CITIBANK BERHAD 2016 ANNUAL REPORT - Home Loans · Citibank berhad 2016 Annual Report 2 ... Indonesia Sukuk issuance during the first quarter of 2016 ... 45th Floor, Menara Citibank

20 16 A N N U A L R E P O R TC I T I B A N K B E R H A D

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

Date of Incorporation22 April, 1994

AuditorsKPMG

C o n t e n t s

Chairman’s Statement

CEO’s Statement

Board of Directors

Directors’ Profile

Corporate Citizenship at Citi

Valuing Our People

Statement of Corporate Governance

Risk Management

Statement of Internal Audit & Internal Control

Management Reports

Ratings Statement

Shariah Committee Profile

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Corporate Information

Governance

Directors’ Report

Statement By Directors

Statutory Declaration

Shariah Committee‘s Report

Independent Auditors’ Report

Statements of Financial Position

Statements of Profit or Loss and Other Comprehensive Income

Statements of Changes In Equity

Statements of Cash Flows

Notes to The Financial Statements

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Financial Statements

It is my pleasure and privilege to present to you the Annual Report for the

financial year ended 31 December 2016.

We are proud of our achievements in a year that proved challenging and

uncertain as global economies grappled with the volatile economic

environment. In Malaysia, Citi leveraged its global strengths and grew even

stronger despite the intense competition locally. Our customers have

benefited from our investments in the new digital solutions and technology

which have enabled us to carve a leadership position as the premier global

digital bank.

The future of financial services will be shaped largely by digitisation as

more of our customers show an increasing preference for digital financial

solutions. It is an exciting future and one that will transform our

operations and enrich customer experience.

The Malaysian economy remained resilient despite the many challenges

of falling oil prices and the impact on the Malaysian ringgit. The

difficulties presented also opened new possibilities for growth. This can

be seen in our better performance across the Citi franchise in 2016. On

behalf of the Board of Directors, I would like to record our

appreciation to the Chief Executive Officer Lee Lung Nien for his able

and visionary leadership and to all employees for their commitment

to the success of the franchise.

Above all, we are grateful to all our customers, clients and business

partners for the trust given to us. We look ahead to many more years

of partnership and contribution to Malaysia’s economic prosperity.

Mr. Terence Cuddyre

Chairman

Citibank berhad 2016 Annua l Report

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CHAIRMAN’S STATEMENT


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Chairman’sStatement


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CEO’sStatement

Amidst the challenges of economic volatility and an ever increasing competitive

financial landscape, the positive strides we took at Citi to embrace change, transform

and grow, proved valuable as we closed the year setting a new record of higher

profitability and stronger performance across our franchise.

While navigating the complexities of the business environment, we kept our eyes

fixed on our vision and journey of growth to entrench ourselves as the best bank in

Malaysia and be a trusted financial services partner to our stakeholders.

The strategic business initiatives that we undertook during the financial year

enabled us to enhance our operating efficiency and open new frontiers for us in

the banking business as we brought to Malaysia, cutting edge digital technology

that reshaped the way we do business and engage with our customers.

Overview

The Malaysian economy showed its resilience and grew 4.5% in the financial

year 2016. Stronger private consumption and acceleration in fixed investment

contributed to the commendable economic performance despite the

difficulties faced.

Clearly, Malaysia is well cushioned by sound economic fundamentals which

augur well for the future as the country moves toward becoming a

high-income nation by 2020.

The country’s banking sector continues to be well-capitalised and has the

capacity to weather any economic downturn. Malaysia’s innovative and

inclusive financial sector has been a major contributor to the country’s

economic prosperity. Moving forward, while we are cautiously optimistic

given the current volatility and complexities, we are confident that we

have a future that is built on a solid foundation of a well-diversified

economy and abounding opportunities for growth.

Performance Review

The Bank recorded a higher pre-tax profit of RM806 million for the

financial year ended December 31, 2016, compared to the RM755

million pre-tax profit recorded in the previous year. The improved

performance was boosted by the Bank’s higher trading income,

growth in personal loans and higher investment sales.

Total post-tax profit was RM612 million in 2016. Net interest

income totalled RM1.21 billion in 2016 while non-interest income

stood at RM778 million. During the same period, the Bank’s

return on equity before tax was a solid 17.4%. Liquidity

continued to be exceptionally strong, with cash, short-term

funds and placements with financial institutions in excess of

RM12.22 billion. The Bank’s Risk Weighted Capital Adequacy

Ratio stood at a strong 17.1%.


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CEO’S STATEMENT

Business Highlights

Consumer Banking

Credit Cards

In 2016, Citi’s priority continued to be on customer

acquisition within our target segment, driving card usage

by customers, simplifying our products and improving

process efficiencies to deliver value to customers. A core

focus was in improving process efficiencies given the

digital offerings which enabled self-service functionality

for Citi Credit Card applications and take up of credit card

installment loans.

The launch of the Remarkable Customer Experience Online

Application Process allowed customers to apply for

banking products online and have instant in-principal

approvals during the application process. This straight

through process reduced turn-around-time, enhanced

customer experience, and minimised manual processes.

Visa Checkout was also launched as a digital payment

service designed to simplify the customer payment process

when shopping online. The launch of Visa Checkout is

in-line with Citi’s strategy to push online/e-commerce

spend, the fastest growing segment currently.

Our unsecured personal loan business introduced in 2015

showed promising growth by achieving year-on-year

revenue growth of 40%. Our commercial cards offerings

also contributed positively with year-on-year sales growth

of 173%.

We received industry-wide recognition for our card

marketing campaigns from Advertising & Marketing

Magazine. Citi Malaysia won awards for:

■ Excellence in Data-Driven Marketing (Gold Award)

■ Excellence in Social Media Marketing (Bronze Award)

■ Highly Commended – Best Card Offering (Retail Banker

International Asia Trailblazer Summit & Awards 2016)

■ 11street – Best Banking Partner

Retail Banking

Our key priority was to help clients manoeuvre through an

extremely volatile year experienced in the market

environment by actively engaging clients and assessing

their financial portfolios as leave vote in the UK’s EU

referendum and the US election outcome resulted in

greater market uncertainties. We offered more options for

clients to diversify across multiple asset classes via our

vast selection of investment solutions denominated in

different currencies, in addition to regular customer

engagement and sound investment advisory.

On the Insurance front, our strategic partnerships with

AIA and AXA grew from strength to strength with

exponential growth seen in new business premium for

face-to-face and telemarketing channels. We provided a

comprehensive suite of financial and insurance products

to help clients achieve and protect their wealth goals.

Citi has also been actively involved in supporting Bank

Negara Malaysia’s drive to accelerate migration to

electronic payments. Citi Malaysia debit cards have been

re-issued with contactless capabilities in an industry-wide

move to migrate to PIN-based electronic payments to

replace conventional signature cards. PIN usage can help

to protect clients against fraud due to lost or stolen cards.

Signatures will no longer be accepted for domestic

payments from 1 July 2017 onwards.

As a leading bank in research and advisory services, we

leveraged our expertise to deliver the Citi Wealth Series

of market outlook presentations to Citigold and

investment customers. A total of 600 clients attended our

investment seminars which were held nationwide and

presented by our regional investment strategist.

Citi Malaysia was awarded Best Retail Mobile Banking

Experience by The Asset in their Triple A Digital Awards 2016.

Mortgages

The property House Price Index (HPI) in Malaysia has

continued to rise moderately while transactions were on a

declining trend. Given the challenging property market

environment coupled with intense market competition,

customers are now more price sensitive when selecting

their preferred home loan service providers.

At Citi, we continue to partner with top tier developers

and key real estate agencies by offering attractive

rewards and tailor made home loan packages to property

buyers/owners.

Institutional Clients Group

Treasury and Trade Solutions

Citi played a leading role in driving the digitisation agenda

for corporate and institutional clients in Malaysia.


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CEO’S STATEMENT

Our flagship internet banking platform, CitiDirect BE,

featured new payment services in the past year. Payments

in over 130 currencies were made available online for the

first time in Malaysia, while the security token was

digitised through a mobile application. Clients welcomed

the convenience of transacting and accessing information

anywhere, anytime. Our new analytics services provided

clients with better insights into their corporate payment

trends, helping them identify abnormalities and ensure

enhanced controls. The Liquidity Management and Trade

Services modules gave clients the ability to manage

corporate funding and trade documentation online, with

enhanced flexibility.

Citi won the Best Corporate Internet Banking Award by

Global Finance 2016. We were proud to celebrate industry

recognition with our corporate clients. The inaugural

Malaysia e-Payments Excellence Awards featured Citi’s

clients leading industry volumes in e-payments. Our shared

services centre client won the 2016 Adam Smith Award for

Asia’s Best SWIFT Solution.

Securities Services

2016 was a successful year for Citi’s Securities Services

notwithstanding increasing uncertainty over the economic

outlook of developing markets. The business registered

better than expected performance across all the business

drivers, with contributions from new product initiatives

and implementation of key mandates.

We continued to invest in securities infrastructure in our

Kuala Lumpur Citi Service Centre, demonstrating our

long term commitment and significant service strengths

in the industry.

Global Markets

Citi won the top spot for the third year running in the 2016

Euromoney FX survey. Citi also won the Best Bank for

Financial Institutions & Best Emerging Markets Investment

Bank Globally in Euromoney Awards for Excellence in 2016.

We were awarded in Best FX Bank Overall in FX Week Best

Banks Award for 2016.

Islamic Banking Division

Citi Islamic participated in several notable Sukuk

transactions in 2016, namely the USD2.5 billion Republic of

Indonesia Sukuk issuance during the first quarter of 2016

and later in the year, TNB Global Ventures Capital Berhad’s

USD750 million Sukuk under the USD2.5 billion

multicurrency Sukuk issuance programme. Citi won the

Deal of the Year 2016 award from Islamic Finance News

(IFN) and Best Foreign Currency Bond Deal of the Year 2016

in Southeast Asia from Alpha SEA for these Sukuk issuances.

Working For and In Community

Prosperous communities and economies are essential to

our success as a company and, in turn, to our ability to

provide financial access and opportunities to others.

Strong citizenship practices, a focus on culture and

environmental, social and governance performance makes

us a stronger and more sustainable company.

In Malaysia, we continue to provide philanthropic support

through Citi Foundation by extending our focus on three

key areas; Youth Economic Opportunities, Financial

Inclusion and Urban Transformation.

Throughout 2016, we extended our collaboration with

grant partners Think City, Era Consumer Malaysia and The

Edge Education Foundation on a number of important

community initiatives.

On urban transformation, Think City rolled out Phase 2 of

the KL Sustainable Shared Spaces Program. A grant

valued at USD 150,000, this three-year initiative focuses

on urban regeneration, the strengthening of community

relations while making the city Kuala Lumpur more livable.

Key highlights of the initiative included large-scale

community events attracting over 15,000 visitors and a

capacity building programme for public spaces and pocket

parks across Kuala Lumpur.

On financial inclusion, our grant partner ERA Consumer

continued its advocacy work for a National Financial

Education Policy through continuous dialogue and will

organise the second National Financial Education

Conference in April 2017 with the support of Bank

Negara Malaysia.

In the area of youth economic opportunities, The Edge

Education Foundation continued with its ‘Money & Me’

Youth Financial Empowerment Program. Designed to equip

low and middle-income youth between the ages of 15 to 16

with the necessary skills on how to manage and grow their

money, the program successfully reached five secondary

schools across the Klang Valley.

In 2016, more than 4,500 Citi Volunteers joined other Citi

employees worldwide for Citi’s 11th Global Community Day

on 28 May. Citi Malaysia employees focused on serving the

urban poor and underprivileged by building a food bank. A

total of 6,000 kgs of food items and basic necessities

touched 2,000 underprivileged lives including orphans,


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CEO’S STATEMENT


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CEO’S STATEMENT

single mothers, senior citizens and refugee families. This

initiative was also carried out by Citi employees in Penang,

Johor Baharu and Kuantan.

Our People

As we continue to maintain our vision of being the best

bank, employer of choice and a trusted advisor to our

clients, our people remain a focus in our top priorities.

We have today a workforce of over 2,257 employees, for

whom we have endeavored to create a culture of

meritocracy and transparency, and among whom we

celebrate excellence, initiative and courage to do the

right thing.

Our approach in people development has always been one

of empowering our employees to drive their own career

progression, leveraging the comprehensive development

resources curated for them in an internal,

technology-driven ‘My Career’ platform; a rich curriculum

of constantly evolving leadership and technical training

that has had us dubbed, ‘The Banking University’;

on-the-job stretch assignments par for the course in a

progressive environment where we aim to build solutions

addressing our clients’ emerging, as well as current needs;

as well as the global mobility and international experience

offered by the Citi marque.

We bring together talent with diverse styles and

backgrounds to expand thinking, and create an

environment where people hold themselves and each

other to the highest ethical standards.

2017 Priorities

Our mission continues to be the best bank in Malaysia, a

trusted financial partner and employer of choice. We have

worked hard to ensure we live up to the standards of a

world class franchise. Citi in Malaysia is built on a solid

foundation, one that we continue to strengthen as we

focus on the four main pillars of our mission namely

People, Clients, Controls and Relationships.

Across the entire franchise, emphasis is on optimising our

strong global network, delivering customer services that

are remarkable and business excellence achieved in an

organisational environment that has ethics and business

integrity as its priority.

Outlook

Citi has invested and contributed to Malaysia’s

economic prosperity for over 50 years. As the world’s

most global financial services leader, our global

strengths and extensive network have enabled us to

differentiate and partner our clients to support their

banking needs both local and abroad.

I would like to express my gratitude to our Chairman

and Board of Directors for their wisdom and astute

guidance extended to us. I am also thankful to the

Management team and all our employees for their

dedicated contribution to the success of our franchise.

We look ahead with confidence, knowing that the depth

of our resources and capabilities and the collective

experience of team Citi in Malaysia to collaborate,

demonstrate market leadership and adapt swiftly to

change, put us in good stead to ensure yet another year

of consistent profitability and remarkable customer

experience in 2017.

Lee Lung Nien

Chief Executive Officer


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Board of Directors

From left to right

Mr. Lee Lung Nien,

Mr. Terence Cuddyre,

Ms. Agnes Liew Yun Chong,

Tan Sri Dr Ghauth bin Jasmon,

Company Secretary:

Ms. Ho Li Chin &

Ms. Tang Wan Chee

Dato’ Siow Kim Lun,

Datuk Ali Bin Tan Sri Abdul Kadir,

and Mr. Philip Tan Puay Koon


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BOARD OF DIRECTORS

Back (From left to right)

Dato’ Siow Kim Lun,,

Mr. Lee Lung Nien,

Tan Sri Dr Ghauth bin Jasmon,

Mr. Terence Cuddyre,

Ms. Ho Li Chin(Company Secretary),

Mr. Philip Tan Puay Koon and

Datuk Ali Bin Tan Sri Abdul Kadir

Front (From left to right)

Ms. Tang Wan Chee(Company Secretary) and

Ms. Agnes Liew Yun Chong


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Directors’Profile

Mr. Terence Cuddyre is the Chairman of the Board and an Independent

Non-Executive Director. He joined the Board on 14 December 2010 as a

Non-Independent Non-Executive Director. He serves as a member of the

Audit Committee, Nominations and Compensation Committee, and Risk

Management Committee of the Bank.

He was Citigroup Country Officer for Brunei Darussalam from July 2009 to

December 2014. Prior to that, he spent four years as Asia Pacific Head of

Training for the Citi Centre for Advanced Learning. He also served as Citigroup’s

Country Officer for Thailand from 2002 to 2005. He was the North Asia Regional

Risk Officer from 2000 to 2001.

Mr. Cuddyre joined Citigroup in 2000 after 23 years with Bank of America where

he held numerous international roles including Country Head of Ireland, Korea,

Hong Kong and China. He also held several risk positions in North America and Asia.

He was also active in the American Chamber of Commerce, serving on the boards in

Hong Kong, Korea and China. In Thailand, he served as the Chairman.

Mr. Cuddyre holds a B.A. in Economics from the University of California,

Santa Barbara and an MBA from the Wharton Business School

University of Pennsylvania.

Mr. Terence Cuddyre


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DIRECTOR’S PROFILE

Mr. Lee Lung Nien was appointed the Executive Director and Chief Executive Officer of Citibank Berhad in October, 2014.

He is a veteran Citibanker with more than 26 years of experience. Prior to his current appointment, Lung was the Anti-Money Laundering (AML) Business Head for Asia and had senior oversight of the AML monitoring hub in Kuala Lumpur. He was responsible for streamlining the AML business processes regionally, implementing policy changes and managing global AML implementations. He was also the primary AML Contact with Business Leadership, and tasked with implementing globally consistent AML initiatives to enhance controls and mitigate AML risk. Together with Compliance, he developed a regional AML strategy for Asia Pacific.

Prior to moving to Malaysia in 2013, Lung was the Chief Operating Officer (“COO”) for Singapore where he was responsible for driving the Bank’s business results, implementing the country’s strategy, developing the bank’s talent pool and executing various cost franchise initiatives.

In addition to his role as COO, Lung was also the Singapore Markets Manager and worked closely with Singapore regulators to coordinate compliance and regulatory processes for the Citi Singapore dealing room. Lung is a 20 year veteran in Markets. His last posting was that of Co-Head of Corporate Sales & Structuring for Asia Pacific in 2007. He was responsible for all foreign exchange, options and derivatives sales to corporate and institutional clients in the region. He started his career as a Credit Analyst in the Bank and has held various key positions including Head of Singapore Treasury Marketing, Sales and Trading Head for Malaysia and Regional e- Commerce Head.

He graduated with a Bachelor of Business Administration, Magna Cum Laude from Chaminade University, USA.

He is a Council Member of the Asian Institute of Chartered Bankers.

Tan Sri Dr Ghauth bin Jasmon was appointed to the Board on 14 September 2015 as an Independent Non-Executive Director of Citibank Berhad. He serves as

a member of the Audit Committee, Nominations and Compensation Committee, and Risk Management Committee of the Bank.

Tan Sri Dr Ghauth holds a PhD and a First Class Honors in Bachelor of Science (Engineering) Degree from the University of London.

He is a Fellow of the Institution of Electrical Engineers UK, Fellow of Institution of Engineers, Australia, Chartered Engineer UK and Chartered Professional Engineer Australia.

Tan Sri Dr Ghauth is currently the Chairman of SEA Capital Sdn Bhd, Elite International College, Puncak Pvt Ltd (Sri Lanka) and Semesta Trade Ventures Sdn

Bhd. He also sits on the Boards of the International University of Malaya-Wales, Sunway University, Beaver Entech Ltd as well as several private limited companies.

Tan Sri Dr Ghauth had worked in the higher education sector for 33 years that

commenced with Head of Electrical Engineering Department in University Malaya in 1986 and culminated in his appointment as the Vice-Chancellor/CEO of University Malaya from

2008 till 2013. Over the years, he held various senior positions including the Founder President/Chief Executive Officer of Multimedia University from 1996 to 2007 and Chief

Executive Officer of Unity College International in 2008.

He received a number of global awards including World Education Congress for Excellence in Education, Leadership & Teaching (2012) and Asia’s Best Business School Awards for

Outstanding Contribution to Education (2011). He has also been awarded the Honorary Doctorate of Technology (Loughborough University), Honorary Doctorate of Science

(University of Wales), Honorary Doctorate of Education (MMU), Excellence Award of Soka University Japan, Eminent Scholar Award of the University of Malaya and an Eisenhower Fellow.

Mr. Lee Lung Nien

Tan Sri Dr Ghauth bin Jasmon

Ms. Agnes Liew Yun Chong was appointed as a Non-Independent Non-Executive

Director of the Bank on 1 November 2010. She is a member of the Risk

Management Committee of Citibank Berhad.

Ms Agnes Liew is currently Managing Director and Vice Chairman of Corporate

Banking, Asia Pacific for Citigroup based in Singapore. She began her career with Citi

in 1982 as a management associate and in her 33 years with the firm, Ms Agnes Liew

has held a number of key senior Banking and Risk positions, both at the country and

regional levels within the Asia Pacific region.

Ms Agnes Liew was Head of Corporate Banking, Singapore; between 2000 to 2003;

before relocating to Taiwan in 2004 as Country Risk Manager. In 2006, Ms Agnes Liew

returned to Singapore as Head of Risk for the ASEAN region.

After a successful rotation with the firm’s Risk Management division, Ms Agnes Liew

returned to the Global Banking and assumed the leadership role for the Global Subsidiaries

Group (GSG) in Asia Pacific from 2007 to 2010 where she was responsible for the

relationship coverage of global multinational subsidiaries in 16 countries. Under her

stewardship, Citi’s GSG Asia grew significantly to become the largest revenue contributor for

GSG globally. During that time, Ms Agnes Liew also held the concurrent position of Global

Banking Head of ASEAN and was responsible for the relationship coverage of top- tier ASEAN

corporate clients.

Continuing on her successful track record of managing and growing key businesses, Ms Agnes

Liew was appointed as Head of Corporate Banking, Asia Pacific in 2010. In this role, she led the

Corporate Bank to solid growth, especially progressing our global relationships with Asia’s fast

growing EMC clients. Ms Agnes Liew chaired the Asia Pacific Citi Corporate Banking Operating

Committee and she is also a member of the Global Corporate Banking Operating Committee.

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

Ms Agnes Liew holds an LL.B (Hons) from the University of Singapore and is a member of the Supreme

Court of Singapore. She is married, with a daughter.

Dato’ Siow Kim Lun is an Independent Non-Executive Director of Citibank

Berhad and has been a board member since April 2007. He is currently the

Chairman of the Bank‘s Nominations and Compensation Committee and a member

of the Audit Committee.

Dato’ Siow is presently a board member of Kumpulan Wang Persaraan, UMW

Holdings Berhad, Eita Resources Berhad, Hong Leong Assurance Berhad, Eco World

International Berhad, Sunway Construction Group Berhad and MainStreet Advisers

Sdn. Bhd. He is also a member of the Land Public Transport Commission.

From 1993 to 2006, Dato’ Siow was with the Securities Commission (“SC”), where he

has served as the Director of its Issues and Investment Division and Director of its

Market Supervision Division. Prior joining the SC, Dato’ Siow worked in the investment

banking and financial services industry in Malaysia for over 12 years.

Dato’ Siow holds an MBA from the Catholic University of Leuven, Belgium and a Bachelor

of Economics (Hons) from the National University of Malaysia. He has also attended the

Advanced Management Program at Harvard Business School.

Ms. Agnes Liew Yun Chong

Dato’ Siow Kim Lun


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Mr. Philip Tan Puay Koon

Datuk Ali bin Tan Sri Abdul Kadir

Mr. Philip Tan was appointed to the Board on 9 October 2015 as an Independent Non- Executive Director of Citibank Berhad. He is the Chairman of the Risk Management Committee, and a member of the Nominations and Compensation Committee of the Bank.

He holds a First Class Honors in Bachelor of Arts (CNAA) Degree in Business Studies (Accounting and Finance) from North-East London Polytechnic, United Kingdom.

