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Company No: 13491-P CIMB Bank Berhad (Incorporated in Malaysia) Reports and Financial Statements for the financial year ended 31 December 2009

Company No: 13491-P CIMB Bank Berhad (Incorporated in Malaysia)

Reports and Financial Statements for the financial year ended 31 December 2009 Contents Pages

Directors’ Report 1 – 10

Statement by Directors 11

Statutory Declaration 11

Independent Auditors’ Report 12 – 14

Balance Sheets 15 – 16

Income Statements 17

Statements of Changes in Equity 18 – 21

Cash Flow Statements 22 – 24

Summary of Significant Accounting Policies 25 – 61

Notes to the Financial Statements 62– 254


1

Directors’ Report for the financial year ended 31 December 2009 The Directors have pleasure in submitting their Report and the Audited Financial Statements of the Group and of CIMB Bank Berhad (“CIMB Bank” or “the Bank”) for the financial year ended 31 December 2009. Principal activities The principal activities of the Bank during the financial year are commercial banking and the provision of related financial services, including Islamic banking. The principal activities of the significant subsidiaries as set out in Note 11 to the Financial Statements, consist of Islamic banking, offshore banking, debt factoring, trustees and nominee services, and property ownership and management. There was no significant change in the nature of these activities during the financial year. Financial results

The Group The BankRM’000 RM’000

Net profit after taxation and zakat - Equity holders of the Bank 1,993,868 1,469,073 - Minority interests 23,048 -

2,016,916 1,469,073 Dividends The dividends on ordinary shares and redeemable preference shares paid or declared by the Bank since 31 December 2008 were as follows:

RM’000In respect of the financial year ended 31 December 2008:Interim gross dividend of 6.72 sen per redeemable preference share, less 25% income tax, paid on 18 March 2009 150,000 The Directors do not recommend the payment of any final dividend for the financial year 31 December 2009.


2

Directors’ Report for the financial year ended 31 December 2009 (Continued) Reserves, provisions and allowances There were no material transfers to or from reserves or provisions or allowances during the financial year other than those disclosed in the Financial Statements and notes to the Financial Statements. Bad and doubtful debts, and financing Before the Financial Statements of the Group and of the Bank were made out, the Directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and financing and the making of allowance for doubtful debts and financing, and satisfied themselves that all known bad debts and financing had been written off and that adequate allowance had been made for doubtful debts and financing. At the date of this Report, the Directors are not aware of any circumstances which would render the amounts written off for bad debts and financing, or the amount of the allowance for doubtful debts and financing in the Financial Statements of the Group and the Bank, inadequate to any substantial extent. Current assets Before the Financial Statements of the Group and of the Bank were made out, the Directors took reasonable steps to ascertain that any current assets, other than debts, which were unlikely to realise in the ordinary course of business, their values as shown in the accounting records of the Group and the Bank had been written down to an amount which they might be expected so to realise. At the date of this Report, the Directors are not aware of any circumstances which would render the values attributed to current assets in the Financial Statements of the Group and the Bank misleading. Valuation methods At the date of this Report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and the Bank misleading or inappropriate.


3

Directors’ Report for the financial year ended 31 December 2009 (Continued) Contingent and other liabilities At 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 which secures the liability of any other person; or (b) any contingent liability of the Group or the Bank which has arisen since the end of the

financial year other than in the ordinary course of banking business. No contingent or other liability of any company in the Group has 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 Bank and its subsidiaries to meet their obligations when they fall due. Change of circumstances At 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 of the Bank, that would render any amount stated in the Financial Statements misleading. Items of an unusual nature In opinion of the Directors: (a) the results of the Group’s and the Bank’s operations for the financial year have not been

substantially affected by any item, transaction or event of a material and unusual nature other than those disclosed in Notes 49 and 55 to the Financial Statements; and

(b) except as disclosed in Note 50 to the Financial Statements, 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 likely to affect substantially the results of the operations of the Group or the Bank for the financial year in which this Report is made.


4

Directors’ Report for the financial year ended 31 December 2009 (Continued) Directors The names of the Directors of the Bank in office since the date of the last Report and at the date of this Report are: Directors Tan Sri Dato’ Seri Haidar bin Mohamed NorDato’ Sri Mohamed Nazir bin Abdul RazakTan Sri G.K. Rama Iyer Dato’ Dr. Mohamad Zawawi bin Ismail Datuk Dr. Syed Muhamad bin Syed Abdul Kadir Dato’ Zainal Abidin bin Putih Dato’ Mohd Shukri bin Hussin Dato’ Seri Yeap Leong Huat Dato’ Dr. Gan Wee Beng Sulaiman bin Mohd Tahir (appointed on 1 October 2009)Tunku Dato’ Ahmad Burhanuddin (resigned on 30 September 2009) In accordance with Article 97 of the Bank’s Articles of Association, Dato' Seri Yeap Leong Huat, Datuk Dr. Syed Muhamad bin Syed Abdul Kadir and Dato' Sri Mohamed Nazir bin Abdul Razak retire from the Board at the forthcoming Annual General Meeting and being eligible, offer themselves for re-election. Tan Sri Dato’ Seri Haidar bin Mohamed Nor and Tan Sri G.K. Rama Iyer who are above the age of seventy (70) years, retire from the Board at the Annual General Meeting pursuant to Section 129 of the Companies Act, 1965. Under Section 129(6) of the Companies Act, 1965 it is proposed to pass a resolution to re-elect them as Directors of the Bank to hold office until the next Annual General Meeting of the Bank.


5

Directors’ Report for the financial year ended 31 December 2009 (Continued) Directors’ interests in shares and share options According to the Register of Directors’ Shareholdings, the beneficial interests of the Directors who held office at the end of the financial year in the shares and share options of the ultimate holding company during the financial year are as follows:

As at1 January Acquired Disposed

As at 31 December

Ultimate holding companyCIMB Group Holdings Berhad (formerly known as Bumiputra-Commerce Holdings Berhad (“CIMB Group”))Tan Sri G.K. Rama Iyer** 25,812 - - 25,812 Dato’ Dr. Mohamad Zawawi bin Ismail 4,000 - (4,000) - Dato’ Sri Mohamed Nazir bin Abdul Razak^ 27,953,261 - (490,000) 27,463,261 Dato’ Mohd Shukri bin Hussin 300,112 - - 300,112 Tunku Dato’ Ahmad Burhanuddin 182,000 - - 182,000 Dato’ Zainal Abidin bin Putih# 55,000 - - 55,000 Dato’ Seri Yeap Leong Huat - 111,000 - 111,000

Centurion Investments Sdn BhdIndirect InterestDato’ Seri Yeap Leong Huat* 200,000 - (200,000) -

Emerald Lodge Sdn BhdIndirect InterestDato’ Seri Yeap Leong Huat* - 100,000 - 100,000

Number of ordinary shares of RM1 each

Note: Includes shareholding of spouse/child, details of which are as follows:

As at1 January Acquired Disposed

As at 31 December

** Puan Sri Vijayalakshmi a/p Krishnaswamy 18,812 - - 18,812 ** Ganapathy Srihari a/l Rama Iyer 6,000 - - 6,000 ^ Datin Sri Azlina binti Abdul Aziz 4,000,000 - - 4,000,000 # Datin Jasmine binti Abdullah Heng 10,000 - - 10,000 # Mohamad Ari Zulkarnain bin Zainal Abidin 5,000 - - 5,000 *Daryl Yeap Liew Sym 24,000 - (24,000) -

Number of ordinary shares of RM1 each

None of the other Directors in office at the end of the financial year had any interest in the shares and share options of the Bank, the holding company, the ultimate holding company and the Bank’s related companies.


6

Directors’ Report for the financial year ended 31 December 2009 (Continued) Directors’ benefits Since the end of the previous financial year, no Director of the Bank has received or become entitled to receive any benefit (other than the benefits included in the aggregate amount of emoluments received or due and receivable by Directors shown in Note 42 to the Financial Statements or the fixed salary as a full time employee of the Bank) by reason of a contract made by the Bank or a related corporation 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. Neither at the end of the financial year, nor at any time during the financial year, did there subsist any other arrangements to which the Bank is a party with the object or objects 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 other than share options of the ultimate holding company.


7

Directors’ Report

for the financial year ended 31 December 2009 (Continued) 2009 Business Plan And Strategy To date, CIMB Bank's profitability has been resilient, despite weak economic conditions and intense competition as management’s efforts to grow CIMB into an established full-fledged market leading regional banking franchise has brought about significant cross border value enhancement. CIMB Bank has strengthened its risk management practices to maintain the credit quality of its loan portfolios, improve cost efficiencies and ensure liquidity and capital positions stay strong. During the year, CIMB Bank has also progressively increased its provision and core capital to improve protection against potential losses in an uncertain environment. CIMB Bank will continue to focus on developing and strengthening its distribution capabilities and invest in human capital to ensure that the Group is well positioned to exploit opportunities in the financial markets. Outlook for 2010 The entry of new foreign players under Phase 3 of the Financial Sector Master Plan will increase the intensity of competition in the banking industry. The more intense competitive landscape over the longer term is expected to enhance the industry’s efficiency and competitiveness. This could, however, have negative implications on margins and the smaller banks that do not have the benefit of scale and niche expertise, and which may see their profits and growth compromised over the longer term. With increasing competition arising from deregulation and globalisation, CIMB Bank aims to be a provider of differentiated solutions to clients not only in Malaysia, but across the region. An entrenched regional presence and distribution network on top of our already established regional banking franchise should create multiple opportunities, especially with regard to enlarging our customer base. Moving forward, CIMB Bank aims to remain competitive in seizing new opportunities in the market and will continue to expand its activities regionally in Southeast Asia.


8

Directors’ Report for the financial year ended 31 December 2009 (Continued) Ratings by External Rating Agencies Details of the ratings of the Bank and its debt securities are as follows: Rating Agency Rating Classification Definition Rating Agency

Malaysia Berhad Date accorded: November 2009

Long Term Rating : AAA Short Term Rating : P1 Outlook : Stable

Indicates a superior capacity to meet its financial obligations.

Malaysian Rating Corporation Berhad Date accorded: December 2009

Long Term Rating : AA+ Short Term Rating : MARC-1 Outlook : Stable

Indicates very strong capacity to meet its financial commitments and ability to withstand adversity. The institution also possesses a good track record and has no readily apparent weaknesses.

Moody’s Investors Services Ltd Date accorded: July 2009

Long Term Rating: A3 Long Term Subordinated Debt : Baa1 Short Term Rating : P-1 Outlook : Stable

Indicates good credit quality. However, elements may be present that suggest a susceptibility to impairment over the long term.

Fitch Ratings Ltd Date accorded: July 2009

Long Term Ratings: BBB+ Long Term Subordinated Debt : BBB Short Term Rating : F2 Outlook : Stable

Indicates currently low expectation of credit risk. Capacity for timely payment of financial commitment is adequate. However, adverse changes in circumstances and in economic conditions are more likely to impair this capacity.

Standard & Poor’s Rating Agency Date accorded: December 2009

Long Term Rating: BBB+ Short Term Rating : A-2 Outlook : Stable

Indicates adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.


9

Directors’ Report for the financial year ended 31 December 2009 (Continued) Shariah Committee All the Islamic banking businesses of the CIMB Group come under the purview of the CIMB Islamic Shariah Committee, which resides at CIMB Islamic Bank Berhad (“CIMB Islamic”). As per BNM/GPS1 (Guideline on the Governance of Shariah Committee for Islamic Financial Institutions), the Shariah Committee advises the Group on the operations of its Islamic banking business to ensure that the Group is not involved in any elements/activities which are not approved under Shariah. In advising on such matters, the Shariah Committee also considers the views of the Shariah Council/Committees of relevant authorities like Bank Negara Malaysia and the Securities Commission on issues relating to the activities and operations of Islamic banking and financing. Composition of the Shariah Committee: 1. Sheikh Professor Dr. Mohammad Hashim Kamali (Chairman) 2. Sheikh Nedham Muhammad Seleh Yaqooby 3. Sheikh Dr. Haji Mohd Nai’m bin Haji Mokhtar 4. Sheikh Associate Professor Dr. Shafaai Bin Musa 5. Sheikh Dr. Yousef Abdullah Al Shubaily 6. The late Sheikh Dr. Haji Zainudin bin Jaffar (until 25 October 2009) Zakat obligations CIMB Islamic is obliged to pay business zakat to comply with the principles of Shariah. CIMB Islamic does not pay zakat on behalf of the shareholders or depositors. Significant events during the financial year Significant events during the financial year are disclosed in Note 49 to the Financial Statements. Subsequent events after the financial year Significant subsequent events after the financial year are disclosed in Note 50 to the Financial Statements.


10

Directors’ Report for the financial year ended 31 December 2009 (Continued) Ultimate holding company The Directors regard CIMB Group Holdings Berhad (formerly known as Bumiputra-Commerce Holdings Berhad), a quoted company incorporated in Malaysia, as the Bank’s ultimate holding company. Auditors The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with their resolution. Tan Sri Dato’ Seri Haidar bin Mohamed Nor Director Sulaiman bin Mohd Tahir Director Kuala Lumpur 30 March 2010


11

Statement by Directors Pursuant to Section 169(15) of the Companies Act, 1965 We, Tan Sri Dato’ Seri Haidar bin Mohamed Nor and Sulaiman bin Mohd Tahir, being two of the Directors of CIMB Bank Berhad, hereby state that, in the opinion of the Directors, the Financial Statements set out on pages 15 to 254 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Bank as at 31 December 2009 and of the results and cash flows of the Group and of the Bank for the financial year ended on that date, in accordance with the provisions of the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities and Bank Negara Malaysia Guidelines. Signed on behalf of the Board of Directors in accordance with their resolution. Tan Sri Dato’ Seri Haidar bin Mohamed Nor Director Sulaiman bin Mohd Tahir Director Kuala Lumpur 30 March 2010 Statutory Declaration Pursuant to Section 169(16) of the Companies Act, 1965 I, Kim Kenny, being the officer primarily responsible for the financial management of CIMB Bank Berhad, do solemnly and sincerely declare the Financial Statements set out on pages 15 to 254 are, in my opinion, 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. Kim Kenny Subscribed and solemnly declared by the abovenamed Kim Kenny at Kuala Lumpur before me, on 30 March 2010. Commissioner for Oaths

12

Independent Auditors’ Report to the members of CIMB Bank Berhad (Company No: 13491-P) (Incorporated in Malaysia) Report on the Financial Statements We have audited the Financial Statements of CIMB Bank Berhad, which comprise the balance sheets as at 31 December 2009 of the Group and of the Bank, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Bank for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 15 to 254. Directors’ Responsibility for the Financial Statements The Directors of the Bank are responsible for the preparation and fair presentation of these Financial Statements in accordance with the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities and the Bank Negara Malaysia Guidelines. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of Financial Statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors’ Responsibility Our 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 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 judgement, 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 and fair presentation of the Financial Statements 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.

13

Independent Auditors’ Report to the members of CIMB Bank Berhad (Continued) (Company No: 13491-P) (Incorporated in Malaysia) Report on the Financial Statements (continued) Opinion In our opinion, the Financial Statements have been properly drawn up in accordance with the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities and the Bank Negara Malaysia Guidelines so as to give a true and fair view of the financial position of the Group and of the Bank as of 31 December 2009 and of their financial performance and cash flows for the financial year then ended. Report on Other Legal and Regulatory Requirements In 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 of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the financial statements and the auditors’ reports of all the

subsidiaries of which we have not acted as auditors, which are indicated in Note 11 to the Financial Statements.

(c) We are satisfied that the financial statements 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.

(d) The 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.

14

Independent Auditors’ Report to the members of CIMB Bank Berhad (Continued) (Company No: 13491-P) (Incorporated in Malaysia) Other Matters This 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. PricewaterhouseCoopers Sridharan Nair (No. AF: 1146) (No. 2656/05/10 (J)) Chartered Accountants Chartered Accountant Kuala Lumpur 30 March 2010


15

Balance Sheets as at 31 December 2009

Note 2009 2008 2009 2008 Asse ts RM'000 RM'000 RM'000 RM'000 Cash and short -t erm funds 2 25,023,098 21,966,362 17,699,691 14,308,346 Securit ies purchased under resale agreements 4 ,260,951 2 ,967,770 2 ,857,456 2 ,967,770 Deposit s and placement s with banks and other financial inst itut ions 3 3 ,402,596 2 ,139,459 11,934,278 4 ,967,910 Securit ies held for t rading 4 13,818,079 9 ,564,281 10,152,185 6 ,517,399 Available-for-sale securit ies 5 8 ,080,319 7 ,360,190 6 ,524,708 6 ,503,390 Held-to-maturit y securit ies 6 12,875,251 11,625,970 10,702,270 8 ,685,401 Derivat ive financial inst ruments 24 3 ,504,962 5 ,335,535 3 ,203,614 5 ,126,006 Loans, advances and financing 7 113,480,642 95,687,146 84,456,367 84,922,177 Other asset s 8 2 ,119,150 2 ,095,571 1 ,607,800 1 ,933,236 Deferred t axat ion 9 301,447 304,537 281,880 263,993 T ax recoverable 2 ,945 248,055 - 226,786 Statutory deposit s with cent ral banks 10 841,857 2 ,723,540 661,983 2 ,453,934 Investment in subsidiaries 11 - - 3 ,816,500 2 ,245,919 Investment in joint ly cont rolled ent ity 12 134,559 127,701 124,448 124,448 Investment in associat e 13 268,636 587,280 245,034 595,814 Amount due from holding company and ult imate holding company 14 47,122 278,350 14,846 246,872 Amount due from subsidiaries 15 - - 128,064 197,618 Amount due from related companies 16 998,818 90,926 994,989 90,819 Goodwill 17 4 ,923,701 3 ,695,075 3 ,555,075 3 ,559,075 Intangible asset s 18 573,416 412,288 512,674 400,857 P repaid lease payment s 19 16,340 29,618 12,511 25,197 P roperty, plant and equipment 20 996,521 728,713 564,486 564,047 Investment propert ies 21 120,349 100,175 96,857 100,175

195,790,759 168,068,542 160,147,716 147,027,189 Non-current asset s/disposal groups held for sale 56 226,224 82,452 73,902 42,712 Total asse ts 196,016,983 168,150,994 160,221,618 147,069,901

Liabi l i ti e sDeposit s from customers 22 146,872,345 121,090,975 114,449,911 100,570,259 Deposit s and placement s of banks and other financial inst itut ions 23 14,180,946 15,149,296 17,633,397 17,104,280 Obligat ions on securit ies sold under repurchase agreements 565,097 - - - Derivat ive financial inst ruments 24 3 ,462,938 4 ,849,035 3 ,261,121 4 ,820,357 Bills and acceptances payable 4 ,056,811 3 ,091,173 2 ,826,165 3 ,085,915 Amount due to Cagamas Berhad 335,612 993,818 335,612 993,818 Amount due to ult imate holding company 14 55,439 - - - Amount due to subsidiaries 15 - - 118,668 178,140 Amount due to relat ed companies 16 9 ,710 15,432 285 9 ,398 Other liabilit ies 25 3 ,149,346 2 ,751,252 2 ,463,818 2 ,400,962 P rovision for t axat ion and zakat 109,169 5 ,698 104,395 - Bonds 26 443,051 - - - Irredeemable Convert ible Unsecured Loan Stocks 27 - 667,000 - 667,000 Other borrowings 28 1 ,027,500 1 ,039,350 - - Subordinated obligat ions 29 4 ,106,716 4 ,573,212 4 ,199,805 5 ,386,548 Redeemable preference shares 30(a) 751,437 813,336 - -

179,126,117 155,039,577 145,393,177 135,216,677 Liabilit ies direct ly associated with non-current asset s/disposal groups classified as held for sale 56 - 29,499 - - Total l iabi l i ti e s 179,126,117 155,069,076 145,393,177 135,216,677

Th e Grou p Th e B an k


16

Balance Sheets as at 31 December 2009 (Continued)

Note 2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

EquityCapital and reserves attributable to equity holders of the BankOrdinary share capital 31 3,764,466 2,974,009 3,764,466 2,974,009 Reserves 33 12,640,620 9,859,290 10,834,235 8,649,475

16,405,086 12,833,299 14,598,701 11,623,484 Perpetual preference shares 32 200,000 200,000 200,000 200,000 Redeemable preference shares 30(b) 29,740 29,740 29,740 29,740 Minority interests 256,040 18,879 - - Total equity 16,890,866 13,081,918 14,828,441 11,853,224

Total equity and liabilities 196,016,983 168,150,994 160,221,618 147,069,901

Commitments and contingencies 24 308,557,853 307,223,451 279,521,325 295,630,457 Credit equivalent 24 11,866,251 16,621,342 10,723,435 14,936,213

Net assets per ordinary share (RM) 4.36 4.32 3.88 3.91

The Group The Bank


17

Income Statements for the financial year ended 31 December 2009

Note 2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Interest income 35 6,958,548 7,341,222 5,977,783 6,935,440 Interest expense 36 (2,729,639) (3,625,092) (2,394,512) (3,448,667)Net interest income 4,228,909 3,716,130 3,583,271 3,486,773 Income from Islamic banking operations 58 716,117 340,390 6,794 1,575 Non-interest income 37 1,997,968 1,375,773 1,804,412 1,827,037 Net income 6,942,994 5,432,293 5,394,477 5,315,385 Overheads 38 (3,714,232) (2,697,439) (2,974,731) (2,552,656)Profit before allowances 3,228,762 2,734,854 2,419,746 2,762,729 Allowances for losses on loans, advances and financing 39 (680,234) (602,714) (400,486) (569,733)(Allowance for)/write-back of losses on other receivables (189) 469 - 23 Allowance for commitment and contingencies (21,199) - (21,000) - (Allowance for)/write-back of impairment losses 40 (12,531) 46,481 (61,191) (8,323)Profit after allowances 2,514,609 2,179,090 1,937,069 2,184,696 Share of results of jointly controlled entity 12 6,858 3,253 - - Share of results of associate 13 23,602 (40,565) - - Profit before taxation and zakat 2,545,069 2,141,778 1,937,069 2,184,696 Taxation and zakat 43 (528,153) (567,080) (467,996) (506,660)Net profit after taxation and zakat 2,016,916 1,574,698 1,469,073 1,678,036

Attributable to :Equity holders of the Bank 1,993,868 1,572,746 1,469,073 1,678,036 Minority interests 23,048 1,952 - -

2,016,916 1,574,698 1,469,073 1,678,036

Earnings per share attributable to ordinary equity holders of the Bank - basic/fully diluted (sen) 44 53.84 43.20 39.67 46.09

Dividend: - per ordinary share of Nil sen (2008: 2.00 sen) less Nil (2008: 26%) tax 45 - 1.48 - 1.48 - per ordinary share of Nil sen (2008: 2.22 sen) less Nil (2008: tax exempt) 45 - 2.22 - 2.22

- per redeemable preference share of 6.72 sen (2008: 22.72 sen) less 25% (2008: 26%) tax 45 5.04 16.81 5.04 16.81

The Group The Bank


18

Statements of Changes in Equity for the financial year ended 31 December 2009

Attributable to equity holders of the Bank The Group

Note

Share capital

RM’000

Redeemable

Preference shares

RM’000

Share premium RM’000

Statutoryreserve

RM’000

Exchange fluctuation

reserve RM’000

Revaluationreserve -

available-for-sale

securitiesRM’000

Merger deficit

RM‘000

Capital reserve

RM’000

Hedging reserve

RM’000

Retained profits

RM’000

Total RM’000

Perpetual preference

shares RM’000

Minority

interests RM ‘000

Total equity

RM‘000

At 1 January 2009 2,974,009 29,740 4,157,074 3,158,429 (54,418) 131,117 (1,085,928) 735,457 (122,336) 2,939,895 12,863,039 200,000 18,879 13,081,918 Net change in available-for- sale securities, net of tax

33

-

-

-

-

-

(39,058)

-

-

-

- (39,058)

- - (39,058)

Currency translation difference 33 - - - - 27,580 - - - - - 27,580 (388) 27,192 Income and expense recognised directly in equity

-

-

-

- 27,580 (39,058)

-

-

-

- (11,478)

- (388) (11,866)

Net profit for the financial year - - - - - - - - - 1,993,868 1,993,868 - 23,048 2,016,916 Total recognised income and expense for the financial year

-

-

-

- 27,580 (39,058)

-

-

- 1,993,868 1,982,390

- 22,660 2,005,050

Transfer to statutory reserves 33 - - - 429,139 - - - - - (429,139) - - - - Interim dividends for the financial year ended 31 December 2008

45

-

-

-

-

-

-

-

-

-

(150,000)

(150,000)

- - (150,000) Dividend paid to minorities 45 - - - - - - - - - - - - (12,825) (12,825) Issue of shares due to rights issue

31,34 123,457

-

876,548

-

-

-

-

-

-

-

1,000,005

-

-

1,000,005

Conversion of ICULS 31 667,000 - - - - - - - - - 667,000 - - 667,000 Arising from net investment

hedge in overseas operations and subsidiaries

-

- - - - - - - 18,961 - 18,961 - - 18,961 Acquisition of subsidiary - - - - 68,006 - - - - (14,575) 53,431 - 227,326 280,757 At 31 December 2009 3,764,466 29,740 5,033,622 3,587,568 41,168 92,059 (1,085,928) 735,457 (103,375) 4,340,049 16,434,826 200,000 256,040 16,890,866


19

Statements of Changes in Equity for the financial year ended 31 December 2009 (Continued)

Attributable to equity holders of the Bank The Group

Note

Share capital

RM’000

Redeemable Preference

Shares RM’000


Statutory reserve

RM’000


reserve RM’000


available- for-sale

securities RM’000

Merger deficit

RM‘000

Capital reserve

RM’000

Hedging reserve

RM’000

Retained profits

RM’000

Total RM’000


shares RM’000

Minority

interests RM ‘000

Total equity

RM‘000

At 1 January 2008 2,974,009 - 4,157,074 2,548,169 (139,230) 98,644 (1,085,928) 735,457 - 2,617,149 11,905,344 200,000 29,727 12,135,071 Net change in available-for- sale securities, net of tax

33

-

-

-

-

-

306

-

-

-

-

306

-

-

306

Currency translation difference 33 - - - - 85,527 - - - - - 85,527 - (178) 85,349 Income and expense recognised directly in equity

-

-

-

-

85,527

306

-

-

-

-

85,833

-

(178)

85,655

Net profit for the financial year - - - - - - - - - 1,572,746 1,572,746 - 1,952 1,574,698 Total recognised income and expense for the financial year

-

-

-

-

85,527

306

-

-

-

1,572,746

1,658,579

-

1,774

1,660,353

Transfer to statutory reserves 33 - - - 610,260 - - - - - (610,260) - - - - Final dividends for the financial year ended 31 December 2007

45

-

-

-

-

-

-

-

-

-

(300,000) (300,000)

-

-

(300,000)Special interim dividend for the financial year ended 31 December 2008

45

-

-

-

-

-

-

-

-

-

(310,000) (310,000)

-

-

(310,000)Capitalised to Redeemable

Preference Shares

-

29,740

-

-

-

-

-

-

-

(29,740)

-

-

-

- Arising from net investment


-

-

-

-

-

-

-

-

(122,336)

-

(122,336)

-

-

(122,336)Acquisition of subsidiary - - - - - 32,167 - - - - 32,167 - - 32,167 Disposal of subsidiary - - - - (715) - - - - - (715) - (12,622) (13,337)At 31 December 2008 2,974,009 29,740 4,157,074 3,158,429 (54,418) 131,117 (1,085,928) 735,457 (122,336) 2,939,895 12,863,039 200,000 18,879 13,081,918


20


Non-distributable Distributable The Bank

Note

Share capital

RM’000


Shares RM’000


Statutory reserve

RM’000


reserve RM’000


available- for-sale

securities RM’000

Merger deficit

RM‘000

Capital reserve

RM’000

Hedging reserve

RM’000

Retained profits

RM’000

Total RM’000


shares RM’000

Total equity

RM‘000

At 1 January 2009 2,974,009 29,740 4,157,074 3,174,009 (48,473) 81,632 (1,047,872) 746,852 (122,336) 1,708,589 11,653,224 200,000 11,853,224 Net change in available-for- sale securities, net of tax

33

-

-

-

-

-

(47,097)

-

-

-

-

(47,097)

-

(47,097)

Currency translation difference 33 - - - - 17,275 - - - - - 17,275 - 17,275 Income and expense recognised directly in equity

-

-

-

-

17,275

(47,097)

-

-

-

-

(29,822)

-

(29,822)

Net profit for the financial year - - - - - - - - - 1,469,073 1,469,073 - 1,469,073 Total recognised income and expense for the financial year

-

-

-

-

17,275

(47,097)

-

-

-

1,469,073

1,439,251

-

1,439,251

Transfer to statutory reserves 33 - - - 367,268 - - - - - (367,268) - - - Interim dividends for the financial year ended 31 December 2008

45

-

-

-

-

-

-

-

-

-

(150,000) (150,000)

-

(150,000)Issue of shares due to right issue 31,34 123,457 - 876,548 - - - - - - - 1,000,005 - 1,000,005 Conversion of ICULS 31 667,000 - - - - - - - - - 667,000 - 667,000 Arising from net investment


-

-

-

-

-

-

-

-

18,961

-

18,961

-

18,961 At 31 December 2009 3,764,466 29,740 5,033,622 3,541,277 (31,198) 34,535 (1,047,872) 746,852 (103,375) 2,660,394 14,628,441 200,000 14,828,441


21


Non-distributable Distributable The Bank

Note

Share capital

RM’000


Shares RM’000


Statutory reserve

RM’000


reserve RM’000


available- for-sale

securities RM’000

Merger deficit

RM‘000

Capital reserve

RM’000

Hedging reserve

RM’000

Retained profits

RM’000

Total RM’000


shares RM’000

Total equity

RM‘000

At 1 January 2008 2,974,009 - 4,157,074 2,601,434 (32,769) 55,458 (1,047,872) 746,852 - 1,242,868 10,697,054 200,000 10,897,054 Net change in available-for- sale securities, net of tax

33

-

-

-

-

-

26,174

-

-

-

-

26,174

-

26,174

Currency translation difference 33 - - - - (15,704) - - - - - (15,704) - (15,704)Income and expense recognised directly in equity

-

-

-

-

(15,704)

26,174

-

-

-

-

10,470

-

10,470

Net profit for the financial year - - - - - - - - - 1,678,036 1,678,036 - 1,678,036 Total recognised income and expense for the financial year

-

-

-

-

(15,704)

26,174

-

-

-

1,678,036

1,688,506

-

1,688,506

Transfer to statutory reserves 33 - - - 572,575 - - - - - (572,575) - - - Final dividends for the financial year ended 31 December 2007

45

-

-

-

-

-

-

-

-

-

(300,000) (300,000)

-

(300,000)Final dividends for the financial year ended 31 December 2008

45

-

-

-

-

-

-

-

-

-

(310,000) (310,000)

-

(310,000)Capitalised to Redeemable

Preference Shares

-

29,740

-

-

-

-

-

-

-

(29,740)

-

-

- Arising from net investment


-

-

-

-

-

-

-

-

(122,336)

-

(122,336)

-

(122,336)At 31 December 2008 2,974,009 29,740 4,157,074 3,174,009 (48,473) 81,632 (1,047,872) 746,852 (122,336) 1,708,589 11,653,224 200,000 11,853,224


22

Cash Flow Statements for the financial year ended 31 December 2009

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Cash flows from operating activities Profit before taxation and zakat 2,545,069 2,141,778 1,937,069 2,184,696 Depreciation of property, plant and equipment 189,924 134,500 142,704 116,860 Amortisation of intangible assets 117,971 111,371 103,054 104,346 Amortisation of prepaid lease payments 1,332 1,057 874 998 Gain on disposal of property, plant and equipment (20,080) (6,393) (24,484) (5,076) Gain on disposal of prepaid lease payments (250) (244) - - Fair value loss on investment properties 3,678 2,141 3,300 2,141 Property, plant and equipment written off 4,273 364 4,226 258 Net gain from disposal of available-for-sale securit ies (117,092) (108,326) (47,830) (103,283) Net gain from disposal of held-to-maturity securities (24,505) (4,089) (2,790) (4,089) Net loss from hedging derivatives 5,132 5,891 8,162 5,891 Unrealised (gain)/loss from revaluation of securit ies held for trading (122,892) 166,791 (95,364) 80,659 Unrealised loss/(gain) from revaluation of derivative financial instruments 339,495 (112,452) 337,782 (129,712) Unrealised gain on foreign exchange (197,373) (184,132) (154,492) (231,312) Allowance for/(write-back of) impairment losses on securit ies 8,531 (46,481) 22,191 (49,855) Allowance for impairment losses on intangible 1,955 - - - Allowance for impairment losses on prepaid lease payments 427 - - - Allowance for impairment losses on property, plant and equipment 28,059 - - - Interest income on available-for-sale securit ies (313,038) (221,779) (287,388) (219,603) Interest income on held-to-maturity securit ies (606,598) (189,912) (442,517) (165,422) Interest expense on subordinated obligations 227,270 171,425 239,706 215,565 Interest expense on redeemable preference shares 44,140 87,015 - 42,875 Accretion of discount less amortisation of premium (131,797) (133,081) (110,130) (141,766) Allowances for bad and doubtful debts and financing 1,047,083 959,410 688,475 913,734 Allowance for impairment loss in subsidiaries - - - 21,178 Allowance for/(write-back of) losses on other receivables 189 (469) - (23) Loss/(gain) from disposal of subsidiaries - 2,669 - (23,693) Gain on disposal of associate - (2,904) - - Gain on disposal of certain assets and liabilt ies of subsidiary (30,000) - - - Dividend income (42,665) (51,234) (204,733) (124,413) Goodwill impairment 4,000 - 39,000 37,000 Share of profit of jointly controlled entity (6,858) (3,253) - - Share of (profit)/loss of associates (23,602) 40,565 - - T ransfer from profit equalisation reserve - (2,200) - -

2,931,778 2,758,028 2,156,815 2,527,954

The Bank The Group


23

Cash Flow Statements for the financial year ended 31 December 2009 (Continued)

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

(Increase)/decrease in operating assets Securit ies purchased under resale agreements (1,293,181) 1,341,201 110,314 1,341,201 Deposits and placements with banks and other financial institutions 3,047,557 2,971,856 (6,966,368) 371,455 Securit ies held for trading 437,347 4,536,619 (3,503,074) 4,249,937 Loans, advances and financing (10,711,990) (16,033,205) (383,491) (12,828,316) Amount due from holding company and ult imate holding company 231,228 262 232,026 16,411 Amount due from subsidiaries - - 69,554 269,814 Amount due from related companies (907,892) 9,442 (904,170) (17,457) Other assets 3,300,094 (184,946) 344,035 (361,638) Statutory deposits with central banks 1,881,683 314,732 1,791,951 480,049

Increase/(decrease) in operating liabilities Deposits from customers 9,904,338 15,436,105 13,879,652 7,797,661 Deposits and placements of banks and other financial institutions (1,987,175) (4,080,365) 529,117 (3,215,649) Securit ies sold under repurchase agreements 565,097 (605,780) - (1,000) Derivative financial instruments 119,056 (401,381) 36,420 (278,416) Bills and acceptances payable 949,476 (1,371,940) (259,750) (1,376,229) Amount due to Cagamas Berhad (658,206) (1,010,889) (658,206) (1,010,889) Amount due to holding company and ultimate holding company 55,439 - - - Amount due to subsidiaries - - (59,472) (130,328) Amount due to related companies (5,722) 13,518 (9,113) 9,398 Other liabilit ies (2,359,420) (96,073) 222,565 (219,063) Cash flows generated from operations 5,499,507 3,597,184 6,628,805 (2,375,105) Taxation paid (171,557) (728,241) (97,448) (691,532) Net cash generated from/(used in) operating activities 5,327,950 2,868,943 6,531,357 (3,066,637)

The Group The Bank


24

Cash Flow Statements for the financial year ended 31 December 2009 (Continued)

2009 2008 2009 2008 Note RM'000 RM'000 RM'000 RM'000

Cash flows from/(used in) investing activities Proceeds from disposal of subsidiaries 54,663 59,101 - 59,101 Proceeds from disposal of associate - 3,499 - - Dividend income 4,062 40,701 166,130 113,380 Investment in associate (245,034) (595,814) (245,034) (595,814) Interest income received from available-for-sale securit ies 280,581 213,737 280,218 211,561 Interest income received from held-to-maturity securit ies 332,488 137,493 451,995 113,003 Net purchase of available-for-sale securit ies (642,934) (438,099) (22,002) (425,981) Net purchase/reclassification of held-to-maturity securities (1,166,492) (8,108,803) (1,979,133) (5,264,700) Purchase of property, plant and equipment (260,924) (223,201) (217,852) (217,077) Proceeds from disposal of property, plant and equipment 70,063 17,564 34,629 13,217 Proceeds from disposal of intangible assets 1,060 - 872 - Proceeds from disposal of prepaid lease payments 930 1,871 795 1,871 Purchase of intangible assets (228,045) (51,531) (215,743) (49,122) Acquisit ion of subsidiary, net of cash (512,236) - (972,628) -

Net cash used in investing activities (2,311,818) (8,943,482) (2,717,753) (6,040,561)

Cash flows from/(used in) financing activities Dividends paid (162,825) (610,000) (150,000) (610,000) Interest expense paid on subordinated notes (223,305) (145,948) (235,656) (189,746) Interest expense paid on redeemable preference shares (44,140) (87,015) - (42,875) Repayment of redeemable asset backed bonds - (31,772) - - Proceeds from issuance of subordinated obligations 293,841 3,500,000 - 3,500,000 Proceeds from issuance of bonds 443,051 - - - Proceeds from issuance of ordinary shares 1,000,005 - 1,000,005 - Repayment of redeemable preference shares - (1,300,000) - (1,300,000) Repayment of subordinated notes (1,312,350) (1,058,400) (1,037,736) (1,058,400) Net cash (used in)/generated from financing activities (5,723) 266,865 (423,387) 298,979

Net increase/(decrease) in cash and short term funds during the financial year 3,010,409 (5,807,674) 3,390,217 (8,808,219) Effects of exchange rate differences 46,327 (590) 1,128 599 Cash and cash equivalents at beginning of financial year 21,966,362 27,774,626 14,308,346 23,115,966 Cash and cash equivalents at end of financial year 2 25,023,098 21,966,362 17,699,691 14,308,346

The Group The Bank


25

Summary of Significant Accounting Policies for the financial year ended 31 December 2009 The following accounting policies have been used consistently in dealing with items that are considered material in relation to the Financial Statements. A Basis of preparation

The Financial Statements of the Group and the Bank are prepared under the historical cost convention, modified by the revaluation of available-for-sale securities, securities held for trading, all derivative contracts, investment properties and non-current assets/disposal groups held for sale.

The Financial Statements of the Group and the Bank have been prepared in accordance with the Financial Reporting Standards, MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities, Bank Negara Malaysia (“BNM”) Guidelines, Shariah requirements and the provisions of the Companies Act, 1965.

The Financial Statements incorporate those activities relating to Islamic banking which have been undertaken by the Bank and its wholly-owned subsidiaries, CIMB Islamic Bank Berhad (“CIMB Islamic”) and CIMB Bank (L) Limited. Islamic banking refers generally to the acceptance of deposits, granting of financing and dealing in Islamic Securities under the Shariah principles.

BNM has granted indulgence to the Group and the Bank and other local banks in Malaysia from complying with the requirements on the impairment of loans under the revised ‘Guideline on Financial Reporting for Licensed Institutions’ (“BNM/GP8”). Paragraph 4, Appendix A of the revised BNM/GP8 requires the impaired loans to be measured at their estimated recoverable amount. This requirement is principally similar to the requirement under FRS 139 – Financial Instruments: Recognition and Measurement. In 2008, BNM issued a revised circular on BNM/GP3 which requires impaired credit facilities to be measured at their recoverable amount. This requirement supersedes paragraph 4, Appendix A of the revised BNM/GP8. In view of the implementation of FRS 139 in Malaysia with effect from 1 January 2010, the Group and the Bank and other local banks in Malaysia will be deemed to be in compliance with the requirement on the impairment of loans under the revised BNM/GP8 if the allowance for non-performing loans, advances and financing is computed based on BNM’s guidelines on the ‘Classification of Non-Performing Loans and Provision for Substandard, Bad and Doubtful Debts’ (“BNM/GP3”) requirements.


26

Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) A Basis of preparation (Continued) The preparation of Financial Statements in conformity with the provisions of the Companies Act, 1965, Financial Reporting Standards and Bank Negara Malaysia Guidelines requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements, and the reported amounts of income and expenses during the reported period. It also requires the Directors to exercise their judgement in the process of applying the Group’s and the Bank’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ from those estimates.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements, are disclosed in Note 51. (a) Standards, amendments to published standards and interpretations that are

effective and applicable to the Group and Bank There were no new accounting standards, amendments to published standards and interpretations that were effective and applicable to the Group and the Bank for the financial year ended 31 December 2009.


27

Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) A Basis of preparation (Continued) (b) Standards, amendments to published standards and interpretations to existing

standards that are applicable to the Group and the Bank but not yet effective The new and revised standards, amendments to published standards and interpretations that are applicable to the Group but which the Group and the Bank have not early adopted, are as follows:

• The revised FRS 3 "Business combinations" (effective prospectively from 1 July 2010). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair vale or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2011.

• FRS 8 "Operating Segments" (effective from 1 July 2009) replaces FRS 1142004 Segment

Reporting. The new standard requires a ‘management approach’, under which segment information is reported in a manner that is consistent with the internal reporting provided to the chief operating decision-maker. The improvement to FRS 8 (effective from 1 January 2010) clarifies that entities that do not provide information about segment assets to the chief operating decision-maker will no longer need to report this information. Prior year comparatives must be restated. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• The revised FRS 101 “Presentation of financial statements” (effective from 1 January

2010) prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity. ‘Non-owner changes in equity’ are to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.


28

Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) A Basis of preparation (Continued)

(b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Bank but not yet effective (Continued)

• The revised FRS 127 "Consolidated and separate financial statements" (effective

prospectively from 1 July 2010) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2011.

• FRS 139 “Financial Instruments: Recognition and Measurement” (effective from 1

January 2010) establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Hedge accounting is permitted under strict circumstances. The amendments to FRS 139 provide further guidance on eligible hedged items. The amendment provides guidance for two situations. On the designation of a one-sided risk in a hedged item, the amendment concludes that a purchased option designated in its entirety as the hedging instrument of a one-sided risk will not be perfectly effective. The designation of inflation as a hedged risk or portion is not permitted unless in particular situations. The improvement to FRS 139 clarifies that the scope exemption in FRS 139 only applies to forward contracts but not options for business combinations that are firmly committed to being completed within a reasonable timeframe. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.


29



• IC Interpretation 9 "Reassessment of Embedded Derivatives" (effective from 1 January 2010) requires an entity to assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. The improvement to IC Interpretation 9 (effective from 1 July 2010) clarifies that this interpretation does not apply to embedded derivatives in contracts acquired in a business combination, businesses under common control or the formation of a joint venture. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• FRS 7 “Financial instruments: Disclosures” (effective from 1 January 2010) provides

information to users of financial statements about an entity’s exposure to risks and how the entity manages those risks. The improvement to FRS 7 clarifies that entities must not present total interest income and expense as a net amount within finance costs on the face of the income statement. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

The Group has applied the transitional provision in the respective standards which exempts entities from disclosing the possible impact arising from the initial application of the following standards and interpretations on the financial statements of the Group and the Bank. - FRS 139, Amendments to FRS 139 on eligible hedged items, Improvement to FRS 139 and

IC Interpretation 9 - FRS 7 and Improvement to FRS 7 BNM has also prescribed the use of an alternative basis for collective assessment of impairment for a transitional period for purpose of complying with the collective assessment of impairment requirement in FRS 139.


30



• The amendment to FRS 2 "Share-based payment: Vesting conditions and cancellations"

(effective from 1 January 2010) deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation there of subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The improvement to FRS 2 (effective from 1 July 2010) clarifies that contributions of a business on formation of a joint venture and common control transactions are outside the scope of FRS 2. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• The amendments to FRS 132 “Financial instruments: Presentation” and FRS 101(revised)

“Presentation of financial statements” - “Puttable financial instruments and obligations arising on liquidation” (effective from 1 January 2010) require entities to classify puttable financial instruments and instruments that impose on the entity an obligation to deliver to another party a prorata share of the net assets of the entity only on liquidation as equity, if they have particular features and meet specific conditions. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.


