HL 2017

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
(ii) Foreign currency risk sensitivity analysis (continued)
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 2017 2016

-1% RM’000 RM’000
United States Dollar (“USD”)
Euro (“EUR”) (4,536) (4,521)
Great Britain Pound (“GBP”) – (9)
Singapore Dollar (“SGD”) (40)
Australian Dollar (“AUD”) 42 331
Chinese Yuan Renminbi (“CNY”) 678
Hong Kong Dollar (“HKD”) (300) (37)
Others (142) (129)
3,352 3,973
30 (105)

(876) (537)

+1% 4,536 4,521
United States Dollar (“USD”) – 9
Euro (“EUR”)
Great Britain Pound (“GBP”) (42) 40
Singapore Dollar (“SGD”) (678) (331)
Australian Dollar (“AUD”) 300
Chinese Yuan Renminbi (“CNY”) 142 37
Hong Kong Dollar (“HKD”) (3,352) 129
Others (30) (3,973)
105
876
537

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

199

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
(ii) Foreign currency risk sensitivity analysis (continued)
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: (continued)

The Bank 2017 2016

-1% RM’000 RM’000
United States Dollar (“USD”)
Euro (“EUR”) (4,446) (4,451)
Great Britain Pound (“GBP”) 46 2
Singapore Dollar (“SGD”) 53
Australian Dollar (“AUD”) 695 (12)
Chinese Yuan Renminbi (“CNY”) 336
Hong Kong Dollar (“HKD”) (290) (35)
Others (141) (128)
3,357 3,978
(98)
26
(408)
(700)

+1% 4,446 4,451
United States Dollar (“USD”) (46) (2)
Euro (“EUR”) (53) 12
Great Britain Pound (“GBP”)
Singapore Dollar (“SGD”) (695) (336)
Australian Dollar (“AUD”) 290 35
Chinese Yuan Renminbi (“CNY”) 141 128
Hong Kong Dollar (“HKD”) (3,357)
Others (26) (3,978)
98
700
408

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

200

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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

2017
Non-trading book

Up to 1 to 3 3 to 12 1 to 5 Over 5 Non- Trading Total
1 month months months years years interest/ book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 profit rate
sensitive RM’000

RM’000

Financial assets 8,816,014 – – – – 2,007,296 – 10,823,310
Cash and short-term funds
Deposits and placements – 624,735 200,000 – – 2,008 – 826,743

with banks and other 300,672 – – – – 208 – 300,880
financial institutions
––– –– – 5,688,165 5,688,165
Securities purchased under
resale agreements 4,999 475,285 1,476,604 16,636,308 3,037,351 6,023,670 – 27,654,217

Financial assets – 1,061,374 384,462 10,029,848 1,406,512 178,408 – 13,060,604
held-for-trading
99,429,541 1,248,245 687,176 9,793,861 12,169,722 – – 123,328,545
Financial investments 9,495 77,959 398,036 – – 662,396
available-for-sale 131,992 44,914 – –– 1,295,179 – 1,327,554

Financial investments 32,375 –
held-to-maturity
––– –– – 953,042 953,042
Loans, advances and –––
financing – 157,297 3,580,933 – 3,738,230 HONG LEONG BANK BERHAD
- performing ANNUAL REPORT 2017
- impaired^

Other assets
Derivative financial

instruments
- trading derivatives

Statutory deposits with
Central Banks

Total financial assets 108,715,593 3,454,553 2,757,737 36,537,976 17,168,918 13,087,702 6,641,207 188,363,686

^ This represents outstanding impaired loans after deducting individual assessment impairment allowance and collective assessment
impairment allowance.

201

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)

The Group
2017

Non-trading book

Up to 1 to 3 3 to 12 1 to 5 Over 5 Non- Trading Total
1 month months months years years interest/ book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 profit rate
sensitive RM’000
29,735,585
RM’000
1,552,561
Financial liabilities 62,516,952 38,157,355 3,042,102 1,134,826 20,646,385 – 155,233,205
Deposits from customers 1,897,279
Deposits and placements 2,886,329 47,464 1,017,246 – – 30,556 – 5,486,692
–
of banks and other 557,416 372,600 – – 2,322 – 2,829,617
financial institutions 57,552 –
Obligations on securities – – 15,865 – – 243,794 – 364,675
sold under repurchase – – – – 3,830,510 – 3,830,510
agreements – –
Bills and acceptances – – –– – – 1,404,048 1,404,048
payable – 33,232,889 – 1,409 195 – – 1,604
Other liabilities –
Derivative financial – – 200,052 – 2,874 – 202,926
instruments – 2,399,324 – 2,821 – 2,402,145
- trading derivatives
- hedging derivatives – 502,852 – 12,771 – 515,623
Recourse obligation on 39,563,066 6,145,739
loans sold to Cagamas
Tier 2 subordinated bonds
Innovative Tier 1 capital
securities

Total financial liabilities 66,018,249 1,135,021 24,772,033 1,404,048 172,271,045

Net interest 42,697,344 (29,778,336) (36,805,329) 30,392,237 16,033,897
sensitivity gap

Financial guarantees – – – – – 563,049

Credit related – – – – – 36,356,330
commitments and
contingencies

Treasury related
commitments and
HONG LEONG BANK BERHAD contingencies (hedging) – – – 400,000 146,429 –
ANNUAL REPORT 2017
Net interest – – – 400,000 146,429 36,919,379
sensitivity gap

202

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)

The Group
2016

Non-trading book

Up to 1 to 3 3 to 12 1 to 5 Over 5 Non- Trading Total
1 month months months years years interest/ book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 profit rate
sensitive RM’000

RM’000

Financial assets 5,863,238 – – – – 1,610,726 – 7,473,964
Cash and short-term funds
Deposits and placements – 1,720,465 335,254 – – 1,632 – 2,057,351
4,052,152 – – – –
with banks and other 4,518 – 4,056,670
financial institutions ––– – –
Securities purchased under 733,249 327,670 1,529,589 13,335,192 2,827,884 – 5,310,241 5,310,241
resale agreements 36,390 1,362,207 1,527,318 7,394,488 1,300,062
Financial assets 7,129,734 – 25,883,318
held-for-trading
Financial investments 151,369 – 11,771,834
available-for-sale
Financial investments 97,241,178 488,622 807,065 9,950,517 10,532,737 – – 119,020,119
held-to-maturity 111,397 1,297 7,998 71,977 245,263 – – 437,932
Loans, advances and 18,304 – – – – 1,585,333 – 1,603,637
financing
- performing ––– – – – 1,012,367 1,012,367
- impaired^
Other assets ––– – 112,002 4,184,117 – 4,296,119
Derivative financial
instruments 108,055,908 3,900,261 4,207,224 30,752,174 15,017,948 14,667,429 6,322,608 182,923,552
- trading derivatives
Statutory deposits with
Central Banks

Total financial assets

^ This represents outstanding impaired loans after deducting individual assessment impairment allowance and collective assessment
impairment allowance.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

203

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)

The Group
2016

Non-trading book

Up to 1 to 3 3 to 12 1 to 5 Over 5 Non- Trading Total
1 month months months years years interest/ book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 profit rate
sensitive RM’000

RM’000

Financial liabilities 63,304,256 23,982,000 36,792,168 3,741,330 514,452 20,189,708 – 148,523,914
Deposits from customers
Deposits and placements 3,300,780 2,748,668 145,177 – – 6,605 – 6,201,230

of banks and other 1,789,407 1,700,606 – – – 4,890 – 3,494,903
financial institutions
Obligations on securities 51,034 26,062 15,159 – – 258,200 – 350,455
sold under repurchase – – – – – 3,688,728 – 3,688,728
agreements
Bills and acceptances – – –– – – 1,547,621 1,547,621
payable
Other liabilities – – – 2,261 – – – 2,261
Derivative financial
instruments – – 1,208,082 – – 7,561 – 1,215,643
- trading derivatives
- hedging derivatives – – – 2,398,581 – 2,741 – 2,401,322
Senior bonds
Tier 2 subordinated bonds – – – 508,741 – 12,771 – 521,512
Innovative Tier 1 capital 384,730 – – – – – – 384,730
securities
Borrowings 68,830,207 28,457,336 38,160,586 6,650,913 514,452 24,171,204 1,547,621 168,332,319

Total financial liabilities

Net interest 39,225,701 (24,557,075) (33,953,362) 24,101,261 14,503,496
sensitivity gap

Financial guarantees – – –– – 540,524
Credit related
– – –– – 41,141,146
commitments and
HONG LEONG BANK BERHAD contingencies – – – 200,000 – –
ANNUAL REPORT 2017 Treasury related
commitments and – – – 200,000 – 41,681,670
contingencies (hedging)

Net interest
sensitivity gap

204

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)

The Bank
2017

Non-trading book

Up to 1 to 3 3 to 12 1 to 5 Over 5 Non- Trading Total
1 month months months years years interest/ book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 profit rate
8,379,656 sensitive RM’000
–
– RM’000
300,672 292,609
Financial assets – – –– 1,819,538 – 10,199,194
Cash and short-term funds – –
Deposits and placements 4,999 100,000 – – 1,055 – 393,664
460,281 – ––
with banks and other – 941,388 – –– 208 – 300,880
financial institutions
83,534,537 1,190,129 1,276,387 14,546,493 2,604,860 – 5,405,310 5,405,310
Securities purchased under 123,119 3,362 384,462 7,969,338 965,600
resale agreements 32,375 – 5,993,260 – 24,886,280

