analyst briefing - dec 2011

STRICTLY PRIVATE & CONFIDENTIAL

ANALYST BRIEFING ANALYST BRIEFING ‐‐ DEC 2011DEC 2011

Hizamuddin JamalluddinStrategic Planning, Managing Director’s Office

BANK ISLAM BANK ISLAM

Malaysia is synonymous with Islamic finance, and Bank Islam, as the pioneer of Islamic banking in the country, has been at the forefront in promoting the industry domestically and abroad. Bank Islam has become the symbol of Islamic banking in Malaysia.

Since its inception in 1983, Bank Islam has continued to contribute to the infrastructural and institutional development of an advanced Islamic financial system and helped build Malaysia’s strong global reputation for the Islamic financial services industry (“IFSI”). We have also produced numerous leaders and specialists in the industry. This has helped developed Bank Islam into a well‐established and universally recognized brand.

As the flag‐bearer of the country’s Islamic financial services industry, our vision is to be “The Global Leader in Islamic Banking”.

Today, Bank Islam boasts a comprehensive list of more than 50 innovative and sophisticated Islamic banking products and services, a vast growing network of 115 branches and more than 900 self‐service terminals nationwide.

The Bank has spiraled its growth, presence and repute upwards since its early years. From the seed capital of RM80 million initially, Bank Islam’s shareholder fund swelled to RM2.5 billion as at Dec 2010, a testament to its successful long‐run growth plan.

CORPORATE INFORMATIONCORPORATE INFORMATION

Shareholders Number of Shares Shareholdings

BIMB Holdings Berhad^ 1,155,400,000 51%

Dubai Financial Group LLC 690,196,000 30.5%

Lembaga Tabung Haji 419,894,000 18.5%

Issued Share Capital 2,265,490,000 100%

Bank Islam was incorporated on 1 March 1983 to become Malaysia’s pioneer bank to operate wholly according to Shariah principles.

Bank Islam was licensed under Islamic Banking Act 1983.

^ Lembaga Tabung Haji (Pilgrimage Funds Board) is deemed as the ultimate controlling shareholder of Bank Islam by virtue of its 51% controlling stake in BIMB Holdings Bhd

OUR SHAREHOLDERSOUR SHAREHOLDERS

Lembaga Tabung Haji (18.5%)Lembaga Tabung Haji (Pilgrim Fund Board) (TH) is a Government Linked Investment Company (GLIC) holds 51.5% and 18.5% of BIMB Holdings Bhd and Bank Islam respectively. It was established mainly to assist Muslims in saving gradually for the purpose of pilgrimage. TH’s vision is to function as the pillar of economy for the community and provide excellent hajj management services. TH is highly determined to make each business and investment venture a roaring success domestically and abroad. It has also made an impressive mark in its asset management as well as in facilitating various Islamic investment instruments such as sukuk/bonds, corporate notes, Government Investment Certificates, Mudharabah Bank Account and Bill of Acceptance.

BIMB Holdings Bhd (51%)BIMB Holdings Bhd (BHB) is an investment holding company which operates along Islamic principles. BHB was incorporated in Malaysia on 20 March 1997 and was listed on the Main Board of Kuala Lumpur Stock Exchange (now Bursa Malaysia) on 16 September in the same year. The core subsidiaries of BHB are pioneers of various Islamic financial services in the region, namely Bank Islam Malaysia Berhad, Syarikat Takaful Malaysia Bhd, BIMB Securities Sdn Bhd, etc.

Dubai Financial Group LLC(30.5%)Dubai Financial Group is primarily an investment company focusing on banking and financial services. Headquartered in Dubai, Dubai Financial Group either directly or through its subsidiary companies, has active investment interests in conventional and Islamic financing in UAE, GCC, Pakistan and Malaysia. Dubai Financial Group is a subsidiary of Dubai Group.

CORPORATE STRUCTURECORPORATE STRUCTURE

BOARD OF DIRECTORSBOARD OF DIRECTORS

Zaiton Mohd HassanChairman, Board Risk Committee

Chairman, Nomination & Assessment Committee Chairman, Remuneration Committee

Mohamed Ridza bin Mohamed AbdullaIndependent Director

Zahari @ Mohd Zin IdrisChairman, Audit & Examination CommitteeChairman, Board Financing Review Committee