31



• IC Interpretation 10 "Interim Financial Reporting and Impairment" (effective from 1

January 2010) prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at a subsequent balance sheet date. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• IC Interpretation 11 "FRS 2 Group and treasury share transactions" (effective from 1

January 2010) provides guidance on whether share-based transactions involving treasury shares or involving group entities should be accounted for as equity-settled or cash-settled share-based payment transactions in the stand-alone accounts of the parent and group companies. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• IC Interpretation 13 "Customer loyalty programmes" (effective from 1 January 2010)

clarifies that where goods or services are sold together with a customer loyalty incentive, the arrangement is a multiple-element arrangement and the consideration receivable from the customer is allocated between the components of the arrangement using fair values. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• IC Interpretation 14 "FRS 119 The limit on a defined benefit asset, minimum funding

requirements and their interaction" (effective from 1 January 2010) provides guidance on assessing the limit in FRS 119 on the amount of the surplus that can be recognised as an asset. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• IC Interpretation 16 "Hedges of a net investment in a foreign operation" (effective from 1

July 2010) clarifies the accounting treatment in respect of net investment hedging. This includes the fact that net investment hedging relates to differences in functional currency not presentation currency, and hedging instruments may be held by any entity in the group. The requirements of FRS 121 "The effects of changes in foreign exchange rates" do apply to the hedged item. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2011.


32



• IC Interpretation 17 "Distribution of non-cash assets to owners" (effective from 1 July

2010) provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. FRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2011.

The following amendments are part of the Malaysian Accounting Standards Board’s (“MASB”) improvements project: • FRS 5 “Non-current assets held for sale and discontinued operations”

- Improvement effective from 1 January 2010 clarifies that FRS 5 disclosures apply to non-current assets or disposal groups that are classified as held for sale and discontinued operations.

- Improvement effective from 1 July 2010 clarifies that all of a subsidiary's assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met.

The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010 and 2011, respectively.

• FRS 107 “Statement of cash flows” (effective from 1 January 2010) clarifies that only

expenditure resulting in a recognised asset can be categorised as a cash flow from investing activities. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• FRS 110 “Events after the balance sheet date” (effective from 1 January 2010) reinforces

existing guidance that a dividend declared after the reporting date is not a liability of an entity at that date given that there is no obligation at that time. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.


33



• FRS 116 “Property, plant and equipments” (consequential amendment to FRS 107

“Statement of cash flows”) (effective from 1 January 2010) requires entities whose ordinary activities comprise of renting and subsequently selling assets to present proceeds from the sale of those assets as revenue and should transfer the carrying amount of the asset to inventories when the asset becomes held for sale. A consequential amendment to FRS 107 states that cash flows arising from purchase, rental and sale of those assets are classified as cash flows from operating activities. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• FRS 117 “Leases” (effective from 1 January 2010) clarifies that the default classification

of the land element in a land and building lease is no longer an operating lease. As a result, leases of land should be classified as either finance or operating, using the general principles of FRS 117. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• FRS 118 “Revenue” (effective from 1 January 2010) provides more guidance when determining whether an entity is acting as a ‘principal’ or as an ‘agent’. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• FRS 119 “Employee benefits” (effective from 1 January 2010) clarifies that a plan amendment that results in a change in the extent to which benefit promises are affected by future salary increases is a curtailment, while an amendment that changes benefits attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the defined benefit obligation. The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defined benefit obligation. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• FRS 127 “Consolidated & separate financial statements” (effective from 1 January 2010)

clarifies that where an investment in a subsidiary that is accounted for under FRS 139 is classified as held for sale under FRS 5, FRS 139 would continue to be applied. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.


34



• FRS 128 “Investments in associates” (effective from 1 January 2010) clarifies that an

investment in an associate is treated as a single asset for impairment testing purposes. Reversals of impairment are recorded as an adjustment to the carrying amount of the investment to the extent that the recoverable amount of the associate increases. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• FRS 128 “Investments in associates" and FRS 131 "Interests in joint ventures”

(consequential amendments to FRS 132 “Financial instruments: Presentation” and FRS 7 “Financial instruments: Disclosure”) (effective from 1 January 2010) clarify that where an investment in associate or joint venture is accounted for in accordance with FRS 139, only certain, rather than all disclosure requirements in FRS 128 or FRS 131 need to be made in addition to disclosures required by FRS 132 and FRS 7. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• FRS 134 “Interim financial reporting” (effective from 1 January 2010) clarifies that basic

and diluted earnings per share (“EPS”) must be presented in an interim report only in the case when the entity is required to disclose EPS in its annual report. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• FRS 136 “Impairment of assets” (effective from 1 January 2010) clarifies that the largest

cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment before the aggregation of segments with similar economic characteristics. The improvement also clarifies that where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value in use should be made. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.


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• FRS 138 “Intangible Assets”

- Improvement effective from 1 January 2010 clarifies that a prepayment may only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services. This means that an expense will be recognised for mail order catalogues when the entity has access to the catalogues and not when the catalogues are distributed to customers. It confirms that the unit of production method of amortisation is allowed.

- Improvement effective from 1 July 2010 clarifies that a group of complementary intangible assets acquired in a business combination is recognised as a single asset if the individual asset has similar useful lives.

The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

• FRS 140 “Investment property” (effective from 1 January 2010) requires assets under

construction/development for future use as investment property to be accounted as investment property rather than property, plant and equipment. Where the fair value model is applied, such property is measured at fair value. However, where fair value is not reliably measurable, the property is measured at cost until the earlier of the date construction is completed and fair value becomes reliably measurable. It also clarifies that if a valuation obtained for an investment property held under lease is net of all expected payments, any recognised lease liability is added back in order to determine the carrying amount of the investment property under the fair value model. The Group and the Bank will apply this standard from financial years beginning on or after 1 January 2010.

The adoption of the above new standards, amendments to standards and IC Interpretations are not expected to have a material impact on the Group’s and the Bank’s Financial Statements for the financial year ending 31 December 2010.


36

Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) B Economic entities in the Group (a) Subsidiaries The Bank treats as subsidiaries, those corporations, partnerships or other entities (including special purpose entities) in which the Bank has the power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Bank controls another entity. Investment in subsidiaries is stated at cost less accumulated impairment losses. Where there is an indication of impairment, the carrying amount of the investment is assessed. A write down is made if the carrying amount exceeds its recoverable amount.

External costs directly attributable to an acquisition, other than the costs of issuing shares and other capital instruments, are included as part of the cost of acquisition.

The consolidated Financial Statements include the Financial Statements of the Bank and all its subsidiaries made up to the end of the financial year.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and de-consolidated from the date that control ceases. Subsidiaries are consolidated using the purchase method of accounting, except for business combinations involving entities or businesses under common control with agreement dates on or after 1 January 2006, which are accounted for using the pooling-of-interests method.

Under the purchase method of accounting, the results of subsidiaries acquired or disposed of during the year are included from the date of acquisition up to the date of disposal. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired at the date of acquisition is reflected as goodwill. If the cost of acquisition is less than the fair value of the assets, liabilities and contingent liabilities of the subsidiary acquired, the difference is recognised directly in the income statement.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) B Economic entities in the Group (Continued) (a) Subsidiaries (Continued) Minority interest represents that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since that date. The Directors note that business combinations involving entities or businesses under common control are outside the scope of FRS 3 – Business Combinations and that there is no guidance elsewhere in FRS covering such transactions. FRS contain specific guidance to be followed where a transaction falls outside the scope of FRS. This guidance is included in paragraphs 10 to 12 of FRS 108 – Accounting Policies, Changes in Accounting Estimates and Errors. This requires, inter alia, that where FRS does not include guidance for a particular issue, the Directors may also consider the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards. In this regard, it is noted that the United States Financial Accounting Standards Board (“FASB”) has issued an accounting standard covering business combinations (“FAS 141”) that is similar in a number of respects to FRS 3. In contrast to FRS 3, FAS 141 does include, as an Appendix, limited accounting guidance for transactions under common control which, as with FRS 3, are outside the scope of that accounting standard. The guidance contained in FAS 141 indicates that a form of accounting that is similar to pooling-of-interests method may be used when accounting for transactions under common control. Having considered the requirements of FRS 108 and the guidance included within FAS 141, the Directors consider appropriate to use a form of accounting which is similar to pooling-of-interests when dealing with business combinations involving entities or businesses under common control. Under the pooling-of-interests method of accounting, the results of entities or businesses under common control are presented as if the merger had been effected throughout the current and previous years. The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting credit difference is classified as equity and regarded as a non-distributable reserve. Any resulting debit difference is adjusted against any suitable reserve. Any share premium, capital redemption reserve and any other reserves which are attributable to share capital of the merged enterprises, to the extent that they have not been reduced by a debit difference, are reclassified and presented as movement in other capital reserve.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) B Economic entities in the Group (Continued) (a) Subsidiaries (Continued) All material transactions and balances between group companies are eliminated and the consolidated Financial Statements reflect external transactions only. Where necessary, the accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group. Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation. The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group’s share of its net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary, and is recognised in the consolidated income statement. (b) Investment in jointly controlled entity The Group treats as a jointly controlled entity, corporations, partnerships or other entities over which there is contractually agreed sharing of control by the Group with one or more parties where the strategic financial and operating decisions relating to the entities require unanimous consent of the parties sharing control. Investment in a jointly controlled entity is stated at cost less accumulated impairment losses. Where there is an indication of impairment, the carrying amount of the investment is assessed. A write down is made if the carrying amount exceeds its recoverable amount. The Group’s interest in jointly controlled entities is accounted for in the consolidated Financial Statements by the equity method of accounting. Equity accounting involves recognising the Group’s share of the post acquisition results of the joint venture in the income statement and its share of post acquisition movements within reserves in reserves. The cumulative post acquisition movements are adjusted against the cost of the investment and include goodwill on acquisition, net of accumulated impairment loss (if any).


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) B Economic entities in the Group (Continued) (c) Investment in associates The Group treats as associates, corporations, partnerships or other entities in which the Group exercises significant influence, but which it does not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not the power to exercise control over those policies.

Investments in associates are stated at cost adjusted for goodwill identified on acquisition less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down to its recoverable amount. Investments in associates are accounted for in the consolidated Financial Statements by the equity method of accounting. The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

C Recognition of profit income and interest income Interest income on financial assets is recognised on an accrual basis. Interest earned on hire purchase, leasing and block discounting agreements is spread over the terms of the loans, using the “Sum-of-Digit” method so as to produce a constant periodic rate of interest. Accretion of discount and amortisation of premium for securities are recognised on an effective yield basis. Where an account is classified as non-performing, interest accrued and recognised as income prior to the date the loans are classified as non-performing are reversed out of income and set off against the accrued interest receivable amount in the balance sheet. Subsequently, the interest earned on non-performing loans is recognised as income on a cash basis instead of being accrued and suspended at the same time as prescribed previously. Customers’ accounts are classified as non-performing where repayments are in arrears for 3 months or more from the first day of default for loans and overdrafts, and after 3 months from maturity date for trade bills, bankers’ acceptances and trust receipts.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) C Recognition of profit income and interest income (Continued) The Group’s policy on recognition of interest/profit income on loans, advances and financing is in conformity with BNM/GP3 and the revised BNM/GP8 for Malaysian banking entities, while foreign banking entities are in conformity with the requirements of their respective central banks. Income from Islamic banking business is recognised on an accrual basis in accordance with the principles of Shariah. D Recognition of fees and other income Loans, advances and financing arrangement fees and commissions are recognised as income when all conditions precedent are fulfilled. Commitment fees, guarantee fees, portfolio management fees and income from asset management and securities services which are material are recognised as income based on a time apportionment method. Brokerage fees are recognised as income based on inception of such transactions. Dividends are recognised when the right to receive payment is established. E Allowances for bad and doubtful debts and financing Specific allowances are made for doubtful debts and financing which have been individually reviewed and specifically identified as bad or doubtful. A general allowance based on a percentage of the loans portfolio is also made to cover possible losses which are not specifically identified. An uncollectible loan or portion of a loan classified as bad is written off after taking into consideration the realisable value of collateral, if any, when in the judgement of the management, there is no prospect of recovery. The Bank’s and the Malaysian banking subsidiaries’ allowances for non-performing loans and financing is in conformity with the requirements of BNM/GP3 and revised BNM/GP8.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) F Sale and repurchase agreements Securities purchased under resale agreements are securities which the Group and the Bank had purchased with a commitment to re-sell at future dates. The commitment to re-sell the securities is reflected as an asset on the balance sheet. Conversely, obligations on securities sold under repurchase agreements are securities which the Group and the Bank had sold from their portfolio, with a commitment to repurchase at future dates. Such financing transactions and the obligation to repurchase the securities are reflected as a liability on the balance sheet. The difference between sale and repurchase price as well as purchase and resale price is treated as interest and accrued over the life of the resale/repurchase agreement using the effective yield method. G Securities The Group and the Bank classify their securities portfolio into the following categories: securities held for trading, available-for-sale securities and held-to-maturity securities. Management determines the classification of securities at initial recognition. (a) Securities held for trading This category comprises securities held for trading and those designated at fair value through

profit or loss at inception. Securities are classified into this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges.

Pursuant to the amendments to the revised BNM/GP8 guidelines, the Bank and its banking subsidiaries are permitted by BNM for the period from 1 July 2008 to 31 December 2009 to reclassify non-derivatives held for trading securities into held-to-maturity securities or available-for-sale securities. Reclassifications are made at the fair value at the date of the reclassification. The fair values of the securities becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before the reclassification date are subsequently made. The effective interest rates for the securities reclassified to held-to-maturity category are determined at the reclassification date. Further changes in estimates of future cash flows are recognised as an adjustment to the effective interest rates.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) G Securities (Continued) (b) Available-for-sale securities Available-for-sale securities are those intended to be held for an indefinite period of time,

which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.

(c) Held-to-maturity securities Held-to-maturity securities are non-derivative instruments with fixed or determinable

payments and fixed maturities that the Group’s and the Bank’s management has the positive intent and ability to hold to maturity. If the Group or the Bank sell other than an insignificant amount of held-to-maturity securities, the entire category will be tainted and reclassified as available-for-sale securities.

Securities are initially recognised at fair value plus transaction costs for all securities not carried at fair value through profit or loss and securities not held for trading. Securities are derecognised when the rights to receive cash flows from the securities have expired or where the Group or the Bank have transferred substantially all risks and rewards of ownership. Securities held for trading and available-for-sale securities are subsequently carried at fair value, except for investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured in which case the investments are stated at cost. Gains and losses arising from changes in the fair value of the securities held for trading category are included in the income statement in the period which they arise. Gains and losses arising from changes in fair value of available-for-sale securities are recognised directly in equity, until the securities are derecognised or impaired at which time the cumulative gains or loss previously recognised in equity are recognised in the income statement. Held-to-maturity securities are subsequently measured at amortised cost using the effective interest method. Gains or losses arising from the de-recognition or impairment of the securities are recognised in the income statement. Interest from securities held for trading, available-for-sale securities and held-to-maturity securities is calculated using the effective interest method and is recognised in the income statement. Dividends from available-for-sale equity instruments are recognised in the income statement when the entity’s right to receive payment is established. The fair values of quoted securities are based on quoted prices in active markets. If the market for an instrument is not active and for unquoted securities, the Group and the Bank establish fair value by using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) H Derivative financial instruments and hedge accounting Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair values. Fair values are obtained from quoted market prices in active markets, including recent market transactions, and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value of any derivatives that do not qualify for hedge accounting are recognised immediately in the income statement. The best evidence of fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of the consideration given or received) unless the fair value of the instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique whose variables include only data from observable markets. When such evidence exists, the Group and the Bank recognise profit/loss immediately. The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group and the Bank designate certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge) or (2) hedges of highly probable future cash flows attributable to a recognised asset or liability, or a forecasted transaction (cash flow hedge) or (3) hedges of a net investment in a foreign operation (net investment hedge). Hedge accounting is used for derivatives designated in this way provided certain criteria are met. At the inception of the transaction, the Group and the Bank document the relationship between hedging instruments and hedged items, as well as their risk management objective and strategy for undertaking various hedge transactions. The Group and the Bank also document their assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. (a) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value

hedges are recorded in the income statement, together with any changes in the fair value of the hedged assets or liabilities that are attributable to the hedged risk.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the

carrying amount of a hedged item for which the effective interest method is used is amortised to the income statement over the period to maturity. The adjustment to the carrying amount of a hedged equity security remains in retained earnings until the disposal of the equity security.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) H Derivative financial instruments and hedge accounting (Continued) (b) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and

qualify as cash flow hedges are recognised in equity. The gain and loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will affect the income statement.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

(c) Net investment hedge Hedges of net investments in foreign operations are accounted for similarly to cash flow

hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Gains and losses accumulated in the equity are included in the income statement when

the foreign operation is partially disposed or sold. (d) Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair

value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement.


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Summary of Significant Accounting Policies

for the financial year ended 31 December 2009 (Continued) I Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the Bank and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred. Freehold land is not depreciated as it has an infinite life. Other property, plant and equipment are depreciated on a straight line basis to write off the cost of the assets to their residual values over their estimated useful lives, summarised as follows: Building on freehold land Building on leasehold land Office equipment, furniture and fittings:

- office equipment - furniture and fixtures

Renovations to rented premises Computer equipment:

- servers and hardware - ATM machine

Computer equipment under lease Motor vehicles

40 years 40 years or over the balance period of the lease, whichever is shorter 5 years 10 years 5 years or over the period of the tenancy, whichever is shorter 3 years 5 years 3 years or over the period of the lease, whichever is shorter 5 years

Depreciation on assets under construction commences when the assets are ready for their intended use. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Property, plant and equipment are reviewed for impairment at each balance sheet date and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amounts and are included in non-interest income.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) J Intangible assets (a) Goodwill Goodwill arises on business combinations when the cost of acquisition exceeds the fair value of the Bank’s share of the identifiable assets, liabilities and contingent liabilities acquired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units (“CGU”) for the purpose of impairment testing. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Impairment testing is performed annually by comparing the present value of the CGU’s projected cash flows against the carrying amount of its net assets which include the allocated goodwill. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the synergies of the business combination in which the goodwill arose. The Group and the Bank allocate goodwill to each business unit (Note 17). Goodwill on acquisitions of associates and jointly controlled entities respectively are included in investments in associates and jointly controlled entities. Such goodwill is tested for impairment as part of the overall balance. Under the current applicable approved accounting standards for business combinations, FRS 3 - Business Combinations which apply to the accounting for business combinations for which the agreement date is on or after 1 January 2006, the provisions of the standard are applied prospectively and no retrospective changes in respect of accounting for business combinations prior to 1 January 2006 have been made.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) J Intangible assets (Continued) (b) Other intangible assets Other intangible assets include credit card customer relationships, core deposits and computer software. Other intangible assets are initially recognised when they are separable or arise from contractual or other legal rights, the cost can be measured reliably and, in the case of intangible assets not acquired in a business combination, where it is probable that future economic benefits attributable to the assets will flow from their use. The value of intangible assets which are acquired in a business combination is generally determined using income approach methodologies. Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Intangible assets that have an indefinite useful life, or are not yet ready for use, are tested for impairment annually. This impairment test may be performed at any time during the year, provided it is performed at the same time every year. An intangible asset recognised during the current period is tested before the end of the current year. Intangible assets that have a finite useful life are stated at cost less accumulated amortisation and accumulated impairment losses, and are amortised over their estimated useful lives. Intangible assets are amortised over their finite useful lives as follows:

Customer relationships: - credit card - revolving credit - overdraft - trade finance

Core deposits Computer software: - core and front-end systems - others

12 years 4 years 6 years 5 years 8 years 5 years 3 years


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) K Assets purchased under lease (a) Finance lease Assets purchased under lease which in substance transfers the risks and benefits of ownership of the assets to the Group or the Bank are capitalised under property, plant and equipment. The assets and the corresponding lease obligations are recorded at the lower of the present value of the minimum lease payments or the fair value of the leased assets at the beginning of the lease term. Such leased assets are subject to depreciation on the same basis as other property, plant and equipment. Leases which do not meet such criteria are classified as operating lease and the related rentals are charged to income statement as incurred. (b) Operating lease Leasehold land Leasehold land that normally has an indefinite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted as prepaid lease payments that are amortised over the lease term in accordance with the pattern of benefits provided. Others Leases of assets under which all the risks and benefits of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) L Assets sold under lease (a) Finance lease When assets are sold under a finance lease, the present value of the lease payments is recognised as a debtor. The difference between the gross debtor and the present value of the debtor is recognised as unearned finance income. Lease income is recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return. (b) Operating lease Assets leased out under operating leases are included in property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar property, plant and equipment. Rental income is recognised on a straight line basis over the lease term. M Bills and acceptances payable Bills and acceptances payable represent the Group’s or the Bank's own bills and acceptances rediscounted and outstanding in the market. N Borrowings Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings. Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The dividends on these preference shares are recognised in the income statement as interest expense.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) O Currency translations (a) Functional and presentation currency Items included in the Financial Statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated Financial Statements are presented in Ringgit Malaysia, which is the Group’s and the Bank’s functional and presentation currency. (b) Foreign currency transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in the carrying amount are recognised in equity. Translation differences on non-monetary financial assets and liabilities, such as equity instruments held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available-for-sale are included in the available-for-sale reserve in equity.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) O Currency translations (continued) (c) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the

date of the balance sheet; • income and expenses for each income statement are translated at average exchange rates

(unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity. On consolidation, exchange differences arising from the translation of the net investment in foreign operations and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity beginning in or after 1 January 2006 are treated as assets and liabilities of the foreign entity and translated at the closing rate. P Income and deferred taxes Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and includes all taxes based upon the taxable profits.


52


for the financial year ended 31 December 2009 (Continued) P Income and deferred taxes (continued) Deferred income tax is recognised in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred income tax is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures except where the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax related to fair value re-measurement of available-for-sale securities, which is charged or credited directly to equity, is also credited or charged directly to equity and is subsequently recognised in the income statement together with the deferred gain or loss. Deferred income tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Q Share capital (a) Classification

Ordinary shares and non-redeemable preference shares with discretionary dividends are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular instrument. Distributions to holders of a financial instrument classified as an equity instrument are charged directly to equity.

(b) Share issue costs

Incremental external costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(c) Dividends

Dividends on ordinary shares are recognised as a liability when the shareholders’ right to receive the dividend is established.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) R Employee benefits (a) Short term employee benefits The Group and the Bank recognise a liability and an expense for bonuses. The Group and the

Bank recognise a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Group and the Bank.

(b) Post employment benefits

The Group and the Bank have various post-employment benefit schemes. These benefit plans are either defined contribution or defined benefit plans.

Defined contribution plans

A defined contribution plan is a pension plan under which the Group and the Bank pay fixed

contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods.

The Group’s and the Bank’s contributions to defined contribution plans are charged to the income statement in the period to which they relate. Once the contributions have been paid, the Group and the Bank have no further payment obligations. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Defined benefit plans A defined benefit plan is a pension plan that defines an amount of pension benefit to be

provided, usually as a function of one or more factors such as age, years of services or compensation.

The liability in respect of a defined benefit plan is the present value of the defined benefit

obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains/losses and past service cost.


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Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) R Employee benefits (Continued) (b) Post employment benefits (Continued)

Defined benefit plans (continued)

The Group and the Bank determine the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the Financial Statements do not differ materially from the amounts that would be determined at the balance sheet date.

The defined benefit obligation, calculated using the projected unit credit method, is

determined by independent actuaries, considering the estimated future cash outflows using market yields at balance sheet date of government securities which have currency and terms to maturity that approximate the terms of the related liability.

Plan assets in excess of the defined obligation are subject to the asset limitation specified in FRS 119 - Employee Benefits.

Actuarial gains and losses arise from experience adjustments and changes in actuarial

assumptions. The amount of net actuarial gains and losses recognised in the income statement is determined by the corridor method in accordance with FRS 119 and is charged or credited to income over the average remaining service lives of the related employees participating in the defined benefit plan.

Past-service costs are recognised immediately in income, unless the changes to the plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period.


55

Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) R Employee benefits (Continued) (c) Other long term employee benefits

The cost of long term employee benefits (for example, long term service leave) is accrued to match the rendering of the services by the employees concerned using an accounting methodology similar to that for defined benefit plans.

(d) Termination benefits Termination benefits are payable whenever an employee’s employment is terminated before

the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group and the Bank recognise termination benefits when they are demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to their present value.

(e) Share-based compensation benefits

The equity compensation benefits of the Group comprise the following: (i) Share options granted by the ultimate holding company under the Modified

Executive Employee Share Option Scheme (“EESOS”). As allowed in the transition provisions of FRS 2 - Share-based Payment, the Group

and the Bank have elected not to apply FRS 2 to these equity instruments which were granted:

(a) before 31 December 2004 (b) after 31 December 2004 but had vested before 1 January 2006 (ii) Management Equity Scheme (‘MES’).

FRS 2 only applies to transactions involving a transfer of equity instruments between shareholders and option holders, hence entitlements based on ordinary shares of the ultimate company granted under the Management Equity Scheme (‘MES’) are out of the scope of FRS 2.


56

Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) S Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. The impairment loss is charged to the income statement unless it reverses a previous revaluation in which case it is charged to the revaluation surplus. Impairment losses on goodwill are not reversed. In respect of other assets, any subsequent increase in recoverable amount is recognised in the income statement unless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus. T Impairment of securities portfolio The Group and the Bank assess at each balance sheet date whether there is objective evidence that the securities are impaired. A security or a group of securities is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the securities (a “loss event”) and that loss event has an impact on the estimated future cash flows of the securities that can be reliably estimated. (a) Securities carried at amortised cost

If there is an objective evidence that an impairment loss on held-to-maturity instruments held at amortised cost has been incurred, the amount of loss is measured as the difference between the securities’ carrying amount and the present value of estimated future cash flows discounted at the securities’ original effective interest rate. The carrying amount of the securities is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement.


57

Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) T Impairment of securities portfolio (Continued) (b) Securities carried at fair value In the case of equity instruments classified as available-for-sale securities, a significant or

prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If there is an objective evidence that an impairment loss on available-for-sale securities has been incurred, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on the securities previously recognised in income statement – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale securities increases and the increase can be related objectively to an event occurring after the impairment was recognised in the income statement, the impairment loss is reversed through the income statement.

U Foreclosed properties Foreclosed properties are stated at the lower of carrying amount and fair value less cost to sell. V Provisions Provisions are recognised by the Group and the Bank when all of the following conditions have been met: (i) the Group and the Bank have a present legal or constructive obligation as a result of past

events: (ii) it is probable that an outflow of resources to settle the obligation will be required; and (iii) a reliable estimate of the amount of obligation can be made. Where the Group and the Bank expect a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses.


58


for the financial year ended 31 December 2009 (Continued) V Provisions (continued) Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present values of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. W Dealers’ handling charges Handling charges paid to hire purchase dealers are expensed off to the income statement. X Zakat This represents business zakat which is a contribution amount payable by CIMB Islamic Bank Berhad (“CIMB Islamic”) to comply with the principles of Shariah. Zakat provision is calculated based on ‘Adjusted Growth’ method, at 2.5% for individual Bumiputra shareholders of CIMB Group Holdings Berhad, the Bank’s ultimate holding company. Y Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank balances and deposit placements maturing less than one month. Z Compound financial instruments Compound financial instruments contain both a liability and equity element. The Group’s and the Bank’s compound financial instruments comprise Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) which were issued in 2001. Pursuant to the transition provisions of FRS 132 - Financial Instruments: Disclosure and Presentation, the classification of compound instruments into equity and liability components need to be applied only to financial instruments that are issued during reporting periods beginning on or after 1 January 2003. Accordingly, the ICULS continue to be classified according to their legal form i.e. as liability instruments. On issue of a financial instrument that contains both a liability and an equity component, the fair value of the liability portion is determined using a market interest rate for an equivalent financial instrument; this amount is carried as liability on the amortised cost basis until extinguished on conversion or maturity of the instrument. The remainder of the proceeds is allocated to the conversion option which is recognised and included in shareholders’ equity; the value of the conversion option is not changed in subsequent periods.


59

Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) AA Segment reporting Segment reporting is presented for enhanced assessment of the Group’s risks and returns. A business segment is a group of assets and operations engaged in providing products or services that are subject to risk and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those components. Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment. Segment revenue, expense, assets and segment liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment. AB Non-current assets/disposal groups held for sale Non-current assets/disposal groups are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through continuing use. AC Investment properties Investment properties, comprising principally land and office buildings, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group, and the Bank. Investment properties are stated at fair value, representing the open-market value determined annually by external valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group and the Bank use alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. Changes in fair values are recorded in the income statement as part of other income. On disposal of an investment property, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal, it shall be derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period of the retirement or disposal.


60

Summary of Significant Accounting Policies for the financial year ended 31 December 2009 (Continued) AD Contingent assets and liabilities Contingent assets arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the Group. As this may result in the recognition of income that may never be realised, contingent assets are not recognised in the Group’s financial statements. Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, are possible obligations that arise from past events whose existence will be confirmed only by the occurrence, or non-occurrence, of one or more uncertain future events not wholly within the control of the Group; or are present obligations that have arisen from past events but are not recognised because it is not probable that settlement will require the outflow of economic benefits, or because the amount of the obligations cannot be reliably measured. Contingent liabilities are not recognised in the financial statements but are disclosed unless the probability of settlement is remote.


61

Notes to the Financial Statements

for the financial year ended 31 December 2009 1 General information The Bank is principally engaged in all aspects of commercial banking and in the provision of related financial services, including Islamic banking. The principal activities of the significant subsidiaries as set out in Note 11 in the Financial Statements, consist of Islamic banking, offshore banking, debt factoring, trustees and nominee services, and property ownership and management. There was no significant change in the nature of these activities during the financial year. The holding company of the Bank is CIMB Group Sdn Bhd and the Directors regard CIMB Group Holdings Berhad (formerly known as Bumiputra-Commerce Holdings Berhad) (“CIMB Group”), a quoted company, as the ultimate holding company. Both companies are incorporated in Malaysia. The Bank is a limited liability company, incorporated and domiciled in Malaysia. The address of the Bank’s registered office is 5th Floor, Bangunan CIMB, Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur, Malaysia. The Bank’s principal place of business is at Menara Bumiputra-Commerce, 11, Jalan Raja Laut, 50350 Kuala Lumpur, Malaysia. 2 Cash and short-term funds

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Cash and balances with banks and other financial institutions 3,199,190 2,830,307 2,684,424 2,629,900 Money at call and deposit placements maturing within one month 21,823,908 19,136,055 15,015,267 11,678,446

25,023,098 21,966,362 17,699,691 14,308,346

The Group The Bank

Included in the Bank’s and Group’s cash and short-term funds are RM990 (2008: RM236,891) of money at call and deposit placements relating to a jointly controlled entity, Proton Commerce Sdn Bhd (“PCSB”). .


62

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 3 Deposits and placements with banks and other financial institutions

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Licensed banks 719,286 1,599,159 9,874,403 4,627,910 Licensed investment banks 1,889,775 50,000 1,859,875 50,000 Bank Negara Malaysia 200,300 210,300 200,000 210,000 Other financial institutions 593,235 280,000 - 80,000

3,402,596 2,139,459 11,934,278 4,967,910

The Bank The Group

Included in the Bank’s deposits and placements with banks and other financial institutions are exposures to Restricted Profit Sharing Investment Accounts (“RPSIA”), as part of an arrangement with CIMB Islamic. The RPSIA is a contract based on the Mudharabah principle between the Bank and CIMB Islamic to finance a specific business venture where the Bank solely provides capital and the business ventures are managed solely by the entrepreneur. The profit of the business venture is shared between both parties based on a pre-agreed ratio and management fees. As at 31 December 2009, the RPSIA placements amounted to RM5,091 million (2008: RM3,020 million) for a tenure between 1 to 3 months at profit rates from 2.42% to 2.50% (2008: 3.56% to 3.93%) per annum.


63

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 4 Securities held for trading

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Money market instrumentsUnquoted:Malaysian Government Securities 1,018,713 1,342,488 1,018,713 1,324,809 Cagamas bonds 28,283 205,323 28,283 205,323 Khazanah bonds - 9,791 - - Malaysian Government treasury bills 185,033 38,262 185,033 38,262 Other Government securities 862,061 - 862,061 - Bank Negara Malaysia bills 2,779,851 552,598 2,779,851 552,598 Bank Negara Malaysia negotiable notes 1,887,613 46,892 700,649 46,892 Bankers’ acceptances and Islamic accepted bills 696,623 1,174,286 641,989 595,865 Negotiable instruments of deposit 3,002,701 3,529,709 1,673,891 1,285,891 Credit-linked notes 158,604 172,884 136,482 159,942 Commercial papers 29,982 332,605 29,982 312,939 Government Investment Issue 500,213 81,376 1,627 66,727

11,149,677 7,486,214 8,058,561 4,589,248

Quoted securities:In MalaysiaShares 457,382 137,527 456,470 134,758 Warrants 5 5 - - Loan stocks - 1,272 - -

457,387 138,804 456,470 134,758 Outside MalaysiaShares 7,840 326 - - Private debt securities 2,696 - - - Other Government bonds 41,500 - - -

52,036 326 - -

Unquoted securities:In MalaysiaShares 5,001 5,001 5,001 5,001 Private and Islamic debt securities 1,508,728 1,416,966 1,309,247 1,401,255

1,513,729 1,421,967 1,314,248 1,406,256 Outside MalaysiaPrivate and Islamic debt securities 645,250 516,970 322,906 387,137

13,818,079 9,564,281 10,152,185 6,517,399

The Bank The Group


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Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 4 Securities held for trading (Continued) During the financial year 2009, the Bank had reclassified securities from held for trading category to available-for-sale category (no such reclassification was made in 2008). In 2008, the Bank and its banking subsidiaries reclassified a portion of their securities in held for trading category to the held-to-maturity category based on current market prices at the relevant dates of the reclassification. The above reclassifications have been accounted for in accordance with the BNM circular on ‘Reclassification of Securities under Specific Circumstances’ dated 17 October 2008, which is effective from 1 July 2008 until 31 December 2009. The fair value of the securities reclassified from the held for trading category to available-for-sale as of the respective dates of reclassification is RM247,330,000 (2008: RMNil) for both the Group and the Bank, while the fair value of the securities reclassified from the held for trading category to held-to-maturity category is RMNil (2008: RM5,955,065,000) and RMNil (2008: RM4,396,670,000) for the Group and the Bank, respectively. Included in the non-interest income (Note 37) is the net gains/(losses) arising from the change in fair value recognised in the income statement in respect of the reclassified securities: The Group The Bank 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000 Net fair value gain/(loss) 70 (110,605) 70 12,449 As of the date of reclassification, the effective interest rates on the reclassified held for trading securities to available-for-sale category, based on the new cost is an average of 4.56% (2008: Nil%) for both the Group and the Bank. The effective interest rates for securities reclassified to held-to-maturity category in 2008 are Nil% (2008: 6.63% per annum) and Nil% (2008: 6.52% per annum) for the Group and the Bank, respectively. The expected recoverable cash flows for the reclassified securities to available-for-sale is RM246,700,000 (2008:RMNil) for both the Group and the Bank, while the expected recoverable cash flows for held-to-maturity category is RMNil (2008: RM6,110,905,000) and RMNil (2008: RM4,430,456,000) for the Group and the Bank respectively, including any coupons receivable on the securities.


65

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 5 Available-for-sale securities

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Money market instrumentsUnquoted:Malaysian Government Securities 180,895 109,729 180,895 99,710 Khazanah bonds 34,975 58,376 - 9,791 Government Investment Issue 360,354 187,714 230,577 66,477 Commercial papers 19,539 134,040 - 134,040 Cagamas bonds 275,157 296,925 240,765 248,011

870,920 786,784 652,237 558,029 Quoted securities:In MalaysiaUnit trusts - 703,889 - 703,889

Outside MalaysiaShares 5,830 - - - Other Government bonds 469,788 - - - Unit trusts 266,525 - - - Private debt securities 109,214 115,216 105,042 115,216

851,357 115,216 105,042 115,216

Unquoted securities:In MalaysiaPrivate debt securities 5,900,409 5,401,347 5,573,980 5,001,921 Shares 379,095 378,104 378,520 378,989 Bonds funds 4,111 - - - Loan stocks 19,437 30,715 19,437 30,715

6,303,052 5,810,166 5,971,937 5,411,625 Outside MalaysiaShares 28,528 9,606 875 633 Private equity funds 119,786 83,953 - - Unit trusts 196,878 136,578 61,669 - Private debt securities 28,325 - - -

373,517 230,137 62,544 633 8,398,846 7,646,192 6,791,760 6,789,392

Allowance for impairment losses: Private debt securities (253,390) (279,343) (253,112) (279,343) Quoted shares (3,026) - - - Unquoted shares (33,552) (6,659) (7,035) (6,659) Loan stocks (6,905) - (6,905) - Unit trusts (21,654) - - -

(318,527) (286,002) (267,052) (286,002) 8,080,319 7,360,190 6,524,708 6,503,390

The Bank The Group


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Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 5 Available-for-sale securities (Continued) Included in available-for-sale securities are securities transferred from the held for trading category during the financial year 2009, with the following amortised cost and fair value as at 31 December 2009.

The Group 2009 2008 RM’000 RM’000 Amortised cost 246,776 - Fair value 249,342 -

Securities amounting to RM1,822 million (2008: RMNil) were invested by asset management companies on behalf of the Group and the Bank.


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Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 6 Held-to-maturity securities

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Money market instrumentsUnquoted:Malaysian Government Securities 1,123,977 149,967 1,123,977 149,967 Cagamas bonds 294,817 294,817 294,817 294,817

1,418,794 444,784 1,418,794 444,784 Quoted securities:Outside MalaysiaStructured notes 342,847 - - - Private debt securities 740,754 - - -

1,083,601 - - - Unquoted securities:In MalaysiaShares 270 462 - 192 Loans stocks 31,814 32,478 - - Islamic commercial paper 6,775 34,832 - - Danaharta Urus Sdn Bhd bonds 929,639 894,807 929,639 929,639 Private debt securities 7,698,001 7,738,316 6,692,180 6,538,110

8,666,499 8,700,895 7,621,819 7,467,941 Outside MalaysiaPrivate debt securities 1,518,478 2,324,723 1,418,763 570,525

Accretion of discount net of amortisation of premium 242,894 231,116 242,894 231,116 Less: Allowance for impairment losses (55,015) (75,548) - (28,965)

12,875,251 11,625,970 10,702,270 8,685,401

The Group The Bank

Private debt securities amounting to RM864 million (2008: RM954 million) are funded by a RPSIA depositor, as part of an arrangement with CIMB Islamic.


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for the financial year ended 31 December 2009 (Continued) 6 Held-to-maturity securities (Continued) Included in the held-to-maturity securities in 2008 are securities transferred from the held for trading category during the last quarter of the financial year ended 31 December 2008, with the following carrying value and fair value as at 31 December: The Group The Bank 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000 Carrying value 4,698,031 5,973,951 4,257,223 4,393,006 Fair value 4,792,894 5,946,391 4,336,098 4,456,902 During the financial year, CIMB Bank (L) Limited, a subsidiary of the Bank, transferred the securities in held-to-maturity category to CIMB Bank Labuan Offshore branch based on amortised cost at the relevant dates of the transfer. The carrying value and fair value of the securities as of the transferred date is RM1,798,099,000 and RM1,815,411,000 respectively. Included in the held-to-maturity securities of the Group as at 31 December 2009 are 10-year promissory notes of THB746 million maturing in 2011, which were received from Thai Asset Management Corporation (“TAMC”) for settlement of non-performing loans transferred by CIMB Thai Bank to TAMC. Such promissory notes are non-transferable, bear interest at the average deposit rate of 5 major banks in Thailand and availed by the Financial Institutions Development Fund. As part of the agreement to transfer non-performing loans to TAMC, CIMB Thai Bank has a gain and loss sharing arrangement with TAMC arising from the recovery of the non-performing loans. The sharing of gain or losses will be calculated at the end of the agreement.


69

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 7 Loans, advances and financing (i) By type

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Overdrafts 7,934,860 7,238,366 7,110,689 7,002,421 Term loans/financing - Housing loan/financing 35,941,384 25,110,340 24,788,159 23,078,689 - Syndicated term loan 7,616,727 6,670,195 3,567,819 2,543,434 - Other term loans/financing 46,171,054 35,010,869 28,901,592 30,970,022 - Factoring receivables 39,169 48,737 - - - Lease receivables 45,355 73,227 - - - Hire purchase receivables 14,276,162 13,663,402 9,181,267 11,484,488 Bills receivable 1,893,087 153,420 183,383 153,420 Trust receipts 810,827 795,516 533,707 771,629 Claim on customers under acceptance credit 4,294,096 5,650,525 4,113,973 5,493,816 Staff loans 406,409 442,311 405,075 441,375 Credit card receivables 3,029,562 2,663,733 2,980,589 2,660,753 Revolving credit 8,459,959 7,619,761 6,597,926 6,429,039 Share margin financing 430,368 172,954 407,172 172,954

131,349,019 105,313,356 88,771,351 91,202,040 Less: Unearned interest (13,653,593) (4,717,873) (1,431,100) (1,870,394)

117,695,426 100,595,483 87,340,251 89,331,646 Less: Islamic financing sold to Cagamas - (294,946) - - Gross loans, advances and financing 117,695,426 100,300,537 87,340,251 89,331,646 Fair value changes arising from fair value hedges 45,028 177,618 18,509 177,618

117,740,454 100,478,155 87,358,760 89,509,264 Less: Specific allowance (2,695,272) (3,184,511) (1,644,003) (3,140,552)

115,045,182 97,293,644 85,714,757 86,368,712 Less: General allowance (1,564,540) (1,606,498) (1,258,390) (1,446,535)Total net loans, advances and financing 113,480,642 95,687,146 84,456,367 84,922,177

The Group The Bank


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Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 7 Loans, advances and financing (Continued) (i) By type (continued) (a) Included in the Bank’s loans, advances and financing balances are RM2,080,513,000

(2008: RM2,061,944,000) of net loans relating to that of a jointly controlled entity, PCSB. The revenue and risks of these accounts are shared equally between the Bank and the joint venture partner, Proton Edar Sdn Bhd, pursuant to the terms of a Joint Venture Agreement.

(b) Included in other term loans is RM7,578,237,000 (2008: RM3,021,205,000) provided on

normal commercial terms which is exempted from general allowance by Bank Negara Malaysia.

(c) Included in the Group’s and the Bank's loans, advances and financing balances are

RM80,235,000 (2008: RM85,506,000) of reinstated loans which were previously non-performing and written off prior to 2005. The reinstatement of these loans has been approved by BNM on 5 February 2010 and were done selectively on the basis of either full settlement of arrears or upon regularised payments of rescheduled loan repayments.

d) The Group and the Bank have undertaken fair value hedge on the interest rate risk of

RM5,468,179,000 (2008: RM2,000,000,000) and RM4,118,179,000 (2008: RM2,0000,000,000) respectively, using interest rate swaps.

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Gross loans hedged 5,468,179 2,000,000 4,118,179 2,000,000 Fair value changes arising from fair value hedges 45,028 177,618 18,509 177,618

5,513,207 2,177,618 4,136,688 2,177,618

The Group The Bank

The fair values of interest rate swaps of the Group and the Bank as at 31 December 2009 were RM104,052,171 (2008: RM202,404,724) and RM62,493,674 (2008: RM202,404,724) respectively.


71

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 7 Loans, advances and financing (Continued) (i) By type (continued)

(e) As part of an arrangement with CIMB Islamic in relation to the RPSIA, the Bank records as

deposits and placements with banks and other financial institutions, its exposure in the arrangement (See Note 3), whereas CIMB Islamic records its exposure as loans, advances and financing. The RPSIA arrangement exposes the Bank to the risks and rewards on the financing and accordingly, the Bank accounts for all the general allowance and specific allowances for bad and doubtful financing arising from the RPSIA financing.

As at 31 December 2009, the gross exposure and general allowance relating to RPSIA

financing are RM4,247 million (2008: RM1,893 million) and RM63.7 million (2008: RM32.2 million) respectively. There was no specific allowance provided for the RPSIA financing.

