CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
7 FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”) (CONTINUED)
Movements in expected credit losses of debt instruments at FVOCI are as follows:
The Group Note Stage 1 Stage 2 Stage 3 Total ECL
RM’000
2019 12 Months Lifetime ECL Lifetime ECL
At 1 July ECL not credit credit
Effect of adopting MFRS 9 impaired
At 1 July, as restated RM’000 RM’000 impaired
New financial assets originated or purchased RM’000
Financial assets derecognised
Changes due to change in credit risk - ---
Exchange differences 59 2,428
At 30 June - 4,453 6,881
2,428
502 - 4,453 6,881
(1,007) - - 502
(401)
44 - (166) (1,173)
1,566
- - (401)
- - 44
- 4,287 5,853
The Bank Note Stage 1 Stage 2 Stage 3 Total ECL
RM’000
2019 12 Months Lifetime ECL Lifetime ECL
At 1 July ECL not credit credit
Effect of adopting MFRS 9 impaired
At 1 July, as restated RM’000 RM’000 impaired
New financial assets originated or purchased RM’000
Financial assets derecognised
Changes due to change in credit risk - ---
Exchange differences 59 2,385
At 30 June - 4,453 6,838
2,385
413 - 4,453 6,838
(994)
(392) - - 413
42
- (166) (1,160)
1,454
- - (392)
- - 42
- 4,287 5,741
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
(b) Equity instruments
Unquoted securities: 44,331 - 44,331 -
Shares in Malaysia
Annual Report 2019 199
Notes to the Financial Statements
for the financial year ended 30 June 2019
7 FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”) (CONTINUED)
At 1 July 2018, the Group and the Bank designated certain investments shown in the following table as equity instruments under
FVOCI. In 2018, these investments were classified as financial investments available-for-sale as disclosed in Note 8. The FVOCI
designation was made because these investments are either held for socio-economic purposes or not for trading purposes.
The Group and The Bank Fair value Dividend
RM’000 income
2019
Securities: recognised
RAM Holdings Berhad during the
Payments Network Malaysia Sdn Bhd financial year
Others
RM’000
7,444 203
35,875 -
-
1,012
44,331 203
8 FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE (“AFS”) The Group The Bank
Money market instruments 2019 2018 2019 2018
Malaysian Government securities
Malaysian Government investment certificates RM’000 RM’000 RM’000 RM’000
Other Government securities
Cagamas bonds - 109,684 - 109,684
Khazanah bonds - 4,339,789 - 3,135,157
- 657,700 - 592,486
Quoted securities - 1,430,259 - 1,263,793
Wholesale fund/unit trust - 673,444 - 638,603
Foreign currency bonds in Malaysia - 7,210,876 - 5,739,723
Foreign currency bonds outside Malaysia
- 7,100,400 - 7,100,400
Unquoted securities - 2,996,117 - 2,984,839
Malaysian Government sukuk - 1,660,272 - 1,660,272
Corporate bonds and sukuk - 18,967,665 - 17,485,234
Shares in Malaysia
Foreign currency bonds in Malaysia - 2,385,470 - 2,024,205
Foreign currency bonds outside Malaysia - 8,335,213 - 7,334,553
- 467,512 - 467,512
- 1,048,287 - 1,048,287
- 658,789 - 658,789
- 31,862,936 - 29,018,580
200 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
8 FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE (“AFS”) (CONTINUED)
The table below shows the movements in allowance for impairment losses during the financial year for the Group and the Bank:
The Group and The Bank
2019 2018
RM’000 RM’000
At 1 July - 7,599
Amount written off - (7,599)
At 30 June --
Included in the financial investments available-for-sale in 2018 are foreign currency bonds, which are pledged as collateral for
obligations on securities sold under repurchase agreements for the Group and the Bank amounting to RM3,821,124,000 and
RM3,794,195,000 respectively.
9 FINANCIAL INVESTMENTS AT AMORTISED COST The Group The Bank
Money market instruments 2019 2018 2019 2018
Government treasury bills RM’000 RM’000 RM’000 RM’000
Malaysian Government securities
Malaysian Government investment certificates 53,820 - 53,820 -
Khazanah bonds 102,105 - 102,105 -
Other Government securities 8,721,860 - 5,887,037 -
304,266 - 267,837 -
Quoted securities 326,179 - 307,305 -
Foreign currency bonds in Malaysia 9,508,230 - 6,618,104 -
Foreign currency bonds outside Malaysia
845,592 - 845,592 -
Unquoted securities 151,587 - 151,587 -
Malaysian Government sukuk 10,505,409 - 7,615,283 -
Corporate bonds and sukuk
2,657,094 - 1,694,196 -
Less: Expected credit losses 1,991,703 - 1,586,027 -
15,154,206 - 10,895,506 -
- (1,001) -
(1,007) - 10,894,505 -
15,153,199
Annual Report 2019 201
Notes to the Financial Statements
for the financial year ended 30 June 2019
9 FINANCIAL INVESTMENTS AT AMORTISED COST (CONTINUED)
Movements in expected credit losses of financial investments at amortised cost are as follows:
The Group Note Stage 1 Stage 2 Stage 3 Total ECL
RM’000
2019 12 Months Lifetime ECL Lifetime ECL
At 1 July ECL not credit credit -
Effect of adopting MFRS 9 impaired 830
At 1 July, as restated RM’000 RM’000 impaired 830
New financial assets originated or purchased RM’000 178
Exchange differences
At 30 June - -- (1)
59 3 - 827 1,007
- 827
3 -- Total ECL
178 -- RM’000
- 827
(1) -
180 827
827
The Bank Note Stage 1 Stage 2 Stage 3 174
1,001
2019 12 Months Lifetime ECL Lifetime ECL
At 1 July ECL not credit credit
Effect of adopting MFRS 9 impaired
At 1 July, as restated RM’000 RM’000 impaired
New financial assets originated or purchased RM’000
At 30 June
- --
59 - - 827
- 827
- --
174 - 827
174
202 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
9 FINANCIAL INVESTMENTS AT AMORTISED COST (CONTINUED)
Movements in the carrying amount of financial investments at amortised cost that contributed to changes in the expected credit
losses are as follows:
The Group Note Stage 1 Stage 2 Stage 3 Total
RM’000 RM’000 RM’000 RM’000
2019
At 1 July 59 - -
Effect of adopting MFRS 9 15,648,266 - 15,649,093
At 1 July, as restated 7,101,214 - 827 15,649,093
New financial assets originated or purchased (7,602,370) - - 7,101,214
Financial assets derecognised 33,213 - - (7,602,370)
Exchange differences (26,944) - - 33,213
Other movements 15,153,379 - (26,944)
At 30 June 827 15,154,206
The Bank Note Stage 1 Stage 2 Stage 3 Total
RM’000 RM’000 RM’000 RM’000
2019
At 1 July 59 - -
Effect of adopting MFRS 9 11,992,866 - 11,993,693
At 1 July, as restated 5,177,548 - 827 11,993,693
New financial assets originated or purchased (6,281,476) - - 5,177,548
Financial assets derecognised 33,214 - - (6,281,476)
Exchange differences (27,473) - - 33,214
Other movements 10,894,679 - (27,473)
At 30 June 827 10,895,506
Annual Report 2019 203
Notes to the Financial Statements
for the financial year ended 30 June 2019
10 FINANCIAL INVESTMENTS HELD-TO-MATURITY (‘HTM’)
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Money market instruments - 52,950 - 52,950
Government treasury bills - 1,357,392 - 1,357,392
Malaysian Government securities - 10,914,275 - 8,083,221
Malaysian Government investment certificates - 383,739 - 297,037
Other Government securities - 12,708,356 - 9,790,600
Unquoted securities - 1,548,339 - 935,715
Malaysian Government sukuk - 61,435 - 61,435
Corporate bonds and sukuk - 30,866 - 30,866
Redeemable preference shares - 87,949 - 87,949
Foreign currency bonds outside Malaysia - 14,436,945 - 10,906,565
The table below shows the movements in allowance for impairment losses during the financial year for the Group and the Bank:
The Group and The Bank
2019 2018
RM’000 RM’000
At 1 July - 113,844
Amount written back in respect of recoveries - (6,454)
Amount written off - (107,390)
At 30 June --
204 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
11 LOANS, ADVANCES AND FINANCING
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Overdrafts 3,863,555 3,794,584 3,119,277 3,251,673
Term loans/financing:
- Housing and shop loans/financing 76,495,886 70,332,643 61,165,045 56,771,907
- Syndicated/term loans or financing 11,740,501 9,953,665 8,717,446 7,902,161
- Hire purchase receivables 17,634,182
- Other term loans/financing 17,229,742 14,015,409 13,757,021
Credit/charge card receivables 7,984,748 7,472,341 5,154,293 5,272,900
Bills receivable 3,597,974 3,899,183 3,597,974 3,899,183
Trust receipts 1,061,015 996,560 926,496 880,816
Claims on customers under acceptance credits 328,628 306,390 283,561
Revolving credit 421,884 7,839,208 7,276,246 7,301,016
Staff loans/financing 8,029,521 6,627,619 5,161,648 5,169,171
Other loans/financing 6,227,550 146,027 132,620 141,341
Gross loans, advances and financing 448,360 370,455 448,356
138,753
Fair value changes arising from fair value hedges and 370,814 129,068,560 109,943,299 105,079,106
unamortised fair value changes arising from terminated 137,566,383
fair value hedges
3,473 (2,553) 3,473 (2,540)
Allowance for impairment losses:
- Expected credit losses (1,261,639) - (1,011,802) -
- Collective assessment allowance - (804,726) - (621,694)
- Individual assessment allowance - (202,176) - (179,969)
(1,006,902) (801,663)
Total net loans, advances and financing (1,261,639) 128,059,105 (1,011,802) 104,274,903
136,308,217 108,934,970
Included in loans, advances and financing are housing loans sold to Cagamas with recourse to the Group and the Bank amounting
to RM236,439,000 (2018: RM177,874,000) and RM188,181,000 (2018: RM177,874,000) respectively.
