MY FELLOW SHAREHOLDERS,
On behalf of the Board of Directors, it is my pleasure to present the Annual Report of AFFIN Holdings Berhad (the Group) for the financial year ended 31 December 2010.
During the course of 2010, we continued to focus our efforts on growing our business portfolios and building a company that would enhance value to our stakeholders. We have done this by making strategic alliances and realising our organic growth from our existing business.
In light of the continuous business, financial and operational growth that we have achieved resulting in a commendable performance for the AFFIN Group, it gives me great pleasure to present to you, on behalf of the Board of Directors of AFFIN Holdings Berhad, the annual report and financial statements of AFFIN Holdings Berhad for the year ended 31 December 2010.
Despite the challenging operating environment, the Group was able to expand its reach and further enhance the ‘AFFIN’ brand name, through swift and concerted policy, conscientiously implemented across the AFFIN Group. Let me begin by expressing my sincere appreciation to every shareholder and stakeholder including the employees of the AFFIN Group who had joined with us to uphold the faith and with a strong commitment to remain in the forefront of the Malaysian banking and financial industry. Thanks to your stout and unflinching support, the AFFIN Group has successfully continued to grow its profitability to higher levels.
The Malaysian economy has expanded by 7.2% in 2010, underpinned by strengthening domestic demand and supported by improving private investments. Private consumptions had benefited from improvements in the labour market, rising disposable incomes and improved customer confidence. This augurs well for the business development activities in year 2011 and AFFIN should benefit accordingly.
The Group was also engaged in measures to control cost and improve productivity. At the Bank level, overlapping and unprofitable business activities including the rationalisation of branch networks were rigorously pursued. Similar enhancing activities were also introduced throughout the Group. A more detailed look at what those initiatives were will be made in the appropriate sections in this statement.
The Board of Directors of AFFIN Holdings Berhad at the 34th Annual General Meeting (AGM) on 19th April 2010.
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AFFIN Investment Bank as the Principal Advisor and lead arranger signed an agreement with Boustead Holdings Berhad, OCBC bank (Malaysia) Berhad, Public Bank Berhad and The Bank of East Asia, Limited to raise up to RM1 billion via a Guaranteed Medium Term Notes programme on 2 November 2010. |
AFFIN Investment Bank as the Principal Advisor and Lead Arranger signed an agreement with Syarikat Kapasi Sdn Bhd, a subsidiary of Asian Pac Holdings Bhd, for the issuance of a RM200 million Commercial Papers/Medium Term Notes (CP/MTN) Programme which also marked the inaugural Danajamin nasional Berhad guaranteed issue on 29 June 2010 |
YEAR 2010 GROUP RESULTS
The AFFIN Group reported a record net profit before tax of RM637.5 million. AFFIN Bank Berhad remained the largest contributor to the Group’s profit as in previous years posting a profit before tax of RM521.9 million, an improvement of 22.8% over the previous year’s result.
AFFIN Investment Bank Berhad’s pre-tax profit for the year ended 31 December 2010 was RM87.1 million, representing an increase of 34.9% from year 2009.
AFFIN Moneybrokers Sdn Bhd recorded a pre-tax profit of RM1.8 million for the year ended 31 December 2010, a marked improvement as compared to RM0.7 million achieved in 2009.
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AFFIN Islamic Bank signed an agreement with Prudential BSN Takaful Berhad (PruBSN) on 28 June 2010 to enter into a strategic alliance for Bancatakaful. |
AXA AFFIN Life Insurance Berhad recorded a gross premium of RM269.0 million for the year 2010, a 51.4% growth against RM177.7 million recorded previously. The company posted a pre tax profit of RM 1.9 million as compared to RM5.3 million previously. This was due to higher pay-out in claims for the year. Despite its lower profit, the company expects year 2011 to be a better year as several marketing and corporate initiatives were already in place.