(f) The maturity structure of loans, advances and financing is as follows:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Maturing within one year 18,602,963 21,501,907 11,339,896 16,123,350 One year to less than three years 33,085,173 24,235,265 26,652,129 22,628,789 Three years to less than five years 13,615,544 11,080,136 11,088,569 10,167,614 Five years and more 52,391,746 43,778,175 38,259,657 40,411,893

117,695,426 100,595,483 87,340,251 89,331,646 Less: Islamic financing sold to Cagamas - (294,946) - - Gross loans, advances and financing 117,695,426 100,300,537 87,340,251 89,331,646

The Group The Bank


72


for the financial year ended 31 December 2009 (Continued) 7 Loans, advances and financing (Continued) (ii) By type of customer:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Domestic banking institutions 123,764 149,356 - - Domestic non-bank financial institutions- others 3,697,005 2,994,551 3,599,009 2,991,427 Domestic business enterprises- small medium enterprises 11,111,752 12,576,067 9,990,157 11,947,385 - others 26,908,896 25,108,259 16,102,866 22,371,585 Government and statutory bodies 7,680,833 3,098,571 6,148,279 3,086,979 Individuals 57,535,132 47,590,813 45,789,079 44,660,572 Other domestic entities 4,006,369 3,375,151 359,916 74,614 Foreign entities 6,631,675 5,702,715 5,350,945 4,199,084


The Group The Bank

(iii) By interest rate sensitivity:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Fixed rate- Housing loans 6,074,280 5,048,818 4,443,826 4,704,226 - Hire-purchase receivables 11,872,957 11,421,719 7,736,546 9,605,869 - Other fixed rate loans 19,307,648 12,272,399 15,405,969 10,743,192

Variable rate- BLR plus 43,334,371 41,327,282 41,041,340 40,913,189 - Cost-plus 21,888,489 22,154,552 14,281,194 19,500,583 - Other variable rates 15,217,681 8,370,713 4,431,376 3,864,587


The Group The Bank


73

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 7 Loans, advances and financing (Continued) (iv) By economic purpose:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Personal use 4,503,629 2,953,083 2,064,033 2,433,123 Credit card 3,030,000 2,663,733 2,980,589 2,660,753 Purchase of consumer durables 3,688 19,111 3,667 17,486 Construction 3,550,772 2,759,028 2,193,835 2,417,509 Residential property (Housing) 29,839,340 24,657,226 25,241,179 23,876,489 Non-residential property 9,616,125 8,593,380 8,591,312 7,904,813 Purchase of fixed assets other than land and building 1,340,343 797,611 440,699 347,299 Merger and acquisition 1,737,598 1,563,682 1,737,598 1,500,984 Purchase of securities 9,104,676 11,828,362 5,995,810 8,734,648 Purchase of transport vehicles 11,620,841 11,415,972 7,859,651 9,735,385 Working capital 29,508,661 27,194,826 21,413,296 24,375,948 Other purpose 13,839,753 6,149,469 8,818,582 5,327,209

117,695,426 100,595,483 87,340,251 89,331,646 Less: Islamic financing sold to Cagamas - (294,946) - -

117,695,426 100,300,537 87,340,251 89,331,646

The Group The Bank

(v) Non-performing loans, advances and financing by economic purpose:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Personal use 139,234 246,826 69,528 224,972 Credit card 64,665 70,400 63,016 70,400 Purchase of consumer durables 223 950 223 950 Construction 298,068 329,641 125,800 309,509 Residential property (Housing) 675,363 1,585,234 555,191 1,529,613 Non-residential property 194,018 438,087 185,673 422,317 Purchased of fixed assets other than land and building 52,666 66,745 7,459 14,830 Purchase of securities 35,455 69,980 8,676 45,119 Purchase of transport vehicles 339,556 354,539 262,055 314,476 Working capital 1,486,427 2,193,798 895,384 2,095,621 Other purpose 816,813 117,578 123,926 116,001

4,102,488 5,473,778 2,296,931 5,143,808

The Group The Bank


74

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 7 Loans, advances and financing (Continued) (vi) Movements in non-performing loans, advances and financing are as follows:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

At 1 January 5,473,778 6,753,711 5,143,808 6,370,443 Classified as non-performing during the financial year 3,700,995 3,349,374 2,889,444 3,124,107 Reclassified as performing during the financial year (1,954,582) (2,532,285) (1,706,141) (2,395,585)Amount written back in respect of recoveries (889,715) (1,051,314) (738,631) (1,016,722)Amount written off (1,025,067) (660,640) (683,862) (604,045)Non-performing loans arising from acquisition of a subsidiary 1,398,003 - - - Non-performing loans purchased from third party 3,852 - - - Sale of non-performing loans (2,607,193) (385,389) (2,607,193) (380,698)Amount transferred from subsidiaries - - - 46,704 Exchange fluctuation 2,417 321 (494) (396)At 31 December 4,102,488 5,473,778 2,296,931 5,143,808

Net non-performing loans, advances and financing 1,759,228 2,488,054 996,697 2,201,984 Ratio of net non-performing loans, advances and financing to total loans, advances and financing (including Islamic financing sold to Cagamas) less specific allowance^ 1.53% 2.55% 1.16% 2.55%

The Group The Bank

^ Excludes specific allowances on performing loans amounting to RM352,012,000 (2008: RM198,787,000) for the Group and RM343,769,000 (2008: RM198,728,000) for the Bank.


75

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 7 Loans, advances and financing (Continued) (vii) Movements in the allowance for bad and doubtful debts and financing are as follows:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Specific allowanceAt 1 January 3,184,511 3,300,748 3,140,552 3,194,131 Allowance made during the financial year 1,688,817 1,508,387 1,311,706 1,364,169 Allowance (written back)/made and charged to deferred assets (2,880) 878 (2,880) 878 Amount written back in respect of recoveries (537,217) (718,893) (445,862) (608,735)Amount written back from NPL sale - (61,099) - (60,416)Amount written off (848,198) (648,042) (672,137) (591,362)Sale of non-performing loans (1,682,837) (194,711) (1,688,240) (189,943)Allowance arising from acquisition of a subsidiary 880,800 - - - Amount transferred from general allowance 10,183 - - - Allowance for non-performing loans purchased from third party 3,440 - - - Allowance made/(written back) in relation to jointly controlled entity 3,009 (4,329) 3,009 (4,329)Amount transferred from subsidiaries - - - 35,589 Exchange fluctuation (4,356) 1,572 (2,145) 570 At 31 December 2,695,272 3,184,511 1,644,003 3,140,552

- - - -

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

General allowanceAt 1 January 1,606,498 1,377,254 1,446,535 1,233,088 Net allowance (written back)/made during the financial year (120,118) 229,830 (189,482) 217,803 Amount transferred to specific allowance (10,183) - - - Allowance arising from acquisition a subsidiary 88,309 - - - Exchange fluctuation 34 (586) 1,337 (4,356)At 31 December 1,564,540 1,606,498 1,258,390 1,446,535 (General allowance as % of gross loans, advances and financing including Islamic financing sold to Cagamas, less loans exempted from general allowance by BNM and specific allowance) 1.46% 1.70% 1.50% 1.70%

The Bank The Group

The Group The Bank


76

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 8 Other assets

Note

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Interest receivable 178,592 176,628 207,290 178,047 Deferred assets (a) 198,610 216,292 198,610 216,292 Foreclosed properties (b) 230,534 27,495 24,911 27,495 Due from brokers and clients 42,482 - - - Due from insurers, brokers and reinsurers 4,796 - - - Option financing 238,224 301,995 238,224 301,995 Credit Support Annex for derivative transactions 210,761 464,823 210,761 464,823 Amounts receivable from non-performing loans sale 118,562 165,871 118,562 165,871 Other debtors, deposits and prepayments 896,589 742,467 609,442 578,713

2,119,150 2,095,571 1,607,800 1,933,236

The Group The Bank

(a) Deferred assets comprise mainly the carrying value of the excess of liabilities over assets

of Common Forge Berhad (now known as Southeast Asia Special Asset Management Berhad) taken over by SBB Berhad in 2000 and will be reduced progressively by a scheme of arrangement which has been agreed by Bank Negara Malaysia. Movements in deferred assets during the financial year are as follows:

The Group and The Bank

2009 2008 RM'000 RM'000

At 1 January 216,292 226,311 Amortisation for the financial year (14,802) (10,897)Specific allowance (written back)/made (2,880) 878 At 31 December 198,610 216,292 (b) Movements in foreclosed properties during the financial year are as follows:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

At 1 January 27,495 29,351 27,495 29,351 Arising from acquisition of a subsidiary 210,512 - - - Acquired during the financial year 33,140 - - - Disposed during the financial year (40,613) (496) (2,584) (496)Reclassified to non-currrent assets held for sale (Note 56(iii)) - (1,360) - (1,360)At 31 December 230,534 27,495 24,911 27,495

The Group The Bank


77

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 9 Deferred taxation Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts have been offset and shown in the balance sheet:

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Deferred tax assets 440,784 459,250 281,880 263,993 Deferred tax liabilities (139,337) (154,713) - -

301,447 304,537 281,880 263,993

The Bank The Group


78

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 9 Deferred taxation (Continued) The movements in deferred tax assets and liabilities during the financial year comprise the following:

General allowance for

doubtful debts and financing

Accelerated tax

depreciation

Revaluation reserve-

available-for-sale

securities

O ther temporary

differences Intangible

assets Total The Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000Deferred tax assets/(l iabilities)At 1 January 2009 388,926 (48,102) (27,009) 70,324 (79,602) 304,537 (Charged)/credited to income statement 43 (28,671) (12,705) - 50,511 11,427 20,562 Under accrual in prior year - 1,847 - 3,107 - 4,954 Arising from acquisition of a subsidiary 55 (a)(i) - - - (43,413) (2,620) (46,033) Transferred to equity 33 (f) - - 17,427 - - 17,427 At 31 December 2009 360,255 (58,960) (9,582) 80,529 (70,795) 301,447

360,255 (58,960) (9,582) 80,529 (70,795)



Accelerated tax

depreciation


available-for-sale

securities

Unrealised gain on

derivatives

O ther temporary

differences

Unutilised tax losses

and capital allowances

Intangible assets Total

The Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Deferred tax assets/(l iabilities)At 1 January 2008 461,115 (49,610) (19,008) 726 72,997 37,422 (94,671) 408,971 Credited/(charged) to income statement 43 48,459 (10,672) 145 - (1,742) 238 14,686 51,114 (Over)/under accrual in prior year (119,060) 12,180 (77) (726) (931) (37,660) 383 (145,891) Disposal of subsidiary 55 (c)(iii) (1,588) - - - - - - (1,588) T ransferred from equity 33 (f) - - (8,069) - - - - (8,069) At 31 December 2008 388,926 (48,102) (27,009) - 70,324 - (79,602) 304,537


79


for the financial year ended 31 December 2009 (Continued) 9 Deferred taxation (Continued) The movements in deferred tax assets and liabilities during the financial year comprise the following:



Accelerated tax

depreciation


available-for-sale

securities

O ther temporary


assets Total The Bank Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Deferred tax assets/(l iabilities)At 1 January 2009 355,144 (47,388) (27,579) 63,419 (79,603) 263,993 (Charged)/credited to income statement 43 (48,978) (13,287) - 47,510 11,427 (3,328)Under accrual in prior year - 1,847 - 1,307 - 3,154 Transferred to equity 33 (f) - - 18,061 - - 18,061 At 31 December 2009 306,166 (58,828) (9,518) 112,236 (68,176) 281,880



Accelerated tax

depreciation


available-for-sale

securities

O ther temporary


assets Total The Bank Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Deferred tax assets/(l iabilities)

At 1 January 2008 449,931 (36,633) (19,486) 71,382 (94,671) 370,523 Credited/(charged) to income statement 43 41,274 (10,451) - 1,893 15,068 47,784 Over accrual in prior year (136,061) (304) - (9,856) - (146,221)Transferred from equity 33 (f) - - (8,093) - - (8,093)At 31 December 2008 355,144 (47,388) (27,579) 63,419 (79,603) 263,993


80

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 10 Statutory deposits with central banks

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Statutory deposits with - Bank Negara Malaysia 603,379 2,612,580 430,573 2,342,974 - Other central banks 238,478 110,960 231,410 110,960

841,857 2,723,540 661,983 2,453,934

The Group The Bank

The non-interest bearing statutory deposits maintained with Bank Negara Malaysia are in compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958 (revised 1994), the amounts of which are determined at set percentages of total eligible liabilities. The non-interest bearing statutory deposits of a foreign subsidiary and foreign branches are maintained with respective central banks in compliance with the applicable legislation. 11 Investment in subsidiaries

2009 2008 RM'000 RM'000

Unquoted shares, at cost- ordinary and preference shares (a) 4,117,770 2,547,517 - discontinuation of fair value hedge (b) (41,100) (41,100)

4,076,670 2,506,417 Less: Allowance for impairment loss (260,170) (260,498)

3,816,500 2,245,919

The Bank


81

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 11 Investment in subsidiaries (Continued) (a) Ordinary shares

On 13 January 2009, the Bank acquired additional 3.33 billion ordinary shares of CIMB Thai Bank Public Company Limited (formerly known as BankThai Public Company Limited).

(b) The Bank had undertaken a fair value hedge on the foreign exchange risk of CIMB (L)

Limited with a USD100 million subordinated debt. The foreign exchange changes are reflected in the Bank’s cost of investment in CIMB (L) Limited. On 31 August 2008, the fair value hedge was discontinued pursuant to the transfer of assets and liabilities of CIMB (L) Limited to CIMB Bank (L) Limited. As such, the Bank had undertaken a net investment hedge on the foreign exchange risk of CIMB Bank (L) Limited using the following hedging instruments:

Fair value at

31.12.09 Fair value at

31.12.08 USD200 million subordinated loans RM685,000,000 RM692,900,000 USD200 million subordinated notes - RM786,501,000 USD200 million loans RM685,000,000 RM692,900,000 USD165 million fixed deposits RM566,238,654 -USD62 million interbank borrowing RM211,294,953 -


82

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 11 Investment in subsidiaries (Continued) (c) The subsidiaries of the Bank are as follows:

2009 2008 2009 2008Name Principal activities % % % %

BOC Nominees Sdn Bhd ^ Dormant - 100 - - BOC Nominees (Tempatan) Sdn Bhd ^ Dormant - 100 - - BOC Nominees (Asing) Sdn Bhd ^ Dormant - 100 - - CIMB Group Nominees Sdn Bhd Nominee services 100 100 - - CIMB Group Nominees (Tempatan) Sdn Bhd Nominee services 100 100 - - CIMB Group Nominees (Asing) Sdn Bhd Nominee services 100 100 - - Bumiputra-Commerce Corporate Services Limited (Incorporated in the Federal Territory of Labuan)

Nominee services - - 100 100

BC Management Services Ltd (Incorporated in the Federal Territory of Labuan)

Nominee services - - 100 100

Bumiputra-Commerce Finance Berhad Dormant 100 100 - - I-Prestige Sdn Bhd Special purpose

vehicle100 100 - -

CIMB Trustee Berhad Trustee services 20 20 40 40 CIMB Trust Limited (Incorporated in the Federal Territory of Labuan)

Trustee services 100 100 - -

BBMB Unit Trust Management Berhad * Dormant 100 100 - - CIMB FactorLease Berhad Leasing, hire

purchase financing, debt factoring, loan management and property management

100 100 - -

CIMB Bank (L) Limited (Incorporated in the Federal Territory of Labuan)

Offshore banking 100 100 - -

CIMB (L) Limited (Incorporated in the Federal Territory of Labuan)

Dormant 100 100 - -

Semerak Services Sdn Bhd Service company 100 100 - - BBMB Securities (Holdings) Sdn Bhd * Investment holding

company100 100 - -

iCIMB (M) Sdn Bhd Provision of management services and outsourcing

100 100 - -

Percentage of equity held:Directly by the

BankThrough subsidiary

company


83

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 11 Investment in subsidiaries (Continued) (c) The subsidiaries of the Bank are as follows: (Continued)


Bumiputra-Commerce Factoring Berhad * Dormant 100 100 - - Bumiputra-Commerce Properties Sdn Bhd * Dormant 100 100 - - BBMB Futures Sdn Bhd * Dormant - - 100 100 BBMB Finance (Hong Kong) Limited (Incorporated in Hong Kong)

Dormant 100 100 - -

CIMB Islamic Bank Berhad Islamic banking 100 100 - - Halyconia Asia Fund Limited (Incorporated in British Virgin Islands)

Open ended investment fund

- - 100 100

CIMB Private Equity General Partner Limited (Incorporated in the Federal Territory of Labuan)

Fund management - - 100 100

CIMB Mezzanine General Partner Limited (Incorporated in the Federal Territory of Labuan)

Fund management - - 100 100

CIMB Islamic Funds DCC Limited (Incorporated in the Federal Territory of Labuan)

Fund company - - 100 100

S.B. Venture Capital Corporation Sdn Bhd Investment holding and provision of management services

100 100 - -

Southern Nominees (Tempatan) Sdn Bhd Nominee services 100 100 - - Southern Nominees (Asing) Sdn Bhd Nominee services 100 100 - - SBB Capital Markets Sdn Bhd * Investment holding 100 100 - - Mohaiyani Sdn Bhd * Investment holding - - 100 100 Mohaiyani Nominees Sdn Bhd ^ Dormant - - - 100 Mohaiyani Nominees (Tempatan) Sdn Bhd ^ Dormant - - - 100 BHLB Trustee Berhad Trustee services - - 73 73 S.B. Properties Sdn Bhd Property

ownership and management

100 100 - -

Elite Constant Development Sdn Bhd Construction of building

- - 100 100

BHLB Properties Sdn Bhd Property ownership and management

100 100 - -

SIBB Berhad (formerly known as Southern Investment Bank Berhad)

Dormant 80 80 - -

Perdana Nominees (Tempatan) Sdn Bhd Nominee services - - 80 80 Perdana Nominees (Asing) Sdn Bhd * Nominee services - - 80 80 Perdana Mutual Fund Berhad * Dormant - - 80 80

Directly by the Bank

Through subsidiary company

Percentage of equity held:


84

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 11 Investment in subsidiaries (Continued) (c) The subsidiaries of the Bank are as follows: (Continued)

2009 2008 2009 2008

Name Principal activities % % % %

BHL Venture Berhad * Investment holding 100 100 - - BHLB Asset Management Sdn Bhd * Investment holding - - 100 100 SBB Unit Trust Management Berhad * Dormant - - 100 100 SFB Auto Berhad Dormant 100 100 - - SFB Nominees (Tempatan) Sdn Bhd ^ Nominee services - 100 - - SFB Development Sdn Bhd Property investment 100 100 - - Seal Line Trading Sdn Bhd Property investment - - 100 100 CIMB Bank Nominees (S) Pte Ltd (formerly known as CIMB Bank Nominees (S) Sdn Bhd (Incorporated in Republic of Singapore) α

Nominee services 100 100 - -

SBB Capital Corporation Special purpose vehicle

100 100 - -

Perdana Visi Hartanah Sdn Bhd Property investment 100 100 - -

Southeast Asia Special Asset Management Berhad (formerly known as Common Forge Berhad)

Special purpose vehicle

- 100 - -

SBB Nominees (Tempatan) Sdn Bhd Nominee services 100 100 - - SBB Nominees (Asing) Sdn Bhd Nominee services 100 100 - - SBB Futures Sdn Bhd * Investment holding 100 100 - - Premier Fidelity Berhad Dormant 100 100 - - CIMB Thai Bank Public Company Limited (Incorporated in the Kingdom of Thailand) #

Banking 93.15 42.13 - -

Commerce Returns Berhad ∞ Special purpose vehicle

- - - -

Percentage of equity held:Directly by the

BankThrough subsidiary

company


85

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 11 Investment in subsidiaries (Continued) The subsidiaries held through CIMB Thai Bank Public Company Limited are as follows:


BT Securities Company Limited (Incorporated in the Kingdom of Thailand)#

Stock and share broking - - 99.9 99.9

BT Insurance Company Limited (Incorporated in the Kingdom of Thailand)#

Non-life insurance activities - - 99.9 99.9

BT Business Consulting Company Limited (Incorporated in the Kingdom of Thailand)#

Consultancy services - - 99.9 99.9

BT Asset Management Company Limited (Incorporated in the Kingdom of Thailand)# Fund Manager - - 99.9 99.9 BT Leasing Company Limited (Incorporated in the Kingdom of Thailand)#

Leasing/hire purchase - - 100 100

BT Worldlease Company Limited (Incorporated in the Kingdom of Thailand)# Hire purchase - - 75 75 Sathorn Asset Management Company Limited (Incorporated in the Kingdom of Thailand)# Asset management - - 99.9 99.9

Through subsidiary company

Directly by the Bank

Percentage of equity held:

* Company will be liquidated in 2010 ^ Company has been voluntarily liquidated during the financial year α Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent

legal entity from PricewaterhouseCoopers Malaysia ∞ In accordance with IC 112 - Consolidation: Special Purpose Entities, Commerce Returns Berhad is consolidated in

the Group as the substance of the relationship between the Group and the special purpose entity indicates that the entity is controlled by the Group

# Not audited by any member firm of PricewaterhouseCoopers International All the subsidiaries, unless otherwise stated, are incorporated in Malaysia


86


for the financial year ended 31 December 2009 (Continued) 12 Investment in jointly controlled entity

2009 2008 RM'000 RM'000

Share of net assets of joint venture 134,559 127,701

The Group

2009 2008 RM'000 RM'000

Unquoted shares, at cost 125,000 125,000 Less: Allowance for impairment loss (552) (552)

124,448 124,448

The Bank

The joint venture, which is incorporated in Malaysia, is as follows: Name

2009 2008% %

Proton Commerce Sdn Bhd 50 50

Percentage of equity heldPrincipal activities

Financing of vehicles On 22 October 2003, Bumiputra-Commerce Finance Berhad (“BCF”) entered into a joint venture agreement with Proton Edar Sdn Bhd (“PESB”) for the purposes of building and operating a competitive vehicle financing business in Malaysia for vehicles distributed by PESB. Subsequently, a jointly controlled entity was incorporated under the name of Proton Commerce Sdn Bhd (“PCSB”) which is 50%:50% owned by BCF and PESB respectively. PCSB is primarily responsible for developing, managing and marketing hire purchase loans for vehicles sold to the customers of PESB. Pursuant to the joint venture, BCF issued RM200 million Perpetual Preference Shares (“PPS”) which were fully subscribed by PCSB. Pursuant to the vesting of the finance company business and the related assets and liabilities of BCF to the Bank and the subsequent capital reduction exercise undertaken by BCF in 2006, the BCF PPS were cancelled, and the Bank issued RM200 million PPS to PCSB. Under the joint venture, the assets and liabilities of PCSB are recorded and accounted for by the Bank in a Special Project Account (“SPA”) for and on behalf of PCSB. The respective balances in this SPA as at the balance sheet date are consolidated and reported as the assets and liabilities of the Bank. All income and expenses arising from PCSB’s activities are recorded in the books of PCSB. At the Group, the 50% share of profit and loss from the operations of PCSB is shown as a line item in the income statement. For the financial year ended 2009, PCSB recorded a profit after taxation of RM13,716,145 (2008: RM6,506,098) and the Group’s share of this profit is RM6,858,072 (2008: RM3,253,049).


87

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 12 Investment in jointly controlled entity (Continued) The assets and liabilities in the SPA as at 31 December are as follows:

2009 2008 RM’000 RM’000

AssetsCash and short-term funds 1 237 Loans and advances 2,080,513 2,061,944 Other assets 4,384 4,423 Held-to-maturity securities 90,000 90,000 Total assets 2,174,898 2,156,604

Liabilities and equityDeposits and placements of banks and other financial institutions 1,188,571 1,030,504 Amount due to Cagamas Berhad 56,657 68,158 Other liabilities 415,310 452,539 Amount due to related company (Note 16) 314,360 405,403 Total liabilities 1,974,898 1,956,604

Perpetual preference shares 200,000 200,000 200,000 200,000

Total liabilities and equity 2,174,898 2,156,604

Commitments and contingencies 46,380 30,840 The Group’s share of income and expenses of the joint venture is as follows:

2009 2008 RM’000 RM’000

Income 55,047 57,224 Expenses (46,229) (53,175)Profit before taxation 8,818 4,049 Taxation (1,960) (796)Net profit for the financial year 6,858 3,253


88

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 12 Investment in jointly controlled entity (Continued) The Group’s share of the assets and liabilities of the joint venture other than those that are held in trust by the Bank is as follows:

2009 2008 RM’000 RM’000

Non-current assets 256,479 301,371 Current assets 86,887 59,368 Current liabilities (58,121) (35,283)Long term liabilities (150,686) (197,755)Net assets 134,559 127,701 13 Investment in associate

2009 2008RM’000 RM’000

At 1 January 587,280 791 Acquisition of associate 245,034 595,814 Disposal of associate (Note 55 (c)(iv)) - (595)Classified as subsidiary during the financial year (587,280) - Dividend from associate - (500)Share of profit/(loss) 23,602 (40,565)Revaluation reserve – available-for-sale securities - 32,167 Exchange fluctuation - 168

268,636 587,280

The Group

2009 2008RM’000 RM’000

Quoted shares outside Malaysia, at cost - 595,814

Unquoted shares outside Malaysia, at cost 245,034 -

The Bank


89

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 13 Investment in associate (Continued) Details of the associate held by the Bank are as follows: Name of company

2009 2008

% %

Bank of Yingkou Co Ltd (Incorporated in the People Republic of China)

19.99 -

CIMB Thai Bank Public Company Limited (formerly known as BankThai Public Company Limited) ("CIMB Thai Bank") (Incorporated in the Kingdom of Thailand) - 42.13

Banking

Banking

Percentage of equity heldPrincipal activities

In 2009, the Bank acquired additional 49.91% stake in CIMB Thai Bank and following the completion of CIMB Thai Bank’s subsequent rights issue, CIMB Bank holds 93.15% in CIMB Thai Bank and this has been accounted for as a subsidiary as at 31 December 2009, as set out in Note 49(a). The Group’s share of income and expenses of the associates is as follows:

2009 2008RM’000 RM’000

Interest income 80,569 73,922 Interest expense (23,684) (38,628)Net interest income 56,885 35,294 Non-interest income 2,184 13,497 Net income 59,069 48,791 Overheads (24,424) (45,572)Allowances for losses on loans and advances (3,202) (24,911)Allowance for impairment losses (41) (19,044)Profit/(loss) before taxation 31,402 (40,736)Taxation (7,800) 140 Profit/(loss) after taxation 23,602 (40,596)Minority interest - 31

23,602 (40,565)


90


for the financial year ended 31 December 2009 (Continued) 13 Investment in associate (Continued) The Group’s share of the assets and liabilities of the associates is as follows:

2009 2008 RM’000 RM’000

Total assets 2,745,155 8,763,864 Total liabilities (2,539,276) (8,587,754)Net assets 205,879 176,110 Revaluation reserve – available-for-sale securities - 32,167 205,879 208,277

Commitments and contingencies 46,380 9,149,942 14 Amount due from/(to) holding company and ultimate holding company

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Amount due from: - holding company 18,087 18,033 14,664 14,568 - ultimate holding company 29,035 260,317 182 232,304

47,122 278,350 14,846 246,872

Amount due to: - ultimate holding company (55,439) - - -

The Group The Bank

The amounts due from/(to) holding company and ultimate holding company are unsecured, interest free and recallable on demand. 15 Amount due from/(to) subsidiaries

2009 2008 RM'000 RM'000

Amount due from subsidiaries 128,064 197,618

Amount due to subsidiaries (118,668) (178,140)

The Bank

The amounts due from/(to) subsidiaries are unsecured, interest free and recallable on demand. Notes to the Financial Statements

for the financial year ended 31 December 2009 (Continued)


91

16 Amount due from/(to) related companies

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Amount due from related companies 998,818 90,926 994,989 90,819

Amount due to related companies (9,710) (15,432) (285) (9,398)

The Group The Bank

The amounts from/(to) related companies are unsecured, interest free and recallable on demand. 17 Goodwill

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

CostAt 1 January 3,695,075 3,695,075 3,559,075 3,559,075 Acquisition of interest in subsidiaries (Note 55(a)(i)) 1,199,277 - - - Exchange fluctuation 33,349 - - - At 31 December 4,927,701 3,695,075 3,559,075 3,559,075

ImpairmentAt 1 January - - - - Impairment charge (4,000) - (4,000) - At 31 December (4,000) - (4,000) - Net book value at 31 December 4,923,701 3,695,075 3,555,075 3,559,075

The Group The Bank


92


for the financial year ended 31 December 2009 (Continued) 17 Goodwill (Continued) Allocation of goodwill to cash-generating units Goodwill has been allocated to the following cash-generating units (“CGUs”). These CGUs do not carry any intangible assets with indefinite useful lives. A segment-level summary of the goodwill allocation is presented below:

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Retail Banking 1,101,075 1,101,075 1,101,075 1,101,075Business Banking 911,000 911,000 911,000 911,000Corporate Banking 419,000 419,000 419,000 419,000Islamic Banking 136,000 136,000 - -Direct Banking Group 587,000 587,000 587,000 587,000Treasury 537,000 537,000 537,000 537,000Foreign Banking operations 1,199,277 - - - Others - 4,000 - 4,000Goodwill 4,890,352 3,695,075 3,555,075 3,559,075Goodwill classified as non-current assets held for sale (Note 56(ii)) - 35,000 - 35,000 Exchange fluctuation 33,349 - - - 4,923,701 3,730,075 3,555,075 3,594,075

The Group The Bank


93

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 17 Goodwill (Continued) Impairment test for goodwill Value-in-use The recoverable amount of CGUs is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on the 2010 financial budgets approved by the Board of Directors, projected for five years based on the average to year historical Gross Domestic Product (“GDP”) growth of the country covering a five year period, revised for current economic conditions. Cash flows beyond the five year period are extrapolated using an estimated growth rate of 5.00% (2008: 5.00%). The cash flow projections are derived based on a number of key factors including the past performance and management’s expectation of market developments. The discount rate used in determining the recoverable amount of the CGUs is 7.10% (2008: 9.80%). The discount rate is pre-tax and reflects the specific risks relating to the CGUs. Management believes that no reasonably possible change in any of the key assumptions would cause the carrying value of any CGU to exceed its recoverable amount. Fair value less costs to sell For foreign banking operation, the recoverable amount determined using fair value less cost to sell, is based on observable quoted market prices. For the CGU which is associated with the proposed disposals as disclosed in Note 56, the recoverable amount is determined based on the estimated disposal price less any costs to sell. The disposal price is determined based on the net tangible assets of the affected business as at 30 January 2009, plus a premium of RM65 million which has been agreed by both the Bank and the acquirer of the business. Impairment charge The impairment charge in the Bank during the financial year arises from the impairment of trustee services of RM4 million (2008: the disposal of certain assets and liabilities of Southern Investment Bank Berhad of RM35 million).


94


for the financial year ended 31 December 2009 (Continued) 18 Intangible assets

Customer relationships

Core deposits

Computer software Licence fee Total

The Group Note RM’000 RM’000 RM’000 RM’000 RM’000 2009Cost or valuationAt 1 January 153,091 263,612 335,819 - 752,522 Acquisition of a subsidiary 10,291 1,050 125,320 256 136,917 Additions - - 228,045 - 228,045 Disposals/write-off - - (3,099) - (3,099)Reclassified from property, plant and equipment 20 - - 1,081 - 1,081 Exchange fluctuation - - (317) - (317)At 31 December 163,382 264,662 686,849 256 1,115,149

Amortisation At 1 January 31,892 82,379 225,963 - 340,234 Acquisition of a subsidiary 346 - 83,267 - 83,613 Amortisation during the financial year 13,051 32,952 71,865 103 117,971 Impairment - - 1,955 - 1,955 Disposals/write-off - - (2,039) - (2,039)Exchange fluctuation - - (1) - (1)At 31 December 45,289 115,331 381,010 103 541,733 Net book value at 31 December 2009 118,093 149,331 305,839 153 573,416


95

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 18 Intangible assets (Continued)


Core deposits

Computer software Total

The Group Note RM’000 RM’000 RM’000 RM’000 2008Cost or valuationAt 1 January 153,091 263,612 275,708 692,411 Additions - - 51,531 51,531 Disposals/write-off - - (14) (14)Reclassified from property, plant and equipment 20 - - 8,289 8,289 Reclassified from non-current assets held for sale 56(ii) - - 301 301 Exchange fluctuation - - 4 4 At 31 December 153,091 263,612 335,819 752,522

Amortisation At 1 January 19,134 49,428 158,224 226,786 Amortisation during the financial year 12,758 32,951 65,662 111,371 Disposals/write-off - - (14) (14)Reclassified from property, plant and equipment 20 - - 1,886 1,886 Reclassified from non-current assets held for sale 56(ii) - - 202 202 Exchange fluctuation - - 3 3 At 31 December 31,892 82,379 225,963 340,234 Net book value at 31 December 2008 121,199 181,233 109,856 412,288


96

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 18 Intangible assets (Continued)


Core deposits


RM’000 RM’000 RM’000 RM’000 The Bank2009Cost or valuationAt 1 January 153,091 263,612 313,120 729,823 Additions - - 215,743 215,743 Disposals/write-off - - (980) (980)At 31 December 153,091 263,612 527,883 944,586

Amortisation At 1 January 31,892 82,379 214,695 328,966 Amortisation during the financial year 12,758 32,951 57,345 103,054 Disposals/write-off - - (108) (108)At 31 December 44,650 115,330 271,932 431,912 Net book value at 31 December 2009 108,441 148,282 255,951 512,674


Core deposits


RM’000 RM’000 RM’000 RM’000 The Bank2008Cost or valuationAt 1 January 153,091 263,612 263,979 680,682 Additions - - 49,122 49,122 Transferred from CIMB Islamic - - 19 19 At 31 December 153,091 263,612 313,120 729,823

Amortisation At 1 January 19,134 49,428 156,058 224,620 Amortisation during the financial year 12,758 32,951 58,637 104,346 At 31 December 31,892 82,379 214,695 328,966 Net book value at 31 December 2008 121,199 181,233 98,425 400,857 The above intangible assets include the software under construction at cost RM199,638,968 (2008: RM37,775,106)


97


for the financial year ended 31 December 2009 (Continued) 18 Intangible assets (Continued) The valuation of customer relationships was determined through the sum of the discounted future excess earnings attributable to existing customers over the remaining life span of the customer relationships. Income from existing customer base was projected, adjusted for expected attrition and taking into account applicable costs to determine future excess earnings. The discount rate used in the valuation of customer relationships was 10.0%-11.7%, which is arrived at using the weighted average cost of capital adjusted for the risk premium after taking into consideration the average market cost of equity. The valuation of core deposits was derived by discounting the anticipated future benefits in the form of net interest savings from core deposits. The discount rate used was 8.0%-9.6%, which was derived from the average of the weighted average cost of capital and the cost of equity, reflecting the lower risk premium for core deposit intangibles compared with equity returns. The remaining amortisation periods of the intangible assets are as follows: Customer relationships:

- credit card - revolving credit - overdraft - trade finance

Core deposits Computer software - core and front-end systems - others

8.5 years 3 years 5 years 4 years 4.5 - 7 years 1 - 4 years 1 - 2 years


98


for the financial year ended 31 December 2009 (Continued) 19 Prepaid lease payments

Long term leasehold

land

Short term leasehold

land Total The Group Note RM’000 RM’000 RM’000 2009CostAt 1 January 36,318 5,822 42,140 Acquisition of a subsidiary - 5,247 5,247 Reclassified to property, plant and equipment 20 (784) - (784)Reclassified to non-current assets/ disposal groups held for sale 56(iii) (16,619) - (16,619)Disposals/write-off (829) (1,736) (2,565)Exchange fluctuation (4) (185) (189)At 31 December 18,082 9,148 27,230

Amortisation and impairmentAt 1 January 8,963 3,559 12,522 Acquisition of a subsidiary - 2,580 2,580 Amortisation during the financial year 929 403 1,332 Impairment - 427 427 Disposals/write-off (252) (1,633) (1,885)Reclassified to non-current assets/ disposal groups held for sale 56(iii) (4,012) - (4,012)Exchange fluctuation (2) (72) (74)At 31 December 5,626 5,264 10,890 Net book value at 31 December 2009 12,456 3,884 16,340


99

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 19 Prepaid lease payments (Continued)

Long term leasehold

land


land Total The Group RM’000 RM’000 RM’000 2008CostAt 1 January 39,728 5,609 45,337 Disposals/write-off (3,427) - (3,427)Exchange fluctuation 17 213 230 At 31 December 36,318 5,822 42,140

Amortisation At 1 January 9,591 3,309 12,900 Amortisation during the financial year 922 135 1,057 Disposals/write-off (1,556) - (1,556)Exchange fluctuation 6 115 121 At 31 December 8,963 3,559 12,522 Net book value at 31 December 2008 27,355 2,263 29,618 Future amortisation of prepaid land lease is as follows:

Long term leasehold

land


land

Long term leasehold

land


land The Group RM’000 RM’000 RM’000 RM’000 - Not later than one year 929 403 922 135 - Later than one year and not later than five years 3,716 1,612 3,688 540 - More than five years 7,811 1,869 22,745 1,588

12,456 3,884 27,355 2,263

20082009


100


Long term leasehold

land


land Total The Bank Note RM’000 RM’000 RM’000 2009CostAt 1 January 31,858 4,897 36,755 Disposals/write-off (614) (1,726) (2,340)Reclassified to non-current assets/ disposal groups held for sale 56(iii) (14,489) - (14,489)Exchange fluctuation - (56) (56)At 31 December 16,755 3,115 19,870

Amortisation At 1 January 8,389 3,169 11,558 Amortisation during the financial year 802 72 874 Disposals/write-off (254) (1,291) (1,545)Reclassified to non-current assets/ disposal groups held for sale 56(iii) (3,484) - (3,484)Exchange fluctuation - (44) (44)At 31 December 5,453 1,906 7,359 Net book value at 31 December 2009 11,302 1,209 12,511


101


Long term leasehold

land


land Total The Bank RM’000 RM’000 RM’000 2008CostAt 1 January 35,285 4,684 39,969 Disposals/write-off (3,427) - (3,427)Exchange fluctuation - 213 213 At 31 December 31,858 4,897 36,755

Amortisation At 1 January 9,064 2,938 12,002 Amortisation during the financial year 881 117 998 Disposals/write-off (1,556) - (1,556)Exchange fluctuation - 114 114 At 31 December 8,389 3,169 11,558 Net book value at 31 December 2008 23,469 1,728 25,197 Future amortisation of prepaid land lease is as follows:

Long term leasehold

land


land

Long term leasehold

land


land The Bank RM’000 RM’000 RM’000 RM’000 - Not later than one year 802 72 881 117 - Later than one year and not later than five years

3,208 288 3,524 468

- More than five years 7,292 849 19,064 1,143 11,302 1,209 23,469 1,728

2009 2008


102

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 20 Property, plant and equipment

The Group Freehold

land

Buildings on freehold

land

Buildings on long

term leasehold

land

Buildings on short

term leasehold

land

Renovations, office

equipment, furniture and

fittings

Computer equipment

and hardware

Motor vehicles

Computer equipment

and software

under lease Total 2009 Note RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 CostAt 1 January 104,999 184,641 98,029 15,849 640,037 492,519 35,493 58,412 1,629,979 Additions - 2,093 14,449 6,149 220,115 9,755 2,950 5,413 260,924 Disposals/write-offs (7,167) (44,203) (343) (3,214) (85,810) (86,538) (4,295) (3,630) (235,200)Acquisit ion of a subsidiary 82,595 440,675 - 43,473 83,199 154,313 3,775 - 808,030 Reclassification - (90) - - 51 1 - 38 - Reclassified to investment properties 21 (14,383) (7,150) (4,310) - - - - - (25,843)Reclassified from prepaid lease payments 19 - - - 784 - - - - 784 Reclassified to intangible assets 18 - - - - (1,081) - - - (1,081)Reclassified to non-current assets held for sale 56(iii) (68,510) (208,093) (46,649) - (2,817) - - - (326,069)Exchange fluctuation - - 238 338 479 130 37 291 1,513 At 31 December 97,534 367,873 61,414 63,379 854,173 570,180 37,960 60,524 2,113,037


103


for the financial year ended 31 December 2009 (Continued) 20 Property, plant and equipment (Continued)

The Group Freehold

land


land

Buildings on long

term leasehold

land

Buildings on short

term leasehold

land

Renovations, office


fittings

Computer equipment

and hardware

Motor vehicles

Computer equipment

and software

under lease Total 2009 Note RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Accumulated depreciationAt 1 January - 77,219 43,340 8,107 413,775 302,995 17,950 37,880 901,266 Charge for the financial year - 2,797 2,174 3,301 79,910 87,017 6,765 7,960 189,924 Disposals/write-off - (8,015) - (1,179) (80,024) (86,224) (2,805) (2,704) (180,951)Acquisit ion of a subsidiary - 114,929 - 20,092 57,635 99,869 1,354 - 293,879 Impairment: - arising from acquisition of a subsidiary 9,008 26,905 - - 337 587 - - 36,837 - disposal - (8,759) - - (9) (10) - - (8,778)Reclassification - - - - (62) 26 - 36 - Reclassified to investment properties 21 - (1,297) (676) - - - - - (1,973)Reclassified to non-current assets held for sale 56(iii) - (91,853) (21,400) - (1,138) - - - (114,391)Exchange fluctuation - - 131 98 276 109 27 62 703 At 31 December 9,008 111,926 23,569 30,419 470,700 404,369 23,291 43,234 1,116,516

Net book value at 31 December 2009 88,526 255,947 37,845 32,960 383,473 165,811 14,669 17,290 996,521 The above property, plant and equipment include renovations, computer equipment and hardware under construction at cost of RM22,768,275.


104

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 20 Property, plant and equipment (Continued)

The GroupFreehold

land


land

Buildings on long

term leasehold

land

Buildings on short

term leasehold

land

Renovations, office


fittings

Computer equipment

and hardware

Motor vehicles

Computer equipment

and software

under lease Total 2008 Note RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 CostAt 1 January 106,014 191,242 95,115 19,504 550,903 399,936 35,862 52,640 1,451,216 Additions - - - - 108,174 106,036 5,574 3,417 223,201 Disposals/write-off (1,015) (6,195) - - (14,446) (5,866) (5,959) (349) (33,830)Reclassification - - 3,611 (3,611) (3,810) 209 - 3,601 - Reclassified to intangible assets 18 - - - - - (8,289) - - (8,289)Reclassified from/(to) non-current assets held for sale 56(iii) - - - - (45) 313 - - 268 Exchange fluctuation - (406) (697) (44) (739) 180 16 (897) (2,587)At 31 December 104,999 184,641 98,029 15,849 640,037 492,519 35,493 58,412 1,629,979


105


The GroupFreehold

land


land

Buildings on long

term leasehold

land

Buildings on short

term leasehold

land

Renovations, office


fittings

Computer equipment

and hardware

Motor vehicles

Computer equipment

and software

under lease Total 2008 Note RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Accumulated depreciationAt 1 January - 75,516 39,995 9,721 360,905 256,655 20,764 28,710 792,266 Charge for the financial year - 3,977 2,206 380 62,718 53,373 2,607 9,239 134,500 Disposals/write-off - (1,866) (67) (470) (8,824) (5,578) (5,413) (321) (22,539)Reclassification - - 1,519 (1,519) (453) 41 - 412 - Reclassified to intangible assets 18 - - - - - (1,886) - - (1,886)Reclassified from/(to) non-current assets held for sale 56(iii) - - - - (44) 263 - - 219 Exchange fluctuation - (408) (313) (5) (527) 127 (8) (160) (1,294)At 31 December - 77,219 43,340 8,107 413,775 302,995 17,950 37,880 901,266



106


The BankFreehold

land


land

Buildings on long

term leasehold

land

Buildings on short

term leasehold

land

Renovations, office


fittings

Computer equipment

and hardware

Motor vehicles

Computer equipment

and software

under lease Total 2009 Note RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000CostAt 1 January 49,707 110,968 80,028 12,840 610,118 474,207 32,387 4,746 1,375,001 Additions - - 14,361 5,939 148,052 48,305 1,143 52 217,852 Disposals/write-off (7,139) (1,657) (343) (67) (76,742) (78,877) (1,982) (1,171) (167,978)Reclassified to non-current assets held for sale 56(iii) (26,366) (55,942) (43,294) - - - - - (125,602)Exchange fluctuation - - 283 (3) 491 134 39 291 1,235 At 31 December 2009 16,202 53,369 51,035 18,709 681,919 443,769 31,587 3,918 1,300,508

Accumulated depreciationAt 1 January - 59,855 38,739 6,533 399,579 287,920 15,861 2,467 810,954 Charge for the financial year - 1,821 1,847 370 71,523 61,249 5,779 115 142,704 Disposals/write off - (410) (21) (55) (71,926) (78,367) (1,666) (1,170) (153,615)Reclassified to non-current assets held for sale 56(iii) - (44,225) (20,419) - - - - - (64,644)Exchange fluctuation - - 132 (2) 288 113 30 62 623 At 31 December 2009 - 17,041 20,278 6,846 399,464 270,915 20,004 1,474 736,022



107


The BankFreehold

land


land

Buildings on long

term leasehold

land

Buildings on short

term leasehold

land

Renovations, office


fittings

Computer equipment

and hardware

Motor vehicles

Computer equipment

and software

under lease Total 2008 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

CostAt 1 January 50,722 114,269 77,291 16,495 520,892 374,569 33,071 1,946 1,189,255

Additions - - - - 106,694 105,108 5,152 123 217,077

Disposals/write-off (1,015) (2,895) - - (13,084) (5,634) (5,842) (27) (28,497)

Reclassifications - - 3,611 (3,611) (3,601) - - 3,601 -

Exchange fluctuation - (406) (874) (44) (783) 164 6 (897) (2,834)

At 31 December 2008 49,707 110,968 80,028 12,840 610,118 474,207 32,387 4,746 1,375,001

Accumulated depreciationAt 1 January - 60,192 35,574 7,735 348,189 243,168 18,808 1,946 715,612

Charge for the financial year - 1,913 2,022 322 59,927 50,012 2,366 298 116,860

Disposals/write off - (1,844) - - (7,559) (5,372) (5,296) (27) (20,098)

Reclassification - - 1,519 (1,519) (412) - - 412 -

Exchange fluctuation - (406) (376) (5) (566) 112 (17) (162) (1,420)

At 31 December 2008 - 59,855 38,739 6,533 399,579 287,920 15,861 2,467 810,954



108

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 21 Investment properties

Freehold land

Buildings on freehold land

Buildings on short term leasehold

land

Buildings on long term leasehold

land Total The Group Note RM’000 RM’000 RM’000 RM’000 RM’000 2009At 1 January - - 44,699 55,476 100,175 Reclassified from property, plant and equipment 20 14,383 5,853 3,634 - 23,870 Fair value adjustments 1,592 (1,236) 5,177 (9,211) (3,678)Exchange fluctuation - - (710) 692 (18)At 31 December 15,975 4,617 52,800 46,957 120,349


land


land Total The Bank RM’000 RM’000 RM’000 2009At 1 January 44,699 55,476 100,175 Fair value adjustments 5,911 (9,211) (3,300)Exchange fluctuation (710) 692 (18)At 31 December 49,900 46,957 96,857


land


land Total The Group and The Bank RM’000 RM’000 RM’000 2008At 1 January 44,519 52,902 97,421 Fair value adjustments (2,141) - (2,141)Exchange fluctuation 2,321 2,574 4,895 At 31 December 44,699 55,476 100,175 The investment properties are valued annually at fair value based on market values determined by independent qualified valuers. The following amounts have been reflected in the income statement:

2009 2008 RM’000 RM’000

Rental income 3,440 3,287 Operating expenses arising from investment properties that generated the rental income (163) (426)


109

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 22 Deposits from customers (a) By type of deposit

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Demand deposits 30,197,077 26,043,404 26,789,999 23,743,569 Saving deposits 12,616,669 9,264,470 9,597,651 8,869,939 Fixed deposits 67,011,173 57,958,370 50,696,236 47,726,542 Negotiable instruments of deposit 1,544,632 2,344,348 988,417 1,230,050 Others 35,502,794 25,480,383 26,377,608 19,000,159

146,872,345 121,090,975 114,449,911 100,570,259

The Group The Bank

The maturity structure of fixed deposits and negotiable instruments of deposit is as follows:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Due within six months 56,237,627 49,551,568 41,273,279 39,514,952 Six months to less than one year 9,212,618 7,497,358 8,045,128 7,295,223 One year to less than three years 1,714,533 2,212,588 1,121,268 1,759,573 Three years to less than five years 1,386,256 1,041,204 1,240,207 386,844 Five years and more 4,771 - 4,771 -

68,555,805 60,302,718 51,684,653 48,956,592

The Group The Bank

(b) By type of customer

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Government and statutory bodies 20,219,428 10,209,884 10,084,788 6,930,030 Business enterprises 61,805,399 62,985,795 50,062,704 48,239,319 Individuals 44,755,386 32,389,188 35,238,687 30,243,479 Others 20,092,132 15,506,108 19,063,732 15,157,431

146,872,345 121,090,975 114,449,911 100,570,259

The Group The Bank


110

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 23 Deposits and placements of banks and other financial institutions

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Licensed banks 5,621,151 8,687,785 10,360,758 11,157,961 Licensed finance companies 101,307 14,140 59,979 14,140 Licensed investment banks 5,352,466 2,506,885 4,242,116 2,306,585 Bank Negara Malaysia 365,000 365,000 365,000 365,000 Other financial institutions 2,741,022 3,575,486 2,605,544 3,260,594

14,180,946 15,149,296 17,633,397 17,104,280

The Group The Bank

The Bank has undertaken a fair value hedge on the interest rate risk of the negotiable instruments of deposit amounting to RM1,083,400,000 (2008: RM1,104,900,000) using interest rate swaps.

