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ANALYST BRIEFING1QFY2016
18 August 2015
in Asia Pacific, Gulf Region & Africa
Executive Summary
Contents
1
Financial Results for 1QFY2016 2
Appendices 3
3
Executive Summary
Strong SME Franchise, Deposit Base and Healthy Balance Sheet
Strengths
Strong Deposit growth: +10.8% y-o-y (Industry: +7.3%), with stable CASA ratio at 34.5%
Strong franchise in SME segment: +21.4% y-o-y loans growth Excellent asset quality: Gross Impaired Loans ratio at 1.0% (Industry:
1.6%). Loan loss coverage at 105.4% Improvement in Net Interest Margin q-o-q despite intense competition Improvement in wealth management income: +17.9% q-o-q
Rising cost of funds Slower economic growth, impacting client activities and revenues
(trade finance, brokerage etc.)
Further optimize loans and deposit mix Build on SME strength Accelerate Wealth Management business
Key Opportunities
Note: Financial Year end is 31 March 2015; Industry data
Key Challenges
4
Improvement in Risk Adjusted
Returns
1
Deposit Growth > Loans Growth
2
Client Based Fee Income
3
Improve Risk Adjusted Returns* by focusing on higher return loans:• SME and Commercial Banking• Personal loans, credit cards and share margin financing for our
business partners and their clients and staff
Improve balance sheet efficiency by growing:• Deposits economically (improve CASA ratio)• Deposits faster than loans
Grow fee income as % of total revenue• Trade finance, FX and brokerage in Business Banking• Wealth management, bancassurance and brokerage in Consumer
Banking
FY2016: Key Priorities
FY2016: Key Priorities to Deliver Sustainable and Profitable Growth
Note: Risk Adjusted Return: Net Interest Margin less (Direct Variable Cost + Business as Usual Credit Cost) ÷ Average Loan Balance
1QFY2016:Income Statement
Net Profit After Taxation Up 30.7% Q-o-Q Despite Challenging Market Environment
5
Income Statement 1QFY16RM mil
1QFY15RM mil
Y-o-Y Change Better /(Worse)
4QFY15RM mil
Q-o-Q ChangeBetter/(Worse)
RM mil % RM mil %
Net Interest Income 207.8 199.8 8.0 4.0% 186.1 21.7 11.6%
Islamic Banking Income 58.6 53.7 4.9 9.1% 58.2 0.4 0.7%
Non-Interest Income 78.0 83.2 (5.2) (6.3%) 61.7 16.3 26.4%
Net Income 344.3 336.7 7.6 2.3% 306.0 38.3 12.5%
Operating Expenses 167.4 161.7 (5.7) (3.5%) 165.5 (1.9) (1.1%)
Pre-Provision Operating Profit 177.0 175.1 1.9 1.1% 140.6 36.4 25.9%
Allowance/ (Write back) for losses on loans & financing and other losses
16.4 1.8 (14.6) >100% 16.0 (0.4) 2.5%
Pre-tax profit 160.7 173.3 (12.6) (7.3%) 124.6 36.1 28.9%
Net Profit After Tax (“NPAT”) 121.9 130.8 (8.9) (6.8%) 93.3 28.6 30.7%
Q-o-Q: Normalised NPAT growth
of 13.8% after one-off adjustment
NIM: + 1bps (+9 bps GIM and 8 bps increase in cost of funds)
Y-o-Y: Pre-provision profit up
1.1%
Lower NPAT of 6.8% due to normalisation of credit cost.
Annualized credit cost, including recoveries, at ~ 18.4 bps in 1QFY2016 vs 2.1 bps in 1Q FY2015.
