CHAIRMAN S STATEMENT PROFIT BEFORE ZAKAT AND TAXATION (PBZT) RM117.4 million TOTAL ASSETS RM13.4 billion JEN. TAN SRI DATO SERI ISMAIL BIN HAJI OMAR (BERSARA) Chairman DEAR SHAREHOLDERS, It gives me pleasure to present the financial and operational highlights of AFFIN ISLAMIC, given the Bank s very encouraging performance within a challenging economic environment that faces the financial industry in Malaysia. Our total assets grew 5.2% to RM13.4 billion and profit before zakat and taxation (PBZT) increased by 28.1% to RM117.4 million. The Board of Directors is committed to ensure the Bank continues to grow from strength to strength, building on its fundamentals in order to ensure its long-term sustainability and steady returns to stakeholders. Since the Bank was established in 2006, we have kept a keen eye on its progress and been pleased not only by its financial scorecard but also with increasing market awareness of the brand and its reputation as an Islamic bank that keeps innovating to introduce Shariah compliant products that appeal to the various segments of the market. We are also committed to play our role in advancing Islamic banking more generally within the local financial landscape. In 2015, we made a quantum leap in this direction when AFFIN ISLAMIC joined forces with five other Islamic banking institutions to form a consortium offering an Islamic Account Platform (IAP). Through the IAP, we will be presenting investment opportunities in local businesses and entrepreneurs that have been riskassessed by the participating banks. We also see the IAP as presenting a new medium to facilitate greater public-private partnerships in financing strategic ventures within specific industries. It is also envisaged for IAP to be eventually positioned to facilitate fund intermediation across borders. Along with enhanced governance in the Islamic banking sector, we believe that Islamic financial institutions in general are better positioned to meet the requirements of the market. AFFIN ISLAMIC in particular has been focusing intently on fulfilling both the investment and financing needs of our growing customer base. As a result, I am pleased to share that the Bank has grown our assets by 5.2%, increased our profit before zakat and taxation (PBZT) by 28.1% to RM117.4 million, and our earnings per share to 23.5 sen compared to 18.5 sen in 2014. In addition to increasing our shareholder value in financial terms, the Bank has also been working assiduously to grow our market reputation and integrate ourselves more fully into local communities via a series of community outreach programmes and zakat (business tithes) contributions. These initiatives are undertaken not out of a sense of obligation but because we truly believe that, by giving back to the communities that surround us, we are building our brand thus increasing the intrinsic and long-term value of the Bank. In 2015, AFFIN ISLAMIC contributed a total of RM5.5 million in zakat to different causes and sectors of the under-served population. We contributed a total of RM1.5 million to the six state zakat centres, while also channelling RM4.0 million in direct contributions to deserving individuals and charitable organisations. Of this sum, RM2.6 million went towards helping the poor and needy to provide for themselves. A total of RM478,842 was channelled towards knowledge cause (Fisabilillah), inclusive of Muallaf activities. Among our Muallaf contributions were RM60,000 to Multiracial Reverted Muslim (MRM) and RM25,000 to Interactive Da wah Training to assist newly converted Muslims. On our educational aid, AFFIN ISLAMIC contributed RM250,000 to support deserving students pursuing tertiary education at local institutions of higher learning such as Universiti Teknologi MARA (UiTM), Universiti Kebangsaan Malaysia (UKM) and Management & Science University (MSU) to 14
