CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
38 OVERHEAD EXPENSES (CONTINUED)
The overhead expenses of the Bank are net of shared services costs charged to subsidiaries. (continued)
(ii) Establishment costs comprise the following:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Depreciation of property and equipment 132,296 120,812 115,934 102,085
Amortisation of intangible assets 54,189 71,841 49,818 67,719
Rental of premises 58,900 73,071 72,169 87,041
Information technology expenses
Security services 170,783 164,271 155,412 153,584
Electricity, water and sewerage 28,807 28,896 22,643 22,677
Hire of plant and machinery 25,345 26,447 20,823 20,812
Others 12,605 12,661 11,968 12,026
33,333 35,574 16,787 18,114
516,258 533,573 465,554 484,058
(iii) Marketing expenses comprise the following:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Advertisement and publicity 25,778 36,888 23,491 33,796
Sales commission and credit card related fees 128,651 107,491 128,651 107,491
Others
19,431 16,262 14,434 13,610
173,860 160,641 166,576 154,897
Annual Report 2019 249
Notes to the Financial Statements
for the financial year ended 30 June 2019
38 OVERHEAD EXPENSES (CONTINUED)
The overhead expenses of the Bank are net of shared services costs charged to subsidiaries. (continued)
(iv) Administration and general expenses comprise the following:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Teletransmission expenses 18,295 16,225 17,883 15,826
Stationery and printing expenses 14,074 14,860 13,359 13,965
Professional fees 87,840 88,287 85,395 83,884
Insurance fees 42,103 41,772 36,934 36,459
Stamp, postage and courier 13,876 13,971 13,526 13,639
Travelling and transport expenses
Registration and license fees 4,637 4,414 3,372 3,283
Brokerage and commission 9,005 9,125 8,011 8,154
Credit card fees 8,382 7,946 4,489 3,793
Others 42,628 39,854 42,628 39,854
12,937 23,427 18,791 20,161
253,777 259,881 244,388 239,018
The above expenditure includes the following statutory disclosures:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Auditors’ remuneration*: 2,022 1,820 1,680 1,579
Malaysian firm 731 877 496 601
- statutory audit 74 70 45 42
- regulatory related fees 63 603 63 575
- tax compliance
- other services 694 572 557 447
PwC overseas affiliated firms 189 192 189 192
- statutory audit 124 130 101
- regulatory related fees 122 218 90 209
- tax compliance 7,902 4,879 122 4,568
7,460
Loss on disposal of property and equipment 39 29 16
Property and equipment written off 37
Intangible assets disposal/written off
* There was no indemnity given to or insurance effected for the Group and the Bank during the financial year.
250 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
39 ALLOWANCE FOR/(WRITTEN BACK OF) IMPAIRMENT LOSSES ON LOANS, ADVANCES AND FINANCING
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Allowance for/(write back of) impairment losses on loans, 221,296 - 144,291 -
advances and financing: - 299,887 - 224,340
- -
- expected credit losses 7,892 (1,125)
- collective assessment allowance 17,679
- individual assessment allowance (226,652) 19,719 14,337 15,992
Impaired loans, advances and financing: (250,847) (202,339) (206,558)
- written off 12,323
- recovered from bad debt written off 76,651 (43,711) 32,649
40 (WRITTEN BACK OF)/ALLOWANCE FOR IMPAIRMENT LOSSES ON FINANCIAL INVESTMENTS AND OTHER FINANCIAL ASSETS
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Expected credit losses on: (906) - (973) -
- Financial investments at FVOCI 178 - 174 -
- Financial investments at amortised cost (240) - (240) -
- Other receivables - 583 -
- Cash and short-term funds 47
- Deposits and placements with banks and other financial - 1,140 -
(51)
institutions
Write back of impairment losses on: - - --
- Financial investments available-for-sale - (73) - (73)
- Financial investments held-to-maturity - (7,058) - (7,058)
(972) (7,131) 684 (7,131)
Annual Report 2019 251
Notes to the Financial Statements
for the financial year ended 30 June 2019
41 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
(a) Related parties and relationships
The related parties of and their relationships with the Bank are as follows:
Related parties Relationship
Hong Leong Company (Malaysia) Berhad Ultimate holding company
Hong Leong Share Registration Services Sdn Bhd, Subsidiary companies of ultimate holding company
HLCM Capital Sdn Bhd, Hong Leong Fund Management Sdn Bhd
and HL Management Co Sdn Bhd
Hong Leong Financial Group Berhad Holding company
Subsidiary companies of Hong Leong Financial Group Berhad as Subsidiary companies of holding company
disclosed in its financial statements
Hong Leong Industries Berhad and its subsidiary and associated Subsidiary and associated companies of ultimate holding
companies as disclosed in its financial statements company
HLMG Management Co Sdn Bhd Subsidiary companies of ultimate holding company
(formerly known as HLI-Hume Management Co Sdn Bhd)
Hume Cement Sdn Bhd
Hume Construction Sdn Bhd
Hume Plastics (Malaysia) Sdn Berhad
Hume Quarry (Sarawak) Sdn Bhd
Hongvilla Development Sdn Bhd
HIMB Overseas Limited
HIMB Trading Limited and Delta Touch Limited
Guoco Group Limited and its subsidiary and associated companies Subsidiary and associated companies of ultimate holding
as disclosed in its financial statements company
GuocoLand (Malaysia) Berhad and its subsidiary and associated Subsidiary and associated companies of ultimate holding
companies as disclosed in its financial statements company
Southern Steel Berhad and its subsidiary and associated companies Subsidiary and associated companies of ultimate holding
company
Subsidiary companies of the Bank as disclosed in Note 16 Subsidiary companies of the Bank
Joint venture of the Group as disclosed in Note 17 Joint venture of the Group
Associated companies of the Group as disclosed in Note 18 Associated companies of the Group
Key management personnel The key management personnel of the Bank consists of:
- All Directors of the Bank and eight members of senior
management of the Bank
Related parties of key management personnel deemed as related (i) Close family members and dependents of key
to the Bank management personnel
(ii) Entities that are controlled, jointly controlled or
significantly influenced by, or for which significant
voting power in such entity resides with, directly or
indirectly by key management personnel or its close
family members
252 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
41 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b) Related party transactions and balances
The Group Parent Other Associated Key
company related companies management
2019 companies
Income RM’000 RM’000 RM’000 personnel
Interest: RM’000
- loans - 6,696
- redeemable preference shares - 1,301 - 42
Commitment fee and bank charges - - -
Dividend income - - -
Commission on Group products/services sold - 261,647 - 43
Brokerage commission - - -
Reimbursement of shared service cost 1,036 33,802 - -
1,036 589 - -
Expenditure - -
Rental and maintenance - 7,557
Insurance 54 311,592 - 85
Interest on current accounts and fixed deposits -
Interest on short-term placements - 14,525 - -
Interest on subordinated notes and capital securities 87 31,206 - -
Management fees - 1,670
Other miscellaneous expenses - 934 - 3,535
6,119 10,667 - -
Amounts due from 26,454 - -
Current accounts 130 32,633 -
Negotiable instruments of deposits 6,390 12,284 20,414 5,205
Redeemable preference shares 128,703 -
Loans - - -
Wholesale funds - - - -
Derivative assets - 300,534 - -
Credit card balances - - 662
Advance rental and deposit - 30,866 - -
Others 135 125,522 - -
- 7,046,520 - 405
Amounts due to - -
Current accounts and fixed deposits 459 1,621 20,414 -
Short-term placements 594 - 1,067
Subordinated notes and capital securities -
Derivative liabilities - 5,485 - 32,784
Others - 2,010 - 317,839
- 7,512,558 -
Commitments and contingencies - - -
Derivative related contracts 278 55,369 - -
278 906,044 -
- 350,623
100,000 47,377
17,509 -
24,746
1,051,045
708,803
Annual Report 2019 253
Notes to the Financial Statements
for the financial year ended 30 June 2019
41 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b) Related party transactions and balances (continued)
The Group Parent Other Associated Key
company related company management
2018 companies RM’000
Income RM’000 RM’000 personnel
Interest: RM’000
- loans
- redeemable preference shares - 9,526 - 37
Commitment fee and bank charges - 1,341 - -
Dividend income -- -
Commission on Group products/services sold - 261,472 - 51
Brokerage commission - 31,774 - -
Reimbursement of shared service cost - 931 - -
266 6,908 - -
Expenditure 266 311,952 - -
Rental and maintenance
Insurance - 20,565 - 88
Interest on current accounts and fixed deposits 57 12,527 -
Interest on short-term placements - -
Interest on subordinated notes and capital securities - 1,614 - -
Management fees 584 17,440 - 3,669
Other miscellaneous expenses 33,255 - 1,601
- 32,786 - -
Amounts due from 7,777 - -
Current accounts 8,545 -
Redeemable preference shares 274 126,732 20,373 5,270
Loans 8,692 -
Wholesale funds - -
Derivative assets -- - -
Credit card balances - 30,866 - 1,076
Advance rental and deposit - 158,920 - -
Others - 6,945,610 - -
327 532 - 421
Amounts due to -- -
Current accounts and fixed deposits - 5,203 20,373 -
Short-term placements - 594 1,497
Subordinated notes and capital securities 327 7,141,725 -
Derivative liabilities - 119,945
Others - 76,436 - 56,505
- 1,688,239 - -
Commitments and contingencies - 698,806 - -
Derivative related contracts - 27,638 - -
- 24,430
- 2,515,549 - 176,450
100,000 635,482 -
254 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
41 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b) Related party transactions and balances (continued)
The Bank Parent Subsidiary Associated Other Key
company companies companies related management
2019 companies
Income RM’000 RM’000 RM’000 RM’000 personnel
Interest: RM’000
- loans
- interbank placements - 14,718 - 6,696 42
- current accounts - 16,684 - - -
- negotiable instruments of deposits - 511 - -
- redeemable preference shares - - - - -
- subordinated facilities - 2,798 - -
Dividend income - - 1,301 -
Commitment fee and bank charges - - 174,604 - -
Commission on Group products/ - 908 -
20,020 261,647 43
services sold - - -
Brokerage commission - - - -
Reimbursement of shared service cost 1,036 - 33,802 -
1,036 - 175,115 589 -
- 85
154,700 7,557
209,828 311,592
Annual Report 2019 255
Notes to the Financial Statements
for the financial year ended 30 June 2019
41 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b) Related party transactions and balances (continued)
The Bank Parent Subsidiary Associated Other Key
company companies companies related management
2019 companies
Expenditure* RM’000 RM’000 RM’000 RM’000 personnel
Rental and maintenance RM’000
Insurance
Interest on current accounts and - 32,267 - 14,253 -
54 - - 31,206 -
fixed deposits
Interest on short-term placements - 1,698 - 34 1,646
Interest on interbank placements 87 - - 10,667 3,535
Interest on subordinated notes and --
- 7,389 -
capital securities - 26,454
Management fees - - - 32,633 -
Other miscellaneous expenses 6,119 - 273 12,272 -
1,866 273 127,519 -
Amounts due from 130 43,220 5,181
Interbank placements 6,390 - -
Current accounts 289,883 20,414 - -
Negotiable instruments of deposits - - 300,534 -
Redeemable preference shares - - - 30,866 -
Loans - - - 125,522 -
Wholesale funds - - 7,046,520 662
Credit card balances - 352,137 - - -
Derivative assets - - - 1,621 405
Advance rental and deposit - - - 5,485 -
Others 135 - 2,010 -
- 22,263 - 7,512,558 -
459 8,414 20,414 1,067
594
13,094
685,791
Amounts due to - 134,099 - 55,369 32,322
Current accounts and fixed deposits -- - 906,044 317,839
Short-term placements
Subordinated notes and -- - 47,377 -
- 14,046 - 17,509 -
capital securities - 29 -- -
Derivative liabilities - 148,174 - 1,026,299 350,161
Others
100,000 1,661,642 - 708,803 -
Commitments and contingencies
Derivative related contracts
* Pursuant to requirements as set out in Bank Negara Malaysia’s (“BNM”) circular dated 28 March 2018 on Standards on
Intercompany Charges Paid/Payable to Foreign Shareholders/Related Entities, the intercompany payments by the Bank
are primarily transacted with related parties domiciled in Malaysia.