Note: 4Q FY2015 RM18.4 million one off adjustment for income recognition for balance transfer for credit cards from upfront to amortiization
Strategy Execution 1Q FY16 Results
Improve Risk Adjusted
Returns (RAR)
1. Shifted production volume to focus on higher risk adjusted return assets
6
Executive Summary – Strategy & Execution
A
Strategy & Execution (Q1 FY16) – Key Updates
Annualized GrowthQ-o-Q Growth
Q1 FY16(Annualized)
Y-o-Y GrowthQ1 FY16
Mortgage, Hire Purchase, Shophouse Financing, Corporate 3.8% 13.8%
SME, Commercial, Personal Loans, Credit Cards, Share Margin Financing 7.1% 11.8 %
Gross Interest Margin Mortgage, Hire Purchase, Shophouse Financing, Corporate: 4.4% SME, Commercial, Personal Loans, Credit Cards, Share Margin
Financing: 5.6%
Risk Adjusted Return (RAR) Mortgage, Hire Purchase, Shophouse Financing, Corporate: 0.4% SME, Commercial, Personal Loans, Credit Cards, Share Margin
Financing: 1.9%
Strategy Execution 1Q FY16 Results
Improve Risk Adjusted
Returns (RAR)
2. Implemented better discipline for loans portfolio returns
7
Executive Summary – Strategy & Execution
A
Strategy & Execution (Q1 FY16) – Key Updates
As a result of focus on RAR: Gross Interest Margin (“GIM”) is up 9 bps Q-o-Q and
managed to neutralize the 8 bps higher cost of funds Net Interest Margin (“NIM”) improved 1 bps Q-o-Q and 3
bps Y-o-Y
Note: *Normalised for one-off accounting adjustment on interest income recognition for balance transfer for Credit Cards from upfront to amortisation*Gross Interest Margin including treasury assets
1QFY15 2QFY15 3QFY15 4QFY15* 1QFY161.5%
2.5%
3.5%
4.5%
2.13% 2.26% 2.20% 2.15% 2.16%
4.35% 4.53% 4.59% 4.58% 4.67%
Net Interest Margin Gross Interest Margin
Gross & Net Interest Margin Trend
Strategy Execution 1Q FY16 Results
(A)
Grow Deposits Economically
and Faster than Loans
Growing Deposits:1. Corporate CASA with
transaction banking services 2. Consumer CASA with
marketing campaigns3. Progressively optimizing the
funding cost
CASA growth of RM152.5 million despite shrinking market liquidity
CASA growth y-o-y of RM1.4 billion or 10.1% (industry: 6.5%)
8
Executive Summary – Strategy & Execution
B
Strategy & Execution (Q1 FY16)
1QFY15 4QFY15 1QFY1612
13
14
15
16
17
18
13.7
15.0 15.1
83.8% 82.8% 85.1%
34.7% 33.6% 34.5%
CASA Deposits LD ratio CASA ratio
RM bil
CASA Growth Trend
Strategy Execution 1Q FY16 Results
(A)
Grow Customer-
based Fee Income
Focus on:1. Wealth Management in Consumer
Banking2. Client-based fee income in Business
Banking
Wealth management income increased by 17.9% quarter-on-quarter.
Client based fee income marginally down despite pressures in trade, treasury sales and brokerage.
9
Executive Summary – Strategy & Execution
C
Strategy & Execution (Q1 FY16) – Key Updates
Non-Interest Income 1QFY16 4QFY15 Q-o-Q Growth
RM mil %
Consumer Banking 13.3 12.1 1.2 9.9%
Business Banking 29.7 31.3 -1.6 -5.1%
Fee & Commission 17.7 17.7 - -
Total Client-Based 60.7 61.1 -0.4 -0.7%
Non Client-Based 19.9 7.8 12.1 >100%
Total Non Interest Income 80.6 68.9 11.7 17.0%
Non-Interest Income Ratio 23.4% 21.9% - +1.5%
Note: Non-Interest Income in this Table is inclusive of Islamic Banking fee income
10
Way Forward
Leverage on franchise strengths to deliver sustainable profitability despite economic challenges
Franchise Growth Focus
Focus Consumer Banking and Wealth Management business on fulfilling the financial needs of the Business Owners, their employees and their clients
Improve Financial Efficiency
Focus on asset efficiency, i.e. Risk Adjusted Returns, to protect margins Grow deposits faster than loans Improve share of customer non-interest income revenues Effective management of asset quality and credit costs Continue to streamline to contain costs
Focus on Client Excellence
Enhance client value propositions and client service standards Build differentiated and relevant brand positioning in target segments