Annual Report 2019 205
Notes to the Financial Statements
for the financial year ended 30 June 2019
11 LOANS, ADVANCES AND FINANCING (CONTINUED)
(i) The maturity structure of loans, advances and financing is as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Maturing within: 26,236,955 26,653,901 23,183,492 23,793,306
- one year 5,914,184 6,007,978 4,699,471 4,929,344
- one year to three years 9,612,277 9,069,429 7,243,460 6,997,601
- three years to five years
- over five years 95,802,967 87,337,252 74,816,876 69,358,855
Gross loans, advances and financing 137,566,383 129,068,560 109,943,299 105,079,106
(ii) The loans, advances and financing are disbursed to the following types of customers:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Domestic non-bank financial institutions other than 953,920 597,185 853,670 248,848
stockbroking companies
21,504,122 20,480,084 17,282,182 17,433,561
Domestic business enterprises: 19,232,651 16,377,193 15,751,104 13,226,492
- small and medium enterprises
- others 2,037 19,374 41 7,803
Government and statutory bodies 93,385,273 84,422,878 73,812,923 67,261,406
Individuals
Other domestic entities 418,282 269,937 374,831 207,752
Foreign entities 2,070,098 6,901,909 1,868,548 6,693,244
Gross loans, advances and financing 137,566,383 129,068,560 109,943,299 105,079,106
206 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
11 LOANS, ADVANCES AND FINANCING (CONTINUED)
(iii) Loans, advances and financing analysed by interest rate/profit rate sensitivity are as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Fixed rate: 1,641,101 2,583,078 1,081,501 1,769,012
- Housing and shop loans/financing 17,413,826 16,916,260 13,797,959 13,444,246
- Hire purchase receivables
- Credit card 3,597,974 3,899,183 3,597,974 3,899,183
- Other fixed rate loans/financing 2,776,796 2,777,605 1,258,553 1,381,055
Variable rate: 94,502,743 86,079,824 76,209,468 71,114,897
- Base rate/base lending rate plus 17,017,202 16,407,547 13,997,844 13,470,713
- Cost plus
- Other variable rates 616,741 405,063 - -
Gross loans, advances and financing 137,566,383 129,068,560 109,943,299 105,079,106
(iv) Loans, advances and financing analysed by their economic purposes are as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Purchase of securities 808,590 382,505 553,613 381,331
Purchase of transport vehicles 17,489,088 16,893,592 13,829,965 13,370,936
Residential property (housing) 67,437,747 61,370,372 53,224,466 48,915,309
Non-residential property 16,369,237 15,553,253 14,144,111 13,925,835
Purchase of fixed assets (excluding landed properties)
Personal use 988,287 546,924 700,315 482,511
Credit card 3,389,881 3,248,454 2,065,876 2,170,175
Construction 3,597,974 3,899,183 3,597,974 3,899,183
Mergers and acquisition 2,006,223 1,552,918 1,277,523 1,024,050
Working capital
Other purpose 312,445 362,600 125,522 179,269
Gross loans, advances and financing 23,791,965 23,850,860 19,545,202 19,761,563
1,374,946 1,407,899 878,732 968,944
137,566,383 129,068,560 109,943,299 105,079,106
Annual Report 2019 207
Notes to the Financial Statements
for the financial year ended 30 June 2019
11 LOANS, ADVANCES AND FINANCING (CONTINUED)
(v) Loans, advances and financing analysed by their geographical distribution are as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
In Malaysia 130,455,793 122,542,932 104,719,012 99,981,335
Outside Malaysia:
- Singapore 5,224,287 5,097,771 5,224,287 5,097,771
- Vietnam 616,741 405,063 - -
- Cambodia - -
Gross loans, advances and financing 1,269,562 1,022,794
137,566,383 129,068,560 109,943,299 105,079,106
(vi) Movements in the impaired loans, advances and financing are as follows:
At 1 July The Group The Bank
Classified as impaired during the financial year 2018 2018
Reclassified as non-impaired during the financial year
Amount written back in respect of recoveries RM’000 RM’000
Amount written off
Exchange difference 1,203,440 1,017,982
At 30 June 1,663,447 1,278,452
(889,043) (652,719)
(387,313) (329,643)
(460,834) (404,026)
(4,195) (3,813)
1,125,502 906,233
Gross impaired loans and financing as a % of gross loans, advances and financing 0.87% 0.86%
208 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
11 LOANS, ADVANCES AND FINANCING (CONTINUED)
(vii) Impaired loans, advances and financing analysed by their economic purposes are as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Purchase of securities 51 1,256 5 1,256
Purchase of transport vehicles 122,105 134,022 90,856 101,223
Residential property (housing) 376,182 352,900 278,841 253,976
Non-residential property 169,127 170,961 161,694 165,421
Purchase of fixed assets (excluding landed properties)
Personal use 5,325 3,465 5,325 3,465
Credit card 44,470 46,682 23,321 29,519
Construction 32,505 39,562 32,505 39,562
Working capital 17,350 15,583
Other purpose 298,966 3,530 274,704 2,963
Gross impaired loans, advances and financing 369,990 306,284
5,030 5,030
1,071,111 3,134 887,864 2,564
1,125,502 906,233
(viii) Impaired loans, advances and financing analysed by their geographical distribution are as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
In Malaysia 1,063,910 1,112,810 886,352 904,839
Outside Malaysia:
- Singapore 1,512 1,394 1,512 1,394
- Vietnam 1,621 3,937 - -
- Cambodia 4,068 7,361 - -
Gross impaired loans, advances and financing 1,071,111 1,125,502
887,864 906,233
Annual Report 2019 209
Notes to the Financial Statements
for the financial year ended 30 June 2019
11 LOANS, ADVANCES AND FINANCING (CONTINUED)
(ix) Movements in expected credit losses for loans, advances and financing are as follows:
The Group Note Stage 1 Stage 2 Stage 3 Total ECL
59 RM’000
2019 12 Months Lifetime ECL Lifetime ECL
At 1 July 59 ECL not credit credit
Effect of adopting MFRS 9 impaired
At 1 July, as restated RM’000 RM’000 impaired
Changes in ECL due to transfer within stages RM’000
Transfer to Stage 1 418,235 487,757 459,145 1,006,902
Transfer to Stage 2 (101,395) (144,111) 245,506 358,235
Transfer to Stage 3
New financial assets originated 23,070 (22,825) (245) 1,365,137
Financial assets derecognised (124,364) 219,679 (95,315) -
Changes due to change in credit risk (340,965) 341,066 -
Amount written off (101) -
Exchange difference 53,847 4,018 110 -
Other movements (34,796) (42,683) (29,024)
At 30 June 33,367 193,217 42,342 57,975
(282,501) (106,503)
The Bank - - 268,926
2019 457 127 1,578 (282,501)
At 1 July (43,557)
Effect of adopting MFRS 9 - - 393,599 2,162
At 1 July, as restated 369,715 498,325 (43,557)
Changes in ECL due to transfer within stages 1,261,639
Transfer to Stage 1 367,527 388,100 375,557 801,663
Transfer to Stage 2 (83,815) (119,839) 203,654 329,521
Transfer to Stage 3 20,745 1,131,184
New financial assets originated (104,503) (20,533) (212)
Financial assets derecognised 173,541 (69,038) -
Changes due to change in credit risk (57) (272,847) 272,904 -
Amount written off 23,715 -
Exchange difference (13,118) 3,426 72 -
Other movements 17,052 (29,233) (16,595) 27,213
At 30 June 144,082 14,631 (58,946)
- (227,057) 175,765
302 - (227,057)
120 1,588 2,010
- (38,367) (38,367)
311,663 - 313,483 1,011,802
386,656
210 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
11 LOANS, ADVANCES AND FINANCING (CONTINUED)
(x) Movements in allowance for impairment on loans, advances and financing are as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Collective assessment allowance 804,726 830,067 621,694 666,787
At 1 July (804,726) - (621,694) -
Effect of adopting MFRS 9
At 1 July, as restated - 830,067 - 666,787
Net allowances made during the financial year - 299,887 - 224,340
Amount written off - (310,061) - (257,615)
Unwinding income - (14,475) - (11,488)
Exchange difference - -
At 30 June - (692) - (330)
804,726 621,694
Individual assessment allowance 202,176 325,426 179,969 310,923
At 1 July (202,176) - (179,969) -
Effect of adopting MFRS 9
As restated - 325,426 - 310,923
Allowances made during the financial year - 63,397 - 50,952
Amount written back in respect of recoveries - (55,505) - (52,077)
Amount written off - -
Unwinding income - (119,266) - (118,014)
Exchange difference - (7,959) - (7,951)
At 30 June - (3,917) - (3,864)
202,176 179,969
Annual Report 2019 211
Notes to the Financial Statements
for the financial year ended 30 June 2019
11 LOANS, ADVANCES AND FINANCING (CONTINUED)
(xi) Movements in the gross carrying amount of loans, advances and financing that contributed to changes in the expected
credit losses are as follows:
The Group Stage 1 Stage 2 Stage 3 Total
RM’000 RM’000 RM’000 RM’000
2019
At 1 July 121,850,099 6,093,286 1,125,175 129,068,560
Total transfer within stages (2,461,389) 1,838,959
1,925,418 (1,935,460) 622,430 -
Transfer to Stage 1 (4,359,507) 5,294,532
Transfer to Stage 2 (27,300) (1,520,113) 10,042 -
Transfer to Stage 3 17,352,533
New financial assets originated (4,810,831) 31,019 (935,025) -
Financial assets derecognised (2,582,661) (331,978)
Changes due to change in credit risk - (832,894) 1,547,413 -
Amount written off 344,727
Exchange difference - 1,421 17,384,973
At 30 June 129,692,478 4,402
6,802,794 (76,519) (5,219,328)
(321,424) (3,736,979)
(282,811) (282,811)
2,839 351,968
1,071,111 137,566,383
The Bank Stage 1 Stage 2 Stage 3 Total
RM’000 RM’000 RM’000 RM’000
2019
At 1 July 99,378,454 4,794,746 905,906 105,079,106
Total transfer within stages (1,804,213) 1,305,426
1,615,819 (1,626,029) 498,787 -
Transfer to Stage 1 (3,394,845) 4,082,974
Transfer to Stage 2 (1,151,519) 10,210 -
Transfer to Stage 3 (25,187)
New financial assets originated 12,489,662 24,539 (688,129) -
Financial assets derecognised (4,119,637) (275,513)
Changes due to change in credit risk (2,372,932) (656,924) 1,176,706 -
Amount written off
Exchange difference - - 1,367 12,515,568
At 30 June 287,456 4,371
103,858,790 5,196,645 (39,404) (4,434,554)
(254,753) (3,284,609)
(226,689) (226,689)
2,650 294,477
887,864 109,943,299
212 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
12 OTHER ASSETS The Group The Bank
Foreclosed properties 2019 2018 2019 2018
Sundry debtors and other prepayments RM’000 RM’000 RM’000 RM’000
Treasury related receivables
Cash collateral pledged for derivative transactions 21,839 46 10,849 46
Other receivables 371,710 204,716 351,193 162,716
242,617 242,617
301,552 65,547 301,552 65,547
259,263 310,933 240,071 310,933
1,196,981 198,827 1,146,282 147,454
780,069 686,696
13 DERIVATIVE FINANCIAL INSTRUMENTS
The Group The Bank
Note 2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
(a)
Derivatives at fair value through profit or loss: (b) 231,307 210,125 218,666 206,621
- interest rate swaps 154,015 252,787 154,017 252,787
- cross currency swaps 125,951 422,115 120,766 416,540
- foreign currency forwards
- foreign currency options 8,129 15,973 8,129 15,973
- futures 32 634 32 634
- future options - 587 - 587
- equity options
- swaption 7,814 13,877 7,814 13,877
- total return swap - - 12,563 23,938
-
Derivatives designated as cash flow hedge: 1,008 1,008 -
- interest rate swaps 1,094
- - 1,094
Derivatives designated as fair value hedge: 875
- interest rate swaps - 918,067 - 875
528,256 522,995 932,926
Total derivative financial instruments assets
Annual Report 2019 213
Notes to the Financial Statements
for the financial year ended 30 June 2019
13 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The Group The Bank
Note 2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Derivatives at fair value through profit or loss: (438,543) (299,894) (439,477) (267,371)
- interest rate swaps (65,089) (295,892) (65,086) (295,251)
- cross currency swaps (343,228) (339,877)
- foreign currency forwards (109,537) (105,011)
- foreign currency options (4,416) (12,834) (4,416) (12,834)
- futures (2,940) (4,913) (2,940) (4,913)
- equity options (7,814) (7,814)
- swaption (13,877) (13,876)
- total return swap (41,201) (49,135) (41,201) (49,135)
(1,008) (1,008)
Derivatives designated as cash flow hedge: - -
- interest rate swaps
(a) (3,385) (423) (3,385) (423)
Derivatives designated as fair value hedge: (b)
- interest rate swaps (4,704) - (4,704) -
(678,637) (1,020,196) (675,042) (983,680)
Total derivative financial instruments liabilities
(a) Cash flow hedge
The Group and the Bank's cash flow hedges principally consist of interest rate swaps that are used to protect against
exposures to variability in future interest cash flows on interest incurring liabilities. The amount and timing of the interest
cash flows, are projected on the basis of their contractual terms and other relevant factors, including estimates of renewal
of interest incurring liabilities. The aggregate projected interest cash flows over time form the basis for identifying gains
and losses on the effective portions of derivatives designated as cash flow hedges to forecast transactions. Gains and
losses are initially recognised directly in equity, in the cash flow hedge reserve, and are transferred to profit or loss when
the forecast cash flows affect the profit or loss.