…INDEPENDENT DIRECTOR

Dato’ Zamani Abdul GhaniChairman

BOARD OF DIRECTORSBOARD OF DIRECTORS……contcont

Dato’ Sri Zukri SamatManaging Director

Bank Islam Malaysia Bhd

Datuk Ismee IsmailGroup Managing DirectorLembaga Tabung Haji

Johan AbdullahGroup Managing Director

BIMB Holdings Bhd

… NON INDEPENDENT DIRECTOR

Fadhel Abdulbaqi Abu Al Hassan Al ZaedExecutive Chairman, Dubai Holding Group

Marwan Hassan Ali Al KhatibManaging Director,

Dubai Islamic Investment Group

GOVERNANCE STRUCTUREGOVERNANCE STRUCTURE

SHARIAH GOVERNANCE FRAMEWORKSHARIAH GOVERNANCE FRAMEWORK

SHARIAH AS OVERARCHING PRINCIPLE IN BANK ISLAM

SHARIAH SUPERVISORY COUNCIL (SSC)

•Oversight accountability on Shariah matters.

BOARD OFDIRECTORS

(Overall oversight on Shariah governance structure & Shariah

compliance) BOARD RISK COMMITTEE

AUDIT & EXAMINATION

COMMITTEE (AEC)

MANAGEMENT•Ensure execution of business & operations are in accordance with Shariah principles.• Provide necessary resources, infrastructure, enablers to the SSC.

Shariah Risk Management Control Function:Identify, measure, monitor, report & control Shariah non‐compliance risk

Shariah Review Function:Review business operation on regular basis to ensure Shariah compliance.

Shariah Research Function:(under Product Development)Conduct in‐depth Shariah research prior to submission to Shariah Committee.

Shariah Audit Function:Provide independent assessment & objective assurance designed to value add & improve Bank Islam adherence to Shariah

SHARIAH GOVERNANCE FRAMEWORKSHARIAH GOVERNANCE FRAMEWORK……CONTCONT

SHARIAH SUPERVISORY COUNCIL (SSC)

SHARIAH REVIEW COMMITTEE

SHARIAH DIVISIONPRODUCT DEVELOPMENT DEPT

SHARIAH AUDIT DEPT

Notes:•Chairman of Board Risk Committee and Chairman of Audit & Examination Committee are permanent invitees to SSC•Chairman of SSC and a member of SSC are permanent invitees to Board Risk Committee•Head of Shariah is a member of Management Committee, Management Risk Control Committee, Shariah Compliance Risk Control Committee & Product Development Committee.•Shariah Division is also represented in Financing Committees and Operational Risk Control Committee

INTEGRATED OVERSIGHT FRAMEWORK INTEGRATED OVERSIGHT FRAMEWORK

Board of Directors

Set Risk Appetite & Tolerance Level

Board Risk Committee

Management Risk Control Committees

[Present single view of risks and to ensure adequate policies and control]

MRCC ALCO SCRC ORCC RMC

Risk Management Division

Credit Risk Management Market Risk Management Operational Risk Mgmt

Monitoring & Reporting

Business DivisionConsumer BankingCorporate Inv. BankingCommercial BankingTreasury

Operation DivisionBranchesCash ManagementCorp. Communication

Business Support Div.Credit AdministrationTransaction ServicesTrade Operations

Other Div.Information Tech.Product Dev.Human Resourceetc

Risk Policies & Capital Allocations

Feedback from Audit & Examination Committee

ORGANIZATION CHARTORGANIZATION CHART

DIVISION DEPARTMENT

KEY PILLARSKEY PILLARS

1

10

5

8

20

165

4

12

8

105

5

5

WP Labuan

1

LOCATION BY REGION TOTAL

Central 31

Northern 24

Southern 21

Eastern 23

East Malaysia 11

Total 115

BRANCH NETWORK @ APRIL 2010BRANCH NETWORK @ APRIL 2010

SELFSELF‐‐SERVICE TERMINALS NETWORK @ APRIL 2010SERVICE TERMINALS NETWORK @ APRIL 2010

CORPORATE MILESTONESCORPORATE MILESTONES

Launched the first‐of‐its‐kind mobile banking service known as “Transact At Palm or TAP Mobile Banking‐i, account owners can perform banking transactions anywhere and anytime without internet access.Launched Waheed‐i, the first fixed term time deposit product based on the Shariah contract of Wakalah that meets local and international Shariah standard.Smart partnership with Tabung Haji (“TH”) or Pilgrimage Funds of Malaysia to offer a uniteller services which enables performance of TH transactions and Hajj registration at any Bank Islam branches.Sole Islamic bank and the only commercial bank that obtained approval from the Securities Commission to act as Principal Advisors for corporate finance activities (public offerings, merger & take‐over, capital/equity raising exercise, and etc)

Appointed as one of Malaysia’s first Islamic Principal Dealers by the Central Bank of Malaysia.