Financial assets – – 148,005 – 10,408,793
held-for-trading – –
– – 493,948 8,111,849 8,671,787 – – 102,002,250
Financial investments 92,375,358 2,887,769 7,939 66,447 335,433 – – 536,300
available-for-sale – – – 1,201,778 – 1,234,153

Financial investments – –– – 947,583 947,583
held-to-maturity
– –– 13,484 – 13,484
Loans, advances and
financing – –– 2,986,547 – 2,986,547
- performing 2,262,736 30,694,127 12,577,680
- impaired^ 12,163,875 6,352,893 159,314,438

Other assets
Derivative financial

instruments
- trading derivatives
Amount due from
subsidiaries
Statutory deposits with
Central Banks

Total financial assets

^ This represents outstanding impaired loans after deducting individual assessment impairment allowance and collective assessment
impairment allowance.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

205

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)

The Bank
2017

Non-trading book

Up to 1 to 3 3 to 12 1 to 5 Over 5 Non- Trading Total
1 month months months years years interest/ book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 profit rate
sensitive RM’000

RM’000

Financial liabilities 52,376,675 24,649,354 31,875,749 2,731,953 452,051 17,773,621 – 129,859,403
Deposits from customers
Deposits and placements 2,913,416 1,498,826 1,017,246 – – 30,588 – 5,460,076

of banks and other 529,165 1,897,279 372,600 – – 2,322 – 2,801,366
financial institutions
Obligations on securities 57,339 46,223 14,870 – – 230,409 – 348,841
sold under repurchase – – – – – 3,290,832 – 3,290,832
agreements
Bills and acceptances – – –– – – 1,362,050 1,362,050
payable – – – 1,409 195 – – 1,604
Other liabilities
Derivative financial – – – 200,052 – 2,874 – 202,926
instruments – – – 1,999,452 – 2,190 – 2,001,642
- trading derivatives
- hedging derivatives – – – 502,852 – 12,771 – 515,623
Recourse obligation on 55,876,595 28,091,682 33,280,465 5,435,718
loans sold to Cagamas 452,246 21,345,607 1,362,050 145,844,363
Tier 2 subordinated bonds
Innovative Tier 1 capital
securities

Total financial liabilities

Net interest 36,498,763 (25,203,913) (31,017,729)25,258,409 12,125,434
sensitivity gap

Financial guarantees – – – – – 474,419

Credit related – – – – – 31,164,776
commitments and
contingencies

Treasury related
commitments and
HONG LEONG BANK BERHAD contingencies (hedging) – – – 400,000 146,429 –
ANNUAL REPORT 2017
Net interest – – – 400,000 146,429 31,639,195
sensitivity gap

206

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)

The Bank
2016

Non-trading book

Up to 1 to 3 3 to 12 1 to 5 Over 5 Non- Trading Total
1 month months months years years interest/ book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 profit rate
sensitive RM’000
4,192,331 –
RM’000
– 1,814,563
Financial assets 4,052,152 – – – – 1,465,516 – 5,657,847
Cash and short-term funds –
Deposits and placements – 335,254 – – 1,632 – 2,151,449
713,239 327,670
with banks and other 1,362,207 – – – 4,518 – 4,056,670
financial institutions 9,999
Securities purchased under 393,565 – –– – 5,115,288 5,115,288
resale agreements 82,902,136 865
Financial assets 102,060 – 1,448,873 11,634,726 2,622,064 7,109,640 – 23,856,212
held-for-trading 18,304
Financial investments – 1,590,937 5,855,025 1,055,012 132,604 – 10,005,784
available-for-sale – –
Financial investments – – 657,552 8,262,717 7,466,998 – – 99,682,968
held-to-maturity – 3,898,870 6,251 65,478 201,497 – – 376,151
Loans, advances and 91,990,221 – – – 1,352,243 – 1,370,547
financing
- performing – –– – 999,038 999,038
- impaired^
Other assets – – – 14,476 – 14,476
Derivative financial
instruments – – – 3,602,936 – 3,602,936
- trading derivatives 4,038,867 25,817,946 11,345,571 13,683,565 6,114,326 156,889,366
Amount due from
subsidiaries
Statutory deposits with
Central Banks

Total financial assets

^ This represents outstanding impaired loans after deducting individual assessment impairment allowance and collective assessment
impairment allowance.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

207

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk (continued)
Interest/Profit rate risk (continued)

The Bank
2016

Non-trading book

Up to 1 to 3 3 to 12 1 to 5 Over 5 Non- Trading Total
1 month months months years years interest/ book RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 profit rate
sensitive RM’000

RM’000

Financial liabilities 53,592,527 19,118,142 32,355,453 3,327,207 514,452 17,332,996 – 126,240,777
Deposits from customers
Deposits and placements 3,326,151 2,393,651 87,330 – – 6,501 – 5,813,633

of banks and other 1,789,407 1,700,606 – – – 4,890 – 3,494,903
financial institutions 50,307 24,201 13,839 – – 245,605 – 333,952
Obligations on securities
sold under repurchase – – – – – 3,396,953 – 3,396,953
agreements
Bills and acceptances – ––– – – 1,529,868 1,529,868
payable
Other liabilities – – – 2,261 – – – 2,261
Derivative financial
instruments – – 1,208,082 – – 7,561 – 1,215,643
- trading derivatives
- hedging derivatives – – – 1,998,835 – 2,005 – 2,000,840
Senior bonds
Tier 2 subordinated bonds – –– 508,741 – 12,771 – 521,512
Innovative Tier 1 capital 58,758,392 23,236,600 33,664,704 5,837,044
securities 514,452 21,009,282 1,529,868 144,550,342

Total financial liabilities

Net interest 33,231,829 (19,337,730) (29,625,837) 19,980,902 10,831,119
sensitivity gap

Financial guarantees – – – – – 507,123

Credit related – – – – – 35,850,182
commitments and
contingencies

Treasury related
commitments and
HONG LEONG BANK BERHAD contingencies (hedging) – – – 200,000 – –
ANNUAL REPORT 2017
Net interest – – – 200,000 – 36,357,305
sensitivity gap

208

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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
2017 based on the remaining contractual maturity:

The Group
2017

Up to 1 week 1 to 3 3 to 6 6 to 12 Over 1 No Total
1 week to months months months year specific RM’000
RM’000 RM’000 RM’000 RM’000 maturity
1 month RM’000 RM’000
RM’000

Assets 10,686,387 136,923 ––– – – 10,823,310
Cash and short-term funds
Deposits and placements – – 626,363 200,380 – – – 826,743

with banks and other – 300,880 ––– – – 300,880
financial institutions
Securities purchased under 1,550,722 602,835 1,520,395 371,805 20,473 1,621,935 – 5,688,165
resale agreements
Financial assets – 5,076 471,236 527,753 643,437 20,199,421 5,807,294 27,654,217
held-for-trading
Financial investments 48 – 1,073,692 384,880 141,407 11,460,577 – 13,060,604
available-for-sale
Financial investments 10,504,859 5,954,327 6,664,066 2,292,636 616,847 97,958,206 – 123,990,941
held-to-maturity 127,404 1,407,731
Loans, advances and 1,223,271 6,896 10,702 14,461 6,177 18,820
financing
Other assets 64,364 59,284 144,844 53,230 157,570 473,750 – 953,042
Derivative financial
instruments –– ––– – 3,738,230 3,738,230
Statutory deposits with
Central Banks –– ––– – 3,466,891 3,466,891 HONG LEONG BANK BERHAD
Investment in associated –– ––– – 169,185 169,185 ANNUAL REPORT 2017
companies –– ––– – 1,423,097
Investment in joint venture –– ––– – 213,323 1,423,097
Property and equipment –– ––– – 1,831,312 213,323
Intangible assets –– ––– – 4,851
Goodwill 1,831,312
Deferred tax assets 4,851

Total assets 24,029,651 7,066,221 10,511,298 3,845,145 1,585,911 131,732,709 16,781,587 195,552,522

209

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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
2017 based on the remaining contractual maturity: (continued)

The Group
2017

Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No Total
1 week 1 month months months months year specific RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 maturity
RM’000 RM’000

Liabilities 55,497,392 27,513,960 29,768,525 20,789,567 17,340,846 4,322,915 – 155,233,205
Deposits from customers
Deposits and placements 1,835,226 1,079,129 1,554,589 983,331 34,417 – – 5,486,692

of banks and other 529,165 28,251 1,899,275 372,926 – – – 2,829,617
financial institutions
Obligations on securities 270 57,282 47,464 15,865 – – 243,794 364,675
sold under repurchase 3,825,483 - - - 170,459 - 56,725 4,052,667
agreements
Bills and acceptances 28,698 42,115 78,590 203,734 274,995 777,520 – 1,405,652
payable
Other liabilities – – – – – 202,926 – 202,926
Derivative financial
instruments – – – – – 2,402,145 – 2,402,145
Recourse obligation on
loans sold to Cagamas – – – – – 515,623 – 515,623
Tier 2 subordinated bonds – – – – – – 201,713 201,713
Innovative Tier 1 capital – – – – – – 172,194 172,194
securities
Taxation 61,716,234 28,720,737 33,348,443 22,365,423 17,820,717 8,221,129 674,426 172,867,109
Deferred tax liabilities

Total liabilities

Total equity - - - - - - 22,685,413 22,685,413
Total liabilities 61,716,234 28,720,737 33,348,443 22,365,423 17,820,717 8,221,129 23,359,839 195,552,522
and equity

Net liquidity gap (37,686,583) (21,654,516) (22,837,145) (18,520,278) (16,234,806) 123,511,580

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

210

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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
2016 based on the remaining contractual maturity: (continued)

