AFFIN BANK BERHAD Presentation to Analysts/Fund Managers
on 1Q2019 results
Kuala Lumpur 31 May 2019
Group CEO
Kamarul Ariffin Mohd Jamil
CONTENTS
1Q2019 Key Performance Highlights
Strategic Initiatives (on-going)
Overview of Financial Performance
Guidance & Economic Outlook
1
2
3
4
1Q2019 Key Performance Highlights
• Achieved a PBT after zakat of RM185.0 million
• Net income recorded was RM472.5 million
• Overhead expenses reduced by RM7.25 million to RM304.3 million from
RM311.6 million in 1Q2018
Profitability
• Gross Impaired Loans ratio was at 3.31% (2018 : 3.25%). Excluding R&R accounts, the Gross Impaired Loan ratio stood at 3.25%
• Loan Loss Reserve was at 97.39% (Dec 2018: 97.32%)
Asset Quality
• Total Capital ratio, Common Equity Tier-1 Capital ratio and Tier 1 Capital ratio of all banking entities within the Group remained at healthy levels, well above the minimum regulatory requirements.
• Total Capital Ratio for AFFIN Bank Berhad Group stood at 20.76%. (CET1:12.42%, Tier1: 14.08%)
• Total Capital Ratio for AFFIN Islamic Bank stood at 19.30% (CET1: 10.81%, Tier1: 12.80%)
• Total Capital Ratio for AFFIN Hwang Investment Bank Berhad Group stood at 32.04% (CET1: 30.62%, Tier1: 31.26%)
Capital Adequacy
Page 3
1Q2019 Key Performance Highlights
• Gross loans, advances and financing reduced by 0.9% during 1Q2019 to RM48.5 billion and customer deposits was at RM57.4 billion (31/12/2018 : RM57.3 billion)
Loans & Deposits Growth
• LCR was 146.76%, well above the BNM requirements.
• Preparing for NSFR via strategic funding plans, including tapping into the existing MTNs/Sukuk programmes.
Liquidity & other regulatory
requirements
Page 4
AFFINITY TRANSFORMATION PROGRAM
STRATEGIC RISK PROGRAM
The Bank has commenced a Strategic Risk Program early 2018, of which a total of 24 initiatives and 36 projects will be undertaken over a three-year period. The risk transformation journey is an evolvement from current “traditionalist” role which focused on regulatory compliance, controls and risk mitigation, to the desired target state of “specialist” role for the Bank’s Risk Management.
The target state of “specialist role” is envisaged to have a more advanced capabilities in terms of sophistication, analytics and systems and focused on enabling risk-reward decision making as well as more proactive risk management and business advisory / strategic function across the Group.
Affinity is the Bank Strategic program launched in 2016 with the objective to enable achievement through
operational enhancements and performance management. As at 31 March 2019, out of the 33 projects, 24
projects of the Program had been completed.
Seven (7) projects are currently on track with improvements seen in turnaround time (~20% average reduction)
for retail portfolios, loan stock, establishment of new departments/policies and growth in total income. Two (2)
projects are yet to begin.
Strategic Initiatives (On-going)
Page 6
PRIORITY ISLAMIC POLICY
The Group has adopted a Priority Islamic Policy (PIP) approach to tap into the faster growing Islamic banking
segment within the industry which had contributed to good performance. As at 31 March 2019, the Priority Islamic
Policy achieved 39% of total Islamic Financing Portfolios against total Affin Bank’s and Affin Islamic Bank’s Portfolio
target of 40% by year 2020.
DIVIDEND REINVESTMENT PLAN
A Dividend Reinvestment Plan (DRP) had been established by the Bank following the approval of the
Shareholders at the EGM held on 15 May 2018. The DRP gives the shareholders of the Company the option
to reinvest their whole or portion of the Dividend for which the reinvestment option applies in new Affin Bank
shares.
The DRP will also made available for any dividend to be declared in future, which the Board may in its
absolute discretion, determine whether the DRP will be applied to the dividend and the portion of the
dividend that can be reinvested into new Affin Bank shares.
