· citibank berhad annual report 2013 corporate information chairman’s statement ceo’s...

Cit ibank Berhad ANNUAL REPORT 2013

CORPORATE INFORMATIONChairman’s Statement

CEO’s Statement

Awards & Accolades

Board Of Directors

Directors‘ Profile

Corporate Citizenship At Citi

Valuing Our People

GOVERNANCEStatement Of Corporate Governance

Risk Management

Statement Of Internal Audit And Internal Control

Management Reports

Shariah Committee

Ratings Statement

FINANCIALSTATEMENTSDirectors’ Report

Statement By Directors

Declaration Pursuant

Shariah Committee‘s Report

Independent Auditors’ Report

Statement Of Financial Position

Statement Of Profit Or LossAnd Other Comprehensive Income

Statement Of Changes In Equity

Statement Of Cash Flows

Notes To The Financial Statements

CONTENTS

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Registered Office45th Floor, Menara Citibank, 165 Jalan Ampang50450 Kuala Lumpur

Date of Incorporation22 April, 1994

AuditorsKPMG

Citibank Berhad ANNUAL REPORT 2013

Malaysia is a significant

market for Citigroup. We have

been operating in the country

for over 55 years and have

grown with the nation

through all economic cycles.

“

”

I am pleased to present to you Citibank Malaysia’s annual report for the financial year 2013. It has been a year of strong performance despite the market challenges, regulatory changes and competition.

On behalf of the Board of Directors, I would like to express our appreciation to Mr. Anil Wadhwani, our non-independent, non-executive director, for his contribution during his tenure with our Board. He resigned on 11 October, 2013.

Malaysia is a significant market for Citigroup. We have been operating in the country for over 55 years and have grown with the nation through all economic cycles. As the country makes progressive strides in its national transformation efforts to become a high income nation by 2020, we are confident that we can contribute in a larger way to the evolution of the financial services sector.

We move into 2014, mindful of the challenges ahead. Industry expectations point to moderate growth due to rising prices, global uncertainties and inflation, amongst other factors. As a Bank, we will continue to leverage our global strengths and network to provide a distinctive and remarkable client experience for all of our customers.

I thank my fellow Board colleagues, senior management and all employees of Citibank Malaysia, for their unwavering commitment and support during the financial year. We have a shared mission, one with a common purpose to bring world class financial services, built on good ethics and responsible financing, to the markets that we serve. The future is one of tremendous opportunity for growth. We look ahead, confident that we can make a difference.

Terence Kent CuddyreChairman

CHAIRMAN’S STATEMENT


03

OVERVIEW

The year 2013 ended on a positive note for the Malaysian economy, amid global volatility and concerns on stimulus taper effects by the US Federal Reserve’s easing and its impact on emerging market economies.

Moving into 2014, the sluggish global economy showed signs of recovery and growth after a three-year slowdown. Malaysia’s national transformation agenda to create a high income and developed nation by 2020 charted significant progress. The country’s resilience in weathering the uncertainties abroad underscored its robust domestic demand and strong economic fundamentals. GDP growth in 2013 stood at 4.7%.

In the World Bank Doing Business Report 2013, Malaysia moved six rankings up from 8th to 12th position. Malaysia was also top for five years from 2009 to 2013 for access to credit. In terms of global competitiveness, the World Economic Forum Global Competitiveness Report 2013-2014 revealed Malaysia as the second most competitive nation in ASEAN and 7th among 25 Asia Pacific countries.

Malaysia’s financial services sector continued to be strong and well capitalised with a high risk-weighted capital adequacy ratio of 14.3% and low net impaired loans ratio of 1.4%. Nevertheless, the industry expects moderate earnings growth in 2014 given rising risks and margin compression.

On the regulatory front, the Financial Services Act 2013 (FSA) and Islamic Financial Services Act 2013 (IFSA) came into force in June 2013, further strengthening the financial sector regulatory and supervisory framework under a single legislative charter for conventional and Islamic financial services.

Consequently, the Banking and Financial Institutions Act 1989 (BAFIA), Islamic Banking Act 1983, Insurance Act 1996, Takaful Act 1984, Payment Systems Act 2003 and Exchange Control Act 1953 were repealed on the same date.

PERFORMANCE HIGHLIGHTS

Citibank recorded pre-tax profit of RM717 million for the financial year ended December 31, 2013. The steady performance although marginally lower than the RM790 million recorded the previous year, was boosted by the Bank’s high levels of capital, liquidity and operating cash flows.

CEO’S STATEMENT

Total net income was RM533 million in 2013. Net interest income totalled RM1.09 billion in 2013 while non-interest income stood at RM617 million.

During the same period, the Bank’s return on equity before tax was a solid 16.6%. Liquidity continues to be exceptionally strong, with cash and short-term funds and placements with financial institutions in excess of RM11.69 billion. The Bank’s Risk Weighted Capital Adequacy Ratio stood at 16.5%.

OPERATIONS REVIEW 2013

Citibank has been at the forefront of technology innovation for the financial services sector since 1959 when we first opened our doors for business in Malaysia. The Bank has been a prime mover, leveraging on our extensive global network.

We continued in 2013 to drive major innovative campaigns across our different product lines, reinforcing our position as one of the leading global banks in the country.

Citibank has been a pillar of support to local companies and multinational companies growing their business in Malaysia and in the region. Despite increased competition following the introduction of more liberalisation measures in the financial industry, we remained the Bank of choice

bond trading, securities clearing and settlement, and cash management.

The year 2013 also set a new milestone for us in technology innovation when Malaysia became the first country in Asia Pacific to successfully implement Go To Common within Citi to deliver world-class operating efficiency by driving common processes and technology across Citi’s Consumer Banking businesses globally. Our customers are the key beneficiaries of the investments we make in pursuit of best technology and innovation to enrich their banking experience with us.

CONSUMER BANKING

Credit Cards Consumers are increasingly discerning especially when choosing credit card options. Matching consumer spending trends and behaviour patterns with their lifestyle needs, we introduced a series of product innovations to the Malaysian market, with various product offerings tailored to suit different customer needs.

Responding to the increasing number of affluent Malaysian travellers, we launched the Citi Prestige Card – the first World Elite MasterCard in Asia Pacific. The card is Citi’s first global credit card that leverages on the bank’s unique global footprint and relationships. Customers are offered unparalleled benefits including a dedicated Citi Prestige Global Concierge. Customers also get complimentary night stays at 800 hotels globally, complimentary airport limo rides home from the Kuala Lumpur International Airport (KLIA) and unlimited access to over 600 airport lounges worldwide.

For frequent travellers, we launched the Citi Premier Miles American Express® Card, the first market in Asia Pacific to do so. The card is the best-in-class travel credit card designed where members earn more miles from their everyday spend and enjoy wider choices of redemption from most airlines, complimentary airport limo rides home from KLIA and access to airport lounges in Asia Pacific.

More Malaysians are going digital and preferring to do their banking in this space. Our Citibank Rewards Platinum Card launched also last year made us the first global bank in Malaysia to pioneer a suite of customisable card services incorporating internet and smartphone technology. With this card, our customers are empowered to control their spending patterns and have the flexibility to select their choice rewards and benefits. Rewards redemption can be done online via smart phones.

In the B2B card payments market, we launched two new commercial cards – the Citibank Business Signature Card and Citibank Visa Travel Account to secure corporate spends in the Procure-to-Pay and Travel and Entertainment categories. The card is targeted at mostly larger tier Small-to-Medium Enterprises and Middle Market Enterprises.


04

Cardholders enjoy privileges at over 2,000 outlets in the country apart from the more than 3,000 Citibank credit card deals across the globe.

Our market leadership in credit card usage underscores our ability to deliver best value propositions and distinctive services to cardholders.

Retail BankingIn 2013, the capital markets produced their share of uncertainty, first of liquidity and uncertainty and the second, of taper fears. Our constant focus during these times was to address the dynamic needs of our clients, to deepen our relationships and to improve return on investments.

Customer experience is top priority at Citibank. In January 2013, we launched the Citibank Express automated teller machine. The concept for Citibank Express grew out of the award-winning Smart Banking project launched in 2008. It is a sophisticated machine equipped with an online banking connection, cheque deposit function and placement of time deposits, amongst other features. Customers can also communicate with a customer service representative anytime through its video-conferencing capability. We believe that Citibank Express will simplify the lives of our customers and revolutionise the retail banking experience in country.

We also enhanced our Wealth Management proposition in 2013 through the introduction of a new online Wealth Portfolio tool for our CitiGold customers.

Through our partnership in Malaysia with Manulife Asset Management Services, Citi launched the Asia Target Maturity Bond Fund. This was a unique opportunity for our high net worth investors to diversify their investment portfolio. We were also the first foreign bank to launch the Private Retirement Scheme (PRS) in Malaysia.

On the awards front, Citi won the Principal Financial Group’s Best IUTA for Bond Fund Award in 2013 for the fifth consecutive year. This award honours Citi for its outstanding performance in terms of Unit Trust sales for CIMB-Principal in Malaysia.

The year also saw us leveraging our strong research and advisory services to organise our Leadership Series of market outlook presentations for CitiGold and investment customers. Three seminars were held in Kuala Lumpur, Penang and Johor Bahru.

MortgagesBank Negara Malaysia enhanced its Responsible Financing guidelines in 2013 and introduced more measures to contain increasing household debt and to encourage prudent lending.

Citi leveraged the more level playing field in the market and drove mortgage acquisition targeting affluent and emerging affluent customer segments while strengthening our relationship with top tier developers and real estate agents. Our 10-minute home loan approval proposition resulted in a 3% rise in end net receivables compared to the previous year. Mortgage booking for the year increased by 50% and loan drawdown by 92%.

INSTITUTIONAL CLIENT GROUP

Treasury and Trade SolutionsCitibank Malaysia has a clear market leadership in the digital space especially in global transactions for our corporate and institutional clients.

We launched in 2013 CitiDirect BE, our web-based banking platform with all corporate banking functions in a single security-protected place, giving customers centralised access to their account information in real time, globally from either their personal computers or mobile devices.

Client response has been positive especially on the data analytics tools available using cloud computing technology which gives them better insights into their operational flows and electronic statements.

The automated global cash management solutions enable clients to control their offshore operations from Malaysia and support development of the treasury management industry locally.

Trade finance experienced strong demand from the expanding domestic economy. Import and supply chain services registered high growth in various industry segments. Citibank was well positioned to facilitate trade flows through our global network while online trade services provided convenience and accessibility to our clients’ broader supply chain partners.

Securities ServicesCitibank’s Securities and Fund Services registered another good year as both Asset Under Custody (AUC) and transaction volumes reached all-time highs on the back of improved market conditions and additional mandates from new and existing clients.

We expect to retain our Top-Rated status in the 2013 Global Custodian Emerging Markets survey for both Leading and Cross Border Clients, reflecting our ability to meet client demands and to stay at the forefront of customer service.

We also used our knowledge, experience and expertise in post-trade services to actively engage in various initiatives to enhance market infrastructures.

SECURITIES AND BANKING

Corporate BankingCitibank Malaysia had a fair share of prominent deals in 2013. A significant win for us was the opportunity we had to conceptualise and implement the KLCC Stapled Securities for KLCC Property Holdings Berhad as sole international financial advisor. This highly innovative transaction was well received by the market and underscored Citi’s global financial leadership and network.

Other notable deals for us included:

■ The US$1.5 billion IPO for Astro where Citi acted as joint bookrunner. The IPO was the third largest IPO in Malaysia. The transaction offered investors a unique blend of yield and growth of a business that has dominant market share in the cable TV business.

■ The IGB Property US$210 million REIT IPO where Citi acted as joint bookrunner for this REIT involving one of the most successful shopping malls in Malaysia. The transaction is notable as it set new benchmarks for yields on retail property assets.

■ Malaysia Airlines US$302 million ECA-backed

bonds where Citi acted as joint bookrunner and joint structuring agent for the bonds, taking out the ECA-backed bank financing for four A330s. This transaction is the first ECA-backed bond issued out of Asia Pacific and allowed MAS the opportunity of a lowered cost of long term financing.

■ Sime Darby US$1.5 billion multi-currency Sukuk programme where Citi acted as joint ratings advisor and lead manager for the setting up of this Sukuk programme and joint book-runner for the US$800 million Sukuk issued under this programme. Citi assisted Sime to achieve the highest ratings thus far for a Malaysian issuer; 2 of the 3 rating agencies ascribed A flat ratings for the issue.

■ Employees Provident Fund GBP350 million Structured Financing where Citi acted as lead arranger in this transaction to part-finance property purchase in UK. This is a repeat transaction following a highly successful first financing transaction led by Citi in 2012.

Global MarketsCiti was voted best foreign exchange (FX) service provider by corporates in Asia in the Asiamoney industry poll for the second consecutive year. The poll surveyed 3,504 senior treasury, financial and management officials based in Asia, representing

3,044 different institutions. Apart from the regional win, Citibank Malaysia was featured in the Best for Overall FX Services category. Citibank Malaysia also won the top spot in overall results for the 2013 Euromoney FX survey. Our pole position in secondary trading of government bonds was again reaffirmed in the Bank Negara Malaysia 2013 league table.

Islamic Banking Division2013 has been a year of transition and adjustment largely due to the implementation of the Islamic Financial Services Act 2013 (IFSA) in 2013.

We were an active participant in the various transitional programmes organised by Bank Negara to keep industry players updated on the progress relating to the implementation of IFSA.

Our Citi Transaction Services continued to develop cross-border Shariah compliant services through the implementation of automated liquidity management solutions. Funds under management total over US$311 million across Citi branches in Asia and Europe. These services were aimed at supporting the growth of Islamic investments offshore and multinational treasury management centres in Malaysia.

Industry AwardsCitibank Malaysia was recognised during the year with several award wins in consumer and corporate banking. We list our awards and accolades on page 32 in this annual report.

A record of appreciation to all Citibankers for their unwavering commitment to the Bank, making these wins possible each year. Also, a note of gratitude to our customers for their continued trust and support extended to us during the year.

Working For And In CommunityFinancial education has been the focus of our Citizenship initiatives in country. We have in the last 10 years adopted a singular focus to support financial literacy and inclusion. Annual grants from the Citi Foundation of over US$210,000 to our local partners Era Consumer Malaysia and Universiti Putra Malaysia were used to support activities under our Citizenship projects in Malaysia.

The programmes to improve financial behaviours amongst pre-school children and mature women have gained good traction in community. For example, the pre-school financial education programme has been extended to cover a train the trainer programme for kindergarten teachers. Our plans in the coming year will be to include youths in similar financial education programmes and increase our network of local partners.

For 2013, Citi organised 40 “My First Ringgit” classes in suburban and rural locations in Peninsular Malaysia as well as the fourth season of TV programme “Stretching Your Ringgit.”

The programme included workshops on basic financial education for over 800 kindergarten children. Five “Training of Trainers” programme for over 200 kindergarten teachers and three focus groups for parents were also organised during the year.

Citi also launched a pilot training initiative for mature women from the low income group working with Universiti Putra Malaysia and the Tsao Foundation based in Singapore. The CITI-UPM Financial Empowerment for Mature Women Programme brought together 800 women aged between 40 and 60 years with income levels of below RM3,000 a month.

Workshops have also been planned for members of women groups such as the UPM Woman’s Association (PERMATA) and National Council of Women’s Organisation (NCWO). The curriculum includes saving, investment and financial retirement planning.

In the area of Volunteerism, over 700 Citibank employees participated in “Restore Hope for Children”, a project with the United Nations High Commissioner for Refugees (UNHCR). Activities included a feeding programme for 500 refugee children in Kuala Lumpur and visits to 200 orphans in Penang and Johor Bahru.

Our PeopleEvery Citibanker is a valued individual in our organisation. Emphasis is given to professional growth and talent development besides continued support for diversity and work-life balance. Citibank has also been an incubator of local banking talent. Opportunities abound in-country and through our global network for local talent to excel and achieve their career ambitions.

Throughout the year, we made good progress on delivering “The Citibanker Difference” for our employees. The Leadership Enhancement & Accelerated Development (L.E.A.D) programme provided accelerated career development opportunities for the top 2% of our best employees across the board. We hired 18 management associates and graduate executives from leading local and foreign universities as part of our ongoing talent recruitment drive.

In addition to the Voice of the Employee platform for employees to engage in improving their work environment and to raise people related or career concerns, the Employee Assistance Programme launched in 2012 is an added support service providing counselling to permanent employees of the Bank.

Another initiative Citi Live Well to encourage healthy living has been well supported by employees.

KEY BUSINESS PRIORITIES FOR 2014

Customer centricity lies at the heart of our business priorities and will frame all our business interactions and inspire product and service offerings, leveraging on our extensive global network. As the industry in Malaysia evolves to a more digitised environment, Citibank has the edge over competition in terms of bringing to market innovative technology for our Malaysian consumer and corporate clients.

OUTLOOK FOR 2014

Global growth prospects are expected to improve in 2014. The Malaysian economy is expected to register a steady growth of around 5% in 2014.

Malaysia’s financial services sector is likely to see moderate loans growth largely due to the tougher economic environment regionally, pressure on margins and stricter retail lending although underlying fundamentals of the industry remain solid. On the corporate front, prospects are expected to be better especially with the continued progress and positive impact from national transformation initiatives and as local companies expand operations abroad.

At Citibank Malaysia, we anticipate this year to be one of creating greater value and enriching the banking experience of our customers with unparalleled standards of service excellence. We have much to accomplish and the journey ahead while challenging, will present us opportunities to grow.

Sanjeev NanavatiChief Executive Officer

for cross border transactions and for clients with regional and international business operations.

We were also the sole international financial advisor to KLCC Property Holdings Berhad on the creation of the KLCC Stapled Securities. Citibank acted as the sole international structuring bank in this highly innovative transaction – the first stapled REIT in Malaysia and first Islamic Stapled REIT globally. This award-winning transaction created the largest REIT in Malaysia and the fourth largest in Asia Pacific.

In Islamic banking, Citibank launched an innovative Islamic investment strategy to enable institutional clients to dynamically adjust their asset allocation to various global Islamic assets according to market trends.

In the Consumer Banking space, we premiered our next-generation automated teller machines (ATM), known as Citibank Express which offers the facilities and convenience for customers to conduct most of their banking transactions including the opening of accounts. Citibank was also the first bank to introduce a 10-minute home loan approval tool, cutting short the average waiting period of 5-7 days.

In terms of market leadership, Citibank has a leading position in credit cards, FX options, Government

CEO’S STATEMENT

OVERVIEW















Citibank has been a pillar of

support to local companies

and multinational companies

growing their business in

Malaysia and in the region.

“

”



CONSUMER BANKING







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CEO’S STATEMENT


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Awards and Accolades 2013

Contact Centre Association of Malaysia

Corporate Awards

Best Technology Innovation Contact Centre – 2nd placing

Best Process Excellence Contact Centre – 2nd placing

Individual Award

Best Contact Centre Professional (Operations) (Goh Chi Xiang) – 1st placing

Best Contact Centre Professional (Non-Operations) (Irene Tok) – 2nd placing

X-Factor Challenge Award

CitiPhone Group Performance (Battalion C) – 1st placing

Contact Centre Association of SingaporeSilver for Best Outsourced Contact Centre for CTSM Johor Bahru (above 100 seats)

Gold for Best Employee Recruitment and Retention for CTSM Johor Bahru (HR)

Advertising & Marketing Magazine Excellence Awards 2013Excellence in Launch Marketing – AirAsia – Citibank Visa Credit Cards Re-launch – Silver award

Excellence in Advertising – 30% Cash Back “Everyday Spend” Campaign – Bronze award

2013 Principal Financial Group AUM Builder AwardFixed Income Category – for highest net sales for fixed income unit trust funds in 2012

Readers’ Digest Trusted BrandCredit Card Issuing Bank – Gold Award

The Asset Triple ABest deal, Malaysia for the Sime Darby US$800 million two-tranche sukuk, in which Citi

has acted as one of the joint bookrunners

Alpha Southeast Asia Annual Deal & Solution Awards 2013Best Foreign Currency Bond Deal Of The Year In Southeast Asia


09

BOARD OF DIRECTORS

Standing from left to right

Tan Sri Dato' Hj Omar B. Ibrahim, Dato' Siow Kim Lun, Mr. Terence Kent Cuddyre,

Mr. Sanjeev Nanavati, Dato’ Dr. R. Thillainathan

Sitting from left to right

Ms. Ho Li Chin (Company Secretary), Ms. Agnes Liew Yun Chong, Ms. Tang Wan Chee (Company Secretary)


10

Mr. Terence Kent Cuddyre

Mr. Sanjeev Nanavati


Mr. Terence Cuddyre joined the Bank on 14 December, 2010 as a Non-Independent, Non-Executive Director. He serves on the Audit Committee and Risk Management Committee of the Bank.

He was Citigroup Country Officer for Brunei. Prior to that, he spent four years as the Head of Training for the Asia Pacific region (Citi Centre for Advanced Learning). He has also served as Citigroup Country Officer for Thailand (2002 – 2005) and was North Asia Regional Risk Officer (2000 – 2001).

Mr. Cuddyre joined Citigroup in 2000 after 23 years with Bank of America. He held numerous international roles including Country Head of Ireland, Korea, Hong Kong and China. He also held several risk positions in North America and Asia.

He has also been active in the American Chamber of Commerce, serving on the boards in Hong Kong, Korea and China. In Thailand, he served as Chairman.

Mr. Cuddyre holds a B.A. in Economics from the University of California, Santa Barbara and an MBA from the Wharton Business School, University of Pennsylvania.

Mr. Sanjeev Nanavati was appointed the Bank’s Chief Executive Officer on 5 October, 2007. He is responsible for Citibank’s retail banking, credit cards, corporate banking, investment banking, global transaction services, equities, fixed income and treasury activities in Malaysia.

Before moving to Malaysia, he was Managing Director and Global Head of Citigroup Depository Receipt Services based in New York and Hong Kong, responsible for all aspects of the ADR / GDR product offering globally. Mr. Nanavati joined the Citigroup Depository Receipt Services Management team in July 2001 and strategically repositioned the business, creating a differentiated value proposition for clients.

Prior to joining Citigroup, he was the Head of Corporate and Investment Banking for six years at one of the largest international banks in India. He also worked for 12 years with a major U.S. bank in M&A and Capital Markets, in the United States and Hong Kong.

Mr. Nanavati holds an MBA Degree from Syracuse University in the United States. At present, he is the President of the American Malaysian Chamber of Commerce and a Council member of the Association of Banks in Malaysia.

Directors’ Profile

1 1

Tan Sri Dato' Hj Omar B. Ibrahim

Dato’ Siow Kim Lun

Tan Sri Dato’ Hj Omar joined the Bank on 3 May, 2000 as an Independent, Non-Executive Director. He served as the Chairman of the Nominating Committee, and a member of the Risk Management Committee and Audit Committee of the Bank.

He is a Non-Executive Director of UEM Group Berhad and UEM Builders Berhad, and also serves as a Non-Executive Director on the Board of several private limited companies including KLCC Projeks Sdn Bhd, KLCC Projects Services Sdn Bhd, PNB Commercial Sdn Bhd, EKVE Sdn Bhd, Capital Development Sdn Bhd, I & P Permodalan Harta Sdn Bhd and Peninsular Medical Sdn Bhd.

He has spent more than three decades serving the government as a civil engineer in the Public Works Department (PWD) of Malaysia and during this long tenure, he held many positions in the department, culminating in the position of Director-General from 1996 to 1999.

Tan Sri Dato’ Hj Omar has particular expertise in structural engineering and water supply engineering. His professional work experience has been varied and included design assignments as well as project management to general management.

He has been the President of the Board of Engineers Malaysia, the Malaysian Water Association and Malaysian Structural Steel Association at various times between 1988 and 1999.

Tan Sri Dato’ Hj Omar holds a Master of Science from the University of Southampton and a Bachelor of Engineering from the University of Malaya.

He is a Fellow of the Institution of Engineers Malaysia and a professional engineer registered with the Board of Engineers Malaysia.

He retired from the Board on 1 May, 2014.

Dato’ Siow Kim Lun is currently a board member of Kumpulan Wang Persaraan, UMW Holdings Berhad, W Z Satu Berhad (formerly known as W Z Steel Berhad), Eita Resources Berhad, Hong Leong Assurance Berhad and MainStreet Advisers Sdn Bhd. He is also a member of the Land Public Transport Commission.

From 1993 to 2006, Dato’ Siow was with the Securities Commission (SC), where he served as the Director of the Issues and Investment Division and Director of the Market Supervision Division. Prior to joining the SC, Dato’ Siow worked in the investment banking and financial services industry in Malaysia for over 12 years.

Dato’ Siow holds an MBA from the Catholic University of Leuven, Belgium and a Bachelor of Economics (Hons) from the National University of Malaysia. He has also attended the Advanced Management Program at Harvard Business School.

Dato’ Siow has been a director of Citibank Berhad since April 2007. He is currently Chairman of the Bank’s Risk Management Committee, and a member of the Nominating Committee and Audit Committee.

DIRECTORS’ PROFILE


12

Ms. Agnes Liew Yun Chong

Dato’ Dr. R. Thillainathan


Ms. Agnes Liew Yun Chong was appointed as Non-Independent, Non-Executive Director of the Bank on 1 November, 2010. She is also a member of the Risk Management Committee and Nominating Committee of Citibank Berhad.

Ms. Liew also sits on the board of Citibank (China) Co. Ltd.

She is responsible for Citigroup’s Corporate Bank in Asia Pacific. The Asia Pacific Corporate Bank is the coverage organisation that delivers the full spectrum of product solutions and Citi’s extensive global network which spans over 100 countries, to institutional clients across 16 markets in Asia, including large public and private corporations. She is also a member of the Global Corporate Banking Operating Committee (NY) and chairs the Asia Pacific Corporate Banking Operating Committee.

