financing Other assets Statutory deposits with central banks Total Liabilities & Shareholders’ Equity 66.0% 65.6% RM765.3 billion as at 31 December 2017 RM736.0 billion 3.2% 5.6% 9.8% 8.9% as at 31 December 2016 4.3% 4.2% 6.9% Deposits from customers Investment accounts of customers Deposits and placements from financial institutions 9.6% 8.2% 7.7% Other liabilities Borrowings, subordinated obligations and capital securities Shareholders' equity GROUP QUARTERLY FINANCIAL PERFORMANCE RM’ million Operating revenue Net interest income (including income from Islamic Banking Scheme operations) Net earned insurance premiums Other operating income Total operating income Operating profit Profit before taxation and zakat Profit attributable to equity holders of the Bank Earnings per share (sen) Dividend per share (sen) RM’ million Operating revenue Net interest income (including income from Islamic Banking Scheme operations) Net earned insurance premiums Other operating income Total operating income Operating profit Profit before taxation and zakat Profit attributable to equity holders of the Bank Earnings per share (sen) Dividend per share (sen) 6 FY 31 Dec 2017 Q3 Q1 Q2 Q4 YEAR 11,278 10,922 11,594 11,786 45,580 4,249 1,254 1,405 6,908 2,208 2,249 1,703 16.7 – 4,231 1,256 1,527 7,014 2,179 2,245 1,659 16.1 23.0 4,309 1,307 1,497 7,113 2,602 2,678 2,027 19.2 – 4,258 1,434 1,598 7,290 2,894 2,926 2,132 19.9 32.0 17,047 5,251 6,027 28,325 9,883 10,098 7,521 72.0 55.0 Q1 Q2 Q4 YEAR 11,182 10,941 11,288 11,247 44,658 3,856 1,169 1,670 6,694 1,893 1,931 1,427 14.6 – 3,793 1,065 1,543 6,401 1,541 1,584 1,160 11.8 20.0 3,822 1,018 1,709 6,549 2,427 2,456 1,796 18.0 – 4,077 1,192 1,367 6,637 2,810 2,873 2,360 23.2 32.0 15,548 4,444 6,289 26,281 8,671 8,844 6,743 67.8 52.0 FY 31 Dec 2016 Q3
9. Our Performance pg . 4-8 FINANCIAL PERFORMANCE Interest earning assets Loans, advances and financing Cash and short-term funds & deposits and placements with financial institutions Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Interest Income/ Expense RM’ million FY 31 Dec 2017 Effective Interest As at Rate 31 December RM’ million % Interest Income/ Expense RM’ million 477,775 71,585 4.80 1.63 22,888 1,164 485,584 67,323 4.86 2.26 24,010 1,265 23,496 92,385 15,022 3.66 3.83 4.98 805 2,940 550 25,117 109,070 20,185 3.70 3.28 4.60 964 3,372 704 485,524 31,545 30,855 34,867 15,901 6,200 1.81 3.27 1.85 2.91 4.45 6.18 9,709 1,080 1,161 920 940 388 502,017 24,555 42,598 34,506 11,979 6,284 2.38 2.05 2.25 3.20 4.74 6.06 9,605 913 1,644 1,097 855 395 FY 31 Dec 2016 RM’000 FY 31 Dec 2017 RM’000 Net interest income Income from Islamic Banking Scheme operations Net earned insurance premiums Other operating income Net insurance benefits and claims incurred, net fee and commission expenses, change in expense liabilities and taxation of life and takaful fund Overhead expenses excluding personnel expenses, depreciation and amortisation Allowances for impairment losses on loans, advances and financing, net Allowances for impairment losses on financial investments, net Share of profits in associates and joint ventures 11,358,470 4,189,242 4,444,057 6,289,283 (4,107,909) 12,147,041 4,900,251 5,250,890 6,027,304 (5,057,130) (4,178,656) (2,832,748) (182,253) 173,464 (4,536,456) (1,959,060) (68,762) 214,620 Value added available for distribution 15,152,950 16,918,698 FY 31 Dec 2016 RM’000 FY 31 Dec 2017 RM’000 5,638,874 6,128,012 1,880,558 2,301,222 4,926,889 220,900 5,708,543 276,332 669,626 1,816,103 692,590 1,811,999 15,152,950 16,918,698 Interest bearing liabilities Customers’ funding: – Deposits from customers – Investment accounts of customers Deposits and placements from financial institutions Borrowings Subordinated obligations Capital securities Basel II Pillar 3 pg. 288-351 FY 31 Dec 2016 Effective Interest As at Rate 31 December RM’ million % The Financials pg. 10-287 KEY INTEREST BEARING ASSETS AND LIABILITIES STATEMENT OF VALUE ADDED DISTRIBUTION OF VALUE ADDED To employees: Personnel expenses To the Government: Taxation To providers of capital: Dividends paid to shareholders Non-controlling interests To reinvest to the Group: Depreciation and amortisation Retained profits Value added available for distribution 7
10. MAYBANK ANNUAL REPORT 2017 FINANCIAL PERFORMANCE SEGMENTAL INFORMATION ANALYSIS BY GEOGRAPHICAL LOCATION Net Operating Income (RM’ million) +4.9% +4.0% 23,268 22,173 +21.2% +9.6% 18,117 17,425 Total +3.4% 3,491 Malaysia 4,232 3,354 3,242 Singapore FY 31 Dec 2016 1,669 Note: Total net operating income includes inter-segment which are eliminated on consolidation of RM4,264 million for FY 31 December 2017 and RM3,654 million for FY 31 December 2016. 1,829 Other Locations Indonesia FY 31 Dec 2017 Profit Before Taxation and Zakat (RM’ million) +14.2% 8,844 10,098 +9.5% 9,740 +8.7% >100.0% 10,663 877 Total +10.8% Malaysia 954 1,081 869 785 Singapore FY 31 Dec 2016 Note: Total profit before taxation and zakat includes inter-segment which are eliminated on consolidation of RM3,469 million for FY 31 December 2017 and RM2,911 million for FY 31 December 2016. 353 Other Locations Indonesia FY 31 Dec 2017 ANALYSIS BY BUSINESS SEGMENTS Net Operating Income (RM’ million) +1.6% Group Global Banking +4.9% 22,173 23,268 Total +6.4% +1.4% 12,684 13,497 7,555 7,658 Group Community Financial Services -5.1% 1,409 Group Corporate Banking & Global Markets FY 31 Dec 2016 +80.3% 1,337 247 Group Investment Banking 137 +18.7% Note: Total net operating income includes expenditure of Head Office & others and inter-segment which are eliminated on consolidation of RM1,362 million for FY 31 December 2017 and RM1,205 million for FY 31 December 2016. 1,891 1,593 Group Asset Management Group Insurance and Takaful FY 31 Dec 2017 Profit Before Taxation and Zakat (RM’ million) +5.6% Group Global Banking +14.2% 8,844 +23.4% 10,098 Total 4,303 5,311 Group Community Financial Services +8.0% >100.0% +14.6% 1,009 4,888 4,525 341 Group Corporate Banking & Global Markets FY 31 Dec 2016 8 -47.6% Note: Total profit before taxation and zakat includes expenditure of Head Office & others and inter-segment which are eliminated on consolidation of RM1,362 million for FY 31 December 2017 and RM1,205 million for FY 31 December 2016. 179 73 880 0 Group Investment Banking FY 31 Dec 2017 Group Asset Management Group Insurance and Takaful
11. FINANCIAL STATEMENTS 10 11 16 28 28 29 32 33 Statement of Directors ' Responsibility Analysis of Financial Statements Directors’ Report Statement by Directors Statutory Declaration Independent Auditors’ Report Index to the Financial Statements Statements of Financial Position 34 Income Statements 35 Statements of Comprehensive Income 36Consolidated Statement of Changes in Equity 38 Statement of Changes in Equity 39 Statements of Cash Flows 41 Notes to the Financial Statements
12. MAYBANK ANNUAL REPORT 2017 STATEMENT OF DIRECTORS ' RESPONSIBILITY IN RESPECT OF THE AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 The directors are responsible for ensuring that the annual audited financial statements of the Group and of the Bank are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards, the requirements of the Companies Act 2016, Bank Negara Malaysia’s Guidelines and the Listing Requirements of Bursa Malaysia Securities Berhad. The directors are also responsible for ensuring that the annual audited financial statements of the Group and of the Bank are prepared with reasonable accuracy from the accounting records of the Group and of the Bank so as to give a true and fair view of the financial position of the Group and of the Bank as at 31 December 2017, and of their financial performance and cash flows for the financial year then ended. In preparing the annual audited financial statements, the directors have: • considered the applicable approved accounting standards in Malaysia; • adopted and consistently applied appropriate accounting policies; • made judgments and estimates that are prudent and reasonable; and • prepared the financial statements on a going concern basis as the directors have a reasonable expectation, having made enquiries, that the Group and the Bank have adequate resources to continue in operational existence for the foreseeable future. The directors also have a general responsibility for taking reasonable steps to safeguard the assets of the Group and the Bank to prevent and detect fraud and other irregularities. 10
13. Our Performance pg . 4-8 ANALYSIS OF FINANCIAL STATEMENTS Basel II Pillar 3 pg. 288-351 Profit before taxation and zakat of Maybank Group for FY2017 breached the RM10,098.1 million mark for the first time and representing an increase of 14.2% more than the RM8,844.5 million recorded a year earlier. Profit attributable to equity holders of the Bank ("net profit") also surpassed RM7.0 billion level for the first time rising a new high of RM7,520.5 million and resulting an increase of 11.5% from FY2016. The increase in net profit is supported by an increase in net operating income of RM1,095.2 million and decrease in allowances for impairment losses made for both loans, advances and financing and financial investments of RM873.7 million and RM113.5 million respectively. NET OPERATING INCOME RM’ million +4.9% The Financials pg. 10-287 REVIEW OF FY2017 FINANCIAL RESULTS +6.9% +17.0% -4.2% +18.2% +23.1% 23,268.3 22,173.1 11,358.5 12,147.0 6,289.3 6,027.3 4,900.2 Total Net interest income Income from IBS FY2016 5,250.9 4,444,0 4,189.2 Other operating income Net insurance premiums Net insurance benefits & claims incurred, net fee & commission expenses , change in expense liabilities and taxation of life and takaful fund (4,107.9) (5,057.1) FY2017 NET INTEREST INCOME Net interest income (“NII”) for FY2017 rose by RM788.5 million or 6.9% mainly attributable to increase in interest income from financial investments portfolio and loans, advances and financing of RM570.9 million and RM399.2 million respectively. The growth is supported by an increase in financial investments portfolio of RM23.5 billion or 17.9% and gross loans, advances and financing of RM8.1 billion or 1.7%. Net interest margin (“NIM”) improved by 9 bps to 2.36% in FY2017. The increase in interest income is offset with increase in interest expense on deposits and placements from financial institutions of RM213.8 million and borrowings, subordinated notes and bonds and capital securities of RM118.1 million. RM'million Interest Income Loans, advances and financing Money at call and deposits and placements with financial institutions Financial investments porfolio Other interest income Interest Expense Deposits and placements from financial institutions Deposits from customers Borrowings, subordinated notes and bonds and capital securities Financial liabilities at fair value through profit or loss Structured deposits Other interest expense Net interest income FY2016 FY2017 Variance % Change 16,066.1 728.2 4,064.8 81.4 16,465.3 781.9 4,635.7 173.4 399.2 53.7 570.9 92.0 2.5 7.4 14.0 113.0 20,940.5 22,056.3 1,115.8 5.3 457.3 6,794.2 2,091.6 46.8 111.9 80.2 671.1 6,628.2 2,209.7 134.7 108.8 156.8 213.8 (166.0) 118.1 87.9 (3.1) 76.6 9,582.0 9,909.3 327.3 3.4 11,358.5 12,147.0 788.5 6.9 46.8 (2.4) 5.6 187.8 (2.8) 95.5 11
14. MAYBANK ANNUAL REPORT 2017 ANALYSIS OF FINANCIAL STATEMENTS INCOME FROM ISLAMIC BANKING SCHEME OPERATIONS The growth in income from Islamic Banking Scheme Operations (“IBS”) of RM711.0 million or 17.0% mainly driven by an increase in fund based income of RM764.8 million, whilst fee based income dipped by RM53.8 million. Year-on-year growth in fund based income is mainly attributable to increase in income from financing and advances of RM723.6 million and financial investments portfolio of RM174.3 million. These were offset by increase in profit distributed to depositors and investment account holders of RM140.5 million. The decrease in fee based income is mainly due to loss on foreign exchange of RM11.8 million as compared to gain in a year earlier of RM76.2 million and lower gain on disposal of financial investments portfolio of RM13.8 million. The decreases were mitigated by an increase in fee income of RM41.1 million which attributable to increase in service charges and fees of RM28.5 million and commission income of RM10.5 million. OTHER OPERATING INCOME The Group’s other operating income decreased by RM262.0 million or 4.2% to RM6,027.3 million in FY2017. The decrease is mainly due to lower gain on disposal of financial investments portfolio of RM289.0 million and unrealised gain on financial liabilities at FVTPL of RM169.1 million. These were mitigated by an increase in realised gain on derivatives of RM135.7 million, gain on disposal of property, plant and equipment of RM132.3 million and fee income of RM5.2 million. RM’ million -9.9% +51.6% +13.3% +100% -14.5% 620.0 558.9 398.6 263.0 245.5 210.0 201.0 108.8 123.3 68.7 Foreign exchange gain, net Realised gain on derivatives Gross dividends income from financial investments portfolio FY2016 Gain on disposal of property, plant & equipment Others FY2017 RM’ million -4.2% +0.1% -25.6% -77.5% +14.2% 6,289.3 6,027.3 3,558.6 3,563.8 1,306.0 1,254.7 1,491.8 933.4 170.0 Total Fee income Investments income FY2016 12 FY2017 38.3 Unrealised gain on financial assets/ liabilities at FVTPL and derivatives Other income
15. Our Performance pg . 4-8 ANALYSIS OF FINANCIAL STATEMENTS The Group’s overhead expenses increased by RM869.9 million which resulted in an increase in cost to income ratio of 48.7% from 47.1% in FY2016. The increase in overhead expenses is mainly attributable to increase in personnel expenses of RM489.1 million, administration and general expenses of RM294.6 million and establishments costs of RM93.2 million. However, these were mitigated by decrease in marketing expenses of RM7.0 million. The Financials pg. 10-287 OVERHEAD EXPENSES +8.3% +8.7% +4.9% -1.3% +12.1% 11,357.0 Basel II Pillar 3 pg. 288-351 RM’ million 10,487.1 6,128.0 5,638.9 1,887.7 2,438.4 1,980.9 522.1 Total Personnel expenses Establishments costs FY2016 2,733.0 515.1 Marketing expenses Administration and general expenses FY2017 Personnel expenses recorded an increase of RM489.1 million mainly due to an increase in salaries, allowances and bonuses of RM403.8 million, pension costs of RM53.0 million and staff incentives of RM33.2 million. Administration and general expenses grew by RM294.6 million which mainly due to an increase in fees and brokerage of RM163.2 million, provision for contingencies of RM81.7 million and subscription for services and club membership of RM26.9 million. Establishments costs increased by RM93.2 million mainly attributable to loss of fair value adjustment on investment properties of RM60.2 million in FY2017, increase in depreciation charges of RM39.8 million and rental of leasehold land and premises of RM14.4 million. These were mitigated by decrease in information technology expenses of RM27.4 million and amortisation of intangible assets of RM16.8 million. 13
16. MAYBANK ANNUAL REPORT 2017 ANALYSIS OF FINANCIAL STATEMENTS ALLOWANCES FOR IMPAIRMENT LOSSES ON LOANS , ADVANCES, FINANCING AND OTHER DEBTS, NET The Group’s allowances for impairment losses on loans, advances, financing and other debts decreased by RM873.7 million to RM1,959.0 million for FY2017. The decrease was mainly due to lower individual allowance made and collective allowance made in FY2017 of RM771.0 million and RM233.5 million respectively. These were offset with decrease in bad debts and financing recovered of RM113.1 million. RM’ million -30.8% -33.9% -21.8% -25.5% 2,832.7 2,275.0 1,959.0 1,504.0 1,069.5 836.0 Bad debts and financing (recovered)/written off and allowances for/(writeback) of impairment losses on other debts Total Individual allowance Collective allowance (381.0) FY2016 FY2017 (511.8) ALLOWANCES FOR IMPAIRMENT LOSSES ON FINANCIAL INVESTMENTS, NET The Group’s allowances for impairment losses on financial investments decreased from RM182.3 million in FY2016 to RM68.8 million in FY2017. REVIEW OF FY2017 FINANCIAL POSITION TOTAL ASSETS The Group’s total assets rose by RM29.3 billion to RM765.3 billion as at 31 December 2017. The growth is mainly attributable to increase in financial investments portfolio and net loans, advances and financing of RM23.5 billion and RM7.8 billion respectively. These were offset by decrease in cash and short-term funds and deposits and placements with financial institutions of RM4.3 billion. RM’ billion +4.0% 736.0 +1.6% +18.0% -6.0% 765.3 477.8 485.6 130.9 154.4 71.6 Total assets Loans, advances and financing FY2016 14 +4.1% Financial investments portfolio FY2017 67.3 Cash and short-term funds & Deposits and placements with financial institutions 55.7 58.0 Other assets
17. Our Performance pg . 4-8 ANALYSIS OF FINANCIAL STATEMENTS The Group’s loans, advances and financing which represents 63.5% of Group’s total assets increased by RM7.8 billion or 1.6% to RM485.6 billion as at 31 December 2017, supported by loans growth in home markets. The Financials pg. 10-287 LOANS, ADVANCES AND FINANCING The Group’s financial investments portfolio increased by RM23.5 billion which attributable to increase in financial investments available-for-sale of RM16.7 billion, financial investments held-to-maturity of RM5.2 billion and financial assets at fair value through profit or loss by RM1.6 billion. TOTAL LIABILITIES Basel II Pillar 3 pg. 288-351 FINANCIAL INVESTMENTS PORTFOLIO The Group’s total liabilities grew by RM24.6 billion or 3.7% to RM690.1 billion as at 31 December 2017 from RM665.5 billion as at 31 December 2016 which was attributable to growth in deposits from customers of RM16.5 billion and deposits and placements from financial institutions of RM11.7 billion. These were mitigated by decrease in investment accounts of customers of RM7.0 billion and borrowings, subordinated obligations and capital securities of RM4.2 billion. RM’ billion +3.7% 665.5 +1.8% +37.9% -7.4% +12.6% 690.1 517.1 526.6 30.9 Total liabilities Deposits from customers and investment accounts of customers FY2016 42.6 Deposits and placements from financial institutions 57.0 52.8 Borrowings, subordinated obligations and capital securities 60.5 68.1 Other liabilities FY2017 DEPOSITS FROM CUSTOMERS AND INVESTMENT ACCOUNTS OF CUSTOMERS The Group’s deposits from customers and investment accounts of customers grew by RM9.5 billion to RM526.6 billion, supported by growth in current and savings account (“CASA”) in our home market. BORROWINGS, SUBORDINATED OBLIGATIONS AND CAPITAL SECURITIES The Group’s borrowings, subordinated obligations and capital securities decreased to RM52.8 billion as at 31 December 2017 from RM57.0 billion as at 31 December 2016. 15
18. MAYBANK ANNUAL REPORT 2017 DIRECTORS ’ REPORT The Board of Directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Bank for the financial year ended 31 December 2017. DIVIDENDS The amount of dividends paid by the Bank since 31 December 2016 (as disclosed in Note 50(c) to the financial statements) were as follows: PRINCIPAL ACTIVITIES RM’000 The Bank is principally engaged in all aspects of commercial banking and related financial services. The subsidiaries of the Bank are principally engaged in the businesses of banking and finance, Islamic banking, investment banking including stockbroking, underwriting of general and life insurance, general and family takaful, trustee and nominee services and asset management. Further details of the subsidiaries are described in Note 63(a) to the financial statements. There were no significant changes in these principal activities during the financial year. RESULTS Group RM’000 Profit before taxation and zakat Taxation and zakat Bank RM’000 10,098,096 (2,301,222) 7,352,614 (1,229,739) Profit for the financial year 7,796,874 6,122,875 Attributable to: Equity holders of the Bank Non-controlling interests 7,520,542 276,332 6,122,875 – 7,796,874 6,122,875 There were no material transfers to or from reserves, allowances or provisions during the financial year other than those as disclosed in Notes 9, 10, 11, 25, 44 and 45 and the statements of changes in equity to the financial statements. In the opinion of the Board of Directors, the results of the operations of the Group and of the Bank during the current financial year were not substantially affected by any item, transaction or event of a material and unusual nature. In respect of the financial year ended 31 December 2016 as reported in the directors’ report of that year: Final dividend of 32 sen single-tier dividend consists of cash portion of 10 sen single-tier dividend per ordinary share and an electable portion of 22 sen per ordinary share, on 10,258,507,149 ordinary shares, approved on 6 April 2017 and paid on 6 June 2017. 3,282,722 In respect of the financial year ended 31 December 2017: A single-tier interim dividend of 23 sen consists of cash portion of 5 sen per ordinary share and an electable portion of 18 sen per ordinary share, on 10,595,615,926 ordinary shares, declared on 30 August 2017 and paid on 1 November 2017. 2,436,992 5,719,714 At the forthcoming Annual General Meeting, a final single-tier dividend in respect of the current financial year ended 31 December 2017 of 32 sen single-tier dividend per ordinary share amounting to a net dividend payable of RM3,450,478,489 (based on 10,782,745,278 ordinary shares issue as at 31 December 2017) will be proposed for the shareholders’ approval. The proposed final single-tier dividend consists of cash portion of 18 sen per ordinary share to be paid in cash amounting to RM1,940,894,150 and an electable portion of 14 sen per ordinary share amounting to RM1,509,584,339. The electable portion can be elected to be reinvested in new ordinary shares in accordance with the Dividend Reinvestment Plan (“DRP”) as disclosed in Note 32(b) to the financial statements and subject to the relevant regulatory approvals as well as shareholders’ approval at the forthcoming Annual General Meeting. The financial statements for the current financial year ended 31 December 2017 do not reflect this proposed final dividend. Such dividend, if approved by the shareholders, will be accounted for in the statements of changes in equity as an appropriation of retained profits in the next financial year ending 31 December 2018. MAYBANK GROUP EMPLOYEES’ SHARE SCHEME (“ESS”) AND CASH-SETTLED PERFORMANCE-BASED EMPLOYEES’ SHARE SCHEME (“CESS”) The Maybank Group Employees’ Share Scheme (“ESS”) is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held on 13 June 2011. The ESS was implemented on 23 June 2011. It is in force for a maximum period of seven (7) years from the effective date and is administered by the ESS Committee. The ESS consists of two (2) types of performance-based awards in the form of Employee Share Option Scheme (“ESOS”) and Restricted Share Unit (“RSU”). 16
19. Following the issuance of new ordinary shares pursuant to the implementation of DRP , the revisions to the exercise prices are as follows: The ESS Committee may, from time to time during the ESS period, make further RSU grants designated as Supplemental RSU (“SRSU”) to a selected group of eligible employees to participate in the RSU award. This selected group may consist of senior management, selected key retentions and selected senior external recruits, and such SRSU grants may contain terms and conditions which may vary from earlier RSU grants made available to selected senior management. Grant date The Maybank Group Cash-settled Performance-based Employees’ Share Scheme (“CESS”) is governed by the guidelines approved by the members of the ESS Committee on 15 June 2011. The CESS comprises Cash-settled Performance-based Option Scheme (“CESOS”) and Cash-settled Performance-based Restricted Share Unit Scheme (“CRSU”) and is made available at the appropriate time to the eligible employees of overseas branches and subsidiaries of the Bank which include PT Bank Maybank Indonesia Tbk, PT Bank Maybank Syariah Indonesia and Maybank Philippines Incorporated, subject to achievement of performance criteria set out by the Board of Directors and prevailing market practices in the respective countries. The aggregate maximum allocation of share options under ESS to Chief Executive Officer and senior management of the Group and of the Bank shall not exceed 50% of the Maximum Allowable Scheme Shares. The actual allocation of share options to Chief Executive Officer and senior management is 19.4% as at 31 December 2017 (2016: 20.2%). Details on the key features of the ESS and CESS are disclosed in Note 32(c) to the financial statements. Exercise price RM/option Exercise period 23.6.2011 – ESOS First Grant 8.82 8.78 8.76 8.75 8.74 8.71 30.6.2011 – 28.12.2011 29.12.2011 – 4.6.2012 5.6.2012 – 28.10.2012 29.10.2012 – 5.6.2016 6.6.2016 – 31.10.2016 1.11.2016 – 22.6.2018 30.4.2012 – ESOS Second Grant 8.83 8.82 8.81 8.78 7.5.2012 – 28.10.2012 29.10.2012 – 5.6.2016 6.6.2016 – 31.10.2016 1.11.2016 – 22.6.2018 30.4.2013 – ESOS Third Grant 9.61 9.59 9.58 9.56 9.54 9.51 9.47 21.5.2013 – 27.6.2013 28.6.2013 – 21.11.2013 22.11.2013 – 24.6.2014 25.6.2014 – 29.6.2015 30.6.2015 – 5.6.2016 6.6.2016 – 31.10.2016 1.11.2016 – 22.6.2018 30.4.2014 – ESOS Fourth Grant 9.91 9.88 9.87 9.84 9.80 9.75 21.5.2014 – 24.6.2014 25.6.2014 – 28.10.2014 29.10.2014 – 29.6.2015 30.6.2015 – 5.6.2016 6.6.2016 – 31.10.2016 1.11.2016 – 22.6.2018 30.4.2015 – ESOS Fifth Grant 9.35 9.32 9.28 21.5.2015 – 5.6.2016 6.6.2016 – 31.10.2016 1.11.2016 – 22.6.2018 30.9.2015 – ESOS Special Grant 8.39 21.10.2015 – 31.10.2016 8.37 1.11.2016 – 22.6.2018 Details of share options granted, vested and exercised under the ESS and CESS are as follows: (a) ESOS Granted Grant date 23.6.2011 – ESOS First Grant 30.4.2012 – ESOS Second Grant 30.4.2013 – ESOS Third Grant 30.4.2014 – ESOS Fourth Grant 30.4.2015 – ESOS Fifth Grant 30.9.2015 – ESOS Special Grant # Original Number exercise of share price options ‘000 RM/option 405,309# Our Performance pg. 4-8 The Financials pg. 10-287 MAYBANK GROUP EMPLOYEES’ SHARE SCHEME (“ESS”) AND CASH-SETTLED PERFORMANCE-BASED EMPLOYEES’ SHARE SCHEME (“CESS”) (CONT’D.) Basel II Pillar 3 pg. 288-351 DIRECTORS’ REPORT Exercise period 8.82* 30.6.2011 – 22.6.2018 62,339# 8.83* 53,594# 9.61* 21.5.2013 – 22.6.2018 54,028# 9.91* 21.5.2014 – 22.6.2018 48,170# 9.35* 21.5.2015 – 22.6.2018 992# 8.39* 21.10.2015 – 22.6.2018 7.5.2012 – 22.6.2018 The number of share options granted are based on the assumptions that the eligible employees met average performance targets. * The ESS Committee approved the reduction of the ESOS exercise prices following the issuances of new ordinary shares pursuant to the implementation of DRP. During the financial year ended 31 December 2017, a total of 7,437,200 (2016: 7,806,200) under the ESOS Third Grant, 8,531,100 (2016: 9,018,700) under the ESOS Fourth Grant, 10,485,000 (2016: 11,250,300) under the ESOS Fifth Grant and 108,200 (2016: 215,500) under the ESOS Special Grant had been vested to a selected group of eligible employees. All tranches under the ESOS Second Grant had been vested in the previous financial year ended 31 December 2016. During the financial year ended 31 December 2017, the Bank vested 55,000 options for the fourth tranche under the Third Grant and 10,000 options for the second tranche under Fifth Grant for appeal cases. 17
20. MAYBANK ANNUAL REPORT 2017 DIRECTORS ’ REPORT MAYBANK GROUP EMPLOYEES’ SHARE SCHEME (“ESS”) AND CASH-SETTLED PERFORMANCE-BASED EMPLOYEES’ SHARE SCHEME (“CESS”) (CONT’D.) (a) ESOS Granted (cont’d.) The movements of ESOS vested are as follows: ESOS First Grant (Vested) Outstanding as at 1.1.2017 ’000 Vesting date 30.4.2012 30.4.2013 30.4.2014 30.4.2015 30.9.2015 1 Movements during the financial year Forfeited Expired Exercised1 ’000 ’000 ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 15,194 37,871 47,256 62,329 33,196 (11,858) (25,798) (26,837) (35,266) (20,501) (76) (313) (401) (607) (349) (3,260) – – – – – 11,760 20,018 26,456 12,346 – 11,760 20,018 26,456 12,346 195,846 (120,260) (1,746) (3,260) 70,580 70,580 4,585,200 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017. ESOS Second Grant (Vested) Outstanding as at 1.1.2017 ’000 Vesting date 7.5.2012 30.4.2013 30.4.2014 30.4.2015 3.5.2016 30.9.2016 2 Movements during the financial year Forfeited Expired Exercised2 ’000 ’000 ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 2,151 5,755 7,042 9,105 9,128 4,655 (1,617) (3,695) (4,001) (5,098) (5,014) (2,764) (49) (123) (155) (246) (252) (130) (485) – – – – – – 1,937 2,886 3,761 3,862 1,761 – 1,937 2,886 3,761 3,862 1,761 37,836 (22,189) (955) (485) 14,207 14,207 772,300 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017. ESOS Third Grant (Vested) Vesting date 21.5.2013 30.4.2014 30.4.2015 3.5.2016 2.5.2017 3 4 18 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested Exercised4 Adjustment3 ’000 ’000 ’000 Forfeited ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 5,669 7,539 8,072 7,472 – – – – 55 – – – – – 7,382 (1,450) (1,853) (1,985) (1,729) (1,482) (271) (356) (353) (285) (132) 3,948 5,330 5,734 5,513 5,768 3,948 5,330 5,734 5,513 5,768 28,752 55 7,382 (8,499) (1,397) 26,293 26,293 Adjustment relates to appeal cases approved during the financial year ended 31 December 2017. 751,900 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017.
21. MAYBANK GROUP EMPLOYEES ’ SHARE SCHEME (“ESS”) AND CASH-SETTLED PERFORMANCE-BASED EMPLOYEES’ SHARE SCHEME (“CESS”) (CONT’D.) (a) ESOS Granted (cont’d.) The movements of ESOS vested are as follows (cont’d.): Our Performance pg. 4-8 The Financials pg. 10-287 DIRECTORS’ REPORT Outstanding as at 1.1.2017 ’000 Vesting date 21.5.2014 30.4.2015 3.5.2016 2.5.2017 5 Movements during the financial year Forfeited Vested Exercised5 ’000 ’000 ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 7,916 9,355 8,633 – – – – 8,531 (204) (159) (164) (127) (405) (506) (461) (241) 7,307 8,690 8,008 8,163 7,307 8,690 8,008 8,163 25,904 8,531 (654) (1,613) 32,168 32,168 Basel II Pillar 3 pg. 288-351 ESOS Fourth Grant (Vested) 18,800 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017. ESOS Fifth Grant (Vested) Vesting date 21.5.2015 3.5.2016 2.5.2017 6 7 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested Exercised7 Adjustment6 ’000 ’000 ’000 Forfeited ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 10,473 10,869 – – 10 – – – 10,475 (3,661) (3,470) (2,594) (503) (474) (131) 6,309 6,935 7,750 6,309 6,935 7,750 21,342 10 10,475 (9,725) (1,108) 20,994 20,994 Adjustment relates to appeal cases approved during the financial year ended 31 December 2017. 721,600 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017. ESOS Special Grant (Vested) Vesting date 21.10.2015 3.5.2016 2.10.2017 8 Outstanding as at 1.1.2017 ’000 Movements during the financial year Forfeited Vested Exercised8 ’000 ’000 ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 143 164 – – – 108 (63) (64) (50) (47) (52) – 33 48 58 33 48 58 307 108 (177) (99) 139 139 6,000 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017. 19
22. MAYBANK ANNUAL REPORT 2017 DIRECTORS ’ REPORT MAYBANK GROUP EMPLOYEES’ SHARE SCHEME (“ESS”) AND CASH-SETTLED PERFORMANCE-BASED EMPLOYEES’ SHARE SCHEME (“CESS”) (CONT’D.) (b) RSU Granted The following table illustrates the number of, and movements in, RSU during the financial year ended 31 December 2017: Grant date 23.6.2011 – RSU First Grant 30.4.2014 – RSU Fourth Grant 30.4.2015 – RSU Fifth Grant 1 2 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested and Adjustment awarded Forfeited ’000 ’000 ’000 41 – – 4462 4,865 6,155 – 11,024 446 (4,113) – 4 (1,198) – (490) 5,665 (1,688) 5,669 – (4,113) Outstanding as at 31.12.2017 ’000 Vesting date Based on 3-year cliff vesting from the grant date and performance metrics Pending transfer of RSU shares to deceased employee’s next of kin. Adjustment pursuant to DRP which was vested during the financial year ended 31 December 2017. During the financial year ended 31 December 2017, the RSU Fourth Grant amounting to 4,113,031 options (including DRP) had been vested and awarded to a selected group of eligible employees. The RSU Third Grant amounting to 3,155,659 options (including DRP), the RSU Second Grant amounting to 2,784,277 options (including DRP) and the RSU First Grant amounting to 2,794,826 options (including DRP) had been vested and awarded to a selected group of eligible employees during the previous financial years ended 31 December 2016, 31 December 2015 and 31 December 2014 respectively. The remaining grant has not been vested as at 31 December 2017. (c) SRSU Granted During the financial year ended 31 December 2017, there is no new SRSU (2016: 34,000) granted to selected group of eligible employees. A total of 110,000 SRSU (2016: 184,000) had been vested as at 31 December 2017. The remaining grant has not been vested as at 31 December 2017. The following table illustrates the number of, and movements in, SRSU during the financial year ended 31 December 2017: Grant date 26.3.2014 1.3.2015 3.5.2016 Fair value of SRSU RM Outstanding as at 1.1.2017 ’000 8.724 8.165 7.743 90 20 34 – – – (90) (20) – – – 34 144 – (110) 34 Movements during the financial year Granted Vested ’000 ’000 Outstanding as at 31.12.2017 ’000 (d) CESOS Granted During the financial year ended 31 December 2017, a total of 461,100 (2016: 518,000) under the CESOS First Grant, a total of 708,700 (2016: 837,900) under the CESOS Second Grant and none of shares (2016: 338,600) under the CESOS Third Grant had been vested to selected employees in overseas branches and selected key retention employees of PT Bank Maybank Indonesia, Tbk. During the previous financial year ended 31 December 2016, the Bank had granted a total of 70,200 shares under the CESOS Second Grant to a selected group of eligible employees. 20
23. MAYBANK GROUP EMPLOYEES ’ SHARE SCHEME (“ESS”) AND CASH-SETTLED PERFORMANCE-BASED EMPLOYEES’ SHARE SCHEME (“CESS”) (CONT’D.) (d) CESOS Granted (cont’d.) The following tables illustrate the numbers of, and movements in, CESOS during the financial year ended 31 December 2017: Our Performance pg. 4-8 The Financials pg. 10-287 DIRECTORS’ REPORT Grant date 30.4.2014 30.4.2015 30.9.2015 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested and awarded Forfeited ’000 ’000 Outstanding as at 31.12.2017 ’000 480 492 253 (461) – – (19) (40) (21) – 452 232 1,225 (461) (80) 684 Basel II Pillar 3 pg. 288-351 CESOS First Grant CESOS Second Grant Grant date 30.4.2014 30.4.2015 30.9.2016 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested and awarded Forfeited ’000 ’000 Outstanding as at 31.12.2017 ’000 806 667 67 (709) – – (97) (64) (3) – 603 64 1,540 (709) (164) 667 CESOS Third Grant Grant date 30.4.2014 30.4.2015 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested and awarded Forfeited ’000 ’000 Outstanding as at 31.12.2017 ’000 401 397 – – (401) (65) – 332 798 – (466) 332 CESOS Fourth Grant Grant date 30.4.2014 30.4.2015 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested and awarded Forfeited ’000 ’000 Outstanding as at 31.12.2017 ’000 253 360 – – (253) (115) – 245 613 – (368) 245 21
24. MAYBANK ANNUAL REPORT 2017 DIRECTORS ’ REPORT MAYBANK GROUP EMPLOYEES’ SHARE SCHEME (“ESS”) AND CASH-SETTLED PERFORMANCE-BASED EMPLOYEES’ SHARE SCHEME (“CESS”) (CONT’D.) (d) CESOS Granted (cont’d.) The following tables illustrate the numbers of, and movements in, CESOS during the financial year ended 31 December 2017 (cont’d.): CESOS Fifth Grant Outstanding as at 1.1.2017 ’000 Grant date Movements during the financial year Vested and awarded Forfeited ’000 ’000 605 30.4.2015 – (53) Outstanding as at 31.12.2017 ’000 552 The remaining CESOS granted have not been vested as at 31 December 2017. (e) CRSU Granted There is no new CRSU granted to eligible senior management of the Group and of the Bank during the financial year ended 31 December 2017. The CRSU Fourth Grant amounting to 42,897 options (including DRP) had been vested during the financial year ended 31 December 2017. The CRSU Third Grant amounting to 41,646 options (including DRP) and the CRSU Second Grant amounting to 54,117 options (including DRP) had been vested during the previous financial years ended 31 December 2016 and 31 December 2015 respectively. The remaining CRSU granted have not been vested as at 31 December 2017. The movements of CRSU granted and vested are as follows: Grant date 30.4.2014 – CRSU Fourth Grant 30.4.2015 – CRSU Fifth Grant 1 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested and awarded Forfeited Adjustment1 ’000 ’000 ’000 Outstanding as at 31.12.2017 ’000 95 5 (43) (57) – 208 – – (40) 168 303 5 (43) (97) 168 Vesting date Based on 3-year cliff vesting from the grant date and performance metrics Adjustment pursuant to DRP which was vested during the financial year ended 31 December 2017. The Bank has been granted exemption by the Companies Commission of Malaysia from having to disclose the names of employees who have been granted share options which have been vested to subscribe for less than 1,245,272 ordinary shares during the financial year ended 31 December 2017. The name of option holder who was granted share options which have been vested to subscribe for at least 1,245,272 ordinary shares during the financial year ended 31 December 2017 is as follows: <---------------- Number of share options from ESOS ----------------> Name Datuk Abdul Farid bin Alias Exercisable/ vested as at 1.1.2017 ’000 Vested ’000 1,601 300 Exercised ’000 (375) Exercisable/ vested as at 31.12.2017 ’000 1,526 The maximum number of ordinary shares in the Bank available under the ESS should not exceed 10% of the total number of issued and paid-up capital of the Bank at any point of time during the duration of the scheme. 22
25. DIRECTORS The following are the changes in debt and equity securities for the Group and the Bank during the current financial year ended 31 December 2017 : The directors who served since the date of the last report and the date of this report are: (i) During the current financial year ended 31 December 2017, the Bank increased its issued ordinary share from 10,193,199,917 units to 10,782,745,278 units via: Datuk Mohaiyani binti Shamsudin (Chairman) (redesignation on 1 April 2017) Datuk Abdul Farid bin Alias (Group President & Chief Executive Officer) Dato’ Johan bin Ariffin Datuk R. Karunakaran Mr Cheng Kee Check Mr Edwin Gerungan Mr Nor Hizam bin Hashim Dr Hasnita binti Dato’ Hashim Mr Anthony Brent Elam Datin Paduka Jamiah binti Abdul Hamid Tan Sri Dato’ Megat Zaharuddin bin Megat Mohd Nor (retired on 31 March 2017) Dato’ Dr Tan Tat Wai (retired on 6 April 2017) Mr Renato Tinio De Guzman (appointed on 2 October 2017 and tendered his resignation on 18 January 2018) (a) Issuance of 154,648,300 new ordinary shares amounting to RM1,445,238,920 to eligible persons who exercised their share options under the ESS, as disclosed in Note 32(d)(ii) to the financial statements; (b) Issuance of 4,098,732 new ordinary shares amounting to RM38,118,208 arising from the Restricted Share Unit (“RSU”), as disclosed in Note 32(e)(i) to the financial statements; (c) Issuance of 110,000 new ordinary shares amounting to RM935,000 arising from the Supplemental Restricted Share Unit (“SRSU”), as disclosed in Note 32(e)(vii) to the financial statements; (d) Issuance of 5,411,200 new ordinary shares amounting to RM49,999,488 to be held in the ESOS Trust Fund (“ETF”) Pool, as disclosed in Note 32(c)(v) to the financial statements; (e) Issuance of 243,599,777 new ordinary shares (including 539,678 new ordinary shares issued to ETF Pool) amounting to RM2,009,408,832 arising from the DRP relating to electable portion of the final dividend of 22 sen per ordinary share in respect of the financial year ended 31 December 2016, as disclosed in Note 50(c) (i) to the financial statements; and (f) Issuance of 181,677,352 new ordinary shares (including 408,244 new ordinary shares issued to ETF Pool) amounting to RM1,634,776,661 arising from the DRP relating to electable portion of the interim dividend of 18 sen per ordinary share in respect of the financial year ended 31 December 2017, as disclosed in Note 50(c)(ii) to the financial statements. The new ordinary shares issued during the current financial year ended 31 December 2017 rank pari passu in all respects with the existing ordinary shares of the Bank. (ii) During the current financial year ended 31 December 2017, the Group and the Bank made a various issuances and redemptions of the debt securities, as disclosed in Notes 23, 29, 30 and 31 to the financial statements. The proceeds from the issuances may be utilised to fund the working capital, general banking and other corporate purposes. Our Performance pg. 4-8 The Financials pg. 10-287 ISSUANCE OF SHARES AND DEBENTURES Basel II Pillar 3 pg. 288-351 DIRECTORS’ REPORT The directors of the Bank’s subsidiaries who served since the date of the last report and the date of this report are disclosed in Note 65 to the financial statements. DIRECTORS’ BENEFITS Neither at the end of the financial year, nor at any time during that financial year, did there subsist any arrangement to which the Bank or any of its subsidiary was a party, whereby the directors might acquire benefits by means of acquisition of shares in or debentures of the Bank or any other body corporate, other than those arising from the ESOS and the RSU pursuant to the ESS. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors from the Bank and its related corporations, or the fixed salary of a full-time employee of the Bank as disclosed in Note 43 to the financial statements) by reason of a contract made by the Bank or its related corporations 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 except for Mr Cheng Kee Check, who is deemed to receive or become entitled to receive a benefit by virtue of fees paid by the Bank or its related corporations to the law firm in which he is a partner in that firm that provides professional legal services to the Bank or its related corporations in the ordinary course of business. 23
26. MAYBANK ANNUAL REPORT 2017 DIRECTORS ’ REPORT DIRECTORS’ INTERESTS According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares, ESOS and RSU of the Bank during the financial year were as follows: Number of ordinary shares Direct interest As at 1.1.2017 Issued pursuant to RSU Issued pursuant to DRP As at 31.12.2017 Datuk Abdul Farid bin Alias Dato’ Johan bin Ariffin 237,554 291,409 190,655 – 20,210 13,753 448,419 305,162 Number of share options from ESOS over ordinary shares Exercise Price (RM) 8.82# 9.91## Datuk Abdul Farid bin Alias Vested as at 1.1.2017 Granted 1,000,000^ 1,410,000 2,410,000 791,000^ 810,000 1,601,000 Vested Exercised Vested as at 31.12.2017 – 300,000 (375,000) – 416,000 1,110,000 300,000 (375,000) 1,526,000 # Revised to RM8.71 on 1 November 2016 based on the revision to ESOS First Grant’s exercise price. Revised to RM9.75 on 1 November 2016 based on the revision to ESOS Fourth Grant’s exercise price. ^ Shares options from ESOS granted and vested prior to the appointment as Group President & Chief Executive Officer are 1,000,000 and 575,000 respectively. ## Number of RSU of ordinary shares Datuk Abdul Farid bin Alias Vested during the financial year Not vested during the financial year Outstanding as at 31.12.2017 Grant Date Granted as at 1.1.2017 Adjustment pursuant to DRP Granted as at 31.12.2017 30.4.2014 30.4.2015 200,000 200,000 20,655 – 220,655 200,000 (190,655) – (30,000) – – 200,000 400,000 20,655 420,655 (190,655) (30,000) 200,000 The remaining ESOS and RSU which were granted to the director have not been vested as at 31 December 2017. The remaining ESOS and RSU will be vested and exercisable upon fulfilment of vesting conditions or predetermined performance metrics including service period, performance targets and performance period. None of the other directors in office at the end of the financial year had any interest in shares in the Bank or its related corporations during the financial year. 24
27. Our Performance pg . 4-8 DIRECTORS’ REPORT Rating agency Date Rating classification Rating received Moody’s Investors Service 2 February 2018 Outlook Bank Deposits Baseline Credit Assessment Adjusted Baseline Credit Assessment Jr Subordinate Counterparty Risk Assessment Senior Unsecured Subordinate Commercial Paper Stable A3/P-2 a3 a3 Baa2 (hybrid) A2(cr)/P-1(cr) A3 Baa2 (hybrid) P-2 Standard & Poor’s (“S&P”) 25 October 2017 Counterparty Credit Rating Preferred Stock Senior Unsecured Subordinated A-/Stable/A-2 BB+ A-/A-2 BBB Fitch Ratings 11 August 2017 Long-Term Foreign-Currency Issuer Default Rating Long-Term Local-Currency Issuer Default Rating Short-Term Foreign-Currency Issuer Default Rating Viability Rating Support Rating Support Rating Floor Senior notes Basel II-compliant subordinated notes Basel II-compliant hybrid Tier 1 securities A-/Stable A-/Stable F2 a2 BBB ABBB+ BB+ RAM Ratings Services Berhad (“RAM”) 21 December 2017 Financial Institution Ratings – National Scale Financial Institution Ratings – ASEAN Scale RM4.0 billion Innovative Tier-1 Capital Securities Programme RM3.5 billion Non-Innovative Tier-1 Capital Securities RM3.0 billion Tier-2 Capital Subordinated Note Programme RM20.0 billion Subordinated Note Programme RM10.0 billion Additional Tier-1 Capital Securities Programme RM10.0 billion Senior and Subordinated Sukuk Murabahah Programme – Senior – Subordinated RM10.0 billion Commercial Papers/Medium Term Notes Programme AAA/Stable/P1 seaAAA/Stable/seaP1 AA2/Stable AA2/Stable AA1/Stable AA1/Stable AA3/Stable Basel II Pillar 3 pg. 288-351 Details of the Bank’s ratings are as follows: The Financials pg. 10-287 RATING BY EXTERNAL RATING AGENCIES AAA/Stable AA1/Stable AAA/Stable/P1 Malaysian Rating Corporation Berhad 4 August 2017 Financial Institution Rating Corporate Debt Rating Outlook AAA/MARC-1 AAA Stable Capital Intelligence 8 February 2017 Foreign Currency – Long Term Foreign Currency – Short Term Financial Strength Support Outlook AA2 A1 Stable Japan Credit Rating Agency 16 August 2017 Foreign Currency Long-term Issuer Rating Outlook Bond A Stable A 25
28. MAYBANK ANNUAL REPORT 2017 DIRECTORS ’ REPORT BUSINESS OUTLOOK OTHER STATUTORY INFORMATION Global real GDP growth is forecasted to remain stable at +3.7% in 2018E (2017: +3.7%), on sustained growth in the US (2018E: +2.5%; 2017: +2.3%), and improved growth in selected BRIC markets such as Brazil (2018E: +2.0%; 2017: +0.9%) and India (2018E: +7.3%; 2017: +6.5%). (a) Before the statements of financial position and income statements of the Group and of the Bank were made out, the directors took reasonable steps: Meanwhile, the ASEAN-6 countries could chart a similar pace of growth in 2018E at 5.1% (2017: +5.1%) benefitting from the spillover effects to domestic demand arising from the expansions in external demand. Maybank Group's home markets are expected to chart sustained growth in 2018E, with Malaysia expected to expand by +5.3% (2017: +5.9%), Singapore forecasted to grow at +2.8% (2017: +3.6%) and Indonesia to remain resilient at +5.3% (2017: +5.1%). Malaysia's real GDP growth in 2018 will be driven by continued growth in consumer spending, public consumption and gross fixed capital formation with expansion in both private and public investments. Exports and imports of goods and services will expand further in 2018 on the back of the sustained global and domestic growth momentum, but the pace of growth is expected to moderate after the high base in 2017. Maybank Malaysia's loan growth is expected to be in-line with industry growth, as the bank focuses on pockets of opportunities within the consumer, retail SME and corporate lending segments. Singapore's GDP is expected to grow at 2.8% in 2018, arising from a cooling off of the manufacturing-driven surge in 2017. In 2018, the services sector is likely to maintain its growth momentum while construction is expected to recover on the back of a strengthening property market and rollout of public infrastructure projects. Maybank Singapore's loan growth will mainly be driven by SME, consumer financing and corporate lending. Maybank Singapore will also focus on building its wealth management services by expanding our investment and insurance products and deepening cross-selling across key customer segments. Indonesia's economy is expected to remain resilient with GDP growth of 5.3% in 2018, driven by business and government spending from accelerated capital expenditure and infrastructure projects. Maybank Indonesia will remain focused on corporate lending growth among top-tier clients while protecting its net interest margin by maintaining pricing discipline across all products. Another area of growth for Maybank Indonesia will be the expansion of its fee income streams through structured products and e-channel transactions. At Maybank Group, key priorities for 2018 include maintaining pricing discipline across our products, focus on attaining cheaper funding sources to support loan growth, growing our loan portfolio within our risk appetite, while proactively managing our asset quality. The Group is also prepared and ready for the implementation of MFRS 9 on 1st January 2018 and will continue to keep its capital and liquidity positions strong. Barring any unforeseen circumstances, the Group expects its financial performance for 2018 to be satisfactory against the expected growth prospects of its key home markets. The Group has set its Headline Key Performance Indicator for Return on Equity of approximately 11%. 26 (i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowances for doubtful debts and satisfied themselves that all known bad debts had been written-off and that adequate allowances had been made for doubtful debts; and (ii) to ensure that any current assets which were unlikely to realise their values 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. (b) At the date of this report, the directors are not aware of any circumstances which would render: (i) the amount written-off for bad debts or the amount of the allowances for doubtful debts in the financial statements of the Group and of the Bank inadequate to any substantial extent; and (ii) the values attributed to current assets in the financial statements of the Group and of the Bank misleading. (c) 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. (d) 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. (e) As at the date of this report, there does not exist: (i) any charge on the assets of the Group and 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 of the Group or of the Bank which has arisen since the end of the financial year other than those arising in the normal course of business of the Group and of the Bank.
29. Our Performance pg . 4-8 DIRECTORS’ REPORT (i) no contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve (12) months after the end of the financial year which will or may affect the ability of the Group and of the Bank to meet their obligations as and when they fall due; and (ii) no item or transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Bank for the financial year in which this report is made. SIGNIFICANT AND SUBSEQUENT EVENTS Basel II Pillar 3 pg. 288-351 (f) In the opinion of the directors: The Financials pg. 10-287 OTHER STATUTORY INFORMATION (CONT’D.) The significant and subsequent events are disclosed in Note 60 to the financial statements. There are no significant adjusting events after the statements of financial position date up to the date when the financial statements are authorised for issuance which is within the period from 1 January 2018 to 28 February 2018. AUDITORS The auditors, Ernst & Young, have expressed their willingness to continue in office. Auditor’s remuneration are disclosed in Note 42 to the financial statements. Signed on behalf of the Board of Directors in accordance with a resolution of the directors dated 28 February 2018. Datuk Mohaiyani binti Shamsudin Datuk Abdul Farid bin Alias Kuala Lumpur, Malaysia 27
30. MAYBANK ANNUAL REPORT 2017 STATEMENT BY DIRECTORS PURSUANT TO SECTION 251 (2) OF THE COMPANIES ACT 2016 We, Datuk Mohaiyani binti Shamsudin and Datuk Abdul Farid bin Alias, being two of the directors of Malayan Banking Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 33 to 287 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Bank as at 31 December 2017 and of the results and the cash flows of the Group and of the Bank for the financial year then ended. Signed on behalf of the Board of Directors in accordance with a resolution of the directors dated 28 February 2018. Datuk Mohaiyani binti Shamsudin Datuk Abdul Farid bin Alias Kuala Lumpur, Malaysia STATUTORY DECLARATION PURSUANT TO SECTION 251(1)(b) OF THE COMPANIES ACT 2016 I, Dato’ Amirul Feisal bin Wan Zahir, being the officer primarily responsible for the financial management of Malayan Banking Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 33 to 287 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 Dato’ Amirul Feisal bin Wan Zahir at Kuala Lumpur in the Federal Territory on 28 February 2018 Before me, 28 Dato’ Amirul Feisal bin Wan Zahir
31. TO THE MEMBERS OF MALAYAN BANKING BERHAD (INCORPORATED IN MALAYSIA) Our Performance pg. 4-8 INDEPENDENT AUDITORS’ REPORT We have audited the financial statements of Malayan Banking Berhad, which comprise the statements of financial position as at 31 December 2017 of the Group and of the Bank, and the income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Bank for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 33 to 282. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Bank as at 31 December 2017, and of their financial performance and their cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. Basel II Pillar 3 pg. 288-351 Opinion The Financials pg. 10-287 REPORT ON THE FINANCIAL STATEMENTS 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 Auditor’s 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 IESBA Code. 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 financial 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. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditors’ responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements of the Group and of the Bank. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements. Risk area and rationale Impairment of loans, advances and financing As at 31 December 2017, the loans, advances and financing represent 63% and 57% of the total assets of the Group and of the Bank respectively. The impairment of loans, advances and financing, includes individual and collective impairment. For consumer loans, advances and financing, the material portion of the impairment is collectively calculated based on models developed which give rise to certain degree of estimation uncertainty. For non-consumer loans, advances and financing, the material portion of impairment is individually calculated. This requires the application of judgement and use of subjective assumptions by management with respect to both the impaired classification and estimation of the size of any such impairment. Our response Our audit procedures included the assessment of controls over the approval, recording and monitoring of loans, advances and financing, and evaluating the methodologies, inputs and assumptions used by the Group and the Bank in calculating collective impairment allowance and individual impairment allowance. For collective impairment, we checked to historical loss data and compared the assumptions used by the Group and the Bank for collective impairment allowances to externally available industry, financial and economic data. As part of this, we assessed the reasonableness of the Group’s and the Bank’s estimates and assumptions, specifically in respect of the inputs to the impairment models and the consistency of judgement applied in the use of economic factors, loss identification periods and the observation period for historical default rates. 29
32. MAYBANK ANNUAL REPORT 2017 INDEPENDENT AUDITORS ’ REPORT TO THE MEMBERS OF MALAYAN BANKING BERHAD (INCORPORATED IN MALAYSIA) KEY AUDIT MATTERS (CONT’D.) Risk area and rationale Our response Impairment of loans, advances and financing (cont’d.) Refer to summary of significant accounting policies in Note 2.3(v)(d)(i), significant accounting judgements, estimates and assumptions in Note 3.4 and the disclosures of loans, advances and financing in Notes 11 and 44 to the financial statements. Impairment of (i) goodwill and (ii) investment in subsidiaries and interest in associates (i)Goodwill With respect to individual impairment, we tested a sample of loans, advances and financing to ascertain whether the impaired classification had been identified by the Group and the Bank in a timely manner. For cases where impairment had been identified, we assessed the Group’s and the Bank’s assumptions on the expected future cash flows, including the value of realisable collateral based on available market information. We also challenged the assumptions and compared estimates to external evidence where available. The Group’s goodwill balances as at 31 December 2017 stood at RM5.8 billion. We also assessed whether the financial statement disclosures appropriately reflect the Group’s and the Bank’s exposure to credit risk. Goodwill impairment testing of cash generating units (“CGUs”) relies on estimates of value-in-use (“VIU”) based on estimated future cash flows. The Group is required to annually test the amount of goodwill for impairment. Our audit procedures included, among others, evaluating the assumptions and methodologies used by the Group and the Bank in performing the impairment assessment. (ii) Investment in subsidiaries and interest in associates As at 31 December 2017, the carrying amount of investment in subsidiaries (Bank only) stood at RM22.1 billion and interest in associates (Group and Bank) stood at RM2.8 billion and RM0.5 billion respectively. Similarly, we focused on impairment assessment of investment in subsidiaries and interest in associates as the impairment testing relies on VIU estimates based on estimated future cash flows. These involve management judgement and are based on assumptions that are affected by expected future market and economic conditions. Refer to summary of significant accounting policies in Notes 2.3(i), 2.3(ii) and 2.3(iii), significant accounting judgements, estimates and assumptions in Notes 3.6 and 3.7 and the disclosure of (i) goodwill and (ii) investment in subsidiaries and interest in associates in Notes 17, 18 and 20 to the financial statements. We tested the basis of preparing the cash flow forecasts taking into account the back testing results on the accuracy of previous forecasts and the historical evidence supporting underlying assumptions. We also assessed the appropriateness of the other key assumptions, such as the weightedaverage cost of capital discount rates assigned to the CGUs, as well as the long-term growth rate, by comparing against internal information, and external economic and market data. We also assessed the sensitivity analysis performed by management on the key inputs to the impairment models, to understand the impact that reasonable alternative assumptions would have on the overall carrying amounts. We also reviewed the adequacy of the Group’s and the Bank’s disclosures within the financial statements about those assumptions to which the outcome of the impairment test is most sensitive. 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 the annual report, but does not include the financial statements of the Group and of the Bank and our auditors’ report thereon, which is expected to be made available to us after the date of this auditors’ report. Our opinion on the financial statements of the Group and of the Bank does not cover the other information and we do not and will 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 identified above 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 on the other information that we obtained prior to the date of this auditors’ report, 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. When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors of the Bank and take appropriate action. 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. 30 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.
33. TO THE MEMBERS OF MALAYAN BANKING BERHAD (INCORPORATED IN MALAYSIA) Our Performance pg. 4-8 INDEPENDENT AUDITORS’ REPORT 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 skepticism throughout the audit. We also: • 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. Basel II Pillar 3 pg. 288-351 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 auditor’s 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The Financials pg. 10-287 AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS • 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 of the Bank’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of 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 and 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 auditor’s report to the related disclosures in the financial statements 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 auditor’s report. However, future events or conditions may cause the Group or the Bank to cease to continue as a going concern. • 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. • 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 financial year and are therefore the key audit matters. We describe these matters in our auditor’s 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. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted as auditors, are disclosed in Note 63 to the financial statements. 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. Ernst & Young AF: 0039 Chartered Accountants Dato’ Megat Iskandar Shah bin Mohamad Nor No. 03083/07/2019 J Chartered Accountant Kuala Lumpur, Malaysia 28 February 2018 31
34. MAYBANK ANNUAL REPORT 2017 INDEX TO THE FINANCIAL STATEMENTS FINANCIAL STATEMENTS Statements of financial position Income statements Statements of comprehensive income Consolidated statement of changes in equity Statement of changes in equity Statements of cash flows PAGE 33 34 35 36 38 39 NOTES TO THE FINANCIAL STATEMENTS Corporate information Accounting policies Significant accounting judgements , estimates and assumptions 4. Standards, annual improvements to standards and IC Interpretation issued but not yet effective 5. Cash and short-term funds 6. Deposits and placements with financial institutions 7. Financial assets purchased under resale agreements and obligations on financial assets sold under repurchase agreements 8. Financial assets at fair value through profit or loss (“FVTPL”) 9. Financial investments available-for-sale 10. Financial investments held-to-maturity 11. Loans, advances and financing 41 41 62 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 83 88 88 89 89 90 93 96 101 104 105 106 1. 2. 3. 24. 25. 26. 27. 28. 32 Derivative financial instruments and hedge accounting Reinsurance/retakaful assets and other insurance receivables Other assets Investment properties Statutory deposits with central banks Investment in subsidiaries Interest in associates and joint ventures Property, plant and equipment Intangible assets Deposits from customers Deposits and placements from financial institutions Financial liabilities at fair value through profit or loss (“FVTPL”) Insurance/takaful contract liabilities and other insurance payables Other liabilities Recourse obligation on loans and financing sold to Cagamas Provision for taxation and zakat Deferred tax 64 71 71 71 72 74 76 77 107 110 116 116 116 PAGE 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. Borrowings Subordinated obligations Capital securities Share capital, share-based payments and shares held-in-trust Retained profits Reserves Operating revenue Interest income Interest expense Net earned insurance premiums Dividends from subsidiaries and associates Other operating income Net insurance benefits and claims incurred, net fee and commission expenses, change in expense liabilities and taxation of life and takaful fund Overhead expenses Directors’ fees and remuneration Allowances for impairment losses on loans, advances, financing and other debts, net Allowances for/(writeback of) impairment losses on financial investments, net Taxation and zakat Significant related party transactions and balances Credit exposure arising from credit transactions with connected parties Earnings per share (“EPS”) Dividends Commitments and contingencies Financial risk management policies Fair value measurements Offsetting of financial assets and financial liabilities Capital and other commitments Capital management Internal capital adequacy assessment process (“ICAAP”) Capital adequacy Segment information Significant and subsequent events Income statement and statement of financial position of insurance and takaful business The operations of Islamic Banking Scheme (“IBS”) Details of subsidiaries, deemed controlled structured entities, associates and joint ventures Currency Directors of subsidiaries of the Group 119 125 127 128 144 145 147 147 148 148 148 149 150 150 152 155 155 156 157 162 163 164 165 169 221 234 235 236 236 237 241 245 247 250 277 282 283
35. Group Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Loans , advances and financing Derivative assets Reinsurance/retakaful assets and other insurance receivables Other assets Investment properties Statutory deposits with central banks Investment in subsidiaries Interest in associates and joint ventures Property, plant and equipment Intangible assets Deferred tax assets Note 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 5 6 7(a) 8 9 10 11 12 13 14 15 16 17 18 19 20 28 50,334,290 16,988,391 8,514,283 25,117,493 109,070,244 20,184,773 485,584,362 6,704,651 3,933,772 9,698,140 753,555 15,397,213 – 2,772,324 2,635,018 6,753,939 859,318 58,140,545 13,444,630 2,492,412 23,496,050 92,384,834 15,021,597 477,774,903 8,311,703 4,139,596 10,525,560 758,488 15,384,134 – 3,210,436 2,595,497 7,345,524 930,344 30,714,527 21,382,493 7,633,503 7,896,677 89,286,739 17,763,565 290,997,969 6,865,221 – 4,801,397 – 7,746,700 22,057,063 472,016 1,165,908 568,030 315,013 38,350,931 19,339,287 2,213,113 7,980,314 74,904,201 12,582,311 295,020,136 8,320,918 – 5,603,512 – 7,530,325 21,586,547 451,518 1,290,761 530,049 358,687 765,301,766 735,956,253 509,666,821 496,062,610 502,017,445 24,555,445 42,598,131 5,367,086 7,221,015 6,375,815 1,894,046 25,118,843 19,179,140 1,543,501 746,494 732,079 34,505,618 11,979,323 6,284,180 485,523,920 31,544,587 30,854,693 2,957,951 8,828,060 3,587,230 1,808,066 23,948,719 17,288,306 974,588 419,729 777,826 34,867,056 15,900,706 6,199,993 328,938,600 – 37,645,134 5,189,316 7,179,998 5,483,120 1,384,983 – 16,910,597 1,543,501 385,876 – 27,106,442 9,362,526 6,284,180 331,878,295 – 29,856,710 2,957,951 8,802,221 2,685,139 1,000,777 – 12,498,698 974,588 47,374 – 28,927,427 13,202,872 6,225,926 690,118,161 665,481,430 447,414,273 439,057,978 Total assets Liabilities Customers' funding: – Deposits from customers – Investment accounts of customers* Deposits and placements from financial institutions Obligations on financial assets sold under repurchase agreements Derivative liabilities Financial liabilities at fair value through profit or loss Bills and acceptances payable Insurance/takaful contract liabilities and other insurance payables Other liabilities Recourse obligation on loans and financing sold to Cagamas Provision for taxation and zakat Deferred tax liabilities Borrowings Subordinated obligations Capital securities 21 62(q) 22 7(b) 12 23 24 25 26 27 28 29 30 31 Total liabilities Equity attributable to equity holders of the Bank Share capital Share premium Shares held-in-trust Retained profits Reserves 32 2.5(i) 32(c)(v) 33 34 Non-controlling interests Total liabilities and shareholders’ equity Commitments and contingencies Net assets per share attributable to equity holders of the Bank Bank 51 44,250,380 – (183,438) 25,268,743 3,652,929 10,193,200 28,878,703 (125,309) 14,408,695 15,160,442 44,250,380 – (183,438) 13,572,235 4,613,371 10,193,200 28,878,703 (125,309) 4,456,832 13,601,206 72,988,614 2,194,991 68,515,731 1,959,092 62,252,548 – 57,004,632 – 75,183,605 70,474,823 62,252,548 57,004,632 765,301,766 735,956,253 509,666,821 496,062,610 811,374,001 766,438,609 761,441,355 721,129,524 RM6.77 RM6.72 RM5.77 RM5.59 Our Performance pg. 4-8 The Financials pg. 10-287 AS AT 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 STATEMENTS OF FINANCIAL POSITION * Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). The accompanying notes form an integral part of the financial statements. 33
36. MAYBANK ANNUAL REPORT 2017 INCOME STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 Group Note 2017 RM ’000 2016 RM’000 2017 RM’000 2016 RM’000 Operating revenue 35 45,580,310 44,657,902 24,841,318 26,592,229 Interest income Interest expense 36 37 22,056,334 (9,909,293) 20,940,499 (9,582,029) 16,099,945 (7,306,999) 15,076,353 (7,134,624) 62(b) 12,147,041 4,900,251 11,358,470 4,189,242 8,792,946 – 7,941,729 – 38 39 40 17,047,292 5,250,890 – 6,027,304 15,547,712 4,444,057 – 6,289,283 8,792,946 – 1,920,144 3,681,248 7,941,729 – 2,400,457 4,272,439 28,325,486 26,281,052 14,394,338 14,614,625 41 (5,057,130) (4,107,909) – – 42 23,268,356 (11,357,058) 22,173,143 (10,487,156) 14,394,338 (5,880,703) 14,614,625 (5,339,639) 11,911,298 11,685,987 8,513,635 9,274,986 44 (1,959,060) (2,832,748) (1,163,238) (1,787,868) 45 (68,762) (182,253) Net interest income Income from Islamic Banking Scheme operations Net earned insurance premiums Dividends from subsidiaries and associates Other operating income Total operating income Net insurance benefits and claims incurred, net fee and commission expenses, change in expense liabilities and taxation of life and takaful fund Net operating income Overhead expenses Operating profit before impairment losses Allowances for impairment losses on loans, advances, financing and other debts, net (Allowances for)/writeback of impairment losses on financial investments, net 2,217 (139,851) 18 9,883,476 214,620 8,670,986 173,464 7,352,614 – 7,347,267 – 46 10,098,096 (2,301,222) 8,844,450 (1,880,558) 7,352,614 (1,229,739) 7,347,267 (924,623) Profit for the financial year 7,796,874 6,963,892 6,122,875 6,422,644 Attributable to: Equity holders of the Bank Non-controlling interests 7,520,542 276,332 6,742,992 220,900 6,122,875 – 6,422,644 – 7,796,874 6,963,892 6,122,875 6,422,644 72.0 72.0 67.8 67.8 23.00 – 32.00 32.00 – 20.00 30.00 – – 32.00 Operating profit Share of profits in associates and joint ventures Profit before taxation and zakat Taxation and zakat Earnings per share attributable to equity holders of the Bank Basic (sen) Diluted (sen) Net dividends per ordinary share held by equity holders of the Bank in respect of the financial year (sen) Paid – First interim Paid – Final for the financial year ended 31 December 2015 Paid – Final for the financial year ended 31 December 2016 Proposed – Final – Final The accompanying notes form an integral part of the financial statements. 34 Bank 49(a) 49(b) 50 50 50 50(a)
37. Group Note Profit for the financial year Bank 2017 RM ’000 2016 RM’000 2017 RM’000 2016 RM’000 7,796,874 6,963,892 6,122,875 6,422,644 Other comprehensive income/(loss): Items that will not be reclassified subsequently to profit or loss: Defined benefit plan actuarial gain/(loss) Income tax effect Share of change in associates’ reserve 25(a)(ii) 28 15,806 (2,846) – (2,043) (472) (10) – – – – – – 12,960 (2,525) – – Our Performance pg. 4-8 The Financials pg. 10-287 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 STATEMENTS OF COMPREHENSIVE INCOME Items that may be reclassified subsequently to profit or loss: Net gain on financial investments available-for-sale Income tax effect Net (loss)/gain on foreign exchange translation Net loss on cash flow hedge Net gain on net investment hedge Net loss on revaluation reserve Share of change in associates’ reserve Other comprehensive (loss)/income for the financial year, net of tax Total comprehensive income for the financial year Other comprehensive (loss)/income for the financial year, attributable to: Equity holders of the Bank Non-controlling interests Total comprehensive income for the financial year, attributable to: Equity holders of the Bank Non-controlling interests 28 12 12 34(c)(ii) 430,576 (104,647) (2,285,427) (447) 69,135 – (469,079) 319,941 (82,871) 1,310,802 (1,157) 21,197 (3,689) 41,941 444,901 (105,905) (519,108) – – – – 203,432 (55,913) 333,369 – – – – (2,359,889) 1,606,164 (180,112) 480,888 (2,346,929) 1,603,639 (180,112) 480,888 5,449,945 8,567,531 (2,352,812) 5,883 1,595,032 8,607 (180,112) – 480,888 – (2,346,929) 1,603,639 (180,112) 480,888 5,167,730 282,215 8,338,024 229,507 5,942,763 – 6,903,532 – 5,449,945 8,567,531 5,942,763 6,903,532 5,942,763 6,903,532 The accompanying notes form an integral part of the financial statements. 35
38. MAYBANK ANNUAL REPORT 2017 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 <--------------------------------------------------------------------------------- Attributable to equity holders of the Bank ---------------------------------------------------------------------------> <------------------------------------------------------------- Non-distributable --------------------------------------------------------------------> Group At 1 January 2017 Profit for the financial year Other comprehensive income Defined benefit plan actuarial gain/(loss) Share of associates’ reserve Net (loss)/gain on foreign exchange translation Net gain/(loss) on financial investments available-forsale Net gain on net investment hedge Net loss on cash flow hedge Total comprehensive income for the financial year Share-based payment under Employees’ Share Scheme (“ESS”) (Note 32(c)) Effects of changes in corporate structure within the Group Transfer from revaluation reserve Transfer from share premium (Note 2.5(i) & Note 32(a)(i)) Transfer from statutory reserve (Note 34(a)) Transfer to regulatory reserve (Note 34(b)) Issue of shares pursuant to ESS (Note 32(a)(ii)) Issue of shares pursuant to Restricted Share Unit (“RSU”) (Note 32(a)(iii)) Issue of shares pursuant to Supplemental Restricted Share Unit (“SRSU”) (Note 32(a)(iv)) Issue of shares pursuant to Share Capital (Note 32) RM’000 Shares Share Held-in-trust Premium (Note 32(c)(v)) RM’000 RM’000 Regulatory Reserve (Note 34(b)) RM’000 AFS Reserve (Note 34) RM’000 Exchange Fluctuation Reserve (Note 34) RM’000 ESS Reserve (Note 34) RM’000 10,934,947 1,057,997 (269,131) 3,592,057 320,912 – (2,733,305) 10,193,200 28,878,703 – – – – – – – – – – – 298,747 – – – – – – – – – – – (36,768) – – – – – – – – – – – 335,515 – – – – – – – – – – – – – – – – – 298,747 – – – – – – – – – – – – – – – – – 28,878,703 (28,878,703) (125,309) Statutory Reserve (Note 34(a)) RM’000 *Retained Total Profits Shareholders’ (Note 33) Equity RM’000 RM’000 NonControlling Interests RM’000 Total Equity RM’000 1,959,092 70,474,823 (476,340) 14,408,695 68,515,731 – – – 81,746 7,520,542 – 7,520,542 (2,352,812) – (432,311) – – 13,058 – – – 13,058 (469,079) (2,300,994) – – – (2,300,994) – – – – – – – – 69,135 (447) – 81,746 7,520,542 5,167,730 282,215 5,449,945 – 18,190 – – 18,190 – 18,190 – – – – – – 53,682 53,682 – – – – 10,575 – – – – – – – – – – – – – – – – – 10,731,889 – – – – – (1,689,288) – – – 1,359,447 – 1,359,447 (2,733,305) (10,575) – – 335,515 69,135 (447) 276,332 5,883 (98) – 15,567 (9,586) – – 7,796,874 (2,346,929) 12,960 (469,079) (2,285,427) 325,929 69,135 (447) – – – – – – – 1,689,288 – – 1,445,239 – – – – – – (85,792) – 38,118 – (3) – – – – (33,002) – (5,113) – – – 935 – – – – – – (921) – (14) – – – 3,644,186 – (8,127) – – – – – – – 3,636,059 – 3,636,059 49,999 – – – (49,999) – – – – – – – – – – – – – 1,689,288 – – 2,747,285 29,616 858,752 Dividend Reinvestment Plan (“DRP”) (Notes 32(a) (vi)&(vii)) Issue of shares pursuant to ESOS Trust Fund (“ETF”) Pool (Note 32(a)(v)) Dividends (Note 50) Total transactions with shareholders/other equity movements 34,057,180 At 31 December 2017 44,250,380 (28,878,703) – (10,731,889) Other Reserves (Note 34(c)) RM’000 (58,129) (10,731,889) (183,438) 203,058 – – (5,708,543) (101,525) (10,575) 3,339,506 219,387 (405,169) 25,268,743 – (5,708,543) – (99,998) – (5,808,541) (694,847) (46,316) (741,163) 72,988,614 2,194,991 75,183,605 * Retained profits includes distributable and non-distributable profits arising from Non-Discretionary Participation Features (“Non-DPF”) surplus of an insurance subsidiary. Refer to Note 33 for further details. 36
39. FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 Our Performance pg . 4-8 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Group At 1 January 2016 Profit for the financial year Other comprehensive income Defined benefit plan actuarial loss Share of associates’ reserve Net gain on foreign exchange translation Net gain/(loss) on financial investments available-forsale Net gain on net investment hedge Net loss on cash flow hedge Net loss on revaluation reserve Total comprehensive income for the financial year Share-based payment under Employees’ Share Scheme (“ESS”) (Note 32(c)) Effects of changes in corporate structure within the Group Transfer to statutory reserve (Note 34(a)) Transfer from regulatory reserve (Note 34(b)) Transfer from profit equalisation reserve (Note 34(c)) Issue of shares pursuant to ESS Issue of shares pursuant to Restricted Share Unit (“RSU”) Issue of shares pursuant to Supplemental Restricted Share Unit (“SRSU”) Issue of shares pursuant to Dividend Reinvestment Plan (“DRP”) Dividends (Note 50) Total transactions with shareholders/other equity movements At 31 December 2016 Share Capital (Note 32) RM’000 Shares Share Held-in-trust Premium (Note 32(c)(v)) RM’000 RM’000 (119,745) Statutory Reserve (Note 34(a)) RM’000 Regulatory Reserve (Note 34(b)) RM’000 AFS Reserve (Note 34) RM’000 Exchange Fluctuation Reserve (Note 34) RM’000 ESS Reserve (Note 34) RM’000 10,456,462 1,247,509 (503,048) 2,245,044 329,523 – 233,917 – 1,347,013 9,761,751 25,900,476 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Other Reserves (Note 34(c)) RM’000 *Retained Total Profits Shareholders’ (Note 33) Equity RM’000 RM’000 NonControlling Interests RM’000 Total Equity RM’000 (455,986) 12,833,004 61,694,990 1,818,467 63,513,457 – – – 14,102 6,742,992 – 6,742,992 1,595,032 220,900 8,607 6,963,892 1,603,639 – 45,709 – – (2,239) (10) – 1,301,304 – – – 1,301,304 – 237,685 – – – – 237,685 – – – – – – – – – – 21,197 (1,157) – – 21,197 (1,157) – – 21,197 (1,157) – – – – – – (3,689) – (3,689) – (3,689) – – – – 233,917 1,347,013 – 14,102 6,742,992 8,338,024 229,507 8,567,531 – – – – – – – 27,612 – 13,060 40,672 – 40,672 – – – – – – – – – – – 6,195 6,195 – – – 478,485 – – – – – (478,485) – – – – – – – – – – – 189,512 – – – – – – – – – – – 34,456 – – – 8,598 70,501 – – – – – (4,707) – – 74,392 – 74,392 3,156 25,687 – – – – – (29,903) – 1,060 – – – 184 1,444 – – – – – (1,613) – (15) – – – 419,511 – 2,880,595 – (5,564) – – – – – – – – – – – – (4,926,889) 3,294,542 (4,926,889) – (95,077) 3,294,542 (5,021,966) 431,449 2,978,227 (5,564) 478,485 – – (34,456) (5,167,301) (1,517,283) (88,882) (1,606,165) 10,193,200 28,878,703 (125,309) 10,934,947 (476,340) 14,408,695 68,515,731 (189,512) (189,512) 1,057,997 – (3,768) (269,131) 3,592,057 – – (8,611) 320,912 (34,456) – – (2,239) 41,931 (276) – 9,498 (615) 1,959,092 (2,515) 41,931 Basel II Pillar 3 pg. 288-351 <------------------------------------------------------------- Non-distributable --------------------------------------------------------------------> The Financials pg. 10-287 <--------------------------------------------------------------------------------- Attributable to equity holders of the Bank ---------------------------------------------------------------------------> 1,310,802 237,070 70,474,823 * Retained profits includes distributable and non-distributable profits arising from Non-Discretionary Participation Features (“Non-DPF”) surplus of an insurance subsidiary. Refer to Note 33 for further details. 37
40. MAYBANK ANNUAL REPORT 2017 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 <----------------------------------------------------- Attributable to equity holders of the Bank ------------------------------------------------> <--------------------------------------------- Non-distributable ----------------------------------------------------> Bank At 1 January 2017 Share Capital (Note 32) RM’000 Shares Statutory Regulatory Share Held-in-trust Reserve Reserve Premium (Note 32(c)(v)) (Note 34(a)) (Note 34(b)) RM’000 RM’000 RM’000 RM’000 10,193,200 28,878,703 Profit for the financial year Other comprehensive income – – – – Net loss on foreign exchange translation Net gain on financial investments available-for-sale – – Total comprehensive income for the financial year – 10,325,216 660,800 – – – – – – – 338,996 – – – – – – – – – – – – – Share-based payment under Employees’ Share Scheme (“ESS”) (Note 32(c)) – – Transfer from share premium (Note 2.5(i) & Note 32(a)(i)) 28,878,703 (28,878,703) Transfer from statutory reserve (Note 34(a)) – – Transfer to regulatory reserve (Note 34(b)) – – Issue of shares pursuant to ESS (Note 32(a)(ii)) 1,445,239 – Issue of shares pursuant to Restricted Share Unit (“RSU”) (Note 32(a)(iii)) 38,118 – Issue of shares pursuant to Supplemental Restricted Share Unit (“SRSU”) (Note 32(a)(iv)) 935 – Issue of shares pursuant to Dividend Reinvestment Plan (“DRP”) (Note 32(a)(vi)&(vii)) 3,644,186 – Issue of shares pursuant to ESOS Trust Fund (“ETF”) Pool (Note 32(a)(v)) 49,999 – Dividends (Note 50) – – (125,309) – – – – – (10,278,961) – – (453,145) Distributable Retained Profits (Note 33) RM’000 Total Equity RM’000 4,456,832 – (519,108) – – 6,122,875 – 6,122,875 (180,112) – 338,996 (519,108) – – – – – (519,108) 338,996 – 338,996 (519,108) – 6,122,875 5,942,763 – – – 18,190 – 18,190 – – 1,572,763 – – – – – – – – – – – – 10,278,961 – (1,572,763) (85,792) – 57,004,632 – – – 1,359,447 (3) – – – – (33,002) (5,113) – – – – – – (921) (14) – – – – – (8,127) (49,999) – – – – – – – – – – 1,572,763 – – At 31 December 2017 44,250,380 – (183,438) 46,255 2,233,563 (114,149) 9,761,751 – – 25,900,476 – – (119,745) – – 9,866,550 – – 813,800 – – (600,664) – 147,519 Net gain on foreign exchange translation Net gain on financial investments available-for-sale – – – – – – – – – – Total comprehensive income for the financial year – – – – – – – – 8,598 – – – 70,501 – – – – – 458,666 – – 3,156 25,687 – – – (58,129) (10,278,961) – 3,636,059 – – (5,708,543) (5,708,543) (101,525) 2,992,528 2,228,315 219,387 13,572,235 62,252,548 2,414,054 – 333,369 329,523 – – 3,252,638 6,422,644 – 51,618,383 6,422,644 480,888 – 147,519 333,369 – – – – – 333,369 147,519 147,519 333,369 – 6,422,644 6,903,532 – – – – – – – – 27,612 – – (4,707) – – – (29,903) – – – – (1,613) – – – – – – – – – – Share-based payment under Employees’ Share Scheme (“ESS”) (Note 32(c)) Transfer to statutory reserve (Note 34(a)) Transfer from regulatory reserve (Note 34(b)) Issue of shares pursuant to ESS Issue of shares pursuant to Restricted Share Unit (“RSU”) Issue of shares pursuant to Supplemental Restricted Share Unit (“SRSU”) Issue of shares pursuant to Dividend Reinvestment Plan (“DRP”) Dividends (Note 50) 184 1,444 419,511 – 2,880,595 – (5,564) – – – Total transactions with shareholders/other equity movements 431,449 2,978,227 (5,564) 458,666 10,193,200 28,878,703 (125,309) 10,325,216 The accompanying notes form an integral part of the financial statements. – – 34,057,180 (28,878,703) At 31 December 2016 2,747,423 ESS Reserve (Note 34) RM’000 320,912 Total transactions with shareholders/other equity movements At 1 January 2016 Profit for the financial year Other comprehensive income 38 Exchange AFS Fluctuation Reserve Reserve (Note 34) (Note 34) RM’000 RM’000 – – (153,000) – (153,000) 660,800 (453,145) 2,747,423 13,060 (458,666) 153,000 – 1,060 (15) (694,847) 40,672 – – 74,392 – – – 3,294,542 (4,926,889) (4,926,889) (8,611) (5,218,450) (1,517,283) 320,912 4,456,832 57,004,632
41. Group Cash flows from operating activities Profit before taxation and zakat Adjustments for : Share of profits in associates and joint ventures (Note 18) Depreciation of property, plant and equipment (Note 42) Amortisation of computer software (Note 42) Amortisation of customer relationship (Note 42) Amortisation of agency force (Note 42) Amortisation of core deposit intangibles (Note 42) Gain on disposal of property, plant and equipment (Note 40) Gain on disposal of foreclosed properties (Note 40) Loss/(gain) on disposal/liquidation of subsidiaries (Note 40) Loss on dilution of interest in associates (Note 40) Net gain on disposal of financial assets at fair value through profit or loss (Note 40, Note 62(y) & (aa)) Net gain on disposal of financial investments available-for-sale (Note 40, Note 62(y) & (aa)) Net gain on disposal/redemption of financial investments held-to-maturity (Note 40) Accretion of discounts, net (Note 36, Note 62(y) & (aa)) Unrealised (gain)/loss of financial assets/liabilities at fair value through profit or loss and derivatives (Note 40, Note 62(y) & (aa)) Allowances for impairment losses on financial investments, net (Note 45) Allowances for impairment losses on loans, advances and financing, net (Note 44) Allowances for/(writeback of) impairment losses on other debts (Note 44) Dividends from subsidiaries and associates (Note 39) Dividends from financial investments portfolio (Note 40) ESS expenses (Note 42) Property, plant and equipment written-off (Note 42) Intangible assets written-off (Note 42) Fair value adjustments on investment properties (Note 42) Impairment losses of investment properties (Note 42) Operating profit before working capital changes Change in cash and short-term funds with original maturity of more than three months Change in deposits and placements with financial institutions with original maturity of more than three months Change in financial assets purchased under resale agreements Change in financial investments portfolio Change in loans, advances and financing Change in other assets Change in statutory deposits with central banks Change in deposits from customers Change in investment accounts of customers Change in deposits and placements from financial institutions Change in obligations on financial assets sold under repurchase agreements Change in bills and acceptances payable Change in financial liabilities at fair value through profit or loss Change in other liabilities Change in reinsurance/retakaful assets and other insurance receivables Change in insurance/takaful contract liabilities and other insurance payables Cash generated from/(used in) operating activities Taxes and zakat paid Net cash generated from/(used in) operating activities Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 10,098,096 8,844,450 7,352,614 7,347,267 (214,620) 418,917 245,360 16,352 6,555 5,406 (201,003) (1,493) 1,988 30,719 (173,464) 379,135 254,089 18,465 7,913 10,024 (68,736) (3,546) 378 – – 186,605 99,177 – – – (62,415) (300) (101) – – 188,540 128,718 – – – (15,242) – – – (313,504) (206,927) (129,630) (101,170) (666,800) (182) (129,401) (1,064,898) (11,397) (133,625) (212,536) (182) (107,688) (923,826) (11,397) (48,339) (35,241) 69,725 2,441,832 2,701 – (123,263) 17,083 546 1,233 60,173 – (160,360) 265,440 3,451,984 (20,673) – (108,761) 40,251 99 1,180 (8,858) 141 51,787 1,071 1,420,122 2,285 (1,920,144) (16,663) 11,106 437 3 – – (70,606) 213,464 2,097,425 (1,343) (2,400,457) (18,569) 28,592 38 1,174 – – 6,414,269 11,731,179 11,312,304 6,675,548 3,448,384 (1,000,336) 3,036,714 3,872,207 (6,021,871) (21,901,675) (24,511,954) 923,518 (13,079) 22,197,905 (6,989,142) 11,743,438 2,409,136 85,980 801,816 5,933,619 205,824 1,170,124 (3,503,541) 5,199,753 (7,197,564) (20,935,336) 2,458,737 882,278 5,547,904 13,886,694 (8,159,223) (1,540,624) 4,886 1,601,573 277,914 216,058 108,994 3,645,635 (5,420,390) (18,554,411) (4,931,934) 459,457 (216,374) 3,234,342 – 7,788,424 2,231,365 384,205 820,794 4,528,798 – – (1,551,211) 5,277,695 (903,193) (5,766,495) 3,567,824 325,053 2,075,389 – (8,047,979) (1,540,624) (113,611) 684,413 (1,561,089) – – 5,085,409 (2,079,848) (839,529) (1,272,986) 3,682,173 (954,525) (1,654,122) (621,212) 3,005,561 (2,112,515) 2,727,648 (2,275,334) Our Performance pg. 4-8 The Financials pg. 10-287 FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 STATEMENTS OF CASH FLOWS (514,563) 39
42. MAYBANK ANNUAL REPORT 2017 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 Group Cash flows from investing activities Purchase of property , plant and equipment (Note 19) Purchase of intangible assets (Note 20) Purchase of investment properties (Note 15) Net effect arising from: – acquisition of a subsidiary (Note 17(e)) – repayment of capital of a subsidiary (Note 17(b)) – liquidation/disposal of subsidiaries (Note 17(f)) – transaction with non-controlling interests Purchase of additional ordinary shares in existing subsidiaries (Note 17(a) & (d)) Purchase of shares in deemed controlled structured entities from a subsidiary (Note 17(c)) Purchase of shares in associates from a subsidiary Proceeds from disposal of property, plant and equipment Proceeds from disposal of investment properties Dividends received from: – financial investments portfolio (Note 40) – associates (Note 39) – subsidiaries (Note 39) Purchase of property, plant and equipment from a subsidiary, net (Note 19) Net cash (used in)/generated from investing activities Cash flows from financing activities Proceeds from issuance of shares Drawdown/(repayment) of borrowings, net (Note 29) Issuance of subordinated obligations (Note 30) Redemption of subordinated obligations (Note 30) Drawdown of financial liabilities at fair value through profit or loss (Note 23) Finance lease obligation (Note 25) Recourse obligation on loans and financing sold to Cagamas, net Dividends paid Dividends paid to non-controlling interests Net cash generated from/(used in) financing activities 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 (562,870) (238,709) (85,505) (297,188) (270,467) (32,984) (96,026) (142,519) – (155,497) (146,898) – (79,356) – – 43,869 – – – 10,861 6,195 – – 242,837 250 – (156,420) – – – – (559,592) – – 228,994 29,890 – – 85,951 – (480,341) (20,497) 85,377 – – – 17,526 – 123,263 – – – 108,761 – – – 16,663 9,856 1,910,288 – 18,569 8,179 2,392,278 (175) (540,424) (388,871) 1,369,468 1,574,390 4,995,506 3,661,438 35,000 (3,240,000) 2,097,150 280,634 568,913 (5,708,543) (99,998) 3,368,934 3,535,381 2,243,000 (6,850,743) 2,156,642 (1,057) (199,758) (4,926,889) (95,077) 4,995,506 (76,897) – (3,240,000) 2,097,150 – 568,913 (5,708,543) – 3,368,934 2,579,375 2,243,000 (5,850,743) 2,156,642 – (199,758) (4,926,889) – (769,567) (1,363,871) (629,439) 2,590,100 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Effects of foreign exchange rate changes 5,055,237 50,875,746 (1,997,139) (3,270,953) 53,049,192 1,097,507 2,733,245 38,217,233 (1,644,094) (1,330,383) 38,619,149 928,467 Cash and cash equivalents at 31 December 53,933,844 50,875,746 39,306,384 38,217,233 Cash and cash equivalents comprise: Cash and short-term funds (Note 5) Deposits and placements with other financial institutions (Note 6) 50,334,290 16,988,391 58,140,545 13,444,630 30,714,527 21,382,493 38,350,931 19,339,287 67,322,681 71,585,175 52,097,020 57,690,218 (13,388,837) (20,709,429) (12,790,636) (19,472,985) 53,933,844 50,875,746 39,306,384 38,217,233 Less: Cash and short-term funds and deposits and placements with original maturity of more than three months The accompanying notes form an integral part of the financial statements. 40 Bank
43. 1 . CORPORATE INFORMATION 2.2 Basis of consolidation Malayan Banking Berhad (“Maybank” or the “Bank”) is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Bank is located at 14th Floor, Menara Maybank, 100, Jalan Tun Perak, 50050 Kuala Lumpur. The Bank is principally engaged in all aspects of commercial banking and related financial services. The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries including the equity accounting of interest in associates and joint ventures as at 31 December 2017. Further details on the accounting policies for investment in subsidiaries and interest in associates and joint ventures are disclosed in Note 2.3. The subsidiaries of the Bank are principally engaged in the businesses of banking and finance, Islamic banking, investment banking including stockbroking, underwriting of general and life insurance, general and family takaful, trustee and nominee services and asset management. The financial statements of the Bank’s subsidiaries, associates and joint ventures are prepared for the same reporting date as the Bank, using consistent accounting policies for transactions and events in similar circumstances. Subsidiaries (including deemed controlled structured entities) are consolidated from the date of acquisition or the date of incorporation, being the date on which the Bank obtains control and continue to be consolidated until the date that such control effectively ceases. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee, if and only if, the Group has three (3) elements of control as below: There were no significant changes in these activities during the financial year. These financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 28 February 2018. 2. ACCOUNTING POLICIES The financial statements of the Bank and its subsidiaries (“Maybank Group” or the “Group”) and of the Bank have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”) and the requirements of the Companies Act 2016 in Malaysia. The financial statements of the Group and of the Bank have been prepared on a historical cost basis unless otherwise indicated in the summary of significant accounting policies as disclosed in Note 2.3. The Group and the Bank present their statements of financial position in the order of liquidity. Financial assets and financial liabilities are offset and the net amount are reported in the statements of financial position of the Group and of the Bank only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Income and expenses are not offset in the income statements of the Group and of the Bank unless required or permitted by an accounting standard or interpretation, and as specifically disclosed in the accounting policies of the Group and of the Bank. • Exposure, or rights, to variable returns from its involvement with the investee; and • The ability to use its power over the investee to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Generally, there is a presumption that a majority of voting rights result in control. To support this presumption, and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: The Group’s financial statements also include separate disclosures on its insurance and takaful businesses and Islamic banking operations as disclosed in Notes 61 and 62, respectively. The principal activities for insurance and takaful businesses are mainly the underwriting of general and life insurance business, the management of general and family takaful business and investment-linked business. Islamic banking refers generally to the acceptance of deposits, granting of financing and dealing in Islamic securities under the Shariah principles. Our Performance pg. 4-8 • Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); 2.1 Basis of preparation and presentation of the financial statements The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS • The contractual arrangement with the other vote holders of the investee; • Rights arising from other contractual arrangements; and • The Group’s voting rights and potential voting rights. When assessing whether to consolidate investment funds, the Group reviews all facts and circumstances to determine whether the Group, as fund manager, is acting as an agent or a principal. The Group may be deemed to be a principal, and hence controls and consolidates the funds, when it acts as a fund manager and cannot be removed without cause, has variable returns through significant unit holdings and/or a guarantee, and is able to influence the returns of the funds through its power. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. The financial statements are presented in Ringgit Malaysia (“RM”) and all values are rounded to the nearest thousand (RM’000), unless otherwise stated. 41
44. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group’s and the Bank’s interest in its associates and joint ventures are accounted for using the equity method. The associates and joint ventures are equity accounted for from the date the Group and the Bank gain significant influence or joint control until the date the Group and the Bank cease to have significant influence over the associate or joint control over the joint venture. Under the equity method, the interest in associates and joint ventures are initially recognised at cost. The carrying amount of the investment is adjusted for changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to an associate or joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Details of goodwill included in the Group’s carrying amount of interest in associates and joint ventures are disclosed in Note 18(d). The consolidated income statement reflects the Group’s share of the results of operations of the associates and joint ventures. Any change in other comprehensive income of those investees is presented as part of the Group’s statement of comprehensive income. Where there has been a change recognised directly in the equity of the associates or joint ventures, the Group recognises its share of such changes and discloses this, when applicable, in the consolidated statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associates or joint ventures are eliminated to the extent of the interest in the associates or joint ventures. The aggregate of the Group’s share of profit or loss in associates and joint ventures is shown on the face of the consolidated income statement. The Group’s share of profit or loss in associates and joint ventures represents profit or loss after tax and non-controlling interests in the subsidiaries of the associates or joint ventures. 2.2 Basis of consolidation (cont’d.) Non-controlling interests (“NCI”) represent the portion of profit or loss and net assets in subsidiaries not wholly-owned, directly or indirectly by the Bank. NCI are presented separately in the consolidated income statement, consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, but separate from parent shareholders’ equity. Total comprehensive income is allocated against the interest of NCI, even if this results in the NCI having a deficit balance. A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction between the Group and its NCI holders. Any difference between the Group’s share of net assets before and after the change and any consideration received or paid, is recognised in equity. If the Group loses control over a subsidiary, it: • Derecognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts; • Derecognises the carrying amount of any non-controlling interest in the former subsidiary; • Recognises the fair value of the consideration received; • Derecognises the cumulative foreign exchange translation differences recorded in equity; • Recognises the fair value of any investment retained in the former subsidiary; • Recognises any gains or losses in the profit or loss; and • Reclassifies the parent’s share of components previously recognised in other comprehensive income to income statements or retained earnings, if required in accordance with other MFRS. All of the above will be accounted for from the date when control is lost. The accounting policies for business combination and goodwill are disclosed in Note 2.3(iii). 2.3 Summary of significant accounting policies (i) Investment in subsidiaries Subsidiaries are entities controlled by the Bank, as defined in Note 2.2. In the Bank’s separate financial statements, investments in subsidiaries are stated at cost less accumulated impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(xv). On disposal of such investments, the difference between the net disposal proceeds and their carrying amounts is recognised as gain or loss on disposal in the income statements. When the Group’s share of losses in associates or joint ventures equals or exceeds its interest in the associates or joint ventures, including any long-term interests that, in substance, form part of the Group’s net interest in the associates or joint ventures, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associates or joint ventures. Additional information on investment in subsidiaries are disclosed in Note 17 and details of subsidiaries and deemed controlled structured entities are disclosed in Notes 63(a) and 63(b), respectively. The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. (ii) Interest in associates and joint ventures 42 An associate is an entity over which the Group and the Bank have significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.
45. 2 . ACCOUNTING POLICIES (CONT’D.) change to other comprehensive income. If the contingent consideration is not within the scope of MFRS 139, it is measured in accordance with the appropriate MFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity. 2.3 Summary of significant accounting policies (cont’d.) (ii) Interest in associates and joint ventures (cont’d.) After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in associates and joint ventures. The Group determines at each reporting date whether there is any objective evidence that the interest in the associates and joint ventures are impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates or joint ventures and its carrying amount, then recognises the amount in the ‘share of profits in associates and joint ventures’ in the consolidated income statement. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in the consolidated income statement. In the Bank’s separate financial statements, interest in associates and joint ventures are stated at cost less accumulated impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 2.3(xv). On disposal of such investments, the difference between the net disposal proceeds and their carrying amounts is recognised as gain or loss on disposal in the income statements. Additional information on interest in associates and joint ventures and details of associates and joint ventures are disclosed in Notes 18(b), 63(c) and 63(d) respectively. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is reviewed for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying amount may be impaired. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group reassesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in the consolidated income statement. For the purpose of impairment testing, goodwill acquired in a business combination is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. The accounting policy for impairment of non-financial assets (including goodwill) is disclosed in Note 2.3(xv). Where goodwill has been allocated to a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operation disposed of and the portion of the cash-generating unit retained. (iii) Business combination and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses in the income statements. When the Group acquires a business, it assesses the financial assets and financial liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in the income statements. It is then considered in the determination of goodwill. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of MFRS 139 Financial Instruments: Recognition and Measurement (“MFRS 139”) is measured at fair value with changes in fair value recognised either in the income statements or as a Our Performance pg. 4-8 The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS (iv) Intangible assets In addition to goodwill, intangible assets also include core deposit intangibles, customer relationship and agency force acquired in business combination, computer software and software-in-development. An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Group and the Bank. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Subsequent to initial recognition, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses, except for software-indevelopment which is not subject to amortisation until the development is completed and the asset is available for use. 43
46. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) profit or loss, loans and receivables, financial investments held-to-maturity and financial investments available-forsale. The classification of financial assets at initial recognition depends on the purpose and the management’s intention for which the financial assets were acquired and their characteristics. The Group and the Bank determine the classification of financial assets at initial recognition, in which the details are disclosed below. 2.3 Summary of significant accounting policies (cont’d.) (iv) Intangible assets (cont’d.) The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with indefinite lives are not amortised but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statements in the expense category consistent with the function of the intangible asset. Included in financial assets are the following: (1) Financial assets at fair value through profit or loss (“FVTPL”) Financial assets at FVTPL include financial assets held-for-trading (“HFT”) and financial assets designated at FVTPL upon initial recognition. Financial assets are classified as held-for-trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as heldfor-trading unless they are designated as effective hedging instruments as defined by MFRS 139. For financial assets designated at FVTPL, upon initial recognition the following criteria must be met: • The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis; or Gains or losses arising from derecognition of intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognised in income statements when the assets are derecognised. • The assets and liabilities are part of a group of financial assets, financial liabilities or both, which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy. A summary of the policies applied to the Group’s and the Bank’s intangible assets are as follows: Amortisation methods used Useful economic lives Computer software Straight-line Core deposit Reducing balance intangibles Customer relationship Reducing balance Agency force Reducing balance 3 to 10 years 8 years Included in financial assets HFT are derivatives (including separated embedded derivatives), debt securities and equities. Included in financial assets designated at FVTPL are debt securities and structured deposits of which are managed on a fair value basis under insurance life fund and family takaful fund. Subsequent to initial recognition, financial assets held-for-trading and financial assets designated at FVTPL are recorded in the statement of financial position at fair value. Changes in fair value are recognised in the income statements under the caption of ‘other operating income’. 3 to 9 years 11 years Additional information on intangible assets are disclosed in Note 20. (v) Financial assets (a) Date of recognition All financial assets are initially recognised on the trade date, i.e. the date that the Group and the Bank become a party to the contractual provisions of the instrument. This includes regular way trades, purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place. (b) Initial recognition and subsequent measurement 44 All financial assets are measured initially at their fair value plus directly attributable transaction costs, except in the case of financial assets recorded at fair value through profit or loss. Financial assets within the scope of MFRS 139 are classified as financial assets at fair value through (2) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets classified in this category include cash and bank balances, reverse repurchase agreements, loans, advances and financing and other receivables. These financial assets are initially recognised at fair value, including direct and incremental transaction costs and subsequently measured at amortised cost using the effective interest method, less any accumulated impairment losses.
47. derecognise financial investments AFS , the cumulative unrealised gain or loss previously recognised in the ‘AFS reserve’ is reclassified to the income statements under the caption of ‘other operating income’. 2.3 Summary of significant accounting policies (cont’d.) (v) Financial assets (cont’d.) (b) Initial recognition and subsequent measurement (cont’d.) (3) Financial investments held-to-maturity (“HTM”) (c)Derecognition (1) The rights to receive cash flows from the financial asset have expired; Financial investments HTM are non-derivative financial assets with fixed or determinable payments and fixed maturity, which the Group and the Bank have the intention and ability to hold to maturity. Subsequent to initial recognition, financial investments HTM are measured at amortised cost using the effective interest method, less accumulated impairment losses. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. The amortisation is included in the income statements under the caption of ‘interest income’. The losses arising from impairment are recognised in the income statements under the caption of ‘allowance for impairment losses on financial investments’ and the gain or loss arising from derecognition of such investments are recognised in the income statements under the caption of ‘other operating income’. If the Group and the Bank were to sell or reclassify more than an insignificant amount of financial investments HTM before maturity (other than in certain specific circumstances), the entire category would be tainted and would have to be reclassified as financial investments available-for-sale. Furthermore, the Group and the Bank would be prohibited from classifying any financial investments as held-to-maturity over the following two (2) years. During the financial year ended 31 December 2017, the Group and the Bank did not reclassify any of its financial investments HTM as financial investments available-for-sale. (4) Financial investments available-for-sale (“AFS”) Financial investments AFS are financial assets that are not classified in any of the three (3) preceding categories. Financial investments AFS include equity and debt securities. Financial investments in this category are intended to be held for an indefinite period of time and which may be sold in response to liquidity needs or changes in market conditions. After initial recognition, financial investments AFS are subsequently measured at fair value. Unrealised gains and losses are recognised directly in other comprehensive income and in the ‘AFS reserve’, except for impairment losses, foreign exchange gains or losses on monetary financial assets and interest/profit income calculated using the effective interest method are recognised in the income statements. Dividends on financial investments AFS are recognised in the income statements when the Group’s and the Bank’s right to receive payment is established. When the Group and the Bank A financial asset is derecognised when: (2) The Group and the Bank have transferred its rights to receive cash flows from the financial asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass through” arrangement; and either: Basel II Pillar 3 pg. 288-351 2. ACCOUNTING POLICIES (CONT’D.) Our Performance pg. 4-8 31 DECEMBER 2017 The Financials pg. 10-287 NOTES TO THE FINANCIAL STATEMENTS (i) the Group and the Bank have transferred substantially all the risks and rewards of the financial asset; or (ii) the Group and the Bank have neither transferred nor retained substantially all the risks and rewards of the financial asset, but have transferred control of the financial asset. When the Group and the Bank have transferred its rights to receive cash flows from a financial asset or have entered into a “pass through” arrangement, they evaluate to what extent they have retained the risks and rewards of ownership. When the Group and the Bank have neither transferred nor retained substantially all the risks and rewards of the financial asset and have not transferred control of the financial asset, the Group and the Bank continue to recognise the transferred financial asset to the extent of the Group’s and of the Bank’s continuing involvement in the financial asset. In that case, the Group and the Bank also recognise an associated financial liability. The transferred financial asset and associated financial liability are measured on a basis that reflect the rights and obligations that the Group and the Bank have retained. (d) Impairment of financial assets The Group and the Bank assess at each reporting date whether there is any objective evidence that a financial asset, including security or a group of securities (other than financial assets at FVTPL) is impaired. A financial asset or a group of financial assets is deemed to be impaired if and only if, there is objective evidence of impairment as a result of one (1) or more events that has occurred after the initial recognition of the asset (an incurred loss event) and that loss event(s) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers experiencing significant financial difficulty, the probability that they will enter bankruptcy or other reorganisation, default or delinquency in interest/profit or principal payments or where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in economic conditions that correlate with defaults. 45
48. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) Future cash flows in a group of loans, advances and financing that are collectively evaluated for impairment are estimated based on the historical loss experience of the Group and of the Bank. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that do not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist. Estimates of changes in future cash flows for a group of assets should reflect and be directionally consistent with changes in related observable data from period to period. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group and the Bank to reduce any differences between loss estimates and actual loss experience. Impairment process – subsequent measurement If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or written back by adjusting the allowances for impairment losses on loans, advances and financing account. Impairment process – written-off accounts When there is no realistic prospect of future recovery, the loans, advances and financing are written-off against the related allowance for loan impairment. Such loans, advances and financing are written-off after the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of the amounts which were previously written-off are recognised in the income statements under the caption of ‘allowances for impairment losses on loans, advances and financing’. 2.3 Summary of significant accounting policies (cont’d.) (v) Financial assets (cont’d.) (d) Impairment of financial assets (cont’d.) (1) Loans and receivables (i) Loans, advances and financing Classification of loans, advances and financing as impaired Loans, advances and financing are classified as impaired when: • Principal or interest/profit or both are past due for more than three (3) months; or • Loans, advances and financing in arrears for less than three (3) months which exhibit indications of credit weaknesses; or • Impaired loans, advances and financing have been rescheduled or restructured, the loans, advances and financing will continue to be classified as impaired until repayments based on the rescheduled or restructured terms have been observed continuously for a period of six (6) months; or • Default occurs for repayments scheduled on intervals of three (3) months or longer. 46 Impairment process – individual assessment The Group and the Bank assess if objective evidence of impairment exists for loans, advances and financing which are deemed to be individually significant. If there is objective evidence that an impairment loss has been incurred, the amount of loss is measured as the difference between the carrying amount of the loans, advances and financing and the present value of the estimated future cash flows discounted at the original effective interest rate of the loans, advances and financing. The carrying amount of the loans, advances and financing is reduced through the use of an impairment allowance account and the amount of the impairment loss is recognised in the income statements. Impairment process – collective assessment Loans, advances and financing which are not individually significant and that have been individually assessed with no evidence of impairment loss are grouped together for collective impairment assessment. These loans, advances and financing are grouped within similar credit risk characteristics for collective assessment, whereby data from the loans, advances and financing portfolio (such as credit quality, levels of arrears, credit utilisation, loan to collateral ratios, etc.) and concentrations of risks (such as the performance of different individual groups) are taken into consideration. (ii) Other receivables To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Bank consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the financial asset is reduced through the use of an impairment allowance account and the amount of the impairment loss is recognised in the income statements.
49. 2 . ACCOUNTING POLICIES (CONT’D.) on that investment previously recognised in the income statements. 2.3 Summary of significant accounting policies (cont’d.) (v) Financial assets (cont’d.) (d) Impairment of financial assets (cont’d.) (1) Loans and receivables (cont’d.) (ii) Other receivables (cont’d.) If in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in the income statements. For financial investments AFS, the Group and the Bank assess at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as financial investments AFS, the objective evidence would include a “significant” or “prolonged” decline in the fair value of the investment below its cost. The Group and the Bank treat “significant” generally as 25% and “prolonged” generally as four (4) consecutive quarters. When there is evidence of impairment, the cumulative loss (which is measured as the difference between the acquisition cost and the current fair value, less any accumulated impairment loss on that investment previously recognised in the income statements) that had been recognised in other comprehensive income is reclassified from equity to income statements. Impairment losses on equity investments are not reversed through the income statements; increases in the fair value after impairment are recognised in other comprehensive income. For unquoted equity securities carried at cost, impairment loss is measured as the difference between the securities’ carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for similar securities. The amount of impairment loss for unquoted equity securities is recognised in the income statements and such impairment losses are not reversed subsequent to its recognition until actual cash is received. For quoted equity securities, its impairment losses are not reversed subsequent to its recognition until such equities are disposed. In the case of debt instruments classified as financial investments AFS, the impairment is assessed based on the same criteria as financial investments HTM. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any accumulated impairment loss Our Performance pg. 4-8 (3) Financial investments held-to-maturity (“HTM”) For financial investments HTM, the Group and the Bank assess at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. If there is objective evidence of impairment on financial investments HTM, impairment loss is measured as the difference between the carrying amount of the financial investments HTM and the present value of the estimated future cash flows discounted at the original effective interest rate of the financial investments HTM. The carrying amount of the financial investments HTM is reduced through the use of an impairment allowance account and the amount of the impairment loss is recognised in the income statements. Subsequent reversals in the impairment loss are recognised when the decrease can be objectively related to an event occurring after the impairment loss was recognised. The reversal should not result in the carrying amount of the asset that exceeds what its amortised cost would have been at the reversal date had the impairment not been recognised. The reversal is recognised in the income statements. (2) Financial investments available-for-sale (“AFS”) Future interest income continues to be accrued based on the reduced carrying amount of asset by using the rate of interest which is used to discount the future cash flows for the purpose of measuring the impairment loss. If in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statements, the impairment loss is reversed through the income statements. The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS (e) Reclassification of financial assets The Group and the Bank may choose to reclassify nonderivative assets out of the financial assets at FVTPL category, in rare circumstances, where the financial assets are no longer held for the purpose of selling or repurchasing in the short term. In addition, the Group and the Bank may also choose to reclassify financial assets that would meet the definition of loans and receivables out of the financial assets at FVTPL or financial investments AFS if the Group and the Bank have the intention and ability to hold the financial assets for the foreseeable future or until maturity. Reclassifications are made at fair value as at the reclassification date, whereby the fair value becomes the new cost or amortised cost, as applicable. For a financial asset reclassified out of the financial investments AFS, any previous gain or loss on that asset that has been recognised in equity is amortised to the income statements over the remaining life of the asset using the effective interest method. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the effective interest method. If the asset is subsequently determined to be impaired, then the amount recorded in equity is recycled to the income statements. 47
50. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) face of statements of financial position of the Group and of the Bank. Details of the financial liabilities at FVTPL are disclosed in Note 23. 2.3 Summary of significant accounting policies (cont’d.) (v) Financial assets (cont’d.) (e) Reclassification of financial assets (cont’d.) Reclassification is at the election of management, and is determined on an instrument-by-instrument basis. The Group and the Bank do not reclassify any financial instrument into the FVTPL category after initial recognition or reclassify any financial instrument out of financial investments AFS during the financial year ended 31 December 2017. (2) Other financial liabilities The Group’s and the Bank’s other financial liabilities include deposits from customers, investment accounts of customers, deposits and placements from financial institutions, debt securities (including borrowings), payables, bills and acceptances payable and other liabilities. (i) Deposits from customers, investment accounts of customers and deposits and placements from financial institutions Deposits from customers, investment accounts of customers and deposits and placements from financial institutions are stated at placement values. Interest/profit expense of deposits from customers, investment accounts of customers and deposits and placements from financial institutions measured at amortised cost is recognised as it accrued using the effective interest method. (vi) Financial liabilities (a) Date of recognition All financial liabilities are initially recognised on the trade date i.e. the date that the Group and the Bank become a party to the contractual provision of the instruments. This includes regular way trades: purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. (b) Initial recognition and subsequent measurement (ii) Debt securities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. All financial liabilities are measured initially at fair value plus directly attributable transaction costs, except in the case of financial liabilities at FVTPL. Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. Debt securities issued by the Group and the Bank are classified as financial liabilities or equity in accordance with the substance of the contractual terms of the instruments. The Group’s and the Bank’s debt securities issued consist of subordinated notes/bonds/sukuk, Innovative Tier 1/Stapled Capital Securities and borrowings. These debt securities 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 that 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 income statements over the period of the borrowings on an effective interest method. (1) Financial liabilities at FVTPL Financial liabilities at FVTPL include financial liabilities HFT and financial liabilities designated upon initial recognition at FVTPL. Financial liabilities held-for-trading Financial liabilities are classified as held-for-trading if they are incurred for the purpose of repurchasing in the near term. This category includes derivatives entered into by the Group and the Bank that do not meet the hedge accounting criteria. Gains or losses on financial liabilities HFT are recognised in the income statements. Financial liabilities designated at fair value Financial liabilities designated upon initial recognition at FVTPL are designated at the initial date of recognition, and only if the criteria in MFRS 139 are satisfied. 48 Effective on 1 January 2016, the Group and the Bank have adopted Fair Value Option (“FVO”) for certain financial liabilities under MFRS 139. The Group and the Bank have designated certain financial liabilities namely, structured deposits and borrowings containing embedded derivatives at FVTPL upon inception. This FVO adoption has been applied prospectively. As a result of this adoption, the Group and the Bank have presented ‘Financial liabilities at FVTPL’, as a separate line item on the (iii) Payables Payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. (iv) Bills and acceptances payable Bills and acceptances payable represent the Group’s and the Bank’s own bills and acceptances rediscounted and outstanding in the market. These financial liabilities are measured at amortised cost using the effective interest method.