The hedging relationship was fully effective for the total hedging period and as of the reporting date. As such, the unrealised
loss of RM2,726,000 (2018: unrealised gain of RM832,000) from the hedging relationship as disclosed in Note 32(f) were
recognised through other comprehensive income.
214 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
13 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
(a) Cash flow hedge (continued)
The cash flows of the hedging instruments and the hedged items are detailed below:
The Group and The Bank
Up to 1 >1-3 >3-6 > 6 - 12 >1-5
month months months months years
RM’000 RM’000 RM’000 RM’000 RM’000
2019 1,380 3,062 4,399 5,854 24,384
Cash inflows (hedging instruments) (1,369) (2,778) (4,110) (5,349) (22,630)
Cash outflows (hedged items)
Net cash inflows 11 284 289 505 1,754
2018 1,380 2,770 4,239 8,382 34,814
Cash inflows (hedging instruments) (1,376) (2,524) (3,990) (7,879) (32,374)
Cash outflows (hedged items)
Net cash inflows 4 246 249 503 2,440
(b) Fair value hedge
The Group and the Bank’s fair value hedges principally consist of interest rate swaps that are used to protect against
changes in the fair value of financial assets due to movement in interest rates. The Group and the Bank have undertaken
fair value hedges on interest rate risk of RM486,310,000 (2018: RM401,786,000) at Group and Bank respectively on certain
receivables using interest rate swaps. The total fair value loss of the said interest rate swaps related to these hedges
amounted to RM4,704,000 (2018: fair value gain of RM875,000) at Group and Bank, respectively.
Included in the net non-interest income is the net gains and losses arising from fair value hedges that were effective during
the financial year as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Gain on hedging instruments 6,012 (2,505) 6,012 (2,505)
Loss on the hedged items attributable to the
(6,317) 2,353 (6,317) 2,353
hedged risks (305) (152) (305) (152)
Annual Report 2019 215
Notes to the Financial Statements
for the financial year ended 30 June 2019
14 AMOUNT DUE FROM SUBSIDIARIES
The Bank
2019 2018
RM’000 RM’000
Intercompany settlement 13,095 43,563
Amount due from subsidiaries is unsecured, interest free, repayable on demand and is denominated in Ringgit Malaysia.
15 STATUTORY DEPOSITS WITH CENTRAL BANKS
The non-interest bearing statutory deposits are maintained by the Bank and its subsidiaries with Bank Negara Malaysia in
compliance with Section 26(2)(c) of the Central Bank of Malaysia Act, 2009, the amounts of which are determined at set
percentages of total eligible liabilities. A foreign subsidiary of the Group and a foreign branch of the Bank also maintained
non-interest bearing statutory deposits with their respective central banks in compliance with the respective applicable
legislations.
16 SUBSIDIARY COMPANIES
The Bank
2019 2018
RM’000 RM’000
Investment in subsidiary companies 963,124 963,124
Unquoted shares, at cost: 775,989 775,989
- in Malaysia 1,739,113 1,739,113
- outside Malaysia
401,799 401,799
Subordinated facilities issued by subsidiary companies, at amortised cost: 400,788 -
Multi-currency Additional Tier 1 subordinated sukuk wakalah financing facility issued by HLISB
Tier 2 subordinated sukuk murabahah financing facility issued by HLISB 16,637 16,220
Subordinated financing facility issued by Hong Leong Bank (Cambodia) PLC 819,224 418,019
2,558,337 2,157,132
216 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
16 SUBSIDIARY COMPANIES (CONTINUED) Percentage (%) of
equity held
The subsidiary companies of the Bank are as follows:
2019 2018 Principal activities
Name
(a) Hong Leong Islamic Bank Berhad ("HLISB") 100 100 Islamic Banking business and related
financial services
(b) HLB Principal Investments (L) Limited and its subsidiary 100 100 Investment holding
company:
- Promino Sdn Bhd 100 100 Holding of pooled motor vehicles for
HLBB group’s usage
(c) EB Nominees (Tempatan) Sendirian Berhad 100 100 Nominees services
(d) EB Nominees (Asing) Sendirian Berhad 100 100 In member’s voluntary liquidation
(e) EB Realty Sendirian Berhad 100 100 Property investment
(f) OBB Realty Sdn Bhd 100 100 Property investment
(g) HLF Credit (Perak) Bhd and its subsidiary companies: 100 100 Investment holding
(i) Gensource Sdn Bhd and its subsidiary company: 100 100 Investment holding
- Pelita Terang Sdn Bhd 100 100 Dormant
(ii) WTB Corporation Sdn Bhd 100 100 In member’s voluntary liquidation
(iii) Chew Geok Lin Finance Sdn Bhd 100 100 In member’s voluntary liquidation
(iv) Hong Leong Leasing Sdn Bhd* 100 100 Dormant
(v) HL Leasing Sdn Bhd 100 100 Dormant
(vi) HLB Realty Sdn Bhd 100 100 Property investment
(h) HLB Nominees (Tempatan) Sdn Bhd 100 100 Agent and nominee for Malaysian
clients
(i) HLB Nominees (Asing) Sdn Bhd 100 100 Agent and nominee for foreign
clients
(j) HL Bank Nominees (Singapore) Pte Ltd*+ 100 100 Agent and nominee for clients
(k) HLB Trade Services (Hong Kong) Limited*+ 100 100 Ceased operations
(l) Hong Leong Bank Vietnam Limited*+ 100 100 Commercial banking business
(m) Hong Leong Bank (Cambodia) PLC*+ 100 100 Commercial banking business
(n) Promilia Berhad 100 100 Holding of motor vehicles for HLBB
group’s usage
(o) DC Tower Sdn Bhd 100 100 Property management
(p) Unincorporated trust for ESOS Ω * - - Special purpose vehicle
* Not audited by PricewaterhouseCoopers PLT
+ Audited by member firm of PricewaterhouseCoopers International
Ω Deemed subsidiaries pursuant to MFRS 10 'Consolidated Financial Statements'
All the subsidiary companies are incorporated in Malaysia with the exception of HL Bank Nominees (Singapore) Pte Ltd which
is incorporated in Singapore, HLB Trade Services (Hong Kong) Limited which is incorporated in Hong Kong, Hong Leong Bank
Vietnam Limited which is incorporated in Vietnam and Hong Leong Bank (Cambodia) PLC which is incorporated in Cambodia.
Annual Report 2019 217
Notes to the Financial Statements
for the financial year ended 30 June 2019
17 INVESTMENT IN JOINT VENTURE
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Retained portion - 24,657 - 24,657
Unquoted shares outside Malaysia, at cost - 26,342 --
Cumulative share of results, net of dividends received - 6,674 --
Exchange fluctuation reserve - 57,673 - 24,657
- 121,753 - 52,054
Equity interest held for sale - 179,426 - 76,711
(a) Information about joint venture
On 1 March 2010, HLB together with Bank of Chengdu Co., Ltd. (“BOCD”), obtained operation approval from China Banking
Regulatory Commission (“CBRC”) for Sichuan Jincheng Consumer Finance Limited Company (“JCCFC”), a joint venture
company that is part of the first batch of approved companies, to start consumer finance operations in Central and Western
China. JCCFC focuses primarily in the consumer financing business with HLB having a 49% equity interest and BOCD having a
51% equity interest in JCCFC. This strategic alliance between HLB and BOCD to tap into the promising and growing financial
services sector in China further cements the Bank's strategic partnership in BOCD and affirms the Bank's vision and belief
in the huge potential of China.
In March 2017, the Board of Directors has approved the divestment of 37% of the Bank's stake through non-subscription
of the issuance of new share capital by JCCFC and selling down the original share capital held by the Bank to new strategic
investors through an exercise via Southwest United Equity Exchange. The sale was completed upon obtaining approval from
CBRC vide its letter dated 3 September 2018. The net gain on divestment of joint venture of RM90,106,000 is recognised in
the Group's statements of income (refer to Note 37).
Post completion of the divestment exercise, the retained interest of 12% under the Group of RM68,782,000 and the Bank of
RM24,657,000 respectively are derecognised from its investment in joint venture and classified as investment in associated
companies.
218 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
17 INVESTMENT IN JOINT VENTURE (CONTINUED)
(b) Summarised financial information of the joint venture, which is accounted for using the equity method is as follows:
The Group
2019 2018
RM’000 RM’000
Total assets - 1,184,983
Total liabilities - (818,808)
Net assets - 366,175
There are no commitments or contingent liabilities relating to the Group's interest in the joint venture.