CHAIRMAN S STATEMENT Contribution to Tabung Zakat Angkatan Tentera Malaysia. name a few. To help eligible recipients to settle their debts, the Bank disbursed RM45,212.43 under Gharimin. Meanwhile, we also contributed RM75,000 towards Riqab (rehabilitation of Aqidah), which included RM50,000 to Pusat Jagaan Remaja Puteri Raudhatus Sakinah. In addition, we contributed RM700,000 to Tabung Zakat Angkatan Tentera Malaysia, which manages funds to be allocated to deserving members of the armed forces. Besides our zakat contribution, through the AFFIN Barakah Charity Account-i, AFFIN ISLAMIC donated RM18,360 to Yayasan Kanser Malaysia (YKM) for the purchase of basic medical needs and equipment for poor patients; and RM20,000 to Pemulihan Dalam Komuniti (PDK) Kasih Templer Autisma to assist children with autism and other special needs. We launched the AFFIN Barakah Charity Account-i as a Mudharabah savings account in 2013 to facilitate charitable donations by depositors. Via the account, customers pledge to donate a certain percentage of their monthly earned investment profit to a worthy cause. Contibution from AFFIN Barakah Charity Account-i to PDK Kasih Autisma. We also support corporate responsibility initiatives together with our parent company, AFFINBANK. Every year, we join forces to hold a Majlis Berbuka Puasa Bersama Anak-anak Yatim, at AFFINBANK s Head Office to bring cheer to orphans. This year, about 160 children from three orphanages in the Klang Valley were invited to a buka puasa (breaking of fast) dinner which was attended by Senior Management from both banks during the month of Ramadhan. We also presented the children with a token of duit raya to add to the occasion. In addition, we jointly sponsored Utusan Melayu s Tutor Pull-out Programme under which specially prepared Tutor Pull-out were distributed to primary and secondary school students, to supplement their normal curriculum learning materials. 15
CHAIRMAN S STATEMENT Zakat presentation to Management & Science University (MSU). Ultimately, we function to serve the needs of the nation. This is reflected not only in our corporate responsibility initiatives but also in the emphasis we place on providing our customers with products that truly meet their needs. I m pleased to share that in January 2016, as part of a Group Strategic Transformation Programme, we are conducting a thorough review of our position within the Islamic finance industry, assessing segments of the population that we are ideally suited to serve, and plan strategically to deliver products that will add value to these target markets. In addition, we are building on our customer service to further enhance our customer experience. The idea is ensure we keep relevant to a rapidly changing marketplace and become a dream bank not only for our customers but also our employees. Our employees, after all, are our most valued assets. I would like to take this opportunity to thank them, on behalf of the Board of Directors, for their hard work and commitment to the Bank. I would also like to acknowledge our Management for their able leadership which has seen the Bank grow over the years. Finally, I would like to express my sincerest appreciation to all other stakeholders from the regulators to our business partners, shareholders and customers for their continued support. We value all your contributions, which have helped us achieve all our successes to date, and are committed to keep growing so we can attain even greater heights in the Islamic banking space in the years to come. Jen. Tan Sri Dato Seri Ismail Bin Haji Omar (Bersara) Chairman Presentation of Zakat to Pusat Jagaan Remaja Puteri Raudhatus Sakinah. 16
CEO S PERFORMANCE REVIEW 28.1% GROWTH IN PROFIT BEFORE ZAKAT AND TAXATION 28.5% GROWTH IN NET FINANCING EN. NAZLEE BIN KHALIFAH Chief Executive Officer The year 2015 was challenging for the banking sector in Malaysia - both Islamic and conventional - due to a bearish capital market and decline of our currency which, combined with an increase in US interest rates, led to capital outflow. This necessitated conscious efforts to increase our capital adequacy, hence competition and increased cost for deposits. Despite the narrowing net profit margin (NPM) and challenging environment, however, AFFIN ISLAMIC continued to grow our overall financing and assets as compared to the previous year while increasing our profit before zakat and taxation (PBZT) by 28.1% to RM117.4 million year-on-year, exceeding the 2015 target by 16.7%. This has been the result of conscientious efforts to strengthen the Bank at our core building its fundamentals while strengthening our relationships with retail and commercial customers. We have continued to identify and segmentalise our key markets, and invest in products that are relevant and provide extra value to them. FINANCIAL RESULTS In defiance of the challenging environment, the Bank s performance for the year ended 31 December 2015 was extremely encouraging, with positive results in all key financial