Ms. Liew joined Citi as a Management Associate in 1982 and during her career with Citi, has held a number of diverse key management positions in Risk and Banking in Asia Pacific. Between 2000 and 2003, she was the Corporate Bank Head of Singapore. In 2003, she was appointed Country Risk Manager of the Corporate and Investment Bank, Citi Taiwan. She subsequently moved into the Regional Risk Management Office in Asia Pacific and assumed the role of Head of Risk, ASEAN, Corporate and Investment Bank in 2005.

Between 2007 and 2010, Ms. Liew led Global Subsidiaries Group in Asia Pacific and was responsible for the relationship coverage of global multinational subsidiaries across 16 markets. Under her leadership, the Global Subsidiaries Group in Asia grew to be a significant pillar of the Global Banking franchise. During that time, she was also the Global Banking Head of ASEAN (ex Singapore), responsible for the relationship coverage of large corporate clients, including financial institutions.

Ms. Liew was named by Finance Asia in 2011 as one of the Top 20 Women in Finance in Asia.

She holds an LL.B (Hons) from the University of Singapore and is a member of the Supreme Court of Singapore.

Dato’ Dr. R. Thillainathan was appointed to the Board on 6 September, 2012 as an Independent, Non-Executive Director. He is the Chairman of the Audit Committee, and a member of the Risk Management Committee, and Nominating Committee.

He sits on the Boards of Petronas Dagangan Berhad, Genting Berhad, Allianz General Insurance Company (Malaysia) Berhad, Allianz Life Insurance Malaysia Berhad, Allianz Malaysia Berhad and Asia Capital Reinsurance Malaysia Sdn Bhd. He is also a board member of Private Pension Administrator Malaysia, Wawasan Open University Sdn Bhd, UM Holdings Sdn Bhd and UM Plantations Sdn Bhd.

He has been with the Genting Group since 1989. He was the Chief Operating Officer of the company from 2002 to 2006 and retired as an Executive Director in 2007. Dato’ Dr. R. Thillainathan has extensive years of experience in finance and banking and has been actively involved in numerous professional and national bodies. He was also the past president of the Malaysian Economic Association.

He graduated from University of Malaya in 1968 and holds a Bachelor of Arts Degree with First Class in Economics. He obtained his Masters and PhD in Economics from the London School of Economics. He is also a Fellow of the Institute of Bankers, Malaysia.

DIRECTORS’ PROFILE

13


THE WORLD’S CITI IT’S WHEREVER YOU ARE.


15

At the various stages of their lives, different people will have different financial priorities. Managing money and using financial services can be intricate and perplexing. However, maintaining financial plans is crucial if one were to remain financially stable and to build assets.

At Citi, our priorities reflect the views of our stakeholders and the risks and opportunities of our business. We keep a constant watch on economic conditions, local and global concerns and we do this largely by engaging with our stakeholders.

As a long established advocate and practitioner of financial capability programmes in the banking industry, Citi collaborated with local partners to design programmes that are relevant, timely and actionable thus offering support and accountability to help consumers achieve their financial goals.

A large aspect of our corporate citizenship in Malaysia focuses on helping consumers build their own financial capability by pairing financial education with access to appropriate products and services so they can save, wisely manage their money and weather setbacks.

CORPORATE CITIZENSHIP AT CITI

Stretching Your Ringgit Season 4 – 3rd instalment ofMy First Ringgit (MFR)

In 2009, Citi launched our flagship financial education programme, “Stretching Your Ringgit” in collaboration with ERA Consumer Malaysia. ERA Consumer has reached out to more than 1,200 students since the inception of “My First Ringgit” (MFR). The MFR, a customised financial education programme aimed at educating and instilling good financial habits among young children, is a component of Citi’s “Stretching Your Ringgit” (SYR) financial education series. ERA Consumer has built a good relationship with kindergarten groups and teachers to get their support for organising the programmes as well as follow up of the programmes.

In 2013, we received a US$90,000 grant from Citi Foundation which was utilised for:

■ 40 “My First Ringgit” classes for 800 kindergarten students located in both suburban and rural locations in Peninsular Malaysia.

■ Five Training of Trainers programme for over 200 kindergarten teachers throughout Malaysia.

■ Three focus groups sessions for parents.

■ Build richer content in ERA microsite to increase knowledge and online accessibility for target segment to obtain financial related information as an empowerment tool.

The MFR programme, targeted at kindergarten children, is aimed at educating and instilling good financial habits among young children. A fun and informative Game Kit has been developed to be used in classroom workshops. The activities and lessons are contained in the Game Kit, which also contains a teacher’s resource manual. The workshop sessions are expected to last two hours and facilitators will be from ERA Consumer.

Within the two hours, the children will be taught about money management through interactive games. Areas covered in the programme include the need to save from young and the benefits derived from saving as well as difference between needs and wants. The kindergarten teachers or principals will be encouraged to be involved to ensure continuity of the programme – post workshop and expose more



students in the subsequent years. Parents are invited to join the workshop for them to observe their children’s understanding about money and to learn skills that help them in teaching their children about money management. The involvement of kindergarten teachers or principals is key as it ensures sustainability of this programme which Citi has funded in Malaysia over the last 10 years.

The “Training of Trainers” (ToT) was conducted in order to demonstrate to teachers the importance of financial education for children. Focus groups were conducted

with parents to address the issues that are faced by parents in teaching their children about money management. Parents were also able to provide feedback on their children’s behavioural change after the workshop.

The population served under the “Stretching Your Ringgit 2013” were pre-school children between the ages of 4 to 6 years. In addition, we also engaged with teachers from kindergartens to organise a training session which assisted them financial education to children. Parents were also involved in programme as

Pre-school children at one of the “My First Ringgit” sessions.



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they will be invited to join the programme. There were focus group discussions to discuss the issues on their children’s financial management.

At the end of the programme, 25% of the children who participated in the workshop increased their ability to demonstrate basic financial knowledge, and 30% of parents reported an improvement in their child’s financial behaviour. In addition to that, 80% of the teachers who participated in the ToT carried out financial education workshop in their kindergartens.

Pre-school children at the various activities of the “My First Ringgit” programme.


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At the launch of the Citi-UPM Financial Empowerment Programme.



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Programme Highlights:Citi-UPM Financial Empowerment ForMature Women Programme

Citi Foundation provided US$120,000 of funds for the Citi-UPM Financial Empowerment for Mature Women Programme in 2012/2013. The programme is aimed to adapt the Citi-Tsao Financial Education Programme for Mature Women [in Singapore] to the Malaysian context and build the capacity of UPM and the National Council of Women Organisations (NCWO) leaders to deliver this programme effectively to low income mature women.

To date, we have visited and observed the implementation of the Tsao Foundation Programme in Singapore and met with the trainers to discuss their experiences and challenges in implementing the project. The research team gained wide knowledge from the experiences through sharing sessions with trainers, class observation and graduation ceremony. Briefing sessions with the project partners were carried out to impart information in implementing the programme and advice were provided on their role and expected contribution to this programme.

Additionally, a total of 20 members from PERMATA and 60 from NCWO were involved in a qualitative need assessment through a Focus Group Discussion (FGD) in developing an evidence based financial education module. Quantitative Training Need Assessments (TNAs) were also conducted. Feedback from the FGD and TNA were incorporated in the production of a module.

Under the programme, 60 financial education trainers were trained to implement the financial education programme to matured women from the low income bracket. These women are affiliated with NCWO and PERMATA and have a household income of less than RM3,000 a month. The financial empowerment programme reached out to 100 PERMATA and 300 NCWO members.

The programme has imparted knowledge and increase financial management skills which eventually improved the participants’ financial behaviours. Upon completion of the financial education programme, at least 80% of the participants will start saving regularly and about 75% of these women will increase their savings by up to 20%. Citi Foundation funds will be used to implement the Training of Trainers (ToT); training of participants; support staff for project management; project monitoring as well as pre-and post-assessment for the ToT and participant training. Both qualitative and quantitative assessments will be adopted.

By 2014, we anticipate that UPM will have fully implemented the curriculum for 800 women to ensure they are financially independent and empowered in their old age. We should see a 100% increase in the number of women who are able to develop a retirement plan and demonstrate positive financial behaviours to achieve the financial goals.


Global Community Day

Last year’s Global Community Day was held on 22 June, with the theme “Restore Hope for Children”.

Citi Volunteers were deployed to eight refugee learning centres in Klang Valley, where they played educational games, distributed food and care packages and had lunch with the children. Over 700 strong employees from the Klang Valley, Penang and Johor Bahru participated in this effort with the United Nations High Commissioner for Refugees (UNHCR). With the theme “Restore Hope for Children”, our Volunteers managed to feed over 500 refugee children in Kuala Lumpur, visited over 200 orphans in both Penang and Johor Bahru.


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Citibankers touched lives through the Global Community Day activities.


Citibankers in action during Global Community Day.

VALUING OUR PEOPLE In Citi, we believe that talent grows talent. Our people philosophy focuses on providing the best learning and development platforms ranging from talent and development programmes; mentoring; on-the-job learning to career pathing initiatives; all of which are supported by key processes and policies – and conducted in a conducive and nurturing work environment. With a flexible work culture, the geographical reach and the richness of diversity of our businesses, we have the ability to provide each Citibanker with the opportunity to have a career of a lifetime.

In 2013, we continue our efforts in the talent space. Our Graduate Programmes attracted the best talent in the market – we hired a total of 18 graduates in 2013, giving us a total of 98 future leaders whom we have hired since 2010 as part of our strategy to build future leadership. Our Leadership Enhancement & Accelerated Development (LEAD) programme, launched in 2010, continues to be focused and relevant for the top 2% of our best employees. As part of our customised training for LEAD in 2013, we invited Professor Lim How, an associate professor with Yale to conduct workshops on Critical Thinking, and Strategic Thinking. We also had Ms. Kate Sweetman from ICLIF and a former editor at the Harvard Business Review and co-author of The Leadership Code: Five Rules to Lead By to conduct a series of “Working Across Organizational Boundaries” workshops.

Leveraging our global presence in 160 countries and the diversity of our businesses, Citi is second to none in our ability to provide in-country, regional and global mobility opportunities. This is evidenced by the 86 internal transfers, including our export of talent to Singapore, Brazil and Hong Kong, and our import of talent from other Citi companies including the United Kingdom, India, Philippines and Latin America.

From a learning and development viewpoint, our consistent approach to training and development

across the company ensures that we have a unified culture and a set of standards that transcend business, product and regional lines. In 2013, Citibank rolled out 160 classrooms/virtual programmes totalling 34,000 training hours, together with 25 leadership programmes across the franchise covering 390 Citibankers. One highlight includes our leadership trainer being recognised as Citi’s 2013 Top 3 Highest Delivering Facilitator in APAC.

And as part of Citibank’s continuous show of support and commitment to the advancement of women as leaders and economic drivers, we also celebrated International Women’s Day (IWD) by organising franchise wide programmes that connect Citi women in ways that inspire change to foster progress, both personally, professionally and within the community.

A key component to ensure that we are able to keep Citibankers engaged and motivated is to provide a conducive and nurturing work environment, with focus on mental and physical health. Our Citi “Live Well” platform and Employee Assistance Programme (EAP) continues to provide support services such as counselling, wellness talks and on-site consultations to all Citibankers, with talks covering key health tips, office ergonomics, and suitable food and exercises.

The Voice of Employee (VOE) platform continues to enable us to have fun and develop team-building activities to build camaraderie and strengthen the professional relationship that we have with each other. VOE champions from each business unit developed and implemented various initiatives, ranging from movie days to team building outings.

There will always be continued focus on building the talent pipeline, developing and implementing relevant programmes, initiatives, policies and processes to ensure we provide the best that we can for our employees.


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Citibankers at the Citi “Live Well” programmes.


24

STATEMENTOF CORPORATEGOVERNANCE The Bank aspires to achieve the highest standards in ethical conduct by delivering our promise to clients, reporting our financial results accurately and transparently and maintaining full compliance with all laws, rules and regulations governing the Bank‘s business operations.

The Bank has also taken the necessary steps to ensure conformity with Bank Negara Malaysia‘s (BNM) Guidelines on Corporate Governance for Licensed Institutions (Revised BNM/GP1).

BOARD COMPOSITION

The Board comprises seven members. The following is the board line-up:

Mr. Terence Kent CuddyreNon-Independent Non-Executive Director/Chairman

Mr. Sanjeev Nanavati Non-Independent Executive Director/Chief Executive Officer

Tan Sri Dato’ Hj Omar B. IbrahimIndependent Non-Executive Director

Dato’ Siow Kim LunIndependent Non-Executive Director

Ms. Agnes Liew Yun ChongNon-Independent Non-Executive Director Dato’ Dr Thillainathan a/l RamasamyIndependent Non-Executive Director Mr. Anil WadhwaniNon-Independent Non-Executive Director(appointed on 22 February 2013 and resigned with effect from 11 October 2013)

The individual profiles of the above mentioned directors are set out on pages 4 to 6 of this report.

The composition of the Bank’s Board of Directors is in compliance with the Revised BNM/GP1, which requires

at least one-third of the board members to be independent directors.

The presence of two non-independent non-executive directors and three independent non-executive directors enables the Bank to view all relevant issues objectively and in a balanced manner. This further enhances the accountability of the decision making process within Citibank Berhad.

The presence of the non-executive directors is also beneficial as it provides room for new perspectives and ideas that could help improve the effectiveness and efficiency of the Board on the whole.

The revised BNM/GP1 guideline stipulates the need for a maximum of one Executive Director in the Bank’s Board of Directors line-up.

Mr. Terence Kent Cuddyre was appointed to the Board on 14 December 2010, and has been the Chairman of Citibank since 12 March 2013.

ROLES AND RESPONSIBILITIES

The primary responsibility of the Board of Directors is to provide effective governance in terms of the Bank’s affairs for the benefit of all shareholders and also to balance the interests of different constituencies such as customers, employees, suppliers and the local community.

Among other things, the Board also reviews and approves the Bank’s strategic business plans annually, oversees the management of the business and monitors the Bank’s actual performance against projections.

The Board also ensures that the infrastructure, internal controls and risk management processes within the Bank remains robust and are implemented in a consistent and timely manner.

In addition, the Board carries out various other functions and responsibilities as stipulated in the guidelines and directives issued by BNM from time to time.

In relation to the requirements stated under the revised BNM/GP1, the Bank has submitted an application to BNM for deviation of Principle 10 (shareholders should be entirely independent of the management and that the CEO should derive authority only from the Board) and Principle 12 (regular communication to be held with shareholders).

On 3 May 2006, BNM approved the Bank’s official request for the above-mentioned deviations.

As the Bank falls under the global structure of Citi, the Board also ensures that the Bank adopts applicable Citi


25

STATEMENT OF CORPORATE GOVERNANCE

policies in relation to credit approval processes and operational manuals.

As a means to ensure the Bank has a beneficial influence on the economy of the local community, the Directors have a continuous responsibility to provide banking services and facilities that are conducive to a well-balanced economic growth.

FREQUENCY AND CONDUCT OF BOARD MEETINGS AND ATTENDANCE

The Board of Directors meet at least six times a year in order to effectively discharge their duties as well as to comply with the revised BNM/GP1 guideline requirements.

During Board meetings, the Directors are provided with an agenda, papers on the Bank’s most recent financial performance, risk management reports, budgets, new business initiatives or product launches, Board committees meetings’ minutes and updates on industry regulations or policy changes. The Board also receives business presentations on topical matters, subject to such requests.

The Board meeting agenda and papers are distributed to all Directors prior to the scheduled meetings so as to grant them sufficient time to review all materials/issues that will be discussed during the actual meeting. This procedure goes a long way in ensuring that all Board meeting discussions as well as decisions made/taken, are meaningful and based on accurate facts and figures.

The proceedings of all Board meetings are also taken down as official minutes and such minutes are later circulated for the Directors’ perusal prior to confirmation during the following meetings.

The attendance record for each Board member for the financial year ended 31 December 2013 is as shown below:

NUMBER OF BOARD MEETINGS

Name of Director Held Attended

Mr. Terence Kent Cuddyre (Chairman) 8 8

Mr. Sanjeev Nanavati 8 8

Tan Sri Dato’ Hj Omar B. Ibrahim 8 7

Dato’ Siow Kim Lun 8 8

Ms. Agnes Liew Yun Chong 8 7

Dato’ Dr Thillainathan a/l Ramasamy 8 8

Mr. Anil Wadhwani 5* 5

* Reflects the number of meetings held during the time the Director held office.

BOARD COMMITTEES

The Board of Directors established several ‘Board Committees’ to assist them in the overall management and supervision of the Bank’s business operations.

The committee members shall be appointed by the Board upon recommendation of the Nominating Committee.

Each committee has its own written charter, clearly outlining the mission and responsibilities of the respective committee as well as well-defined terms of reference approved by the Board.

Pursuant to the revised BNM/GP1 guideline, the Board is also required to establish the following additional committees besides the existing Audit Committee then:

■ Nominating Committee

■ Remuneration Committee

■ Risk Management Committee

The Bank has since set up the Nominating Committee and Risk Management Committee.

The Bank submitted an application to BNM for a waiver from establishing the Remuneration Committee. On 3 May 2006, BNM granted the Bank approval on the above application.

AUDIT COMMITTEE

Composition and Frequency of Meetings

The Audit Committee was established in 1994.

The attendance record for each Audit Committee member for the financial year ended 31 December 2013 is as shown below:

NUMBER OF MEETINGS

Name of Audit Committee Member Held Attended

Dato’ Dr Thillainathan a/l Ramasamy 4 4(Chairman)

Tan Sri Dato’ Hj Omar B. Ibrahim 4 3


Mr. Terence Kent Cuddyre 4 4

Mr. Anil Wadhwani 2* 2

* Reflects the number of meetings held during the time the Director held office.

All the Audit Committee members are non-executive directors of the Bank.


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TERMS OF REFERENCE

The Board has approved the terms of reference for the Audit Committee.

The main objective of the Audit Committee is to review the financial position of Citibank Berhad, its internal controls, performance and findings of the internal and external auditors as well as to recommend appropriate remedial action (if necessary).

The Audit Committee’s main responsibilities are as follows:

a. Ensure that the financial accounts are prepared in a timely and accurate manner with frequent reviews on the adequacy of provisions for contingencies, and bad and doubtful debts.

b. Review the balance sheet and profit and loss account for submission to the Board of Directors and ensure the prompt publication of annual accounts.

c. Review the annual financial statements before submission to the Board, focusing on:

1. Compliance with accounting standards and other legal requirements

2. Changes in accounting policies and practices

3. Significant issues and unusual events arising from the audit

4. Going concern assumption

5. Major judgemental areas

d. Conduct a complete review prior to publishing the annual report to ensure compliance with regulatory requirements.

e. Review the effectiveness of internal controls, including the scope of the internal audit programme, its role, resources of the internal audit functions and ensure it has the necessary authority to carry out its work, internal audit findings as well as recommend action to be taken by management, whenever necessary. The reports of internal auditors and the Audit Committee should not be subject to the clearance of the Board of Directors.

f. Evaluate appointment, performance and provide appraisal and feedback on the remuneration package offered to the chief internal auditor.

g. Leverage on the Bank’s performance management and talent inventory development process in overseeing the performance evaluation of the internal auditors.

h. Review with the external auditors, the scope of their audit plan, internal accounting controls, audit

reports, assistance given by the management and its staff to the auditors as well as their findings and recommended action(s) to be taken. Select and recommend external auditors for appointment by the Board annually.

i. Discuss problems and reservations arising from the interim and final external audits, including any matters the external auditors may wish to deliberate (in the absence of management, where necessary).

j. Review external auditor’s letter to management and the latter’s response to the same.

k. Review related party transactions and identify any potential conflict of interest situation(s) that may arise within the Bank including any transactions, procedure or course of conduct which questions the integrity of the management.

l. Review resignation letters from the external auditors of Citibank Berhad.

m. Select external auditors to be appointed by the Board, unless otherwise advised (such as not suitable for re-appointment supported by valid justifications / grounds).

n. Review any external expert’s terms and scope of engagement, working arrangement with the internal auditors and reporting requirements to ensure these are clearly established.

o. Leverage on the oversight provided by Regional Compliance Control or engage any external party to perform assessment on the continuing effectiveness of the internal audit function.

NOMINATING COMMITTEE


The Nominating Committee was established in 2006.

The attendance record for each Nominating Committee member for the financial year ended 31 December 2013 is as shown below:

NUMBER OF MEETINGS

Name of Nominating Committee Member Held Attended

Tan Sri Dato’Hj Omar B. Ibrahim 2 2(Chairman)

Mr. Sanjeev Nanavati 2 2




The constitution of the Nominating Committee comprises four non-executive directors and one executive director.


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TERMS OF REFERENCE

The Board has approved the terms of reference for the Nominating Committee.

The main objective of the Nominating Committee is to provide a formal and transparent procedure for the appointment of directors as well as assessing the effectiveness of individual directors, the Board as a whole and also the performance of the CEO along with other key senior management staff. The Nominating Committee’s main responsibilities are as follows:

a. Review and assess the adequacy of the Bank’s Code of Conduct and other internal policies and guidelines and monitor that the principles described therein are being incorporated into the Bank’s culture and business practices.

b. Establish minimum requirements for the Board, i.e. required mix of skills, experience, qualification and other core competencies required of a director. The Committee is also responsible for establishing minimum requirements for the CEO. The requirements and criteria should be approved by the full Board.

c. Review the appropriateness of the size of the Board relative to its various responsibilities. Review the overall composition of the Board, taking into consideration factors such as business experience and specific areas of expertise of each Board member and make recommendations to the Board as necessary.

d. Review and assess that the directors do not have any directorship(s) which could potentially result in conflict of interest(s).

e. Recommend to the Board the number of committees required, identify their respective responsibilities, propose a suitable Chairperson as well as suggest ordinary members for the different committees. This includes advising the Board on committee member appointments and removal of such members from the relevant committees or from the Board, rotation of the committee members and Chairperson as well as proposals on individual committee structures and operations.

f. Assist the Board in developing criteria to identify and select qualified individuals who may be nominated for election to the Board, which shall reflect, at a minimum, all applicable laws, rules and governing regulations. This includes assessing directors for re-appointment before an application for approval is submitted to BNM. The actual decision as to who shall be nominated should be the responsibility of the full Board.

g. Recommend to the Board qualified individuals to become members of the Board.

h. Review and recommend periodically to the Board, the compensation structure for non-executive directors.

i. Recommend to the Board the removal of a director/CEO from the Board/Management, if the director/CEO is ineffective, errant and negligent in discharging his responsibilities.

j. Assess annually the effectiveness of the Board as a whole in meeting its responsibilities and the contribution of each director to the effectiveness of the Board, contribution of the Board’s various committees and the performance of the CEO.

k. Report annually to the Board with an assessment of the Board’s performance and such assessment is conducted based on an objective performance criteria. Such performance criteria to be approved by the full Board.

l. Leveraging on the Bank’s Performance Management and Talent Inventory development process in overseeing the appointment, management succession planning and performance evaluation of key senior management staff, except that (as recommended by Bank Negara Malaysia) the Committee shall play an active role in reviewing and recommending the nominees for the position of Chief Executive Officer, Chief Financial Officer and Chief Risk Officer.

m. Assess annually to ensure the directors and key senior management staff are not disqualified under the Financial Services Act 2013.

n. Plan and ensure all directors receive appropriate and continuous training program in order to keep abreast with the latest developments in the industry.

o. Conduct an annual review of the Committee’s performance and report the results to the Board periodically, assess the adequacy of its charter and recommend changes to the Board as needed.

p. Report regularly to the Board on the Committee’s activities.

q. Perform any other duties and responsibilities expressly delegated to the Committee by the Board from time to time.

RISK MANAGEMENT COMMITTEE


The Risk Management Committee was established in 2006.


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The attendance record for each Risk Management Committee member for the financial year ended 31 December 2013 is as shown below:

NUMBER OF MEETINGS

Name of Risk Management Committee Member Held Attended

Dato’ Siow Kim Lun 4 4(Chairman)

Tan Sri Dato’Hj Omar B. Ibrahim 4 3


Mr. Terence Kent Cuddyre 4 4


All the Risk Management Committee members are non-executive directors of the Bank.

TERMS OF REFERENCE

The Board has approved the terms of reference for the Risk Management Committee.

The main objective of the Risk Management Committee is to oversee the senior management’s activities in managing credit, market, liquidity, operational, legal and other risk(s) while ensuring proper risk management process is properly in place and functioning well.

The Risk Management Committee’s main responsibilities are as follows:

a. Ratify the adoption of Citi risk management strategies, policies, and risk tolerance; and recommend the same for the Board’s approval.

b. Discuss with Management the Bank’s major credit, market, liquidity and operational risk exposures and steps that the Management has taken to monitor and control such exposures, including the Bank’s risk assessment and risk management policies.

c. Assess the adequacy of risk management policies and framework in identifying, measuring, monitoring and controlling risks and the extent to which these are operating effectively.

d. Ensure appropriate infrastructure, resources and systems are in place for actual risk management implementation, i.e. ensure staff responsible for implementing the risk management system perform their duties independently of the Bank’s risk taking activities.

e. Periodically review management reports on risk exposure, risk portfolio, composition and other risk management activities.

f. Review periodically with management, including independent Risk Officer, Head of Compliance and Legal Counsel, any correspondence(s) with or action by, regulators or governmental agencies, any material legal affairs of the Bank and the Bank’s compliance with applicable laws and regulations.

g. Report regularly to the Board on the Committee’s activities.

h. Review annually and report to the Board on its own performance.

i. Review and assess the adequacy of its charter annually and recommend any proposed changes to the Board for approval.

j. Present the risk strategy and the risk appetite to the Board of Directors and seek approval on an annual basis.

k. Share the Bank’s risk appetite indicators with the Board on a regular basis to ensure that the risk appetite remains consistent with the Bank’s risk taking ability, its inherent risk profile and its external market and macroeconomic conditions.


