Annual Report 2020

Corporate Financials Additional Information

01 Vision 156 Directors’ Report 421 Other Information
02 The Business 166 Statements of Financial Position 432 Local & Overseas Branches
04 Awards & Accolades 167 Statements of Income • Form of Proxy
05 Hong Leong Bank Story 168 Statements of Comprehensive
07 Corporate Milestones Income

10 Chairmanʼs Statement 169 Statements of Changes in Equity

16 Five Year Group Financial 173 Statements of Cash Flows

Highlights 179 Notes to the Financial
18 Group Managing Director/ Statements
Chief Executive Officerʼs Review 365 Statement by Directors
32 HLB’s COVID-19 Response 365 Statutory Declaration
36 Management Discussion & 366 Independent Auditors’ Report
Analysis 371 Basel II Pillar 3 Disclosures
73 Sustainability Statement
106 Corporate Information
Scan the QR Code by following
107 Notice of Annual General
these simple steps:
Meeting
111 Statement Accompanying Notice
of Annual General Meeting
112 Board of Directorsʼ Profile
116 Key Senior Management of the Get it
Group Download the “QR Code Reader” app from
Google Play (Android Market), BlackBerry
122 Board Audit Committee Report AppWorld, App Store (iOS/iPhone) or Windows
Phone Store
125 Board Risk Management
Committee (BRMC) Report
Run it
128 Board Information and Run the QR Code Reader app and point your
Technology Committee Report camera at the QR Code

130 Corporate Governance Overview,

Access it
Risk Management & Internal Get access to Hong Leong Bank Berhad’s
Control Statement website
 CORPORATE FINANCIALS ADDITIONAL INFORMATION

To be a Highly
Digital and Innovative
Financial Services
Company
Annual Report 2020 1
The
Business

In line with HLB’s ethos of ‘Digital-at-the-Core’ and brand promise of ‘Built Around
You’, the Bank is well on the way to ensure that Digital Banking permeates all that
we do, whether it’s with our product and service offerings to customers or the way
we work internally and interact and transact with customers. Further, we are seeing
traction on our endeavours to build a culture where the client is at the centre of
everything we do. We do this by continuing to invest in new and more accessible
technologies, leveraging on consumer collaborations, research and, insights to form
an integrated banking platform with the aim of personalising solutions around
customer needs. Through these efforts, the Bank is able to deliver a simple, seamless
and straightforward banking experience delighting our customers with experiences
and interactions with us that gives them the ability to take control of their finances
and financial management.

Hong Leong Bank Berhad (“HLB” or “the terminals. Wealth Management services at the right time. The essence of this
Bank”) is a leading Malaysian financial are offered through branches in Malaysia, approach was very apparent during
services institution which provides a Singapore and Hong Kong, in addition the peak of the COVID-19 pandemic
wide range of products and services and to various Priority Banking centres in the countries where we serve its
innovative financial solutions in Malaysia located throughout Malaysia and one in communities. In staying true to HLB’s
and across the region. Singapore. ethos of being Digital-at-the-Core
and building personalised solutions by
HLB’s extensive branch network extends With vast changes and numerous having a deep understanding of our
beyond Malaysian borders with one developments in the banking industry customer’s needs during these trying
branch each in Labuan Offshore, Singapore and financial landscape as a whole, times, we were able to accelerate help
and Hong Kong respectively, four there is a need to ensure that we can through technological engagements
branches in Vietnam and seven branches continue to stay ahead of our customers’ that enabled swift delivery of products
in Cambodia as well as a full-service call financial needs and ambitions so that and services to customers in a bid to
centre and more than 1,000 self-service we can provide the right solutions help them recover and rebuild their

HONG LEONG BANK’S KEY BUSINESS PILLARS ARE:

Personal Financial Services Business & Corporate Banking

Principal business activities include providing banking services Principal business activities include the provision of banking
and financial products to individuals so that they can fulfil solutions to SMEs, commercial and corporate clients, such as
their needs for property and auto financing, personal loans/ deposit and loan services covering business current account,
financing for their periodic household needs, payment products liquidity management, auto-sweep as well as fixed deposit.
to facilitate everyday spend, share financing, investment and Financing options available range from asset acquisition, working
insurance to provide options to grow and manage their wealth capital, business expansion and business automation. HLB also
as well as protect wealth for retirement and/or the next specialises in the provision of transaction banking solutions via
generation, as well as deposits and remittance products and cash management, corporate internet banking platform, trade
services to individuals and small businesses for their liquidity, financing and services and merchant payment solutions.
savings and payment needs.

2 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

The
Business

businesses. Simultaneously, we were services, private wealth management has a branch and a transaction office,
able to leverage on our technology and global markets. The branch is forging both located in Ho Chi Minh City and a
infrastructure spend and upskilling ahead by expanding the client segments branch each in Binh Duong and Hanoi.
of our employees, so that we could value proposition, expanding employee’s
quickly adapt to the way we work, capabilities and stepping-up its digital CAMBODIA OPERATIONS
and from where we work, ensuring transformation to enhance clients’ In July 2013, Hong Leong Bank (Cambodia)
services and support to customers experiences and operational efficiency. PLC (“HLBCAM”) commenced operations
remained uninterrupted even during the as a 100% wholly owned subsidiary
lock-down and recovery phases put in HONG KONG OPERATIONS providing comprehensive financial
place by governments to manage the The Bank’s Hong Kong Branch operates services covering consumer banking,
spread of COVID-19. under a full banking license and provides business banking, global markets and
global market and wealth management transaction banking services. With seven
HLB’s digital ambition will continue to see services to its customers. We are also full-fledged branches located in Phnom
us have a sharp focus on building around the first bank in Hong Kong to launch an Penh, HLBCAM’s primary customer
customers’ needs so that we can deliver Islamic Banking service. Currently, we are focus is towards established SME and
an ever increasing personalised approach developing a value proposition to service commercial/corporate customers, high
to make every banking experience SME customers as we prepare to launch net worth individuals, affluent and
with us easy, contextual, efficient and our SME business proposition in the new emerging affluent as well as tech savvy
seamless so that we can delight them financial year. young professionals.
constantly.
VIETNAM OPERATIONS INVESTMENT IN CHINA
Hong Leong Bank Vietnam Limited HLB was the first Malaysian bank to enter
REGIONAL FOOTPRINT the Chinese banking sector in 2008 with a
(“HLBVN”), a subsidiary of the Bank,
In line with our growth strategy, HLB has commenced operations in October 2009. strategic investment in Bank of Chengdu
been expanding its footprint in the Asian HLBVN is a full-fledged commercial bank Co., Ltd (“Bank of Chengdu”) and has
region. in Vietnam whose principal activities an 18% stake in the company. Bank of
include provision of retail loans, deposit Chengdu is a leading city commercial
SINGAPORE OPERATIONS products, wealth management, and bank in Western and Central China
HL Bank Singapore, the Singapore branch priority banking services to individuals. based in Chengdu, the capital of Sichuan
of HLB operates under a full banking Whereas business banking solutions Province which is listed on the Shanghai
license. We offer a comprehensive range include working capital and term loans, Stock Exchange. HLB also holds a 12%
of financial services to business, retail deposit and liability management equity investment in Sichuan JinCheng
and high net worth customers through products and trade finance services as Consumer Finance Company, a licensed
our 4 core business segments – business well as foreign exchange (“forex”) and consumer finance firm established in
& corporate banking, personal financial money market services. To date HLBVN Chengdu in March 2010.

Global Markets Islamic Financial Services

Principal activities include supporting our customers on their Islamic Financial Services are offered by Hong Leong Islamic Bank,
investment and hedging needs through key treasury products a wholly-owned subsidiary of HLB which is focused on providing
of Foreign Exchange, Fixed Income, Derivatives and Structured Shariah-compliant Personal Financial Services, Business and
Products. Global Markets also prudently manages the Bank’s excess Corporate Banking and Global Markets products and services.
liquidity and manages risks arising from customer transactions and
payment flows.

Annual Report 2020 3

 HONG LEONG BANK BERHAD

The Asset Triple A Digital Awards Euromoney Awards for Excellence Asiamoney Best Bank Awards
2020 2020 2019

Best Cloud Based Excellence in Best SME Bank in

Project Leadership in Asia Malaysia
Organised by The Asset Triple A 2020 Organised by Asiamoney
Organised by Euromoney

Asiamoney Best Bank Awards

2019

Best Digital Bank

Malaysia

Awards &
Organised by Asiamoney

Accolades
Highest Return to Shareholders
(FI) Over 3 Years

Billion Ringgit Club

Organised by The Edge

Red Hat APAC Innovation Awards Top Financial Instituition Partner Highest Return to Shareholders
2019 (Overall Category) 2019 (Super Big Cap) Over 3 Years

Red Hat APAC Top Financial Billion Ringgit Club

Innovation Awards Instituition Partner Organised by The Edge

Organised by Red Hat Organised by Credit Guarantee

Corporation Malaysia

International Business HR Excellence Awards HR Excellence Awards

Magazine Awards 2019 2019 2019

Best SME Bank Excellence in Workplace HR Leader of the Year

Malaysia Culture - Gold - Gold
Organised by International Organised by Human Resources Online Organised by Human Resources Online
Business Magazine

HR Excellence Awards HR Excellence Awards HR Excellence Awards

2019 2019 2019

Excellence in HR Team Excellence in HR Young HR Talent of the

Collaboration - Silver Innovation - Bronze Year - Individual
Organised by Human Resources Online Organised by Human Resources Online - Bronze
Organised by Human Resources Online

4 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Hong Leong Bank

Story

HLB is listed on Bursa Malaysia Berhad and forms part of the Hong Leong
Group. Headquartered in Kuala Lumpur, the Bank has a strong Malaysian
entrepreneurship heritage of over 100 years.

HLB was originally incorporated as

Kwong Lee Mortgage and Remittance
Financial Group Berhad) and renamed
it Hong Leong Bank Berhad. The Bank
Incorporated
Company in 1905 in Kuching, Sarawak was listed on the Kuala Lumpur Stock in 1905:
and later as Kwong Lee Bank Limited Exchange (now under Main Market of Kwong Lee Mortgage and
in 1934, bearing heritage of the oldest Bursa Malaysia) on 17 October 1994 and Remittance Company in
local financial institution in Malaysia. since then has grown to be a significant Kuching, Sarawak
Kwong Lee Bank Berhad was acquired player in the Malaysian banking and
by the MUI Group in May 1982 and financing landscape, organically as well
renamed Malayan United Bank Berhad as through mergers and acquisitions,
on 2 February 1983. In 1989, it was with its merger with EON Bank Group
Over
renamed as MUI Bank. Under the MUI in 2011. Today the Bank is Malaysia’s RM220 billion
Bank banner, it grew from 11 to 35 fifth largest banking group by assets in assets
branches nationwide. On 3 January with over RM220 billion in assets as at as at 30 June 2020
1994, Hong Leong Group acquired MUI 30 June 2020, and 4th largest by market
Bank Berhad through Hong Leong Credit capitalisation as at the same date.
Berhad (now known as Hong Leong

Locations
China

Hong Kong

Cambodia
Vietnam

Malaysia (HQ) (Listed on Bursa Malaysia)

Singapore

Annual Report 2020 5

Hong Leong Bank
Story

Personal Business & Global Islamic

Financial Corporate Markets Banking
Services Banking

Channels Core Values

Technologically Mobile Here for the
Focused: Banking long-term
Digital-at-the-Core

Customer Centred Internet

Solutions: Banking
Innovation
Built Around You

Strong Collaborate
Entrepreneurial Branches
to Win
Heritage
Self Service
Decisiveness
Terminals

Call Centre Have fun

6 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Corporate
Milestones

1905 1934 1989 1994

Started in Kuching, Sarawak, Incorporated as Kwong Lee Renamed as MUI Bank, • Acquired MUI Bank through
Malaysia, under the name Bank Limited operating with 35 branches Hong Leong Credit Berhad
of Kwong Lee Mortgage and (Now known as Hong Leong
Remittance Company Financial Group Berhad)
• Renamed as HLB

2013 2011 2009 2008

• HLBCAM commenced its HLB completed merger with HLBVN opened its doors in Ho Entered China banking sector
operations EON Bank Group Chi Minh City with a 20% strategic stake in
• Set up representative office Bank of Chengdu Co., Ltd.
in Nanjing, China

20%

Intensified digitisation of HLB’s

products and services
2015 2017
• Launched new platform for business internet • Piloted in-branch mobile
banking to replace HLOB (Hong Leong Online servicing solution featuring
Business), Applewatch app, eFD & e-TDI, iPad-equipped service
e-Will/Wasiat and Biometric authentication ambassadors to greet and
• Introduced physical PEx+ Merchant Payment service customers
• Launched HLB LaunchPad to
nurture Malaysian technology
and FinTech start-ups

2014 2016 • Introduced eFD via FPX

Launched new Internet Banking • First domestic bank to enable FPX payment allowing customers to
platform, PEx payment, tablet conduct transactions 24/7 via Hong Leong Connect BIZ
app and cardless withdrawal • Launched Artificial Intelligence Chat Service using IBM Watson, E-TT
and online statement
• Supercharged innovation through the setting up of a Customer
Experience and Innovation Lab
• Moved to online platforms for auto and personal loans, credit card
& CASA (Current Account & Savings Account) opening applications
• PEx+ Merchant Payment went online

Annual Report 2020 7

Corporate
Milestones

2018 2019
• Rolled out Robotic Process Business
Automation projects • First bank in Malaysia to enable merchants and individual users
• Launched comprehensive online to transact with WeChat Pay in Ringgit, with Malaysia being the
banking platforms for corporate, first country outside of China and Hong Kong to be able to make
commercial and SME banking payments in the local currency
(Hong Leong Connect First) • Increased efforts on SME business with more focus on providing
fit-for-industry total business solutions
• Introduced a first-in-market all-in-one Smart Point-of-Sales (POS)
terminal that enables merchants and consumers to perform cashless
transactions, accepting all cards and e-payments in a single device
• Introduced eLearning for the • Celebrated the 10th year of success of the country’s first co-branding
benefit of all employees, a card, the HLB Golden Screen Cinema (GSC) Credit Card with more
peer-to-peer, knowledge sharing exciting rewards and value to movie-goers
mobile platform application • Partnered and launched two Travel Cards, HLB AirAsia Credit Card
which incorporates fun elements and Emirates HLB Credit Card with two of the best-in-class airlines,
of gamification in the learning AirAsia and Emirates to serve the rising travel market in Malaysia
journey (SmartUp)
Innovation
• Pioneering change in the banking industry with the introduction of
intuitive digital service delivery by launching the first Digital Branch
in Penang at Burmah House
• Launched the Customer Experience and Usability Lab (CX Lab)
• Established the first Hong Leong in Menara Hong Leong providing a collaborative space for cross-
Bank Digital Concept flagship functional business, operations and technology teams to work
branch in Damansara City, together with external parties such as FinTechs, startups and
featuring Personalised Teller technology partners
tablets, Teller Assisted Units and a • The first bank in Asia to transform customer support with leading
Discovery Zone interactive digital innovative technology Amazon Connect, a self-service cloud-based
platform contact centre solution at HL Bank, HLB’s branch in Singapore
• Piloted Multi-lingual Robot
Concierge services at Damansara People
City Priority Banking Branch • Introduced Hackathons to discover talents and to inculcate and
• Introduced a virtual assistant cultivate an innovation mindset to create an agile and future ready
Artificial Intelligence chatbox on workforce
our employees’ digital devices • Innovated the recruitment process via the introduction of HALI, an
(HALI) to provide answers on Artificial Intelligence chatbot and Virtual Recruitment Assistant to
Human Resources and Branch match suitable candidates with high-skill jobs
Operations Support policies and • Future-proofing employees by incorporating design thinking in our
procedure queries training modules as part of the on-boarding programme
• Rolled out Digital Business • Introduced Workplace by Facebook to ensure our workforce can
Solutions and SMElite Financing communicate, collaborate and connect simpler and better, using
facilities for SMEs familiar features like groups, chat and video calls

CSR/Community
• Launched HLB Jumpstart, the Bank’s CSR platform that champions
Malaysians helping to build a sustainable Malaysia from social
enterprises and non-profit organisations to passionate individuals
on Malaysia Day
- Introduced the ‘Demi Kita’ campaign in collaboration with SURI
which upcycles denim and provides financial opportunity and
living skills for single and underprivileged mothers
- Partnered with Green Hero to support food wastage solutions
across Malaysia

8 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Corporate
Milestones

2020
Business
• Committed RM500 million for renewable energy financing for the next 4 years in supporting government plans
to increase the share of Renewable Energy in the country
• Launched HLB Connect in Vietnam:
- true convenience for consumers with next generation, customer-centric digital banking
- greater financial inclusion and access to e-commerce on a single platform
• Pre-emptive action (early Feb 2020) to support customers with our HLB Customer Financial Relief Plans to support
customers facing financial challenges due to the impact of the novel coronavirus (COVID-19)
• Fast tracked credit approval for SME’s under BNM’s Special Relief Facility Funds (SRF) to ease their burden amidst
these challenging times
• Participated in the PENJANA SME Financing Scheme (“PSF”) where the Bank will extend its support to local SME
businesses during the recovery period which have and continue to be adversely impacted by COVID-19
• Plan in place to provide additional targeted assistance to customers who foresee difficulties in restarting their
regular payments come October 2020 (post Malaysia’s auto moratorium for individuals and SMEs) under the
Bank’s Payment Relief Assistance Plans

Innovation
• Cashless Experience - collaborated with WeEat, a WeChat mini programme for F&B outlets for customers to order
and enjoy meals seamlessly while avoiding queues
• Worked with MyTaman to empower Taman Desa Residents Association (TDRA) to use WeChat Pay functionality
at all merchants in the community, the first of such an effort in Malaysia
• Launched First-in-Market eToken with Biometric Recognition for businesses making banking more secure and
convenient
• Expanded and enhanced in-branch tablet facilities to serve customers quickly and effectively, while enabling the
Bank to reallocate resources to greater value add activities
• Launched ‘Cashless Lagi Senang’: onboarded traders at more than 20 public markets in Penang to accept
cashless transactions in support of the state’s ‘Cashless Pasar Awam’ initiative
• Upgraded the HLB Connect App to give customers the freedom to customise their digital banking experiences
and reduces the number of steps needed to make online transactions
• Continued the digitalisation and innovation journey with the successful transformation and migration of Financial
and Procurement processes to the PtoP@HLB platform allowing staff to work remotely, anytime and anywhere
with ease and convenience to amongst others, raise claims, process invoice payments and raise purchase
requisitions

Customers and Employees

• Introduced the Brand Promise “Built Around You” which revolves around the principles of building trust through
personalised experiences, by having a deep understanding of our customers, making every experience easy to
delight customers consistently and to proactively anticipate customers’ needs to make their lives better
• Expanded Workplace by Facebook to Cambodia and Vietnam to make employee collaboration faster and
easier and connect easily with familiar features such as groups, chats and video calls
• Introduced the cloud-based Workday platform which has helped streamline talent management, HR
operational activities as well as learning and development

CSR/Community
• Launched HLB DuitSmart initiative to empower Malaysians with better financial knowledge during Malaysia
Day Via HLB Jumpstart:
- the Bank partnered with Coffee for Good who provides barista training for underprivileged youth
- Assisted Social Enterprise SURI with Social Procurement to Support Single Mothers Producing PPE for Medical
front liners in an effort to uplift and strengthen communities in-need
• Pledged RM150,000 to Support Orphanages and Senior Care Homes with meals during Ramadan and Raya
• Donated RM1 million to MERCY Malaysia through the Association of Banks Malaysia to help the fight against
COVID-19
• Embraced environmentally friendly policies by changing the way we procure and use resources and how
we interact with customers, for example, not sending hardcopy statements which was expanded to more
products and services

Annual Report 2020 9

Chairman’s
Statement

Against the backdrop of a global COVID-19 pandemic that has severely impacted
the economies around the world, Hong Leong Bank (“HLB” or “Bank”) performed
commendably well in the 2020 Financial Year (“FY2020”). During the year, HLB
continued to deliver and preserve value for our stakeholders underpinned by our
strong capital, liquidity and the disciplined execution of our strategies. While there
was a 6.4% reduction in net profits against the previous year, when we exclude a
one-off divestment gain in FY2019 and modification loss in FY2020, the Bank’s core
net profit after tax was higher at RM2,603 million.

The Bank’s strategy has been built on 100bps, our core net interest margin has Total assets

RM221.3
our prudent approach to asset quality remained relatively stable. Total assets
and investments and our dedication to continue to increase, now standing at
improving efficiencies and delivering a record RM221.3 billion, 6.7% higher
value through our digital transformation. than the previous year, as we continue
Despite the three cuts to the Overnight to pursue growth in a prudent and Billion
Policy Rate (“OPR”) in FY2020 totalling sustainable manner.

10 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Chairman’s
Statement

Most of the Bank’s accomplishments in I am pleased to present to you the at home, Bank Negara Malaysia also
FY2020 in preserving shareholder value Annual Report and Financial Statements adjusted its OPR downwards by 125bps to
can be attributed to the implementation of the Bank for the financial year ended 1.75% in the first seven months of 2020
of our strategic priorities over the recent 30 June 2020. and reduced the Statutory Reserve Ratio
years that have transformed the Bank by 100bps to 2.00% to provide liquidity
into a strong, digital-first and resilient ECONOMIC LANDSCAPE to the market.
organisation. We have also been
The Malaysian economy remained
pro-active in helping our customers DELIVERING RESULTS UNDER
resilient in FY2020 despite headwinds
who have been impacted by the CHALLENGING CIRCUMSTANCES
caused by the COVID-19 pandemic in the
current economic malaise trigged by
second-half of FY2020. In the first quarter For the year under review, the Bank’s
the COVID-19 pandemic, acknowledging
of 2020, the economy posted a small 0.7% performance held up well despite the
that the sustainability of our business is
year-on-year (“y-o-y”) growth, supported prevailing headwinds as we operated
closely linked to the financial health of
by still robust private consumption, which from a position of strength with solid
our customers.
was comparatively better than many asset quality and prudent management
regional economies as they had started strategies. With industry-leading loans
With the Malaysian economy likely to stay
to experience contractions during the growth, robust contributions from our
weak in 2020, we will continue to focus on
4th quarter of 2019. Economic activities regional operations and a strong capital
helping customers weather this difficult
subsequently contracted by 17.1% y-o-y base, the Bank has also seen encouraging
period which will enable the economy
in the second quarter as the economic payment behaviour with over a third
to bounce back stronger. Although the
impact of the necessary Movement of customers continuing with their loan
government’s RM295 billion stimulus
Control Order (“MCO”) came into effect instalments despite the ongoing loan
packages will provide much-needed
mid-March 2020. moratorium.
support to the economy, we remain
vigilant over the second wave of virus
Inflation was subdued in the absence of This has further strengthened our
infections in major economies, protracted
both demand and cost pressure while robust asset quality, resulting in further
US-China trade tensions that has lingered
the nation’s current account surplus and improvements to our gross impaired loan
since 2018 and domestic policy challenges
foreign reserves remain healthy and (“GIL”) ratio. The Bank’s total gross loans
on the fiscal front in the form of rising
will continue to provide a buffer in the and financing has also maintained its
government debt levels and a higher fiscal
event of external shocks. The financial positive growth trend with a healthy 6.1%
deficit.
markets remain sound despite some y-o-y expansion to RM145.9 billion, even
volatility, while liquidity in the system during this uncertain period, demonstrating
the strength of our domestic lending
We have also been remains ample. The Malaysian banking
sector is healthy, well capitalised and will businesses. Customer deposits in FY2020
pro-active in helping our continue to play a crucial role to support expanded at an accelerated rate of 6.4%
customers who have the country’s economic recovery. y-o-y, to RM173.5 billion, outpacing last
year’s increase of 3.6%.
been impacted by the The external environment, which was
current economic malaise already slowing before the outbreak With this performance, the Bank’s core
trigged by the COVID-19 of COVID-19, weakened further with earnings per share (“EPS”) for FY2020
the pandemic, exposing the fragility is 127.2 sen, an increase of 1.1% y-o-y,
pandemic, acknowledging of the global economy and the while our core return on equity (“ROE”)
that the sustainability of inter-dependency of a global supply stood at 9.9%, excluding one-off items.
chain. This has prompted many central Our share price performed resiliently
our business is closely to close at RM14.08 for FY2020, with
banks to further ease their already loose
linked to the financial monetary policy with the Federal Reserve share price appreciation over five years
health of our customers. delivering two emergency cuts totalling outperforming both the FBM KLCI index
150bps in March and expanding its and KLFIN index by 20.8% and 26.3%,
balance sheet from US$4 trillion to US$7 respectively.
trillion within three months. Similarly,

Annual Report 2020 11

Chairman’s
Statement

Total gross loans and financing Innovative, simplified and in respect to the business, economy,
maintained a healthy 6.1% environment and the communities we
y-o-y expansion to
personalised financial serve. HLISB has made progress in this

RM145.9
solutions are key to context as we continue to strive to meet
our aspiration of becoming a Value Based
HLISB’s value proposition
Bank.
to connect with
Billion REGIONAL PERFORMANCE
customers, with Shariah
Total customer deposit governance at the heart The Bank’s regional business has continued
to make solid contributions to our overall
expanded 6.4% y-o-y to of our proposition. performance, helping to deliver value to

RM173.5
our stakeholders. Accounting for 19.1% of
and caters to the evolving needs of our the Bank’s pre-tax profit in FY2020, we
customers, further raising Malaysia’s continue to see robust loan growth from
Billion premier status as a global Islamic Finance our businesses in Cambodia and Vietnam,
hub. and strong profit contributions from our
associate in China.
Thus, for FY2020, the Board has proposed Our efforts has translated into HLISB
a final dividend of 20.0 sen per share producing a strong FY2020 performance Our Singapore operation is represented
subject to the approval of shareholders with profit before zakat and taxation by HL Bank Singapore (“HLBS”) and is
during the forthcoming Annual General recording a growth of 8% y-o-y to an important franchise for the Bank. In
Meeting on 30 October 2020. This brings RM475 million. Gross Islamic financing FY2020, total income recorded was RM130
the total dividend for FY2020 to 36.0 sen assets saw an increase of 15% y-o-y to million while gross loans remained stable
per share, with a dividend payout ratio RM30 billion. The contribution of HLISB’s at RM5.3 billion, which contributed 3.6%
of 30%, as we exercise prudence in the financing portion towards the Bank’s to the Bank’s total gross loans. In recent
management of our capital in view of the total financing also expanded to 21% years, the branch has seen itself change
current environment. from 19% in the last financial year. from a pure Private Banking outfit to a
more holistic financial services provider
ISLAMIC BANKING Amidst the challenging background with greater coverage in niche sectors.
PERFORMANCE presented by the COVID-19 pandemic This has enabled Personal Financial
Malaysia continues to build on its outbreak and persistent global Services to establish a firm foothold in
position as a major powerhouse in the uncertainties, HLISB will adapt to the Auto Financing, while looking to expand
global Islamic Finance industry with “New Norm” and is well-positioned to into other consumer loans. Business and
total Islamic banking assets expanding remain resilient and move forward via its Corporate Banking focuses on Medium
by 8.3%, amounting to RM835.2 billion continued embracing of the wider group’s Size Enterprises in economic sectors
in 2019. Financing by Islamic financial ethos of being “Digital at the Core”. such as manufacturing, construction and
institutions accounted for 39.2% of total Innovative, simplified and personalised wholesale trade, while Private Wealth is
banking sector financing, up from last financial solutions are key to HLISB’s value re-strategising to focus on generational
year’s 37.7%, illustrating its increasing proposition to connect with customers, wealth transfer, specific sectors such
appeal and wide public acceptance. with Shariah governance at the heart of as healthcare professionals and other
our proposition. high net worth individuals. HLBS will
Capitalising on the growing awareness of continue to develop its business to
Islamic banking as an alternative financial Aligning with the Bank’s sustainability best align with customer preferences,
solution, Hong Leong Islamic Bank goals, HLISB remains dedicated to with the use of digital technology that
(“HLISB”) remains steadfast in enhancing integrate Value-Based Intermediation leverages on the Head Office’s (“HO”)
the sustainable growth of its business. (“VBI”) principles into the business. VBI digital transformation roadmap, to build
This is done by providing a seamless and puts equal emphasis to economic value the Hong Leong franchise by immersing
connected experience which anticipates creation while upholding ethical values ourselves in the communities we serve.

12 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Chairman’s
Statement

Total profit contribution from by the COVID-19 pandemic. Operations resumed

Hong Leong Bank
international operations to the right after the Chinese New Year period with
Vietnam Ltd
Bank’s pre-tax profit is business continuity plans in place.
Total loan growth

19.1%
of 47.4% y-o-y to
PERSEVERING THROUGH CHALLENGES
RM909 million
The Bank continues to seek ways to create
sustainable value in how we operate while we
Hong Leong Bank
expand the vibrant ecosystem we have built for (Cambodia) PLC
Hong Leong Bank Vietnam Ltd (“HLBVN”) recorded our stakeholders and communities around us.
Total loan growth
a solid performance in FY2020 with loans growing of 26.8% y-o-y to
by 47.4% y-o-y and deposits improving by 21.5% We recognise that everything that we do must RM1.6 billion
y-o-y (on a normalised basis), resulting in total be built around the potential and success of the
income growth of 12.0% y-o-y. GIL ratio remains people we engage with. Thus, it is our mission
Bank of Chengdu
well under control at 0.20%. HLBVN has also to continuously learn from our customers and
made good progress in its journey to become to enhance our products and service delivery, to Profit contribution
a retail digital bank with the release of a new of RM631 million,
provide an ecosystem that enables the potential
13.9% y-o-y
mobile app designed and built exclusively for and capabilities of those around us to be fully improvement
customers in Vietnam. It is also among the first realised. More importantly, we are driven to
few banks in the country to introduce digital debit cultivate and nurture the entrepreneurial spirit
cards to the market. In the second half of 2020, with which the Bank was founded, to generate
HLBVN will be launching other digital initiatives to new and sustainable opportunities.
further enhance customer acquisition and improve
customer experience. We remain fully committed to strengthen and
refine our digitalisation journey through our Digital
Hong Leong Bank (Cambodia) PLC (“HLBCAM”) at the Core initiatives. Customers have embraced
managed to record a 26.8% y-o-y growth in its digitalisation, and at Hong Leong Bank, we strive
loan portfolio to RM1.6 billion, while deposits grew to take it to the next level for our customers as
by 11.2% y-o-y to RM1.4 billion. This has elevated we continue to invest in transforming our business
our total assets to approximately RM2.7 billion model, process optimisation, and innovation
as at end June 2020, representing a 29.9% y-o-y to provide a comprehensive suite of banking
growth. Our Cambodian operation has shifted functionality at the fingertips of our clients. Our
from a traditional branch structure to be a more
digital based financial services provider. We have
enhanced our mobile banking platform (Hong
Leong Connect Cambodia) along with other digital
initiatives to further complement our products and
services and will continue to further upgrade our
Internet banking application for HLBCAM’s business
customers.

Our associate in China, Bank of Chengdu (“BOCD”),

a city commercial bank in Sichuan Province listed
on the Shanghai Stock Exchange, has maintained
above average growth and made meaningful
contributions of RM631 million to our bottom line;
a 13.9% y-o-y improvement. BOCD’s operations are
mainly provincial centric and were relatively more
insulated from the more drastic disruption caused

Launch of HLB Connect in Vietnam

Annual Report 2020 13

Chairman’s
Statement

improving Customer Satisfaction Scores We firmly believe that we need to integrity that goes beyond compliance.
is a key indicator that we are on the take the initiative in addressing the For example, the Bank’s position on
right track and validates our strategy and environmental changes that are corruption and bribery is one of zero
progress. happening around us. Therefore, we tolerance and we have developed an
have embraced green financing to play Anti-Bribery and Corruption Framework
This digital transformation extends to a role against climate change and we to affirm this. The Bank also appointed an
our regional operations which have seen have built on this further by incorporating Ethics and Integrity Officer who sets out a
meaningful progress in recent years. Environmental Sustainability Risk in our holistic approach in the implementation
Business and Corporate Banking Credit of adequate policies and procedures
Beyond our employees and customers, Policy. The Bank will continue to develop to safeguard the Bank from corrupt
we see social enterprises as an important frameworks and policies and upgrade practices.
emerging segment which allows us procedures and processes that will enable
to provide support to businesses that us to be a positive influence towards the For our customers, we continue to
pursue relevant and worthwhile causes. creation of a more sustainable future. prioritise the principle of fair treatment
Assisting these enterprises not only with various initiatives undertaken to
enables us to make our communities CREATING VALUE THROUGH ensure that Fair Treatment of Financial
sustainable, but also adds vibrancy GOOD GOVERNANCE Consumers is completely integrated
and promotes innovation too. We are throughout the Bank. We believe fair
One of the key components of operating
consistently developing programmes treatment is integral to our business
a sustainable financial services business
under our Corporate Social Responsibility conduct and in our interest to cultivate
is the enactment of rigorous governance
pillar to provide social enterprises with a conducive environment that enhances
practices and a strong culture of integrity
the necessary financial tools, skills business opportunities and contributes to
as important safeguards of the value
development, and marketing and the overall well-being of the community
creation process. In this context, the Bank
branding expertise that would enable we operate in.
has undertaken a number of initiatives
them to expand their businesses in a
that upholds good governance and
sustainable manner.

14 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Chairman’s
Statement

ACKNOWLEDGEMENTS
In closing, I would like to extend my
sincere appreciation and gratitude to my
fellow Board members for their wisdom,
leadership and insights. To our customers,
business partners and shareholders –
thank you for your support and loyalty
throughout the years. Our employees
also deserve special recognition for
their dedication and energy as they
continue to deliver consistent and
quality performances while holding
true to our core values at all times. I
would like to convey my appreciation to
Bank Negara Malaysia, the Ministry of
Finance, government agencies and other
regulatory authorities for their assistance
and guidance. Last and not least, I would
like to acknowledge the performance of
our senior management team who have
managed and guided the Bank with
To further combat financial crime risks, consumer behaviour and the need for a
unwavering commitment during these
the Bank has established a dedicated more resilient global supply chain may be
very challenging times.
Financial Crime Governance Committee here to stay.
(“FCGC”) in January 2020, in addition
to the existing Risk & Compliance Despite the challenging economic
QUEK LENG CHAN
Governance Committee, as we strive to backdrop, Malaysia is expected to
Chairman
safeguard the Bank from being used as weather the storm, supported by massive
11 September 2020
a conduit for financial crime proceeds. fiscal and monetary stimulus and by
The committee focuses on Financial capitalising on its sound fundamentals
Crime Compliance (“FCC”) matters and and diversified economic base. The
further enhances senior management Malaysian economy is expected to
oversight of the ever-increasing FCC recover in 2021 in line with the rest
risk landscape. To bolster these efforts of the world, as trade and domestic
against Financial Crime Risk, the Bank consumption improve along with better
is embarking on a project to adopt an consumer sentiments and job prospects
Anti-Money Laundering (“AML”) system and business investments return.
which leverages on artificial intelligence
and machine learning to improve The Bank remains committed to support
the effectiveness of AML detection, our customers through these trying
monitoring and reporting. times, and will keep on delivering
products and services that meet their
OUTLOOK ever-changing needs. While the
unexpected economic headwinds may
The global economic outlook remains
require some recalibration of our tactical
highly uncertain as both consumers and
approach, it has nevertheless proven that
businesses adjust and adapt to the new
the Bank has the resilience to consistently
normal brought about by the COVID-19
return good value to its stakeholders.
pandemic and the US-China trade
tension. The changes we are seeing in

Annual Report 2020 15

Five Year Group
Financial Highlights

Gross Loans, Advances and Financing Deposits from Customers Total Income
Sustained loans/financing growth Deposit growth driven by good CASA Topline sustained by above industry
momentum led by key segments expansion loan growth and improved non-interest
of mortgages, SME and commercial (RM’Million) income contribution, however impacted
banking by modification loss
(RM’Million) (RM’Million)
145,932
4,840 4,778
137,566 4,726
129,069 173,493 4,551
125,147
120,605 4,178
163,070
155,233 157,414
148,524

54.8% 55.5% 56.0% 53.3%

52.4%

27.9%

25.0% 25.0% 26.2% 25.6%

FY2016 FY2017 FY2018 FY2019 FY2020 FY2016 FY2017 FY2018 FY2019 FY2020 FY2016 FY2017 FY2018 FY2019 FY2020

+6.1% YoY +6.4% YoY +1.1% YoY

Individuals Deposit Mix % CASA Ratio
Total Deposits (RM’mil)

FY2016 FY2017 FY2018 FY2019 FY2020

The Group RM’Million RM’Million RM’Million RM’Million RM’Million

Total Assets 189,828 195,553 202,891 207,369 221,278

Gross Loans, Advances and Financing 120,605 125,147 129,069 137,566 145,932

Customer Deposits 148,524 155,233 157,414 163,070 173,493

Shareholders’ Fund 21,117 22,685 23,892 25,474 27,234

Profit Before Tax 2,382 2,748 3,246 3,186 2,989

Profit After Tax 1,903 2,145 2,638 2,665 2,495

Earnings per share (sen) 100 105 129 130 122

Net dividend per share (sen) 41.0 45.0 48.0 50.0 36.0

Dividend payout ratio (%) 44.1 42.9 37.2 38.4 29.5

16 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Five Year Group

Financial Highlights

Profitability Asset Quality Capital Ratios

Sustainable returns on solid Asset quality remained solid with Strong capital position
performance sufficient coverage
(RM’Million)

3,246 3,186 2,989

2,748 16.3% 16.3% 16.5%

1.62% 1.63% 15.8%
1.60%
1.56% 1.45% 14.7%
2,382 14.2%
14.1%
13.7%
13.1% 13.3%
2,638 2,665
2,495
13.3% 13.7%
2,145 12.7% 12.6% 13.1%

1,903
0.96%
0.87%
0.79% 0.78%
0.61%

FY2016 FY2017 FY2018 FY2019 FY2020 FY2016 FY2017 FY2018 FY2019 FY2020 FY2016 FY2017 FY2018 FY2019 FY2020

ROE%
10.0% 9.8% 11.3% 10.8% 9.5%

PBT PAT Industry GIL Ratio GIL Ratio Total Capital % Tier 1 % CET 1 %

FY2016 FY2017 FY2018 FY2019 FY2020

The Bank RM’Million RM’Million RM’Million RM’Million RM’Million

Total Assets 162,238 164,817 169,111 169,461 177,707

Gross Loans, Advances and Financing 101,054 103,516 105,079 109,943 113,745

Customer Deposits 126,241 129,859 129,583 131,397 137,633

Shareholders’ Fund 17,431 18,442 19,263 20,125 20,985

Profit Before Tax 2,025 2,347 2,518 2,386 2,075

Profit After Tax 1,605 1,744 1,972 1,927 1,654

Annual Report 2020 17

Group Managing Director/
Chief Executive Officer’s Review

Dear Shareholders, Customers and Business Partners,

The Bank has delivered a healthy set of results in FY2020, given the backdrop
of the COVID-19 pandemic and its widespread effects on the local, regional
and global economy. Our financial results were underpinned by strong loan/
financing growth, a further improvement in asset quality, strong results from
our Markets/Treasury business and robust contributions from our associates.
This performance marks a second consecutive year of above market loans/
financing growth, bolstered by a set of solid financial ratios coupled with
continued disciplined cost management.

I am pleased with the Bank’s made with regard to the economic faced by our customers with regard to
performance and our response to the slowdown and weak outlook as well as their loan repayments and financial
challenges posed by the COVID-19 the day 1 modification loss we had to commitments during this difficult time.
pandemic, particularly in the context make due to the support provided to
of the direct impact on the banking borrowers through the auto-moratorium The year in review also witnessed
industry’s profitability from multiple cuts in Malaysia for retail and SME customers. a further injection of pace in our
to interest rates in FY2020, as the central As a customer-centric financial services digitisation push for both our customers
bank sought to bring support to the organisation, we responded swiftly and employees offerings. The various
economy following the severe economic to this crisis and continue to evolve digital improvements to our products,
slowdown, preventive provisions we our offerings to alleviate the burdens services and internal processes aided

18 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Group Managing Director/

Chief Executive Officer’s Review

all our employees to continue to work ECONOMIC OUTLOOK of the next 18 to 24 months. In the
together, albeit physically remote, to interim period, we have set ourselves
The global economy expanded at a
deliver uninterrupted services to all the objective to maintain our sharp
more moderate pace of 2.9% in 2019
clients during the Movement Control focus on helping clients so that we
even before the onset of the pandemic,
Orders (“MCO”) and thereafter, as online are able to help those in need, as well
as a result of slower expansion from
transactions and virtual interactions, as, those looking to invest to capture
both advanced as well as emerging
a necessity rather than a choice, were opportunities that will arise under this
economies. The protracted protectionism
facilitated by the digital capabilities we “new norm”.
policy pursued by major economies has
have been building over the past couple
dampened global trade flows and world
of years. About 86% of retail transactions,
economic activities. The US economy
It is my honour to present
and 71% of SME and corporate clients’
transactions were executed via the
expanded at a slower rate of 2.3% in to you the Annual Report
internet or mobile device in FY2020. For
2019 (2018: 2.9%), while growth in the
and Financial Statements
China economy tapered off from 6.6%
our employees, the digital evolution
to 6.1%, its slowest in nearly three of Hong Leong Bank
has taken us to a new level of digital
interactions over the past year, with
decades. Berhad for the financial
many of the traditional functions
Acknowledging the dissipating growth
year ended 30 June 2020.
moving online. Recent additions
momentum, the Federal Reserve began
incorporate cloud-solutions into the OPERATING PERFORMANCE
slashing interest rates as early as July
management of our human capital,
2019, and by a cumulative 50bps in the Core* total income for the Bank for
talent management, collaboration and
second half of 2019, to sustain economic FY2020 stood at RM4,921 million,
learning & development, making it much
expansion, besides expanding its rising by 6.1% y-o-y, while core net
easier for employees to remain engaged
balance sheet again. Other major central profit was higher than the previous
and work together even in periods like
banks have also resorted to expanding year at RM2,603 million. In light of the
those faced by the Bank over the second
their bond buying programmes, again headwinds experienced during the
half of the financial year.
to ensure a continuous accommodative financial year, these are commendable
monetary policy to sustain growth. results, achieved through the sharp
The environment within which we have
entered the new financial year remains focus on managing clients’ needs,
In Malaysia, growth momentum has seeking opportunities where we could
highly uncertain and the outlook for
eased since the second half of 2019, as extend lending and financing and
business growth subdued. There is an
a softer external environment arising reduce loans/financing in arrears which
expectation that gross impaired loans
from the protracted US-China trade war resulted in continued improvements
(“GIL”) will see a significant increase
dampened exports. Domestic demand in asset quality. The Markets/Treasury
after the financing and loans moratorium
has also slowed considerably in the first business had a very strong second
period ends, as the economy’s recovery
half of this year as consumer spending half of the year as we looked for the
is expected to be slow. We have been
and investment activities were severely right opportunities in the volatile
hard at work to pro-actively assist
affected by the movement restrictions environment that ensued with the onset
clients before the auto-moratorium
implemented to contain the spread of
started and will continue to do so when
the COVID-19 pandemic.
it ends (scheduled for 30 September
Core* net profit
2020). With a track record of deeper

RM2,603
Before economic activities return to
collaboration with our customers, we
pre-COVID 19 levels, we will need to see
are of the view that whilst GILs are likely
that the spread of the virus is brought
to rise, we come from a very solid base,
which will put us in good stead to see
under control, with governments around Million
the world re-opening borders and
the recovery period through together.
enabling the free movement of people,
We will therefore, be able to maintain
a moderation in protectionist behaviour * Core basis: Excluding one-off gain from
GILs at a reasonable level and retain our
and employment returning to pre-crisis divestment of joint venture of RM90 million
ability to support and provide financing in FY2019 and net modification loss of RM142
level. This might take the better part
for viable projects and initiatives. million in FY2020.

Annual Report 2020 19

Group Managing Director/
Chief Executive Officer’s Review

of COVID-19. Our associates in China had financial year. Even with the cautious at 83.5%. Liquidity coverage ratio
another respectable year, which resulted business and consumer sentiment, HLB (“LCR”) remained well above regulatory
in healthy contributions to the Bank. saw an increase in contributions from requirements, improving to 137% at
key segments of residential mortgages, financial year end.
Due to the multiple OPR cuts in Small and Medium Enterprises (“SME”),
FY2020 that totalled 100bps, the Bank Commercial Banking and our overseas Customer deposits increased by 6.4%
experienced net interest margin (“NIM”) operations. y-o-y in FY2020 to RM173.5 billion and by
compression and hence pressure on leveraging the Bank’s cash management
interest and profit income, nevertheless Overall, domestic loans/financing system, CASA growth was robust at
we were able to maintain core* NIM growth continued to outpace the 15.9% y-o-y with an improved CASA ratio
for FY2020 at a stable 1.96% as a result industry in FY2020, with growth of 5.9% of 27.9%. The Bank continued to enjoy
of the many initiatives to manage cost y-o-y. Residential mortgages expanded a stable funding base backed by a solid
of deposits and diversify sources of by 8.7% y-o-y to RM73.3 billion, while individual deposit base, with the ratio at
funding. transport vehicle loans were muted due 53.3%, amongst the highest in the industry.
to lower car sales during the MCO period
Core* non-interest income stood at and closed out the year at RM16.8 billion. The Bank’s emphasis on maintaining
RM1,373 million, which was 10.4% strong asset quality continued to yield
higher than the previous year, with the Domestic loans/financing to business results with the GIL ratio in FY2020
non-interest income ratio improving to enterprises expanded 6.3% y-o-y to improving to a record low 0.61% (down
27.9% from 26.8% the previous year. This RM43.3 billion. SMEs, a key segment from 0.78% in the previous year).
is reflective of the solid performance for the Bank, saw loan/financing Meanwhile, loan impairment coverage
from the Markets/Treasury business in grow by 5.3% y-o-y to RM22.6 (“LIC”) ratio improved to 142%, as
the second half of the year and wealth billion, with the community banking management’s pre-emptive actions
management throughout the year. sub-segment recording convincing to build provision buffers bolstered
growth of 32.8% y-o-y, boosted by the the coverage. It is also noteworthy to
Operating expenses remained flat Bank moving quickly to provide much report that the provisions on GIL coupled
at RM2,104 million compared to the needed financing to SMEs via the Bank with the security value that we hold
RM2,092 million in the previous year, Negara Malaysia’s (“BNM”) Special Relief on these GILs results in a combined
a clear indication of the effectiveness Facility (“SRF”). The SRF was launched LIC ratio of 184%. This pre-emptive
of our digitisation efforts and strategic as part of the country’s response to build-up of provisions is in anticipation
cost management initiatives to drive help businesses following the negative of potential risks arising from the
efficiencies across the businesses. economic impact caused by the MCO. COVID-19 pandemic after the loan/
Positive JAWS was achieved as our core* financing auto-moratorium ends, as well
cost-to-income ratio (“CIR”) for FY2020 The Bank has maintained its healthy as the expected moderate pace of the
improved to 42.8%. position in terms of funding and liquidity economic recovery that lies ahead.
with the loan-to-deposit ratio (“LDR”)
Consequently, core* operating profit for
FY2020 was RM2,817 million, a 10.7%
y-o-y increase compared to the same
period last year, excluding the one-off
items.

In FY2020, gross loans and financing

grew by 6.1% y-o-y to RM145.9 billion,
mirroring the pace of growth from the
previous year, and doing so despite
economic activity slowing significantly
in the 3rd and 4th quarter of the

* Core basis: Excluding one-off gain from divestment of joint venture of RM90 million in FY2019 and net modification loss of RM142 million in FY2020.

20 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Group Managing Director/

Chief Executive Officer’s Review

The Bank’s capital position remains obtained from constant and consistent understanding evolving customer
supportive of future loan/financing engagements with retail and business expectations, and making their day-to-
expansion with Common Equity Tier 1, customers. The Bank has also raised its day banking needs and experience as
Tier 1 and Total Capital Ratios at 13.7%, game further in branches, expanding frictionless as possible, are even more
14.2% and 16.5% respectively. and enhancing the In-Branch tablet important now that most activities,
facilities throughout FY2020, putting the driven by the risks surrounding the
focus squarely on serving our customers pandemic, have moved online. We expect
RECOGNITIONS FOR quickly and effectively, while also this trend to continue in the coming
BUILDING SOLUTIONS FOR giving us the opportunity to reallocate months as most customers will make a
OUR STAKEHOLDERS resources to greater value-add activities. permanent shift to online banking. For our
persistent drive in innovating customer
HLB continues to garner recognition for
HLB’s solid efforts to accelerate digital experiences on mobile, internet and
its success in uniting technology with the
transformation and raise its customers’ in-branch banking, the Bank was
skills of our people to create innovative
digital engagement successfully recognised as the “Best SME Bank in
solutions not only for customers,
earned us the recognition as the Malaysia” at the Best Bank Awards 2019
but also employees and the various
“Best Digital Bank, Malaysia” for the by Asiamoney.
communities in the banking ecosystem.
second consecutive year at the Best
Our ethos of being “Digital at the Core”,
Bank Awards 2019 by Asiamoney. In the context of our people, the Bank
is clearly delivering excellent customer
remains committed to its overall strategy
experiences which are seamless and
In the SME space, the Bank has taken to ensure the readiness of our workforce
easy to use and centred around what the
a leadership position in providing to tackle emerging customer needs and
customer wants; fulfilling this growing
tailor-made holistic banking solutions evolving working environment. We will
demand for digital based solutions
powered by digital innovation, by do this by devoting a significant portion
predicated on eliminating pain points.
continuing to work closely with business of our resources to employee training and
owners to better serve their business development in order to drive the right
For example, we have introduced new
needs and requirements. With the skillset that we will need to compete
features that makes banking even
rapidly changing business landscape in today’s and tomorrow’s marketplace.
easier in our Hong Leong Bank Connect
and fast-paced technological changes, Key components of this plan are centred
mobile application following feedback

Annual Report 2020 21

Group Managing Director/
Chief Executive Officer’s Review

around delivering quality development prestigious awards at the HR Excellence STRATEGIC PRIORITIES
interventions where and when needed, Awards 2019 for Excellence in Workplace
The Bank remains completely focused
leveraging on a practical learning Culture, HR Leader of the Year, Excellence
on its mission of building a highly digital
framework, through multiple channels in HR Team Collaboration, Young HR
and innovative ASEAN financial services
and employee engagement sessions. Talent of the Year and Excellence in HR
institution, grounded in our calling to
Innovation.
make banking easier, more convenient
For example, to-date, a little over 2,000
and bringing meaningful value add to
of our employees have been trained in In response to the COVID-19 pandemic,
our customers. Our strategic priorities
design thinking concepts, with more HLB moved to ensure the safety of our
are helping us to do this every single
in the pipeline to undergo this type of employees and to reduce the risk of cross
day, as our “Digital at the Core” ethos
training. These workshops have greatly infection by swiftly instituting business
has truly taken root across the Bank,
enabled us to shift the workforce culture continuity plans, social distancing and
delivering numerous innovations that
from being process driven to being laser work from home arrangements. Being
unlock and preserve value even through
focused on customer outcomes. a company that has embraced being
the challenging times we have been
“Digital at the Core”, the shift was an
facing. During the year under review,
In terms of employee engagement, easy one as employees made use of
we have constantly reminded ourselves
the introduction of the cloud-based platforms such as Workchat video calls,
about our responsibility to advocate a
Workday platform has helped streamline remote system access and other digital
strong customer-centric culture, while
talent management and learning and channels to ensure business operations
nurturing our people to perform to the
development, while the introduction continued smoothly. Our efforts were
best of their abilities. As a result of the
of Workplace, a Facebook application acknowledged by Euromoney through
foundations that have been laid over
for enterprises, has made employee the Excellence in Leadership in Asia 2020
the years, the Bank is seeing significant
collaboration faster and easier, and stood award, the only bank in Malaysia to
outcomes through a tumultuous period.
us in good stead when the workforce had win this prestigious award, recognising
to move rapidly to work-from-home or our leadership and resilience for the
back-up sites. Our efforts in the area of support we extended to customers,
human capital development have been the community ecosystem and our
recognised with the Bank clinching five employees.

22 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Group Managing Director/

Chief Executive Officer’s Review

The key strategic priorities that we

focused on to continue to deliver on
our brand promise of “Built Around
You” are: eliminating pain points
01 ELIMINATING PAIN POINTS BY LISTENING TO
CUSTOMERS

by listening to customers; fostering

The events that unfolded at the turn of MAKING BANKING EASIER FOR
employees experience that drives a OUR CUSTOMERS THROUGH
the calendar year into 2020 have clearly
high-performance culture; injecting DIGITALISATION
had disruptive effects on businesses,
momentum into our Digital at the Core
individuals and societies. It has been our Our efforts to optimise the customer
journey; and increasing our support
main priority to help customers weather journey has gained even more traction
to developing a sustainable banking
the storm, by extending repayments/ as we continue to leverage digital
ecosystem to build improved resilience
payments relief and providing the technology to deliver products and
and capabilities amongst those that we
required liquidity at different stages of services built around our customers’
serve, while positively impacting the
the pandemic and during the recovery needs. This year in particular, customers
environment and ensuring our business
phase, helping them rebound as the are now experiencing new and upgraded
activities are sustainable. I will elaborate
economy rebounds. We have provided features throughout our products and
further on our strategic agenda below:
various types of assistance whenever services that were introduced as a result
and wherever possible, and in fact, we of clients’ feedback and insights obtained
Key Strategic Priorities mobilised early in our response to help in 2019. These new features have sought
SME and individual customers with our to eliminate as many pain points as

01 own Customer Financial Relief Plans put

in place at the beginning of February
possible, as we re-imagined the customer
journey through the use of innovation to
ELIMINATING PAIN
2020. The Bank has also leveraged on give customers a seamless, convenient
POINTS BY LISTENING
its “Digital at the Core” ethos to provide and secure banking experience.
TO CUSTOMERS
simple, seamless and straight-through Feedback continues to be collected for
processing and interactions for customers future upgrades to our products and
02 that applied for the various loans and services, as we believe that there are
FOSTERING AN financial relief programs that were always avenues for further improvement
EMPLOYEE EXPERIENCE announced by the government, BNM and to make the banking experience easier
THAT DRIVES A the Bank itself. We have since approved and frictionless.
HIGH-PERFORMANCE more than a total of RM1.2 billion
CULTURE funding for over 1,500 SMEs under the The new HLB Connect App is a clear
SRF, providing timely and much needed example of the results from our joint
03 support to SMEs. In an effort to further efforts with our customers. The new
INJECTING MOMENTUM support SMEs, HLB has also provided application gives clients the freedom
INTO OUR DIGITAL AT an additional RM500 million loans from to customise their digital banking
THE CORE JOURNEY its own funds to more than 600 SMEs experiences, reduces the number of
supplementing the SRF to address the steps needed to make payments,
04 financing gap, filling the demand from
SMEs to shore up their finances and
introduces real time credit and debit card
transaction status and keeps track of
DEVELOPING A
SUSTAINABLE BANKING reboot their businesses. the most recent payments so that it can
ECOSYSTEM be easily accessed again - making the
For more information on how HLB mobile banking experience even more
responded to the COVID-19 pandemic pleasant. We have received positive
to help customers, employees and feedback from customers on our efforts
communities, please refer to page 32. in improving their digital experiences
with the Connect Online Banking and HLB
Connect App achieving an 85% customer
satisfaction score in FY2020.

Annual Report 2020 23

Group Managing Director/
Chief Executive Officer’s Review

01 ELIMINATING PAIN POINTS BY LISTENING TO CUSTOMERS

HLB has also expanded this ‘zero’ queue experience, the tablet additional biometric facial recognition
customer-centricity approach to our has empowered branch staff to deliver feature, which simplifies the process
subsidiary in Vietnam with the launch greater value-add through digital tools further.
of digital banking services via its and the simultaneous reduction of
mobile banking platform, HLB Connect. time spent on operational duties. As Given the backdrop of the working
Customers can use this platform to of August 2020, the Bank has deployed environment, we have seen a wider
enjoy fee-free financial services, shop the tablets to over 150 branches and adoption of digital technology as
for e-vouchers and also apply for a bank plans to expand this to all remaining well as adaptation to more digitally
account which comes with a ready-to-use branches by the end of FY2021. enabled business models amongst
virtual Visa prepaid card, without ever our SME customers. Building on this
having to visit a physical branch. Listening to our Business customers, and leveraging on our “Digital at the
and true to our brand promise of “Built Core” ethos, HLB reached out to various
Our branches continue to play a Around You”, in FY2020 we were able partners in the digital ecosystem in the
critical role in meeting the needs to simplify the process of approving area of food and beverage, payments
of customers and we are actively banking transactions which this segment and e-commerce platforms to help
expanding the introduction of of customers felt was unnecessarily SMEs get through this difficult period.
In-Branch tablets throughout the branch complex. The introduction of an eToken For example, we partnered with WeEat
network to further improve customer linked to a mobile phone to authenticate to launch a food ordering and payment
service efficiency. In FY2020, further banking transactions, in replacement platform at a fraction of the fees charged
enhancements were made to the of a physical security token, has since by competitors and we also launched
tablet to provide added functions in the seen an encouraging take-up rate as it FastCollect in partnership with PayNet,
areas of new account opening, product has effectively removed a pain point of which allows businesses to quickly
application, account management significant concern while providing the register as a JomPAY biller and start
and data-enabled personalised offers. same level of security but at a greater receiving payments faster.
In addition to customers enjoying a efficiency. This eToken also has an

24 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Group Managing Director/

Chief Executive Officer’s Review

02 FOSTERING AN EMPLOYEE EXPERIENCE THAT DRIVES A

HIGH-PERFORMANCE CULTURE

We strongly believe that to deliver an bit-sized learning content, anytime RESOLVING CHALLENGES TOGETHER
outstanding customer experience, it is and anywhere. With the launch of the BY FOSTERING MEANINGFUL
crucial that the Bank and our employees Workday platform which incorporates the RELATIONSHIPS
use digital technology internally for learning functionality found previously in People thrive on relationships to learn, to
almost everything we do. Expanding on our Smartup mobile platform, HLB is now be inspired and to improve. Whilst settings
our “Digital at the Core” ethos, we have also able to assign courses to specific have changed, the best experiences are
integrated digitalisation into many parts segments of our employee population, fostered through human connections
of the employee journey and experience, mirroring the intent of role-based even in a world that is highly reliant on
giving employees a strong foundation training that is available to our frontline technology. It is one of the reasons we
on which to further improve their skills or customer-facing employees. organised an internal hackathon last year,
and to achieve their career aspirations. At placing senior regional heads, branch
the same time, as employees experience During the MCO, we began testing managers, front, middle and back office
“digital” in their daily work tasks, they the response of curated learning by staff together to focus on resolving work
are better equipped to empathise and promoting online learning around the and/or customers’ challenges and having
see the customers’ view point, making pillars of personal growth, productivity them take the driving seat to bring about
digital customer offerings more attuned and wellbeing. The response to date real business change through their ideas
to human behaviour. At the same time, has been encouraging enough for us and collaborative solutions.
we have not neglected the human touch, to turn these offerings into permanent
understanding that employees will be far available modules. The pilot was also a At the heart of workforce engagement
more engaged and productive by being precursor to the next phase of eLearning and productivity lies meaningful
able to have meaningful interactions – to integrate curated learning from cloud conversations. Over the past year we have
with their co-workers and managers. vendors with Workday and use it to drive coached our people managers to have
specific skillsets for selected employees. meaningful retention conversations by
Over the past 12 months we have For example, customer service staff who actively discovering their team members’
continued to see further encouraging may require refresher courses in customer career aspirations. People managers
results towards empowering, engaging etiquette and communication or pointers and employees have responded very
and developing our people to ensure that on how to remain motivated and resilient positively, taking on the responsibility of
they continue to reach their full potential. whilst working remotely. helping us nurture a high-performance
Our strategies are designed to build culture. It is this belief in our values and
resilience, agility and entrepreneurial RESHAPING THE WAY WE WORK actions, along with the impetus to keep
skills, to produce a high-performing The MCO had the dual effect of not progressing as an organisation that has
customer-focused workforce. only confirming our learning strategy, led to our continued success.
but also encouraging us to use it as
PERSONALISED LEARNING an opportunity to review the work The Bank is deeply committed to its
EXPERIENCES experience and flexibility in our practices. human capital development journey.
As part of our digital transformation, we We have conducted an employee We continue the discussion in the
have launched a cloud-based people on-line survey to assess their sentiment Management Discussion & Analysis
and performance management solution, towards alternate worksites and section of this report.
namely HLB@Workday to empower work-from-home arrangements and
our people to collaborate and make practices, with the aim of using the
data-driven decisions, in all the markets results to shape future policies and
we operate in. An important aspect of standard operating procedures that could
this platform is that it is also able to possibly provide greater flexibility and
deliver personalised learning experiences further improve the employee experience
to employees, enabling them to consume at HLB.

