Bank Islam - Analyst Briefing - Bank Islam · PDF file¾Bank Islam was incorporated on 1 March 1983 to become Malaysia’s pioneer ... (now Bursa Malaysia) ... and other public sector

STRICTLY PRIVATE & CONFIDENTIAL

ANALYSTS BRIEFING

Page 2 Strategic Planning

CORPORATE INFORMATIONCORPORATE INFORMATION

Shareholders Number of Shares Shareholdings

BIMB Holdings Berhad^ 1,155,400,000 51%

Dubai Investment Group 690,196,000 30.5%

Lembaga Tabung Haji 419,894,000 18.5%

Issued Share Capital 2,265,490,000 100%

Bank Islam was incorporated on 1 March 1983 to become Malaysia’s pioneer bank to operate wholly according to Shariah principles

Bank Islam was licensed under Islamic Banking Act 1983

^ Lembaga Tabung Haji (Pilgrimage Funds Board) is deemed as the ultimate controlling shareholder of Bank Islam by virtue of its 51% controlling stake in BIMB Holdings Bhd


OUR SHAREHOLDERSOUR SHAREHOLDERSLembaga Tabung Haji (18.5%)

Lembaga Tabung Haji (Pilgrim Fund Board) (TH) is a government controlled entity that was established mainly to assist Muslims in saving gradually for the purpose of pilgrimage. TH is highly determined to make each business and investment venture a roaring success domestically and abroad. It has also made an impressive mark in various Islamic investment instruments such as sukuk/bonds, corporate notes, Government Investment Certificates, Mudharabah Bank Account and Bill of Acceptance.

BIMB Holdings Bhd (51%)

BIMB Holdings was incorporated in Malaysia on 20 March 1997 and was listed on the Main Board of Kuala Lumpur Stock Exchange (now Bursa Malaysia) on 16 September in the same year. The core subsidiaries of BIMB Holdings are leaders and pioneers of various Islamic financial services in the region, namely Bank Islam Malaysia Berhad, Syarikat Takaful Malaysia Berhad, ASEAN Retakaful International (L)

Dubai Banking Group (30.5%)Pursuant to the internal restructuring of Dubai Financial LLC and Dubai Islamic Investment Group, the 40% equity interest of

Bank Islam was transferred to Dubai Banking Group (DBG), a special vehicle of Dubai Group to develop and grow Shari'ah compliant businesses and brands on a global scale through significant and direct acquisitions and by building strategic alliances with valued local partners around the world as well as to generate exceptional returns and long‐term growth, leading to creation of sustainable shareholder value. From its headquarters in Dubai, DBG focuses on identifying anchor investment opportunities in its selected markets. Its current investment portfolio includes: 100% ownership of Dubai Bank, 51% stake in Al Fajer Re‐Takaful, 16.66% stake in National Bonds UAE, the national Shari'ah‐compliant saving scheme and 40% stake in ACR Re‐Takaful Holdings Limited, the world's largest reinsurance company


CORPORATE STRUCTURECORPORATE STRUCTURE


GOVERNANCE STRUCTURE GOVERNANCE STRUCTURE


MANAGING DIRECTORMANAGING DIRECTOR

DATO’ SRI ZUKRI SAMAT

FINANCECONSUMER BANKING

CHIEF INTERNAL AUDIT

CHIEF RISK CHIEF RISK OFFICEROFFICER

COMMERCIAL BANKING

TREASURY

CORPORATE COMMUNICATIONS

LEGAL & SECRETARIAL

CHIEF FINANCIAL CHIEF FINANCIAL OFFICEROFFICER

GENERAL ADMINISTRATION

VALUATION

CORPORATE INVESTMENTBANKING

ORGANIZATION CHARTORGANIZATION CHART

CORPORATECORPORATESERVICESSERVICES

HUMAN HUMAN RESOURCESRESOURCES

BUSINESSBUSINESS

INFORMATIONTECHNOLOGY

PROGRAM MANAGEMENTOFFICE

CHIEF TECHNOLOGYCHIEF TECHNOLOGYOFFICER OFFICER

MDMD’’S OFFICES OFFICE SHARIAH SHARIAH

RECOVERY & REHABILITATION

CHIEF BUSINESS SUPPORT OFFICER

TRANSACTION SERVICES

BRANCH OPERATIONS

CREDITADMINISTRATION

CHANNEL STRATEGY& DEVELOPMENT

CASH & TRADE MANAGEMENT


““To be the Global Leader in Islamic To be the Global Leader in Islamic BankingBanking””