51. 31 DECEMBER 2017 The Group and the Bank use derivative instruments to manage exposures to interest rate , foreign currency and credit risks. In order to manage particular risks, the Group and the Bank apply hedge accounting for transactions which meet specified criteria. The Financials pg. 10-287 (b) Hedge accounting At the inception of the hedge relationship, the Group and the Bank formally document the relationship between the hedged item and the hedging instrument, including the nature of the risk, the risk management objective and strategy for undertaking the hedge and the method that will be used to assess the effectiveness of the hedging relationship at inception and on ongoing basis. Basel II Pillar 3 pg. 288-351 2. ACCOUNTING POLICIES (CONT’D.) Our Performance pg. 4-8 NOTES TO THE FINANCIAL STATEMENTS At each hedge effectiveness assessment date, a hedge relationship must be expected to be highly effective on a prospective basis and demonstrate that it was effective (retrospective effectiveness) for the designated period in order to qualify for hedge accounting. Hedge ineffectiveness is recognised in the income statements. For situations where the hedged item is a forecast transaction, the Group and the Bank also assess whether the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect the income statements. (vii) Offsetting of financial assets and financial liabilities Hedges that meet the strict criteria for hedge accounting are accounted for, as described below: (1) Fair value hedge 2.3 Summary of significant accounting policies (cont’d.) (vi) Financial liabilities (cont’d.) (b) Initial recognition and subsequent measurement (cont’d.) (2) Other financial liabilities (cont’d.) (v) Other liabilities Other liabilities are stated at cost which is the fair value of the consideration expected to be paid in the future for goods and services received. (c)Derecognition A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying amount of the original financial liability and the consideration paid is recognised in the income statements. Financial assets and financial liabilities are offset and the net amount is reported in the statements of financial position of the Group and of the Bank if there is a current legally enforceable right to offset the recognised amount and there is an intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously. The financial assets and financial liabilities of the Group and of the Bank that are subject to offsetting, enforceable master netting arrangements and similar agreements are disclosed in Note 54. For designated and qualifying fair value hedges, the cumulative change in the fair value of a hedging instrument is recognised in the income statements. Meanwhile, the cumulative change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying amount of the hedged item in the statements of financial position and is also recognised in the income statements. For fair value hedges relating to items carried at amortised cost, any adjustment to carrying amount is amortised over the remaining term of the hedge using the effective interest method. Effective interest rate amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognised, the unamortised fair value adjustment is recognised immediately in the income statements. The Group disclosed the details of fair value hedge in Note 12. (viii) Derivative financial instruments and hedge accounting (a) Derivative financial instruments The Group and the Bank trade derivatives such as interest rate swaps and futures, credit default swaps, commodity swaps, currency swaps, currency forwards and options on interest rates, foreign currencies, equities and commodities. Derivative financial instruments are initially recognised at fair value. For non-option derivatives, their fair value are normally zero or negligible at inception. For purchased or written options, their fair value are equivalent to the market premium paid or received. The derivatives are subsequently remeasured at their fair value. Fair values are obtained from quoted market prices in active markets, including recent market transactions and valuation techniques that include discounted cash flow models and option pricing models, as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value of any derivatives that do not qualify for hedge accounting are recognised immediately in the income statements. (2) Cash flow hedge For designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income in the cash flow hedge reserve, while any ineffective portion of the gain or loss on the hedging instrument is recognised immediately in the income statements. 49
52. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) 2.3 Summary of significant accounting policies (cont’d.) (x) Resale and repurchase agreements Securities purchased under resale agreements are securities which the Group and the Bank purchase with a commitment to resell at future dates. The commitments to resell the securities are reflected as assets on the statements of financial position. The difference between the purchase and resale prices is recognised in the income statements under the caption of ‘interest income’ and is accrued over the life of the agreement using the effective interest method. Conversely, obligations on securities sold under repurchase agreements are securities which the Group and the Bank sell from its portfolio, with a commitment to repurchase at future dates. Such financing transactions and corresponding obligations to purchase the securities are reflected as liabilities on the statements of financial position. The difference between the sale and the repurchase prices is recognised in the income statements under the caption of ‘interest expense’ and is accrued over the life of the agreement using the effective interest method. (viii) Derivative financial instruments and hedge accounting (cont’d.) (b) Hedge accounting (cont’d.) (2) Cash flow hedge (cont’d.) When the hedged cash flow affects the income statements, the gain or loss on the hedging instrument previously recognised as other comprehensive income is transferred to the corresponding income or expense line of the income statements. When a hedging instrument expires, or is sold, terminated, exercised or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in other comprehensive income remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately transferred to income statements. The Group disclosed the details of cash flow hedge in Note 12. (3) Net investment hedge Net investment hedge including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar 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, while any gain or loss relating to the ineffective portion is recognised immediately in the income statements. On disposal of the foreign operations, the cumulative amount of any such gains or losses recognised in other comprehensive income is transferred to the income statements. The Group uses its subordinated obligations and capital securities as a hedge of its exposure to foreign exchange risk on its investments in foreign subsidiaries. Refer to Note 12 for more details. (ix) Embedded derivatives 50 Derivatives embedded in other financial instruments are treated as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contract and the host contract is not itself held-for-trading or designated at fair value through profit or loss. The embedded derivatives separated from the host are carried at fair value in the trading portfolio with changes in fair value recognised in the income statements. (xi) Property, plant and equipment and depreciation All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset, if and only if, it is probable that future economic benefits associated with the item will flow to the Group and the Bank and the cost of the item can be measured reliably. Subsequent to initial recognition, property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group and the Bank recognise such parts as individual assets with specific useful lives and depreciate them accordingly. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the income statements as incurred. Freehold land has an unlimited useful life and therefore is not depreciated. Work-in-progress are not depreciated until the development is completed and is available for use. Leasehold land is depreciated over the period of the respective leases which ranges from 35 to 999 years. The remaining period of respective leases ranges from 7 to 898 years. Depreciation of other property, plant and equipment is computed on a straight-line basis over its estimated useful life at the following annual rates: Buildings on freehold land Buildings on leasehold land Office furniture, fittings, equipment and renovations Computers and peripherals Electrical and security equipment Motor vehicles 50 years 50 years or remaining life of the lease, whichever is shorter 10% – 25% 14% – 25% 8% – 25% 20% – 25%
53. 2 . ACCOUNTING POLICIES (CONT’D.) 2.3 Summary of significant accounting policies (cont’d.) (xi) Property, plant and equipment and depreciation (cont’d.) The carrying amounts of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The residual value, useful life and depreciation method are reviewed at each financial year end and adjusted prospectively, if appropriate. 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 income statements. The Group disclosed the details of investment properties in Note 15. Investment property under construction (“IPUC”) is measured at fair value (when the fair value is reliably determinable). IPUC for which fair value cannot be determined reliably is measured at cost less impairment. The fair values of IPUC are determined at the end of the reporting period based on the opinion of a qualified independent valuer and valuations are performed using either the residual method approach or discounted cash flow approach, as deemed appropriate by the valuer. Each IPUC is individually assessed. The Group and the Bank do not have any IPUC as at 31 December 2017. Details of property, plant and equipment of the Group and of the Bank are disclosed in Note 19. Gains or losses arising from changes in the fair values of investment properties are recognised in the income statements in the year in which they arise, including the corresponding tax effect. Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the income statements in the period of derecognition. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment as set out in Note 2.3(xi) up to the date of change in use. Any difference arising at the date of change in use between the carrying amount of the property immediately prior to the change in use and its fair value is recognised directly in equity as revaluation reserve. When a fair value gain reverses a previous impairment loss, the gain is recognised in the income statements. Upon disposal of such investment property, any surplus previously recorded in equity is transferred to retained earnings; the transfer is not made through the income statements. Included in other assets are other debtors, amount due from brokers and clients, prepayments and deposits, tax recoverable and foreclosed properties. (a) Other debtors and amount due from brokers and clients Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Such properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value which reflect market conditions at the reporting date. Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. Our Performance pg. 4-8 (xiii)Other assets (xii) Investment properties The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS These assets are carried at anticipated realisable values. An estimate is made for doubtful debts based on a review of all outstanding balances as at the reporting date. Bad debts are written-off when identified. Included in other debtors are physical gold held by the Group and the Bank as a result of its broker-dealer activities. These are accounted for at fair value less costs to sell. Changes in fair value less costs to sell are recognised in the income statements under the caption of ‘other operating income’. (b) Foreclosed assets Foreclosed assets are those acquired in full or partial satisfaction of debts. Foreclosed assets are stated at the lower of carrying amount and fair value less costs to sell and are recognised in ‘other assets’. (xiv) Cash and short-term funds Cash and short-term funds in the statement of financial position comprise cash balances and deposits with financial institutions and money at call with a maturity of one month or less, which are subject to an insignificant risk of changes in value. For the purpose of the statements of cash flows, cash and cash equivalents comprise cash and short-term funds and deposits and placements with financial institutions, with original maturity of 3 months or less. (xv) Impairment of non-financial assets The carrying amounts of non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If there is such indication or when annual impairment testing for an asset is required, the Group and the Bank estimate the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cashgenerating unit (“CGU”)’s fair value less costs to sell and its value-in-use (“VIU”). When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 51
54. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) 2.3 Summary of significant accounting policies (cont’d.) (xv) Impairment of non-financial assets (cont’d.) The Group bases its VIU calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGU to which the individual assets are allocated. In assessing VIU, 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. In determining fair value less costs to sell, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. An impairment loss in respect of goodwill is not reversed. For other non-financial assets, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group and the Bank estimate the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statements. Further disclosures relating to impairment of non-financial assets are disclosed in the following notes: • Significant accounting judgements, estimates and assumptions (Note 3) Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed and recognised in income statements. (xvii) Financial guarantees contract Financial guarantees 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 party fails to meet its obligation when it is due in accordance with the contractual terms. In the ordinary course of business, the Group and the Bank give financial guarantees, consisting of letter of credit, guarantees and acceptances. Financial guarantees premium are initially recognised at fair value on the date the guarantee was issued. Subsequent to initial recognition, the received premium is amortised over the life of the financial guarantee. The guarantee liability (the notional amount) is subsequently recognised at the higher of this amortised amount and the present value of any expected payments (when a payment under guarantee has become probable). The unamortised premium received on these financial guarantees is included within ‘other liabilities’ in the statements of financial position. (xviii) Foreign currencies (a) Functional and presentation currency (b) Foreign currency transactions and balances Transactions in foreign currencies are measured in the respective functional currencies of the Bank and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate of exchange at the reporting date. Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in the income statements except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in other comprehensive income. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the spot exchange rates as at the date of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the spot exchange rates at the date when the fair value was determined. • Property, plant and equipment (Note 19) • Intangible assets (Note 20) (xvi)Provisions 52 Provisions are recognised when the Group and the Bank have a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. When the Group and the Bank expect some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the income statements net of any reimbursement. Where the effect of the time value of money is material, the amount of the provision is the present value of the expenditure expected to be required to settle the obligation. Any increase in the provision due to the passage of time is recognised in the income statements. The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (“RM”), which is also the Bank’s functional currency.
55. 2 . ACCOUNTING POLICIES (CONT’D.) Income taxes for the year comprises current and deferred taxes. Current tax expense is determined according to the tax laws of each jurisdiction in which the Bank and the Bank’s subsidiaries or associates operate and generate taxable income. Current tax expense relating to items recognised directly in equity, is recognised in other comprehensive income or in equity and not in the income statements. Details of income taxes for the Group and the Bank are disclosed in Note 46. 2.3 Summary of significant accounting policies (cont’d.) (xviii) Foreign currencies (cont’d.) (b) Foreign currency transactions and balances (cont’d.) Exchange differences arising on the translation of non-monetary items carried at fair value are included in the income statements for the financial year except for the differences arising on the translation of nonmonetary items in respect of which gains and losses are recognised in other comprehensive income. (c) Foreign operations The results and financial position of foreign operations that have a functional currency different from the presentation currency of Ringgit Malaysia (“RM”) of the consolidated financial statements are translated into RM as follows: •Assets and liabilities of foreign operations are translated at the closing rate prevailing at the reporting date; •Income and expenses for each income statement are translated at average exchange rates for the financial year; and Deferred tax is recognised in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts at the reporting date. Deferred tax liabilities are recognised for all temporary differences, except: (i) Current tax assets/recoverable and current tax liabilities/ provisions are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and (ii) in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. (xix) Income and deferred taxes and zakat (a) Income tax Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: (i) Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign subsidiaries and translated at the closing rate at the reporting date. when the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and (ii) in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. On the partial disposal of a subsidiary that includes a foreign operation, the Group reattributes the proportionate share of the cumulative amount of the exchange differences recognised in other comprehensive income to the non-controlling interests in that foreign operation. In any other partial disposal of a foreign operation, the Group reclassifies to the income statements only the proportionate share of the cumulative amount of the exchange differences recognised in other comprehensive income. Our Performance pg. 4-8 (b) Deferred tax •All resulting exchange differences are taken directly to other comprehensive income through the foreign currency translation reserve. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognised in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to the income statements (as a reclassification adjustment) when the gain or loss on disposal is recognised. The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised. 53
56. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) (b) Finance lease – the Group and the Bank as lessee 2.3 Summary of significant accounting policies (cont’d.) Assets acquired by way of 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 accumulated impairment losses. 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 practical to determine; otherwise, the Bank’s or the Bank’s subsidiaries’ 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 leased assets, are recognised in the income statements 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 2.3(xi). (xix)Income and deferred taxes and zakat (cont’d.) (b) Deferred tax (cont’d.) Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside income statements is recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Details of deferred tax assets and liabilities are disclosed in Note 28. (c)Zakat This represents business zakat payable by the Group in compliance with Shariah principles and as approved by the Group’s Shariah Committee. (c) Operating lease – the Group and the Bank as lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term of the relevant lease. In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and building element of the lease at the inception of the lease. The up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term. (xx)Leases The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement. (a)Classification A lease is classified at the inception date as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the leased assets to the Group and the Bank. All leases that do not transfer substantially all the risks and rewards are classified as operating leases, with the following exceptions: • Property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease; and • Land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of the building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. 54 (d) Operating lease – the Group and the Bank as lessor Assets leased out under operating leases are presented on the statement of financial position according to the nature of the assets. Rental income from operating leases is recognised on a straight-line basis over the lease term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term on the same basis as rental income. (xxi)Insurance contracts/takaful certificates Through its insurance and takaful subsidiaries, the Group issues contracts/certificates to customers that contain insurance/takaful risk, financial risk or a combination thereof. A contract/certificate under which the Group accepts significant insurance/takaful risk from another party by agreeing to compensate that party on the occurrence of a specified uncertain future event, is classified as an insurance contract/ takaful certificate. An insurance contract/takaful certificate may also transfer financial risk, but is accounted for as an insurance contract/takaful certificate if the insurance/takaful risk is significant.
57. 2 . ACCOUNTING POLICIES (CONT’D.) 2.3 Summary of significant accounting policies (cont’d.) (xxi)Insurance contracts/takaful certificates (cont’d.) (a) Insurance premium/contribution income Premium/contribution income from general insurance/ general takaful businesses are recognised in the financial year in respect of risks assumed during that particular financial year. Premium/contribution from direct business are recognised during the financial year upon issuance of debit notes. Premium/contribution in respect of risk incepted for which debit notes have not been issued as of the reporting date are accrued at that date. Premium/contribution income from life insurance/family takaful businesses are recognised as soon as the amount of the premium/contribution can be reliably measured. Initial premiums/contributions are recognised from inception date and subsequent premiums/contributions are recognised on due dates. At the end of the financial year, all due premiums/contributions are accounted for to the extent that they can be reliably measured. (e) Premium/contribution liabilities, unearned premium/ contribution reserves and unexpired risk reserves (1) Premium/contribution liabilities Premium/contribution liabilities represent the future obligations on insurance/takaful contracts as represented by premium/contribution received for risks that have not yet expired. The movement in premium/contribution liabilities is released over the term of the insurance/takaful contracts and is recognised as premium/contribution income. Premium liabilities for general insurance business are reported at the higher of the aggregate of the unearned premium reserves for all lines of business or the best estimated value of the insurer’s unexpired risk reserves at the end of the financial year and a provision of risk margin for adverse deviation (“PRAD”) as prescribed by BNM. Contribution liabilities for general takaful business are reported at the higher of the aggregate of the unearned contribution reserves for all line of businesses or the total general takaful fund’s unexpired risk reserves at above 75% confidence level at the end of the financial year. (b) Reinsurance premium/retakaful contributions Reinsurance premium/retakaful contributions are recognised in the same financial year as the original policies/certificates to which the reinsurance/retakaful relates. Inward treaty reinsurance premium/retakaful contributions are recognised on the basis of periodic advices received from ceding insurers/takaful operators. Inward facultative reinsurance premium/retakaful contributions are recognised in the financial year in respect of the facultative risks accepted during that particular financial year, as in the case of direct policies/ certificates, following the individual risks’ inception dates. (c) Benefits and claims expenses Benefits and claims expenses are recognised in the income statements when a claimable event occurs and/ or the insurer/takaful operator is notified. Recoveries on reinsurance/retakaful claims are accounted for in the same financial year as the original claims are recognised. (d) Commission expenses and acquisition costs The commission expenses and gross cost of acquiring and renewing insurance policies/takaful certificates, after net of income derived from ceding reinsurance premiums/ retakaful contributions, are recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. Gross commission and agency expenses for life insurance business are costs directly incurred in securing premium on insurance policies, after net of income derived from ceding reinsurance premium, are recognised in the income statements in the year in which they are incurred. Our Performance pg. 4-8 The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS (2) Unearned premium reserves (“UPR”) and unearned contribution reserves (“UCR”) UPR/UCR represent the portion of net premiums/ gross contributions of insurance policies/takaful certificates written that relate to the unexpired periods of policies/certificates at the end of the financial year. In determining the UPR/UCR at the reporting date, the method that most accurately reflects the actual unearned premium/contribution is used as follows: • 25% method for marine cargo, aviation cargo and transit business; • 1/24th method for all other classes of local business of general insurance and 1/365th method for all other classes of general takaful business, reduced by the corresponding percentage of accounted gross direct business commissions to the corresponding premiums/ contributions, not exceeding limits specified by BNM; • 1/8th method for all classes of overseas business with a deduction of 20% for commissions; • Earned upon maturity method for bond business written by the general takaful funds; and • Non-annual policies are time-apportioned over the period of the risks after deducting the commission, that relate to the unexpired periods of policies at the end of the financial year. 55
58. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) insolvency or significant financial difficulties of the issuer or obligor and default or significant delay in payments. If any such evidence exists, the insurance and takaful subsidiaries of the Bank reduce the carrying amount of the insurance/takaful receivables accordingly and recognise that impairment loss in the income statements. 2.3 Summary of significant accounting policies (cont’d.) (xxi)Insurance contracts/takaful certificates (cont’d.) (e) Premium/contribution liabilities, unearned premium/ contribution reserves and unexpired risk reserves (cont’d.) (3) Unexpired risk reserves (“URR”) The URR is the prospective estimate of the expected future payments arising from future events insured under policies/certificates in force as at the reporting date and also includes allowance for expenses, including overheads and cost of reinsurance/ retakaful, expected to be incurred during the unexpired period in administering these policies/ certificates and settling the relevant claims and expected future premium/contribution refunds. URR is estimated via an actuarial valuation performed by the signing actuary. (h) Insurance contract/takaful certificate liabilities Insurance contract/takaful certificate liabilities are recognised when contracts/certificates are in-force and premiums/contributions are charged. Insurance contract/ takaful certificate liabilities are derecognised when the contracts/certificates have expired, discharged or cancelled. Any adjustments to the liabilities at each reporting date are recorded in the income statements. Profits originating from margins of adverse deviation on run-off contracts/certificates, are recognised in the income statements over the life of the contract/certificate, whereas losses are fully recognised in the income statements during the first year of run-off. An assessment is made at each reporting date through the performance of a liability adequacy test to determine whether the recognised insurance contract/takaful certificate liabilities are adequate to cover the obligations of insurance/takaful subsidiaries, contractual or otherwise, with respect to insurance contracts/takaful certificates issued. In performing the liability adequacy test, the insurance/takaful subsidiaries discount all contractual cash flows and compare them against the carrying amount of insurance contract/takaful certificate liabilities. Any deficiency is recognised in the income statements. (f) Reinsurance/retakaful assets The insurance and takaful subsidiaries of the Bank cede insurance/takaful risk in the normal course of their businesses. Reinsurance/retakaful assets represent amounts recoverable from reinsurers or retakaful operators for insurance/takaful contract liabilities which have yet to be settled at the reporting date. At each reporting date, or more frequently, the insurance and takaful subsidiaries of the Bank assess whether objective evidence exists that reinsurance/retakaful assets are impaired. To determine whether there is objective evidence that an impairment loss on reinsurance/retakaful asset has been incurred, the insurance and takaful subsidiaries of the Bank consider factors such as the probability of insolvency or significant financial difficulties of the issuer or obligor and default or significant delay in payments. If any such evidence exists, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in the income statements. (i) Claim liabilities Reinsurance/retakaful assets are derecognised when the contractual rights are extinguished or expired or when the contract is transferred to another party. (g) Insurance/takaful receivables 56 Insurance/takaful receivables are recognised when due and measured on initial recognition at fair value. Subsequent to initial recognition, insurance/takaful receivables are measured at amortised cost, using the effective yield method. At each reporting date, the insurance and takaful subsidiaries of the Bank assess whether objective evidence exists that insurance/takaful receivables are impaired. To determine whether there is objective evidence that an impairment loss on insurance/takaful receivables have been incurred, the insurance and takaful subsidiaries of the Bank consider factors such as the probability of Insurance/takaful receivables are derecognised when the contractual right to receive cash flows has expired or substantially all the risks and rewards have been transferred to another party. Claim liabilities represent the insurer’s obligations, whether contractual or otherwise, to make future payments in relation to all claims that have been incurred as at reporting date. Claim liabilities are the estimated provision for claims reported, claims incurred but not reported (“IBNR”), claims incurred but not enough reserved (“IBNER”) and related claims handling costs. These comprised of the best estimate value of claim liabilities and a PRAD as prescribed by BNM. Liabilities for outstanding claims are recognised upon notification by policyholders/participants. Claim liabilities are determined based upon valuations performed by the signing actuary, using a range of actuarial claims projection techniques based on, amongst others, actual claims development patterns. Claim liabilities are not discounted. (j) Expense liabilities Expense liabilities in relation to general takaful and family takaful businesses are based on estimations performed by a qualified actuary. Changes in expense liabilities are recognised in the income statements.
59. Our Performance pg . 4-8 For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group and the Bank determine whether transfers have occurred between fair value hierarchy levels by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The fair value hierarchies of financial instruments and nonfinancial assets that are measured at fair value are disclosed in Note 53(c). While the fair value hierarchies of financial assets and financial liabilities that are not measured at fair value, for which fair value is disclosed are presented in Note 53(g). 2.3 Summary of significant accounting policies (cont’d.) (xxi)Insurance contracts/takaful certificates (cont’d.) (k) Insurance/takaful payables Insurance/takaful payables are recognised when due and measured on initial recognition at fair value. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. (xxii)Fair value measurement The Group and the Bank measure financial instruments such as financial assets at FVTPL, financial liabilities designated at FVTPL, financial investments AFS, derivatives, and non-financial assets such as investment properties, at fair value at each statement of financial position date. (xxiii)Interest/profit income and expense Interest/profit-bearing financial assets classified as loans, advances and financing, financial investments AFS, financial assets HFT and financial assets designated at FVTPL are recognised in the income statements under the caption of ‘interest income’ using the effective interest method. Interest/ profit-bearing financial liabilities classified as deposits from customers, investment accounts of customers, deposits and placements from financial institutions, financial liabilities designated at FVTPL, debt securities and payables are recognised in the income statements under the caption ‘interest expense’ using effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instruments or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group and the Bank take into account all contractual terms of the financial instrument and include any fees or incremental costs that are directly attributable to the instrument, which are an integral part of the effective interest rate, but does not consider future credit losses. Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Profit income and expense from Islamic banking business is recognised on an accrual basis in accordance with the principles of Shariah. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • In the principal market for the asset or liability; or • In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Group and the Bank. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group and the Bank use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Basel II Pillar 3 pg. 288-351 2. ACCOUNTING POLICIES (CONT’D.) 31 DECEMBER 2017 The Financials pg. 10-287 NOTES TO THE FINANCIAL STATEMENTS • Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities. • Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. • Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. 57
60. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) absences. Short-term non-accumulating compensated absences such as sick leave are recognised as an expense in the income statements when the absences occur. 2.3 Summary of significant accounting policies (cont’d.) (xxiv)Fee and other income (a) Fee income (b) Other long-term employee benefits Other long-term employee benefits are benefits that are not expected to be settled wholly before twelve months after the end of the reporting date in which the employees render the related service. The cost of long-term employee benefits is accrued to match the services rendered by employees of the Group using the recognition and measurement bases similar to that for defined benefit plans disclosed in Note 2.3 (xxv) (d), except that the remeasurements of the net defined benefit liability or asset are recognised immediately in the income statements. The Group and the Bank earn fee income from a diverse range of services they provide to its customers. Fee income can be divided into the following three categories: (1) Fee income earned on the execution of a significant act Income earned on the execution of a significant act is recognised as revenue when the act is completed (for example, fees arising from negotiating, or participating in the negotiation of, a transaction for a third party, such as an arrangement for the acquisition of shares or other securities). (2) Fee income earned from provision of services Income earned from the provision of services is recognised as revenue over the period in which the services are provided (for example, asset management, portfolio and other management advisory and service fees). (3) Fee income that forms an integral part of the effective interest rate of a financial instrument (c) Defined contribution plans Income that forms an integral part of the effective interest rate of a financial instrument is recognised as an adjustment to the effective interest rate (for example, certain loan commitment fees) and recorded as part of ‘interest income’ in the income statements. (d) Defined benefit plans As required by labour laws in certain countries, certain subsidiaries of the Bank are required to pay severance payment to their employees upon employees’ retirement. The Group treated such severance payment obligations as defined benefit plans or pension plans. The defined benefit costs and the present value of defined benefit obligations are calculated at the reporting date by the qualified actuaries using the projected unit credit method. Remeasurements of the net defined benefit liability or asset, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income in the period in which they occur and recorded in defined benefit reserve. Remeasurements are not reclassified to the income statement in subsequent periods. Past service costs are recognised in the income statements on the earlier of: (b) Dividend income Dividend income is recognised when the Group’s and the Bank’s right to receive the payment is established. This is the ex-dividend date for listed equity securities, and usually the date when shareholders have approved the dividend for unlisted equity securities. (c) Customer loyalty programmes Award credits under the customer loyalty programmes are accounted for as a separately identifiable component of the transaction in which they are granted. The fair value of the consideration received in respect of the initial sale is allocated between the cost of award credits and the other components of the sale. The consideration allocated to award credits is recognised in the income statements under the caption of ‘other operating income’ when award credits are redeemed. (xxv) Employee benefits • The date of the plan amendment or curtailment; or • The date that the overseas subsidiaries of the Bank recognise restructuring related costs. Net interest on the net defined benefit asset or liability and other expenses relating to defined benefit plans are calculated by applying the discount rate to the net defined benefit liability or asset and recognised in the income statements. The Group disclosed the details of defined benefit plans in Note 25(a). (a) Short-term employee benefits 58 Wages, salaries, bonuses and social security contributions are recognised as an expense in the income statements in the year in which the associated services are rendered by employees of the Group and of the Bank. Short-term accumulating compensated absences such as paid annual leave are recognised as an expense in the income statements when services are rendered by employees that increase their entitlement to future compensated As required by law, companies in Malaysia make contributions to the Employees Provident Fund (“EPF”). Certain overseas branches and overseas subsidiaries of the Bank make contributions to their respective countries’ statutory pension schemes. Such contributions are recognised as an expense in the income statements when incurred.
61. 2 . ACCOUNTING POLICIES (CONT’D.) At each reporting date, the Bank revises its estimates of the number of RSU that are expected to be awarded on vesting date. It recognises the impact of the revision of original estimates, if any, in the income statements and a corresponding adjustment to equity over the remaining vesting period. The equity amount is recognised in the share option reserve. 2.3 Summary of significant accounting policies (cont’d.) (xxv) Employee benefits (cont’d.) (e) Share-based compensation (1) Employee Share Option Scheme (“ESOS”) The ESOS is an equity-settled share-based compensation plan that allows the Group’s directors and employees to acquire shares of the Bank. The total fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in the share option reserve within equity over the vesting period and taking into account the probability that the options will vest. The fair value of share options is measured at grant date, taking into account, if any, the market vesting conditions upon which the options were granted but excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable on vesting date. The proceeds received net of any directly attributable transaction costs are credited to share capital when the options are exercised. The share option reserve is transferred to retained earnings upon expiry of the share option. Senior management employees of the Group are entitled to performance-based restricted shares as consideration for services rendered. The RSU may be settled by way of issuance and transfer of new Maybank shares or by cash at the absolute discretion of the Maybank Group Employees’ Share Scheme (“ESS”) Committee. The total fair value of RSU granted to senior management employees is recognised as an employee cost with a corresponding increase in the reserve within equity over the vesting period and taking into account the probability that the RSU will vest. The fair value of RSU is measured at grant date, taking into account, the market vesting conditions upon which the RSU were granted but excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of shares that are expected to be awarded on the vesting date. (3) Cash-settled Performance-based Scheme (“CESS”) CESS comprising of Cash-settled Performancebased Option Scheme (“CESOS”) and Cash-settled Performance-based Restricted Share Unit Scheme (“CRSU”) is made available to the eligible employees of overseas branches and overseas subsidiaries of the Bank, subject to achievement of performance criteria set out by the Board of Directors and prevailing market practices in the respective countries. Our Performance pg. 4-8 The cost of CESS is measured initially at fair value at the grant date using binomial model and Monte-Carlo simulation model, further details of which are disclosed in Note 32(f) and 32(g). This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognised in the income statements in ‘personnel expenses’ under caption of “ESS Expense”. At each reporting date, the Group revises its estimates of the number of options that are expected to become exercisable on vesting date. It recognises the impact of the revision of original estimates, if any, in the income statements and a corresponding adjustment to equity over the remaining vesting period. The equity amount is recognised in the share option reserve. (2) Restricted Share Units (“RSU”) The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS Details of share options granted under ESS and CESS are disclosed in Note 32(c). (xxvi)Non-current assets (or disposal group) held for sale and discontinued operations Non-current assets (or disposal group) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. The condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition, management has committed to the sale, and the sale is expected to have been completed within one year from the date of classification. Immediately before the initial classification of non-current assets (or disposal group) as held for sale, the carrying amount of non-current assets (or component of a disposal group) is remeasured in accordance with applicable MFRS. Thereafter, the non-current assets (or disposal group) are measured at the lower of carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to financial assets, deferred tax assets and investment property, which continue to be measured in accordance with MFRS. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in the income statements. Gains are not recognised in excess of any cumulative impairment loss. 59
62. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) Basic EPS is calculated by dividing the net profit attributable to equity holders of the Bank by the weighted average number of ordinary shares in issue during the financial year. Diluted EPS is calculated by dividing the net profit attributable to equity holders of the Bank by the weighted average number of ordinary shares in issue during the financial year, which has been adjusted for the effects of all dilutive potential ordinary shares. No adjustment is made for anti-dilutive potential ordinary shares. Where there is a discontinued operation reported, the Group presents the basic and diluted amounts per share for the discontinued operation on the face of the income statements. 2.3 Summary of significant accounting policies (cont’d.) (xxvi) Non-current assets (or disposal group) held for sale and discontinued operations (cont’d.) Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale. Equity accounting on associates ceases once the associates are classified as held for sale. A disposal group qualifies as discontinued operation if it is a component of the Group and of the Bank that either has been disposed of, or is classified as held for sale and: • represents a separate major line of business or geographical area of operations; • is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or (xxx) 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 is a person or a group of people that is responsible to allocate resources and assess the performance of the operating segments of an entity. The Group has determined the Group Executive Committee of the Bank as its chief operating decision-maker. All transactions between business segments (intra-segment revenue and costs) are being eliminated at head office. Income and expenses directly associated with each business segment are included in determining business segment performance. The Group disclosed its segment information in Note 59. • is a subsidiary acquired exclusively with a view to resale. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the income statements. (xxvii) Share capital and dividends declared Ordinary shares are classified as equity when there is no contractual obligation to transfer cash or other financial assets. Transaction costs directly attributable to the issuance of new equity shares are taken to equity as a deduction against the issuance proceeds. Dividends declared on ordinary shares are recognised as a liability and deducted from equity in the period in which all relevant approvals have been obtained. Dividends declared on ordinary shares held under ESOS Trust Fund (“ETF”) Pool are eliminated at the Group level. (xxxi) Monies held-in-trust by Participating Organisation of Bursa Malaysia Securities Berhad (“FRSIC Consensus 18”) Contingent assets arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the Group and the Bank. The Group and the Bank do not recognise contingent assets but disclose its existence when inflows of economic benefits are probable, but not virtually certain. FRSIC Consensus 18 was developed by the Financial Reporting Standards Implementation Committee (“FRSIC”) and issued by the Malaysian Institute of Accountants on 18 September 2012. FRSIC Consensus 18 has been applied in the financial statements of the Group relating to monies in the trust accounts held by entities within the Group that is a participating organisation of Bursa Malaysia Securities Berhad or participating members of equivalent stock exchanges in the respective countries. Contingent liabilities are possible obligations that arise from past events, whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group and of the Bank; or are present obligations that have arisen from past events but are not recognised because it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably. The Group and the Bank do not recognise contingent liabilities. Contingent liabilities are disclosed, unless the probability of outflow of economic benefits is remote. In accordance with FRSIC Consensus 18, monies held-intrust by a participating organisation are not recognised as part of the entity’s assets with the corresponding liabilities as the entity neither has control over the trust monies to obtain the future economic benefits embodied in the trust monies nor has any contractual or statutory obligation to its clients on the money deposited in the trust account that would result in an outflow of resources embodying economic benefits from the entity. This accounting treatment is consistent with the definition of assets and liabilities as defined in the Conceptual Framework for Financial Reporting under the MFRS Framework. The Group has disclosed the carrying amounts of the monies held-in-trust for clients as at the reporting date in Note 5. (xxviii)Contingent assets and contingent liabilities (xxix) Earnings per share 60 The Group presents basic and diluted (where applicable) earnings per share (“EPS”) for profit or loss from continuing operations attributable to the ordinary equity holders of the Bank on the face of the income statements.
63. 2 . ACCOUNTING POLICIES (CONT’D.) The amendments are effective for annual periods beginning on or after 1 January 2017 with early application permitted. If an entity applies the amendments for an earlier period, it must disclose that fact. The amendments should be applied retrospectively. However, on initial application of the amendments, adjustment to the opening equity of the earliest comparative period may be recognised in opening retained earnings, without allocating the change between retained earnings and other components of equity. If this relief is applied, the entity must disclose this fact. The Group and the Bank have been recognising deferred tax assets based on the requirements in the amendments. Thus, the amendments do not have any impact to the financial statements of the Group and of the Bank. Annual Improvements to MFRSs 2014-2016 Cycle – Amendments to MFRS 12 Disclosure of Interests in Other Entities The amendments clarify the scope of MFRS 12 by specifying that its disclosure requirements (other than those in paragraphs B10-B16) apply to an entity’s interests irrespective of whether they are classified (or included in a disposal group that is classified) as held-for-sale or as discontinued operations in accordance with MFRS 5. The amendments are applied retrospectively. The amendments do not have any impact to the financial statements of the Group and of the Bank, as the Group and the Bank do not have any significant interest in entities classified as held-for-sale or as discontinued operations during the financial year ended 31 December 2017. 2.4 Changes in accounting policies and disclosures On 1 January 2017, the Group and the Bank adopted the following amendments to MFRSs and annual improvements to MFRSs: Description Effective for annual periods beginning on or after MFRS 107 Statement of Cash Flows – Disclosure Initiative (Amendments to MFRS 107) 1 January 2017 MFRS 112 Income Taxes – Recognition of Deferred Tax Asset for Unrealised Losses (Amendments to MFRS 112) 1 January 2017 Annual Improvements to MFRSs 2014-2016 Cycle – Amendments to MFRS 12 Disclosure of Interests in Other Entities 1 January 2017 The nature and impact of these amendments to MFRSs are disclosed below: MFRS 107 Statement of Cash Flows – Disclosure Initiative (Amendments to MFRS 107) The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (for example, foreign exchange movements and fair value changes). The amendments are effective for annual periods beginning on or after 1 January 2017, with early application permitted. On initial application of these amendments, entities are not required to provide comparative information for preceding periods. Application of the amendments have resulted in additional disclosures to be provided by the Group and the Bank. The Group and the Bank disclosed the additional disclosures in Notes 23, 25, 29, 30 and 31. MFRS 112 Income Taxes – Recognition of Deferred Tax for Unrealised Losses (Amendments to MFRS 112) The amendments clarify that deductible tax difference will arise from unrealised losses of debt instruments classified at fair value regardless of whether the holder expects to recover the carrying amount by holding the debt instrument until maturity or by selling the debt instrument. In circumstances where tax law restricts the utilisation of tax losses such that an entity can only deduct the tax losses against income of a specified type, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type. The amendments also clarify that when estimating taxable profit of future periods, an entity can assume that an asset will be recovered for more than its carrying amount if that recovery is probable and the asset is not impaired. All relevant facts and circumstances should be assessed when making this assessment. In evaluating whether sufficient future taxable profits are available, an entity should compare the deductible temporary differences with the future taxable profits excluding tax deductions resulting from the reversal of those deductible temporary differences. Our Performance pg. 4-8 The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS 2.5 Significant changes in regulatory requirements (i) Companies Act 2016 The Companies Act 2016 (“New Act”) was enacted to replace the Companies Act 1965 in Malaysia with the objective of creating a legal and regulatory structure that will facilitate business and promote accountability as well as protection of corporate directors and shareholders, taking into consideration the interest of other stakeholders. The New Act was passed on 4 April 2016 by the Dewan Rakyat (House of Representative) and gazetted on 15 September 2016. On 26 January 2017, the Minister of Domestic Trade Co-operatives and Consumerism announced that the date on which the New Act comes into operation, except Section 241 and Division 8 of Part III of the New Act, would be 31 January 2017. Amongst the key changes introduced in the New Act which affect the financial statements of the Group and of the Bank upon the commencement of the New Act on 31 January 2017 are: • the removal of the authorised share capital; • the ordinary shares of the Bank will cease to have par or nominal value; and • the Bank’s share premium will become part of the share capital. During the financial year ended 31 December 2017, the Bank has transferred RM28.9 billion share premium to its share capital. Pursuant to Section 618 of the New Act, the Bank has twenty four (24) months to utilise the amount of share premium that has been transferred to share capital. 61
64. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 2 . ACCOUNTING POLICIES (CONT’D.) 2.5 Significant changes in regulatory requirements (cont’d.) (ii) Revised Policy Documents on Capital Funds and Capital Funds for Islamic Banks issued by Bank Negara Malaysia (“BNM”) On 3 May 2017, BNM issued Revised Policy Documents on Capital Funds and Capital Funds for Islamic Banks (“Revised Policy Documents”). These Revised Policy Documents apply to banking institutions in Malaysia that covers licensed bank, licensed investment bank and licensed Islamic bank. The issuance of these Revised Policy Documents have superseded two guidelines issued by BNM previously, namely Capital Funds and Capital Funds for Islamic Banks dated 1 July 2013. 3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the Group’s and of the Bank’s financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of income, expenses, assets, liabilities, the accompanying disclosures and the disclosure of contingent liabilities. Although these estimates and judgements are based on management’s best knowledge of current events and actions, actual results may differ. The most significant uses of judgements and estimates are as follows: 3.1 Going concern The key changes in the Revised Policy Documents are as follows: (a) the removal of the requirement on maintenance of a reserve fund; and (b) the revised component of capital funds shall exclude share premium and reserve fund. Upon adoption of the Revised Policy Documents, the Group and the Bank have transferred RM10.7 billion and RM10.3 billion of statutory reserve to retained earnings respectively during the financial year ended 31 December 2017. (iii) Policy Document on Classification and Regulatory Treatment for Structured Products under the Financial Services Act 2013 and Islamic Financial Services Act 2013 issued by BNM 3.2 Impairment of financial investments portfolio (Notes 9, 10 and 45) The Group and the Bank review their financial investments AFS and financial investments HTM at each reporting date to assess whether there are any objective evidence that these investments are impaired. If there are indicators or objective evidence, these investments are subjected to impairment review. In carrying out the impairment review, the following management’s judgements are required: On 21 June 2017, BNM issued a Policy Document on Classification and Regulatory Treatment for Structured Products under the Financial Services Act 2013 (“FSA”) and Islamic Financial Services Act 2013 (“IFSA”). This Policy Document applies to banking institutions in Malaysia that covers licensed commercial bank and licensed Islamic bank. (i) Determination whether the investment is impaired based on certain indicators such as, amongst others, prolonged decline in fair value, significant financial difficulties of the issuers or obligors, the disappearance of an active trading market and deterioration of the credit quality of the issuers or obligors; and The Policy Document clarifies that structured products that do not guarantee full repayment of principal amount on demand do not fulfil the definition of deposits under Section 2 of the FSA and IFSA and hence must not be classified as deposits or Islamic deposits. (ii) Determination of “significant” or “prolonged” requires judgement and management evaluation on various factors, such as historical fair value movement, the duration and extent of reduction in fair value. In terms of financial reporting, insofar that the structured product is bifurcated, the principal amount shall not be reported under the “deposit”, “Islamic deposit” or “investment account” line items in the banking institutions’ financial statements. Effective from June 2017 reporting date onwards, banking institutions shall report structured products (in accordance with the accounting treatment adopted) under either of these items: • “Financial Liabilities Designated at Fair Value through Profit or Loss” if applying fair value options; or • “Other Liabilities” if accounted for separately from the embedded derivative. 62 The Group’s and the Bank’s management have made an assessment of its ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s and the Bank’s ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis. As at 31 December 2017, the Group and the Bank have presented the required disclosures in Note 25. Also, upon adoption of the Policy Document, the Group and the Bank have restated the deposits from customers and other liabilities balances as at 31 December 2016 by RM4.31 billion. 3.3 Fair value estimation of financial assets at FVTPL (Note 8), financial investments AFS (Note 9), derivative financial instruments (Note 12) and financial liabilities designated at FVTPL (Note 23) When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair values are measured using valuation techniques. Valuation techniques include the discounted cash flows method, option pricing models, credit models and other relevant valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Refer to Note 53 for further disclosures.
65. 3 . SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONT’D.) Once a suitable method of valuation is selected, management makes certain assumptions concerning the future to estimate the recoverable amount of the specific individual investment. These assumptions and other key sources of estimation uncertainty at the reporting date, may have a significant risk of causing a material adjustment to the carrying amounts of the investments within the next financial year. Depending on the specific individual investment, assumptions made by management may include, amongst others, assumptions on expected future cash flows, revenue growth, terminal value, discount rate used for purposes of discounting future cash flows which incorporates the relevant risks and expected future outcome based on certain past trends. Sensitivity to changes in assumptions Management believes that no reasonably expected possible change in the key assumptions described above would cause the carrying amounts of the investments to materially exceed their recoverable amounts. 3.4 Impairment losses on loans, advances and financing (Notes 11 and 44) The Group and the Bank review their individually significant loans, advances and financing at each reporting date to assess whether an impairment loss should be recorded in the income statements. In particular, management’s judgement is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, the Group and the Bank make judgements about the borrower’s or the customer’s financial situation and the net realisable value of collateral. These estimates are based on assumptions on a number of factors and actual results may differ, resulting in future changes to the allowances. Loans, advances and financing that have been assessed individually but for which no impairment is required and all individually insignificant loans, advances and financing are then assessed collectively, in groups of assets with similar credit risk characteristics, to determine whether allowances should be made due to incurred loss events for which there is objective evidence but whose effects of which are not yet evident. The collective assessment takes account of data from the loans, advances and financing portfolio (such as credit quality, levels of arrears, credit utilisation, loan to collateral ratios etc.) and judgements on the effect of concentrations of risks (such as the performance of different individual groups). The Group tests annually whether the goodwill that has an indefinite life is impaired by measuring the recoverable amount of the CGU based on the VIU method, which requires the use of estimates of future cash flow projections, terminal growth rates and discount rates. Changes to the assumptions used by management, particularly the discount rate and the terminal value, may affect the results of the impairment assessment. 3.8 Amortisation of other intangible assets (Note 20(b) to (d)) 3.6 Impairment of investment in subsidiaries (Note 17) and interest in associates and joint ventures (Note 18) The Group assesses whether there is any indication that an investment in subsidiaries and interest in associates and joint ventures may be impaired at each reporting date. If indicators are present, these investments are subjected to impairment review. The impairment review comprises a comparison of the carrying amounts and estimated recoverable amounts of the investments. Judgements made by management in the process of applying the Group’s accounting policies in respect of investment in subsidiaries and interest in associates and joint ventures are as follows: (i) The Group determines whether its investments are impaired following certain indications of impairment such as, amongst others, prolonged shortfall between market value and carrying amount, significant changes with adverse effects on the investment and deteriorating financial performance of the investment due to observed changes in the economic environment; and Our Performance pg. 4-8 3.7 Impairment of goodwill (Note 20(a)) 3.5 Valuation of investment properties (Note 15) The measurement of the fair value for investment properties is arrived at by reference to market evidence of transaction prices for similar properties and is performed by independent valuers who hold a recognised and relevant professional qualification and have recent experience in the locations and category of the properties being valued. The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS The Group’s and the Bank’s intangible assets that can be separated and sold, and have a finite useful life are amortised over their estimated useful life. The determination of the estimated useful life of these intangible assets requires management’s judgement which includes analysing the circumstances, the industry and market practice. 3.9 Deferred tax (Note 28) and income taxes (Note 46) The Group and the Bank are subject to income taxes in many jurisdictions and significant judgement is required in estimating the provision for income taxes. There are many transactions and interpretations of tax law for which the final outcome will not be established until some time later. Liabilities for taxation are recognised based on estimates of whether additional taxes will be payable. The estimation process includes seeking advice on the tax treatments where appropriate. Where the final liability for taxation is different from the amounts that were initially recorded, the differences will affect the income tax and deferred tax provisions in the period in which the estimate is revised or the final liability is established. Deferred tax assets are recognised in respect of tax losses to the extent that it is probable that future taxable profit will be available against which the losses can be utilised. Judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits, together with future tax planning strategies. (ii) Depending on their nature and the location in which the investments relate to, judgements are made by management to select suitable methods of valuation such as, amongst others, discounted future cash flows or estimated fair value based on quoted market price of the most recent transactions. 63
66. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 3 . SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONT’D.) 3.10 Liabilities of insurance business (Note 24) (a) Life insurance and family takaful businesses There are several sources of uncertainty that need to be considered in the estimation of life insurance and family takaful liabilities. For life insurance contracts, the main assumptions used relate to mortality, morbidity, longevity, expenses, withdrawal rates and discount rates. These estimates, adjusted when appropriate to reflect the insurance subsidiary’s unique risk exposure, provide the basis for the valuation of future policy benefits payable. For family takaful certificates, estimates are made for future deaths, disabilities, maturities, investment returns in accordance with the takaful subsidiary’s experience. The family takaful fund bases the estimate of expected number of deaths on applied mortality tables, adjusted where appropriate to reflect the fund’s unique risk exposures. The estimated number of deaths determines the value of possible future benefits to be paid out, which will be factored into ensuring sufficient cover by reserves, which in return is monitored against current and future contributions. For those certificates that cover risks related to disability, estimates are made based on recent past experience and emerging trends. (b) General insurance and general takaful businesses The principal uncertainty in the general insurance and general takaful businesses arise from the technical provisions which include the premium/contribution liabilities and claims liabilities. The basis of valuation of the premium/contribution liabilities and claims liabilities are disclosed in Note 2.3(xxi). Generally, claims liabilities are determined based upon historical claims experience, existing knowledge of events, the terms and conditions of the relevant policies and interpretation of circumstances. Particularly relevant is past experience with similar cases, historical claims, development trends, legislative changes, judicial decisions, economic conditions and claims handling procedures. It is certain that actual, future contribution and claims liabilities will not exactly develop as projected and may vary from the projections. 3.11 Defined benefit plans (Note 25(a)) 64 The cost of the defined benefit plan and other post employment benefits and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, expected rate of returns on investments, future salary increases, mortality rates, resignation rates and future pension increases. Due to the complexity of the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. In determining the appropriate discount rate, management considers the interest rates of high quality government bonds in their respective currencies and extrapolated maturity corresponding to the expected duration of the defined benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Future salary increases and pension increases are based on expected future inflation rates for the respective countries. Further details about the assumptions used, including a sensitivity analysis, are given in Note 25(a)(iv). 3.12 Deemed controlled structured entities (Note 63(b)) The Group has established a number of fixed income funds and equity funds, where it is deemed to be acting as principal rather than agent in its role as funds investment manager for the funds. Accordingly, the Group is deemed to control these entities and consolidate these entities based on the accounting policies as disclosed in Note 2.2. 4. STANDARDS, ANNUAL IMPROVEMENTS TO STANDARDS AND IC INTERPRETATION ISSUED BUT NOT YET EFFECTIVE The following are standards, annual improvements to standards and IC Interpretation issued by Malaysian Accounting Standards Board (“MASB”), but not yet effective, up to the date of issuance of the Group’s and of the Bank’s financial statements. The Group and the Bank intend to adopt these standards, annual improvements to standards and IC Interpretation, if applicable, when they become effective: Description Effective for annual periods beginning on or after MFRS 2 Share-based Payment – Classification and Measurement of Share-based Payment Transactions (Amendments to MFRS 2) 1 January 2018 MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014) 1 January 2018 MFRS 9 Prepayment Features with Negative Compensation (Amendments to MFRS 9) 1 January 2019 MFRS 10 Consolidated Financial Statements – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments To be announced to MFRS 10) by MASB MFRS 15 Revenue from Contracts with Customers 1 January 2018 MFRS 16 Leases 1 January 2019 MFRS 17 Insurance Contracts 1 January 2021 MFRS 128 Long-term Interests in Associates and Joint Ventures (Amendments to MFRS 128) 1 January 2019 MFRS 128 Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture To be announced (Amendments to MFRS 128) by MASB MFRS 140 Transfers of Investment Property (Amendments to MFRS 140) 1 January 2018 Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts (Amendments to MFRS 4) 1 January 2018 Annual Improvements to MFRSs 2014-2016 Cycle (i) Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards 1 January 2018 (ii)Amendments to MFRS 128 Investments in Associates and Joint Ventures 1 January 2018
67. Description IC Interpretation 22 Foreign Currency Transactions and Advance Consideration IC Interpretation 23 Uncertainty over Income Tax Treatments Annual Improvements to MFRSs 2015-2017 Cycle (i) Amendments to MFRS 3 Business Combinations and MFRS 11 Joint Arrangements (ii)Amendments to MFRS 112 Income Tax (iii)Amendments to MFRS 123 Borrowing Costs Amortised Cost Effective for annual periods beginning on or after 1 January 2019 1 January 2019 1 January 2019 1 January 2019 MFRS 2 Share-based Payment – Classification and Measurement of Share-based Payment Transactions (Amendments to MFRS 2) (i) The effects of vesting conditions on the measurement of a cashsettled share-based payment transaction; (ii) The classification of a share-based payment transaction with net settlement features for withholding tax obligations; and •Equity •Equity instruments that instruments are were not normally elected for measured at FVOCI will be FVTPL. measured at However, for FVTPL. non-traded equity instruments, with an irrevocable option at inception, to measure changes through FVOCI (i.e. without recycling profit or loss upon derecognition). (iii) Accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. The amendments are effective for annual periods beginning on or after 1 January 2018, with early application permitted. The Group and the Bank are assessing the potential impact of the amendments on the financial statements. MFRS 9 Financial Instruments The International Accounting Standards Board (“IASB”) issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but restatement of comparative information is not compulsory. MFRS 9 is issued by the MASB in respect of its application in Malaysia. It is equivalent to IFRS 9 as issued by IASB, including the effective and issuance dates. The areas with expected significant impact from application of MFRS 9 are summarised below: (i) Classification and measurement MFRS 9 requires financial assets to be classified on the basis of two criteria: FVTPL • Financial assets • Financial assets • Financial assets will be will be will be measured at measured at measured at FVTPL if the FVOCI if the amortised cost assets that are assets held if the assets held for trading within a held within a or financial business model business model assets that whose objective whose objective qualify for is achieved by is to hold neither held at both collecting financial assets amortised cost contractual cash in order to nor at FVOCI. flows and selling collect financial assets, contractual cash and the flows which contractual cash represent solely flows represent payments of solely payments principal and of principal and interest. interest. 1 January 2018 <----------------- Fair Value -----------------> FVOCI The amendments address three main areas: At initial recognition, each financial assets will be classified as either amortised cost, fair value through other comprehensive income (“FVOCI”), or FVTPL as summarised in below table: Basel II Pillar 3 pg. 288-351 4. STANDARDS, ANNUAL IMPROVEMENTS TO STANDARDS AND IC INTERPRETATION ISSUED BUT NOT YET EFFECTIVE (CONT’D.) Our Performance pg. 4-8 31 DECEMBER 2017 The Financials pg. 10-287 NOTES TO THE FINANCIAL STATEMENTS Classification and measurement of financial liabilities will remain largely unchanged, other than the fair value gains and losses attributable to changes in ‘own credit risk’ for financial liabilities designated and measured at FVTPL to be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change in respect of the liability’s credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. (1) The business model within financial assets are managed; and (2) The contractual cash flows characteristic. 65
68. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 4 . STANDARDS, ANNUAL IMPROVEMENTS TO STANDARDS AND IC INTERPRETATION ISSUED BUT NOT YET EFFECTIVE (CONT’D.) • Expected life MFRS 9 Financial Instruments (cont’d.) (ii)Impairment The MFRS 9 impairment requirements are based on an Expected Credit Loss (“ECL”) model that replaces the Incurred Loss model under the current accounting standard. The ECL model applies to financial assets measured at amortised cost or at FVOCI, irrevocable loan commitments and financial guarantee contracts, which will include loans, advances and financing and debt instruments held by the Group and the Bank. The ECL model also applies to contract assets under MFRS 15 Revenue from Contracts with Customers and lease receivables under MFRS 117 Leases. • Forward looking information The measurement of expected loss will involve increased complexity and judgement that include: • Determining a significant increase in credit risk since initial recognition The assessment of significant deterioration since initial recognition is key in establishing the point of switching between the requirement to measure an allowance based on 12-month ECLs and one that is based on lifetime ECLs. The quantitative and qualitative assessments are required to estimate the significant increase in credit risk by comparing the risk of a default occurring on the financial assets as at reporting date with the risk of default occurring on the financial assets as at the date of initial recognition. The Group and the Bank will be generally required to apply a three-stage approach based on the change in credit quality since initial recognition: 3 Stage approach Stage 1 Stage 2 Stage 3 Performing Underperforming Nonperforming ECL Approach 12-month ECL Lifetime ECL Lifetime ECL Criterion No significant increase in credit risk Credit risk increased significantly Creditimpaired assets Gross carrying amount Gross carrying amount Net carrying amount Recognition of interest/ profit income 66 Expected credit losses are the unbiased probability-weighted credit losses determined by evaluating a range of possible outcomes and considering future economic conditions. The reasonable and supportable forward looking information will be based on the Group’s and the Bank’s research arm, Maybank Kim Eng (“MKE”). In addition, the MKE Research’s assumptions and analysis would also be based on the collation of macroeconomic data obtained from various sources such as, but not limited to regulators, government and foreign ministries as well as independent research organisations. (iii) Hedge accounting The requirements for general hedge accounting have been simplified for hedge effectiveness testing and may result in more designations of hedged items for accounting purposes. The Group and the Bank have established a MFRS 9 project sponsored by Group Chief Financial Officer and co-sponsored by Group Chief Risk Officer and includes the subject matter experts with assistance from external consultants to plan and manage the implementation of MFRS 9. This implementation project consists of the following phases: (a) Phase 1 – Impact assessment and solution development This phase involves the following: (i) Provide a clear understanding of the new accounting requirements via training; (ii) Perform gap and impact assessment; (iii) Understand the interdependencies with other projects; and (iv) Develop MFRS 9 blue-print. (b) Phase 2 – Build, test and deploy There are three main components to measure ECL which are a probability of default model (“PD”), a loss given default model (“LGD”) and the exposure at default model (“EAD”). The model is to leverage as much as possible the Group’s and the Bank’s existing Basel II models and performed the required adjustments to produce MFRS 9 compliant model. MFRS 9 does not distinguish between individual assessment and collective assessment. Therefore, the Group and the Bank decided to continue measure the impairment on an individual transaction basis for financial assets that are deemed to be individually significant. For detailed information on existing impairment approach under MFRS 139, please refer to Note 2.3(v)(d). This phase aims to: (i) Develop detailed implementation plan; (ii) Determine accounting policies to be adopted by the Group and the Bank; and (iii) Identify optimal solutions for the Group and the Bank. • ECL Measurement Lifetime expected credit losses must be measured over the expected life. This is restricted to the maximum contractual life and takes into account expected prepayment, extension, call and similar options, except for certain revolver financial instruments such as credit cards and overdrafts. The expected life for these revolver facilities is expected to be behavioural life. (c) Phase 3 – Go live This phase involves the following: (i) Parallel run and deployment of solution tools; and (ii) Reassessment of solution tools and conclusion.
69. The Group and the Bank had completed Phase 1 during the financial year ended 31 December 2016 and Phase 2 on 30 June 2017 . Specifically on 1 July 2017, the Group and the Bank have carried out the Phase 3 – parallel run on the financial instruments that are impacted by the classification and measurement requirements and ECL computation based on the developed impairment methodology. During the financial year ended 31 December 2017, the Group and the Bank have also developed its approach for assessing significant increase in credit risk, incorporating forward looking information, including the probability weighted outcome of future economic conditions. The overall governance of MFRS 9 project implementation is through the MFRS 9 Project Steering Committee which includes representation from Finance, Risk, IT and various Business sectors. In addition, the Audit Committee of the Board and the Board of Directors have provided effective oversight of the Group’s and the Bank’s progress in preparation of MFRS 9 adoption along with the regular updates on the MFRS 9 progress and readiness by the project team. Overall, the Group and the Bank anticipate impact to the financial statements in the areas of classification and measurement for financial assets and impairment. The classification and measurement requirements will affect the presentation and disclosures within the Group’s and the Bank’s financial statements whilst the impairment requirements are expected to result in a higher allowance for impairment losses. Following the Group’s and the Bank’s parallel run using the latest available information, the Group’s and the Bank’s Capital Adequacy Ratios indicate potential reduction of around 40 basis points to the opening retained earnings on 1 January 2018 upon adoption of MFRS 9. The final impacts are still being assessed and may be adjusted as necessary. MFRS 9 Prepayment Features with Negative Compensation (Amendments to MFRS 9) Under MFRS 9, a debt instrument can be measured at amortised cost or at fair value through other comprehensive income, provided that the contractual cash flows are solely payments of principal and interest on the principal amount outstanding (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to MFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. The amendments must be applied retrospectively. Earlier application is permitted. These amendments are not expected to have a significant impact on the Group’s and the Bank’s financial statements. MFRS 10 Consolidated Financial Statements – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to MFRS 10) and MFRS 128 Investment in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to MFRS 128) The amendments address the conflict between MFRS 10 and MFRS 128 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments require the full gain to be recognised when the assets transferred to an associate or joint venture in which it meets the definition of a business as defined in MFRS 3 Business Combinations. Our Performance pg. 4-8 MFRS 9 Financial Instruments (cont’d.) Any gain or loss on assets transferred to an associate or joint venture that do not meet the definition of a business would be recognised only to the extent of the unrelated investors’ interest in the associate or joint venture. The amendments originally apply prospectively effective for periods beginning on or after 1 January 2016, with early application permitted. On 31 December 2015, MASB announced to defer the effective date of the amendments, except for the amendments which clarify how an entity should determine any gain or loss it recognises when assets are sold or contributed between the entity and an associate or joint venture in which it invests, where early application still permitted. The deferment is in line with the IASB’s recent decision which removed the requirement to apply Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to MFRS 10 and MFRS 128) by 2016. The IASB’s reason for making the decision to defer the effective date is that the IASB is planning a broader review that may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and joint ventures. The Group and the Bank do not anticipate significant impact to the financial statements upon adoption of the amendments. Basel II Pillar 3 pg. 288-351 4. STANDARDS, ANNUAL IMPROVEMENTS TO STANDARDS AND IC INTERPRETATION ISSUED BUT NOT YET EFFECTIVE (CONT’D.) 31 DECEMBER 2017 The Financials pg. 10-287 NOTES TO THE FINANCIAL STATEMENTS MFRS 15 Revenue from Contracts with Customers MFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. Under MFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in MFRS 15 provide a more structured approach (i.e. five-step model) to measure and recognise revenue. The five-step model that applies to revenue recognition under MFRS 15 is as follows: (1) Identify the contract(s) with a customer; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to the performance obligations in the contract; and (5) Recognise revenue when (or as) the entity satisfies a performance obligation. The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies how to account for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. New disclosure requirements under MFRS 15 which include disaggregated information about revenue and information about the performance obligations remaining at the reporting date. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under MFRS (including MFRS 111 Construction Contracts, MFRS 118 Revenue, IC Interpretation 13 Customer Loyalty Programmes, IC Interpretation 15 Agreements for the Construction of Real Estate, IC Interpretation 18 Transfers of Assets from Customers and IC Interpretation 131 Revenue – Barter Transactions Involving Advertising Services). Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. The Group and the Bank adopt the standard on its effective date, using the modified retrospective method of adoption. The standard does not apply to income or revenue associated with financial instruments scoped in MFRS 9 such as loan, advances and financing and financial investment securities. 67
70. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 4 . STANDARDS, ANNUAL IMPROVEMENTS TO STANDARDS AND IC INTERPRETATION ISSUED BUT NOT YET EFFECTIVE (CONT’D.) (ii) A Contractual Service Margin (“CSM”) that is equal and opposite to any day-one gain in the fulfilment cash flows of a group of contracts, representing the unearned profitability of the insurance contracts to be recognised in profit or loss over the service period (i.e. coverage period); MFRS 15 Revenue from Contracts with Customers (cont’d.) The Group and the Bank have established a project team, with assistance from the various lines of business and finance management to evaluate the potential impact of adopting this standard. The implementation efforts included the scoping of material revenue streams, analysis of underlying contracts, business unit discussion to further assess specific contracts and products and the development of updated disclosures. The project team has completed the scoping and determined that approximately RM4 billion of other operating income for the financial year ended 31 December 2017 would be within the scope of the new revenue recognition standard, when adopted. Based on the completed contracts reviews to date, the potential changes in revenue recognition for those contracts are not expected to result in a material impact to the Group and the Bank upon adoption. The project team is developing additional quantitative and qualitative disclosures that will be required upon the adoption of the new revenue recognition standard. (iii) Certain changes in the expected present value of future cash flows are adjusted against the CSM and thereby recognised in profit or loss over the remaining contractual service period; (iv) The effect of changes in discount rates will be reported in either profit or loss or other comprehensive income, determined by an accounting policy choice; (v) The presentation of insurance revenue and insurance service expenses in the statement of comprehensive income based on the concept of services provided during the period; (vi) Amounts that the policyholder will always receive, regardless of whether an insured event happens (non-distinct investment components) are not presented in the income statement, but are recognised directly on the balance sheet; (vii) Insurance services results (earned revenue less incurred claims) are presented separately from the insurance finance income or expense; and MFRS 16 Leases MFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model, similar to the accounting for finance leases under MFRS 117. The standard will supersede MFRS 117 Leases, IC Interpretation 4 Determining whether an Arrangement contains a Lease, IC Interpretation 115 Operating Lease – Incentives and IC Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. (viii)Extensive disclosures to provide information on the recognised amounts from insurance contracts and the nature and extent of risks arising from these contracts. (i)Lessee At the commencement date of a lease, a lessee will recognise a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. Subsequently, lessees will be required to recognise interest expense on the lease liability and the depreciation expense on the right-of-use asset. The standard is effective for annual periods beginning on or after 1 January 2021. Early application is permitted, provided the entity also applies MFRS 9 and MFRS 15 on or before the date it first applies MFRS 17. An entity shall apply MFRS 17 retrospectively. However, if full retrospective application for estimating the CSM, as defined by MFRS 108 for a group of insurance contracts, is impracticable, an entity is required to choose one of the following two alternatives: (i) Modified retrospective approach Based on reasonable and supportable information available without undue cost and effort to the entity, certain modifications are applied to the extent full retrospective application is not possible, but still with the objective to achieve the closest possible outcome to retrospective application. (ii)Lessor Lessor accounting under MFRS 16 is substantially the same as the accounting under MFRS 117. Lessors will continue to classify all leases using the same classification principle as in MFRS 117 and distinguish between two types of leases: operating and finance leases. The standard is effective for annual periods beginning on or after 1 January 2019. Early application is permitted but not before an entity applies MFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The Group and the Bank are in the process of assessing the financial implication for adopting the new standard and plan to adopt the new standard on the required effective date. MFRS 17 Insurance Contracts MFRS 17 will replace MFRS 4 Insurance Contracts that was issued in 2005. MFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. The main features of the new accounting model for insurance contracts are, as follows: (i) The measurement of the present value of future cash flows, incorporating an explicit risk adjustment, re-measured every reporting period (the fulfilment cash flows); 68 (ii) Fair value approach The CSM is determined as the positive difference between the fair value determined in accordance with MFRS 13 Fair Value Measurement and the fulfilment cash flows (any negative difference would be recognised in retained earnings at the transition date). Both the modified retrospective approach and the fair value approach provide transitional reliefs for determining the grouping of contracts. If an entity cannot obtain reasonable and supportable information necessary to apply the modified retrospective approach, it is required to apply the fair value approach. The Group is in the process of assessing the financial implication for adopting the new standard and plan to adopt the new standard on the required effective date.
71. 31 DECEMBER 2017 4 . STANDARDS, ANNUAL IMPROVEMENTS TO STANDARDS AND IC INTERPRETATION ISSUED BUT NOT YET EFFECTIVE (CONT’D.) MFRS 128 Long-term Interests in Associates and Joint Ventures (Amendments to MFRS 128) The amendments clarify that an entity applies MFRS 9 Financial Instruments to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). In applying MFRS 9, an entity does not account for any losses of the associate, or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying MFRS 128 Investments in Associates and Joint Ventures. (ii) Amendments to MFRS 128 Investments in Associates and Joint Ventures The amendments must be applied retrospectively, with certain exceptions. Early application of the amendments is permitted and must be disclosed. As the amendments eliminate ambiguity in the wording of the standard, the directors of the Bank do not expect the amendments to have any impact on the Group’s and the Bank’s financial statements. MFRS 140 Transfers of Investment Property (Amendments to MFRS 140) The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management’s intentions for the use of a property is insufficient to support the change in use. The amendments apply for annual periods beginning on or after 1 January 2018, with earlier application permitted. Entities are given two options to apply these amendments: The amendments removed a number of short-term exemptions because the reliefs provided are no longer available or because they were relevant for reporting periods that have now passed. The Group and the Bank do not anticipate significant impact to the financial statements upon adoption of the amendments. The amendments clarify that a venture capital organisation, or a mutual fund, unit trust and similar entities (including investmentlinked insurance funds) may choose, on an investment by investment basis, to account for its investments in joint ventures and associates at fair value or using the equity method. The method chosen for each investment must be made on initial recognition. The amendments apply retrospectively for annual periods beginning on or after 1 January 2018, with earlier application permitted. The Group and the Bank do not anticipate significant impact to the financial statements upon adoption of the amendments. IC Interpretation 22 Foreign Currency Transactions and Advance Consideration IC Interpretation 22 addresses the exchange rate that should be used to measure revenue (or expense) when the related consideration was received (or paid) in advance. It requires that the exchange rate to use is the one that applied when the non-monetary asset (or liability) arising from the receipt (or payment) of advance consideration was initially recognised. IC Interpretation 22 is effective for annual periods beginning on or after 1 January 2018, with earlier application permitted. Entities are given two options to apply these amendments: (i)the prospective approach – apply the amendments to transfer that occur after the date of initial application and also reassess the classification of property assets held at that date; or (i) retrospectively according to MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors; or (ii)the retrospective approach – apply the amendments retrospectively, but only if it does not involve the use of hindsight. (ii) prospectively to all assets, expenses and income in the scope of the interpretation initially recognised on or after: The Group and the Bank do not anticipate significant impact to the financial statements upon adoption of the amendments. • the beginning of the reporting period in which the entity first applies the interpretation; or Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts (Amendments to MFRS 4) In December 2016, the MASB issued amendments to MFRS 4 to address issues arising from the different effective dates of MFRS 9 and the upcoming new insurance contracts standard (IFRS 17) to be issued by the International Accounting Standards Board. • the beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the interpretation. The amendments introduce two alternative options for entities issuing contracts within the scope of MFRS 4, notably a temporary exemption and an overlay approach. The temporary exemption enables eligible entities to defer the implementation date of MFRS 9 for annual periods beginning before 1 January 2021 at the latest whilst the overlay approach allows an entity applying MFRS 9 to reclassify between profit or loss and other comprehensive income an amount that results in the profit or loss at the end of the reporting period for the designated financial assets being the same as if an entity had applied MFRS 139 to these designated financial assets. The Group has opted not to apply the exemptions permitted under these amendments and will fully adopt MFRS 9 effective on 1 January 2018. Basel II Pillar 3 pg. 288-351 (i) Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards The Financials pg. 10-287 Annual Improvements to MFRSs 2014-2016 Cycle Our Performance pg. 4-8 NOTES TO THE FINANCIAL STATEMENTS The Group and the Bank do not anticipate significant impact to the financial statements upon adoption of the interpretation. IC Interpretation 23 Uncertainty over Income Tax Treatments IC Interpretation 23 clarifies application of recognition and measurement requirements in MFRS 112 Income Taxes when there is uncertainty over income tax treatments (e.g. when recognising a current tax asset if tax laws require entities to make payments on a disputed tax treatment). The Interpretation specifically addresses the following: • Whether an entity considers uncertain tax treatments separately; • The assumptions an entity makes about the examination of tax treatments by taxation authorities; • How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and • How an entity considers changes in facts and circumstances. 69
72. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 4 . STANDARDS, ANNUAL IMPROVEMENTS TO STANDARDS AND IC INTERPRETATION ISSUED BUT NOT YET EFFECTIVE (CONT’D.) (ii) Amendments to MFRS 112 Income Tax The amendments clarify that an entity must recognise all income tax consequences of dividends in profit or loss, other comprehensive income or equity, depending on where the entity recognised the originating transaction or event that generated the distributable profits giving rise to the dividend. The amendments apply for annual periods beginning on or after 1 January 2019, with earlier application permitted. The Group and the Bank do not anticipate significant impact to the financial statements upon adoption of the amendments. IC Interpretation 23 Uncertainty over Income Tax Treatments (cont’d.) An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. The interpretation is effective for annual reporting periods beginning on or after 1 January 2019, but certain transition reliefs are available. The Group and the Bank are in the process of assessing the financial implication for adopting the interpretation and plan to adopt the new interpretation on the required effective date. (iii) Amendments to MFRS 123 Borrowing Costs Paragraph 14 of MFRS 123 requires an entity to exclude borrowings made specifically for the purpose of obtaining/constructing a qualifying asset i.e. specific borrowings, when determining the funds that an entity borrows generally i.e. general borrowings and the funds that it uses for the purpose of obtaining/constructing a qualifying asset. The amendments 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. Therefore, from that date, the rate applied on those specific borrowings are included in the determination of the capitalisation rate of general borrowings accordingly. The amendments are effective for annual periods beginning on or after 1 January 2019, with earlier application permitted. The Group and the Bank do not anticipate significant impact to the financial statements upon adoption of the amendments. Annual Improvements to MFRSs 2015-2017 Cycle (i) Amendments to MFRS 3 Business Combinations and MFRS 11 Joint Arrangements • MFRS 3 Business Combinations The amendments clarify that if an entity in a joint operation that is a business subsequently obtains control of the joint operation, it must remeasure its previously held interest at the acquisition-date fair value. Any difference between the acquisitiondate fair value and previous carrying value is recognised as a gain or loss. The amendments therefore means that when the entity in a joint operation that is a business subsequently obtains control of the joint operation, it applies the same requirements already in MFRS 3 that apply to business combinations achieved in stages. The amendments are effective for annual periods beginning on or after 1 January 2019, with earlier application permitted. The Group and the Bank do not anticipate significant impact to the financial statements upon adoption of the amendments. • MFRS 11 Joint Arrangements 70 The amendments clarify that if an entity that participates in (but does not have joint control over) a joint operation that is a business subsequently obtains joint control of the joint operation, it must not remeasure its previously held interest. The amendments therefore aligns with the accounting applied to transactions in which an associate becomes a joint venture and vice versa. The amendments are effective for annual periods beginning on or after 1 January 2019, with earlier application permitted. The Group and the Bank do not anticipate significant impact to the financial statements upon adoption of the amendments.
73. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Cash balances and deposits with financial institutions Money at call Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 49,110,527 1,223,763 56,932,108 1,208,437 30,714,527 – 38,350,931 – 50,334,290 58,140,545 30,714,527 38,350,931 Basel II Pillar 3 pg. 288-351 Group The Financials pg. 10-287 5. CASH AND SHORT-TERM FUNDS The Group’s monies held-in-trust for clients as at the reporting date are approximately RM4,836,268,000 (2016: RM3,467,046,000). These amounts are excluded from the cash and short-term funds of the Group in accordance with FRSIC Consensus 18. The Bank does not have monies held-in-trust for clients as at the reporting date. 6. DEPOSITS AND PLACEMENTS WITH FINANCIAL INSTITUTIONS Group Note Licensed banks Bank Negara Malaysia Other financial institutions (a) Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 9,386,944 2,200,134 5,401,313 9,512,235 1,142,428 2,789,967 14,340,757 2,200,134 4,841,602 16,120,174 1,139,794 2,079,319 16,988,391 13,444,630 21,382,493 19,339,287 (a) Included in deposits and placements with other financial institutions is USD20.0 million (2016: USD30.0 million) or Ringgit Malaysia equivalent of RM81.0 million (2016: RM134.6 million) pledged with the New York State Banking Department which is not available for use by the Group and the Bank due to capital equivalency deposit requirements. 7. FINANCIAL ASSETS PURCHASED UNDER RESALE AGREEMENTS AND OBLIGATIONS ON FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS (a) The financial assets purchased under resale agreements are as follows: Group Foreign Government Bonds Foreign Government Securities Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 880,780 7,633,503 220,393 2,272,019 – 7,633,503 213,970 1,999,143 8,514,283 2,492,412 7,633,503 2,213,113 (b) The obligations on financial assets sold under repurchase agreements are as follows: Group Financial assets held-for-trading Financial investments available-for-sale Financial investments held-to-maturity Bank Note 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 8(b) 9(a) 10(d) – 4,905,607 461,479 752,735 716,135 1,489,081 – 4,727,837 461,479 752,735 716,135 1,489,081 5,367,086 2,957,951 5,189,316 2,957,951 71
74. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 8 . FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (“FVTPL”) Group Note Financial assets designated upon initial recognition Financial assets held-for-trading (a) (b) Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 13,187,127 11,930,366 12,909,681 10,586,369 – 7,896,677 – 7,980,314 25,117,493 23,496,050 7,896,677 7,980,314 (a) Financial assets designated upon initial recognition are as follows: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 243,699 142,181 254,048 254,952 111,432 225,385 197,483 249,261 103,421 24,804 – – – – – – – – – – 1,006,312 800,354 – – Quoted securities: In Malaysia: Shares, warrants, trust units and loan stocks 18,056 54,503 – – Outside Malaysia: Shares, warrants, trust units and loan stocks 188,865 233,627 – – 206,921 288,130 – – 747,270 10,840,030 386,594 428,318 11,057,416 335,463 – – – – – – 11,973,894 11,821,197 – – 13,187,127 12,909,681 – – At fair value Money market instruments: Malaysian Government Securities Malaysian Government Investment Issues Negotiable Islamic Certificates of Deposits Foreign Government Securities Foreign Government Treasury Bills Unquoted securities: Foreign Corporate Bonds and Sukuk Corporate Bonds and Sukuk in Malaysia Structured deposits Total financial assets designated upon initial recognition 72
75. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (b) Financial assets held-for-trading are as follows: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 441,205 55,157 505,238 3,925,083 49,698 73,571 – 233,251 37,677 – 2,931,845 – 655 56,867 392,497 10,009 505,238 2,706,833 49,698 73,571 – 203,379 – – 2,313,978 – 655 56,867 5,049,952 3,260,295 3,737,846 2,574,879 Quoted securities: In Malaysia: Shares, warrants, trust units and loan stocks Corporate Bonds and Sukuk 1,077,730 – 805,806 4,571 128,081 – 128,780 4,571 Outside Malaysia: Shares, warrants, trust units and loan stocks Foreign Corporate Bonds and Sukuk Foreign Government Bonds 1,743,565 – 97,667 1,245,355 451 74,930 14,332 – – 11,896 – – 2,918,962 2,131,113 142,413 145,247 2,031,971 1,320,909 608,572 3,760,622 982,324 452,015 1,648,442 1,767,926 600,050 3,410,260 1,399,841 450,087 3,961,452 5,194,961 4,016,418 5,260,188 11,930,366 10,586,369 7,896,677 7,980,314 At fair value Money market instruments: Malaysian Government Securities Malaysian Government Investment Issues Negotiable instruments of deposits Foreign Government Securities Bank Negara Malaysia Bills and Notes Foreign Government Treasury Bills Cagamas Bonds Unquoted securities: Foreign Corporate Bonds and Sukuk Corporate Bonds and Sukuk in Malaysia Foreign Government Bonds Total financial assets held-for-trading Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (“FVTPL”) (CONT’D.) Included in financial assets held-for-trading are financial assets sold under repurchase agreements as follows: Group Foreign Government Securities (Note 7(b)) Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 – 752,735 – 752,735 73
76. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 9 . FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 12,276,119 20,113,895 1,453,388 9,744,294 7,967,482 2,404,554 793,877 166,173 – 10,004,488 12,621,577 4,573,550 10,611,242 5,807,734 1,917,128 728,048 – 44,909 12,271,396 12,087,870 1,035,128 7,151,001 7,961,429 2,404,554 793,877 – – 9,955,613 7,426,545 4,492,819 8,092,808 5,807,734 1,917,128 728,048 – 44,909 54,919,782 46,308,676 43,705,255 38,465,604 Quoted securities: In Malaysia: Shares, warrants, trust units and loan stocks 2,682,254 2,188,387 196,592 141,507 Outside Malaysia: Shares, warrants, trust units and loan stocks Foreign Corporate Bonds and Sukuk Foreign Government Bonds Foreign Government Treasury Bills 222,422 66,283 22,495 – 142,135 97,007 23,224 33,874 – – – – 733 – – – 2,993,454 2,484,627 196,592 142,240 360,644 3,045 22,213,641 23,486,479 4,772,932 320,267 – 347,701 94,741 18,714,932 17,214,829 6,641,416 576,547 1,365 280,825 – 21,010,325 19,076,312 4,741,288 276,142 – 268,622 – 17,794,222 11,099,251 6,606,641 527,621 – 51,157,008 43,591,531 45,384,892 36,296,357 109,070,244 92,384,834 89,286,739 74,904,201 At fair value Money market instruments: Malaysian Government Securities Malaysian Government Investment Issues Negotiable instruments of deposits Foreign Government Securities Foreign Government Treasury Bills Khazanah Bonds Cagamas Bonds Bankers’ acceptances and Islamic accepted bills Foreign Certificates of Deposits At fair value, or at cost for certain unquoted equity instruments, less accumulated impairment losses Unquoted securities: Shares, trust units and loan stocks in Malaysia# Shares, trust units and loan stocks outside Malaysia# Foreign Corporate Bonds and Sukuk Corporate Bonds and Sukuk in Malaysia Foreign Government Bonds Malaysian Government Bonds Structured deposits Total financial investments available-for-sale # 74 Securities that do not have quoted market price in an active market and whose fair value cannot be reliably measured are carried at cost, net of impairment losses.
77. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (a) Included in financial investments available-for-sale are financial assets sold under repurchase agreements as follows: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Malaysian Government Securities Malaysian Government Investment Issues Foreign Corporate Bonds and Sukuk Foreign Government Bonds 2,091,359 816,064 1,820,414 177,770 – 485,797 13,611 216,727 2,091,359 816,064 1,820,414 – – 485,797 13,611 216,727 Total (Note 7(b)) 4,905,607 716,135 4,727,837 716,135 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 9. FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE (CONT’D.) (b) The maturity profile of money market instruments are as follows: Group Within one year One year to three years Three years to five years After five years Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 13,538,360 8,619,642 4,499,263 28,262,517 15,126,464 6,453,764 3,194,596 21,533,852 11,583,774 5,812,115 3,707,828 22,601,538 11,946,433 7,115,552 2,144,873 17,258,746 54,919,782 46,308,676 43,705,255 38,465,604 (c) Movements in the allowances for impairment losses on financial investments available-for-sale are as follows: Group At 1 January Allowance made (Note 45) Amount written back in respect of recoveries (Note 45) Amount written-off/realised Exchange differences At 31 December Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 560,730 69,725 (856) (106,962) (1,314) 641,405 265,440 (83,187) (275,898) 12,970 409,141 1,071 (3,288) (11,258) 4,235 365,495 213,464 (73,613) (99,951) 3,746 521,323 560,730 399,901 409,141 75
78. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 10 .FINANCIAL INVESTMENTS HELD-TO-MATURITY Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 2,022,531 2,525,606 1,398,014 19,057 860,393 50,247 174,618 2,017,799 2,522,557 1,275,579 67,403 827,825 50,259 92,935 2,022,427 2,525,606 – – 860,393 50,247 – 2,017,695 2,522,557 – – 827,825 50,259 – 7,050,466 6,854,357 5,458,673 5,418,336 2,832,177 9,945,774 358,536 2,044 1,373,041 5,530,942 1,285,495 2,044 2,452,215 9,806,381 48,028 2,044 911,100 6,223,862 30,745 2,044 13,138,531 8,191,522 12,308,668 7,167,751 At amortised cost less accumulated impairment losses Money market instruments: Malaysian Government Securities Malaysian Government Investment Issues Foreign Government Securities Foreign Government Treasury Bills Khazanah Bonds Cagamas Bonds Foreign Certificates of Deposits Unquoted securities: Foreign Corporate Bonds and Sukuk Corporate Bonds and Sukuk in Malaysia Foreign Government Bonds Others Accumulated impairment losses Total financial investments held-to-maturity (4,224) 20,184,773 (24,282) 15,021,597 (3,776) 17,763,565 (3,776) 12,582,311 (a) Indicative fair values of financial investments held-to-maturity are as follows: Group Money market instruments: Malaysian Government Securities Malaysian Government Investment Issues Foreign Government Securities Foreign Government Treasury Bills Khazanah Bonds Cagamas Bonds Foreign Certificates of Deposits Unquoted securities: Foreign Corporate Bonds and Sukuk Corporate Bonds and Sukuk in Malaysia Foreign Government Bonds Others Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 2,076,812 2,535,648 1,408,594 19,466 863,690 50,032 174,618 2,032,724 2,525,156 1,282,484 67,730 827,268 49,969 92,935 2,076,706 2,535,648 – – 863,690 50,032 – 2,032,620 2,525,156 – – 827,268 49,969 – 2,811,946 10,060,155 358,535 2,044 1,459,408 5,549,257 1,285,608 2,044 2,425,518 9,920,762 48,028 2,044 996,397 6,242,178 30,747 2,044 (b) The maturity profile of money market instruments is as follows: Group Within one year One year to three years Three years to five years After five years 76 Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 1,953,614 772,004 1,502,339 2,822,509 800,772 1,377,322 1,364,568 3,311,695 713,366 434,603 1,488,300 2,822,404 – 927,258 1,179,488 3,311,590 7,050,466 6,854,357 5,458,673 5,418,336
79. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Movements in the allowances for impairment losses on financial investments held-to-maturity are as follows: Group At 1 January Amount written back in respect of recoveries (Note 45) Amount written-off Exchange differences At 31 December Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 24,282 (107) (20,053) 102 24,248 – – 34 3,776 – – – 3,776 – – – 4,224 24,282 3,776 3,776 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 10.FINANCIAL INVESTMENTS HELD-TO-MATURITY (CONT’D.) (d) Included in financial investments held-to-maturity are financial assets sold under repurchase agreements as follows: Group Malaysian Government Securities Foreign Government Securities Malaysian Government Investment Issues Total (Note 7(b)) Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 – 461,479 337,154 – – 461,479 337,154 – – 1,151,927 – 1,151,927 461,479 1,489,081 461,479 1,489,081 11.LOANS, ADVANCES AND FINANCING Group Overdrafts/cashline Term loans: – Housing loans/financing – Syndicated loans/financing – Hire purchase receivables* – Lease receivables – Other loans/financing Credit card receivables Bills receivables Trust receipts Claims on customers under acceptance credits Loans/financing to financial institutions (Note 11(x)) Revolving credits Staff loans Loans to: – Directors of the Bank – Directors of subsidiaries Others Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 22,177,237 21,873,512 11,016,583 10,812,916 149,069,563 39,920,409 73,150,529 120,939 216,033,764 8,991,286 3,868,214 4,528,344 11,493,076 2,040,105 54,764,740 3,447,298 144,805,122 38,015,281 64,119,786 60,636 223,604,109 8,359,305 4,153,762 4,420,182 11,575,723 2,247,694 55,041,314 3,525,502 59,881,852 35,704,531 25,862,558 – 96,176,360 7,257,690 3,722,569 3,821,888 5,773,350 18,817,485 29,825,692 815,718 56,290,758 35,060,528 21,215,380 – 107,314,937 6,713,601 4,086,302 3,722,796 5,953,148 18,640,278 31,285,172 888,331 4,253 4,811 4,190,061 4,012 3,215 3,372,116 212 639 – 463 1,630 – 593,804,629 (99,959,543) 585,181,271 (99,445,560) 298,677,127 (1,841,868) 301,986,240 (1,628,063) Gross loans, advances and financing Allowances for impaired loans, advances and financing: – Individual allowance – Collective allowance 493,845,086 485,735,711 296,835,259 300,358,177 Net loans, advances and financing 485,584,362 Unearned interest and income (4,120,531) (4,140,193) (3,764,929) (4,195,879) 477,774,903 (3,002,620) (2,834,670) 290,997,969 (2,493,534) (2,844,507) 295,020,136 * The hire purchase receivables of a subsidiary of RM2,038,846,000 (2016: RM2,023,889,000) are pledged as collateral to a secured borrowing as disclosed in Note 29(a)(i). 77
80. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 11 .LOANS, ADVANCES AND FINANCING (CONT’D.) (i) Loans, advances and financing analysed by type of customer are as follows: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Domestic banking institutions Domestic non-banking financial institutions Domestic business enterprises: – Small and medium enterprises – Others Government and statutory bodies Individuals Other domestic entities Foreign entities 16,084 25,554,508 76,819 24,995,761 18,059,723 20,265,706 17,776,082 20,110,549 78,320,245 104,221,505 15,402,406 228,084,123 8,657,197 33,589,018 78,450,015 108,054,043 9,553,849 219,007,962 6,632,911 38,964,351 57,001,083 57,380,920 900,545 110,824,453 1,361,032 31,041,797 54,417,927 62,336,597 962,303 107,355,810 536,924 36,861,985 Gross loans, advances and financing 493,845,086 485,735,711 296,835,259 300,358,177 (ii) Loans, advances and financing analysed by geographical location are as follows: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Malaysia Singapore Indonesia Labuan Offshore Hong Kong SAR United States of America People’s Republic of China Vietnam United Kingdom Brunei Cambodia Bahrain Philippines Thailand Laos Myanmar Others 289,103,366 124,388,161 39,009,785 14,478,182 8,571,662 813,651 4,101,002 861,178 1,692,984 660,211 2,263,316 120,152 5,860,871 1,515,687 134,911 230,601 39,366 275,060,627 121,561,911 42,213,162 18,612,494 10,855,710 835,785 3,553,392 834,027 1,413,903 638,659 2,515,045 449,529 5,579,772 1,399,415 125,437 43,226 43,617 142,852,051 122,847,450 – 14,478,182 8,266,943 813,079 4,101,002 637,743 1,692,934 660,211 – 120,152 – – 134,911 230,601 – 143,030,884 120,583,331 – 18,612,494 10,385,398 835,152 3,553,392 686,796 1,413,879 638,659 – 449,529 – – 125,437 43,226 – Gross loans, advances and financing 493,845,086 485,735,711 296,835,259 300,358,177 (iii) Loans, advances and financing analysed by interest/profit rate sensitivity are as follows: Group Fixed rate: – Housing loans/financing – Hire purchase receivables – Other fixed rate loans/financing 78 Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 14,448,234 62,031,596 65,233,033 20,972,243 58,229,799 65,839,818 12,367,358 23,507,256 49,151,305 18,635,026 21,011,268 49,935,496 141,712,863 145,041,860 85,025,919 89,581,790
81. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (iii) Loans, advances and financing analysed by interest/profit rate sensitivity are as follows (cont’d.): Group Variable rate: – Base lending/financing rate/Base rate plus – Cost plus – Other variable rates Gross loans, advances and financing Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 186,900,601 62,214,999 103,016,623 176,999,015 61,815,505 101,879,331 86,193,316 56,955,905 68,660,119 88,766,345 56,727,126 65,282,916 352,132,223 340,693,851 211,809,340 210,776,387 493,845,086 485,735,711 296,835,259 300,358,177 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 11.LOANS, ADVANCES AND FINANCING (CONT’D.) (iv) Loans, advances and financing analysed by economic purpose are as follows: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Purchase of securities Purchase of transport vehicles Purchase of landed properties: – Residential – Non-residential Purchase of fixed assets (excluding landed properties) Personal use Credit card Purchase of consumer durables Constructions Mergers and acquisitions Working capital Others 33,963,031 64,175,135 33,763,335 57,427,629 9,428,608 22,793,620 10,840,651 20,092,532 106,334,633 40,756,217 5,883,215 10,376,625 9,168,555 4,565 16,761,677 876,464 160,235,663 45,309,306 97,122,826 41,698,958 7,284,181 10,720,712 8,534,651 4,482 17,850,789 411,826 167,885,959 43,030,363 66,085,358 28,602,987 5,842,763 6,351,673 7,393,984 4,235 10,827,248 850,019 97,562,331 41,092,433 61,316,702 29,040,220 7,253,314 6,751,692 6,853,811 4,189 12,629,495 365,022 110,029,604 35,180,945 Gross loans, advances and financing 493,845,086 485,735,711 296,835,259 300,358,177 (v) The maturity profile of loans, advances and financing are as follows: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Within one year One year to three years Three years to five years After five years 130,156,691 56,735,002 58,058,485 248,894,908 134,071,165 56,347,584 62,071,403 233,245,559 84,077,790 41,663,942 40,131,495 130,962,032 94,290,760 43,872,159 41,133,223 121,062,035 Gross loans, advances and financing 493,845,086 485,735,711 296,835,259 300,358,177 79
82. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 11 .LOANS, ADVANCES AND FINANCING (CONT’D.) (vi) Movements in impaired loans, advances and financing (“impaired loans”) are as follows: Group 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Gross impaired loans at 1 January Impaired during the financial year Reclassified as non-impaired Amount recovered Amount written-off Transferred from a subsidiary Exchange differences 11,055,380 7,105,386 (2,276,061) (2,262,161) (1,648,146) – (424,495) 8,555,007 9,291,509 (2,999,037) (2,292,629) (1,693,147) – 193,677 7,180,389 3,875,729 (997,473) (1,151,312) (648,610) – (187,882) 5,398,626 5,597,011 (1,834,681) (1,362,096) (856,897) 179,286 59,140 Gross impaired loans at 31 December Less: Individual allowance 11,549,903 (4,120,531) 11,055,380 (3,764,929) 8,070,841 (3,002,620) 7,180,389 (2,493,534) 7,429,372 7,290,451 5,068,221 4,686,855 11,483,939 (4,120,531) 10,973,689 (3,764,929) 8,070,841 (3,002,620) 7,180,389 (2,493,534) 7,363,408 7,208,760 5,068,221 4,686,855 Net impaired loans at 31 December Calculation of ratio of net impaired loans: Gross impaired loans at 31 December (excluding financing funded by Investment Account*) Less: Individual allowance Net impaired loans Gross loans, advances and financing Less: Individual allowance Less: Funded by Investment Account* 493,845,086 (4,120,531) (24,555,445) 485,735,711 (3,764,929) (31,544,587) 296,835,259 (3,002,620) – 300,358,177 (2,493,534) – Net loans, advances and financing 465,169,110 450,426,195 293,832,639 297,864,643 1.58% 1.60% 1.72% 1.57% Ratio of net impaired loans * In the books of Maybank Islamic Berhad, a wholly-owned subsidiary of the Bank. 80 Bank
83. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (vii) Impaired loans, advances and financing by economic purpose are as follows: Group Purchase of securities Purchase of transport vehicles Purchase of landed properties: – Residential – Non-residential Purchase of fixed assets (excluding landed properties) Personal use Credit card Purchase of consumer durables Constructions Working capital Others Gross impaired loans, advances and financing Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 275,691 369,622 201,965 330,164 163,430 100,104 149,992 107,557 717,419 992,952 1,512,007 160,019 90,831 106 1,504,782 5,381,439 545,035 617,185 925,181 474,886 150,544 92,484 32 1,439,746 6,094,034 729,159 376,994 872,588 1,483,691 128,583 63,872 98 1,106,035 3,425,896 349,550 324,843 820,599 439,861 111,840 60,640 18 1,034,438 3,896,560 234,041 11,549,903 11,055,380 8,070,841 7,180,389 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 11.LOANS, ADVANCES AND FINANCING (CONT’D.) (viii)Impaired loans, advances and financing by geographical distribution are as follows: Group Malaysia Singapore Indonesia Labuan Offshore Hong Kong SAR United States of America People’s Republic of China Vietnam Brunei Cambodia Bahrain Philippines Thailand Laos Others Gross impaired loans, advances and financing Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 5,619,324 2,931,842 1,417,698 244,722 886,737 572 1,054 68,271 38,529 97,667 5,063 123,185 38,438 41,730 35,071 5,754,507 1,587,853 1,993,758 209,957 1,031,921 633 5,878 82,976 21,888 95,619 5,608 185,823 31,887 8,214 38,858 3,896,008 2,897,765 – 244,722 878,849 – 1,054 67,121 38,529 – 5,063 – – 41,730 – 4,246,493 1,570,036 – 209,957 1,031,921 – 5,878 80,394 21,888 – 5,608 – – 8,214 – 11,549,903 11,055,380 8,070,841 7,180,389 81
84. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 11 .LOANS, ADVANCES AND FINANCING (CONT’D.) (ix) Movements in the allowances for impaired loans, advances and financing are as follows: Group 2017 RM’000 Bank 2016 RM’000 2017 RM’000 2016 RM’000 Individual allowance At 1 January Allowance made (Note 44) Amount written back (Note 44) Amount written-off Transferred to collective allowance Exchange differences 3,764,929 1,830,104 (326,072) (858,546) (31,234) (258,650) 2,259,910 2,390,222 (115,272) (858,279) (30,057) 118,405 2,493,534 1,237,538 (238,042) (317,726) (26,013) (146,671) 1,422,090 1,592,007 (80,690) (510,376) (18,990) 89,493 At 31 December 4,120,531 3,764,929 3,002,620 2,493,534 Collective allowance At 1 January Allowance made (Note 44) Amount written back (Note 44) Amount written-off Transferred from individual allowance Exchange differences 4,195,879 836,425 (390) (789,601) 31,234 (133,354) 3,899,141 1,100,315 (30,762) (834,868) 30,057 31,996 2,844,507 346,381 – (330,885) 26,013 (51,346) 2,627,341 522,087 – (346,521) 18,990 22,610 At 31 December 4,140,193 4,195,879 2,834,670 2,844,507 As a percentage of total loans, less individual allowance (including regulatory reserve) 1.53% 1.19% 1.76% 1.20% As a percentage of total risk-weighted assets (including regulatory reserve) 1.84% 1.38% 1.95% 1.31% (x) Included in the Bank’s loans/financing to financial institutions is financing granted to Maybank Islamic Berhad (“MIB”), a subsidiary of the Bank, under Restricted Profit Sharing Investment Account (“RPSIA”) amounting to RM18,068.2 million (2016: RM17,767.7 million). The RPSIA is a contract based on the Mudharabah principle between two parties to finance a financing where the Bank acts as the investor who solely provides capital to MIB whereas the business venture is managed solely by MIB as an entrepreneur. The profit of the business venture is shared between both parties based on pre-agreed ratios. Losses, if any, are borne by the Bank. 82
85. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Group <---------- Fair Values ----------> Assets RM’000 Liabilities RM’000 Principal Amount RM’000 <---------- Fair Values ----------> Assets RM’000 Liabilities RM’000 Basel II Pillar 3 pg. 288-351 2017 Principal Amount RM’000 Bank Trading derivatives Foreign exchange related contracts Currency forwards: – Less than one year – One year to three years – More than three years 32,008,349 1,629,193 422,172 233,163 47,603 11,944 (634,310) (31,293) (2,671) 25,510,068 1,304,273 670,373 227,109 39,069 11,944 (402,267) (30,958) (2,671) 34,059,714 292,710 (668,274) 27,484,714 278,122 (435,896) 236,187,976 61,347 6,926 2,293,375 6,897 – (2,202,490) (2,171) (719) 235,256,487 61,347 6,926 2,425,979 6,897 – (2,413,916) (2,171) (719) 236,256,249 2,300,272 (2,205,380) 235,324,760 2,432,876 (2,416,806) Currency spots: – Less than one year 1,851,202 1,568 (4,683) 2,217,295 2,440 (4,766) Currency options: – Less than one year 3,486,393 7,298 (6,526) 3,486,393 7,298 (6,526) 6,937,210 13,057,868 14,392,784 249,013 466,175 697,288 (405,083) (447,398) (647,777) 6,231,388 13,803,118 14,130,849 254,172 583,609 694,522 (399,862) (549,254) (647,776) 34,387,862 1,412,476 (1,500,258) 34,165,355 1,532,303 (1,596,892) 72,311,200 68,156,174 136,896,093 55,593 315,620 1,706,997 (86,753) (301,183) (1,659,486) 72,562,300 68,334,401 137,510,497 55,593 315,821 1,701,148 (87,548) (298,075) (1,667,467) 277,363,467 2,078,210 (2,047,422) 278,407,198 2,072,562 (2,053,090) 4,233,443 2,957,496 994 1,362 (4,016) (230) 2,632,500 1,620,000 737 633 (3,263) – 7,190,939 2,356 (4,246) 4,252,500 1,370 (3,263) 603,020 3,290,696 6,792,907 5 5,452 44,212 (11) (2,308) (241,238) 603,020 3,290,696 7,682,907 5 5,452 55,550 (11) (2,308) (241,250) 10,686,623 49,669 (243,557) 11,576,623 61,007 (243,569) Currency swaps: – Less than one year – One year to three years – More than three years Cross currency interest rate swaps: – Less than one year – One year to three years – More than three years The Financials pg. 10-287 12.DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING Interest rate related contracts Interest rate swaps: – Less than one year – One year to three years – More than three years Interest rate futures: – Less than one year – One year to three years Interest rate options: – Less than one year – One year to three years – More than three years 83
86. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 12 .DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING (CONT’D.) Group 2017 (cont’d.) Bank <---------- Fair Values ----------> Assets RM’000 Liabilities RM’000 Principal Amount RM’000 33,663 3,036 – 191,473 1,665 33,953 143 193,138 Principal Amount RM’000 <---------- Fair Values ----------> Assets RM’000 Liabilities RM’000 – – – (86,815) – 15,450 – 1,061 – – – 34,096 (86,815) 15,450 1,061 – 1,953,990 60,603 (35,301) 148,378 15,080 (1,176) 2,565,283 3,465,273 207,536 256,342 (205,258) (258,620) 2,565,283 3,465,273 207,536 256,342 (205,258) (258,620) 6,030,556 463,878 (463,878) 6,030,556 463,878 (463,878) 920,669 382,166 344,713 54,591 10,982 12,475 (54,069) (10,898) (11,878) 920,669 382,166 344,713 54,591 10,982 12,475 (54,069) (10,898) (11,878) 1,647,548 78,048 (76,845) 1,647,548 78,048 (76,845) 664,789 3,144,706 1,519,588 37,343 161,885 – – (130,381) (36,123) 664,789 3,144,706 1,519,588 37,343 161,885 – – (130,381) (36,123) 5,329,083 199,228 (166,504) 5,329,083 199,228 (166,504) 742,552 384,750 1,813 11,166 (1,311) (1,791) 202,500 384,750 558 11,166 (772) (1,791) 1,127,302 12,979 (3,102) 587,250 11,724 (2,563) Trading derivatives (cont’d.) Equity related contracts Index futures: – More than three years Equity options: – Less than one year – One year to three years Equity swaps: – Less than one year Commodity related contracts Commodity options: – Less than one year – One year to three years Commodity swaps: – Less than one year – One year to three years – More than three years Hedging derivatives Foreign exchange related contracts Cross currency interest rate swaps: – Less than one year – One year to three years – More than three years Interest rate related contracts Interest rate swaps: – One year to three years – More than three years Netting effects under MFRS 132 Amendments Total 84 – 621,597,729 (291,776) 6,704,651 291,776 (7,221,015) – 610,673,103 (291,776) 6,865,221 291,776 (7,179,998)
87. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Group <---------- Fair Values ----------> Assets RM’000 Liabilities RM’000 Principal Amount RM’000 <---------- Fair Values ----------> Assets RM’000 Liabilities RM’000 Basel II Pillar 3 pg. 288-351 2016 Principal Amount RM’000 Bank Trading derivatives Foreign exchange related contracts Currency forwards: – Less than one year – One year to three years – More than three years 36,297,307 1,614,408 109,540 1,041,107 43,098 2,533 (390,038) (61,139) (2,388) 30,177,674 1,614,408 109,540 740,114 43,098 2,533 (340,842) (61,139) (2,388) 38,021,255 1,086,738 (453,565) 31,901,622 785,745 (404,369) 170,207,992 548,551 2,498,234 38,012 (2,492,608) (342) 172,616,102 548,551 2,743,381 38,012 (2,483,234) (342) 170,756,543 2,536,246 (2,492,950) 173,164,653 2,781,393 (2,483,576) Currency spots: – Less than one year 2,154,112 2,058 (1,017) 2,186,968 2,081 (1,022) Currency options: – Less than one year – One year to three years 6,409,635 13,808 85,298 73 (63,946) (1,043) 6,409,635 13,808 85,298 73 (63,946) (1,043) 6,423,443 85,371 (64,989) 6,423,443 85,371 (64,989) 9,037,284 13,831,249 13,349,911 395,630 970,326 1,073,245 (778,333) (1,315,263) (1,007,515) 8,530,572 14,958,939 13,106,138 378,013 1,122,190 1,068,280 (746,253) (1,438,413) (996,509) 36,218,444 2,439,201 (3,101,111) 36,595,649 2,568,483 (3,181,175) 93,180,752 63,070,554 128,356,609 87,030 214,879 1,873,499 (87,075) (206,497) (1,912,682) 93,310,856 63,833,150 128,644,612 86,231 214,775 1,868,107 (86,044) (205,977) (1,912,702) 284,607,915 2,175,408 (2,206,254) 285,788,618 2,169,113 (2,204,723) 4,658,638 3,905,590 938 1,925 (876) (1,755) 3,602,258 2,557,020 882 1,786 (811) (1,620) 8,564,228 2,863 (2,631) 6,159,278 2,668 (2,431) 200,000 1,450,906 8,332,291 121 1,063 93,015 – (1,756) (233,144) 200,000 1,450,906 9,242,290 121 1,063 115,325 – (1,756) (233,144) 9,983,197 94,199 (234,900) 10,893,196 116,509 (234,900) Currency swaps: – Less than one year – One year to three years Cross currency interest rate swaps: – Less than one year – One year to three years – More than three years The Financials pg. 10-287 12.DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING (CONT’D.) Interest rate related contracts Interest rate swaps: – Less than one year – One year to three years – More than three years Interest rate futures: – Less than one year – One year to three years Interest rate options: – Less than one year – One year to three years – More than three years 85
88. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 12 .DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING (CONT’D.) Group 2016 (cont’d.) Principal Amount RM’000 Bank <---------- Fair Values ----------> Assets RM’000 Liabilities RM’000 Principal Amount RM’000 <---------- Fair Values ----------> Assets RM’000 Liabilities RM’000 Trading derivatives (cont’d.) Equity related contracts Index futures: – Less than one year – More than three years Equity options: – Less than one year – One year to three years Equity swaps: – Less than one year 119,070 33,663 – 1,636 (69) – – – – – – – 152,733 1,636 (69) – – – 622,453 19,274 33,908 2,081 (36,471) (112) 92,332 16,100 1,234 1,173 (1,234) (112) 641,727 35,989 (36,583) 108,432 2,407 (1,346) 817,228 55,596 (13,305) 145,345 11,456 (3,372) 5,449,862 2,417,900 343,678 139,392 (356,263) (139,392) 5,449,862 2,417,900 343,678 139,392 (356,263) (139,392) 7,867,762 483,070 (495,655) 7,867,762 483,070 (495,655) 699,708 330,200 263,232 67,338 15,903 6,056 (67,075) (15,430) (5,479) 699,708 330,200 263,232 67,338 15,903 6,056 (67,075) (15,430) (5,479) 1,293,140 89,297 (87,984) 1,293,140 89,297 (87,984) 1,790,546 1,659,207 592,728 8,803 19,513 8,440 (267,187) (179,446) (12,918) 1,790,546 1,659,207 592,728 8,803 19,513 8,440 (267,187) (179,446) (12,918) 4,042,481 36,756 (459,551) 4,042,481 36,756 (459,551) 567,290 560,750 201,870 453 3,204 13,902 (1,814) (962) (5,004) 67,290 224,300 201,870 453 2,498 13,902 (1,446) (962) (5,004) 1,329,910 17,559 (7,780) 493,460 16,853 (7,412) Commodity related contracts Commodity options: – Less than one year – One year to three years Commodity swaps: – Less than one year – One year to three years – More than three years Hedging derivatives Foreign exchange related contracts Cross currency interest rate swaps: – Less than one year – One year to three years – More than three years Interest rate related contracts Interest rate swaps: – Less than one year – One year to three years – More than three years Netting effects under MFRS 132 Amendments Total 86 – 572,874,118 (830,284) 8,311,703 830,284 (8,828,060) – 567,064,047 (830,284) 8,320,918 830,284 (8,802,221)
89. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Included within hedging derivatives are derivatives where the Group and the Bank apply hedge accounting. Fair value hedge is used by the Group and the Bank to protect against changes in the fair value of financial assets and financial liabilities due to movements in interest rates. The financial instruments hedged for interest rate risk include the Group’s and the Bank’s financial investments availablefor-sale, borrowings and loans, advances and financing. For the financial year ended 31 December 2017, the Group and the Bank recognised the following net gain/(loss): Group 2017 RM’000 (Loss)/gain on the hedging instruments Gain/(loss) on the hedged items attributable to the hedged risk Bank 2016 RM’000 2017 RM’000 Basel II Pillar 3 pg. 288-351 Fair value hedge The Financials pg. 10-287 12.DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING (CONT’D.) 2016 RM’000 (15,513) 318 (15,513) 318 19,177 (331) 19,177 (331) Net investment hedge The Group has designated net investment hedge for borrowings amounting of SGD0.52 billion (2016: SGD0.52 billion) or Ringgit Malaysia equivalent of RM1.58 billion (2016: RM1.62 billion) and USD0.05 billion (2016: USD0.11 billion) or Ringgit Malaysia equivalent of RM0.2 billion (2016: RM0.48 billion) which were used to fund investment in subsidiaries. The effectiveness of the hedging relationship is tested prospectively and retrospectively at each reporting date by comparing the cumulative value changes of hedging instruments and hedged items. The hedging relationship was highly effective for the total hedging period and as of the reporting date. Resultantly, the unrealised gain totalling RM69,135,000 (net of tax) (2016: RM21,197,000) from the hedging relationship as disclosed in Note 34 were recognised through other comprehensive income. Cash flow hedge The Group used an interest rate swap to manage the variability in future cash flows on a liability with floating rates of interest by exchanging the floating rates for fixed rates. The amount and timing of future cash flows, representing both principal and interest flows, are projected on the basis of their contractual terms and other relevant factors. The aggregate principal balance and interest cash flows over time form the basis for identifying gains and losses on the effective portion of derivatives designated as cash flow hedges of forecast transactions. Gains and losses are initially recognised through other comprehensive income, in the cash flow hedge reserve, and transferred to profit or loss when the forecast cash flows affect the profit or loss. All underlying hedged cash flows are expected to be recognised in profit or loss in the period in which they occur which is anticipated to take place over the next 2 years. The hedging relationship was effective for the total hedging period and as of the reporting date. As such the unrealised loss of SGD147,000 or Ringgit Malaysia equivalent of RM447,000 from the hedging relationship as disclosed in Note 34 were recognised through other comprehensive income. 87
90. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 13 .REINSURANCE/RETAKAFUL ASSETS AND OTHER INSURANCE RECEIVABLES 2017 RM’000 2016 RM’000 3,222,455 711,317 3,692,581 447,015 3,933,772 4,139,596 2017 RM’000 2016 RM’000 Reinsurers’ share of: 2,884,125 3,400,731 Life insurance contract liabilities General insurance contract liabilities 32,963 2,851,162 25,767 3,374,964 Retakaful operators’ share of: 338,330 291,850 Family takaful certificate liabilities General takaful certificate liabilities 76,166 262,164 49,677 242,173 3,222,455 3,692,581 Group 2017 RM’000 2016 RM’000 Due premium including agents/brokers and co-insurers balances Due from reinsurers and cedants/retakaful operators 283,197 444,868 330,061 135,981 Allowance for impairment losses 728,065 (16,748) 466,042 (19,027) 711,317 447,015 Group Note Reinsurance/retakaful assets (Note 24) Other insurance receivables (i) (ii) (i) Reinsurance/retakaful assets Group (ii) Other insurance receivables 14.OTHER ASSETS Group Note Other debtors Amount due from brokers and clients Prepayments and deposits Tax recoverable Foreclosed properties (a) 54 Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 5,554,056 2,346,536 1,420,247 88,297 289,004 6,304,018 2,452,894 1,407,933 113,850 246,865 4,328,113 – 443,875 – 29,409 5,077,156 – 491,926 – 34,430 9,698,140 10,525,560 4,801,397 5,603,512 (a) Included in other debtors are physical gold held by the Group and the Bank as a result of its broker-dealer activities amounting to approximately RM637,351,000 (2016: RM698,131,000). 88
91. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS At fair value At 1 January Additions Fair value adjustments (Note 42) Impairment losses (Note 42) Disposal – Reversal of cost – Reversal of fair value adjustments upon disposal (Note 42) Exchange differences 2017 RM’000 2016 RM’000 758,488 85,505 (173) – 716,818 32,984 8,858 (141) (29,890) (60,000) (375) – – (31) 753,555 758,488 Group 2017 RM’000 2016 RM’000 At fair value Leasehold land Buildings Work-in-progress 76,000 55,360 161,209 167,000 56,265 76,691 292,569 299,956 At 31 December Basel II Pillar 3 pg. 288-351 Group The Financials pg. 10-287 15.INVESTMENT PROPERTIES The following investment properties are held under lease terms: The Group has no restrictions on the realisability of its investment properties and has no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements. Investment properties are stated at fair value, which have been determined by an accredited independent valuer using a variety of approaches such as comparison method and income capitalisation approach. Details of valuation methods are disclosed in Note 53(b). 16.STATUTORY DEPOSITS WITH CENTRAL BANKS Group Note Bank Negara Malaysia Other central banks (a) (b) Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 7,069,370 8,327,843 6,781,599 8,602,535 3,827,265 3,919,435 3,711,494 3,818,831 15,397,213 15,384,134 7,746,700 7,530,325 (a) The non-interest bearing statutory deposits maintained with Bank Negara Malaysia are in compliance with the requirements of the Central Bank of Malaysia Act 2009, the amount of which is determined as set percentages of total eligible liabilities. (b) The statutory deposits of the foreign branches and foreign subsidiaries are denominated in foreign currencies and maintained with the central banks of the respective countries, in compliance with the applicable legislations in the respective countries. 89
92. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 17 .INVESTMENT IN SUBSIDIARIES 2017 RM’000 2016 RM’000 Unquoted shares, at cost – In Malaysia – Outside Malaysia 23,597,460 1,575,405 23,193,214 1,509,135 Less: Accumulated impairment losses 25,172,865 (3,115,802) 24,702,349 (3,115,802) 22,057,063 21,586,547 Bank The following are major events of the Group and of the Bank during the financial year ended 31 December 2017: (a) Capital injection into Maybank Cambodia Plc, a wholly-owned subsidiary of the Bank On 31 January 2017, the Bank injected additional share capital of USD15.0 million (or equivalent amount of approximately RM66.4 million) to comply with the minimum regulatory capital requirement as well as to strenghten its capital level. (b) Reduction of share capital for Maybank International (L) Ltd., a wholly-owned subsidiary of the Bank On 29 June 2017, Maybank International (L) Ltd., a wholly-owned subsidiary of the Bank repatriated the excess share capital to the Bank of USD56.5 million (or equivalent amount of approximately RM166.1 million) in order to optimise its capital level. (c) Investment in deemed controlled structured entities by the Bank On 11 August 2017, the Bank invested directly into Maybank Asset Management Group Berhad traditional funds, namely Akshayam Asia Fund Ltd., Bluewaterz Total Return Bond Fund, Maybank Bluewaterz Total Return Bond Fund and Maybank Syariah Equity Fund for equivalent amount of approximately RM480.3 million. These direct investments are treated as the deemed controlled structured entities as disclosed in Note 63(b). (d) Capital injection into Maybank Asset Management Group Berhad, a wholly-owned subsidiary of the Bank On 5 September 2017, the Bank injected additional share capital of RM90.0 million for future business expansion. (e) Acquisition of PT Asuransi Asoka Mas On 28 September 2017, Etiqa International Holdings Sdn. Bhd., a wholly-owned subsidiary of the Bank completed the acquisition of 75% shareholding in PT Asuransi Asoka Mas, a General Insurance company based in Indonesia, for a purchase consideration of IDR207.2 billion (or equivalent amount of approximately RM64.9 million). The acquisition of 750,000,000 shares was purchased from PT Transpacific Mutualcapita who will keep the remaining 25% shareholding in PT Asuransi Asoka Mas. All relevant approvals including those from Bank Negara Malaysia and Otoritas Jasa Keuangan of Indonesia have been obtained. This acquisition is in line with the Group’s Insurance and Takaful business vision to be a leading regional insurance player. The fair value of the identifiable assets and liabilities of PT Asuransi Asoka Mas as at the date of acquisition were as follows: Note Assets Cash and short-term funds Trade and other receivables Property, plant and equipment 19 Recognised acquisition values RM’000 21,007 240,578 1,546 263,131 90
93. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The following are major events of the Group and of the Bank during the financial year ended 31 December 2017 (cont’d.): (e) Acquisition of PT Asuransi Asoka Mas (cont’d.) The fair value of the identifiable assets and liabilities of PT Asuransi Asoka Mas as at the date of acquisition were as follows (cont’d.): Note Liabilities Trade and other payables Provision for taxation Recognised acquisition values RM’000 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 17.INVESTMENT IN SUBSIDIARIES (CONT’D.) 210,617 208 210,825 52,306 (7,825) Net identifiable assets Non-controlling interest Goodwill on acquisition (provisional) 20 44,481 55,882 100,363 (21,007) Cash and short-term funds paid on acquisition Less: Cash of subsidiary acquired 79,356 Net cash outflow on acquisition Fair values upon consolidation of PT Asuransi Asoka Mas will be subject to further review during the 12 months period from 17 October 2017, being the effective date of consolidation. The following is a major event of the Group during the previous financial year ended 31 December 2016: (f) Disposal of Maybank Asset Management Thailand Co. Ltd (“MAMT”) During the previous financial year ended 31 December 2016, Maybank Asset Management Group Berhad (“MAMG”), a wholly-owned subsidiary of the Bank, had sold 26,999,998 shares representing 99.99% ownership in Maybank Asset Management Thailand Co. Ltd (“MAMT”) to a Thailandbased company named as Capital Link Holding Limited (“Closing Date”) (the “Disposal”). The Disposal was completed as part of MAMG’s continuous effort and strategy to improve its regional business operations and optimise the company’s current resources in the most efficient manner. MAMT ceased to be an indirect subsidiary of the Bank with effect from the Closing Date. The Disposal had the following effects on the statement of financial position of the Group as at 31 December 2016: Note Total assets Total liabilities Identifiable net assets disposed Loss on disposal of a subsidiary Transferred from shareholders’ equity – Foreign currency translation Effects of disposal RM’000 13,599 (1,030) 40 12,569 (378) (665) Cash proceeds from disposal Less: Cash and short-term funds of a subsidiary disposed 11,526 (665) Net cash inflow on disposal 10,861 91
94. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 17 .INVESTMENT IN SUBSIDIARIES (CONT’D.) Details and financial information of subsidiaries that have material non-controlling interests are as follows: (i) Etiqa International Holdings Sdn. Bhd. (“EIH”); and (ii) Maybank Kim Eng Holdings Limited (“MKEH”). The proportion of effective equity interest held by non-controlling interests within EIH and MKEH are disclosed in Note 63(a). The summarised financial information of EIH and MKEH are disclosed as follows: EIH 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Summarised income statements: Interest income Interest expense 1,127,796 (34,222) 1,043,186 (34,268) 317,790 (114,191) 281,065 (86,955) Net interest income Net earned insurance premiums Other operating income 1,093,574 5,250,890 821,150 1,008,918 4,375,763 424,991 203,599 – 593,542 194,110 68,294 815,730 Total operating income Net insurance benefits and claims incurred, net fee and commission expenses, change in expense liabilities and taxation of life and takaful fund 7,165,614 5,809,672 797,141 1,078,134 (5,274,877) (4,226,423) Net operating income Overhead expenses 1,890,737 (811,109) 1,583,249 (700,684) 797,141 (815,790) 1,019,148 (847,694) Operating profit/(loss) before impairment losses (Allowances for)/writeback of impairment losses on loans, advances, financing and other debts, net Allowances for impairment losses on financial investments, net Share of profits in associates 1,079,628 882,565 (18,649) 171,454 22,214 (48,042) – (16,209) (3,721) 11,191 Profit/(loss) before taxation and zakat 1,017,275 856,737 (27,388) 175,513 (246,843) (213,839) (27,474) (51,088) Profit/(loss) for the financial year 770,432 642,898 (54,862) 124,425 Attributable to: Equity holders of the Bank Non-controlling interests 540,719 229,713 455,135 187,763 (66,763) 11,901 105,866 18,559 770,432 642,898 (54,862) 124,425 79,133 77,455 18,566 17,622 Taxation and zakat Dividends paid to non-controlling interests of the Group Summarised statements of financial position: Total assets Total liabilities (5,820) (56,533) – – (58,986) 1,382 (3,204) 5,881 34,587,143 (28,425,441) 32,568,542 (27,117,291) 8,543,671 (6,260,212) 8,750,486 (6,148,981) Total equity 6,161,702 5,451,251 2,283,459 2,601,505 Attributable to: Equity holders of the Bank Non-controlling interests 4,077,367 2,084,335 3,616,464 1,834,787 2,175,044 108,415 2,483,145 118,360 6,161,702 5,451,251 2,283,459 2,601,505 Summarised cash flow statements: Operating activities Investing activities Financing activities Net increase/(decrease) in cash and cash equivalents Details of the subsidiaries of the Bank are disclosed in Note 63(a). 92 MKEH 341,083 (24,855) (111,509) 507,356 (69,901) (111,702) 204,719 325,753 (1,111,182) 24,312 1,137,396 50,526 416,040 (46,686) (508,208) (138,854)
95. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 2017 RM’000 Equity interest Unquoted shares, at cost Quoted shares, at cost Exchange differences Share of post-acquisition reserves Less: Accumulated impairment losses Market value of quoted shares Bank 2016 RM’000 2017 RM’000 2016 RM’000 493,455 2,825,135 (954,600) 487,282 2,864,864 (551,372) 472,016 – – 451,518 – – 2,363,990 2,800,774 472,016 451,518 779,202 780,530 – – 3,143,192 (370,868) 3,581,304 (370,868) 472,016 – 451,518 – 2,772,324 3,210,436 472,016 451,518 1,734,645 2,270,346 – – Basel II Pillar 3 pg. 288-351 Group The Financials pg. 10-287 18.INTEREST IN ASSOCIATES AND JOINT VENTURES (a) The carrying amount of interest in joint ventures of the Group amounting to approximately RM3,724,000 (2016: RM12,826,000) is included in the total carrying amount of interest in associates and joint ventures. (b) The following table summarises the information of the Group’s material associates, adjusted for any differences in accounting policies and reconciles the information to the carrying amount of the Group’s interest in associates and joint ventures: Summarised income statements: An Binh Commercial Joint Stock Bank RM’000 Other individually immaterial associates and joint ventures RM’000 Total RM’000 Group MCB Bank RM’000 2017 Interest income Interest expense 3,297,144 (1,428,601) 1,031,285 (638,976) 44,352 (7,540) 4,372,781 (2,075,117) 1,868,543 692,580 392,309 116,816 36,812 17,853 2,297,664 827,249 2,561,123 (1,357,844) 509,125 (263,863) 54,665 (58,271) 3,124,913 (1,679,978) Operating profit/(loss) before impairment losses Writeback of/(allowances for) impairment losses on loans, advances and financing, net 1,203,279 245,262 (3,606) 1,444,935 (114,506) (3,119) Operating profit Share of profits in associates 1,288,373 25,214 130,756 – (6,725) – 1,412,404 25,214 Profit/(loss) before taxation Taxation 1,313,587 (288,689) 130,756 (19,458) (6,725) (3,129) 1,437,618 (311,276) Profit/(loss) for the financial year 1,024,898 111,298 (9,854) 1,126,342 Group’s share of profit/(loss) for the financial year 197,504 22,259 (5,143) 214,620 Dividends paid by the associates during the financial year 120,817 7,351 2,505 130,673 Net interest income Other operating income Net operating income Overhead expenses 85,094 (32,531) 93
96. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 18 .INTEREST IN ASSOCIATES AND JOINT VENTURES (CONT’D.) (b) The following table summarises the information of the Group’s material associates, adjusted for any differences in accounting policies and reconciles the information to the carrying amount of the Group’s interest in associates and joint ventures (cont’d.): Summarised income statements (cont’d.): Group 94 MCB Bank RM’000 An Binh Commercial Joint Stock Bank RM’000 Other individually immaterial associates and joint ventures RM’000 Total RM’000 2016 Interest income Interest expense 2,812,426 (988,156) 845,277 (540,628) 54,381 (9,592) 3,712,084 (1,538,376) Net interest income Other operating income 1,824,270 567,865 304,649 45,570 44,789 14,129 2,173,708 627,564 Net operating income Overhead expenses 2,392,135 (993,816) 350,219 (214,923) 58,918 (49,245) 2,801,272 (1,257,984) Operating profit before impairment losses Writeback of/(allowances for) impairment losses on loans, advances and financing, net 1,398,319 135,296 9,673 1,543,288 (122,873) (1,068) Operating profit Share of profits in associates 1,440,671 51,500 12,423 – 8,605 – 1,461,699 51,500 Profit before taxation Taxation 1,492,171 (634,878) 12,423 (8,179) 8,605 (1,100) 1,513,199 (644,157) Profit for the financial year 857,293 4,244 7,505 869,042 Group’s share of profits for the financial year 171,459 849 1,156 173,464 Dividends paid by the associates during the financial year 121,922 6,786 1,393 130,101 42,352 (81,589)
97. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (b) The following table summarises the information of the Group’s material associates, adjusted for any differences in accounting policies and reconciles the information to the carrying amount of the Group’s interest in associates and joint ventures (cont’d.): Summarised statements of financial position: Basel II Pillar 3 pg. 288-351 Other individually immaterial associates and joint ventures RM’000 MCB Bank RM’000 An Binh Commercial Joint Stock Bank RM’000 49,157,194 (43,575,092) 13,865,378 (12,803,163) 237,834 (104,097) 63,260,406 (56,482,352) Total equity 5,582,102 1,062,215 133,737 6,778,054 Proportion of Group’s ownership Goodwill 1,047,202 1,266,541 212,443 203,540 42,598 – 1,302,243 1,470,081 Carrying amount of the investment 2,313,743 415,983 42,598 2,772,324 Group 2017 Total assets Total liabilities 2016 Total assets Total liabilities The Financials pg. 10-287 18.INTEREST IN ASSOCIATES AND JOINT VENTURES (CONT’D.) Total RM’000 42,743,493 (36,722,157) 13,552,345 (12,388,578) 348,694 (119,625) 56,644,532 (49,230,360) Total equity 6,021,336 1,163,767 229,069 7,414,172 Proportion of Group’s ownership Goodwill 1,204,267 1,479,936 232,753 228,142 65,338 – 1,502,358 1,708,078 Carrying amount of the investment 2,684,203 460,895 65,338 3,210,436 (c) Details of the associates and joint ventures of the Group and of the Bank are disclosed in Note 63(c) and Note 63(d) respectively. (d) The details of goodwill included within the Group’s carrying amount of interest in associates and joint ventures are as follows: Group 2017 RM’000 2016 RM’000 At 1 January Exchange differences 1,708,078 (237,997) 1,633,230 74,848 At 31 December 1,470,081 1,708,078 95
98. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 19 .PROPERTY, PLANT AND EQUIPMENT Group As at 31 December 2017 Cost At 1 January 2017 Additions Disposals Acquisition of a subsidiary (Note 17(e)) Write-offs (Note 42) Transferred between categories Transferred to intangible assets (Note 20) Exchange differences At 31 December 2017 Accumulated depreciation and impairment losses At 1 January 2017 Depreciation charge for the financial year (Note 42) Disposals Acquisition of a subsidiary (Note 17(e)) Write-offs (Note 42) Exchange differences Computers and Peripherals RM’000 Electrical and Security Equipment RM’000 Motor Vehicles RM’000 Workin-Progress RM’000 Total RM’000 2,259,227 2,848 (38,626) – (208) 30,455 1,522,057 59,214 (14,089) 3,190 (6,551) 29,766 1,332,241 438,856 (10,687) 1,604 (7,907) 1,398 291,501 10,276 (2,461) – (1,821) 11,002 71,319 8,315 (8,076) 168 (1,235) – 77,366 43,361 – – (164) (72,621) 5,553,711 562,870 (73,939) 4,962 (17,886) – – (59,909) – (54,334) (400) (49,804) – (1,725) – (5,720) (4,360) (333) (4,760) (171,825) 2,193,787 1,539,253 1,705,301 306,772 64,771 43,249 5,853,133 644,497 1,078,547 993,297 198,189 43,684 – 2,958,214 10,936 (5,892) 87 (1,235) (3,986) – – – – – 43,133 (16,058) – (208) (14,207) 165,399 (11,975) 2,247 (6,269) (41,347) 176,867 (10,628) 1,082 (7,894) (38,598) 22,582 (1,395) – (1,734) (1,006) 418,917 (45,948) 3,416 (17,340) (99,144) At 31 December 2017 657,157 1,186,602 1,114,126 216,636 43,594 – 3,218,115 Analysed as: Accumulated depreciation Accumulated impairment losses 649,608 7,549 1,186,598 4 1,114,126 – 216,636 – 43,594 – – – 3,210,562 7,553 657,157 1,186,602 1,114,116 216,636 43,594 – 3,218,115 1,536,630 352,651 591,175 90,136 21,177 43,249 2,635,018 Net carrying amount At 31 December 2017 96 *Properties RM’000 Office Furniture, Fittings, Equipment and Renovations RM’000
99. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Cost At 1 January 2016 Additions Disposals Disposal of a subsidiary (Note 17(f)) Write-offs (Note 42) Transferred between categories Transferred from intangible assets (Note 20) Exchange differences *Properties RM’000 2,217,089 14,495 (22,397) – – 20,199 1,367,931 94,156 (7,015) (367) (6,767) 44,203 Computers and Peripherals RM’000 1,291,281 91,436 (42,956) (206) (37,966) 2,142 Electrical and Security Equipment RM’000 261,141 10,774 (401) – (600) 12,082 Motor Vehicles RM’000 70,202 13,286 (14,996) – (598) – Workin-Progress RM’000 82,869 73,041 – – – (78,626) Total RM’000 5,290,513 297,188 (87,765) (573) (45,931) – – 29,841 – 29,916 1,019 27,491 – 8,505 – 3,425 – 82 1,019 99,260 2,259,227 1,522,057 1,332,241 291,501 71,319 77,366 5,553,711 604,565 903,850 910,146 168,578 41,902 – 2,629,041 41,598 (9,649) – – – 163,208 (6,930) (196) (6,672) (6) 141,513 (42,737) (162) (37,962) – 22,329 (359) – (600) 6 10,487 (10,875) – (598) – – – – – – 379,135 (70,550) (358) (45,832) – – 7,983 – 25,293 5 22,494 – 8,235 – 2,768 – – 5 66,773 At 31 December 2016 644,497 1,078,547 993,297 198,189 43,684 – 2,958,214 Analysed as: Accumulated depreciation Accumulated impairment losses 636,948 7,549 1,078,543 4 993,297 – 198,189 – 43,684 – – – 2,950,661 7,553 644,497 1,078,547 993,297 198,189 43,684 – 2,958,214 1,614,730 443,510 338,944 93,312 27,635 77,366 2,595,497 At 31 December 2016 Accumulated depreciation and impairment losses At 1 January 2016 Depreciation charge for the financial year (Note 42) Disposals Disposal of a subsidiary (Note 17(f)) Write-offs (Note 42) Transferred between categories Transferred from intangible assets (Note 20) Exchange differences Net carrying amount At 31 December 2016 Basel II Pillar 3 pg. 288-351 Group As at 31 December 2016 Office Furniture, Fittings, Equipment and Renovations RM’000 The Financials pg. 10-287 19.PROPERTY, PLANT AND EQUIPMENT (CONT’D.) 97
100. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 19 .PROPERTY, PLANT AND EQUIPMENT (CONT’D.) Group Buildings on Buildings on Leasehold Land Freehold Less Than 50 Years Land 50 Years or More RM’000 RM’000 RM’000 Leasehold Land Less Than 50 Years 50 Years or More RM’000 RM’000 Total RM’000 As at 31 December 2017 *Properties consist of: Cost At 1 January 2017 Additions Disposals Write-off Transferred between categories Exchange differences 114,526 – (1,530) – – (332) 508,988 – (34,721) – 10,124 (6,451) 410,523 1,955 (1,175) (208) – (21,506) 629,592 – – – 20,331 (13,022) 170,368 865 (392) – 1,572 (14,060) 425,230 28 (808) – (1,572) (4,538) 2,259,227 2,848 (38,626) (208) 30,455 (59,909) At 31 December 2017 112,664 477,940 389,589 636,901 158,353 418,340 2,193,787 54 229,361 182,681 160,532 15,221 56,648 644,497 – – – – 11,600 (14,714) – (1,941) At 31 December 2017 54 224,306 185,738 170,758 16,623 59,678 657,157 Analysed as: Accumulated depreciation Accumulated impairment losses – 54 218,269 6,037 184,870 868 170,332 426 16,623 – 59,514 164 649,608 7,549 54 224,306 185,738 170,758 16,623 59,678 657,157 Net carrying amount At 31 December 2017 112,610 253,634 203,851 466,143 141,730 358,662 1,536,630 As at 31 December 2016 *Properties consist of: Cost At 1 January 2016 Additions Disposals Transferred between categories Exchange differences 115,653 – (1,531) – 404 515,742 3,526 (17,116) 8,790 (1,954) 391,294 9,538 – 2,360 7,331 622,254 86 (3,750) – 11,002 160,029 1,345 – – 8,994 412,117 – – 9,049 4,064 2,217,089 14,495 (22,397) 20,199 29,841 At 31 December 2016 114,526 508,988 410,523 629,592 170,368 425,230 2,259,227 54 224,578 166,765 147,766 13,438 51,964 604,565 1,584 – 199 3,929 – 755 Accumulated depreciation and impairment losses At 1 January 2017 Depreciation charge for the financial year Disposals Write-offs Exchange differences Accumulated depreciation and impairment losses At 1 January 2016 Depreciation charge for the financial year Disposals Exchange differences – – – 11,563 (6,686) (94) 11,995 (828) (208) (7,902) 11,790 – 4,126 13,464 – – (3,238) 12,732 (2,963) 2,997 1,843 (201) – (240) 4,231 (315) – (886) 43,133 (16,058) (208) (14,207) 41,598 (9,649) 7,983 At 31 December 2016 54 229,361 182,681 160,532 15,221 56,648 644,497 Analysed as: Accumulated depreciation Accumulated impairment losses – 54 223,324 6,037 181,813 868 160,106 426 15,221 – 56,484 164 636,948 7,549 54 229,361 182,681 160,532 15,221 56,648 644,497 114,472 279,627 227,842 469,060 155,147 368,582 1,614,730 Net carrying amount At 31 December 2016 98 Freehold Land RM’000
101. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS As at 31 December 2017 Cost At 1 January 2017 Additions Disposals Write-offs (Note 42) Transferred between categories Exchange differences 1,283,057 253 (29,640) – 30,455 (10,901) At 31 December 2017 1,273,224 480,489 Accumulated depreciation At 1 January 2017 Depreciation charge for the financial year (Note 42) Disposals Write-offs (Note 42) Exchange differences Electrical and Security Equipment RM’000 Motor Vehicles RM’000 Workin-Progress RM’000 Total RM’000 544,289 20,733 (5,202) (7,055) – (4,595) 212,393 7,708 (8) (1,821) 9,748 (721) 16,331 1,858 (1,490) (1,069) – (494) 58,852 39,028 – (164) (68,580) (208) 3,111,746 96,026 (42,880) (14,434) – (24,310) 1,033,391 548,170 227,299 15,136 28,928 3,126,148 725,060 458,273 145,180 11,983 – 1,820,985 2,234 (1,256) (1,069) (369) – – – – 104,166 (6,383) (4,141) (4,932) 38,528 (5,200) (7,053) (3,690) 17,350 (8) (1,734) (423) 186,605 (19,918) (13,997) (13,435) At 31 December 2017 493,724 813,770 480,858 160,365 11,523 – 1,960,240 Net carrying amount At 31 December 2017 779,500 219,621 67,312 66,934 3,613 28,928 1,165,908 1,260,362 366 (2,543) – 20,198 913,120 54,935 (8) (4,407) 29,850 572,677 31,952 (32,444) (31,695) – 196,598 7,316 – (334) 8,364 15,769 1,340 (933) (7) – 58,252 59,588 – – (58,412) 3,016,778 155,497 (35,928) (36,443) – As at 31 December 2016 Cost At 1 January 2016 Additions Disposals Write-offs (Note 42) Transferred between categories Transferred from intangible assets (Note 20) Transferred from a subsidiary Exchange differences At 31 December 2016 Accumulated depreciation At 1 January 2016 Depreciation charge for the financial year (Note 42) Disposals Write-offs (Note 42) Transferred between categories Transferred from intangible assets (Note 20) Transferred from a subsidiary Exchange differences 24,327 (7,071) – (4,021) 996,824 26,446 (6,540) (4,325) 28,377 (7,391) Computers and Peripherals RM’000 – 276 4,398 – – 3,334 999 – 2,800 – – 449 – – 162 1,283,057 996,824 544,289 212,393 16,331 58,852 3,111,746 455,842 625,548 475,079 127,846 10,366 – 1,694,681 101,096 (8) (4,369) (6) 44,761 (32,423) (31,695) – 23,052 (426) – – 17,355 – (334) 6 – – (576) 2,276 (787) (7) – – – – – Basel II Pillar 3 pg. 288-351 Bank *Properties RM’000 Office Furniture, Fittings, Equipment and Renovations RM’000 The Financials pg. 10-287 19.PROPERTY, PLANT AND EQUIPMENT (CONT’D.) 999 276 10,567 188,540 (33,644) (36,405) – – 101 1,920 – – 2,799 5 – 2,546 – – 307 – – 135 – – – 5 101 7,707 At 31 December 2016 480,489 725,060 458,273 145,180 11,983 – 1,820,985 Net carrying amount At 31 December 2016 802,568 271,764 86,016 67,213 4,348 58,852 1,290,761 The net carrying amount of property, plant and equipment of the Group held under finance leases as at 31 December 2017 was RM302,675,000 (2016: RM43,556,000). 99
102. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 19 .PROPERTY, PLANT AND EQUIPMENT (CONT’D.) Bank Freehold Land RM’000 Buildings on Buildings on Leasehold Land Freehold Less Than 50 Years Land 50 Years or More RM’000 RM’000 RM’000 Leasehold Land Less Than 50 Years 50 Years or More RM’000 RM’000 Total RM’000 As at 31 December 2017 *Properties consist of: Cost At 1 January 2017 Additions Disposals Transferred between categories Exchange differences 108,317 – (1,530) – (319) 422,639 – (25,735) 10,124 (529) 312,797 22 (1,175) – (1,080) 328,654 – – 20,331 (8,342) 12,529 204 (392) 1,572 – 98,121 27 (808) (1,572) (631) 1,283,057 253 (29,640) 30,455 (10,901) At 31 December 2017 106,468 406,499 310,564 340,643 13,913 95,137 1,273,224 – 204,836 142,297 106,718 5,234 21,404 480,489 Accumulated depreciation At 1 January 2017 Depreciation charge for the financial year Disposals Exchange differences – – – At 31 December 2017 – 207,669 147,166 111,536 5,486 21,867 493,724 Net carrying amount At 31 December 2017 106,468 198,830 163,398 229,107 8,427 73,270 779,500 Cost At 1 January 2016 Additions Disposals Transferred between categories Transferred from a subsidiary Exchange differences 109,534 – (1,531) – – 314 417,506 101 (1,012) 8,790 276 (3,022) 309,628 179 – 3,045 – (55) 322,658 86 – (685) – 6,595 12,529 – – – – – 88,507 – – 9,048 – 566 1,260,362 366 (2,543) 20,198 276 4,398 At 31 December 2016 108,317 422,639 312,797 328,654 12,529 98,121 1,283,057 – 196,943 135,776 97,761 5,043 20,319 455,842 6,924 – – 2,033 191 – – – 879 – – 206 8,684 (5,727) (124) 6,659 (828) (962) 7,521 – (2,703) 453 (201) – 1,010 (315) (232) 24,327 (7,071) (4,021) As at 31 December 2016 *Properties consist of: 100 Accumulated depreciation At 1 January 2016 Depreciation charge for the financial year Disposals Transferred from a subsidiary Exchange differences – – – – At 31 December 2016 – 204,836 142,297 106,718 5,234 21,404 480,489 Net carrying amount At 31 December 2016 108,317 217,803 170,500 221,936 7,295 76,717 802,568 8,446 (426) 101 (228) 6,612 – – (91) 23,052 (426) 101 1,920
103. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS As at 31 December 2017 Cost At 1 January 2017 Additions Disposals Acquisition of a subsidiary (Note 17(e)) Write-offs (Note 42) Transferred between categories Transferred from property, plant and equipment (Note 19) Exchange differences At 31 December 2017 Agency Force RM’000 Customer Relationship RM’000 7,938,278 – – 55,882 – – 355,682 – – – – – 82,742 – – – – – 163,749 – – – – – – (616,563) – (37,235) – – – (1,687) Computer Software-inSoftware Development RM’000 RM’000 Total RM’000 1,973,975 79,411 (289) – (2,618) 51,512 169,275 159,298 – – – (51,512) 10,683,701 238,709 (289) 55,882 (2,618) – 4,035 (30,790) 725 (3,270) 4,760 (689,545) 7,377,597 318,447 82,742 162,062 2,075,236 274,516 10,290,600 152,959 1,138,522 – 1,716,907 Accumulated amortisation At 1 January 2017 Amortisation charge for the financial year (Note 42) Write-offs (Note 42) Exchange differences – 350,068 75,358 – – – 5,406 – (37,027) 6,555 – (6,907) At 31 December 2017 – 318,447 75,006 160,358 1,361,620 – 1,915,431 16,352 – (8,953) 245,360 (1,385) (20,877) – – – 273,673 (1,385) (73,764) Accumulated impairment losses At 1 January 2017 Exchange differences 1,621,270 (40) – – – – – – – – – – 1,621,270 (40) At 31 December 2017 1,621,230 – – – – – 1,621,230 Net carrying amount At 31 December 2017 5,756,367 – 7,736 1,704 713,616 274,516 6,753,939 7,532,757 – – – – 331,622 – – – – 82,742 – – – – 162,237 – – – – 1,727,740 116,216 (219) (77,851) 190,026 204,538 154,251 – (209) (190,026) 10,041,636 270,467 (219) (78,060) – – 405,521 – 24,060 – – – 1,512 (302) 18,365 (717) 1,438 (1,019) 450,896 7,938,278 355,682 82,742 163,749 1,973,975 169,275 10,683,701 – 316,378 65,799 131,125 948,640 – 1,461,942 As at 31 December 2016 Cost At 1 January 2016 Additions Disposal of a subsidiary (Note 17(f)) Write-offs (Note 42) Transferred between categories Transferred to property, plant and equipment (Note 19) Exchange differences At 31 December 2016 Basel II Pillar 3 pg. 288-351 Group Goodwill RM’000 Core Deposit Intangibles RM’000 The Financials pg. 10-287 20.INTANGIBLE ASSETS Accumulated amortisation At 1 January 2016 Amortisation charge for the financial year (Note 42) Disposal of a subsidiary (Note 17(f)) Write-offs (Note 42) Transferred to property, plant and equipment (Note 19) Exchange differences – – – 10,024 – – 7,913 – – 18,465 – – 254,089 (61) (76,880) – – – 290,491 (61) (76,880) – – – 23,666 – 1,646 – 3,369 (5) 12,739 – – (5) 41,420 At 31 December 2016 – 350,068 75,358 152,959 1,138,522 – 1,716,907 Accumulated impairment losses At 1 January 2016 Exchange differences 1,621,232 38 – – – – – – – – – – 1,621,232 38 At 31 December 2016 1,621,270 – – – – – 1,621,270 Net carrying amount At 31 December 2016 6,317,008 5,614 7,384 10,790 835,453 169,275 7,345,524 101
104. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 20 .INTANGIBLE ASSETS (CONT’D.) Bank 102 Goodwill RM’000 As at 31 December 2017 Cost At 1 January 2017 Additions Write-offs (Note 42) Transferred between categories Exchange differences 81,015 – – – – At 31 December 2017 81,015 Computer Software RM’000 987,220 8,527 (3) 42,779 (7,858) 1,030,665 Software-inDevelopment RM’000 Total RM’000 147,450 133,992 – (42,779) (2,539) 1,215,685 142,519 (3) – (10,397) 236,124 1,347,804 Accumulated amortisation At 1 January 2017 Amortisation charge for the financial year (Note 42) Exchange differences – – – 685,636 99,177 (5,039) – – – 685,636 99,177 (5,039) At 31 December 2017 – 779,774 – 779,774 Net carrying amount At 31 December 2017 81,015 250,891 236,124 568,030 As at 31 December 2016 Cost At 1 January 2016 Additions Write-offs (Note 42) Transferred between categories Transferred to property, plant and equipment (Note 19) Exchange differences 81,015 – – – – – 944,839 21,130 (77,662) 92,397 (282) 6,798 113,568 125,768 (209) (92,397) (717) 1,437 1,139,422 146,898 (77,871) – (999) 8,235 At 31 December 2016 81,015 987,220 147,450 1,215,685 Accumulated amortisation At 1 January 2016 Amortisation charge for the financial year (Note 42) Write-offs (Note 42) Transferred to property, plant and equipment (Note 19) Exchange differences – – – – – 629,942 128,718 (76,697) (5) 3,678 – – – – – 629,942 128,718 (76,697) (5) 3,678 At 31 December 2016 – 685,636 – 685,636 Net carrying amount At 31 December 2016 81,015 301,584 147,450 530,049
105. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (a)Goodwill Goodwill has been allocated to the Group’s Cash-Generating Units (“CGUs”) identified according to the following business segments: Note 2017 RM’000 2016 RM’000 American Express (“AMEX”) card services business in Malaysia (i) 81,015 81,015 Acquisition of PT Bank Maybank Indonesia Tbk (“Maybank Indonesia”) Less: Accumulated impairment losses (ii) Group Acquisition of Maybank Kim Eng Holdings Limited (“MKEH”) Less: Accumulated impairment losses (iii) Acquisition of PT Maybank Asset Management Acquisition of PT Asuransi Asoka Mas 17(e) American Express (“AMEX”) card services business in Malaysia 5,807,085 (1,619,518) 4,187,567 4,187,567 2,001,914 (1,422) 2,001,914 (1,422) 2,000,492 2,000,492 20,162 20,162 55,882 – (588,751) Exchange differences Bank 5,807,085 (1,619,518) Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 20.INTANGIBLE ASSETS (CONT’D.) 27,772 5,756,367 6,317,008 Note 2017 RM’000 2016 RM’000 (i) 81,015 81,015 Goodwill is allocated to the Group’s CGUs expected to benefit from the synergies of the acquisitions. The recoverable amount of the CGUs are assessed based on value-in-use and compared to the carrying amount of the CGUs to determine whether any impairment exists. Impairment loss is recognised in the income statement when the carrying amount of the CGUs exceeds its recoverable amount. During the financial year ended 31 December 2017, no additional impairment losses were recognised or reversed for the CGUs. (i) The value-in-use calculations apply discounted cash flow projections prepared and approved by management, covering a 10-year period. The other key assumptions for the computation of value-in-use are as follows: (a) The Bank expects the AMEX card services business to be a going concern; (b) The growth in business volume is expected to be consistent with the industry growth rate of 13.0% to 15.0% per annum; and (c) The discount rate applied is the internal weighted average cost of capital of the Bank at the time of assessment, which is estimated to be 9.25% per annum (2016: 9.35% per annum). (ii) The value-in-use discounted cash flow model uses free cash flow to equity (“FCFE”) projections prepared and approved by management covering a 5-year period. The other key assumptions for the computation of value-in-use are as follows: (a) The Bank expects Maybank Indonesia’s banking business operations to be a going concern; (b) The discount rate applied is based on current specific country risks which is estimated to be approximately 15.0% per annum (2016: 15.0% per annum); and (c) Terminal value whereby cash flow growth rate of 5.5% (2016: 5.5%), which is consistent with the Gross Domestic Product rate of Indonesia. For sensitivity analysis purposes, a 10 basis points change in the discount rate would increase or decrease the recoverable amount by RM159 million, while a 10 basis points change in the terminal growth rate on the annual cashflows of Maybank Indonesia would increase or decrease the recoverable amount by RM105 million. 103
106. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 20 .INTANGIBLE ASSETS (CONT’D.) (a) Goodwill (cont’d.) (iii) Maybank Kim Eng Group (“MKEG”) is segregated into two business pillars, namely, Investment Banking and Advisory (“IB&A”) and Equities. MKEG comprises mainly Maybank Investment Bank Berhad (“MIBB”) and Maybank Kim Eng (“MKE”) whilst MKEG forms the Investment Banking sub-segment within the Global Banking. The value-in-use discounted cash flow model uses free cash flow to the firm (“FCFF”) projections prepared and approved by management covering a 5-year period of MIBB and MKE collectively. The other key assumptions for the computation of value-in-use are as follows: (a) The Bank expects MKEG’s business operations to be a going concern; (b) The discount rate applied is the internal weighted average cost of capital of MKEG at the time of assessment, which is estimated to be 8.3% per annum (2016: 10.0% per annum); and (c) Terminal value whereby cash flow growth rate is 5.8% (2016: 5.0%), which is consistent with the average Gross Domestic Product rate of Malaysia and Singapore, the major MKEG’s operating markets. For sensitivity analysis purposes, if the annual cash flows growth rate of MKEG is at a constant negative growth rate of 27.1% or the discount rate increased to approximately 15.5%, the recoverable amount would be reduced to its carrying amount of the CGU. (b) Core Deposit Intangibles (“CDI”) Core deposit intangibles arise from the acquisition of Maybank Indonesia’s banking business operations. The CDI is deemed to have a finite useful life of 8 years and is amortised based on a reducing balance method. (c) Agency force The agency force arises from the acquisition of MKEH’s investment banking business operations. The agency force is deemed to have a finite useful life of 11 years and is amortised based on a reducing balance method. (d) Customer relationship The customer relationship arises from the acquisition of MKEH’s investment banking business operations. The customer relationship is deemed to have a finite useful life of 3 – 9 years and is amortised based on a reducing balance method. 21.DEPOSITS FROM CUSTOMERS Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Fixed deposits and negotiable instruments of deposits – One year or less – More than one year 285,822,118 11,605,917 280,377,560 11,231,648 167,002,740 9,296,982 178,035,292 10,029,739 Money market deposits Savings deposits Demand deposits 297,428,035 18,167,679 71,591,820 114,829,911 291,609,208 15,200,225 68,143,180 110,571,307 176,299,722 18,167,679 47,602,272 86,868,927 188,065,031 15,200,225 44,203,976 84,409,063 502,017,445 485,523,920 328,938,600 331,878,295 The maturity profile of fixed deposits and negotiable instruments of deposits are as follows: Group Within six months Six months to one year One year to three years Three years to five years 104 Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 226,669,904 59,152,214 10,813,684 792,233 234,901,381 45,476,179 10,183,159 1,048,489 124,598,343 42,404,397 9,221,071 75,911 141,455,104 36,580,188 9,963,861 65,878 297,428,035 291,609,208 176,299,722 188,065,031
107. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The deposits are sourced from the following types of customers: Group Business enterprises Individuals Government and statutory bodies Others Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 238,688,009 205,434,319 28,731,383 29,163,734 226,074,468 204,025,300 26,481,227 28,942,925 166,333,827 141,356,982 9,327,767 11,920,024 163,000,362 145,714,679 9,046,804 14,116,450 502,017,445 485,523,920 328,938,600 331,878,295 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 21.DEPOSITS FROM CUSTOMERS (CONT’D.) 22.DEPOSITS AND PLACEMENTS FROM FINANCIAL INSTITUTIONS Group Licensed banks Licensed finance companies Licensed investment banks Other financial institutions Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 37,657,509 75,407 31,021 4,834,194 27,340,841 112,341 42,146 3,359,365 35,529,964 75,407 31,021 2,008,742 28,044,586 112,341 42,146 1,657,637 42,598,131 30,854,693 37,645,134 29,856,710 The maturity profile of deposits and placements from financial institutions are as follows: Group One year or less More than one year Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 39,516,290 3,081,841 28,086,419 2,768,274 36,024,326 1,620,808 28,385,549 1,471,161 42,598,131 30,854,693 37,645,134 29,856,710 105
108. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 23 .FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (“FVTPL”) Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Structured deposits 2,366,966 1,560,054 1,474,271 657,963 Borrowings Unsecured Medium term notes – More than one year Denominated in: – USD – RM 3,362,727 646,122 1,444,465 582,711 3,362,727 646,122 1,444,465 582,711 4,008,849 2,027,176 4,008,849 2,027,176 6,375,815 3,587,230 5,483,120 2,685,139 The movements in the borrowings are as follows: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 At 1 January Drawdown/(repayment) Non-cash changes: Fair value changes Others Exchange fluctuation 2,027,176 2,097,150 – 2,156,642 2,027,176 2,097,150 – 2,156,642 As 31 December 4,008,849 (16,338) 50,271 (149,410) (163,481) 34,406 (391) 2,027,176 (16,338) 50,271 (149,410) 4,008,849 (163,481) 34,406 (391) 2,027,176 The Group and the Bank have designated certain structured deposits and borrowings at FVTPL. This designation is permitted under MFRS 139 Financial Instruments: Recognition and Measurement as it significantly reduces accounting mismatch. These instruments are managed by the Group and the Bank on the basis of their fair values and include terms that have substantive derivative characteristics. The carrying amounts of both structured deposits and borrowings designated at FVTPL of the Group and of the Bank as at 31 December 2017 were RM6,590,566,000 and RM5,692,384,000 (2016: RM3,792,621,000 and RM2,875,461,000) respectively. The fair value changes of the financial liabilities at FVTPL that are attributable to the changes in own credit risk are not significant. The list of borrowings issued under financial liabilities at FVTPL is as follows: Description Issue date Maturity date Coupon/profit rate (% p.a.) Nominal value Malayan Banking Berhad USD15.0 billion Multicurrency MTN Programme USD Callable zero coupon note1 3-Feb-16 3-Feb-46 – USD347.0 million USD Callable zero coupon note2 26-Jul-17 26-Jul-47 – USD203.0 million USD Callable zero coupon note3 19-Oct-17 19-Oct-47 – USD300.0 million 14-Nov-16 14-Nov-31 4.20 RM600.0 million 22-Feb-17 20-Feb-32 4.20 RM60.0 million RM10.0 billion Senior Medium Term Note Programme RM Callable fixed rate notes4,6 RM10.0 billion Sukuk Murabahah Programme RM Callable fixed rate Sukuk5,6 1 2 3 4 5 106 6 The Bank, may redeem all (and not some only) of the notes on 3 February 2021 (the “First Redemption Date”) and each 3 February after the First Redemption Date up to 3 February 2045. The Bank, may redeem all (and not some only) of the notes on 26 July 2022 (the “First Redemption Date”) and each 26 July after the First Redemption Date up to and including 26 July 2046. The Bank, may redeem all (and not some only) of the notes on 19 October 2022 (the “First Redemption Date”) and each 19 October after the First Redemption Date up to and including 19 October 2046. The Bank, may redeem in whole or in part, on the anniversary date of the notes, starting from the 3rd anniversary date of the notes (14 November 2019). The Bank, may redeem in whole or in part, on the anniversary date of the sukuk, starting from the 3rd anniversary date of the sukuk (24 February 2020). There is a step-up in the coupon rate of 0.30% on the third, sixth, ninth and twelfth anniversary dates.
109. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Note Insurance/takaful contract liabilities Other insurance payables (i) (ii) 2017 RM’000 2016 RM’000 24,577,568 541,275 23,513,212 435,507 25,118,843 23,948,719 (i) Insurance/takaful contract liabilities Group Note 2017 Life insurance/family takaful General insurance/general takaful 2016 Life insurance/family takaful General insurance/general takaful (a) (b) (a) (b) Gross contract liabilities RM’000 Reinsurance/ retakaful assets (Note 13) RM’000 Net contract liabilities RM’000 19,275,837 5,301,731 (109,129) (3,113,326) 19,166,708 2,188,405 24,577,568 (3,222,455) 21,355,113 17,642,499 5,870,713 (75,444) (3,617,137) 17,567,055 2,253,576 23,513,212 (3,692,581) 19,820,631 Basel II Pillar 3 pg. 288-351 Group The Financials pg. 10-287 24.INSURANCE/TAKAFUL CONTRACT LIABILITIES AND OTHER INSURANCE PAYABLES (a) Life insurance/family takaful The breakdown of life insurance/family takaful contract liabilities and its movements are further analysed as follows: (A) Life insurance/family takaful contract liabilities Group 2017 Claims liabilities Actuarial liabilities Unallocated surplus AFS reserve Net asset value (“NAV”) attributable to unitholders 2016 Claims liabilities Actuarial liabilities Unallocated surplus AFS reserve Net asset value (“NAV”) attributable to unitholders Gross contract liabilities RM’000 Reinsurance/ retakaful assets RM’000 Net contract liabilities RM’000 225,021 13,961,280 3,648,905 (33,021) 1,473,652 (9,445) (99,684) – – – 215,576 13,861,596 3,648,905 (33,021) 1,473,652 19,275,837 (109,129) 19,166,708 216,303 12,623,670 3,552,633 55,356 1,194,537 (9,356) (66,088) – – – 206,947 12,557,582 3,552,633 55,356 1,194,537 17,642,499 (75,444) 17,567,055 107
110. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 24 .INSURANCE/TAKAFUL CONTRACT LIABILITIES AND OTHER INSURANCE PAYABLES (CONT’D.) (i) Insurance/takaful contract liabilities (cont’d.) (a) Life insurance/family takaful (cont’d.) The breakdown of life insurance/family takaful contract liabilities and its movements are further analysed as follows (cont’d.): (B) Movements of life insurance/family takaful contract liabilities and reinsurance/retakaful assets <---------------------------- Gross contract liabilities -----------------------------> Group As at 31 December 2017 Claims liabilities RM’000 Actuarial Unallocated surplus liabilities RM’000 RM’000 At 1 January 2017 Net earned insurance premiums Other revenue Experience/benefit variation Benefits and claims Other expenses Adjustments due to changes in: – Discounting – Assumptions – Policy movements Exchange differences Changes in AFS reserve Taxation Transfer to shareholders’ fund Hibah paid to participants 216,303 12,623,670 – – – – (445) – 12,185 741,953 – – At 31 December 2017 225,021 – – (3,022) – – – – – 5,718 85,606 520,102 (15,769) – – – – 13,961,280 NAV Total gross Reinsurance/ attributable AFS retakaful Net contract contract reserve to unitholders liabilities liabilities assets RM’000 RM’000 RM’000 RM’000 RM’000 3,552,633 1,202,338 522,349 – (731,615) (312,116) 55,356 – – – – – (5,718) (85,606) (366,927) – – 2,026 (100,764) (27,695) – – (50,167) – (38,210) – – – 3,648,905 (33,021) 1,194,537 17,642,499 79,763 1,282,101 4,625 526,974 (9) (454) (8,533) 13,990 (492) (312,608) – – 204,091 – – (330) – – – – 304,077 (15,769) (38,210) 1,696 (100,764) (27,695) 1,473,652 19,275,837 (75,444) 17,567,055 (63,031) 1,219,070 – 526,974 27,802 27,348 35,140 49,130 – (312,608) – – (33,596) – – – – – – – 270,481 (15,769) (38,210) 1,696 (100,764) (27,695) (109,129) 19,166,708 <---------------------------- Gross contract liabilities -----------------------------> Group As at 31 December 2016 108 Claims liabilities RM’000 Actuarial Unallocated surplus liabilities RM’000 RM’000 NAV Total gross Reinsurance/ attributable AFS retakaful Net contract contract reserve to unitholders liabilities liabilities assets RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2016 Net earned insurance premiums Other revenue Experience/benefit variation Benefits and claims Other expenses Adjustments due to changes in: – Discounting – Policy movements Changes in AFS reserve Taxation Transfer to shareholders’ fund Hibah paid to participants 184,793 – – 2,805 28,705 – 12,112,712 – – – 339,754 – 3,153,908 1,121,146 468,412 – (645,382) (289,874) 95,052 – – – (28,797) – – – – – – – (17,032) 188,236 – – – – 17,032 (174,164) – 8,962 (87,501) (19,906) – – (10,899) – – – At 31 December 2016 216,303 12,623,670 3,552,633 55,356 1,750,476 17,296,941 10,421 1,131,567 1,799 470,211 – 2,805 (567,704) (873,424) (352) (290,226) (58,268) (52,658) – 28,064 21,497 – 17,238,673 1,078,909 470,211 30,869 (851,927) (290,226) – 14,072 (10,899) 8,859 (87,501) (19,906) – (14,079) – – – – – (7) (10,899) 8,859 (87,501) (19,906) 1,194,537 17,642,499 (75,444) 17,567,055 – – – (103) – –
111. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (i) Insurance/takaful contract liabilities (cont’d.) (b) General insurance/general takaful Group 2017 Claims liabilities Premiums/contribution liabilities Unallocated surplus of general takaful fund AFS reserve 2016 Claims liabilities Premiums/contribution liabilities Unallocated surplus of general takaful fund AFS reserve Note (A) (B) (A) (B) Gross contract liabilities RM’000 Reinsurance/ retakaful assets RM’000 Net contract liabilities RM’000 3,808,751 1,309,433 196,299 (12,752) (2,649,941) (463,385) – – 1,158,810 846,048 196,299 (12,752) 5,301,731 (3,113,326) 2,188,405 4,599,820 1,115,571 175,393 (20,071) (3,316,484) (300,653) – – 1,283,336 814,918 175,393 (20,071) 5,870,713 (3,617,137) 2,253,576 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 24.INSURANCE/TAKAFUL CONTRACT LIABILITIES AND OTHER INSURANCE PAYABLES (CONT’D.) (A) Claims liabilities Group As at 31 December 2017 At 1 January 2017 Claims incurred in the current accident year Claims paid during the financial year Movements in Unallocated Loss Adjustment Expenses (“ULAE”) Movements in Provision of Risk Margin for Adverse Deviation (“PRAD”) Exchange differences Gross contract liabilities RM’000 Reinsurance/ retakaful assets RM’000 Net contract liabilities RM’000 4,599,820 796,815 (1,581,401) 6,192 (8,490) (4,185) (3,316,484) (37,569) 774,193 (76,244) 6,038 125 1,283,336 759,246 (807,208) (70,052) (2,452) (4,060) At 31 December 2017 3,808,751 (2,649,941) 1,158,810 As at 31 December 2016 At 1 January 2016 Claims incurred in the current accident year Claims paid during the financial year Movements in Unallocated Loss Adjustment Expenses (“ULAE”) Movements in Provision of Risk Margin for Adverse Deviation (“PRAD”) Exchange differences 4,706,536 872,294 (878,291) (19,708) (84,359) 3,348 (3,367,456) (127,328) 161,342 2,744 14,731 (517) 1,339,080 744,966 (716,949) (16,964) (69,628) 2,831 At 31 December 2016 4,599,820 (3,316,484) 1,283,336 109
112. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 24 .INSURANCE/TAKAFUL CONTRACT LIABILITIES AND OTHER INSURANCE PAYABLES (CONT’D.) (i) Insurance/takaful contract liabilities (cont’d.) (b) General insurance/general takaful (cont’d.) (B) Premiums/contribution liabilities Gross contract liabilities RM’000 Group As at 31 December 2017 At 1 January 2017 Premiums/contributions written in the financial year Premiums/contributions earned during the financial year Exchange differences Reinsurance/ retakaful assets RM’000 Net contract liabilities RM’000 1,115,571 2,502,313 (2,305,969) (2,482) (300,653) (959,084) 795,586 766 At 31 December 2017 1,309,433 (463,385) As at 31 December 2016 At 1 January 2016 Premiums/contributions written in the financial year Premiums/contributions earned during the financial year Exchange differences 1,273,379 2,462,219 (2,622,247) 2,220 (401,103) (950,322) 1,051,321 (549) 1,115,571 (300,653) 814,918 Group 2017 RM’000 2016 RM’000 Due to agents and intermediaries Due to reinsurers and cedants Due to retakaful operators 81,154 371,874 88,247 61,822 313,648 60,037 541,275 435,507 At 31 December 2016 814,918 1,543,229 (1,510,383) (1,716) 846,048 872,276 1,511,897 (1,570,926) 1,671 (ii) Other insurance payables 25.OTHER LIABILITIES Group Note Amount due to brokers and clients Deposits, other creditors and accruals Defined benefit pension plans Provisions for commitments and contingencies Finance lease liabilities Structured deposits 54 (a) (b) (c) Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 2,807,623 10,426,200 531,809 41,953 290,559 5,080,996 4,044,200 8,336,837 552,462 35,507 9,925 4,309,375 – 11,787,648 – 41,953 – 5,080,996 – 8,154,734 – 35,507 – 4,308,457 19,179,140 17,288,306 16,910,597 12,498,698 (a) Defined benefit pension plans The Bank’s subsidiaries have obligations in respect of the severance payments they must make to employees upon retirement under labour laws of respective countries. The Bank’s subsidiaries treat these severance payment obligations as a defined benefit plan. The obligation under the defined benefit plan is determined by a professionally qualified independent actuary based on actuarial assumptions using Projected Unit Credit Method. Such determination is made based on the present value of expected cash flows of benefits to be paid in the future taking into account the actuarial assumptions, including salaries, turnover rate, mortality rate, years of service and other factors. The defined benefit plans expose the Bank’s subsidiaries to actuarial risks, such as longevity risk, interest rate risk, currency risk and market (investment) risk. 110
113. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (i) Funding to defined benefit plans The defined benefit plans are fully funded by the Bank’s subsidiaries. The funding requirements are based on the pension funds actuarial measurement framework set out in the funding policies of the plans. The subsidiaries’ employees are not required to contribute to the plans. The following payments are expected contributions to be made by the Bank’s subsidiaries to the defined benefit plans obligations in the future years: Group Within the Between 1 Between 5 Beyond 10 next 12 months and 5 years and 10 years years Total expected payments 2017 RM’000 2016 RM’000 17,224 135,459 398,491 3,762,292 16,939 160,554 431,982 4,681,701 4,313,466 5,291,176 Fair value of plan assets RM’000 Net defined benefit liabilities RM’000 Basel II Pillar 3 pg. 288-351 (a) Defined benefit pension plans (cont’d.) The Financials pg. 10-287 25.OTHER LIABILITIES (CONT’D.) (ii) Movements in net defined benefit liabilities The following table shows a reconciliation of net defined benefit liabilities and its components: Group As at 31 December 2017 At 1 January 2017 Included in income statements: Current service cost Past service cost Interest cost Actuarial gain on other long–term employee benefits plans Included in statements of comprehensive income: Remeasurement (gain)/loss: – Actuarial (gain)/loss arising from: – Demographic assumptions – Financial assumptions – Experience adjustments – Return on plan assets (excluding interest income) Others: Contributions paid by employers Benefits paid Exchange differences At 31 December 2017 Defined benefit obligations RM’000 583,533 (31,071) 552,462 52,292 124 39,135 (375) – – – – 52,292 124 39,135 (375) 91,176 – 91,176 (2,144) 20,223 (33,292) – – (65) – (528) (2,144) 20,158 (33,292) (528) (15,213) (593) (15,806) (1,125) (29,911) (65,962) (804) 99 1,680 (1,929) (29,812) (64,282) (96,998) 975 (96,023) 562,498 (30,689) 531,809 111
114. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 25 .OTHER LIABILITIES (CONT’D.) (a) Defined benefit pension plans (cont’d.) (ii) Movements in net defined benefit liabilities (cont’d.) The following table shows a reconciliation of net defined benefit liabilities and its components (cont’d.): Group As at 31 December 2016 At 1 January 2016 Included in income statements: Current service cost Past service cost Interest cost/(income) Actuarial gain on other long–term employee benefits plans Included in statements of comprehensive income: Remeasurement (gain)/loss: – Actuarial (gain)/loss arising from: – Demographic assumptions – Financial assumptions – Experience adjustments – Effect of asset ceiling – Return on plan assets (excluding interest income) Others: Contributions paid by employers Benefits paid Exchange differences At 31 December 2016 112 Defined benefit obligations RM’000 502,236 Fair value of plan assets RM’000 (35,468) Net defined benefit liabilities RM’000 466,768 56,621 184 39,709 (255) – – (2,108) – 56,621 184 37,601 (255) 96,259 (2,108) 94,151 1,880 17,354 (18,036) – – – – – (683) 1,528 1,880 17,354 (18,036) (683) 1,528 1,198 845 2,043 – (51,804) 35,644 (11,718) 17,014 364 (11,718) (34,790) 36,008 (16,160) 5,660 (10,500) 583,533 (31,071) 552,462
115. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (a) Defined benefit pension plans (cont’d.) (iii) Plan assets The major categories of plan assets included as part of the fair value of total plan assets are as follows: Group Cash and cash equivalents Quoted investments in active markets: Equity securities: – Consumer markets – Oil and gas – Financial institutions Bonds issued by foreign governments Unquoted investments: Debt instruments Equity securities Other receivables Other payables 2017 RM’000 2016 RM’000 16,240 14,105 – – 3,161 9,247 1,534 361 3,531 9,083 – 2,692 687 (1,338) 316 3,007 651 (1,517) 30,689 31,071 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 25.OTHER LIABILITIES (CONT’D.) For Bank’s subsidiaries which have plan assets, an Asset-Liability Matching Study (“ALM”) is performed at each reporting date. The principal technique of the ALM is to ensure the expected return on assets is sufficient to support the desired level of funding arising from the defined benefit plans. (iv) Defined benefit obligations (A) Actuarial assumptions The principal assumptions used by subsidiaries in determining its pension obligations are as follows: Group 2017 % 2016 % Discount rate – Indonesia – Philippines – Thailand 7.71 5.51 3.21 8.40 5.22 4.25 Future salary growth – Indonesia – Philippines – Thailand 7.50 5.33 6.00 7.58 6.00 5.00 113
116. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 25 .OTHER LIABILITIES (CONT’D.) (a) Defined benefit pension plans (cont’d.) (iv) Defined benefit obligations (cont’d.) (A) Actuarial assumptions (cont’d.) The principal assumptions used by subsidiaries in determining its pension obligations are as follows (cont’d.): Group 2017 Years 2016 Years Indonesia: Life expectancy for individual retiring at age of 55 – 56: – Male – Female 17.70 18.70 17.79 18.79 Philippines: Life expectancy for individual retiring at age of 50: – Male – Female 8.00 8.00 8.00 8.00 Thailand: Life expectancy for individual retiring at age of 60: – Male – Female 6.32 6.32 8.18 9.30 Group 2017 Years 2016 Years Duration of defined benefit plans obligations – Indonesia – Philippines – Thailand 10.40 14.66 7.15 11.61 14.78 9.24 The average duration of the defined benefit plans obligations at the end of each reporting year are as follows: (B) Sensitivity analysis Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligations by the amounts shown below: Group Defined benefit obligations Decreased Increased by 1% by 1% RM’000 RM’000 2017 Discount rate (1% movement) Future salary growth (1% movement) Future mortality (1% movement) (43,681) 51,532 (30) 52,233 (43,886) 32 2016 Discount rate (1% movement) Future salary growth (1% movement) Future mortality (1% movement) (51,796) 47,190 (200) 40,214 (32,785) 204 The sensitivity analysis above have been determined based on a method that extrapolates the impact on net defined benefit obligations as a result of reasonable changes in key assumptions occurring at the end of each reporting year. 114
117. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The Financials pg. 10-287 25.OTHER LIABILITIES (CONT’D.) (b) The movements of provisions for commitments and contingencies are as follows: 2017 RM’000 Bank 2016 RM’000 2017 RM’000 2016 RM’000 At 1 January Addition Provisions written back during the financial year 35,507 6,446 – 36,616 – (1,109) 35,507 6,446 – 36,616 – (1,109) At 31 December 41,953 35,507 41,953 35,507 Future minimum lease payments RM’000 Future finance charges RM’000 Present value of finance lease liabilities RM’000 Basel II Pillar 3 pg. 288-351 Group (c) Finance lease liabilities of the Group are payable as follows: Group 2017 Less than one year Between one and five years 2016 Less than one year Between one and five years 69,886 242,320 (2,533) (19,114) 67,353 223,206 312,206 (21,647) 290,559 10,848 – (923) – 9,925 – 10,848 (923) 9,925 The Group leases certain computer equipment and software under finance lease. At the end of the lease term, the Group has 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. The movements in finance lease liabilities are as follows: Group 2017 RM’000 2016 RM’000 At 1 January Drawdown/(repayment), net 9,925 280,634 10,982 (1,057) At 31 December 290,559 9,925 115
118. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 26 .RECOURSE OBLIGATION ON LOANS AND FINANCING SOLD TO CAGAMAS Group 2017 RM’000 Bank 2016 RM’000 2017 RM’000 2016 RM’000 At 1 January Amount sold to Cagamas during the financial year Repayment forwarded Exchange differences 974,588 1,543,501 (974,588) – 1,174,345 – (186,026) (13,731) 974,588 1,543,501 (974,588) – 1,174,345 – (186,026) (13,731) At 31 December 1,543,501 974,588 1,543,501 974,588 Represented by: Sold directly to Cagamas 1,543,501 974,588 1,543,501 974,588 1,543,501 974,588 1,543,501 974,588 Based on the agreement, the Group and the Bank undertake to administer the loans and financing on behalf of Cagamas Berhad and to buy back any loans and financing which are regarded as defective based on pre-determined and agreed-upon prudential criteria with recourse against the originators. The loans and financing sold to Cagamas Berhad with recourse are mainly housing loans. 27.PROVISION FOR TAXATION AND ZAKAT Group Taxation Zakat Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 723,961 22,533 395,624 24,105 385,876 – 47,374 – 746,494 419,729 385,876 47,374 28.DEFERRED TAX Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 At 1 January Acquisition of subsidiaries Recognised in income statements, net (Note 46) Recognised in statements of other comprehensive income, net Insurance/takaful contract liabilities Exchange differences (152,518) (619) (130,945) 107,493 (5,900) 55,250 (220,231) – 42,014 83,343 (384) (57,260) (358,687) – (63,288) 105,905 – 1,057 (441,814) – 27,668 55,913 – (454) At 31 December (127,239) (152,518) (315,013) (358,687) Presented after appropriate offsetting as follows: Group Deferred tax assets Deferred tax liabilities Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 (859,318) 732,079 (930,344) 777,826 (315,013) – (358,687) – (127,239) (152,518) (315,013) (358,687) 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 income taxes relate to the same fiscal authority. 116
119. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The Financials pg. 10-287 28.DEFERRED TAX (CONT’D.) The components and movements of deferred tax assets and liabilities during the financial year prior to offsetting are as follows: Loan loss and allowances RM’000 AFS reserve, impairment losses on financial investments and amortisation of premium RM’000 Provision for liabilities RM’000 Other temporary differences RM’000 Basel II Pillar 3 pg. 288-351 Deferred tax assets of the Group: Total RM’000 As at 31 December 2017 (700) – 7,195 – (3,539) At 1 January 2017 Acquisition of subsidiaries Recognised in income statements Recognised in statements of other comprehensive income Exchange differences 2,956 At 31 December 2017 (120,220) – 11,424 113,033 (2,309) 1,928 (478,425) – (89,889) 2,995 15,047 (330,999) (619) (31,091) – 48,779 (930,344) (619) (102,361) 116,028 57,978 (550,272) (313,930) (859,318) As at 31 December 2016 At 1 January 2016 Recognised in income statements Recognised in statements of other comprehensive income Exchange differences At 31 December 2016 10,458 (15,086) – 3,928 (212,670) 10,220 83,365 (1,135) (487,413) 20,262 783 (12,057) (286,457) 6,065 – (50,607) (976,082) 21,461 84,148 (59,871) (700) (120,220) (478,425) (330,999) (930,344) Deferred tax liabilities of the Group: Unabsorbed capital allowance RM’000 AFS reserve and accretion of discounts RM’000 Provision for liabilities RM’000 Non-DPF unallocated surplus RM’000 Other temporary differences RM’000 Total RM’000 As at 31 December 2017 At 1 January 2017 Recognised in income statements Recognised in statements of other comprehensive income Insurance/takaful contract liabilities Exchange differences 109,100 (2,747) At 31 December 2017 108,630 38,413 (3,233) 495,367 92,902 732,079 At 1 January 2016 Recognised in income statements Recognised in statements of other comprehensive income Insurance/takaful contract liabilities Exchange differences 112,434 (3,340) 48,172 408 (11,733) (1,423) 454,288 46,565 152,690 (21,657) 755,851 20,553 (66) – (593) 1,899 – – (1,604) – 3,082 At 31 December 2016 109,100 (13,815) 502,752 – – 2,277 47,278 160 5,563 (5,900) (8,688) (13,815) 10,256 – – 326 502,752 6,034 (13,419) – – 132,511 (42,287) 777,826 (28,584) (679) – 3,357 (8,535) (5,900) (2,728) As at 31 December 2016 – – 6 (1,034) (384) 116 47,278 132,511 (805) (384) 2,611 777,826 117
120. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 28 .DEFERRED TAX (CONT’D.) The components and movements of deferred tax assets and liabilities during the financial year prior to offsetting are as follows (cont’d.): Deferred tax assets of the Bank: AFS reserve, impairment losses on financial investments and amortisation of premium RM’000 Provision for liabilities RM’000 Total RM’000 (144,309) – 105,905 – (292,421) (38,169) – 1,057 (436,730) (38,169) 105,905 1,057 (38,404) (329,533) (367,937) At 1 January 2016 Recognised in income statements Recognised in statements of other comprehensive income Exchange differences (200,211) – 55,913 (11) (334,014) 42,036 – (443) (534,225) 42,036 55,913 (454) At 31 December 2016 (144,309) (292,421) (436,730) As at 31 December 2017 At 1 January 2017 Recognised in income statements Recognised in statements of other comprehensive income Exchange differences At 31 December 2017 As at 31 December 2016 Deferred tax liabilities of the Bank: Unabsorbed capital allowance RM’000 Other temporary differences RM’000 Total RM’000 As at 31 December 2017 At 1 January 2017 Recognised in income statements At 31 December 2017 78,043 (25,119) – – 78,043 (25,119) 52,924 – 52,924 As at 31 December 2016 At 1 January 2016 Recognised in income statements At 31 December 2016 89,316 (11,273) 78,043 3,095 (3,095) 92,411 (14,368) – 78,043 Group 2017 RM’000 2016 RM’000 Unutilised tax losses Others 205,287 9 128,727 1 205,296 128,728 Deferred tax assets have not been recognised in respect of the following items: The above items are available for offsetting against future taxable profits of the respective subsidiaries in which those items arose. Deferred tax assets have not been recognised in respect of those items as they may not be used to offset taxable profits of other subsidiaries within the Group. They have arisen from subsidiaries that have past losses in which the deferred tax assets are recognised to the extent that future taxable profits will be available. 118
121. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Note Secured: (i)Borrowings – Less than one year Denominated in: – SGD – PHP – IDR – VND (ii) Medium Term Notes – More than one year Denominated in: – IDR Total secured borrowings – More than one year Denominated in: – USD – IDR – JPY 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 668 80 1,159,884 5,138 – 35 741,714 – – – – – – – – – 1,165,770 741,749 – – 236,302 – 1,982,846 – 171 2,348,667 – – – – – – 2,219,148 2,348,838 – – 74,588 83,251 – – 3,459,506 3,173,838 – – 4,272,752 1,616,118 121,905 30,788 1,232,326 3 – 193,671 6,358 2,533,470 5 5,380,539 994,982 285,567 362,598 824,493 – 33,536 466 13,240 517,000 – 3,861,646 – – – – – – 193,671 – 2,533,470 – 5,148,693 – 216,923 – – – – – – 517,000 – 10,007,396 8,412,421 6,588,787 5,882,616 3,746,250 519,091 1,970 5,607,500 233,562 2,424 3,746,250 – – 5,607,500 – – 4,267,311 5,843,486 3,746,250 5,607,500 (a) – More than one year Denominated in: – SGD – PHP – IDR Unsecured: (i)Borrowings – Less than one year Denominated in: – USD – SGD – HKD – IDR – THB – VND – PHP – EURO – INR – RM – JPY Bank Basel II Pillar 3 pg. 288-351 Group The Financials pg. 10-287 29.BORROWINGS (b) 119
122. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 29 .BORROWINGS (CONT’D.) Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 1,768,020 164,087 357,950 668,664 3,250 449,015 476,918 39 5,801 2,361,664 156,039 433,498 2,539,458 808 16,207 834,625 – – 1,768,020 164,087 357,950 668,664 3,250 449,015 476,918 39 5,801 2,361,664 156,039 433,498 2,539,458 808 16,207 834,625 – – 3,893,744 6,342,299 3,893,744 6,342,299 3,705,750 – 2,432,872 4,197,152 328,346 956,940 220,000 414,301 622,300 4,957,030 167,440 2,102,130 2,352,871 181,466 1,114,075 220,000 – – 3,705,750 – 2,432,872 4,197,152 328,346 956,940 220,000 414,301 622,300 4,957,030 167,440 2,102,130 2,352,871 181,466 1,114,075 220,000 – – 12,877,661 11,095,012 12,877,661 11,095,012 Total unsecured borrowings 31,046,112 31,693,218 27,106,442 28,927,427 Total borrowings 34,505,618 34,867,056 27,106,442 28,927,427 Note Unsecured (cont’d.): (ii) Medium Term Notes – Less than one year Denominated in: – USD – SGD – HKD – JPY – AUD – CNH – RM – CHF – CNY – More than one year Denominated in: – USD – SGD – HKD – JPY – AUD – CNH – RM – CHF – CNY The movements in the borrowings are as follows: Group Bank 2017 RM’000 2016 RM’000 At 1 January Drawdown/(repayment), net Non-cash changes: Others Exchange fluctuation 34,867,056 3,661,438 30,643,652 3,535,381 28,927,427 (76,897) 24,873,211 2,579,375 361,167 326,856 44,941 (1,789,029) 350,455 1,124,386 At 31 December 34,505,618 27,106,442 28,927,427 46,504 (4,069,380) 34,867,056 2017 RM’000 2016 RM’000 (a) Secured borrowings The secured borrowings are secured against the following collaterals: (i) Fiduciary transfer of the subsidiary’s receivables with an aggregate amount of not less than 50% to 110% of the total outstanding loan; (ii) Fiduciary transfer of the subsidiary’s receivables with day past due not more than 30 to 90 days; and (iii) Specific collaterals are as follows: (1) certain motor vehicles; and (2) land together with the buildings erected thereon and properties at 48 and 50 North Canal Road, Singapore. The interest rates of these borrowings range from 2.46% to 11.25% (2016: 6.50% to 13.00%) per annum ("p.a."). The tenor for these secured borrowings range from 1 month to 60 months (2016: 1 month to 71 months). 120
123. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The Financials pg. 10-287 29.BORROWINGS (CONT’D.) (a) Secured borrowings (cont'd.) These secured borrowings include the following bonds issued/redeemed by the subsidiaries of the Bank: PT Maybank Indonesia Finance Bonds II BII Finance Year 2013 – Series B Shelf Bonds I BII Finance Year 2015 – Tranche I – Series A – Series B Shelf Bonds I Maybank Finance Year 2016 – Tranche II – Series A – Series B – Tranche III – Series A – Series B Medium Term Notes VI Shelf Bonds I Maybank Finance Year 2017 – Tranche IV – Series A – Series B PT Wahana Ottomitra Multiartha Tbk Shelf Bonds I WOM Finance Year 2014 – Tranche I – Series B1 – Tranche II – Series B1 Issue date Maturity date Coupon rate (% p.a.) Nominal value 19-Jun-13 19-Jun-18 8.25 IDR525.0 billion 12-Nov-15 12-Nov-15 12-Nov-18 12-Nov-20 10.35 10.90 IDR300.0 billion IDR200.0 billion 13-Apr-16 13-Apr-16 13-Apr-19 13-Apr-21 9.10 9.35 IDR750.0 billion IDR350.0 billion 3-Nov-16 3-Nov-16 3-Nov-19 3-Nov-21 8.30 8.80 IDR800.0 billion IDR300.0 billion 4-Aug-16 4-Aug-19 8.75 IDR250.0 billion 15-Nov-17 15-Nov-17 15-Nov-20 15-Nov-22 7.65 7.90 IDR1,150.0 billion IDR50.0 billion 25-Jun-14 25-Jun-17 11.00 IDR203.0 billion 5-Dec-14 5-Dec-17 11.25 IDR500.0 billion Shelf Bonds I WOM Finance Year 2015 – Tranche III – Series B – Tranche IV – Series B 2-Apr-15 2-Apr-18 10.25 IDR860.0 billion 22-Dec-15 22-Dec-18 10.80 IDR397.0 billion Shelf Bonds II WOM Finance Year 2016 – Tranche I – Series A1 – Series B 24-Jun-16 24-Jun-16 4-Jul-17 24-Jun-19 8.50 9.50 IDR442.0 billion IDR223.0 billion 22-Aug-17 22-Aug-17 1-Sep-18 22-Aug-20 7.80 8.90 IDR400.0 billion IDR320.5 billion 6-Dec-17 6-Dec-17 16-Dec-18 6-Dec-20 7.15 8.45 IDR601.5 billion IDR266.0 billion Shelf Bonds II WOM Finance Year 2017 – Tranche II – Series A – Series B – Tranche III – Series A – Series B 1 Basel II Pillar 3 pg. 288-351 Description Fully redeemed during the financial year ended 31 December 2017. 121
124. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 29 .BORROWINGS (CONT’D.) (b) Unsecured borrowings The unsecured borrowings include term loans, commercial papers ("CP"), medium term notes ("MTN") and overdrafts denominated in multi-currencies. The interest rates of these unsecured borrowings range from 0.33% to 8.65% (2016: 0.15% to 11.35%) per annum ("p.a."). These unsecured borrowings include the following medium term notes/sukuk issued/redeemed by the Group and the Bank: Description Issue date Maturity date 30-Apr-15 30-Apr-15 27-Apr-18 30-Apr-20 0.397 0.509 JPY18,500.0 million JPY12,800.0 million 24-Jul-17 24-Jul-20 4.60 CNY1,000.0 million USD2.0 billion Multicurrency MTN Programme USD Fixed rate notes1 HKD Fixed rate notes1 JPY Fixed rate notes 10-Feb-12 1-Mar-12 22-Dec-11 10-Feb-17 1-Mar-17 22-Dec-26 3.00 2.85 2.50 USD400.0 million HKD700.0 million JPY10,000.0 million USD15.0 billion Multicurrency MTN Programme USD Fixed rate notes USD Floating rate notes1 USD Fixed rate notes USD Fixed rate notes USD Callable zero coupon notes2 USD Callable zero coupon notes3 USD Floating rate notes USD Floating rate notes USD Floating rate notes1 USD Floating rate notes USD Floating rate notes USD Floating rate notes USD Fixed rate notes USD Floating rate notes USD Floating rate notes SGD Fixed rate notes1 SGD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes HKD Fixed rate notes JPY Fixed rate notes1 JPY Fixed rate notes JPY Fixed rate notes1 JPY Fixed rate notes JPY Fixed rate notes JPY Fixed rate notes JPY Fixed rate notes 15-May-13 12-May-14 20-May-14 18-Jun-14 28-Nov-14 7-Jul-15 16-May-16 8-Jun-16 1-Aug-16 1-Sep-16 9-Dec-16 5-May-17 17-May-17 19-Sep-17 25-Sep-17 10-Apr-15 26-Jun-15 20-Jul-12 27-Jun-14 15-Aug-14 10-Nov-14 20-Nov-15 22-Jan-16 13-May-16 8-Jun-16 2-Aug-16 12-Oct-16 2-Jun-17 2-Jun-17 3-Oct-17 30-May-12 6-Feb-14 22-May-14 21-Aug-14 8-Jun-17 5-Jul-17 7-Aug-17 15-May-18 12-May-17 20-May-19 18-Jun-29 28-Nov-44 7-Jul-45 16-May-19 8-Jun-21 1-Aug-17 3-Sep-19 9-Jun-18 5-Nov-18 17-May-22 19-Mar-19 26-Sep-22 10-Apr-17 26-Jun-18 20-Jul-22 27-Jun-19 15-Aug-24 10-Nov-19 20-Nov-18 22-Jan-18 13-May-21 8-Jun-19 2-Aug-19 12-Oct-21 22-May-20 25-May-22 3-Oct-22 30-May-17 6-Feb-19 22-May-17 21-Aug-19 8-Jun-22 5-Jul-22 7-Aug-20 1.76 3-month USD LIBOR + 0.64 2.56 4.23 – – 3-month USD LIBOR + 0.85 3-month USD LIBOR + 1.13 3-month USD LIBOR + 0.30 3-month USD LIBOR + 0.85 3-month USD LIBOR + 0.50 3-month USD LIBOR + 0.50 2.82 3-month USD LIBOR + 0.50 3-month USD LIBOR + 0.79 1.85 2.08 3.25 2.55 3.35 2.40 2.15 1.77 2.66 2.09 1.80 2.05 1.845 2.295 2.40 0.85 0.669 0.4375 0.52 0.20 0.21 0.19 Malayan Banking Berhad Samurai Bonds Panda Bonds 122 Coupon/profit rate (% p.a.) Nominal value USD200.0 USD50.0 USD50.0 USD45.0 USD500.0 USD160.0 USD30.0 USD20.0 USD20.0 USD20.0 USD80.0 USD70.0 USD50.0 USD20.0 USD20.0 SGD50.0 SGD54.0 HKD600.0 HKD284.0 HKD707.0 HKD310.0 HKD435.0 HKD200.0 HKD300.0 HKD220.0 HKD200.0 HKD378.0 HKD200.0 HKD909.0 HKD624.0 JPY5,000.0 JPY30,000.0 JPY31,100.0 JPY20,000.0 JPY22,000.0 JPY2,000.0 JPY20,000.0 million million million million million million million million million million million million million million million million million million million million million million million million million million million million million million million million million million million million million
125. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The Financials pg. 10-287 29.BORROWINGS (CONT’D.) (b) Unsecured borrowings (cont’d.) These unsecured borrowings include the following medium term notes/sukuk issued/redeemed by the Group and the Bank (cont’d.): Issue date Maturity date Coupon/profit rate (% p.a.) Nominal value Malayan Banking Berhad (cont’d.) USD15.0 billion Multicurrency MTN Programme (cont’d.) AUD Floating rate notes 5-May-14 AUD Collared floating rate notes 31-Mar-17 AUD Collared floating rate notes 18-Apr-17 AUD Collared floating rate notes 18-Jul-17 AUD Collared floating rate notes 30-Nov-17 CNH Fixed rate notes 5-Mar-15 CNH Fixed rate notes 11-Aug-15 CNH Fixed rate notes 27-Apr-16 CNH Fixed rate notes 27-Apr-16 CNH Fixed rate notes 18-Jul-16 CNH Fixed rate notes 19-Jul-16 CNH Fixed rate notes 2-Nov-17 CHF Zero coupon notes 2-Aug-17 5-May-19 31-Mar-22 18-Apr-22 18-Jul-22 30-Nov-22 5-Mar-20 11-Aug-18 27-Apr-18 27-Apr-18 18-Jul-19 19-Jul-19 2-Nov-20 2-Aug-21 3-month BBSW + 1.20 See footnote 4 See footnote 5 See footnote 6 See footnote 7 4.12 4.10 4.05 4.05 4.00 4.00 4.50 – AUD56.0 AUD12.0 AUD12.0 AUD12.0 AUD12.0 CNH410.0 CNH323.0 CNH180.0 CNH190.0 CNH500.0 CNH130.0 CNH500.0 CHF100.0 million million million million million million million million million million million million million RM10.0 billion Senior MTN Programme Callable fixed rate notes8 Zero coupon notes1 Zero coupon notes1 Zero coupon notes1 Zero coupon notes1 24-Nov-15 20-Jun-16 29-Jul-16 4-Aug-16 11-Aug-16 24-Nov-25 20-Jul-17 31-Jul-17 4-Aug-17 11-Aug-17 4.65 – – – – RM220.0 RM200.0 RM200.0 RM200.0 RM200.0 million million million million million RM10.0 billion Commercial Paper/Medium Term Note Programme Zero coupon medium term notes Zero coupon medium term notes Zero coupon medium term notes Zero coupon medium term notes Zero coupon medium term notes Zero coupon medium term notes Zero coupon medium term notes Zero coupon medium term notes Zero coupon medium term notes Zero coupon medium term notes 7-Mar-17 22-Mar-17 7-Jun-17 14-Jun-17 25-Jul-17 1-Aug-17 8-Aug-17 17-Aug-17 3-Oct-17 4-Oct-17 8-Mar-18 22-Mar-18 7-Jun-18 14-Jun-18 26-Jul-18 8-Aug-18 8-Aug-18 17-Aug-18 4-Oct-18 9-Oct-18 – – – – – – – – – – RM60.0 RM44.1 RM43.0 RM35.0 RM15.0 RM21.0 RM22.0 RM200.0 RM19.0 RM17.0 million million million million million million million million million million Basel II Pillar 3 pg. 288-351 Description 123
126. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 29 .BORROWINGS (CONT’D.) (b) Unsecured borrowings (cont’d.) These unsecured borrowings include the following medium term notes/sukuk issued/redeemed by the Group and the Bank (cont’d.): Description Issue date Maturity date PT Bank Maybank Indonesia Tbk Shelf Bonds I Bank BII Year 2012 – Tranche II – Series B1 31-Oct-12 31-Oct-17 8.00 IDR1,020.0 billion 8-Jul-14 8-Jul-17 9.35 IDR300.0 billion Shelf Sukuk Mudharabah II Bank Maybank Indonesia Year 2016 – Tranche II 10-Jun-16 10-Jun-19 8.25 IDR700.0 billion Shelf Bonds II Bank Maybank Indonesia Year 2017 – Tranche I – Series A – Series B – Series C 11-Jul-17 11-Jul-17 11-Jul-17 11-Jul-22 11-Jul-24 11-Jul-27 8.00 8.50 8.65 IDR435.0 billion IDR300.0 billion IDR100.0 billion Shelf Sukuk Mudharabah II Bank Maybank Indonesia Year 2017 – Tranche I 11-Jul-17 11-Jul-20 7.85 IDR266.0 billion Shelf Sukuk Mudharabah I Bank BII Year 2014 – Tranche I1 Coupon/profit rate (% p.a.) Nominal value 1 Fully redeemed during the financial year ended 31 December 2017. The Bank may redeem all (and not some only) of the notes on 28 November 2019 (“First Redemption Date”) and each 28 November after the First Redemption Date up to 28 November 2043. 3 The Bank may redeem all (and not some only) of the notes on 7 July 2020 (“First Redemption Date”) and each 7 July after the First Redemption Date up to 7 July 2044. 4 (i) Period from and including the Issue Date up to but excluding 31 March 2018: 2.96% payable annually in arrear if the 3-month AUD BBSW is less than or equal to the barrier of 3.50% p.a., or 1.48% payable annually in arrear if the 3-month AUD BBSW is more than the barrier of 3.50% p.a. (ii) Period from and including 31 March 2018 up to but excluding the last interest payment date falling on or about 31 March 2022: 3-month AUD BBSW + 1.00% Floating Rate, payable quarterly in arrear. 5(i)Period from and including the Issue Date up to but excluding 18 April 2018: 2.98% payable annually in arrear if the 3-month AUD BBSW is less than or equal to the barrier of 3.50% p.a., or 1.49% payable annually in arrear if the 3-month AUD BBSW is more than the barrier of 3.50% p.a. (ii) Period from and including 18 April 2018 up to but excluding the last interest payment date falling on or about 18 April 2022: 3-month AUD BBSW + 1.00% Floating Rate, payable quarterly in arrear. 6(i)Period from and including the Issue Date up to but excluding 18 July 2018: 2.85% payable annually in arrear if the 3-month AUD BBSW is less than or equal to the barrier of 3.00% p.a., or 1.425% payable annually in arrear if the 3-month AUD BBSW is more than the barrier of 3.00% p.a. (ii) Period from and including 18 July 2018 up to but excluding the last interest payment date falling on or about 18 July 2022: 3-month AUD BBSW + 1.00% Floating Rate, payable quarterly in arrear. 7(i)Period from and including the Issue Date up to but excluding 30 November 2018: 2.90% payable annually in arrear if the 3-month AUD BBSW is less than or equal to the barrier of 3.00% p.a., or 1.45% payable annually in arrear if the 3-month AUD BBSW is more than the barrier of 3.00% p.a. (ii) Period from and including 30 November 2018 up to but excluding the last interest payment date falling on or about 30 November 2022: 3-month AUD BBSW + 1.00% Foating Rate, payable quarterly in arrear. 8 The Bank may redeem these senior notes, in whole or in part, on 26 November 2018 (“First Call Date”) and on each coupon payment after the First Call Date. 2 Additionally, the aggregate nominal value of the commercial papers issued by the Bank and outstanding as at 31 December 2017 are as follows: Description Malayan Banking Berhad USD5.0 billion Euro-Commercial Paper Programme USD500.0 million U.S. Commercial Paper Programme RM10.0 billion Commercial Paper/Medium Term Note Programme 124 Tenor 182 – 186 days 32 – 278 days 174 – 365 days Nominal value (RM) 801.1 million 2,023.8 million 2,562.8 million
127. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS RM250.0 million subordinated notes due in 2023 RM2,100.0 million subordinated notes due in 2024 RM1,600.0 million subordinated notes due in 2024 RM2,200.0 million subordinated notes due in 2025 RM1,100.0 million subordinated notes due in 2025 USD800.0 million subordinated notes due in 2022 USD500.0 million subordinated notes due in 2026 RM500.0 million subordinated notes due in 2023 RM300.0 million subordinated sukuk due in 2024 IDR1.5 trillion BMI subordinated bond due in 2018 IDR500.0 billion BMI subordinated bond due in 2018 IDR1.0 trillion BMI subordinated bond due in 2019 IDR1.5 trillion BMI subordinated bonds due in 2021 IDR800.0 billion BMI subordinated bonds due in 2023 RM1,500.0 million subordinated sukuk due in 2024 Bank Note 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) (xv) 245,122 2,112,715 1,627,964 2,221,855 1,109,435 – 2,035,330 510,119 301,189 387,666 150,218 303,037 67,221 98,796 808,656 245,181 2,112,715 1,628,425 2,221,855 1,109,382 3,617,331 2,257,968 510,120 301,189 431,718 167,676 338,374 75,057 110,334 773,381 250,113 2,112,715 1,633,078 2,221,855 1,109,435 – 2,035,330 – – – – – – – – 250,113 2,112,715 1,633,508 2,221,855 1,109,382 3,617,331 2,257,968 – – – – – – – – 11,979,323 15,900,706 9,362,526 13,202,872 Basel II Pillar 3 pg. 288-351 Group The Financials pg. 10-287 30.SUBORDINATED OBLIGATIONS The movements in the subordinated obligations are as follows: Group 2017 RM’000 Bank 2016 RM’000 2017 RM’000 2016 RM’000 At 1 January Issuance during the financial year Redemption during the financial year Non-cash changes: Others Exchange fluctuation 15,900,706 35,000 (3,240,000) 20,252,116 2,243,000 (6,850,743) 13,202,872 – (3,240,000) 16,750,738 2,243,000 (5,850,743) (36,200) (680,183) (167,200) 423,533 (34,619) (565,727) (158,052) 217,929 At 31 December 11,979,323 15,900,706 9,362,526 13,202,872 125
128. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 30 .SUBORDINATED OBLIGATIONS (CONT’D.) Note Description Coupon/Profit rate (% p.a.) Issue date First call date Maturity date (i) Malayan Banking Berhad RM3.0 billion Subordinated Note Programme RM Subordinated notes1 28-Dec-11 28-Dec-18 28-Dec-23 4.12 (ii) (iii) (iv) (v) RM20.0 billion Subordinated Note Programme RM Subordinated notes1 RM Subordinated notes2, 7 RM Subordinated notes2, 7 RM Subordinated notes2, 7 10-May-12 29-Jan-14 19-Oct-15 27-Oct-15 10-May-19 29-Jan-19 19-Oct-20 27-Oct-20 10-May-24 29-Jan-24 17-Oct-25 27-Oct-25 4.25 4.90 4.90 4.90 (vi) (vii) USD15.0 billion Multicurrency MTN Programme USD Subordinated notes3 USD Subordinated notes4, 7 20-Sep-12 29-Apr-16 20-Sep-17 29-Oct-21 20-Sep-22 29-Oct-26 3.25 3.905 USD800.0 million USD500.0 million (viii) Etiqa Insurance Berhad RM Subordinated notes6 5-Jul-13 5-Jul-18 5-Jul-23 4.13 RM500.0 million (ix) Etiqa Takaful Berhad RM Subordinated Sukuk Musyarakah5 30-May-14 30-May-19 30-May-24 4.52 RM300.0 million 19-May-11 – 19-May-18 10.75 IDR1,500.0 billion 6-Dec-11 – 6-Dec-18 10.00 IDR500.0 billion 31-Oct-12 – 31-Oct-19 9.25 IDR1,000.0 billion 8-Jul-14 – 8-Jul-21 11.35 IDR1,500.0 billion 10-Jun-16 – 10-Jun-23 9.625 IDR800.0 billion Maybank Islamic Berhad RM10.0 billion Subordinated Sukuk Murabahah Programme 7-Apr-14 RM Subordinated Sukuk Murabahah5, 7 5-Apr-19 5-Apr-24 4.75 RM1,500.0 million (x) (xi) (xii) (xiii) (xiv) (xv) PT Bank Maybank Indonesia Tbk Subordinated Bonds I Bank BII Year 2011 Shelf Subordinated Bonds I Bank BII Year 2011 – Tranche I Shelf Subordinated Bonds I Bank BII Year 2012 – Tranche II Shelf Subordinated Bonds II Bank BII Year 2014 – Tranche I Shelf Subordinated Bonds II Bank Indonesia Year 2016 – Tranche II Nominal value RM250.0 million RM2,100.0 RM1,600.0 RM2,200.0 RM1,100.0 million million million million 1 The Bank may, subject to the prior consent of BNM, redeem these subordinated notes, in whole but not in part on the first call date and on each interest payment date thereafter. 2 The Bank may, subject to the prior consent of BNM, redeem these subordinated notes, in whole or in part on the first call date and on each interest payment date thereafter. 3 These subordinated notes were fully redeemed on 20 September 2017. 4 The Bank may, subject to the prior consent of BNM, redeem these subordinated notes, in whole or in part, on 29 October 2021 (the “Optional Redemption Date”). Should the Bank decide not to exercise its call option, the rate of interest payable on these subordinated notes from the Optional Redemption Date up to, and including, the maturity date will be reset to the prevailing 5-year U.S. Dollar mid swap rate plus the initial spread per annum. 5 The subsidiary may, subject to the prior consent of BNM, redeem these subordinated notes/sukuk, in whole or in part, on the first call date and on each interest/ profit payment date thereafter. 6 The subsidiary may, subject to the prior consent of BNM, redeem these subordinated notes, in whole but not in part, on the first call date and on each interest payment date thereafter. 7 These subordinated note/sukuk are Basel III – Compliant. 126 All the subordinated instruments above constitute unsecured liabilities of the Group and of the Bank and are subordinated to the senior indebtedness of the Group and of the Bank in accordance with the respective terms and conditions of their issues.
129. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Description Malayan Banking Berhad RM3,500 million 6.85% Stapled Capital Securities (Note (a)) Less: Transaction costs First call date Maturity date 27-Jun-08 27-Jun-18 27-Jun-38 2017 RM’000 Bank 2016 RM’000 2017 RM’000 2016 RM’000 63,059 (3) 63,059 (9) 63,059 (3) 63,059 (9) 63,056 63,050 63,056 63,050 Basel II Pillar 3 pg. 288-351 Group Issue date The Financials pg. 10-287 31.CAPITAL SECURITIES RM4.0 billion Innovative Tier 1 Capital Securities (“IT1CS”) Programme SGD600.0 million 6.00% IT1CS1, 2, 4 RM1,100.0 million 6.30% IT1CS1, 3 Less: Transaction costs 11-Aug-08 25-Sep-08 11-Aug-18 25-Sep-18 10-Aug-68 25-Sep-68 1,611,995 1,118,607 (398) 1,649,898 1,092,484 (1,631) 1,611,995 1,118,607 (398) 1,649,898 1,118,417 (1,631) 2,730,204 2,740,751 2,730,204 2,766,684 3,556,921 (66,001) 3,500,000 (103,808) 3,556,921 (66,001) 3,500,000 (103,808) 3,490,920 3,396,192 3,490,920 3,396,192 6,284,180 6,199,993 6,284,180 6,225,926 RM10.0 billion Additional Tier 1 Capital Securities (“AT1CS”) Programme RM3,500 million 5.30% AT1CS5 Less: Transaction costs 1 2 3 4 5 10-Sep-14 10-Sep-19 Perpetual (10th) The Bank may, subject to the prior consent of BNM, redeem the IT1CS on the tenth anniversary of the issue date and on any interest payment date thereafter. On the 10th anniversary of the issue date, there will be a step-up in the interest rate to a floating rate, reset quarterly, at the initial credit spread plus one hundred (100) basis points above the three (3) months SGD Swap Offer Rate. On the 10th anniversary of the issue date, there will be a step-up in the interest rate to a floating rate, reset quarterly, at the initial credit spread plus one hundred (100) basis points above the Kuala Lumpur Inter-Bank Offer Rate for 3-month RM deposits. On 21 January 2015, the Bank had purchased SGD78.0 million out of the SGD600.0 million IT1CS through a private treaty arrangement. The SGD78.0 million IT1CS bought back was cancelled on 28 January 2015. The Bank may, subject to the prior consent of BNM, redeem AT1CS, in whole or in part, on the first call date and on every coupon payment date thereafter. This AT1CS is Basel III-compliant. (a)NCPCS On 27 June 2008, the Bank issued RM3.5 billion securities in nominal value comprising: The NCPCS are issued in perpetuity unless redeemed under the terms of the NCPCS. The NCPCS are redeemable at the option of the Bank on the twentieth (20th) interest payment date or ten (10) years from the issuance date of the Sub-Notes, or any NCPCS distribution date thereafter, subject to redemption conditions being satisfied. The Sub-Notes have a tenor of thirty (30) years unless redeemed earlier under the terms of the Sub-Notes. The Sub-Notes are redeemable at the option of CMB on any interest payment date, which cannot be earlier than the occurrence of an assignment event, subject to redemption conditions being satisfied. The Stapled Capital Securities comply with BNM Guidelines on Non-Innovative Tier 1 capital instruments. They constitute unsecured and subordinated obligations of the Group. Claims in respect of the NCPCS rank pari passu and without preference among themselves, other Tier 1 capital securities of the Bank and with the most junior class of preference shares of the Bank but in priority to the rights and claims of the ordinary shareholders of the Bank. The Sub-Notes rank pari passu and without preference among themselves and with the most junior class of notes or preference shares of CMB. An “assignment event” means the occurrence of any of the following events: (a) Non-Cumulative Perpetual Capital Securities (“NCPCS”), which are issued by the Bank and stapled to the Subordinated Notes described below; and (b) Subordinated Notes (“Sub-Notes”), which are issued by Cekap Mentari Berhad (“CMB”), a wholly-owned subsidiary of the Bank. (collectively known as “Stapled Capital Securities”). Until an assignment event occurs, the Stapled Capital Securities cannot be transferred, dealt with or traded separately. Upon occurrence of an assignment event, the Stapled Capital Securities will unstaple, leaving the investors to hold only the NCPCS while ownership of the Sub-Notes will be re-assigned to the Bank pursuant to a forward purchase contract entered into by the Bank. Unless there is an earlier occurrence of any other events stated under the terms of the Stapled Capital Securities, the assignment event would occur on the twentieth (20th) interest payment date or ten (10) years from the issuance date of the Sub-Notes. Each of the NCPCS and Sub-Notes has a fixed interest rate of 6.85% per annum. However, the NCPCS distribution will not begin to accrue until the Sub-Notes are re-assigned to the Bank as referred to above. Thus effectively, the Stapled Capital Securities are issued by the Bank at a fixed rate of 6.85% per annum. Interest is payable semi-annually in arrears. (a) The Bank is in breach of BNM’s minimum capital adequacy ratio requirements applicable to the Bank; or (b) Commencement of a winding-up proceeding in respect of the Bank or CMB; or 127
130. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 31 .CAPITAL SECURITIES (CONT’D.) (a) NCPCS (cont’d.) (c) Appointment of an administrator in connection with a restructuring of the Bank; or (d) Occurrence of a default of the NCPCS distribution payments or Sub-Notes interest payments; or (e) CMB ceases to be, directly or indirectly, a wholly-owned subsidiary of the Bank; or (f) BNM requires that an assignment event occurs; or (g) The Bank elects that an assignment event occurs; or (h) The twentieth (20th) Interest Payment Date of the Sub-Notes; or (i) Sixty (60) days after a regulatory event (means at any time there is more than an insubstantial risk, as determined by the Bank, that the NCPCS will no longer qualify as Non-Innovative Tier 1 capital of the Bank for the purposes of BNM’s capital adequacy requirements under any applicable regulations) has occurred, subject to such regulatory event continuing to exist at the end of such sixty (60) days; or (j) Any deferral of interest payment of the Sub-Notes; or (k) Thirty (30) years from the issue date of the Sub-Notes. In addition to the modes of redemption, the NCPCS and the Sub-Notes can be redeemed in the following circumstances: (a) If the NCPCS and the Sub-Notes were issued for the purpose of funding a merger or acquisition which is subsequently aborted, at the option of the Bank and CMB subject to BNM’s prior approval; (b) At any time if there is more than an insubstantial risk in relation to changes in applicable tax regulations, as determined by the Bank or CMB, that could result in the Bank or CMB paying additional amounts or will no longer be able to deduct interest in respect of the SubNotes or the inter-company loan (between the Bank and CMB) for taxation purposes; and (c) At any time if there is more than an insubstantial risk in relation to changes in applicable regulatory capital requirements, as determined by the Bank or CMB, that could disqualify the NCPCS to be regarded as part of Non-Innovative Tier 1 capital for the purpose of regulatory capital requirements. On 10 September 2014, the Bank had completed a partial redemption of RM3,437.0 million in nominal value. The movements in capital securities are as follows: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 At 1 January Non-cash changes: Others Exchange fluctuation 6,199,993 6,049,375 6,225,926 6,212,597 82,324 1,863 80,327 70,291 56,391 1,863 At 31 December 6,284,180 6,199,993 6,284,180 6,225,926 (56,962) 70,291 32.SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST Group and Bank Issued and fully paid ordinary shares: At 1 January Transfer from share premium Shares issued under the: – Dividend Reinvestment Plan (“DRP”) issued on: – 1 November 2017 – 6 June 2017 – 25 October 2016 – 3 June 2016 – Maybank Group Employees’ Share Scheme (“ESS”): – Employee Share Option Scheme (“ESOS”) – Restricted Share Unit (“RSU”) – Supplemental Restricted Share Unit (“SRSU”) – Shares held-in-trust At 31 December 128 2017 ’000 2016 ’000 2017 RM’000 2016 RM’000 10,193,200 – 9,761,751 – 10,193,200 28,878,703 9,761,751 – 181,677 243,600 – – – – 184,372 235,139 1,634,777 2,009,409 – – – – 184,372 235,139 154,648 4,099 110 5,411 8,598 3,156 184 – 1,445,239 38,118 935 49,999 8,598 3,156 184 – 10,782,745 10,193,200 44,250,380 10,193,200
131. 32 .SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) Whenever a cash dividend (either an interim, final, special or other dividend) is announced, the Board may, in its absolute discretion, determine that the DRP will apply to the whole or a portion of the cash dividend (“Electable Portion”) and where applicable any remaining portion of the dividend will be paid in cash; and (a) Increase in share capital During the current financial year ended 31 December 2017, the Bank increased its share capital from RM10,193,199,917 to RM44,250,380,043 via: (i) Transfer of share premium amounting to RM28,878,703,017 to share capital pursuant to Companies Act 2016; (iv) Each shareholder has the following options in respect of the Electable Portion: (1) elect to receive the Electable Portion in cash; or (ii) Issuance of 154,648,300 new ordinary shares amounting to RM1,445,238,920 to eligible persons who exercised their share options under the ESS, as disclosed in Note 32(d)(ii); (iii) Issuance of 4,098,732 new ordinary shares amounting to RM38,118,208 arising from the Restricted Share Unit (“RSU”), as disclosed in Note 32(e)(i); (iv) Issuance of 110,000 new ordinary shares amounting to RM935,000 arising from the Supplemental Restricted Share Unit (“SRSU”), as disclosed in Note 32(e)(vii); (v) Issuance of 5,411,200 new ordinary shares amounting to RM49,999,488 to be held in the ESOS Trust Fund (“ETF”) Pool, as disclosed in Note 32(c)(v); (vi) Issuance of 243,599,777 new ordinary shares (including 539,678 new ordinary shares issued to ESOS Trust Fund (“ETF”) Pool) amounting to RM2,009,408,832 arising from the DRP relating to electable portion of the final dividend of 22 sen per ordinary share in respect of the financial year ended 31 December 2016, as disclosed in Note 50(c)(i); and (vii) Issuance of 181,677,352 new ordinary shares (including 408,244 new ordinary shares issued to ETF Pool) amounting to RM1,634,776,661 arising from the DRP relating to electable portion of the interim dividend of 18 sen per ordinary share in respect of the financial year ended 31 December 2017, as disclosed in Note 50(c)(ii). (b) Dividend Reinvestment Plan (“DRP”) Maybank via the announcement on 25 March 2010 proposed to undertake a recurrent and optional dividend reinvestment plan that allows shareholders of Maybank (“shareholders”) to reinvest their dividend into new ordinary share(s) in Maybank (“Maybank Shares”) (collectively known as the Dividend Reinvestment Plan (“DRP”)). The rationale of Maybank embarking on the DRP are as follows: (i) To enhance and maximise shareholders’ value via the subscription of new Maybank Shares where the issue price of a new Maybank Share shall be at a discount; (ii) To provide the shareholders with greater flexibility in meeting their investment objectives, as they would have the choice of receiving cash or reinvesting in the Bank through subscription of additional Maybank Shares without having to incur material transaction or other related costs; (iii) To benefit from the participation by shareholders in the DRP to the extent that if the shareholders elect to reinvest into new Maybank Shares, the cash which would otherwise be payable by way of dividend will be reinvested to fund the continuing business growth of the Group. The DRP will not only enlarge Maybank’s share capital base and strengthen its capital position, but will also add liquidity of Maybank Shares on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”). (2) elect to reinvest the entire Electable Portion into new Maybank Shares credited as fully paid-up at an issue price to be determined on a price fixing date subsequent to the receipt of all relevant regulatory approvals. Our Performance pg. 4-8 The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS (c) Maybank Group Employees’ Share Scheme (“ESS”) and Cash-settled Performance-based Employees’ Share Scheme (“CESS”) The Maybank Group Employees’ Share Scheme (“ESS”) is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held on 13 June 2011. The ESS was implemented on 23 June 2011. It is in force for a maximum period of seven (7) years from the effective date and is administered by the ESS Committee. The ESS consists of two (2) types of performance-based awards in the form of Employee Share Option Scheme (“ESOS”) and Restricted Share Unit (“RSU”). The Maybank Group Cash-settled Performance-based Employees’ Share Scheme (“CESS”) is governed by the guidelines approved by the members of the ESS Committee on 15 June 2011. The maximum number of ordinary shares in the Bank available under the ESS should not exceed 10% of the total number of issued and paid-up capital of the Bank at any point of time during the duration of the scheme. The aggregate maximum allocation of share options under ESS to Chief Executive Officer and senior management of the Group and of the Bank shall not exceed 50% of the maximum Allowable Scheme Shares. The actual allocation of share options to Chief Executive Officer and senior management is 19.4% as at 31 December 2017 (2016: 20.2%). Other principal features of the ESS are as follows: (i) The employees eligible to participate in the ESS must be employed on a full time basis and on the payroll of the Participating Maybank Group and is confirmed in service. Participating Maybank Group includes the Bank and its overseas branches and subsidiaries which include PT Bank Maybank Indonesia Tbk, but excluding listed subsidiaries, overseas subsidiaries and dormant subsidiaries. (ii) The entitlement under the ESS for the Executive Directors, including any persons connected to the directors, is subject to the approval of the shareholders of the Bank in a general meeting. 129
132. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 32 .SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) (c) Maybank Group Employees’ Share Scheme (“ESS”) and Cash-settled Performance-based Employees’ Share Scheme (“CESS”) (cont’d.) (iii) The ESS shall be valid for a period of seven (7) years from the effective date. Notwithstanding the above, the Bank may terminate the ESS at any time during the duration of the scheme subject to: • consent of Maybank’s shareholders at a general meeting, wherein at least a majority of the shareholders, present and voting, vote in favour of termination; and • written consent of all participants of ESS who have yet to exercise their ESS option, either in part or in whole, and all participants whose Restricted Shares Unit (“RSU”) Agreement are still subsisting. Upon the termination of the ESS, all unexercised ESS and/or unvested RSU shall be deemed to have been cancelled and be null and void. (iv) ESS consists of Employee Share Option Scheme (“ESOS”) and Restricted Shares Unit (“RSU”). (1)ESOS Under the ESOS award, the Bank may from time to time within the offer period, offer to eligible employees a certain number of options at the Offer Date. Subject to acceptance, the participants will be granted the ESOS options which can then be exercised within a period of five (5) years to subscribe for fully paid-up ordinary shares in the Bank, provided all the conditions including performance-related conditions are duly and fully satisfied. (2)RSU Under the RSU award, the Bank may from time to time within the offer period, invite selected participants to enter into an agreement with the Bank, whereupon the Bank shall agree to award the scheme’s shares to the participants, subject to fulfilling the relevant service and performance objectives and provided all performancerelated conditions are duly and fully satisfied. The scheme’s shares as specified under the RSU award will only vest based on a three (3) years cliff vesting schedule or a two (2) years cliff vesting schedule in the case of supplemental RSU award, provided all the RSU vesting conditions are fully and duly satisfied. (v) Key features of the ESOS award are as follows: (1) On 23 June 2011, the Bank originally granted five (5) tranches of ESOS amounting to 405,308,500 options based on the assumption that the eligible employees met the average performance target (“ESOS First Grant”). The first tranche of ESOS under ESOS First Grant amounting to 80,871,000 options have been vested and exercisable as at 30 June 2011. The second tranche of ESOS under ESOS First Grant amounting to 42,136,100 options have been vested and exercisable as at 30 April 2012. The third tranche of ESOS under ESOS First Grant amounting to 78,885,100 options have been vested and exercisable as at 30 April 2013. The fourth tranche of ESOS under ESOS First Grant amounting to 74,253,400 130 options have been vested and exercisable as at 30 April 2014. The Bank also vested 600 options for appeal cases for fourth tranche of ESOS First Grant in the previous financial year ended 31 December 2015. The fifth tranche of ESOS under ESOS First Grant amounting to 69,854,500 options have been vested and exercisable as at 30 April 2015. On 10 August 2015, ESS Committee approved the vesting of an additional sixth tranche of ESOS under ESOS First Grant amounting to 34,951,500 options effective on 30 September 2015. The sixth tranche is awarded to the eligible employees after taking into consideration the change in the financial year end from 30 June to 31 December, where the second tranche of ESOS was brought forward and prorated based on six months. The ESOS quantum allotted under the sixth tranche is prorated based on six months period. In the previous financial year ended 31 December 2016, the Bank vested 5,600 options and 3,000 options for appeal cases for fifth and sixth tranche of ESOS First Grant. On 29 April 2017, the second tranche of ESOS under ESOS First Grant amounting to 3,260,000 options have expired. (2) On 30 April 2012, the Bank granted five (5) tranches of ESOS amounting to 62,339,000 options to confirmed new recruits in the Group (“ESOS Second Grant”). The first tranche of ESOS under ESOS Second Grant amounting to 6,185,800 options have been vested and exercisable as at 7 May 2012. The second tranche of ESOS under ESOS Second Grant amounting to 12,870,600 options have been vested and exercisable as at 30 April 2013. The third tranche of ESOS under ESOS Second Grant amounting to 12,002,000 options have been vested and exercisable as at 30 April 2014. The fourth tranche of ESOS under ESOS Second Grant amounting to 10,808,600 options have been vested and exercisable as at 30 April 2015. The Bank also vested options for appeal cases for the first tranche and second tranche of ESOS Second Grant amounting to 1,300 and 3,100 respectively in the previous financial year ended 31 December 2015. The fifth tranche of ESOS under ESOS Second Grant amounting to 9,424,800 options have been vested and exercisable as at 3 May 2016. On 25 April 2016, ESS Committee approved the vesting of an additional sixth tranche of ESOS under ESOS Second Grant amounting to 4,687,000 options effective on 30 September 2016. The sixth tranche is awarded to the eligible employees after taking into consideration the change in the financial year end from 30 June to 31 December, where the first tranche of ESOS was brought forward and prorated based on six months. The ESOS quantum alloted under the sixth tranche is prorated based on six months period. On 29 April 2017, the first tranche of ESOS under ESOS Second Grant amounting to 484,700 options have expired.
133. 32 .SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) (c) Maybank Group Employees’ Share Scheme (“ESS”) and Cash-settled Performance-based Employees’ Share Scheme (“CESS”) (cont’d.) (v) Key features of the ESOS award are as follows (cont’d.): (3) On 30 April 2013, the Bank granted five (5) tranches of ESOS amounting to 53,593,800 options to confirmed new recruits in the Group (“ESOS Third Grant”). The first tranche of ESOS under ESOS Third Grant amounting to 9,199,800 options have been vested and exercisable as at 21 May 2013. The second tranche of ESOS under ESOS Third Grant amounting to 10,523,300 options have been vested and exercisable as at 30 April 2014. The third tranche of ESOS under ESOS Third Grant amounting to 9,197,600 options have been vested and exercisable as at 30 April 2015. The fourth tranche of ESOS under ESOS Third Grant amounting to 7,806,200 options have been vested and granted as at 3 May 2016. The fifth tranche of ESOS under ESOS Third Grant amounting to 7,382,200 options have been vested and granted as at 2 May 2017. During the financial year ended 31 December 2017, the Bank vested 55,000 options for appeal cases for fourth tranche of ESOS Third Grant. (4) On 30 April 2014, the Bank granted five (5) tranches of ESOS amounting to 54,027,800 options to confirmed new recruits in the Group (“ESOS Fourth Grant”). The first tranche of ESOS under ESOS Fourth Grant amounting to 9,651,900 options have been vested and exercisable as at 21 May 2014. The second tranche of ESOS under ESOS Fourth Grant amounting to 10,591,900 options have been vested and exercisable as at 30 April 2015. The Bank also vested 100,000 options relating to change of staff grade and 100 options for appeal cases for the first tranche of ESOS Fourth Grant in the previous financial year ended 31 December 2015. The third tranche of ESOS under ESOS Fourth Grant amounting to 9,018,700 options have been vested and exercisable as at 3 May 2016. The fourth tranche of ESOS under ESOS Fourth Grant amounting to 8,531,100 options have been vested and exercisable as at 2 May 2017, while the remaining tranche of ESOS and the corresponding number of ESOS will be vested and exercisable upon fulfillment of predetermined vesting conditions including service period, performance targets and performance period. (5) On 30 April 2015, the Bank granted four (4) tranches of ESOS amounting to 48,170,100 options to confirmed new recruits in the Group (“ESOS Fifth Grant”). The first tranche of ESOS under ESOS Fifth Grant amounting to 11,439,300 options have been vested and exercisable as at 21 May 2015. The second tranche of ESOS under ESOS Fifth Grant amounting to 11,250,300 options have been vested and exercisable as at 3 May 2016. The third tranche of ESOS under ESOS Fifth Grant amounting to 10,475,000 options have been vested and exercisable as at 2 May 2017, while the remaining tranche of ESOS and the corresponding number of ESOS will be vested and exercisable upon fulfillment of predetermined vesting conditions including service period, performance targets and performance period. During the financial year ended 31 December 2017, the Bank vested 10,000 options for appeal cases for second tranche of ESOS Fifth Grant. (6) On 30 September 2015, the Bank granted three (3) tranches of ESOS amounting to 992,400 options to confirmed new recruits in the Group (“ESOS Special Grant”). The first tranche of ESOS under ESOS Special Grant amounting to 309,400 options have been vested and exercisable as at 21 October 2015. The second tranche of ESOS under ESOS Special Grant amounting to 215,500 options have been vested and exercisable as at 3 May 2016. The third tranche of ESOS under ESOS Special Grant amounting to 108,200 options have been vested and exercisable as at 2 May 2017. Our Performance pg. 4-8 The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS (7) The new ordinary shares in the Bank allotted upon any exercise of options under the scheme will upon allotment, rank pari passu in all aspects with the then existing ordinary shares in the Bank, except that the new ordinary shares so issued will not rank for any dividends or other distribution declared, made or paid to shareholders prior to the date of allotment of such new ordinary shares and will be subject to all the provisions of the Article of Association of the Bank relating to transfer, transmission and otherwise. (8) The subscription price of the ESOS shall be at the Volume Weighted Average Market Price (“VWAMP”) of Maybank Shares for the five (5) market days immediately preceding the offer date with no entitlement to any discount. (9) In the implementation of ESS, the Bank has established a Trust of which to be administered by the Trustee. To enable the Trustee to subscribe for new shares for the purposes of the ESS implementation, the Trustee will be entitled from time to time to accept funding and/or assistance from the Bank. (10)The first tranche of ESOS First Grant was exercisable by way of self-funding by the respective eligible employees within twelve (12) months from the ESOS commencement date. (11) Subsequent tranches and any ESOS which are unexercised after the initial twelve (12) months from the ESOS commencement date may be exercised during the remainder of the ESOS option period by way of selffunding or ESOS Trust Funding (“ETF”) mechanism. (12)ETF mechanism is a trust funding mechanism for the ESOS award involving an arrangement under which Maybank will fund a certain quantum of money for the subscription of Maybank shares by the Trustee, to be held in a pool and placed into an omnibus Central Depository System (“CDS”) account of the Trustee or an authorised nominee, to facilitate the exercise of ESOS options by the eligible employees and at the request of selected employees whereupon part of the proceeds of such sale shall be utilised towards payment of the ESOS option price and the related costs. The shares to be issued and alloted under the ETF mechanism will rank equally in all respects with the existing issued Maybank shares. On 12 April 2012, the ESS Committee approved the subscription of new Maybank shares with value of RM100 million for ETF mechanism pool. 131
134. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 32 .SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) (c) Maybank Group Employees’ Share Scheme (“ESS”) and Cash-settled Performance-based Employees’ Share Scheme (“CESS”) (cont’d.) (v) Key features of the ESOS award are as follows (cont’d.): (12) Maybank had on 28 June 2012 announced the issuance of 11,454,700 new ordinary shares under the ETF mechanism. The new Maybank shares are recorded as “shares held-in-trust” in the financial statements. Maybank had on 7 May 2013 issued additional 4,000 new ordinary shares under the ETF mechanism. The new Maybank shares are recorded as “shares held-in-trust” in the financial statements. Maybank had on 23 June 2014 issued additional 2,831,509 new ordinary shares under the ETF mechanism due to RSU. Subsequent to the issuance, 2,794,826 options have been vested to eligible Senior Management of the Group and of the Bank. The remaining Maybank shares are recorded as “shares held-in-trust” in the financial statements. Maybank had on 23 April 2015 and 14 May 2015 issued additional 2,753,823 and 30,419 new ordinary shares respectively under the ETF mechanism due to RSU. Subsequent to the issuance, 2,784,277 options have been vested to eligible Senior Management of the Group and of the Bank. Maybank had on 28 April 2016 issued additional 3,155,659 new ordinary shares under the ETF mechanism due to RSU. Subsequent to the issuance, 3,155,659 options have been vested to eligible Senior Management of the Group and of the Bank. Maybank had on 28 April 2017 issued additional 5,411,200 new ordinary shares under the ETF mechanism. The new Maybank shares are recorded as “shares held-in-trust” in the financial statements. Maybank had on 2 May 2017 issued additional 4,098,732 new ordinary shares under the ETF mechanism due to RSU. Subsequent to the issuance, 4,084,433 options have been vested to eligible Senior Management of the Group and of the Bank. Maybank also have been vested 14,299 options to eligible Senior Management of the Group and of the Bank using the existing ordinary shares under ETF mechanism. The movements of shares held-in-trust for the financial year ended 31 December 2017 are as follows: Number of ordinary shares Group and Bank As at 31 December 2017 Amount RM’000 At 1 January 2017 Exercise of ESOS options by eligible employees 14,442,769 (146,301,500) 125,309 – Replenishment of shares held-in-trust (131,858,731) 146,301,500 125,309 – 14,442,769 5,411,200 947,922 4,098,732 (4,098,732) 125,309 49,999 8,127 38,118 (38,115) 20,801,891 183,438 Group and Bank As at 31 December 2016 Number of ordinary shares Amount RM’000 At 1 January 2016 Exercise of ESOS options by eligible employees 13,735,330 (7,895,700) 119,745 (69,117) 5,839,630 7,895,700 50,628 69,117 Additional shares issued under ETF mechanism due to election under DRP Additional shares issued under ETF mechanism due to RSU RSU vested to the Eligible Senior Management of the Group and of the Bank 13,735,330 707,439 3,155,659 (3,155,659) 119,745 5,564 28,843 (28,843) At 31 December 2016 14,442,769 125,309 Additional shares issued under ETF mechanism Additional shares issued under ETF mechanism Additional shares issued under ETF mechanism RSU vested to the Eligible Senior Management due to replenish of ESOS pool due to election under DRP due to RSU of the Group and of the Bank At 31 December 2017 The movements of shares held-in-trust for the financial year ended 31 December 2016 are as follows: Replenishment of shares held-in-trust 132
135. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (vi) Key features of the RSU award are as follows: • The RSU granted will be vested and awarded upon fulfillment of predetermined vesting conditions including service period, performance targets and performance period. • The scheme shares on RSU may be settled by way of issuance and transfer of new Maybank Shares or by cash at the absolute discretion of the ESS Committee. The new Maybank Shares to be issued and transferred to eligible employees pursuant to physical settlement will not require any payment to the Bank by the RSU participants. • In the case of settlement by way of cash, the RSU vesting price will be based on the value of the scheme shares with no entitlement to any discount, taking into account the VWAMP of Maybank Shares for the five (5) market days immediately preceding the RSU vesting date. • The ESS Committee may, from time to time during the ESS period, make further RSU grant designated as Supplemental RSU grant (“SRSU grant”) to a selected group of eligible employees to participate in the RSU award. This selected group may consist of senior management, selected key retentions and selected senior external recruits and such SRSU grant may contain terms and conditions which may vary from earlier RSU grant made to selected senior management. The SRSU will be vested on a two (2) to three (3) years cliff vesting schedule. Basel II Pillar 3 pg. 288-351 (c) Maybank Group Employees’ Share Scheme (“ESS”) and Cash-settled Performance-based Employees’ Share Scheme (“CESS”) (cont’d.) The Financials pg. 10-287 32.SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) (vii) Cash-settled Performance-based Employees’ Share Scheme (“CESS”) A separate Cash-settled Performance-based Employees’ Share Scheme (“CESS”) comprising of Cash-settled Performance-based Option Scheme (“CESOS”) and Cash-settled Performance-based Restricted Share Unit Scheme (“CRSU”) are made available at the appropriate time to the eligible employees of overseas branches and subsidiaries of the Bank which include PT Bank Maybank Indonesia Tbk, PT Bank Maybank Syariah Indonesia and Maybank Philippines Incorporated, subject to achievement of performance criteria set out by the Board of Directors and prevailing market practices in the respective countries. Key features of the CESS award are as follows: • The CESS award is a cash plan and may be awarded from time to time up to five (5) tranches. The award will be subject to fulfilling the performance targets, performance period, service period and other vesting conditions as stipulated in the CESS Guidelines. • The amount payable for each CESS tranche will correspond to the number of reference shares awarded multiplied by the appreciation in the Bank’s share price between the price at the time of award and the time of vesting of which the vesting date shall be at the end of the three (3) years from the grant date of each CESS tranche. (d) Details of share options under ESOS (i) Details of share options granted: Number of share options ’000 Grant date 23.6.2011 30.4.2012 30.4.2013 30.4.2014 30.4.2015 30.9.2015 – – – – – – ESOS ESOS ESOS ESOS ESOS ESOS First Grant Second Grant Third Grant Fourth Grant Fifth Grant Special Grant 405,309# 62,339# 53,594# 54,028# 48,170# 992# Original exercise price RM/option 8.82* 8.83* 9.61* 9.91* 9.35* 8.39* Exercise period 30.6.2011 7.5.2012 21.5.2013 21.5.2014 21.5.2015 21.10.2015 – – – – – – 22.6.2018 22.6.2018 22.6.2018 22.6.2018 22.6.2018 22.6.2018 # The number of share options granted are based on the assumptions that the eligible employees met average performance targets. * The ESS Committee approved the reduction of the ESOS exercise prices following the issuance of new ordinary shares pursuant to the implementation of DRP. 133
136. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 32 .SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) (d) Details of share options under ESOS (cont’d.) (i) Details of share options granted (cont’d.): Following the issuance of new ordinary shares pursuant to the implementation of DRP, the revision to the exercise prices are as follows: Exercise price RM/option Exercise period 23.6.2011 – ESOS First Grant 8.82 8.78 8.76 8.75 8.74 8.71 30.6.2011 – 28.12.2011 29.12.2011 – 4.6.2012 5.6.2012 – 28.10.2012 29.10.2012 – 5.6.2016 6.6.2016 – 31.10.2016 1.11.2016 – 22.6.2018 30.4.2012 – ESOS Second Grant 8.83 8.82 8.81 8.78 7.5.2012 – 28.10.2012 29.10.2012 – 5.6.2016 6.6.2016 – 31.10.2016 1.11.2016 – 22.6.2018 30.4.2013 – ESOS Third Grant 9.61 9.59 9.58 9.56 9.54 9.51 9.47 21.5.2013 – 27.6.2013 28.6.2013 – 21.11.2013 22.11.2013 – 24.6.2014 25.6.2014 – 29.6.2015 30.6.2015 – 5.6.2016 6.6.2016 – 31.10.2016 1.11.2016 – 22.6.2018 30.4.2014 – ESOS Fourth Grant 9.91 9.88 9.87 9.84 9.80 9.75 9.35 21.5.2014 – 24.6.2014 25.6.2014 – 28.10.2014 29.10.2014 – 29.6.2015 30.6.2015 – 5.6.2016 6.6.2016 – 31.10.2016 1.11.2016 – 22.6.2018 21.5.2016 – 5.6.2016 9.32 9.28 6.6.2016 – 31.10.2016 1.11.2016 – 22.6.2018 8.39 8.37 21.10.2015 – 31.10.2016 1.11.2016 – 22.6.2018 Grant date 30.4.2015 – ESOS Fifth Grant 30.9.2015 – ESOS Special Grant The following tables illustrate the number and weighted average exercise price (“WAEP”) of, and movements in, share options during the financial year: ESOS First Grant (Vested) Vesting date 30.4.2012 30.4.2013 30.4.2014 30.4.2015 30.9.2015 WAEP (RM) 1 134 Outstanding as at 1.1.2017 ’000 Movements during the financial year Forfeited Expired Exercised1 ’000 ’000 ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 15,194 37,871 47,256 62,329 33,196 (11,858) (25,798) (26,837) (35,266) (20,501) (76) (313) (401) (607) (349) (3,260) – – – – – 11,760 20,018 26,456 12,346 – 11,760 20,018 26,456 12,346 195,846 (120,260) (1,746) (3,260) 70,580 70,580 8.71 8.71 8.71 8.71 – – 4,585,200 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017.
137. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (i) Details of share options granted (cont’d.): The following tables illustrate the number and weighted average exercise price (“WAEP”) of, and movements in, share options during the financial year (cont’d.): ESOS Second Grant (Vested) Outstanding as at 1.1.2017 ’000 Vesting date 7.5.2012 30.4.2013 30.4.2014 30.4.2015 3.5.2016 30.9.2016 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 2,151 5,755 7,042 9,105 9,128 4,655 (1,617) (3,695) (4,001) (5,098) (5,014) (2,764) (49) (123) (155) (246) (252) (130) (485) – – – – – – 1,937 2,886 3,761 3,862 1,761 – 1,937 2,886 3,761 3,862 1,761 37,836 (22,189) (955) (485) 14,207 14,207 8.78 8.78 8.78 WAEP (RM) 2 Movements during the financial year Forfeited Expired Exercised2 ’000 ’000 ’000 8.78 – – Basel II Pillar 3 pg. 288-351 (d) Details of share options under ESOS (cont’d.) The Financials pg. 10-287 32.SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) 772,300 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017. ESOS Third Grant (Vested) Vesting date Outstanding as at 1.1.2017 ’000 21.5.2013 30.4.2014 30.4.2015 3.5.2016 2.5.2017 WAEP (RM) 3 4 Movements during the financial year Vested Exercised4 Forfeited Adjustment3 ’000 ’000 ’000 ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 5,669 7,539 8,072 7,472 – – – – 55 – – – – – 7,382 (1,450) (1,853) (1,985) (1,729) (1,482) (271) (356) (353) (285) (132) 3,948 5,330 5,734 5,513 5,768 3,948 5,330 5,734 5,513 5,768 28,752 55 7,382 (8,499) (1,397) 26,293 26,293 9.47 9.47 9.47 9.47 9.47 9.47 – Adjustment relates to appeal cases approved during the financial year ended 31 December 2017. 751,900 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017. ESOS Fourth Grant (Vested) Vesting date 21.5.2014 30.4.2015 3.5.2016 2.5.2017 WAEP (RM) 5 Outstanding as at 1.1.2017 ’000 Movements during the financial year Forfeited Vested Exercised5 ’000 ’000 ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 7,916 9,355 8,633 – – – – 8,531 (204) (159) (164) (127) (405) (506) (461) (241) 7,307 8,690 8,008 8,163 7,307 8,690 8,008 8,163 25,904 8,531 (654) (1,613) 32,168 32,168 9.75 9.75 9.75 9.75 9.75 – 18,800 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017. 135
138. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 32 . SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) (d) Details of share options under ESOS (cont’d.) (i) Details of share options granted (cont’d.): The following tables illustrate the number and weighted average exercise price (“WAEP”) of, and movements in, share options during the financial year (cont’d.): ESOS Fifth Grant (Vested) Vesting date Outstanding as at 1.1.2017 ’000 21.5.2015 3.5.2016 2.5.2017 WAEP (RM) 6 7 Movements during the financial year Vested Exercised7 Forfeited Adjustment6 ’000 ’000 ’000 ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 10,473 10,869 – – 10 – – – 10,475 (3,661) (3,470) (2,594) (503) (474) (131) 6,309 6,935 7,750 6,309 6,935 7,750 21,342 10 10,475 (9,725) (1,108) 20,994 20,994 9.28 9.28 9.28 9.28 9.28 9.28 – Adjustment relates to appeal cases approved during the financial year ended 31 December 2017. 721,600 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017. ESOS Special Grant (Vested) Vesting date 21.10.2015 3.5.2016 2.10.2017 WAEP (RM) 8 Outstanding as at 1.1.2017 ’000 Movements during the financial year Forfeited Vested Exercised8 ’000 ’000 ’000 Outstanding as at 31.12.2017 ’000 Exercisable as at 31.12.2017 ’000 143 164 – – – 108 (63) (64) (50) (47) (52) – 33 48 58 33 48 58 307 108 (177) (99) 139 139 8.37 8.37 8.37 – 8.37 8.37 6,000 of the share options exercised during the financial year ended 31 December 2017 were only issued and quoted in the Main Market of Bursa Malaysia Securities Berhad subsequent to 31 December 2017. Total share options granted to the directors of the Bank as at 31 December 2017 are disclosed under the directors’ interests section in the Directors’ Report. (ii) Share options exercised during the financial year The options exercised during the financial year, are as disclosed above. Options exercised under ESOS First Grant have resulted in the issuance of approximately 115,674,800 (2016: 8,151,800) new ordinary shares as at 31 December 2017, at WAEP of RM8.71 (2016: RM8.71) each. The related weighted average share price of ESOS First Grant at the date of exercise was RM9.16 (2016: RM9.05) per share. Options exercised under the ESOS Second Grant have resulted in the issuance of approximately 21,417,200 (2016: 445,700) new ordinary shares as at 31 December 2017, at WAEP of RM8.78 (2016: RM8.78) each. The related weighted average share price of ESOS Second Grant at the date of exercise was RM9.17 (2016: RM9.08) per share. Options exercised under the ESOS Third Grant have resulted in the issuance of approximately 7,747,100 (2016: 800) new ordinary shares as at 31 December 2017, at WAEP of RM9.47 (2016: RM9.47) each. The related weighted average share price of ESOS Third Grant at the date of exercise was RM9.52 (2016: RM9.17) per share. Options exercised under the ESOS Fourth Grant have resulted in the issuance of approximately 634,800 (2016: Nil) new ordinary shares as at 31 December 2017, at WAEP of RM9.75 (2016: Nil) each. The related weighted average share price of ESOS Fourth Grant at the date of exercise was RM9.74 (2016: Nil) per share. Options exercised under the ESOS Fifth Grant have resulted in the issuance of approximately 9,003,000 (2016: Nil) new ordinary shares as at 31 December 2017, at WAEP of RM9.28 (2016: Nil) each. The related weighted average share price of ESOS Fifth Grant at the date of exercise was RM9.46 (2016: Nil) per share. 136
139. 31 DECEMBER 2017 (ii) Share options exercised during the financial year (cont’d.) Options exercised under the ESOS Special Grant have resulted in the issuance of approximately 171,400 (2016: Nil) new ordinary shares as at 31 December 2017, at WAEP of RM8.37 (2016: Nil) each. The related weighted average share price of ESOS Special Grant at the date of exercise was RM8.88 (2016: Nil) per share. (iii) Share options expired during the financial year On 29 April 2017, the second tranche of ESOS under ESOS First Grant amounting to 3,260,000 options and the first tranche of ESOS under ESOS Second Grant amounting to 484,700 options have expired. (iv) Fair value of share options granted on 23 June 2011 The fair value of share options granted on 23 June 2011 was estimated by an external valuer using the Binomial-Lattice model, taking into account the terms and conditions upon which the options were granted. The fair value of share options measured, weighted average exercise price and the assumptions were as follows: Before/ After DRP Fair value of share options under ESOS First Grant: – tranche 1: vested on 30 June 2011 (RM) – tranche 2: vested on 30 April 2012 (RM) – tranche 3: vested on 30 April 2013 (RM) – tranche 4: vested on 30 April 2014 (RM) – tranche 5: vested on 30 April 2015 (RM) – tranche 6: vested on 30 September 2015 (RM) Weighted average exercise price (RM) Expected volatility (%) Expected life (years) Risk free rate (%) Expected dividend yield (%) 0.635 0.695 0.748 0.768 0.784 0.566 8.71 15.60 3–5 2.69 6.42 The expected life of the options was based on historical data, therefore it is not necessarily indicative of exercise patterns that may occur. The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the options granted were incorporated into the measurement of fair value. The fair value of share options granted on 30 April 2012 was estimated by an external valuer using the Binomial-Lattice model, taking into account the terms and conditions upon which the options were granted. The fair value of share options measured, weighted average exercise price and the assumptions were as follows: Before/ After DRP Fair value of share options under ESOS Second Grant: – tranche 1: vested on 7 May 2012 (RM) – tranche 2: vested on 30 April 2013 (RM) – tranche 3: vested on 30 April 2014 (RM) – tranche 4: vested on 30 April 2015 (RM) – tranche 5: vested on 3 May 2016 (RM) – tranche 6: vested on 30 September 2016 (RM) Weighted average exercise price (RM) Expected volatility (%) Expected life (years) Risk free rate (%) Expected dividend yield (%) The Financials pg. 10-287 (d) Details of share options under ESOS (cont’d.) (v) Fair value of share options granted on 30 April 2012 Basel II Pillar 3 pg. 288-351 32.SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) Our Performance pg. 4-8 NOTES TO THE FINANCIAL STATEMENTS 0.459 0.496 0.512 0.524 0.533 0.539 8.78 15.60 3–5 2.69 6.42 The expected life of the options was based on historical data, therefore it is not necessarily indicative of exercise patterns that may occur. The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the options granted were incorporated into the measurement of fair value. (vi) Fair value of share options granted on 30 April 2013 The fair value of share options granted on 30 April 2013 was estimated by an external valuer using the Binomial-Lattice model, taking into account the terms and conditions upon which the options were granted. The fair value of share options measured, weighted average exercise price and the assumptions were as follows: Before/ After DRP Fair value of share options under ESOS Third Grant: – tranche 1: vested on 21 May 2013 (RM) – tranche 2: vested on 30 April 2014 (RM) – tranche 3: vested on 30 April 2015 (RM) – tranche 4: vested on 3 May 2016 (RM) – tranche 5: vested on 2 May 2017 (RM) Weighted average exercise price (RM) Expected volatility (%) Expected life (years) Risk free rate (%) Expected dividend yield (%) 0.566 0.606 0.627 0.640 0.646 9.47 15.60 1–5 2.69 6.42 137
140. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 32 .SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) (d) Details of share options under ESOS (cont’d.) (vi) Fair value of share options granted on 30 April 2013 (cont’d.) The expected life of the options was based on historical data, therefore it is not necessarily indicative of exercise patterns that may occur. The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the options granted were incorporated into the measurement of fair value. (vii) Fair value of share options granted on 30 April 2014 The fair value of share options granted on 30 April 2014 was estimated by an external valuer using the BinomialLattice model, taking into account the terms and conditions upon which the options were granted. The fair value of share options measured, weighted average exercise price and the assumptions were as follows: Before/ After DRP Fair value of share options under ESOS Fourth Grant: – tranche 1: vested on 21 May 2014 (RM) – tranche 2: vested on 30 April 2015 (RM) – tranche 3: vested on 3 May 2016 (RM) – tranche 4: vested on 2 May 2017 (RM) – tranche 5: not yet vested (RM) Weighted average exercise price (RM) Expected volatility (%) Expected life (years) Risk free rate (%) Expected dividend yield (%) 0.527 0.577 0.601 0.613 0.622 9.75 15.60 1–3 2.69 6.42 The expected life of the options was based on historical data, therefore it is not necessarily indicative of exercise patterns that may occur. The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the options granted were incorporated into the measurement of fair value. (viii) Fair value of share options granted on 30 April 2015 The fair value of share options granted on 30 April 2015 was estimated by an external valuer using the BinomialLattice model, taking into account the terms and conditions upon which the options were granted. The fair value of share options measured, weighted average exercise price and the assumptions were as follows: Before/ After DRP Fair value of share options under ESOS Fifth Grant: – tranche 1: vested on 21 May 2015 (RM) – tranche 2: vested on 3 May 2016 (RM) – tranche 3: vested on 2 May 2017 (RM) – tranche 4: not yet vested (RM) Weighted average exercise price (RM) Expected volatility (%) Expected life (years) Risk free rate (%) Expected dividend yield (%) 0.364 0.388 0.399 0.405 9.28 15.60 1–3 2.69 6.42 The expected life of the options was based on historical data, therefore it is not necessarily indicative of exercise patterns that may occur. The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the options granted were incorporated into the measurement of fair value. (ix) Fair value of share options granted on 30 September 2015 The fair value of share options granted on 30 September 2015 was estimated by an external valuer using the BinomialLattice model, taking into account the terms and conditions upon which the options were granted. The fair value of share options measured, weighted average exercise price and the assumptions were as follows: Before/ After DRP Fair value of share options under ESOS Special Grant: – tranche 1: vested on 21 October 2015 (RM) – tranche 2: vested on 3 May 2016 (RM) – tranche 3: vested on 2 May 2017 (RM) Weighted average exercise price (RM) Expected volatility (%) Expected life (years) Risk free rate (%) Expected dividend yield (%) 0.499 0.530 0.545 8.37 15.60 1–3 2.69 6.42 The expected life of the options was based on historical data, therefore it is not necessarily indicative of exercise patterns that may occur. The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the options granted were incorporated into the measurement of fair value. 138
141. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (i) Details of RSU granted All the RSU granted by the Bank were allocated to eligible Senior Management of the Group and of the Bank. Details of the RSU granted are as follows: Grant date 23.6.2011 30.4.2012 30.4.2013 30.4.2014 30.4.2015 – – – – – RSU RSU RSU RSU RSU Number of share options ’000 Fair value RM 3,690 4,355 4,820 5,520 6,610 7.247 6.902 7.732 7.850 7.159 First Grant Second Grant Third Grant Fourth Grant Fifth Grant Vesting date Basel II Pillar 3 pg. 288-351 (e) Details of RSU The Financials pg. 10-287 32.SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) Based on 3-year cliff vesting from the grant date and performance metrics The following table illustrates the number of, and movements in, RSU during the financial year ended 31 December 2017: Grant date Outstanding as at 1.1.2017 ’000 Movements during the financial year Outstanding Vested and as at Adjustment awarded Forfeited 31.12.2017 ’000 ’000 ’000 ’000 23.6.2011 – RSU First Grant 30.4.2014 – RSU Fourth Grant 41 4,865 30.4.2015 – RSU Fifth Grant 6,155 – 11,024 446 1 2 – 4462 – (4,113) – (4,113) – (1,198) 4 – (490) 5,665 (1,688) 5,669 Vesting date Based on 3-year cliff vesting from the grant date and performance metrics Pending transfer of RSU shares to deceased employee’s next of kin. Adjustment pursuant to DRP which vested during the financial year ended 31 December 2017. Total RSU granted to the directors of the Bank as at 31 December 2017 are disclosed under the directors’ interests section in the Directors’ Report. During the financial year ended 31 December 2017, the RSU Fourth Grant amounting to 4,113,031 options (including DRP) had been vested and awarded to a selected group of eligible employees. The RSU Third Grant amounting to 3,155,659 options (including DRP), the RSU Second Grant amounting to 2,784,277 options (including DRP) and the RSU First Grant amounting to 2,794,826 options (including DRP) had been vested and awarded to a selected group of eligible employees during the previous financial years ended 31 December 2016, 31 December 2015 and 31 December 2014 respectively. The remaining grant has not been vested as at 31 December 2017. (ii) Fair value of RSU granted on 23 June 2011 The fair value of RSU granted on 23 June 2011 was estimated by an external valuer using the Monte-Carlo Simulation model, taking into account the terms and conditions upon which the RSU were granted. The fair value of RSU measured, closing share price at grant date and the assumptions were as follows: Fair value of RSU under RSU First Grant (RM) Closing share price at grant date (RM) Expected volatility (%) Vesting period (years) Risk free rate (%) Expected dividend yield (%) 7.247 8.82 14.59 3 3.31 4.49 The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the RSU granted were incorporated into the measurement of fair value. 139
142. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 32 .SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) (e) Details of RSU (cont’d.) (iii) Fair value of RSU granted on 30 April 2012 The fair value of RSU granted on 30 April 2012 was estimated by an external valuer using the Monte-Carlo Simulation model, taking into account the terms and conditions upon which the RSU were granted. The fair value of RSU measured, closing share price at grant date and the assumptions were as follows: Fair value of RSU under RSU Second Grant (RM) Closing share price at grant date (RM) Expected volatility (%) Vesting period (years) Risk free rate (%) Expected dividend yield (%) 6.902 8.63 14.11 3 3.19 5.49 The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the RSU granted were incorporated into the measurement of fair value. (iv) Fair value of RSU granted on 30 April 2013 The fair value of RSU granted on 30 April 2013 was estimated by an external valuer using the Monte-Carlo Simulation model, taking into account the terms and conditions upon which the RSU were granted. The fair value of RSU measured, closing share price at grant date and the assumptions were as follows: Fair value of RSU under RSU Third Grant (RM) Closing share price at grant date (RM) Expected volatility (%) Vesting period (years) Risk free rate (%) Expected dividend yield (%) 7.732 9.62 13.96 3 3.03 5.35 The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the RSU granted were incorporated into the measurement of fair value. (v) Fair value of RSU granted on 30 April 2014 The fair value of RSU granted on 30 April 2014 was estimated by an external valuer using the Monte-Carlo Simulation model, taking into account the terms and conditions upon which the RSU were granted. The fair value of RSU measured, closing share price at grant date and the assumptions were as follows: Fair value of RSU under RSU Fourth Grant (RM) Closing share price at grant date (RM) Expected volatility (%) Vesting period (years) Risk free rate (%) Expected dividend yield (%) 7.850 9.90 13.87 3 3.45 5.84 The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the RSU granted were incorporated into the measurement of fair value. (vi) Fair value of RSU granted on 30 April 2015 The fair value of RSU granted on 30 April 2015 was estimated by an external valuer using the Monte-Carlo Simulation model, taking into account the terms and conditions upon which the RSU were granted. The fair value of RSU measured, closing share price at grant date and the assumptions were as follows: Fair value of RSU under RSU Fifth Grant (RM) Closing share price at grant date (RM) Expected volatility (%) Vesting period (years) Risk free rate (%) Expected dividend yield (%) 7.159 9.21 13.08 3 3.40 6.37 The expected volatility reflected the assumption that the historical volatility was indicative of future trends, which may also not necessarily be the actual outcome. No other features of the RSU granted were incorporated into the measurement of fair value. 140
143. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (vii)Details of SRSU granted During the financial year ended 31 December 2017, there is no new SRSU (2016: 34,000) granted to selected group of eligible employees. A total of 110,000 SRSU (2016: 184,000) had been vested as at 31 December 2017. The remaining grant has not been vested as at 31 December 2017. The following table illustrates the number of, and movements in, SRSU during the financial year ended 31 December 2017: Grant date 26.3.2014 1.3.2015 3.5.2016 Fair value of SRSU RM Outstanding as at 1.1.2017 ’000 8.724 8.165 7.743 Movements during the financial year Outstanding Granted Vested as at 31.12.2017 ’000 ’000 ’000 90 20 34 – – – (90) (20) – – – 34 144 – (110) 34 Basel II Pillar 3 pg. 288-351 (e) Details of RSU (cont’d.) The Financials pg. 10-287 32.SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) The fair value of SRSU was estimated by an external valuer using the Monte-Carlo Simulation model, taking into account the terms and conditions upon which the SRSU were granted. The fair value of SRSU measured, closing share price at grant date and the assumptions were as follows: Grant Date Fair value of SRSU (RM) Closing share price at grant date (RM) Expected volatility (%) Vesting period (years) Risk free rate (%) Expected dividend yield (%) (f) Details of CESOS The Bank granted a total of 719,500 CESOS to eligible employees in overseas branches on 23 June 2011 (“CESOS First Grant”). On 30 April 2012, the Bank granted second tranche of CESOS under the CESOS First Grant amounting to 394,800 to promoted employees in overseas branches. On 30 April 2013, the Bank granted third tranche of CESOS under the CESOS First Grant amounting to 671,600. On 30 April 2014, the Bank granted fourth tranche of CESOS under the CESOS First Grant amounting to 591,300. On 30 April 2015 and 30 September 2015, the Bank granted fifth and sixth tranche of CESOS under the CESOS First Grant amounting to 548,900 and 273,000 respectively. The fourth tranche of CESOS under the CESOS First Grant amounting to 461,100 options have been vested as at 31 December 2017. The third tranche under the CESOS First Grant amounting to 518,000 options and the second tranche under the CESOS First Grant amounting to 286,500 options have been vested during the previous financial years ended 31 December 2016 and 31 December 2015 respectively. The remaining tranches have not been vested as at 31 December 2017. During the previous financial year ended 31 December 2016, the Bank had granted 20,100 options relating to the change of staff’s appointment date under the CESOS First Grant. 2015 2014 7.743 8.78 14.80 2 3.10 6.42 8.165 9.20 14.20 2 3.43 6.14 8.724 9.66 12.80 2 3.22 5.84 On 30 April 2012, the Bank granted a first tranche of CESOS under the CESOS Second Grant of 554,000 CESOS to selected employees in overseas branches and selected key retention employees of PT Bank Maybank Indonesia Tbk. The second tranche of CESOS under the CESOS Second Grant of 1,302,800 has been granted on 30 April 2013. On 30 April 2014, the Bank granted third tranche of CESOS under the CESOS Second Grant amounting to 1,011,800. On 30 April 2015, the Bank granted fourth tranche of CESOS under the CESOS Second Grant amounting to 779,600 and during the previous financial year ended 31 December 2015, the Bank also granted 400 options for appeal cases for first tranche of CESOS Second Grant. On 30 September 2016, the Bank granted fifth tranche of CESOS under the CESOS Second Grant amounting to 70,200 options. During the previous financial year ended 31 December 2016, the Bank also made an adjustment of 3,100 options relating to the change of staff’s appointment date under the CESOS Second Grant. The third tranche of CESOS under the CESOS Second Grant amounting to 708,700 options have been vested as at 31 December 2017. The second tranche of CESOS under the CESOS Second Grant amounting to 837,900 options and the first tranche of CESOS under the CESOS Second Grant amounting to 749,600 options have been vested during the previous financial years ended 31 December 2016 and 31 December 2015 repectively. The remaining tranches have not been vested as at 31 December 2017. (i) Details of CESOS granted 2016 141
144. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 32 .SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) On 30 April 2014, the Bank granted first tranche of CESOS under the CESOS Fourth Grant amounting to 556,500 to selected employees in overseas branches and selected key retention employees of PT Bank Maybank Indonesia Tbk. The second tranche of CESOS under the CESOS Fourth Grant of 576,700 has been granted on 30 April 2015. The Bank also granted 5,100 options for appeal cases for first tranche of CESOS under the CESOS Fourth Grant in the previous financial year ended 31 December 2015. (f) Details of CESOS (cont’d.) (i) Details of CESOS granted (cont'd.) On 30 April 2013, the Bank granted first tranche of CESOS under the CESOS Third Grant amounting to 614,700 to selected employees in overseas branches and selected key retention employees of PT Bank Maybank Indonesia Tbk. The second tranche of CESOS under the CESOS Third Grant of 695,000 has been granted on 30 April 2014. The third tranche of CESOS under the CESOS Third Grant of 518,700 has been granted on 30 April 2015. During the previous financial year ended 31 December 2016, the Bank also granted 1,100 options relating to the change of staff’s appointment date under the CESOS Fourth Grant. The first tranche of CESOS under the CESOS Fourth Grant is not vested and considered as forfeited as at 31 December 2017 due to vesting price was lower than award price, whilst the remaining tranche has not been vested as at 31 December 2017. During the previous financial year ended 31 December 2016, the Bank also granted 22,200 options relating to the change of staff’s appointment date under the CESOS Third Grant. The second tranche of CESOS under the CESOS Third Grant is not vested and considered forfeited as at 31 December 2017 due to vesting price was lower than award price. The first tranche of CESOS under the CESOS Third Grant amounting to 338,600 options have been vested as at 31 December 2016, whilst the remaining tranche has not been vested as at 31 December 2017. On 30 April 2015, the Bank granted first tranche of CESOS under the CESOS Fifth Grant amounting to 773,200 to selected employees in overseas branches and selected key retention employees of PT Bank Maybank Indonesia Tbk. During the previous financial year ended 31 December 2016, the Bank also granted 1,200 options relating to change of staff’s promotion date under the CESOS Fifth Grant. The following tables illustrate the number of, and movements in, CESOS during the financial year: CESOS First Grant Grant date 30.4.2014 30.4.2015 30.9.2015 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested and awarded Forfeited ’000 ’000 Outstanding as at 31.12.2017 ’000 480 492 253 (461) – – (19) (40) (21) – 452 232 1,225 (461) (80) 684 CESOS Second Grant Grant date 30.4.2014 30.4.2015 30.9.2016 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested and awarded Forfeited ’000 ’000 Outstanding as at 31.12.2017 ’000 806 667 67 (709) – – (97) (64) (3) – 603 64 1,540 (709) (164) 667 CESOS Third Grant Grant date 30.4.2014 30.4.2015 142 Outstanding as at 1.1.2017 ’000 Movements during the financial year Vested and awarded Forfeited ’000 ’000 Outstanding as at 31.12.2017 ’000 401 397 – – (401) (65) – 332 798 – (466) 332
145. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The Financials pg. 10-287 32.SHARE CAPITAL, SHARE-BASED PAYMENTS AND SHARES HELD-IN-TRUST (CONT’D.) (f) Details of CESOS (cont’d.) (i) Details of CESOS granted (cont'd.) The following tables illustrate the number of, and movements in, CESOS during the financial year (cont’d.): Outstanding as at 1.1.2017 ’000 Grant date 30.4.2014 30.4.2015 Movements during the financial year Vested and awarded Forfeited ’000 ’000 Outstanding as at 31.12.2017 ’000 253 360 – – (253) (115) – 245 613 – (368) 245 Basel II Pillar 3 pg. 288-351 CESOS Fourth Grant CESOS Fifth Grant Grant date Outstanding as at 1.1.2017 ’000 30.4.2015 605 Movements during the financial year Vested and awarded Forfeited ’000 ’000 – (53) Outstanding as at 31.12.2017 ’000 552 The remaining CESOS granted have not been vested as at 31 December 2017. (ii) Fair value of CESOS granted The fair value of CESOS granted was estimated by a valuer using the binomial model, taking into account the terms and conditions upon which the CESOS were granted. (g) Details of CRSU (i) Details of CRSU granted All the CRSU granted by the Bank were allocated to eligible senior management of the Group and of the Bank. Details of the CRSU granted are as follows: Number of share options ’000 Grant date 23.6.2011 30.4.2012 30.4.2013 30.4.2014 30.4.2015 – – – – – CRSU CRSU CRSU CRSU CRSU First Grant Second Grant Third Grant Fourth Grant Fifth Grant Fair value RM 15 95 185 145 238 Vesting date 7.247 Based on 3-year cliff vesting 6.902 from the grant date and 7.732 performance metrics 7.850 7.159 The CRSU Fourth Grant amounting to 42,897 options (including DRP) had been vested during the financial year ended 31 December 2017. The CRSU Third Grant amounting to 41,646 options (including DRP) and the CRSU Second Grant amounting to 54,117 options (including DRP) had been vested during the previous financial years ended 31 December 2016 and 31 December 2015 respectively. The remaining CRSU granted has not been vested as at 31 December 2017. (ii) Fair value of CRSU granted The fair value of CRSU granted was estimated by an external valuer using the Monte-Carlo Simulation model, taking into account the terms and conditions upon which the CRSU were granted. The fair value of CRSU measured, closing share price at grant date and the assumptions were as follows: Grant date Fair value of CRSU (RM) Closing share price at grant date (RM) Expected volatility (%) Vesting period (years) Risk free rate (%) Expected dividend yield (%) 30.4.2015 30.4.2014 30.4.2013 30.4.2012 23.6.2011 7.159 9.21 13.08 3 3.40 6.37 7.850 9.90 13.87 3 3.45 5.84 7.732 9.62 13.96 3 3.03 5.35 6.902 8.63 14.11 3 3.19 5.49 7.247 8.82 14.59 3 3.31 4.49 143
146. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 33 .RETAINED PROFITS (a) The Group’s retained profits The retained profits of the Group include the non-distributable Non-DPF unallocated surplus of an insurance subsidiary as a result of the Revised Bank Negara Malaysia (“BNM”) Guidelines on Financial Reporting for Insurers. This non-distributable Non-DPF unallocated surplus is only available for distribution to shareholders based on the amount recommended by the Appointed Actuary in accordance with the Financial Services Act 2013. The breakdown of distributable and non-distributable retained profits of the Group are as follows: NonDistributable Non-DPF Unallocated Surplus RM’000 Distributable Retained Profits RM’000 Total Retained Profits RM’000 1,188,223 112,427 13,220,472 7,408,115 14,408,695 7,520,542 Total comprehensive income for the financial year 112,427 7,408,115 7,520,542 Transfer from non-par surplus upon recommendation by the Appointed Actuary Transfer from revaluation reserve Transfer from statutory reserve Transfer to regulatory reserve Issue of shares pursuant to Restricted Share Unit (“RSU”) (Note 32(a)(iii)) Issue of shares pursuant to Supplemental Restricted Share Unit (“SRSU”) (Note 32(a)(iv)) Dividends (Note 50) (78,717) – – – – – – 78,717 10,575 10,731,889 (1,689,288) (5,113) (14) (5,708,543) – 10,575 10,731,889 (1,689,288) (5,113) (14) (5,708,543) Total transactions with shareholders/other equity movements (78,717) 3,418,223 3,339,506 1,221,933 24,046,810 25,268,743 NonDistributable Non-DPF Unallocated Surplus RM’000 Distributable Retained Profits RM’000 Total Retained Profits RM’000 1,073,961 114,262 11,759,043 6,628,730 12,833,004 6,742,992 114,262 6,628,730 6,742,992 Group As at 31 December 2017 At 1 January 2017 Profit for the financial year At 31 December 2017 Group As at 31 December 2016 At 1 January 2016 Profit for the financial year Total comprehensive income for the financial year Share-based payment under Employees’ Share Scheme (“ESS”) (Note 32(c)) Transfer to statutory reserve Transfer from regulatory reserve Transfer from profit equalisation reserve Issue of shares pursuant to Restricted Share Unit (“RSU”) Issue of shares pursuant to Supplemental Restricted Share Unit (“SRSU”) Dividends (Note 50) – – – – – – – 13,060 (478,485) 189,512 34,456 1,060 (15) (4,926,889) 13,060 (478,485) 189,512 34,456 1,060 (15) (4,926,889) Total transactions with shareholders/other equity movements – (5,167,301) (5,167,301) 13,220,472 14,408,695 At 31 December 2016 1,188,223 (b) The Bank’s retained profits The retained profits of the Bank as at 31 December 2017 and 31 December 2016 are distributable profits and may be distributed as dividends under the single-tier system based on the tax regulations in Malaysia. The breakdown of retained profits of the Bank are disclosed in the statement of changes in equity. 144
147. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Note Non-distributable: Statutory reserve Regulatory reserve Other reserves AFS reserve Exchange fluctuation reserve ESS reserve (a) (b) (c) 2.3(v)(b)(4) 2.3(xviii)(c) 2.3(xxv)(e) 2017 RM’000 Bank 2016 RM’000 2017 RM’000 2016 RM’000 203,058 2,747,285 (405,169) 29,616 858,752 219,387 10,934,947 1,057,997 (476,340) (269,131) 3,592,057 320,912 46,255 2,233,563 – (114,149) 2,228,315 219,387 10,325,216 660,800 – (453,145) 2,747,423 320,912 3,652,929 15,160,442 4,613,371 13,601,206 Basel II Pillar 3 pg. 288-351 Group The Financials pg. 10-287 34.RESERVES (a) On 3 May 2017, BNM issued a Revised Policy Document on Capital Fund and Capital Funds for Islamic Banks (“Revised Policy Document”). The Revised Policy Document has been updated to remove the requirement for a banking institution to maintain a reserve fund. The Group and the Bank had transferred the statutory reserve to retained profits as at 31 December 2017 amounting to RM10,731.9 million and RM10,279.0 million respectively. The remaining statutory reserves are maintained in compliance with the requirements of certain Central Banks of the respective countries in which the Group and the Bank operate and are not distributable as cash dividends. (b) Regulatory reserve is maintained in addition to the collective impairment allowance that has been assessed and recognised in accordance with MFRS and which has been transferred from the retained profits, in accordance with BNM’s Revised Policy Document on Classification and Impairment Provisions for Loans/Financing issued on 6 April 2015. (c) Other reserves Group As at 31 December 2017 At 1 January 2017 Other comprehensive income Defined benefit plan actuarial gain Net gain on net investment hedge Net loss on cash flow hedge Total comprehensive income for the financial year Transfer to retained profits Total other equity movements At 31 December 2017 Capital Reserve (Note 34(c)(i)) RM’000 Revaluation Reserve (Note 34(c)(ii)) RM’000 13,557 – – – – – 8,147 – – – – – – – (10,575) (10,575) 13,557 (2,428) Defined Benefit Reserve RM’000 (54,360) 13,058 13,058 – – 13,058 – – (41,302) Net Investment Hedge and Cash Flow Hedge Reserve (Note 12) RM’000 (443,684) 68,688 – 69,135 (447) 68,688 – – (374,996) Total Other Reserves RM’000 (476,340) 81,746 13,058 69,135 (447) 81,746 (10,575) (10,575) (405,169) 145
148. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 34 .RESERVES (CONT’D.) (c) Other reserves (cont’d.) Group As at 31 December 2016 At 1 January 2016 Other comprehensive (loss)/income Defined benefit plan actuarial loss Net gain on net investment hedge Net loss on cash flow hedge Net loss on revaluation reserve Share of associates’ reserve Total comprehensive (loss)/income for the financial year Transfer to retained profits Total other equity movements At 31 December 2016 Capital Reserve (Note 34(c)(i)) RM’000 Profit Equalisation Revaluation Reserve Reserve (Note 34(c)(ii)) (Note 34(c)(iii)) RM’000 RM’000 Defined Benefit Reserve RM’000 Net Investment Hedge and Cash Flow Hedge Reserve (Note 12) RM’000 Total Other Reserves RM’000 13,557 – – – – – – 11,836 (3,689) – – – (3,689) – 34,456 – – – – – – (52,111) (2,249) (2,239) – – – (10) (463,724) 20,040 – 21,197 (1,157) – – (455,986) 14,102 (2,239) 21,197 (1,157) (3,689) (10) – (3,689) – (2,249) 20,040 14,102 – – – – 13,557 8,147 (34,456) (34,456) – – – (54,360) – – (443,684) (34,456) (34,456) (476,340) (i) The capital reserve of the Group arose from the corporate exercises undertaken by certain subsidiaries in previous years. (ii) Revaluation reserve relates to the transfer of self-occupied properties to investment properties subsequent to the change on occupation intention. (iii) The Profit Equalisation Reserve (“PER”) of Islamic Banking Institution (“IBI”) is classified as a separate reserve in equity as per BNM Revised Guidelines on Profit Equalisation Reserve issued on 1 July 2012. The Islamic banking subsidiary ceased such practice and the remaining balance has been transferred to retained profits during the previous financial year ended 31 December 2016. 146
149. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Operating revenue of the Group comprises all types of revenue derived from the business of banking, income from Islamic Banking Scheme (“IBS”) operations, finance, investment banking, general and life insurance (including takaful), stockbroking, leasing and factoring, trustee and nominee services, asset management and venture capital but excluding all transactions between related companies. The Financials pg. 10-287 35.OPERATING REVENUE Group Interest income Income derived from investment of depositors’ funds Income derived from investment of investment account funds Income derived from investment of Islamic Banking Funds Net earned insurance premiums Dividends from subsidiaries and associates Other operating income Excluding non-operating revenue which comprises the following items: – Interest expense on derivatives* – Direct costs on brokerage of subsidiaries – Loss/(gain) on liquidation/disposal of subsidiaries – Loss on disposal/liquidation of associates – Rental income – Gain on disposal of property, plant and equipment – Other non-operating income Bank Note 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 36 62(b) 62(b) 62(b) 38 39 40 22,056,334 7,045,382 1,526,848 402,161 5,250,890 – 6,027,304 20,940,499 6,148,251 1,613,812 356,576 4,444,057 – 6,289,283 16,099,945 – – – – 1,920,144 3,681,248 15,076,353 – – – – 2,400,457 4,272,439 40 40 40 40 40 3,308,839 192,020 1,988 30,719 (43,574) (201,003) (17,598) 9,298,695 45,580,310 4,911,287 90,040 378 – (44,480) (68,736) (23,065) 11,154,707 44,657,902 3,248,909 – (101) – (32,165) (62,415) (14,247) 6,821,229 24,841,318 Basel II Pillar 3 pg. 288-351 Operating revenue of the Bank comprises gross interest income, gross fee and gross commission income, investment income, gross dividends and other income derived from banking and finance operations. 4,907,773 – – – (30,401) (15,242) (19,150) 9,115,419 26,592,229 * Interest expense on derivatives forms part of the “realised gain on derivatives” as disclosed in Note 40. 36.INTEREST INCOME Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Loans, advances and financing Money at call and deposits and placements with financial institutions Financial assets purchased under resale agreements Financial assets at FVTPL Financial investments AFS Financial investments HTM 16,465,364 781,866 119,247 956,075 3,061,837 617,810 16,066,134 728,156 73,216 798,919 2,715,479 550,431 11,675,791 855,031 57,403 263,415 2,566,120 574,497 11,231,324 736,324 2,472 201,371 2,326,933 529,590 Accretion of discounts, net 22,002,199 54,135 20,932,335 8,164 15,992,257 107,688 15,028,014 48,339 22,056,334 20,940,499 16,099,945 15,076,353 Included in interest income for the current financial year was interest on impaired assets amounting to approximately RM313,375,000 (2016: RM286,199,000) for the Group and RM250,421,000 (2016: RM210,895,000) for the Bank. 147
150. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 37 .INTEREST EXPENSE Group Deposits and placements from financial institutions Deposits from customers Floating rate certificates of deposits Loans sold to Cagamas Obligations on financial assets sold under repurchase agreements Borrowings Subordinated notes Subordinated bonds Capital securities Structured deposits Financial liabilities at fair value through profit or loss Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 671,140 6,628,172 8,043 71,108 77,619 1,097,184 683,401 34,209 394,863 108,806 134,748 457,307 6,794,223 23,121 36,134 20,876 885,491 783,544 34,240 388,308 111,942 46,843 629,109 4,736,950 8,043 71,108 77,619 639,336 506,105 – 395,175 108,806 134,748 422,161 4,978,398 23,121 36,134 20,876 481,941 621,920 – 391,288 111,942 46,843 9,909,293 9,582,029 7,306,999 7,134,624 2017 RM’000 2016 RM’000 38.NET EARNED INSURANCE PREMIUMS Group Gross earned premiums Premiums ceded to reinsurers 6,219,425 (968,535) 5,655,538 (1,211,481) 5,250,890 4,444,057 2017 RM’000 2016 RM’000 1,910,288 9,856 2,392,278 8,179 1,920,144 2,400,457 39.DIVIDENDS FROM SUBSIDIARIES AND ASSOCIATES Bank Subsidiaries Associates 148
151. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Fee income: Commission Service charges and fees Underwriting fees Brokerage income Fees on loans, advances and financing Investment income: Net gain on disposal of financial assets at FVTPL – Designated upon initial recognition – Held-for-trading Net gain on disposal of financial investments AFS Net gain on disposal/redemption of financial investments HTM (Loss)/gain on liquidation/disposal of subsidiaries Loss on disposal/liquidation of associates Gross dividends from: Financial investments AFS – Quoted in Malaysia – Unquoted in Malaysia – Quoted outside Malaysia Financial assets at FVTPL – Quoted in Malaysia – Quoted outside Malaysia Unrealised gain/(loss) of: Financial assets at FVTPL – Designated upon initial recognition – Held-for-trading Financial liabilities at FVTPL Derivatives Other income: Foreign exchange gain net Realised gain on derivatives Rental income Gain on disposal of property, plant and equipment Gain on disposal of foreclosed properties Other operating income Other non-operating income Total other operating income Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 1,329,124 1,448,488 80,237 452,874 253,102 1,268,040 1,502,493 42,288 506,515 239,266 1,155,792 1,058,425 24,073 – 139,580 1,012,359 1,055,054 23,933 – 136,381 3,563,825 3,558,602 2,377,870 2,227,727 184,107 124,359 657,483 182 (1,988) (30,719) 54,176 149,930 1,039,601 11,397 (378) – – 129,630 212,536 182 101 – – 101,170 923,826 11,397 – – 933,424 1,254,726 342,449 1,036,393 63,562 16,227 11,186 65,069 12,507 5,076 2,363 13,657 – 4,726 11,630 – 90,975 82,652 16,020 16,356 20,283 12,005 19,067 7,042 189 454 1,628 585 123,263 108,761 16,663 18,569 (36,272) 179,112 20,824 (125,342) 116,258 (45,836) 189,931 (90,318) – 31,878 20,824 (104,489) – (12,265) 189,931 (107,060) 38,322 170,035 (51,787) 70,606 558,867 398,606 43,574 201,003 1,493 147,329 17,598 619,973 262,953 44,480 68,736 3,546 174,406 23,065 559,006 374,827 32,165 62,415 300 (46,907) 14,247 632,262 210,882 30,401 15,242 – 11,207 19,150 1,368,470 1,197,159 996,053 919,144 6,027,304 6,289,283 3,681,248 4,272,439 Basel II Pillar 3 pg. 288-351 Group The Financials pg. 10-287 40.OTHER OPERATING INCOME 149
152. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 41 .NET INSURANCE BENEFITS AND CLAIMS INCURRED, NET FEE AND COMMISSION EXPENSES, CHANGE IN EXPENSE LIABILITIES AND TAXATION OF LIFE AND TAKAFUL FUND 2017 RM’000 Group 2016 RM’000 Gross benefits and claims paid Claims ceded to reinsurers Gross change to contract liabilities Change in contract liabilities ceded to reinsurers 3,862,105 (732,284) 1,062,601 632,337 4,109,574 (726,826) 397,660 40,619 Net insurance benefits and claims incurred 4,824,759 3,821,027 Net fee and commission expenses Change in expense liabilities Taxation of life and takaful fund 196,760 (9,845) 45,456 208,256 56,240 22,386 Net fee and commission expenses, change in expense liabilities and taxation of life and takaful fund 232,371 286,882 5,057,130 4,107,909 42.OVERHEAD EXPENSES Group Personnel expenses Salaries, allowances and bonuses Social security cost Pension costs – defined contribution plan ESS expenses1 Other staff related expenses Establishment costs Depreciation of property, plant and equipment (Note 19) Amortisation of core deposit intangibles (Note 20) Amortisation of agency force (Note 20) Amortisation of customer relationship (Note 20) Amortisation of computer software (Note 20) Rental of leasehold land and premises Repairs and maintenance of property, plant and equipment Information technology expenses Fair value adjustments on investment properties (Note 15) Others Marketing costs Advertisement and publicity Others 150 Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 4,685,520 43,640 531,482 17,083 850,287 4,281,737 40,749 478,480 40,251 797,657 2,867,817 19,749 410,587 11,106 485,970 2,555,688 17,495 358,877 28,592 467,384 6,128,012 5,638,874 3,795,229 3,428,036 186,605 – – – 99,177 151,534 98,379 850,743 – 7,493 188,540 – – – 128,718 149,779 88,242 814,191 – 8,812 418,917 5,406 6,555 16,352 245,360 374,128 170,723 631,651 60,173 51,644 379,135 10,024 7,913 18,465 254,089 359,714 160,443 659,073 (8,858) 47,735 1,980,909 1,887,733 1,393,931 1,378,282 217,446 297,638 254,363 267,717 118,891 215,719 126,259 235,140 515,084 522,080 334,610 361,399
153. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Administration and general expenses Fees and brokerage Administrative expenses General expenses Others Overhead expenses allocated to subsidiaries Total overhead expenses Cost to income ratio2 Included in overhead expenses are: Directors’ fees and remuneration (Note 43) Rental of equipment Direct operating expenses of investment properties Auditors’ remuneration: Statutory audit: – Ernst & Young Malaysia – Other member firms of Ernst & Young Global – Other auditors3 Assurance and compliance related services: – Reporting accountants, review engagements and regulatory-related services Non-audit services: – Other services Employee benefit expenses (Note 25(a)(ii)) Property, plant and equipment written-off (Note 19) Intangible assets written-off (Note 20) Impairment of investment properties (Note 15) 1 2 3 Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 995,078 622,214 970,959 144,802 831,850 715,261 865,485 25,873 664,526 278,537 365,431 116,205 565,980 303,224 316,785 21,880 2,733,053 2,438,469 1,424,699 1,207,869 – – (1,067,766) (1,035,947) 11,357,058 10,487,156 5,880,703 5,339,639 48.7% 47.1% 40.9% 36.5% 83,815 96,327 3,054 79,349 87,006 3,081 13,917 21,185 – 11,461 22,086 – 18,259 7,998 9,793 468 16,427 6,909 9,117 401 9,406 5,328 3,810 268 8,149 4,391 3,538 220 6,519 5,130 4,323 2,851 5,953 87,992 546 1,233 – 4,389 94,151 99 1,180 141 5,889 – 437 3 – 4,100 – 38 1,174 – Basel II Pillar 3 pg. 288-351 Group The Financials pg. 10-287 42.OVERHEAD EXPENSES (CONT’D.) ESS expenses comprise cash-settled and equity-settled share-based payment transactions. The amount arising from equity-settled share-based payment transactions for the Group and the Bank are approximately RM17,083,000 and RM11,106,000 (2016: RM40,251,000 and RM28,592,000) respectively. Cost to income ratio is computed using total cost over the net operating income. Total cost of the Group is the total overhead expenses, excluding amortisation of intangible assets for PT Bank Maybank Indonesia Tbk and Maybank Kim Eng Holdings Limited of RM5,406,000 and RM22,907,000 (2016: RM10,024,000 and RM26,378,000) respectively. Income is the net operating income amount, as disclosed on the face of income statements. Relates to fees paid and payable to accounting firms other than Ernst & Young. 151
154. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 43 .DIRECTORS’ FEES AND REMUNERATION Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 2,400 4,300 1,075 680 241 39 1,800 2,700 722 1,198 241 48 2,400 4,300 1,075 680 241 39 1,800 2,700 722 1,198 241 48 8,735 6,709 8,735 6,709 7,167 1,352 247 6,704 1,153 38 4,067 1,154 247 3,853 947 38 8,766 7,895 5,468 4,838 17,501 14,604 14,203 11,547 36,397 15,086 674 256 2,954 35,943 13,896 1,126 598 301 – – – – – – – – – – 55,367 51,864 – – 9,748 3,063 1,376 9,458 1,587 2,223 – – – – – – 14,187 13,268 – – 69,554 65,132 – – 1,135 1,143 1,092 1,119 Total (including benefits-in-kind and indemnity given to or insurance effected for any directors) (Note 47(a)(iii)) 88,190 80,879 15,295 12,666 Total (excluding benefits-in-kind and indemnity given to or insurance effected for any directors) (Note 42) 83,815 79,349 13,917 11,461 Directors of the Bank: Executive directors: Salary Bonus Pension cost – defined contribution plan ESS expenses Other remuneration Estimated monetary value of benefits-in-kind Non-executive directors: Fees Other remuneration Estimated monetary value of benefits-in-kind Sub-total for directors of the Bank Directors of the subsidiaries: Executive directors: Salary and other remuneration, including meeting allowance Bonus Pension cost – defined contribution plan ESS expenses Estimated monetary value of benefits-in-kind Non-executive directors: Fees Other remuneration ESS expenses Sub-total for directors of the subsidiaries Indemnity given to or insurance effected for any directors The Bank maintained on group basis, a Directors' and Officers' Liability Insurance against any legal liability incurred by the Directors in the discharge of their duties while holding office for the Bank. The Directors shall not be indemnified by such insurance for any deliberate negligence, fraud, intentional breach of law or breach of trust proven against them. 152
155. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The remuneration attributable to the Group President & Chief Executive Officer of the Bank including benefits-in-kind during the financial year amounted to RM8,735,000 (2016: RM6,709,000). The total remuneration (including benefits-in-kind) of the directors of the Bank are as follows: Group 2017 Executive director: Datuk Abdul Farid bin Alias Non-executive directors: Datuk Mohaiyani binti Shamsudin1 Dato’ Johan bin Ariffin Datuk R. Karunakaran Mr Cheng Kee Check Mr Edwin Gerungan Mr Nor Hizam bin Hashim Dr Hasnita binti Dato’ Hashim Mr Anthony Brent Elam Datin Paduka Jamiah binti Abdul Hamid Tan Sri Dato’ Megat Zaharuddin bin Megat Mohd Nor2 Dato’ Dr Tan Tat Wai3 Mr Renato Tinio De Guzman4 Total directors’ remuneration Salary and/ or other Fees emoluments* RM’000 RM’000 Bank Benefitsin-kind RM’000 Total RM’000 Fees RM’000 Salary and/ or other emoluments* RM’000 Benefitsin-kind RM’000 Total RM’000 – 8,696 39 8,735 – 8,696 39 8,735 863 797 1,010 527 848 502 549 405 484 92 125 86 65 75 56 56 33 6 7 – 2 3 6 3 1,380 895 1,142 613 915 580 611 464 546 356 426 434 414 369 365 378 458 53 58 81 57 54 43 49 33 6 7 – 2 3 6 3 1,037 415 491 515 473 426 414 430 483 84 3 570 430 79 3 512 360 493 330 199 19 11 136 43 5 695 555 346 153 115 81 197 14 11 136 43 5 486 172 97 7,167 1,352 247 8,766 4,067 1,154 247 5,468 7,167 10,048 286 17,501 4,067 9,850 286 14,203 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 43.DIRECTORS’ FEES AND REMUNERATION (CONT’D.) * Includes bonus, pension cost, ESS expenses, duty allowances, social allowances, leave passage and meeting allowances. 1 Redesignation as Chairman on 1 April 2017 2 Retired on 31 March 2017 3 Retired on 6 April 2017 4 Appointed on 2 October 2017 and tendered his resignation on 18 January 2018 153
156. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 43 .DIRECTORS’ FEES AND REMUNERATION (CONT’D.) The total remuneration (including benefits-in-kind) of the directors of the Bank are as follows (cont’d.): Group 2016 Executive director: Datuk Abdul Farid bin Alias Non-executive directors: Tan Sri Dato’ Megat Zaharuddin bin Megat Mohd Nor Dato’ Dr Tan Tat Wai Dato’ Johan bin Ariffin Datuk Mohaiyani binti Shamsudin Datuk R. Karunakaran Mr Cheng Kee Check Mr Edwin Gerungan Tan Sri Datuk Dr Hadenan bin A. Jalil1 Mr Nor Hizam bin Hashim2 Dr Hasnita binti Dato’ Hashim3 Dato’ Seri Ismail bin Shahudin4 Mr Anthony Brent Elam5 Total directors’ remuneration * 1 2 3 4 5 154 Salary and/ or other Fees emoluments* RM’000 RM’000 Bank Benefitsin-kind RM’000 Total RM’000 Fees RM’000 Salary and/ or other emoluments* RM’000 Benefitsin-kind RM’000 Total RM’000 – 6,661 48 6,709 – 6,661 48 6,709 1,417 712 777 626 48 85 28 – 3 2,071 760 865 610 426 375 571 45 47 28 – 3 1,209 471 425 737 1,172 407 430 66 138 65 60 3 3 – – 806 1,313 472 490 355 415 396 430 39 64 64 60 3 3 – – 397 482 460 490 150 202 159 496 45 9 26 17 5 8 1 – – – – 160 228 176 501 53 92 178 159 372 45 5 23 17 4 8 1 – – – – 98 201 176 376 53 6,704 1,153 38 7,895 3,853 947 38 4,838 6,704 7,814 86 14,604 3,853 7,608 86 11,547 Includes bonus, pension cost, ESS expenses, duty allowances, social allowances, leave passage and meeting allowances. Retired on 7 April 2016 Appointed on 13 June 2016 Appointed on 1 July 2016 Demised on 30 July 2016 Appointed on 15 November 2016
157. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 2017 RM’000 Bank 2016 RM’000 2017 RM’000 2016 RM’000 Allowances for/(writeback of) impairment losses on loans, advances and financing: – Individual allowance (Note 11(ix)) Allowance made Amount written back 1,830,104 (326,072) 2,390,222 (115,272) 1,237,538 (238,042) 1,592,007 (80,690) Net 1,504,032 2,274,950 999,496 1,511,317 836,425 (390) 1,100,315 (30,762) 346,381 – 522,087 – 836,035 1,069,553 346,381 522,087 – Collective allowance (Note 11(ix)) Allowance made Amount written back Net Bad debts and financing: – Written-off – Recovered 101,765 (485,473) 107,481 (598,563) 74,245 (259,169) 64,021 (308,214) Net (383,708) (491,082) (184,924) (244,193) Allowances for/(writeback of) impairment losses on other debts 2,701 1,959,060 (20,673) 2,832,748 2,285 1,163,238 Basel II Pillar 3 pg. 288-351 Group The Financials pg. 10-287 44. ALLOWANCES FOR IMPAIRMENT LOSSES ON LOANS, ADVANCES, FINANCING AND OTHER DEBTS, NET (1,343) 1,787,868 45. ALLOWANCES FOR/(WRITEBACK OF) IMPAIRMENT LOSSES ON FINANCIAL INVESTMENTS, NET Group 2017 RM’000 Bank 2016 RM’000 2017 RM’000 2016 RM’000 Financial investments AFS (Note 9(c)) – Allowance made – Amount written back in respect of recoveries 69,725 (856) 265,440 (83,187) 1,071 (3,288) 213,464 (73,613) Net 68,869 182,253 (2,217) 139,851 Financial investments HTM (Note 10(c)) – Amount written back in respect of recoveries (107) – – – Net (107) – – – 68,762 182,253 (2,217) 139,851 155
158. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 46 .TAXATION AND ZAKAT Group 2017 RM’000 Malaysian income tax Foreign income tax Less: Double taxation relief (Over)/underprovision in respect of prior years: Malaysian income tax Foreign income tax Tax expense for the financial year Zakat 2016 RM’000 2016 RM’000 1,671,721 482,240 (179,899) 1,329,138 295,562 (282,811) 1,020,447 187,752 (179,899) 2,472,172 1,974,062 1,341,889 1,028,300 (15,409) (48,272) (130,945) (103,528) (51,971) 1,818,563 42,014 1,272 (50,134) 1,293,027 (63,288) (78,977) (52,368) 896,955 27,668 2,277,546 23,676 1,860,577 19,981 1,229,739 – 924,623 – 2,301,222 1,880,558 1,229,739 924,623 The Group’s and the Bank’s effective tax rate for the financial year ended 31 December 2017 was lower than the statutory tax rate due to certain income not subject to tax. Domestic income tax is calculated at the Malaysian statutory tax rate of 24% (2016: 24%) of the estimated chargeable profit for the financial year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. 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 Profit before taxation 156 2017 RM’000 2,159,444 595,539 (282,811) 2,408,491 Deferred tax (Note 28): Relating to origination and reversal of temporary differences Bank Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 10,098,096 8,844,450 7,352,614 7,347,267 Taxation at Malaysian statutory tax rate of 24% (2016: 24%) Different tax rates in other countries Income not subject to tax Expenses not deductible for tax purposes Overprovision in income tax expense in prior years Share of profits in associates and joint ventures 2,423,543 16,632 (557,188) 507,040 (63,681) (48,800) 2,122,668 15,980 (327,688) 319,860 (155,499) (114,744) 1,764,627 14,644 (600,055) 99,385 (48,862) – 1,763,344 10,529 (793,416) 75,511 (131,345) – Tax expense for the financial year 2,277,546 1,860,577 1,229,739 924,623
159. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the Bank has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Bank and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group and of the Bank either directly or indirectly. The key management personnel includes all the directors and chief executive officers of the Group and of the Bank. The Group and the Bank have related party relationships with their substantial shareholders, subsidiaries, associates and key management personnel. Related party transactions have been entered into in the normal course of business under normal trade terms. The significant related party transactions and balances of the Group and of the Bank are as follows: Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 47.SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (a) Significant related party transactions (i)Subsidiaries Bank Income: Interest on deposits Dividend income (Note 39) Rental of premises Other income Expenditure: Interest on deposits Information technology expenses Other expenses Others: ESS expenses charged to subsidiaries Overhead expenses allocated to subsidiaries (Note 42) 2017 RM’000 2016 RM’000 1,077,042 1,910,288 3,090 312,037 846,600 2,392,278 3,096 290,113 3,302,457 3,532,087 44,912 511,610 96,412 63,813 479,861 82,753 652,934 626,427 9,644 1,067,766 12,190 1,035,947 1,077,410 1,048,137 Transactions between the Bank and its subsidiaries are eliminated on consolidation at Group level. (ii)Associates Bank Income: Dividend income (Note 39) 2017 RM’000 2016 RM’000 9,856 8,179 There were no significant transactions with joint ventures for the financial year ended 31 December 2017. 157
160. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 47 .SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONT’D.) Related party transactions have been entered into in the normal course of business under normal trade terms. The significant related party transactions and balances of the Group and of the Bank are as follows (cont’d.): (a) Significant related party transactions (cont’d.): (iii) Key management personnel Group Short-term employee benefits – Fees – Salaries, allowances and bonuses – Pension cost-defined contribution plan – Other staff benefits Share-based payment – ESS expenses Others – Indemnity given to or insurance effected for any directors (Note 43) Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 16,915 72,037 3,398 6,803 16,162 66,280 3,382 2,870 4,067 8,096 1,075 285 3,853 5,688 722 86 3,000 6,405 680 1,198 1,135 1,143 1,092 1,119 103,288 96,242 15,295 12,666 Included in the total key management personnel compensation are: Group Directors’ remuneration (including benefits-in-kind and indemnity given to or insurance effected for any directors) (Note 43) Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 88,190 80,879 15,295 12,666 The movements in ESOS vested to key management personnel are as follows: Group Bank 2017 ’000 2016 ’000 2017 ’000 2016 ’000 10,908 90 1,490 (3,884) (247) (20) 9,611 881 1,438 (240) – (782) 1,601 – 300 (375) – – 1,501 – 300 – – (200) 1,526 1,601 ESOS vested At 1 January Adjustment* Vested and exercisable Exercised Forfeited Expired At 31 December * Adjustment relates to changes in key management personnel during the financial year. 158 8,337 10,908
161. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Related party transactions have been entered into in the normal course of business under normal trade terms. The significant related party transactions and balances of the Group and of the Bank are as follows (cont’d.): (a) Significant related party transactions (cont’d.): (iii) Key management personnel (cont’d.) The movements in the number of RSU to key management personnel are as follows: Movements during the financial year Group Grant date 30.4.2014 – RSU Fourth Grant 30.4.2015 – RSU Fifth Grant Outstanding as at 1.1.2017 ’000 955 Adjustment* ’000 88 1,140 (135) 2,095 (47) Vested and awarded ’000 Not vested during the financial year ’000 (810) (233) – – (810) (233) Outstanding as at 31.12.2017 ’000 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 47.SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONT’D.) – 1,005 1,005 Movements during the financial year Bank Grant date 30.4.2014 – RSU Fourth Grant 30.4.2015 – RSU Fifth Grant Outstanding as at 1.1.2017 ’000 Adjustment* ’000 200 21 200 – 400 21 Vested and awarded ’000 (191) – (191) Not vested during the financial year ’000 (30) Outstanding as at 31.12.2017 ’000 – – 200 (30) 200 * Adjustment due to DRP and relates to changes in key management personnel during the financial year ended 31 December 2017. The RSU Fifth Grant has not been vested as at 31 December 2017. 159
162. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 47 .SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONT’D.) Related party transactions have been entered into in the normal course of business under normal trade terms. The significant related party transactions and balances of the Group and of the Bank are as follows (cont’d.): (b) Significant related party balances (i)Subsidiaries Bank Amounts due from: Current accounts and deposits Negotiable instruments of deposits Loans, advances and financing Interest and other receivable on deposits Corporate bonds and sukuk Derivative assets Amounts due to: Current accounts and deposits Private debt securities Interest payable on deposits Deposits and other creditors Derivative liabilities Commitments and contingencies 2017 RM’000 2016 RM’000 7,219,071 – 17,944,182 508,777 8,988,217 556,968 9,797,348 2,995,936 18,374,778 628,894 3,295,238 589,894 35,217,215 35,682,088 3,087,278 9,999 4,216 7,192,640 424,050 3,220,706 35,421 5,617 4,711,637 373,042 10,718,183 8,346,423 148,300 231,400 Balances between the Bank and its subsidiaries are eliminated on consolidation at Group level. (ii)Associates Bank Amount due from: Current accounts and deposits 2017 RM’000 2016 RM’000 6,091 345 There were no significant balances with joint ventures as at 31 December 2017. (iii) Key management personnel Group Loans, advances and financing Deposits from customers 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 29,851 41,517 37,770 60,945 7,367 22,621 8,721 29,933 The balances relate to transactions with key management personnel of the Group. 160 Bank
163. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Related party transactions have been entered into in the normal course of business under normal trade terms. The significant related party transactions and balances of the Group and of the Bank are as follows (cont’d.): (c) Government-related entities Permodalan Nasional Berhad (“PNB”), a government-linked entity and a shareholder with significant influence on the Bank, with direct shareholding of 7.40% (2016: 6.48%) and indirect shareholding of 33.97% (2016: 35.54%) via Amanah Raya Trustee Berhad (Skim Amanah Saham Bumiputera) as at 31 December 2017. PNB and entities directly controlled by PNB are collectively referred to as government-related entities to the Group and the Bank. All the transactions entered into by the Group and the Bank with the government-related entities are conducted in the ordinary course of the Group’s and of the Bank’s business on terms comparable to those with other entities that are not government-related. The Group has established credit policies, pricing strategy and approval process for loans and financing, which are independent of whether the counterparties are governmentrelated entities or not. Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 47.SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONT’D.) (i) Individually significant transactions and balances with PNB due to its size of transactions: Group Transactions during the financial year: Interest and finance income Balances as at reporting dates: Loans, advances and financing Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 381,148 360,895 289,789 217,361 8,446,507 9,459,175 3,695,000 4,307,680 (ii) Collectively, but not individually, significant transactions The Group has transactions with other government-related entities including but not limited to provision of loans and financing, deposits placement, brokerage services and underwriting of insurance and takaful. For the financial year ended 31 December 2017, management estimates that the aggregate amount of the significant transactions with other government-related entities for the Group is at 0.2% (2016: 0.1%) and the Bank is at 0.2% (2016: 0.2%) of their total interest and finance income. For the financial year ended 31 December 2017, management estimates that the aggregate amount of the significant balances due from other government-related entities for the Group and the Bank are 0.2% and 0.1% (2016: 0.2% and 0.1%) respectively of their total loans, advances and financing. 161
164. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 48 .CREDIT EXPOSURE ARISING FROM CREDIT TRANSACTIONS WITH CONNECTED PARTIES The credit exposures disclosed below are based on the requirement of Paragraph 9.1 of BNM revised Guidelines on Credit Transactions and Exposures with Connected Parties. Based on these guidelines, a connected party refers to the following: (i) Directors of the Bank and their close relatives; (ii) Controlling shareholder of the Bank and his close relatives; (iii) Influential shareholder of the Bank and his close relatives; (iv) Executive officer, being a member of management having authority and responsibility for planning, directing and/or controlling activities of the Bank and his close relatives; (v) 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; (vi) Firms, partnerships, companies or any legal entities which control, or are controlled by any person listed in (i) to (v) 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; (vii) Any person for whom the persons listed in (i) to (v) above is a guarantor; and (viii)Subsidiary of or an entity controlled by the Bank and its connected parties. Credit transactions and exposures to connected parties as disclosed below include the extension of credit facilities and/or off-balance sheet credit exposures such as guarantees, trade-related facilities and loan commitments. Group Outstanding credit exposures with connected parties (RM’000) Percentage of outstanding credit exposures to connected parties as proportion of total credit exposures Percentage of outstanding credit exposures to connected parties which is impaired* or in default Bank 2017 2016 2017 2016 20,923,529 21,695,021 32,673,755 37,789,161 2.7% 3.0% 6.0% 7.1% – – – – * Impaired refers to non-performing as stated in Paragraph 9.1 of Bank Negara Malaysia’s revised Guidelines on Credit Transactions and Exposures with Connected Parties. 162
165. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (a) Basic EPS The basic EPS of the Group and of the Bank are calculated by dividing the net profit for the financial year attributable to equity holders of the Bank by the weighted average number of ordinary shares in issue during the financial year. Group Net profit for the financial year attributable to equity holders of the Bank (RM’000) Weighted average number of ordinary shares in issue (’000) Basic earnings per share (sen) Bank 2017 2016 2017 2016 7,520,542 6,742,992 6,122,875 6,422,644 10,439,428 9,939,881 10,439,428 9,939,881 72.0 67.8 58.7 64.6 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 49.EARNINGS PER SHARE (“EPS”) (b) Diluted EPS The diluted EPS of the Group and of the Bank are calculated by dividing the net profit for the financial year attributable to equity holders of the Bank by the weighted average number of ordinary shares in issue, which has been adjusted for the number of ordinary shares that could have been issued under the Maybank Group Employees’ Share Scheme (“ESS”). The details of ESS are disclosed in Note 32(c). In the diluted EPS calculation, it is assumed that certain number of ordinary shares under the ESS relating to the RSU are vested and awarded to employees through issuance of additional ordinary shares. A calculation is done to determine the number of ordinary shares that could have been issued at fair value (determined as the last 5-day Volume Weighted Average Market Price (“VWAMP”) of the Bank’s ordinary shares during the financial year) based on the monetary value of the ESS entitlement attached to the outstanding RSU granted. This calculation serves to determine the number of dilutive shares to be added to the weighted average ordinary shares in issue for the purpose of computing the dilution. No adjustment is made to the net profit for the financial year. Group 2017 2016 2017 2016 7,520,542 6,742,992 6,122,875 6,422,644 Weighted average number of ordinary shares in issue (’000) Effects of dilution (’000) 10,439,428 2,317 9,939,881 385 10,439,428 2,317 9,939,881 385 Adjusted weighted average number of ordinary shares in issue (’000) 10,441,745 9,940,266 10,441,745 9,940,266 72.0 67.8 58.6 64.6 Net profit for the financial year attributable to equity holders of the Bank (RM’000) Diluted earnings per share (sen) Bank ESOS granted to employees under the ESS have not been included in the calculation of diluted earnings per share for the financial year ended 31 December 2016, as the ESOS are non-dilutive potential ordinary shares as at 31 December 2016. 163
166. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 50 .DIVIDENDS Net dividends per share Group and Bank Final dividend of 32 sen single-tier dividend in respect of the financial year ended 31 December 2016 (Note 50(c)(i)) First single-tier interim dividend of 23 sen in respect of the financial year ended 31 December 2017 (Note 50(c)(ii)) Final dividend of 30 sen single-tier dividend in respect of the financial year ended 31 December 2015 First single-tier interim dividend of 20 sen in respect of the financial year ended 31 December 2016 Less: Dividend on shares held-in-trust pursuant to ETF mechanism 2017 RM’000 2016 RM’000 2017 sen 2016 sen 3,282,722 – 32.00 – 2,436,992 – 23.00 – – 2,932,078 – 30.00 – 2,001,766 – 20.00 55.00 50.00 5,719,714 (11,171) 4,933,844 (6,955) 5,708,543 4,926,889 (a) Proposed final dividend At the forthcoming Annual General Meeting, a final single-tier dividend in respect of the current financial year ended 31 December 2017 of 32 sen single-tier dividend per ordinary share, amounting to a net dividend payable of RM3,450,478,489 (based on 10,782,745,278 ordinary shares in issue as at 31 December 2017) will be proposed for the shareholders’ approval. The proposed final single-tier dividend consists of cash portion of 18 sen per ordinary share to be paid in cash amounting to RM1,940,894,150 and an electable portion of 14 sen per ordinary share amounting to RM1,509,584,339. The electable portion can be elected to be reinvested in new ordinary shares in accordance with the Dividend Reinvestment Plan (“DRP”) as disclosed in Note 32(b) and subject to the relevant regulatory approvals as well as shareholders’ approval at the forthcoming Annual General Meeting. The financial statements for the current financial year ended 31 December 2017 do not reflect this proposed final dividend. Such dividend, if approved by the shareholders, will be accounted for in the statements of changes in equity as an appropriation of retained profits in the next financial year ending 31 December 2018. (b) Dividend Reinvestment Plan (“DRP”) The Bank via the announcement on 25 March 2010 proposed to undertake a recurrent and optional DRP that allows shareholders of the Bank to reinvest electable portion of their dividends into new ordinary share(s) in the Bank. Details of the DRP are disclosed in Note 32(b). (c) Dividends paid during the financial year (i) The final dividend consists of cash portion of 10 sen single-tier dividend per ordinary share paid in cash amounting to RM1,025,850,715 and an electable portion of 22 sen per ordinary share amounting to RM2,256,871,573 which elected to be reinvested in new Maybank Shares in accordance with the DRP, in respect of the financial year ended 31 December 2016. (ii) The interim single-tier dividend consists of cash portion of 5 sen per ordinary share paid in cash amounting to RM529,780,796 and an electable portion of 18 sen per ordinary share amounting to RM1,907,210,867 which elected to be reinvested in new Maybank Shares in accordance with the DRP, in respect of the current financial year ended 31 December 2017. (d) Dividends paid by Maybank’s subsidiaries to non-controlling interests Dividends paid by Maybank’s subsidiaries to non-controlling interests amounting to RM99,998,000 during the financial year ended 31 December 2017 (2016: RM95,077,000). 164
167. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The risk-weighted exposures of the Group and of the Bank are as follows: Credit equivalent amount* RM’000 Riskweighted amount* RM’000 12,970,421 18,427,282 6,029,951 12,064,534 9,348,060 1,107,435 6,552,472 6,086,500 694,977 37,427,654 22,520,029 13,333,949 102,342,408 37,907,505 20,083,466 26,263,062 10,313,630 12,565,526 140,249,913 46,346,528 22,879,156 12,098,705 412,246 180,312 Total credit-related commitments and contingencies 189,776,272 69,278,803 36,393,417 Derivative financial instruments Foreign exchange related contracts: – Less than one year – One year to less than five years – Five years and above 281,135,919 30,150,396 4,084,188 4,013,251 1,450,112 89,195 1,058,177 1,176,205 48,174 315,370,503 5,552,558 2,282,556 77,147,663 163,085,655 56,135,013 434,138 4,039,064 1,867,117 193,277 1,659,736 1,613,596 296,368,331 6,340,319 3,466,609 5,631,415 4,193,817 33,663 10,492 10,944 – 3,792 1,976 – 9,858,895 21,436 5,768 Total treasury-related commitments and contingencies 621,597,729 11,914,313 5,754,933 Total commitments and contingencies 811,374,001 81,193,116 42,148,350 Group 2017 Contingent liabilities Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Commitments Irrevocable commitments to extend credit: – Maturity within one year – Maturity exceeding one year Miscellaneous commitments and contingencies Interest rate related contracts: – Less than one year – One year to less than five years – Five years and above Equity and commodity related contracts: – Less than one year – One year to less than five years – Five years and above Full commitment RM’000 Basel II Pillar 3 pg. 288-351 (a) 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 Financials pg. 10-287 51.COMMITMENTS AND CONTINGENCIES * The credit equivalent amount and the risk-weighted amount are derived at using the credit conversion factors and risk-weights respectively as specified by BNM for regulatory capital adequacy purposes. 165
168. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 51 .COMMITMENTS AND CONTINGENCIES (CONT’D.) (a) 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 (cont’d.). The risk-weighted exposures of the Group and of the Bank are as follows (cont’d.): Credit equivalent amount* RM’000 Riskweighted amount* RM’000 12,656,766 20,138,714 6,332,853 65,885 11,637,132 9,865,761 1,206,287 – 6,773,719 6,526,837 806,417 – 39,194,218 22,709,180 14,106,973 104,587,826 40,215,328 16,793,150 29,185,348 9,513,436 14,299,675 144,803,154 45,978,498 23,813,111 9,567,119 720,161 366,431 Total credit-related commitments and contingencies 193,564,491 69,407,839 38,286,515 Derivative financial instruments Foreign exchange related contracts: – Less than one year – One year to less than five years – Five years and above 225,896,876 25,804,447 5,914,955 4,022,354 2,706,778 1,045,414 1,714,681 1,715,007 680,700 257,616,278 7,774,546 4,110,388 98,606,680 144,934,350 60,944,220 446,302 2,615,144 1,371,891 235,998 1,163,462 1,008,054 304,485,250 4,433,337 2,407,514 7,708,321 3,030,606 33,663 43,124 – – 21,111 – – 10,772,590 43,124 21,111 Total treasury-related commitments and contingencies 572,874,118 12,251,007 6,539,013 Total commitments and contingencies 766,438,609 81,658,846 44,825,528 Group 2016 Contingent liabilities Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Obligations under underwriting agreements Commitments Irrevocable commitments to extend credit: – Maturity within one year – Maturity exceeding one year Miscellaneous commitments and contingencies Interest rate related contracts: – Less than one year – One year to less than five years – Five years and above Equity and commodity related contracts: – Less than one year – One year to less than five years – Five years and above Full commitment RM’000 * The credit equivalent amount and the risk-weighted amount are derived at using the credit conversion factors and risk-weights respectively as specified by BNM for regulatory capital adequacy purposes. 166
169. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The risk-weighted exposures of the Group and of the Bank are as follows (cont’d.): Credit equivalent amount* RM’000 Riskweighted amount* RM’000 10,665,916 14,618,417 5,600,847 10,373,876 7,207,090 937,807 5,071,621 4,429,669 548,026 30,885,180 18,518,773 10,049,316 79,885,420 30,199,078 14,787,173 23,168,096 6,948,719 10,967,370 110,084,498 37,955,269 17,916,089 9,798,574 411,803 180,312 Total credit-related commitments and contingencies 150,768,252 56,885,845 28,145,717 Derivative financial instruments Foreign exchange related contracts: – Less than one year – One year to less than five years – Five years and above 273,366,420 30,556,992 4,084,188 3,815,458 1,366,385 243 991,438 1,118,455 125 308,007,600 5,182,086 2,110,018 75,797,820 163,096,687 55,929,064 296,628 3,484,049 1,879,885 148,788 1,374,343 1,610,746 294,823,571 5,660,562 3,133,877 3,649,780 4,192,152 10,492 10,944 3,792 1,976 7,841,932 21,436 5,768 Total treasury-related commitments and contingencies 610,673,103 10,864,084 5,249,663 Total commitments and contingencies 761,441,355 67,749,929 33,395,380 Bank 2017 Contingent liabilities Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Commitments Irrevocable commitments to extend credit: – Maturity within one year – Maturity exceeding one year Miscellaneous commitments and contingencies Interest rate related contracts: – Less than one year – One year to less than five years – Five years and above Equity and commodity related contracts: – Less than one year – One year to less than five years Full commitment RM’000 Basel II Pillar 3 pg. 288-351 (a) 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 (cont’d.). The Financials pg. 10-287 51.COMMITMENTS AND CONTINGENCIES (CONT’D.) * The credit equivalent amount and the risk-weighted amount are derived at using the credit conversion factors and risk-weights respectively as specified by BNM for regulatory capital adequacy purposes. 167
170. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 51 .COMMITMENTS AND CONTINGENCIES (CONT’D.) (a) 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 (cont’d.). The risk-weighted exposures of the Group and of the Bank are as follows (cont’d.): Credit equivalent amount* RM’000 Riskweighted amount* RM’000 10,494,313 17,336,804 5,767,014 10,133,153 8,226,900 1,029,670 5,276,902 5,175,883 644,283 33,598,131 19,389,723 11,097,068 80,959,286 31,500,386 10,987,463 25,583,666 6,040,954 12,464,323 112,459,672 36,571,129 18,505,277 8,007,674 346,853 161,538 Total credit-related commitments and contingencies 154,065,477 56,307,705 29,763,883 Derivative financial instruments Foreign exchange related contracts: – Less than one year – One year to less than five years – Five years and above 221,711,497 26,688,364 5,914,955 3,860,533 2,669,793 944,436 1,657,761 1,703,282 639,275 254,314,816 7,474,762 4,000,318 97,180,404 145,209,928 60,944,220 296,982 2,279,530 1,376,823 169,061 931,515 945,673 303,334,552 3,953,335 2,046,249 6,387,247 3,027,432 43,124 – 21,111 – 9,414,679 43,124 21,111 Total treasury-related commitments and contingencies 567,064,047 11,471,221 6,067,678 Total commitments and contingencies 721,129,524 67,778,926 35,831,561 Bank 2016 Contingent liabilities Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Commitments Irrevocable commitments to extend credit: – Maturity within one year – Maturity exceeding one year Miscellaneous commitments and contingencies Interest rate related contracts: – Less than one year – One year to less than five years – Five years and above Equity and commodity related contracts: – Less than one year – One year to less than five years Full commitment RM’000 * The credit equivalent amount and the risk-weighted amount are derived at using the credit conversion factors and risk-weights respectively as specified by BNM for regulatory capital adequacy purposes. 168
171. 31 DECEMBER 2017 (a) Financial risk management overview Risk Management is a critical pillar of the Group’s operating model, complementing the other two pillars, which are business sectors and support sectors. A dedicated Board-level Risk Management Committee provides risk oversight of all material risks across the Group. The Management-level Risk Management Committees, which include the Group Executive Risk Committee, Group Operational Risk Management Committee, Group Asset and Liability Management Committee (“Group ALCO”) and Group Management Credit Committee, are responsible for the management of all material risks within the Group. The Group’s approach to risk management is premised on the following Seven Principles of Risk Management: (i) The Group’s and the Bank’s derivative financial instruments are subject to market, credit and liquidity risks, as follows: • Market risk on derivatives is the potential loss to the value of these contracts due to changes in price of the underlying items such as equities, interest rates, foreign exchange rates, credit spreads, commodities or other indices. The notional or contractual amounts provide only the volume of transactions outstanding at the reporting date and do not represent the amount at risk. Exposure to market risk may be reduced through offsetting items from on and off-balance sheet positions; • Credit risk arises from the possibility that a counterparty may be unable to meet the terms of a contract in which the Bank and certain subsidiaries have a gain position. As at 31 December 2017, the amount of credit risk in the Group, measured in terms of the cost to replace the profitable contracts, was RM6,704.7 million (2016: RM8,311.7 million). This amount will increase or decrease over the life of the contracts, mainly as a function of maturity dates and market rates or prices; and • Liquidity risk on derivatives is the risk that the derivative position cannot be closed out promptly. Exposure to liquidity risk is reduced through contracting derivatives where the underlying items are widely traded. (ii) There have been no changes since the end of the previous financial year in respect of the following: • The types of derivative financial contracts entered into and the rationale for entering into such contracts, as well as the expected benefits accruing from these contracts; • The risk management policies in place for mitigating and controlling the risks associated with these financial derivative contracts; and • The related accounting policies. The Financials pg. 10-287 (a) 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 (cont’d.). 52.FINANCIAL RISK MANAGEMENT POLICIES Basel II Pillar 3 pg. 288-351 51.COMMITMENTS AND CONTINGENCIES (CONT’D.) Our Performance pg. 4-8 NOTES TO THE FINANCIAL STATEMENTS (a) Establishment of a risk appetite and strategy which articulates the nature, type and level of risk the Group is willing to assume and must be approved by the Board. (b) Capital management driven by the Group’s strategic objectives and accounts for the relevant regulatory, economic and commercial environments in which the Group operates. (c) Proper governance and oversight through a clear, effective and robust governance structure with well-defined, transparent and consistent lines of responsibility established within the Group. (d) Promotion of a strong risk culture which supports and provides appropriate standards and incentives for professional and responsible behaviour. (e) Implementation of risk frameworks and policies to ensure that risk management practices and processes are effective at all levels. (f) Execution of sound risk management processes to actively identify, measure, control, monitor and report risks inherent in all products and activities undertaken by the Group. (g) Ensure sufficient resources and systems infrastructure are in place to enable effective risk management. (b) Arising from the recourse obligation on loans and financing sold to Cagamas Berhad as disclosed in Note 26, the Group and the Bank are contingently liable in respect of loans and financing sold to Cagamas Berhad on the condition that they undertake to administer the loans and financing on behalf of Cagamas Berhad and to buy back any loans and financing which are regarded as defective based on pre-determined and agreed-upon prudential criteria with recourse against the originators. (c) Contingent liabilities There is no material contingent liabilities during the financial year ended 31 December 2017. 169
172. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 . FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (b) Financial instrument by category Group 2017 Designated at fair value through profit Held-foror loss trading RM’000 RM’000 Assets Cash and short-term funds – Deposits and placements with financial institutions – Financial assets purchased under resale agreements – Financial investments portfolio* 11,930,365 Loans, advances and financing – Derivative assets 6,704,651 Reinsurance/retakaful assets and other insurance receivables – Other assets – Investment properties – Statutory deposits with central banks – Interest in associates and joint ventures – Property, plant and equipment – Intangible assets – Deferred tax assets – Total assets 18,635,016 Sub-total RM’000 Assets not in scope of MFRS 139 RM’000 Total RM’000 50,334,290 50,334,290 – 50,334,290 16,988,391 16,988,391 – 16,988,391 Availablefor-sale RM’000 Held-tomaturity RM’000 Loans and receivables RM’000 – – – – – – – – 13,187,128 109,070,244 – – – – – 8,514,283 8,514,283 20,184,773 – 154,372,510 – 485,584,362 485,584,362 – – 6,704,651 – 8,514,283 – 154,372,510 – 485,584,362 – 6,704,651 – – – – – – – – – 711,317 7,588,054 – 711,317 7,588,054 – 3,222,455 2,110,086 753,555 3,933,772 9,698,140 753,555 – – – 15,397,213 15,397,213 – 15,397,213 – – – – – – – – – – – – – – – – – – – – 2,772,324 2,635,018 6,753,939 859,318 2,772,324 2,635,018 6,753,939 859,318 13,187,128 109,070,244 20,184,773 585,117,910 746,195,071 19,106,695 765,301,766 * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity. Group 2017 Liabilities Customers' funding: – Deposits from customers – Investment accounts of customers*** Deposits and placements from financial institutions Obligations on financial assets sold under repurchase agreements Bills and acceptances payable Financial liabilities at fair value through profit or loss Derivative liabilities** Insurance/takaful contract liabilities and other insurance payables Other liabilities Recourse obligation on loans and financing sold to Cagamas Provision for taxation and zakat Deferred tax liabilities Borrowings Subordinated obligations Capital securities Total liabilities Designated at fair value through profit Held-foror loss trading RM’000 RM’000 – – – Other financial liabilities RM’000 Sub-total RM’000 – 502,017,445 502,017,445 – 24,555,445 24,555,445 – 42,598,131 42,598,131 Liabilities not in scope of MFRS 139 RM’000 Total RM’000 – 502,017,445 – 24,555,445 – 42,598,131 – – – 7,221,015 – – 6,375,815 – 5,367,086 1,894,046 – – 5,367,086 1,894,046 6,375,815 7,221,015 – – – – 5,367,086 1,894,046 6,375,815 7,221,015 – – – – 541,275 15,456,842 541,275 15,456,842 24,577,568 3,722,298 25,118,843 19,179,140 – – – – – – – – – – – – 1,543,501 – – 34,505,618 11,979,323 6,284,180 1,543,501 – – 34,505,618 11,979,323 6,284,180 – 746,494 732,079 – – – 1,543,501 746,494 732,079 34,505,618 11,979,323 6,284,180 7,221,015 6,375,815 646,742,892 660,339,722 29,778,439 690,118,161 ** Included in derivative liabilities are derivative instruments designated as effective hedging instruments. Refer to Fair Value Hedge disclosed in Note 12. ***Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). 170
173. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (b) Financial instrument by category (cont’d.) Group 2016 Held-fortrading RM’000 Assets Cash and short-term funds – Deposits and placements with financial institutions – Financial assets purchased under resale agreements – Financial investments portfolio* 10,586,369 Loans, advances and financing – Derivative assets 8,311,703 Reinsurance/retakaful assets and other insurance receivables – Other assets – Investment properties – Statutory deposits with central banks – Interest in associates and joint ventures – Property, plant and equipment – Intangible assets – Deferred tax assets – Total assets 18,898,072 Designated at fair value through profit or loss RM’000 Availablefor-sale RM’000 Held-tomaturity RM’000 Loans and receivables RM’000 – – – – – – – 12,909,681 – – – 92,384,834 – – – – – – – – – – – 447,015 8,557,540 – 447,015 8,557,540 – 3,692,581 1,968,020 758,488 4,139,596 10,525,560 758,488 – – – 15,384,134 15,384,134 – 15,384,134 – – – – – – – – – – – – – – – – – – – – 3,210,436 2,595,497 7,345,524 930,344 3,210,436 2,595,497 7,345,524 930,344 12,909,681 92,384,834 Sub-total RM’000 Assets not in scope of MFRS 139 RM’000 Total RM’000 58,140,545 58,140,545 – 58,140,545 13,444,630 13,444,630 – 13,444,630 – 2,492,412 2,492,412 15,021,597 – 130,902,481 – 477,774,903 477,774,903 – – 8,311,703 15,021,597 576,241,179 715,455,363 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) – 2,492,412 – 130,902,481 – 477,774,903 – 8,311,703 20,500,890 735,956,253 * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity. Group 2016 Liabilities Customers' funding: – Deposits from customers – Investment accounts of customers*** Deposits and placements from financial institutions Obligations on financial assets sold under repurchase agreements Bills and acceptances payable Financial liabilities at fair value through profit or loss Derivative liabilities** Insurance/takaful contract liabilities and other insurance payables Other liabilities Recourse obligation on loans and financing sold to Cagamas Provision for taxation and zakat Deferred tax liabilities Borrowings Subordinated obligations Capital securities Total liabilities Designated at fair value through profit Held-foror loss trading RM’000 RM’000 – – – Other financial liabilities RM’000 Sub-total RM’000 – 485,523,920 485,523,920 – 31,544,587 31,544,587 – 30,854,693 30,854,693 Liabilities not in scope of MFRS 139 RM’000 Total RM’000 – 485,523,920 – 31,544,587 – 30,854,693 – – – 8,828,060 – – 3,587,230 – 2,957,951 1,808,066 – – 2,957,951 1,808,066 3,587,230 8,828,060 – – – – 2,957,951 1,808,066 3,587,230 8,828,060 – – – – 435,507 14,116,139 435,507 14,116,139 23,513,212 3,172,167 23,948,719 17,288,306 – – – – – – – – – – – – 974,588 – – 34,867,056 15,900,706 6,199,993 974,588 – – 34,867,056 15,900,706 6,199,993 – 419,729 777,826 – – – 974,588 419,729 777,826 34,867,056 15,900,706 6,199,993 8,828,060 3,587,230 625,183,206 637,598,496 27,882,934 665,481,430 ** Included in derivative liabilities are derivative instruments designated as effective hedging instruments. Refer to Fair Value Hedge disclosed in Note 12. ***Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). 171
174. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (b) Financial instrument by category (cont’d.) Bank 2017 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Loans, advances and financing Derivative assets Other assets Statutory deposits with central banks Investment in subsidiaries Interest in associates and joint ventures Property, plant and equipment Intangible assets Deferred tax assets Total assets Designated at fair value through profit Held-foror loss trading RM’000 RM’000 Availablefor-sale RM’000 Held-tomaturity RM’000 Loans and receivables RM’000 Sub-total RM’000 Assets not in scope of MFRS 139 RM’000 Total RM’000 – – – – 30,714,527 30,714,527 – 30,714,527 – – – – 21,382,493 21,382,493 – 21,382,493 – 7,896,677 – 6,865,221 – – – – – – – 89,286,739 – – – – – – – – – – – 7,746,700 – 7,746,700 – – 22,057,063 7,746,700 22,057,063 – – – – – – – – – – – – – – – – – – – – – – – – 472,016 1,165,908 568,030 315,013 472,016 1,165,908 568,030 315,013 14,761,898 – 89,286,739 – 7,633,503 7,633,503 17,763,565 – 114,946,981 – 290,997,969 290,997,969 – – 6,865,221 – 4,207,727 4,207,727 17,763,565 362,682,919 484,495,121 – 7,633,503 – 114,946,981 – 290,997,969 – 6,865,221 593,670 4,801,397 25,171,700 509,666,821 * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity. Bank 2017 Liabilities Deposits from customers Deposits and placements from financial institutions Obligations on financial assets sold under repurchase agreements Bills and acceptances payable Financial liabilities at fair value through profit or loss Derivative liabilities** Other liabilities Recourse obligation on loans and financing sold to Cagamas Provision for taxation and zakat Borrowings Subordinated obligations Capital securities Total liabilities Held-fortrading RM’000 Designated at fair value through profit or loss RM’000 Other financial liabilities RM’000 – – – Sub-total RM’000 Liabilities not in scope of MFRS 139 RM’000 Total RM’000 328,938,600 328,938,600 – 328,938,600 – 37,645,134 37,645,134 – 37,645,134 – – – – 5,189,316 1,384,983 5,189,316 1,384,983 – – 5,189,316 1,384,983 – 7,179,998 – 5,483,120 – – – – 15,207,920 5,483,120 7,179,998 15,207,920 – – 1,702,677 5,483,120 7,179,998 16,910,597 – – – – – – – – – – 1,543,501 – 27,106,442 9,362,526 6,284,180 1,543,501 – 27,106,442 9,362,526 6,284,180 – 385,876 – – – 1,543,501 385,876 27,106,442 9,362,526 6,284,180 7,179,998 5,483,120 432,662,602 445,325,720 2,088,553 447,414,273 ** Included in derivative liabilities are derivative instruments designated as effective hedging instruments. Refer to Fair Value Hedge disclosed in Note 12. 172
175. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (b) Financial instrument by category (cont’d.) Bank 2016 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Loans, advances and financing Derivative assets Other assets Statutory deposits with central banks Investment in subsidiaries Interest in associates and joint ventures Property, plant and equipment Intangible assets Deferred tax assets Total assets Designated at fair value through profit Held-foror loss trading RM’000 RM’000 Availablefor-sale RM’000 Held-tomaturity RM’000 Loans and receivables RM’000 Sub-total RM’000 Assets not in scope of MFRS 139 RM’000 Total RM’000 – – – – 38,350,931 38,350,931 – 38,350,931 – – – – 19,339,287 19,339,287 – 19,339,287 – 7,980,314 – 8,320,918 – – – – – – – 74,904,201 – – – – – – – – – – – 7,530,325 – 7,530,325 – – 21,586,547 7,530,325 21,586,547 – – – – – – – – – – – – – – – – – – – – – – – – 451,518 1,290,761 530,049 358,687 451,518 1,290,761 530,049 358,687 16,301,232 – 74,904,201 – 2,213,113 2,213,113 12,582,311 – 95,466,826 – 295,020,136 295,020,136 – – 8,320,918 – 4,937,972 4,937,972 12,582,311 367,391,764 471,179,508 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) – 2,213,113 – 95,466,826 – 295,020,136 – 8,320,918 665,540 5,603,512 24,883,102 496,062,610 * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity. Bank 2016 Liabilities Deposits from customers Deposits and placements from financial institutions Obligations on financial assets sold under repurchase agreements Bills and acceptances payable Financial liabilities at fair value through profit or loss Derivative liabilities** Other liabilities Recourse obligation on loans and financing sold to Cagamas Provision for taxation and zakat Borrowings Subordinated obligations Capital securities Total liabilities Held-fortrading RM’000 Designated at fair value through profit or loss RM’000 Other financial liabilities RM’000 – – – – – – Sub-total RM’000 Liabilities not in scope of MFRS 139 RM’000 Total RM’000 331,878,295 29,856,710 331,878,295 29,856,710 – – 331,878,295 29,856,710 – – 2,957,951 1,000,777 2,957,951 1,000,777 – – 2,957,951 1,000,777 – 8,802,221 – 2,685,139 – – – – 11,081,676 2,685,139 8,802,221 11,081,676 – – 1,417,022 2,685,139 8,802,221 12,498,698 – – – – – – – – – – 974,588 – 28,927,427 13,202,872 6,225,926 974,588 – 28,927,427 13,202,872 6,225,926 – 47,374 – – – 974,588 47,374 28,927,427 13,202,872 6,225,926 8,802,221 2,685,139 426,106,222 437,593,582 1,464,396 439,057,978 ** Included in derivative liabilities are derivative instruments designated as effective hedging instruments. Refer to Fair Value Hedge disclosed in Note 12. 173
176. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) The Group wide hierarchy of credit approving authorities and committee structures are in place to ensure appropriate underwriting standards are enforced consistently throughout the Group. In managing large exposures and to avoid undue concentration of credit risk in its loans and financing portfolio, the Group has emplaced, amongst others, the following limits and related lending guidelines, for: (c) Credit risk management 1. Credit risk management overview Credit risk definition Credit risk is the risk of loss of principal or income arising from the failure of an obligor or counterparty to perform their contractual obligations in accordance with agreed terms. •Countries; Management of credit risk Reviews are conducted at least once a year with updated information on borrower’s/customer’s financial position, market position, industry and economic condition and account conduct. Corrective actions are taken when the accounts show signs of credit deterioration. Retail credit exposures are managed on a programme basis. Credit programmes are assessed jointly between credit risk and business units. Reviews on credit programmes are conducted at least once a year to assess the performance of the portfolios. Counterparty credit risk is the risk arising from the possibility that a counterparty may default on current and future payments as required by contract for treasury-related activities. Counterparty credit risk originates from the Group’s lending business, investment and treasury activities that impact the Group’s trading and banking books through dealings in foreign exchange, money market instruments, fixed income securities, commodities, equities and over-the-counter (“OTC”) derivatives. The primary distinguishing feature of counterparty credit risk compared to other forms of credit risk is that the future value of the underlying contract is uncertain, and may be either positive or negative depending on the value of all future cash flows. 174 • Business segments; Corporate and institutional credit risks are assessed by business units and evaluated and approved by an independent party within the Group, where each customer is assigned a credit rating based on the assessment of relevant qualitative and quantitative factors including borrower’s/customer’s financial position, future cash flows, types of facilities and securities offered. Counterparty credit risk exposures are managed via counterparty limits either on a single counterparty basis or counterparty group basis that adheres to BNM’s Single Counterparty Exposure Limits. The Group actively monitors and manages its exposure to ensure that exposures to a single counterparty or a group of connected counterparties are within prudent limits at all times. Counterparty risk exposures which may be materially affected by market risk events are identified, reviewed and acted upon by management and highlighted to the appropriate risk committees. For counterparty risk exposures (on-balance sheet), the Group employs risk treatments that are in accordance with BNM Guidelines and Basel II requirements. While for off-balance sheet exposures, the Group measures the credit risk using Credit Risk Equivalent via the Current Exposure Method. This method calculates the Group's credit risk exposure after considering both the mark-to-market exposures and the appropriate add-on factors for potential future exposures. The add-on factors employed are in accordance with BNM Guidelines and Basel II requirements. • Economic sectors; • Single customer groups; • Banks and non-bank financial institutions; • Counterparties; and •Collaterals. Reviews of the said limits and related lending guidelines are undertaken on a periodic basis, whereupon any emerging concentration risks are addressed accordingly. Any exception to the limits and lending guidelines would be subject to approvals from higher credit authorities. The Group has dedicated teams at Head Office and Regional Offices to effectively manage vulnerable corporate, institutional and consumer credits of the Group. Special attention is given to these vulnerable credits where more frequent and intensive reviews are performed in order to prevent further deterioration or to accelerate remedial action. The Group’s credit approving process encompasses pre-approval evaluation, approval and post-approval evaluation. Group Risk is responsible for developing, enhancing and communicating an effective and consistent credit risk management policies, tools and methodologies across the Group to ensure appropriate standards are in place to identify, measure, control, monitor and report such risks. In view that authority limits are directly related to the risk levels of the borrower and transaction, a Risk-Based Authority Limit structure was implemented based on the Expected Loss (“EL”) principles and internally developed Credit Risk Rating System (“CRRS”). Credit risk measurement The Group’s retail portfolios are under Basel II Advanced Internal Ratings-Based (“AIRB”) Approach. This approach calls for more extensive reliance on the Bank’s own internal experience whereby estimations for all the three components of Risk-Weighted Assets (“RWA”) calculation namely Probability of Default (“PD”), Exposure at Default (“EAD”) and Loss Given Default (“LGD”) are based on its own historical data. Separate PD, EAD and LGD statistical models were developed at the respective retail portfolio level; each model covering borrowers with fundamentally similar risk profiles in a portfolio. The estimates derived from the models are used as input for RWA calculations. For non-retail portfolios, the Group uses internal credit models for evaluating the majority of its credit risk exposures. For Corporate and Bank portfolios, the Group has adopted the Foundation Internal Ratings-Based (“FIRB”) Approach, which allows the Group to use its internal PD estimates to determine an asset risk weighting and apply supervisory estimates for LGD and EAD.
177. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Credit risk management (cont’d.) 1. Credit risk management overview (cont’d.) Credit risk measurement (cont’d.) CRRS is developed to allow the Group to identify, assess and measure corporate, commercial and small business borrowers’ credit risk. CRRS is a statistical default prediction model. The model was developed and recalibrated to suit the Group’s banking environment using internal data. The model development process was conducted and documented in line with specific criteria for model development in accordance to Basel II. The EL principles employed in the Group enables the calculation of expected loss using PD estimates (facilitated by the CRRS), LGD and EAD. To account for differences in risk due to industry and size, CRRS is designed to rate all corporate and commercial borrowers by their respective industry segments (i.e. manufacturing, services, trading, contractors, property developers (single project) and property investors (single property)). 2. Maximum exposure to credit risk The following analysis represents the Group’s maximum exposure to credit risk of on-balance sheet financial assets and off-balance sheet exposure, excluding any collateral held or other credit enhancements. For on-balance sheet financial assets, the exposure to credit risk equals their carrying amount. For off-balance sheet exposure, the maximum exposure to credit risk is the maximum amount that the Group would have to pay if the obligations of the instruments issued are called upon and/or the full amount of the undrawn credit facilities granted to customers/borrowers. Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) Maximum exposure Group Credit exposure for on-balance sheet financial assets: Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Loans, advances and financing Derivative assets Reinsurance/retakaful assets and other insurance receivables Other assets Statutory deposits with central banks Credit exposure for off-balance sheet items: Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Obligations under underwriting agreements Irrevocable commitments to extend credit Miscellaneous Total maximum credit risk exposure * 2017 RM’000 2016 RM’000 50,334,290 16,988,391 8,514,283 148,439,618 485,584,362 6,704,651 711,317 7,588,054 15,397,213 58,140,545 13,444,630 2,492,412 126,232,668 477,774,903 8,311,703 447,015 8,557,540 15,384,134 740,262,179 710,785,550 12,970,421 18,427,282 6,029,951 – 140,249,913 12,098,705 12,656,766 20,138,714 6,332,853 65,885 144,803,154 9,567,119 189,776,272 193,564,491 930,038,451 904,350,041 Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 175
178. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 2. Maximum exposure to credit risk (cont’d.) Maximum exposure Bank Credit exposure for on-balance sheet financial assets: Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Loans, advances and financing Derivative assets Other assets Statutory deposits with central banks Credit exposure for off-balance sheet items: Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Irrevocable commitments to extend credit Miscellaneous Total maximum credit risk exposure * 176 2017 RM’000 2016 RM’000 30,714,527 21,382,493 7,633,503 114,607,977 290,997,969 6,865,221 4,207,727 7,746,700 38,350,931 19,339,287 2,213,113 95,183,910 295,020,136 8,320,918 4,937,972 7,530,325 484,156,117 470,896,592 10,665,916 14,618,417 5,600,847 110,084,498 9,798,574 10,494,313 17,336,804 5,767,014 112,459,672 8,007,674 150,768,252 154,065,477 634,924,369 624,962,069 Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. The financial effect of collateral (quantification of the extent to which collateral and other credit enhancements mitigate credit risk) held for loans, advances and financing as at 31 December 2017 for the Group is at 63% (2016: 62%) and the Bank is at 63% (2016: 61%). The financial effect of collateral held for other financial assets is not significant.
179. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 3. Credit risk concentration profile Concentration risk is the risk that can materialise from excessive exposures to single counterparty and persons connected to it, a particular instrument or a particular market segment/sector. The Group analysed the concentration of credit risk by geographic purpose and industry sector as follows: (a) Concentration of credit risk for both on-balance sheet financial assets and off-balance sheet exposures analysed by geographic purpose are as follows: Deposits Financial and assets placements purchased with under Financial financial resale investments institutions agreements portfolio* RM’000 RM’000 RM’000 Group Cash and short-term funds RM’000 2017 Malaysia 26,585,108 2,562,324 Singapore 4,112,611 4,620,647 7,633,506 Indonesia 2,492,214 200,448 476,499 Labuan Offshore Loans, advances and financing RM’000 – 106,898,454 284,754,428 19,051,616 122,790,709 6,991,198 38,318,562 Reinsurance/ retakaful assets and other Derivative insurance assets receivables RM’000 RM’000 Other assets RM’000 Statutory deposits with central banks RM’000 Commitments and Total contingencies RM’000 RM’000 3,560,461 581,522 4,029,855 527,585 43,263 315,916 3,635,712 162,731,565 7,069,370 436,041,522 117,918,567 56,347 85,847 833,810 2,728,919 52,183,844 45,956,214 2,526,779 365 – – 55,107 14,213,613 3 – 329,004 – 14,598,092 78,694 Hong Kong SAR 5,325,636 2,218,776 – 8,779,923 7,614,672 531,727 – 326,883 – 24,797,617 3,682,442 United States of America 2,258,930 4,300,872 – 1,388,580 800,909 17,622 – 47,903 – 8,814,816 1,848,672 People’s Republic of China 6,079,806 1,455,553 429,563 – 1,709,284 4,038,448 955,283 – 121,178 – 8,709,309 Vietnam 444,866 5,378 – 9,226 834,459 69 – 354,289 113,327 1,761,614 990,946 United Kingdom 571,868 91,817 – 367,530 1,667,590 871,106 – 220,944 – 3,790,855 1,895,693 2,244,685 1,168,721 456,139 401,739 946,088 5,747,122 8,967 – 211,341 1,231,862 10,171,979 Brunei 152,510 – – 48,028 644,542 20 685 13 – 845,798 206,584 Cambodia 288,102 694,171 – – 2,182,505 3 – – 447,627 3,612,408 608,068 Philippines Bahrain Thailand India Others 537 – – – 113,363 – – – – 113,900 246,984 79,760 3,159 – 406,803 1,483,931 1,350 – 588,840 – 2,563,843 119,353 55,502 4,985 2,539 439,366 – – – 35,175 – 537,567 1,263,798 5,342,007 1,400,112 – 1,348,415 379,509 174,108 – 172,903 170,396 8,987,450 4,108,987 50,334,290 16,988,391 8,514,283 148,439,618 485,584,362 6,704,651 711,317 7,588,054 15,397,213 740,262,179 189,776,272 2016 Malaysia 28,310,042 1,570,540 213,970 89,636,943 270,487,252 4,362,974 416,364 2,950,598 Singapore 4,275,667 2,220,722 1,999,143 18,277,599 120,820,329 594,369 30,208 727,983 3,697,356 152,643,376 Indonesia 3,713,146 247,225 279,299 87,454 – 962,493 3,152,642 Labuan Offshore 6,498,514 41,263,643 6,781,599 404,730,282 121,569,505 56,204,416 48,275,038 2,118,065 375 – – – 18,344,825 1 – 3,527 – 18,348,728 – Hong Kong SAR 2,952,460 3,822,226 – 5,124,775 9,850,008 813,757 – 174,499 – 22,737,725 4,229,134 United States of America 5,904,501 1,684,425 – 1,500,159 822,655 140,190 – 2,215,102 – 12,267,032 2,396,837 People’s Republic of China 1,564,805 1,007,302 – 327,735 3,494,302 865,574 – 150 – 7,259,868 4,438,400 416,187 341,968 – – 792,568 48 – 24,666 32,306 1,607,743 733,084 United Kingdom 2,340,612 24,887 – 217,951 1,392,694 1,126,365 – 129,981 – 5,232,490 2,139,852 Philippines Vietnam 1,598,311 199,387 – 692,356 5,434,982 10,591 – 330,561 1,211,195 9,477,383 2,054,687 Brunei 155,368 – – 30,745 623,946 – 443 260,059 81,860 1,152,421 219,404 Cambodia 318,607 980,154 – – 2,435,384 – – – 419,867 4,154,012 546,960 Bahrain 2,683 – – – 437,262 – – – – 439,945 3,987 Thailand 87,370 1,811 – 1,255,425 1,369,037 90 – 595,762 – 3,309,495 112,369 India Others Basel II Pillar 3 pg. 288-351 (c) Credit risk management (cont’d.) The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) 35,081 6,423 – 10,963 – – – 2,543 – 55,010 1,187,469 6,465,330 1,337,560 – 2,659,503 206,016 310,290 – 179,616 7,309 11,165,624 3,539,700 58,140,545 13,444,630 2,492,412 126,232,668 477,774,903 8,311,703 447,015 8,557,540 15,384,134 710,785,550 193,564,491 * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 177
180. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 3. Credit risk concentration profile (cont’d.) (a) Concentration of credit risk for both on-balance sheet financial assets and off-balance sheet exposures analysed by geographic purpose are as follows (cont’d.): Deposits Financial and assets placements purchased with under Financial financial resale investments institutions agreements portfolio* RM’000 RM’000 RM’000 Loans, advances and financing RM’000 Derivative assets RM’000 Other assets RM’000 Statutory deposits with central banks RM’000 Commitments and Total contingencies RM’000 RM’000 Bank Cash and short-term funds RM’000 2017 Malaysia 10,130,929 7,923,886 – 82,624,979 139,999,199 3,834,737 3,296,793 3,827,265 251,637,788 83,904,983 Singapore 3,962,754 4,470,317 7,633,503 18,494,956 121,253,828 514,272 242,750 3,635,712 160,208,092 45,932,762 Indonesia 370,622 181,967 – 283,168 – 3,929 – – 839,686 Labuan Offshore 363 – – – 14,213,613 3 158,186 – 14,372,165 213,846 78,694 Hong Kong SAR 5,298,635 2,218,776 – 8,667,128 7,314,211 531,584 21,572 – 24,051,906 3,681,634 United States of America 2,222,352 4,300,872 – 1,196,260 800,909 17,622 1,859 – 8,539,874 1,848,315 People’s Republic of China 1,455,553 429,563 – 1,593,290 4,038,448 955,283 120,943 – 8,593,080 6,079,806 Vietnam 393,368 – – 9,226 612,173 69 330,376 113,327 1,458,539 988,161 United Kingdom 524,390 91,817 – 271,947 1,667,540 834,392 33,188 – 3,423,274 1,886,252 Philippines 759,902 364,581 – 114,286 – 1,259 – – 1,240,028 161,115 Brunei 152,510 – – 48,028 644,542 20 13 – 845,113 206,584 Cambodia Bahrain 19,556 – – – – – – – 19,556 96,784 537 – – – 113,363 – – – 113,900 246,984 Thailand 30,698 – – 75,580 – – – – 106,278 92,918 India 53,081 602 – – – – – – 53,683 1,240,427 5,339,277 1,400,112 – 1,229,129 340,143 172,051 2,047 170,396 8,653,155 4,108,987 30,714,527 21,382,493 7,633,503 114,607,977 290,997,969 6,865,221 4,207,727 Others 7,746,700 484,156,117 150,768,252 2016 Malaysia 13,539,407 8,589,960 213,969 67,118,915 139,870,209 4,557,502 2,156,703 3,711,494 239,758,159 86,445,557 Singapore 4,073,746 2,085,504 1,999,144 18,031,128 119,844,252 556,551 434,693 3,697,356 150,722,374 48,164,286 Indonesia 462,730 195,576 – 480,527 – 265 – – 1,139,098 Labuan Offshore 370 – – – 18,344,825 – – – 18,345,195 214,434 – Hong Kong SAR 2,910,641 3,822,226 – 5,110,182 9,379,696 812,849 – – 22,035,594 4,217,371 United States of America 5,864,149 1,684,425 – 1,249,983 822,655 132,563 2,086,517 – 11,840,292 2,393,978 People’s Republic of China 1,564,805 1,007,302 – 320,437 3,494,302 865,574 – – 7,252,420 4,438,400 Vietnam 395,141 313,347 – – 647,919 48 – 32,306 1,388,761 729,040 2,302,765 24,886 – 211,221 1,392,671 1,083,817 – – 5,015,360 2,128,984 Philippines 504,873 143,921 – 89,610 – 2,731 – – 741,135 212,337 Brunei 155,368 – – 30,745 623,946 – 260,059 81,860 1,151,978 219,404 88,114 United Kingdom 75,887 134,580 – – – – – – 210,467 Bahrain Cambodia 2,683 – – – 437,262 – – – 439,945 3,987 Thailand 29,188 – – – – 4 – – 29,192 82,918 India Others 34,118 – – – – – – – 34,118 1,186,967 6,435,060 1,337,560 – 2,541,162 162,399 309,014 – 7,309 10,792,504 3,539,700 38,350,931 19,339,287 2,213,113 95,183,910 295,020,136 8,320,918 4,937,972 7,530,325 470,896,592 154,065,477 * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 178
181. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 3. Credit risk concentration profile (cont’d.) (b) Concentration of credit risk for both on-balance sheet financial assets and off-balance sheet exposures analysed by industry sector are as follows: Group 2017 Agriculture Cash and short-term funds RM’000 – Deposits Financial and assets placements purchased with under Financial financial resale investments institutions agreements portfolio* RM’000 RM’000 RM’000 – – 869,939 Loans, advances and financing RM’000 9,908,387 Reinsurance/ retakaful assets and other Derivative insurance assets receivables RM’000 RM’000 11,780 – Other assets RM’000 Statutory deposits with central banks RM’000 – – Commitments and Total contingencies RM’000 RM’000 10,790,106 1,036,750 Mining and quarrying – – – 632,155 5,427,444 – – – – 6,059,599 1,359,453 Manufacturing – – – 230,201 30,237,828 478,109 – – – 30,946,138 9,780,850 Construction – – – 3,526,543 47,742,244 20,628 – – – 51,289,415 17,303,882 Electricity, gas and water supply – – – 6,596,996 10,715,173 25,908 – 74 – 17,338,151 1,578,786 Wholesale, retail trade, restaurants and hotels – – – 1,064,696 43,939,750 17,733 – 262,761 – 45,284,940 27,578,961 Finance, insurance, real estate and business 49,932,599 16,988,391 8,514,283 101,697,798 66,468,786 4,466,617 711,317 5,688,401 15,397,213 269,865,405 63,862,004 9,185 – 180 Transport, storage and communication – – – 4,268,343 17,715,545 – – 378,641 8,990,098 2 – – – – – 215,757,454 20,159 – 776,582 28,681,653 1,654,530 – 860,056 – 16,470,079 8,514,283 148,439,618 485,584,362 6,704,651 711,317 7,588,054 318,911 – – Education, health and others – Household – 401,691 – – 50,334,290 16,988,391 – – Others 2016 Agriculture – 29,174,306 1,030,195 10,929,886 – 21,993,253 – 9,368,741 3,010,687 – 216,554,195 45,251,527 60,772,236 2,543,293 15,397,213 740,262,179 189,776,272 – 12,278,992 1,336,770 Mining and quarrying – – – 638,197 4,136,263 2,026 – – – 4,776,486 1,866,722 Manufacturing – – – 167,058 31,148,589 797,915 – – – 32,113,562 10,638,988 Construction – – – 3,216,081 45,757,600 23,526 – 13 – 48,997,220 19,095,832 Electricity, gas and water supply – – – 6,318,925 13,015,272 22,359 – 77 – 19,356,633 1,066,921 Wholesale, retail trade, restaurants and hotels – – – 884,351 45,196,197 59,886 – 482 – 46,140,916 29,077,578 57,880,343 13,444,630 2,492,412 91,860,833 68,126,734 6,789,295 447,015 6,975,594 15,384,134 263,400,990 56,954,755 – – – 2,568,794 17,620,368 17,895 – 17 381,791 12,208,300 3,613 – – – 205,397,426 2,166 – 596,465 24,238,268 274,111 – 984,892 – 18,021,121 2,492,412 126,232,668 477,774,903 8,311,703 447,015 8,557,540 Finance, insurance, real estate and business Transport, storage and communication Education, health and others – – – Household – – – 260,202 – – 58,140,545 13,444,630 Others 19,166,443 Basel II Pillar 3 pg. 288-351 (c) Credit risk management (cont’d.) The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) – 20,207,074 – 12,593,704 5,287,854 – 205,996,057 47,253,976 44,923,916 2,963,974 15,384,134 710,785,550 193,564,491 * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 179
182. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 3. Credit risk concentration profile (cont’d.) (b) Concentration of credit risk for both on-balance sheet financial assets and off-balance sheet exposures analysed by industry sector are as follows (cont’d.): Bank Cash and short-term funds RM’000 Deposits Financial and assets placements purchased with under Financial financial resale investments institutions agreements portfolio* RM’000 RM’000 RM’000 Loans, advances and financing RM’000 Derivative assets RM’000 Other assets RM’000 Statutory deposits with central banks RM’000 Commitments and Total contingencies RM’000 RM’000 2017 Agriculture – – – 711,635 4,296,204 4,841 – – 5,012,680 774,373 Mining and quarrying – – – 592,830 3,935,894 – – – 4,528,724 932,301 Manufacturing – – – 230,201 16,215,956 476,725 – – 16,922,882 8,099,976 Construction – – – 3,266,376 36,449,121 20,628 – – 39,736,125 13,421,834 Electricity, gas and water supply – – – 3,466,794 7,913,991 379 – – 11,381,164 1,376,310 Wholesale, retail trade, restaurants and hotels – – – 740,375 28,003,517 16,998 255,412 – 29,016,302 26,394,121 Finance, insurance, real estate and business 30,312,836 21,382,493 7,633,503 84,062,723 61,897,920 4,702,177 3,952,315 7,746,700 221,690,667 45,521,010 Transport, storage and communication – – – 4,035,776 12,420,090 9,185 – – 16,465,051 2,330,052 Education, health and others – – – 378,641 6,975,728 2 – – 7,354,371 2,779,504 Household Others – – – 401,691 – – 30,714,527 21,382,493 – 110,113,407 20,159 – – 110,133,566 37,117,965 2,776,141 1,614,127 – – 12,020,806 7,633,503 114,607,977 290,997,969 6,865,221 4,207,727 17,122,626 21,914,585 7,746,700 484,156,117 150,768,252 2016 Agriculture – – – 865,827 5,500,956 310,067 – – 6,676,850 808,887 Mining and quarrying – – – 627,929 1,492,395 2,025 – – 2,122,349 754,216 Manufacturing – – – 166,754 16,431,375 786,696 – – 17,384,825 9,056,876 Construction – – – 2,972,095 37,019,351 23,526 – – 40,014,972 14,924,376 Electricity, gas and water supply – – – 3,392,206 11,307,804 4,003 – – 14,704,013 934,347 Wholesale, retail trade, restaurants and hotels – – – 840,495 29,174,684 58,363 – – 30,073,542 27,940,824 Finance, insurance, real estate and business 38,090,729 19,339,287 2,213,113 69,976,341 63,040,902 6,838,469 4,937,972 7,530,325 211,967,138 41,010,491 Transport, storage and communication – – – 2,343,562 11,435,513 17,880 – – 13,796,955 2,402,270 Education, health and others – – – 381,791 10,305,759 3,613 – – 10,691,163 4,947,612 Household Others – – – 260,202 – – 38,350,931 19,339,287 2,213,113 – 106,769,186 2,166 – – 106,771,352 36,723,306 2,542,211 274,110 – – 14,562,272 95,183,910 295,020,136 8,320,918 4,937,972 13,616,910 16,693,433 7,530,325 470,896,592 154,065,477 * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 180
183. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Credit risk management (cont’d.) 4.Collateral The main types of collateral obtained by the Group and the Bank to mitigate credit risk are as follows: – – – – – – 5. For For For For For For mortgages – charges over residential properties; auto loans and financing – ownership claims over the vehicles financed; share margin financing – pledges over securities from listed exchanges; commercial property loans and financing – charges over the properties financed; other loans and financing – charges over business assets such as premises, inventories, trade receivables or deposits; and derivatives – cash and securities collateral for over-the-counter (“OTC”) traded derivatives. Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) Credit quality of financial assets Credit classification for financial assets For the purposes of disclosure relating to MFRS 7, all financial assets are categorised into the following: – Neither past due nor impaired; – Past due but not impaired; and – Past due and impaired. The four (4) risks categories as set out and defined below and on the following page, from very low to high, apart from impaired, describe the credit quality of the Group’s lending. These classifications encompass a range of more granular, internal gradings assigned to loans, advances and financing whilst external gradings are applied to financial investments. There is no direct correlation between the internal and external ratings at a granular level, except to the extent that each falls within a single credit quality band. Risk Category (Non-Retail) Probability of default (“PD”) grade External credit ratings based on S&P’s ratings External credit ratings based on RAM’s ratings 1–5 6 – 10 11 – 15 16 – 21 AAA to ABBB+ to BB+ BB+ to B+ B+ to CCC AAA to AA1 AA1 to A3 A3 to BB1 BB1 to C Probability of default (“PD”) grade External credit ratings based on S&P’s ratings External credit ratings based on RAM’s ratings 1–2 3–5 6–8 9 – 11 AAA to BBBBB+ to BBB+ to CCC CCC to C AAA to A A to BBB BB to B B to C Very low Low Medium High Risk Category (Retail) Very low Low Medium High Risk category is as described below: Very low Low Medium High :Obligors :Obligors :Obligors :Obligors rated rated rated rated in in in in this this this this category category category category have have have have an excellent capacity to meet financial commitments with very low credit risk. a good capacity to meet financial commitments with low credit risk. a fairly acceptable capacity to meet financial commitments with moderate credit risk. uncertain capacity to meet financial commitments and are subject to high credit risk. Other than the above rated risk categories, other categories used internally are as follows: Impaired/default :Obligors with objective evidence of impairment as a result of one or more events that have an impact on the estimated future cash flows of the obligors that can be reliably estimated. The detailed definition is further disclosed in Note 2.3(v)(d). Unrated :Refer to obligors which are currently not assigned with obligors’ ratings due to unavailability of ratings models. Sovereign :Refer to obligors which are governments and/or government-related agencies. 181
184. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 6. Credit quality of financial assets – gross loans, advances and financing Group 2017 Neither <-------- Past due but not impaired -------> past Due within Due within due nor Due within 31 to 61 to impaired 30 days 60 days 90 days RM’000 RM’000 RM’000 RM’000 Nonimpaired total RM’000 Impaired RM’000 Total RM’000 Overdrafts Term loans Others 20,593,848 354,562,810 85,338,648 284,732 14,687,124 333,031 54,712 4,444,313 148,056 79,714 21,013,006 1,750,375 375,444,622 17,820 85,837,555 1,164,231 22,177,237 8,117,433 383,562,055 2,268,239 88,105,794 Gross loans, advances and financing 460,495,306 15,304,887 4,647,081 1,847,909 482,295,183 11,549,903 493,845,086 Less: – Individual allowance – Collective allowance (4,120,531) (4,140,193) (8,260,724) 485,584,362 Net loans, advances and financing As a percentage of total gross loans, advances and financing 93.25% 3.10% 0.94% 0.37% 97.66% 2.34% 100.00% Summary of risk categories of gross loans, advances and financing of the Group are assessed based on credit quality classification as described in Note 52(c)(5). <------------------------------- Neither past due nor impaired ------------------------------> Very low RM’000 Low RM’000 Medium RM’000 High RM’000 Unrated RM’000 Total RM’000 Overdrafts Term loans Others 1,968,356 106,609,469 21,012,309 3,092,429 121,718,034 33,396,814 4,848,686 74,709,634 21,931,313 1,299,621 9,005,572 2,853,269 9,384,756 42,520,101 6,144,943 20,593,848 354,562,810 85,338,648 Total – Neither past due nor impaired 129,590,134 158,207,277 101,489,633 13,158,462 58,049,800 460,495,306 26.24% 32.04% 20.55% 2.67% 11.75% 93.25% Group 2017 As a percentage of total gross loans, advances and financing 182
185. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Credit risk management (cont’d.) 6. Credit quality of financial assets – gross loans, advances and financing (cont’d.) <-------- Past due but not impaired -------> Due within Due within Due within 31 to 61 to 30 days 60 days 90 days RM’000 RM’000 RM’000 Group 2016 Neither past due nor impaired RM’000 Nonimpaired total RM’000 Overdrafts Term loans Others 19,884,500 348,433,498 84,454,197 210,567 14,990,003 381,011 77,837 4,496,175 71,796 22,627 20,195,531 1,637,746 369,557,422 20,374 84,927,378 1,678,190 21,873,721 7,241,565 376,798,987 2,135,625 87,063,003 Gross loans, advances and financing 452,772,195 15,581,581 4,645,808 1,680,747 474,680,331 11,055,380 485,735,711 Impaired RM’000 Less: – Individual allowance – Collective allowance Total RM’000 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (3,764,929) (4,195,879) (7,960,808) Net loans, advances and financing As a percentage of total gross loans, advances and financing 477,774,903 93.21% 3.21% 0.95% 0.35% 97.72% 2.28% 100.00% Summary of risk categories of gross loans, advances and financing of the Group are assessed based on credit quality classification as described in Note 52(c)(5). <------------------------------- Neither past due nor impaired ------------------------------> Group 2016 Overdrafts Term loans Others Total – Neither past due nor impaired As a percentage of total gross loans, advances and financing Very low RM’000 Low RM’000 Medium RM’000 High RM’000 Unrated RM’000 Total RM’000 1,659,114 90,489,921 15,919,704 3,046,915 129,412,772 31,943,617 4,958,243 73,246,286 20,874,362 1,139,597 10,421,267 2,219,474 9,080,631 44,863,252 13,497,040 19,884,500 348,433,498 84,454,197 108,068,739 164,403,304 99,078,891 13,780,338 67,440,923 452,772,195 22.25% 33.84% 20.40% 2.84% 13.88% 93.21% 183
186. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 6. Credit quality of financial assets – gross loans, advances and financing (cont’d.) <-------- Past due but not impaired -------> Due within Due within Due within 31 to 61 to 30 days 60 days 90 days RM’000 RM’000 RM’000 Bank 2017 Neither past due nor impaired RM’000 Nonimpaired total RM’000 Overdrafts Term loans Others 9,928,925 202,208,532 67,707,853 189,320 5,807,097 247,081 43,808 1,791,765 133,992 76,251 10,238,304 617,022 210,424,416 12,772 68,101,698 778,279 11,016,583 5,317,741 215,742,157 1,974,821 70,076,519 Gross loans, advances and financing 279,845,310 6,243,498 1,969,565 706,045 288,764,418 8,070,841 296,835,259 Impaired RM’000 Less: – Individual allowance – Collective allowance Total RM’000 (3,002,620) (2,834,670) (5,837,290) 290,997,969 Net loans, advances and financing As a percentage of total gross loans, advances and financing 94.28% 2.10% 0.66% 0.24% 97.28% 2.72% 100.00% Summary of risk categories of gross loans, advances and financing of the Bank are assessed based on credit quality classification as described in Note 52(c)(5). <------------------------------- Neither past due nor impaired ------------------------------> Very low RM’000 Low RM’000 Medium RM’000 High RM’000 Unrated RM’000 Total RM’000 Overdrafts Term loans Others 593,876 57,852,338 13,531,481 1,884,035 72,489,707 25,465,030 2,078,607 49,170,364 14,092,267 705,296 5,896,747 1,603,676 4,667,111 16,799,376 13,015,399 9,928,925 202,208,532 67,707,853 Total – Neither past due nor impaired 71,977,695 99,838,772 65,341,238 8,205,719 34,481,886 279,845,310 24.25% 33.64% 22.01% 2.76% 11.62% 94.28% Bank 2017 As a percentage of total gross loans, advances and financing 184
187. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Credit risk management (cont’d.) 6. Credit quality of financial assets – gross loans, advances and financing (cont’d.) <-------- Past due but not impaired -------> Due within Due within Due within 31 to 61 to 30 days 60 days 90 days RM’000 RM’000 RM’000 Bank 2016 Neither past due nor impaired RM’000 Nonimpaired total RM’000 Overdrafts Term loans Others 9,972,629 206,093,946 68,173,709 119,833 5,901,679 270,743 38,494 1,947,471 56,318 6,935 10,137,891 586,983 214,530,079 9,048 68,509,818 675,234 10,813,125 4,819,815 219,349,894 1,685,340 70,195,158 Gross loans, advances and financing 284,240,284 6,292,255 2,042,283 602,966 293,177,788 7,180,389 300,358,177 Impaired RM’000 Less: – Individual allowance – Collective allowance Total RM’000 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (2,493,534) (2,844,507) (5,338,041) Net loans, advances and financing As a percentage of total gross loans, advances and financing 295,020,136 94.63% 2.10% 0.68% 0.20% 97.61% 2.39% 100.00% Summary of risk categories of gross loans, advances and financing of the Bank are assessed based on credit quality classification as described in Note 52(c)(5). <------------------------------- Neither past due nor impaired ------------------------------> Very low RM’000 Low RM’000 Medium RM’000 High RM’000 Unrated RM’000 Total RM’000 Overdrafts Term loans Others 487,994 52,971,345 9,374,803 2,004,684 80,720,643 22,917,482 2,064,599 46,473,820 12,717,738 663,910 7,094,031 1,546,762 4,751,442 18,834,107 21,616,924 9,972,629 206,093,946 68,173,709 Total – Neither past due nor impaired 62,834,142 105,642,809 61,256,157 9,304,703 45,202,473 284,240,284 20.92% 35.17% 20.39% 3.10% 15.05% 94.63% Bank 2016 As a percentage of total gross loans, advances and financing 185
188. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 7. Credit quality of financial assets – financial investments portfolio and other financial assets <----- Past due but not impaired------> Group 2017 Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Derivative assets Reinsurance/retakaful assets and other insurance receivables Other assets Statutory deposits with central banks As a percentage of gross balances Neither past due nor impaired RM’000 Due within 30 days RM’000 Due within 31 to 60 days RM’000 Due within 61 to 90 days RM’000 Nonimpaired total RM’000 Impaired RM’000 Total RM’000 Impairment allowance RM’000 Net total RM’000 50,334,290 – – – 50,334,290 – 50,334,290 – 50,334,290 16,988,391 – – – 16,988,391 – 16,988,391 – 16,988,391 8,514,283 – – – 8,514,283 – 8,514,283 – 8,514,283 148,044,361 6,704,651 39,583 – – – – – 148,083,944 6,704,651 539,552 – 148,623,496 6,704,651 710,157 7,425,707 – 125,196 – 10,317 – 409 710,157 7,561,629 17,908 72,250 728,065 7,633,879 15,397,213 – – – 15,397,213 – 15,397,213 254,119,053 164,779 10,317 409 254,294,558 629,710 254,924,268 99.69% 0.06% 0.00% 0.00% 99.75% 0.25% 100.00% (183,878) 148,439,618 – 6,704,651 (16,748) (45,825) – 711,317 7,588,054 15,397,213 (246,451) 254,677,817 Summary of risk categories of financial investments portfolio and other financial assets of the Group are assessed based on credit quality classification as described in Note 52(c)(5). <---------------------------------------------------- Neither past due nor impaired -------------------------------------------------> Group 2017 Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Derivative assets Reinsurance/retakaful assets and other insurance receivables Other assets Statutory deposits with central banks Total – Neither past due nor impaired As a percentage of gross balances * 186 Sovereign RM’000 Very low RM’000 Low RM’000 Medium RM’000 High RM’000 Unrated RM’000 Netting effects under MFRS 132 Amendments RM’000 25,100,022 8,946,386 6,147,413 2,878,746 42,175 7,219,548 – 50,334,290 2,759,845 617,266 6,745,128 575,848 134,460 6,155,844 – 16,988,391 8,514,279 – – – – 4 – 8,514,283 65,609,168 – 39,440,835 945,867 24,083,008 991,288 7,149,546 1,668,259 953,537 295,445 10,808,267 3,095,568 – 2,074 – 133,389 – 2,876,052 – 622,226 43,263 288 666,894 3,791,678 – – 710,157 7,425,707 15,397,213 – – – – – – 15,397,213 117,382,601 50,083,743 40,842,889 12,894,625 1,469,168 31,737,803 (291,776) 254,119,053 46.05% 19.65% 16.02% 5.06% 0.58% 12.44% (0.11%) 99.69% – (291,776) Total RM’000 148,044,361 6,704,651 Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments.
189. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 7. Credit quality of financial assets – financial investments portfolio and other financial assets (cont’d.) Due within 30 days RM’000 Due within 31 to 60 days RM’000 Due within 61 to 90 days RM’000 Nonimpaired total RM’000 Impaired RM’000 Total RM’000 Impairment allowance RM’000 Net total RM’000 58,140,545 – – – 58,140,545 – 58,140,545 – 58,140,545 13,444,630 – – – 13,444,630 – 13,444,630 – 13,444,630 2,492,412 – – – 2,492,412 – 2,492,412 – 2,492,412 125,784,477 8,311,703 59,192 – – – 19,913 – 125,863,582 8,311,703 627,314 – 126,490,896 8,311,703 (258,228) – 126,232,668 8,311,703 447,015 8,501,092 – 22,548 – 1,027 – 10,348 447,015 8,535,015 19,027 91,905 466,042 8,626,920 (19,027) (69,380) 447,015 8,557,540 Group 2016 Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Derivative assets Reinsurance/retakaful assets and other insurance receivables Other assets Statutory deposits with central banks 15,384,134 – – – 15,384,134 – 15,384,134 – 15,384,134 232,506,008 81,740 1,027 30,261 232,619,036 738,246 233,357,282 (346,635) 233,010,647 99.64% 0.03% 0.00% 0.01% 99.68% 0.32% 100.00% As a percentage of gross balances Basel II Pillar 3 pg. 288-351 <----- Past due but not impaired -----> Neither past due nor impaired RM’000 Summary of risk categories of financial investments portfolio and other financial assets of the Group are assessed based on credit quality classification as described in Note 52(c)(5). <------------------------------------------ Neither past due nor impaired -------------------------------------> Group 2016 Netting effects under MFRS 132 Unrated Amendments RM’000 RM’000 Sovereign RM’000 Very low RM’000 Low RM’000 Medium RM’000 High RM’000 Total RM’000 22,514,762 15,503,146 9,172,713 1,106,272 88,557 9,755,095 – 58,140,545 2,513,429 550,943 2,405,692 489,624 134,580 7,350,362 – 13,444,630 2,278,442 – – – – 213,970 – 2,492,412 54,779,969 812 34,869,745 2,421,990 27,890,337 2,887,110 2,135,430 1,628,252 65,161 210,259 6,043,835 1,993,564 Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Derivative assets Reinsurance/retakaful assets and other insurance receivables Other assets Statutory deposits with central banks – 1,086 – 972 – – – 1,276,869 – 5,293 447,015 7,216,872 – – 447,015 8,501,092 15,384,134 – – – – – – 15,384,134 Total – Neither past due nor impaired 97,472,634 53,346,796 42,355,852 6,636,447 503,850 33,020,713 41.77% 22.86% 18.15% 2.85% 0.22% 14.15% As a percentage of gross balances * – 125,784,477 (830,284) 8,311,703 (830,284) 232,506,008 (0.36%) 99.64% Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 187
190. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 7. Credit quality of financial assets – financial investments portfolio and other financial assets (cont’d.) Bank 2017 Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Derivative assets Other assets Statutory deposits with central banks As a percentage of gross balances Neither past due nor impaired RM’000 Impaired RM’000 Total RM’000 30,714,527 21,382,493 7,633,503 114,272,287 6,865,221 4,189,492 7,746,700 – – – 459,731 – 33,561 – 30,714,527 21,382,493 7,633,503 114,732,018 6,865,221 4,223,053 7,746,700 – – – (124,041) – (15,326) – 30,714,527 21,382,493 7,633,503 114,607,977 6,865,221 4,207,727 7,746,700 192,804,223 493,292 193,297,515 (139,367) 193,158,148 99.74% 0.26% 100.00% Impairment allowance RM’000 Net total RM’000 Summary of risk categories of financial investments portfolio and other financial assets of the Bank are assessed based on credit quality classification as described in Note 52(c)(5). <------------------------------------------ Neither past due nor impaired -----------------------------------------> Bank 2017 Sovereign RM’000 Very low RM’000 Low RM’000 Medium RM’000 High RM’000 Unrated RM’000 7,819,948 5,379,222 2,819,701 37,842 7,380,466 – 30,714,527 421,412 12,114,347 565,228 – 6,081,372 – 21,382,493 – – – – – – 7,633,503 31,457,107 1,291,129 56,822 15,758,687 953,881 2,876,052 6,690,900 1,623,959 622,226 888,618 294,626 – 11,441,610 2,993,402 634,392 – – – – – 72,893,050 41,046,418 37,082,189 12,322,014 1,221,086 28,531,242 37.71% 21.23% 19.18% 6.38% 0.63% 14.76% Cash and short-term funds 7,277,348 Deposits and placements with financial institutions 2,200,134 Financial assets purchased under resale agreements 7,633,503 Financial investments portfolio* 48,035,365 Derivative assets – Other assets – Statutory deposits with central banks 7,746,700 Total – Neither past due nor impaired As a percentage of gross balances * 188 Netting effects under MFRS 132 Amendments RM’000 Total RM’000 – 114,272,287 (291,776) 6,865,221 – 4,189,492 – 7,746,700 (291,776) 192,804,223 (0.15%) 99.74% Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments.
191. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Credit risk management (cont’d.) 7. Credit quality of financial assets – financial investments portfolio and other financial assets (cont’d.) Bank 2016 Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Derivative assets Other assets Statutory deposits with central banks As a percentage of gross balances Neither past due nor impaired RM’000 Impaired RM’000 Total RM’000 38,350,931 19,339,287 2,213,113 94,828,431 8,320,918 4,919,732 7,530,325 – – – 488,357 – 42,345 – 38,350,931 19,339,287 2,213,113 95,316,788 8,320,918 4,962,077 7,530,325 – – – (132,878) – (24,105) – 38,350,931 19,339,287 2,213,113 95,183,910 8,320,918 4,937,972 7,530,325 175,502,737 530,702 176,033,439 (156,983) 175,876,456 99.70% 0.30% 100.00% Impairment allowance RM’000 Net total RM’000 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) Summary of risk categories of financial investments portfolio and other financial assets of the Bank are assessed based on credit quality classification as described in Note 52(c)(5). <--------------------------------------------- Neither past due nor impaired ----------------------------------------> Bank 2016 Sovereign RM’000 Very low RM’000 Low RM’000 Medium RM’000 High RM’000 13,023,012 6,674,487 1,011,433 81,755 9,712,935 – 38,350,931 335,658 9,456,241 471,980 134,580 7,275,607 – 19,339,287 – – – – 213,970 – 2,213,113 24,507,489 2,967,905 – 18,766,454 2,631,703 – 1,421,929 1,517,085 1,276,869 58,380 173,021 5,293 6,012,353 1,861,488 3,637,570 – – – – – 63,103,824 40,834,064 37,528,885 5,699,296 453,029 28,713,923 35.85% 23.20% 21.32% 3.24% 0.25% 16.31% Cash and short-term funds 7,847,309 Deposits and placements with financial institutions 1,665,221 Financial assets purchased under resale agreements 1,999,143 Financial investments portfolio* 44,061,826 Derivative assets – Other assets – Statutory deposits with central banks 7,530,325 Total – Neither past due nor impaired As a percentage of gross balances * Netting effects under MFRS 132 Unrated Amendments RM’000 RM’000 – (830,284) – – Total RM’000 94,828,431 8,320,918 4,919,732 7,530,325 (830,284) 175,502,737 (0.47%) 99.70% Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 189
192. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 8. Credit quality of impaired financial assets (i) Impaired financial assets analysed by geographic purpose are as follows: Group Loans, advances and financing RM’000 Reinsurance/ retakaful assets and other Financial insurance investments receivables portfolio* RM’000 RM’000 Other assets RM’000 Total RM’000 2017 Malaysia Singapore Indonesia Labuan Offshore Hong Kong SAR United States of America People’s Republic of China Vietnam Philippines Brunei Cambodia Bahrain Thailand Laos Others 5,619,324 2,931,842 1,417,698 244,722 886,737 572 1,054 68,271 123,185 38,529 97,667 5,063 38,438 41,730 35,071 299,157 174,046 21,314 – – – – – 482 – – – 1,824 – 42,729 16,359 1,549 – – – – – – – – – – – – – 38,723 14,465 – – 13,052 – – 10 568 – – – 5,432 – – 5,973,563 3,121,902 1,439,012 244,722 899,789 572 1,054 68,281 124,235 38,529 97,667 5,063 45,694 41,730 77,800 11,549,903 539,552 17,908 72,250 12,179,613 5,754,507 1,587,853 1,993,758 209,957 1,031,921 633 5,878 82,976 – 185,823 21,888 95,619 5,608 31,887 8,214 38,858 299,411 201,918 76,426 – – – – – – 17,136 – – – 1,836 – 30,587 18,123 904 – – – – – – – – – – – – – – 55,791 15,316 1,119 – 13,372 494 – – 2 418 – – – 5,347 – 46 6,127,832 1,805,991 2,071,303 209,957 1,045,293 1,127 5,878 82,976 2 203,377 21,888 95,619 5,608 39,070 8,214 69,491 11,055,380 627,314 19,027 91,905 11,793,626 2016 Malaysia Singapore Indonesia Labuan Offshore Hong Kong SAR United States of America People’s Republic of China Vietnam United Kingdom Philippines Brunei Cambodia Bahrain Thailand Laos Others * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 190
193. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Credit risk management (cont’d.) 8. Credit quality of impaired financial assets (cont’d.) (i) Impaired financial assets analysed by geographic purpose are as follows (cont’d.): Bank Loans, advances and financing RM’000 Financial investments portfolio* RM’000 Other assets RM’000 Total RM’000 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) 2017 Malaysia Singapore Labuan Offshore Hong Kong SAR People’s Republic of China Vietnam Brunei Bahrain Laos 3,896,008 2,897,765 244,722 878,849 1,054 67,121 38,529 5,063 41,730 298,957 160,774 – – – – – – – 33,561 – – – – – – – – 4,228,526 3,058,539 244,722 878,849 1,054 67,121 38,529 5,063 41,730 8,070,841 459,731 33,561 8,564,133 4,246,493 1,570,036 209,957 1,031,921 5,878 80,394 21,888 5,608 8,214 298,957 189,400 – – – – – – – 42,345 – – – – – – – – 4,587,795 1,759,436 209,957 1,031,921 5,878 80,394 21,888 5,608 8,214 7,180,389 488,357 42,345 7,711,091 2016 Malaysia Singapore Labuan Offshore Hong Kong SAR People’s Republic of China Vietnam Brunei Bahrain Laos * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 191
194. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 8. Credit quality of impaired financial assets (cont’d.) (ii) Impaired financial assets analysed by industry sectors are as follows (cont’d.): Group Loans, advances and financing RM’000 Reinsurance/ retakaful assets and other Financial insurance investments receivables portfolio* RM’000 RM’000 Other assets RM’000 Total RM’000 2017 Agriculture Mining and quarrying Manufacturing Construction Electricity, gas and water supply Wholesale, retail trade, restaurants and hotels Finance, insurance, real estate and business Transport, storage and communication Education, health and others Household Others 85,760 380,252 1,279,606 821,101 447,444 1,856,751 2,584,452 2,543,342 32,454 1,344,443 174,298 – 45,443 – 139,129 – 7,066 129,120 21,314 1,435 – 196,045 – – – – – – 17,908 – – – – – – – – – – 47,659 – – 6,263 18,328 85,760 425,695 1,279,606 960,230 447,444 1,863,817 2,779,139 2,564,656 33,889 1,350,706 388,671 11,549,903 539,552 17,908 72,250 12,179,613 306,765 536,016 1,376,882 814,598 641,238 1,832,007 2,614,440 1,549,355 82,041 1,085,238 216,800 – 60,514 – 131,078 – – 42,487 52,905 – – 340,330 – – – – – – 19,027 – – – – – – – – – – 67,645 – – 17,380 6,880 306,765 596,530 1,376,882 945,676 641,238 1,832,007 2,743,599 1,602,260 82,041 1,102,618 564,010 11,055,380 627,314 19,027 91,905 11,793,626 2016 Agriculture Mining and quarrying Manufacturing Construction Electricity, gas and water supply Wholesale, retail trade, restaurants and hotels Finance, insurance, real estate and business Transport, storage and communication Education, health and others Household Others * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 192
195. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Credit risk management (cont’d.) 8. Credit quality of impaired financial assets (cont’d.) (ii) Impaired financial assets analysed by industry sectors are as follows (cont’d.): Bank Loans, advances and financing RM’000 Financial investments portfolio* RM’000 Other assets RM’000 Total RM’000 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) 2017 Agriculture Mining and quarrying Manufacturing Construction Electricity, gas and water supply Wholesale, retail trade, restaurants and hotels Finance, insurance, real estate and business Transport, storage and communication Education, health and others Household Others 50,850 43,218 912,283 682,670 253,586 1,349,902 2,280,798 1,702,644 13,873 763,610 17,407 – 45,443 – 139,129 – 7,065 114,386 – – – 153,708 – – – – – – 33,561 – – – – 50,850 88,661 912,283 821,799 253,586 1,356,967 2,428,745 1,702,644 13,873 763,610 171,115 8,070,841 459,731 33,561 8,564,133 59,054 11,081 1,120,741 714,441 268,389 1,289,386 2,193,512 827,594 11,466 671,837 12,888 – 60,514 – 131,078 – – 23,062 – – – 273,703 – – – – – – 42,345 – – – – 59,054 71,595 1,120,741 845,519 268,389 1,289,386 2,258,919 827,594 11,466 671,837 286,591 7,180,389 488,357 42,345 7,711,091 2016 Agriculture Mining and quarrying Manufacturing Construction Electricity, gas and water supply Wholesale, retail trade, restaurants and hotels Finance, insurance, real estate and business Transport, storage and communication Education, health and others Household Others * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity, excluding quoted equity investments. 9. Possessed collateral Assets obtained by taking possession of collateral held as security against loans, advances and financing and held as at the financial year end are as follows: Group Residential properties Others Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 125,228 163,775 116,552 130,313 – 29,409 – 34,430 289,003 246,865 29,409 34,430 Repossessed collaterals are sold as soon as practicable. Repossessed collaterals are included under ‘other assets’ on the statement of financial position. The Group and the Bank do not occupy repossessed properties or assets for its business use. 193
196. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (c) Credit risk management (cont’d.) 10. Reconciliation of allowance account Movements in allowances for impairment losses for financial assets are as follows: Group Loans, advances and financing RM’000 Financial investments availablefor-sale* RM’000 Financial investments held-tomaturity RM’000 Reinsurance/ retakaful assets and other insurance receivables RM’000 Other assets RM’000 Total RM’000 As at 31 December 2017 Individual allowance At 1 January 2017 Allowance made during the financial year Amount written back Amount written-off Transferred to collective allowance Exchange differences 3,764,929 233,946 24,282 19,027 69,380 4,111,564 1,830,104 (326,072) (858,546) (31,234) (258,650) 5,890 (1,111) (46,137) – (12,934) – (107) (20,053) – 102 9,624 (11,903) – – – 1,218 (4,412) (16,729) – (3,632) 1,846,836 (343,605) (941,465) (31,234) (275,114) At 31 December 2017 4,120,531 179,654 4,224 16,748 45,825 4,366,982 4,195,879 – – – – 4,195,879 – – – – – – – – – – – – – – – – – – – – 4,140,193 – – – – 4,140,193 24,248 42,121 57,753 2,584,302 4,293 (21,752) (5,635) – – 18,016 (139) (4,525) – (1,725) 2,628,963 (210,507) (982,514) (30,057) 121,377 Collective allowance At 1 January 2017 Allowance made during the financial year Amount written back Amount written-off Transferred from individual allowance Exchange differences At 31 December 2017 836,425 (390) (789,601) 31,234 (133,354) 836,425 (390) (789,601) 31,234 (133,354) As at 31 December 2016 Individual allowance At 1 January 2016 Allowance made during the financial year Amount written back Amount written-off Transferred to collective allowance Exchange differences 2,259,910 200,270 2,390,222 (115,272) (858,279) (30,057) 118,405 216,432 (73,344) (114,075) – 4,663 At 31 December 2016 3,764,929 233,946 24,282 19,027 69,380 4,111,564 Collective allowance At 1 January 2016 Allowance made during the financial year Amount written back Amount written-off Transferred from individual allowance Exchange differences 3,899,141 – – – – 3,899,141 1,100,315 (30,762) (834,868) 30,057 31,996 – – – – – – – – – – – – – – – – – – – – 1,100,315 (30,762) (834,868) 30,057 31,996 At 31 December 2016 4,195,879 – – – * Financial investments available-for-sale exclude quoted equity investments. 194 – – – – 34 – 4,195,879
197. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Credit risk management (cont’d.) 10. Reconciliation of allowance account (cont’d.) Movements in allowances for impairment losses for financial assets are as follows (cont’d.): Bank Loans, advances and financing RM’000 Financial investments availablefor-sale* RM’000 Financial investments held-tomaturity RM’000 Other assets RM’000 Total RM’000 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) As at 31 December 2017 Individual allowance At 1 January 2017 Allowance made during the financial year Amount written back Amount written-off Transferred to collective allowance Exchange differences 2,493,534 1,237,538 (238,042) (317,726) (26,013) (146,671) 129,102 1,071 (3,288) – – (6,620) 3,776 – – – – – 24,105 – – (8,779) – – 2,650,517 1,238,609 (241,330) (326,505) (26,013) (153,291) At 31 December 2017 3,002,620 120,265 3,776 15,326 3,141,987 Collective allowance At 1 January 2017 Allowance made during the financial year Amount written-off Transferred from individual allowance Exchange differences 2,844,507 346,381 (330,885) 26,013 (51,346) – – – – – – – – – – – – – – – 2,844,507 346,381 (330,885) 26,013 (51,346) At 31 December 2017 2,834,670 – – – 2,834,670 As at 31 December 2016 Individual allowance At 1 January 2016 Allowance made during the financial year Amount written back Amount written-off Transferred to collective allowance Exchange differences 1,422,090 1,592,007 (80,690) (510,376) (18,990) 89,493 85,518 213,122 (73,344) (99,951) – 3,757 3,776 – – – – – 17,690 6,415 – – – – 1,529,074 1,811,544 (154,034) (610,327) (18,990) 93,250 At 31 December 2016 2,493,534 129,102 3,776 24,105 2,650,517 Collective allowance At 1 January 2016 Allowance made during the financial year Amount written-off Transferred from individual allowance Exchange differences 2,627,341 522,087 (346,521) 18,990 22,610 – – – – – – – – – – – – – – – 2,627,341 522,087 (346,521) 18,990 22,610 At 31 December 2016 2,844,507 – – – 2,844,507 * Financial investments available-for-sale exclude quoted equity investments. 195
198. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (d) Market risk management 1. Market risk management overview Management and measurement of Interest Rate Risk (“IRR”)/ Rate of Return Risk (“RoR”) in the banking book The Group emphasises the importance of managing IRR/RoR in the banking book as most of the balance sheet items of the Group generate interest income and interest expense, which are indexed to interest rates. Volatility of earnings can pose a threat to the Group’s profitability while economic value provides a more comprehensive view of the potential long-term effects on the Group’s overall capital adequacy. IRR/RoR in the banking book encompasses repricing risk, yield curve risk, basis risk and option risk arising from movement in interest rate. In addition, Islamic operation is exposed to displace commercial risk. The objective of the Group’s IRR/ RoR in the banking book framework is to ensure that all IRR/ RoR in the banking book is managed within its risk appetite. IRR/RoR in the banking book is measured and monitored proactively, using the following principal measurement techniques: Market risk management Market risk is defined as the risk of loss or adverse impact on earnings or capital arising from changes in the level of volatility of market rates or prices such as interest rates/profit rates, foreign exchange rates, commodity prices and equity prices. The primary categories of market risk for the Group are: (i) Interest/profit rate risk: arising from changes in yield curves, credit spreads and implied volatilities on interest rate options; (ii) Foreign exchange rate risk: arising from adverse movements in the exchange rates of two currencies; and (iii) Equity price risk: arising from changes in the prices of equities, equity indices and equity baskets. 2. • Repricing Gap Analysis • Economic Value at Risk • Stress Testing Market risk management Management of trading activities 196 The Group’s traded market risk exposures are primarily from proprietary trading, flow trading and market making. The risk measurement techniques employed by the Group comprise both quantitative and qualitative measures. Value at Risk (“VaR”) measures the potential loss of value resulting from market movements over a specified period of time within a specified probability of occurrence under normal business situations. The method adopted is based on historical simulation, at a 99% confidence level using a 1 day holding period. The VaR model is back tested and is subject to periodic independent validation to ensure it meets its intended use. Also, the Group computes a Stressed VaR based on a 1-day holding period to measure the VaR arising from market movements over a previously identified stress period. Besides VaR, the Group utilises other non-statistical risk measures, such as exposure to a one basis point increase in yield (“PV01”) for managing portfolio sensitivity to market interest rate movements, net open position (“NOP”) limit for managing foreign currency exposure and Greek limits for controlling options risk. These measures provide granular information on the Group’s market risk exposures and are used for control and monitoring purposes. 3. Interest rate risk The Group and the Bank are exposed to various risks associated with the effects of fluctuations in the prevailing levels of market interest rates on the financial position and cash flows. Interest rate risk exposure is identified, measured, monitored and controlled through limits and procedures set by the Group ALCO to protect total net interest income from changes in market interest rates.
199. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 3. Interest rate risk (cont’d.) The tables below summarise the Group’s and the Bank’s exposure to interest rate risk as at 31 December 2017 and 31 December 2016. The tables indicate effective average interest rates at the reporting date and the periods in which the financial instruments are repriced or mature, whichever is earlier. Group 2017 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Loans, advances and financing – Non-impaired – Impaired* – Collective allowance Derivative assets Reinsurance/retakaful assets and other insurance receivables Other assets Investment properties Other non-interest sensitive balances Total assets Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 12 months RM’000 >1 to 5 years RM’000 Over 5 years RM’000 Noninterest sensitive RM’000 Trading books RM’000 Total RM’000 Effective interest rate % 43,490,766 2,525 – – – 6,840,999 – 50,334,290 2.22 – 8,775,726 4,662,150 1,417,902 822,127 1,310,486 – 16,988,391 2.39 8,514,283 – – – – – – 8,514,283 1.59 – 3,641,696 550,696 – 8,078,826 281,737 – 10,529,641 1,376,899 – 26,474,951 6,884,494 – 56,361,410 10,918,368 – 3,983,720 172,579 25,117,493 – – 25,117,493 109,070,244 20,184,773 3.70 3.28 5.37 306,825,576 7,429,372 – – 53,143,637 – – – 40,490,674 – – – 40,416,965 – – – 41,418,331 – – – – – (4,140,193) – – – – 6,704,651 482,295,183 7,429,372 (4,140,193) 6,704,651 4.86 – – – – – – – – – – – – – – – – – – – – – – – 3,933,772 9,698,140 753,555 28,417,812 – 3,933,772 9,698,140 753,555 28,417,812 370,452,389 70,282,451 57,059,364 75,194,312 109,520,236 50,970,870 31,822,144 765,301,766 82,788,794 3,793,912 131,431,200 8,570,575 107,795,933 7,222,526 10,346 – – – – – 502,017,445 24,555,445 2.38 3.00 11,930,485 3,983,976 2,287,049 118 1,761,635 – 42,598,131 2.05 2,965,708 – – – – – – – – 1,388,775 – – 5,367,086 1,894,046 2.07 3.16 – – – – 6,133,415 – 242,400 – – – – 7,221,015 6,375,815 7,221,015 4.39 – – 3,122,047 – 90,354 – 64,723 – – 25,118,843 14,151,298 – – 25,118,843 19,179,140 – 1.80 – 3,059,771 – – – – 7,087,693 870,430 2,784,180 – 1,543,501 17,734,912 9,370,549 3,500,000 – – 1,136,633 1,738,344 – – – – – – 1,478,573 – – – – – 1,543,501 34,505,618 11,979,323 6,284,180 1,478,573 4.20 3.20 4.74 6.06 – 217,738,448 107,660,717 154,818,408 155,652,608 3,127,841 43,899,124 7,221,015 690,118,161 – – – – – – – – – – 72,988,614 2,194,991 – – 72,988,614 2,194,991 Liabilities and shareholders’ equity Customers’ funding: – Deposits from customers 179,991,172 – Investment accounts of customers^ 4,968,432 Deposits and placements from financial institutions 22,634,868 Obligations on financial assets sold under repurchase agreements 2,401,378 Bills and acceptances payable 505,271 Financial liabilities at fair value through profit or loss – Derivative liabilities – Insurance/takaful contract liabilities and other insurance payables – Other liabilities 1,750,718 Recourse obligation on loans and financing sold to Cagamas – Borrowings 5,486,609 Subordinated obligations – Capital securities – Other non-interest sensitive balances – Total liabilities Shareholders’ equity Non-controlling interests – – – – – – – 75,183,605 – 75,183,605 Total liabilities and shareholders’ equity 217,738,448 107,660,717 154,818,408 155,652,608 3,127,841 119,082,729 7,221,015 765,301,766 (68,111,859) 24,601,129 On-balance sheet interest sensitivity gap Off-balance sheet interest sensitivity gap (interest rate swaps) 152,713,941 Total interest sensitivity gap 149,677,006 (37,942,605) (96,261,884) (79,318,418) 107,356,631 (68,111,859) 24,601,129 Cumulative interest rate sensitivity gap 149,677,006 111,734,401 (24,601,129) – (3,036,935) (37,378,266) (97,759,044) (80,458,296) 106,392,395 (564,339) 1,497,160 15,472,517 1,139,878 (63,845,901) 964,236 43,510,730 – Basel II Pillar 3 pg. 288-351 (d) Market risk management (cont’d.) The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) – – – – – – – * This is arrived after deducting the individual allowance from gross impaired loans. ^ Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). 197
200. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (d) Market risk management (cont’d.) 3. Interest rate risk (cont’d.) Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 12 months RM’000 >1 to 5 years RM’000 Over 5 years RM’000 Noninterest sensitive RM’000 Trading books RM’000 Total RM’000 Effective interest rate % 49,622,134 – – – – 8,518,411 – 58,140,545 1.21 357,707 6,923,750 4,870,413 1,057 – 1,291,703 – 13,444,630 3.43 2,010,649 481,763 – – – – – 2,492,412 0.83 – 7,701,014 343,921 – 4,711,802 565,381 – 11,306,614 1,169,330 – 27,598,662 4,911,545 – 38,206,221 7,901,328 – 2,860,521 130,092 23,496,050 – – 23,496,050 92,384,834 15,021,597 3.66 3.83 4.98 293,132,222 7,290,453 – – 50,377,299 – – – 47,568,306 – – – 39,817,720 – – – 43,784,782 – – – – – (4,195,879) – – – – 8,311,703 474,680,329 7,290,453 (4,195,879) 8,311,703 4.80 – – – – – – – – – – – – – – – – – – – – – – – 4,139,596 10,525,560 758,488 29,465,935 – – – – 4,139,596 10,525,560 758,488 29,465,935 360,458,100 63,059,995 64,914,663 72,328,984 89,892,331 53,494,427 31,807,753 735,956,253 71,069,990 1,026,110 93,558,511 14,940,830 108,189,056 5,211,342 10,348 – – – – – 485,523,920 31,544,587 2.01 3.27 7,759,316 2,922,948 2,108,890 38,620 1,089,926 – 30,854,693 1.85 1,974,878 – 46,507 – 133,476 – 191,360 – – 1,046,122 – – 2,957,951 1,808,066 3.01 2.41 – – – – 3,344,846 – 242,384 – – – – 8,828,060 3,587,230 8,828,060 4.40 – – 399,345 – 500,003 – 3,036,147 – – 23,948,719 12,979,849 – – 23,948,719 17,288,306 – 1.19 – 5,307,146 – – – – 13,661,792 3,589,989 – – 974,588 11,954,158 11,246,745 6,136,993 – – 1,471,757 942,899 63,000 – – 3,916 – – 1,197,555 – – – – – 974,588 34,867,056 15,900,706 6,199,993 1,197,555 3.86 2.91 4.45 6.18 – 244,333,309 87,536,785 129,220,580 152,336,241 2,960,368 40,266,087 8,828,060 665,481,430 – – – – – – – – – – 68,515,731 1,959,092 – – 68,515,731 1,959,092 – – – – – 70,474,823 – 70,474,823 244,333,309 87,536,785 129,220,580 152,336,241 2,960,368 110,740,910 8,828,060 735,956,253 On-balance sheet interest sensitivity gap Off-balance sheet interest sensitivity gap (interest rate swaps) 116,124,791 (24,476,790) (64,305,917) (80,007,257) 86,931,963 (57,246,483) 22,979,693 1,525,848 (1,450,371) 1,385,641 Total interest sensitivity gap 114,881,937 (24,695,054) (62,780,069) (81,457,628) 88,317,604 (57,246,483) 22,979,693 Cumulative interest rate sensitivity gap 114,881,937 90,186,883 27,406,814 (54,050,814) 34,266,790 (22,979,693) – Group 2016 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Loans, advances and financing – Non-impaired – Impaired* – Collective allowance Derivative assets Reinsurance/retakaful assets and other insurance receivables Other assets Investment properties Other non-interest sensitive balances Total assets Liabilities and shareholders’ equity Customers’ funding: – Deposits from customers 212,696,015 – Investment accounts of customers^ 10,366,305 Deposits and placements from financial institutions 16,934,993 Obligations on financial assets sold under repurchase agreements 611,730 Bills and acceptances payable 761,944 Financial liabilities at fair value through profit or loss – Derivative liabilities – Insurance/takaful contract liabilities and other insurance payables – Other liabilities 372,962 Recourse obligation on loans and financing sold to Cagamas – Borrowings 2,468,287 Subordinated obligations 121,073 Capital securities – Other non-interest sensitive balances – Total liabilities Shareholders’ equity Non-controlling interests Total liabilities and shareholders’ equity (1,242,854) (218,264) – * This is arrived after deducting the individual allowance from gross impaired loans. ^ Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). 198 – – – – – – –
201. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (d) Market risk management (cont’d.) 3. Interest rate risk (cont’d.) Bank 2017 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 12 months RM’000 >1 to 5 years RM’000 Over 5 years RM’000 Noninterest sensitive RM’000 Trading books RM’000 Total RM’000 Effective interest rate % 24,682,086 – – – – 6,032,441 – 30,714,527 1.55 – 10,546,240 5,698,921 3,284,332 1,044,484 808,516 – 21,382,493 1.84 7,633,503 – – – – – – 7,633,503 1.47 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Loans, advances and financing – Non-impaired – Impaired* – Collective allowance Derivative assets Other assets Other non-interest sensitive balances – 3,029,936 – – 7,200,307 15,053 – 8,835,644 621,075 – 22,539,607 8,377,447 – 46,559,064 8,578,337 – 1,122,181 171,653 7,896,677 – – 7,896,677 89,286,739 17,763,565 2.94 3.07 4.38 189,492,921 5,068,221 – – – – 38,650,324 – – – – – 31,799,565 – – – – – 16,325,169 – – – – – 12,496,439 – – – – – – – (2,834,670) – 4,801,397 32,324,730 – – – 6,865,221 – – 288,764,418 5,068,221 (2,834,670) 6,865,221 4,801,397 32,324,730 4.29 – – – – – Total assets 229,906,667 56,411,924 46,955,205 50,526,555 68,678,324 42,426,248 14,761,898 509,666,821 46,827,223 85,249,557 70,027,627 – – – 328,938,600 1.61 10,130,118 4,647,617 556,384 – 1,354,905 – 37,645,134 2.06 2,965,708 – – – – – – – – 1,379,050 – – 5,189,316 1,384,983 2.14 4.32 – – 3,122,047 – – 90,354 5,240,720 – 64,723 242,400 – – – – 11,882,752 – 7,179,998 – 5,483,120 7,179,998 16,910,597 4.49 – 1.80 – 2,309,066 – – – – 6,427,833 337,526 2,784,180 – 1,543,501 15,495,961 9,025,000 3,500,000 – – 907,951 – – – – – – – 385,876 – – – – – 1,543,501 27,106,442 9,362,526 6,284,180 385,876 4.20 2.46 4.51 6.06 – 153,736,196 65,354,162 99,537,067 105,453,916 1,150,351 15,002,583 7,179,998 447,414,273 – – – – – 62,252,548 – 62,252,548 153,736,196 65,354,162 99,537,067 105,453,916 1,150,351 77,255,131 7,179,998 509,666,821 67,527,973 (34,828,883) 7,581,900 Liabilities and shareholders’ equity Deposits from customers 126,834,193 Deposits and placements from financial institutions 20,956,110 Obligations on financial assets sold under repurchase agreements 2,223,608 Bills and acceptances payable 5,933 Financial liabilities at fair value through profit or loss – Derivative liabilities – Other liabilities 1,750,721 Recourse obligation on loans and financing sold to Cagamas – Borrowings 1,965,631 Subordinated obligations – Capital securities – Other non-interest sensitive balances – Total liabilities Shareholders’ equity Total liabilities and shareholders’ equity On-balance sheet interest sensitivity gap Off-balance sheet interest sensitivity gap (interest rate swaps) 76,170,471 Total interest sensitivity gap 73,369,898 (9,261,547) (51,084,793) (54,268,785) 68,492,210 (34,828,883) 7,581,900 Cumulative interest rate sensitivity gap 73,369,898 64,108,351 27,246,983 (7,581,900) – (2,800,573) (8,942,238) (52,581,862) (54,927,361) (319,309) 1,497,069 13,023,558 658,576 (41,245,227) 964,237 – Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) – * This is arrived after deducting the individual allowance from gross impaired loans. 199
202. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (d) Market risk management (cont’d.) 3. Interest rate risk (cont’d.) Bank 2016 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 12 months RM’000 >1 to 5 years RM’000 Over 5 years RM’000 Noninterest sensitive RM’000 Trading books RM’000 Total RM’000 Effective interest rate % 31,004,209 – – – – 7,346,722 – 38,350,931 1.19 – 9,163,967 6,298,142 2,765,932 311,494 799,752 – 19,339,287 2.27 1,731,350 481,763 – – – – – 2,213,113 0.83 – 933,756 125,982 7,980,314 – – 7,980,314 74,904,201 12,582,311 2.94 3.72 4.65 4.17 – – – – – Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Loans, advances and financing – Non-impaired – Impaired* – Collective allowance Derivative assets Other assets Other non-interest sensitive balances – 5,407,292 5,004 – 3,257,355 39,975 – 9,603,559 577,333 – 25,562,681 4,858,487 – 30,139,558 6,975,530 195,747,299 4,686,855 – – – – 34,073,787 – – – – – 37,407,291 – – – – – 17,561,948 – – – – – 8,387,463 – – – – – – – (2,844,507) – 5,603,512 31,747,887 – – – 8,320,918 – – 293,177,788 4,686,855 (2,844,507) 8,320,918 5,603,512 31,747,887 Total assets 238,582,009 47,016,847 53,886,325 50,749,048 45,814,045 43,713,104 16,301,232 496,062,610 54,327,438 79,019,513 71,274,298 – – – 331,878,295 1.45 7,645,511 2,784,178 602,208 – 697,861 – 29,856,710 1.71 1,974,878 – 46,507 – 133,476 – 191,360 – – 992,808 – – 2,957,951 1,000,777 3.01 4.35 – – 399,345 – – 500,003 2,442,755 – 3,036,147 242,384 – – – – 8,190,241 – 8,802,221 – 2,685,139 8,802,221 12,498,698 4.74 – 1.19 – 4,994,552 – – – – 11,599,123 3,588,800 – – 974,588 10,050,385 9,493,000 6,162,926 – – 1,341,748 – 63,000 – – – – – 47,374 – – – – – 974,588 28,927,427 13,202,872 6,225,926 47,374 3.86 2.10 4.17 6.15 – 147,439,350 69,341,724 97,538,124 104,169,783 1,838,492 9,928,284 8,802,221 439,057,978 – – – – – 57,004,632 – 57,004,632 Total liabilities and shareholders’ equity 147,439,350 69,341,724 97,538,124 104,169,783 1,838,492 66,932,916 8,802,221 496,062,610 (22,324,877) (43,651,799) (53,420,735) 43,975,553 (23,219,812) 7,499,011 1,533,738 (1,450,371) 1,385,641 Liabilities and shareholders’ equity Deposits from customers 127,257,046 Deposits and placements from financial institutions 18,126,952 Obligations on financial assets sold under repurchase agreements 611,730 Bills and acceptances payable 7,969 Financial liabilities at fair value through profit or loss – Derivative liabilities – Other liabilities 372,962 Recourse obligation on loans and financing sold to Cagamas – Borrowings 941,619 Subordinated obligations 121,072 Capital securities – Other non-interest sensitive balances – Total liabilities Shareholders’ equity On-balance sheet interest sensitivity gap Off-balance sheet interest sensitivity gap (interest rate swaps) 91,142,659 Total interest sensitivity gap 89,891,393 (22,542,619) (42,118,061) (54,871,106) 45,361,194 (23,219,812) 7,499,011 Cumulative interest rate sensitivity gap 89,891,393 67,348,774 25,230,713 (29,640,393) 15,720,801 (7,499,011) – (1,251,266) (217,742) * This is arrived after deducting the individual allowance from gross impaired loans. 200 – –
203. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 4. Yield/Profit rate risk on IBS portfolio The Group and the Bank are exposed to the risk associated with the effects of fluctuations in the prevailing levels of yield/profit rate on the financial position and cash flows of the IBS portfolio. The fluctuations in yield/profit rate can be influenced by changes in profit rates that affect the value of financial instruments under the IBS portfolio. Yield/profit rate risk is monitored and managed by the ALCO to protect the income from IBS operations. The tables below summarise the Group’s exposure to yield/profit rate risk for the IBS operations as at 31 December 2017 and 31 December 2016. The tables indicate effective average yield/profit rates at the reporting date and the periods in which the financial instruments are either repriced or mature, whichever is earlier. Group 2017 Assets Cash and short-term funds Financial assets at fair value through profit or loss Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 12 months RM’000 >1 to 5 years RM’000 Over 5 years RM’000 Non-yield/ profit rate sensitive RM’000 Trading books RM’000 Total RM’000 Effective yield/profit rate % 17,147,071 – – – – 3,331 – 17,150,402 2.99 – – – – – – 240,571 240,571 1.66 Financial investments available-for-sale Financial investments held-to-maturity Financing and advances – Non-impaired – Impaired* – Collective allowance Derivative assets Other assets Other non-yield/profit sensitive balances 276,081 174,618 298,751 – 495,052 24,113 3,352,476 564,414 5,459,644 2,206,844 – – – – 9,882,004 2,969,989 3.93 5.91 106,008,886 1,049,353 – – – – 9,660,255 – – – – – 2,490,174 10,425 – – – – 14,419,971 34,340 – – – – 29,366,583 – – – – – – – (825,954) – 7,233,195 3,282,972 – – – 487,989 – – 161,945,869 1,094,118 (825,954) 487,989 7,233,195 3,282,972 Total assets 124,656,009 9,959,006 3,019,764 18,371,201 37,033,071 9,693,544 728,560 203,461,155 36,803,869 4,968,432 27,711,854 3,793,912 40,761,388 8,570,575 24,791,877 7,222,526 – – – – – – 130,068,988 24,555,445 2.83 3.00 9,184,384 5,537,942 1,458,668 7,940,707 3,741,025 388,545 – 28,251,271 2.80 – – – – 249,400 – – – – – – – 496,893 – – – – – – – 2,195,922 – – – 892,695 – – – 2,003,222 2,534,105 1,002,441 – – – – – – – – – – 8,854 – 660,680 – – – 148,510 – – 650,320 – – – – – 892,695 8,854 650,320 660,680 4,945,437 2,534,105 1,002,441 148,510 3.75 – – – 3.99 4.71 4.95 – 51,206,085 37,540,601 52,986,553 46,387,573 3,741,025 1,206,589 650,320 193,718,746 – – – – – 9,742,409 – 9,742,409 Total liabilities and Islamic banking capital funds 51,206,085 37,540,601 52,986,553 46,387,573 3,741,025 10,948,998 650,320 203,461,155 On-balance sheet yield/profit rate sensitivity gap 73,449,924 33,292,046 (1,255,454) 78,240 Cumulative yield/profit rate sensitivity gap 73,449,924 1,177,214 (78,240) – Basel II Pillar 3 pg. 288-351 (d) Market risk management (cont’d.) The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) 5.09 – – – – – Liabilities and Islamic banking capital funds Customers’ funding: – Deposits from customers – Investment accounts of customers^ Deposits and placements from financial institutions Financial liabilities at fair value through profit or loss Bills and acceptances payable Derivative liabilities Other liabilities Term funding Subordinated sukuk Capital securities Other non-yield/profit sensitive balances Total liabilities Islamic banking capital funds (27,581,595) (49,966,789) (28,016,372) 45,868,329 (4,098,460) (32,114,832) * This is arrived after deducting the individual allowance from gross impaired financing outstanding. ^ Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). 201
204. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (d) Market risk management (cont’d.) 4. Yield/Profit rate risk on IBS portfolio (cont’d.) Group 2016 Up to 1 month RM’000 >1 to 3 months RM’000 Assets Cash and short-term funds 15,547,094 – Deposits and placements with financial institutions – 654,194 Financial assets at fair value through profit or loss – – Financial investments available-forsale 1,597,324 1,248,368 Financial investments held-tomaturity 92,924 – Financing and advances – Non-impaired 89,120,797 10,494,776 – Impaired* 921,778 – – Collective allowance – – Derivative assets – – Other assets – – Other non-yield/profit sensitive balances – – Total assets Liabilities and Islamic banking capital funds Customers’ funding: – Deposits from customers – Investment accounts of customers^ Deposits and placements from financial institutions Financial liabilities at fair value through profit or loss Bills and acceptances payable Derivative liabilities Other liabilities Subordinated sukuk Other non-yield/profit sensitive balances Total liabilities Islamic banking capital funds 107,279,917 12,397,338 >3 to 12 months RM’000 >1 to 5 years RM’000 Over 5 years RM’000 Non-yield/ profit rate sensitive RM’000 – – – 5,851 – – – – – 426,114 – 3.07 – – 654,194 3.50 – – 252,451 252,451 4.38 1,295,364 4,152,484 – – 8,719,654 3.91 116,962 – – – 209,886 6.97 – – – (758,418) – 4,959,989 – 3,094,192 7,301,614 768,005 182,669,757 – – – 106,842,961 2.77 3,094,192 – 7,002,203 10,366,305 1,026,110 14,940,830 5,211,342 – – – 31,544,587 3.27 9,609,438 3,949,454 5,195,811 9,659,253 1,540,438 391,903 – 30,346,297 3.91 – – – – – – – – – – – – – – – 902,091 – – – 2,534,496 – – – – – – 53,220 – 388,615 – – – 535,161 – – 902,091 53,220 535,161 388,615 2,534,496 3.40 – – – 4.75 – – – – – 98,561 – 98,561 – 90,178,077 11,977,767 28,364,396 39,717,851 1,540,438 932,299 – 9,423,768 – – 8,227,755 21,410,669 – 5.10 – – – – 70,202,334 On-balance sheet yield/profit rate sensitivity gap 17,101,840 – – 1,540,438 10,356,067 419,571 (24,254,155) (25,068,133) 34,622,486 17,101,840 17,521,411 (6,732,744) (31,800,877) 2,821,609 535,161 173,245,989 – 9,423,768 535,161 182,669,757 (3,054,453) 232,844 (232,844) – * This is arrived after deducting the individual allowance from gross impaired financing outstanding. ^ Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). 202 – 148,547,532 – 921,778 – (758,418) 515,554 515,554 – 4,959,989 4,110,241 14,649,718 36,162,924 Total liabilities and Islamic banking capital funds 90,178,077 11,977,767 28,364,396 39,717,851 Cumulative yield/profit rate sensitivity gap Effective yield/profit Total rate RM’000 % – 15,552,945 3,684,127 13,237,392 32,010,440 – – – – – – – – – – – – – Trading books RM’000
205. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 5. Sensitivity analysis for interest rate risk The tables below show the sensitivity of the Group’s and of the Bank’s profit after tax to an up and down 100 basis points parallel rate shock. Group Bank -100 basis points RM’000 +100 basis points RM’000 -100 basis points RM’000 Tax rate +100 basis points RM’000 24% 992,995 754,676 (992,995) (754,676) 507,041 385,351 (507,041) (385,351) 24% 879,957 668,767 (879,957) (668,767) 587,527 446,521 (587,527) (446,521) Basel II Pillar 3 pg. 288-351 (d) Market risk management (cont’d.) The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) 2017 Impact to profit before tax Impact to profit after tax 2016 Impact to profit before tax Impact to profit after tax Impact to profit after tax is measured using Earnings-at-Risk (EaR) methodology which is simulated based on a set of standardised rate shocks on the interest rate gap profile derived from the financial position of the Group and of the Bank. The interest rate gap is the mismatch of rate sensitive assets and rate sensitive liabilities taking into consideration the earlier of repricing or remaining maturity, behavioural assumptions of certain indeterminate maturity products such as current and savings deposits, to reflect the actual sensitivity behaviour of these interest bearing liabilities. Impact to revaluation reserve is assessed by applying up and down 100 basis points rate shocks to the yield curve to model the impact on mark-to-market of financial investments available-for-sale (“AFS”). Group Bank +100 basis points RM’000 -100 basis points RM’000 +100 basis points RM’000 -100 basis points RM’000 (4,603,871) 4,603,871 (3,774,607) 3,774,607 (3,095,287) 3,095,287 (2,719,049) 2,719,049 2017 Impact to revaluation reserve for AFS 2016 Impact to revaluation reserve for AFS 6. Foreign exchange risk Foreign exchange (“FX”) risk arises as a result of movements in relative currencies due to the Group’s operating business activities, trading activities and structural foreign exchange exposures from foreign investments and capital management activities. Generally, the Group is exposed to three types of foreign exchange risk such as translation risk, transactional risk and economic risk which are managed in accordance with the market risk policy and limits. The FX translation risks are mitigated as the assets are funded in the same currency. In addition, the earnings from the overseas operations are repatriated in line with Management Committees’ direction as and when required. The Group controls its FX exposures by transacting in permissible currencies. It has an internal FX NOP to measure, control and monitor its FX risk and implements FX hedging strategies to minimise FX exposures. Stress testing is conducted periodically to ensure sufficient capital to buffer the FX risk. 203
206. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (d) Market risk management (cont’d.) 6. Foreign exchange risk (cont’d.) The tables below analyse the net foreign exchange positions of the Group and of the Bank as at 31 December 2017 and 31 December 2016, by major currencies, which are mainly in Ringgit Malaysia, Singapore Dollar, Great Britain Pound, Hong Kong Dollar, US Dollar, Indonesia Rupiah and Euro. The “others” foreign exchange risk include mainly exposure to Australian Dollar, Japanese Yen, Chinese Renminbi, Philippine Peso and Brunei Dollar. Group 2017 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Loans, advances and financing Derivative assets* Reinsurance/retakaful assets and other insurance receivables Other assets* Investment properties Statutory deposits with central banks Interest in associates and joint ventures Property, plant and equipment Intangible assets Deferred tax assets* Total assets Malaysian Ringgit RM’000 Singapore Dollar RM’000 Great Britain Pound RM’000 Hong Kong Dollar RM’000 United States Dollar RM’000 Indonesia Rupiah RM’000 Euro RM’000 Others RM’000 Total RM’000 27,036,482 5,891,940 215,438 1,053,201 8,996,026 1,167,142 879,998 5,094,063 50,334,290 1,241,208 69,414 122,916 – 14,227,734 18,481 552,058 756,580 16,988,391 – 7,633,503 – – – 476,500 – 404,280 8,514,283 1,875,371 3,317,704 1,511,475 32,535,988 40,606 – 1,385,683 – 553,063 1,512,174 2,760,406 9,564,677 488,906 13,265,652 17,165,840 25,117,493 109,070,244 20,184,773 485,584,362 6,704,651 14,331,241 62,894,171 15,402,820 273,295,410 27,260,976 3,820,275 16,493,759 – 108,952,379 (349,748) 3,556,056 2,724,633 748,443 7,069,370 5,715 1,286,398 719,897 612,792 134,233 1,087,204 – 3,635,712 – 820,982 1,740,874 (2,380) 438,185,612 Liabilities Customers’ funding: – Deposits from customers 270,233,455 – Investment accounts of customers^ 24,555,445 Deposits and placements from financial institutions 12,560,267 Obligations on financial assets sold under repurchase agreements 2,907,423 Bills and acceptances payable 1,050,998 Financial liabilities at fair value through profit or loss 3,013,088 Derivative liabilities* 33,199,149 Insurance/takaful contract liabilities and other insurance payables 23,278,821 Other liabilities* 7,302,358 Recourse obligation on loans and financing sold to Cagamas 1,543,501 Provision for taxation and zakat 365,275 Deferred tax liabilities 690,702 Borrowings 3,230,388 Subordinated obligations 8,937,055 Capital securities 4,672,482 – 900,823 – – – 21,790 83,029 – – 2,422,598 990 1,294,708 22,887 51,300 12,245 17,491 241,697 1,271,292 – 2,067,650 – 345,780 3,352,021 126,783 – 43,480 – – – – – – 1,786 1,002,288 4,122 1,329,773 2,743,722 79,907 845,873 104,632 3,933,772 9,698,140 753,555 15,397,213 2,772,324 2,635,018 6,753,939 859,318 149,928,147 5,110,512 7,204,057 55,985,985 48,348,490 4,926,456 55,612,507 765,301,766 120,856,838 – 2,279,943 – 3,153,453 – 58,396,379 – 28,802,791 – 1,629,874 – 16,664,712 – 502,017,445 24,555,445 1,880,331 112,512 2,536,306 22,884,164 895,556 290,789 1,438,206 42,598,131 461,478 333,258 – 80 – 577 393,202 350,554 177,771 151,463 762,869 5,217 664,343 1,899 5,367,086 1,894,046 – 3,493,480 – 2,254,716 – 449,614 – 1,998,298 – 13,089,993 6,375,815 7,221,015 1,508,757 5,759,628 – 742,770 256,009 1,579,649 – 1,192,733 72,167 1,835,226 25,118,843 19,179,140 – 191,723 29,617 2,017,175 – 1,611,698 – 3,635 67 – – – 138,143,983 5,393,723 397,540,407 On-balance sheet open position Less: Derivative assets Add: Derivative liabilities Add: Net forward position 40,645,205 (27,260,976) 33,199,149 (4,043,565) 11,784,164 349,748 3,493,480 (5,040,586) 42,539,813 10,586,806 – 12,102,517 Net structural currency exposures 498,178 1,831,980 2,451,516 12,751,067 – 2,781,572 3,307,915 48,455,892 (1,112,395) (36,880,505) – 245,822 – – – 28,861 – – Total liabilities Net open position 42 211,667 – 5,218,063 (932,297) (283,211) 932,297 2,254,716 (3,827,732) (923,930) 4,517 – 3,362,727 (3,148,768) (44,115,467) – 943,583 3,089 (176,807) – (34,676) – 2,912,727 – – – 14,884 – 13,492,772 2,035,330 – – 163,141 – 3,767,197 1,006,938 – – – – 193,671 – – – 42,512 11,693 8,891,688 – – 1,543,501 746,494 732,079 34,505,618 11,979,323 6,284,180 6,363,202 56,640,827 37,250,129 6,073,451 42,712,439 690,118,161 840,855 (654,842) 1,112,395 36,880,505 (3,148,768) (44,115,467) 3,448,764 14,116,356 11,098,361 (40,606) 449,614 (763,420) (1,146,995) 12,900,068 (1,512,174) (17,165,840) 1,998,298 13,089,993 (1,586,405) (700,020) 75,183,605 (6,704,651) 7,221,015 1,603,392 2,253,246 6,226,552 10,743,949 (2,247,276) 8,124,201 77,303,361 1,615,451 2,330,061 9,171,453 (3,966) 5,596,941 30,816,974 * The currency positions of the respective assets and liabilities in the analysis above have been stated on a gross basis. These assets and liabilities have been set-off and presented on a net basis if necessary and as appropriate in accordance with applicable MFRS in the Group’s and the Bank’s statements of financial position. ^ Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). 204
207. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (d) Market risk management (cont’d.) 6. Foreign exchange risk (cont’d.) Group 2016 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Loans, advances and financing Derivative assets* Reinsurance/retakaful assets and other insurance receivables Other assets* Investment properties Statutory deposits with central banks Interest in associates and joint ventures Property, plant and equipment Intangible assets Deferred tax assets* Total assets Malaysian Ringgit RM’000 Singapore Dollar RM’000 Great Britain Pound RM’000 Hong Kong Dollar RM’000 United States Dollar RM’000 Indonesia Rupiah RM’000 Euro RM’000 Others RM’000 Total RM’000 26,922,703 3,499,513 976,046 842,016 17,072,643 1,648,109 501,841 6,677,674 58,140,545 1,707,533 757,438 – 376,000 8,217,216 5,044 47,101 2,334,298 13,444,630 – 1,999,143 – – 213,969 279,300 – – 2,492,412 879 184,516 – 4,219,036 (2,062,431) 80,468 1,520,462 – 3,461,901 777,398 3,728,387 13,102,392 1,365,467 58,053,946 37,730,797 1,423,162 3,263,476 1,278,011 35,271,395 (345,106) – (272,577) – – – 32,282 – 32 – 591,922 – – – 11,380 85,706 1,854 – 2,105,678 985 1,190,763 23,329 64,342 13,172 15,656 – 1,269,220 – 2,400,461 – 382,191 3,868,738 154,154 – 91,836 – – – – – – 2,535 2,532,992 3,618 1,313,955 3,181,070 113,266 865,518 113,201 4,139,596 10,525,560 758,488 15,384,134 3,210,436 2,595,497 7,345,524 930,344 3,077,783 7,749,107 142,898,742 50,898,155 1,630,600 25,673,324 735,956,253 2,621,775 – 2,912,949 – 66,797,285 – 31,325,656 – 1,341,929 – 13,998,823 – 485,523,920 31,544,587 505,415 1,688,267 17,601,666 646,808 552,016 3,849,329 30,854,693 – 80 13,611 6,692 216,727 496,639 – 249,269 – 5,076 – 10,478 2,957,951 1,808,066 – 291,814 1,444,465 39,804,285 – 24,630 – (48,293) – (14,668,189) 3,587,230 8,828,060 – 5,928 3,511 5,738,890 – 1,689,425 – 100,013 43,618 6,081,829 23,948,719 17,288,306 – (37,562) – 2,821,196 – – – 20,770 – 18,306,733 5,875,299 – – 221,678 26,842 3,769,791 1,123,158 – – – – 466 – – 974,588 34,996 12,833 7,078,784 – – 974,588 419,729 777,826 34,867,056 15,900,706 6,199,993 665,481,430 14,556,527 2,746,390 50,019,460 16,310,086 10,947,650 – 258,447,144 106,534,305 (4,588,316) (10,563,334) 4,007,339 3,445,172 753,885 6,781,599 6,037 1,112,568 760,467 667,079 375,546,847 129,722 761,317 – 3,697,356 – 879,468 1,751,923 (21,632) 128,481,695 Liabilities Customers’ funding: – Deposits from customers 245,642,389 120,883,114 – Investment accounts of customers^ 31,544,587 – Deposits and placements from financial institutions 4,795,675 1,215,517 Obligations on financial assets sold under repurchase agreements 1,974,878 752,735 Bills and acceptances payable 729,890 309,942 Financial liabilities at fair value through profit or loss 2,142,765 – Derivative liabilities* (9,168,881) (7,079,892) Insurance/takaful contract liabilities and other insurance payables 23,068,595 832,995 Other liabilities* 6,032,863 (2,751,902) Recourse obligation on loans and financing sold to Cagamas – – Provision for taxation and zakat 32,503 147,190 Deferred tax liabilities 701,429 36,722 Borrowings 1,571,625 1,318,461 Subordinated obligations 8,902,249 – Capital securities 4,551,493 1,648,500 Total liabilities 117,313,382 – 391,260 – 154 – – – – 960,237 23,496,050 6,029,332 92,384,834 1,430,469 15,021,597 11,499,979 477,774,903 (11,384,820) 8,311,703 3,191,270 7,702,895 156,306,270 39,077,257 1,951,207 17,417,089 On-balance sheet open position Less: Derivative assets Add: Derivative liabilities Add: Net forward position 53,024,787 4,588,316 (9,168,881) 5,338,103 11,168,313 10,563,334 (7,079,892) 3,215,533 (113,487) 2,062,431 (327,414) (1,917,938) 46,212 (777,398) 291,814 1,295,488 (13,407,528) (37,730,797) 39,804,285 10,581,100 11,820,898 345,106 24,630 (887,240) (320,607) 1,252,485 (48,293) (940,370) 8,256,235 11,384,820 (14,668,189) 1,049,345 70,474,823 (8,311,703) 8,828,060 17,734,021 Net open position 53,782,325 17,867,288 (296,408) 856,116 (752,940) 11,303,394 (56,785) 6,022,211 88,725,201 – 11,806,220 (40,368) 1,297,285 9,852,551 (3,038) 7,379,295 31,472,605 Net structural currency exposures 322,522,060 – (327,414) – 1,955,110 – 287,197 (1,252,485) 1,180,660 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) * The currency positions of the respective assets and liabilities in the analysis above have been stated on a gross basis. These assets and liabilities have been set-off and presented on a net basis if necessary and as appropriate in accordance with applicable MFRS in the Group’s and the Bank’s statements of financial position. ^ Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). 205
208. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (d) Market risk management (cont’d.) 6. Foreign exchange risk (cont’d.) Bank 2017 Malaysian Ringgit RM’000 Singapore Dollar RM’000 Great Britain Pound RM’000 Hong Kong Dollar RM’000 United States Dollar RM’000 Indonesia Rupiah RM’000 Euro RM’000 Others RM’000 Total RM’000 Assets Cash and short-term funds 9,487,476 5,769,098 197,938 1,032,442 8,329,514 164,219 867,262 4,866,578 30,714,527 Deposits and placements with financial institutions 2,724,923 288,854 713,828 – 16,289,356 – 552,058 813,474 21,382,493 Financial assets purchased under resale agreements – 7,633,503 – – – – – – 7,633,503 Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Loans, advances and financing Derivative assets* Other assets* 1,639,953 2,769,440 – 365,685 616,317 560,813 – 1,944,469 7,896,677 47,256,707 16,036,105 211,667 2,450,895 11,576,193 1,116,264 1,385,683 9,253,225 89,286,739 15,263,322 – – – 2,452,215 – – 48,028 17,763,565 132,626,152 107,345,696 4,441,020 2,987,063 37,244,714 – 519,492 5,833,832 290,997,969 16,066 1,505,254 17,141,866 10,081 38,077 28,063,743 475,288 (771,341) 859,662 518,591 245,050 (1,112,742) (38,452,913) 640,462 2,501,547 (12,073) 6,865,221 4,801,397 Statutory deposits with central banks 3,827,265 3,635,712 – – 186,724 – – 96,999 7,746,700 Investment in subsidiaries 6,599,450 2,853,843 – 173,400 585,591 7,704,270 – 4,140,509 22,057,063 31,342 – – – 6,140 – – 434,534 472,016 778,405 330,235 26,927 5,904 7,698 – – 16,739 1,165,908 Intangible assets 314,742 235,212 – 4,370 7,808 – – 5,898 568,030 Deferred tax assets* 310,215 (26,523) – – 151 – – 31,170 315,013 Interest in associates and joint ventures Property, plant and equipment Total assets 249,783,357 147,865,054 5,065,089 6,547,479 41,351,055 9,571,713 4,867,826 44,615,248 509,666,821 146,208,075 120,617,636 2,206,772 3,149,513 44,521,196 103 1,386,674 10,848,631 328,938,600 8,447,655 1,882,997 168,944 2,542,306 22,904,352 – 298,328 1,400,552 37,645,134 Liabilities Deposits from customers Deposits and placements from financial institutions Obligations on financial assets sold under repurchase agreements 2,907,423 461,478 – – 393,202 – 762,869 664,344 5,189,316 Bills and acceptances payable 1,041,273 333,258 80 577 8,438 276 253 828 1,384,983 – 3,362,727 Financial liabilities at fair value through profit or loss 2,120,393 – – 32,260,252 4,326,604 2,254,552 Other liabilities 8,087,616 6,191,972 730,034 Recourse obligation on loans and financing sold to Cagamas 1,543,501 – – 205,157 179,316 3,463 3,230,388 164,087 – Derivative liabilities* Provision for taxation and zakat Borrowings (3,151,474) (44,019,383) 582,416 – (69,128) – – – 5,483,120 444,849 1,995,140 13,069,458 7,179,998 82,346 1,115,373 189,968 16,910,597 1,543,501 – – – – 3,323 – – 29,271 385,876 2,790,822 13,081,666 – 193,671 7,645,808 27,106,442 (34,654) Subordinated obligations 7,327,196 – – – 2,035,330 – – – 9,362,526 Capital securities 4,672,482 1,611,698 – – – – – – 6,284,180 218,051,411 135,769,046 5,363,845 5,879,506 42,221,723 527,574 5,752,308 33,848,860 447,414,273 31,731,946 12,096,008 10,766,388 62,252,548 Total liabilities On-balance sheet open position Less: Derivative assets (28,063,743) (475,288) (298,756) 771,341 667,973 1,112,742 (870,668) 38,452,913 (16,066) (884,482) (1,505,254) (17,141,866) 32,260,252 4,326,604 2,254,552 Add: Net forward position (4,218,737) (5,214,522) (3,681,013) 3,451,123 12,881,111 Net open position 31,709,718 10,732,802 (953,876) 2,080,364 6,443,973 8,636,564 (2,167,609) 5,985,838 62,467,774 – 11,793,424 1,600,552 1,936,383 7,704,270 (3,966) 5,075,418 28,110,598 4,517 444,849 1,995,140 (836,358) (1,773,013) 13,069,458 (6,865,221) Add: Derivative liabilities Net structural currency exposures (3,151,474) (44,019,383) 9,044,139 (708,142) 7,179,998 (99,551) * The currency positions of the respective assets and liabilities in the analysis above have been stated on a gross basis. These assets and liabilities have been set-off and presented on a net basis if necessary and as appropriate in accordance with applicable MFRS in the Group’s and the Bank’s statements of financial position. 206
209. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (d) Market risk management (cont’d.) 6. Foreign exchange risk (cont’d.) Bank 2016 Malaysian Ringgit RM’000 Singapore Dollar RM’000 Great Britain Pound RM’000 Hong Kong Dollar RM’000 United States Dollar RM’000 Indonesia Rupiah RM’000 Euro RM’000 Others RM’000 Total RM’000 Assets 11,445,863 3,286,065 1,131,607 819,553 15,028,225 225,101 480,518 5,933,999 38,350,931 Deposits and placements with financial institutions Cash and short-term funds 4,935,299 843,885 315,746 376,000 10,584,438 – 47,101 2,236,818 19,339,287 Financial assets purchased under resale agreements – 1,999,143 – – 213,970 – – – 2,213,113 Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Loans, advances and financing Derivative assets* Other assets* 1,793,438 2,328,820 – 446 2,934,234 625,286 – 298,090 7,980,314 35,925,065 15,967,871 184,516 1,519,770 12,188,145 1,383,628 1,955,110 5,780,096 74,904,201 11,640,466 – – – 911,100 – – 30,745 12,582,311 130,117,983 105,583,756 3,519,758 2,948,650 47,871,513 – 281,888 4,696,588 295,020,136 (1,877,842) 776,449 37,779,511 (379,040) (279,080) 440,526 2,953,090 (22,905) (5,493,293) 1,149,571 (9,689,577) 454,851 (1,254,642) 52,880 (11,540,648) 854,579 8,320,918 5,603,512 Statutory deposits with central banks 3,711,494 3,697,356 – – 22,282 – – 99,193 7,530,325 Investment in subsidiaries 6,505,060 2,852,896 – 173,400 377,555 7,537,127 – 4,140,509 21,586,547 Interest in associates and joint ventures 10,845 – – – 6,140 – – 434,533 451,518 859,988 357,592 30,162 6,979 11,085 – – 24,955 1,290,761 Intangible assets 306,830 200,860 – 7,024 8,027 – – 7,308 530,049 Deferred tax assets* 368,815 (32,573) – – 214 – – 22,231 358,687 Property, plant and equipment Total assets Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) 203,277,424 127,850,945 3,024,867 7,068,797 130,889,529 9,369,197 1,562,855 13,018,996 496,062,610 Liabilities 144,004,912 120,605,792 2,562,826 2,912,997 52,945,507 115 1,239,775 7,606,371 331,878,295 Deposits and placements from financial institutions Deposits from customers 4,123,047 1,235,225 544,766 1,691,901 17,890,369 – 561,322 3,810,080 29,856,710 Obligations on financial assets sold under repurchase agreements 1,974,878 752,735 – 13,611 216,727 – – – 2,957,951 676,663 308,233 80 6,692 4,500 164 227 4,218 1,000,777 Bills and acceptances payable Financial liabilities at fair value through profit or loss Derivative liabilities* Other liabilities* Recourse obligation on loans and financing sold to Cagamas Provision for taxation and zakat Borrowings – 1,444,465 (9,930,663) 1,240,674 (6,224,199) (330,488) 291,179 39,675,108 (12,351) (52,578) (14,613,787) 8,802,221 4,782,162 (2,703,301) 374,324 (142,397) 6,889,713 301,511 50,270 2,946,416 12,498,698 974,588 – (71,840) 1,571,625 – – – – 138,110 – 323,479 – – – – – 2,685,139 – – – 974,588 1,836 – – 16,812 47,374 2,752,552 18,074,888 – – 6,204,883 28,927,427 (37,544) Subordinated obligations 7,327,573 – – – 5,875,299 – – – 13,202,872 Capital securities 4,577,426 1,648,500 – – – – – – 6,225,926 160,276,457 116,084,574 3,151,508 7,488,991 143,018,412 289,439 1,799,016 6,949,581 439,057,978 43,000,967 11,766,371 5,493,293 9,689,577 Add: Derivative liabilities (9,930,663) (6,224,199) Add: Net forward position (10,290,930) Total liabilities On-balance sheet open position Less: Derivative assets Net open position Net structural currency exposures (126,641) (420,194) (12,128,883) 9,079,758 (776,449) (37,779,511) 379,040 (330,488) 291,179 39,675,108 (12,351) (52,578) 3,174,891 (1,756,614) 1,295,847 9,617,235 (1,149,074) (1,006,605) 863,129 747,879 28,272,667 18,406,640 (335,901) 390,383 – 11,277,935 (40,368) 1,262,738 1,877,842 (236,161) 1,254,642 6,069,415 57,004,632 11,540,648 (8,320,918) (14,613,787) 8,802,221 (616,051) 8,297,373 (40,702) 3,859,405 58,233,814 199,058 7,537,127 (3,038) 6,290,414 26,523,866 * The currency positions of the respective assets and liabilities in the analysis above have been stated on a gross basis. These assets and liabilities have been set-off and presented on a net basis if necessary and as appropriate in accordance with applicable MFRS in the Group’s and the Bank’s statements of financial position. 207
210. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (d) Market Risk Management (cont’d.) 6. Foreign exchange risk (cont’d.) Net structural foreign currency position represents the Group’s and the Bank’s net investment in overseas operations. This position comprises the net assets of the Group’s and of the Bank’s overseas branches and investments in overseas subsidiaries. Where possible, the Group and the Bank mitigate the effect of currency exposures by funding the overseas operations with borrowings and deposits received in the same functional currencies of the respective overseas locations. The foreign currency exposures are also hedged using foreign exchange derivatives. The structural currency exposures of the Group and of the Bank as at the reporting dates are as follows: Group Structural currency exposures in overseas operations RM’000 Hedges by funding in respective currencies RM’000 Net structural currency exposures RM’000 2017 Singapore Dollar Great Britain Pound Hong Kong Dollar United States Dollar Indonesia Rupiah Euro Others 15,112,947 4,517 1,615,451 6,167,530 9,171,453 (3,966) 5,596,941 (3,010,430) – – (3,837,469) – – – 12,102,517 4,517 1,615,451 2,330,061 9,171,453 (3,966) 5,596,941 37,664,873 (6,847,899) 30,816,974 14,696,325 (40,368) 1,297,285 4,185,814 9,852,551 (3,038) 7,379,295 (2,890,105) – – (3,005,154) – – – 11,806,220 (40,368) 1,297,285 1,180,660 9,852,551 (3,038) 7,379,295 37,367,864 (5,895,259) 31,472,605 2016 Singapore Dollar Great Britain Pound Hong Kong Dollar United States Dollar Indonesia Rupiah Euro Others 208
211. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (d) Market risk management (cont’d.) 6. Foreign exchange risk (cont’d.) The structural currency exposures of the Group and of the Bank as at the reporting dates are as follows (cont’d.): Bank Structural currency exposures in overseas operations RM’000 Hedges by funding in respective currencies RM’000 Net structural currency exposures RM’000 2017 Singapore Dollar Great Britain Pound Hong Kong Dollar United States Dollar Indonesia Rupiah Euro Others 14,803,854 4,517 1,600,552 5,757,105 7,704,270 (3,966) 5,075,418 (3,010,430) – – (3,820,722) – – – 11,793,424 4,517 1,600,552 1,936,383 7,704,270 (3,966) 5,075,418 34,941,750 (6,831,152) 28,110,598 14,168,040 (40,368) 1,262,738 3,339,749 7,537,127 (3,038) 6,290,414 (2,890,105) – – (3,140,691) – – – 11,277,935 (40,368) 1,262,738 199,058 7,537,127 (3,038) 6,290,414 32,554,662 (6,030,796) 26,523,866 2016 Singapore Dollar Great Britain Pound Hong Kong Dollar United States Dollar Indonesia Rupiah Euro Others Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) 209
212. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (d) Market Risk Management (cont’d.) 7. Sensitivity analysis for foreign exchange risk Foreign exchange risk Foreign exchange risk arises from the movements in exchange rates that adversely affect the revaluation of the Group’s and of the Bank’s foreign currency positions. Considering that other risk variables remain constant, the foreign currency revaluation sensitivity for the Group and the Bank on their unhedged position are as follows: Group 1% Appreciation RM’000 Bank 1% Depreciation RM’000 1% Appreciation RM’000 1% Depreciation RM’000 2017 Impact to profit after taxation (20,644) 20,644 (26,098) 26,098 2016 Impact to profit after taxation (21,969) 21,969 (33,058) 33,058 Interpretation of impact The Group and the Bank measure the foreign exchange sensitivity based on the foreign exchange net open positions (including foreign exchange structural position) under an adverse movement in all foreign currencies against the functional currency – Ringgit Malaysia (“RM”). The result implies that the Group and the Bank may be subject to additional translation (losses)/gains if the RM appreciates/depreciates against other currencies and vice versa. 8. Equity price risk Equity price risk arises from the unfavourable movements in share price of quoted shares that adversely affect the Group’s and the Bank’s mark-to-market valuation on quoted shares. There is a direct correlation between movements in share price of quoted shares and movements in stock market index. The Group’s equity price risk policy requires it to manage such risk by setting and monitoring objectives and constraints on investments, diversification plans and limits on investment in each country, sector, market and issuer. Considering that other risk variables remain constant, the sensitivity of mark-to-market valuation of quoted shares for the Group and the Bank against the stock market index are as follows: Group Change in market index 210 Bank Change in market index +10% RM’000 –10% RM’000 +10% RM’000 –10% RM’000 2017 Impact to profit after tax Impact to post-tax equity 230,144 220,755 (230,144) (220,755) 10,823 14,941 (10,823) (14,941) 2016 Impact to profit after tax Impact to post-tax equity 177,786 177,120 (177,786) (177,120) 10,691 10,810 (10,691) (10,810)
213. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 1. Liquidity risk management overview Liquidity risk management Liquidity risk is defined as the risk of an adverse impact to the Group’s financial condition or overall safety and soundness that could arise from its inability (or perceived inability) or unexpected higher cost to meet its obligations. The Group has taken BNM Liquidity Framework and leading practices as a foundation to manage and measure its liquidity risk exposure. The Group also uses a range of tools to monitor and control liquidity risk exposure such as liquidity gap, early warning signals, liquidity indicators and stress testing. The liquidity positions of the Group are monitored regularly against the established policies, procedures and limits. Basel II Pillar 3 pg. 288-351 (e) Liquidity risk management The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) The Group has a diversified liability structure to meet its funding requirements. The primary source of funding includes customer deposits, interbank deposits, debt securities, swap market, bank loan syndication and medium term funds. The Group also initiates and implements strategic fund raising programmes as well as institutes standby lines with external parties on a need basis. Sources of fund providers are regularly reviewed to maintain a wide diversification by currency, provider, product and term, thus minimising excessive funding concentration. Management of liquidity risk For day-to-day liquidity management, the treasury operations will ensure sufficient funding to meet its intraday payment and settlement obligations on a timely basis. Besides, the process of managing liquidity risk also includes: • Maintaining a sufficient amount of unencumbered high quality liquidity buffer as a protection against any unforeseen interruption to cash flows; • Managing short and long-term cash flows via maturity mismatch report and various indicators; • Monitoring depositor concentration at the Group and the Bank levels to avoid undue reliance on large depositors; • Managing liquidity exposure by domestic and significant foreign currencies; • Diversifying funding sources to ensure proper funding mix; • Conducting liquidity stress testing under various scenarios as part of prudent liquidity control; • Maintaining a robust contingency funding plan that includes strategies, decision-making authorities, internal and external communication and courses of action to be taken under different liquidity crisis scenarios; and • Conducting Recovery Plan (“RCP”) testing to examine the effectiveness and robustness of the plans to avert any potential liquidity disasters affecting the Group’s and the Bank’s liquidity soundness and financial solvency. 211
214. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (e) Liquidity risk management (cont’d.) 2. Contractual maturity of total assets and liabilities The tables below analyse assets and liabilities (inclusive of non-financial instruments) of the Group and of the Bank in the relevant maturity tenors based on remaining contractual maturities as at 31 December 2017 and 31 December 2016. These disclosures are made in accordance with the requirement of policy document on Financial Reporting issued by BNM: Group 2017 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements Financial investments portfolio* Loans, advances and financing Derivative assets Reinsurance/retakaful assets and other insurance receivables Other assets Investment properties Statutory deposits with central banks Interest in associates and joint ventures Property, plant and equipment Intangible assets Deferred tax assets Total assets Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 months to 1 year RM’000 >1 to 3 years RM’000 >3 to 5 years RM’000 Over 5 years RM’000 No-specific maturity RM’000 Total RM’000 50,334,290 – – – – – – – 50,334,290 – 10,853,851 513,318 1,292,406 2,368,898 1,737,837 222,081 – 16,988,391 5,916,473 6,636,051 77,765,837 1,086,043 2,597,810 13,437,404 26,562,868 1,085,728 – 7,697,157 13,196,664 553,632 – 11,254,934 10,637,235 472,997 – 23,215,372 52,774,753 1,516,628 – 21,942,954 62,323,121 1,285,332 – 63,685,263 242,323,884 704,291 – 6,503,375 – – 8,514,283 154,372,510 485,584,362 6,704,651 3,355,257 5,339,570 – – – – – – 43,263 143,376 – – – – – – – 58,621 – – – – – – 412,598 331,266 – – – – – – 78,279 3,819 – – – – – – – 4,506 – – – – – – 44,375 6,732 – – – – – – – 3,810,250 753,555 15,397,213 2,772,324 2,635,018 6,753,939 859,318 3,933,772 9,698,140 753,555 15,397,213 2,772,324 2,635,018 6,753,939 859,318 150,433,521 54,724,300 22,019,392 24,401,436 79,957,749 87,293,750 306,986,626 39,484,992 765,301,766 80,364,672 3,169,363 58,679,768 4,964,199 68,612,221 2,532,512 65,721,600 2,564 6,437,962 18,240 19,164 – – – 502,017,445 24,555,445 12,489,098 3,435,797 899,755 1,855,936 1,225,788 118 – 42,598,131 2,965,707 169,851 – 199,724 – 18,485 – – – – – 337 – 77 5,367,086 1,894,046 – 1,268,296 – 793,739 – 641,117 – 1,473,202 2,131,807 1,839,666 4,244,008 199,076 – – 6,375,815 7,221,015 1,527,071 4,227,187 738,403 193,784 3,620,226 1,441,868 315 936,920 1,896,082 485,050 5,168,499 622,698 260,756 2,352,569 25,118,843 19,179,140 Liabilities Customers’ funding: – Deposits from customers 222,182,058 – Investment accounts of customers^ 13,868,567 Deposits and placements from financial institutions 22,691,639 Obligations on financial assets sold under repurchase agreements 2,401,379 Bills and acceptances payable 1,505,572 Financial liabilities at fair value through profit or loss – Derivative liabilities 1,005,919 Insurance/takaful contract liabilities and other insurance payables 11,907,491 Other liabilities 8,919,064 Recourse obligation on loans and financing sold to Cagamas – Provision for taxation and zakat 7,191 Deferred tax liabilities – Borrowings 4,461,164 Subordinated obligations 9 Capital securities – Total liabilities Net liquidity gap * ^ 212 288,950,053 – – – 1,543,501 – – – 1,543,501 4,737 – 2,995,772 – – 8,594 – 4,681,544 449,175 – 78,220 – 2,850,694 149,221 – – – 9,023,601 399,619 – – – 6,691,891 – – – – 3,800,952 10,981,299 6,284,180 647,752 732,079 – – – 746,494 732,079 34,505,618 11,979,323 6,284,180 109,181,754 74,144,727 80,844,319 80,957,258 (138,516,532) (54,457,454) (52,125,335) (56,442,883) (999,509) 20,726,486 31,320,331 3,993,233 690,118,161 66,567,264 275,666,295 35,491,759 75,183,605 Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity. Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii).
215. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (e) Liquidity risk management (cont’d.) 2. Contractual maturity of total assets and liabilities (cont’d.) Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 months to 1 year RM’000 >1 to 3 years RM’000 >3 to 5 years RM’000 Over 5 years RM’000 No-specific maturity RM’000 Total RM’000 Cash and short-term funds 58,140,545 – – – – – – – 58,140,545 Deposits and placements with financial institutions – 4,477,912 2,701,071 2,272,020 2,105,110 1,559,079 329,438 – 13,444,630 Group 2016 Assets Financial assets purchased under resale agreements 2,004,337 488,075 – – – – – – 2,492,412 Financial investments portfolio* 4,567,932 9,486,123 7,136,429 6,804,464 28,594,057 13,068,733 57,962,855 3,281,888 130,902,481 55,257,173 25,286,755 18,474,218 25,648,216 55,643,228 62,596,054 234,869,259 – 477,774,903 769,366 718,836 833,580 280,739 1,389,435 1,786,193 2,533,554 – 8,311,703 Reinsurance/retakaful assets and other insurance receivables 3,582,543 115,796 – 392,784 17,682 – 30,791 – 4,139,596 Other assets 3,283,763 71,475 6,932 383,524 19,963 191,639 264,873 6,303,391 10,525,560 Loans, advances and financing Derivative assets Investment properties – – – – – – – 758,488 758,488 Statutory deposits with central banks – – – – – – – 15,384,134 15,384,134 Interest in associates and joint ventures – – – – – – – 3,210,436 3,210,436 Property, plant and equipment – – – – – – – 2,595,497 2,595,497 Intangible assets – – – – – – – 7,345,524 7,345,524 Deferred tax assets – – – – – – – 930,344 930,344 127,605,659 40,644,972 29,152,230 35,781,747 87,769,475 79,201,698 295,990,770 39,809,702 735,956,253 Total assets Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) Liabilities Customers’ funding: 227,873,657 71,182,258 44,577,108 47,696,890 62,045,128 32,148,879 – – 485,523,920 – Investment accounts of customers^ – Deposits from customers 16,840,520 728,366 5,040,636 8,929,760 3,513 1,792 – – 31,544,587 Deposits and placements from financial institutions 17,867,696 7,377,593 2,120,247 720,883 1,326,669 1,405,601 36,004 – 30,854,693 983,074 1,974,877 – – – – – – 2,957,951 1,277,936 266,311 236,975 7,888 15,913 – 2,957 86 1,808,066 Obligations on financial assets sold under repurchase agreements Bills and acceptances payable Financial liabilities at fair value through profit or loss Derivative liabilities Insurance/takaful contract liabilities and other insurance payables Other liabilities Recourse obligation on loans and financing sold to Cagamas Provision for taxation and zakat Deferred tax liabilities Borrowings Subordinated obligations Capital securities Total liabilities Net liquidity gap – – – – – 1,328,591 2,258,639 – 3,587,230 736,127 592,352 1,054,740 277,461 1,780,153 2,109,732 2,277,495 – 8,828,060 12,127,809 823,301 688,294 3,859,561 750 1,587,576 4,772,949 88,479 23,948,719 8,690,429 515,635 609,920 526,174 3,521,120 108,825 987,973 2,328,230 17,288,306 – – – 974,588 – – – – 974,588 14,727 1,451 28,981 50,518 28,706 – – 295,346 419,729 – – – – – – – 777,826 777,826 2,170,640 3,894,674 3,931,468 5,499,688 9,798,189 5,049,890 4,522,507 – 34,867,056 85,059 – 1,255 30,770 1,205,758 – 14,577,864 – 15,900,706 – – – – – – 6,199,993 – 6,199,993 288,667,674 87,356,818 58,289,624 68,574,181 79,725,899 43,740,886 35,636,381 3,489,967 665,481,430 (161,062,015) (46,711,846) (29,137,394) (32,792,434) 8,043,576 35,460,812 260,354,389 36,319,735 70,474,823 * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity. ^ Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). 213
216. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (e) Liquidity risk management (cont’d.) 2. Contractual maturity of total assets and liabilities (cont’d.) Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 months to 1 year RM’000 >1 to 3 years RM’000 >3 to 5 years RM’000 Over 5 years RM’000 No-specific maturity RM’000 Total RM’000 Cash and short-term funds 30,714,527 – – – – – – – 30,714,527 Deposits and placements with financial institutions – 15,272,648 503,021 1,278,008 2,368,898 1,737,837 222,081 – 21,382,493 Bank 2017 Assets Financial assets purchased under resale agreements 5,083,762 2,549,741 – – – – – – 7,633,503 Financial investments portfolio* 4,387,633 11,331,990 6,010,381 9,591,365 17,171,670 18,308,504 47,458,503 686,935 114,946,981 290,997,969 50,861,271 14,074,815 7,673,552 10,134,489 39,572,242 41,828,147 126,853,453 – Derivative assets 1,020,555 1,063,891 542,530 632,223 1,630,284 1,305,226 670,512 – 6,865,221 Other assets 1,382,911 59,331 3,699 82 281 12 – 3,355,081 4,801,397 Loans, advances and financing Statutory deposits with central banks – – – – – – – 7,746,700 7,746,700 Investment in subsidiaries – – – – – – – 22,057,063 22,057,063 Interest in associates and joint ventures – – – – – – – 472,016 472,016 Property, plant and equipment – – – – – – – 1,165,908 1,165,908 Intangible assets – – – – – – – 568,030 568,030 Deferred tax assets – – – – – – – 315,013 315,013 93,450,659 44,352,416 14,733,183 21,636,167 60,743,375 63,179,726 175,204,549 36,366,746 509,666,821 127,573,618 46,397,955 33,235,858 51,870,263 64,128,329 5,732,577 – – 328,938,600 3,316,961 842,612 1,249,083 371,725 – – 37,645,134 Total assets Liabilities Deposits from customers Deposits and placements from financial institutions 21,438,786 10,425,967 Obligations on financial assets sold under repurchase agreements 2,223,609 2,965,707 – – – – – – 5,189,316 Bills and acceptances payable 1,384,646 – – – – – 337 – 1,384,983 Financial liabilities at fair value through profit or loss Derivative liabilities Other liabilities Recourse obligation on loans and financing sold to Cagamas Provision for taxation and zakat Borrowings – – – – 1,239,112 4,244,008 – 5,483,120 1,190,123 651,807 777,911 1,571,241 1,846,937 199,076 – 7,179,998 11,058,078 4,004,222 184,626 527,232 472,133 382,282 – 282,024 16,910,597 1,543,501 – – – – 1,543,501 – – – 1,111 4,591 – – – – – 380,174 385,876 1,941,789 2,286,540 3,961,971 2,053,053 6,370,246 6,691,891 3,800,952 – 27,106,442 Subordinated obligations – – – – – – 9,362,526 – 9,362,526 Capital securities – – – – – – 6,284,180 – 6,284,180 Total liabilities 166,564,540 67,275,105 41,351,223 56,071,071 75,334,533 16,264,524 23,891,079 662,198 447,414,273 Net liquidity gap (73,113,881) (22,922,689) (26,618,040) (34,434,904) (14,591,158) 46,915,202 151,313,470 35,704,548 62,252,548 * 214 – 942,903 Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity.
217. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (e) Liquidity risk management (cont’d.) 2. Contractual maturity of total assets and liabilities (cont’d.) Bank 2016 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 months to 1 year RM’000 >1 to 3 years RM’000 >3 to 5 years RM’000 Over 5 years RM’000 No-specific maturity RM’000 Total RM’000 38,350,931 – – – – – – – 38,350,931 – 10,379,941 2,694,757 2,272,020 2,104,053 1,559,079 329,437 – 19,339,287 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets purchased under resale agreements 1,731,461 481,652 – – – – – – 2,213,113 Financial investments portfolio* 7,911,408 6,169,150 5,671,532 4,839,050 20,814,310 10,519,838 38,984,182 557,356 95,466,826 295,020,136 46,320,895 16,636,780 14,516,656 14,968,105 42,340,144 41,259,813 118,977,743 – Derivative assets Loans, advances and financing 664,307 657,987 695,552 447,733 1,560,847 1,829,749 2,464,743 – 8,320,918 Other assets 200,018 68,843 – – – 286 – 5,334,365 5,603,512 Statutory deposits with central banks – – – – – – – 7,530,325 7,530,325 Investment in subsidiaries – – – – – – – 21,586,547 21,586,547 Interest in associates and joint ventures – – – – – – – 451,518 451,518 Property, plant and equipment – – – – – – – 1,290,761 1,290,761 Intangible assets – – – – – – – 530,049 530,049 Deferred tax assets – – – – – – – 358,687 358,687 95,179,020 34,394,353 23,578,497 22,526,908 66,819,354 55,168,765 160,756,105 37,639,608 496,062,610 128,313,736 54,386,191 35,807,945 42,335,269 49,058,958 21,976,196 – – 331,878,295 1,916,832 699,052 1,118,430 348,499 4,232 – 29,856,710 Total assets Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) Liabilities Deposits from customers Deposits and placements from financial institutions 18,561,558 7,208,107 Obligations on financial assets sold under repurchase agreements 983,074 1,974,877 – – – – – – 2,957,951 Bills and acceptances payable 997,820 – – – – – 2,957 – 1,000,777 Financial liabilities at fair value through profit or loss Derivative liabilities Other liabilities Recourse obligation on loans and financing sold to Cagamas – – – – – 426,500 2,258,639 – 2,685,139 653,669 573,638 1,046,364 250,704 1,890,598 2,109,753 2,277,495 – 8,802,221 8,102,800 421,027 520,551 1,243 3,043,921 – 405,205 3,951 12,498,698 974,588 – – – 974,588 – – – – 3,745 1,451 – – 28,706 – – 13,472 47,374 Borrowings 961,756 3,613,441 3,466,269 4,183,449 7,130,114 5,049,890 4,522,508 – 28,927,427 Subordinated obligations 121,072 – – – – – 13,081,800 – 13,202,872 – – – – – – 6,225,926 – 6,225,926 Total liabilities 158,699,230 68,178,732 42,757,961 48,444,305 62,270,727 29,910,838 28,778,762 17,423 439,057,978 Net liquidity gap (63,520,210) (33,784,379) (19,179,464) (25,917,397) 4,548,627 25,257,927 131,977,343 37,622,185 57,004,632 Provision for taxation and zakat Capital securities * Financial investments portfolio consists of financial assets at fair value through profit or loss, financial investments available-for-sale and financial investments held-to-maturity. 215
218. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (e) Liquidity risk management (cont’d.) 3. Contractual maturity of financial liabilities on an undiscounted basis The tables below present the cash flows payable by the Group and the Bank under non-derivative financial liabilities by remaining contractual maturities as at 31 December 2017 and 31 December 2016. The amounts disclosed in the table will not agree to the carrying amounts reported in the statements of financial position as the amounts incorporated all contractual cash flows, on an undiscounted basis, relating to both principal and interest/profit analysis. The Group and the Bank manage inherent liquidity risk based on discounted expected cash flows. Group 2017 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 months to 1 year RM’000 >1 to 3 years RM’000 >3 to 5 years RM’000 Over 5 years RM’000 Total RM’000 510,195,818 Non-derivative liabilities 226,497,147 83,419,626 59,316,971 69,209,613 65,290,759 6,442,538 19,164 Investment accounts of customers 13,868,567 3,169,363 4,964,199 2,532,512 2,564 18,240 – 24,555,445 Deposits and placements from financial institutions 24,793,974 12,355,894 3,451,225 934,534 1,868,754 1,250,437 118 44,654,936 Obligations on financial assets sold under repurchase agreements 2,404,407 2,977,497 – – – – – 5,381,904 Bills and acceptances payable 1,893,713 – – – – – 337 1,894,050 4,586 136 3,459 – – 2,129,112 4,244,008 6,381,301 Deposits from customers Financial liabilities at fair value through profit or loss Insurance/takaful contract liabilities and other insurance payables 12,168,247 1,508,263 738,403 3,639,034 315 1,896,082 5,168,499 25,118,843 Other liabilities 16,066,064 1,015,686 83,407 1,245,310 872,703 1,216,731 1,477,952 21,977,853 Recourse obligation on loans and financing sold to Cagamas – – – – 1,705,998 – – 1,705,998 4,275,946 3,093,031 4,740,280 3,133,407 8,891,236 7,667,584 7,726,461 39,527,945 Subordinated obligations 8 1,069 489,517 486,784 639,318 599,690 13,883,854 16,100,240 Capital securities – – – – – – 14,514,358 14,514,358 301,972,659 107,540,565 73,787,461 81,181,194 79,271,647 21,220,414 47,034,751 712,008,692 Borrowings Commitments and contingencies Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Irrevocable commitments to extend credit Miscellaneous 216 1,473,688 624,593 905,437 6,190,926 3,175,065 87,342 513,370 12,970,421 732,736 339,145 569,873 5,771,556 6,433,254 815,780 3,764,938 18,427,282 2,320,963 2,529,779 139,193 931,037 108,979 – – 6,029,951 44,423,160 63,597 374,268 57,481,382 24,592,453 12,281,507 1,033,546 140,249,913 6,198,668 2,243,544 856,529 2,477,636 150,758 168,503 3,067 12,098,705 55,149,215 5,800,658 2,845,300 72,852,537 34,460,509 13,353,132 5,314,921 189,776,272
219. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (e) Liquidity risk management (cont’d.) 3. Contractual maturity of financial liabilities on an undiscounted basis (cont’d.) Group 2016 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 months to 1 year RM’000 >1 to 3 years RM’000 >3 to 5 years RM’000 Over 5 years RM’000 Total RM’000 487,975,223 Non-derivative liabilities 228,304,080 71,602,760 45,020,547 48,386,636 62,319,196 32,342,004 – Investment accounts of customers Deposits from customers 16,840,520 728,366 5,040,636 8,929,760 3,513 1,792 – 31,544,587 Deposits and placements from financial institutions 18,116,896 7,460,254 2,139,692 743,714 1,338,868 1,431,440 36,004 31,266,868 Obligations on financial assets sold under repurchase agreements Bills and acceptances payable Financial liabilities at fair value through profit or loss 983,163 1,984,357 – – – – – 2,967,520 1,808,072 – – – – – – 1,808,072 – – – – – 1,328,591 2,258,639 3,587,230 Insurance/takaful contract liabilities and other insurance payables 12,129,463 823,301 688,294 3,859,561 750 1,587,576 4,859,774 23,948,719 Other liabilities 10,380,238 551,491 609,920 627,525 3,044,834 108,825 2,509,173 17,832,006 Recourse obligation on loans and financing sold to Cagamas Borrowings Subordinated obligations Capital securities – – – 1,001,900 – – – 1,001,900 2,557,660 4,031,873 4,110,671 6,112,388 9,397,996 5,816,585 8,943,954 40,971,127 85,059 – 3,456 – 815,280 1,163,330 18,976,152 21,043,277 – – – – – – 15,421,674 15,421,674 291,205,151 87,182,402 57,613,216 69,661,484 76,920,437 43,780,145 53,005,370 679,368,205 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) Commitments and contingencies Direct credit substitutes 2,825,291 1,908,543 1,301,152 3,122,034 2,535,839 401,398 562,509 12,656,766 Certain transaction-related contingent items 2,001,227 750,034 2,156,768 3,118,821 6,181,817 4,762,734 1,167,313 20,138,714 Short-term self-liquidating trade-related contingencies 2,257,250 3,174,105 436,128 402,738 62,632 – – 6,332,853 65,885 – – – – – – 65,885 80,378,245 227,041 366,855 23,615,684 23,332,500 16,377,773 505,056 144,803,154 6,629,723 963,218 1,140,998 593,621 205,002 30,133 4,424 9,567,119 94,157,621 7,022,941 5,401,901 30,852,898 32,317,790 21,572,038 2,239,302 193,564,491 Obligations under underwriting agreements Irrevocable commitments to extend credit Miscellaneous 217
220. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (e) Liquidity risk management (cont’d.) 3. Contractual maturity of financial liabilities on an undiscounted basis (cont’d.) Bank 2017 Non-derivative liabilities Deposits from customers Deposits and placements from financial institutions Obligations on financial assets sold under repurchase agreements Bills and acceptances payable Financial liabilities at fair value through profit or loss Other liabilities Recourse obligation on loans and financing sold to Cagamas Borrowings Subordinated obligations Capital securities Commitments and contingencies Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Irrevocable commitments to extend credit Miscellaneous 2016 Non-derivative liabilities Deposits from customers Deposits and placements from financial institutions Obligations on financial assets sold under repurchase agreements Bills and acceptances payable Financial liabilities at fair value through profit or loss Other liabilities Recourse obligation on loans and financing sold to Cagamas Borrowings Subordinated obligations Capital securities Commitments and contingencies Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Irrevocable commitments to extend credit Miscellaneous 218 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 months to 1 year RM’000 >1 to 3 years RM’000 >3 to 5 years RM’000 Over 5 years RM’000 Total RM’000 130,104,016 21,485,529 49,480,817 10,479,207 33,729,136 3,349,392 52,309,121 874,138 63,697,311 1,261,901 5,737,153 396,374 – – 335,057,554 37,846,541 2,225,831 1,384,646 2,977,497 – – – – – – – – – – 337 5,203,328 1,384,983 – 15,548,132 – 893,298 – 73,531 – 200,188 – 872,095 1,239,112 1,113,963 4,244,008 638,690 5,483,120 19,339,897 – 1,718,116 – – – 2,283,433 – – – 3,991,222 – – – 2,094,772 – – 1,705,998 6,648,477 – – – 7,258,992 – – – 7,479,824 12,433,671 14,514,358 1,705,998 31,474,836 12,433,671 14,514,358 172,466,270 66,114,252 41,143,281 55,478,219 74,185,782 15,745,594 39,310,888 464,444,286 565,115 152,014 2,028,452 41,947,210 4,163,120 426,763 147,531 2,404,771 63,597 2,237,103 778,263 386,875 127,857 374,268 845,285 5,927,375 5,528,231 930,788 37,500,345 2,464,954 2,923,141 5,302,921 108,979 16,894,780 87,965 31,889 264,117 – 12,270,752 – 13,370 2,836,728 – 1,033,546 147 10,665,916 14,618,417 5,600,847 110,084,498 9,798,574 48,855,911 5,279,765 2,512,548 52,351,693 25,317,786 12,566,758 3,883,791 150,768,252 128,662,071 18,577,482 54,713,563 7,245,800 36,171,845 1,936,207 42,919,435 721,629 49,275,681 1,132,893 22,134,065 374,216 – – 333,876,660 29,988,227 983,163 1,000,777 1,984,357 – – – – – – – – – – – 2,967,520 1,000,777 – 8,102,800 – 421,027 – 520,551 – 5,194 – 3,043,922 426,500 – 2,258,639 405,205 2,685,139 12,498,699 – 961,858 121,072 – – 3,592,341 – – – 3,478,843 – – 1,001,900 4,225,404 – – – 7,352,471 – – – 5,444,341 – – – 8,809,596 17,271,538 15,447,608 1,001,900 33,864,854 17,392,610 15,447,608 158,409,223 67,957,088 42,107,446 48,873,562 60,804,967 28,379,122 44,192,586 450,723,994 1,848,292 1,431,922 1,929,755 78,146,592 5,211,470 1,832,189 617,653 3,011,528 227,041 954,424 1,210,978 1,932,177 422,832 366,855 1,121,281 2,919,612 2,932,991 357,103 2,218,798 568,092 2,377,558 5,004,056 45,796 14,642,786 152,246 303,675 4,393,935 – 16,377,773 10 2,009 1,024,070 – 479,827 151 10,494,313 17,336,804 5,767,014 112,459,672 8,007,674 88,568,031 6,642,835 5,054,123 8,996,596 22,222,442 21,075,393 1,506,057 154,065,477
221. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 3. Contractual maturity of financial liabilities on an undiscounted basis (cont’d.) The tables below analyse the Group’s and the Bank’s derivative financial liabilities that will be settled on a net basis into relevant maturity groupings by remaining contractual maturities as at 31 December 2017 and 31 December 2016. The amounts disclosed in the tables are the contractual undiscounted cash flows. Group 2017 Net settled derivatives Derivative financial liabilities Trading derivatives – Foreign exchange related contracts – Interest rate related contracts – Equity related contracts Hedging derivatives – Interest rate related contracts Up to 1 month RM’000 (9,469) 29,105 8,644 139 28,419 Gross settled derivatives Derivative financial liabilities Trading derivatives Derivatives: – Outflow – Inflow Hedging derivatives Derivatives: – Outflow – Inflow 2016 Net settled derivatives Derivative financial liabilities Trading derivatives – Foreign exchange related contracts – Interest rate related contracts – Equity related contracts Hedging derivatives – Interest rate related contracts Hedging derivatives Derivatives: – Outflow – Inflow >3 to 6 months RM’000 (11,363) (59,434) (13,675) (38,184) (17,370) (17,446) 779 (83,693) 141 (72,859) >6 months to 1 year RM’000 (162,395) (14,747) (50,001) >1 to 3 years RM’000 (243,355) 2,512,187 (31,297) (1,859) 3,298 (229,002) 2,240,833 >3 to 5 years RM’000 (264) (1,185,194) (11,878) 19,864 (1,177,472) (90,732,456) (47,879,755) (20,400,932) (25,531,224) (25,859,787) (12,827,215) 85,306,527 42,034,595 19,882,502 24,043,492 24,209,093 11,530,731 (5,656) 4,061 (7,707) 4,009 (51,537) 33,211 (251,518) 226,164 (1,166,257) 1,081,046 (1,565,262) 1,582,885 (5,427,524) (5,848,858) (536,756) (1,513,086) (1,735,905) (1,278,861) (440,389) 70,421 10,803 102,153 (1,101) (1,893) 99,256 66,164 (14,655) 94,167 (49,675) (64,279) 771 74,362 (15,542) 516 (62,950) (5,479) (111) (258) – (359,165) Gross settled derivatives Derivative financial liabilities Trading derivatives Derivatives: – Outflow – Inflow >1 to 3 months RM’000 99,048 150,507 – (19,787) – 59,591 – (67,913) (64,699,276) (33,363,723) (20,265,478) (21,539,966) (32,544,618) (11,212,059) 64,163,377 32,913,109 20,221,318 21,765,574 31,256,226 10,335,363 (9,294) 2,843 (6,352) 3,333 (1,659,099) 1,394,096 (542,350) (453,633) (309,163) Over 5 years RM’000 Total RM’000 – (583,608) – (465,030) 680,939 (115,653) – (583,608) Basel II Pillar 3 pg. 288-351 (e) Liquidity risk management (cont’d.) The Financials pg. 10-287 52.FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) 22,362 122,618 (3,260,745) (226,492,114) 3,093,733 210,100,673 – – (3,047,937) 2,931,376 (167,012) (16,508,002) – (1,345,229) – – (1,345,229) (143,526) (1,248,008) (91,045) (369) (1,482,948) (4,642,694) (188,267,814) 4,199,457 184,854,424 (13,826) 17,804 (1,125,721) 1,000,622 (3,718) 22,560 (348,579) 355,514 (3,166,589) 2,796,772 229,586 (1,413,491) (857,854) (436,302) (3,783,207) 219
222. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (e) Liquidity risk management (cont’d.) 3. Contractual maturity of financial liabilities on an undiscounted basis (cont’d.) Bank 2017 Net settled derivatives Derivative financial liabilities Trading derivatives – Foreign exchange related contracts – Interest rate related contracts – Equity related contracts Hedging derivatives – Interest rate related contracts Up to 1 month RM’000 (9,469) 29,569 (4,246) 139 15,993 Gross settled derivatives Derivative financial liabilities Trading derivatives Derivatives: – Outflow – Inflow Hedging derivatives Derivatives: – Outflow – Inflow 2016 Net settled derivatives Derivative financial liabilities Trading derivatives – Foreign exchange related contracts – Interest rate related contracts – Equity related contracts Gross settled derivatives Derivative financial liabilities Trading derivatives Derivatives: – Outflow – Inflow Hedging derivatives Derivatives: – Outflow – Inflow 220 >1 to 3 months RM’000 >3 to 6 months RM’000 (11,363) (57,511) (13,761) (38,184) (15,225) (21,333) – (82,635) 141 (74,601) >6 months to 1 year RM’000 (162,395) (12,091) (50,001) (1,406) (225,893) >1 to 3 years RM’000 (243,355) (104,218) (31,297) 4,122 (374,748) >3 to 5 years RM’000 (264) (1,183,504) (11,878) 19,864 (1,175,782) Over 5 years RM’000 – (584,626) – – (584,626) Total RM’000 (465,030) (1,927,606) (132,516) 22,860 (2,502,292) (82,911,012) (41,141,884) (18,621,255) (23,845,732) (25,279,564) (11,430,806) (3,260,745) (206,490,998) 80,397,788 39,867,219 17,483,143 22,075,702 24,083,024 10,497,101 3,093,733 197,497,710 (546) 2,602 (6,270) 3,147 (7,580) 21,664 (16,616) 22,901 (1,166,257) 1,081,045 (1,565,262) 1,582,885 (2,511,168) (1,277,788) (1,124,028) (1,763,745) (1,281,752) (916,082) (167,012) (9,041,575) (443,641) 69,299 – 101,534 (1,118) (2,317) 99,256 66,142 (15,287) 94,167 (49,648) (66,463) 771 74,910 (15,542) 516 (61,880) (5,479) – (1,345,229) – (147,397) (1,247,524) (105,088) (374,342) 98,099 150,111 (21,944) 60,139 (66,843) (1,345,229) (1,500,009) (62,531,242) (32,752,860) (20,066,905) (21,522,774) (32,544,618) (11,212,059) 62,271,164 31,992,373 19,584,002 21,013,092 31,256,226 10,335,363 – – (2,762,531) 2,714,244 (4,642,694) (185,273,152) 4,199,457 180,651,677 (294) 2,843 (844) 3,333 (1,654,231) 1,393,176 (2,533) 10,499 (1,125,282) 989,008 (3,718) 22,560 (348,579) 355,514 (3,135,481) 2,776,933 (257,529) (757,998) (743,958) (501,716) (1,424,666) (857,854) (436,302) (4,980,023)
223. 52 .FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.) (f) Operational risk management Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputational risk. The Group’s operational risk management is premised on the three lines of defence concept. Risk taking units (Strategic Business Unit), as first line of defence are primarily responsible for the day-to-day management of operational risks within their respective business operations. They are responsible for establishing and maintaining their respective operational manuals and ensuring that activities undertaken by them comply with the Group’s operational risk management framework. The Operational Risk Management (“ORM”) team, as the second line of defence, is responsible for the formulation and implementation of operational risk management policy within the Group, which encompasses the operational risk management strategy and governance structure. Another key function is the development and implementation of operational risk management tools and methodologies to identify, measure, control, report and monitor operational risks. The Group’s Internal Audit plays the third line of defence by providing independent assurance in respect of the overall effectiveness of the operational risk management process, which includes performing independent review and periodic validation of the ORM policy and process as well as conducting regular review on implementation of ORM tools by ORM and the respective business units. 53.FAIR VALUE MEASUREMENTS This disclosure provides information on fair value measurements for both financial instruments and non-financial assets and liabilities and is structured as follows: in the selection and application of appropriate parameters, assumptions and modelling techniques where some or all of the parameter inputs are not observable in deriving fair value. The Group has also established a framework and policies that provide guidance concerning the practical considerations, principles and analytical approaches for the establishment of prudent valuation for financial instruments measured at fair value. Valuation adjustment is also an integral part of the valuation process. Valuation adjustment is to reflect the uncertainty in valuations generally for products that are less standardised, less frequently traded and more complex in nature. In making a valuation adjustment, the Group and the Bank follow methodologies that consider factors such as bid-offer spread, unobservable prices/inputs in the market and uncertainties in the assumptions/parameters. For disclosure purposes, the level in the hierarchy within which the instruments are classified in its entirety is based on the lowest level input that is significant to the position’s fair value measurements: • Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities Refers to instruments which are regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, and those prices which represent actual and regularly occurring market transactions in an arm’s length basis. Such financial instruments include actively traded government securities, listed derivatives and cash products traded on exchange. • Level 2: Valuation techniques for which all significant inputs are, or are based on, observable market data (b) Valuation techniques; Refers to inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices). Examples of Level 2 financial instruments include over-the-counter (“OTC”) derivatives, corporate and other government bonds, illiquid equities and consumer loans and financing with homogeneous or similar features in the market. (d) Transfers between Level 1 and Level 2 in the fair value hierarchy; • Level 3: Valuation techniques for which significant inputs are not based on observable market data (e) Movements of Level 3 instruments; (f) Sensitivity of fair value measurements to changes in unobservable input assumptions; and (g) Financial instruments not measured at fair value. (a) Valuation principles Our Performance pg. 4-8 The Group and the Bank continuously enhance their design, validation methodologies and processes to ensure the valuations are reflective. The valuation models are validated both internally and externally, with periodic reviews to ensure the model remains suitable for their intended use. (a) Valuation principles; (c) Fair value measurements and classification within the fair value hierarchy; The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS Refers to instruments where fair value is measured using significant unobservable inputs. The valuation techniques used are consistent with Level 2 but incorporates the Group’s and the Bank’s own assumptions and data. Examples of Level 3 instruments include corporate bonds in illiquid markets, private equity investments and loans and financing priced primarily based on internal credit assessment. Fair value is defined as the price that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market as of the measurement date. The Group and the Bank determine the fair value by reference to quoted prices in active markets or by using valuation techniques based on observable inputs or unobservable inputs. Management judgement is exercised 221
224. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 53 .FAIR VALUE MEASUREMENTS (CONT’D.) (b) Valuation techniques The valuation techniques used for both the financial instruments and non-financial assets that are not determined by reference to quoted prices (Level 1) are described below: Derivatives, loans and financing and financial liabilities The fair values of the Group’s and of the Bank’s derivative instruments, loans and financing and financial liabilities are derived using discounted cash flows analysis, option pricing and benchmarking models. Financial assets designated at fair value through profit or loss, financial assets held-for-trading, financial investments available-for-sale and financial investments held-to-maturity The fair values of financial assets and financial investments are determined by reference to prices quoted by independent data providers and independent brokers. Financial liabilities at fair value through profit or loss The fair value of financial liabilities designated at fair value through profit or loss are derived using discounted cash flows. Investment properties The fair values of investment properties are determined by an accredited independent valuer using a variety of approaches such as comparison method and income capitalisation approach. Under the comparison method, fair value is estimated by considering the selling price per square foot of comparable investment properties sold adjusted for location, quality and finishes of the building, design and size of the building, title conditions, market trends and time factor. Income capitalisation approach considers the capitalisation of net income of the investment properties such as the gross rental less current maintenance expenses and outgoings. This process may consider the relationships including yield and discount rates. 222
225. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Fair value measurements and classification within the fair value hierarchy The classification in the fair value hierarchy of the Group’s and of the Bank’s financial and non-financial assets and liabilities measured at fair value is summarised in the table below: The Financials pg. 10-287 53.FAIR VALUE MEASUREMENTS (CONT’D.) Group 2017 Quoted Market Price (Level 1) RM’000 Observable Unobservable Inputs Inputs (Level 3) (Level 2) RM’000 RM’000 Total RM’000 Basel II Pillar 3 pg. 288-351 Valuation technique using Non-financial assets measured at fair value: Investment properties – – 753,555 753,555 Financial assets measured at fair value: Financial assets held-for-trading Money market instruments Quoted securities Unquoted securities Financial assets designated at fair value through profit or loss Money market instruments Quoted securities Unquoted securities Financial investments available-for-sale Money market instruments Quoted securities Unquoted securities Derivative assets Foreign exchange related contracts Interest rate related contracts Equity and commodity related contracts Netting effects under MFRS 132 Amendments 2,918,962 – 2,918,962 – 206,921 – 206,921 – 2,993,454 – 2,993,454 – – – – – – 9,011,404 5,049,952 – 3,961,452 12,980,206 1,006,312 – 11,973,894 105,568,565 54,919,782 – 50,648,783 6,225,117 4,213,552 2,143,214 160,127 (291,776) – – – – – – – – 508,225 – – 508,225 479,534 – – 479,534 – 11,930,366 5,049,952 2,918,962 3,961,452 13,187,127 1,006,312 206,921 11,973,894 109,070,244 54,919,782 2,993,454 51,157,008 6,704,651 4,213,552 2,143,214 639,661 (291,776) 6,119,337 133,785,292 987,759 140,892,388 Financial liabilities measured at fair value: Financial liabilities designated at fair value through profit or loss Structured deposits Borrowings Derivative liabilities Foreign exchange related contracts Interest rate related contracts Equity and commodity related contracts Netting effects under MFRS 132 Amendments – – – 26,899 – – 26,899 – 26,899 6,375,815 2,366,966 4,008,849 6,715,643 4,551,625 2,298,327 157,467 (291,776) 13,091,458 – – – 478,473 – – 478,473 – 478,473 6,375,815 2,366,966 4,008,849 7,221,015 4,551,625 2,298,327 662,839 (291,776) 13,596,830 223
226. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 53 .FAIR VALUE MEASUREMENTS (CONT’D.) (c) Fair value measurements and classification within the fair value hierarchy (cont’d.) Valuation technique using Group 2016 Quoted Market Price (Level 1) RM’000 Observable Unobservable Inputs Inputs (Level 3) (Level 2) RM’000 RM’000 Total RM’000 Non-financial assets measured at fair value: Investment properties – – 758,488 758,488 2,131,113 – 2,131,113 – 288,130 – 288,130 – 2,484,627 – 2,484,627 – – – – – – 8,455,256 3,260,295 – 5,194,961 12,540,737 800,354 – 11,740,383 89,132,601 46,308,676 – 42,823,925 7,826,227 6,186,370 2,290,029 180,112 (830,284) – – – – 80,814 – – 80,814 767,606 – – 767,606 485,476 – – 485,476 – 10,586,369 3,260,295 2,131,113 5,194,961 12,909,681 800,354 288,130 11,821,197 92,384,834 46,308,676 2,484,627 43,591,531 8,311,703 6,186,370 2,290,029 665,588 (830,284) Financial assets measured at fair value: Financial assets held-for-trading Money market instruments Quoted securities Unquoted securities Financial assets designated at fair value through profit or loss Money market instruments Quoted securities Unquoted securities Financial investments available-for-sale Money market instruments Quoted securities Unquoted securities Derivative assets Foreign exchange related contracts Interest rate related contracts Equity and commodity related contracts Netting effects under MFRS 132 Amendments 4,903,870 117,954,821 1,333,896 124,192,587 Financial liabilities measured at fair value: Financial liabilities designated at fair value through profit or loss Structured deposits Borrowings Derivative liabilities Foreign exchange related contracts Interest rate related contracts Equity and commodity related contracts Netting effects under MFRS 132 Amendments – – – 5,041 – – 5,041 – 5,041 224 3,587,230 1,560,054 2,027,176 8,326,018 6,573,183 2,451,565 131,554 (830,284) 11,913,248 – – – 497,001 – – 497,001 – 497,001 3,587,230 1,560,054 2,027,176 8,828,060 6,573,183 2,451,565 633,596 (830,284) 12,415,290
227. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Fair value measurements and classification within the fair value hierarchy (cont’d.) Valuation technique using Bank 2017 Quoted Market Price (Level 1) RM’000 Observable Unobservable Inputs Inputs (Level 3) (Level 2) RM’000 RM’000 Total RM’000 Financial assets measured at fair value: Financial assets held-for-trading Money market instruments Quoted securities Unquoted securities Financial investments available-for-sale Money market instruments Quoted securities Unquoted securities Derivative assets Foreign exchange related contracts Interest rate related contracts Equity and commodity related contracts Netting effects under MFRS 132 Amendments 142,413 – 142,413 – 196,592 – 196,592 – – – – – – 339,005 7,754,264 3,737,846 – 4,016,418 88,734,733 43,705,255 – 45,029,478 6,385,687 4,452,267 2,146,663 78,533 (291,776) 102,874,684 – – – – 355,414 – – 355,414 479,534 – – 479,534 – 834,948 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 53.FAIR VALUE MEASUREMENTS (CONT’D.) 7,896,677 3,737,846 142,413 4,016,418 89,286,739 43,705,255 196,592 45,384,892 6,865,221 4,452,267 2,146,663 558,067 (291,776) 104,048,637 Financial liabilities measured at fair value: Financial liabilities designated at fair value through profit or loss Structured deposits Borrowings Derivative liabilities Foreign exchange related contracts Interest rate related contracts Equity and commodity related contracts Netting effects under MFRS 132 Amendments – – – – – – – – – 5,483,120 1,474,271 4,008,849 6,701,525 4,627,390 2,302,485 63,426 (291,776) 12,184,645 – – – 478,473 – – 478,473 – 478,473 5,483,120 1,474,271 4,008,849 7,179,998 4,627,390 2,302,485 541,899 (291,776) 12,663,118 225
228. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 53 .FAIR VALUE MEASUREMENTS (CONT’D.) (c) Fair value measurements and classification within the fair value hierarchy (cont’d.) Valuation technique using Bank 2016 Quoted Market Price (Level 1) RM’000 Observable Unobservable Inputs Inputs (Level 3) (Level 2) RM’000 RM’000 Total RM’000 Financial assets measured at fair value: Financial assets held-for-trading Money market instruments 145,247 – 7,835,067 2,574,879 – – 7,980,314 2,574,879 Quoted securities Unquoted securities Financial investments available-for-sale Money market instruments Quoted securities Unquoted securities Derivative assets Foreign exchange related contracts Interest rate related contracts Equity and commodity related contracts Netting effects under MFRS 132 Amendments 145,247 – 142,240 – 142,240 – – – – – – – 5,260,188 74,266,457 38,465,604 – 35,800,853 7,835,442 6,259,829 2,305,143 100,754 (830,284) – – 495,504 – – 495,504 485,476 – – 485,476 – 145,247 5,260,188 74,904,201 38,465,604 142,240 36,296,357 8,320,918 6,259,829 2,305,143 586,230 (830,284) 287,487 89,936,966 980,980 91,205,433 Financial liabilities measured at fair value: Financial liabilities designated at fair value through profit or loss Structured deposits Borrowings Derivative liabilities Foreign exchange related contracts Interest rate related contracts Equity and commodity related contracts Netting effects under MFRS 132 Amendments – – – – – – – – – 2,685,139 657,963 2,027,176 8,305,220 6,594,682 2,449,466 91,356 (830,284) 10,990,359 – – – 497,001 – – 497,001 – 497,001 2,685,139 657,963 2,027,176 8,802,221 6,594,682 2,449,466 588,357 (830,284) 11,487,360 (d) Transfers between Level 1 and Level 2 in the fair value hierarchy The accounting policy for determining when transfers between levels of the fair value hierarchy occurred is disclosed in Note 2.3(xxii). There were no transfers between Level 1 and Level 2 for the Group and the Bank during the financial year ended 31 December 2017. 226
229. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The following tables present additional information about Level 3 financial assets and financial liabilities measured at fair value on a recurring basis: Group As at 31 December 2017 Unrealised gains/ Unrealised (losses) gains/ recognised (losses) in other recognised in income comprehensive Purchases/ income Issuances statements# RM’000 RM’000 RM’000 At 1 January 2017 RM’000 Other gains/ (losses) recognised in income statements* RM’000 – (19) – – 551 (532) – (19) – – 551 Transfer out At from 31 December Level 3 2017 RM’000 RM’000 Exchange differences RM’000 Transfer into Level 3 RM’000 – – – – – (532) – – – – – Sales Settlements RM’000 RM’000 Basel II Pillar 3 pg. 288-351 (e) Movements of Level 3 instruments The Financials pg. 10-287 53.FAIR VALUE MEASUREMENTS (CONT’D.) Financial assets held-fortrading Unquoted securities Financial assets designated at fair value through profit or loss Unquoted securities 80,814 3,540 (21,754) – – (62,600) – – – – – 80,814 3,540 (21,754) – – (62,600) – – – – – 767,606 (3,925) – (32,323) 2,925 (90,155) (35,860) (6,621) 59,211 (152,633) 508,225 767,606 (3,925) – (32,323) 2,925 (90,155) (35,860) (6,621) 59,211 (152,633) 508,225 Financial investments available-for-sale Unquoted securities Derivative assets Equity and commodity related contracts Total Level 3 financial assets 485,476 283,723 35,194 – 747,929 – (1,072,788) – – – 479,534 485,476 283,723 35,194 – 747,929 – (1,072,788) – – – 479,534 1,333,896 283,319 13,440 (32,323) 751,405 (153,287) (1,108,648) (6,621) 59,211 (152,633) 987,759 Derivative liabilities Equity and commodity related contracts (497,001) 311,262 (9) – (774,070) – 481,345 – – – (478,473) Total Level 3 financial liabilities (497,001) 311,262 (9) – (774,070) – 481,345 – – – (478,473) 836,895 594,581 Total net Level 3 financial assets/(liabilities) * # 13,431 (32,323) (22,665) (153,287) (627,303) (6,621) 59,211 (152,633) 509,286 Included within ‘Other operating income’, ‘Allowances for/(writeback of) Impairment Losses on Financial Investments’ and ‘Income from Islamic Banking Scheme operations’. Included within ‘Other operating income’ and ‘Income from Islamic Banking Scheme operations’. 227
230. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 53 .FAIR VALUE MEASUREMENTS (CONT’D.) (e) Movements of Level 3 instruments (cont’d.) The following tables present additional information about Level 3 financial assets and financial liabilities measured at fair value on a recurring basis (cont’d.): Group As at 31 December 2016 At 1 January 2016 RM’000 Other gains/ (losses) recognised in income statements* RM’000 Unrealised gains/ Unrealised (losses) gains/ recognised (losses) in other recognised in income comprehensive Purchases/ income Issuances statements# RM’000 RM’000 RM’000 Exchange Sales Settlements^ differences RM’000 RM’000 RM’000 Transfer into Level 3 RM’000 Transfer out At from 31 December Level 3 2016 RM’000 RM’000 Financial assets designated at fair value through profit or loss Unquoted securities 81,454 373 425 – – (1,438) – – – – 80,814 81,454 373 425 – – (1,438) – – – – 80,814 576,527 655,862 – 7,189 15,869 (11,126) (668,492) (55,260) 251,336 (4,299) 767,606 576,527 655,862 – 7,189 15,869 (11,126) (668,492) (55,260) 251,336 (4,299) 767,606 (653) Financial investments availablefor-sale Unquoted securities Derivative assets Interest rate related contracts Equity and commodity related contracts Total Level 3 financial assets – (1,073) 1,073 – 653 8,304 (7,364) 273,153 – 211,383 8,304 (8,437) 274,226 – 212,036 (653) 274,651 7,189 227,905 (13,217) (668,492) 1,787 – – 54,454 64,880 – – – – – – – – – – – – – 485,476 – – – – 485,476 666,285 647,798 (55,260) 251,336 (4,299) 1,333,896 (61,943) (59,178) (8,016) 4,896 (269,912) – (223,969) – – – – – (497,001) Total Level 3 financial liabilities (69,959) (54,282) (268,125) – (223,969) 54,454 64,880 – – – (497,001) Total net Level 3 financial assets/(liabilities) 596,326 593,516 41,237 (603,612) Derivative liabilities Interest rate related contracts Equity and commodity related contracts * # ^ 228 6,526 7,189 3,936 (55,260) 251,336 (4,299) – 836,895 Included within ‘Other operating income’, ‘Allowances for/(writeback of) Impairment Losses on Financial Investments’ and ‘Income from Islamic Banking Scheme operations’. Included within ‘Other operating income’ and ‘Income from Islamic Banking Scheme operations’. The settlement amount of financial investments available-for-sale for the financial year ended 31 December 2016 was mainly comprised of disposal of unquoted shares of RM625.2 million.
231. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The following tables present additional information about Level 3 financial assets and financial liabilities measured at fair value on a recurring basis (cont’d.): Bank As at 31 December 2017 Unrealised gains/ Unrealised (losses) gains/ recognised (losses) in other recognised in income comprehensive Purchases/ income Issuances statements# RM’000 RM’000 RM’000 At 1 January 2017 RM’000 Other gains/ (losses) recognised in income statements* RM’000 495,504 (8,676) – 3,739 – (5,904) 495,504 (8,676) – 3,739 – (5,904) Transfer out At from 31 December Level 3 2017 RM’000 RM’000 Exchange differences RM’000 Transfer into Level 3 RM’000 (35,861) – 59,211 (152,599) 355,414 (35,861) – 59,211 (152,599) 355,414 Sales Settlements RM’000 RM’000 Basel II Pillar 3 pg. 288-351 (e) Movements of Level 3 instruments (cont’d.) The Financials pg. 10-287 53.FAIR VALUE MEASUREMENTS (CONT’D.) Financial investments available-for-sale Unquoted securities Derivative assets Equity and commodity related contracts Total Level 3 financial assets 485,476 283,723 35,194 – 747,929 – (1,072,788) – – – 479,534 485,476 283,723 35,194 – 747,929 – (1,072,788) – – – 479,534 980,980 275,047 35,194 3,739 747,929 (5,904) (1,108,649) – 59,211 (497,001) 311,262 (9) – (774,070) – 481,345 – – – (478,473) (497,001) 311,262 (9) – (774,070) – 481,345 – – – (478,473) (497,001) 311,262 (9) – (774,070) – 481,345 – – – (478,473) 483,979 586,309 3,739 (26,141) (627,304) – 59,211 (152,599) 834,948 Derivative liabilities Equity and commodity related contracts Total Level 3 financial liabilities Total net Level 3 financial assets/(liabilities) 35,185 (5,904) (152,599) 356,475 * Included within ‘Other operating income’ and ‘Allowances for/(writeback of) Impairment Losses on Financial Investments’. # Included within ‘Other operating income’. 229
232. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 53 .FAIR VALUE MEASUREMENTS (CONT’D.) (e) Movements of Level 3 instruments (cont’d.) The following tables present additional information about Level 3 financial assets and financial liabilities measured at fair value on a recurring basis (cont’d.): Bank As at 31 December 2016 At 1 January 2016 RM’000 Other gains/ (losses) recognised in income statements* RM’000 Unrealised gains/ Unrealised (losses) gains/ recognised (losses) in other recognised in income comprehensive Purchases/ income Issuances statements# RM’000 RM’000 RM’000 Exchange Sales Settlements^ differences RM’000 RM’000 RM’000 Transfer into Level 3 RM’000 Transfer out At from 31 December Level 3 2016 RM’000 RM’000 Financial investments available-for-sale Unquoted securities 363,677 655,361 – 6,612 – (9,190) (668,491) (59,975) 211,809 (4,299) 495,504 363,677 655,361 – 6,612 – (9,190) (668,491) (59,975) 211,809 (4,299) 495,504 Derivative assets Interest rate related contracts – (1,073) 1,073 – – – – – – – – 8,304 (7,364) 273,153 – 211,383 – – – – – 485,476 8,304 (8,437) 274,226 – 211,383 – – – – – 485,476 646,924 274,226 6,612 211,383 (18,548) 2,303 1,787 – – (8,016) 4,896 (269,912) – (26,564) 7,199 (268,125) Total Level 3 financial liabilities (26,564) 7,199 (268,125) Total net Level 3 financial assets/(liabilities) 345,417 Equity and commodity related contracts Total Level 3 financial assets 371,981 (9,190) (668,491) (59,975) 211,809 (4,299) 980,980 Derivative liabilities Interest rate related contracts Equity and commodity related contracts 654,123 6,101 – 14,458 – – – (223,969) – – – – – (497,001) – (223,969) – 14,458 – – – (497,001) – (223,969) – 14,458 – – – (497,001) 6,612 (12,586) (9,190) (654,033) (59,975) 211,809 (4,299) – 483,979 * Included within ‘Other operating income’ and ‘Allowances for/(writeback of) Impairment Losses on Financial Investments’. # Included within ‘Other operating income’. ^ The settlement amount of financial investments available-for-sale for the financial year ended 31 December 2016 was mainly comprised of disposal of unquoted shares of RM625.2 million. During the financial year ended 31 December 2017, the Group and the Bank transferred certain financial investments available-for-sale from Level 2 into Level 3 of the fair value hierarchy. The reason for the transfer is that inputs to the valuation models ceased to be observable. Prior to the transfer, the fair value of the instruments was determined using observable market transactions or binding broker quotes for the same or similar instruments. Since the transfer, these instruments have been valued using valuation models incorporating significant unobservable market inputs. The Group and the Bank have transferred certain financial investments available-for-sale out from Level 3 due to the market for some instruments became more liquid, which led to a change in the method used to determine its fair value. Prior to the transfer, the fair value of the financial instruments was determined using unobservable market transactions or binding broker quotes for the same or similar instruments. Since the transfer, these financial instruments have been valued using quoted price in the exchange. (f) Sensitivity of fair value measurements to changes in unobservable input assumptions Changing one or more of the inputs to reasonable alternative assumptions would not change the value significantly for the financial assets and financial liabilities in Level 3 of the fair value hierarchy. Recent sale transactions transacted in the real estate market would result in a significant change of estimated fair value for investment properties. 230
233. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The on-balance sheet financial assets and financial liabilities of the Group and of the Bank whose fair values are required to be disclosed in accordance with MFRS 132 comprise all their assets and liabilities with the exception of investments in subsidiaries, interest in associates and joint ventures, property, plant and equipment and provision for current and deferred taxation. For loans, advances and financing to customers, where such market prices are not available, various methodologies have been used to estimate the approximate fair values of such instruments. These methodologies are significantly affected by the assumptions used and judgements made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in the assumptions could significantly affect these estimates and the resulting fair value estimates. Therefore, for a significant portion of the Group’s and of the Bank’s financial instruments, including loans, advances and financing to customers, their respective fair value estimates do not purport to represent, nor should they be construed to represent, the amounts that the Group and the Bank could realise in a sale transaction as at the reporting date. The fair value information presented herein should also in no way be construed as representative of the underlying value of the Group and of the Bank as a going concern. Basel II Pillar 3 pg. 288-351 (g) Financial instruments not measured at fair value The Financials pg. 10-287 53.FAIR VALUE MEASUREMENTS (CONT’D.) The estimated fair values of those on-balance sheet financial assets and financial liabilities as at the reporting date approximate their carrying amounts as shown in the statement of financial position, except for the financial assets and financial liabilities as disclosed below. The table below analyses financial instruments not carried at fair value for which fair value is disclosed, together with carrying amount shown in the statement of financial position: Group 2017 Financial assets Deposits and placements with financial institutions Financial investments HTM Loans, advances and financing Financial liabilities Customers’ funding: – Deposits from customers – Investment accounts of customers^ Deposits and placements from financial institutions Recourse obligation on loans and financing sold to Cagamas Borrowings Subordinated obligations Capital securities ^ Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total fair value RM’000 Carrying amount RM’000 – – – 16,988,391 14,127,981 174,952,117 – 6,233,559 308,369,276 16,988,391 20,361,540 483,321,393 16,988,391 20,184,773 485,584,362 – – – 502,601,360 24,555,704 42,522,695 – – – 502,601,360 24,555,704 42,522,695 502,017,445 24,555,445 42,598,131 – – – – 1,543,501 30,595,378 11,655,947 6,287,425 – 4,664,092 499,947 – 1,543,501 35,259,470 12,155,894 6,287,425 1,543,501 34,505,618 11,979,323 6,284,180 Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). 231
234. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 53 .FAIR VALUE MEASUREMENTS (CONT’D.) (g) Financial instruments not measured at fair value (cont’d.) The table below analyses financial instruments not carried at fair value for which fair value is disclosed, together with carrying amount shown in the statement of financial position (cont’d.): Group 2016 Financial assets Deposits and placements with financial institutions Financial investments HTM Loans, advances and financing Financial liabilities Customers’ funding: – Deposits from customers – Investment accounts of customers^ Deposits and placements from financial institutions Recourse obligation on loans and financing sold to Cagamas Borrowings Subordinated obligations Capital securities Bank 2017 Financial assets Deposits and placements with financial institutions Financial investments HTM Loans, advances and financing Financial liabilities Deposits from customers Deposits and placements from financial institutions Recourse obligation on loans and financing sold to Cagamas Borrowings Subordinated obligations Capital securities ^ 232 Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total fair value RM’000 Carrying amount RM’000 – – – 13,438,545 11,063,959 181,884,280 – 4,110,624 291,948,845 13,438,545 15,174,583 473,833,125 13,444,630 15,021,597 477,774,903 – – – 486,104,299 31,544,591 30,756,272 – – – 486,104,299 31,544,591 30,756,272 485,523,920 31,544,587 30,854,693 – – – – 974,588 32,802,322 15,347,116 6,273,093 – 3,627,031 474,174 – 974,588 36,429,353 15,821,290 6,273,093 974,588 34,867,056 15,900,706 6,199,993 Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total fair value RM’000 Carrying amount RM’000 – – – 21,382,493 11,688,902 138,264,014 – 6,233,526 151,885,912 21,382,493 17,922,428 290,149,926 21,382,493 17,763,565 290,997,969 – – 329,542,447 37,644,752 – – 329,542,447 37,644,752 328,938,600 37,645,134 – – – – 1,543,501 27,863,941 9,452,662 6,287,425 – – – – 1,543,501 27,863,941 9,452,662 6,287,425 1,543,501 27,106,442 9,362,526 6,284,180 Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii).
235. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The table below analyses financial instruments not carried at fair value for which fair value is disclosed, together with carrying amount shown in the statement of financial position (cont’d.): Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total fair value RM’000 Carrying amount RM’000 Financial assets Deposits and placements with financial institutions Financial investments HTM Loans, advances and financing – – – 19,333,202 8,596,003 144,907,276 – 4,110,376 147,242,828 19,333,202 12,706,379 292,150,104 19,339,287 12,582,311 295,020,136 Financial liabilities Deposits from customers Deposits and placements from financial institutions Recourse obligation on loans and financing sold to Cagamas Borrowings Subordinated obligations Capital securities – – – – – – 332,921,710 29,834,890 974,588 30,297,532 13,089,921 6,299,026 – – – 166,036 – – 332,921,710 29,834,890 974,588 30,463,568 13,089,921 6,299,026 331,878,295 29,856,710 974,588 28,927,427 13,202,872 6,225,926 Bank 2016 Basel II Pillar 3 pg. 288-351 (g) Financial instruments not measured at fair value (cont’d.) The Financials pg. 10-287 53.FAIR VALUE MEASUREMENTS (CONT’D.) The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments: (i) Financial investments held-to-maturity (“HTM”) Fair values of securities that are actively traded is determined by quoted bid prices. For non-actively traded securities, independent broker quotations are obtained. Fair values of equity securities are estimated using a number of methods, including earnings multiples and discounted cash flows analysis. Where discounted cash flows technique is used, the estimated future cash flows are discounted using applicable prevailing market or indicative rates of similar instruments at the reporting date. (ii) Loans, advances and financing The fair values of variable rate loans are estimated to approximate their carrying amount. For fixed rate loans and Islamic financing, the fair values are estimated based on expected future cash flows of contractual instalment payments, discounted at applicable and prevailing rates at reporting date offered for similar facilities to new borrowers with similar credit profiles. In respect of impaired loans, the fair values are deemed to approximate the carrying amount which are net of impairment allowances. (iii) Deposits from customers, deposits and placements with/from financial institutions and investment accounts of customers The fair values of deposits payable on demand and deposits and placements with maturities of less than one year approximate their carrying amount due to the relatively short maturity of these instruments. The fair values of fixed deposits and placements with remaining maturities of more than one year are estimated based on discounted cash flows using applicable rates currently offered for deposits and placements with similar remaining maturities. (iv) Recourse obligation on loans and financing sold to Cagamas The fair values of recourse obligation on housing and hire purchase loans sold to Cagamas are determined based on the discounted cash flows of future instalment payments at applicable prevailing Cagamas rates as at reporting date. (v) Borrowings, subordinated obligations and capital securities The fair values of borrowings, subordinated obligations and capital securities are estimated by discounting the expected future cash flows using the applicable prevailing interest rates for similar instruments as at reporting date. 233
236. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 54 .OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Financial assets and financial liabilities are offset and the net amounts are reported 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. Amounts are not offset in the statement of financial position are related to: (i) The counterparties’ offsetting exposures with the Group and the Bank where the right to set-off is only enforceable in the event of default, insolvency or bankruptcy of the counterparties; and (ii) Cash and securities that are received from or pledged with counterparties. Financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements are as follows: Group 2017 Financial assets Derivative assets Other assets: Amount due from brokers and clients (Note 14) Financial liabilities Derivative liabilities Other liabilities: Amount due to brokers and clients (Note 25) Gross amount of recognised financial assets/financial liabilities RM’000 Gross amount offset in the statement of financial position RM’000 Amount presented in the statement of financial position RM’000 Amount not offset in the statement of financial position Financial collateral received/ Financial pledged instruments RM’000 RM’000 (1,961,906) 6,996,428 (291,777) 6,704,651 4,225,239 (1,878,703) 2,346,536 7,512,791 (291,776) 7,221,015 4,686,326 (1,878,703) 2,807,623 – – 2,807,623 9,141,987 (830,284) 8,311,703 (4,228,068) (861,423) 3,222,212 4,384,021 (1,931,127) 2,452,894 – (681,751) 1,771,143 9,658,344 (830,284) 8,828,060 (4,228,068) (3,134,219) 1,465,773 5,975,327 (1,931,127) 4,044,200 – – 4,044,200 – (1,961,906) (681,335) Net amount RM’000 – (2,448,456) 4,061,410 2,346,536 2,810,653 2016 Financial assets Derivative assets Other assets: Amount due from brokers and clients (Note 14) Financial liabilities Derivative liabilities Other liabilities: Amount due to brokers and clients (Note 25) 234
237. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Gross amount of recognised financial assets/financial liabilities RM’000 Bank 2017 Gross amount offset in the statement of financial position RM’000 Amount presented in the statement of financial position RM’000 Amount not offset in the statement of financial position Financial collateral received/ Financial pledged instruments RM’000 RM’000 Net amount RM’000 Financial assets Derivative assets 7,156,997 (291,776) 6,865,221 (1,961,092) (681,335) 4,222,794 Financial liabilities Derivative liabilities 7,471,774 (291,776) 7,179,998 (1,961,092) (2,284,036) 2,934,870 Financial assets Derivative assets 9,151,202 (830,284) 8,320,918 (4,228,068) (861,423) 3,231,427 Financial liabilities Derivative liabilities 9,632,505 (830,284) 8,802,221 (4,228,068) (3,134,219) 1,439,934 Basel II Pillar 3 pg. 288-351 Financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements are as follows (cont’d.): The Financials pg. 10-287 54.OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONT’D.) 2016 55.CAPITAL AND OTHER COMMITMENTS (a) Capital expenditure approved by directors but not provided for in the financial statements amounting to: Group Approved and contracted for Approved but not contracted for Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 251,995 242,103 492,539 166,006 42,656 110,585 52,208 100,018 494,098 658,545 153,241 152,226 2017 RM’000 2016 RM’000 – 150 (b) Uncalled issued share capital of a subsidiary: Bank Uncalled capital Pursuant to Companies Act 2016, the uncalled share capital will cease to have par or nominal value. 235
238. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 56 .CAPITAL MANAGEMENT The Group’s approach to capital management is driven by its strategic objectives and takes into account all relevant regulatory, economic and commercial environments in which the Group operates. The Group regards having a strong capital position as essential to the Group’s business strategy and competitive position. As such, implications on the Group’s capital position are taken into account by the Board and senior management prior to implementing major business decisions in order to preserve the Group’s overall capital strength. The Group’s key thrust of capital management are to diversify its sources of capital; to allocate and deploy capital efficiently, guided by the need to maintain a prudent relationship between available capital and the risks of its underlying businesses; and to meet the expectations of key stakeholders, including investors, regulators and rating agencies. In addition, the Group’s capital management is also implemented with the aim to: • Maintain adequate capital adequacy ratios at all times, at levels sufficiently above the minimum regulatory requirements across the Group; • Support the Group’s credit rating from local and international rating agencies; • Deploy capital efficiently to businesses and optimise returns on capital; • Remain flexible to take advantage of future opportunities; and • Build and invest in businesses, even in a reasonably stressed environment. The quality and composition of capital are key factors in the Board and senior management’s evaluation of the Group’s capital adequacy position. The Group places strong emphasis on the quality of its capital and, accordingly, holds a significant amount of its capital in the form of common equity which is permanent and has the highest loss absorption capability on a going concern basis. 57.INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS (“ICAAP”) (a)General The Group’s overall capital adequacy in relation to its risk profile is assessed through a process articulated in the Group ICAAP policy. The ICAAP policy is designed to ensure that adequate levels of capital, including capital buffers, are held to support the Group’s current and projected demand for capital under the existing and stressed conditions. Regular ICAAP reports are submitted to the Group Executive Risk Committee and the Risk Management Committee (“RMC”) for comprehensive review of all material risks faced by the Group and assessment of the adequacy of capital to support them. The Group’s ICAAP closely integrates the risk and capital planning and management processes. Since March 2013, the Group has prepared a Board-approved ICAAP document to fulfil the requirements under the BNM Pillar 2 Guideline, which came into effect on 31 March 2013. The document included an overview of ICAAP, current and projected financial and capital position, ICAAP governance, risk assessment models and processes, risk appetite and capital management, stress testing and capital planning and the use of ICAAP. Annually, the Group submits an update of the material changes made to the document to BNM. (b) Comprehensive risk assessment under ICAAP policy The Group’s capital management is guided by the Group Capital Management Framework to ensure that capital is managed on an integrated approach and ensure a strong and flexible financial position to manage through economic cycles across the Group. Under the Group’s ICAAP methodology, the following risk types are identified and measured: The Group’s capital management is also supplemented by the Group Annual Capital Plan to facilitate efficient capital levels and utilisation across the Group. The plan is updated on an annual basis covering at least a three year horizon and approved by the Board for implementation at the beginning of each financial year. The Group Annual Capital Plan is reviewed by the Board semi-annually in order to keep abreast with the latest development on capital management and also to ensure effective and timely execution of the plans contained therein. • Risks not fully captured under Pillar 1 (e.g. model risk); Pursuant to Bank Negara Malaysia’s (“BNM”) Capital Adequacy Framework (Capital Components) issued on 4 August 2017, all financial institutions shall hold and maintain at all times, the minimum Common Equity Tier 1 Ratio of 4.5%, Tier 1 Ratio of 6%, and Total Capital Ratio of 8%. BNM has also introduced additional capital buffer requirements which comprises Capital Conservation buffer of 2.5% of total RWA and Countercyclical Capital Buffer ranging between 0%-2.5% of total RWA. The framework also provides further guidance on the computation approach and operations of the Countercyclical Capital Buffer ranging between 0%-2.5%. In addition, as banking institutions in Malaysia evolve to become key regional players and identified as systemically important, BNM will assess at a later date the need to require large banking institutions to operate at higher levels of capital, commensurate with their size, extent of cross-border activities and complexity of operations. 236 In the Group’s pursuit of an efficient and healthy capital position, the Group had implemented a recurrent and optional Dividend Reinvestment Plan (“DRP”) that allows the shareholders of the Group to reinvest electable portions of their dividends into new ordinary shares in the Bank. The DRP is part of the Group’s strategy to preserve equity capital to meet the regulatory requirement as well as to grow its business whilst providing healthy dividend income to shareholders. Details of the DRP is disclosed in Note 32(b) and dividend payout is disclosed in Note 50. • Risks captured under Pillar 1 (credit risk, market risk and operational risk); • Risks not specifically addressed under Pillar 1 (e.g. interest rate risk/rate of return risk in the banking book, liquidity risk, business and strategic risk, reputational risk, credit concentration risk, IT risks (e.g. security risk and cyber risk), regulatory risk, country risk, compliance risk, capital risk, profitability risk, Shariah non-compliance risk, industry risk, information risk, conduct risk, workforce risk and data quality risk, amongst others); and • External factors, including changes in economic environment, regulations and accounting rules.
239. 31 DECEMBER 2017 In line with industry best practices , the Group quantifies its risks using methodologies that have been reasonably tested and deemed to be acceptable within the industry. Where risks may not be easily quantified due to the lack of commonly acceptable risk measurement techniques, expert’s judgement is used to determine the size and materiality of risk. The Group’s ICAAP would then focus on the qualitative controls in managing such material non-quantifiable risks. These qualitative measures include the following: • Adequate governance processes; • Adequate systems, procedures and internal controls; • Effective risk mitigation strategies; and • Regular monitoring and reporting. (d) Regular and robust stress testing The Group’s stress testing programme is embedded in the risk and capital management process of the Group and it is a key function of the capital planning and business planning processes. The programme serves as a forward-looking risk and capital management tool to understand the risk profile under extreme but plausible conditions. Such conditions may arise mainly from economic, political and environmental factors. Under Maybank Group’s Stress Test policy, the potential unfavourable effects of stress scenarios on the Group’s profitability, asset quality, risk-weighted assets, capital adequacy and ability to comply with the risk appetites set, are considered. Specifically, the stress test programme is designed to: • Highlight the dynamics of stress events and their potential implications on the Group’s trading and banking book exposures, liquidity positions and likely reputational impacts; • Proactively identify key strategies to mitigate the effects of stress events; and • Produce stress results as inputs into the Group’s ICAAP in determining capital adequacy and capital buffers. Stress test themes reviewed by the Stress Test Working Group in the past include global economic turmoil, impact on liquidity risk due to cyber attack, digital disruption, impact of external geopolitical events on ASEAN and Asia, impact of weakening Malaysian Ringgit and higher bond yields, Post-Brexit risk on ASEAN economies, the Perfect Storm: Impact of low oil price, weak currencies and slower Chinese GDP growth on ASEAN economies, Federal Reserve rate hike, idiosyncratic event’s implication to the Group, oil price decline, intensified capital outflows from emerging markets including ASEAN, rising inflation and interest rate hikes in ASEAN, impact of Federal Reserve Quantitative Easing tapering, sovereign rating downgrades, slowing Chinese economy, a repeat of Asian Financial Crisis, US dollar depreciation, pandemic flu, asset price collapse, a global double-dip recession scenario, Japan disasters, crude oil price hike, the Eurozone and US debt crises, amongst others. The Stress Test Working Group, which comprises business and risk management teams, tables the stress test reports to the senior management and Board committees and discusses the results with regulators on a regular basis. (a) Compliance and application of capital adequacy ratios The capital adequacy ratios of the Group and of the Bank are computed in accordance with BNM’s Capital Adequacy Framework (Capital Components) issued on 4 August 2017 and Capital Adequacy Framework (Basel II – Risk-Weighted Assets) issued on 2 March 2017. The total RWA are computed based on the following approaches: (A) Credit risk under Internal Ratings-Based Approach; (B) Market risk under Standardised Approach; and The Financials pg. 10-287 (c) Assessment of Pillar 1 and Pillar 2 risks 58.CAPITAL ADEQUACY Basel II Pillar 3 pg. 288-351 57.INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS (“ICAAP”) (CONT’D.) Our Performance pg. 4-8 NOTES TO THE FINANCIAL STATEMENTS (C) Operational risk under Basic Indicator Approach. The minimum regulatory capital adequacy requirements for CET1, Tier 1 and Total Capital are 4.5%, 6.0% and 8.0% of total RWA for the current financial year ended 31 December 2017 (2016: 4.5%, 6.0% and 8.0% of total RWA). On an entity level basis, the computation of capital adequacy ratios of the subsidiaries of the Bank are as follows: (i) For Maybank Islamic Berhad, the computation of capital adequacy ratios are based on BNM’s Capital Adequacy Framework for Islamic Banks (Capital Components) and Capital Adequacy Framework for Islamic Banks (Risk-Weighted Assets) issued on 4 August 2017 and 2 March 2017 respectively. The total RWA are computed based on the following approaches: (A) Credit risk under Internal Ratings-Based Approach; (B) Market risk under Standardised Approach; and (C) Operational risk under Basic Indicator Approach. The minimum regulatory capital adequacy requirements for CET1, Tier 1 and Total Capital are 4.5%, 6.0% and 8.0% of total RWA for the current financial year ended 31 December 2017 (2016: 4.5%, 6.0% and 8.0% of total RWA). (ii) For Maybank Investment Bank Berhad, the computation of capital adequacy ratios are based on BNM’s Capital Adequacy Framework (Capital Components) and Capital Adequacy Framework (Basel II – Risk-Weighted Assets) issued on 4 August 2017 and 2 March 2017 respectively. The total RWA are computed based on the following approaches: (A) Credit risk under Standardised Approach; (B) Market risk under Standardised Approach; and (C) Operational risk under Basic Indicator Approach. The minimum regulatory capital adequacy requirements for CET1, Tier 1 and Total Capital are 4.5%, 6.0% and 8.0% of total RWA for the current financial year ended 31 December 2017 (2016: 4.5%, 6.0% and 8.0% of total RWA). (iii) For PT Bank Maybank Indonesia Tbk, the computation of capital adequacy ratios are in accordance with local requirements, which is based on the Basel Il capital accord. The total RWA are computed based on the following approaches: (A) Credit risk under Standardised Approach; (B) Market risk under Standardised Approach; and (C) Operational risk under Basic Indicator Approach. The minimum regulatory capital adequacy requirement for PT Bank Maybank Indonesia Tbk is 10% up to less than 11% (2016: 9% up to less than 10%) of total RWA. 237
240. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 58 .CAPITAL ADEQUACY (CONT’D.) (b) The capital adequacy ratios of the Group and of the Bank With effect from 30 June 2013, the amount of declared dividend to be deducted in the calculation of CET1 Capital under a DRP shall be determined in accordance with BNM’s Implementation Guidance on Capital Adequacy Framework (Capital Components) (“Implementation Guidance”) issued on 8 May 2013. Under the said Implementation Guidance, where a portion of the dividend may be reinvested under a DRP (the electable portion), the amount of declared dividend to be deducted in the calculation of CET1 Capital may be reduced as follows: (i) where an irrevocable written undertaking from shareholder has been obtained to reinvest the electable portion of the dividend; or (ii) where there is no irrevocable written undertaking provided, the average of the preceding 3-year take-up rates subject to the amount being not more than 50% of the total electable portion of the dividend. In respect of the financial year ended 31 December 2017, the Board has proposed the payment of final single-tier dividend of 32 sen per ordinary share, which consists of cash portion of 18 sen and an electable portion of 14 sen per ordinary share. The electable portion can be elected to be reinvested by shareholders in new Maybank Shares in accordance with the DRP as disclosed in Note 32(b). In arriving at the capital adequacy ratios for the financial year ended 31 December 2017, the proposed final dividend has not been deducted from the calculation of CET1 Capital. Based on the above, the capital adequacy ratios of the Group and of the Bank are as follows: Group CET1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio Bank 2017 2016 2017 2016 14.773% 16.459% 19.383% 13.990% 15.664% 19.293% 15.853% 17.950% 19.313% 15.881% 18.232% 19.432% (c) Components of capital: Group 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 CET1 Capital Paid-up share capital Share premium Retained profits1 Other reserves1 Qualifying non-controlling interests Less: Shares held-in-trust 44,250,380 – 20,451,568 3,619,581 137,081 (183,438) 10,193,200 28,878,703 10,482,202 15,048,174 112,513 (125,309) 44,250,380 – 13,582,048 4,612,799 – (183,438) 10,193,200 28,878,703 4,514,094 13,605,920 – (125,309) CET1 Capital before regulatory adjustments 68,275,172 64,589,483 62,261,789 57,066,608 (12,864,771) (802,593) (5,756,367) (855,056) (17,922) (2,747,285) (11,482,463) (874,988) (6,317,009) (955,441) – (1,057,997) (21,091,369) (315,013) (81,015) (487,015) – (2,233,563) (14,648,641) (358,687) (81,015) (449,034) – (660,800) (2,685,548) (2,277,028) (17,974,763) (13,099,105) 55,410,401 53,107,020 41,170,420 42,417,967 Less: Regulatory adjustments applied on CET1 Capital Deferred tax assets Goodwill Other intangibles Gain on financial instruments classified as ‘available-for-sale’ Regulatory reserve Investment in ordinary shares of unconsolidated financial and insurance/takaful entities3 Total CET1 Capital 238 Bank
241. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (c) Components of capital (cont’d.): Group Additional Tier 1 Capital Capital securities Qualifying CET1 and Additional Tier 1 capital instruments held by third parties Less: Investment in capital instruments of unconsolidated financial and insurance/takaful entities3 Total Tier 1 Capital Tier 2 Capital Subordinated obligations Qualifying CET1, Additional Tier 1 and Tier 2 capital instruments held by third parties Collective allowance2 Surplus of total eligible provision over total expected loss Less: Investment in capital instruments of unconsolidated financial and insurance/takaful entities3 Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 6,244,010 6,279,948 6,244,010 6,279,948 80,195 73,556 – – – – 61,734,606 59,460,524 46,614,430 48,697,915 9,271,613 13,077,127 9,271,613 13,077,127 488,385 278,397 1,601,682 473,100 408,984 1,333,468 – 136,641 1,171,604 – 120,467 1,194,370 (1,518,018) (7,038,871) (11,186,221) (671,387) (800,000) – Total Tier 2 Capital 10,968,690 13,774,661 3,540,987 3,205,743 Total Capital 72,703,296 73,235,185 50,155,417 51,903,658 1 2 3 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 58.CAPITAL ADEQUACY (CONT’D.) For the Group, the amount excludes retained profits and other reserves from insurance and takaful business. For the Bank, the amount includes retained profits and other reserves of Maybank International (L) Ltd.. Excludes collective allowance for impaired loans, advances and financing restricted from Tier 2 Capital of the Group and of the Bank. For the Bank, the regulatory adjustment includes cost of investment in subsidiaries and associates, except for: (i) Myfin Berhad of RM18,994,000 as its business, assets and liabilities have been transferred to the Bank; (ii) Maybank International (L) Ltd. of RM10,289,000 and (iii) Maybank Agro Fund Sdn. Bhd. of RM10,845,000, as its assets are included in the Bank’s RWA. For the Group, the regulatory adjustment includes carrying amount of associates and investment in insurance and takaful entities. The capital adequacy ratios of the Group is derived from consolidated balances of the Bank and its subsidiaries, excluding the investments in insurance and takaful entities and associates. The capital adequacy ratios of the Bank is derived from the Bank and its wholly-owned offshore banking subsidiary, Maybank International (L) Ltd., excluding the investments in subsidiaries and associates (except for Myfin Berhad, Maybank International (L) Ltd. and Maybank Agro Fund Sdn. Bhd. as disclosed above). (d) The breakdown of RWA by each major risk categories for the Group and the Bank are as follows: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 Standardised Approach exposure Internal Ratings-Based Approach exposure after scaling factor 53,705,463 266,947,028 52,450,074 277,055,512 29,785,935 195,267,276 28,712,714 205,446,192 Total RWA for credit risk Total RWA for market risk Total RWA for operational risk 320,652,491 14,351,443 40,075,835 329,505,586 12,875,985 37,218,327 225,053,211 11,445,563 23,197,842 234,158,906 11,148,492 21,797,628 Total RWA 375,079,769 379,599,898 259,696,616 267,105,026 239
242. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 58 .CAPITAL ADEQUACY (CONT’D.) (e) The capital adequacy ratios and RWA of subsidiaries of the Bank are as follows: (i) Capital adequacy ratios Maybank Islamic Berhad Maybank Investment Bank Berhad PT Bank Maybank Indonesia Tbk 2017 CET1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio 14.500% 16.150% 20.782% 31.322% 31.322% 31.525% – – 17.535% 2016 CET1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio 13.992% 13.992% 18.553% 33.010% 33.010% 33.010% – – 16.772% Maybank Islamic Berhad RM’000 Maybank Investment Bank Berhad RM’000 PT Bank Maybank Indonesia Tbk RM’000 8,796,181 60,246,868 1,023,110 – 32,949,975 – 69,043,049 (15,855,390) 939,674 6,490,748 1,023,110 – 124,903 763,899 32,949,975 – 578,180 5,000,612 60,618,081 1,911,912 38,528,767 7,151,955 64,702,050 519,661 – 37,487,141 – 71,854,005 (16,426,406) 882,544 5,691,742 519,661 – 162,713 823,413 37,487,141 – 562,342 5,286,446 1,505,787 43,335,929 (ii) The breakdown of RWA by each major risk categories of subsidiaries of the Bank are as follows: 2017 Standardised Approach exposure Internal Ratings-Based Approach exposure after scaling factor Total Total Total Total RWA RWA RWA RWA for for for for credit risk credit risk absorbed by Maybank and Investment Account^ market risk operational risk Total RWA 2016 Standardised Approach exposure Internal Ratings-Based Approach exposure after scaling factor Total Total Total Total RWA RWA RWA RWA Total RWA for for for for credit risk credit risk absorbed by Maybank and Investment Account^ market risk operational risk 62,001,885 ^ In accordance with BNM Guideline on the recognition and measurement of Restricted Profit Sharing Investment Account (“RPSIA”) and Investment Accounts of Customers (“IA”) as Risk Absorbent, the credit risk on the assets funded by the RPSIA and IA are excluded from the capital adequacy ratios calculation. 240
243. 59 .SEGMENT INFORMATION Corporate Banking comprises the full range of products and services offered to business customers in the region, ranging from large corporate and the public sector. The products and services offered including long-term loans such as project financing, short-term credit such as overdrafts and trade financing, and fee-based services such as cash management, trustee services and custodian services. (i) By business segments The Group’s operating segments are Group Community Financial Services, Group Global Banking and Group Insurance and Takaful. The Group determines and presents operating segments based on information provided to the Board and senior management of the Group. Global Markets comprise the full range of products and services relating to treasury activities and services, including foreign exchange, money market, derivatives and trading of capital market. The Group is organised into three (3) operating segments based on services and products available within the Group as follows: (a) Group Community Financial Services (“CFS”) (i) Consumer Banking Investment Banking comprises the investment banking and securities broking business. This segment focuses on business needs of mainly large corporate customers and financial institutions. The products and services offered to customers include corporate advisory services, bond issuance, equity issuance, syndicated acquisition advisory services, debt restructuring advisory services, and share and futures dealings. (ii) Small, Medium Enterprise (“SME”) Banking (iii) Business Banking Business Banking comprises the full range of products and services offered to commercial enterprises in the region. The products and services offered including longterm loans such as project financing, short-term credit such as overdrafts and trade financing, and fee-based services such as cash management and custodian services. Our Performance pg. 4-8 (ii) Group Investment Banking (Maybank IB and Maybank Kim Eng) Consumer Banking comprises the full range of products and services offered to individuals in the region, including savings and fixed deposits, remittance services, current accounts, consumer loans such as housing loans and personal loans, hire purchases, unit trusts, bancassurance products and credit cards. SME Banking comprises the full range of products and services offered to small and medium enterprises in the region. The products and services offered including longterm loans such as project financing, short-term credit such as overdrafts and trade financing, and fee-based services such as cash management and custodian services. The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS (iii) Group Asset Management Asset Management comprises the asset and fund management services, providing a diverse range of Conventional and Islamic investment solutions to retail, corporate and institutional clients. (c) Group Insurance and Takaful Insurance and Takaful comprise the business of underwriting all classes of general and life insurance businesses, offshore investment life insurance business, general takaful and family takaful businesses. (b) Group Global Banking (“GB”) (i) Group Corporate Banking and Global Markets Group Corporate Banking and Global Markets comprise Corporate Banking and Global Markets business. 241
244. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 59 .SEGMENT INFORMATION (CONT’D.) (i) By business segments (cont’d.) <------------------------------------ Business Segments ------------------------------------> <------------ Group Global Banking ------------> Group 2017 Group Community Financial Services RM’000 Group Corporate Banking & Global Markets RM’000 Net interest income and income from IBS operations: – External – Inter-segment 10,291,972 – 5,057,720 – 309,191 (6,954) 10,291,972 5,057,720 10,291,972 – 3,205,078 Total operating income Net insurance benefits and claims incurred, net fee and commission expenses, change in expense liabilities and taxation of life and takaful fund Net operating income Overhead expenses 13,497,050 (7,221,988) 7,657,648 (2,004,442) 6,275,062 5,653,206 Net interest income and income from IBS operations Net earned insurance premiums Other operating income Operating profit/(loss) before impairment losses Allowances for impairment losses on loans, advances, financing and other debts, net Allowances for impairment losses on financial investments, net Group Asset Management RM’000 Group Insurance and Takaful RM’000 Head Office and Others RM’000 Total RM’000 8,765 (9,659) 1,043,745 49,830 335,899 (33,217) 17,047,292 – 302,237 (894) 1,093,575 302,682 17,047,292 5,057,720 – 2,599,928 302,237 – 1,035,027 (894) – 248,273 1,093,575 5,250,890 821,149 302,682 – (1,882,151) 17,047,292 5,250,890 6,027,304 13,497,050 7,657,648 1,337,264 247,379 7,165,614 (1,579,469) 28,325,486 – – – – (963,760) – 1,337,264 (1,143,866) 193,398 (5,274,877) 217,747 (5,057,130) 247,379 (167,090) 1,890,737 (819,672) (1,361,722) – 23,268,356 (11,357,058) 80,289 1,071,065 (1,361,722) 11,911,298 (977,631) (11,347) (502) (5,820) – (1,959,060) (1,307) (3,721) (7,202) (56,532) – (68,762) Operating profit/(loss) Share of profits in associates and joint venture 5,311,302 4,674,268 178,330 72,585 1,008,713 – 214,235 385 – – Profit/(loss) before taxation and zakat Taxation and zakat 5,311,302 4,888,503 178,715 72,585 1,008,713 (1,361,722) – (1,361,722) 9,883,476 214,620 10,098,096 (2,301,222) Profit after taxation and zakat Non-controlling interests 7,796,874 (276,332) Profit for the financial year attributable to equity holders of the Bank 7,520,542 Included in overhead expenses are: Depreciation of property, plant and equipment Amortisation of intangible assets 242 Group Investment Banking RM’000 (263,429) (168,681) (74,419) (46,152) (61,648) (43,007) (830) (478) (18,591) (15,355) – – (418,917) (273,673)
245. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The Financials pg. 10-287 59.SEGMENT INFORMATION (CONT’D.) (i) By business segments (cont’d.) <------------------------------------ Business Segments ------------------------------------> Group Community Financial Services RM’000 Group Corporate Banking & Global Markets RM’000 Group Investment Banking RM’000 Group Asset Management RM’000 Group Insurance and Takaful RM’000 Head Office and Others RM’000 Total RM’000 9,626,560 – 4,792,335 – 306,473 (13,831) 8,302 (15,746) 940,503 68,415 (126,461) (38,838) 15,547,712 – 9,626,560 4,792,335 292,642 (7,444) 1,008,918 (165,299) 15,547,712 9,626,560 – 3,058,046 4,792,335 – 2,762,490 292,642 – 1,116,144 (7,444) – 144,648 1,008,918 4,444,057 424,991 (165,299) – (1,217,036) 15,547,712 4,444,057 6,289,283 Total operating income Net insurance benefits and claims incurred, net fee and commission expenses, change in expense liabilities and taxation of life and takaful fund 12,684,606 7,554,825 1,408,786 137,204 5,877,966 (1,382,335) 26,281,052 – – – – (4,285,388) 177,479 (4,107,909) Net operating income Overhead expenses 12,684,606 (6,755,258) 7,554,825 (1,837,628) 1,408,786 (1,062,587) 137,204 (145,178) 1,592,578 (686,505) (1,204,856) – 22,173,143 (10,487,156) 5,929,348 5,717,197 346,199 (7,974) 906,073 (1,204,856) 11,685,987 (1,626,116) (1,226,461) (2,322) (62) 22,213 – (2,832,748) – (139,207) (3,204) 8,199 (48,041) – (182,253) Operating profit/(loss) Share of profits in associates and joint venture 4,303,232 4,351,529 340,673 163 880,245 (1,204,856) 8,670,986 – 172,941 523 – – – 173,464 Profit/(loss) before taxation and zakat Taxation and zakat 4,303,232 4,524,470 341,196 163 880,245 (1,204,856) 8,844,450 (1,880,558) Group 2016 Net interest income and income from IBS operations: – External – Inter–segment Net interest income and income from IBS operations Net earned insurance premiums Other operating income Operating profit/(loss) before impairment losses (Allowances for)/writeback of impairment losses on loans, advances, financing and other debts, net (Allowances for)/writeback of impairment losses on financial investments, net Profit after taxation and zakat Non-controlling interests 6,963,892 (220,900) Profit for the financial year attributable to equity holders of the Bank 6,742,992 Included in overhead expenses are: Depreciation of property, plant and equipment Amortisation of intangible assets (240,604) (188,678) (65,825) (47,345) (55,809) (43,731) (776) (293) (16,121) (10,444) – – Basel II Pillar 3 pg. 288-351 <------------ Group Global Banking ------------> (379,135) (290,491) 243
246. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 59 .SEGMENT INFORMATION (CONT’D.) (ii) By geographical locations The Group has operations in Malaysia, Singapore, Indonesia, the Philippines, Brunei Darussalam, People’s Republic of China, Hong Kong SAR, Vietnam, United Kingdom, United States of America, Cambodia, Laos, Bahrain, Labuan Offshore and Thailand. With the exception of Malaysia, Singapore and Indonesia, no other individual country contributed more than 10% of the consolidated operating revenue before operating expenses and of the total assets. Operating revenue, net operating income, profit before taxation and zakat, and assets based on geographical locations of customers are as follows: Operating revenue RM’000 Net operating income RM’000 Profit before taxation and zakat RM’000 For the financial year ended 31 December 2017 Malaysia Singapore Indonesia Others 32,922,022 7,496,570 5,674,390 4,949,928 18,117,459 4,232,277 3,353,712 1,829,018 10,662,633 954,165 869,402 1,081,258 Elimination* 51,042,910 (5,462,600) 27,532,466 (4,264,110) 13,567,458 (3,469,362) Group 45,580,310 23,268,356 10,098,096 For the financial year ended 31 December 2016 Malaysia Singapore Indonesia Others 33,856,880 6,071,914 5,493,492 3,840,750 17,424,690 3,490,910 3,242,182 1,668,990 9,740,066 877,560 784,599 352,736 Elimination* 49,263,036 (4,605,134) 25,826,772 (3,653,629) 11,754,961 (2,910,511) Group 44,657,902 22,173,143 8,844,450 Income statement items * Inter-segment revenue are eliminated on consolidation. The total non-current and current assets based on geographical locations are as follows: Non-current assets1 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 8,987,472 909,478 96,660 148,902 9,437,611 962,665 112,210 187,023 470,828,358 191,073,126 52,004,976 87,957,823 488,949,513 168,542,314 55,399,495 57,354,406 Elimination3 10,142,512 – 10,699,509 – 801,864,283 (46,705,029) 770,245,728 (44,988,984) Group 10,142,512 10,699,509 755,159,254 725,256,744 Statement of financial position items: Malaysia Singapore Indonesia Others 1 2 3 244 Current assets2 Non-current assets consist of investment properties, property, plant and equipment and intangible assets. Current assets are total assets excluding non-current assets as mentioned above. Inter-segment balances are eliminated on consolidation.
247. 60 .SIGNIFICANT AND SUBSEQUENT EVENTS (i) The following are the significant events of the Group and of the Bank during the financial year ended 31 December 2017: (a) Proposed Disposal of PT Bank Maybank Indonesia Tbk’s (“Maybank Indonesia”) Entire Equity Interest in PT Wahana Ottomitra Multiartha Tbk (“WOM Finance”) On 11 January 2017, Maybank Indonesia, a subsidiary of Maybank, has entered into a conditional share purchase agreement (“CSPA”) with PT Reliance Capital Management (“RCM”) for the proposed disposal of Maybank Indonesia’s entire equity interest of 68.55% in WOM Finance to RCM (“Proposed Disposal”). The Proposed Disposal is undertaken as part of Maybank Indonesia’s strategic initiative to maximise its capital use and streamline its customer segmentation which will optimise its resources in the most efficient manner. WOM Finance will cease to be a subsidiary of Maybank Indonesia with effect from the completion of the Proposed Disposal. However, WOM Finance will continue to be a significant business partner of Maybank Indonesia in the future. On 4 May 2017, the Bank announced that the Proposed Disposal has been terminated as of 3 May 2017, as certain conditions precedent to the CSPA which were scheduled to be satisfied by 30 April 2017 have not been fulfilled. Our Performance pg. 4-8 With the termination of the Proposed Disposal, WOM Finance will continue to be a subsidiary of Maybank Indonesia. RCM is a limited liability company incorporated under Indonesian Law and has subsidiaries that provide financial services, including financial services in investment (securities and asset management), protection (general, health, life and Shariah insurance) and financing (multi-finance, banking and venture capital). (b) Proposed Establishment of an Employees Share Grant Plan of up to Seven Point Five Percent (7.5%) of the Issued and Paid-up Ordinary Share Capital of the Bank (excluding Treasury Shares) at any point of time (“Proposed ESGP”) The Proposed Disposal involves the sale of Maybank Indonesia’s entire equity interest in WOM Finance to RCM for a total cash consideration of approximately IDR673.77 billion (equivalent to approximately RM229.08 million based on the exchange rate of IDR1 for RM0.00034 as at 11 January 2017), plus the difference between the book value of WOM Finance as set out in the audited accounts of WOM Finance for the financial year ended 31 December 2016 and the financial year ended 31 December 2015 in proportion to Maybank Indonesia’s 68.55% equity interest in WOM Finance. The completion of the Proposed Disposal is expected to occur by the first quarter of 2017, upon the conditions precedent of the seller and buyer being fulfilled as prescribed in the CSPA. On 29 September 2017, Bursa Securities approved the Bank’s application for an extension of time from 13 September 2017 to 12 March 2018 for the implementation of the Proposed ESGP. WOM Finance is incorporated in Indonesia and listed on the Indonesia Stock Exchange. WOM Finance provides financing for new and used motorcycles, with the majority of consumer financing granted for well-established motorcycle brands. The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS On 26 January 2017, the Bank announced the proposed establishment of an employees share grant plan of up to seven point five percent (7.5%) of the issued and paid-up ordinary share capital of the Bank (excluding treasury shares) at any point in time. On 27 February 2018, Bursa Securities approved the Bank’s application for a further extension of time until 12 September 2018 for the implementation of the Proposed ESGP. (c) Establishment of new subsidiaries On 20 July 2017, Maybank Ageas Holdings Berhad (“MAHB”), an indirect subsidiary of the Bank, had incorporated two new subsidiaries in Malaysia under the Companies Act 2016. Details of the said subsidiaries are as follows: Company name Date of incorporation Principal activity Etiqa General Takaful Berhad (“EGTB”) 18 July 2017 To establish and transact every kind of takaful and retakaful limited to general takaful business (Islamic alternative to non-life insurance) which is not concerned with family takaful business Etiqa Life Insurance Berhad (“ELIB”) 19 July 2017 To establish and transact every kind of insurance and reinsurance limited to life insurance business which is not concerned with general insurance business EGTB and ELIB will not commence its business prior to the approval and the grant of the relevant business licenses by the Minister of Finance. The incorporation of EGTB and ELIB is not expected to have any material impact on the earnings, net assets and gearing of Maybank Group for the financial year ended 31 December 2017. (d) Inaugural issuance of RMB Bonds in the People’s Republic of China Interbank Bond Market amounting to RMB1.0 billion in nominal value On 24 July 2017, the Bank has completed its inaugural issuance of RMB bonds in the People’s Republic of China (“PRC”) interbank bond market amounting to RMB1.0 billion in nominal value through a bookbuilding process. Approval from the People’s Bank of China was obtained on 24 June 2017 for the Bank to issue RMB bonds of up to RMB6.0 billion in the PRC interbank bond market in multiple tranches within a period of 2 years from the date of approval (“RMB Bonds”). The issued RMB bonds bear fixed interest rate of 4.60% per annum which will fall due in 2020. 245
248. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 60 .SIGNIFICANT AND SUBSEQUENT EVENTS (CONT’D.) (i) The following are the significant events of the Group and of the Bank during the financial year ended 31 December 2017 (cont’d.): (d) Inaugural issuance of RMB Bonds in the Peoples Republic of China Interbank Bond Market amounting to RMB1.0 billion in nominal value (cont’d.) (Proposed Acquisition I and Proposed Acquisition II are collectively referred to as “Proposed Acquisitions”) The proceeds from the issued RMB bonds will be used for the Bank’s working capital, general banking and other corporate purposes. This includes utilising the proceeds both onshore and offshore to support activities in connection with the Belt and Road Initiatives, including but not limited to, financing of projects within Asia in various sectors such as the utilities, mining, oil and gas and petrochemical sectors. (iii) conditional share subscription agreement (“Subscription Agreement”) with PNB for the proposed subscription by PNB of 8,336,404 new ordinary shares in MAMG (“MAMG Shares”) (“Subscription Shares”) for a cash consideration of RM50.0 million or approximately RM6.00 per Subscription Share (“Subscription Consideration”) (“Proposed Subscription”). (e) Redemption of USD800.0 million subordinated notes (“USD Subordinated Notes”) under the USD15.0 billion Multicurrency Medium Term Note Programme Maybank, MAMG and PNB will also enter into a shareholders’ agreement upon completion of the Proposed Subscription to form the basis of governance for the operations of MAMG following the Proposed Subscription and to govern the conduct, exercise of rights and performance of obligations of MAMG and PNB (“Shareholders’ Agreement”). On 20 September 2017, the Bank fully redeemed the USD Subordinated Notes and accordingly, the USD Subordinated Notes will be delisted from the Singapore Exchange Securities Trading Limited and Labuan International Financial Exchange Inc. The USD Subordinated Notes was issued on 20 September 2012. (f) Acquisition of 75% interest in PT Asuransi Asoka Mas On 28 September 2017, Etiqa International Holdings Sdn. Bhd. (“EIH”), a wholly-owned subsidiary of the Bank completed acquisition of 75% shareholding in PT Asuransi Asoka Mas, a general insurance company based in Indonesia, for a purchase consideration of IDR207.2 billion (equivalent to approximately RM64.9 million). The acquisition of 750,000,000 shares was purchased from PT Transpacific Mutualcapita which will keep the remaining 25% shareholding in PT Asuransi Asoka Mas. All relevant approvals including those from Bank Negara Malaysia and Otoritas Jasa Keuangan of Indonesia have been obtained. This acquisition is in line with the Group’s Insurance and Takaful business vision to be a leading regional insurance player. The transaction has no material impact on the earnings, net assets and gearing of Maybank Group for the financial year ended 31 December 2017. Details of the acquisition are disclosed in Note 17(e). (g) (i) Proposed acquisition of 100% equity interest in Amanah Mutual Berhad (“AMB”) and 100% equity interest in Singapore Unit Trusts Limited (“SUTL”) by Maybank Asset Management Group Berhad (“MAMG”) for a total cash consideration of RM51.0 million; and (ii) Proposed subscription by Permodalan Nasional Berhad (“PNB”) of 8,336,404 new ordinary shares in MAMG, representing 20% of the enlarged issued share capital of MAMG for a cash consideration of RM50.0 million. On 13 December 2017, Maybank Asset Management Group Berhad (“MAMG”), a wholly-owned subsidiary of the Bank, entered into the following agreements: (i) 246 (ii) conditional SPA with PNB International Limited (“PIL”), a wholly-owned subsidiary of PNB, for the proposed acquisition of 100% equity interest in SUTL for a cash consideration of RM34.88 million (“Proposed Acquisition II”) (“SUTL SPA”); and conditional share purchase agreement (“SPA”) with Amanah Saham Nasional Berhad (“ASNB”), a wholly-owned subsidiary of PNB, for the proposed acquisition of 100% equity interest in AMB for a cash consideration of RM16.12 million (“Proposed Acquisition I”) (“AMB SPA”); (Proposed Acquisitions and Proposed Subscription are collectively referred to as “Proposals”) The Proposals are subject to the following approval being obtained: (i) BNM for the Proposed Acquisitions; (ii) the Securities Commission Malaysia (“SC”) for the Proposal; (iii) Monetory Authority of Singapore (“MAS”) for the Proposal; (iv) shareholders of Maybank at a general meeting to be convened for the Proposed Subscription; and (v) any other relevant authorities and/or parties for the Proposed Acquisitions I, Proposed Acquisition II and Proposed Subscription, as the case may be (if required). The Proposed Acquisitions and Proposed Subscription are not inter-conditional upon each other. For avoidance of doubt, the Proposed Acquisitions are not subject to the approval of the shareholders of Maybank. The completion of the Proposed Acquisitions and Proposed Subscription will not have any effect on the issued and paidup share capital and shareholding of the substantial shareholders of Maybank, and no material effect on the earnings per share, net assets per share and gearing of the Group for the financial year ended 31 December 2017. (ii) The following is the subsequent event of the Group and of the Bank subsequent to the financial year ended 31 December 2017: (h) Incorporation of Maybank Singapore Limited On 1 February 2018, Maybank International Holdings Sdn. Bhd., a wholly-owned subsidiary of the Bank incorporated a new wholly-owned subsidiary in Singapore, namely Maybank Singapore Limited (the “Incorporation”). The Incorporation is not expected to have any material impact on the earnings, net assets and gearing of Maybank for the financial year ending 31 December 2018.
249. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (a) Income statement Life Fund Family Takaful Fund General Takaful Fund Shareholders’ and General Fund Total 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 1,817,412 1,327,264 1,723,828 1,516,449 1,084,573 1,057,178 2,617,813 1,248,258 7,243,626 5,149,149 Interest income Interest expense 409,905 – 388,922 – 416,707 – 380,440 – 72,318 – 68,925 – 222,154 (34,222) 190,963 1,121,084 1,029,250 (34,268) (34,222) (34,268) Net interest income Net earned insurance premiums Other operating income 409,905 388,922 416,707 380,440 72,318 68,925 187,932 156,695 1,086,862 994,982 1,884,285 468,248 1,250,328 164,388 1,172,398 145,385 1,035,041 114,074 1,008,741 6,628 976,352 17,450 1,185,466 186,365 1,182,336 112,147 5,250,890 806,626 4,444,057 408,059 Group Operating revenue Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 61.INCOME STATEMENT AND STATEMENT OF FINANCIAL POSITION OF INSURANCE AND TAKAFUL BUSINESS Total operating income 2,762,438 1,803,638 1,734,490 1,529,555 1,087,687 1,062,727 1,559,763 1,451,178 7,144,378 5,847,098 Net insurance benefits and claims incurred, net fee and commission expenses, change in expense liabilities and taxation of life and takaful fund (2,480,379) (1,631,058) (1,681,228) (1,483,973) (1,088,315) (1,071,993) (24,955) (98,385) (5,274,877) (4,285,409) Net operating income/(loss) Overhead expenses Operating profit/(loss) before impairment losses Writeback of/(allowances for) impairment losses on loans, advances, financing and other debts, net Allowances for impairment losses on financial investments, net 282,059 (261,572) 172,580 (155,896) 53,262 (26,756) 45,582 (30,300) (628) (24) 20,487 16,684 26,506 15,282 (652) (188) 648 (212) 1,132 905 (20,299) (17,332) (26,294) (16,414) (253) (9,266) 1,534,808 1,352,793 1,869,501 1,561,689 (1,223) (519,548) (512,590) (807,900) (700,009) (10,489) 1,015,260 840,203 1,061,601 861,680 10,726 (6,325) 9,708 (5,820) 22,214 (237) (9,687) (14,059) (56,533) (48,042) Operating profit Share of losses in associates – – – – – – – – – – – – 999,248 – 835,852 – 999,248 – 835,852 – Profit before taxation and zakat Taxation and zakat – – – – – – – – – – – – 999,248 (243,607) 835,852 (206,433) 999,248 (243,607) 835,852 (206,433) Profit for the financial year – – – – – – 755,641 629,419 755,641 629,419 247
250. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 61 .INCOME STATEMENT AND STATEMENT OF FINANCIAL POSITION OF INSURANCE AND TAKAFUL BUSINESS (CONT’D.) (b) Statement of financial position Group 2017 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets at fair value through profit or loss Financial investments available-for-sale Loans, advances and financing Derivative assets Reinsurance/retakaful assets and other insurance receivables Other asset Investment properties Interest in associates Property, plant and equipment Intangible assets Deferred tax assets Total assets Liabilities Derivative liabilities Insurance/takaful contract liabilities and other insurance payables Other liabilities* Provision for taxation and zakat Deferred tax liabilities Subordinated obligations Total liabilities Equity attributable to equity holders of the Subsidiaries Share capital Other reserves Total liabilities and shareholders’ equity * 248 Life Fund RM’000 Family Takaful Fund RM’000 General Takaful Fund RM’000 Shareholders’ and General Funds RM’000 Total RM’000 225,549 642,249 9,061,661 1,132,277 230,585 3,319 45,708 582,981 5,299,221 3,922,491 – – 34,132 202,299 – 1,510,604 – – 259,948 743,745 113,121 4,214,734 56,036 1,848 565,337 2,171,274 14,474,003 10,780,106 286,621 5,167 81,501 194,918 635,709 – 86,160 33,780 6,109 188,038 175,929 – – – – 5,459 345,028 3,349 – – – – 5,867 3,319,205 423,843 113,724 152 63,001 47,259 20,598 3,933,772 798,039 749,433 152 149,161 81,039 38,033 12,333,817 10,219,827 2,101,279 9,377,214 34,032,137 25,791 – – – 25,791 9,446,728 2,840,515 (5,953) 26,736 – 9,873,134 345,960 (852) 1,585 – 1,755,432 345,048 – 799 – 4,043,549 (1,802,610) 83,115 566,070 811,307 25,118,843 1,728,913 76,310 595,190 811,307 12,333,817 10,219,827 2,101,279 3,701,431 28,356,354 – – – – – – 660,865 5,014,918 660,865 5,014,918 – – – 5,675,783 5,675,783 12,333,817 10,219,827 2,101,279 9,377,214 34,032,137 Included in other liabilities are the amounts due to/(from) life, general and investment-linked funds which are unsecured, not subject to any interest elements and are repayable on demand.
251. 61 .INCOME STATEMENT AND STATEMENT OF FINANCIAL POSITION OF INSURANCE AND TAKAFUL BUSINESS (CONT’D.) (b) Statement of financial position (cont’d.) Group 2016 Assets Cash and short-term funds Deposits and placements with financial institutions Financial assets at fair value through profit or loss Financial investments available-for-sale Loans, advances and financing Derivative assets Reinsurance/retakaful assets and other insurance receivables Other assets Investment properties Interest in associates Property, plant and equipment Intangible assets Deferred tax assets Total assets Liabilities Derivative liabilities Insurance/takaful contract liabilities and other insurance payables Other liabilities* Provision for taxation and zakat Deferred tax liabilities Subordinated obligations Total liabilities Equity attributable to equity holders of the Subsidiaries Share capital Other reserves Total liabilities and shareholders’ equity Life Fund RM’000 Family Takaful Fund RM’000 General Takaful Fund RM’000 Shareholders’ and General Funds RM’000 Total RM’000 146,731 1,018,841 7,973,163 859,714 234,497 1,636 71,062 582,234 5,760,444 2,966,503 – – 70,496 370,618 – 1,404,077 – – 171,474 714,028 – 4,226,756 95,231 – 459,763 2,685,721 13,733,607 9,457,050 329,728 1,636 63,130 77,845 658,541 – 87,736 24,090 8,130 158,155 23,592 – – – – 3,302 283,102 2,445 – – – – 7,948 3,635,209 195,115 96,329 152 67,950 43,390 15,659 4,139,596 298,997 754,870 152 155,686 67,480 35,039 11,154,054 9,565,292 2,138,686 9,261,293 32,119,325 57,014 – – 208 57,222 8,461,829 2,596,402 2,506 36,303 – 9,226,725 334,616 134 3,817 – 1,752,648 384,876 – 1,162 – 4,507,517 (1,763,681) 42,270 564,633 811,309 23,948,719 1,552,213 44,910 605,915 811,309 11,154,054 9,565,292 2,138,686 4,162,256 27,020,288 – – – – – – 252,005 4,847,032 252,005 4,847,032 – – – 5,099,037 5,099,037 11,154,054 9,565,292 2,138,686 9,261,293 32,119,325 Our Performance pg. 4-8 The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS * Included in other liabilities are the amounts due to/(from) life, general and investment-linked funds which are unsecured, not subject to any interest elements and are repayable on demand. 249
252. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (a) Statement of financial position Group Assets Cash and short-term funds Deposits and placements with financial institutions Financial investments portfolio Financing and advances Derivative assets Other assets Statutory deposits with central banks Property, plant and equipment Intangible asset Deferred tax assets Note (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) Total assets Liabilities Customers’ funding: – Deposits from customers – Investment accounts of customers1 Deposits and placements from financial institutions Financial liabilities at fair value through profit or loss Bills and acceptances payable Derivative liabilities Other liabilities Provision for taxation and zakat Term funding Subordinated sukuk Capital securities (p) (q) (r) (s) (j) (t) (u) (v) (w) (x) Total liabilities Islamic Banking Capital Funds Islamic Banking Funds Share premium Retained profits Other reserves (d) (d) (d) Total liabilities and Islamic Banking capital funds Commitments and contingencies 1 Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). The accompanying notes provide further details on the balances as at reporting date. 250 (af) 2017 RM’000 2016 RM’000 17,150,402 – 13,092,564 162,214,033 487,989 7,233,195 3,242,000 1,053 2,541 37,378 15,552,945 654,194 9,181,991 148,710,892 515,554 4,959,989 3,070,000 2,566 614 21,012 203,461,155 182,669,757 130,068,988 24,555,445 28,251,271 892,695 8,854 650,320 660,680 148,510 4,945,437 2,534,105 1,002,441 106,842,961 31,544,587 30,346,297 902,091 53,220 535,161 388,615 98,561 – 2,534,496 – 193,718,746 173,245,989 5,769,752 – 3,499,853 472,804 595,076 5,200,228 2,881,471 746,993 9,742,409 9,423,768 203,461,155 182,669,757 53,480,858 52,097,394
253. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 2017 RM’000 2016 RM’000 Group Note Income derived from investment of depositors’ funds Income derived from investment of investment account funds Income derived from investment of Islamic Banking Funds Allowances for impairment losses on financing and advances (y) (z) (aa) (ab) 7,045,382 1,526,848 402,161 (152,181) 6,148,251 1,613,812 356,576 (418,951) Total distributable income Profit distributed to depositors Profit distributed to investment account holders (ac) 8,822,210 (3,994,498) (913,276) 7,699,688 (3,472,913) (1,079,875) 3,914,436 (137,092) (1,417,008) 3,146,900 (122,267) (1,293,039) 2,360,336 (494,426) (19,670) 1,731,594 (427,444) (16,598) 1,846,240 1,287,552 Total net income Finance cost Overhead expenses Profit before taxation and zakat Taxation Zakat (ad) (ae) Profit for the financial year Basel II Pillar 3 pg. 288-351 (b) Income statement The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) For consolidation with the conventional banking operations, income from Islamic Banking Scheme as shown on the face of the consolidated income statements, comprises the following items: 2017 RM’000 2016 RM’000 7,045,382 1,526,848 402,161 6,148,251 1,613,812 356,576 8,974,391 (3,994,498) (913,276) 8,118,639 (3,472,913) (1,079,875) Finance cost Net of intercompany income and expenses 4,066,617 (137,092) 970,726 3,565,851 (122,267) 745,658 Income from Islamic Banking Scheme operations reported in the income statement of the Group 4,900,251 4,189,242 Group Income derived from investment of depositors’ funds Income derived from investment of investment account funds Income derived from investment of Islamic Banking Funds Total income before allowance for impairment losses on financing and advances and overhead expenses Profit distributed to depositors Profit distributed to investment account holders The accompanying notes provide further details on the amounts recorded for the financial years ended 31 December 2017 and 31 December 2016. (c) Statement of comprehensive income Group Profit for the financial year Other comprehensive income/(loss): Items that will not be reclassified subsequently to profit or loss: Defined benefit plan actuarial gain Income tax effect Items that may be reclassified subsequently to profit or loss: Net loss on foreign exchange translation Net gain of financial investments available-for-sale Income tax effect Other comprehensive loss for the financial year, net of tax Total comprehensive income for the financial year 2017 RM’000 2016 RM’000 1,846,240 1,287,552 496 (124) 380 (95) 372 285 (65,600) 30,185 (7,239) (136,703) 66,616 (17,387) (42,654) (87,474) (42,282) (87,189) 1,803,958 1,200,363 251
254. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (d) Statement of changes in Islamic Banking Capital Funds <----------------------------------------- Non-distributable ------------------------------------------------> Equity contribution Exchange from Defined Distributable Share AFS Fluctuation Statutory Regulatory the holding Benefit Retained Premium Reserve Reserve Reserve Reserve company* Reserve Profits RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Islamic Banking Fund RM’000 As at 31 December 2017 At 1 January 2017 595,076 5,200,228 – – – – – 22,946 – – – – – – – – 22,946 – – 22,946 – – – Profit for the financial year Other comprehensive income/(loss) Defined benefit plan actuarial gain Net loss on foreign exchange translation Net gain on financial investments available-forsale Total comprehensive income/(loss) for the financial year 409,672 393,700 1,697 85 2,881,471 9,423,768 – – – – 1,846,240 1,846,240 – – – 372 – – – – 372 – – – – – – (65,600) – – – – – 22,946 (65,600) – – – 372 1,846,240 1,803,958 – 62,774 – – – (9) 14,766 51,979 – – – – 115,000 – – (115,000) – – – – – – – 409,672 – – – – – – – – – – – – – – 508,700 1,697 448 Transfer (to)/from conventional banking operations Transfer from regulatory reserve Transfer from statutory reserve Transfer from share premium^ Dividends paid 5,200,228 (5,200,228) – – At 31 December 2017 5,769,752 (25,552) – (55,264) (2,897) Total RM’000 – (65,600) – (65,600) – (32,318) (409,672) (5,723) (42,282) 372 – – (1,537,296) (1,537,296) 3,499,853 9,742,409 <------------------------------------------------- Non-distributable ------------------------------------------------> Group As at 31 December 2016 At 1 January 2016 Profit for the financial year Other comprehensive income/(loss) Defined benefit plan actuarial gain Net loss on foreign exchange translation Net gain on financial investments availablefor-sale Total comprehensive income/(loss) for the financial year Transfer from/(to) conventional banking operations Issue of ordinary shares Transfer to regulatory reserve Transfer from profit equalisation reserve Dividends paid At 31 December 2016 * ^ 252 Islamic Banking Fund RM’000 Share Premium RM’000 1,194,821 4,658,233 Exchange AFS Fluctuation Reserve Reserve RM’000 RM’000 (104,493) (3,719) Equity contribution from the Profit Statutory Regulatory holding Equalisation Reserve Reserve company* Reserve RM’000 RM’000 RM’000 RM’000 430,249 1,697 34,456 – – – – – – – – – 285 – – – – – 285 – – – – – – – (136,703) – – – – – – 49,229 (136,703) – – – – 285 – – – – – – (10) – – – – – – – – 49,229 – – – – – – – – 49,229 – – 49,229 (617,342) 17,597 – 541,995 – – 137,525 – – – – – – – – – – – – – – – – – – – – – – 409,672 393,700 1,697 (55,264) – (136,703) – (136,703) – (2,897) (36,549) (34,456) – – (190) Total RM’000 409,672 – 595,076 5,200,228 Defined Distributable Benefit Retained Reserve Profits RM’000 RM’000 2,728,172 9,348,898 1,287,552 1,287,552 (87,189) 285 1,287,552 1,200,363 (80,794) (560,621) – 559,592 36,549 – – – 34,456 – (1,124,464) (1,124,464) 85 2,881,471 9,423,768 This equity contribution reserve from holding company is pertaining to waiver of intercompany balance between respective subsidiaries and its holding company. Transfer of share premium to share capital pursuant to Companies Act 2016.
255. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Group Cash flows from operating activities Profit before taxation and zakat Adjustments for: Allowances for impairment losses on financing and advances, net Amortisation of premiums less accretion of discounts, net Unrealised (gain)/loss of derivatives Unrealised loss/(gain) of financial assets at fair value through profit or loss Unrealised loss/(gain) of financial liabilities at fair value through profit or loss Net gain on disposal of financial investments available-for-sale Net gain on disposal of financial assets at fair value through profit or loss Loss/(gain) on foreign exchange transactions Depreciation of property, plant and equipment Amortisation of computer software ESS expenses Finance cost 2017 RM’000 2016 RM’000 2,360,336 1,731,594 272,611 (75,266) (6,510) 9 9,582 (9,317) (5,038) 11,780 473 428 511 137,092 612,235 (125,463) 24,788 (44) (15,069) (25,297) (2,820) (76,161) 425 112 1,007 122,267 2,696,691 654,194 201,263 (13,775,752) 149,234 (2,273,206) (172,000) 23,226,027 (2,104,332) (6,989,142) (44,366) (3,856,377) (18,978) 272,051 2,247,574 (641,746) 103,515 (18,117,242) (95,048) (854,936) 764,000 764,492 9,071,720 13,886,694 19,664 370,333 917,160 (10,795) Cash (used in)/generated from operations Taxes and zakat paid (2,034,693) (489,703) 8,425,385 (369,882) Net cash (used in)/generated from operating activities (2,524,396) 8,055,503 Operating Change in Change in Change in Change in Change in Change in Change in Change in Change in Change in Change in Change in Change in profit before working capital changes deposits and placements with financial institutions cash and short-term funds with original maturity of more than three months financing and advances derivative assets and liabilities other assets statutory deposit with central banks deposits from customers deposits and placements from financial institutions investment accounts of customers bills and acceptances payable financial investments portfolio financial liabilities at fair value through profit or loss other liabilities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible asset (187) (1,776) (2,065) (617) Net cash used in investing activities (1,963) (2,682) (1,537,296) (118,140) (13,679) – 1,000,000 4,942,215 51,979 (1,124,464) (115,731) – 559,592 – – (560,621) 4,325,079 (1,241,224) Net increase in cash and cash equivalents Cash and cash equivalents at 1 January 1,798,720 15,351,682 6,811,597 8,540,085 Cash and cash equivalents at 31 December 17,150,402 15,351,682 Cash and cash equivalents comprise: Cash and short-term funds (Note 62(f)) Deposits and placements with financial institutions (Note 62(g)) 17,150,402 – 15,552,945 654,194 17,150,402 16,207,139 Cash flows from financing activities Dividends paid Dividends paid for subordinated sukuk Dividends paid for term funding Proceeds from issuance of ordinary shares Proceeds from issuance of capital securities Drawdown of term funding Funds transferred from/(to) holding company Net cash generated from/(used in) financing activities Less: Cash and short-term funds and deposits and placements with original maturity of more than three months – 17,150,402 Basel II Pillar 3 pg. 288-351 (e) Statement of cash flows The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (855,457) 15,351,682 253
256. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (f) Cash and short-term funds 2017 RM’000 2016 RM’000 15,781 17,134,621 19,352 15,533,593 17,150,402 15,552,945 2017 RM’000 2016 RM’000 – 654,194 2017 RM’000 2016 RM’000 240,571 9,882,004 2,969,989 252,451 8,719,654 209,886 13,092,564 9,181,991 2017 RM’000 2016 RM’000 Unquoted securities: Foreign Corporate Sukuk 240,571 252,451 Total financial assets at fair value through profit or loss 240,571 252,451 2017 RM’000 2016 RM’000 7,286,200 398,541 166,173 4,337,818 3,088,513 – 7,850,914 7,426,331 1,969,825 16,389 44,126 750 1,189,659 53,989 48,925 750 2,031,090 1,293,323 9,882,004 8,719,654 Group Cash, bank balances and deposits with financial institutions Money at call (g) Deposits and placements with financial institutions Group Licensed banks (h) Financial investments portfolio Group Financial assets at fair value through profit or loss Financial investments available-for-sale Financial investments held-to-maturity Note (i) (ii) (iii) (i) Financial assets at fair value through profit or loss are as follows: Group At fair value (ii) Financial investments available-for-sale are as follows: Group At fair value Money market instruments: Malaysian Government Investment Issues Negotiable instruments of deposits Bankers’ acceptances and Islamic accepted bills Unquoted securities: Corporate Sukuk in Malaysia Foreign Corporate Sukuk Malaysian Government Sukuk Equity Total financial investments available-for-sale 254
257. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (h) Financial investments portfolio (cont’d.) (iii) Financial investments held-to-maturity are as follows: Group 2017 RM’000 2016 RM’000 174,618 19,057 92,935 67,403 193,675 160,338 2,731,560 45,202 – 50,049 2,776,762 50,049 At amortised cost Money market instruments: Foreign Certificates of Deposits Foreign Government Securities Unquoted securities: Corporate Sukuk in Malaysia Foreign Corporate Sukuk Accumulated impairment losses Total financial investments held-to-maturity (448) Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (501) 2,969,989 209,886 2017 RM’000 2016 RM’000 Movements in the allowances for impairment losses on financial investments held-to-maturity are as follows: Group At 1 January Exchange differences 501 (53) 467 34 At 31 December 448 501 2017 RM’000 2016 RM’000 843,952 1,793,362 575,283 4,831,992 3,329,676 461,121 475,241 3,320,631 8,044,589 7,586,669 The maturity profile of money market instruments available-for-sale and held-to-maturity are as follows: Group Within one year One year to three years Three years to five years After five years 255
258. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (i) Financing and advances Group Ijarah RM’000 Istisna’ RM’000 Others Total Financing and Advances RM’000 – – 78 – 5,600,110 2,374,094 – – 1,200,320 – – – – 37,176,740 – – – – – – 124,918 – – – – – 132,001 – – – – – 60,396 – – 83,159,772 790,499 37,176,740 109,164,680 226 179,243 4,882,661 1,518,560 – 16,742,846 – 9,784 – – – 152,340 – – – – – – – – – – – 49,928 982,881 – 4,882,661 2,349,546 982,881 16,742,846 2,258 – 865 2,761 – – 918 303 – – – – – 29 4,041 3,093 40,010,294 178,761,314 3,584,198 37,330,301 124,918 132,079 1,093,234 Bai’* RM’000 Murabahah RM’000 Musyarakah RM’000 – 5,600,032 – 17,660,022 – – 21,729,080 – – 63,125,656 790,499 – 85,917,965 226 179,243 – 618,934 – – Al-Ijarah Thumma Al-Bai (AITAB) RM’000 2017 Cashline Term financing – Housing financing – Syndicated financing – Hire purchase receivables – Other term financing Bills receivables Trust receipts Claims on customers under acceptance credits Staff financing Credit card receivables Revolving credit Financing to: – Directors of the Bank – Directors of subsidiaries Unearned income 261,036,338 (97,335,170) Gross financing and advances** Allowances for impaired financing and advances: – Individual allowance – Collective allowance 163,701,168 Net financing and advances 162,214,033 (661,181) (825,954) 2016 Cashline Term financing – Housing financing – Syndicated financing – Hire purchase receivables – Other term financing Bills receivables Trust receipts Claims on customers under acceptance credits Staff financing Credit card receivables Revolving credit Financing to: – Directors of the Bank – Directors of subsidiaries Unearned income – 4,844,236 – – – 157 – 4,844,393 19,101,421 – – 27,852,633 – – 59,662,500 824,763 – 69,777,874 793 153,310 2,563,623 – – 1,339,766 – – – – 36,148,172 – – – – – – 118,178 – – – – – 148,079 – – – – – 54,879 379 – 81,327,544 824,763 36,148,172 99,291,409 1,172 153,310 – 737,605 – – 4,838,297 1,369,618 – 16,596,086 – 10,546 – – – 150,097 – – – – – – – – – – – 47,785 825,661 – 4,838,297 2,315,651 825,661 16,596,086 391 – 2,932 – – – 226 – – – – – – 3 3,549 3 47,692,050 158,070,409 3,913,935 36,298,495 118,178 148,236 928,707 247,170,010 (96,954,485) Gross financing and advances** Allowances for impaired financing and advances: – Individual allowance – Collective allowance 150,215,525 Net financing and advances 148,710,892 (746,215) (758,418) * Bai’ comprises Bai-Bithaman Ajil, Bai Al-Inah and Bai-Al-Dayn. ** Included in financing and advances are the underlying assets under the Restricted Profit Sharing Investment Account (“RPSIA”) and Investment Accounts of customers (“IA”). 256
259. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (i) Financing and advances (cont’d.) (i) Financing and advances analysed by type of customers are as follows: 2017 RM’000 2016 RM’000 4,979,718 5,389,556 15,430,088 30,886,510 14,501,853 96,187,112 25,455 1,690,432 17,405,662 28,139,041 8,546,355 89,401,016 27,117 1,306,778 163,701,168 150,215,525 2017 RM’000 2016 RM’000 1,197,274 32,249,261 27,148,158 1,411,729 31,306,119 27,228,395 60,594,693 59,946,243 35,422,279 67,684,196 30,589,184 59,680,098 103,106,475 90,269,282 163,701,168 150,215,525 2017 RM’000 2016 RM’000 Purchase of securities Purchase of transport vehicles Purchase of landed properties – Residential – Non-residential Purchase of fixed assets Personal use Consumer durables Construction Working capital Credit/charge cards Other purposes 20,351,945 32,224,211 19,549,967 31,286,124 35,970,912 11,223,437 40,451 3,540,248 330 3,627,019 55,566,579 1,028,349 127,687 30,560,568 11,448,638 30,867 3,293,019 293 3,553,259 49,393,180 867,904 231,706 Gross financing and advances 163,701,168 150,215,525 Group Domestic non-banking institutions Domestic business enterprises – Small and medium enterprises – Others Government and statutory bodies Individuals Other domestic entities Foreign entities Gross financing and advances Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (ii) Financing and advances analysed by profit rate sensitivity are as follows: Group Fixed rate – House financing – Hire purchase receivables – Other financing Floating rate – House financing – Other financing Gross financing and advances (iii) Financing and advances analysed by their economic purposes are as follows: Group 257
260. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (i) Financing and advances (cont’d.) (iv) The maturity profile of financing and advances are as follows: 2017 RM’000 2016 RM’000 Within one year One year to three years Three years to five years After five years 33,402,949 6,887,139 13,267,220 110,143,860 31,920,746 5,243,447 14,356,180 98,695,152 Gross financing and advances 163,701,168 150,215,525 2017 RM’000 2016 RM’000 Group (v) Movements in the impaired financing and advances (“impaired financing”) are as follows: Group Gross impaired financing at 1 January Newly impaired Reclassified as non-impaired Amount recovered Amount written-off 1,667,994 1,289,639 (531,863) (405,108) (265,363) 1,065,972 1,470,216 (415,007) (237,721) (215,466) Gross impaired financing at 31 December 1,755,299 1,667,994 Gross impaired financing at 31 December (excluding financing funded by RPSIA and IA) Less: Individual allowance 1,689,335 (661,181) 1,586,303 (746,215) Net impaired financing at 31 December 1,028,154 840,088 Calculation of ratio of net impaired financing: Gross financing and advances (excluding financing funded by RPSIA and IA) Less: Individual allowance 122,450,621 (661,181) 100,940,476 (746,215) Net financing and advances 121,789,440 100,194,261 0.84% 0.84% 2017 RM’000 2016 RM’000 10,490 149,452 14,906 135,642 158,635 91,046 20,548 8 349,422 964,980 10,718 117,898 79,290 17,375 14 356,865 938,065 7,939 1,755,299 1,667,994 Net impaired financing as a percentage of net financing and advances (vi) Impaired financing and advances by economic purposes are as follows: Group Purchase of securities Purchase of transport vehicles Purchase of landed properties – Residential – Non-residential Personal use Consumer durables Construction Working capital Credit/charge cards Impaired financing and advances 258
261. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (i) Financing and advances (cont’d.) (vii) Movements in the allowances for impaired financing and advances are as follows: Group Individual allowance At 1 January Allowance made (Note 62(ab)) Amount written back in respect of recoveries (Note 62(ab)) Amount written-off Transferred to collective allowance Exchange differences At 31 December Collective allowance At 1 January Allowance made* (Note 62(ab)) Amount written-off Transferred from individual allowance Exchange differences At 31 December As a percentage of gross financing and advances (excluding financing funded by RPSIA and IA) less individual allowance (including regulatory reserve) 2017 RM’000 2016 RM’000 746,215 159,929 (75,632) (156,307) (5,191) (7,833) 356,555 522,127 (22,583) (121,604) (3,406) 15,126 661,181 746,215 758,418 178,389 (115,476) 5,191 (568) 755,997 104,376 (105,591) 3,406 230 825,954 758,418 1.20% 1.20% Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) * As at 31 December 2017, the gross exposure of the financing funded by RPSIA was RM16,695.1 million (2016: RM17,730.5 million). The individual allowance and collective allowance relating to this RPSIA amounting to RM168.3 million and RM41.5 million (2016: RM126.7 million and RM52.0 million) respectively are recognised in the Group’s conventional banking operations. The gross exposure of the financing funded by IA as at 31 December 2017 was RM24,555.4 million (2016: RM31,544.6 million). The individual allowance and collective allowance relating to financing funded by IA are not recognised in the financial statement of the Group, but is charged to and borne by the investors. 259
262. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (j) Derivative financial instruments The table below shows the fair value of derivative financial instruments recorded as assets or liabilities, together with their principal amounts. The principal amount, recorded gross, is the amount of the derivative’s underlying asset, reference rate or index and is the basis upon which change in the value of derivatives are measured. The principal amounts indicate the volume of transactions outstanding at the financial year end and are indicative of neither the market risk nor the credit risk. The IBS enters into derivative financial instruments at the request and on behalf of its customers as well as to hedge the IBS’ own exposures and not for speculative purpose. 2017 Group Principal amount RM’000 2016 <---------- Fair Values -----------> Assets RM’000 Liabilities RM’000 Principal amount RM’000 <---------- Fair Values -----------> Assets RM’000 Liabilities RM’000 Trading derivatives Foreign exchange related contracts Currency forward: – Less than one year – One year to three years 3,978,004 623,903 8,805 8,534 (223,594) (18,294) 4,087,372 – 263,098 – (3,724) – Currency swaps: – Less than one year 5,451,419 229,285 (152,482) 5,212,700 14,892 (263,997) Currency spots: – Less than one year 270,312 10 (872) 46,449 6 (24) Currency options: – Less than one year – – 1,794 130 (130) 632,421 2,013,315 33,862 65,553 (33,039) (65,553) – 668,208 – 75,201 – (73,928) 12,969,374 346,049 (493,834) 10,016,523 353,327 (341,803) Profit rate options: – More than three years 1,490,000 5,463 (16,789) 1,310,000 5,801 (28,111) Profit rate swaps: – One year to three years – More than three years 850,000 2,900,620 1,849 18,451 (1,789) (10,341) 750,000 2,603,674 2,700 25,356 (2,777) (20,655) 5,240,620 25,763 (28,919) 4,663,674 33,857 (51,543) 18,209,994 371,812 (522,753) 14,680,197 387,184 (393,346) 170,607 1,514,854 – 114,921 (11,620) (114,921) – 1,704,621 – 127,296 – (141,161) 1,685,461 114,921 (126,541) 1,704,621 127,296 (141,161) – 607,500 – 1,256 – (1,026) 1,000,000 672,900 368 706 (368) (286) 607,500 1,256 (1,026) 1,672,900 1,074 (654) 2,292,961 116,177 (127,567) 3,377,521 128,370 (141,815) 20,502,955 487,989 (650,320) 18,057,718 515,554 (535,161) Cross currency profit rate swaps: – One year to three years – More than three years – Profit rate related contracts Hedging derivatives Foreign exchange related contracts Cross currency profit rate swaps: – Less than one year – One year to three years Profit rate related contracts Profit rate swaps: – Less than one year – One year to three years Total 260
263. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Group Amount due from holding company Prepayment and deposits Other debtors 2017 RM’000 2016 RM’000 6,232,515 271,289 729,391 3,758,203 263,164 938,622 7,233,195 4,959,989 Basel II Pillar 3 pg. 288-351 (k) Other assets The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (l) Statutory deposits with central banks The non-interest bearing statutory deposits maintained with BNM are in compliance with Section 26(2)(c) and Section 26(3) of the Central Bank of Malaysia Act, 2009, the amounts of which are determined as set percentages of total eligible liabilities. (m) Property, plant and equipment Group As at 31 December 2017 Office Furniture, Fittings, Equipment and Renovations RM’000 Computers and Peripherals RM’000 Motor Vehicles RM’000 Total RM’000 Cost At 1 January 2017 Additions Transferred to intangible assets (Note 62(n)) Exchange differences 3,077 187 – (173) 3,600 – (651) (562) 740 – – (75) 7,417 187 (651) (810) At 31 December 2017 3,091 2,387 665 6,143 Accumulated depreciation At 1 January 2017 Depreciation charge for the financial year (Note 62(ad)) Exchange differences 2,789 225 (110) 1,509 153 (62) 553 95 (62) 4,851 473 (234) At 31 December 2017 2,904 1,600 586 5,090 Net carrying amount At 31 December 2017 187 787 79 1,053 261
264. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (m) Property, plant and equipment (cont’d.) Office Furniture, Fittings, Equipment and Renovations RM’000 Computers and Peripherals RM’000 Cost At 1 January 2016 Additions Disposals Exchange differences 2,620 230 – 227 1,567 1,835 – 198 733 – (18) 25 4,920 2,065 (18) 450 At 31 December 2016 3,077 3,600 740 7,417 Accumulated depreciation At 1 January 2016 Depreciation charge for the financial year (Note 62(ad)) Disposals Exchange differences 2,595 23 – 171 1,173 116 – 220 263 286 (18) 22 4,031 425 (18) 413 At 31 December 2016 2,789 1,509 553 4,851 Net carrying amount At 31 December 2016 288 2,091 187 2,566 2017 RM’000 2016 RM’000 Group As at 31 December 2016 Motor Vehicles RM’000 Total RM’000 (n) Intangible assets Group 262 Computer software Cost At 1 January Additions Transferred from property, plant and equipment (Note 62(m)) Exchange differences 7,374 1,776 651 (772) 6,299 617 – 458 At 31 December 9,029 7,374 Accumulated amortisation At 1 January Amortisation charge for the financial year (Note 62(ad)) Exchange differences 6,760 428 (700) 6,191 112 457 At 31 December 6,488 6,760 Net carrying amount At 31 December 2,541 614
265. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Group 2017 RM’000 2016 RM’000 At 1 January Recognised in income statements, net (Note 62(ae)) Recognised in statement of comprehensive income, net Exchange differences (21,012) (25,556) 7,363 1,827 (38,402) 18 17,482 (110) At 31 December (37,378) (21,012) Basel II Pillar 3 pg. 288-351 (o) Deferred tax assets The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) Deferred tax assets of the Group: Group Allowances for impairment losses on financing and advances RM’000 AFS reserve, impairment loss on financial investments and amortisation of premium RM’000 Provision for liabilities RM’000 Other temporary differences RM’000 Total RM’000 As at 31 December 2017 At 1 January 2017 Recognised in income statement Recognised in statement of comprehensive income Exchange differences (176) (24,371) – 1,683 (17,903) – 7,239 – (29) (192) 124 92 (2,904) (993) – 52 (21,012) (25,556) 7,363 1,827 At 31 December 2017 (22,864) (10,664) (5) (3,845) (37,378) As at 31 December 2016 At 1 January 2016 Recognised in income statement Recognised in statement of comprehensive income Exchange differences (141) – – (35) (35,290) – 17,387 – (67) – 95 (57) (2,904) 18 – (18) (38,402) 18 17,482 (110) At 31 December 2016 (176) (17,903) (29) (2,904) (21,012) (p) Deposits from customers 2017 RM’000 2016 RM’000 Savings deposit Qard 14,629,051 13,498,387 Demand deposit Qard 18,734,884 17,403,516 Term deposit Murabahah Qard 94,379,313 2,325,740 73,653,740 2,287,318 96,705,053 75,941,058 130,068,988 106,842,961 Group Total deposits from customers 263
266. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (p) Deposits from customers (cont’d.) (i) The maturity profile of term deposits are as follows: Group Within six months Six months to one year One year to three years Three years to five years 2017 RM’000 2016 RM’000 80,676,337 14,731,846 1,273,516 23,354 69,792,917 6,093,985 30,863 23,293 96,705,053 75,941,058 2017 RM’000 2016 RM’000 53,932,007 41,157,440 19,292,571 15,686,970 43,286,750 33,244,988 17,395,634 12,915,589 130,068,988 106,842,961 2017 RM’000 2016 RM’000 (ii) The deposits are sourced from the following types of customers: Group Business enterprises Individuals Government and statutory bodies Others (q) Investment accounts of customers (i) Movements in the investment accounts of customers are as follows: Group Funding inflows/(outflows) At 1 January New placement during the financial year Redemption during the financial year Profit payable At 31 December 31,544,587 57,230,520 (64,204,911) (14,751) 17,657,893 99,504,483 (85,637,094) 19,305 24,555,445 31,544,587 2017 RM’000 2016 RM’000 9,841,269 13,255,075 218,371 1,240,730 13,040,863 16,197,049 460,216 1,846,459 24,555,445 31,544,587 (ii) Unrestricted investment account are sourced from the following customers: Group Business enterprises Individuals Government and statutory bodies Others 264
267. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (q) Investment accounts of customers (cont’d.) (iii) Maturity structure of unrestricted investment accounts are as follows: Group 2017 RM’000 2016 RM’000 9,948,920 14,606,525 12,053,209 2,532,512 2,564 18,240 7,564,114 23,980,473 15,045,407 8,929,760 3,513 1,793 24,555,445 31,544,587 2017 RM’000 2016 RM’000 24,554,642 803 27,913,126 3,631,461 24,555,445 31,544,587 Mudharabah – Without maturity – With maturity Due within six months Six months to one year One year to three years Three years to five years Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (iv) The allocations of investment asset are as follows: Group Retail financing Non-retail financing (v) Profit sharing ratio and rate of return are as follows: Investment account holder (“IAH”) Average profit sharing ratio % Average rate of return % 2017 Investment accounts of customers 60 3.07 2016 Investment accounts of customers 63 3.17 Group 265
268. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (r) Deposits and placements from financial institutions Group Mudharabah Fund Licensed banks* Non-Mudharabah Fund Licensed banks Licensed Islamic banks Licensed investment banks Other financial institutions 2017 RM’000 2016 RM’000 18,082,098 17,771,962 18,082,098 17,771,962 5,260,456 1,873,521 199,034 2,836,162 10,667,415 198,120 – 1,708,800 10,169,173 12,574,335 28,251,271 30,346,297 * Included in the deposits and placements from licensed banks is the Restricted Profit Sharing Investment Account (“RPSIA”) placed by the Group’s conventional operations amounting to RM18,068.2 million (2016: RM17,767.7 million). These placements are used to fund certain specific financing. The RPSIA is a contract based on the Mudharabah principle between two parties to finance a financing where the investor solely provides capital and the business venture is managed solely by the entrepreneur. The profit of the business venture is shared between both parties based on pre-agreed ratios. Losses shall be borne by the Group’s conventional operations as the investor. (s) Financial liabilities at fair value through profit or loss Group 2017 RM’000 2016 RM’000 Structured deposits 892,695 902,091 The Group have designated certain structured deposits at fair value through profit or loss. This designation is permitted under MFRS 139 Financial Instruments: Recognition and Measurement as it significantly reduces accounting mismatch. These instruments are managed by the Group on the basis of its fair value and include terms that have substantive derivative characteristics. The carrying amount of structured deposits designated at fair value through profit or loss of the Group as at 31 December 2017 was RM898,182,000 (2016: RM917,160,000). The fair value changes of the financial liabilities that are attributable to the changes in its own credit risk are not significant. (t) Other liabilities Group 2017 RM’000 2016 RM’000 Due to holding company Other creditors, provisions and accruals Defined benefit pension plans 330,542 326,692 3,446 283,213 101,597 3,805 660,680 388,615 Group 2017 RM’000 2016 RM’000 Taxation Zakat 130,022 18,488 81,540 17,021 148,510 98,561 (u) Provision for taxation and zakat 266
269. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Group Unsecured term funding: (i) Commercial Papers – Less than one year (ii) Medium Term Notes – Less than one year – More than one year Total term funding 2017 RM’000 2016 RM’000 2,459,845 – 482,370 2,003,222 – – 2,485,592 – 4,945,437 – Basel II Pillar 3 pg. 288-351 (v) Term funding The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) The unsecured term fundings are commercial papers and medium term notes denominated in Ringgit Malaysia (“RM”). The profit rates of these unsecured term fundings ranging from 3.68% to 4.20% per annum. Details of the unsecured term fundings are as follows: Description Issue date Maturity date Maybank Islamic Berhad RM10.0 billion Commercial Paper/Medium Term Note Programme Islamic zero coupon medium term notes Islamic medium term notes Islamic zero coupon medium term notes 16-Nov-17 18-Dec-17 19-Dec-17 16-Nov-18 16-Dec-22 19-Dec-18 Profit rate (% p.a.) – 4.20 – Nominal value RM250.0 million RM2,000.0 million RM250.0 million Additionally, the aggregate nominal value of the commercial papers are as follows: Description Tenor Maybank Islamic Berhad RM10.0 billion Commercial Paper/Medium Term Note Programme Nominal value 90 – 365 days RM2,500.0 million (w) Subordinated sukuk Group Note RM1,500 million subordinated sukuk due in 2024 RM1,000 million subordinated sukuk due in 2026 (i) (ii) 2017 RM’000 2016 RM’000 1,516,397 1,017,708 1,516,788 1,017,708 2,534,105 2,534,496 Details of the issued subordinated sukuk are as follows: Note Description/nominal value (i) (ii) 1 Maybank Islamic Berhad RM10.0 billion Subordinated Sukuk Murabahah Programme RM1,500.0 million1 RM1,000.0 million1 Issue date First call date Maturity date 7-Apr-14 15-Feb-16 5-Apr-19 15-Feb-21 5-Apr-24 13-Feb-26 Profit rate (% p.a.) 4.75 4.65 The subsidiary may, subject to the prior consent of BNM, redeem these subordinated sukuk, in whole or in part, on the first redemption date and on each profit payment date thereafter. 267
270. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (x) Capital securities Description Issue date First call date Maturity date 2017 RM’000 2016 RM’000 14-Dec-22 Perpetual 1,002,441 – Maybank Islamic Berhad RM10.0 billion Additional Tier 1 Sukuk Wakalah Programme RM1,000.0 million 4.95% Additional Tier 1 Sukuk Wakalah1 1 14-Dec-17 The subsidiary, may redeem these capital securities, in whole or in part on the first redemption date and on every Periodic Distribution Date thereafter. (y) Income derived from investment of depositors’ funds 2017 RM’000 2016 RM’000 5,237,277 1,808,105 4,369,717 1,778,534 7,045,382 6,148,251 2017 RM’000 2016 RM’000 Finance income and hibah: Financing and advances Financial investments AFS Financial investments HTM Financial assets at FVTPL Money at call and deposits and placements with financial institutions 4,300,422 221,718 61,785 5,866 338,857 3,538,772 151,248 4 4,272 289,664 Amortisation of premiums less accretion of discounts, net 4,928,648 53,721 3,983,960 84,861 Total finance income and hibah 4,982,369 4,068,821 246,133 327 6,650 224,950 1,908 17,111 Group Income from investment of: (i) General investment deposits (ii) Other deposits (i) Income derived from investment of general investment deposits: Group Other operating income: Fee income Gain on disposal of financial assets at FVTPL Gain on disposal of financial investments AFS Unrealised gain/(loss) of: – Financial assets at FVTPL – Financial liabilities at FVTPL – Derivatives Foreign exchange (loss)/gain, net Net profit on derivatives Total other operating income 268 (7) (6,839) 4,646 (8,365) 12,363 30 10,192 (16,766) 51,932 11,539 254,908 300,896 5,237,277 4,369,717
271. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (y) Income derived from investment of depositors’ funds (cont’d.) (ii) Income derived from investment of other deposits: 2017 RM’000 2016 RM’000 Finance income and hibah: Financing and advances Financial investments AFS Financial investments HTM Financial assets at FVTPL Money at call and deposits and placements with financial institutions 1,483,700 76,341 21,291 2,020 118,300 1,439,617 61,426 4 1,735 118,904 Amortisation of premiums less accretion of discounts, net 1,701,652 18,497 1,621,686 34,463 Total finance income and hibah 1,720,149 1,656,149 84,814 113 2,290 91,423 775 6,949 (2) (2,355) 1,600 (2,761) 4,257 12 4,139 (6,809) 21,210 4,686 Group Other operating income: Fee income Gain on disposal of financial assets at FVTPL Gain on disposal of financial investments AFS Unrealised gain/(loss) of: – Financial assets at FVTPL – Financial liabilities at FVTPL – Derivatives Foreign exchange (loss)/gain, net Net profit on derivatives Total other operating income 87,956 122,385 1,808,105 1,778,534 2017 RM’000 2016 RM’000 1,503,196 – 1,570,992 1,308 1,503,196 1,572,300 23,652 41,512 1,526,848 1,613,812 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (z) Income derived from investment of investment account funds Group Finance income and hibah: Financing and advances Financial investments AFS Other operating income: Fee income 269
272. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (aa) Income derived from investment of Islamic Banking Funds Group 2017 RM’000 2016 RM’000 Finance income and hibah: Financing and advances Financial investments AFS Financial investments HTM Financial assets at FVTPL Money at call and deposits and placements with financial institutions 257,175 12,578 3,582 333 26,388 272,083 10,936 10 314 27,354 Accretion of discounts, net 300,056 3,048 310,697 6,137 Total finance income and hibah 303,104 316,834 94,159 4,598 377 34,988 138 1,237 Other operating income: Fee income Gain on disposal of financial assets at FVTPL Gain on disposal of financial investments AFS Unrealised gain/(loss) of: – Financial assets at FVTPL – Financial liabilities at FVTPL – Derivatives Foreign exchange (loss)/gain, net Net profit on derivatives Total other operating income – (388) 264 (654) 701 2 737 (1,212) 3,018 834 99,057 39,742 402,161 356,576 2017 RM’000 2016 RM’000 159,929 (75,632) 178,389 522,127 (22,583) 104,376 9,371 (120,430) 554 8,451 (193,284) (136) 152,181 418,951 2017 RM’000 2016 RM’000 4,763 2,971,975 9,490 2,709,548 640,642 332,224 44,894 418,112 285,422 50,341 3,994,498 3,472,913 (ab) Allowances for impairment losses on financing and advances Group Individual allowance: – Allowance made (Note 62(i)(vii)) – Amount written back (Note 62(i)(vii)) Collective allowance (Note 62(i)(vii)) Bad debts and financing: – Written-off – Recovered Allowances for/(writeback of) impairment losses on other debts (ac) Profit distributed to depositors Group Deposits from customers: – Mudharabah Fund – Non-Mudharabah Fund Deposits and placements from financial institutions: – Mudharabah Fund – Non-Mudharabah Fund Financial liabilities at fair value through profit or loss 270
273. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS 2017 RM’000 2016 RM’000 39,950 131 4,646 511 7,930 36,456 121 4,528 1,007 7,780 53,168 49,892 473 428 3,330 5,702 425 112 3,020 5,839 9,933 9,396 9,627 1,774 10,930 2,855 11,401 13,785 67,787 1,300 98,898 51,732 4,994 57,233 167,985 113,959 Shared service cost paid/payable to Maybank 1,174,521 1,106,007 Total 1,417,008 1,293,039 607 726 2017 RM’000 2016 RM’000 531,062 427,419 Group Personnel expenses: – Salaries and wages – Social security cost – Pension cost – defined contribution plan – ESS expenses – Other staff related expenses Establishment costs: – Depreciation of property, plant and equipment (Note 62(m)) – Amortisation of computer software (Note 62(n)) – Information technology expenses – Others Marketing costs: – Advertisement and publicity – Others Administration and general expenses: – Fees and brokerage – Administrative expenses – General expenses Included in overhead expenses are: Shariah Committee Members’ fee and remuneration Basel II Pillar 3 pg. 288-351 (ad) Overhead expenses The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (ae)Taxation Group Tax expense for the financial year (Over)/under provision in respect of prior years: Malaysian income tax (11,080) 519,982 Deferred tax (Note 62(o)): Relating to origination and reversal of temporary differences 7 427,426 (25,556) 18 (25,556) 18 494,426 427,444 271
274. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (af) Commitments and contingencies In the normal course of business, the Group makes various commitments and incurs certain contingent liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions. The risk-weighted exposures of the Group as at each reporting date are as follows: Credit Equivalent Amount* RM’000 RiskWeighted Amount* RM’000 1,483,863 3,486,103 188,659 1,438,157 1,718,161 36,697 1,292,069 1,278,929 28,596 5,158,625 3,193,015 2,599,594 19,987,064 7,705,504 4,218,895 2,676,066 2,330,534 1,093,008 27,692,568 6,894,961 3,423,542 126,710 – – 32,977,903 10,087,976 6,023,136 9,870,342 4,784,493 407,037 182,470 83,392 103,359 14,654,835 589,507 186,751 3,808,120 2,040,000 683,383 72,276 284,177 41,970 5,848,120 755,659 326,147 Total treasury-related commitments and contingencies 20,502,955 1,345,166 512,898 Total commitments and contingencies 53,480,858 11,433,142 6,536,034 Group 2017 Contingent liabilities Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Commitments Irrevocable commitments to extend credit: – Maturity within one year – Maturity exceeding one year Miscellaneous commitments and contingencies Total credit-related commitments and contingencies Derivative financial instruments Foreign exchange related contracts: – Less than one year – One year to less than five years Profit rate related contracts: – One year to less than five years – Five years and above Full Commitment RM’000 * The credit equivalent amount and risk-weighted amount are derived at using the credit conversion factors and risk-weights respectively as specified by BNM. 272
275. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS (af) Commitments and contingencies (cont’d.) The risk-weighted exposures of the Group as at each reporting date are as follows (cont’d.): Credit Equivalent Amount* RM’000 RiskWeighted Amount* RM’000 1,243,371 2,344,978 295,126 1,243,371 1,158,149 50,777 1,275,387 861,937 35,283 3,883,475 2,452,297 2,172,607 21,396,886 8,703,287 4,788,406 2,728,616 2,352,723 1,321,241 30,100,173 7,517,022 3,673,964 56,028 – – 34,039,676 9,969,319 5,846,571 9,348,315 2,372,829 456,329 137,963 116,847 53,150 11,721,144 594,292 169,997 1,000,000 2,822,620 2,513,954 612 424,627 102,199 710 191,104 92,637 6,336,574 527,438 284,451 Total treasury-related commitments and contingencies 18,057,718 1,121,730 454,448 Total commitments and contingencies 52,097,394 11,091,049 6,301,019 Group 2016 Contingent liabilities Direct credit substitutes Certain transaction-related contingent items Short-term self-liquidating trade-related contingencies Commitments Irrevocable commitments to extend credit: – Maturity within one year – Maturity exceeding one year Miscellaneous commitments and contingencies Total credit-related commitments and contingencies Derivative financial instruments Foreign exchange related contracts: – Less than one year – One year to less than five years Profit rate related contracts: – Less than one year – One year to less than five years – Five years and above Full Commitment RM’000 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) * The credit equivalent amount and risk-weighted amount are derived at using the credit conversion factors and risk-weights respectively as specified by BNM. 273
276. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (ag) Capital adequacy The capital adequacy ratios of the Group are as follows: Group 2017 2016 14.935% 16.559% 21.127% 14.358% 14.358% 18.873% 2017 RM’000 2016 RM’000 CET1/Tier 1 Capital Paid-up share capital/Islamic Banking Fund Share premium Retained profits Other reserves 5,769,752 – 3,499,853 472,804 595,076 5,200,228 2,881,471 746,993 CET1 Capital before regulatory adjustments Less: Regulatory adjustment applied in CET1 Capital 9,742,409 (546,078) 9,423,768 (414,711) Total CET1 Capital 9,196,331 9,009,057 Additional Tier 1 Capital Capital securities 1,000,000 – 10,196,331 9,009,057 Tier 2 Capital Tier 2 capital instruments Collective allowance1 Surplus of eligible provision over expected loss 2,500,000 25,694 287,154 2,500,000 28,972 304,154 Total Tier 2 Capital 2,812,848 2,833,126 13,009,179 11,842,183 2017 RM’000 2016 RM’000 9,240,097 60,375,489 7,320,596 64,936,792 69,615,586 (15,855,390) 1,169,182 6,647,456 72,257,388 (16,426,406) 1,096,340 5,819,189 61,576,834 62,746,511 CET1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio Components of capital: Group Total Tier 1 Capital Total Capital 1 Excludes collective allowance for impaired financing and advances restricted from Tier 2 Capital. The breakdown of RWA by each major risk categories are as follows: Group Standardised Approach exposure Internal Ratings-Based Approach exposure after scaling factor Total Total Total Total RWA RWA RWA RWA Total RWA for for for for credit risk credit risk absorbed by Maybank and IAH* market risk operational risk * In accordance with BNM’s guideline on the recognition and measurement of Restricted Profit Sharing Investment Account (“RPSIA”) and Investment Account (“IA”) as Risk Absorbent, the credit risk on the assets funded by the RPSIA and IA are excluded from the capital adequacy ratios calculation of the IBS operations. 274
277. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS The estimated fair values of financial assets and financial liabilities as at the reporting date approximate their carrying amounts as shown in the statement of financial position, except for the following financial assets and liabilities: Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total fair value RM’000 Carrying amount RM’000 2017 Financial assets Financial investments HTM Financing and advances – – 2,973,952 36,688,103 – 122,503,950 2,973,952 159,192,053 2,969,989 162,214,033 Financial liabilities Customers’ funding: – Deposits from customers – Investment accounts of customers^ Deposits and placements from financial institutions Term funding Subordinated sukuk Capital securities – – – – – – 130,058,317 24,555,704 28,176,217 4,941,794 2,558,967 999,897 – – – – – – 130,058,317 24,555,704 28,176,217 4,941,794 2,558,967 999,897 130,068,988 24,555,445 28,251,271 4,945,437 2,534,105 1,002,441 2016 Financial assets Financial investments HTM Financing and advances – – 211,365 36,977,004 – 108,483,054 211,365 145,460,058 209,886 148,710,892 Financial liabilities Customers’ funding: – Deposits from customers – Investment accounts of customers^ Deposits and placements from financial institutions Subordinated sukuk – – – – 106,637,006 31,544,591 30,281,851 2,517,123 – – – – 106,637,006 31,544,591 30,281,851 2,517,123 106,842,961 31,544,587 30,346,297 2,534,496 Group Basel II Pillar 3 pg. 288-351 (ah) Fair values of financial assets and financial liabilities The Financials pg. 10-287 62.THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) ^ Investment accounts of customers are used to fund financing and advances as disclosed in Note 62(i)(vii). The methods and assumptions used to estimate the fair values of the financial assets and financial liabilities of IBS operations are as disclosed in Note 53. (ai) Allocation of income The policy of allocation of income to the various types of deposits and investments is subject to “The Framework on Rate of Return” issued by BNM in October 2001 and has been updated on 13 March 2013. The objective is to set the minimum standard and terms of reference for the Islamic banking institutions in calculating and deriving the rate of return for the depositors. (aj) Shariah disclosures (i) Shariah Committee and governance The operation of the Group is governed by Section 28 and 29 of the Islamic Financial Services Act 2013 (“IFSA”), which stipulates that “any licensed institution shall at all times ensure that its aims and operations, business, affairs and activities are in compliance with Shariah and in accordance with the advice or ruling of the Shariah Advisory Council (“SAC”), specify standards on Shariah matters in respect of the carrying on of its business, affair or activity” and Section IV of BNM’s “Guidelines on the Governance of Shariah Committee for The Islamic Financial Institutions” known as the Shariah Governance Framework (“SGF”) (which supersedes the BNM/GPS 1), which stipulates that “Every Islamic institution is required to establish a Shariah Committee”. Based on the above, the duties and responsibilities of the Group’s Shariah Committee are to advise on the overall Islamic Banking operations of the Group’s business in order to ensure compliance with the Shariah requirements. 275
278. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 62 .THE OPERATIONS OF ISLAMIC BANKING SCHEME (“IBS”) (CONT’D.) (aj) Shariah disclosures (cont’d.) (i) Shariah Committee and governance (cont’d.) The roles and responsibilities of Shariah Committee (“SC”) in monitoring the Group’s activities include: (a) To advise the Board on Shariah matters in its business operations; (b) To endorse Shariah Compliance Manual; (c) To endorse and validate relevant documentations; (d) To assist related parties on Shariah matters for advise upon request; (e) To advise on matters to be referred to the SAC; (f) To provide written Shariah opinion; and (g) To assist the SAC on reference for advise. The Shariah Committee at the Group level has five members. Any transaction suspected as Shariah non-compliance will be escalated to the SC for deliberation and decision whether any Shariah requirements have been breached. Shariah Risk Management will track on the incident and rectification status, and ensure timely reporting to the SC, Board and Bank Negara Malaysia. For any Shariah non-compliance transactions, the related income will be purified by channeling the amount to an approved charitable organisation. (ii) Shariah non-compliance events For the financial year ended 31 December 2017, the nature of transactions deliberated at the Shariah Committee for Shariah non-compliance are as follows: Group 2017 Non-existence and/or insufficient of underlying assets, usage of non-eligible underlying assets and non-execution of aqad 2016 Non-existence and/or insufficient of underlying assets, usage of non-eligible underlying assets and non-execution of aqad No. of events RM’000 3 1 3 1 4 64 4 64 (iii) Sources and uses of charity funds Apart from the purification of income from Shariah non-compliance events, Maybank Islamic Berhad has implemented several rectification measures relating to processes, legal documents and other control mechanism to minimise reoccurrence of Shariah non-compliance incidents. 2017 RM’000 2016 RM’000 Sources of charity funds Shariah non-compliance/prohibited income Income earned from late payment charges 1 – 64 30 Total sources of charity funds during the financial year 1 94 Uses of charity funds Contribution to non-profit organisation 1 94 Total uses of charity funds during the financial year 1 94 Undistributed charity funds as at 31 December – – (iv) Recognition and measurement by main class of Shariah contracts The recognition and measurement of each main class of Shariah contracts is dependent on the nature of the products, either financing or deposit product. The accounting policies for each of these products are disclosed in their respective policies. 276
279. 63 .DETAILS OF SUBSIDIARIES, DEEMED CONTROLLED STRUCTURED ENTITIES, ASSOCIATES AND JOINT VENTURES (a) Details of the subsidiaries are as follows: Name of Company Banking Maybank Islamic Berhad PT Bank Maybank Syariah Indonesia11 Maybank International (L) Ltd. Maybank Philippines, Incorporated11 PT Bank Maybank Indonesia Tbk11 Maybank (Cambodia) Plc.11 Finance Myfin Berhad Maybank Allied Credit & Leasing Sdn. Bhd. PT Maybank Indonesia Finance11 PT Wahana Ottomitra Multiartha Tbk11 Kim Eng Finance (Singapore) Pte. Ltd.11 Insurance Maybank Ageas Holdings Berhad Etiqa Life International (L) Ltd. Principal Activities Country of Incorporation/ Principal Place of Business Islamic banking Islamic banking Malaysia Indonesia Offshore banking Malaysia Effective Interest held by the Non-Controlling Interest Effective Interest held by the Group Share Capital Total 2017 RM 2016 RM 2017 % 2016 % 2017 % 2016 % 2017 % 2016 % 5,481,783,300 819,307,000,0001 5,481,783,300 819,307,000,0001 100.00 100.00 100.00 100.00 – – – – 100.00 100.00 100.00 100.00 3,500,0002 60,000,0002 100.00 100.00 – – 100.00 100.00 10,545,500,3023 10,545,500,3023 99.97 99.97 0.03 0.03 100.00 100.00 8,220,957,567,7971 8,220,957,567,7971 98.3115 98.3115 1.69 1.69 100.00 100.00 Banking Philippines Banking Indonesia Banking Cambodia 65,000,0002 50,000,0002 100.00 100.00 – – 100.00 100.00 Ceased operations Financing Malaysia 847,500,000 847,500,000 100.00 100.00 – – 100.00 100.00 Malaysia 10,000,000 10,000,000 100.00 100.00 – – 100.00 100.00 Multi-financing Indonesia 32,370,000,0001 32,370,000,0001 98.3115 98.3115 1.69 1.69 100.00 100.00 Multi-financing Indonesia 508,338,022,1741 508,338,022,1741 67.3915 67.3915 32.61 32.61 100.00 100.00 Money lending Singapore 24 24 100.00 100.00 – – 100.00 100.00 Malaysia 660,866,223 653,566,223 69.05 69.05 30.95 30.95 100.00 100.00 Malaysia 3,500,0002 3,500,0002 69.05 69.05 30.95 30.95 100.00 100.00 Malaysia 169,878,927 169,878,927 69.05 69.05 30.95 30.95 100.00 100.00 Malaysia 400,000,000 400,000,000 69.05 69.05 30.95 30.95 100.00 100.00 Malaysia 124,8416 124,8416 69.05 69.05 30.95 30.95 100.00 100.00 Malaysia 485,310,828 485,310,828 100.00 100.00 – – 100.00 100.00 1,206,511,1523 494,994,0403 95.24 95.24 4.76 4.76 100.00 100.00 Singapore 78,000,0004 78,000,0004 69.05 69.05 30.95 30.95 100.00 100.00 Indonesia 150,000,000,0001 – 75.00 – 25.00 – 100.00 – Malaysia 100,000,000 – 69.05 – 30.95 – 100.00 – Malaysia 870,000,000 – 69.05 – 30.95 – 100.00 – Investment holding Offshore investmentlinked insurance Etiqa Insurance Berhad General insurance, life insurance and investmentlinked business Etiqa Takaful Berhad General takaful, family takaful and investmentlinked business Provision of Etiqa Offshore Insurance (L) Ltd. bureau services in Federal Territory of Labuan Etiqa International Holdings Investment Sdn. Bhd. holding Insurance AsianLife & General provider Assurance Corporation11 Underwriting of Etiqa Insurance Pte. Ltd.11 general insurance and life insurance businesses Insurance PT Asuransi Asoka Mas12 provider Etiqa Life Insurance Berhad Life and investmentlinked business Etiqa General Takaful Berhad General takaful business Philippines Our Performance pg. 4-8 The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS 277
280. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 63 .DETAILS OF SUBSIDIARIES, DEEMED CONTROLLED STRUCTURED ENTITIES, ASSOCIATES AND JOINT VENTURES (CONT’D.) (a) Details of the subsidiaries are as follows (cont’d.): Name of Company Principal Activities Country of Incorporation/ Principal Place of Business Effective Interest held by the Group Share Capital Effective Interest held by the Non-Controlling Interest Total 2017 RM 2016 RM 2017 % 2016 % 2017 % 2016 % 2017 % 2016 % Investment Banking 278 Maybank Investment Bank Berhad Investment banking Malaysia 222,785,000 222,785,000 100.00 100.00 – – 100.00 100.00 Maysec Sdn. Bhd. Investment holding Malaysia 162,000,000 162,000,000 100.00 100.00 – – 100.00 100.00 PhileoAllied Securities (Philippines) Inc.11 Dormant Philippines 21,875,0003 21,875,0003 100.00 100.00 – – 100.00 100.00 BinaFikir Sdn. Bhd. Business/ Malaysia Economic consultancy and advisory 742,011 742,011 100.00 100.00 – – 100.00 100.00 Maybank International Holdings Sdn. Bhd. Investment holding Malaysia 4,390,000,000 4,390,000,000 100.00 100.00 – – 100.00 100.00 Maybank Kim Eng Holdings Limited11 Investment holding Singapore 211,114,2244 211,114,2244 100.00 100.00 – – 100.00 100.00 Maybank Kim Eng Securities Pte. Ltd.11 Dealing in securities Singapore 75,000,0004 75,000,0004 100.00 100.00 – – 100.00 100.00 PT. Maybank Kim Eng Securities11 Dealing in securities Indonesia 50,000,000,0001 50,000,000,0001 80.00 80.00 20.00 20.00 100.00 100.00 Maybank Kim Eng Securities (Thailand) Public Company Limited11 Dealing in securities Thailand 3,377,643,2297 3,377,643,2297 83.50 83.50 16.50 16.50 100.00 100.00 Maybank Kim Eng Securities (London) Limited11 Dealing in securities United Kingdom 600,0006 600,0006 100.00 100.00 – – 100.00 100.00 Maybank Kim Eng Securities USA Inc.12 Dealing in securities United States of America 21,500,0002 18,500,0002 100.00 100.00 – – 100.00 100.00 Kim Eng Securities India Private Limited11 Dealing in securities India 290,000,0008 290,000,0008 75.00 75.00 25.00 25.00 100.00 100.00 Ong Asia Limited11 Under member’s voluntary liquidation Singapore 63,578,0724 63,578,0724 100.00 100.00 – – 100.00 100.00 Ong Asia Securities (HK) Limited11 Securities trading Hong Kong 30,000,0005 30,000,0005 100.00 100.00 – – 100.00 100.00 Maybank Kim Eng Research Pte. Ltd.11 Provision of research services Singapore 300,0004 300,0004 100.00 100.00 – – 100.00 100.00 Kim Eng Securities (Hong Kong) Limited11 Dealing in securities Hong Kong 310,000,0005 310,000,0005 100.00 100.00 – – 100.00 100.00 Kim Eng Futures (Hong Kong) Limited11 Futures contracts Hong Kong broker 6,000,0005 6,000,0005 100.00 100.00 – – 100.00 100.00 Maybank ATR Kim Eng Capital Partners, Inc.11 Corporate finance Philippines & financial and investment advisory 872,558,0003 872,558,0003 100.00 100.00 – – 100.00 100.00 Maybank ATR Kim Eng Securities, Inc.11 Dealing in securities Philippines 404,795,9003 404,795,9003 100.00 100.00 – – 100.00 100.00 Maybank Kim Eng Securities Limited11 Dealing in securities Vietnam 829,110,000,00010 829,110,000,00010 100.00 100.00 – – 100.00 100.00
281. 63 .DETAILS OF SUBSIDIARIES, DEEMED CONTROLLED STRUCTURED ENTITIES, ASSOCIATES AND JOINT VENTURES (CONT’D.) (a) Details of the subsidiaries are as follows (cont’d.): Name of Company Principal Activities Country of Incorporation/ Principal Place of Business Effective Interest held by the Group Share Capital Effective Interest held by the Non-Controlling Interest Total 2017 RM 2016 RM 2017 % 2016 % 2017 % 2016 % 2017 % 2016 % Our Performance pg. 4-8 The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS Asset Management/ Trustees/Custody Maybank Asset Management Group Berhad Investment holding Malaysia 212,300,030 122,300,030 100.00 100.00 – – 100.00 100.00 Maybank (Indonesia) Berhad Dormant Malaysia 5,000,000 5,000,000 100.00 100.00 – – 100.00 100.00 Cekap Mentari Berhad Securities issuer Malaysia 2 2 100.00 100.00 – – 100.00 100.00 Maybank International Trust (Labuan) Berhad Investment holding Malaysia 2,879,678,473 2,879,678,473 100.00 100.00 – – 100.00 100.00 Maybank Offshore Corporate Investment Services (Labuan) Sdn. Bhd. holding Malaysia 9,262,091,185 9,262,091,185 100.00 100.00 – – 100.00 100.00 Maybank Trustees Berhad Trustee services Malaysia 500,000 500,000 100.00 100.00 – – 100.00 100.00 Maybank Private Equity Sdn. Bhd. Private equity investments Malaysia 14,000,000 14,000,000 100.00 100.00 – – 100.00 100.00 Maybank Asset Management Sdn. Bhd. Fund management Malaysia 31,600,000 31,600,000 100.00 100.00 – – 100.00 100.00 Philmay Property, Inc.11 Property leasing and trading Philippines 100,000,0003 100,000,0003 60.00 60.00 40.00 40.00 100.00 100.00 Maybank (Nominees) Sdn. Bhd. Nominee services Malaysia 31,000 31,000 100.00 100.00 – – 100.00 100.00 Maybank Nominees (Tempatan) Sdn. Bhd. Nominee services Malaysia 10,000 10,000 100.00 100.00 – – 100.00 100.00 Maybank Nominees (Asing) Sdn. Bhd. Nominee services Malaysia 10,000 10,000 100.00 100.00 – – 100.00 100.00 60,0004 60,0004 100.00 100.00 – – 100.00 100.00 35 35 100.00 100.00 – – 100.00 100.00 Maybank Securities Nominees Nominee services Malaysia (Tempatan) Sdn. Bhd. 10,000 10,000 100.00 100.00 – – 100.00 100.00 Maybank Securities Nominees Nominee services Malaysia (Asing) Sdn. Bhd. 10,000 10,000 100.00 100.00 – – 100.00 100.00 Nominee services Singapore Maybank Nominees (Singapore) Private Limited11 Maybank Nominees (Hong Kong) Limited11 Nominee services Hong Kong Maybank Allied Berhad Investment holding Malaysia 753,908,638 753,908,638 100.00 100.00 – – 100.00 100.00 Dourado Tora Holdings Sdn. Bhd. Investment holding Malaysia 71,224,427 71,224,427 100.00 100.00 – – 100.00 100.00 Aurea Lakra Holdings Sdn. Bhd. Property investment Malaysia 1,000,000 1,000,000 100.00 100.00 – – 100.00 100.00 Maybank International Trust (Labuan) Ltd. Liquidated Malaysia – 40,0002 – 100.00 – – – 100.00 KBB Nominees (Tempatan) Sdn. Bhd. Nominee services Malaysia 10,000 10,000 100.00 100.00 – – 100.00 100.00 KBB Properties Sdn. Bhd. Ceased operations Malaysia 410,000 410,000 100.00 100.00 – – 100.00 100.00 Etiqa Overseas Investment Pte. Ltd. Investment holding Malaysia 12 12 69.05 69.05 30.95 30.95 100.00 100.00 Double Care Sdn. Bhd.14 Under member’s voluntary liquidation Malaysia 35,000,000 35,000,000 69.05 69.05 30.95 30.95 100.00 100.00 Sorak Financial Holdings Pte. Ltd.11 Investment holding Singapore 779,694,2004 779,694,2004 100.00 100.00 – – 100.00 100.00 Rezan Pte. Ltd.11 Investment holding Singapore 24 24 100.00 100.00 – – 100.00 100.00 279
282. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 63 .DETAILS OF SUBSIDIARIES, DEEMED CONTROLLED STRUCTURED ENTITIES, ASSOCIATES AND JOINT VENTURES (CONT’D.) (a) Details of the subsidiaries are as follows (cont’d.): Name of Company Principal Activities Country of Incorporation/ Principal Place of Business Effective Interest held by the Non-Controlling Interest Effective Interest held by the Group Share Capital Total 2017 RM 2016 RM 2017 % 2016 % 2017 % 2016 % 2017 % 2016 % Asset Management/ Trustees/Custody (cont’d.) 280 Maybank KE Strategic Pte. Ltd.11 Investment holding Singapore 24 24 100.00 100.00 – – 100.00 100.00 Maybank Kim Eng Properties Pte. Ltd.11 Property investment Singapore 8,000,0004 8,000,0004 100.00 100.00 – – 100.00 100.00 Strategic Acquisitions Pte. Ltd.11 Investment holding Singapore 14 14 100.00 100.00 – – 100.00 100.00 415,000,0005 415,000,0005 100.00 100.00 – – 100.00 100.00 5,000,0002 5,000,0002 100.00 100.00 – – 100.00 100.00 Kim Eng Investment Limited11 Investment holding Hong Kong KE Sovereign Limited13 Investment holding British Virgin Islands FXDS Learning Group Pte. Ltd.11 Financial education Singapore 200,0004 200,0004 100.00 100.00 – – 100.00 100.00 Ong & Company Private Limited11 Under member’s voluntary liquidation Singapore 53,441,1734 53,441,1734 100.00 100.00 – – 100.00 100.00 Maybank Kim Eng Securities Nominees Pte. Ltd.11 Acting as nominee for beneficiary shareholders Singapore 10,0004 10,0004 100.00 100.00 – – 100.00 100.00 St. Michael’s Development Pte. Ltd.11 Under members’ voluntary liquidation Singapore 1,000,0004 1,000,0004 100.00 100.00 – – 100.00 100.00 Maybank Asset Management Singapore Pte. Ltd.11 Fund management Singapore 5,000,0004 5,000,0004 100.00 100.00 – – 100.00 100.00 Kim Eng Nominees (Hong Kong) Limited11 Nominee services Hong Kong 25 25 100.00 100.00 – – 100.00 100.00 Maybank Kim Eng Properties USA Inc.13 Property investment United States of America 3,000,0002 3,000,0002 100.00 100.00 – – 100.00 100.00 PT Prosperindo12 Investment holding Indonesia 240,510,000,0001 240,510,000,0001 100.00 100.00 – – 100.00 100.00 Maybank Shared Services Sdn. Bhd. IT shared services Malaysia 5,000,000 5,000,000 100.00 100.00 – – 100.00 100.00 PT Maybank Asset Management11 Fund management Indonesia 48,000,000,0001 48,000,000,0001 99.00 99.00 1.00 1.00 100.00 100.00 Maybank Islamic Asset Management Sdn. Bhd. Fund management Malaysia 3,000,000 3,000,000 100.00 100.00 – – 100.00 100.00 MAM DP Ltd. Fund management Malaysia 12 12 100.00 100.00 – – 100.00 100.00 MBB Labs Private Limited IT development services India 15,000,0008 – 100.00 – – – 100.00 –
283. 63 .DETAILS OF SUBSIDIARIES, DEEMED CONTROLLED STRUCTURED ENTITIES, ASSOCIATES AND JOINT VENTURES (CONT’D.) Effective Interest Name of Company Principal Activities Country of Incorporation/ Principal Place of Business 2017 % 2016 % (b) Details of the deemed controlled structured entities are as follows: Held by the Bank Akshayam Asia Fund Limited11, 16 Akshayam Asia Master Fund Limited11, 16 Maybank Bluewaterz Total Return Bond Fund11, 16 Maybank Syariah Equity Fund16 Equity Fund Equity Fund Fixed Income Fund and other securities Equity Fund British Virgin Islands British Virgin Islands Cayman Islands 90 90 63 91 91 83 Indonesia 99 98 Held through subsidiaries Maybank Malaysia Sukuk Fund MAM PE Asia Fund I (Labuan) LLP Maybank Asian Equity Fund11 Maybank Asian Income Fund11 Fixed Income Fund Private Equity Fund Equity Fund Fixed Income Fund Malaysia Malaysia Singapore Singapore – 100 84 88 100 100 100 100 Maybank AsiaPac Ex-Japan Equity-I Fund Maybank Malaysia Equity-I Fund Disposed Equity Fund Malaysia Malaysia – 84 97 94 Leasing Investment holding Liquidated Banking Fixed Income Fund Uzbekistan Philippines Malaysia Vietnam Malaysia 20 33 – 20 37 20 33 33 20 – General takaful businesses Banking Under member’s voluntary liquidation Broker between participants in forex, and fixed income Insurance brokerage Disposed Pakistan Pakistan Malaysia 22 19 23 22 20 23 Philippines 49 49 Philippines Philippines 40 – 40 35 Our Performance pg. 4-8 The Financials pg. 10-287 31 DECEMBER 2017 Basel II Pillar 3 pg. 288-351 NOTES TO THE FINANCIAL STATEMENTS (c) Details of the associates are as follows: Held by the Bank Uzbek Leasing International A.O.12 Philmay Holding, Inc.11 Maybank Agro Fund Sdn. Bhd. An Binh Commercial Joint Stock Bank12 Maybank Malaysia Sukuk Fund Held through subsidiaries Pak-Kuwait Takaful Company Limited12 MCB Bank Limited12 Asian Forum, Inc.12 Tullet Prebon (Philippines), Inc.12 Adrian V. Ocampo Insurance Brokers, Inc.11 ATRAM Investment Management Partners Corporation11 281
284. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 63 .DETAILS OF SUBSIDIARIES, DEEMED CONTROLLED STRUCTURED ENTITIES, ASSOCIATES AND JOINT VENTURES (CONT’D.) Effective Interest Name of Company Principal Activities Country of Incorporation/ Principal Place of Business Investment banking Kingdom of Saudi Arabia 2017 % 2016 % 35 35 (d) Details of the joint ventures are as follows: Held through subsidiary Anfaal Capital12 Note: (1) Indonesia Rupiah (IDR) (2) United States Dollars (USD) (3) Philippine Peso (Peso) (4) Singapore Dollars (SGD) (5) Hong Kong Dollars (HKD) (6) Great Britain Pound (GBP) (7) Thailand Baht (THB) (8) Indian Rupee (INR) (9) Chinese Renminbi (CNY) (10) Vietnamese Dong (VND) (11) Audited by other member firms of Ernst & Young Global (12) Audited by firms of auditors other than Ernst & Young (13) No audit required as allowed by the laws of the respective country of incorporation (14) No audit required as the entity is under members’ voluntary liquidation (15) In the financial year ended 31 December 2013, the Group completed the disposal of 18.3% equity interest in PT Bank Maybank Indonesia Tbk (“BMI”) to a third party investor. The disposal was undertaken to ensure compliance with the Otoritas Jasa Keuangan (“OJK”)’s mandatory sell down requirement under the OJK Regulation No. IX.H.1. The Group has also entered into a commercial arrangement where the economic exposure resulting from the disposal is being retained. Hence, the disposal has no financial impact to the Group and has not resulted to a decrease in the Group’s effective interest in BMI. (16) Held through subsidiaries in the previous financial year ended 31 December 2016. Refer to Note 17(c) for further details. 64.CURRENCY The financial statements are presented in Ringgit Malaysia (“RM”), which is also the Bank’s functional currency and rounded to the nearest thousand (RM’000) unless otherwise stated. 282
285. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Name of Company Name of Directors Name of Company Maybank Islamic Berhad Zainal Abidin bin Jamal Dato’ Dr Muhammad Afifi al-Akiti Dali Kumar @ Dali bin Sardar Nor Hizam bin Hashim Datin Paduka Jamiah binti Abdul Hamid (appointed on 17 July 2017) Datuk Mohd Anwar bin Yahya (appointed on 17 July 2017) Dato’ Zulkiflee Abbas Abdul Hamid (resigned on 3 April 2017) Maybank (Cambodia) Dato’ Johan bin Ariffin Plc. Spencer Lee Tien Chye Datuk Hamirullah bin Boorhan Soon Su Long Anthony Brent Elam (appointed on 31 October 2017) Pollie Sim Sio Hoong (resigned on 5 October 2017) Datuk R. Karunakaran (resigned on 31 October 2017) PT Bank Maybank Syariah Indonesia Dato’ Mohamed Rafique Merican bin Mohd Wahiduddin Merican Francisca Ekawati Hadi Sunaryo Myfin Berhad Loy Teck Wooi Surin Segar a/l Gnanasegaram (appointed on 10 August 2017) Narita Naziree binti Ahmad Naziree (resigned on 11 August 2017) Maybank Allied Credit & Leasing Sdn. Bhd. Leong Chin Seng Surin Segar a/l Gnanasegaram (appointed on 10 August 2017) Narita Naziree binti Ahmad Naziree (resigned on 11 August 2017) PT Maybank Indonesia Finance Deswandhy Agusman Ghazali bin Mohd Rasad (appointed on 4 July 2017) Jenny Wiriyanto (appointed on 15 September 2017) Djaja Suryanto Sutandar (resigned on 17 March 2017) Maybank Khalijah binti Ismail (appointed International (L) Ltd. on 2 August 2017) Lim Siew Ming (appointed on 2 August 2017) Khairudin bin Abdul Rahman (appointed on 2 August 2017) Aziah binti Abdullah (appointed on 2 August 2017) Dato’ Johan bin Ariffin (resigned on 2 August 2017) Dato’ John Chong Eng Chuan (resigned on 2 August 2017) Loh Lee Soon (resigned on 2 August 2017) Maybank Philippines, Dato’ Dr Tan Tat Wai Incorporated Datuk Lim Hong Tat Pollie Sim Sio Hoong Atty. Ray C. Espinosa Renato Tinio De Guzman Aloysius B. Colayco Choong Wai Hong (appointed on 15 September 2017) Herminio M. Famatigan, Jr. (resigned on 11 April 2017) PT Bank Maybank Indonesia Tbk 1 2 Datuk Abdul Farid bin Alias Spencer Lee Tien Chye Budhi Dyah Sitawati Achjar Iljas Edwin Gerungan1 Hendar2 Tan Sri Dato’ Megat Zaharuddin bin Megat Mohd Nor (resigned on 31 March 2017) Umar Juoro (resigned on 27 October 2017) Name of Directors Basel II Pillar 3 pg. 288-351 The following is the list of directors who served on the Boards of the subsidiaries of the Group since the beginning of the current financial year to the date of the directors’ report: The Financials pg. 10-287 65.DIRECTORS OF SUBSIDIARIES OF THE GROUP PT Wahana Ottomitra I Nyoman Tjager Multiartha Tbk Robbyanto Budiman Garibaldi Thohir Thilagavathy Nadason Myrnie Zachraini Tamin Kim Eng Finance Chuah Lai Hock (Singapore) Pte. Ltd. Harmeet Bedi Singh Maybank Ageas Holdings Berhad Datuk R. Karunakaran Bart K.A. Smet Gary Lee Crist Dato’ Johan bin Ariffin (appointed on 1 September 2017) Dato’ Amirul Feisal bin Wan Zahir (appointed on 1 September 2017) Dato’ Majid bin Mohamad (appointed on 1 December 2017) Datuk Abdul Farid bin Alias (resigned on 1 September 2017) Tan Sri Dato’ Megat Zaharuddin bin Megat Mohd Nor (resigned on 31 March 2017) The appointment has been approved through the Annual Shareholders’ General Meeting dated 31 March 2017, approval has been obtained from Financial Services Authority and will be effective in March 2018. The appointment has been approved through the Extraordinary General Meeting of Shareholders’ dated 16 October 2017, approval has been obtained from Financial Services Authority and has effectively served since 22 January 2018. 283
286. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 65 .DIRECTORS OF SUBSIDIARIES OF THE GROUP (CONT’D.) The following is the list of directors who served on the Boards of the subsidiaries of the Group since the beginning of the current financial year to the date of the directors’ report (cont’d.): Name of Company Name of Directors Etiqa Life Datuk Sulaiman bin Salleh International (L) Ltd. Frank J.G. Van Kempen Kamaludin bin Ahmad (appointed on 29 November 2017) Etiqa Insurance Berhad Etiqa Takaful Berhad Dato’ Majid bin Mohamad (appointed on 1 September 2017) Philippe Pol Arthur Latour Dato’ Mohamed Rafique Merican bin Mohd Wahiduddin Merican Dato’ Johan bin Ariffin (appointed on 1 September 2017) Dr. Abdul Rahim bin Abdul Rahman (appointed on 1 October 2017) Dr. Ismail bin Mohd @ Abu Hassan (resigned on 22 September 2017) Zainal Abidin bin Jamal (resigned on 31 December 2017) Frank J.G. Van Kempen (resigned on 1 January 2018) Datuk R. Karunakaran (resigned on 1 January 2018) Koh Heng Kong (resigned on 1 January 2018) Loh Lee Soon (resigned on 1 January 2018) Etiqa Offshore Insurance (L) Ltd. Datuk Sulaiman bin Salleh Frank J.G. Van Kempen Kamaludin bin Ahmad (appointed on 29 November 2017) Etiqa International Holdings Sdn. Bhd. Datuk Abdul Farid bin Alias Datuk R. Karunakaran (appointed on 22 May 2017) Dato’ Johan bin Ariffin (appointed on 22 May 2017) Foong Seong Yew (resigned on 23 May 2017) Kamaludin bin Ahmad (resigned on 23 May 2017) AsianLife & General Assurance Corporation 284 Datuk R. Karunakaran Philippe Pol Arthur Latour Dato’ Johan bin Ariffin Loh Lee Soon Frank J.G. Van Kempen Koh Heng Kong Normala binti A. Manaf (appointed on 1 January 2017) Wong Pakshong Kat Jeong Colin Stewart (appointed on 1 September 2017 and resigned on 1 January 2018) Name of Company Name of Directors Etiqa Insurance Pte. Ltd. Dato’ Mohd Salleh bin Hj Harun Kamaludin bin Ahmad Frank J.G. Van Kempen Datuk Lim Hong Tat Sallim bin Abdul Kadir Wong Pakshong Kat Jeong Colin Stewart PT Asuransi Asoka Mas Endra Raharja Oka Masagung Amir Imam Poero Andy Wardhana Putra Tanumihardja Etiqa Life Insurance Berhad Datuk R. Karunakaran (appointed on 1 January 2018) Philippe Pol Arthur Latour Dato’ Johan bin Ariffin (appointed on 1 January 2018) Loh Lee Soon (appointed on 1 January 2018) Normala binti A. Manaf (appointed on 1 January 2018) Frank J.G. Van Kempen (appointed on 1 January 2018) Wong Pakshong Kat Jeong Colin Stewart (appointed on 1 January 2018) Kamaludin bin Ahmad (resigned on 1 January 2018) Zaharudin bin Daud (resigned on 1 January 2018) Etiqa General Takaful Dato’ Majid bin Mohamad (appointed on Berhad 1 January 2018) Philippe Pol Arthur Latour (appointed on 1 January 2018) Dato’ Johan bin Ariffin (appointed on 1 January 2018) Dato’ Mohamed Rafique Merican bin Mohd Wahiduddin Merican (appointed on 1 January 2018) Dr. Abdul Rahim bin Abdul Rahman (appointed on 1 January 2018) Koh Heng Kong (appointed on 1 January 2018) Kamaludin bin Ahmad (resigned on 1 January 2018) Ahmad Rizlan bin Azman (resigned on 1 January 2018) Maybank Investment Bank Berhad Datuk Mohaiyani binti Shamsudin Lee Siang Chin Hans Johan Patrik Sandin Goh Ching Yin Dato’ Muzaffar bin Hisham (appointed on 3 August 2017) Dato’ Abdul Hamid bin Sheikh Mohamed (appointed on 26 October 2017) Dato’ Sri Sharifah Sofianny binti Syed Hussain (appointed on 4 December 2017) Datuk Abdul Farid bin Alias (resigned on 3 August 2017) Maysec Sdn. Bhd. Mohamad Yasin bin Abdullah Koh Swee Ong Kamaludin bin Ahmad Lee Hin Sze Manuel N. Tordesillas Eulogio A. Mendoza Modesta P. Mammuad Ma. Victoria C. Vinas Ramon B. Arnaiz (resigned on 18 August 2017)
287. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Name of Company Name of Directors PhileoAllied Securities Mohamad Yasin bin Abdullah (Philippines) Inc. Hamidah binti Moris Gemma M. Santos Luis Manuel L. Gatmaitan Graciella Marie D. Baldoz-Paz BinaFikir Sdn. Bhd. Zain Azhari Zainul Bador Fad’l bin Mohamed (appointed on 1 March 2017) Oh-Lau Chong Jin (resigned on 1 March 2017) Maybank International Wan Marzimin bin Wan Muhammad Holdings Sdn. Bhd. Mohamad Yasin bin Abdullah Maybank Kim Eng Holdings Limited Datuk Mohaiyani binti Shamsudin Dato’ John Chong Eng Chuan Dato’ Muzaffar bin Hisham Leslie Foo Chek Shen (appointed on 5 July 2017) Dr John Lee Hock Hin (appointed on 4 December 2017) Datuk Lim Hong Tat (resigned 5 December 2017) Maybank Kim Eng Securities Pte. Ltd. Harmeet Bedi Singh Datuk Lim Hong Tat Jeffrey Goh Cho Kiat (appointed on 16 June 2017) Goh Keat Jin (resigned on 11 May 2017) PT. Maybank Kim Eng I Nyoman Tjager Securities Deswandhy Agusman Fad’l bin Mohamed Ronnie Royston Fernandiz (resigned on 9 March 2017) Maybank Kim Eng Securities (Thailand) Public Company Limited Yuth Vorachattarn Montree Sornpaisarn Dato’ John Chong Eng Chuan Sopawadee Lertmanaschai Lee Siang Chin Maybank Kim Eng Securities (London) Limited Patrick Chung Ho Han Alexander Panasko Leonard White James Johnstone Maybank Kim Eng Securities USA Inc. Alexander Panasko Jean Louis Lee (appointed on 17 January 2017) Joe Borusso (appointed on 17 January 2017) Lawrence Walther (resigned on 17 January 2017) Jessica Kim (resigned on 17 January 2017) Kim Eng Securities Jigar Shah India Private Limited Vikas Kawatra Harmeet Bedi Singh Alexander Panasko Name of Company Name of Directors Ong Asia Limited Chuah Lai Hock Ng Mui Hong Ong Asia Securities (HK) Limited Mohamad Yasin bin Abdullah Boh In Cher (appointed on 31 July 2017) Ausca Leung (resigned on 31 July 2017) Maybank Kim Eng Research Pte. Ltd. Ong Seng Yeow Saddiq Currimbhoy (appointed on 31 August 2017) Yap Yi Choy (resigned on 31 August 2017) Basel II Pillar 3 pg. 288-351 The following is the list of directors who served on the Boards of the subsidiaries of the Group since the beginning of the current financial year to the date of the directors’ report (cont’d.): The Financials pg. 10-287 65.DIRECTORS OF SUBSIDIARIES OF THE GROUP (CONT’D.) Kim Eng Securities Dato’ John Chong Eng Chuan (Hong Kong) Limited Alexander Panasko Oh-Lau Chong Jin Caroline Teoh Meow Choo Cecil Ng Kim Hung Jacqueline Ko (appointed on 31 July 2017) Boh In Cher (appointed on 31 July 2017) Gregory Seow Poon Garn (appointed on 1 December 2017) Lim Eng Ping (appointed on 1 December 2017) Goh Keat Jin (resigned on 18 January 2018) Ausca Leung (resigned on 31 July 2017) Howard Wong (resigned on 31 July 2017) Ho Kiam Seong (resigned on 23 October 2017) Kim Eng Futures Boh In Cher (Hong Kong) Limited Jeffrey Goh Cho Kiat Goh Keat Jin (resigned on 18 January 2018) Maybank ATR Kim Manuel N. Tordesillas Eng Capital Partners, Lorenzo Sixto T. Lichauco Inc. Ekhwan bin Jani Udaishankar a/l Raman Ma. Victoria C. Viñas David L. Balangue Kristen Quintos Ramon B. Arnaiz (retired on 16 August 2017) Maybank ATR Kim Eng Securities, Inc. Lorenzo Sixto T. Lichauco Ekhwan bin Jani Jeffrey Goh Cho Kiat Maybank Kim Eng Securities Limited Ronnie Royston Fernandiz Alexander Panasko Hamidah binti Moris Jeffrey Goh Cho Kiat Maybank Asset Dr Hasnita binti Dato’ Hashim Management Group Dato’ Azian binti Mohd Noh Berhad Loh Lee Soon Goh Ching Yin Dato’ Muzaffar bin Hisham Fad’l bin Mohamed (Alternate director to Dato’ Muzaffar bin Hisham) Maybank (Indonesia) Berhad Loy Teck Wooi Wan Marzimin bin Wan Muhammad 285
288. MAYBANK ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017 65 .DIRECTORS OF SUBSIDIARIES OF THE GROUP (CONT’D.) The following is the list of directors who served on the Boards of the subsidiaries of the Group since the beginning of the current financial year to the date of the directors’ report (cont’d.): Name of Company Name of Directors Name of Company Name of Directors Cekap Mentari Berhad Khalijah binti Ismail Lee Yih Hwan (appointed on 17 August 2017) Wong Yee Fun (resigned on 18 August 2017) Maybank Nominees (Asing) Sdn. Bhd. Maybank International Trust (Labuan) Berhad Khalijah binti Ismail Lee Yih Hwan (appointed on 24 August 2017) Wong Yee Fun (resigned on 25 August 2017) Mohamad Yasin bin Abdullah (appointed on 29 November 2017) Ronnie Royston Fernandiz (appointed on 29 November 2017) Narita Naziree binti Ahmad Naziree (resigned on 11 August 2017) Chong Kin Tuck (resigned on 30 November 2017) Mohammad Fairuz bin Mohd Radi (resigned on 30 November 2017) Maybank Offshore Corporate Services (Labuan) Sdn. Bhd. Khalijah binti Ismail Ronnie Royston Fernandiz (appointed on 29 November 2017) Mohammad Fairuz bin Mohd Radi (resigned on 30 November 2017) Maybank Nominees (Singapore) Private Limited Lee Hong Khim Allen Ng Kian Guan Alan Lau Chee Keong Ronnie Royston Fernandiz (resigned on 12 May 2017) Maybank Trustee Berhad Cheng Kee Check Dato’ Dr Tan Tat Wai Datuk Mohd Hanif bin Suadi Ong Sau Yin Zainal Abidin bin Jamal (resigned on 1 June 2017) Maybank Nominees (Hong Kong) Limited Seow Poon Garn (appointed on 16 November 2017) Ho Kiam Seong (resigned on 16 November 2017) Maybank Securities Nominees (Tempatan) Mohamad Yasin bin Abdullah Koh Swee Ong Maybank Securities Nominees (Asing) Sdn. Bhd. Mohamad Yasin bin Abdullah Koh Swee Ong Maybank Allied Berhad Leong Chin Seng Wan Marzimin bin Wan Muhammad Dourado Tora Holdings Sdn. Bhd. Muhammad Fuad bin Hassan Lee Yih Hwan (appointed on 2 November 2017) Wong Yee Fun (resigned on 3 November 2017) Maybank Private Equity Sdn. Bhd. Goh Ching Yin Fad’l bin Mohamed Norlia binti Mat Yusof Maybank Asset Management Sdn. Bhd. Dr Hasnita binti Dato’ Hashim Goh Ching Yin Khalijah binti Ismail Badrul Hisyam bin Abu Bakar Philmay Property, Inc. Ong Seet-Joon Atty. Llewellyn L. Llanillo Ng Yok Chin Maybank (Nominees) Mohamad Yasin bin Abdullah (appointed on Sdn. Bhd. 29 November 2017) Ronnie Royston Fernandiz (appointed on 29 November 2017) Narita Naziree binti Ahmad Naziree (resigned on 11 August 2017) Chong Kin Tuck (resigned on 30 November 2017) Mohammad Fairuz bin Mohd Radi (resigned on 30 November 2017) Maybank Nominees (Tempatan) Sdn. Bhd. 286 Mohamad Yasin bin Abdullah (appointed on 29 November 2017) Ronnie Royston Fernandiz (appointed on 29 November 2017) Narita Naziree binti Ahmad Naziree (resigned on 11 August 2017) Chong Kin Tuck (resigned on 30 November 2017) Mohammad Fairuz bin Mohd Radi (resigned on 30 November 2017) Aurea Lakra Holdings Muhammad Fuad bin Hassan Sdn. Bhd. Lee Yih Hwan (appointed on 17 August 2017) Wong Yee Fun (resigned on 18 August 2017) KBB Nominees (Tempatan) Sdn. Bhd. Yeoh Cheang Teik Abdullah bin Taib KBB Properties Sdn. Bhd. Yeoh Cheang Teik Mohd Nor bin Bahari Abdullah bin Taib Etiqa Overseas Lee Hin Sze (appointed on Investment Pte. Ltd. 14 December 2017) Kamaludin bin Ahmad (resigned on 15 December 2017) Double Care Sdn. Bhd.* Dato’ Aminuddin bin Md Desa Hans De Cuyper
289. 31 DECEMBER 2017 Our Performance pg . 4-8 NOTES TO THE FINANCIAL STATEMENTS Name of Company Name of Directors Name of Company Name of Directors Sorak Financial Holdings Pte. Ltd. Lim Choon Meng Khalijah binti Ismail Maybank Kim Eng Properties USA Inc. Rezan Pte. Ltd. Jeffrey Goh Cho Kiat Chuah Lai Hock Alexander Panasko Jean Louis Lee (appointed on 17 January 2017) Joe Borusso (appointed on 17 January 2017) Lawrence Walther (resigned on 17 January 2017) Jessica Kim (resigned on 17 January 2017) PT Prosperindo Lee Tien Poh Narita Naziree binti Ahmad Naziree Surin Segar a/l Gnanasegaram Maybank Shared Services Sdn. Bhd. Surin Segar a/l Gnanasegaram Loy Teck Wooi Mohd Suhail Amar Suresh bin Abdullah PT Maybank Asset Management Drs M Noor Rachman (appointed on 20 September 2017) Badrul Hisyam bin Abu Bakar (appointed on 3 April 2017) Sharifah Sarah binti Syed Mohamed Tahir (appointed on 6 June 2017) Nor’ Azamin bin Salleh (resigned on 8 March 2017) Willy Soekianto (resigned on 17 May 2017) Maybank Islamic Asset Management Sdn. Bhd. Dato’ Azian binti Mohd Noh Ahmad Najib bin Nazlan Wong Yee Fun (appointed on 15 January 2017 and resigned on 28 November 2017) Maybank KE Strategic Ng Mui Hong Pte. Ltd. Chuah Lai Hock Maybank Kim Eng Properties Pte. Ltd. Mohamad Yasin bin Abdullah Jeffrey Goh Cho Kiat Strategic Acquisitions Baizashaharin bin Bain Pte. Ltd. Tan Boon Guan Kim Eng Investment Limited Chuah Lai Hock Yan Sek Weng (appointed on 31 July 2017) Ausca Leung (resigned on 31 July 2017) KE Sovereign Limited Alexander Panasko FXDS Learning Group Jeffrey Goh Cho Kiat Pte. Ltd. Winston Ng Yu-Tang Ong & Company Private Limited* Daniel Kwek Thiam Buck Chuah Lai Hock Ng Mui Hong Maybank Kim Eng Jefrrey Goh Cho Kiat Securities Nominees Henry Koh Swee Hang Pte. Ltd. St. Michael’s Development Pte. Ltd.* Ng Mui Hong Chuah Lai Hock MAM DP Ltd. Baizashaharin bin Bain Tan Wai Yuen (appointed on 28 April 2017) Chan Wan Yin (resigned on 28 April 2017) Maybank Asset Management Singapore Pte. Ltd. Loh Lee Soon Bedi Harmeet Goh Keat Jin MBB Labs Private Limited Meenakshy Ramaswamy Iyer Mohd Suhail Amar Suresh bin Abdullah Normala binti A. Manaf Basel II Pillar 3 pg. 288-351 The following is the list of directors who served on the Boards of the subsidiaries of the Group since the beginning of the current financial year to the date of the directors’ report (cont’d.): The Financials pg. 10-287 65.DIRECTORS OF SUBSIDIARIES OF THE GROUP (CONT’D.) Kim Eng Nominees Chris Chan (appointed on 31 July 2017) (Hong Kong) Limited Boh In Cher Ausca Leung (resigned on 31 July 2017) * Under member’s voluntary liquidation 287
290. BASEL II PILLAR 3 DISCLOSURE 289Overview 289 Scope of Application 290 Capital Management 303 Risk Management 304 Credit Risk – Regulatory Capital Requirement – Management of Credit Risk – Credit Impairment Policy and Classification and Impairment Provisions for Loans, Advances and Financing – Basel II Requirements – Non-Retail Portfolio – Retail Portfolio – Independent Model Validation – Credit Risk Mitigation –Securitisation – Credit Exposures Subject to Standardised Approach – Counterparty Credit Risk – Country Risk 342 Market Risk – Traded Market Risk – Non-Traded Market Risk – Capital Treatment for Market Risk – Liquidity Risk – Equity Risk in the Banking Book 345 Non-Financial Risk – Management of Non-Financial Risk – Capital Treatment for Operational Risk 348 Shariah Governance 349 Investment Account 351 Forward-Looking Statements
291. The Group adopts the following approaches in determining the capital requirements of Pillar 1 in accordance with BNM ’s Guidelines on Capital Adequacy Framework (Basel II – Risk Weighted Assets) and CAFIB (Basel II – Risk Weighted Assets): • Credit Risk – Foundation Internal Ratings-Based (“FIRB”) Approach and supervisory slotting criteria to calculate credit risk-weighted assets (“RWA”) for major non-retail portfolios, and the Advanced Internal Ratings-Based (“AIRB”) Approach for major retail portfolios. Other credit portfolios, especially those in the Bank’s subsidiaries and some overseas units, are on the Standardised Approach and will migrate to the Internal Ratings-Based (“IRB”) approaches progressively. Our Performance pg. 4-8 The Financials pg. 10-287 The Pillar 3 Disclosure for the financial year ended 31 December 2017 for Malayan Banking Berhad (“Maybank” or the “Bank”) and its subsidiaries (“Maybank Group” or the “Group”) is in accordance with Bank Negara Malaysia’s (“BNM”) Risk-Weighted Capital Adequacy Framework (“RWCAF”) – Disclosure Requirements (“Pillar 3”) and Capital Adequacy Framework for Islamic Banks (“CAFIB”) – Disclosure Requirements (“Pillar 3”), which are the equivalent of that issued by the Basel Committee on Banking Supervision (“BCBS”) entitled International Convergence of Capital Measurement and Capital Standards (commonly referred to as Basel II). Basel II Pillar 3 pg. 288-351 OVERVIEW • Market Risk – Standardised Approach (“SA”). • Operational Risk – Basic Indicator Approach (“BIA”). MEDIUM AND LOCATION OF DISCLOSURE The Pillar 3 Disclosure will be made available under the Investor Relations section of the Group’s website at www.maybank2u.com.my and as a separate report in the annual and half-yearly financial reports, after the notes to the Financial Statements. BASIS OF DISCLOSURE This Pillar 3 Disclosure is prepared in accordance with BNM’s Pillar 3 Guidelines and the Group’s internal policy on Pillar 3 Disclosure, and is to be read in conjunction with the Group’s and Bank’s Financial Statements for the financial year ended 31 December 2017. Whilst this document discloses the Group’s assets both in terms of exposures and capital requirements, the information disclosed herein may not be directly comparable with the information in the Financial Statements 2017 published by the Group and the Bank. These disclosures have been reviewed and verified by an independent internal party and approved by the Risk Management Committee (“RMC”), as delegated by the Board of Directors (“Board”) of the Group. COMPARATIVE INFORMATION This is the eighth full Pillar 3 Disclosure since the Group adopted the Basel II IRB Approach in July 2010. The corresponding Pillar 3 Disclosure in the preceding reporting period would be as at 31 December 2016. SCOPE OF APPLICATION The Pillar 3 Disclosure is prepared on a consolidated basis and comprises information of the Group, the Bank and Maybank Islamic Berhad (“Maybank Islamic”), a wholly-owned subsidiary of the Bank which provides Islamic banking financial services in Malaysia. For regulatory reporting purposes, Maybank establishes two main levels of reporting namely at Maybank Group level, covering Maybank and its subsidiaries excluding the investments in insurance entities and associates; and at Maybank level, covering Maybank. Information on subsidiaries and associates of the Group is available in the notes to the Financial Statements. The basis of consolidation for financial reporting is disclosed in the notes to the Financial Statements, which differs from that used for regulatory capital reporting purposes. 289
292. MAYBANK ANNUAL REPORT 2017 CAPITAL MANAGEMENT Effective capital management is fundamental to the sustainability of the Group . The Group proactively manages its capital to meet the expectations of key stakeholders such as regulators, shareholders, investors, rating agencies and analysts whilst ensuring that the returns on capital commensurate with risks undertaken by respective business units. The effective capital management aims to: • Maintain adequate capital ratios at levels sufficiently above the regulatory minimum requirements; • Support the Group’s strong credit ratings from local and international rating agencies; • Deploy capital efficiently to businesses and optimise returns on capital; • Remain flexible to take advantage of future opportunities; and • Build and invest in businesses, even in a reasonably stressed environment. Capital Contingency Plan The Group Capital Contingency Plan is an extension of the Maybank Group Capital Management Framework that is approved by the Board and updated from time to time. The plan provides a comprehensive approach to the management and restoration of capital across the Group in the unlikely event of a capital crisis by: • Establishing policies, procedures and governance for capital contingency planning; Capital Management Framework • Providing early warning signals and establishing monitoring and escalation process; The Group formulated the Maybank Group Capital Management Framework (“Framework”) to ensure integrated capital management and alignment of capital management policies and procedures across the Group. • Establishing strategies and action plans to ensure that capital is managed promptly; and The Framework, which is approved by the Board comprises the governance, policies and procedures which set out the requirements for effective management of capital at the Group level, its subsidiaries and overseas branches, including identification, assessment, monitoring, managing and escalation of any capital matters. The Framework also contains principles for the development and usage of Risk Adjusted Performance Measurement (“RAPM”) to measure and manage the return on capital across the Group. The RAPM tool is implemented to promote optimal capital levels for business sectors, subsidiaries and overseas branches, to reduce wastage, minimise cost of capital and optimise returns on capital. Overall responsibility for effective management of capital rests with the Board whilst the Group Executive Committee (“Group EXCO”) is responsible for ensuring the effectiveness of capital management policies on an ongoing basis and for updating the Framework to reflect revisions and new developments. Annual Group Capital Plan The Group Capital Plan aims to ensure robust monitoring of the Group’s (inclusive of subsidiaries and overseas branches) capital position and adequate levels of capital and optimal capital mix to support business plans and strategic objectives during the financial year. The Group Capital Plan is updated on an annual basis and approved by the Board. It is comprehensively drawn up to cover at least a three-year horizon and takes into account, amongst others, the Group’s strategic objectives and business plans, regulatory capital requirements, views from key stakeholders, capital benchmarking, development on capital guidelines both locally and overseas, available supply of capital and capital raising options, performance of business sectors based on RAPM approach, risks under Pillar 2 Internal Capital Adequacy Assessment Process as well as stress test results. Key issues pertaining to the capital position will be identified for discussion at the Board level and appropriate solutions are recommended for implementation. 290 Internal capital targets (“ICTs”) are set for the Group as well as subsidiaries and overseas branches based on their respective risk profile and regulatory requirements at the jurisdictions in which they are based. The ICTs are reviewed annually to ensure adequate capital buffers to support their risk profiles and business growth. • Serving as a reference guide for Maybank Group of companies. The capital adequacy ratios of the Group including its subsidiaries and overseas branches are monitored actively by Senior Management and the relevant committees on a monthly basis. Appropriate trigger points are established based on the capital adequacy ratios computed in accordance with BNM guidelines and other foreign regulators (where relevant) in order to facilitate monitoring and escalation, reporting, decision making and action planning. The trigger points formalise the basis of escalation to the appropriate departments and committees and also provide clear action plans to ensure that capital is restored back to healthy levels in the event of a capital crisis. Circumstances that could lead to deficiencies in capital position include, amongst others, economic environment, market and financial conditions. Capital Structure The Group places strong emphasis on the quality of its capital and, accordingly, holds a significant amount of its capital in the form of common equity which is permanent and has the highest loss absorption capability on a going concern basis. The common equity capital of the Group comprises share capital, reserves and retained profits. During the financial year, the share capital of the Group increased by approximately RM34,057 million mainly arising from the transfer of share premium of RM28,879 million to share capital pursuant to Companies Act, 2016, the issuance of 155 million new ordinary shares amounting to RM1,445 million under the Employee Share Option Schemes and from the issuance of 425 million new ordinary shares amounting to RM3,644 million pursuant to the completion of the Dividend Reinvestment Plans (“DRP”). The DRP scheme was announced by the Bank on 25 March 2010 to allow shareholders to reinvest their dividends into new shares in the Bank. The Bank has implemented 15 DRPs since its implementation in 2010, all with successful reinvestment rates of around 85%. In addition to common equity, the Group maintains other types of capital instruments such as Additional Tier 1 and Tier 2 capital instruments in order to optimise its capital mix and lower its cost of capital.
293. Table 1 : Additional Tier 1 Capital Instruments As at 31 December 2017 RM’ Million Issue Date First Call Date (callable at the option of the Issuer) Maturity Date 27 June 2008 27 June 2018 27 June 2038 11 August 2008 11 August 2018 10 August 2068 1,612 RM1.1 billion 6.30% Innovative Tier 1 Capital Securities due on 25 September 2068 25 September 2008 25 September 2018 25 September 2068 1,119 RM3.5 billion 5.30% Basel III-compliant Additional Tier 1 Capital Securities 10 September 2014 10 September 2019 Perpetual 3,557 Issue Date First Call Date (callable at the option of the Issuer) Maturity Date RM250 million 4.12% Subordinated Notes due in 2023 (12 non-call 7) 28 December 2011 28 December 2018 28 December 2023 RM2.1 billion 4.25% Subordinated Notes due in 2024 (12 non-call 7) 10 May 2012 10 May 2019 10 May 2024 2,113 RM1.6 billion 4.90% Basel III-compliant Subordinated Notes due in 2024 (10 non-call 5) 29 January 2014 29 January 2019 29 January 2024 1,628 7 April 2014 5 April 2019 5 April 2024 RM2.2 billion 4.90% Basel III-compliant Subordinated Notes due in 2025 (10 non-call 5) 19 October 2015 19 October 2020 17 October 2025 2,222 RM1.1 billion 4.90% Basel III-compliant Subordinated Notes due in 2025 (10 non-call 5) 27 October 2015 27 October 2020 27 October 2025 1,109 29 April 2016 29 October 2021 29 October 2026 2,035 Description RM3.5 billion 6.85% Stapled Capital Securities (“NCPCS”) (Non-innovative) due on 27 June 2038 SGD600 million 6.00% Innovative Tier 1 Capital Securities due on 10 August 2068 63 Our Performance pg. 4-8 The Financials pg. 10-287 Table 1 and 2 depicts a summary of the Additional Tier 1 and Tier 2 capital instruments which the Group has, which are qualified in the capital computation in accordance with BNM’s Capital Adequacy Framework (Capital Components) and CAFIB (Capital Components) issued on 4 August 2017. For further details of these capital instruments, please refer to Notes 30 and 31 in the Financial Statements. Basel II Pillar 3 pg. 288-351 CAPITAL MANAGEMENT Table 2: Tier 2 Capital Instruments Description RM1.5 billion 4.75% Basel III-compliant Subordinated Sukuk Murabahah due in 2024 (10 non-call 5) USD500 million 3.905% Basel III-compliant Subordinated Notes due in 2026 (10.5 non-call 5.5) As at 31 December 2017 RM’ Million 245 809 Regulatory Updates Pursuant to BNM’s Capital Adequacy Framework (Capital Component), banking institutions are required to hold and maintain, at all times, the minimum regulatory Common Equity Tier 1 (“CET1”), Tier 1 and Total Capital Ratio of 4.5%, 6.0% and 8.0% respectively starting from 1 January 2015. The regulatory minimum capital requirements also include the introduction of Capital Conservation Buffer (“CCB”) of 2.5% which is to be phased-in progressively from 1 January 2016 to 1 January 2019, commencing with 0.625% for the financial year ended 31 December 2016. The CCB is intended to encourage the buildup of capital buffers by individual banking institutions during normal times that can be drawn down during stress periods. Table 3 depicts the minimum regulatory capital requirement applicable from 2016 to 2019. 291
294. MAYBANK ANNUAL REPORT 2017 CAPITAL MANAGEMENT Table 3 : Minimum Regulatory Capital Requirement From 1 January Minimum CAR 2016 % 2017 % 2018 % 2019 % CET1 (a) CCB (b) CET1 including CCB (a) + (b) Tier 1 Capital Ratio Total Capital Ratio 4.500 0.625 5.125 6.625 8.625 4.500 1.250 5.750 7.250 9.250 4.500 1.875 6.375 7.875 9.875 4.500 2.500 7.000 8.500 10.500 In addition to the CCB, BNM had also introduced the Countercyclical Capital Buffer (“CCyB”) ranging between 0% – 2.5% of Total RWA to be effective from 1 January 2016. The CCyB is intended to protect the banking sector as a whole from build-up of systemic risk during an economic upswing when aggregate credit growth tends to be excessive. The CCyB will be determined as the weighted-average of the prevailing CCyB rates applied in the jurisdictions in which a financial institution has credit exposures. BNM will communicate any decision on the CCyB rate by up to 12 months before the date from which the rate applies. CAPITAL ADEQUACY RATIO Table 4 and 5 depicts the Capital Adequacy Ratios and Capital Adequacy Structure for the Group, the Bank and Maybank Islamic, respectively. Table 4: Capital Adequacy Ratios for Maybank Group, Maybank and Maybank Islamic As at 31 December 2017 Capital Adequacy Ratios CET1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio1 As at 31 December 2016 Group Maybank Maybank Islamic Group Maybank Maybank Islamic 14.773% 16.459% 19.383% 15.853% 17.950% 19.313% 14.500% 16.150% 20.782% 13.990% 15.664% 19.293% 15.881% 18.232% 19.432% 13.992% 13.992% 18.553% Table 5: Capital Adequacy Structure for Maybank Group, Maybank and Maybank Islamic As at 31 December 2017 As at 31 December 2016 Group RM’000 Maybank RM’000 Maybank Islamic RM’000 Group RM’000 Maybank RM’000 Maybank Islamic RM’000 72,703,296 50,155,417 12,597,883 73,235,185 51,903,658 11,503,022 Credit RWA Credit RWA absorbed by the parent and Investment Account Holders (“IAH”)2 Market RWA Operational RWA 320,652,491 225,053,211 69,043,049 329,505,586 234,158,906 71,854,005 – 14,351,443 40,075,835 – 11,445,563 23,197,842 (15,855,390) 939,674 6,490,748 – 12,875,985 37,218,327 – 11,148,492 21,797,628 (16,426,406) 882,544 5,691,742 Total RWA 375,079,769 259,696,616 60,618,081 379,599,898 267,105,026 62,001,885 Total Capital Notes: 1 Before proposed final dividend for FYE 2017 and FYE 2016. 2 In accordance with BNM’s guideline on the recognition and measurement of Restricted Profit Sharing Investment Account (“RPSIA”) and Investment Accounts of customers (“IA”) as Risk Absorbent, the credit risk on the assets funded by RPSIA and IA are excluded from the risk-weighted capital ratio (“RWCR”) calculation. The Total Capital Ratio of the Group as at 31 December 2017 stood at 19.383%, which is an increase from the previous financial year’s ratio of 19.293%. At entity level, the Bank’s Total Capital Ratio remains strong at 19.313% and Maybank Islamic registered a healthy ratio of 20.782%. The Group is poised to maintain healthy capital ratios above the minimum regulatory capital requirement under BNM’s Capital Adequacy Framework (Capital Components), a testament of the Group’s resilience and strength in meeting its obligations. With the continued conservation of capital from the DRP coupled with active capital management across the Group, CET1 Capital Ratio will be maintained comfortably well ahead of the minimum level of 7% (inclusive of CCB) as required by 2019. Table 6 discloses Capital Adequacy under IRB Approach for the Group, the Bank and Maybank Islamic respectively. Tables 7 through 9 present the minimum regulatory capital requirement for credit risk under the IRB Approach for the Group, the Bank and Maybank Islamic, respectively. These tables tabulate the Total RWA under the various exposure classes under the IRB Approach and apply the minimum capital requirement at 8% as set by BNM to ascertain the minimum capital required for each portfolio assessed. Please refer to Note 58 in the Financial Statements for detailed discussion on the Capital Adequacy Ratios. 292
295. Our Performance pg . 4-8 CAPITAL MANAGEMENT Maybank Islamic RM‘000 44,250,380 – 20,451,568 3,619,581 137,081 (183,438) 44,250,380 – 13,582,048 4,612,799 – (183,438) 5,481,783 – 3,351,547 478,079 – – 68,275,172 (12,864,771) 62,261,789 (21,091,369) 9,311,409 (521,603) Deferred tax assets Goodwill Other intangibles Cumulative gains of financial instruments classified as ‘AFS’ or ‘designated at fair value (FVO)’ Regulatory reserve attributable to loans/financing Investment in ordinary shares of unconsolidated financial/insurance entities (802,593) (5,756,367) (855,056) (17,922) (2,747,285) (2,685,548) (315,013) (81,015) (487,015) – (2,233,563) (17,974,763) (12,903) – – – (508,700) – Total CET1 Capital Additional Tier 1 Capital Capital securities Qualifying CET1 and additional Tier 1 capital instruments held by third parties Less: Investment in capital instruments of unconsolidated financial and insurance/takaful entities 55,410,401 Total Tier 1 Capital 61,734,606 46,614,430 9,789,806 9,271,613 488,385 278,397 1,601,682 9,271,613 – 136,641 1,171,604 2,500,000 – 20,923 287,154 As at 31 December 2017 CET1 Capital Paid-up share capital Share premium Retained profits Other reserves Qualifying non-controlling interests Less: Shares-held-in-trust CET1 capital before regulatory adjustments Less: Regulatory adjustments applied on CET1 capital Tier 2 Capital Subordinated obligations Qualifying CET1, additional Tier 1 and Tier 2 capital instruments held by third parties Collective allowance Surplus of total eligible provision over total expected loss Less: Investment of total in capital instruments of unconsolidated financial and insurance/ takaful entities 6,244,010 80,195 – (671,387) 41,170,420 6,244,010 – (800,000) (7,038,871) Basel II Pillar 3 pg. 288-351 Maybank RM‘000 Group RM‘000 The Financials pg. 10-287 Table 6: Disclosure on Capital Adequacy under IRB Approach 8,789,806 1,000,000 – – – Total Tier 2 Capital 10,968,690 3,540,987 2,808,077 Total Capital 72,703,296 50,155,417 12,597,883 293
296. MAYBANK ANNUAL REPORT 2017 CAPITAL MANAGEMENT Table 6 : Disclosure on Capital Adequacy under IRB Approach (cont’d.) Maybank RM‘000 Maybank Islamic RM‘000 10,193,200 28,878,703 10,482,202 15,048,174 112,513 (125,309) 10,193,200 28,878,703 4,514,094 13,605,920 – (125,309) 281,556 5,200,227 2,857,088 749,805 – – 64,589,483 (11,482,463) 57,066,608 (14,648,641) 9,088,676 (413,187) Deferred tax assets Goodwill Other intangibles Regulatory reserve attributable to loans/financing Investment in ordinary shares of unconsolidated financial and insurance/takaful entities (874,988) (6,317,009) (955,441) (1,057,997) (2,277,028) (358,687) (81,015) (449,034) (660,800) (13,099,105) (19,487) – – (393,700) – Total CET1 Capital Additional Tier 1 Capital Capital securities Qualifying CET1 and additional Tier 1 capital instruments held by third parties Less: Regulatory adjustments due to insufficient Tier 2 capital 53,107,020 42,417,967 8,675,489 6,279,948 73,556 – 6,279,948 – – – – – Total Tier 1 Capital 59,460,524 48,697,915 8,675,489 13,077,127 473,100 408,984 1,333,468 13,077,127 – 120,467 1,194,370 2,500,000 – 23,379 304,154 (1,518,018) (11,186,221) Total Tier 2 Capital 13,774,661 3,205,743 2,827,533 Total Capital 73,235,185 51,903,658 11,503,022 As at 31 December 2016 CET1 Capital Paid-up share capital Share premium Retained profits Other reserves Qualifying non-controlling interests Less:Shares-held-in-trust CET1 capital before regulatory adjustments Less: Regulatory adjustments applied on CET1 capital Tier 2 Capital Subordinated obligations Qualifying CET1, additional Tier 1 and Tier 2 capital instruments held by third parties Collective allowance Surplus of total eligible provision over total expected loss Less: Investment in capital instruments of unconsolidated financial and insurance/ takaful entities 294 Group RM‘000 –
297. Our Performance pg . 4-8 CAPITAL MANAGEMENT 1.0 1.1 Exposure Class As at 31 December 2017 Net Exposures/ EAD after CRM RM’000 RiskWeighted Assets RM’000 Minimum Capital Requirement at 8% RM’000 Credit Risk Exempted Exposures (Standardised Approach) On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Insurance Cos, Securities Firms & Fund Managers Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Defaulted Exposures 122,775,998 22,840,791 3,269,679 393,327 17,969,903 31,342,925 3,826,609 400,619 12,685,588 61,467 490,756 497,353 122,775,998 22,840,791 3,269,679 393,327 17,874,797 31,014,923 3,826,609 400,619 12,685,588 61,467 490,756 497,344 4,155,310 3,096,301 861,384 393,327 14,251,607 20,370,188 1,497,368 600,929 5,531,355 12,293 493,168 676,462 332,425 247,704 68,911 31,466 1,140,129 1,629,615 119,789 48,074 442,508 983 39,453 54,117 Total On-Balance Sheet Exposures 216,555,015 216,131,898 51,939,692 4,155,174 537,335 2,044,951 7,599 537,335 2,023,850 7,599 325,049 1,429,528 11,194 26,004 114,362 896 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures Total Off-Balance Sheet Exposures 1.2 2,589,885 2,568,784 1,765,771 141,262 Total On and Off-Balance Sheet Exposures 219,144,900 218,700,682 53,705,463 4,296,436 Exposures under the IRB Approach On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures 53,881,944 235,961,877 53,881,944 235,961,877 16,931,736 162,576,828 1,354,539 13,006,146 191,813,872 44,148,005 191,813,872 44,148,005 129,301,560 33,275,268 10,344,125 2,662,021 – – – – 191,152,691 191,152,691 40,669,216 3,253,538 75,237,737 7,349,137 42,012,215 66,553,602 75,237,737 7,349,137 42,012,215 66,553,602 13,895,446 3,394,285 9,202,952 14,176,533 1,111,636 271,543 736,236 1,134,123 9,334,882 9,334,882 1,845,672 147,654 490,331,394 490,331,394 222,023,452 17,761,877 6,439,476 55,701,969 533,456 6,439,476 55,701,968 533,456 2,766,645 26,985,502 61,220 221,332 2,158,840 4,898 a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures Total On-Balance Sheet Exposures Off-Balance Sheet Exposures OTC Derivatives 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 62,674,901 62,674,900 29,813,367 2,385,070 553,006,295 553,006,294 251,836,819 20,146,947 266,947,028 21,355,764 320,652,491 25,652,200 7,013,055 4,582,449 1,835,837 20 920,082 40,075,835 561,044 366,596 146,867 2 73,607 3,206,067 375,079,769 30,006,383 Total IRB Approach after Scaling Factor of 1.06 Total (Exposures under Standardised Approach & IRB Approach) 2.0 3.0 Market Risk Interest Rate Risk Foreign Currency Risk Equity Risk Commodity Risk Option Risk Operational Risk 4.0 Total RWA and Capital Requirements 772,151,195 771,706,976 Basel II Pillar 3 pg. 288-351 Item Gross Exposures/ EAD before CRM RM’000 The Financials pg. 10-287 Table 7: Disclosure on Capital Adequacy under IRB Approach for Maybank Group 295
298. MAYBANK ANNUAL REPORT 2017 CAPITAL MANAGEMENT Table 7 : Disclosure on Capital Adequacy under IRB Approach for Maybank Group (cont’d.) Item 1.0 1.1 Exposure Class As at 31 December 2016 Gross Exposures/ EAD before CRM RM’000 Net Exposures/ EAD after CRM RM’000 RiskWeighted Assets RM’000 Minimum Capital Requirement at 8% RM’000 Credit Risk Exempted Exposures (Standardised Approach) On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Insurance Cos, Securities Firms & Fund Managers Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Defaulted Exposures 100,065,244 13,923,606 2,040,243 316,263 20,707,104 28,512,768 3,075,170 266,106 12,263,734 159,896 307,436 701,069 100,065,244 13,923,606 2,040,243 316,263 20,653,599 28,280,388 3,075,170 266,106 12,246,390 159,896 307,436 701,064 5,305,630 2,070,831 400,476 316,263 17,796,627 18,044,332 1,204,671 399,158 4,768,271 31,979 307,825 917,368 424,450 165,666 32,038 25,301 1,423,730 1,443,547 96,374 31,933 381,462 2,558 24,626 73,389 Total On-Balance Sheet Exposures 182,338,639 182,035,405 51,563,431 4,125,074 364,096 1,392,168 148 364,096 1,392,168 148 93,761 792,660 222 7,501 63,413 18 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures Total Off-Balance Sheet Exposures 1.2 1,756,412 1,756,412 886,643 70,932 Total On and Off-Balance Sheet Exposures 184,095,051 183,791,817 52,450,074 4,196,006 Exposures under the IRB Approach On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures 58,080,430 235,533,833 58,080,430 235,533,833 21,608,217 159,247,932 1,728,657 12,739,835 173,033,830 62,500,003 173,033,830 62,500,003 119,202,545 40,045,387 9,536,204 3,203,631 – – – – 173,727,510 173,727,510 44,512,277 3,560,982 63,813,353 6,566,597 42,810,084 60,537,476 63,813,353 6,566,597 42,810,084 60,537,476 17,236,809 3,014,081 9,683,424 14,577,963 1,378,945 241,126 774,674 1,166,237 7,075,288 7,075,288 1,209,515 96,761 474,417,061 474,417,061 226,577,941 18,126,235 4,784,898 67,922,238 45,513 4,784,898 67,922,238 45,513 3,565,312 31,216,017 13,855 285,225 2,497,281 1,109 a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures Total On-Balance Sheet Exposures Off-Balance Sheet Exposures OTC Derivatives 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 72,752,649 72,752,649 34,795,184 2,783,615 547,169,710 547,169,710 261,373,125 20,909,850 277,055,512 22,164,441 329,505,586 26,360,447 5,238,774 4,856,019 1,504,298 1,276,894 37,218,327 419,102 388,481 120,344 102,152 2,977,466 379,599,898 30,367,992 Total IRB Approach after Scaling Factor of 1.06 Total (Exposures under Standardised Approach & IRB Approach) 2.0 3.0 Market Risk Interest Rate Risk Foreign Currency Risk Equity Risk Option Risk Operational Risk 4.0 Total RWA and Capital Requirements 731,264,761 730,961,527 Total RWA for the Group, the Bank and Maybank Islamic reduced in 2017 predominantly due to a reduction in Credit RWA. Apart from foreign currency movements, the key factors that contributed to the reduction in Credit RWA include methodology changes in the application of effective maturity for Credit RWA computation as well as continuous model enhancement efforts. 296 In 2017, the Group and the Bank recorded higher Market RWA mainly due to an increase in interest rate risk, while Maybank Islamic reported higher Market RWA due to an increase in foreign exchange risk.
299. Our Performance pg . 4-8 CAPITAL MANAGEMENT 1.0 1.1 Exposure Class As at 31 December 2017 Credit Risk Exempted Exposures (Standardised Approach) On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Defaulted Exposures Total On-Balance Sheet Exposures 1.2 Net Exposures/ EAD after CRM RM’000 RiskWeighted Assets RM’000 Minimum Capital Requirement at 8% RM’000 83,932,589 13,194,608 – 11,201,506 13,934,026 437,944 128,604 9,775,160 61,467 323,725 131,004 83,932,589 13,194,608 – 11,192,669 13,849,757 437,944 128,604 9,775,160 61,467 323,725 131,004 1,833,785 2,964,483 – 9,072,526 9,905,057 158,283 192,906 3,778,290 12,293 325,748 157,117 146,703 237,159 – 725,802 792,405 12,663 15,432 302,263 983 26,060 12,569 133,120,633 133,027,527 28,400,488 2,272,039 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 451,625 1,386,154 7,470 451,625 1,376,822 7,470 288,182 1,086,261 11,003 23,055 86,901 880 Total Off-Balance Sheet Exposures 1,845,249 1,835,917 1,385,446 110,836 Total On and Off-Balance Sheet Exposures 134,965,882 134,863,444 29,785,934 2,382,875 Exposures under the IRB Approach On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures 63,692,418 183,807,840 63,692,418 183,807,840 19,180,849 120,725,911 1,534,468 9,658,073 155,058,924 28,748,916 155,058,924 28,748,916 98,654,601 22,071,310 7,892,368 1,765,705 a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures – – – – 107,574,829 107,574,829 20,139,933 1,611,195 46,991,971 5,737,571 15,641,790 39,203,497 46,991,971 5,737,571 15,641,790 39,203,497 7,280,546 2,066,698 3,099,897 7,692,792 582,444 165,336 247,992 615,423 5,684,672 5,684,671 726,609 58,129 360,759,759 360,759,758 160,773,302 12,861,865 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 4,315,808 46,936,830 58,540 4,315,808 46,936,830 58,540 2,215,119 21,217,678 8,313 177,210 1,697,414 665 Total Off-Balance Sheet Exposures 51,311,178 51,311,178 23,441,110 1,875,289 412,070,937 412,070,936 184,214,412 14,737,154 195,267,277 15,621,382 225,053,211 18,004,257 6,396,084 4,172,484 876,995 23,197,842 511,687 333,799 70,160 1,855,827 259,696,616 20,775,730 Defaulted Exposures Total On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures Total IRB Approach after Scaling Factor of 1.06 Total (Exposures under Standardised Approach & IRB Approach) 2.0 3.0 Market Risk Interest Rate Risk Foreign Currency Risk Option Risk Operational Risk 4.0 Total RWA and Capital Requirements 547,036,819 546,934,380 Basel II Pillar 3 pg. 288-351 Item Gross Exposures/ EAD before CRM RM’000 The Financials pg. 10-287 Table 8: Disclosure on Capital Adequacy under IRB Approach for Maybank 297
300. MAYBANK ANNUAL REPORT 2017 CAPITAL MANAGEMENT Table 8 : Disclosure on Capital Adequacy under IRB Approach for Maybank (cont’d.) Item 1.0 1.1 Gross Exposures/ EAD before CRM RM’000 Net Exposures/ EAD after CRM RM’000 RiskWeighted Assets RM’000 Minimum Capital Requirement at 8% RM’000 67,546,000 10,096,024 218,470 14,464,363 9,776,532 398,575 121,138 9,645,995 159,896 287,926 87,291 67,546,000 10,096,024 218,470 14,448,426 9,754,332 398,575 121,138 9,628,652 159,896 287,926 87,291 2,679,176 1,989,161 – 13,046,468 6,200,596 144,818 181,706 3,734,937 31,979 287,926 107,358 214,334 159,133 – 1,043,717 496,048 11,585 14,536 298,795 2,558 23,034 8,590 112,802,210 112,746,730 28,404,125 2,272,330 Off-Balance-Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 29,311 291,639 – 29,311 291,639 – 29,310 279,279 – 2,345 22,342 – Total Off-Balance Sheet Exposures 320,950 320,950 308,589 24,687 Total On and Off-Balance Sheet Exposures 113,123,160 113,067,680 28,712,714 2,297,017 Exposures under the IRB Approach On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures 61,384,375 184,599,098 61,384,375 184,599,098 22,278,223 120,148,635 1,782,258 9,611,891 135,728,642 48,870,456 135,728,642 48,870,456 89,607,496 30,541,139 7,168,600 2,443,291 – – – – 102,226,072 102,226,072 22,833,257 1,826,661 44,897,646 5,328,358 13,897,011 38,103,057 44,897,646 5,328,358 13,897,011 38,103,057 9,481,859 2,267,818 2,876,125 8,207,455 758,549 181,425 230,090 656,597 Exposure Class As at 31 December 2016 Credit Risk Exempted Exposures (Standardised Approach) On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Defaulted Exposures Total On-Balance Sheet Exposures 1.2 a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures 5,035,496 5,035,496 686,397 54,912 353,245,041 353,245,041 165,946,512 13,275,722 Off-Balance Sheet Exposures OTC Derivatives Off balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 5,212,190 57,056,005 35,691 5,212,190 57,056,005 35,691 3,383,531 24,482,050 5,070 270,682 1,958,564 406 Total Off-Balance Sheet Exposures 62,303,886 62,303,886 27,870,651 2,229,652 415,548,927 415,548,927 Total On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures Total IRB Approach after Scaling Factor of 1.06 Total (Exposures under Standardised Approach & IRB Approach) 2.0 298 3.0 Market Risk Interest Rate Risk Foreign Currency Risk Option Risk Operational Risk 4.0 Total RWA and Capital Requirements 528,672,087 528,616,607 193,817,163 15,505,374 205,446,192 16,435,696 234,158,906 18,732,713 4,664,780 5,274,766 1,208,946 21,797,628 373,182 421,981 96,716 1,743,810 267,105,026 21,368,402
301. Our Performance pg . 4-8 CAPITAL MANAGEMENT 1.0 1.1 Exposure Class As at 31 December 2017 Credit Risk Exempted Exposures (Standardised Approach) On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Defaulted Exposures Total On-Balance Sheet Exposures Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Total Off-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 1.2 Exposures under the IRB Approach On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures a)Corporates (excluding Specialised Lending and firm-size adjustment) b) Corporates (with firm-size adjustment) c) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures Total On-Balance Sheet Exposures Off-Balance Sheet Exposures OTC Derivatives 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 Minimum Capital Requirement at 8% RM’000 – (2,210,000) 8,283 131,818 663 10,545 – 2,366,698 2,581,247 1,160,777 54 278,323 21,517 – (355,180) (902,317) – – – – – 2,011,518 1,678,930 1,160,777 54 278,323 21,517 – 160,921 134,314 92,862 4 22,266 1,721 52,098,483 8,758,717 (3,467,497) 5,291,220 423,296 61,054 61,054 12,211 – 12,211 977 169,430 169,430 25,253 – 25,253 2,020 Net Exposures/ EAD after CRM RM’000 RiskWeighted Assets RM’000 RiskWeighted Assets Absorbed by IA RM’000 27,310,794 14,945,783 27,310,794 14,945,783 8,283 2,341,818 1 2,608,048 3,794,110 2,897,358 36 525,325 17,028 1 2,608,048 3,794,110 2,897,358 36 525,325 17,028 52,098,483 Basel II Pillar 3 pg. 288-351 Item Total RiskWeighted Assets after effects of IA RM’000 Gross Exposures/ EAD before CRM RM’000 230,484 230,484 37,464 37,464 2,997 52,328,967 52,328,967 8,796,181 (3,467,497) 5,328,684 426,293 7,833,475 45,230,111 7,833,475 45,230,111 1,050,330 27,885,352 – (7,017,253) 1,050,330 20,868,099 84,026 1,669,448 29,831,022 15,399,089 29,831,022 15,399,089 16,681,395 11,203,957 (7,017,253) – 9,664,142 11,203,957 773,131 896,317 2.0 3.0 Market Risk Benchmark Rate Risk Foreign Exchange Risk Operational Risk 4.0 Total RWA and Capital Requirements – – – – – – 100,100,113 100,100,113 22,970,647 (4,669,439) 18,301,208 1,464,097 27,570,620 948,984 30,442,810 41,137,699 27,570,620 948,984 30,442,810 41,137,699 6,604,798 339,323 7,353,467 8,673,059 (898,160) – (1,581,960) (2,189,319) 5,706,638 339,323 5,771,507 6,483,740 456,531 27,146 461,721 518,699 1,570,340 1,570,340 514,907 514,907 41,193 154,734,039 154,734,039 52,421,236 40,734,544 3,258,764 1,818,180 1,818,180 417,035 – 417,035 33,363 7,045,847 4,730 7,045,847 4,730 3,995,660 2,736 – – 3,995,660 2,736 319,653 219 8,868,757 8,868,757 4,415,431 – 4,415,431 353,235 163,602,796 163,602,796 56,836,667 (11,686,692) 45,149,975 3,611,999 60,246,868 (12,387,893) 47,858,975 3,828,719 69,043,049 (15,855,390) 53,187,659 4,255,012 332,317 607,357 6,490,748 26,585 48,589 519,260 60,618,081 4,849,446 Total IRB Approach after Scaling Factor of 1.06 Total (Exposures under Standardised Approach & IRB Approach) The Financials pg. 10-287 Table 9: Disclosure on Capital Adequacy under IRB Approach for Maybank Islamic 215,931,763 215,931,763 332,317 607,357 6,490,748 76,473,471 – – (11,686,692) – – – (15,855,390) 299
302. MAYBANK ANNUAL REPORT 2017 CAPITAL MANAGEMENT Table 9 : Disclosure on Capital Adequacy under IRB Approach for Maybank Islamic (cont’d.) Item 1.0 1.1 Minimum Capital Requirement at 8% RM’000 – (1,301,585) – (1,115,138) – – – – 9,175 81,670 1,641,544 1,669,121 876,326 57 270,612 17,802 734 6,534 131,324 133,530 70,106 5 21,648 1,424 (2,416,723) 4,566,307 365,305 – 63,435 5,075 105,490 – 105,490 8,439 834,300 168,925 – 168,925 13,514 38,881,715 38,881,715 7,151,955 (2,416,723) 4,735,232 378,819 10,345,970 43,985,636 10,345,970 43,985,636 3,530,852 26,163,945 – (5,904,581) 3,530,852 20,259,364 282,468 1,620,749 30,356,089 13,629,547 30,356,089 13,629,547 16,659,697 9,504,248 (5,904,581) – 10,755,116 9,504,248 860,409 760,340 – – – – – 92,571,741 92,571,741 26,764,215 (7,312,102) 19,452,113 1,556,170 23,095,571 803,333 29,432,246 39,240,591 23,095,571 803,333 29,432,246 39,240,591 9,880,994 354,467 7,147,668 9,381,086 – (157,370) (1,235,742) (5,918,990) 9,880,994 197,097 5,911,926 3,462,096 790,480 15,768 472,954 276,968 974,598 974,598 397,744 397,744 31,819 147,877,945 147,877,945 56,856,756 43,640,073 3,491,206 34,072 34,072 28,746 – 28,746 2,300 8,221,701 2,697 8,221,701 2,697 4,152,933 1,235 – – 4,152,933 1,235 332,235 98 Net Exposures/ EAD after CRM RM’000 RiskWeighted Assets RM’000 RiskWeighted Assets Absorbed by IA RM’000 Credit Risk Exempted Exposures (Standardised Approach) On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Defaulted Exposures 20,459,569 8,818,836 1,880,733 3,801,273 2,165,730 38 905,203 16,033 20,459,569 8,818,836 1,880,733 3,801,273 2,165,730 38 905,203 16,033 9,175 1,383,255 1,641,544 2,784,259 876,326 57 270,612 17,802 Total On-Balance Sheet Exposures 38,047,415 38,047,415 6,983,030 317,173 317,173 63,435 517,127 517,127 834,300 Exposure Class As at 31 December 2016 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Total Off-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 1.2 Total RiskWeighted Assets after effects of IA RM’000 Gross Exposures/ EAD before CRM RM’000 Exposures under the IRB Approach On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures a)Corporates (excluding Specialised Lending and firm-size adjustment) b) Corporates (with firm-size adjustment) c)Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures Total On-Balance Sheet Exposures Off-Balance Sheet Exposures OTC Derivatives 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 2.0 300 3.0 Market Risk Benchmark Rate Risk Foreign Exchange Risk Operational Risk 4.0 Total RWA and Capital Requirements – (13,216,683) 8,258,470 8,258,470 4,182,914 4,182,914 334,633 156,136,415 156,136,415 61,039,670 (13,216,683) 47,822,987 3,825,839 64,702,050 (14,009,683) 50,692,367 4,055,389 71,854,005 (16,426,406) 55,427,599 4,434,208 375,735 506,809 5,691,742 30,059 40,545 455,339 62,001,885 4,960,151 Total IRB Approach after Scaling Factor of 1.06 Total (Exposures under Standardised Approach & IRB Approach) – 195,018,130 195,018,130 375,735 506,809 5,691,742 78,428,291 – – – – (16,426,406)
303. Our Performance pg . 4-8 CAPITAL MANAGEMENT Since March 2013, the Group has prepared a Board-approved ICAAP document to fulfil the requirements under the BNM Pillar 2 Guideline, which came into effect on 31 March 2013. The document included an overview of ICAAP, current and projected financial and capital position, ICAAP governance, risk assessment models and processes, risk appetite and capital management, stress testing and capital planning and the use of ICAAP. Annually, the Group submits an update of the material changes made to the document to BNM. Basel II Pillar 3 pg. 288-351 The Group’s overall capital adequacy in relation to its risk profile is assessed through a process articulated in the Maybank Group ICAAP Policy (“ICAAP Policy”). The ICAAP Policy is designed to ensure that adequate levels of capital, including capital buffers, are held to support the Group’s current and projected demand for capital under existing and stressed conditions. Regular ICAAP reports are submitted to the Group Executive Risk Committee (“Group ERC”) and RMC for comprehensive review of all material risks faced by the Group and assessment of the adequacy of capital to support them. The ICAAP closely integrates the risk and capital planning and management processes. The Financials pg. 10-287 INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS (“ICAAP”) Diagram 1: ICAAP and Supervisory Review Process INTERNAL GOVERNANCE RESPONSIBILITY OF BANKS Dialogue Internal Capital Adequacy Assessment Assess all risks and identify controls to mitigate risks Identify amount of internal capital in relation to risk profile, strategies and business plan Supervisory Review Process Supervisory risk-assessment under the Risk-based Supervisory Framework (”RBSF”) Propose ICAAP ICAAP review: assess, review and evaluate ICAAP Review assumptions Produce ICAAP number and assessment Overall assessment and conclusion Supervisory evaluation of on-going compliance with minimum standards and requirements 1 2 ICAAP considered as fully satisfactory ICAAP considered as not fully satisfactory Internal Capital Targets Minimum Regulatory Capital Ratio Regulatory capital allocated for Pillar 1 risks Regulatory capital allocated for Pillar 2 risks Supervisory Add-on Including Broad range of supervisory measures Supplementing the ICAAP reports is the Group Capital Plan, which is updated on an annual basis, where the internal capital targets are set and reviewed, amongst others as part of sound capital management. 301
304. MAYBANK ANNUAL REPORT 2017 CAPITAL MANAGEMENT Comprehensive Risk Assessment under ICAAP Policy Regular and Robust Stress Testing Under the Group ’s ICAAP methodology, the following risk types are identified and measured: The Group’s stress testing programme is embedded within the risk and capital management process of the Group and is a key function of capital and business planning processes. The programme serves as a forward-looking risk and capital management tool to understand the risk profile under extreme but plausible conditions. Such conditions may arise mainly from economic, political and environmental factors. • Risks captured under Pillar 1 (credit risk, market risk and operational risk); • Risks not fully captured under Pillar 1 (e.g. model risk); • Risks not specifically addressed under Pillar 1 (e.g. interest rate risk/rate of return risk in the banking book, liquidity risk, business and strategic risk, reputational risk, credit concentration risk, IT risks (e.g. security risk and cyber risk), regulatory risk, country risk, compliance risk, capital risk, profitability risk, Shariah non-compliance risk, industry risk, information risk, conduct risk, workforce risk and data quality risk amongst others); and • External factors, including changes in economic environment, regulations and accounting rules. A key process emplaced within the Group provides for the identification of material risks that may arise through the introduction of new products and services. Material risks are defined as “risks which would materially impact the financial performance (profitability), capital adequacy, asset quality and/ or reputation of the Group should the risk occur”. Specifically, the stress test programme is designed to: • Highlight the dynamics of stress events and their potential implication on the Group’s trading and banking book exposures, liquidity positions and likely reputational impacts; • Proactively identify key strategies to mitigate the effects of stress events; and • Produce stress results as inputs into the Group’s ICAAP in determining capital adequacy and capital buffers. There are three types of stress tests conducted across the Group: In the ICAAP Policy, the Material Risk Assessment Process (“MRAP”) is designed to identify key risks from the Group’s Risk Universe. Annually, a group-wide risk landscape survey is carried out as part of a robust risk management approach to identify and prioritise the key risks based on potential impact of the risks on earnings and capital facing the Group. The survey results provide a synthesis of perceptions of current and future market outlook, based on perspectives of the key stakeholders across retail, commercial, investment banking and insurance operations in all the Group’s major entities. In addition, the outcomes of the survey assist in identifying the major risk scenarios over the near term time horizon. • Group stress tests – Using a common scenario approved by RMC of which the results are submitted to BNM. It also includes periodic industrywide stress tests organised by BNM where the scenarios are specified by the Central Bank. Risks deemed “material” are reported to the Group ERC and RMC via the ICAAP report. For each material risk identified, the Group will ensure appropriate risk mitigation is in place to address these key risks, which include regular risk monitoring through Enterprise Risk Dashboard reporting, stress testing, risk mitigation, capital planning and crisis management strategies. Stress test themes reviewed by the Stress Test Working Group in the past include global economic turmoil, impact on liquidity risk due to cyber attack, digital disruption, impact of external geopolitical events on ASEAN and Asia, impact of weakening Malaysian ringgit and higher bond yields, Post-Brexit risk on ASEAN economies, the Perfect Storm: Impact of low oil price, weak currencies and slower Chinese GDP growth on ASEAN economies, Federal Reserve rate hike, idiosyncratic event’s implication to the Group, oil price decline, intensified capital outflows from emerging markets including ASEAN, rising inflation and interest rate hikes in ASEAN, impact of Federal Reserve Quantitative Easing tapering, sovereign rating downgrades, slowing Chinese economy, a repeat of Asian Financial Crisis, US dollar depreciation, pandemic flu, asset price collapse, a global double-dip recession scenario, Japan disasters, crude oil price hike, the Eurozone and US debt crises, amongst others. Assessment of Pillar 1 and Pillar 2 Risks In line with industry best practices, the Group quantifies its risks using methodologies that have been reasonably tested and determined to be fitfor-purpose. Where risks may not be easily quantified due to the lack of commonly accepted risk measurement techniques, expert judgement is used to determine the size and materiality of risk. The Group’s ICAAP would then focus on the qualitative controls in managing such material non-quantifiable risks. These qualitative measures include the following: • Adequate governance process; • Adequate systems, procedures and internal controls; • Effective risk mitigation strategies; and • Regular monitoring and reporting. 302 Under Maybank Group Stress Test (“GST”) Policy, the potential unfavourable effects of stress scenarios on the Group’s profitability, asset quality, RWA, capital adequacy and ability to comply with the risk appetites set, are considered. • Localised stress tests – Limited scope stress tests undertaken at portfolio, branch/sector or entity levels based on scenarios relevant to specific localities. • Ad-hoc stress tests – Periodic stress tests conducted in response to emerging risk events. The Stress Test Working Group, which comprises of business and risk management teams, tables the stress test reports to the Senior Management and Board committees and discusses the results with the regulators on a regular basis.
305. INTEGRATED RISK MANAGEMENT FRAMEWORK The Group ’s approach to risk management is enterprise-wide and involves the establishment of a strong risk culture as the foundation and driver of the Group’s governance and risk management practices. Its risk management is fortified by a comprehensive, best-practice Integrated Risk Management Framework (“IRM Framework”), which is constantly evolving to remain relevant and effective in this environment of changing times, uncertainty and risk. The broad overarching IRM Framework is underpinned by seven core principles to ensure the integration of risk strategies, governance, culture, processes and infrastructure within the Group’s regional footprint. The seven key principles are broadly described below: Principles of Risk Management 1. Establishing a risk appetite and strategy, which is approved by the Board that articulates the nature, type and level of risk the Group is willing to assume. 2. Driving capital management by strategic objectives that takes into account the relevant regulatory, economic and commercial environments in which the Group operates. 3. Ensuring proper governance and oversight through a clear, effective and robust governance structure with well-defined, transparent and consistent lines of responsibility established within the Group. 4. Promoting a strong risk culture that supports and provides appropriate standards and incentives for professional and responsible behaviour. 5. Implementing risk frameworks, policies and procedures to ensure that risk management practices and processes are effective at all levels. 6. Executing robust risk management practices and processes to actively identify, measure, control, monitor and report risks inherent in all products and activities undertaken by the Group. 7. Ensuring sufficient resources, infrastructure and techniques are in place to enable effective risk management. RISK APPETITE AND STRATEGY The Group’s risk appetite is a critical component of the robust IRM Framework which is driven by both top-down Board leadership and bottom-up involvement of management at all levels. The risk appetite enables the Board and Senior Management to communicate, understand and assess the types and levels of risk that the Group is willing to accept in pursuit of its business objectives. appetite statements that defines the Group’s appetite on all material risks of the Group. The risk appetite balances the needs of all stakeholders by acting both as a governor of risk, and a driver of future and current business activities. Our Performance pg. 4-8 RISK GOVERNANCE AND OVERSIGHT The governance model provides a transparent and effective structure that promotes active involvement and oversight from the Board and Senior Management in the risk management process to ensure a uniform view of risk across the Group. The risk governance model aims to place accountability and ownership, whilst facilitating an appropriate level of independence and segregation of duties. Basel II Pillar 3 pg. 288-351 Risk management plays an integral part in systematically managing various financial and non-financial risks posed by the rapidly evolving business environment in which the Group operates in. During the financial year, the Group remained steadfast in strengthening its risk capabilities and committed in assimilating strong risk management practices at the heart of the Group’s business. The management of risk is an important driver for strategic decisions in support of the Group’s aspirations to maintain sound performance and capital position and to ultimately enhance shareholders value. The Financials pg. 10-287 RISK MANAGEMENT The risk governance structure is premised on the Three Lines of Defence and clearly defines the lines of authority, roles and responsibilities to efficiently manage risk across the Group. The chart illustrating the risk governance structure of the Group can be found in the Group Risk Management section under the Corporate Book. INDEPENDENT GROUP RISK FUNCTION The Group Risk function, headed by the Group Chief Risk Officer (“GCRO”), provides value to the Group through its independent and integrated assessment of credit management and enterprise-wide risk management. Group Risk plays a distinct role in the following key functions: • Supporting the Group’s regional expansion and businesses in the achievement of strategic objectives; • Continuing as a strategic partner to the business in budget planning and risk appetite implementation; • Enhancing risk functions across the regions that the Group have operations in and embedding the Group’s risk culture; • Providing authority limits for both central and regional approvals, controls, risk systems and architecture leadership; • Managing various risk committees to facilitate pro-active monitoring and controlling of the Group’s risk exposures and enterprise risk reporting; • Acting as a strategic partner to the business in addressing external stakeholders including regulators and analysts pertaining to risk issues; and • Engaging in business development activities such as new product sign-offs and approvals, post-implementation reviews and due diligence exercises. In its continuous pursuit to drive efficiency, Group Risk has established Centres of Excellence (“COEs”) to build deep specialisation of risk professionals, to provide value-added risk insights to support business decision-making and increase economies of scale. The COEs have established consistent standards of implementation in relation to risk policies, risk reporting, risk modelling and specialisation in the management of specific risk areas within the Group. The Group’s development of its risk appetite has been integrated into the strategic planning process and is adaptable to changing business and market conditions. The articulation of the risk appetite is done through a set of risk 303
306. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Credit risk is the risk of loss of principal or income arising from the failure of an obligor or counterparty to perform their contractual obligations in accordance with agreed terms . Reviews of the said limits and related lending guidelines are undertaken on a periodic basis, whereupon any emerging concentration risks are addressed accordingly. Any exception to the limits and lending guidelines would be subject to approvals from higher credit authorities. REGULATORY CAPITAL REQUIREMENT Asset Quality Management Amongst the various risk types the Group engages in, credit risk continues to attract the largest regulatory capital requirement. The Group has dedicated teams to effectively manage vulnerable corporate, institutional and consumer credits. Special attention is given to these vulnerable credits where more frequent and intensive reviews are performed in order to prevent further deterioration or, where necessary, accelerate remedial actions. MANAGEMENT OF CREDIT RISK Corporate and institutional credit risks are assessed by business units, where each customer is assigned a credit rating based on the assessment of relevant qualitative and quantitative factors including the customer’s financial position, future cash flows, types of facilities and securities offered. These credits are then evaluated and approved by a party independent of the originator. Reviews are conducted at least once a year with updated information on the customer’s financial position, market position, industry and economic conditions, and conduct of account. Corrective actions are taken when the accounts show signs of credit deterioration. The Group manages its credit risk using a two-pronged approach: • Managing the Credit Risk; and • Managing the Credit Portfolio. Retail credit exposures are managed on a programme basis. Credit programmes are assessed jointly between credit risk and business units. Reviews on the credit programmes are conducted at least once a year to assess the performances of the portfolios. Group-wide hierarchy of credit approving authorities and committee structures are in place to ensure appropriate underwriting standards are enforced consistently throughout the Group. Management of Concentration Risk Concentration risk can materialise from excessive exposures to a single counterparty and persons connected to it, a particular instrument or a particular market segment/sector. In managing large exposures and to avoid undue concentration of credit risk in its loans and financing portfolio, the Group has emplaced, amongst others, limits and related lending guidelines for: •Countries; • Business segments; • Economic sectors; • Single customer groups; • Banks and Non-Bank Financial Institutions (“NBFIs”); • Counterparties; and •Collaterals. 304 The Group’s credit approving process encompasses pre-approval evaluation, approval and post-approval evaluation. Group Risk is responsible for developing, enhancing and communicating effective and consistent credit risk management policies, tools and methodologies across the Group, to ensure appropriate standards are in place to identify, measure, control, monitor and report such risks. In view that the authority limits are directly related to the risk levels of the borrower and the transaction, a Risk-Based Authority Limit structure is implemented based on the Expected Loss principle and internally-developed Credit Risk Rating System. Tables 10 through 12 present the geographic analysis and distribution of credit exposures under both the Standardised Approach and IRB Approach for the Group, the Bank and Maybank Islamic, respectively. Tables 13 through 15 present the credit risk exposures by various industries for the Group, the Bank and Maybank Islamic, respectively. Tables 16 through 18 present the credit risk exposures by maturity periods of one year or less, one to five years and over five years for the Group, the Bank and Maybank Islamic, respectively.
307. Our Performance pg . 4-8 CREDIT RISK Singapore RM’000 Indonesia RM’000 72,412,745 20,736,645 3,259,863 – 7,870,631 9,598,564 3,167,265 436,799 5,959,511 61,467 490,756 30,003,400 2,480,791 40,828 393,327 4,452,154 11,296,178 559 46,507 1,813,811 – – 7,891,548 – – – 3,582,474 6,922,317 143,231 10,137 2,773,539 – – 12,731,839 – 9,703 – 2,241,633 5,655,684 522,012 256 2,138,727 – – 123,039,532 23,217,436 3,310,394 393,327 18,146,892 33,472,742 3,833,066 493,700 12,685,588 61,467 490,756 Total Standardised Approach 123,994,246 50,527,555 21,323,246 23,299,854 219,144,900 Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures 22,119,432 150,569,731 14,368,658 71,886,815 2,310,510 20,229,853 18,698,626 41,198,260 57,497,226 283,884,659 100,413,888 50,155,843 71,886,815 – 20,229,853 – 41,198,260 – 233,728,816 50,155,843 Exposure Class As at 31 December 2017 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Insurance Cos, Securities Firms & Fund Managers Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures a) Corporates (excluding Specialised Lending and firm-size adjustment) b) Corporates (with firm-size adjustment) c) Specialised Lending (Slotting Approach) – Project Finance Total RM’000 – – – – – 149,160,400 52,631,073 9,832,937 – 211,624,410 49,313,345 9,639,130 33,286,702 56,921,223 21,621,756 6,038,303 6,624,661 18,346,353 4,633,281 1,147,233 4,052,423 – – – – – 75,568,382 16,824,667 43,963,785 75,267,576 Total IRB Approach 321,849,563 138,886,546 32,373,300 59,896,885 553,006,295 Total Standardised and IRB Approaches 445,843,809 189,414,101 53,696,546 83,196,739 772,151,195 As at 31 December 2016 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Insurance Cos, Securities Firms & Fund Managers Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures 59,296,109 12,017,540 1,812,550 – 3,137,781 8,194,606 2,400,006 272,332 4,826,586 159,896 295,152 23,574,277 2,738,084 218,589 316,263 12,876,249 6,904,459 775 31,732 1,770,904 – 12,285 7,706,890 – – – 3,945,572 8,885,895 517,791 11,151 3,074,047 – – 9,506,824 – 9,104 – 1,473,053 5,344,159 171,908 285 2,592,197 – – 100,084,100 14,755,624 2,040,243 316,263 21,432,655 29,329,119 3,090,480 315,500 12,263,734 159,896 307,437 Total Standardised Approach 92,412,558 48,443,617 24,141,347 19,097,530 184,095,051 32,213,368 164,815,046 17,980,088 56,837,792 3,702,223 19,773,456 15,978,846 47,667,771 69,874,525 289,094,065 102,315,057 62,499,989 56,837,792 – 19,773,456 – 47,667,771 – 226,594,076 62,499,989 Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures a) Corporates (excluding Specialised Lending and firm-size adjustment) b) Corporates (with firm-size adjustment) c) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures – – – – – 131,766,740 46,563,795 9,870,585 – 188,201,120 40,847,804 7,040,686 32,839,370 51,038,880 21,236,254 5,737,621 5,767,878 13,822,042 4,484,130 956,737 4,429,718 – – – – – 66,568,188 13,735,044 43,036,966 64,860,922 Total IRB Approach 328,795,154 121,381,675 33,346,264 63,646,617 547,169,710 Total Standardised and IRB Approaches 421,207,712 169,825,292 57,487,610 82,744,147 731,264,761 Basel II Pillar 3 pg. 288-351 Malaysia RM’000 Other Overseas Units RM’000 The Financials pg. 10-287 Table 10: Disclosure on Credit Risk Exposure – Geographical Analysis for Maybank Group 305
308. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 11 : Disclosure on Credit Risk Exposure – Geographical Analysis for Maybank Malaysia RM’000 Singapore RM’000 Other Overseas Units RM’000 As at 31 December 2017 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures 44,686,088 10,864,141 – 5,430,343 6,421,704 268,016 181,283 7,407,513 61,467 323,725 29,693,681 2,480,791 40,715 3,822,577 8,119,949 559 30,023 1,063,534 – – 9,816,247 – – 2,148,826 630,114 170,472 – 1,304,114 – – 84,196,016 13,344,932 40,715 11,401,746 15,171,767 439,047 211,306 9,775,161 61,467 323,725 Total Standardised Approach 75,644,280 45,251,829 14,069,773 134,965,882 34,063,156 113,167,573 13,788,080 71,886,815 18,149,952 37,273,991 66,001,188 222,328,379 78,410,818 34,756,755 71,886,815 – 37,273,991 – 187,571,624 34,756,755 – – – – 71,110,297 52,631,073 – 123,741,370 25,444,610 7,964,488 9,017,129 28,684,070 21,621,756 6,038,303 6,624,661 18,346,353 – – – – 47,066,366 14,002,791 15,641,790 47,030,423 Total IRB Approach 218,341,026 138,305,968 55,423,943 412,070,937 Total Standardised and IRB Approaches 293,985,306 183,557,797 69,493,716 547,036,819 As at 31 December 2016 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures 38,606,385 7,357,940 – 1,319,017 5,145,358 228,813 156,267 7,109,135 159,896 275,641 22,317,390 2,738,084 218,470 12,059,786 4,262,299 775 5,456 907,681 – 12,285 6,624,475 – – 1,401,177 415,742 171,908 – 1,629,180 – – 67,548,250 10,096,024 218,470 14,779,980 9,823,399 401,496 161,723 9,645,996 159,896 287,926 Total Standardised Approach 60,358,452 42,522,226 10,242,482 113,123,160 40,140,327 129,160,794 17,398,947 56,837,792 15,142,458 42,961,383 72,681,732 228,959,969 80,290,352 48,870,442 56,837,792 – 42,961,383 – 180,089,527 48,870,442 Exposure Class Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance – – – – 67,343,430 46,563,796 – 113,907,226 23,987,589 5,901,686 8,203,789 29,250,366 21,236,254 5,737,621 5,767,878 13,822,043 – – – – 45,223,843 11,639,307 13,971,667 43,072,409 Total IRB Approach 236,644,551 120,800,535 58,103,841 415,548,927 Total Standardised and IRB Approaches 297,003,003 163,322,761 68,346,323 528,672,087 Retail Exposures a) b) c) d) 306 Total RM’000 Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures
309. Our Performance pg . 4-8 CREDIT RISK As at 31 December 2016 Total RM’000 Exposures under Standardised Approach Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets 27,310,900 15,172,104 1 2,608,048 3,802,927 2,899,249 10,413 525,325 20,459,579 9,650,854 – 1,881,083 3,806,466 2,171,193 7,338 905,202 Total Standardised Approach 52,328,967 38,881,715 Exposures under IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures 8,839,203 52,803,996 11,262,901 50,163,001 37,404,907 15,399,089 36,533,454 13,629,547 – – 101,959,597 94,710,513 27,676,591 1,674,643 30,583,616 42,024,747 23,202,177 1,138,999 29,558,330 40,811,007 Total IRB Approach 163,602,796 156,136,415 Total Standardised and IRB Approaches 215,931,763 195,018,130 Exposure Class a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Basel II Pillar 3 pg. 288-351 As at 31 December 2017 Total RM’000 The Financials pg. 10-287 Table 12: Disclosure on Credit Risk Exposure – Geographical Analysis for Maybank Islamic * Credit exposure for Maybank Islamic is derived from Malaysia only. 307
310. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 13 : Disclosure on Credit Risk Exposure – Industry Analysis for Maybank Group Exposure Class As at 31 December 2017 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Insurance Cos, Securities Firms & Fund Managers Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Wholesale, Retail Trade, Restaurants & Hotels RM’000 Finance, Transport, Insurance, Storage & Real Estate & Business Communication RM’000 RM’000 Education, Health & Others RM’000 Household RM’000 Others RM’000 Total RM’000 591 3,331,422 – 75 – 74 – 7,951,093 8,182 – 891 1,871 115,163,685 10,959,151 – 662 203,140 947,135 7,473,794 – 189,249 25,953 123,039,532 23,217,436 – – – – – – 1,440,700 – – – 1,869,694 3,310,394 – 30,733 116,162 1,934 – – – – – 1,100,343 16,588 – – – – – – 636,181 180,257 3,971 – – – – – 343,914 206,441 647 – – – 11,814 – 23,027 41,250 – – – – 53,971 – 416,542 1,508,454 49,604 – – – – 56,634 1,397,422 3,392,895 174,435 60,773 2,827,618 61,467 4,045 – 5,070 528,881 – – 710 – – – 78,325 581,857 5,052 – 282,313 – – – 4,778,592 10,034,752 3,595,843 20,550 7,925,454 – 253,889 336,693 9,336,743 16,865,205 1,580 412,377 1,649,493 – 167,037 393,327 18,146,892 33,472,742 3,833,066 493,700 12,685,588 61,467 490,756 Total Standardised Approach 3,480,842 1,117,006 820,483 8,513,909 126,430 1,977,362 135,538,825 535,323 2,097,822 34,082,874 30,854,024 219,144,900 Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures – 9,186,585 – 4,363,685 – 24,918,344 – 22,296,823 – 12,289,764 – 28,263,269 55,219,070 82,758,571 – 15,191,247 – 9,328,527 2,278,154 20,003,658 – 55,284,186 57,497,226 283,884,659 8,856,530 330,055 4,339,138 24,547 24,362,447 555,897 20,780,194 1,516,629 12,045,709 244,055 27,140,972 1,122,297 80,848,753 1,909,818 15,045,926 145,321 8,992,622 335,905 20,003,658 – 11,312,867 43,971,319 233,728,816 50,155,843 a) Corporates (excluding Specialised Lending and firm-size adjustment) b) Corporates (with firm-size adjustment) c) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) Residential Mortgages b) Qualifying Revolving Retail Exposures c) Hire Purchase Exposures d) Other Retail Exposures Total IRB Approach Total Standardised and IRB Approaches As at 31 December 2016 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Insurance Cos, Securities Firms & Fund Managers Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Total Standardised Approach Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures a) Corporates (excluding Specialised Lending and firm-size adjustment) b) Corporates (with firm-size adjustment) c) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) Residential Mortgages b) Qualifying Revolving Retail Exposures c) Hire Purchase Exposures d) Other Retail Exposures 308 Agriculture RM’000 Mining & Quarrying Manufacturing Construction RM’000 RM’000 RM’000 Electricity, Gas & Water Supply RM’000 – – – – – – – – – – – – 678,708 81,354 2,388,468 1,989,832 56,967 7,613,688 4,718,838 1,021,508 912,754 153,597,997 38,564,296 211,624,410 – – – 678,708 – – – 81,354 – – – 2,388,468 – – – 1,989,832 – – – 56,967 – – – 7,613,688 – – – 4,718,838 – – – 1,021,508 – – – 912,754 75,568,382 16,824,667 43,963,785 17,241,163 – – – 38,564,296 75,568,382 16,824,667 43,963,785 75,267,576 9,865,293 4,445,039 27,306,812 24,286,655 12,346,731 35,876,957 142,696,479 16,212,755 10,241,281 175,879,809 93,848,482 553,006,295 13,346,135 5,562,045 28,127,295 32,800,564 12,473,161 37,854,319 278,235,304 16,748,078 12,339,103 209,962,683 124,702,508 772,151,195 22 390,492 – 90 – 9 20,258 3,215,415 – – 316 1,568 81,037,910 10,031,100 5,032,211 – 1,780,196 606,813 – – 12,213,187 510,137 100,084,100 14,755,624 – – – – – – 1,008,505 – – – 1,031,738 2,040,243 – 153,055 8,277 – – – – – – – 806 – – – – – – 504,247 32,979 – – – – 3,223 – 220,267 7,099 – – – – 12,302 – 332,790 39,260 – – – – 53,971 – 116,716 121,907 – 691 – – – 119,263 901,137 53,865 – 79,645 271,361 159,896 9,063 – 488,033 392,610 171,908 285 1,782,255 – – – 404,195 108,330 – – – – – – 1,375,525 14,857,715 2,400,781 7,338 4,995,923 – 209,360 197,000 16,936,690 13,706,271 517,791 227,541 5,214,195 – 19,518 316,263 21,432,655 29,329,119 3,090,480 315,500 12,263,734 159,896 307,437 551,846 896 540,458 3,475,341 426,021 241,198 93,671,745 7,867,302 2,899,534 23,846,642 50,574,068 184,095,051 – 8,666,737 – 6,409,340 – 44,247,524 – 18,118,427 – 13,602,616 – 25,117,144 68,224,426 65,373,503 – 25,633,261 – 9,647,901 – 890,641 1,650,099 71,386,971 69,874,525 289,094,065 8,242,771 423,966 6,360,874 48,466 43,703,494 544,030 17,267,484 850,943 13,377,667 224,949 24,551,905 565,239 63,581,656 1,791,847 25,530,735 102,526 9,327,906 319,995 890,641 – 13,758,943 57,628,028 226,594,076 62,499,989 – – – – – – – – – – – – 696,047 97,873 2,177,939 1,847,531 63,988 6,154,359 3,963,960 861,084 875,614 135,642,910 35,819,815 188,201,120 – – – 696,047 – – – 97,873 – – – 2,177,939 – – – 1,847,531 – – – 63,988 – – – 6,154,359 – – – 3,963,960 – – – 861,084 – – – 875,614 66,568,188 13,735,044 43,036,966 12,302,712 – – – 35,819,815 66,568,188 13,735,044 43,036,966 64,860,922 Total IRB Approach 9,362,784 6,507,213 46,425,463 19,965,958 13,666,604 31,271,503 137,561,889 26,494,345 10,523,515 136,533,551 108,856,885 547,169,710 Total Standardised and IRB Approaches 9,914,630 6,508,109 46,965,921 23,441,299 14,092,625 31,512,701 231,233,634 34,361,647 13,423,049 160,380,193 159,430,953 731,264,761
311. Our Performance pg . 4-8 CREDIT RISK As at 31 December 2017 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Agriculture RM’000 Wholesale, Retail Trade, Restaurants & Hotels RM’000 Finance, Transport, Insurance, Storage & Real Estate & Business Communication RM’000 RM’000 Education, Health & Others RM’000 Household RM’000 Others RM’000 Total RM’000 591 3,245,763 – – – 74 – 1,749,868 8,182 – 891 1,817 83,973,212 7,583,127 – 662 203,140 737,817 – – 10,000 25,804 84,196,016 13,344,932 – 30,733 – – – – – – – 1,100,343 461 – – – – – – 600,981 4,382 – – – – – – 333,324 2,322 – – – – 11,814 – 17,536 – – – – – 53,971 – 361,471 21,775 – – – – – 40,715 903,033 147,603 170,472 4,588 2,212,093 61,467 4,045 – 2,007 – – – – – – – 73,854 3,262 – – 416 – – – – 5,269 268,575 – 7,400,129 – 253,889 – 7,978,464 14,986,693 – 206,718 162,523 – 6 40,715 11,401,746 15,171,767 439,047 211,306 9,775,161 61,467 323,725 Total Standardised Approach 3,277,087 1,100,804 605,437 2,097,328 79,689 385,954 95,100,355 2,669 1,018,489 7,927,862 23,370,208 134,965,882 Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures – 6,775,211 – 3,424,016 – 19,614,195 – 15,168,212 – 11,125,279 – 24,936,157 66,001,188 74,280,355 – 13,110,538 – 8,548,116 – – – 45,346,300 66,001,188 222,328,379 6,775,211 – 3,424,016 – 19,614,195 – 15,168,212 – 11,125,279 – 24,936,157 – 74,280,355 – 13,110,538 – 8,548,116 – – – 10,589,545 34,756,755 187,571,624 34,756,755 a) Corporates (excluding Specialised Lending and firm-size adjustment) b) Corporates (with firm-size adjustment) c) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) Residential Mortgages b) Qualifying Revolving Retail Exposures c) Hire Purchase Exposures d) Other Retail Exposures Total IRB Approach Total Standardised and IRB Approaches – – – – – – – – – – – – 340,191 33,878 949,662 842,639 19,776 3,457,929 2,015,534 509,265 396,502 76,710,947 38,465,047 123,741,370 – – – 340,191 – – – 33,878 – – – 949,662 – – – 842,639 – – – 19,776 – – – 3,457,929 – – – 2,015,534 – – – 509,265 – – – 396,502 47,066,366 14,002,791 15,641,790 – – – – 38,465,047 47,066,366 14,002,791 15,641,790 47,030,423 7,115,402 3,457,894 20,563,857 16,010,851 11,145,055 28,394,086 142,297,077 13,619,803 8,944,618 76,710,947 83,811,347 412,070,937 10,392,489 4,558,698 21,169,294 18,108,179 11,224,744 28,780,040 237,397,432 13,622,472 9,963,107 84,638,809 107,181,555 547,036,819 As at 31 December 2016 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures 22 285,202 – – – 9 20,258 1,487,507 – – 316 1,500 59,091,414 7,947,262 3,006,973 – 1,780,196 371,935 – – 3,649,071 2,609 67,548,250 10,096,024 – 126,425 – – – – – – – – – – – – – – – 499,306 5,105 – – – – 3,223 – 219,069 – – – – – 12,302 – 322,547 407 – – – – 53,971 – 107,931 15,216 – 691 – – – 218,470 969,096 – – 15,433 258,076 159,896 9,063 – 464,503 21,060 171,908 – 1,088,424 – – – 369,018 3,172 – – – – – – – 9,411,488 229,588 – 4,090,719 – 209,360 – 11,702,085 366,951 – 145,599 4,208,777 – 7 218,470 14,779,980 9,823,399 401,496 161,723 9,645,996 159,896 287,926 Total Standardised Approach 411,649 – 507,643 1,739,136 376,925 125,654 68,668,710 4,752,868 2,524,321 13,941,155 20,075,099 113,123,160 – 5,285,767 – 4,233,785 – 20,245,790 – 11,715,983 – 12,791,473 – 21,136,948 72,681,731 63,444,396 – 20,152,164 1 8,889,366 – 78 – 61,064,219 72,681,732 228,959,969 5,285,767 – 4,233,785 – 20,245,790 – 11,715,983 – 12,791,473 – 21,136,948 – 63,444,396 – 20,152,164 – 8,889,366 – 78 – 12,193,777 48,870,442 180,089,527 48,870,442 Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures a) Corporates (excluding Specialised Lending and firm-size adjustment) b) Corporates (with firm-size adjustment) c) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) Residential Mortgages b) Qualifying Revolving Retail Exposures c) Hire Purchase Exposures d) Other Retail Exposures – – – – – – – – – – – – 331,095 35,735 885,125 748,835 23,373 2,906,320 1,636,128 429,846 373,145 70,834,817 35,702,807 113,907,226 – – – 331,095 – – – 35,735 – – – 885,125 – – – 748,835 – – – 23,373 – – – 2,906,320 – – – 1,636,128 – – – 429,846 – – – 373,145 45,223,843 11,639,307 13,971,667 – – – – 35,702,807 45,223,843 11,639,307 13,971,667 43,072,409 Total IRB Approach 5,616,862 4,269,520 21,130,915 12,464,818 12,814,846 24,043,268 137,762,255 20,582,010 9,262,512 70,834,895 96,767,026 415,548,927 Total Standardised and IRB Approaches 6,028,511 4,269,520 21,638,558 14,203,954 13,191,771 24,168,922 206,430,965 25,334,878 11,786,833 84,776,050 116,842,125 528,672,087 Basel II Pillar 3 pg. 288-351 Exposure Class Mining & Quarrying Manufacturing Construction RM’000 RM’000 RM’000 Electricity, Gas & Water Supply RM’000 The Financials pg. 10-287 Table 14: Disclosure on Credit Risk Exposure – Industry Analysis for Maybank 309
312. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 15 : Disclosure on Credit Risk Exposure – Industry Analysis for Maybank Islamic Exposure Class As at 31 December 2017 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Total Standardised Approach Exposures under IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures a) Corporates (excluding Specialised Lending and firm-size adjustment) b) Corporates (with firm-size adjustment) c) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) Residential Mortgages b) Qualifying Revolving Retail Exposures c) Hire Purchase Exposures d) Other Retail Exposures Wholesale, Retail Trade, Restaurants & Hotels RM’000 Finance, Transport, Insurance, Storage & Real Estate & Business Communication RM’000 RM’000 Education, Health & Others RM’000 Household RM’000 Others RM’000 Total RM’000 – 85,660 – 75 – – – 6,201,224 – – – 53 27,310,900 3,376,025 – – – 209,318 – – – 5,299,749 27,310,900 15,172,104 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 1 – – – – – – 2,982 – – – – – – – – – – – 1,469,348 3,802,927 2,899,249 10,413 525,325 – 1,135,718 – – – – 1 2,608,048 3,802,927 2,899,249 10,413 525,325 85,660 75 – 6,201,224 – 53 30,686,926 2,982 209,318 8,707,262 6,435,467 52,328,967 – 2,298,437 – 900,773 – 4,817,708 – 6,872,006 – 754,410 – 2,007,747 8,839,203 7,948,038 – 1,973,170 – 623,198 – – – 24,608,509 8,839,203 52,803,996 1,968,382 330,055 876,226 24,547 4,261,811 555,897 5,355,377 1,516,629 510,355 244,055 885,450 1,122,297 6,038,220 1,909,818 1,827,849 145,321 287,293 335,905 – – 15,393,944 9,214,565 37,404,907 15,399,089 – – – – – – – – – – – – 338,517 47,476 1,438,806 1,147,192 37,190 4,155,759 2,703,304 512,244 516,252 90,963,607 99,250 101,959,597 – – – 338,517 – – – 47,476 – – – 1,438,806 – – – 1,147,192 – – – 37,190 – – – 4,155,759 – – – 2,703,304 – – – 512,244 – – – 516,252 27,676,591 1,674,643 30,583,616 31,028,757 – – – 99,250 27,676,591 1,674,643 30,583,616 42,024,747 Total IRB Approach 2,636,954 948,249 6,256,514 8,019,198 791,600 6,163,506 19,490,545 2,485,414 1,139,450 90,963,607 24,707,759 163,602,796 Total Standardised and IRB Approaches 2,722,614 948,324 6,256,514 14,220,422 791,600 6,163,559 50,177,471 2,488,396 1,348,768 99,670,869 31,143,226 215,931,763 As at 31 December 2016 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets – 105,289 – – – – – – 90 – – – – – – – – – – – – – 1,727,908 – – – – – – – 10,138 – – – – – 68 – – – – – 20,459,569 7,075,093 21 – – – – – – 3,174 – – – – – 234,878 35,177 – – – – – – 1,375,525 2,430,941 2,171,193 7,338 905,202 10 507,528 457,048 1,375,525 – – – 20,459,579 9,650,854 1,881,083 3,806,466 2,171,193 7,338 905,202 Total Standardised Approach 105,289 90 – 1,727,908 10,138 68 27,534,683 3,174 270,055 6,890,199 2,340,111 38,881,715 – 3,175,524 – 2,126,162 – 5,092,312 – 5,949,423 – 665,338 – 3,014,204 11,227,414 16,340,531 – 4,169,885 – 660,509 – – 35,487 8,969,113 11,262,901 50,163,001 2,751,558 423,966 2,077,696 48,466 4,548,282 544,030 5,098,480 850,943 440,389 224,949 2,448,965 565,239 14,548,684 1,791,847 4,067,359 102,526 340,514 319,995 – – 211,527 8,757,586 36,533,454 13,629,547 Exposures under IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures a) Corporates (excluding Specialised Lending and firm-size adjustment) b) Corporates (with firm-size adjustment) c) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) Residential Mortgages b) Qualifying Revolving Retail Exposures c) Hire Purchase Exposures d) Other Retail Exposures 310 Agriculture RM’000 Mining & Quarrying Manufacturing Construction RM’000 RM’000 RM’000 Electricity, Gas & Water Supply RM’000 – – – – – – – – – – – – 364,953 62,138 1,292,814 1,098,696 40,615 3,248,039 2,327,832 431,238 502,469 85,224,713 117,006 94,710,513 – – – 364,953 – – – 62,138 – – – 1,292,814 – – – 1,098,696 – – – 40,615 – – – 3,248,039 – – – 2,327,832 – – – 431,238 – – – 502,469 23,202,177 1,138,999 29,558,330 31,325,207 – – – 117,006 23,202,177 1,138,999 29,558,330 40,811,007 Total IRB Approach 3,540,477 2,188,300 6,385,126 7,048,119 705,953 6,262,243 29,895,777 4,601,123 1,162,978 85,224,713 9,121,606 156,136,415 Total Standardised and IRB Approaches 3,645,766 2,188,390 6,385,126 8,776,027 716,091 6,262,311 57,430,460 4,604,297 1,433,033 92,114,912 11,461,717 195,018,130
313. Our Performance pg . 4-8 CREDIT RISK One to five years RM’000 Over five years RM’000 Total RM’000 As at 31 December 2017 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Insurance Cos, Securities Firms & Fund Managers Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures 48,596,474 6,818,984 1,399,984 – 3,874,607 10,317,578 19,528 95,662 1,506,974 – – 28,980,667 8,688,987 1,910,410 393,327 11,847,971 15,864,963 138,668 362,798 2,246,522 61,467 490,756 45,462,391 7,709,465 – – 2,424,314 7,290,201 3,674,870 35,240 8,932,092 – – 123,039,532 23,217,436 3,310,394 393,327 18,146,892 33,472,742 3,833,066 493,700 12,685,588 61,467 490,756 Total Standardised Approach 72,629,791 70,986,536 75,528,573 219,144,900 Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures 42,927,300 95,261,469 7,849,603 102,869,853 6,720,323 85,753,337 57,497,226 283,884,659 93,935,962 1,325,507 92,336,888 10,532,965 47,455,966 38,297,371 233,728,816 50,155,843 Exposure Class a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance – – – – 7,589,845 41,328,999 162,705,566 211,624,410 383,501 818,316 918,921 5,469,107 4,099,596 15,073,270 14,036,907 8,119,226 71,085,285 933,081 29,007,957 61,679,243 75,568,382 16,824,667 43,963,785 75,267,576 Total IRB Approach 145,778,614 152,048,455 255,179,226 553,006,295 Total Standardised and IRB Approaches 218,408,405 223,034,991 330,707,799 772,151,195 As at 31 December 2016 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Insurance Cos, Securities Firms & Fund Managers Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures 40,316,541 7,235,189 790,035 – 3,115,342 12,443,285 28,372 75,590 5,798,324 – – 20,294,982 2,261,383 1,250,208 316,263 15,532,671 10,129,129 146,183 226,760 5,573,910 22,343 307,437 39,472,577 5,259,052 – – 2,784,642 6,756,705 2,915,925 13,150 891,500 137,553 – 100,084,100 14,755,624 2,040,243 316,263 21,432,655 29,329,119 3,090,480 315,500 12,263,734 159,896 307,437 Total Standardised Approach 69,802,678 56,061,269 58,231,104 184,095,051 Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures 54,831,043 96,919,199 4,175,371 83,783,965 10,868,111 108,390,901 69,874,525 289,094,065 95,884,080 1,035,119 74,049,590 9,734,375 56,660,406 51,730,495 226,594,076 62,499,989 – – – – 6,661,545 36,373,540 145,166,035 188,201,120 328,040 519,818 904,683 4,909,004 4,223,717 10,085,467 14,730,342 7,334,014 62,016,431 3,129,759 27,401,941 52,617,904 66,568,188 13,735,044 43,036,966 64,860,922 Total IRB Approach 158,411,787 124,332,876 264,425,047 547,169,710 Total Standardised and IRB Approaches 228,214,465 180,394,145 322,656,151 731,264,761 Retail Exposures a) b) c) d) a) b) c) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Basel II Pillar 3 pg. 288-351 One year or less RM’000 The Financials pg. 10-287 Table 16: Disclosure on Credit Risk Exposure – Maturity Analysis for Maybank Group 311
314. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 17 : Disclosure on Credit Risk Exposure – Maturity Analysis for Maybank One year or less RM’000 One to five years RM’000 Over five years RM’000 Total RM’000 As at 31 December 2017 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures 26,193,849 682,342 – 1,134,575 6,163,397 1,201 53,629 71,663 – – 22,063,963 8,267,373 40,715 9,420,789 5,116,301 18,697 129,440 1,297,953 61,467 323,725 35,938,204 4,395,217 – 846,382 3,892,069 419,149 28,237 8,405,545 – – 84,196,016 13,344,932 40,715 11,401,746 15,171,767 439,047 211,306 9,775,161 61,467 323,725 Total Standardised Approach 34,300,656 46,740,423 53,924,803 134,965,882 Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures 44,446,178 60,763,256 15,641,279 95,946,050 5,913,731 65,619,073 66,001,188 222,328,379 60,763,256 – 95,946,050 – 30,862,318 34,756,755 187,571,624 34,756,755 – – – – 3,673,250 26,259,616 93,808,504 123,741,370 341,083 393,017 288,806 2,650,344 1,114,605 12,736,328 7,415,823 4,992,860 45,610,678 873,446 7,937,161 39,387,219 47,066,366 14,002,791 15,641,790 47,030,423 Total IRB Approach 108,882,684 137,846,945 165,341,308 412,070,937 Total Standardised and IRB Approaches 143,183,340 184,587,368 219,266,111 547,036,819 As at 31 December 2016 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures 24,558,285 645,701 – 554,357 7,393,187 1,253 34,403 5,435,790 – – 14,212,242 6,909,265 218,470 14,137,666 1,580,304 22,360 120,917 2,222,421 22,343 287,926 28,777,723 2,541,058 – 87,957 849,908 377,883 6,403 1,987,785 137,553 – 67,548,250 10,096,024 218,470 14,779,980 9,823,399 401,496 161,723 9,645,996 159,896 287,926 Total Standardised Approach 38,622,976 39,733,914 34,766,270 113,123,160 Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures 47,177,879 61,920,050 16,307,353 75,221,947 9,196,500 91,817,972 72,681,732 228,959,969 61,920,050 – 75,221,947 – 42,947,530 48,870,442 180,089,527 48,870,442 – – – – 3,401,132 22,519,263 87,986,831 113,907,226 293,137 260,590 324,642 2,522,763 1,128,440 8,502,070 8,420,368 4,468,385 43,802,266 2,876,647 5,226,657 36,081,261 45,223,843 11,639,307 13,971,667 43,072,409 Total IRB Approach 112,499,061 114,048,563 189,001,303 415,548,927 Total Standardised and IRB Approaches 151,122,037 153,782,477 223,767,573 528,672,087 Exposure Class a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) a) b) c) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) 312 Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures
315. Our Performance pg . 4-8 CREDIT RISK One to five years RM’000 Over five years RM’000 Total RM’000 As at 31 December 2017 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgage Higher Risk Assets Other Assets 16,814,029 6,136,642 – 80,832 644,323 859 2,588 1,361 2,392,569 421,613 1 1,345,208 1,519,184 44,334 822 – 8,104,302 8,613,849 – 1,182,008 1,639,420 2,854,056 7,003 523,964 27,310,900 15,172,104 1 2,608,048 3,802,927 2,899,249 10,413 525,325 Total Standardised Approach 23,680,634 5,723,731 22,924,602 52,328,967 Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures 7,626,287 22,734,087 1,134,011 15,531,324 78,905 14,538,585 8,839,203 52,803,996 21,408,580 1,325,507 4,998,359 10,532,965 10,997,968 3,540,617 37,404,907 15,399,089 Exposure Class a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures – – – – 3,120,789 14,452,556 84,386,252 101,959,597 19,395 12,548 270,083 2,818,763 395,841 1,644,771 9,285,578 3,126,366 27,261,355 17,324 21,027,955 36,079,618 27,676,591 1,674,643 30,583,616 42,024,747 Total IRB Approach 33,481,163 31,117,891 99,003,742 163,602,796 Total Standardised and IRB Approaches 57,161,797 36,841,622 121,928,344 215,931,763 As at 31 December 2016 Exempted Exposures (Standardised Approach) Sovereigns/Central Banks Public Sector Entities Corporates Regulatory Retail Residential Mortgage Higher Risk Assets Other Assets 13,053,660 6,589,488 110,287 515,535 748 1,458 157,019 970,721 343,372 563,165 1,542,727 31,421 644 – 6,435,198 2,717,994 1,207,631 1,748,204 2,139,024 5,236 748,183 20,459,579 9,650,854 1,881,083 3,806,466 2,171,193 7,338 905,202 Total Standardised Approach 20,428,195 3,452,050 15,001,470 38,881,715 Exposures under the IRB Approach Banks, Development Financial Institutions & MDBs Corporate Exposures 6,910,256 22,605,090 4,264,657 15,548,573 87,988 12,009,338 11,262,901 50,163,001 21,569,971 1,035,119 5,814,198 9,734,375 9,149,285 2,860,053 36,533,454 13,629,547 – – – – 2,606,739 11,393,518 80,710,256 94,710,513 10,893 7,959 201,647 2,386,240 340,427 888,390 7,299,071 2,865,630 22,850,857 242,650 22,057,612 35,559,137 23,202,177 1,138,999 29,558,330 40,811,007 Total IRB Approach 32,122,085 31,206,748 92,807,582 156,136,415 Total Standardised and IRB Approaches 52,550,280 34,658,798 107,809,052 195,018,130 a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Basel II Pillar 3 pg. 288-351 One year or less RM’000 The Financials pg. 10-287 Table 18: Disclosure on Credit Risk Exposure – Maturity Analysis for Maybank Islamic 313
316. MAYBANK ANNUAL REPORT 2017 CREDIT RISK CREDIT IMPAIRMENT POLICY AND CLASSIFICATION AND IMPAIRMENT PROVISIONS FOR LOANS , ADVANCES AND FINANCING Refer to Note 2.3 to Note 2.5 and Note 3.4 of the Financial Statements for the accounting policies and accounting estimates on impairment assessment for loans, advances and financing. The disclosures on reconciliation of impairment/allowance can be found in Note 52(c) (10) of the Financial Statements. This credit impairment policy is applicable to the Group. Table 19 (a) to 19 (f) provides details on impaired loans, advances and financing for the Group, the Bank and Maybank Islamic, respectively. Table 19 (a): Impaired and Past Due Loans, Advances and Financing and Allowances – Industry Analysis for Maybank Group As at 31 December 2017 Agriculture Mining & quarrying Manufacturing Construction Electricity, gas & water supply Wholesale, retail trade, restaurants & hotels Finance, insurance, real estate & business Transport, storage & communication Education, health & others Household Others Total As at 31 December 2016 Agriculture Mining & quarrying Manufacturing Construction Electricity, gas & water supply Wholesale, retail trade, restaurants & hotels Finance, insurance, real estate & business Transport, storage & communication Education, health & others Household Others Total 314 Impaired Loans, Advances and Financing RM‘000 Past Due Loans RM‘000 Individual Allowance RM‘000 Collective Allowance RM‘000 85,760 380,252 1,279,606 821,101 447,444 1,856,751 2,584,452 2,543,342 32,454 1,344,443 174,298 123,833 13,152 367,539 452,369 18,723 885,885 1,443,530 283,085 152,445 17,322,087 737,232 23,237 248,278 402,759 233,596 284,372 609,528 1,247,159 1,006,851 1,018 58,737 4,996 93,260 33,720 692,296 464,140 55,830 658,584 986,324 320,656 51,691 582,518 201,174 11,549,903 21,799,880 4,120,531 4,140,193 1,504,032 (858,546) 306,765 536,016 1,376,882 814,598 641,238 1,832,007 2,614,440 1,549,355 82,040 1,085,239 216,800 78,453 12,181 275,272 728,362 7,322 807,103 1,252,106 203,430 143,825 17,453,767 946,315 97,674 316,262 501,655 222,044 266,122 486,091 1,250,081 552,338 13,597 58,147 918 131,868 22,821 597,242 423,043 70,843 628,953 998,331 326,649 103,426 563,047 329,656 50,193 259,929 279,840 162,703 206,299 279,684 743,543 287,877 2,411 7,616 (5,145) (4,212) (28,332) (217,945) (23,340) (9,854) (256,991) (38,177) (186,212) (75,829) (14,435) (2,952) 11,055,380 21,908,136 3,764,929 4,195,879 IA Charges/ Write Back RM‘000 8,658 74,196 87,306 66,230 139,469 219,030 287,480 603,165 (10,129) 26,299 2,328 2,274,950 IA Write-Offs RM‘000 (85,684) (135,393) (168,788) (38,309) (37,408) (184,305) (52,707) (143,564) – (12,388) – (858,279)
317. Our Performance pg . 4-8 CREDIT RISK Past Due Loans RM‘000 Individual Allowance RM‘000 Collective Allowance RM‘000 IA Charges/ Write Back RM‘000 As at 31 December 2017 Agriculture Mining & quarrying Manufacturing Construction Electricity, gas & water supply Wholesale, retail trade, restaurants & hotels Finance, insurance, real estate & business Transport, storage & communication Education, health & others Household Others 50,850 43,218 912,283 682,670 253,586 1,349,902 2,280,798 1,702,644 13,873 763,610 17,407 69,964 8,495 241,077 280,620 3,868 547,929 529,872 197,824 66,537 6,967,372 5,552 13,241 41,476 325,411 218,868 214,386 448,879 1,133,847 603,759 – 2,753 – 50,855 21,128 457,611 337,715 19,607 421,379 805,769 274,206 40,821 319,025 86,554 5,534 32,778 16,627 61,099 64,610 101,935 267,569 445,498 – 2,842 1,004 (4,872) – (74,450) (38,309) – (53,515) (19,284) (127,296) – – – Total 8,070,841 8,919,110 3,002,620 2,834,670 999,496 (317,726) As at 31 December 2016 Agriculture Mining & quarrying Manufacturing Construction Electricity, gas & water supply Wholesale, retail trade, restaurants & hotels Finance, insurance, real estate & business Transport, storage & communication Education, health & others Household Others 59,054 11,081 1,120,741 714,441 268,389 1,289,386 2,193,512 827,594 11,466 671,837 12,888 45,966 4,024 155,045 527,936 838 468,406 421,454 112,141 74,352 7,118,790 8,552 12,696 9,951 395,980 207,934 161,986 312,525 1,113,335 279,127 – – – 84,252 9,969 455,374 311,434 40,065 415,297 791,638 255,236 60,325 326,388 94,529 (306) 9,951 268,978 150,304 149,223 150,514 683,822 99,166 (335) – – (3,506) – (208,644) (22,677) – (149,505) (20,434) (30,018) (75,592) – – Total 7,180,389 8,937,504 2,493,534 2,844,507 1,511,317 IA Write-Offs RM‘000 Basel II Pillar 3 pg. 288-351 Impaired Loans, Advances and Financing RM‘000 The Financials pg. 10-287 Table 19 (b): Impaired and Past Due Loans, Advances and Financing and Allowances – Industry Analysis for Maybank (510,376) Table 19 (c): Impaired and Past Due Loans, Advances and Financing and Allowances – Industry Analysis for Maybank Islamic As at 31 December 2017 Agriculture Mining & quarrying Manufacturing Construction Electricity, gas & water supply Wholesale, retail trade, restaurants & hotels Finance, insurance, real estate & business Transport, storage & communication Education, health & others Household Others Total As at 31 December 2016 Agriculture Mining & quarrying Manufacturing Construction Electricity, gas & water supply Wholesale, retail trade, restaurants & hotels Finance, insurance, real estate & business Transport, storage & communication Education, health & others Household Others Total Impaired Loans, Advances and Financing RM‘000 Past Due Loans RM‘000 Individual Allowance RM‘000 Collective Allowance RM‘000 23,072 228,539 71,881 97,736 712 166,371 204,002 539,245 12,404 358,972 7,599 42,588 2,027 100,379 125,748 12,387 188,496 243,687 42,377 69,912 10,207,505 5,381 3,359 141,009 13,460 10,288 – 56,821 100,658 335,204 379 – – 33,353 7,847 100,650 104,073 19,522 170,372 121,228 28,567 6,373 204,332 24,866 3,206 (34,259) 14,322 2,841 – 391 6,935 79,636 379 – – – – (7,433) – – (2,815) – (14,182) – – – 1,710,533 11,040,487 661,178 821,183 73,451 (24,430) 5,671 254,583 58,189 54,663 440 136,166 195,782 476,080 7,742 293,477 6,493 13,682 5,855 89,285 181,925 3,557 165,425 223,873 40,512 51,146 10,148,202 7,582 153 175,268 7,717 7,448 – 61,288 93,869 271,607 – – – 37,370 4,960 80,528 93,722 18,600 143,877 121,370 43,383 16,693 169,355 22,968 153 175,268 (6,005) 7,448 – 51,337 21,537 187,787 – – – – – – – – (25,452) – – – – – 1,489,286 10,931,045 617,350 752,826 437,525 (25,452) IA Charges/ Write Back RM‘000 IA Write-Offs RM‘000 315
318. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 19 (d): Impaired and Past Due Loans, Advances and Financing and Allowances – Geographical Analysis for Maybank Group As at 31 December 2017 Malaysia Singapore Indonesia Other Overseas Units Total As at 31 December 2016 Malaysia Singapore Indonesia Other Overseas Units Total Impaired Loans, Advances and Financing RM‘000 Past Due Loans RM‘000 Individual Allowance RM‘000 Collective Allowance RM‘000 IA Charges/ Write Back RM‘000 5,619,324 2,931,842 1,417,698 1,581,039 17,880,667 2,048,224 1,410,066 460,923 1,724,584 867,371 326,431 1,202,145 2,622,845 731,590 364,792 420,966 267,236 701,257 386,319 149,220 (239,329) (82,792) (488,395) (48,030) 11,549,903 21,799,880 4,120,531 4,140,193 1,504,032 (858,546) 5,754,507 1,587,853 1,993,758 1,719,262 7,352,799 1,592,124 1,617,949 11,345,264 1,713,706 288,583 525,649 1,236,991 2,829,374 453,358 436,893 476,254 588,641 193,534 290,706 1,202,069 (321,385) (59,726) (256,340) (220,828) 11,055,380 21,908,136 3,764,929 4,195,879 2,274,950 (858,279) IA Write-Offs RM‘000 Table 19 (e): Impaired and Past Due Loans, Advances and Financing and Allowances – Geographical Analysis for Maybank Impaired Loans, Advances and Financing RM‘000 Past Due Loans RM‘000 Individual Allowance RM‘000 Collective Allowance RM‘000 IA Charges/ Write Back RM‘000 As at 31 December 2017 Malaysia Singapore Indonesia Other Overseas Units 3,896,008 2,897,765 – 1,277,068 6,838,942 2,048,224 – 31,944 1,051,832 862,033 – 1,088,755 1,801,020 731,590 – 302,060 187,810 698,780 – 112,906 (208,895) (82,792) – (26,039) Total 8,070,841 8,919,110 3,002,620 2,834,670 999,496 (317,726) As at 31 December 2016 Malaysia Singapore Indonesia Other Overseas Units 4,246,493 1,570,036 – 1,363,860 7,352,799 1,566,427 – 18,278 1,084,575 285,722 – 1,123,237 2,076,099 453,358 – 315,050 589,412 197,771 – 724,134 (321,384) (59,726) – (129,266) Total 7,180,389 8,937,504 2,493,534 2,844,507 1,511,317 (510,376) IA Write-Offs RM‘000 Table 19 (f): Impaired and Past Due Loans, Advances and Financing and Allowances – Geographical Analysis for Maybank Islamic 316 Impaired Loans, Advances and Financing RM‘000 Past Due Loans RM‘000 Individual Allowance RM‘000 Collective Allowance RM‘000 IA Charges/ Write Back RM‘000 As at 31 December 2017 Malaysia Other Overseas Units 1,710,533 – 11,040,487 – 661,178 – 821,183 – 73,451 – (24,430) – Total 1,710,533 11,040,487 661,178 821,183 73,451 (24,430) As at 31 December 2016 Malaysia Other Overseas Units 1,489,286 – 10,931,045 – 617,350 – 752,826 – 437,525 – (25,452) – Total 1,489,286 10,931,045 617,350 752,826 437,525 (25,452) IA Write-Offs RM‘000
319. In line with Basel II requirements for capital adequacy purposes , the parameters are calibrated to a full economic cycle experience to reflect the long-run, cycle-neutral estimations: • Probability of Default (“PD”) PD represents the probability of a borrower defaulting within the next 12 months. The first level estimation is based on portfolio’s Observed Default Rate of the more recent years’ data. The average longrun default experience covering crisis periods including the major Asian crisis in 1997 is reflected through Central Tendency calibration for the Basel estimated PD. • Loss Given Default (“LGD”) LGD measures the economic loss the bank would incur in the event of a borrower defaulting. Among others, it takes into account post default pathways, cure probability, direct and indirect costs associated with the workout, recoveries from borrower and collateral liquidation. For Basel II purpose, LGD is calibrated to loss experiences during the period of economic crisis whereby for most portfolios, the estimated loss during crisis years is expected to be higher than that during normal economic period. The crisis period LGD, known as Downturn LGD, is used as an input for RWA calculation. • Exposure at Default (“EAD”) EAD is linked to facility risk, namely the expected gross exposure of a facility should a borrower default. The “race-to-default” is captured by Credit Conversion Factor (“CCF”), which should reflect the expected increase in exposure amount due to additional drawdown by a borrower facing financial difficulties leading to default. Internal experience during crisis period is being taken into consideration for EAD estimations and where there is a material difference in EAD during downturn period as compared to normal period, downturn EAD would be used in RWA computation. Application of Internal Ratings Since the development and implementation of the Group’s internal rating models, internal ratings are used in the following areas: • Credit Approval The level of approval for a loan application is determined based on the internal rating of the borrower and the quantum of exposure being requested. Policy is formulated to fast track loan application processing for low risk borrowers. Additionally for the Review Policy, borrowers with higher risk grades are subjected to additional semi-annual reviews to ensure close monitoring and tracking of these borrowers. The Financials pg. 10-287 The Group has obtained BNM’s approval to use internal credit models for evaluating the majority of its credit risk exposures. For the RWA computation of Corporate and Bank portfolios, the Group adopts the FIRB Approach, which relies on its own internal PD estimates and applies supervisory estimates of LGD and EAD, while the Retail and Retail-Small and Medium Enterprises (“RSME”) portfolios adopt the AIRB Approach relying on internal estimates of PD, LGD, and EAD. •Policy •Reporting Regular reporting on the risk rating portfolio distribution and sectoral outlook vs. borrower risk profile within sector are being produced and monitored by the Group. • Capital Management Basel II Pillar 3 pg. 288-351 BASEL II REQUIREMENTS Our Performance pg. 4-8 CREDIT RISK The Group has emplaced risk-based capital management, ICAAP programme and uses regulatory capital charge for decision making and budgeting process. • Risk Governance Internal ratings are used for various risk governance activities such as the setting of group exposure limits under the Maybank Group Sectoral (“MGS”) Policy, threshold limit for Credit Review Committee (“CRC”) review, sectoral limit policy, sampling methodology for credit review and policy breach. • Pricing Decision Internal ratings are being used as a basis for pricing credit facilities. NON-RETAIL PORTFOLIO Non-retail exposures comprise of Corporate, Commercial, Small Business, Real Estate, NBFIs and Special Purpose Vehicles, while, for bank exposures, they include Commercial, Investment, Savings and Co-operative Banks apart from the Development Financial Institutions (“DFIs”) portfolios. The general approach adopted by the Group can be categorised into the following three categories: • Default History Based (“Good-Bad” Analysis) This approach is adopted when the Group has sufficient default data. Under this approach, statistical method is employed to determine the likelihood of default on existing exposures. Scorecards under the Group’s CRRS models were developed using this approach. • Shadow Rating Approach This approach is usually applied when there are few or no default data available or also known as “low default portfolio” category. The objective of this methodology is to replicate the risk ranking applied by the external rating agency. The Group’s Bank Risk Rating Scorecards were developed using this approach. • Experts Judgement Approach The default experience for some exposures, for example Holding Companies and Specialised Lending is insufficient for the Group to perform the required analyses to develop a robust statistical model. Hence, another approach known as experts’ judgement approach is opted to develop the scorecard. Under this approach, the qualitative, quantitative and factor weights are determined by the Group’s credit experts. 317
320. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Credit Risk Models and Tools Bank Risk Rating Scorecard (“BRRS”) Credit Risk Rating System (“CRRS”) The Group has developed BRRS to risk grade the Group’s bank counterparties. As the Group’s bank portfolio fall under low default portfolio category, the shadow-bond rating technique is used in developing the scorecards. The Borrower Risk Rating (“BRR”), which is a component of CRRS, is a borrower-specific rating element that provides an estimate on the likelihood of the borrower going into default over the next 12 months. The BRR estimates the borrower risk and is independent of the type/nature of facilities and collaterals offered. The BRR is generated from a structured rating process which consists of quantitative and qualitative factors. From the raw rating, the rating is then capped at policy rating, if any. The Group Support Matrix is then used to objectively measure the impact of the group relationship on the raw rating of the borrower, where relevant. In view that the risk rating is based on historical financial data, judgemental override is allowed on the BRR by the relevant parties. Rating judgemental override is permissible subject to a maximum five notches upgrade to be decided by the rating approval party and unlimited downgrade (subject to the worst performing grades of 21) that can be performed by the business units. For reference, each grade can be mapped to external agency ratings, such as Standard & Poor’s (“S&P”), as illustrated in Table 20 below that contains mapping of internal rating grades of corporate borrowers with S&P’s and Rating Agency of Malaysia’s (“RAM”) rating grades. Table 20: Rating Grades Risk Category Very Low Low Medium High Rating Grade S&P Equivalent RAM Equivalent 1-5 6-10 11-15 16-21 AAA to ABBB+ to BB+ BB+ to B+ B+ to CCC AAA to AA1 AA1 to A3 A3 to BB1 BB1 to C International Risk Rating Scorecard (“IRRS”) IRRS is used to rate Corporate and Commercial borrowers of the Group’s branches and subsidiaries, incorporated and/or operating outside Malaysia and Singapore (except Maybank Indonesia, which has its own scorecards). 318 A different masterscale known as Global Masterscale is used to map the PD generated from BRRS to the scale. There are altogether 17 performing grades in the BRRS Masterscale with Grade 1 being the best performing grade and Grade 17 being the worst performing grade. For defaulted borrowers, the applicable grade is Grade 18. The BRRS Global Masterscale and its mapping to S&P’s and RAM’s ratings are shown in Table 21 below: Table 21: BRRS Global Masterscale Rating Grade 1-4 5-8 9-12 13-17 S&P Equivalent RAM Equivalent AAA to AAA+ to BBB+ BBB to BB BB- to CCC AAA AAA to AA AA to BBB BBB to C Tables 22 through 24 show the exposures by PD bands for Non-Retail Portfolios of the Group, the Bank and Maybank Islamic, respectively. A summary of the PD distribution of these exposures is also provided.