parameters. AFFIN ISLAMIC achieved a total financing growth of 28.5% and experienced an increase in net financing, advances & other financing to RM9.2 billion with our net impaired financing ratio stable at 1.1%. The bank s deposit portfolio continued to grow, surpassing the RM10.0 billion mark, as a result of various collaborations with our parent, AFFINBANK. These included promotions such as the AFFIN Best Deposit Campaign, Merdeka Combo Campaign and Year End Bonanza 2015. Together, these enabled AFFIN ISLAMIC to end the year with total assets of RM13.4 billion, an expansion by 5.2% from the previous financial year. In an increasingly competitive environment, it is more important than ever to operate at a high level of efficiency, and I am pleased to say that constant efforts towards this end have had a positive effect on our balance sheet. By managing our operating costs effectively, AFFIN ISLAMIC managed to improve our cost to income ratio from 55.48% in 2014 to 47.61%. This played a part in the increase in PBZT as reported above, and a 27.3% increase in profit after zakat and taxation from RM66.6 million to RM84.8 million. BUSINESS INITIATIVES We continued to explore different market segments in order to better understand consumers characteristics, needs and how we can better serve them. Our marketing efforts were concentrated on channels that appeal to an increasingly more tech-savvy and connected population via various online and social media interaction. During the year, we organised competitions on social media such as Create Your Own Version of Raya Song and Guess for an ipad. Supplementing on our online efforts, we extended our reach to consumers belonging to Gen Y via more direct approach, such as presenting a talk geared specifically towards first-time home buyers during Prospek Hartanah. These targeted efforts were supplemented by mass advertising in order to increase brand visibility among the public. We ran a nationwide advertisement campaign using digital displays at Giant hypermarkets, while also promoting Ar-Rahnu and AFFIN ISLAMIC Impian Haji, a Term Deposit-i campaign, on digital screens at selected locations. 17
CEO S PERFORMANCE REVIEW Ground breaking ceremony of Kompleks At-Tijarah AFFIN-UiTM. Additionally, we created more awareness of our Term Deposit-i by advertising it on a highly visible billboard in Petaling Jaya. Other products were advertised in the New Straits Times daily and i-property, Prospek Hartanah and Solusi magazines. The Bank collaborated with strategic business partners such as MARA, Management & Science University (MSU) and Universiti Teknologi MARA to organise events and create awareness on Islamic banking. 2015 also saw AFFIN ISLAMIC work with other Islamic banking institutions to raise the bar of Islamic financial services in the country, enabling Islamic banks to become financial intermediaries. In October, the Bank, along with five others chosen by Bank Negara Malaysia, set up a consortium - Raeed Holdings Sdn Bhd - to offer a Shariah compliant Investment Account Platform (IAP) providing investors the opportunity to fund businesses, corporates, new growth industries as well as entrepreneurs with viable projects. The IAP is an exciting development as it marks the first cooperation among Islamic banks to create a new Shariah compliant investment avenue with attractive returns. The initiative is particularly beneficial to investors who do not have dedicated risk assessment resources, as this function will be overseen by the sponsoring banks. IAP will also be positioned to facilitate more public-private partnerships in financing strategic ventures within specific industries. Through the IAP, government agencies can identify viable ventures to invest in and create opportunities for the private sector to partially fund them. It is also envisaged for IAP to be eventually positioned to facilitated fund intermediation across borders. The fact that AFFIN ISLAMIC was chosen by BNM to be part of this IAP speaks volumes of our credibility and integrity, which are qualities that we will continue to uphold as we serve our valued customers. During the year, we also strengthened our position in the community via various contributions. Key among these were a RM4.5 million contributed to help build Kompleks At-Tijarah UiTM; and RM18,360 to Yayasan Kanser Malaysia (YKM). The amount channelled to YKM was partly derived from our AFFIN Barakah Charity