Page 7
Overview of Financial Performance
Highlights of financial performance by entities - Profit Before Tax after Zakat
Entity 1Q2018
(RM’’Mil)
1Q2019
(RM’Mil)
Variance
(RM’Mil) Commentary
AFFINBANK
(Bank Level) 108.0 103.7 (4.3)
Lower PBT was mainly due to reduction in net
interest income and lower writeback of credit
impairment losses, offset by lower overhead
expenses
AFFIN ISLAMIC 32.3 32.0 (0.3)
Slightly lower PBT was mainly attributable to lower
operating income, higher overhead expenses
cushioned by lower allowance for credit impairment
losses.
Affin Hwang Capital 42.0 45.2 3.2
Higher PBT was mainly attributed to higher net
gain on financial instruments, offset by lower net
fee and commission income and net interest
income
AXA Affin Life Insurance
Berhad (3.0) (4.6) (1.6)
Higher pre-tax loss was due to lower interest rates
leading to higher reserves for future policyholders’
liabilities.
AXA Affin General
Insurance Berhad 38.0 29.1 (8.9)
Lower PBT as the results of 1Q2018 included a
writeback of claim reserves. Excluding this one-off
writeback, the results for 1Q2019 is consistent with
the results of 1Q2018.
Affin Moneybrokers Sdn
Bhd 0.3 0.7 0.4
Higher PBT was mainly due to higher net
brokerage income net of higher overhead
expenses.
AFFINBANK Group 186.8 185.0 (1.8)
Page 9
186.8
108.0
32.3 42.0
(1.2) 13.5
0.3
185.0
103.7
32.0
45.2
(1.8) 9.1
0.7
Affin Bank (Group) Affin Bank (Banklevel)
Affin Islamic Bank Affin HwangCapital
AXA Affin Life AXA Affin General AffinMoneybrokers
1Q2018 1Q2019
Group PBT and contribution by Subsidiaries, Joint Venture
and Associate Company
Contribution of PBT by Entities (RM’ Million)
Page 10
Key drivers for improvement in Operating Performance
Profitability FY2018 (%) 1Q2019 (%) Increase/(decrease)
(%)
Return on Equity (After Tax) 5.94 5.79 (0.15)
Net Interest Margin 1.83 1.61 (0.22)
Cost to Income Ratio 63.39 64.40 1.01
Liquidity 4Q2018 (%) 1Q2019 (%) Increase/(decrease)
(%)
Liquidity Coverage Ratio (LCR) 169.32 146.79 (22.53)
Loan to Fund (LTF) 81.08 79.43 (1.65)
Loan to Fund and Equity (LTFF) 72.00 70.40 (1.60)
Asset Quality 4Q2018 (%) 1Q2019 (%) Increase/(decrease)
(%)
Gross Impaired Loans Ratio 3.25 3.31 0.06
Net Impaired Loans Ratio 2.59 2.63 0.04
Loans Loss Reserve Ratio 97.32 97.39 0.31
Capital Adequacy 4Q2018 (%) 1Q2019 (%) Increase/(decrease)
(%)
CET 1 Capital Ratio 11.92 12.42 0.50
Tier 1 Capital Ratio 13.56 14.08 0.52
Total Capital Ratio 19.00 20.76 1.76
Page 11
Gross Credit Cost (bps)
17.0
25.0 23.0
17.0
2016 2017 2018 1Q2019
Key drivers for improvement in Operating Performance
1.98 1.84 1.83 1.61
2016 2017 2018 1Q2019
Net Interest Margin (%)
Page 12
Group Income Statement at a glance
Profit Before Tax after Zakat
(RM million)
185.0 737.7 693.2 675.0
185.0
2016 2017 2018 1Q2019
Profit After Tax
(RM million)
143.7 579.8 534.9 527.4
143.7
2016 2017 2018 1Q2019
Operating Expenses
(RM million)
304.3 1142.9 1223.5 1217.5
304.3
2016 2017 2018 1Q2019
Earnings Per Share (sen)
6.94 29.03 26.54 25.89
6.94
2016 2017 2018 1Q2019
Net Fee and Commission Income
(RM million)
102.6 496.1 451.6 456.9
102.6
2016 2017 2018 1Q2019
Net Interest Income
(RM million)
188.4
Share of Profit in Joint Ventures /Associate
(RM million)
7.4
892.9 895.7 845.4
188.4
2016 2017 2018 1Q2019
48.9 40.9 46.9
7.4
2016 2017 2018 1Q2019
