ANNUAL REPORT A NEW DAWN A NEW DAWN Having weathered the storms of adversity and having garnered a wealth of experience and expertise from over a century of banking, the RHB Banking Group is well primed to embrace a new era of banking and expand its regional footprint. Leveraging on the strength of a revitalised organisation and our IGNITE 2017 blueprint, we are strongly poised to grow by leaps and bounds in CR SSING B new markets within ASEAN+ and beyond. RIES... VIETNAM LAO THAILAND BRUNEI BRUNEI CR SSING B UNDARIES... VIETNAM INDONESIA CHINA Lao CAMBODIA HONG KONG THAILAND SINGAPORE MALAYSIA Brunei CROSSING BOUNDARIES With a strong focus on delivering enhanced customer service experiences, the Group is now poised on the threshold of a new dawn. As we propel forward towards achieving our aspiration to be the region’s Leading Multinational Financial Services Group, we are confident of making strong advances towards achieving our 2020 ambitions of attaining strong market leadership in the local arena while gaining recognition as a regional powerhouse. RHB banKING GROUP MALAYSIA STRENGTHENING OUR PRESENCE WITHIN ASEAN+ AND BEYOND RHB banKING GROUP SINGAPORE WELL PRIMED TO DELIVER GROWTH RHB banKING GROUP THAILAND ESTABLISHING STABILITY AMIDST CHANGE RHB banKING GROUP INDONESIA BUILDING ON TODAY FOR TOMORROW RHB banKING GROUP HONG KONG OPENING UP NEW HORIZONS CAMBODIA BRUNEI VIETNAM EMBRACING A NEW DAWN LAO MALAYSIA Having established deep roots in Malaysia and having ventured across the four corners of ASEAN and beyond, RHB is now poised for our next phase of growth. We will continue to make strong headway in our aspiration to build a regional presence. As RHB embraces a new dawn that brings different opportunities and CHINA challenges, we will continue to build our current momentum. 14 Annual Report 2013 RHB Capital Berhad Inside this Report 15 RHB’s Aspirations 42 Group Committees 108 Awards and Recognition 16 Group Financial Highlights 43 Corporate Governance Statement 111 A Journey of a 100 Years 17 Simplified Group Statements of Financial 57 Statement on Risk Management & 122 Analysis of the Financial Performance Position Internal Control 129 Analysis of Shareholdings 18 Five-Year Group Financial Summary 61 Group Board Audit Committee Report 130 List of Thirty (30) Largest Shareholders 19 Summary of Five-Year Group Financial 64 Risk Management Statement 132 List of Top Ten (10) Properties Highlights 69 Compliance Statement 133 Group Branch Network 20 Segmental Analysis 73 Review of the Malaysian Economy 137 Notice of Nineteenth Annual General 21 Group Quarterly Performance 77 Continuing Our Commitment to Human Meeting 22 Corporate Information Capital Development 140 Statement Accompanying Notice of 24 RHB Capital Berhad Group Structure 81 Our Transformation IGNITE 2017 Nineteenth Annual General Meeting 26 Board of Directors 86 Group Senior Management 28 Profiles of the Board of Directors 88 Overview: Business and Operations • Proxy Form 35 Chairman’s Statement 93 Group Retail and Commercial Banking 40 Chairmen of the Key Operating Companies 103 Corporate and Investment Banking 41 Chairmen of Group Committees 106 Group International Business RHB Capital Berhad Annual Report 2013 15 RHB’s Aspirations By 2020 To be a Leading Multinational Financial Services Group TOP 3 IN STRONG REGIONAL NEXT PrOMInenT MalaYSIA/TOP MARKET POwerhOUSE GeneraTION EMPLOYER OF 8 IN ASEAN leaderSHIP IN ASEAN+ CUSTOmer CHOICE by size and IN MalaYSIA with 40% revenue CENTRIC banK within the region performance across targeted contribution from delivering innovative products and international and personalised segments operations customer offerings 16 Annual Report 2013 RHB Capital Berhad Group Financial Highlights 2013 2012* PROFITABILITY (RM’ million) Revenue 5,951 4,829 Operating profit before allowances 2,899 2,536 Profit before taxation 2,471 2,385 Net profit attributable to equity holders of the Company 1,831 1,785 FINANCIAL POSITION (RM’ million) Total assets 191,090 189,112 Financial assets and investments portfolio 43,746 36,849 Gross loans, advances and financing 121,753 111,474 Total liabilities 174,147 173,772 Deposits from customers 137,741 138,228 Shareholders' equity 16,739 15,117 Commitments and contingencies 100,232 83,160 FINANCIAL RATIOS (%) Net return on average shareholders’ equity 11.5 13.4 Net return on average total assets 1.0 1.0 Gross impaired loans ratio 2.8 3.0 Gross loans to deposits ratio 88.4 80.6 * The comparative period has been restated to reflect the adoption of MFRS 3. RHB Capital Berhad Annual Report 2013 17 Simplified Group Statements of Financial Position ASSETS LIABILITIES & EQUITY 2013 2013 1% Clients’ and Brokers’ Balances 1% Bills and Acceptances Payable 2% Deposits and Placements with Banks 