BIMB Integrated Annual Report 2017

MANAGEMENT DISCUSSION & ANALYSIS BANK ISLAM MALAYSIA BERHAD’S PERFORMANCE REVIEW & OUTLOOK Sadaqa House. To date, Sadaqa House has identified three key projects, namely, financial assistance to selected Institut Jantung Negara (“IJN”) patients undergoing heart surgery; a partnership with Universiti Teknologi Malaysia (“UTM”) to install solar systems for the ‘orang asal’ community; and construction of fish drying cabins for the fishermen community in collaboration with Technology Park Malaysia (“TPM”). Going forward, Bank Islam is also looking at entering another collaboration with a FinTech company to enhance its capability to serve SMEs. Towards this end, during the year, the Bank decided to transform 10 of its Automobile Financing Centres into new SME centres to serve existing and potential entrepreneurs. As at 31 December 2017, the Bank is actively financing 1,264 SME customers. FINANCIAL PERFORMANCE Bank Islam reported a PBZT of RM767.1 million for FY2017, an increase of RM46.7 million or 6.48% over the PBZT of the previous financial year of RM720.4 million. This was primarily driven by the strong financing growth of 7.46%which was almost double the industry’s average financing growth of 4.26% in 2017. Financing grew RM2.9 billion to reach RM42.1 billion as at 31 December 2017 with the asset quality remaining strong and resilient, despite the competitive banking landscape. The strong asset quality was reflected in the improvement of the gross impaired financing ratio of 0.93% as at 31 December 2017, lower than the 0.98% registered as at 31 December 2016. The Bank’s financing loss coverage ratio stood at 160%, significantly higher than the industry average of 82.90%. On the funding side, the Bank’s customer deposits and investment accounts stood at RM46.2 billion and RM4.3 billion as at 31 December 2017 with a year-on-year increase of RM0.3 billion and RM0.5 billion respectively. The Current and Savings (“CASA”) and IA without maturity, low cost deposits/IA ratio stood at 34.62%, higher than the 31.46% registered as at 31 December 2016. The Bank’s funding position also remained healthy with the financing to available funds ratio of 81.41% compared to 77.31% in the previous year. The Bank’s pre-tax ROE was 16.42% and after-tax ROE was 12.12%. MOVING FORWARD For 2018, the Bank’s corporate direction is premised on the over-arching themes of VBI. VBI is at the heart of the Bank’s business model, to deliver a sustainable performance with a strategic focus to support economic, social and environmental development. This will involve a continued focus on providing access to financing, in supporting viable infrastructure projects that promote the economic growth by creating new business and job opportunities to the country. Shariah rules and principles remain fundamental to the Bank’s direction along with the new Triple Bottom Line approach embedded in all operating principles. This forms part of our sustainability agenda. The Bank will focus on optimising its risks and returns, resource and productivity as well as its franchise value, which is underpinned by a disciplined balance sheet management. This is to sustain net income margin, preserve asset quality as well as to minimise financial impact arising from the implementation of MFSR 9 in 2018 and the upcoming NSFR requirements. The Bank will stay on course with its strategy to collaborate with FinTech companies in enhancing its reach and spurring innovation. Digital banking agenda has been formulated to enhance to the Bank’s customer experience and optimise its distribution channel to be more cost effective. It will also continue to invest in its people, to build a strong compliance and risk culture as well as enhance its capability and capacity as one of the key players in the Islamic Finance world. 2018 Strategic Priorities • New business model based on VBI – grow responsibly and reposition balance sheet with greater exposure to real economy • Realignment of product offerings to reflect a more consumer centric purpose • Credit scoring model that discourages over leveraging • Responsible employer that optimises its talent pool and provides competitive remuneration. • Provide opportunity for underprivileged and handicapped to be part of the Bank Islam team • Promote thought leadership and position as a learning organisation • Seek sustainable suppliers that are aligned with its new DNA as a VBI 58 BIMB HOLDINGS BERHAD Integrated Annual Report 2017