Executive Summary
Contents
1
Financial Results for 1QFY2016 2
Appendices 3
Key Financial Ratios
Financial Ratios 1QFY16 1QFY15 Y-o-Y Change 4QFY15 Q-o-Q Change
Shareholder Value
Return on Equity 10.9% 13.2% -2.3% 9.4% 1.5%
Earnings per Share 8.0 sen 8.6 sen -7.0% 6.1 sen 31.1%
Net Assets per Share RM2.92 RM2.68 9.0% RM2.90 0.7%
Efficiency
Net Interest Margin 2.16% 2.13% +0.3 bps 2.15 % +1 bps
Non-Interest Income Ratio 23.4% 25.7% -2.3% 21.9% 1.5%
Cost to Income Ratio 48.6% 48.0% 0.6% 54.1% -5.5%
Balance Sheet Growth
Net Loans (RM bil) 37.0 32.8 12.7% 36.6 1.1%
Customer Deposits (RM bil) 43.9 39.6 10.8% 44.6 -1.6%
Asset Quality
Gross Impaired Loans Ratio 1.0% 1.4% -0.4% 1.0% -
Net Impaired Loans Ratio 0.6% 0.8% -0.2% 0.6% -
Loan Loss Coverage Ratio 105.4% 90.2% 15.2% 102.7% 2.7%
LiquidityLoan to Deposit Ratio 85.1% 83.8% 1.3% 82.8% 2.3%
CASA Ratio 34.5% 34.7% -0.2% 33.6% 0.9%
Capital
Common Equity Tier 1 Capital Ratio 11.1% 10.0% 1.1% 11.1% -
Tier 1 Capital Ratio 11.1% 11.1% - 11.1% -
Total Capital Ratio 13.0% 13.2% -0.2% 13.0% -
12
Summarised Balance Sheet
Balance Sheet 1QFY16 RM bil
1QFY15RM bil
Change Y-o-Y4QFY15RM bil
Change Q-o-Q
RM bil % RM bil %
Total Assets 52.3 50.1 2.2 4.3% 53.1 -0.8 -1.6%
Treasury Assets(1) 11.2 12.8 -1.6 -12.3% 11.5 -0.3 -2.7
Net Loans 37.0 32.8 4.2 12.7% 36.6 0.4 1.1%
Customer Deposits 43.9 39.6 4.3 10.8% 44.6 -0.7 -1.6%
CASA Deposits 15.1 13.7 1.4 10.1% 15.0 0.1 1.0%
Shareholders’ Funds 4.5 4.1 0.4 9.0% 4.5 - -
Net Loan Growth (y-o-y) 12.7% 15.7% - -3.0% 14.9% - -2.2%
Customer Deposit Growth (y-o-y) 10.8% 10.9% - -0.1% 13.7% - -2.9%
-12.3% y-o-y reduction in Treasury Assets for effective management of market risk
+12.7% y-o-y Net Loan growth moderated (industry*: 9.1% y-o-y) driven by strong loan growth in Consumer and Business segments by:
Group Consumer Banking (+10.7% y-o-y)
Group Business Banking (+15.0% y-o-y)
+10.8% y-o-y Customer Deposit growth, is above industry growth rate of 7.3%.
+10.1% y-o-y growth in CASA deposits despite intensified competition in industry for CASA deposits.
Net Loan Growth at 12.7% Y-o-Y, Driven by Consumer and SME Segments
Note: * Industry data sourced from BNM Monthly Statistical Bulletin as of June 2015(1) Treasury assets comprise financial assets (HFT, AFS & HTM), derivative financial assets & placements with Financial Institutions
13
5.1% Y-o-Y and 9.0% Q-o-Q Net Interest Income & Islamic Banking Growth
Interest & Islamic Banking Income
Net Interest Income & Islamic Banking Income Deposit rates increase:
Competition for retail deposits ahead of implementation of Basel III Liquidity Coverage Ratio, effective June 2015
25 bps increase in OPR to 3.25% in July 2014
Rising industry loans to deposits ratio
Net Interest Margin expanded by 1 bps Q-o-Q, due to changes in loan composition.
focus on higher risk adjusted return loans;
slower growth in residential and non-residential loans.
1QFY15 2QFY15 3QFY15 4QFY15 1QFY160
200000
400000
199,821.0 221,139.0 213,519.0 186,110.0 207,766.0
53,674.0 53,919.0 58,279.0 58,211.0 58,552.0
253,495.0 275,058.0 271,798.0 244,321.0
266,318.0
Net Interest Income Islamic Banking IncomeRM mil
141QFY15 2QFY15 3QFY15 4QFY15* 1QFY16
1.5%
2.5%
3.5%
4.5%
2.35% 2.41% 2.53% 2.58% 2.66%
2.13% 2.26% 2.20% 2.15% 2.16%
4.35% 4.53% 4.59% 4.58% 4.67%
Cost of Fund Net Interest Margin Gross Interest Margin
Cost of Funds & Net Interest Margin Trend
1QFY15 2QFY15 3QFY15 4QFY15 1QFY160
100
200
18.3 21.1 18.6 18.0 17.6
28.4 40.1
27.0 24.1 25.0
33.1 25.3
15.9 15.1 24.3
3.4
28.6
16.5 4.5
11.1
83.2
115.1
78.0 61.7
78.0
25.7%
30.1%
23.0% 21.9% 23.4%
Commission Fee Income Investment Income
Other Income Non-Interest Income Ratio
15
Non-Interest Income
Mix
14.2%
31.1%
32.1%
22.6%
RM mil
Non-Interest Income Trend
Non-Interest Income Ratio at 23.4%
Non-interest income ratio improved to 23.4% from, 21.9% at 4 Q FY2015.