He is currently an Associate Fellow of the Asian Institute of Chartered Bankers.

Mr Philip Tan has more than 25 years of experience in the field of banking and finance, principally in the areas of Treasury and Risk Management. He was formerly a Managing Director and the Chief Financial Officer of Emerging Market Sales and Trading, Asia-Pacific of Citibank N.A. He was also the Financial Markets Head and Country Treasurer of Citibank Berhad from 1995 to 2001. He was a Director of Citibank Malaysia (L) Ltd from 2000 to 2001.

Mr Philip Tan currently serves as an Independent Director of Danajamin Nasional Berhad, Cagamas Berhad, MIDF Amanah Investment Bank Berhad, SP Setia Bhd, Qinzhou Development (Malaysia) Consortium Sdn Bhd, China-Malaysia Qinzhou Industrial Park (Guangxi) Development Co. Ltd, and Malaysian Electronic Clearing Corporation Sendirian Berhad (MyClear). He is a member of Corporate Debt Restructuring Committee since his appointment by BNM in 2009.

Datuk Ali bin Abdul Kadir was appointed to the Board on 6 May 2014 as an Independent Non-Executive Director of Citibank Berhad. Datuk Ali is the

Chairman of the Audit Committee, and a member of the Nominations and Compensation Committee of the Bank.

He is a Fellow of the Institute of Chartered Accountants in England and Wales ("ICAEW"), member of the Malaysian Institute of Certified Public Accountants and

the Malaysian Institute of Accountants. He is also currently Honorary Advisor to ICAEW Malaysia, Honorary Fellow of the Institute of Chartered Secretaries &

Administrators (UK) and the Malaysian Institute of Directors.

Datuk Ali is currently the Chairman of JcbNext Berhad (formerly known as Jobstreet Corporation Berhad), Privasia Technology Berhad and ENRA Group Berhad. He is also

a Board Member of Glomac Berhad, Labuan Financial Services Authority, Ekuiti Nasional Berhad, Tropical Rainforest Conservation & Research Centre Berhad as well as

several private limited companies.

Datuk Ali was appointed as Chairman of the Securities Commission of Malaysia on 1 March 1999 and served in that capacity until 29 February 2004. During his tenure, he also

served on the Foreign Investment Committee, and Oversight Committee of Danaharta. Prior to this appointment, he was the Executive Chairman and Partner of Ernst & Young

and its related firms. He was the former President of the Malaysian Association (now Institute) of Certified Public Accountants, chairing both its Executive Committee and

Insolvency Practices Committee and co-chairing the Company Law Forum. He was a member of the Malaysian Audit Oversight Board. He was appointed as an Adjunct Professor in the

Accounting and Business Faculty, University of Malaya in 2008 and retired in August 2011, and was then appointed to the Advisory Board of the same Faculty. He chaired the Financial

Reporting Foundation from 2009 to 2015, which oversees the Malaysian Accounting Standards Board, and oversaw the convergence with International Accounting Standards.

On the international front, Datuk Ali was the Chairman of the International Organisation of Securities Commissions’ (“IOSCO”) Asia Pacific Regional Committee and the Islamic Capital

Market Working Group, and sat as a board member of IOSCO’s Executive Committee. In addition, he was also a Trustee of the Accounting and Auditing Organisation for Islamic Financial Institutions

and Force of Nature Aid Foundation; and the Advisor to the Sri Lanka Securities and Exchange Commission in 2006 for their Capital Market Strategic Plan.


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CorporateCitizenshipat Citi

Citizenship is core to Citi and a responsibility shared by all

of our businesses, clients, suppliers and communities. It is

embedded in our mission value proposition, and is

brought to life by our colleagues each day.

Through the support of Citi Foundation, our citizenship

efforts focus on promoting economic progress and

improving the lives of people in low-income

communities. We continuously invest in initiatives that

increase financial inclusion, create job opportunities

for youth, and introduce new approaches to build and

sustain vibrant cities.

In Malaysia, Citi adopts a long-term approach to

fulfilling its duties as a corporate citizen and has

proactively taken a step further to ‘More than

Philanthropy’. Upholding this approach, Citi

Malaysia continued its citizenship mission across

three focus areas - Urban Transformation,

Financial Inclusion and Youth Economic

Opportunities.

In 2016, we received a USD200,000 grant

from Citi Foundation and worked closely with

our partners to execute a range of programs

that directly impacted people and

communities at large.


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CORPORATE CITIZENSHIP AT CITI

Urban Transformation - Think City KL Sustainable Shared Spaces Program Phase 2

Citi Malaysia continued its flagship Urban Transformation program entitled ‘Think City KL

Sustainable Shared Spaces’ in collaboration with Think City, wholly-owned subsidiary of Khazanah

Nasional Berhad.

Think City is a community-based urban regeneration agency with its flagship program in the

GeorgeTown UNESCO World Heritage Site, Penang. Part of a larger strategy, Think City has

decided to make Kuala Lumpur more livable, using its community based urban regeneration

formula. This is to strengthen community cooperation.

This program is a three-year initiative, with the first year focused on capacity building via

baseline studies for benchmarking of program effectiveness, research to help identify key

socio-economic issues and engaging local stakeholders.

Together with Dewan Bandaraya Kuala Lumpur, Think City has delivered on urban design and

place making training programs to local communities.

In 2016, Think City received a USD150,000 grant from Citi Foundation to execute phase 2 of

Sustainable Shared Spaces Program. Key activities included:

■ A capacity building program for public spaces and pocket parks.■ DBKL (City Hall) approached Think City to study 2 public spaces and 3 pocket parks.

The outcome from a series of engagement exercises with the stakeholders included

the re-designing and place making for the following:

• 2 Public Spaces (Medan Sultan Ismail & Lama Medan Tuanku).

• 3 Pocket Parks (Medan Imbi Signature Parks).

■ Baseline Study■ Think City carried out a baseline study in collaboration with DBKL, business

owners and employees living and working in KL Sentral/Brickfields for the

purpose of urban revitalisation.

■ Residents were engaged and invited to share their thoughts on improvements

they would like to see being implemented. This area contains approximately

16,000 residents, 42,000 jobs and 660 buildings.

■ This baseline study provided key data and a more conclusive overview of the

current scenario of the community and the physical space. The study also

led to the development of an action plan designed to conserve, rejuvenate,

and more importantly, re-connect the community of Brickfields to the

National Museum and Perdana Botanical Gardens.

■ Inclusive Community Events in 2016■ As part of its efforts to reimagine and re-invent public spaces as the

heart of community and celebrate multicultural diversity, Think City

organized two major events in Medan Pasar Kuala Lumpur:

• Malam Wayang (A Night of Shadow Puppets) attended by 10,000

visitors out of which 70% were from Malaysia.

• Sama-Sama Festival, a food and cultural performance festival

comprising of local and international residents from the likes of

Burma, Nepal, Vietnam and Pakistan. Total number of visitors to

the festival was 5,000 out of which 90% was from Malaysia.


18



19



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Financial Inclusion - Policy Advocacy for Malaysia National Financial Education Strategy

Citi Malaysia continued its partnership with ERA Consumer on

advocacy work for a National Financial Education Policy through

continuous dialogue.

Education and Research Association for Consumers (ERA

Consumer Malaysia) is a voluntary, non-profit and non-political civil

society organisation. It conducts programs to nurture

development initiatives at the community level through

participatory accountable governance, socio-economic,

sustainable agriculture and ecological endeavors.

In 2016, ERA received a USD50,000 grant from Citi Foundation

to continue its Policy Advocacy for Malaysia National Financial

Education Strategy. Key activities under this initiative

included:

■ Renewed focus towards the implementation of the 1st

National Financial Education Strategy.

■ A clear mandate of the strategy is for students to build

financial capabilities at an early age as well as adopt a

‘life-events’ approach in financial education.

■ Other components of the strategy covered a

comprehensive literature review of financial

education programs and next steps to compile a

comprehensive framework for the Malaysian

financial education strategy model.

■ ERA also facilitated a series of engagements with

key stakeholders and Bank Negara Malaysia to

put in place a collaborative process that will

drive development of the national strategy and

define stakeholder roles and responsibilities.

■ A 2nd National Financial Education Strategy

Conference will be held in 2017. The objective

is to collaborate with Bank Negara Malaysia

by building on the outcomes of the first

conference as well as identifying

contemporary issues to be incorporated

into an overall financial education strategy.


21


Youth Economic Opportunities – ‘Money & Me’ Youth Financial Empowerment Program

Citi Malaysia continued its partnership with The Edge Education

Foundation to run the 'Money & Me' Youth Financial Empowerment

Program. The initiative is aimed at equipping low- and

middle-income youths aged 15 to 16 in Greater Kuala

Lumpur/Klang Valley with the necessary knowledge and skills on

how to manage and grow their money.

In 2016, The Edge Education Foundation kicked off their program

in 5 secondary schools in the Klang Valley. Supporting this

initiative on the ground, 40 Citi Volunteers actively facilitated

the program at SMK Methodist Sentul over a period of 6

months. As a result of combined efforts, a total of 220

Students graduated in 2016 from the 'Money & Me' Youth

Financial Empowerment Program.

The program concluded with a special ‘Money & Me’ Boot

camp. The event was aimed at creating awareness of social

and financial enterprises and cultivating the spirit of giving.

Students attending the boot camp learned important

lessons such as basic entrepreneur skills covering

business plans, risk management, budgeting, business

pitching, and product manufacturing and selling.


22


Global Community Day

Global Community Day is a global Citi event that began in 2006

when Citi employees, along with their friends, families, and

clients take part in various community programs all around

the world.

In 2016, Citi celebrated its 11th annual Global Community

Day, as more than 85,000 Citi volunteers in more than 500

cities spanning 91 countries and territories engage in

service activities in their local communities.

In Malaysia, 4,500 Citi volunteers pitched in to help the

urban poor and underprivileged by building a Food Bank.

Their positive efforts resulted in:

■ A total of 20 homes benefited from the Food Bank

project which involved the distribution of over

700 food boxes in Kuala Lumpur, Penang, Johor

Baharu and Kuantan.

■ Distribution of more than 6,000 kgs of food

items and basic necessities.

■ Impacted 2,000 underprivileged lives

including orphans, single mothers, the

disabled, senior citizens and refugee families.

Beyond the Food Bank initiative, around 200 Citi

Volunteers also participated in a blood donation drive

for the National Blood Bank and made organ donor

pledges to the National Transplant Resource Center.

ValuingOur People

Our people have answered the needs of economies in

hundreds of cities, in over 160 countries, for over 200 years.

To operate at this scale, we need to continuously cultivate

an environment that attracts quality talent to contribute to

the organization’s priorities in meaningful ways, and

enables them to self-direct their own progressive career

paths.

In 2016, we launched a major initiative to empower our

people to navigate and drive their own career journeys

through ‘My Career’, a one stop portal for career

development resources for both employees and managers.

Apart from comprehensive online resources such as

articles, videos and access to Employee Networks and Citi’s

Mobility, Talent and Learning systems, ‘My Career’ gave

employees access to sophisticated career assessment tools

to help them establish a baseline from which to plan their

development. These tools were tailored to different levels of

the organization, providing debriefs by certified

practitioners for more senior segments, and using engaging

gamification interfaces to generate detailed,

self-explanatory reports for our junior employees.

Empowering employees to take charge of their career

required a sustained mindset change exercise, with multiple

My Career workshops conducted covering a total of 557

people managers, and ongoing sessions educating our

people on how to leverage on the platform in an optimal

manner.

We continued our efforts building talent pipeline in the high

potential graduate space. Leveraging on virtual channels to

engage and hire Malaysian students overseas, we hired and

on-boarded a class of 10 Management Associates (“MAs”),

part of 49 future leaders hired since 2014 who continue to

grow with us as part of our strategy to build leadership

bench strength. Of this MA pool, 2 of our Malaysian MAs

were selected to be part of a regional Leadership

Development Program offering exposure and strategic

insights in various demanding roles across the Asia Pacific.


24

We invested in a Summer Associate program designed to

build a pipeline for future MAs, hiring & on-boarding a total

of 47 summer interns from local, UK, UK, Australia and

Hong Kong universities. We also made inroads in enhancing

our presence as employer of choice and developer of talent

in local campuses, with senior leaders, business managers

and current/alumni Management Associates representing

Citi at engagement sessions with targeted local universities.

Our Leadership Enhancement & Accelerated Development

(“LEAD”) program, focused on the development of the top

two percent of our best employees, placed some of our best

talent in an internal innovation incubator. This enabled our

employees to create solutions generating RM551,000 of

innovation value over a 3 month period, as validated by

seniors from the country management committee. Other

LEAD participants were exposed to training opportunities,

products, services and people outside of their normal

day-to-day roles, allowing them an opportunity to glean

insights they would otherwise not have experienced. They

benefited from exclusive networking opportunities, panel

discussion and speaker series with regional and global

senior leaders, country management committee members,

and fellow high-performing LEAD peers.

From a learning and development viewpoint, not only did

Citi Malaysia leverage on quality leadership programs and

soft-skill and technical business trainings delivered in

country, we successfully nominated Malaysian talent

through to competitive regional and global development

programs. Malaysian employees comprised 6 of the cohort

of 33 talents selected for the regional Leadership

Development Program (LDP), a 2-year program that aims to

accelerate development and provide breadth of experience

for employees to become future leaders in Asia Pacific

Operations & Technology. 3 Malaysian participants were

also selected for the 6 month regional Asia Inspiring Women

Leaders Program, designed to retain a key group of highly

valued female leaders for dialogue and learning around

career development.


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VALUING OUR PEOPLE

Our CCO and CBM, together with other globally-nominated senior

management in Malaysia, conducted a series of workshops for 833

people managers and emerging leaders entitled ‘Leadership

Matters: It Starts With Us’. This interactive, case-based workshop

was designed to bring Citi’s Leadership Standards to life by

engaging participants in a conversation about the choices we

make in critical leadership moments. Recognizing that choices in

these moments often lead to behaviors that impede our ability to

execute and grow, participants were challenged to exercise new

leadership habits that, if widely adopted, can unlock our

collective potential to transform Citi’s culture and equip us to

move forward in ethical, thoughtful and dynamic ways.

Recognising that a diverse workforce enhances our

competitiveness as an organisation and is key in retaining

top talent, as part of our commitment to gender diversity

and the advancement of women as leaders and economic

drivers, Citibank created a Citi Malaysia Women’s Network

to develop our women, both professionally and personally,

and equip them with the skills, knowledge and network to

grow in the Citi organization. Among the related

initiatives were ‘Lean In Circles’ designed to help women

at Citi Malaysia build valuable peer relationships and

create an avenue for employees to raise and discuss

issues surrounding inclusiveness.

Not least of Citi’s key priorities is employee

engagement; striving to ensure Citi is an Employer of

Choice for both our current and future employees. In

2016, to complement the Citi Wellness Hub of gym

facilities and weekly exercises classes offered to

employees, Citi launched the Citi Live Well

initiative, a holistic wellness program covering not

just the physical but also the emotional and

mental wellbeing of employees through

team-based engagement activities and a point

awards mechanism with AIA Vitality that

rewarded employees for positive lifestyle

behaviors.

Citi will continue to focus on building the

talent pipeline and developing and

implementing relevant programs, initiatives,

policies and processes to nurture a dynamic

and progressive ecosystem for our people.


26

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

The Bank has also taken the necessary steps to ensure conformity with Bank Negara Malaysia’s (“BNM”) Corporate Governance policy issued on 3 August 2016 (that superseded the Guidelines on Corporate Governance for Licensed Institutions (Revised BNM/GP1)).

Board Composition

The Board comprises seven members.

The following is the board line-up:

Mr. Terence Kent CuddyreIndependent Non-Executive Director/Chairman

Mr. Lee Lung NienNon-Independent Executive Director/Chief Executive Officer

Dato’ Siow Kim LunIndependent Non-Executive Director

Ms. Agnes Liew Yun ChongNon-Independent Non-Executive Director

Datuk Ali bin Abdul KadirIndependent Non-Executive Director

Tan Sri Dr Ghauth bin Jasmon Independent Non-Executive Director

Mr. Philip Tan Puay Koon Independent Non-Executive Director

The individual profiles of the current directors are set out on pages 9 to 13 of this report.

The composition of the Bank’s Board of Directors fulfils the prescribed requirements by BNM to comprise a majority of independent directors.

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

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

The Corporate Governance policy stipulates the need for a maximum of one Executive Director in the Bank’s Board of Directors line-up.

Mr Terence Cuddyre joined the Board on 14 December 2010 as a Non-Independent Non- Executive Director, and has been the Chairman of the Board of Directors since 12 March 2013. With BNM’s approval obtained in January 2017, Mr Cuddyre is re-designated as Independent Non-Executive Chairman/Director of Citibank Berhad.

Roles and Responsibilities

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

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

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

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

Statement of Corporate Governance


27

STATEMENT OF CORPORATE GOVERNANCE

As the Bank falls under the global structure of Citi, the Board also ensures that the Bank adopts applicable Citi policies in relation to, among others, credit approval processes and operational manuals.

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

Tenure limits for independent directors

Citibank Berhad licensed by BNM abides by the requirements of the Corporate Governance policy. Independent directors shall be eligible to serve on the Board for a continuous period of nine years except under exceptional circumstances.

Training of Board members

The Bank provides an orientation program for new directors who are introduced to the Bank’s culture. The new directors are also introduced to the organisation structure, franchise overview, governance structure and constitution. The senior management presented to them the Bank’s strategic plan and business overview, its significant financial and risk management strategy, its compliance programs, its management structure, Islamic finance operations and internal audit. At such sessions, the senior management also shares their points of view and industry updates on relevant issues.

The Bank also makes available continuing education programs for all directors of the Board. A training budget has been set aside to provide the directors with the opportunity to go for training to ensure they are kept up to date on relevant developments or changes. Training includes attendance at seminars, forums, conferences, and updates by external professionals. In addition, they are provided with internal refresher sessions and training from the Bank’s Risk, Islamic Banking and Compliance functions during the year.

Frequency and Conduct of Board Meetings and Attendance

The Board of Directors meet at least six times a year in order to effectively discharge their duties as well as to comply with the Corporate Governance policy requirements.

For the Board meetings, the Directors are provided with an agenda, papers on the Bank’s most recent financial performance, risk management reports, budgets, new business initiatives or product launches, Board committees meetings’ minutes and updates on industry regulations or

policy changes. The Board also receives business presentations on topical matters, subject to such requests.

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

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

The attendance record for each Board member for the financial year ended 31 December 2016 is as shown below:

Number of Board MeetingsName of Director Held Attended

Mr. Terence Kent Cuddyre (Chairman) 7 7Mr Lee Lung Nien 7 7Dato’ Siow Kim Lun 7 7Ms. Agnes Liew Yun Chong 7 6Datuk Ali bin Abdul Kadir 7 7Tan Sri Dr Ghauth bin Jasmon 7 7Mr. Philip Tan Puay Koon 7 7

Board Committees

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

The committee members shall be appointed by the Board upon recommendation of the Nominations and Compensation Committee (formerly known as the Nominating Committee).

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

Pursuant to Corporate Governance policy, the following prescribed committees have been set up in the Bank:-

■ Audit Committee

■ Nominations and Compensation Committee

■ Risk Management Committee

Audit Committee

Composition and Frequency of Meetings


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Terms of Reference

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

The purpose of the Committee is to assist the Citibank Berhad’s Board in fulfilling its oversight responsibility relating to (i) the integrity of Citibank Berhad’s financial statements and financial reporting process and Citibank Berhad’s systems of internal accounting and financial controls; (ii) the performance of Internal Audit (“Internal Audit”) (iii) providing any concerns or recommendations to the Citigroup Audit Committee regarding the annual independent integrated audit of Citibank Berhad’s financial statements and effectiveness of Citibank Berhad’s internal control over financial reporting, the engagement of the independent registered public accounting firm (“Independent Auditors”) and the evaluation of the Independent Auditors’ qualifications, independence and performance, where feasible for the local team; (iv) policy standards and guidelines for risk assessment and risk management; (v) the compliance by Citibank Berhad with local legal and regulatory requirements; and (vi) the fulfillment of the other responsibilities set out herein. All of the responsibilities under this Charter promulgated by the Citigroup and Citibank, N.A. Audit Committees Charters as supplemented by local law and regulation.

While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to a) plan or conduct audits or b) to determine that Citibank Berhad’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of Citigroup’s Independent Auditors and management respectively. The Committee may take into consideration the Independent Auditor’s views and matters communicated to it by the Independent Auditors when reporting to the Board.

The Audit Committee’s main duties and responsibilities are as follows:

Financial Statement and Disclosure Matters

■ Review and discuss with management and the Independent Auditors the annual audited financial statements of Citibank Berhad where provided as well as any disclosure requirements.

■ Review the accuracy and adequacy of the chairman’s statement in the directors’ report, corporate governance disclosures, interim financial reports and preliminary announcements in relation to the preparation of financial statements.

■ Review and discuss with management (1) any significant deficiencies or material weaknesses in the design or operation of Citibank Berhad’s internal control over financial reporting, and (2) any fraud, whether or not material, involving management or other employees who have a significant role in Citibank Berhad’s internal control over financial reporting.

■ Review and discuss periodically reports from the Independent Auditors on, among other things, certain:

- Critical accounting policies and estimates and practices to be used;

- Alternative treatments of financial information in conformance with locally accepted accounting principles;

- Significant unusual transactions;

- New accounting pronouncements;

- Schedules of uncorrected audit misstatements;

- Other material written communications between the Independent Auditors and management, such as any management letter and Citibank Berhad’s response to such letter or schedule of unadjusted differences; and

- Difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information, any significant disagreements with management, and communications between the audit team and the audit firm’s national office, (if relevant), with respect to difficult auditing or accounting issues presented by the engagement.

■ Review and discuss with management and the Independent Auditors, at least annually:

- Developments and issues with respect to loan loss reserves (if set at local level);

- Regulatory and accounting initiatives, as well as off-balance sheet structures, and their effect on Citibank Berhad’s financial statements; and

The Audit Committee was established in 1994.

The attendance record for each Audit Committee member for the financial year ended 31 December 2016 is as shown below:

Number of MeetingsName of Audit Committee Member Held Attended

Datuk Ali bin Abdul Kadir (Chairman) 4 4Dato’ Siow Kim Lun 4 3Mr. Terence Kent Cuddyre 4 4Tan Sri Dr Ghauth bin Jasmon 4 4

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


29


- Accounting policies used in the preparation of Citibank Berhad’s financial statements and, in particular, those policies for which management is required to exercise discretion or judgment regarding the implementation thereof.

■ Review with management its evaluation of Citibank Berhad’s internal control structure and procedures for financial reporting and review periodically, but in no event less frequently than quarterly, management’s conclusions about the efficacy of such internal controls and procedures, including any significant deficiencies or material weaknesses in such controls and procedures.

■ Annually review and discuss with management and the Independent Auditors (1) management’s assessment of the effectiveness of Citibank Berhad’s internal control structure and procedures for financial reporting and (2) the Independent Auditors’ report on the effectiveness of Citibank Berhad’s internal control over financial reporting.