Annual Report 2020 25

Group Managing Director/
Chief Executive Officer’s Review

03 INJECTING MOMENTUM INTO OUR DIGITAL AT THE CORE JOURNEY

As a core component of our strategic leaving little room for complacency. As a 39,000 customers participating during the
priorities, the Bank’s digitalisation push value creation tool, the digitalisation of campaign period. On offer were exclusive
continues to gain momentum, solidifying the Bank continues to provide multiple benefits and rewards for banking online
the cultural shift in how we create new opportunities across all areas of our and spending at participating outlets,
products, services and features that operations as we strive for frictionless while our commercial partners offered
simplify processes and reduces friction banking in everything we do. This was digital solutions and services.
for our customers and employees. The particularly evident in how we were able
latest slate of improvements in our to swiftly assist our customers to safely Having the right infrastructure is the
digital services being a direct result of apply for financial relief post the onset of bedrock to driving customer centricity and
comprehensive customer feedback that the MCO and various recovery plans since. innovation and our Customer Experience
was then refined and transformed via the Lab (“CX Lab”) in the Damansara City
design thinking process into features that To further drive home the adoption of head office continues to play a pivotal
not only make banking easier, but also digital banking and services, the Bank role in facilitating collaboration sessions
drives further digital adoption. organised its fourth annual Digital where cross-functional business,
Day, which kicked off a month-long operations and technology teams
By providing convenient and line-up of deals and promotions, from as well as ecosystem value creators
omni-channel options that have July 7th 2020. With the aptly theme (e.g. FinTechs, startups & bigtech
eliminated pain points in the customer “Reboot Your 2020” campaign, we technology partners) come together
journey, the Bank continues to see digital stressed that whilst the first half of 2020 to find customer-centric solutions.
adoption rising across all channels. has indeed been challenging for all our These activities include customer
We now have 1.9 million of our retail customers, we invited them to move co-creation sessions, design thinking, UI/
customers registered for Hong Leong ahead with us into the rest of the year. UX design labs, rapid prototyping and
Connect, with over 40 million transactions In this context, recognising the desire agile developments. In addition to this,
executed monthly either through Connect of customers to return to spending time the Bank has launched the Jumpstart@65
online or mobile banking, accounting for with friends and families at restaurants, facility in February 2020, comprising a
86% of our total transactions. No doubt, outdoor activities and domestic travel, co-working space, customer usability
the acceleration in adoption was partly the Digital Day centred its rewards and labs and a community centre to further
driven by the onset of the various MCOs deals around these various activities, emphasize the need for collaborative
in the later part of the financial year, as we partnered with over 35 online, problem solving. Equipped with
with customers taking advantage of the retail and commercial brands, with over state-of-the-art tools like eye tracking
additional cashless payment options technology and 3D printing etc. This is
offered by an increasing number of a place where our employees are able
merchants and vendors. Nevertheless, to observe and participate in customer
we would not have been able to handle immersion sessions like focus groups,
a 13-fold increase in the total amount ethnographic studies, customer-staff
of transaction value of e-wallet top-ups co-creation sessions as well as
between March and May 2020, compared experiencing first-hand how customers
with the same period last year, if our behave and react when they try out
digital platforms were not ready. our pre-launch products/services during
concept and usability testing sessions.
As we review our achievements, and feel
quite proud about the journey so far, it Read more about Jumpstart in the
is important to remind ourselves that the next section which also describes
how we actively contribute to
journey is far from over as competitors
improving the sustainability of the
evolve and customer expectations grow, All-new HLB Connect App & Pocket Connect App banking ecosystem

26 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Group Managing Director/

Chief Executive Officer’s Review

Workshop at Jumpstart@65

Looking internally, we continually strive Bank, allowing us to drive efficiency in across the Bank, some of which are now
to make our business operations more managing and maintaining infrastructure, live, and have helped our people work
resilient, data enabled, and efficient. providing the ability to scale and to do so better, faster and smarter.
Digitalisation allows us to do this, in a nimble manner, thus improving our
by significantly reducing our cost, ability to implement at pace across the Further details about our digital
subsequently boosting our financial countries we operate in. In the past 12 and innovation activities can be
found in the Digital & Innovation
capacity to invest and grow. Today, months, we have embarked on a number
section of the MD&A
we use robotic process automation of enterprise grade cloud-based solutions
to automate a large proportion of our
cheque clearing, credit and collection
operations, credit card operations and
merchant settlement. This has not only
freed up valuable human resources to
focus on high value activities but also
made the back office more efficient. It
has also eliminated any potential human
error, ultimately delivering a faster and
error free experience for our customers.

Alongside process automation, the use

of cloud services will also continue
to play a role in how we transform our
operations. Cloud services provide a
number of real tangible benefits for the Café at Jumpstart@65

Annual Report 2020 27

Group Managing Director/
Chief Executive Officer’s Review

04 DEVELOPING A SUSTAINABLE BANKING ECOSYSTEM

As we evolve and grow through the initiatives carried out in FY2020 are initiative - ‘HLB DuitSmart’, with the
sustained execution of our strategic representative of these aspirations, and support of the Credit Counselling and
priorities, we remain committed to we continue to be encouraged to do Debt Management Agency and University
ensuring that everything we do will more because of the many opportunities of Malaya. This initiative was focused on
in fact bolster and fortify our ability that exist. engaging Malaysians with approachable
to sustainably create value. Thus, and relatable content and activities on
our contribution to the sustainable For example, for our customers, besides financial knowledge and information
development of a vibrant ecosystem our unrelenting focus on digitalisation which helped to demystify financial
continues in earnest, as we apply which has helped to make their banking jargon.
ourselves to protecting the environment, experiences better, the Bank has
and assisting communities and other also realised that a more vibrant and Subsequently, to help Malaysians
stakeholders to bring about long-lasting, sustainable banking ecosystem is closely kickstart their financial education journey
impactful and positive change. HLB is linked to the customer’s financial literacy with the right tools, we partnered with
also deliberately improving its operations and knowledge. Findings from a survey iMoney, an online financial education
and business practices by incorporating we conducted showed that at least platform, to enable a month-long free
environmental, social and governance three-quarters of Malaysians nationwide credit score check. We also activated
(“ESG”) principles into our frameworks rated their financial knowledge as low a year-long on-ground engagement
and processes. to average, while almost two thirds roadshow with the public which included
found financial jargon to be confusing visiting media houses, universities and
We believe the key to helping us succeed and intimidating. This presented the corporate organisations nationwide, as
in this mission is through the acquisition Bank an ideal opportunity to help bridge well as organising Hong Leong Bank
of knowledge, driving innovation and the gap, and we did so with the launch in-branch activities for customers and
embracing digitalisation. Most of our of our very first financial sustainability surrounding communities.

Launch of HLB DuitSmart

28 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Group Managing Director/

Chief Executive Officer’s Review

On the environmental front, we have

noticed a significant shift in customer
sentiment towards going green with
simple things such as bank statements.
Hence, we moved quickly to migrate
those that are not using paperless and
electronic statements (e-statements).
This not only contributes towards
reducing HLB’s environmental impact,
but also supports a seamless transition
for our customers towards a sustainable
lifestyle and reduced carbon footprint.

The urgency to adopt more ecologically

friendly ways of doing business is not
confined to our retail customers, as
we continued to make push into the
renewable energy sector, for example,
underscoring our commitment to ESG
principles. As an industry with significant
growth potential, HLB has committed
RM500 million in financing for renewable ESG framework for SME, Commercial and provides a platform to bring businesses
energy over the next four years focusing Corporate lending/financing to enable us online while expanding the visibility of
on solar, biogas and small hydropower, to assess and screen for environmental and their products and Snaptruck fulfils the
marking our contribution to the nation’s social risks, in addition to the traditional needs of SMEs in the logistics space by
target of 20% renewable energy in its credit, cashflow and collateral risks. For offering cost effective, efficient and
power generation mix by 2025. Within this, we are working with our strategic reliable on-demand transport solutions.
two years, 75% of the RM500 million has partners, the World Wide Fund for Nature These two additions have expanded
already been achieved, indicating that Malaysia and Jeffrey Sachs Center for the ecosystem and complemented our
climate-positive financing is an important Sustainable Development under Sunway existing relationships with Kakitangan,
component of the banking ecosystem. University in order to equip ourselves with an e-human resource and payroll
the right knowledge so that we can build platform; and Biztory, an e-accounting
To add further value to the ecosystem, a internal capacity to implement this initiate solution. As the growth of the SME
portion of the financing is allocated to SMEs Bank-wide. solutions ecosystem gains momentum,
interested in venturing into this industry we have also provided an option for SMEs
and is also providing advisory services to In relation to making SMEs more resilient, to take up key man insurance to serve
enable customers to make well-informed as they account for more than 98% of as protection and savings for business
business decisions surrounding renewable businesses in Malaysia, HLB continues to owners, to help preserve the legacy and
energy equipment and projects. The strive to provide broad-based solutions sustainability of SMEs. Finally, earlier
Bank is also exploring other areas driven by our “Digital at the Core” ethos. in 2020 we created a partnership with
where we can develop similar financing In FY2020, we partnered with two new Avana, a social commerce platform with
opportunities, such as green bonds and tech startups – Bixzee and Snaptruck the intention to help our SME businesses
green car financing. In addition, the Bank – by onboarding them as part of HLB’s grow digitally through Facebook,
is in its final stages of developing an SME Digital Business Solutions. Bixzee Instagram, WhatsApp and more.

Annual Report 2020 29

Group Managing Director/
Chief Executive Officer’s Review

04 DEVELOPING A SUSTAINABLE BANKING ECOSYSTEM

Following the launch of our first CSR HLB commercially today. Additionally, Sustainable banking practices also
platform, ‘HLB Jumpstart’, which has 80% of the alumnus have raised public require participants in the financial
spearheaded our efforts in developing and private funding (Seed to Series A) system and economy at large, to promote
social enterprises, HLB took a significant and many have expanded their business fair banking practices, stamp out dubious
step forward with the launch of footprints across the country because of financial transactions, promote honesty
Jumpstart@65. Situated in a five-storey this programme. and integrity and have zero tolerance for
building in Jalan Tun H.S. Lee, which was corrupt practices. HLB, over the course of
previously a HLB branch, it now houses a As illustrated, the Bank’s sustainability the past year, continued to drive policy
co-working space, customer usability labs journey is closely connected with that of and operational initiatives to ensure that
and a community centre. Jumpstart@65 the vitality of the ecosystem it operates we remain resilient to financial crime
aims to benefit a wide range of audiences in, which includes our customers, the and we maintain a strict anti-bribery and
including startups, social enterprises environment, communities and other corruption stance.
and communities-in-need by providing stakeholders. We will continue to drive
them a space to call their own to further additional initiatives, both digital and For more information on our sustainability
develop their initiatives. non-digital, to enhance our services and practices, please refer to the Sustainability
contribute to the well-being of society. Statement in this annual report on
With the success of SURI and Green Hero, page 73. The statement summarises
our first two HLB Jumpstart participants, HLB is also highly aware of the importance our Sustainability Report 2020 which
we on-boarded Coffee for Good, a social of its role as a financial services provider details our strategies and achievements,
enterprise which offers barista skills in the era of the COVID-19 pandemic, and guided by local and international
training to youth from the B40 community. we remain fully committed to helping standards such as the Bursa Malaysia
In addition to this, Jumpstart@65 also our customers get through this very Sustainability Reporting Guide and the
works with a number of social enterprises difficult period, knowing full well that United Nations Sustainable Development
to empower underprivileged youth with the financial health of our customers is Goals. Our efforts saw us meet globally
skillsets (e.g. coding, 3D printing and key to our own financial wellbeing. You recognised standards, which led to the
design & financial literacy) to create a may find out more about our COVID-19 Bank’s inclusion in the FTSE4Good Bursa
forward thinking, digital and financially response to help customers, communities Malaysia Index since June 2018.
savvy generation. and employees on page 32.

Our contributions to nurturing FinTechs

and startups will be further boosted as
Jumpstart@65 will soon be the primary
venue to house our efforts in this,
supported by our existing Hong Leong
Tower CX Lab. Further efforts around
our HLB LaunchPad programme - a
mentorship programme in collaboration
with ecosystem partners, such as The
Malaysia Business Angels Network,
Cradle & MaGIC to nurture young
startups/Fintechs, have seen our senior
management team dedicate over 1,500
hours to coach and mentor these startups
with 20% of the alumnus engaging with

3rd Social Enterprise Coffee for Good

30 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Group Managing Director/

Chief Executive Officer’s Review

FINAL REMARKS OUTLOOK My gratitude also goes out to all

employees of the Bank and my
While there are signs to suggest that the Looking ahead, the global economy is
management team for your commitment,
world and the domestic economy are expected to contract by 4.9% in 2020
devotion and drive to accomplish all that
on the path to recovery, it will remain before rebounding to growth of slightly
we have set out to do. We are certainly
uncertain with downside risks prevailing more than 5% in 2021, according to
well-positioned to do more, and I feel
until a vaccine is found for COVID-19. This projections given by the International
privileged to helm the Bank during these
new normal will definitely provide us Monetary Fund (IMF). No country has
times.
with opportunities to develop new and been spared from the economic fallout
innovative ways to serve our customers brought by the COVID-19 pandemic, with
Our sincere appreciation also goes out
better and we will endeavour to do so by advanced economies expected to contract
to Bank Negara Malaysia, the Ministry
being agile and responsive. at a faster pace of 8.0% compared to that
of Finance and related government
of emerging economies, at 3.0%.
agencies and regulatory authorities for all
We remain steadfast in our vision to build
the assistance rendered during the year.
a highly digital and innovative ASEAN In the case of Malaysia, we expect the
financial services institution, and to build domestic economy to experience a
For further details on the Bank’s
products and services propositions that contraction in 2020 before rebounding
performance in FY2020, please refer to
reflect our brand promise of “Built Around in 2021, in line with the world economy
the Management Discussion and Analysis
You”, where clients are at the centre which is in the process of recovering from
(“MD&A”) section.
of everything we do. We also remain the double whammy of unprecedented
committed to provide the necessary health and supply & demand shocks.
support and collaborate closely with our While supply is expected to slowly
DOMENIC FUDA
customers to make sure they are able to normalise after the lifting of movement
Group Managing Director/
return to a state of financial normalcy restrictions, overall demand is expected
Chief Executive Officer
as the pandemic subsides. Concurrently, to remain soft given the new procedures
we will continue to improve our cost in place to ensure social distancing
11 September 2020
structure, enabling us to invest in growth compliance and the still cautious
opportunities and deliver sustainable consumer sentiment. Concerns over job
returns to our shareholders. security and a shift in consumer spending
behaviour will also likely affect certain
business sectors. Barring the outbreak
In the year ahead, we will of a second wave of infections, overall
further drive sustainable growth is expected to gradually return as
we move through 2021.
practices into how we
work and what we do as
ACKNOWLEDGEMENTS
well as into the products
HLB continues to maintain its resilient
and services that we performance due to the strong support
offer. It’s imperative that of our stakeholders. We thank our
customers for your feedback and trust
we promote sustainable shown in us, and your encouragement
practices as climate and that supports our passion to serve you
better and to help you through these
environmental changes are challenging times. To our shareholders,
increasingly manifesting we will remain dedicated to creating
sustainable value for you and truly
themselves into risks appreciate your support. As for our
that we, as a financial Board of Directors, your insights and
guidance has helped us achieve much,
institution and corporate and I look forward to your further
citizen, need to tackle, support on our journey together.

influence and manage.

Annual Report 2020 31

HLB’s COVID-19
Response

Key Highlights

Approximately 93% of HLB was amongst the top 3

retail loans and 91% of the
financial institutions in approving
and availing the BNM SRF to SMEs
nationwide that were affected by
SME portfolio are under the slowdown in business activities
the automatic loan moratorium due to COVID-19.
programme.

RM1.2 billion
HLB had also provided an additional

RM500 million from

Approved

for over 1,500 SME its own funds to more than

customers under the BNM

SRF, providing timely and much
600 SMEs supplementing
the SRF to address the financing gap.
needed support to SMEs.

In addition, the Bank had approved

a moratorium for non-SME loans Approximately 35 %
totalling RM5 billion of retail customers
internal Special
under its
Financial Relief
and 39% of SME
Programme (“SFR”).
borrowers continued to repay
their financial obligations, indicating
that we will enter the post-moratorium
period with a reasonable level of
confidence that whilst some customers
will require further assistance come
October 2020, the majority should be
able to resume monthly payments.

32 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

HLB’s COVID-19
Response

The COVID-19 pandemic continues to create uncertainty around

the world, causing significant disruptions to economic activity
and society, as people and governments grapple with how to
manage and live with a persistent and evolving health crisis.

At Hong Leong Bank, we have always had our customers and

employees as our top priority when considering our response to the numerous
changes to the way of life and work that was triggered by the pandemic outbreak.

For our customers, we quickly initiated financial assistance whilst ensuring that we can continue to provide uninterrupted
and support to enable them to access the funds required services.
to sustain themselves during the different stages of the
movement control order and recovery phases, complementing The Bank also deployed assistance in the form of Corporate
the financing moratorium and various other relief measures Social Responsibility activities to help communities-in-need
announced by the government. In fact, many of our initiatives and the underprivileged. Looking ahead, the Bank is committed
began before the implementation of the MCO, as we moved to extending additional assistance to our customers, based
pre-emptively to help individual customers and SMEs while on their individual circumstances, post 30th September 2020
also activating various business continuity initiatives which (end of the auto-moratorium), through the HLB Payment
were predominantly targeted at protecting our employees, Relief Assistance Plans.

IMPORTANT MILESTONES

FEBRUARY MARCH APRIL AUGUST

2020 2020 2020 2020

• The Bank initiated its business • The Bank was fully operating • Commencement of industry • The Bank announced additional
continuity plan for alternate on business continuity mode wide automatic loan moratorium. targeted assistance through
sites for critical functions as when MCO was announced on its Payment Relief Assistance
well as initial working from 18th March. Business continuity Plans, specifically aimed
home flexibility to those plans were also initiated at customers who foresee
employees that were in the in our overseas operations difficulties in restarting regular
high risk category to COVID-19. of Singapore, Hong Kong, payments after the automatic
Vietnam and Cambodia. loan moratorium period ends
• The Bank’s Retail Customers
on 30th September 2020.
Financial Relief Plan was •
Bank Negara Malaysia’s
initiated. Special Relief Facility for SMEs
began.
• The Bank’s Special Financial
Relief Programme for
corporates and SMEs was
initiated.

Annual Report 2020 33

HLB’s COVID-19
Response

What we did for

our customers
As a customer-centric bank, HLB looked beyond the various financing relief initiatives BNM and the government introduced, as we sought
to not only safeguard the health of our customers, but to provide convenience whilst protecting their financial sustainability and business
viability. As such, the principle of 'We are Here to Help' guided many of our initiatives:

• Clear communication to customers regarding our loan/financing • The Bank organised the ‘SME Talk’, a monthly webinar series
relief programs and the automatic moratorium once it was focusing on emerging trends and needs that would benefit
announced by BNM, via emails, HLB website and SMS in the 3 the SME business community, to help them rebuild a stronger
major languages. business while introducing digital tools that could be adapted
into their businesses.
• The Bank simplified and digitised the application process for
BNM’s SRF for SMEs due to the movement restrictions under • Extended financial support to corporate customers on a
the MCO by allowing applications to be done via email, SMS or case-by-case basis to meet their customised needs.
Whatsapp with consent provided via digital signature.
• Provided the option to credit cardholders to convert their balances
• The Bank rolled-out its internal Greenlane SFR Programme, into term loan/financing.
prior to the commencement of automatic loan moratorium. The
• Used analytics to identify and reach out to vulnerable customers
programme which was open to all customers allowed applications
such as the self-employed, highly leveraged, senior citizens/
without the requirement of traditional supporting documents in
retirees, as well as those involved in business activities most
order to enjoy payment relief for up to six months.
impacted by the pandemic to discuss about their cashflow
• Safe banking practices at our branches – amongst others, ensuring outlook and recovery journey and if further financial assistance is
temperature checks and social distancing adherence at all times required.
at the branches and keeping Self-Service Terminals, door handles
• Monitored and analysed customers’ payment behaviours to
and other customer touchpoints safe with regular sanitisation on
identify potential at risk accounts whom are showing early signs
an hourly basis.
of facing financial difficulties. As of June 2020, we have assisted
• Further SME relief support had been provided via BNM’s Micro more than 100,000 customers to restore their CCRIS track record
Enterprise Facility, Automation & Digitalisation Facility, Agrofood to prompt status with various actions to help them with their
Facility, PENJANA SME Financing Scheme and PENJANA Tourism payment behaviour.
Financing Facility. This is to ensure that customers in these
• Many of the initiatives above were implemented in Malaysia as
impacted industries receive the targeted assistance they need.
well as our overseas operations, following local requirements
wherever necessary.

What we did for

communities
Recognising that underprivileged and marginalised communities would be severely impacted by the pandemic, the Bank responded by closing
some of the gap that resulted from lower public contributions due to the COVID-19 pandemic and ensuing MCOs. We also ensured that our
stakeholders in our Jumpstart programme continued to be supported during these difficult times:

• HLB and Hong Leong Islamic Bank pledged a total of RM150,000 provide food pack worth of RM10,000 to Asnaf recipient during
worth of meals for buka puasa and Hari Raya celebrations for 10 the COVID-19 outbreak.
welfare homes nationwide in collaboration with SME customers,
• The Bank also extended support to our first Jumpstart participant,
and in addition to cash aid for these homes to buy essentials.
SURI, a denim upcycling social enterprise and changed their
• HLB donated RM1 million to MERCY Malaysia through the output into Personal Protective Equipment (“PPE”) suits for
Association of Banks Malaysia as part of a collective contribution medical frontliners at Klang Hospital. HLB subsidised their labour
to support critical preparedness, readiness and response to cost, to help ensure underprivileged single mothers had an
COVID-19 cases. income to weather the pandemic.

• HLISB as part of the Association of Islamic Banking Institutions • Other social enterprises HLB worked closely with are The Asli
Malaysia, gave out Zakat contributions of RM10,000 pledged to Co., who works with Orang Asli mothers and Coffee For Good, by
upgrade medical facilities at Hospital KL and Hospital Sg Buloh. empowering underprivileged youths to earn a sustainable income
HLISB also partnered with a digital platform, Global Sadaqah, to and overcome challenges faced as a result of the health crisis.

34 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

HLB’s COVID-19
Response

What we did for What we did

our employees to protect loan

The safety and well-being of our employees remains a key priority. portfolio quality
Even before the MCO was announced, our business continuity plan
and split operations had been activated to safeguard their health As part of the Bank’s pre-emptive strategy to protect the
at the onset of the pandemic. At the peak of the MCO, 67% of our retail, SME, commercial and corporate loans portfolio quality,
workforce were working from home and these employees were
the following initiatives were implemented:
provided with the necessary tools to do so.
• The Bank’s Retail, SMEs and Corporates Financial Relief Plans
Some of our other initiatives included:
were initiated.
• Giving priority to high risk groups such as expectant and nursing
• Rolled out the auto-moratorium programme for Retail and SME
mothers and employees with underlying health conditions to
borrowers in conjunction with the industry wide initiative.
commence working from home.
• Participated in the BNM SRF financing programme for SMEs
• Employees were encouraged to practice staggered work hours to
affected by COVID-19.
avoid crowds during peak hour.
• Rolled out the Greenlane Special Financing Relief/R&R Programme
• Consistent communication Bank-wide to employees on measures
for non-SME borrowers.
undertaken by the Bank to ensure transparency and ease
anxieties that they may have/were experiencing. • Conducted sectoral reviews to identify vulnerable sectors
that were stressed due to drastic changes to macro-economic
• Commissioning a doctor specialising in Occupational Health &
variables and disruption to overall business environment from
Safety to be stationed at our premises as an expert consultant
the effects of the COVID-19 pandemic.
to provide guidance and advice on ensuring the processes and
policies that we have in place are sufficient and robust. • Individual reviews were conducted on customers under the
identified vulnerable sectors (approximately 4% of total Business
• From the onset, regular broadcasts to encourage staff to wear
and Commercial Banking portfolio) to ascertain the degree of
masks in common areas and practice proper hygiene at all times.
stress and assistance required.
• Provision of masks and sanitising materials for employees
• Individual reviews were further extended to cover BCB’s top
and customers visiting our branches/premises to keep all our
exposures and watchlist names. In total, the reviews covered
workplaces clean and safe from the virus.
approximately 50% of overall Business and Commercial Banking
• HLB@Workday, our cloud-based people and performance portfolio.
management system, enabled employees to provide proof of
• Leveraged on data analytics to review and analyse customers’
employment digitally and for HR to develop timely responses
behavior in the Retail and SMEs portfolios (commenced and
in accordance to developments in Malaysian National Security
on-going)
Council (“MKN”)/BNM requirements.
a. Analysis of repayment behavior to determine which borrowers
• Establishing a COVID-19 Standard Operating Procedure (“SOP”)
continued to repay during the moratorium and hence showing
to ensure employees nationwide would be able to adapt and
signs of limited impact.
manage the pandemic risk without compromising on their
wellbeing whilst maintaining productivity/service levels. b. Analysis of the savings, debit and credit cards activities for
retail customers and business current account activities for
• Continue building on earlier efforts to ensure the SOPs are guided
SMEs and corporates to gauge pace of business recovery
by and meet the requirements of BNM, MKN and Ministry of
during the various MCO stages.
Health Malaysia under the Recovery MCO.
c. Analysis of borrower CCRIS, litigation and trade reference data
• Alternative work sites, staggered work hours and split-operations
to forecast potential delinquencies, repayment capacity and
are now part of the Bank’s sustainable practices, in the event that
credit build up of SME borrowers and guarantors.
subsequent infection waves occur.
d. Provided flexibility to borrowers to make partial or full
• Virtual meetings are compulsory unless face-to-face is
payments on accounts that were delinquent prior to 31 March
unavoidable.
2020 so that they have the opportunity to rehabilitate their
credit track record, hence improving their ability to manage
loan commitments post moratorium as well as improve their
ability to apply for new credit as the economic situation
improves.

Annual Report 2020 35

Management Discussion & Analysis
Financial Review

1. FINANCIAL HIGHLIGHTS

SUMMARY OF GROUP PERFORMANCE

FY2019 FY2020 Growth %
Profitability & Efficiency (RM’million)
Total Income 4,726 4,778 1.1%
Operating Profit 2,634 2,675 1.5%
Profit Before Tax 3,186 2,989 -6.2%
Profit After Tax 2,665 2,495 -6.4%
Underlying Profit After Tax* 2,574 2,603 1.1%
Earnings Per Share (sen) 130 122 -6.4%
Net Interest Margin 1.96% 1.88% -0.08%
Cost-to-Income Ratio 44.3% 44.0% -0.3%
Return on Assets 1.30% 1.16% -0.14%
Return on Equity 10.8% 9.5% -1.3%
Underlying Return on Equity* 10.4% 9.9% -0.6%

Balance Sheet (RM’million)

Total Assets 207,369 221,278 6.7%
Gross Loans, Advances and Financing 137,566 145,932 6.1%
Customer Deposits 163,070 173,493 6.4%

Asset Quality
Gross Impaired Loan Ratio 0.78% 0.61% -0.17%
Loan Impairment Coverage Ratio 118% 142% 24%
LIC Ratio (provisions and security value on GIL) 171% 184% 12%
LIC Ratio (including Regulatory Reserve) 197% 236% 39%

Liquidity and Capital Ratios

Loan-to-Deposit Ratio 84.4% 83.5% -0.9%
Common Equity Tier 1 Capital Ratio 13.1% 13.7% 0.5%
Tier 1 Capital Ratio 14.1% 14.2% 0.2%
Total Capital Ratio 16.3% 16.5% 0.1%
Note: *Excluding one-off gain on divestment of joint venture (“JV Gain”) of RM90 mil in FY2019 and net modification loss (“Mod-Loss”) of RM108 mil (net of tax) in FY2020.

SELECTED KEY PERFORMANCE INDICATORS

Total Income Opex & Cost-to-income Ratio Operating Profit

Healthy topline underpinned by above industry CIR improved with positive JAWS attained Resilient operating profit against challenging
loan growth and improved non-interest income backdrop
contribution, partially mitigated by modification loss 44.3% 44.0%

42.8% Ex 11% Ex Mod-Loss* & JV Gain^

6% Ex Mod-Loss* & JV Gain^
Mod-Loss*
RM’mil RM’mil RM’mil
1% 1% 2%

4,726 4,778 2,104 2,634 2,675

2,092

FY2019 FY2020 FY2019 FY2020 FY2019 FY2020

Note: *Excluding net modification loss of RM142 mil in FY2020.

^Excluding one-off gain on divestment of joint venture of RM90 mil in FY2019.

36 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Management Discussion & Analysis

Financial Review

GIL & Coverage Ratio Gross Loans/Financing Customer Deposits

Asset quality remained solid with sufficient Sustained loans/financing growth momentum Deposit growth driven by good CASA
coverage led by key segments of mortgages, SME and expansion
184% commercial banking
171% LIC
(Provisions
142% made on GIL
and security
118% value)

RM’bil RM’bil
6% 6%

0.78% 145.9 173.5

0.61% 137.6 163.1

FY2019 FY2020 FY2019 FY2020 FY2019 FY2020

SOLID OPERATING METRICS & PROFITABILITY IMPROVING BALANCE SHEET

The Bank has continued to produce solid results across key Notwithstanding the overall industry’s subdued credit growth
operating metrics, outperforming industry numbers and making in FY2020, our gross loans, advances and financing growth
clear and consistent improvements across underlying business recorded strong expansion of 6.1% y-o-y to RM145.9 billion,
drivers. We have improved our asset quality, experienced strong predominantly led by growth in our key segments of mortgages,
loans growth and protected our net interest margin (“NIM”) even SME and commercial banking. Meanwhile, our customer deposits
as the entire banking industry faced unprecedented disruptions for FY2020 grew 6.4% y-o-y to RM173.5 billion, demonstrating
from the COVID-19 pandemic, subsequent economic downturn the Bank’s strong retail franchise which boasts a solid individual
and interest rates cuts. deposit mix of 53.3%. As a result, the Bank’s loan-to-deposit
ratio (“LDR”) remains prudent at 83.5% and liquidity coverage
Total income for FY2020 recorded a 1.1% y-o-y growth to RM4,778 ratio ("LCR") at 137%, supportive of maintaining smooth business
million, on the back of loan book expansion and improved operations and future business growth.
non-interest income (“NII”) contribution, after the impact of
the one-off modification loss, which arose as a consequence of SOLID ASSET QUALITY
providing payment relief to individual Hire Purchase and Islamic The Bank continued to uphold outstanding asset quality,
Fixed Personal Financing customers. showing improvement on this metric from the previous year
with a gross impaired loan (“GIL”) ratio of 0.61% despite the
Operating expenses where managed tightly, consequently underlying concerns in the credit markets due to the economic
showed a slight increase of 0.6% y-o-y to RM2,104 million consequences of the actions taken to combat COVID-19. Loan
while the cost-to-income ratio (“CIR”) reduced to 44.0%, with impairment coverage (“LIC”) ratio remains prudent at 142%,
positive JAWS attained for the year. Excluding the modification one of the strongest in the industry. It is worth noting that
loss, CIR would have improved to 42.8%. The improvement in the provisions on GIL coupled with security value of these GILs
CIR indicates the effectiveness of our digitisation efforts and improves the LIC ratio further to 184%, providing a buffer for
strategic cost management initiatives to drive efficiencies. future non-performing loans/financing formation.

Operating profit for FY2020 was RM2,675 million compared to ROBUST CAPITAL POSITION
RM2,634 million in the same period last year. Correspondingly,
The Bank continues to maintain a strong capital position with
the Bank concluded the financial year with profit before tax
Common Equity Tier 1 (“CET 1”), Tier 1 and Total Capital Ratios
(“PBT”) and profit after tax (“PAT”) at RM2,989 million and
at 13.7%, 14.2% and 16.5% respectively. BNM’s relaxation of
RM2,495 million respectively. Excluding the impact from the
prudential buffers allows the Bank to release regulatory reserve
one-time modification loss, PBT and PAT would have been higher
if need arises, which would boost capital levels further.
at RM3,132 million and RM2,603 million respectively.

Earnings per share (“EPS”) was lower at 122 sen for FY2020.
Despite the uncertain operating environment, the Bank achieved
a healthy return on equity (“ROE”) of 9.5% in FY2020.

Annual Report 2020 37

Management Discussion & Analysis
Financial Review

2. KEY PERFORMANCE INDICATORS (KPIs)

FY2020 KPI ACHIEVEMENT

Target FY2020 Achieved FY2020 Ex Mod-Loss*

Gross Loan Growth 6% to 6.5% 6.1% y-o-y 6.1% y-o-y

Net Interest Margin ~1.9% 1.88% 1.96%

Non-Interest Income Ratio >27% 28.7% 27.9%

Cost-to-Income Ratio <45% 44.0% 42.8%

Gross Impaired Loan Ratio <1% 0.61% 0.61%

Return on Equity ~10% 9.5% 9.9%

Note: *Excluding net modification loss of RM142 mil in FY2020.

In light of the headwinds experienced and one-off modification loss due to the loan moratorium initiatives, we are pleased to have
achieved a set of commendable results in FY2020. We have also illustrated above what our results would have been in the absence of
the modification loss.

• Loans growth of 6.1% y-o-y, predominantly driven by growth in key segments of mortgages, SME, commercial banking and
overseas operations.

• NIM for FY2020 held steadily at 1.88% despite three OPR cuts of a combined of 100 bps during the financial year. Excluding
modification loss, NIM would have been higher at 1.96%.

• Non-interest income ratio stood at 28.7% for the year, ahead of our guidance of above 27%.

• CIR ratio was enhanced to 44.0% as we continue to exert prudent cost management during this challenging year whilst continuing
focus on growth. Underlying cost productivity was stronger, if one adjust for the lower income due to the modification loss.

• Asset quality indicators remains solid with GIL <1% per our guidance.

• ROE for the financial year was close to guidance at 9.5%. Without the modification loss, we would have ended the year on a
stronger footing, demonstrating resiliency in our underlying business with ROE at 9.9%.

38 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Management Discussion & Analysis

Financial Review

FY2021 TARGETS

FY2020 Actual

6.1% 1.88% 44.0% 0.61% 9.5% 27.9%

y-o-y

Gross Loan Net Interest Cost-to- Gross Impaired Return on CASA Mix
Growth Margin Income Ratio Loan Ratio Equity

Target FY2021

5% to 6% 1.95% to 2% <43% <1% 9.5% to 10% >26%

• Moving forward, we believe that our strategic and tactical plans executed over the past few years put us in a position of strength,
along with commendable loans growth and solid asset quality, giving us confidence that we will be able to face the uncertainties
ahead and deliver performance commensurate to these strengths.

• For FY2021, the Bank has set targets for loan growth to be around 5% to 6% with a ROE within the range of 9.5% to 10%. We are
guiding NIM to be within the range of 1.95% to 2% and CASA mix above 26%.

• Management intends to continue prudently managing expenses as well as upholding our strong asset quality. With that, CIR is
expected to be maintained below 43% whilst GIL ratio should be able to be kept below 1%.

3. INCOME STATEMENT ANALYSIS

INCOME STATEMENT SUMMARY

RM’mil FY2019 FY2020 Growth %
Net interest income 3,392 3,406 0.4%
Non-interest income 1,334 1,373 2.9%
Total Income 4,726 4,778 1.1%
Operating expenses (2,092) (2,104) 0.6%
Operating profit before allowances 2,634 2,675 1.5%
Allowances for loan and other impairments (11) (327) ->100%
Share of profits from associates 563 642 14.1%
Profit before tax 3,186 2,989 -6.2%
Profit after tax 2,665 2,495 -6.4%
Underlying profit after tax* 2,574 2,603 1.1%

Note: * Excluding one-off gain on divestment of joint venture of RM90 mil in FY2019 and net modification loss of RM108 mil (net of tax) in FY2020.

Annual Report 2020 39

Management Discussion & Analysis
Financial Review

Total income for FY2020 increased 1.1% y-o-y to RM4,778 million, on the back of loan book expansion and improved non-interest income
contribution, partially mitigated by modification loss, and OPR cuts.

Operating expenses for the year were marginally higher by 0.6% y-o-y to RM2,104 million. Accordingly, CIR was improved y-o-y to 44.0%
due to prudent cost management.

Consequently, operating profit before allowances was 1.5% y-o-y higher at RM2,675 million.

During the year, there were higher impairment allowances of RM327 million as we made prudent provisioning to mitigate potential credit
risks arising from the COVID-19 pandemic and the post auto-loan/financing moratorium period ahead.

Profit contributions from our associates, mainly from BOCD, remained strong at RM642 million, a 14.1% y-o-y increase compared to the
same period last year. BOCD performance remained resilient and recovered quickly from the China lock-down COVID-19 pandemic period.

With this resilient performance, PBT and PAT for FY2020 were RM2,989 million and RM2,495 million respectively. Without the impact of the
modification loss, PBT and PAT would have been higher at RM3,132 million and RM2,603 million respectively.

A) NET INTEREST INCOME

Despite OPR being reduced three times to 2.00% during the financial year, we were able to uphold NIM at 1.88% for FY2020,
indicating the Bank’s resiliency during this challenging economic environment. Accordingly, net interest income for FY2020
increased 0.4% y-o-y to RM3,406 million when compared against FY2019, as a result of healthy loans growth coupled with the
easing cost of funds, dragged down by one-off modification loss recorded in the fourth quarter.

Modification loss arising from the modification of cash flows due to the automatic moratorium on loan repayments/payments
arrived at RM142 million.

The repricing of loan assets from the combined 100bps OPR cuts during the financial year resulted in yields for FY2020 dropping by
49bps y-o-y, while interest income declined 5.8% y-o-y. Nevertheless, interest expense fell at a faster pace of 10.1% y-o-y as we
tightly managed our cost of funds, which was lower by 36bps y-o-y mainly due to the repricing of Fixed Deposits and improved
CASA mix.

If we were to exclude the impact from OPR cuts and modification loss, net interest income for FY2020 would have recorded higher
growth of 8.4%, with NIM at 2.03%.

Down by
No OPR cut and ex
100bps
Mod-Loss scenario
3.00% 3.00%
2.50%
2.00% 7bps
2.03% y-o-y
1.96% 8bps
2.04% 1.88% y-o-y
2.03%
1.92%
1.84%
1.62% 3,677 8.4%
3,406 0.4% y-o-y
3,392 y-o-y
912
882 839
773

RM’mil RM’mil

Q1FY20 Q2FY20 Q3FY20 Q4FY20 FY2019 FY2020 Adjusted

FY2020
Net Interest Income OPR NIM NIM (Ex Mod-Loss)

40 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Management Discussion & Analysis

Financial Review

B) NON-INTEREST INCOME
Non-interest income for FY2020 increased by 2.9% to RM1,373 million, with the NII ratio higher at 28.7% due to strong performance
in Markets/Treasury and wealth management business.

Trading and investment gain for the year increased by 36.0% y-o-y to RM538 million, mostly driven by higher realised gains
from sales of FVOCI, partially offset by unrealised losses of financial instruments. We have approximately RM342 million of FVOCI
revaluation reserve which provides potential opportunity in the new financial year.

Fee income dropped by 11.1% y-o-y, attributable to lower credit card fees mainly due to the downward adjustment of the
interchange rate and the decline in retail spend during the MCO period. This was partly off-set by strong performance in the wealth
management portfolio.

Foreign exchange (“FX”) gain was 48.7% lower y-o-y at RM78 million on the back of higher FX trading losses and reduced FX
franchise business as business activities reduced in the second half of the financial year due to the MCO and slow recovery
thereafter to June 2020.

Potential opportunity in new FY with FVOCI

28.2% 28.7% revaluation reserve of ~RM342 mil

RM’mil 1,334 1,373 Trading & Investments

of which
90 Net gain
236 FY2019 FY2020
110 from sale of 122%
78 RM164 mil RM364 mil
152 FVOCI

396 538
Fee income
of which Credit Card FY2019 FY2020
16.6%
Fees RM239 mil RM199 mil
585 521

Wealth FY2019 FY2020

FY2019 FY2020 10.6%
Management
Fee income Trading and investment Forex Islamic and others
RM108 mil RM120 mil
Income
Divestment of joint venture Non-interest income ratio

Annual Report 2020 41

Management Discussion & Analysis
Financial Review

C) OPERATING EXPENSES
We continue to manage our expenses with discipline especially during these challenging times. Operating expenses for FY2020
were kept flattish at RM2,104 million, while CIR improved to 44.0% on positive JAWS. Without the modification loss, CIR would have
been significantly better at 42.8%. Performance was even better on the domestic front, as CIR was enhanced to 41.4% for FY2020,
as we continue to drive efficiency through our strategic cost management initiatives and digitisation efforts.

Personnel costs, which accounted for 56% of total operating expenses, increased only 1.6% y-o-y to RM1,166 million due to higher
salaries and personnel related costs as we are focused on driving productivity to offset pressures on the income line.

Marketing expenses recorded a decrease of 12% y-o-y due to decrease in sales incentives from weakened sales momentum
because of the MCO and lower credit card rewards. Establishment costs and administrative expenses were kept relatively flat y-o-y.

Domestic
42.9% 41.4%
CIR
Composition of Operating Expenses

44.3% 44.0% Admin and general

12%

42.8% Marketing
7%
2,092 2,104 Personnel
254 258 cost
174 153
FY2020 56%
516 526

1,148 1,166 Establishment

RM’mil
25%
FY2019 FY2020

Personnel cost Establishment Marketing

Admin and general CIR CIR (Ex Mod-Loss)

4. GROSS LOANS, ADVANCES AND FINANCING

MAINTAINED GROWTH MOMENTUM, GROWING DOMESTIC MARKET SHARE

FY2019 FY2020
Gross Loans, Advances and Financing by Domicile RM’million % Contribution RM’million % Contribution Growth %
Total Domestic Operations 130,456 95% 138,163 95% 5.9%
International Operations 7,111 5% 7,769 5% 9.3%
of which
Singapore 5,224 4% 5,250 4% 0.5%
Hong Kong - - - - -
Vietnam 617 0.4% 909 0.6% 47.4%
Cambodia 1,270 0.9% 1,609 1.1% 26.8%
Total Gross Loans, Advances and Financing 137,566 100% 145,932 100% 6.1%

42 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Management Discussion & Analysis

Financial Review

Growth of gross loans, advances and financing continued its upward trajectory, expanding 6.1% y-o-y to RM145.9 billion, a pleasing
result considering such a cautious consumer and business environment. The Bank’s key segments of mortgages, SME and commercial
banking remain the main driver of loan growth, supplemented by a strong lending franchise expansion in Vietnam and Cambodia.

In terms of geographical breakdown; domestic loans/financing, which represents 95% of the Bank’s total loan/financing book, grew
faster than the industry average at 5.9% y-o-y to RM138.2 billion as at 30 June 2020. Overseas loans grew 9.3% y-o-y to RM7.8 billion,
led by strong expansion in Vietnam and Cambodia which experienced a 47.4% y-o-y and 26.8% y-o-y growth to RM909 million and
RM1.6 billion, respectively.

Gross Loans, Advances and FY2019 FY2020 Domestic

Financing by Key Segments RM’million % Contribution RM’million % Contribution Growth % Market Share %
Residential Properties 67,438 49% 73,336 50% 8.7% 12%
Transport Vehicles 17,489 13% 16,769 11% -4.1% 9%
SME 21,504 16% 22,643 16% 5.3% 8%

Our residential properties segment continued to grow at a healthy pace of 8.7% y-o-y to RM73.3 billion, backed by a solid loan
pipeline while transport vehicle loans growth was muted on lower car sales during the MCO period to close at RM16.8 billion.

FY2019 FY2020

SME (RM’mil) y-o-y Growth SME (RM’mil)

21,504 22,643
5.3%

Community SME Community SME

Banking (RM’mil) Banking (RM’mil)

5,808 32.8% 7,712

Reported SME loans growth was commendable with a 5.3% y-o-y increase to RM22.6 billion. This performance was boosted by BNM’s
SRF, which we were able to quickly roll out to SMEs that urgently needed liquidity post the start of the MCO. In addition, within
this SME portfolio, the Bank’s community banking initiative continues to grow from strength-to-strength with convincing growth of
32.8% y-o-y.

Annual Report 2020 43

Management Discussion & Analysis
Financial Review

5. ASSET QUALITY

ASSET QUALITY - STRONGER FOOTING TO FACE THE UNCERTAIN TIMES AHEAD

1.63% 1.60%
1.58%
1.56%
1.45%

0.96% 0.98%
0.87%
0.78%

0.61%
1,401
1,203
1,126 1,071
890

RM’mil

FY2017 FY2018 FY2019 Q3FY20 Q4FY20

Gross impaired loans GIL Ratio Industry GIL Ratio

Asset quality remains a key concern during these times, and whilst we provide support to our stakeholders, we also tightly manage our
portfolio to ensure that asset quality remains robust. The Bank’s GIL ratio saw a good downward trend during the June 2020 quarter and
ended at a record low 0.61% as at 30 June 2020, demonstrating that the Bank’s initiatives to proactively engage customers and work
with them on payment plans yielded desired results.

Industry Average
Asset Quality by Key Segments FY2019 FY2020 as at June 2020
Residential Properties 0.56% 0.47% 1.08%
Transport Vehicles 0.70% 0.42% 0.56%
SME 1.54% 1.33% 2.53%

Asset quality of our key segments continued to show improving GILs which are below the industry averages, with GIL ratios for
residential properties, transport vehicles and SME at 0.47%, 0.42% and 1.33% respectively.

44 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Management Discussion & Analysis

Financial Review

Loan Impairment Coverage (LIC)

184%
171%
159%
151%
148%
Inclusive of
142% ECL buffer:
RM220 mil
118% FLA:
RM81 mil
96%
91%
89%

93%
91%

84% 84%
82%

FY2017 FY2018 FY2019 Q3FY20 Q4FY20

LIC (provisions on GIL and security value) LIC Industry LIC

With additional provision for forward looking adjustments (“FLA”) of RM81 million and expected credit loss (“ECL”) buffers of RM220
million pre-emptively built up against risks arising from the COVID-19 pandemic and the end of the auto-moratorium period, loan
impairment coverage (“LIC”) rebounded to a comfortable level of 142% as at 30 June 2020. It is worthy to note that the provisions on
GIL coupled with the value of security that we hold on these GILs results in a combined LIC ratio of 184%.

6. CUSTOMER DEPOSITS

DEPOSIT GROWTH DRIVEN BY STRONG CASA EXPANSION

FY2019 FY2020
Customer Deposits by Domicile RM’million % Contribution RM’million % Contribution Growth %
Total Domestic Operations 152,895 94% 163,358 94% 6.8%
International Operations 10,175 6% 10,135 6% -0.4%
of which
Singapore 7,921 5% 7,771 4% -1.9%
Hong Kong 255 0.2% 222 0.1% -13.1%
Vietnam 783 0.5% 789 0.5% 0.8%
Cambodia 1,217 0.7% 1,353 0.8% 11.2%
Total Customer Deposits 163,070 100% 173,493 100% 6.4%

Total customer deposits grew 6.4% y-o-y to RM173.5 billion, driven mainly by core customer deposits growth both in the domestic and
regional markets. Leveraging on the Bank’s cash management system, CASA expansion was robust at 15.9% y-o-y with an improved
CASA mix of 27.9%.

Domestic customer deposits comprises 94% of the Bank’s total deposit base and grew 6.8% y-o-y to RM163.4 billion. International
operation customer deposits decreased marginally by 0.4% y-o-y.

Annual Report 2020 45

Management Discussion & Analysis
Financial Review

Customer Deposits by Key Product and FY2019 FY2020 Domestic

Customer Type RM’million % Contribution RM’million % Contribution Growth % Market
By key product type of deposits

Demand and Savings Deposits (CASA) 41,725 26% 48,358 28% 15.9% 7%
Fixed Deposits 91,064 56% 94,503 54% 3.8% 8%
Total Core Deposits 132,789 81% 142,861 82% 7.6% 8%

By key type of customers

Individual 85,518 52% 92,514 53% 8.2% 11%

Business enterprises 67,039 41% 69,640 40% 3.9% 6%
Total Customer Deposits 163,070 100% 173,493 100% 6.4% 8%

Core customer deposits comprising demand deposits, savings deposits and fixed deposits represents 82% of our total customer
deposits base. Our core deposits expanded 7.6% y-o-y for an 8% market share. CASA, which are low cost deposits, grew strongly by
15.9% y-o-y to RM48.4 billion and comprised 28% of our total customer deposits. Fixed deposits expanded 3.8% y-o-y to RM94.5 billion,
representing a domestic market share of about 8%.

The Bank continues to maintain stable funding backed by a solid individual deposit base of RM92.5 billion, which expanded 8.2% y-o-y
with a deposit mix of 53%, amongst the highest in the industry.

7. LIQUIDITY

LIQUIDITY POSITIONS REMAINED HEALTHY AND PRUDENT

90.6% 90.6% 90.0% 89.7%

88.7%

84.4% 83.5%
81.2% 82.0%
80.6%

FY2016 FY2017 FY2018 FY2019 FY2020

Industry LDR HLB LDR

Note: Industry data derived from banking system’s commercial banks plus Islamic banks only.

With regards to our funding and liquidity, our position remains stable and prudent with LDR at 83.5%.

46 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Management Discussion & Analysis

Financial Review

FY2019 FY2020
Liquidity Coverage Ratio (LCR) 134% 137%
Loan to Funds Ratio (LTF) 88% 87%
Loan to Funds & Equity Ratio (LTFE) 76% 75%

As at 30 June 2020, the Bank’s LCR position remained comfortable at 137%, exceeding the regulatory requirement. Loan-to-funds (“LTF”)
and loan-to-funds & equity (“LTFE”) ratios are 87% and 75% respectively, well in line with industry numbers.

8. CREDIT RATINGS

Rating Agency Malaysia and Moody’s Investors Services have reaffirmed our long-term and short-term ratings, anchored by our strong
retail and SME franchises, conservative risk appetite as well as sound funding and liquidity positions.

Our consistent performance has translated to strong credit ratings by domestic and international credit rating agencies, as shown below:

Rating Agency Date Accorded Rating Classification Outlook

Rating Agency Malaysia Berhad 12-Dec-19 Long-Term Rating: AAA Stable
Short-Term Rating: P1
Subordinated Notes: AA1
Additional Tier 1 Capital Securities: A1
Moody’s Investors Services Ltd 4-Feb-20 Long-Term Rating: A3 Stable
Short-Term Rating: P2

Annual Report 2020 47

Management Discussion & Analysis
Financial Review

9. CAPITAL MANAGEMENT

INTRODUCTION II) BI-ANNUAL CAPITAL PLAN

HLB’s capital management framework enables the efficient use The Bi-Annual Capital Plan is a three-year strategic capital
of capital by the Bank and its principle subsidiaries, while also plan for the Bank, which highlights capital projections,
ensuring that regulatory thresholds are met or exceeded. requirements, levels of capital and the composition
of the capital and aligns it to the Bank’s business and
In the context of capital sufficiency, the framework outlines the strategic objectives. The plan also considers the concerns
respective risk profiles, management targets and applicable originating from across the spectrum of regulatory, policy
regulatory standards or guidelines that each entity should adhere and stakeholder viewpoints, such as capital buffers, new
to. accounting standards and expectations of investors, analysts
and rating agencies.
The capital management framework aims to:

• Maintain capital ratios at levels above the regulatory CAPITAL INITIATIVES

minimum or internal capital thresholds. The Bank pays considerable attention to ensuring its capital
• Support the Bank’s strong credit ratings. position meets the stringent Basel III capital requirements,
• Be flexible towards future strategic opportunities. expectations from stakeholders and to align with strategic
• Deploy capital efficiently to businesses and optimise return business objectives.
on capital.
• Be resilient during stressful economic and financial Major initiatives undertaken over the years include:
conditions.
I) EQUITY CAPITAL
As at June 2020, the Bank held 39.6 million treasury shares
CAPITAL MANAGEMENT FRAMEWORK that had been bought back previously. These shares which
The Bank’s capital management framework, is detailed out in the are available for sale can further strengthen the Bank’s CET 1.
Internal Capital Adequacy Assessment Process (“ICAAP”), which
is approved by the Senior Management, Board Risk Management II) DEBT CAPITAL
Committee (“BRMC”) and the Board. In addition, the Bank’s The Bank had established a RM10 billion Multi-Currency
capital levels in expected and stressed economic environments Additional Tier 1 Capital Securities (“AT1”) and a RM10 billion
under ICAAP are further evaluated to determine the appropriate Multi-Currency Tier 2 Subordinated Notes (“Sub Notes”).
capital adequacy for the Bank.
Over the year, there was a redemption of RM500 million
I) COMPREHENSIVE RISK ASSESSMENT UNDER ICAAP Innovative Tier 1 Capital Securities in Sep 2019, as
The ICAAP provides the platform to comprehensively assess management felt that capital formation from business
all material risks that the Bank is exposed to and evaluates operations was sufficient to cover capital use and hence did
whether there is sufficient capital to support its business not warrant re-issuing this.
activities in relation to those risks, enabling the Group to
meet its capital management objectives. III) HEALTHY DIVIDEND PAYOUT
The Bank does not have a fixed dividend pay-out policy
As part of this process, the Bank undertakes a variety of but takes into consideration a balance between growth
stress tests that examine if the level of capital, derived from and proactive capital management to ensure the long-term
the Bank’s annual budget, is adequate to weather adverse sustainability of dividends to its shareholders. The Board
economic situations or a rapid economic downturn. has proposed a final dividend of 20 sen per share, bringing
the total dividend to 36 sen for the FY2020, with dividend
Based on the results, the Bank will calibrate its internal payout ratio of 30%.
capital targets accordingly and review these targets annually
to ensure that capital levels are maintained above regulatory
requirements and is able to accommodate the Bank’s needs
during times of difficult economic conditions.

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Financial Review

CAPITAL ADEQUACY RATIO • Higher Loss Absorbency (“HLA”) requirement per Table
1 for FIs designated as Domestic Systemically Important
I) MINIMUM CAPITAL ADEQUACY REQUIREMENTS
Banking Institutions (“D-SIBs”) by BNM:
Under BNM’s Capital Adequacy Framework, banks are
required to maintain a minimum CET 1 ratio of 4.5%, Tier 1
Bucket HLA requirement
Capital Ratio of 6.0% and Total Capital Ratio of 8.0%.
(as % of risk-weighted assets)
II) CAPITAL BUFFER REQUIREMENTS 3 (empty*) 2.0
Furthermore, banks are also required to hold the following 2 1.0
capital buffers over and above the minimum capital 1 0.5
requirements:
Note: * An empty bucket will be maintained above the current
• Capital Conservation Buffer (“CCB”) of up to 2.5% to highest populated bucket (3) as a pre-emptive measure for D-SIBs
ensure banks build up capital buffers during normal with higher systemic importance in the future. If the empty bucket
times that can be drawn down during periods of stress. becomes populated in the future, an additional bucket with a higher
It is phased in from 1 January 2016 at 0.625% per year, HLA requirement shall be added.

to reach 2.5% on 1 January 2019.

• BNM will review the list of D-SIBs on an annual basis.
Due to the COVID-19 outbreak, with effect from 24 However, they may also review the list as and when deemed
March 2020, BNM allowed FIs to drawdown the 2.5% necessary if there are major structural changes in the
CCB. Subsequently, FIs are required to restore the CCB banking system, e.g. a merger or significant restructuring
by 30 September 2021. exercise by banks.

• Counter-cyclical Capital Buffer ranging between 0% and

• D-SIBs are also required to maintain HLA and this shall
2.5% of total risk-weighted assets (excludes exposures
apply to apex entities on a consolidated basis (this includes
to Sovereigns, Central Banks and Banking Institutions),
which is intended to protect the banking sector as a consolidation of all subsidiaries, except insurance and/or
whole from the build-up of systemic risk during an takaful subsidiaries). However, at its discretion, BNM may
economic upswing when aggregate credit growth require financial institutions to additionally comply at the
tends to be excessive. This capital buffer is currently not entity level.
required for credit exposures in Malaysia but may be
enforced by BNM in the future. • On 5 Feb 2020, BNM announced that three banking groups
(MBB, CIMB and PBB) have been identified as D-SIBs based
on 2018 data.

HEALTHY CAPITAL ADEQUACY RATIOS

The table below shows the capital adequacy ratios of the Bank, at both group and entity levels, presenting figures for financial years
2019 and 2020.

Regulatory Minimum
HLB Group HLB Entity with CCB*
After proposed dividend FY2019 FY2020 FY2019 FY2020 2019 2020
CET 1 Ratio 13.1% 13.7% 12.6% 13.4% 7.00% 7.00%
Tier 1 Ratio 14.1% 14.2% 13.4% 13.8% 8.50% 8.50%
Total Capital Ratio 16.3% 16.5% 15.6% 15.9% 10.50% 10.50%

Note: * Inclusive of minimum capital adequacy requirements and Capital Conservation Buffer of up to 2.5%.

Annual Report 2020 49

Management Discussion & Analysis
Business Operation Review

1. PERSONAL FINANCIAL SERVICES (“PFS”)

OVERVIEW

Over an unprecedented year marked by two vastly contrasting halves, the Bank’s PFS
business remained resilient, generating sustainable returns by contributing 52% and
38% of the Bank’s revenue and pre-tax profits, respectively. In FY2020, PFS navigated
through cautious consumer and business sentiment in the first half of the year as
economic growth in later part of 2019 moderated, with this sentiment dipping further
following the severe economic disruption caused by the COVID-19 pandemic.

Despite these challenges, the Bank was able to defend its market share across key
categories, such as mortgages, unsecured loans, deposits and wealth management.
Led by strong mortgage loan growth of 7.4% y-o-y, the PFS loan book recorded a
5% y-o-y growth against an industry growth of 3.6%. We continue to be disciplined
with our underwriting standards, procuring quality through-the-door customers and
ensuring that the portfolio continues to perform to expected internal benchmarks.
Asset quality remained solid and stable, with a low GIL ratio of 0.47%.

BUILDING ON OUR DIGITAL usability tests, and customer feedback on can quickly repeat these transactions
JOURNEY the old app. Designed with a brand new without adding recipients as favourites.
look, the app introduces new features This feature proved particularly useful
In a post-COVID-19 world, digital banking
and services that demonstrates the during the MCO period when many
capabilities have perhaps never been
Bank’s “Built Around You” brand promise, customers transacted online for many of
more important. Having invested
bringing convenience and seamlessness their daily purchases.
significantly in our digital transformation
with the removal of pain points from the
over the past couple of years, guided
customer journey. For example, customers This year, we also took steps to simplify
by our ethos of “Digital at the Core”, the
now have more personalisation options, the Connect Online registration process
Bank is now well positioned to serve
day/night mode display to make it easier to continue easing the on boarding
and grow with its customers. In FY2020,
to read, and option to show/hide account experience. With new upfront ID
about 86% of the Bank’s transactions
balances, to transaction limit settings verification, customers are auto routed
were performed via HLB Connect Online
that were previously available on Connect to the relevant next steps based on the
or mobile banking, while 69% of Connect
Online only. products they hold with the Bank. In
users having downloaded the Connect
addition, less registration information is
App. The encouraging 20% year-on-year
Other enhancements to the Connect App required of customers who hold loans
increase in downloads of the app is
include the new “Transaction without with the Bank and only need to access
a clear indication that customers are
TAC” setting, which has proven popular e-statements. We have also introduced
increasingly comfortable banking directly
with customers, as they can now set a a Mandarin language option which,
on their phones.
daily limit ranging from zero to RM1,500 in addition to the existing Bahasa
and choose to enter a TAC for every Malaysia and English options, allows
However, the most exciting development
transaction performed or only upon us to serve our customers in the three
in the year under review was the launch
reaching the daily limit. Quick Pay is main languages used among Malaysians.
of our all-new HLB Connect App. Built
another new feature designed to make Further improvements are in the pipeline
completely in-house to ensure agility
banking easy as it proactively saves users’ for rollout in the next quarter, as we
and cost efficiency, it is the outcome of
recent payments and transfers, so they continue our march towards realising
insights collected from user focus groups,

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Business Operation Review

our vision of being a highly digital and customers, where we reward customers Connect total financial
innovative ASEAN financial services for their strong support by giving them transactions rose

40%
enterprise. amazing offers for various retail and
banking products through seamless
At the branch level, most operational staff online and offline mediums. It is also an
are now equipped with the In-Branch ideal opportunity to further grow digital
Sales & Service tablet which further adoption amongst our customers, in the against the previous year
entrenches our digital transformation hope that the incentives will drive repeat
and the ongoing change in customer behaviour going forward.
behaviour that is much more open to the Continued rise of FY2020
various forms of digital banking. Integral Over the two-week campaign period, mortgage loan market share to

10.7%
to the Bank’s vision of paperless branches, the focus was on driving cashless
available services for our customers have transactions, of which transactions on
continued to expand beyond day-to-day Connect were a key pillar. The total
transactions to include applications for number of financial transactions rose a
from 10.5% in FY2019
products like current or savings accounts, significant 40% against the previous year,
personal loans, credit cards, and credit demonstrating the growing acceptance
card services like Balance Transfer, to digital banking. The number of e-FD
Call-For-Cash and Flexi Payment Plan. placements grew almost 50%, and the to customers who do not have a prior
corresponding transaction value jumped housing loan/financing. Our consistent
Our comprehensive digital offerings by over 70%. Personal Loans saw a efforts have led to the continued rise of
continue to attract and retain users, major uplift during the period, where our FY2020 market share to 10.7% from
and we have enhanced our services the number of applications doubled and 10.5% in FY2019 and 10.3% in FY2018.
to allow Connect Online to withdraw the funded value grew by almost 150%,
funds that were deposited via the while e-CASA applications quadrupled. Moving forward, the business will
Certless Fixed Deposit services in the continue to innovate to better serve
branch. In another move that helps customers, developers and property
transition branch customers to digital, PFS LOANS market intermediaries, as we support
the Online Telegraphic Transfer daily market recovery efforts. In this context,
The mortgage business recorded a
limit of RM45,000 was increased to allow collaborative ecosystem efforts are
strong loan growth of 7.4% y-o-y, ahead
transfers of up to RM200,000 in a single underway with several PropTech and
of industry growth of 5.3%, despite
transaction. FinTech players to improve the property
the challenging property market that
has worsened because of the COVID-19 buying and financing journey for
As we move forward, end-to-end digital consumers.
pandemic. We have continued to defined
onboarding journeys will deliver scalable
and grow out market positioning in the
customer acquisition that is independent In a similar vein, the auto loan business
affordable segments, and we remain
of physical location, making the customer forged strategic partnerships with key
steadfast in our commitment to lending
journey even easier. To this end, we brands to better serve dealers through
to and supporting homebuyers.
will leverage on the support of new win-win opportunities. For consumers,
technologies like e-KYC (“Electronic Know we introduced exciting campaigns to
In this context, we have continued to
Your Customer”) and an In-Branch tablet engage and broaden the customer
defend and grow our market positioning
system that has now matured to support base by investing in above-the-line
in the affordable segments, with close to
off-site sales as well. communications. As a result, we upheld
40% of our total approvals being extended
to customers purchasing residential our 10% market share of total auto
properties priced between RM250,000 loans disbursed in FY2020. The outlook
DIGITAL DAY 2019 is challenging, but there is room to
and RM500,000. This has largely been
A mainstay in our calendar, our third a result of our strong support for home innovate on service delivery, turnaround
HLB Digital Day on 7 July 2019 was a ownership programmes, especially for time, process simplification and customer
resounding success. The HLB Digital Day first time homeowners, where more than experience to mitigate the pressures
celebrates with our existing and new 60% of total approvals were extended facing the sector.

Annual Report 2020 51

Management Discussion & Analysis
Business Operation Review

The Bank’s personal loans/financing base

grew 12% y-o-y on the back of stable
impairments, a faster pace of growth
compared to FY2019. We believe our digital
initiatives have been the differentiator in
offering an easy and convenient way to
our customers to apply for small personal
loans/financing, which has resulted in
sales from digital channels increasing
during the year, and even more so during
the MCO period when customers could
not visit our branches. Further evidence
of the value that has been delivered
by our digital transformation was that
our online Connect channel was one of
the main growth contributors of loan/
financing applications. Going forward,
we will remain focused on targeting
resilient segments even through times of
economic uncertainty.

