Annual Report 2016 – Corporate & Financial Statements
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INTRODUCTION • About Us • Vision & Mission Statement, Core Brand Values • Employee Value Proposition • Bank Islam Key Highlights • 2016 Milestones COVER RATIONALE • Award-Winning Journey 2009 - 2016 This year’s cover design concept reflects the strategic balance achieved by Bank Islam through focus and commitment to our core values. These drive our ability to grow steadfastly CORPORATE HIGHLIGHTS 18 even through challenging times. By PRESERVING VALUES, Bank Islam 20 Financial Highlights ensures core strengths are sustained 22 Financing by Contract and a balance achieved in delivering 23 Financing by Segment of Business Units innovation and excellence while resting on prudence and responsibility. 24 Chairman’s Statement 30 Managing Director’s Operational Review 44 Economic Review for 2016 and Prospects for 2017 46 Media Highlights CONTENTS CORPORATE FRAMEWORK 50 ACCOUNTABILITY 106 52 Corporate Information 108 Statement of Corporate Governance 54 Shareholding Structure 134 Ethics, Integrity & Trust 55 Shareholder’s Information 56 Subsidiaries’ Information 58 Organisation Chart FINANCIAL STATEMENTS 136 60 Board of Directors 62 Profile of Board of Directors 138 Financial Statements 70 Profile of Shariah Supervisory Council 255 Pillar 3 Disclosure 77 Senior Management 80 Profile of Senior Management 85 Profile of Regional Managers DIRECTORY 311 87 Profile of Heads of Subsidiaries 311 Directory & Branch Network INITIATIVES 88 90 Calendar of Significant Events 98 Taking Corporate Responsibility to New Heights 104 Product Excellence, Service Enhancement 2016 ABOUT US BANK ISLAM IS THE FIRST SHARIAH-BASED BANKING INSTITUTION IN MALAYSIA AND SOUTH EAST ASIA; AND HAS BEEN PLAYING THE LEADING ROLE IN THE DEVELOPMENT OF THE NATION’S ISLAMIC BANKING INDUSTRY. In fact, it has provided technical assistance in the setting up of A pioneer in the industry, Bank Islam believes in the importance several Islamic institutions in the Asian region such as Indonesia, of innovation and has produced some of the most innovative Thailand and Sri Lanka. Incorporated in 1983, it was originally banking solutions for the market. A strong advocate of ethical established with the sole purpose of assisting with the financial and responsible financing, Bank Islam’s pioneering status has needs of the Muslim population of Malaysia. Since then, Bank also given it an advantage by having a strong brand name and Islam has extended its services to the wider, non-Muslim, franchise that significantly differentiates it from its competitors population fulfilling its “Banking-for-All” principle. – creating an appealing image of being the purest Islamic bank which has attracted and continue to attract a growing, Today, with over 70 innovative and sophisticated Islamic banking loyal customer base. In addition, the Bank has always been products and services, Bank Islam offers a comprehensive range committed to corporate responsibility, not just by giving back of Shariah-compliant banking and financial solutions to its more to the community in which it operates but the Islamic finance than five million customers. Primarily a retail bank with consumer industry as a whole through knowledge sharing and becoming banking constituting more than 70% of total financing, Bank the source of reference. In recent years, the Bank had not Islam’s list of products ranges from the traditional financing, only exhibited significant improvements in terms of financial savings and investment solutions exclusively for individual performance but applied robust risk management as well to customers, to banking and financial solutions designed to ensure sustainability of growth. fulfil the fast-changing financial needs of customers from all categories including those related to micro financing, wealth Bank Islam’s vision to become ‘A Global Leader in Islamic Banking’ management, capital market, treasury and structured products. illustrates its commitment to the expansion of Malaysia’s brand The variety of financial services offered by the Bank has come a of Islamic finance into global markets. By placing importance long way since its early days when it acted as the lead arranger to the service excellence culture, Bank Islam continues to offer for the world’s first Sukuk issuance of RM125 million in 1990 by only the best and cater to the differing needs of the customers Shell MDS Sdn Bhd. as it strives to uphold its status as the symbol of Islamic banking in Malaysia. In serving its ever expanding customer base, Bank Islam currently has the widest dedicated Islamic banking network in Malaysia with 145 branches and more than 1,000 self-service terminals nationwide. MISSION VISION STATEMENT TO BE A GLOBAL LEADER • To continually • To deliver