256 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
41 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b) Related party transactions and balances (continued)
The Bank Parent Subsidiary Associated Other Key
company companies company related management
2018 RM’000 companies
Income RM’000 RM’000 RM’000 personnel
Interest: RM’000
- loans
- interbank placements - 14,473 - 9,526 37
- current accounts -
- negotiable instruments of deposits - 11,320 - - -
- redeemable preference shares -
- subordinated facilities - - 1,277 - -
Dividend income -
Commitment fee and bank charges - 82 - - -
Commission on Group products/
- - - 1,341 51
services sold
Brokerage commission - 65 - - -
Reimbursement of shared service cost -
- 43,400 138,560 266,354 -
88
----
- - - 31,774
- - - 931
266 143,416 - 6,908
266 212,756 139,837 316,834
Annual Report 2019 257
Notes to the Financial Statements
for the financial year ended 30 June 2019
41 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b) Related party transactions and balances (continued)
The Bank Parent Subsidiary Associated Other Key
company companies company related management
2018 RM’000 companies
Expenditure* RM’000 RM’000 RM’000 personnel
Rental and maintenance RM’000
Insurance
Interest on current accounts and fixed - 29,405 - 20,225 -
57 - - 12,527 -
deposits
Interest on short-term placements - 1,095 - 114 3,659
Interest on interbank placements 584 1,616 - 17,440 1,601
Interest on subordinated notes and 2,067 --
- -
capital securities - - 32,271
Management fees - 26 - 32,786 -
Other miscellaneous expenses 7,777 1,055 350 8,503 -
35,264 350 123,866 -
274 5,260
8,692
Amounts due from - 959,027 - - -
Interbank placements -- 20,373 - -
Current accounts -- 30,866 -
Redeemable preference shares - 358,226 - 158,920 818
Loans -- - 6,945,610 -
Wholesale funds -- - - 421
Credit card balances 327 60,863 - 532 -
Derivative assets - 8,414 - 5,203 -
Advance rental and deposit - 43,563 - 594 -
Others 327 1,430,093 - 7,141,725 1,239
20,373
Amounts due to - 129,249 - 76,436 119,302
Current accounts and fixed deposits -- - 1,688,239 56,505
Short-term placements
Subordinated notes and capital -- - 678,237 -
- 1,890 - 27,638 -
securities - 131,139 - 2,470,550 175,807
Derivative liabilities
Commitments and contingencies 100,000 2,979,856 - 635,482 -
Derivative related contracts
* Pursuant to requirements as set out in Bank Negara Malaysia’s (“BNM”) circular dated 28 March 2018 on Standards on
Intercompany Charges Paid/Payable to Foreign Shareholders/Related Entities, the intercompany payments by the Bank
are primarily transacted with related parties domiciled in Malaysia.
258 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
41 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b) Related party transactions and balances (continued)
The Group
2019 2018
RM’000 RM’000
The approved limit on loans, advances and financing for key management personnel 5,316 6,160
(c) Key management personnel
Key management compensation
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Salaries and other short-term employee benefits 23,284 21,328 23,284 21,328
Director fees 1,141 1,256 973 1,088
ESS expenses 11,662 13,077 11,662 13,077
Included in the above is the Directors’ remuneration which is disclosed in Note 42 to the financial statements.
Loans made to key management personnel of the Group and the Bank will be on similar terms and conditions generally
available to other employees within the Group. No impairment allowances were required in 2019 and 2018 for loans made
to key management personnel.
(d) Credit transactions and exposures with connected parties
Credit exposures with connected parties as per BNM’s revised “Guidelines on Credit Transactions and Exposures with
Connected Parties” which became effective on 1 January 2008 are as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Outstanding credit exposures with connected parties 2,210,547 2,340,089 2,188,386 2,317,297
Percentage of outstanding credit exposures to 1.43% 1.61% 1.78% 1.96%
connected parties as a proportion of total credit
exposures 0.0002% 0.0002% 0.0003% 0.0003%
Percentage of outstanding credit exposures with
connected parties which is non-performing or in
default
Annual Report 2019 259
41 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(e) Intercompany charges
Breakdown of intercompany charges by type of services received and geographical distribution as per BNM’s Guidelines on Financial Reporting issued on
2 February 2018 are as follows:
Notes to the Financial Statements
The Bank Interest on Interest on Interest on Rental Management Insurance Others
for the financial year ended 30 June 2019deposits anddepositssubordinatedandfeesRM’000RM’000
260 HONG LEONG BANK BERHAD2019 from
Malaysia placements notes and maintenance RM’000 13,699
Singapore of banks customers capital RM’000 -
Hong Kong and other RM’000
Cambodia financial securities 501
Others RM’000 42
institutions
RM’000 299
14,541
- 9,849 26,454 37,696 38,436 31,246
- 373 - 6,118 - -
- 42 - 2,706
7,389 - - - 316 14
- - - - -
7,389 2,222 - -
12,486 26,454 46,520
38,752 31,260
2018 - 16,468 32,271 41,210 40,278 12,572 8,950
Malaysia - - - 6,126 - - -
Singapore - - 2,294
Hong Kong - 375 - - 311 12 522
Vietnam 2,067 - - - - - 6
Cambodia - - - - - -
Others 2,067 - - 276
4,006 32,271 49,630 428
20,849 40,589 12,584 10,182
42 CHIEF EXECUTIVE OFFICER (“CEO”) AND DIRECTORS’ REMUNERATION
Forms of remuneration in aggregate for CEO and all Directors and for the financial year are as follows:
Salaries, The Group Salaries, The Bank
bonuses, bonuses,
allowances Director fees Estimated Total allowances Director fees Estimated Total
and defined RM’000 money value RM’000 and defined RM’000 money value RM’000
contribution contribution 15,343
retirement for retirement for
benefits- benefits-
plan plan
RM’000 in-kind RM’000 in-kind
RM’000 RM’000
2019 8,141 - 7,202 15,343 8,141 - 7,202
CEO
Mr Domenic Fuda
Executive Director -------- Notes to the Financial Statements
Mr Tan Kong Khoon for the financial year ended 30 June 2019
Non-executive Directors - - - - - --- CORPORATE
YBhg Tan Sri Quek Leng Chan - - - - - ---
Mr Kwek Leng Hai 24 224 - 248 24 224 - 248
Ms Lim Lean See* 29 251 - 280 29 251 - 280
Ms Chok Kwee Bee 30 285 - 315 30
YBhg Dato’ Nicholas John Lough 24 328 - 352 9 285 - 315
3 53 - 56 3
@ Sharif Lough bin Abdullah 110# 1,141 - 1,251 95# 160 - 169 FINANCIALS
YBhg Datuk Dr Md Hamzah bin 3,084 633 - 3,717 - 53 - 56
11,335 1,774 7,202 20,311 8,236
Md Kassim 973 - 1,068
Ms Chong Chye Neo** ---
Directors of subsidiaries 973 7,202 16,411
Total CEO and Directors’
remuneration
The movement and details of the Directors of the Group and the Bank in office and interests in shares and share options are reported in the Directors’ report.
Annual Report 2019 * Retired on 5 May 2019
** Appointed on 21 February 2019
# Directors’ meeting allowances
Note: The Directors’ Remuneration in the current financial year represents remuneration for Directors of the Group, the Bank and its subsidiaries to comply with the requirements of ADDITIONAL INFORMATION
Companies Act 2016. The names of Directors of subsidiaries and their remuneration details are set out in the respective subsidiaries’ statutory accounts and the said information is
deemed incorporated herein by such reference and made a part hereof.
261 During the financial year, Directors and Officers of the Group and the Bank are covered under the Directors’ & Officers’ Liability Insurance in respect of liabilities arising from acts
committed in their capacity as, inter alia, Directors and Officers of the Group and the Bank subject to the terms of the policy. The total amount of Directors' and Officers' Liability
Insurance effected for the Directors and Officers of the holding company was RM10.0 million. The total amount of premium paid for the Directors’ & Officers’ Liability Insurance by
the Group and the Bank was RM58,264 and RM51,462, respectively.
42 CHIEF EXECUTIVE OFFICER (“CEO”) AND DIRECTORS’ REMUNERATION (CONTINUED)
Forms of remuneration in aggregate for CEO and all Directors and for the financial year are as follows: (continued)
Notes to the Financial Statements
Salaries, The Group Salaries, The Bank
for the financial year ended 30 June 2019bonuses,bonuses,
262 HONG LEONG BANK BERHAD allowances Director fees Estimated Total allowances Director fees Estimated Total
and defined RM’000 money value RM’000 and defined RM’000 money value RM’000
contribution contribution 12,024
retirement for retirement for
benefits- benefits-
plan plan
RM’000 in-kind RM’000 in-kind
RM’000 RM’000
2018 7,641 - 4,383 12,024 7,641 - 4,383
CEO
Mr Domenic Fuda
Executive Director --------
Mr Tan Kong Khoon
Non-executive Directors -- -- -- --
YBhg Tan Sri Quek Leng Chan -- -- -- --
Mr Kwek Leng Hai 26 265 - 291 26 265 - 291
Ms Lim Lean See 18 195 - 213 18 195 - 213
Ms Chok Kwee Bee 29 285 - 314 29 285 - 314
YBhg Dato’ Nicholas John Lough 14 183 - 197 14 183 - 197
25 328 - 353 10 160 - 170
@ Sharif Lough bin Abdullah 112# 1,256 - 1,368 97# 1,088 - 1,185
YBhg Datuk Wira Azhar bin Abdul
Hamid*
YBhg Datuk Dr Md Hamzah bin
Md Kassim
Directors of subsidiaries 2,661 580 62 3,303 - - - -
Total CEO and Directors’ 10,414 1,836 4,445 16,695 7,738 1,088 4,383 13,209
remuneration
The movement and details of the Directors of the Group and the Bank in office and interests in shares and share options are reported in the Directors’ report.