PFS DEPOSITS
Our individual deposit mix remains one
of the highest in the industry, which
positions the Bank strongly for balance It was a contrasting outcome for our Our well-positioned customer portfolios,
sheet growth in the coming year. merchants’ business however, with coupled with our customer-centric
Deposits grew 9% y-o-y, capping a strong merchant acquiring sales growing in approach of staying close to customers
year for deposit portfolio acquisition and excess of 10% y-o-y as our strategy and anticipating their needs, minimised
management initiatives, such as the of focusing on grocery and drugstore and mitigated the impact of the volatility
strategic acquisition of salary and junior segment in the past 18 months placed us and ensuing market downturn. As a
accounts. The addition of e-KYC will be in an advantageous position during the result, there was no material sell-down
a key feature to enhance the speed in uncertain environment brought about of AUM in March 2020, and by June 2020,
which we onboard customers in the by the COVID-19 pandemic. The volume AUM has recovered to its previous high.
coming year. of cashless payments has accelerated
during the pandemic which has augured During the MCO, we accelerated on
well for this business, as customers opted delivering non-physical services by
PAYMENTS BUSINESS for a quicker and safer option to conduct launching and expanding phone
We started the financial year focused their daily transactions. transaction services, covering all
on strong positioning on travel, with 2 investment products and transaction
co-brand cards in collaboration with types enabling us to reach out to
AirAsia and Emirates airlines, and a major
RETAIL WEALTH MANAGEMENT customers and facilitate any transaction
usage campaign which saw us hit a record
SERVICES in five minutes. An additional trend that
RM1 billion retail credit card spending in emerged during the MCO was the switch
The Bank’s Retail Wealth Management
December 2019. This was derailed due from traditional face to face customer
Services continues to be a key contributor
to the pandemic and it saw us quickly events to digital webinars, and this
to the PFS portfolio. Despite a challenging
switch gears to key essential sectors and has effectively become the new norm
business environment arising from the
online purchases. In spite of that, our in engaging customers and increasing
pandemic and subsequent investment
customer credit card retail spending was customer coverage.
markets uncertainty, our income and
impacted, resulting in a marginal y-o-y total Assets Under Management (“AUM”)
decline of 5%. grew 24% and 18% y-o-y respectively.

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Business Operation Review

We have also continued to bolster our

digital solutions within this segment
by introducing the Pay&Save Share
Trading e-application, a first in the retail
banking space, which allows customers
to seamlessly trade shares directly
through HLB Connect Online with an
auto settlement capability that off-sets
the share purchases from the Pay&Save
current account balance.

As for our Priority Banking segment,

the Bank’s customer value proposition
continues to evolve as we move beyond
investments and look to providing
total banking services. Our consistent
engagement with high networth
customers through frequent lifestyle
events, weekend Brunch-Series,
insightful seminars, and personalised The ongoing branch amalgamation strategy envisions a streamlined branch network
wealth management advisory and to strengthen our footprint and improve retail presence, and we will be relocating the
solution has seen the Bank’s Priority Taman Sri Tebrau branch in Southkey, Johor and will transform it into our third digital
Banking customer base growing more branch nationwide, after Burmah House in Penang and Damansara City in Kuala Lumpur.
than 6% y-o-y. To enhance our presence
in the Southern region, our new Priority
Banking Centre in Southkey Johor Bahru MOVING FORWARD
will be opening by the end of the year
As we recover from the extraordinary economic realities caused by efforts to contain
and promises to offer a better banking
the pandemic, the Bank is committed to helping our customers through the hardship
environment, increased efficiency and
and steering them towards a more resilient, stable and positive experience in the
improved customer experience.
management of their finances. As customers emerge from the loan moratorium, it is
equally, if not even more crucial, to ensure the viability of their income, repayments and
affordability for our products and services.
ONGOING BRANCH
TRANSFORMATION
Internally, it is important to sustain our core products through this economic cycle and to
Moving into the new financial year, we step up the underlying profitability, and as the opportunities arise, undertake structural
will be reorganising our branch sales operating model changes to better place our capabilities to service clients effectively
force into product specialists to deliver and efficiently. Our resolute focus during these times on the value drivers of the future
broad and deep expertise to customers. remain unchanged – we will continue to invest in digital experiences, collaborate with
This structural change elevates staff ecosystem partners, and drive fee income business. With the Connect platform being
skillsets and product expertise that key to engaging our customers, our priority is to enhance and expand our services and
will position us to be even more products on this platform, as we continue to equip our people with the right tools,
customer-centric in everything we do knowledge and skills to enable the effective execution of our strategies.
while building personalised experiences
and solutions for our customers.

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Business Operation Review

2. BUSINESS & CORPORATE BANKING (“BCB”)

OVERVIEW

BCB has continued to produce consistent and solid results in FY2020, driven by strong
loans and deposits growth, underpinned by robust strategies that are fulfilling our
clients’ needs. BCB’s revenue and PBT recorded RM1,171 million and RM755 million
respectively for the year, representing a 24.5% and 25.2% contribution to the Bank’s
total income and PBT.

Extending our improvement on key business metrics, BCB loans/financing grew an

industry-leading 10% y-o-y, outpacing last year’s growth performance, as the commercial
and strategic SME client segments continued to record strong numbers, expanding a
respective 7% and 33% y-o-y. Impressive results were also seen in our current account
balances as it out-performed the industry’s demand deposit growth rate, registering a
robust 24% y-o-y increase, which is significantly higher than last year’s performance.

STRENGTHENING THE SME ECOSYSTEM In FY2020, the Bank launched the HLB Total SME Solutions
branding initiatives to strengthen our presence in the local
In FY2020, the SME segment recorded significant loans and
SME market. This has led to the onboarding of new partners
deposits growth of 33% y-o-y and 18% y-o-y, respectively. Total
in the form of Bixzee, AVANA and SnapTruck, which offer B2B
income improved by 4% y-o-y, while operating profit increased
& B2C e-commerce and logistic solutions to SMEs, further
by 5% y-o-y on the back of a 6bps improvement in NIM.
complementing our digital HR, payroll and accounting solutions
that HLB previously offered.
At HLB, we recognise that the SME segment is the main engine
of the Malaysian economy. As such, we continue to strive to help
The Bank also pays close attention to the underserved within
SMEs overcome their challenges and enable them to achieve
the SME ecosystem. This year, we launched a pilot run of a
their objectives. Meeting our client’s needs is an important part
microfinancing programme targeted at businesses who have
of what we do as a customer-centric bank and we are committed
been in operations for less than three years. This financing
to making the customer journey seamless and convenient. Thus,
programme, which is secured with a guarantee from Credit
in the year under review, we have made efforts to engage our
Guarantee Corporation Malaysia Berhad (“CGC”), is offered
SME customers via customer focus groups to better understand
digitally and processed straight through, only needing simplified
their pain points, so that we can effectively structure our products
financial documents. The pilot run, involving our existing
and services to meet their needs.
borrowing and non-borrowing current account customers
commenced in December 2019. The encouraging results of the
These initiatives are essentially part of our strategic objective to
pilot run convinced us to officially offer this product beginning
establish ourselves as the preferred financial solution provider
July 2020.
for the SME segment. We leverage on our nationwide network
of strategically located branches as well as a dedicated group
of 155 Community Business Managers, to offer advice and
TARGETED SECTORAL GROWTH STRATEGY
financing solutions to this segment. Our focus has been to assist
SMEs to grow their business with the support of government As BCB continues to grow its existing portfolios in the corporate
funding subsidies (where eligible), working capital, trade and middle market segments, we are simultaneously surveying
financing, hedging, and cash management solutions. The SME the market to identify new focus sectors that present good growth
Banking team also actively participated in SME related events, opportunities. This strategy is supported by the expansion of our
roadshows, association events and launches to demonstrate our industry specialist team, which allows us to provide structured
deep commitment to helping SMEs succeed and thrive. financing solutions that better suit our customer’s needs as

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Management Discussion & Analysis

Business Operation Review

well as provide advisory services to our In addition to this, we introduced three major enhancements to our processes to further
clients. During the last financial year, improve the customers’ digital experience:
we on-boarded an in-house renewable
energy specialist and we have further No Service Name Feature Benefits
expanded the team to cover identified 1. Foreign Track the status • End-to-end Tracking – Track inward
growth sectors such as halal food Telegraphic of inward & and outward telegraphic payment
manufacturing, logistics & warehousing Transfer Tracker outward Cross status
and private healthcare. (FTT) via SWIFT Border Payments • Reduced Costs - Reduced enquiry
gpi conveniently costs due to ability to track
IMPROVING THE BANKING payments
EXPERIENCE • Fee Transparency - View fees
The Transaction Banking business has charged for each leg of the
spent much of FY2020 implementing new transaction
ways to enhance the customer experience • Unaltered Remittance Info. Ensure
and journey. The resources invested in remittance data is unchanged when
digitalising the customer journey and payment arrives
removing pain points have produced 2. Pre-defined Register a list • Pre-defined beneficiary list by
positive outcomes as more customers opt Beneficiary List of pre-defined Payment type or Debiting account
for digital channels for their day to day favourite • Limit & Control ad hoc payments
banking needs. For example, in FY2020, beneficiaries, • Reduce risk of unauthorised
the Bank witnessed a large 30% y-o-y
allowing them payments
increase in Corporate Internet Banking
to better control • Time Saving - Faster for staff to
users, which brought the penetration rate
who the staff can initiate the payment
to 64% of all business customers, from
transfer funds to
46% in FY2019. The amount transacted
was also up by 10% y-o-y with a total 3. Cash Automate cash • Consolidates cash balances
of 37 million transactions taking place in Concentration sweeping from effectively from other banks
FY2020. (Sweep from other banks to account
Other Banks) via Hong Leong Bank • Make payments or investments
To continue our journey of improvement Direct Debit with readily available funds
and to increase as well as sustain digital • Balances are automatically
adoption, the Bank launched the first- transferred to main operating
in-market eToken with biometric facial account
recognition for the HLB ConnectFirst • Better overview & easier access to
platform. This enhancement refined group-wide liquidity
the customer experience in terms of
approvals or eliminating forgotten
passwords issues. We are also on track
MOVING FORWARD
to implement the opening of business Our strategy going forward will largely remain unchanged as we continue building on
current accounts and the application of the momentum of our loans/financing growth, coupled with a prudent approach to asset
merchant facilities via our online banking quality. The cross-selling of the Bank’s suite of products and solutions will be aided by
platform, with the target to have these enhanced contextual marketing as we leverage on the increasing number of digital tools
services available before the end of 2020. and analytics to accurately identify our customers’ needs.
 
Our online platform, HLB ConnectFirst will continue to be enhanced as we strive to be the
preferred transaction banking partner for our middle market and SME client base. Our
strategy is mainly underpinned by our cash management services and we aim to grow
our CASA balances above the industry average growth rate. As with all of the Bank’s
digital efforts, we will also be consistently improving HLB ConnectFirst’s functionalities
and interface to enhance the user experience, such as the introduction of eTokens and a
mobile version for a more frictionless engagement.

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Management Discussion & Analysis
Business Operation Review

3. GLOBAL MARKETS (“GM”)

OVERVIEW

The GM business serves as a key product partner for the Bank’s clients in five countries
– Malaysia, Singapore, Hong Kong, Vietnam and Cambodia. Our core products of
Foreign Exchange, Fixed Income, Derivatives and Structured Products allow us to offer
comprehensive solutions to our clients regionally.

Our capabilities are also extended into Shariah-compliant structures which supports
Bank Negara Malaysia’s aim to grow the Islamic Banking business in Malaysia. GM also
manages the Bank’s excess liquidity and capital through investments in Fixed Income
and Money Market instruments.

PERFORMANCE REVIEW The first half of 2020 saw the business their homes was a health risk for our
benefitting strongly from deep interest clients, the Bank’s volume of online
The GM business delivered a record
rate cuts globally which was triggered remittance transactions increased around
performance for the year with revenues
by the impact of COVID-19 on the world 50% in April 2020, the month after MCO
and PBT at RM866 million and RM750
economy. Fixed Income sales and trading was implemented.
million respectively. This represents a
profit surged from higher volatility and
18.1% and 25.1% contribution to the
lower interest rates, as investors veered
Bank’s total income and PBT, respectively,
away from equities to look for safer INITIATIVES FOR THE PAST YEAR
for FY2020.
investments. Our continued strength
The GM business is continuing its journey
in the Malaysia Fixed Income markets
to leverage on technology to enhance
Revenues was once again recognised by leading
our digital offerings especially for FX

RM866
publications such as The Asset, which
execution. We spent most of FY2020
awarded Hong Leong Bank the top
working on a remittance solution with
position in MYR bond sales and trading in
one of the leading FinTech firms in the
the Local Currency Bond space.
region, with the aim of allowing our
Million
Retail and SME customers to make small
Although the business benefitted from
remittances at lower cost. Moving into
rate cuts, unprecedented measures to
FY2021, the team is planning to enhance
PBT contain the spread of COVID-19 dealt
our FX capabilities through our HLB

RM750
a heavy blow to the ASEAN region’s
Connect First online channel which would
economic activity, impacting trade flows
allow clients to hedge their foreign
and client investment activities for the
currency payment requirements.
second half of our financial year. This was
Million seen through our Client Foreign Exchange
In Cambodia, we have made significant
volumes which dropped sharply, and
headway with the successful launch of
higher risk aversion by our wealth clients.
the first Khmer Riel Bond hedging product
in the country and we expect to leverage
However, this crisis has created a positive
this to expand our buy-side client base.
opportunity for Hong Leong Bank to
This product is key, as it allows investors
accelerate our client’s adoption of our
which predominantly have liabilities in
online remittance capabilities. As leaving

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Business Operation Review

US Dollars to be able to invest in the Cambodia capital markets to have a competitive advantage in intermediating these flows
which is issued in Khmer Riel. We plan to be a major player in through our strong Ringgit fixed income and FX franchise, coupled
Cambodia’s capital markets and financial markets in the years with our experienced sales team in Singapore.
ahead through our onshore subsidiary.
We also expect increased Ringgit Government Bond issuances to
fund the government’s economic stimulus packages that were
MOVING FORWARD implemented to kick-start the economy following the adverse
impact of COVID-19. This could prove beneficial to HLB as the
Malaysia’s economy remains vulnerable to the continued impact
Ringgit bond yield curve could potentially steepen and provide
from COVID-19 which has caused global economic growth
increased gapping opportunities to the Bank.
to contract and weakened labour markets. Households and
businesses have become more cautious in their spending and
For our SME, commercial and retail customers, we should see a
investment activities to weather the storm. Over time however,
recovery in FX activities in line with the reopening of the economy
we expect to see the gradual resumption of economic activities,
and the Bank’s focus on these segments. Our complete Islamic
accommodative monetary policies and fiscal policy stimulus
banking product suite will also provide us added advantage in
providing relief and accelerating the pace of GDP recovery.
growing Shariah-compliant investments and customer hedging
flows.
We believe the low global rates environment could lead to
foreign funds potentially returning to Malaysia in the year ahead,
seeking higher yields from emerging markets. We will continue

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4. ISLAMIC BANKING

OVERVIEW

HLISB achieved a good set of results in FY2020 with Profit before Zakat and Taxation
increasing by 8% y-o-y to RM475 million. The increase in earnings was mainly driven
by steady asset growth, Non-Financing Income which expanded by 159% and stable
operating expenditure. The financing business recorded a commendable 15% growth
compared to last year led by strong business momentum of our retail and commercial
business segments, further supported by stable asset quality. Our CIR also continued
to strengthen despite the backdrop of a more muted economic prospects amid weaker
consumer and business sentiment, improving to 27.9% compared to 30.0% in the last
financial year.

Ramly Group goes digital with HLISB

EXPANDING THE DIMENSION OF ISLAMIC FINANCE

The unprecedented economic disruption has presented an opportune time for HLISB to further strengthen its business resilience, guided
by our brand promise of ‘’Built Around You’’ and ethos of being “Digital at the Core”, to achieve our goal of positioning HLISB as the
Premier Islamic Financial Service Provider.

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Thus, HLISB has worked hard this year to accelerate our digital a Halal Industry Handbook which has helped them to serve our
efforts and to institutionalise the constant enhancement of customers more effectively, and we will be looking to increase
the customer experience by making the customer journey our exposure in other halal segments, such as pharmaceuticals,
easier, seamless and frictionless. For example, through our chemicals and healthcare.
successful partnership with Pusat Pungutan Zakat Majlis Agama
Islam Wilayah Persekutuan (“PPZ MAIWP”), this year we have In nurturing the Bank’s digital aspirations, HLISB is also looking
on-boarded e-Zakat service into Hong Leong Connect in a move into how we can inject digitalisation into the Shariah ecosystem,
to simplify zakat payments for our retail customers. HLISB now with a particular focus on identifying potential technologies that
offers payment for the full suite of zakat types with all the can be used in the Shariah compliance process. With the Shariah
convenience of a digital platform to fulfil their religious and Governance Policy coming into effect during the year, it has
social obligations. Looking ahead, we plan to expand this service been crucial for us to strengthen Shariah knowledge across the
to include other state zakat authorities nationwide. Bank, especially in the areas of compliance, business operations
and operations technology, and we are looking into how digital
A complete refresh of the HLISB website was also carried out to technology can help accelerate this process.
demystify all things Islamic Banking. With clarity and transparency
in mind for our customers, we removed jargons and emphasised Our continued success relies on our ability to attract and retain
key differentiators to improve the reach and adoption of Islamic quality human capital, and we remain committed to growing
Banking beyond the Muslim demographic. We plan to on-board the collective knowledge about Islamic Banking, which will help
e-ASNB and Multi Currency Feature (“MCF”) deposits into our elevate standards across the industry. In FY2020, HLISB launched
digital platform with both products having reached their final the Islamic Graduate Trainee Programme (“IGTP”) with the aim
stage of development this financial year. These efforts have to nurture and produce future Islamic Finance professionals
complemented our approach of projecting HLISB as the trusted through a structured rotation in various departments of HLISB,
companion in simplifying the customers’ wealth journey and leveraging on each Graduate Trainee’s academic background
meeting each of their evolving financial needs, ranging from and strengths. We are also committed to sharing our expertise
wealth accumulation, wealth protection, wealth distribution and and insights through Shariah Thought Leadership and the “Celik
wealth purification. Muamalat” programme.

For our business and corporate banking segment, HLISB continues

to support the Small Medium Enterprise (“SME”) ecosystem, EMBRACING VALUE BASED INTERMEDIATION
which is also an important customer segment for the Bank in CULTURE
general. This year, we have continued our close partnership
Value-Based Intermediation (“VBI”) is set to be a key differentiator
with SME Corporation via the Shariah Compliant SME Financing
for Islamic Financial Institutions moving forward where Islamic
Scheme (“SSFS”) Programme, participated in a new guarantee
banking goes beyond mere Shariah compliance. We have started
Scheme with Syarikat Jaminan Pembiayaan Perniagaan (“SJPP”)
to embark on a journey of attaining status as an “Emerging Value
and extended our collaboration with Unit Peneraju Agenda
Based Institution” where our business practices, products and
Bumiputera (“TERAJU”) to aid high-potential Bumiputera
services demonstrate the principles of VBI. ‘The Attainment of
companies to improve their capital position.
Benefit and Prevention of Harm’, ‘Integration of Shariah’, ‘Fairness
and Transparency’ and ‘Constructive and Inclusive Collaboration
As we continue to improve our SME on-boarding turnaround time,
of Stakeholders’ are at the core of our VBI agenda.
HLISB is set to explore digitalisation initiatives for Trade Finance,
through online submission of documentation requirements,
To foster the VBI culture, we will embed its elements into our
digital business solutions and straight-through financing
governance processes through a comprehensive review of
applications. Our focus on the SME sector was further supported
the existing business environment against the Value Based
by specific campaigns, such as stamp duty rebates and a Trade
Intermediation Financing and Investment Impact Assessment
Finance campaign to encourage utilisation.
Framework (“VBIAF”) issued by BNM. This is to inculcate
impact-based risk management into our business to innovate
HLISB has also seen significant growth in our Halal assets which
new policies and systems that can further deliver the value
expanded by more than 35% y-o-y, which was largely contributed
proposition of Shariah, done in a combined effort with Hong
by increased utilisation from the Food & Beverage segment. Our
Leong Bank’s Group Sustainability Drive.
relationship managers have benefited from our development of

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5. INTERNATIONAL

Profit contribution from A) BANK OF CHENGDU (“BOCD”)

BOCD BOCD has delivered a strong profit contribution to the Bank once again, contributing

RM631
21.1% of the Bank’s PBT or RM631 million, which is a 13.9% y-o-y improvement from
previous year, almost double the pace of last year’s growth as it was only minimally
affected by the COVID-19 pandemic. Going forward, BOCD’s strategy is to continue
to grow cautiously in its current selected business segment while optimising asset
Million quality and returns amidst a contracting net interest margin environment.
13.9% y-o-y increase
B) HONG LEONG BANK SINGAPORE (“HLBS”)
HLBS recorded an operating profit of RM31.4 million in FY2020 against total income
HLBVN loans growth of of RM130.1 million, while its loan book stood at RM5.3 billion.

47.4%
y-o-y
HLBS’s nature as a single branch operation has driven us to remain focused on
identifying and building niche business segments, and over recent years, we have
grown from our core business of Private Wealth Management (“PWM”) to include
BCB while expanding into very specific areas of Personal Financial Services.

For example, our PWM value proposition is to be a “one-stop” hub for Asian
HLBCAM loans growth of millionaires with high service quality and a robust digital platform, with a strategic

26.8%
client focus on second generation millennial wealth, wealthy entrepreneurs and
businessmen in healthcare/tech sectors, and high net worth resident Chinese
families.

y-o-y In terms of PFS, HLBS has focused on gaining market share in auto finance, and our
digital transformation has seen the implementation of on-line loan applications and
approvals to further penetrate and widen our dealer distribution networks. We are
working towards further enhancing our PFS value proposition to build our financing
and services around the needs arising from the customers’ various life stages,
through debit cards and relevant consumer loans.

BCB is another growth area for HLBS as it targets to grow its loan book, focusing on
Medium Enterprise businesses in construction, infrastructure and wholesale trade.
Our value proposition is to support the growth of these businesses via simple and
reliable solutions, while improving market connectivity by implementing a regional
digital platform for cash management and trade financing to accelerate BCB’s
market outreach to MMEs.

C) HONG LEONG BANK VIETNAM (“HLBVN”)

Vietnam’s economy has shown a rapid recovery with the successful containment
of COVID-19 and this has helped HLBVN sustain a strong performance throughout
FY2020, with loans growing of 47.4% and deposits of 21.5% y-o-y (on a normalised
basis). The GIL ratio continued to improve hitting 0.20% which represented a y-o-y
reduction of 0.06%. Total income increased 12.0% and operating expenses went up
19.4% as the franchise continued investing in digital initiatives.

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The franchise remained focused on executing its and financial needs of our Corporate and SME clients, and
two-pronged strategy which continues to return meaningful we expect our internet banking application for business
results. The first prong to “Strengthen Existing Operations” customers to be available soon, further enhancing the
enhances PFS sales activities, sharpens BCB focus and convenience of their banking journey. Moving forward,
improves operational efficiency. Thus, in FY2020, HLBVN we remain committed towards supporting our customers
implemented the SME programme, further expanded its through the period of economic recovery, following the
priority banking business and enlarged the mortgage and adverse impact of the COVID-19 outbreak.
car loan sales team. These were the key factors behind the
strong performance in FY2020. E) HONG LEONG BANK HONG KONG (“HLBHK”)
It has been an unprecedented year for Hong Kong in FY2020
In parallel, HLBVN continued investing in the second strategic as it experienced multiple economic headwinds due to
prong to “Create a Retail Digital Bank”, which sets out to persistent social unrest and the outbreak of the COVID-19
capture future growth opportunities and achieve scale in pandemic. Since the second half of 2019, the Hong Kong
the fast moving and growing Vietnamese market. This saw economy experienced slow growth due to moderating
HLBVN releasing a new mobile app and introducing digital economic growth in mainland China, US-China trade tensions
debit cards earlier in the financial year to further improve and social unrest in the city. The business environment was
the customer experience. This Retail Digital Bank initiative further worsened by the COVID-19 outbreak in early 2020,
will continue to be the key focus in the new financial year severely affecting a wide range of industries including
and will be introducing digital unsecured personal loans imports and exports, retail and tourism-related businesses.
in Vietnam in late 2020. Work is also underway to add In response to the challenging operating environment, we
new features and benefits to the mobile app to enhance continue to be vigilant in the expansion of our business and
customer engagement and experience. have maintained solid asset quality in both our treasury
assets and loan book.
D) HONG LEONG BANK CAMBODIA (“HLBCAM”)
HLBCAM continues to record solid profits, achieving RM20.4 Amid this difficult business environment, we continue to
million in PBT while growing revenue by 3.5% y-o-y to expand our SME strategy with the recent approval from HKMC
RM61.6 million despite the Cambodian economy slowing Insurance Limited (“HKMCI”), a company wholly owned by
down significantly as a result of the COVID-19 pandemic. the Government of Hong Kong, to join their SME Financing
Guarantee Scheme. Under this scheme, HKMCI provides
After seven years in operation, we now have approximately guarantee coverage of up to 90% of the financing amount
10,000 customers and make an important contribution to eligible SMEs to help them secure loans from participating
towards the overall success of the Cambodian economy. lenders, giving us more room to acquire more clients. This
HLBCAM’s success is also important to the Bank and we are development builds on our FY2019 approval by the Trade
constantly looking for ways to drive rapid and continuous and Industry Department of the Hong Kong Government to
improvements in order to build competitive advantage and provide a similar guarantee scheme.
competitiveness.
In 2020, HLBHK successfully implemented some digitisation
In our aspiration to be a ‘preferred’ digital and innovative initiatives which enhanced the efficiency of internal system
financial services provider, we remain ever committed to processes in HR and procurement, further improving the
improving the customer experience in a market that has alignment and collaboration with head office and other
embraced the digital wave wholeheartedly. For example, overseas operations. Moving ahead, HLBHK will be prudently
we recently launched online-account opening for customers expanding the SME business and will work to support our
to open and operate their accounts anytime, anywhere. clients’ networking requirements together with head office
HLBCAM has also moved to better understand the business and overseas branches.

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6. INFORMATION TECHNOLOGY

In FY2020, the technology unit faced one of its most challenging The Bank was also able to continue executing major IT projects
times as it dealt with a set of unique challenges that emerged and deployed 20 such projects during the period of March to June
as a result of the COVID-19 pandemic. As the custodian of all 2020. Some of the projects executed during the various stages of
technology infrastructure, digital capabilities and cyber security the MCO were:
for the Bank, the most pressing concern was to ensure that
business operations remained normal, with customers being 1. The public release of the new retail mobile banking
able to access products and services, while keeping them and application in Malaysia.
our employees safe. The overriding aim was to maintain the
same levels of services as customers have been accustomed 2. Release of the Vietnamese mobile banking enhancements
to, whilst having employees worked from home or from split for e-KYC, API tie-ups with external parties providing greater
operations for extended periods of time throughout the various functionality and product sets for customers.
stages of the MCO.
3. Launch of a new collections system in Malaysia, released
Benefitting from the focus in recent years on digital transformation, additions to our iOS enabled teller system for ease of Credit
we were able to maintain uninterrupted operations, continuing Card application and ASNB application at our branches,
to support our stakeholders effectively. It was also very pleasing thus reducing human interaction and time taken to process
to see that even during the most disruptive period between customers’ request.
March and June 2020, we were able to continue with projects that
were underway. Our “Digital at the Core” ethos and “Built Around 4. CASA Linked which is a straight through online share trading
You” brand promise, have resulted in internal processes, products account opening capability.
and services that are online, convenient and seamless, hugely
benefitting employees and customers during this unprecedented 5. Launch of the SWIFT Global Payment Interface for corporate
times. The pandemic also presented a great opportunity for the customers.
faster adoption of available technologies as the situation forced
people to change from traditional to newer, more dynamic ways 6. Upgrading the branch network to newer digital technologies
of working. to enhance throughput and reduce cost, resulting in RM5.7
million in annual savings.
Over the years, we have been digitising internal processes
through automation, online working tools, remote access to 7. Junior savings application to encourage younger people to
enable people to work across multiple geographical locations. gain an interest in saving money and practice good financial
Some of these initiatives include the use of Robotic Process management from a young age.
Automation, system schedulers and automation controls. For staff
interaction, we have long enabled internal online collaboration 8. Enrolment into the Paynet QR compliance requirement for
technologies such as Facebook’s Workplace and Workchat for an interoperable QR code via online banking.
secure and auditable internal and group collaborations, Workday
for human resource interaction and approvals, virtual meeting 9. Launched the new corporate internet banking application,
collaboration tools and multi-faceted VPN enablement to improve for corporate customers to be able to transact online
remote connections. In terms of operations, we have Oracle ERP anywhere, anytime via their mobile phones.
systems for electronic straight through procurement, approvals
and payment requests, enabling effective remote working.
BUILDING RESILIENCE
These efforts have positioned us well to manage the complexities
The focus on building our very own Center of Excellence (“COE”)
of split geographical operations and work-from-home settings,
has allowed us to reduce our dependency on external vendors
with the infrastructure facilitating strong operational stability
and to adopt newer and agile technologies, which is critical for
during the pandemic. Our experience also showed that working
the Bank to drive future business growth. With a staff strength
from home was not counterproductive and in fact complemented
of 60, the COE is making deep inroads into this vision and we
business continuity.
have seen our development teams become a driving force in
the continued delivery of new products and services for our
customers.

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Business Operation Review

One of the key deliveries from the COE for the year was the all We are proactive in ensuring that all forms of data is secure
new Malaysian and Vietnamese retail banking iOS and Android and protected from unauthorised use especially in the context
Apps. While these are not the first apps or online banking systems of cyber threats which are constantly evolving. The Bank keeps
we built and delivered with the in-house development ops and itself well-informed of the latest cyber threats by collaborating
digital teams, these apps are by far the most complicated, and with international organisations and security researchers to
feature rich so far. Based on customer feedback and insights, we keep abreast of the latest threats and investments required to
designed and built these apps from the ground up on an open mitigate emerging threats. Comprehensive simulations are also
stack framework, and executed the entire process with only HLB carried out to ensure the Bank’s readiness, and includes periodic
employees. Testing was also carried out by staff through bug exercises to test, validate and strengthen the controls that are in
hunter sessions, obtaining feedback, insights and suggestions on place. To ensure that customer data is protected, the Bank uses
how to improve it further whilst it was in Beta form. industry strength encryption capabilities to protect data-at-rest
and data-in-transit.
As we continue to grow our internal capabilities, we have not
only experienced the benefits of speed to market and the agility Global threats to security are ever increasing and in line with
to quickly adjust designs and functions, but as importantly, we this, the Bank has enhanced its cyber threat intelligence to
have seen considerable upside in terms of overall costs, seeing work with industry and regulatory bodies both domestically and
a reduction of RM18 million compared to traditional vendor internationally. We have deployed newer monitoring capabilities
engagements for the capabilities build in-house. In addition, throughout the year, such as technology stack vulnerability
we are also experiencing cost optimisation that is obtained by monitoring and threat/Advanced Persistent Threat (“APT”) actor
the shift to open stack development tooling and products, and surveillance through the proactive implementation of Indicators
where possible, leveraging on non-proprietary hardware stacks. of Compromise.

To ensure the sustainability of this approach, we are focused on To improve the Bank’s security posture, we conduct Red Team
building a young talent pool of college graduates, continuing exercises based on current cyber threats that affect the Financial
to contribute in building and developing skills that will provide Service Industry worldwide. We consider the Tools, Techniques
the required resources in the years ahead. In this endeavour, we and Procedures used by threat actors to test the cyber defences
have employed the first intake of 40 graduates, with the team of the Bank and ensure its resilience, while looking at areas to
completing their first training project under the mentorship of improve the cyber readiness of the organisation.
the existing development ops teams.

For all the improvements we are making, and new services we

are creating, it is also imperative that the systems that support
it are consistently stable and always-on. In this context, we
are striving to improve system stability and availability, and in
FY2020, we managed to reduce our unscheduled downtime by a
further 30 hours and also reduced incident counts by 33% over the
previous reporting period. This was made possible through the
continual effort to enhance and expand our real time monitoring
and alert capabilities, the use of more systems utilising active
frameworks and ensuring that we remain resilient to outages. In
the last reporting period, we also conducted our first site failover
test, and we ran all systems from our alternate site for a week,
indicating the robustness of our failsafe systems.

CYBER SECURITY & DATA PRIVACY

Cyber security and data privacy continue to be a top priority
and an ongoing area of concern for the Bank. A breach could
compromise our systems and customer data, leading to potential
commercial losses and reputational damage to the Bank and its
stakeholders. We recognise these potential threats and continue
to enhance our mitigating actions to prevent disruptions to our
operations.

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Supporting the Bank’s defences is our Security Operations vii. Staff are being upskilled using current industry recognised
Centre that operates round-the-clock, providing the requisite certification (COMPTIA Security+) program as a baseline
defence against inbound attacks and mitigates them by using requirement.
an antispam gateway and the APT mitigation platform. Security
infrastructure will continue to be refreshed going forward, viii. Strengthening areas of Data Leakage Protection by
together with the periodic review of policies and procedures enhancing controls to ensure that Bank’s data remains
which govern day-to-day operations, to ensure they reflect the secure and confidential within the Bank’s infrastructure.
latest market intelligence.
ix. Improving the Bank’s infrastructure resilience by ensuring
In terms of data privacy and protection of personal data, the a thorough and comprehensive process for infrastructure
Bank remains committed to fulfilling the requirements under the readiness such as infrastructure hardening exercises using
Personal Data Protection Act 2010 (“PDPA”), Financial Services Act industry benchmarks (CISA, NIST).
2013 (“FSA”) and Islamic Financial Services Act 2013 (“IFSA”). We
will continue to invest to uphold the confidentiality and security
of all the personal data we handle in addition to maintaining MOVING FORWARD
a Privacy Policy so that employees, customers and partners
The Bank continues to invest to drive improvements across
understand how we collect, use and manage personal data.
all segments and layers of the Bank’s operations with the aim
of creating a seamless, frictionless and pleasant customer
We make continuous efforts to enhance compliance programmes,
experience. Going forward, this includes making enhancements
which protects customer and employee data. Initiatives include:
to regional corporate internet banking infrastructure, e-KYC
capabilities and improvements to both online and branch tablet
i. New joiners are given an introductory session on the
services with a focus on developing these improvements using
background, implications and applications of the PDPA and
in-house capabilities.
secrecy laws under FSA/IFSA.

The Bank will also continue to strengthen its security posture by

ii. All existing employees undergo at least annually, mandatory
looking into the following areas for the next financial year:
training on Cyber Security, PDPA and FSA/IFSA. In addition,
they must view the Customer Data Secrecy Videos that
i. Network segmentation (both physical and logical)
we developed to demonstrate the different instances of
through platform and infrastructure modernisation, whilst
possible breaches and the importance of protecting the
maintaining availability and removing single point of
confidentiality and security of personal data.
failures.
iii. Staff are regularly reminded through our internal IT systems
ii. Identity Governance to ensure that the Bank’s access and
to be vigilant and on the lookout for possible threats. This
credentials remains well managed throughout its lifecycle.
is accomplished through the internal awareness platforms,
SmartUp/Workday, with regularly refreshed content relevant
iii. Security infrastructure modernisation, looking at introducing
to current threats.
and implementing relevant technologies to best mitigate
current and future cyber threats.
iv. We have embarked on a year-long awareness campaign
to ensure that our customers gain knowledge of activities
iv. Managing technology obsolescence timely and effectively
around cyber security, data loss methods and compromised
by ensuring that a programme is in place to ensure migration
situations while providing suggestions on how to avoid such
of technology to newer stack.
scenarios.

v. Enhancement to physical security at branches and

v. We also run experiential learning exercises such as phishing
self-service machines. The Bank has worked with BNM to
simulations to identify areas of improvement as well as
improve its security by implementing ink staining, shutters
providing staff a controlled learning environment while
and bollards.
simulating actual threats that occur worldwide.

vi. We have enhanced physical security access to our premises

and IT systems.

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7. DIGITAL AND INNOVATION

At HLB, we are “Digital at the Core”, and we continually innovate to deliver a compelling
experience across all channels to our customers. The Bank is on a multi-year journey
to instill a customer-obsessed mindset to deliver a Digital Human Experience using our
“Built Around You” brand promise.

On top of delivering new digital Our online and mobile banking channels behaviour, wants and needs. Over the
capabilities and driving customer are also well received by customers as last year, HLB has connected with over
adoption, HLB continues to strengthen evidenced by the customer satisfaction 15,000 customers and non-customers
its foundation in creating a vibrant scores for the financial year. For our with the intent to identify opportunities
digital ecosystem to promote open Internet banking platform, our customers to enable their life moments. We do this
innovation and deepen our ‘digital have rated us 4.24 out of a 5-point by conducting various sessions including:
& customer first’ culture across the scale and 85% Top-2-Box score (i.e. the quantitative research, ethnographic
organisation – by bringing our staff, percentage of customers who rated us 4 and qualitative research, AB testing,
customers, value partners and ecosystem or 5); while our mobile banking garnered gaze tracking, UX/UI usability tests, and
enablers together. 4.28 and 85% Top-2-Box score. We have more. Prototypes created during the
also seen a massive positive shift in co-creation sessions are independently
Some of the key foundational enablers customers’ willingness to recommend evaluated by customers using tools like
include the design and development of our digital services as evidenced in the gaze (retina) tracking technologies. This
new facilities to foster innovation (CX Lab increase in our NPS scores over the last 2 captures the way customers interact
& Jumpstart@65), introducing new ways years, +44 for mobile banking and +53 for with the prototype - from visual fixation
of working (design thinking, customer online banking. to tap/click paths. These findings are
co-creation, customer behavioral and then used to refine the experience to
ethnographic research) and running ensure the final outcome is aligned
strategic programmes (HLB LaunchPad, FOSTERING INNOVATION WITH with the customers’ expectation. Once
employee and external hackathons). THE RIGHT ENVIRONMENT live, we continue to measure customer
With these enablers now in place, we are interactions to enhance and evolve the
Having the right physical environment
able to execute our digital and innovation experience.
plays an important role in inspiring
strategy faster than ever before.
creative thinking, new idea generation
Through this approach, we are able to
and fostering collaboration between
Customer adoption, Customer Satisfaction iteratively ideate, design, prototype,
teams. Today, we have two primary
Score ("CSAT") and Net Promoter Score and validate to deliver customer centric
locations to enable this – our CX
("NPS") are a testament to the success of experiences. In FY2020, we ran over 66
Innovation Lab in Hong Leong Tower
the journey thus far. Over 1.9 million of customer research projects, 21 usability
(launched in 2018) and our Jumpstart@65
the total retail customers have registered testing sessions and 10 customer
Community Center (launched in 2020) on
for Hong Leong Connect, which is an 8% co-creation sessions.
Jalan Tun H.S. Lee, Kuala Lumpur.
increase y-o-y. Of that, 1.3 million are
registered for the Hong Leong Connect
At our multi-purpose CX Lab, we have
mobile banking app, which is a 20% EMBEDDING DESIGN THINKING
hosted various activities like design
increase y-o-y. In terms of our business IN OUR WAY OF WORKING
thinking, customer experience-design,
customers, there are now 91,000
customer co-creation, UX/UI design, Besides having the right environment,
users on our digital platforms, an 11%
rapid prototyping and usability testing we also need the right mindset and
year-on-year increase.
sessions. One of the most important approach to drive our innovation
aspects, beyond innovation related process; for this, we have picked Design
Overall, nearly 2 out of 3 of our customers
activities, is the use of these facilities to Thinking, which is a human-centered
that are registered for online and mobile
get more intimate with our customers approach in creative problem solving. It
banking are active users, with some
by understanding their ever-evolving integrates customer needs, technology,
logging in multiple times a week to
conduct their banking activities.

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and business requirements by making The Hong Leong Bank Hackathons are We have also implemented real-time
customers the focal point throughout the designed to bring together developers, alerts to proactively notify frontline staff
design process, from ideating, designing, designers and disruptive thinkers from on adverse customer feedback to ensure
creating, testing to finally delivering academia, big tech and startups to help swift customer problem resolution and
new digital customer journeys and create solutions to customer problems recovery.
experiences. To do it at scale, the Bank and also come up with newer business
now has 10 in-house Design Thinking models. This is achieved through a To nurture an action oriented
facilitators and over 2,000 trained staff combination of the participants using customer-obsessed culture, our goal
members. With this know-how, our disruptive technologies and mentorship is to provide our front liners (channel
ultimate goal is to create a culture of from the Bank’s subject matter experts. and product teams) with information
innovation that will set us apart from our on the performance of our CX delivery
peers. In 2019 we conducted two Hackathons – and customer sentiments. Using a
one external and the second one for staff. combination of our VOC platform and
Through Design Thinking, our staff For the external Hackathon, we partnered visual analytics tool, we continue
are exposed to the creative process of with Google Cloud and Rakuten to enable to develop and deploy a number
how different tools can be utilised to participants to use cloud and API’s to of CX dashboards consisting of
break down complex problems, draw create their prototypes within 24 hours. operational service levels, product
inspirations and generate ideas while A total of 47 prototypes were developed application turnaround times, customer
creating the right environment for during this event, ranging from financial satisfaction scores and social media
collaboration and co-creation with our trackers to machine vision enabled ATMs sentiments. The level of granularity
colleagues, customers and partners. This for drive-through customers. From the of the information we obtain ranges
approach also ensures we continuously event, we hired thirteen interns and two from macro views (e.g. overall branch
challenge conventional methods and permanent staff. experience nationwide) to micro levels
legacy beliefs to enable customer life (e.g. the customer satisfaction score by
moments. The internal hackathon for employees individual contact centre agent).
generated 222 ideas that came from 171
Some of the recent successes include the teams across Malaysia. The event helped Today, we have 27 live dashboards that
Virtual Credit Card, HLB Connect mobile foster collaborative team-building, are accessible anytime, anywhere by
banking app for retail consumers, HLB increased employee engagement and our front liners. With these in hand, our
ConnectFirst Mobile eToken for business empowered front line staff to come up teams are equipped with timely insights
customers, the all new customer intent with creative solutions to real customer on their CX performance, allowing them
focused HLB Islamic and conventional problems. to identify opportunities while elevating
Banking website, and many more. We their experience standards for our
continue to adopt the use of design customers on an on-going basis.
thinking in the way we enhance and CREATING A CUSTOMER-OBSESSED
create new digital and non-digital human CULTURE Recognition of the progress that is
experiences to make banking simply being made in creating experiences that
The ability to measure and gauge the
simple. delight customers is seen through our
pulse of our customers throughout the
Customer Satisfaction Index consistently
banking journey is crucial to provide
achieving a score of 4.0 (over a 5-point
the necessary insights for continuous
CROWDSOURCING INNOVATION scale). The Association of Banks Malaysia
improvement and innovation.
THROUGH EMPLOYEE AND conducted a ‘Malaysian Banking Industry
PUBLIC HACKATHONS 2019’ Customer Satisfaction Survey from
We identify improvement opportunities
November 2019 to January 2020 and HLB
At HLB, we recognise that innovative for consumers and business customers
was in the top quartile amongst the pool
ideas are abundant both within and using feedback we get from our real-time
of 20 participating banks.
outside the Bank. voice of customer (“VOC”) platform. In the
last 12 months, we have increased the
Tapping into local young talented VOC measures by 32%, spanning across
individuals to help shape the future various touchpoints including branches,
transformation of the Bank continues to contact centre, self-service terminals,
be a key component to our digital strategy. online and mobile banking.

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Management Discussion & Analysis

Business Operation Review

8. HUMAN RESOURCES (“HR”)

DRIVING BUSINESS RESULTS

Key HR Pillars

Organisational Attraction & Performance & Reward & Leadership Engaging

Effectiveness Recruitment Development Recognition Succession Culture

HLB Values

Here for the

Innovation Collaborate to Win Decisiveness Have Fun!
long-term

HR Pillars to drive results, underpinned by our HLB values

The Bank continues to prioritise the time and effort invested in our people, the key
enablers of our business success, while integrating our “Digital at the Core” ethos into
all aspects of the employee journey. We have seen remarkable progress each year, as
we use technology in meaningful and relevant ways across the HR spectrum of talent
management, recruitment and learning & development. Beyond this, we are driving a
culture that enables employees to openly engage with others regardless of division or
reporting structure. In this section, we are pleased to share some of the key milestones
that have been delivered this year.

HLB AS EMPLOYER OF CHOICE While the Bank continues to evolve, the message is clear: we
seek to hire and retain talent with the right qualities and attitude,
This year we have made significant progress in our mission
which are - the agility to learn and unlearn, being resilient and
to strengthen our talent brand, making it more visible while
agile to rise to challenges. It is also important to ensure that
communicating a clear value proposition that improves our
employees and new hires share HLB's values of Being Here For
chances of attracting the best talent. Our efforts are also
The Long Term, Collaborate To Win, Decisiveness, Innovation and
not limited to external hires, but are translated internally to
Have Fun! as these values help to guide our employees towards
demonstrate to our own employees, the efforts put in to develop,
a shared mission and vision. These consistent messages are
motivate and provide opportunities to create a conducive and
reflected in all channels that we use for communication. For
positive work environment at HLB.
example, our LinkedIn page showcases our university outreach

Annual Report 2020 67

Management Discussion & Analysis
Business Operation Review

activities, internship testimonials, employee engagement activities, as well as industry accolades, and we have seen this clearly
resonating with people as subscribers to our page have almost doubled from 23,000 in FY2018 to 42,509 in FY2020.

Clockwise from top right: HLB project mentors with INTI Finance students, speaking engagements at Reading University Malaysia’s Career Fair,
the 11th Young Corporates Malaysia Summit and the Asia Pacific University of Technology & Innovation

Key activities in FY2020 included project mentorships between our Digital & Innovation Office and Inti International University and our
Wealth team hosting TAR University College finance and accounting students at Hong Leong Tower. Our talent brand presence is also a
mainstay at career fairs and speaking engagements, as we hone in on events that enable us to engage with candidates that possess
the skills and qualities the Bank requires.

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Management Discussion & Analysis

Business Operation Review

RECRUITING & BUILDING TALENT

Our value proposition goes beyond
merely our branding, as we pay particular
attention to engaging our employees and
further refining our hiring practices to
enhance the sustainability and retention
of our workforce. We do this through
the implementation of various talent
programmes, internal transfers and more
effective ways of hiring external talent.

In terms of internal talent, we encourage

our people to explore and experience
different career pathways within the vast
number of opportunities available within
the Bank. This method not only helps to fill
vacancies with internal hires, but just as
importantly provides career progression The HLB team proudly display the awards onstage at the HR Excellence Awards 2019 ceremony
opportunities to fulfil career aspirations
of our people. Internal movement of
In a similar vein, we know that hiring quality talent is costly, and losing good talent
people, has the added benefit of reducing
is just as expensive. Market statistics indicate that costs for employee turnover have
overall hiring costs while adding value to
doubled and have continued to rise since 2010 with 36% of employees leaving their
the employee engagement experience.
current employer within their first year. At HLB, we make every effort to retain our
In FY2020, we filled 37% of our vacancies
talent in order to safeguard our institutional knowledge and our key human capital
through internal hiring as we continued
resource, namely our people. Over the past year, we have made efforts to coach our
to optimise the number of external hires
people managers to have meaningful retention conversations in order to retain key
year-on-year.
talent on their teams. These retention conversations centre around four main areas: the
value-add of the line manager to the employee’s experience (Leadership); available
Much of the basis for our approach is the
career growth and learning opportunities (Talent & Development); rewarding outcomes
drive to eliminate poor hiring practices
(Rewards & Recognition); and aligning the way we work (Organisation Culture).
which are costly and creates inefficiency
for the Bank. Therefore, in addition to
Attrition data for FY2020 indicate early signs of success in this approach to retaining our
driving the effective use of our existing
people as the number of employees leaving in their first year saw a significant reduction
talent, we are training our line managers
from FY2019, while the Bank’s overall year on year attrition rate also reduced substantially,
in competence-based interviewing to
both in percentage and absolute number of people. To further institutionalise this
reduce mismatches in hiring while also
initiative, the outcomes of these retention conversations are followed through as part of
piloting the use of Artificial Intelligence
the performance management and planning process of the Bank.
and Machine Learning technologies to
automate applicant screening which
HLB’s ongoing graduate programmes and the talent management processes that we
increases the efficiency of the hiring
have established remains key to build our future bench strength, and we are proud
process. We have tested this through the
of our achievements in this area. Our Management Associate and Graduate Trainee
HALI (Hong Leong Artificial Intelligence)
programmes in particular have delivered strong results, with 124 of the 237 candidates
chat bot by employing a customised
that have passed through these programmes having graduated and are now serving in
recruitment algorithm to successfully
permanent roles across the Bank, with the remaining candidates still in the midst of
increase the probability of screening
completing their respective programmes.
high quality candidates for our graduate
programmes. This deployment of
technology has enabled us to meet our Our efforts have continued to attract the attention of the industry and our peers at the
objective of fast-tracking talent into the HR Excellence Awards 2019, as we received awards in recognition of the effectiveness
Bank. of our initiatives, garnering the Gold award for Workplace Culture and Bronze award for
Workplace Wellbeing. In addition, our own HR colleagues were also recognised for their
foresight and leadership and received the HR Leader of the Year and Young HR Talent of
the Year awards.

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Business Operation Review

PROFESSIONALISING OUR
PEOPLE
We have a responsibility to our
shareholders and customers to ensure
that we uphold impeccable standards
through a workforce that is competent
and able to protect the reputation and
integrity of our business. To achieve this,
we have ensured that the policies and
processes that we have put in place are
robust and effective, in accordance with
statutory and regulatory requirements,
and are supported by a consistent effort
to professionalise our people especially Monthly Compliance Huddle in action
in the area of compliance and ethics.
Beyond these initiatives, the Bank has robust talent management and learning and
Certifications and role-specific development policies that focus on developing and retaining talent, to build a talent
training continue to be key drivers in pool from which a succession plan can be put in place to support and drive the execution
professionalising our people and is part of business strategy. In FY2020, the Bank’s digital transformation efforts resulted in the
of our long-term plan to improve the launch of a game-changing platform which empowers our people to make accurate and
specialist knowledge of our employees in real-time decisions on recruitment, on-boarding, performance management, learning
critical roles such as Audit, Compliance, and development, talent management and rewards and recognition. The launch of the
Credit and Risk. As of FY2020, 60% cloud-based HLB@Workday to all six countries in which the Bank operates, also enables
of the 1,148 employees that have employees to access and self-serve their HR administrative tasks, through mobile first
been identified are currently pursuing and web platforms anytime, anywhere.
certifications. For our customer-facing
staff, role-specific training such as ‘No
Training, No Sales’ ensures that they are
knowledgeable in product, compliance
and customer service skills, enabling us
to provide a superior level of customer
experience in all their interactions.

As a further example of our commitment

to nurturing a compliance culture,
all employees have gone through
compliance awareness learning and more
than 1,500 customer-facing employees
have completed specifically tailored
role-based compliance training this year.
Employees are then assessed on their
knowledge a month after attending
training to ensure that the knowledge
from the training is retained. Besides the
individual focus, the compliance culture
is driven at the organisational level by
“Tone from the Top” emails, Driving The
People Agenda sessions with people
managers and at the operational level
through monthly compliance huddles at
the divisional and branch levels. T - B Workday Launch at Hong Leong Tower and in our Cambodia office

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 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Management Discussion & Analysis

Business Operation Review

CELEBRATING OUR PEOPLE

As part of the employee journey in HLB, the Bank strives to create a conducive work environment that genuinely considers the
needs of our employees. It is our belief that providing a nurturing and warm environment will promote higher productivity and
greater retention. In that context, we continued to review and develop policies that create a conducive working environment that
supports the Bank’s mission and values by undertaking the third My Thoughts, Our Future (“MTOF”) employee engagement survey
in the second half of 2019.

To provide relevant, meaningful and positive employee experiences we refocused our employee engagement initiatives into the three
pillars of Engagement, Appreciation and Wellness and organised events around these themes throughout the year.

Under the Engagement Pillar, we organised the HLB Games which saw more than 2,500 employees participating, fostering closer
rapport, respect and collaboration with colleagues through sports activities, such as bowling, badminton and futsal. We also celebrated
International Women’s Day in recognition of our female employees which comprise 62% of our workforce by giving a thoughtful gift
to each female employee. Meanwhile, year-on-year attendance for the Brown Bag Lunch and Learn Series continues to increase as we
present a balanced set of topics covering employee wellness, compliance, information security and sustainability.

Clockwise from top left: HLB Games in Melaka, Northern, Central and East Malaysia throughout 2019

Annual Report 2020 71

Management Discussion & Analysis
Business Operation Review

Through our Appreciation Pillar, we organise an annual

appreciation day to express gratitude for employees’ work and
efforts throughout the year. In 2019, it was themed Appleciation
Day and all employees received an apple attached with a note
from the Group Managing Director. In conjunction with this event,
we also launched an appreciation campaign through our internal
digital platforms to share messages with colleagues who have
gone above and beyond their duties to help one another. The top
5 receivers of eTouch (Trust, On Time, Understand, Connect and
Happy) messages received a small gift.

As for our Wellness pillar which seeks to promote healthy lifestyles,

the Bank organised a Breast Cancer Awareness Month in October
2019 which consisted of a series of Brown Bag Lunch & Learn
talks on breast cancer awareness at our branches nationwide -
Penang, Johor Baru, KL, Kuching and Kota Kinabalu conducted by
medical practitioners. We also organised the Bank’s third Virtual
Run in February 2020, challenging our employees to run 30km
over 11 days at their own pace and to receive a finishers’ medal.
A total of 547 employees participated in this event which has
now become a source of pride as participants post pictures of
their medals on Workplace, our internal employee engagement
platform. In addition, the Bank frequently shares infographics
under our theme of HLBCares which gives tips on topics such as
stress management, maintaining a balanced diet and good body
posture in the office.
Breast Cancer Awareness Month activities at PJ City

Participants of the HLBG Virtual Run 2020 pose proudly with their finisher medals

72 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Sustainability
Statement

The contents of this Sustainability Statement present an overview of our sustainability

approach, describing how we identify and manage economic, environmental and
social risks and opportunities as part of our business activities. Detailed disclosure of
these practices are presented in HLB’s standalone Sustainability Report 2020, which
provides a more comprehensive overview of the progress we have made to integrate
sustainability into our business practices, products and services.

Our Sustainability Report 2020 covers the operations of Disclosure (“TCFD”) and the United Nations Sustainable
Hong Leong Bank (“HLB”) and its subsidiaries (collectively, Development Goals (“UN SDGs”).
“the Bank”), including Hong Leong Islamic Bank (“HLISB”) in
Malaysia in the financial year from 1 July 2019 – 30 June 2020, The Report has been reviewed and approved by HLB’s senior
unless otherwise stated. It has been prepared in accordance management and its Board of Directors. Its content has
with the Global Reporting Initiative Standards (“GRI been externally assured by an independent body, Malaysia’s
standards”) Core option and Bursa Malaysia Sustainability leading certification, inspection and testing body, SIRIM QAS
Reporting Guide (2nd Edition). It has been further guided by International Sdn. Bhd.
the Recommendations of the Task Force of Climate-related

Annual Report 2020 73

Sustainability
Statement

Sustainability Themes

HLB Corporate Vision “To be a highly digital and innovative

ASEAN financial services company”

To help clients succeed through simple, relevant, personal and fair banking;
HLB Mission To provide our people with the best opportunities to realise their potential;
To create stakeholders value

HLB
Sustainability
Themes Digital Workforce Socially Responsible Environmental Community
at the Core Readiness Business Management Investment

We have embraced We nurture a high We aim to be a We keep our We empower the

digital transformation performing and value-based financial environmental communities where
as a key future inclusive workforce, institution, committed footprint low and we operate by
value driver, and are empowering our in operating our promote responsible providing relevant
always innovating to people to constantly business, as well consumption to tools, knowledge and
enhance customer be at the forefront as supporting limit negative banking products and
and employee of change through our stakeholders environmental and services, supporting
experiences, acquiring strategic through fair and social externalities. the growth of Social
accessibility and skills and capabilities. responsible social Enterprises and
efficiency. and environmental promoting greater
practices. We financial literacy
provide fair banking amongst the public.
to ensure that
consumers understand
their financial
commitments,
opportunities and the
risks associated when
entering into financial
contracts with us.

• Digital Banking • Climate-positive • Managing Our • Building

• Cyber Security and Financing Environmental Communities
Data Privacy • Responsible Footprint • Financial Literacy
• Simplifying Financing • Responsible
Our Material Customer • Fair Banking Consumption
Topics Experiences • Sustainable Supply
Chain
• Community Banking
• Prevention of
Financial Crime

Sustainability Risk Management

In FY2020 we updated our Sustainability Themes to fit with current needs and growth opportunities of the Bank. Further emphasis has been
placed on our commitment to embedding social and environmental considerations into the Bank’s operations and the continued support for
our SME customers under the Socially Responsible Business pillar. The Community Investment pillar drives our initiatives targeted at building
communities and supporting financial literacy. We have also restructured our previous Fit-For-Future pillar to Workforce Readiness to match our
human resource initiatives in nurturing competence and inclusivity today and as we move forward as the “future” is now.

74 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Sustainability
Statement

OUR SUSTAINABILITY GOVERNANCE

Our approach to sustainability is overseen by our Board of Directors, who are responsible for providing oversight of the Bank’s strategic
measures to manage ESG risks and opportunities including climate change-related actions and policies. The Board of Directors, together
with the Board Risk Management Committee, ensure that all sustainability initiatives and policies are aligned with business objectives
and consistent with the Bank’s values.
Frequency of
Governing Body Roles/Responsibilities Sustainability
Meetings in FY2020

Oversees the strategic direction for the company’s approach to

sustainability, progress updates on sustainability initiatives and One meeting
BOARD OF
DIRECTORS sustainability reporting.

Responsible for overseeing the management of ESG risks

BOARD RISK Three meetings
MANAGEMENT as well as the sustainability strategy and progress updates.
COMMITTEE
(Conventional &
Islamic)

Custodians and main enablers of the organisation’s

SUSTAINABILITY Three meetings
STEERING COMMITTEE sustainability strategy and initiatives.

Two physical
meetings in addition
Responsible for overseeing implementation of sustainability to monthly progress
SUSTAINABILITY
WORKING COMMITTEE strategies at the working level. updates with
different working
groups

Annual Report 2020 75

Sustainability
Statement

OUR SUSTAINABILITY APPROACH

The Bank’s approach to integrating economic, environmental and social considerations into our business activities is best demonstrated
by our core value ʻHere for the long termʼ. In line with this value, we are committed to delivering long-lasting ESG and VBI solutions
that contribute to a better future for all. This commitment forms a guiding principle for our business initiatives and was indeed vividly
brought to life as a guiding value as we actioned various programmes during the COVID-19 pandemic.

To ensure that we are delivering results that matter to those who are impacted by our business, our strategy is guided by deep and
meaningful engagements with stakeholders. This in turn provides guidance for the prioritisation of ESG issues and HLISB’s VBI core
principles, including the identification of our most material sustainability topics.

MATERIALITY
In FY2020 we performed a comprehensive review and restructuring of our material topics to better reflect the Bank’s areas of impact
and opportunity. As part of this process, we evaluated the topics identified by our FY2019 assessments against current industry and
business focus areas and updated the topics so as to better capture current themes. The result was a revised list of 16 material topics
organised into 5 sustainability themes, which will guide our strategic efforts towards managing ESG risks and opportunities.

HLB Sustainability
Themes Material Topic Description

Digital Banking Digitising products and services for greater accessibility therefore creating positive
customer experiences through adaptation of relevant latest digital technologies,
always taking into account the financial needs of consumers and clients.

Cyber Security and Protecting our organisation and customer data from unauthorised access, attacks or
Digital at Data Privacy threats aimed at exploiting personal and confidential customer and proprietary data.
the Core
Simplifying Enabling customer-focused experiences in all of our banking operations, including
Customer meeting customers’ dynamic demands for seamless and efficient banking services.
Experiences

Nurturing Talent Encouraging a growth mindset in our employees by providing ‘anytime, anywhere’
Growth learning and empowering our people to continuously develop skills that equip them
for the fast-evolving employment landscape. Embracing the fundamental need to
drive change so that we remain competitive and the business thrives.

Ethics, Integrity and Ensure that employees and related stakeholders commit to a high standard
Compliance of professionalism and ethics in the conduct of our business and professional
Workforce activities, we have established a Code of Conduct and Ethics ("CoCE") policy,
Readiness encapsulating 6 principles, namely, Competence, Integrity, Fairness,
Confidentiality, Objectivity and Environment.

Employee Health Creating an optimum and positive work environment which supports employee
and Well-being well-being to ensure a healthy and engaged workforce.

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 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Sustainability
Statement

HLB Sustainability
Themes Material Topic Description

Climate-positive Offering financial solutions to projects that have a climate-positive impact.

Financing

Responsible Developing innovative products and services that sustain the advancement and
Financing growth of the communities we do business with, whilst ensuring compliance
with relevant regulations, policies and principles. We will assess and screen for
environmental and social risks as an integral part of our banking practices.

Fair Banking Offering products and services that meet customers’ expectations, are fair and
responsible and take into consideration the interests of both parties in terms of
fairness in all aspects.

Socially Sustainable Conducting due diligence reviews on suppliers to assess financial strength,
Responsible Supply Chain performance, disaster recovery, business continuity plans, cyber security
Business capabilities, and screen for unfair practices. Requiring suppliers to meet social and
environmental assessment requirements before being on-boarded as business
partners, and during annual reviews.

Community Engaging and helping local communities to develop an inclusive economic

Banking ecosystem via products, services and programmes that have been designed to
meet their specific needs.

Prevention of Taking measures to prevent being the channel for financial crimes and money
Financial Crime laundering.

Managing Our Using the planet’s resources and energy efficiently to reduce Greenhouse Gas
Environmental (“GHG”) emissions and carbon footprint at all levels of our operations.
Footprint
Environmental
Management Responsible Reducing reliance on material resources through the inculcation of responsible
Consumption consumption throughout the organisation.

Building Conducting social outreach programmes for the community, whilst empowering
Communities them with knowledge, skills and tools needed to secure economic development
and advance their quality of life.

Community Financial Literacy Improving understanding of financial services, including Islamic finance,
Investment through knowledge sharing and financial literacy programmes aimed at driving
inclusiveness by assisting and empowering the community to achieve financial
goals.

Annual Report 2020 77

Sustainability
Statement

Our commitment
to the United
Nations Sustainable
Development Goals
(“UN SDGs”)

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 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Sustainability
Statement

RISK MANAGEMENT AND RISK CULTURE

Our risk management strategies are governed by the Risk Management Structure as depicted below:

HLB and HLISB Risk Management Structure

Board of Directors

Top Down Effective stewardship and control

HLB HLISB
Monitoring & Reporting
Set risk Appetite &
Board Risk Management Board Audit Risk
Tolerance Limit
Committee Management Committee
Bottom Up
Present single view of risks and to ensure adequate
Set Policies and Capital Allocation policies and controls within the Group

Group Risk Management & Group Compliance

Credit Risk Market Risk Operational Liquidity Risk IT & Cyber Risk Regulatory Bribery and Environmental Pandemic Shariah
Risk Compliance Corruption Risk Risk Related Risk Risk*

Daily management of risks, limits, policies, procedures and reports.

* Applicable only for HLISB

Environmental Risk, Sustainability and Climate Change

Environmental risks, including climate change, have been incorporated into our Risk Management Structure since FY2019. Environmental
risks are defined as the actual or potential threat of adverse effects on living organisms and the environment by effluents, emissions,
wastes, resource depletion and other impacts. Environmental risks are also associated with broader sustainability risks, including the
effect of business actions and environmental impacts, such as climate change, on society and the well-being of the community.