29

RISK MANAGEMENTPlease refer to the Pillar 3 disclosure at the back pocket of the Annual Report.


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Citibank Berhad’s Board of Directors is responsible to establish and maintain adequate internal control over financial reporting standards and related issues.

The Bank’s internal control system is designed to provide reasonable assurance to the company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with the provisions under the Companies Act 1965 and other applicable approved standards in Malaysia.

All internal control systems no matter how well designed and implemented have inherent limitations.

In view of the limitations, therefore, even the best of systems determined to be effective can only provide a reasonable assurance in relation to the preparation and presentation of financial statements.

A comprehensive system of controls is maintained to ensure that all transactions are executed in accordance with the management’s authorisation, assets are safeguarded and that the financial records are reliable.

The management also takes relevant steps to see that information and communication flows are effective and monitor the performance of internal control procedures.

Citibank Berhad’s risk management policies, procedures and practices set out the foundation to the risk architecture governing its business activities.

The management conducts business monitoring initiatives and continuously assesses their significant processes and controls in accordance with the Manager’s Control Assessment Procedures / Operational Risk policy for all applicable businesses.

Control system weaknesses resulting in corrective actions will be documented, escalated to the management and track to closure.

Citibank Berhad’s Internal Audit reports to the Audit Committee. The role of Internal Audit is to provide independent, objective, reliable, valued and timely assurance to the Boards of Directors of Citigroup and Citibank Berhad, the Audit Committees, senior management and regulators over the effectiveness of governance, risk management, and controls that mitigate current and evolving risks and enhance the control culture within Citigroup and Citibank Berhad.

The scope of the audit activities are reviewed and endorsed by the Audit Committee while audits are carried out on a risk-based approach, to provide an independent and objective report on operational and management activities.

The Audit Committee regularly reviews and deliberates with management on the actions taken on internal control issues identified in reports prepared by Internal Audit, the external auditors, regulatory authorities and the management themselves.

The management of Citibank Berhad has also set up a Country Coordinating Committee, Business Risk Compliance and Control Committee, Legal Vehicle Committee, Asset and Liability Committee, Country Legal and Compliance Committee and Management Committee as part of its monitoring function to ensure effective management and supervision of the areas under the respective Committee’s purview.

Citibank Berhad has also adopted the Citi Code of Conduct which expresses the values that each employee is expected to appreciate and apply in their respective working life.

Ethics hotlines are made available to employees who wish to voice concerns about suspected violations of law or industry regulation as well as actions that may fail to live up to the Bank’s high standards of ethical conduct.

The Bank has an internal policy prohibiting retaliatory actions against any individual for raising legitimate concerns or questions regarding ethical matters, or for reporting suspected violations.

STATEMENT OFINTERNAL AUDITAND INTERNALCONTROL


3 1

The pre-set agenda, management reports and other ad-hoc proposals or applications are circulated to the Directors prior to the actual Board meetings.

This enables the Board of Directors to assess the overall performance of the Bank and make sound management decisions.

Management reports presented to the Board include, among others, the following:

■ Economic Updates

■ Business Plans

■ Year to date Financial Performance Report

■ Financial performance by major business segments

■ Quarterly Performance Scorecard

■ Semi-annual BNM Stress Tests Results

■ Credit Risk Management Report

■ Liquidity & Market Risk Management Reports

■ Quarterly Derivative Outstanding Report

■ Minutes of Audit Committee meetings

■ Minutes of Risk Management Committee meetings

■ Minutes of Nominating Committee meetings

■ Minutes of Shariah Committee meetings

MANAGEMENT REPORTS


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SHARIAHCOMMITTEE

Citibank Berhad’s Shariah Committee is responsible for the provision of Shariah oversight in relation to Citibank Berhad’s Islamic Banking business operations. The duties and responsibilities of the Shariah Committee are governed by the Shariah Governance Framework for Islamic Financial Institution as issued by the Bank Negara Malaysia (BNM).

For the year 2013, the Shariah Committee met 11 times. Additionally, individual Shariah Committee members participated in various business discussions where Shariah advice was required prior to submission to the full Shariah Committee.

Citibank Berhad’s Islamic Banking business operations were subjected to a full Shariah audit conducted jointly by Citibank Berhad’s Internal Audit together with Citi’s Global Islamic Control unit. The Shariah Committee reviewed the findings of the Shariah audit and was satisfied with the report and its findings.

Citibank Berhad’s Shariah Committee effective from 1 June 2013 included the following distinguished members:

PROFESSOR DR. ABDUL GHAFAR ISMAIL (CHAIRMAN)

Abdul Ghafar Ismail has been a Professor in Banking and Financial Economics, School of Economics, Universiti Kebangsaan Malaysia (UKM) since 2003. He is currently the Head of Islamic Economics and Finance Research Division, Islamic Research and Training Institute (IRTI), Islamic Development Bank (IDB), Saudi Arabia.

He has published extensively in several refereed journals among others Journal of Business Ethics; Review of Islamic Economics; Journal of Islamic Economics, Banking and Finance; Humanomics; International Journal of Social Economics; Savings and Development; Global Journal of Finance and Economics; Review of Financial Economics; Journal of Financial Services Marketing; International Journal of Islamic and Middle Eastern Finance and Management; Australian Journal of Basics and Applied Sciences; Research in Financial Qualitative Markets; and Investment Management and Financial Innovations. His

papers have also been presented in many international and local conferences, such as International Seminar on Islamic Economics and Finance, IRTI International Conference and Malaysia Finance Association Conference.

He has also published several textbooks among others, Ar-Rahnu: Islamic Pawnbroking; and Money, Islamic Banks and Real Economy. His research interests include learning process and growth theory, inter-temporal allocation of resources, earning management, capital adequacy standard for Islamic banks, and risk management. He has been a lecturer since 1987 and has been teaching several economics courses such as money and banking, financial economics, advanced macroeconomics, money and capital market in Islam, Islamic economics system, Islamic economics analysis, and international finance; risk management in Islamic banking; issues in Islamic banking; Islamic banking; and money, zakat and real economy.

He holds a PhD from the University of Southampton, England.

EN. MOHD BAHRODDIN BADRI(DEPUTY CHAIRMAN)

Mohd Bahroddin is a researcher at the International Shariah Research Academy (ISRA). Prior to that, he was attached to International Islamic University Malaysia (IIUM) as a lecturer in the Department of Islamic Revealed Knowledge and Human Resources.

He is actively involved in Islamic finance and Shariah related seminars, workshops and trainings organised by ISRA and Bank Negara Malaysia (BNM) to name few. He has also published outstanding research papers such as Critical Appraisal of the Rahn-based Islamic Microcredit Facility, Shariah Analysis on Gold Investment Products in Malaysia, Shariah Analysis on Zakat in Gold Investment, Kafalah bil Ujrah in Islamic Banking Guarantee Product: A Shariah Analysis, Fiqh of Risk Sharing in Islamic Finance and Shariah Rules and Interpretations Across Jurisdictions: Towards Greater Global Connectivity in Islamic Finance.

He holds Bachelor of Islamic Revealed Knowledge (Fiqh & Usul Fiqh) from IIUM and Master Degree in Shariah from University of Malaya.

EN. NIK ABDUL RAHIM BIN NIK ABDUL GHANI

Nik Abdul Rahim is a lecturer of Fiqh Muamalat at Department of Shariah, Faculty of Islamic Studies, UKM.

He regularly conducts lectures, researches and presents papers at seminars and conferences, both

locally and internationally on the areas of Fiqh Muamalat and Usul Fiqh particularly those related to Islamic banking, Islamic insurance (Takaful) and current issues of Islamic transaction laws.

He is currently a member of the Research Centre for Islamic Economics and Finance (EKONIS) or formerly known as Islamic Economics and Finance Research Group. He is also a member of the committee of Klinik Hukum Syarak and Guaman Syarie, Department of Shariah, and an expert consultant and speaker for Pusat Islam UKM and Unit Latihan UKM programmes related to Islamic Law.

He holds a Master Degree in Shariah from UKM and currently is a PhD candidate at International Centre for Education in Islamic Finance (INCEIF).

EN. MAT NOOR MAT ZAIN

Mat Noor Mat Zain is a lecturer at the Department of Shariah, Faculty of Islamic Studies, UKM.

His specialisation areas are in Fiqh Muamalah, Islamic Contract and Islamic Family Law. He has extensive research experience in the area of Fiqh Muamalah and Islamic Finance such as Instruments of Islamic Hedging, Term and Condition in Standard Form Contract. He teaches several courses related to Muamalah and Islamic Jurisprudence such as Fiqh Muamalat, Islamic Finance, and Principles of Islamic Jurisprudence.

He has presented many papers related to Islamic banking and finance at domestic and international level. He is a consultant for UKM Pakarunding, an expert speaker for ILIM/JAKIM programmes related to Fiqh Muamalah and consulting article assessors in several journals such as The Journal of Muamalat and Islamic Finance Research (JMIFR) published by Islamic Science University of Malaysia (USIM).

He holds a Bachelor of Shariah from Islamic University of Medina, Saudi Arabia, Master Degree in Islamic Studies (Muamalah) from UKM and currently a PhD candidate in the field of Islamic Contract.

DR. MOHAMMAD FIRDAUS BIN MOHAMMAD HATTA

Mohammad Firdaus is a senior lecturer at the Department of Islamic Banking, Faculty of Business Management, Mara University of Technology (UITM).

He has also published outstanding research papers such as The Impact of Islamic Financial System on Malaysian Economy, Islam in Malaysia and Its Political Dimensions: Past, Present and Future, The IMF and World Bank: The Growth - or Crisis Promoters? Concept and the application of Kafalah in Bank’s Letter of Guarantee and

Effect of Sub-Prime Crisis on the Global Economy and How Such Crisis should have been Averted in an Islamic Finance Environment among others.

He holds Bachelor of Shariah from Islamic University of Medina, Saudi Arabia, Master Degree in Fiqh & Usul Fiqh from IIUM, Diploma in Islamic Finance, Markfield Institute of Higher Education and Phd in Islamic Banking from the University of Wales, United Kingdom.

DR. HAKIMAH HJ YAACOB

Hakimah Yaacob is a researcher at ISRA. She is also a certified arbitrator and mediator by the Malaysian Bar Council and Malaysian Chartered of Arbitration Association (CIArb).She has written many books such as Alternative Dispute Resolution (ADR): Expanding Options in Islamic Finance Dispute.

She is a certified negotiator and drafter in the International Contract from International Chamber of Commerce (ICC). She is a professional trainer in Islamic Finance. She has conducted local and international trainings in Islamic Finance for government sectors, government linked companies, statutory bodies and private entities. She has received the best paper award and has presented many papers at international level such as the World Bank Conference in Bahrain, Accounting and Auditing Organisation of Islamic Finance (AAOIFI) on International Convention for Islamic Finance.

She holds Bachelor and Master Degree in Law and PhD in Victimology and Takaful Justice.

DR. RUZIAN HJ MARKOM

Ruzian Markom is a senior lecturer at the Department of Law, UKM.

Her specialisation areas are in Islamic Banking, Takaful, Islamic Capital Market, Consumer Protection and Law. She has extensive research experience such as Renewable Energy Act 2011 and the Feed Tariff System: An Islamic Legal Analysis; Steps to Eradicate Loan Shark Activities in Malaysia According To Islamic And Civil Law; Regulations of Consumer Credit Laws in Malaysia; Sovereignty and Transformational Challenges Facing Islamic Financial System at the Central Bank Level: Towards A New Model, Litigation as Dispute Resolution Mechanism in Islamic Finance: Malaysian Experience. European Journal of Law and Economics and The Current Practices of Islamic Build Operate Transfer (BOT) Financing Contracts: A Legal Analysis.

She holds Bachelor Degree in Law, Master in Business Law and PhD in Law from IIUM.

SHARIAH COMMITTEE


33

Citibank Berhad’s Shariah Committee is responsible for the provision of Shariah oversight in relation to Citibank Berhad’s Islamic Banking business operations. The duties and responsibilities of the Shariah Committee are governed by the Shariah Governance Framework for Islamic Financial Institution as issued by the Bank Negara Malaysia (BNM).

For the year 2013, the Shariah Committee met 11 times. Additionally, individual Shariah Committee members participated in various business discussions where Shariah advice was required prior to submission to the full Shariah Committee.

Citibank Berhad’s Islamic Banking business operations were subjected to a full Shariah audit conducted jointly by Citibank Berhad’s Internal Audit together with Citi’s Global Islamic Control unit. The Shariah Committee reviewed the findings of the Shariah audit and was satisfied with the report and its findings.

Citibank Berhad’s Shariah Committee effective from 1 June 2013 included the following distinguished members:

PROFESSOR DR. ABDUL GHAFAR ISMAIL (CHAIRMAN)

Abdul Ghafar Ismail has been a Professor in Banking and Financial Economics, School of Economics, Universiti Kebangsaan Malaysia (UKM) since 2003. He is currently the Head of Islamic Economics and Finance Research Division, Islamic Research and Training Institute (IRTI), Islamic Development Bank (IDB), Saudi Arabia.

He has published extensively in several refereed journals among others Journal of Business Ethics; Review of Islamic Economics; Journal of Islamic Economics, Banking and Finance; Humanomics; International Journal of Social Economics; Savings and Development; Global Journal of Finance and Economics; Review of Financial Economics; Journal of Financial Services Marketing; International Journal of Islamic and Middle Eastern Finance and Management; Australian Journal of Basics and Applied Sciences; Research in Financial Qualitative Markets; and Investment Management and Financial Innovations. His

papers have also been presented in many international and local conferences, such as International Seminar on Islamic Economics and Finance, IRTI International Conference and Malaysia Finance Association Conference.

He has also published several textbooks among others, Ar-Rahnu: Islamic Pawnbroking; and Money, Islamic Banks and Real Economy. His research interests include learning process and growth theory, inter-temporal allocation of resources, earning management, capital adequacy standard for Islamic banks, and risk management. He has been a lecturer since 1987 and has been teaching several economics courses such as money and banking, financial economics, advanced macroeconomics, money and capital market in Islam, Islamic economics system, Islamic economics analysis, and international finance; risk management in Islamic banking; issues in Islamic banking; Islamic banking; and money, zakat and real economy.

He holds a PhD from the University of Southampton, England.

EN. MOHD BAHRODDIN BADRI(DEPUTY CHAIRMAN)

Mohd Bahroddin is a researcher at the International Shariah Research Academy (ISRA). Prior to that, he was attached to International Islamic University Malaysia (IIUM) as a lecturer in the Department of Islamic Revealed Knowledge and Human Resources.

He is actively involved in Islamic finance and Shariah related seminars, workshops and trainings organised by ISRA and Bank Negara Malaysia (BNM) to name few. He has also published outstanding research papers such as Critical Appraisal of the Rahn-based Islamic Microcredit Facility, Shariah Analysis on Gold Investment Products in Malaysia, Shariah Analysis on Zakat in Gold Investment, Kafalah bil Ujrah in Islamic Banking Guarantee Product: A Shariah Analysis, Fiqh of Risk Sharing in Islamic Finance and Shariah Rules and Interpretations Across Jurisdictions: Towards Greater Global Connectivity in Islamic Finance.

He holds Bachelor of Islamic Revealed Knowledge (Fiqh & Usul Fiqh) from IIUM and Master Degree in Shariah from University of Malaya.

EN. NIK ABDUL RAHIM BIN NIK ABDUL GHANI

Nik Abdul Rahim is a lecturer of Fiqh Muamalat at Department of Shariah, Faculty of Islamic Studies, UKM.

He regularly conducts lectures, researches and presents papers at seminars and conferences, both

locally and internationally on the areas of Fiqh Muamalat and Usul Fiqh particularly those related to Islamic banking, Islamic insurance (Takaful) and current issues of Islamic transaction laws.

He is currently a member of the Research Centre for Islamic Economics and Finance (EKONIS) or formerly known as Islamic Economics and Finance Research Group. He is also a member of the committee of Klinik Hukum Syarak and Guaman Syarie, Department of Shariah, and an expert consultant and speaker for Pusat Islam UKM and Unit Latihan UKM programmes related to Islamic Law.

He holds a Master Degree in Shariah from UKM and currently is a PhD candidate at International Centre for Education in Islamic Finance (INCEIF).

EN. MAT NOOR MAT ZAIN

Mat Noor Mat Zain is a lecturer at the Department of Shariah, Faculty of Islamic Studies, UKM.

His specialisation areas are in Fiqh Muamalah, Islamic Contract and Islamic Family Law. He has extensive research experience in the area of Fiqh Muamalah and Islamic Finance such as Instruments of Islamic Hedging, Term and Condition in Standard Form Contract. He teaches several courses related to Muamalah and Islamic Jurisprudence such as Fiqh Muamalat, Islamic Finance, and Principles of Islamic Jurisprudence.

He has presented many papers related to Islamic banking and finance at domestic and international level. He is a consultant for UKM Pakarunding, an expert speaker for ILIM/JAKIM programmes related to Fiqh Muamalah and consulting article assessors in several journals such as The Journal of Muamalat and Islamic Finance Research (JMIFR) published by Islamic Science University of Malaysia (USIM).

He holds a Bachelor of Shariah from Islamic University of Medina, Saudi Arabia, Master Degree in Islamic Studies (Muamalah) from UKM and currently a PhD candidate in the field of Islamic Contract.

DR. MOHAMMAD FIRDAUS BIN MOHAMMAD HATTA

Mohammad Firdaus is a senior lecturer at the Department of Islamic Banking, Faculty of Business Management, Mara University of Technology (UITM).

He has also published outstanding research papers such as The Impact of Islamic Financial System on Malaysian Economy, Islam in Malaysia and Its Political Dimensions: Past, Present and Future, The IMF and World Bank: The Growth - or Crisis Promoters? Concept and the application of Kafalah in Bank’s Letter of Guarantee and

Effect of Sub-Prime Crisis on the Global Economy and How Such Crisis should have been Averted in an Islamic Finance Environment among others.

He holds Bachelor of Shariah from Islamic University of Medina, Saudi Arabia, Master Degree in Fiqh & Usul Fiqh from IIUM, Diploma in Islamic Finance, Markfield Institute of Higher Education and Phd in Islamic Banking from the University of Wales, United Kingdom.

DR. HAKIMAH HJ YAACOB

Hakimah Yaacob is a researcher at ISRA. She is also a certified arbitrator and mediator by the Malaysian Bar Council and Malaysian Chartered of Arbitration Association (CIArb).She has written many books such as Alternative Dispute Resolution (ADR): Expanding Options in Islamic Finance Dispute.

She is a certified negotiator and drafter in the International Contract from International Chamber of Commerce (ICC). She is a professional trainer in Islamic Finance. She has conducted local and international trainings in Islamic Finance for government sectors, government linked companies, statutory bodies and private entities. She has received the best paper award and has presented many papers at international level such as the World Bank Conference in Bahrain, Accounting and Auditing Organisation of Islamic Finance (AAOIFI) on International Convention for Islamic Finance.

She holds Bachelor and Master Degree in Law and PhD in Victimology and Takaful Justice.

DR. RUZIAN HJ MARKOM

Ruzian Markom is a senior lecturer at the Department of Law, UKM.

Her specialisation areas are in Islamic Banking, Takaful, Islamic Capital Market, Consumer Protection and Law. She has extensive research experience such as Renewable Energy Act 2011 and the Feed Tariff System: An Islamic Legal Analysis; Steps to Eradicate Loan Shark Activities in Malaysia According To Islamic And Civil Law; Regulations of Consumer Credit Laws in Malaysia; Sovereignty and Transformational Challenges Facing Islamic Financial System at the Central Bank Level: Towards A New Model, Litigation as Dispute Resolution Mechanism in Islamic Finance: Malaysian Experience. European Journal of Law and Economics and The Current Practices of Islamic Build Operate Transfer (BOT) Financing Contracts: A Legal Analysis.

She holds Bachelor Degree in Law, Master in Business Law and PhD in Law from IIUM.

RATINGS STATEMENT


34

RAM Rating Services Berhad (RAM) has, on 09 January 2014, reaffirmed the AAA/Stable/P1 financial institution ratings (FIR) of Citibank Berhad.

Citibank Berhad’s ratings are premised on its entrenched market position in the consumer banking arena, strong funding and liquidity profile, robust capitalisation as well as satisfactory asset quality.

BANK RATING SYMBOLS AND DEFINITIONS:

AAA A financial institution rated AAA has a superior capacity to meet its financial obligations. This is the highest long-term FIR assigned by RAM Ratings.

P1 A financial institution rated P1 has a strong capacity to meet its short-term financial obligations. This is the highest short-term FIR assigned by RAM Ratings.


CONTENTSFINANCIALSTATEMENTSDirectors’ Report

Statement By Directors

Declaration Pursuant

Shariah Committee‘s Report

Independent Auditors’ Report

Statement Of Financial Position

Statement Of Profit Or LossAnd Other Comprehensive Income

Statement Of Changes In Equity

Statement Of Cash Flows

Notes To The Financial Statements

36

39

40

41

42

43

44

45

46

48

The Directors have pleasure in submitting their report and the audited financial statements of the Group and the Bank for the year ended 31 December 2013.

Principal activitiesThe Bank is principally engaged in banking and related financial services that also include Islamic Banking business whilst the principal activities of the subsidiaries are stated in Note 12 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

Results Group and Bank

RM’000

Profit before taxation 716,869Tax expense (183,982) Profit for the year 532,887

Reserves and provisions There were no material transfers to or from reserves and provisions during the year under review except as disclosed in the financial statements.

DividendsSince the end of the previous financial year, the Bank paid a final ordinary dividend of 548 sen per ordinary share less tax at 25% totalling RM500 million (411 sen net per ordinary share) in respect of the year ended 31 December 2012 on 28 June 2013.

The final ordinary dividend recommended by the Directors in respect of the year ended 31 December 2013 is 411 sen per ordinary share totalling RM500 million.

Bad and doubtful debts and financingBefore the financial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain that actions had been taken in relation to the writing off of bad debts and financing and the making of provisions for impaired loans, advances and financing, and satisfied themselves that all known bad debts and financing had been written off and adequate provisions made for impaired loans, advances and financing.

At the date of this report, the Directors are not aware of any circumstances, which would render the amount written off for bad debts and financing, or the amount of the provision for impaired loans, advances and financing, in the financial statements of the Group and the Bank inadequate to any substantial extent.

Current assetsBefore the financial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain that the value of any current assets, other than debts and financing, which were unlikely to be realised in the ordinary course of business, as shown in the accounting records of the Group and the Bank, have been written down to an amount which they might be expected to realise.

At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and the Bank misleading.

Valuation methodsAt the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing methods of valuation of assets or liabilities in the financial statements of the Group and the Bank misleading or inappropriate.

Contingent and other liabilitiesAt the date of this report, there does not exist:

(a) any charge on the assets of the Group or the Bank which has arisen since the end of the financial year and which secures the liabilities of any other person, or

(b) any contingent liabilities in respect of the Group or the Bank that has arisen since the end of the financial year other than those incurred in the ordinary course of business.

No contingent or other liability of the Group and the Bank have become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and the Bank to meet their obligations as and when they fall due.

Change of circumstancesAt the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and the Bank, that would render any amount stated in the financial statements misleading.

Items of an unusual natureThe results of the operations of the Group and the Bank for the financial year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature.

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature, in the opinion of the Directors, likely to affect substantially the results of the operations of the Group and the Bank for the current financial year in which this report is made.


36

DIRECTORS’ REPORTFOR THE YEAR ENDED 31 DECEMBER 2013

00

3

Compliance with Bank Negara Malaysia’s expectations on financial reportingIn the preparation of the financial statements, the Directors have taken reasonable steps to ensure that Bank Negara Malaysia’s expectations on financial reporting have been complied with, including those as set out in the Guidelines on Financial Reporting and the Guidelines on Classification and Impairment Provisions for Loans/Financing.

Directors’ interests in sharesThe interests in the ordinary shares and options over shares of the Bank and of its related corporations of those who were Directors at year end as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of USD1 each At At 1 .1 .2013 Bought Sold 31.12.2013Shares in Citigroup Inc. Direct interests Sanjeev Nanavati 23,998 8,036 - 26,902 Dato’ Siow Kim Lun @ Siow Kim Lin 900 - - 900 Agnes Liew Yun Chong 14,049 5,977 - 20,026 Terence Kent Cuddyre 2,199 563 1,719 1,043

Number of ordinary shares of USD1 each At At 1 .1 .2013 Granted Vested 31.12.2013Capital Accumulation Program/ Supplementary CAP/SEA in Citigroup Inc.

Sanjeev Nanavati 10,865 8,012 10,865 8,012 Agnes Liew Yun Chong 18,821 6,532 5,977 19,376 Terence Kent Cuddyre 2,000 865 563 2,302

Number of options over ordinary shares of USD1 each At At 1 .1 .2013 Granted Forfeited 31.12.2013 Stock Option Plan in Citigroup Inc.

Sanjeev Nanavati 6,298 - - 6,298 Agnes Liew Yun Chong 3,600 - - 3,600 Terence Kent Cuddyre 816 - - 816

None of the other Directors holding office at 31 December 2013 had any interest in the ordinary shares and options over ordinary shares of the Bank and of its related corporations during the financial year.


37


Directors of the BankDirectors who served since the date of the last report are:

■ Sanjeev Nanavati ■ Tan Sri Dato’ Hj. Omar Bin Ibrahim■ Dato’ Siow Kim Lun @ Siow Kim Lin■ Agnes Liew Yun Chong■ Terence Kent Cuddyre■ Dato’ Dr. Thillainathan A/L Ramasamy ■ Anil Wadhwani (resigned on 11 October 2013)


38

Directors’ benefitsSince the end of the previous financial year, no Director of the Bank has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Bank or of related corporations) by reason of a contract made by the Bank or a related company with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Bank to acquire benefits by means of the acquisition of shares in or debentures of the Bank or any other body corporate apart from the Directors above who were granted options to subscribe for shares in the ultimate holding company under various stock incentive and purchase schemes where the price and terms are as determined by the said schemes.

