COMMERCIAL BANK OPERATIONS

BWBB 3013/GROUP C

Prepared by:

MOHAMAD FIRDAUS IZANI BIN MUHAMAD ZAMAN (233674)

NUR SYAFIQAH BT MD. KHALIL (233968)

NURUL SYAHIRAH BINTI RAMLY (234003)

SITI NASIRAH BINTI ALYAMUTTY (233903)

NURUL HUSNA BINTI RAMLAN (234001)

Universiti Utara Malaysia

An Analysis of commercial bank(Affin Bank) performance in Malaysia

AFFIN Holdings Berhad (AHB) was incorporated in Malaysia on 31 May 1975 as a private limited company under the name of I.M.A Sdn Bhd. It started off as a credit company providing hire-purchase financing for motor vehicles. On 15 September 1978, it changed its name to AFFIN Motor and Credit Finance (Malaysia) Sdn Bhd.

Subsequently it changed its name again to AFFIN Credit (Malaysia) Sdn Bhd on 16 January 1979 and thereafter to AFFIN Holdings Sdn Bhd on 2 March 1991. It was converted into a public company under its present name on 6 May 1991. In the last decade, AHB has changed substantially in terms of group organisation structure through a series of mergers and acquisitions which had been undertaken to facilitate AHB's status as the flagship financial services subsidiary of its major shareholder, Lembaga Tabung Angkatan Tentera (LTAT).

Introduction- Bank history & background

1991

Listed on Bursa Malaysia on 4 November 1991 with AFFIN Finance Berhad and AFFIN Merchant Bank Berhad (now known as AFFIN Investment Bank Berhad) as subsidiaries and AXA AFFIN Assurance Berhad (now known as AXA AFFIN General Insurance Berhad) as an associate company

1992

Undertook a joint corporate exercise with Boustead Holdings Berhad to acquire 100% interest in Perwira AFFIN Bank

 

1997

Acquired Antara Discount Berhad (now known as AFFIN Discount Berhad) and Telenas (Malaysia) Sdn Bhd (now known as AFFIN Moneybrokers Sdn Bhd)

1998

Expanded its operations to include stockbroking business through 55% interest in AFFIN-UOB Securities Sdn Bhd (now known as AFFIN Securities Sdn Bhd)

1999

Acquired ACF Holdings Bhd and Asia Commercial Finance (M) Bhd from the Lion Group

2001

Acquired BSN Commercial Bank Berhad

2004

Acquired United Overseas Bank (UOB)'s 45% stake in AFFIN Securities Sdn Bhd

2005

Acquired the remaining 37.88% interest in AFFIN-ACF Holdings Berhad (now known as AFFIN-ACF Holdings Sdn Bhd) in January 2005

Completed the merger of AFFIN Bank Berhad and AFFIN-ACF Finance Berhad (now known as AFFIN-ACF Capital Sdn Bhd) on 1 June 2005

Acquired the remaining 36.84% interest in AFFIN Merchant Bank Berhad (now known as AFFIN Investment Bank Berhad) from MISC Enterprise Holdings Sdn Bhd in December 2005

2006

AFFIN Islamic Bank Berhad commenced its business operation on 3 April 2006

AXA AFFIN Life Insurance Berhad (51% owned by AFFIN Holdings Berhad) acquired life insurance business of Tahan Insurance Malaysia Berhad in June 2006 and commenced its business operation on 1 July 2006

Completed the transfer of discount house business of AFFIN Discount Berhad to AFFIN Investment Bank Berhad in July 2006. On the same date, AFFIN Investment Bank also acquired AFFIN Fund Management Sdn Bhd and AFFIN Trust Management Berhad from AFFIN Holdings Berhad to form an Investment Bank

2007

The Stockbroking Business of AFFIN Securities Sdn Bhd is transferred to AFFIN Investment Bank Berhad on 1 January 2007 to form a full fledged Investment Bank

AXA AFFIN Life Insurance Berhad was officially launced on 30 January 2007

The asset and liabilities of AFFIN Trust Management Berhad was transferred to AFFIN Fund Management Berhad with effect from 1 July 2007