* Retired on 14 May 2018
# Directors’ meeting allowances
Note: The Directors’ Remuneration in the current financial year represents remuneration for Directors of the Group, the Bank and its subsidiaries to comply with the requirements of
Companies Act 2016. The names of Directors of subsidiaries and their remuneration details are set out in the respective subsidiaries’ statutory accounts and the said information is
deemed incorporated herein by such reference and made a part hereof.
During the financial year, Directors and Officers of the Group and the Bank are covered under the Directors’ & Officers’ Liability Insurance in respect of liabilities arising from acts
committed in their capacity as, inter alia, Directors and Officers of the Group and the Bank subject to the terms of the policy. The total amount of Directors' and Officers' Liability
Insurance effected for the Directors and Officers of the holding company was RM10.0 million. The total amount of premium paid for the Directors’ & Officers’ Liability Insurance by
the Group and the Bank was RM54,920.
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
43 TAXATION The Group The Bank
Note 2019 2018 2019 2018
Current year income tax 22 RM’000 RM’000 RM’000 RM’000
Deferred taxation
(Over)/Under accrual in prior years 610,102 655,010 518,815 594,634
Taxation (41,203) (50,649) (17,337) (52,529)
(47,386) (42,482)
521,513 3,816 458,996 3,416
608,177 545,521
The effective tax rate for the Group and Bank differed from the statutory rate of taxation due to:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Profit before taxation 3,186,020 3,246,255 2,385,907 2,517,932
Tax calculated at a rate of 24% 764,645 779,101 572,618 604,304
Tax effects of:
- Income not subject to tax (101,178) (64,045) (109,126) (80,978)
- Share of net income of foreign associated company and
(135,147) (128,798) - -
joint venture company 40,579 18,103 37,986 18,779
- Expenses not deductible for tax purposes (47,386) 3,816 (42,482)
(Over)/Under accrual in prior years 458,996 3,416
Taxation 521,513 608,177 545,521
The Group
2019 2018
RM’000 RM’000
Unused tax losses from a wholly owned subsidiary for which no deferred tax is recognised in 29,046 29,046
the financial statements*
* Under the Malaysian Finance Act 2018 which was gazetted on 27 December 2018, the Group’s unutilised tax losses with no
expiry period will be imposed with a time limited of utilisation. Any accumulated unutilised tax losses brought forward from
year of assessment 2019 can be carried forward for up to 7 consecutive years of assessment (i.e. from year of assessment
2019 to 2026).
Annual Report 2019 263
Notes to the Financial Statements
for the financial year ended 30 June 2019
44 EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share from operations is calculated by dividing the net profit attributable to ordinary equity holders of the
Bank after taxation by the weighted average number of ordinary shares in issue during the financial year, excluding the average
number of ordinary shares purchased by the Bank and held as treasury shares.
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Net profit attributable to equity holders 2,664,507 2,638,078 1,926,911 1,972,411
Weighted average number of ordinary shares in issue (‘000) 2,045,995 2,045,677 2,045,995 2,045,677
Basic earnings per share (sen)
130.2 129.0 94.2 96.4
Diluted earnings per share
The Bank has two categories of dilutive potential ordinary shares, which are the share options and ordinary shares granted under
the ESS. For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value
(determined as the average annual market share price of the Bank’s shares) based on the monetary value of the subscription
rights attached to outstanding share options. The number of shares calculated as below is compared with the number of shares
that would have been issued assuming the exercise of the share options.
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Net profit attributable to equity holders 2,664,507 2,638,078 1,926,911 1,972,411
Weighted average number of ordinary shares in issue (‘000) 2,045,995 2,045,677 2,045,995 2,045,677
- adjustment for ESS
4,310 3,423 4,310 3,423
Diluted earnings per share (sen) 2,050,305 2,049,100 2,050,305 2,049,100
130.0 128.7 94.0 96.3
264 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
45 INCOME TAX RELATING TO COMPONENTS OF OTHER COMPREHENSIVE INCOME/(LOSS)
The Group Before 2019 Net of Before 2018 Net of
tax tax tax Tax tax
Debt instruments at fair Tax
value through other RM’000 benefits amount RM’000 benefits amount
comprehensive income/ RM’000 RM’000 RM’000 RM’000
(348,012)
Financial investments 321,330 (71,602) 249,728 2,398 170,532 (177,480)
available-for-sale (3,558) (498) 1,900
- net fair value changes (4,531) 973
and changes in 167,008 (166,384)
expected credit losses (498) 1,900
Cash flow hedge
- net fair value (loss)/gain
The Bank 274,961 (59,981) 214,980 (333,392)
Debt instruments at fair (4,531)
973 (3,558) 2,398
value through other
comprehensive income/
Financial investments
available-for-sale
- net fair value changes
and changes in
expected credit losses
Cash flow hedge
- net fair value (loss)/gain
Annual Report 2019 265
Notes to the Financial Statements
for the financial year ended 30 June 2019
46 DIVIDENDS
The Group and The Bank
2019 2018
Gross Amount Gross Amount
dividends of dividends dividends of dividends
per share per share
net of tax net of tax
sen RM’000 sen RM’000
Final dividend paid 32.0 654,666 --
- for financial year ended 30 June 2018 - - 30.0 613,680
- for financial year ended 30 June 2017
Interim dividend paid 16.0 327,390 --
- for financial year ended 30 June 2019 - - 16.0 327,333
- for financial year ended 30 June 2018 46.0 941,013
48.0 982,056
A final single tier dividend in respect of the financial year ended 30 June 2019 of 34.0 sen per share (2018: 32.0 sen single tier
per share) will be proposed for shareholders’ approval at the forthcoming Annual General Meeting. Based on the Bank’s adjusted
total number of issued shares (excluding 81,101,700 treasury shares held pursuant to Section 127 of the Companies Act 2016 and
ESOS scheme of 40,182,412 shares) of 2,046,434,172 shares as at 30 June 2019, the dividend amount would approximately be
RM695,787,618. The proposed dividend will be reflected in the financial statements for the financial year ending 30 June 2020
when approved by shareholders.
266 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
47 COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Group and the Bank make various commitments and incur certain contingent liabilities
with legal recourse to its customers. No material losses are anticipated as a result of these transactions. These commitments and
contingencies are also not secured over the assets of the Group.
The notional amounts of the commitments and contingencies constitute the followings:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Direct credit substitutes* 117,740 108,341 64,395 50,361
Certain transaction related contingent items 1,446,851 1,286,782 1,261,524 1,165,364
Short-term self liquidating trade related contingencies
Irrevocable commitments to extend credit: 674,511 831,871 638,625 800,721
- maturity more than one year
- maturity less than one year 17,720,606 14,301,856 12,749,585 10,410,497
Foreign exchange related contracts:^ 19,020,280 16,074,688 15,541,640 14,108,380
- less than one year
- one year to less than five years 34,829,534 42,895,473 33,337,605 41,893,038
- five years and above 3,995,994 2,640,932 3,995,994 2,640,932
Interest rate related contracts:^ 301,327 517,408 301,327 517,408
- less than one year
- one year to less than five years 38,511,811 28,281,796 38,511,811 28,281,796
- five years and above 34,300,635 46,342,804 35,195,635 48,687,804
Equity related contracts:^
- less than one year 3,170,389 6,839,805 3,320,389 6,389,805
- one year to less than five years
Credit related contracts:^ 591,385 306,258 591,386 306,258
- five years and above 127,853 503,502 127,852 503,502
Unutilised credit card lines
82,753 - 82,753 -
7,276,500 6,908,565 7,276,500 6,908,565
162,168,169 167,840,081 152,997,021 162,664,431
^ These derivatives are revalued at gross position basis and the fair value have been reflected in Note 13 to the financial
statements as derivatives assets or derivatives liabilities.
* Included in direct credit substitutes above are the financial guarantee contracts of RM103,153,716 and RM53,153,716 at
Group and Bank, respectively (2018: RM96,689,047 and RM46,689,047 at Group and Bank, respectively), of which fair value
at the time of issuance is nil.
Annual Report 2019 267
Notes to the Financial Statements
for the financial year ended 30 June 2019
48 CAPITAL COMMITMENTS
The capital commitments are in respect of:
- property and equipment
- intangible assets
Capital expenditure approved by the Directors but not provided for in the financial statements are as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Authorised and contracted for 155,521 143,576 131,104 137,080
Authorised but not contracted for 51,570 26,212 51,438 23,812
207,091 169,788 182,542 160,892
49 LEASE COMMITMENTS
The Group and the Bank have lease commitments in respect of rented premise, photocopier machine and scanner, all of which
are classified as operating leases. A summary of the future minimum lease payments, under non-cancellable operating lease
commitment are as follows:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Not later than one year 13,827 16,982 29,413 30,908
Later than one year and not later than five years 1,075 3,390 1,075 1,094
Later than five years 1,298 1,562 1,298 1,562
16,200 21,934 31,786 33,564
50 HOLDING AND ULTIMATE HOLDING COMPANIES
The holding and ultimate holding companies are Hong Leong Financial Group Berhad and Hong Leong Company (Malaysia)
Berhad, respectively. Both companies are incorporated in Malaysia.
268 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS
(a) Financial risk management objectives and policies
Overview and organisation
Group Risk Management (“GRM”)
The Group has implemented a risk management framework with the objective to ensure the overall financial soundness
and stability of the Group’s business operations. The Group's risk management framework outlines the overall governance
structure, aspiration, values and risk management strategies that balances between risk profiles and returns objectives.
Appropriate methodologies and measurements have been developed to manage uncertainties such that deviations from
intended strategic objectives are closely monitored and kept within tolerable levels.
From a governance perspective, the Board has the overall responsibility to define the Group's risk appetite and ensure
that a robust risk management and compliance culture prevails. The Board is supported by the Board Risk Management
Committee (“BRMC”) in approving the Group's risk management framework as well as the attendant capital management
and planning policy, risk appetite statements, risk management strategies and risk policies.
Dedicated management level committees are established to oversee the development and the effectiveness of risk
management policies, to review risk exposures and portfolio composition as well as to ensure appropriate infrastructures,
resources and systems are put in place for effective risk management activities.
From the financial risk perspective, the BRMC is supported by the Group Risk Management (“GRM”) functions. The GRM
function has been established to provide independent oversight on the adequacy, effectiveness and integrity of risk
management practices at all levels within the Group. The core functions of the GRM are to identify key and emerging risks
for the Group, to measure these risks, to manage the risk positions and to determine the optimum capital allocations. The
Group regularly reviews its risk management framework to reflect changes in markets, products, regulatory and emerging
best market practice.
Credit Risk Management
Credit risk arises as a result of customers or counterparties not being able to or willing to fulfil their financial and contractual
obligations as and when they fall due. These obligations arise from lending, trade finance and other activities undertaken
by the Group.