Given the Bank’s role in the economy, we are cognisant that individuals and companies we do business with will directly or indirectly
affect the environment. Therefore, the Bank has taken measures to ensure these risks are incorporated into our business activities and
policies to reflect our commitment to build an environmentally friendly ecosystem where we operate. Our policies are in line with the
discussion paper issued by BNM on Climate Change and Principle-based Taxonomy.

However, if the Bank is unable to achieve its sustainability goals, the impact can be classified into the categories stated below:

Impact Categories when

Sustainability Goals are
Not Achieved Description
Sanctions Failure to comply with sustainability regulations could result in sanction(s) imposed on the Bank.
Financial Performance Failure of the Bank or the Bank’s customers to comply with sustainability regulations and/or
requirements could result in deteriorated financial performance of the Bank or its customers, which
may adversely impact the asset quality of the Bank’s portfolio.
Investor Preference Research demonstrates that the equity price performance of companies that incorporate sustainability
practices is better than other companies. Increasingly, institutional investors prefer to invest in
companies that embrace sustainability goals. The inability of the Bank to achieve its sustainability
goals could affect the Bank adversely in the equity market as investors choose companies that have
successfully achieved their sustainability goals.

Annual Report 2020 79

Sustainability
Statement

As a part of HLB’s and HLISB’s risk management exercise, we map out our material topics onto a risk matrix that helps us assess the
severity of these risks and the corresponding level of action needed. From our restructured sustainability themes and the revised
list of 16 new material topics, we have updated our previous risk matrix to identify our high-priority action areas.

Measure and Monitor

HIGH RISK MANAGEMENT Quadrant indicates topics that have low gaps
in current infrastructure and a high impact on
Measure and Monitor Immediate Enhancement sustainability. These topics would be continuously
• Nurturing Talent Growth • Climate-positive Financing measured, monitored and reported on periodically.
• Ethics, Integrity and Compliance • Simplifying Customer Experience Risk thresholds may be applied where appropriate.
• Employee Health & Well-being
• Community Banking Immediate Enhancement
• Building Communities Quadrant indicates topics that have some gaps
• Digital Banking in current infrastructure and a high impact on
• Cyber Security and Data Privacy sustainability. Areas of improvement are required to
• Prevention on Financial Crime be identified and immediate actions taken.
• Fair Banking
IMPACT ON SUSTAINABILITY

• Responsible Consumption Build for Future

• Responsible Financing Quadrant indicates topics that have low gaps
in current infrastructure and a low impact on
sustainability. This means that the topics will be
reviewed annually or as conditions evolve. It is
Build For Future Phased Enhancement important for the Bank to “build for the future”.
• Financial Literacy • Sustainable Supply Chain
• Managing Our Environmental Footprint Phased Enhancement
Quadrant indicates topics that have gaps in current
infrastructure and a low impact on sustainability.
Areas of improvement need to be identified for
these topics.

LOW GAPS IN CURRENT INFRASTRUCTURE HIGH

Within the Immediate Enhancement quadrant, the Bank has established the following focus areas and improvement strategies.

Material Topic Programmes/Initiatives

Climate-positive Financing Supporting the development and adoption of green technologies through targeted financing and
developing green investment products to help consumers align their financial choices with their
sustainable values.

Simplifying Customer Providing support for customers and SMEs and expanding our network of digital branches to offer
Experiences an enhanced and more efficient customer experience. Assisting all customers to migrate to digital
banking, helping those that might need more time to make the transition.

In line with our own initiatives and BNM’s Climate Change and Principle-based Taxonomy document which was issued as a consultative
document at the end of 2019. HLB has been in active discussion with various authorities and non-profit organisations such as WWF, to
refine a corporate ESG Framework as part of our client selection and credit decisioning process. The Framework will guide us in better
managing our portfolio and transitioning clients to climate change resilient business operations.

In addition, the Bank is committed to the guiding principles of fair, equitable and responsible lending, and seeks to ensure that
customers are treated fairly, equally and do not encounter discriminatory processes when assessing financial services. In this regard,
the Bank implemented, amongst other measures, two policies; namely the Board Policy on Products and Value Propositions and the
Policy on Product Transparency and Disclosure, to ensure that we operationalise these strategic priorities. The oversight role discharged
by the Products and Value Proposition Committee of the Bank further enhances internal governance on product and services offered.

An Independent Review was performed on the Bank’s Sustainability Initiatives to facilitate the identification and rectification of
sustainability weaknesses and to ensure the Bank’s initiatives conforms to our sustainability objectives. Furthermore, this review
included an independent assessment conducted on our corporate customers’ credit evaluation process with the intention to validate
whether our customers conform to the sustainability standards and certifications relating to ESG. The Bank will conduct periodic reviews
to assess the implementation and progress of the sustainability initiatives and to ensure our objectives towards building a sustainable
business community are met.

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Sustainability
Statement

Stakeholder Engagement
Engagement with our stakeholders provides essential feedback to ensure that we are identifying and addressing our most significant
ESG impacts and opportunities. As our stakeholders’ priorities are constantly shifting, we maintain regular channels of communication
in order to capture input which is relevant and reflective of current trends.

Sustainability Topics

Cyber Security Simplifying Employee Climate-

Digital Nurturing Talent Ethics, Integrity Responsible
and Data Customer Health positive
Banking Growth and Compliance Financing
Privacy Experiences and Well-being Financing

Managing Our
Fair Sustainable Community Prevention of Responsible Building Financial
Environmental
Banking Supply Chain Banking Financial Crime Consumption Communities Literacy
Footprint

Communication & Interaction Norms

News/
Employee Customer Investor Incident Contingency Community
Whistleblowing Social Media
Engagement Advocacy Relations Management Measures Engagement
Management

Key Stakeholders

Shareholders/ Suppliers/ Local General public

Employees Customers Investors Regulators Vendors communities & media

Annual Report 2020 81

Sustainability
Statement

GOOD BUSINESS CONDUCT

Robust business ethics and governance set a clear structure and form the guiding principles that chart the Bank’s growth pathway.
The systems, processes, procedures and policies we have in place are designed to instill a culture that affirms good business conduct.
This culture is reinforced from the very top, with our Board of Directors setting the tone for responsible conduct right across the Bank.

CORPORATE GOVERNANCE
Achieving alignment of sustainability and corporate governance requires sound leadership. Our Board of Directors take seriously our
responsibility to operate according to governance best practices and, together with the Bank’s senior management, oversee systemic
compliance with responsible business conduct policies and practices. Established policies and procedures related to ethical conduct,
anti-bribery and corruption, anti-money laundering and whistleblowing, among others, are in place. Policies and Standard Operating
Procedures are reviewed annually to ensure that they remain relevant, promote and uphold standards of best practice.

ETHICS AND INTEGRITY

Our Code of Conduct and Ethics (“the Code”) sets out the values, principles and standards of professional conduct that are expected
to be upheld at the Bank. Applicable to all those who serve or employed by the Bank, including subsidiaries and affiliates, the Bank's
business partners and vendors, the Code ensures that the highest standards of behaviour are enacted across our business activities.

Compliance with the Code is driven by a strong culture of ethical conduct fostered through multi-channel engagement with our
employees. Efforts include both onboarding training for new employees and regular reinforcement training for existing employees. We
work to ensure that the standards set out by the Code are embedded throughout the organisation. Our commitment to upholding these
standards is reaffirmed each year by the Board of Directors’ mandatory annual attestations to the Code.

Pillars of Hong Leong Bank Group’s Code of Conduct and Ethics

COMPETENCE INTEGRITY
The Banking Group is committed to ensuring that its The Banking Group’s values-based culture guides decisions,
employees develop and maintain the relevant knowledge, actions and interactions as a key enabler for the success of
skills and behaviours such that our activities are conducted our business.
professionally and proficiently.

CONFIDENTIALITY
FAIRNESS The Banking Group is committed to providing a safe,
A core mission of the Banking Group is to help our reliable and secured banking experience for our customers.
clients succeed through simple, relevant, personal and
fair banking. We must act responsibly and be fair and
transparent in our business practices, including treating our
ENVIRONMENT
colleagues, customers and business partners with respect. The Banking Group is committed to reducing the effect of
We must consider the impact of our decisions and actions our operations on the environment to build our franchise
on all stakeholders. in a safe and healthy environment. We aim to do this
by managing resources across the Banking Group and
raising staff awareness about the importance of caring
OBJECTIVITY for the environment. The Banking Group will be mindful
Employees must not allow any conflict of interest, bias or of its activities with employees, business partners and the
undue influence of others to override their business and community we operate within to ensure human rights are
professional judgement. Employees must not be influenced safeguarded. Where there are adverse impacts, we are
by friendships or association in performing their role. committed to addressing these.
Decisions must be made on a strictly arms-length business
basis.

To demonstrate the Bank’s zero tolerance position on corruption and bribery, an Anti-Bribery and Corruption Framework was
established. The Bank also appointed an Ethics and Integrity Officer who sets out a holistic approach in the implementation of
adequate policies and procedures to safeguard the Bank from corrupt practices.

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Sustainability
Statement

COMPLIANCE FRAMEWORK matters and further enhances senior management oversight

of the ever-increasing FCC risk landscape. To bolster these
The Bank operates across Malaysia, Singapore, Hong Kong,
efforts against Financial Crime Risk, the Bank is embarking on
Cambodia, Vietnam and China. To drive compliance with
a project to replace its AML system which leverages on artificial
all relevant laws, regulations and standards, a Compliance
intelligence and machine learning to improve the effectiveness
Framework is in place to guide compliance standards and
of AML detection, monitoring and reporting.
requirements as well as roles, responsibilities, processes and
practices governing the day-to-day operations of the Bank.
PROMOTING A CULTURE OF COMPLIANCE
Under the Bank’s Compliance Framework, Group Compliance
partners with the business and support units to develop and The Bank recognises that fostering and promoting a compliance
update systems, policies, processes and procedures to manage culture requires regular and focused employee engagement and
compliance risk inherent in business activities. To further training. To achieve this, regular compliance training is delivered
support the framework, Business Unit Compliance Officers across the Bank together with role-based training targeted at
(“BUCOs”) and Business Unit Compliance Representatives specific risks associated with divisions and individual positions.
(“BUCRs”) are based in business and support units to help Together these practices raise and reinforce awareness of
unit heads drive compliance initiatives. Group Compliance compliance and keep employees updated on compliance related
maintains oversight of these processes to additionally carry out matters.
a compliance assurance programme to independently assess
the compliance status of the various business and support units Employees are required to complete mandatory eLearning
across the Bank. modules that consists of videos, reading materials and
assessment delivered through HLB@Workday, the Bank’s people
Group Compliance also disseminates any changes as well as and performance management platform. Topics covered include,
new regulatory requirements to the Horizon Scanning Working Anti-Bribery and Corruption (“ABC”), AML/CFT/TFS, Banking
Group (“HSWG”) which was set up to identify timely applicable Secrecy & Data Protection. These modules are accompanied
requirements and assess the impacts of these requirements with assessment questions to ensure retention of knowledge.
on the affected divisions. Relevant staff are also kept up to Employees are also updated and reminded of necessary
date with any regulatory updates issued or published by the compliance practices through bank-wide communications. Since
regulators via a weekly circular. the start of 2019, themed compliance months have also been
held where managers conduct weekly and monthly huddles
to learn and discuss compliance topics as part of their team
PREVENTION OF FINANCIAL CRIME meetings.

In FY2020 we took several measures to further strengthen

our lines of defense against financial crime. The Anti-Money
WHISTLEBLOWING POLICY
Laundering and Counter Financing of Terrorism and Targeted
Financial Sanctions (“AML, CFT and TFS”) Policy (“Policy”) was The Bank has in place a Whistleblowing Policy to safeguard
updated in line with regulatory updates from Bank Negara the integrity of our operations. All employees, customers and
Malaysia. The Policy sets out the Bank’s AML, CFT and TFS business associates are encouraged to report any concerns arising
Programme (“Programme”) in managing money laundering, pertaining to improper conduct. The Whistleblowing Policy can
terrorist financing and targeted financial sanctions (“ML/TF/TFS”) be found on our Corporate website, and has clear instructions on
risks. Concurrently, the AML, CFT and TFS SOP is also updated to
how to raise such concerns. Reports of non-compliance including
ensure effective implementation of the Programme.
Shariah non-compliance or improper conduct behaviours can be
made anonymously and are addressed through independent
To further manage financial crime risks, the Bank has
established a dedicated Financial Crime Governance Committee investigation. Whistleblowers who disclose or raise issues in good
(“FCGC”) in January 2020 in addition to the existing Risk & faith will be protected from retaliation, adverse employment
Compliance Governance Committee, as we strive to safeguard action and from disclosure of their identity.
the Bank from being a conduit for financial crime proceeds.
The committee focuses on Financial Crime Compliance (“FCC”)

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DIGITAL AT THE CORE

MATERIAL OUR DIGITAL JOURNEY

TOPICS As digital technologies and financial services have converged, new opportunities for enhanced functionality,
accessibility and affordability are emerging. At the Bank, our goal is to help customers realise these opportunities
through ongoing digital enhancements to our products and services that will make them seamless for customers
to consume. At its core, our digitisation strategy is about inclusiveness, simplicity and intuitiveness, so that
financial services are delivered in a timely manner, without the traditional waiting times and cumbersome
Digital processes, driving more efficient business practices in the process.
Banking

Therefore, enhancing our range of digital FY2020 saw the continuation of the strategic priority to insource
products and services and improving our digital capabilities by expanding our Digital Centre of Excellence.
digital security is a key area of investment
Cyber Security and for the Bank. This includes efforts to
Data Privacy Digital Transition Highlights
make transactions easier and safer by
investing in customer journey capabilities 81% 86% 53% 45% 36% 20%
and automation, plus investments into
cyber security capabilities, as well as
initiatives to digitise internal processes
Simplifying
so that we can have employees lead the
Customer
Experience transformation through immersion in
the digital ecosystem. These digitisation
efforts extend beyond our Malaysian
operations to include the Bank's
operations in overseas market.
Total transactions Increase in mobile Reduction in physical
completed digitally transaction (y-o-y) branch transactions

FY2019 FY2020

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Sustainability
Statement

HLB CONNECT RETAIL

We provide mobile and web-based banking services to retail customers through our digital banking platform HL Connect. In line with
our ambition to improve the customer experience through digitisation, HL Connect offers a convenient and multi-functional platform
for customers to complete different banking functions with ease.

Enhancing Customer Experience Through HL Connect

e-Fixed Deposit Credit Card Functions

Set higher transaction limits to transfer funds Self-service functions including card activation,
from other banks all in one go card replacement and travel notifications

Fixed Deposit Management Instant Disbursement

Manage, view and make withdrawals online for Instantly receive funds in your HLB account
Fixed Deposits made in-branch following application approval for select
borrowing products

Call-for-Cash HLISB Investment Account

Borrow any amount within your credit limit and The first digital investment account offered by an
receive funds in HLB bank the next business day Islamic bank in Malaysia launched in FY2019

Customers uptake of digital services and the number of digital transactions we record are important metrics to assess whether our
digital offerings are in line with customer needs. We saw an increase of about 9.3% in the total number of customers using our HLB
Connect Retail platform. This increase places our current digital retail customer base at 54% as we continue to move towards our target
of reaching over 60% by FY2021.

FY2017 FY2018 FY2019 FY2020

HLB Connect Retail Customers (total) 1,225,466 1,489,036 1,715,001 1,874,333

HLB Connect Retail Customers (percentage) 35% 42% 49% 54%

One of our key focus areas for FY2020 was to provide even more digital offerings for our customers while simultaneously promoting
their migration from traditional branch transactions to our HLB Connect platform. FY2020 witnessed the launch of our all-new HLB
Connect app which offers an improved user interface and user exchange design to provide a more seamless user experience.

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DIGITAL AT THE CORE (CONTINUED)

HLB CONNECTFIRST FOR BUSINESS

Our digital platform for corporate, commercial and SME customers, HLB ConnectFirst, offers a comprehensive suite of banking
solutions to help businesses achieve enhanced efficiency. The platform, which includes a range of transaction banking services
tailored to business needs, can be customised to meet each customer’s specific requirements. Our Corporate Internet Banking users,
inclusive of ConnectFirst and ConnectBiz users, have increased by 8.6% compared to FY2019.

FY2018 FY2019 FY2020

Corporate Internet Banking Users 63,638 72,021 78,230

Percentage increase in Corporate Banking Users from previous FY - 13.2% 8.6%

Number of transactions 7,087,993 8,803,884 9,072,043

Transaction Value (RM) 72,451,435,979 87,646,594,697 81,778,965,258

To provide added security for our corporate, commercial and CYBER SECURITY AND DATA PRIVACY
SME customers, we introduced a revamped eToken platform.
This digital token authentication solution that allows easy and As new opportunities to meet customers’ needs are created
secure access into the platform, which was first introduced in through the digitisation of financial services, new digital
mid-2018, has been equipped with a first-in-market biometric risks are also emerging. To ensure that we can provide
facial-recognition technology for mobile devices. We were innovative and efficient products and services while protecting
also one of the five banks in Malaysia to partner with SWIFT our customers from harm, we continue to invest in our
to onboard their Global Payment Initiative (“gpi”) solutions cybersecurity infrastructure and our ability to counter evolving
onto our platform. This partnership will allow our customers digital threats. In doing so, we attend closely to emerging Bank
to complete cross-border payments in a faster and more Negara Malaysia regulations in order to ensure compliance in
transparent manner. To further improve the digital banking this rapidly developing risk area.
experience for our SME customers, we integrated the FastCollect
feature to our HLB ConnectFirst platform which allows customers The receipt, storage and protection of customers’ private
to be onboarded as JomPAY billers 88% more efficiently than details is governed by our Group Data Protection and Customer
traditional channels. JomPAY, being one of Malaysia’s biggest Secrecy Policy, which has been developed in line with the
online bill payment services, will enable our SME customers to Personal Data Protection Act (2010) (“PDPA”). The Group Data
collect payments more efficiently providing them with the ease Protection and Customer Secrecy Policy outlines the necessary
of mind to focus on other areas of their business. compliance-related roles, responsibilities, processes and
practices to be observed within the Bank and helps to cultivate
FY2021 will mark an important milestone for our HLB ConnectFirst a culture of compliance among our employees. Customers are
platform. We are planning to launch before the end of 2020, notified of the manner in which the Bank handles their personal
the second iteration of this platform which aims to simplify the information and what rights and protection they are entitled
current ConnectFirst platform by revamping the user interface to as a data owner through the Bank’s Privacy Notice, which
according to the latest digital trends and personalised actions also applies to the personal information of employees and
based on customers’ preferences. To ensure the success of HLB business partners. Changes to the notice are communicated
ConnectFirst 2.0, we have undergone extensive engagement to stakeholders via the Bank’s website or other appropriate
via awareness and training programmes with our staff and our communication means such as email.
customers throughout FY2020.

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Sustainability
Statement

Via our crisis management strategy, we are involved in national capabilities help customers complete their banking transactions
and international early warning systems to detect cyber immediately. Data-entry and processing tasks have been
security risks. In order to stay abreast of potential cyber-attacks, automated, which allows our employees to be more engaging
we subscribe to the Financial Services – Information Sharing with customers. Our general digital branch space deployed with
and Analysis Centre (“FS-ISAC”). We have also enlisted threat technologies such as wireless terminals and applications, allow
intelligence solutions to provide real-time intel that allows us customers to quickly perform banking transactions.
to prevent or mitigate cyber-attacks.
Selected digital solutions piloted at our Digital Branches, such
To further strengthen our defenses against cyber-attacks, as our InBranch tablet-based teller services, have also been
including scams, improving customer and employee awareness rolled out across the Bank’s Malaysian branch network. These
of cyber security measures and practices is integral to our ongoing efforts target to equip 150 of our branches with this
digital risk management strategy. Through various initiatives, feature by February 2021. Currently, we have equipped more
including employee training and awareness programmes and than 100 branches throughout Malaysia.
information provided to customers via our website and other
means of customer communication, we strive to build a culture TOWARDS A CASHLESS SOCIETY
where data security amongst our workforce is top-in-mind and
simultaneously ensure that customers have the knowledge Within the Malaysian banking industry, we aim to champion
needed to protect themselves and the banking relationship seamless digital transactions in our drive to create a cashless
from risk. society. Beyond the products and services through which we
promote cashless transactions, including bank cards, mobile
DIGITISATION OF CUSTOMER EXPERIENCES payment methods and online banking, we continue to focus
on expanding our merchant network for cashless payments. In
For our digitisation efforts to be meaningful, it is essential addition to offering an integrated Point-of-Sale terminal which
that they are designed in a way that enhances the banking accepts all card and mobile payments, we provide incentives
experience and creates value for our customers. Improving such as low transaction rates, waived desktop terminal rental
and evaluating digital customer experience is therefore a key fees and complimentary set-up services to promote widespread
priority under our digitisation agenda. Since FY2019, progress adoption of digital payment methods.
in this area has been driven by our Customer Experience (“CX”)
Lab, which brings together teams from across the Bank and
In line with our commitment to help small business go
external partners to accelerate the delivery of new products
cashless, in FY2020 we introduced HLB Tap On Phone, a
and services. The CX Lab serves as a platform to explore the
new contactless mobile payment acceptance service for
applications for new technologies, such as Artificial Intelligence
Android mobile devises that allows vendors to receive
and machine learning, among others, and to work with
card payments using their mobile device. Made possible
customers to understand their banking needs.
through a partnership with Payment Networks Malaysia,
Tap On Phone is helping to bring down the costs of going
DIGITAL BRANCHES
cashless for businesses. In June 2020, we also launched the
“Cashless Lagi Senang” campaign to onboard more vendors
The launch of HLB’s flagship Digital Branch in 2017 marked a
and traders in order to enable them to add cashless
key milestone in the Bank’s efforts to re-imagine the banking
and contactless payment methods for the ease of their
experience in a digital era. Since then, our two Digital Branches,
customers.
located in Kuala Lumpur and Penang, have stood as a model
for the future of brick-and-mortar banking, leveraging new
technology to improve efficiency and enhance the customer Our Cashfree Society programme, targeted at university students,
experience. was activated in FY2020 with the broader goal of building and
equipping a society that conducts daily financial transactions
Our digital branches utilise a suite of solutions that guide our digitally. To achieve this, we have already implemented
customers through a seamless journey. During consultation Point-of-Sales terminals across university campuses, with plans
with branch Personal Financial Consultants, our paper-free to enable the other retail merchants on campus with similar
approach of using app-enabled digital tablets with biometric cashless terminals in the year 2021.

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WORKFORCE READINESS

MATERIAL NURTURING A SUSTAINABLE EMPLOYEE EXPERIENCE

TOPICS

Workplace Readiness
Launch of HLB@Workday
A singular, real-time and mobile-first platform for all entities to manage the
employee lifecycle end-to-end – from on-boarding and performance management
Nurturing Talent
Growth to compensation and learning & career development

Workforce Readiness
Data and insights-driven decision-making and learning on the go
With HLB@Workday our employees are now empowered to harness data to drive
Ethics, Integrity
decision-making on managing their teams. Learning is no longer restricted to the
and Compliance
classroom; it can and should happen anytime, anywhere

Talent Management
Building and retaining talent
Employee Health & We continue to refine our end-to-end talent management processes encompassing
Wellbeing recruitment, performance management, learning and development and talent
succession planning

Driving A Compliance Culture

Structured training
For bankwide effectiveness, the Bank utilises all available platforms to shape desired
workforce behaviour – from huddles and tone from the top communications, to
on-boarding, mandatory eLearning and role-based training

Employee Well-being, Health & Safety, Environment

Nurturing positive employee experiences
Providing relevant, meaningful and positive employee experiences at every stage of
their professional lives, taking into account diversity and inclusivity

At the Bank, we believe our employees are our greatest asset. Our aim is to create a workforce that is primed
to embrace the challenges of the digital age with resilience and agility. From this foundation, we strive to
deliver the highest levels of customer service and work to achieve optimal outcomes for the Bank. To ensure
our employees can meet these ambitious standards, we seek to continuously grow our own talent and offer
opportunities that allow individuals to develop to their full potential. By creating an inclusive work environment
where we demonstrate investment into our employees, we are supporting the success of our business and
positioning ourselves to give back to the communities where we operate.

Through our union policies, we make known our commitment to the right to freedom of association and
collective bargaining. We adhere to all regulations of labour standards, including those related to minimum
wage, non-discrimination and merit-based rewards structures.

As the external operating environment shifts and evolves at pace, it is key that HLB has the right people in
place to respond with agility to technological advances, customer expectation and even business challenges
that present unexpectedly, such as COVID-19.

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Statement

WORKPLACE READINESS In the search to continually innovate and harness opportunities,

we want to deploy advanced technologies to refine what we do
Mobile-first technology continues to drive the employee and what we offer for the benefit of our customers, employees
experience, both from a workplace and workforce perspective. and the Bank.
Three years back, our workforce embraced interactions with our
HALI chatbot for employee benefits queries, while our candidates HALI, HLB’s AI chatbot, has gone from strength to strength since
for employment enjoyed interaction with HALI when engaging its introduction in FY2018. Initially conceived as a virtual assistant
with us for employment opportunities. Our employees have also for the Bank’s HR team to support operations by responding to
been primed to consume bite-sized learning content through our employee queries on policies and procedures, HALI has since
mobile and web-based micro learning app, SmartUp. We have been deployed to perform enhanced duties along the HR value
since then made significant progress in enhancing the employee chain, including at the initial stages of the recruitment process
experience through digital means. by screening candidates upon application for roles within the
Bank. Recognising the greater potential within our AI chatbot,
HLB@WORKDAY in FY2019, HALI, was tasked to conduct digital recruitment for
our Management Associate Programme, with HALI deployed
The launch of HLB@Workday marks our next chapter in to screen and evaluate applicants in the initial stages of the
terms of workplace readiness. All employees are now able to recruitment process.
have mobile-first access to a secure network for all Human
Resources (“HR”) related functions, such as leave application, Digital recruitment process:
salary statements and personal information updates to crucial
professional development processes including performance
management, learning and career development and Send Email to Candidate Database
compensation decisions.

In April 2020, our Learning and Development (“L&D”) team Candidate Clicks on Linkin Email
launched a new series of curated external digital courses on
HLB@Workday covering topics such as productivity, personal
growth, leadership and well-being. Since its launch, 89% of our HALI Guides Candidate Through Screening Process
employees have adopted this platform on a regular basis and
1,660 employees have completed these non-mandatory external
courses.
Candidate Submits Video or Text

For the next phase of our eLearning strategy, we plan on

integrating curated learning from cloud vendors with our HLB@
Workday platform with the purpose of utilising the platform to Candidates Shortlisted
drive specific skillsets for selected employees such as customer
etiquette and communication skills for our customer service staff.
Skype Interview
RECRUITMENT

Recruitment actions are guided by our recruitment policy

framework, which aim to promote equal opportunities through The seamless digital environment has also reduced our reliance
consistency, transparency and hiring the right people to fill the on non-sustainable resources. For example we now use less
immediate needs of the role, as well as candidates that have paper in the recruitment or hiring process. Job applications are
potential for growth and have a working history of strong ethics submitted through our HLB Careers website and offer letters are
and behaviour confirmed by the pre-employment checks that we accepted with digital signatures via our HLB@Workday platform.
carry out. Our recruitment positions are open to both internal and
external candidates, with hiring decisions based on merits.

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WORKFORCE READINESS (CONTINUED)

DIGITAL TRAINING LEARNING AND DEVELOPMENT

Through technology, we have sought to deliver a mobile Our Learning and Development team specialist remain at the
first learning experience for employees. This began with our forefront of technological innovation, adopting digital platforms
mission to enable employees to learn on a platform that and content to enhance employees’ training experience. In
would enable them to consume bite-sized learning content,
parallel, emphasis is placed on the value of on-the-job learning,
anytime and anywhere. This was made available bankwide to
through experience and interaction with peers and senior
all employees, accessible via mobile. The content comprised of
managers. The 70:20:10 Learning Framework guides the way
a blend of digital-focused modules and modules from subject
matter experts, segmented by division. In February 2020, we we learn: 70% on-the-job, 20% learning from others and 10%
successfully launched HLB@Workday to all six countries in via structured training, such as digital and classroom learning.
which Hong Leong Banking Group ("HLBG") operates. Whilst we believe that employees are able to learn and retain
knowledge better by learning on the job, we have also sought
On HLB@Workday, competencies or skills that we seek in to support this by fine-tuning our approach to structured or
employees can be linked to training modules, enabling us to classroom-based training.
assign courses to specific segments of our employee population,
mirroring the intent of role-based training that is available to Bank-Wide Training
our frontline or customer-facing employees, specialist roles etc.
FY2020 Overall Employee Training (1 July 2019 - 30 June 2020)
While we already had in place a plan to transition classroom
learning to virtual classrooms as part of our workplace
readiness strategy, the emergence of the COVID-19 pandemic Total number of employees
and the resulting MCO enacted in Malaysia in March 2020 gave
us renewed focus. We reviewed and reworked with our training 8,090
partners on the most viable options to deliver training, shifting
from face-to-face classroom courses to virtual platforms such
as WebEx, MS teams, Google Meet and our internal employee
engagement platform, Workplace. Total number of training hours provided

At the same time, we began testing the response of curated

255,502 hours
learning during the MCO by sending out links to learning around
the pillars of personal growth, productivity and well-being,
selected by the Learning & Development team. The response Average training hours per employee
to date has been encouraging enough for us to continue on
a permanent basis, as employees understand that learning is
no longer restricted to the classroom. Employees are able to
31.5 hours
participate in all the eLearning or a selection based on their
preferences, enhancing engagement and knowledge retention.
Our employees today are primed to learn from this blended
training approach, utilising different media and channels for
effectiveness and engagement.

The pilot is also a precursor to the next phase of eLearning –

to integrate curated learning from cloud vendors within HLB@
Workday so that we use the platform to drive not only basic
learnings but also specific skillsets for selected employees.
For example, customer service staff who may require refresher
courses in customer etiquette and communication. Prior to the
pandemic, structured training comprised 80% training within
the classroom; this has now shifted to 65% learning in a virtual
environment.

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Sustainability
Statement

AUTOMATION AND DATA DRIVEN WORKFORCE

We are embracing the fundamental need for automation and data driven insights, and recognise the key to empowering our
people to make accurate, real-time decisions. This has cut across all HR processes including recruitment, on-boarding, performance
management, learning and development, talent management and rewards and recognition.

Managers are empowered with real-time data and insights into the management and development of their team. Apart from being
able to deepen their engagement with their teams using valuable information and insights, the HLB@Workday platform provides
the agility for managers to respond to changes or requests from team members anytime, anywhere. As an indication that Digital at
the Core is not just an ethos anymore but also our immediate reality.

Recruiting the right talent with the right skill sets, perspectives and abilities is central for business growth. And as we seek an
increasingly multi-dimensional workforce, sourcing individuals from diverse industries and backgrounds, our hiring practices must
evolve at speed to position ourselves as an employer of choice.

Growing our own talent within HLB and HLISB is a key strategy for continued competitiveness within the industry. Our Learning
Framework details our approach towards enhancing our employees’ knowledge, experience and skill-sets, through bank-wide
training, role-specific learning and tailored programmes on an individual basis.

BUILDING A TALENT PIPELINE THROUGH GRADUATE PROGRAMMES

Over the last 4 years, we have hired 237 candidates through graduate programmes, and welcomed more than 300 interns into our
business on a short-term basis. Many of these individuals are now in permanent roles across the Bank after graduation, and the
programmes’ outcomes are now very much ingrained as a key part of our workforce strength-building initiatives.

In FY2020 as the pandemic deepened, we began testing new ways to source for these candidates with no loss in terms of focus and
quality. For example, instead of flying the senior management to the UK to interview potential programme candidates face-to-face,
we began interviewing them through virtual means. Additionally, we hosted a live online engagement sessions on graduate
opportunities at HLB with media partner Graduan, garnering an audience of 5,717 viewers and more than 386 applications in
seven days. This response has given us cause to examine more sustainable methods of recruiting candidates for the Management
Associate programme. Doing away with the need for physical visits to the UK and Australian universities and also has the added
effect of reducing our carbon footprint.

2016 – 2020 Permanently Retention 2021

Hires Placed Rate Target

Management Associates 54 27 81% 25

Graduate Trainees 183 97 63% 20

Internships 321 57 - 100

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WORKFORCE READINESS (CONTINUED)

TALENT MANAGEMENT
Our overarching talent management policy aims to strategically pair the right individuals with the right roles to drive employee
growth and business performance, and also to assist us in identifying the key gaps between the talent in place and the talent
required within the Bank.

The policy is supported by the following processes:

1 2 3 4
RECRUITMENT
PERFORMANCE
MANAGEMENT &
INDIVIDUAL
DEVELOPMENT PLAN
LEARNING &
DEVELOPMENT
TALENT REVIEW
& SUCCESSION
PLANNING

Promote consistency, Drive strong Drive L&D opportunities Develop internal talent
transparency and hiring performance-oriented to continuously and identification
the right people to fill outcomes and develop develop knowledge of external talent,
the immediate needs internal talent pool, and skillsets, for to form part of the
of the role, as well as consistently aligned to a highly engaged succession planning
candidates that have business priorities and workforce, focused on slate for leadership and
potential for growth goals. delivering strategic business critical roles
and have a working goals, and maintaining of the Bank.
history of strong ethics high standards
and sound behaviour. of responsibility,
professional conduct
and behaviour.

TALENT REVIEW AND SUCCESSION PLANNING

Our talent and succession planning framework is designed to develop internal talent and identify external talent as part of the
succession planning process so that we have a slate of potential candidates for leadership and business critical roles. Key stakeholders
within our framework are assigned specific roles throughout the talent and succession process.

HLB Talent Council Senior Managers Line Manager Identified Talent

Comprising the Group Develop internal talent and Focus on retaining talent in Opportunity to learn and grow
Managing Director and senior identification of external a structured manner, place at an accelerated pace, greater
executives who analyse past talent, to form part of the talent in roles identified as access and exposure to senior
performance, employee succession planning slate for areas targeted for growth. management and opportunity
aspirations, demonstrated leadership and business critical Complete performance to learn from other talent
drive and critical thinking in roles of the Bank. evaluation checklists so that cohorts.
the process of identifying high-potential individuals can
a pool of people that can be identified and a career path
progress to future senior established.
leadership roles.

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Sustainability
Statement

PERFORMANCE MANAGEMENT AND INDIVIDUAL DEVELOPMENT

Our performance management policy framework aims to drive strong performance-oriented outcomes and develop an internal
talent pool in order to align with and support the delivery of business priorities and goals consistently.

The performance management framework consists of three cycles – Goal Setting, Mid-Year Review, and Year-End review – all of
which require a discussion between employee and line manager to agree on the target deliverables, expected standards and
corresponding outputs. Each cycle includes an Individual Development Plan (“IDP”) discussion which aims to identify an employee’s
potential next role or opportunity for continues growth and development and to understand employees’ mid- to long-term career
aspirations so that HLB and HLISB can support their career progression.

Employee and Line manager agreement

on targeted deliverables, expected Goal-Setting Mid-Year Review Year-End Review
standards and corresponding outputs.

IDP discussion at each cycle to:

Identify employee’s potential next role Understand employees’
and expansion for continuous growth and career aspirations mid
development to long term

At the heart of workforce engagement and productivity lies meaningful conversations. Over the past year we have coached our people
managers to not only have meaningful retention conversations but to actively discover their team members’ career aspirations. We
have seen success with the attrition rate reduced by 26% compared to prior year and close to 40% of internal vacancies taken up by
internal candidates, as a result of our people managers and employees responding positively to the processes and taking ownership
of retaining and nurturing employees while employees take ownership of their own development and career aspirations.

REMUNERATION POLICY AND FRAMEWORK

Our Remuneration Policy Framework is designed to promote a high-performance culture that drives specific behaviours, with
employees operating according to strong values, integrity, a clear sense of responsibility and high ethical standards. Underpinned
by a rigorous performance management process, remuneration is determined by key performance indicators such as behaviours in
accordance with our Code of Conduct and Ethics, risk and compliance, meritocracy in performance, prudent risk-taking, selected ESG
performance and HLB values. Every senior management officer has a responsibility to embed sustainability in all initiatives in their
division. This is linked to performance considerations and, in turn, total remuneration received.

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WORKFORCE READINESS (CONTINUED)

EMPLOYEE WELL-BEING, HEALTH & SAFETY

Board of Directors in FY2020
Employees who feel valued, appreciated and cared for are
more likely to experience job satisfaction and, in turn, remain 37.5%
committed to a long-term career with the Bank. We take a
broad approach to caring for our workforce and their families,
offering support for individual well-being related to mental Male 5
health, personal safety and financial security. Female 3

EMPLOYEE ENGAGEMENT
62.5%
We believe that open and regular two-way communication
with employees is a key driver towards workplace satisfaction.
Various forums are used to communicate and listen to the
voice of employees. Our HLB Workplace and HLB Workchat SAFETY AND WELL-BEING
platforms also connect our employees and provide a space
for communication and collaboration right across the Bank. The health, safety and well-being of our employees remains a
Modelled on social media platforms, these channels facilitate priority. Our Occupational Health and Safety Procedures ensure
group chat, voice and video calls as well as screen sharing that we have in place processes and controls that adhere to
while maintaining a high level of security of information. all standards and regulations. Upon joining the Bank, new
employees are introduced to our health and safety systems
Our employee engagement survey, “My Thoughts, Our Future” and processes and are trained to identify and mitigate health
was launched in FY2017 and designed to seek feedback from and safety risk. HLB’s and HLISB’s health and safety programme
employees on the Bank’s position and progress made on operates within a framework that recognises incidents directly
workforce related perspectives. For FY2020, our three key survey related to factors under the Bank’s control and aims to eliminate
theme areas were: Strategy, Goals & Objectives, Customer Focus those. In FY2020, we had 5 accidents within the workplace and
and Organisational Culture. For our third iteration of the survey 799 workdays lost due to these accidents.
in FY2020, the response rate was 92% compared to 91% in
FY2019 and 89% in FY2018. Data analysis of survey results have To ensure our workforce is operating at an optimum level,
enabled us to refine our approach to employee engagement HLB and HLISB proactively work to support the health and
as well as initiate new engagement activities to drive greater well-being of all our employees. For FY2020 we held a series
employees engagement. of wellness initiatives and events guided by three pillars of
Engagement, Appreciation and Well-being, with activities
DIVERSE AND INCLUSIVE WORKFORCE supported by an overarching communications plan deploying
the hashtag #HLBCares. Focus topics included Cardiovascular
An inclusive workplace is central to the well-being of our Disease, Maintaining a Balanced Diet, Ergonomics & Posture,
employees. Our Code of Conduct sets out a framework to and Diabetes & Obesity. Staffs were engaged with each topic
establish a safe and inclusive work environment that prohibits via circulation of an infographic containing key information and
discrimination. Our focus is to create an environment where all advice, Brown Bag ‘Lunch & Learn’ sessions, curated L&D content
our employees, regardless of demographic, age, background available on HLB@Workday and a series of events designed to
or other indicator of diversity, are encouraged to succeed. bring colleagues together to enjoy activities supporting healthy
Equal opportunity is normalised, with leaders, managers and lifestyles. In FY2020, over 1,189 employees took part in our
supervisors trained to contribute to a culture where people health and wellness programmes.
are respected and valued. As of FY2020, we have six full-time
employees who identify as differently abled, as one of our
previous differently abled staff have found another opportunity
to explore within Hong Leong Financial Group.

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Sustainability
Statement

SOCIALLY RESPONSIBLE BUSINESS

MATERIAL RESPONSIBLE BUSINESS PRACTICES ESG Framework and Policy

TOPICS The products and services that we design and
To further strengthen the Bank’s oversight of
deliver are part of the broader responsibilities that
ESG lending and financing risks, in FY2020 the
we have as a financial service provider. Financial
Sustainability Steering Committee endorsed
intermediation has widespread implications for
the development of an ESG Policy for corporate,
the economy, the environment and society at
commercial and SME clients. The policy will be
Climate Positive large. At the Bank, we are committed to ensuring
Financing used to guide our relationship managers and credit
that the role we play within the system is one
risk team to assess the environmental and social
of responsibility and accountability, hence, we
risks associated with our lending and financing
continue to strengthen the integration of fairness,
activities. In developing the Bank’s ESG Policy, we
and social and environmental considerations into
have adopted an inclusionary approach which will
our business practices.
Responsible focus on supporting the sustainability progress of our
Financing customers, regardless of what point they may be at
RESPONSIBLE LENDING AND FINANCING
in their sustainability journey.

While the lending and financing that we provide

The key priority in developing the ESG Policy was to
is critical to economic development, it is essential
actively engage with stakeholders across a range of
that funds be disbursed in a manner that takes into
Fair Banking industries, including Bank Negara Malaysia, Malaysian
consideration the potential social and environmental
Timber Certification Council, Forest Stewardship
risks of the activities we finance.
Council and Malaysia Palm Oil Board, among others,
to better understand the unique environmental and
Our corporate and commercial loans and financing
social risks and relevant regulations in each sector
activities are governed by our Business and
Sustainable Supply before finalising our own policy document. As part
Corporate Banking Credit Policy (“BCB Credit Policy”),
Chain of the policy development process, we also worked
which includes a set of policies designed to help us
with World Wildlife Fund for Nature’s Sustainable
and our clients to manage environmental and social
Finance Unit to review our corporate ESG Framework
risks. Under the BCB Credit Policy, credit applications
which will serve as the foundation for our ESG Policy.
by businesses that present sustainability risks
This includes a strategic engagement and discussion
are assessed based on the business’ ability to
Community session with HLB’s and HLISB’s Board members and
demonstrate full compliance to rules and regulatory
Banking Senior Management on aspirations that the Bank
requirements of that business sector. The policy
could target as part of our sustainability roadmap
is updated at least annually and serves to guide
and journey.
decisions about enhancing existing or future
development of products and services as well as to
External frameworks that guided the
Prevention of improve engagement with our stakeholders. Due
development of our ESG Policy include:
Financial Crime diligence activities that we practice include site
• IFC Performance Standard
visits, environmental assessments and third-party
• First for Sustainability: E&S Risk
specialist reviews of proposals that might pose
• Global Reporting Initiative (GRI)
additional risks, such as exploitation of native land.
• CDC Investment Works ESG toolkits
• Bursa Malaysia Sustainability Reporting Guide,
Our strategic objective is to conduct our lending and
2nd Edition
financing activities in strict compliance with our
• Task Force on Climate-related Financial
internal and local regulations, ensuring high ethical
Disclosures (TCFD)
standards in decision making. We endeavor to
• RSPO Principle
evaluate and ensure that activities and businesses
• Enviromental Quality (Industrial Effluent)
we finance do not harm the environment, human
Regulations 2009
rights and labour rights which include the Child Act
• Environment Quality Act (Clean Air)
2001 and Malaysian Anti-Corruption Commission Act
Regulations 2014
2009, among others.
• MSPO Standards

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SOCIALLY RESPONSIBLE BUSINESS (CONTINUED)

The policy will also take into account BNM’s VBI Financing and Investment Impact Assessment Framework, ensuring that financing
granted to the Bank's customers is not only assessed and screened for environmental and social risks but also in compliance with
Shariah requirements or criteria. The policy will govern screening during annual client credit reviews for existing customers and
at the outset for new to bank customers.

HLB ESG Framework Exclusion List1

Involvement in money laundering, crime, terrorism or illegal activities (e.g. illegal waste management, illegal
deforestation).

Involvement in pornography, prostitution.

Production or trade of military weapons or firearms.

Involvement in forced labour, exploitation of children and human trafficking.

Activities resulting in significant conversion or degradation of any high biodiversity value areas2.

Operations which use fire for land clearance or preparation of land.

Fishing activities using drift nets or explosives.

1. HLISB will also adhere to the exclusions in Shariah Compliance Policy, under which HLISB will be guided by such exclusions under the ESG Policy/HLB BCB Credit
Board Policy endorsed by HLISB SC on 17th August 2020.
2. Primary forest; areas designated by law or relevant competent authority to serve the purpose of nature protection; areas for the protection of rare, threatened or
endangered ecosystems/species.

In addition to the general exclusions outlined above, as part With the implementation of the ESG Policy and environmental
of our sectoral risk rating module under the ESG Policy, we and social risk assessment process, we have set our focus for
will conduct an assessment of the client’s sector’s specific FY2021 to be on data collection for us to assess the environmental
environmental and social impacts to determine if it would be and social risk profile of our corporate loans/financing portfolio.
classified as a sensitive sector. This would include assessment of In the long term, the ESG Policy will also include sector-specific
environmental considerations such as, air emissions, waste and frameworks for financing and lending activities.
effluents, biodiversity, water and energy efficiency, as well as
social considerations such as, land acquisition and involuntary CLIMATE-POSITIVE FINANCING
resettlement, labour and working conditions and risk to cultural
heritage, or indigenous or local communities. Renewable Energy Financing

The global climate crisis is driving an urgent need for an economic

Our focus for FY2020 has been on raising awareness and
system grounded in climate-friendly solutions. At the Bank, we
knowledge levels of HLB’s staff on climate change and
recognise the role we have to play in mobilising capital to drive
sustainability related issues, risk and opportunities. For
this transition and have committed to providing RM500 million
FY2021 we have plans in place for similar climate change worth of financing for renewable energy products from FY2018
and sustainability awareness and engagement programmes to FY2022. As of FY2020 year-end, the Bank has approved a
targeted at our stakeholders such as customers, vendors, total of RM402 million to support the development of about 40
service providers, business communities. renewable energy projects namely solar, bioenergy and hydro.
Beyond financing, the Bank has worked closely with clients to
help new industry players navigate industry requirements and
evaluate project feasibility.

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Sustainability
Statement

In addition to large-scale project financing, the Bank is Fair Banking

committed to helping smaller players enter the renewable
energy space through a targeted SME Solar PV programme. The Bank is committed to the guiding principles of fair,
The programme, which will be launched in FY2021 will provide equitable and responsible lending/financing, and seeks to
financing for SMEs looking to install rooftop solar panels. ensure that our customers are treated fairly, equally and have
non-discriminatory access to financial services. In this regard,
HLB being among the most active banks in supporting the the Bank has implemented oversight accountabilities as well
government’s Green Technology Financing Scheme (“GTFS”). as policies and procedures to promote fair and responsible
At the end of FY2020, we have supported close to 20 projects banking.
from the inception of GTFS with government guarantees worth
approximately RM140 million.
Fair Banking: Responding to Regulators
Green Car Financing In August 2019, BNM issued a directive to all Islamic Banks
requiring that banks ensure that late payment charges (“LPCs”)
Vehicular emissions associated with the consumption of fossil that the banks were issuing were commensurate with the
fuels have a significant impact on the global climate crisis and actual costs or losses incurred. To address BNM’s concerns, in
on local air quality. In recognition of the need to decarbonise FY2020 HLISB outlined the methodology used for calculating
transportation in Malaysia, HLB commenced the development LPCs for delinquent and defaulted financing. The calculations
of a Green Car Financing Framework this year. The Framework, revealed that HLISB is indeed fair and is in accordance with
targeted at our employees and customers, aims to increase BNM’s Guidelines on Late Payment Charges for Islamic Financial
HLB’s hybrid and electric car financing by a factor of five Institutions.
and will include efforts to build partnerships with hybrid car
manufacturers and community engagements to promote
changing consumer preferences towards green vehicles. Fair Treatment for Financial Consumers

As of FY2020 year end, the framework was undergoing the In FY2020, to further strengthen our fair banking practices and
drafting and approval stages, with further manufacturer promote high standards of responsible and professional conduct
engagements and marketing and communication initiatives to when dealing with customers, we expanded our internal
occur in FY2021. We have initiatives in the pipeline to provide policies to integrate the newly issued Bank Negara Malaysia’s
potential retail customers with attractive interest rates and Fair Treatment of Financial Consumers (“FTFC”) Policy into our
added value packages. As for our corporate customers, we have operations and Customer Service Charter.
plans to support energy efficient dealerships.
Consisting of six principles, namely Corporate Culture, Fair
Green Developer Framework Terms, Disclosure, Fair Dealing, Advice & Recommendation and
Redress, the FTFC Policy sets expectations for financial service
In FY2020 we initiated discussions on the creation of a Green providers (“FSPs”) to effectively manage conduct risk and
Developer Framework to guide our financing activities for provide consumers with confidence in its dealings. Five out of
property development companies. Under the Framework, the six principles were implemented in FY2020 with the second
developers will be categorised based on their adherence to principle, Fair terms in contracts with financial consumers, to be
environmental practices, such as the design and construction of activated in FY2021.
green buildings, the use of water and energy-efficient fixtures
and sustainable construction practices. Developers deemed To help familiarise employees with the new FTFC Policy, a FTFC
to be adopting the best practices will be eligible for better Compliance month was held prior to the Policy’s enactment
financing packages and be fast tracked for approval, while and employees were re-introduced to the updated Customer
companies demonstrating poor performance will be provided Service Charter. Moving forward, the Bank intends to roll out
support to improve their practices and be subject to monitoring. mandatory eLearning on the policy and establish onboarding
training for new employees.

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SOCIALLY RESPONSIBLE BUSINESS (CONTINUED)

ACCESS TO FINANCIAL SERVICES

Serving the Underserved

Supporting the Visually Impaired

In FY2020, HLB became the first financial institution in Malaysia to offer Self-Service Terminals with speech functions for visually impaired
customers. Including both a braille keypad and headphone jack, the HLB Talking ATMs enable visually impaired customers to be guided through
transactions using personal headphones to receive instruction in one of three different languages used in Malaysia. HLB Talking ATMs have
been strategically located in the Brickfields, Kuala Lumpur and Pulau Tikus, Penang communities where the Society of the Blind, Malaysia
operate. The ATMs were developed with the assistance of visually impaired employees, reflecting the Bank’s commitment to a customer-centric
approach to designing and delivering products and services.

VALUE-BASED INTERMEDIATION INITIATIVE FOR ISLAMIC SUSTAINABLE PROCUREMENT PRACTICES

BANKING
Our commitment to responsible business practices extends to
the suppliers and vendors that we work with across our value
In line with the VBI principles championed by Bank Negara
chain. Suppliers and vendors are required to self-declare their
Malaysia, HLISB is committed to contributing to the generation
environmental and social responsibility strategy during the
of positive and sustainable impacts through Islamic finance. Our
supplier screening process. Suppliers and vendors are also
aim is to position HLISB as an Emerging VBI Institution in three
advised of the terms of our whistleblowing policy at several
years. As part of our effort, we have set up a dedicated team to
stages throughout the procurement and purchase process, so as
oversee and coordinate the implementation of VBI principles.
to ensure their ability to report inappropriate behaviour. Policies
These include the drafting of VBI framework, monthly updates
related to our procurement activities, including our supplier
on VBI initiatives, consistent creation of VBI-specific content for
Code of Conduct and Statement on Sustainable Practices for
Workplace and enhancing access to knowledge and promoting
business partners, are available on our corporate website.
Islamic banking and financial literacy. In FY2020 we also
expanded our public education efforts through the "Program
To further enhance the sustainability of our value chain, in FY2020
Celik Muamalat" speaking series, which aimed to create public
we initiated the development of a Sustainable Procurement
awareness on Islamic finance and financial management. The
Framework to guide the development of business relationships
programme, which was held in collaboration with two local
with suppliers who uphold the Bank’s expectations for
universities, reached a total audience of 215 through two
sustainable practices. The Sustainable Procurement Framework
speaking programmes. Subsequently, we plan to raise public
will include guidelines for the screening and assessment of
awareness on Shariah through research collaboration with local
suppliers as well as tools to assist suppliers enhance their
universities.
mitigation and disclosure of ESG risks.
Moving forward, HLISB will also incorporate VBI principles at
the product development and design stage, to ensure that
EMPOWERING SMES
we deliver solutions with greater awareness of sustainability
considered from a Shariah perspective. In support of this goal SMEs are widely recognised for the role they play in economic
and to promote stronger understanding of VBI principles across growth and job creation. At HLB and HLISB, we are committed
our workforce, in FY2020 we arranged two training sessions to supporting the development of the SME economy through
with a Shariah expert on VBI financing and investment as part the provision of targeted services, including financing, specially
of our staff capacity building in Islamic finance knowledge. A tailored products, payment collection solutions and mentorship
total of 35 employees from both HLB and HLISB attended the programmes. In FY2020, we focused on developing and
training. upgrading two of our key sustainability initiatives for the SMEs
and social enterprises, namely HLB LaunchPad and iStart@HLB.

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Sustainability
Statement

HLB LAUNCHPAD Through the strategic collaboration with our ecosystem partners
such as Cradle and MaGIC, which have a large SME base under
Our support for SMEs goes beyond the provision of financial them, we are able to acquire these potential SME customers
services to include guidance and exposure provided through to on-board them for our Business Current Account and HLB
our SME mentorship programme, HLB LaunchPad. Under this ConnectFirst digital platform. By offering them holistic SME
initiative, high-potential technology start-ups from ASEAN business solutions via our iStart@HLB platform, we stand to be
are selected to collaborate with HLB to develop and present their preferred partners.
solutions to real banking challenges. By participating in the
programme, the start-ups, which are selected under the three JumpStart@65
pillars of Simplifying Banking Today, Digitising Customer Journey
and Experience, and Reimagining Banking for Tomorrow, gain JumpStart@65 is a new community space managed by HLB’s
insights into business development, exposure from programme Digital Innovation Office in Jalan Tun H.S. Lee, Kuala Lumpur. The
marketing and opportunities for market testing. At the end of space is currently refurbished as a platform to build networks of
the programme, start-ups are invited to pitch their solutions people, including both HLB employees and social enterprises,
to our management team, after which winning companies and who can co-create innovative solutions to issues faced by
selected participants are invited to partner with the Bank for communities. By doing so, we hope that Jumpstart@65 will
the implementation of their project. inspire communities by showing purposeful life skills in action.

Moving forward, HLB intends to expand the Launchpad The space has been rolled out to secure the support of staff,
programme to develop a more inclusive ecosystem that not reaching 600 HLB employees, and key partnerships have
only focuses on startups in the fintech space but also other been inked with MaGIC, MDEC, Cradle and Fonterra. The first
partners, such as social enterprises and green technology co-creative project in the pipeline is with PopTani, a social
companies. enterprise with a vision to create a self-sufficient farm in every
house.
iSTART@HLB
Workshops with organisations such as UNICEF and Chumbaka are
As part of our continuous effort to support and engage with the in the pipeline, bringing together communities, HLB employees
SMEs in Malaysia, we are taking the initiative to reach out to all and key project partners to find ways to inspire households
SMEs – including the underserved entrepreneurs and start-ups to become successful self-sufficient urban gardeners. The
– through strategic collaborations with partners such as Cradle initiative is looking to engage with one social enterprise per
and MaGIC, via our special program called iStart@HLB. month, with a total of 12 events hosted in the first year.

iStart@HLB is a platform that offers SMEs easy access to

banking facilities, digital business tools and co-working spaces
at low, if not zero, costs– starting with just our Business Current
Account. From banking facilities to digital business tools that
simplify SME business’ needs on administration, market place
and even logistics, iStart@HLB also accommodates unlimited
access to creative and innovative spaces for ideation, product
pitching and experimentation sessions at our community space,
Jumpstart@65. With this personalised range of offers, we are
able to provide solutions and most importantly bridge the
scarcity gap of financial convenience for young businesses.

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ENVIRONMENTAL MANAGEMENT

MATERIAL OUR ENVIRONMENTAL FOOTPRINT GREEN BUILDING

TOPICS Our direct environmental impact encompasses the In addition to encouraging behavioural changes
resources used and emissions generated across our to drive sustainable consumption, we are
business network. Aided by our digitisation strategy, committed to investing in physical infrastructure
we aim to reduce the influence of our business that minimises the environmental impacts of
activities on the environment through more efficient our business operations. In FY2019, Menara Hong
Managing our patterns of consumption and disposal. Leong was awarded a Green Building Index (“GBI”)
Environmental Silver rating and the internationally recognised
Footprint
In FY2020 we launched our Responsible Consumption LEED Gold rating. This has paved the way for the
Activation Plan to guide our efforts in this area, Bank to pursue further green certifications for its
with the aim of creating a cultural shift among Bank-owned properties.
our employees towards greater environmental
responsibility. The plan consists of measuring In FY2020 we set out the target to achieve Green
Responsible
Consumption the baseline of our consumption and employee Building Index certification for HLB’s upcoming South
educational and engagement programmes, which Key Digital Branch in Johor, PJ City Tower A and our
include the publication of online content promoting Penang branch located on Light Street by FY2025.
environmentally friendly behaviours as well as Preparation for the GBI applications for South Key
workshops and events to support a sustainable began in FY2020, with further design planning,
lifestyle. The development of these initiatives assessment and registration to occur in FY2021. PJ
began in FY2020 with the establishment of the plan, City Tower A is one of our existing buildings and
with full rollout targeted for FY2021, including water, is currently fully-occupied by the Bank. We are
energy and waste reduction efforts. currently assessing upgrades needed to obtain its
green certification. In November 2019, we launched
the use of automatic license-plate recognition and
the use of camera technology to recognise and
verify vehicles for parking access in order to reduce
the dependency on plastic-based access cards. We
have also retrofitted the fluorescent & PLCE light
fittings to energy efficient LED fittings in July 2020.

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Sustainability
Statement

ENERGY AND EMISSIONS

We calculate our Scope 1 and Scope 2 greenhouse gas emissions based on the fuel and energy consumed by our operations in
Malaysia. In FY2020 we recorded a decrease in our carbon emissions of 800tCO2e.

This year we recorded a decrease in the electricity consumed by both our towers compared to FY2019 levels. In addition, our electricity
consumption for PJ City Tower showed an 8.8% decrease compared to 2017 baseline levels, marking the achievement of our goal to
reduce electricity consumption in that facility by 5% by 2020 through the retrofitting and upgrading of aging equipment. Initiatives
implemented in FY2020 to support this goal included increasing the efficiency of our heating, ventilation and air-conditioning system
as well as replacing existing lighting with LED bulbs.

To further drive the efficient use of energy across our operations, in FY2020 we initiated the development of a Sustainable Energy
Policy, as a guideline for building energy consumption and targets. The Policy is due for review and approval in FY2021.

Scope 1 GHG Emissions Scope 2 GHG Emissions Energy Consumption

(tCO2e) (tCO2e)
226 206 151 9,991 11,658 10,904 5,458,697 8,937,095 7,479,171 9,319,501 7,268,816 8,443,213 66,314

FY2018 FY2019 FY2020 FY2018 FY2019 FY2020 FY2018 FY2019 FY2020

Menara Hong Leong Electricity, kWh* Petrol, Litres

PJ City Electricity, kWh

FY2020 Achievements

Scope 1 GHG Scope 2 GHG Electricity Consumption

27% 6% 9%
reduction from FY2019 reduction from FY2019 reduction in PJ City Tower A
from FY2019

* Note: The building became fully operational in 2018

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ENVIRONMENTAL MANAGEMENT (CONTINUED)

WATER CONSUMPTION

This year we recorded a decrease in the water consumed in both PJ City Tower A and Menara Hong Leong, amounting to a collective
reduction of 12% compared to FY2019 levels.

Metric Boundary FY2018 FY2019 FY2020

Menara Hong Leong* 57,357 61,823 55,269

Water consumption
(cubic metres) PJ City 39,550 39,223 33,632
* Note: The building became fully operational in 2018

WASTE MANAGEMENT

We monitor the amount of recyclable materials diverted from the waste disposal stream in both Menara Hong Leong and PJ City
Tower. In FY2020 we recycled a total of 31,031.34kg of plastic, paper and aluminium.

Total plastic recycled (kg) Total plastic recycled (kg) Total cans recycled (kg)

FY2020: FY2020: FY2020:

1,431 29,401 199

FY2019: 1,382 FY2019: 24,625 FY2019: 1.55

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Sustainability
Statement

COMMUNITY INVESTMENT

MATERIAL BUILDING COMMUNITIES

TOPICS As a socially responsible financial institution, we are cognisant of the responsibility we bear to bring about
positive change for the communities that we serve. Our targeted approach focuses on forming partnerships
with promising social enterprises to drive community development. We aim to provide our expertise to
further develop their platforms to spur greater socioeconomic developments in the groups of societies that
they focus on empowering.
Building
Communities
HLB JUMPSTART

HLB Jumpstart operates as HLB’s flagship CSR programme, working to empower social enterprises with
specialist support to grow sustainably and to succeed with impact. Social enterprises exist at a key
intersection of society, not only driving economic development and social well-being, but also working
Financial Literacy
towards development of the nation. Recognising the potential for HLB to convene the right experts and
knowledge specialists to give social enterprises a fighting chance, HLB Jumpstart was launched in September
2018 to bring together a stable of specialists and partners in fields such as finance, branding and advertising
and design and volunteerism. Far from helping just once and then walking away, HLB Jumpstart works to
become part of the journey.

SURI, selected as our very first collaboration partner in September 2018, is an organisation that seeks to
offer financial opportunities and skills development for single mothers in the Klang Valley via upcycling
used denim into new items for resale. Green Hero, partnered in May 2019, is a social enterprise dedicated to
reducing food waste across the nation.

Key Highlights from our Ongoing HLB Jumpstart Partners

SURI Green Hero

6,271 upcycled denim bags sold, an Increased average monthly sales by 113%
increase of 215% compared to sales prior to compared to pre-collaboration levels
partnership
9,366 meals saved from landfill through
Empowered 15 mothers, an increase of 50% Food Surplus Donation Drive

Collected 5,175 pieces of denim through Collaborations with 85 merchants from the
Denim Donation Drive, saving this material food and beverage industry in Penang and the
from landfills Klang Valley

Collaborated with big brands, including Tarik Green Hero Food App in progress
Jeans and VOIR Group

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COMMUNITY INVESTMENT (CONTINUED)

FY2020 saw us onboarding two more social enterprises onto our HLB Jumpstart platform.

Coffee For Good

Joining HLB Jumpstart in December 2019, as its third partnership, Coffee For Good was founded by Faridah Halani and Dalia A Aziz to give
low-income youth a chance to upskill themselves for the workplace through an on-the-job training programme. Students are equipped with
specialist coffee knowledge and skills whilst simultaneously given job placements as skilled baristas.

As a local cafe operator, Faridah recognised that the coffee culture was booming in Malaysia, yet the industry was facing a shortage of
trained staff. Her solution was to bridge her business, coffee-making skills and empowering low-income youths to solve the on-going labour
shortage faced by cafe-owners nationwide.

To support Coffee For Good in their efforts to offer employment opportunities to unskilled youth, HLB Jumpstart worked with Faridah and Dalia
to energise their approach to recruitment through a branding and marketing campaign designed to recruit more trainees. To reduce costs
and enable the business to thrive, valuable floor space was offered at no cost for pop-up cafes to be established in some HLB's locations and
affiliated companies’ offices for events and functions. Further, we worked with the duo to increase efficiency by introducing cashless payment
facilities, as well as offering financial knowledge sessions with the Bank’s SME specialists.