““Global LeaderGlobal Leader”” is defined as being the ultimate guidance is defined as being the ultimate guidance and source of reference for innovative Shariahand source of reference for innovative Shariah--based based

products & servicesproducts & services

VISION STATEMENTVISION STATEMENT


To continually develop and innovate universally accepted financiTo continually develop and innovate universally accepted financial solutions in al solutions in line with Shariah Principlesline with Shariah Principles

To provide a reasonable and sustainable return to shareholdersTo provide a reasonable and sustainable return to shareholders

To provide for a conducive working environment and to become an To provide for a conducive working environment and to become an Employer of Employer of Choice for top talents in the marketChoice for top talents in the market

To deliver comprehensive financial solutions of global standardsTo deliver comprehensive financial solutions of global standards using stateusing state--ofof--thethe--art technologyart technology

To be a responsible and prudent corporate citizenTo be a responsible and prudent corporate citizen

In the performance of this corporate mission Bank Islam shall beIn the performance of this corporate mission Bank Islam shall be guided by its guided by its corporate brand values of being: A Leader, Dynamic, Professionalcorporate brand values of being: A Leader, Dynamic, Professional, Caring and , Caring and TrustworthyTrustworthy

MISSION STATEMENTMISSION STATEMENT


STRENGTHSSTRENGTHS

Being a pioneer, Bank Islam remains as Malaysia’s Islamic banking icon.

Capitalizing on a strong brand equity, Bank Islam positions itself as a “true‐blue Islamic bank”and “Most Trusted Brand” ‐ A value proposition that is premised on trust and reliability.

Backing of Tabung Haji (TH). Leveraging business relationship and operational synergistic.

Liquid balance sheet and sizeable portion of low‐cost deposits.

Competent and highly experienced Senior Management team, forward‐looking and passionate about transforming Bank Islam into “a global leader in Islamic banking “.

Healthy Risk Weighted Capital Ratio (RWCR) and increased capital strength.

Formidable ties with the Federal Govt and its ministries/agencies, Government‐linked companies (GLCs) and other public sector entities such as universities, State Govts and their agencies, local councils, etc.


1

10

5

8

17

145

3

11

8

105

4

5

WP Labuan

1

LOCATION BY REGION TOTAL

Central 31

Northern 24

Southern 19

Eastern 23

East Malaysia 10

Total 107

BRANCH NETWORKBRANCH NETWORK


NEW & REMODELLED BRANCHESNEW & REMODELLED BRANCHES

BDC Karamunsing, Sabah Consumer Business Center, Padang Garong,

Kelantan

Putra Heights, SelangorKota Damansara, Selangor

Saujana Utama, Selangor Karamunsing, SabahWangsa Maju, KL

Alor Setar II, KedahPutra Square, Pahang


KEY HIGHLIGHTSKEY HIGHLIGHTS

Record profit before tax of RM313 mil, historical high, due to improved contribution across all key business segments.

Financing portfolio grew 16.8% YoY.

Asset quality continued to improve with net NPF ratio declining to 3.2% from 6.7% a year ago based on 3‐months classification.

Capitalization remains strong with tier‐1 and overall risk‐weighted capital ratio of a respective 15.6% and 16.7%, which were higher than the banking industry’s averages.

Return of Equity of 16.2% which exceeds Bank Islam’s Headline KPI as well as industry average.

The Bank’s current and savings deposits account for 37.1% of the Bank’s total deposits, higher than industry average of 23.8%.