2009 2008 RM'000 RM'000

Negotiable instruments of deposit 1,083,400 1,104,900 Fair value changes arising from fair value hedges (11,765) 13,420

1,071,635 1,118,320


The fair values of interest rate swaps as at 31 December 2009 were RM35,953,565 (2008: RM44,861,369).


111

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 24 Derivative financial instruments, commitments and contingencies (i) Derivative financial instruments The following tables summarise the contractual the underlying principal amounts of derivative financial instruments held at fair value through the income statement. The principal or contractual amounts of these instruments reflect the volume of transactions outstanding at balance sheet date, and do not represent amounts at risk. Trading derivative financial instruments are revalued on a gross position basis and the unrealised gains or losses are reflected in "Derivative financial instruments" Assets and Liabilities respectively.

De rivative s at fai r valu e th rou gh in com e state m e n t Prin cipal Asse ts Liabi l i ti e s Prin cipal Asse ts Liabi l i ti e s At 31 De ce m be r 2009 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Foreign exchange derivat ivesCurrency forward 10,594,076 63,687 (116,660) 7,522,561 55,589 (108,723)Currency swaps 33,048,786 167,904 (238,702) 31,878,930 161,837 (228,260)Currency opt ion 1,383,714 5,018 (4,537) 1,383,714 5,018 (4,537)Cross currency interest rat e swaps 17,139,468 500,600 (345,448) 15,821,588 468,853 (333,916)

62,166,044 737,209 (705,347) 56,606,793 691,297 (675,436)

Interest rate derivat ivesInterest rate swaps 148,823,859 1,975,599 (1,626,041) 134,200,816 1,783,373 (1,558,902)Interest rate futures 16,702,600 30,334 (25,774) 16,702,600 30,334 (25,774)Interest rate opt ions 3,130,000 11,854 (4,920) 3,130,000 11,854 (4,920)

168,656,459 2,017,787 (1,656,735) 154,033,416 1,825,561 (1,589,596)Equity related derivat ivesEquity opt ions 11,975,449 528,843 (856,920) 8,991,160 424,075 (752,152)Commodity opt ions 690,261 70,562 (66,429) 690,261 70,562 (66,429)Commodity futures 31,672 842 (13) 31,672 842 (13)

12,697,382 600,247 (923,362) 9,713,093 495,479 (818,594)Credit related cont ractCredit default swaps 397,879 2,062 (651) 397,879 2,062 (651)

Held for hedging purposeInterest rate swaps 8,628,728 147,657 (176,843) 9,978,728 189,215 (176,844)

T otal derivat ives asset s/(liabilit ies) 252,546,492 3,504,962 (3,462,938) 230,729,909 3,203,614 (3,261,121)

Th e Grou p Th e Ban k Fair valu e s Fair valu e s


112

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 24 Derivative financial instruments, commitments and contingencies

(Continued) (i) Derivative financial instruments (continued)

Derivatives at fair value through income statement Principal Assets Liabilities Principal Assets Liabilities At 31 December 2008 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Foreign exchange derivativesCurrency forward 8,292,585 113,488 (79,987) 7,640,459 113,382 (79,987)Currency swaps 16,222,368 229,311 (245,874) 16,202,368 229,311 (242,394)Currency option 1,881,221 56,429 (50,018) 1,881,221 56,429 (50,018)Cross currency interest rate swaps 12,786,403 388,497 (396,895) 12,859,158 388,497 (406,933)

39,182,577 787,725 (772,774) 38,583,206 787,619 (779,332)

Interest rate derivativesInterest rate swaps 156,927,418 3,045,560 (2,622,839) 154,185,276 2,878,665 (2,630,138)Interest rate futures 28,174,595 82,820 (45,444) 28,174,595 82,820 (45,444)Interest rate options 3,630,000 14,954 (13,512) 3,630,000 14,954 (13,512)

188,732,013 3,143,334 (2,681,795) 185,989,871 2,976,439 (2,689,094)Equity related derivativesEquity options 15,383,947 194,711 (201,303) 11,637,270 152,183 (158,768)Commodity options 971,404 986,367 (982,056) 971,404 986,367 (982,056)Equity futures 13,009 1 (420) 13,009 1 (420)

16,368,360 1,181,079 (1,183,779) 12,621,683 1,138,551 (1,141,244)Credit related contract

Credit default swaps 580,817 4,207 (6,117) 580,817 4,207 (6,117)

Held for hedging purposeInterest rate swaps 4,736,722 219,190 (204,570) 4,736,722 219,190 (204,570)

Total derivatives assets/(liabilit ies) 249,600,489 5,335,535 (4,849,035) 242,512,299 5,126,006 (4,820,357)

The Group The Bank Fair values Fair values

(ii) Commitments and contingencies In the normal course of business, the Group and the Bank enter into various commitments and incur certain contingent liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions and hence, they are not provided for in the Financial Statements.

These commitments and contingencies are not secured over the assets of the Group and the Bank, except for certain securities held for trading being pledged as credit support assets for certain over-the-counter derivative contracts.


113


(Continued) (ii) Commitments and contingencies (continued) The commitments and contingencies constitute the following:

2009 2008Credit Risk Credit Risk

equivalent weighted equivalent weightedPrincipal amount* amount Principal amount* amount

The Group RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Credit-relatedDirect credit substitutes 1,695,289 1,300,835 1,134,888 1,840,720 1,809,540 1,231,300 Transaction-related contingent items 4,634,554 2,317,277 1,814,403 4,379,188 2,189,594 1,710,147 Short-term self-liquidating trade-related contingencies 3,761,011 744,063 590,935 3,700,924 737,396 511,436 Islamic Financing sold directly and indirectly to Cagamas - - - 294,946 294,946 294,946 Obligations under underwriting agreement 250,000 125,000 125,000 65,000 32,500 32,500 Irrevocable commitments to extend credit : - maturity not exceeding one year 34,545,466 - - 35,316,004 - - - maturity exceeding one year 5,948,048 116,698 114,688 8,751,965 4,375,983 3,721,781 Forward asset purchase 52,478 1 - 104,052 14 10 Miscellaneous commitments and contingencies 6,210,077 228,012 68,928 4,722,384 320,398 65,012 Total credit-related commitments and contingencies 57,096,923 4,831,886 3,848,842 59,175,183 9,760,371 7,567,132

Treasury-relatedForeign exchange related contracts : - less than one year 53,042,013 392,185 103,669 35,372,264 308,096 111,756 - one year to less than 5 years 4,368,956 1,589,408 500,432 1,769,837 867,286 211,566 - five years and above 1,333,036 387,218 114,425 2,040,476 733,002 283,815

58,744,005 2,368,811 718,526 39,182,577 1,908,384 607,137 Interest rate related contracts : - less than one year 91,152,067 17,918 4,801 114,353,287 13,008 2,623 - one year to less than 5 years 63,956,743 1,917,155 440,286 71,481,378 2,162,265 499,791 - five years and above 9,592,814 2,056,288 434,888 7,634,070 2,059,072 442,869

164,701,624 3,991,361 879,975 193,468,735 4,234,345 945,283 Equity related contracts: - less than one year 4,941,677 102,076 30,209 5,602,078 116,973 25,687 - one year to less than 5 years 6,163,741 317,527 88,596 9,737,250 596,904 177,659 - five years and above 870,031 59,200 11,840 57,628 4,365 873

11,975,449 478,803 130,645 15,396,956 718,242 204,219 Other treasury related contracts 16,039,852 195,390 84,592 - - - Total treasury-related commitments and contingencies 251,460,930 7,034,365 1,813,738 248,048,268 6,860,971 1,756,639

308,557,853 11,866,251 5,662,580 307,223,451 16,621,342 9,323,771


114



24 Derivative financial instruments, commitments and contingencies (Continued)

(ii) Commitments and contingencies (continued) Included in the Group’s commitments and contingencies above is RM46,380,000 (2008: RM30,840,000) of irrevocable commitments to extend credit with maturity less than one year relating to a jointly controlled entity, PCSB.

The Bank has given a continuing guarantee to Bank Negara Malaysia to meet the liabilities and financial obligations and requirements of its subsidiary, CIMB Bank (L) Limited, arising from its offshore banking business in the Federal Territory of Labuan.

2009 2008Credit Risk Credit Risk

equivalent weighted equivalent weightedPrincipal amount* amount Principal amount* amount

The Bank RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Credit-relatedDirect credit substitutes 1,386,270 1,022,641 859,116 1,538,499 1,538,499 960,259 T ransaction-related contingent items 3,657,150 1,828,575 1,344,973 3,827,518 1,913,759 1,511,102 Short-term self-liquidating trade-related contingencies 3,356,089 671,218 520,791 3,388,686 677,737 478,249 Obligations under underwriting agreement 250,000 125,000 125,000 15,000 7,500 7,500 Irrevocable commitments to extend credit : - maturity not exceeding one year 32,336,000 - - 32,082,352 - - - maturity exceeding one year 4,495,174 83,731 81,721 7,491,232 3,745,616 3,307,623 Forward assets purchase 52,478 1 - 99,052 14 10 Miscellaneous commitments and contingencies 4,343,817 214,394 65,480 6,228,040 567,869 312,482 Total credit-related commitments and contingencies 49,876,978 3,945,560 2,997,081 54,670,379 8,450,994 6,577,225

T reasury-relatedForeign exchange related contracts : - less than one year 51,223,368 397,253 104,656 34,720,138 295,712 108,225 - one year to less than 5 years 4,050,389 1,561,119 493,024 1,842,592 873,708 212,851 - five years and above 1,333,036 387,218 114,425 2,020,476 729,052 282,290

56,606,793 2,345,590 712,105 38,583,206 1,898,472 603,366 Interest rate related contracts : - less than one year 91,396,954 18,041 4,825 114,398,325 13,016 2,625 - one year to less than 5 years 61,667,342 1,873,563 430,555 68,562,547 2,040,193 475,377 - five years and above 10,982,098 2,178,418 459,314 7,765,721 2,062,033 443,461

164,046,394 4,070,022 894,694 190,726,593 4,115,242 921,463 Equity related contracts: - less than one year 3,307,970 87,024 27,199 3,425,246 78,016 17,896 - one year to less than 5 years 5,031,764 227,069 70,504 8,196,303 390,608 136,400 - five years and above 651,426 48,170 9,634 28,730 2,881 576

8,991,160 362,263 107,337 11,650,279 471,505 154,872 Total treasury-related commitments and contingencies 229,644,347 6,777,875 1,714,136 240,960,078 6,485,219 1,679,701

279,521,325 10,723,435 4,711,217 295,630,457 14,936,213 8,256,926

# #


115


(Continued) (ii) Commitments and contingencies (continued)

* Other than the credit equivalent of RM625,419,000 (2008: RMNil) arising from a subsidiary, CIMB Thai Bank Public

Company Limited, which is computed based on Bank of Thailand requirements, the other credit equivalent amounts are arrived at using the credit conversion factors as per Bank Negara Malaysia guidelines. The following approaches have been adopted for the computation of the credit equivalent and risk weighted assets: - adoption of bilateral netting as provided under the Standardised Approach Framework which involves the weighting

of net claims rather than gross claims with the same counterparties arising out of the full range of forwards, swaps, options and similar derivative contracts.

- irrevocable commitments to extend credit (undrawn loans) have been revised to include only those undrawn loan whereby all conditions precedent have been met.

# Included in miscellaneous commitment and contingencies is a commitment by the Bank to place an additional

RM2,250 million (2008: RM1,507 million) with CIMB Islamic in relation to the RPSIA arrangement (See Note 3). The Bank has confirmed that it will provide continuing financial support to certain of its wholly-owned subsidiaries to meet their liabilities and financial obligations as and when they fall due and to carry on their businesses without significant restriction on their operations. 25 Other liabilities

2009 2008 2009 2008Note RM’000 RM’000 RM’000 RM’000

Interest payable 503,733 544,351 475,975 557,552 Due to brokers and clients 42,860 - - - Accrued employee benefits (a) 10,980 9,822 10,980 9,822 Post employment benefit obligations (b) 161,150 55,324 62,746 55,189 Sundry creditors 309,822 474,492 273,322 172,172 Expenditure payable 437,740 369,379 431,734 358,761 Amount due to special purpose vehicle of jointly controlled entity (Note 12) 314,360 405,403 314,360 405,403 Insurance fund - general insurance business 14,574 - - - Allowance for commitments and contingencies (c) 36,952 - 21,000 - Provision for legal claims 212,121 186,750 186,692 186,750 Others 1,105,054 705,731 687,009 655,313

3,149,346 2,751,252 2,463,818 2,400,962

The Group The Bank


116

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 25 Other liabilities (Continued) (a) Accrued employee benefits This refers to the accruals for short term employee benefits for leave entitlement. Under their employment contract, employees can earn their leave entitlement which they are entitled to carry forward and will lapse if not utilised in the following accounting period. Accruals are made for the estimate of liability for unutilised annual leave. (b) Post employment benefit obligations

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Defined contribution plan – EPF (i) 11,332 9,393 11,326 9,258 Defined benefit plans (ii) 149,818 45,931 51,420 45,931

161,150 55,324 62,746 55,189

The Group The Bank

(i) Defined contribution plan of the Bank and the Group Group companies incorporated in Malaysia contribute to the Employees Provident Fund (“EPF”), the national defined contribution plan. Once the contributions have been paid, the Bank and the Group have no further payment obligations. (ii) Defined benefit plans of the Bank and the Group CIMB Bank and CIMB Thai Bank operate final salary defined benefit plans for employees, the assets of which are held in separate trustee - administered funds. The latest actuarial valuation of the plans was carried out as at 31 December 2009.


117

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 25 Other liabilities (Continued) (b) Post employment benefit obligations (continued) (ii) Defined benefit plans of the Bank and the Group (continued) The amounts recognised in the balance sheet in respect of defined benefit plans are determined as follows:

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Present value of funded obligations 186,191 170,709 186,191 170,709 Present value of unfunded obligations 98,398 - - - Fair value of plan assets (104,644) (83,622) (104,644) (83,622)Unrecognised actuarial loss (30,127) (41,156) (30,127) (41,156)Liability 149,818 45,931 51,420 45,931

The BankThe Group

The amount recognised in the income statement in respect of defined benefit plans are as follows:

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Current service cost 18,061 9,780 11,927 9,780 Interest cost 13,861 8,417 11,134 8,417 Expected return on plan assets (4,775) (5,924) (4,775) (5,924)Amortisation of unrecognised loss 1,548 - 1,548 - Curtailment/settlement costs - (11,330) - (11,330) Total included in personnel costs (Note 38) 28,695 943 19,834 943

The Group The Bank

The actual return on plan assets of the Group and the Bank were RM14,256,741 (2008: RM15,082,892) respectively.


118


for the financial year ended 31 December 2009 (Continued) 25 Other liabilities (Continued) (b) Post employment benefit obligation (continued) (ii) Defined benefit plans of the Bank and the Group (continued) Movements in the defined benefit obligation over the financial year are as follows:

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

At 1 January 170,709 142,191 170,709 142,191 Arising from acquisition of subsidiary 89,420 - - - Current services costs 18,061 9,780 11,927 9,780 Interest costs 13,861 8,417 11,134 8,417 Actuarial losses - 31,827 - 31,827 Benefits paid (10,477) (6,638) (7,579) (6,638)Settlement - (14,868) - (14,868)Exchange fluctuation 3,015 - - - At 31 December 284,589 170,709 186,191 170,709

The Group The Bank

The movements in the fair value of plan assets for the financial year are as follows:

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

At 1 January 83,622 89,696 83,622 89,696 Expected return on plan assets 4,775 5,924 4,775 5,924 Actuarial gain/(losses) 9,482 (21,007) 9,482 (21,007)Employer contributions 11,402 12,498 11,402 12,498 Benefits paid (4,637) (3,489) (4,637) (3,489)At 31 December 104,644 83,622 104,644 83,622

The Group The Bank

To develop the expected long-term rate of return on assets assumption, the Bank considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio.


119


for the financial year ended 31 December 2009 (Continued) 25 Other liabilities (Continued) (b) Post employment benefit obligation (continued) (ii) Defined benefit plans of the Bank and the Group (continued) The principal actuarial assumptions used in respect of the Group’s and the Bank’s defined benefit plans were as follows:

2009 2008 2009 2008% % % %

Discount rates 3.00 - 6.60 6.60 6.60 6.60 Expected return on plan assets 5.45 5.45 5.45 5.45 Future salary increases 4.00 - 6.00 6.00 6.00 6.00

The Group The Bank

^^ ^ The Bank included a special 8.00% revision for employees in Grade 34, 35 and 36 who are entitled to salary revisions under the Association of Bank Officers in Malaysia and CIMB Executive Staff Union collective agreements for the year 2009 only. The expected contribution to post employment benefits plan for the financial year ended 31 December 2010 is RM20,000,000 (2009: RM20,000,000) to both the Group and the Bank.

2009 2008 2007 2006 2005RM'000 RM'000 RM'000 RM'000 RM'000

The GroupAs at 31 DecemberPresent value of defined benefit obligation 284,589 170,709 142,191 136,444 162,734 Fair value of plan assets (104,644) (83,622) (89,696) (70,198) (105,352)Deficit 179,945 87,087 52,495 66,246 57,382

Experience adjustments on plan liabilities - 31,827 2,650 8,232 1,686 Experience adjustments on plan assets 9,482 (21,007) (8,458) (774) -

The BankAs at 31 DecemberPresent value of defined benefit obligation 186,191 170,709 142,191 134,584 143,554 Fair value of plan assets (104,644) (83,622) (89,696) (68,717) (91,557)Deficit 81,547 87,087 52,495 65,867 51,997

Experience adjustments on plan liabilities - 31,827 2,650 8,036 1,623 Experience adjustments on plan assets 9,482 (21,007) (8,458) (771) 352


120

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 25 Other liabilities (Continued) (c) Allowance for commitments and contingencies Movement in the allowance for commitments and contingencies are as follows:

2009 2008 2009 2008RM’000 RM’000 RM’000 RM’000

At 1 January - - - - Allowance made during the financial year 21,199 - 21,000 - Allowance arising from acquisition of subsidiary 15,738 - - - Exchange fluctuation 15 - - - At 31 December 36,952 - 21,000 -

The Group The Bank

26 Bonds During the financial year, CIMB Bank (L) Limited, a wholly-owned subsidiary of CIMB Bank, has issued a 2 year senior unsecured USD 140 million bonds guaranteed by CIMB Group. The USD 140 million bonds were issued at par on 17 April 2009 and mature on 15 April 2011. The USD140 million bonds bear an interest rate of 3.00% per annum payable annually in arrears on 16 April 2010 and 15 April 2011. The USD 140 million bonds are not listed on any exchange and shall be redeemed at the nominal value on the maturity date. The USD 140 million bonds were fully subscribed by TPG Malaysia Finance, L.P. 27 Irredeemable Convertible Unsecured Loan Stocks Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) with detachable coupons 2001/2011

2009 2008 RM'000 RM'000

At 31 December - 667,000



121

Notes to the Financial Statements for the financial year ended 31 December 2009(Continued)

27 Irredeemable Convertible Unsecured Loan Stocks (Continued) The main features of the 7.5% irredeemable convertible unsecured loan stocks (“ICULS”) 2001/2011 issued in 2001 are as follows: (i) Nominal value of the ICULS is RM667,000,000 in denominations or multiples of

RM1,000 with detachable coupons. (ii) The ICULS bear fixed interest at the rate of 7.5% per annum payable annually in arrears

from the date of issue of the ICULS. The detachable coupons represent the interest of the ICULS and as such, bear no further interest.

(iii) The ICULS are not redeemable for cash except upon the occurrence and declaration of an

event of default as provided in the trust deed. All outstanding ICULS will be mandatorily converted by the Bank into new ordinary shares of the Bank on the last day of the tenure of the ICULS.

(iv) The ICULS shall constitute unsecured and subordinated obligations of the Bank. (v) All new ordinary shares issued upon conversion of ICULS will rank pari passu in all

respects with the existing ordinary shares of the Bank save and except that they will not be entitled to any dividend, right, allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the new ordinary shares of the Bank.

On 10 July 2009, the Bank has fully redeemed the RM667 million ICULS via issuance of 667 million new ordinary shares to CIMB Group Sdn Bhd. 28 Other borrowings

2009 2008RM'000 RM'000

Term loan- USD300 million 1,027,500 1,039,350

At 1 January 1,092,750 1,092,750 Exchange difference (65,250) (53,400)

1,027,500 1,039,350

The Group

In 2006, CIMB Bank (L) Limited secured a term loan facility amounting to USD300 million which will mature on 22 June 2011. It bears a floating interest rate of LIBOR+0.19% per annum and is guaranteed by CIMB Group. The term loan is secured by a corporate guarantee issued by the Bank.


122

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 29 Subordinated obligations

2009 2008 2009 2008Note RM'000 RM'000 RM'000 RM'000

Subordinated notes - USD200 million (a) - 674,250 - 674,250 Subordinated loans - USD100 million (b) - 363,486 - 363,486 Subordinated loans - USD200 million (c) - - 751,437 813,336 Subordinated bonds - RM1.5 billion (d) 1,516,786 1,535,476 1,516,786 1,535,476 Subordinated bonds - RM1.0 billion (e) 1,000,000 1,000,000 1,000,000 1,000,000 Subordinated bonds - RM1.0 billion (f) 931,582 1,000,000 931,582 1,000,000 Subordinated notes - USD50 million (g) 171,424 - - - Subordinated notes - USD40 million (h) 137,138 - - - Subordinated notes - THB544 million (i) 55,945 - - - Subordinated notes - THB120 million (j) 9,660 - - - Subordinated Sukuk - RM300 million (k) 284,181 - - -

4,106,716 4,573,212 4,199,805 5,386,548

The Group The Bank

(a) The USD200 million 10-year subordinated notes (“the USD200 million Notes”) were issued

on 30 June 2004. The USD200 million Notes were issued at a price of 99.028% of the principal amount and are callable with step-up in 2009. The USD200 million Notes bear an interest rate of 6.125% per annum payable semi-annually in arrears for the first 5 years, after which interest rate will be reset at a rate per annum equal to the 5-year US Treasury Rate plus 3.925%.

The Bank may at its option, subject to the prior approval of BNM, redeem the USD200

million Notes in whole but not in part, on 30 June 2009 at their principal amount plus accrued interest.

The USD200 million Notes were listed on the Luxembourg Stock Exchange on 30 June

2004 and qualify as Tier-2 Capital for the purpose of the risk weighted capital ratio (‘RWCR’) computation.

The Bank has fully redeemed the USD200 million Notes on 30 June 2009 upon obtaining approval from BNM.


123

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 29 Subordinated obligations (Continued) (b) On 12 June 2006, the Bank obtained a USD100 million subordinated loan due on 2014

callable with step-up in 2009 from CIMB Investment Bank Berhad. The loan bears interest at the rate of 5% per annum from, and including 12 June 2006 to, but excluding 15 October 2008 and, thereafter, at a rate per annum equal to the US Treasury Rate plus 3.7%. The interest rate is payable semi-annually in arrears on 15 April and 15 October in each year, commencing on 12 June 2006. The USD100 million subordinated loan qualifies as Tier-2 Capital for the purpose of the RWCR computation.

The Bank has undertaken fair value hedge on the foreign exchange risk and interest rate risk

of the USD100 million subordinated loan using interest rate swaps and net investment hedge of CIMB Bank (L) Limited.

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Subordinated loans, at cost - 367,850 - 367,850 Fair value changes arising from fair value hedges - 17,806 - 17,806 Foreign exchange translations - (22,170) - (22,170)

- 363,486 - 363,486

The Group The Bank

The fair value loss of interest rate swaps at 31 December 2009 were RMNil (2008: RM2,165,621).

The Bank has fully redeemed the USD100 million subordinated loans on 15 April 2009 upon

obtaining approval from BNM.


124

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 29 Subordinated obligations (Continued) (c) The USD200 million 6.62% subordinated loans of the Bank were obtained from SBB

Capital Corporation (“SCC”) from the net proceeds that SCC raised through the issuance of SCC Preference Shares. The loans bear interest at a rate of 6.62% per annum payable semi-annually in arrears on 2 May and 2 November up to and including 2 November 2015. Thereafter, interest will be reset at a floating rate per annum equal to three-month LIBOR plus 2.53%, payable quarterly on 2 February, 2 May, 2 August and 2 November. The subordinated loans will mature on 2 November 2055. The USD200 million subordinated loans qualify as Tier-1 Capital for the purpose of the RWCR computation.

The Bank has undertaken fair value hedge on the interest rate risk of the USD200 million

subordinated loans using interest rate swaps.

2009 2008RM'000 RM'000

Subordinated loans, at cost 728,250 728,250 Fair value changes arising from fair value hedges 73,449 129,846 Foreign exchange translations (50,262) (44,760)

751,437 813,336

The Bank

The fair values of interest rate swaps as at 31 December 2009 were RM78,314,282 (2008: RM127,438,641).


125


for the financial year ended 31 December 2009 (Continued) 29 Subordinated obligations (Continued) (d) The RM1.5 billion 10-year subordinated bonds (“the RM1.5 billion Bonds”) were issued by

the Bank on 28 March 2008. The Bonds were issued at par and are callable with step-up in 2013. The Bonds bear an interest rate of 4.9% per annum payable semi-annually in arrears for the first 5 years, after which interest rate will be reset to 5.9% per annum until maturity date.

The Bank may at its option, subject to the prior approval of BNM, redeem the RM1.5 billion

Bonds in part or in whole, on 28 March 2013 at their principal amount.

The RM1.5 billion Bonds qualify as Tier-2 Capital for the purpose of the RWCR computation.

The Bank has undertaken fair value hedge on the interest rate risk amounting to RM600 million of the RM1.5 billion Bonds using interest rate swaps.

2009 2008RM'000 RM'000

Subordinated bonds, at cost 600,000 600,000 Fair value changes arising from fair value hedges 16,786 35,476

616,786 635,476


The fair value of interest rate swaps as at 31 December 2009 was RM31,680,114 (2008: RM46,890,284)

(e) The RM1.0 billion subordinated bonds (“the RM1.0 billion Bonds”) were issued at par on 7 October 2008 under the Innovative Tier-1 Capital Securities Programme which was approved by the Securities Commission on 24 September 2008. The RM1.0 billion Bonds are due on 7 October 2038 callable with step-up on 7 October 2018. The bonds bear an interest rate of 6.7% per annum payable semi-annually in arrears for the first ten years, after which the interest rate will be reset at a rate per annum equal to the 3-month KLIBOR plus 2.98%.

The Bank may at its option, subject to the prior approval of BNM, redeem the RM1.0 billion subordinated bonds in whole but not in part, on 7 October 2018 or any interest payment date thereafter, at their principal amount plus accrued interest. The RM1.0 billion Bonds qualify as Tier-1 Capital for the purpose of the RWCR computation.


126

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 29 Subordinated obligations (Continued) (f) The RM1.0 billion subordinated bonds (“the Bonds”) is part of the Non-Innovative Tier 1

Stapled Securities Issuance Programme which was approved by the Securities Commission on 17 December 2008. Under the programme, the Bank is allowed to raise Non-Innovative Tier 1 Capital of up to RM4.0 billion in nominal value outstanding at any one time comprising:

(i) Non-Cumulative Perpetual Capital Securities issued by the Bank; and (ii) Subordinated Notes issued by Commerce Returns Berhad, a wholly-owned

subsidiary of the Bank The Bonds under the first issuance were issued at par on 26 December 2008 and are due on 26 December 2058, with optional redemption on 26 December 2018 or any distribution payment date thereafter. The Bonds bear an interest rate of 7.2% per annum payable semi-annually in arrears.

Subject to the prior approval of BNM, the Bank shall redeem the RM1.0 billion subordinated bonds in whole but not in part, on 26 December 2018 or any distribution payment date thereafter, at their principal amount plus accrued interest. The Bonds qualify as Tier-1 Capital for the purpose of the RWCR computation. The Bank has undertaken fair value hedge on the interest rate risk amounting to RM800 million of the RM1.0 billion Bonds using interest rate swaps.

2009 2008RM'000 RM'000

Subordinated bonds, at cost 800,000 - Fair value changes arising from fair value hedges (68,418) -

731,582 -


The fair value loss of interest rate swaps as at 31 December 2009 was RM71,803,319 (2008: RMNil)


127

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 29 Subordinated obligations (Continued) (g) On 17 July 2006, CIMB Thai Bank, a subsidiary of CIMB Bank, issued 50 unit

unsecured 10-year subordinated notes (“the USD50 million Notes”). The USD50 million Notes were issued at a price of USD1 million per unit and are callable with step-up in 2011. The USD50 million Notes bear an interest rate at six-month LIBOR plus 3.5% for the first 5 years payable semi-annually on 17 July and 17 January, after which interest rate will be reset at a rate per annum equal to the six-month LIBOR plus 5.25%.

CIMB Thai Bank may at its option, subject to the prior approval of Bank of Thailand,

redeem the USD50 million Notes in whole but not in part, on 17 July 2011 at their principal amount plus accrued interest.

The USD50 million Notes will mature on 17 July 2016 and qualify as Tier-2 Capital for the

purpose of the RWCR computation. (h) On 16 February 2007, CIMB Thai Bank, a subsidiary of CIMB Bank, issued 400 unit

unsecured 10-year subordinated notes (“the USD40 million Notes”). The USD40 million Notes were issued at a price of USD100,000 per unit and are callable with step-up in 2012. The USD40 million Notes bear an interest rate at six-month LIBOR plus 3.5% for the first 5 years payable semi-annually on 20 February and 20 August, after which interest rate will be reset at a rate per annum equal to the six-month LIBOR plus 5.25%.

CIMB Thai Bank may at its option, subject to the prior approval of Bank of Thailand,

redeem the USD40 million Notes in whole but not in part, on 20 February 2012 at their principal amount plus accrued interest.

The USD40 million Notes will mature on 20 February 2017 and qualify as Tier-2 Capital for the purpose of the RWCR computation


128

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 29 Subordinated obligations (Continued) (i) The THB 544 million subordinated notes (“the THB544 million Notes”) represent CIMB

Thai Bank’s obligation with regards to the promissory notes previously issued by few financial institutions before a series of merger. The promissory notes, which are guaranteed by Financial Institutions Development Fund (“FIDF”) has been recalled as FIDF is of the opinion that CIMB Thai Bank has no obligations in respect to the related liabilities. However, CIMB Thai Bank has yet to return the promissory notes to FIDF in order to retain its right to claim compensation from FIDF should CIMB Thai Bank need to undertake any responsibility for any obligations in the future.

(j) On 31 August 2009, BT Securities Company Limited, a subsidiary of CIMB Thai Bank,

issued 120,000 unit 5-year Unsecured Zero-Coupon Subordinated Debentures (“the THB120 million Notes”) at a price of THB783.5262 per unit. The THB120 million Notes bear no interest. The THB120 million Notes will mature on 31 August 2014.

(k) The RM300 million subordinated Sukuk (‘the Sukuk’) is part of the Tier-2 Junior Sukuk

programme which was approved by the Securities Commission on 22 May 2009. Under the programme, CIMB Islamic is allowed to raise Tier-2 capital of up to RM2.0 billion in nominal value outstanding at any one time.

The Sukuk under the first issuance were issued at par on 25 September 2009 and are due on 25 September 2024, with optional redemption on 25 September 2019 or any periodic payment date thereafter. The Sukuk bears a profit rate of 5.85% per annum, payable semi-annually in arrears. The RM300 million Sukuk qualify as Tier-2 capital for the purpose of the RWCR computation.


129

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 30 Redeemable preference shares (a)

2009 2008RM’000 RM’000

AuthorisedRedeemable preference shares of USD0.01 eachAt 1 January/31December 8 8

The Group

2009 2008RM'000 RM'000

Issued and fully paidRedeemable preference shares of USD0.01 eachNon-cumulative guaranteed preference shares 751,437 813,336

The Group

2009 2008RM'000 RM'000

Non-cumulative guaranteed preference shares, at cost 728,250 728,250 Fair value changes arising from fair value hedges 73,449 129,846 Foreign exchange translations (50,262) (44,760)

751,437 813,336

The Group

The USD200 million 6.62% Non-cumulative Guaranteed Preference Shares of USD0.01 each at a premium of USD999.99 per share were issued on 2 November 2005 by SBB Capital Corporation (“SCC”), a wholly owned subsidiary company of the Bank incorporated in Labuan. In accordance with FRS 132 – Financial Instruments: Disclosure and Presentation, the SCC Preference Shares are recognised as a financial liability in the Financial Statements. The main features of the SCC Preference Shares are as follows:

(i) The SCC Preference Shares are entitled to dividends which are payable in arrears on

2 May and 2 November up to and including 2 November 2015 at a fixed rate of 6.62% per annum.

(ii) On 2 November 2015 (First Optional Redemption Date) and on each dividend date

thereafter, SCC may at its option, subject to the prior approval of Bank Negara Malaysia, redeem the SCC Preference Shares in whole but not in part, at their principal amount plus accrued but unpaid dividends. If the SCC Preference Shares are not called on 2 November 2015, dividends will be reset at a floating rate per annum equal to three-month LIBOR plus 2.53%, payable quarterly on 2 February, 2 May, 2 August and 2 November.

(iii) The SCC Preference Shares will not be convertible into ordinary shares.


130



30 Redeemable preference shares (Continued)

(iv) The SCC Preference Shares are guaranteed by the Bank on a subordinated basis. If the SCC Preference shares have not been redeemed in full on or prior to 2 November 2055, the Bank shall cause the substitution of the SCC Preference Shares with Preference Shares issued by the Bank (Substitute Preference Shares) and the SCC Preference Shares shall be mandatorily exchanged for such Substitute Preference Shares having economic terms which are in all material aspects equivalent to those of the SCC Preference Share.

The SCC Preference Shares were admitted to the Official List of the Singapore Exchange Securities Trading Limited and Labuan International Financial Exchange Inc on 4 November 2005 and 24 November 2005 respectively and qualify as Tier-1 Capital for the purpose of the RWCR computation, subject to the limit as prescribed in the ‘Guidelines on Innovative Tier 1 Capital Instruments’ issued by Bank Negara Malaysia on 24 December 2004.

(b)

2009 2008RM’000 RM’000

AuthorisedRedeemable preference shares of RM0.01 eachAt 1 January 50,000 - Created during the financial year - 50,000 At 31 December 50,000 50,000


2009 2008RM’000 RM’000

Issued and fully paidRedeemable preference shares of RM0.01 eachRedeemable preference shares (equity) 29,740 29,740




131


30 Redeemable preference shares (Continued)

The Bank paid a dividend of RM29.74 million on the RM1.3 billion RPS via bonus shares capitalised from retained profits. Arising from this, on 30 January 2008, the Bank issued 2,974,009,486 RPS of nominal value RM0.01 each to the Bank’s minority shareholders and to CIMB Group at an issue price of RM1.00 each, which was approved by the shareholders via an Extraordinary General Meeting on the same date. In accordance with FRS 132 - Financial Instruments: Disclosure and Presentation, the RPS is recognised as an equity instrument in the Financial Statements. The main features of the RPS are as follows:

(i) The RPS will rank equal in all respects with each other and senior to ordinary

shares. (ii) The RPS will be fully paid-up upon issue and allotment. (iii) The RPS will not carry any fixed dividend but ranks the most senior in terms of

dividend distribution. (iv) The RPS will not carry any voting rights. (v) The RPS will only be redeemable, subject to BNM’s approval, at the option of the

Bank. (vi) The RPS will not be convertible. (vii) The RPS will not be earmarked to any particular assets or banking activities. (viii) The RPS will not represent any fixed charge on the earnings of the Bank.


132

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 31 Ordinary share capital

2009 2008RM'000 RM'000

AuthorisedOrdinary shares of RM1.00 each:At 1 January/31 December 7,000,000 7,000,000

Issued and fully paidOrdinary shares of RM1.00 each:At 1 January 2,974,009 2,974,009Issued during the year (Note 49(f)) 123,457 - Conversion of ICULS (Note 49(g)) 667,000 - At 31 December 3,764,466 2,974,009


32 Perpetual preference shares

2009 2008 RM’000 RM’000

AuthorisedPerpetual preference shares of RM1.00 each:At 1 January/31 December 500,000 500,000

2009 2008 RM’000 RM’000

Issued and fully paidPerpetual preference shares of RM1.00 each:At 1 January/31 December 200,000 200,000



The main features of the PPS are as follows: (a) The PPS have no right to dividends. (b) In the event of liquidation, dissolution or winding-up of the Bank, PCSB as holder of the

PPS will be entitled to receive full repayment of the capital paid up on the PPS in priority to any payments to be made to the ordinary shareholders of the Bank.

(c) The PPS rank pari passu in all aspects among themselves. (d) The Bank must not redeem or buy back any portion of the PPS and the PPS will be

perpetual except for any capital reduction exercise permitted by the Companies Act, 1965 and as approved by Bank Negara Malaysia.


133

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 33 Reserves (a) The statutory reserve is maintained in compliance with Section 36 of the Banking and

Financial Institutions Act, 1989 and is not distributable as cash dividends. (b) Pursuant to the Finance Act, 2007 which was gazetted on 28 December 2007, dividends

paid, credited or distributed to shareholders are not tax deductible by the Bank, but is exempted from tax in the hands of the shareholders ("single tier system"). During the year, the Bank has utilised the credit in the Section 108 balance to distribute dividend payments to its shareholders as allowed by the transitional provision under the Finance Act, 2007. As at 31 December 2009, the Bank has sufficient credit in the Section 108 balance to pay franked dividends and sufficient tax exempt account balances to pay tax exempt dividends out of its entire retained earnings.

(c) Currency translation differences have arisen from translation of net assets of CIMB Thai

Bank, Labuan offshore banking subsidiaries and the Bank’s foreign branches. These translation differences are shown under exchange fluctuation reserve.

(d) Capital reserves, which are non-distributable, relate to the retained earnings of Bumiputra-

Commerce Finance Berhad and CIMB Investment Bank Berhad, and the four months profit of SBB Berhad (formerly known as Southern Bank Berhad) from 1 July 2006 to 31 October 2006 which were transferred to the Bank, arising from the business combinations under common control using the ‘pooling-of-interests’/merger accounting method in financial year 2006.

(e) Merger deficit, which is non-distributable, relates to the difference between the cost of the

merger between the Bank and CIMB Investment Bank Berhad and SBB Berhad (formerly known as Southern Bank Berhad) in 2006 and the value of the net assets and reserves transferred to the Bank and the Group.


134

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 33 Reserves (Continued) (f) Movement of the revaluation reserve of available-for-sale securities is as follows:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

At 1 January 131,117 98,644 81,632 55,458 Net gain/(loss) from change in fair value 60,607 116,701 (17,328) 137,550 Net loss transferred to income statement on disposal and impairment (117,092) (108,326) (47,830) (103,283)Deferred taxation 17,427 (8,069) 18,061 (8,093)Acquisition of associate - 32,167 - - Net change in available-for-sale securities (39,058) 32,473 (47,097) 26,174

92,059 131,117 34,535 81,632

The Bank The Group

(g) Hedging reserve arise from net investment hedge activities undertaken by the Bank on

overseas operations and foreign subsidiaries. The reserve are non-distributable and are reversed to the income statement when the foreign operations and subsidiaries are partially or fully disposed.