The Group has established a credit risk management framework to ensure that exposure to credit risk is kept within the
Bank’s financial capacity to withstand potential future losses. Lending activities are guided by the internal credit policies
and guidelines that are reviewed and concurred by the Management Credit Committee (“MCC”), endorsed by the Credit
Supervisory Committee (“CSC”) and the BRMC, and approved by the Board. These policies are subject to review and
enhancements, at least on an annual basis.
Credit portfolio strategies and significant exposures are reviewed by both the BRMC and the Board. These portfolio strategies
are designed to achieve a desired portfolio risk tolerance level and sector distribution.
The Group’s credit approving process encompasses pre-approval evaluation, approval and post-approval evaluation. While
the business units are responsible for credit origination, the credit approving function rests mainly with the Credit Evaluation
Departments, the MCC and the CSC. The Board delegates the approving and discretionary authority to the MCC, CSC and the
various personnel of the Bank based on job function and designation.
Annual Report 2019 269
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(a) Financial risk management objectives and policies (continued)
Credit Risk Management (continued)
For any new products, credit risk assessment also forms part of the new product sign-off process to ensure that the new
product complies with the appropriate policies and guidelines, prior to the introduction of the product.
The Groupʼs exposure to credit risk is mainly from its retail, small and medium enterprise (“SME”), commercial and corporate
customers. The credit assessment for retail customers is managed on a portfolio basis and the risk scoring models and
lending templates are designed to assess the credit worthiness and the likelihood of the obligors to repay their debts.
The SME, commercial and corporate customers are individually assessed and assigned with a credit rating, which is based
on the assessment of relevant factors such as the customer’s financial position, industry outlook, types of facilities and
collaterals offered.
In addition, the Group also conducts periodic stress testing of its credit portfolios to ascertain the credit risk impact to
capital under the relevant stress scenarios.
Independent Credit Review Team conducts independent post approval reviews on sampling basis to ensure that the quality
of credit appraisals and approval standards are in accordance with the credit standards, lending policies and the directives
established and approved by the Group’s management.
Market Risk Management
Market risk is the risk of financial loss arising from exposure to adverse changes in values of financial instruments caused
by changes in market prices or rates, which include changes to interest rates.
The Group adopts a systematic approach in managing such risks by types of instruments and nature of exposure. Market
risk is primarily controlled via a series of cut-loss limits and potential loss limits, i.e. Value at Risk (“VaR”), set in accordance
with the size of positions and risk tolerance appetites.
Portfolios held under the Group’s trading books are tracked using daily mark-to-market positions, which are compared
against preset limits. The daily tracking of positions is supplemented by sensitivity analysis and stress tests, using VaR and
other measurements.
Foreign exchange risks arising from adverse exchange rate movements, is managed by the setting of preset limits, matching
of open positions against these preset limits and imposition of cut-loss mechanisms.
Interest rate risk is identified, measured and controlled through various types of limits. In addition, the Group regularly
review the interest rate outlook and develop strategies to protect the total net interest income from adverse changes
in market interest rates. This applies to both interest rate risk exposures in the trading book and the banking book. In
managing interest rate risk in the banking book, the Group measures earnings at risk and economic value or capital at risk.
The Group also conducts periodic stress testing of the respective portfolios and on an overall basis to ascertain market risk
under abnormal market conditions.
270 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(a) Financial risk management objectives and policies (continued)
Liquidity Risk Management
Liquidity risk is the risk of financial loss arising from the inability to fund increases in assets and/or meet obligations as
they fall due. Financial obligations arise from the withdrawal of deposits, funding of loans committed and repayment of
borrowed funds. It is the Group’s policy to ensure there is adequate liquidity across all business units to sustain ongoing
operations, as well as sufficient liquidity to fund asset growth and strategic opportunities.
Besides adhering to the Regulatory Liquidity Requirement, the Group has put in place a robust and comprehensive liquidity
risk management framework consisting of risk appetite, policies, triggers and controls which are reviewed and concurred
by the Group Asset-Liability Committee, endorsed by the BRMC and approved by the Board. The key elements of the
framework cover proactive monitoring and management of cashflow, maintenance of high quality long-term and short-
term marketable debt securities, diversification of funding base as well as maintenance of a liquidity compliance buffer to
meet any unexpected cash outflows.
The Group has in place liquidity contingency funding plan and stress test programs to minimise the liquidity risk that
may arise due to unforeseen adverse changes in the marketplace. Contingency funding plan sets out the crisis escalation
process and the various strategies to be employed to preserve liquidity including an orderly communication channel during
liquidity crisis scenarios. Liquidity stress tests are conducted regularly to ensure there is adequate liquidity contingency fund
to meet the shortfalls during liquidity crisis scenarios.
(b) Market risk
Market risk sensitivity assessment is based on the changes in key variables, such as interest rates and foreign currency
rates, while all other variables remain unchanged. The sensitivity factors used are assumptions based on parallel shifts in
the key variables to project the impact on the assets and liabilities position of the Group and the Bank.
The scenarios used are simplified whereby it is assumed that all key variables for all maturities move at the same time
and by the same magnitude and do not incorporate actions that would be otherwise taken by the business units and risk
management to mitigate the effect of this movement in key variables. In reality, the Group and the Bank proactively seek
to ensure that the interest rate risk profile is managed to minimise losses and optimise net revenues.
(i) Interest/Profit rate risk sensitivity analysis
The interest/profit rate sensitivity results below shows the impact on profit after tax and equity of financial assets
and financial liabilities bearing floating interest/profit rates and fixed rate financial assets and financial liabilities
carried at fair value.
Annual Report 2019 271
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
(i) Interest/Profit rate risk sensitivity analysis (continued)
The Group The Bank
Impact Impact Impact Impact
on profit on equity on profit on equity
after tax after tax
RM’000 RM’000
RM’000 RM’000
2019 50,274 (300,025) 49,884 (230,924)
Increase/(Decrease)
+100 basis points (‘bps’)
-100 bps (50,274) 300,025 (49,884) 230,924
2018 95,130 (375,925) 86,289 (293,449)
Increase/(Decrease)
+100 basis points (‘bps’)
-100 bps (95,130) 375,925 (86,289) 293,449
(ii) Foreign currency risk sensitivity analysis
The Group and the Bank take on exposure to the effects of fluctuations in the prevailing foreign currency exchange
rates on their financial position and cash flows.
The table below sets out the principal structure of foreign exchange exposures of the Group and the Bank:
The Group 2019 2018
RM’000 RM’000
Asset/(Liability)
United States Dollar (“USD”) 86,757 126,020
Euro (“EUR”) 5,932 (88,263)
Great Britain Pound (“GBP”)
Singapore Dollar (“SGD”) 13,718 (2,296)
Australian Dollar (“AUD”) (113,025) (68,339)
Chinese Yuan Renminbi (“CNY”) (14,383)
Hong Kong Dollar (“HKD”) (20,861)
Others 5,207 1,717
(112,732)
(104,623) 101,063
84,982
(41,913) (57,213)
272 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
(ii) Foreign currency risk sensitivity analysis (continued)
The Bank 2019 2018
RM’000 RM’000
Asset/(Liability) 112,895 143,504
United States Dollar (“USD”) 969 (91,955)
Euro (“EUR”)
Great Britain Pound (“GBP”) 8,323 (7,415)
Singapore Dollar (“SGD”) (111,637) (69,373)
Australian Dollar (“AUD”) (16,223)
Chinese Yuan Renminbi (“CNY”) (23,091)
Hong Kong Dollar (“HKD”) 1,659 943
Others (113,665)
(105,594) 100,186
37,931
(78,545) (53,998)
An analysis of the exposures to assess the impact of a one per cent change in the foreign currency exchange rates to
the profit after tax are as follows:
The Group 2019 2018
RM’000 RM’000
Increase/(Decrease)
-1% (659) (958)
United States Dollar (“USD”) (45) 671
Euro (“EUR”)
Great Britain Pound (“GBP”) (104) 17
Singapore Dollar (“SGD”) 859 519
Australian Dollar (“AUD”) 159 109
Chinese Yuan Renminbi (“CNY”) (40) (13)
Hong Kong Dollar (“HKD”) 795 857
Others (646) (768)
319 434
+1%
United States Dollar (“USD”) 659 958
Euro (“EUR”) 45 (671)
Great Britain Pound (“GBP”)
Singapore Dollar (“SGD”) 104 (17)
Australian Dollar (“AUD”) (859) (519)
Chinese Yuan Renminbi (“CNY”) (159) (109)
Hong Kong Dollar (“HKD”)
Others 40 13
(795) (857)
646 768
(319) (434)
Annual Report 2019 273
Notes to the Financial Statements 2019 2018
RM’000 RM’000
for the financial year ended 30 June 2019
(858) (1,091)
51 FINANCIAL INSTRUMENTS (CONTINUED) (7) 699
56
(b) Market risk (continued) (63) 527
848 123
(ii) Foreign currency risk sensitivity analysis (continued) 175 (7)
(13) 864
The Bank 803 (761)
(288) 410
Increase/(Decrease) 597
-1%
United States Dollar (“USD”) 858 1,091
Euro (“EUR”) 7 (699)
Great Britain Pound (“GBP”)
Singapore Dollar (“SGD”) 63 (56)
Australian Dollar (“AUD”) (848) (527)
Chinese Yuan Renminbi (“CNY”) (175) (123)
Hong Kong Dollar (“HKD”)
Others 13 7
(803) (864)
+1% 288 761
United States Dollar (“USD”) (597) (410)
Euro (“EUR”)
Great Britain Pound (“GBP”)
Singapore Dollar (“SGD”)
Australian Dollar (“AUD”)
Chinese Yuan Renminbi (“CNY”)
Hong Kong Dollar (“HKD”)
Others
274 HONG LEONG BANK BERHAD
51 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk
The tables below summarise the Group’s and the Bank’s exposure to interest/profit rate risks. Included in the tables are the Group’s and the Bank’s financial assets and financial
liabilities at their carrying amounts, categorised by the earlier of contractual repricing or maturity dates. The net interest sensitivity gap for items not recognised in the statements
of financial position represents the net notional amounts of all interest/profit rate sensitive derivative financial instruments. As interest rates and yield curves change over time,
the Group and the Bank may be exposed to loss in earnings due to the effects of interest rates on the structure of the statement of financial position. Sensitivity to interest/profit
rates arises from mismatches in the repricing dates, cash flows and other characteristics of the financial assets and their corresponding financial liabilities funding.