Higher operating expenses were incidental to business expansion and growing financing portfolio.

Paid 4% dividend to CRNCPS‐i holders on 30 August 2010 .


KEY FINANCIAL INDICATORSKEY FINANCIAL INDICATORS

@ Commencing December 2009, NPF is based on 3 months classification. Audit FY June 2009 has been restated to reflect 3 monthsclassification

^ Annualised* Bank Negara Malaysia Annual Report 2009 # Bank Negara Malaysia Monthly Statistical Bulletin @ March‘10

Audited FY June 05

Audited FY June 06

AuditedFY June 07

AuditedFY June 08

Audited FY June 09

AuditedJune 10

IslamicBanking System

Banking System

PROFITABILITY

Return on Equity (%) N/A N/A 23.3% 26.5% 16.5% 16.2% ^ 13.9% * 13.9% *

Return on Assets (%) N/A N/A 1.4% 1.5% 0.9% 1.1% ^ 1.3% * 1.2% *

Cost Income Ratio (%) 63.3% 65.4% 68.2% 60.8% 56.7% 56.0% 42.9% * 48.4% *

Non‐Fund Based Income Ratio (%) 12.3% 9.4% 9.0% 7.8% 10.3% 10.5% 9.0% * 18.3% *

Net NPF Ratio (%) 12.6% 9.2% 11.4% 7.8% 6.7% 3.2% @ 2.1% # 1.8% #

Financing Loss Coverage Ratio (%)

55.3% 74.8% 67.7% 75.8% 80.8% 81.6% @ 85.2% # 95.9% #

Financing to Deposit (%) 74.5% 71.3% 55.9% 50.4% 42.5% 45.0% 73.5% # 75.4% #

RWCR / CAFIB (%) 9.1% (3.0%) 12.0% 12.9% 13.6% 16.7% 14.8% # 14.9% #


TOTAL REVENUETOTAL REVENUE

885.0 949.5

1,010.5

1,152.0

1,267.1 1,358.9

‐

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

June‐05 June‐06 June‐07 June‐08 June‐09 June‐10

RM million


PROFIT BEFORE ZAKAT AND TAXPROFIT BEFORE ZAKAT AND TAX

(479.8)

(1,288.3)

236.7 308.3

233.1 313.0

(1,400.0)

(1,200.0)

(1,000.0)

(800.0)

(600.0)

(400.0)

(200.0)

0.0

200.0

400.0


RM million

…surpassed Jun-08

historical high


PROFIT BEFORE PROVISIONS PROFIT BEFORE PROVISIONS –– OPERATING PROFITSOPERATING PROFITS

226.3 202.9

218.6 280.2

359.2

429.7

‐

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0


RM million


TOTAL ASSETS AND CUSTOMER DEPOSITSTOTAL ASSETS AND CUSTOMER DEPOSITS

15.8 14.6

19.1

23.6

27.5

30.3

13.5 14.4

17.6

20.8

25.2 26.7

‐

5.0

10.0

15.0

20.0

25.0

30.0

35.0


RM billion

Total Assets Deposits from Customers


NET FINANCINGNET FINANCING

Overall Financing growth of 16.8% (June 2006 vs June 2010)

RM’M

illio

n 11,2

84


ASSET QUALITY TRENDASSET QUALITY TREND

Summarized below Total Bank NPF on 6‐months classification:

RM’M

illio

n


BETTER ASSET QUALITYBETTER ASSET QUALITY

%As at

Jun 2010As at

Jun 2009 Decrease

Gross NPF Ratio 7.65 14.34 6.69

Net NPF Ratio 3.24 6.74 3.50

Changed from 6 months to 3 months classification in December 2009

Based on 3 months classification

VolumeAs at

Jun 2010As at

Jun 2009

Decrease

Amount %

Gross NPF Ratio 918,011 1,534,951 (616,940) (40.2)

Net NPF Ratio 371,293 663,062 (291,769) (44.0)


SUSTAINING STRONG ASSET QUALITYSUSTAINING STRONG ASSET QUALITY

Focus on lower risk sectors.