34 Share premium

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Relating to- Ordinary shares 5,033,622 4,157,074 5,033,622 4,157,074

At 1 January 4,157,074 4,157,074 4,157,074 4,157,074Issued during the year 876,548 - 876,548 - At 31 December 5,033,622 4,157,074 5,033,622 4,157,074

The BankThe Group


135

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 35 Interest income

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Loans and advances- interest income other than recoveries 5,275,275 5,142,021 4,451,354 4,810,704 - recoveries from non-performing loans and advances 240,700 376,522 231,055 375,561 - recoveries from NPL sale - 5,541 - 5,541 Money at call and deposit with financial institutions 295,361 833,859 396,531 878,937 Securities purchased under resale agreement 111,861 124,891 69,898 124,891 Securities held for trading 143,404 505,221 130,836 401,708 Available-for- sale securities 313,038 221,779 287,388 219,603 Held-to-maturity securities 606,598 189,912 442,517 165,422 Others 255 3,043 44 313

6,986,492 7,402,789 6,009,623 6,982,680 Net accretion of discount less amortisation of premium 131,747 133,081 110,130 141,766 Net interest suspended (159,691) (194,648) (141,970) (189,006)

6,958,548 7,341,222 5,977,783 6,935,440

The Group The Bank

36 Interest expense

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Deposits and placements of banks and other financial institutions 124,744 357,062 105,627 346,694 Deposits from other customers 2,098,004 2,663,475 1,817,620 2,506,151 Obligation on securities sold under repurchase agreements 947 9,269 45 1,379 Loans sold to Cagamas 26,575 60,376 26,575 60,376 Negotiable certificates of deposits 133,456 225,602 133,084 225,602 ICULS 71,855 50,025 71,855 50,025 Redeemable preference shares 44,140 87,015 - 42,875 Subordinated obligations 227,270 171,425 239,706 215,565 Others 2,648 843 - -

2,729,639 3,625,092 2,394,512 3,448,667

The Group The Bank


136

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 37 Non-interest income

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Fee and commission incomeCommissions 144,367 164,224 135,592 150,461 Fee on loans and advances 351,861 301,840 299,379 284,477 Service charges and fees 199,045 157,816 156,914 146,206 Guarantee fees 56,775 47,904 48,492 47,686 Other fee income 261,413 218,027 231,406 227,181

1,013,461 889,811 871,783 856,011 Gross dividend income from:In MalaysiaSubsidiaries - - 178,341 74,985 Securities held for trading 15,035 29,500 14,961 29,458 Available-for-sale securities 11,431 21,676 11,431 19,970 Held-to-maturity securities - 58 - -

26,466 51,234 204,733 124,413 Outside MalaysiaSecurities held for trading 22 - - - Available-for-sale securities 16,177 - - -

16,199 - - - Net gain/(loss) arising from securities held for trading - realised 124,048 (36,587) 115,824 6,120 - unrealised 122,892 (166,791) 95,364 (80,659)

246,940 (203,378) 211,188 (74,539)

Net loss arising from hedging derivatives (5,132) (5,891) (8,162) (5,891)

Net gain/(loss) arising from derivative financial instruments - realised 502,997 59,980 536,481 49,757 - unrealised (339,495) 112,452 (337,782) 129,712

163,502 172,432 198,699 179,469

The Group The Bank


137

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 37 Non-interest income (Continued)

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Net gain from sale of available-for-sale securities 117,092 108,326 47,830 103,283

Net gain from sale of held to maturity securities 24,505 4,089 2,790 4,089

Brokerage income 15,839 - - -

Other non-interest incomeForeign exchange gain 237,807 274,875 194,487 292,827 Rental income 17,481 15,662 10,708 10,996 Gain on disposal of property, plant and equipment 20,080 6,393 24,484 5,076 (Loss)/gain on disposal of foreclosed properties (8,120) 2,520 - 2,520 Gain on disposal of leased assets 250 244 - - (Loss)/gain on disposal of subsidiaries - (2,669) - 23,693 Gain on disposal of certain assets and liabilities of subsidiary 30,000 - - - Gain on disposal of associate - 2,904 - - Gain from insurance business 12,403 - - - Loss on revaluation of investment properties (3,678) (2,141) (3,300) (2,141)Capital gain from capital repayment of subsidiary - - - 248,700 Others 72,873 61,362 49,172 58,531

379,096 359,150 275,551 640,202 1,997,968 1,375,773 1,804,412 1,827,037

The Group The Bank


138

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 38 Overheads

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Personnel costs- Salaries, allowances and bonuses 1,349,982 872,925 1,074,749 783,348- Pension cost (defined contribution plan) 125,023 102,658 115,338 100,573- Pension cost (defined benefit plan) (Note 25(b)(ii)) 28,695 943 19,834 943- Termination benefits (748) 405 (405) 405- Overtime 20,355 32,240 13,816 26,298- Staff incentives and other staff payments 115,687 160,995 102,863 130,545- Medical expenses 46,088 36,446 41,524 34,266- Others 137,663 69,967 51,640 52,578

1,822,745 1,276,579 1,419,359 1,128,956Establishment costs- Depreciation of property, plant and equipment 189,924 134,500 142,704 116,860- Amortisation of prepaid lease payments 1,332 1,057 874 998 - Impairment of prepaid lease payments 427 - - - - Rental 165,960 102,712 125,041 104,292- Insurance 75,275 16,862 11,883 15,257- Repairs and maintenance 140,435 129,088 121,150 125,374- Outsourced services 145,176 111,455 246,524 225,612- Security expenses 77,257 55,729 85,833 69,656- Utility expenses 45,775 31,247 36,094 27,707- Others 82,717 73,378 41,610 48,985

924,278 656,028 811,713 734,741Marketing expenses- Sales commission 44,362 26,619 3,226 17,814- Advertisement 155,928 136,103 139,896 119,761- Legal fees reversed/made (8,449) 32,693 (8,449) 32,693- Others 22,467 11,742 9,631 6,380

214,308 207,157 144,304 176,648Administration and general expenses- Communication 41,113 39,268 33,759 36,766- Consultancy and professional fees 55,054 40,613 47,786 37,837- Legal expenses 63,588 52,923 56,662 51,766- Stationery 51,169 55,585 40,029 50,812- Merchant expenses 93,924 85,993 93,924 85,993- Amortisation of intangible assets 117,971 111,371 103,054 104,346- Impairment of intangible assets 1,955 - - - - Postages 36,593 22,465 32,732 21,616- Administrative travelling and vehicle expenses 25,234 20,913 16,713 19,947- Incidental expenses on banking operations 110,701 84,133 80,412 77,344- Others 155,599 44,411 94,284 25,884

752,901 557,675 599,355 512,311 3,714,232 2,697,439 2,974,731 2,552,656

The Group The Bank


139

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 38 Overheads (Continued) The above expenditure includes the following statutory disclosures:

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Directors' remuneration (excluding benefits-in-kind) (Note 42) 3,505 3,700 3,177 3,282 Hire of equipment 4,712 4,166 4,160 3,626Lease rental 1,618 4,476 1,618 4,390Auditors’ remuneration- statutory audit (PwC Malaysia) 1,795 1,794 1,423 1,380- statutory audit (other member firms of PwC International Limited) 423 362 416 362- others (PwC Malaysia) 2,079 2,558 1,291 2,413- others (other member firms of PwC International Limited) 421 1,481 121 1481Property, plant and equipment written-off 4,273 364 4,226 258

The Group The Bank

* PricewaterhouseCoopers Malaysia and other member firms of PricewaterhouseCoopers International Limited are

separate and independent legal entities.


140


for the financial year ended 31 December 2009 (Continued) 39 Allowances for losses on loans, advances and financing During the financial year, the Group and the Bank have evaluated their portfolio of non-performing loans, advances and financing that have been in default and that remained uncollected for more than 7 years and also those non-performing loans, advances and financing in default for more than 5 but less than 7 years. For loans, advances and financing in default for more than 7 years, 20% of the realisable value of assets held has been assigned as the value of collateral with effect from 1 January 2009, as allowed by BNM. In prior years, no value was assigned as the realisable value of collateral. For loans, advances and financing which are in default for more than 5 but less than 7 years, 50% of the realisable value of assets held has been assigned as the value of collateral. The effect of this exercise resulted in specific allowances of RM104,310,083 made for the Group (2008: RM186,537,987) and RM98,341,650 (2008: RM172,843,102) made for the Bank during the financial year.

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Allowance for bad and doubtful debts and financing(a) Specific allowance - made during the financial year 1,688,817 1,508,387 1,311,706 1,364,169 - written back (537,217) (718,893) (445,862) (608,735) - written back from NPL sale - (61,099) - (60,416)

(537,217) (779,992) (445,862) (669,151)(b) General allowance - (written back)/made during the financial year (120,118) 229,830 (189,482) 217,803

Bad debts on loans and financing- recovered (366,849) (330,420) (287,989) (318,407)- recovered from NPL sale - (26,276) - (25,594)- written off 15,601 1,185 12,113 913

680,234 602,714 400,486 569,733

The Group The Bank


141

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 40 Allowance for/(write-back of) impairment losses

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Securities held for trading - made during the financial year - 10,000 - 10,000

Available-for-sale securities - made during the financial year 1,592 19,258 - 17,883 - written back during the financial year (17,767) (106,703) (17,767) (106,703)

(16,175) (87,445) (17,767) (88,820)Held-to-maturity securities - made during the financial year 53,954 32,282 46,825 28,965 - written back during the financial year (29,248) (1,318) (6,867) -

24,706 30,964 39,958 28,965 Goodwill - made during the financial year 4,000 - 39,000 37,000

Subsidiaries - made during the financial year - - - 21,178

12,531 (46,481) 61,191 8,323

The Group The Bank

During the financial year, the Bank impaired the goodwill allocated to BHLB Trustee amounting to RM4 million and goodwill allocated to SIBB amounting to RM35 million (see Note 55(b)(i)). The goodwill impaired in 2008 arose from SBB Securities which was disposed during the financial year.


142

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 41 Significant related party transactions and balances (a) The related parties of, and their relationship with the Bank, are as follows: Related parties Relationship

CIMB Group Holdings Berhad (formerly known as Bumiputra-Commerce Holdings Berhad) Ultimate holding company CIMB Group Sdn Bhd Holding company Subsidiaries of the Bank as disclosed in Note 11 Subsidiaries CIMB Investment Bank Berhad Subsidiary of holding company SBB Berhad Subsidiary of ultimate holding company PT Bank CIMB Niaga Tbk and Group Subsidiary of holding company Proton Commerce Sdn Bhd Jointly controlled entity Commerce International Group Berhad and Group Subsidiary of holding company Commerce Asset Ventures Sdn Bhd and Group Subsidiary of holding company Commerce Asset Realty Sdn Bhd Subsidiary of ultimate holding company Commerce Asset Nominees Sdn Bhd Subsidiary of ultimate holding company Commerce Volantia Sdn Bhd Subsidiary of ultimate holding company Commerce MGI Sdn Bhd Subsidiary of ultimate holding company Commerce Capital (Labuan) Ltd Subsidiary of ultimate holding company Key management personnel See below Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Group and the Bank either directly or indirectly. The key management personnel of the Group and the Bank include all the Directors of the Bank and employees of the Bank who make certain critical decisions in relation to the strategic direction of the Bank.


143

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 41 Significant related party transactions and balances (Continued) (b) Related party transactions A number of banking transactions are entered into with related parties in the normal course of business. These include loans, deposits, derivative transactions and other financial instruments. These transactions were carried out on commercial terms and at market rates.

Parent company Subsidiaries

Other related

companies

Key management

personnel2009 RM’000 RM’000 RM’000 RM’000IncomeInterest on deposits and placements with financial institutions 81,170 107,683 25,755 - Interest on loans, advances and financing - 18,282 - 130 Others 75 64,499 - - ExpenditureInterest on deposits from customers and securities sold under repurchase agreement 11,177 - 192 99 Interest on deposits and placements of banks and other financial institutions - 17,140 33,614 - Interest on ICULS 25,902 - - - Rental of premises 1,485 - - - Others 75 176,552 17 -

2008IncomeInterest on deposits and placements with financial institutions 82,716 85,498 37,955 - Interest on loans, advances and financing - 9,312 - 20 Others - 39,795 - - ExpenditureInterest on deposits from customers and securities sold under repurchase agreement 12,156 - - 611 Interest on deposits and placements of banks and other financial institutions - 76,987 51,811 - Interest on ICULS 48,760 - - - Others - 192,605 4 - Transactions with other related parties are aggregated because these transactions are similar in nature and no single transaction with these parties is significant enough to warrant separate disclosure.


144

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 41 Significant related party transactions and balances (Continued) (c) Related party balances

Parent company Subsidiaries

Other related

companies

Key management

personnel2009 RM’000 RM’000 RM’000 RM’000Amounts due fromCurrent accounts, deposits and placements with banks and other financial institutions - 7,749,495 2,668,648 - Loans, advances and financing 1,875,131 655,456 45,113 4,265 Derivatives - 74,306 - - Others 83 168,384 16,861 -

Amounts due toDeposits from customers and securities sold under repurchase agreement 35,597 112,375 3,910,140 18,083 Deposits and placements of banks and other financial institutions 622,424 4,540,545 1,044,799 - Derivatives 85,243 33,587 - - Subordinated obligations - - 60,347 - Others 103,744 209,913 413,941 12

Commitment and contingenciesForeign exchange related contracts - 241,387 - - Interest rate related contracts - 1,071,858 1,973 -

2008Amounts due fromCurrent accounts, deposits and placements with banks and other financial institutions - 3,586,578 1,423,385 - Loans, advances and financing 1,900,000 186,659 45,157 545 Others 239,061 111,849 1,158 -

Amounts due toDeposits from customers and securities sold under repurchase agreement 301,477 141,743 77,057 31,923 Deposits and placements of banks and other financial institutions 99,700 2,932,102 2,079,400 - Subordinated obligations - - 345,680 - ICULS 667,000 - - - Others 16 25,732 5,250 66

Commitment and contingenciesInterest rate swap - 802,032 - - Other related party balances are unsecured, non-interest bearing and has no fixed repayment terms.


145

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 41 Significant related party transactions and balances (Continued) (c) Related party balances (continued) Other than the disclosure above, during the financial year, CIMB Investment Bank had transferred their investment in CIMB Principal Institutional Bond Fund amounting to RM583,505,000 to the Bank. (d) Key management personnel Key management compensation

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Salaries and other short-term employee benefits 28,879 24,938 20,426 23,513

Unit Unit Unit Unit Share options balance of ultimate holding company

14,636,200 21,802,126 10,890,000 21,552,398

The Group The Bank

Included in the above is the Executive Directors’ compensation which is disclosed in Note 43. The share options are granted on the same terms and condition as those offered to other employees of the Group and the Bank. There were no loans, advances and financing granted to the Directors of the Bank. Loans made to other key management personnel of the Group and the Bank are on similar terms and conditions generally available to other employees within the Group. No specific allowances were required in 2009 and 2008 for loans, advances and financing made to the key management personnel.


146

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 41 Significant related party transactions and balances (Continued) (e) Management Equity Scheme (“MES”) The MES were granted to eligible senior management of the Bank as part of the performance linked compensation scheme by a substantial shareholder of CIMB Group. The scheme was initially launched in 1 March 2004 at CIMB Group level and in November 2007, both the Nomination and Remuneration Committee of CIMB Group approved amendments to the terms which provides for the inclusion of the senior management of CIMB Group in the MES. The eligibility for participation in the scheme shall be at the discretion of the Nomination and Remuneration Committee of CIMB Group. Entitlement of eligible members of senior management are non-assignable and non-transferable whereby the Nomination and Remuneration Committee of CIMB Group administers the scheme on behalf of the substantial shareholder. The options granted vest in proportions across various exercise periods. In December 2008, the substantial shareholder of CIMB Group approved the extension of the MES Scheme from 28 February 2009 to 28 February 2012. The MES will continue to be in force until 28 February 2012, after which the voting rights of unexercised balances will remain with the substantial shareholder of CIMB Group. All options have the same reference price which is at RM3.48 each. The weighted average remaining contractual life is 2.2 years.

2009 2008 2009 2008'000 '000 '000 '000

Number of options:- Granted during the financial year (units) 824 800 770 650 - As at 31 December (units) 1,201 1,201 386 1,021

The Group The Bank


147

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 41 Significant related party transactions and balances (Continued) (f) Credit transactions and exposures with connected parties Credit exposures with connected parties as per BNM’s revised “Guidelines in Credit Transactions and Exposures with Connected Parties” which became effective on 1 January 2008 are as follows:

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Outstanding credit exposures with connected parties 6,921,854 5,862,475 6,508,435 5,241,829 Percentage of outstanding credit exposures to connected parties as a proportion of total credit exposures 4.7% 4.5% 5.2% 4.7%Percentage of outstanding credit exposures with connected parties which is non-performing or in default 0.0% 0.0% 0.0% 0.0%

The Group The Bank


148

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 42 Directors’ remuneration The Directors of the Bank in office during the financial year were as follows: Non-Executive Directors Tan Sri Dato’Seri Haidar bin Mohamed Nor Dato’ Sri Mohamed Nazir bin Abdul Razak Tan Sri G.K. Rama Iyer Dato’ Zainal Abidin bin Putih Dato’ Seri Yeap Leong Huat Dato’ Dr. Mohamad Zawawi bin Ismail Datuk Dr. Syed Muhamad bin Syed Abdul Kadir Dato’ Mohd Shukri bin Hussin Executive Directors Tunku Dato’ Ahmad Burhanuddin (resigned on 30 September 2009) Dato’ Dr. Gan Wee Beng Sulaiman bin Mohd Tahir (appointed on 1 October 2009) The Directors of the Bank and their total remuneration during the financial year are analysed below:

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Executive Directors- Salary and other remuneration 1,353 1,332 1,353 1,332 - Bonus 668 864 668 864 - Benefits-in-kind 168 75 168 75

Non-Executive Directors- Fees 294 309 204 192 - Other remuneration 1,190 1,195 952 894 - Benefits-in-kind 51 73 42 44

3,724 3,848 3,387 3,401

The Group The Bank

Consistent with the practice for certain key personnel, the Directors' bonus for financial year 2009 will be paid in tranches, spread over financial years 2010 and 2011 with the final tranche to be paid out in the first quarter of financial year 2011, after certain key financial performance indicators for the Group in respect of the financial year 2010 has been met. A similar condition is also imposed on the bonus for financial year 2009 of certain key personnel.


149

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 42 Directors’ remuneration (Continued) The functions and responsibilities of the CEO are carried out on a Group basis. The Directors of the Bank and their total remuneration during the financial year are analysed below:

2009 2008 2009 2008 Number of

directors Number of

directors Number of

directors Number of

directors Executive Directors RM50,001 – RM200,000 1 - 1 - RM450,001 – RM700,000 1 - 1 - RM700,001 – RM750,000 - 1 - 1 RM750,001 – RM1,500,000 1 - 1 - RM1,500,001 – RM2,500,000 - 1 - 1

The Group The Bank

2009 2008 2009 2008 Number of

directors Number of

directors Number of

directors Number of

directors Non-Executive Directors RM50,000 and below 2 2 2 2 RM100,001 – RM150,000 1 1 2 2 RM150,001 – RM200,000 2 1 2 2 RM200,001 – RM250,000 1 2 1 1 RM300,001 – RM350,000 1 1 1 1 RM400,001 – RM550,000 1 1 - -

The Group The Bank


150


for the financial year ended 31 December 2009 (Continued) 43 Taxation and zakat

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Taxation based on the profit for the financial year: - Malaysian income tax 550,008 618,931 476,238 549,934 - Foreign tax 12,617 7,412 6,972 7,412 Deferred taxation (Note 9) (20,562) (51,114) 3,328 (47,784)Over accrual in prior years (20,331) (8,383) (18,542) (2,902)

521,732 566,846 467,996 506,660 Zakat 6,421 234 - -

528,153 567,080 467,996 506,660 Reconciliation between tax expense and the Malaysian tax rateProfit before taxation and zakat 2,545,069 2,141,778 1,937,069 2,184,696

Tax calculated at a rate of 25% (2008: 26%) 636,267 556,862 484,267 568,021 Tax effects: - different tax rates in Labuan and other countries (55,011) (13,261) 16,355 - - change in tax rates - 12,457 - 11,664 - expenses not deductible for tax purposes 65,844 64,748 56,516 54,982 - income not subject to tax (102,635) (45,577) (70,600) (125,105) - utilisation of previously unrecognised tax losses (2,402) - - - - over accrual in prior years (20,331) (8,383) (18,542) (2,902)Tax expense 521,732 566,846 467,996 506,660

The Group The Bank

44 Earnings per share The basic and fully diluted earnings per ordinary share for the Group have been calculated based on the net profit attributable to ordinary equity holders of the Group of RM1,993,868,000 (2008: RM1,572,746,000). For the Bank, the basic and fully diluted earnings per ordinary share have been calculated based on the net profit attributable to ordinary equity holders of the Bank of RM1,469,073,000 (2008: RM1,678,036,000). Ordinary shares issued arising from business combinations under common control are included in the calculation of the weighted average number of shares from the date the business combination had been effected. The weighted average number of shares in issue during the year of 3,703,246,000 (2008: 3,641,009,000) is used for the computation.


151

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 45 Dividends The gross and net dividend declared per share for each financial year are as follows:

Gross per share

Net per share

Amount of dividend net

of taxGross per

shareNet per

share

Amount of dividend net

of taxsen sen RM’000 sen sen RM’000

Dividends recognised as distributions to equity holders:

Final dividendPer redeemable preference shares - - - 13.63 10.09 300,000

Interim special dividendPer ordinary shares - - - 2.00 1.48 44,000Per ordinary shares - tax exempt - - - 2.22 2.22 66,000 Per redeemable preference shares 6.72 5.04 150,000 9.09 6.72 200,000

6.72 5.04 150,000 26.94 20.51 610,000

2009 2008

The Directors do not recommend the payment of any final dividend for the financial year 31 December 2009.


152

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 46 Lease commitments The Group and the Bank have lease commitments in respect of rented premises and equipment on hire, all of which are classified as operating leases. A summary of the non-cancellable long-term commitments, net of sub-leases, is as follows:

2009 2008 2009 2008RM’000 RM’000 RM’000 RM’000

Within one year 102,814 83,215 101,318 81,438One year to less than five years 158,406 41,512 152,125 38,995Five years and more 173,577 1,152 164,693 1,152

The Group The Bank

47 Capital commitments

2009 2008 2009 2008RM’000 RM’000 RM’000 RM’000

Capital expenditure:- authorised and contracted for 65,768 24,269 65,768 24,269- authorised but not contracted for 647,298 613,028 633,982 613,028At 31 December 713,066 637,297 699,750 637,297

The BankThe Group

These capital commitments are for acquisition of property, plant and equipment of RM245,746,000 (2008: RM505,631,000) and for computer software of RM467,320,000 (2008: RM131,666,000).


153



48 Capital adequacy (a) The capital adequacy ratios of CIMB Bank, CIMB Islamic Bank and CIMB Thai Bank are as follows:

CIMB Thai Bank**

2009 2008 2009 2008 2009RM’000 RM’000 RM’000 RM’000 RM’000

Tier I capital 14,874,153 11,512,347 690,239 590,060 640,167 Eligible Tier II capital 2,868,642 4,752,839 458,004 75,613 640,167

17,742,795 16,265,186 1,148,243 665,673 1,280,334 Less:Investment in subsidiaries and holding of other banking institution’s capital (2,618,131) (1,376,978) - - - Capital base 15,124,664 14,888,208 1,148,243 665,673 1,280,334

Core capital ratio 14.81% 10.75% 6.82% 10.36% 6.00%Risk-weighted capital ratio 15.06% 13.90% 11.34% 11.69% 11.99%

The Bank* CIMB Islamic Bank


154


for the financial year ended 31 December 2009 (Continued) 48 Capital adequacy (Continued) (b) Components of Tier I and Tier II capitals are as follows:

CIMB Thai Bank**

2009 2008 2009 2008 2009RM’000 RM’000 RM’000 RM’000 RM’000

Tier I capitalPaid-up share capital 3,764,466 2,974,009 550,000 550,000 685,791 Perpetual preference shares 200,000 200,000 70,000 70,000 - Non-innovative Tier I capital 1,000,000 1,000,000 - - - Innovative Tier I capital 1,685,000 1,692,900 - - - Other reserves 12,061,642 9,468,506 250,864 127,122 (45,624)

18,711,108 15,335,415 870,864 747,122 640,167 Less:Deferred tax assets (281,880) (263,993) (44,625) (21,062) - Goodwill (3,555,075) (3,559,075) (136,000) (136,000) - Total Tier I capital 14,874,153 11,512,347 690,239 590,060 640,167

Tier II capitalICULS issued - 667,000 - - - Subordinated notes 1,500,000 2,539,350 300,000 - 568,134 Redeemable preference shares 29,740 29,740 - - 1,693 Revaluation reserve - - - - 47,118 General allowance for bad and doubtful debts and financing 1,338,902 1,516,749 158,004 75,613 23,222 Total Eligible Tier II capital 2,868,642 4,752,839 458,004 75,613 640,167 Add/(less):(i) Investment in subsidiaries (2,287,602) (717,021) - - - (ii) Investment in joint venture^ (72,608) (51,564) - - - (iii) Investment in associate (245,034) (595,814) - - - (iv) Holding of other banking institutions' capital instruments (12,887) (12,579) - - -

15,124,664 14,888,208 1,148,243 665,673 1,280,334

CIMB Islamic BankThe Bank*


155


for the financial year ended 31 December 2009 (Continued) 48 Capital adequacy (Continued) (c) Breakdown of risk-weighted assets in the various categories of risk-weights:

PrincipalRisk-

weighted PrincipalRisk-




weightedRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

0% 30,359,481 - 23,692,884 - 6,554,422 - 5,402,401 - 5,174,033 - 10% 24,173 2,417 147,282 14,728 - - - - - - 20% 21,909,123 4,381,825 22,637,137 4,527,427 2,070,774 414,155 2,814,340 562,868 822,660 164,532 35% - - - - - - - - 1,064,206 372,472 50% 22,437,082 11,218,541 24,013,412 12,006,706 3,068,223 1,534,112 733,413 366,707 358,716 179,358 75% - - - - - - - - 1,690,677 1,268,008 100%# 79,804,879 79,804,879 85,765,298 85,765,298 7,628,648 7,628,648 4,458,449 4,458,449 7,181,200 7,181,200 150% - - - - - - - - 360,587 540,881 Total risk-weighted assets for credit risks 154,534,738 95,407,662 156,256,013 102,314,159 19,322,067 9,576,915 13,408,603 5,388,024 16,652,079 9,706,451 Risk-weighted assets for market risk 4,834,636 4,834,636 4,629,925 4,629,925 548,828 548,828 308,695 308,695 123,231 123,231 Risk-weighted assets for large exposure risk requirements 193,983 193,983 196,983 196,983 - - - - 848,117 848,117 Total risk-weighted assets 159,563,357 100,436,281 161,082,921 107,141,067 19,870,895 10,125,743 13,717,298 5,696,719 17,623,427 10,677,799

The Bank * The Bank *2009 2008 2009 2008 2009

CIMB Thai Bank**CIMB Islamic Bank CIMB Islamic Bank

* Includes the operations of CIMB Bank (L) Limited and CIMB (L) Limited. ** Computation is based on Bank of Thailand requirements ^ In accordance with a circular by Bank Negara Malaysia (“BNM”) dated 25 April 2006, the Bank is required to deduct 50% of its investment in its jointly controlled entity,

PCSB, from the capital base for purposes of computing the capital adequacy ratio. # In accordance with BNM guidelines on the Recognition and Measurement of Profit Sharing Investment Account as Risk Absorbent (‘PSIA Guidelines’), the credit and

market risks on the assets funded by the PSIA are included in the risk weighted capital (‘RWCR’) calculation, where a 100% risk weight is assigned. The capital adequacy ratios have incorporated market risk pursuant to BNM’s guideline on Market Risk Capital Adequacy Framework which is effective from 1 April 2005.


156


for the financial year ended 31 December 2009 (Continued) 49 Significant events during the financial year (a) Acquisition of additional equity stake in CIMB Thai Bank Public Company Limited

(formerly known as BankThai Public Company Limited) (“CIMB Thai Bank”) On 13 January 2009, the Bank acquired additional 3.33 billion CIMB Thai Bank Public

Company Limited shares representing approximately 49.91% of the total issued and paid-up capital of CIMB Thai Bank, thus making it a subsidiary of the Bank with a total equity holdings of 92.04%. Upon completion of CIMB Thai Bank’s subsequent rights issue, the Bank’s shareholding in CIMB Thai Bank was raised to 93.15%.

See Note 55(a)(i) for the effects of the acquisition on the financial statements of the Group. (b) Disposal of certain assets, liabilities and the asset/fund management business of

Southern Investment Bank Berhad ("SIBB") to HLG Credit Sdn Bhd ("HLGC"), a 75% indirect subsidiary of Hong Leong Financial Group Berhad ("SIBB Disposal")

The proposed SIBB Disposal has been approved by the Minister of Finance II on 20 May 2008 and the vesting of the certain assets and liabilities to HLGC was completed on 31 January 2009.

See Note 55(b)(i) for the effects of the disposal on the financial statements of the Group. (c) Acquisition of Bank of Yingkou Co Ltd

On 17 April 2008, CIMB Group entered into a share subscription agreement with Bank

of Yingkou Co., Ltd (“BOYK”) to acquire 141.2 million new ordinary shares in BOYK for RMB348.8 million cash (RM156.2 million). These shares represent 19.99% equity interest in share capital of BOYK. On 14 May 2008 and 22 December 2008, the Group received approval from Bank Negara Malaysia and China Banking Regulatory Commission respectively for the proposed acquisition. The proposed acquisition was completed on 17 April 2009.


157


for the financial year ended 31 December 2009 (Continued) 49 Significant events during the financial year (Continued) (d) Issuance of USD140 million senior unsecured guaranteed bonds (“Bonds”) together

with the issuance of 5-year warrants (“Warrants”) On 3 November 2008, CIMB Bank (L) Limited (“CIMB Bank (L)”) and CIMB Group Holdings Berhad (“CIMB Group”) entered into an agreement with TPG Malaysia Finance, L. P. for the proposed issuance by CIMB Bank (L) of up to USD150 senior unsecured guaranteed bonds (“Bonds”) together with the issuance of 5-year warrants (“Warrants”) by CIMB Group. The Bonds will be guaranteed by CIMB Group in the manner set out in the conditions applicable to the Bonds.

The proposed issuance was completed on 17 April 2009 with the issuance of USD140 million senior unsecured guaranteed bonds and 50,622,413 CIMB Group warrants.

(e) Proposed Tier 2 Subordinated Bonds and Tier 2 Junior Sukuk Programmes The Bank had on 2 June 2009 obtained the approval from the Securities Commission

with regards to the proposed Tier 2 Subordinated Bonds Programme and proposed Tier 2 Junior Sukuk Programme (“Bonds and Sukuk”) with a combined limit of RM5.0 billion (or its foreign currency equivalent) in nominal value. The bonds and Sukuk have not been issued as at 31 December 2009.

(f) Rights issue of up to 297,400,949 new Bank shares

Pursuant to the Board of Directors resolution dated 25 June 2009, approval was granted for the Bank to increase the authorised share capital by way of a non-renounceable rights issue of up to 297,400,949 new Bank shares ("Right Shares") at an issue price of RM8.10 for each Right Shares to the shareholders of the Bank, whose name appear in the Register of Members of the Bank as at the close of business on 26 June 2009 on a basis of 1 Rights Share for every 10 existing Bank shares held on 26 June 2009. On 30 June 2009, the Bank issued 123,456,800 new ordinary shares at an issue price of RM8.10 each.


158


for the financial year ended 31 December 2009 (Continued) 49 Significant events during the financial year (continued) (g) Conversion of ICULS

On 10 July 2009, the Bank has fully redeemed the RM667 million ICULS via issuance of 667 million new ordinary shares to CIMBG.

(h) Issuance of up to RM2 billion nominal value Junior Sukuk (“Sukuk”)

CIMB Islamic Bank Berhad (“CIMB Islamic”) had on 15 April 2009 and 22 May 2009, obtained the approval from Bank Negara Malaysia and the Securities Commission for the proposed issuance of up to RM2 billion Tier 2 Junior Sukuk Programme in nominal value. On 25 September 2009, CIMB Islamic issued RM300 million Sukuk under Syariah principle of Musyarakah. The Junior Sukuk carries a profit rate of 5.85% per annum payable semi annually and are due on 25 September 2024, with optional redemption on 25 September 2019 or any periodic payment date thereafter.

(i) Sale of Sathorn Building On 20 October 2009, CIMB Thai Bank, a 93.15% subsidiary of CIMB Bank had entered

into a Sale and Purchase Agreement (“SPA”) for the Sale of Sathorn Building. Pursuant to the SPA, CIMB Thai Bank shall dispose of Sathorn Building for a total cash consideration of approximately THB 1 billion (or approximately RM100 million). The sale was completed on 4 January 2010. As at 31 December 2009, the Sathorn Building has been reclassified to non-current assets held for sale (see Note 56).

(j) Sale of non-performing loans

On 11 November 2009, CIMB Group received approval from the Minister of Finance (“MoF”) for the proposed disposal of part of the Bank’s non-performing loans (“NPLs”) to a special purpose company, Southeast Asia Special Asset Management Berhad (formerly known as Common Forge Berhad) (“SEASAM”). The Bank disposed a portfolio of mostly legacy NPLs comprising approximately 25,000 accounts with gross loan amount of RM2.6 billion to SEASAM at net book value of RM925 million. SEASAM is a wholly-owned subsidiary of CIMB Group Sdn Bhd.


159


for the financial year ended 31 December 2009 (Continued) 49 Significant events during the financial year (continued) (k) Disposal of Southeast Asia Special Asset Management Berhad (“SEASAM”) to

CIMBG On 1 December 2009, the Bank disposed its 100% equity interest in SEASAM to CIMBG for a cash consideration of RM100. See Note 55(b)(ii) for the effects of the disposal on the Financial Statements of the Group.

50 Subsequent events after the financial year There are no significant events subsequent to the financial year ended 31 December 2009.


160

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 51 Critical accounting estimates and judgements in applying accounting

policies The Group and the Bank make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Group’s and the Bank’s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are outlined below: (a) Impairment of available-for-sale and held-to-maturity securities The Group and the Bank follow the guidance of the revised BNM/GP8 in determining

when an investment is other than temporarily impaired. This determination requires significant judgement. The Group and the Bank evaluate, among other factors, the duration and extent to which the fair value of the investment is less than cost; and the financial health and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financial cash flow.

(b) Allowance on loans, advances and financing The Group and the Bank make allowance for losses on loans, advances and financing

based on assessment of recoverability. Whilst management is guided by the relevant BNM guidelines, management makes judgement on the future and other key factors in respect of the recovery of loans, advances and financing. Among the factors considered are the Group’s aggregate exposure to the borrowers, the net realisable value of the underlying collateral value, the viability of the customer’s business model, the capacity to generate sufficient cash flow to service debt obligations and the aggregate amount and ranking of all other creditor claims.

(c) Goodwill impairment The Group tests annually whether goodwill has suffered any impairment in accordance

with the accounting policy stated in Note J(a) of the Summary of Significant Accounting Policies.


161

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 51 Critical accounting estimates and judgements in applying accounting

policies (Continued) (c) Goodwill impairment(continued) The first step of the impairment review process requires the identification of independent

operating units, dividing the Group’s business into the various business segments. The goodwill is then allocated to these various business segments. The first element of this allocation is based on the areas of the business expected to benefit from the synergies derived from the acquisition. The second element reflects the allocation of the net assets acquired and the difference between the consideration paid for those net assets and their fair value. This allocation is reviewed following business reorganisation. The carrying value of the business segment, including the allocated goodwill, is compared to its fair value to determine whether any impairment exists. Detailed calculations may need to be carried out taking into consideration changes in market in which a business operates. In the absence of readily available market data, this calculation is usually based upon discounting expected pre-tax cash flows at the Group’s and the Bank’s cost of capital, which requires exercise of judgement.

Changes to the assumptions used by management, particularly the discount rate and the

terminal growth rate, may significantly affect the results of the impairment. (d) Intangible assets The Group’s and the Bank’s intangible assets that derive their value from contractual

customer relationships and core deposits or that can be separated and sold and have a finite useful life are amortised over their estimated useful life.

Determining the estimated useful life of these intangible assets requires an analysis of

circumstances and judgment by the Bank’s management. At each balance sheet date, or more frequently when events or changes in circumstances dictate, intangible assets are assessed for indications of impairment. If indications are present, these assets are subject to an impairment review. The impairment review comprises a comparison of the carrying amount of the assets with its recoverable amount: the higher of the assets’ selling price and its value in use. Net selling price is calculated based by reference to the amount at which the asset could be disposed in a binding agreement in an arms length transaction evidenced by an active market or recent transactions for similar assets. Value in use is calculated by discounting the expected future cash flows obtainable as a result of the assets’ continued use, including those resulting from its ultimate disposal, at a market-based discount rate on pre-tax basis.


162

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 52 Segment reporting (i) Primary reporting – business segments Definition of segments For management purposes, the Group is organised into six major operating divisions. The divisions form the basis on which the Group reports its primary segment information. Treasury Treasury focuses on treasury activities and services which include foreign exchange, money market, derivatives and capital market instruments trading. It also invests the Group’s proprietary capital. Corporate and Investment Banking Corporate and Investment Banking comprise Investment Banking, Corporate Banking, International Banking and Transactional Services, Equity Derivatives and Equity Investment and Trading.

Investment Banking advises on issuance of equity and equity-linked products management services. Corporate Banking provides a broad spectrum of financial and Ringgit lending services for domestic and multinational corporations as well as institutional and public sector clients. International Banking and Transactional Services oversees the activities of the Group’s overseas branches in London, Singapore and Hong Kong and provides conventional and customised financial packages in order to meet customers’ needs, with products including non-Ringgit corporate lending, nominee services and cash management services. Equity Derivatives develops and issues new equity derivatives instruments such as structured warrants and over-the-counter options to provide investors with alternative investment avenues. Equity Investment and Trading is the Group’s proprietary equity trading unit. Retail Banking Retail Banking focuses on innovative products and services to individual customers. It offers products such as credit facilities (residential mortgages, personal loans, share financing, credit card and hire purchase), remittance services, deposit collection, private banking and retail equity services.


163

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 52 Segment reporting (Continued) (i) Primary reporting – business segments (continued) Business Banking Business Banking is responsible for offering products and services for customer segments comprising micro-enterprises, small and medium-scale enterprises (“SMEs”) and mid-sized corporations. Its products include credit facilities (loans, banker’s acceptances, revolving credit, leasing, factoring, hire purchase), remittance services and deposit collection. Foreign Banking Operations Foreign Banking Operations comprise of CIMB Thai Bank Public Company Limited and Bank of Yingkou Co Ltd, which are involved in the provision of commercial banking and related services. Support and others Support services comprises all middle and back-office processes and cost centres and other subsidiaries whose results are not material to the Group.


164

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 52 Segment reporting (Continued) (i) Primary reporting – business segments (continued)

2009 Treasury

Corporate and

Investment Banking

Retail Banking

Business Banking

Foreign Banking

O perationsSupport

and others TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Net interest income - external (194,088) 1,301,383 2,225,497 424,578 472,069 (530) 4,228,909 - inter-segment 1,088,538 (761,597) (473,745) 176,082 - (29,278) -

894,450 539,786 1,751,752 600,660 472,069 (29,808) 4,228,909 Islamic banking income (7,879) 208,769 481,520 33,707 - - 716,117 Non-interest income 714,740 309,424 591,129 111,023 231,880 39,772 1,997,968

1,601,311 1,057,979 2,824,401 745,390 703,949 9,964 6,942,994 Overheads (262,195) (330,607) (1,940,740) (559,546) (519,510) (101,634) (3,714,232)Profit/(loss) before allowances 1,339,116 727,372 883,661 185,844 184,439 (91,670) 3,228,762 Allowances for losses on loans, advances and financing - (289,833) (309,340) (1,148) (74,202) (5,711) (680,234)Allowance for losses on other receivables - - - - - (189) (189)Write-back of/(allowances for) impairment losses 4,862 17,767 - - (1,592) (33,568) (12,531)Allowance for commitment and contingencies - (21,000) - - (199) - (21,199)Segment results 1,343,978 434,306 574,321 184,696 108,446 (131,138) 2,514,609 Share of results of jointly controlled entity - - 6,858 - - - 6,858 Share of results of associate - - - - 23,602 - 23,602 Taxation and zakat (528,153)Net profit after taxation and zakat 2,016,916


165


2009 Treasury

Corporate and

Investment Banking

Retail Banking

Business Banking

Foreign Banking

O perationsSupport

and others TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Segment assets 67,953,229 40,601,049 56,552,328 12,152,220 14,597,927 60,910 191,917,663 Unallocated assets 4,099,320 Total assets 196,016,983

Segment liabilit ies 85,730,642 17,756,591 39,520,360 20,558,739 12,284,084 751,448 176,601,864 Unallocated liabilities 2,524,253 Total liabilities 179,126,117

O ther segment itemsCapital expenditure 9,390 6,331 41,038 8,240 40,007 383,963 488,969 Depreciation of property, plant and equipment 2,080 1,015 13,347 9,523 25,536 138,423 189,924 Amortisation of prepaid lease payments - - - - 332 1,000 1,332 Amortisation of intangible assets 3,004 2,511 10,128 422 8,484 93,422 117,971 Accretion of discount less amortisation of premium 130,180 1,569 - - - (2) 131,747 Investment in jointly controlled entity - - 134,559 - - - 134,559 Investment in associate - - - - 268,636 - 268,636


166


2008 Treasury

Corporate and

Investment Banking

Retail Banking

Business Banking

Foreign Banking

O perationsSupport

and others TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000Net interest income - external (385,690) 1,285,829 2,310,050 497,495 - 8,446 3,716,130 - inter-segment 951,161 (612,957) (542,303) 242,187 - (38,088) -

565,471 672,872 1,767,747 739,682 - (29,642) 3,716,130 Islamic banking income 70,899 67,795 188,569 13,127 - - 340,390 Non-interest income 260,462 403,048 518,896 131,116 - 62,251 1,375,773

896,832 1,143,715 2,475,212 883,925 - 32,609 5,432,293 Overheads (199,174) (247,919) (1,653,920) (510,816) - (85,610) (2,697,439)Profit/(loss) before allowances 697,658 895,796 821,292 373,109 - (53,001) 2,734,854 (Allowances for)/write-back of losses on loans, advances and financing - (210,889) (355,671) (38,749) - 2,595 (602,714)Write back of losses on other receivables 3 - - - - 466 469 (Allowances for)/write-back of impairment losses (46,291) 92,830 - - - (58) 46,481 Segment results 651,370 777,737 465,621 334,360 - (49,998) 2,179,090 Share of results of jointly controlled entity - - 3,253 - - - 3,253 Share of results of associate - - - - (40,565) - (40,565)Taxation and zakat (567,080)Net profit after taxation and zakat 1,574,698

Segment assets 64,453,411 38,086,188 48,067,980 13,337,556 587,280 1,822 164,534,237 Unallocated assets 3,616,757 Total assets 168,150,994

Segment liabilit ies 84,713,596 15,040,942 32,896,776 18,480,949 - 1,480,340 152,612,603 Unallocated liabilit ies 2,456,473 Total liabilities 155,069,076

O ther segment itemsCapital expenditure 3,515 2,522 16,023 5,616 - 247,056 274,732 Depreciation of property, plant and equipment 1,458 1,031 7,584 10,572 - 113,855 134,500 Amortisation of prepaid lease payments - - - - - 1,057 1,057 Amortisation of intangible assets 1,716 1,611 49,817 314 - 57,913 111,371 Accretion of discount less amortisation of premium 132,708 81 - - - 292 133,081 Investment in jointly controlled entity - - 127,701 - - - 127,701 Investment in associate - - - - 587,280 - 587,280


167


Basis of pricing for inter-segment transfers:

Intersegmental charges are computed on the interest-bearing assets and liabilities of each business segment with rates applied based on the interest yield curve according to the term structure of maturity.

(ii) Secondary reporting – geographic segments

The Group operates in two main geographical areas:

- Malaysia, the home country of the Group, which includes all the areas of operations in

the primary business segments. - Overseas operations, which include branch and subsidiary operations in Thailand,

Singapore, United Kingdom and Hong Kong. The overseas operations are involved mainly in corporate lending and borrowing activities. With the exception of Malaysia, no other individual country contributed more than 10% of the net interest income and of total assets.

Net interest income

Total assets

Total liabilities

Capital expenditure

RM’000 RM’000 RM’000 RM’000The GroupMalaysia 3,676,298 172,745,791 157,079,218 416,463 Overseas operations 552,611 23,271,192 22,046,899 72,506

4,228,909 196,016,983 179,126,117 488,969 - - -

Net interest income Total assets Total liabilities

Capital expenditure

RM’000 RM’000 RM’000 RM’000The GroupMalaysia 3,628,156 161,895,206 148,665,889 267,668 Overseas operations 87,974 6,255,788 6,403,187 7,064

3,716,130 168,150,994 155,069,076 274,732

2009

2008


168

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (a) Financial risk management objectives and policies An effective risk management system is critical for the Group to achieve continued profitability and sustainable growth in shareholder’s value, more so in today’s globalised, yet inter-linked financial and economic environment. Risk management is an integral part of the Group’s activities and is an important feature in all its business, operations, delivery channels and decision-making processes. The extent to which CIMB Group is able to identify, assess, monitor, manage and report each of the various types of risk is critical to its safety, soundness and profitability. CIMB’s risk management function is independent of its operating units and reports to the Board on a regular basis. The Group does not embark on new businesses, introduce new products, engage in new activities or enter into new markets, unless approved by the Group Risk Committee. Generally, the objectives of CIMB Group’s risk management activities are to:

• Identify the various risk exposures and risk capital requirements; • Ensure risk taking activities are consistent with risk policies and the aggregated risk

position are within the risk appetite as approved by the Board; • Help create shareholder value through proper allocation of risk capital and facilitate

development of new business and products; (b) Enterprise Risk Management and Control Framework CIMB Group employs the Enterprise Wide Risk Management (EWRM) framework to manage its risk and opportunity effectively. The EWRM framework involves an on-going process of identifying, evaluating, monitoring, managing and reporting significant risks affecting the Group, implemented through a number of committees established by the Board of Directors. The framework provides the Board and its management with a tool to anticipate and manage both the existing and potential risk, taking into consideration the changing risk profiles, as dictated by changes in business strategies and regulatory environment and functional activities throughout the year. The Group employs a Capital-at-Risk (CaR) framework as the common measure of risk across CIMB Group. The CaR framework provides the basis of allocating economic capital within CIMB, to cushion against unexpected losses. CaR can be aggregated, thus allowing measurement of the Group’s total risk. It also provides a yardstick for evaluating risk-return relationship in different lines of business. The CaR framework also enables measurement of return of risk-adjusted-capital, to compare profitability across different businesses and for performance measurement in the Group.


