Citibank Berhad Annual Report 2018 · CITIBANK BERHAD ANNUAL REPORT 201804 The year 2018 will be remembered as one of transformation as we intensified our focus to future-proof and

C i t i b a n k B e r h a d A n n u a l R e p o r t 2 0 1 8

Registered Office

44th Floor, Menara Citibank,

165 Jalan Ampang 50450 Kuala Lumpur

Date of Incorporation

22 April, 1994

Auditors

KPMG

CO R P O R AT E I N FO R M AT I O N

F I N A N C I A L STAT E M E N TS

CHAIRMAN’S STATEMENT

CEO’S STATEMENT

BOARD OF DIRECTORS

BOARD OF DIRECTORS - PROFILE

STATEMENT OF CORPORATE GOVERNANCE

RISK MANAGEMENT

STATEMENT OF INTERNAL AUDIT AND INTERNAL CONTROL

CITIBANK BERHAD’S REMUNERATION POLICY

MANAGEMENT REPORTS

RATINGS STATEMENT

SHARIAH COMMITTEE

CUSTOMER ENGAGEMENT AND SERVICE DELIVERY

CORPORATE CITIZENSHIP AT CITI

OUR PEOPLE

DIRECTORS’ REPORT

STATEMENT BY DIRECTORS

STATUTORY DECLARATION

SHARIAH COMMITTEE‘S REPORT

INDEPENDENT AUDITORS’ REPORT

STATEMENTS OF FINANCIAL POSITION

STATEMENTS OF PROFIT OR LOSS AND OTHERCOMPREHENSIVE INCOME

STATEMENTS OF CHANGES IN EQUITY

STATEMENTS OF CASH FLOWS

NOTES TO THE FINANCIAL STATEMENTS

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CONTENTS

C I T I B A N K B E R H A D A N N U A L R E P O R T 2 0 1 802

CHAIRMAN’SSTATEMENT


CHAIRMAN’SSTATEMENT

I am pleased to present to you the Citibank Berhad Annual Report for the financial year ended 31 December 2018.

It was truly a year of significant political change and continued economic stability for Malaysia. The change in Government was a first in Malaysia since the country gained its independence in 1957. Despite the headwinds from a volatile global environment, the Malaysian economy remained steady and recorded moderate growth of about 4.7% sustained by domestic demand and the private sector.

Given its strategic geographic location in the heart of ASEAN, Malaysia is amongst ASEAN’s stronger economies and is set on a transformational growth path to attain developed status. The country’s strong macro-economic fundamentals proved a firm foundation despite the challenges of inflationary pressures, slowed economic growth and global trade tensions.

At Citi, our franchise remained steadfast and showed consistent profitability across our core business sectors. As a global financial leader, Citi in Malaysia has spearheaded financial innovation particularly in the consumer banking business. Customer centric financial solutions built on state of the art technology and innovation give us the leading edge to shape the future of financial services and offer customers a world class banking experience.

Our Institutional Clients Group continues to bank some of the country’s top corporates which have since expanded into the region and beyond. Citi’s wherewithal to support them in their growth plans underscore the strength of our global network and capabilities.

We look to the future with confidence. The road ahead will bring with it fresh challenges and with it new opportunities of growth for our franchise in Malaysia.

Together with the rest of the Board of Directors of Citibank Berhad, I would like to commend our Chief Executive Officer Lee Lung Nien, the senior leadership team and dedicated employees for yet another year of steady performance and commitment to Citi.

Our appreciation also to Bank Negara Malaysia and the relevant authorities for the counsel and support extended throughout the year.

Mr. Terence CuddyreChairman

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The year 2018 will be remembered as one of transformation as we intensified our focus to future-proof and strengthen our leadership as a premier global digital bank in Malaysia. Innovation and investment in new technology enabled us to deepen our customer engagement and service delivery to Be the Best for our customers and clients.

Citibank Berhad was recognised by Finance Asia as The Best Foreign Bank in Malaysia and for Best Retail Mobile Banking Experience by The Asset. The Bank has also over the last 19 years been rated AAA by RAM Holdings Berhad.

It is indeed a testament of our inherent franchise strengths and sustainable growth track which we have aligned to our corporate mission to serve as a trusted partner, enabling growth and economic progress.

Highlights

Despite moderating economic growth, the Malaysian economy was cushioned by strong domestic demand and private sector expenditure, which remained as the key engines of economic growth in the country. Steady growth was seen across the core economic sectors amidst the challenges of increased market uncertainty and global tension. The country showed its economic resilience and braced well inflationary pressures and the mixed performance of the Malaysian Ringgit.

The financial sector set its sights on entrenching its footprint in digitisation and accelerated investment in new technology and fin-tech partnerships to grow the e-commerce ecosystem. Citi spearheaded innovative solutions in consumer banking and in e-commerce trade. Our progress and leadership gained have set us on a new path of growth for the future.

Performance Review

The Bank recorded a pre-tax profit of RM1.047 billion for the financial year ended 31 December 2018, compared to the RM1.039 billion pre-tax profit recorded in 2017, a 1% increase from the previous year.

Total post-tax profit was RM788 million in 2018. Net interest income totalled RM1.20 billion in 2018 while non-interest income stood at RM796 million. During the same period, the Bank’s return on equity before tax was a solid 20.7%. The Bank’s Risk Weighted Total Capital Adequacy Ratio stood at a strong 18.9%.

Business Highlights

Consumer Banking

Credit Card

In 2018, Citi continued to drive digitalisation as well as forming strategic partnerships to build further scale and a better ecosystem. Focus was on growing our target client segment and to drive seamless customer experience.

Citi’s leadership and core customer engagement strategy of innovation through digitisation was best exemplified with the first partnership between Citi and AirAsia via its Big Xchange points platform. Citi cardholders can now convert their Citi Rewards points or PremierMiles to AirAsia BIG points seamlessly and instantly through the AirAsia BIG Loyalty mobile app.

Citi also partnered with Samsung to launch the Pay With Points via Samsung Pay, enabling Citi card holders to offset their Samsung Pay purchases with Citi Rewards points or PremierMiles at the click of a button. Both platforms were the result of API integration between Citi and its partners, taking the Pay

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With Points experience to a new level as it makes spending with a Citi credit card even more rewarding.

Citi and selected leading e-commerce companies hosted the #CitiCyberSale in 2018, a first in the industry with exclusive online deals and offers from Lazada, Shopee, Agoda, Expedia, Grab and Zalora. Citi card holders benefited from deals as low as RM1 and enjoyed discounts of up to 85%.

Innovation to drive usage of Citi credit cards was demonstrably visible when we tied up with the GrabPay mobile wallet to provide cardholders with increased digital convenience through cashless payments while earning GrabRewards.

In 2018, Citi introduced the Merchant Recommendation Engine, a real-time, personalised engine recommending preferred deals to Citi card holders at the right time and place. With the engine’s cutting-edge big data recommendation algorithms, Citi is able to enhance the recommended individualised-targeted customer deals integrating with Google maps to provide location based promotions.

We also launched the Citi Mobile® Application experience that allows Citi cardholders to have a personalised quick view of balances, transactions, statements, available credit limit and rewards. New card activation, PIN creation, cash loans on credit cards as well as converting balances or big purchases into monthly instalments can also be done with the Application.

Citi’s Personal Loan business continues to record year-on-year growth on sales volumes and revenues at 52% and 12% respectively. The business benefited from its strategic focus on offering customers financing solutions that are fast and affordable. Personal Loan customers enjoy instant in-principal approvals through application via the Remarkable Customer Experience Online Application Process.

Retail Banking

We entered 2018 on a steady tide of economic growth and strong corporate earnings. The year, however, stunned markets as extreme volatility fueled by significant political developments such as the US-China trade tensions and Brexit resulted in greater investor uncertainty. We focused on helping clients navigate the challenging environment through portfolio diversification across multiple asset classes with the right selection of investment opportunities.

Significant milestones for the year in our wealth management business included customer engagement on investment opportunities via the Edge Citigold Wealth Forum which we hosted for the second consecutive year. Partners in the Forum included Blackrock, Franklin Templeton and Affin Hwang. Citi provided cutting edge investment solutions through our digital tools namely the Total Wealth Advisor, a real-time in depth portfolio with goals analysis as well as our proprietary Model Portfolio and Citigold Diversification Index. Citi Wealth Insights give customers access to in-depth global market views and information while the Citigold Exclusive Webinar allows customers to gain valuable market insights from our expert financial analysts across the Globe.

In line with the direction from Bank Negara Malaysia to accelerate migration to electronic payments, Citi introduced e-payment channels to customers namely DuitNow, a new electronic payment service from PayNet for customers to transfer money instantly and securely via the mobile phone.

Strategic partnerships with AIA and AXA continued to strengthen as more comprehensive insurance products were offered to customers to help achieve and protect wealth goals.

Mortgage

With the challenging property market environment and intense market competition, customers are now more


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price sensitive when selecting their preferred home loan service providers. At Citi, we continue to penetrate real estate agent channels by offering attractive incentives and home loan packages. Citi’s fast loan approvals and hassle-free application processes through our 10-minute home loan approval gained good traction in the emerging and affluent customer segments.

Institutional Client Group

Treasury and Trade Solutions

Client experience was enhanced through launching of new features in CitiDirect BE, our flagship internet banking platform.

• Cross border payments now covers over 130 currencies, the broadest currency choice in Malaysia. Our corporate clients have further flexibility to settle seamlessly, commercial trades in local currencies apart from the USD.

• The CitiDirect tablet was introduced during the year to provide clients with further mobility and flexibility when accessing online banking.

• Liquidity Manager, another feature, was added to enable clients view intra-day or end-of-day daily cash aggregated balances and analyse account trends globally.

• Citi’s ERP integrator capability is another strong testament of our commitment to clients through more efficient integration of banking services electronically.

Given our digital footprint and leadership, Citi remained in the forefront supporting the rapid expansion of e-commerce business in the country. Citi’s payer identification solution remains a key value proposition amongst e-Commerce players. The innovative solution enables clients to identify their payers and improve account reconciliation. As a strong recognition of our digital footprint, Citi enabled a large e-commerce B2B corporate player win the 2018 Adam Smith Award for Asia’s Best Foreign Exchange Solution.

Securities Services

Citi’s Securities Services business recorded a 3% growth in 2018 with stronger contribution from intermediary and investor clients. The business secured several sizable mandates and further strengthened its position in the custodian industry.

Global Markets

Citi facilitated onshore and offshore bond market flows, gaining recognition as top market maker in bonds from several top money managers. We also participated in forums to facilitate market development of Real-time Retail Payments Platform (RPP). We proactively engaged our clients via a consultative approach in helping them better manage their currency exposures in light of the latest FX FEA guideline, including helping clients to seek exceptional BNM’s approval for certain risk management hedges. Citi continues to maintain a dominant MYR market share of 15.5% and delivered value-added solutions content for different asset classes beyond the traditional FX flow. We executed several episodic trades including a strategic M&A FX and 1st milestone trades in CPO & Natural Gas commodities hedges. This resulted in a 9% growth over the previous financial year.

Citi won the Euromoney Awards for Excellence for Asia’s Best Bank. The Global Markets team was awarded best e-FX platform for corporates by FX Week. Citi also won Best Global Foreign Exchange Bank & Best Bank Platform (Citi Velocity) awards from Global Finance.

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 which focus on culture and environmental, social and governance performance make us a stronger and more sustainable organisation.

In 2018, Citi Foundation extended three community grants in Malaysia.


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Think City, a subsidiary of Khazanah Nasional Berhad received a grant to run The Laneway Improvement Programme. Think City is a community-based urban regeneration company that seeks to create more sustainable and livable cities in Malaysia.

The Programme will transform dilapidated laneways into vibrant community spaces with opportunities for healthy living in the heart of Kuala Lumpur city. It is also a strategy for Think City to approach inner-city social problems including homelessness and assimilation of migrant communities.

Through this programme, Think City provides opportunities for selected community and civil society partners to jointly address significant social issues. There is also an environmental dimension to enhance sustainable development in line with the urban transformation initiatives that have been planned.

The Edge Education Foundation grant to run the ‘Money & Me’ Youth Financial Empowerment Programme made good progress. The programme is designed to equip low and middle-income youth in selected secondary schools in Kuala Lumpur with basic financial planning and entrepreneurial skills to prepare them for the job market.

The Junior Achievement Programme by JA Malaysia was successfully implemented in Kuala Lumpur, Penang, Negeri Sembilan and Melaka. Over 2,000 students benefitted from the business entrepreneur skills training provided through classroom and practical sessions. JA partnered with the State Education Departments and Ministry of Education during the year.

A regional citizenship initiative funded by Citi Foundation was held for the first time in Malaysia. The UNDP and Citi Foundation Youth Co-Lab brought together young social entrepreneurs throughout the country to compete and develop innovative business proposals to support the UN Sustainable Development Goals. The Initiative had the support of the Malaysian Global Innovation and Creativity Centre (MaGIC) as well as the relevant government bodies involved in science and the environment.

More than 4,500 Citi Volunteers in Malaysia joined other Citi employees globally for our Citi Global Community Day 2018 Charity Fun Run and Breakfast in the Park. Citi employees, friends and family contributed and raised RM120,000 for six local charities.

Citi Malaysia was Highly Commended by the Retail Banker International group for Best Initiative in Financial Inclusion, a recognition of Citi’s contribution to promoting financial inclusion and generating positive social impact in community.

Our People

We believe that Citi has more to offer than others do - our global business model, our rich history, our values and culture, and our commitment to progress are second to none.

In particular, we believe that the quality of our people represents one of Citi’s most important assets. How we come to work and how we show up for one another directly translates into how we demonstrate what it means to Be the Best for our clients.

We have a work force of over 2,000 employees at Citibank Berhad and prioritise maintaining a meritocracy that attracts, retains and promotes highly talented professionals. Emphasis is on the development of banking professionals who exemplify best leadership standards and nurturing talent to “future-proof” and meet the demands of an ever challenging business environment.

2019 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


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in an organisational environment that has ethics and business integrity as its priority.

Outlook

It is a challenging environment ahead of us. Global volatility and uncertainty will demand greater resilience and agility to sustain market leadership amidst the pressures of growing competition. Our extensive global network and strengths give us the edge to be the best bank for our customers. Citi has a solid footprint in Malaysia for 60 years serving the emerging affluent and affluent markets as a global financial leader in Malaysia.

The journey ahead is an exciting one that will demand bold leadership, a spirit of innovation to offer world class financial solutions and putting our customers at the heart of all that we do.

My appreciation to our Chairman and Board of Directors for their counsel and support during the financial year. I am grateful to the strong country Leadership Team and all employees for their contribution and commitment to Citi.

Lee Lung Nien, FCBChief Executive Officer

BOARD OF DIRECTORS

From Left to Right : Terence Kent Cuddyre, Lee Lung Nien and Tang Wan Chee (Company Secretary)



From Left to Right : Dato’ Siow Kim Lun, Agnes Liew Yun Chong, Datuk Ali Bin Abdul Kadir and Philip Tan Puay Koon

BOARD OF DIRECTORS - PROFILE


Mr. Terence Cuddyre is the Chairman of the Board and an Independent Non-Executive Director of Citibank Berhad. 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 Bachelor of Arts degree in Economics from the University of California, Santa Barbara and a Master of Business Administration from the Wharton Business School, University of Pennsylvania, USA.

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Mr. Philip Tan Puay Koon 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 Audit Committee and Nominations and Compensation Committee of the Bank.

He is a treasury and professional training consultant with close to 30 years of experience in 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 Cagamas Berhad, SP Setia Bhd, Qinzhou Development (Malaysia) Consortium Sdn. Bhd., China-Malaysia Qinzhou Industrial Park (Guangxi) Development Co. Ltd, Malaysian Electronic Payment Sdn. Bhd., MEPS Currency Management Sdn. Bhd. and Payments Network Malaysia Sdn. Bhd. In addition, he is a member of the Corporate Debt Restructuring Committee established by Bank Negara Malaysia, since 2009.

He holds a First Class Honours in Bachelor of Arts (CNAA) degree in Business Studies (Accounting and Finance) from North-East London Polytechnic, United Kingdom. He is a Fellow of the Institute of Corporate Directors Malaysia and an Associate Fellow of the Asian Institute of Chartered Bankers.

BOARD OF DIRECTORS- PROFILE

Mr. Lee Lung Nien was appointed as the Executive Director and Chief Executive Officer of Citibank Berhad in October 2014. He is a veteran Citibanker with more than 29 years of experience. Prior to his current appointment, Mr. Lee 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, Mr. Lee was the Chief Operating Officer for Citi 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.

Mr. Lee is also a 23-year veteran in Treasury and Markets. His last posting in Markets was that of Co-Head of Corporate Sales & Structuring for Citi 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 Citi Singapore 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.

Mr. Lee is a Fellow Chartered Banker (FCB) and a Council Member of the Education Committee of Asian Institute of Chartered Bankers.

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Dato’ Siow Kim Lun is an Independent Non-Executive Director of Citibank Berhad and has been a board member since April 2007 until his retirement from the Board on 24 April 2019. He is the Chairman of the Bank‘s Nominations and Compensation Committee and a member of the Audit Committee until 24 April 2019.

Dato’ Siow is presently a board member of Eco World International Berhad, Eita Resources Berhad, Hong Leong Assurance Berhad, Radiant Globaltech Berhad, Sunway Construction Group Berhad, UMW Holdings Berhad, HLA Holdings Sdn. Bhd. and MainStreet Advisers Sdn. Bhd.

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

Dato’ Siow holds a Master of Business Administration 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 Programme at Harvard Business School, USA.


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

She began her career with Citi in 1982 as a management associate and in her 35 years with Citi, Ms. Agnes Liew 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, Citi Singapore between 2000 and 2003 before relocating to Citi Taiwan in 2004 as Country Risk Manager. In 2006, she returned to Citi Singapore as Head of Risk for the ASEAN region.

After a successful rotation with Citi’s Risk Management division, Ms. Agnes Liew returned to the Global Banking and assumed a couple of business leadership roles including: Asia Pacific Head of the Global Subsidiaries Group from 2007 to 2010 where she was responsible for the relationship coverage of global multinational subsidiaries in 16 countries and large corporates in ASEAN and Asia Pacific Head of Corporate Banking from 2010 to 2016. In 2016, she was appointed Vice Chairman of Corporate Banking, Asia Pacific for Citigroup based in Singapore and in 2017, Ms. Agnes Liew retired from Citigroup after a successful 35-year career with Citi, to become entrepreneur and founded her lifestyle gym, Oompf! Fitness.

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 a Bachelor of Laws Honours degree from the University of Singapore and is a member of the Supreme Court of Singapore. She is married, with a daughter. She is also a member of the Singapore Institute of Directors.


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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 Risk Management Committee and 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 (“MICPA”) and the Malaysian Institute of Accountants. He is also currently Honorary Advisor to ICAEW Malaysia and Honorary Fellow of the Institute of Chartered Secretaries & Administrators (UK).

Datuk Ali is currently the Chairman of JcbNext Berhad and ENRA Group Berhad. He is also a Board Member of Glomac Berhad, Labuan Financial Services Authority, Ekuiti Nasional Berhad as well as several private limited companies and non-profit organisations. He was previously Chairman of Milux Corporation Berhad, Microlink Solutions Berhad and Privasia Technology Berhad. 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 MICPA, 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 2016, which oversees the Malaysian Accounting Standards Board, and oversaw the convergence with International Accounting Standards.

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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.

He was conferred the Panglima Jasa Negara (PJN) in 2000 by the Yang di-Pertuan Agong and was also awarded the Lifetime Achievement Award by ICAEW and President Award by MICPA, both in 2012.

The Bank aspires to the highest standards of corporate governance and ethical conduct: doing what we say; reporting results with accuracy and transparency; and maintaining full compliance with the laws, rules and regulations that govern the Bank’s businesses.

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.

Board Composition

The Board of Directors (“Board”) comprises six 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 Lun*Independent Non-Executive Director

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

Datuk Ali bin Abdul KadirIndependent Non-Executive Director

Mr. Philip Tan Puay KoonIndependent Non-Executive Director

Tan Sri Dr. Ghauth bin Jasmon ceased as an Independent Non-Executive Director of the Bank on13 September 2018.

The individual profiles of the current directors are set out on pages 12 to 15 of this report.

* Retired on 24 April 2019.

The composition of the Bank’s Board fulfils the requirement of having a majority of independent directors as prescribed by BNM.


STATEMENT OF CORPORATEGOVERNANCE

The Board is chaired by Mr. Terence Kent Cuddyre, an Independent Non-Executive Director. He was appointed to the Board on 14 December 2010 and has been the Chairman of the Board since 12 March 2013.

The Chief Executive Officer (“CEO”), Mr. Lee Lung Nien, is the only Executive Director on the Board, while the other five directors are non-executive directors and four of whom are independent.

The presence of five non-executive directors enables the Board 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 strong presence of the non-executive directors is also beneficial as it enables the Board to exercise sound independent judgement to question, probe and challenge recommendations and decisions made by management.

Roles and Responsibilities

The primary responsibility of the Board 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 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.

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.

Director Independence and Tenure Limits

Citibank Berhad licensed by BNM abides by the requirements of the Corporate Governance policy on independent director. A director shall qualify as independent for purposes of service on the Board of Citibank Berhad and its committees if the Board has determined that the director has no material relationship with Citibank Berhad. Independent directors shall generally not be eligible to serve on the Board for more than nine years except under exceptional circumstances.

Director Training and On-going Development

The Bank provides comprehensive orientation programme for new directors to introduce them to the Bank’s culture, organisation structure, franchise overview, governance structure and constitution. The senior management present to them the Bank’s strategic plan and business overview, its significant financial and risk management strategy, its compliance programmes, its management structure, Islamic finance operations and internal audit coverage. During such sessions, the senior management also share their points of view and industry updates on relevant issues.

The Bank also makes available continuing education programmes for all directors of the Board. A training budget has been set aside to provide the directors with the opportunity to attend 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.

Evaluation of Board Performance

The Board conducts annual review of Board performance, which includes an overview of the talent base of the Board as a whole as well as an individual assessment of each director and performance of each committee. The results of the Board and committee evaluations are presented to the Nominations and Compensation Committee. The results of the individual director’s evaluation are reported to the Chairman of the Board.