Operating Expenses
16
Administration Expenses up by RM4.8 million, mainly due to higher deposit insurance cost.
The Group continues to enhance productivity and efficiency through effective cost management and also investment in branch channels, IT infrastructure and marketing.
Expenses under Control, rising by +3.5% Y-o-Y and 1.1% Q-o-Q
OPEX Contribution 1QFY16RM mil
1QFY15RM mil
Change
RM %
Personnel 104.6 105.0 -0.4 -0.4%
Establishment 37.1 34.0 3.1 9.0%
Marketing 4.8 6.6 -1.8 -27.3%
Administration 20.9 16.1 4.8 30.2%
Total OPEX 167.4 161.7 5.7 3.5%1QFY15 2QFY15 3QFY15 4QFY15 1QFY160
100
200
300
161.7 160.5 159.3 165.5 167.4
48.0%
41.1%
45.5%
54.1%
48.6%
OPEX CIRRM mil
Operating Expenses Trend
Personnel62.5%
Establishment22.1%
Marketing2.9%
Admin12.5%
Composition of Operating Expenses
Personnel65.0%
Establishment21.0%
Marketing4.1%
Admin9.9%
1QFY151QFY16
17
FY2012 FY2013 FY2014 FY2015 1QFY160
10
20
30
40
24.527.8
31.8
36.6 37.0
Net Loans, Advances and Financing Trend
Loan Portfolio
12.7% Y-o-Y Loans Growth
RM bil
1QFY16 vs 1QFY15+ RM4.2 bil
+ 12.7%
FY2012 FY2013 FY2014 FY2015 1QFY160%
20%
40%
60%
80%
100%
53.9% 55.7% 57.2% 56.5% 56.7%
21.9% 17.9% 18.3% 20.3% 20.5%
24.2% 26.4% 24.5% 23.2% 22.8%
Consumer SME Wholesale
Loan Composition by Business Segments
Y-o-Y Net Loan Growth of 12.7%, higher than industry loan growth of 9.1% (1)
Balanced loan composition with 56.7% Consumer, and 43.3% in Business Banking, of which 47.3% is SME Lending
Effective management of interest rate risk: 89.6% of loan book is floating rate (1QFY15: 89.6%)
Note: (1) Industry data sourced from BNM Monthly Statistical Bulletin as of June 2015
Loans Growth for Residential and Non-Residential Continues to Moderate
Loan Growth:By Economic Purposes
Going forward, loans for residential and non-residential properties to grow in tandem with industry due to: Focus on risk adjusted returns instead of market
share Overall slow down in transactions in property
markets Above industry loans growth for SME remains a core
area of focus
FY2012 FY2013 FY2014 FY2015 1QFY160
4
8
12
16
20
24
9.811.6
13.315.1 15.4
12.4%18.9%
14.9% 13.5% 11.3%
RM bil
Residential Loans Growth (Y-o-Y)
18
FY2012 FY2013 FY2014 FY2015 1QFY160
5
10
15
5.5 5.05.9
7.5 7.7
14.4%
-7.9%
17.0%
26.8% 21.4%
RM bil
SME Loan Growth (Y-o-Y)
RM mil 1QFY16 1QFY15 Y-o-Y Growth
SME 7,660 6,312 21.4%
Corporate & Commercial 8,509 7,754 9.7%
Business Banking 16,169 14,066 15.0%
Note: * BNM’s revised SME definition effective from 1 January 2014. FY2013 SME loans and onwards have been restated based on BNM’s revised SME definition.
FY2012 FY2013 FY2014 FY2015 1QFY160
4
8
12
3.4 3.74.8
6.5 6.6
17.9%11.0%
27.8%35.5%
29.3%
RM bil
Non-Residential Loans Growth ((Y-o-Y)
Note: Y-o-Y Loans Growth
FY2012 FY2013 FY2014 FY2015 1QFY160
500
1000
1500
2000
2500
451.3
1,022.0
1,561.6 1,566.7 1,498.4
29.9%126.5%
52.8% 0.3% -6.1%
RM mil
Share Margin Financing Growth (Y-o-Y)
Stronger Growth Trajectory for Personal Loans. Share Margin and Transport Vehicles Moderated
Loan Growth: By Economic Purposes
19
FY2012 FY2013 FY2014 FY2015 1QFY160
1000
2000
3000
4000
2,147.2 1,952.9 2,047.3 2,276.1 2,371.2
2.5%-9.1%
4.8% 11.2% 13.9%RM mil
Personal Loans Growth (Y-o-Y)
FY2012 FY2013 FY2014 FY2015 1QFY160
250
500
750
1000
623.6 581.3 601.3 653.1 655.0
-6.0% -6.8%3.4% 8.6% 4.8%
RM mil
Credit Card Receivables Growth (Y-o-Y)
FY2012 FY2013 FY2014 FY2015 1QFY160
500
1000
1500
2000
2500
561.8737.9
1117.81427.0 1369.7
-20.2%31.3% 51.5% 27.7% 13.2%
RM mil
Transport Vehicles Growth (Y-o-Y)
Note: Y-o-Y Loans Growth
20
Shift in Loan Composition Will Occur Over Time
Gradual change of loan mix over time as loan production now focused on SME and Commercial Lending (term loans, share margin financing, personal loans and credit cards).