The Group Notes to the Financial Statements
2019 for the financial year ended 30 June 2019
Non-trading book
Up to 1 to 3 3 to 12 1 to 5 Over 5 Non-interest/ Trading Total
1 month months months years years profit rate book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 sensitive
RM’000 RM’000
Financial assets
Cash and short-term funds 3,043,906 - - - - 1,811,550 - 4,855,456 CORPORATE
Deposits and placements with banks and - 867,749 417,180 - - 6,487 - 1,291,416
other financial institutions
Financial assets at fair value through - - - - - 7,402,652 4,728,381 12,131,033
profit or loss
Financial investments at fair value through 635,857 1,301,245 1,761,639 15,990,018 3,848,771 316,980 - 23,854,510
other comprehensive income
Financial investments at amortised cost - - 53,820 13,010,653 1,884,567 204,159 - 15,153,199 FINANCIALS
Loans, advances and financing
- performing 114,796,095 1,217,840 639,349 9,223,211 9,754,210 - - 135,630,705
- impaired^ 110,775 6,761 11,435 79,807 468,734 - - 677,512
Annual Report 2019 Other assets 14,532 - - - - 1,116,804 - 1,131,336
Derivative financial instruments
- trading derivatives - - - - - - 528,256 528,256 ADDITIONAL INFORMATION
Statutory deposits with Central Banks - - - - 209,674 4,379,159 - 4,588,833
Total financial assets 118,601,165 3,393,595 2,883,423 38,303,689 16,165,956 15,237,791 5,256,637 199,842,256
275 ^ This represents outstanding impaired loans after deducting expected credit losses.
51 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)
Notes to the Financial Statements
The Group
for the financial year ended 30 June 20192019
276 HONG LEONG BANK BERHAD
Non-trading book
Up to 1 to 3 3 to 12 1 to 5 Over 5 Non-interest/ Trading Total
1 month months months years years profit rate book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 sensitive
RM’000 RM’000
Financial liabilities 62,890,768 31,251,833 41,379,505 2,701,208 1,291,598 23,555,382 - 163,070,294
Deposits from customers 198 2,030 1 - - 6 - 2,235
Investment accounts of customers
Deposits and placements of banks and 3,458,394 3,565,524 314,315 - - 20,191 - 7,358,424
other financial institutions 178,431 2,150,720 - - - 4,765 - 2,333,916
Obligations on securities sold under 46,703 128,278 35,094 - - 182,948 - 393,023
5,335 499 - - 4,621,297 - 4,629,225
repurchase agreements 2,094
Bills and acceptances payable -
Other liabilities - - - 4,307 - - 670,548 670,548
Derivative financial instruments - - 388 3,394 - - 8,089
- trading derivatives 50,000
- hedging derivatives - 200,059 - 1,499,970 - 3,532 - 253,591
Recourse obligation on loans sold to - - - - 2,370 - 1,502,340
799,523
Cagamas - - - - - 6,662 - 806,185
Tier 2 subordinated bonds - 499,611 - - 12,657 - 512,268
Multi-currency Additional Tier 1 Capital 66,579,829 37,798,554 41,731,397 5,055,008 1,294,992 28,409,810 670,548 181,540,138
Securities
Innovative Tier 1 Capital Securities
Total financial liabilities
Net interest sensitivity gap 52,021,336 (34,404,959) (38,847,974) 33,248,681 14,870,964
Financial guarantees - - - - - 492,044
Credit related commitments and
- - - - - 44,017,386
contingencies
Treasury related commitments and - - 200,000 453,571 332,738 -
- - 200,000 453,571 332,738 44,509,430
contingencies (hedging)
Net interest sensitivity gap
51 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)
The Group
2018
Non-trading book
Up to 1 to 3 3 to 12 1 to 5 Over 5 Non-interest/ Trading Total
1 month months months years years profit rate book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 sensitive
RM’000 RM’000
Financial assets
Cash and short-term funds 4,193,725 - - - - 2,278,680 - 6,472,405 Notes to the Financial Statements
for the financial year ended 30 June 2019
Deposits and placements with banks and
other financial institutions - 2,078,011 701,736 - - 16,733 - 2,796,480
Financial assets held-for-trading - - - - - - 5,969,872 5,969,872
Financial investments available-for-sale 172,000 1,627,844 1,392,227 17,019,379 3,821,978 7,829,508 - 31,862,936
Financial investments held-to-maturity - 201,862 1,724,068 11,692,057 610,091 208,867 - 14,436,945
Loans, advances and financing
- performing 106,638,879 1,040,811 631,803 9,017,525 9,978,099 - - 127,307,117 CORPORATE
- impaired^ 153,564 6,844 12,206 96,640 482,734 - - 751,988
Other assets 34,540 - - - - 666,905 - 701,445
Derivative financial instruments
- trading derivatives - - - - - - 916,098 916,098
- hedging derivatives - - - 1,286 683 - - 1,969
Statutory deposits with Central Banks - - - - 171,369 4,141,113 - 4,312,482
Total financial assets 111,192,708 4,955,372 4,462,040 37,826,887 15,064,954 15,141,806 6,885,970 195,529,737 FINANCIALS
^ This represents outstanding impaired loans after deducting individual assessment impairment allowance and collective assessment impairment allowance.
Annual Report 2019 ADDITIONAL INFORMATION
277
51 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)
Notes to the Financial Statements
The Group
for the financial year ended 30 June 20192018
278 HONG LEONG BANK BERHAD
Non-trading book
Up to 1 to 3 3 to 12 1 to 5 Over 5 Non-interest/ Trading Total
1 month months months years years profit rate book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 sensitive
RM’000 RM’000
Financial liabilities 60,227,115 25,867,804 42,790,885 4,048,868 1,409,132 23,070,291 - 157,414,095
Deposits from customers
Deposits and placements of banks and 4,070,353 2,862,530 280,259 - - 24,292 - 7,237,434
other financial institutions 752,569 3,068,376 - - - 10,924 - 3,831,869
Obligations on securities sold under 266,278 28,108 26,182 - - 223,883 - 544,451
- - - 4,440,166 - 4,440,166
repurchase agreements - -
Bills and acceptances payable - - - - 1,019,773 1,019,773
Other liabilities - - - 423 - - - 423
Derivative financial instruments - -
- trading derivatives - 200,057 - 2,895 - 202,952
- hedging derivatives - - - 500,000 - 3,142 - 2,902,908
Recourse obligation on loans sold to - 2,399,766
- 399,393 - 1,799 - 401,192
Cagamas - - - 499,808 - 12,544 - 512,352
Tier 2 subordinated bonds - 31,826,818 - 5,648,549 1,409,132 27,789,936 1,019,773 178,507,615
Multi-currency Additional Tier 1 Capital 65,316,315 45,497,092
Securities
Innovative Tier 1 Capital Securities
Total financial liabilities
Net interest sensitivity gap 45,876,393 (26,871,446) (41,035,052) 32,178,338 13,655,822
Financial guarantees - - - - - 616,389
Credit related commitments and
- - - - - 37,285,109
contingencies
Treasury related commitments and - - - 500,000 351,786 -
- - - 500,000 351,786 37,901,498
contingencies (hedging)
Net interest sensitivity gap
51 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)
The Bank
2019
Non-trading book
Up to 1 to 3 3 to 12 1 to 5 Over 5 Non-interest/ Trading Total
1 month months months years years profit rate book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 sensitive
RM’000 RM’000
Financial assets
Cash and short-term funds 2,626,955 - - - - 1,756,119 - 4,383,074 Notes to the Financial Statements
for the financial year ended 30 June 2019
Deposits and placements with banks and - 1,042,272 417,180 - - 6,488 - 1,465,940
other financial institutions
Financial assets at fair value through profit - - - - - 7,402,652 4,213,086 11,615,738
or loss
Financial investments at fair value through 526,067 1,102,265 1,512,743 14,387,485 2,931,424 286,014 - 20,745,998
other comprehensive income
Financial investments at amortised cost - - 53,820 9,713,703 976,211 150,771 - 10,894,505 CORPORATE
Loans, advances and financing
- performing 93,123,924 1,064,611 465,650 6,868,124 6,838,280 - - 108,360,589
- impaired^ 109,291 6,457 9,957 68,404 380,272 - - 574,381
Other assets 14,532 - - - - 1,071,264 - 1,085,796
Derivative financial instruments
- trading derivatives - - - - - - 522,995 522,995
Amount due from subsidiaries - - - - - 13,095 - 13,095 FINANCIALS
Statutory deposits with Central Banks - - - - - 3,564,423 - 3,564,423
Total financial assets 96,400,769 3,215,605 2,459,350 31,037,716 11,126,187 14,250,826 4,736,081 163,226,534
^ This represents outstanding impaired loans after deducting expected credit losses.
Annual Report 2019 ADDITIONAL INFORMATION
279
51 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)
Notes to the Financial Statements
The Bank
for the financial year ended 30 June 20192019
280 HONG LEONG BANK BERHAD
Non-trading book
Up to 1 to 3 3 to 12 1 to 5 Over 5 Non-interest/ Trading Total
1 month months months years years profit rate book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 sensitive
RM’000 RM’000
Financial liabilities 50,276,597 23,418,570 33,606,335 2,296,418 1,140,467 20,658,138 - 131,396,525
Deposits from customers
Deposits and placements of banks and 3,823,581 3,252,567 108,594 - - 20,192 - 7,204,934
other financial institutions 178,431 2,150,720 - - - 4,765 - 2,333,916
Obligations on securities sold under 45,155 121,287 27,768 - - 168,368 - 362,578
5,310 462 - - 4,085,585 - 4,092,702
repurchase agreements 1,345
Bills and acceptances payable -
Other liabilities - - - 4,307 - - 666,953 666,953
Derivative financial instruments - - 388 3,394 - - 8,089
- trading derivatives -
- hedging derivatives - 200,059 - 1,499,970 - 2,895 - 202,954
Recourse obligation on loans sold to - - - - 2,370 - 1,502,340
799,523
Cagamas - - - - - 6,662 - 806,185
Tier 2 subordinated bonds - 499,611 - - 12,657 - 512,268
Multi-currency Additional Tier 1 Capital 54,329,074 29,643,276 33,744,430 4,600,218 1,143,861 24,961,632 666,953 149,089,444
Securities
Innovative Tier 1 Capital Securities
Total financial liabilities
Net interest sensitivity gap 42,071,695 (26,427,671) (31,285,080) 26,437,498 9,982,326
Financial guarantees - - - - - 404,022
Credit related commitments and
- - - - - 35,567,725
contingencies
Treasury related commitments and - - 200,000 453,571 332,738 -
- - 200,000 453,571 332,738 35,971,747
contingencies (hedging)
Net interest sensitivity gap
51 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)
The Bank
2018
Non-trading book
Up to 1 to 3 3 to 12 1 to 5 Over 5 Non-interest/ Trading Total
1 month months months years years profit rate book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 sensitive
RM’000 RM’000
Financial assets
Cash and short-term funds 3,599,583 - - - - 1,950,805 - 5,550,388 Notes to the Financial Statements
for the financial year ended 30 June 2019
Deposits and placements with banks and
other financial institutions - 2,087,905 601,736 - - 15,881 - 2,705,522
Financial assets held-for-trading - - - - - - 5,619,035 5,619,035
Financial investments available-for-sale 161,995 1,622,843 1,352,195 15,480,773 2,607,246 7,793,528 - 29,018,580
Financial investments held-to-maturity - 201,862 1,182,783 8,836,602 518,386 166,932 - 10,906,565
Loans, advances and financing
- performing 88,212,412 900,505 387,298 7,108,305 7,068,241 - - 103,676,761 CORPORATE
- impaired^ 113,412 6,634 9,323 73,147 395,626 - - 598,142
Other assets 34,540 - - - - 591,301 - 625,841
Derivative financial instruments
- trading derivatives - - - - - - 930,957 930,957
- hedging derivatives - - - 1,286 683 - - 1,969
Amount due from subsidiaries - - - - - 43,563 - 43,563
Statutory deposits with Central Banks - - - - - 3,453,017 - 3,453,017 FINANCIALS
Total financial assets 92,121,942 4,819,749 3,533,335 31,500,113 10,590,182 14,015,027 6,549,992 163,130,340
^ This represents outstanding impaired loans after deducting individual assessment impairment allowance and collective assessment impairment allowance.