2% Borrowings and Senior Debt and Other Financial Institutions Securities 2% Statutory Deposits 3% Subordinated Obligations and Hybrid Tier-1 Capital Securities 4% Other Assets 4% Other Liabilities (Including Goodwill and Intangible Assets) 9% Shareholders’ Equity 5% Cash and Short Term Funds 9% Deposits and Placements of Banks 23% Financial Assets and Investments and Other Financial Institutions Portfolio 72% Deposits from Customers 63% Loans, Advances and Financing ASSETS LIABILITIES & EQUITY 2012 2012 2% Clients’ and Brokers’ Balances 2% Bills and Acceptances Payable 2% Deposits and Placements with Banks 3% Borrowings and Senior Debt and Other Financial Institutions Securities 2% Statutory Deposits 3% Subordinated Obligations and Hybrid Tier-1 Capital Securities 4% Other Assets 4% Other Liabilities (Including Goodwill and Intangible Assets) 7% Deposits and Placements of Banks 13% Cash and Short Term Funds and Other Financial Institutions 8% Shareholders’ Equity 19% Financial Assets and Investments Portfolio 73% Deposits from Customers 58% Loans, Advances and Financing 18 Annual Report 2013 RHB Capital Berhad Five-Year Group Financial Summary 2013 2012* 2011** 2010** 2009 RESULTS (RM’ million) Profit before taxation 2,471 2,385 2,250 1,899 1,538 Net profit attributable to equity holders of the Company 1,831 1,785 1,688 1,420 1,201 FINANCIAL POSITION (RM’ million) Total assets 191,090 189,112 152,304 129,112 115,085 Gross loans, advances and financing 121,753 111,474 97,438 83,886 69,635 Total liabilities 174,147 173,772 140,676 119,148 106,345 Deposits from customers 137,741 138,228 115,861 94,434 84,841 Paid-up share capital 2,547 2,494 2,205 2,153 2,153 Shareholders’ equity 16,739 15,117 11,615 9,953 8,708 Commitments and contingencies 100,232 83,160 74,161 70,522 67,234 SHARE INFORMATION Net dividend per share - (sen) 16.3 22.1 20.5 19.8 16.9 Net assets per share - (RM) 6.6 6.1 5.3 4.6 4.0 Net tangible assets per share - (RM) 4.5 4.0 3.5 2.8 2.3 Basic earnings per share - (sen) 72.9 79.0 77.5 66.0 55.8 Share price - (RM) 7.90 7.69 7.48 8.72 5.30 Market capitalisation (RM’ million) 20,121 19,180 16,492 18,778 11,413 FINANCIAL RATIOS (%) Profitability Net return on average equity 11.5 13.4 15.7 15.2 14.5 Net return on average assets 1.0 1.0 1.2 1.2 1.1 Cost to income ratio 51.3 47.5 43.5 40.5 42.7 Non-interest income ratio 35.0 28.6 24.7 25.8 25.3 Asset Quality Gross loans to deposits ratio 88.4 80.6 84.1 88.8 82.1 Gross impaired loans ratio 2.8 3.0 3.6 4.6 6.7# Ordinary Shares Net dividend yield 2.1 2.9 2.7 2.3 3.2 Dividend payout ratio 22.6 30.0 30.0 30.0 30.2 * Restated to reflect the adoption of MFRS 3. ** Restated as a result of retrospective application of MFRS 139 and FRSIC 18. For the financial year 2010, only relevant balance sheet items have been restated to position as at 1 January 2011. # Adjusted for effect of adoption of MFRS 139. RHB Capital Berhad Annual Report 2013 19 Summary of Five-Year Group Financial Highlights TOTAL ASSETS PROFIT BEFORE TAXATION GROSS LOANS, ADVANCES & FINANCING (RM’ million) (RM’ million) (RM’ million) 191,090 2,471 121,753 2013 2013 2013 189,112 2,385 111,474 2012# 2012 2012 152,304 2,250 97,438 2011* 2011* 2011* 129,112 1,899 83,886 2010* 2010* 2010* 115,085 1,538 69,635 2009 2009 2009 DEPOSITS FROM CUSTOMERS SHAREHOLDERS’ EQUITY NET DIVIDENDS (RM’ million) (RM’ million) (RM’ million) 137,741 16,739 414 2013 2013 2013 138,228 15,117 535 2012# 2012 2012 115,861 11,615 450 2011 2011* 2011 94,434 9,953 426 2010 2010* 2010 84,841 8,708 363 2009 2009 2009 * Restated as a result of retrospective application of MFRS 139 and FRSIC 18. # Restated to reflect the adoption of MFRS 3. 20 Annual Report 2013 RHB Capital Berhad Segmental Analysis For the Financial Year Ended 31 December 2013 REVENUE ASSETS EMPLOYED BY BUSIneSS SeGmenT BY BUSIneSS SeGmenT 5% Global Financial Banking 7% Business Banking 7% Islamic Banking Business 8% Global Financial Banking 8% Group Treasury 10% Islamic Banking Business 12% Business Banking 22% Corporate and Investment Banking 30% Corporate and Investment Banking 26% Group Treasury 38% Retail Banking 27% Retail Banking OPERATING REVENUE ASSETS EMPLOYED BY GeOGraPHICAL LOCATION BY GeOGraPHICAL LOCATION 11% Overseas* 10% Overseas* 89% Malaysia 90% Malaysia * Inclusive of overseas RHB Investment banking operations. RHB Capital Berhad Annual Report 2013 21 Group Quarterly Performance 2013 First Second Third Fourth Year Quarter Quarter Quarter Quarter 2013 FINANCIAL PERFORMANCE (RM’ million) Revenue 1,362 1,432 1,540 1,617 5,951 Net interest income 779 803 828 864 3,274 Operating profit before allowances 644 685 772 798 2,899 Profit before taxation 494 554 740 683 2,471 Profit attributable to equity holders of the Company 357 410 559 505 1,831 Earnings per share