With HLB’s support, in FY2020 Coffee for Good generated a total of RM17,800 in sales from HLB’s events, provided 5 youths experience running
a coffee pop-up business and initiated a new collaboration with a corporate company for catering business.

The Asli Co.

HLB Jumpstart's fourth, and most recent collaboration which was chosen from a batch of 9 shortlisted applicants, is with The Asli Co. who
were selected to come on board in June 2020. Founded by Jason Wee and Lim Xin Yu, The Asli Co. is a social enterprise focusing on providing
sustainable incomes for Orang Asli mothers from two villages via the commissioning of artisanal handicrafts and products that the women
make from home.

The women are paid upfront for their creations and earn between 14% to 20% of sales. To ensure the mothers earn a fair and viable income,
The Asli Co. pays up to four times the minimum hourly wage. Within the next two years, The Asli Co. aims to have a range of at least 20
handmade products to capture a wider audience and to provide income opportunities for more Orang Asli mothers.

In partnership with HLB Jumpstart, The Asli Co. will receive media and marketing assistance as well as mentorship to help strengthen their
business, making it more profitable and scalable. In addition, HLB Jumpstart will help to build a more seamless payment gateway so that
customers can make payments more simply. Financial literacy sessions for 10 women employed by The Asli Co. are also in the pipeline, to
give the necessary financial skills required in planning for their futures.

As we continue to grow HLB Jumpstart’s portfolio, FY2021 will see a fifth and sixth social enterprise come on board, with announcements
due in late 2020.

ENHANCING FINANCIAL LITERACY

Financial literacy is a fundamental building block needed to secure financial well-being. Typically, those living in underserved or
economically disadvantaged communities have extremely low levels of financial literacy and this lack of knowledge and insight risks
creating long-term cycles of poverty that are difficult to break.

As a leading responsible financial institution in Malaysia, HLB is a sponsor and supporter of Bank Negara Malaysia’s Karnival
Kewangan roadshow events, designed as a platform to enhance financial literacy throughout the country. Held across Malaysia,
these events work to bring together financial institutions and rural communities to connect, inform and educate.

104 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Sustainability
Statement

To complement our work to disseminate knowledge on FINANCIAL LITERACY IN ISLAMIC BANKING

conventional financial matters, HLB and HLISB are supportive
of the Malaysian government initiative to promote Islamic Spearheaded by HLISB, the Program Celik Muamalat is a series
banking principles under the National Strategy for Financial of public awareness talks and forums striving to provide
Literacy (2019-2023). Members of the HLISB team regularly financial literacy training regarding Islamic banking topics. Two
share knowledge and expertise to a range of audiences, from events were conducted in FY2020, the first of which was held
industry seminars and conferences, through to educational at Universiti Sains Islam Malaysia. Topics discussed revolved
programmes for students at high school as well as those around product development in Islamic banking. The second
studying for undergraduate and postgraduate qualifications. event which focused on broader Islamic banking and finance
subject matters was held in Universiti Tunku Abdul Rahman and
DUITSMART was attended by almost 100 undergraduates.

In September 2019, HLB launched DuitSmart, a digital platform To further improve our channels of engagement regarding
designed as a repository for content that would enhance Islamic finance, we focus on digitising our knowledge sharing
financial literacy amongst Malaysians, helping them to achieve initiatives. Our revamped HLISB website has an additional
their financial goals. Established in response to a survey education page which provides information on Islamic banking
conducted in partnership with iMoney, DuitSmart was also topics such as Tawarruq, Mudarabah, and Tabarru’. In line with
intended to help HLB and HLISB better understand the financial our digital efforts, we also have plans to conduct future Program
health of the Malaysian population. Celik Muamalat sessions via a webinar format in future higher
learning institutions that we collaborate with.
Containing topics such as the importance of a good credit score,
adoption of good money habits, financial mistakes to avoid
and other useful tips, HLB takes the view that by investing in HONG LEONG FOUNDATION
useful and educational content, we are working to strengthen
Hong Leong Group’s charitable entity, the Hong Leong Foundation
financial education nationwide and working to improve the
(“HLF” or “the Foundation”) operates to deliver philanthropic
overall financial health of the nation. The platform was created
and social outreach programmes targeting underserved
in partnership with Agensi Kaunseling dan Pengurusan Kredit
communities. Established in 1992 and funded through Hong
(AKPK) and University of Malaya.
Leong Group’s companies, the Foundation works to create
long-term sustainable impacts in communities with focus on
To ensure that as many people as possible from every walk of
projects related to Education and Community Development.
life are able to access the DuitSmart platform, work in FY2020
has focused on taking a strategic approach to reaching out to
Working in partnership with established charitable
audiences through online and on-the-ground activities. These
organisations or with recognised community change agents, the
audiences include HLB employees, media houses, corporate
Foundation seeks to implement projects by leveraging existing
companies, universities, customers at HLB branches and wider
infrastructure, knowledge or connections in order to secure
communities at Bank Negara Malaysia events. Engagement
optimal outcomes. Furthermore, the programmes implemented
interactions with individuals both on and offline have focused
by the Foundation offer Hong Leong Bank employees valuable
on two main areas - ‘Check Your Credit Score’ and ‘Understanding
opportunities to volunteer time and resources to make
Basic Financial Jargon’.
important contributions.

To date on-the-ground activities have taken place at nine HLB

branches, five media houses, two staff engagement sessions and Hong Leong Foundation’s Total expenditure in FY2020

RM3,446,963
through two Bank Negara events — Karnival Kewangan Perlis 2019
and LIFT Festival 2019. A total of 865 participants benefited from
our on-the-ground engagement activities. To supplement these
in-person engagements, we have also launched an online portal
providing financial tips and scam awareness content, as well as
information on the Malaysian government’s COVID-19-related RM1,417,171 RM2,029,763
for community development
loan moratorium. As of September 2020, we had recorded a for education programmes
programmes
consumer reach of over 4.6 million for this digital content since
its launch.

Annual Report 2020 105

Corporate
Information

DIRECTORS
YBHG TAN SRI QUEK LENG CHAN (Chairman)

MR TAN KONG KHOON

MR KWEK LENG HAI

MS CHOK KWEE BEE

YBHG DATO’ NICHOLAS JOHN LOUGH @ SHARIF LOUGH BIN ABDULLAH

YBHG DATUK DR MD HAMZAH BIN MD KASSIM

MS CHONG CHYE NEO

MS LAU SOUK HUAN

GROUP MANAGING DIRECTOR/ REGISTRAR

CHIEF EXECUTIVE OFFICER Hong Leong Share Registration Services Sdn Bhd
Mr Domenic Fuda Level 25, Menara Hong Leong
No. 6, Jalan Damanlela
Bukit Damansara
GROUP COMPANY SECRETARY 50490 Kuala Lumpur
Tel : 03-2088 8818
Mr Jack Lee Tiong Jie
Fax : 03-2088 8990
MAICSA 7060133
SSM PC No. 202008001704

REGISTERED OFFICE
AUDITORS Level 30, Menara Hong Leong
No. 6, Jalan Damanlela
PricewaterhouseCoopers PLT (LLP0014401-LCA & AF1146)
Bukit Damansara
Chartered Accountants
50490 Kuala Lumpur
Level 10, 1 Sentral
Tel : 03-2080 9888
Jalan Rakyat
Fax : 03-2080 9801
Kuala Lumpur Sentral
50706 Kuala Lumpur
Tel : 03-2173 1188
Fax : 03-2173 1288
WEBSITE
www.hlb.com.my

106 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notice of
Annual General Meeting

NOTICE IS HEREBY GIVEN that the Seventy-Ninth Annual General Meeting (“AGM”) of Hong Leong Bank Berhad
(“Bank”) will be held at Wau Bulan Ballroom, Level 2, Sofitel Kuala Lumpur Damansara, No. 6, Jalan Damanlela,
Bukit Damansara, 50490 Kuala Lumpur on Friday, 30 October 2020 at 10:30 a.m. in order:

1. To lay before the meeting the audited financial statements together with the reports of the Directors and
Auditors thereon for the financial year ended 30 June 2020.

2. To declare a final single-tier dividend of 20 sen per share for the financial year ended 30 June 2020 to be
paid on 20 November 2020 to members registered in the Record of Depositors on 5 November 2020. (Resolution 1)

3. To approve the payment of Director Fees of RM1,221,415 for the financial year ended 30 June 2020 to
be divided amongst the Directors in such manner as the Directors may determine and Directors’ Other
Benefits of up to an amount of RM120,000 from the 79th AGM to the 80th AGM of the Bank. (Resolution 2)

4. To re-elect the following Directors pursuant to the Bank’s Constitution:

(a) YBhg Tan Sri Quek Leng Chan (Resolution 3)
(b) Ms Chok Kwee Bee (Resolution 4)
(c) YBhg Dato‘ Nicholas John Lough @ Sharif Lough bin Abdullah (Resolution 5)

5. To re-appoint PricewaterhouseCoopers PLT as Auditors of the Bank and to authorise the Directors to fix
their remuneration. (Resolution 6)

SPECIAL BUSINESS

As special business, to consider and, if thought fit, pass the following motions as resolutions:

6. Ordinary Resolution
Authority to Directors to Allot Shares
“THAT subject to the Companies Act 2016, the Main Market Listing Requirements of Bursa Malaysia
Securities Berhad (“Bursa Securities”), the Bank’s Constitution and approval of the relevant governmental
regulatory authorities, if required, the Directors be and are hereby empowered pursuant to Sections 75
and 76 of the Companies Act 2016 to allot shares in the Bank, grant rights to subscribe for shares in the
Bank, convert any security into shares in the Bank, or allot shares under an agreement or option or offer
at any time and from time to time, and upon such terms and conditions and for such purposes as the
Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued
and allotted, to be subscribed under any rights granted, to be issued from conversion of any security, or to
be issued and allotted under an agreement or option or offer, pursuant to this resolution does not exceed
10% of the total number of issued shares (excluding treasury shares) of the Bank for the time being and
that the Directors be and are also empowered to obtain approval for the listing of and quotation for the
additional shares so allotted on Bursa Securities and that such authority shall continue in force until the
conclusion of the next Annual General Meeting of the Bank.” (Resolution 7)

Annual Report 2020 107

Notice of
Annual General Meeting

7. Ordinary Resolution
Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue
or Trading Nature with Hong Leong Company (Malaysia) Berhad (“HLCM”) and Persons Connected
with HLCM

“THAT approval be and is hereby given for the Bank and/or its subsidiaries to enter into any of the
transactions falling within the types of recurrent related party transactions of a revenue or trading
nature as disclosed in Section 2.3 (A) and (B) of the Bank’s Circular to Shareholders dated 1 October 2020
(“the Circular”) with HLCM and persons connected with HLCM (“Hong Leong Group”), as set out in Appendix
II of the Circular provided that such transactions are undertaken in the ordinary course of business, on
arm’s length basis and on commercial terms which are not more favourable to the Hong Leong Group
than those generally available to and/or from the public and are not, in the Bank’s opinion, detrimental
to the minority shareholders;

AND THAT such approval shall continue to be in force until:

(a) the conclusion of the next Annual General Meeting (“AGM”) of the Bank at which time it will lapse,
unless by a resolution passed at the meeting, the authority is renewed; or

(b) the expiration of the period within which the next AGM of the Bank after that date is required to be
held pursuant to Section 340(2) of the Companies Act 2016 (but shall not extend to such extension
as may be allowed pursuant to Section 340(4) of the Companies Act 2016); or

(c) revoked or varied by resolution passed by the shareholders in general meeting,

whichever is the earlier;

AND THAT the Directors of the Bank be and are hereby authorised to complete and to do all such acts and
things (including executing all such documents as may be required) as they may consider expedient or
necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution.” (Resolution 8)

8. To consider any other business of which due notice shall have been given.

108 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notice of
Annual General Meeting

FURTHER NOTICE IS HEREBY GIVEN that a depositor shall qualify for entitlement to the final dividend only in respect of:

(a) shares transferred into the depositor’s securities account before 4:30 p.m. on 5 November 2020 in respect of ordinary transfers;
and

(b) shares bought on Bursa Securities on a cum entitlement basis according to the Rules of the Bursa Securities.

By Order of the Board

JACK LEE TIONG JIE

(MAICSA 7060133)
(SSM PC No. 202008001704)
Group Company Secretary

Kuala Lumpur
1 October 2020

NOTES:

1. For the purpose of determining members’ eligibility to attend this meeting, only members whose names appear in the Record of
Depositors as at 22 October 2020 shall be entitled to attend this meeting or appoint proxy(ies) to attend and vote on their behalf.

2. Save for a member who is an exempt authorised nominee, a member entitled to attend and vote at the meeting is entitled to appoint
not more than two (2) proxies to attend, participate, speak and vote in his stead. A proxy may but need not be a member of the Bank.
A member who is an authorised nominee may appoint not more than two (2) proxies in respect of each securities account it holds.
A member who is an exempt authorised nominee for multiple beneficial owners in one securities account (“Omnibus Account”) may
appoint any number of proxies in respect of the Omnibus Account.

3. Where two (2) or more proxies are appointed, the proportion of shareholdings to be represented by each proxy must be specified in the
instrument appointing the proxies, failing which the appointments shall be invalid.

4. The Form of Proxy must be deposited at the Registered Office of the Bank at Level 30, Menara Hong Leong, No. 6, Jalan Damanlela, Bukit
Damansara, 50490 Kuala Lumpur or lodge electronically via email at cosec-hlfg@hongleong.com.my, not less than forty-eight (48) hours
before the time appointed for holding of the meeting or adjourned meeting.

5. Pursuant to Paragraph 8.29 A (1) of the Main Market Listing Requirements of Bursa Securities, all the resolutions set out in this Notice
will be put to vote by way of a poll.

Annual Report 2020 109

Notice of
Annual General Meeting

EXPLANATORY NOTES

1. Resolution 2 on Director Fees and Other Benefits

• Director Fees of RM1,221,415 are inclusive of Board Committee Fees of RM389,875 and Meeting Allowances of RM109,000.
• Directors’ Other Benefits refer to Directors’ & Officers’ Liability Insurance coverage based on premium paid/payable and Directors’
training benefits of up to RM120,000.

2. Resolution 7 on Authority to Directors to Allot Shares

The proposed Ordinary Resolution, if passed, will renew the general mandate given to the Directors of the Bank to issue ordinary shares
of the Bank from time to time and expand the mandate to grant rights to subscribe for shares in the Bank, convert any security into
shares in the Bank, or allot shares under an agreement or option or offer, provided that the aggregate number of shares allotted, to be
subscribed under any rights granted, to be issued from conversion of any security, or to be allotted under an agreement or option or
offer, pursuant to this resolution does not exceed 10% of the total number of issued shares (excluding treasury shares) of the Bank for
the time being (“Renewed General Mandate”). In computing the aforesaid 10% limit, shares issued or agreed to be issued or subscribed
pursuant to the approval of shareholders in a general meeting where precise terms and conditions are approved shall not be counted.
The Renewed General Mandate, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Bank.

As at the date of this Notice, no new shares in the Bank were issued and allotted pursuant to the general mandate given to the Directors
at the last AGM held on 29 October 2019 and which will lapse at the conclusion of the 79th AGM. The Renewed General Mandate will
enable the Directors to take swift action in case of, inter alia, a need for corporate exercises or in the event business opportunities or
other circumstances arise which involve the issuance and allotment of new shares, grant of rights to subscribe for shares, conversion of
any security into shares, or allotment of shares under an agreement or option or offer, and to avoid delay and cost in convening general
meetings to approve the same.

3. Resolution 8 on Recurrent Related Party Transactions of a Revenue or Trading Nature

The proposed Ordinary Resolution, if passed, will empower the Bank and its subsidiaries (“HLB Group”) to enter into recurrent related
party transactions of a revenue or trading nature which are necessary for HLB Group’s day-to-day operations, subject to the transactions
being in the ordinary course of business and on terms which are not more favourable to the Hong Leong Group than those generally
available to the public and are not, in the Bank’s opinion, detrimental to the minority shareholders of the Bank (“Proposed Shareholders’
Mandate”).

Detailed information on the Proposed Shareholders’ Mandate is set out in the Circular to Shareholders dated 1 October 2020 which is
available on the Bank's Corporate website (https://www.hlb.com.my/annualreport2020).

110 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Statement Accompanying Notice of

Annual General Meeting
(Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Securities)

• Details of individuals who are standing for election as Directors

No individual is seeking election as a Director at the forthcoming Seventy-Ninth Annual General Meeting of the Bank.

• Statement relating to general mandate for issue of securities in accordance with Paragraph 6.03(3) of the Main Market
Listing Requirements of Bursa Securities

Details of the general mandate to issue securities in the Bank pursuant to Sections 75 and 76 of the Companies Act 2016 are set
out in Explanatory Note 2 of the Notice of Seventy-Ninth Annual General Meeting.

Annual Report 2020 111

Board of
Directors’ Profile

YBHG TAN SRI QUEK LENG CHAN MR TAN KONG KHOON

Position Position

Chairman/Non-Executive/Non-Independent Executive Director/Non-Independent

Nationality / Age / Gender Nationality / Age / Gender

Malaysian / 77 / Male Singaporean / 63 / Male

YBhg Tan Sri Quek Leng Chan is qualified as a Mr Tan Kong Khoon holds a Bachelor of Business
Barrister-at-Law from Middle Temple, United Kingdom. Administration degree from Bishop’s University, Canada
He has extensive business experience in various business and is an alumnus of the Harvard Business School
sectors, including financial services, manufacturing and Advanced Management Program. He is a Chartered
real estate. Banker of the Asian Institute of Chartered Bankers.

Mr Tan is the President & Chief Executive Officer of HLFG.

YBhg Tan Sri Quek is the Chairman of Hong Leong Bank
He was the Group Managing Director/Chief Executive
Berhad (“HLB”) and was appointed to the Board of
Officer of HLB from 1 July 2013 to 4 February 2016. Prior to
Directors (“Board”) of HLB on 3 January 1994. He is the joining HLB, Mr Tan was the Group Executive, Consumer
Chairman of the Credit Supervisory Committee (“CSC”) Banking Group of DBS Bank Ltd (“DBS”) from 1 December
and a member of the Remuneration Committee (“RC”) 2010 to 15 April 2013 where he led and managed strategy
of HLB. formulation and execution for consumer banking globally
across the DBS Group.
He is the Chairman & Chief Executive Officer of Hong
Leong Company (Malaysia) Berhad (“HLCM”), a public Mr Tan began his banking career with DBS in 1981.
company; Chairman of Hong Leong Financial Group Since then, he has successfully built consumer banking
Berhad (“HLFG”), a company listed on the Main Market franchises across multiple markets in Asia for Citibank,
Standard Chartered Bank and ANZ Bank.
of Bursa Malaysia Securities Berhad (“Bursa Securities”);
and Chairman of Hong Leong Assurance Berhad (“HLA”)
From March 2007 to December 2009, Mr Tan was
and Hong Leong Foundation, both public companies. He
President and Chief Executive Officer of Bank of Ayudhya,
is also the Chairman of the Council of Members of Hong the fifth largest financial group in Thailand listed on
Leong Bank Vietnam Limited (“HLBVN”). the Thailand Stock Exchange. The group businesses
included commercial and investment banking, life and
non-life insurance, stock broking, asset management
and consumer finance subsidiaries.

Mr Tan was appointed to the Board of HLB on 1 July 2013

and is a member of the CSC, Executive Committee and
Nomination Committee (“NC”) of HLB.

Mr Tan is the Chairman of Hong Leong Capital Berhad

and a Director of HLFG, both companies listed on the
Main Market of Bursa Securities; and a Director of HLA
and Hong Leong Investment Bank Berhad, both public
companies. He is also the Chairman of Hong Leong Bank
(Cambodia) PLC and Chief Controller on the Board of
Controllers of HLBVN.

112 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Board of
Directors’ Profile

MR KWEK LENG HAI MS CHOK KWEE BEE

Position Position

Non-Executive Director/Non-Independent Non-Executive Director/Independent

Nationality / Age / Gender Nationality / Age / Gender

Singaporean / 67 / Male Malaysian / 68 / Female

Mr Kwek Leng Hai is qualified as a Chartered Accountant Ms Chok Kwee Bee holds a Bachelor of Arts (Honours)
and has extensive experience in financial services, degree in Business Studies from Kingston University,
manufacturing and property investment. United Kingdom and is also a member of the Associate
of the Chartered Institute of Bankers, United Kingdom.
Mr Kwek was appointed to the Board of HLB on 3 January
1994. He is also a Director of Hong Leong Islamic Bank Ms Chok is presently the Managing Director of Teak
Berhad (“HLISB”) and HLCM, both public companies. Capital Sdn Bhd, a venture capital management company
and a Principal of Intres Capital Partners Sdn Bhd. Prior to
Mr Kwek is the Executive Chairman of Guoco Group that, she was with Walden International, a Silicon Valley
Limited (“GGL”). He was appointed as a Director of GGL based venture capital firm, overseeing the operations
in 1990 and assumed the position of President, Chief and investments of Walden International and BI Walden
Executive Officer from 1995 to 1 September 2016. He is in Malaysia.
also the Chairman of Lam Soon (Hong Kong) Limited
(“LSHK”). Both GGL and LSHK are listed on the Hong Kong Ms Chok was also previously Head of the Corporate
Stock Exchange. Mr Kwek is also a Director of GGL’s key Finance at AmInvestment Bank Berhad. She previously
subsidiaries, including his positions as the Non-Executive held posts as a member of the Securities Commission
Chairman of GL Limited and a Director of GuocoLand Capital Market Advisory Council, the Chairman of the
Limited, both public listed companies in Singapore. He Malaysian Venture Capital and Private Equity Association,
is also a Director of Bank of Chengdu Co., Ltd., a public a Non-Executive Board Member of the Audit Oversight
company listed on the Shanghai Stock Exchange. Board and also a member of the Malaysian Venture Capital
Development Council of the Securities Commission.

Ms Chok was appointed to the Board of HLB on

2 December 2013 and is the Chairman of the NC and
Board Audit Committee (“BAC”), and a member of the
Board Risk Management Committee (“BRMC”) of HLB.

Ms Chok is currently the Chairman of Aemulus Holdings

Berhad, a company listed on the Main Market of Bursa
Securities. She also sits on the board of several private
companies.

Annual Report 2020 113

Board of
Directors’ Profile

YBHG DATO’ NICHOLAS YBHG DATUK DR MD HAMZAH BIN

JOHN LOUGH @ SHARIF MD KASSIM
LOUGH BIN ABDULLAH
Position Position

Non-Executive Director/Independent Non-Executive Director/Independent

Nationality / Age / Gender Nationality / Age / Gender

British and Malaysian Permanent Resident / Malaysian / 71 / Male

68 / Male

YBhg Dato’ Nicholas John Lough @ Sharif Lough bin YBhg Datuk Dr Md Hamzah bin Md Kassim holds a PhD in Business from Aston
Abdullah holds a Gemmology Diploma from The University, United Kingdom and a Master in Business Administration. He was
National Association of Goldsmiths, London, Great inducted in 2012 into the Alumni Hall of Achievement of Monmouth College in
Illinois, USA where he did his undergraduate education.
Britain and is a Fellow member of The Gemmological
Association of Great Britain. YBhg Datuk Dr Md Hamzah had over 20 years of experience as strategy and
management consultant in global firms specialising in large scale technology
YBhg Dato’ Nicholas Lough has extensive experience and business transformation, working across several sectors with established
in the corporate sector, serving in various capacities, organisations, ranging from banks to telecommunication companies, public
including Group Executive Director of The Melewar institutions and foreign governments. He is the Co-Founder of The iA Group,
where he currently serves as an Advisor. The iA Group, which was established
Corporation Berhad from 1987 to 1995.
in 2002, specialises in business and public sector transformation, technology
and human capital.
YBhg Dato’ Nicholas Lough was appointed to the Board
of HLB on 23 June 2014 and is the Chairman of the Prior to The iA Group, he was the Executive Director/Partner of international
BRMC and RC, and a member of the BAC and NC of HLB. firm of Ernst & Young, Vice President and Country Head of the global consulting
firm of Cap Gemini and member of the global management team and Country
Head of PA Consulting Group.
YBhg Dato’ Nicholas Lough is currently a Director of
GLM REIT Management Sdn Bhd, the Manager of Tower
Before joining the consulting industry in 1995, YBhg Datuk Dr Md Hamzah held
Real Estate Investment Trust and Scicom (MSC) Berhad, various senior positions in government for over 18 years related to industrial
both listed on the Main Market of Bursa Securities. R&D management and public policy on technology development and
innovation. He also served as a member of expert/advisory groups in various
national and international organisations such as United Nations Conference
on Trade and Development and Islamic Development Bank, Jeddah. He was
the Project Director for the Industrial Technology Master Plan for Malaysia
in the Institute of Strategic and International Studies and subsequently took
up the position as Director of Science and Technology, Ministry of Science,
Technology and Environment to spearhead the implementation of the plan as
part of the national strategies to accelerate economic growth and technology
development.

In 2006, YBhg Datuk Dr Md Hamzah was appointed as the Consulting Advisor

to the National Implementation Task Force chaired by the Prime Minister to
oversee the 9th Malaysia Development Plan and in 2009, he was appointed
as member of the National Economic Advisory Council (NEAC). YBhg Datuk
Dr Md Hamzah was a member of the Review and Operational Panel to the
Malaysian Anti-Corruption Commission from 2013 to February 2015. In 2015,
he was appointed as member of the Anti-Corruption Advisory Board by the
DYMM Yang Di Pertuan Agong and completed his term in 2018. YBhg Datuk
Dr Md Hamzah was appointed to the Malaysian Anti-Corruption Commission
(MACC) Advisory Board since 1 June 2020.

YBhg Datuk Dr Md Hamzah was appointed to the Board of HLB on 19 May 2016
and is a member of the RC and Board Information and Technology Committee
(“BITC”) of HLB.

YBhg Datuk Dr Md Hamzah is also the Board Chairman of HLISB, a public

company.

114 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Board of
Directors’ Profile

MS CHONG CHYE NEO MS LAU SOUK HUAN

Position Position

Non-Executive Director/Independent Non-Executive Director/Independent

Nationality / Age / Gender Nationality / Age / Gender

Malaysian / 57 / Female Malaysian / 56 / Female

Ms Chong Chye Neo holds a Bachelor of Science (Honours) in Ms Lau Souk Huan holds a Bachelor Degree in Accounting
Computer Science from Universiti Sains Malaysia. (Honours) from the University of Malaya and she is a Certified
Public Accountant from the Malaysian Institute of Certified Public
Ms Chong has been part of the information technology industry Accountants. Ms Lau is also a member of the Malaysian Institute
for more than 30 years, having been with IBM Malaysia of Accountants.
Sdn Bhd (“IBM Malaysia”) since 1989 until her retirement
in December 2018. In IBM, she held senior leadership roles Ms Lau has more than 30 years of experience in accounting
that spanned across multiple disciplines of technical, sales, garnered from the accounting profession and the working
intellectual property development, business and strategy experience with a global international financial institution and
development; and roles which gave her in-depth experience an accounting standard setter. Ms Lau was a Project Director
working in multiple countries across ASEAN and Asia Pacific. with the Malaysian Accounting Standards Board (MASB), an
She was appointed to the role of Managing Director/Chief independent authority which develops and sets accounting
Executive Officer (“MD/CEO”) of IBM Malaysia in 2015, the first standards in Malaysia. Prior to joining MASB in 2010, Ms Lau was
woman to helm the company in its 57-year history in Malaysia. with J.P. Morgan Chase Bank Berhad (“JP Morgan”) primarily as
As MD/CEO, she was responsible for the overall management the Chief Financial Officer for a period of 14 years. In addition,
of IBM Malaysia and Brunei, and was a Director of IBM Global Ms Lau was also co-Country Operating Officer, Director of
Delivery Centre (M) Sdn Bhd and Kenexa Techologies Sdn Bhd. subsidiary entities, trustee of JP Morgan's retirement fund,
country coordinator for philanthropy and company secretary for
In 2016, Ms Chong was recognised with the “CEO Champion JP Morgan. Ms Lau was appointed to the Board of JP Morgan in
Award” by Talentcorp. In November 2017, she was appointed 2002 and served as the Executive Director from 2006 until June
to Talent Compact 4.0, a national advisory panel in response 2009. She left JP Morgan in June 2009 but continued to serve as
to the impact of Industry Revolution 4.0 and its implication a Non-Executive Director and later Independent Director of JP
to the future of work. In April 2018, she was recognised by Morgan until September 2017.
the Malaysian Business publication as one of Malaysia's 25
Women of Influence. She was also appointed to the Board Prior to joining JP Morgan, Ms Lau was with Price Waterhouse
of Governors of American Malaysian Chamber of Commerce (now known as PricewaterhouseCoopers PLT) and assumed
and served until her retirement. Ms Chong speaks regularly various positions over 7 years from December 1987 to June 1995;
at national and international forums on topics ranging from the last being Senior Manager, Audit and Business Advisory.
Women in Leadership to Digital Disruptions and Impact of
Industry Revolution 4.0. Ms Lau was appointed to the Board of HLB on 6 September 2019
and is a member of the BRMC, BAC and BITC of HLB.
Ms Chong was appointed to the Board of HLB on 21 February
2019 and is the Chairman of the BITC of HLB.

Ms Chong currently also serves as an Independent

Non-Executive Director of Bursa Malaysia Berhad and HLFG,
both listed on the Main Market of Bursa Securities.

Notes: 3. Conviction of Offences

None of the Directors has been convicted of any offences (excluding traffic
1. Family Relationship with Director and/or Major Shareholder offences) in the past 5 years and there were no public sanctions or penalties
YBhg Tan Sri Quek Leng Chan and Mr Kwek Leng Hai are brothers. Save as imposed by the relevant regulatory bodies during the financial year ended
disclosed herein, none of the Directors has any family relationship with any other 30 June 2020.
Director and/or major shareholder of HLB.
4. Attendance of Directors
2. Conflict of Interest Details of Board meeting attendance of each Director are disclosed in the
None of the Directors has any conflict of interest with HLB. Statement on Corporate Governance Overview, Risk Management and Internal
Control in the Annual Report.

Annual Report 2020 115

Key Senior
Management of the Group

MR DOMENIC FUDA MR MALKIT SINGH MAAN

Position Position

Group Managing Director/Chief Executive Officer Chief Financial Officer

Nationality / Age / Gender Nationality / Age / Gender

Australian / 53 / Male Malaysian / 54 / Male

Mr Domenic Fuda holds a Bachelor of Economics from Mr Malkit Singh Maan is a Chartered Accountant with the
Macquarie University, Sydney, as well as a Master of Malaysian Institute of Accountants and a fellow member
Business (Banking & Finance) and a Master of Business of the Australian Society of Certified Public Accountant. He
Administration (M.B.A.), both from University of graduated with a Bachelor of Business in Accounting from
Technology, Sydney. Mr Fuda is a Chartered Banker of the Curtin University of Technology, Perth, Western Australia
Asian Institute of Chartered Bankers (“AICB”). and a Master of Business Administration from Victoria
University, Melbourne.
Mr Fuda was appointed as the Group Managing Director
and Chief Executive Officer of Hong Leong Bank Berhad Mr Malkit joined HLB on 22 July 2019 as Chief Financial
(“HLB”) on 5 February 2016. Mr Fuda is a member of the Officer (“CFO”).
Credit Supervisory Committee and Executive Committee
of HLB. He is also a Director of Hong Leong Islamic Bank Mr Malkit has over 29 years of banking, corporate and
Berhad (“HLISB”) and Hong Leong Bank (Cambodia) PLC finance experience. Prior to joining HLB, he was with BIMB
(“HLBCAM”) as well as a Council Member of Hong Leong Holdings Berhad as the Group CFO. Being responsible
Bank Vietnam Limited (“HLBVN”). He is also a Council for the financial management of the Group, he assisted
Member of AICB. to steer, BIMB Holdings Berhad to achieve the highest
Return on Equity (ROE) for the last 4 years (FYE 2015-2018),
Before joining HLB, Mr Fuda served as Deputy Group amongst listed banking groups, being the top pick of most
Head of Consumer Banking & Wealth Management at DBS research houses and analysts. He talks to analyst and
Bank and was a member of the DBS Group Management fund managers locally and abroad attracting interest from
Committee, where he was responsible for driving business Singapore, Hong Kong, Japan and London. Mr Malkit had
growth and digitisation of the business across its six also previously served as the CFO of Bank Islam Malaysia
regional markets. Prior to his position in DBS Bank, he Berhad (“Bank Islam”). He contributed considerably in the
spent 16 years at Citigroup covering various senior roles in turnaround plan of Bank Islam and thereafter set the path
Australia and Asia. for sustainable growth and value based business for Bank
Islam. Prior to Bank Islam, Mr Malkit was the CFO of ABN
AMRO Bank Berhad and Vice President-Finance at RHB
Bank Berhad.

Mr Malkit is a director of HLF Credit (Perak) Bhd and

Promilia Berhad, both wholly-owned subsidiaries of HLB.

116 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Key Senior
Management of the Group

MR CHARLES SIK WAN KING MR YOW KUAN TUCK

Position Position

Managing Director, Personal Financial Services Managing Director, Business and Corporate Banking

Nationality / Age / Gender Nationality / Age / Gender

Malaysian / 58 / Male Malaysian / 49 / Male

Mr Charles Sik Wan King holds a Bachelor of Commerce Mr Yow Kuan Tuck holds a Bachelor of Laws and Letters
(Honours) from University of Ottawa, Canada. In addition, degree from University of Leicester, United Kingdom
he has completed management programmes at the Procter as well as a Certificate of Legal Practice from the Legal
& Gamble School of Management, the INSEAD Graduate Qualifying Board, Malaysia.
School and the Columbia Senior Executive Programme at
the Columbia Business School. Mr Yow joined HLB on 2 May 2017 as Managing Director,
Business and Corporate Banking.
Mr Charles Sik joined HLB on 4 February 2015 as Chief
Operating Officer, Personal Financial Services. He leads and Mr Yow has over 20 years of experience in the financial
manages the HLB Retail Banking portfolio. He assumed his services sector having built a successful track record in
current position on 1 September 2016. growing corporate and financial institutions businesses,
managing portfolios such as financial institutions, public
Prior to HLB, Mr Charles Sik led the retail banking sector and other industry groups.
franchises for RHB Group and earlier OCBC Bank (M) Bhd.
His career in banking started at Citibank and was the Prior to HLB, Mr Yow was with Standard Chartered
Wealth Management Director when he left. Bank Malaysia as Managing Director, Head of Financial
Institutions between 2013 and 2017. He commenced
Prior to banking, Mr Charles Sik spent his formative years his banking career with Citibank Malaysia in Country
in FMCG (fast moving consumer goods) companies in Compliance for a number of years before a career change
various sales and marketing positions across Asia and into institutional banking where over the next 15 years, he
United States. held various senior positions including Head of Financial
Institutions & Public Sector Group in Citibank Malaysia’s
Corporate Bank.

Annual Report 2020 117

Key Senior
Management of the Group

MR HOR KWOK WAI ENCIK JASANI BIN ABDULLAH

Position Position

Managing Director, Global Markets Chief Executive Officer, HLISB, a wholly-owned

subsidiary of HLB

Nationality / Age / Gender Nationality / Age / Gender

Malaysian / 46 / Male Malaysian / 60 / Male

Mr Hor Kwok Wai holds a Bachelor of Science in Actuarial Encik Jasani bin Abdullah is a Chartered Professional in
Mathematics and Statistics from Heriot-Watt University, Islamic Finance (CPIF) of the Chartered Institute of Islamic
United Kingdom. Finance Professional (CIIF) and holds a Post Graduate
Diploma in Islamic Banking & Finance from International
He joined HLB in January 2011 as Chief Operating Officer Islamic University, Malaysia; a Bachelor degree in Business
of Global Markets. He assumed his current position on Administration from Ohio University, USA; and a Diploma in
1 September 2016. Public Administration from MARA Institute of Technology.

Prior to HLB, Mr Hor was Head of Global Markets for Encik Jasani joined HLISB in June 2007 as Assistant General
The Royal Bank of Scotland Malaysia where he spent Manager and was promoted to Chief Operating Officer
7 years developing their sales and trading business across of HLISB in June 2010. He was appointed as the Chief
foreign exchange, fixed income, derivatives and structured Executive Officer of HLISB on 17 July 2017.
products. Prior to that, he had worked for several major
foreign banks in Malaysia such as JP Morgan Chase Bank, Encik Jasani has more than 30 years of working experience
Standard Chartered Bank and OCBC Bank in various roles. in the banking industry with the last 20 years in Islamic
finance.

Prior to HLISB, Encik Jasani spent 24 years in various

senior positions in RHB Bank Berhad and RHB Islamic
Bank Berhad, his last position being the Vice President,
Head-Product Development Division.

118 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Key Senior
Management of the Group

MR AARON HO WAI CHOONG MS NG WEE LEE

Position Position

Managing Director, China Operations Managing Director & Chief Executive, HLB Singapore
Branch

Nationality / Age / Gender Nationality / Age / Gender

Malaysian / 65 / Male Singaporean / 52 / Female

Mr Aaron Ho Wai Choong holds a Bachelor of Engineering Ms Ng Wee Lee graduated from the National University
(Honours) from University of Malaya and a Master of of Singapore with a Bachelor in Business Administration.
Business Administration from University of Rochester, USA.
Ms Ng joined HLB on 1 October 2019 as Managing Director
Mr Aaron Ho joined HLB on 7 April 2008 as Chief Operating & Chief Executive, HLB Singapore Branch.
Officer of International Banking of HLB China. He assumed
his current position on 1 September 2016. He was Prior to HLB, Ms Ng was Managing Director, Head of
appointed as Vice Chairman of Bank of Chengdu Co., Ltd Local Corporates & Middle Markets and Deputy Head of
(“BOCD”) since July 2008 and a member of the Board of Commercial Banking from Standard Chartered Bank,
Directors of JinCheng Consumer Finance Company (“JCCFC”) Singapore. Prior to that, Ms Ng took on senior roles
since February 2010. Both BOCD and JCCFC are associate with CIMB, ANZ Banking Group, ABN AMRO and Citibank
companies of HLB. in Singapore. She brings with her close to 30 years of
experience in Corporate and Commercial Banking, holding
Mr Aaron Ho has more than 35 years’ experience in the senior positions in relationship management, risk &
banking and financial services industry. Prior to HLB, he control, product & business development and marketing.
had held various managerial positions such as Manager of
Operations/Credit of American Express (Malaysia), General
Manager of MBf Card Services (Malaysia), Senior Manager/
Head of RHB Bank Card Center (Malaysia), Vice President,
Operations and Technology of MasterCard International
(Singapore), Vice President/Senior Country Operations
Officer, Citibank Malaysia and Citibank Taiwan as well
as General Manager/Director of Citicorp Software and
Technology Services (Shanghai) Ltd under CitiGroup China.

Annual Report 2020 119

Key Senior
Management of the Group

MR JOSEPH FARRUGIA MR DUONG DUC HUNG

Position Position

Managing Director & Chief Executive Officer, HLBCAM, Managing Director & General Director, HLBVN, a
a wholly-owned subsidiary of HLB wholly-owned subsidiary of HLB

Nationality / Age / Gender Nationality / Age / Gender

Australian / 57 / Male Vietnamese / 44 / Male

Mr Joseph Farrugia undertook and completed a course Mr Duong Duc Hung holds a Master of Business
in Marketing Strategy at Melbourne Business School, Administration from Katholieke Universiteit Leuven,
Australia. Belgium and a Bachelor of Arts in International Economics
at Foreign Trade University.
Mr Joseph Farrugia joined HLB on 30 July 2012 as Chief
Executive Officer of HLBCAM. Mr Duong joined HLBVN on 2 January 2018 as Managing
Director & General Director of HLBVN.
Prior to HLB, he was the Head of Retail Banking and Wealth
Management, ANZ Bank Vietnam & Greater Mekong Prior to HLBVN, Mr Duong brings more than 20 years of
Region, which incorporates Cambodia and Laos. banking and financial services experience, with his most
recent role as a member of Techcombank’s Management
Committee as Transformation Director. Prior to that,
he has been with ANZ Vietnam for more than 10 years,
holding various key portfolios in Product, Performance
Management, Wealth Management, Sales & Services
before he was appointed to head the entire Retail Banking
and Operations.

He is well versed in regional and international business

practices, having served in world class organisations such
as JP Morgan Chase as the Head of Financial Institutions
segment for Vietnam and Cambodia. He was also with
HSBC, heading the cash management division, and the
Financial Controller in Baxter Healthcare and Auditor in
KPMG, both in Vietnam and abroad.

120 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Key Senior
Management of the Group

MR PHILIP LUK KAI MAN Notes:

1. Family Relationship with

Position Director and/or Major
Shareholder
Managing Director & Chief Executive, HLB Hong Kong None of the Key Senior
Branch Management has any
family relationship with
any Director and/or major
shareholder of HLB.
Nationality / Age / Gender
2. Conflict of Interest
Hong Kong Citizen / 50 / Male None of the Key Senior
Management has any
conflict of interest with
Mr Philip Luk Kai Man graduated from the University HLB.
of Sydney, Australia with a Master of Economics with a
3. Conviction of Offences
double major in Economics and Econometrics. None of the Key Senior
Management has been
Mr Philip Luk joined HLB on 1 May 2019 as General convicted of any offences
(excluding traffic offences)
Manager, HLB Hong Kong Branch. He assumed his current in the past 5 years and
position on 20 September 2019. there were no public
sanctions or penalties
imposed by the relevant
Prior to HLB, Mr Philip Luk was Head of Transactional regulatory bodies during
Banking, North East Asia with National Australia Bank, the financial year ended
30 June 2020.
Hong Kong. In this role, he was part of the Executive
Committee (EXCO) and Assets & Liabilities Management
Committee (ALCO) of the Bank.

He began his career in banking with the Bank of East Asia

as an Executive Trainee and then moved into the Credit
& Marketing division. He spent 12 years with Standard
Chartered Bank, where he started his tenure as Relationship
Manager for the Public Sector and steadily grew his career
to eventually take on the Director, Head of Public Sector &
Korean Corporates role. Subsequently, he took on several
senior roles to gain more exposure with another foreign
bank as Head of Payment and Cash Management North
Asia, Head of Business Banking Greater China and Head
of Liabilities Business Asia, Commercial Banking after he
joined ANZ Banking Group.

Mr Philip Luk is a seasoned, all-rounded banking

professional specialising in end-to-end business setup. He
is well-versed with the local banking regulations and has
covered Hong Kong as well as North Asia.

Annual Report 2020 121

Board Audit
Committee Report

CONSTITUTION The Group Managing Director/Chief Executive Officer, Chief

Financial Officer, Chief Risk Officer, Chief Internal Auditor, Chief
The Board Audit Committee of HLB has been established since
Compliance Officer, other senior management and external
18 August 1994 and was re-designated as the Board Audit &
auditors may be invited to attend the BAC meetings whenever
Risk Management Committee (“BARMC”) on 10 January 2002.
required. At least twice a year, the BAC will have separate
Subsequently, on 2 October 2006, the Board of Directors decided
sessions with the external auditors without the presence of
to reconstitute the Board Audit Committee (“BAC”) separately
Executive Directors and management.
from the Board Risk Management Committee (“BRMC”).
The BAC will also engage privately with the Chief Internal Auditor
on a regular basis to provide the opportunity for the Chief Internal
COMPOSITION Auditor to discuss issues faced by the internal audit function.
MS CHOK KWEE BEE
(Chairman, Independent Non-Executive Director) Issues raised, discussions, deliberations, decisions and conclusions
made at the BAC meetings are recorded in the minutes of the
YBHG DATO’ NICHOLAS JOHN LOUGH @ SHARIF LOUGH BAC meetings. A BAC member who has, directly or indirectly,
BIN ABDULLAH an interest in a material transaction or material arrangement
(Independent Non-Executive Director) shall not be present at the BAC meeting where the material
transaction or material arrangement is being deliberated by the
MS LAU SOUK HUAN BAC.
(Independent Non-Executive Director)
(Appointed as BAC member with effect from 6 September 2019) Two (2) members of the BAC, who shall be independent, shall
constitute a quorum and the majority of members present must
be independent directors.
SECRETARY
After each meeting, the BAC shall report and update the
The Secretary(ies) to the BAC is/are the Company Secretary(ies)
Board on significant issues and concerns discussed during the
of the Bank.
BAC meetings and where appropriate, make the necessary
recommendations to the Board.

TERMS OF REFERENCE
The terms of reference of the BAC are published on the Bank’s ACTIVITIES
website, www.hlb.com.my.
The BAC carried out its duties in accordance with its Terms of
Reference.

AUTHORITY During the financial year ended 30 June 2020, nine (9) BAC
The BAC is authorised by the Board to review any activity of meetings were held and the attendance of the BAC members
the Group within its Terms of Reference. It is authorised to seek was as follows:
any information it requires from any Director or member of
management and all employees are directed to co-operate with Members Attendance
any request made by the BAC.
Ms Chok Kwee Bee 9/9
The BAC is authorised by the Board to obtain independent legal
YBhg Dato’ Nicholas John Lough @ Sharif Lough 9/9
or other professional advice if it considers necessary.
bin Abdullah

Ms Lau Souk Huan (1) 8/8

MEETINGS
Notes:
The BAC meets at least eight (8) times a year and additional

(1)
Appointed as BAC member with effect from 6 September 2019.
meetings may be called at any time as and when necessary. All
meetings to review the quarterly reports and annual financial
statements are held prior to such quarterly reports and annual
financial statements being presented to the Board for approval.

122 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Board Audit
Committee Report

HOW THE BAC DISCHARGES ITS RESPONSIBILITIES The BAC reviewed the external auditors’ fees and their scope
of services. The approved and incurred fees for the financial
FINANCIAL REPORTING
year ended 30 June 2020 amounted to RM3,601,959 of which
The BAC reviewed the quarterly reports and financial statements RM300,000 was payable in respect of non-audit services.
of the Company and of the Group focusing particularly on: Non-audit services accounted for 13% of the total audit fees
payable. The BAC assessed the objectivity and independence of
(i) any changes in accounting policies and practices; the external auditors prior to the appointment of the external
(ii) significant adjustments arising from the audit; auditors for ad-hoc non-audit services.
(iii) the going concern assumptions; and
(iv) compliance with accounting standards and other legal The BAC also evaluated the performance of PwC PLT in the
requirements. following areas in relation to its re-appointment as auditors for
the financial year ended 30 June 2020 and considered PwC PLT to
BAC had reviewed management’s responses and the action be independent:
plans taken to address the findings and recommendations
highlighted by BNM during their review on the Bank’s MFRS 9 (a) level of knowledge, capabilities, experience and quality of
implementation. previous work;

The legal and regulatory environment was monitored and (b) level of engagement with BAC;
consideration given to changes in law, regulation, accounting
policies and practices including financial reporting standards (c) ability to provide constructive observations, implications
in the pipeline as well as the revised disclosure requirements and recommendations in areas which require
pursuant to the amendments to the Main Market Listing improvements;
Requirements of Bursa Malaysia Securities Berhad.
(d) adequacy in audit coverage, effectiveness in planning and
EXTERNAL AUDIT conduct of audit;
The external auditors of the Group for the financial year ended 30
June 2020 is PricewaterhouseCoopers PLT (“PwC PLT”). The BAC (e) ability to perform the audit work within the agreed
discussed and reviewed with the external auditors, before the timeframe;
audit commences for the financial year:
(f) non-audit services rendered by PwC PLT does not impede
(i) the audit plan and timetable for the financial audit of independence;
the Group including the focus areas and approach to the
current financial year’s audit and any significant issues (g) ability to demonstrate unbiased stance when interpreting
that can be foreseen, either as a result of the past year’s the standards/policies adopted by HLB; and
experience or due to new accounting standards or other
changes in statutory or listing requirements; and (h) risk of familiarity in respect of PwC PLT’s appointment as
external auditors.
(ii) the methodology and timetable of the Statement on
Internal Control and Risk Management. PwC PLT, in accordance with professional ethical standards, has
provided the BAC with confirmation of their independence for
The BAC reviewed the report and audit findings of the external the duration of the financial year ended 30 June 2020 and the
auditors and considered management’s responses to the measures used to control the quality of their work.
external auditors’ audit findings and investigations. The BAC
also had two (2) separate sessions with the external auditors The BAC has therefore recommended to the Board that PwC
without the presence of Executive Directors and management PLT be re-appointed as the auditors. Resolution concerning the
whereby matters discussed include key reservations noted by reappointment of PwC PLT will be proposed to shareholders at
the external auditors during the course of their audit; whilst the the 2020 Annual General Meeting.
BAC Chairman maintained regular contact with the audit partner
throughout the year.

Annual Report 2020 123

Board Audit
Committee Report

RELATED PARTIES TRANSACTIONS The BAC has reviewed the audit findings and recommendations
The BAC conducted quarterly review of the recurrent related of the GIAD, including any findings of internal investigations,
party transactions (“RRPT”) entered into by the Group to ensure and has ensured that management has taken the necessary
that such transactions are undertaken on commercial terms and corrective actions in a timely manner to address control
on terms not more favourable to the related parties than those weaknesses, non-compliance with laws, regulatory requirements
generally available to and/or from the public. and policies. The BAC also reviewed at every BAC meeting the
status update of management’s corrective action plans for the
The Group had put in place the procedures and processes to resolution of internal audit’s findings and recommendations.
ensure the RRPT are conducted on commercial terms consistent Recommendations were made by BAC to ensure that the root
with the Group’s usual business practices and policies and on causes raised by GIAD in their audit reports were effectively
terms not more favourable to the related parties than those resolved and that any outstanding audit findings be tracked for
generally available to and/or from the public, where applicable. timely resolution.

The BAC reviewed the said procedures and processes on an

annual basis and as and when required, to ensure that the said GROUP INTERNAL AUDIT DIVISION (“GIAD”)
procedures are adequate to monitor, track and identify RRPT in a The GIAD of HLB assists the BAC in the discharge of its duties and
timely and orderly manner, and are sufficient to ensure that the
responsibilities. GIAD employs a risk-based assessment approach
RRPT will be carried out on commercial terms consistent with
in auditing the Bank’s Group business and operational activities.
the Group’s usual business practices and policies and on terms
The high risk activities are given due attention and audited on a
not more favourable to the related parties than those generally
available to and/or from the public. more regular basis while the rest are prioritised to potential risk
exposure and impact.
CREDIT TRANSACTIONS AND EXPOSURE WITH CONNECTED
PARTIES During the financial year ended 30 June 2020, GIAD carried out
The Group is guided by the Guidelines on Credit Transactions its duties covering audits on branches, and risk-based audits
and Exposures with Connected Parties to ensure that credit on Personal Financial Services, Business Corporate Banking and
transactions with connected parties are carried out on an arm’s Global Markets businesses, Group Operations and Technology,
length basis on terms and conditions not more favourable Group Functions, investigation and other assignments as directed.
than those entered into with other counterparties with similar These audits are performed in line with the BNM Guidelines on
circumstances and creditworthiness. Internal Audit Function.

The BAC had conducted quarterly review of credit transactions of Besides performing internal audit functions to the Bank Group,
the Group with connected parties to ensure compliance with the
it also through a service agreement, provides internal audit
said Guidelines.
services to Hong Leong Capital Berhad, Hong Leong Assurance
Berhad, and Hong Leong MSIG Takaful Berhad. The cost incurred
INTERNAL AUDIT
for the Internal Audit function of the Bank in respect of the
The BAC reviewed the adequacy of internal audit scope, internal
financial year ended 30 June 2020 was RM14.1 million.
audit plan and resources of the various internal audit functions
within Group Internal Audit Division (“GIAD”).
This BAC Report is made in accordance with the resolution of the
During the financial year, BAC noted that GIAD had effectively Board of Directors.
carried out internal audits to all business entities of the Group,
and reviewed the GIAD’s reports on the audits performed on the
Group as set out in the Internal Audit Function section below.

124 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Board Risk Management

Committee (BRMC) Report

CONSTITUTION 2. To review management’s reporting to the Board on

measures taken to:
The Board Risk Management Committee (“BRMC”) is established
to support the Board in discharging the following responsibilities:
a) Identify and examine principal risks faced by the
Company.
1. Oversee management’s implementation of the Company’s
governance framework and internal control framework/
b) Implement appropriate systems and internal controls
policies.
to manage these risks.

2. Ensure management meets the expectations on risk

3. To review management’s major risk management
management as set out in the policy document on Risk
strategies, policies and risk tolerance for Board’s approval.
Governance.
4. To review management’s overall framework on the
3. Oversee management’s implementation of compliance
Internal Capital Adequacy Assessment Process (“ICAAP”),
risk management.
annual risk appetite and Capital Management Plan for
Board’s approval.
4. Promote the adoption of sound corporate governance
principles as set out in the Policy Document on Corporate
5. To review management’s development and effective
Governance within the Bank and its subsidiaries
implementation of the ICAAP.
(“the Group”).
6. To review management’s stress testing governance
COMPOSITION
including the evaluation on the capital stress test scenarios,
The BRMC shall: parameters, key assumptions and results.

(a) have at least three directors; 7. To review management’s periodic reports on risk appetite,
risk exposure, risk portfolio composition, stress testing and
(b) comprise only non-executive directors, with a majority of risk management activities.
them being independent directors;
8. To review the adequacy and effectiveness of management’s
(c) be chaired by an independent director; internal controls and risk management process.

(d) comprise directors who have the skills, knowledge and 9. To review the adequacy of risk management policies and
experience relevant to the responsibilities of the board frameworks in identifying, measuring, monitoring and
committee; and controlling risk and the extent to which these are operating
effectively.
(e) include the Chair of the Board Audit Committee.
10. To review risk management function’s infrastructure,
resources and systems and to ensure the staff responsible
SECRETARY for implementing risk management systems perform those
The Secretariat to the BRMC is the Group Risk Management duties independently of the Group’s risk-taking activities.
(“GRM”) of the Bank.
11. To receive and review reports from pertinent management
committees.
TERMS OF REFERENCE
12. To review management’s implementation of risk
RISK MANAGEMENT management as set out in BNM’s policy documents on Risk
1. To review management’s activities in managing principal Governance, Approaches to Regulating and Supervising
risks such as credit, market, liquidity, interest rate risk in Financial Group and Corporate Governance.
the banking book, operational, compliance and the risk
management process. 13. To review and advise on the appointment, remuneration,
removal and redeployment of the Chief Risk Officer.

Annual Report 2020 125

Board Risk Management
Committee (BRMC) Report

14. To engage privately with the Chief Risk Officer on a regular a) reviewing and advising on the appointment,
basis (and in any case at least twice annually) to provide remuneration, removal and redeployment of the
opportunity for the Chief Risk Officer to discuss issues faced Chief Compliance Officer;
by the risk management function.
b) ensuring that the Chief Compliance Officer has
15. To review management’s implementation of the sufficient stature to allow for effective engagement
remuneration system and incentives provided by the with the CEO and other members of senior
remuneration system which take into consideration risks, management;
capital, liquidity and the likelihood and timing of earnings,
without prejudice to the tasks of the Board Remuneration c) engaging privately with the Chief Compliance Officer
Committee. on a regular basis (and in any case at least twice
annually) to provide the opportunity for the Chief
16. Other risk management functions as may be agreed to by Compliance Officer to discuss issues faced by the
the Board. compliance function;

COMPLIANCE d) ensuring that the Chief Compliance Officer is

1. To assist the Board in the oversight of the management of supported with sufficient resources to perform
compliance risk by: duties effectively;

a) reviewing compliance policies and overseeing e) where the Chief Compliance Officer also carries out
management’s implementation of the same; responsibilities in respect of other control functions,
the BRMC shall be satisfied that a sound overall
b) reviewing the establishment of the compliance control environment will not be compromised by
function and the position of the Chief Compliance the combination of responsibilities performed by the
Officer to ensure the compliance function and Chief Compliance Officer.
Chief Compliance Officer has appropriate standing,
authority and independence; 3. Other compliance functions as may be agreed to by the
Board.
c) discussing and deliberating compliance issues
regularly and ensuring such issues are resolved GROUP GOVERNANCE
effectively and expeditiously; 1. Noted that:

d) reviewing annually the effectiveness of the (a) The Bank, as a company with licensed subsidiary
Company’s overall management of compliance companies has overall responsibility for ensuring the
risk, having regard to the assessments of senior establishment and operation of a clear governance
management and internal audit and interactions structure within its subsidiaries (“Bank Group”).
with the Chief Compliance Officer;
(b) The Board’s responsibility is to promote the adoption
e) overseeing the management’s implementation of of sound corporate governance principles throughout
the principles set out in the Policy Document on the Bank Group.
Fair Treatment of Financial Consumers, including to
promote the adoption of a sound corporate culture (c) The Bank’s risk and compliance functions may propose
within the Group which reinforces ethical, prudent objectives, strategies, plans, governance framework
and professional conduct and behaviour; and policies for adoption and implementation within
the Bank Group.
f) updating the Board on all compliance matters,
including providing its views on (a) to (e) above. (d) The respective subsidiaries’ board and senior
management must validate that the objectives,
2. In relation to the role of the Chief Compliance Officer, strategies, plans, governance framework and
support the Board in meeting the expectations on policies set at the Bank level are fully consistent
compliance management as set out in BNM’s policy with the regulatory obligations and the prudential
document on Compliance by: management of the subsidiary and ensure that
entity specific risks are adequately addressed in the
implementation of Bank Group policies.

126 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Board Risk Management

Committee (BRMC) Report

AUTHORITY For the financial year ended 30 June 2020, eight (8) BRMC
meetings and five (5) special BRMC meetings were held and the
The BRMC is authorised by the Board to review any activities
attendance of the BRMC members is recorded as follows:
of the Group within its terms of reference. It is authorised to
seek any information it requires from any Director or member of
management and all employees are directed to co-operate with Member Attendance
any request made by the BRMC. YBhg Dato’ Nicholas John Lough @ Sharif Lough 13/13
bin Abdullah
The BRMC is authorised by the Board to obtain independent legal
or other professional advice if it considers necessary. Ms Chok Kwee Bee 13/13

Ms. Lau Souk Huan 10/10

MEETINGS
Ms. Lau Souk Huan was appointed as a member of the BRMC
The BRMC meets at least eight (8) times a year and additional with effect from 6 September 2019. She attended the BRMC
meetings may be called at any time as and when necessary. meetings from October 2019.

The Group Managing Director/Chief Executive Officer, Chief The BRMC reviewed major risk management strategies, policies
Financial Officer, Chief Risk Officer, Chief Internal Audit, Chief and risk appetite levels for Board’s approval. In addition, the
Compliance Officer, other senior management and external BRMC regularly reviews risk management reports which covers
auditors may be invited to attend the BRMC meetings, whenever global and regional economic developments, risk headwinds,
required. capital adequacy, stress tests, credit risk, market risk, interest
rate risk, liquidity risk, and operational risk.
Issues raised, discussions, deliberations, decisions and
conclusions made at the BRMC meetings are recorded in the The BRMC also regularly reviews regulatory compliance
minutes of the BRMC meetings. A BRMC member who has, and financial crime compliance reports which include new
directly or indirectly, an interest in a material transaction or regulations updates, compliance assurance reports, non-
material arrangement shall not be present at the BRMC meeting compliant incidents report and financial crime compliance
where the material transaction or material arrangement is being trends. The BRMC continuously provides oversight of the Group’s
deliberated by the BRMC. compliance activities to ensure that the Group is in compliance to
all established policies and external regulations.
Two (2) members of the BRMC, who shall be independent and
non-executive, shall constitute a quorum. Specifically with regards to the Covid-19 pandemic, the BRMC
reviewed reports of management’s analysis and risk mitigation
After each BRMC meeting, the BRMC shall report and update actions in relation to the Bank’s credit exposures, market risk,
the Board on significant issues and concerns discussed during operational risk, capital adequacy and liquidity. The BRMC
the BRMC meetings and where appropriate, make the necessary reviewed revisions to policies for prudential operations of the
recommendations to the Board. Bank that addresses issues arising from the pandemic, the
movement control orders instituted by the government and the
REVISION OF THE TERMS OF REFERENCE loan repayment moratorium measures introduced for customers
Any revision or amendment to the Terms of Reference, as that may be adversely impacted by the economic interruptions
proposed by the BRMC, shall first be presented to the Board caused by the pandemic. The BRMC also reviewed the Group’s
for its approval. Upon the Board’s approval, the said revision or implementation of business continuity management plans and
amendment shall form part of this Terms of Reference which processes. Information on employees who were infected with
shall be considered duly revised or amended. Covid-19 or quarantined due to close contact with a positive or
suspected Covid-19 case was promptly reported to the BRMC.
ACTIVITIES
The BRMC also deliberated on stress test results formulated
The BRMC carried out its duties in accordance with its Terms of
against the backdrop of a highly stressed economic environment,
Reference supported by the Group Risk Management and Group
which provided insightful and timely updates particularly on
Compliance functions.
financial, capital and liquidity impacts to the Bank as well as
management’s actions taken to mitigate any impact.

Annual Report 2020 127

Board Information and Technology
Committee Report

CONSTITUTION AUTHORITY
The Board Information and Technology Committee (“BITC”) was The BITC is authorised by the Board to review any technology
established on 1 January 2020 to jointly support the Boards of related activities of the Group within its terms of reference. It is
Hong Leong Bank Berhad and Hong Leong Islamic Bank Berhad authorised to seek any technology related information it requires
(the “Bank”) in discharging the following responsibilities: from any Director or member of management and all employees
are directed to co-operate with any request made by the BITC.
1. Oversee technology and cyber security related matters.
The BITC is authorised by the Board to obtain independent legal
2. Ensure that risks assessments undertaken in relation or other professional advice if it considers necessary.
to material technology applications are robust and
comprehensive.
MEETINGS
3. Ensure that management meets the expectations on
The BITC meets at least four (4) times a year and additional
technology and cyber security risk management as set
meetings may be called at any time as and when necessary.
out in the Bank Negara Malaysia policy document on Risk
Management in Technology (“BNM RMiT Policy”).
The Group Managing Director/Chief Executive Officer, Chief
Financial Officer, Chief Risk Officer, Chief Internal Auditor, Chief
Compliance Officer, Chief Information Security Officer, Head of
COMPOSITION
Group Operations and Technology, Chief IT Officer, other senior
MS CHONG CHYE NEO management and external auditors may be invited to attend the
(Chairman, Independent Non-Executive Director) BITC meetings, whenever required.

YBHG DATUK DR MD HAMZAH BIN MD KASSIM Issues raised, as well as discussions, deliberations, decisions
(Independent Non-Executive Director) and conclusions made at the BITC meetings are recorded in the
minutes of the BITC meetings. A BITC member who has, directly
MS LAU SOUK HUAN or indirectly, an interest in a material transaction or material
(Independent Non-Executive Director) arrangement shall not be present at the BITC meeting where
the material transaction or material arrangement is being
deliberated by the BITC.
SECRETARY
Two (2) members of the BITC shall constitute a quorum.
The Secretary(ies) to the BITC is/are the Company Secretary(ies)
of the Bank.
After each BITC meeting, the BITC shall report and update the
Board on significant technology related issues and concerns
discussed during the BITC meetings and where appropriate, make
TERMS OF REFERENCE
the necessary recommendations to the Board for its deliberation
The terms of reference of the BITC are published on the Bank’s and approval.
website, www.hlb.com.my.