Frequency and Conduct of Board Meetings and Attendance

The Board meet at least six times a year to effectively discharge their duties. When required, the Board will meet on ad hoc basis to consider urgent matters. All directors attended more than 75% of Board meetings held during the financial year 2018.

For the Board meetings, the directors are provided with an agenda, discussion decks on the Bank’s financial performance, risk management reports, budgets, new business initiatives or product launches, Board committees' meeting 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 discussion decks are distributed to all directors prior to the scheduled meetings to grant them sufficient time to review all materials and issues that will be discussed during the 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 the meeting 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 2018 is as shown below:

Number of Board MeetingsName of Directors Held AttendedTerence Kent Cuddyre (Chairman) 7 7Lee Lung Nien 7 7Dato’ Siow Kim Lun 7 7Agnes Liew Yun Chong 7 6Datuk Ali bin Abdul Kadir 7 6Philip Tan Puay Koon 7 7Tan Sri Dr. Ghauth bin Jasmon* 5 4

* Tan Sri Dr. Ghauth bin Jasmon has retired from the Board on 13 September 2018. He has attended 4 of the 5 Board meetings held up to 13 September 2018.

Board Committees

The Board has established several Board committees to assist the Board in fulfilling its diverse range of responsibilities.

The committee members are appointed by the Board based on recommendation of the Nominations and Compensation Committee.


Audit Committee Charter

The Board has approved the written charter for the Audit Committee.

The purpose of the Audit 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


Each committee has its own written charter approved by the Board, clearly outlining the mission and responsibilities of the respective committees as well as qualifications for committee membership, procedures for committee member appointment and removal, committee structure, operations and reporting to the Board.

The agenda for each committee meeting is furnished to all directors in advance of the meeting, and each independent director may attend any meeting of any committee, whether or not he or she is a member of that committee.

The Board and each committee have the power to hire independent legal, financial or other advisors, as they may deem necessary.

Pursuant to the 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

The Audit Committee was established in 1994.

The attendance record for each Audit Committee member for the financial year ended 31 December 2018 is as shown below:

Number of MeetingsName of Audit Committee Held AttendedMemberDatuk Ali bin Abdul Kadir (Chairman) 6 6Dato’ Siow Kim Lun 6 6Terence Kent Cuddyre 6 6Tan Sri Dr. Ghauth bin Jasmon* 5 5

* Tan Sri Dr Ghauth bin Jasmon has retired from the Board on 13 September 2018. He has attended all the 5 Audit Committee meetings held up to 13 September 2018.

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

process and Citibank Berhad’s systems of internal accounting and financial controls; (ii) the performance of Internal Audit function (“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.

While the Audit Committee has the responsibilities and powers set forth in the Charter, it is not the duty of the Audit 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 the Bank’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

• 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 judgement 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 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 Independent Auditors

■ Have direct communication channels with the Independent 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 Audit 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 fulfil 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 enhancemen 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.

■ 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 Nominating Committee was established in 2006. It was subsequently renamed to Nominations and Compensation Committee in 2016.

The attendance record for each Nominations and Compensation member for the financial year ended 31 December 2018 is as shown below:

Number of MeetingsName of Nominations and Held AttendedCompensation Committee MemberDato’ Siow Kim Lun (Chairman) 4 4Terence Kent Cuddyre 4 4Datuk Ali bin Abdul Kadir 4 4Philip Tan Puay Koon 4 4Tan Sri Dr. Ghauth bin Jasmon* 2 2

* Tan Sri Dr. Ghauth bin Jasmon has retired from the Board on 13 September 2018. He has attended all the 2 Nominations and Compensation Committee meetings held up to 13 September 2018.

All the Nominations and Compensation Committee members are independent non-executive directors of the Bank.

Nominations and Compensation Committee Charter

The Board has approved the written charter 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 committees, 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) that 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.

■ 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.

■ Support the Board in actively overseeing the design and operation of the financial institution's remuneration system.

■ 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 programme 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 2018 is as shown below:

Number of MeetingsName of Risk Management Held AttendedCommittee MemberPhilip Tan Puay Koon (Chairman) 4 4Agnes Liew Yun Chong 4 3Terence Kent Cuddyre 4 4Datuk Ali bin Abdul Kadir* - -Tan Sri Dr. Ghauth bin Jasmon* 3 2

* Datuk Ali bin Abdul Kadir was appointed as a Risk Management Committee member on 8 November 2018. There were no Risk Management Committee meetings held after his appointment date.

* Tan Sri Dr. Ghauth bin Jasmon has retired from the Board on 13 September 2018. He has attended 2 of the 3 Risk Management Committee meetings held up to 13 September 2018.




All the Risk Management Committee members are non-executive directors of the Bank and three of them are independent directors.

Risk Management Committee Charter

The Board has approved the written charter 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:

■ Recommend the adoption of Citi risk management strategies, policies, and risk tolerance to the Board for 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.

■ 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.

Please refer to Pillar 3 disclosure.


RISK MANAGEMENT

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 Bank’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 2016 and other applicable approved standards in Malaysia.

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

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

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

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

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

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

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


STATEMENT OF INTERNALAUDIT AND INTERNALCONTROL

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 control 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 Regulatory Change Management Governance 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.

The following policy covers all employees in Citibank Berhad:

Compensation Philosophy

Employee compensation is a critical strategic tool in the successful execution of our goals. As long-term value creation requires balancing strategic goals, so does developing compensation programmes that incent balanced behaviours. The Group’s and the Bank’s Compensation Philosophy describes our approach to balancing the five primary objectives that our compensation programmes and structures are designed to achieve.

Objectives

Our compensation objectives, as outlined below, have been developed globally and approved by the Nomination and Compensation Committee of the Board of Directors (the “Committee”), in consultation with management, independent consultants and the Group’s and the Bank’s senior risk officers. They have been specifically created to encourage prudent risk-taking, while attracting the world-class talent necessary to see the company through to success and ‘Be the Best for Our Clients’.

Compensation Objectives:

1. Align compensation programmes, structure and decisions with shareholder and other stakeholder interests;

2. Reinforce a business culture based on the highest ethical standards;

3. Manage risks by encouraging prudent decision-making;

4. Reflect regulatory guidance in compensation programmes; and

5. Attract and retain the best talent to lead the Bank to success.


CITIBANK BERHAD’SREMUNERATION POLICY

Shareholder/Stakeholder Alignment

■ Compensate executives through an objective framework that aims to strengthen the link between pay and performance by using a balanced scorecard approach with financial metrics and non-financial objectives that, in combination, are expected to improve risk-adjusted returns to shareholders.

■ Provide meaningful portions of incentive compensation in the form of equity to help build a culture of ownership and to align employee interests with those of shareholders and other stakeholders.

■ Defer the delivery of significant portions of incentive compensation with vesting over a number of years and tie the amounts delivered to longer-term performance of the Bank to better link long-term shareholder value creation to the interests of management and to enhance alignment with risk outcomes.

■ Provide for Clawbacks in cases of improper risk-taking and material adverse outcomes in the years following the awarding of incentive compensation.

■ Size incentive compensation to reflect company performance as well as industry and environmental factors, while maintaining strong capital levels.

■ Recognise capital planning outcomes in senior management incentive compensation awards, to improve alignment with both shareholder interests and regulatory guidance.

Ethics and Culture

■ Promote conduct based on the highest ethical standards through performance assessments, incentive compensation programmes and, where appropriate, disciplinary actions, and communicate throughout the organisation that acting with integrity at all times is the foundation of our business.


■ Enhance a business culture that supports accountability and a zero-tolerance environment for unethical conduct, through appropriate compensation and employment decisions.

Risk Management

■ Develop and enforce risk management controls that reduce incentives to create imprudent risks for the Group and the Bank and its businesses, and that reward a thoughtful balance of risk and return.

■ Exercise discretion within a framework designed to make appropriate trade-offs between risk and reward.

■ Encourage prudent risk-taking through multiple incentive compensation programme processes for all employees who manage or influence material risks, including

a. rigorous performance management processes;

b. bonus pool funding and individual bonus determination processes that reflect risk adjusted performance; and

c. deferrals that keep a meaningful portion of incentives at risk for future performance outcomes.

■ Evaluate incentive compensation programme results on an iterative basis, recognising that validation and monitoring may result in future changes.

■ Communicate clearly to all employees that poor risk management practices and imprudent risk-taking activity will lead to an adverse impact on incentive compensation, including the loss of incentive compensation and the reduction or elimination of previously awarded incentive compensation.

■ Differentiate compensation decisions based on demonstrated risk management behaviours.

■ Appoint only independent directors to the Committee, to provide independent review and approval of the firm’s overall compensation philosophy.

■ Involve the Group’s and the Bank’s control functions, including Independent Risk, Compliance and Internal Audit, in compensation governance and oversight.

Regulatory Guidance

■ Design incentive compensation programmes with the recognition that global regulation of bank incentive

compensation is evolving and that the programmes must be responsive to emerging trends and best practices.

■ Where appropriate, develop innovative and industry-leading approaches that reconcile regulatory considerations and other stakeholder interests in compensation structures and designs.

■ Promote understanding of the design and implementation of incentive compensation programmes by outlining compensation policies, procedures and practices in public disclosures.

Attract and Retain Talent

■ Compensate employees based on ability, contributions and risk-adjusted performance demonstrated over time, balanced with appropriate recognition for short-term results and contributions.

■ Provide compensation programmes that are competitive within global financial services to attract the best talent to successfully execute the Bank’s strategy.

■ Differentiate individual compensation to reflect employees’ current or prospective contributions, based on both financial and non-financial performance such as risk and compliance behaviour, and to reward those employees who demonstrate ingenuity and leadership.

■ Provide discretionary incentive compensation, including equity awards, that is variable within guidelines prescribed by management and the Committee using a rigorous objective framework of goal-setting and performance evaluation for all highly paid professionals.

■ Clearly and consistently communicate the approach to compensation throughout the year, cascading such communications broadly to employees through key value statements such as the Code of Conduct and the statements and actions of senior management and managers generally.

Guiding Principles on Remuneration

General

1. As part of a global organisation, the Group’s and the Bank’s policy on remuneration follows mostly the global policies, programmes, or directions/guidelines where it is applicable to the local context. In formulating this remuneration policy, references are



made to the respective global policies/practices where necessary while local consideration will also be included.

2. Fixed remuneration should be sufficiently competitive against our competitors in order to support the Group and the Bank to attract and retain talent based on individual circumstances and performance level.

3. Variable remuneration will be structured to encourage behaviour that supports the Group’s and the Bank’s long term objectives and business strategies, and will not encourage excessive risk-taking that would otherwise jeopardise the Group’s and the Bank’s risk tolerance and long term financial soundness, while balancing the needs to attract and retain talent with the relevant skills, knowledge and expertise to discharge their specific functions.

4. The mix between fixed and variable remuneration depends on the importance of the employee’s role within the organisation. In general, highly compensated employees will receive a greater percentage of their total annual compensation as variable remuneration. Of the variable remuneration awarded to highly compensated employees, a percentage, currently ranging from 25% to 60%, of will be awarded as deferred variable remuneration under the Discretionary Incentive and Retention Award Plan (the “DIRA plan”). Currently, employees, except for Covered Employees*, who receive annual variable remuneration that equals or exceeds the local currency equivalent of USD 100,000 will receive deferred variable remuneration under the DIRA plan. Covered Employees who receive annual variable remuneration of greater than USD 50,000 but less than USD 100,000 have a deferral of 10% of the variable award. Group 1 and 2 Covered Employees are subject to a minimum deferral of 40% of their incentive, and all Covered Employees have 50% of their deferral in stock and 50% in cash. Generally, deferred variable remuneration awarded under the DIRA plan is granted in the form of an equity award that vests in four equal annual instalments.

5. The payment or distribution of deferred variable remuneration requires that the employee satisfy pre-defined vesting conditions (and performance-based vesting conditions for Covered Employees). The pre-defined vesting conditions generally require that an employee remain actively employed by the Group and the Bank over the vesting period applicable to the award.

6. Generally, unvested deferred variable remuneration is subject to forfeiture upon employee’s voluntary resignation. In addition, irrespective of an employee’s employment status, an unvested deferred variable remuneration award is subject to forfeiture, in whole or in part, if the following Clawback provision is triggered:

a. The award is based on materially inaccurate publicly reported financial statements; or

b. Employee knowingly engaged in providing materially inaccurate information relating to publicly reported financial statements; or

c. Employee materially violated any risk limits

established or revised by senior management and/or risk management; or

d. The employee engaged in misconduct resulting in summary dismissal or a material breach of the Code of Conduct.

7. It is important to differentiate performance among employees in order to support a pay for performance culture. In general, employees with a higher performance rating should be given a relatively higher reward when compare to employees with a lower performance rating, and employees with unsatisfactory performance rating should not be given any reward.

8. Risk adjustment to the variable remuneration awarded to an individual employee will take any adverse performance in non-financial measures into account, and any adverse performance may result in a reduction or elimination of the variable remuneration awarded to an individual employee.

9. To avoid conflicts of interest, individual employees are not involved in the decision making process in respect of their own remuneration.

Senior Management and Individual Key Personnel

1. The determination of the remuneration package of Senior Management and Key Personnel is reviewed and approved independent of the local management. With respect to the determination of the annual variable remuneration for Senior Management and Key Personnel, the process begins at the Regional Office of Asia Pacific Region, which initially reviews and approves annual variable remuneration for all countries in the region.



2. The determination and approval of bonus pool size and the respective allocation to the regional products and functions are conducted at the global level. In addition to financial performance, the pool calculations are based on a business scorecard approach which takes account of risk with increasing degrees of sophistication. Bonus pool amounts are reviewed and approved internally by the Global CEO and presented to the Personnel and Compensation Committee for final approval.

3. Once the pool allocations are released to the region, regional management (which is independent of local management) will review the annual variable remuneration of the Senior Management and Key Personnel. The review will focus on linking performance to variable compensation. These recommendations will be reviewed and approved by the regional CEO before submitting to the global head office for further review and approval.

4. At the global level, the annual variable remuneration for Senior Management and Key Personnel will be reviewed and approved by the respective global management before they are presented to the Personnel & Compensation Committee for final review.

5. The annual variable remuneration for Senior Management and Key Personnel who are identified as Covered Employees will be subject to the Group’s and the Bank’s global policy on Covered Employees for determination of annual variable remuneration.

6. The ultimate approval of incentive pools will be by the Country Nomination and Compensation Committee of the Board of Directors before any compensation decisions are communicated to the employees.

Disclosure Requirement

Aggregated quantitative information on remuneration for Senior Management and Key Personnel, as well as key information on decision making process and plan characteristics of the remuneration system, as required under the local law shall also be disclosed to the public or to Bank Negara Malaysia (“BNM”) as the case may be in a timely manner.

This information will be prepared for disclosure on an annual basis after the completion of the year-end process. Timeframe is usually around the end of the first quarter.


Annual Independent Self-Assessment

An annual independent self-assessment will be conducted by the Nominations and Compensation Committee of the Board of Directors to demonstrate that the Group and the Bank comply with BNM’s Corporate Governance Guidelines. Such assessment is usually performed around the 4th Quarter of the year.

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

■ Annual ICAAP Results

■ Credit Risk Management Report

■ Liquidity & Market Risk Management Reports

■ Operational Risk Update

■ Quarterly Derivative Outstanding Report

■ Compliance Monitoring Report

■ Minutes of Audit Committee meetings

■ Minutes of Risk Management Committee meetings

■ Minutes of Nominations and Compensation Committee meetings

■ Minutes of Shariah Committee meetings


MANAGEMENT REPORTS

RAM Rating Services Berhad (“RAM”) has, on 27 December 2018, 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.


RATINGS STATEMENT

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 2018, the Shariah Committee convened 9 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 until 31 May 2019 included the following distinguished members:

Dr. Mat Noor Mat Zain (Chairman)

Dr. Mat Noor Mat Zain is Chairman of the Centre for Contemporary Fiqh and Shari'ah Compliance, 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 the Journal of Contemporary Islamic Law published by Centre for Contemporary Fiqh and Shari'ah Compliance, Faculty of Islamic Studies, UKM.


SHARIAH COMMITTEE

He holds a Bachelor of Shariah from the Islamic University of Medina, Saudi Arabia, a Master's Degree in Islamic Studies (Muamalah) from UKM and Ph.D. in the field of Islamic Contract from International Islamic University Malaysia (“IIUM”).

Prof. Dr. Abdul Ghafar Ismail

Prof. Dr. Abdul Ghafar Ismail is currently a Chief Executive, Kolej Pengajian Islam Johor (or Johor Islamic Studies College, Chairman of Organisation of Islamic Economic Studies and Thought, Malaysia. He is also a professor of Islamic financial economics. He got obtained his Ph.D. from the University of Southampton, England. His experience includes Head of Research Division, Islamic Research and Training Institute, Islamic Development Bank; Professor of Islamic financial economics, Universiti Kebangsaan Malaysia; Bank Supervision Advisor of the International Monetary Fund for Djibouti; AmBank Group Resident Fellow for Perdana Leadership Foundation; Fellow, Yayasan Pembangunan Ekonomi Islam Malaysia and Shariah Committee Member for Citibank Malaysia. He has published extensively in several referred journals among others Journal of Business Ethics; European Journal of Law and Economics; 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; 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 the International Seminar on Islamic Economics and Finance, the IRTI International Conference and the Malaysia Finance Association Conference. His research interests include the learning process and growth theory, inter-temporal allocation of resources, earning management, capital adequacy standard for Islamic financial institutions, risk management, and institutional economics.

His recent books are Money, Islamic Banking and Real Economy; Islamic Microfinance Institutions: Efficiency and Sustainability; Case Studies in Islamic Banking and


SHARIAH COMMITTEE

Finance; Financial Inclusiveness of the Poor: Beyond Microfinance; Waqf and Socio-Economic Development; Regulation and Supervision of Islamic Microfinance; Maqasid Al-Shariah Based Index of Socio-Economic Development and Financial Inclusion and Poverty Alleviation: Perspective from Islamic Institutions and Instruments.

Dr. Hakimah Hj Yaacob

Dr Hakimah Yaacob is a Senior Assistant Professor of Sultan Sharif Ali Islamic University (UNISSA) Brunei Darussalam. Prior to this, she was an Associate Professor at the Faculty of Laws, National University Malaysia. She holds a Bachelor and Master Degree in Law and a PhD in Law. She is a member of the Shariah committee of Citibank Malaysia and Citibank Labuan. She was involved in providing consultation to various organisations in Maldives, Indonesia, Brunei and Malaysia such as Bank Islam Brunei Darussalam, AMBD, CIBFM, etc. She is a senior trainer of IBFIM and a trainer for CIBFM in Brunei Darussalam. She is a member of the Chartered Institute of Arbitrators, UK and certified mediator of Australian Accord Group and Malaysian Mediation Centre. She was appointed as a court expert in several cases involving Islamic finance cases in Malaysia and Brunei.

Her specialisation is in financial legal and regulatory compliance. Dr Hakimah is an expert in writing and drafting Islamic Legal documentation and has published several books on ‘The World Banking System’, also the author of ‘Alternative Dispute Resolution in Cross Border Islamic Finance Cases'. Dr.Hakimah's consulting assignments includes drafting the regulatory framework for Islamic Finance in Maldives and Brunei. She is currently active in issuing Policy papers on the synchronisation of Takaful into the policy of qisas. Dr. Hakimah is actively involved with advising on Shariah and legal compliance issues in banking, drafting internal Policies for banking compliance, World Trade law, International economics law, and International Islamic economics. She has published 100 interactive education videos concerning banking and presented more than 300 academic, Modules, Interactive videos and consultation papers.

Dr. Nik Abdul Rahim bin Nik Abdul Ghani

Dr. Nik Abdul Rahim is a senior lecturer of Fiqh Muamalat at Centre for Contemporary Fiqh and Shari’ah Compliance, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia (“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 Hukum Syarak Consultative Committee, Office of Wilayah Persekutuan's Mufti. He is also a member of the Research Centre for Islamic Economics and Finance ("EKONIS") or formerly known as Islamic Economics and Finance Research Group. He is one of the members of the committee of Klinik Hukum Syarak and Guaman Syarie, Centre for Contemporary Fiqh and Shari'ah Compliance, and also an expert consultant and speaker for Pusat Islam UKM and Unit Latihan UKM programmes related to Islamic Law.

He holds a Master’s Degree in Shariah from UKM and a PhD in Islamic Finance from the International Centre for Education in Islamic Finance ("INCEIF").

Mohd Bahroddin Badri

Mohd Bahroddin Badri is a Researcher at the International Shariah Research Academy for Islamic Finance ("ISRA") and Shariah Consultant at ISRA Consultancy Sdn. Bhd. ("ICSB") a consultancy arm of ISRA. Prior to joining ISRA in 2012, he has served as a lecturer at International Islamic University Malaysia ("IIUM") since 2003. He holds a Bachelor Degree of Islamic Revealed Knowledge and Heritage (Fiqh and Usul Fiqh) from IIUM and Master Degree of Shariah-Economics from University of Malaya. Currently, he is pursuing his Doctoral study in Business at the International University Malaya-Wales ("IUMW"). He is one of the Authors of the world’s first most comprehensive Islamic finance textbook, “Islamic Financial System: Principles & Operations” (2 Ed) and co-Author of Sukuk: Principles and Practices. He has produced several research papers and articles on Shariah and Islamic Finance that have been published in international refereed journals and international magazines including Islamic Finance News (“IFN”), General Council for Islamic Banks and Financial Institutions (“CIBAFI”), Bloomberg etc. He actively presented and participated in local and international workshops, seminars and conferences e.g. Brunei, Singapore, Jakarta, Oman, Istanbul and Toronto, Canada. His co-authored research on “Shariah Issues of Preference Shares: Analysis Based on Musharakah Contract” has won Best Paper Award at the 1st International Halal Management Conference 2017 held in Sejong University, Seoul Korea.

Mohd Bahroddin Badri has resigned from the Shariah Committee on 15 July 2018.

Customer Issue Resolution

At Citibank, we have a robust complaints handling process that is set out in our Customer Service Charter. In the spirit of Welcoming What’s Next, we have embarked on several initiatives to improve our quality of complaints to ensure that we continue to be the best for our customers. We also seek feedback proactively through surveys whenever customers transact with us, we take it upon ourselves to read every feedback provided and channel them to the relevant departments for improvement. This allows us to continue to do things that delights our customers and work on the areas where we are not doing well. The intent is to reduce customer pain points across the multiple channels and customer journeys while accelerating the results.