The Group
2016

Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No Total
1 week 1 month months months months year specific RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 maturity
RM’000 RM’000
1,654,321 –
Assets
– 1,721,584
Cash and short-term funds 5,819,643 – – – – 7,473,964
4,056,670 –
Deposits and placements – 303,091 32,676 – – 2,057,351
with banks and other 1,784,002 2,102,414
financial institutions
118,016 330,395
Securities purchased under – – – – – 4,056,670
resale agreements 20,373 1,379,218

Financial assets 21,803 6,148,011 5,792,698 90,384 – 1,311,638 – 5,310,241
held-for-trading 77 12,871

Financial investments 624,822 72,416 66,940 568,570 652,684 16,629,164 6,959,667 25,883,318
available-for-sale
– –
Financial investments 16,435 923,763 612,340 8,819,705 – 11,771,834
held-to-maturity – –
– –
Loans, advances and 10,969,090 – – 2,813,164 684,413 93,050,675 – 119,458,051
financing – – 8,304 291,869 1,703,163
– –
Other assets 1,365,078 – – 3,999 20,965
11,406,120
Derivative financial 108,179 67,182 48,129 649,521 – 1,012,367
instruments

Statutory deposits with – – – – 4,296,119 4,296,119
Central Banks

Investment in associated – – – – 3,177,768 3,177,768
companies –
–
Investment in joint venture – – – – 144,875 144,875
–
Property and equipment – – – – 1,382,459 1,382,459

Intangible assets – 4,774,458 – – 264,766 264,766

Goodwill – – – 1,831,312 1,831,312

Deferred tax assets – – – 3,957 3,957

Total assets 18,925,050 13,853,886 2,034,241 120,481,668 18,352,792 189,828,215

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

211

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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
2016 based on the remaining contractual maturity: (continued)

The Group
2016

Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No Total
1 week 1 month months months months year specific RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 maturity
RM’000 RM’000
48,732,383
Liabilities 34,503,798 23,849,064 20,106,824 16,841,113 4,490,732 – 148,523,914
Deposits from customers 1,964,900
Deposits and placements 1,179,785 2,791,364 170,268 94,913 – – 6,201,230
230,836
of banks and other 1,562,179 1,701,888 –– – – 3,494,903
financial institutions 43,503
Obligations on securities 3,657,405 7,531 26,062 15,155 4 – 258,200 350,455
sold under repurchase - - - 113,294 - 145,230 3,915,929
agreements 62,573
Bills and acceptances – 68,382 170,906 191,864 102,672 953,485 – 1,549,882
payable – – – – 1,215,643 – – 1,215,643
Other liabilities – – – – 2,401,322
Derivative financial – – 2,401,322
instruments –
Senior bonds – – – – – 521,512 – 521,512
Tier 2 subordinated bonds – – – – – 384,730 – 384,730
Innovative Tier 1 capital 54,691,600 – – – – 31,447
securities – – – – – 120,101 31,447
Borrowings – 120,101
Taxation 37,321,675 28,539,284 20,484,111 18,367,639
Deferred tax liabilities 8,751,781 554,978 168,711,068

Total liabilities

Total equity – – – – – – 21,117,147 21,117,147
Total liabilities 54,691,600 37,321,675 28,539,284 20,484,111 18,367,639 8,751,781 21,672,125 189,828,215
and equity (35,766,550) (23,467,789) (17,133,164) (15,709,653) (16,333,398) 111,729,887

Net liquidity gap

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

212

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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
2017 based on the remaining contractual maturity: (continued)

The Bank

2017

Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No Total
1 week 1 month months months months year specific RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 maturity
RM’000 RM’000
9,699,564 499,630 –
Assets –– – – 10,199,194
Cash and short-term funds – – 293,650
Deposits and placements 100,014 – – – 393,664
– 300,880 –
with banks and other –– – – 300,880
financial institutions 1,900,702 503,014 1,351,669
Securities purchased under 371,805 20,473 1,257,647 – 5,405,310
resale agreements – 5,076 456,086
Financial assets 381,760 587,787 17,648,277 5,807,294 24,886,280
held-for-trading 48 – 952,371
Financial investments 384,880 141,407 8,930,087 – 10,408,793
available-for-sale 9,246,875 5,291,056 5,971,562
Financial investments 1,157,336 6,777 10,502 2,081,208 477,702 79,470,147 – 102,538,550
held-to-maturity 14,185 97,844 1,309,339
Loans, advances and 63,817 57,557 144,131 6,171 16,524
financing
Other assets – – – 53,097 157,164 471,817 – 947,583
Derivative financial
instruments – – – –– – 13,484 13,484
Amount due from – – –
subsidiaries –– – 2,986,547 2,986,547
Statutory deposits with – – – –– – 1,662,409 1,662,409
Central Banks – – –
Subsidiary companies – – – –– – 946,525 946,525
Investment in associated – – – –– – 76,711 76,711
companies – – – –– – 774,999
Investment in joint venture 22,068,342 6,663,990 9,179,971 –– – 194,870 774,999
Property and equipment –– – 1,771,547 194,870
Intangible assets 1,771,547
Goodwill
3,386,949 1,390,704 107,794,499 14,332,230 164,816,685
Total assets

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

213

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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
2017 based on the remaining contractual maturity: (continued)

The Bank
2017

Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No Total
1 week 1 month months months months year specific RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 maturity
RM’000 RM’000
18,022,027 13,934,823
Liabilities 46,569,608 23,413,305 24,500,847 3,418,793 – 129,859,403
Deposits from customers 983,331 34,417
Deposits and placements 1,952,922 988,552 1,500,854 – – 5,460,076
372,926 –
of banks and other 529,165 – 1,899,275 14,870 – – – 2,801,366
financial institutions - 165,880
Obligations on securities 246 57,095 46,223 274,507 – 230,407 348,841
sold under repurchase 3,262,291 - - 203,726 – - 47,518 3,475,689
agreements – –
Bills and acceptances 28,696 40,399 78,505 – – 737,821 – 1,363,654
payable – –
Other liabilities – –– – – 202,926 – 202,926
Derivative financial – –– – 2,001,642 – 2,001,642
instruments
Recourse obligation on – –– 515,623 – 515,623
loans sold to Cagamas – –– – 173,953 173,953
Tier 2 subordinated bonds – –– – 171,131 171,131
Innovative Tier 1 capital
securities 6,876,805
Taxation
Deferred tax liabilities

Total liabilities 52,342,928 24,499,351 28,025,704 19,596,880 14,409,627 623,009 146,374,304

Total equity –– ––– – 18,442,381 18,442,381
Total liabilities
and equity 52,342,928 24,499,351 28,025,704 19,596,880 14,409,627 6,876,805 19,065,390 164,816,685

Net liquidity gap (30,274,586) (17,835,361) (18,845,733) (16,209,931) (13,018,923) 100,917,694

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

214

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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
2016 based on the remaining contractual maturity:

The Bank
2016

Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No Total
1 week 1 month months months months year specific RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 maturity
RM’000 RM’000
4,203,895 1,453,952
Assets – – – – – 5,657,847
Cash and short-term funds – –
Deposits and placements 1,815,682 303,091 32,676 – – 2,151,449
– 4,056,670
with banks and other – – – – – 4,056,670
financial institutions 21,802 1,734,122
Securities purchased under 2,102,414 90,384 – 1,166,566 – 5,115,288
resale agreements 624,822 97,504
Financial assets 330,395 513,207 626,412 14,704,205 6,959,667 23,856,212
held-for-trading 48 10,145
Financial investments 1,379,218 697,387 902,827 7,016,159 – 10,005,784
available-for-sale 9,537,823 5,860,023
Financial investments 1,156,136 - 5,447,286 2,616,171 585,697 76,012,119 – 100,059,119
held-to-maturity 233,482 1,433,531
Loans, advances and 107,939 68,900 12,742 8,133 3,920 19,118
financing
Other assets – – 59,027 60,261 47,791 655,120 – 999,038
Derivative financial
instruments – – – –– – 14,476 14,476
Amount due from – –
subsidiaries – –– – 3,602,936 3,602,936
Statutory deposits with – – – –– – 1,529,760 1,529,760
Central Banks – –
Subsidiary companies – – – –– – 946,525 946,525
Investment in associated – – – –– – 76,711 76,711
companies – – – –– –
Investment in joint venture 15,652,465 13,281,316 – –– – 714,784 714,784
Property and equipment – –– – 246,784 246,784
Intangible assets 1,771,547 1,771,547
Goodwill 11,146,764 4,288,634 2,199,323 99,573,287
16,096,672 162,238,461
Total assets

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

215

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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
2016 based on the remaining contractual maturity: (continued)

The Bank
2016

Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No Total
1 week 1 month months months months year specific RM’000
RM’000 RM’000 RM’000 RM’000 RM’000 maturity
RM’000 RM’000

Liabilities 39,874,251 30,842,738 18,973,217 17,297,906 15,192,729 4,059,936 – 126,240,777
Deposits from customers
Deposits and placements 2,087,108 1,082,908 2,556,283 45,271 42,063 – – 5,813,633

of banks and other 230,836 1,562,179 1,701,888 – – – – 3,494,903
financial institutions
Obligations on securities 43,491 6,816 24,201 13,836 4 – 245,604 333,952
sold under repurchase 3,359,205 - - - 110,048
agreements - 65,972 3,535,225
Bills and acceptances
payable 62,472 66,516 163,298 185,088 102,368 952,387 – 1,532,129
Other liabilities – – – – 1,215,643 – – 1,215,643
Derivative financial – – – – – 2,000,840
instruments – 2,000,840
Senior bonds
Tier 2 subordinated bonds – – – – – 521,512 – 521,512
Innovative Tier 1 capital – – – – – – 4,587 4,587
securities – – – – – – 114,527
Taxation 114,527
Deferred tax liabilities 45,657,363 33,561,157 23,418,887 17,542,101 16,662,855 7,534,675
430,690 144,807,728
Total liabilities