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 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Board Information and Technology

Committee Report

ACTIVITIES • Reviewed the System Stability Risk Appetite Statement for

the financial year 2019/2020, in line with the BNM RMiT
During the financial year ended 30 June 2020, two (2) BITC
Policy.
meetings were held and the attendance of the BITC members
was as follows:
• Reviewed the audit findings identified by the Group
Internal Audit Division and the External Auditors on
Member Attendance IT-related matters and monitored the resolutions and
Ms Chong Chye Neo 2/2 action items in relation thereto.

YBhg Datuk Dr Md Hamzah bin Md Kassim 2/2 • Reviewed the Business Continuity Management of the
Ms Lau Souk Huan 2/2 Group, including critical system downtime and disaster
recovery plans.
The BITC carried out the following activities in discharge of
its duties in accordance with its terms of reference during the • Reviewed the Data Centre Resiliency Assessment Report
financial year ended 30 June 2020: to evaluate the facilities and infrastructure of existing
live/production data centre site based on concurrent
• Reviewed the IT strategy and monitored the progress maintainable requirement by BNM RMiT Policy.
against management plan.
• Reviewed the Group’s adoption of emerging technologies,
• Reviewed the cyber security strategy/framework. including the adoption status and corresponding
capabilities.
• Reviewed the production incidents and trending.
This BITC Report is made in accordance with the resolution of the
• Reviewed the state of compliance and progress updates on Board of Directors.
action items in relation to the BNM RMiT Policy.

• Reviewed and assessed IT-related policies/guidelines.

• Reviewed the risk assessment on IT outsourcing and

insourcing arrangements of the Group.

• Reviewed the assessment results on the adequacy and

robustness of the existing risk management measures,
preventive and detective control mechanisms adopted
to prevent frauds in e-banking, direct debit and
card-not-present transactions.

Annual Report 2020 129

Corporate Governance Overview,
Risk Management & Internal Control Statement

Corporate Governance is the process and structure used to direct and manage
the business and affairs of the Company towards enhancing business prosperity
and corporate accountability with the ultimate objective of realising long term
shareholder value, whilst taking into account the interest of other stakeholders.

Finance Committee on Corporate Governance

The Board of Directors (“Board”) is pleased to present this The day-to-day business of the Bank is managed by
statement with an overview of the corporate governance (“CG”) the Group Managing Director/Chief Executive Officer
practices of the Group which supports the three key principles (“GMD/CEO”) who is assisted by the management team.
of the Malaysian Code on Corporate Governance (“MCCG”) The GMD/CEO and his management team are accountable
namely board leadership and effectiveness; effective audit to the Board for the performance of the Bank. In addition,
and risk management; and integrity in corporate reporting and the Board has established Board Committees which
meaningful relationship with stakeholders. operate within clearly defined TOR primarily to support the
Board in the execution of its duties and responsibilities.
The CG Report 2020 of the Bank in relation to this statement
is published on the Bank’s website, www.hlb.com.my To discharge its oversight roles and responsibilities more
(“the Bank’s Website”). effectively, the Board has delegated the independent
oversight over, inter alia, internal and external audit
The Board also reviewed the manner in which the Bank Negara functions and internal controls to the Board Audit
Malaysia’s (“BNM”) policy document on Corporate Governance Committee (“BAC”); and risk management to the Board
(“BNM CG Policy”) is applied in the Group, where applicable, as Risk Management Committee (“BRMC”). The Nomination
set out below. Committee (“NC”) is delegated the authority to, inter
alia, assess and review Board, Board Committees and
GMD/CEO appointments and re-appointments and oversee
A. ROLES AND RESPONSIBILITIES OF THE BOARD management succession planning. Although the Board
has granted such authority to the Board Committees, the
The Board assumes responsibility for effective stewardship
ultimate responsibility and the final decision rest with
and control of the Bank and has established terms
the Board. The chairmen of the Board Committees report
of reference (“TOR”) to assist in the discharge of this
to the Board on matters dealt with at their respective
responsibility.
Board Committee meetings. Minutes of Board Committee
meetings are also tabled at Board meetings.
In discharging its responsibilities, the Board has
established functions which are reserved for the Board
There is a clear division of responsibilities between the
and those which are delegated to management. The key
Chairman of the Board and the GMD/CEO. This division of
roles and responsibilities of the Board are set out in the
responsibilities between the Chairman and the GMD/CEO
Board Charter, which is reviewed periodically by the Board.
ensures an appropriate balance of roles, responsibilities
The Board Charter is published on the Bank’s Website. The
and accountability.
key roles and responsibilities of the Board broadly cover
reviewing and approving corporate policies and strategies;
The Chairman leads the Board and ensures its smooth and
overseeing and evaluating the conduct of the Group’s
effective functioning.
businesses; identifying principal risks and ensuring the
implementation of appropriate systems to manage those
The GMD/CEO is responsible for formulating the vision
risks; and reviewing and approving key matters such as
and recommending policies and the strategic direction
financial results, investments and divestments, acquisitions
of the Bank for approval by the Board, implementing
and disposals, and major capital expenditure and such
the decisions of the Board, initiating business ideas and
other responsibilities that are required as specified in the
corporate strategies to create competitive edge and
guidelines and circulars issued by BNM from time to time.

130 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Corporate Governance Overview,

Risk Management & Internal Control Statement

enhancing shareholder wealth, providing management to collective skills, perspectives and strengths to the
of the day-to-day operations of the Bank and tracking Board. The Board will consider appropriate targets in Board
compliance and business progress. diversity including gender balance on the Board and will
take the necessary measures to meet these targets from
Independent Non-Executive Directors (“INEDs”) are time to time as appropriate. The Board currently has eight
responsible for providing insights, unbiased and (8) Directors, of whom three (3) are women Directors. The
independent views, advice and judgment to the Board Board will continue to maintain women participation on
and bring impartiality to Board deliberations and the Board in line with the MCCG.
decision-making. They also ensure effective checks and
balances on the Board. There are no relationships or Based on the review of the Board composition in July
circumstances that could interfere with or are likely to 2020, the Board is of the view that the current size and
affect the exercise of INEDs’ independent judgment or composition of the Board are appropriate and effective
their ability to act in the best interest of the Bank and its for the control and direction of the Group’s strategy and
shareholders. business. The composition of the Board also fairly reflects
the investment of shareholders in the Bank.
The Group continues to operate in a sustainable manner
and seeks to contribute positively to the well-being of
stakeholders. The Group takes a progressive approach in C. BOARD COMMITTEES
integrating sustainability into its businesses as set out in
Board Committees have been established by the Board to
the Sustainability Report which forms part of this Annual
assist in the discharge of its duties.
Report.
(A) BAC
The Board observes the Code of Ethics for Company
Directors established by the Companies Commission The composition of the BAC and a summary of its
of Malaysia (“CCM”) and Hong Leong Bank Group activities in the discharge of its functions and duties
(“HLB Group” or “HLBG”) Code of Conduct & Ethics, which for the financial year and explanation on how the
have been adopted by the Board and published on the BAC had met its responsibilities are set out in the
Bank’s Website. Details of the HLB Group Code of Conduct BAC Report in this Annual Report.
& Ethics are set out in Section F of this Statement.
The BAC’s functions and responsibilities are set out in
the TOR which is published on the Bank’s Website.
B. BOARD COMPOSITION
(B) BRMC
The Board currently comprises eight (8) Directors. The eight
The composition of the BRMC and a summary of its
(8) Directors are made up of one (1) Executive Director and
activities in the discharge of its functions and duties
seven (7) Non-Executive Directors, of whom five (5) are
for the financial year and explanation on how the
independent. The profiles of the members of the Board are
BRMC had met its responsibilities are set out in the
set out in this Annual Report.
BRMC Report of this Annual Report.

The Bank is guided by the BNM CG Policy and the Main

The BRMC’s functions and responsibilities are set out
Market Listing Requirements (“MMLR”) of Bursa Malaysia
in the TOR which is published on the Bank’s Website.
Securities Berhad (“Bursa”) in determining its board
composition. The Board shall determine the appropriate
(C) BITC
size of the Board to enable an efficient and effective
conduct of Board deliberation. The Board shall have a The composition of the BITC and a summary of its
balance of skills and experience to commensurate with activities in the discharge of its functions and duties
the complexity, size, scope and operations of the Bank. for the financial year and explanation on how the
Board members should have the ability to commit time BITC had met its responsibilities are set out in the
and effort to carry out their duties and responsibilities BITC Report of this Annual Report.
effectively.
The BITC’s functions and responsibilities are set out
The Bank has in place a Board Diversity Policy. The Board in the TOR which is published on the Bank’s Website.
recognises the merits of Board diversity in adding value

Annual Report 2020 131

Corporate Governance Overview,
Risk Management & Internal Control Statement

C. BOARD COMMITTEES (CONTINUED)

(D) NC
The NC was established on 17 June 2003. The composition of the NC is as follows:

• Ms Chok Kwee Bee (Chairman)

• Mr Tan Kong Khoon
• YBhg Dato’ Nicholas John Lough @ Sharif Lough bin Abdullah

The NC’s functions and responsibilities are set out in the TOR which is published on the Bank’s Website.

The Bank has in place a Fit and Proper (“F&P”) Policy as a guide for the following process and procedure for assessment
of (i) new appointments and re-appointments of Chairman, Directors and GMD/CEO, (ii) appointment of Board Committee
members, and (iii) annual F&P assessment of Chairman, Directors and GMD/CEO, and the criteria and guidelines used for
such assessments. Upon the approval of the Board, an application on the prescribed forms will be submitted to BNM for
approval in respect of new appointments and re-appointments.

(i) New Appointments

The nomination, assessment and approval process for new appointments is as follows:

• Assessment against Assessment

Criteria and BNM Guidelines
• F&P Declaration by candidates Deliberation by the
Identification of Meeting with
• Relevant Credit Bureau Checks Board and decision
candidates candidates
• CTOS (Bankruptcy) search thereof
• Independent Background Checks
• Recommendation by the NC

In assessing the candidates for Board appointments, the NC will take into account, inter alia, the strategic and
effective fit of the candidates for the Board, the overall desired composition and the mix of expertise and experience
of the Board as a whole and having regard to the candidates’ attributes, qualifications, management, leadership,
business experience and their F&P Declarations in respect of their probity, competence, personal integrity, reputation,
qualifications, skills, experience and financial integrity in line with the standards required under the relevant BNM
Guidelines. The Bank will also conduct independent background checks to verify the information disclosed in the F&P
Declarations. The Bank has taken steps to build and maintain a pool of potential Board candidates from internal and
external introductions, recommendations and independent sources with director databases in its search for suitable
Board candidates.

In the case of GMD/CEO, the NC will take into account the candidate’s knowledge and experience in the industry,
market and segment. The NC will also consider the candidate’s F&P Declaration in line with the standards required
under the relevant BNM Guidelines.

(ii) Re-Appointments
The assessment and approval process for re-appointments is as follows:

• Assessment against Assessment Criteria and BNM Guidelines

• F&P Declaration
• Relevant Credit Bureau Checks Deliberation by the Board
• CTOS (Bankruptcy) search and decision thereof
• Independent Background Checks
• Recommendation by the NC

132 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Corporate Governance Overview,

Risk Management & Internal Control Statement

C. BOARD COMMITTEES (CONTINUED)

(D) NC (CONTINUED)
(ii) Re-Appointments (continued)
For re-appointments, the Chairman, Directors and GMD/CEO will be evaluated on their performance in the discharge
of duties and responsibilities effectively, including, inter alia, contribution to Board deliberations and time
commitment. The NC will also consider the results of the Annual Board Assessment (as defined below) results, their
contributions during the term of office, attendance at Board meetings, F&P Declarations in respect of their probity,
competence, personal integrity, reputation, qualifications, skills, experience and financial integrity in line with the
standards required under the relevant BNM Guidelines and for Independent Directors, their continued independence.
Independent background checks will also be conducted to verify the information disclosed in their F&P Declarations.

(iii) Board Committee Appointments

The nomination, assessment and approval process for appointments to Board Committees (“Board Committee
Appointments”) is as follows:

Identification of Directors • Assessment against Assessment Criteria

Deliberation by the Board
for Board Committees and BNM Guidelines
and decision thereof
membership • Recommendation by the NC

The assessment for Board Committee Appointments will be based on the Directors’ potential contributions and
value-add to the Board Committees with regard to Board Committees’ roles and responsibilities.

(iv) Annual F&P Assessment

The annual F&P assessment process is as follows:

• Directors/CEO to complete: • Assessment against
- the Board Annual Assessment Form Assessment Criteria
Deliberation by the Board
- the F&P Declaration and Guidelines
and decision thereof
• The Bank to conduct Independent • Recommendation by
Background Checks the NC

A formal evaluation process has been put in place to assess the effectiveness of the Board as a whole, the Board
Committees and the contribution and performance of each individual Director on an annual basis (“Annual Board
Assessment”) in conjunction with the annual F&P assessment of Chairman, Directors and GMD/CEO per BNM
Guidelines. Directors are required to complete the F&P Declaration in respect of their probity, competence, personal
integrity, reputation, qualifications, skills, experience and financial integrity in line with the standards required under
the relevant BNM Guidelines. Independent background checks will also be conducted to verify the information
disclosed in their F&P Declarations.

The NC will deliberate the results of the Annual Board Assessment and submit its recommendation to the Board for
consideration and approval. For newly appointed Chairman, Directors and GMD/CEO, the Annual Board Assessment
will be conducted at the next annual assessment exercise following the completion of one year service.

Annual Report 2020 133

Corporate Governance Overview,
Risk Management & Internal Control Statement

C. BOARD COMMITTEES (CONTINUED)

(D) NC (CONTINUED)
(iv) Annual F&P Assessment (continued)
Assessment criteria for Board as a whole include, inter alia, the effectiveness of the Board composition in terms of
size and structure vis-à-vis the complexity, size, scope and operations of the Bank; the core skills, competencies and
experience of the Directors; and the Board’s integrity, competency, responsibilities and performance. The assessment
criteria for Board Committees include the effectiveness of the respective Board Committees’ composition in terms of
mix of skills, knowledge and experience to carry out their respective roles and responsibilities in accordance with the
Board Committees’ TOR and the contribution of the Board Committees members. Each individual Director is assessed
on, inter alia, the effectiveness of his/her competency, expertise and contributions. The skills, experience, soundness
of judgment as well as contributions towards the development of business strategies and direction of the Bank and
analytical skills to the decision-making process are also taken into consideration.

For management succession planning, it has been embedded in the Group’s process over the years to continuously identify,
groom and develop key talents from within the Group. The Group also has a talent development programme to identify,
retain and develop young high potential talents.

The NC meets at least once in each financial year and additional meetings may be called at any time as and when
necessary.

During the financial year ended 30 June 2020 (“FY 2020”), five (5) NC meetings were held and the attendance of the NC
members were as follows:

Member Attendance
Ms Chok Kwee Bee 5/5
Mr Tan Kong Khoon 5/5
YBhg Dato’ Nicholas John Lough @ Sharif Lough bin Abdullah 5/5

The NC carried out the following activities in the discharge of its duties in accordance with its TOR during the FY 2020:

• Carried out the Annual Board Assessment and was satisfied that the Board as a whole, Board Committees and
individual Directors have continued to effectively discharge their duties and responsibilities in accordance with
their respective TORs, and that the current Board composition in terms of Board balance, size and mix of skills is
appropriate and effective for the discharge of its functions. The NC took cognisance of the merits of Board diversity
including women participation on the Board, in adding value to the Bank. The NC will continue to maintain women
participation on the Board in line with the MCCG;

• Considered and assessed the position of Independent Directors of the Bank and was satisfied that the Independent
Directors met the regulatory requirements for Independent Directors;

• Reviewed the F&P Declarations by Directors, GMD/CEO and Company Secretary in line with the BNM policy document
on F&P Criteria and was satisfied that the Directors, GMD/CEO and Company Secretary met the requirements as set
out in BNM policy document on F&P Criteria;

• Reviewed the term of office and performance of the BAC and each of its members in accordance with the TOR of BAC
and was of the view that the BAC and each of its members had carried out their duties in accordance with the BAC
TOR for the period under review;

• Reviewed the appointment and re-appointments of Directors in accordance with the F&P Policy, BNM CG Policy and
MMLR and recommended to the Board for consideration and approval;

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 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Corporate Governance Overview,

Risk Management & Internal Control Statement

C. BOARD COMMITTEES (CONTINUED)

(D) NC (CONTINUED)
• Reviewed the establishment and composition of the BITC and recommended to the Board for consideration and
approval;

• Reviewed the revision to the TOR of the NC and recommended to the Board for consideration and approval; and

• Reviewed the new Board Policy on Talent Management and recommended to the Board for consideration and
approval.

(E) REMUNERATION COMMITTEE (“RC”)

The RC was established on 17 June 2003. The composition of the RC is as follows:

• YBhg Dato’ Nicholas John Lough @ Sharif Lough bin Abdullah (Chairman)
• YBhg Tan Sri Quek Leng Chan
• YBhg Datuk Dr Md Hamzah bin Md Kassim

The RC’s functions and responsibilities are set out in the TOR which is published on the Bank’s Website.

During the FY 2020, three (3) RC meetings were held and the attendance of the RC members were as follows:

Member Attendance
YBhg Dato’ Nicholas John Lough @ Sharif Lough bin Abdullah 3/3
YBhg Tan Sri Quek Leng Chan 3/3
YBhg Datuk Dr Md Hamzah bin Md Kassim 3/3

The Group’s remuneration scheme for Executive Directors is linked to performance, service seniority, experience and scope
of responsibility and is periodically benchmarked to market/industry surveys conducted by human resource consultants.
Performance is measured against profits and targets set in the Group’s annual plan and budget.

The level of remuneration of Non-Executive Directors reflects the scope of responsibilities and commitment undertaken by
them.

The RC, in assessing and reviewing the remuneration packages of Executive Directors, ensures that a strong link is maintained
between their rewards and individual performance, based on the provisions in the Group’s Human Resources Manual, which
are reviewed from time to time to align with market/industry practices. The fees of Directors are recommended and
endorsed by the Board for approval by the shareholders of the Bank at its Annual General Meeting (“AGM”).

The detailed remuneration of each Director during the FY 2020 is as set out in Note 41 of the Audited Financial Statements
in this Annual Report.

REMUNERATION PHILOSOPHY & FRAMEWORK

HLB Group’s remuneration strategy supports and promotes a high performance culture to deliver the Bank’s Vision to be a highly
digital & innovative ASEAN financial services company. It also forms a key part of the Bank's Employer Value Proposition with the
aim to drive the right behaviors, create a workforce of strong values, high integrity, clear sense of responsibility and high ethical
standards.

The remuneration framework provides a balanced approach between fixed and variable components that is measured using
a robust and rigorous performance management process that incorporates meritocracy in performance, HLB values, prudent
risk-taking and key behaviours in accordance to the Bank's Code of Conduct and risk and compliance management as part of the
key performance indicators for remuneration decisions.

Annual Report 2020 135

Corporate Governance Overview,
Risk Management & Internal Control Statement

C. BOARD COMMITTEES (CONTINUED)

OVERVIEW OF REMUNERATION POLICY FRAMEWORK

Remuneration philosophy hinges on:

• Our values and commitment to the employees of the Bank
A. Philosophy • High performance culture
• Strong alignment between prudent risk taking and reward

Remuneration principles are based on 3 key principles:

• Oversight by Remuneration Committee & Board of Directors
B. Principles • Prudent Risk Taking
• Governance Process for Bonus, Increment and Promotion (BIP)

Remuneration practices:
• Details how the remuneration principles will be achieved in practice
C. Practices • Includes remuneration structures, design, implementation and
workflow/procedures

GUIDING PRINCIPLES
Principle 1 - Oversight by Remuneration Committee & Board of Directors
The RC’s responsibilities are to recommend to the Board the framework and policies that govern the remuneration of the
Directors, Shariah Committee, Chief Executive Officer, senior management officers and other material risk takers. The RC ensures
that the remuneration system is in line with the business and risk strategies, corporate values and long-term interests of the Bank
and that it has a strong link between rewards and individual performance and is periodically benchmarked to market/industry.
The Board must ensure that the corporate governance disclosures on remuneration are accurate, clear, and presented in a manner
that is easily understood by its shareholders, customers and other relevant stakeholders.

Principle 2 - Prudent Risk Taking

Remuneration for employees within the Bank must be aligned with prudent risk-taking. Hence, remuneration outcomes must be
symmetric with risk outcomes. This includes ensuring that remuneration is adjusted to account for all types of risk, and must be
determined by both quantitative measures and qualitative judgement.

Principle 3 - Governance Process for Bonus, Increment and Promotion (“BIP”)

The Bank has established an end-to-end BIP process to ensure proper governance and sufficient control is in place. Provision
for variable remuneration is tied to the performance of the Bank and the pool is allocated according to the performance of each
business unit. To safeguard the independence and authority of individuals engaged in control functions, the Bank ensures that
the remuneration of such individuals is based principally on the achievement of control functions objectives and determined in
a manner that is independent from the business lines they oversee. No increment and bonus is accorded to an employee with
performance rating 1 or 2 or if the employee has tendered his/her resignation.

REMUNERATION PRACTICES
Measurement of Performance
The Bank’s performance is determined in accordance with a balanced scorecard which includes key measures on profitability,
cost, capital, shareholders’ return, medium to long-term strategic initiatives, as well as risk, audit and compliance positions.

136 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Corporate Governance Overview,

Risk Management & Internal Control Statement

C. BOARD COMMITTEES (CONTINUED)

REMUNERATION PRACTICES (CONTINUED)
Measurement of Performance (continued)
For each employee, performance is tracked through Key Result Areas (KRAs) in a balanced scorecard. It focuses on the achievement
of key objectives which are aligned to value creation for the Bank's shareholders and multiple stakeholders. At the end of the
year, performance of the employee is assessed through the performance management framework which is based on 70% of
KRAs (with mandatory weightage for Compliance and Training) and 30% of HLB Values.

The Bank shall ensure the performance measure of the employee promotes the Bank’s core values and desired conduct and
behaviour to achieve Fair Treatment of Financial Consumers (“FTFC”) and all relevant regulatory policies outcomes. Apart from
quantitative targets, performance measures shall include qualitative criteria that closely reflect the delivery of FTFC and all
relevant regulatory policies outcomes.

Every senior management officer has a responsibility to embed sustainability in all initiatives in their division. This is linked to
performance considerations and in turn, total remuneration received.

Pay Mix Delivery and its Purpose

The overall Total Compensation for the GMD/CEO and members of the Senior Management team generally includes base pay,
fixed cash allowances, performance-based variable pay, long term incentives, benefits and other employee programmes.

1. Fixed Pay (base pay and fixed cash allowances)

Fixed pay is delivered at an appropriate level taking into account skills, experience, responsibilities, competencies and
performance; ensuring its competitiveness vis-à-vis comparable institutions for attraction and retention purposes.

2. Performance-based variable pay

Performance-linked variable pay in the form of bonuses is paid out at the end of the financial year subject to the Bank’s
performance and in recognition of individual performance and key achievements during the year. It focuses on the
achievement of key objectives which are aligned to value creation for the Bank's shareholders and multiple stakeholders.
A robust key performance indicators (“KPIs”) setting process that incorporates risk management as part of the scorecards is
also in place to ensure excessive risk taking behaviours of staff are minimised and sufficient control mechanism is in place.
Variable bonus awards for individuals in senior management position and in excess of a certain thresholds will be deferred
over a period of time.

3. Long term incentives

In addition, the Bank also recognises and rewards individuals for their contributions towards the Bank’s long-term business
achievements (both in qualitative and quantitative measures) through a combination of cash and non-cash (i.e. shares or
share-linked instruments) elements that are subject to partial deferment over a period of time (typically over a few years)
with built-in clawback mechanism.

The clawback mechanism can be triggered when there are non-compliances to regulations and policies and where
Management deemed necessary due to achievements of performance targets that are not sustainable. Clawbacks are
typically (and not limited to) applied in the case of Gross Misconduct, Financial Misstatements, Material Risks and/or
Malfeasance of Fraud.

The variable portion of remuneration (both Performance-based variable pay and long-term incentives) increases along
with the individual’s level of accountability. By subjecting an adequate portion of the variable remuneration package to
forfeiture, it takes into account potential financial risks that may crystallize over a period of time, reinforces HLB’s corporate
and risk culture in promoting prudent risk taking behaviours.

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C. BOARD COMMITTEES (CONTINUED)

REMUNERATION PRACTICES (CONTINUED)
Pay Mix Delivery and its Purpose (continued)

4. Employee Benefits and Programmes

Employee benefits (e.g. screening, health and medical, leave passage) are used to foster employee value proposition and
wellness to ensure the overall well-being of the employees. These are being reviewed annually to ensure HLB remains
competitive in the industry and that the employees are well taken care of.

Remuneration Disclosure
The following depicts the total value of remuneration awarded to the GMD/CEO, Senior Management team and Material Risk
Takers of the Bank for the FY 2020:

Total amount
Total amount of of outstanding
outstanding deferred
deferred remuneration paid
remuneration as out (vested)
No. of officers Unrestricted Deferred at 30.6.2020 in FY2020
received (RM) (RM) (RM) (RM)

Fixed Remuneration
Cash-based 31 30,593,394 - - -
Shares and share-linked
instruments - - - - -
Other - - - - -
Variable Remuneration
Cash-based 28 22,717,999 3,618,511 - -
Shares and share-linked
instruments 23 - 3,379,760 6,129,763 7,089,939
Other - - - - -

Note: The value of share is based on the valuation used for MFRS2 Accounting.

D. INDEPENDENCE
The Board takes cognisance of the provisions of the MCCG, which states that the tenure of an Independent Director should not
exceed a cumulative term of 9 years and upon completion of the 9 years, an Independent Director may continue to serve on
the Board subject to the Director’s re-designation as a Non-Independent Director. It further states that in the event the Board
wishes to retain an Independent Director who has served a cumulative term of 9 years and above, shareholders’ approval shall be
annually sought with justification. In the event the Board wishes to retain an Independent Director who has served a cumulative
term of 12 years and above, shareholders’ approval shall be annually sought through a two-tier voting process.

The tenure of all the Independent Directors on the Board of the Bank does not exceed 9 years. The Independent Directors
have declared their independence, and the NC and the Board have determined, at the annual assessment carried out, that the
Independent Directors have continued to bring independent and objective judgment to Board deliberations and decision making.

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Corporate Governance Overview,

Risk Management & Internal Control Statement

D. INDEPENDENCE (CONTINUED) and services of the internal auditors and in addition,

to independent professional advice, where necessary, at
The Bank has in place a policy in relation to the
the Bank’s expense, in consultation with the Chairman or
tenure for Independent Directors of the Bank
the GMD/CEO of the Bank.
(“Tenure Policy”) under the F&P Policy of the Bank.
Pursuant to the Tenure Policy, the tenure of an
At Board meetings, active deliberations of issues by
Independent Director shall not exceed a cumulative term of
Board members are encouraged and such deliberations,
9 years from the date of his or her first appointment in the
decisions and conclusions are recorded by the Company
Bank. Upon completion of the 9 years, an Independent
Secretary accordingly. Any Director who has, directly or
Director shall retire on the expiry date of his or her term
indirectly, an interest in a material transaction or material
of office approved by BNM.
arrangement shall not be present at the Board meeting
where the material transaction or material arrangement is
being deliberated by the Board.
E. COMMITMENT
The Directors are aware of their responsibilities and devote The Board met seven (7) times for the FY 2020 with timely
sufficient time to carry out such responsibilities. In line notices of issues to be discussed. Details of attendance of
with the MMLR, Directors are required to comply with the each Director are as follows:
restrictions on the number of directorships in public listed
companies. Directors provide notifications to the Board for Director Attendance
acceptance of any new Board appointments. This ensures
YBhg Tan Sri Quek Leng Chan 7/7
that their commitment, resources and time are focused
on the affairs of the Bank to enable them to discharge Mr Tan Kong Khoon 7/7
their duties effectively. Board meetings are scheduled a Mr Kwek Leng Hai 7/7
year ahead in order to enable full attendance at Board
Ms Chok Kwee Bee 7/7
meetings. Additional meetings may be convened on an
ad-hoc basis as and when necessary. Where appropriate, YBhg Dato’ Nicholas John Lough @ Sharif 7/7
decisions are also taken by way of Directors’ Circular Lough bin Abdullah
Resolutions. Directors are required to attend at least 75% YBhg Datuk Dr Md Hamzah bin Md 7/7
of Board meetings held in each financial year pursuant to Kassim
the BNM CG Policy. Ms Chong Chye Neo 7/7
Ms Lau Souk Huan (1)
6/6
All Board members are supplied with information in a
timely manner. The Bank has moved towards electronic (1)
Appointed as Director with effect from 6 September 2019.
Board reports. Board reports are circulated electronically
prior to Board and Board Committee meetings and the
The Bank recognises the importance of continuous
reports provide, amongst others, financial and corporate
professional development and training for its Directors.
information, significant operational, financial and corporate
issues, updates on the performance of the Bank and of
The Bank is guided by a Directors’ Training Policy,
the Group and management’s proposals which require the
which covers an Induction Programme and Continuing
approval of the Board.
Professional Development (“CPD”) for Directors of the
Bank. The Induction Programme is organised for newly
All Directors have access to the advice and services of a
appointed Directors to assist them to familiarise and to get
qualified and competent Company Secretary to facilitate the
acquainted with the Bank’s business, governance process,
discharge of their duties effectively. The Company Secretary
roles and responsibilities as Director of the Bank. The CPD
is qualified to act under Section 235 of the Companies
encompasses areas related to the industry or business of
Act 2016. The Company Secretary supports the effective
the Bank, governance, risk management and regulations
functioning of the Board, provides advice and guidance
through a combination of courses and conferences.
to the Board on policies and procedures, relevant rules,
A training budget is allocated for Directors’ training
regulations and laws in relation to corporate secretarial and
programmes.
governance functions and facilitates effective information
flow amongst the Board, Board Committees and senior
All Directors of the Bank have completed the Mandatory
management. All Directors also have access to the advice
Accreditation Programme.

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E. COMMITMENT (CONTINUED) • FIDE Elective Programme – Emerging Risks, the

Future Board and Return on Compliance
The Bank regularly organises in-house programmes,
• FIDE Forum – 2nd PIDM : FIDE Forum Annual Dialogue
briefings and updates by its in-house professionals. The
with the CEO of PIDM
Directors are also encouraged to attend seminars and
• FIDE Forum – Artificial Intelligence and Its Role in
briefings in order to keep themselves abreast with the
Financial Institutions
latest developments in the business environment and to
• FIDE Forum – Challenging Times: What Role Must the
enhance their skills and knowledge. Directors are kept
Board Play?
informed of available training programmes on a regular
• FIDE Forum – Covid-19 and Current Economic Reality:
basis.
Implications for Financial Stability
• FIDE Forum – Digital Banking: Why Does It Matter?
The Bank has prepared for the use of its Directors, a Director
• FIDE Forum – Digital To The Core
Manual which highlights, amongst others, the major duties
• FIDE Forum – Outthink The Competition: Excelling in a
and responsibilities of a Director vis-a-vis various laws,
Post Covid-19 World
regulations and guidelines governing the same.
• IBFIM – Islamic Jurisprudence and Its Application in
Islamic Finance
In assessing the training needs of Directors, the Board
• ICLIF – Board & Executive Pay During and Post
has determined that appropriate training programmes
Covid-19
covering matters on corporate governance, finance, legal,
• ICLIF – Cybersecurity & Work-From-Home Security
risk management, information technology, cyber security,
Challenges Amidst Covid-19 Pandemic
internal control and/or statutory/regulatory compliance, be
• ICLIF – Environmental, Social and Governance (ESG)
recommended and arranged for the Directors to enhance
Trends & Regulatory Developments
their contributions to the Board.
• ICLIF – FIDE Core Programme
• ICLIF – Force Majeure & Covid-19: How are Contractual
During the FY 2020, the Directors received regular briefings
Relationships Affected and Managed?
and updates on the Bank’s businesses, strategies,
• ICLIF – Raising Defences: Section 17A, Malaysian Anti-
operations, risk management and compliance, internal
Corruption Commission (Amendment) Act 2018
controls, corporate governance, finance and any changes
• ISRA Consultancy – Islamic Finance for Board of
to relevant legislation, rules and regulations from in-house
Directors Programme
professionals. In-house programmes were also organised
• Khazanah Megatrends Forum 2019
for the Directors and senior management of the Bank.
• Mandatory Accreditation Programme for Directors of
Public Listed Companies
The Directors of the Bank have also attended various
• MIBA – SIDC: The More Things Change, The More They
programmes and forums facilitated by external
Stay The Same
professionals in accordance with their respective needs in
• MICG – Strengthening the Effectiveness of the Audit
discharging their duties as Directors.
Committee: A Practical Approach
• MICG – Members’ Breakfast Talk: Why Sustainability
During the FY 2020, the Directors of the Bank, collectively
Matters?
or on their own, attended various training programmes,
• MICG – 2019 Forum on Corporate Governance in the
seminars, briefings and/or workshops including:
Capital Market: Building and Sustaining A Robust
Malaysian Capital Market
• Anti-Money Laundering Act Training 2019
• Securities Commission Malaysia – Audit Oversight
• Asia School of Business – “9th Series: Creating Jobs In
Board : Conversation with Audit Committees
The Post-Covid World"
• Update on Singapore Stock Exchange Listing Rules
• Asset-Liability and Risk Management – Regulatory
• Update on Singapore Code of Corporate Governance
Principles and Market Best Practice
2018
• BNM – Regional Conference on Climate Change
• 14th International Shari'ah Scholars Forum
• BNM – FIDE Forum Dialogue on Key Aspects of Fintech
• Workshop on the Internal Capital Adequacy
and Regulation
Assessment Process (ICAAP)
• BNM – FIDE Forum Dialogue on Innovation and
Fintech in the Financial Services Industry

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Corporate Governance Overview,

Risk Management & Internal Control Statement

F. STRENGTHENING CORPORATE GOVERNANCE CULTURE

OUR APPROACH TO CORPORATE GOVERNANCE
Nurturing a strong corporate governance culture encompasses not only the policies or processes that we already have in place
but also training that is practical and based on every day scenarios that can be applied in an employee’s work. Our approach to
corporate governance includes the following:

1 2 3
Code of Conduct & Ethics Policies & Processes Continuous Development

The HLBG Code of Conduct & Ethics (“CoCE”) In addition to the HLBG CoCE, the Talent Continuously strengthening corporate
ensures that our employees commit to Management Board Policy, Remuneration governance through cumulative learning
a high standard of professionalism and Board Policy and the Learning & across all touchpoints: key learnings
ethics in the conduct of our business and Development Management Policy aim from Risk and Compliance Governance
professional activities. The HLBG CoCE is to promote a culture of compliance Meetings, feedback from customer
fundamental to align employee behaviour, underpinned by the Bank’s values, whilst complaint management channels, BUCO
drive a high performance culture bankwide striking a balance between prudent and BUCR meetings and bankwide/
and achieve business results. risk-taking and reward. divisional learning for employees.

Code of Conduct & Ethics

Employees are guided by the Bank’s values, which seek to ensure that everything we do is sustainable and adds value to the
communities we operate in (Here For The Long Term); we treat people with respect and seek win-win solutions for all parties
(Collaborate To Win); we take ownership and make things happen (Decisiveness). At the same time, employees are encouraged
to embrace change and not be afraid to do things differently (Innovation) and celebrate new learning opportunities (Have Fun).

The Bank’s values, together with the six principles stated in the HLBG CoCE, is fundamental to align employee behaviour, drive a
high performance culture bankwide and achieve business results.

Specifically, in upholding the value of ‘‘Here for the Long Term”, the HLB Group commits to a high standard of professionalism and
ethics in the conduct of our business and professional activities as set out in the HLBG CoCE.

The Code is applicable to:

All employees who work in the HLB Group across the jurisdictions in which we operate – including but not limited to
permanent, part-time and temporary employees;
Board of Directors of the HLB Group; and
Any other persons permitted to perform duties or functions within the HLB Group – including but not limited to contractors,
secondees, interns, industrial attachment and agency staff.

As the Code forms part of the terms and conditions of employment, our employees are required to adhere to a high standard
of professionalism and ethics in the conduct of their business, professional activities and personal lives, which might otherwise
reflect poorly on the reputation of the HLB Group.

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F. STRENGTHENING CORPORATE GOVERNANCE CULTURE (CONTINUED)

OUR APPROACH TO CORPORATE GOVERNANCE (CONTINUED)
Code of Conduct & Ethics (continued)
Principles
There are six key pillars to the HLB Group CoCE:

Principle 1 Principle 2 Principle 3

Competence Integrity Fairness

The HLB Group is committed to ensuring The HLB Group’s Vision, Mission and Values A core mission of the HLB Group is to
that its employees develop and maintain identifies a strong values-based culture to help our clients succeed through simple,
the relevant knowledge, skills and guide decisions, actions and interactions relevant, personal and fair banking. We
behaviour to ensure that our activities are with stakeholders as a key enabler for the must act responsibly and be fair and
conducted professionally and proficiently. success of the HLB Group. transparent in our business practices,
including treating our colleagues,
customers and business partners with
respect. We must consider the impact
of our decisions and actions on all
stakeholders.

Principle 4 Principle 5 Principle 6

Confidentiality Objectivity Environment

The HLB Group is committed to providing Employees must not allow any conflict of The HLB Group is committed to reduce
a safe, reliable and secured banking interest, bias or undue influence of others the effect of our operations on the
environment and experience for our to override their business and professional environment so that we are able to
customers. judgment. Employees must not be build our franchise in a safe and healthy
influenced by friendships or association in environment. We aim to do this by
performing their role. Decisions must be managing the resources we use across
made on a strictly arms-length business the HLB Group and raising staff awareness
basis. about the importance of caring for the
environment. The HLB Group will be
mindful of its activities with employees,
business partners and the community we
operate within to ensure human rights
are safeguarded. Where there are adverse
impacts, we are committed to addressing
these.

Policies & Processes

In addition to the HLBG CoCE, the Talent Management Board Policy, Remuneration Board Policy and the Learning & Development
Management Policy aim to promote a culture of compliance underpinned by the Bank’s values, whilst striking a balance between
prudent risk-taking and reward. The policies are designed to create and cultivate a highly engaged workforce, focused on
delivering strategic goals. This highly engaged workforce is expected to maintain high standards of responsibility, professional
conduct and behaviour, and are able to be role models to other employees and industry peers.

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Corporate Governance Overview,

Risk Management & Internal Control Statement

F. STRENGTHENING CORPORATE GOVERNANCE CULTURE (CONTINUED)

OUR APPROACH TO CORPORATE GOVERNANCE (CONTINUED)
Policies & Processes (continued)

Policy Name Purpose

HLBG Code of The HLBG CoCE ensures that our employees commit to a high standard of professionalism and ethics
Conduct & Ethics in the conduct of our business and professional activities. All employees are required to attest to
the CoCE on an annual basis.

Talent Management The Talent Management Policy aims to set out our talent management strategy in recruiting,
Board Policy developing, retaining talent and succession planning to support and drive the execution of the
business strategy with the ambition to build an organisation that build talent to cater for our needs
from within.

Learning & The Learning & Development (“L&D”) Policy sets out principles that will govern the Bank’s L&D
Development strategy and execution plans. The aim is to cultivate a highly engaged workforce, focused on
Management Policy delivering strategic goals, maintain high standards of responsibility, professional conduct and
behaviour, and are role models to other employees and industry peers.

Remuneration Board The Remuneration Policy aims to maintain a competitive remuneration strategy, enabling us to
Policy attract and retain talent and at the same time balance risk and performance outcomes, with an eye
on prudent risk-taking.

Whistleblowing The Bank’s Whistleblowing Policy provides a structured channel for all employees of the HLB Group
Policy and any other persons providing services to, or having a business relationship with the HLB Group,
to report any concerns about any improper conducts, wrongful acts or malpractice committed within
the HLB Group. The Whistleblowing Policy is published on the Bank’s Website.

Continuous Development
The Bank’s efforts to continuously strengthen corporate governance is the result of cumulative efforts across every touchpoint.
Key learnings from each Risk and Compliance Governance Committee (“RCGC”) meeting is summarized and circulated to all
attendees, BUCRs (Business Unit Compliance Representative), BUCOs (Business Unit Compliance Officer) and respective business
units to act upon. BUCOs meet with the L&D team in Human Resources on a monthly basis to review and request for any ad hoc
compliance training requirements. Our online and offline customer touchpoints (on social media and via the feedback form on our
website and via our branches and contact centre respectively) also serve to provide feedback directly. On learning, each division
is responsible for their own content creation of key topics for their divisions, in addition to the compliance topics and videos
available on Workday for huddles and the quarterly Mandatory eLearning.

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G. ACCOUNTABILITY AND AUDIT The Bank also has a Policy on the Use of External
Auditors for Non-Audit Services to govern the
The Bank has put in place a framework of processes
professional relationship with the external auditors
whereby Board committees provide oversight on critical
in relation to non-audit services. Assessment will be
processes of the Bank’s reporting of financial statements,
conducted by the BAC for non-audit services to ensure
in order to ensure that accountability and audit are integral
that the provision of non-audit services does not
components of the said processes.
interfere with the exercise of independent judgment of
the external auditors.
I. FINANCIAL REPORTING
The Board has a fiduciary responsibility to ensure During the financial year under review, the external
the proper maintenance of accounting records of the auditors met with the BAC to:
Group. The Board receives the recommendation to
adopt the financial statements from the BAC, which • present the scope of the audit before the
assesses the integrity of financial statements with commencement of audit; and
the assistance of the external auditors. • review the results of the audit as well as the
management letter after the conclusion of the
II. RISK MANAGEMENT AND INTERNAL CONTROL audit.
The Board has overall responsibility for maintaining
a system of internal controls which covers financial The external auditors meet with the BAC members at
and operational controls and risk management. least twice a year without the presence of Executive
This system provides reasonable but not absolute Directors and management.
assurance against material misstatements, losses
and fraud.
H. DISCLOSURE
The BRMC is delegated with the responsibility to The Bank has in place a Corporate Disclosure Policy for
provide oversight on the Bank’s management of compliance with the disclosure requirements set out in
critical risks that the Group faces while the BAC is the MMLR, and to raise awareness and provide guidance
delegated with the responsibility to review the to the Board and management on the Group’s disclosure
effectiveness of internal controls implemented in requirements and practices.
the Bank.
All timely disclosure and material information documents
The Statement on Risk Management and Internal will be posted on the Bank’s Website after release to Bursa.
Control as detailed under Section J of this Statement
provides an overview of the system of internal
controls and risk management framework of the I. SHAREHOLDERS
Group.
I. DIALOGUE BETWEEN COMPANIES AND INVESTORS

III. RELATIONSHIP WITH AUDITORS The Board acknowledges the importance of regular
communication with shareholders and investors
The appointment of external auditors is recommended
via the annual reports, circulars to shareholders
by the BAC, which also reviews the remuneration of
and quarterly financial reports and the various
the external auditors. The BAC reviews the suitability
announcements made during the year, through
and independence of the external auditors annually. In
which shareholders and investors can have an
this regard, an annual assessment is conducted by the
overview of the Group’s performance and operation.
BAC to evaluate the performance, independence and
objectivity of the external auditors prior to making any
Notices of general meetings and the accompanying
recommendation to the Board on the re-appointment
explanatory notes are provided within the prescribed
of the external auditors.
notice period on the Bank’s Website, Bursa’s website,
in the media and by post to shareholders. This allows
shareholders to make the necessary arrangements
to attend and participate in general meetings either
in person, by corporate representative, by proxy or
by attorney.

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Corporate Governance Overview,

Risk Management & Internal Control Statement

The Bank has a website at www.hlb.com.my which J. STATEMENT ON RISK MANAGEMENT AND
the shareholders can access for information which INTERNAL CONTROL
includes the Board Charter, TORs of Board Committees,
I. INTRODUCTION
corporate information, announcements/press
releases/briefings, financial information, products The Board recognises that practice of good governance
information and investor relations. A summary of is an important process and has established the BAC
the key matters discussed at the AGM is published and BRMC to ensure maintenance of a sound system
on the Bank’s Website. of internal controls and good risk management
practices. The processes for risks and controls
The Board has identified Ms Chok Kwee Bee, assessments and improvements are on-going
the Chairman of the BAC, as the Independent
and are regularly reviewed in accordance with the
Non-Executive Director of the Board to whom
guidelines on the ‘Statement on Risk Management
concerns may be conveyed, and who would bring
and Internal Control: Guidelines for Directors of
the same to the attention of the Board.
Listed Issuers’.
In addition, shareholders and investors can have
a channel of communication with the following II. BOARD RESPONSIBILITIES
persons to direct queries and provide feedback to The Board acknowledges its overall responsibility
the Group: for the risk management and internal control
environment and its effectiveness in safeguarding
GENERAL MANAGER, COMMUNICATION & CSR shareholders’ interests and the Group’s assets. The
Tel No. : 03-2081 8888 ext. 61914
risk management and internal control framework
Fax No. : 03-2081 7801
is designed to manage rather than to eliminate
E-mail address : capr@hongleong.com.my
the risk of failure in the achievement of goals and
HEAD, CORPORATE FINANCE & INVESTOR RELATIONS objectives of the Group, and therefore only provide
Tel No. : 03-2081 2972 reasonable assurance and not absolute assurance,
Fax No. : 03-2081 8924 against material misstatement or loss.
E-mail address : IR@hlbb.hongleong.com.my
The system of risk management and internal control
II. AGM instituted throughout the Group is updated from
The AGM provides an opportunity for the time to time to align with the dynamic changes in
shareholders to seek and clarify any issues and the business environment as well as any process
to have a better understanding of the Group’s improvement initiatives undertaken. The Board
performance. Shareholders are encouraged to meet confirms that its Management team responsibly
and communicate with the Board at the AGM and implements the Board policies, Management
to vote on all resolutions. Senior management and policies and standard operating procedures (“SOP”)
the external auditors are also available to respond to
on risk management and internal control.
shareholders’ queries during the AGM. All Directors
and the GMD/CEO attended the last AGM held on 29
October 2019.

Pursuant to Paragraph 8.29A(1) of the MMLR, all

resolutions tabled at general meetings will be put to
a vote by way of a poll and the voting results will be
announced at the meetings and through Bursa.

The Bank has adopted electronic voting for the

conduct of poll on all resolutions at the AGM.

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J. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

III. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK
The organisational structure of the Group clearly defines the lines of accountability and responsibility. Risk assessment
and evaluation are integral part of the Group’s strategic planning cycle and are responsive to business environment and
opportunities. Management committees are appropriately set up to ensure proper utilisation and investment of the Group’s
assets for effective risk return rewards or to limit losses. The Group Risk Management (“GRM”) and Group Compliance (“GC”)
divisions have implemented an enterprise-wide risk management framework to inculcate continuous risk and regulatory
compliance awareness, understanding of procedures and controls thus improving the overall control environment.

Operationally, the Group operates multiple lines of defence to effect a robust control framework. At the first level, the
operating business and support units are responsible for the day-to-day management of risks inherent in the various
business activities. Regulatory compliance and operational risk units are set up in the various lines of businesses and in
support departments. They oversee the day-to-day compliance to policies, regulatory requirements, business and process
controls. At the second level, GRM is responsible for setting the risk management framework, reviewing portfolio risks,
and developing tools and methodologies for the identification, measurement, monitoring, and control of risks; whereas
GC is responsible for ensuring that controls to manage compliance risks are adequate and operating as intended. At the
third level, the Group Internal Audit division complements GRM and GC by monitoring and evaluating the effectiveness of
internal control systems. It also provides an independent perspective and assessment on the adequacy and effectiveness
of the risk management and compliance policies, process, governance and systems.

The above is depicted in the following diagram:

First Line of Defence Second Line of Defence Third Line of Defence

Group Risk Management

Business and Support Units Group Internal Audit
Group Compliance

Manage inherent risks and ensure Sets policies, reviews portfolio risks and Independent assessment of adequacy
compliance to policies and SOPs in provides oversight of risk management and effectiveness of policies and
day-to-day activities. and compliance matters. processes.

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Risk Management & Internal Control Statement

J. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

III. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (CONTINUED)
a) Risk Management
Managing risks is an integral part of the Group’s overall business strategy. It involves a process of identifying,
assessing and managing risks and uncertainties that could inhibit the Group’s ability to achieve its strategy and
strategic objectives.

Risk governance oversight is underpinned by the core pillars of risk culture, appetite, policies, surveillance, escalation
and capacity. Above all, the approaches need to be relevant, forward looking and sustainable.

The Group’s risk management framework incorporates the components depicted in the diagram below:

RISK GOVERNANCE OVERSIGHT

Board and management to exercise oversight and set tone from the top

Culture of risk Defined risk Clear Rigorous risk Robust Functional

ownership appetite framework, surveillance escalation capabilities
and capital policies and structure and capacity
strategy process

Risk Clear articulation Provide clear Facilitates early Cultivation of The right
PILLARS management of Board’s risk direction. Defined identification proactive risk talent pool and
Critical is part of the appetite in pursuit business rules of emerging communication infrastructure are
day-to-day job of of its business and operating risks and to support timely key to effectively
components to
all employees, objectives, parameters. opportunities. and informed carry out risk
put in place
driven through supported by Gives clarity to decisions. surveillance
daily application ICAAP, and various parties’ activities.
of management ensuring strategy- accountabilities.
decisions. risk-capital
alignment.

Relevant
Focus on things that matter.

APPROACH Forward looking

How we Be proactive, anticipate emerging risks and opportunities.
implement
Sustainable
Strive to build for the long term.

Figure 1: Risk Management Framework

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J. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

III. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (CONTINUED)
a) Risk Management (continued)
In addition, the risk management framework is effected through an organisational construct and escalation structure
as depicted below:

Board of Directors
Top Down

Effective stewardship and control

Monitoring and
Set Risk Appetite &
Board Risk Management Committee Reporting
Tolerance Limit

Present single view of risks and to ensure adequate

Set Policies and Capital policies and controls within the Group
Allocation
Group Risk Management & Group Compliance Bottom Up

Bribery &
Credit Market Operational Liquidity IT & Cyber Regulatory Environmental Pandemic
Corruption
Risk Risk Risk Risk Risk Compliance Risk Related Risk
Risk

Daily management of risk, limits, policies, procedures and reports

Business Distribution & Service Credit Management Operations & Shared

Divisions Channels Functions Services Functions

Figure 2: Risk Management Structure

The Board has the overall responsibility to ensure there is proper oversight of the management of risks in the Group.
The Board sets the risk appetite and tolerance level, and allocates the Group’s capital that is consistent with the
Group’s overall business objectives and desired risk profile. GRM monitors and reports the Group’s Credit, Market,
Liquidity, Operational and IT Risks. GC identifies, assesses, monitors and reports compliance issues in addition to
advising, providing guidance and training on regulatory requirements. These risks are presented to BRMC regularly.

The BRMC deliberates and evaluates the reports prepared by GRM and GC, and provides updates to the Board, and
where appropriate, make necessary recommendations to the Board.

148 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Corporate Governance Overview,

Risk Management & Internal Control Statement

J. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

III. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (CONTINUED)
a) Risk Management (continued)

HONG LEONG BANKING GROUP’S KEY RISKS

Type of Risk Mitigating Actions Taken / Strategy

CREDIT RISK • The Group has established a credit risk management framework (via the
Credit Risk is the risk of loss if Credit Risk Governance Board Policy) to ensure that exposure to credit risk
is kept within the Group’s financial capacity to withstand potential future
a borrower or counterparty in
losses. Financing activities are also guided by internal credit policies. The
a transaction fails to meet its
above policies are subject to reviews and enhancements, at least on an
obligations.
annual basis.

• Credit portfolio strategies are developed to achieve a desired portfolio risk

tolerance level and sector concentration distribution.

• To assess the credit risk of retail customers, the Group employs risk scoring
models and lending templates that are designed to assess the credit
worthiness and the likelihood of the obligors to repay their debts.

• To assess the credit risk of small and medium enterprise (“SME”), commercial
and corporate customers, they are evaluated based on the assessment of
relevant factors such as the customer’s financial position, industry outlook,
types of facilities and collaterals offered; and are assigned with a credit
rating.

• The Group has a comprehensive credit approving process. While the business
units are responsible for credit origination, the credit decisioning function
rests mainly with the Credit Evaluation Departments, the Management
Credit Committee (“MCC”) and the Credit Supervisory Committee. The Board
delegates the approving and discretionary authority to the MCC and various
personnel based on job function and designation.

• For any new products, credit risk assessment also forms part of the new
product sign-off process to ensure that the new product complies with the
appropriate policies and guidelines, prior to their introduction.

• Credit risk reports are presented to the relevant management and board
level committees. Such reports identify adverse credit trends and asset
quality to enable the Group to take prompt corrective actions and/or take
appropriate risk-adjusted decisions.

• GRM conducts independent credit reviews on a portfolio basis, which cover

the Personal Financial Services, Business and Corporate Banking and Global
Markets portfolios, providing an independent and where appropriate,
countervailing perspective on credit risk management issues including
business performance, credit decisions, overall assets quality and credit
operations robustness.

• In addition, the Bank also conducts periodic stress testing of its credit
portfolios to ascertain the credit risk impact to capital under the relevant
stress scenarios.

Annual Report 2020 149

Corporate Governance Overview,
Risk Management & Internal Control Statement

J. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

III. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (CONTINUED)
a) Risk Management (continued)

HONG LEONG BANKING GROUP’S KEY RISKS

Type of Risk Mitigating Actions Taken / Strategy

OPERATIONAL RISK • Management oversight on operational risk management (“ORM”) matters

Operational Risk is the risk of are effected through the Risk and Compliance Governance Committee
loss resulting from inadequate (“RCGC”) whilst Board oversight is effected through the BRMC.
or failed internal processes,
• The Group’s ORM strategy is based on a framework of continuous
people and systems or from
improvements, good governance structure, policies and procedures as well
external events which also
as the employment of risk mitigation strategies. The objective is to create
include outsourcing and
a strong risk and internal control culture by ensuring awareness of the
business continuity risks.
significance of operational risk, its methodology of identification, analysis,
assessment, control and monitoring.

• The Group adopts ORM tools such as loss event reporting, risk and control
self assessment and key risk indicators to manage operational risks and are
used to assess risk by taking into consideration key business conditions,
strategies and internal controls.

MARKET RISK • Market risk is primarily managed through various risk limits and controls
Market Risk is the risk of loss following an in-depth risk assessment and review. The types and level
in financial instruments or the of market risk that the Group is able and willing to take in pursuit of
balance sheet due to adverse its business objectives and risk-taking strategies are used as a basis for
setting market risk appetite for the Group.
movements in market
factors such as interest
• Market risk limits, the monitoring and escalation processes, delegation
and exchange rates, prices,
of authority, model validation and valuation methodologies are built into
spreads, volatilities, and/or
the Group’s market risk policies, which are reviewed and concurred by
correlations.
the Group Asset and Liability Management Committee (“Group ALCO”),
endorsed by the BRMC and approved by the Board.

• Regular market risk stress tests are conducted on the trading book to
measure the loss vulnerability under stressed market conditions.

150 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Corporate Governance Overview,

Risk Management & Internal Control Statement

J. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

III. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (CONTINUED)
a) Risk Management (continued)

HONG LEONG BANKING GROUP’S KEY RISKS

Type of Risk Mitigating Actions Taken / Strategy

LIQUIDITY RISK • The Group adopts a prudent liquidity management that includes
Liquidity Risk is the risk establishing comprehensive policies and procedures, risk controls, reviews
of loss resulting from the and monitoring. The liquidity risk policies and governance are reviewed by
unavailability of sufficient Group ALCO, endorsed by the BRMC and approved by the Board.
funds to fulfill financial
• The Group seeks to manage the liquidity to ensure that our liquidity
commitments, including
obligations will continue to be honored under normal as well as adverse
customers’ liquidity needs, as
circumstances. The key elements of liquidity risk management includes
they fall due. Liquidity Risk
proactive monitoring and management of cashflow, maintenance of high
also includes the risk of not
quality liquid assets, diversification of funding sources and maintaining a
being able to liquidate assets
liquidity compliance buffer to meet any unexpected cash outflow.
in a timely manner.
• The Group strives to develop a diversified funding base with access to
funding sources across retail and wholesale channels. The funding strategy
is anchored on the strength of our core deposit franchise. The Group also
designs and conducts regular stress test programmes in accordance with the
board-approved risk appetite and risk management policies. The appropriate
management action plans would be developed and recommended to the
Board if there is any potential vulnerabilities identified during the stress test
exercise.

IT & CYBER RISK • New technology initiatives are subjected to a rigorous evaluation process
Information Technology Risk which assesses the potential risks and readiness of the initiative prior to its
is the risk of technological implementation.
failure which may disrupt
• The Group performs continuous monitoring on system performance to
business operations such as
ensure minimal system disruption, while ensuring that redundancies in IT
system defects or service
infrastructure and Disaster Recovery Plans are regularly tested.
outages. This also includes
cyber security risk, which is
• In addition to continuously improving the Group’s cyber resilience by
the risk of possible threat that
upgrading technology capabilities to mitigate cyber threats, cyber risks
might exploit a vulnerability
are also managed by closely monitoring key risk metrics and progressively
to breach system security
enhancing its cyber threat intelligence gathering capabilities to improve the
and therefore cause possible Group’s situational awareness.
harm.
• Management oversight on IT and cyber risk management matters are
effected through the IT Steering Committee and Information Security
Governance Council whilst Board oversight is effected through the BITC.

Annual Report 2020 151

Corporate Governance Overview,
Risk Management & Internal Control Statement

J. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

III. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (CONTINUED)
a) Risk Management (continued)

HONG LEONG BANKING GROUP’S KEY RISKS

Type of Risk Mitigating Actions Taken / Strategy

REGULATORY COMPLIANCE • The Group undertakes robust monitoring of developments in laws and
RISK regulations and assesses its impact to its processes, where applicable. The
Regulatory Compliance Risk is assessments are undertaken to identify gaps in existing processes so that
the risk of legal or regulatory actions are taken within defined timeframes to ensure that the Group is in
sanctions, material financial compliance.
loss or loss to reputation as
a result of failure to comply
with laws and regulations.

FINANCIAL CRIME RISK • In mitigating the risk of financial crime, The Group undertakes monitoring
Financial Crime Risk is the of developments of laws and regulations and assesses its impact to internal
risk of legal or regulatory policies, processes and procedures. In addition, the Group is building our
penalties, material financial digital transformation by leveraging on technological solutions to enhance
our capabilities in detection, monitoring and reporting of potential suspicious
loss or reputational damage
activities. The Group continuously maintains robust controls as a gatekeeper
resulting from the failure
to the financial system against Money Laundering, Terrorist Financing and
to comply with applicable
Proliferation Financing risks. Management oversight on financial crime
laws and regulations relating
matters are effected through the Management level Financial Crime
to Anti-Money Laundering,
Governance Committee, whilst Board oversight is effected through the
Counter Financing of Terrorism
BRMC.
and Targeted Financial
Sanctions requirements.

BRIBERY AND CORRUPTION • The Group ensures that the management team conducts bribery and
RISK corruption risk assessment of the overall Group’s operations periodically to
Bribery and Corruption Risk is identify, analyse, assess and prioritise actions needed to mitigate internal
the risk of offering, paying or and external bribery and corruption risks. Management also reviews risk
receiving a bribe through an assessment reports, consider improvements to the Group’s policies and
procedures, and provides training to internal and external stakeholders in
officer, employee, subsidiary,
combating corruption and bribery. The Anti-Bribery and Corruption (“ABC”)
intermediary or any third
policies and procedures are communicated to all our employees, who are
party (individual or corporate)
required to undergo mandatory training and assessment on completion
acting on the Group’s behalf.
of training in the subject matter. Clauses relating to ABC have also been
incorporated in written agreements to ensure that suppliers to the
Group understand their obligations and abide by the relevant laws and
regulations. Continuous reinforcement of communications to our suppliers
on our expectations in relation to ABC are in progress. Board oversight
of bribery and corruption risk is effected through the BRMC and BAC. The
Group has a whistleblowing policy and accompanying procedures in place,
where whistleblowing reports can be addressed directly to the Chairman
of the BAC.

152 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Corporate Governance Overview,

Risk Management & Internal Control Statement

J. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

III. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (CONTINUED)
a) Risk Management (continued)

HONG LEONG BANKING GROUP’S KEY RISKS

Type of Risk Mitigating Actions Taken / Strategy

ENVIRONMENTAL RISK • The Group has policies, principles and codes of conduct to ensure the
Environmental risk is actual interests of the Bank are aligned with the interests of stakeholders on
or potential threat of adverse responsible lending/ financing. These include assessments to screen for and
effects on living organisms review environmental and social risks, financial evaluation of existing and
and environment by effluents, potential customers, and the provision of basic banking products to those
emissions, wastes, resource who cannot afford to pay for fees so that they can participate in the financial
depletion, etc., arising out of system.
an organisation’s activities.
In our particular case, given • We have credit policies that require sales and credit staff to review the
our role in the economy, in borrowers’ compliance with applicable environmental and social laws and
addition to our own activities, review of the same at annual reviews of loan/financing facilities to ensure
we are cognisant of the fact ongoing compliance.
that people and companies we
do business with also have an • The Group manages environmental footprint through reduction of waste
impact on the environment, (such as paper and water) and efficient usage of energy.
and hence, ensure that our
lending and procurement • The Group has an Independent Tender Review Committee that assesses
policies, for example, take this diligence reviews of suppliers’ across a number of risks, not just financial
risk into account. strength and operational performance. We take into account considerations
on environment and social track record and policies, business continuity
plans and cyber security capabilities. Suppliers have to satisfy our zero
tolerance for corruption and unfair practices.

PANDEMIC RELATED RISK • The Group has put in place a strategic plan to ensure that its operations
Pandemic related risk is and services are maintained fully functional in the event of a pandemic.
the risk of loss arising from In the continuing Covid-19 pandemic, businesses of the Group which are
infectious diseases spreading classified under the essential services sector, operates under specific
locally, regionally or globally operating conditions with heightened public health safety and business
at an epidemic level, usually continuity requirements, as mandated in countries that the Group operates
at an undetermined scale and in. In demonstrating preparedness under crisis conditions, the Group has
duration. Financial risks may implemented enhanced Business Continuity Management plans and
be caused by such disruptions processes to ensure the continuity of its businesses and operations.
on the Group’s customers, on
financial markets and on the • In managing credit risk exposures, the Group has implemented changes
Group’s operations. arising from central banks and governments’ supportive action, to introduce
loan repayment moratorium or other forms of financial assistance for its
customers that may be adversely impacted by the pandemic.

• As an additional measure to safeguard the health and safety of its

employees, the Group established enhanced standard operating procedures
that provides detail guidance to its employees on disease containment
measures, work safety arrangements as well as reporting and incident
escalation requirements.