Residential and non-residential properties accounted for 58.9% of gross loan portfolio: 41.3% of loan portfolio is for residential
properties, slight decline from 41.7% as at 1QFY2015
17.6% for non-residential properties, mainly lending to SMEs for operating business premises
Risk management - Well diversified and collateralised loan book
Robust credit scoring and credit underwriting standards
Composition of Loan Portfolio
Purchase of residential property
41.3%
Working capital17.5%
Purchase of non-residential property
17.6%Personal use6.3%
Credit card1.8%
Purchase of
securities4.1%
Purchase of
transport vehicles
3.7%
Others7.7%
1QFY16
Loan Composition by Economic Purposes
21
Further Reduction in Impaired Loans. Net Impaired Loans Ratio Stable at 0.6%
Asset Quality
Gross and Net Impaired Loans Ratio remained stable
Gross Impaired Loan ratio at 1.0%, and Net Impaired Loans at 0.6%, better than industry average
Continuing efforts to refine credit underwriting and origination as well as monitoring and collections initiatives.
1QFY16 vs 1QFY15GIL: - RM76.4 mil
- 16.9%
FY2012 FY2013 FY2014 FY2015 1QFY160
200
400
600
800
1000
1200
1400
629.2 579.2442.8
380.7 376.104
2.5% 2.1%1.4% 1.0% 1.0%
1.4% 1.1% 0.7% 0.6% 0.6%
Gross impaired loans Gross Impaired Loan RatioNet Impaired Loan Ratio (%)
RM mil
Gross Impaired Loans Balance Sheet: Movements in impaired loans, advances and financing
RM’000 1QFY16 1QFY15
At beginning of year 380,712 442,781
Impaired during the quarter 136,524 167,573
Reclassified as unimpaired during the quarter (84,841) (92,235)
Recoveries (40,188) (53,620)
Amount written off (16,103) (12,004)
Gross Impaired Loans at 30 June 376,104 452,495
Individual allowance for impairment (62,370) (92,344)
Collective allowance for impairment (impaired portion) (99,797) (111,934)
Net impaired Loans at 30 June 213,937 248,217
1QFY16 vs 1QFY15NIL: - RM34.3 mil
- 13.8%
22
Further Reduction in Impaired Loans for Residential and Non-Residential Properties
Asset Quality: Mortgages, Hire Purchase, SME
Consumer Lending: Gross Impaired Loans ratio for the purchase of residential & non-residential property improved to 1.1%.
SME Lending: Gross Impaired Loans ratio stable at 0.9%.
FY2012 FY2013 FY2014 FY2015 1QFY160
100
200
300
400
500
266.7282.4
254.2 255.939 244
2.0%1.8%
1.4%1.2% 1.1%
Gross impaired loans GIL Ratio
RM mil
FY2012 FY2013 FY2014 FY2015 1QFY160
5
10
15
5.7 5.6
9.8
8.3 8.6
1.0% 0.8% 0.9%0.6% 0.6%
Gross impaired loans GIL Ratio
RM mil
FY2012 FY2013 FY2014 FY2015 1QFY160
100
200
146.2
101.4
79.4 65.5 65.3
2.7%1.7%
1.4%0.9% 0.9%
Gross impaired loans GIL Ratio
RM mil
Purchase of Residential andNon-Residential Properties Purchase of Transport Vehicles SME
Impairment Provisions
23
Normalization of Credit Cost and Lower Recoveries
FY2012 FY2013 FY2014 FY2015 1QFY16
87.7%82.5%
92.7%
102.7%105.4%
RM’000 1QFY16 1QFY15
Individual assessment 4,224 (5,972)
Collective assessment 17,406 15,563
Bad debts recovered (8,777) (12,688)
Bad debts written off 3,342 4,171
Allowance for other assets 919 678
Allowance/ (write-back) for losses on loans, financing and other losses 17,114 1,752
Write-back of impairment (CLO) (676) -
Total allowance 16,438 1,752
1Q FY16: Higher provision charge y-o-y with normalisation of credit cost.