169

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (b) Enterprise Risk Management and Control Framework (continued) A group wide stress test is performed on a semi-annual basis to evaluate the financial impact on the Group in the event of projected adverse economic and financial situations. This process enables the Group to assess the sufficiency of its liquidity surplus and reserves, and whether it could continue to meet its minimum capital requirement under such scenario. Such group wide stress test allows management to gain a better understanding of how portfolios and investments are likely to react to changing economic conditions and how the Group can best prepare for and react to them. In addition, the Group performs ad-hoc stress tests on selected portfolio to evaluate its performance under a given stress scenario. (c) Risk Management Organisation At the apex of the Group’s risk management structure is the Board Risk Committee (the “BRC”), which comprises exclusively of non-executive Directors of the Bank. In line with best practices, the BRC determines the risk policy objectives for the Group, and assumes responsibility on behalf of the Board for the supervision of risk management. The BRC also decides the yearly allocation of risk capital to support all risks taken by the Group. The day-to-day responsibility for risk management and control is delegated to the Group Risk Committee (the “GRC”). The GRC, comprises of senior management of the Group, undertakes the oversight function for capital allocation and overall risk limits, in line with the risk appetite determined by the Board of Directors. The GRC is supported by five (5) specialised sub-committees, namely the Group Market Risk Committee, the Credit Risk Committee, the Regional Credit Committee, the Regional Liquidity Risk Committee and the Operational Risk Committee, each addressing one of the following:

• Market risk, arising from changes in value of market risk factors such as interest rates, currency exchange rate, credit spreads, equity prices, commodities prices and their associated volatility;

• Credit risk, arising from losses due to obligor, market counterparty or issuer failing to

perform its contractual obligations to the Group;


170

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (c) Risk Management Organisation (continued)

• Liquidity risk, arising from a Group’s inability to efficiently meet its present and future funding needs or regulatory obligations, when they come due, which may adversely affect its daily operations and incur unacceptable losses; and

• Operational risk, arising from internal processes which may result from inadequacies or

failures in processes, controls or projects due to fraud, unauthorised activities, error, omission, inefficiency, systems failures or from external events.

The roles and responsibilities of the committees and sub-committees are set out in the chart below:

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (d) Group Risk Division (“GRD”) The primary oversight body is the Group Risk Division, comprising of Group Risk Management

BOARD OF DIRECTORS

BOARD RISK COMMITTEE

• Review and recommend risk policies and strategies for approval

• Oversee entire EWRM and provide strategic guidance to various risk committees

GROUP RISK COMMITTEE

• Review and advise on risk policies and strategies

• Oversee management of risk, capital allocation and asset liability management process across the Group

• Operational Risk Committee (“ORC”)

• Oversee issues relating to the operational risk and internal control environment

• Review and evaluate all Business Continuity Management (BCM)/ Disaster Recovery (DR) activities

• Credit Risk Committee (“CRC”)

• Credit approval authority for Malaysian centric cases

• Assign and review the Malaysian centric Inter-bank Limits, Sectorial Exposures and Global Counterparty Credit Limits

• Regional Liquidity Risk Committee (“LRC”)

• Oversee the Group’s overall liquidity management

• Ensure Group is able to meet its cash flow obligations in a timely and cost effective manner

• Regional Credit Committee (“RCC”)

• Credit approval authority for non-Malaysian centric cases

• Ensuring Group overall loan portfolio meets regulatory guidelines and approved internal policies and procedures

• Group Market Risk Committee (“GMRC”)

• Oversee exposures to market risks

• Evaluate and approve proposals for primary and secondary market deals for debt and equity instruments


171

(“GRM”), Group Credit (“GC”) and Regional Credit Management (“RCM”), which are independent of business units and assist the Management and the various risk committees in monitoring and controlling the Group’s risk exposures. The key responsibilities of GRD are to identify, analyse, monitor, review and report the principal risks to which the Group is exposed. Further, it provides the management with timely information and analysis of the risk positions in order for the Management to exercise control over all exposures. It also helps to create shareholder value through proper allocation of risk capital, development of risk-based pricing framework and facilitate development of new business and products. (e) Group Risk Management (“GRM”) GRM monitors risk-taking activities, initiates and proposes risk policies, risk measurement methodologies, risk limits and risk capital allocation, performs independent review of loan assets quality and loan recovery plan, coordinates new products deployments and develops the risk-based product pricing framework for loan portfolios. In propagating and ensuring compliance to the Market Risk framework, GRM reviews and analyses treasury trading strategy, positions and activities vis-à-vis changes in the financial market and performs mark-to-market as part of financial valuation. Further, GRM also conducts validation on the risk pricing parameters and models used. GRM is also tasked with the co-ordination of the Group’s effort towards implementation of the Basel II framework in compliance with the International Convergence of Capital Measurement and Capital Standards prescribed by the Bank of International Settlements and as adopted by BNM. In this regard, GRM develops, implements and validates all internal rating and scoring models and closely monitors the usage of the rating and scoring systems to ensure relevance to current market conditions and integrity of the ratings.


172

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (f) Group Credit (“GC”)

GC carries out independent assessments and evaluations of all credit risk related proposals originating from the various business units such as loans and advances, fixed income, derivatives, sales and trading, prior to submission to the BCC, CRC, the EXCO or Board for approval. GC ensures proper grouping of entities and counterparties under the single customer framework. GC also reviews the Group’s holdings of all fixed income assets issued by Malaysian companies and recommends the internal ratings for CRC’s approval. (g) Regional Credit Management (“RCM”) A new regional credit platform was established towards the second half of 2009 with a primary objective of enhancing efficiency and effectiveness of the credit oversight as well as credit approval process for all non-Malaysian centric Corporate and Financial Institutions at CIMB Group level. The platform includes two (2) credit committees, one for smaller-sized exposures of up to SGD10 million and the other for larger regional exposures. All credit proposals submitted to the two (2) credit committees for approval/concurrence are routed through RCM for independent assessment and due recommendation to the credit committees. (h) Key Areas of Risk Management 1. Credit Risk

Credit and counterparty risk is defined as the possibility of losses due to an obligor or market counterparty or issuer of securities or other instruments held failing to perform its contractual obligations to the Group. Credit risk arises primarily from lending activities through loans as well as commitments to support clients’ obligations to third parties, i.e. guarantees. In sales and trading activities, credit risk arises from the possibility that counterparties will not be able or willing to fulfil their obligation on transactions on or before settlement date. In derivatives activities, credit risk arises when counterparties to derivative contracts, such as interest rate swaps, are not able to or willing to fulfil their obligation to pay the Group the positive fair value or receivable resulting from the execution of contract terms. Credit risk may also arise where the downgrading of an entity’s rating causes the fair value of the Group’s investment in that entity’s financial instruments to fall. Credit risk remains the most significant risk to which the Group is exposed. The purpose of credit risk management is to keep credit risk exposure to an acceptable level vis-à-vis the capital, and to ensure the returns commensurate with risk.


173


for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (h) Key Areas of Risk Management (Continued) 1. Credit Risk (Continued)

All credit exposures are subjected to an internal rating, based on a combination of quantitative and qualitative criteria. Adherence to set credit limits is monitored daily by GRM, which combines all exposures for each counterparty or group, including off balance sheet items and potential exposures. Limits are also monitored based on the industry sector and rating classification. Credit exposures are evaluated by GC/RCM and are monitored against approved limits on a regular basis. Adherence to and compliance with single customer limit as well as assessing the quality of collateral are approaches adopted to address concentration risk to any large sector/ industry, or to a particular counterparty group or individual. Following the pro-active measures undertaken by GC to scale down the Group’s exposure in several industries/sectors, countries and counterparties that were affected by the 2008 global and the recent Dubai financial meltdown, the Group weathered the market challenges in 2009 well with asset quality remained intact.

2. Market Risk

Market risk is defined as any fluctuation in the value of the portfolio arising from changes in value of market risk factors such as interest rates, currency exchange rates, credit spreads, equity prices, commodities prices and their associated volatility. Market risk results from trading activities that can arise from customer-related businesses or from proprietary positions. The Group hedges the exposures to market risk by employing varied strategies, including the use of derivative instruments. CIMB adopts various measures in its risk management process to manage market risk. An accurate and timely valuation of position is critical to providing the Group with its current market exposure. GRM values the exposure using market price or a pricing model where appropriate. The Group also adopts a value-at-risk (“VAR”) approach in the measurement of market risk. Backtesting is performed to validate and reassess the accuracy of the existing VAR model. VAR is a statistical measure of the potential losses that could occur as a result of movements in market rates and prices over a specified time horizon within a given confidence level. Backtesting involves the comparison of the daily model-generated


174

VAR Notes to the Financial Statements

for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (h) Key Areas of Risk Management (Continued) 2. Market Risk (Continued)

forecast against the actual or hypothetical profit or loss data over the corresponding period.

Stress testing is conducted to capture the potential market risk exposures from an unexpected market movement. In formulating stress scenario, consideration is given to various aspects of the market; for example identification of areas where unexpected losses can occur and areas where historical correlation may no longer hold true. Policies and procedures governing risk-taking activities translate limits and management triggers to complement the global CaR limit. Limits constitute the key mechanism to control allowable risk taking, and are regularly reviewed in the face of changing business needs, market conditions, and regulatory changes. Risk Middle Office (“RMO”) within GRM undertakes monitoring and oversight process at Group Treasury and Equity Market & Derivatives trading floor, which includes reviewing and analysing treasury trading strategy, positions and activities vis-à-vis changes in the financial market, monitoring limit usage, assessing limit adequacy, and verifying transaction prices.

3. Liquidity Risk

Liquidity risk is defined as the current and prospective risk to earnings, shareholders' funds or the reputation arising from the Group's inability to efficiently meet its present and future (both anticipated and unanticipated) funding needs or regulatory obligations when they come due, which may adversely affect its daily operations and incur unacceptable losses. CIMB Group’s liquidity risk management policy is to maintain hiqh quality and well diversified portfolios of liquid assets and sources of funds under both normal business and stress conditions. Liquidity risk undertaken by the Group is governed by a set of established risk tolerance levels. Management action triggers have been established to alert management to potential and emerging liquidity pressures. The Group’s early warning system and contingency funding plans are in place to alert and enable management to act effectively and efficiently during a liquidity crisis and under adverse market conditions.


175


for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (h) Key Areas of Risk Management (Continued) 3. Liquidity Risk (Continued)

The Regional Liquidity Risk Committee meets at least once a month to discuss the liquidity risk and funding profile and is chaired by the Head of Group Risk Division. The Asset Liability Management function, which is responsible for the independent monitoring of CIMB’s liquidity risk profile, works closely with Group Treasury in its surveillance on market conditions and performs frequent stress testing on liquidity positions. Liquidity positions are monitored on a daily basis and complied with internal risk thresholds and regulatory requirements for liquidity risk. The Group maintains large buffers of liquidity throughout the year to ensure safe and sound operations from a strategic, structural and tactical perspective

4. Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. The existing Operational Risk Management Framework, which is revised periodically to cater for changing business conditions, is designed objectively to monitor and control operational risk effectively leading to a sound and stable operational environment within the CIMB Group. All operational risks, both inherent and anticipated, are properly identified, captured, monitored, mitigated, and reported in a systematic and consistent manner. The Operational Risk Committee (ORC) has oversight responsibility for all Group operational activities conducted on a day-to-day basis. In anticipation of the occurrence of potential operational risks which may impact the Group, ORC is entrusted with the added role to discuss and provide recommendations on forward looking operations matters affecting the financial services industry.

The adoption of the Control Risk Self Assessment (CRSA) and the Self Assessment Review Project (ShARP) are part of CIMB’s initiatives to ensure that operational risks within the processes in each business unit are properly identified, analyzed and mitigated on a periodic basis. Relevant Key Risk Indicators (KRI) are continuously being developed and used to track changes that may highlight new risk concerns and potential areas of weaknesses in operational control.


176


for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (h) Key Areas of Risk Management (Continued)

4. Operational Risk (Continued)

Each new or varied product and changes to the process flow are subjected to a rigorous risk review through sign-offs from the relevant support units where all critical and relevant areas of risk are being appropriately identified and assessed independently from the risk takers or product owners. The Group New Product Development Policy Manual also safeguards and protects the interest of customers through proper regulatory disclosure requirements, the availability of options or choices when the products and services are offered to the public. CIMB continues to stress the importance of adhering to internal controls and established procedures to deter fraud and to minimize losses due to staff negligence. In order to demonstrate the seriousness of such offences, strict disciplinary actions are instituted against staff concerned. The promotion of a culture within the Group whereby the demand for integrity and honesty is non-negotiable remains the core theme in its operational risk awareness program.

5. Basel II Implementation

BNM has announced a two-phased approach for implementing the standards recommended by the Bank of International Settlements set out in “International Convergence of Capital Measurement and Capital Standards: A Revised Framework” (Basel II) in Malaysia. In the first phase, banking institutions are required to adopt the Standardised Approach for credit risk by the end of 2008. In the second phase, qualified banking institutions are allowed to migrate directly to the Internal Rating-Based approach (IRB Approach) beginning from 2010. BNM has approved the Group’s application for direct migration to IRB. The approach for credit risk will be Advance IRB for retail exposure and Foundation IRB for corporate exposure. Operational risk will be based on Basic Indicator Approach and working towards Standarised Approach in 2010


177


for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (h) Key Areas of Risk Management (Continued)

5. Basel II Implementation (Continued)

A Basel II Steering Committee chaired by the Group CEO has been set up to oversee the implementation initiatives across the Group with the assistance of various sub-committees. Over the last few years, the Group has implemented various initiatives to enhance its risk management standards to meet Basel II requirements. Regular meetings were held with the regulator and on-going validations were carried out by both external consultants and the regulator to ensure the Group is moving towards IRB compliance within the stipulated timeframe.

The Group employs an economic capital allocation framework, whereby capital is allocated to all business units for risk-taking purposes. All major categories of risk are measured. This is in line with the Pillar 2 of the Basel II framework – Supervisory Review Process and also BNM’s Internal Capital Adequacy Assessment Process, which requires banks adopting IRB approach to develop a robust risk management framework (methodologies and process) to assess the adequacy of its internal economic capital in relation to the risk profile. The initiatives that were implemented under Basel II further enhanced the use of risk management parameters in the internal economic capital framework.

.

.


178

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (i) Interest rate risk The tables below summarise the Group’s and the Bank’s exposure to interest rate risks. Included in the tables are the Group’s and the Bank’s assets and liabilities

at their full carrying amounts, analysed by the earlier of contractual repricing or maturity dates. As interest rates and yield curves change over time, the Group and the Bank may be exposed to loss in earnings due to the effects of interest rates on the structure of the balance sheets. Sensitivity to interest rates arises from mismatches in the repricing dates, cash flows and other characteristics of the assets and their corresponding liabilities funding.

Up to 1 m o nth

> 1 – 3 m o nths

> 3 – 6 m o nths

> 6 – 12 m o nths

> 1 – 5 ye a rs

Ov e r 5 ye a rs

N o n- inte re s t s e ns it iv e

Tra ding bo o k To ta l

R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0

A s s e tsCas h and s ho rt-te rm funds 2 2 ,9 6 5 ,4 8 2 - - - - - 2 ,0 5 7 ,6 16 - 2 5 ,0 2 3 ,0 9 8 Securities purchas ed under res a le agreements 3 ,18 1,4 7 9 1,0 7 4 ,3 5 7 5 5 1 4 ,5 6 4 - - - - 4 ,2 6 0 ,9 5 1 Depo s its and placements with banks and o ther financ ia l ins titutio ns - 2 ,5 4 2 ,2 0 6 6 8 6 ,7 18 13 7 ,8 7 1 - - 3 5 ,8 0 1 - 3 ,4 0 2 ,5 9 6 Securities he ld fo r trading - - - - - - - 13 ,8 18 ,0 7 9 13 ,8 18 ,0 7 9 Available-fo r-s a le s ecurities 13 9 ,3 8 6 3 7 0 ,8 6 7 7 9 ,8 7 4 3 5 5 ,19 4 2 ,8 6 7 ,6 8 6 3 ,12 3 ,3 2 7 1,14 3 ,9 8 5 - 8 ,0 8 0 ,3 19 Held-to -maturity s ecurities 2 ,7 9 6 2 7 8 ,8 6 9 15 ,4 8 3 18 1,8 2 5 5 ,4 7 3 ,0 6 9 6 ,9 2 3 ,2 0 9 - - 12 ,8 7 5 ,2 5 1 Deriva tive financ ia l ins truments - - - 2 ,7 5 0 6 0 ,3 0 2 10 1,4 9 8 5 3 ,6 4 3 3 ,2 8 6 ,7 6 9 3 ,5 0 4 ,9 6 2 Lo ans , advances and financ ing - - - - - - - - - P erfo rming 5 8 ,3 3 3 ,9 5 9 10 ,0 0 7 ,3 6 3 1,5 0 4 ,9 6 9 1,6 0 1,4 5 3 17 ,0 2 1,8 5 4 2 5 ,0 18 ,13 4 15 0 ,2 3 4 - 113 ,6 3 7 ,9 6 6 - No n-perfo rming - - - - - - (15 7 ,3 2 4 ) - (15 7 ,3 2 4 )

Other as s e ts - - 14 3 ,5 6 5 8 5 ,0 0 0 - - 1,8 9 0 ,5 8 5 - 2 ,119 ,15 0 Deferred taxa tio n - - - - - - 3 0 1,4 4 7 - 3 0 1,4 4 7 Tax reco verable - - - - - - 2 ,9 4 5 - 2 ,9 4 5 Sta tuto ry depo s its with centra l banks - - - - - - 8 4 1,8 5 7 - 8 4 1,8 5 7 Inves tment in jo intly co ntro lled entity - - - - - - 13 4 ,5 5 9 - 13 4 ,5 5 9 Inves tment in as s o c ia te - - - - - - 2 6 8 ,6 3 6 - 2 6 8 ,6 3 6 Amo unt due fro m ho lding co mpany and ultimate ho lding co mpany - - - - - - 4 7 ,12 2 - 4 7 ,12 2 Amo unt due fro m re la ted co mpanies - - - - - - 9 9 8 ,8 18 - 9 9 8 ,8 18 Go o dwill - - - - - - 4 ,9 2 3 ,7 0 1 - 4 ,9 2 3 ,7 0 1 Intangible a s s e ts - - - - - - 5 7 3 ,4 16 - 5 7 3 ,4 16 P repa id leas e payments - - - - - - 16 ,3 4 0 - 16 ,3 4 0 P ro perty, plant and equipment - - - - - - 9 9 6 ,5 2 1 - 9 9 6 ,5 2 1 Inves tment pro perties - - - - - - 12 0 ,3 4 9 - 12 0 ,3 4 9 No n current-as s e ts /dis po s a l gro ups he ld fo r s a le - - - - - - 2 2 6 ,2 2 4 - 2 2 6 ,2 2 4

To ta l a s s e ts 8 4 ,6 2 3 ,10 2 14 ,2 7 3 ,6 6 2 2 ,4 3 1,16 0 2 ,3 6 8 ,6 5 7 2 5 ,4 2 2 ,9 11 3 5 ,16 6 ,16 8 14 ,6 2 6 ,4 7 5 17 ,10 4 ,8 4 8 19 6 ,0 16 ,9 8 3

N o n- t rad ing b o o k

The Gro up2 0 0 9

^


179

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (i) Interest rate risk (continued)

Up to 1 m o nth

> 1 – 3 m o nths

> 3 – 6 m o nths

> 6 – 12 m o nths

> 1 – 5 ye a rs

Ov e r 5 ye a rs



R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0Lia bilit ie s

Depo s its fro m cus to mers 7 4 ,6 9 6 ,6 6 0 2 1,3 9 5 ,7 4 7 10 ,17 8 ,7 7 5 9 ,2 3 2 ,6 9 4 5 ,0 6 0 ,10 2 16 5 ,0 3 7 2 6 ,14 3 ,3 3 0 - 14 6 ,8 7 2 ,3 4 5 Depo s its and placements o f banks and o ther financ ia l ins titutio ns 1,6 7 0 ,3 5 3 8 ,9 2 9 ,3 8 4 8 6 7 ,9 7 7 7 6 3 ,8 10 1,7 6 6 ,16 2 7 2 ,5 0 4 110 ,7 5 6 - 14 ,18 0 ,9 4 6 Obliga tio ns o n s ecurities s o ld under repurchas e agreements 5 6 5 ,0 9 7 - - - - - - - 5 6 5 ,0 9 7 Deriva tive financ ia l ins truments - - - - (9 6 3 ) 15 8 ,2 0 4 2 4 5 ,4 8 2 3 ,0 6 0 ,2 15 3 ,4 6 2 ,9 3 8 Bills and acceptances payable 1,3 3 7 ,9 3 8 1,8 2 0 ,2 5 2 3 8 7 ,8 8 0 5 8 3 - - 5 10 ,15 8 - 4 ,0 5 6 ,8 11 Amo unt due to Cagamas Berhad - 6 6 ,6 6 6 - 12 0 ,4 6 3 14 8 ,4 8 3 - - - 3 3 5 ,6 12 Amo unt due to re la ted co mpanies - - - - - - 9 ,7 10 - 9 ,7 10 Other liabilities - - - - - - 3 ,14 9 ,3 4 6 - 3 ,14 9 ,3 4 6 P ro vis io n fo r taxa tio n and zaka t - - - - - - 10 9 ,16 9 - 10 9 ,16 9 Amo unt due to ultimate ho lding co mpany - - - - - - 5 5 ,4 3 9 - 5 5 ,4 3 9 Other bo rro wings 1,0 2 7 ,5 0 0 - - - - - - - 1,0 2 7 ,5 0 0 Subo rdina ted o bliga tio ns 3 0 8 ,5 6 2 - - - 1,5 16 ,7 8 6 2 ,2 2 5 ,4 2 3 5 5 ,9 4 5 - 4 ,10 6 ,7 16 Bo nds - - - - 4 4 3 ,0 5 1 - - - 4 4 3 ,0 5 1 Redeemable pre fe rence s hares - - - - - 7 5 1,4 3 7 - - 7 5 1,4 3 7

To ta l lia bilit ie s 7 9 ,6 0 6 ,110 3 2 ,2 12 ,0 4 9 11,4 3 4 ,6 3 2 10 ,117 ,5 5 0 8 ,9 3 3 ,6 2 1 3 ,3 7 2 ,6 0 5 3 0 ,3 8 9 ,3 3 5 3 ,0 6 0 ,2 15 17 9 ,12 6 ,117

To ta l in te re s t ra te s e ns it iv ity g a p 5 ,0 16 ,9 9 2 (17 ,9 3 8 ,3 8 7 ) (9 ,0 0 3 ,4 7 2 ) (7 ,7 4 8 ,8 9 3 ) 16 ,4 8 9 ,2 9 0 3 1,7 9 3 ,5 6 3 14 ,0 4 4 ,6 3 3

N o n-tra ding bo o k

The Gro up

2 0 0 9

^ Includes specific allowances and general allowances of RM4,259,812,000



180

for the financial year ended 31 December 2009 (Continued) 54 Risk management and use of financial instruments (Continued) (i) Interest rate risk (continued)

Up to 1 m o nth

> 1 – 3 m o nths

> 3 – 6 m o nths

> 6 – 12 m o nths

> 1 – 5 ye a rs

Ov e r 5 ye a rs




A s s e t s

Cas h and s ho rt-te rm funds 20,114,833 - - - - - 1,851,529 - 21,966,362 Securities purchas ed under res a le agreements 1,439,221 1,528,549 - - - - - - 2,967,770 Depo s its and placements with banks and o ther financ ia l ins titutio ns - 1,793,676 293,813 51,970 - - - - 2,139,459 Securitie s he ld fo r trading - - - - - - - 9,564,281 9,564,281 Available-fo r-s a le s ecurities 62,599 171,108 165,119 473,516 2,404,158 2,747,504 1,336,186 - 7,360,190 Held-to -maturity s ecurities 79,090 263,527 115,517 290,606 4,520,286 6,324,004 32,940 - 11,625,970 Deriva tive financ ia l ins truments - - - - 91,752 127,439 21,088 5,095,256 5,335,535 Lo ans , advances and financ ing - P erfo rming 58,415,137 5,810,968 1,881,841 884,600 9,849,578 17,967,159 195,094 - 95,004,377 - No n-perfo rming - - - - - - 682,769 - 682,769 Other as s e ts - - 281,746 20,249 - - 1,793,576 - 2,095,571 Deferred taxatio n - - - - - - 304,537 - 304,537 Tax reco verable - - - - - - 248,055 - 248,055 Sta tuto ry depo s its with centra l banks - - - - - - 2,723,540 - 2,723,540 Inves tment in jo intly co ntro lled entity - - - - - - 127,701 - 127,701 Inves tment in as s o c ia te - - - - - - 587,280 - 587,280 Amo unt due fro m ho lding co mpany and ultimate ho lding co mpany - - - - - - 278,350 - 278,350 Amo unt due fro m re la ted co mpanies - - - - - - 90,926 - 90,926 Go o dwill - - - - - - 3,695,075 - 3,695,075 Intangible as s e ts - - - - - - 412,288 - 412,288 P repa id leas e payments - - - - - - 29,618 - 29,618 P ro perty, plant and equipment - - - - - - 728,713 - 728,713 Inves tment pro perties - - - - - - 100,175 - 100,175 No n current-as s e ts /dis po s a l gro ups held fo r s a le - - - - - - 82,452 - 82,452 To ta l a s s e ts 80,110,880 9,567,828 2,738,036 1,720,941 16,865,774 27,166,106 15,321,892 14,659,537 168,150,994

N o n- t rad ing b o o k

2 0 0 8

The Gro up

^



181


Up to 1 m o nth

> 1 – 3 m o nths

> 3 – 6 m o nths

> 6 – 12 m o nths

> 1 – 5 ye a rs

Ov e r 5 ye a rs



R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0Lia bilit ie s

Depo s its fro m cus to mers 63,172,538 15,047,986 9,228,697 7,059,410 2,655,515 15,866 23,910,963 - 121,090,975 Depo s its and placements o f banks and o ther financ ia l ins titutio ns 5,294,565 6,149,264 510,163 573,590 2,255,746 365,232 736 - 15,149,296 Obliga tio ns o n s ecuritie s s o ld under repurchas e agreements - - - - - - - - - Deriva tive financ ia l ins truments - - 2,166 - - 202,404 3,279 4,641,186 4,849,035 Bills and acceptances payable 1,243,331 1,276,781 75,689 5,591 - - 489,781 - 3,091,173 Amo unt due to Cagamas Berhad 11,524 73,487 298,801 136,845 473,161 - - - 993,818 Redeemable as s e t-backed bo nds - - - - - - - - - Amo unt due to re la ted co mpanies - - - - - - 15,432 - 15,432 Other liabilities - - - - - - 2,751,252 - 2,751,252 P ro vis io n fo r taxa tio n and zaka t - - - - - - 5,698 - 5,698 Irredeemable Co nvertible Uns ecured Lo an Sto cks - - - - 667,000 - - - 667,000 Other bo rro wings 1,039,350 - - - - - - - 1,039,350 Subo rdina ted o bliga tio ns - - 1,037,736 - 1,535,476 2,000,000 - - 4,573,212 Redeemable preference s hares - - - - - 813,336 - - 813,336 Liabilitie s direc tly as s o c ia ted with no n-current a s s e ts /dis po s a l gro ups c las s ified as he ld fo r s a le - - - - - - 29,499 - 29,499 To ta l lia bilit ie s 70,761,308 22,547,518 11,153,252 7,775,436 7,586,898 3,396,838 27,206,640 4,641,186 155,069,076

To ta l inte re s t ra te s e ns it iv ity g a p 9,349,572 (12,979,690) (8,415,216) (6,054,495) 9,278,876 23,769,268 10,018,351

N o n-tra d ing bo o k

The Gro up

2 0 0 8

^ Includes specific allowances and general allowances of RM4,791,009,000.


182


Up to 1 m o nth

> 1 – 3 m o nths

> 3 – 6 m o nths

> 6 – 12 m o nths

> 1 – 5 ye a rs

Ov e r 5 ye a rs

N o n-inte re s t s e ns it iv e


R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0A s s e ts

Cas h and s ho rt-te rm funds 16 ,0 7 4 ,7 0 0 - - - - - 1,6 2 4 ,9 9 1 - 17 ,6 9 9 ,6 9 1 Securities purchas ed under res a le agreements 1,7 7 7 ,9 8 4 1,0 7 4 ,3 5 7 5 5 1 4 ,5 6 4 - - - - 2 ,8 5 7 ,4 5 6 Depo s its and placements with banks and o ther financ ia l ins titutio ns - 11,2 5 4 ,7 3 6 5 6 1,4 3 8 118 ,10 4 - - - - 11,9 3 4 ,2 7 8 Securities he ld fo r trading - - - - - - - 10 ,15 2 ,18 5 10 ,15 2 ,18 5 Available -fo r-s a le s ecurities 7 1,113 110 ,0 5 5 4 9 ,7 2 3 3 15 ,2 7 7 2 ,7 0 9 ,2 4 1 2 ,9 0 4 ,5 6 4 3 6 4 ,7 3 5 - 6 ,5 2 4 ,7 0 8 Held-to -maturity s ecurities - 6 ,5 2 4 - 15 0 ,8 5 9 3 ,6 4 7 ,4 0 9 6 ,8 9 7 ,4 7 8 - - 10 ,7 0 2 ,2 7 0 Deriva tive financ ia l ins truments - - - 2 ,7 5 0 6 0 ,3 0 2 10 1,4 9 8 2 4 ,6 6 5 3 ,0 14 ,3 9 9 3 ,2 0 3 ,6 14 Lo ans , advances and financ ing - P erfo rming 5 3 ,8 7 1,9 17 3 ,4 6 7 ,5 11 1,13 3 ,0 5 0 5 2 3 ,2 7 2 13 ,6 4 2 ,4 6 8 12 ,4 0 5 ,10 2 18 ,5 0 9 - 8 5 ,0 6 1,8 2 9 - No n-perfo rming - - - - - - (6 0 5 ,4 6 2 ) - (6 0 5 ,4 6 2 )Other as s e ts - - 14 3 ,5 6 5 8 5 ,0 0 0 - - 1,3 7 9 ,2 3 5 - 1,6 0 7 ,8 0 0 Deferred taxa tio n - - - - - - 2 8 1,8 8 0 - 2 8 1,8 8 0 Sta tuto ry depo s its with centra l banks - - - - - - 6 6 1,9 8 3 - 6 6 1,9 8 3 Inves tment in s ubs idia ries - - - - - - 3 ,8 16 ,5 0 0 - 3 ,8 16 ,5 0 0 Inves tment in jo intly co ntro lled entity - - - - - - 12 4 ,4 4 8 - 12 4 ,4 4 8 Inves tment in as s o c ia te - - - - - - 2 4 5 ,0 3 4 - 2 4 5 ,0 3 4 Amo unt due fro m ho lding co mpany and ultimate ho lding co mpany - - - - - - 14 ,8 4 6 - 14 ,8 4 6 Amo unt due fro m s ubs idia ries - - - - - - 12 8 ,0 6 4 - 12 8 ,0 6 4 Amo unt due fro m re la ted co mpanies - - - - - - 9 9 4 ,9 8 9 - 9 9 4 ,9 8 9 Go o dwill - - - - - - 3 ,5 5 5 ,0 7 5 - 3 ,5 5 5 ,0 7 5 Intangible as s e ts - - - - - - 5 12 ,6 7 4 - 5 12 ,6 7 4 P repa id leas e payments - - - - - - 12 ,5 11 - 12 ,5 11 P ro perty, plant and equipment - - - - - - 5 6 4 ,4 8 6 - 5 6 4 ,4 8 6 Inves tment pro perties - - - - - - 9 6 ,8 5 7 - 9 6 ,8 5 7 No n-current as s e ts /dis po s a l gro ups he ld fo r s a le - - - - - - 7 3 ,9 0 2 - 7 3 ,9 0 2 To ta l a s s e ts 7 1,7 9 5 ,7 14 15 ,9 13 ,18 3 1,8 8 8 ,3 2 7 1,19 9 ,8 2 6 2 0 ,0 5 9 ,4 2 0 2 2 ,3 0 8 ,6 4 2 13 ,8 8 9 ,9 2 2 13 ,16 6 ,5 8 4 16 0 ,2 2 1,6 18

2 0 0 9


The B a nk

^



183

for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued)

(i) Interest rate risk (continued)

Up to 1 m o nth

> 1 – 3 m o nths

> 3 – 6 m o nths

> 6 – 12 m o nths

> 1 – 5 ye a rs

Ov e r 5 ye a rs




Lia bilit ie sDepo s its fro m cus to mers 5 7 ,5 9 8 ,7 8 5 13 ,2 16 ,2 3 4 7 ,0 6 7 ,4 5 5 8 ,0 19 ,0 6 0 2 ,7 8 2 ,8 7 2 4 4 ,18 7 2 5 ,7 2 1,3 18 - 114 ,4 4 9 ,9 11 Depo s its and placements o f banks and o ther financ ia l ins titutio ns 11,0 8 2 ,15 1 3 ,8 0 2 ,14 4 3 0 6 ,3 4 2 4 9 9 ,3 5 8 1,8 3 7 ,7 5 1 5 8 3 10 5 ,0 6 8 - 17 ,6 3 3 ,3 9 7 Deriva tive financ ia l ins truments - - - - (9 6 3 ) 12 9 ,9 4 9 4 7 ,8 5 8 3 ,0 8 4 ,2 7 7 3 ,2 6 1,12 1 Bills and acceptances payable 7 16 ,6 4 3 1,2 6 9 ,9 5 6 3 5 8 ,2 12 5 8 3 - - 4 8 0 ,7 7 1 - 2 ,8 2 6 ,16 5 Amo unt due to Cagamas Berhad - 6 6 ,6 6 6 - 12 0 ,4 6 3 14 8 ,4 8 3 - - - 3 3 5 ,6 12 Amo unt due to s ubs idia ries - - - - - - 118 ,6 6 8 - 118 ,6 6 8 Amo unt due to re la ted co mpany - - - - - - 2 8 5 - 2 8 5 Other liabilities - - - - - - 2 ,4 6 3 ,8 18 - 2 ,4 6 3 ,8 18 P ro vis io n fo r taxa tio n - - - - - - 10 4 ,3 9 5 - 10 4 ,3 9 5

Subo rdina ted o bliga tio ns - - - - 1,5 16 ,7 8 6 2 ,6 8 3 ,0 19 - - 4 ,19 9 ,8 0 5 To ta l lia bilit ie s 6 9 ,3 9 7 ,5 7 9 18 ,3 5 5 ,0 0 0 7 ,7 3 2 ,0 0 9 8 ,6 3 9 ,4 6 4 6 ,2 8 4 ,9 2 9 2 ,8 5 7 ,7 3 8 2 9 ,0 4 2 ,18 1 3 ,0 8 4 ,2 7 7 14 5 ,3 9 3 ,17 7

To ta l in te re s t ra te s e ns it iv ity g a p 1,9 7 0 ,0 0 9 (2 ,0 13 ,6 9 1) (5 ,8 4 3 ,6 8 2 ) (7 ,4 3 9 ,6 3 8 ) 13 ,7 7 4 ,4 9 1 19 ,4 5 0 ,9 0 4 10 ,0 8 2 ,3 0 7


The B a nk

2 0 0 9

^ Includes specific allowances and general allowances of RM2,902,393,000.


184


Up to 1 m o nth

> 1 – 3 m o nths

> 3 – 6 m o nths

> 6 – 12 m o nths

> 1 – 5 ye a rs

Ov e r 5 ye a rs



R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0A s s e tsCas h and s ho rt-te rm funds 12,770,875 - - - - - 1,537,471 - 14,308,346 Securities purchas ed under res a le agreements 1,439,221 1,528,549 - - - - - - 2,967,770 Depo s its and placements with banks and o ther financ ia l ins titutio ns 2,036,331 2,781,610 44,016 105,953 - - - - 4,967,910 Securities he ld fo r trading - - - - - - - 6,517,399 6,517,399 Available -fo r-s a le s ecurities 57,024 161,090 140,064 416,432 2,102,215 2,518,998 1,107,567 - 6,503,390 Held-to -maturity s ecurities - 28,717 - 262,773 2,705,032 5,688,687 192 - 8,685,401 Deriva tive financ ia l ins truments - - - - 91,752 127,439 3,314 4,903,501 5,126,006 Lo ans , advances and financ ing - P erfo rming 55,596,858 2,773,840 1,562,093 303,425 8,611,820 15,322,327 195,093 - 84,365,456 - No n-perfo rming - - - - - - 556,721 - 556,721 Other as s e ts - - 281,745 20,250 - - 1,631,241 - 1,933,236 Tax reco verable - - - - - - 226,786 - 226,786 Deferred taxa tio n - - - - - - 263,993 - 263,993 S ta tuto ry depo s its with centra l banks - - - - - - 2,453,934 - 2,453,934 Inves tment in s ubs idia ries - 2,245,919 2,245,919 Inves tment in jo intly co ntro lled entity - - - - - - 124,448 - 124,448 Inves tment in as s o c ia te - - - - - - 595,814 - 595,814 Amo unt due fro m ho lding co mpany and ultimate ho lding co mpany - - - - - - 246,872 - 246,872 Amo unt due fro m s ubs idia ries - 197,618 197,618 Amo unt due fro m re la ted co mpanies - - - - - - 90,819 - 90,819 Go o dwill - - - - - - 3,559,075 - 3,559,075 Intangible as s e ts - - - - - - 400,857 - 400,857 P repa id leas e payments - - - - - - 25,197 - 25,197 P ro perty, plant and equipment - - - - - - 564,047 - 564,047 Inves tment pro perties - - - - - - 100,175 - 100,175 No n-current as s e ts /dis po s a l gro ups he ld fo r s a le - - - - - - 42,712 - 42,712 To ta l a s s e ts 71,900,309 7,273,806 2,027,918 1,108,833 13,510,819 23,657,451 16,169,865 11,420,900 147,069,901

2 0 0 8The B a nk


^


185



Up to 1 m o nth

> 1 – 3 m o nths

> 3 – 6 m o nths

> 6 – 12 m o nths

> 1 – 5 ye a rs

Ov e r 5 ye a rs




Lia bilit ie sDepo s its fro m cus to mers 49,244,727 11,666,198 8,515,750 6,826,036 688,756 - 23,628,793 - 100,570,260 Depo s its and placements o f banks and o ther financ ia l ins titutio ns 8,090,948 4,315,012 466,150 467,369 3,399,031 365,033 736 - 17,104,279 Deriva tive financ ia l ins truments - - 2,166 - - 202,404 2,842 4,612,945 4,820,357 Bills and acceptances payable 1,243,331 1,276,781 75,689 5,591 - - 484,523 - 3,085,915 Amo unt due to Cagamas Berhad 11,524 73,487 298,801 136,845 473,161 - - - 993,818 Amo unt due to s ubs idia ries - - - - - - 178,140 - 178,140 Amo unt due to re la ted co mpany - - - - - - 9,398 - 9,398 Other liabilities - - - - - - 2,400,962 - 2,400,962 Irredeemable Co nvertible Uns ecured Lo an Sto cks - - - 667,000 - - 667,000 Subo rdina ted o bliga tio ns - - 1,037,736 - 1,535,476 2,813,336 - - 5,386,548 To ta l lia bilit ie s 58,590,530 17,331,478 10,396,292 7,435,841 6,763,424 3,380,773 26,705,394 4,612,945 135,216,677

To ta l in te re s t ra te s e ns it iv ity g a p 13,309,779 (10,057,672) (8,368,374) (6,327,008) 6,747,395 20,276,678 6,807,955


2 0 0 8

The B a nk

^ Includes specific allowances and general allowances of RM4,587,087,000


186

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued) (i) Interest rate risk (continued) The tables below summarises the effective average interest rates by major currencies for each class of financial asset and financial liability:

RM USD THB RM USD RM USD RM USD% % % % % % % % %

Financial assetsCash and short-term funds 2.02 0.34 1.12 3.20 1.08 2.05 0.26 3.28 1.10 Securities purchased under resale agreements 2.06 - 1.21 2.83 - 2.06 - 2.83 - Deposits and placements with banks and other financial institutions 2.07 0.70 0.55 3.38 1.93 2.09 0.96 3.54 2.07 Securities held for trading 2.57 4.10 - 3.63 5.46 2.68 2.11 3.70 2.59 Available-for-sale securities 4.99 2.00 2.21 5.12 - 5.03 - 5.22 - Held-to-maturity securities 5.42 5.58 4.15 5.64 7.26 5.46 - 5.67 - Loans, advances and financing 4.93 3.09 7.46 5.72 3.92 4.82 - 5.71 - Other assets 4.73 3.50 - 5.93 - 4.73 - 5.93 -

Financial liabilitiesDeposits from customers 2.15 0.34 5.09 3.22 0.56 2.27 0.35 3.36 0.62 Deposits and placements of banks and other financial institutions 2.19 0.38 3.30 3.20 1.43 2.05 0.33 2.89 1.54 Obligations on securities sold under repurchase agreements - - 1.22 - - - - - - Bills and acceptances payable 2.25 - 1.27 3.72 - 2.25 - 3.73 - Amount due to Cagamas Berhad 4.68 - - 4.74 - 4.68 - 4.74 - ICULS - - - 7.50 - - - 7.50 - Other borrowings - 0.86 - - 2.19 - - - - Subordinated obligations 5.58 - - 6.07 5.61 6.04 6.62 6.07 6.10 Bonds - 3.00 - - - - - - - Redeemable preference shares - 6.62 - - 6.62 - - - -

2009 2008The Group The Bank

2009 2008


187

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued)

(j) Credit risk

The following tables set out the credit risk concentrations of financial instruments:

S ho rt te rm funds a nd

pla c e m e nts with f ina nc ia l

ins t itut io ns

S e c urit ie s purc ha s e d

unde r re s a le a g re e m e nt

S e c urit ie s he ld fo r tra ding

A v a ila b le - fo r-s a le

s e c urit ie s

He ld- to -m a turity

s e c urit ie s

D e riv a t iv e f ina nc ia l

ins trum e nts

Lo a ns , a dv a nc e s a nd

f ina nc ingTo ta l o n-

ba la nc e s he e t

Tre a s ury re la te d

c o m m itm e nts a nd

c o nt ing e nc ie s

C re dit re la te d c o m m itm e nts

a nd c o nt ing e nc ie s

R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0Agriculture - - 10 2 ,3 18 10 8 ,6 13 2 5 9 ,4 3 9 9 9 7 2 ,4 0 1,6 15 2 ,8 7 2 ,9 8 2 2 ,13 2 5 4 ,8 6 7 Mining and quarrying - - 3 1 - - 8 3 ,5 7 7 3 2 5 ,0 6 6 4 0 8 ,6 7 4 2 7 ,8 3 0 18 0 ,12 5 Manufac turing - - 2 1,6 6 4 3 0 6 ,6 5 1 7 0 ,4 2 0 9 5 2 8 ,3 6 3 ,7 8 5 8 ,7 6 3 ,4 7 2 2 0 5 ,6 3 3 6 9 9 ,2 2 5 Elec tric ity, gas and water - - 2 7 9 ,8 7 0 1,18 6 ,5 3 3 1,3 8 9 ,8 0 2 2 7 5 1,7 4 5 ,5 4 7 4 ,6 0 2 ,0 2 7 5 7 ,6 6 2 2 0 4 ,3 0 6 Co ns truc tio n - - 14 6 ,3 9 9 8 6 3 ,8 7 2 3 9 4 ,7 9 1 5 ,0 11 4 ,3 6 9 ,3 7 1 5 ,7 7 9 ,4 4 4 3 2 ,8 15 1,2 5 1,5 5 2 Real es ta te - - 12 7 ,0 2 9 15 5 ,5 9 8 6 2 6 ,9 11 19 ,3 7 1 11,110 ,6 4 9 12 ,0 3 9 ,5 5 8 5 0 9 5 ,9 11 P urchas e o f landed pro perty - Res identia l - - - 4 5 9 - - 2 8 ,5 6 8 ,4 5 9 2 8 ,5 6 8 ,9 18 - 2 0 ,9 0 2 - No n-res identia l - - - - - - 7 ,0 11,3 0 6 7 ,0 11,3 0 6 - - Genera l co mmerce - - - 2 0 ,2 8 5 - 1,7 7 1 2 ,6 9 1,2 7 4 2 ,7 13 ,3 3 0 5 ,8 9 5 1,0 2 6 ,0 5 1 Trans po rt, s to rage and co mmunica tio ns - - 2 ,8 3 3 ,111 1,4 7 0 ,6 3 4 3 ,3 8 3 ,8 5 5 10 9 ,5 9 4 6 ,8 4 1,6 4 2 14 ,6 3 8 ,8 3 6 3 6 1,6 9 9 2 0 9 ,12 2 Finance , ins urance and bus ines s s e rvices 14 ,0 4 6 ,6 3 0 3 ,9 7 5 ,7 16 2 ,4 7 5 ,6 5 1 1,6 17 ,7 2 9 3 ,2 9 1,7 7 7 3 ,2 7 4 ,0 17 4 ,7 12 ,0 7 0 3 3 ,3 9 3 ,5 9 0 6 ,3 2 3 ,5 2 3 5 3 1,5 3 9 Go vernment and go vernment agenc ies 14 ,3 7 9 ,0 6 4 2 8 5 ,2 3 5 7 ,2 6 3 ,2 5 5 1,8 0 4 ,9 4 9 3 ,3 12 ,5 4 8 7 7 5 - 2 7 ,0 4 5 ,8 2 6 7 ,6 0 6 - P urchas e o f s ecurities - - - 12 4 - - 3 ,3 5 9 ,9 8 7 3 ,3 6 0 ,111 3 ,6 0 0 13 4 ,7 9 5 P urchas e o f trans po rt vehic les - - - - - - 11,4 7 5 ,8 8 7 11,4 7 5 ,8 8 7 - - Co ns umptio n c redit - - 3 3 ,9 3 0 5 5 ,6 3 2 - - 7 ,4 8 3 ,8 6 2 7 ,5 7 3 ,4 2 4 - 4 6 1 Others - - 6 4 ,5 9 3 112 ,3 6 5 14 5 ,4 3 8 8 ,6 2 2 14 ,5 8 4 ,6 6 2 14 ,9 15 ,6 8 0 5 ,9 2 0 4 2 3 ,0 3 0

2 8 ,4 2 5 ,6 9 4 4 ,2 6 0 ,9 5 1 13 ,3 4 7 ,8 5 1 7 ,7 0 3 ,4 4 4 12 ,8 7 4 ,9 8 1 3 ,5 0 4 ,9 6 2 115 ,0 4 5 ,18 2 18 5 ,16 3 ,0 6 5 7 ,0 3 4 ,3 6 5 4 ,8 3 1,8 8 6

The Gro up

2 0 0 9

# * α ^# * α ^# Exclude equity instruments amounting to RM470,228,000 * Exclude equity instruments amounting to RM376,875,000 ∝ Exclude equity instruments amounting to RM270,000 ^ Gross loans, advances and financing after specific allowance but before general allowance of RM1,564,540,000 Equity instruments are not subject to credit risk due to their nature which are short-term, lower credit risk, easily disposable and has no maturity period.