Annual Report 2019 ADDITIONAL INFORMATION
281
51 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)
Notes to the Financial Statements
The Bank
for the financial year ended 30 June 20192018
282 HONG LEONG BANK BERHAD
Non-trading book
Up to 1 to 3 3 to 12 1 to 5 Over 5 Non-interest/ Trading Total
1 month months months years years profit rate book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 sensitive
RM’000 RM’000
Financial liabilities 49,382,454 20,592,117 35,597,409 3,516,211 593,082 19,902,152 - 129,583,425
Deposits from customers
Deposits and placements of banks and 4,347,853 2,696,513 176,812 - - 24,676 - 7,245,854
other financial institutions 743,922 3,050,273 - - - 10,924 - 3,805,119
Obligations on securities sold under 265,634 26,294 24,460 - - 190,583 - 506,971
- - - 3,724,286 - 3,724,286
repurchase agreements - -
Bills and acceptances payable - - - - 983,257 983,257
Other liabilities - - - 423 - - - 423
Derivative financial instruments - -
- trading derivatives - 200,057 - 2,895 - 202,952
- hedging derivatives - - - 500,000 - 2,458 - 2,502,278
Recourse obligation on loans sold to - 1,999,820
- 399,393 - 1,799 - 401,192
Cagamas - - - 499,807 - 12,545 - 512,352
Tier 2 subordinated bonds - 26,365,197 - 5,115,891 593,082 23,872,318 983,257 149,468,109
Multi-currency Additional Tier 1 Capital 54,739,863 37,798,501
9,997,100 528,028
Securities
Innovative Tier 1 Capital Securities - 31,427,442
Total financial liabilities
- -
Net interest sensitivity gap 37,382,079 (21,545,448) (34,265,166) 26,384,222 31,955,470
351,786
Financial guarantees ---- 351,786
Credit related commitments and
----
contingencies
Treasury related commitments and - - - 500,000
- - - 500,000
contingencies (hedging)
Net interest sensitivity gap
51 FINANCIAL INSTRUMENTS (CONTINUED)
(c) Liquidity risk
Liquidity risk is defined as the current and prospective risk arising from the inability of the Group and the Bank to meet its contractual or regulatory obligations when they become
due without incurring substantial losses. The liquidity risk is identified based on concentration, volatility of source of fund and funding maturity structure and it is measured primarily
using BNM’s New Liquidity Framework and depositor’s concentration ratios. The Group and the Bank seek to project, monitor and manage its liquidity needs under normal as well
as adverse circumstances.
The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2019 based on the remaining contractual maturity:
The Group
2019
Up to 1 week to 1 1 to 3 3 to 6 6 to 12 Over 1 No specific Total Notes to the Financial Statements
1 week month months months months year maturity RM’000 for the financial year ended 30 June 2019
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
RM’000
Assets
Cash and short-term funds 4,309,642 545,814 - - - - - 4,855,456
Deposits and placements with banks and - - 872,409 272,868 146,139 - - 1,291,416
other financial institutions
Financial assets at fair value through 12,836 333 138,749 27,198 163,866 11,482,479 305,572 12,131,033 CORPORATE
profit or loss
Financial investments at fair value through 169,192 471,922 1,307,777 572,769 1,243,510 20,045,009 44,331 23,854,510
other comprehensive income
Financial investments at amortised cost 883 512 957 914 75,253 15,074,680 - 15,153,199
Loans, advances and financing 12,298,130 5,596,972 5,344,123 1,859,481 659,641 110,549,870 - 136,308,217
Other assets 788,102 9,560 6,219 7,499 1,298 28,957 355,346 1,196,981 FINANCIALS
Derivative financial instruments 42,006 32,344 41,184 51,789 46,785 314,148 - 528,256
Statutory deposits with Central Banks - - - - - - 4,588,833 4,588,833
Investment in associated companies - - - - - - 4,106,375 4,106,375
Annual Report 2019 Property and equipment - - - - - - 1,382,572 1,382,572
Intangible assets - - - - - - 125,225 125,225
Goodwill - - - - - - 1,831,312 1,831,312 ADDITIONAL INFORMATION
Deferred tax assets - - - - - - 16,030 16,030
Total assets 17,620,791 6,657,457 7,711,418 2,792,518 2,336,492 157,495,143 12,755,596 207,369,415
283
51 FINANCIAL INSTRUMENTS (CONTINUED)
Notes to the Financial Statements
(c) Liquidity risk (continued)
for the financial year ended 30 June 2019
284 HONG LEONG BANK BERHAD
The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2019 based on the remaining contractual maturity:
(continued)
The Group
2019
Up to 1 week to 1 1 to 3 3 to 6 6 to 12 Over 1 No specific Total
1 week month months months months year maturity RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
RM’000
Liabilities 59,062,352 27,177,389 31,419,431 19,699,578 21,909,182 3,802,362 - 163,070,294
Deposits from customers 13 187 2,034 1 - - - 2,235
Investment accounts of customers
Deposits and placements of banks and 2,288,410 1,269,354 3,631,083 127,940 41,637 - - 7,358,424
other financial institutions 288,221 179,272 1,866,423 - - - - 2,333,916
Obligations on securities sold under 244 46,459 128,278 35,082 11 - 182,949 393,023
777 499 194,073 -
repurchase agreements 4,594,642 26,395 47,253 405 56,802 488,225 91,349 4,881,745
Bills and acceptances payable 26,398 33,564 - 678,637
Other liabilities - 203,591 - 50,000
Derivative financial instruments - - - - - 1,499,970 - 253,591
Recourse obligation on loans sold to - 2,370 - 1,502,340
- 4,863 - 799,523
Cagamas - - 512,268 1,799 - - - 806,185
Tier 2 subordinated bonds - - - - - - 512,268
Multi-currency Additional Tier 1 Capital - - - - - - 95,864
- 28,699,833 - - 22,201,705 6,506 95,864
Securities 66,260,280 37,815,723 6,640,080 376,668 6,506
Innovative Tier 1 Capital Securities 19,900,739
Taxation 181,895,028
Deferred tax liabilities
Total liabilities
Total equity - - - - - - 25,474,387 25,474,387
Total liabilities and equity 66,260,280 28,699,833 37,815,723 19,900,739 22,201,705 6,640,080 25,851,055 207,369,415
Net liquidity gap (48,639,489) (22,042,376) (30,104,305) (17,108,221) (19,865,213) 150,855,063 12,378,928 25,474,387
51 FINANCIAL INSTRUMENTS (CONTINUED)
(c) Liquidity risk (continued)
The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2018 based on the remaining contractual maturity:
The Group
2018
Up to 1 week to 1 1 to 3 3 to 6 6 to 12 Over 1 No specific Total
1 week month months months months year maturity RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
RM’000
Assets
Cash and short-term funds 5,010,896 1,461,509 - - - - - 6,472,405
Deposits and placements with banks and
other financial institutions - - 2,091,492 664,596 40,392 - - 2,796,480
Notes to the Financial Statements
Financial assets held-for-trading 400,168 601,228 1,424,652 150,111 10,065 3,383,648 - 5,969,872 for the financial year ended 30 June 2019
Financial investments available-for-sale 4,603,924 1,119,715 2,845,539 235,461 1,109,591 21,481,194 467,512 31,862,936
Financial investments held-to-maturity - - 204,482 141,135 1,671,354 12,419,974 - 14,436,945
Loans, advances and financing 12,484,785 6,087,736 5,250,306 1,788,511 595,167 101,852,600 - 128,059,105
Other assets 545,398 7,450 9,384 11,525 4,647 16,427 185,238 780,069
Derivative financial instruments 32,753 67,845 229,657 168,826 76,187 342,799 - 918,067 CORPORATE
Statutory deposits with Central Banks - - - - - - 4,312,482 4,312,482
Investment in associated companies - - - - - - 3,651,091 3,651,091
Investment in joint venture - - - - - - 179,426 179,426
Property and equipment - - - - - - 1,414,975 1,414,975
Intangible assets - - - - - - 152,541 152,541
Goodwill - - - - - - 1,831,312 1,831,312
Deferred tax assets - - - - - - 53,067 53,067
Total assets 23,077,924 9,345,483 12,055,512 3,160,165 3,507,403 139,496,642 12,247,644 202,890,773 FINANCIALS
Annual Report 2019 ADDITIONAL INFORMATION
285
51 FINANCIAL INSTRUMENTS (CONTINUED)
Notes to the Financial Statements
(c) Liquidity risk (continued)
for the financial year ended 30 June 2019
286 HONG LEONG BANK BERHAD
The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2018 based on the remaining contractual maturity:
(continued)
The Group
2018
Up to 1 week to 1 1 to 3 3 to 6 6 to 12 Over 1 No specific Total
1 week month months months months year maturity RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
RM’000
Liabilities 58,579,387 24,848,207 25,449,016 16,726,662 26,303,065 5,507,758 - 157,414,095
Deposits from customers
Deposits and placements of banks and 3,499,882 590,203 2,867,119 208,129 72,101 - - 7,237,434
other financial institutions 1,594 751,540 3,078,735 - - - - 3,831,869
Obligations on securities sold under 39,140 227,138 28,108 26,182 - - 223,883 544,451
4,387,338 - 199,233 - 132,875
repurchase agreements 94,764 - - 82,230 411,878 4,719,446
Bills and acceptances payable 117,336 109,292 204,696 - 1,020,196
Other liabilities - - 202,952
Derivative financial instruments - - - - 2,402,509 500,399 - 202,952
Recourse obligation on loans sold to - - - - 2,902,908
- - 401,192
Cagamas - - - - - 512,352 - 401,192
Tier 2 subordinated bonds - - - - - - 512,352
Multi-currency Additional Tier 1 Capital 66,602,105 - - - 29,059,138 - 211,619 211,619
26,534,424 31,532,270 17,165,669 7,536,531 568,377 178,998,514
Securities
Innovative Tier 1 Capital Securities
Taxation
Total liabilities
Total equity - - - - - - 23,892,259 23,892,259
Total liabilities and equity 66,602,105 26,534,424 31,532,270 17,165,669 29,059,138 7,536,531 24,460,636 202,890,773
Net liquidity gap (43,524,181) (17,188,941) (19,476,758) (14,005,504) (25,551,735) 131,960,111 11,679,267 23,892,259
51 FINANCIAL INSTRUMENTS (CONTINUED)
(c) Liquidity risk (continued)
The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2019 based on the remaining contractual maturity:
The Bank
2019
Up to 1 week to 1 1 to 3 3 to 6 6 to 12 Over 1 No specific Total
1 week month months months months year maturity RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
RM’000
Assets
Cash and short-term funds 3,618,599 764,475 - - - - - 4,383,074
Deposits and placements with banks and - - 1,046,933 272,868 146,139 - - 1,465,940 Notes to the Financial Statements
other financial institutions for the financial year ended 30 June 2019
Financial assets at fair value through profit 12,836 333 138,749 27,198 163,866 10,967,184 305,572 11,615,738
or loss
Financial investments at fair value through 169,192 361,962 1,108,797 502,064 1,063,220 17,496,432 44,331 20,745,998