We pride ourselves in providing excellent services for our customers but we are far from being satisfied, to


CUSTOMER ENGAGEMENTAND SERVICE DELIVERY

improve further in this area we have embarked on several initiatives to be the best in class for customer experience. To mention a few, drive a culture change programme to instill the culture of being Client Obsessed to our employees, customer engagement sessions with more senior management involvement and dedicated team address customer pain points.

Citi has a strong culture of accountability and ownership with senior management team have an oversight on customer feedback and complaints. Our senior management team will be more involved in engagement with customers and take ownership of customer’s pain points.

We are confident that all the actions that have been put in place have resulted in better customer experience as we take pride in being truly Customer Obsessed.

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 has proactively embraced a “More than Philanthropy” approach to our strategic community initiatives. Our focus areas are in Urban Transformation, Financial Inclusion and Youth Economic Opportunities.

In 2018, Citi Foundation extended grants of US$360,000 grant to our grant partners in Malaysia.

Think City, a subsidiary of Khazanah Nasional Berhad received a grant of US$200,000 from Citi Foundation to run the The Laneway Improvement Programme in 2018/2019. Think City is a community-based urban regeneration body that seeks to create more sustainable and livable cities.

The Laneway Improvement Programme aims to transform dilapidated laneways into vibrant community spaces with opportunities for healthy living. It is also a strategy for Think City to approach inner-city social problems including homelessness and supporting migrant communities that are based around three laneways in historic Kuala Lumpur.


CORPORATECITIZENSHIP AT CITI


Images courtesy of Think City

The JA Be Entrepreneurial Programme, delivered through workshops with the students is aimed at providing

knowledge and skills on business. Over 2000 school children, drawn from the public schools in

communities/areas populated by middle to lower income groups were part of the programme.

Students were also exposed to social impact and coached in the development of business plans for welfare

organisations.

The National Level JA Social Impact Programme Grand Final were conducted on November 16 in Kuala

Lumpur. Fifteen teams were selected to further benefit from mentoring by Citi employees and to present their

business plan in a final competition.

On Youth Economic

Opportunities, Citi Malaysia

continued to support The

Edge Education Foundation

which received US$80,000

to run its ‘Money & Me’

Youth Financial

Empowerment Programme.

The programme is designed

to equip low and

middle-income youth with

basic financial planning and

entrepreneurial skills to

prepare them for the job

market. Over 40 Citi

Volunteers facilitated the

first session for the year at

Sekolah Menengah

Kebangsaan Bangsar

(Secondary School in Kuala

Lumpur).


CORPORATE CITIZENSHIP AT CITI


Citi Foundation partnered with The Edge Education Foundation to run the 'Money & Me' Youth Financial

Empowerment Programme to equip 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.

The programme was launched in 2016 with five secondary schools and 96 participants. A year later, the number of

schools participating in the programme grew by 60% to eight schools. The number of participants increased 48%

in 2017 and included 48 participants at the Sekolah Integrasi Kajang (a prison school for youths). The programme

was approved by The Ministry of Education as a co-curricular programme for Form 4 students.

In 2018, all 341 students carried out their business projects successfully during Sales Day at the 14 participating

schools. The Sales Day revenue for 2018 doubled from 2017. All participants successfully carried out a small

business project; 56% showed an increase in financial knowledge and skills; 77% said they were putting money

into a savings account or giving to their families to save on their behalf and 100% of the participants completed a

map to set a career goal after their post-secondary education and training.




Global Community Day 2018 – Charity Fun Run & Breakfast in the Park

Citi Malaysia’s Global Community Day 2018 was a Charity Fun Run and Breakfast in the Park. The event was held at three locations in Malaysia – Perdana Botanical Gardens Kuala Lumpur and Johor’s Hutan Bandar Park and Penang’s Botanical Garden. A total of 4504 Citi employees, friends and family contributed and raised RM 120,000, which was donated to the following beneficiaries:

The Society for the Severely Mentally Handicapped Selangor and Federal Territory (SSMH), Kuala Lumpur

Special Children Society of Ampang, Kuala Lumpur

Malaysia Lotus Charity Care Centre Association, Kuala Lumpur

The Pit Stop Community Café, Kuala Lumpur

Bethesda Senior Home, Penang

Summit Care Center, Johor Bahru

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Strong Tradition of Volunteerism

3000

720

1031

45004504

20152013 2014 2016 20182017

5040

Citibank Berhad has been a leadership incubator in the country, through the years nurturing and

grooming some of the best financial talent in Malaysia today.

In 2018, we continued our focus on identifying and developing a diverse pool of top talent for current

and future leadership roles. High Potential individuals with a history of high performance and the

potential and aspiration to move to considerably more complex leaderships positions were identified

for the 2018/2019 cohort of the Leadership Enhancement and Accelerated Development (“LEAD”)

programme.

The focus for learning and development in 2018 was on ‘future-proofing’ our workforce and enhancing managerial capability. To that end, the LEAD programme kicked off with an interactive ‘Forward Compatibility’ workshop designed to assess and prepare employees to thrive in an evolving world, through ongoing assessment of employees’ six Forward Compatibility attributes: being Adaptable, Bold, Curious, Collaborative, Determined and Empathetic. These attributes have been identified as being crucial to help drive greater innovation and collaboration, widen employees’ perspectives to better empathise with client needs, and ultimately help them personally Be their Best.

The core modules of the LEAD programme for 2018/2019 encompass three core skills: Innovation Capability, Strategic Thinking, and Coaching as a key leadership skillset.

Methodology for how these skillsets are internalised meaningfully by talent included:

■ creating ‘breathing space from business-as-usual’ for reflection and internalisation

■ supporting learners as they adopted new mindsets and practiced new skills on the job, working on key performance indicator (“KPI”)-relevant projects with built-in feedback mechanisms from external coaches and mentors outside their reporting line

■ encouraging collaboration with cross-franchise peers, building ‘social capital' and support networks

■ a visible accountability factor i.e. final outcomes presentations that also allow stakeholders to evaluate transformations that have occurred as a result of the development initiatives

Innovation Capability was developed in the LEAD Turbocharge, an incubator programme teaching agile methodology, and focused on participants exceeding


OUR PEOPLE

(turbocharging) their core KPIs by at least 10% in 16 weeks. 43 participants graduated in November 2018, generating over RM27,000,000 in innovation valuation as endorsed by participants’ managers and presented to senior management.

Valuing Our People

We continued building LEAD-ers’ Strategic Thinking capabilities with a Learning Gamification methodology in which learners became players in a board game simulating a tech-forward competitive environment. They were challenged to balance complexities around capitalising opportunities and mitigating risks amidst limited resources and evolving markets. Skills learned were then practised and observed on-the-job over a period of 10 weeks, with both managers and external coaches providing support and feedback over the programme period. An outcome sharing presentation at the end of the programme demonstrated tangible impact to employee behaviours and business results, laudable given the intangible nature of strategic thinking as a teachable skillset. A similar framework of theory coupled with on-the-job application and observation will underpin the LEAD Coaching skills programme to be piloted in Q1 2019.

Throughout the remainder of the organisation, we delivered Citi’s leadership programmes to 63% of eligible managers across the franchise, and introduced Degreed, a new online learning platform that acts as a one-stop-shop for employees to be able to access learning content and opportunities. Degreed allows employees to discover, share and track all kinds of learning resources: courses, videos, articles and more, while providing a social media like functionality allowing employees to receive relevant, personalised recommendations from their peers, thereby allowing employees to take charge of what and how they learn – at work and on the go.

We also continued the process of supporting the Bank Negara Malaysia mandate to professionalise the banking industry via the Chartered Banker qualification, a globally recognised designation jointly conferred by the Asian Institute of Chartered Bankers and the Chartered Banker Institute in the United Kingdom. In 2018, 2 seniors successfully attained Chartered Banker certifications, paving the way for full certification of all senior management to be completed by end 2021.

Relevant employees commenced specialist certifications in critical job functions (i.e. Credit, Compliance, Risk Management, Audit, Anti Money Laundering and Counter Financing of Terrorism) with two Risk Management staff completing certifications in 2018, kick starting progression of the ongoing effort to achieve 100% completion of specialist certifications by end 2022.

Citi Malaysia believes that investing in talent development early will prepare us for the generational change and a rapidly changing landscape. We have continued to bring in fresh talents through our Summer Analyst and Full Time Graduate Programmes. 2018 saw the launch of seven business/function-specific programmes, allowing the respective businesses to plan and strategise their own programme model. Corporate Banking, Treasury & Trade Solutions, Markets & Securities Services, Global Consumer Banking, Securities Services & Operations, Anti Money Laundering, Operations & Technology all have a combined 36 Analysts in total undergoing training & rotations to be ready as the next generation leaders. Citi Malaysia also hosted 20 Summer Analysts (interns) from various universities in Malaysia and abroad for a period of 2.5 months, to build pipeline for our Analyst programmes.

Malaysian employees comprised 18% of the cohort of 28 talents selected for the regional Operations & Technology Leadership Development Programme (LDP), a 2-year programme that aims to accelerate development and provide breadth of experience for employees to become future leaders in Operations & Technology. Endorsing Citi Malaysia’s ability to attract talent, 39% of permanent roles for graduating LDP-ers were placed in Citi Malaysia roles.

As part of our commitment to gender diversity and recognising that a diverse workforce enhances our competitiveness as an organisation and is key in retaining top talent, Malaysia put up 25 female talents (representing 89% of the regional cohort) in the 2018 EDGE programme. This is a 6-month programme designed to develop high performing female employees at Assistant Vice President level by building their leadership capabilities.

Five Malaysian participants were also selected for the 6-month regional Asia Inspiring Women Leaders Programme, bringing together a select group of high performing Vice President level women employees, to be inspired and confidently lean in to career growth and development.

Additionally, Citi Malaysia’s Women and Generational Diversity Employee Networks responded to concerns of their members by organising Lean-in Circles for discussion of gender diversity issues; ‘App Idol’, a competition highlighting the most valuable apps available today, and workshops on issues of common concern across multigenerational employees, including Practical Crime Prevention/Self Defence workshops.

Subsequently, about 600 Malaysian employees joined 35,000 Citi employees in a global Unconscious Bias training experience with Harvard Professor and author Dr. Mahzarin Banaji. The training covered "blindspots" – the hidden biases we have about ourselves and others, why our best intentions do not always translate to our behaviours; and how biases affect our clients’ interests, daily interactions and decision-making.

Moving forward, Citi will continue to focus on building the talent pipeline, developing, and implementing relevant programmes, initiatives, policies and processes to nurture a dynamic and progressive ecosystem for our people.











Valuing Our People






OUR PEOPLE

















Valuing Our People






OUR PEOPLE







F I N A N C I A L STAT E M E N TS

DIRECTORS’ REPORT



SHARIAH COMMITTEE‘S REPORT


STATEMENTS OF FINANCIAL POSITION

STATEMENTS OF PROFIT OR LOSS AND OTHERCOMPREHENSIVE INCOME

STATEMENTS OF CHANGES IN EQUITY

STATEMENTS OF CASH FLOWS


44

47

48

49

50

52

53

54

55

57

CONTENTS

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 2018.

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 11 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 Holding (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 1,047,354Tax expense (259,696) Profit for the year 787,658

Reserves and provisionsThere 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 Bank paid a final ordinary dividend of 394 sen per ordinary share totalling RM480 million in respect of the financial year ended 31 December 2017 on 27 June 2018.

The final ordinary dividend recommended by the Directors in respect of the financial year ended 31 December 2018 is 647 sen per ordinary share totalling RM788 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.

FOR THE YEAR ENDED 31 DECEMBER 2018


DIRECTORS’ REPORT

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

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

Item 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

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 Bought/ 1.1.2018 Vested Sold 31.12.2018Shares in Citigroup Inc. Direct interests

Dato’ Siow Kim Lun 900 - (900) - Agnes Liew Yun Chong 47,574 5,113 - 52,687 Terence Kent Cuddyre 3,023 151 (31) 3,143 Philip Tan Puay Koon 916 - - 916 Lee Lung Nien 2,093 3,224 (2,093) 3,224

Number of ordinary shares of USD1 each At At Bought/ 1.1.2018 Granted Vested 31.12.2018Capital Accumulation Programme/ Supplementary CAP/SEA in Citigroup Inc.

Lee Lung Nien 10,990 3,094 (4,481) 9,603 Agnes Liew Yun Chong 12,280 - (5,113) 7,167 Terence Kent Cuddyre 151 - (151) -

None of the other Directors holding office at 31 December 2018 had any interest in the ordinary shares and options over ordinary shares of the Bank and of its related corporations during the financial year.

DIRECTORS’ REPORT


the results of the operations of the Group and the Bank for the current financial year in which this report is made.

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.

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

■ Lee Lung Nien■ Datuk Ali Bin Abdul Kadir ■ Dato’ Siow Kim Lun (retired on 24 April 2019)■ Agnes Liew Yun Chong■ Terence Kent Cuddyre■ Philip Tan Puay Koon ■ Tan Sri Dr. Ghauth bin Jasmon (resigned on 13 September 2018)

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 except for certain Directors who have participated in a discretionary incentive and retention award program that provides the Directors (in their capacity as employees of Citigroup subsidiaries) with shares of Citigroup Inc.’s common stock in the form of restricted stock awards.

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 Bank is RM30,311.

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

The auditors’ remuneration is disclosed in Note 22 to the financial statements.

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

Lee Lung Nien, FCBDirector

Datuk Ali Bin Abdul Kadir Director

Kuala LumpurDate: 9 May 2019

DIRECTORS’ REPORT


In the opinion of the Directors, the financial statements set out on pages 52 to 150 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and the Bank as at 31 December 2018 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 Nien, FCBDirector

Datuk Ali Bin Abdul Kadir Director



PURSUANT TO SECTION 251(2) OF THE COMPANIES ACT 2016


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 52 to 150 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 abovenamed Tang Wan Chee, NRIC: 640901-10-7346, MIA CA12894, at Kuala Lumpur in the Federal Territory on 9 May 2019.

Tang Wan Chee

Before me:

Commissioner for Oaths


PURSUANT TO SECTION 251(1)(b) OF THE COMPANIES ACT 2016


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 2018.

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 2018 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 we have no personal interest in any dealings or transactions approved by Citbank Berhad and the operations of the Citibank Berhad’s Islamic Banking division for the year ended 31 December 2018 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 IsmailChairman of the Shariah Committee Member of the Shariah Committee

Dr. Hakimah Hj Yaacob Dr. Nik Abdul Rahim bin Nik Abdul GhaniMember of the Shariah Committee Member of the Shariah Committee



IN THE NAME OF ALLAH, THE MOST BENEFICENT, THE MOST MERCIFUL

SHARIAH COMMITTEE’S REPORT

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 2018 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 56 to 183.

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 2018, 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 2016 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 Thereon The 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 Statements The 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 2016 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 Statements Our 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,


TO THE MEMBERS OF CITIBANK BERHAD AND ITS SUBSIDIARIES


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:

• 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.

Other MatterThis report is made solely to the members 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 PLT Adrian Lee Lye WangLLP0010081-LCA & AF 0758 Approval Number: 02679/11/2019 JChartered Accountants Chartered Accountant

Petaling Jaya, Selangor

Date: 9 May 2019



Group Bank Note 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000

Assets

Cash and short term funds 3 2,987,381 5,879,561 2,987,361 5,879,541

Deposits and placements with banks and other financial institutions 4 996,236 943,830 996,236 943,830

Securities purchased under resale agreements 122,439 19,685 122,439 19,685

Investment securities 5 8,929,403 6,388,656 8,929,403 6,388,656

Loans, advances and financing 6 23,932,094 23,526,645 23,932,094 23,526,645

Other assets 8 1,004,538 859,249 1,004,538 859,249

Statutory deposits with Bank Negara Malaysia 9 400,524 339,330 400,524 339,330

Deferred tax assets 10 139,233 77,348 139,233 77,348

Investments in subsidiaries 11 - - 20 20

Plant and equipment 12 45,019 43,378 45,019 43,378

Total assets 38,556,867 38,077,682 38,556,867 38,077,682

Liabilities

Deposits from customers 13 26,408,324 26,421,900 26,408,324 26,421,900

Deposits and placements of banks and other financial institutions 14 5,317,859 4,464,256 5,317,859 4,464,256

Other liabilities 15 1,701,347 2,287,992 1,701,347 2,287,992

Provision for taxation 63,119 34,546 63,119 34,546

Total liabilities 33,490,649 33,208,694 33,490,649 33,208,694

Equity

Share capital 16 502,000 502,000 502,000 502,000

Reserves 17 4,564,218 4,366,988 4,564,218 4,366,988

Total equity attributable to equity holder of the Bank 5,066,218 4,868,988 5,066,218 4,868,988

Total liabilities and equity 38,556,867 38,077,682 38,556,867 38,077,682

Commitments and contingencies 35 198,520,587 161,448,027 198,520,587 161,448,027

The notes on pages 57 to 150 are an integral part of these financial statements.

AS AT 31 DECEMBER 2018


STATEMENTS OFFINANCIAL POSITION

Group and Bank Note 2018 2017 RM’000 RM’000

Revenue 2(b) 2,535,243 2,547,317 Interest income 19 1,682,725 1,697,787Interest expense 20 (478,729) (445,706)

Net interest income 1,203,996 1,252,081

Net income from Islamic Banking operations 37(n) 56,820 68,675Other operating income 21 795,698 780,855

Total net income 2,056,514 2,101,611

Other operating expenses 22 (947,941) (1,007,463)

Operating profit 1,108,573 1,094,148

Allowance for loans, advances and financing 23 (63,985) (54,947)Allowance for other assets 2,766 -

Profit before taxation 1,047,354 1,039,201

Tax expense 24 (259,696) (276,121)

Profit for the year 787,658 763,080

Other comprehensive (expense)/income, net of tax Items that are or may be reclassified subsequently to profit or loss

Investment securities - Net change in fair value 1,460 33,983 - Net transfer to profit or loss (1,862) - Items that will not be reclassified subsequently to profit or loss - Withdrawal by members/net gain on remeasurement of defined benefit plans (6,491) 2,377

Total other comprehensive (expense)/income for the year (6,893) 36,360

Total comprehensive income for the year 780,765 799,440 Profit for the year attributable to:

Owner of the Bank 787,658 763,080

Total comprehensive income attributable to:

Owner of the Bank 780,765 799,440

Earnings per share - basic (sen) 25 647 627

The notes on pages 57 to 150 are an integral part of these financial statements

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018


STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Attributable to owner of the Bank Non-distributable Distributable Share Share Statutory Other Retained Total Group and Bank Capital premium reserve reserve profits reserves Total Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2017 121,697 380,303 121,697 (55,893) 4,051,744 4,497,851 4,619,548

Net gain on revaluation of financial investments available-for-sale - - - 33,983 - 33,983 33,983

Net gain on remeasurement of defined benefit plans - - - 2,377 - 2,377 2,377

Total other comprehensive income for the year - - - 36,360 - 36,360 36,360

Transfer of statutory reserve to retained profits - - (121,697) - 121,697 - -

Profit for the year - - - - 763,080 763,080 763,080

Total comprehensive income for the year - - (121,697) 36,360 884,777 799,440 799,440

Dividends to owner of the Bank 26 - - - - (550,000) (550,000) (550,000)

Total contribution to owner - - - - (550,000) (550,000) (550,000)Transfer from share premium in accordance with Section 618(2) of the Companies Act 2016 380,303 (380,303) - - - (380,303) -

At 31 December 2017 502,000 - - (19,533) 4,386,521 4,366,988 4,868,988

Note 16 Note 17

At 1 January 2018 502,000 - - (19,533) 4,386,521 4,366,988 4,868,988Effect of adopting MFRS 9 at 1 January 2018 36.3 - - - 3,397 (106,932) (103,535) (103,535)

Restated balance at 1 January 2018 502,000 - - (16,136) 4,279,589 4,263,453 4,765,453

Fair value reserve on investment securities: - Net change in fair value - - - 1,460 - 1,460 1,460 - Net change transferred to profit or loss - - - (1,862) - (1,862) (1,862)

Distribution of funds to the members of defined benefit plans - - - (6,491) - (6,491) (6,491)

Total other comprehensive expense for the year - - - (6,893) - (6,893) (6,893)

Profit for the year - - - - 787,658 787,658 787,658

Total comprehensive (expense)/income for the year - - - (6,893) 787,658 780,765 780,765

Dividends to owner of the Bank 26 - - - - (480,000) (480,000) (480,000)

Total contribution to owner - - - - (480,000) (480,000) (480,000)

At 31 December 2018 502,000 - - (23,029) 4,587,247 4,564,218 5,066,218

Note 16 Note 17

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018


STATEMENTS OF CHANGESIN EQUITY


Group Bank 2018 2017 2018 2017 RM’000 RM’000 RM’000 RM’000

Cash flows from operating activities

Profit before taxation 1,047,354 1,039,201 1,047,354 1,039,201

Adjustments for: Amortisation of premium less accretion of discount of investment securities 3,803 37,505 3,803 37,505

Allowance for loans, advances and financing 63,985 54,947 63,985 54,947

Depreciation 16,483 15,896 16,483 15,896

Unrealised loss/(gain) from revaluation of investment securities at FVTPL – debt instruments (2017: held-for-trading) 494 (1,766) 494 (1,766)

Unrealised (gain)/loss from derivatives (192,426) 575,608 (192,426) 575,608

Gross dividends from investment securities (2017: available-for-sale) - (315) - (315)

Gain from sales of investment securities at FVOCI (2017: available-for-sale) (4,985) (3,348) (4,985) (3,348)

Loss on revaluation of investment securities at FVTPL – equity instruments 2,734 - 2,734 -

Loss on revaluation of loans, advances and financing at FVTPL 5,889 - 5,889 -

Plant and equipment written off 125 1,812 125 1,812

Share-based compensation 1,252 1,902 1,252 1,902

Operating profit before working capital changes 944,708 1,721,442 944,708 1,721,442

Changes in working capital:

Deposits and placements with banks and other financial institutions (52,406) (149,062) (52,406) (149,062)

Securities purchased under resale agreements (102,754) 755,712 (102,754) 755,712

Investment securities at FVTPL 72,833 (971,772) 72,833 (971,772)

Loans, advances and financing (620,210) 703,505 (620,210) 703,505

Other assets 46,731 394,517 46,731 394,517

Statutory deposits with Bank Negara Malaysia (61,194) 163,393 (61,194) 163,393

Deposits from customers (13,576) (2,952,181) (13,576) (2,952,181)

Deposits and placements of banks and other financial institutions 853,603 (2,330,102) 853,603 (2,330,102)

Bills and acceptances payable - (64,314) - (64,314)

Other liabilities (591,658) (207,990) (591,658) (207,990)

Cash generated/(used in) from operating activities 476,077 (2,936,852) 476,077 (2,936,852)

Income taxes paid (255,767) (231,094) (255,767) (231,094)

Net cash generated/(used in) from operating activities 220,310 (3,167,946) 220,310 (3,167,946)


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018


Cash flows from investing activities

Dividend from investment securities at FVOCI - 315 - 315

Purchase of plant and equipment (19,439) (16,772) (19,439) (16,772)

Proceeds from disposal of plant and equipment 1,190 - 1,190 -

Purchase of investment securities at FVOCI (5,893,865) (3,466,040) (5,893,865) (3,466,040)

Redemption of investment securities at FVOCI 911,390 - 911,390 -

Proceeds from disposal of investment securities at FVOCI 2,368,234 1,848,750 2,368,234 1,848,750

Net cash used in investing activities (2,632,490) (1,633,747) (2,632,490) (1,633,747)

Cash flows from financing activity Dividends paid to owner (480,000) (550,000) (480,000) (550,000) Net cash used in financing activities (480,000) (550,000) (480,000) (550,000) Net decrease in cash and short term funds (2,892,180) (5,351,693) (2,892,180) (5,351,693)

Cash and short term funds at 1 January 5,879,561 11,231,254 5,879,541 11,231,234

Cash and short term funds at 31 December (Note 3) 2,987,381 5,879,561 2,987,361 5,879,541


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 (CONTINUED)


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:

44th Floor, Menara Citibank 165 Jalan Ampang50450 Kuala Lumpur

The consolidated financial statements of the Bank as at and for the year ended 31 December 2018 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 11 to the financial statements.