The Group
2019 2018
RM’000 RM’000
Interest income - 113,659
Interest expenses - (29,369)
Non-interest income - 22,197
Profit before taxation - 56,148
Profit after taxation - 41,935
Dividend paid by the joint venture during the financial year - 7,271
(c) Reconciliation of the summarised financial information to the carrying amount of the interest in the joint venture recognised
in the consolidated financial statements:
The Group
2019 2018
RM’000 RM’000
Opening net assets as at 1 July - 345,275
Profit for the financial year - 41,935
Dividend paid - (7,271)
Exchange fluctuation reserve - (13,764)
Closing net assets as at 30 June - 366,175
The information presented above is based on the financial statements of the joint venture after reflecting adjustments
made by the Group when using the equity method, such as differences in accounting policies between the Group and the
joint venture.
Annual Report 2019 219
Notes to the Financial Statements
for the financial year ended 30 June 2019
18 INVESTMENT IN ASSOCIATED COMPANIES The Group The Bank
2019 2018 2019 2018
Quoted shares outside Malaysia, at cost RM’000 RM’000 RM’000 RM’000
Unquoted shares in Malaysia, at cost
Unquoted shares outside Malaysia, at cost 938,311 938,311 946,505 946,505
Cumulative share of results, net of dividends received 20 20 20 20
Cumulative share of changes in other comprehensive - -
24,657 24,657 -
income/(loss) 2,695,242 2,225,589 -
Exchange fluctuation reserve
13,690 (250) - -
434,455 487,421 - -
4,106,375 3,651,091 971,182 946,525
(a) Information about associated companies
Country of The Group
incorporation Percentage (%) of
China equity held
Malaysia
Name 2019 2018 Principal activities
China
Bank of Chengdu Co., Ltd. (“BOCD”) 18% 18% Commercial banking
Community CSR Sdn Bhd (“CCSR”) 20% 20% Investment holding
Sichuan Jincheng Consumer Finance
12% - Consumer financing
Limited Company (“JCCFC”)
Nature of relationship
(i) BOCD
On 25 October 2007, HLB entered into a Share Subscription Agreement with BOCD to subscribe for new shares
representing 19.99% equity interest of the Enlarged Capital in BOCD. BOCD is a leading commercial bank in Western
and Central China with its base in Chengdu, the capital of Sichuan Province. The Subscription enables HLB to enter
into a strategic alliance with BOCD to tap into the promising and growing financial services sector of China. It will
strengthen and diversify the earnings base of HLB.
On 31 January 2018, BOCD was officially listed on the Shanghai Stock Exchange after completing its initial public
offering ("IPO") of 361 million shares and raised 2.53 billion yuan. Arising from the IPO, the Bank's equity interest of
the enlarged capital in BOCD is now reduced to 18% from 20% and a dilution loss of RM26.80 million is recognised
in the Group's statements of income (refer to Note 37).
The market value of BOCD's shares held by the Bank is RM3.46 billion (2018: RM3.47 billion) at RM5.32 (2018: RM5.34)
per share as at 30 June 2019.
The Group deems BOCD as a material associated company.
220 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
18 INVESTMENT IN ASSOCIATED COMPANIES (CONTINUED)
(a) Information about associated companies (continued)
(i) BOCD (continued)
As at 30 June 2019, the market value of investment in BOCD was below the carrying amount. The Group has performed
impairment assessment on the carrying amount of the investment in BOCD, which confirmed that no impairment
is required as at 30 June 2019 as the recoverable amount as determined by a value-in-use (“VIU”) calculation was
higher than the carrying value. Management believes that any reasonable possible change to the key assumptions
applied would not cause the carrying value to exceed its recoverable amount.
The VIU calculation uses discounted cash flows projections based on BOCD management’s best estimates of future
earnings taking into account of past performance and BOCD’s expectation of market development. This calculation
uses cash flows projections being the amount attributable to the shareholders based on the budget for the financial
year ending 2020 with a further projection of 4 years, which was approved by BOCD management. Cash flows beyond
the 5 year period are extrapolated using an estimated growth rate of 6.12% representing the forecasted Gross
Domestic growth rate of the country.
The discount rate of 12.0% used in determining the recoverable amount is derived based on a capital asset pricing
model calculation, using market data.
(ii) CCSR
In 2011, HLB subscribed to RM50 million Cumulative Redeemable Preference Shares (“CRPS”) in Jana Pendidikan
Malaysia Sdn Bhd. For every RM1 million of subscription of CRPS, the Bank is entitled to subscribe for 1 ordinary share
of RM1 each in CCSR. As such, the Bank subscribed for 50 CCSR shares of RM1 each for cash at par which represent
20% equity interest of CCSR.
In November 2014, HLB subscribed to additional 19,950 CCSR Rights Issue of RM1 each.
CCSR is a private company and there is no quoted market price available for its shares.
(iii) JCCFC
Included in the investment in associated companies are the reclassification of the retained interest of 12% from
investment in joint venture under the Group of RM68,782,000 and the Bank of RM24,657,000 respectively.
Annual Report 2019 221
Notes to the Financial Statements
for the financial year ended 30 June 2019
18 INVESTMENT IN ASSOCIATED COMPANIES (CONTINUED)
(b) The summarised financial information of the material associated companies which is accounted for using the equity method
is as follows:
(i) BOCD
The Group
2019 2018
RM’000 RM’000
Total assets 324,735,826 292,049,818
Total liabilities (302,292,283) (271,754,702)
Net assets
22,443,543 20,295,116
The Group
2019 2018
RM’000 RM’000
Interest income 11,914,756 10,215,530
Interest expenses (5,758,006) (4,969,863)
Non-interest income 1,247,857 1,619,781
Profit before taxation 3,358,001 3,084,753
Profit after taxation 3,081,834 2,690,594
Total comprehensive income 3,159,322 2,686,344
Dividends paid/declared by the associated company during the financial year
683,785 562,040
Share of results of associated companies (%) 18% 18%
Share of results of associated companies (RM’000) 554,422 516,111
Dividends received/accrued from the associated company (RM’000) 123,013 101,111
(ii) JCCFC
The Group
Total assets
Total liabilities 2019 2018
Net assets RM’000 RM’000
3,236,527 -
(2,663,343) -
-
573,184
222 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
18 INVESTMENT IN ASSOCIATED COMPANIES (CONTINUED)
(b) The summarised financial information of the material associated companies which is accounted for using the equity method
is as follows: (continued)
(ii) JCCFC (continued)
The Group
2019 2018
RM’000 RM’000
Interest income 295,636 -
Interest expenses (85,464) -
Non-interest income 10,631 -
Profit before taxation 97,599 -
Profit after taxation 72,402 -
Dividends paid/declared by the associated company during the financial year 36,667 -
Share of results of associated companies (%) 12% -
Share of results of associated companies (RM’000) 8,689 -
Dividends received/accrued from the associated company (RM'000) 4,400 -
(c) Reconciliation of the summarised financial information to the carrying amount of the interest in the material associated
companies recognised in the consolidated financial statements:
(i) BOCD
The Group
2019 2018
RM’000 RM’000
Opening net assets as at 1 July 20,295,116 17,334,455
Effect arising from IPO* - 1,579,992
Profit for the financial year 2,690,594
Other comprehensive profit/(loss) for the financial year 3,081,834 (4,250)
Dividends paid/declared 77,488 (562,040)
Exchange fluctuation reserve (743,635)
Closing net assets as at 30 June (683,785)
(327,110) 20,295,116
22,443,543
Interest in associated companies (%) 18% 18%
Interest in associated companies (RM’000) 4,037,593 3,651,091
* This includes issuance of additional new shares and dilution of goodwill arising from IPO.
Annual Report 2019 223
Notes to the Financial Statements
for the financial year ended 30 June 2019
18 INVESTMENT IN ASSOCIATED COMPANIES (CONTINUED)
(c) Reconciliation of the summarised financial information to the carrying amount of the interest in the material associated
companies recognised in the consolidated financial statements: (continued)
(ii) JCCFC
The Group
2019 2018
RM’000 RM’000
Reclassified from investment in joint venture 364,186 -
Effect arising from issuance of additional new shares 189,642 -
Profit for the financial year -
Dividends paid/declared 55,209 -
Exchange fluctuation reserve (36,667) -
Closing net assets as at 30 June -
814
573,184
Interest in associated companies (%) 12% -
Interest in associated companies (RM’000) 68,782 -
The information presented above is based on the financial statements of the associated companies after reflecting
adjustments made by the Group when using the equity method, such as fair value adjustments made at the time of
acquisition and differences in accounting policies between the Group and the associated companies.
The summarised financial information above represents amount shown in the material associates’ financial statements
prepared in accordance with MFRSs (adjusted by the Group for equity accounting purposes).