Note : Comparative results for 2016 and 2017 are for Affin Holdings Berhad’s Group
Page 13
RM’000 ABB GROUP
1Q2018
ABB GROUP
1Q2019
(Increase/
Decrease)
Net interest income 215,807 188,383 (27,424)
Islamic banking income 98,517 97,395 (1,122)
Net fee and commission income 117,553 102,610 (14,943)
Net gains on financial instruments 33,233 71,511 38,278
Other income 11,507 12,617 1,110
Net Income 476,617 472,516 (4,101)
Operating expenses (311,575) (304,322) 7,253
Operating profit before allowances 165,042 168,194 3,152
Allowances for impairment losses 9,684 9,860 176
Operating profit 174,726 178,054 3,328
Share of results of a joint venture and associate 12,261 7,369 (4,892)
Profit before zakat and taxation 186,987 185,423 (1,564)
Zakat (237) (447) (210)
Profit before taxation after zakat 186,750 184,976 (1,774)
Taxation (40,763) (41,231) (468)
Net Profit for the financial period 145,987 143,745 (2,242)
Summary : Group Profit & Loss
Page 14
RM’000 ABB Group
1Q2018
ABB Group
1Q2019
(Increase/
Decrease)
Personnel cost 201,712 193,105 (8,607)
Promotion & marketing related expenses 15,471 17,041 1,570
Establishment-related expenses 65,975 67,806 1,831
General & administrative expenses 28,417 26,370 (2,047)
TOTAL 311,575 304,322 (7,253)
Cost to Income ratio (%) 63.39 64.40 1.01
Summary: Group Operating Expenses
Page 15
RM’000 ABB GROUP
1Q2018 ABB GROUP
1Q2019
(Increase/ Decrease)
Net brokerage 22,430 16,914 (5,516)
Underwriting fees - 1,443 1,443
Portfolio management fees 74,123 70,470 (3,693)
Corporate advisory fees 1,874 651 (1,223)
Commission 6,324 5,511 (813)
Service charges and fees 21,570 12,661 (8,909)
Guarantee fees 5,984 9,177 3,193
Arrangement fees 850 100 (750)
Agency fees 1,765 525 (1,240)
Initial service charges 37,773 13,894 (23,879)
Other fee income 1,519 1,829 310
Subtotal 174,212 133,175 (41,037)
Fee and commission expense (56,659) (30,565) 26,094
NET FEE AND COMMISSION INCOME 117,553 102,610 (14,943)
Summary of Net Fee And Commission Income
Page 16
Group Balance Sheet at a glance
Total Equity (RM billion)
9.2 8.7 9.1 8.7 9.2
2016 2017 2018 1Q2019
Gross Loans, Advances and Financing
(RM billion)
48.5
Total Deposits from Customers
(RM billion)
57.4
Total Assets (RM billion)
76.2
44.2 46.1 48.9 48.5
2016 2017 2018 1Q2019
51.5 50.9 57.3 57.4
2016 2017 2018 1Q2019
68.9 70.8 76.0 76.2
2016 2017 2018 1Q2019
Total Liabilities (RM billion)
67.1
Net Loans, Advances and Financing
(RM billion)
47.9
60.2 61.7 67.2 67.1
2016 2017 2018 1Q2019
43.7 45.7 48.4 47.9
2016 2017 2018 1Q2019
Net Assets Per Share
(Sen)
4.58 4.47 4.67 4.46 4.58
2016 2017 2018 1Q2019
Note : Comparative Results for 2016 and 2017 are for Affin Holdings Berhad’s Group
Page 17
94.3
98.5
97.3 97.4
2016 2017 2018 1Q2019
Loans Portfolio
20.8 22.4 24.9 25.2
19.7 18.8 19.9 19.2
3.7 4.9 4.1 4.1
2016 2017 2018 1Q2019
Consumer Corporate SMEs
Mortgage 43.9%
Hire Purchase
48.1%
Credit Card 0.6%
Overdraft &
personal loans 7.4%
44.2 46.1 48.9
Term Loans 69.1%
Revolving Credit
21.2%
Trade Products 9.7%
Term Loans 70.4%
Overdrafts
18.3%
Trade Products 11.3%
48.5
Gross Loans by Composition (RM Billion) Loan Loss Reserve (%)
Consumer Loans
1Q2019
Corporate Loans
1Q2019
SMEs
1Q2019
Page 18
* 706.2
2015
Gross Impaired Loans
700.3 1,143.1
1,493.5 1,575.1 37.0
24.2
96.4 31.2
2016 2017 2018 1Q2019
R&R Loans
Impaired Loans
1.90 1.67