■ Ensure that prior to publication of the annual report, a complete review is done to comply with the regulatory listing requirements.

■ To monitor related party transactions and conflict of interest situation that may arise within the Bank including any transactions, procedure or course of conduct that raises questions on management integrity.

■ To review any letter of resignation from the external auditors of Citibank Berhad.

■ To select external auditor for appointment by the Board unless otherwise advised is not suitable for re-appointment (supported by justification/grounds).

Oversight of Citibank Berhad’s Relationship with the

Local Independent Auditors

■ Have direct communication channels with the external auditors.

■ Review and discuss key local staffing and local lead audit partner rotation plans.

■ Review and discuss the scope and plan of the independent audit.

■ Be able to convene meetings with the external auditors, wherever deemed necessary.

■ Provide any concerns or recommendations regarding the qualifications, performance and independence of the Independent Auditors to the Chairman of Citibank Berhad’s Board of Directors.

Oversight of Internal Audit

■ In consultation with the Chief Auditor of Citigroup or his/her designee, review and approve the appointment and replacement of the Chief Audit Executive who shall report directly to the Committee and to the Chief Auditor of Citigroup or his/her designee; and, in consultation with the Chief Auditor of Citigroup or his/her designee discuss the Chief Audit Executive's base compensation, adjustments and incentive compensation.

■ Review and discuss any significant Internal Audit findings that have been reported to management, management’s responses, and the progress of the related corrective action plans.

■ Review and evaluate the adequacy of the work performed by the Chief Audit Executive and Internal Audit, and ensure that Internal Audit is independent and has adequate resources to fulfill its duties, including implementation of the annual audit plan.

■ If the Committee considers that internal audit support is required from a third party provider, the Committee shall consult with the Citigroup Chief Auditor directly before engaging any external parties, so as to ensure compliance with the requirements of Citigroup’s lead regulators regarding external providers of internal audit services.

■ Review and approve the Internal Audit Charter, where relevant.

Compliance, Regulation and Controls Oversight

Responsibilities

■ Review and discuss with management, at least annually Citibank Berhad’s major financial risk exposures and the steps management has taken to monitor and control such exposures.

■ Receive and discuss reports from management responsible for the following topics on a quarterly and as needed basis relating to: significant regulatory and compliance issues; compliance with regulatory internal control and compliance reporting requirements; business resumption and contingency planning, including disaster recovery; fraud and operating losses; internal and external fraud incidents, and associated control enhancements and remediation plans; and technology and information security.

■ Have the discretion to call on any staff of Citibank Berhad for explanation.

■ Have authority to investigate any matter within its terms of reference.


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■ Have the resources which are required to perform its duties.

■ Have full and unrestricted access to any information pertaining to the Citibank Berhad.

■ Be able to obtain independent professional or other advice.

Nominations and Compensation Committee


The Nominations and Compensation was established in 2006.

The attendance record for each Nominations and Compensation member for the financial year ended 31 December 2016 is as shown below:

Number of MeetingsName of Nominations andCompensation Committee Member Held Attended

Dato’ Siow Kim Lun (Chairman) 4 4Mr. Terence Cuddyre 4 4Datuk Ali bin Abdul Kadir 4 4Tan Sri Dr Ghauth bin Jasmon 1 0* 0Mr. Philip Tan Puay Koon 4 4Ms. Agnes Liew Yun Chong 2 4 4Mr. Lee Lung Nien 2 4 4 1 appointed as a member of Nominations and Compensation

Committee on 7 December 20162 ceased on 7 December 2016

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

The current constitution of the Nominations and Compensation Committee comprises five independent non-executive directors.

Terms of Reference

The Board has approved the terms of reference for the Nominations and Compensation Committee.

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

The Nominations and Compensation Committee’s main responsibilities are as follows:

■ Review and assess the adequacy of the Bank’s Code of Conduct and other internal policies and guidelines and

monitor that the principles described therein are being incorporated into the Bank’s culture and business practices.

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

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

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

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

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

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

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

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

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


31


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

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

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

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

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

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

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

Risk Management Committee


The Risk Management Committee was established in 2006.

The attendance record for each Risk Management Committee member for the financial year ended 31 December 2016 is as shown below:

Number of MeetingsName of Risk Management Committee Member Held Attended

Mr Philip Tan Puay Koon (Chairman) 4 4Ms. Agnes Liew Yun Chong 4 3Mr. Terence Kent Cuddyre 4 4Tan Sri Dr Ghauth bin Jasmon 2 4 4 All the Risk Management Committee members are non-executive directors of the Bank.

Terms of Reference

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

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

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

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

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

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

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

■ Review periodically management reports on risk exposure, risk portfolio, composition and other risk management activities.

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

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

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

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

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

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


32


■ Discuss matters related to Comprehensive Capital Analysis and Review (“CCAR”)/Dodd-Frank Act Stress Testing (“DFAST”) and provide adequate oversight. The Risk Management Committee will also be the governance vehicle for the Bank’s Board to provide oversight to the strategic forecasting and stress testing processes (CCAR/DFAST) including forecasting framework, models and non-model analyses and forecast results. Specific invitees to such meetings may be included.


33

RiskManagement

Please refer to Pillar 3 disclosure.


34

Citibank Berhad’s Board of Directors is responsible to

establish and maintain adequate internal control over

financial reporting standards and related issues.

The Bank’s internal control system is designed to provide

reasonable assurance to the company’s management and

Board of Directors regarding the preparation and fair

presentation of published financial statements in

accordance with the provisions under the Companies Act

1965 and other applicable approved standards in Malaysia.

All internal control systems no matter how well designed

and implemented have inherent limitations.

In view of the limitations, therefore, even the best of

systems determined to be effective can only provide a

reasonable assurance in relation to the preparation and

presentation of financial statements.

A comprehensive system of controls is maintained to

ensure that all transactions are executed in accordance

with the management’s authorization, assets are

safeguarded and that the financial records are reliable.

The management also takes relevant steps to see that

information and communication flows are effective and

monitor the performance of internal control procedures.

Citibank Berhad’s risk management policies, procedures and

practices set out the foundation to the risk architecture

governing its business activities.

The management conducts business monitoring initiatives

and continuously assesses their significant processes and

controls in accordance with the Manager’s Control

Assessment Procedures/Operational Risk policy for all

applicable businesses.

Control system weaknesses resulting in corrective actions

will be documented, escalated to the management and

tracked to closure.

Citibank Berhad’s Internal Audit reports to the Audit

Committee. The role of Internal Audit is to provide

independent, objective, reliable, valued and timely

assurance to the Boards of Directors of Citigroup and

Citibank Berhad, the Audit Committees, senior management

and regulators over the effectiveness of governance, risk

management, and controls that mitigate current and

evolving risks and enhance the control culture within

Citigroup and Citibank Berhad.

The scope of the audit activities are reviewed and endorsed

by the Audit Committee while audits are carried out on a

risk-based approach, to provide an independent and

objective report on operational and management activities.

The Audit Committee regularly reviews and deliberates with

management on the actions taken on internal control issues

identified in reports prepared by Internal Audit, the external

auditors, regulatory authorities and the management themselves.

The management of Citibank Berhad has also set up a

Country Coordinating Committee, Business Risk Compliance

and Control Committee, Asset and Liability Committee,

Country Legal and Compliance Committee and Management

Committee as part of its monitoring function to ensure

effective management and supervision of the areas under

the respective Committee’s purview.

Citibank Berhad has also adopted the Citi Code of Conduct

which expresses the values that each employee is expected

to appreciate and apply in their respective working life.

Ethics hotlines are made available to employees who wish to

voice concerns about suspected violations of law or industry

regulation as well as actions that may fail to live up to the

Bank’s high standards of ethical conduct.

The Bank has an internal policy prohibiting retaliatory

actions against any individual for raising legitimate

concerns or questions regarding ethical matters, or for

reporting suspected violations.

Statement of InternalAudit and Internal Control


35

ManagementReports

The pre-set agenda, management reports and other

ad-hoc proposals or applications are circulated to the

Directors prior to the actual Board meetings.

This enables the Board of Directors to assess the overall

performance of the Bank and make sound management

decisions.

Management reports presented to the Board include,

among others, the following:

■ Economic Updates

■ Business Plans

■ Year to date Financial Performance Report

■ Financial performance by major business segments

■ Quarterly Performance Scorecard

■ Semi-annual BNM Stress Tests Results

■ Credit Risk Management Report

■ Liquidity & Market Risk Management Reports

■ Operational Risk

■ Quarterly Derivative Outstanding Report

■ Minutes of Audit Committee meetings

■ Minutes of Risk Management Committee meetings

■ Minutes of Nominations and Compensation Committee

meetings

■ Minutes of Shariah Committee meetings


36

RatingsStatement

RAM Rating Services Berhad (“RAM”) has, on 2 November

2016, reaffirmed the AAA/Stable/P1 financial institution

ratings (“FIR”) of Citibank Berhad.

The reaffirmation of Citibank Berhad's financial institution

ratings incorporate its strategic importance to Citigroup

Inc, and the expectation that support will be readily

extended if required. The ratings also reflect the Bank's

robust capitalisation and sturdy funding and liquidity

profile, which have remained within our expectations.

Meanwhile, the Bank’s asset quality remained moderate

given its sizeable unsecured consumer lending portfolio.

Bank Rating Symbols and Definitions:

AAA A financial institution rated AAA has a superior

capacity to meet its financial obligations. This is the

highest long-term FIR assigned by RAM Ratings.

P1 A financial institution rated P1 has a strong

capacity to meet its short-term financial

obligations. This is the highest short-term FIR

assigned by RAM Ratings.


37

Shariah CommitteeProfile

Citibank Berhad's Shariah Committee is responsible for

the provision of Shariah oversight in relation to Citibank

Berhad’s Islamic Banking business operations. The duties

and responsibilities of the Shariah Committee are

governed by the Shariah Governance Framework for

Islamic Financial Institution as issued by the Bank Negara

Malaysia (BNM).

For the year 2016, the Shariah Committee convened 11

times. Additionally, individual Shariah Committee

members have participated in various business

discussions where Shariah advice was required prior to

submission to the full Shariah Committee.

Citibank Berhad’s Islamic Banking business operations

were subjected to a full Shariah audit conducted jointly by

Citibank Berhad’s Internal Audit together with Citi’s

Global Islamic Control unit. The Shariah Committee

reviewed the findings of the Shariah audit and was

satisfied with the report and its findings.

Citibank Berhad’s Shariah Committee effective from 1 June

2015 included the following distinguished members:

Dr. Mat Noor Mat Zain (Chairman)

Mat Noor Mat Zain is Head of Shariah Department, Faculty

of Islamic Studies, Universiti Kebangsaan Malaysia (UKM).

His specialisation areas are in Fiqh Muamalat, Islamic

Contract and Islamic Family Law. He has extensive

research experience in the area of Fiqh Muamalat and

Islamic Finance such as Instruments of Islamic Hedging,

Term and Condition in Standard Form Contract. He

teaches several courses related to Muamalah and Islamic

Jurisprudence such as Fiqh Muamalat, Islamic Finance,

and Principles of Islamic Jurisprudence.

He has presented many papers related to Islamic banking

and finance at domestic and international level. He is a

consultant for UKM Pakarunding, an expert speaker for

ILIM/JAKIM programmes related to Fiqh Muamalat and the

managing director of Journal of Contemporary Islamic

Law published by Department of Shariah, Faculty of

Islamic Studies, UKM.

He holds a Bachelor of Shariah from Islamic University of

Medina, Saudi Arabia, Master’s Degree in Islamic Studies

(Muamalah) from UKM and PhD in the field of Islamic

Contract from International Islamic University Malaysia (IIUM).

Prof. Dr. Abdul Ghafar Ismail

Abdul Ghafar Ismail is a Professor at Faculty of Economics

and Islamic Finance, Sultan Sharif Ali Islamic University,

Brunei. Previously he was Head of Islamic Economics and

Finance Research Division, Islamic Research and Training

Institute (IRTI), Islamic Development Bank (IDB), Saudi

Arabia. He has been a Professor in Islamic Banking and

Financial Economics, School of Economics, UKM since 2003.

He has published extensively in several refereed journals

among others Journal of Business Ethics; Review of

Islamic Economics; Journal of Islamic Economics, Banking

and Finance; Humanomics; International Journal of Social

Economics; Savings and Development; Global Journal of

Finance and Economics; Review of Financial Economics;

Journal of Financial Services Marketing; International

Journal of Islamic and Middle Eastern Finance and

Management; Australian Journal of Basics and Applied

Sciences; Research in Financial Qualitative Markets; and

Investment Management and Financial Innovations. His

papers have also been presented in many international

and local conferences, such as International Seminar on

Islamic Economics and Finance, IRTI International

Conference and Malaysia Finance Association Conference.

He has also published several textbooks among others,

Ar-Rahnu: Islamic Pawnbroking; and Money, Islamic Banks

and Real Economy. His research interests include learning


38

SHARIAH COMMITTEE PROFILE

process and growth theory, inter-temporal allocation of

resources, earning management, capital adequacy

standard for Islamic banks, and risk management. He has

been a lecturer since 1987 and has been teaching several

economics courses such as money and banking, financial

economics, advanced macroeconomics, money and capital

market in Islam, Islamic economics system, Islamic

economics analysis, and international finance; risk

management in Islamic banking; issues in Islamic banking;

Islamic banking; and money, zakat and real economy.

He holds a PhD from the University of Southampton,

England.

Dr. Hakimah Hj Yaacob

Hakimah Yaacob is a Senior Assistant Professor at Faculty

of Economics and Islamic Finance, Sultan Sharif Ali Islamic

University, Brunei. Previously she was an Associate

Professor at Law Faculty, UKM, Head of Economic,

Finance, Zakat and Awqaf Division at International

Institute of Advanced Islamic Studies (IAIS) and a

researcher at International Shariah Research Academy

(ISRA). She is a certified arbitrator and mediator by the

Malaysian Bar Council and Malaysian Chartered of

Arbitration Association (CIArb). She has written many

books and a columnist in Berita Harian. She is actively

conducted trainings under RedMoney and IBFIM. She was

appointed as a report editor from the International

Finance Corporation of World Bank. She has written books

in Islamic Finance on Alternative Dispute Resolution

(ADR): Expanding Options in Islamic Finance Dispute,

International Regulatory Framework in Islamic Finance,

Compliance and Writing Legal Documentations in Islamic

finance, Islamic Finance operations and Principles and

Explanation on Islamic Financial Services Act 2013 on

selected Provisions.

She is a panel of Financial Accreditation Agency (FAA) and

a professional trainer in Islamic Finance. She is also the

adviser of Kauthar Wealth Management (KWM). She has

conducted local and international trainings in Islamic

Finance for government sectors, government linked

companies, statutory bodies and private entities. She has

received the best paper award and has presented many

papers at international level such as the World Bank

Conference in Bahrain, Accounting and Auditing

Organisation of Islamic Finance (AAOIFI) on International

Convention for Islamic Finance.

She holds the LL.B (Honours), LL.B (Shariah), Master of

Comparative Laws (MCL) and PhD from IIUM. She also

holds Diploma in Victimology from Tokiwa International

Victimology Institute (TIVI).

En. Mohd Bahroddin Badri

Mohd Bahroddin Badri is currently a researcher at

International Shariah Research Academy for Islamic

Finance (ISRA) cum Shariah Manager at ISRA Consultancy

Sdn Bhd. Prior to joining ISRA, he has served as a lecturer

at the International Islamic University Malaysia (IIUM).

He is Co-author of the world’s first comprehensive Islamic

financial markets textbook, Islamic Finance: Principles and

Operations (2nd Ed) and Sukuk textbook published by ISRA.

He has extensively produced a number of research papers

on Shariah and Islamic Finance. His articles have been

published in international refereed journals as well as

international magazines including Islamic Finance News

(IFN), General Council for Islamic Banks and Financial

Institutions (CIBAFI), Bloomberg etc. He has presented

papers and involved in local and international conferences

in Brunei, Jakarta, Istanbul and Toronto, Canada.

He has been involved in various ISRA’s high impact

projects; among others are the Shariah Standards of

Central Bank of Malaysia (BNM) and Policy Guidelines on

Shariah based Scheme for Companies Commission of

Malaysia (SSM). At present, he is also Shariah Consultant

for Credit Guarantee Corporation Malaysia Berhad (CGC

Islamic) and closely engaged with industry players by

conducting trainings, advisory and consultancy services.

He holds Bachelor Degree of Islamic Revealed Knowledge

and Heritage (Fiqh and Usul Fiqh) from IIUM and Master’s

Degree of Shariah in Economics from University of Malaya.

En. Nik Abdul Rahim bin Nik Abdul Ghani

Nik Abdul Rahim is a lecturer of Fiqh Muamalat at

Department of Shariah, Faculty of Islamic Studies, UKM.

He regularly conducts lectures, researches and presents

papers at seminars and conferences, both locally and

internationally on the areas of Fiqh Muamalat and Usul Fiqh

particularly those related to Islamic banking, Islamic insurance

(Takaful) and current issues of Islamic transaction laws.

He is currently a member of the Research Centre for

Islamic Economics and Finance (EKONIS) or formerly known

as Islamic Economics and Finance Research Group. He is

also a member of the committee of Klinik Hukum Syarak

and Guaman Syarie, Department of Shariah, and an expert

consultant and speaker for Pusat Islam UKM and Unit

Latihan UKM programmes related to Islamic Law.

He holds a Bachelor of Shariah from Islamic University of

Medina, Saudi Arabia, Master’s Degree in Shariah from UKM

and currently is a PhD candidate at International Centre for

Education in Islamic Finance (INCEIF).

C o n t e n t s

Directors’ Report

Statement By Directors

Statutory Declaration

Shariah Committee‘s Report

Independent Auditors’ Report

Statements of Financial Position

Statements of Profit or Loss and Other Comprehensive Income

Statements of Changes In Equity

Statements of Cash Flows

Notes to The Financial Statements

40

43

44

45

46

48

49

50

5 1

53

Financial Statements

The Directors have pleasure in submitting their report and the audited financial statements of the Group and the Bank for the financial year ended 31 December 2016.

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

Immediate and ultimate holding companiesThe Bank’s immediate holding company and ultimate holding company as regarded by the Directors during the financial year and until the date of this report are Citigroup Holdings (Singapore) Pte. Ltd and Citigroup Inc. respectively. Both are incorporated in Singapore and United States of America respectively.

Results Group and Bank

RM’000

Profit before taxation 805,620Tax expense (193,159) Profit for the year 612,461

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

DividendsSince the end of the previous financial year, the amount of dividends paid by the Bank in respect of the financial year ended 31 December 2015, as reported in the Directors’ Report of that year, a final ordinary dividend of 370 sen per ordinary share totalling RM450 million paid on 25 July 2016.

The final ordinary dividend recommended by the Directors in respect of the financial year ended 31 December 2016 is 452 sen per ordinary share totalling RM550 million.

Bad and doubtful debts and financingBefore the financial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain that actions had been taken in relation to the

writing off of bad debts and financing and the making of provisions for impaired debts and financing, and satisfied themselves that all known bad debts and financing had been written off and adequate provisions made for impaired debts and financing.

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

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

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

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

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

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

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

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

Directors’ReportFor The Year Ended 31 December 2016

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

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

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

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

Number of ordinary shares of USD1 each At At 1.1.2016 Bought Sold 31.12.2016Shares in Citigroup Inc. Direct interests Dato’ Siow Kim Lun @ Siow Kim Lin 900 - - 900 Agnes Liew Yun Chong 35,088 6,436 - 41,524 Terence Kent Cuddyre 2,340 736 (298) 2,778 Philip Tan Kuay Koon 916 - - 916 Lee Lung Nien 5,043 6,370 (11,413) -

Number of ordinary shares of USD1 each At At 1.1.2016 Granted Vested 31.12.2016Capital Accumulation Program/ Supplementary CAP/SEA in Citigroup Inc.

Lee Lung Nien 15,877 5,557 (8,173) 13,261 Agnes Liew Yun Chong 14,710 7,273 (6,436) 15,547 Terence Kent Cuddyre 1,254 - (736) 518

None of the other Directors holding office at 31 December 2016 had any interest in the ordinary shares and options over ordinary shares of the Bank and of its related corporations during the financial year.

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

Directors of the BankDirectors who served during the financial year until the date of this report are:

■ Lee Lung Nien■ Datuk Ali Bin Tan Sri Abdul Kadir■ Dato’ Siow Kim Lun @ Siow Kim Lin■ Agnes Liew Yun Chong■ Terence Kent Cuddyre■ Tan Sri Dr. Ghauth bin Jasman■ Philip Tan Puay Koon

For The Year Ended 31 December 2016Citibank berhad 2016 Annua l Report

41

DIRECTORS’ REPORT


42

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

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

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

There were no debentures issued during the financial year.

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

Indemnity and insurance costsDuring the financial year, the total amount of insurance cost effected for Directors and officers of the Company is RM20,943.

AuditorsThe auditors, KPMG PLT (converted from a conventional partnership, KPMG, on 27 December 2016), have indicated their willingness to accept re-appointment.

The auditors’ remuneration is disclosed in note 23 to the financial statements.

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

Lee Lung NienDirector

Datuk Ali Bin Tan Sri Abdul KadirDirector

Kuala LumpurDate: 14 June 2017

For The Year Ended 31 December 2016DIRECTORS’ REPORT

Pursuant To Section 251(2) of the Companies Act, 2016

In the opinion of the Directors, the financial statements set out on pages 53 to 165 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and the Bank as of 31 December 2016 and of their financial performance and cash flows for the financial year then ended.

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

Lee Lung NienDirector

Datuk Ali Bin Tan Sri Abdul KadirDirector



43

StatementBy Directors

I, Tang Wan Chee, the officer primarily responsible for the financial management of Citibank Berhad, do solemnly and sincerely declare that the financial statements set out on pages 53 to 165 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the declaration to be true, and by virtue of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named Tang Wan Chee, I/C No.: 640901- 10-7346 in Kuala Lumpur on 14 June 2017.

Tang Wan Chee

Before me:

Commissioner for Oaths

StatutoryDeclarationPursuant To Section 251(1)(b) of the Companies Act, 2016

ShariahCommittee’s ReportIn the name of Allah, the Most Beneficent, the Most Merciful

We, members of Citibank Berhad Shariah Committee hereby confirm that we have reviewed the principles and the contracts relating to the transactions and applications introduced by Citibank Berhad’s Islamic Banking division during the financial year ended 31 December 2016.

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

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

We have assessed the work carried out by Shariah Control Officer and internal Shariah audit which included, but not limited to, examining, on a test basis, each type of transaction, the relevant documentation and procedures adopted by the Citibank Berhad’s Islamic Banking division.

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

In our opinion:

1. the contracts, transactions and dealings entered into by the Citibank Berhad’s Islamic Banking division during the year ended 31 December 2016 that we have reviewed are in compliance with the Shariah principles;

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

3. all earnings that have been realised from sources or by means prohibited by the Shariah principles have been considered for disposal to charitable causes.