develop and innovate comprehensive IN ISLAMIC BANKING universally accepted financial solutions financial solutions of global standards “Global Leader” is defined in line with Shariah using state-of-the-art as being the ultimate guidance principles technology • To provide a reasonable • To be a responsible and source of reference and sustainable return and prudent corporate for innovative Shariah-based to shareholders citizen products and services • To provide a conducive working environment and to become an Employer of Choice for top talents in the market CARING A LEADER Approachable and Our Islamic products Supportive Partner. are the Benchmark. We help fulfil every Reputed as the pioneer customer’s financial in Islamic banking, needs. we helped build the Islamic banking industry. TRUSTWORTHY Dependable and Reliable. DYNAMIC CORE BRAND 100% Shariah-compliant products, services and Progressive and VALUES corporate values. Innovative. We are constantly moving ahead as we offer new and technologically advanced products PROFESSIONAL and services. Fast, Efficient and Responsive Service. We are knowledgeable and equipped to handle global business challenges. WORKING WITH THOUGHT LEADERS OF ISLAMIC FINANCE Working in Bank Islam means working with the best minds in the industry. We are the pioneer and acknowledged leader of Islamic finance EMPLOYEE VALUE which continue to meet the needs for Shariah-compliant PROPOSITION financial solutions. It provides great opportunities What it means to be here... for idea sharing and knowledge development. LIVING THE UNIVERSALLY MAXIMISING BEYOND WORK ACCEPTED POTENTIAL AND LIFE GOOD VALUES We bring out the best in our We believe in a balanced At Bank Islam, we believe people through a lifelong approach to work and life, in living the universally and multi-faceted learning allowing our employees accepted good values. You approach. We provide a to grow and benefit both will discover a workplace that platform which allows professionally and spiritually. thrives on professionalism, employees to explore, As we grow our businesses, integrity, mutual respect and develop and fulfil their we believe in giving back care for each other. We also ambitions, both personally to society through various believe in being inclusive in and professionally. We go initiatives as this would propagating and practicing beyond the norm to ensure enable the community to these good values. the holistic development of develop further. We also our people. recognise the importance of contributing back to the ecosystem we operate in. Assets Growth RM5.9billion +11.9% BANK ISLAM Total Number of Branches MARKET POSITIONING IN 2016 (as at December 2016) Industry Total Assets RM’Bil 55.7 145 49.9 49.8 48.1 49.8 45.8 42.8 581.6 5-year CAGR 558.4 563.2 Self-Service Terminals 535.4 537.1 477.1 % 426.6 11.6 12.1% 1,124 2,036.3 2,219.4 2,354.3 2,362.3 2,398.8 2,384.7 2,443.6 % 7.0 Ar-Rahnu Outlets Dec ’13 Dec ‘14 Dec ‘15 Mar ‘16 Jun ‘16 Sept ‘16 Dec ’16 Total Banking Industry Islamic Banking Industry ■ Bank Islam 9 Industry Gross Financing RM’Bil 39.9 37.8 37.0 Bureau de Change 35.0 35.9 5-year CAGR 30.1 24.2 435.5 409.1 415.4 390.9 398.1 % 336.1 22.3 284 8 16.8% 1,225.7 1,339.7 1,445.1 1,449.5 1,465.2 1,483.8 1,521.5 8.7% Total Number of Employees Dec ’13 Dec ‘14 Dec ‘15 Mar ‘16 Jun ‘16 Sept ‘16 Dec ’16 Total Banking Industry Islamic Banking Industry ■ Bank Islam 4,559 Profit before Zakat & Tax Financing RM720.4million RM39.2billion +5.1% +14.3% KEY HIGHLIGHTS Gross Impaired Capital Adequacy Ratio Financing to Financing Ratio of Deposit Ratio 0.98% +15.52% 78.5% compared to 1.09% in 2015 Industry 89.8% Current and Savings Pre-Tax Return on Equity (“CASA”) Ratio % Financing Loss 30.8% 17.1 Coverage Ratio Industry 26.5% % Pre-Tax Return on Assets 175.4 2015: 174.6% Customer Deposits 1.4% RM45.9billion from 2015 +RM2.4 billion Net Fund-Based Income Non-Fund-Based Income % % Investment Accounts +5.1 +17.2 in line with growth in net supported by growth in financing investment income and RM3.8billion fee-based income from 2015 +RM3.1 billion 2016 MILESTONES Critics’ Choice BEST ISLAMIC RETAIL BANK ISLAM VOTED TOP 3 MOST UPCOMING PERSONALITY BANKING INNOVATION MALAYSIA BERHAD POPULAR GRADUATE IN ISLAMIC FINANCE AWARD 2016 REAFFIRMED EMPLOYER (LEADERSHIP) AWARD 2016 by RAM Rating with its AA3/ (Cambridge IF Analytica – UK) in the Banking and Financial by Global Islamic Finance Awards Stable/P1 financial institution by Islamic Retail Banking Services Sector 2016 ratings Awards BEST CSR INITIATIVE BEST WHOLESALE CATEGORY BANKING AWARD 2016 for its AL-MAAD (P) Yayasan Islam by Global Islamic Finance Perlis Wakaf Fund Project from Cards Awards 2016 & Electronic Payments International (“CEPI”) Asia Awards 2016 ASIA’S BEST EMPLOYER BRAND AWARDS 2016 Dato’ Sri Zukri Samat won the BEST