2.53
3.25 3.31
1.53
2.48
2.97 3.25
2015 2016 2017 2018 1Q2019
Gross Impaired Loan Ratio
Gross Impaired Loan Ratio - Excluding R&R
0.95
1.03
2.10
2.59 2.63
0.95
2.05 1.94
2.56
2015 2016 2017 2018 1Q2019
Net Impared Loan Ratio
Net Impared Loan Ratio - Excluding R&R
Gross Impaired Loans (RM Mil)
Net Impaired Loans Ratio (%) Gross Impaired Loans Ratio (%)
Page 19
GROSS LOAN BY ECONOMIC PURPOSE - 31.03.2019 (%)
GROSS LOAN BY ECONOMIC PURPOSE - 31.12.2018 (%)
Gross Loans Portfolio by Economic Purpose
31/3/2019
RM ‘000
Construction 3.470,097
Purchase of residential properties 10,863,836
Purchase of non-residential properties 6,821,901
Purchase of securities 1,596,270
Purchase of transport vehicles 12,426,067
Working Capital 10,675,901
Personal use 852,303
Others 1.803,776
TOTAL 48,510,151
31/12/2018
RM ‘000
Construction 3,459,827
Purchase of residential properties 10,435,105
Purchase of non-residential properties 6.654,767
Purchase of securities 1.615,833
Purchase of transport vehicles 12,799,056
Working Capital 11,354,983
Personal use 776,714
Others 1,876,519
TOTAL 48,972,804
7.2
22.4
14.1
3.3
25.6
22.0
1.8 3.7
Construction Purchase ofresidentialproperties
Purchase ofnon
residentialproperties
Purchase ofsecurities
Purchase oftransportvehicles
Workingcapital
Personal use Others
7.1
21.3
13.6
3.3
26.1
23.2
1.6 3.8
Construction Purchase ofresidentialproperties
Purchase ofnon
residentialproperties
Purchase ofsecurities
Purchase oftransportvehicles
Workingcapital
Personal use Others
Page 20
51.5 50.9
57.3 57.4
2016 2017 2018 1Q2019
35.2
16.6
5.5
34.4
17.8
5.2
Corporate Consumer SME
2018 1Q2019
Customers Deposits
Deposits (RM’ Billion)
Y-o-Y -2.3%
Y-o-Y 7.2%
Q-o-Q -5.5%
Deposits by Sector (RM’ Billion)
Y-o-Y - 1.2% Y-o-Y 12.6%
81.1
72.0
79.4
70.4
Loans to Fund Ratio (LTF) Loan to Funds and Equity Ratio(LTFE)
2018 1Q2019
Industry LTF 2018 82.7 1Q2019 82.5
Industry LTFE
2018 72.4 1Q2019 71.9
Q-o-Q 0.2%
Page 21
31/03/2019 31/12/2018
Deposits from Customers
RM57.4 billion Deposits from Customers
RM57.3 billion
8.8 14.5
76.6
Money Market andOther Deposits
CASA Fixed Deposits
9.7 15.6
74.7
Money Market andOther Deposits
CASA Fixed Deposits
Customers Deposits by Segments
Page 22
Economic Outlook for 2019
Overnight Policy Rate (OPR) BNM decided to cut its OPR by 25 bps to 3.0% at the latest Monetary Policy Committee meeting. This was the first policy rate cut since July 2016. BNM maintained its cautious tone on the global growth outlook citing that risks remain tilted towards the downside, stemming from the unresolved trade tensions and prolonged country-specific weaknesses in the major economies, which will dampen global trade and investment activities. Slower external and domestic demand envisaged for 2019 We expect the country’s real GDP growth to slowdown from 4.5% yoy in 1Q2019 to 4.4% in 2Q2019 before recovering to 4.7% yoy in 2H2019. We are revising our GDP growth forecast from 4.7% previously to 4.5% for 2019, although this is still at the mid-point of the official forecast range of 4.3% to 4.8%. Going forward, with the trade tensions escalating between the US and China, and Malaysia being an open economy that is highly dependent on exports and the manufacturing sector, we believe that Malaysian external demand could be dampened on possible global chain disruptions.