1Q FY15: Benefited from recoveries
Cha
rge
Writ
e-ba
ck
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16-15
0
15
30
45
1.8 (6.6)
27.0 17.5 17.1
(0.8) (4.4) (1.5) (0.7)
Write-back of Impairment
Allowance for/ (write -back of) Losses on Loans & Other Losses
1.8
22.6
(7.4)
16.0 16.4
Net (Write-back) / Allowance of losses on Loans/ Financing and Impairment
RM mil Loan Loss Coverage
Credit Cost (bps) AnnualizedFY16
1QFY16 FY2015
Including recoveries 18.4 bps 4.6 bps 11.5 bps
Excluding recoveries 28.0 bps 7.0 bps 29.4 bpsNote: Credit cost annualized based on 1Q FY2016 actual charge
Deposits from customers
83.9%
Deposits of banks and other FIs
4.0%
Shareholders' Funds8.6%
Other Liabilities3.5%
1QFY16
Net Loans70.7%
Investment securities
21.1%
Cash, ST funds, Deposits with FI
3.5%
Other Assets4.7%
1QFY16
24
Balance Sheet Management
83.9% of Funding from Customer Deposits
4.3% y-o-y growth in total assets Loans account for 70.7% of total assets, up from
65.5% a year ago
1QFY16 vs 1QFY15+ RM2.2 bil
+ 4.3%
FY2012 FY2013 FY2014 FY2015 1QFY160
10
20
30
40
50
60
24.5 27.8 31.836.6 37.0
11.512.7
11.911.5 11.2
3.73.2
4.45.0 4.1
39.743.7
48.153.1 52.3
Net Loans Treasury Assets Other AssetsRM bil
Note: Investment securities comprise financial assets (HFT, AFS & HTM) & derivative financial assets
Net Loans65.5%
Investment securities
23.6%
Cash, ST funds, Deposits with FI
6.1%
Other Assets4.8%
1QFY15
Deposits from customers
79.0%
Deposits of banks and other FIs
9.0%
Shareholders' Funds8.3%
Other Liabilities3.7%
1QFY15
Total Assets Trend Composition of Total Assets
Composition of Total Liabilities/ Equity
25
Customer Deposits
Customer Deposits grew +10.8% y-o-y, higher than industry growth +7.3%(1) y-o-y.
CASA deposits expanded by RM1.4 billion or 10.1% y-o-y to RM15.1 billion in 1QFY2016
34.5% CASA deposits ratio, driven mainly by SME segment.
Reduced high cost fixed deposits, in view of slower loans growth
Robust Y-o-Y Deposit Growth of 10.8%, with CASA Deposits Up 10.1% to RM15.1 billion
FY2012(EOP) FY2013(EOP) FY2014 (EOP) FY2015(EOP) 1QFY16(EOP)0
20
40
60
9.1 10.4 11.5 13.2 13.31.7 1.7 1.8 1.8 1.815.6
17.1 18.621.0 20.4
5.86.8
7.38.6 8.4
33.7% 33.6% 34.0% 33.6% 34.5%
DD SA FD NID,MMD,SD CASA ratioRM bil
43.9
32.236.0
39.244.6
12.1 13.3 15.0 15.110.8
(1) Industry data sourced from BNM Monthly Statistical Bulletin as of June 2015. EOP – refers to end of period.
Customer Deposits Trend
26
Liquidity Management
Liquidity: Healthy Loan to Deposit Ratio at 85.1%
Stable funding with 40.9% from Individuals and 30.6% from Business Enterprises
Liquidity Coverage Ratio at 144%, above 60% regulatory requirement
FY2012 FY2013 FY2014 FY2015 1QFY160%
20%
40%
60%
80%
100%
77.7% 78.4%82.1% 82.8% 85.1%
Individuals40.9%
Business enterprises30.6%
Govt. & statutory bodies6.8%
Domestic financial
institutions11.1%
Domestic non-bank financial
institutions7.9%
Foreign entity1.4% Others
1.3%
Demand deposits, 30.4% Saving de-
posits, 4.1%
Fixed/ investment deposits, 46.6%
Money market deposits, 7.1%
Negotiable instruments of
deposits, 10.9%
Structured deposits,
0.9%
Deposit Composition by Customer Types
Deposit Composition by Product Types
Loan to Deposit Ratio Trend
Legal Entity CET 1 Capital Ratio
Tier 1 Capital Ratio
Total Capital Ratio
Alliance Financial Group 11.1% 11.1% 13.0%
Alliance Bank 11.1% 11.1% 11.6%
Alliance Islamic Bank 10.9% 10.9% 11.6%
Alliance Investment Bank 101.6% 101.6% 101.6%
Basel III Minimum regulatory capital adequacy ratio (1)
4.5% 6.0% 8.0%
Effective Capital Management
27
Core Equity Tier I Ratio at 11.1% above industry average.