Issue of shares and debenturesThere were no changes in the issued and paid-up capital of the Bank during the financial year.

There were no debentures issued during the financial year.

Options granted over unissued sharesNo options were granted to any person to take up unissued shares of the Bank during the financial year.

AuditorsThe auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Sanjeev Nanavati

Dato’ Dr. Thillainathan A/L Ramasamy

Kuala LumpurDate: 5 June 2014



39

In the opinion of the Directors, the financial statements set out on pages 43 to 140 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and the Bank as of 31 December 2013 and of their financial performance and cash flows for the year then ended.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Sanjeev Nanavati

Dato’ Dr. Thillainathan A/L Ramasamy


STATEMENT BY DIRECTORSPURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965


40

I, Tang Wan Chee, the officer primarily responsible for the financial management of Citibank Berhad, do solemnly and sincerely declare that the financial statements set out on pages 43 to 140 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named in Kuala Lumpur on 5 June 2014.

Tang Wan Chee

Before me:

Commissioner for Oaths

DECLARATION PURSUANTTO SECTION 169(16) OF THE COMPANIES ACT, 1965


We, Dr. Abdul Ghafar bin Ismail, Mohd Bahroddin Badri, Nik Abdul Rahim Nik Abdul Ghani, Mat Noor Mat Zain, Dr. Mohammad Firdaus Mohammad Hatta, Dr. Hakimah Hj Yaacob and Dr. Ruzian Hj Markom being the members of Citibank Berhad Shariah Committee hereby confirm that we have reviewed the principles and the contracts relating to the transactions and applications introduced by Citibank Berhad’s Islamic Banking division during the financial year ended 31 December 2013.

We have also conducted our review to form an opinion as to whether Citibank Berhad’s Islamic Banking division has complied with the Shariah principles and with the Shariah rulings issued by the Shariah Advisory Council of Bank Negara Malaysia, as well as Shariah decisions made by us.

The management of Citibank Berhad’s Islamic Banking division is responsible for ensuring that the financial institution conducts its business in accordance with Shariah principles. It is our responsibility to form an independent opinion, based on our review of the operations of the Citibank Berhad’s Islamic Banking division, and to report to you.

We have assessed the work carried out by Shariah review and Shariah audit which included examining, on a test basis, each type of transaction, the relevant documentation and procedures adopted by the Citibank Berhad’s Islamic Banking division.

We planned and performed our review so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Citibank Berhad’s Islamic Banking division has not violated the Shariah principles.

In our opinion:

1. the contracts, transactions and dealings entered into by the Citibank Berhad’s Islamic Banking division during the year ended 31 December 2013 that we have reviewed are in compliance with the Shariah principles; and

2. the allocation of profit and charging of losses relating to investment accounts conform to the basis that had been approved by us in accordance with Shariah principles.

We, the members of Citibank Berhad Shariah Committee, do hereby confirm that the operations of the Citibank Berhad’s Islamic Banking division for the year ended 31 December 2013 have been conducted in conformity with the Shariah principles.

We beg Allah the Almighty to grant us success and lead us on the right path.

Wassalamu Alaikum Wa Rahmatullahi Wa Barakatuh

Professor Dr. Abdul Ghafar Ismail Mohd Bahroddin BadriChairman of the Shariah Committee Deputy Chairman of the Shariah Committee

Nik Abdul Rahim Nik Abdul Ghani Mat Noor Mat ZainMember of the Shariah Committee Member of the Shariah Committee

Dr. Mohammad Firdaus Mohammad Hatta Dr. Hakimah Hj YaacobMember of the Shariah Committee Member of the Shariah Committee


SHARIAH COMMITTEE’S REPORTIN THE NAME OF ALLAH, THE BENEFICENT, THE MERCIFUL

41

Report on the Financial StatementsWe have audited the financial statements of Citibank Berhad, which comprise the statements of financial position as at 31 December 2013 of the Group and the Bank, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows of the Group and the Bank for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 43 to 140.

Directors’ Responsibility for the Financial StatementsThe Directors of the Bank are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Bank’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of the Group and the Bank as of 31 December 2013 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Report on Other Legal and Regulatory RequirementsIn accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Bank and its subsidiaries have been properly kept in accordance with the provisions of the Act.

b) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Bank’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

c) Our audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

Other MattersThis report is made solely to the members of the Bank, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG Ahmad Nasri bin Abdul WahabFirm Number: AF 0758 Approval Number: 2919/03/16(J)Chartered Accountants Chartered Accountant

Petaling Jaya, MalaysiaDate: 5 June 2014

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF CITIBANK BERHAD


42


43

Group Bank

2013 2012 2013 2012

Note RM’000 RM’000 RM’000 RM’000

Assets

Cash and short term funds 3 10,847,348 10,293,235 10,847,328 10,293,215

Deposits and placements with banks and other financial institutions 4 843,609 296,775 843,609 296,775

Securities purchased under resale agreements 484,631 743,921 484,631 743,921

Financial assets held-for-trading 5 2,543,577 3,045,057 2,543,577 3,045,057

Financial investments available-for-sale 6 1,792,120 3,399,436 1,792,120 3,399,436

Loans, advances and financing 7 20,498,282 19,276,194 20,498,282 19,276,194

Other assets 9 901,806 832,926 901,806 832,926

Statutory deposits with Bank Negara Malaysia 10 359,000 438,840 359,000 438,840

Deferred tax assets 11 19,105 17,292 19,105 17,292

Investments in subsidiary companies 12 - - 20 20

Plant and equipment 13 82,733 109,343 82,733 109,343

Total assets 38,372,211 38,453,019 38,372,211 38,453,019

Liabilities

Deposits from customers 14 25,783,529 26,330,142 25,783,529 26,330,142

Deposits and placements of banks and other financial institutions 15 5,856,257 5,514,077 5,856,257 5,514,077

Bills and acceptances payable 52,688 133,076 52,688 133,076

Other liabilities 16 2,352,153 2,189,904 2,352,153 2,189,904

Total liabilities 34,044,627 34,167,199 34,044,627 34,167,199

Equity

Share capital 17 121,697 121,697 121,697 121,697

Reserves 18 4,205,887 4,164,123 4,205,887 4,164,123

Total equity attributable to equity holder of the Bank 4,327,584 4,285,820 4,327,584 4,285,820

Total liabilities and equity 38,372,211 38,453,019 38,372,211 38,453,019

Commitments and contingencies 36 77,626,306 79,345,922 77,626,306 79,345,922

The notes on pages 48 to 140 are an integral part of these financial statements.

STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2013


44

Group and Bank

2013 2012

Note RM’000 RM’000

Revenue 2(b) 2,206,698 2,358,094

Interest income 20 1,540,762 1,669,075

Interest expense 21 (448,500) (511,581)

Net interest income 1,092,262 1,157,494

Net income from Islamic banking operations 37(n) 48,909 39,445

Other operating income 22 617,027 649,574

Total net income 1,758,198 1,846,513

Other operating expenses 23 (908,044) (934,098)

Operating profit 850,154 912,415

Allowance for loans, advances and financing 24 (133,285) (122,838)

Profit before taxation 716,869 789,577

Tax expense 25 (183,982) (210,970)

Profit for the year 532,887 578,607

Other comprehensive income/(expenses), net of tax

Items that will not be reclassified subsequently to profit or loss

- Net loss on revaluation of financial investments available-for-sale (3,460) (8,210)

Items that are or may be reclassified subsequently to profit or loss

- Net gain on remeasurement of defined benefit plans 12,337 -

Total other comprehensive income/(expense) for the year 8,877 (8,210)

Total comprehensive income for the year 541,764 570,397

Profit for the year attributable to:

Owner of the Bank 532,887 578,607

Total comprehensive income attributable to:


Earnings per share - basic (sen) 26 438 475


STATEMENTS OF PROFIT OR LOSS ANDOTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013


45


Attributable to owner of the Bank

Non-distributable Distributable

Share Share Statutory Other Retained Total

Note Capital Premium Reserve Reserve Profits Reserves Total

Group and Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2012 121,697 380,303 121,697 7,387 3,384,339 3,893,726 4,015,423

Net loss on revaluation of financial investments available-for-sale - - - (8,210) - (8,210) (8,210)

Total other comprehensive expense for the year - - - (8,210) - (8,210) (8,210)

Profit for the year - - - - 578,607 578,607 578,607

Total comprehensive (expense)/ income for the year - - - (8,210) 578,607 570,397 570,397

Dividends to owner of the Bank 27 - - - - (300,000) (300,000) (300,000)

Total contribution to owner - - - - (300,000) (300,000) (300,000)

At 31 December 2012 121,697 380,303 121,697 (823) 3,662,946 4,164,123 4,285,820

Note 17 Note 18

At 1 January 2013 121,697 380,303 121,697 (823) 3,662,946 4,164,123 4,285,820

Net loss on revaluation of financial investments available-for-sale - - - (3,460) - (3,460) (3,460)

Net gain on remeasurement of defined benefit plans - - - 12,337 - 12,337 12,337

Total other comprehensive income for the year - - - 8,877 - 8,877 8,877

Profit for the year - - - - 532,887 532,887 532,887

Total comprehensive income for the year - - - 8,877 532,887 541,764 541,764

Dividends to owner of the Bank 27 - - - - (500,000) (500,000) (500,000)

Total contribution to owner - - - - (500,000) (500,000) (500,000)

At 31 December 2013 121,697 380,303 121,697 8,054 3,695,833 4,205,887 4,327,584

Note 17 Note 18

STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013


46

STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013

Group Bank

2013 2012 2013 2012

RM’000 RM’000 RM’000 RM’000

Cash flows from operating activities

Profit before taxation 716,869 789,577 716,869 789,577

Adjustments for:

Amortisation of premium less accretion of discount of financial investments available-for-sale 81,253 (27,739) 81,253 (27,739)

Allowance for bad and doubtful debts (net of write-back) 133,285 122,838 133,285 122,838

Depreciation 35,575 36,534 35,575 36,534

Dividends from unquoted investment securities (245) (28) (245) (28)

Unrealised loss/(gain) from revaluation of financial assets held-for-trading 4,445 (41) 4,445 (41)

Gain from disposal of financial investments available-for-sale (12,237) (20,581) (12,237) (20,581)

Loss on disposal of plant and equipment 32 392 32 392

Operating profit before working capital changes 958,977 900,952 958,977 900,952

Changes in working capital:

Deposits and placements with banks and other financial institutions (546,834) 1,219,898 (546,834) 1,219,898

Securities purchased under resale agreements 259,290 475,072 259,290 475,072

Financial assets held-for-trading 497,035 (708,167) 497,035 (708,167)

Loans, advances and financing (1,355,373) 958,295 (1,355,373) 958,295

Other assets (79,267) 456,566 (79,267) 456,566

Statutory deposits with Bank Negara Malaysia 79,840 (40,760) 79,840 (40,760)

Deposits from customers (546,613) (3,740,563) (546,613) (3,740,563)

Deposits and placements of banks and other financial institutions 342,180 (2,263,020) 342,180 (2,263,020)

Bills and acceptances payable (80,388) 69,315 (80,388) 69,315

Other liabilities 162,894 (304,514) 162,894 (304,514)

Cash used in operating activities (308,259) (2,976,926) (308,259) (2,976,926)

Income taxes paid (176,053) (239,125) (176,053) (239,125)

Net cash used in operating activities (484,312) (3,216,051) (484,312) (3,216,051)



47

STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013

Group Bank

2013 2012 2013 2012

RM’000 RM’000 RM’000 RM’000Cash flows from investing activities

Dividend from investment securities 245 28 245 28

Purchase of plant and equipment (9,206) (26,034) (9,206) (26,034)

Proceeds from disposal of plant and equipment 209 670 209 670

Purchase of financial investments available-for-sale (3,839,635) (6,174,833) (3,839,635) (6,174,833)

Redemption of financial investments available-for-sale 1,205,202 1,626,774 1,205,202 1,626,774

Proceeds from disposal of financial investments available-for-sale 4,181,610 6,414,241 4,181,610 6,414,241

Net cash generated from investing activities 1,538,425 1,840,846 1,538,425 1,840,846

Cash flows from financing activities

Dividend paid to owner (500,000) (300,000) (500,000) (300,000)

Net cash used in financing activities (500,000) (300,000) (500,000) (300,000)

Net increase/(decrease) in cash and cash equivalents 554,113 (1,675,205) 554,113 (1,675,205)

Cash and cash equivalents at 1 January 10,293,235 11,968,440 10,293,215 11,968,420

Cash and cash equivalents at

31 December (Note 3) 10,847,348 10,293,235 10,847,328 10,293,215


NOTES TO THE FINANCIAL STATEMENTS

Citibank Berhad (“the Bank”) is a public limited liability company, incorporated and domiciled in Malaysia. The address of both its principal place of business and registered office is as follows:

45th Floor, Menara Citibank 165 Jalan Ampang50450 Kuala Lumpur

The consolidated financial statements of the Bank as at and for the year ended 31 December 2013 comprise the Bank and its subsidiaries (together referred to as the “Group”).

The Bank is principally engaged in banking and related financial services that also include Islamic Banking business whilst the principal activities of the subsidiaries are as stated in Note 12 to the financial statements.

The immediate holding company is Citigroup Holdings (Singapore) Pte. Ltd., a company incorporated in Singapore and the ultimate holding company is Citigroup Inc., a company incorporated in the United States of America.

The financial statements were authorised for issue by the Board of Directors on 5 June 2014.

1. Basis of preparation

A. Statement of compliance The financial statements of the Group and the Bank

have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the Companies Act, 1965 in Malaysia.

The financial statements also incorporate those activities relating to Islamic Banking which have been undertaken by the Bank. Islamic Banking refers generally to the acceptance of deposits and granting of financing under the Shariah principles.

The following are accounting standards, amendments and interpretations that have been issued by the Malaysian Accounting Standards Board (“MASB”) but have not been adopted by the Group and the Bank:

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2014

• Amendments to MFRS 10, Consolidated Financial Statements: Investment Entities

• Amendments to MFRS 12, Disclosure of Interests in Other Entities: Investment Entities

• Amendments to MFRS 127, Separate Financial Statements (2011): Investment Entities

• Amendments to MFRS 132, Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities

• Amendments to MFRS 136, Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets

• Amendments to MFRS 139, Financial Instruments: Recognition and Measurement – Novation of Derivatives and Continuation of Hedge Accounting

• IC Interpretation 21, Levies

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 2014

• Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements 2011-2013 Cycle)

• Amendments to MFRS 2, Share-based Payment (Annual Improvements 2010-2012 Cycle)

• Amendments to MFRS 3, Business Combinations (Annual Improvements 2010-2012 Cycle and 2011-2013 Cycle)

• Amendments to MFRS 8, Operating Segments (Annual Improvements 2010-2012 Cycle)

• Amendments to MFRS 13, Fair Value Measurement (Annual Improvements 2010-2012 Cycle and 2011-2013 Cycle)

• Amendments to MFRS 116, Property, Plant and Equipment (Annual Improvements 2010-2012 Cycle)

• Amendments to MFRS 119, Employee Benefits – Defined Benefit Plans: Employee Contributions

• Amendments to MFRS 124, Related Party Disclosures (Annual Improvements 2010-2012 Cycle)

• Amendments to MFRS 138, Intangible Assets (Annual Improvements 2010-2012 Cycle)

• Amendments to MFRS 140, Investment Property (Annual Improvements 2011-2013 Cycle)

MFRSs, Interpretations and amendments effective for a date yet to be confirmed

• MFRS 9, Financial Instruments (2009)

• MFRS 9, Financial Instruments (2010)

• MFRS 9, Financial Instruments – Hedge Accounting and Amendments to MFRS 9, MFRS 7 and MFRS 139

• Amendments to MFRS 7, Financial Instruments: Disclosures – Mandatory Effective Date of MFRS 9 and Transition Disclosures

The Group and the Bank plan to apply the abovementioned accounting standards, amendments and interpretations:

• from the annual period beginning on 1 January 2014 for those accounting standards, amendments or interpretations that are effective for annual periods beginning on or after 1 January 2014, except for amendments to MFRS 10, MFRS 12 and MFRS 127 which are not applicable to the Group and the Bank.


48


1. Basis of preparation (continued)

A. Statement of compliance (continued)

• from the annual period beginning on 1 January 2015 for those accounting standards, amendments or interpretations that are effective for annual periods beginning on or after 1 July 2014, except for amendments to MFRS 1, MFRS 3, MFRS 8, MFRS 138 and MFRS 140 which are not applicable to the Group and the Bank.

Material financial impact of initial application of MFRS 9, Financial Instruments is discussed below:

(i) MFRS 9, Financial Instruments MFRS 9 replaces the guidance in MFRS 139, Financial

Instruments: Recognition and Measurement on the classification and measurement of financial assets and financial liabilities, and on hedge accounting.

This standard requires all financial assets to be classified based on an entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Financial assets are to be initially measured at fair value. Subsequent to initial recognition, depending on the business model under which these assets are acquired, these will be measured at either fair value or amortised cost.

This standard also specifies the requirements for the classification and measurement of financial liabilities, which are generally similar to the requirements of MFRS 139. However, this standard requires that for financial liabilities designated at fair value through profit or loss, changes in fair value attributable to the credit risk of that liability are to be presented in other comprehensive income, whereas the remaining amount of the change in fair value will be presented in the income statement.

The adoption of MFRS 9 may result in a change in accounting policy. The Group and the Bank is currently assessing the financial impact that may arise from the adoption of MFRS 9.

The initial application of the other applicable accounting standards, amendments and interpretations are not expected to have any material financial impact to the current period and prior period financial statements of the Group and the Bank.

B. Basis of measurement The financial statements have been prepared on

the historical cost basis other than those disclosed in Note 2.

C. Functional and presentation of currency The financial statements are presented in Ringgit

Malaysia (“RM”), which is the Group’s and the Bank’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

D. Use of estimates and judgements The preparation of financial statements in conformity

with MFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

■ Note 2(g)(i) - Impairment losses on loans, advances and financing

Collective impairment allowance for loan losses represents management’s estimate of probable losses inherent in the portfolio. The allowance is available to absorb probable loan losses inherent in the overall portfolio.

The allowance attributed to these loans is established via a process that estimates the probable losses inherent in the portfolio based upon various analysis. These include migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, together with analysis that reflect current trends and conditions.

■ Note 2(f)(vi) - Fair value estimation for financial assets and liabilities

The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in accounting policy in Note 2(f)(vi).

■ Note 2(o)(iii) - Actuarial valuation for employee benefits

The liability for the defined benefit plan is recognised as the present value of the defined benefit obligation less the fair value of the Plan’s assets.

49



50

2. Significant accounting policies The accounting policies set out below have been applied

consistently to the periods presented in these financial statements and have been applied consistently by the Group and the Bank, unless otherwise stated.

A. Basis of consolidation

i. Subsidiaries Subsidiaries are investees, including unincorporated

entities, controlled by the Bank. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date when control ceases.

The Bank adopted MFRS 10, Consolidated Financial Statements in the current financial year. This resulted in changes to the following policies:

• Control exists when the Bank is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In the previous financial years, control exists when the Bank has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

• Potential voting rights are considered when assessing control only when such rights are substantive. In the previous financial years, potential voting rights are considered when assessing control when such rights are presently exercisable.

• The Bank considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return. In the previous financial years, the Bank did not consider de facto power in its assessment of control.

The change in the accounting policy has been made retrospectively and in accordance with the transitional provision of MFRS 10. The adoption of MFRS 10 has no impact to the financial statements of the Bank.

Investments in subsidiaries are measured in the Bank’s statement of financial position at cost less any impairment losses, unless the investment is held for sale or distribution. The cost of investments includes transaction costs.

The accounting policies of subsidiaries are changed when necessary to align them with the policies adopted by the Bank.

ii. Transactions eliminated on consolidation Intra-group balances and transactions, and any

unrealised income and expenses arising from

intra-group transactions, are eliminated in preparing the consolidated financial statements.

B. Revenue

Revenue comprises of gross interest income, other income derived from banking operations and net income from Islamic Banking operation.

C. Interest and financing income and expense

Interest income and expense are recognised in the profit or loss using the effective interest method. The ‘effective interest rate’ is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or financial liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group and the Bank estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses.

The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial liability.

Interest income and expense presented in the statements of profit or loss and other comprehensive income include:

• Interest on financial assets and financial liabilities measured at amortised cost calculated on an effective interest rate basis; and

• Interest on financial assets held-for-trading, financial investments available-for-sale on an effective interest rate basis.

D. Fees and commission

Fees and commission income and expense that are integral to the effective interest rate on a financial asset or financial liability are included in the measurement of the effective interest rate (see (c)).

Other fees and commission income, including account servicing fees, investment management fees, sales commission, placement fees and syndication fees – are recognised as the related services are performed. If a loan commitment is not expected to result in the draw-down of a loan, then the related loan commitment fees are recognised on a straight-line basis over the commitment period. When it is probable that a loan commitment will result in a specific lending arrangement, commitment fees are included in the measurement of the effective interest rate.

Other fees and commission expense relate mainly to transaction and service fees, which are expensed as the services are received.



51

2. Significant accounting policies (continued)

E. Net trading income

Net trading income comprises gains less losses related to trading assets and liabilities, and includes all realised and unrealised fair value changes, interest, dividends and foreign exchange differences.

F. Financial assets and financial liabilities

i. Initial recognition and measurement

A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group or the Bank becomes a party to the contractual provisions of the instrument.

A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

ii. Financial instrument categories and subsequent measurement

The Group and the Bank categorise financial instruments as follows:

Financial assets

a. Financial assets at fair value through profit or loss

Fair value through profit or loss category comprises financial assets that are held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial assets that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Financial assets categorised as fair value through profit or loss are subsequently measured at fair values with the gain or loss recognised in profit or loss.

b. Held-to-maturity investments Held-to-maturity investments category

comprises debt instruments that are quoted

in an active market and the Group or the Bank has the positive intention and ability to hold them to maturity.

Financial assets categorised as held-to-maturity investments are subsequently measured at amortised cost using the effective interest method.

c. Loans and receivables Loans and receivables category comprises

debt instruments that are not quoted in an active market.

Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method.

d. Financial investments available-for-sale Available-for-sale category comprises

investment in equity and debt securities instruments that are not held for trading.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-sale are subsequently measured at their fair values with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses arising from monetary items and gains and losses of hedged items attributable to hedge risks of fair value hedges which are recognised in profit or loss. On derecognition, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss. Interest calculated for a debt instrument using the effective interest method is recognised in profit or loss.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see Note 2(g)).

Financial liabilities

All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.



F. Financial assets and financial liabilities (continued) ii. Financial instrument categories and subsequent

measurement (continued)

Financial liabilities (continued)

Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair value with the gain or loss recognised in profit or loss.

iii. Regular way purchase or sale of financial assets

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting. Trade date accounting refers to:

a. the recognition of an asset to be received and the liability to pay for it on the trade date, and

b. derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.

iv. Derecognition

A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

v. Offsetting

Financial assets and liabilities are offset and the net amount reported in the statements of financial position when, and only when, the Group and the Bank have a legal right to set off the amounts and intend either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions such as in the Group’s and the Bank’s trading activity.

vi. Fair value measurement

From 1 January 2013, the Group and the Bank adopted MFRS 13, Fair Value Measurement which prescribed that fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as 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 measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

In accordance with the transitional provision of MFRS 13, the Group and the Bank applied the new fair value measurement guidance prospectively, and has not provided any comparative fair value information for new disclosures. The adoption of MFRS 13 has not significantly affected the measurements of the Group’s and the Bank’s assets or liabilities other than the additional disclosures.

The determination of fair values of financial assets and financial liabilities are based on quoted market prices or dealer price quotation, for financial instruments traded in active markets without any deduction for transaction cost. The Group and the Bank also use widely recognised valuation models for determining the fair value of common and simpler financial instruments such as options and interest rate and currency swaps. For these financial instruments, inputs into models are market observable.

The Group and the Bank use valuation techniques to determine the fair value of financial assets and liabilities where quoted prices in an active market are not available. The valuation techniques used for different financial instruments are selected to reflect how the market would be expected to price the instruments, using inputs that reasonably reflect risk-return factors inherent in the instruments. Depending upon the characteristics of the financial instruments, observable market factors are available for use in most valuations, while other valuations may involve a greater degree of judgement and estimation.

The value produced by a model or other valuation techniques is adjusted to allow for a number of factors as appropriate, because valuation techniques cannot appropriately reflect all factors market participants take into account when entering into a transaction. Valuation adjustments are recorded to allow for model risks, bid-ask spreads, liquidity risks, as well as other factors.



52



F. Financial assets and financial liabilities (continued)

vi. Fair value measurement (continued)

Management believes that these valuation adjustments are necessary and appropriate to fairly state financial instruments carried at fair value on the statements of financial position.

G. Impairment

i. Financial assets

At each reporting date, the Group and the Bank assess whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. Financial assets categorised as held to maturity and loans and receivables are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows on the asset that can be estimated reliably. Impairment losses are measured as the difference between the carrying amount of the financial assets and the present value of estimated cash flows discounted at the assets’ original effective interest rate.

The Group and the Bank assess whether objective evidence of impairment exists individually for financial assets that are individually significant. For financial assets that are not individually significant, assessment of objective evidence of impairment is done individually or/and collectively.

Objective evidence that a loan or a loan portfolio is impaired includes observable data that could include the following loss events:

• significant financial difficulty of the issuer or obligor;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• it becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

• observable data relating to a portfolio of financial assets such as:

i) adverse changes in the payment status of borrowers in the portfolio; and

ii) national or local economic conditions that correlate with defaults on the assets in the portfolio.