The immediate holding company is Citigroup Holding (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 9 May 2019.

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 2016 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 2019

• MFRS 16, Leases

• IC Interpretation 23, Uncertainty over Income Tax Treatments

• Amendments to MFRS 3, Business Combinations (Annual Improvements to MFRS Standards 2015-2017 Cycle)

• Amendments to MFRS 9, Financial Instruments – Prepayment Features with Negative Compensation

• Amendments to MFRS 11, Joint Arrangements (Annual Improvements to MFRS Standards 2015-2017 Cycle)

• Amendments to MFRS 112, Income Taxes (Annual Improvements to MFRS Standards 2015-2017 Cycle)

• Amendments to MFRS 119, Employee Benefits – Plan Amendment, Curtailment or Settlement

• Amendments to MFRS 123, Borrowing Costs (Annual Improvements to MFRS Standards 2015-2017 Cycle)

• Amendments to MFRS 128, Investments in Associates and Joint Ventures – Long-term Interests in Associates and Joint Ventures


• Amendments to MFRS 3, Business Combinations – Definition of a Business

• Amendments to MFRS 101, Presentation of Financial Statements and MFRS 108, Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material


• MFRS 17, Insurance Contracts

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, interpretations and amendments:

• from the annual period beginning on 1 January 2019 for those accounting standards, interpretation and amendments that are effective for annual periods beginning on or after 1 January 2019.


NOTES TOTHE FINANCIAL STATEMENTS

1. Basis of preparation (continued)

(a) Statement of compliance (continued)

• from the annual period beginning on 1 January 2020 for those amendments that are effective for annual periods beginning on or after 1 January 2020.

The Group and the Bank do not plan to apply MFRS 17, Insurance Contracts that is effective for annual periods beginning on 1 January 2021 as it is not applicable to the Group and the Bank.

The initial application of the accounting standards, interpretations and amendments are not expected to have any material financial impacts to the current period and prior period financial statements of the Group and the Bank except as mentioned in the subsequent paragraphs:

MFRS 16, Leases MFRS 16 replaces the guidance in MFRS 117, Leases,

IC Interpretation 4, Determining whether an Arrangement contains a Lease, IC Interpretation 115, Operating Leases – Incentives and IC Interpretation 127, Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

MFRS 16 introduces a single, on-balance sheet lease accounting model for lessees and eliminates the distinction between finance lease and operating lease. Lessee is now required to recognise assets and liabilities for all leases.

The Group and the Bank have assessed the estimated impact that initial application of MFRS 16 will have on their financial statements. The recognition of the 'right-of-use' asset and the lease liability will increase the Group’s and the Bank’s total assets by approximately 0.26% and total liabilities by approximately 0.30% as at 1 January 2019.

(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 currencies The financial statements are presented in Ringgit

Malaysia (“RM”), which is the Group’s and the Bank’s functional currencies. 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 of financial assets

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

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

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

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

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, except for the changes in significant accounting policies stated below.

The Group and the Bank have adopted MFRS 9, Financial Instruments on 1 January 2018. This standard replaces MFRS 139, Financial Instruments: Recognition and Measurement. Arising from the adoption of MFRS 9, Financial Instruments, there are changes to the accounting policies of financial instruments and impairment as compared to those adopted in previous financial statements.

As permitted by the transitional provisions of MFRS 9, the Group and the Bank elected not to restate comparative figures. Any adjustments to the carrying amounts of financial assets and liabilities at the date of transition were recognised in the opening retained profits and other reserves of the current period. The impact arising from the changes are disclose in Note 36.

(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.



(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 2(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.

A contract with a customer that results in a recognised financial instrument in the Group’s and the Bank’s financial statements may be partially in the scope of MFRS 9 and partially in the scope of MFRS 15. If this is the case, then the Group and the Bank first apply MFRS 9 to separate and measure the part of the contract that is in the scope of MFRS 9 and then apply MFRS 15 to the residual.

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, dividends and foreign exchange differences.

(f) Financial assets and financial liabilities (i) Initial recognition and measurement A financial asset or a financial liability is recognised in

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

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

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

(ii) Financial instrument categories and subsequent measurement

The Group and the Bank categorise financial instruments as follows:

Financial assets - Policy applicable before 1 January 2018

2. Significant accounting policies (continued)

(a) Basis of consolidation (continued)

(i) Subsidiaries (continued)

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

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 estimate future cash flows considering all contractual terms of the financial instrument, but not future credit losses.

The calculation of the effective interest rate includes transaction costs and fees and points paid or received that were an integral part of the effective interest rate. Transaction costs include incremental costs that were 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 investment securities on an effective interest rate basis.




(f) Financial assets and financial liabilities (continued)

(ii) Financial instrument categories and subsequent measurement (continued)

Financial assets - Policy applicable before 1

January 2018 (continued)

(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 were 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 were subsequently measured at amortised cost using the effective interest method.

(c) Loans and receivables Loans and receivables category comprises

debt instruments that were not quoted in an active market.

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

(d) Financial investments available-for-sale Available-for-sale category comprises

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

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

of hedged items attributable to hedge risks of fair value hedges which are recognised in profit or loss. On derecognition, the cumulative gain or loss recognised in other

comprehensive income was reclassified from equity into profit or loss. Interest calculated for a debt instrument using the effective interest method was recognised in profit or loss.

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

Financial assets - Policy applicable from 1 January 2018

On initial recognition, a financial asset is classified and measured at: amortised cost; fair value through other comprehensive income (“FVOCI”) - debt investment; FVOCI - equity investment; or fair value through profit or loss (“FVTPL”).

Financial assets are not reclassified subsequent to their initial recognition unless the Group or the Bank changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

(e) Financial assets measured at amortised cost A financial asset is measured at amortised

cost if it meets both of the following conditions and is not designated as at FVTPL:

• the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payment of principal and interest.

These assets are subsequently measured at amortised cost using effective interest rate method. These assets are stated net of unearned income and any impairment loss.

(f) Financial assets measured at FVOCI

FVOCI – debt investments A debt investment is measured at FVOCI if it

meets both of the following conditions and is not designated as at FVTPL:

• the asset is held within a business model whose objective is to hold assets to collect contractual cash flows and selling financial assets; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payment of principal and interest.






Financial assets - Policy applicable from 1

January 2018 (continued)

(f) Financial assets measured at FVOCI (continued)

FVOCI – debt investments (continued)

These assets are subsequently measured at fair value. Any gain or loss arising from a change in the fair value is recognised in the fair value reserve through other comprehensive income except for impairment losses and foreign exchange gains and losses arising from monetary items which are recognised in profit or loss.

On derecognition or disposal, the cumulative gains or losses previously recognised in other comprehensive income are reclassified from equity into profit or loss. Interest calculated for a debt instrument using the effective interest method is recognised in profit or loss.

FVOCI – equity investments On initial recognition of an equity

investment that is not held for trading, the Group and the Bank may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-by-investment basis.

These assets are subsequently measured at fair value. Any gain or loss arising from a change in the fair value is recognised in the fair value reserve through other comprehensive income except for dividends that are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment.

On derecognition or disposal, the cumulative gains or losses previously recognised in other comprehensive income are never reclassified to profit or loss.

(g) Financial assets measured at FVTPL

All financial assets not measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes derivative financial assets. On initial recognition, the Group and the Bank may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Any gains or losses, including any interest or dividend income, are recognised in profit or loss.

Financial assets - Business model assessment - Policy applicable from 1 January 2018

The Group and the Bank make an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

• the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether management’s strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets;

• how the performance of the portfolio is evaluated and reported to the management;

• the risks that affect the performance of the business model (and the financial assets held within that business model) and its strategy for how those risks are managed; and

• how managers of the business are compensated (e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected).

Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest (“SPPI”) - Policy applicable from 1 January 2018

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.

In assessing whether the contractual cash flows are SPPI, the Group and the Bank consider the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Group and the Bank consider:

• contingent events that would change the amount and timing of cash flows;

• leverage features;

• prepayment and extension terms; and

• terms that limits the Group’s and the Bank’s claims to cash flows from specified assets (e.g. non-recourse loans).




(g) Financial assets measured at FVTPL (continued)


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 profit or loss.

From 1 January 2018, any cumulative gain/loss recognised in OCI in respect of equity investment securities designated as at FVOCI is not recognised in profit or loss on derecognition of such securities.

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.





(vi) Fair value measurement (continued)

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 values are categorised into different levels in a fair value hierarchy based on the inputs 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

Impairment of financial assets - Policy applicable before 1 January 2018

At each reporting date, the Group and the Bank assess whether there was objective evidence that financial assets not carried at fair value through profit or loss were impaired. Financial

assets categorised as loans and receivables were 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 were measured as the difference between the carrying amount of the financial assets and the present value of estimated cash flows discounted at the assets’ original effective interest rate.

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

Objective evidence that a loan or a loan portfolio was 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 was also classified as impaired if the repayment conduct of the loan was 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 were individually assessed for impairment and for which an impairment loss was or continues to be recognised were 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




(g) Impairment (continued)

(i) Financial assets (continued)

Impairment of financial assets - Policy applicable before 1 January 2018 (continued)

factors. These characteristics were 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 were such that the actual losses incurred were likely to be greater or less than suggested by historical modelling. Default rates, loss rates and expected timing of future recoveries were 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 were such that actual losses were likely to be greater or less than suggested by historical modelling.

Losses were recognised in profit or loss and reflected in an allowance account against loans, advances and financing.

An impairment loss in respect of financial investments available-for-sale was recognised in profit or loss and was 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 was 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 classified as available-for-sale 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.

Impairment of financial assets - Policy applicable from 1 January 2018

The Group’s and the Bank’s accounting policy for impairment of financial assets changed significantly under MFRS 9, and the expected credit loss model was applied for the financial year ended 31 December 2018.

The Group and the Bank recognise loss allowances for expected credit loss (“ECL”) on financial assets measured at amortised cost, contract assets and debt investments measured at FVOCI, but not to investments in equity instruments.

Under MFRS 9, credit loss allowances will be measured on each reporting date according to a three-stage expected credit loss impairment model under which each financial asset is classified in one of the stages below. The internal credit risk grading system (“ORR”) and external risk rating are used to assess deterioration in credit quality of a financial asset. There is an established Credit Rating mapping framework that enables accurate risk rating reporting across portfolio reports used by credit risk management. The assessment of whether credit risk has increased/decreased significantly since initial recognition is performed for each reporting period by considering the change in the risk of default occurring over the remaining life of the financial instrument. The Group and the Bank assume that the credit risk on a financial asset has increased significantly when it is more than 30 days past due.

(i) Stage 1: 12-months ECL

From initial recognition of a financial asset to the date on which the asset has experienced a significant increase in credit risk relative to its initial recognition, a loss allowance is recognised equal to the credit losses expected to result from defaults expected over the next 12 months. These are obligors which have not shown a significant deterioration in their ORR. Generally, performing financial assets (<30 days past due) are classified in this stage.

(ii) Stage 2: Lifetime ECL – not credit impaired

Following a significant increase in credit risk relative to the risk at initial recognition of the financial asset, a loss allowance is recognised equal to the full credit losses






Impairment of financial assets - Policy applicable from 1 January 2018 (continued)

(ii) Stage 2: Lifetime ECL – not credit impaired (continued)

expected over the remaining life of the asset. These are obligors rated ORR 7 and those where there is a significant deterioration in ORR. Generally, underperforming financial assets (30-89 days past due and credit quality deteriorated with significant increase in credit risk compared to Stage 1) are classified under this stage.

(iii) Stage 3: Lifetime ECL – credit-impaired

When a financial asset is considered to be credit-impaired, a loss allowance equal to the full lifetime expected credit losses will be recognised. These are generally obligors rated ORR 9 or 10. Generally, non-performing financial assets (>90 days past due) are considered to be credit-impaired account.

Measurement of ECL

The concept and estimation of ECL is based on the likelihood and severity of credit events and their impact on cash shortfalls, which comprises the Probability of Default (“PD”), Loss Given Default (“LGD”), Exposure at Default (“EAD”), and discount rate using Effective Interest Rate (“EIR”). A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contractual cash flows and the cash flows that the Group and the Bank expect to receive. As expected credit losses consider the amount and timing of payments, a credit loss arises even if the entity expects to be paid in full but later than when contractually due. For a financial asset in Stage 1, the Group and the Bank will utilise a 12-month PD, whereas a financial asset within Stage 2 and Stage 3 will utilise a lifetime PD in order to estimate an impairment allowance.

The Group and the Bank measured the ECL measurement for retail products under Stage 1 by estimating the 12-month forward looking loss rate. For financial assets within Stage 2 and Stage 3, the Group and the Bank measure the impairment allowance after taking into consideration of recoveries.

Credit-impaired financial assets

At each reporting date, the Group and the Bank assess whether financial assets carried at amortised cost and debt securities measured at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that

have a negative impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

• significant financial difficulty of the borrower or issuer;

• a breach of contract such as default or past due event;

• the restructuring of a loan or advance by the Group and the Bank on terms that the Group and the Bank would not consider otherwise;

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

• the disappearance of an active market for a security because of financial difficulties.

Under the revised policy issued by BNM on Financial Reporting, if the repayment conduct of the loan is past due for more than 90 days or 3 months of either principal, interest or both, the loan shall be classified as impaired. The Group and the Bank apply this policy in addition to the above when determining if a loan is impaired.

Presentation of allowance for ECL in the statements of financial position

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

For debt securities at FVOCI, no loss allowance is recognised in the statements of financial position because the carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is recognised in the fair value reserve.

Write-off

Loans and debt securities are written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. This is generally the case when the Group and the Bank determine that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

Financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s and the Bank’s procedures for recovery of amounts due.

For wholesale, loans are written-off after all legal avenues for recovery have been fully exhausted, i.e. litigation completed against both the borrower and guarantor/s if any (foreclosure, winding-up, liquidation and/or bankruptcy as the case may be).






Write-off (continued)

For secured loans, they are generally written-off after receipt of any proceeds from the realisation of collateral. In circumstances where the net realisation value of any collateral has been determined and there is no reasonable expectation of further recovery, write-off may be earlier.

For credit cards, the balances and related allowance for credit losses are generally written-off when payment is 180 days past due. Personal loans are generally written-off at 120 days past due.

(ii) Other assets

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

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

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. 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 profit or loss. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amounts of the other assets in the unit (or a group 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 agreements

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 short term funds

Cash and short term funds 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 short term funds are measured at amortised cost in the statements of financial position in accordance to the accounting policy stated in Note 2(f)(ii)(e).

(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.

When 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.

The gain or loss on disposal of an item of plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of plant and equipment and is recognised net within “other operating income” or “other operating expenses” respectively in profit or loss.




(j) Plant and equipment (continued)

(ii) Subsequent costs

The cost of replacing a component of an item of plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Bank, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The cost of the day-to-day servicing of plant and equipment are recognised in profit or loss 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 from the date that they are available for use. 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.

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 statements 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

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

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

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting period, except for those that are measured at fair value which 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 equity instruments measured at fair value through other comprehensive income, 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


(n) Income tax (continued)

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 service is 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 profit or loss in the year to which they relate. Once the contributions have been paid, the Group and the Bank have no further payment obligations.

(ii) Defined contribution plan

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

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 or income on the net defined benefit liability or 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 or asset, taking into account any changes in the net defined benefit liability or 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.

On 2 August 2018, the Trustees of the Plan had passed a resolution on the voluntary winding up of the Plan. During the financial period under review, the Plan had distributed all its funds to

3. Cash and short term funds


Cash and balances with banks and other financial institutions 48,102 53,201 48,082 53,181

Money at call and deposit placements maturing within one month 2,939,279 5,826,360 2,939,279 5,826,360

2,987,381 5,879,561 2,987,361 5,879,541

4. Deposits and placements with banks and other financial Institutions

Group and Bank 2018 2017 RM’000 RM’000

Licensed banks 996,236 943,830


(o) Employee benefits (continued)

(iii) Defined benefit plan (continued)

the members’ respective Employees’ Provident Fund (“EPF”) accounts.

(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 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 their estimates of the number of options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in 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.

5. Investment securities (i) By measurement Group and Bank 2018 2017 RM’000 RM’000

Investment securities measured at FVTPL

- Debt instruments 2,132,243 -

- Equity instruments 13,102 -

Investment securities measured at FVTPL

- Debt instruments 6,784,058 -

Financial assets held-for-trading - 2,205,570

Financial investments available-for-sale - 4,183,086 8,929,403 6,388,656

(ii) By type Group and Bank 2018 2017 RM’000 RM’000

Malaysian Government Treasury Bills 51,825 81,462

Malaysian Government Securities 5,337,380 3,523,959

Malaysian Government Investment Issues 2,757,050 1,921,202

Bank Negara Malaysia Bills/Notes 609,385 49,699

U.S. Treasury Notes 160,661 805,319

Unquoted securities 13,102 7,015 8,929,403 6,388,656

6. Loans, advances and financing

(i) By measurement Group and Bank 2018 2017 RM’000 RM’000

Loans, advances and financing measured at amortised cost 24,075,714 23,994,623

Loans, advances and financing measured at FVTPL 284,481 -

Gross loans, advances and financing 24,360,195 23,994,623

Less: Loss allowance Note (7)(iv) (428,101) (467,978)

Net loans, advances and financing 23,932,094 23,526,645



6. Loans, advances and financing (continued)

(ii) By type Group and Bank 2018 2017 RM’000 RM’000

Overdrafts 554,163 471,364

Term loans/financing

- housing loans/financing 10,167,752 10,680,991

- other term loans/financing 3,030,756 2,678,424

Bills receivable 1,017,443 1,361,621

Trust receipts 168,399 189,923

Claims on customers under acceptance credits 732,270 686,584

Staff loans 39,792 45,311

Share margin financing 105,981 146,883

Credit cards receivables 6,143,620 6,046,915

Revolving credit 2,415,355 1,696,623

24,375,531 24,004,639

Unearned interest and income (15,336) (10,016)

Gross loans, advances and financing 24,360,195 23,994,623

Less: Loss allowance Note (7)(iv) (428,101) (467,978)

Net loans, advances and financing 23,932,094 23,526,645

(iiI) By type of customer Group and Bank 2018 2017 RM’000 RM’000

Domestic non-bank financial institutions

- others 568,566 454,878

Domestic business enterprises

- small and medium enterprises 596,933 545,396

- others 5,316,990 4,631,424

Individuals 16,843,114 17,453,232

Foreign entities 1,034,592 909,693

24,360,195 23,994,623




(iv) By interest/profit rate sensitivity Group and Bank 2018 2017 RM’000 RM’000

Fixed rate

- Housing loans/financing 546,131 570,321

- Other fixed rate loans/financing 10,721,509 11,255,501

Variable rate

- Base rate/Base Lending Rate plus 10,230,796 10,631,131

- Cost plus 2,861,759 1,537,670

24,360,195 23,994,623

(v) By sector Group and Bank 2018 2017 RM’000 RM’000

Primary agriculture 5,574 62,489

Mining and quarrying 40,003 379,023

Manufacturing (including agriculture based) 2,791,531 2,115,835

Electricity, gas and water 1,645 1,200

Construction 19,674 36,924

Wholesale, retail trade, restaurants and hotels 1,350,387 1,174,863

Transport, storage and communication 724,509 334,301

Finance, insurance, real estate and business services 1,292,551 759,876

Social and community services 44,305 190,627

Household

- consumption credit 7,126,672 7,085,419

- residential 9,501,516 10,049,691

- purchase of securities 105,981 152,148

- others 108,945 165,974

Other sectors 1,246,902 1,486,253

24,360,195 23,994,623




(vi) Residual contractual maturity Group and Bank 2018 2017 RM’000 RM’000

Maturing within one year 12,403,312 11,194,413

One to five years 1,551,666 1,867,212

Over five years 10,405,217 10,932,998

24,360,195 23,994,623

(vii) By geographical distribution Group and Bank 2018 2017 RM’000 RM’000

Within Malaysia 24,360,195 23,994,623



7. Impaired loans, advances and financing

(i) Movements in impaired loans, advances and financing are as follows:


At 1 January 556,106 526,696

Classified as impaired during the year 495,802 725,859

Reclassified as performing during the year (460,618) (374,624)

Amount recovered (70,409) (118,622)

Amount written off (280,024) (203,203)

Others (20,340) -

At 31 December 220,517 556,106

Lifetime ECL credit impairment/individual assessment allowance (48,650) (119,590)

Net impaired loans, advances and financing 171,867 436,516 Ratio of net impaired loans and financing to gross loans and financing less lifetime ECL credit impairment/individual assessment allowance 0.71% 1.83%

(ii) Impaired loans, advances and financing by sector


Primary agriculture - 261

Mining and quarrying - 1,398

Manufacturing (including agriculture based) 1,938 11,707

Construction 903 1,040

Wholesale, retail trade, restaurants and hotels 10,344 2,417

Transport, storage and communication 164 70

Finance, insurance, real estate and business services 1,444 4,534

Household

- consumption credit 53,322 225,965

- residential 143,016 283,097

- purchase of securities - 19,091

Other sectors 9,386 6,526

220,517 556,106



7. Impaired loans, advances and financing (continued)

(iii) Impaired loans, advances and financing by geographical distribution


Within Malaysia 220,517 556,106

(iv) Loss allowance

The following tables show reconciliations from the opening to the closing balance of the loss allowance by class of financial instrument.