AXA AFFIN General Insurance Berhad recorded a pre-tax profit of RM44.3 million as compared to RM29.0 million recorded last year. Acquisition of BH Insurance (M) Bhd has been completed and the merger will enhance the profitability of the company.
Barring any unforeseen circumstances, the Group expects to be able to further improve on its profitability in the current financial year ending December 2011.
At this juncture, I would like to comment in more detail on the performance of each of our operating subsidiaries during the year under review.
AFFIN BANK BERHAD (ABB)
The Bank recorded a consolidated profit before tax and zakat of RM521.9 million for the financial year ended 31 December 2010, representing an increase of 22.8% from last year’s results of RM425.1 million The earnings per share (EPS) for the year was 26.5 sen as compared to 22.1 sen the previous year. During the year, total assets increased to RM42.1 billion from RM35.6 billion at the end of 2009. Of significance, net loans, advances and financing grew by 18.2% to RM26.0 billion from RM22.0 billion registered in 2009.
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| The signing of Memorandum of Understanding between AFFIN Holdings Berhad and The Bank of East Asia, Limited on 26 August 2010 |
During the year, the Bank concentrated on establishing itself as a preferred financial institution. In 2009, the Bank had undertaken various bold initiatives such as rebranding and strengthening of its human capital through the implementation of new and dynamic system and technology to enhance operations and improve on its quality products and services. The initiatives were vigorously and diligently implemented through 2010. Specific campaigns like AFFIN FD2 Plus and OMG (Oh My Goshh!) were launched. Our brand position was further enhanced with exclusive sponsorship of the Malaysia Budget 2011 in two mainstream papers and the SME (small and medium enterprises) webpage, resulting in extra mileage gained in terms of brand awareness and value.
The Bank also undertook to expand, relocate and renovate existing branches as a priority to improve its reach and image in the communities we operate in. Presently, the Bank has 91 branches throughout Malaysia.
AFFIN Islamic Bank, a wholly owned subsidiary of the Bank, opened a new branch in 2010 at MSU (Management and Science University) campus in Shah Alam, Selangor, increasing its branch network to six. Despite being relatively new in the islamic banking industry, the Bank has managed to grow its business and will continue to nurture this business and develop a strong presence in this industry.
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| AFFIN Islamic Bank Berhad and UMP Holdings Sdn Bhd entered into an Islamic Term Financing of RM137.7 million to finance the purchase of property to support the growth of Universiti Malaysia Pahang on 1 March 2010 | AFFIN Investment Bank signed an agreement with MRCB Sentral Properties Sdn Bhd, a wholly-owned subsidiary of Malaysian Resources Corporation Berhad, to act as the Principal Adviser and Lead Arranger in relation to the Guaranteed Commercial Paper/Medium term Note (CP/MTN) programme of up to RM400 million on 28 July 2010. |
Looking ahead, the Bank will aggressively grow its consumer base, retail segment and fee-based income through introduction of new products and campaigns. Identification of appropriate locations for new branches is under way too as this will further strengthen the Bank’s position in the market and increase its presence locally.
The prospect for the Bank is very encouraging as it also looked beyond the Malaysian shores towards Indonesia, with its proposed acquisition of PT Bank Ina Perdana which is expected to be completed in the second half of 2011.
AFFIN INVESTMENT BANK BERHAD (AIBB)
While the world economy experienced the worst effects of the global financial crisis in the first half of 2009, most economies experienced a recovery in the second half of the year. As a highly open economy, the Malaysian economy was similarly significantly affected by the financial meltdown. The Government’s timely and swift domestic policy response coupled with its strong economic fundamentals, brought about an economic recovery in the second half of the year. Following a contraction in 2009 of 1.7%, the Malaysian economy recovered strongly to record a 7.2% growth in 2010. The recovery has been broad-based, underpinned by healthy exports and high domestic demand, more so in the private consumption and investment.