188


(j) Credit risk (continued)




ins t itut io ns




A v a ila ble - fo r-s a le

s e c urit ie s


s e c urit ie s


ins trum e nts



ba la nc e s he e t






R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0Agriculture - - 133,259 128,408 284,836 340 2,206,557 2,753,400 8,701 320,868 Mining and quarrying - - - - - - 420,764 420,764 31,215 209,963 Manufac turing - - 5,471 123,656 110,126 61,617 7,733,217 8,034,087 244,518 689,813 Electric ity, gas and water - - 229,560 1,143,606 1,567,379 70,669 945,268 3,956,482 96,108 101,168 Co ns truc tio n - - 55,016 552,039 206,003 38 5,180,529 5,993,625 148,217 1,417,506 Rea l es ta te - - 33,352 232,087 930,668 - 10,313,304 11,509,411 10,982 417,885 P urchas e o f landed pro perty - Res identia l - - - - - - 18,546,181 18,546,181 - 10,150 - No n-res identia l - - - - - 429 5,685,054 5,685,483 2,640 6,295 General co mmerce - - - 28,626 46,809 4,019 1,401,051 1,480,505 105,024 1,363,631 Trans po rt, s to rage and co mmunica tio ns - - 607,419 1,553,278 4,072,739 445,460 7,716,965 14,395,861 222,635 783,366 Finance , ins urance and bus ines s s e rvices 18,453,115 14,256 5,121,901 1,624,581 1,543,536 4,649,101 2,557,703 33,964,193 5,936,909 1,468,798 Go vernment and go vernment agenc ies 5,652,706 2,953,514 3,182,136 1,281,068 2,841,809 5,336 - 15,916,569 14,207 43,203 P urchas e o f s ecurities - - - 15,580 - - 7,160,336 7,175,916 4,500 155,903 P urchas e o f trans po rt vehic les - - - - - - 11,026,546 11,026,546 946 - Co ns umptio n c redit - - - - - - 10,171,035 10,171,035 - 14,678 Others - - 53,308 296,209 21,603 98,526 6,229,134 6,698,780 34,369 2,757,144

24,105,821 2,967,770 9,421,422 6,979,138 11,625,508 5,335,535 97,293,644 157,728,837 6,860,971 9,760,371

The Gro up

2 0 0 8

# * α ^# * α ^ # Exclude equity instruments amounting to RM142,859,000 * Exclude equity instruments amounting to RM381,051,000 ∝ Exclude equity instruments amounting to RM462,000 ^ Gross loans, advances and financing after specific allowance but before general allowance RM1,606,498,000. Equity instruments are not subject to credit risk due to their nature which are short-term, lower credit risk, easily disposable and has no maturity period.


189


(j) Credit risk (continued)



p la c e m e nts with f ina nc ia l

ins t itut io ns





s e c urit ie s


s e c urit ie s


ins trum e nts



ba la nc e s he e t






R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0Agriculture - - 10 2 ,3 18 10 3 ,5 4 0 4 ,9 3 6 9 9 7 1,4 8 7 ,3 6 8 1,6 9 9 ,15 9 2 ,13 2 4 5 ,0 10 Mining and quarrying - - - - - 8 3 ,5 7 7 2 5 0 ,7 2 1 3 3 4 ,2 9 8 2 7 ,8 3 0 17 2 ,2 9 0 Manufac turing - - 5 ,0 7 9 2 9 6 ,8 9 1 6 8 ,5 2 0 9 5 2 5 ,6 7 7 ,2 7 0 6 ,0 4 8 ,7 12 2 0 5 ,6 3 3 5 4 7 ,16 1 Elec tric ity, gas and water - - 2 7 4 ,8 3 2 1,14 5 ,15 6 1,3 8 0 ,2 5 9 2 7 5 9 5 3 ,6 2 1 3 ,7 5 4 ,14 3 5 7 ,6 6 2 114 ,6 0 0 Co ns truc tio n - - 5 0 ,8 3 7 8 2 6 ,5 6 0 3 8 6 ,4 0 1 5 ,0 11 3 ,3 3 6 ,8 8 9 4 ,6 0 5 ,6 9 8 3 2 ,8 15 1,0 5 1,7 6 5 Real es ta te - - 12 7 ,0 2 9 13 5 ,0 0 5 - 19 ,3 7 1 10 ,4 5 6 ,0 7 3 10 ,7 3 7 ,4 7 8 5 0 3 4 ,8 8 2 P urchas e o f landed pro perty - Res identia l - - - - - - 2 4 ,0 6 3 ,2 3 3 2 4 ,0 6 3 ,2 3 3 - 2 0 ,9 0 2 - No n-res identia l - - - - - - 5 ,9 9 4 ,8 6 5 5 ,9 9 4 ,8 6 5 - - Genera l co mmerce - - - 2 0 ,13 2 - 1,7 7 1 1,2 2 6 ,8 3 9 1,2 4 8 ,7 4 2 5 ,8 9 5 8 9 8 ,9 3 0 Trans po rt, s to rage and co mmunica tio ns - - 2 ,8 0 8 ,0 9 3 1,4 0 5 ,8 3 3 3 ,2 9 1,9 2 7 10 9 ,5 9 4 3 ,12 4 ,8 2 5 10 ,7 4 0 ,2 7 2 3 6 1,6 9 9 2 0 5 ,4 8 1 Finance , ins urance and bus ines s s e rvices 19 ,4 0 6 ,9 2 9 2 ,7 4 2 ,7 7 7 4 0 4 ,4 11 9 9 5 ,2 8 2 2 ,8 7 8 ,9 8 8 2 ,9 7 2 ,6 6 9 3 7 4 ,6 8 6 2 9 ,7 7 5 ,7 4 2 6 ,0 6 7 ,0 3 3 4 7 7 ,4 7 7 Go vernment and go vernment agenc ies 10 ,2 2 7 ,0 4 0 114 ,6 7 9 5 ,8 7 9 ,10 8 1,0 6 9 ,2 0 3 2 ,5 4 5 ,9 3 1 7 7 5 - 19 ,8 3 6 ,7 3 6 7 ,6 0 6 - P urchas e o f s ecurities - - - - - - 3 ,112 ,4 6 6 3 ,112 ,4 6 6 3 ,6 0 0 - P urchas e o f trans po rt vehic les - - - - - - 7 ,5 6 9 ,6 0 7 7 ,5 6 9 ,6 0 7 - - Co ns umptio n c redit - - 3 3 ,9 3 0 5 5 ,6 2 0 - - 4 ,9 2 1,6 5 2 5 ,0 11,2 0 2 - - Others - - 5 ,0 7 7 9 9 ,12 6 14 5 ,3 0 8 8 ,6 2 2 13 ,16 4 ,6 4 2 13 ,4 2 2 ,7 7 5 5 ,9 2 0 3 7 7 ,0 6 2

2 9 ,6 3 3 ,9 6 9 2 ,8 5 7 ,4 5 6 9 ,6 9 0 ,7 14 6 ,15 2 ,3 4 8 10 ,7 0 2 ,2 7 0 3 ,2 0 3 ,6 14 8 5 ,7 14 ,7 5 7 14 7 ,9 5 5 ,12 8 6 ,7 7 7 ,8 7 5 3 ,9 4 5 ,5 6 0

The B a nk2 0 0 9

# * ^# * ^ # Exclude equity instruments amounting to RM461,471,000 * Exclude equity instruments amounting to RM372,360,000 ^ Gross loans, advances and financing after specific allowance but before general allowance RM1,258,390,000

Equity instruments are not subject to credit risk due to their nature which are short-term, lower credit risk, easily disposable and has no maturity period.


190


for the financial year ended 31 December 2009 (Continued) 53 Risk management and use of financial instruments (Continued)

(j) Credit risk (continued) The following tables set out the credit risk concentrations of financial instruments:


p la c e m e nts with f ina nc ia l

ins t itut io ns





s e c urit ie s


s e c urit ie s


ins trum e nts



ba la nc e s he e t






R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0Agriculture - - 101,351 108,499 14,900 340 1,545,901 1,770,991 2,932 150,516 Mining and quarrying - - - - - - 182,681 182,681 31,215 140,990 Manufac turing - - 5,096 123,656 108,226 61,617 7,130,502 7,429,097 228,748 678,726 Elec tric ity, gas and water - - 229,561 1,084,165 1,468,370 70,669 901,625 3,754,390 78,828 93,745 Co ns truc tio n - - 18,133 390,520 192,731 38 4,223,249 4,824,671 4,061 1,295,237 Rea l es ta te - - 32,454 211,372 - - 10,034,664 10,278,490 4,364 417,358 P urchas e o f landed pro perty - - - Res identia l - - - - - - 17,793,588 17,793,588 - 10,150 - No n-res identia l - - - - - 429 5,053,741 5,054,170 2,640 6,295 Genera l co mmerce - - - 19,211 4,563 4,019 907,643 935,436 21,774 1,251,353 Trans po rt, s to rage and co mmunica tio ns - - 591,962 1,508,103 3,252,841 445,460 6,827,666 12,626,032 391,385 679,724 F inance , ins urance and bus ines s s e rvices 15,184,429 14,256 2,202,261 1,283,231 834,391 4,409,272 702,854 24,630,694 5,674,481 1,047,091 Go vernment and go vernment agenc ies 4,091,827 2,953,514 3,140,017 1,111,246 2,786,117 5,336 14,088,057 14,207 43,203 P urchas e o f s ecurities - - - - - - 5,738,207 5,738,207 4,500 - P urchas e o f trans po rt vehic les - - - - - - 9,698,436 9,698,436 - - Co ns umptio n c redit - - - - - - 9,633,659 9,633,659 - 14,678 Others - - 56,805 290,424 23,070 128,826 5,994,296 6,493,421 26,084 2,621,928

19,276,256 2,967,770 6,377,640 6,130,427 8,685,209 5,126,006 86,368,712 134,932,020 6,485,219 8,450,994

The B a nk2 0 0 8

# * ^α# * ^α

# Exclude equity instruments amounting to RM139,759,000 * Exclude equity instruments amounting to RM372,963,000 ∝ Exclude equity instruments amounting to RM192,000 ^ Gross loans, advances and financing after specific allowance but before general allowance of RM1,446,535,000.

Equity instruments are not subject to credit risk due to their nature which are short-term, lower credit risk, easily disposable and has no maturity period.


191

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 54 Fair value of financial instruments Financial instruments comprise financial assets, financial liabilities and off-balance sheet financial instruments. Fair value is the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in an arm’s length transaction. The information presented herein represents the estimates of fair values as at the balance sheet date. Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates. In addition, fair value information for non-financial assets and liabilities are excluded as they do not fall within the scope of FRS 132 – Financial Instruments: Disclosure and Presentation which requires the fair value information to be disclosed. A range of methodologies and assumptions had been used in deriving the fair values of the Group’s and the Bank’s financial instruments at balance sheet date. The total fair value of each financial instrument approximates the total carrying value as at the balance sheet, except for the following:

Carrying amount Fair value


RM’000 RM’000 RM’000 RM’000Financial assetsHeld-to-maturity securities 12,875,251 12,987,468 10,702,270 10,807,087Loans, advances and financing 113,480,642 110,523,863 84,456,367 81,596,389

Financial liabilitiesDeposits from customers 146,872,345 145,547,872 114,449,911 114,524,865Amount due to Cagamas Berhad 335,612 338,340 335,612 338,340Subordinated obligations 4,106,716 4,233,611 4,199,805 4,120,425

The Bank2009

The Group2009


192

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 54 Fair value of financial instruments (Continued)



RM’000 RM’000 RM’000 RM’000Financial assetsHeld-to-maturity securities 11,625,970 11,651,170 8,685,401 8,640,259Loans, advances and financing 95,687,146 93,872,845 84,922,177 82,306,562

Financial liabilitiesDeposits from customers 121,090,975 121,190,838 100,570,259 100,674,838Amount due to Cagamas Berhad 993,818 994,910 993,818 994,910Subordinated obligations 4,573,212 4,527,478 5,386,548 5,220,378

The Bank2008

The Group2008

The carrying amount of the financial assets at the balance sheet date were not reduced to their estimated fair values as the Directors are of the opinion that the amounts will be recoverable in full on the maturity date. The fair values are based on the following methodologies and assumptions: Short term funds and placements with financial institutions For short term funds and placements with financial institutions with maturities of less than six months, the carrying value is a reasonable estimate of fair value. For deposits and placements with maturities of six months and above, the estimated fair value is based on discounted cash flows using prevailing money market interest rates at which similar deposits and placements would be made with financial institutions of similar credit risk and remaining period to maturity. Securities held for trading, available-for-sale securities and held-to-maturity securities The estimated fair value is generally based on quoted and observable market prices. Where there is no ready market in certain securities, the Group and the Bank establish fair value by using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.


193

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 54 Fair value of financial instruments (Continued) Loans, advances and financing For floating rate loans, the carrying value is generally a reasonable estimate of fair value. For fixed rate loans with maturities of six months or more, the fair value is estimated by discounting the estimated future cash flows using the prevailing market rates of loans with similar credit risks and maturities. The fair values of impaired floating and fixed rate loans are represented by their carrying value, net of specific allowance, being the expected recoverable amount. Amount due (to)/from subsidiaries and related companies The estimated fair values of the amount due from subsidiaries and related companies approximate the carrying values as the balances are either recallable on demand or are based on the current rates for such similar loans. Amount due (to)/from holding company and ultimate holding company The estimated fair value of the amount due from holding company approximates the carrying value as the balances are recallable on demand. Deposits from customers For deposits from customers with maturities of less than six months, the carrying amounts are a reasonable estimate of their fair value. For deposit with maturities of six months or more, fair values are estimated using discounted cash flows based on prevailing market rates for similar deposits from customers. Deposits and placements of banks and other financial institutions The estimated fair values of deposits and placements of banks and other financial institutions with maturities of less than six months approximate the carrying values. For deposits and placements with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing money market interest rates for deposits and placements with similar remaining period to maturities.


194

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 54 Fair value of financial instruments (Continued) Obligations on securities sold under repurchase agreements The estimated fair values of obligations on securities sold under repurchase agreements with maturities of less than six months approximate the carrying values. For obligations on securities sold under repurchase agreements with maturities of more than six months, the fair values are estimated based on discounted cash flows using prevailing money market interest rates with similar remaining period to maturity. Bills and acceptances payable The estimated fair values of bills and acceptances payable with maturities of less than six months approximate the carrying values. For bills and acceptances payable with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing money market interest rates for bills and acceptance payable with similar remaining period to maturity. Amount due to Cagamas Berhad The estimated fair values of the amount due to Cagamas Berhad with maturities of less than six months approximate the carrying values. For amount due to Cagamas Berhad with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing interest rates for loans sold to Cagamas Berhad with similar remaining period to maturity. ICULS The estimated fair value of ICULS approximates the carrying value as based on the Directors’ estimate, the effective interest rate of the ICULS is a fair reflection of the current rates for such similar long term borrowings. Bonds, subordinated obligations and other borrowings The fair values for the quoted bonds and subordinated obligations are obtained from quoted market prices while the fair values for unquoted bonds and subordinated obligations are estimated based on discounted cash flow models. The estimated fair values of other borrowings with maturities of less than six months or with floating interest rates approximates the carrying values. For other borrowings with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing money market interest rates with similar remaining period to maturity.


195

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 54 Fair value of financial instruments (Continued) Redeemable preference shares The estimated fair value of redeemable cumulative preference shares (“RCPS”) approximates the carrying value based on Directors’ estimate as the effective interest rate of the RCPS is a fair reflection of the current rate for such similar instrument. Derivative financial instruments The fair values of derivative financial instruments are obtained from quoted market prices in active markets, including recent market transactions and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. Credit related commitment and contingencies The net fair value of these items was not calculated as estimated fair values are not readily ascertainable. These financial instruments generally relate to credit risks and attract fees in line with market prices for similar arrangements. They are not presently sold nor traded. The fair value may be represented by the present value of fees expected to be received, less associated costs.


196

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 55 Business combinations (a) Acquisitions during the financial year (i) Additional investment in CIMB Thai Bank Public Company Limited (formerly

known as BankThai Public Company Limited (“CIMB Thai Bank”) On 5 November 2008, CIMB Bank Berhad had acquired approximately 42.127% of the

total issued share capital of CIMB Thai Bank for a cash consideration of RM595,814,000. The goodwill and intangibles arising from this acquisition amounted to RM401,219,000 and RM4,790,000 respectively.

On 13 January 2009, CIMB Bank acquired additional 3.33 billion CIMB Thai Bank shares representing approximately 49.91% of the total issued and paid-up capital of CIMB Thai Bank for a purchase consideration of RM718,762,000. Upon completion of CIMB Thai Bank’s subsequent rights issue, CIMB Bank’s shareholding in CIMB Thai Bank was increased by a further 1.11%.

The assets and liabilities arising from the additional investment and subsequent rights issue representing an equity interest of 51.02% are shown on the next page.


197

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 55 Business combinations (a) Acquisitions during the financial year (i) Additional investment in CIMB Thai Bank Public Company Limited (formerly

known as BankThai Public Company Limited (“CIMB Thai Bank”)

Acquirees's carrying

amount at date of

acquisition

Generally Accepted

Accounting Principles

adjustmentsFair value

adjustments

Acquirees' adjusted carrying

amount at date of

acquisition RM'000 RM'000 RM'000 RM'000

Cash and short term funds 460,392 - - 460,392 Deposits and placements with bank and other financial institutions 4,310,694 - - 4,310,694 Investments 4,524,707 (4,473) - 4,520,234 Loans, advances and financing 8,315,495 (7,157) (43,542) 8,264,796 Properties foreclosed 246,773 - (40,615) 206,158 Customers' liability under acceptance 16,162 - - 16,162 Property, plant and equipment 453,765 (74,035) 134,421 514,151 Intangible assets 59,818 - (6,514) 53,304 Prepaid lease payments 2,667 - - 2,667 Other assets 2,797,259 (9,304) (41,999) 2,745,956 Deposits from customers (15,877,032) - - (15,877,032) Deposits and placements of bank and other financial institutions (1,018,825) - - (1,018,825) Bills and acceptances payable (16,162) - - (16,162) Borrowings (702,672) - - (702,672) Deferred tax liabilities - - (1,418) (1,418) Other liabilities (3,062,599) (4,882) (62,044) (3,129,525) Net assets 510,442 (99,851) (61,711) 348,880 Share of net assets acquired 174,575 Purchase consideration satisfied via cash 972,628 Less: Cash and cash equivalents acquired (460,392) Cash outflow on acquisition 512,236


198

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued)

55 Business combinations (Continued)

(a) Acquisitions during the financial year are as follows: (Continued)

(i) Additional investment in CIMB Thai Bank Public Company Limited (formerly known as BankThai Public Company Limited (“CIMB Thai Bank”) (continued) The additional investment in CIMB Thai Bank and subsequent rights issue has increased the Group’s equity interest in CIMB Thai Bank to 93.15% and accordingly, the results of CIMB Thai Bank has been consolidated as a subsidiary in the financial statements of the Group.

Total goodwill and intangibles arising from the entire 93.15% acquisition of CIMB Thai Bank amounted to RM1,199,277,000 and RM10,460,000 respectively. The goodwill on acquisition represents the value of synergies arising from the acquisition. The GAAP, fair value adjustments and intangible assets identified on acquisition are based on finalised purchase price allocation and fair value exercise engaged by an external professional body. For the financial year ended 31 December 2009, the acquisition contributed to revenue (comprising net income and non-interest income) and net profit of RM657,863,788 and RM40,727,470 respectively, to the Group for the period from 1 January 2009 to 31 December 2009. Due to the close proximity of the additional investment acquisition date to 1 January 2009, the contribution to revenue and net profit to the Group has been deemed to be the same as if the acquisition took place on 1 January 2009.


199


for the financial year ended 31 December 2009 (Continued) 55 Business combinations (Continued) (b) Disposals during the financial year (i) Disposal of certain assets, liabilities and the asset/fund management business of

Southern Investment Bank Berhad ("SIBB")

On 31 January 2009, SIBB disposed its certain assets, liabilities and the asset/fund management to HLG Capital Berhad. The disposal was done at premium of RM65 million.

The effects of the disposal on the financial position of the Group as at 31 December 2009 are as follows:

2009

RM'000Loans and advances (38,040) Property, plant and equipment (21) Intangible assets (83) Deposits from customer 603 Deposits and placements of banks and others financial institutions 47,796 Other liabilities 82 Identifiable net assets disposed 10,337 Less: Goodwill (35,000)

(24,663) Net disposal proceeds 54,663 Gain on disposal before and after tax 30,000

The net cash inflow arising from the disposal amounted to RM54,663,000.


200


for the financial year ended 31 December 2009 (Continued) 55 Business combinations (Continued) (b) Disposals during the financial year (ii) Disposal of Southeast Asia Special Asset Management Berhad (formerly known as

Common Forge Berhad) (“SEASAM”) to CIMBG On 1 December 2009, the Bank disposed its 100% equity interest in SEASAM to CIMBG for a cash consideration of RM100. The effects of the disposal on the financial position of the Group as at 31 December 2009 are as follows:

RM'000Loans, advances and financing (917,150) Other assets (9,152) Other liabilities 2,132 Amount due to holding company 928,181 Identifiable net assets disposed 4,011 Net disposal proceeds - Gain on disposal before and after tax 4,011


201

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 55 Business combinations (Continued) (c) Disposals during the prior financial year (i) Disposal of CIMB Trustee Berhad

On 1 January 2008, CIMB Bank Berhad disposed 20% of its direct and 20% of its indirect equity interest in CIMB Trustee Berhad to CIMB Berhad and CIMB Holdings Sdn Bhd. The disposal was satisfied via intercompany balances.


2008RM'000

Fixed assets (112) Intangible assets (58) Statutory deposit (40) Deferred tax ssets (69) Trade debtors (165) Sundry debtors (6) Amount due from a related company - Deposits and placements with a licensed trustee (571) Deposits and placements with a licensed institution (1,427) Cash and bank balances (435) Sundry creditors 506 Provision for taxation 75 Amount due to holding company 409 Amount due to related company 437 Identifiable net assets disposed (1,456) Net disposal proceeds 794 Loss on disposal before and after tax (662)


202

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 55 Business combinations (Continued) (c) Disposals during the prior financial year (Continued) (ii) Disposal of South East Asian Bank Limited (“SEA Bank”) On 1 April 2008, CIMB Bank Berhad disposed its entire 60% equity interest in SEA Bank

to British American Investment Co (Mauritius) Ltd, for a total cash consideration of 339.0 million Mauritius Rupees (or approximately RM40.0 million).


2008RM'000

Cash and short-term funds (13,262) Deposits and placements with banks and other financial institutions (125,144) Securities and other investments (36,500) Derivative financial instruments (11) Loans, advances and financing (108,797) Other assets (4,232) Intangible assets (1,205) Property, plant and equipment (8,413) Deposits from customers 268,825 Deposits and placements of banks and other financial institutions 153 Deferred tax liabilities 434 Provision for taxation 214 Other liabilities 7,268 Identifiable net assets disposed (20,670) Less : Goodwill (1,574)

(22,244) Net disposal proceeds 40,002 Gain on disposal before and after tax 17,758

The net cash flow on disposal was determined as follows:

Total proceeds from disposal – cash consideration 40,002 Expenses directly attributable to the disposal, paid in cash - Net disposal proceeds 40,002 Cash and cash equivalents of subsidiaries disposed (13,262) Net cash inflow on disposal 26,740


203

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 55 Business combinations (Continued) (c) Disposals during the prior financial year (Continued) (iii) Disposal of SBB Securities Sdn Bhd (“SSSB”) On 22 October 2008, SBB Capital Markets Sdn Bhd (“SCMSB”), a wholly owned

subsidiary of the Bank, had disposed its 100% equity interest in SSSB to HLG Credit Sdn Bhd (“HLGC”) for a cash consideration of RM75.2 million.


2008

RM'000Property, plant and equipment (2,288) Deferred tax assets (1,588) Clients and brokers balances (assets) (29,746) Other receivables, deposits and prepayments (1,085) Tax recoverable (4,936) Cash and bank balances (43,610) Clients and brokers balances (liabilities) 17,132 Other payables and accruals 8,179 Identifiable net assets disposed (57,942) Less : Goodwill (37,000)

(94,942) Net disposal proceeds 75,177 Loss on disposal before and after tax (19,765)

The net cash flow on disposal was determined as follows:

Total proceeds from disposal – cash consideration 75,177 Expenses directly attributable to the disposal, paid in cash - Net disposal proceeds 75,177 Cash and cash equivalents of subsidiaries disposed (43,610) Net cash inflow on disposal 31,567


204

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 55 Business combinations (Continued) (c) Disposals during the prior financial year (Continued)

(iv) Disposal of Navis-CIMB General Partner Ltd (“Navis-CIMB”)

On 18 September 2008, CIMB(L) Limited, a wholly owned subsidiary of the Bank, had disposed its entire 25% equity interest in Navis-CIMB to Navis Capital Partners Ltd.


2008RM'000

Non-current assets (229) Current assets (741) Current liabilities 375 Net assets (595) Net disposal proceeds 3,499 Gain on disposal before and after tax 2,904


205

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 56 Non-current assets/disposal groups held for sale

Note 2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Non-current assets held for sale: - disposal of certain assets of Southern Investment Bank Berhad (i) - 39,740 - - - goodwill (ii) - 35,000 - 35,000 - foreclosed properties (iii) 1,939 7,592 1,939 7,592 - prepaid lease payments (iii) 12,607 - 11,005 - - property plant and equipment (iii) 211,678 120 60,958 120 Total non-current assets held for sale 226,224 82,452 73,902 42,712

Liabilities directly associated with non- current assets classified as held for sale: - disposal of certain liabilities of Southern Investment Bank Berhad (i) - 29,499 - - Total liabilit ies directly associated with non- current assets classified as held for sale - 29,499 - -

The Group The Bank

(i) Disposal of certain assets, liabilities and asset/fund management business of Southern

Investment Bank Berhad (“SIBB”)

Certain assets and liabilities of SIBB have been presented as held for sale following the proposed sale to HLG Capital Berhad (“HLGC”). The disposal was completed on 31 January 2009.

2009 2008RM’000 RM’000

AssetsLoans, advances and financing - 39,636Intangible assets - 83Property, plant and equipment - 21Non-current assets held for sale - 39,740

LiabilitiesDeposits from customers - 3,507Deposits and placements of banks and other financial institutions - 25,296Other liabilities - 696Liabilities directly associated with non-current assets classified as held for sale - 29,499

The Group


206


for the financial year ended 31 December 2009 (Continued) 56 Non-current assets/disposal groups held for sale (Continued) (ii) Goodwill

Arising from item (i) above, the goodwill arising from the acquisition of SIBB is classified as non-current assets held for sale as at 31 December 2008.

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

SIBB - 35,000 - 35,000

The Group The Bank

(iii) Foreclosed properties, property, plant and equipment and prepaid lease payments

Foreclosed properties, property, plant and equipment and prepaid lease payments of the Bank where deposits have been received from buyers of the properties and where a definitive buyer has been identified have been classified as held for sale. The disposals are expected to be completed in 2010.


207

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 57 Comparatives (a) Restatement of comparatives Certain comparatives were restated to conform with the current financial year’s presentation. There was no impact to the financial performance and ratios in relation to the financial year ended 31 December 2008. The restatements are as follows:

NoteAs previously

reported Reclassification As restatedGroup RM’000 RM’000 RM’000Balance sheetDeposits from customers (i) 127,625,741 (6,534,766) 121,090,975 Deposits and placements of banks and other financial institutions (i) 8,614,530 6,534,766 15,149,296

BankBalance sheetDeposits from customers (i) 107,105,025 (6,534,766) 100,570,259 Deposits and placements of banks and other financial institutions (i) 10,569,514 6,534,766 17,104,280

(i) The reclassification is in relation to the Negotiable Instrument of Deposit placed by financial institutions previously classified under deposits from customers, now reclassified under deposits and placements of banks and other financial institutions.


208


for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking Balance Sheet as at 31 December 2009

Note 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

AssetsCash and short-term funds (a) 5,342,372 6,249,125 484,261 - Deposits and placements with banks and other financial institutions (b) 1,485,276 711,989 493,001 377,574 Securities held for trading (c) 3,491,709 2,882,056 207,415 - Available-for-sale securit ies (d) 542,277 612,378 - - Held-to-maturity securit ies (e) 1,011,378 1,198,056 - - Islamic derivative financial instruments (f) 263,732 267,369 6,044 2,349 Financing, advances and other loans (g) 16,454,805 6,259,726 213,664 68,268 Other assets (h) 111,877 99,244 3,841 2,002 Deferred taxation (i) 44,625 21,369 - 307 Amount due from holding company - 100,622 - - Statutory deposits with Bank Negara Malaysia (j) 172,806 269,224 - - Goodwill (k) 136,000 136,000 - - Intangible assets (l) 3,676 5,962 - - Property, plant and equipment (m) 2,625 3,855 - - Total assets 29,063,158 18,816,975 1,408,226 450,500

Liabilities Deposits from customers (n) 18,184,606 13,984,562 525,463 291,375 Deposits and placements of banks and other financial institutions (o) 9,086,271 3,656,836 805,577 156,000 Islamic derivative financial instruments (f) 159,357 46,452 1,321 - Bills and acceptances payable - 5,258 - - Other liabilities (q) 292,691 304,493 69,649 3,600 Amount due to holding company 24,183 - - - Amount due to related company 6,425 4,010 147 - Provision for taxation and zakat (r) 17,034 3,076 - - Subordinated Sukuk (p) 300,000 - - - Total l iabilities 28,070,567 18,004,687 1,402,157 450,975

EquityOrdinary share capital (s) 550,000 550,000 - - Perpetual preference shares (t) 70,000 70,000 - - Reserves (u) 372,591 192,288 6,069 (475)Total equity 992,591 812,288 6,069 (475)Total equity and liabilities 29,063,158 18,816,975 1,408,226 450,500

- - Commitment and contingencies (f) 13,661,181 11,402,365 301,761 293,695 Credit equivalent (f) 542,081 1,263,729 11,210 6,792

The Group The Bank


209

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) Income Statements for the financial year ended 31 December 2009

Note 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Income derived from investment of depositors’ funds and others (v) 884,431 630,902 17,954 18,922 Income derived from investment of shareholders’ funds (w) 131,481 121,592 - - Allowances for losses on financing, advances and other loans (x) (277,383) (83,481) - (1,451)Write back of/(allowance for) impairment of securities

164 (164) - -

T ransfer from profit equalisation reserve - 2,200 - - Other expenses directly attributable to investment of the depositors' and shareholders' funds - (11,012) - (11,012)Total distributable income 738,693 660,037 17,954 6,459 Income attributable to depositors (y) (299,794) (401,092) (11,160) (6,335)Total net income 438,898 258,945 6,794 124 Personnel expenses (z) (97,863) (47,568) (263) (337)Other overheads and expenditures (aa) (117,624) (74,661) (73) (143)Profit/(loss) before taxation and zakat 223,411 136,716 6,458 (356)Taxation (ac) (40,668) (23,756) (307) 307 Zakat (6,421) (234) - - Profit/(loss) after taxation and zakat 176,322 112,726 6,151 (49)

Total net income 438,898 258,945 6,794 124 Add: Allowances for losses on financing, advances and other loans

277,383 83,481 - 1,451

Less: Transfer from profit equalisation reserve - (2,200) - - Less: Write back of/(allowance for) impairment of securit ies (164) 164 - -

716,117 340,390 6,794 1,575

The Group The Bank


210

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) Statements of Changes in Equity for the financial year ended 31 December 2009

Sharecapital


sharesStatutory

reserve


reserves

Revaluation reserve

available for-sale

securitiesRetained

profit Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

The GroupAt 1 January 2009 550,000 70,000 75,846 (3,310) (1,719) 121,471 812,288 Net gain from change in fair value of available- for-sale securities net of deferred tax - - - - 1,913 - 1,913 Currency translation difference - - - 2,068 - - 2,068 Income and expenses recognised directly in equity - - - 2,068 1,913 - 3,981 Net profit for the financial year - - - - - 176,322 176,322 Total recognised income and expenses for the financial year - - - 2,068 1,913 176,322 180,303 Transfer to statutory reserve - - 61,871 - - (61,871) - At 31 December 2009 550,000 70,000 137,717 (1,242) 194 235,922 992,591


211

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) Statements of Changes in Equity for the financial year ended 31 December 2009 (Continued)

Sharecapital


sharesStatutory

reserve


reserves

Revaluation reserve

available for-sale

securitiesRetained

profit Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

The GroupAt 1 January 2008Issue of shares during the financial year 550,000 70,000 39,186 (999) 303 45,405 703,895 Net gain from change in fair value of available- for-sale securities net of deferred tax - - - (2,022) - (2,022) Currency translation difference - - - (2,311) - - (2,311) Income and expenses recognised directly in equity - - - (2,311) (2,022) - (4,333)Net profit for the financial year - - - - - 112,726 112,726 Total recognised income and expenses for the financial year - - - (2,311) (2,022) 112,726 108,393 Transfer to statutory reserve - - 36,660 - - (36,660) - At 31 December 2008

550,000 70,000 75,846 (3,310) (1,719) 121,471 812,288


212

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) Statements of Changes in Equity for the financial year ended 31 December 2009 (continued)

Non- distributable Distributable


reservesRetained

profit TotalRM’000 RM’000 RM’000

BankAt 1 January 2009 (426) (49) (475)Currency translation difference 393 - 393 Net profit for the financial year - 6,151 6,151 At 31 December 2009 (33) 6,102 6,069

0 Non-

distributable Distributable Exchange

fluctuation reserves

Accumulated loss Total

Bank RM’000 RM’000 RM’000At 1 January 2008 - - - Currency translation difference (426) - (426)Net loss for the financial year - (49) (49)At 31 December 2008 (426) (49) (475)


213

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) Cash flow statements for the financial year ended 31 December 2009 The Group The Bank

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Cash flows from / (used in) operating activitiesProfit / (loss) before taxation and zakat 223,411 136,716 6,458 (356)Adjustments for:Depreciation of property, plant and equipment 1,479 965 - - Amortisation of intangible assets 3,581 3,829 - - Net gain from disposal of available-for-sale securities (1,934) (105) - - Net loss from sale of securit ies held for trading 416 100 - - Unrealised loss/(gain) on Islamic derivative financial instruments 80,889 (127,914) - (2,349)Allowance for bad and doubtful debts and financing 262,788 90,803 - 1,451 Unrealised loss from revaluation of securit ies held for trading - (95) - - Accretion of discount less amortisation of premium (44,058) (31,964) - - Profit income from available-for-sale securities (24,828) (24,433) - - Profit income from held-to-maturity securities (53,974) (17,847) - - T ransfer from profit equalisation reserve - (2,200) - - (Writeback of)/allowance for impairment loss for securit ie (164) 164 - - Bad debt written off 36 47 - -

447,642 28,066 6,458 (1,254)

(Increase) / decrease in operating assetsDeposits and placements with banks and other financial institutions (773,287) 437,912 (115,427) (377,574)Securities held for trading (610,069) (2,263,189) (207,415) - Financing, advances and other loans (10,457,903) (4,096,352) (145,396) (69,719)Other assets (14,436) (27,527) (1,839) (2,002)Amount due from holding company - (100,603) - - Amount due from related company - 5,996 147 - Statutory deposits with Bank Negara Malaysia 96,418 (168,080) - -

Increase / (decrease) in operating l iabilitiesDeposits from customers 4,200,044 6,464,157 234,088 291,375 Deposits and placements of banks and other financial institutions 5,429,435 3,056,493 649,577 156,000 Islamic derivative financial instruments 35,653 3,379 (2,374) - Bills and acceptances payable (5,258) 4,290 - - Amount due to holding company 124,805 (338,166) - - Amount due to related companies 2,415 4,010 - - Other liabilities (9,734) 245,836 66,442 3,174 Cash flows (used in)/generated from operations (1,534,275) 3,256,222 484,261 - Taxation and zakat paid (57,025) (31,366) - - Cash flows (used in)/generated from operating activit ies (1,591,300) 3,224,856 484,261 -


214

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) Cash flow statements for the financial year ended 31 December 2009 (continued) The Group The Bank

Note 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Cash flows from / (used in) investing activitiesNet proceeds from held-to-maturity securit ies 186,842 (1,071,108) - - Net purchase of available-for-sale securit ies 118,644 40,555 - - Profit income from held-to-maturity securities 55,279 17,847 - - Profit income from available-for-sale securities 25,326 24,433 - - Purchase of property, plant and equipment (1,330) (1,105) - - Purchase of intangible assets (214) (278) - - Net cash generated from/(used in) investing activit ies 384,547 (989,656) - -

Cash flows from financing activitiesIssuance of sukuk 300,000 - - - Net cash generated from/(used in) financing activities 300,000 - - -

Net (decrease)/increase in cash and cash equivalents (906,753) 2,235,200 484,261 - Cash and cash equivalents at beginning of financial year 6,249,125 4,013,925 - - Cash and cash equivalents at end of financial year 5,342,372 6,249,125 484,261 -

0.00 - Cash and cash equivalents comprise:

Cash and short-term funds (a) 5,342,372 6,249,125 484,261 -


215

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (a) Cash and short-term funds

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Cash and balances with banks and other financial institutions 55,817 222,123 - - Money at call and deposit placements maturing within one month 5,286,555 6,027,002 484,261 -

5,342,372 6,249,125 484,261 -

The Group The Bank

(b) Deposits and placements with banks and other financial institutions

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Licensed banks 918,376 511,989 493,001 377,574 Licensed investment banks 29,900 - - - Other financial institutions 537,000 200,000 - -

1,485,276 711,989 493,001 377,574

The Group The Bank


216

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (c) Securities held for trading

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Money market instrumentsUnquotedGovernment Investment Issues 498,587 14,649 - - Khazanah bonds - 9,791 - - Bank Negara negotiable notes 1,186,923 - - - Islamic negotiable instruments of deposits 1,328,917 2,243,818 - - Bankers’ acceptance and Islamic accepted bills 54,634 578,421 - - Islamic commercial papers - 19,666 - -

3,069,061 2,866,345 - - Unquoted securitiesIn MalaysiaPrivate debt securities 215,233 15,711 - -

Outside MalaysiaIslamic debt securities 207,415 - 207,415 -

3,491,709 2,882,056 207,415 - - - - -

The BankThe Group

In 2008, the Bank reclassified certain held for trading securities to the held-to-maturity category. The reclassification has been accounted for in accordance with the BNM circular on ‘Reclassification of Securities under Specific Circumstances’ issued during the year, and is effective from 1 July 2008 until 31 December 2009. The fair values of the securities reclassified from held for trading category to held-to-maturity category, as of the respective dates of reclassification were RM38 million.


217

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (c) Securities held for trading (continued) Included in the other operating income (Note v & w) is the net gains arising from the change in fair value recognised in the income statement in respect of the reclassified securities:

2009 2008 RM’000 RM’000

Net fair value gain - 894

As of the date of reclassification, the effective profit rates on the reclassified held for trading securities, based on the new cost is an average of 5.36% per annum with expected recoverable cash flows of approximately RM40 million in face value inclusive of coupon receivable on the securities. There were no such reclassification of securities for the financial year ended 31 December 2009. (d) Available-for-sale securities

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Money market instrumentsUnquotedGovernment Investment Issues 129,778 121,237 - - Islamic Cagamas bonds 34,392 48,914 - - Islamic commercial papers 19,538 - - - Khazanah bonds 34,975 48,585 - -

218,683 218,736 - - Unquoted securitiesIn Malaysia

Private debt securities 323,019 393,067 - - Placement with Islamic Banking and Finance Institute Malaysia 575 575 - -

542,277 612,378 - -

The Group The Bank


218

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (e) Held-to-maturity securities

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Unquoted securitiesIn MalaysiaIslamic commercial papers 6,775 34,832 - - Private debt securities 1,010,812 1,168,385 - -

1,017,587 1,203,217 - - Amortisation of premium less accretion of discounts (6,209) (4,997) - - Less: Allowance for impairment losses - (164) - -

1,011,378 1,198,056 - -

The Group The Bank

Private debt securities amounting to RM864 million (2008: RM954 million) are funded by a Restricted Profit Sharing Investment Account (‘RPSIA’) depositor, as part of an arrangement between CIMB Islamic and the Bank. Included in the held-to-maturity securities are securities transferred from securities held for trading category in 2008, with the following carrying value and fair value as at 31 December: 2009 2008 RM’000 RM’000

Carrying value 38,037 37,430 Fair value 39,027 37,609 The carrying value and fair value of the securities as of the transfer date is RM37.4 million and RM37.6 million respectively.


219

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (f) Islamic derivative financial instruments, commitments and contingencies (i) Islamic derivative financial instruments The following tables summarise the contractual or underlying principal amounts of derivative financial instruments held at fair value through income statement and hedging purposes. The principal or contractual amounts of these instruments reflect the volume of transactions outstanding at balance sheet date, and do not represent amounts at risk. Trading derivative financial instruments are revalued on a gross position basis and the unrealised gains or losses are reflected in "Islamic derivative financial instruments" Assets and Liabilities respectively.