AHB entered into an agreement with The Bank of East Asia, Limited on 18 September 2007 for the placement of new ordinary shares of RM1 each representing up to 15% of the issued and paid-up capital in AHB. Subsequently, The Bank of East Asia, Limited became one of the substantial shareholders of AHB

2008

AFFIN-ACF Holdings Berhad (a 100% subsidiary of AFFIN Holdings Berhad) had entered a share sale agreement with Commerce International Group Berhad on 10 November 2008 for the disposal of 100% equity interest in AFFIN Insurance Brokers Sdn Bhd

2014

Acquired 100% equity interest in HWANG DBS Investment Bank Berhad, which in turn owns the following entities:

70% of Hwang Investment Management Berhad49% of Asian Islamic Investment Management Sdn Bhd100% of HDM Futures Sdn Bhd100% of HDM Nominees (Tempatan) Sdn Bhd100% of HDM Nominees (Asing) Sdn Bhd

For a total purchase consideration of RM 1,363 million (subject to a net asset adjustment).

AFFIN Group is a major home-grown financial services conglomerates. The Group's primary activities focus on the provision of commercial, islamic and investment banking services, money broking, fund management, underwriting of general and life insurance business. The prominent shareholder of Affin Holdings Berhad is Lembaga Tabung Angkatan Tentera the nation’s premier superannuation fund manager for the armed forces.

 

Management team 

Kamarul Ariffin Mohd Jamil Group Chief Executive Officer, Affin Holdings Berhad Managing Director / Chief Executive Officer, Affin Bank Berhad

Shariffudin Mohamad Executive Director, Operations and Strategic Services

Amirudin Abdul Halim Executive Director, Banking

Ramanathan Rajoo Chief Financial Officer

Tan Kok Toon Director, Group Treasury

Khatimah Mahadi Group Chief Internal Auditor

Idris Abd. Hamid Director, Consumer Banking

Nor Rozita Nordin Chief Human Resource Officer

Nimma Safira Khalid Chief Compliance Officer and Company Secretary

Norhazlizawati Mohd Razali Group Chief Credit Officer

Wong Kok Leong Group Chief Risk Officer

1.GEN (R) DATO’ SERI DIRAJA TAN SRI MOHD ZAHIDI BIN HAJI ZAINUDDIN

2.TAN SRI DATO’ SERI LODIN BIN WOK KAMARUDDIN

3.RAJA TAN SRI DATO’ SERI AMAN BIN RAJA HAJI AHMAD

4.DATO’ MUSTAFA BIN MOHAMAD ALI

5.ABD MALIK BIN A RAHMAN

6.TAN SRI DATO’ SERI ALAUDDIN BIN DATO’ MOHD SHERIFF

7.ROSNAH BINTI OMAR

8.IGNATIUS CHAN TZE CHING

9.JOSEPH YUK WING PANG

Board Of Director

There have 5 types of Affin’s Bank Group achievement :

 

i)AFFINBANK & AFFIN ISLAMIC

The AFFINBANK Group which includes AFFIN Bank Berhad and AFFIN Islamic Bank Berhad recorded a profit after taxation and zakat (PAT) of RM543.7 million in 2014 with a 8.9% growth in net loans, advances and financing and a 4.3% increase in deposits respectively.

 

Total assets increased by 5.5% from RM56.4 billion in 2013 to RM59.5 billion in the year under review.

Achievement

The Chinese New Year deposit 'Fortune Rides Your Way!' promotion offering special fixed deposit rates and the popular OMG customer rewards campaign.

 Three programmes for fresh graduates were carried out to expose

trainees to the banking industry for a year comprising technical and soft skills training and on-the-job attachments with different departments in the Bank.

 Presence in the Islamic banking sector with the introduction of a

financing package for pilgrims called HUZ-i (Hajj, Umrah and Ziarah Financing-i) package and the launch of Term Deposit-I, which is a product based on the Shariah concept of Wakalah with underlying Commodity Murabahah and provides customers with fixed profit rates.

ii)AFFIN HWANG IB GROUP

AFFIN Hwang IB Group reported a PBT of RM107.4 million for the year ended 31 December 2014 which includes the acquired businesses of AFFIN Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad).