Against this backdrop, AIBB registered a profit before tax of RM87.1 million, representing an increase of 34.9% from financial year ended 2009. Net income was higher at RM181.0 million with strong contributions from brokerage fee, investment and interest income. EPS improved sharply to 33.2 sen with a healthy return on equity of 14.8%, while net impaired loans ratio was well below industry average at 1.4% and loan loss coverage at a reputable 103.2%.
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| AFFIN Bank signed on as an Official Sponsor for Defence Asia (DSA) 2010. YB Dato' Seri Dr Ahmad Zahid Hamidi, the Minister of Defense witnessed the presentation of AFFIN Bank's sponsorship cheque of RM50,000 on 8 April 2010. |
Highlights for 2010 include arranging for the inaugural Danajamin Nasional Berhad [Malaysia’s first Financial guarantee insurance for bonds and SUKUK issuances to financially viable Malaysian companies to enable access to the capital market], guaranteed Private Debt Securities issue in June 2010, launching of a new fund - AFFIN Tactical Fund - with an asset size of RM200 million in August 2010, launching of the Electronic Cross Border Trading platform thereby enabling access to trade and arranging for the first business cooperation between The Bank of East Asia, Limited (‘BEA’) and AFFIN Group since the signing of Memorandum of Understanding with BEA’s participation in a Syndicated Bank Guarantee facility to guarantee a CP/MTN Programme arranged by the Bank in November 2010.
AIBB’s subsidiary, AFFIN Fund Management Berhad (AFMB) has implemented various initiatives in 2010 to strengthen the company’s operational efficiency and its delivery system. The company’s continued investment in technology and re-engineering of business processes have enabled AFMB to manage its growth efficiently and to deliver its products and services in a cost-effective manner.
Moving into 2011, we expect emerging headwinds such as further normalization in monetary policy, crowding-out effects and inflation threats to slow down business growth. Nonetheless, the implementation of the Government’s Economic Transformation Programme (GTP) and the anticipated roll out of the identified Entry Point Projects in 2010, are expected to bring positive drivers in the market such as rising capital market activities (Bond Issues, Mergers & Acquisitions, spinoffs and Initial Public Offerings), a buoyant stock market and industry consolidation / joint ventures which would spur business activities for the Bank.
AFFIN MONEYBROKERS SDN BHD (AMBSB)
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| Launching ceremony of Integrated Community Centre at Bukit Kernau, Mukim Pulau Manis, Pekan, Pahang on 16 July 2010. The Chairman of AFFIN Islamic Bank, Gen (R) tan Sri Dato' Seri Ismail Hj. Omar handed over 50 houses worth RM1.7 million to the Prime Minister of Malaysia, Yang Amat Berhormat Dato' Seri Mohd Najib Tun Abd Razak for the purpose of eradicating hard core poor in Pekan, Pahang. |
The Company’s net turnover was RM9.4 million for the year ended 31 December 2010, an increase of 30.6%, compared with RM7.2 million for the previous year. Net assets as at 31 December 2010 were RM8.1 million, an increase of 8.0%, compared with RM7.5 million for the previous year. The Company recorded a higher profit after tax of RM1.3 million compared with RM0.5 million the previous year. The increase in net turnover was due to the renewed confidence in the financial market.
The revenue contribution was better from the Foreign Exchange, Forwards/Derivatives, Money Market, Fixed Income and Islamic Sections compared to the previous year. However, the highest brokerage income contributed for the year was from Forwards/ACU/Derivatives/Option Section of RM3.1 million representing 34.0% of total net brokerage income.
Domestic demand is expected to strengthen with better employment conditions and uninterrupted credit flows and private investment is expected to increase in 2011. Despite the positive future outlook, we anticipate the globalization and liberalization of financial markets, as outlined in the Financial Sectors Master Plan, will see new entrants in the financial sector. The entry of foreign money broking companies competing in the domestic market will be a threat and for the company to retain its competitive edge, and remain a lead market player, we will continue to implement strategic plans which include:-
a) enhancing the synergy at group level;
b) introduction of new and quality products;
c) increasing efficiency through staff employment and skilled training;
d) introducing new and improve marketing plans;
e) introducing e-broking facilities;
f) retaining and retraining human capital by offering a progressive remuneration package;
g) strategic link with international money broking companies for the transfer of technology and professional expertise.