other comprehensive income
Financial investments at amortised cost 883 512 957 914 75,253 10,815,986 - 10,894,505
Loans, advances and financing 10,555,719 5,009,250 4,984,949 1,639,889 556,855 86,188,308 - 108,934,970
Other assets 773,946 6,881 5,990 7,171 1,223 28,882 322,189 1,146,282 CORPORATE
Derivative financial instruments 41,938 30,745 39,105 50,672 46,451 314,084 - 522,995
Amount due from subsidiaries - - - - - - 13,095 13,095
Statutory deposits with Central Banks - - - - - - 3,564,423 3,564,423
Subsidiary companies - - - - - - 2,558,337 2,558,337
Investment in associated companies - - - - - - 971,182 971,182
Property and equipment - - - - - - 761,639 761,639
Intangible assets - - - - - - 110,895 110,895 FINANCIALS
Goodwill - - - - - - 1,771,547 1,771,547
Total assets 15,173,113 6,174,158 7,325,480 2,500,776 2,053,007 125,810,876 10,423,210 169,460,620
Annual Report 2019 ADDITIONAL INFORMATION
287
51 FINANCIAL INSTRUMENTS (CONTINUED)
Notes to the Financial Statements
(c) Liquidity risk (continued)
for the financial year ended 30 June 2019
288 HONG LEONG BANK BERHAD
The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2019 based on the remaining contractual maturity:
(continued)
The Bank
2019
Up to 1 week to 1 1 to 3 3 to 6 6 to 12 Over 1 No specific Total
1 week month months months months year maturity RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
RM’000
Liabilities 48,549,789 22,288,137 23,539,897 14,856,490 18,933,045 3,229,167 - 131,396,525
Deposits from customers
Deposits and placements of banks and 2,724,471 1,115,297 3,255,858 67,671 41,637 - - 7,204,934
other financial institutions 288,221 179,272 1,866,423 - - - - 2,333,916
Obligations on securities sold under 222 44,933 121,287 27,757 11 - 168,368 362,578
768 462 184,733 -
repurchase agreements 4,054,048 24,611 44,739 388 56,432 489,159 49,677 4,290,076
Bills and acceptances payable 26,352 33,749 - 675,042
Other liabilities - 202,954 - -
Derivative financial instruments - - - - - 1,499,970 - 202,954
Recourse obligation on loans sold to - 2,370 - 1,502,340
- 4,863 - 799,523
Cagamas - - 512,268 1,799 - - - 806,185
Tier 2 subordinated bonds - - - - - - 512,268
Multi-currency Additional Tier 1 Capital - - - - - - 42,152
- 23,653,018 - - 19,215,858 6,506 42,152
Securities 55,643,103 29,548,751 6,017,819 266,703 6,506
Innovative Tier 1 Capital Securities 14,990,224
Taxation 149,335,476
Deferred tax liabilities
Total liabilities
Total equity - - - - - - 20,125,144 20,125,144
Total liabilities and equity 55,643,103 23,653,018 29,548,751 14,990,224 19,215,858 6,017,819 20,391,847 169,460,620
Net liquidity gap (40,469,990) (17,478,860) (22,223,271) (12,489,448) (17,162,851) 119,793,057 10,156,507 20,125,144
51 FINANCIAL INSTRUMENTS (CONTINUED)
(c) Liquidity risk (continued)
The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2018 based on the remaining contractual maturity:
The Bank
2018
Up to 1 week to 1 1 to 3 3 to 6 6 to 12 Over 1 No specific Total
1 week month months months months year maturity RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
RM’000
Assets
Cash and short-term funds 3,604,463 1,945,925 - - - - - 5,550,388
Deposits and placements with banks and - 40,392
other financial institutions - 2,100,965 564,165 - - 2,705,522
Notes to the Financial Statements
Financial assets held-for-trading 400,168 401,418 1,424,652 150,111 10,065 3,232,621 - 5,619,035 for the financial year ended 30 June 2019
Financial investments available-for-sale 4,603,924 1,109,454 2,840,482 220,333 1,038,398 18,738,477 467,512 29,018,580
Financial investments held-to-maturity - - 204,482 141,135 1,049,460 9,511,488 - 10,906,565
Loans, advances and financing 11,124,805 5,333,867 4,910,310 1,567,186 446,077 80,892,658 - 104,274,903
Other assets 516,828 4,922 9,186 11,229 4,571 16,202 123,758 686,696
Derivative financial instruments 32,061 67,792 226,287 167,365 76,160 363,261 - 932,926 CORPORATE
Amount due from subsidiaries - - - - - - 43,563 43,563
Statutory deposits with Central Banks - - - - - - 3,453,017 3,453,017
Subsidiary companies - - - - - - 2,157,132 2,157,132
Investment in associated companies - - - - - - 946,525 946,525
Investment in joint venture - - - - - - 76,711 76,711
Property and equipment - - - - - - 782,853 782,853
Intangible assets - - - - - - 137,166 137,166
Goodwill - - - - - - 1,771,547 1,771,547 FINANCIALS
Deferred tax assets - - - - - - 47,908 47,908
Total assets 20,282,249 8,863,378 11,716,364 2,821,524 2,665,123 112,754,707 10,007,692 169,111,037
Annual Report 2019 ADDITIONAL INFORMATION
289
51 FINANCIAL INSTRUMENTS (CONTINUED)
Notes to the Financial Statements
(c) Liquidity risk (continued)
for the financial year ended 30 June 2019
290 HONG LEONG BANK BERHAD
The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2018 based on the remaining contractual maturity:
(continued)
The Bank
2018
Up to 1 week to 1 1 to 3 3 to 6 6 to 12 Over 1 No specific Total
1 week month months months months year maturity RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
RM’000
Liabilities 49,133,318 20,106,097 20,409,995 13,644,822 22,152,549 4,136,644 - 129,583,425
Deposits from customers
Deposits and placements of banks and 3,777,382 590,203 2,701,102 105,066 72,101 - - 7,245,854
other financial institutions 1,594 742,893 3,060,632 - - - - 3,805,119
Obligations on securities sold under 38,777 226,857 26,294 24,460 - - 190,583 506,971
3,684,210 - 194,840 -
repurchase agreements 94,244 - - 82,230 379,361 53,119 3,932,169
Bills and acceptances payable 116,459 108,104 203,282 - 983,680
Other liabilities - - 202,952
Derivative financial instruments - - - - 2,001,879 500,399 - 202,952
Recourse obligation on loans sold to - - - - 2,502,278
- - 401,192
Cagamas - - - - - 512,352 - 401,192
Tier 2 subordinated bonds - - - - - - 512,352
Multi-currency Additional Tier 1 Capital 56,729,525 - - - 24,503,599 - 171,958 171,958
21,782,509 26,306,127 13,977,630 6,132,900 415,660 149,847,950
Securities
Innovative Tier 1 Capital Securities
Taxation
Total liabilities
Total equity - - - - - - 19,263,087 19,263,087
Total liabilities and equity 56,729,525 21,782,509 26,306,127 13,977,630 24,503,599 6,132,900 19,678,747 169,111,037
Net liquidity gap (36,447,276) (12,919,131) (14,589,763) (11,156,106) (21,838,476) 106,621,807 9,592,032 19,263,087
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(c) Liquidity risk (continued)
The following table shows the contractual undiscounted cash flows payable for financial liabilities by remaining contractual
maturities. The balances in the table below will not agree to the balances reported in the statements of financial position as
the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.
The contractual maturity profile does not necessarily reflect the behavioural cash flows.
The Group
2019
Up to 1 to 3 3 to 12 1 to 5 Over 5 Total
1 month months months years years RM’000
RM’000 RM’000 RM’000 RM’000 RM’000
Financial liabilities 56,637,447 32,833,750 44,208,357 30,505,103 831,502 165,016,159
- 2,245
Deposits from customers 199 2,045 1 -
- 7,424,698
Investment accounts of 3,624,191 3,690,086 110,421 -
customers - 2,378,622
219,177 2,159,445 - - - 352,330
Deposits and placements of 225,460 106,380 20,490 - - 4,629,225
banks and other financial 4,626,632 499 -
institutions 2,094
Obligations on securities (5,053,049) (3,906,447) (6,449,277) (2,384,604) (1,631,205) (19,424,582)
sold under repurchase 5,079,703 3,937,181 6,494,165 2,437,467
agreements 1,642,106 19,590,622
13,046 16,189 273,659 247,136
Bills and acceptances payable 90,555 640,585
Other liabilities - 204,911 1,050 54,213 - 260,174
-- 41,333 1,640,826 - 1,682,159
Derivative financial
instruments - 9,518 29,990 926,956 - 966,464
- Gross settled derivatives - 520,682 - - - 520,682
65,372,806 39,574,239 44,732,283 33,427,097 932,958 184,039,383
- Inflow
- Outflow
- Net settled derivatives
Recourse obligation on loans
sold to Cagamas
Tier 2 subordinated bonds
Multi-currency Additional Tier
1 Capital Securities
Innovative Tier 1 Capital
Securities
Total financial liabilities
Annual Report 2019 291
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(c) Liquidity risk (continued)
The following table shows the contractual undiscounted cash flows payable for financial liabilities by remaining contractual
maturities. The balances in the table below will not agree to the balances reported in the statements of financial position as
the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.
The contractual maturity profile does not necessarily reflect the behavioural cash flows. (continued)
The Group
2018
Up to 1 to 3 3 to 12 1 to 5 Over 5 Total
1 month months months years years RM’000
RM’000 RM’000 RM’000 RM’000 RM’000
Financial liabilities
Deposits from customers 56,837,193 27,440,620 45,626,651 28,162,572 1,584,809 159,651,845
Deposits and placements of 4,204,695 3,494,352 188,181 - - 7,887,228
banks and other financial
institutions 3,105,697 - - - 3,897,470
5,517 11,314 - - 502,767
Obligations on securities 791,773 - - - 4,440,166
sold under repurchase -
agreements (4,205,619) (727,391)
4,300,253 (3,896,490) 793,892
Bills and acceptances payable 485,936 4,166,101 285,422
26,149 203,848
Other liabilities 4,440,166 3,791 114,568 597,466
- 3,853 471,961
Derivative financial instruments - 520,682
2,535,118 30,308,452
- Gross settled derivatives 20,568 20,520
34,191,328 20,568
- Inflow (8,034,144) (1,482,113) (18,345,757)
48,790,384
- Outflow 8,212,419 1,501,885 18,974,550
- Net settled derivatives 20,609 107,430 554,178
Recourse obligation on loans - - 211,492
sold to Cagamas - 3,151,731
Tier 2 subordinated bonds 19,147
Multi-currency Additional Tier - - 492,481
1 Capital Securities
Innovative Tier 1 Capital - - 561,818
Securities 1,712,011 181,979,969
Total financial liabilities 66,977,794
292 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(c) Liquidity risk (continued)
The following table shows the contractual undiscounted cash flows payable for financial liabilities by remaining contractual
maturities. The balances in the table below will not agree to the balances reported in the statements of financial position as
the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.