Sounds underwriting standards with frequent calibration to reflect market behavior.

Strong credit risk culture and oversight function.

For mortgages and business premise financing, focus on location…location…location

Focus on lower risk customer segments:‐

Female

Package Employers

Program financing (Doctors, Bankers, etc)

Middle & Affluent market segments

Collection….collection & collection


KEY BALANCE SHEET ITEMSKEY BALANCE SHEET ITEMS

RM MillionAudited

FY June 05Audited

FY June 06Audited

FY June 07Audited

FY June 08Audited

FY June 09Actual June

2010

Assets 15,849 14,598 19,091 23,559 27,488 30,335

Growth (%) 22% (8%) 31% 23% 17% 10.4%

Net Financing 9,169 8,643 8,472 9,061 9,662 11,284

Growth (%) 20% (6%) (2%) 7% 7% 16.8%

Treasury Assets 5,962 5,333 10,025 13,785 17,347 18,623

Growth (%) 28% (11%) 88% 37% 26% 7.4%

Deposits 13,483 14,443 17,617 20,763 25,212 27,062

Growth (%) 20% 7% 22% 18% 21% 7.3%


CUSTOMER BASECUSTOMER BASE

1,736

2,010

2,323 2,643

3,769

‐

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

June‐06 June‐07 June‐08 June‐09 June‐10

RM million

“Customer base has grown by 117% since the implementation of the Turnaround Plan. As at end‐June 2010, we count 3.8 million customers. We have remodeled 67 branches and have opened 11 new branches”


RWCR / CAFIBRWCR / CAFIB

9.1%

‐3.0%

12.0%12.9%

13.6%

16.7%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%


…Robust Capital Adequacy


CORE BUSINESS CORE BUSINESS


KEY BUSINESS DIRECTIONKEY BUSINESS DIRECTION

Business composition – Retail (70%) : Business (30%)

Consumer banking to remain as our key growth driver, focusing on high yielding assets such as personal financing, with a calculated risk ‐ direct deduction from source. House financing (with good profile, ticket size and location) shall continue as our main thrust to build sustainable long term asset portfolio.

Commercial banking to focus on secured financing via business premises financing program. Special attention to be given on driving utilization from existing emerging local corporate with strong credit profile and from existing contract financing clients with good performance record.

Corporate banking will continue to originate and participate in syndication facility as well as focusing on non‐fund based income such as sukuk, corporate finance and advisory deals, etc. The Bank also aims to enhance on wallet seizing and strengthen relationships with top‐tier Malaysian GLCs. Term financing to spearhead future growth.


KEY BUSINESS DIRECTIONKEY BUSINESS DIRECTION……contcont

Cash Management to cross sell its offering to existing reputable clients of Corporate, Commercial and Consumer banking (i.e. tapping our Package Employers)

Treasury to enhance our portfolio return and ensure competitive funding profile of the Bank. The bank seeks to expand client‐related FX business. Treasury shall continue to manage asset‐liability gap, profit rate risk as well as displaced commercial risk within the Bank’s prescribed risk appetite.

Branches will act as spear‐point to garner CASA.

Robust collection strategy is critical to success especially for retail business portfolio.

Key emphasis to drive down cost‐to‐income ratio i.e. via business process re‐engineering

Ar‐Rahnu business as our micro‐financing arm of the Bank.