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| AFFIN Investment Bank's Chairman, YBhg Gen (R) Tan Sri Yaacob bin Mohd Zain presenting a replica van key to Yang Teramat Mulia Tengku Temenggong Negeri Kedah Darul Aman as its zakat contribution to Rumah Pertubuhan Pembangunan Anak-anak Yatim Daerah Kulim, Kedah on 7 January 2010 |
AXA AFFIN LIFE INSURANCE BERHAD (AALIB)
2010 was indeed an eventful year for AXA AFFIN Life Insurance Berhad (AALIB) as the company finished the year on a strong note. During the year, AALIB took several initiatives to cushion itself from the effect of challenging economic conditions. AALIB recorded a gross premium of RM269.0 million, approximately 51.4% growth against RM177.7 million recorded last year. Gross new premium increased 49.0% to RM232.7 million in 2010. Underpinned by a series of expansion, AALIB posted a profit before tax of RM1.9 million as compared to RM5.3 million the year before.
The Agency division recorded a positive 184.0% growth in the agency force and an outstanding 149.0% growth in production. Bancassurance is another distribution platform that posted strong results with an impressive 83% growth to record RM56.3 million in weighted new business premium. Within the Bancassurance division, the Direct Marketing/Telemarketing (DM/TM) achieved a 60.0% growth and recorded RM10 million in production.
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| AFFIN Bank contributed its annual "Bungkusan Hari Raya" to "tabung Kebajikan Angkatan Tentera" on 16 August 2010 at Ministry of Defence. |
A series of marketing and corporate initiatives capped an exciting year for AALIB. A credential campaign was launched in January 2010 where AALIB redefines its identity and commitment to redefine the standards of the industry by breaking traditional codes and barriers. Leveraging on AXA Group strength as a global financial protection leader and AFFIN Holding’s local knowledge and diversified network, AALIB is focused on helping individuals manage risk and achieve their financial goals.
AALIB launched some stellar products like MaxxSaver and AssureCare, in January 2010 and July 2010 respectively which helped the distribution channels in meeting customers’ need and generated overall growth and productivity.
July 2010 saw the launch of AXA AFFIN MY Child Safety Programme in collaboration with Malaysia Crime Prevention Foundation (MCPF). The event was graced by the Prime Minister’s wife, YABhg Datin Paduka Seri Rosmah Mansor. The Programme, which is slated to continue through to 2012, is part of the ‘Community’ pillar in AALIB’s CSR plan and it represents an expansion to the existing ‘AXA Hearts In Action’. The Programme is motivated by AALIB’s aspiration to make the community safer for our future leaders. It is a unique programme that focuses on on-ground education and provide specific self defence techniques to primary school children.
AXA AFFIN GENERAL INSURANCE BERHAD (AAGIB)
AAGIB’s performance was credible during the year under review. AAGIB ended year 2010 with gross written premium of RM592.6 million, representing a 67.8% growth over 2009 and a profit before tax of RM44.3 million compared with RM29.0 million previous year. AAGIB’s proposed acquisition of the business of BH Insurance (M) Bhd has now been finalised and fully functional and operational. This merger brings the strength of previous BH Insurance (M) Bhd’s commercial business, its branch network and the quality of its staff to complement AAGIB’s operations. Post merger, we are now among the top 6-7 companies in the industry operating in the country. Our priority now is to propel AAGIB to a Billion-Ringgit entity in the very near future.
The focus for 2011 will be to improve profitability, service and organic growth. Strategies and action plans to achieve our targets are being put in place. Considering that we now have the resources, we are optimistic and confident of realizing our goals for 2011 and our vision to be the preferred insurer in the insurance industry. We are currently working on a few key projects, namely Health, Bancassurance and a Front End System which will support our objectives for 2011. As in the past, we will continue to invest in human capital and technology. With the merger now completed, we are confident that in 2011 we will reap our reward as we begin the new expansionary phase.