224 HONG LEONG BANK BERHAD
19 PROPERTY AND EQUIPMENT Buildings Buildings Office
on
The Group on furniture,
2019 leasehold
Cost Buildings Leasehold Leasehold land less leasehold fittings,
At 1 July on land less land than 50
Additions than 50 land equipment Capital
Reclassification/Transfer freehold years 50 years years work-in-
Disposals/Write off Freehold land RM’000 or more RM’000 50 years and Computer Motor progress
Exchange fluctuation land RM’000 equipment vehicles RM’000
At 30 June RM’000 or more renovations RM’000 Total
RM’000 RM’000 RM’000
Accumulated depreciation RM’000 RM’000
At 1 July
Charge for the financial year 136,194 588,360 1,693 40,825 2,233 94,838 537,140 1,033,430 7,432 67,330 2,509,475
Reclassification/Transfer - - 5 - 37 - 1,255
Disposals/Write off 10,246 35,669 75,801 123,013
Exchange fluctuation 267 (848) (606) (620) 622 1,185 -
At 30 June - - - - (256) - 31,503 53,188 (2,133) (100,602) (15,911)
Net book value as at 30 June 2019 - - - - -
- (50,194) (70,525) 48 (155) (123,263) Notes to the Financial Statements
136,461 587,512 1,092 40,205 2,636 96,023 6,602 for the financial year ended 30 June 2019
727 1,941 23 2,739
529,422 1,053,703 42,397 2,496,053
- 31,063 1,414 4,440 1,111 19,942 397,110 633,515 5,905 - 1,094,500 CORPORATE
- 10,330 17 445 115 1,837 33,837 85,039 676 - 132,296
- (249) 414 1,244 (702) 644 - - (58) FINANCIALS
- (413) (996) - (205) - (42,792) (69,727) - (114,854)
- - - - - - 350 1,197 (2,130) - 1,597
- - - 50 -
136,461 4,636 1,435 23,023 387,803 650,668 42,397 1,113,481
40,980 435 35,569 1,201 73,000 141,619 403,035 4,501 1,382,572
546,532 657 2,101
Annual Report 2019 ADDITIONAL INFORMATION
225
19 PROPERTY AND EQUIPMENT (CONTINUED)
Notes to the Financial Statements
Buildings Buildings Office
for the financial year ended 30 June 2019on
226 HONG LEONG BANK BERHAD on furniture,
leasehold
Buildings Leasehold Leasehold land less leasehold fittings,
on land less land than 50
than 50 land equipment Capital Property
freehold years 50 years years work-in- work-in-
Freehold land RM’000 or more RM’000 50 years and Computer Motor progress progress
land RM’000 equipment vehicles RM’000 RM’000
RM’000 or more renovations RM’000 Total
RM’000 RM’000 RM’000
The Group RM’000 RM’000
2018 66,361 60,509 1,693 40,825 2,233 94,838 524,807 965,180 8,012 116,145 599,591 2,480,194
Cost - - - - - - 7,031 38,910 767 77,981 - 124,689
At 1 July - - - - 81,974 - (1,105)
Additions 70,500 529,091 - - - - 43,693 (48,757) (126,772) (599,591) (88,547)
Reclassification/Transfer (667) (1,240) - - - - (36,619) (3,877) (1,264) - - (5,756)
Disposals/Write off - - (83) -
Exchange fluctuation 1,693 40,825 2,233 94,838 (1,772) 1,033,430 (24) - 2,509,475
At 30 June 136,194 588,360 537,140 7,432 67,330
Accumulated depreciation - 18,449 1,407 3,976 1,066 18,042 399,547 608,351 6,259 - - 1,057,097
At 1 July - 13,176 7 464 45 1,900 30,357 74,006 857 - - 120,812
Charge for the financial year - - - - - (31,977) (46,587) - - (80,260)
Disposals/Write off - (562) - - - - (817) (2,255) (1,134) - - (3,149)
Exchange fluctuation - - (77) - - 1,094,500
At 30 June 136,194 1,414 4,440 1,111 19,942 397,110 633,515 67,330 - 1,414,975
Net book value as at 30 June 2018 31,063 279 36,385 1,122 74,896 140,030 399,915 5,905
557,297 1,527
19 PROPERTY AND EQUIPMENT (CONTINUED)
Buildings Buildings Office
on
on furniture,
leasehold
Buildings Leasehold Leasehold land less leasehold fittings,
on land less land than 50
than 50 land equipment Capital
freehold years 50 years years work-in-
Freehold land RM’000 or more RM’000 50 years and Computer Motor progress
land RM’000 equipment vehicles RM’000
RM’000 or more renovations RM’000 Total
RM’000 RM’000 RM’000
The Bank RM’000 RM’000
2019 55,832 56,163 433 39,774 1,972 91,596 505,994 995,582 6,990 66,082 1,820,418
Cost - - 195 - 1,297 - 1,255
At 1 July - 9,445 34,374 68,907 115,473
Additions 267 (523) -- 256 - -
Reclassification/Transfer - - -- (256) - 29,768 51,156 (2,133) (94,730) (13,806)
Disposals/Write off - - --
Exchange fluctuation 628 39,774 - 91,596 (47,895) (69,587) 41 - (119,871) Notes to the Financial Statements
At 30 June 56,099 55,640 3,269 6,153 for the financial year ended 30 June 2019
293 1,699 - 2,033
497,605 1,013,224 40,259 1,804,247
Accumulated depreciation - 17,054 155 4,171 997 17,989 378,287 613,314 5,598 - 1,037,565 CORPORATE
At 1 July - 1,116 7 445 41 1,822 30,671 81,212 620 - 115,934
Charge for the financial year - (203) -- - (634) 634 - - - FINANCIALS
Reclassification/Transfer - - -- 203 - (40,805) (68,916) - (112,056)
Disposals/Write off - - -- (205) - 105 1,019 (2,130) - 1,165
Exchange fluctuation - 41 -
At 30 June 56,099 17,967 162 4,616 - 19,811 367,624 627,263 40,259 1,042,608
Net book value as at 30 June 2019 37,673 466 35,158 1,036 71,785 129,981 385,961 4,129 761,639
2,233 2,024
Annual Report 2019 ADDITIONAL INFORMATION
227
19 PROPERTY AND EQUIPMENT (CONTINUED)
Notes to the Financial Statements
Buildings Buildings Office
for the financial year ended 30 June 2019on
228 HONG LEONG BANK BERHAD on furniture,
leasehold
Buildings Leasehold Leasehold land less leasehold fittings,
on land less land than 50
than 50 land equipment Capital
freehold years 50 years years work-in-
Freehold land RM’000 or more RM’000 50 years and Computer Motor progress
land RM’000 equipment vehicles RM’000
RM’000 or more renovations RM’000 Total
RM’000 RM’000 RM’000
The Bank RM’000 RM’000
2018 56,499 57,403 433 39,774 1,972 91,596 491,161 927,589 7,663 113,994 1,788,084
Cost - - -- - - 6,513 38,406 649 74,374 119,942
At 1 July - - -- - - 79,084 - (542)
Additions -- - - 42,660 (46,743) (122,286) (83,803)
Reclassification/Transfer (667) (1,240) -- - - (33,895) (2,754) (1,258) - (3,263)
Disposals/Write off - - (64) -
Exchange fluctuation 433 39,774 1,972 91,596 (445) 995,582 1,820,418
At 30 June 55,832 56,163 505,994 6,990 66,082
Accumulated depreciation - 16,482 148 3,717 958 16,167 380,651 588,937 6,025 - 1,013,085
At 1 July - 1,134 7 454
Charge for the financial year - (562) -- 39 1,822 27,314 70,549 766 - 102,085
Disposals/Write off - - --
Exchange fluctuation - - - (29,556) (44,702) (1,129) - (75,949)
At 30 June 55,832 17,054 155 4,171
Net book value as at 30 June 2018 39,109 278 35,603 - - (122) (1,470) (64) - (1,656)
997 17,989 378,287 613,314 5,598 - 1,037,565
975 73,607 127,707 382,268 1,392 66,082 782,853
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
20 INTANGIBLE ASSETS Core Customer Computer Total
deposits relationships software RM’000
RM’000
The Group RM’000 RM’000
2019 152,434 127,426 523,641 803,501
Cost or valuation - - 10,918 10,918
At 1 July - - 15,710 15,710
Additions - - (18,136) (18,136)
Reclassification - - 625 625
Disposals/Write off
Exchange fluctuation 152,434 127,426 532,758 812,618
At 30 June
152,434 91,324 407,202 650,960
Amortisation and impairment - 12,743 41,446 54,189
At 1 July - (18,097) (18,097)
Amortisation during the financial year - - 341 341
Disposals/Write off -
Exchange fluctuation 152,434 104,067 430,892 687,393
At 30 June - 23,359 101,866 125,225
Net book value as at 30 June 2019
Core Customer Computer Total
The Group deposits relationships software RM’000
RM’000
2018 RM’000 RM’000
Cost or valuation
At 1 July 152,434 127,426 525,424 805,284
Additions - - 11,337 11,337
Reclassification - - 755 755
Disposals/Write off - - (11,807) (11,807)
Exchange fluctuation - - (2,068) (2,068)
At 30 June
152,434 127,426 523,641 803,501
Amortisation and impairment
At 1 July 134,286 78,581 379,094 591,961
Amortisation during the financial year 18,148 12,743 40,950 71,841
Disposals/Write off - (11,778) (11,778)
Exchange fluctuation - - (1,064) (1,064)
At 30 June -
Net book value as at 30 June 2018 152,434 91,324 407,202 650,960
- 36,102 116,439 152,541
Annual Report 2019 229
Notes to the Financial Statements
for the financial year ended 30 June 2019
20 INTANGIBLE ASSETS (CONTINUED) Core Customer Computer Total
deposits relationships software RM’000
RM’000
The Bank RM’000 RM’000
2019 152,434 127,426 483,642 763,502
Cost or valuation - - 9,750 9,750
At 1 July - -
Additions - - 13,806 13,806
Reclassification - - (18,116) (18,116)
Disposals/Write off
Exchange fluctuation 152,434 127,426 31 31
At 30 June 489,113 768,973
Amortisation and impairment 152,434 91,324 382,578 626,336
At 1 July - 12,743 37,075 49,818
Amortisation during the financial year - (18,079) (18,079)
Disposals/Write off - - 3 3
Exchange fluctuation -
At 30 June 152,434 104,067 401,577 658,078
Net book value as at 30 June 2019 - 23,359 87,536 110,895
The Bank Core Customer Computer Total
deposits relationships software RM’000
2018 RM’000
Cost or valuation RM’000 RM’000
At 1 July
Additions 152,434 127,426 483,989 763,849
Reclassification - - 9,681 9,681
Disposals/Write off - - 350 350
At 30 June - -
(10,378) (10,378)
152,434 127,426 483,642 763,502
Amortisation and impairment
At 1 July 134,286 78,581 356,112 568,979
Amortisation during the financial year 18,148 12,743 36,828 67,719
Disposals/Write off - - (10,362) (10,362)
At 30 June 152,434 91,324 382,578 626,336
Net book value as at 30 June 2018 - 36,102 101,064 137,166
Customer relationships acquired in a business combination have value when they represent an identifiable and predictable source
of future cash flows to the combined business.
230 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
20 INTANGIBLE ASSETS (CONTINUED)
The valuation of business banking customer relationships was determined using an income approach, specifically the multi-
period excess earnings method (“MEEM”). This was done by discounting forecasted incremental customer revenues attributable
solely to EON Banking Group's existing business banking customer.
Core deposits comprising savings and current accounts are low cost source of funds. The valuation of core deposits was derived
using an income approach, specifically the cost savings method under the incremental cash flow method. This was done by
discounting forecast net interest savings from core deposits.
The discount rate used in discounting incremental cash flows was based on the risk associated with the identified intangible
assets. The remaining amortisation period of customer relationships is approximately 2 years (2018: 3 years).
21 GOODWILL
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Cost 1,831,312 1,831,312 1,771,547 1,771,547
As at 1 July/30 June
Allocation of goodwill to cash-generating units (“CGUs”)
Goodwill has been allocated to the following CGUs:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Personal Financial Services 1,188,705 1,188,705 1,149,911 1,149,911
Business & Corporate Banking 479,437 479,437 463,791 463,791
Global Markets 163,170 163,170 157,845 157,845
1,831,312 1,831,312 1,771,547 1,771,547
Impairment test for goodwill
The recoverable amount of CGUs is determined based on higher of fair value less costs to sell and value-in-use calculations.
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, less costs of disposal. This estimate is mainly determined, on 30 June 2019, on the basis of available market
information such as the fair value of the underlying assets and liabilities which have been marked-to-market.