Launhed Al‐Awfar, a first‐of‐its‐kind joint savings‐i and investment‐i account which offers cash prizes.Launched the first Islamic structured and capital protected funds, An Najah NID‐i, the first Shariah based structured product with health care as the investment theme.

First Islamic cross‐currency swap agreement

First bank in South East Asia to introduce an Islamic Platinum MasterCard.

First bank in the Asia‐Pacific region to introduce EMV compliant credit cards with chip‐based system .

Lead arranger for the first Global Sukuk Inc, the world’s first Islamic global corporate sukuk.

First bank to offer zakat (tithe) payment facilities via ATM and credit card.

First bank in Malaysia to introduce chip‐based ATM card (Smart Card).

Lead Arranger for Shell MDS Sdn Bhd, Malaysia’s first ringgit dominated Islamic corporate bond issuance.

KEY STRENGTHS & COMPETITIVE ADVANTAGESKEY STRENGTHS & COMPETITIVE ADVANTAGES

OPPORTUNITIESOPPORTUNITIES

MARKET SCANMARKET SCAN

KEY DEVELOPMENTS & CHALLENGESKEY DEVELOPMENTS & CHALLENGES

S.W.O.T ANALYSIS S.W.O.T ANALYSIS –– MALAYSIA ECONOMICMALAYSIA ECONOMIC

S.W.O.T ANALYSIS S.W.O.T ANALYSIS –– ISLAMIC BANKING INDUSTRYISLAMIC BANKING INDUSTRY

BUSINESS OVERVIEWBUSINESS OVERVIEW

OUR OFFERINGSOUR OFFERINGS

CONSUMER BANKINGKhairul Kamarudin

CORPORATE BANKINGMashitah Hj. Osman

TREASURYNorashikin Mohd

Kassim

COMMERCIAL BANKINGAbdul Rashid Abd Hamid

MANAGING DIRECTORDato’ Sri Zukri Samat

BUSINESS DRIVERSBUSINESS DRIVERS

IN A NUTSHELLIN A NUTSHELL

KEY BUSINESS DIRECTIONKEY BUSINESS DIRECTION

Business composition – Retail (70%) : Business (30%)

Consumer banking to remain as our key growth driver, focusing on high yielding assets such as personal financing, with a calculated risk ‐ direct deduction from source. House financing (with good profile, ticket size and location) shall continue as our main thrust to build sustainable long term asset portfolio.

Commercial banking to focus on secured financing via business premises financing program. Special attention to be given on driving utilization from existing emerging local corporate with strong credit profile and from existing contract financing clients with good performance record.

Corporate banking will continue to originate and participate in syndication facility as well as focusing on non‐fund based income such as sukuk, corporate finance and advisory deals, etc. The Bank also aims to enhance on wallet seizing and strengthen relationships with top‐tier Malaysian GLCs. Term financing to spearhead future growth.

KEY BUSINESS DIRECTIONKEY BUSINESS DIRECTION……contcont

Cash Management to cross sell its offering to existing reputable clients of Corporate, Commercial and Consumer banking (i.e. tapping our Package Employers)

Treasury to enhance our portfolio return and ensure competitive funding profile of the Bank. The bank seeks to expand client‐related FX business. Treasury shall continue to manage asset‐liability gap, profit rate risk as well as displaced commercial risk within the Bank’s prescribed risk appetite.

Branches will act as spear‐point to garner CASA.

Robust collection strategy is critical to success especially for retail business portfolio.

Key emphasis to drive down cost‐to‐income ratio i.e. via business process re‐engineering

Ar‐Rahnu business as our micro‐financing arm of the Bank.

CONSUMER BANKINGCONSUMER BANKING

LATEST INNOVATIONLATEST INNOVATION

One of the highlights of our innovation trail was the introduction of Transact at Palm (“TAP”) Mobile Banking‐i – the first truly mobile banking without Internet requirement, not only in Malaysia but also in the Southeast Asian region. This innovation will support the nation’s financial inclusion agenda.