Total equity – – – – – – 17,430,733 17,430,733
Total liabilities 45,657,363 33,561,157 23,418,887 17,542,101 16,662,855 7,534,675 17,861,423 162,238,461
and equity

Net liquidity gap (30,004,898) (20,279,841) (12,272,123) (13,253,467) (14,463,532) 92,038,612

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

216

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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

2017

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
156,914,078
Financial liabilities 83,202,914 30,144,990 38,617,452 3,693,534 1,255,188
Deposits from customers 6,957,931
Deposits and placements of 3,753,776 3,039,855 164,300 – –
2,843,774
banks and other financial 28,251 2,427,391 388,132 – – 327,185
institutions 297,817 26,867 2,501 – –
Obligations on securities 3,830,510 – – – – 3,830,510
sold under repurchase
agreements (3,729,159) (2,377,441) (8,265,623) (2,310,471) (1,683,057) (18,365,751)
Bills and acceptances payable 3,770,397 2,456,719 8,757,402 2,680,188 1,705,165 19,369,871
Other liabilities 165,119 66,290
Derivative financial 25,490 27,218 391,031 – 675,148
instruments – – 219,130
- Gross settled derivatives – 3,791 3,853 211,486 – 2,621,730
- Inflow – – 110,779 2,510,951 1,343,586 603,294
- Outflow 175,996,900
- Net settled derivatives 91,179,996 20,908 20,568 561,818
Recourse obligation on loans 7,738,537
sold to Cagamas 35,770,298 39,964,483
Tier 2 subordinated bonds
Innovative Tier 1 capital
securities

Total financial liabilities

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

217

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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

2016

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 83,580,380 24,145,665 37,926,373 4,266,104 550,166 150,468,688
Deposits from customers
Deposits and placements of 4,249,201 3,142,329 95,215 – – 7,486,745

banks and other financial 1,567,165 2,213,440 – – – 3,780,605
institutions 305,688 3,244 1,665 – – 310,597
Obligations on securities 3,688,728 – – – 3,688,728
sold under repurchase –
agreements
Bills and acceptances payable (4,345,877) (4,249,119) (5,254,768) (2,881,709) (1,842,714) (18,574,187)
Other liabilities 4,397,314 4,405,410 5,558,625 3,364,296 1,910,265 19,635,910
Derivative financial 24,788
instruments – 39,267 289,987 529,559 13,892 897,493
- Gross settled derivatives – – 1,247,555 – – 1,247,555
- Inflow – – 2,732,536
- Outflow 110,805 2,621,731
- Net settled derivatives
Senior bonds – 21,021 20,229 603,295 – 644,545
Tier 2 subordinated bonds 1,631 3,244 14,467 173,790 344,982 538,114
Innovative Tier 1 capital
securities 93,469,018 29,724,501 40,010,153 8,677,066 976,591 172,857,329
Borrowings

Total financial liabilities

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

218

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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

2017

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 69,660,461 24,776,257 32,323,110 3,316,225 513,054 130,589,107
Deposits from customers
Deposits and placements of 3,041,178 3,032,043 164,300 – – 6,237,521

banks and other financial – 2,427,391 388,132 – – 2,815,523
institutions 284,433
Obligations on securities 3,290,832 26,867 2,501 – – 313,801
sold under repurchase
agreements (3,602,915) – – – – 3,290,832
Bills and acceptances payable 3,642,483
Other liabilities (2,262,798) (8,265,185) (2,310,471) (1,683,057) (18,124,426)
Derivative financial 24,288 2,340,137 8,756,953 2,680,188 1,705,165 19,124,926
instruments – 31,047 38,992 635,657
- Gross settled derivatives – 169,466 371,864
- Inflow –
- Outflow 3,791 3,853 211,486 – 219,130
- Net settled derivatives 76,340,760 – – 2,183,436
Recourse obligation on loans 91,632 2,091,804
sold to Cagamas
Tier 2 subordinated bonds 20,908 20,568 561,818 – 603,294
Innovative Tier 1 capital 6,922,914 574,154 147,888,801
securities 30,395,643 33,655,330

Total financial liabilities

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

219

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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

2016

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 70,882,393 19,224,389 32,898,042 3,768,819 550,166 127,323,809
Deposits from customers
Deposits and placements of 3,736,381 2,829,175 95,215 – – 6,660,771

banks and other financial 1,567,165 2,213,440 – – – 3,780,605
institutions 292,582
Obligations on securities 3,396,953 2,899 1,383 – – 296,864
sold under repurchase
agreements (4,197,152) – – – – 3,396,953
Bills and acceptances payable 4,247,996
Other liabilities (4,018,504) (5,194,374) (2,881,709) (1,842,714) (18,134,453)
Derivative financial 24,651 4,166,697 5,497,169 3,364,296 1,910,265 19,186,423
instruments – 285,896
- Gross settled derivatives – 38,624 1,247,555 510,742 13,892 873,805
- Inflow – – – – 1,247,555
- Outflow – 91,500 – 2,274,936
- Net settled derivatives 79,950,969 2,183,436
Senior bonds
Tier 2 subordinated bonds 21,021 20,229 603,295 – 644,545
Innovative Tier 1 capital 24,477,741 34,942,615 7,548,879 631,609 147,551,813
securities

Total financial liabilities

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

220

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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
2017 1 year 1 year RM’000
RM’000
RM’000

Direct credit substitutes 31,628 50,157 81,785
Short-term self liquidating trade related contingencies 433,912 47,352 481,264
Irrevocable commitments to extend credit 16,097,927 13,257,147 29,355,074
Unutilised credit card lines 7,001,256 7,001,256
–
Total commitments and contingencies 23,564,723 36,919,379
13,354,656

2016 119,525 1,153 120,678
370,876 48,970 419,846
Direct credit substitutes 17,512,946 16,125,180 33,638,126
Short-term self liquidating trade related contingencies 7,503,020 7,503,020
Irrevocable commitments to extend credit –
Unutilised credit card lines 25,506,367 41,681,670
Total commitments and contingencies 16,175,303

The Bank Less than Over Total
2017 1 year 1 year RM’000
RM’000
Direct credit substitutes RM’000
Short-term self liquidating trade related contingencies
Irrevocable commitments to extend credit 28,230 157 28,387
Unutilised credit card lines 398,680 47,352 446,032
Total commitments and contingencies 14,562,467 9,601,053 24,163,520
7,001,256 7,001,256
–
21,990,633 31,639,195
9,648,562

2016

Direct credit substitutes 116,371 70 116,441 HONG LEONG BANK BERHAD
Short-term self liquidating trade related contingencies 350,651 40,031 390,682 ANNUAL REPORT 2017
Irrevocable commitments to extend credit 15,734,240 12,612,922 28,347,162
Unutilised credit card lines 7,503,020 7,503,020
–
Total commitments and contingencies 23,704,282 36,357,305
12,653,023

Undrawn loan commitments are recognised at activation stage and include commitments which are unconditionally 221
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.

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 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.

The Group

2017 2016
RM’000 RM’000

Credit risk exposure relating to on-balance sheet assets: 9,956,192 8,310,628
300,880 4,056,670
Short-term funds and placements with banks and
other financial institutions (exclude cash in hand) 5,688,165 5,308,437
Securities purchased under resale agreements 21,846,485 18,923,553
Financial assets and investments portfolios (exclude shares 13,060,070 11,771,301
and wholesale fund): 123,990,941 119,458,051
1,585,333
- Financial assets held-for-trading 1,295,179
- Financial investments available-for-sale 953,042 1,012,367
- Financial investments held-to-maturity
Loans, advances and financing 36,919,379 41,681,670
Other assets 214,010,333 212,108,010
Derivative assets

Credit risk exposure relating to off-balance sheet items:

Credit related commitments and contingencies
Total maximum credit risk exposure

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

222

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
(i) Maximum exposure to credit risk (continued)

The Bank

2017 2016
RM’000 RM’000

Credit risk exposure relating to on-balance sheet assets:

Short-term funds and placements with banks and 9,050,170 6,673,083
other financial institutions (exclude cash in hand) 300,880 4,056,670
Securities purchased under resale agreements
Financial assets and investments portfolios (exclude shares 5,405,310 5,113,484
and wholesale fund): 19,078,547 16,896,447
10,408,259 10,005,250
- Financial assets held-for-trading 102,538,550 100,059,119
- Financial investments available-for-sale
- Financial investments held-to-maturity 1,201,778 1,352,243
Loans, advances and financing 13,484 14,476
Other assets 947,583
Amount due from subsidiaries 999,038
Derivative assets

Credit risk exposure relating to off-balance sheet items:

Credit related commitments and contingencies 31,639,195 36,357,305
Total maximum credit risk exposure 180,583,756 181,527,115

(ii) Collaterals HONG LEONG BANK BERHAD
The main types of collateral obtained by the Group and the Bank are as follows ANNUAL REPORT 2017
(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 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 85.28% (2016: 84.05%)
and 84.85% (2016: 83.81%) respectively. The financial effects of collateral held for the remaining financial assets
are insignificant.