Value-in-use is the present value of the future cash flows expected to be derived from the CGUs or groups of CGUs. The recoverable
amount of CGUs is determined based on value-in-use calculation. This calculation uses pre-tax cash flow projections based on
the budget for the financial year ending 2020, which is approved by the Board of Directors with a further projection of 4 years
(2018: 4 years). Cash flows beyond the 5 year period are extrapolated using an estimated growth rate of 4.7% (2018: 4.7%)
representing the forecasted Gross Domestic Product growth rate of the country for all cash generating units.
Annual Report 2019 231
Notes to the Financial Statements
for the financial year ended 30 June 2019
21 GOODWILL (CONTINUED)
Impairment test for goodwill (continued)
The cash flow projections are derived based on a number of key factors including past performance and management’s expectation
of market developments.
The discount rates used are pre-tax and reflect specific risks relating to the CGUs.
The discount rates used in determining the recoverable amount are as follows:
Discount rate 2018
%
2019
%
Personal Financial Services 9.12 10.04
Business & Corporate Banking 9.12 10.08
Global Markets 9.12 10.11
Based on the impairment test performed, impairment was not required for goodwill arising from all CGUs for the financial year
ended 30 June 2019. Management believes that any reasonable possible change to the key assumptions applied would not cause
the carrying value of any CGU to exceed its recoverable amount.
22 DEFERRED TAXATION
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 taxes relate to the same authority. The following amounts determined after appropriate set
off, are shown in the statements of financial position:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Deferred tax assets 16,030 53,067 - 47,908
Deferred tax liabilities (6,506) - (6,506) -
9,524 (6,506)
53,067 47,908
The analysis of deferred tax assets and deferred tax liabilities after appropriate set off is as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Deferred tax assets 116,039 85,532 94,353 83,283
- To be recovered within 12 months (106,515) (32,465) (100,859) (35,375)
- To be recovered after more than 12 months 53,067 47,908
9,524 (6,506)
232 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
22 DEFERRED TAXATION (CONTINUED)
The movements in deferred tax assets and liabilities during the financial year are as follows:
Financial
instruments
Property at FVOCI/ Cash flow Expected
credit
and available- hedge Intangible losses Provisions
equipment for-sale reserve assets RM’000 RM’000 Total
RM’000
The Group Note RM’000 RM’000 RM’000 RM’000
Deferred tax assets/
(liabilities)
2019 59 (79,647) 43,077 (161) (8,665) - 98,463 53,067
At 1 July - (14,080) - - - - (14,080)
- Effect of adopting MFRS 9 43 28,997 - 98,463 38,987
At 1 July, as restated 45 (79,647) (161) (8,665)
Credited/(Charged) to -
6,997 (71,602) - 3,059 73,797 (42,650) 41,203
statements of income -
Credited/(Charged) to equity - - 973 - - - (70,629)
Exchange difference (42,605)
At 30 June (72,650) - - - (37) (37)
812 (5,606) 73,797 55,776 9,524
2018 (94,213) (142,097) 337 (16,079) - 84,709 (167,343)
At 1 July
Credited/(Charged) to 43 14,566 14,642 - 7,414 - 14,027 50,649
45 - 170,532 (498) -
statements of income - - - - 170,034
Credited/(Charged) to equity - -
Exchange difference (79,647) 43,077 (161) (8,665) - (273) (273)
At 30 June
- 98,463 53,067
Annual Report 2019 233
Notes to the Financial Statements
for the financial year ended 30 June 2019
22 DEFERRED TAXATION (CONTINUED)
The movements in deferred tax assets and liabilities during the financial year are as follows: (continued)
Financial
instruments
Property at FVOCI/ Cash flow Expected
credit
and available- hedge Intangible losses Provisions
equipment for-sale reserve assets RM’000 RM’000 Total
RM’000
The Bank Note RM’000 RM’000 RM’000 RM’000
Deferred tax assets/
(liabilities)
2019 59 (75,994) 39,629 (161) (8,665) - 93,099 47,908
At 1 July - (12,743) - - - - (12,743)
- Effect of adopting MFRS 9 43 26,886 - 93,099 35,165
At 1 July, as restated 45 (75,994) (161) (8,665)
Credited/(Charged) to -
6,214 (59,981) - 3,058 53,971 (45,906) 17,337
statements of income - (33,095) 973 - - - (59,008)
Credited/(Charged) to equity 812 (5,607) 53,971 47,193 (6,506)
At 30 June (69,780)
2018 (91,221) (142,021) 337 (16,079) - 77,853 (171,131)
At 1 July
Credited/(Charged) to 43 15,227 14,642 - 7,414 - 15,246 52,529
45 - 167,008 (498) - - - 166,510
statements of income (161) - 93,099 47,908
Credited/(Charged) to equity (75,994) 39,629 (8,665)
At 30 June
234 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
23 DEPOSITS FROM CUSTOMERS The Group The Bank
Amortised cost 2019 2018 2019 2018
Fixed deposits RM’000 RM’000 RM’000 RM’000
Negotiable instruments of deposits
Short-term placements 91,064,010 88,222,375 70,785,542 71,745,421
10,123,656 6,892,073 8,598,899 5,394,717
Demand deposits 17,161,123
Savings deposits 118,348,789 16,950,886 14,131,227 14,687,624
Others 24,018,791 112,065,334 93,515,668 91,827,762
17,706,562 20,722,461 20,232,702
23,638,473 14,663,658 14,657,220
891,350 17,563,850
160,965,492 736,729 847,170
979,288 129,638,516 127,564,854
154,246,945
At fair value through profit and loss 2,159,671 3,334,428 1,812,544 2,132,691
Structured deposits linked to interest rate derivatives (54,869) (167,278) (54,535) (114,120)
2,104,802 3,167,150 1,758,009 2,018,571
Fair value changes arising from designation at fair value 163,070,294 157,414,095 131,396,525 129,583,425
through profit or loss*
* The Group and the Bank have issued structured deposits which are linked to interest rate derivatives and designated them at
fair value through profit or loss. This designation is permitted under MFRS 9 as it significantly reduces accounting mismatch.
These instruments are managed by the Group on the basis of fair value and includes terms that have substantive derivative
characteristics.
The fair value changes of the structured deposits which are linked to interest rate derivatives that are attributable to the
changes in own credit risk are not significant.
The carrying amount of the structured deposits of the Group is RM41,525,000 (2018: RM150,847,000) and the Bank is
RM43,318,000 (2018: RM104,426,000) lower than the contractual amount at maturity.
Annual Report 2019 235
Notes to the Financial Statements
for the financial year ended 30 June 2019
23 DEPOSITS FROM CUSTOMERS (CONTINUED)
(i) The maturity structure of fixed deposits, negotiable instruments of deposits and short-term placements are as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Due within: 95,101,452 83,581,278 73,557,213 67,728,986
- six months 21,763,420 26,159,087 18,818,766 21,998,104
- six months to one year
- one year to five years 1,440,321 2,324,969 1,096,093 2,100,672
- more than five years 43,596 - 43,596 -
118,348,789 112,065,334 93,515,668 91,827,762
(ii) The deposits are sourced from the following customers:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Government and statutory bodies 7,415,514 3,977,104 4,246,520 2,016,899
Business enterprises 67,038,577 62,744,665 51,715,857 48,300,831
Individuals 85,518,130 88,159,470 73,129,569 77,108,346
Others
3,098,073 2,532,856 2,304,579 2,157,349
163,070,294 157,414,095 131,396,525 129,583,425
24 INVESTMENT ACCOUNTS OF CUSTOMERS The Group The Bank
Unrestricted investment accounts
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
2,235 - --
25 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Licensed banks 7,059,886 7,084,745 7,059,770 7,095,827
Licensed investment banks 95,023 150,027 95,023 150,027
Licensed Islamic banks - - -
Central banks 140,000 - - -
Other financial institutions 12,222 2,662 50,141 -
51,293
7,237,434 7,204,934 7,245,854
7,358,424
236 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
26 OTHER LIABILITIES
The Group The Bank
Note 2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Zakat 350 350 --
Post employment benefits obligation
300 297 300 297
- defined contribution plan 3,351,885 3,229,766 2,691,960 2,586,339
Loan advance payment
Interbranch clearing with subsidiary company - - 571,263 -
Amount due to subsidiary companies - - 29 -
Treasury and cheque clearing 452,626 50,106 50,106
Treasury related payables 149,347 231,223 66,405 231,223
Sundry creditors and accruals 175,507 531,979 149,347 494,991
Provision for bonus and staff related expenses 164,504 176,617 140,623 168,984
Expected credit losses on financial guarantee 155,941
contracts (a) 7,928 - 7,117 -
Others
579,298 499,108 507,091 400,229
4,881,745 4,719,446 4,290,076 3,932,169
(a) Movements in expected credit losses of financial guarantee contracts are as follows:
The Group Note Stage 1 Stage 2 Stage 3 Total ECL
59 RM’000
2019 12 Months Lifetime ECL Lifetime ECL
At 1 July ECL not credit credit -
Effect of adopting MFRS 9 impaired 6,920
At 1 July, as restated RM’000 RM’000 impaired 6,920
Changes in ECL due to transfer within stages RM’000
-
Transfer to Stage 1 2,065 4,855 - -
Transfer to Stage 2 (13) (80) 93 -
Transfer to Stage 3 23 (23) -
New financial assets originated (36) 36 - 144
Financial assets derecognised - (93) - (40)
Changes due to change in credit risk 142 2 93 794
Exchange difference (28) (12) - 114
Other movements 220 642 - (4)
At 30 June (6) 120 (68) 7,928
- - -
(4)
2,380 5,527 21
Annual Report 2019 237
Notes to the Financial Statements
for the financial year ended 30 June 2019
26 OTHER LIABILITIES (CONTINUED)
(a) Movements in expected credit losses of financial guarantee contracts are as follows: (continued)
The Bank Note Stage 1 Stage 2 Stage 3 Total ECL
59 RM’000
2019 12 Months Lifetime ECL Lifetime ECL
At 1 July ECL not credit credit -
Effect of adopting MFRS 9 impaired 6,749
At 1 July, as restated RM’000 RM’000 impaired 6,749
Changes in ECL due to transfer within stages RM’000
-
Transfer to Stage 1 1,909 4,840 - -
Transfer to Stage 2 (14) (79) 93 -
Transfer to Stage 3 22 (22) -
New financial assets originated (36) 36 - 20
Financial assets derecognised - (93) - (38)
Changes due to change in credit risk 20 - 93 277
Exchange difference (26) (12) - 113
Other movements 652 - (4)
At 30 June (308) 120 (67) 7,117
(7) - -
- (4)
5,521 22
1,574
27 RECOURSE OBLIGATION ON LOANS SOLD TO CAGAMAS BERHAD
This represents the proceeds received from housing loans sold directly to Cagamas Berhad with recourse to the Group and the
Bank. Under this agreement, the Group and the Bank undertake to administer the loans on behalf of Cagamas Berhad and to
buy back any loans which are regarded as defective based on prudential criteria set by Cagamas Berhad. Such financing
transactions and the obligation to buy back the loans are reflected as a liability on the statements of financial position.