• the disappearance of an active market for a security.

Above all, a loan is also classified as impaired if the repayment conduct of the loan is past due for more than 90 days of either principal, interest or both.

If the Group and the Bank determine that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group

of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a separate collective assessment of impairment.

For the purposes of the collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics by using a grading process that considers obligor type, industry, geographical location, collateral type, past-due status and other relevant factors. These characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the likelihood of receiving all amounts due under a facility according to the contractual terms of the assets being evaluated.

In assessing the collective impairment, the Group and the Bank use methods as listed below depending on the loan portfolio:-

i) Statistical modeling of historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether the current economic and credit conditions are such that the actual losses incurred are likely to be greater or less than suggested historical modeling. Default rates, loss rates and expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure they remain appropriate; or

ii) Based upon historical delinquency flow rates, charge-off statistics and loss severity, adjusted for management’s judgement as to whether current economic and credit conditions are such that actual losses are likely to be greater or less than suggested by historical modeling.

Losses are recognised in the profit or loss and reflected in an allowance account against loans and advances.

An impairment loss in respect of financial investments available-for-sale is recognised in profit or loss and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an financial investments available-for-sale has been recognised in other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity to profit or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in profit or loss for an investment in an equity instrument is not reversed through profit or loss.


53


G. Impairment (continued)

i. Financial assets (continued)

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss.

ii. Other assets

The carrying amounts of other assets (except for deferred tax asset and assets arising from employee benefits) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its recoverable amount.

Impairment losses are recognised in the profit or loss. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised.

H. Repurchase and resale agreement

Securities purchased under resale agreements are securities which the Group and the Bank had purchased with a commitment to resell at future dates. The commitment to resell the securities is reflected as an asset on the statements of financial position.

Conversely, obligations on securities sold under repurchase agreements are securities which the Group and the Bank have sold from its portfolio, with a commitment to repurchase at future dates. Such financing transactions and the obligations to repurchase the securities in its entirety are reflected as a liability on the statements of financial position. The securities sold under repurchase agreements are treated as pledged assets and continue to be recognised as assets in the statements of financial position.

I. Cash and cash equivalents Cash and cash equivalents consist of cash and bank

balances and short term funds that are readily convertible to known amounts of cash and which are

subject to an insignificant risk of change in value, with original maturity within one month.

Cash and cash equivalents are categorised as loans and receivables and carried at amortised cost in the statements of financial position in accordance to the accounting policy stated in Note 2(f)(ii)(c).

J. Plant and equipment

i. Recognition and measurement

Items of plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the assets and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

If significant parts of an item of plant and equipment have different useful lives, then they are accounted for as separate items (major components) of plant and equipment.

Any gain or loss on disposal of an item of plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised net within other income or other expenses in profit or loss.



54



J. Plant and equipment (continued)

ii. Subsequent costs

Subsequent expenditure is capitalised only when it is probable that the future economic benefits of the expenditure will flow to the Group and the Bank. Ongoing repairs and maintenance are expensed as incurred.

iii. Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of the asset, then that component is depreciated separately.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group and the Bank will obtain ownership by the end of the lease term.

The estimated useful lives for the current and comparative periods are as follows:

• building and leasehold land 40 years - 50 years • installations 8 years - 14 years • furniture and equipment 2 years - 10 years

Depreciation methods, useful lives and residual values are reviewed at end of the reporting period, and adjusted as appropriate.

K. Leased assets

i. Finance lease

Leases in terms of which the Group or the Bank assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

ii. Operating lease

Leases, where the Group or the Bank does not assume substantially all the risks and rewards of ownership are classified as operating leases and, the leased assets are not recognised on the statement of financial position.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

L. Bills and acceptances payable

Bills and acceptances payable represent the Group’s and the Bank’s own bills and acceptances rediscounted and outstanding in the market.

M. Foreign currency

Transactions in foreign currencies are translated into the functional currency of the Group and the Bank at the spot exchange rates at the date of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date, except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of financial investments available-for-sale equity instruments, which are recognised in other comprehensive income.

N. Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.


55



N. Income tax (continued)

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is measured at the tax rates that are expected to apply to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

O. Employee benefits

i. Short-term employee benefits

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related services are provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group and the Bank have a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

The Group and the Bank contribute to the Employees Provident Fund (“EPF”) for eligible employees on a monthly basis. Obligations for contributions to EPF are recognised as an expense in the profit or loss in the year to which they relate. Once the contributions have been paid, the Group and the Bank have no further payment obligations.

ii. Defined contribution plan

In addition to the contribution requirement by law, the Group and the Bank are contributing additional amounts for those employees eligible under the defined contribution plan. The contribution is made to Citibank Malaysia Official Staff Retirement Plan ("the Plan") and is recognised as an expense in the profit or loss as incurred.

iii. Defined benefit plan The Bank and certain related companies

contribute to the Citibank Malaysia Official Staff Retirement Plan ("the Plan") for eligible officers. Contributions are made based on an external actuarial report to the Plan, which is a defined benefit scheme and defined contribution scheme (as explained in item (ii) above), and is funded to the extent permitted by tax allowable Bank contributions.

As a result of the adoption of MFRS 119 (2011), Employee Benefits, the Group and the Bank has changed its accounting policy in respect of the basis for determining the income or expense relating to its post employment defined benefit plan.

The Group’s and the Bank’s net obligation in respect of the defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group and the Bank, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The Group and the Bank determine the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in personnel expenses in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Group and the Bank recognise gains and losses on the settlement of a defined benefit plan when the settlement occurs.


56


57


O. Employee benefits (continued)

iii. Defined benefit plan (continued)

The adoption of MFRS 119 (2011) has no significant impact to the financial statements of the Group and the Bank and hence, the comparatives have not been restated.

iv. Share-based compensation

The Group and the Bank participate in equity-settled and cash-settled share based compensation plan for the employees that is offered by the ultimate holding company, Citigroup Inc.. The fair value of the services received in exchange for the grant of the options is recognised as an expense in the profit or loss over the vesting periods of the grant.

The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each reporting date, the Group and the Bank revise its estimates of the number of options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in the profit or loss.

P. Foreclosed properties

Foreclosed properties are those acquired in full or partial satisfaction of debts, are stated at cost less accumulated impairment losses.

Q. Provisions

A provision is recognised if, as a result of a past event, the Group and the Bank have a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

R. Deposits from customers and deposits and placements of banks and financial institutions

Deposits from customers are stated at placement values and adjusted for accrued interest. Deposits and placements of banks and financial institutions are stated at placement values.

3. Cash and short term funds Group Bank

2013 2012 2013 2012

RM’000 RM’000 RM’000 RM’000 Cash and balances with banks and other financial institutions 84,618 88,995 84,598 88,975

Money at call and deposit placements maturing within one month 10,762,730 10,204,240 10,762,730 10,204,240

10,847,348 10,293,235 10,847,328 10,293,215


4. Deposits and placements with banks and other financial institutions Group and Bank

2013 2012

RM’000 RM’000

Bank Negara Malaysia 100,000 -

Licensed banks 743,609 296,775 843,609 296,775



58

5. Financial assets held-for-trading

Group and Bank

2013 2012

At fair value RM’000 RM’000

Malaysian Government Treasury Bills 161,551 103,053

Malaysian Government Securities 100,312 642,680

Malaysian Government Investment Issues 113,221 267,104

Bank Negara Malaysia Bills/Notes 2,168,493 2,032,220 2,543,577 3,045,057

6. Financial investments available-for-sale

Group and Bank

2013 2012

At fair value RM’000 RM’000

Malaysian Government Treasury Bills/Securities 599,952 1,698,966

Bank Negara Malaysia Bills 545,552 788,073


1,784,621 3,391,937

At cost

Unquoted securities 7,499 7,499

1,792,120 3,399,436


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7. Loans, advances and financing

i. By type Group and Bank

2013 2012

RM’000 RM’000

Overdrafts 474,258 408,205 Term loans/financing

- housing loans/financing 9,218,551 8,956,129

- hire purchase receivables - 808

- lease receivables - 570

- other term loans/financing 1,650,245 1,350,200

Bills receivable 1,023,755 740,065

Trust receipts 1,223 13,100

Claims on customers under acceptance credits 761,376 922,132

Staff loans 82,866 91,719

Share margin financing 209,105 180,455

Credit cards receivables 6,364,477 6,093,593

Revolving credit 1,128,461 1,099,443

Other loans 162,563 6,578

21,076,880 19,862,997

Unearned interest and income (20,686) (23,970)

Gross loans, advances and financing 21,056,194 19,839,027 Less: Allowance for impaired loans, advances and financing

- Collective assessment allowance (368,381) (357,064)

- Individual assessment allowance (189,531) (205,769)

Net loans, advances and financing 20,498,282 19,276,194

ii. By type of customer

Domestic non-bank financial institutions

- others 810,099 502,069

Domestic business enterprises

- small and medium enterprises 474,295 423,326

- others 2,735,094 2,823,232

Individuals 16,753,454 15,869,348

Foreign entities 283,252 221,052

21,056,194 19,839,027


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7. Loans, advances and financing (continued)

iii. By interest/profit rate sensitivity Group and Bank

2013 2012

RM’000 RM’000 Fixed rate

Housing loans/financing 697,459 741,937

Hire purchase receivables - 808

Other fixed rate loans/financing 9,873,938 9,181,998

Variable rate

BLR plus 9,727,043 9,034,808

Cost plus 757,754 879,476

21,056,194 19,839,027

iv. By sector

Primary agriculture 24,337 93,268

Mining and quarrying 41,557 32,050

Manufacturing (including agriculture based) 1,614,026 1,705,728

Electricity, gas and water 11,112 84,073

Construction 38,516 43,163

Wholesale, retail trade, restaurants and hotels 711,917 758,725

Transport, storage and communication 320,181 307,544

Finance, insurance, real estate and business services 968,580 639,076

Social & community services 20,453 9,862

Household

- consumption credit 6,993,296 6,689,390

- residential 9,321,700 8,751,212

- purchase of securities 209,105 180,455

- others 229,353 248,291

Other sectors 552,061 296,190

21,056,194 19,839,027

v. By purpose

Purchase of securities 209,105 180,455

Purchase of landed property 9,934,658 9,321,539

Purchase of fixed assets excluding land and building 1,532 3,500

Personal use 725,123 693,920

Credit card 6,364,477 6,093,593


Working capital 3,779,344 3,478,277

Other purposes 27,574 50,631

21,056,194 19,839,027


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7. Loans, advances and financing (continued)

vi. Residual contractual maturity Group and Bank

2013 2012

RM’000 RM’000

Maturing within one year 10,443,716 9,691,474

One to five years 658,579 739,269

Over 5 years 9,953,899 9,408,284

21,056,194 19,839,027

vii. By geographical distribution

Within Malaysia 21,056,194 19,839,027

8. Impaired loans, advances and financing

i. Movements in impaired loans, advances and financing are as follows: Group and Bank

2013 2012

RM’000 RM’000

At 1 January 481,854 518,800

Classified as impaired during the year 657,235 694,620

Reclassified as performing during the year (369,473) (361,861)

Amount recovered (154,339) (205,842)

Amount written off (162,922) (163,863)

At 31 December 452,355 481,854

Individual assessment allowance (189,531) (205,769)

Net impaired loans, advances and financing 262,824 276,085

Ratio of net impaired loans and financing to gross loans

and financing less individual assessment allowance 1.26% 1.41%



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8. Impaired loans, advances and financing (continued)

ii. Movements in impairment provisions for loans, advances and financing are as follows:

Group and Bank

2013 2012

RM’000 RM’000 Collective assessment allowance

At 1 January 357,064 365,325

Allowance/(Written back) made during the year, net 11,317 (8,261)

At 31 December 368,381 357,064

As % of gross loans, advances and financing less individual assessment allowance 1.77% 1.82%

Individual assessment allowance

At 1 January 205,769 219,436

Allowance made during the period 12,976 10,957

Written back during the year (12,658) (19,777)

Written off during the year (16,556) (4,847)

At 31 December 189,531 205,769

iii. Impaired loans, advances and financing by sector Group and Bank

2013 2012

RM’000 RM’000

Primary agriculture 7,388 7,689

Mining and quarrying 748 373

Manufacturing (including agriculture based) 28,280 33,651


Wholesale, retail trade, restaurants and hotels 12,245 16,300

Transport, storage and communication 61 71

Finance, insurance, real estate and business services 7,762 7,556

Household

- consumption credit 104,762 117,880

- residential 258,538 264,529

- purchase of securities 19,490 19,831

Other purposes 658 482

452,355 481,854

iv. Impaired loans, advances and financing by geographical distribution

Within Malaysia 452,355 481,854



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9. Other assets Group and Bank

2013 2012

RM’000 RM’000 Interest/Income receivable 28,315 42,295

Other debtors, deposits and prepayments 246,439 293,651

Retirement benefits plan (Note 19(i)) 10,228 -

Derivative assets (Note 30) 600,510 472,092

Tax recoverable 16,314 24,888

901,806 832,926

10. Statutory deposits with Bank Negara Malaysia

The non-interest bearing statutory deposits are maintained with Bank Negara Malaysia (“BNM”) in compliance with Section 26(2)(c) of the Central Bank of Malaysia Act, 2009 to satisfy the Statutory Reserve Requirement (“SRR”), the amount of which is determined as a set percentage of total eligible liabilities.

11. Deferred tax assets

Recognised deferred tax assets/(liabilities) are attributable to the followings:

Reserves Plant and - Financial equipment - investments Capital available- allowances Provisions for-sale Total

Group and Bank RM’000 RM’000 RM’000 RM’000

At 1 January 2012 (19,854) 23,112 (2,462) 796

Recognised in profit or loss 5,038 8,721 - 13,759

Recognised in other comprehensive income - - 2,737 2,737

At 31 December 2012/ At 1 January 2013 (14,816) 31,833 275 17,292

Recognised in profit or loss 4,415 (3,755) - 660

Recognised in other comprehensive income - - 1,153 1,153

At 31 December 2013 (10,401) 28,078 1,428 19,105

Deferred tax assets and liabilities are offset above as there is a legally enforceable right to set off current tax

assets against current tax liabilities.



64

12. Investments in subsidiary companies Group and Bank

2013 2012

RM’000 RM’000 Unquoted shares at cost – in Malaysia 20 20 Details of the wholly owned subsidiaries are as follows:

Effective Country of Ownership Name of subsidiary Principal activity incorporation Interest 2013 2012 Citigroup Nominee (Malaysia) Sdn. Bhd. Nominee company Malaysia 100% 100% Citigroup Nominees (Tempatan) Sdn. Bhd.* Nominee company Malaysia 100% 100% Citigroup Nominees (Asing) Sdn. Bhd.* Nominee company Malaysia 100% 100%

* Wholly owned by Citigroup Nominee (Malaysia) Sdn. Bhd. All income and expenditure arising from the activities of the subsidiaries have been recognised in the Bank’s

statement of profit or loss and other comprehensive income.



65

13. Plant and equipment Building on Furniture leasehold and Group and Bank land Installations equipment Total

Cost RM’000 RM’000 RM’000 RM’000

At 1 January 2012 6,581 114,127 329,944 450,652

Additions 73 6,439 19,522 26,034

Disposals (256) (9,206) (17,182) (26,644)

At 31 December 2012/1 January 2013 6,398 111,360 332,284 450,042

Additions - 184 9,022 9,206

Disposals - (6,874) (11,343) (18,217)

Write-off (73) - - (73)

Reclassification 104,661 (104,661) - -

At 31 December 2013 110,986 9 329,963 440,958

Depreciation

At 1 January 2012 4,473 85,991 239,283 329,747

Charge for the year 411 10,050 26,073 36,534

Disposals (196) (9,018) (16,368) (25,582)


Charge for the year 6,628 3,468 25,479 35,575

Disposals - (6,863) (11,113) (17,976)

Write-off (73) - - (73)

Reclassification 83,624 (83,624) - -

At 31 December 2013 94,867 4 263,354 358,225

Carrying amounts

At 1 January 2012 2,108 28,136 90,661 120,905


At 31 December 2013 16,119 5 66,609 82,733



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14. Deposits from customers

i. By type of deposit Group and Bank

2013 2012

RM’000 RM’000

Demand deposits 11,068,690 10,562,576

Saving deposits 1,117,806 852,220

Fixed deposits 9,231,986 9,683,793

Other deposits 4,352,378 5,200,906

Negotiable instruments of deposit 10,000 17,900

Others - cash collateral 2,669 12,747

25,783,529 26,330,142

ii. Maturity structure of fixed deposits, other deposits and negotiable instruments of deposit are as follows:

Group and Bank

2013 2012

RM’000 RM’000

Due within six months 12,326,286 11,746,885

Six months to one year 1,260,122 3,046,788

One year to three years 7,956 108,926

13,594,364 14,902,599

iii. By type of customer Group and Bank

2013 2012

RM’000 RM’000

Government and statutory bodies 7,343 281,570

Business enterprises 13,043,042 13,209,461

Individuals 11,886,623 9,753,818

Others 846,521 3,085,293

25,783,529 26,330,142


67


15. Deposits and placements of banks and other financial institutions

Group and Bank

2013 2012

RM’000 RM’000

Bank Negara Malaysia 131,422 83,731

Licensed banks 3,163,145 3,017,901

Licensed finance companies 2,561,690 2,412,445

5,856,257 5,514,077

16. Other liabilities Group and Bank

2013 2012

RM’000 RM’000

Interest/Profit payable 48,902 52,883

Other creditors and accruals 1,778,633 1,608,074

Provision for retirement benefits (Note 19(i)) - 270

Derivative liabilities (Note 30) 524,618 528,677

2,352,153 2,189,904

17. Share capital Group and Bank

Number Number

Amount of shares Amount of shares

2013 2013 2012 2012

RM’000 ’000 RM’000 ’000 Ordinary shares of RM1 each:

Authorised 500,000 500,000 500,000 500,000

Issued and fully paid 121,697 121,697 121,697 121,697

18. Reserves Group and Bank

2013 2012

RM’000 RM’000

Share premium 380,303 380,303

Statutory reserve 121,697 121,697

Retained profits 3,695,833 3,662,946

Other reserve 8,054 (823)

- Fair value reserve (4,283) (823)

- Defined benefit reserve 12,337 -

Total reserves 4,205,887 4,164,123

The share premium arose from the issuance of 121,696,972 ordinary shares of RM1 each at an issue price of RM4.125 per share.



68

18. Reserves (continued)

The statutory reserve is maintained in compliance with Section 47(2)(f) of the Financial Services Act 2013 and is not distributable as cash dividends. No transfers were made to the statutory reserve during the year as the Bank has met the reserve requirements.

The fair value reserve is in respect of unrealised fair value gains and losses on financial investments available-for-sale.

The defined benefit reserve is in respect of remeasurement of the defined benefit plan assets/liabilities.

Subject to agreement by the Inland Revenue Board, the Bank has tax exempt income to frank approximately RM20,479,000 of its distributable reserves at 31 December 2013 if paid out as dividends.

19. Employee benefits

i. Retirement benefits

The amounts recognised in the statements of financial position are as follows:

Group and Bank

2013 2012

RM’000 RM’000

Present value of the funded obligation 26,661 31,391

Fair value of plan assets (36,889) (38,934)

(10,228) (7,543)

Unrecognised past service costs - (4)

Unrecognised actuarial gains - 7,817

(Assets)/Liabilities recognised in statements of financial position (10,228) 270

The Group and the Bank make contributions to a fully funded defined benefit scheme for its employees. Contributions to the fund are made to a separately administered fund. Under the fund, eligible employees are entitled to one and a half month of the final/last drawn salary multiplied by the Plan service not in excess of 40 upon attainment of the retirement age of 55. For employees who leave before the attainment of the retirement age, the retirement benefit will be computed based on the scale rate stipulated in the rules of the Fund.

On 1 January 2007, majority of the Plan members’ benefits accrued under the Defined Benefit Plan were converted to the new Defined Contribution Plan. Only those staff who satisfied the criteria below, will continue to be maintained under the Defined Benefit Plan.

a. Age as at 31 December 2006: at least 40 years

b. Years of service as at 31 December 2006: at least 5 years

c. Sum of age and years of service as at 31 December 2006: at least 55 years


69


19. Employee benefits (continued)

i. Retirement benefits (continued)

Plan assets comprise: Group and Bank 2013 2012 RM’000 RM’000

Equities 11,159 11,291

Property - 15,807

Securities 9,617 11,018

Others 16,113 818

36,889 38,934

Funding Arrangement and Policies Contribution to the Plan take into account the funding valuation results, subject to the local tax effective contribution limit up to 19% of the Plan members’ total remuneration (including the Bank’s contributions to the EPF for the members).

Results from the last funding valuation recommend a contribution holiday for the 2014 year. The surplus under the Plan (Defined Benefit section) will also be used to fund the contribution requirements of the Defined Contribution section. The funding position is reviewed annually by the Trustees and the Bank.

Movement in the present value of the defined benefit obligations: Group and Bank 2013 2012 RM’000 RM’000

Defined benefit obligations at 1 January 31,391 35,439

Settlements (2,177) (3,248)

Benefits paid from plan assets (598) -

Current service costs and interest 2,456 3,221

Plan changes/amendments 42 -

Remeasurement/Actuarial gains (4,453) (4,021)

Defined benefit obligations at 31 December 26,661 31,391

Movement in the fair value of plan assets: Group and Bank 2013 2012 RM’000 RM’000

Fair value of plan assets at 1 January 38,934 37,343

Contributions paid into the plan* (2,918) 1,301

Settlements (2,177) (3,248)

Benefits paid from plan assets (598) -

Expected return on plan assets - 2,370

Remeasurement/Actuarial gains 2,120 1,168

Interest Income 1,528 -

Fair value of plan assets at 31 December 36,889 38,934

* Negative employer contributions in 2013 reflect transfer of funds from Defined Benefit Section to the Defined Contribution Section of the Plan.



70



The amounts recognised in the statements of profit or loss and other comprehensive income are as follows:

Group and Bank 2013 2012 RM’000 RM’000

Current service costs 1,205 1,515

Interest cost (295) 1,706

Expected return on plan assets - (2,370)

Cost of settlement - 202

Past services cost 42 8

Plan administration cost 44 -

Amount included under “personnel costs” 996 1,061

Actual return on plan assets - 3,538

Movement in the net benefit asset/ (liability) recognised in the statements of financial position are as follows:


Balance as at 1 January 270 701

Included in Profit or Loss

- Current service cost 1,205 1,515

- Past service cost (2,049) (2,370)

- Interest (income)/cost (235) 1,706

- Others - 210

(1,079) 1,061

Included in Other Comprehensive Income

Remeasurement gain

- Prior year (5,140) -

- Current year (7,197) -

(12,337) -

Other

Contributions paid by employer 2,918 (1,492)

Balance as at 31 December (10,228) 270

The latest valuation of the Defined Benefit Plan as at 31 December 2013 was conducted by Towers Watson (Malaysia) Sdn. Bhd.. The unfunded portion of the total liability will continue to be borne by Citibank Berhad. Projected unit credit method is used to calculate the actuarial present value of promised retirement benefits.


71




Principal actuarial assumptions used at the reporting date (expressed as weighted averages):


Discount rate 4.75% 4.25%

Rate of increase in salary levels 5.00% 6.00%

Price inflation 3.50% 3.50%

Assumptions regarding future mortality are based on published statistics and mortality tables. The average

life expectancy of an individual retiring is at the age of 55 years.

Historical information

Group and Bank 2013 2012 2011 2010 2009

RM’000 RM’000 RM’000 RM’000 RM’000

Present value of the defined benefit obligation 26,661 31,391 35,439 34,633 34,093

Fair value of plan assets (36,889) (38,934) (37,343) (37,488) (25,972)

(Surplus)/Deficit in the plan (10,228) (7,543) (1,904) (2,855) 8,121

Experience adjustments arising on plan assets - (gains)/losses (2,120) (1,168) 833 (9,602) (2,127)

Experience adjustments arising on plan liabilities - (gains)/losses (1,775) (2,866) (686) (1,342) 4,850

Assumption adjustment on plan liabilities – (gains)/losses (2,678) (1,155) 484 508 566

Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

2013 Increase Decrease RM’000 RM’000

Defined benefit obligation

Discount rate (1% movement) (1,564) 1,708

Future salary growth (1% movement) 2,601 (2,423)

Other assumptions are held constant when quantifying the sensitivity results to a particular assumption.

The sensitivity results above determine their individual impact on the Plan’s end of year defined benefit obligation. In reality, the Plan is subject to multiple external experience items which may move the defined benefit obligation in similar or opposite directions, while the Plan’s sensitivity to such changes can vary over time.



72


ii. Share option plan

The Group and the Bank have a number of stock option programmes for their officers and employees as part of a discretionary award package. Certain stock awards with performance conditions or certain claw back provisions are subject to variable accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’s stock price. Options are granted on Citigroup stock at the market value denominated in US dollar at the time of grant. Compensation cost related to awards granted to employees who meet certain age plus years of service requirements (retirement eligible employees) is accrued in the year prior to the grant date.