223

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
(iii) Credit quality
The Group and the Bank assess credit quality of loans, advances and financing using internal rating techniques
tailored to the various categories of products and counterparties. These techniques have been developed internally
and combine statistical analysis with credit officers judgement.
The credit quality of financial assets other than loans, advances and financing are determined based on the ratings
of counterparties as defined by Moody’s or equivalent ratings of other internationals rating agencies as defined
below:
- AAA to AA3
- A1 to A3
- Baa1 to Baa3
- P1 to P3
(a) Loans, advances and financing
Loans, advances and financing are summarised as follows:

The Group The Bank

Neither past due nor impaired 2017 2016 2017 2016
Past due but not impaired RM’000 RM’000 RM’000 RM’000
Individually impaired
Gross loans, advances and financing 116,427,519 112,213,031 96,710,351 94,259,009
7,515,545 7,435,026 5,787,961 5,958,004
Fair value changes arising from 1,203,440 956,579 1,017,982
fair value hedges 836,568

Unamortised fair value changes arising 125,146,504 120,604,636 103,516,294 101,053,581
from terminated fair value hedges
(34) – (34) –
Less: Allowance for impaired loans,
advances and financing (36) (784) – 26

- Individual assessment allowance (325,426) (289,744) (310,923) (280,216)
- Collective assessment allowance (830,067) (856,057) (666,787) (714,272)
Net loans, advances and financing
123,990,941 119,458,051 102,538,550 100,059,119

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

224

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
(iii) Credit quality (continued)
(a) Loans, advances and financing (continued)
(i) Loans, advances and financing neither past due nor impaired
Analysis of loans, advances and financing that are neither past due nor impaired analysed based on the
Group’s and the Bank’s credit grading system is as follows:

The Group The Bank

2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

Consumer loans/financing 84,893,412 80,222,051 70,208,652 67,104,530
Risk Grade 408,017 382,298 395,815 374,844
Good
Weakest 85,301,429 80,604,349 70,604,467 67,479,374

Corporates loans/financing

Risk Grade Credit Quality

A Exceptional 979,207 1,015,687 620,572 479,981
3,286,343 2,829,101 2,107,371 2,212,047
B+ Superior 5,105,050 5,361,051 4,372,311 4,705,633
5,987,873 5,921,342 5,117,836 5,110,505
B Excellent 5,179,776 5,945,392 4,451,494 5,407,145
6,769,870 7,046,394 5,765,541 5,742,515
B- Strong 2,790,420 2,575,544 2,759,077 2,293,147
426,452
C+ Good 508,591 509,732 183,846 447,908
189,345 88,609 301,384 85,144
C Satisfactory 329,615 315,830
26,105,884 295,610
C- Fair 31,126,090 31,608,682
96,710,351 26,779,635
D+ Adequate 116,427,519 112,213,031
94,259,009
D Marginal

Un-graded

Total neither past due nor impaired

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

225

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
(iii) Credit quality (continued)
(a) Loans, advances and financing (continued)
(ii) Loans, advances and financing past due but not impaired
A financial asset is defined as “past due” when the counterparty has failed to make a principal or interest
payment when contractually due.
Loans, advances and financing less than 90 days past due are not considered impaired, unless other
information is available to indicate the contrary. Gross amount of loans, advances and financing by class to
customers that were past due but not impaired were as follows:

The Group The Bank

Past due less than 30 days 2017 2016 2017 2016
Past due 30 to less than 60 days RM’000 RM’000 RM’000 RM’000
Past due 60 to less than 90 days
5,130,954 5,176,331 3,978,685 4,185,974
Past due but not impaired 1,667,456 1,681,913 1,265,428 1,312,643

717,135 576,782 543,848 459,387

7,515,545 7,435,026 5,787,961 5,958,004

(iii) Loans, advances and financing that are determined to be impaired as at 30 June 2017 and 30 June 2016 are
as follows:

The Group The Bank

Gross amount of impaired loans 2017 2016 2017 2016
Less: Individual assessment RM’000 RM’000 RM’000 RM’000
impairment allowance 1,203,440 956,579 1,017,982 836,568
Less: Collective assessment
impairment allowance (325,426) (289,744) (310,923) (280,216)

Total net amount impaired loans (215,618) (228,903) (170,759) (180,201)
662,396 437,932 536,300 376,151

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

226

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
(iii) Credit quality (continued)
(b) Other financial assets
Analysis of other financial assets by rating agency designation (where applicable) as at 30 June 2017, based on
Moody’s ratings or its equivalent are as follows:

Short-term
funds and
deposits and
placements Securities
with banks purchased Financial Financial Financial
and other under assets investments investments
financial resale available- held-to- Other Derivative
The Group institutions* agreements^ held-for- for-sale# maturity# assets assets
2017 RM’000 RM’000 trading# RM’000 RM’000 RM’000 RM’000
Neither past due RM’000

nor impaired 1,894,731 – 3,055,710 6,163,966 447,600 – 136,073
AAA to AA3 861,992 – 1,720,399 3,725,266 – – 588,519
A1 to A3 580,208 – – –
Baa1 to Baa3 – – 38,888 734,692 – – 8,177
P1 to P3 300,880 – 105,323 1,295,179 –
Non-rated 6,619,261 11,117,238 12,612,470
873,168 220,273
9,956,192 21,846,485
300,880 5,688,165 13,060,070 1,295,179 953,042

The amount of short-term funds and deposits and placements with banks and other financial institutions,
securities purchased under resale agreements, financial assets and investment portfolios, other assets and
derivative assets that are past due but not impaired is not material.
* Placements with banks and other financial institutions with no ratings mainly comprise placements with BNM.
^ Comprises securities purchased under resale agreements with local financial institutions.
# Securities with no ratings consist of government securities.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

227

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
(iii) Credit quality (continued)
(b) Other financial assets (continued)
Analysis of other financial assets by rating agency designation (where applicable) as at 30 June 2016, based on
Moody’s ratings or its equivalent are as follows

Short-term Securities Financial Financial Financial
funds and purchased assets investments investments
deposits and available- held-to- Other Derivative
The Group placements under held-for- for-sale# maturity# assets assets
2016 with banks resale trading# RM’000 RM’000 RM’000
Neither past due and other agreements^ RM’000 RM’000
RM’000
nor impaired financial
AAA to AA3 institutions*
A1 to A3
Baa1 to Baa3 RM’000
P1 to P3
Non-rated 1,442,426 – 356,530 6,399,776 325,165 – 99,518
3,470,836 – 562,145 4,363,738 – – 664,886
– 20,599 – –
23,364 – 782,136 – – 26,411
– 4,056,670 5,028 10,159 1,585,333 –
4,364,135 11,446,136
3,374,002 7,367,744 1,585,333 221,552
4,056,670 5,308,437 11,771,301
8,310,628 18,923,553 1,012,367

The amount of short-term funds and deposits and placements with banks and other financial institutions,
securities purchased under resale agreements, financial assets and investment portfolios, other assets and
derivative assets that are past due but not impaired is not material.
* Placements with banks and other financial institutions with no ratings mainly comprise placements with BNM.
^ Comprises securities purchased under resale agreements with local financial institutions.
# Securities with no ratings consist of government securities.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

228

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
(iii) Credit quality (continued)
(b) Other financial assets (continued)
Analysis of other financial assets by rating agency designation (where applicable) as at 30 June 2017, based on
Moody’s ratings or its equivalent are as follows:

Short-term
funds and
deposits and
placements Securities
with banks purchased Financial Financial Financial
and other under assets investments investments Amount
financial resale Other due from Derivative
The Bank institutions* agreements^ held-for- available- held-to- assets subsidiaries assets
2017 RM’000 RM’000 trading# for-sale# maturity# RM’000 RM’000
RM’000 RM’000 RM’000 RM’000
Neither past
due nor 1,793,058 – 2,637,224 5,277,436 447,600 – – 136,073
impaired 762,913 – 1,720,399 3,712,999 – – – 578,670
578,647 – 38,888 – – –
AAA to AA3 – –– 734,692 – – – 8,177
A1 to A3 300,880 1,008,799 105,323 1,201,778 13,484 –
Baa1 to Baa3 5,915,552 9,248,097 9,960,659
P1 to P3 13,484 224,663
Non-rated 9,050,170
947,583
300,880 5,405,310 19,078,547 10,408,259 1,201,778

The amount of short-term funds and deposits and placements with banks and other financial institutions,
securities purchased under resale agreements, financial assets and investment portfolios, other assets and
derivative assets that are past due but not impaired is not material.
* Placements with banks and other financial institutions with no ratings mainly comprise placements with BNM.
^ Comprises securities purchased under resale agreements with local financial institutions.
# Securities with no ratings consist of government securities.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

229

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
(iii) Credit quality (continued)
(b) Other financial assets (continued)
Analysis of other financial assets by rating agency designation (where applicable) as at 30 June 2016, based on
Moody’s ratings or its equivalent are as follows:

Short-term
funds and
deposits and
placements Securities
with banks purchased Financial Financial Financial
and other under assets investments investments Amount
financial resale Other due from Derivative
The Bank institutions* agreements^ held-for- available- held-to- assets subsidiaries assets
2016 RM’000 RM’000 trading# for-sale# maturity# RM’000
RM’000 RM’000 RM’000 RM’000 RM’000
Neither past
due nor 1,191,804 – 356,530 5,553,555 314,937 – – 99,519
impaired 3,134,241 – 562,145 4,275,009 – 641,274
– 20,599 –– – 26,411
AAA to AA3 7,076 – 778,091 –
A1 to A3 – 4,056,670 5,028 10,159 –– 14,476 –
Baa1 to Baa3 4,169,182 231,834
P1 to P3 2,339,962 6,279,633 –– 14,476
Non-rated 999,038
6,673,083 16,896,447 9,690,313 1,352,243

4,056,670 5,113,484 10,005,250 1,352,243

The amount of short-term funds and deposits and placements with banks and other financial institutions,
securities purchased under resale agreements, financial assets and investment portfolios, other assets and
derivative assets that are past due but not impaired is not material.
* Placements with banks and other financial institutions with no ratings mainly comprise placements with BNM.
^ Comprises securities purchased under resale agreements with local financial institutions.
# Securities with no ratings consist of government securities.