Annual Report 2020 153

Corporate Governance Overview,
Risk Management & Internal Control Statement

J. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

III. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (CONTINUED)
b) Basel II and III
The Group places great importance on Basel II and III and views Basel II and III as a bank-wide initiative that will
ensure that the Group continues to meet international best practices for the Group’s credit, market, operational and
liquidity risk management practices. By adopting Basel II and III, the Group is able and will continue to enhance
and embed sound risk management practices within the Group and be equipped with the right risk management
discipline, practices, processes and systems.

For Basel II Pillar 1, the Group is in compliance with the regulatory standards and is progressively employing advance
risk measurement in the respective businesses. For Basel II Pillar 2, the Group has established an Internal Capital
Adequacy Assessment Process (ICAAP) Board Policy that forms an integrated approach to manage the Group’s risk,
capital and business strategy. For Basel II Pillar 3, which is related to market discipline and disclosure requirements,
the Group has provided the disclosures under a separate Pillar 3 section in this Annual Report.

For Basel III, the Group is in compliance with the regulatory requirements and will continuously strengthen its
capital and liquidity profile in all the countries that the Bank operates in, to ensure sufficient capital and liquidity is
maintained to allow for business growth and sound capital/liquidity buffer management.

c) Internal Audit
The Bank’s Group Internal Audit Division (“GIAD”) performs the internal auditing function for the various entities in
the Group. GIAD regularly reviews the critical operations (as defined in BNM Guidelines on Internal Audit Function
of Licensed Institutions) and critical controls in the Information Technology environment (as outlined in the BNM
Risk Management in Technology Policy Document) of the Group to ensure that the internal controls are in place and
working effectively.

The results of the audits conducted by GIAD are reported to the BAC. Follow-up actions and the review of the status
of corrective action plans are carried out by Management via the RCGC chaired by the Group Managing Director/Chief
Executive Officer, whose members comprise senior management. The minutes of meetings of RCGC are tabled to the
BRMC and BAC for notation.

Implementation of corrective action plans are followed up on a monthly basis and reported to the BAC. Highlights of
the BAC meetings are submitted to the Board for review and further deliberation.

In addition, internal controls are also effected through the following processes:

• The Board receives and reviews regular reports from Management on the key operating statistics, business
dynamics, legal matters and regulatory issues that would have implications on internal control measures.

• The BAC regularly reviews and holds discussions with Management on the actions taken on internal control
issues identified in reports prepared by GIAD, external auditors and regulatory authorities.

• Policies on delegation and authority limits are strictly implemented to ensure a culture that respects integrity
and honesty, and thereby reinforce internal controls.

• Policies and procedures are set out in operation manuals and disseminated throughout the organisation in
support of a learning culture, so as to reinforce an environment of internal controls discipline.

• Policies for recruitment, promotion and termination of staff are in place to ensure the Group’s human resources
comply with internal controls.

154 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Corporate Governance Overview,

Risk Management & Internal Control Statement

J. STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

IV. ASSESSMENT OF RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM
The Board has received assurance from the Group Managing Director/Chief Executive Officer, Chief Financial Officer, Chief
Risk Officer, Chief Internal Auditor and Chief Compliance Officer that the Group’s risk management and internal control
system is operating adequately and effectively, in all material aspects, based on the risk management and internal control
system of the Group.

Based on the assurance it has received from Management, the Board is of the view that the Group’s risk management and
internal control system is operating adequately and effectively for the financial year under review and up to the date of
approval of this report.

V. REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

As required by Paragraph 15.23 of the MMLR of Bursa, the external auditors have reviewed this Statement on Risk
Management and Internal Control. Their limited assurance review was performed in accordance with Audit and Assurance
Practice Guide (“AAPG”) 3 issued by the Malaysian Institute of Accountants. AAPG 3 does not require the external auditors
to form an opinion on the adequacy and effectiveness of the risk management and internal control systems of the Group.

K. DIRECTORS’ RESPONSIBILITY IN FINANCIAL REPORTING

The MMLR require the directors to prepare financial statements for each financial year which give a true and fair view of the state
of affairs of the Group and of the Bank as at the end of the financial year and of its financial results and cash flows of the Group
and of the Bank for the financial year.

The directors are satisfied that in preparing the financial statements of the Group and of the Bank for the FY 2020, the Group has
used the appropriate accounting policies and applied them consistently. The directors are also of the view that relevant approved
accounting standards have been followed in the preparation of these financial statements.

This Statement on Corporate Governance Overview, Risk Management and Internal Control is made in accordance with the
resolution of the Board.

Annual Report 2020 155

Directors’ Report
for the financial year ended 30 June 2020

The Directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Bank for
the financial year ended 30 June 2020.

PRINCIPAL ACTIVITIES

The Bank is principally engaged in all aspects of commercial banking business and in the provision of related services. The principal
activity of the significant subsidiary consists of Islamic Banking services. Other subsidiary companies are primarily engaged in property
investment and management, investment holding and nominee services. The details of the subsidiary companies are disclosed
in Note 13 to the financial statements.

BUSINESS STRATEGY FOR THE CURRENT FINANCIAL YEAR

Tracking weaker global growth prospect, the Malaysian economy has followed trend succumbing to the double whammy of a global
fallout triggered by the Covid-19 pandemic, as well as weaknesses in the commodity sectors. Growth in the Malaysian economy has
moderated considerably to 0.7% YOY in 1Q 2020, and is poised for a steep double-digit contraction in 2Q as economic activities almost
grinded to a standstill amid the Movement Control Order (MCO). The economic condition is expected to improve in the second half of
2020 but growth will remain sub-potential on the back of cautious shift in consumer spending patterns and adjustments by businesses
to reflect the new normal.

In order to successfully operate in this dynamic environment and living up to our brand promise of "Built Around You", we continuously
innovate so that we deliver products and services that meet customers' changing needs, while internally build a high performing
culture that can sustain the Bank in challenging times like those we are experiencing now. Execution of our strategic priorities over the
past 4 years has enabled us to achieve resilient performance during this past year, continue to make meaningful contributions to our
communities within which we operate and deliver sustainable returns to our shareholders.

OUTLOOK AND BUSINESS PLAN FOR NEW FINANCIAL YEAR

The world economy is expected to recover moving on to 2021, as supply chain disruption normalizes and economic activities adjust to
the new normal and households feel more confident about employment and job prospects. Indeed, there are encouraging signs that
economic activities are bouncing back from the April 2020 and May 2020 trough.

Rebuilding from the slump in 2020, the Malaysian economy is also expected to recover in line with the world economy in 2021, amidst
a brighter export outlook and resumption in domestic consumption, with consumer spending expected to improve in tandem with
improving job prospects and sentiments while business investments are expected to make a return. This shall pave the way for the
Malaysian economy to return to potential growth level.

In line with that, we are well positioned to assist the local community weather through this very difficult period and bounce back
stronger as the situation improves. We continue to focus on delivering products and services that meet customers evolving financial
needs, while providing our people with the best opportunities to realise their full potential. We strive to continue leading the digital
and innovation space by providing best-in-class experiences and becoming a highly digital and innovative ASEAN financial services
institution.

PERFORMANCE REVIEW AND MANAGEMENT REPORTS

The Board receives and reviews regular reports from the Management on key financial and operating statistics as well as legal and
regulatory matters. The performance of each business unit is assessed against the approved budgets and business objectives whilst
explanation is provided for significant variances.

156 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Directors’ Report
for the financial year ended 30 June 2020

CREDIT INFORMATION RATING

On 12 December 2019, Rating Agency Malaysia Berhad has reaffirmed the Bank's long-term rating to AAA and short-term rating at P1,
with a stable outlook.

The ratings indicate that in the long-term, the Bank is adjudged to offer high safety for timely payment of financial obligations while
in the short-term, the Bank is adjudged to have superior capacities for timely payment of obligations.

Details of the rating of the Bank and its debt securities are as follows:

Rating Agency Date Accorded Rating Classification

Rating Agency Malaysia Berhad 12 December 2019 Long-Term Rating: AAA

Short-Term Rating: P1
Subordinated Notes: AA1
Additional Tier 1 Capital Securities: A1

Moody’s Investors Services Ltd 4 February 2020 Long-Term Rating: A3

Short-Term Rating: P2

FINANCIAL RESULTS

The Group The Bank

RM’000 RM’000

Profit before taxation 2,989,397 2,075,475

Taxation (494,800) (421,460)
Net profit for the financial year 2,494,597 1,654,015

DIVIDENDS

Since the last financial year ended 30 June 2019, a final single tier dividend of 34.0 sen per share amounting to RM695,812,560 in
respect of the financial year ended 30 June 2019, was paid on 19 November 2019.

An interim single tier dividend for the financial year ended 30 June 2020 of 16.0 sen per share amounting to RM327,526,638 was paid
on 26 March 2020.

The Directors now propose a final single tier dividend of 20.0 sen per share on the Bank’s adjusted total number of issued shares
(excluding 81,101,700 treasury shares held pursuant to Section 127 of the Companies Act 2016 and Executive Share Scheme of
39,575,096 shares) amounting to RM409,408,298 for the financial year ended 30 June 2020.

Annual Report 2020 157

Directors’ Report
for the financial year ended 30 June 2020

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

Significant events during the financial year are disclosed in Note 55 to the financial statements.

SUBSEQUENT EVENTS AFTER THE FINANCIAL YEAR

Subsequent events after the financial year are disclosed in Note 56 to the financial statements.

ISSUE OF SHARES AND DEBENTURES

There were no new ordinary shares or debentures issued during the financial year.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial
statements.

DIRECTORS

The Directors who have held office during the financial year and during the period from the end of the financial year to the date of this
report are:

YBhg Tan Sri Quek Leng Chan (Chairman, Non-Executive Non-Independent)

Mr Tan Kong Khoon (Non-Independent Executive Director)
Mr Kwek Leng Hai (Non-Independent Non-Executive Director)
Ms Chok Kwee Bee (Independent Non-Executive Director)
YBhg Dato’ Nicholas John Lough @ Sharif Lough bin Abdullah (Independent Non-Executive Director)
YBhg Datuk Dr Md Hamzah bin Md Kassim (Independent Non-Executive Director)
Ms Chong Chye Neo (Independent Non-Executive Director)
Ms Lau Souk Huan (Independent Non-Executive Director)
(Appointed with effect from 6 September 2019)

The names of Directors of subsidiaries are set out in the respective subsidiary's statutory accounts and the said information is deemed
incorporated herein by such reference and made a part hereof.

DIRECTORS' REMUNERATION

Details of Directors' remuneration are set out in Note 41 to the financial statements.

158 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Directors’ Report
for the financial year ended 30 June 2020

DIRECTORS’ INTERESTS

According to the Register of Directors' Shareholdings kept by the Bank under Section 59 of the Companies Act 2016, the Directors
holding office at the end of the financial year who had beneficial interests in the ordinary shares and/or preference shares and/or loan
stocks and/or options over ordinary shares of the Bank and/or its related corporations during the financial year are as follows:

Directors’ direct interests

Number of ordinary shares/preference shares/ordinary shares issued or to be issued or
acquired arising from the exercise of options*/conversion of redeemable convertible
unsecured loan stocks**/nominal value in Ringgit Malaysia of Additional Tier 1
capital securities/perpetual subordinated sukuk wakalah***/nominal value in Ringgit
Malaysia of Tier 2 subordinated notes/subordinated sukuk murabahah****
Nominal value As at As at
per share 01.07.2019 Acquired Sold 30.06.2020

RM (unless indicated)
Interests of YBhg Tan Sri Quek Leng Chan in:
Hong Leong Company (Malaysia) Berhad (1)
390,000 - - 390,000
Hong Leong Financial Group Berhad (1)
5,438,664 - - 5,438,664
Guoco Group Limited USD0.50 1,056,325 - - 1,056,325
GuocoLand Limited (2)
13,333,333 - - 13,333,333
GuocoLand (Malaysia) Berhad (1)
19,506,780 - - 19,506,780
GL Limited USD0.20 735,000 - - 735,000
The Rank Group Plc GBP138/9p 285,207 - - 285,207

Interests of Tan Kong Khoon in:

Hong Leong Financial Group Berhad 8,000,000* - - 8,000,000*

Interests of Mr Kwek Leng Hai in:

Hong Leong Company (Malaysia) Berhad (1)
420,500 - - 420,500
Hong Leong Industries Berhad (1)
190,000 - - 190,000
Hong Leong Financial Group Berhad (1)
2,526,000 - - 2,526,000
Hong Leong Bank Berhad (1)
5,510,000 - - 5,510,000
Hume Industries Berhad (1)
205,200 - - 205,200
105,571(11) - - 105,571(11)
Guoco Group Limited USD0.50 3,800,775 - - 3,800,775
GuocoLand Limited (2)
35,290,914 - - 35,290,914
Lam Soon (Hong Kong) Limited (5)
2,300,000 - - 2,300,000
GuocoLand (Malaysia) Berhad (1)
226,800 - - 226,800
Malaysian Pacific Industries Berhad (1)
71,250 - - 71,250
The Rank Group Plc GBP13 p
8/9
1,026,209 - - 1,026,209
GL Limited USD0.20 300,000 - - 300,000

Interests of YBhg Dato' Nicholas John Lough @

Sharif Lough bin Abdullah in:
Hong Leong Financial Group Berhad 250,000*** - - 250,000***

Annual Report 2020 159

Directors’ Report
for the financial year ended 30 June 2020

DIRECTORS’ INTERESTS (CONTINUED)

Directors’ deemed interests

Number of ordinary shares/preference shares/ordinary shares issued or to be issued or
acquired arising from the exercise of options*/conversion of redeemable convertible
unsecured loan stocks**/nominal value in Ringgit Malaysia of Additional Tier 1 capital
securities/perpetual subordinated sukuk wakalah***/nominal value in Ringgit Malaysia of
Tier 2 subordinated notes/subordinated sukuk murabahah****
Nominal value As at As at
per share 01.07.2019 Acquired Sold 30.06.2020

RM (unless indicated)
Interests of YBhg Tan Sri Quek Leng Chan in:
Hong Leong Company (Malaysia) Berhad (1)
7,651,455(6) - - 7,651,455(6)
Hong Leong Financial Group Berhad (1)
894,718,726(6) - - 894,718,726(6)
Hong Leong Capital Berhad (1)
200,805,058 - - 200,805,058
Hong Leong Bank Berhad (1)
1,346,237,169 - (209,960) 1,346,027,209
800,000,000*** - - 800,000,000***
1,500,000,000**** - - 1,500,000,000****
Hong Leong MSIG Takaful Berhad (1)
130,000,000 - - 130,000,000
Hong Leong Assurance Berhad (1)
140,000,000 - - 140,000,000
Hong Leong Islamic Bank Berhad 400,000,000*** - - 400,000,000***
400,000,000**** - - 400,000,000****
Hong Leong Industries Berhad (1)
242,700,470(6) 132,500 (44,167) 242,788,803(6)
Hong Leong Yamaha Motor Sdn Bhd (1)
17,352,872 - - 17,352,872
Guocera Tile Industries (Meru) Sdn Bhd (1)
19,600,000 - - 19,600,000
Malaysian Pacific Industries Berhad (1)
108,853,457 175,500 (74,167) 108,954,790
Carter Resources Sdn Bhd (1)
5,640,607 - - 5,640,607
Carsem (M) Sdn Bhd (1)
84,000,000 - - 84,000,000
(1)
22,400(7) - - 22,400(7)
Hume Industries Berhad (1)
350,231,658(6) - - 350,231,658(6)
195,510,374**(6) - (3,571,428)** (6)
191,938,946**(6)
3,830,000*(6) - - 3,830,000*(6)
Guoco Group Limited USD0.50 237,124,930 - - 237,124,930
GuocoLand Limited (2)
818,093,030(6) 18,475,308 - 836,568,338(6)
238,000*(6) - - 238,000*(6)
Southern Steel Berhad (1)
292,169,709 140,076,337(10) (15,000,000) 417,246,046
(1)
140,076,337** - (140,076,337)**(10) -
Southern Pipe Industry (Malaysia) Sdn Bhd (1)
124,964,153 - - 124,964,153
TPC Commercial Pte. Ltd. (2)
189,600,000 200,000,000 - 389,600,000
TPC Hotel Pte. Ltd. (2)
62,400,000 - - 62,400,000
Wallich Residence Pte. Ltd. (2)
24,000,000 - - 24,000,000
GLL A Pte. Ltd. (2)
10 - - 10

160 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Directors’ Report
for the financial year ended 30 June 2020

DIRECTORS’ INTERESTS (CONTINUED)

Directors’ deemed interests

Number of ordinary shares/preference shares/ordinary shares issued or to be issued or
acquired arising from the exercise of options*/conversion of redeemable convertible
unsecured loan stocks**/nominal value in Ringgit Malaysia of Additional Tier 1 capital
securities/perpetual subordinated sukuk wakalah***/nominal value in Ringgit Malaysia of
Tier 2 subordinated notes/subordinated sukuk murabahah****
Nominal value As at As at
per share 01.07.2019 Acquired Sold 30.06.2020

RM (unless indicated)
Interests of YBhg Tan Sri Quek Leng Chan in:
(continued)
GLL Chongqing 18 Steps Pte. Ltd. (2)
149,597,307 49,060,065 - 198,657,372
Guoco Midtown Pte. Ltd. (2)
184,000,000 - - 184,000,000
Midtown Bay Pte. Ltd. (2)
32,000,000 - - 32,000,000
MTG Apartments Pte. Ltd. (2)
- 69,180,000(9) - 69,180,000
MTG Retail Pte. Ltd. (2)
- 3,000,000(9) - 3,000,000
GGL Asset Management (Singapore) Pte Ltd (2)
1,700,000 - (1,700,000)(8) -
Hillcrest Hives Limited 700 - - 700
Beijing Ming Hua Property Co., Ltd (3)
3,750,000 - - 3,750,000
Shanghai Xinhaojia Property Development Co., (3)
315,000,000 - - 315,000,000
Ltd
Shanghai Xinhaozhong Holding Co., Ltd (3)
490,000 - - 490,000
JB Parade Sdn Bhd (1)
28,000,000 - - 28,000,000
(1)
97,390,000(7) - - 97,390,000(7)
Lam Soon (Hong Kong) Limited (5)
140,008,659 - - 140,008,659
Guangzhou Lam Soon Food Products Limited (4)
6,570,000 - (6,570,000)(8) -
GuocoLand (Malaysia) Berhad (1)
455,574,796 - - 455,574,796
Guoman Hotel & Resort Holdings Sdn Bhd (1)
277,000,000 - - 277,000,000
GLM Emerald Industrial Park ( Jasin) Sdn Bhd (1)
34,408,000 - - 34,408,000
(1)
123,502,605(7) - - 123,502,605(7)
GL Limited USD0.20 955,011,334(6) 24,125,900 - 979,137,234(6)
930,000*(6) - - 930,000*(6)
The Rank Group Plc GBP138/9p 219,282,221 - - 219,282,221

Notes:
(1)
Concept of par value was abolished with effect from 31 January 2017 pursuant to the Companies Act, 2016
(2)
Concept of par value was abolished with effect from 30 January 2006 pursuant to the Singapore Companies (Amendment) Act, 2005
(3)
Capital contribution in RMB
(4)
Capital contribution in HKD
(5)
Concept of par value was abolished with effect from 3 March 2014 pursuant to the New Companies Ordinance (Chapter 622), Hong Kong
(6)
Inclusive of interest pursuant to Section 59(11)(c) of the Companies Act, 2016 in shares held by family member
(7)
Redeemable Preference Shares/Cumulative Redeemable Preference Shares
(8)
Dissolved/struck off during the financial year
(9)
Incorporated during the financial year
(10)
Mandatory conversion of 5-Year 5% Redeemable Unsecured Loan Stocks upon maturity
(11)
5-Year 5% Redeemable Convertible Unsecured Loan Stocks

Annual Report 2020 161

Directors’ Report
for the financial year ended 30 June 2020

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no Director of the Bank received or became entitled to receive any benefit (other than a
benefit included in the aggregate amount of emoluments received or due and receivable by the Directors as shown in the financial
statements or as fixed salary of a full-time employee of the Bank or of related corporations) by reason of a contract made by the Bank
or its related corporations with the Director or with a firm of which the Director is a member, or with a company in which the Director
has a substantial financial interest except for:

YBhg Tan Sri Quek Leng Chan, who may be deemed to derive a benefit by virtue of those transactions, contracts and agreements
for the acquisitions and/or disposal of stocks and shares, stocks-in-trade, products, parts, accessories, plants, chattels, fixtures,
buildings, land and other properties or any interest in any properties; and/or for the provision of services including but not limited
to project and sales management and any other management and consultancy services; and/or for construction, development,
leases, tenancy, licensing, dealership and distributorship; and/or for the provision of treasury functions, advances in the conduct
of normal trading, banking, insurance, investment, stockbroking and/or other businesses between the Bank or its related
corporations and corporations in which YBhg Tan Sri Quek Leng Chan is deemed to have interests.

Neither at the end of the financial year, nor at any time during the financial year, did there subsist any other arrangements to which
the Bank is a party, with the object or objects of enabling the Directors of the Bank to acquire benefits by means of the acquisition
of shares in, or debentures of, the Bank or any other body corporate, other than the share options granted pursuant to the Executive
Share Scheme.

RESPONSIBILITY STATEMENT BY THE BOARD OF DIRECTORS

In the course of preparing the annual financial statements of the Group and of the Bank, the Directors are collectively responsible in
ensuring that these financial statements are drawn up in accordance with the Malaysian Financial Reporting Standards, International
Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

It is the responsibility of the Directors to ensure that the financial reporting of the Group and the Bank present a true and fair view of
the state of affairs of the Group and the Bank as at 30 June 2020 and of the financial results and cash flows of the Group and of the
Bank for the financial year ended 30 June 2020.

The financial statements are prepared on the going concern basis and the Directors have ensured that proper accounting records are
kept, applied the appropriate accounting policies on a consistent basis and made accounting estimates that are reasonable and fair so
as to enable the preparation of the financial statements of the Group and of the Bank with reasonable accuracy.

EXECUTIVE SHARE SCHEME

The Bank has established and implemented an Executive Share Scheme (“ESS”).

The ESS of up to ten percent (10%) of the total number of issued shares (excluding treasury shares) of the Bank comprises the Executive
Share Option Scheme (“ESOS”) and the Executive Share Grant Scheme (“ESGS”).

(i) ESOS

The ESOS which was approved by the shareholders of the Bank on 25 October 2012, was established on 12 March 2013 and would
be in force for a period of ten (10) years.

On 18 September 2012, the Bank announced that Bursa Malaysia Securities Berhad had resolved to approve the listing of new
ordinary shares of the Bank to be issued pursuant to the exercise of options under the ESOS.

The ESOS would provide an opportunity for eligible executives who had contributed to the growth and development of the HLB
Group to participate in the equity of the Bank.

162 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Directors’ Report
for the financial year ended 30 June 2020

EXECUTIVE SHARE SCHEME (CONTINUED)

(ii) ESGS

The ESGS which was approved by the shareholders of the Bank on 23 October 2013, was established on 28 February 2014 and
would end on 11 March 2023.

On 10 September 2013, the Bank announced that Bursa Malaysia Securities Berhad had resolved to approve the listing of new
ordinary shares of the Bank to be issued pursuant to the ESGS.

The ESGS would provide the Bank with the flexibility to reward the eligible executives of the HLB Group for their contribution with
awards of the Bank’s shares without any consideration payable by the eligible executives.

At any point of time during the existence of the ESS, the aggregate number of shares comprised in the options and grants under the
ESS established by the Bank which are still subsisting shall not exceed 10% of the total number of issued shares (excluding treasury
shares) of the Bank at any one time (“Schemes Aggregate Maximum Allocation”).

(i) ESOS

There were 37,550,000 share options granted at an exercise price of RM14.24 under the ESOS 2013/2023 of the Bank on 2 April 2015.

Arising from the completion of the Bank's Rights Issue on 28 December 2015, the exercise price for the share options granted on
2 April 2015 under the ESOS was adjusted from RM14.24 to RM13.77 and additional share options of 782,657 were allotted to
the option holders, in accordance with the provisions of the bye-laws governing the ESOS.

On 15 December 2017, the Bank has granted up to 22,750,000 share options at an exercise price of RM16.46.

There were no options granted under the ESOS of the Bank during the financial year ended 30 June 2020.

As at the financial year ended 30 June 2020, a total of 46,945,153 share options lapsed primarily arising from the resignation of
some option holders.

As at 30 June 2020, a total of 61,082,657 share options had been granted under the ESOS, out of which 13,702,915 share options
(adjusted following the completion of the Bank's Rights Issue) remain outstanding. 172,946 share options were exercised during
the financial year ended 30 June 2020. The aggregate share options granted to Directors and chief executives of the HLB Group
under the ESOS amounted to 19,326,399, out of which 5,600,000 share options remain outstanding.

Since the commencement of the ESOS, the maximum allocation applicable to Directors and senior management of the HLB Group
is 50% of the Schemes Aggregate Maximum Allocation.

As at 30 June 2020, the actual percentage of options granted to Directors and senior management of the HLB Group under the
ESOS was 2.33% of the total number of issued shares (excluding treasury shares) of the Bank. During the financial year ended 30
June 2020, there is no option granted to the Directors and senior management of the HLB Group.

(ii) ESGS

The Bank had granted 250,514 ordinary shares under the ESGS amounting to 0.01% of the total number of issued shares
(excluding treasury shares) of the Bank to eligible executives of the Bank during the financial year ended 30 June 2020.

As at 30 June 2020, a total of 1,537,419 ordinary shares had been granted under the ESGS amounting to 0.07% of the total
number of issued shares (excluding treasury shares) to the chief executive and eligible executives of the Bank, out of which
1,153,215 ordinary shares had been vested and a total of 9,746 ordinary shares lapsed, with 374,458 ordinary shares remain
outstanding.

Save for the above, there were no other shares granted under the ESGS.

Annual Report 2020 163

Directors’ Report
for the financial year ended 30 June 2020

EXECUTIVE SHARE SCHEME (CONTINUED)

A trust has been set up for the ESS and it is administered by an appointed trustee. This trustee will be entitled from time to time to
accept financial assistance from the Bank upon such terms and conditions as the Bank and the trustee may agree to purchase the
Bank’s shares from the open market for the purposes of this trust. In accordance with MFRS 132, the shares purchased for the benefit
of the ESS holdings are recorded as “Treasury Shares for ESS”, in addition to the Treasury Shares for share buy-back, in the Shareholders’
Equity on the statements of financial position.

For further details on the ESS, refer to Note 57 to the financial statements on Equity Compensation Benefits.

STATUTORY INFORMATION REGARDING THE GROUP AND THE BANK

(I) As at the end of the financial year

(a) Before the financial statements of the Group and the Bank were prepared, the Directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and financing and the
making of allowance for doubtful debts and financing and had satisfied themselves that all known bad debts and
financing had been written off and that adequate allowance had been made for doubtful debts and financing; and

(ii) to ensure that any current assets, which were unlikely to be realised in the ordinary course of business including the
values of current assets as shown in the accounting records of the Group and of the Bank had been written down to
an amount which the current assets might be expected so to realise.

(b) In the opinion of the Directors, the results of the operations of the Group and the Bank during the financial year had not
been substantially affected by any item, transaction or event of a material and unusual nature.

(II) From the end of the financial year to the date of this report

(a) The Directors are not aware of any circumstances:

(i) which would render the amount written off for bad debts and financing or the amount of the allowance for doubtful
debts and financing in the financial statements of the Group and the Bank, inadequate to any substantial extent;

(ii) which would render the values attributed to current assets in the financial statements of the Group and the Bank
misleading; and

(iii) which had arisen which would render adherence to the existing method of valuation of assets or liabilities of the
Group and the Bank misleading or inappropriate.

(b) In the opinion of the Directors:

(i) the results of the operations of the Group and the Bank for the financial year ended 30 June 2020 are not likely to
be substantially affected by any item, transaction or event of a material and unusual nature which had arisen in the
interval between the end of the financial year and the date of this report; and

(ii) no contingent or other liability has become enforceable, or is likely to become enforceable, within the period of
twelve months after the end of the financial year which will or may affect the ability of the Group and the Bank to
meet their obligations as and when they fall due.

164 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Directors’ Report
for the financial year ended 30 June 2020

STATUTORY INFORMATION REGARDING THE GROUP AND THE BANK (CONTINUED)

(III) As at the date of this report

(a) There are no charges on the assets of the Group and the Bank which had arisen since the end of the financial year to secure
the liabilities of any other person.

(b) There are no contingent liabilities which had arisen since the end of the financial year.

(c) The Directors are not aware of any circumstances not otherwise dealt with in the report or financial statements of the Group
and the Bank which would render any amount stated in the financial statements misleading.

DISCLOSURE OF SHARIAH COMMITTEE

The Group’s Islamic banking activity is subject to the Shariah compliance and confirmation by the Shariah Committee consisting of
3 scholars, at all times, appointed by the Board of Directors of Hong Leong Islamic Bank Berhad and approved by BNM.

The primary role of the Shariah Committee is mainly advising on matters relating to the business operations and products of the Group
and providing support by attending regular meetings with the Group to ensure that they are in conformity with Shariah principles.

HOLDING AND ULTIMATE HOLDING COMPANIES

The holding and ultimate holding companies are Hong Leong Financial Group Berhad and Hong Leong Company (Malaysia) Berhad
respectively. Both companies are incorporated in Malaysia.

SUBSIDIARIES

Details of subsidiaries are set out in Note 13 to the financial statements.

AUDITORSʼ REMUNERATION

Details of auditorsʼ remuneration are set out in Note 37 to the financial statements.

AUDITORS

The auditors, PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146), have expressed their willingness to continue in office.

This report was approved by the Board of Directors on 11 September 2020. Signed on behalf of the Board of Directors:

Tan Kong Khoon

Chok Kwee Bee

Kuala Lumpur
11 September 2020

Annual Report 2020 165

Statements of Financial Position
as at 30 June 2020

The Group The Bank

2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000

Assets
Cash and short-term funds 3 8,562,169 4,855,456 5,543,800 4,383,074
Deposits and placements with banks and other financial
institutions 4 1,052,379 1,291,416 1,818,174 1,465,940
Financial assets at fair value through profit or loss 5 8,069,396 12,131,033 8,047,727 11,615,738
Financial investments at fair value through other comprehensive
income 6 27,282,544 23,854,510 24,737,905 20,745,998
Financial investments at amortised cost 7 20,101,432 15,153,199 15,079,081 10,894,505
Loans, advances and financing 8 144,694,950 136,308,217 112,823,975 108,934,970
Other assets 9 1,682,516 1,196,981 1,606,849 1,146,282
Derivative financial instruments 10 1,111,469 528,256 1,057,621 522,995
Amount due from subsidiaries 11 - - 106,363 13,095
Statutory deposits with Central Banks 12 418,120 4,588,833 254,181 3,564,423
Subsidiary companies 13 - - 2,558,901 2,558,337
Investment in associated companies 14 4,644,527 4,106,375 971,182 971,182
Property and equipment 15 1,299,902 1,382,572 685,169 761,639
Intangible assets 16 187,505 125,225 168,060 110,895
Right-of-use assets 17 253,118 - 420,653 -
Goodwill 18 1,831,312 1,831,312 1,771,547 1,771,547
Deferred tax assets 19 86,578 16,030 55,984 -
Total assets 221,277,917 207,369,415 177,707,172 169,460,620

Liabilities
Deposits from customers 20 173,492,661 163,070,294 137,633,362 131,396,525
Investment accounts of customers 21 356,475 2,235 - -
Deposits and placements of banks and other financial institutions 22 6,501,080 7,358,424 6,651,241 7,204,934
Obligations on securities sold under repurchase agreements 3,124,132 2,333,916 3,124,132 2,333,916
Bills and acceptances payable 134,053 393,023 120,216 362,578
Lease liabilities 23 241,177 - 407,838 -
Other liabilities 24 5,348,210 4,881,745 4,773,705 4,290,076
Derivative financial instruments 10 1,298,513 678,637 1,251,096 675,042
Recourse obligation on loans/financing sold to Cagamas Berhad
(“Cagamas”) 25 1,049,005 253,591 300,567 202,954
Tier 2 subordinated bonds 26 1,502,224 1,502,340 1,502,224 1,502,340
Multi-currency Additional Tier 1 capital securities 27 806,320 806,185 806,320 806,185
Innovative Tier 1 capital securities 28 - 512,268 - 512,268
Provision for taxation 189,768 95,864 150,979 42,152
Deferred tax liabilities 19 - 6,506 - 6,506
Total liabilities 194,043,618 181,895,028 156,721,680 149,335,476

Equity
Share capital 29 7,739,063 7,739,063 7,739,063 7,739,063
Reserves 30 20,218,580 18,463,141 13,969,773 13,113,898
Less: Treasury shares 31 (723,344) (727,817) (723,344) (727,817)
Total equity 27,234,299 25,474,387 20,985,492 20,125,144
Total equity and liabilities 221,277,917 207,369,415 177,707,172 169,460,620

Commitments and contingencies 46 147,233,168 162,168,169 131,969,797 152,997,021

The accompanying notes form an integral part of the financial statements

166 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Statements of Income
for the financial year ended 30 June 2020

The Group The Bank

2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000

Interest income 32a 5,912,043 6,284,861 5,782,292 6,165,814

Interest income for financial assets at fair value through
profit or loss 32b 268,718 397,201 268,718 397,201
Interest expense 33 (3,416,377) (3,917,897) (3,382,940) (3,877,566)
Net interest income 2,764,384 2,764,165 2,668,070 2,685,449
Income from Islamic Banking business 34 846,540 707,269 - -
3,610,924 3,471,434 2,668,070 2,685,449
Non-interest income 36 1,167,432 1,254,401 1,389,660 1,479,658
Net income 4,778,356 4,725,835 4,057,730 4,165,107
Overhead expenses 37 (2,103,804) (2,091,575) (1,792,455) (1,822,227)
Operating profit before allowances 2,674,552 2,634,260 2,265,275 2,342,880
(Allowance for)/written back of impairment losses on
loans, advances and financing 38 (327,655) (12,323) (188,333) 43,711
Written back of/(allowance for) impairment losses on
financial investments and other financial assets 39 167 972 (1,467) (684)
2,347,064 2,622,909 2,075,475 2,385,907
Share of results of associated companies 14 642,333 563,111 - -
Profit before taxation 2,989,397 3,186,020 2,075,475 2,385,907
Taxation 42 (494,800) (521,513) (421,460) (458,996)
Net profit for the financial year 2,494,597 2,664,507 1,654,015 1,926,911

Attributable to:
Owners of the parent 2,494,597 2,664,507 1,654,015 1,926,911

Earnings per share for profit attributable to owners of

the parent (sen):

- basic 43 121.9 130.2 80.8 94.2

- diluted 43 121.9 130.0 80.8 94.0

The accompanying notes form an integral part of the financial statements

Annual Report 2020 167

Statements of Comprehensive Income
for the financial year ended 30 June 2020

The Group The Bank

2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000

Net profit for the financial year 2,494,597 2,664,507 1,654,015 1,926,911

Other comprehensive income in respect of:

(i) Item that will not be reclassified to profit or loss:

Equity instruments at fair value through other
comprehensive income
- Net fair value changes 15,763 11,796 15,763 11,796
- Net gain on disposal - 108 - 108

(ii) Items that may be reclassified subsequently to profit

or loss:
(a) Share of other comprehensive income
of associated companies 15,976 13,940 - -
(b) Currency translation differences 78,085 (25,307) 13,621 33,745
(c) Debt instruments at fair value through other
comprehensive income
- Net fair value changes 44 203,515 322,192 231,676 275,892
- Changes in expected credit losses 44 502 (862) 601 (931)
(d) Net fair value changes in cash flow hedge 44 (7,633) (4,531) (7,631) (4,531)
Income tax relating to components of other
comprehensive income 44 (43,019) (70,629) (49,823) (59,008)
Other comprehensive income for the financial year,
net of tax 263,189 246,707 204,207 257,071

Total comprehensive income for the financial year 2,757,786 2,911,214 1,858,222 2,183,982

Attributable to:
Owners of the parent 2,757,786 2,911,214 1,858,222 2,183,982

The accompanying notes form an integral part of the financial statements

168 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Statements of Changes in Equity

for the financial year ended 30 June 2020

Attributable to owners of the parent

Share Treasury Regulatory Other Retained
capital shares* reserves^ reserves profits Total
The Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 July 2019 7,739,063 (727,817) 858,315 918,414 16,686,412 25,474,387

Comprehensive income
Net profit for the financial year - - - - 2,494,597 2,494,597
Share of other comprehensive income
of associated company - - - 15,976 - 15,976
Financial assets measured at fair value
through other comprehensive income
- Equity instruments
- Net fair value changes - - - 15,763 - 15,763
- Debt instruments 44
- Net fair value changes - - - 158,626 - 158,626
- Changes in expected credit losses - - - 502 - 502
Net fair value changes in cash flow
hedge 44 - - - (5,763) - (5,763)
Currency translation differences - - - 78,085 - 78,085
Total comprehensive income - - - 263,189 2,494,597 2,757,786

Transactions with owners

Transfer from regulatory reserve - - (9,887) - 9,887 -
Dividends paid:
- final dividend for the financial year
ended 30 June 2019 45 - - - - (695,813) (695,813)
- interim dividend for the financial year
ended 30 June 2020 45 - - - - (327,527) (327,527)
ESS exercised - 4,473 - (7,342) 5,250 2,381
Option charge arising from ESS granted - - - 23,085 - 23,085
Total transactions with owners - 4,473 (9,887) 15,743 (1,008,203) (997,874)
At 30 June 2020 7,739,063 (723,344) 848,428 1,197,346 18,172,806 27,234,299

* Treasury shares consist of two categories which are detailed in Note 31.
^ Comprise regulatory reserves maintained by the Group's banking subsidiaries of RM837,183,000 (30 June 2019: RM847,070,000)
in accordance with BNM's Guideline and the banking subsidiary in Vietnam with the State Bank of Vietnam of RM11,245,000
(30 June 2019: RM11,245,000).

The accompanying notes form an integral part of the financial statements

Annual Report 2020 169

Statements of Changes in Equity
for the financial year ended 30 June 2020

Attributable to owners of the parent

Share Treasury Regulatory Other Retained
capital shares* reserves^ reserves profits Total
The Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 July 2018 7,739,063 (732,267) 752,939 947,991 15,184,533 23,892,259

- effect of adopting MFRS 9 - - (4,280) (288,588) (75,481) (368,349)
As restated 7,739,063 (732,267) 748,659 659,403 15,109,052 23,523,910

Comprehensive income
Net profit for the financial year - - - - 2,664,507 2,664,507
Share of other comprehensive income
of associated company - - - 13,940 - 13,940
Financial assets measured at fair value
through other comprehensive income
- Equity instruments
- Net fair value changes - - - 11,796 - 11,796
- Net gain on disposal - - - (51) 159 108
- Debt instruments 44
- Net fair value changes - - - 250,590 - 250,590
- Changes in expected credit losses - - - (862) - (862)
Net fair value changes in cash flow
hedge 44 - - - (3,558) - (3,558)
Currency translation differences - - - (25,307) - (25,307)
Total comprehensive income - - - 246,548 2,664,666 2,911,214

Transactions with owners

Transfer to regulatory reserve - - 109,656 - (109,656) -
Dividends paid:
- final dividend for the financial year
ended 30 June 2018 45 - - - - (654,666) (654,666)
- interim dividend for the financial year
ended 30 June 2019 45 - - - - (327,390) (327,390)
ESS exercised - 4,450 - (5,253) 4,406 3,603
Option charge arising from ESS granted - - - 17,716 - 17,716
Total transactions with owners - 4,450 109,656 12,463 (1,087,306) (960,737)
At 30 June 2019 7,739,063 (727,817) 858,315 918,414 16,686,412 25,474,387

* Treasury shares consist of two categories which are detailed in Note 31.
^ Comprise regulatory reserves maintained by the Group's banking subsidiaries of RM847,070,000 (30 June 2018: RM741,694,000)
in accordance with BNM's Guideline and the banking subsidiary in Vietnam with the State Bank of Vietnam of RM11,245,000
(30 June 2018: RM11,245,000).

The accompanying notes form an integral part of the financial statements

170 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Statements of Changes in Equity

for the financial year ended 30 June 2020

Non-distributable Distributable
Share Treasury Regulatory Other Retained Total
capital shares* reserves reserves profits equity
The Bank Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 July 2019 7,739,063 (727,817) 695,197 384,364 12,034,337 20,125,144

Comprehensive income
Net profit for the financial year - - - - 1,654,015 1,654,015
Financial assets measured at fair value
through other comprehensive income
- Equity instruments
- Net fair value changes - - - 15,763 - 15,763
- Debt instruments 44
- Net fair value changes - - - 179,983 - 179,983
- Changes in expected credit losses - - - 601 - 601
Net fair value changes in cash flow
hedge 44 - - - (5,761) - (5,761)
Currency translation differences - - - 13,621 - 13,621
Total comprehensive income - - - 204,207 1,654,015 1,858,222

Transactions with owners

Transfer to regulatory reserve - - 8,790 - (8,790) -
Dividends paid:
- final dividend for the financial year
ended 30 June 2019 45 - - - - (695,813) (695,813)
- interim dividend for the financial year
ended 30 June 2020 45 - - - - (327,527) (327,527)
ESS exercised - 4,473 - (7,342) 5,250 2,381
Option charge arising from ESS granted - - - 23,085 - 23,085
Total transactions with owners - 4,473 8,790 15,743 (1,026,880) (997,874)
At 30 June 2020 7,739,063 (723,344) 703,987 604,314 12,661,472 20,985,492

* Treasury shares consist of two categories which are detailed in Note 31.

The accompanying notes form an integral part of the financial statements

Annual Report 2020 171

Statements of Changes in Equity
for the financial year ended 30 June 2020

Non-distributable Distributable
Share Treasury Regulatory Other Retained Total
capital shares* reserves reserves profits equity
The Bank Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 July 2018 7,739,063 (732,267) 637,098 406,668 11,212,525 19,263,087

- effect of adopting MFRS 9 - - (32,008) (291,679) (37,501) (361,188)
As restated 7,739,063 (732,267) 605,090 114,989 11,175,024 18,901,899

Comprehensive income
Net profit for the financial year - - - - 1,926,911 1,926,911
Financial assets measured at fair value
through other comprehensive income
- Equity instruments
- Net fair value changes - - - 11,796 - 11,796
- Net gain on disposal - - - (51) 159 108
- Debt instruments 44
- Net fair value changes - - - 215,911 - 215,911
- Changes in expected credit losses - - - (931) - (931)
Net fair value changes in cash flow
hedge 44 - - - (3,558) - (3,558)
Currency translation differences - - - 33,745 - 33,745
Total comprehensive income - - - 256,912 1,927,070 2,183,982

Transactions with owners

Transfer to regulatory reserve - - 90,107 - (90,107) -
Dividends paid:
- final dividend for the financial year
ended 30 June 2018 45 - - - - (654,666) (654,666)
- interim dividend for the financial year
ended 30 June 2019 45 - - - - (327,390) (327,390)
ESS exercised - 4,450 - (5,253) 4,406 3,603
Option charge arising from ESS granted - - - 17,716 - 17,716
Total transactions with owners - 4,450 90,107 12,463 (1,067,757) (960,737)
At 30 June 2019 7,739,063 (727,817) 695,197 384,364 12,034,337 20,125,144

* Treasury shares consist of two categories which are detailed in Note 31.

The accompanying notes form an integral part of the financial statements

172 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Statements of Cash Flows

for the financial year ended 30 June 2020

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Cash flows from operating activities

Profit before taxation 2,989,397 3,186,020 2,075,475 2,385,907
Adjustments for:
Depreciation of property and equipment 134,390 132,296 115,957 115,934
Depreciation of right-of-use assets 55,174 - 77,643 -
Amortisation of intangible assets 59,025 54,189 53,909 49,818
Net gain on disposal of property and equipment (3,996) (1,417) (3,997) (1,535)
Share of results of associated companies (642,333) (563,111) - -
Property and equipment written off 26,399 7,902 26,156 7,460
Intangible assets written off 8,357 37 8,352 35
Amortisation of upfront fees 632 2,272 632 2,218
Net realised gain on financial instruments:
- financial assets at fair value through profit or loss (133,481) (104,539) (133,481) (104,539)
- derivatives financial instruments 67,285 221,202 67,285 221,202
- financial investments at fair value through other
comprehensive income (364,324) (164,261) (364,033) (164,261)
- financial investments at amortised cost - (15,902) - (15,902)
Allowances for impairment losses on loans,
advances and financing 501,804 221,296 339,746 144,291
Impaired loans and financing written off 17,976 17,679 12,877 14,337
Modification loss on contractual cash flows arising from
financial assets 142,467 - 90,751 -
Net unrealised gain on revaluation of financial instruments:
- financial assets at fair value through profit or loss (13,199) (51,544) (13,199) (51,544)
- derivatives financial instruments 131,991 (1,754) 131,991 (1,754)
Net realised loss on fair value changes arising from
fair value hedges 2,643 504 2,643 504
Net gain on divestment of joint venture - (90,106) - (138,101)
Net loss arising from fair value hedges 1,051 305 1,051 305
(Written back of)/allowance for impairment losses on financial
investments and other financial assets (167) (972) 1,467 684
Interest expense on:
- Recourse obligation on loans/financing sold to Cagamas 26,783 8,239 6,588 7,602
- Tier 2 subordinated bonds 66,752 116,165 66,782 116,135
- Multi-currency Additional Tier 1 capital securities 39,473 25,347 39,639 25,513
- Innovative Tier 1 capital securities 8,413 41,053 8,413 41,053
- Lease liabilities 11,307 - 19,147 -

Annual Report 2020 173

Statements of Cash Flows
for the financial year ended 30 June 2020

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Interest income from:

- financial investments at fair value through other
comprehensive income (687,729) (816,881) (692,225) (815,988)
- financial investments at amortised cost (416,058) (427,136) (415,255) (423,467)
- Multi-currency Additional Tier 1 subordinated sukuk wakalah - - (56) (20,520)
- Tier 2 subordinated sukuk murabahah - - 46 (788)
Dividend income from:
- subsidiary company - - (19,000) (20,020)
- associated companies - - (205,332) (174,604)
- financial assets at fair value through profit or loss (226,380) (279,533) (226,380) (279,533)
- financial investments at fair value through other
comprehensive income (3,683) (203) (3,683) (203)
Share option expenses 23,085 17,716 23,085 17,716
Operating profit before working capital changes 1,823,054 1,534,863 1,092,994 937,955

Decrease/(Increase) in operating assets

Cash and short-term funds and deposits and placements with
banks and other financial institutions with original maturity of
more than three months (804,192) 3,682,441 (766,697) 3,382,971
Financial assets at fair value through profit or loss 4,208,317 (651,053) 3,714,691 (286,784)
Loans, advances and financing (9,033,498) (8,811,344) (4,316,897) (5,128,811)
Derivative financial instruments (818,542) 85,772 (768,148) 118,455
Other assets (335,664) (293,700) (310,696) (459,346)
Amount due from subsidiaries - - (93,268) 30,468
Statutory deposits with Central Banks 4,170,713 (276,351) 3,310,242 (111,406)

Increase/(Decrease) in operating liabilities

Deposits from customers 10,424,791 5,711,052 6,239,472 1,867,611
Investment accounts of customers 354,240 2,235 - -
Deposits and placements of banks and other financial institutions (857,344) 120,990 (553,693) (40,920)
Securities sold under repurchase agreements 790,216 (1,497,953) 790,216 (1,471,203)
Bills and acceptances payable (258,970) (151,428) (242,362) (144,393)
Derivative financial instruments 633,526 (318,903) 587,686 (298,203)
Other liabilities 432,921 158,043 446,542 490,425
Cash flows generated from/(used in) operations 10,729,568 (705,336) 9,130,082 (1,113,181)
Taxation paid (516,455) (615,398) (367,133) (496,777)
Net cash generated from/(used in) operating activities 10,213,113 (1,320,734) 8,762,949 (1,609,958)

174 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Statements of Cash Flows

for the financial year ended 30 June 2020

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Cash flows from investing activities

Net (purchases of)/proceeds from financial investments at fair
value through other comprehensive income (2,156,673) 2,660,336 (2,688,182) 2,796,969
Net (purchases of)/proceeds from financial investments at
amortised cost (4,532,195) 937,924 (3,769,345) 1,537,556
Proceeds from sale of intangible assets - 2 - 2
Purchase of property and equipment (181,342) (123,156) (163,150) (115,473)
Net proceeds from sale of property and equipment 6,251 2,209 6,207 1,890
Purchase of intangible assets (27,275) (10,918) (23,471) (9,750)
Interest received from investment in Multi-currency Additional
Tier 1 subordinated sukuk wakalah - - - 20,520
Investment in Tier 2 subordinated sukuk murabahah - - - (400,000)
Investment in subordinated facilities - - (554) (417)
Proceeds from divestment of joint venture - 60,606 - 60,606
Dividends received from:
- subsidiary company - - 19,000 20,020
- associated companies - 127,413 - 127,413
- financial assets at fair value through profit or loss 226,380 279,533 226,380 279,533
- financial investments at fair value through other
comprehensive income 3,683 203 3,683 203
Net cash (used in)/generated from investing activities (6,661,171) 3,934,152 (6,389,432) 4,319,072

Annual Report 2020 175

Statements of Cash Flows
for the financial year ended 30 June 2020

The Group The Bank

2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000

Cash flows from financing activities

Dividends paid (1,023,340) (982,056) (1,023,340) (982,056)
Cash received from ESOS exercised 2,381 3,603 2,381 3,603
Repayment of Innovative Tier 1 capital securities (500,000) - (500,000) -
Repayment of Tier 2 subordinated loan - (2,400,000) - (2,000,000)
Repayment of lease liabilities (44,849) - (62,629) -
Repayment of recourse obligation on loans sold to
Cagamas (200,050) - (200,050) -
Proceeds from debt issuance:
- Recourse obligation on financing sold to Cagamas 993,447 50,000 300,023 -
- Tier 2 subordinated bonds - 1,000,000 - 1,000,000
- Multi-currency Additional Tier 1 capital securities - 400,000 - 400,000
Interest paid:
- Recourse obligation on loans/financing sold to Cagamas (24,766) (7,600) (8,948) (7,600)
- Tier 2 subordinated bonds (66,868) (116,937) (66,898) (116,223)
- Multi-currency Additional Tier 1 capital securities (39,468) (20,485) (39,634) (20,651)
- Innovative Tier 1 capital securities (21,071) (40,940) (21,071) (40,940)
- Lease liabilities (11,307) - (19,147) -
Net cash used in financing activities (935,891) (2,114,415) (1,639,313) (1,763,867)

Net increase in cash and cash equivalents 2,616,051 499,003 734,204 945,247
Effects of exchange rate changes 47,433 61,425 12,059 30,828
Cash and cash equivalents at the beginning of
financial year 4,523,737 3,963,309 4,258,769 3,282,694
Cash and cash equivalents at the end of financial year 7,187,221 4,523,737 5,005,032 4,258,769

Cash and cash equivalents comprise the following:

Cash and short-term funds 3 8,562,169 4,855,456 5,543,800 4,383,074
Deposits and placements with banks and other
financial institutions 4 1,052,379 1,291,416 1,818,174 1,465,940
9,614,548 6,146,872 7,361,974 5,849,014
Less:
Cash and short-term funds and deposits and placements
with banks and other financial institutions with original
maturity of more than three months (2,427,327) (1,623,135) (2,356,942) (1,590,245)
7,187,221 4,523,737 5,005,032 4,258,769

The accompanying notes form an integral part of the financial statements

176 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Statements of Cash Flows

for the financial year ended 30 June 2020

An analysis of changes in liabilities arising from financing activities is as follows:

Recourse
obligation Multi-
on loans/ currency Innovative
financing Tier 2 Additional Tier 1
sold to subordinated Tier 1 capital capital Lease
Cagamas bonds securities securities liabilities Total
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2020
Balance at the beginning of the financial
year 253,591 1,502,340 806,185 512,268 - 3,074,384
Effect of adopting MFRS 16 - - - - 285,782 285,782
As restated 253,591 1,502,340 806,185 512,268 285,782 3,360,166
Proceeds from issuance 993,447 - - - - 993,447
Redemptions and repayments (200,050) - - (500,000) (44,849) (744,899)
Interest paid (24,766) (66,868) (39,468) (21,071) (11,307) (163,480)
Accrued interest 26,783 66,752 39,473 8,413 11,307 152,728
Amortisation - - 130 502 - 632
Other non-cash - - - (112) 244 132
Balance at the end of the financial year 1,049,005 1,502,224 806,320 - 241,177 3,598,726

2019
Balance at the beginning of the financial
year 202,952 2,902,908 401,192 512,352 - 4,019,404
Proceeds from issuance 50,000 1,000,000 400,000 - - 1,450,000
Repayments from redemption - (2,400,000) - - - (2,400,000)
Interest paid (7,600) (116,937) (20,485) (40,940) - (185,962)
Accrued interest 8,239 116,165 25,347 41,053 - 190,804
Amortisation - 204 131 1,937 - 2,272
Other non-cash - - - (2,134) - (2,134)
Balance at the end of the financial year 253,591 1,502,340 806,185 512,268 - 3,074,384

Annual Report 2020 177

Statements of Cash Flows
for the financial year ended 30 June 2020

An analysis of changes in liabilities arising from financing activities is as follows: (continued)

Recourse
obligation Multi-
on loans/ currency Innovative
financing Tier 2 Additional Tier 1
sold to subordinated Tier 1 capital capital Lease
Cagamas bonds securities securities liabilities Total
The Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2020
Balance at the beginning of the financial
year 202,954 1,502,340 806,185 512,268 - 3,023,747
Effect of adopting MFRS 16 - - - - 459,572 459,572
As restated 202,954 1,502,340 806,185 512,268 459,572 3,483,319
Proceeds from issuance 300,023 - - - - 300,023
Redemptions and repayments (200,050) - - (500,000) (62,629) (762,679)
Interest paid (8,948) (66,898) (39,634) (21,071) (19,147) (155,698)
Accrued interest 6,588 66,782 39,639 8,413 19,147 140,569
Amortisation - - 130 502 - 632
Other non-cash - - - (112) 10,895 10,783
Balance at the end of the financial year 300,567 1,502,224 806,320 - 407,838 3,016,949

2019
Balance at the beginning of the financial
year 202,952 2,502,278 401,192 512,352 - 3,618,774
Proceeds from issuance - 1,000,000 400,000 - - 1,400,000
Repayments from redemption - (2,000,000) - - - (2,000,000)
Interest paid (7,600) (116,223) (20,651) (40,940) - (185,414)
Accrued interest 7,602 116,135 25,513 41,053 - 190,303
Amortisation - 150 131 1,937 - 2,218
Other non-cash - - - (2,134) - (2,134)
Balance at the end of the financial year 202,954 1,502,340 806,185 512,268 - 3,023,747

178 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

The following accounting policies have been used consistently in dealing with items that are considered material in relation to the
financial statements.

1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements of the Group and the Bank have been prepared in accordance with the Malaysian Financial Reporting
Standards (“MFRS”), International Financial Reporting Standards (“IFRS”) and the requirements of the Companies Act 2016, in
Malaysia.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of fair value
through other comprehensive income financial assets, and financial assets/financial liabilities at fair value through profit or loss
(including derivative financial instruments).

The financial statements incorporate the activities relating to Islamic Banking which have been undertaken by the Group in
compliance with Shariah principles. Islamic Banking business refers generally to the acceptance of deposits and granting of
financing under the Shariah principles.

The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenue and expenses during the reported financial year. It also
requires Directors to exercise their judgement in the process of applying the Group and the Bank’s accounting policies. Although
these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may
differ.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in Note 59.

A Standards, amendments to published standards and interpretations that are effective and applicable to the Group
and the Bank

The Group and the Bank have applied the following amendments for the first time for the financial year beginning on 1 July
2019:

* MFRS 16 ‘Leases’
* Amendments to MFRS 9 ‘Prepayment Features with Negative Compensation’
* Amendments to MFRS 128 ‘Long-term Interests in Associates and Joint Ventures’
* Amendments to MFRS 119 ‘Plan Amendment, Curtailment or Settlement’
* IC Interpretation 23 ‘Uncertainty over Income Tax Treatments’
* Annual Improvements to MFRSs 2015 – 2017 Cycle

The Group and the Bank have adopted MFRS 16 for the first time in the 2020 financial statements, which resulted in
changes in accounting policies. The Group has elected to use the simplified retrospective transition method and to apply a
number of practical expedients as provided in MFRS 16 as summarised in Note H.

Under the simplified retrospective transition method, the 2019 comparative information was not restated and the
cumulative effects of initial application of MFRS 16 where the Group is a lessee were recognised as an adjustment to
the opening balance of retained earnings as at 1 July 2019. The comparative information continued to be reported under
the previous accounting policies governed under MFRS 117 ‘Leases’ and IC Interpretation 4 ‘Determining whether an
Arrangement Contains a Lease’.

Annual Report 2020 179

Notes to the Financial Statements
for the financial year ended 30 June 2020

1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)

A Standards, amendments to published standards and interpretations that are effective and applicable to the Group
and the Bank (continued)

The impact of adoption of MFRS 16 of the Group is summarised in Note 58.

Other than that, the adoption of other amendments to published standards above did not have any impact on the current
period or any prior period and is not likely to affect future periods.

B Standards, amendments to published standards and interpretations to existing standards that are applicable to
the Group and the Bank that have been issued but not yet effective

(i) Financial year beginning on/after 1 July 2020

* Amendments to MFRS 3 “Definition of a Business” (effective 1 January 2020) revise the definition of a business.
To be considered a business, an acquisition would have to include an input and a substantive process that
together significantly contribute to the ability to create outputs.

The amendments provide guidance to determine whether an input and a substantive process are present,
including situation where an acquisition does not have outputs. To be a business without outputs, there will
now need to be an organised workforce. It is also no longer necessary to assess whether market participants
are capable of replacing missing elements or integrating the acquired activities and assets.

In addition, the revised definition of the term ‘outputs’ is narrower, focusses on goods or services provided to
customers, generating investment returns and other income but excludes returns in the form of cost savings.

The amendments introduce an optional simplified assessment known as ‘concentration test’ that, if met,
eliminates the need for further assessment. Under this concentration test, if substantially all of the fair value
of gross assets acquired is concentrated in a single identifiable asset (or a group of similar assets), the assets
acquired would not represent a business.

The amendments shall be applied prospectively.

* Amendments to MFRS 101 and MFRS 108 clarify the definition of materiality and use a consistent definition
throughout MFRSs and the Conceptual Framework for Financial Reporting.

The definition of ‘material’ has been revised as “Information is material if omitting, misstating or obscuring
it could reasonably be expected to influence decisions that the primary users of general purpose financial
statements make on the basis of those financial statements, which provide financial information about a
specific reporting entity.”

180 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)

B Standards, amendments to published standards and interpretations to existing standards that are applicable to
the Group and the Bank that have been issued but not yet effective (continued)

(i) Financial year beginning on/after 1 July 2020 (continued)

The amendments also:

* clarify that an entity assesses materiality in the context of the financial statements as a whole.

* explain the concept of obscuring information in the new definition. Information is obscured if it has the
effect similar as omitting or misstating of that information. For example, material transaction is scattered
throughout the financial statements, dissimilar items are inappropriately aggregated, or material
information is hidden by immaterial information.

* clarify the meaning of ‘primary users of general purpose financial statements’ to whom those financial
statements are directed, by defining them as ‘existing and potential investors, lenders and other creditors’
that must rely on general purpose financial statements for much of the financial information they need.

The amendments shall be applied prospectively.

* Amendments to MFRS 101 ‘Classification of liabilities as current or non-current’ (effective 1 January 2022)
clarify that a liability is classified as non-current if an entity has a substantive right at the end of the reporting
period to defer settlement for at least 12 months after the reporting period.

A liability is classified as current if a condition is breached at or before the reporting date and a waiver
is obtained after the reporting date. A loan is classified as non-current if a covenant is breached after the
reporting date.

The amendments shall be applied retrospectively.

* The Conceptual Framework for Financial Reporting (Revised 2018)

The Framework was revised with the primary purpose to assist the International Accounting Standards Board
(“IASB”) to develop IFRSs that are based on consistent concepts and enable preparers to develop consistent
accounting policies where an issue is not addressed by an IFRS. The Framework is not an IFRS, and does not
override any IFRSs.

Key changes to the Framework are as follows:

* Objective of general purpose financial reporting - clarification that the objective of financial reporting is
to provide useful information to the users of financial statements for resource allocation decisions and
assessment of management’s stewardship.

* Qualitative characteristics of useful financial information - reinstatement of the concepts of prudence

when making judgement of uncertain conditions and ‘substance over form’ concept to ensure faithful
representation of economic phenomenon.

Annual Report 2020 181

Notes to the Financial Statements
for the financial year ended 30 June 2020

1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)

B Standards, amendments to published standards and interpretations to existing standards that are applicable to
the Group and the Bank that have been issued but not yet effective (continued)

(i) Financial year beginning on/after 1 July 2020 (continued)

* Clarification on reporting entity for financial reporting - introduction of new definition of a reporting entity,
which might be a legal entity or a portion of a legal entity.

* Elements of financial statements - the definitions of an asset and a liability have been refined. Guidance in
determining unit of account for assets and liabilities have been added, by considering the nature of executory
contracts and substance of contracts.

* Recognition and derecognition - the probability threshold for asset or liability recognition has been removed.
New guidance on de-recognition of asset and liability have been added.

* Measurement - explanation of factors to consider when selecting a measurement basis have been provided.

* Presentation and disclosure - clarification that statements of income is the primary source of information about
an entity’s financial performance for a reporting period. In principle, recycling of income/expense included in
other comprehensive income to income statements is required if this results in more relevant information or a
more faithful representation of statements of income.

Amendments to References to the Conceptual Framework in MFRS Standards

The MASB also issued Amendments to References to the Conceptual Framework in MFRS Standards (‘Amendments’),
to update references and quotations to fourteen (14) Standards so as to clarify the version of Conceptual Framework
these Standards refer to, for which the effective date above applies.

The amendments should be applied retrospectively in accordance with MFRS 108 unless retrospective application
would be impracticable or involve undue cost or effort.

* Amendments to MFRS 7, MFRS 9 and MFRS 139 - Interest Rate Benchmark Reform

‘Highly probable’ requirement

The relief provided by the amendments requires an entity to assume that the interest rate on which the
hedged cash flows are based does not change as a result of the reform. Hence, where the hedged cash flows
may change as a result of IBOR reform (for example, where the future interest payments on a hedged forecast
debt issuance might be Sterling Overnight Index Average (‘SONIA’) + X% rather than LIBOR + Y%), this will not
cause the ‘highly probable’ test to be failed.

Prospective assessment

Under the amendments, an entity assumes that the interest rate benchmark on which the cash flows of the
hedged item, hedging instrument or hedged risk are based is not altered by IBOR reform. Accordingly, this will
not cause the forward-looking prospective assessment to apply hedge accounting to fail.