Private consumption likely to slow down We expect the Malaysian domestic economy, especially private consumption growth to slowdown in 2Q2019,
due to further normalisation in spending following the frontloading of purchases during the tax holiday period
(from 1 June to 31August 2018 when the GST rate was set at zero), as well as weaker consumer sentiment due
to slower economic growth and the weaker Ringgit. We foresee some support for private consumption from
government assistance and the fuel targeted subsidy to be implemented in 2H2019. Private investment to be supported by primary-related sectors Although private investment slowed sharply yoy in 4Q2018 to 0.4% in 1Q2019, reflecting a continued cautious business sentiment as well as lower capital expenditures of heightened uncertainty over global trade negotiations and weaknesses in the broad property segment, there were some improvement in spending on large multi-year projects, particularly in the primary-related manufacturing and utilities services sub-sectors, which provided some cushion to private investment growth.
Page 24
Economic Outlook for 2019
Still substantial amount of development expenditure to be spent We expect the possibility of an acceleration in the Federal Government’s developments expenditure as well as improvement in public operations’ capital spending. This is to support domestic demand and provide some cushion to slowing exports due to the escalation in US-China trade tensions. Nevertheless, external risks remain elevated.
Stance of monetary policy likely to remain accommodative BNM cautioned that risks to the global growth outlook remain tilted to the downside, citing possible further escalation in trade tensions, where BNM will likely hold its OPR at 3.0% throughout 2019. BNM will continue to monitor and assess the balance of the risks surrounding the outlook for domestic growth and inflation. The recent adjustment in OPR is intended to preserve the degree of monetary accommodativeness. Economic fundamentals to support Ringgit against USD ASEAN region will likely experience short-term volatility in the financial markets, possibly due to investor concerns, regarding President Trump’s latest threat to hike tariffs on Chinese goods, which may lead to some weaknesses in the regional currencies. We expect the Malaysian Ringgit to appreciate gradually towards RM4.10 against the USD by end 2019 against our earlier projection of RM3.90/USD by end 2019 (RM4.19/USD currently).
Malaysia’s inflation will likely remain low and manageable in 2019 The headline inflation is expected to remain low, due to policy measures which include the price ceiling on domestic retail fuel prices until the end of 1H2019 and the impact of the changes in the consumption tax policy.
Page 25
2019 Group guidance: a positive balance
Loan Growth 6-7%
Deposit Growth 11%
Cost to Income Ratio <60%
Gross Credit Cost 30-40bps
Fee Based ratio 40.0%
2019 Guidance for AFFINBANK Group 2019 Guidance for Malaysia
GDP
4.5%
CPI
0.7% - 1.7%
OPR
3.00%
RM/USD
4.10
Page 26
Shareholding statistics as at 30 April 2019
LTAT 35.51
BHB 20.73
BEA 23.56
EPF 6.54
[CATEGORY
NAME] 13.66
Substantial Shareholders (%) Foreign Shareholdings (%)
JAN 2019
FEB 2019
MAR 2019
APRIL 2019
26.61 26.57 26.55 26.56
23.56 23.56 23.56 23.56
3.05 3.01 2.99 3.00
J F M A
BEA Others
Page 27
THANK YOU
For any enquiries, please email [email protected] or call us at
+603-2055-9005 (Investor Relations Department)
Disclaimer. This presentation has been prepared by AFFIN Holdings Berhad (the “Company”) for information purposes only and does not purport to contain all the information that may be required to evaluate the Company or its financial position. No representation or warranty, express or implied, is given by or on behalf of the Company as to the accuracy or completeness of the information or opinions contained in this presentation. The presentation does not constitute or form part of an offer, solicitation or invitation of any offer, to buy or subscribe for any securities, nor should it or any part of it form the basis of, or be relied in any connection with, any contract, investment decision or commitment whatsoever. The Company does not accept any liability whatsoever for any loss howsoever arising from any use of this presentation or their contents or otherwise arising in connection therewith.