RM2.2 billionBaIDS

KL International Airport BhdSole Lead Arranger

RM1.0 billionIstisna’

Projekt Usahasama Transit Aliran RinganJoint Arranger & Shariah Adviser

First Istisna’ First Syndicated Ijarah

RM1.50 billionAl-Ijarah Muntahiyah Bit-Tamlik

Kumpulan Guthrie BerhadStructuring & Shariah Adviser

CORPORATE INVESTMENT BANKINGCORPORATE INVESTMENT BANKING

RM570 millionBaIDS

Encorp Systembilt Sdn BhdCo-Arranger & Shariah Adviser

First Sukuk Ijarah

USD150 millionSukuk Al Ijarah

First Global Sukuk IncSole Lead Arranger

RM2.01 billionBaIDS

Sistem Lingkaran Lebuhraya Kajang Sdn BhdCo-Arranger & Shariah Adviser

USD600 millionSukuk Al Ijarah

Malaysia Global Sukuk IncCo Arranger

RM1.28 billionBaIDS

SAJ Holdings Sdn BhdJoint Lead Arranger/ Lead Manager & Shariah Adviser

RM5.6 billionIstisna’ Notes

SKS Power Sdn BhdJoint Lead Arranger & Shariah Adviser

RM200 millionBBA CPs &RM3.0 billion BBA MTNs

Syarikat Bekalan Air Selangor Sdn BhdJoint Lead Arranger &Shariah Advisor

RM500 millionBank Guaranteed Sukuk Ijarah

Aras Sejagat Sdn BhdJoint Lead Arranger &Joint Lead Manager

Akarmas Sdn BhdConditional Take-Over Offer on PK ResourcesBerhad’s SharesPrincipal Adviser

RM752.2 millionMudharabah Sukuk

Manfaat Tetap Sdn Bhd

Shariah Adviser

RM4.0 billionSukuk Musyarakah

Plus SPV BerhadJoint Book Runner

First Commercial Bank as Advisor

RM1.5 billion Islamic Medium Term Notes Program

Malaysia Debt Ventures Berhad

Joint Lead Manager

RM4.0 billionIjarah Medium Term Notes Programme

Syarikat Prasarana Negara BerhadCo-Manager

RM330.0 millionSyndicated Islamic Financing Facility

Kedah Sato Sdn BhdLead Arranger

RM327.0 millionSyndicated Islamic Financing Facility

Prolintas Expressway Sdn BhdLead Arranger

CORPORATE : NOTABLE TRANSACTIONS FYE DEC 2010CORPORATE : NOTABLE TRANSACTIONS FYE DEC 2010

USD150.0 million*Syndicated Islamic Financing

Facility

Qatar Airways Q.C.S.C.Arranger

Rights IssueRM540 mil Islamic

Convertible Redeemable Non-Cumulative Preference

Shares (Tier 1- Capital)

Acquisition of 20% equity interest in

Amana Bank Limited, Sri Lanka By Bank Islam Malaysia Bhd

RM668 millionSyndicated Islamic Financing Facility

Ranhill Powertron IILead ArrangerLead Manager

RM70 millionBusiness Financing Facility

Blossom Time Sdn Bhd

CORPORATE FINANCECORPORATE FINANCE

COMMERCIAL BANKINGCOMMERCIAL BANKING

TREASURY SERVICESTREASURY SERVICES

SUSTAINABLE GROWTH PLANSUSTAINABLE GROWTH PLAN

RECOVERY MODERECOVERY MODEMoving out of crisis & return to the black

PHASE 1PHASE 12006 2006 ‐‐ 20072007

STABLE MODESTABLE MODEBuilding solid foundation for a sustainable

growth

PHASE 2PHASE 22008 2008 ‐‐ 20092009

HIGH GROWTH MODEHIGH GROWTH MODEOperational excellence &

market leader

PHASE 3PHASE 32010 2010 ‐‐ OnwardsOnwards

CORPORATE PLANCORPORATE PLAN

TURNAROUND PLAN (JUNE 2006 – JUNE 09)

SUSTAINABLE GROWTH PLAN1st pillar : Recapitalization & Balance Sheet Restructuring

2nd pillar : IT Infrastructure Revamp3rd pillar : Transformation Program4th pillar : Cost Rationalization5th pillar : Human Capital Development

1st pillar: Business innovation2nd pillar: Robust risk management3rd pillar: Strengthening enabling

infrastructure4th pillar : Building capability &

capacity5th pillar: Franchise development6th pillar: Inorganic growth and

corporate expansion

KEY RESULT AREAS (JAN 2011 KEY RESULT AREAS (JAN 2011 –– DEC 2013)DEC 2013)