1,458.6(20.5%)

- 419.3(-20.3%)

298.3(29%) -46.2

(-9.2%)

RM’M

illio

n

FINANCING GROWTH BY BUSINESS UNITSFINANCING GROWTH BY BUSINESS UNITS


CONSUMER INITIATIVESCONSUMER INITIATIVES


RM4.0 billionIjarah Medium Term Notes Programme

Syarikat Prasarana Negara BerhadCo-Manager

RM330.0 millionSyndicated Islamic Financing Facility

Kedah Sato Sdn BhdLead Arranger

RM327.0 millionSyndicated Islamic Financing Facility

Prolintas Expressway Sdn BhdLead Arranger

NOTABLE TRANSACTIONSNOTABLE TRANSACTIONS

USD150.0 million*Syndicated Islamic Financing

Facility

Qatar Airways Q.C.S.C.Arranger

Rights IssueRM540 mil Islamic

Convertible Redeemable Non-Cumulative Preference

Shares (Tier 1- Capital)

2009

Acquisition of 20% equity interest in

Amana Bank Limited, Sri Lanka By Bank Islam Malaysia Bhd

2009

RM668 millionSyndicated Islamic Financing Facility

Ranhill Powertron IILead ArrangerLead Manager

RM70 millionBusiness Financing Facility

Blossom Time Sdn Bhd


ISLAMIC BANKING LANDSCAPEISLAMIC BANKING LANDSCAPE


STAND‐ALONE

SUBSIDIARIES OF CONVENTIONAL BANKS

ISLAMIC WINDOWS & DFIs

ISLAMIC BANKING LANDSCAPEISLAMIC BANKING LANDSCAPE

INTERNATIONAL ISLAMIC BANKS

2 Mega Islamic Banks (Paid Up

Capital of US$1 bil) – August 2010

17 Commercial Islamic Banks

5 new Islamic banking licenses ‐

subsidiary of foreign banks


COMPETITIVENESSCOMPETITIVENESS

ISLAMIC

17.2% 11.7%15.0%10.1%

Total Assetsas at June 2010

RM44.5 billion RM30.3 billionRM39.0 billion RM26.1 billion

Islamic Banking Assets – RM259.36 bil


COMPETITIVENESSCOMPETITIVENESS

ISLAMIC

16.4% 13.1% 10.6% 7.0%

Deposits as at June2010

RM34.5 billion RM27.5 billion RM22.4 billion RM15.4 billion

Our strength is non reliance on interbank funding (only 3% of deposits)

Islamic Banking Deposits – RM210.39 bil


SUSTAINABLE GROWTH PLANSUSTAINABLE GROWTH PLANACHIEVEMENTS TOACHIEVEMENTS TO‐‐DATEDATE


RECOVERY MODERECOVERY MODEMoving out of crisis & return to the black

PHASE 1PHASE 12006 2006 ‐‐ 20072007

STABLE MODESTABLE MODEBuilding solid foundation for a sustainable

growth

PHASE 2PHASE 22008 2008 ‐‐ 20092009

HIGH GROWTH MODEHIGH GROWTH MODEOperational excellence &

market leader

PHASE 3PHASE 32010 2010 ‐‐ OnwardsOnwards

CORPORATE PLAN CORPORATE PLAN –– MOVING FORWARDMOVING FORWARD

TURNAROUND PLAN (JUNE 2006 – JUNE 09)

SUSTAINABLE GROWTH PLAN

1st pillar : Recapitalization & Balance Sheet Restructuring2nd pillar : IT Infrastructure Revamp3rd pillar : Transformation Program4th pillar : Cost Rationalization5th pillar : Human Capital Development

1st pillar: Business innovation2nd pillar: Robust risk management3rd pillar: Strengthening enabling

infrastructure4th pillar : Building capability &

capacity5th pillar: Franchise development6th pillar: Inorganic growth and

corporate expansion


SUSTAINABLE GROWTH PLAN SUSTAINABLE GROWTH PLAN

Key Strategy Objective Actions

Business Innovation

To continuously develop new financial solutions and product offerings that suit the ever-evolving customer needs and benchmarked to international standards.

Research & Development for product innovation - Mudharabah & Musharakah-based financing- Wakaf development- Ar Rahn business

Innovative product packaging (Competitive pricing with value added proposition)

Robust Risk Management

To build a solid foundation for sustainable revenue generation and high quality asset portfolio as well as efficient capital allocation

Acquiring the right customer at the point of origination

Inculcating credit risk culture – “Know Your Customer”

Addressing operational risk related issues

Strengthening Enabling Infrastructure

To provide an infrastructure that would improve operational efficiency, increase productivity and reduce transactional costs.