AFFIN GROUP CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES
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| The Chairman and CEO/MD of AFFIN Bank Berhad presenting Duit Raya during Majlis Berbuka Puasa with orphans and new converts on 20 August 2010. |
As AFFIN Group forges ahead with the next stage of growth, AFFIN Group believes in maintaining good relations with the community and strives to create an image of a good corporate citizen that cares for the community. Over the years, the Group has undertaken numerous corporate initiatives that take into consideration the interest of the community, employees, environment, shareholders and other stakeholders.
Given that AFFIN’s major shareholder is Lembaga Tabung Angkatan Tentera (LTAT) and in line with the aspiration of the Group to improve the well-being of retired and serving Armed Forces personnel and their families, the Group has pledged an annual contribution of over RM2.0 million to Yayasan Warisan Perajurit. In line with the pledge, the Group contributed RM3.0 million to the Yayasan in year 2010. The objective of the Yayasan is to promote and assist in the education and welfare of the members and children of the serving and retired Armed Forces personnel who are in need.
In August 2010, AFFIN Bank contributed ‘Bungkusan Hari Raya’ to Armed Forces personnel in conjunction with the Hari Raya celebration. AFFIN Bank also donated and participated in the ‘Rayuan Hari Pahlawan’ campaign from July 2010 to September 2010.
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| The launching of AXA AFFIN MY Child Safety Programme in SK Seri Hartamas on 28 July 2010 by YBhg Datin Paduka Seri Rosmah Mansor, Yang DiPertua of BAKTI. |
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| AXA AFFIN General Insurance Berhad collaborated with Damai Disabled Association of Selangor and Federal Territories to organise a Sports Day at Damai Training centre, Petaling jaya on 17 July 2010. |
Other CSR activities of AFFIN Bank for year 2010 were :-
a) Blood donation by staff on 1 April 2010;
b) Donation drive for flood victims in Pakistan in August 2010;
c) Breaking fast with orphans on 20 August 2010;
d) Donated RM20,000 to the Selangor & Federal Territory Association of the Mentally Handicapped in November 2010.
In 2010, AFFIN Islamic Bank donated 50 houses worth RM1.7 million as its zakat contribution to hardcore poor in Pekan, Pahang. The houses, with basic household furniture were handed-over to the residents by the Prime Minister, YAB Dato’ Seri Mohd Najib Tun Razak on 16 July 2010. AFFIN Islamic Bank also donated RM50,000 to International Islamic University Endowment Fund in December 2010. AFFIN Investment Bank embarked on a financial literacy programme named “Teenz.fm” for secondary students in Forms 1 & 2 to equip them with the basics of financial education, knowledge and skills and confidence they need to manage their finances. The programme was moderated by a CFP qualified instructor and participated by about 200 school children from about 20 schools in Selangor.
ACKNOWLEDGEMENT
On behalf of the Board, I would like to take this opportunity to thank everyone involved with the AFFIN Group, my colleagues on the Board and the Boards of subsidiary and associate companies and the management team and staff of all companies under the Group. I would also like to thank our shareholders, Lembaga Tabung Angkatan Tentera (LTAT), Boustead Holdings Bhd, The Bank of East Asia, Limited and our customers for their trust, confidence and continuous support. Our progress over the years would not have been possible without the trust, commitment, dedication and integrity of our people. They have certainly contributed much to the positive results I have just had the pleasure of highlighting to all shareholders and other stakeholders of the AFFIN Group. Last but not least, my sincere thanks and appreciation to Bank Negara Malaysia and Securities Commission for their support and guidance.
Gen. (R) Tan Sri Dato’ Seri Mohd Zahidi bin Hj. Zainuddin
Chairman, AFFIN Holdings Berhad