Account-i, through which customers pledge a certain percentage of their monthly profits to charity. This year, RM20,000 from this savings account was also channelled towards Pemulihan Dalam Komuniti (PDK) Kasih Templer Autisma, which cares for children with autism and other special needs. OUTLOOK & PROSPECTS The year 2016 is going to be challenging for the banking industry, given the expected slowdown in both global and local economies. We expect intense competition for market share and more stringent regulatory requirement, therefore; it is essential for banks to manage the envolving of customer behaviours and expectations. In response, AFFIN ISLAMIC together with our parent, AFFINBANK, are embarking on a comprehensive Strategic Transformation Programme that will analyze our position in the industry to capture greater growth, profitability and sustainability. In 2016, we continue to invest in new product capabilities and infrastructure to seize opportunities offered by new affluent segments. Together, we will step up efforts to enhance our efficiency and productivity to establish a highperformance culture by integrating strategic functions of AFFIN ISLAMIC with AFFINBANK for greater operational effectiveness and optimal utilization of resources. 18
CEO S PERFORMANCE REVIEW Distributing duit raya to orphans from selected orphanages. The bank will continue to safeguard strong asset quality, pursuing disciplined risk management framework, while maintaining best practices in corporate governance and adhering to the regulators capital and liquidity requirements. The launch of IAP with our partner banks will elevate our role in the expanding Islamic banking world. We will continue to launch innovative Shariah-based financial solutions and services to strengthen AFFIN ISLAMIC s position as a premier local and international Islamic financial institution. ACKNOWLEDGEMENTS The Bank is at an exciting juncture in our onward journey. We have achieved much over the years, and in 2015, for which I would like to thank our various stakeholders - from our customers to our partners and investors as well as to our Board of Directors, Management Team and Shariah Committee members. To everyone who has contributed to AFFIN ISLAMIC, thank you for your support. Let us continue to work together for even better performance and results in the future. Launching of Kompleks At-Tijarah AFFIN-UiTM. EN. NAZLEE BIN KHALIFAH Chief Executive Officer 19
CORPORATE DIARY JAN Zakat contribution to Pusat Zakat Melaka AFFIN ISLAMIC contributed RM364,800 of its Zakat funds to eligible Asnaf of Pusat Zakat Melaka. The mock cheque was presented by Ustaz Mohd Faiz Rahim, Head of Shariah Supervisory to Yang Dipertua Negeri Melaka, Tun Mohd Khalil Yaakob during Sambutan Maulidur Rasul held at Bukit Falah, Melaka. JAN Wakaf Desa Fahmi A total of RM350,000 was contributed to Wakaf Desa Fahmi, a centre that offers accommodation to hardcore poor, homeless, neglected Muslims and tahfiz students. The mock cheque was presented by Deputy CEO AFFIN ISLAMIC, En. Ferdaus Toh Abdullah to Dr. Kamarolzaman Hajar, founder of Wakaf Desa Fahmi. JUL International Islamic University Malaysia (IIUM) Hijrah Grand Iftar JUN Ground breaking ceremony of Kompleks At-Tijarah AFFIN-UiTM The ground breaking ceremony of Kompleks At-Tijarah AFFIN UiTM which was funded by AFFINBANK & AFFIN ISLAMIC was held at UiTM Puncak Alam campus on 11 June. The ceremonious event was graced by Chairman of AFFINBANK & AFFIN ISLAMIC, YBhg. Jen. Tan Sri Dato Seri Ismail Hj. Omar (Bersara), Managing Director/ CEO of AFFINBANK, En. Kamarul Ariffin Mohd Jamil, Chief Executive Officer of AFFIN ISLAMIC, En. Nazlee Khalifah, Deputy Chief Executive Officer of AFFIN ISLAMIC, En. Ferdaus Toh Abdullah, and Vice Chancellor of Universiti Teknologi Mara, YBhg. Tan Sri Dato Sri Prof. Ir. Dr. Sahol Hamid Abu Bakar. The first in UiTM, the complex of Islamic Centre consists of four components which are Rukhsah, Food & Beverages, Da wah and Medical & Health. JUL Zakat contribution to Management and Science University (MSU) Management and Science University (MSU) received a total of RM100,000 to assist Asnaf students and RM30,000 for MSU Mobile Clinic.The zakat contribution was presented by Deputy Chief Executive Officer of AFFIN ISLAMIC, En. Ferdaus Toh Abdullah to President of MSU, Prof. Tan Sri Dato Wira Dr. Mohd Shukri Ab. Yajid. OCT Pusat Jagaan Bakti Cahaya Hati AFFIN ISLAMIC spreads cheer and happiness to 45 children of Pusat Jagaan Bakti Cahaya Hati (PJBCH). The centre is a welfare home for orphans and underprivileged children. The mock cheque was presented by Head of Shariah Supervisory AFFIN ISLAMIC, Ustaz Mohd Faiz Rahim, to Puan Hajah Wahyuning, founder of PJBCH in Rawang, Selangor. 