We, the members of Citibank Berhad Shariah Committee, do hereby confirm that the operations of the Citibank Berhad’s Islamic Banking division for the year ended 31 December 2016 have been conducted in conformity with the Shariah principles.

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

Wassalamu Alaikum Wa Rahmatullahi Wa Barakatuh.

Dr. Mat Noor Mat Zain Prof. Dr. Abdul Ghafar Ismail Chairman of the Shariah Committee Member of the Shariah Committee

Dr. Hakimah Hj Yaacob Mohd Bahroddin BadriMember of the Shariah Committee Member of the Shariah Committee

Nik Abdul Rahim Nik Abdul Ghani Member of the Shariah Committee



45

Report on the Audit of the Financial Statements

OpinionWe have audited the financial statements of Citibank Berhad, which comprise the statements of financial position as at 31 December 2016 of the Group and of the Bank, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Bank for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 53 to 165.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Bank as at 31 December 2016, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Basis for OpinionWe conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our auditors’ report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and Other Ethical ResponsibilitiesWe are independent of the Group and of the Bank in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Information Other than the Financial Statements and Auditors’ Report ThereonThe Directors of the Bank are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Bank and our auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Bank does not cover the annual report and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Bank, our responsibility is to read the annual report and, in doing so, consider whether the annual report is materially inconsistent with the financial statements of the Group and of the Bank or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the annual report, we are required to report that fact. We have nothing to report in this regard.

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

In preparing the financial statements of the Group and of the Bank, the Directors are responsible for assessing the ability of the Group and of the Bank to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Bank or to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Bank as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

IndependentAuditors’ ReportTo The Member Of Citibank Berhad

• Identify and assess the risks of material misstatement of the financial statements of the Group and of the Bank, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 internal control of the Group and of the Bank.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group or of the Bank to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Bank or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Bank to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Bank, including the disclosures, and whether the financial statements of the Group and of the Bank represent the underlying transactions and events in a manner that gives a true and fair view.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding,among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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

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

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

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

Other MatterThis report is made solely to the member of the Bank, as a body, in accordance with Section 266 of the Companies Act, 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG Adrian Lee Lye WangLLP0010081-LCA & AF 0758 Approval Number: 2679/11/17(J)Chartered Accountants Chartered Accountant

Petaling Jaya, MalaysiaDate: 14 June 2017

To The Member Of C it ibank BerhadCitibank berhad 2016 Annua l Report

47

INDEPENDENT AUDITORS’ REPORT

Group Bank

Note 2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Assets

Cash and short term funds 3 11,425,781 9,883,187 11,425,761 9,883,167

Deposits and placements with banks and other financial institutions 4 794,768 839,489 794,768 839,489

Securities purchased under resale agreements 775,397 145,107 775,397 145,107

Financial assets held-for-trading 5 1,232,032 846,298 1,232,032 846,298

Financial investments available-for-sale 6 2,560,734 1,086,935 2,560,734 1,086,935

Loans, advances and financing 7 24,285,097 23,932,917 24,285,097 23,932,917

Other assets 9 1,855,709 1,599,862 1,855,709 1,599,862

Statutory deposits with Bank Negara Malaysia 10 502,723 544,910 502,723 544,910

Deferred tax assets 11 52,606 39,510 52,606 39,510

Investments in subsidiary companies 12 - - 20 20

Plant and equipment 13 44,314 44,985 44,314 44,985

Total assets 43,529,161 38,963,200 43,529,161 38,963,200

Liabilities

Deposits from customers 14 29,571,629 27,353,699 29,571,629 27,353,699

Deposits and placements of banks and other financial institutions 15 6,794,358 4,428,296 6,794,358 4,428,296

Bills and acceptances payable 64,314 50,341 64,314 50,341

Other liabilities 16 2,479,312 2,603,189 2,479,312 2,603,189

Total liabilities 38,909,613 34,435,525 38,909,613 34,435,525

Equity

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

Reserves 18 4,497,851 4,405,978 4,497,851 4,405,978

Total equity attributable to equity holder of the Bank 4,619,548 4,527,675 4,619,548 4,527,675

Total liabilities and equity 43,529,161 38,963,200 43,529,161 38,963,200

Commitments and contingencies 36 96,139,821 77,736,181 96,139,821 77,736,181

The notes on pages 60 to 165 are an integral part of these financial statements.

Statements ofFinancial Position As At 31 December 2016

Statements ofProfit or Loss and OtherComprehensive Income For The Financial Year Ended 31 December 2016

Group and Bank

Note 2016 2015

RM’000 RM’000

Revenue 2(b) 2,400,205 2,310,509

Interest income 20 1,563,104 1,522,644

Interest expense 21 (414,763) (426,212)

Net interest income 1,148,341 1,096,432

Net income from Islamic banking operations 38(m) 59,101 39,455

Other operating income 22 778,000 748,410

Total net income 1,985,442 1,884,297

Other operating expenses 23 (979,568) (1,026,892)

Operating profit 1,005,874 857,405

Allowance for loans, advances and financing 24 (200,254) (102,144)

Profit before taxation 805,620 755,261

Tax expense 25 (193,159) (185,836)

Profit for the year 612,461 569,425

Other comprehensive (expense)/income, net of tax

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

- Net (loss)/gain on revaluation of financial investments available-for-sale (66,122) 16,400

Items that will not be reclassified subsequently to profit or loss

- Net loss on remeasurement of defined benefit plan (4,466) (172)

Total other comprehensive (expense)/income for the year (70,588) 16,228

Total comprehensive income for the year 541,873 585,653

Profit for the year attributable to:

Owner of the Bank 612,461 569,425

Total comprehensive income attributable to:

Owner of the Bank 541,873 585,653

Earnings per share - basic (sen) 26 503 468



49


Attributable to owner of the Bank

Non-distributable Distributable

Share Share Statutory Other Retained Total

Capital Premium Reserve Reserve Profits Reserves Total

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

At 1 January 2015 121,697 380,303 121,697 (1,533) 3,719,858 4,220,325 4,342,022

Net gain on revaluation of financial investments available-for-sale - - - 16,400 - 16,400 16,400

Net loss on remeasurement of defined benefit plans - - - (172) - (172) (172)

Total other comprehensive expense for the year - - - 16,228 - 16,228 16,228

Profit for the year - - - - 569,425 569,425 569,425

Total comprehensive income for the year - - - 16,228 569,425 585,653 585,653

Dividends to owner of the Bank 27 - - - - (400,000) (400,000) (400,000)

Total contribution to owner - - - - (400,000) (400,000) (400,000)

At 31 December 2015 121,697 380,303 121,697 14,695 3,889,283 4,405,978 4,527,675

Note 17 Note 18

At 1 January 2016 121,697 380,303 121,697 14,695 3,889,283 4,405,978 4,527,675

Net gain on revaluation of financial investments available-for-sale - - - (66,122) - (66,122) (66,122)

Net loss on remeasurement of defined benefit plans - - - (4,466) - (4,466) (4,466)

Total other comprehensive expense for the year - - - (70,588) - (70,588) (70,588)

Profit for the year - - - - 612,461 612,461 612,461

Total comprehensive income for the year - - - (70,588) 612,461 541,873 541,873

Dividends to owner of the Bank 27 - - - - (450,000) (450,000) (450,000)

Total contribution to owner - - - - (450,000) (450,000) (450,000)

At 31 December 2016 121,697 380,303 121,697 (55,893) 4,051,744 4,497,851 4,619,548

Note 17 Note 18

Statements ofChanges In Equity For The Financial Year Ended 31 December 2016

Group Bank

2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000

Cash flows from operating activities

Profit before taxation 805,620 755,261 805,620 755,261

Adjustments for:

Amortisation of premium less accretion of discount of financial investments available-for-sale 22,245 231 22,245 231

Allowance for loans, advances and financing 200,254 102,144 200,254 102,144

Depreciation 16,406 20,116 16,406 20,116

Unrealised loss/(gain) from revaluation of financial assets held-for-trading 2,749 (12,356) 2,749 (12,356)

Gain from disposal of financial investments available-for-sale (43,672) (18,026) (43,672) (18,026)

Plant and equipment written off 2,519 66 2,519 66

Loss/(Gain) on disposal of plant and equipment 310 (75) 310 (75)

Operating profit before working capital changes 1,006,431 847,361 1,006,431 847,361

Changes in working capital:

Deposits and placements with banks and other financial institutions 44,721 (734,861) 44,721 (734,861)

Securities purchased under resale agreements (630,290) 934,760 (630,290) 934,760

Financial assets held-for-trading (388,483) 2,728,727 (388,483) 2,728,727

Loans, advances and financing (552,434) (2,393,515) (552,434) (2,393,515)

Other assets (220,979) (89,201) (220,979) (89,201)

Statutory deposits with Bank Negara Malaysia 42,187 (149,910) 42,187 (149,910)

Deposits from customers 2,217,930 1,177,025 2,217,930 1,177,025

Deposits and placements of banks and other financial institutions 2,366,062 (354,290) 2,366,062 (354,290)

Bills and acceptances payable 13,973 2,357 13,973 2,357

Other liabilities (98,230) 292,730 (98,230) 292,730

Cash used in operating activities 3,800,888 2,261,183 3,800,888 2,261,183

Income taxes paid (255,961) (163,868) (255,961) (163,868)

Net cash generated from operating activities 3,544,927 2,097,315 3,544,927 2,097,315

Statements of Cash Flows For The Financial Year Ended 31 December 2016


51


Group Bank

2016 2015 2016 2015

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

Purchase of plant and equipment (18,654) (9,243) (18,654) (9,243)

Proceeds from disposal of plant and equipment 90 564 90 564

Purchase of financial investments available-for-sale (8,579,690) (4,786,999) (8,579,690) (4,786,999)

Proceeds from disposal of financial investments available-for-sale 7,045,921 5,786,669 7,045,921 5,786,669

Net cash generated (used in)/from investing activities (1,552,333) 990,991 (1,552,333) 990,991

Cash flows from financing activities

Dividend paid to owner (450,000) (400,000) (450,000) (400,000)

Net cash used in financing activities (450,000) (400,000) (450,000) (400,000)

Net increase in cash and cash equivalents 1,542,594 2,688,306 1,542,594 2,688,306

Cash and cash equivalents at 1 January 9,883,187 7,194,881 9,883,187 7,194,881

Cash and cash equivalents at

31 December (Note 3) 11,425,781 9,883,187 11,425,781 9,883,187


52

For The F inancia l Year Ended 31 December 2016STATEMENTS OF CASH FLOWS

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

45th Floor, Menara Citibank 165 Jalan Ampang50450 Kuala Lumpur

The consolidated financial statements of the Bank as at and for the year ended 31 December 2016 comprise the Bank and its subsidiaries (together referred to as the “Group”).

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

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

The financial statements were authorised for issue by the Board of Directors on 14 June 2017.

1. Basis of preparation

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

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

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

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

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2017

• Amendments to MFRS 12, Disclosure of Interests in Other Entities (Annual Improvements to MFRS Standards 2014-2016 Cycle)

• Amendments to MFRS 107, Statement of Cash Flows – Disclosure Initiative

• Amendments to MFRS 112, Income Taxes – Recognition of Deferred Tax Assets for Unrealised Losses

MFRSs, Interpretations and amendments

effective for annual periods beginning on or after 1 January 2018

• MFRS 9, Financial Instruments (2014)

• MFRS 15, Revenue from Contracts with Customers

• Clarifications to MFRS 15, Revenue from Contracts with Customers

• IC Interpretation 22, Foreign Currency Transactions and Advance Consideration

• Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements to MFRS Standards 2014-2016 Cycle)

• Amendments to MFRS 2, Share-based Payment – Classification and Measurement of Share-based Payment Transactions

• Amendments to MFRS 4, Insurance Contracts – Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts

• Amendments to MFRS 128, Investments in Associates and Joint Ventures (Annual Improvements to MFRS Standards 2014-2016 Cycle)

• Amendments to MFRS 140, Investment Property – Transfers of Investment Property

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2019

• MFRS 16, Leases

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

• Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

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

• from the annual period beginning on 1 January 2017 for those amendments that are effective for annual periods beginning on or after 1 January 2017.

• from the annual period beginning on 1 January 2018 for those accounting standards that are effective for annual periods beginning on or after 1 January 2018.

Notes to TheFinancial Statements

1. Basis of preparation (continued)

A. Statement of compliance (continued)

• from the annual period beginning on 1 January 2019 for the accounting standard that is effective for annual periods beginning on or after 1 January 2019.

Material financial impact of initial application of MFRS 15, Revenue from Contracts with Customers and MFRS 9, Financial Instruments are discussed below:

(i) MFRS 15, Revenue from Contracts with Customers MFRS 15 replaces the guidance in MFRS 111,

Construction Contracts, MFRS 118, Revenue, IC Interpretation 13, Customer Loyalty Programmes, IC Interpretation 15, Agreements for Constructions of Real Estate, IC interpretation 18, Transfers of Assets from Customers and IC Interpretation 131, Revenue - Barter Transactions Involving Advertising Services. Upon adoption of MFRS 15, it is expected that the timing of revenue recognition might be different as compared with the current practices.

The adoption of MFRS 15 may result in a change in accounting policy. The Group and the Bank is currently assessing the financial impact that may arise from the adoption of MFRS 15.

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

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

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

This standard also specifies the requirements for

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

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

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

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

historical cost basis other than those disclosed in Note 2.

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

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

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

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

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

There are no significant areas of estimation

uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

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

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

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

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

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


54

NOTES TO THE FINANCIAL STATEMENTS

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

Interest income and expense presented in the

statements of profit or loss and other comprehensive income include:

• Interest on financial assets and financial

liabilities measured at amortised cost calculated on an effective interest rate basis; and

• Interest on financial assets held-for-trading,

financial investments available- for-sale on an effective interest rate basis.

D. Fees and commission Fees and commission income and expense that are

integral to the effective interest rate on a financial asset or financial liability are included in the measurement of the effective interest rate (see (c)).

Other fees and commission income, including

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

Other fees and commission expense relate mainly to

transaction and service fees, which are expensed as the services are received.

E. Net trading income Net trading income comprises gains less losses

related to trading assets and liabilities, and includes all realised and unrealised fair value changes, interest, dividends and foreign exchange differences.

F. Financial assets and financial liabilities i. Initial recognition and measurement A financial asset or a financial liability is recognised

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

A financial instrument is recognised initially, at its

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

An embedded derivative is recognised separately

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

1. Basis of preparation (continued)

D. Use of estimates and judgements (continued)

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

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

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

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

A. Basis of consolidation

i. Subsidiaries Subsidiaries are investees, including

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

The Bank controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Bank also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

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

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

unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

B. Revenue Revenue comprises of gross interest income, other

income derived from banking operations and net income from Islamic Banking operations.

C. Interest and financing income and expense Interest income and expense are recognised in the

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

NOTES TO THE FINANCIAL STATEMENTS Citibank berhad 2016 Annua l Report

55

2. Significant accounting policies (continued)

F. Financial assets and financial liabilities (continued)

ii. Financial instrument categories and subsequent measurement

The Group and the Bank categorise financial instruments as follows:

Financial assets

a. Financial assets at fair value through profit or loss

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

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

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

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

comprises debt instruments that are quoted in an active market and the Group or the Bank has the positive intention and ability to hold them to maturity.

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

c. Loans and receivables Loans and receivables category comprises

debt instruments that are not quoted in an active market.

Financial assets categorised as loans and

receivables are subsequently measured at amortised cost using the effective interest method.

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

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

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-sale are subsequently measured at their fair values with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses arising from monetary items and gains and losses of hedged items attributable to hedge risks of


56


fair value hedges which are recognised in profit or loss. On derecognition, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss. Interest calculated for a debt instrument using the effective interest method is recognised in profit or loss.

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

Financial liabilities

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

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

Derivatives that are linked to and must be settled by delivery of equity instruments that do not have a quoted price in an active market for identical instruments whose fair values otherwise cannot be reliably measured are measured at cost.

Other financial liabilities categorised as fair value

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

iii. Regular way purchase or sale of financial assets A regular way purchase or sale is a purchase or

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

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

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

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

iv. Derecognition A financial asset or part of it is derecognised

when, and only when the contractual rights to the cash flows from the financial asset expire or control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset are transferred to another party. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss.


F. Financial assets and financial liabilities (continued)

iv. Derecognition (continued)

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

v. Offsetting Financial assets and liabilities are offset and the

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

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

vi. Fair value measurement Fair value of an asset or a liability, except for

share-based payment and lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use that asset in its highest and best use.

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

The Group and the Bank use valuation techniques to determine the fair value of

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

The value produced by a model or other valuation techniques is adjusted to allow for a number of factors as appropriate, because valuation techniques cannot appropriately reflect all factors market participants take into account when entering into a transaction. Valuation adjustments are recorded to allow for model risks, bid-ask spreads, liquidity risks, as well as other factors. Management believes that these valuation adjustments are necessary and appropriate to fairly state financial instruments carried at fair value on the statements of financial position.

Fair value are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group and the Bank can access at the measurement date.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: unobservable inputs for the asset or liability.

The Group and the Bank recognise transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that caused the transfers.

G. Impairment

i. Financial assets At each reporting date, the Group and the Bank

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


57


G. Impairment (continued)

i. Financial assets (continued)

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

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

• significant financial difficulty of the issuer or obligor;

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

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

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

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

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

• the disappearance of an active market for a security.

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

If the Group and the Bank determine that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a separate collective assessment of impairment.

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

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

i) statistical modelling of historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether the current economic and credit

conditions are such that the actual losses incurred are likely to be greater or less than suggested historical modelling. Default rates, loss rates and expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure they remain appropriate; or

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

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

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

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

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

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

ii. Other assets The carrying amounts of other assets (except for

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

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


58



G. Impairment (continued)

ii. Other assets (continued)

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

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

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

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

H. Repurchase and resale agreement Securities purchased under resale agreements are

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

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

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

balances and short term funds that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value, with original maturity within one month.

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

J. Plant and equipment

i. Recognition and measurement Items of plant and equipment are measured at

cost less accumulated depreciation and accumulated impairment losses, if any.

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

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

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

ii. Subsequent costs Subsequent expenditure is capitalised only when

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

iii. Depreciation Depreciation is based on the cost of an asset less

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

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

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

• building improvements 8 years - 14 years • furniture and equipment 2 years - 10 years

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

K. Leased assets

i. Finance lease Leases in terms of which the Group or the Bank

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


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K. Leased assets (continued) i. Finance lease (continued)

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

ii. Operating lease Leases, where the Group or the Bank does not

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

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

L. Bills and acceptances payable Bills and acceptances payable represent the

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

M. Foreign currency Transactions in foreign currencies are translated

into the functional currency of the Group and the Bank at the spot exchange rates at the date of the transactions.

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

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

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

N. Income tax Income tax expense comprises current and

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

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

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to apply to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

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

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

O. Employee benefits

i. Short-term employee benefits Short-term employee benefit obligations in

respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related services are provided.

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

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


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O. Employee benefits (continued)

ii. Defined contribution plan In addition to the contribution requirement by

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

iii. Defined benefit plan The Bank and certain related companies

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

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

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

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

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

iv. Share-based compensation The Group and the Bank participate in

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

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

P. Provisions A provision is recognised if, as a result of a past

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

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

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


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3. Cash and short term funds Group Bank

2016 2015 2016 2015

RM’000 RM’000 RM’000 RM’000 Cash and balances with banks and other financial institutions 66,454 55,237 66,454 55,237

Money at call and deposit placements maturing within one month 11,359,327 9,827,950 11,359,327 9,827,950

11,425,781 9,883,187 11,425,761 9,883,167

5. Financial assets held-for-trading Group and Bank

2016 2015

RM’000 RM’000

At fair value

Malaysian Government Treasury Bills 84,323 3,871

Malaysian Government Securities 661,152 711,712

Malaysian Government Investment Issues 471,257 116,635

Bank Negara Malaysia Bills/Notes 15,300 14,080 1,232,032 846,298

6. Financial investments available-for-sale Group and Bank

2016 2015

RM’000 RM’000

At fair value

Malaysian Government Securities 1,784,721 857,560

Malaysian Government Investment Issues 594,205 222,360

U.S. Treasury Notes 174,793 -

2,553,719 1,079,920

At cost

Unquoted securities 7,015 7,015

2,560,734 1,086,935

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

2016 2015

RM’000 RM’000

Licensed banks 794,768 839,489


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7. Loans, advances and financing

i. By type Group and Bank

2016 2015

RM’000 RM’000

Overdrafts 862,668 512,449 Term loans/financing

- housing loans/financing 10,888,720 10,931,868

- other term loans/financing 2,568,853 2,632,771

Bills receivable 1,290,927 1,128,282

Claims on customers under acceptance credits 607,247 610,526

Staff loans 53,864 62,900

Share margin financing 156,149 188,472

Credit cards receivables 6,033,830 6,227,797

Revolving credit 2,376,248 2,163,418

24,838,506 24,458,483

Unearned interest and income (12,186) (14,752)

Gross loans, advances and financing 24,826,320 24,443,731 Less: Allowance for impaired loans, advances and financing

- Collective assessment allowance (416,271) (338,459)

- Individual assessment allowance (124,952) (172,355)

Net loans, advances and financing 24,285,097 23,932,917

ii. By type of customer Group and Bank

2016 2015

RM’000 RM’000 Domestic non-bank financial institutions

- others 590,860 518,945

Domestic business enterprises

- small and medium enterprises 450,211 562,454

- others 5,146,136 4,649,189

Individuals 17,851,495 18,181,294

Foreign entities 787,618 531,849

24,826,320 24,443,731


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7. Loans, advances and financing (continued)

iii. By interest/profit rate sensitivity Group and Bank

2016 2015

RM’000 RM’000 Fixed rate

- Housing loans/financing 616,573 646,462

- Other fixed rate loans/financing 10,493,776 11,444,257

Variable rate

- BLR plus 10,902,257 11,046,476

- Cost plus 2,813,714 1,306,536

24,826,320 24,443,731

iv. By sector Group and Bank

2016 2015

RM’000 RM’000

Primary agriculture 3,064 20,079

Mining and quarrying 27,633 43,042

Manufacturing (including agriculture based) 2,156,982 2,797,497

Electricity, gas and water 963 1,638

Construction 37,989 27,348

Wholesale, retail trade, restaurants and hotels 1,089,658 864,126

Transport, storage and communication 917,998 258,292

Finance, insurance, real estate and business services 1,345,966 1,087,245

Social & community services 124,930 12,051

Household

- consumption credit 7,198,929 7,338,127

- residential 10,307,086 10,445,299

- purchase of securities 175,241 207,581

- others 170,239 190,287

Other sectors 1,269,642 1,151,119

24,826,320 24,443,731

v. By purpose Group and Bank

2016 2015

RM’000 RM’000

Purchase of securities 175,241 207,581

Purchase of landed property 11,136,599 11,217,685

Purchase of fixed assets excluding land and building 515 783

Personal use 1,300,792 1,231,405

Credit card 6,033,830 6,229,389


Working capital 6,133,412 5,529,205

Other purposes 41,696 20,153

24,826,320 24,443,731


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7. Loans, advances and financing (continued)

vi. Residual contractual maturity Group and Bank

2016 2015

RM’000 RM’000

Maturing within one year 11,971,977 12,571,691

One to five years 1,977,086 921,539

Over 5 years 10,877,257 10,950,501

24,826,320 24,443,731

vii. By geographical distribution Group and Bank

2016 2015

RM’000 RM’000

Within Malaysia 24,826,320 24,443,731

8. Impaired loans, advances and financing

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

2016 2015

RM’000 RM’000

At 1 January 527,186 470,101

Classified as impaired during the year 703,944 671,027

Reclassified as performing during the year (333,013) (265,785)