SUSTAINABLE GROWTH PLAN SUSTAINABLE GROWTH PLAN ‐‐ GOALSGOALS

SUSTAINABLE GROWTH PLANSUSTAINABLE GROWTH PLAN

SUSTAINABLE GROWTH PLANSUSTAINABLE GROWTH PLAN……contcont

SUSTAINABLE GROWTH PLANSUSTAINABLE GROWTH PLAN–– ACHIEVEMENTS @ JUNE 2010ACHIEVEMENTS @ JUNE 2010

SUSTAINABLE GROWTH PLANSUSTAINABLE GROWTH PLAN……contcont

CORPORATE AGENDACORPORATE AGENDA

HEADLINES KPIs 2011HEADLINES KPIs 2011

Return on Equity15%

Return on AssetsAbove 1%

Net Financing Asset Growth of 20%

Net Impaired Assets Below 2%

Cost‐to‐Income ratio : Below 55%

RWCR > 15%Core Capital >8%

Dividend Payout50% of PAZT

Non‐ Fund Based Income Above 10%

Financing Assets Composition 70:30

Growth of Secured Assets Portfolio ‐ 30%

KEY DIRECTION KEY DIRECTION –– REVENUE GENERATORREVENUE GENERATOR

““RESHAPING THE FUTURERESHAPING THE FUTURE””

SUSTAINABLE GROWTH PLAN

ASSET

COMPO

SITION

OF 70

:30

(CONSU

MER

: OTH

ERS)

BALA

NCING ASSET

MIXED

BETWEEN

SECU

RED & UNSECU

RED

INTENSIFYING

NON FUND BASED

INCO

ME

PRODUCT

OFFER

ING TO

FOCU

S ON

FLOATING RATE

KEY DIRECTION KEY DIRECTION –– COST CENTRECOST CENTRE


SUSTAINABLE GROWTH PLAN

OPE

RATIONAL

REORG

ANIZATION

BUSINESS PR

OCE

SS RE‐

ENGINEERING

COST M

ANAGEM

ENT

DISCIPLINES

OPE

RATIONAL

EFFICIEN

CY

KEY DIRECTION KEY DIRECTION ––INFRASTRUCTUREINFRASTRUCTURE


RISK MANAGEMENT INFRASTRUCTURE

PROSPEC

TING &

ACC

OUNT PLANNING

(VIA FINANCING ORIGINATION

SYSTEM

)

RISK

ASSESSM

ENT &

CRED

IT M

ANAGEM

ENT

(VIA RISK MANAGEM

ENT SYSTEM

, ASSET

LIABILITY

MANAGEM

ENT SYSTEM

&

INTERN

AL RA

TING SYSTEMS)

COLLEC

TION & REC

OVER

Y (VIA FINANCING COLLEC

TION SYSTEM)

DOCU

MEN

TATION &

DISBU

RSEM

ENT

(VIA STA

NDARD

FINANCING

DOCU

MEN

TATION , CO

LLATERA

L MANAGEM

ENT & LIM

IT M

ONITORING

SYSTEM

)

ACHIEVEMENTSACHIEVEMENTS

INDUSTRY & BRAND RECOGNITIONSINDUSTRY & BRAND RECOGNITIONS

CORPORATE RESPONSIBILITYCORPORATE RESPONSIBILITY

Annual Zakat Presentation

Bank Islam’s PINTAR ProgramZakat for MARA Students

Contribution to Sahabat Korporat TH 30 houses for Needy Families in Kedah ( RM1 mil)

11stst QUARTER 2011QUARTER 2011

LOOKING AHEADLOOKING AHEAD

Striking the right balance between capital, growth, profitability

Positive out look for FYE Dec 2011, as pipeline of high yielding consumer assets and corporate activity remains good coupled with steady growth in CASA.

Healthy economic outlook in our key markets, underpinned by rising affluent.

Broaden relationships with our existing customers, and increase cross‐sell, and customer referrals across the group and key stakeholders.

Leveraging on synergistic relationship with Lembaga Tabung Haji.

Enhance operational effectiveness via business process re‐engineering, development and deployment of common corporate resources i.e. technology, risk management and human talent.

Maintain capital prudence in expectation of Basel III and in compliance with new financial reporting standard (FRS 139).

Balance organic growth with selective acquisitions that fit our overall franchise.

Promote innovation, service excellent and competitive offering.

Q & A SESSIONQ & A SESSION

“Bank Islam wishes to register its appreciation to all its stakeholders especially regulators, shareholders and customers for their unwavering commitment and continuous support especially in

transforming Bank Islam into a viable, sound, adequately capitalized and competitive banking institution, in line with its

vision to become a “global leader in Islamic banking”.

Bank Islam seeks the recognition as an integrated financial solutions provider with a panoply of innovative Shariah-based

financial products & services that respond to customer needs andrequirements.” ش شك ك

ر را اج ز جي ز ي ال ال

و ولا لاس سال ال م م

analyst briefing - dec 2011

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