(iv) Repossessed collaterals

The Group The Bank

2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

HONG LEONG BANK BERHAD Industrial and residential properties, 146,604 147,249 125,068 131,629
ANNUAL REPORT 2017 lands and automobiles

Repossessed collaterals are made available-for-sale in an orderly fashion, with the proceeds used to reduce or repay
the outstanding indebtedness. The Group and the Bank generally do not utilise the repossessed collaterals for its
business use.

230

47 FINANCIAL INSTRUMENTS (CONTINUED) Notes to the Financial Statements
(d) Credit risk (continued)
Credit risk exposure analysed by industry in respect of the Group’s and the Bank’s financial assets are set out below: for the financial year ended 30 June 2017

The Group
2017

Short-term
funds and
placements Securities Undrawn Guarantees,
with banks purchased Financial Financial Financial Loans, loan endorsements
and other under assets investments investments advances Total
financial resale available- held-to- Other Derivative credit risk commitments and other
institutions agreements held-for- for-sale maturity and assets assets exposures and other contingent
RM’000 RM’000 trading RM’000 RM’000 financing RM’000 facilities
RM’000 RM’000 RM’000 RM’000 items
RM’000 – RM’000
Agriculture – – – 64,756 – – – 2,758,205 1,044,645
– – – 43,812 – 2,693,449 – – 305,040 79,247 83
Mining and quarrying – – – 34,610 – 261,228 – –
8,881,019 6,421,783
Manufacturing 8,846,409 180,192

Electricity, gas and – – 25,689 2,207,950 – 192,950 – – 2,426,589 77,583 674
water
– – – 299,594 – 2,441,120 – – 2,740,714 1,901,560 5,443
Construction
– – – 65,234 – 10,228,205 – – 10,293,439 4,969,794 235,875
Wholesale and retail
– – – 416,628 – 2,932,632 – – 3,349,260 676,862 7,395
Transport, storage and
communications 5,390,256 – 4,276,825 10,588,828 32,066 9,644,935 1,277,669 953,042 32,163,621 3,086,173 128,490

Finance, insurance, 4,565,936 300,880 1,385,651 8,013,129 13,028,004 – 17,510 – 27,311,110 – 200
real estate and
– –– – – 1,927,915 – – 1,927,915 248,723 –
business services – –– – – 84,109,089 – – 84,109,089 17,756,977 4,296
– –– 111,944 – 713,009 – –
Government and 9,956,192 824,953 92,983 401
government 300,880 5,688,165 21,846,485 13,060,070 123,990,941 1,295,179 953,042 36,356,330 563,049
177,090,954
agencies

Education, health and
others

Household

Others

FINANCIALS

231 HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

232
HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
Credit risk exposure analysed by industry in respect of the Group’s and the Bank’s financial assets are set out below: (continued)

The Group
2016

Short-term Securities Financial Financial Financial Loans, Other Derivative Total Undrawn Guarantees,
funds and purchased assets investments investments advances assets assets credit risk loan endorsements
placements RM’000 exposures
with banks under held-for- available- held-to- and RM’000 commitments and other
and other resale trading for-sale maturity financing – RM’000 and other contingent
agreements RM’000 RM’000 RM’000 – – facilities
financial RM’000 RM’000 – – RM’000 items
institutions 50,191 – RM’000
– – 2,800,195
Agriculture RM’000 – – 60,575 – 347,776 2,910,961 896,679 1,184
– 41,383 – 389,159 186,823 –
Mining and quarrying – 48,842 – 8,921,822 6,497,895
– 8,970,664 145,388
Manufacturing –

Electricity, gas and – – 40,759 2,042,133 – 167,402 – – 2,250,294 183,603 –
water
– – – 659,642 – 2,293,560 – – 2,953,202 1,568,446 15,391
Construction
– –– – – 10,027,519 – – 10,027,519 6,158,637 202,727
Wholesale and retail
– – 249,500 504,818 – 2,418,559 – – 3,172,877 505,001 5,408
Transport, storage and
communications 6,392,869 – 4,423,969 9,594,022 62,422 9,350,683 1,565,034 1,012,367 32,401,366 3,724,003 164,971

Finance, insurance, 1,917,759 4,056,670 544,018 5,669,293 11,708,879 – 20,299 – 23,916,918 – 202
real estate and
business services – – – – – 2,113,462 – – 2,113,462 468,984 –
– – – – – 79,874,894 – – 79,874,894 20,522,701 1,387
Government and – – – 302,845 – – – 3,866
government 8,310,628 18,923,553 1,142,179 1,445,024 428,374 540,524
4,056,670 5,308,437 11,771,301 1,585,333 1,012,367 41,141,146
agencies 119,458,051 170,426,340

Education, health and
others

Household

Others

47 FINANCIAL INSTRUMENTS (CONTINUED) Notes to the Financial Statements
(d) Credit risk (continued)
Credit risk exposure analysed by industry in respect of the Group’s and the Bank’s financial assets are set out below: (continued) for the financial year ended 30 June 2017

The Bank

2017

Short-term
funds and
placements Securities Undrawn Guarantees,
with banks purchased Financial Financial Financial Loans, loan endorsements
and other under assets investments investments advances Amount Total commitments and other
financial resale held-for- available- held-to- Other due from Derivative credit risk and other contingent
institutions agreements trading for-sale maturity and assets subsidiaries assets exposures facilities items
RM’000 RM’000 RM’000 RM’000 RM’000 financing RM’000 RM’000 RM’000 RM’000 RM’000
RM’000
Agriculture –– – 64,756 – RM’000 –– – 1,858,880 586,807 83
1,794,124 –
Mining and quarrying –– – 43,812 – 209,368 –– – 253,180 77,926 –
8,076,680
Manufacturing –– – 34,610 – –– 8,111,290 5,514,135 176,713

Electricity, gas and – – 25,689 1,843,666 – 139,509 – – – 2,008,864 63,962 674
water
– – – 218,752 – 2,084,697 – – – 2,303,449 1,549,823 3,700
Construction
– – – 65,234 – 9,351,160 – – – 9,416,394 4,504,382 212,474
Wholesale and retail
– – – 267,838 – 2,483,611 – – – 2,751,449 615,647 5,494
Transport, storage and
5,213,753 – 4,358,256 10,081,651 32,066 8,443,719 1,184,277 13,484 947,583 30,274,789 2,496,601 70,785
communications
3,836,417 300,880 1,021,365 6,346,284 10,376,193 – 17,501 – – 21,898,640 – 200
Finance, insurance,
real estate and – –– – – 1,107,227 – – – 1,107,227 191,541 –
business services – –– – – 68,694,445 – – – 68,694,445 15,470,970 4,296
– –– 111,944 – 154,010 – – – 265,954
Government and 9,050,170 13,484 947,583 148,944,561 92,982 –
government 300,880 5,405,310 19,078,547 31,164,776 474,419
agencies

Education, health and
others

Household

Others

10,408,259 102,538,550 1,201,778

FINANCIALS

233 HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

234
HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

47 FINANCIAL INSTRUMENTS (CONTINUED)
(d) Credit risk (continued)
Credit risk exposure analysed by industry in respect of the Group’s and the Bank’s financial assets are set out below: (continued)

The Bank

2016

Short-term
funds and
placements Securities Undrawn Guarantees,
with banks purchased Financial Financial Financial Loans, loan endorsements
and other under assets investments investments advances Amount Total commitments and other
financial resale held-for- available- Other due from Derivative credit risk and other contingent
institutions agreements trading for-sale held-to- and assets subsidiaries assets exposures facilities items
RM’000 RM’000 RM’000 RM’000 maturity financing RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
RM’000
Agriculture –– 50,191 60,575 RM’000 – –– 2,141,057 687,356 205
– 2,030,291
Mining and quarrying –– – 41,383 – – –– 381,092 184,043 –
– 339,709
Manufacturing –– – 48,842 8,185,600 – –– 8,234,442 5,713,345 143,558

Electricity, gas and – – 40,759 1,826,416 – 105,662 – – – 1,972,837 122,980 –
water – – – 538,036 – 1,966,893 –
– –– – – 9,347,686 – – – 2,504,929 1,282,654 13,665
Construction
– – 9,347,686 5,770,151 187,065
Wholesale and retail
– – 249,500 468,917 – 1,961,584 – – – 2,680,001 484,069 3,718
Transport, storage and
communications 5,557,549 – 4,374,088 9,092,506 554,145 7,766,411 1,332,046 14,476 999,038 29,690,259 2,958,850 155,714

Finance, insurance, 1,115,534 4,056,670 398,946 4,531,060 9,451,105 – 20,197 – – 19,573,512 – 202
real estate and
– – – – – 1,494,432 – – – 1,494,432 225,866 –
business services – – – – – 66,123,896 – – – 66,123,896 18,035,891 1,387
– – – 288,712 – 736,955 – – – 1,025,667 1,609
Government and 384,977 507,123
government 6,673,083 4,056,670 5,113,484 16,896,447 14,476 999,038 145,169,810 35,850,182
agencies