Group and Bank

2013 2012

Outstanding at 1 January 683,830 661,935

Granted - -

Exercised (8,931) -

Transfer in 69,040 55,874

Lapsed/Cancelled (635) (33,979)

Outstanding at 31 December 743,304 683,830

Details of share options granted during the year:

Group and Bank

2013 2012 Expiry dates - -

Average grant price per ordinary share (RM) - -

Aggregated proceeds if shares are issued (RM’000) - -

Details of share options exercised during the year:

Year of expiry 2015 -

Average exercise price per ordinary share (RM) 13.38 -

Aggregated issue proceeds (RM’000) 120 -

Fair value at date of vesting (RM’000) 120 -

Terms of the options outstanding at 31 December:

Group and Bank

2013 2012 Expiry dates Exercise price - 635

11,182 11,188

732,122 672,007

743,304 683,830

RM 166.35

RM 74.79

RM 12.48

Jan 2013

Jan 2014

Oct 2015


73



iii. Share capital accumulation plan (CAP)

The Group and the Bank have a number of capital accumulation programmes for the officers and employees. The Core CAP is a discretionary award of restricted shares. The number of CAP shares in a Core CAP award is calculated using a 25% discount from the market price of Citigroup common stock. Supplemental CAP is a discretionary retention award programme composed of an award of CAP shares. The difference between Supplemental CAP award and a Core CAP award is that generally, a Supplementary CAP is given in addition to the discretionary award package and the number of shares awarded will not be based on a discount from the market price of Citigroup common stock. CAP granted in 2013 typically vest 25% each year for four years, with the first vesting date occurring 12 months after the grant date. Shares acquired upon exercise of a CAP option generally may not be sold for two years following the exercise date.

Group and Bank

2013 2012

Outstanding at 1 January 607,580 485,525

Granted 240,739 416,375

Vested (335,637) (269,016)

Lapsed/cancelled (56,898) (354)

Net transferred out (25,993) (24,950)

Outstanding at 31 December 429,791 607,580

Details of CAP granted during the year:

Group and Bank

2013 2012

Expiry dates Feb 18, 2017 Jan 16, 2016

Average grant price per ordinary share (RM) 14.41 9.34

Aggregated proceeds if shares are issued (RM’000) 3,468 3,889

Details of CAP vested during the year:

Average exercise price per ordinary share (RM) 13.07 8.93

Aggregated issue proceeds (RM’000) 3,732 4,355

Fair value at date of vesting (RM’000) 3,871 1,695



74

20. Interest income Group and Bank 2013 2012 RM’000 RM’000 Loans and advances

- Interest income other than recoveries from impaired loans 1,147,135 1,168,629

- Recoveries from impaired loans 46,016 53,571

Money at call and deposit placements with financial institutions 165,395 198,850

Financial assets held-for-trading 38,160 47,508

Financial investments available-for-sale 61,778 97,967

Securities purchased under resale agreements 24,585 29,357

1,483,069 1,595,882

Accretion of discount 57,693 73,193

Total interest income 1,540,762 1,669,075

21. Interest expense Group and Bank 2013 2012 RM’000 RM’000

Deposits and placements of banks and other financial institutions 44,176 62,646

Deposits from customers 400,177 445,195

Others 4,147 3,740

448,500 511,581


iii. Share capital accumulation plan (CAP) (continued)

Terms of the CAP outstanding at 31 December:

Group and Bank

2013 2012 Year of expiry Grant price

- 35,232

22,765 -

- 61,905

- 131,856

60,127 104,795

133,190 -

- 273,792

213,709 -

429,791 607,580

RM 14.29

RM 11.53

RM 10.76

RM 15.36

RM 9.34

RM 10.01

RM 9.34

RM 14.41

Jan 2013

Jan 2014

Jan 2014

Jan 2015

Jan 2015

Jan 2016

Jan 2016

Feb 2017


75


22. Other operating income Group and Bank 2013 2012 RM’000 RM’000 Fee income:

Commission 154,139 145,628

Service charges and fees 13,128 15,568

Guarantee fees 6,677 6,775

Bankcard fees 214,916 221,601

Insurance premium and referral 30,399 28,105

Other fee income 64,443 46,753

483,702 464,430

Trading income:

Unrealised (loss)/gain from revaluation of financial

assets held-for-trading (4,445) 41

Net (loss)/gain from sales of securities

- Financial assets held-for-trading (3,277) 7,052

- Financial investments available-for-sale 12,237 19,447

Gross dividends from financial investments available-for-sale 245 28

4,760 26,568

Other income:

Foreign exchange profit

- unrealised gain 165,955 112,462

- realised gain 31,144 31,552

(Loss)/Gain from derivatives (68,502) 14,954

Loss on disposal of plant and equipment (32) (392)

128,565 158,576

617,027 649,574



76

23. Other operating expenses Group and Bank

2013 2012

RM’000 RM’000

Personnel costs - Salaries, allowances and bonuses 328,587 334,821

- Contributions to Employees Provident Fund 42,406 42,291

- Staff benefits and other compensations 35,143 42,654

- Others 9,696 10,925

415,832 430,691

Establishment costs

- Depreciation 35,575 36,534

- Rental of premises 23,625 24,171

- Hire of equipments 2,045 4,120

- Utilities 5,252 6,334

- Others 17,667 17,793

84,164 88,952

Marketing expenses

- Advertisement and promotional expenses 43,602 47,077

- Others 664 1,327

44,266 48,404

Administrative and general expenses

- Processing cost 261,732 250,907

- Auditors’ remuneration

- Statutory audit 371 361

- Other services 305 263

- Stationeries and supplies 4,165 4,810

- Communication expenses 10,256 6,948

- Maintenance of office equipment 1,218 3,694

- Others 85,735 99,068

363,782 366,051

Total other operating expenses 908,044 934,098


77


23. Other operating expenses (continued) Group and Bank

2013 2012

RM’000 RM’000 i. CEO and Directors’ remuneration

Executive Directors (including CEO) Salary and other remuneration, including meeting allowances 2,676 2,011

Bonuses 766 1,032

Benefits-in-kind 460 430

Share-based payment 1,667 (29)

Non-executive Directors

Fees 300 232

5,869 3,676

ii. Other key management personnel:

- short-term employee benefits 5,505 2,902

Salary Benefits- and others in- remunerations Fees Bonuses kind Total

RM’000 RM’000 RM’000 RM’000 RM’000

Executive Director and CEO

Sanjeev Nanavati 2,676 - 766 460 3,902

Non-executive Directors

Terence Kent Cuddyre - - - - -

Tan Sri Dato’ Hj Omar Ibrahim - 100 - - 100

Dato’ Siow Kim Lun @ Siow Kim Lin - 100 - - 100

Agnes Liew Yun Chong - - - - -

Dato’ Dr. Thillainathan A/L Ramasamy - 100 - - 100

2,676 300 766 460 4,202



78

24. Allowance for loans, advances and financing Group and Bank

2013 2012

RM’000 RM’000 Allowance for loans, advances and financing:

Individual assessment

- allowance made during the year 12,976 10,957

- written back (12,658) (19,777) Collective assessment - allowance/(written back) 11,317 (8,261) Impaired loans, advances and financing - written back (87,493) (90,145)

- written off 209,143 230,064

133,285 122,838

25. Tax expense Group and Bank

2013 2012

RM’000 RM’000 Malaysian income tax

- current year 186,425 204,436

- prior year (over)/under provision (1,783) 20,293

184,642 224,729 Deferred tax expense

- Origination and reversal of temporary differences (6,391) (5,999)

- prior year under/(over) provision 5,731 (7,760)

183,982 210,970

A reconciliation of the income tax expense between the statutory tax expense and effective tax expense is as follows:-

Group and Bank

2013 2012

RM’000 RM’000


Income tax using Malaysian tax rate of 25% 179,217 197,394

Non-deductible expenses 817 1,043

180,034 198,437

Under provision in prior year 3,948 12,533

183,982 210,970


79


26. Earnings per share

The earnings per ordinary share has been calculated based on the profit for the year of RM532,887,000 (2012 – RM578,607,000) divided by 121,696,972 units of ordinary shares of RM 1 each issued as at the financial years ended.

27. Dividends Dividends recognised by the Bank are:

Sen Total per share amount Date of (net of tax) RM’000 payment 2013 Final 2012 ordinary 411 500,000 28 June 2013

2012 Final 2011 ordinary 247 300,000 13 June 2012

After the reporting period, the following dividend was proposed by the Directors. This dividend will be recognised in subsequent financial period upon approval by the equity holder of the Bank.

Sen Total per share amount RM’000

Final ordinary - 2013 411 500,000

28. Significant related party transactions and balances

For the purpose of these financial statements, parties are considered to be related to the Group or the Bank if the Group or the Bank has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Bank and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

The related parties of the Group and the Bank are:

(i) Parent companies Parent companies of the Group and the Bank are Citigroup Holdings (Singapore) Pte. Ltd. and Citigroup Inc.

(ii) Other related companies Entities which are related by virtue of having Citigroup Holdings (Singapore) Pte. Ltd. as the holding

company or having Citigroup Inc. as the ultimate holding company.

(iii) Key management personnel Key management personnel are defined as those persons having authority and responsibility for planning,

directing and controlling the activities of the Group or the Bank either directly or indirectly. The key management personnel of the Group or the Bank includes all the Directors and certain members of senior management of the Group or the Bank. Key management personnel compensation is disclosed in Note 23 (i) and (ii).



80

28. Significant related party transactions and balances (continued)

Transactions and balances with parent companies and other related companies Group and Bank Group and Bank

2013 2012

RM’000 RM’000 RM’000 RM’000

Parent Other related Parent Other related companies companies companies companies Income

Interest on interest bearing deposits - 20,667 60,343 41,678

Other income 9,805 40,883 22,802 98,575

9,805 61,550 83,145 140,253

Expenditure

Interest on interest bearing deposits - 8,709 - 23,372

Other expenses 26,173 410,061 49,693 380,066

26,173 418,770 49,693 403,438

Amount due from

Interest bearing deposits - 2,933,357 - 5,775,748

Current account balances 22,507 543,447 25,436 971,284

Other balances 69,206 88,419 102,942 270,376

91,713 3,565,223 128,378 7,017,408

Amount due to

Interest bearing deposits - 1,691,532 - 2,563,330

Current account balances 301,761 1,165,247 122,069 359,737

Other balances 50,909 240,863 97,787 203,071

352,670 3,097,642 219,856 3,126,138

All related party transactions are conducted at arm’s length basis and on normal commercial terms which are

not more favourable than those generally available to public.


81


29. Credit transactions and exposures with connected parties Group and Bank

2013 2012

RM’000 RM’000 Outstanding credit exposures with connected parties of which: 1,252,786 1,643,454

Total credit exposure which is non-performing or in default - -

Total credit exposures 61,380,539 65,626,933

Percentage of outstanding credit exposures to connected parties - as a proportion of total credit exposures 2.04% 2.50%

- as a proportion of capital base 27.58% 36.65%

- which is non-performing or in default 0.00% 0.00%

The disclosure on Credit Transactions and Exposures with Connected Parties above are presented in accordance with para 9.1 of Bank Negara Malaysia’s revised Guidelines on Credit Transactions and Exposures with Connected Parties, which became effective on 1 January 2008.

Based on these guidelines, a connected party refers to the following:

i. Directors of the Bank and their close relatives;

ii. Controlling shareholder and his close relatives;

iii. Executive Officer, being a member of management having authority and responsibility for planning, directing and/or controlling the activities of the Bank, and his close relatives;

iv. Officers who are responsible for or have the authority to appraise and/or approve credit transactions or review the status of existing credit transactions, either as a member of a committee or individually, and their close relatives;

v. Firms, partnerships, companies or any legal entities which control, or are controlled by any person listed in (i) to (iv) above, or in which they have an interest, as a director, partner, executive officer, agent or guarantor, and their subsidiaries or entities controlled by them;

vi. Any person for whom the persons listed in (i) to (iv) above is a guarantor; and

vii. Subsidiary of or an entity controlled by the Bank and its connected parties.

Credit transactions and exposures to connected parties as disclosed above include the extension of credit facilities and/or off-balance sheet credit exposures such as guarantees, trade-related facilities and loan commitments. They also include holdings of equities and private debt securities issued by the connected parties.

The credit transactions with connected parties above are all transacted on an arm’s length basis and on terms and conditions no more favourable than those entered into with other counterparties with similar circumstances and creditworthiness. Due care has been taken to ensure that the creditworthiness of the connected party is not less than that normally required of other persons.



82

30. Derivative financial instruments

2013 2012

Positive Negative Positive Negative

Contract fair fair Contract fair fair

amount value value amount value value

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Foreign exchange related contracts:

- Forwards 38,338,105 252,550 147,650 43,496,302 68,211 98,562

- Cross currency interest rate swaps 4,346,640 112,908 154,316 5,946,434 176,445 175,376

- Options 2,264,685 25,948 19,241 2,093,720 5,099 5,021

Interest rate contracts:

- Futures 13,132,100 - - 1,445,000 - -

- Swaps 20,170,970 199,432 181,449 22,806,028 212,748 231,305

- Options 446,307 121 843 454,262 45 1,308

Equity related contracts 222,224 4,104 4,104 212,919 5,604 5,604

Others 461,870 5,447 17,015 274,330 3,940 11,501

79,382,901 600,510 524,618 76,728,995 472,092 528,677

Note 9 Note 16 Note 9 Note 16


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31. Financial risk management

The Group’s and the Bank’s risk management framework are designed to monitor, evaluate and manage the principal risk they assume in conducting their activities. These risks include the following:

■ credit risk

■ market risk

■ operational risk

1. Credit Risk

Credit risk is the risk of financial loss to the Group and the Bank if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s and the Bank’s loans and advances to customers and other banks, and investment in debt securities and when the Group or the Bank acts as an intermediary on behalf of its clients and other third parties.

The credit risk management process of the Group and the Bank relies on corporate-wide standards to ensure consistency and integrity, with business-specific policies and practices to ensure applicability and ownership. While business managers and independent risk management are jointly responsible for managing risk/return trade offs as well as establishing limits and risk management practices, the origination and approval roles are clearly defined and segregated. In addition to conforming to established corporate standards, independent credit risk management is responsible for establishing policies that comply with local regulations and any other relevant legal requirements.

Independent credit risk management is also responsible for implementing portfolio limits, including obligor limits through risk rating, maturity and business segments limits to ensure diversification of portfolios, monitoring business risk management performance, providing on-going assessment of portfolio credit risk and approving new products.

Continuous monitoring of credit behaviour aided by sophisticated scoring modules, plus portfolio delinquency performance allows independent credit risk management to constantly assess the health of the credit portfolio.

The Group and the Bank secure various forms of collateral to mitigate credit risk exposures. The main types of collateral obtained by the Group and the Bank to mitigate credit risk are as follows:

■ for residential mortgages - charges over residential properties

■ for commercial property loans - charges over the properties being financed

■ for share margin financing - pledges over quoted securities

■ for other loans - charges over business assets such as premises, inventories, trade receivables or deposits



84

31. Financial risk management (continued) A. Credit risk exposures and credit risk concentration

The following tables present the Group’s maximum exposure to credit risk of its on and off balance sheet financial instruments at each reporting dates, by industry and geographical anaylsis, before taking into account collateral held or other credit enhancements.

i. By Industry analysis

Financial Services, Wholesale Government Insurance, Electricity, & Retail and House- Real Estate Gas & Trade, Transport, Social & Central hold & Business Services, Mining & Water Restaurants Storage & Community Other Group Banks Loans Services Agriculture Quarrying Manufacturing Supply Construction & Hotels Communication Services Sectors Total

2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet

Cash and short term funds 6,369,000 - 4,478,348 - - - - - - - - - 10,847,348

Deposits and placements with bank and other financial institutions 100,000 - 743,609 - - - - - - - - - 843,609

Securities purchased under resale agreements 484,631 - - - - - - - - - - - 484,631

Financial assets held- for-trading 2,543,577 - - - - - - - - - - - 2,543,577

Financial investments available-for-sale 1,784,621 - - - - - - - - - - 7,499 1,792,120

Loans, advances and financing - 16,753,454 968,580 24,337 41,557 1,614,026 11,112 38,516 711,917 320,181 20,453 552,061 21,056,194

Other assets - - 525,648 7,521 16,783 106,961 2,248 19 13,435 282 12 228,897 901,806

Statutory deposits with Bank Negara Malaysia 359,000 - - - - - - - - - - - 359,000

11,640,829 16,753,454 6,716,185 31,858 58,340 1,720,987 13,360 38,535 725,352 320,463 20,465 788,457 38,828,285

Contingent liabilities - - 516,417 17,515 400,710 561,167 203,280 6,562 643,462 878,234 2,119 9,584 3,239,050

Commitments - 27,454,308 2,903,563 - - - - - - - - - 30,357,871

Total Credit Exposures 11,640,829 44,207,762 10,136,165 49,373 459,050 2,282,154 216,640 45,097 1,368,814 1,198,697 22,584 798,041 72,425,206


85


Financial Services, Wholesale Government Insurance, Electricity, & Retail and House- Real Estate Gas & Trade, Transport, Social & Central hold & Business Services, Mining & Water Restaurants Storage & Community Other Group Banks Loans Services Agriculture Quarrying Manufacturing Supply Construction & Hotels Communication Services Sectors Total

2012 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet

Cash and short term funds 2,845,000 - 7,448,235 - - - - - - - - - 10,293,235

Deposits and placements with bank and other financial institutions - - 296,775 - - - - - - - - - 296,775

Securities purchased under resale agreements 743,921 - - - - - - - - - - - 743,921

Financial assets held- for-trading 3,045,057 - - - - - - - - - - - 3,045,057

Financial investments available-for-sale 3,391,937 - - - - - - - - - - 7,499 3,399,436

Loans, advances and financing - 15,869,348 639,076 93,268 32,050 1,705,728 84,073 43,163 758,725 307,544 9,862 296,190 19,839,027

Other assets - - 660,749 2,246 - 3,142 1,002 20 9,330 4,306 56 152,075 832,926

Statutory deposits with Bank Negara Malaysia 438,840 - - - - - - - - - - - 438,840

10,464,755 15,869,348 9,044,835 95,514 32,050 1,708,870 85,075 43,183 768,055 311,850 9,918 455,764 38,889,217

Contingent liabilities - - 2,691,936 - - - - - - - - - 2,691,936

Commitments - 23,454,557 1,668,806 - - - - - - - - - 25,123,363

Total Credit Exposures 10,464,755 39,323,905 13,405,577 95,514 32,050 1,708,870 85,075 43,183 768,055 311,850 9,918 455,764 66,704,516

31. Financial risk management (continued) A. Credit risk exposures and credit risk concentration (continued)

i. By Industry analysis (continued)

The disclosures represented the Bank’s exposures except for RM20,000 cash and cash equivalents deposited by the subsidiaries which were eliminated in the above tables.



86

Hong Kong & North United Other Group Malaysia Singapore China PRC Japan Australasia America Kingdom countries Total

2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet

Cash and short term funds 8,011,251 1,824,416 41,290 16,583 7,417 610,069 302,013 34,309 10,847,348

Deposits and placements with banks and other financial institutions 702,805 140,804 - - - - - - 843,609

Securities purchased under resale agreements 484,631 - - - - - - - 484,631

Financial assets held- for-trading 2,543,577 - - - - - - - 2,543,577

Financial investments available-for-sale 1,792,120 - - - - - - - 1,792,120

Loans, advances and financing 21,056,194 - - - - - - - 21,056,194

Other assets 770,367 2,237 19 - 1,768 100,745 26,670 - 901,806

Statutory deposits with Bank Negara Malaysia 359,000 - - - - - - - 359,000

35,719,945 1,967,457 41,309 16,583 9,185 710,814 328,683 34,309 38,828,285

Contingent liabilities 2,931,038 14,948 170,534 - 3,226 68,284 2,595 48,425 3,239,050

Commitments 30,357,871 - - - - - - - 30,357,871

Total Credit Exposures 69,008,854 1,982,405 211,843 16,583 12,411 779,098 331,278 82,734 72,425,206


ii. By Geographical analysis


87


Hong Kong & North United Other Group Malaysia Singapore China PRC Japan Australasia America Kingdom countries Total

2012 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet

Cash and short term funds 5,014,113 4,270,060 72,291 36,979 40,832 410,781 422,321 25,858 10,293,235

Deposits and placements with banks and other financial institutions 4,419 139,406 - 152,950 - - - - 296,775

Securities purchased under resale agreements 743,921 - - - - - - - 743,921

Financial assets held- for-trading 3,045,057 - - - - - - - 3,045,057

Financial investments available-for-sale 3,399,436 - - - - - - - 3,399,436

Loans, advances and financing 19,839,027 - - - - - - - 19,839,027

Other assets 462,705 775 19,010 4,735 - 243,740 101,961 - 832,926

Statutory deposits with Bank Negara Malaysia 438,840 - - - - - - - 438,840

32,947,518 4,410,241 91,301 194,664 40,832 654,521 524,282 25,858 38,889,217

Contingent liabilities 2,152,869 22,092 224,288 - 1,598 60,242 63,577 167,270 2,691,936

Commitments 25,123,363 - - - - - - - 25,123,363

Total Credit Exposures 60,223,750 4,432,333 315,589 194,664 42,430 714,763 587,859 193,128 66,704,516


ii. By Geographical analysis (continued)

The disclosures represented the Bank’s exposures except for RM20,000 cash and cash equivalents depos-ited by the subsidiaries which were eliminated in the above tables.



88

31. Financial risk management (continued)

B. Deposits and placements with banks and other financial institutions

i. Deposits and placements with banks and other financial institutions analysis by credit rating Group and Bank

2013 2012

RM’000 RM’000

AAA 600,000 -

AA to AA- - -

A+ to A- 143,609 296,775

Unrated 100,000 -

843,609 296,775

ii. Deposits and placements with banks and other financial institutions analysis by geographical location where the credit risk of issuers reside, regardless of where the assets are booked, is as follows:

Group and Bank

2013 2012

RM’000 RM’000

Malaysia 702,805 4,419

Other 140,804 292,356

843,609 296,775

C. Other securities Group and Bank

2013 2012

RM’000 RM’000

Financial assets held-for-trading 2,543,577 3,045,057

Financial investments available-for-sale 1,792,120 3,399,436

4,335,697 6,444,493


89



C. Other securities (continued)

i. Other securities analysis by credit rating

At the reporting date, the credit quality of investment in other securities by designation of an external credit assessment institution is as follows:-

Group and Bank

2013 2012

RM’000 RM’000

AAA 6,500 6,500

A+ to A- 1,575,196 3,297,538

Unrated 2,754,001 3,140,455

4,335,697 6,444,493

ii. Other securities analysis by geographical location where the credit risk of issuers reside, regardless of where the assets are booked, is as follows:

Group and Bank

2013 2012

RM’000 RM’000

Malaysia 4,335,697 6,444,493



90


D. Credit quality of loans, advances and financing Group and Bank

2013 2012

RM’000 RM’000 Loans, advances and financing

- neither past due nor impaired 19,046,142 17,429,100

- past due but not impaired 1,557,697 1,928,073

- impaired 452,355 481,854

Gross amount 21,056,194 19,839,027

Individual assessment allowance (189,531) (205,769)

Collective assessment allowance (368,381) (357,064)

Carrying amount 20,498,282 19,276,194

Neither past due nor impaired

Included in the total loans, advances and financing of neither past due nor impaired are renegotiated loans. The analysis below represents the carrying amount of loans that would otherwise be past due or impaired if their terms had not been renegotiated. These renegotiated loans are considered neither past due nor impaired after they have been monitored as impaired loans until a minimum number of payments have been received under the new terms.

Group and Bank

2013 2012

RM’000 RM’000

Renegotiated loans 738,811 790,739

Past due but not impaired

Analysis of loans, advances and financing to customers that are past due but not impaired analysed based on aging are as follows:

Group and Bank

2013 2012

RM’000 RM’000

1 - 29 dpd 1,096,247 1,434,140

30 - 59 dpd 335,775 356,567

60 - 89 dpd 125,675 137,366

90 - 119 dpd - -

120 - 180 dpd - -

>180 dpd - -

1,557,697 1,928,073


91



D. Credit quality of loans, advances and financing (continued)

Impaired

Loans, advances and financing are classified as impaired when they meet one of the following criteria:

i. principal or interest or both are past due for three (3) months or more;

ii. where there is an individual impairment provision on the loan;

iii. impaired loans that have been rescheduled or restructured that have not met the continuous repayment behavior based on the revised rescheduled and/or restructured terms over the observation period.

Loans, advances and financing to customers that are individually impaired analysed by age are as follows:

Group and Bank

2013 2012

RM’000 RM’000

Current 24,882 28,676

1 - 29 dpd 25,771 11,820

30 - 59 dpd 30,115 27,948

60 - 89 dpd 26,557 30,907

90 - 1 19 dpd 56,356 64,577

120 - 180 dpd 98,463 104,157

>180 dpd 190,211 213,769

452,355 481,854

Estimated value of collaterals against past due but not impaired and impaired loans are RM705,890,000 (2012 - RM709,848,000).



92

31. Financial risk management (continued) 2. Market Risk

Market risk encompasses price risk and liquidity risk, both arising from the normal course of business operations of the Group and the Bank. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return on risk.

Market risk in the Group and the Bank are managed through corporate-wide standards and business-specific policies and procedures with the help of responsible personnel and committees delegated by the Board of Directors such as the Risk Management Committee, Asset and Liability Committee and Market Risk Management. The business is required to establish risk measures, limits and controls, clearly defining approved risk profiles within the parameters of the Group’s and the Bank’s overall risk appetite and for operating within the established market risk limit framework. Independent market risk management establishes policies and procedures, approves limits and monitors exposures against limits.

Price Risk

Price risk is the risk associated to earnings arising from changes in interest rate, foreign exchange rates, equity and commodity prices and in their implied volatilities. Price risk arises in non-trading as well as trading portfolios. Price risk in non-trading portfolio is measured predominantly through earnings-at-risk and factor sensitivities supplemented with additional tools such as stress testing and cost-to-close analysis. Price risk in trading portfolios is measured through tools such as factor sensitivities, value-at-risk and stress testing.

Interest rate risk primarily results from the timing differences in the repricing of interest bearing assets, liabilities and commitments. It is also related to positions from non-interest bearing liabilities including shareholders’ funds and current accounts, as well as from certain fixed rate loans and liabilities.

The Group and the Bank are exposed to such risks associated with the effects of the fluctuations in the prevailing market interest rates on its financial positions and cash flows.