These financial liabilities are stated at amortised cost.
238 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
28 TIER 2 SUBORDINATED BONDS
The Group The Bank
Note 2019 2018 2019 2018
(a) RM’000 RM’000 RM’000 RM’000
RM1.5 billion Tier 2 subordinated notes, at par - 1,500,000 - 1,500,000
Add: Interest payable - 1,664 - 1,664
- 1,501,664 - 1,501,664
Less: Unamortised discounts - (91) - (91)
- 1,501,573 - 1,501,573
RM400 million Tier 2 subordinated Sukuk Ijarah, (b) - 400,000 - -
at par - 684 - -
- 400,684 - -
Add: Profit payable - (54) - -
- 400,630 - -
Less: Unamortised discounts
RM1.5 billion Tier 2 subordinated notes, at par (c) 1,500,000 1,000,000 1,500,000 1,000,000
Add: Interest payable
2,370 794 2,370 794
Less: Unamortised discounts
1,502,370 1,000,794 1,502,370 1,000,794
(30) (89) (30) (89)
1,502,340 1,000,705 1,502,340 1,000,705
1,502,340 2,902,908 1,502,340 2,502,278
(a) On 22 June 2012, the Bank had completed the issuance of RM1.5 billion nominal value of Tier 2 Subordinated Notes
(“Sub Notes”). The RM1.5 billion Sub Notes will mature in 2024 and are callable on any interest payment date falling on
or after the 7th anniversary of the issue date subject to approval of BNM. The Sub Notes which bears interest of 4.50% per
annum is payable semi-annually in arrears.
The Sub Notes constitute unsecured liabilities of the Bank, and is subordinated in right of payment to the deposit liabilities
and all other liabilities of the Bank in accordance with the terms and conditions of the issue and qualify as Tier 2 capital for
the purpose of determining the capital adequacy ratio of the Group and the Bank.
On 24 June 2019, HLB had fully redeemed the RM1.5 billion nominal value of this Sub Notes.
Annual Report 2019 239
Notes to the Financial Statements
for the financial year ended 30 June 2019
28 TIER 2 SUBORDINATED BONDS (CONTINUED)
(b) On 17 June 2014, Hong Leong Islamic Bank Berhad (“HLISB”), a wholly owned subsidiary of the Bank, had completed the
first issuance of RM400.0 million nominal value of Tier 2 Subordinated Sukuk Ijarah (”Subordinated Sukuk Ijarah”) out of its
RM1.0 billion Tier 2 Subordinated Sukuk Ijarah Programme. The RM400.0 million Subordinated Sukuk Ijarah will mature in
2024 and is callable at end of year 5 and on each subsequent coupon payment date thereafter subject to approval of BNM.
The Subordinated Sukuk Ijarah which bears profit rate of 4.80% per annum is payable semi-annually in arrears.
The Subordinated Sukuk Ijarah constitute direct, unconditional, subordinated and unsecured obligations of HLISB and
subordinated in right and priority of payment, to the extend and in the manner provided in the Subordinated Sukuk Ijarah,
ranking pari passu among themselves. The Subordinated Sukuk Ijarah is subordinated in right of payment to all deposit
liabilities and other liabilities of HLISB, except to those liabilities, which by their terms, rank equally in right of payment
with or are subordinated to the Subordinated Sukuk Ijarah. The Subordinated Sukuk Ijarah qualifies as Tier 2 capital for the
purpose of determining the capital adequacy ratio of HLISB.
On 17 June 2019, HLISB had fully redeemed the RM400.0 million nominal value of Tier 2 Subordinated Sukuk Ijarah.
(c) On 23 June 2014, HLB had completed the first issuance of RM500.0 million nominal value of Tier 2 Subordinated Notes
(”Sub Notes”) out of its RM10.0 billion Multi-Currency Sub Notes Programme. The RM500.0 million Sub Notes will mature
in 2024 and is callable on any coupon payment date falling on or after the 5th anniversary of the issue date. The Sub Notes
which bears interest rate of 4.80% per annum is payable semi-annually in arrears. The exercise of the call option on the
Sub Notes shall be subject to the approval of BNM.
The Sub Notes constitute unsecured liabilities of the Bank, and is subordinated in right of payment to the deposit liabilities
and all other liabilities of the Bank in accordance with the terms and conditions of the issue, except to those liabilities,
which by their terms, rank equally in right of payment with or are subordinated to the Sub Notes. The Sub Notes may
be written off, either fully or partially, at the discretion of BNM at the point of non-viability as determined by BNM or
Perbadanan Insurans Deposit Malaysia. The Sub Notes qualify as Tier 2 capital for the purpose of determining the capital
adequacy ratio of the Group and the Bank.
On 24 June 2019, HLB had fully redeemed the RM500.0 million nominal value of this Sub Notes.
On 25 June 2018, the Bank issued a second tranche of RM500.0 million nominal value of 10-year non-callable 5 years
Sub Notes callable on 26 June 2023 (and thereafter) and due on 23 June 2028 out of its RM10.0 billion Multi-Currency
Sub Notes Programme. The coupon rate for this second tranche of the Sub Notes is 4.86% per annum, which is payable
semi-annually in arrears from the date of the issue.
On 14 June 2019, the Bank issued a third tranche of RM1.0 billion nominal value of 10-year non-callable 5 years Sub Notes
callable on 14 June 2024 (and thereafter) and due on 14 June 2029 out of its RM10.0 billion Multi-Currency Sub Notes
Programme. The coupon rate for this third tranche of the Sub Notes is 4.23% per annum, which is payable semi-annually
in arrears from the date of the issue.
240 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
29 MULTI-CURRENCY ADDITIONAL TIER 1 CAPITAL SECURITIES
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
RM800 million Multi-currency Additional Tier-1 800,000 400,000 800,000 400,000
capital securities at par 6,661 1,799 6,661 1,799
Add: Interest payable 806,661 401,799 806,661 401,799
(476) (607) (476) (607)
Less: Unamortised discounts
806,185 401,192 806,185 401,192
On 30 November 2017, the Bank issued a nominal value RM400.0 million perpetual Multi-currency Additional Tier 1 capital
securities (“Capital Securities”) under the RM10.0 billion Capital Securities Programme of which was fully subscribed by its
holding company, Hong Leong Financial Group Berhad (“HLFG”). The Capital Securities, which qualify as Additional Tier 1 capital
for the Bank, carry a distribution rate of 5.13% per annum. The Capital Securities are perpetual with an Issuer’s call option to
redeem at the end of year 5. The proceeds from the issuance was used to subscribe the RM400.0 million Multi-currency Additional
Tier 1 subordinated sukuk wakalah issued by HLISB, a wholly-owned subsidiary of the Bank.
On 29 March 2019 the Bank issued a second tranche nominal value of RM400.0 million perpetual Capital Securities fully subscribed
by HLFG. The Capital Securities carry a distribution rate of 4.72% per annum and are perpetual with an Issuer’s call option to
redeem at the end of year 5. The proceeds from the issuance shall be utilised to fulfill the requirements of Additional Tier 1 capital
as per BNM’s Capital Adequacy Framework (Capital Components) issued on 2 February 2018 and without limitation, to on-lend to
HLB’s subsidiaries, for investment into HLB’s subsidiaries, for working capital, general banking and other corporate purposes and/
or if required, the refinancing of any existing financing obligations of HLB and/or any existing capital securities issued under the
Capital Securities Programme.
30 INNOVATIVE TIER 1 CAPITAL SECURITIES
The Group and The Bank
2019 2018
RM’000 RM’000
RM500 million Innovative Tier 1 capital securities, at par 500,000 500,000
Add: Interest payable 12,658 12,545
Less: Unamortised discounts 512,658 512,545
Fair value adjustments on completion of business combination accounting (502) (2,439)
112 2,246
512,268 512,352
On 10 September 2009, Promino Sdn Bhd (“Promino”) issued the first tranche of Innovative Tier 1 Capital Securities (“IT-1 Capital
Securities”) amounting to RM500.0 million in nominal value, from its RM1.0 billion IT-1 Capital Securities Programme. The IT-1
Capital Securities is structured in accordance with the Risk-Weighted Capital Adequacy Framework (General Requirements and
Capital Components) issued by BNM.
Annual Report 2019 241
Notes to the Financial Statements
for the financial year ended 30 June 2019
30 INNOVATIVE TIER 1 CAPITAL SECURITIES (CONTINUED)
The RM500.0 million IT-1 Capital Securities has a tenor of 30 years and Promino has the option to redeem the RM500.0 million
IT-1 Capital Securities at the 10th anniversary, subject to BNM approval. The RM500.0 million IT-1 Capital Securities has a coupon
rate of 8.25% per annum, payable semi-annually. In the event the IT-1 Capital Securities is not redeemed at the 10th anniversary
(the First Optional Redemption Date), the coupon rate will be revised to 9.25% per annum from the 11th year to the final maturity.
On 1 July 2011, the above IT-1 Capital Securities was vested to HLB. The IT-1 Capital Securities constitute unsecured and
subordinated obligations of HLB and are subordinated to all deposit liabilities and all other liabilities except those liabilities which
rank equally in, and/or junior to, the rights of payment of the IT-1 Capital Securities. The IT-1 Capital Securities qualify as Tier 1
capital for the purpose of computing the capital adequacy ratio of the Group and the Bank.
31 SHARE CAPITAL The Group and The Bank
Ordinary shares issued and fully paid: 2019 2018
At 1 July/30 June - ordinary shares with no par value
Number of Number of
ordinary ordinary
shares shares
‘000 RM’000 ‘000 RM’000
2,167,718 7,739,063 2,167,718 7,739,063
32 RESERVES Note The Group 2018 The Bank 2018
Retained profits (a) 2019 RM’000 2019 RM’000
RM’000 15,184,533 RM’000 11,212,525
16,686,412 12,034,337
Share options reserve (b) 39,170 26,707 39,170 26,707
Fair value reserve
- Financial investments at FVOCI (c)
- Financial investments available-for-sale
Exchange fluctuation reserve 150,952 - 129,590 -
Regulatory reserves
Cash flow hedge reserve - 164,127 - 194,544
(d) 731,018 756,325 218,330 184,585
(e) 858,315 752,939 695,197 637,098
(f) (2,726) 832 (2,726) 832
1,776,729 1,700,930 1,079,561 1,043,766
18,463,141 16,885,463 13,113,898 12,256,291
(a) The Bank can distribute dividends out of its entire retained earnings under the single-tier system.
242 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
32 RESERVES (CONTINUED)
(b) The share options reserve arose from share options and ordinary shares granted to eligible executives of the Bank pursuant
to the Bank’s ESS. Terms of the Bank’s ESS are disclosed in Note 58 to the financial statements.