321. Our Performance pg . 4-8 CREDIT RISK As at 31 December 2017 Non-Retail Exposures Bank 0.0000 – 0.0470 0.0470 – 0.1460 0.1460 – 0.9280 0.9280 – 100 100 Total for Bank Exposures 1,751,496 37,855,525 15,450,182 2,440,021 – 299,333 6,869,277 8,080,189 2,847,020 – 114,160 18,095,819 3,779,300 6,356,518 3,343,125 586,540 85,155 5,986,137 52,536,778 77,917,862 18,174,506 – 14,150,638 154,615,283 26,362 417,410 333,508 94,300 2,029 551,646 7,237,333 19,099,730 6,386,559 – 50,155,844 873,609 33,275,268 341,381,884 15,138,407 205,986,370 – 207,377 47,529 701 – 1,167,989 14,358,561 7,709,109 2,616,278 – 255,607 25,851,936 4,933,655 10,420,596 2,121,315 270,453 155,712 6,384,230 51,685,680 73,301,383 14,778,808 2,236 17,901,731 146,152,337 31,729 420,496 495,687 58,941 3,302 665,184 9,727,362 21,556,917 8,095,912 – 62,499,989 1,010,155 40,045,375 358,968,590 19,167,493 212,049,648 57,497,224 28,008,648 103,396,022 82,336,019 11,660,365 8,327,762 Total for Corporate (excluding Specialised Lending and firm-size adjustment) 233,728,816 (with firm-size adjustment) 0.1200 0.6440 3.0000 100 Total for Corporate (with firm-size adjustment) Total Non-Retail Exposures As at 31 December 2016 Non-Retail Exposures Bank 0.0000 – 0.0470 0.0470 – 0.1460 0.1460 – 0.9280 0.9280 – 100 100 Total for Bank Exposures 2,584,401 15,700,959 25,179,676 5,208,999 1,481,809 5,372,196 50,014,457 12,447,049 2,040,823 – 28,819,237 103,051,099 77,211,810 9,169,494 8,342,436 Total for Corporate (excluding Specialised Lending and firm-size adjustment) 226,594,076 (with firm-size adjustment) 0.1200 0.6440 3.0000 100 Total for Corporate (with firm-size adjustment) Total Non-Retail Exposures 44.08 44.00 43.66 42.12 43.60 41.33 41.03 38.08 36.66 42.24 45.00 45.00 45.00 45.00 – 21.37 50.81 94.63 155.87 – 21.35 46.09 75.85 122.61 – 21.74 28.71 61.94 128.20 – 69,874,525 Corporate (excluding Specialised Lending and firm-size adjustment) 0.0000 – 0.1200 0.1200 – 0.6440 0.6440 – 3.0000 3.0000 – 100 100 Corporate 0.0000 – 0.1200 – 0.6440 – 3.0000 – 100 17.09 18.15 52.30 116.68 – RWA RM’000 3 39,278 63,207 11,672 – Corporate (excluding Specialised Lending and firm-size adjustment) 0.0000 – 0.1200 0.1200 – 0.6440 0.6440 – 3.0000 3.0000 – 100 100 Corporate 0.0000 – 0.1200 – 0.6440 – 3.0000 – 100 45.58 53.62 53.95 48.29 – Exposure Weighted Undrawn Average Risk Weight Commitments RM’000 (%) 3,129,874 22,011,849 29,218,132 6,728,331 1,411,803 43.76 43.43 43.40 43.55 44.16 44.12 44.04 43.39 44.19 44.64 22.15 50.16 94.94 161.17 0.03 21.25 44.19 73.78 120.33 – Basel II Pillar 3 pg. 288-351 PD Range (%) EAD Post CRM RM’000 Exposure Weighted Average LGD (%) The Financials pg. 10-287 Table 22: Disclosure on Exposure by PD Band (IRB Approach) for Non-Retail for Maybank Group 319
322. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 23 : Disclosure on Exposure by PD Band (IRB Approach) for Non-Retail for Maybank PD Range (%) As at 31 December 2017 Non-Retail Exposures Bank 0.0000 – 0.0470 0.0470 – 0.1460 0.1460 – 0.9280 0.9280 – 100 100 1,659,364 47,589,136 14,489,720 2,262,968 – 86,046 19,937,594 2,670,330 4,214,312 2,378,740 381,531 83,686 4,894,952 45,184,316 56,063,630 12,144,833 – 9,728,599 118,287,731 22,085 289,547 261,879 72,226 1,976 358,572 5,029,742 12,448,600 4,234,396 – 34,756,755 647,713 22,071,310 288,329,567 10,462,358 160,296,635 – 5,668 45,768 702 – 1,130,082 15,646,185 6,413,728 2,910,027 – 52,138 26,100,022 4,284,510 7,590,465 1,268,272 218,590 150,393 5,726,102 42,545,868 51,710,156 10,874,988 420 13,512,230 110,857,534 31,327 326,337 394,353 36,809 3,191 584,849 7,732,582 16,489,818 5,733,878 – 48,870,442 792,017 30,541,127 301,641,701 14,356,385 167,498,683 Corporate (excluding Specialised Lending and firm-size adjustment) 0.0000 – 0.1200 0.1200 – 0.6440 0.6440 – 3.0000 3.0000 – 100 100 22,827,455 90,275,324 60,830,330 7,640,005 5,998,510 Corporate 0.0000 – 0.1200 – 0.6440 – 3.0000 – 100 (with firm-size adjustment) 0.1200 0.6440 3.0000 100 Total for Corporate (with firm-size adjustment) Total Non-Retail Exposures As at 31 December 2016 Non-Retail Exposures Bank 0.0000 – 0.0470 0.0470 – 0.1460 0.1460 – 0.9280 0.9280 – 100 100 1,742,713 11,065,963 17,171,956 3,555,645 1,220,478 5,170,577 55,576,609 9,684,341 2,250,205 – 72,681,732 Corporate (excluding Specialised Lending and firm-size adjustment) 0.0000 – 0.1200 0.1200 – 0.6440 0.6440 – 3.0000 3.0000 – 100 100 26,313,709 86,830,186 54,741,049 6,753,598 5,450,985 Corporate 0.0000 – 0.1200 – 0.6440 – 3.0000 – 100 (with firm-size adjustment) 0.1200 0.6440 3.0000 100 Total for Corporate (with firm-size adjustment) Total Non-Retail Exposures 21.44 50.05 92.16 158.96 – 187,571,624 Total for Bank Exposures Total for Corporate (excluding Specialised Lending and firm-size adjustment) 44.58 42.85 43.18 40.95 43.10 17.10 19.72 52.78 115.88 – RWA RM’000 283,710 9,383,295 7,648,249 2,622,340 – 66,001,188 47.88 45.31 44.95 45.00 – Exposure Weighted Undrawn Average Risk Weight Commitments RM’000 (%) 3 20,328 61,543 4,172 – Total for Bank Exposures Total for Corporate (excluding Specialised Lending and firm-size adjustment) 320 EAD Post CRM RM’000 Exposure Weighted Average LGD (%) 39.41 39.93 38.33 35.47 41.18 46.00 45.00 45.00 45.00 – 45.00 44.00 44.00 44.00 44.00 20.58 45.45 72.49 119.09 – 21.88 28.18 69.13 132.15 – 24.05 51.47 94.66 165.98 – 180,089,527 2,756,234 17,502,211 22,725,866 4,816,570 1,069,561 45.00 45.00 45.00 45.00 45.00 21.44 41.87 69.28 119.80 –
323. Our Performance pg . 4-8 CREDIT RISK As at 31 December 2017 Non-Retail Exposures Bank 0.0000 – 0.0470 0.0470 – 0.1460 0.1460 – 0.9280 0.9280 – 100 100 – 8,234,154 597,171 7,878 – Total for Bank Exposures 9,923,684 16,946,240 8,013,206 1,102,797 1,418,980 Total for Corporate (excluding Specialised Lending and firm-size adjustment) 37,404,907 (with firm-size adjustment) 0.1200 0.6440 3.0000 100 Total for Corporate (with firm-size adjustment) – 13.34 43.21 31.86 – 8,839,203 Corporate (excluding Specialised Lending and firm-size adjustment) 0.0000 – 0.1200 0.1200 – 0.6440 0.6440 – 3.0000 3.0000 – 100 100 Corporate 0.0000 – 0.1200 – 0.6440 – 3.0000 – 100 – 45.00 45.00 30.72 – Exposure Weighted Undrawn Average Risk Weight Commitments RM’000 (%) 841,688 4,634,996 8,007,720 1,653,355 261,330 44.80 44.56 44.56 44.14 43.72 43.24 42.12 37.83 37.86 43.31 22.70 49.47 101.84 154.84 – 22.94 47.63 83.06 130.17 – RWA RM’000 – 17,223 – 7,500 – – 1,098,347 258,060 2,510 – 24,723 1,358,917 1,108,970 2,141,663 868,076 14,450 1,469 2,253,046 8,382,812 8,160,429 1,707,625 – 4,134,628 20,503,912 4,277 127,863 71,629 22,074 53 193,074 2,207,590 6,651,130 2,152,163 – 15,399,089 225,896 11,203,957 Total Non-Retail Exposures 61,643,199 4,385,247 33,066,786 As at 31 December 2016 Non-Retail Exposures Bank 0.0000 – 0.0470 0.0470 – 0.1460 0.1460 – 0.9280 0.9280 – 100 100 – 10,083,943 1,174,378 4,580 – – 201,709 1,761 – – – 3,198,992 641,460 7,272 – 203,470 3,847,724 649,145 2,830,131 853,043 51,863 5,320 1,956,407 8,107,843 8,824,438 1,064,004 1,816 4,389,502 19,954,508 402 94,159 101,334 22,132 112 80,335 1,994,780 5,067,099 2,362,034 – 13,629,547 218,139 9,504,248 61,425,902 4,811,111 33,306,480 Total for Bank Exposures 11,262,901 Corporate (excluding Specialised Lending and firm-size adjustment) 0.0200 – 0.1200 0.1200 – 0.6440 0.6440 – 3.0000 3.0000 – 100 100 8,640,047 16,334,148 9,825,861 781,429 951,969 Total for Corporate (excluding Specialised Lending and firm-size adjustment) 36,533,454 Corporate 0.0000 – 0.1200 – 0.6440 – 3.0000 – 100 (with firm-size adjustment) 0.1200 0.6440 3.0000 100 Total for Corporate (with firm-size adjustment) Total Non-Retail Exposures 373,640 4,509,639 6,492,266 1,911,761 342,241 – 45.01 45.00 45.00 – 44.98 44.80 44.92 43.72 44.69 43.27 44.18 43.60 42.83 44.00 – 31.74 56.32 158.77 – 25.18 58.49 98.28 136.75 0.19 18.95 42.46 71.97 123.08 – Basel II Pillar 3 pg. 288-351 PD Range (%) EAD Post CRM RM’000 Exposure Weighted Average LGD (%) The Financials pg. 10-287 Table 24: Disclosure on Exposure by PD Band (IRB Approach) for Non-Retail for Maybank Islamic 321
324. MAYBANK ANNUAL REPORT 2017 CREDIT RISK RETAIL PORTFOLIO Risk Measurement for Retail Portfolio The Group ’s retail portfolios are under the AIRB Approach. This approach calls for a more extensive reliance on the Bank’s own internal experience (based on historical data) by estimating all three main components of RWA calculation namely PD, EAD and LGD which are based on its own historical data. Application and behaviour scorecards are part of Basel II Retail IRB models and are used to estimate the probability that a customer will fail to make full and timely repayment of credit obligations. Business decisions and strategies are then built around the scores. Separate PD, EAD and LGD statistical models are developed at the respective retail portfolio level, with each model covering borrowers with fundamentally similar risk profiles in a portfolio. The estimates derived from such models are used as input for RWA calculations. With application scorecards, at the point of time when an applicant applies for the credit facility, each applicant is assigned a score that corresponds to the probability of future repayment. Scores are designed to rank-order the riskiness of the applicants, whereby higher score represents lower risk. AIRB Coverage for Retail Portfolios Currently the following material retail portfolios are under Retail IRB: Maybank Retail Portfolios • Housing Loan (Malaysia, Singapore and Indonesia) • Other Property Based Loan (Malaysia) • Staff Housing Loan (Malaysia) • Equity Term Loan (Singapore) Qualifying Revolving Retail Exposure (“QRRE”) • Credit Card (Malaysia, Singapore and Indonesia) Other Retail • Auto Loan (Malaysia, Singapore and Indonesia) • Unit Trust Loan (Malaysia) • Commercial Property Loan (Malaysia) RSME Portfolio Legal entities that carry a maximum exposure of RM5 million and are eligible for treatment as ‘retail’ exposure, are rated under the RSME scorecard. Similar to retail portfolios, separate PD, EAD and LGD statistical models are developed at the portfolio level; each model covering borrowers with fundamentally similar risk profiles in a portfolio. • Improved turnaround time; • Better management control of the portfolios; and • Improved revenue and profit through the identification and acceptance of additional business. Currently, application scorecards are deployed for all major retail portfolios in Malaysia, Singapore and Indonesia. Behaviour Scorecard The Credit Card product is subject to variable utilisation and payment patterns; a customer is able to utilise any portion of the granted limit and pay any amount of the outstanding balance. Due to the volatile nature of the product, a more robust risk measurement tool is required to manage the portfolio. Behavioural Scorecards are therefore developed for Credit Card portfolios both in Malaysia and Singapore. Behaviour score measures the borrower’s riskiness based on transaction information and behavioural pattern of customer’s utilisation and payment of the Credit Card. The scores are generated on a monthly basis and amongst others, are being used for the following purposes: • Collection Strategies; • Limit Management; and Retail and RSME Masterscale • Transaction Authorisation. A retail and RSME masterscale with mapping to PD is used to promote a common risk language across the Group’s retail portfolios as shown in the table below: With the use of Behaviour score, the Credit Card portfolio is able to be closely managed to reduce defaulters, increase collection and ultimately increase profitability. Table 25: Retail and RSME Masterscale Rating Grade R1 R3 R6 R9 322 Application scorecards benefit both risk management and business acquisition process through: • Consistency in credit risk assessment; Basel II Retail SubPortfolio Category Residential Mortgage Application Scorecard to to to to R2 R5 R8 R11 PD Range 0.25% to 0.44% 0.79% to 2.50% 4.45% to 14.06% 25% to 79.06% Tables 26 through 28 show the exposures by PD bands for Retail Portfolios of the Group, the Bank and Maybank Islamic, respectively. A summary of the PD distribution of these exposures are also provided.
325. Our Performance pg . 4-8 CREDIT RISK As at 31 December 2017 Retail Exposures Residential Mortgages 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 Total for Residential Mortgages Exposures Qualifying Revolving Retail Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 39,565,929 29,205,603 4,934,269 1,341,093 521,488 13.73 15.38 16.64 14.01 37.66 Exposure Weighted Average Undrawn Risk Weight Commitments (%) RM’000 8.75 22.21 59.74 76.20 91.52 75,568,382 8,456,166 6,532,996 1,509,084 282,600 43,821 68.26 67.71 65.83 63.18 75.56 11.93 34.82 109.32 199.78 118.12 RWA RM’000 25,422 36,866 16,295 1,754 711 3,460,897 6,486,324 2,947,493 1,021,941 477,264 81,048 14,393,919 5,703,279 2,984,162 252,468 46,914 9,060 1,008,903 2,274,650 1,649,777 564,582 51,760 8,995,883 5,549,672 – – – – – 5,169,005 2,422,480 1,214,004 397,464 930,925 – 10,133,878 2,982,642 4,711,507 579,744 49,904 6,952 2,605,800 8,375,429 3,081,125 1,313,856 396,770 Total for Qualifying Revolving Retail Exposures 16,824,667 Hire Purchase Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 33,968,055 5,585,375 1,983,018 411,204 2,016,133 Total Hire Purchase Exposures 43,963,785 Other Retail Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 22,837,743 37,491,078 11,886,910 2,298,769 753,076 Total Other Retail Exposures 75,267,576 8,230,749 15,772,980 211,624,410 17,307,680 45,850,449 13,275 36,854 17,798 750 863 3,285,838 8,716,296 4,393,442 1,283,285 401,746 69,540 18,080,607 1,251,165 5,319,087 52,985 23,191 – 1,041,185 1,868,882 1,550,331 451,778 30,681 6,646,428 4,942,857 – – – – – 5,501,651 2,022,587 1,236,484 392,244 1,009,688 – 10,162,654 1,212,570 3,984,408 544,963 43,917 8,148 2,271,636 7,916,122 4,213,228 1,429,868 306,505 Total Retail Exposures As at 31 December 2016 Retail Exposures Residential Mortgages 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 Total for Residential Mortgages Exposures Qualifying Revolving Retail Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 32,422,747 27,453,288 4,945,604 1,284,006 462,543 42.95 40.82 40.32 39.96 81.58 20.77 18.59 15.44 24.56 43.24 17.27 24.22 27.00 19.82 60.51 15.22 43.37 61.22 96.66 46.17 11.41 22.34 25.92 57.15 52.69 10.13 31.75 88.84 99.94 86.86 66,568,188 7,341,961 4,905,576 1,253,881 206,129 27,497 78.97 78.17 77.30 78.74 74.63 14.18 38.10 123.64 219.17 111.58 Total for Qualifying Revolving Retail Exposures 13,735,044 Hire Purchase Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 34,328,542 4,132,392 2,012,897 411,342 2,151,793 Total Hire Purchase Exposures 43,036,966 Other Retail Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 18,837,630 27,213,098 15,848,471 2,353,882 607,841 Total Other Retail Exposures 64,860,922 5,794,006 16,137,359 188,201,120 12,509,974 49,323,477 Total Retail Exposures 45.45 43.01 41.99 41.81 83.30 25.65 20.83 18.73 28.25 55.50 16.03 48.94 61.43 95.36 46.92 12.06 29.09 26.58 60.75 50.43 Basel II Pillar 3 pg. 288-351 PD Range (%) EAD Post CRM RM’000 Exposure Weighted Average LGD (%) The Financials pg. 10-287 Table 26: Disclosure on Exposures by PD band (IRB Approach) for Retail for Maybank Group 323
326. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 27 : Disclosure on Exposures by PD band (IRB Approach) for Retail for Maybank PD Range (%) As at 31 December 2017 Retail Exposures Residential Mortgages 0.0000 – 05900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 Total for Residential Mortgages Exposures Qualifying Revolving Retail Exposures 0.0000 – 05900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 27,976,664 15,684,367 2,475,476 658,197 271,662 7,644,629 5,172,424 992,313 169,054 24,371 14,002,791 Hire Purchase Exposure 0.0000 – 05900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 13,412,684 1,629,509 454,395 80,637 64,565 Total Hire Purchase Exposures 15,641,790 Other Retail Exposures 0.0000 – 05900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 17,435,879 23,866,699 4,373,744 947,404 406,697 Total Other Retail Exposures As at 31 December 2016 Retail Exposures Residential Mortgages 0.0000 – 05900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 Total for Residential Mortgages Exposures Qualifying Revolving Retail Exposures 0.0000 – 05900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 74.78 73.67 69.92 64.62 89.38 40.84 38.90 39.62 39.23 80.53 16.80 19.37 17.71 28.78 43.09 12.34 33.72 101.27 186.77 122.63 15.40 41.50 60.92 100.37 215.04 10.09 21.36 28.74 69.79 68.65 22,583 35,199 14,515 1,616 482 2,262,260 3,193,686 1,352,610 491,508 287,014 74,395 7,587,078 5,350,639 2,633,533 237,158 39,884 4,006 943,031 1,744,025 1,004,883 315,748 29,886 8,265,220 4,037,573 – – – – – 2,065,889 676,255 276,817 80,936 138,841 – 3,238,738 2,878,329 4,350,874 414,945 28,701 3,984 1,759,486 5,097,580 1,256,986 661,156 279,179 47,030,423 7,676,833 9,054,387 16,016,448 23,917,776 10,745 33,436 15,153 476 627 2,392,964 4,561,685 1,894,561 662,333 264,704 60,437 9,776,247 1,112,338 5,131,863 46,661 19,971 – 931,647 1,508,456 1,108,744 294,251 219 6,310,833 3,843,317 – – – – – 1,840,401 641,965 305,404 88,355 171,538 – 3,047,663 1,105,822 2,953,982 357,976 17,912 6,458 1,529,272 5,633,171 1,521,393 712,909 254,508 25,960,285 15,787,382 2,514,725 695,063 266,388 14.48 21.23 21.28 18.12 51.78 9.22 28.89 75.34 95.29 99.37 45,223,843 6,469,080 4,081,091 952,414 136,303 419 11,639,307 Hire Purchase Exposure 0.0000 – 05900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 11,742,666 1,553,062 511,020 90,262 74,657 Total Hire Purchase Exposures 13,971,667 Other Retail Exposures 0.0000 – 05900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 14,514,819 22,499,243 4,745,767 928,156 384,424 Total Other Retail Exposures 8.09 20.36 54.64 74.67 105.65 RWA RM’000 123,741,370 Total for Qualifying Revolving Retail Exposures Total Retail Exposures 12.95 14.36 14.80 13.08 30.37 Exposure Weighted Average Undrawn Risk Weight Commitments (%) RM’000 47,066,366 Total for Qualifying Revolving Retail Exposures Total Retail Exposures 324 EAD Post CRM RM’000 Exposure Weighted Average LGD (%) 83.31 81.70 79.96 82.84 74.63 45.24 42.62 41.95 41.92 83.90 20.68 21.49 20.97 34.03 58.48 10.54 35.65 109.19 215.78 52.31 15.67 41.34 59.76 97.89 229.77 10.54 25.04 32.06 76.81 66.20 43,072,409 4,442,150 9,651,253 113,907,226 10,813,420 26,318,480
327. Our Performance pg . 4-8 CREDIT RISK As at 31 December 2017 Retail Exposures Residential Mortgages 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 Total for Residential Mortgages Exposures Qualifying Revolving Retail Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 Total for Qualifying Revolving Retail Exposures 9,347,644 15,522,435 2,241,619 465,345 99,548 690,252 797,179 149,310 37,836 66 Total Hire Purchase Exposures 30,583,616 Other Retail Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 (Grade 12) 5,401,864 23,965,075 10,960,064 1,351,365 346,379 As at 31 December 2016 Retail Exposures Residential Mortgages 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 Total for Residential Mortgages Exposures Qualifying Revolving Retail Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 Total for Qualifying Revolving Retail Exposures 45.05 42.74 41.02 40.68 82.62 24.75 17.80 13.17 20.35 43.38 17.99 45.55 62.37 104.45 219.42 15.67 20.53 21.64 48.30 33.95 2,839 1,668 1,780 137 229 928,792 3,794,248 1,485,786 397,662 91,018 6,653 6,697,506 352,640 350,629 15,309 7,029 – 54,955 248,603 130,402 68,000 79 725,607 502,039 – – – – – 4,517,898 1,634,967 905,362 295,241 308,956 – 7,662,424 104,313 360,633 64,799 21,203 2,968 846,313 4,919,839 2,371,470 652,700 117,591 42,024,747 553,916 8,907,913 1,286,176 23,769,882 2,530 3,418 2,645 274 236 598,342 6,395,603 2,389,149 503,677 74,443 9,103 9,961,214 138,826 187,224 6,324 3,220 – 41,233 217,526 137,916 56,515 136 335,594 453,326 – – – – – 4,389,110 1,590,956 895,031 272,571 272,257 – 7,419,925 106,748 1,030,427 186,987 26,006 1,690 742,362 5,695,570 2,691,835 716,960 51,998 4,287,399 16,169,665 2,231,091 416,284 97,738 20.06 27.22 32.72 21.52 69.23 14.47 42.13 113.52 121.65 78.61 23,202,177 407,709 576,969 128,051 26,161 109 74.63 74.63 74.63 74.63 74.63 10.09 37.07 106.78 216.27 142.98 1,138,999 24,285,374 3,473,414 1,415,334 258,124 126,084 Total Hire Purchase Exposures 29,558,330 Other Retail Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 4,322,811 23,736,348 11,102,705 1,425,726 223,417 Total Other Retail Exposures 7.96 31.19 87.34 179.72 118.62 RWA RM’000 101,959,597 Hire Purchase Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 Total Retail Exposures 61.74 61.74 61.74 61.74 61.74 1,674,643 25,119,407 3,589,239 1,451,514 282,650 140,806 Total Other Retail Exposures 9.94 24.44 66.28 85.46 91.43 27,676,591 Hire Purchase Exposures 0.0000 – 0.5900 0.5900 – 3.3330 3.3330 – 18.7500 18.7500 – 100 100 Total Retail Exposures 14.50 16.39 18.47 14.94 44.94 Exposure Weighted Average Undrawn Risk Weight Commitments (%) RM’000 45.66 43.41 42.03 41.70 82.71 30.61 20.17 16.48 22.47 52.52 18.27 46.24 64.00 107.01 214.85 17.74 24.61 27.51 56.16 26.82 40,811,007 1,351,858 9,898,725 94,710,513 1,696,555 27,733,190 Basel II Pillar 3 pg. 288-351 PD Range (%) EAD Post CRM RM’000 Exposure Weighted Average LGD (%) The Financials pg. 10-287 Table 28: Disclosure on Exposures by PD band (IRB Approach) for Retail for Maybank Islamic 325
328. MAYBANK ANNUAL REPORT 2017 CREDIT RISK INDEPENDENT MODEL VALIDATION CREDIT RISK MITIGATION The use of models will give rise to model risk , which is defined as the risk of a model not performing the tasks or able to capture the risks it was designed to. Any model not performing in line with expectations may potentially result in financial loss, incorrect business decisions, misstatement of external financial disclosures, or damage to the reputation. The Group takes a holistic approach when granting credit facilities and do so very much based on the repayment capacity of the borrower, rather than placing the credit risk mitigation as a primary source of repayment. As a fundamental credit principle, the Group generally does not grant facilities solely on the basis of collaterals provided. Credit facilities are granted based on the credit standing of the borrower, source of repayment and debt servicing ability. To manage this risk, model validation is performed to assess whether the model is performing according to expectations. The model validation function at the Group is distinct from the model development function and model users, with the objective to provide the required independence in performing the function. In line with regulatory requirements, all credit IRB models used for capital calculation are subject to independent validation by the Model Validation team. Additionally, as part of best practices, other significant models such as market risk models used for valuation and pricing are also subject to validation. Approval and oversight of model validation are governed by the technical committee and the relevant risk committees. The technical committee known as Model Validation and Acceptance Committee (“MVAC”) meets regularly and its membership is drawn from Risk and Business stakeholders. Scope and Frequency of Model Validation Validation techniques include both quantitative and qualitative analysis to test the appropriateness and robustness of the IRB models used. Validation of credit risk models covers activities that evaluate and examine the rating system and the estimation process and methods for deriving the risk components. For instance, for credit risk models the risk components are known as PD, LGD and EAD. The process involves validating whether the risk models are capable of discriminating (‘discriminatory or rank ordering power’) and are giving consistent and predictive estimates (‘calibration’) of the relevant risk parameters. Model validation is conducted at two stages: • Pre-implementation model validation which is conducted prior to launch of the model; and • Post-implementation validation which is performed at least on an annual basis for models used for IRB capital calculation. For other types of models which are deemed less risky and not subject to regulatory requirements, post implementation validation is performed on a less frequent basis. In addition to annual review, frequent monitoring are performed by the model owners to ensure that the models are performing as expected, and that the assumptions used in model development remain appropriate. As part of governance, validation processes are also subject to regular independent review by Internal Audit, to ensure that they are fit to be used for regulatory purposes. 326 Depending on a customer’s credit standing and the type of product, facilities may be provided on an unsecured basis. Nevertheless, collateral is taken whenever possible to mitigate the credit risk assumed. The Group’s general policy is to promote the use of credit risk mitigation, justified by commercial prudence and good practice as well as capital efficiency. The value of collateral taken is also monitored periodically. The frequency of valuation depends on the type, liquidity and volatility of the collateral value. The main types of collateral taken by the Group include cash, marketable securities, real estate, equipment, inventory and trade receivables. For IRB purposes, personal guarantees are not recognised as an eligible credit risk protection. Corporate guarantees are often obtained when the borrower’s credit worthiness is not sufficient to accommodate an extension of credit. To recognise the effects of guarantees under the FIRB Approach, the Group adopts the Probability of Default substitution approach whereby exposures guaranteed by an eligible guarantor will utilise the PD of the guarantor in the computation of its capital requirement. As a general rule-of-thumb, the following eligibility criteria must be met before the collateral can be accepted for IRB purposes: • Legal Certainty The documentation must be legally binding and enforceable in all relevant jurisdictions. • Material Positive Correlation The value of the collateral must not be significantly affected by the deterioration of the borrower’s credit worthiness. • Third-party Custodian The collateral that is held by a third-party custodian must be segregated from the custodian’s own assets. Tables 29 through 31 show the credit risk mitigation analysis under the Standardised Approach for the Group, the Bank and Maybank Islamic, respectively. Whilst Tables 32 through 34 show the credit risk mitigation analysis under the IRB Approach.
329. Our Performance pg . 4-8 CREDIT RISK Exposures Covered by Eligible Financial Collateral RM’000 Exposures Covered by Other Eligible Collateral RM’000 As at 31 December 2017 On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Insurance Cos, Securities Firms & Fund Managers Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Defaulted Exposures 122,775,998 22,840,791 3,269,679 393,327 17,969,903 31,342,925 3,826,609 400,619 12,685,588 61,467 490,756 497,352 – 16,629,816 – – 32,258 – – – – – – – – 756,640 – – 766,657 5,378,788 – – – – – 5,929 – – – – 18,596 2,897,358 407,873 – – – – 2,993 Total On-Balance Sheet Exposures 216,555,014 16,662,074 6,908,014 3,326,820 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 537,335 2,044,952 7,599 – – – – 30,663 – – 2,831 – Total for Off-Balance Sheet Exposures 2,589,886 – 30,663 2,831 Total On and Off-Balance Sheet Exposures 219,144,900 16,662,074 6,938,677 3,329,651 As at 31 December 2016 On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Insurance Cos, Securities Firms & Fund Managers Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Defaulted Exposures 100,065,244 13,923,606 2,040,243 316,263 20,707,104 28,512,768 3,075,170 266,106 12,263,734 159,896 307,436 701,069 – 4,066,333 – – 68,375 – – – – – – – – 753,144 – – 1,097,135 4,323,640 – – – – – 2,886 – – – – 1,348 – 2,392,294 – – – – 8,384 Total On-Balance Sheet Exposures 182,338,639 4,134,708 6,176,805 2,402,026 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 364,096 1,392,168 148 – – – – 53,622 – – 103 – Total for Off-Balance Sheet Exposures 1,756,412 – 53,622 103 184,095,051 4,134,708 6,230,427 2,402,129 Total On and Off-Balance Sheet Exposures Basel II Pillar 3 pg. 288-351 Exposure Class Exposures before CRM RM’000 Exposures Covered by Guarantees/ Credit Derivatives RM’000 The Financials pg. 10-287 Table 29: Disclosure on Credit Risk Mitigation Analysis (Standardised Approach) for Maybank Group 327
330. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 30 : Disclosure on Credit Risk Mitigation Analysis (Standardised Approach) for Maybank 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 83,932,589 13,194,608 – 11,201,506 13,934,026 437,944 128,604 9,775,160 61,467 323,725 131,004 – 7,193,958 – 32,258 – – – – – – – – 752,207 – 16,427 1,683,499 – – – – – 5,929 – – – 236 – 267,473 – – – – 1,102 133,120,633 7,226,216 2,458,062 268,811 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 451,625 1,386,154 7,470 – – – – 30,663 – – 1 – Total for Off-Balance Sheet Exposures 1,845,249 – 30,663 1 134,965,882 7,226,216 2,488,725 268,812 67,546,000 10,096,024 218,470 14,464,363 9,776,532 398,575 121,138 9,645,995 159,896 287,926 87,291 – 1,320,516 – 63 – – – – – – – – 750,200 – 16,105 1,454,536 – – – – – 1,740 – – – – – 226,565 – – – – 2,921 112,802,210 1,320,579 2,222,581 229,486 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 29,311 291,639 – – – – – 52,174 – – 103 – Total for Off-Balance Sheet Exposures 320,950 – 52,174 103 113,123,160 1,320,579 2,274,755 229,589 Exposure Class As at 31 December 2017 On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Defaulted Exposures Total On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures As at 31 December 2016 On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Securitisation Exposures Equity Exposures Defaulted Exposures Total On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 328
331. Our Performance pg . 4-8 CREDIT RISK Exposures Covered by Eligible Financial Collateral RM’000 Exposures Covered by Other Eligible Collateral RM’000 As at 31 December 2017 On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Defaulted Exposures 27,310,794 14,945,783 1 2,608,048 3,794,110 2,897,358 36 525,325 17,028 – 9,435,858 – – – – – – – – 4,433 – – 795,889 – – – – – – – 2,876 2,897,358 – – – 1,891 Total On-Balance Sheet Exposures 52,098,483 9,435,858 800,322 2,902,125 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives 61,054 169,430 – – – – – – Total for Off-Balance Sheet Exposures 230,484 – – – Total On and Off-Balance Sheet Exposures 52,328,967 9,435,858 800,322 2,902,125 As at 31 December 2016 On-Balance Sheet Exposures Sovereigns/Central Banks Public Sector Entities Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Defaulted Exposures 20,459,569 8,818,836 1,880,733 3,801,273 2,165,730 38 905,203 16,033 – 2,745,816 68,312 – – – – – – 2,944 – 546,711 – – – 810 – – 1,348 – 2,165,730 – – 5,463 Total On-Balance Sheet Exposures 38,047,415 2,814,128 550,465 2,172,541 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives 317,173 517,127 – – – 1,448 – – Total for Off-Balance Sheet Exposures 834,300 – 1,448 – 38,881,715 2,814,128 551,913 2,172,541 Exposure Class Total On and Off-Balance Sheet Exposures Basel II Pillar 3 pg. 288-351 Exposures before CRM RM’000 Exposures Covered by Guarantees/ Credit Derivatives RM’000 The Financials pg. 10-287 Table 31: Disclosure on Credit Risk Mitigation Analysis (Standardised Approach) for Maybank Islamic 329
332. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 32 : Disclosure on Credit Risk Mitigation Analysis (IRB Approach) for Maybank Group 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 As at 31 December 2017 On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures 53,881,944 235,961,877 – 4,359,947 523,783 3,943,687 – 24,080,916 191,813,872 44,148,005 4,359,947 – 3,943,687 – 24,080,916 – – – – – 191,152,691 – – – 75,237,737 7,349,137 42,012,215 66,553,602 – – – – – – – – – – – – 9,334,882 – 56,916 839,915 490,331,394 4,359,947 4,524,386 24,920,831 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 6,439,476 55,701,968 533,456 – 15,732 – – 409,944 338 – 1,026,011 2,800 Total for Off-Balance Sheet Exposures 62,674,900 15,732 410,282 1,028,811 Total On and Off-Balance Sheet Exposures 553,006,294 4,375,679 4,934,668 25,949,642 As at 31 December 2016 On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures 58,080,430 235,533,833 – 136,918 818,304 1,419,180 – 17,803,005 173,033,830 62,500,003 136,918 – 1,419,180 – 17,803,005 – – – – – 173,727,510 – 351,116 510,866 63,813,353 6,566,597 42,810,084 60,537,476 – – – – – 351,116 – – 510,866 – – – 7,075,288 3,965 74,559 1,303,285 474,417,061 140,883 2,663,159 19,617,156 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 4,784,898 67,922,238 45,513 – 43,926 – 17,135 941,004 1,245 – 1,721,659 6,822 Total for Off-Balance Sheet Exposures 72,752,649 43,926 959,384 1,728,481 547,169,710 184,809 3,622,543 21,345,637 a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures Total On-Balance Sheet Exposures a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures Total On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 330
333. Our Performance pg . 4-8 CREDIT RISK Exposures Covered by Eligible Financial Collateral RM’000 Exposures Covered by Other Eligible Collateral RM’000 As at 31 December 2017 On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures 63,692,418 183,807,840 – 3,538,362 518,782 3,050,842 – 23,786,178 155,058,924 28,748,916 3,538,362 – 3,050,842 – 23,786,178 – – – – – 107,574,829 – – – 46,991,971 5,737,571 15,641,790 39,203,497 – – – – – – – – – – – – 5,684,671 – 56,122 473,815 360,759,758 3,538,362 3,625,746 24,259,993 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 4,315,808 46,936,830 58,540 – 15,732 – – 410,008 178 – 1,028,843 1,341 Total for Off-Balance Sheet Exposures 51,311,178 15,732 410,186 1,030,184 Total On and Off-Balance Sheet Exposures 412,070,936 3,554,094 4,035,932 25,290,177 As at 31 December 2016 On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures 61,384,375 184,599,098 – 136,918 813,304 1,137,575 – 17,563,589 135,728,642 48,870,456 136,918 – 1,137,575 – 17,563,589 – – – – – 102,226,072 – – – 44,897,646 5,328,358 13,897,011 38,103,057 – – – – – – – – – – – – 5,035,496 2,927 74,559 965,204 353,245,041 139,845 2,025,438 18,528,793 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 5,212,190 57,056,005 35,691 – 9,063 – 17,135 864,153 1,245 – 1,703,379 6,822 Total for Off-Balance Sheet Exposures 62,303,886 9,063 882,533 1,710,201 415,548,927 148,908 2,907,971 20,238,994 a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures Total On-Balance Sheet Exposures a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures Total On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures Basel II Pillar 3 pg. 288-351 Exposure Class Exposures before CRM RM’000 Exposures Covered by Guarantees/ Credit Derivatives RM’000 The Financials pg. 10-287 Table 33: Disclosure on Credit Risk Mitigation Analysis (IRB Approach) for Maybank 331
334. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 34 : Disclosure on Credit Risk Mitigation Analysis (IRB Approach) for Maybank Islamic 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 7,833,475 45,230,111 – 821,585 5,001 164,329 – 294,738 29,831,022 15,399,089 821,585 – 164,329 – 294,738 – – – – – 100,100,113 – – – 27,570,620 948,984 30,442,810 41,137,699 – – – – – – – – – – – – 1,570,340 – 762 363,269 154,734,039 821,585 170,092 658,007 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 1,818,180 7,045,847 4,730 – – – – – 160 – – 237 Total for Off-Balance Sheet Exposures 8,868,757 – 160 237 163,602,796 821,585 170,252 658,244 10,345,970 43,985,636 – – 5,000 242,587 – 220,905 30,356,089 13,629,547 – – 242,587 – 220,905 – – – – – 92,571,741 – – – 23,095,571 803,333 29,432,246 39,240,591 – – – – – – – – – – – – 974,598 1,038 – 330,714 147,877,945 1,038 247,587 551,619 Off-Balance Sheet Exposures OTC Derivatives Off-balance sheet exposures other than OTC derivatives or credit derivatives Defaulted Exposures 34,072 8,221,701 2,697 – 34,863 – – 76,851 – – 18,280 – Total for Off-Balance Sheet Exposures 8,258,470 34,863 76,851 18,280 156,136,415 35,901 324,438 569,899 Exposure Class As at 31 December 2017 On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures Total On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures As at 31 December 2016 On-Balance Sheet Exposures Banks, Development Financial Institutions & MDBs Corporate Exposures a) b) c) Corporates (excluding Specialised Lending and firm-size adjustment) Corporates (with firm-size adjustment) Specialised Lending (Slotting Approach) – Project Finance Retail Exposures a) b) c) d) Residential Mortgages Qualifying Revolving Retail Exposures Hire Purchase Exposures Other Retail Exposures Defaulted Exposures Total On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 332
335. Our Performance pg . 4-8 CREDIT RISK Securitisation is a financial transaction backed by cash flow from underlying financial assets or the value of specific assets that are used to service obligations to debt holders. During the securitisation process, the underlying assets (e.g. consumer loans, receivables, mortgages) are selected and pooled together into a special purpose vehicle (“SPV”). The SPV will then issue securities that can be sold to debt investors. The Financials pg. 10-287 SECURITISATION • Traditional securitisations – where assets are sold to an SPV, which issues notes in different tranches with different risk and return profiles. Cash flow from the underlying assets is used by the SPV to pay the coupons and principal on the notes issued by the SPV; or • Synthetic transactions – where only the underlying credit risk or part of the credit risk is transferred to a third party without the ownership of assets being transferred to the SPV. Basel II Pillar 3 pg. 288-351 Securitisations may be categorised as either: Some structures have multiple tranches that reflect different degrees of credit risk (i.e. one class of creditor is entitled to receive payments from the pool before another class of creditors). The class in a particular series that is entitled to receive payment first will rank senior to the sub-tranche notes of the same series. As part of the Group’s capital and liquidity management strategy, the Group can decide to securitise loans granted to customers. The Group is also involved in the investment of securities which include the purchase of securitised bonds in the secondary markets. These are primarily legacy exposures that are being held in the banking book. Similar to non-securitised assets, these securitisation exposures are governed by and managed in accordance to credit risk and market risk policies. The valuation of our investment in securitisation exposures mainly focuses on quotations from external parties. Primary recourse for securitisation exposures lies with the underlying assets. Key risks inherent in securitised bonds include credit risk, liquidity risk, counterparty risk, prepayment risk and interest rate risk. These risks are typically mitigated by credit enhancement which may be in the form of overcollateralization, reserve accounts, subordination, excess interest, or other support arrangements. The securitised bonds may also be covered with added protection features such as financial covenants and events of defaults stipulated in the legal documentation which, when breached, provide for the acceleration of repayment and/or other remediation. Table 35 shows the securitisation exposures under the Standardised Approach for the Group and the Bank. Table 35: Disclosure on Securitisation under the Standardised Approach for Maybank Group and Maybank Group Maybank Exposure after CRM RM’000 Risk Weights of Securitisation Exposures 20% Risk Weighted Asset RM’000 12,293 61,467 61,467 12,293 61,467 12,293 61,467 61,467 12,293 159,896 159,896 31,979 159,896 159,896 31,979 159,896 159,896 31,979 159,896 159,896 31,979 Exposure after CRM RM’000 Risk Weights of Securitisation Exposures 20% Risk Weighted Asset RM’000 As at 31 December 2017 Originated by Third Party On Balance Sheet Exposure 61,467 61,467 Total (Traditional Securitisation) 61,467 As at 31 December 2016 Originated by Third Party On Balance Sheet Exposure Total (Traditional Securitisation) Type of Securitisation Exposures 333
336. MAYBANK ANNUAL REPORT 2017 CREDIT RISK CREDIT EXPOSURES SUBJECT TO STANDARDISED APPROACH The Standardised Approach is applied to portfolios that are classified as permanently exempted from the IRB Approach , and those portfolios that are currently in transition to the IRB Approach. The Standardised Approach measures credit risk pursuant to fixed risk-weights and is the least sophisticated of the capital calculation methodologies. The risk-weights applied under Standardised Approach are prescribed by BNM and is based on the asset class to which the exposure is assigned. For exposures subject to Standardised Approach, approved External Credit Assessment Agencies (“ECAI”) ratings and the prescribed risk-weights based on asset classes are used in the computation of regulatory capital. The ECAI used by the Group include Fitch Ratings, Moody’s Investor Services, S&P, RAM, Malaysia Rating Corporation (“MARC”) and Rating & Investment Inc. Assessments provided by approved ECAIs are mapped to credit quality grades prescribed by the regulator. Table 36 shows the risk-weights applicable for Banking Institutions and Corporates under the Standardised Approach. Table 36: Risk-Weights under Standardised Approach Rating Category S&P Moody’s Fitch RAM MARC Rating & Investment Inc 1 2 3 4 AAA to AAA+ to ABBB+ to BBB+ and below Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to below AAA to AAA+ to ABBB+ to BBB+ and below AAA to AA3 A+ to A3 BBB1 to BB3 B1 and below AAA to AAA+ to ABBB+ to BBB+ and below AAA to AAA+ to ABBB+ to BBB+ and below 5 Unrated Table 37 shows the risk-weights applicable for Banking Institutions and Corporates under the Standardised Approach for short-term ratings. Table 37: Risk-Weights under Standardised Approach for Short-Term Ratings Rating Category S&P Moody’s Fitch RAM MARC Rating & Investment Inc 1 2 3 4 A-1 A-2 A-3 Others P-1 P-2 P-3 Others F1+, F1 F2 F3 B to D P-1 P-2 P-3 NP MARC-1 MARC-2 MARC-3 MARC-4 a-1+, a-1 a-2 a-3 b, c 5 Unrated Tables 38 through 40 show the risk-weights under Standardised Approach for the Group, the Bank and Maybank Islamic, respectively. Tables 41 through 43 further show the rated exposures by ECAIs for the Group, the Bank and Maybank Islamic respectively. 334
337. Our Performance pg . 4-8 CREDIT RISK Exposures after Netting and Credit Risk Mitigation Sovereigns & Central Banks RM’000 PSEs RM’000 Banks, MDBs & FDIs RM’000 As at 31 Dec 2017 0% 116,278,500 20% 1,854,329 35% – 50% 2,168,098 75% – 100% 2,738,605 150% – 17,386,456 3,254,836 – 121,102 – 2,455,042 – 366,098 2,035,881 – 908,415 – – – Total 123,039,532 23,217,436 90,159,950 3,966,380 – 2,889,726 – 3,068,044 – 100,084,100 Risk Weights As at 31 Dec 2016 0% 20% 35% 50% 75% 100% 150% Total Insurance Cos, Securities Firms & Fund Managers RM’000 Corporates RM’000 Regulatory Retail RM’000 Residental Mortgages RM’000 Higher Risk Assets RM’000 – – – – – 393,327 – 2,160,253 1,942,611 – 300,225 – 13,503,581 134,728 5,082,304 – – 9,493 22,746,153 4,885,729 410,339 – – 2,820,354 978,668 28,411 5,634 – – – – – – – 493,699 5,866,005 1,612,267 – – – 5,204,145 3,171 3,310,394 393,327 18,041,398 33,134,018 3,833,067 493,699 12,685,588 8,334,536 5,228,049 – – – 1,193,039 – 549,102 1,150,315 – 340,826 – – – – – – – – 316,263 – 1,911,251 1,237,202 – 72,216 – 18,007,417 151,065 4,484,317 – – 12,213 23,479,312 857,842 263,050 – – 2,229,945 843,117 6,310 11,108 – – – – – – – 315,500 7,189,332 359,103 – – – 4,693,507 4,448 14,755,624 2,040,243 316,263 21,379,151 29,096,734 3,090,480 315,500 12,246,390 Other Assets Securitisation RM’000 RM’000 Equity RM’000 Total Exposures after Netting & Credit Risk Mitigation* RM’000 – 147,139,616 – 10,699,924 – 2,820,354 – 4,486,001 – 22,774,564 485,932 29,671,995 4,824 1,046,761 61,467 – 2,139,985 987,124 2,243,000 17,080,923 29,671,995 1,570,143 490,756 218,639,215* 53,693,170* – 112,628,488 – 11,941,049 – 2,229,945 – 4,158,098 – 23,485,622 306,657 28,453,877 779 734,842 159,896 Total Risk Weighted Assets* RM’000 Basel II Pillar 3 pg. 288-351 The Financials pg. 10-287 Table 38: Credit Risk Disclosure on Risk-Weights under the Standardised Approach for Maybank Group – 2,388,210 780,481 2,079,049 17,614,217 28,453,877 1,102,263 307,436 183,631,921* 52,418,097* * Total Exposures after netting & credit risk mitigation and risk-weighted assets do not include securitisation. Table 39: Credit Risk Disclosure on Risk-Weights under the Standardised Approach for Maybank Exposures after Netting and Credit Risk Mitigation Risk Weights Sovereigns & Central Banks RM’000 PSEs RM’000 Banks, MDBs & FDIs RM’000 As at 31 Dec 2017 0% 20% 35% 50% 75% 100% 150% 80,682,156 1,812,914 – 383,068 – 1,317,878 – 7,946,165 2,922,564 – 121,102 – 2,355,101 – 40,715 – – – – – – Total 84,196,016 13,344,932 As at 31 Dec 2016 0% 20% 35% 50% 75% 100% 150% 61,550,990 3,890,231 – 410,692 – 1,696,337 – Total 67,548,250 Insurance Cos, Securities Firms & Fund Managers RM’000 Corporates RM’000 Regulatory Retail RM’000 Residental Mortgages RM’000 Higher Risk Assets RM’000 – – – – – – – 500,838 1,857,665 – 294,381 – 8,728,707 11,318 1,642,991 – – 1,195 9,518,947 3,911,306 3,728 – – 404,593 33,387 – 1,067 – – – – – – – 211,306 4,850,772 1,432,621 – – – 3,491,766 – 40,715 – 11,392,909 15,078,167 439,047 211,306 9,775,159 4,571,895 4,418,710 – – – 1,105,419 – 218,470 – – – – – – – – – – – – – 481,818 1,123,530 – 57,651 – 13,091,331 9,713 1,490,249 – – 585 8,281,762 28,369 234 – – 373,650 20,828 6,310 708 – – – – – – – 161,723 5,687,255 258,076 – – – 3,683,322 – 10,096,024 218,470 – 14,764,043 9,801,199 401,496 161,723 9,628,653 Other Assets Securitisation RM’000 RM’000 61,467 Equity RM’000 Total Exposures after Netting & Credit Risk Mitigation* RM’000 – – – – – 319,680 4,045 95,663,637 8,025,764 404,593 833,133 9,518,947 20,125,505 230,397 – 1,605,153 141,608 416,567 7,139,210 20,125,505 345,596 323,725 134,801,976* 29,773,639* – – – – – 287,926 – 159,896 Total Risk Weighted Assets* RM’000 74,000,677 9,690,547 373,650 489,756 8,288,072 19,893,412 171,670 – 1,938,109 130,777 244,878 6,216,054 19,893,412 257,505 287,926 112,907,784* 28,680,735* * Total Exposures after netting & credit risk mitigation and risk-weighted assets do not include securitisation. 335
338. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 40 : Credit Risk Disclosure on Risk-Weights under the Standardised Approach for Maybank Islamic Exposures after Netting and Credit Risk Mitigation Corporates RM’000 Regulatory Retail RM’000 Residental Mortgages RM’000 Higher Risk Assets RM’000 Other Assets RM’000 Equity RM’000 Total Exposures after Netting & Credit Risk Mitigation RM’000 – – – – – – – 183,244 72,546 – 353 – 2,351,693 212 796,041 – – 941 1,672,576 1,333,369 – – – 1,950,726 927,959 18,829 1,735 – – – – – – – 10,413 247,002 – – – – 278,323 – – – – – – – – 41,025,664 446,233 1,950,726 929,253 1,691,405 6,275,061 10,625 – 89,246 682,754 464,627 1,268,554 6,275,062 15,938 1 – 2,608,048 3,802,927 2,899,249 10,413 525,325 – 52,328,967 8,796,181 6,262,641 2,296,425 – – – 1,091,788 – – – – – – – – – – – – – – – 179,980 73,932 – 467 – 1,626,440 264 548,649 – – 1,082 1,881,210 1,375,525 – – – 1,376,925 789,864 – 4,404 – – – – – – – 7,338 634,591 – – – – 270,611 – – – – – – – – 28,039,567 2,416,230 1,376,925 791,413 1,881,210 4,368,768 7,602 – 483,246 481,924 395,706 1,410,908 4,368,768 11,403 9,650,854 – – 1,881,083 3,806,466 2,171,193 7,338 905,202 – 38,881,715 7,151,955 Risk Weights Sovereigns & Central Banks RM’000 PSEs RM’000 Banks, MDBs & FDIs RM’000 As at 31 Dec 2017 0% 20% 35% 50% 75% 100% 150% 27,269,485 41,415 – – – – – 12,529,891 332,272 – – – 2,309,941 – 1 – – – – – – Total 27,310,900 15,172,104 As at 31 Dec 2016 0% 20% 35% 50% 75% 100% 150% 20,413,706 45,873 – – – – – Total 20,459,579 Insurance Cos, Securities Firms & Fund Managers RM’000 Total Risk Weighted Assets RM’000 Table 41: Disclosure on Rated Exposures according to Ratings by ECAI by Maybank Group Rating Categories Exposure Class As at 31 December 2017 On and Off-Balance Sheet Exposures Rated Exposures A) Ratings of Corporate: Public Sector Entities Insurance Cos, Securities Firms & Fund Managers Corporates B) Ratings of Sovereigns and Central Banks: Sovereigns and Central Banks C) Ratings of Banking Institutions: Banks, MDBs and FDIs Total Exposures As at 31 December 2016 On and Off-Balance Sheet Exposures Rated Exposures A) Ratings of Corporate: Public Sector Entities Insurance Cos, Securities Firms & Fund Managers Corporates B) Ratings of Sovereigns and Central Banks: Sovereigns and Central Banks C) Ratings of Banking Institutions: Banks, MDBs and FDIs Total Exposures 336 1 RM’000 2 RM’000 3 RM’000 4 RM’000 5 RM’000 Total RM’000 17,386,456 – 2,160,253 3,254,836 – 1,942,611 121,102 – 300,225 – – 134,728 2,455,042 393,327 13,503,581 23,217,436 393,327 18,041,398 116,278,500 1,854,329 2,168,098 – 2,738,605 123,039,532 366,098 2,035,881 908,415 – – 3,310,394 136,191,307 9,087,657 3,497,840 134,728 19,090,555 168,002,087 8,334,536 – 1,911,251 5,228,049 – 1,237,202 – – 72,216 – – 151,065 1,193,039 316,263 18,007,417 14,755,624 316,263 21,379,151 90,159,950 3,966,381 2,889,726 – 3,068,044 100,084,101 549,102 1,150,315 340,826 – – 2,040,243 100,954,839 11,581,947 3,302,768 151,065 22,584,763 138,575,382
339. Our Performance pg . 4-8 CREDIT RISK Exposure Class As at 31 December 2017 On and Off Balance-Sheet Exposures Rated Exposures A) Ratings of Corporate: Public Sector Entities Insurance Cos, Securities Firms & Fund Managers Corporates B) Ratings of Sovereigns and Central Banks: Sovereigns and Central Banks C) Ratings of Banking Institutions: Banks, MDBs and FDIs Total Exposures As at 31 December 2016 On and Off-Balance Sheet Exposures Rated Exposures A) Ratings of Corporate: Public Sector Entities Insurance Cos, Securities Firms & Fund Managers Corporates B) Ratings of Sovereigns and Central Banks: Sovereigns and Central Banks C) Ratings of Banking Institutions: Banks, MDBs and FDIs Total Exposures 1 RM’000 2 RM’000 3 RM’000 4 RM’000 5 RM’000 Total RM’000 7,946,165 – 500,838 2,922,564 – 1,857,665 121,102 – 294,381 – – 11,318 2,355,101 – 8,728,708 13,344,932 – 11,392,910 80,682,156 1,812,914 383,068 – 1,317,878 84,196,016 40,715 – – – – 40,715 89,169,874 6,593,143 798,551 11,318 12,401,687 108,974,573 4,571,895 – 481,817 4,418,710 – 57,652 – – 1,123,530 – – 9,713 1,105,419 – 13,091,331 10,096,024 – 14,764,043 61,550,990 3,890,232 410,692 – – 65,851,914 218,470 – – – – 218,470 66,823,172 8,366,594 1,534,222 9,713 14,196,750 90,930,451 Basel II Pillar 3 pg. 288-351 Rating Categories The Financials pg. 10-287 Table 42: Disclosure on Rated Exposures according to Ratings by ECAI by Maybank Table 43: Disclosure on Rated Exposures according to Ratings by ECAI by Maybank Islamic Rating Categories Exposure Class As at 31 December 2017 On and Off-Balance Sheet Exposures Rated Exposures A) Ratings of Corporate: Public Sector Entities Banks, Development Financial Institutions & MDBs Corporates B) Ratings of Sovereigns and Central Banks: Sovereigns and Central Banks Total Exposures 1 RM’000 2 RM’000 3 RM’000 4 RM’000 5 RM’000 Total RM’000 12,529,891 – 183,243 332,272 – 72,546 – – 353 – – 212 2,309,941 – 2,351,693 15,172,104 – 2,608,047 27,269,485 41,415 – – – 27,310,900 39,982,619 446,233 353 212 4,661,634 45,091,051 As at 31 December 2016 On and Off-Balance Sheet Exposures Rated Exposures A) Ratings of Corporate: Public Sector Entities Corporates B) Ratings of Sovereigns and Central Banks: Sovereigns and Central Banks 6,262,641 179,980 2,296,425 74,399 – – – – 1,091,788 1,626,704 9,650,854 1,881,083 20,413,706 45,873 – – – 20,459,579 Total Exposures 26,856,327 2,416,697 – – 2,718,492 31,991,516 337
340. MAYBANK ANNUAL REPORT 2017 CREDIT RISK COUNTERPARTY CREDIT RISK Counterparty credit risk is the risk arising from the possibility that a counterparty may default on current and future payments as required by contract for treasury-related activities . Counterparty credit risk originates from the Group’s lending business, investment and treasury activities that impact the Group’s trading and banking books through dealings in foreign exchange, money market instruments, fixed income securities, commodities, equities and over-the-counter (“OTC”) derivatives. The primary distinguishing feature of counterparty credit risk compared to other forms of credit risk is that the future value of the underlying contract is uncertain, and may be either positive or negative depending on the value of all future cash flows. Limits Counterparty credit risk exposures are managed via counterparty limits either on a single counterparty basis or counterparty group basis that adheres to BNM’s Single Counterparty Exposure Limits (“SCEL”). The Group actively monitors and manages its exposures to ensure that exposures to a single counterparty or a group of connected counterparties are within prudent limits at all times. Counterparty credit risk exposures may be materially affected by market risk events. The Group has in place dedicated teams to promptly identify, review, and prescribe appropriate actions to the respective risk committees. Credit Risk Exposure Treatment For on-balance sheet exposures, the Group employs risk treatments in accordance with BNM and Basel II guidelines. For off-balance sheet exposures, the Group measures credit risk using Credit Risk Equivalent via the Current Exposure Method. This method calculates the Group’s credit risk exposure after considering both the mark-to-market exposures and the appropriate add-on factors for potential future exposures. The add-on factors employed are in accordance with BNM’s guidelines and Basel II requirements. Counterparty Credit Risk Mitigation The Group typically engages with entities of strong credit quality and utilises a comprehensive approach of limit setting by trade, counterparty and portfolio levels to diversify exposures across different counterparties. As a secondary recourse, the Group adopts credit risk mitigation methods using bilateral netting and collateral netting with counterparties, where appropriate. Counterparty credit risk exposures in swaps and derivatives are mitigated via master netting arrangements i.e. the International Swaps and Derivatives Association (“ISDA”) Master Agreement which provides for closeout and payment netting with counterparties, where possible. A master agreement governs all transactions between two parties and enables the netting of outstanding obligations upon termination of outstanding transactions should an event of default or other predetermined events occur. In certain cases, the Group may request for further mitigation by entering into a Credit Support Annex (“CSA”) agreement with approved ISDA counterparties. This provides collateral margining in order to mitigate counterparty credit risk exposures. Tables 44 through 46 show the off-balance sheet and counterparty credit risk exposures for the Group, the Bank and Maybank Islamic, respectively. 338
341. Our Performance pg . 4-8 CREDIT RISK Credit Equivalent Amount RM’000 RWA RM’000 12,216,975 18,831,965 5,544,647 12,064,534 9,348,060 1,107,435 6,552,472 6,086,500 694,977 13,133,194 176,623,638 412,246 4,472,716 180,312 2,067,829 155,405,836 19,963,457 1,254,345 2,936,500 1,447,021 89,195 844,889 1,174,766 48,174 39,861,024 2,509,744 1,500,635 13,195,871 21,055,538 5,609,615 266,834 1,639,966 602,944 146,095 836,583 517,957 490,296 21,436 5,768 262,303 227,993 – 10,492 10,944 – 3,792 1,976 – OTC derivative transactions and credit derivative contracts subject to valid bilateral netting agreements Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year Any commitments that are unconditionally cancellable at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness Unutilised credit card lines (for portfolios under the standardised approach subject to 20% CCF) 244,228,266 12,105,361 28,586,754 4,910,417 26,263,062 19,461,340 2,180,701 12,565,526 9,980,336 133,658,775 1,664,271 315,487 306,640 73,053 260,242 Total 686,945,166 81,193,117 42,148,351 Nature of Item As at 31 December 2017 Direct credit substitutes Transaction related contingent items Short-term self-liquidating trade-related contingencies Lending of banks’ securities or the posting of securities as collateral by banks, including instances where these arise out of repo-style transactions (i.e. repurchase/reverse repurchase and securities lending/borrowing transactions), and commitment to buy-back Islamic securities under Sell and Buy-Back Foreign exchange related contracts – One year or less – Over one year to five years – Over five years Interest/profit rate related contracts – One year or less – Over one year to five years – Over five years Commodity contracts – One year or less – Over one year to five years – Over five years As at 31 December 2016 Direct credit substitutes Transaction related contingent items Short-term self-liquidating trade-related contingencies Lending of banks’ securities or the posting of securities as collateral by banks, including instances where these arise out of repo-style transactions (i.e. repurchase/reverse repurchase and securities lending/borrowing transactions), and commitment to buy-back Islamic securities under Sell and Buy-Back Foreign exchange related contracts 12,878,417 20,378,669 6,091,737 11,637,132 9,865,761 1,206,287 6,773,719 6,526,837 806,417 4,412,355 171,957,081 85,577 6,879,417 4,084 3,760,563 – One year or less – Over one year to five years – Over five years 135,133,814 30,284,278 6,538,989 3,133,811 2,700,192 1,045,414 1,368,872 1,710,991 680,700 Interest/profit rate related contracts 24,700,056 1,825,522 1,579,986 – One year or less – Over one year to five years – Over five years 11,076,154 7,161,056 6,462,846 208,119 916,913 700,490 172,482 602,663 804,841 Commodity contracts 330,604 43,124 21,111 – One year or less – Over one year to five years – Over five years 330,604 – – 43,124 – – 21,111 – – OTC derivative transactions and credit derivative contracts subject to valid bilateral netting agreements Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year Any commitments that are unconditionally cancellable at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness Unutilised credit card lines (for portfolios under the standardised approach subject to 20% CCF) 231,678,436 52,255,639 26,919,348 3,502,945 29,185,348 16,793,150 1,177,354 14,299,675 9,513,436 59,706,889 1,870,500 285,408 349,176 71,269 291,078 Total 613,179,731 81,658,847 44,825,529 Basel II Pillar 3 pg. 288-351 Principal/ Notional Amount RM’000 The Financials pg. 10-287 Table 44: Disclosure on Off-Balance Sheet and Counterparty Credit Risk Exposure for Maybank Group 339
342. MAYBANK ANNUAL REPORT 2017 CREDIT RISK Table 45 : Disclosure on Off-Balance Sheet and Counterparty Credit Risk Exposure for Maybank Principal/ Notional Amount RM’000 Credit Equivalent Amount RM’000 RWA RM’000 10,491,711 14,501,336 4,691,333 10,373,876 7,207,090 937,807 5,071,621 4,429,669 548,026 12,954,667 166,426,869 411,803 4,102,244 180,312 1,895,291 149,102,193 17,318,601 6,075 2,738,707 1,363,294 243 778,150 1,117,016 125 27,236,265 1,829,987 1,167,903 4,983,926 16,529,264 5,723,075 129,324 1,084,951 615,712 101,606 551,190 515,107 490,296 21,436 5,768 262,303 227,993 – 10,492 10,944 – 3,792 1,976 – OTC derivative transactions and credit derivative contracts subject to valid bilateral netting agreements Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year Any commitments that are unconditionally cancellable at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness Unutilised credit card lines (for portfolios under the standardised approach subject to 20% CCF) 244,228,266 5,958,301 20,971,288 4,910,417 23,168,096 14,511,405 2,180,701 10,967,370 6,780,823 99,184,486 793,568 143,269 132,499 38,661 129,236 Total 607,928,386 67,749,929 33,395,379 11,161,467 17,027,217 5,185,003 10,133,153 8,226,900 1,029,670 5,276,902 5,175,883 644,283 4,412,355 160,730,105 85,577 6,579,633 4,084 3,650,493 126,735,651 28,771,658 5,222,796 2,971,990 2,663,207 944,436 1,311,952 1,699,266 639,275 18,106,672 1,345,520 1,218,721 6,627,195 4,958,416 6,521,061 58,799 581,299 705,422 105,545 370,716 742,460 330,604 43,124 21,111 330,604 – – 43,124 – – 21,111 – – OTC derivative transactions and credit derivative contracts subject to valid bilateral netting agreements Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year Any commitments that are unconditionally cancellable at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness Unutilised credit card lines (for portfolios under the standardised approach subject to 20% CCF) 231,678,436 45,289,350 17,386,347 3,502,945 25,583,666 10,987,463 1,177,354 12,464,323 6,040,954 39,795,404 761,776 133,844 127,432 32,994 124,460 Total 551,864,736 67,778,927 35,831,562 Nature of Item As at 31 December 2017 Direct credit substitutes Transaction related contingent items Short-term self-liquidating trade-related contingencies Lending of banks’ securities or the posting of securities as collateral by banks, including instances where these arise out of repo-style transactions (i.e. repurchase/reverse repurchase and securities lending/borrowing transactions), and commitment to buy-back Islamic securities under Sell and Buy-Back Foreign exchange related contracts – One year or less – Over one year to five years – Over five years Interest/profit rate related contracts – One year or less – Over one year to five years – Over five years Commodity contracts – One year or less – Over one year to five years – Over five years As at 31 December 2016 Direct credit substitutes Transaction related contingent items Short term self liquidating trade related contingencies Lending of banks’ securities or the posting of securities as collateral by banks, including instances where these arise out of repo-style transactions (i.e. repurchase/reverse repurchase and securities lending/borrowing transactions), and commitment to buy-back Islamic securities under Sell and Buy-Back Foreign exchange related contracts – One year or less – Over one year to five years – Over five years Interest/profit rate related contracts – One year or less – Over one year to five years – Over five years Commodity contracts – One year or less – Over one year to five years – Over five years 340
343. Our Performance pg . 4-8 CREDIT RISK Credit Equivalent Amount RM’000 RWA RM’000 1,472,763 3,484,342 188,659 13,600,196 1,438,157 1,717,826 36,697 589,507 1,292,069 1,278,929 28,596 186,751 9,699,523 2,652,403 1,248,270 407,037 93,518 88,952 83,392 55,310 48,049 6,902,547 755,660 326,147 170,607 5,650,590 1,081,350 5,545 677,839 72,276 975 283,202 41,970 5,154,910 6,080,688 2,676,066 4,046,677 1,093,008 2,296,142 3,628,674 – 172,218 – 34,392 – Total 40,512,779 11,432,808 6,536,034 As at 31 December 2016 Direct credit substitutes Transaction related contingent items Short-term self-liquidating trade-related contingencies Foreign exchange related contracts 1,456,342 2,383,664 277,534 13,142,938 1,243,371 1,155,527 50,777 594,292 1,275,387 861,936 35,283 169,997 10,314,126 1,512,620 1,316,192 456,329 36,985 100,978 116,847 11,725 41,425 3,572,384 527,108 284,452 1,794 2,372,828 1,197,762 612 424,297 102,199 710 191,105 92,637 4,911,008 7,683,303 2,728,616 4,636,842 1,321,241 2,314,448 3,834,297 – 151,564 – 38,274 – 37,261,470 11,088,097 6,301,018 Nature of Item As at 31 December 2017 Direct credit substitutes Transaction related contingent items Short-term self-liquidating trade-related contingencies Foreign exchange related contracts – One year or less – Over one year to five years – Over five years Profit rate related contracts – One year or less – Over one year to five years – Over five years Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year Any commitments that are unconditionally cancellable at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a customer’s creditworthiness Unutilised credit card lines (for portfolios under the standardised approach subject to 20% CCF) – One year or less – Over one year to five years – Over five years Profit rate related contracts – One year or less – Over one year to five years – Over five years Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year Any commitments that are unconditionally cancellable at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a customer’s creditworthiness Unutilised credit card lines (for portfolios under the standardised approach subject to 20% CCF) Total Basel II Pillar 3 pg. 288-351 Principal/ Notional Amount RM’000 The Financials pg. 10-287 Table 46: Disclosure on Off-Balance Sheet and Counterparty Credit Risk Exposure for Maybank Islamic COUNTRY RISK Country risk is the risk arising from changes in various political, financial or economic factors that may adversely cause a borrower or counterparty to default on their obligations. The limits for countries are set based on country-specific criteria as well as strategic business considerations, and are approved at RMC. 341
344. MAYBANK ANNUAL REPORT 2017 MARKET RISK Market risk is defined as the risk of loss or adverse impact on earnings or capital arising from changes in the level of volatility of market rates or prices such as interest rates /profit rates, foreign exchange rates, commodity prices and equity prices. iii. The Group’s approved policies require disciplined trading conduct. Dealers are to adhere to the limits set at all times and are strictly prohibited from transacting in any non-permissible instruments/activities as stipulated in the approved policies. The Group manages market risk of its trading and non-trading/banking activities using a variety of measurement techniques and controls. iv. In the event that trading risks require to be brought to management attention, there is a robust escalation process to inform designated authorities to ensure prompt action are taken for any non-adherence. Monthly reports are escalated and presented to Senior Management/ committee for further deliberation. TRADED MARKET RISK Traded market risk arises mainly from proprietary trading, flow trading and market-making activities. These activities may create positions held with trading intent to express a market view, to benefit from short-term price movements or to lock in arbitrage profits. The overall trading book portfolio is governed by trading limits, trading book policies and procedures. Policy requires the Group to set trading limits against the various quantitative and qualitative measures outlined below to manage the Group’s traded market risk. i. ii. The Group employs a Value-at-Risk (“VaR”) model to measure the expected loss in the trading book arising from severe market movements over a specified period of time within a given probability of occurrence. The Group is approved to utilize a VaR model based on the historical simulation method at a 99% confidence level using a 1-day holding period. For periodic independent validation, the VaR model is back tested regularly to gauge its model performance and accuracy. In addition, the Group computes a Stressed VaR based on a 1-day holding period to measure the VaR of the trading book arising from market movements over a previously identified stress period. Risk sensitivity measures: The Group measures first order and second order movements in market prices. For the trading portfolio’s risk sensitivity to interest rate movements, it is measured using the present value exposure to a one basis point (“PV01”). For the trading portfolio’s risk sensitivity to foreign exchange rate movements, the foreign exchange net open position (“FX NOP”) measure is employed. For non-linear risk sensitivity to market prices, option risk sensitivities are employed to manage options risk. For measuring the adverse impact of severe market price movements to trading profit in stress event scenarios, stressed profit/loss methods are employed. For traded credit risk, the Group adopts measures of Jump-to-Default (“JTD”) and credit spread sensitivity to a basis point (“CS01”). JTD measures the immediate impact to the value of the portfolio during a credit event (e.g. issuer default) while CS01 measures the change in value of the portfolio when the credit spread changes by 1 basis point. NON-TRADED MARKET RISK Non-traded market risk is primarily inherent risk arising from banking book activities. The major risk classes are interest rate risk/rate of return risk in the banking book and foreign exchange risk. Interest Rate Risk/Rate of Return Risk in the Banking Book (“IRR/RoRBB”) IRR/RoRBB is defined as risk of loss in earnings or economic value on banking book exposures arising from movements in interest rates. Sources of IRR/ RoRBB include repricing, basis, yield curve and option risk. In addition, Islamic operations is exposed to displaced commercial risk. Accepting IRR/RoRBB is a normal part of banking and can be an important source of profitability and shareholder value. However, excesses of this risk can be detrimental to the Group’s earnings, capital, liquidity and solvency. Banking book policies and limits are established to measure and manage non-traded market risk. Repricing gap analysis remains one of the building blocks for IRR/RoRBB assessment for the Group. Earnings-at-Risk (“EaR”) and Economic Value-at-Risk (“EVaR”) are derived to gauge the maximum tolerance level of the adverse impact of market interest rate towards earnings and capital. Through Group Asset and Liability Management Committee (“Group ALCO”) supervision, the lines of businesses are insulated from IRR/RoRBB through fund transfer pricing whereby non-traded market and liquidity risks are centralised at the corporate treasury unit for active risk management and balance sheet optimisation. The corporate treasury unit reviews the risk exposures regularly and recommends strategies to mitigate any unwarranted risk exposures in accordance with the approved policies. Certain portfolios such as products with non-deterministic characteristics are subjected to periodic statistical modelling to understand the customer/ product’s behavioural patterns in relation to changing rates and business cycles. Regular risk assessment and stress testing are applied to ensure the portfolios can withstand the risk tolerance and adverse rate scenarios. Tables 47 (a) and (b) show the impact of a change in IRR/RoRBB to earnings and capital for the Group, the Bank and Maybank Islamic respectively. 342
345. Our Performance pg . 4-8 MARKET RISK Impact on Earnings of which: MYR USD SGD IDR Others* Group ±200bps RM‘000 Maybank ±200bps RM‘000 1,465,943 1,545,596 (432,702) (223,822) (80,514) 657,386 1,642,395 982,952 (347,163) (220,869) 3,274 1,224,202 As at 31 December 2016 Maybank Islamic ±200bps RM‘000 521,662 559,189 (28,010) – – (9,517) Group ±200bps RM‘000 Maybank ±200bps RM‘000 1,384,286 1,517,106 (492,613) 116,304 (90,418) 333,907 1,194,799 1,084,392 (345,595) 116,004 4,873 335,125 Maybank Islamic ±200bps RM‘000 369,967 431,121 (65,220) – – 4,066 Basel II Pillar 3 pg. 288-351 As at 31 December 2017 The Financials pg. 10-287 Table 47 (a): Interest Rate Risk/Rate of Return Risk in the Banking Book for the Group, Maybank and Maybank Islamic (Impact on Earnings) Table 47 (b): Interest Rate Risk/Rate of Return Risk in the Banking Book for Maybank Group, Maybank and Maybank Islamic (Impact on Capital) As at 31 December 2017 Maybank ±200bps RM‘000 Group ±200bps RM‘000 Impact on Earnings of which: MYR USD SGD IDR Others* (2,560,724) (3,248,403) 4,681 717,865 (111,424) 76,557 (2,483,054) (3,170,675) (11,161) 716,918 (43,084) 24,947 As at 31 December 2016 Maybank Islamic ±200bps RM‘000 (69,453) (75,842) 6,017 – – 371 Group ±200bps RM‘000 Maybank ±200bps RM‘000 Maybank Islamic ±200bps RM‘000 (751,915) (1,368,946) 234,269 306,408 (85,602) 161,955 (549,678) (1,174,984) 242,170 305,805 (53,887) 131,217 188,282 (192,184) 3,722 – – 179 Notes: 1. All figures are in absolute amount with the exception of ‘total impact’ which is in net aggregate amount (after netting off currency/position at different geographical locations). 2. * Inclusive of GBP, HKD, BND, VND, CNY, EUR, PHP and other currencies. Foreign Exchange Risk in the Banking Book CAPITAL TREATMENT FOR MARKET RISK Foreign exchange (“FX”) risk arises from adverse movements in the exchange rates of two currencies. The Group adopts the SA to compute the minimum capital requirement for market risk as per BNM’s Guidelines on Capital Adequacy Framework (Basel II – Risk Weighted Assets) and CAFIB (Basel II – Risk Weighted Assets). Tables 7 through 9 separately disclose the RWA and capital requirements for Market Risk of the Group, the Bank and Maybank Islamic, respectively. FX risk exposures can be attributed to structural and non-structural positions. Structural FX positions are primarily net investments in overseas branches and subsidiaries whereas other FX positions are non-structural in nature. Generally, structural FX positions need not be hedged as these investments are by definition “perpetual” and revaluation losses will not materialise if they are not sold. The residual or unhedged FX positions are managed in accordance with the approved policies and limits. Foreign currency assets in the banking book are match-funded by the same currency to minimise FX NOP. In addition, the Group implements qualitative controls such as listing of permissible on/offshore currencies and hedging requirements for managing FX risk. The FX risk is primarily assessed from both earnings and capital perspectives. Group ALCO plays an active role in ensuring FX risk is managed within stipulated limits. Interest rate/profit rate, foreign exchange and options are the primary risk factors in the Group’s trading activities, whilst commodity and equity are generally attributed to investment banking activities. LIQUIDITY RISK Liquidity risk is defined as the risk of an adverse impact to the financial condition or overall safety and soundness arising from the inability (or perceived inability) or unexpected higher cost to meet obligations. It is also known as consequential risk, triggered by underlying problems which can be endogenous (e.g. credit risk deterioration, rating downgrade, operational risk events) or exogenous (e.g. market disruption, default in the banking payment system and deterioration of sovereign risk). 343
346. MAYBANK ANNUAL REPORT 2017 MARKET RISK Balance sheet risk measures structurally maintain a diverse and stable funding base while achieving an optimal portfolio . These measures drive the desired targets for loans to deposits ratio, sources of funds through borrowing, wholesale borrowing and swaps markets in order to support the growing asset base regionally. Through these measures, the Group shapes its assets and liabilities profile to achieve its desired balance sheet state. The net cash flow mismatch along different time horizons, also known as liquidity gap analysis, provides Senior Management with a clear picture of the imminent funding needs in the near term as well as the structural balance sheet for the medium term and long term tenors. The sources of fund providers are reviewed to maintain a wide diversification by currency, provider, product and term, thus minimising excessive funding concentration. The Group runs liquidity stress scenarios to assess the vulnerability of cash flows under stressed market situations. The Group continuously reviews and maintains unencumbered High Quality Liquid Assets (“HQLA”) that can be easily sold or pledged, as readily available sources of funds for immediate cash to determine the funding capacity to withstand stressed situations. In line with BNM requirements on Liquidity Coverage Ratio (“LCR”) effective 1 June 2015, the Group ensures its LCR remains above the specified regulatory minimum requirements at both entity and consolidated levels. LCR is a short-term resilience assessment to measure the adequacy of HQLA to withstand an acute liquidity stress scenario over a 30-day horizon. HQLA are liquid assets that can be easily and immediately converted into cash at little or no loss of value. Over and above this, the Group is preparing for the Net Stable Funding Ratio (“NSFR”) to ensure that it maintains sufficient stable funds to support its asset growth over a one year horizon. NSFR promotes long-term structural funding of the Balance Sheet and strengthens the long term resilience of the liquidity risk profile. • Privately Held Privately held equities are unquoted investments where their fair value cannot be reliably measured and therefore are carried at cost less impairment losses, if any. The Group holds investments in equity securities with the purpose of gaining strategic advantage as well as capital appreciation on the sale thereof. Tables 48 and 49 show the equity exposures for banking book positions for the Group and the Bank respectively. Table 48: Equities Disclosures for Banking Book Positions for Maybank Group As at 31 December 2017 As at 31 December 2016 Equity Type EAD RM’000 RWA RM’000 EAD RM’000 RWA RM’000 Publicly traded Privately held 490,756 493,699 493,168 740,548 307,436 315,500 307,825 473,250 Total Net Unrealised Gains/(Loss) Cumulative realised gains/(losses) arising from sales and liquidations in the reporting period The objective of equity exposure is to determine the nature and extent of the Group’s exposure to investment risk arising from equity positions and instruments held in its banking book. 344 170,315 163,594 38,748 631,840 As at 31 December 2017 As at 31 December 2016 Equity Type EAD RM’000 RWA RM’000 EAD RM’000 RWA RM’000 Publicly traded Privately held 323,725 211,306 325,748 316,959 287,926 161,723 287,926 242,584 • Publicly Traded Holding of equity investments comprises of quoted shares which are traded actively in the stock exchange. All publicly traded equity exposures are stated at fair value. RM’000 Table 49: Equities Disclosures for Banking Book Positions for Maybank EQUITY RISK IN THE BANKING BOOK Equity price risk is the risk arising from movements in the price of equities, equity indices and equity baskets. RM’000 RM’000 RM’000 Total Net Unrealised Gains/(Loss) 41,656 63,777 Cumulative realised gains/(losses) arising from sales and liquidations in the reporting period 34,493 632,425
347. The Group has evolved and broadened its management of operational risk to encompass a wider range of emerging non-financial risks . This is utmost critical in enabling the Group to effectively manage the risk of loss arising from operational failures due to inadequate or failed internal processes, people and systems or external factors that could result in monetary losses or negative reputational implications to the brand value and stakeholder’s perception towards the Group. Our Performance pg. 4-8 The Financials pg. 10-287 NON-FINANCIAL RISK The management of non-financial risk is anchored on an established risk strategy that provides the overall principles and objectives, with defined risk appetite reflecting the Group’s acceptable tolerance level for non-financial risk. A sound risk governance model premised on the Three Lines of Defence and a robust risk culture are vital in driving the management of non-financial risk in the Group. Further information on the risk governance model and risk culture can be found in the Group Risk Management section under the Corporate Book. Basel II Pillar 3 pg. 288-351 MANAGEMENT OF NON-FINANCIAL RISK To further strengthen the management of non-financial risk, risk methodologies and tools are deployed and integrated into processes to support businesses from point of discovery of an incident until its resolution. The risk methodologies and tools complement each other for an effective process to identify, assess and measure, control, monitor and report non-financial risk exposures on a timely basis, in minimising the resulting reputational risk towards the Group. An integrated risk management system for non-financial risk forms the foundation to enable the implementation of the methodologies and tools. Diagram 2: Management of Non-Financial Risk Continuous Improvement BUSINESS MISSIONS, OBJECTIVES & STRATEGIES NON-FINANCIAL RISK STRATEGY & APPETITE Validation/ Reassessment Non-Financial Risk Management Process Risk Identification Risk Assessment & Measurement Strategy & Policy Governance & Organisation Risk Control Tools – RCSA, KRI & IMDC Risk Monitoring Disclosure Risk Reporting Capital Charge Measurement RISK MANAGEMENT INFRASTRUCTURE Risk Identification, Assessment and Measurement • Incident Management and Data Collection (“IMDC”) IMDC provides a structured and systematic platform for the management and reporting of non-financial risk incidents. The collection of consistent and standardised information on non-financial risk incidents in a centralised database enables a comprehensive analysis of operational lapses, focuses on operational ‘hotspots’ and minimises the risk impact of future operational losses. • Risk and Control Self-Assessment (“RCSA”) RCSA is a process of continual assessment of non-financial risk inherent in the operations of the Group and the effectiveness of corresponding controls in place to mitigate the risk. It is a risk profiling tool which gives due emphasis to the review of business processes for the identification of control gaps and development of appropriate action plans to address these gaps. RCSA is integral in supporting businesses to manage changes in the business and operational environment of the Group, in which a rigorous process of identification and assessment of risk and controls with appropriate mitigation and action plans is built into the governance of the changes, for example product approval for new/enhanced products/services, implementation of IT projects and other changes to the operating environment of the Group (e.g. outsourcing, restructuring or enhancement to business processes). • Key Risk Indicator (“KRI”) KRI provides a structured process to measure and monitor critical non-financial risk exposures by way of establishing indicators that serves as early warning signals to increasing risk at the Group, Business and Operating levels. KRI enables close monitoring of non-financial risk to be within the tolerable level before the risk translates into operational losses. 345
348. MAYBANK ANNUAL REPORT 2017 NON-FINANCIAL RISK Risk Control and Mitigation The objective of non-financial risk controls and mitigation is to minimise or mitigate non-financial risk exposure to an acceptable level , as defined by the Group’s risk appetite. The key control and mitigation tools deployed in the Group are as follows: •Outsourcing Outsourcing minimises non-financial risk exposure by enabling the Group to focus on its core business with a view to enhance operational efficiency. An external party is engaged to perform an internal operational function on behalf of the Group whilst the Group still maintains ownership and ultimate responsibility of the function outsourced including meeting technology risk standards. • Anti-Fraud Management The Group has in place robust and comprehensive tools and programs aligned to the established vision, principles and strategies in ensuring that the risks arising from fraud are managed in a decisive, timely and systematic manner. Therefore mitigating the risk to the lowest level possible and to deter future occurrences. Clear roles and responsibilities are outlined at every level of the organisation in promoting high standards of integrity in every employee. • Business Continuity Management (“BCM”) BCM serves as a tool for a comprehensive and integrated approach in building organisational resilience in event of disruptions, with the capability for an effective response in safeguarding the interests of its key stakeholders, reputation, brand and value-creating activities. The BCM approach in the Group is premised upon the following key focus: • To implement mitigating measures to minimise the impact of disruption (i.e. disaster/crisis/emergency) to business and critical operations; and • To resume business and critical operations of the Group in a timely manner in the event of a disruption. In the event of a disruption, the main priority for the Group is always the safety of people, followed by stabilisation of the disruptive incident and escalation to the appropriate stakeholder for response with the aim of minimising the potential impact of the disruption. The BCM approach encapsulates key components as further outlined in the diagram below, which includes identification of potential threats to the Group, assessment of the level of impact to the people and business operations should those threats be realised, and implementation of appropriate strategies to ensure people safety and business recovery against downtime. Diagram 3: BCM Approach IDENTIFY REACT ESCALATE RESPOND • Disaster • Crisis • Evacuation • Damage Assessment • Notification & Escalation • Activation • Recovery The Group continuously reviews business operations’ resilience through regular testing (planned and without prior notification), in ensuring the established BCM process and infrastructure have the required capability and resources to recover during disruptions. Regular Crisis Simulation Exercise (“CSE”) and Business Continuity Plan (“BCP”) “Live Run” Activations are carried out for each critical business function in the Group, in addition to simultaneous CSEs across the Group. Regular testing and exercises, checks, amongst others, on the preparedness of staff, the readiness of alternate worksites, reliability of IT system disaster recovery, and effectiveness of communication, escalation and recovery procedures between all locations. 346
349. Our Performance pg . 4-8 NON-FINANCIAL RISK The Plan encompasses clear strategies, decision-making authorities, roles and responsibilities and communication. Other key components covered as part of the Plan include recovery indicators, recovery options and preparatory measures as well as scenario analysis. The Plan serves as a guideline for proactive actions to be taken under different capital and liquidity event scenarios focusing on “Normal”, “Beyond Normal” and “Extreme” stress levels. It is developed as part of the Group’s IRM Framework which outlines overarching principles for the management of risks that the Group is exposed to. Diagram 4: Interlink Between Recovery Plan Components and Risk Management Framework Normal stress Stress severity Risk Appetite Statement beyond normal stress extreme stress Risk capacity Risk tolerance Risk appetite Calibration of risk limits and recovery indicators Risk appetite limits Risk management processes and governance BAU monitoring Risk management actions and recovery options Early warning phase Business as usual (“BAU”) Recovery phase Risk tolerance limits Early warning thresholds Development, approval and maintenance of recovery plan NON-VIABILITY Recovery planning components Key business states Basel II Pillar 3 pg. 288-351 The RCP is instituted with the aim to identify credible options to recover from events impacting the Group’s financial strength, operational capability as well as reputation. It provides a systematic approach in addressing potential capital, liquidity or funding disruptions affecting the liquidity soundness and financial solvency of the Group. The Financials pg. 10-287 • Maybank Group Recovery Planning (“RCP”) Resolution phase triggered upon notice of non-viability by the Bank Recovery thresholds Intensified monitoring Escalation and activation of early warning phase or recovery phase Implement management actions or recovery options to revert to desired risk levels ICAAP, Internal Liquidity Adequacy Assessment Process (“ILAAP”), Contingency Plan, BCP Menu of recovery options (based on impact and feasibility assessment) The Recovery Plan is an iterative and evolutionary process with regular reviews to ensure its effectiveness and robustness against changing scenarios and Regulatory requirements. Risk Monitoring and Reporting Supporting the implementation of the methodologies and tools are clearly defined processes to facilitate timely escalation and reporting of non-financial risk exposures experienced by businesses and operations to designated stakeholders (i.e. Management and relevant risk committees) in the Group for effective oversight on non-financial risk exposure. This includes continuous review, monitoring and reporting and analyses of non-financial risk incidents and its trend, risk ‘hotspots’, RCSA risk profile, risk exposure level via KRIs and the performance of outsourced service providers. CAPITAL TREATMENT FOR OPERATIONAL RISK The Group adopts the BIA to compute the minimum capital requirement for operational risk as per BNM’s Guidelines on Capital Adequacy Framework (Basel II – Risk Weighted Assets) and CAFIB (Basel II – Risk Weighted Assets). Tables 7 through 9 disclose separately the RWA and capital requirements for Operational Risk for the Group, the Bank and Maybank Islamic, respectively. The Group has established the foundation for The Standardised Approach (“TSA”) for Operational Risk. For the purpose of operational risk capital requirement, the Group has mapped its business activities into the eight business lines as prescribed by Basel II and BNM. 347
350. MAYBANK ANNUAL REPORT 2017 SHARIAH GOVERNANCE Shariah principles are the foundation for the practice of Islamic finance through the observance of the tenets , conditions and principles prescribed by Shariah as resolved by BNM’s and Securities Commission’s Shariah Advisory Council (“SAC”) and the appointed Shariah Committee within the Group. Comprehensive Shariah compliance infrastructure will ensure stakeholders’ confidence in Islamic financial institutions’ business activities and operations. In accordance with BNM requirements, the Group established a comprehensive and sound Shariah Governance Framework to ensure effective and efficient oversight by the Board, Shariah Committee, Management and Business Units on business activities and operations of Islamic products and services carried out by the Group’s Islamic banking businesses. Underpinning the governance framework is detailed policies and procedures that include the required steps to ensure that each transaction executed by the Group complies with Shariah requirements. IMPLEMENTATION OF THE SHARIAH GOVERNANCE FRAMEWORK (“SGF”) The implementation of the SGF is through the following approach: • Broad oversight, accountability and responsibility of the Board, Shariah Committee and Board Committees; • Oversight, guidance and observance by the Executive Committees; • Establishment of functions for Shariah Advisory and Research, Shariah Risk, Shariah Review and Shariah Audit; and • Accountability of the management in ensuring day-to-day compliance to Shariah requirements in its business operations. The Shariah Governance structure adopted by the Group is as illustrated in the diagram below. Diagram 5: Shariah Governance Structure for the Group Shariah as overarching principle in Islamic finance BOARD SHARIAH COMMITTEE Shariah Advisory and Research Shariah Risk { { AUDIT COMMITTEE OF THE BOARD MANAGEMENT { 1st line RISK MANAGEMENT COMMITTEE 2nd line 3rd line Shariah Review Shariah Audit 4th line RECTIFICATION PROCESS OF SHARIAH NON-COMPLIANT INCOME Shariah non-compliance risk is the possible failure in fulfilling the required Shariah requirement and tenets as determined by Shariah Advisory Council of BNM and appointed Shariah Committee within the Group. The control structure for handling and reporting of Shariah non-compliance issues has been emplaced in the Group. As at 31 December 2017, Maybank Islamic reported 3 Shariah Non-Compliance incidences with total sum of RM502.34 that needed to be purified, whereby the amount has been fully channelled to charity in 2017. 348
351. Mudarabah is a contract between a customer as the capital provider (rabbul mal) and the bank as an entrepreneur (mudarib) under which the customer provides capital to be invested in a Mudarabah venture that is managed by the bank. Any profit generated from the venture is distributed between the customer and the bank according to a mutually agreed Profit Sharing Ratio (“PSR”) whilst financial losses are borne by the customer provided such losses are not due to the bank’s misconduct (ta’addi), negligence (taqsir) or breach of specific terms (mukhalafah al-shurut). The Mudarabah venture managed by the bank in this instance refers to monies placed by the customers through various Mudarabah products offered by the bank which are subsequently invested into a blended portfolio of the bank’s assets. Maybank Islamic offers two types of Investment Account (“IA”) namely, Restricted Profit Sharing Investment Account (“RPSIA”) which refers to an IA where the customer provides a specific investment mandate to the bank and Unrestricted Investment Account which refers to an IA where the customer provides the bank with the mandate to make the ultimate investment decision without specifying any particular restriction or condition. The IA is not covered by the Perbadanan Insurans Deposit Malaysia (“PIDM”). Our Performance pg. 4-8 The Financials pg. 10-287 The Islamic Financial Services Act 2013 (“IFSA”) distinguishes investment account from Islamic deposits, where an investment account is defined by the application of Shariah contracts with a non-principal guarantee feature for the purpose of investment. Basel II Pillar 3 pg. 288-351 INVESTMENT ACCOUNT (“IA”) Maybank Islamic’s Unrestricted Mudarabah Investment Account (“UA”) In line with the transition requirements by BNM, Maybank Islamic had undergone a reclassification exercise effective 16 July 2015 whereby eligible Mudarabahbased deposit accounts were reclassified to UA for customers who chose to do so. The investment objective of UA places emphasis on capital preservation and stable returns with the risk profile varying from low risk to low-to-medium risk depending on the fund it is invested in. Notwithstanding the above, customers are made aware, through the respective fund’s Product Disclosure Sheet, of the various risk factors associated with UA which includes (but not limited to): • Risk of capital reduction – Any investment carries the risk of reduction in the value of purchasing power. Hence, Maybank Islamic will only invest the fund in diversified assets with low risk attributes and apply sound investment management standards. • Market risk – Invested assets are subjected to fluctuations in market rates, which may impact the overall income performance of the fund. This risk shall be managed by Maybank Islamic in accordance with its overall hedging strategy. • Liquidity risk – Such risk occurs when withdrawals/redemption exceed total investments. The risk shall be managed by Maybank Islamic in accordance with its overall liquidity management strategy. • Credit risk – This may arise when substantial amount of assets for the fund goes into default. This shall be managed by Maybank Islamic by prudent selection of diversified asset portfolios and close monitoring of the performance of the selected assets. The investment mandate, strategy and parameters for UA are in accordance with the governance set up by Maybank Islamic to ensure effective and efficient oversight on business activities and operations of UA in safeguarding the customer’s interest. 349
352. MAYBANK ANNUAL REPORT 2017 INVESTMENT ACCOUNT (“IA”) The governance structure adopted by the Group for IA is as illustrated in the diagram below: Diagram 6: IA Governance Structure Shariah Maybank Islamic Maybank Maybank Islamic Board BOARD Group Shariah Committee Board Investment Committee (“BIC”) EXCO SENIOR MANAGEMENT RMC Group ALCO Group ERC Maybank Islamic Management Committee (“MIC”) Investment Account Unit The roles and responsibilities of the respective committees are as below: UA Performance • Broad oversight, accountability and responsibility of Maybank Islamic Board, Group Shariah Committee and Board Committees; The gross exposure of the financing funded by UA as at 31 December 2017 was RM24,555,445,091. The related individual allowance and collective allowance is not included in the financial statements of Maybank Islamic. The performance of UA is as described in the table below: • Oversight, guidance and observance by the Executive Committees; • Accountability of the Senior Management in ensuring management, development and implementation of operational policies that govern the conduct of the IA; and • Establishment of functions for the IA unit. As at 31 December 2017 Return on Assets (“ROA”) Average Net Distributable Income Average Net Distributable Income Attributable to the IAH Average Profit Sharing Ratio to the IAH % 5.34% 5.15% 3.07% 59.63% RM’000 Impaired assets funded by UA Collective allowance provisions funded by UA Individual allowance provisions funded by UA 65,965 50,480 – Notes: 1. ROA refers to total gross income/average amount of assets funded by UA. 2. Average Net Distributable Income refers to total average net distributable income/ average amount of assets funded by UA. 350
353. Forward-looking statements speak only as of the date they are made , and it should not be assumed that they have been revised or updated in light of changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations and dispositions. The Group undertakes no obligation to revise or update any forward-looking statements contained in this document, regardless of whether those statements are affected as a result of new information, future events or otherwise. Our Performance pg. 4-8 The Financials pg. 10-287 This document could or may contain certain forward-looking statements that are based on current expectations or beliefs, as well as assumptions or anticipation of future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, plan, goal, believe, will, may, would, could, potentially, intend or other words of similar expressions. Undue reliance should not be placed solely on any of such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group’s plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Basel II Pillar 3 pg. 288-351 FORWARD-LOOKING STATEMENTS 351
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