Strong profit generation capacity to fund balance sheet expansion
Going forward, asset growth in line with revenue growth resulting in stable capital ratios.
Core Equity Tier 1 Capital Ratio at 11.1%
(1) Based on the Basel III minimum capital ratios for calendar year 2015
AFG Ratio (%) FY12 FY13 FY14 FY15 1QFY16
Double Leverage Ratio 98.7% 98.5% 99.0% 96.0% 97.4%
RWA/ Total Assets 66.2% 63.8% 63.2% 65.7% 66.7%
RWA (RM bil) 26.3 27.9 30.4 34.9 34.9
Y-o-Y RWA Growth 17.2% 5.9% 9.0% 15.0% 10.7%
FY2012 FY2013 FY2014 FY2015 1QFY16
15.1% 14.6% 13.7% 13.0% 13.0%
Total Capital Ratio (%)
1QFY15 2QFY15 3QFY15 4QFY15 1QFY160
100
200
130.8
180.3
126.493.3
121.9
RM mil
1QFY15 2QFY15 3QFY15 4QFY15 1QFY160
5
10
15
8.611.8
8.36.1
8
NPAT: 30.7% Improvement in Q-o-Q Profitability
28
Enhanced Shareholder Value
sen
Net Profit After Tax
Earnings Per Share Return On Equity
1QFY15 2QFY15 3QFY15 4QFY15 1QFY160
100
200
300
173.3237.0
168.2124.6
160.7
RM mil
Profit Before Tax
1QFY15 2QFY15 3QFY15 4QFY15 1QFY160%
10%
20%
13.2%15.1%
11.6%9.4% 10.9%
RM mil
29
FY2012 FY2013 FY2014 FY2015 1QFY16 14 Aug'150
2
4
6
8
10
6.0226.811 6.827
7.4156.796
5.697
RM bil
Enhanced Shareholder Value
FY2012 FY2013 FY2014 FY2015 1QFY16 14 Aug'150
1
2
3
4
5
6
3.894.40 4.41
4.794.39
3.68
RM
Market Capitalization at RM6.8 billion
FY12 FY13 FY14FY15
1QFY16 14 Aug’15
1.6 1.7 1.6 1.6 1.5 1.3
FY12 FY13
FY14 FY15 1QFY16 July’15
30.7% 37.2% 32.5% 31.0% 29.3% 29.4%
Price-to-Book Multiple (times) Foreign Shareholding
Market Capitalisation Share Price Performance
Executive Summary
Contents
1
Financial Results for 1QFY20162
Appendices3
31
INCOME STATEMENT 1QFY16 4QFY15 3QFY15 2QFY15 1QFY15 30.6.2015 31.3.2015 31.12.2014 30.9.2014 30.6.2014
Interest income 463,765 432,025 459,142 457,755 423,485
Interest expense (255,999) (245,915) (245,623) (236,616) (223,664)Net interest income 207,766 186,110 213,519 221,139 199,821 Net income from Islamic banking business 58,552 58,211 58,279 53,919 53,674 266,318 244,321 271,798 275,058 253,495 Other operating income 78,029 61,726 78,032 115,064 83,244 Net income 344,347 306,047 349,830 390,122 336,739 Other operating expenses (167,350) (165,466) (156,401) (160,523) (161,668)
Operating profit before allowance 176,997 140,581 193,429 229,599 175,071
Allowance for losses on and other losses loans, advances and financing (17,114) (17,490) (26,950) 6,588 (1,752)
Write-back of impairment 676 1,539 1,743 833 -Operating profit after allowance 160,559 124,630 168,222 237,020 173,319 Share of results of joint venture 103 2 8 6 -Profit before taxation and zakat 160,662 124,632 168,230 237,026 173,319 Taxation and zakat (38,732) (31,363) (41,857) (56,698) (42,509)Net profit after taxation and zakat 121,930 93,269 126,373 180,328 130,810
Quarterly Income Statement
Islamic Banking: Y-o-Y Net Financing Growth of 27.4% and Deposit Growth of 22.8%
32
Net Financing & Advances (AIS)
Customer Deposits (AIS)
Islamic Banking Income
Net Profit After Tax & Zakat (AIS)
FY2012 FY2013 FY2014 FY2015 1QFY160
5
10
15
5.2 5.9 6.38.0 8.5
36.8% 33.1% 32.9% 31.7% 32.8%
Customer Deposits CASA RatioRM bil
Islamic Banking
1QFY15 2QFY15 3QFY15 4QFY15 1QFY160
50
100
53.7 53.9 58.3 58.2 58.6
15.9% 13.8% 16.7% 19.0% 17.0%
Islamic Banking Income % of Group's Net IncomeRM mil
1QFY15 2QFY15 3QFY15 4QFY15 1QFY160
5
10
15
20
15.6 12.9
14.9 17.1
11.0
RM mil
FY2012 FY2013 FY2014 FY2015 1QFY160
2
4
6
8
4.4 4.6 5.0
6.6 6.7
RM bil
Non-Interest Income
33Note: Including Islamic Banking Income