Education, health and
others

Household

Others

10,005,250 100,059,119 1,352,243

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments comprise financial assets and financial liabilities. 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 at the measurement date. The
information presented herein represents the estimates of fair values as at the statements of financial position date.
Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and
observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions
regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors.
Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates.
(a) Determination of fair value and fair value hierarchy
The Group and the Bank measure fair values using the following fair value hierarchy that reflects the significance of the

inputs used in making the measurements:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations

in which inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are not based on observable
market data.
Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are
valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted
prices is readily available, and the price represents actual and regularly occurring market transactions. An active market
is one in which transactions occur with sufficient volume and frequency to provide pricing information on an on-going
basis. These would include actively traded listed equities and actively exchange-traded derivatives.
Where fair value is determined using unquoted market prices in less active markets or quoted prices for similar assets
and liabilities, such instruments are generally classified as Level 2.
In cases where quoted prices are generally not available, the Group then determines fair value based upon valuation
techniques that use as inputs, market parameters including but not limited to yield curves, volatilities and foreign
exchange rates. The majority of valuation techniques employ only observable market data and so reliability of the fair
value measurement is high.
Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on
observable market data (unobservable inputs). Such inputs are generally determined based on observable inputs of a
similar nature, historical observations on the level of the input or other analytical techniques.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

235

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Determination of fair value and fair value hierarchy (continued)
The table below analyses financial instruments carried at fair value analysed by level within the fair value hierarchy:

The Group

2017
Fair value

Level 1 Level 2 Level 3 Total
RM’000 RM’000 RM’000 RM’000

Recurring fair value measurements – 5,113,268 – 5,113,268
Financial Assets 258,452 – – 258,452
Financial assets held-for-trading – 316,445
- Money market instrument – 316,445
- Quoted securities – 6,640,333
- Unquoted securities – 6,640,333 – 10,077,526
Financial investments available-for-sale 10,077,526 – 454,760 10,936,358
- Money market instrument 8,568
- Quoted securities – 10,481,598 463,328 953,042
- Unquoted securities 18 944,456 34,295,424
Derivative financial instruments 10,335,996
23,496,100

Financial Liabilities 1,228 1,395,856 8,568 1,405,652
Derivative financial instruments
Financial liabilities designated at fair value – 2,480,925 – 2,480,925
- Callable range accrual notes and 1,228 3,876,781 8,568 3,886,577
Callable inverse floater

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which
the transfer has occurred. The fair value of an asset to be transferred between levels is determined as of the date of the
event or change in circumstances that caused the transfer. There were no transfers between Level 1 and Level 2 of the
fair value hierarchy during the financial year (2016: RM Nil).

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

236

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Determination of fair value and fair value hierarchy (continued)
The table below analyses financial instruments carried at fair value analysed by level within the fair value hierarchy:
(continued)

The Group

2016
Fair value

Level 1 Level 2 Level 3 Total
RM’000 RM’000 RM’000 RM’000

Recurring fair value measurements – 4,436,353 – 4,436,353
Financial Assets 554,287 – – 554,287
Financial assets held-for-trading – 319,601
- Money market instrument – 319,601
- Quoted securities – 5,589,162
- Unquoted securities – 5,589,162 – 11,642,510
Financial investments available-for-sale 11,642,510 – 427,328 8,651,646
- Money market instrument 7,995 1,012,367
- Quoted securities – 8,224,318 435,323 32,205,926
- Unquoted securities 11 1,004,361
Derivative financial instruments 12,196,808 19,573,795

Financial Liabilities 1,564 1,540,323 7,995 1,549,882
Derivative financial instruments
Financial liabilities designated at fair value – 1,421,919 – 1,421,919
- Callable range accrual notes 1,564 2,962,242 7,995 2,971,801

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

237

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Determination of fair value and fair value hierarchy (continued)
The table below analyses financial instruments carried at fair value analysed by level within the fair value hierarchy:
(continued)

The Bank

2017
Fair value

Level 1 Level 2 Level 3 Total
RM’000 RM’000 RM’000 RM’000

Recurring fair value measurements – 5,021,807 – 5,021,807
Financial Assets 258,452 – – 258,452
Financial assets held-for-trading – 125,051
- Money market instrument – 125,051
- Quoted securities – 5,110,048
- Unquoted securities – 5,110,048 – 10,065,260
Financial investments available-for-sale 10,065,260 – 454,760
- Money market instrument 8,568 9,710,972
- Quoted securities – 9,256,212 463,328 947,583
- Unquoted securities 18 938,997
Derivative financial instruments 10,323,730 31,239,173
20,452,115

Financial Liabilities 1,228 1,353,858 8,568 1,363,654
Derivative financial instruments
Financial liabilities designated at fair value – 1,628,683 – 1,628,683
- Callable range accrual notes and 1,228 2,982,541 8,568 2,992,337
Callable inverse floater

The Bank recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which
the transfer has occurred. The fair value of an asset to be transferred between levels is determined as of the date of the
event or change in circumstances that caused the transfer. There were no transfers between Level 1 and Level 2 of the
fair value hierarchy during the financial year (2016: RM Nil).

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

238

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Determination of fair value and fair value hierarchy (continued)
The table below analyses financial instruments carried at fair value analysed by level within the fair value hierarchy:
(continued)

The Bank

2016
Fair value

Level 1 Level 2 Level 3 Total
RM’000 RM’000 RM’000 RM’000

Recurring fair value measurements – 4,241,400 – 4,241,400
Financial Assets 554,287 – – 554,287
Financial assets held-for-trading – 319,601
- Money market instrument – 319,601
- Quoted securities – 4,375,977
- Unquoted securities – 4,375,977 – 11,549,737
Financial investments available-for-sale 11,549,737 – 427,328 7,930,498
- Money market instrument 7,995
- Quoted securities – 7,503,170 435,323 999,038
- Unquoted securities 11 991,032 29,970,538
Derivative financial instruments 12,104,035
17,431,180

Financial Liabilities 1,564 1,522,570 7,995 1,532,129
Derivative financial instruments
Financial liabilities designated at fair value – 1,010,784 – 1,010,784
- Callable range accrual notes 1,564 2,533,354 7,995 2,542,913

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

239

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Determination of fair value and fair value hierarchy (continued)
Reconciliation of fair value measurements in Level 3 of the fair value hierarchy, is as below:

Financial Assets Financial
Liability
The Group Financial Derivative
2017 investments financial Derivative
financial
At 1 July available- instruments
Fair value changes recognised in statements of income for-sale RM’000 instruments
Net fair value changes recognised in other RM’000 RM’000
7,995 7,995
comprehensive income 427,328 7,297 7,297
Purchases –
Settlements
Disposal 31,814 – –
Transfer out from Level 3 – 7,582 7,582
– (14,306) (14,306)
At 30 June
(53) – –
(4,329) – –

454,760 8,568 8,568

Fair value changes recognised in statements of income – 7,297 7,297
relating to assets/liability held on 30 June 2017

Total gain recognised in other comprehensive income 31,814 – –
relating to assets held on 30 June 2017

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

240

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Determination of fair value and fair value hierarchy (continued)
Reconciliation of fair value measurements in Level 3 of the fair value hierarchy, is as below (continued):

Financial Assets Financial
Liability
The Bank Financial Derivative
2017 investments financial Derivative
financial
At 1 July available- instruments
Fair value changes recognised in statements of income for-sale RM’000 instruments
Net fair value changes recognised in other RM’000 RM’000
7,995 7,995
comprehensive income 427,328 7,297 7,297
Purchases –
Settlements
Disposal 31,814 – –
Transfer out from Level 3 – 7,582 7,582
– (14,306) (14,306)
At 30 June
(53) – –
(4,329) – –

454,760 8,568 8,568

Fair value changes recognised in statements of income – 7,297 7,297
relating to assets/liability held on 30 June 2017

Total gain recognised in other comprehensive income 31,814 – –
relating to assets held on 30 June 2017

During the financial year ended 30 June 2017, the Group and the Bank transferred certain financial instruments (mainly
shares outside Malaysia) from Level 3 to Level 2 of the fair value hierarchy. The reason for the transfer was due to
upliftment of conversion restriction whereby certain shares are now convertible to Class A shares which are currently
listed on the New York Stock Exchange. Thus, these shares can now be reliably measured based on observable inputs
under Level 2.