 

Affin Hwang Capital has also instituted efforts to increase its level of cross-selling of its products and services with the ultimate aim of creating a one-stop investment banking platform for institutional, corporate and retail clients.

 

In the securities segment, AFFIN Hwang IB has also reformed its institutional coverage to be segment-based with a client-focused research model for institutional equities.

 

AFFIN Hwang Asset Management Berhad (AFFIN Hwang AM) became the first Malaysian company to launch a Luxembourg-registered Undertaking for Collective Investments in Transferable Securities Fund in November 2014.

iii) AFFIN MONEYBROKERS SDN BHD (AMBSB)

- Maintain strong growth in market capitalisation amidst trying times registering a net turnover of RM12.9 million for the year ended 31 December 2014. This was significantly higher by 11%, compared to RM11.6 million for the previous year.

- Revenue contribution was higher by the Swap/Foreign Deposits, Foreign Exchange and Money Market sections compared to the previous year with the Swap/Foreign Deposits Section contributing the highest brokerage of RM3.8 million, representing 30.1% of total net brokerage income.

- be a highly cash generative business and this has enabled the company to maintain a progressive approach on the dividend paid to shareholders.

iv. AXA AFFIN LIFE INSURANCE BERHAD (AALIB)

- Gross premiums totalled RM329 million in 2014 representing a 4.5% increase from RM314.8 million the year before.

- AALIB’s agency distribution channel recorded a strong new business growth rate of 9% for 2014 on the back of increased manpower

- AALIB will continue to leverage on AFFIN Bank Berhad’s network for bancassurance and focus on customer centric initiatives and technology changes.

v) AXA AFFIN GENERAL INSURANCE BERHAD (AAGIB)An exceptionally strong performance saw AAGIB registered gross

written premiums (GWP) totalling RM1.1 billion in 2014 compared to RM963.2 million. Significant milestone was achieved during the year by hitting the RM1 billion mark for GWP. The Motor, Health and SME segments were the key contributors to this double digit growth of 17.8%. AAGIB is now ranked 5th in the industry with a market share close to 7%.

The Agency distribution channel, representing more than 50% of AAGIB’s activity, recorded 18% growth compared to 13% in 2013 while Broking and Alternative Distribution recorded the highest growth rates of 29.4% (RM40.7 million) and 77.2% (RM16.8 million) respectively against 2013. All other distribution channels performed as expected.

Underwriting profit totalled RM72.8 million compared to RM50.3 million in 2013, reflecting AAGIB’s prudent underwriting and strong strategies to achieve higher profitable growth.

In 2016, the potential liberalisation of the insurance market and insurers’ drive for business are expected to increase competition in the industry. Despite these challenges, AAGIB will continue to build market share focusing on customers and enhanced technology in 2015.

The achievements in 2014 are a reflection of the trust placed by valued customers as well as the dedication, support and commitment from the team, agents, distributors and business partners. AAGIB is confident that this coupled with strong strategies and prudent risk management, will enable AAGIB to continue to achieve profitable and sustainable long term growth.

i) ATM (TARIFF CHARGE)

ii) FOREIGN PAYMENTS

iii) MISCELLANEOUS

iv) MORTGAGE LOAN

v) HIRE PURCHASE

vi) DOMESTIC PAYMENT

vii) ASB LOAN

Types of products & services offer by bank

STRENGTHS WEAKNESSES

1 ) Catering to various products segmentation 1) Competing with identical products to other banking entities

2) Vast pool of capital for further company growth 2) Weaker brand name as compared to bigger industry player