Amount recovered (113,294) (182,050)

Amount written off (258,127) (166,107)

At 31 December 526,696 527,186

Individual assessment allowance (124,952) (172,355)

Net impaired loans, advances and financing 401,744 354,831

Ratio of net impaired loans and financing to gross loans

and financing less individual assessment allowance 1.63% 1.46%


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8. Impaired loans, advances and financing (continued)

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

Group and Bank 2016 2015 RM’000 RM’000 Collective assessment allowance

At 1 January 338,459 380,755

Allowance made/(written back) during the year, net 77,812 (42,296)

At 31 December 416,271 338,459

As % of gross loans, advances and financing less individual assessment allowance 1.69% 1.39%

Individual assessment allowance

At 1 January 172,355 181,784

Allowance made during the year 18,194 25,027

Written back during the year (9,256) (12,632)

Written off during the year (56,341) (21,824)

At 31 December 124,952 172,355

iii. Impaired loans, advances and financing by sector Group and Bank 2016 2015 RM’000 RM’000

Primary agriculture 598 7,765

Mining and quarrying 1,124 2,709

Manufacturing (including agriculture based) 8,100 33,041


Wholesale, retail trade, restaurants and hotels 6,719 16,302

Transport, storage and communication 1,092 457

Finance, insurance, real estate and business services 4,038 3,381

Household - consumption credit 187,668 152,356

- residential 291,060 284,814

- purchase of securities 19,091 19,108

Other sectors 6,166 5,820

526,696 527,186

iv. Impaired loans, advances and financing by geographical distribution Group and Bank 2016 2015 RM’000 RM’000

Within Malaysia 526,696 527,186


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9. Other assets Group and Bank

2016 2015

RM’000 RM’000 Interest/Income receivable 81,783 23,456

Other debtors, deposits and prepayments 260,711 289,656

Retirement benefits (Note 19(i)) 1,264 4,894

Derivative assets (Note 30) 1,473,481 1,281,856

Tax recoverable 38,470 -

1,855,709 1,599,862

10. Statutory deposits with Bank Negara Malaysia

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

11. Deferred tax assets

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

Reserves - Plant and Financial Retirement equipment - investments Plan - Capital available- Defined Group and Bank allowances Provisions for-sale Benefit Total

RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2015 (5,934) 25,206 3,428 (2,917) 19,783

Recognised in profit or loss 9,197 16,031 - - 25,228

Recognised in other comprehensive income - - (5,467) (34) (5,501)

At 31 December 2015/ At 1 January 2016 3,263 41,237 (2,039) (2,951) 39,510

Recognised in profit or loss (1,766) 451 - - (1,315)

Recognised in other comprehensive income - - 15,276 (865) 14,411

At 31 December 2016 1,497 41,688 13,237 (3,816) 52,606

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

assets against current tax liabilities.


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12. Investments in subsidiary companies Group and Bank

2016 2015

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

Effective Country of Ownership Name of subsidiary Principal activity incorporation Interest 2016 2015 % % Citigroup Nominee (Malaysia) Sdn. Bhd. Nominee company Malaysia 100 100 Citigroup Nominees (Tempatan) Sdn. Bhd.* Nominee company Malaysia 100 100 Citigroup Nominees (Asing) Sdn. Bhd.* Nominee company Malaysia 100 100

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

statement of profit or loss and other comprehensive income.


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13. Plant and equipment Furniture Building and Group and Bank improvements equipment Total

Cost RM’000 RM’000 RM’000

At 1 January 2015 110,495 329,366 439,861

Additions 3,019 6,224 9,243

Disposals - (1,504) (1,504)

Write-offs (4,741) (6,581) (11,322)

At 31 December 2015/1 January 2016 108,773 327,505 436,278

Additions 6,374 12,280 18,654

Disposals - (2,108) (2,108)

Write-offs (8,267) (124,874) (133,141)

At 31 December 2016 106,880 212,803 319,683

Depreciation

At 1 January 2015 103,432 280,016 383,448

Charge for the year 3,138 16,978 20,116

Disposals - (1,015) (1,015)

Write-offs (4,720) (6,536) (11,256)


Charge for the year 2,062 14,344 16,406

Disposals - (1,708) (1,708)

Write-offs (6,342) (124,280) (130,622)

At 31 December 2016 97,570 177,799 275,369

Carrying amounts

At 1 January 2015 7,063 49,350 56,413


At 31 December 2016 9,310 35,004 44,314


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14. Deposits from customers

i. By type of deposit Group and Bank

2016 2015

RM’000 RM’000

Demand deposits 15,372,515 13,925,753

Saving deposits 1,486,839 1,460,108

Fixed deposits 8,341,741 8,098,664

Other deposits 4,369,867 3,868,190

Others - cash collateral 667 984

29,571,629 27,353,699

ii. Maturity structure of fixed deposits and other deposits are as follows:

Group and Bank

2016 2015

RM’000 RM’000

Due within six months 11,603,894 10,932,131

Six months to one year 1,098,756 1,028,908

One year to three years 8,958 5,815

12,711,608 11,966,854

iii. By type of customer Group and Bank

2016 2015

RM’000 RM’000

Government and statutory bodies - 46,729

Business enterprises 16,661,837 14,428,907

Individuals 11,784,030 12,181,059

Others 1,125,762 697,004

29,571,629 27,353,699


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15. Deposits and placements of banks and other financial institutions

Group and Bank

2016 2015

RM’000 RM’000

Bank Negara Malaysia 25,090 240,485

Licensed banks 3,171,910 1,793,188

Licensed finance companies 3,597,358 2,394,623

6,794,358 4,428,296

16. Other liabilities Group and Bank

2016 2015

RM’000 RM’000

Interest/Profit payable 52,096 42,995

Provision for taxation - 25,647

Other creditors and accruals 1,246,926 1,287,825

Derivative liabilities (Note 30) 1,180,290 1,246,722

2,479,312 2,603,189

17. Share capital Group and Bank

Number Number

Amount of shares Amount of shares

2016 2016 2015 2015

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

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

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

18. Reserves Group and Bank

2016 2015

RM’000 RM’000

Share premium 380,303 380,303

Statutory reserve 121,697 121,697

Retained profits 4,051,744 3,889,283

Other reserve (55,893) 14,695

- Fair value reserve (60,007) 6,115

- Defined benefit reserve 4,114 8,580

Total reserves 4,497,851 4,405,978

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


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18. Reserves (continued)

The statutory reserve is maintained in compliance with Section 47(2)(f) of the Financial Services Act 2015 and is not distributable as cash dividends. No transfers were made to the statutory reserve during the year as the Bank has met the reserve requirements.

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

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

19. Employee benefits

i. Retirement benefits

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

Group and Bank

2016 2015

RM’000 RM’000

Fair value of plan assets 19,575 20,797 Present value of the funded obligation (18,311) (15,903)

Total employee benefit assets 1,264 4,894

The Group and the Bank make contributions to a fully funded and separately administrated defined benefit scheme (“Defined Benefit Plan”) for its employees. Under the Defined Benefit Plan, eligible employees are entitled to one and a half month of the final/last drawn salary multiplied by all years of continuous employment with the Group and the Bank, not in excess of 40 upon attainment of the retirement age of 55.

For employees who leave before the attainment of the retirement age, the retirement benefit will be computed based on the scale rate stipulated in the rules of the Defined Benefit Plan.

On 1 January 2007, majority of the members’ benefits accrued under the Defined Benefit Plan were converted to the new Defined Contribution Plan. Only those staff who satisfied the criteria below, will continue to be maintained under the Defined Benefit Plan (collectively, Defined Benefit Plan and Defined Contribution Plan are known as “the Plan”).

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

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

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

The Bank intends to wind-up the Plan as at 31 December 2015, subject to regulatory approval. The Plan has been frozen as at 31 December 2015, with full accrued benefits amounts as at 31 December 2015 to be paid out to eligible active members’ EPF accounts once regulatory approval on the Plan wind-up is received. As the Plan is currently in surplus position, no additional future contributions are expected to be made into the Plan given the Plan wind-up. For the purpose of valuation as at 31 December 2016, the Plan wind-up is assumed to be completed in mid-2017.


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19. Employee benefits (continued)

i. Retirement benefits (continued)

Plan assets comprise: Group and Bank 2016 2015 RM’000 RM’000

Equities - 2,225

Malaysian Government Securities 15,327 5,095

Cash and cash equivalent 4,248 9,483

Others - 3,994

19,575 20,797

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

Results from the latest funding valuation recommend a contribution holiday for the 2016 year. The surplus under the Defined Benefit Plan will also be used to fund the contribution requirements of the Defined Contribution Plan. The funding position is reviewed quarterly by the Trustees and the Bank.

Movement in the present value of the defined benefit obligations: Group and Bank 2016 2015 RM’000 RM’000

Defined benefit obligations at 1 January (15,903) (22,857)

Settlements 1,316 3,639

Benefits paid by the plan 82 -

Current service costs and interest (978) (1,920)

Plan changes/amendments - 4,477

Remeasurement/Actuarial gains (2,828) 758

Defined benefit obligations at 31 December (18,311) (15,903)

Movement in the fair value of plan assets: Group and Bank 2016 2015 RM’000 RM’000

Fair value of plan assets at 1 January 20,797 26,554

Contributions paid into the plan* (40) (2,447)

Settlements (1,316) (3,639)

Benefits paid from plan assets (82) -

Remeasurement/Actuarial gains (777) (892)

Interest Income 993 1,221

Fair value of plan assets at 31 December 19,575 20,797

* Negative employer contributions for the year 2016 and 2015 reflect transfer of funds from the Defined Benefit Plan to the Defined Contribution Plan.


73



The amounts recognised in the statements of profit or loss and other comprehensive income are as follows:

Group and Bank 2016 2015 RM’000 RM’000

Current service costs - 875

Past services cost - (4,477)

Interest cost (15) (176)

Plan administration cost 40 87

Amount included under “personnel costs” 25 (3,691)

Movement in the net benefit asset/(liability) recognised in the statements of financial position are as follows:


Balance as at 1 January 4,894 3,697

Included in Profit or Loss

- Current service cost (40) (962)

- Past service cost - 4,477

- Interest income 15 176

(25) 3,691

Included in Other Comprehensive Income

Remeasurement loss (3,605) (135)

Other

Contributions paid by employer - (2,359)

Balance as at 31 December (Note 9) 1,264 4,894

The latest valuation of the Defined Benefit Plan as at 31 December 2016 was conducted by Towers Watson (Malaysia) Sdn. Bhd. The unfunded portion of the total liability will continue to be borne by Citibank Berhad. Projected unit credit method is used to calculate the actuarial present value of promised retirement benefits.


74




Principal actuarial assumptions used at the reporting date (expressed as weighted averages):


Discount rate 4.50% 5.00%

Rate of increase in salary levels - 5.00%

Price inflation - 3.50%

Assumptions regarding future mortality are based on published statistics and mortality tables. The average

life expectancy of an individual retiring is at the age of 60 years.

Historical information

Group and Bank 2016 2015 2014 2013 2012

RM’000 RM’000 RM’000 RM’000 RM’000

Fair value of plan assets 19,575 20,797 26,554 36,889 38,934

Present value of the defined benefit obligation (18,311) (15,903) (22,857) (26,661) (31,391)

Surplus in the plan 1,264 4,894 3,697 10,228 7,543

Experience adjustments arising on plan assets - (losses)/gains (777) (892) (1,276) 2,120 1,168

Experience adjustments arising on plan liabilities - (losses)/gains (2,828) 758 608 1,775 2,866

Assumption adjustment on plan liabilities – gains - - - 2,678 1,155

Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

Group and Bank Increase Decrease Increase Decrease 2016 2016 2015 2015 RM’000 RM’000 RM’000 RM’000

Defined benefit obligation

Discount rate (1% movement) (87) 88 (703) 753

Other assumptions are held constant when quantifying the sensitivity results to a particular assumption.

The sensitivity results above determine their individual impact on the Plan’s end of year defined benefit obligation. In reality, the Plan is subject to multiple external experience items which may move the defined benefit obligation in similar or opposite directions, while the Plan’s sensitivity to such changes can vary over time.


75


ii. Share option plan

The Group and the Bank have a number of stock option programmes for their officers and employees as part of a discretionary award package. Certain stock awards with performance conditions or certain claw back provisions are subject to variable accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’s stock price. Options are granted on Citigroup stock at the market value denominated in US dollar at the time of grant. Compensation cost related to awards granted to employees who meet certain age plus years of service requirements (retirement eligible employees) is accrued in the year prior to the grant date.

Group and Bank

2016 2015

Outstanding at 1 January - 53,244

Exercised - (39,617)

Transfer in - 66

Lapsed/Cancelled - (13,693)

Outstanding at 31 December - -

Group and Bank

2016 2015

Details of share options exercised during the year:

Year of expiry - 2015

Average exercise price per ordinary share (RM) - 229.37

Aggregated issue proceeds (RM’000) - 9,087

Fair value at date of vesting (RM’000) - 9,087

Terms of the options outstanding at 31 December:

Group and Bank

2016 2015 Expiry dates Exercise price - -

- -

RM 142.66Oct 2015


76



iii. Share capital accumulation plan (CAP)

The Group and the Bank have a number of capital accumulation programmes for the officers and employees. The Core CAP is a discretionary award of restricted shares. The number of CAP shares in a Core CAP award is calculated using a 25% discount from the market price of Citigroup common stock. Supplemental CAP is a discretionary retention award programme composed of an award of CAP shares. The difference between Supplemental CAP award and a Core CAP award is that generally, a Supplementary CAP is given in addition to the discretionary award package and the number of shares awarded will not be based on a discount from the market price of Citigroup common stock. CAP granted in 2016 typically vest 25% each year for four years, with the first vesting date occurring 12 months after the grant date. Shares acquired upon exercise of a CAP option generally may not be sold for two years following the exercise date.

Group and Bank

2016 2015

‘000 ’000

Outstanding at 1 January 39,208 42,081

Granted 14,130 14,193

Vested (17,437) (21,273)

Net transferred out 6,984 4,207

Outstanding at 31 December 42,885 39,208

Details of CAP granted during the year:

Group and Bank

2016 2015

Expiry dates Feb 15, 2020 Feb 15, 2019

Average grant price per ordinary share (RM) 166.21 214.99

Aggregated proceeds if shares are issued (RM’000) 2,346 3,051

Details of CAP vested during the year:

Average exercise price per ordinary share (RM) 228.38 243.29

Aggregated issue proceeds (RM’000) 8,113 4,270

Fair value at date of vesting (RM’000) 9,602 5,634


77

20. Interest income Group and Bank 2016 2015 RM’000 RM’000 Loans and advances

- Interest income other than recoveries from impaired loans 1,242,155 1,230,120

- Recoveries from impaired loans 54,422 52,145

Money at call and deposit placements with financial institutions 135,555 119,776

Financial assets held-for-trading 44,643 40,372

Financial investments available-for-sale 93,940 57,908

Securities purchased under resale agreements 5,458 17,043

1,576,173 1,517,364

(Amortisation of premium)/Accretion of discount (13,069) 5,280

Total interest income 1,563,104 1,522,644

21. Interest expense Group and Bank 2016 2015 RM’000 RM’000

Deposits and placements of banks and other financial institutions 48,867 59,937

Deposits from customers 361,590 361,966

Others 4,306 4,309

414,763 426,212


iii. Share capital accumulation plan (CAP) (continued)

Terms of the CAP outstanding at 31 December:

Group and Bank

2016 2015 Year of expiry Grant price

- 6,392

3,235 -

- 12,293

10,120 -

- 6,329

4,691 -

- 14,194

10,709 -

14,130 -

42,885 39,208

RM131.11

RM136.98

RM188.62

RM197.08

RM213.23

RM222.79

RM214.99

RM224.63

RM166.21

Jan 2016

Jan 2016

Feb 2017

Feb 2017

Feb 2018

Feb 2018

Feb 2019

Feb 2019

Feb 2020


78


22. Other operating income Group and Bank 2016 2015 RM’000 RM’000 Fee income:

Commission 56,131 54,766

Service charges and fees 20,240 21,470

Guarantee fees 7,937 9,217

Bankcard fees 330,658 292,097

Insurance premium and referral 44,821 47,233

Other fee income 52,046 79,667

511,833 504,450

Trading income:

Unrealised (loss)/gain from revaluation of financial

assets held-for-trading ((2,749) 12,356

Net gain from sales of securities

- Financial assets held-for-trading 18,232 15,649

- Financial investments available-for-sale 43,672 18,026

59,155 46,031

Other income:

Foreign exchange gain, net 112,394 277,091

Unrealised gain/(loss) from derivatives 136,539 (86,546)

Realised loss from derivatives (41,611) (18,439)

(Loss)/Gain on disposal of plant and equipment (310) 75

Amount recovered from impaired securities - 25,748

207,012 197,929

778,000 748,410


79

23. Other operating expenses Group and Bank

2016 2015

RM’000 RM’000

Personnel costs - Salaries, allowances and bonuses 315,238 321,483

- Contributions to Employees Provident Fund 46,095 42,997

- Staff benefits and other compensations 36,318 34,299

- Others 3,393 6,638

401,044 405,417

Establishment costs

- Depreciation 16,406 20,116

- Rental of premises 24,126 26,109

- Hire of equipments 235 165

- Utilities 4,877 4,988

- Plant and equipment written off 2,519 66

- Others 12,258 13,234

60,421 64,678

Marketing expenses

- Advertisement and promotional expenses 24,742 28,506

- Others 418 498

25,160 29,004

Administrative and general expenses

- Processing cost 361,693 386,348

- Auditors’ remuneration

- Statutory audit 459 429

- Other services 330 349

- Stationeries and supplies 9,111 3,380

- Communication expenses 25,323 18,660

- Maintenance of office equipment 1,903 380

- Others 94,124 118,247

492,943 527,793

Total other operating expenses 979,568 1,026,892


80


23. Other operating expenses (continued) Group and Bank

2016 2015

RM’000 RM’000 i. CEO and Directors’ remuneration

Executive Directors (including CEO) Salary and other remuneration, including meeting allowances 2,298 1,972

Bonuses 2,555 2,103

Benefits-in-kind 176 166

Non-executive Directors

Fees 625 543

5,654 4,784

ii. Other key management personnel:

Short-term employee salary and benefits 2,355 2,197

Salary Benefits- and others in- remunerations Fees Bonuses kind Total

RM’000 RM’000 RM’000 RM’000 RM’000

Executive Director and CEO

Lee Lung Nien 2,298 - 2,555 176 5,029

Non-executive Directors

Terence Kent Cuddyre - 125 - - 125

Dato’ Siow Kim Lun @ Siow Kim Lin - 125 - - 125

Agnes Liew Yun Chong - - - - -

Datuk Ali Bin Tan Sri Abdul Kadir - 125 - - 125

Tan Sri Dr. Ghauth bin Jasman - 125 - - 125

Philip Tan Kuay Koon - 125 - - 125

2,298 625 2,555 176 5,654


81

24. Allowance for loans, advances and financing Group and Bank

2016 2015

RM’000 RM’000 Allowance for/(Write back of) impairment losses on loans, advances and financing:

Individual assessment allowance 8,938 12,395 Collective assessment allowance 77,812 (42,296)

Impaired loans, advances and financing - recovered (84,866) (87,325)

- written off 198,370 219,370

200,254 102,144

25. Tax expense Group and Bank

2016 2015

RM’000 RM’000 Malaysian income tax

- current year 192,600 208,643

- prior year (over)/under provision (756) 2,421

191,844 211,064 Deferred tax expense

- origination and reversal of temporary differences (910) (19,412)

- prior year under/(over) provision 2,225 (5,816)

193,159 185,836

A reconciliation of the effective tax expense based on the applicable tax rate is as follows:

Group and Bank

2016 2015

RM’000 RM’000

Profit before taxation 805,620 755,261

Income tax using Malaysian tax rate of 24% (2015: 25%) 193,349 188,815

Non-deductible expenses 469 461

Effect of changes in tax rate (1,681) -

Others (447) (45)

191,690 189,231

Over provision in prior year 1,469 (3,395)

193,159 185,836


82


26. Earnings per share

The earnings per ordinary share has been calculated based on the profit for the year of RM612,461,000 (2015 - RM569,425,000) divided by 121,696,972 units of ordinary shares of RM1 each issued during the financial year under review.

27. Dividends Dividends recognised by the Bank are:

Sen Total per share amount Date of RM’000 payment 2016 Final 2015 ordinary 370 450,000 25 July 2016

2015 Final 2014 ordinary 329 400,000 28 July 2015

After the reporting period, the following dividend was proposed by the Directors. This dividend will be recognised in subsequent financial period upon approval by the equity holder of the Bank.

Sen Total per share amount RM’000

Final 2016 ordinary 452 550,000

28. Significant related party transactions and balances

For the purpose of these financial statements, parties are considered to be related to the Group or the Bank if the Group or the Bank has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Bank and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

The related parties of the Group and the Bank are:

(i) Parent companies Parent companies of the Group and the Bank are Citigroup Holdings (Singapore) Pte. Ltd. and Citigroup Inc.

(ii) Other related companies Entities which are related by virtue of having Citigroup Holdings (Singapore) Pte. Ltd. as the holding

company or having Citigroup Inc. as the ultimate holding company.

(iii) Key management personnel Key management personnel are defined as those persons having authority and responsibility for

planning, directing and controlling the activities of the Group or the Bank either directly or indirectly. The key management personnel of the Group or the Bank includes all the Directors and certain members of senior management of the Group or the Bank. Key management personnel compensation is disclosed in Note 23 (i) and (ii).


83

28. Significant related party transactions and balances (continued)

Transactions and balances with parent companies and other related companies Group and Bank

Other Other Parent related Parent related companies companies companies companies 2016 2016 2015 2015

RM’000 RM’000 RM’000 RM’000

Income

Interest on interest bearing deposits 1,970 9,724 1,337 12,141

Other income 31,244 341,087 11 87,024

33,214 350,811 1,348 99,165

Expenditure

Interest on interest bearing deposits - 9,416 6 4,283

Other expenses 32,561 318,209 36,599 352,703

32,561 327,625 36,605 356,986

Amount due from

Interest bearing deposits - 556,798 - 2,167,969

Current account balances 4,486 503,822 379 1,193,786

Other balances 27,786 160,441 8 196,833

32,272 1,221,061 387 3,558,588

Amount due to

Interest bearing deposits - 2,140,806 - 296,999

Current account balances - 2,029,014 - 950,648

Other balances 2,042 248,375 15,541 225,938

2,042 4,418,195 15,541 1,473,585

All related party transactions are conducted at arm’s length basis and on normal commercial terms which are

not more favourable than those generally available to public.