Factor sensitivities are expressed as the change in the value of a position for a defined change in a market risk factor. For the sensitivity analysis provided in this section, the Group and the Bank have used a 90 basis points movement for interest rates and a 4% movement in foreign exchange rates to measure the impact of these market risk movements on the Group and the Bank.

Interest rate risk – Sensitivity analysis

At 31 December 2013, it is estimated that a general increase of 90 basis points in interest rate, with all other variables held constant, would decrease the Group’s and the Bank’s profit before tax by approximately RM75,575,000 whereas a general decrease of 90 basis points in interest rate, with all other variables held constant, would have an equal but opposite effect.

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the reporting date and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date and that all other variables, in particular foreign exchange rates, remain constant. The above basis point increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual reporting date.

Foreign currency risk – Sensitivity analysis

As at 31 December 2013, it is estimated that a movement of 4% in Ringgit Malaysia (RM) against foreign currencies, with all other variables held constant, would result in maximum loss of approximately RM4,542,000.

The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the reporting date and had been applied to the Group’s and the Bank’s exposure to currency risk for both derivative and non-derivative financial instruments in existence at that date, and that all other variables, in particular interest rate, remains constant. The sensitivity analysis includes balances where the denomination of the balances is in a currency other than the Ringgit Malaysia (RM).

The stated changes represent management’s assessment of reasonably possible changes in foreign exchange rates over the period until the next annual reporting date. Results of the analysis represent an aggregation of the effects on the Group’s and the Bank’s profit before tax measured in the respective functional currencies, translated into Ringgit Malaysia (RM) at the exchange rate ruling at the reporting date for presentation purposes.


93



2. Market Risk (continued)

Liquidity Risk

Liquidity risk is the risk that the Group and the Bank will not be able to meet its financial commitments when due. Under the Group’s and the Bank’s internal liquidity risk management policy, there is a set of standards for the measurement of liquidity risk in order to ensure consistency, stability in methodologies and transparency of risk. Management of liquidity is performed on a daily basis and is monitored by the Treasurer. The Asset and Liability Committee and the Treasurer undertake the joint responsibility of overall liquidity risk management which covers establishing and endorsing the annual funding and liquidity plan, liquidity limits, liquidity ratios, market triggers and periodic stress tests.

The Group and the Bank include the net cash flow position for derivatives as part of their daily liquidity reports under off-balance sheet items, which are consolidated together with the on-balance sheet items to monitor the overall liquidity position of the Group and the Bank. The daily report prepared to monitor the daily liquidity position is known as the Market Access Report (“MAR”). It is prepared by major currencies and it has maturity analysis ranging from overnight to more than 2 years and limits are set for each tenor bucket. Maturity mismatches are monitored through the daily MAR report for necessary treasury actions on funding and gapping.

Limits are determined by the ultimate holding company and are reviewed as often as on a quarterly basis and is done in conjunction with the liquidity stress testing.

The following table indicates the effective interest rate at the reporting dates and periods in which the financial instruments reprice or mature, whichever is earlier.

i. Interest/profit rate risk

Effective Up to 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 Non-interest Trading interest Group month months months years years sensitive book Total rate

2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Assets

Cash and short term funds 9,607,138 - - - - 1,240,210 - 10,847,348 1.37%

Deposits and placements with banks and other financials institutions - 827,682 15,004 923 - - - 843,609 2.94%

Securities purchased under resale agreements 484,631 - - - - - - 484,631 2.88%

Financial assets held-for-trading - - - - - - 2,543,577 2,543,577 3.27%

Financial investments available-for-sale - 298,216 257,413 1,180,568 55,923 - - 1,792,120 3.70%

Loans, advances and financing

- performing 1,779,590 1,309,503 7,067,920 492,927 9,953,899 (368,381) - 20,235,458 6.14%

- impaired - - - - - 262,824 - 262,824

Other assets - - - - - 301,296 600,510 901,806

Statutory deposits with Bank Negara Malaysia - - - - - 359,000 - 359,000

Deferred tax assets - - - - - 19,105 - 19,105

Plant and equipment - - - - - 82,733 - 82,733

Total assets 11,871,359 2,435,401 7,340,337 1,674,418 10,009,822 1,896,787 3,144,087 38,372,211



94


i. Interest/profit rate risk (continued)



Liabilities and Shareholders’ Equity

Deposits from customers 22,167,030 1,415,748 2,192,795 7,956 - - - 25,783,529 1.56%

Deposits and placements of banks and other financial institutions 5,324,233 29,583 182,746 319,695 - - - 5,856,257 0.68%

Bills and acceptances payable - - - - - 52,688 - 52,688

Other liabilities - - - - - 1,827,535 524,618 2,352,153

Total liabilities 27,491,263 1,445,331 2,375,541 327,651 - 1,880,223 524,618 34,044,627

Shareholders’ equity - - - - - 4,327,584 - 4,327,584

Total liabilities and shareholders' equity 27,491,263 1,445,331 2,375,541 327,651 - 6,207,807 524,618 38,372,211

On-balance sheet interest sensitivity gap (15,619,904) 990,070 4,964,796 1,346,767 10,009,821 (4,311,020) 2,619,469

Off-balance sheet interest sensitivity gap (114,000) 12,000 (40,000) 55,000 (33,000) - -

(15,733,904) 1,002,070 4,924,796 1,401,767 9,976,821 (4,311,020) 2,619,469


95




Assets

Cash and short term funds 9,042,370 - - - - 1,250,865 - 10,293,235 1.56%

Deposits and placements with banks and other financials institutions - 274,439 19,719 2,617 - - - 296,775 3.36%

Securities purchased under resale agreements 743,921 - - - - - - 743,921 2.78%

Financial assets held-for-trading - - - - - - 3,045,057 3,045,057 3.30%

Financial investments available-for-sale 107,414 281,064 771,654 1,601,846 637,458 - - 3,399,436 3.29%

Loans, advances and financing

- performing 1,574,100 878,875 6,284,063 790,872 9,829,263 (357,064) - 19,000,109 6.32%

- impaired - - - - - 276,085 - 276,085

Other assets - - - - - 360,834 472,092 832,926

Statutory deposits with Bank Negara Malaysia - - - - - 438,840 - 438,840


Plant and equipment - - - - - 109,343 - 109,343

Total assets 11,467,805 1,434,378 7,075,436 2,395,335 10,466,721 2,096,195 3,517,149 38,453,019





96





Liabilities and Shareholders’ Equity

Deposits from customers 21,044,601 1,602,244 3,574,372 108,925 - - - 26,330,142 1.65%

Deposits and placements of banks and other financial institutions 4,876,449 33,729 118,081 485,818 - - - 5,514,077 1.04%

Bills and acceptances payable - - - - - 133,076 - 133,076

Other liabilities - - - - - 1,661,227 528,677 2,189,904

Total liabilities 25,921,050 1,635,973 3,692,453 594,743 - 1,794,303 528,677 34,167,199

Shareholders’ equity - - - - - 4,285,820 - 4,285,820

Total liabilities and shareholders' equity 25,921,050 1,635,973 3,692,453 594,743 - 6,080,123 528,677 38,453,019

On-balance sheet interest sensitivity gap (14,453,245) (201,595) 3,382,983 1,800,592 10,466,721 (3,983,928) 2,988,472

Off-balance sheet interest sensitivity gap (138,000) (296,000) 296,000 (154,000) 86,000 - -

(14,591,245) (497,595) 3,678,983 1,646,592 10,552,721 (3,983,928) 2,988,472

The disclosures represented the Bank’s exposures except for RM20,000 cash and cash equivalents deposited by the subsidiaries which were eliminated in the above tables.


97



ii. Foreign currency risk

Foreign currency risk results in the Group’s exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The tables below summarise the RM equivalent amount of the Group’s and the Bank’s exposure to foreign currency exchange rate risk as at reporting date:

Group MYR USD JPY Others Total

2013 RM’000 RM’000 RM’000 RM’000 RM’000

Assets

Cash and short term funds 7,125,786 2,572,071 17,507 1,131,984 10,847,348

Deposits and placements with banks and other financial institutions 700,000 32,056 - 111,553 843,609

Securities purchased under resale agreements 484,631 - - - 484,631

Financial assets held- for-trading 2,543,577 - - - 2,543,577

Financial investments available-for-sale 1,792,120 - - - 1,792,120

Loans, advances and financing 18,994,052 1,319,455 138,415 46,360 20,498,282

Other assets (6,853,372) 6,844,450 (331,061) 1,241,789 901,806

Statutory Deposits with Bank Negara Malaysia 359,000 - - - 359,000

Deferred tax assets 19,105 - - - 19,105

Plant and equipment 82,733 - - - 82,733

Total assets 25,247,632 10,768,032 (175,139) 2,531,686 38,372,211

Liabilities

Deposits from customers 19,723,007 4,962,954 72,767 1,024,801 25,783,529

Deposits and placements of banks and other financial institutions 3,876,690 1,687,712 100,026 191,829 5,856,257

Bills and acceptances payable 12,091 37,781 2,112 704 52,688

Other liabilities (2,490,458) 3,761,338 (317,402) 1,398,675 2,352,153

Total liabilities 21,121,330 10,449,785 (142,497) 2,616,009 34,044,627

Shareholder’s equity 4,327,584 - - - 4,327,584

Total liabilities and shareholder’s equity 25,448,914 10,449,785 (142,497) 2,616,009 38,372,211



98

Group MYR USD JPY Others Total

2012 RM’000 RM’000 RM’000 RM’000 RM’000

Assets

Cash and short term funds 3,639,362 485,947 4,917,767 1,250,159 10,293,235

Deposits and placements with banks and other financial institutions - 89,973 157,369 49,433 296,775

Securities purchased under resale agreements 743,921 - - - 743,921

Financial assets held- for-trading 3,045,057 - - - 3,045,057

Financial investments available-for-sale 3,399,436 - - - 3,399,436

Loans, advances and financing 17,978,104 1,122,670 130,747 44,673 19,276,194

Other assets 5,273,902 (4,505,351) 264,222 (199,847) 832,926

Statutory Deposits with Bank Negara Malaysia 438,840 - - - 438,840

Deferred tax assets 17,292 - - - 17,292

Plant and equipment 109,343 - - - 109,343

Total assets 34,645,257 (2,806,761) 5,470,105 1,144,418 38,453,019

Liabilities

Deposits from customers 19,792,912 5,513,580 47,550 976,100 26,330,142

Deposits and placements of banks and other financial institutions 2,777,286 2,299,943 310,776 126,072 5,514,077

Bills and acceptances payable 5,985 125,480 894 717 133,076

Other liabilities 8,153,768 (6,273,043) 282,662 26,517 2,189,904

Total liabilities 30,729,951 1,665,960 641,882 1,129,406 34,167,199

Shareholder’s equity 4,285,820 - - - 4,285,820

Total liabilities and shareholder’s equity 35,015,771 1,665,960 641,882 1,129,406 38,453,019


ii. Foreign currency risk (continued)

The disclosures represented the Bank’s exposures except for RM20,000 cash and cash equivalents being deposited by the subsidiaries were eliminated in the above tables.


99


No Less than 7 days to 1 to 3 3 to 6 6 to 12 1 to 3 3 to 5 Over specific Group 7 days 1 month months months months years years 5 years maturity Total

2013 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Assets

Cash and short term funds 7,270,324 2,336,813 - - - - - - 1,240,211 10,847,348

Deposits and placements with banks and other financial institutions - - 827,682 8,489 6,515 923 - - - 843,609

Securities purchased under resale agreements 484,631 - - - - - - - - 484,631

Financial assets held-for-trading 4,999 41,676 592,747 1,034,621 731,728 116,439 65,990 (44,623) - 2,543,577

Financial investments available-for-sale - - 298,216 247,336 10,077 1,099,152 81,416 55,923 - 1,792,120

Loans, advances and financing 795,543 859,230 1,366,175 408,158 6,839,140 459,877 198,702 9,953,899 (382,442) 20,498,282

Other assets 171,522 53,542 108,828 85,181 59,843 69,242 179,917 17,266 156,465 901,806

Statutory Deposits with Bank Negara Malaysia - - - - - - - - 359,000 359,000

Deferred tax assets - - - - - - - - 19,105 19,105

Plant and equipment - - - - - - - - 82,733 82,733

Total assets 8,727,019 3,291,261 3,193,648 1,783,785 7,647,303 1,745,633 526,025 9,982,465 1,475,072 38,372,211


iii. Analysis of assets and liabilities by remaining maturity

The following maturity profile is based on the remaining period at the reporting date to the contractual maturity.



100



Liabilities and shareholders’ funds

Deposits from customers 15,892,470 6,274,561 1,415,748 932,672 1,260,122 7,956 - - - 25,783,529

Deposits and placements of banks and other financial institutions 4,427,590 896,643 29,583 55,990 126,756 319,695 - - - 5,856,257

Bills and acceptances payable 654,402 (162,376) (324,490) (114,848) - - - - - 52,688

Other liabilities 1,420,924 60,227 71,728 78,555 19,511 89,588 132,837 22,525 456,258 2,352,153

Total liabilities 22,395,386 7,069,055 1,192,569 952,369 1,406,389 417,239 132,837 22,525 456,258 34,044,627

Share capital - - - - - - - - 121,697 121,697

Reserves - - - - - - - - 4,205,887 4,205,887

Total equity attributable to equity holder of the bank - - - - - - - - 4,327,584 4,327,584

Total liabilities and equity 22,395,386 7,069,055 1,192,569 952,369 1,406,389 417,239 132,837 22,525 4,783,842 38,372,211


iii. Analysis of assets and liabilities by remaining maturity (continued)


101




Assets

Cash and short term funds 8,580,461 461,909 - - - - - - 1,250,865 10,293,235

Deposits and placements with banks and other financial institutions - - 274,439 11,946 7,773 2,617 - - - 296,775

Securities purchased under resale agreements 743,921 - - - - - - - - 743,921

Financial assets held-for-trading 196,739 79,120 847,024 1,097,814 116,764 392,288 179,792 135,516 - 3,045,057

Financial investments available-for-sale 107,414 249,271 339,203 278,926 185,318 1,063,988 537,858 637,458 - 3,399,436

Loans, advances and financing 900,546 673,554 878,875 116,095 6,167,968 278,854 512,018 9,829,263 (80,979) 19,276,194

Other assets 290,454 9,934 30,680 62,163 44,207 145,409 97,319 51,034 101,726 832,926

Statutory Deposits with Bank Negara Malaysia - - - - - - - - 438,840 438,840

Deferred tax assets - - - - - - - - 17,292 17,292

Plant and equipment - - - - - - - - 109,343 109,343

Total assets 10,819,535 1,473,788 2,370,221 1,566,944 6,522,030 1,883,156 1,326,987 10,653,271 1,837,087 38,453,019





102



Liabilities and shareholders’ funds

Deposits from customers 17,097,661 3,946,939 1,602,244 527,584 3,046,788 108,926 - - - 26,330,142

Deposits and placements of banks and other financial institutions 3,427,771 1,448,678 33,729 80,622 37,459 369,304 116,514 - - 5,514,077

Bills and acceptances payable 718,963 (167,158) (323,072) (95,657) - - - - - 133,076

Other liabilities 1,730,688 13,987 39,193 68,710 53,603 169,608 73,139 40,698 278 2,189,904

Total liabilities 22,975,083 5,242,446 1,352,094 581,259 3,137,850 647,838 189,653 40,698 278 34,167,199

Share capital - - - - - - - - 121,697 121,697

Reserves - - - - - - - - 4,164,123 4,164,123

Total equity attributable to equity holder of the bank - - - - - - - - 4,285,820 4,285,820

Total liabilities and equity 22,975,083 5,242,446 1,352,094 581,259 3,137,850 647,838 189,653 40,698 4,286,098 38,453,019





103



iv. Analysis of financial liabilities by contractual undiscounted cash flows

The table below details the remaining contractual maturities at the balance sheet date of the Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or if floating, based on current rates at the reporting date) and the earliest date the Group can be required to pay.

Total contractual Over 1 Over 3 Over Carrying undiscounted 1 month month to months to 1 year to Over Group Amount cash flows or less 3 months 1 year 5 years 5 years

2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


Deposits from customers 25,783,529 26,059,866 20,824,359 1,638,097 3,565,084 32,326 -

Deposits and placements of banks and other financial institutions 5,856,257 5,857,530 5,324,524 29,695 183,616 319,695 -

Bills and acceptances payable 52,688 52,688 492,027 (324,490) (114,849) - -

Other liabilities 2,352,153 2,352,153 1,937,409 71,728 98,066 222,425 22,525

Total 34,044,627 34,322,237 28,578,320 1,415,030 3,731,917 574,446 22,525

Total contractual Over 1 Over 3 Over Carrying undiscounted 1 month month to months to 1 year to Over Group Amount cash flows or less 3 months 1 year 5 years 5 years

2012 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


Deposits from customers 26,330,142 29,151,704 23,271,812 1,588,924 3,799,559 491,409 -

Deposits and placements of banks and other financial institutions 5,514,077 2,855,766 2,731,826 16,069 1,015 106,856 -

Bills and acceptances payable 133,076 133,076 604,725 (337,359) (134,290) - -

Other liabilities 2,189,904 2,189,904 624,011 2,843 3,238 664 1,559,148

Total 34,167,199 34,330,450 27,232,374 1,270,477 3,669,522 598,929 1,559,148




104


3. Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. It includes reputation and franchise risk associated with business practices or market conduct that the Group and the Bank may undertake and includes the risk of failing to comply with applicable laws, regulations and Citigroup policies.

Operational risk is inherent in the Group’s and the Bank’s business activities and is managed through an overall framework with checks and balances that include recognised ownership of the risk by businesses and independent risk management oversight. The Group and the Bank mitigate their operational risk by setting up its key controls and assessments according to Citigroup’s and Regulators’ standards. They are also evaluated, monitored, and managed by its sound governance structure.

The Group’s and the Bank’s Self-Assessments and Operational Risk Framework include the Risk and Control Self-Assessment and the Operational Risk Policy, and define the Group’s and the Bank’s approach to operational risk management. The objective of the policy is to establish a consistent approach to assessing relevant risks and the overall control environment across the Group and the Bank, to facilitate adherence to regulatory requirements and other corporate initiatives.

32. Financial assets and liabilities

32.1 Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

a. Loans and receivables (“L&R”);

b. Fair value through profit or loss (“FVTPL”):

- Held for trading (“HFT”);

c. Financial investments available-for-sale (“AFS”);

d. Other liabilities (“OL”).


105


32. Financial assets and liabilities (continued) 32.1 Categories of financial instruments (continued)

Carrying L&R/ FVTPL

amount OL - HFT AFS

Group RM’000 RM’000 RM’000 RM’000

2013

Financial Assets

Cash and short-term funds 10,847,348 10,847,348 - -

Deposits and placements

with banks and other

financial institutions 843,609 843,609 - -

Securities purchased under

resale agreements 484,631 484,631 - -

Financial assets held-for-trading 2,543,577 - 2,543,577 -

Financial investments available-for-sale 1,792,120 - - 1,792,120

Loans, advances and financing 20,498,282 20,490,828 7,454 -

Statutory deposits with

Bank Negara Malaysia 359,000 359,000 - -

Derivatives financial assets 600,510 - 600,510 -

Interest/Income receivable 28,315 28,315 - -

Total financial assets 37,997,392 33,053,731 3,151,541 1,792,120

Financial Liabilities

Deposits from customers 25,783,529 25,694,455 89,074 -


of banks and other

financial institutions 5,856,256 5,496,483 359,773 -

Bills and acceptances payable 52,688 52,688 - -

Derivatives financial

liabilities 524,618 - 524,618 -

Interest/Profit payable 48,902 48,902 - -

Total financial liabilities 32,265,993 31,292,528 973,465 -



106

32. Financial assets and liabilities (continued) 32.1 Categories of financial instruments (continued)

Carrying L&R/ FVTPL

amount OL - HFT AFS

Group RM’000 RM’000 RM’000 RM’000

2012

Financial Assets

Cash and short-term funds 10,293,235 10,293,235 - -


with banks and other

financial institutions 296,775 296,775 - -

Securities purchased under

resale agreements 743,921 743,921 - -

Financial assets held-for-trading 3,045,057 - 3,045,057 -


Loans, advances and financing 19,276,194 19,265,906 10,288 -

Statutory deposits with

Bank Negara Malaysia 438,840 438,840 - -

Derivatives financial assets 472,092 - 472,092 -

Interest/Income receivable 42,295 42,295 - -

Total financial assets 38,007,845 31,080,972 3,527,437 3,399,436

Financial Liabilities

Deposits from customers 26,330,142 26,245,274 84,868 -


of banks and other

financial institutions 5,514,077 5,097,974 416,103 -

Bills and acceptances payable 133,076 133,076 - -

Derivatives financial

liabilities 528,677 - 528,677 -

Interest/Profit payable 52,883 52,883 - -

Total financial liabilities 32,558,855 31,529,207 1,029,648 -


107


32. Financial assets and liabilities (continued)

32.2 Determination of fair value and fair value hierarchy

MFRS 13 Fair Value Measurement requires each class of assets and liabilities measured at fair value in the statements of financial position after initial recognition to be categorised according to hierarchy that reflects the significance of inputs used in making the measurements, in particular, whether the inputs used are observable or unobservable. The following levels of hierarchy are used for determining and disclosing the fair value of those financial instruments:

■ Level 1: Quoted market prices: quoted prices (unadjusted) in active markets for identical instruments;

■ Level 2: Fair values based on observable inputs: inputs other than quoted prices included within Level 1 that are observable for the instrument, whether directly (i.e. as prices) or indirectly (i.e. derived from prices), are used; and

■ Level 3: Fair values derived using unobservable inputs: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

32.2.1 Financial instruments carried at fair value

Level 1 Level 2 Level 3 Total


2013

Financial assets

Financial assets held-for-trading 2,543,577 - - 2,543,577


Loans, advances and financing - - 7,454 7,454

Derivative financial assets - 597,048 3,462 600,510

4,328,198 597,048 10,916 4,936,162


Deposits from customers - - 89,074 89,074

Deposits and placements of banks

and other financial institutions - - 359,773 359,773

Derivative financial liabilities - 509,697 14,921 524,618

- 509,697 463,768 973,465



108


32.2 Determination of fair value and fair value hierarchy (continued)

32.2.1 Financial instruments carried at fair value (continued)

Level 1 Level 2 Level 3 Total


2012

Financial assets

Financial assets held-for-trading 3,045,057 - - 3,045,057


Loans, advances and financing - 10,288 - 10,288

Derivative financial assets - 464,501 7,591 472,092

6,436,994 474,789 7,591 6,919,374


Deposits from customers - 84,869 - 84,869

Deposits and placements of banks

and other financial institutions - 416,103 - 416,103

Derivative financial liabilities - 521,237 7,440 528,677

- 1,022,209 7,440 1,029,649

Policy on transfer between levels

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.

Transfers between Level 1 and Level 2 fair values

There has been no transfer between Level 1 and 2 fair values during the financial year (2012: no transfer in either directions).


109





The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:

Group and Bank

2013 2012

RM’000 RM’000

Financial assets

Balance at 1 January 7,591 11,392

Transfer into Level 3 10,288 -

Total losses recognised in profit or loss: Attributable to losses relating to assets or liabilities that: - have not been realised (6,963) (3,801)

Balance at 31 December 10,916 7,591


Balance at 1 January 7,440 10,006

Transfer into Level 3 500,972 -

Total gains recognised in profit or loss: Attributable to gains relating to assets or liabilities that: - have not been realised (44,644) (2,566)

Balance at 31 December 463,768 7,440



1 10




The following shows the valuation techniques used in the determination of fair values within Level 3.

a. Loans, advances and financing

Loans, advances and financing carried at fair value are those structured products (hybrid financial instruments) offered by the Group and the Bank. The fair values are estimated based on expected future cash flows of contractual installment payments and discounted at prevailing rates at the reporting date offered for similar products to new borrowers with similar credit profiles, where applicable. For impaired loans, if any, the fair values are deemed to approximate the carrying values, net of individual assessment allowance for bad and doubtful debts and financing. Collective assessment allowance is excluded from the carrying value.

b. Deposits from customers and deposits and placements of banks and other financial institutions

Deposits from customers and deposits and placements of banks and other financial institutions carried at fair value are those structured products (hybrid financial instruments) offered by the Group and the Bank. The fair values are estimated based on discounted contracted cash flows using rates currently offered for deposits of similar features and remaining maturities. The fair values of Islamic deposits are deemed to approximate their carrying values as at the reporting date as the profit rates are determined at the end of their holding periods based on the profit generated from the assets invested.

c. Derivative financial assets and liabilities

Fair values of financial instrument classified at Level 3 are determined using appropriate valuation technique which, includes the use of mathematical models, such as discounted cash flow models and option pricing models, comparison to similar instruments for which market observable prices exist and other valuation techniques. Valuation techniques used incorporate assumptions regarding discount rates, interest/profit rate yield curves, estimates of future cash flows and other factors, as applicable.


1 1 1




32.2.2 Financial instruments not carried at fair value

In respect of cash and short term funds, deposits and placements with banks and financial institutions, securities purchased under resale agreements, other assets (excluding derivatives), deposits from customers, deposits and placements of banks and other financial institutions, bills and acceptances payable, and other liabilities (excluding derivatives), the carrying amounts in the statements of financial position approximate their fair values due to the relatively short term/ on demand nature of these financial instruments.

The fair values of other financial assets, together with the carrying amounts shown in the statements of financial position, are as follows:

Carrying

Level 1 Level 2 Level 3 Total Amount

Group and Bank RM’000 RM’000 RM’000 RM’000 RM’000

2013

Financial assets

Loans, advances and financing - - 20,522,081 20,522,081 20,490,828

32.3 Offsetting of financial assets and liabilities

The Group and the Bank enters into derivative transactions under International Swaps and Derivatives Association (“ISDA”) master netting agreements. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all transactions are aggregated into a single net amount that is payable by one party to the other. In certain circumstances – e.g. when a credit event such as a default occurs, all outstanding agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.