(c) Movement of the fair value reserve is as follows:
The Group The Bank
Note 2019 2018 2019 2018
59 RM’000 RM’000 RM’000 RM’000
At 1 July 164,127 342,429 194,544 360,928
Effect of adopting MFRS 9 (288,588) - (291,679) -
As restated (124,461)
342,429 (97,135) 360,928
Equity instruments 11,796 12,915 11,796 12,915
- Net fair value changes (51) - (51) -
- Net loss on disposal
Debt instruments 45 447,030 (211,179) 400,730 (196,725)
- Net fair value changes (862) - (931) -
- Changes in expected credit losses
Reclassification to net profit on disposal and (124,838) (149,748) (124,838) (149,582)
(71,602) 170,532 (59,981) 167,008
impairment
Deferred taxation 13,940 (822) - -
Share of fair value reserve of associated 275,413 (178,302) 226,725 (166,384)
150,952 164,127 129,590 194,544
company
Net change in fair value reserve
At 30 June
(d) Currency translation differences arising from translation of the Bank’s foreign branches, subsidiaries, associated companies
and joint venture are recognised in exchange fluctuation reserve.
(e) Regulatory reserves represent the Group’s and the Bank’s compliance with BNM’s Revised Policy Documents on Financial
Reporting and Financial Reporting for Islamic Banking Institutions with effect from 1 July 2018, whereby the Bank and
its domestic banking subsidiaries must maintain, in aggregate, loss allowance for non-credit impaired exposures and
regulatory reserves of no less than 1% of total credit exposures, net of loss allowance for credit-impaired exposures.
Prior to 1 July 2018, the Group and the Bank comply with BNM’s Policy on Classification and Impairment Provisions for
Loans/Financing, to maintain, in aggregate, the collective impairment allowances and regulatory reserves of no less than
1.2% of total outstanding loans/financing, net of individual impairment allowances.
During the financial year, an additional amount of RM109.7 million (2018: RM74.5 million) at Group and RM90.1 million
(2018: RM65.4 million) at Bank have been transferred from retained profits to regulatory reserves.
Included in the Group is the regulatory reserve maintained by the Group’s banking subsidiary company in Vietnam of
RM11.2 million (2018: RM11.2 million) in line with the requirements of the State Bank of Vietnam.
Annual Report 2019 243
Notes to the Financial Statements
for the financial year ended 30 June 2019
32 RESERVES (CONTINUED)
(f) Cash flow hedge reserve arises from cash flow hedge activities undertaken by the Bank to hedge the changes in the cash
flow of customer deposits arising from the movement of market interest rates. The reserve is non-distributable and is
reversed to the statements of income upon maturity or termination of the cash flow hedge.
33 TREASURY SHARES
The Group The Bank
Note 2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
(a)
Purchase of own shares pursuant to Section 127, (b) 431,829 431,829 431,829 431,829
Companies Act 2016 295,988 300,438 295,988 300,438
727,817 732,267 727,817 732,267
Treasury shares for ESS
(a) Purchase of own shares pursuant to Section 127 of the Companies Act 2016
The shareholders of the Bank, via an ordinary resolution passed at the Annual General Meeting held on 23 October 2013,
had approved the Bank’s plan to purchase its own shares up to 10% of the issued and paid-up share capital. The Directors
of the Bank are committed to enhance the value of the Bank to its shareholders and believe that the share buyback plan
can be applied in the best interests of the Bank and its shareholders.
As at 30 June 2019, the total number of shares bought was 81,101,700 (2018: 81,101,700) and the shares held were
accounted as treasury shares in accordance with the provisions of Section 127 of the Companies Act 2016.
There was no resale or cancellation of treasury shares during the financial year. The number of issued shares with voting
rights as at 30 June 2019 after deducting treasury shares purchased is 2,086,616,584 shares (2018: 2,086,616,584).
Treasury shares have no rights to vote nor participation in dividends or other distribution.
(b) Treasury shares for ESS
In 2006, the Bank entered into a Trust for ESOS purposes established via the signing of a Trust Deed on 23 January 2006 with
an appointed Trustee in conjunction with the establishment of an Executive Share Option Scheme (“ESOS”). The trustee will
be entitled from time to time to accept financial assistance from the Bank upon such terms and conditions as the Bank and
the trustee may agree to purchase the Bank’s shares from the open market for the purposes of this trust.
MFRS 132 ‘Financial Instruments: Presentation’ requires that if an entity reacquires its own equity instruments, those
instruments shall be deducted from equity and are not recognised as a financial asset regardless of the reason for which
they are reacquired.
In accordance with MFRS 132, the shares purchased for the benefit of the ESS holders are recorded as “Treasury Shares for
ESS” in the equity on the statements of financial position.
During the financial year ended 30 June 2019, a total of 604,138 ordinary shares were vested and transferred pursuant to
the Bank’s ESS. As at 30 June 2019, the total number of shares held was 40,182,412 (2018: 40,786,550).
244 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
34A INTEREST INCOME The Group The Bank
Loans, advances and financing 2019 2018 2019 2018
Money at call and deposit placements with financial RM’000 RM’000 RM’000 RM’000
institutions 4,827,453 4,642,090 4,720,096 4,562,593
Securities purchased under resale agreements
Financial assets held-for-trading 203,883 209,538 197,060 209,566
Financial investments at FVOCI 12 3,513 12 3,513
Financial investments available-for-sale - -
Financial investments at amortised cost 382,004 382,086
Financial investments held-to-maturity 816,881 - 815,988 -
Others - -
742,369 738,767
Of which: 427,136 - 423,467 -
Accretion of discount less amortisation of premium - -
Interest income earned on impaired loans, advances and 375,142 370,398
financing 9,496 2,903 9,191 2,404
6,284,861 6,165,814
6,357,559 6,269,327
237,117 228,294 237,117 228,294
12,915 52,766 12,893 52,766
34B INTEREST INCOME FOR FINANCIAL ASSETS AT FVTPL The Group The Bank
Financial assets at FVTPL
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
397,201 - 397,201 -
Annual Report 2019 245
Notes to the Financial Statements
for the financial year ended 30 June 2019
35 INTEREST EXPENSE The Group The Bank
Deposits and placements of banks and other financial 2019 2018 2019 2018
institutions RM’000 RM’000 RM’000 RM’000
Deposits from customers 265,971 165,480 272,408 175,551
Short-term placements 3,031,773 2,803,439 2,984,869 2,757,875
Tier 2 subordinated bonds
Multi-currency Additional Tier-1 capital securities 429,986 344,662 429,986 344,662
Innovative Tier 1 capital securities 116,165 92,268 116,135 92,268
Recourse obligation on loans sold to Cagamas 12,783 12,051
25,347 38,205 25,513 38,205
41,053 7,602 41,053 7,602
7,602 3,464,439 7,602 3,428,214
3,917,897 3,877,566
36 INCOME FROM ISLAMIC BANKING BUSINESS The Group
Income derived from investment of depositors’ funds and others 2019 2018
Income derived from investment of shareholders’ funds RM’000 RM’000
Income derived from investment of investment account
Income attributable to depositors 1,455,046 1,279,994
Income attributable to depositors on investment account 176,972 137,744
12 -
Of which: (924,754) (771,674)
Financing income earned on impaired financing and advances (7) -
707,269 646,064
1,553 11,941
246 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
37 NON-INTEREST INCOME
The Group The Bank
Note 2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Fee income 168,070 172,773 165,064 168,814
Commissions 51,723 62,674 49,761 62,032
Service charges and fees 15,488 14,213 15,360 14,117
Guarantee fees
Credit card related fees 239,129 218,225 239,129 218,225
Corporate advisory fees 1,447 481 1,447 481
Commitment fees
Fee on loans, advances and financing 32,662 33,086 31,678 32,407
Other fee income 37,074 39,136 33,469 35,340
39,712 33,133 39,527 32,380
585,305 573,721 575,435 563,796
Net income from securities 104,539 - 104,539 -
Net realised gain/(loss) on financial instruments: - 10,902 - 10,902
- Financial assets at FVTPL 28,185 28,185
- Financial assets held-for-trading (221,202) (221,202)
- Derivative financial instruments 164,261 - 164,261 -
- Financial investments at FVOCI 197,037 196,818
- Financial investments available-for-sale - -
- Financial investments amortised cost 15,902 - 15,902 -
- Financial investments held-to-maturity 7 7
Dividend income from: - -
- Subsidiary companies 43,400
- Joint venture - - 20,020 4,882
- Associated companies - - -
- Financial assets at FVTPL - - 138,560
- Financial investments at FVOCI 279,533 - 174,604 -
- Financial investments available-for-sale 203 - 279,533 -
Net unrealised gain/(loss) on revaluation of: - 281,087
- Financial assets at FVTPL 203 281,087
- Financial assets held-for-trading 51,544 -
- Derivative financial instruments - -
Net realised loss on fair value changes arising from - 51,544 (2,457)
1,754 (2,457) - 109,026
fair value hedges 109,026
Net unrealised loss on fair value changes arising (504) 1,754 (800)
(800)
from fair value hedges (305) (504) (152)
395,725 (152) 809,458
622,835 (305)
590,349
Annual Report 2019 247
Notes to the Financial Statements
for the financial year ended 30 June 2019
37 NON-INTEREST INCOME (CONTINUED) The Group The Bank
Note 2019 2018 2019 2018
Other income RM’000 RM’000 RM’000 RM’000
Foreign exchange gain
Rental income 152,425 104,749 150,983 103,180
Gain on disposal of property and equipment 12,113 7,770 7,494 5,597
Net loss on dilution of investment in associated 1,539 2,492 1,657 2,492
company 18 - (26,800) - -
Net gain on divestment of a joint venture
Other non-operating income 17 90,106 - 138,101 -
17,188 15,614 15,639 15,062
273,371 103,825 313,874 126,331
1,254,401 1,300,381 1,479,658 1,499,585
38 OVERHEAD EXPENSES
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Personnel costs 1,147,680 1,106,354 945,709 919,275
465,554 484,058
Establishment costs 516,258 533,573 166,576 154,897
244,388 239,018
Marketing expenses 173,860 160,641 1,822,227 1,797,248
Administration and general expenses 253,777 259,881
2,091,575 2,060,449
The overhead expenses of the Bank are net of shared services costs charged to subsidiaries.
(i) Personnel costs comprise the following:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Salaries, bonus and allowances 1,048,998 1,008,943 864,504 838,865
Medical expenses 31,587 35,791 26,472 31,108
Training and convention expenses 24,585 26,317 20,542 21,569
Staff welfare 10,012 9,253 8,632 7,973
Other employees benefits 32,498 26,050 25,559 19,760
1,147,680 1,106,354 945,709 919,275
248 HONG LEONG BANK BERHAD
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