20 In the month of Ramadhan, AFFIN ISLAMIC presented zakat contribution amounting RM100,000 to deserving students of International Islamic University Malaysia (IIUM). The mock cheque was presented by En. Nazlee Khalifah, Chief Executive Officer of Affin Islamic Bank Berhad to, The Honourable Tan Sri Dato Seri Utama Dr. Rais Yatim, Advisor to the Government of Malaysia and President of IIUM in a Hijrah Grand Iftar held at IIUM Gombak. MAR Yayasan Kanser Malaysia Yayasan Kanser Malaysia, a non-profit organisation received donation of RM18,360.49. The amount was raised from customers dividends through AFFIN Barakah Charity Account-i, which provides customers the option to donate a certain percentage of their monthly earned Hibah (profit/dividend) to a worthy cause. APR Islamic Relief Malaysia A mock cheque of RM15,000 zakat contribution was presented by Ustaz Helmi Afizal Zainal from Zakat Management to En. Zairulshahfuddin Zainal Abidin, Country Director of Islamic Relief Malaysia in a ceremony held at Bangi, Selangor. Islamic Relief Malaysia is a Non-Government Organisation (NGO) that provides humanitarian aid in Asia Pacific region. FEB Pusat Zakat Perak Contribution of RM364,800 to Pusat Zakat Perak was presented by Encik Kamarul Ariffin, Chief Executive Officer of AFFIN ISLAMIC during Corporate Zakat Presentation Ceremony which was graced by Duli Yang Maha Mulia Paduka Seri Sultan Nazrin Muizzuddin Shah, the Sultan of Perak. The ceremony was witnessed by Menteri Besar Perak, Dato Seri Dr. Zambry Abdul Kadir. JUL Majlis Penyampaian Sumbangan Angkatan Tentera Malaysia (ATM) AFFIN ISLAMIC contributed zakat funds amounting to RM700,000 to Tabung Zakat Angkatan Tentera Malaysia. The zakat contribution was presented by AFFIN ISLAMIC Independent Non-Executive Director, YBhg. Tan Sri Dato Sri Abdul Aziz bin Abdul Rahman, to Minister of Defence, YB Datuk Seri Hishammuddin Tun Hussein during Majlis Penyampaian Sumbangan Hari Raya Aidilfitri held at Ministry of Defence, Kuala Lumpur. NOV MSU Islamic Finance Conference 2015 AFFIN ISLAMIC presented a seminar entitled Islamic Finance: Maturing Towards Sustainable Talent at MSU Islamic Finance Conference 2015. The event was attended by 800 students from universities around Selangor and KL. NOV Majlis Pelancaran Tabung Pendidikan Kanak-kanak PDK Kasih Autisma Ninety autistic and disabled children of PDK Kasih Templer Autisma, a community rehabilitation centre for autistic and disabled children received a contribution amounting to RM20,000 from AFFIN Barakah Charity Account-i. The mock cheque was presented by Chief Executive Officer of AFFIN ISLAMIC, En. Nazlee Khalifah and Deputy Chief Executive Officer, En. Ferdaus Toh Abdullah to Dato Saiful Bahri Abdul Hadi, Chairman of PDK Kasih Autisma at Putrajaya Lake Club.
CORPORATE DIARY 21
FINANCIAL HIGHLIGHTS Earnings Per Share (EPS) Sen 15 23.5 14 18.5 13 16.4 12 25.8 AFFIN ISLAMIC s EPS for the financial year ended 31 December 2015 stood at 23.5 sen compared to 18.5 sen the year before with an increase of 27.0%. Profit Before Zakat And Taxation RM million 15 117.4 14 91.7 13 87.3 12 106.4 AFFIN ISLAMIC achieved profit before zakat and taxation of RM117.4 million for the year ended 31 December 2015 with an increase of 28.1% compared with RM91.7 million in 2014. Total Assets RM billion 15 13.4 14 12.7 13 12.3 12 11.7 AFFIN ISLAMIC s financial position as at 31 December 2015 continued to remain strong with total assets of RM13.4 billion, an increase of 5.2% compared with RM12.7 billion as at 31 December 2014. Net Financing, Advances & Other Financing RM billion 15 9.2 14 7.2 13 6.0 12 5.1 AFFIN ISLAMIC s net financing, advances and financing grew by 28.5% to RM9.2 billion compared to RM7.2 billion in 2014. Deposits From Customers RM billion 22 15 10.0 14 9.9 13 9.3 12 9.0 Shareholders Equity RM million 15 954.8 14 772.1 13 704.4 12 655.0 Total deposits increased by 1.3% year-on-year to RM10.0 billion as at 31 December 2015 compared to RM9.9 billion in the year before. Total shareholders equity of AFFIN ISLAMIC is RM954.8 million as at 31 December 2015 with an increase of 23.7% compared to RM772.1 million in 2014.