84


29. Credit transactions and exposures with connected parties Group and Bank

2016 2015

RM’000 RM’000 Outstanding credit exposures with connected parties 912,437 721,187

Total credit exposure which is non-performing or in default - -

Total credit exposures 62,692,238 59,671,418

Percentage of outstanding credit exposures to connected parties - as a proportion of total credit exposures 1.46% 1.21%

- as a proportion of capital base 18.58% 15.20%

- which is non-performing or in default 0.00% 0.00%

The disclosure on Credit Transactions and Exposures with Connected Parties above are presented in accordance with para 9.1 of Bank Negara Malaysia’s revised Guidelines on Credit Transactions and Exposures with Connected Parties, which became effective on 1 January 2008.

Based on these guidelines, a connected party refers to the following:

i. Directors of the Bank and their close relatives;

ii. Controlling shareholder and his close relatives;

iii. Executive Officer, being a member of management having authority and responsibility for planning, directing and/or controlling the activities of the Bank, and his close relatives;

iv. Officers who are responsible for or have the authority to appraise and/or approve credit transactions or review the status of existing credit transactions, either as a member of a committee or individually, and their close relatives;

v. Firms, partnerships, companies or any legal entities which control, or are controlled by any person listed in (i) to (iv) above, or in which they have an interest, as a director, partner, executive officer, agent or guarantor and their subsidiaries or entities controlled by them;

vi. Any person for whom the persons listed in (i) to (iv) above is a guarantor; and

vii. Subsidiary of or an entity controlled by the Bank and its connected parties.

Credit transactions and exposures to connected parties as disclosed above include the extension of credit facilities and/or off-balance sheet credit exposures such as guarantees, trade-related facilities and loan commitments. They also include holdings of equities and private debt securities issued by the connected parties.

The credit transactions with connected parties above are all transacted on an arm’s length basis and on terms and conditions no more favourable than those entered into with other counterparties with similar circumstances and creditworthiness. Due care has been taken to ensure that the creditworthiness of the connected party is not less than that normally required of other persons.


85

30. Derivative financial instruments

Positive Negative

Contract fair fair

amount value value

RM’000 RM’000 RM’000

2016 Foreign exchange related contracts:

- Forwards 64,018,074 799,220 590,889

- Cross currency interest rate swaps 9,184,991 496,851 430,349

- Options 935,499 11,200 1,246

Interest rate contracts:

- Futures 897,200 - -

- Swaps 49,709,479 128,838 105,904

- Options 343,693 1,558 -

Equity related contracts 102,340 1,174 1,061

Others 430,855 34,640 50,841

125,622,131 1,473,481 1,180,290

Note 9 Note 16

2015 Foreign exchange related contracts:

- Forwards 45,890,123 686,518 590,725

- Cross currency interest rate swaps 3,986,599 411,420 489,485

- Options 1,955,440 21,884 3,342

Interest rate contracts:

- Swaps 19,151,283 133,713 122,768

- Options 365,064 2,286 -

Equity related contracts 255,542 76 76

Others 155,382 25,959 40,326

71,759,433 1,281,856 1,246,722

Note 9 Note 16


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31. Financial risk management

The Group’s and the Bank’s risk management framework are designed to monitor, evaluate and manage the principal risk they assume in conducting their activities. These risks include the following:

■ credit risk

■ market risk

■ operational risk

1. Credit Risk

Credit risk is the risk of financial loss to the Group and the Bank if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s and the Bank’s loans and advances to customers and other banks, and investment in debt securities and when the Group or the Bank acts as an intermediary on behalf of its clients and other third parties.

The credit risk management process of the Group and the Bank relies on corporate-wide standards to ensure consistency and integrity, with business- specific policies and practices to ensure applicability and ownership. While business managers and independent risk management are jointly responsible for managing risk/return trade-offs as well as establishing limits and risk management practices, the origination and approval roles are clearly defined and segregated. In addition to conforming to established corporate standards, independent credit risk management is responsible for establishing policies that comply with local regulations and any other relevant legal requirements.

Independent credit risk management is also responsible for implementing portfolio limits, including obligor limits through risk rating, maturity and business segments limits to ensure diversification of portfolios, monitoring business risk management performance, providing on-going assessment of portfolio credit risk and approving new products.

Continuous monitoring of credit behaviour aided by sophisticated scoring modules, plus portfolio delinquency performance allows independent credit risk management to constantly assess the health of the credit portfolio.

The Group and the Bank secure various forms of collateral to mitigate credit risk exposures. The main types of collateral obtained by the Group and the Bank to mitigate credit risk are as follows:

■ for residential mortgages - charges over residential properties

■ for commercial property loans - charges over the properties being financed

■ for share margin financing - pledges over quoted securities

■ for other loans - charges over business assets such as premises, inventories, trade receivables or deposits


87

31. Financial risk management (continued) A. Credit risk exposures and credit risk concentration

The following tables present the Group’s maximum exposure to credit risk of its on and off balance sheet financial instruments at each reporting dates, by industry and geographical analysis, before taking into account collateral held or other credit enhancements.

i. By Industry analysis

Financial Services, Wholesale Government Insurance, Electricity, & Retail and House- Real Estate Gas & Trade, Transport, Social & Central hold & Business Primary Mining & Water Restaurants Storage & Community Other Group Banks Loans Services Agriculture Quarrying Manufacturing Supply Construction & Hotels Communication Services Sectors Total

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

On-Balance Sheet

Cash and short term funds 9,040,700 - 2,385,081 - - - - - - - - - 11,425,781

Deposits and placements with bank and other financial institutions - - 794,768 - - - - - - - - - 794,768

Securities purchased under resale agreements 775,397 - - - - - - - - - - - 775,397

Financial assets held- for-trading 1,148,226 - 83,806 - - - - - - - - - 1,232,032

Financial investments available-for-sale 2,553,719 - 6,700 - - - - - - - - 315 2,560,734

Loans, advances and financing - 17,851,495 1,345,966 3,064 27,633 2,156,982 963 37,989 1,089,658 917,998 124,930 1,269,642 24,826,320

Other assets 43,952 - 1,370,585 (3) (362) 199,387 32,378 19 21,003 1,062 84 187,604 1,855,709

Statutory deposits with Bank Negara Malaysia 502,723 - - - - - - - - - - - 502,723

14,064,717 17,851,495 5,986,906 3,061 27,271 2,356,369 33,341 38,008 1,110,661 919,060 125,014 1,457,561 43,973,464

Contingent liabilities - - 1,071,358 71 592,187 709,178 140,531 27,639 453,530 274,574 1,173 - 3,270,241

Commitments - 25,043,822 1,555,722 92,580 158,914 2,482,684 250 39,841 1,288,639 20,224 44,378 44,221 30,771,275

Total Credit Exposures 14,064,717 42,895,317 8,613,986 95,712 778,372 5,548,231 174,122 105,488 2,852,830 1,213,858 170,565 1,501,782 78,014,980


88


Financial Services, Wholesale Government Insurance, Electricity, & Retail and House- Real Estate Gas & Trade, Transport, Social & Central hold & Business Primary Mining & Water Restaurants Storage & Community Other Group Banks Loans Services Agriculture Quarrying Manufacturing Supply Construction & Hotels Communication Services Sectors Total

2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet

Cash and short term funds 5,220,110 - 4,663,077 - - - - - - - - - 9,883,187

Deposits and placements with bank and other financial institutions - - 839,489 - - - - - - - - - 839,489

Securities purchased under resale agreements 145,107 - - - - - - - - - - - 145,107

Financial assets held- for-trading 846,298 - - - - - - - - - - - 846,298

Financial investments available-for-sale 1,079,920 - - - - - - - - - - 7,015 1,086,935

Loans, advances and financing - 18,181,294 659,420 20,079 470,867 2,797,497 1,638 27,348 864,126 258,292 12,051 1,151,119 24,443,731

Other assets 18,914 - 1,041,114 2,170 302 133,431 37,916 16 8,974 24,237 8 332,780 1,599,862

Statutory deposits with Bank Negara Malaysia 544,910 - - - - - - - - - - - 544,910

7,855,259 18,181,294 7,203,100 22,249 471,169 2,930,928 39,554 27,364 873,100 282,529 12,059 1,490,914 39,389,519

Contingent liabilities - - 466,214 9,031 993,716 513,088 199,629 36,043 966,298 278,995 979 69,995 3,533,988

Commitments - 23,283,035 1,111,198 42,430 127,844 1,774,203 11,465 13,770 823,456 185,003 695 2,774 27,375,873

Total Credit Exposures 7,855,259 41,464,329 8,780,512 73,710 1,592,729 5,218,219 250,648 77,177 2,662,854 746,527 13,733 1,563,683 70,299,380

31. Financial risk management (continued) A. Credit risk exposures and credit risk concentration (continued)

i. By Industry analysis (continued)

The disclosures represented the Bank’s exposures except for RM20,000 cash and cash equivalents deposited by the subsidiaries which were eliminated in the above tables.


89

Hong Kong & North United Other Group Malaysia Singapore China PRC Japan Australasia America Kingdom countries Total

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

On-Balance Sheet

Cash and short term funds 10,493,788 358,104 - - 251,101 89,101 178,352 55,335 11,425,781

Deposits and placements with banks and other financial institutions 621,620 173,148 - - - - - - 794,768

Securities purchased under resale agreements 775,397 - - - - - - - 775,397

Financial assets held- for-trading 1,232,032 - - - - - - - 1,232,032

Financial investments available-for-sale 2,385,941 - - - - 174,793 - - 2,560,734

Loans, advances and financing 24,826,320 - - - - - - - 24,826,320

Other assets 1,629,003 59,250 17,146 (1) 1,498 53,420 77,073 18,320 1,855,709

Statutory deposits with Bank Negara Malaysia 502,723 - - - - - - - 502,723

42,466,824 590,502 17,146 (1) 252,599 317,314 255,425 73,655 43,973,464

Contingent liabilities 3,128,545 21,233 13,028 885 4,601 30,070 7,156 64,723 3,270,241

Commitments 30,771,275 - - - - - - - 30,771,275

Total Credit Exposures 76,366,644 611,735 30,174 884 257,200 347,384 262,581 138,378 78,014,980


ii. By Geographical analysis


90



ii. By Geographical analysis (continued)

Hong Kong & North United Other Group Malaysia Singapore China PRC Japan Australasia America Kingdom countries Total

2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet

Cash and short term funds 6,133,224 1,371,249 160,294 56,169 74,538 873,712 1,013,004 200,997 9,883,187

Deposits and placements with banks and other financial institutions 800,000 39,489 - - - - - - 839,489

Securities purchased under resale agreements 145,107 - - - - - - - 145,107

Financial assets held- for-trading 846,298 - - - - - - - 846,298

Financial investments available-for-sale 1,086,935 - - - - - - - 1,086,935

Loans, advances and financing 24,443,731 - - - - - - - 24,443,731

Other assets 1,463,130 83,427 59 (1) 704 32,740 20,027 (224) 1,599,862

Statutory deposits with Bank Negara Malaysia 544,910 - - - - - - - 544,910

35,463,335 1,494,165 160,353 56,168 75,242 906,452 1,033,031 200,773 39,389,519

Contingent liabilities 3,335,627 12,125 25,993 28 2,348 46,664 1,719 109,484 3,533,988

Commitments 27,375,873 - - - - - - - 27,375,873

Total Credit Exposures 66,174,835 1,506,290 186,346 56,196 77,590 953,116 1,034,750 310,257 70,299,380



91

31. Financial risk management (continued)

B. Deposits and placements with banks and other financial institutions

i. Deposits and placements with banks and other financial institutions analysis by credit rating Group and Bank

2016 2015

RM’000 RM’000

AAA 420,000 200,000

BBB+ 374,768 639,489

794,768 839,489

ii. Deposits and placements with banks and other financial institutions analysis by geographical location where the credit risk of issuers reside, regardless of where the assets are booked, is as follows:

Group and Bank

2016 2015

RM’000 RM’000

Malaysia 621,620 800,000

Other 173,148 39,489

794,768 839,489

C. Other securities Group and Bank

2016 2015

RM’000 RM’000

Financial assets held-for-trading 1,232,032 846,298

Financial investments available-for-sale 2,560,734 1,086,935

3,792,766 1,933,233


92



C. Other securities (continued)

i. Other securities analysis by credit rating

At the reporting date, the credit quality of investment in other securities by designation of an external credit assessment institution is as follows:

Group and Bank

2016 2015

RM’000 RM’000

AAA 174,793 -

A+ to A- 3,610,958 1,926,218

Unrated 7,015 7,015

3,792,766 1,933,233

ii. Other securities analysis by geographical location where the credit risk of issuers reside, regardless of where the assets are booked, is as follows:

Group and Bank

2016 2015

RM’000 RM’000

Malaysia 3,617,973 1,933,233

North America 174,793 -

3,792,766 1,933,233


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D. Credit quality of loans, advances and financing Group and Bank

2016 2015

RM’000 RM’000 Loans, advances and financing

- neither past due nor impaired 22,960,554 22,465,503

- past due but not impaired 1,339,070 1,451,042

- impaired 526,696 527,186

Gross amount 24,826,320 24,443,731

Individual assessment allowance (124,952) (172,355)

Collective assessment allowance (416,271) (338,459)

Carrying amount 24,285,097 23,932,917

Neither past due nor impaired

Included in the total loans, advances and financing of neither past due nor impaired are renegotiated loans. The analysis below represents the carrying amount of loans that would otherwise be past due or impaired if their terms had not been renegotiated. These renegotiated loans are considered neither past due nor impaired after they have been monitored as impaired loans until a minimum number of payments have been received under the new terms.

Group and Bank

2016 2015

RM’000 RM’000

Renegotiated loans 191,763 554,933

Past due but not impaired

Analysis of loans, advances and financing to customers that are past due but not impaired analysed based on aging are as follows:

Group and Bank

2016 2015

RM’000 RM’000

1 - 29 dpd 1,009,164 1,043,674

30 - 59 dpd 241,566 289,881

60 - 89 dpd 88,034 117,372

90 - 119 dpd 111 -

120 - 180 dpd - 5

>180 dpd 195 110

1,339,070 1,451,042


94



D. Credit quality of loans, advances and financing (continued)

Impaired

Loans, advances and financing are classified as impaired when they meet one of the following criteria:

i. principal or interest or both are past due for three (3) months or more;

ii. where there is an individual impairment provision on the loan;

iii. impaired loans that have been rescheduled or restructured that have not met the continuous repayment behavior based on the revised rescheduled and/or restructured terms over the observation period.

Loans, advances and financing to customers that are individually impaired analysed by age are as follows:

Group and Bank

2016 2015

RM’000 RM’000

Current 93,264 82,110

1 - 29 dpd 59,044 37,038

30 - 59 dpd 29,468 32,854

60 - 89 dpd 50,687 44,112

90 - 1 19 dpd 70,903 65,895

120 - 180 dpd 84,178 89,242

>180 dpd 139,152 175,935

526,696 527,186

Estimated value of collaterals against past due but not impaired and impaired loans are RM838,362,000 (2015 - RM831,032,000).


95

31. Financial risk management (continued) 2. Market Risk

Market risk encompasses price risk and liquidity risk, both arising from the normal course of business operations of the Group and the Bank. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return on risk.

Market risk in the Group and the Bank are managed through corporate-wide standards and business-specific policies and procedures with the help of responsible personnel and committees delegated by the Board of Directors such as the Risk Management Committee, Asset and Liability Committee and Market Risk Management. The business is required to establish risk measures, limits and controls, clearly defining approved risk profiles within the parameters of the Group’s and the Bank’s overall risk appetite and for operating within the established market risk limit framework. Independent market risk management establishes policies and procedures, approves limits and monitors exposures against limits.

Price Risk

Price risk is the risk associated to earnings arising from changes in interest rate, foreign exchange rates, equity and commodity prices and in their implied volatilities. Price risk arises in non-trading as well as trading portfolios. Price risk in non-trading portfolio is measured predominantly through earnings-at-risk and factor sensitivities supplemented with additional tools such as stress testing and cost-to-close analysis. Price risk in trading portfolios is measured through tools such as factor sensitivities, value-at-risk and stress testing.

Interest rate risk primarily results from the timing differences in the repricing of interest bearing assets, liabilities and commitments. It is also related to positions from non-interest bearing liabilities including shareholders’ funds and current accounts, as well as from certain fixed rate loans and liabilities.

The Group and the Bank are exposed to such risks associated with the effects of the fluctuations in the prevailing market interest rates on its financial positions and cash flows.

Factor sensitivities are expressed as the change in the value of a position for a defined change in a market risk factor. For the sensitivity analysis provided in this section, the Group and the Bank have used a 90 basis points movement for interest rates and a 4% movement in foreign exchange rates to measure the impact of these market risk movements on the Group and the Bank.

Interest rate risk – Sensitivity analysis

At 31 December 2016, it is estimated that an increase from 28 to 145 basis points (2015: a general increase of 90 basis points) in interest rate across different countries, with all other variables held constant, would decrease the Group’s and the Bank’s profit before tax by approximately RM13,849,595 (2015: RM7,100,653) whereas a decrease from 28 to 145 basis points (2015: general decrease of 90 basis points) in interest rate across different countries, with all other variables held constant, would have an equal but opposite effect.

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the reporting date and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date and that all other variables, in particular foreign exchange rates, remain constant. The above basis point increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual reporting date.

Foreign currency risk – Sensitivity analysis

As at 31 December 2016, it is estimated that a movement of 6% (2015: 4%) in Ringgit Malaysia (“RM”) against foreign currencies, with all other variables held constant, would result in maximum loss of approximately RM11,782,862 (2015: RM12,369,248).

The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the reporting date and had been applied to the Group’s and the Bank’s exposure to currency risk for both derivative and non- derivative financial instruments in existence at that date, and that all other variables, in particular interest rate, remains constant. The sensitivity analysis includes balances where the denomination of the balances is in a currency other than the Ringgit Malaysia (“RM”).

The stated changes represent management’s assessment of reasonably possible changes in foreign exchange rates over the period until the next annual reporting date. Results of the analysis represent an aggregation of the effects on the Group’s and the Bank’s profit before tax measured in the respective functional currencies, translated into Ringgit Malaysia (“RM”) at the exchange rate ruling at the reporting date for presentation purposes.


96



2. Market Risk (continued)

Liquidity Risk

Liquidity risk is the risk that the Group and the Bank will not be able to meet its financial commitments when due. Under the Group’s and the Bank’s internal liquidity risk management policy, there is a set of standards for the measurement of liquidity risk in order to ensure consistency, stability in methodologies and transparency of risk. Management of liquidity is performed on a daily basis and is monitored by the Treasurer. The Asset and Liability Committee and the Treasurer undertake the joint responsibility of overall liquidity risk management which covers establishing and endorsing the annual funding and liquidity plan, liquidity limits, liquidity ratios, market triggers and periodic stress tests.

The Group and the Bank include the net cash flow position for derivatives as part of their daily liquidity reports under off-balance sheet items, which are consolidated together with the on-balance sheet items to monitor the overall liquidity position of the Group and the Bank. The daily report prepared to monitor the daily liquidity position is known as the Market Access Report (“MAR”). It is prepared by major currencies and it has maturity analysis ranging from overnight to more than 2 years and limits are set for each tenor bucket. Maturity mismatches are monitored through the daily MAR report for necessary treasury actions on funding and gapping.

Limits are determined by the ultimate holding company and are reviewed as often as on a quarterly basis and is done in conjunction with the liquidity stress testing.