Group and Bank 2018 2017 Lifetime ECL Lifetime 12-months not credit ECL credit ECL impaired impaired Total Collective Individual Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 467,978 416,271 124,952 541,223

Less: Adjustments on initial application of MFRS 9

- Reclassified to loans at FVTPL (42,247)

- Remeasurement of ECL 144,888

Restated at 1 January 109,412 300,469 160,738 570,619 416,271 124,952 541,223

Transfer to 12-month ECL 681,243 (638,072) (43,171) - - - -

Transfer to lifetime ECL not credit impaired (6,486) 19,785 (13,299) - - - -

Transfer to lifetime ECL credit impaired provision (129) (110,449) 110,578 - - - -

Less: Loans/financing derecognised during the year (other than write-offs) (8,606) (12,702) (31,057) (52,365) - - -

New loans/financing originated or purchased 15,816 395 - 16,211 - - -

Net remeasurement of loss allowance (661,487) 707,743 15,246 61,502 (61,383) 17,222 (44,161)

Modifications to contractual cash flows of financial asset - 75,478 15,607 91,085 - - -

Less: Write-offs (11,430) (18,481) (172,709) (202,620) - (22,584) (22,584)

Others (37,559) (25,489) 6,717 (56,331) (6,500) - (6,500)

At 31 December 80,774 298,677 48,650 428,101 348,388 119,590 467,978



8. Other assets


Interest/Income receivable 117,019 107,051

Other debtors, deposits and prepayments 339,520 240,159

Retirement benefits (Note 18(i)) - 1,695

Derivative assets (Note 29) 549,092 510,344

1,005,631 859,249

Less: Loss allowance (1,093) -

1,004,538 859,249

9. 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.

10. Deferred tax assets

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

Plant and Retirement equipment- Reserves- Plan- Capital Investment Defined Loss Group and Bank allowances Provisions securities Benefit allowance Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2017 1,497 41,688 13,237 (3,816) - 52,606

Recognised in profit or loss (Note 24) 632 27,343 - - - 27,975

Recognised in other comprehensive income - - (5,236) 2,003 - (3,233)

At 31 December 2017/1 January 2018 2,129 69,031 8,001 (1,813) - 77,348

Recognised in profit or loss (Note 24) (4,499) 9,695 - - 55,227 60,423

Recognised in other comprehensive income - - (351) 1,813 - 1,462

At 31 December 2018 (2,370) 78,726 7,650 - 55,227 139,233

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.



11. Investments in subsidiaries

Bank 2018 2017 RM’000 RM’000

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

Effective ownership Country of interest Name of subsidiary Principal activity incorporation 2018 2017 % %

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.



12. Plant and equipment Furniture Building and improvements equipment Total Group and Bank RM’000 RM’000 RM’000

Cost

At 1 January 2017 106,880 212,803 319,683

Additions 1,989 14,783 16,772

Disposals - - -

Write-offs (2,853) (11,796) (14,649)

At 31 December 2017/1 January 2018 106,016 215,790 321,806

Additions 5,008 14,431 19,439

Disposals - (1,549) (1,549)

Write-offs (5,612) (12,120) (17,732)

At 31 December 2018 105,412 216,552 321,964

Depreciation

At 1 January 2017 97,570 177,799 275,369

Charge for the year 3,050 12,846 15,896

Disposals - - -

Write-offs (2,554) (10,283) (12,837)


Charge for the year 3,327 13,156 16,483

Disposals - (359) (359)

Write-offs (5,503) (12,104) (17,607)

At 31 December 2018 95,890 181,055 276,945

Carrying amounts

At 1 January 2017 9,310 35,004 44,314


At 31 December 2018 9,522 35,497 45,019



13. Deposits from customers

(i) By type of deposits Group and Bank 2018 2017 RM’000 RM’000

Demand deposits 17,196,802 16,684,943

Saving deposits 1,356,029 1,431,787

Fixed deposits 7,855,493 8,304,689

Others - cash collateral - 481 26,408,324 26,421,900

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


Due within six months 6,422,386 6,463,186

Six months to one year 1,424,599 1,821,297

One year to five years 8,508 20,206 7,855,493 8,304,689

(iii) By type of customer


Government and statutory bodies 1,497,786 129,438

Business enterprises 14,220,784 14,438,752

Individuals 10,667,935 11,472,070

Others 21,819 381,640 26,408,324 26,421,900

14. Deposits and placements of banks and other financial institutions


Bank Negara Malaysia 51,363 21,300

Licensed banks 3,894,058 1,612,441

Licensed financial institutions 1,372,438 2,830,515

5,317,859 4,464,256



15. Other liabilities Group and Bank 2018 2017 RM’000 RM’000

Interest/Profit payable 51,124 42,236

Other creditors and accruals 1,190,917 1,351,745

Structured products 79,681 154,667

Provision for commitments and contingencies 2,299 -

Derivative liabilities (Note 29) 377,326 739,344

1,701,347 2,287,992

16. Share capital Group and Bank Number Number Amount of shares Amount of shares 2018 2018 2017 2017 RM’000 ’000 RM’000 ’000 Issued and fully paid Ordinary shares

At 1 January 502,000 121,697 121,697 121,697

Transfer from share premium - - 380,303 -

At 31 December 502,000 121,697 502,000 121,697

17. Reserves Group and Bank 2018 2017 RM’000 RM’000

Retained profits 4,587,247 4,386,521

Other reserve (23,029) (19,533)

- Fair value reserve (23,029) (26,024)

- Defined benefit reserve - 6,491

Total reserves 4,564,218 4,366,988

The fair value reserve is in respect of unrealised fair value gains and losses on investment securities at fair value through other comprehensive income (2017: financial investments available-for-sale).

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



18. Employee benefits

(i) Retirement benefits

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


Fair value of plan assets - 20,050

Present value of the funded obligation - (18,355) Total employee benefit assets (Note 8) - 1,695

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 were 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

On 2 August 2018, the Trustees of the Plan had passed a resolution on the voluntary winding up of the Plan. During the financial period under review, the Plan had distributed all its funds to the members’ respective Employees’ Provident Fund (“EPF”) accounts.

Plan assets comprise: Group and Bank 2018 2017 RM’000 RM’000

Malaysian Government Securities - 4,274

Cash and cash equivalents - 15,776 - 20,050

Funding Arrangement and Policies Contribution to the Plan takes 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 2018 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.



18. Employee benefits (continued)

(i) Retirement benefits (continued)

Movement in the present value of the defined benefit obligations:


Defined benefit obligations at 1 January (18,355) (18,311)

Disbursement to members 20,050 -

Losses on settlement (1,695) -

Interest cost - (403)

Remeasurement/Actuarial gains - 359 Defined benefit obligations at 31 December - (18,355)

Movement in the fair value of plan assets:


Fair value of plan assets at 1 January 20,050 19,575

Realisation of plan assets (20,050) -

Remeasurement/Actuarial gains - 15

Interest income - 460 Fair value of plan assets at 31 December - 20,050

The amounts recognised in the statements of profit or loss and other comprehensive income were as follows:


Losses on settlement 1,695 -

Interest cost - (57) Amount included under “personnel costs” 1,695 (57)





Movement in the net benefit asset/(liability) recognised in the statements of financial position were as follows:


Balance as at 1 January 1,695 1,264

Included in Profit or Loss - Interest income - 57 - Losses on settlement (1,695) -

- 57

Included in Other Comprehensive Income Remeasurement gain - 374

Balance as at 31 December (Note 8) - 1,695

Projected unit credit method was used to calculate the actuarial present value of promised retirement benefits.

Principal actuarial assumptions used at the reporting date (expressed as weighted averages):

Group and Bank 2018 2017

Discount rate - 4.00%

The assumption expected to affect the valuation was the discount rate. The Plan has been frozen since 2015 and was

no longer dependent on salary increase rate.

Historical information

Group and Bank 2018 2017 2016 2015 2014 2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Fair value of plan assets - 20,050 19,575 20,797 26,554 36,889

Present value of the defined benefit obligation - (18,355) (18,311) (15,903) (22,857) (26,661)

Surplus in the Plan - 1,695 1,264 4,894 3,697 10,228

Experience adjustments arising on plan assets - gains/(losses) - 359 (777) (892) (1,276) 2,120

Experience adjustments arising on plan liabilities - gains/(losses) - 15 (2,828) 758 608 1,775

Assumption adjustment on plan liabilities – gains - - - - - 2,678





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 2018 2018 2017 2017 RM’000 RM’000 RM’000 RM’000

Defined benefit obligation

Discount rate (1% movement) - - (88) 89

Other assumptions were 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 was 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.

(ii) 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 2018 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 2018 2017 ’000 ’000

Outstanding at 1 January 41,583 42,885

Granted 8,765 9,352

Vested (11,262) (11,964)

Net transferred out 5,045 1,310

Lapsed/Cancel (1,277) - Outstanding at 31 December 42,854 41,583




(ii) Share capital accumulation plan (CAP) (continued)

Details of CAP granted during the year:

Group and Bank 2018 2017

Expiry dates Feb 14,2022 Feb 15,2021

Average grant price per ordinary share (RM) 307.96 238.54

Aggregated proceeds if shares are issued (RM’000) 2,699 2,231 Details of CAP vested during the year:

Average exercise price per ordinary share (RM) 337.44 271.43

Aggregated issue proceeds (RM’000) 2,420 2,303

Fair value at date of vesting (RM’000) 4,201 3,436

Terms of the CAP outstanding at 31 December:

Group and Bank 2018 2017 Year of expiry Grant price

Feb 2018 RM201.36 - 13,512

Feb 2018 RM205.46 11,689 -

Feb 2019 RM203.03 - 7,619

Feb 2019 RM207.16 4,786 -

Feb 2020 RM150.22 - 11,100

Feb 2020 RM153.28 9,133 -

Feb 2021 RM238.54 - 9,352

Feb 2021 RM243.40 8,481 -

Feb 2022 RM307.96 8,765 -

42,854 41,583



19. Interest income


Loans and advances

- Interest income other than recoveries from impaired loans 1,242,597 1,227,885

- Recoveries from impaired loans 54,850 53,923

Money at call and deposit placements with financial institutions 173,475 236,445

Investment securities 204,143 190,225

Securities purchased under resale agreements 6,520 5,209

1,681,585 1,713,687

Accretion of discount/(Amortisation of premium) 1,140 (15,900)

Total interest income 1,682,725 1,697,787

20. Interest expense Group and Bank 2018 2017 RM’000 RM’000

Deposits and placements of banks and other financial institutions 51,835 75,871

Deposits from customers 419,239 365,859

Others 7,655 3,976

478,729 445,706



21. Other operating income


Fee income:

Commission 65,615 83,069

Service charges and fees 58,747 53,081

Guarantee fees 7,426 7,309

Bankcard fees 344,379 319,657

Insurance premium and referral 46,838 51,578

Other fee income 56,178 52,791

579,183 567,485

Trading income:

Unrealised (loss)/gain from revaluation of investment securities at FVTPL - debt instruments (2017: held-for-trading) (494) 1,766

Gross dividends from investments securities (2017: available-for-sale) - 315

Net gain from sales of investment securities at FVTPL - debt instruments (2017: held-for-trading) 15,650 12,233

Net gain from sales of investment securities at FVOCI (2017: available-for-sale) 4,985 2,692

20,141 17,006

Other income: Foreign exchange (loss)/gain, net (20,146) 639,159

Gain/(loss) from derivatives 229,296 (433,061)

Net loss on revaluation of investment securities at FVTPL - equity instruments (2,734) -

Net loss on revaluation of loans, advances and financing at FVTPL (5,889) -

Loss on disposal of plant and equipment (125) -

Gain on disposal of loan - 1,257

Others (4,028) (10,991)

196,374 196,364

795,698 780,855



22. Other operating expenses


Personnel costs

- Salaries, allowances and bonuses 286,113 295,788

- Contributions to Employees Provident Fund 47,466 44,726

- Staff benefits and other compensations 35,026 34,455

- Others 4,121 3,954

372,726 378,923

Establishment costs

- Depreciation 16,483 15,896

- Rental of premises 19,847 21,301

- Hire of equipments 563 353

- Utilities 3,781 4,084

- Repairs and maintenance 8,916 9,397

- Plant and equipment written off 125 1,812

- Others 9,357 7,466

59,072 60,309

Marketing expenses

- Advertisement and promotional expenses 26,605 34,664

- Others 563 504

27,168 35,168

Administrative and general expenses

- Processing cost 344,185 370,656

- Auditors’ remuneration

- Statutory audit 451 451

- Other services 354 359

- Stationeries and supplies 3,478 3,708

- Communication expenses 6,808 8,850

- Others 133,699 149,039

488,975 533,063

Total other operating expenses 947,941 1,007,463



22. Other operating expenses (continued)

(i) CEO and Directors’ remuneration Group and Bank 2018 2017 RM’000 RM’000

Executive Director (including CEO)

Salary and other remuneration, including meeting allowances 5,353 5,251

Bonuses 2,951 2,888

Benefits-in-kind 184 178

Non-executive Directors Fees 855 765 Benefits-in-kind 15 - 9,358 9,082

(ii) Other key management personnel:

Short-term employee salary and benefits 2,724 2,545

Salary and other Benefits remuneration Fees Bonuses -in-kind Total RM’000 RM’000 RM’000 RM’000 RM’000

Executive Director and CEO

Lee Lung Nien 5,353 - 2,951 184 8,488

Non-executive Directors

Terence Kent Cuddyre - 150 - - 150

Dato’ Siow Kim Lun - 150 - 4 154

Agnes Liew Yun Chong - 150 - - 150

Datuk Ali Bin Abdul Kadir - 150 - 4 154

Tan Sri Dr. Ghauth bin Jasmon - 105 - 3 108

Philip Tan Puay Koon - 150 - 4 154

5,353 855 2,951 199 9,358



23. Allowance for loans, advances and financing


Individual assessment allowance - 17,222

Collective assessment allowance - (61,383)

Impaired loans, advances and financing

- written back - (88,620)

- written off - 187,728

12-months ECL (28,716) -

Lifetime ECL not credit impaired (1,791) -

Lifetime ECL credit impaired

- made in the financial period 12,094 -

- written back (109,604) -

- written off 192,002 -

63,985 54,947

24. Tax expense Group and Bank 2018 2017 RM’000 RM’000 Malaysian income tax

- current year 328,967 273,000

- prior year (over)/under provision (8,848) 31,096 320,119 304,096

Deferred tax expense

- origination and reversal of temporary differences (57,056) (23,022)

- prior year over provision (3,367) (4,953)

(60,423) (27,975)

259,696 276,121

A reconciliation of the effective tax expense based on the applicable tax rate is as follows:


Profit before taxation 1,047,354 1,039,201

Income tax using Malaysian tax rate of 24% 251,365 249,409

Non-deductible expenses 2,547 2,272

Others 17,999 (1,703)

271,911 249,978

(Over)/Under provision in prior year (12,215) 26,143

259,696 276,121



25. Earnings per share

The earnings per ordinary share has been calculated based on the profit for the year of RM787,658,000 (2017: RM763,080,000) divided by 121,696,972 (2017: 121,696,972) units of ordinary shares issued during the financial year under review.

26. Dividends Dividends recognised by the Bank are: Sen Total per share amount Date of payment RM’000 2018 Final 2017 ordinary 394 480,000 27 June 2018

2017 Final 2016 ordinary 452 550,000 29 June 2017

After the reporting date, 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 per Total share amount RM’000

Final 2018 ordinary 647 788,000

27. 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 or jointly 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 Holding (Singapore) Pte. Ltd. and Citigroup Inc.

(ii) Other related companies Entities which are related by virtue of having Citigroup Holding (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 22 (i) and (ii).



27. Significant related party transactions and balances (continued)

(i) Transactions and balances with parent companies and other related companies Group and Bank Other Other Parent related Parent related companies companies companies companies 2018 2018 2017 2017 RM’000 RM’000 RM’000 RM’000

Income

Interest on interest bearing deposits 5,334 7,787 435 5,959

Other income 9,506 310,583 38,181 136,972

14,840 318,370 38,616 142,931

Expenditure

Interest on interest bearing deposits 65 38,869 60 37,853

Other expenses 41,393 302,217 25,000 350,152

41,458 341,086 25,060 388,005

Amount due from

Interest bearing deposits - 509,781 - 210,081

Current account balances 4,137 707,159 4,055 262,636

Other balances 34,856 165,607 47,438 183,781

38,993 1,382,547 51,493 656,498

Amount due to

Interest bearing deposits - 1,553,142 - 309,297

Current account balances 12,808 745,930 955 1,673,168

Other balances 55,813 221,552 5,406 129,947

68,621 2,520,624 6,361 2,112,412

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.



27. Significant related party transactions and balances (continued)

(ii) Intercompany charges with a breakdown by type of services received and geographical distribution Group and Bank 2018

Europe, the Middle Asia North East and Latin Pacific America Africa America Total RM’000 RM’000 RM’000 RM’000 RM’000

System & technology 97,139 14,914 266 - 112,319

Operation & technology support 55,380 12,084 869 2 68,335

Global functions 11,191 54,471 1,679 5 67,346

Data center 49,643 8,525 82 - 58,250

Global/Regional Business 25,381 10,150 459 - 35,990

Others 734 636 - - 1,370

239,468 100,780 3,355 7 343,610

Group and Bank 2017

Europe, the Middle Asia North East and Latin Pacific America Africa America Total RM’000 RM’000 RM’000 RM’000 RM’000

System & technology 91,819 27,283 174 1 119,277

Operation & technology support 60,272 7,846 587 1 68,706

Global functions 39,095 41,654 2,475 1 83,225

Data center 59,115 1,951 1 - 61,067

Global/Regional Business 31,976 9,024 621 - 41,621

Others 1,081 175 - - 1,256

283,358 87,933 3,858 3 375,152



28. Credit transactions and exposures with connected parties


Outstanding credit exposures with connected parties 723,408 451,007

Total credit exposure which is non-performing or in default - -

Total credit exposures 57,620,110 57,977,802

Percentage of outstanding credit exposures to connected parties

- as a proportion of total credit exposures 1.26% 0.78%

- as a proportion of capital base 13.91% 8.92%

- 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.



29. Derivative financial instruments

Contract Positive Negative amount fair value fair value RM’000 RM’000 RM’000

2018

Foreign exchange related contracts:

- Forwards 65,027,260 200,204 181,589

- Cross currency interest rate swaps 4,693,055 176,377 53,539

- Options 1,053,631 2,851 2,016

Interest/Profit rate contracts:

- Futures 3,309,600 - -

- Swaps 85,975,787 97,670 57,970

- Options 240,000 332 -

Equity related 1,587,018 632 642

Others 2,369,982 71,026 81,570

164,256,333 549,092 377,326

Note 8 Note 15

2017


- Forwards 40,689,409 149,225 395,557

- Cross currency interest rate swaps 5,974,934 178,599 192,977

- Options 508,488 1,530 919

Interest/Profit rate contracts:

- Futures 810,900 - -

- Swaps 77,765,261 113,581 70,202

- Options 240,000 869 -

Others 1,145,203 66,540 79,689

127,134,195 510,344 739,344

Note 8 Note 15



30. 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

Risk Concentration

(i) Wholesale

Credit concentration risk refers to the risk of material loss due to large exposures to individual counterparties or groups of counterparties whose likelihood of default is driven by common underlying factors. The Group and the Bank have processes in place to identify and measure credit concentration risk.

• Obligor concentration - Obligors are aggregated to relationship groups on the basis of ownership and/or management control. The resulting total exposure within each relationship group is required to remain within the Total Credit Facilities approved for that obligor, as well as the applicable Obligor Limit under the risk policy (“policy OL”). The policy OL is driven by the Obligor Limit Rating of the relationship group, based on an aggregate notional exposure limit, tenor notional limits and credit and cross-border risk capital limits. Total exposure used for the purposes of measuring against obligor limits contains the aggregate of direct, contingent and market sensitive exposure outstanding’s across all tenor buckets. Risk capital includes the Credit Risk Capital and Cross Border Risk Capital associated with all facilities to an entity.



30. Financial risk management (continued)

(1) Credit Risk (continued)

Risk Concentration (continued)

(i) Wholesale (continued)

• Industry concentration - industry limits are managed on an overall global basis under an industry limit framework/model which incorporates historical risk, return and concentration metrics. The goal of industry limit setting is to establish a framework for managing industry risk to improve the overall return on the Group’s and the Bank’s capital by doing the following:

- Reduce industry concentration risk, particularly to those industries with fat tail risk. - Allocate capital to those industries that have historically had higher returns on capital. - Reduce concentrations in industries based on capital intensity, total size, and portfolio dispersion.

Concentration risk is assessed on a quarterly basis through review of exposure class by single counterparty and industry. These concentrations are presented and discussed regularly at Board and Risk Management Committee meetings

• Counterparty concentration: The Group and the Bank assess large exposures to single counterparty groups of connected obligors, either through common ownership or control, or through financial and economic interdependencies, in compliance with the Single Counterparty Exposure Limit (“SCEL”) policy. Risk concentration to a single counterparty may arise through direct exposures to the counterparty and indirectly through exposures to guarantors and protection providers. In order to manage and contain large exposure to single counterparties, there are a series of checks and balances, as defined in the SCEL policy, to ensure that exposure to a single counterparty does not exceed 25% of the Group’s and the Bank’s qualifying capital.