QTD QTD Y-O-Y QTD Q-O-QNon Interest Income (RM'm) 1Q FY16 1Q FY15 RM mil % 4Q FY15 RM mil % Consumer Banking Fee IncomeWealth Management 9.2 9.2 - - 7.8 1.4 17.9%Brokerage - retail 2.5 3.1 (0.6) -19.4% 2.7 (0.2) -7.4%Cards 1.6 2.4 (0.8) -33.3% 1.6 - - TOTAL 13.3 14.7 (1.4) -9.5% 12.1 1.2 9.9%Business Banking Fee IncomeTrade Finance & Guarantees 12.6 14.9 (2.3) -15.4% 15.4 (2.8) -18.2%FX - Treasury Sales 12.4 12.4 - - 12.8 (0.4) -3.1%Brokerage - institutional 4.7 2.9 1.8 64.0% 3.1 1.6 51.3%TOTAL 29.7 30.2 (0.5) -1.5% 31.3 (1.6) -5.1%Fee & Commission (Incl. fees from Treasury sales) 17.7 19.7 (2.0) -10.2% 17.7 - - Customer Based 60.7 64.6 (3.9) -6.0% 61.1 (0.4) -0.7%
Gain from sale/redemption of Financial Investments 0.9 6.9 (6.0) -87.0% (0.7) 1.6 >-100%Revaluation & Realised Gain from Derivatives (including DCI/SI) 5.8 6.1 (0.3) -4.9% (11.7) 17.5 >-100%Foreign Exchange Gain (Translation & Trading) 4.2 1.1 3.1 >100% 10.6 (6.4) -60.4%Dividend Income 2.7 1.6 1.1 68.8% - 2.7 - Others 6.3 6.2 0.1 1.6% 9.6 (3.3) -34.4%Non Customer Based 19.9 21.9 (2.0) -9.1% 7.8 12.1 >100%
Total Non Interest Income 80.6 86.5 (5.9) -6.8% 68.9 11.7 17.0%
Requirements Banks to maintain, in aggregate, Collective
Assessment Allowance (“CA”) and Regulatory Reserve ratio of 1.2%.
The CA + Regulatory Reserve is stated as a percentage of gross loans (excluding guaranteed loans from the Government of Malaysia), net of individual allowance (“IA”).
CA includes both provision for impaired and non-impaired loans, amount as per disclosed in our financial statements.
The Bank shall comply with this requirement by 31 December 2015.
Guideline on Classification and Impairment Provision for Loans/Financing
Treatments In the event the Bank is required to top up the provision to
1.2% (via the creation of Regulatory Reserve), the top up portion is created by way of transferring the provision from retained profits i.e. merely movement within the statement of equity without additional charge to profit & loss accounts.
It would be a transfer from Retained Earnings to Regulatory Reserve (within Shareholders Funds).
Effectively the Regulatory Reserve will be similar to the Statutory Reserve – cannot be used to declare dividends. But no impact on the Net Tangible Assets (“NTA”).
As per Para 16.1, CA and Regulatory Reserve, attributable to impaired loans shall be excluded from Tier-2 Capital’s computation.
AFG June 2015 March 2015
CA % 1.0% 1.0%
Impact As at end-June 2015, AFG’s CA ratio was at 1.0%. To top up to 1.2%, this translates to transfer of RM113.25 million from
retained earnings to Regulatory Reserve. Estimated impact to CET1 ratio is a drop of 0.32% to 10.8%. Total Capital Ratio maintained at 13.0%.
Regulatory Reserve
34
Alliance Financial Group7th Floor, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala Lumpur, MalaysiaTel: (6)03-2604 3333www.alliancefg.com/quarterlyresults
THANK YOU
Maple Chan Yun FengCorporate Strategy & Investor RelationsContact: (6)03-2604 3385Email: maplechan@alliancefg.com
Disclaimer: This presentation has been prepared by Alliance Financial Group (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, expressed 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.
This 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 its contents or otherwise arising in connection therewith.
For further information, please contact: Amarjeet KaurGroup Corporate Strategy & DevelopmentContact: (6)03-2604 3386Email: amarjeet@alliancefg.com