Principal Assets Liabilities Principal Assets LiabilitiesThe Group RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Foreign exchange derivativesCurrency forward 542,757 1,982 (479) 652,126 106 - Currency swaps 1,471,617 12,111 (11,763) 313,695 2,349 (3,480)Cross currency profit rate swaps 89,703 201 (201) - - -

2,104,077 14,294 (12,443) 965,821 2,455 (3,480)

Profit rate derivativesIslamic profit rate swaps 3,405,868 144,670 (587) 3,471,419 222,386 (437)

Equity related derivativesEquity options 2,984,288 104,768 (104,768) 3,746,677 42,528 (42,535)

Held for hedging purposeIslamic profit rate swaps 1,350,000 - (41,559) - - -

Total derivative assets/(liabilities) 9,844,233 263,732 (159,357) 8,183,917 267,369 (46,452)

(0) 0 - -

Principal Assets Liabilities Principal Assets LiabilitiesThe Bank RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Foreign exchange derivativesCurrency swaps 301,761 6,044 (1,321) 293,695 2,349 -

Total derivative assets/(liabilities) 301,761 6,044 (1,321) 293,695 2,349 -

Fair values Fair values

Fair valuesFair values

2009 2008

2009 2008


220

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued)

(f) Islamic derivative financial instruments, commitments and contingencies (continued)

(ii) Commitments and contingencies In the normal course of business, the Group and the Bank entered into various commitments and incur certain contingent liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions and hence, they are not provided for in the Financial Statements. The commitments and contingencies constitute the following:

PrincipalCredit

equivalent*

Risk Weighted

amount PrincipalCredit

equivalent*

Risk Weighted

amountThe Group RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Credit relatedDirect credit substitutes 26,949 26,949 26,949 35,057 35,057 35,057 Certain transaction-related contingent items 334,694 167,347 162,021 381,536 190,768 113,978 Short-term self-liquidating trade-related contingencies 33,982 6,796 6,796 147,568 29,514 3,042 Obligation under underwriting agreements - - - 50,000 25,000 25,000 Islamic financing sold directly and indirectly to Cagamas with - - - 294,946 294,946 294,946 Irrevocable commitments to extend credit: - maturity not exceeding one year 2,010,593 - - 1,716,834 - - - maturity exceeding one year 1,386,942 1 1 586,343 293,172 76,963 Forward asset purchase - - - 5,000 - - Miscellaneous commitments and contingencies 23,788 13,618 3,448 1,164 1,164 1,164 Total credit-related commitments and contingencies 3,816,948 214,711 199,215 3,218,448 869,621 550,150

Treasury relatedForeign exchange related contracts: - less than one year 2,014,374 30,865 6,200 652,126 12,384 3,531 - one year to less than five years 89,703 11,817 4,113 313,695 10,742 2,883 Profit rate related contracts: - one year to less than five years 3,405,868 46,648 10,342 3,471,419 124,245 24,849 - five years and above 1,350,000 121,500 24,300 - - - Equity related contracts: - less than one year 1,633,706 15,052 3,010 2,176,832 38,957 7,791 - one year to less than five years 1,131,977 90,458 18,092 1,540,947 206,296 41,259 - five years and above 218,605 11,030 2,206 28,898 1,484 297 Total treasury-related commitments and contingencies

9,844,233 327,370 68,263 8,183,917 394,108 80,610

13,661,181 542,081 267,478 11,402,365 1,263,729 630,760

20082009


221


for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (f) Derivative financial instruments, commitments and contingencies (continued)

(ii) Commitments and contingencies (continued)

PrincipalCredit

equivalent*

Risk Weighted

amount PrincipalCredit

equivalent*

Risk Weighted

amountThe Bank RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Treasury relatedForeign exchange related contracts: - less than one year 301,761 11,210 2,242 - - - - five years and above - - - 293,695 6,792 1,358

301,761 11,210 2,242 293,695 6,792 1,358

2009 2008

* The credit equivalent amount is arrived at using the credit conversion factors as per Bank Negara Malaysia guidelines.

The following approaches have been adopted for the computation of the credit equivalent and risk weighted assets: - adoption of bilateral netting as provided under the Standardised Approach Framework which involves the

weighting of net claims rather than gross claims with the same counterparties arising out of the full range of forwards, swaps, options and similar derivative contracts.

- Irrevocable commitments to extend credit (undisbursed financing) have been revised to include only those undisbursed financing whereby all conditions precedent have been met.

As at 31 December 2009, the commitment and contingencies exposure to RPSIA financing is RM2,250 million (2008: RM1,663 million)


222

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (g) Financing, advances and other loans (i) By type:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Cash line 241,179 235,945 - - Term financing - Housing financing 9,950,056 2,031,304 24,652 - - Syndicated term financing 797,833 559,285 189,884 69,449 - Hire purchase receivables 4,436,748 2,030,346 - - - Other term financing 12,369,381 4,096,445 - - Credit card receivables 48,973 2,980 - -

Bills receivable 1,625 - - -

Islamic trust receipts 29,827 23,887 - -

Claim on customers under acceptance credit 173,893 156,709 - - Staff financing - 17 - - Revolving credits 845,716 422,299 - - Other financing 72 74 - -

28,895,303 9,559,291 214,536 69,449 Less: Unearned income (12,093,880) (2,824,630) (872) -

16,801,423 6,734,661 213,664 69,449 Less: Financing sold to Cagamas - (294,946) - - Gross financing, advances and other loans 16,801,423 6,439,715 213,664 69,449 Fair value changes arising from fair value hedges 26,519 - - -

16,827,942 6,439,715 213,664 69,449 Less: Specific allowance (212,890) (99,374) - -

16,615,052 6,340,341 213,664 69,449 Less: General allowance (160,247) (80,615) - (1,181)Total net financing, advances and other loans 16,454,805 6,259,726 213,664 68,268

The Group The Bank

a) Included in other term financing is RM1,519 million (2008: RM Nil) financing provided in normal commercial terms which is exempted from general allowance by Bank Negara Malaysia. b) During the financial year, the Bank has undertaken fair value hedges on the profit rate risk of RM1,350 million financing using Islamic profit rate swaps. The Group

2009 2008RM'000 RM'000

Gross financing hedged 1,350,000 - Fair value changes arising from fair value hedges 26,519 -

1,376,519 - The fair values loss on profit rate swaps as at 31 December 2009 were RM41.6 million (2008: RM Nil)


223


for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (g) Financing, advances and other loans (continued) Included in financing, advances and other loans of the Group are exposures to Restricted Profit Sharing Investment Accounts (‘RPSIA’), as part of an arrangement between CIMB Islamic and CIMB Bank. CIMB Bank is exposed to risks and rewards on RPSIA financing and will account for all the general and specific allowances for bad and doubtful debts arising thereon. As at 31 December 2009, the gross exposures to RPSIA financing is RM4,247 million (2008: RM1,893 million) and the general allowance relating to this RPSIA is RM63.7 million (2008: RM32.2 million). (ii) By contract:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Bai-Bithaman Ajil (deferred payment sale) 7,195,630 3,530,591 - - Murabahah (cost-plus) 2,919,713 488,572 213,664 69,449 Ijarah Muntahiyyah Bittamlik/AITAB (lease ended with ownership) 4,210,366 2,080,452 - - Others 2,475,714 635,046 - -

16,801,423 6,734,661 213,664 69,449 Less: Financing sold to Cagamas - (294,946) - -

16,801,423 6,439,715 213,664 69,449

The Group The Bank

(iii) By type of customer:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Domestic non-bank financial institutions 51,355 1,454 - - Domestic business enterprises- small medium enterprises 617,749 579,945 - - - others 5,366,716 2,896,762 - - Government and statutory bodies 1,527,492 8,231 - - Individuals 8,764,262 2,929,412 - - Other domestic entities 17,802 19,993 - - Foreign entities 456,047 298,864 213,664 69,449


16,801,423 6,439,715 213,664 69,449

The Group The Bank


224

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (g) Financing, advances and other loans (continued) (iv) By profit rate sensitivity:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Fixed rate- House financing 308,792 343,427 - - - Hire-purchase receivables 3,577,319 1,639,046 - - - Other financing 4,538,602 1,437,004 - -

Variable rate- House financing 3,047,836 390,663 - - - Others 5,328,874 2,924,521 213,664 69,449


16,801,423 6,439,715 213,664 69,449

The Group The Bank

(v) By economic purposes:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Personal use 1,417,727 519,960 - - Credit card 48,973 2,980 - - Purchase of consumer durables 21 1,626 - - Residential property 3,394,765 779,572 - - Non residential property 1,005,163 661,912 - - Purchase of fixed assets other than land and building 317,848 167,293 - - Construction 258,358 33,700 - - Purchase of securities 2,515,992 1,417,806 - - Purchase of transport vehicles 3,577,816 1,643,861 - - Working capital 3,990,858 1,257,678 213,664 - Other purpose 273,902 248,273 - 69,449


16,801,423 6,439,715 213,664 69,449 - -

The Group The Bank


225

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (g) Financing, advances and other loans (continued) (vi) Non-performing financing by economic purposes:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Personal use 15,846 21,854 - - Credit card 1,211 - - - Residential property 56,379 55,621 - - Non residential property 8,345 15,770 - - Purchase of fixed assets other than land and building 1,620 1,620 - - Purchase of securities 18,670 18,672 - - Purchase of transport vehicles 42,779 40,063 - - Working capital 164,231 46,291 - - Other purpose 48,034 1,577 - -

357,115 201,468 - -

The Group The Bank

(vii) Movements in non-performing financing, advances and other loans are as follows:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

At 1 January 201,468 251,507 - - Non-performing during the financial year 376,283 167,038 - - Reclassified to performing during the financial year (90,353) (132,282) - - Recoveries (34,424) (30,441) - - Amount written off (95,859) (54,354) - - At 31 December 357,115 201,468 - - Less: Specific allowance (212,890) (99,374) - - Net non-performing financing, advances and other loans 144,225 102,094 - -

Ratio of net non-performing financing, advances and other loans to total financing, advances and other loans (including financing sold to Cagamas) less specific allowance

0.87% 1.54% - -

The Group The Bank


226

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (g) Financing, advances and other loans (continued) (viii) Movements in allowance for bad and doubtful financing:

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Specific allowanceAt 1 January 99,374 94,904 - - Allowance made during the financial year 236,951 99,584 - - Amount written back in respect of recoveries (25,785) (40,608) - - Amount written off (95,616) (54,506) - - Exchange fluctuation (2,034) - - - At 31 December 212,890 99,374 - -

- - General allowanceAt 1 January 80,615 48,882 1,181 - Net allowance made during the financial year 80,813 31,827 - 1,451 Allowance transferred to conventional operations (1,181) - (1,181) - Exchange fluctuation - (94) - (270)At 31 December 160,247 80,615 - 1,181

- - - - As % of gross financing, advances and other loans (including financing sold to Cagamas, but excluding RPSIA financing and financing exempted from general allowance by BNM) less specific allowance 1.48% 1.70% - 1.70%

The Group The Bank


227

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (h) Other assets

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Income receivable 18,472 23,438 1,856 170 Deposits and prepayments 315 309 - - Sundry debtors 93,090 75,497 1,985 1,832

111,877 99,244 3,841 2,002

The Group The Bank

(i) Deferred taxation Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts are offset and shown in the balance sheet:

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Deferred tax assets 44,625 22,912 - 307 Deferred tax liabilities - (1,543) - -

44,625 21,369 - 307

The Group The Bank


228

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (i) Deferred taxation (continued) The movements in deferred tax assets and liabilities during the financial year comprise the following: The Group

Note

General allowance

for bad and doubtful

financing

Accelerated tax

depreciation

Revaluation reserves –

available-for-sale

securities

O ther temporary

differences Total RM’000 RM’000 RM’000 RM’000 RM’000

Deferred tax assets

2009At 1 January 17,637 (1,543) 573 4,702 21,369 Credited to income statement (ac) 20,291 631 - 2,665 23,587 Underprovision in prior year (ac) - - - 307 307 Transferred to equity - - (638) - (638)At 31 December 37,928 (912) (65) 7,674 44,625

- Deferred tax assets

2008At 1 January 10,061 (1,384) 549 7,625 16,851 Credited/(charged) to income statement (ac) 7,576 (159) - (2,923) 4,494 Transferred from equity - - 24 - 24 At 31 December 17,637 (1,543) 573 4,702 21,369


229

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (i) Deferred taxation (continued) The movements in deferred tax assets and liabilities during the financial year comprise the following: The Bank General

allowance for bad and

doubtful financing

O ther temporary

differences TotalRM’000 RM’000 RM’000

Deferred tax assets

2009At 1 January 307 - 307 Charged to income statement (307) - (307)At 31 December - - -

2008At 1 January / 31 December 307 - 307


230

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (j) Statutory deposits with Bank Negara Malaysia The non-profit bearing statutory deposits are maintained with Bank Negara Malaysia in compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958 (revised 1994), the amounts of which are determined at set percentages of total eligible liabilities. (k) Goodwill

2009 2008 RM’000 RM’000

CostAt 1 January/31 December 136,000 136,000

The Group

Goodwill is wholly allocated to the retail banking cash-generating unit(‘CGU’). The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on the 2010 financial budgets approved by management, projected for five years based on the average to year historical Gross Domestic Product (‘GDP’) growth of the country covering a five year period, revised for current economic conditions. Cash flows beyond the five year period are extrapolated using an estimated growth rate of 5.00% (2008: 5.00%). The discount rate is 7.10% (2008: 9.80%) which reflects the specific risks relating to the CGU. Management believes that no reasonably possible change in any of the key assumptions would cause the carrying value of any CGU to exceed its recoverable amount.


231

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (l) Intangible assets

2009 2008RM’000 RM’000

Computer softwareCostAt 1 January 11,043 11,626 Additions 214 278 Reclassified from/(to) property, plant and equipment (Note m) 1,081 (842)Transfer of assets to holding company - (19)At 31 December 12,338 11,043

AmortisationAt 1 January 5,081 2,070 Charge for the financial year 3,581 3,829 Reclassified from/(to) property, plant and equipment (Note m) - (818)At 31 December 8,662 5,081

Net book value at 31 December 3,676 5,962

The Group

The remaining amortisation period of the intangible assets are as follows: Computer software - core and front-end systems 1-4 years - others 1-2 years


232

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (m) Property, plant and equipment

The Group

Renovations, office


fittings Computer

equipments Motor

Vehicles Total2009 RM'000 RM'000 RM'000 RM'000CostAt 1 January 6,751 21 302 7,074 Additions 1,330 - - 1,330 Reclassified to intangible assets (Note l) (1,081) - - (1,081)At 31 December 7,000 21 302 7,323

DepreciationAt 1 January 3,092 9 118 3,219 Charge for the financial year 1,415 4 60 1,479 At 31 December 4,507 13 178 4,698 Net book value at 31 December 2,493 8 124 2,625

-

The Group

Renovations, office


fittings Computer

equipments Motor

Vehicles Total 2008 RM'000 RM'000 RM'000 RM'000 CostAt 1 January 4,804 21 302 5,127 Additions 1,105 - - 1,105 Reclassified from intangible assets (Note l) 842 - - 842 At 31 December 6,751 21 302 7,074

DepreciationAt 1 January 1,328 5 103 1,436 Charge for the financial year 946 4 15 965 Reclassified from intangible assets (Note l) 818 - - 818 At 31 December 3,092 9 118 3,219 Net book value at 31 December 3,659 12 184 3,855 The above property, plant and equipment include renovations and computer equipment and software under construction at cost of RM173,000 (2008: RM659,000).


233

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (n) Deposits from customers (i) By type of deposits

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Non-MudharabahDemand deposits 985,490 1,897,477 819 17 Savings deposits 510,379 301,675 - - Fixed return investment account 2,964,472 1,840,535 524,644 291,358 Islamic negotiable instruments of deposit 523,089 242,975 - - Commodity Murabahah 17,125 379,480 - - Others 7,366 303,680 - -

5,007,921 4,965,822 525,463 291,375 MudharabahDemand deposits 2,155,363 398,731 - - Savings deposits 204,066 92,856 - - General investment deposits (inclusive of Special General investment deposits of RM7,425,800,000 (2008: RM5,254,880,000)) 9,158,674 6,780,540 - - Specific investment deposit 1,658,582 1,746,613 - -

13,176,685 9,018,740 - - 18,184,606 13,984,562 525,463 291,375

The BankThe Group

(ii) By type of customer

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Government and statutory bodies 4,071,897 3,279,854 - - Business enterprises 10,529,314 7,940,207 1,065 - Individuals 2,518,194 2,125,845 771 784 Others 1,065,201 638,656 523,627 290,591

18,184,606 13,984,562 525,463 291,375

The Group The Bank


234

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (o) Deposits and placements of banks and other financial institutions

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Licensed Islamic banks 50,000 64,809 - - Licensed banks 7,891,835 3,074,907 785,571 154,072 Licensed investment banks 1,110,350 200,300 - - Other financial institutions 34,086 316,820 20,006 1,928

9,086,271 3,656,836 805,577 156,000

The Group The Bank

(p) Subordinated Sukuk The RM300 million subordinated Sukuk (‘the Sukuk’) is part of the Tier-2 Junior Sukuk programme which was approved by the Securities Commission on 22 May 2009. Under the programme, the Bank is allowed to raise Tier-2 capital of up to RM2.0 billion in nominal value outstanding at any one time. The Sukuk under the first issuance were issued at par on 25 September 2009 and is due on 25 September 2024, with optional redemption on 25 September 2019 or any periodic payment date thereafter. The Sukuk bears a profit rate of 5.85% per annum payable semi-annually in arrears. The RM300 million Sukuk qualify as Tier-2 capital for the purpose of the RWCR computation. (q) Other liabilities

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Income payable 51,028 38,412 1,154 3,600 Amount due to Head office - 17,073 - - Accruals and other payables 241,657 249,002 68,495 - Defined contribution plan (i) 6 6 - -

292,691 304,493 69,649 3,600

The Group The Bank

(i) Defined contribution plan The Bank contributes to the Employees Provident Fund (‘EPF’), the national defined contribution plan. Once the contribution has been paid, the Bank has no further payment obligations.


235

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (r) Provision for taxation and zakat

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Taxation 10,613 3,076 - - Zakat 6,421 - - -

17,034 3,076 - -

The Group The Bank

(s) Ordinary share capital

2009 2008 RM'000 RM'000

AuthorisedOrdinary shares of RM1.00 each:At 1 January / 31 December 900,000 900,000

Issued and fully paidOrdinary shares of RM1.00 each:At 1 January / 31 December 550,000 550,000

The Group

(t) Perpetual preference shares

2009 2008 RM'000 RM'000

AuthorisedPerpetual preference shares of RM1.00 each:At 1 January / 31 December 100,000 100,000

Issued and fully paidPerpetual preference shares of RM1.00 each:At 1 January / 31 December 70,000 70,000

The Group

The preference shares shall rank pari passu among themselves, and in priority to the ordinary shares. Each preference share shall on a winding-up or other return of capital confer on its holder the right to receive, in priority to the holders of ordinary shares, the cash repayment in full the nominal amount and premium payable of that preference share after the payment and discharge of all debts and liabilities of the Bank and the costs of winding up or such capital reduction exercise. Notes to the Financial Statements


236

for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (t) Perpetual preference shares (continued) A preference share shall not entitle its holder to participate in the surplus assets and profits of the Bank beyond such redemption rights as are expressly set out in these Articles. The Bank may declare dividends on any of the preference shares. The preference shares are not convertible to ordinary shares or any other class of share of the Bank. (u) Reserves (a) The statutory reserve is maintained in compliance with Section 15 of the Islamic Banking

Act, 1983 and is not distributable as cash dividends. (b) Movement of the revaluation reserve of available-for-sale securities is as follows:

2009 2008 RM'000 RM'000

At 1 January (1,719) (1,562)Net gain/(loss) from change in fair value 4,485 (76)Net loss transferred to income statement on disposal and impairment (1,934) (105)Deferred taxation (638) 24 Net change in available-for-sale securities 1,913 (157)At 31 December 194 (1,719)



237

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (v) Income derived from investment of depositors’ funds and others

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Income derived from investment of (i) General investment deposits 456,540 412,327 3,617 18,922 (ii) Specific investment deposits 183,138 83,948 - - (iii) Other deposits 244,753 134,627 14,337 -

884,431 630,902 17,954 18,922

The Group The Bank

(i) Income derived from investment of general investment deposits

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Financing, advances and other loans 337,462 175,551 - 4,014 Securities held for trading 5,911 7,242 - - Available-for-sale securities 15,494 18,219 - - Held-to-maturity securities 6,838 4,640 - - Money at call and deposits with financial institutions 56,486 166,462 3,617 6,237 Others - 9,168 - 6,322

422,191 381,282 3,617 16,573 Accretion of discount less amortisation of premium 27,772 23,381 - - Total finance income and hibah 449,963 404,663 3,617 16,573

Other operating income - Net gain/(loss) from securities held for trading -realised gain/(loss) 1,787 (37) - - -unrealised loss (201) (164) - - - Net gain from sale of available-for-sale securities 1,195 78 - - - Net gain from derivative instruments - 2,349 - 2,349 - Net (loss)/gain from foreign exchange transactions

(3,295) 1,761 - -

(514) 3,987 - 2,349 Fee and commission income 7,091 3,677 - -

456,540 412,327 3,617 18,922

The BankThe Group


238

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (v) Income derived from investment of depositors’ funds and others (continued) (ii) Income derived from specific investment deposits

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Financing , advances and other loans 105,619 21,309 - - Money at call and deposit with financial institutions 34,686 51,004 - - Held-to-maturity securities 43,033 11,635 - -

183,338 83,948 - - Other operating income-Net loss from maturity/redemption of held-to-maturity securities (200) - - -

183,138 83,948 - -

The Group The Bank

(iii) Income derived from investment of other deposits

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Financing, advances and other loans 189,674 79,611 14,337 - Securities held for trading 3,265 1,883 - - Available-for-sale securities 7,939 4,543 - - Held-to-maturity securities 3,486 1,146 - - Money at call and deposits with financial institutions 25,840 39,251 - -

230,204 126,434 14,337 - Accretion of discount less amortisation of premium 13,773 6,476 - - Total finance income and hibah 243,977 132,910 14,337 -

Other operating income - Net gain from securities held for trading -realised gain/(loss) 976 (8) - - -unrealised (loss)/gain (196) 227 - - - Net gain from sale of available-for-sale securities 635 20 - - - Net (loss)/gain from foreign exchange transactions (1,885) 488 - -

(470) 727 - - Fee and commission income 1,246 990 -

244,753 134,627 14,337 -

The Group The Bank


239

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (w) Income derived from investment of shareholders’ funds

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Financing, advances and other loans 47,799 17,083 - - Securities held for trading 514 658 - - Available-for-sale securities 1,395 1,671 - - Held-to-maturity securities 617 426 - - Money at call and deposits with financial institutions 4,732 14,633 - - Others - 150 - -

55,057 34,621 - - Accretion of discount less amortisation of premium 2,513 2,107 - - Total finance income and hibah 57,570 36,728 - -

Other operating income- Net gain/(loss) from securities held for trading - Realised gain/(loss) 157 (55) - - - Unrealised (loss)/gain (19) 32 - - - Net gain from sale of available-for-sale securities 104 7 - - - Net gain/(loss) from derivative financial instruments - Realised 79,633 (69,389) - - - Unrealised (80,889) 125,565 - - - Net (loss)/gain from foreign exchange transactions (291) 154 - - - Net loss from hedging derivatives (1,625) - - -

(2,930) 56,314 - -

Fee and commission income 66,631 28,428 - - Sundry income 10,210 122 - -

131,481 121,592 - -

The BankThe Group


240


58 The operations of Islamic Banking (Continued) (x) Allowances for losses on financing, advances and other loans

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Allowance for bad and doubtful debts and financing:(i) Specific allowance - made during the financial year 236,951 99,584 - - - written back the financial year (25,785) (40,608) - -

(ii) General allowance - made during the financial year 80,813 31,827 - 1,451

Bad debts on financing: - recovered (14,631) (7,369) - - - written off 35 47 - -

277,383 83,481 - 1,451

The Group The Bank

(y) Income attributable to depositors

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

Deposits from customers - Mudharabah 185,574 242,733 - - - Non-Mudharabah 65,857 94,386 3,469 - Deposits and placements of banks and other financial institutions - Mudharabah 16,516 46,040 - - - Non-Mudharabah 27,095 17,933 7,691 6,335 Others 4,752 - -

299,794 401,092 11,160 6,335

The Group The Bank

(z) Personnel expenses

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Wages and salaries 8,518 7,366 - - Allowances and bonuses 10,113 6,263 263 288Personnel expenses charged by CIMB Bank Berhad 57,219 28,822 - - Staff incentive 5,195 - - - Other staff related costs 16,818 5,117 - 49

97,863 47,568 263 337

The Group The Bank

Included in the personnel costs are fees paid to the Shariah Committee’s members amounting to RM619,000 (2008:RM361,000). Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued)


241

58 The operations of Islamic Banking (Continued) (aa) Other overheads and expenditures

2009 2008 2009 2008 RM'000 RM'000 RM'000 RM'000

EstablishmentRental 1,282 1,768 - - Depreciation of property, plant and equipment 1,479 965 - - Repairs and maintenance 1,870 271 Overheads charged by CIMB Bank Berhad 27,041 17,675 - - EDP expenses 2,211 3,230 - - Takaful/insurance 668 268 - - Others 1,269 2,771 - -

PromotionAdvertisement and publicity 13,514 13,573 - - Handling fees 22,535 8,333 - - Promotion costs charged by CIMB Bank Berhad 6,498 2,751 - - Others 3,561 4,509 73 -

General expensesAuditor's remuneration - statutory audit 94 104 - - Amortisation of intangible assets 3,581 3,829 - - General expenses charged by CIMB Bank Berhad 15,106 848 - - Legal and professional fees 1,585 788 - - Communication 1,499 1,005 - - Incidental expenses on banking operations 3,431 5,565 - - Brokerage fees and commissions 52 3,648 - - Others 10,348 2,760 - 143

117,624 74,661 73 143

The Group The Bank


242

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (ab) Significant related party transactions and balances The related parties of, and their relationship with the Group and Bank, are disclosed in Note 41.

Parent company

O ther related

companies

Key management

personnel2009 RM'000 RM'000 RM’000IncomeProfit income on deposits and placements with banks and other financial institution 1,823 2,119 - Expenditure - Profit expense on deposits and placements of banks and other financial institution 104,664 15,528 - Profit expense on deposits from customers - 38 2 Profit expense on others 4,735 16 - Outsourced back-office processing 105,863 15,882 - Security services - 66 -

Amounts due fromCurrent accounts, deposits and placements with banks and other financial institutions 102,750 88,712 - Profit income on deposits and placements with banks and other financial institution 16 44 - Amounts due toDeposits from customers - 256,665 1,089 Deposits and placements of banks and other financial institutions 6,870,808 1,301,623 - Profit expense on deposits from customers - 32 - Profit expense on deposits and placements of banks and other financial institution 16,894 2,620 - Subordinated Sukuk 299,000 1,000 - Profit expense on subordinated Sukuk 4,735 16 - Outsourced back-office processing 9,892 1,395 -


243

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (ab) Significant related party transactions and balances (continued)

Parent company

O ther related

companies

Key management

personnel2008 RM'000 RM'000 RM’000Income Profit income on deposits and placements with banks and other financial institution 2,498 3,304 - ExpenditureProfit expense on deposits and placements of banks and other financial institution 45,952 9,127 - Profit expense on deposits and placements of customers 43,363 11,863 36 Security services - 177 -

Amounts due fromCurrent accounts, deposits and placements with banks and other financial institutions 207,870 2,500 - Others 552 - - Amounts due toDeposits from customers - 27,533 1,826 Deposits and placements of banks and other financial institutions 3,381,584 265,192 - Profit expense on deposits from customers - 10 7 Profit expense on deposits and placements of banks and other financial institutions 4,040 929 - Outsourced back-office processing 8,091 - - Transactions with other related parties are aggregated because these transactions are similar in nature and no single transaction with these parties is significant enough to warrant separate disclosure. Key management compensation and credit transaction and exposures with connected parties are disclosed in Note 41. (ac) Taxation

2009 2008 2009 2008RM'000 RM'000 RM'000 RM'000

Taxation based on the profit for the financial year: - Malaysian income tax 63,948 28,250 - - Deferred taxation (Note i) (23,587) (4,494) - - Under/(over) provision in prior year (Note i) 307 - 307 (307)

40,668 23,756 307 (307)

The Group The Bank


244

Notes to the Financial Statements for the financial year ended 31 December 2008 (Continued) 58 The operations of Islamic Banking (Continued) (ad) Profit rate risk The tables below summarise the Group’s and the Bank’s exposure to rate of return risk. Included in the tables are the Group’s and the Bank’s assets and liabilities at their full carrying amounts, categorised by the earlier of contractual repricing or maturity dates. As market rates and yield curves change over time, the Group and the Bank may be exposed to loss in earnings due to the effects of market rates on the structure of the balance sheets. Sensitivity to market rates arises from mismatches in the repricing dates, cash flows and other characteristics of the assets and their corresponding liabilities funding.

Up to 1 month

> 1 – 3 months

> 3 – 6 months

> 6 – 12 months

> 1 – 5 years

O ver 5 years

Non-profit sensitive

Trading book Total

2009 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000AssetsCash and short-term funds 5,286,556 - - - - - 55,816 - 5,342,372 Deposits and placements with banks and other financial institutions - 1,070,960 414,316 - - - - - 1,485,276 Securit ies held for trading - - - - - - - 3,491,709 3,491,709 Available-for-sale securit ies 59,525 55,157 30,151 20,191 158,387 218,668 198 - 542,277 Held-to-maturity securit ies - 15,483 15,483 30,966 847,975 101,471 - - 1,011,378 Islamic derivative financial instruments - - - - - - - 263,732 263,732 Financing, advances and other loans - Performing 1,015,617 3,739,213 373,097 44,599 1,530,108 9,767,957 - - 16,470,591 - Non-performing - - - - - - (15,786) - (15,786)Other assets - - - - - - 111,877 - 111,877 Deferred taxation - - - - - - 44,625 - 44,625 Statutory deposits with Bank Negara Malaysia - - - - - - 172,806 - 172,806 Intangible assets - - - - - - 3,676 - 3,676 Goodwill - - - - - - 136,000 - 136,000 Property, plant and equipment - - - - - - 2,625 - 2,625 Total assets 6,361,698 4,880,813 833,047 95,756 2,536,470 10,088,096 511,837 3,755,441 29,063,158

The Gro up No n-trading bo o k

^


245

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (ad) Profit rate risk (continued) `

Up to 1 month

> 1 – 3 months

> 3 – 6 months

> 6 – 12 months

> 1 – 5 years

O ver 5 years


Trading book Total

2009 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000LiabilitiesDeposits from customers 10,121,695 4,446,638 1,382,462 527,708 1,576,753 120,850 8,500 - 18,184,606 Deposits and placements of banks and other financial institutions 3,003,810 5,164,512 799,843 118,106 - - - - 9,086,271 Islamic derivative financial instruments - - - - - 28,255 13,304 117,798 159,357 Other liabilities - - - - - - 292,691 - 292,691 Amount due to holding company - - - - - - 24,183 - 24,183 Amount due to related company - - - - - - 6,425 - 6,425 Provision for taxation and zakat - - - - - - 17,034 - 17,034 Subordinated sukuk - - - - - 300,000 - - 300,000 Total liabilities 13,125,505 9,611,150 2,182,305 645,814 1,576,753 449,105 362,137 117,798 28,070,567

28,070,567 Total profit rate sensitivity gap (6,763,807) (4,730,337) (1,349,258) (550,058) 959,717 9,638,991 3,637,643 -

The Group Non-trading book

^ Includes specific allowances and general allowance of RM373 million.


246

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (ad) Profit rate risk (continued)

Up to 1 month

> 1 – 3 months

> 3 – 6 months

> 6 – 12 months

> 1 – 5 years

O ver 5 years


Trading book Total

2008 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000AssetsCash and short-term funds 6,027,002 - - - - - 222,123 - 6,249,125 Deposits and placements with banks and other financial institutions 116,700 300,289 245,000 50,000 - - - - 711,989 Securit ies held for trading - - - - - - - 2,882,056 2,882,056 Available-for-sale securit ies 5,000 - 25,055 54,380 306,832 220,536 575 - 612,378 Held-to-maturity securit ies 892,884 69,664 8,708 17,416 106,390 102,994 - - 1,198,056 Islamic derivative financial instruments - - - - - - - 267,369 267,369 Financing,advances and other loans - Performing 1,854,418 910,753 98,192 63,342 789,915 2,518,579 3,048 - 6,238,247 - Non-performing - - - - - - 21,479 - 21,479 Other assets - - - - - - 99,244 - 99,244 Deferred taxation - - - - - - 21,369 - 21,369 Statutory deposits with Bank Negara Malaysia - - - - - - 269,224 - 269,224 Amount due to related companies - - - - - - 100,622 - 100,622 Intangible assets - - - - - - 5,962 - 5,962 Goodwill - - - - - - 136,000 - 136,000 Property, plant and equipment - - - - - - 3,855 - 3,855 Total assets 8,896,004 1,280,706 376,955 185,138 1,203,137 2,842,109 883,501 3,149,425 18,816,975

The Group Non-trading book

^

^

^


247


Up to 1 month

> 1 – 3 months

> 3 – 6 months

> 6 – 12 months

> 1 – 5 years

O ver 5 years


Trading book Total

2008 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000LiabilitiesDeposits from customers 7,615,406 3,444,257 704,423 218,932 1,966,670 15,866 19,008 - 13,984,562 Deposits and placements of banks and other financial institutions 2,639,886 1,016,950 - - - - - - 3,656,836 Islamic derivative financial instruments - - - - - - - 46,452 46,452 Bills and acceptable payable 1,808 1,913 1,537 - - - - - 5,258 Amount due to holding company - - - - - - 304,493 - 304,493 Other liabilities - - - - - - 4,010 - 4,010 Provision for taxation and zakat - - - - - - 3,076 - 3,076 Total liabilities 10,257,100 4,463,120 705,960 218,932 1,966,670 15,866 330,587 46,452 18,004,687

Total profit rate sensitivity gap (1,361,096) (3,182,414) (329,005) (33,794) (763,533) 2,826,243 3,102,973

Non-trading bookThe Group

^ Includes specific allowances and general allowance of RM180 million.


248


Up to 1 month

> 1 – 3 months

> 3 – 6 months

> 6 – 12 months

> 1 – 5 years

O ver 5 years


Trading book Total

2009 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000Assets Cash and short-term funds 484,261 - - - - - - - 484,261 Deposits and placements with banks and other financial institutions - 198,560 294,441 - - - - - 493,001 Securit ies held for trading - - - - - - - 207,415 207,415 Islamic derivative financial instruments - - - - - - - 6,044 6,044 Financing,advances and other loans - Performing - - 213,664 - - - - - 213,664 Other assets - - - - - - 3,841 - 3,841 Total assets 484,261 198,560 508,105 - - - 3,841 213,459 1,408,226 Liabilities Deposits from customers - - 524,644 - - - 819 - 525,463 Deposits and placements of banks and other financial institutions 484,261 198,560 122,756 - - - - - 805,577 Islamic derivative financial instruments - - - - - - - 1,321 1,321 Other liabilities - - - - - 69,649 - 69,649 Amount due to related company - - - - - - 147 - 147 Total liabilities 484,261 198,560 647,400 - - - 70,615 1,321 1,402,157

Total profit rate sensitivity gap - - (139,295) - - - 212,138

The Bank

Non-trading book


249


Up to 1 month

> 1 – 3 months

> 3 – 6 months

> 6 – 12 months

> 1 – 5 years

O ver 5 years


Trading book Total

2008 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000AssetsDeposits and placements with banks and other financial institutions 99,377 275,911 - - 2,286 - - - 377,574 Islamic derivative financial instruments - - - - - - - 2,349 2,349 Financing,advances and other loans - Performing - 68,268 - - - - - - 68,268 Other assets - - - - - - 2,002 - 2,002 Deferred tax assets - - - - - - 307 - 307 Total assets 99,377 344,179 - - 2,286 - 2,309 2,349 450,500

LiabilitiesDeposits from customers 49,161 242,214 - - - - - - 291,375 Deposits and placements of banks and other financial institutions 17,118 138,882 - - - - - - 156,000 Other liabilities - - - - - - 3,600 - 3,600 Total liabilities 66,279 381,096 - - - - 3,600 - 450,975

Total profit rate sensitivity gap 33,098 (36,917) - - 2,286 - 2,349

The Bank Non-trading book

^

^

^ Includes general allowance of RM1.2 million.


250

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (ad) Profit rate risk (continued) The tables below summarises the effective average profit rates for each class of financial asset and financial liability:

MYR USD SGD MYR USD SGD MYR USD SGD USD SGDFinancial assetsCash and short-term funds 2.02 0.37 - 3.03 2.55 - - - - - - Deposits and placements with banks and other financial institutions 1.02 0.76 0.63 2.63 2.80 1.81 - - 0.63 2.78 1.81 Securities held for trading 2.28 - 2.64 3.50 - - - - 2.64 - - Available-for-sale securities 4.53 - - 4.48 - - - - - - - Securities held-to-maturity 4.99 - - 5.23 - - - - - - - Financing, advances and other loans 5.45 1.51 3.42 5.86 4.34 - - 3.12 3.42 4.07 -

Financial liabilitiesDeposits from customers 1.59 0.84 0.87 2.52 1.29 0.93 - - 0.87 - 0.93 Deposits and placements of banks and other financial institutions 2.27 0.52 - 2.34 2.17 - - - - 2.67 - Subordinated Sukuk 5.85 - - - - - - - - - -

%

The Bank2008

%

The Bank2009

%

The Group2008%

The Group2009


251


58 The operations of Islamic Banking (Continued) (ae) Credit risk The following tables set out the credit risk concentrations of financial instruments:


pla c e m e nts with

f ina nc ia l ins t itut io ns


A v a ila b le -fo r- s a le

s e c urit ie s

He ld-to -m a turity

s e c urit ie s

Is la m ic de riv a t iv e

f ina nc ia l ins trum e nts

F ina nc ing , a dv a nc e s a nd

o the r lo a nsOthe r

a s s e tsTo ta l o n-

ba la nc e s he e t






R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0Agriculture - - 5 ,0 5 1 2 5 4 ,5 0 3 - 2 8 3 ,9 5 0 - 5 4 3 ,5 0 4 16 1 - Manufac turing - - - - - 4 5 6 ,4 0 8 - 4 5 6 ,4 0 8 6 5 ,5 18 7 4 Mining and quarrying - - - - - - - - - - Electric ity, gas and wate r - 5 ,0 3 7 4 1,3 5 9 9 ,5 4 3 - 14 1,3 3 8 - 19 7 ,2 7 7 9 ,6 18 - Co ns truc tio n - 9 5 ,3 14 3 7 ,2 8 8 8 ,3 9 0 - 8 6 ,8 5 1 - 2 2 7 ,8 4 3 8 3 ,9 0 7 - Real es ta te - - 2 0 ,5 9 3 6 2 6 ,9 11 - - - 6 4 7 ,5 0 4 - - P urchas e o f landed pro perty - - Res identia l - - - - - 3 ,3 18 ,2 16 - 3 ,3 18 ,2 16 - - - No n res identia l - - - - - 1,0 13 ,12 0 - 1,0 13 ,12 0 - - Genera l co mmerce - - - - - 3 8 1,9 14 - 3 8 1,9 14 10 ,17 0 14 P urchas e o f s ecurities - - - - - - - - - - Trans po rt, s to rage and co mmunica tio ns - 2 5 ,0 13 5 9 ,3 3 3 9 1,9 2 7 - 3 ,0 13 ,4 3 3 - 3 ,18 9 ,7 0 6 3 ,6 4 1 -

Finance , takaful/ins urance and bus ines s s e rvices 2 ,7 3 1,8 5 9 2 ,0 2 5 ,9 4 1 10 6 ,9 8 9 2 0 ,10 4 2 6 3 ,7 3 2 2 ,6 2 3 ,9 3 3 111,8 7 7 7 ,8 8 4 ,4 3 5 11,6 9 5 3 2 7 ,2 8 2 Go vernment and go vernment agenc ies 4 ,0 9 5 ,7 8 9 1,3 4 0 ,4 0 4 2 6 5 ,9 5 8 - - - - 5 ,7 0 2 ,15 1 - - P urchas e o f trans po rt vehic les - - - - - 3 ,5 5 3 ,8 8 0 - 3 ,5 5 3 ,8 8 0 - - Co ns umptio n c redit - - - - - 1,4 3 8 ,4 2 0 - 1,4 3 8 ,4 2 0 - - Others - - 5 ,7 0 6 - - 3 0 3 ,5 8 9 - 3 0 9 ,2 9 5 3 0 ,0 0 1 -

6 ,8 2 7 ,6 4 8 3 ,4 9 1,7 0 9 5 4 2 ,2 7 7 1,0 11,3 7 8 2 6 3 ,7 3 2 16 ,6 15 ,0 5 2 111,8 7 7 2 8 ,8 6 3 ,6 7 3 2 14 ,7 11 3 2 7 ,3 7 0

The Gro up

2 0 0 9

^ ^ Gross financing and advances after specific allowance but before general allowance of RM160,247,000


252

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 58 The operations of Islamic Banking (Continued) (ae) Credit risk (continued)


pla c e m e nts with

f ina nc ia l ins t itut io ns


A v a ila b le -fo r- s a le

s e c urit ie s

He ld-to -m a turity

s e c urit ie s



F ina nc ing , a dv a nc e s a nd

o the r lo a nsOthe r

a s s e ts

To ta l o n-ba la nc e

s he e t





c o nt ing e nc ie sR M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0

Agriculture - - 19,909 174,160 - 192,833 100 387,002 88,319 - Manufac turing - - - - - 193,053 - 193,053 32,320 - Electric ity, gas and wate r - - 60,424 4,816 - - 1,070 66,310 8,659 - Co ns truc tio n - - 49,378 - - 107,766 614 157,758 88,060 - Rea l Es ta te - - 20,715 892,884 - 259,449 697 1,173,745 32,712 - P urchas e o f landed pro perty - Res identia l - - - - - 751,769 - 751,769 56 - - No n res identia l - - - - - 626,952 - 626,952 13,500 - Genera l co mmerce - - 9,415 - - 278,105 58 287,578 83,513 - P urchas e o f s ecurities - - - - - 1,417,806 - 1,417,806 - - Trans po rt, s to rage and co mmunica tio ns - 15,710 130,535 106,070 - 8,252 3,768 264,335 99,328 - F inance ,takaful/ins urance and bus ines ss e rvices 2,057,785 2,822,240 115,364 20,126 267,369 519,601 89,154 5,891,639 296,152 394,108 Go vernment and go vernment agenc ies 4,815,807 44,106 200,974 - - - 1,721 5,062,608 - - P urchas e o f trans po rt vehic les - - - - - 1,328,110 - 1,328,110 - - Co ns umptio n c redit - - - - - 517,361 - 517,361 - - Others 87,522 - 5,089 - - 139,284 2,062 233,957 127,002 -

6,961,114 2,882,056 611,803 1,198,056 267,369 6,340,341 99,244 18,359,983 869,621 394,108

The Gro up

2 0 0 8

* ^* ^ * Exclude equity instruments amounting to RM575,000. ^ Gross financing and advances after specific allowance but before general allowance of RM80,615,000.

Equity instruments are not subject to credit risk due to their nature which are short-term, lower credit risk, easily disposable and has no maturity period


253


58 The operations of Islamic Banking (Continued) (ae) Credit risk (continued)

S ho rt t e rm funds a nd


ins t itut io ns




F ina nc ing , a dv a nc e s a nd o the r

lo a nsOthe r

a s s e t s


s he e t





c o nt ing e nc ie sR M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0 R M ’0 0 0

Genera l co mmerce - - - 8 5 ,9 9 1 - 8 5 ,9 9 1 - -

Trans po rt, s to rage and co mmunica tio ns - - - 10 3 ,2 0 6 - 10 3 ,2 0 6 - -

Finance ,takaful/ins urance and bus ines ss e rvices

9 7 7 ,2 6 2 2 0 7 ,4 15 6 ,0 4 4 2 4 ,4 6 7 3 ,8 4 1 1,2 19 ,0 2 9 - 11,2 10

9 7 7 ,2 6 2 2 0 7 ,4 15 6 ,0 4 4 2 13 ,6 6 4 3 ,8 4 1 1,4 0 8 ,2 2 6 - 11,2 10

S ho rt t e rm funds a nd


ins t itut io ns




F ina nc ing , a dv a nc e s a nd o the r

lo a nsOthe r

a s s e t s


s he e t






RM’000 R M ’0 0 0 RM’000 RM’000 RM’000 RM’000 R M ’0 0 0 R M ’0 0 0

Finance ,takaful/ins urance and bus ines ss e rvices

290,053 - 2,349 - - 292,402 - -

Others 87,521 - - 69,449 2,002 158,972 - 6,792 377,574 - 2,349 69,449 2,002 451,374 - 6,792

The Bank2008

The Bank2009

^

^

^ Gross financing and advances after specific allowance but before general allowance of RMNil (2008: RM1.2 million.)


254

Notes to the Financial Statements for the financial year ended 31 December 2009 (Continued) 59 Authorisation for issue of Financial Statements

The Financial Statements have been authorised for issue by the Board of Directors in accordance with a resolution of the Directors dated 9 March 2010.

reports and financial statements for the financial …...2009/12/31 · company no: 13491-p cimb...

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