The following table indicates the effective interest rate at the reporting dates and periods in which the financial instruments reprice or mature, whichever is earlier.

i. Interest/profit rate risk

Effective Up to 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 Non-interest Trading interest Group month months months years years sensitive book Total rate

2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Assets

Cash and short term funds 10,808,572 - - - - 617,209 - 11,425,781 2.06%

Deposits and placements with banks and other financials institutions - 784,842 9,926 - - - - 794,768 2.88%

Securities purchased under resale agreements 775,397 - - - - - - 775,397 1.83%

Financial assets held-for-trading - - - - - - 1,232,032 1,232,032 3.35%

Financial investments available-for-sale - - 4,150 1,967,389 589,195 - - 2,560,734 3.01%

Loans, advances and financing

- performing 2,739,212 2,153,690 6,669,718 1,948,343 10,788,661 (416,271) - 23,883,353 5.44%

- impaired - - - - - 401,744 - 401,744

Other assets - - - - - 382,228 1,473,481 1,855,709

Statutory deposits with Bank Negara Malaysia - - - - - 502,723 - 502,723

Deferred tax assets - - - - - 52,606 - 52,606

Plant and equipment - - - - - 44,314 - 44,314

Total assets 14,323,181 2,938,532 6,683,794 3,915,732 11,377,856 1,584,553 2,705,513 43,529,161


97


i. Interest/profit rate risk (continued)



Liabilities and Shareholder‘s Equity

Deposits from customers 25,867,186 1,267,958 2,427,527 8,958 - - - 29,571,629 1.38%

Deposits and placements with banks and other financial institutions 6,708,643 70,042 15,673 - - - - 6,794,358 0.96%

Bills and acceptances payable - - - - - 64,314 - 64,314

Other liabilities - - - - - 1,299,022 1,180,290 2,479,312

Total liabilities 32,575,829 1,338,000 2,443,200 8,958 - 1,363,336 1,180,290 38,909,613

Shareholders’ equity - - - - - 4,619,548 - 4,619,548

Total liabilities and shareholder’s equity 32,575,829 1,338,000 2,443,200 8,958 - 5,982,884 1,180,290 43,529,161

On-balance sheet interest sensitivity gap (18,252,648) 1,600,532 4,240,594 3,906,774 11,377,856 (4,398,331) 1,525,223

Off-balance sheet interest sensitivity gap 9,065,305 3,203,731 (2,026,706) (12,316,500) 877,111 - -

(9,187,343) 4,804,263 2,213,888 (8,409,726) 12,254,967 (4,398,331) 1,525,223


98





99



Assets

Cash and short term funds 8,431,022 - - - - 1,452,165 - 9,883,187 1.54%

Deposits and placements with banks and other financials institutions - 825,779 13,710 - - - - 839,489 3.97%

Securities purchased under resale agreements 145,107 - - - - - - 145,107 3.50%

Financial assets held-for-trading - - - - - - 846,298 846,298 3.37%

Financial investments available-for-sale - - - 980,135 106,800 - - 1,086,935 3.18%

Loans, advances and financing

- performing 2,843,271 1,479,594 7,400,827 754,630 11,438,222 (338,458) - 23,578,086 5.62%

- impaired - - - - - 354,831 - 354,831

Other assets - - - - - 318,006 1,281,856 1,599,862

Statutory deposits with Bank Negara Malaysia - - - - - 544,910 - 544,910

Deferred tax assets - - - - - 39,510 - 39,510

Plant and equipment - - - - - 44,985 - 44,985

Total assets 11,419,400 2,305,373 7,414,537 1,734,765 11,545,022 2,415,949 2,128,154 38,963,200





Liabilities and Shareholder‘s Equity

Deposits from customers 24,518,116 1,114,450 1,715,370 5,763 - - - 27,353,699 1.40%

Deposits and placements with banks and other financial institutions 4,197,252 49,144 181,900 - - - - 4,428,296 1.20%

Bills and acceptances payable - - - - - 50,341 - 50,341

Other liabilities - - - - - 1,356,467 1,246,722 2,603,189

Total liabilities 28,715,368 1,163,594 1,897,270 5,763 - 1,406,808 1,246,722 34,435,525

Shareholders’ equity - - - - - 4,527,675 - 4,527,675

Total liabilities and shareholder’s equity 28,715,368 1,163,594 1,897,270 5,763 - 5,934,483 1,246,722 38,963,200

On-balance sheet interest sensitivity gap (17,295,967) 1,141,779 5,517,266 1,729,002 11,545,022 (3,518,534) 881,432

Off-balance sheet interest sensitivity gap 9,654,333 2,018,736 (1,171,215) (10,435,812) 476,518 - -

(7,641,634) 3,160,515 4,346,051 (8,706,810) 12,021,540 (3,518,534) 881,432


100




ii. Foreign currency risk

Foreign currency risk results in the Group’s exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The tables below summarise the RM equivalent amount of the Group’s and the Bank’s exposure to foreign currency exchange rate risk as at reporting date:

Group MYR USD JPY Others Total

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

Assets

Cash and short term funds 8,916,249 1,775,698 - 733,834 11,425,781

Deposits and placements with banks and other financial institutions 620,000 52,086 - 122,682 794,768

Securities purchased under resale agreements 775,397 - - - 775,397

Financial assets held-for-trading 1,232,032 - - - 1,232,032

Financial investments available-for-sale 2,385,941 174,793 - - 2,560,734

Loans, advances and financing 20,449,206 3,659,068 122,206 54,617 24,285,097

Other assets 1,570,733 169,849 9,528 105,599 1,855,709

Statutory deposits with Bank Negara Malaysia 502,723 - - - 502,723

Deferred tax assets 52,606 - - - 52,606

Plant and equipment 44,314 - - - 44,314

Total assets 36,549,201 5,831,494 131,734 1,016,732 43,529,161

Liabilities

Deposits from customers 19,769,609 8,484,383 67,551 1,250,086 29,571,629

Deposits and placements of banks and other financial institutions 5,685,439 926,565 11,255 171,099 6,794,358

Bills and acceptances payable 1,622 55,204 5,932 1,556 64,314

Other liabilities 2,162,909 122,846 17,120 176,437 2,479,312

Total liabilities 27,619,579 9,588,998 101,858 1,599,178 38,909,613

Shareholder’s equity 4,619,548 - - - 4,619,548

Total liabilities and shareholder’s equity 32,239,127 9,588,998 101,858 1,599,178 43,529,161


101


ii. Foreign currency risk (continued)

The disclosures represented the Bank’s exposures except for RM20,000 cash and cash equivalents being deposited by the subsidiaries were eliminated in the above tables.


102


Group MYR USD JPY Others Total

2015 RM’000 RM’000 RM’000 RM’000 RM’000

Assets

Cash and short term funds 5,598,642 2,326,746 257,191 1,700,608 9,883,187

Deposits and placements with banks and other financial institutions 800,000 12,331 - 27,158 839,489

Securities purchased under resale agreements 145,107 - - - 145,107

Financial assets held-for-trading 846,298 - - - 846,298

Financial investments available-for-sale 1,086,935 - - - 1,086,935

Loans, advances and financing 21,793,672 2,071,222 35,469 32,554 23,932,917

Other assets 375,163 1,163,658 1,017 60,024 1,599,862

Statutory deposits with Bank Negara Malaysia 544,910 - - - 544,910

Deferred tax assets 39,510 - - - 39,510

Plant and equipment 44,985 - - - 44,985

Total assets 31,275,222 5,573,957 293,677 1,820,344 38,963,200

Liabilities

Deposits from customers 18,482,516 7,500,038 55,013 1,316,132 27,353,699

Deposits and placements of banks and other financial institutions 3,277,054 710,367 222,807 218,068 4,428,296

Bills and acceptances payable 2,079 43,785 810 3,667 50,341

Other liabilities 1,319,882 1,185,404 3,646 94,257 2,603,189

Total liabilities 23,081,531 9,439,594 282,276 1,632,124 34,435,525

Shareholder’s equity 4,527,675 - - - 4,527,675

Total liabilities and shareholder’s equity 27,609,206 9,439,594 282,276 1,632,124 38,963,200

No Less than 7 days to 1 to 3 3 to 6 6 to 12 1 to 3 3 to 5 Over specific Group 7 days 1 month months months months years years 5 years maturity Total

2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Assets

Cash and short term funds 4,489,227 6,319,345 - - - - - - 617,209 11,425,781

Deposits and placements with banks and other financial institutions - - 784,842 5,142 4,784 - - - - 794,768

Securities purchased under resale agreements 775,397 - - - - - - - - 775,397

Financial assets held-for-trading - - 160,670 10,970 111,178 488,200 296,786 164,228 - 1,232,032

Financial investments available-for-sale - - - - 4,150 9,958 1,957,431 589,195 - 2,560,734

Loans, advances and financing 1,518,566 831,731 2,233,845 514,792 6,331,820 794,522 1,182,564 10,877,257 - 24,285,097

Other assets 143,779 127,587 422,784 193,012 333,317 281,286 75,206 26,835 251,903 1,855,709

Statutory deposits with Bank Negara Malaysia - - - - - - - - 502,723 502,723

Deferred tax assets - - - - - - - - 52,606 52,606

Plant and equipment - - - - - - - - 44,314 44,314

Total assets 6,926,969 7,278,663 3,602,141 723,916 6,785,249 1,573,966 3,511,987 11,657,515 1,468,755 43,529,161


iii. Analysis of assets and liabilities by remaining maturity

The following maturity profile is based on the remaining period at the reporting date to the contractual maturity.


103



Liabilities and shareholder’s funds

Deposits from customers 21,556,545 4,310,641 1,267,958 1,328,772 1,098,755 8,958 - - - 29,571,629

Deposits and placements of banks and other financial institutions 6,640,293 68,350 70,042 15,277 396 - - - - 6,794,358

Bills and acceptances payable (17,286) 43,329 32,885 5,386 - - - - - 64,314

Other liabilities 945,232 87,012 224,476 158,267 233,501 354,285 57,735 7,881 410,923 2,479,312

Total liabilities 29,124,784 4,509,332 1,595,361 1,507,702 1,332,652 363,243 57,735 7,881 410,923 38,909,613

Share capital - - - - - - - - 121,697 121,697

Reserves - - - - - - - - 4,497,851 4,497,851

Total equity attributable to equity holder of the bank - - - - - - - - 4,619,548 4,619,548

Total liabilities and equity 29,124,784 4,509,332 1,595,361 1,507,702 1,332,652 363,243 57,735 7,881 5,030,471 43,529,161


iii. Analysis of assets and liabilities by remaining maturity (continued)


104





105



Assets

Cash and short term funds 4,842,988 3,588,034 - - - - - - 1,452,165 9,883,187

Deposits and placements with banks and other financial institutions - - 825,779 7,519 6,191 - - - - 839,489

Securities purchased under resale agreements 145,107 - - - - - - - - 145,107

Financial assets held-for-trading - - 24,088 3,871 20,558 179,031 301,628 317,122 - 846,298

Financial investments available-for-sale - - - - - 466,288 513,847 106,800 - 1,086,935

Loans, advances and financing 930,710 1,338,433 1,556,560 593,838 6,991,178 442,650 458,863 11,438,365 182,320 23,932,917

Other assets 197,085 73,182 109,440 311,669 194,732 301,386 227,280 11,014 174,074 1,599,862

Statutory deposits with Bank Negara Malaysia - - - - - - - - 544,910 544,910

Deferred tax assets - - - - - - - - 39,510 39,510

Plant and equipment - - - - - - - - 44,985 44,985

Total assets 6,115,890 4,999,649 2,515,867 916,897 7,212,659 1,389,355 1,501,618 11,873,301 2,437,964 38,963,200





106




Liabilities and shareholder’s funds

Deposits from customers 19,354,033 5,164,083 1,114,450 686,410 1,028,960 5,763 - - - 27,353,699

Deposits and placements of banks and other financial institutions 3,892,529 304,723 49,144 34,445 147,455 - - - - 4,428,296

Bills and acceptances payable (5,032) 36,019 14,898 4,456 - - - - - 50,341

Other liabilities 1,125,784 86,893 64,417 224,233 398,744 341,046 69,752 9,019 283,301 2,603,189

Total liabilities 24,367,314 5,591,718 1,242,909 949,544 1,575,159 346,809 69,752 9,019 283,301 34,435,525

Share capital - - - - - - - - 121,697 121,697

Reserves - - - - - - - - 4,405,978 4,405,978

Total equity attributable to equity holder of the bank - - - - - - - - 4,527,675 4,527,675

Total liabilities and equity 24,367,314 5,591,718 1,242,909 949,544 1,575,159 346,809 69,752 9,019 4,810,976 38,963,200


iv. Analysis of financial liabilities by contractual undiscounted cash flows

The table below details the remaining contractual maturities at the reporting date of the Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or if floating, based on current rates at the reporting date) and the earliest date the Group can be required to pay.

Total contractual Over 1 Over 3 Over Carrying undiscounted 1 month month to months to 1 year to Over Group Amount cash flows or less 3 months 1 year 5 years 5 years

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


Deposits from customers 29,571,629 30,652,310 26,452,827 1,415,473 2,773,687 10,323 -

Deposits and placements of banks and other financial institutions 6,794,358 6,795,182 6,708,982 70,315 15,885 - -

Bills and acceptances payable 64,314 64,315 26,043 32,885 5,387 - -

Other liabilities 2,479,312 2,479,312 1,443,167 224,476 391,768 412,020 7,881

Total 38,909,613 39,991,119 34,631,019 1,743,149 3,186,727 422,343 7,881

Total contractual Over 1 Over 3 Over Carrying undiscounted 1 month month to months to 1 year to Over Group Amount cash flows or less 3 months 1 year 5 years 5 years

2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


Deposits from customers 27,353,699 28,257,734 20,357,268 1,137,995 5,485,656 1,276,815 -

Deposits and placements of banks and other financial institutions 4,428,296 4,432,944 4,197,434 49,388 186,122 - -

Bills and acceptances payable 50,341 50,341 338,737 (208,755) (79,641) - -

Other liabilities 2,603,189 2,603,189 1,495,977 64,417 622,978 410,797 9,020

Total 34,435,525 35,344,208 26,389,416 1,043,045 6,215,115 1,687,612 9,020



107


3. Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. It includes reputation and franchise risk associated with business practices or market conduct that the Group and the Bank may undertake and includes the risk of failing to comply with applicable laws, regulations and Citigroup policies.

Operational risk is inherent in the Group’s and the Bank’s business activities and is managed through an overall framework with checks and balances that include recognised ownership of the risk by businesses and independent risk management oversight. The Group and the Bank mitigate their operational risk by setting up its key controls and assessments according to Citigroup’s and Regulators’ standards. They are also evaluated, monitored, and managed by its sound governance structure.

The Group’s and the Bank’s Operational Risk Management clearly defines the Group’s and the Bank’s approach to operational risk management. The objective of the policy is to establish a consistent approach to assessing relevant risks and the overall control environment across the Group and the Bank, to facilitate adherence to regulatory requirements and other corporate initiatives.

32. Financial assets and liabilities

32.1 Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

a. Loans and receivables (“L&R”);

b. Fair value through profit or loss (“FVTPL”):

- Held-for-trading (“HFT”);

c. Financial investments available-for-sale (“AFS”);

d. Other liabilities (“OL”).


108


32. Financial assets and liabilities (continued) 32.1 Categories of financial instruments (continued)

Carrying L&R/ FVTPL

amount (OL) - HFT AFS

Group RM’000 RM’000 RM’000 RM’000

2016

Financial Assets

Cash and short term funds 11,425,781 11,425,781 - -

Deposits and placements with banks and other financial institutions 794,768 794,768 - -

Securities purchased under resale agreements 775,397 775,397 - -

Financial assets held-for-trading 1,232,032 - 1,232,032 -

Financial investments available-for-sale 2,560,734 - - 2,560,734

Loans, advances and financing 24,285,097 24,285,097 - -

Statutory deposits with Bank Negara Malaysia 502,723 502,723 - -

Derivatives financial assets 1,473,481 - 1,473,481 -

Other debtors and deposits 171,428 171,428 - -

Interest/Income receivable 81,783 81,783 - -

Total financial assets 43,303,224 38,036,977 2,705,513 2,560,734

Financial Liabilities

Deposits from customers 29,571,629 29,374,081 197,548 -

Deposits and placements of banks and other financial institutions 6,794,358 6,784,640 9,718 -

Bills and acceptances payable 64,314 64,314 - -

Derivatives financial liabilities 1,180,290 - 1,180,290 -

Other creditors and accruals 1,246,926 1,246,926 - -

Interest/Profit payable 52,096 52,096 - -

Total financial liabilities 38,909,613 37,522,057 1,387,556 -


109

32. Financial assets and liabilities (continued) 32.1 Categories of financial instruments (continued)

Carrying L&R/ FVTPL

amount (OL) - HFT AFS

Group RM’000 RM’000 RM’000 RM’000

2015

Financial Assets

Cash and short term funds 9,883,187 9,883,187 - -

Deposits and placements with banks and other financial institutions 839,489 839,489 - -

Securities purchased under resale agreements 145,107 145,107 - -

Financial assets held-for-trading 846,298 - 846,298 -

Financial investments available-for-sale 1,086,935 - - 1,086,935

Loans, advances and financing 23,932,917 23,932,917 - -

Statutory deposits with Bank Negara Malaysia 544,910 544,910 - -

Derivatives financial assets 1,281,856 - 1,281,856 -

Other debtors and deposits 280,606 280,606 - -

Interest/Income receivable 23,456 23,456 - -

Total financial assets 38,864,761 35,649,672 2,128,154 1,086,935

Financial Liabilities

Deposits from customers 27,353,699 27,047,636 306,063 -

Deposits and placements of banks and other financial institutions 4,428,296 4,302,538 125,758 -

Bills and acceptances payable 50,341 50,341 - -

Derivatives financial liabilities 1,246,722 - 1,246,722 -

Other creditors and accruals 1,287,825 1,287,825 - -

Interest/Profit payable 42,995 42,995 - -

Total financial liabilities 34,409,878 32,731,335 1,678,543 -


110


32. Financial assets and liabilities (continued)

32.2 Determination of fair value and fair value hierarchy

MFRS 13 Fair Value Measurement requires each class of assets and liabilities measured at fair value in the statements of financial position after initial recognition to be categorised according to hierarchy that reflects the significance of inputs used in making the measurements, in particular, whether the inputs used are observable or unobservable as discussed in note 2(f)(vi).

32.2.1 Financial instruments carried at fair value

Level 1 Level 2 Level 3 Total

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

2016

Financial assets

Financial assets held-for-trading 1,232,032 - - 1,232,032

Financial investments available-for-sale 2,553,719 - 7,015 2,560,734

Derivative financial assets - 1,472,308 1,173 1,473,481

3,785,751 1,472,308 8,188 5,266,247


Deposits from customers - - 197,548 197,548

Deposits and placements of banks and other financial institutions - - 9,718 9,718

Derivative financial liabilities - 1,179,230 1,060 1,180,290

- 1,179,230 208,326 1,387,556


111

Level 1 Level 2 Level 3 Total

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

2015

Financial assets

Financial assets held-for-trading 846,298 - - 846,298

Financial investments available-for-sale 1,079,920 - 7,015 1,086,935

Derivative financial assets - 1,262,815 19,041 1,281,856

1,926,218 1,262,815 26,056 3,215,089


Deposits from customers - - 306,063 306,063

Deposits and placements of banks and other financial institutions - - 125,758 125,758

Derivative financial liabilities 1,246,722 - 1,246,722

- 1,246,722 431,821 1,678,543


32.2 Determination of fair value and fair value hierarchy (continued)

32.2.1 Financial instruments carried at fair value (continued)

Policy on transfer between levels

The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer.

Transfers between Level 1 and Level 2 fair values

There has been no transfer between Level 1 and 2 fair values during the financial year (2015: no transfer in either directions).


112





The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:

Group and Bank

2016 2015

RM’000 RM’000

Financial assets

Balance at 1 January 26,056 7,149

Purchased/(Settled) - (134)

Transfer out from Level 3 (19,041) -

Total losses recognised in profit or loss: Attributable to gains relating to assets that have not been realised 1,173 19,041

Balance at 31 December 8,188 26,056


Balance at 1 January 431,821 513,611

Issued/(Settled) (224,916) (96,625)

Transfer into Level 3 - -

Total gains recognised in profit or loss: Attributable to gains relating to liabilities that have not been realised 1,421 14,835

Balance at 31 December 208,326 431,821


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The following shows the valuation techniques used in the determination of fair values within Level 3.

a. Loans, advances and financing

Loans, advances and financing carried at fair value are those structured products (hybrid financial instruments) offered by the Group and the Bank. The fair values are estimated based on expected future cash flows of contractual installment payments and discounted at prevailing rates at the reporting date offered for similar products to new borrowers with similar credit profiles, where applicable. For impaired loans, if any, the fair values are deemed to approximate the carrying values, net of individual assessment allowance for bad and doubtful debts and financing. Collective assessment allowance is excluded from the carrying value.

b. Deposits from customers and deposits and placements of banks and other financial institutions

Deposits from customers and deposits and placements of banks and other financial institutions carried at fair value are those structured products (hybrid financial instruments) offered by the Group and the Bank. The fair values are estimated based on discounted contracted cash flows using rates currently offered for deposits of similar features and remaining maturities. The fair values of Islamic deposits are deemed to approximate their carrying values as at the reporting date as the profit rates are determined at the end of their holding periods based on the profit generated from the assets invested.

c. Derivative financial assets and liabilities

Fair values of financial instrument classified at Level 3 are determined using appropriate valuation technique which, includes the use of mathematical models, such as discounted cash flow models and option pricing models, comparison to similar instruments for which market observable prices exist and other valuation techniques. Valuation techniques used incorporate assumptions regarding discount rates, interest/profit rate yield curves, estimates of future cash flows and other factors, as applicable.

32.2.2 Financial instruments not carried at fair value

In respect of cash and short term funds, deposits and placements with banks and other financial institutions, securities purchased under resale agreements, other assets (excluding derivatives), bills and acceptances payable, and other liabilities (excluding derivatives), the carrying amounts in the statements of financial position approximate their fair values due to the relatively short term/on demand nature of these financial instruments.

The fair values of other financial assets, together with the carrying amounts shown in the statements of financial position, are as follows:

Carrying Level 1 Level 2 Level 3 Total Amount Group and Bank RM’000 RM’000 RM’000 RM’000 RM’000

2016

Financial assets Loans, advances and financing - - 24,268,508 24,268,508 24,285,097

Financial liabilities Deposits from customers - - 30,454,762 30,454,762 29,374,081

Deposits and placement of banks and other financial institution - - 6,785,408 6,785,408 6,784,640


114




32.2.2 Financial instruments not carried at fair value (continued)

Carrying Level 1 Level 2 Level 3 Total Amount Group and Bank RM’000 RM’000 RM’000 RM’000 RM’000

2015

Financial assets Loans, advances and financing - - 23,913,009 23,913,009 23,932,917

Financial liabilities Deposits from customers - - 27,354,222 27,354,222 27,047,636

Deposits and placement of banks and other financial institution - - 4,428,296 4,428,296 4,302,538

32.3 Offsetting of financial assets and liabilities

The Group and the Bank enters into derivative transactions under International Swaps and Derivatives Association (“ISDA”) master netting agreements. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all transactions are aggregated into a single net amount that is payable by one party to the other. In certain circumstances – e.g. when a credit event such as a default occurs, all outstanding agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.

The ISDA agreements do not meet the criteria for offsetting in the statements of financial position. This is because the Group and the Bank currently do not have any legally enforceable right to offset recognised amounts, because the right to offset is enforceable only on the occurrence of future events such as default by the counterparty.

The fair values of fixed rate loans with remaining maturity of less than one year and variable rate loans are estimated to approximate their carrying values at statements of financial position date. The fair value for loans, advances and financing, deposits from customers and deposit and placement of banks and other financial institutions are estimated with similar methodology as discussed in 32.2.1(a) and (b).


115


32.3 Offsetting of financial assets and liabilities (continued)

The following table sets out the carrying amounts of recognised financial instruments that are subject to the above agreements.

Related

Gross amount financial

recognized/ instrument

Amount that are not

presented offset but

in the subject to

statements of netting Net

Group and Bank financial position agreement amount

2016 RM’000 RM’000 RM’000

Derivative financial assets

Foreign exchange related contracts 1,307,272 (357,207) 950,065

Interest rate contracts 130,395 (105,387) 25,008

Equity related contracts 1,174 103 1,277

Other contracts 34,640 (1,834) 32,806

1,473,481 (464,325) 1,009,156

Derivative financial liabilities

Foreign exchange related contracts (1,022,483) 357,207 (665,276)

Interest rate contracts (105,904) 105,387 (517)

Equity related contracts (1,061) (103) (1,164)

Other contracts (50,842) 1,834 (49,008)

(1,180,290) 464,325 (715,965)


116



32.3 Offsetting of financial assets and liabilities (continued)

Related

Gross amount financial

recognized/ instrument

Amount that are not

presented offset but

in the subject to

statements of netting Net

Group and Bank financial position agreement amount

2015 RM’000 RM’000 RM’000

Derivative financial assets

Foreign exchange related contracts 1,119,822 (1,236) 1,118,586

Interest rate contracts 135,999 (30,723) 105,276

Equity related contracts 76 (21) 55

Other contracts 25,959 (776) 25,183

1,281,856 (32,756) 1,249,100

Derivative financial liabilities

Foreign exchange related contracts (1,083,552) 1,236 (1,082,316)

Interest rate contracts (122,768) 30,723 (92,045)

Equity related contracts (76) 21 (55)

Other contracts (40,326) 776 (39,550)

(1,246,722) 32,756 (1,213,966)


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33. Lease commitments

The Group and the Bank have lease commitments in respect of rented premises and equipment for hire, all of which are classified as operating leases. A summary of the non-cancellable long term commitments, net of sub leases are as follows:

Group and Bank

2016 2015

RM’000 RM’000

Within 1 year 28,501 26,659

Between 1 and 5 years 14,204 28,126

42,705 54,785

34. Capital commitments Group and Bank

2016 2015

RM’000 RM’000

Capital expenditures:

Authorised and contracted for 3,566 2,095

Authorised and not contracted for 34 -

3,600 2,095


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35. Capital adequacy

A. The capital adequacy ratios are as follows:

Group and Bank

2016 2015

RM’000 RM’000

Computation of Total Risk Weighted Assets

(“RWA”)

Total credit RWA 24,182,073 24,633,029

Total market RWA 991,767 3,008,049

Total operational RWA 3,567,208 3,425,132

Total Risk Weighted Asset 28,741,048 31,066,210

Computation of Capital Ratios

Common Equity Tier (I) (“CET I”) Capital 4,565,678 4,479,908

Tier 1 Capital 4,565,678 4,479,908

Total Capital 4,909,581 4,743,600

Before deducting proposed dividends:

CET I Capital ratio 15.886% 14.421%

Total Tier I Capital ratio 15.886% 14.421%

Total capital ratio 17.082% 15.269%

After deducting proposed dividends:

CET I Capital ratio 13.972% 12.972%

Total Tier I Capital ratio 13.972% 12.972%

Total Capital ratio 15.169% 13.821%

Detailed information on the risk exposures above are disclosed in the Pillar 3 disclosures of the annual report as prescribed under BNM’s Risk Weighted Capital Adequacy Framework (Basel II) – Disclosures requirements (Pillar 3).