HONG LEONG BANK BERHAD
ANNUAL REPORT 2017

241

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Determination of fair value and fair value hierarchy (continued)
Reconciliation of fair value measurements in Level 3 of the fair value hierarchy, is as below (continued):

Financial Assets Financial
Liability
The Group Financial Derivative
2016 investments financial Derivative
financial
At 1 July available- instruments
Fair value changes recognised in statements of income for-sale RM’000 instruments
Net fair value changes recognised in other RM’000 RM’000
6,952 6,952
comprehensive income 394,887 (3,023) (3,023)
Purchases –
Disposal
32,441 – –
At 30 June – 4,171 4,171
– (105) (105)

427,328 7,995 7,995

Fair value changes recognised in statements of income – (3,023) (3,023)
relating to assets/liability held on 30 June 2016

Total gain recognised in other comprehensive 32,441 – –
income relating to assets held on 30 June 2016

Financial Assets Financial
Liability
The Bank Financial Derivative
2016 investments financial Derivative
financial
At 1 July available- instruments
Fair value changes recognised in statements of income for-sale RM’000 instruments
Net fair value changes recognised in other RM’000 RM’000
6,952 6,952
comprehensive income 394,887 (3,023) (3,023)
Purchases –
Disposal
HONG LEONG BANK BERHAD 32,441 – –
ANNUAL REPORT 2017 At 30 June – 4,171 4,171
– (105) (105)

427,328 7,995 7,995

Fair value changes recognised in statements of income – (3,023) (3,023)
relating to assets/liability held on 30 June 2016

242 Total gain recognised in other comprehensive 32,441 – –
income relating to assets held on 30 June 2016

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Determination of fair value and fair value hierarchy (continued)
Quantitative information about fair value measurements using significant unobservable inputs (Level 3)

The Group and the Bank Valuation Unobservable Range Inter-
Fair value technique(s) input (weighted relationship
Description Fair value
2017 assets liabilities average) between
significant
RM’000 RM’000 unobservable

inputs
and fair value
measurement

Financial investments
available-for-sale

Unquoted shares 454,760 – Net tangible Net tangible Not Higher net
assets assets applicable tangible

assets results
in higher fair

value

Derivative financial
instruments

Monte Carlo Equity volatility +3% to Higher volatility,
Simulation +37% would

Equity derivatives 8,568 (8,568) generally result
in higher fair
valuation for
long volatility
positions and
vice versa

Monte Carlo Equity / FX -10% to An increase in
Simulation Correlation +60% correlation,
would
between
underlyers generally result
in a higher
fair value HONG LEONG BANK BERHAD
ANNUAL REPORT 2017
measurement
and vice versa

243

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Determination of fair value and fair value hierarchy (continued)
Quantitative information about fair value measurements using significant unobservable inputs (Level 3)

The Group and the Bank Valuation Unobservable Range Inter-
Fair value technique(s) input (weighted relationship
Description Fair value
2016 assets liabilities average) between
significant
RM’000 RM’000 unobservable

inputs
and fair value
measurement

Financial investments
available-for-sale

Unquoted shares 427,328 – Net tangible Net tangible Not Higher net
assets assets applicable tangible

assets results
in higher fair

value

Derivative financial
instruments

Monte Carlo Equity volatility +19% to Higher volatility,
Simulation +48% would

Equity derivatives 7,995 (7,995) generally result
in higher fair
valuation for
long volatility
positions and
vice versa

Monte Carlo Equity / FX -51% to An increase in
Simulation Correlation +75% correlation,
would
between
underlyers generally result
in a higher
HONG LEONG BANK BERHAD fair value
ANNUAL REPORT 2017
measurement
and vice versa

244

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(a) Determination of fair value and fair value hierarchy (continued)
Sensitivity analysis for Level 3

The Group and the Bank Type of Sensitivity Effect of reasonably possible
2017 unobservable of significant alternative assumptions to:
unobservable Statements of income
Financial assets input
Derivative financial instruments input Favourable/(Unfavourable) changes
- Equity derivatives RM’000

Equity volatility +10% 514
-10% (529)

Equity / FX +10% 95
Correlation -10% (122)
(42)
Total*

Financial liabilities Equity volatility +10% (514)
Derivative financial instruments -10% 529
- Equity derivatives

Equity / FX +10% (95)
Correlation -10% 122
42
Total*

* No or insignificant impact to the Group. All equity link derivatives with unobservable inputs are hedged back-to-back
with external parties.

The Group and the Bank Type of Sensitivity Effect of reasonably possible
2016 unobservable of significant alternative assumptions to:
unobservable Statements of income
Financial assets input
Derivative financial instruments input Favourable/(Unfavourable) changes
- Equity derivatives RM’000

Equity volatility +10% 617
-10% (569)

Equity / FX +10% 137
Correlation -10% (110)

Total* 75

Financial liabilities Equity volatility +10% (617) HONG LEONG BANK BERHAD
Derivative financial instruments -10% 569 ANNUAL REPORT 2017
- Equity derivatives

Equity / FX +10% (137)

Correlation -10% 110

Total* (75) 245

* No or insignificant impact to the Group. All equity link derivatives with unobservable inputs are hedged back-to-back
with external parties.

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(b) Fair values of financial instruments not carried at fair value
Set out below is the comparison of the carrying amounts and fair values of the financial instruments of the Group and
the Bank which are not carried at fair value in the financial instruments, but for which fair value is disclosed. It does not
include those short term/on demand financial assets and financial liabilities where the carrying amounts are reasonable
approximation of their fair values:

2017 2016
Carrying
Carrying Fair Amount Fair
Amount Value RM’000 Value
RM’000 RM’000 RM’000

The Group 12,059,374 11,998,585 11,210,737 11,243,183
Financial Assets 1,001,230 998,129 561,097 557,850
Financial investments held-to-maturity 123,990,941
- Money market 124,086,471 119,458,051 119,420,041
- Unquoted securities 137,051,545
Loans, advances and financing 137,083,185 131,229,885 131,221,074

Financial Liabilities 152,752,280 153,554,117 147,101,995 148,018,742
Deposits from customers 202,926 201,195 – –
- At amortised cost – –
Recourse obligation on loans sold to Cagamas 1,215,643 1,224,557
Senior bonds 2,402,145 2,398,710 2,401,322 2,401,480
Tier 2 subordinated bonds 515,623 550,590
Innovative Tier 1 capital securities 521,512 565,528
155,872,974 156,704,612
151,240,472 152,210,307

The Bank 9,662,488 9,612,915 9,454,868 9,475,065
Financial Assets 746,305 750,427 550,916 547,643
Financial investments held-to-maturity
- Money market 102,538,550 102,523,943 100,059,119 99,971,492
- Unquoted securities
Loans, advances and financing 112,947,343 112,887,285 110,064,903 109,994,200

HONG LEONG BANK BERHAD Financial Liabilities 128,230,720 128,980,028 125,229,993 126,026,857
ANNUAL REPORT 2017 Deposits from customers 202,926 201,195 – –
- At amortised cost – –
Recourse obligation on loans sold to Cagamas 1,215,643 1,224,557
Senior bonds 2,001,642 1,997,750 2,000,840 2,000,200
Tier 2 subordinated bonds 515,623 550,590
Innovative Tier 1 capital securities 521,512 565,528
130,950,911 131,729,563
246 128,967,988 129,817,142

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(b) Fair values of financial instruments not carried at fair value (continued)
The following table analyses within the fair value hierarchy of the Group’s and the Bank’s assets and liabilities not
measured at fair value at 30 June 2017 but for which fair value is disclosed:

The Group

2017

Carrying Level 1 Fair Value Level 3
Amount RM’000 Level 2 RM’000
RM’000 RM’000

Financial Assets 12,059,374 – 11,998,585 –
Financial investments held-to-maturity 1,001,230 – 997,594 535
- Money market 123,990,941 – 124,086,471
- Unquoted securities –
Loans, advances and financing 137,051,545 – 137,082,650
535

Financial Liabilities 152,752,280 – 153,554,117 –
Deposits from customers 202,926 – 201,195 –
- At amortised cost – 2,398,710 –
Recourse obligation on loans sold to Cagamas 2,402,145 – 550,590 –
Tier 2 subordinated bonds 515,623
Innovative Tier 1 capital securities – 156,704,612 –
155,872,974

The Bank

2017

Carrying Level 1 Fair Value Level 3
Amount RM’000 Level 2 RM’000
RM’000 RM’000

Financial Assets 9,662,488 – 9,612,915 –
Financial investments held-to-maturity 746,305 – 749,892 535
- Money market – 102,523,943
- Unquoted securities 102,538,550 –
Loans, advances and financing – 112,886,750
112,947,343 535

Financial Liabilities 128,230,720 – 128,980,028 – HONG LEONG BANK BERHAD
Deposits from customers 202,926 – 201,195 – ANNUAL REPORT 2017
- At amortised cost – 1,997,750 –
Recourse obligation on loans sold to Cagamas 2,001,642 – 550,590 –
Tier 2 subordinated bonds 515,623
Innovative Tier 1 capital securities – 131,729,563 – 247
130,950,911

FINANCIALS

Notes to the Financial Statements

for the financial year ended 30 June 2017

48 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(b) Fair values of financial instruments not carried at fair value (continued)
The following table analyses within the fair value hierarchy of the Group’s and the Bank’s assets and liabilities not
measured at fair value at 30 June 2016 but for which fair value is disclosed:

The Group

2016

Carrying Level 1 Fair Value Level 3
Amount RM’000 Level 2 RM’000
RM’000 RM’000

Financial Assets 11,210,737 – 11,243,183 –
Financial investments held-to-maturity 561,097 – 557,315 535
- Money market – 119,420,041
- Unquoted securities 119,458,051 –
Loans, advances and financing – 131,220,539
131,229,885 535

Financial Liabilities 147,101,995 – 148,018,742 –
Deposits from customers 1,215,643 – 1,224,557 –
- At amortised cost 2,401,322 – 2,401,480 –
Senior bonds 521,512 – 565,528 –
Tier 2 subordinated bonds
Innovative Tier 1 capital securities 151,240,472 – 152,210,307 –

The Bank

2016

Carrying Level 1 Fair Value Level 3
Amount RM’000 Level 2 RM’000
RM’000 RM’000

Financial Assets 9,454,868 – 9,475,065 –
Financial investments held-to-maturity 550,916 – 547,108 535
- Money market – 99,971,492
- Unquoted securities 100,059,119 –
Loans, advances and financing – 109,993,665
110,064,903 535

HONG LEONG BANK BERHAD Financial Liabilities 125,229,993 – 126,026,857 –
ANNUAL REPORT 2017 Deposits from customers 1,215,643 – 1,224,557 –
- At amortised cost 2,000,840 – 2,000,200 –
Senior bonds 521,512 – 565,528 –
Tier 2 subordinated bonds
Innovative Tier 1 capital securities 128,967,988 – 129,817,142 –

248