• Industry concentration: Concentration risk is assessed using the Herfindahl-Hirschman Index (“HHI”). HHI is used as an overarching tool to measure and quantify the extent of portfolio wide concentration by industry sector. HHI of more than 25% indicates high concentration. Methodology is applied on total wholesale’s exposures on an extending unit basis and using the Obligor Risk Management Industry. The Industry Concentration is reviewed on a bi-monthly basis and presented quarterly at the Country Coordinating Committee (“CCC”). In the event that industry concentration exceeds 25% of gross outstanding and unused commitment (“OSUC”), the Country Risk Manager will present an exposure management plan that includes a timeframe to contain the said exposure in that specific industry and/or address the excess by highlighting mitigants to the concentration issue.

(ii) Retail

Credit concentration risk is the subset of credit risk, further defined as the potential loss arising from large exposures to specific names or highly correlated names, sectors, or countries. Sources of credit concentration risk include the following:

• Large exposures to specific names or highly correlated names; • Concentration of risk to sectors or countries; • Concentration of risk to certain banking products; and • Concentration of risk to specific market factors.

Retail concentration risk is associated with the build-up of exposures in high risk segments that entail to disproportionate risk during cyclical downturns. As consumer risk manages volumes, the concentration risk is not material on single name, sector, etc. Concentration risk in retail products are monitored via new bookings quality, segments distribution in portfolio or high losses from specific segment. As the various portfolios, higher risk segments are strictly mitigated with capping of the portfolio exposure and/or allowable only on selective credit worthy customers with higher or better profile and lower margin of finance, concentration risk is not material for retail products.





Risk Mitigation

(i) Wholesale

Hedging and mitigating credit risk is performed through eligible collateral, personal and/or corporate guarantees, targeted exposure reduction, loan sales and derivatives. Hedges and risk mitigation are subject to applicable credit policies. To the extent permissible by local law, cross-product netting and cross-product margining can be achieved through a qualifying master netting agreement that provides for termination, cross-default, and close-out netting across multiple types of financial transactions documented under multiple agreements. Close-out netting occurs when termination values of all transactions documented under a single agreement are calculated and netted to determine a single lump sum close-out amount that is either due to, or by, a counterparty. Determination on whether a margin can function as a legally recognisable risk mitigant against exposure and thereby decrease the Group’s and the Bank’s exposure is made on a counterparty by counterparty, agreement by agreement basis, giving consideration to such factors as the place of organisation of the counterparty, the insolvency laws applicable, the location of the margin, and the relevant documentation. Margining must be covered by an International Swaps and Derivative Association (“ISDA”), Credit Support Agreement (where appropriate) or equivalent Master Agreements if required by local law.

Collateral and other secured assets should have perfected first priority security interest. This includes physical collateral (evaluated by an approved external appraiser) as well as cash and financial collateral. All qualifying collateral that is pledged to support direct and contingent risk exposures must be legally enforceable and documented with insurance coverage as applicable. An approved technology system for collateral data collection and aggregation is used to track current collateral values for regulatory capital treatment. Collateral is reviewed annually or more often as deemed appropriate. The Group and the Bank accept physical collateral such as equipment, inventory, and real estate in addition to cash and financial collateral. Acceptable guarantees are personal, third-party, and corporate guarantees. Risk from collateral is mitigated by accepting only approved assets. Guarantees are primarily from qualified parties that are related to obligors or acceptable third parties in the form of standby letter of credit.

(ii) Retail

Retail risk management processes are govern by a series of standards and policies that include:

• Retail credit risk management monitors its lending activities with clear and comprehensive credit policies that weigh long term viability of products with risk and rewards balance objectives as against short term gains. Policies and credit programme features are maintained by Credit Risk Management in a comprehensive manual. This serves as the single repository of the Group’s and the Bank’s credit policies.

• Risk Appetite Framework that is built on a clear risk appetite statement that dovetails into a detailed document based on acceptable financials, benchmarks related to the financials, guardrails, triggers and governance processes to ensure that these are tracked and measured consistently.

• Credit performance and through the door credit concentration key indicators are benchmark to ensure balance of risk and rewards to long term business strategy. Portfolio classifications policies that monitor portfolio health with established indicators such as credit loss rates, return on assets, risk appetite ratios, etc. Well establish loan loss reserves and provisioning policies to ensure appropriate and timely losses recognition.

• Product programme, credit transaction approvals, credit authority and credit delegation are implemented to guide and govern credit underwriting process.

• Credit policies are executed through automated processes through system and scores models to mitigate and minimise judgemental decisions and improve decision turnaround time.

• Constant reviews are performed to ensure that credit performance is within acceptable standards. Policy changes are implemented based on MIS and data analytics.

• Monthly business reviews are conducted across the various functions to ensure that the risk and business aspects of each product are reviewed jointly and decisions taken accordingly to make changes on product or risk profile.





Risk Mitigation (continued)

(ii) Retail (continued)

Credit authority levels, delegation processes, approval processes for portfolios, product approvals, and other types of required approval are defined in the Global Consumer Credit and Fraud Risk Policies (“GCCFRP”). The GCCFRP establishes a consistent set of standards for the appointment of Credit Officers and Senior Credit Officers, streamlines the approval process, creates auditable policies, and ensures the accountability and responsibility of retail risk management staff, Risk Management ascertains the standard quality of the delegated credit officers in-country while ensuring adequacy of training, credit understanding and exposure. Interviews and discussions are performed regularly to ensure credit staffs are in sync to the policies requirements/changes.

Score performances of new booking and portfolio are closely monitored and reviewed to ensure the portfolio performance continue to remain as per target segments, score performances would act as indicators of the booking quality.



Risk Assessment

(i) Wholesale

Credit risk is the risk that financial obligations to the Group and the Bank will not be paid on time and in full as expected or contracted, resulting in a financial loss. Credit Risk can be divided into two broad categories namely, Lending Risk (which consists of Direct & Contingent lending risks) and Counterparty Risk (Pre-settlement & Settlement Risks).

• Direct lending risk is the risk that actual customer obligations (loans and overdrafts) cannot be settled on time while Contingent lending risk is the potential claims against customer or potential customer obligations (letter of credit, guarantees) that will become actual obligations when not be settled on time.

• Pre-settlement risk is the risk that a counterparty may default on a contractual obligation to the back before the settlement date (current mark-to-market + maximum likely increase in value) while Settlement Risk occurs on the maturity date when the bank has delivered its side of the transaction, but do not receive simultaneous delivery (due to time zone difference etc.).

The Credit Approval process covers credit reviews and approvals. Credit lines are proposed or recommended for renewal by the Business Sponsor and approved by Independent Risk according to the credit policy standards.

Credit Risk Assessment (credit evaluation) of an obligor covers eight key areas namely Business Risk, Financial Risk, Capital Structure, Management Assessment, Credit Structure, Risk Rating, Industry Assessment and Documentation. The credit limits and product offering by relationship to clients are based on the end-to-end credit assessment, including relationship strategy and risk-returns assessment.

The Risk Rating process is a vital component of risk management measures and a key variable in the returns calculations. The Wholesale Global Risk Management develops Risk Rating models, including Debt Rating Models (which takes into account an obligors key financials) and Scorecard Models that determine an obligor’s one year probability of default. In addition, ratings issued by approved external rating agencies may also be used.

The credit approval sign-off is provided at various levels depending on the size and type of facility and may even include specific industry and cross border approvals as the case may be. The approval levels are governed by a credit approval grid which is based on Risk Appetite (facility limit based) and Concentration Risk (exposure based).

Pro-active Problem Recognition is an inherent and critical tool of the wholesale risk management process. Repayment capacity and financial strength are two key components in determining the classification of an obligor.



Risk Assessment (continued)

(i) Wholesale (continued)

All facilities are accorded classification grades as follows:

• Pass - indicating no evident weakness. • Pass Watch-list - indicating potential weakness but mitigated by the current and projected financial and

operating strength of the obligor. • Special Mention - indicating potential weaknesses that deserve management’s close attention. • Sub-standard - facilities that are inadequately protected by the current sound worth and paying capacity of

the obligor indicating well-defined weakness, or weaknesses, that jeopardise the liquidation of the debt. • Doubtful - facilities with weakness in credit making collection or liquidation in full highly questionable.

Classifications in addition to Risk Ratings are used to evaluate the overall portfolio quality of the business.

(ii) Retail

Credit risk has an established set of measurement to monitor the performance of the portfolios. This is performed through the monthly Portfolio Quality Review (“PQR”) which covers the following key areas:

• Leading indicators that include macroeconomic indicators, industry credit performance, receivables growth, new bookings approval rates, deviation rates and exception approval performance, etc.

• Risk appetite dashboard that tracks performance against key triggers and shares this with senior management at country, regional and global level.

• Portfolio performance indicators such as delinquencies, net flows, and credit losses on coincident basis and vintage level and where applicable, is compared against historical performance, plans, and/or benchmarks.

• Test programmes and significant credit changes are tracked and reviewed consistently. • Portfolios classification as New, Mature & Stable, Performance Exception or Liquidating to clearly define the

portfolio status, product profitability and RAR (“Risk Acceptable Return”). • Monitoring of limits stipulated in approved programmes and concentration limits and/or caps for high-risk

segments. • Collections performance which includes call effectiveness and efficiency, Average Collector per account

(“ACR”) and cost of calls in delinquency and pre-delinquent buckets.

On a quarterly basis, Country Risk Manager is required to submit an attestation on the Business Monitor (“BM”) Validation of the overall status of the country’s risk factors. This is done through a qualitative assessment of

• Fundamental risk factors: risk staffing, organisational and training adequacy, infrastructure at the front end (initiation, fraud detection), back-end (collections, fraud), data and analytics (integrity, adequacy, availability) and its respective quality and compliance.

• Strategic evaluation: growth and risk appetite, sustainability and adequacy of return of each product (pricing, cost of funds) and portfolio stability (profitability, growth).

The credit risk and control frameworks are fully integrated into the retail business where management oversight is executed on business and products level through the governance of the Group’s and the Bank’s internal and Bank Negara Malaysia (“BNM”) policies. The Business Managers have ownership of portfolios and are accountable in managing the risk/return trade-offs. Regional Independent Risk will further provide regular and independent oversight on all portfolios, while working closely with the country risk and business teams.



30. 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 date, by industry and geographical analysis, before taking into account collateral held or other credit enhancements.

(i) By industry analysis

Financial services, Wholesale insurance, Electricity, & retail Government House- real estate Mining gas and trade, Transport, Social & and Central hold & business Primary and water restaurants storage & community Other Group banks loans services agriculture quarrying Manufacturing supply Construction & hotels communication services sectors Total 2018 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 1,898,000 - 1,089,381 - - - - - - - - - 2,987,381

Deposits and placements with banks and other financial institutions - - 996,236 - - - - - - - - - 996,236

Securities purchased under resale agreements 122,439 - - - - - - - - - - - 122,439

Investment securities 8,916,301 - 12,610 - - - - - - - - 492 8,929,403

Loans, advances and financing - 16,843,114 1,292,551 5,574 40,003 2,791,531 1,645 19,674 1,350,387 724,509 44,305 818,801 23,932,094

Other assets - - 628,440 1,739 53 40,821 13,327 21 11,862 35,268 86,332 112,886 930,749

Statutory deposits with Bank Negara Malaysia 400,524 - - - - - - - - - - - 400,524

11,337,264 16,843,114 4,019,218 7,313 40,056 2,832,352 14,972 19,695 1,362,249 759,777 130,637 932,179 38,298,826

Contingent liabilities (Note 35) - - 145,552 6,032 244,968 1,153,417 197,625 26,975 203,619 195,681 45 62,249 2,236,163

Commitments^ (Note 35) - 19,220,011 2,070,382 139,642 822,455 5,840,012 356,920 20,492 2,570,604 442,086 4,530 540,957 32,028,091

Total Credit Exposures 11,337,264 36,063,125 6,235,152 152,987 1,107,479 9,825,781 569,517 67,162 4,136,472 1,397,544 135,212 1,535,385 72,563,080

^ Commitments excluding derivatives



30. Financial risk management (continued) (A) Credit risk exposures and credit risk concentration (continued)

(i) By industry analysis (continued)

Financial services, Wholesale insurance, Electricity, & retail Government House- real estate Mining gas and trade, Transport, Social & and Central hold & business Primary and water restaurants storage & community Other Group banks loans services agriculture quarrying Manufacturing supply Construction & hotels communication services sectors Total 2017 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 4,811,450 - 1,068,111 - - - - - - - - - 5,879,561

Deposits and placements with banks and other financial institutions - - 943,830 - - - - - - - - - 943,830

Securities purchased under resale agreements 19,685 - - - - - - - - - - - 19,685

Financial assets held-for-trading 2,205,570 - - - - - - - - - - - 2,205,570

Financial investments available-for-sale 4,176,071 - 6,700 - - - - - - - - 315 4,183,086

Loans, advances and financing - 17,453,232 759,876 62,489 379,023 2,115,835 1,200 36,924 1,174,863 334,301 190,627 1,018,275 23,526,645

Other assets - - 555,174 107 - 31,650 22,989 21 13,322 13,138 67,937 71,187 775,525

Statutory deposits with Bank Negara Malaysia 339,330 - - - - - - - - - - - 339,330

11,552,106 17,453,232 3,333,691 62,596 379,023 2,147,485 24,189 36,945 1,188,185 347,439 258,564 1,089,777 37,873,232

Contingent liabilities (Note 35) - - 374,057 8,790 313,078 871,626 222,446 29,083 171,060 270,778 1,754 4,608 2,267,280

Commitments^ (Note 35) - 20,598,979 2,033,173 24,737 205,278 5,312,907 240 16,737 3,390,311 392,973 67,506 3,711 32,046,552

Total Credit Exposures 11,552,106 38,052,211 5,740,921 96,123 897,379 8,332,018 246,875 82,765 4,749,556 1,011,190 327,824 1,098,096 72,187,064




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

Hong Kong & North United Other Group Malaysia Singapore China PRC Japan Australasia America Kingdom countries Total 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet

Cash and short term funds 2,146,527 161,199 41,139 - 112,224 189,657 122,973 213,662 2,987,381

Deposits and placements with banks and other financial institutions 979,133 17,103 - - - - - - 996,236

Securities purchased under resale agreements 122,439 - - - - - - - 122,439

Investment securities 8,768,742 - - - - 160,661 - - 8,929,403

Loans, advances and financing 23,932,094 - - - - - - - 23,932,094

Other assets 436,091 6,039 38 102 159,310 258,777 70,308 84 930,749

Statutory deposits with Bank Negara Malaysia 400,524 - - - - - - - 400,524

36,785,550 184,341 41,177 102 271,534 609,095 193,281 213,746 38,298,826

Contingent liabilities (Note 35) 1,951,943 639 - - 379 4,262 - 278,940 2,236,163

Commitments^ (Note 35) 32,028,091 - - - - - - - 32,028,091

Total Credit Exposures 70,765,584 184,980 41,177 102 271,913 613,357 193,281 492,686 72,563,080


(ii) By geographical analysis




Hong Kong & North United Other Group Malaysia Singapore China PRC Japan Australasia America Kingdom countries Total 2017 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 5,415,069 237,140 39,741 - 76,839 18,485 57,468 34,819 5,879,561

Deposits and placements with banks and other financial institutions 923,084 20,746 - - - - - - 943,830

Securities purchased under resale agreements 19,685 - - - - - - - 19,685

Financial assets held- for-trading 1,801,270 - - - - 404,300 - - 2,205,570

Financial investments available-for-sale 3,782,067 - - - - 401,019 - - 4,183,086

Loans, advances and financing 23,526,645 - - - - - - - 23,526,645

Other assets 582,263 7,958 - - 591 133,241 50,342 1,130 775,525

Statutory deposits with Bank Negara Malaysia 339,330 - - - - - - - 339,330

36,389,413 265,844 39,741 - 77,430 957,045 107,810 35,949 37,873,232

Contingent liabilities (Note 35) 2,122,364 22,615 645 231 4,510 24,470 8,571 83,874 2,267,280

Commitments^ (Note 35) 32,046,552 - - - - - - - 32,046,552

Total Credit Exposures 70,558,329 288,459 40,386 231 81,940 981,515 116,381 119,823 72,187,064


(ii) By geographical 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.




(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 2018 2017 RM’000 RM’000

AAA - 300,000

A+ - 200,000

BBB+ 996,236 400,000

Unrated - 43,830

996,236 943,830

(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:


Malaysia 979,133 923,084

Other 17,103 20,746

996,236 943,830

(C) Other securities


Investment securities 8,929,403 6,388,656

8,929,403 6,388,656






(C) Other securities (continued)

(i) Other securities analysis by credit rating


AAA 160,661 805,319

A+ to A- 8,755,640 5,576,322

Unrated 13,102 7,015

8,929,403 6,388,656

(ii) Other securities analysis by geographical location where the credit risk of issuers reside, regardless of where the assets are booked, is as follows:


Malaysia 8,768,742 5,583,337

North America 160,661 805,319

8,929,403 6,388,656


(D) Credit quality of loans, advances and financing

Policy applicable before 1 January 2018

Group and Bank Note 2017 RM’000 Loans, advances and financing

- neither past due nor impaired 21,968,503

- past due but not impaired 1,470,014

- impaired 556,106

Gross amount 23,994,623 Less: Loss allowance Note (7)(iv) (467,978) Carrying amount 23,526,645

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.


Renegotiated loans 424,526 157,757

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 2017 RM’000

1 - 29 dpd 1,117,303

30 - 59 dpd 263,700

60 - 89 dpd 88,961

90 - 119 dpd -

120 - 180 dpd -

>180 dpd 50

1,470,014




(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 90 days or more;

(ii) significant financial difficulty;

(iii) enter bankruptcy or other financial reorganisation;

(iv) adverse changes in the payment status;

(v) national or economic conditions that correlate with defaults on the assets;

(vi) disappearance of an active market for a security.

Loans, advances and financing to customers that are individually impaired analysed by age are as follows:

Group and Bank 2017 RM’000

Current 128,671

1 - 29 dpd 54,311

30 - 59 dpd 35,020

60 - 89 dpd 38,785

90 - 119 dpd 98,207

120 - 180 dpd 59,212

>180 dpd 141,900

556,106

Estimated value of collaterals against past due but not impaired and impaired loans are RM502,483,000 (2017: RM817,277,000).




(D) Credit quality of loans, advances and financing (continued)

Policy applicable after 1 January 2018

Group and Bank Note 2018 RM’000 Loans, advances and financing

1 – 29 dpd 23,287,028

30 – 89 dpd 852,650

> 90 dpd 220,517

Gross amount 24,360,195 Less: Loss allowance Note (7)(iv) (428,101) Carrying amount 23,932,094

(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 116 basis points (2017: 119 basis points) movement for interest rates and a 6% (2017: 4%) movement in foreign exchange rates to measure the impact of these market risk movements on the Group and the Bank.






(2) Market Risk (continued)

Interest rate risk – Sensitivity analysis

At 31 December 2018, it is estimated that an increase from 28 to 144 basis points (2017: estimated that an increase from 28 to 147 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 RM203,215,000 (2017: RM30,722,000) whereas a decrease from 28 to 144 basis points (2017: decrease from 28 to 147 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 2018, it is estimated that a movement of 6% (2017: 4%) in Ringgit Malaysia (“RM”) against foreign currencies, with all other variables held constant, would result in maximum loss of approximately RM7,078,000 (2017: RM20,960,000).

The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the reporting date and had been applied to the Group’s and the Bank’s exposure to currency risk for both derivative and non-derivative financial instruments in existence at that date, and that all other variables, in particular interest rate, remains constant. The sensitivity analysis includes balances where the denomination of the balances is in a currency other than the Ringgit Malaysia (“RM”).

The stated changes represent management’s assessment of reasonably possible changes in foreign exchange rates over the period until the next annual reporting date. Results of the analysis represent an aggregation of the effects on the Group’s and the Bank’s profit before tax measured in the respective functional currencies, translated into Ringgit Malaysia (“RM”) at the exchange rate ruling at the reporting date for presentation purposes.

Liquidity Risk

Liquidity risk is the risk that the Group and the Bank will not be able to meet their 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 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Financial assets

Cash and short term funds 2,211,198 - - - - 776,183 - 2,987,381 4.04

Deposits and placements with banks and other financial institutions - 545,745 178,750 271,741 - - - 996,236 3.11

Securities purchased under resale agreements 122,439 - - - - - - 122,439 4.20

Investment securities - 222,260 1,387,295 5,113,858 60,645 13,102 2,132,243 8,929,403 3.00

Loans, advances and financing

- performing 9,500,505 1,866,401 1,063,300 1,363,099 10,346,373 (379,451) - 23,760,227 5.61

- impaired - - - - - 171,867 - 171,867

Other assets - - - - - 381,635 549,114 930,749

Statutory deposits with Bank Negara Malaysia - - - - - 400,524 - 400,524

Total financial assets 11,834,142 2,634,406 2,629,345 6,748,698 10,407,018 1,363,860 2,681,357 38,298,826


Deposits from customers 22,644,290 1,378,603 2,376,923 8,508 - - - 26,408,324 2.11

Deposits and placements with banks and other financial institutions 4,443,329 827,400 45,274 1,856 - - - 5,317,859 1.04

Other liabilities - - - - - 1,321,722 377,326 1,699,048

Total financial liabilities 27,087,619 2,206,003 2,422,197 10,364 - 1,321,722 377,326 33,425,231

On-balance sheet interest sensitivity gap (15,253,477) 428,403 207,148 6,738,334 10,407,018 42,138 2,304,031

Off-balance sheet interest sensitivity gap 2,427,523 751,173 345,174 (5,387,934) 586,177 - -

(12,825,954) 1,179,576 552,322 1,350,400 10,993,195 42,138 2,304,031

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 2017 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Financial assets


Deposits and placements with banks and other financial institutions - 536,040 407,790 - - - - 943,830 3.45

Securities purchased under resale agreements 19,685 - - - - - - 19,685 3.71

Financial assets held-for-trading - - - - - - 2,205,570 2,205,570 3.19

Financial investments available-for-sale 243,055 25,035 50,060 3,386,875 471,046 7,015 - 4,183,086 3.11

Loans, advances and financing 5.43

- performing 1,499,910 2,110,974 7,179,039 1,830,168 10,818,426 (348,388) - 23,090,129

- impaired - - - - - 436,516 - 436,516

Other assets - - - - - 265,181 510,344 775,525

Statutory deposits with Bank Negara Malaysia - - - - - 339,330 - 339,330

Total financial assets 7,290,010 2,672,049 7,636,889 5,217,043 11,289,472 1,051,855 2,715,914 37,873,232


Deposits from customers 22,183,453 1,362,153 2,856,088 20,206 - - - 26,421,900 1.31

Deposits and placements with banks and other financial institutions 4,427,321 30,853 6,082 - - - - 4,464,256 1.37

Other liabilities - - - - - 1,548,648 739,344 2,287,992

Total financial liabilities 26,610,774 1,393,006 2,862,170 20,206 - 1,548,648 739,344 33,174,148

On-balance sheet interest sensitivity gap (19,320,764) 1,279,043 4,774,719 5,196,837 11,289,472 (496,793) 1,976,570

Off-balance sheet interest sensitivity gap 5,347,985 2,052,121 (1,351,382) (8,220,408) 726,952 - -

(13,972,779) 3,331,164 3,423,337 (3,023,571) 12,016,424 (496,793) 1,976,570

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.