The ISDA agreements do not meet the criteria for offsetting in the statements of financial position. This is because the Group and the Bank currently do not have any legally enforceable right to offset recognised amounts, because the right to offset is enforceable only on the occurrence of future events such as a by the counterparty.

Comparative figures have not been analysed by levels by virtue of transitional provision given in Appendix C2 of MFRS 13.

The fair values of fixed rate loans with remaining maturity of less than one year and variable rate loans are estimated to approximate their carrying values at statements of financial position date. The fair value for loans, advances and financing is estimated with similar methodology as discussed in 32.2.1(a).



1 12


32.3 Offsetting of financial assets and liabilities (continued)

The following table sets out the carrying amounts of recognised financial instruments that are subject to the above agreements.

Related

Gross amount financial

recognized/ instrument

Amount that are not

presented offset but

in the subject to

statements of netting Net

Group and Bank financial position agreement amount

2013 RM’000 RM’000 RM’000

Derivative financial assets

Foreign exchange related contracts 391,406 (23,142) 368,264

Interest rate contracts 199,553 (88,224) 111,329

Equity related contracts 4,104 (3,665) 439

Other contracts 5,447 (1,896) 3,551

600,510 (116,927) 483,583

Derivative financial liabilities



Equity related contracts 4,104 (1,354) 2,750

Other contracts 17,015 (9,969) 7,046

524,618 (116,927) 407,691


1 13



32.3 Offsetting of financial assets and liabilities (continued)

The following table sets out the carrying amounts of recognised financial instruments that are subject to the above agreements.

Related

Gross amount financial

recognized/ instrument

Amount that are not

presented offset but

in the subject to

statements of netting Net

Group and Bank financial position agreement amount

2012 RM’000 RM’000 RM’000

Derivative financial assets



Equity related contracts 5,604 (5,604) -

Other contracts 3,940 (842) 3,098

472,092 (131,578) 340,514

Derivative financial liabilities



Equity related contracts 5,604 (744) 4,860

Other contracts 11,501 (4,211) 7,290

528,677 (131,578) 397,099



1 14

33. Lease commitments

The Group and the Bank have lease commitments in respect of rented premises and equipment for hire, all of which are classified as operating leases. A summary of the non-cancellable long term commitments, net of sub leases are as follows:

Group and Bank

2013 2012

RM’000 RM’000

Within 1 year 25,674 27,213

Between 1 and 5 years 5,415 30,426

34. Capital commitments Group and Bank

2013 2012

RM’000 RM’000

Capital expenditures:

Authorised and contracted for 3,803 33,905


1 15


35. Capital adequacy

A. The capital adequacy ratios are as follows:

Group and Bank

2013 2012

RM’000 RM’000

Computation of Total Risk Weighted Assets

(“RWA”)

Total credit RWA 22,178,804 20,634,205

Total market RWA 2,004,327 2,223,864

Total operational RWA 3,427,065 3,546,462

Total Risk Weighted Asset 27,610,196 26,404,531

Computation of Capital Ratios

Common Equity Tier (I) (“CET I”) Capital 4,298,251 N/A

Tier 1 Capital 4,298,251 4,269,626

Total Capital 4,542,195 4,484,017

Before deducting proposed dividends:

CET I Capital ratio 15.568% N/A

Total Tier I Capital ratio 15.568% 16.170%

Total capital ratio 16.451% 16.982%

After deducting proposed dividends:

CET I Capital ratio 13.757% N/A

Total Tier I Capital ratio 13.757% 14.276%

Total Capital ratio 14.640% 15.088%

Detailed information on the risk exposures above are disclosed in the Pillar 3 disclosures of the annual report as prescribed under BNM’s Risk Weighted Capital Adequacy Framework (Basel II) – Disclosures requirements (Pillar 3).

With effect from 1 January 2013, the total capital and capital adequacy ratios of the Group and the Bank are computed in accordance with Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components and Basel II – Risk-weighted Assets) dated 28 November 2012 and 27 June 2013 respectively. The Group and the Bank have adopted the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components), the minimum capital adequacy requirement for common equity Tier I capital ratio and Tier I capital ratio are 3.5% and 4.5% respectively for year 2013. The minimum regulatory capital adequacy requirement remains at 8.0% (2012 – 8.0%) for total capital ratio.



1 16

35. Capital adequacy (continued)

B. The components of CET I, Tier I and Tier II Capital are as follows:

Group and Bank

2013 2012

RM’000 RM’000

Paid up ordinary share capital 121,697 121,697

Share premium 380,303 380,303

Retained profits 3,695,833 3,662,946

Other reserves 129,751 121,697

Less: Deferred tax assets (19,105) (17,017)

Defined benefit pension fund assets (10,228) -

Total CET I Capital/Tier I Capital 4,298,251 4,269,626

Tier II Capital

Collective impairment provisions* 243,944 214,411

Total Tier II Capital 243,944 214,411

Total Eligible Tier II Capital 243,944 214,411

Less: Investments in subsidiary companies - (20)

Total Capital 4,542,195 4,484,017

* Excludes collective assessment allowance on impaired loans restricted from Tier II Capital by BNM of RM124.4million (2012: RM142.7 million).


1 17


36. Commitments and contingencies

The off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows: 2013 Credit Risk Group and Bank Principal equivalent weighted amount amount assets

Nature of item RM’000 RM’000 RM’000

Direct credit substitutes 2,516,407 2,516,407 2,348,766

Transaction related contingent items 527,562 263,781 229,143

Short term self liquidating trade related contingencies 151,656 30,331 28,147

Forward asset purchases 43,428 43,428 2,140

Foreign exchange related contracts:

One year or less 21,335,774 580,044 432,001

Over one year to five years 3,348,423 358,975 207,951

Over five years - - -

Interest/Profit rate related contracts:

One year or less 6,193,843 27,530 9,979


Over five years 1,379,978 114,475 61,343

Equity related contracts:

One year or less 25,587 2,303 1,102

Over one year to five years 167,012 16,698 9,216


Debt security contracts and other commodity contracts:

One year or less 248,611 30,325 12,745

Over one year to five years 2,295 705 629


Other commitments, such as formal standby facilities and credit lines, with an original maturity up to one year 364,271 72,854 72,854

Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year 1,855,219 927,610 696,522

Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness 6,216,423 - -

Unutilised credit card lines 21,921,958 4,384,392 3,291,028

Total 77,626,306 9,803,018 7,539,929



1 18

36. Commitments and contingencies (continued)

2012 Credit Risk Group and Bank Principal equivalent weighted amount amount assets


Direct credit substitutes 1,775,552 1,775,552 1,614,183

Transaction related contingent items 459,766 229,883 193,184

Short term self liquidating trade related contingencies 223,238 44,648 34,165

Forward asset purchases 233,379 233,379 168,747

Foreign exchange related contracts:

One year or less 24,502,920 450,794 279,071


Over five years 91,650 19,022 19,022

Interest/Profit rate related contracts:

One year or less 8,194,786 133,790 30,061


Over five years 1,276,778 123,369 51,781

Equity related contracts:

One year or less 82,608 7,192 1,438



Debt security contracts and other commodity contracts:

One year or less 56,113 7,466 5,479



Other commitments, such as formal standby facilities and credit lines, with an original maturity up to one year 568,688 113,738 113,738

Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year 1,074,639 537,320 399,334

Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness 4,861,934 - -

Unutilised credit card lines 18,618,102 3,723,620 2,795,626

Total 79,345,922 8,279,157 6,093,629


1 19


37. The operations of Islamic Banking

Statements of financial position as at 31 December 2013

Bank

2013 2012


Assets

Cash and short term funds (a) 725,216 91,705

Financial assets held-for-trading (b) 9,751 671,823

Financial investments available-for-sale (c) 249,018 58,071

Financing, advances and other loans (d) 345,725 397,083

Deferred tax assets 1,732 1,411

Other assets (f) 28,663 9,249

Total assets 1,360,105 1,229,342

Liabilities

Deposits from customers (g) 994,630 907,552

Other liabilities (h) 73,110 66,523

Total liabilities 1,067,740 974,075

Islamic banking funds (i) 292,365 255,267

Total liabilities and Islamic banking funds 1,360,105 1,229,342

Commitments and contingencies (r) 581,621 607,205




120

37. The operations of Islamic Banking (continued)

Statement of profit or loss and other comprehensive income for the financial year ended 31 December 2013

Bank

2013 2012


Income derived from investment of depositors’ funds and others (j) 32,764 31,994

Provision for financing, advances and others

(made)/written back (k) (126) 6,179

Total attributable income 32,638 38,173

Income attributable to depositors (l) (6,224) (6,880)

Total attributable to the Bank 26,414 31,293

Income derived from investment of Islamic Banking Funds (m) 22,369 14,331

Total net income 48,783 45,624

Other operating expenses (o) (4,614) (2,879)


Tax expense (p) (7,002) (10,686)

Profit for the year 37,167 32,059

Other comprehensive loss, net of tax Net loss on revaluation of financial investments available-for-sale (69) (373)

Total comprehensive income for the year 37,098 31,686

Profit for the year attributable to:


Total comprehensive income attributable to:




121



Statement of changes in Islamic Banking funds for the financial year ended 31 December 2013

Bank

Capital Fair value Retained

funds reserve profits Total

RM’000 RM’000 RM’000 RM’000

At 1 January 2012 20,000 542 203,039 223,581

Fair value changes on financial investments available-for-sale - (373) - (373)

Total other comprehensive income for the year - (373) - (373)

Profit for the year - - 32,059 32,059

Total comprehensive income for the year - (373) 32,059 31,686

At 31 December 2012/ 1 January 2013 20,000 169 235,098 255,267

Fair value changes on financial investments available-for-sale - - - -

Total other comprehensive loss for the year - (69) - (69)

Profit for the year - - 37,167 37,167

Total comprehensive income for the year - (69) 37,167 37,098

At 31 December 2013 20,000 100 272,265 292,365

Note 37(i)




122


Statements of cash flows for the financial year ended 31 December 2013

Bank

2013 2012

RM’000 RM’000

Cash flows from operating activities


Adjustments for:

Amortisation of premium less accretion of discount of investment securities (7,658) (5,594)

Provision for financing, advances and others written back 126 (6,179)

Gain from disposal of financial investments available-for-sale - (1,228)

Mark-to-market (gain)/loss on financial assets held-for-trading (95) 685

Operating profit before working capital changes 36,542 30,429

Changes in working capital:

Financial assets held-for-trading 662,167 (672,508)

Financing, advances and others 51,232 53,256

Other assets (19,413) 6,344

Deposits from customers 87,078 246,811

Other liabilities 8,142 (10,897)

Cash generated from/(used) in operating activities 825,748 (346,565)

Income taxes paid (8,879) (10,686)

Net cash generated from/(used) in operating activities 816,869 (357,251)

Cash flows from investing activities

Purchase of financial investments available-for-sale (249,088) (736,011)

Proceeds from disposal of financial investments available-for-sale 65,729 1,116,104

Net cash (used in)/generated from investing activities (183,359) 380,093

Net increase in cash and cash equivalents 633,511 22,842

Cash and cash equivalents at 1 January 91,705 68,863

Cash and cash equivalents at 31 December (Note 37(a)) 725,216 91,705



123



a. Cash and short term funds Bank

2013 2012

RM’000 RM’000

Cash and balances with banks and other financial institutions 4,216 3,705

Money at call and deposit placements maturing within one month 721,000 88,000

725,216 91,705

b. Financial assets held-for-trading Bank

2013 2012

RM’000 RM’000

At fair value

Bank Negara Malaysia Islamic Bills - 662,090

Malaysian Government Treasury Bills 9,751 9,733

9,751 671,823

c. Financial investments available-for-sale Bank

2013 2012

RM’000 RM’000

At fair value




124


d. Financing, advances and others

i. By type Bank

2013 2012

RM’000 RM’000

Term financing

- Housing financing 363,374 418,414

- Hire purchase receivables - 808

- Lease receivables - 570

363,374 419,792

Unearned income (16,226) (20,022)

Gross financing, advances and others 347,148 399,770

Less:

Allowance for impaired financing, advances and others

- Collective assessment allowance (615) (543)

- Individual assessment allowance (808) (2,144)

Total net financing, advances and others 345,725 397,083

ii. By contract

Bai’Bithamin Ajil 24,534 30,669

Ijarah Muntahia Bittamilik - 1,378

Diminishing Musharakah 322,614 367,723

347,148 399,770

iii. By type of customer

Domestic business enterprises

- Small and medium enterprises - 1,355

- Others 3,408 3,227

Individuals 343,740 395,188

347,148 399,770


125



d. Financing, advances and others (continued)

iv. By profit rate sensitivity Bank

2013 2012

RM’000 RM’000

Fixed rate

- Housing financing 347,148 398,392

- Hire purchase receivables - 808

- Other fixed rate/financing - 570

347,148 399,770

v. By sector

Manufacturing (including agriculture based) - 1,377

Transport, storage and communication - -

Household - residential 343,740 395,188

Other sectors 3,408 3,205

347,148 399,770

vi. By purpose

Purchase of landed property 347,148 398,393

Purchase of fixed assets excluding land and building - 1,377

347,148 399,770



126


e. Impaired financing, advances and others

i. Movements in impaired financing, advances and others are as follows:

Bank

2013 2012

RM’000 RM’000

At 1 January 9,758 9,629

Classified as impaired during the year 6,101 2,354

Amount recovered (3,642) (2,225)

Amount written off (1,377) -

At 31 December 10,840 9,758

Individual assessment allowance (808) (2,144)

Net impaired financing, advances and others 10,032 7,614

Ratio of net impaired financing, advances and others to total gross financing, advances and others less individual assessment allowance 2.90% 1.91%

ii. Movements in impaired financing, advances and others are as follows:

Bank

2013 2012

RM’000 RM’000

Collective assessment allowance

At 1 January 543 6,764

Allowance made/(written back) during the year 72 (6,221)

At 31 December 615 543

As % of gross financing, advances and others less individual assessment allowance 0.18% 0.14%


127



e. Impaired financing, advances and others (continued)

ii. Movements in impaired financing, advances and others are as follows (continued):

Bank

2013 2012

RM’000 RM’000


At 1 January 2,144 2,119

Allowance made during the year 176 133

Allowance written back during the year (122) (91)

Amount written off (1,390) (17)

At 31 December 808 2,144

iii. Impaired financing, advances and others by sector

Bank

2013 2012

RM’000 RM’000

Manufacturing (including agriculture based) - 1,377

Household - residential 10,840 8,381

10,840 9,758

f. Other assets Bank

2013 2012

RM’000 RM’000

Profit receivables 891 876

Other debtors, deposits and prepayments 5,136 6,352

Revaluation gain on profit rate undertaking contracts (Note 37(s)) 22,636 2,021

28,663 9,249



128


g. Deposits from customers

i. By type of deposit Bank

2013 2012

RM’000 RM’000

Non-Mudharabah Fund

Demand deposits 834,654 685,700

Saving deposits 63,511 53,787

Other deposits 4,371 60,294

Negotiable Instruments of Deposits 85,580 85,581

Mudharabah Fund

General investment deposits 6,514 22,190

994,630 907,552

ii. By type of customer Bank

2013 2012

RM’000 RM’000

Government and statutory bodies 141,657 145,853

Business enterprises 760,135 191,370

Individuals 72,562 498,605

Others 20,276 71,724

994,630 907,552


129



h. Other liabilities Bank

2013 2012

RM’000 RM’000

Profit payable 36 65

Other creditors and accruals 50,437 62,880

Taxation 1 1,557

Revaluation loss on profit rate undertaking contracts (Note 37(s)) 22,636 2,021

73,110 66,523

i. Islamic banking funds Bank

2013 2012

RM’000 RM’000

Fund allocated 20,000 20,000

Fair value reserve 100 169

Retained earnings 272,265 235,098

292,365 255,267

j. Income derived from investment of depositors’ funds and others

Bank

2013 2012

RM’000 RM’000

Income derived from investment of:

(i) General investment deposits 29,403 27,937

(ii) Other deposits 3,361 4,057

32,764 31,994



130


j. Income derived from investment of depositors’ funds and others (continued)

i. Income derived from investment of general deposits

Bank

2013 2012

RM’000 RM’000

Finance income and hibah


Money at call and placements with financial institutions 9,084 5,592

Income from financial investments available- for-sale 1,521 3,903

23,829 23,860

Accretion of discount less amortisation of premium 5,518 4,032

Total finance income and hibah 29,347 27,892

Other operating income

Fee income 56 45

Income from general investment deposits 29,403 27,937


131



j. Income derived from investment of depositors’ funds and others (continued)

ii. Income derived from investment of other deposits Bank

2013 2012

RM’000 RM’000

Finance income and hibah


Money at call and placements with financial institutions 1,038 812

Income from financial investments available- for-sale 174 567

2,724 3,465

Accretion of discount less amortisation of premium 631 586



Fee income 6 6

Income from investment of other deposits 3,361 4,057

k. Provision for financing, advances and others written back

Bank

2013 2012

RM’000 RM’000


- made during the year (176) (133)

- written back 122 91

Collective assessment allowance

- (made)/reversal during the year (72) 6,221

(126) 6,179



132


l. Income attributable to depositors

Bank

2013 2012

RM’000 RM’000

Deposits from customers

- Mudharabah Fund 3,330 3,845

- Non-Mudharabah Fund 2,829 2,974

Others 65 61

6,224 6,880

m. Income derived from investment of Islamic Banking Capital Funds

Bank

2013 2012

RM’000 RM’000


Money at call and placements with financial institutions 1,996 1,530

Income from financial investments available-for-sale 311 1,068

Income from securities held-for-trading 23 -

5,236 6,530

Accretion of discount less amortisation of premium 1,509 976



Gain/(Loss) from financial assets held-for-trading 95 (685)

Gain from financial investments available-for-sale - 1,228

Fee income 1,011 1,395

Gain from trading activities 14,394 4,685

Insurance premium and referral 124 202

15,624 6,825

Income from Islamic Banking Capital Funds 22,369 14,331


133



n. Income from Islamic banking operations

For consolidation with the conventional operations, income from Islamic Banking operations comprises the following:

Bank

2013 2012


Income derived from investment of depositors’ funds and others (j) 32,764 31,994

Income attributable to depositors (l) (6,224) (6,880)

Income derived from investment of Islamic Banking Funds (m) 22,369 14,331

48,909 39,445

o. Other operating expenses Bank

2013 2012

RM’000 RM’000

Personnel costs

- Salaries, allowances and bonuses 91 97

- Contributions to Employees Provident Fund - 7

- Staff benefits and other compensations 27 31

Establishment costs

- Utilities 1 4

- Rental 21 -

Marketing expenses

- Advertisement 76 -

Administrative and general expenses

- Others 4,398 2,740

4,614 2,879

Included in other operating expenses is the Syariah Committee’s remuneration of RM228,000 (2012 - RM139,000).

p. Taxation Bank

2013 2012

RM’000 RM’000

Current tax expense 7,294 11,780

Deferred tax expense (292) (1,094)

7,002 10,686



134


q. Capital adequacy

i. The capital adequacy ratios are as follows: Bank

2013 2012

RM’000 RM’000

Computation of Total Risk Weighted

Assets (“RWA”)

Total credit RWA 143,700 189,349

Total market RWA 99,584 192,293

Total operational RWA 68,023 73,421

Total Risk Weighted Assets 311,307 455,063

Computation of Capital Ratios

Common Equity Tier (I) (“CET I”) Capital 290,579 N/A

Tier 1 Capital 290,579 253,585

Total Capital 290,749 253,805

CET I Capital Ratio 93.342% N/A

Total Tier I Capital Ratio 93.342% 55.725%

Total Capital Ratio 93.396% 55.774%

With effect from 1 January 2013, the total capital and capital adequacy ratios of the Group and the Bank are computed in accordance with Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components and Basel II – Risk-weighted Assets) dated 28 November 2012 and 27 June 2013 respectively. The Group and the Bank have adopted the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components), the minimum capital adequacy requirement for common equity Tier I capital ratio and Tier I capital ratio are 3.5% and 4.5% respectively for year 2013. The minimum regulatory capital adequacy requirement remains at 8.0% (2012 – 8.0%) for total capital ratio.


135



q. Capital adequacy (continued)

ii. The components of CET I, Tier I and Tier II Capital are as follows:

Bank

2013 2012

RM’000 RM’000

Fund allocated 20,000 20,000

Retained earnings 272,265 235,098

Other reserves 100 -

Less: Deferred tax assets (1,731) (1,513)

55% of cumulative gains of AFS financial

instruments (other than financing and

receivables) (55) -

Total CET I Capital/Tier I Capital 290,579 253,585

Tier II Capital

Collective impairment provisions* 170 220

Total Tier II Capital 170 220

Total Capital 290,749 253,805

* Excludes collective assessment allowance on impaired financing restricted from Tier II Capital by BNM of RM445,000 (2012 – RM323,000).



136


r. Commitments and contingencies

The off-balance sheet exposures and their related counterparty credit risk of the Bank for each reporting dates are as follows:

2013 Credit Risk Principal equivalent weighted amount amount assets


Profit rate related contracts:

One year or less - - -


Over five years 75,000 10,343 2,069

Other commitments, such

as formal standby facilities

and credit lines, with an original

maturity of over one year 6,621 3,310 2,466

Total 581,621 46,446 11,094

2012

Profit rate related contracts:

One year or less 100,000 - -



Other commitments, such

as formal standby facilities

and credit lines, with an original

maturity of over one year 7,205 3,603 2,613

Total 607,205 23,556 15,604


137


2013 2012

Positive Negative Positive Negative

Contract fair fair Contract fair fair

amount value value amount value value

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Foreign exchange

related contracts:

- Cross currency Islamic

profit rate undertaking - - - - - -

Others

- Islamic profit

rate undertaking 1,250,000 22,636 22,636 1,200,000 2,021 2,021

1,250,000 22,636 22,636 1,200,000 2,021 2,021

Note 37(f) Note 37(h) Note 37(f) Note 37(h)


s. Derivative financial instruments



138

Effective

Up to 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 Non-interest Trading profit

Bank month months months years years sensitive book Total rate


Assets

Cash and short term funds 721,000 - - - - 4,216 - 725,216 2.09%

Financial assets

held-for-trading - - - - - - 9,751 9,751 3.39%

Financial investments available-for-sale - 198,848 - 50,170 - - - 249,018 2.13%

Financing, advances and others

- performing 48 44 194 4,059 331,963 (615) - 335,693 4.82%

- impaired - - - - - 10,032 - 10,032


Others assets - - - - - 6,027 22,636 28,663

Total assets 721,048 198,892 194 54,229 331,963 21,392 32,387 1,360,105

Effective




Liabilities and

Islamic Banking funds

Deposits from customers 902,760 416 1,503 89,951 - - - 994,630 0.66%

Other liabilities - - - - - 50,474 22,636 73,110

Total liabilities 902,760 416 1,503 89,951 - 50,474 22,636 1,067,740

Islamic Banking funds - - - - - 292,365 - 292,365

Total liabilities and Islamic

Banking funds 902,760 416 1,503 89,951 - 342,839 22,636 1,360,105

On-balance sheet profit

sensitivity gap (181,712) 198,476 (1,309) (35,722) 331,963 (321,447) 9,751


t. Profit rate risk


139


Effective




Assets

Cash and short term funds 88,000 - - - - 3,705 - 91,705 2.08%

Financial assets

held-for-trading - - - - - - 671,823 671,823 2.27%

Financial investments available-for-sale - 1,781 6,005 50,285 - - - 58,071 4.47%

Financing, advances and others

- performing 389 2,138 3,475 1,066 382,944 (543) - 389,469 4.94%

- impaired - - - - - 7,614 - 7,614


Others assets - - - - - 7,228 2,021 9,249

Total assets 88,389 3,919 9,480 51,351 382,944 19,415 673,844 1,229,342

Effective




Liabilities and

Islamic Banking funds

Deposits from customers 754,388 5,152 60,020 87,992 - - - 907,552 0.81%

Other liabilities - - - - - 64,502 2,021 66,523

Total liabilities 754,388 5,152 60,020 87,992 - 64,502 2,021 974,075

Islamic Banking funds - - - - - 255,267 - 255,267

Total liabilities and Islamic

Banking funds 754,388 5,152 60,020 87,992 - 319,769 2,021 1,229,342

On-balance sheet profit

sensitivity gap (665,999) (1,233) (50,540) (36,641) 382,944 (300,354) 671,823


t. Profit rate risk (continued)



140

38. Changes in accounting policies

38.1 Effect of adopting MFRS 119 Employee Benefits (as amended by MASB in June 2011)

The adoption of the revised MFRS 119 affected the accounting treatment of certain items such as the timing of the recognition of certain gains and losses arising from defined benefit plans and the presentation of changes in defined benefit liability or asset. The key changes to the accounting policy and financial impact to the Group and the Bank are as follows:-

■ Actuarial gains and losses (renamed as ‘remeasurements’) are recognised immediately in other comprehensive income, and are not subsequently recycled to the statement of profit or loss. The corridor approach of accounting for unrecognised actuarial gains in prior years is discontinued.

■ Past service costs, whether unvested or already vested, are recognised immediately in the statement of profit or loss as incurred. Pension costs for a funded benefit plan will include net interest expense or income, calculated by applying the discount rate to the net defined benefit asset or liability. This will replace the interest cost and expected return on plan assets.

The revised MFRS 119 does not have any significant financial impact to the financial statements of the Group and the Bank.

CITIBANK BERHAD (297089M)

45th Floor, Menara Citibank, 165 Jalan Ampang,

50450 Kuala Lumpur

Tel : +603 2383 8585 Fax : +603 2383 6000

www.citibank.com.my

· citibank berhad annual report 2013 corporate information chairman’s statement ceo’s...

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