The contractual maturity profile does not necessarily reflect the behavioural cash flows. (continued)
The Bank
2019
Up to 1 to 3 3 to 12 1 to 5 Over 5 Total
1 month months months years years RM’000
RM’000 RM’000 RM’000 RM’000 RM’000
Financial liabilities 45,539,564 24,498,522 35,849,215 26,314,071 672,578 132,873,950
Deposits from customers 4,105,868 3,729,889 110,421 - - 7,946,178
Deposits and placements of 219,177 2,159,445 - - - 2,378,622
banks and other financial 209,789 101,274 14,950 - - 326,013
institutions 4,090,895 462 - - 4,092,702
1,345
Obligations on securities
sold under repurchase (4,859,412) (3,700,913) (6,196,223) (2,384,604) (1,631,205) (18,772,357)
agreements 4,884,133 3,729,232 6,240,336 2,437,467
1,642,106 18,933,274
Bills and acceptances payable 13,128 15,087 271,842 235,415
81,516 616,988
Other liabilities
- 203,850 - - - 203,850
Derivative financial -- 41,333 1,640,826 - 1,682,159
instruments
- 9,518 29,990 926,956 - 966,464
- Gross settled derivatives
- 520,682 - - - 520,682
- Inflow 54,203,142 31,267,048 36,363,209 29,170,131 764,995 151,768,525
- Outflow
- Net settled derivatives
Recourse obligation on loans
sold to Cagamas
Tier 2 subordinated bonds
Multi-currency Additional Tier
1 Capital Securities
Innovative Tier 1 Capital
Securities
Total financial liabilities
Annual Report 2019 293
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(c) Liquidity risk (continued)
The following table shows the contractual undiscounted cash flows payable for financial liabilities by remaining contractual
maturities. The balances in the table below will not agree to the balances reported in the statements of financial position as
the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.
The contractual maturity profile does not necessarily reflect the behavioural cash flows. (continued)
The Bank
2018
Up to 1 to 3 3 to 12 1 to 5 Over 5 Total
1 month months months years years RM’000
RM’000 RM’000 RM’000 RM’000 RM’000
Financial liabilities
Deposits from customers 42,832,078 22,052,579 38,274,239 27,388,084 711,595 131,258,575
Deposits and placements of 4,614,880 3,677,190 178,392 - - 8,470,462
banks and other financial
institutions 3,087,594 - - - 3,870,720
5,246 10,793 - - 468,328
Obligations on securities 783,126 - - - 3,724,286
sold under repurchase -
agreements (4,053,926) (727,391)
4,145,406 (3,863,512) 793,892
Bills and acceptances payable 452,289 4,131,774 232,981
27,508 203,848
Other liabilities 3,724,286 3,791 120,339 597,466
- 3,853 471,961
Derivative financial instruments - 520,682
2,115,971 29,481,523
- Gross settled derivatives 20,568 20,520
28,965,956 20,568
- Inflow (7,866,195) (1,482,113) (17,993,137)
41,012,937
- Outflow 8,043,608 1,501,885 18,616,565
- Net settled derivatives 21,294 101,356 503,478
Recourse obligation on loans - - 211,492
sold to Cagamas - 2,713,437
Tier 2 subordinated bonds -
Multi-currency Additional Tier - - 492,481
1 Capital Securities
Innovative Tier 1 Capital - - 561,818
Securities 832,723 152,898,505
Total financial liabilities 52,605,366
294 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(c) Liquidity risk (continued)
The following table presents the contractual expiry by maturity of the Group's and Bank's commitments and contingencies:
The Group Less than Over Total
1 year 1 year RM’000
2019 RM’000
Direct credit substitutes RM’000
Short-term self liquidating trade related contingencies
Irrevocable commitments to extend credit 67,590 50,150 117,740
Unutilised credit card lines 374,304 - 374,304
Total commitments and contingencies 19,020,280 36,740,886
7,276,500 17,720,606 7,276,500
26,738,674 - 44,509,430
17,770,756
2018 57,374 50,967 108,341
Direct credit substitutes 508,048 - 508,048
Short-term self liquidating trade related contingencies 16,074,688 30,376,544
Irrevocable commitments to extend credit 6,908,565 14,301,856 6,908,565
Unutilised credit card lines 23,548,675 - 37,901,498
Total commitments and contingencies
14,352,823
The Bank 64,245 150 64,395
2019 339,627 - 339,627
Direct credit substitutes 15,541,640 28,291,225
Short-term self liquidating trade related contingencies 7,276,500 12,749,585 7,276,500
Irrevocable commitments to extend credit 23,222,012 - 35,971,747
Unutilised credit card lines
Total commitments and contingencies 12,749,735
2018 50,361 - 50,361
Direct credit substitutes 477,667 - 477,667
Short-term self liquidating trade related contingencies 14,108,380 10,410,497 24,518,877
Irrevocable commitments to extend credit 6,908,565 - 6,908,565
Unutilised credit card lines 21,544,973 10,410,497 31,955,470
Total commitments and contingencies
Undrawn loan commitments are recognised at activation stage and include commitments which are unconditionally
cancellable by the Group and the Bank. The Group and the Bank expect that not all of the contingent liabilities and undrawn
loan commitments will be drawn before expiry.
Annual Report 2019 295
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk
(i) Maximum exposure to credit risk
The maximum exposure to credit risk for financial assets recognised in the statements of financial position is their
carrying amounts. For contingent liabilities, the maximum exposure to credit risk is the maximum amount that
the Group and the Bank would have to pay if the obligations of the instruments issued are called upon. For credit
commitments, the maximum exposure to credit risk is the full amount of the undrawn credit facilities granted to
customers. The table below shows the maximum exposure to credit risk for the Group and the Bank on financial
instruments subject to impairment:
The Group
2019 2018
RM’000 RM’000
Credit risk exposure relating to on-balance sheet assets: 4,587,073 7,427,607
Short-term funds and placements with banks and other financial institutions
(exclude cash in hand) 23,810,179 -
Financial assets and investments portfolios (exclude shares): - 24,294,684
- Financial investments at FVOCI
- Financial investments available-for-sale 15,153,199 -
- Financial investments at amortised cost - 14,436,458
- Financial investments held-to-maturity 128,059,105
136,308,217
Loans, advances and financing 1,116,804 666,905
Other assets
Credit risk exposure relating to off-balance sheet items: 44,509,430 37,901,498
Credit related commitments and contingencies 225,484,902 212,786,257
Total maximum credit risk exposure that are subject to impairment
296 HONG LEONG BANK BERHAD
CORPORATE FINANCIALS ADDITIONAL INFORMATION
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED) The Bank
(d) Credit risk (continued) 2019 2018
RM’000 RM’000
(i) Maximum exposure to credit risk (continued)
4,514,288 6,684,995
Credit risk exposure relating to on-balance sheet assets:
Short-term funds and placements with banks and other financial institutions 20,701,667 -
(exclude cash in hand) - 21,450,328
Financial assets and investments portfolios (exclude shares):
- Financial investments at FVOCI 10,894,505 -
- Financial investments available-for-sale - 10,906,078
- Financial investments at amortised cost 104,274,903
- Financial investments held-to-maturity 108,934,970
Loans, advances and financing 1,071,264 591,301
Other assets 13,095 43,563
Amount due from subsidiaries
Credit risk exposure relating to off-balance sheet items: 35,971,747 31,955,470
Credit related commitments and contingencies 182,101,536 175,906,638
Total maximum credit risk exposure that are subject to impairment
The table below shows the credit exposure of the Group and the Bank on financial instruments that are not subject
to impairment:
The Group The Bank
2019 2018 2019 2018
RM’000 RM’000 RM’000 RM’000
Financial assets at FVTPL (exclude shares and 4,759,248 - 4,243,953 -
wholesale funds) - 5,969,872 - 5,619,035
Financial assets held-for-trading 528,256 918,067 522,995 932,926
5,287,504 6,887,939 4,766,948 6,551,961
Derivative assets
Annual Report 2019 297
Notes to the Financial Statements
for the financial year ended 30 June 2019
51 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
(ii) Collaterals
The main types of collateral obtained by the Group and the Bank are as follows:
(a) Fixed deposits, Mudharabah General Investment Account, negotiable instrument of deposits, foreign currency
deposits and cash deposits/margins
(b) Land and buildings
(c) Aircrafts, vessels and automobiles
(d) Quoted shares, unit trust, Malaysian Governments Bonds and securities and private debt securities
(e) Endowment life policies with cash surrender value
(f) Other tangible business assets, such as inventory and equipment
The Group and the Bank also accept non-tangible securities such as support, guarantees from individuals, corporates
and institutions, bank guarantees, debentures, assignment of contract payments, which are subject to internal
guidelines on eligibility.
The outstanding balance for loans, advances and financing for which no allowances is recognised because of collateral
as at 30 June 2019 amounted to RM184,663,000 and RM183,134,000 respectively for the Group and the Bank.
The financial effect of collateral (quantification to the extent to which collateral and other credit enhancements
mitigate credit risk) held for loans, advances and financing for the Group and the Bank is 85.43% (2018: 86.08%)
and 85.13% (2018: 85.92%) respectively. The financial effects of collateral held for the remaining financial assets are
insignificant.
The financial effect of collateral (quantification to the extent to which collateral and other credit enhancements
mitigate credit risk) held for net loans, advances and financing that are credit impaired as at 30 June 2019 for the
Group and the Bank is 83.64% and 84.51% respectively.
(iii) Credit exposure by stage
Financial assets of the Group and the Bank are classified into three stages as below:
Stages Description
Stage 1: 12 months ECL Stage 1 includes financial assets which have not had a significant increase in credit risk
- not credit impaired since initial recognition or which have low credit risk at reporting date. 12-months ECL is
recognised and interest income is calculated on the gross carrying amount of the financial
assets.
Stage 2: Lifetime ECL Stage 2 includes financial assets which have had a significant increase in credit risk since
- not credit impaired initial recognition (unless they have low credit risk at the reporting date) but do not have
objective evidence of impairment. Lifetime ECL is recognised and interest income is
calculated on the gross carrying amount of the financial assets.
Stage 3: Lifetime ECL Stage 3 includes financial assets that have objective evidence of impairment at the
- credit impaired reporting date. Lifetime ECL is recognised and interest income is calculated on the net
carrying amount of the financial assets.
For further details on the stages, refer to accounting policy Note 2N.
298 HONG LEONG BANK BERHAD
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