(i) Interest/profit rate risk (continued)


(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 risk as at the reporting date:

Group MYR USD JPY Others Total 2018 RM’000 RM’000 RM’000 RM’000 RM’000

Financial assets

Cash and short term funds 2,150,664 183,959 - 652,758 2,987,381

Deposits and placements with banks and other financial institutions 600,000 210,885 - 185,351 996,236

Securities purchased under resale agreements 122,439 - - - 122,439

Investment securities 8,768,742 160,661 - - 8,929,403

Loans, advances and financing 20,293,678 3,398,985 200,229 39,202 23,932,094

Other assets 443,513 476,971 1,560 8,705 930,749

Statutory deposits with Bank Negara Malaysia 400,524 - - - 400,524

Total financial assets 32,779,560 4,431,461 201,789 886,016 38,298,826


Deposits from customers 19,441,540 6,025,596 52,973 888,215 26,408,324

Deposits and placements of banks and other financial institutions 2,684,252 2,355,605 99,534 178,468 5,317,859

Other liabilities 1,400,840 238,464 6,069 53,675 1,699,048

Total financial liabilities 23,526,632 8,619,665 158,576 1,120,358 33,425,231



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.


(ii) Foreign currency risk (continued)

Group MYR USD JPY Others Total 2017 RM’000 RM’000 RM’000 RM’000 RM’000

Financial assets

Cash and short term funds 5,009,620 472,322 - 397,619 5,879,561

Deposits and placements with banks and other financial institutions 900,001 9,807 - 34,022 943,830

Securities purchased under resale agreements 19,685 - - - 19,685

Financial assets held-for-trading 1,801,270 404,300 - - 2,205,570

Financial investments available-for-sale 3,782,067 401,019 - - 4,183,086

Loans, advances and financing 20,644,222 2,752,045 103,835 26,543 23,526,645

Other assets 432,160 295,201 193 47,971 775,525

Statutory deposits with Bank Negara Malaysia 339,330 - - - 339,330

Total financial assets 32,928,355 4,334,694 104,028 506,155 37,873,232


Deposits from customers 19,663,058 5,856,261 51,116 851,465 26,421,900

Deposits and placements of banks and other financial institutions 3,196,460 1,067,559 45,086 155,151 4,464,256

Other liabilities 1,765,725 420,396 1,958 99,913 2,287,992

Total financial liabilities 24,625,243 7,344,216 98,160 1,106,529 33,174,148



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 2018 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Financial assets

Cash and short term funds 943,532 1,267,666 - - - - - - 776,183 2,987,381

Deposits and placements with banks and other financial institutions - - 545,745 152,690 26,060 271,741 - - - 996,236

Securities purchased under resale agreements 35,659 86,780 - - - - - - - 122,439

Investment securities - 387,746 522,260 126,986 1,429,642 4,105,644 1,700,016 644,007 13,102 8,929,403

Loans, advances and financing 7,843,666 1,253,380 1,877,706 597,490 619,053 975,683 418,743 10,346,373 - 23,932,094

Other assets 173,921 52,270 135,533 72,611 139,977 102,384 56,739 9,133 188,181 930,749

Statutory deposits with Bank Negara Malaysia - - - - - - - - 400,524 400,524

Total financial assets 8,996,778 3,047,842 3,081,244 949,777 2,214,732 5,455,452 2,175,498 10,999,513 1,377,990 38,298,826




(iii) Analysis of assets and liabilities by remaining maturity

The following maturity profile is based on the remaining period to the contractual maturity at the reporting date.


Deposits from customers 19,617,203 3,027,087 1,378,603 952,323 1,424,600 8,388 120 - - 26,408,324

Deposits and placements of banks and other financial institutions 4,013,574 429,755 827,400 - 45,274 1,856 - - - 5,317,859

Other liabilities 200,883 60,445 65,499 88,422 31,593 55,127 17,410 5,681 1,173,988 1,699,048

Total financial liabilities 23,831,660 3,517,287 2,271,502 1,040,745 1,501,467 65,371 17,530 5,681 1,173,988 33,425,231



Deposits from customers 18,896,549 3,286,903 1,362,153 1,034,792 1,821,297 20,206 - - - 26,421,900

Deposits and placements of banks and other financial institutions 4,359,188 68,133 30,853 6,082 - - - - - 4,464,256

Other liabilities 1,090,064 125,132 142,421 198,437 124,434 54,957 25,773 1,955 524,819 2,287,992

Total financial liabilities 24,345,801 3,480,168 1,535,427 1,239,311 1,945,731 75,163 25,773 1,955 524,819 33,174,148

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 2017 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Financial assets

Cash and short term funds 3,861,450 1,665,910 - - - - - - 352,201 5,879,561

Deposits and placements with banks and other financial institutions - - 536,041 404,152 3,637 - - - - 943,830

Securities purchased under resale agreements 19,685 - - - - - - - - 19,685

Financial assets held-for-trading - 121,528 421,046 28,373 546,460 200,841 313,956 573,366 - 2,205,570

Financial investments available-for-sale - 243,055 25,035 50,060 - 1,074,355 2,312,520 471,046 7,015 4,183,086

Loans, advances and financing 866,324 816,567 2,184,779 445,138 6,446,475 1,189,712 670,344 10,907,306 - 23,526,645

Other assets 130,448 49,501 82,752 36,681 61,404 192,366 91,551 24,017 106,805 775,525

Statutory deposits with Bank Negara Malaysia - - - - - - - - 339,330 339,330

Total financial assets 4,877,907 2,896,561 3,249,653 964,404 7,057,976 2,657,274 3,388,371 11,975,735 805,351 37,873,232




(iii) Analysis of assets and liabilities by remaining maturity

The following maturity profile is based on the remaining period to the contractual maturity at the reporting date.

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 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


Deposits from customers 26,408,324 26,455,879 22,650,769 1,391,608 2,399,271 14,231 -

Deposits and placements of banks and other financial institutions 5,317,859 5,324,306 4,444,013 832,029 46,328 1,936 -

Other liabilities 1,699,048 1,699,048 1,435,316 65,499 120,015 72,537 5,681

Total financial liabilities 33,425,231 33,479,233 28,530,098 2,289,136 2,565,614 88,704 5,681

2017


Deposits from customers 26,421,900 27,354,009 22,533,649 1,542,837 3,254,338 23,185 -

Deposits and placements of banks and other financial institutions 4,464,256 4,464,912 4,427,829 30,959 6,124 - -

Other liabilities 2,287,992 2,287,992 1,740,015 142,421 322,871 80,730 1,955

Total financial liabilities 33,174,148 34,106,913 28,701,493 1,716,217 3,583,333 103,915 1,955





(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.




(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.

31. Financial assets and liabilities

31.1 Categories of financial instruments

The table below provides an analysis of financial instruments as at 31 December 2018 categorised as follows:

(a) Amortised cost;

(b) Fair value through profit or loss (“FVTPL”); and

(c) Fair value through other comprehensive income (“FVOCI”)

Carrying Amortised Group amount cost FVTPL FVOCI

2018 RM’000 RM’000 RM’000 RM’000

Financial assets

Cash and short term funds 2,987,381 2,987,381 - -

Deposits and placements with banks and other financial institutions 996,236 996,236 - -

Securities purchased under resale agreements 122,439 122,439 - -

Investment securities 8,929,403 - 2,145,345 6,784,058

Loans, advances and financing 23,932,094 23,647,613 284,481 -

Statutory deposits with Bank Negara Malaysia 400,524 400,524 - -

Derivative financial assets 549,092 - 549,092 -

Other debtors and deposits 264,638 264,638 - -

Interest/Income receivable 117,019 117,019 - -

Total financial assets 38,298,826 28,535,850 2,978,918 6,784,058


Deposits from customers 26,408,324 26,408,324 - -

Deposits and placements of banks and other financial institutions 5,317,859 5,317,859 - -

Derivative financial liabilities 377,326 - 377,326 -

Other creditors and accruals 1,190,917 1,190,917 - -

Interest/Profit payable 51,124 51,124 - -

Structured products 79,681 79,681 - -

Total financial liabilities 33,425,231 33,047,905 377,326 -



31. Financial assets and liabilities (continued)

31.1 Categories of financial instruments (continued)



Carrying L&R/ FVTPL- Group amount OL HFT AFS

2017 RM’000 RM’000 RM’000 RM’000

Financial assets

Cash and short term funds 5,879,561 5,879,561 - -

Deposits and placements with banks and other financial institutions 943,830 943,830 - -

Securities purchased under resale agreements 19,685 19,685 - -

Investment securities 6,388,656 - 2,205,570 4,183,086

Loans, advances and financing 23,526,645 23,526,645 - -

Statutory deposits with Bank Negara Malaysia 339,330 339,330 - -

Derivative financial assets 510,344 - 510,344 -

Other debtors and deposits 158,130 158,130 - -

Interest/Income receivable 107,051 107,051 - -

Total financial assets 37,873,232 30,974,232 2,715,914 4,183,086


Deposits from customers 26,421,900 26,421,900 - -

Deposits and placements of banks and other financial institutions 4,464,256 4,464,256 - -

Derivative financial liabilities 739,344 - 739,344 -

Other creditors and accruals 1,351,745 1,351,745 - -

Interest/Profit payable 42,236 42,236 - -

Structured products 154,667 154,667 - -

Total financial liabilities 33,174,148 32,434,804 739,344 -


31.1 Categories of financial instruments (continued)

The table below provides an analysis of financial instruments as at 31 December 2017 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”); and

(d) Other liabilities (“OL”).

Level 1 Level 2 Level 3 Total Group and Bank RM’000 RM’000 RM’000 RM’000

2018 Financial assets Loans, advances and financing - - 284,481 284,481 Investment securities 8,916,301 - 13,102 8,929,403 Derivative financial assets - 537,655 11,437 549,092

8,916,301 537,655 309,020 9,762,976

Financial liabilities Derivative financial liabilities - 325,878 11,448 377,326

2017 Financial assets Financial assets held-for-trading 2,205,570 - - 2,205,570 Financial investments available-for-sale 4,176,071 - 7,015 4,183,086 Derivative financial assets - 510,344 - 510,344

6,381,641 510,344 7,015 6,899,000

Financial liabilities Derivative financial liabilities - 739,344 - 739,344

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 (2017: no transfer in either directions).




31.2 Determination of fair value and fair value hierarchy (continued)

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).

31.2.1 Financial instruments carried at fair value (continued)



2018 2017 RM’000 RM’000

Group and Bank

Financial assets

Balance at 1 January 7,015 8,188

Effect of MFRS 9 adoption 308,781 -

Restated balance at 1 January 2018 315,796 8,188

Addition / (Settled) 9,457 (1,173)

Total losses recognised in profit or loss: Attributable to gains relating to assets that have not been realised (16,233) -

Balance at 31 December 309,020 7,015


Balance at 1 January - 10,778

Addition / (Settled) 9,542 (10,778)

Total gains recognised in profit or loss: Attributable to gains relating to liabilities that have not been realised 1,906 -

Balance at 31 December 11,448 -

The following shows the valuation techniques used in the determination of fair values within Level 3.

(a) Loans, advances and financing

The fair value of loans with intention to sell is determined where possible using quoted secondary-market prices. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan. Fair value for the other real estate owned is based on appraisals. For loans whose carrying amount is based on the fair value of the underlying collateral, the fair values depend on the type of collateral. Fair value of the collateral is typically estimated based on quoted market prices if available, appraisals or other internal valuation techniques. Where the fair value of the related collateral is based on an unadjusted appraised value, the loan is generally classified as Level 2. Where significant adjustments are made to the appraised value, the loan is classified as Level 3. Additionally, for corporate loans, appraisals of the collateral are often based on sales of similar assets however, because the prices of similar assets require significant adjustments to reflect the unique features of the underlying collateral, these fair value measurements are generally classified as Level 3, where enterprise valuation is adopted with consideration of significant unobservable inputs, including but not limited to, nature of the exposure (security, tenure, pricing), profitability and outlook of the underlying company and discount rates applied to the firm’s cash-flows.

The estimated fair value would increase (decrease) if expected macroeconomic environment and industry dynamics would improve (worsen) expected profitability and cash flows of the borrower and if weighted average capital cost decrease (increase).




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:






(b) Investment securities

The fair value of non-marketable equity securities under the measurement alternative is based on observed transaction prices for identical or similar investments of the same issuer, or an internal valuation technique in the case of an impairment. Where significant adjustments are made to the observed transaction price or when an internal valuation technique is used, the security is classified as Level 3. Fair value may differ from the observed transaction price due to a number of factors, including the book value of the underlying investment and marketability adjustments when the observed transaction is not for the identical investment held by Citi.

(c) Derivative financial assets and liabilities

Fair values of financial instruments 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.

31.2.2 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 Group and Bank Level 1 Level 2 Level 3 Total amount 2018 RM’000 RM’000 RM’000 RM’000 RM’000 Financial assets Loans, advances and financing - - 23,138,929 23,138,929 23,647,613

Financial liabilities Deposits from customers - - 26,455,879 26,455,879 26,408,324 Deposits and placements of banks and other financial institutions - - 5,324,306 5,324,306 5,317,859

2017 Financial assets Loans, advances and financing - - 23,513,247 23,513,247 23,526,645

Financial liabilities Deposits from customers - - 27,354,009 27,354,009 26,421,900 Deposits and placements of banks and other financial institutions - - 4,464,912 4,464,912 4,464,256

Related Gross amount financial recognised/ instruments Amount that are not presented in offset but the statements subject to of financial netting Net Group and Bank position agreement amount

2018 RM’000 RM’000 RM’000

Derivative financial assets

Foreign exchange related contracts 379,432 (150,831) 228,601

Interest rate contracts 98,002 (75,834) 22,168

Equity related contracts 632 (618) 14

Other contracts 71,026 (9,422) 61,604

549,092 (236,705) 312,387

Derivative financial liabilities

Foreign exchange related contracts (237,144) 150,831 (86,313)

Interest rate contracts (57,970) 75,834 17,864

Equity related contracts (642) 618 (24)

Other contracts (81,570) 9,422 (72,148)

(377,326) 236,705 (140,621)



31.2.2 Financial instruments not carried at fair value (continued)

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 deposits and placements of banks and other financial institutions are estimated with similar methodology as discussed in Note 31.2.1(a) and (b).

31.3 Offsetting of financial assets and liabilities

The Group and the Bank enter 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 agreements 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 following table sets out the carrying amounts of recognised financial instruments that are subject to the above agreements.



Related Gross amount financial recognised/ instruments Amount that are not presented in offset but the statements subject to of financial netting Net Group and Bank position agreement amount

2017 RM’000 RM’000 RM’000

Derivative financial assets

Foreign exchange related contracts 329,354 (170,787) 158,567

Interest rate contracts 114,450 (92,104) 22,346

Other contracts 66,540 (66,540) -

510,344 (329,431) 180,913

Derivative financial liabilities

Foreign exchange related contracts (589,453) 170,787 (418,666)

Interest rate contracts (70,202) 92,104 21,902

Other contracts (79,689) 66,540 (13,149)

(739,344) 329,431 (409,913)


31.3 Offsetting of financial assets and liabilities (continued)



32. 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 is as follows:


Within 1 year 23,231 6,794 Between 1 and 5 years 7,261 3,876 30,492 10,670

33. Capital commitments


Contracted but not provided for 1,252 631

Calendar Year Capital Conservation Buffer

2017 0.625%

2018 1.250%

2018 1.875%

2019 onwards 2.500%



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 2 February 2018. 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 1 capital ratio, Tier 1 capital ratio and total capital ratio are 4.5%, 6.0% and 8.0% respectively for year 2018 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:

34. Capital adequacy

(a) The capital adequacy ratios are as follows: Group and Bank 2018 2017 RM’000 RM’000

Computation of Total Risk Weighted Assets (“RWA”)

Total credit RWA 21,899,709 21,028,798

Total market RWA 1,782,855 1,643,230

Total operational RWA 3,836,381 3,731,917

Total Risk Weighted Assets 27,518,945 26,403,945

Computation of Capital Ratios

Common Equity Tier (1) (“CET 1”) Capital 4,926,985 4,789,945

Tier 1 Capital 4,926,985 4,789,945

Total Capital 5,200,731 5,052,805

Before deducting proposed dividends:

CET 1 Capital ratio 17.904% 18.141%

Total Tier 1 Capital ratio 17.904% 18.141%

Total Capital ratio 18.899% 19.137%

After deducting proposed dividends:

CET 1 Capital ratio 15.040% 16.323%

Total Tier 1 Capital ratio 15.040% 16.323%

Total Capital ratio 16.035% 17.319%

34. Capital adequacy (continued)

(b) The components of CET 1, Tier 1 and Tier 2 Capital are as follows:


Paid up ordinary share capital 502,000 502,000

Retained profits 4,587,247 4,386,521

Other reserves (23,029) (19,533)

Less: Deferred tax assets (139,233) (77,348)

Defined benefit pension fund assets - (1,695)

Total CET 1 Capital/Tier 1 Capital 4,926,985 4,789,945

Tier 2 Capital

Loss allowance and regulatory reserves* 273,746 262,860

Total Tier 2 Capital 273,746 262,860

Total Eligible Tier 2 Capital 273,746 262,860

Total Capital 5,200,731 5,052,805

* Excludes loss allowance restricted from Tier 2 Capital by BNM of RM106.8 million (2017: RM85.5 million).



35. Commitments and contingencies

The off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows: Credit Risk Principal equivalent weighted Group and Bank amount amount assets 2018 RM’000 RM’000 RM’000

Nature of item

Direct credit substitutes 1,478,949 1,478,949 1,367,221

Transaction related contingent items 568,008 284,004 269,300

Short term self-liquidating trade related contingencies 189,206 37,841 34,754


One year or less 68,824,339 424,234 260,961

Over one year to five years 1,910,151 60,370 38,787

Over five years 39,456 1,795 1,838

Interest/Profit rate related contracts:

One year or less 18,192,349 13,706 4,088


Over five years 3,190,000 83,300 28,075

Equity related contracts:

One year or less 1,587,018 47,611 23,806

Debt security contracts and other commodity contracts:

One year or less 1,784,191 536,034 276,606

Over one year to five years 585,791 148,408 85,675

Other commitments, such as formal standby facilities and credit lines, with an original maturity up to one year 18,464 3,693 3,693

Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year 419,225 209,613 176,447

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 13,706,370 - -

Unutilised credit card lines 17,884,032 3,576,806 2,702,336

Total 198,520,587 7,684,077 5,554,293





35. Commitments and contingencies (continued)

Credit Risk Principal equivalent weighted Group and Bank amount amount assets 2017 RM’000 RM’000 RM’000

Nature of item

Direct credit substitutes 1,651,974 1,651,974 1,527,019

Transaction related contingent items 491,885 245,942 216,789

Short term self-liquidating trade related contingencies 121,881 24,376 20,417

Forward asset purchases 1,540 1,540 770


One year or less 43,977,381 473,491 314,906


Over five years 43,287 3,972 3,972

Interest/Profit rate related contracts

One year or less 20,728,494 21,072 6,443


Over five years 2,482,000 143,077 84,945

Debt security contracts and other commodity contracts:

One year or less 1,132,108 128,106 68,273

Over one year to five years 13,095 23,655 19,609

Other commitments, such as formal standby facilities and credit lines, with an original maturity up to one year 160,583 32,117 32,117

Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year 824,093 412,047 348,277

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 12,585,530 - -

Unutilised credit card lines 18,476,346 3,695,269 2,790,328

Total 161,448,027 7,973,712 5,840,390



36. Significant changes in accounting policies

36.1 Classification of financial assets and financial liabilities

MFRS 9 contains three principal classification categories for financial assets and financial liabilities: amortised cost (“AC”), fair value through other comprehensive income (“FVOCI”), and fair value through profit or loss (“FVTPL”). The standard eliminates the existing MFRS 139 categories of held-to-maturity (“HTM”), loans and receivable (“L&R”), other liabilities (“OL”), available-to-sale (“AFS”) and held-for-trading (“HFT”). MFRS 9 classification is generally based on the business model in which a financial asset is managed and its contractual cash flows.

MFRS 9 largely retains the existing requirements in MFRS 139 for the classification and measurement of financial liabilities. As such, there is no change on the Group’s and the Bank’s accounting policies related to financial liabilities.

The impact on classification and measurement to the Group’s and Bank’s financial assets and financial liabilities are summarised below on the initial application of MFRS 9 on 1 January 2018.