Enhancing capability and capacity (core banking system, network infrastructure & Data Center)

Upgrading and simplifying Internet banking

Technology Refresh


SUSTAINABLE GROWTH PLAN SUSTAINABLE GROWTH PLAN

Key Strategy Objective Actions

Building Capability & Capacity

To attract, retain and build future human capital capabilities, to capture and retain best talents in Islamic finance as well as to ensure that employees are fully equipped with the right knowledge, capability and skills to excel and steer the Bank.

Structured Talent Development Program –“Invest in People”

Leadership Development & Succession Planning

Franchise Development

To establish an extensive network of branches in strategic growth locations, to expand electronic delivery channels that would enhance Bank Islam’s reach to customers as well as brand positioning that would drive business growth and sustain its competitive edges.

115 branches by 2011

“Most Trusted Brand” & “Premier Islamic Bank” – a Global Brand

Enhancing customer experience at all our touch points – Service Excellence

Inorganic Growth & Corporate Expansion

To strengthen Bank Islam’s market presence and stay ahead in an environment of heightened competition; to tap vast opportunities in the South East Asian region as well as countries with high growth potential

Strategic stake & management control

“Close to Home”

Maximize synergistic – remittance business

Knowledge sharing


SUSTAINABLE GROWTH PLANSUSTAINABLE GROWTH PLAN–– ACHIEVEMENTS @ JUNE 2010ACHIEVEMENTS @ JUNE 2010








““GROWING OUR OWN TIMBERGROWING OUR OWN TIMBER””




INDUSTRY & BRAND RECOGNITIONSINDUSTRY & BRAND RECOGNITIONS




CORPORATE RESPONSIBILITIES PROGRAM CORPORATE RESPONSIBILITIES PROGRAM

Minggu Matematik UiTM 2009 Awareness Program Malaysia Financial Planning Council (MFPC)

PINTAR National Programme : PINTAR Mobile Unit World of Innovation and Creativity

Minggu Kesedaran Kewangan (M2K) Bank Negara Malaysia

Invention , Innovation & Design Award 2010 ‐ UiTM

Sambutan Maulidur Rasul S.A.W 1431H/2010M –‘Memantapkan Ukhuwah Memperkasa Ummah’


FINAL REMARKSFINAL REMARKS

Positive out look for 6‐months ending Dec 2010, as pipeline of high yielding consumer assets and corporate activity remains good coupled with steady growth in CASA.

Expected ROE for Dec 2010 of 16. 3% and ROA of 1.1%. Margins expected to be stable

Maintain capital prudence in expectation of Basel III and in compliance with new financial reporting standard (FRS 139).

Now focused on strengthening our core business, leveraging on cross selling and synergistic relationship with Lembaga Tabung Haji.

Net NPF ratio getting closer to industry average.

Significant emphasis on branch expansion, operational improvements and sustainability of franchise value.

Continuous investment in people, technology and process, with efforts to improve efficiency and productivity.

Promote innovation, service excellent and competitive offering.


Q & A SESSIONQ & A SESSION


“Bank Islam wishes to register its appreciation to all its stakeholders especially regulators, shareholders and customers for their unwavering commitment and continuous support especially in

transforming Bank Islam into a viable, sound, adequately capitalized and competitive banking institution, in line with its

vision to become a “global leader in Islamic banking”.

Bank Islam seeks the recognition as an integrated financial solutions provider with a panoply of innovative Shariah-based

financial products & services that respond to customer needs andrequirements.”

شكراشكراوالسالوالسالجزيالجزيال

مم

Documents

Bank Islam - Analyst Briefing - Bank Islam · PDF file¾Bank Islam was incorporated on 1 March 1983 to become Malaysia’s pioneer ... (now Bursa Malaysia) ... and other public sector