The total capital and capital adequacy ratios of the Group and the Bank are computed in accordance with Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components and Basel II – Risk-weighted Assets) dated 13 October 2015. The Group and the Bank have adopted the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components), the minimum capital adequacy requirement for common equity Tier I capital ratio, Tier I capital ratio and total capital ratio are 4.5%, 6.0% and 8.0% respectively for year 2016 before including capital conservation buffer and countercyclical capital buffer (CCyB).

Banking institutions are required to maintain a capital conservation buffer of up to 2.5% and CCyB above the minimum regulatory capital adequacy ratios above. Under transition arrangements, capital conservation buffer will be phased-in as follows:


119

Calendar Year Capital Conservation Buffer

2016 0.625%

2017 1.250%

2018 1.875%

2019 onwards 2.500%

35. Capital adequacy (continued)

B. The components of CET I, Tier I and Tier II Capital are as follows:

Group and Bank

2016 2015

RM’000 RM’000

Paid up ordinary share capital 121,697 121,697

Share premium 380,303 380,303

Retained profits 4,051,744 3,889,283

Other reserves 65,804 136,392

Less: Deferred tax assets (52,606) (39,510)

Defined benefit pension fund assets (1,264) (4,894)

55% of cumulative gains of AFS financial

instruments (other than financing and receivables) - (3,363)

Total CET I Capital/Tier I Capital 4,565,678 4,479,908

Tier II Capital

Collective impairment provisions* 343,903 263,692

Total Tier II Capital 343,903 263,692

Total Eligible Tier II Capital 343,903 263,692

Total Capital 4,909,581 4,743,600

* Excludes collective assessment allowance on impaired loans restricted from Tier II Capital by BNM of RM72.4 million (2015: RM74.7 million).


120


36. Commitments and contingencies

The off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows: 2016 Credit Risk Group and Bank Principal equivalent weighted amount amount assets

RM’000 RM’000 RM’000

Nature of item

Direct credit substitutes 1,693,459 1,693,459 1,590,727

Transaction related contingent items 642,387 321,193 295,591

Short term self liquidating trade related contingencies 353,670 70,734 53,391

Forward asset purchases 114,755 114,755 5,645

Foreign exchange related contracts:

One year or less 33,705,237 1,636,785 1,246,241

Over one year to five years 3,302,964 509,417 246,043

Over five years 24,155 4,348 4,348

Interest/Profit rate related contracts:

One year or less 6,520,980 25,349 9,331


Over five years 1,474,873 138,604 88,172

Equity related contracts:

One year or less 51,735 4,278 3,066

Over one year to five years - - -

Debt security contracts and other commodity contracts:

One year or less 333,596 66,509 39,427

Over one year to five years - 1,487 745

Other commitments, such as formal standby facilities and credit lines, with an original maturity up to one year 461,873 92,375 92,375

Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year 625,062 312,531 218,403

Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness 7,720,832 - -

Unutilised credit card lines 21,963,510 4,392,702 3,317,242

Total 96,139,821 9,869,278 7,371,087


121

2015 Credit Risk Group and Bank Principal equivalent weighted amount amount assets

RM’000 RM’000 RM’000

Nature of item

Direct credit substitutes 2,585,276 2,585,276 2,486,853

Transaction related contingent items 739,121 369,561 336,464

Short term self liquidating trade related contingencies 151,472 30,294 20,627

Forward asset purchases 58,119 58,119 29,060

Foreign exchange related contracts:

One year or less 23,994,873 1,098,214 893,918


Interest/Profit rate related contracts:

One year or less 3,943,805 12,271 3,819


Over five years 1,206,239 126,933 88,189

Equity related contracts:

One year or less 178,257 10,690 2,138

Over one year to five years 38,643 3,173 1,600

Debt security contracts and other commodity contracts:

One year or less 97,166 36,466 34,255

Over one year to five years 2,031 (548) 788

Other commitments, such as formal standby facilities and credit lines, with an original maturity up to one year 950,880 475,440 341,274

Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness 6,993,398 - -

Unutilised credit card lines 19,431,595 3,886,319 2,929,867

Total 77,736,181 9,810,035 7,621,833

36. Commitments and contingencies (continued)


122


37. Comparative figures

Certain comparative figures have been restated to correct certain erroneous cash flow movements as follows:

2015

As restated As previously Group and Bank stated

Statement of cash flows RM’000 RM’000

Amortisation of premium less accretion of discount of financial investments available-for-sale 231 41,067

Other assets (89,201) (89,237)

Other liabilities 292,730 298,231

Purchase of financial investments available-for-sale (4,786,999) (1,142,703)

Redemption of financial investments available-for-sale - 177,060

Proceeds from disposal of financial investments available-for-sale 5,786,669 1,919,012


123

38. The operations of Islamic Banking

Statement of financial position as at 31 December 2016

Bank

2016 2015

Note RM’000 RM’000

Assets

Cash and short term funds (a) 1,708,549 2,092,803

Financial assets held-for-trading (b) 1,291 -

Financing, advances and other loans (c) 562,532 658,898

Other assets (e) 6,381 16,435

Total assets 2,278,753 2,768,136

Liabilities

Deposits and funds from customers (f) 1,966,171 2,412,532

Deferred tax liabilities 623 803

Other liabilities (g) 7,892 30,709

Total liabilities 1,974,686 2,444,044

Islamic banking funds (h) 304,067 324,092

Total liabilities and Islamic banking funds 2,278,753 2,768,136

Commitments and contingencies (r) - 476,035



124


38. The operations of Islamic Banking (continued)

Statement of profit or loss and other comprehensive income for the financial year ended 31 December 2016

Bank

2016 2015


Income derived from investment of depositors’ funds and others (i) 64,603 43,507

Provision for financing, advances and others (j) (84,222) (18,978)

Total attributable (expense)/income (19,619) 24,529

Income attributable to depositors and others (k) (10,641) (7,856)

Total attributable to the Bank (30,260) 16,673

Income derived from investment of Islamic Banking Funds (l) 5,139 3,804

Total net (expense)/income (25,121) 20,477

Other operating expenses (n) (1,216) (1,191)

(Loss)/Profit before taxation (26,337) 19,286

Tax income/(expense) (o) 6,312 (4,820)

(Loss)/Profit for the year (20,025) 14,466

Other comprehensive loss, net of tax Net loss on revaluation of financial investments available-for-sale - (1)

Total comprehensive (loss)/income for the year (20,025) 14,465

(Loss)/Profit for the year attributable to:

Owner of the Bank (20,025) 14,466

Total comprehensive (expense)/income attributable to:

Owner of the Bank (20,025) 14,465



125


Statement of changes in Islamic Banking funds for the financial year ended 31 December 2016

Bank

Capital Fair value Retained

funds reserve profits Total

RM’000 RM’000 RM’000 RM’000

At 1 January 2015 20,000 1 289,626 309,627

Fair value changes on financial investments available-for-sale - (1) - (1)

Total other comprehensive loss for the year - (1) - (1)

Profit for the year - - 14,466 14,466

Total comprehensive income for the year - (1) 14,466 14,465

At 31 December 2015/ 1 January 2016 20,000 - 304,092 324,092

Loss for the year - - (20,025) (20,025)

Total comprehensive Loss for the year - - (20,025) (20,025)

At 31 December 2016 20,000 - 284,067 304,067

Note 38(h)



126



Statement of cash flows for the financial year ended 31 December 2016

Bank

2016 2015

RM’000 RM’000

Cash flows from operating activities

(Loss)/Profit before taxation (26,337) 19,286

Adjustments for:

Amortisation of premium less accretion of discount of investment securities 74 (996)

Provision for financing, advances and others made 84,222 18,978

Mark-to-market gain on financial assets held-for-trading - (8)

Loss from sale of financial assets held-for-trading 409 158

Gain from sale of financial assets available-for-sale - (41)

Operating profit before working capital changes 58,368 37,377

Changes in working capital:

Financial assets held-for-trading (1,774) 149,447

Financing, advances and others 12,144 (379,782)

Other assets 5,231 175,953

Deposits and funds from customers (446,361) 1,318,575

Other liabilities (24,166) (195,565)

Cash generated from in operating activities (396,558) 1,106,005

Income taxes paid 12,304 (284)

Net cash (used in)/generated from operating activities (384,254) 1,105,721

Cash flows from investing activities

Proceeds from disposal of financial investments available-for-sale - 51,041

Net cash generated from investing activities - 51,041

Net increase in cash and cash equivalents (384,254) 1,156,762

Cash and cash equivalents at 1 January 2,092,803 936,041

Cash and cash equivalents at 31 December (Note 38(a)) 1,708,549 2,092,803



127


a. Cash and short term funds Bank

2016 2015

RM’000 RM’000 Cash and balances with banks and other financial institutions 6,549 2,693

Money at call and deposit placements maturing within one month 1,702,000 2,090,110

1,708,549 2,092,803

b. Financial assets held-for-trading Bank

2016 2015

RM’000 RM’000 At fair value

Malaysia Government Treasury Bills 1,291 -

c. Financing, advances and others

(i) By type Bank

2016 2015

RM’000 RM’000 Term financing

- housing financing 226,778 261,916

- other term financing 448,553 427,806

675,331 689,722

Unearned income (8,280) (10,504)

Gross financing, advances and others 667,051 679,218

Less:

Allowance for impaired financing, advances and others

- Collective assessment allowance (104,004) (19,736)

- Individual assessment allowance (515) (584)

Allowance for impaired financing, advances and others 562,532 658,898


128



c. Financing, advances and others (continued)

ii. By contract Bank

2016 2015

RM’000 RM’000

Bai ‘ Bi Thaman Ajil 14,952 17,370

Diminishing Musharakah 203,546 234,042

Murabahah 448,553 427,806

667,051 679,218

iii. By type of customer

Domestic business enterprises

- Others 449,056 428,344

Individuals 217,995 250,874

667,051 679,218

iv. By profit rate sensitivity

Fixed rate - Housing financing 218,498 251,412

Variable rate - Cost plus 448,553 427,806

667,051 679,218

v. By sector

Household - residential 217,995 250,874

Business services 448,553 427,806

Other sectors 503 538

667,051 679,218

vi. By purpose

Purchase of landed property 218,498 251,412

Working Capital 448,553 427,806

667,051 679,218


129


130



d. Impaired financing, advances and others

i. Movements in impaired financing, advances and others are as follows:

Bank

2016 2015

RM’000 RM’000

At 1 January 9,076 9,557

Classified as impaired during the year 5,746 7,207

Reclassified as performing during the year (5,821) (5,894)

Amount recovered (1,699) (1,794)

At 31 December 7,302 9,076

Individual assessment allowance (515) (584)

Net impaired financing, advances and others 6,787 8,492

Ratio of net impaired financing, advances and others to total gross financing, advances and others less individual assessment allowance 1.02% 1.25%

ii. Movements in impairment provision for financing, advances and others are as follows:

Bank

2016 2015

RM’000 RM’000

Collective assessment allowance

At 1 January 19,736 687

Allowance made during the year 84,268 19,049

At 31 December 104,004 19,736

As % of gross financing, advances and others less individual assessment allowance 15.60% 2.91%


d. Impaired financing, advances and others (continued)

ii. Movements in impairment provision for financing, advances and others are as follows (continued):

Bank

2016 2015

RM’000 RM’000

Individual assessment allowance

At 1 January 584 656

Allowance made during the year 27 28

Allowance written back during the year (73) (99)

Amount written off (23) (1)

At 31 December 515 584

iii. Impaired financing, advances and others by sector

Bank

2016 2015

RM’000 RM’000

Household - residential 7,302 9,076

e. Other assets Bank

2016 2015

RM’000 RM’000

Profit receivables 456 433

Other debtors, deposits and prepayments 5,925 5,365

Revaluation gain on profit rate undertaking contracts (Note 38(s)) - 5,814

Tax recoverable - 4,823

6,381 16,435


131


f. Deposits and funds from customers

i. By type of deposit and funds Bank

2016 2015

RM’000 RM’000

Non-Mudarabah Fund

Demand deposits 1,908,617 2,255,858

Saving deposits 57,554 60,318

Other deposits - 10,776

Mudarabah Fund

Negotiable Instruments of Deposits - 85,580

1,966,171 2,412,532

ii. By type of customer Bank

2016 2015

RM’000 RM’000

Government and statutory bodies - 452,550

Business enterprises 1,231,627 1,861,441

Individuals 64,233 74,502

Others 670,311 24,039

1,966,171 2,412,532


132



g. Other liabilities Bank

2016 2015

RM’000 RM’000

Provision for taxation 1,349 -

Other creditors and accruals 6,543 24,895

Revaluation loss on profit rate undertaking contracts (Note 38(s)) - 5,814

7,892 30,709

h. Islamic Banking funds Bank

2016 2015

RM’000 RM’000

Fund allocated 20,000 20,000

Retained earnings 284,067 304,092

304,067 324,092

i. Income derived from investment of depositors’ funds and others

Bank

2016 2015

RM’000 RM’000

Income derived from investment of:

(i) General investment funds 61,828 40,588

(ii) Other deposits 2,775 2,919

64,603 43,507


133


i. Income derived from investment of depositors’ funds and others (continued)

i. Income derived from investment of general investment funds

Bank

2016 2015

RM’000 RM’000

Finance income and hibah

Financing, advances and others 16,428 10,636

Money at call and placements with financial institutions 43,326 27,442

Income from financial investments available- for-sale 981 1,736

60,735 39,814

Accretion of discount less amortisation of premium (61) 762

Total finance income and hibah 60,674 40,576

Other operating income

Fee income 1,154 12

Income from general investment funds 61,828 40,588


134



i. Income derived from investment of depositors’ funds and others (continued)

ii. Income derived from investment of other deposits and funds Bank

2016 2015

RM’000 RM’000

Finance income and hibah

Financing, advances and others 737 765


Income from financial investments available- for-sale 44 125

2,726 2,863




Fee income 52 1

Income from investment of other deposits 2,775 2,919

j. Provision for financing, advances and others (made)/written back

Bank

2016 2015

RM’000 RM’000

Allowance for/(Write back of) impairment losses on

financing, advances and others

Individual assessment allowance 46 71

Collective assessment allowance (84,268) (19,049)

(84,222) (18,978)


135


k. Income attributable to depositors and others

Bank

2016 2015

RM’000 RM’000

Deposits and funds from customers

- Mudarabah Fund 8,304 5,235

- Non-Mudarabah Fund 2,258 2,530

Others 79 91

10,641 7,856

l. Income derived from investment of Islamic Banking funds

Bank

2016 2015

RM’000 RM’000

Financing, advances and others 2,626 2,556


Income from financial investments available-for-sale - 67

Income from securities held-for-trading 157 350

9,708 9,567




Gain/(Loss) from financial assets held-for-trading 409 (150)

Gain from financial investments available-for-sale - 41

Fee income 569 521

Loss from trading activities (5,537) (6,355)

(4,559) (5,943)

Income from Islamic Banking Capital Funds 5,139 3,804


136



m. Net income from Islamic Banking operations

For consolidation with the conventional operations, income from Islamic Banking operations comprises the following:

Bank

2016 2015


Income derived from investment of depositors’ funds and others (j) 64,603 43,507

Income attributable to depositors and others (l) (10,641) (7,856)

Income derived from investment of Islamic Banking Funds (m) 5,139 3,804

59,101 39,455

n. Other operating expenses Bank

2016 2015

RM’000 RM’000

Personnel costs

- Staff allowances and benefits 11 110

Establishment costs

- Rental 13 20

- Others 10 30

Administrative and general expenses

- Others 1,182 1,031

1,216 1,191

Included in other operating expenses is the Shariah Committee’s remuneration of RM222,000 (2015: RM257,000).

o. Taxation Bank

2016 2015

RM’000 RM’000

Current tax (income)/expense (6,132) 5,040

Deferred tax (income) (180) (220)

(6,312) 4,820


137


p. Zakat

Zakat is compulsory for business activities. According to the principles of Shariah, Muslim shareholders of the Bank are obliged to make payment. Thus, the Bank is not obliged for the collection or payment of zakat on behalf of its Muslim shareholders and depositors as resolved by its Shariah Committee.

As of 31 December 2016, the shareholding of Citibank Berhad is 100% owned by Citigroup Holding Singapore Pte. Ltd., hence no assessment was made on zakat payable.

q. Capital adequacy

i. The capital adequacy ratios are as follows: Bank

2016 2015

RM’000 RM’000

Computation of Total Risk Weighted

Assets (“RWA”)

Total credit RWA 87,844 97,830

Total market RWA 22 47,722

Total operational RWA 79,413 73,044

Total Risk Weighted Assets 167,279 218,596

Computation of Capital Ratios

Common Equity Tier (I) (“CET I”) Capital 304,067 324,092

Tier 1 Capital 304,067 324,092

Total Capital 407,866 343,590

CET I Capital Ratio 181.772% 148.261%

Total Tier I Capital Ratio 181.772% 148.261%

Total Capital Ratio 243.823% 157.180%

The total capital and capital adequacy ratios of the Group and the Bank are computed in accordance with Bank Negara Malaysia’s Capital Adequacy Framework for Islamic Banks (Capital Components and Basel II – Risk- weighted Assets) dated 28 November 2012 and 27 June 2015 respectively. The Group and the Bank have adopted the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia’s Capital Adequacy Framework for Islamic Banks (Capital Components), the minimum capital adequacy requirement for common equity Tier I capital ratio and Tier I capital ratio are 4.0% and 5.5% respectively for year 2016. The minimum regulatory capital adequacy requirement remains at 8.0% (2015 – 8.0%) for total capital ratio.


138



q. Capital adequacy (continued)

ii. The components of CET I, Tier I and Tier II Capital are as follows:

Bank

2016 2015

RM’000 RM’000

Fund allocated 20,000 20,000

Retained earnings 284,067 304,092

Total CET I Capital/Tier I Capital 304,067 324,092

Tier II Capital

Collective impairment provisions* 103,799 19,498

Total Tier II Capital 103,799 19,498

Total Capital 407,866 343,590

* Excludes collective assessment allowance on impaired financing restricted from Tier II Capital by BNM of RM205,000 (2015 – RM238,000).


139


r. Commitments and contingencies

Credit Risk Principal equivalent weighted amount amount assets

Nature of item RM’000 RM’000 RM’000

2016

Profit rate related contracts:

One year or less - - -

Over one year to five years - - -

Over five years - - -

Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year - - -

Total - - -

2015

Profit rate related contracts:

One year or less - - -

Over one year to five years 475,000 13,801 2,760

Over five years - - -

Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year 1,035 518 385

Total 476,035 14,319 3,145


140


Positive Negative

Contract fair fair

amount value value

RM’000 RM’000 RM’000

2016

Islamic profit rate undertaking contracts - - -

2015

Islamic profit rate undertaking contracts 950,000 5,814 5,814

Note 38(e) Note 38(g)


s. Derivative financial instruments


141

Effective

Up to 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 Non-interest Trading profit

Bank month months months years years sensitive book Total rate


Assets

Cash and short term funds 1,702,000 - - - - 6,549 - 1,708,549 2.79%

Financial investments held-for-trading - - - - - - 1,291 1,291

Financing, advances and others

- performing 3 - 36 454,215 205,495 (104,004) - 555,745

- impaired - - - - - 6,787 - 6,787 3.40%

Deferred tax assets - - - - - - - -

Others assets - - - - - 6,381 - 6,381

Total assets 1,702,003 - 36 454,215 205,495 (84,287) 1,291 2,278,753

Liabilities and Islamic Banking funds

Deposits and funds from customers 1,517,330 - - 448,841 - - - 1,966,171

Deferred tax liabilities - - - - - 623 - 623

Other liabilities - - - - - 7,892 - 7,892

Total liabilities 1,517,330 - - 448,841 - 8,515 - 1,974,686

Islamic Banking funds - - - - - 304,067 - 304,067

Total liabilities and Islamic Banking funds 1,517,330 - - 448,841 - 312,582 - 2,278,753

On-balance sheet profit

sensitivity gap 184,673 - 36 5,374 205,495 (396,869) 1,291


t. Profit rate risk


142



t. Profit rate risk (continued)


143

Effective

Up to 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 Non-interest Trading profit

Bank month months months years years sensitive book Total rate


Assets

Cash and short term funds 2,090,110 - - - - 2,693 - 2,092,803 2,09%

Financing, advances and others

- performing - 4 118 5,542 664,478 (19,736) - 650,406 3.78%

- impaired - - - - - 8,492 - 8,492

Deferred tax assets - - - - - - - -

Others assets - - - - - 10,621 5,814 16,435

Total assets 2,090,110 4 118 5,542 664,478 2,070 5,814 2,768,136

Liabilities and Islamic Banking funds

Deposits and funds from customers 2,316,176 96,356 - - - - - 2,412,532 0.43%

Deferred tax liabilities - - - - - 803 - 803

Other liabilities - - - - - 24,895 5,814 30,709

Total liabilities 2,316,176 96,356 - - - 25,698 5,814 2,444,044

Islamic Banking funds - - - - - 324,092 - 324,092

Total liabilities and Islamic Banking funds 2,316,176 96,356 - - - 349,790 5,814 2,768,136

On-balance sheet profit

sensitivity gap (226,066) (96,352) 118 5,542 664,478 (347,720) -

CITIBANK BERHAD (297089M)

45th Floor, Menara Citibank,

165 Jalan Ampang, 50450 Kuala Lumpur

Tel : +603 2383 8585

Fax : +603 2383 6000

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Documents

CITIBANK BERHAD 2016 ANNUAL REPORT - Home Loans · Citibank berhad 2016 Annual Report 2 ... Indonesia Sukuk issuance during the first quarter of 2016 ... 45th Floor, Menara Citibank