3) Years of financial experience for proven credibility and

reliability as a sound banking and financial institution

3) Limited facilities in terms of branch opening and the

placement of ATM strategic locations

4) Great degree of appeal to government sector 4) Customer focus orientation, more on government sector

rather than creating balance target market

5) Have strong current ratio in meeting short term financial

obligations

5) Depending on debt to finance their asset

  6) Conservatives in terms of using its resources to gain and

generate more profitable income

Swot analysis

OPPORTUNITIES THREATS

1) Rise of private banking, especially from high eaners

group where they appreciate a certain privileged when

doing financial transactions

1) World economic volatility that may cause economic

depression such as increase in financing rates, the pluming

of monetory currency significant withdrawal of

investment

2) Positive salary growth of Malaysian and the big

spending habits that they can gain advantage

2) Intense rivalry between banking entities that may cause

burden to the bank operating cost that may contribute to

industry downfall

3) The increase number of young populations as executive

and technocrats that desire for banking facilities that suits

their lifestyles such as debit card and loyalty programs

3) Cyber-crime that can inflict significant impact to the

banking industry such as fraud and identity theft

 

 

4) Mass home development, particularly, luxurious homes

that potential customer needs for loan financing

 

5) New target market segment that can be venture into  

Ratio Analysis

2012 2013 20142.00%

2.10%

2.20%

2.30%

2.40%

2.50%

2.60% 2.57%

2.37%

2.22%

ROA

ROA

Return on asset =

Return on equity =

2012 2013 20140.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00% 28.27%26.97%

22.64%

ROE

ROE

NPL Ratio=

2012 2013 20140

0.2

0.4

0.6

0.8

1

1.2

1.4

0.03

0.19

1.33

NPL Ratio

NPL Ratio

Debt Ratio=

2012 2013 201489.60%

89.80%

90.00%

90.20%

90.40%

90.60%

90.80%

91.00%

91.20%

91.40%

90.90%

91.20%

90.21%

Debt ratio

Debt ratio

Loan to deposit ratio=

2012 2013 201475.00%

75.50%

76.00%

76.50%

77.00%

77.50%

78.00%

78.50%

79.00%

79.50%

78.82%

76.48%

77.11%

Loan to deposit ratio

Loan to deposit ratio

EPS=

2012 2013 201431

32

33

34

35

36

37

38

35

37.5

33.3

Earnings Per Share

Earnings Per Share

Debt equity ratio=

2012 2013 20148.6

8.8

9

9.2

9.4

9.6

9.8

10

10.2

10.4

10.6

9.98

10.36

9.22

Debt equity ratio

Debt equity ratio

Net interest margin=

2012 2013 20141.60%

1.65%

1.70%

1.75%

1.80%

1.85%

1.90%

1.95%

2.00%1.96%

1.86%

1.75%

Net interest margin

Net interest margin

Net operating margin=

2012 2013 2014

-0.54%

-0.52%

-0.50%

-0.48%

-0.52%

-0.50% -0.50%

Net operating margin

Net operating margin

The Board should acknowledges its roles and responsibilities for the overall performance of AFFINBANK.

These include responsibility for determining AFFINBANK’s general policies and strategies for the short, medium and long term, approving business plans, including targets and budgets, and approving major strategic decisions.

The Corporate Internet Banking-make sure the system was operate properly-Customer acknowledges that at certain times some or all of the affinOnline.com service may not be accessible due to system maintenance or other reasons that Affinonline.com should responsible.

Recommendation

Make other arrangements subsisted to which the Bank or any of its subsidiaries is a party with the objects of enabling Directors of the Bank or any of its subsidiaries to acquire benefits by means of the acquisition of shares, or debenture of the Bank or any other body corporate.

-Smart20 Financial Plan is an insurance plan combining Protection, Savings and Investment in one plan. It is a Regular Premium Investment-Linked Plan

- Smart20 covers 4 core aspects in life which are Career, Family, Health and Retirement

which is:

• Smart20 Graduate Plan 

• Bright Future Savings Plan 

• Financial Freedom Protection Plan 

• Golden Nest Savings Plan 

Future prospects / future direction

Benefits & Features of Smart20 Financial Plan :

i) Death and TPD

ii) Regular Premium and Top Up Premium

iii) Fund Switching

iv) Fund Withdrawal

v) Loyalty Bonus

Conclusion