Measurement category Carrying amount Original New Original classification classification under New under under MFRS under Group Note MFRS 139 MFRS 9 139 MFRS 9 RM’000 RM’000 Financial assets

Cash and short term funds L&R AC 5,879,561 5,879,561

Deposits and placements with banks and other financial institutions L&R AC 943,830 943,830

Securities purchased under resale agreements L&R AC 19,685 19,685

Loans, advances and financing (a) L&R AC 23,226,815 23,081,927

Loans, advances and financing (b) L&R FVTPL 299,830 299,830

Investment securities HFT FVTPL 2,205,570 2,205,570

(c) AFS (measured Investment securities at fair value) FVOCI 4,176,071 4,176,071

(d) AFS (measured Investment securities at amortised cost) FVTPL 7,015 15,966

Statutory deposits with Bank Negara Malaysia L&R AC 339,330 339,330

Derivative financial assets FVTPL FVTPL 510,344 510,344

Other debtors and deposits (a) L&R AC 158,130 157,561

Interest/Income receivable L&R AC 107,051 107,051


Deposits from customers OL AC 26,421,900 26,421,900

Deposits and placements from banks and other financial institutions OL AC 4,464,256 4,464,256

Derivative liabilities FVTPL FVTPL 739,344 739,344

Other creditors and accruals OL AC 1,351,745 1,351,745

Provision for commitments and contingencies OL AC - 3,624

Interest/Profit payable OL AC 42,236 42,236

The following table shows the measurement categories under MFRS 139 and the new measurement categories under MFRS 9 for each impacted class of the Group’s and the Bank’s financial assets and financial liabilities as at 1 January 2018:

36. Significant changes in accounting policies (continued)

36.1 Classification of financial assets and financial liabilities (continued)

(a) Reclassification from loans and receivables to amortised cost

Loans, advances and financing that were classified as loans and receivables under MFRS 139 are now reclassified as amortised cost. RM145 million in allowance for impairment was recognised in opening retained profits of the Group and of the Bank at 1 January 2018.

(b) Reclassification from loans and receivables to FVTPL

Loans that was classified as loans and receivables under MFRS 139 are now reclassified as FVTPL.

(c) Reclassification from AFS to FVOCI

Debt securities previously classified as available-for-sale were held by the Group and the Bank primarily for collecting contractual cash flows and selling them if the need arises to meet liquidity requirements. These debt securities are reclassified as financial assets at FVOCI.

(d) Reclassification from AFS to FVTPL

These are equity investments which are held for socio-economic purposes that were measured at cost before the adoption of MFRS 9. The carrying amount of RM7 million was reclassified from available-for-sale to fair value though profit or loss. The fair value gain of RM9 million were recognised in opening retained profits at 1 January 2018.



MFRS 139 MFRS 9 carrying carrying amount at amount at 31 December Reclassification Remeasurement 1 January Group and Bank 2017 2018 RM’000 RM’000 RM’000 RM’000 Financial assets

Investment securities – measured at FVTPL

Opening balance under MFRS 139 -

Addition: From held-for-trading investment securities 2,205,570

Addition: From available-for-sale investment securities 7,015

Remeasurement: From available-for-sale to FVTPL 8,951

Closing balance under MFRS 9 2,221,536

Investment securities – measured at FVOCI


Addition: From available-for-sale investment securities 4,176,071





36.1 Classification of financial assets and financial liabilities (continued)

MFRS 139 MFRS 9 carrying carrying amount at amount at 31 December Reclassification Remeasurement 1 January Group and Bank 2017 2018 RM’000 RM’000 RM’000 RM’000 Financial assets – held-for-trading

Opening balance under MFRS 139 2,205,570

Subtraction: To investment securities FVTPL (2,205,570)

Closing balance under MFRS 9 -

Investment securities – available-for-sale


Subtraction: To investment securities FVOCI (4,176,071)

Subtraction: To investment securities FVTPL (7,015)

Closing balance under MFRS 9 -

Loans, advances and financing – measured at amortised cost


Subtraction: To loans, advances and financing FVTPL (299,830)

Remeasurement: ECL allowance (144,888)


Loans, advances and financing – measured at FVTPL


Addition: From loans, advances and financing amortised cost 299,830

Closing balance under MFRS 9 299,830

Other assets – other debtors and deposits

Opening balance under MFRS 139 158,130

Remeasurement: ECL allowance (569)

Closing balance under MFRS 9 157,561

Other liabilities – Provision for commitments and contingencies


Remeasurement: ECL allowance (3,624)

Closing balance under MFRS 9 (3,624)


36.2 Impairment of financial assets

MFRS 9 replaces the ‘incurred loss’ model in MFRS 139 with an ‘expected credit loss’ (“ECL”) model. The new impairment model applies to financial assets measured at amortised cost, investment securities at FVOCI, and to certain loan commitments and financial guarantee contracts. Under MFRS 9, credit losses are recognised earlier than under MFRS 139. For an explanation of how the Group and the Bank apply the impairment requirements of MFRS 9, see Note 2(g)(i).

36.3 Transition

In the adoption of MFRS 9, the following transitional exemptions as permitted by the standard have been adopted:

The following assessments have been made based on the facts and circumstances that existed at the date of initial application:

• the determination of the business model within which a financial asset is held; and • the designation and revocation of previous designations of certain financial assets and financial liabilities

as measured at FVTPL.

The following table analyses the impact, net of tax, of transition to MFRS 9 on the opening balance of reserves and retained profits.



Impact of adopting MFRS 9 on opening Group and Bank balance RM’000 Other reserve (fair value reserve)

1 January 2018, as previously reported (26,024)

Recognition of expected credit loss under MFRS 9 for investment securities measured at FVOCI (a) 3,397

Restated at 1 January 2018 (22,627)

Retained profits

1 January 2018, as previously reported 4,386,521

Recognition of expected credit losses under MFRS 9 (b) (152,478)

- Loans, advances and financing measured at amortised cost (144,888)

- Other assets – other debtors and deposits (569)

- Other liabilities – provision for commitments and contingencies (3,624)

- Investment securities measured at FVOCI (3,397)

Related tax (c) 36,595

Remeasurement of fair value gain from financial assets AFS to FVTPL (d) 8,951

Impact at 1 January 2018 4,279,589

Effects on adopting MFRS 9 at 1 January 2018

(i) AFS/FVOCI reserve (a) 3,397

(ii) Additional ECL (b) (152,478)

(iii) Related tax (c) 36,595

(iv) AFS measured at amortised cost remeasured to FVTPL (d) 8,951

(103,535)

37. The operations of Islamic Banking

Statement of financial position as at 31 December 2018

Bank Note 2018 2017 RM’000 RM’000 Assets

Cash and short term funds (a) 1,680,534 2,355,265

Investment securities (b) 960,471 -

Financing, advances and others (c) 446,329 399,855

Other assets (e) 11,235 4,001 Total assets 3,098,569 2,759,121

Liabilities

Deposits and funds from customers (f) 912,763 250,905

Deposits and placements of banks and other financial institutions (g) 1,727,618 2,088,457

Deferred tax liabilities 138 505

Other liabilities (h) 5,629 10,819 Total liabilities 2,646,148 2,350,686

Islamic Banking funds (i) 452,421 408,435 Total liabilities and Islamic banking funds 3,098,569 2,759,121






37. The operations of Islamic Banking (continued)

Statement of profit or loss and other comprehensive income for the financial year ended 31 December 2018

Bank Note 2018 2017 RM’000 RM’000

Income derived from investment of depositors’ funds and others (j) 63,817 62,800

(Allowance)/Write back for financing, advances and others (k) (628) 70,150

Total attributable income 63,189 132,950

Income attributable to depositors and others (l) (7,869) (10,995)

Total attributable to the Bank 55,320 121,955

Income derived from investment of Islamic Banking funds (m) 872 16,870 Total net income 56,192 138,825

Other operating expenses (o) (71) (1,499)

Profit before taxation 56,121 137,326

Tax expense (p) (13,470) (32,958) Profit the year 42,651 104,368

Other comprehensive income, net of tax Items that are or may be reclassified subsequently to profit or loss

Investment securities - Net change in fair value 1,078 -

Total other comprehensive income for the year 1,078 -

Total comprehensive income for the year 43,729 104,368

Profit for the year attributable to: Owner of the Bank 42,651 104,368

Total comprehensive income attributable to: Owner of the Bank 43,729 104,368



Statement of changes in Islamic Banking funds for the financial year ended 31 December 2018



Capital Fair value Retained funds reserve profits Total RM’000 RM’000 RM’000 RM’000

At 1 January 2017 20,000 - 284,067 304,067

Profit for the year - - 104,368 104,368

Total comprehensive income for the year - - 104,368 104,368

At 31 December 2017/1 January 2018 20,000 - 388,435 408,435

Effect of MFRS 9 adoption - - 257 257

Restated balance at 1 January 2018 20,000 - 388,692 408,692

Fair value reserve on investment securities:

- Net change in fair value - 1,078 - 1,078

Profit for the year - - 42,651 42,651

Total comprehensive income for the year - 1,078 42,651 43,729

At 31 December 2018 20,000 1,078 431,343 452,421 Note 37(i)





Statement of cash flows for the financial year ended 31 December 2018

Bank 2018 2017 RM’000 RM’000 Cash flows from operating activities Profit before taxation 56,121 137,326 Adjustments for: Amortisation of premium less accretion of discount of investment securities (162) 3

Allowance/(Write back) for financial assets 628 (70,150)

Gain from sale of investment securities at FVOCI (318) - Operating profit before working capital changes 56,269 67,179

Changes in working capital: Investment securities at FVTPL (2017: held-for-trading) - 1,288

Financing, advances and others (46,845) 232,827

Other assets (7,236) 2,380

Deposits and funds from customers 661,858 (496,238)

Deposits and placements of banks and other financial institutions (360,839) 869,429

Other liabilities (5,261) 4,265

Cash generated from operating activities 297,946 681,130

Income taxes (13,765) (34,414) Net cash generated from operating activities 284,181 646,716

Cash flows from investing activities

Purchase of investment securities (1,620,094) -

Proceeds from disposal of investment securities 661,182 -

Net cash used in investing activities (958,912) -

Net (decrease)/increase in cash and short term funds (674,731) 646,716

Cash and short term funds at 1 January 2,355,265 1,708,549

Cash and short term funds at 31 December (Note 37(a)) 1,680,534 2,355,265





(a) Cash and short term funds

Bank 2018 2017 RM’000 RM’000 Cash and balances with banks and other financial institutions 2,136 2,432

Money at call and deposit placements maturing within one month 1,678,398 2,352,833

1,680,534 2,355,265

(b) Investment securities

(i) By measurement Bank 2018 2017 RM’000 RM’000 Investment securities measured at FVOCI 960,471 -

960,471 -

(ii) By type

Bank 2018 2017 RM’000 RM’000 Malaysian Government Investment Issues 960,471 -

(c) Financing, advances and others

(i) By measurement Bank 2018 2017 RM’000 RM’000 Financing, advances and others measured at amortised cost 246,255 432,030

Financing, advances and others measured at FVTPL 200,807 -

Gross financing, advances and others 447,062 432,030

Less: Loss allowance Note (37)(d)(iii) (733) (32,175)

Total net financing, advances and others 446,329 399,855




(c) Financing, advances and others (continued)

(ii) By type Bank 2018 2017 RM’000 RM’000 Term financing

- housing financing 168,423 195,329

- other term financing 284,087 243,129

452,510 438,458

Unearned income (5,448) (6,428)

Gross financing, advances and others 447,062 432,030

Less: Loss allowance Note (37)(d)(iii) (733) (32,175)

Total net financing, advances and others 446,329 399,855

(iii) By contract Bank 2018 2017 RM’000 RM’000

Bai’Bi Thaman Ajil 10,960 12,664

Diminishing Musharakah 152,015 176,237

Murabahah 284,087 243,129

447,062 432,030

(iv) By type of customer Bank 2018 2017 RM’000 RM’000

Domestic business enterprises - Others 284,527 243,601

Individuals 162,535 188,429

447,062 432,030

(v) By profit rate sensitivity Bank 2018 2017 RM’000 RM’000

Fixed rate - Housing financing 162,975 188,901

Variable rate - Cost plus 284,087 243,129

447,062 432,030




(c) Financing, advances and others (continued)

(vi) By sector Bank 2018 2017 RM’000 RM’000

Mining & Quarrying - 243,129

Manufacturing (including agriculture based) 82,722 -

Finance, insurance, real estate and business services 201,366 -

Household - residential 162,535 188,429

Other sectors 439 472

447,062 432,030

(d) Impaired financing, advances and others

(i) Movements in impaired financing, advances and others are as follows:

Bank 2018 2017 RM’000 RM’000

At 1 January 8,147 7,302

Classified as impaired during the year 3,608 8,726

Reclassified as performing during the year (6,556) (6,255)

Amount recovered (418) (1,626)

Amount written off (279) -

Others (341) -

At 31 December 4,161 8,147

Lifetime ECL credit impairment/individual assessment allowance (23) (487)

Net impaired financing, advances and others 4,138 7,660

Ratio of net impaired financing, advances and others to total gross financing, advances and others less lifetime ECL credit impaired/ individual assessment allowance 0.93% 1.77%

(ii) Impaired financing, advances and others by sector

Bank 2018 2017 RM’000 RM’000

Household - residential 4,161 8,147




(d) Impaired financing, advances and others (continued)

(iii) Loss allowance

The following tables show reconciliations from the opening to the closing balance of the loss allowance by class of financial instrument.

Group and Bank 2018 2017 Lifetime ECL Lifetime 12-months not credit ECL credit ECL impaired impaired Total Collective Individual Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 32,175 104,004 515 104,519

Less: Adjustments on initial application of MFRS 9

- Reclassified to loans at FVTPL (31,024)

- Remeasurement of ECL (340)

Restated at 1 January 286 28 497 811 104,004 515 104,519

Transfer to 12-month ECL 193 (46) (147) - - - -

Transfer to lifetime ECL not credit impaired (30) 102 (72) - - - -

Transfer to lifetime ECL credit impaired provision - (11) 11 - - - -

Less: Financing derecognised during the period (other than write-offs) (16) (3) (1) (20) - - -

New financing originated or purchased 103 - - 103 - - -

Net remeasurement of loss allowance (1) - - (1) (70,137) (13) (70,150)

Less: Write-offs (142) (67) (279) (488) (2,179) (15) (2,194)

Others 264 50 14 328 - - -

At 31 December 657 53 23 733 31,688 487 32,175


(e) Other assets

Bank 2018 2017 RM’000 RM’000

Profit receivables 9,299 1,534

Other debtors, deposits and prepayments 2,153 2,467

11,452 4,001

Less: Loss allowance (217) -

11,235 4,001

(f) Deposits and funds from customers

(i) By type of deposits and funds

Bank 2018 2017 RM’000 RM’000

Non-Mudarabah Fund

Demand deposits 866,008 202,708

Saving deposits 46,755 48,197

912,763 250,905

(ii) By type of customer

Bank 2018 2017 RM’000 RM’000

Government and statutory bodies 701,849 25,430

Business enterprises 152,795 157,295

Individuals 58,119 56,186

Others - 11,994

912,763 250,905




(g) Deposits and placements of banks and other financial institutions

Bank 2018 2017 RM’000 RM’000

Bank Negara Malaysia 1,289,160 1,501,986

Licensed banks 347,366 252,651

Licensed financial institutions 91,092 333,820

1,727,618 2,088,457

(h) Other liabilities

Bank 2018 2017 RM’000 RM’000

Provision for taxation 82 11

Other creditors and accruals 5,547 10,808

5,629 10,819

(i) Islamic Banking funds

Bank 2018 2017 RM’000 RM’000

Fund allocated 20,000 20,000

Fair value reserve 1,078 -

Retained profits 431,343 388,435

452,421 408,435

(j) Income derived from investment of depositors’ funds and others

Bank 2018 2017 RM’000 RM’000

Income derived from investment of:

(i) General investment funds 63,817 62,800

63,817 62,800




(j) Income derived from investment of depositors’ funds and others (continued)

(i) Income derived from investment of general investment funds

Bank 2018 2017 RM’000 RM’000

Finance income and hibah

Financing, advances and others 15,350 14,806

Money at call and placements with financial institutions 40,254 47,965

Investment securities at FVOCI 7,221 -

Investment securities at FVTPL 629 -

63,454 62,771

Accretion of discount less amortisation of premium 335 3

Total finance income and hibah 63,789 62,774

Other operating income

Fee income 28 26

Income from general investment funds 63,817 62,800

(k) Allowance/(Write back) for financing, advances and others

Bank 2018 2017 RM’000 RM’000

Individual assessment allowance - (13)

Collective assessment allowance - (70,137)

12-months ECL 584 -

Lifetime ECL not credit impaired 25 -

Lifetime ECL credit impaired

- made in the financial period 14 -

- written back (3) -

- written off 8 -

628 (70,150)

(l) Income attributable to depositors and others

Bank 2018 2017 RM’000 RM’000

Deposits and funds from customers

- Non-Mudarabah Fund 7,806 10,919

Others 63 76

7,869 10,995






(m) Income derived from investment of Islamic Banking funds

Bank 2018 2017 RM’000 RM’000

Financing, advances and others 3,321 2,230

Money at call and placements with financial institutions 8,709 7,223

Investment securities at FVOCI 1,562 -

Investment securities at FVTPL 136 -

13,728 9,453

Accretion of discount less amortisation of premium 235 -

Total finance income and hibah 13,963 9,453

Other operating income

Gain from investment securities at FVOCI 318 -

Gain from investment securities at FVTPL 54 -

Fee income 200 249

Gain from trading activities 478 7,168

Net loss on revaluation of financing, advances

and others at FVTPL (14,141) -

(13,091) 7,417

Income from Islamic Banking funds 872 16,870

(n) Net income from Islamic Banking operations

For consolidation with the conventional operations, income from Islamic Banking operations comprises the following:

Bank Note 2018 2017 RM’000 RM’000

Income derived from investment of depositors’ funds and others (j) 63,817 62,800

Income attributable to depositors and others (l) (7,869) (10,995)

Income derived from investment of Islamic Banking funds (m) 872 16,870

56,820 68,675




(o) Other operating expenses

Bank 2018 2017 RM’000 RM’000 Personnel costs

- Staff allowances and benefits 58 58

Establishment costs

- Rental 16 10

- Others - 27

Administrative and general expenses

- Others (3) 1,404

71 1,499

Included in other operating expenses is the Shariah Committee’s remuneration. The total remuneration of the Shariah committee members are as follows:

Bank 2018 2017 RM’000 RM’000

Dr. Mat Noor Mat Zain 54 54

Prof. Dr. Abdul Ghafar Ismail 42 42

Dr. Hakimah Hj Yaacob 42 42

Dr. Nik Abdul Rahim bin Nik Abdul Ghani 42 42

Mohd Bahroddin Badri 21 42

201 222

(p) Taxation

Bank 2018 2017 RM’000 RM’000

Current tax expense 13,836 33,076

Deferred tax income (366) (118)

13,470 32,958




(q) 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 depositors and shareholders as resolved by its Shariah Committee.

As of 31 December 2018, the shareholding of Citibank Berhad is 100% owned by Citigroup Holding (Singapore) Pte. Ltd., hence no assessment was made on zakat payable.

(r) Capital adequacy

(i) The capital adequacy ratios are as follows:

Bank 2018 2017 RM’000 RM’000

Computation of Total Risk Weighted Assets (“RWA”)

Total credit RWA 149,910 74,744

Total market RWA - -

Total operational RWA 115,264 104,519

Total Risk Weighted Assets 265,174 179,263

Computation of Capital Ratios

Common Equity Tier (1) (“CET 1”) Capital 451,828 408,435

Tier 1 Capital 451,828 408,435

Total Capital 452,756 412,317

CET 1 Capital Ratio 170.389% 227.841%

Total Tier 1 Capital Ratio 170.389% 227.841%

Total Capital Ratio 170.739% 230.007%

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 2 February 2018 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 1 Capital Ratio and Tier 1 Capital Ratio are 4.0% and 5.5% respectively for year 2018. The minimum regulatory capital adequacy requirement remains at 8.0% (2017: 8.0%) for total capital ratio.




(r) Capital adequacy (continued)

(ii) The components of CET 1, Tier 1 and Tier 2 Capital are as follows:

Bank 2018 2017 RM’000 RM’000

Fund allocated 20,000 20,000

Retained profits 431,343 388,435

Other reserves 1,078 -

55% of cumulative gains of investment securities (other than financing and receivables) (593) -

Total CET 1 Capital/Tier 1 Capital 451,828 408,435

Tier 2 Capital

Loss allowance and regulatory reserve* 928 3,882

Total Tier 2 Capital 928 3,882

Total Capital 452,756 412,317

* Excludes loss allowance restricted from Tier 2 Capital by BNM of RM Nil. (2017: RM27.8 million).

Non- Effective Up to 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 profit Trading profit Bank month months months years years sensitive book Total rate 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Financial assets


Investment securities - - 223,582 736,889 - - - 960,471

Financing, advances and others

- performing 16 35 163 291,327 151,644 (994) - 442,191 4.34

- impaired - - - - - 4,138 - 4,138

Others assets - - - - - 11,235 - 11,235

Total financial assets 1,678,414 35 223,745 1,028,216 151,644 16,515 - 3,098,569


Deposits and funds from customers 912,763 - - - - - - 912,763 1.55

Deposits and placements of banks and other financial institutions 1,396,091 - - 331,527 - - - 1,727,618 0.57

Deferred tax liabilities - - - - - 138 - 138

Other liabilities - - - - - 5,629 - 5,629

Total financial liabilities 2,308,854 - - 331,527 - 5,767 - 2,646,148

On-balance sheet profit sensitivity gap (630,440) 35 223,745 696,689 151,644 10,748 -




(s) Profit rate risk



Non- Effective Up to 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 profit Trading profit Bank month months months years years sensitive book Total rate 2017 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Financial assets


Financing, advances and others

- performing 4,765 37 126 241,849 177,106 (31,688) - 392,195

- impaired - - - - - 7,660 - 7,660 4.00

Others assets - - - - - 4,001 - 4,001

Total financial assets 2,357,598 37 126 241,849 177,106 (17,595) - 2,759,121


Deposits and funds from customers 250,905 - - - - - - 250,905 0.93

Deposits and placements of banks and other financial institutions 1,844,950 - - 243,507 - - - 2,088,457 0.55

Deferred tax liabilities - - - - - 505 - 505

Other liabilities - - - - - 10,819 - 10,819

Total financial liabilities 2,095,855 - - 243,507 - 11,324 - 2,350,686

On-balance sheet profit sensitivity gap 261,743 37 126 (1,658) 177,106 (28,919) -


(s) Profit rate risk (continued)

CITIBANK BERHAD (297089-M)

44th Floor, Menara Citibank, 165 Jalan Ampang, 50450 Kuala Lumpur

Tel : +603 2383 8585 Fax : +603 2383 6000

www.cit ibank.com.my

Documents

Citibank Berhad Annual Report 2018 · CITIBANK BERHAD ANNUAL REPORT 201804 The year 2018 will be remembered as one of transformation as we intensified our focus to future-proof and