182 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)

B Standards, amendments to published standards and interpretations to existing standards that are applicable to
the Group and the Bank that have been issued but not yet effective (continued)

(i) Financial year beginning on/after 1 July 2020 (continued)

* Amendments to MFRS 7, MFRS 9 and MFRS 139 - Interest Rate Benchmark Reform (continued)

MFRS 139(*) retrospective effectiveness test exception

IBOR reform might cause a hedge to fall outside the required 80-125% range. MFRS 139(*) has therefore been
amended to provide an exception to the retrospective effectiveness test such that a hedge is not discontinued
during the period of IBOR-related uncertainty solely because the retrospective effectiveness falls outside this
required 80-125% range. However, the other requirements for hedge accounting, including the prospective
assessment, would still need to be met.

For hedge accounting to be applied, both MFRS 9 and MFRS 139(*) require the designated risk component to
be separately identifiable and reliably measurable. Under the amendments, the risk component only needs to
be separately identifiable at initial hedge designation and not on an ongoing basis. In the context of a macro
hedge, where an entity frequently resets a hedging relationship, the relief applies from when a hedged item
was initially designated within that hedging relationship.

Disclosures

The amendment requires disclosure of the nominal amount of hedging instruments to which the reliefs are
applied, any significant assumptions or judgements made in applying the reliefs, and qualitative disclosures
about how the entity is impacted by IBOR reform and is managing the transition process.

An entity shall apply the amendments retrospectively. This retrospective application applies only to the
following:

* hedging relationships that existed at the beginning of the reporting period in which an entity first applies
those amendments or were designated thereafter; and

* the amount accumulated in the cash flow hedge reserve that existed at the beginning of the reporting
period in which an entity first applies those requirements.

(*) When entity first applied MFRS 9, it may choose as its accounting policy to continue to apply the hedge
accounting requirements of MFRS 139 instead of the requirements in Chapter 6 of MFRS 9. Accordingly,
the hedging rules in MFRS 139 remain relevant.

The adoption of the above amendments to published standards is not expected to give rise to any material financial
impact to the Group and the Bank.

Annual Report 2020 183

Notes to the Financial Statements
for the financial year ended 30 June 2020

1 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED)

C Changes in regulatory requirements

(i) BNM's Revised Policy Documents on Financial Reporting and Financial Reporting for Islamic Banking Institutions

On 27 September 2019, BNM issued the revised policy document on Financial Reporting and Financial Reporting for
Islamic Banking Institutions with updates to clarify on the classification of a credit facility as credit impaired including
where the credit facility is rescheduled and restructured, effective 1 October 2019.

The application of the revised policy document will affect disclosure, measurement and classification of a rescheduled
and restructured credit facility as credit impaired.

(ii) Measures to Assist Individuals, Small-Medium Enterprises (“SMEs”) and Corporates Affected by COVID-19

On 25 March 2020, BNM had announced a number of regulatory and supervisory measures in support of efforts by
banking institutions to assist individuals, SMEs and corporations to manage the impact of the Covid-19 outbreak.

Banking institutions will grant an automatic moratorium on all loan/financing repayments for a period of 6 months,
with effect from 1 April 2020 to all individuals and SMEs. This offer is applicable to performing loans, denominated
in Malaysian Ringgit, that have not been in arrears for more than 90 days as at 1 April 2020. For credit card facilities,
banking institutions will offer the option to convert the outstanding balances into term loan of not more than 3 years.

Banking institutions will also facilitate requests by corporations to defer or restructure their loans/financing
repayments in a way that will enable viable corporations to preserve jobs and resume economic activities when
conditions improve.

To further support lending/financing activities, banking institutions are allowed to drawdown on the capital
conservation buffer of 2.5%, to operate below the minimum liquidity coverage ratio of 100% and to reduce the
regulatory reserves held against expected losses to 0%.

The implementation of the Net Stable Funding Ratio (“NSFR”) which will be effective on 1 July 2020 is lowered to
80%. Banking institutions are expected to restore their buffer to the minimum regulatory requirements and comply
with a 100% NSFR ratio from 30 September 2021.

The moratorium should not automatically result in stage transfer under MFRS 9 in the absence of other factors
relevant to the assessment.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A Consolidation

(i) Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group and are de-consolidated from the date control ceases.

184 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A Consolidation (continued)

(i) Subsidiaries (continued)

The consolidated financial statements include the financial statements of the Bank and all its subsidiaries made up
to the end of the financial year.

The Group applies the acquisition method to account for business combinations.

The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred,
the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement and fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are with limited exceptions, measured initially
at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the
recognised amounts of acquiree’s identifiable net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net
assets acquired is recognised as goodwill. If the total of consideration transferred, non-controlling interest recognised
and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the
case of a bargain purchase, the difference is recognised directly in the statements of income.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, carrying value of the acquirer’s previously held equity interest in
the acquiree is remeasured to fair value at the acquisition date, any gains or losses from such remeasurement are
recognised in the statements of income.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is
recognised in accordance with MFRS 9 in the statements of income. Contingent consideration that is classified as
equity is not remeasured, and its subsequent settlement is accounted for within equity.

The Group applies predecessor accounting to account for business combinations under common control. Under
predecessor accounting, assets and liabilities acquired are not restated to their respective fair values. They are
recognised at the carrying amounts from the consolidated financial statements of the ultimate holding company
of the Group and adjusted to conform with the accounting policies adopted by the Group. The difference between
any consideration given and the aggregate carrying amounts of the assets and liabilities (as of the date of the
transaction) of the acquired entity is recognised as an adjustment to equity. No additional goodwill is recognised.

The acquirer only incorporates the acquired entity’s results and statements of financial position prospectively from
the date on which the business combination between entities under common control occurred. Consequently, the
consolidated financial statements do not reflect the results of the acquired entity for the period before the transaction
occurred. The corresponding amounts for the previous financial year are also not restated.

Annual Report 2020 185

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A Consolidation (continued)

(i) Subsidiaries (continued)

Predecessor accounting may lead to a difference between the cost of the transaction and the carrying value of the
net assets. The difference is recorded in retained profits.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transfer
assets. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.

(ii) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as transactions
with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying
amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any
difference between the amount of the adjustment to non-controlling interests and any consideration paid or received
is recognised in equity attributable to owners of the Group.

(iii) Disposal of subsidiaries

When the Group ceases to consolidate because of loss of control, any retained interest in the entity is remeasured to
its fair value at the date when control is lost, with the change in carrying amount recognised in statements of income.
The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as
an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive
income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or
liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to
statements of income.

Gains and losses of the disposal of subsidiaries include the carrying amount of goodwill relating to the subsidiaries
sold.

(iv) Joint arrangements

A joint arrangement is an arrangement of which there is contractually agreed sharing of control by the Group with one
or more parties, where decisions about the relevant activities relating to the joint arrangement require unanimous
consent of the parties sharing control. The classification of a joint arrangement as a joint operation or a joint venture
depends upon the rights and obligations of the parties to the arrangement. A joint venture is a joint arrangement
whereby the joint venturers have rights to the net assets of the arrangement. A joint operation is a joint arrangement
whereby the joint operators have rights to the assets and obligations for the liabilities, relating to the arrangement.

186 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A Consolidation (continued)

(iv) Joint arrangements (continued)

The Group’s interest in a joint venture is accounted for in the financial statements by the equity method of accounting.
Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted
thereafter to recognise the Group’s share of the post-acquisition profits or losses and the Group’s share of movements
in other comprehensive income of the joint venture in other comprehensive income. Dividends received or receivable
from a joint venture are recognised as a reduction in the carrying amount of the investment. When the Group’s share
of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests
that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise
further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

The Group determines at each reporting date whether there is any objective evidence that the investment in the
joint venture is impaired. An impairment loss is recognised for the amount by which the carrying amount of the joint
venture exceeds its recoverable amount. The Group presents the impairment loss adjacent to ‘share of results of joint
venture' in the statements of income.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s
interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary
to ensure consistency with the policies adopted by the Group.

If the ownership interest in a joint venture is reduced but joint control is retained, only a proportionate share of
the amounts previously recognised in other comprehensive income is reclassified to statements of income where
appropriate.

(v) Associated companies

Associates are all entities over which the Group has significant influence but not control or joint control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted
for using the equity method of accounting. Under the equity method, the investment in an associate is initially
recognised at cost, and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses
of the associate in statements of income, and the Group's share of movements in other comprehensive income of
the associate in other comprehensive income. Dividends received or receivable from an associate are recognised
as a reduction in the carrying amount of the investment. When the Group's share of losses in an associate equals
or exceeds its interests in the associate, including any long-term interests that, in substance, form part of the
Group's net investment in the associate, the Group does not recognise further losses, unless it has incurred legal or
constructive obligations or made payments on behalf of the associate. The Group’s investment in associates includes
goodwill identified on acquisition.

The Group determines at each reporting date whether there is any objective evidence that the investment in the
associate is impaired. An impairment loss is recognised for the amount by which the carrying amount of the associate
exceeds its recoverable amount. The Group presents the impairment loss adjacent to ‘share of results of associated
company' in the statements of income.

Annual Report 2020 187

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A Consolidation (continued)

(v) Associated companies (continued)

Profits and losses resulting from upstream and downstream transactions between the Group and its associate are
recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates.
Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share
of the amounts previously recognised in other comprehensive income is reclassified to statements of income where
appropriate.

Dilution gains and losses arising in investments in associates are recognised in the statements of income.

(vi) Loss of joint control or significant influence

When the Group ceases to equity account its joint venture or associate because of a loss of joint control or significant
influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount
recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently
accounting for the retained interest as a financial asset. In addition, any amount previously recognised in other
comprehensive income in respect of the entity is accounted for as if the Group had directly disposed of the related
assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified
to statements of income.

(vii) Investments in subsidiaries and associated companies

In the Bank's separate financial statements, investments in subsidiaries and associated companies are carried at cost
less any accumulated impairment losses. On disposal of investments in subsidiaries and associated companies, the
difference between disposal proceeds and the carrying amount of investments are recognised in the statements of
income.

Investments in debt instruments issued by subsidiary companies at amortised cost are measured in accordance with
Note D.

B Recognition of interest/profit income and interest/profit expense

Interest and financing income and expense for all interest/profit bearing financial instruments are recognised within
interest income and interest expense and income from Islamic Banking business in the statements of income using the
effective interest/profit method. Interest/profit income from financial assets at fair value through profit or loss is disclosed
as separate line item in statements of income.

188 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B Recognition of interest/profit income and interest/profit expense (continued)

The effective interest/profit method is a method of calculating the amortised cost of a financial asset or a financial liability
and of allocating the interest and financing income or interest/profit expense over the relevant period. The effective
interest/profit rate is the rate that discounts estimated future cash payments or receipts through the expected life of the
financial instruments or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial
liability. When calculating the effective interest/profit rate, the Group and the Bank take into account all contractual terms
of the financial instrument and includes any fees or incremental costs that are directly attributable to the instrument and
are an integral part of the effective interest/profit rate, but not future credit losses.

Interest/profit income is calculated by applying the effective interest/profit rate to the gross carrying amount of a financial
asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets, the effective
interest/profit rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).

C Recognition of fees and other income

The Group and the Bank earn fee and commission income from a diverse range of products and services provided to its
customers. Fee and commission income are recognised when the Group and the Bank have satisfied its performance
obligation in providing the promised products and services to the customer, and are recognised based on contractual rates
or amount agreed with customers, and net of expenses directly related to it. The Group and the Bank generally satisfy its
performance obligation and recognises the fee and commission income on the following basis:

* Transaction-based fee and commission income is recognised on the completion of the transaction. Such fees include
fees related to the completion of corporate advisory transactions, commissions, service charges and fees, credit card
related fees and fees on loans, advances and financing. These fees constitute a single performance obligation.

* For a service that is provided over a period of time, fee and commission income is recognised on an equal proportion
basis over the period during which the related service is provided or credit risk is undertaken. This basis of recognition
most appropriately reflects the nature and pattern of provision of these services to the customers over time. Fees for
these services will be billed periodically over time. Such fees include guarantee fees and commitment fees.

The Group and the Bank do not provide any significant credit terms to customers for the above products and services.

Directly related expenses typically include card-related expenses and sales commissions, but do not include expenses for
services delivered over a period (such as service contracts) and other expenses that are not specifically related to fee and
commission income transactions.

Other income recognition are as follows:

a) Dividends are recognised when the right to receive payment is established. This applies even if they are paid out of
pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence. Dividend
income received from subsidiary companies, joint venture, associated companies, financial assets at fair value
through profit or loss and financial investments at fair value through other comprehensive income are recognised as
non-interest income in statements of income. Dividends that clearly represent a recovery of part of the cost of
investment is recognised in other comprehensive income if it relates to an investment in equity instruments
measured at fair value through other comprehensive income.

Annual Report 2020 189

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C Recognition of fees and other income (continued)

b) Net gain or loss from disposal of financial assets at fair value through profit or loss and debt instruments at fair value
through other comprehensive income are recognised in statements of income upon disposal of the securities, as the
difference between net disposal proceeds and the carrying amount of the securities.

D Financial assets

(i) Classification

The Group and the Bank have applied MFRS 9 and classified its financial assets in the following measurement
categories in accordance with MFRS 9 requirements:

• those to be measured subsequently at fair value (either through other comprehensive income (“OCI”) or
through profit or loss), and

• those to be measured at amortised cost.

The Group and the Bank reclassify debt investments when and only when its business model for managing those
assets changes. The Group and the Bank do not change the classification of the remaining financial assets held in
the business model, but consider the circumstances leading to the model change when assessing newly originated
or newly purchased financial assets going forward.

Business model assessment

The Group and the Bank conduct assessment of the objective of a business model to align with how an asset held
within a portfolio is being managed. Factors that are being considered include the key objectives of a portfolio
whether the business strategy is to earn contractual interest revenue, matching the duration of the financial assets
to the duration of the liabilities that are funding those assets or realising a portfolio through sale of assets. Other
factors considered also include the frequency and volume of sales in prior periods, how the asset's performance is
evaluated and reported to key management personnel.

Assessment whether contractual cash flows are solely payments of principal and interest (“SPPI”)

Where the business model is to hold the financial assets to collect contractual cash flows, or to collect contractual
cash flows and sell, the Group and the Bank assess whether the financial assets’ contractual cash flows represent
solely payment of principal and interest. In applying the SPPI test, the Group and the Bank consider whether the
contractual cash flows are consistent with a basic lending arrangement, i.e. interest includes only consideration for
time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending
arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic
lending arrangement, the related financial asset is classified and measured at fair value through profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash
flows are solely payment of principal and interest.

(ii) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group and
the Bank commit to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or have been transferred and the Group and the Bank have transferred
substantially all the risks and rewards of ownership.

190 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D Financial assets (continued)

(iii) Measurement

At initial recognition, the Group and the Bank measure a financial asset at its fair value plus, in the case of a financial
asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of
the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in
statements of income.

Debt instruments

Subsequent measurement of debt instruments depends on the Group's and the Bank's business model for managing
the financial asset and the cash flow characteristics of the financial asset. There are three measurement categories
into which the Group and the Bank classify its debt instruments:

(a) Amortised cost

Financial assets that are held for collection of contractual cash flows where those cash flows represent SPPI,
and that are not designated at fair value through profit or loss, are measured at amortised cost using the
effective interest method. Interest/profit income from these financial assets is included in interest income and
income from Islamic Banking business using the effective interest/profit rate method. Any gain or loss arising
on derecognition is recognised directly in statements of income as presented in net realised gain or loss on
financial instruments. Impairment losses are presented as separate line item (as per Note 38 and Note 39) in
the statements of income.

(b) Fair value through other comprehensive income

Financial assets that are held for collection of contractual cash flows and for selling the financial assets, where
the financial assets’ cash flows represent SPPI, and that are not designated at fair value through profit or
loss, are measured at fair value through other comprehensive income. Movements in the carrying amount
are taken through OCI, except for the recognition of impairment gains or losses, interest/profit income and
foreign exchange gains and losses which are recognised in statements of income. When the financial asset is
derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to statements
of income and recognised in net realised gain or loss on financial instruments. Interest/profit income from
these financial assets is included in interest income and income from Islamic Banking business using the
effective interest/profit rate method. Foreign exchange gains and losses are presented in other income and
impairment losses are presented as separate line item (as per Note 39) in the statements of income.

(c) Fair value through profit or loss

Financial assets that do not meet the criteria for amortised cost or fair value through other comprehensive
income are measured at fair value through profit or loss. The Group and the Bank may also irrevocably
designate financial assets at fair value through profit or loss if doing so significantly reduces or eliminates a
mismatch created by assets and liabilities being measured on different bases. Fair value changes is recognised
in statements of income and presented net within net unrealised gain or loss on revaluation in the period
which it arises.

Annual Report 2020 191

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D Financial assets (continued)

(iii) Measurement (continued)

Equity instruments

The Group and the Bank subsequently measure all equity investments at fair value through profit or loss, except
where the management has elected, at initial recognition to irrevocably designate an equity instrument at fair value
through other comprehensive income. Where the Group's and the Bank's management have elected to present fair
value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and
losses to statements of income following the derecognition of the investment. Cumulative gain or loss previously
recognised in OCI is not subsequently reclassified to statements of income, but is to be transferred to retained profits.
Dividends from such investments continue to be recognised in statements of income as other income when the
Group's and the Bank's right to receive payments is established.

Changes in the fair value of equity instruments designated as financial assets at fair value through profit or loss are
recognised in net unrealised gain or loss on revaluation in the statements of income.

(iv) Reclassification policy

Reclassification of financial assets is required when, and only when, the Group and the Bank change their business
model for managing the assets. In such cases, the Group and the Bank are required to reclassify all affected financial
assets.

However, it will be inappropriate to reclassify financial assets that have been designated at fair value through profit
or loss, or equity instruments that have been designated as at fair value through other comprehensive income even
when there is a change in business model. Such designations are irrevocable.

E Financial liabilities

Financial liabilities are measured at amortised cost, except for trading liabilities designated at fair value, which are held at
fair value through profit or loss. Financial liabilities are initially recognised at fair value plus transaction costs for all financial
liabilities not carried at fair value through profit or loss. Financial liabilities at fair value through profit or loss are initially
recognised at fair value, and transaction costs are expensed in statements of income. Financial liabilities are de-recognised
when extinguished.

(i) Financial liabilities at fair value through profit or loss

This category comprises two sub-categories: financial liabilities as held-for-trading, and financial liabilities designated
at fair value through profit or loss upon initial recognition.

A financial liability is classified as held-for-trading if it is acquired or incurred principally for the purpose of selling
or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed
together and for which there is evidence of a recent actual pattern of short term profit-taking. Derivatives are also
categorised as held-for-trading unless they are designated as hedges.

192 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E Financial liabilities (continued)

(i) Financial liabilities at fair value through profit or loss (continued)

The Group and the Bank have also designated certain structured deposits at fair value through profit or loss as
permitted under MFRS 9 'Financial Instruments' as it significantly reduces accounting mismatch that would otherwise
arise from measuring the corresponding assets and liabilities on different basis.

(ii) Financial liabilities at amortised cost

Financial liabilities that are not classified as fair value through profit or loss fall into this catergory and are measured at
amortised cost. Financial liabilities are initially recognised at fair value plus transaction costs. Subsequently, financial
liabilities are remeasured at amortised cost using the effective interest/profit rate.

Financial liabilities measured at amortised cost are deposits from customers, investment accounts of customers,
deposits and placements of banks and other financial institutions, obligations on securities sold under repurchase
agreements, bills and acceptances payable, lease liabilities, other financial liabilities, recourse obligation on loans/
financing sold to Cagamas, Tier 2 subordinated bonds, Multi-currency additional Tier 1 capital securities and Innovative
Tier 1 capital securities.

F Property and equipment and depreciation

Property and equipment are initially recorded at cost net of the amount of goods and services tax (“GST”) except where
the amount of GST incurred is not recoverable from the government. When the amount of GST incurred is not recoverable
from the government, the GST is recognised as part of the cost of acquisition of the property and equipment. The cost of
an item of property and equipment initially recognised includes its purchase price and any cost that is directly attributable
to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by
management. Cost also includes borrowing costs that are directly attributable to the acquisition, construction or production
of a qualifying asset. With effect from 1 June 2018, GST is reduced from 6% to 0%.

Property and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the Bank and the cost of the
item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance
are charged to the statements of income during the financial period in which they are incurred.

Freehold land is not depreciated as it has an infinite life. Other property and equipment are depreciated on a straight line
basis to write off the cost of the assets to their residual values over their estimated useful lives, summarised as follows:

Leasehold land Over the remaining period of the lease or 100 years (1%) whichever is shorter
Buildings on freehold land 2%
Buildings on leasehold land Over the remaining period of the lease or 50 years (2%) whichever is shorter
Office furniture, fittings,
equipment and renovations
and computer equipment 10% - 33%
Motor vehicles 25%

Annual Report 2020 193

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

F Property and equipment and depreciation (continued)

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Depreciation on assets under construction commences when the assets are ready for their intended use.

Property and equipment are reviewed for indication of impairment at each statements of financial position date and
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Where the
carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in
non-interest income.

Accounting policies applied from 1 July 2019

From 1 July 2019, leased assets presented under Property and equipment and Prepaid lease payments are right-of-use
assets within the scope of MFRS 16. See Note H for the accounting policies on right-of-use assets.

G Intangible assets

(i) Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the
specific software. These costs are amortised over their estimated useful lives of 3 years to 8 years.

(ii) Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the aggregate of the acquisition
date fair value of consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the net of the acquisition date fair
value of the identifiable assets acquired and liabilities assumed. If the fair value of consideration transferred,
the amount of non-controlling interest and the fair value of previously held interest in the acquiree are less than the
fair value of the net identifiable assets of the acquiree, the resulting gain is recognised in the statements of income.

Goodwill is allocated to cash-generating units (“CGUs”) for the purpose of impairment testing. The allocation is made
to those cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of
the business combination in which the goodwill arose. Each unit or group of units to which the goodwill is allocated
represents the lowest level within the entity at which goodwill is monitored for internal management purposes.
Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of
value in use and the fair value less cost of disposal. Any impairment is recognised immediately as an expense and is
not subsequently reversed.

194 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G Intangible assets (continued)

(iii) Other intangible assets

Other intangible assets include core deposits and customer relationships. These intangible assets were acquired in a
business combination and are valued using income approach methodologies. These intangible assets are stated at
cost less accumulated amortisation and any accumulated impairment losses.

Other intangible assets have finite useful lives as follows:

Core deposit: 7 years

Customer relationships: 10 years

H Leases

Accounting policies applied until 30 June 2019

(i) Finance lease

Assets purchased under lease which in substance transfers substantially all the risks and rewards of ownership of
the assets to the Group or the Bank are capitalised under property and equipment. The assets and the corresponding
lease obligations are recorded at the lower of the present value of the minimum lease payments or the fair value
of the leased assets at the beginning of the lease term. Such leased assets are subject to depreciation on the same
basis as other property and equipment.

Leases which do not meet such criteria are classified as operating lease and the related rentals are charged to
statements of income.

(ii) Operating lease

Leases of assets under which substantially all the risks and rewards of ownership are retained by the lessor are
classified as operating leases.

Payments made under operating leases are charged to the statements of income on a straight line basis over the
period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the
lessor by way of penalty is recognised as an expense in the period in which termination takes place.

Accounting policies applied from 1 July 2019

In applying MFRS 16 for the first time, the Group and the Bank have applied the following practical expedients permitted
by the standard to leases previously classified as operating leases under MFRS 117:

• the use of a single discount rate to a portfolio of leases with reasonably similar characteristics; and
• the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as
short-term leases.

Annual Report 2020 195

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

H Leases (continued)

Accounting policies applied from 1 July 2019 (continued)

Leases are recognised as right-of-use (“ROU”) asset and a corresponding liability at the date on which the leased asset is
available for use by the Group and the Bank (i.e. the commencement date).

Contracts may contain both lease and non-lease components. The Group and the Bank allocate the consideration in the
contract to the lease and non-lease components based on their relative stand-alone prices.

Lease term

In determining the lease term, the Group and the Bank considers all facts and circumstances that create an economic
incentive to exercise an extension option, or not to exercise a termination option. Extension options (or periods after
termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not to be
terminated).

The Group and the Bank reassess the lease term upon the occurrence of a significant event or change in circumstances
that is within the control of the Group and the Bank, and affects whether the Group and the Bank is reasonably certain
to exercise an option not previously included in the determination of lease term, or not to exercise an option previously
included in the determination of lease term. A revision in lease term results in remeasurement of the lease liabilities. See
accounting policy below on reassessment of lease liabilities.

ROU assets

ROU assets are initially measured at cost comprising the following:

• the amount of the initial measurement of lease liability;

• any lease payments made at or before the commencement date less any lease incentive received;
• any initial direct costs; and
• decommissioning or restoration costs.

ROU assets that are not investment properties are subsequently measured at cost, less accumulated depreciation and
impairment loss (if any). The ROU assets are generally depreciated over the shorter of the asset’s useful life and the lease
term on a straight-line basis. If the Group and the Bank are reasonably certain to exercise a purchase option, the ROU asset
is depreciated over the underlying asset’s useful life. In addition, the ROU assets are adjusted for certain remeasurement
of the lease liabilities.

Lease liabilities

Lease liabilities are initially measured at the present value of the lease payments that are not paid at that date. The lease
payments include the following:

• fixed payments (including in-substance fixed payments), less any lease incentive receivable;
• amounts expected to be payable by the Group and the Bank under residual value guarantees;
• the exercise price of a purchase and extension options if the Group and the Bank are reasonably certain to exercise
that option; and

196 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

H Leases (continued)

Accounting policies applied from 1 July 2019 (continued)

Lease liabilities (continued)

• payments of penalties for terminating the lease, if the lease term reflects the Group and the Bank exercising that
option.

Lease payments are discounted using the interest/profit rate implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group and the Bank, an incremental borrowing rate is used in determining
the discount rate which assumes the interest/profit rate that the Group and the Bank would have to pay to borrow over a
similar term, the funds necessary to obtain the asset.

Lease payments are allocated between principal and finance cost. The finance cost is charged to statements of income
over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period.

The Group and the Bank present the lease liabilities as a separate line item in the statements of financial position. Interest
expense on the lease liability is presented within the other interest expenses in the statements of income.

Short term leases and leases of low value assets

The Group and the Bank elect to apply MFRS 16 recognition exemption such as short-term leases and leases for which the
underlying asset is of low value. Short-term leases are leases with a lease term of 12 months or less with no purchase
option. Low-value assets comprise IT equipment and small items of office furniture. Payments associated with short-term
leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense
in the statements of income.

I Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets
that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying
amount of the assets exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
cost of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for
which separately identifiable cash flows which are largely independent of the cash inflows from other assets or groups of
assets (cash generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.

The impairment loss is charged to the statements of income unless it reverses a previous revaluation in which case it is
charged to the revaluation surplus. Any subsequent increase in recoverable amount of non-financial assets (other than
goodwill) is recognised in the statements of income unless it reverses an impairment loss on a revalued asset in which
case it is taken to revaluation surplus.

Annual Report 2020 197

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

J Current and deferred income taxes

The tax expense for the period comprises current and deferred income tax. The income tax expense or credit for the period
is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction
adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is recognised in other comprehensive income or directly in equity, respectively. The
liabilities in relation to tax penalties or its associated interest are included within the taxation liability on the statements of
financial position and charged to the tax expense in the statements of income as under provision of prior year tax.

Current income tax expense is determined according to the tax laws enacted or substantively enacted at the end of the
reporting period of each jurisdiction in which the Group operates and generates taxable income and includes all taxes
based upon the taxable profits.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be
paid to the tax authorities. This liability is measured using the single best estimate of the most likely outcome.

Deferred income tax is recognised in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are
not recognised if they arise from the initial recognition of goodwill. Deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which
the temporary differences of unused tax losses or unused tax credits can be utilised.

Deferred tax liability is recognised on temporary differences arising on investments in subsidiaries, associates and joint
ventures except where the timing of the reversal of the temporary difference can be controlled by the Group and it is
probable that the temporary difference will not reverse in the foreseeable future. Generally the Group is unable to control
the reversal of the temporary difference for associates and joint ventures. Only where there is an agreement in place that
gives the Group the ability to control the reversal of the temporary difference, a deferred tax liabilities is not recognised.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries,
associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future
and there is sufficient taxable profit available against which the deductible temporary difference can be utilised.

Deferred income tax related to fair value remeasurement of financial instruments at fair value through other comprehensive
income, which are charged or credited directly to equity, is also credited or charged directly to equity and is subsequently
recognised in the statements of income together with the deferred gain or loss.

Deferred income tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the
end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax
liability is settled.

Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied by the same
taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances
on a net basis.

198 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

K Derivative financial instruments and hedging

The Group and the Bank have elected an accounting policy choice under MFRS 9 to continue to apply the hedge accounting
requirements under MFRS 139 on the adoption of MFRS 9 on 1 July 2018.

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair value at the end of each reporting period. Fair values are obtained from quoted market prices in
active markets, including recent market transactions, and valuation techniques, including discounted cash flow models and
option pricing models, as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when
fair value is negative. Changes in the fair value of any derivatives that do not qualify for hedge accounting are recognised
immediately in the statements of income. Cash collateral held in relation to derivative transactions are carried at amortised
cost.

The best evidence of fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of the
consideration given or received) unless the fair value of the instrument is evidenced by comparison with other observable
current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation
technique whose variables include only data from observable markets. When such evidence exists, the Group and the Bank
recognise profits immediately.

The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the item being hedged. The Group and the Bank designated certain derivatives
as either: (1) hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge) or
(2) hedges of highly probable future cash flows attributable to a recognised asset or liability, or a forecasted transaction
(cash flow hedge) or (3) hedges of a net investment in a foreign operation (net investment hedge). Hedge accounting is
used for derivatives designated in this way provided certain criteria are met.

At the inception of the transaction, the Group and the Bank document the relationship between hedging instruments and
hedged items, as well as their risk management objective and strategy for undertaking various hedge transactions. The
Group and the Bank also document their assessments, both at hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes
in fair values or cash flows of hedged items.

(i) Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the
statements of income, together with any changes in the fair value of the hedged assets or liabilities that are
attributable to the hedged risk.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged
item for which the effective interest method is used is amortised to statements of income over the period to maturity
using a recalculated effective interest rate.

Annual Report 2020 199

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

K Derivative financial instruments and hedging (continued)

(ii) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
are recognised in equity. The gain and loss relating to the ineffective portion is recognised immediately in the
statements of income. Amounts accumulated in equity are recycled to the statements of income in the financial
periods in which the hedged item will affect statements of income.

When a hedging instrument expires or is sold or transferred, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when
the forecast transaction is ultimately recognised in the statements of income. When a forecast transaction is no
longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to the
statements of income.

(iii) Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are recognised immediately in the statements of income.

L Currency translations

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (“the functional currency”). The consolidated financial
statements are presented in Ringgit Malaysia, which is the Bank’s functional and presentation currency.

(ii) Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in the statements of income, except when deferred
in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to items that form
part of the net investment in a foreign operation.

Changes in the fair value of monetary securities denominated in foreign currency classified as financial instruments at
fair value through other comprehensive income are analysed between translation differences resulting from changes
in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences
related to changes in the amortised cost are recognised in the statements of income, and other changes in the
carrying amount are recognised in other comprehensive income.

200 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

L Currency translations (continued)

(ii) Foreign currency transactions and balances (continued)

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates
at the date when the fair value is determined. Translation differences such as equity held at fair value through profit
or loss and assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation
differences on non-monetary financial assets such as equities held at fair value through profit or loss are recognised
in income as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as
equities classified as financial assets at fair value through other comprehensive income are included in the fair value
reserve in other comprehensive income.

(iii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the presentation
currency as follows:

• assets and liabilities for each statements of financial position presented are translated at the closing rate at the
date of the statements of financial position;

• income and expenses for each statements of income are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and
of borrowings and other currency instruments designated as hedges of such investments, are recognised in other
comprehensive income.

On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a
disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint
control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant
influence over an associate that includes a foreign operation), all of the exchange differences relating to that foreign
operation recognised in other comprehensive income and accumulated in the separate component of equity are
reclassified to statements of income. In the case of a partial disposal that does not result in the Group losing control
over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are
re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (that
is, reductions in the group’s ownership interest in associates or jointly controlled entities that do not result in the
group losing significant influence or joint control) the proportionate share of the accumulated exchange difference is
reclassified to statements of income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities
of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other
comprehensive income.

Annual Report 2020 201

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

M Employee benefits

(i) Short-term employee benefits

Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary benefits that are expected to be
settled wholly within 12 months after the end of the period in which the employees render the related services are
recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts
expected to be paid when the liabilities are settled.

The Group and the Bank recognise a liability and an expense for bonuses. The Group and the Bank recognise a
provision where contractually obliged or where there is a past practice that has created a constructive obligation.

(ii) Defined contribution plan

A defined contribution plan is a pension plan under which the Group and the Bank pay fixed contributions into a
separate entity (a fund) on a mandatory, contractual or voluntary basis and the Group and the Bank has no legal or
constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees
benefits relating to employee service in the current and prior financial periods.

The Group and the Bank contributes to a national defined contribution plan (the Employee Provident Fund) on a
mandatory basis and the amounts contributed to the plan are charged to the statements of income in the financial
period to which they relate. Once the contributions have been paid, the Group and the Bank have no further payment
obligations.

Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future
payments is available.

(iii) Share-based compensation

The Bank operates an equity-settled, share-based compensation plan for the employees of the Bank under which the
Bank receives services from employees as consideration for equity instruments (options) of the Bank. The fair value
of the employee services received in exchange for the grant of the share options is recognised as an expense in the
statements of income over the vesting periods of the grant with a corresponding increase to share options reserve
within equity.

The total amount to be expensed over the vesting period is determined by reference to the fair value of the share
options granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are
included in assumptions about the number of options that are expected to vest. At each statements of financial
position date, the Bank revises its estimates of the number of share options that are expected to vest based on the
non-market vesting conditions. It recognises the impact of the revision of original estimates, if any, in the statements
of income, with a corresponding adjustment to share options reserve in equity.

A trust has been set up for the Executive Share Option Scheme (“ESOS”) and is administered by an appointed trustee.
The trustee will be entitled from time to time to accept financial assistance from the Bank upon such terms and
conditions as the Bank and the trustee may agree to purchase the Bank’s shares from the open market for the
purposes of this trust.

202 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

M Employee benefits (continued)

(iii) Share-based compensation (continued)

In accordance with MFRS 132 'Financial Instruments: Presentation', the shares purchased for the benefit of the ESOS
holders are recorded as “Treasury Shares” in equity on the statements of financial position. The cost of operating the
ESOS scheme would be charged to the statements of income when incurred in accordance with accounting standards.

When the options are exercised, the Bank transfers the Treasury shares for ESOS scheme to the ESOS holder. The
Treasury shares and share options reserve would be adjusted against the retained earnings.

When the options are exercised, the Bank may also issue new shares. The proceeds received net of any directly
attributable transaction costs are credited to share capital.

When options are not exercised and lapsed, the share options reserve is transferred to retained earnings.

N Impairment of financial assets

The Group and the Bank assess on a forward looking basis the ECL associated with its financial assets carried at amortised
cost and fair value through other comprehensive income. The impairment methodology applied depends on whether there
has been a significant increase in credit risk.

The Group and the Bank assess whether the credit risk on an exposure has increased significantly on an individual or
collective basis. The Group and the Bank first assess whether objective evidence of impairment exists for financial assets
which are individually significant. If the Group and the Bank determine the objective evidence of impairment exists, i.e.
credit-impaired for an individually assessed financial asset, a lifetime ECL will be recognised for impairment loss. Financial
assets which are collectively assessed are grouped on the basis of similar credit risk characteristics.

The Group and the Bank have adopted the general approach for ECL.

Financial assets accounted for at amortised cost, fair value through other comprehensive income and with the
exposure arising from loan commitments and financial guarantee contracts - General Approach

ECL will be assessed using an approach which classified financial assets into three stages which reflects the change in credit
quality of the financial assets since initial recognition:

(a) Stage 1: 12-months ECL - not credit impaired

Stage 1 includes financial assets which have not had a significant increase in credit risk since initial recognition or
which have low credit risk at reporting date. 12-months ECL is recognised and interest income is calculated on the
gross carrying amount of the financial assets.

(b) Stage 2: Lifetime ECL - not credit impaired

Stage 2 includes financial assets which have had a significant increase in credit risk since initial recognition (unless
they have low credit risk at the reporting date) but do not have objective evidence of impairment. Lifetime ECL is
recognised and interest income is calculated on the gross carrying amount of the financial assets.

Annual Report 2020 203

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

N Impairment of financial assets (continued)

Financial assets accounted for at amortised cost, fair value through other comprehensive income and with the
exposure arising from loan commitments and financial guarantee contracts - General Approach (continued)

(c) Stage 3: Lifetime ECL - credit impaired

Stage 3 includes financial assets that have objective evidence of impairment at the reporting date. Lifetime ECL is
recognised and interest income is calculated on the net carrying amount of the financial assets.

Significant increase in credit risk

At each reporting date, the Group and the Bank assess whether there has been a significant increase in credit risk for
exposures since initial recognition to determine whether the exposure is subject to 12-month ECL or lifetime ECL. This is
performed by comparing the risk of default occurring over the remaining expected life from the reporting date and the date
of initial recognition. When determining whether the risk of default has increased significantly since initial recognition, the
Group and the Bank consider both quantitative and qualitative information and assessments based on the Group's and the
Bank's historical experience and credit risk assessments, including forward-looking information. A backstop of 30 days or
1 month past due from its contractual payment is applied and a financial asset will still be designated as having significant
increase in credit risk regardless if it meets both the quantitative and qualitative assessments.

Definition of default and credit-impaired financial assets

At each reporting period, the Group and the Bank assess whether financial assets are impaired. Qualitative and quantitative
information are used to determine if a financial asset is credit impaired. Nevertheless, a backstop is applied and a financial
asset is considered as credit impaired if it is more than 90 days or 3 months past due on its contractual payments.

As part of the assessment of impairment of financial assets under ECL model, the default definition, which is largely align
with regulatory reporting purposes, has been applied to three main components, which is a probability of default (“PD”)
model, a loss given default (“LGD”) model and exposure at default (“EAD”) model respectively.

Where measurement of ECL is relying on external published sources, in determining if a financial asset is credit-impaired,
the Group and the Bank will consider factors, such as, but not limited to, rating agencies' assessment of creditworthiness
and country's ability to access to capital markets for new debt issuance.

Measurement of ECL

ECL are measured using three main components, which include PD, LGD and EAD. These components are derived from
internally developed statistical models and adjusted to reflect forward-looking information as set out below.

204 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

N Impairment of financial assets (continued)

Financial assets accounted for at amortised cost, fair value through other comprehensive income and with the
exposure arising from loan commitments and financial guarantee contracts - General Approach (continued)

Measurement of ECL (continued)

The 12-month and lifetime PD represent the expected point-in-time probability of default over the next 12 months
and remaining lifetime of a financial instrument, based on conditions that exist at the reporting date and taking into
consideration of future economic conditions that affect credit risk. The LGD component represents that expected loss if
a default event occurs at a given time, taking into account the mitigating effect of collateral, its expected value when
realised and time value of money. The EAD represents the expected exposure at default, taking into account the repayment
of principal and interest from the reporting date to the default event together with expected drawdown and utilisation
of a facility. The 12-month ECL is equal to the discounted sum over the next 12 months of monthly PD multiplied by LGD
and EAD. The discount rate used in the ECL measurement is the original effective interest/profit rate or an approximation
thereof.

The measurement of ECL reflects an unbiased and probability-weighted amount that is derived by evaluating a range of
possible macroeconomic outcome, the time value of money together with reasonable and supportable information that
is available without undue cost or effort at the reporting date about past events, current conditions and forecast of future
economic conditions.

Forward looking information

The Group and the Bank have internally developed methodologies for the application of forward looking macroeconomic
(“MEV”) which consist of economic indicators and industry statistics in the measurement of ECL. This involves the
incorporation of MEV forward looking into PD estimation, which is determined based on probability-weighted outcome
from a range of economic scenarios. No MEV was incorporated into LGD estimation due to insufficient data points and lack
of solid statistical results supporting the said application.

The measurement of ECL incorporates a broad range of forward-looking information as economic inputs, such as but not
limited to:

- Gross Domestic Product (“GDP”)

- Unemployment Rate
- Consumer Price Index
- House Price Index

The Group and the Bank apply three economic scenarios to reflect an unbiased probability-weighted range of possible
future outcome in estimating ECL:

Base case: This represents 'most likely outcome' of future economic conditions which are backed by consensus forecast
from various sources.

Best and Worst case: This represent the 'upside' and 'downside' outcome of future economic conditions by making references
to past historical cyclical conditions together with incorporation of best estimates and judgements on an unbiased basis.

Annual Report 2020 205

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

N Impairment of financial assets (continued)

Modification of loans/financing

The Group and the Bank may renegotiate or otherwise modify the contractual cash flows of loans/financing to customers.
When this happens, the Group and the Bank assess whether or not the new terms are substantially different to the original
terms.

The Group and the Bank do this by considering, among others, the following factors:

• If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to
amounts the borrower is expected to be able to pay.
• Whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially
affects the risk profile of the loan.
• Significant extension of the loan term when the borrower is not in financial difficulty.
• Significant change in the interest/profit rate.
• Change in the currency the loan/financing is denominated in.
• Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with
the loan/financing.

If the terms are substantially different, the Group and the Bank derecognise the original financial asset and recognises
a 'new' asset at fair value and recalculates a new effective interest/profit rate for the asset. The date of renegotiation
is consequently considered to be the date of initial recognition for impairment calculation purposes, including for the
purpose of determining whether a significant increase in credit risk has occurred. However, the Group and the Bank also
assess whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in
circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed payments.
Differences in the carrying amount are also recognised in statements of income as a gain or loss on derecognition.

If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and
the Group and the Bank recalculate the gross carrying amount based on the revised cash flows of the financial asset
and recognises a modification gain or loss in statements of income. The new gross carrying amount is recalculated by
discounting the modified cash flows at the original effective interest/profit rate (or credit–adjusted effective interest/profit
rate for purchased or originated credit-impaired financial assets).

The impact of modifications of financial assets on the expected credit loss calculation is discussed in Note 32 and Note 34.

O Derecognition of financial assets and financial liabilities other than on a modification

Financial assets are derecognised when the contractual rights to receive the cash flows from these assets have ceased to
exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also
transferred. Financial liabilities are derecognised when they have been redeemed or otherwise extinguished.

Collateral furnished by the Bank under standard repurchase agreements transactions is not derecognised because the
Bank retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for
derecognition are therefore not met.

206 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

P Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is presented in the statements of financial position where
there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or
realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future
events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy.

Q Financial guarantee contracts

Financial guarantee contracts are contracts that require the Group or the Bank to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms
of a debt instrument.

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued and the liability is
initially measured at fair value.

The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the
contractual payments required under the debt instrument and the payments that would be required without the guarantee,
or the estimated amount that would be payable to a third party for assuming the obligations.

Financial guarantee contracts are subsequently measured at the higher of the amount determined in accordance with the
ECL model under MFRS 9 ʻFinancial Instrumentsʼ and the amount initially recognised less cumulative amount of income
recognised in accordance with the principles of MFRS 15 ʻRevenue from Contracts with Customersʼ, where appropriate.

R Foreclosed properties

Foreclosed properties are stated at the lower of carrying amount and fair value less cost to sell.

S Bills and acceptances payable

Bills and acceptances payable represent the Group’s and the Bank’s own bills and acceptances rediscounted and outstanding
in the market.

T Provisions

Provisions are recognised by the Group and the Bank when all of the following conditions have been met:

(i) the Group and the Bank have a present legal or constructive obligation as a result of past events;
(ii) it is probable that an outflow of resources to settle the obligation will be required; and
(iii) a reliable estimate of the amount of obligation can be made.

Where the Group and the Bank expect a provision to be reimbursed by another party, the reimbursement is recognised as
a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating
losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined
by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with
respect to any one item included in the same class of obligations may be small.

Annual Report 2020 207

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

T Provisions (continued)

Provisions are measured at the present value of management's best estimate of the expenditures expected to be required
to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and risks
specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

U Cash and cash equivalents

Cash and short-term funds in the statements of financial position comprise cash balances and deposits with financial
institutions and money at call with a maturity of one month or less, which are subject to an insignificant risk of changes in
value.

For the purpose of the statements of cash flows, cash and cash equivalents comprise cash and short-term funds and
deposits and placements with financial institutions, with original maturity of 3 months or less.

V Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker is the person or group that allocates resources and assesses the
performance of the operating segments of an entity. The Group has determined the Board of Directors as the collective
body of chief operating decision makers.

Segment revenue, expense, assets and liabilities are those amount resulting from the operating activities of a segment
that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the
segment. Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group
transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and
transactions are between group enterprises within a single segment.

W Share capital

(i) Classification

Ordinary shares are classified as equity. Other shares are classified as equity and/or liability according to the substance
of the particular instrument.

(ii) Share issue costs

Incremental external costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.

(iii) Dividends

Distributions to shareholders are recognised directly in equity. Liability is recognised for the amount of any dividend
declared, being appropriately authorised and no longer at the discretion of the Group, on or before the end of the
reporting period but not distributed at the end of the reporting period.

208 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

W Share capital (continued)

(iv) Purchase of own shares

The Bank has repurchased its shares and designated as treasury shares in accordance with MFRS 132 ʻFinancial
Instruments: Presentationʼ. Treasury shares consist of those own shares purchased pursuant to Section 127 of the
Companies Act 2016 and those purchased pursuant to ESOS scheme.

Where the Bank or its subsidiaries purchases the Bank’s equity share capital (treasury shares), the consideration
paid, including any directly attributable incremental costs, net of tax, is deducted from equity attributable to the
Bank’s equity holders as treasury shares until they are cancelled, reissued or disposed off. Where such shares are
subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction
costs and the related tax effects, is adjusted against treasury shares.

X Contingent assets and contingent liabilities

The Group does not recognise contingent assets and liabilities other than those arising from business combinations, but
discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events
whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the
control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources
will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability
that cannot be recognised because it cannot be measured reliably. However, contingent liabilities do not include financial
guarantee contracts. A contingent asset is a possible asset that arises from past events whose existence will be confirmed
by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group
does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not
virtually certain.

Y Sale and repurchase agreements

Securities purchased under resale agreements are securities which the Group and the Bank had purchased with a
commitment to re-sell at future dates. The commitment to re-sell the securities is reflected as an asset on the statements
of financial position.

Conversely, obligations on securities sold under repurchase agreements are securities which the Group had sold from its
portfolio, with a commitment to repurchase at future dates. Such financing transactions and the obligation to repurchase
the securities are reflected as a liability on the statements of financial position.

The difference between the sale and repurchase price as well as purchase and resale price is treated as interest and
accrued over the life of the resale/repurchase agreement using the effective yield method.

Annual Report 2020 209

Notes to the Financial Statements
for the financial year ended 30 June 2020

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Z Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing:

* the profit attributable to owners of the Bank, excluding any costs of servicing equity other than ordinary shares.
* by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and excluding treasury shares.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures in the determination of basic earnings per share to take into account:

* the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares, and
* the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.

AA Financial assistance scheme

Financing under a government scheme is recognised and measured in accordance with MFRS 9 Financial Instruments, with
the benefit at a below market rate measured as the difference between the initial carrying amount or fair value of the
financing and the amount received.

The benefits of such schemes that addresses identified costs or expenses incurred by the Group and the Bank is recognised
in the statements of income in the same financial period in accordance with MFRS 120.

3 CASH AND SHORT-TERM FUNDS

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Cash and balances with banks and other financial institutions 2,615,425 1,845,729 1,842,619 1,563,734
Money at call and deposit placements maturing within
one month 5,946,901 3,010,236 3,702,258 2,819,993
8,562,326 4,855,965 5,544,877 4,383,727
Less: Expected credit losses (157) (509) (1,077) (653)
8,562,169 4,855,456 5,543,800 4,383,074

210 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

4 DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Licensed banks 919,858 1,291,668 1,820,099 1,467,320

Central banks 132,584 - - -
1,052,442 1,291,668 1,820,099 1,467,320
Less: Expected credit losses (63) (252) (1,925) (1,380)
1,052,379 1,291,416 1,818,174 1,465,940

5 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (“FVTPL”)

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Money market instruments

Government treasury bills 579,866 21,900 579,866 21,900
Malaysian Government securities 747,323 2,245,849 747,323 2,245,849
Malaysian Government investment certificates 1,135,704 1,824,682 1,114,035 1,309,387
Cagamas bonds 166,697 76,386 166,697 76,386
Khazanah bonds 19,999 136,726 19,999 136,726
Other Government securities 47,452 92,163 47,452 92,163
2,697,041 4,397,706 2,675,372 3,882,411
Quoted securities
Wholesale fund/unit trust 4,657,038 7,066,213 4,657,038 7,066,213
Foreign currency bonds in Malaysia 159,401 60,375 159,401 60,375
Foreign currency bonds outside Malaysia 145,069 108,167 145,069 108,167
7,658,549 11,632,461 7,636,880 11,117,166
Unquoted securities
Corporate bonds and sukuk 55,211 162,134 55,211 162,134
Shares in Malaysia 330,636 305,572 330,636 305,572
Redeemable preference shares 25,000 30,866 25,000 30,866
8,069,396 12,131,033 8,047,727 11,615,738

Annual Report 2020 211

Notes to the Financial Statements
for the financial year ended 30 June 2020

6 FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”)

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

At fair value
(a) Debt instruments 27,222,450 23,810,179 24,677,811 20,701,667
(b) Equity instruments 60,094 44,331 60,094 44,331
27,282,544 23,854,510 24,737,905 20,745,998

(a) Debt instruments

Money market instruments

Government treasury bills 487,768 - 487,768 -
Malaysian Government securities 2,106,857 1,420,656 2,106,857 1,420,656
Malaysian Government investment certificates 8,287,017 6,303,409 6,656,156 5,151,270
Negotiable instruments of deposit 950,404 1,197,900 700,603 899,135
Other Government securities 312,507 694,508 196,152 542,176
Cagamas bonds 1,687,440 1,311,562 1,522,417 1,045,677
Khazanah bonds 529,373 272,685 529,373 263,646
14,361,366 11,200,720 12,199,326 9,322,560
Quoted securities
Foreign currency bonds in Malaysia 2,131,473 1,776,207 2,131,473 1,743,093
Foreign currency bonds outside Malaysia 1,353,402 1,638,380 1,353,402 1,638,380
17,846,241 14,615,307 15,684,201 12,704,033
Unquoted securities
Malaysian Government sukuk 554,124 350,898 554,124 183,458
Corporate bonds and sukuk 8,091,050 7,318,697 7,708,451 6,288,899
Foreign currency bonds in Malaysia 306,295 973,343 306,295 973,343
Foreign currency bonds outside Malaysia 424,740 551,934 424,740 551,934
27,222,450 23,810,179 24,677,811 20,701,667

Included in the debt instruments at FVOCI are securities which are pledged as collateral for obligations on securities sold under
repurchase agreements for the Group and the Bank amounting to RM2,925,732,000 (2019: RM2,387,337,000).

The carrying amount of debt instruments at FVOCI is equivalent to their fair value. The expected credit losses is recognised in other
comprehensive income and does not reduce the carrying amount in the statement of financial position.

212 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

6 FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”) (CONTINUED)

Movements in expected credit losses of debt instruments at FVOCI are as follows:

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Group RM’000 RM’000 RM’000 RM’000

2020
At 1 July 1,566 - 4,287 5,853
New financial assets originated or purchased 1,735 - - 1,735
Financial assets derecognised (1,046) - - (1,046)
Changes due to change in credit risk (197) - - (197)
Changes in models/risk parameters (20) - - (20)
Exchange differences 30 - - 30
At 30 June 2,068 - 4,287 6,355

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Group RM’000 RM’000 RM’000 RM’000

2019
At 1 July - - - -
Effect of adopting MFRS 9 2,428 - 4,453 6,881
At 1 July, as restated 2,428 - 4,453 6,881
New financial assets originated or purchased 502 - - 502
Financial assets derecognised (1,007) - (166) (1,173)
Changes due to change in credit risk (401) - - (401)
Exchange differences 44 - - 44
At 30 June 1,566 - 4,287 5,853

Annual Report 2020 213

Notes to the Financial Statements
for the financial year ended 30 June 2020

6 FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”) (CONTINUED)

Movements in expected credit losses of debt instruments at FVOCI are as follows: (continued)

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Bank RM’000 RM’000 RM’000 RM’000

2020
At 1 July 1,454 - 4,287 5,741
New financial assets originated or purchased 1,724 - - 1,724
Financial assets derecognised (975) - - (975)
Changes due to change in credit risk (158) - - (158)
Changes in models/risk parameters (18) - - (18)
Exchange differences 28 - - 28
At 30 June 2,055 - 4,287 6,342

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Bank RM’000 RM’000 RM’000 RM’000

2019
At 1 July - - - -
Effect of adopting MFRS 9 2,385 - 4,453 6,838
At 1 July, as restated 2,385 - 4,453 6,838
New financial assets originated or purchased 413 - - 413
Financial assets derecognised (994) - (166) (1,160)
Changes due to change in credit risk (392) - - (392)
Exchange differences 42 - - 42
At 30 June 1,454 - 4,287 5,741

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

(b) Equity instruments

Unquoted securities:
Shares in Malaysia 60,094 44,331 60,094 44,331

214 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

6 FINANCIAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”) (CONTINUED)

The Group and the Bank designated certain investments shown in the following table as equity instruments under FVOCI, which
is held for socio-economic purposes or not for trading purposes.

Dividend
income
recognised
during the
Fair value financial year
The Group and The Bank RM’000 RM’000

2020
Securities:
RAM Holdings Berhad 9,357 3,683
Payments Network Malaysia Sdn Bhd 49,554 -
Others 1,183 -
60,094 3,683

Dividend
income
recognised
during the
Fair value financial year
The Group and The Bank RM’000 RM’000

2019
Securities:
RAM Holdings Berhad 7,444 203
Payments Network Malaysia Sdn Bhd 35,875 -
Others 1,012 -
44,331 203

Annual Report 2020 215

Notes to the Financial Statements
for the financial year ended 30 June 2020

7 FINANCIAL INVESTMENTS AT AMORTISED COST

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Money market instruments

Government treasury bills - 53,820 - 53,820
Malaysian Government securities 2,764,183 102,105 2,764,183 102,105
Malaysian Government investment certificates 10,871,164 8,721,860 7,301,857 5,887,037
Khazanah bonds 316,038 304,266 278,110 267,837
Other Government securities 456,623 326,179 437,425 307,305
14,408,008 9,508,230 10,781,575 6,618,104
Quoted securities
Foreign currency bonds in Malaysia 857,780 845,592 857,780 845,592
Foreign currency bonds outside Malaysia 145,577 151,587 145,577 151,587
15,411,365 10,505,409 11,784,932 7,615,283
Unquoted securities
Malaysian Government sukuk 2,659,375 2,657,094 1,695,435 1,694,196
Corporate bonds and sukuk 2,030,894 1,991,703 1,598,916 1,586,027
20,101,634 15,154,206 15,079,283 10,895,506
Less: Expected credit losses (202) (1,007) (202) (1,001)
20,101,432 15,153,199 15,079,081 10,894,505

Included in the financial investments at amortised cost are foreign currency bonds, which are pledged as collateral for obligations
on securities sold under repurchase agreements for the Group and the Bank amounting to RM218,408,000 (2019: RM Nil) and
RM218,408,000 (2019: RM Nil) respectively.

216 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

7 FINANCIAL INVESTMENTS AT AMORTISED COST (CONTINUED)

Movements in expected credit losses of financial investments at amortised cost are as follows:

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Group RM’000 RM’000 RM’000 RM’000

2020
At 1 July 180 - 827 1,007
Changes due to change in credit risk 20 - - 20
Amount written off - - (827) (827)
Exchange differences 2 - - 2
At 30 June 202 - - 202

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Group RM’000 RM’000 RM’000 RM’000

2019
At 1 July - - - -
Effect of adopting MFRS 9 3 - 827 830
At 1 July, as restated 3 - 827 830
New financial assets originated or purchased 178 - - 178
Exchange differences (1) - - (1)
At 30 June 180 - 827 1,007

Annual Report 2020 217

Notes to the Financial Statements
for the financial year ended 30 June 2020

7 FINANCIAL INVESTMENTS AT AMORTISED COST (CONTINUED)

Movements in expected credit losses of financial investments at amortised cost are as follows: (continued)

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Bank RM’000 RM’000 RM’000 RM’000

2020
At 1 July 174 - 827 1,001
Changes due to change in credit risk 24 - - 24
Amount written off - - (827) (827)
Exchange differences 4 - - 4
At 30 June 202 - - 202

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Bank RM’000 RM’000 RM’000 RM’000

2019
At 1 July - - - -
Effect of adopting MFRS 9 - - 827 827
At 1 July, as restated - - 827 827
New financial assets originated or purchased 174 - - 174
At 30 June 174 - 827 1,001

218 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

7 FINANCIAL INVESTMENTS AT AMORTISED COST (CONTINUED)

Movements in the carrying amount of financial investments at amortised cost that contributed to changes in the expected credit
losses are as follows:

Stage 1 Stage 2 Stage 3 Total

The Group RM’000 RM’000 RM’000 RM’000

2020
At 1 July 15,153,379 - 827 15,154,206
New financial assets originated or purchased 5,007,109 - - 5,007,109
Financial assets derecognised (75,115) - (827) (75,942)
Changes due to change in credit risk (13,654) - - (13,654)
Exchange differences 29,933 - - 29,933
Other movements (18) - - (18)
At 30 June 20,101,634 - - 20,101,634

Stage 1 Stage 2 Stage 3 Total

The Group RM’000 RM’000 RM’000 RM’000

2019
At 1 July -
Effect of adopting MFRS 9 15,649,093
At 1 July, as restated 15,648,266 - 827 15,649,093
New financial assets originated or purchased 7,101,214 - - 7,101,214
Financial assets derecognised (7,602,370) - - (7,602,370)
Exchange differences 33,213 - - 33,213
Other movements (26,944) - - (26,944)
At 30 June 15,153,379 - 827 15,154,206

Annual Report 2020 219

Notes to the Financial Statements
for the financial year ended 30 June 2020

7 FINANCIAL INVESTMENTS AT AMORTISED COST (CONTINUED)

Movements in the carrying amount of financial investments at amortised cost that contributed to changes in the expected credit
losses are as follows: (continued)
Stage 1 Stage 2 Stage 3 Total
The Bank RM’000 RM’000 RM’000 RM’000

2020
At 1 July 10,894,679 - 827 10,895,506
New financial assets originated or purchased 4,244,593 - - 4,244,593
Financial assets derecognised (75,439) - (827) (76,266)
Changes due to change in credit risk (14,465) - - (14,465)
Exchange differences 29,933 - - 29,933
Other movements (18) - - (18)
At 30 June 15,079,283 - - 15,079,283

Stage 1 Stage 2 Stage 3 Total

The Bank RM’000 RM’000 RM’000 RM’000

2019
At 1 July -
Effect of adopting MFRS 9 11,993,693
At 1 July, as restated 11,992,866 - 827 11,993,693
New financial assets originated or purchased 5,177,548 - - 5,177,548
Financial assets derecognised (6,281,476) - - (6,281,476)
Exchange differences 33,214 - - 33,214
Other movements (27,473) - - (27,473)
At 30 June 10,894,679 - 827 10,895,506

220 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

8 LOANS, ADVANCES AND FINANCING

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Overdrafts 3,590,801 3,863,555 2,751,759 3,119,277

Term loans/financing:
- Housing and shop loans/financing 82,482,204 76,495,886 65,361,213 61,165,045
- Syndicated/term loans or financing 13,850,875 11,740,501 9,721,008 8,717,446
- Hire purchase receivables 17,006,512 17,634,182 13,297,789 14,015,409
- Ijarah receivables 161,188 - - -
- Other term loans/financing 8,642,885 7,984,748 5,130,527 5,154,293
Credit/charge card receivables 3,094,683 3,597,974 3,094,683 3,597,974
Bills receivable 2,680,254 1,061,015 2,156,191 926,496
Trust receipts 1,476,882 421,884 1,444,741 306,390
Claims on customers under acceptance credits 5,235,605 8,029,521 4,487,325 7,276,246
Revolving credit 7,202,385 6,227,550 5,803,126 5,161,648
Staff loans/financing 143,067 138,753 131,302 132,620
Other loans/financing 365,021 370,814 365,020 370,455
Gross loans, advances and financing 145,932,362 137,566,383 113,744,684 109,943,299

Fair value changes arising from fair value hedges 21,714 3,473 18,955 3,473

Allowance for impairment losses:

- Expected credit losses (1,259,126) (1,261,639) (939,664) (1,011,802)
Total net loans, advances and financing 144,694,950 136,308,217 112,823,975 108,934,970

Included in loans, advances and financing are housing loans sold to Cagamas with recourse to the Group and the Bank amounting
to RM1,023,078,000 (2019: RM236,439,000) and RM297,169,000 (2019: RM188,181,000) respectively.

Annual Report 2020 221

Notes to the Financial Statements
for the financial year ended 30 June 2020

8 LOANS, ADVANCES AND FINANCING (CONTINUED)

(i) The maturity structure of loans, advances and financing is as follows:

The Group The Bank
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Maturing within:
- one year 26,269,928 26,236,955 22,339,034 23,183,492
- one year to three years 5,687,390 5,914,184 4,545,659 4,699,471
- three years to five years 10,647,798 9,612,277 7,374,925 7,243,460
- over five years 103,327,246 95,802,967 79,485,066 74,816,876
Gross loans, advances and financing 145,932,362 137,566,383 113,744,684 109,943,299

(ii) The loans, advances and financing are disbursed to the following types of customers:

The Group The Bank
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Domestic non-bank financial institutions other than

stockbroking companies 1,434,866 953,920 1,104,936 853,670
Domestic business enterprises:
- small and medium enterprises 22,642,512 21,504,122 17,935,809 17,282,182
- others 20,648,535 19,232,651 15,767,074 15,751,104
Government and statutory bodies 1,892 2,037 44 41
Individuals 98,108,836 93,385,273 76,575,340 73,812,923
Other domestic entities 975,756 418,282 445,023 374,831
Foreign entities 2,119,965 2,070,098 1,916,458 1,868,548
Gross loans, advances and financing 145,932,362 137,566,383 113,744,684 109,943,299

222 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

8 LOANS, ADVANCES AND FINANCING (CONTINUED)

(iii) Loans, advances and financing analysed by interest rate/profit rate sensitivity are as follows:

The Group The Bank
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Fixed rate:
- Housing and shop loans/financing 1,577,765 1,641,101 1,002,819 1,081,501
- Hire purchase receivables 16,847,128 17,413,826 13,141,515 13,797,959
- Credit card 3,094,683 3,597,974 3,094,683 3,597,974
- Other fixed rate loans/financing 3,446,335 2,776,796 1,781,019 1,258,553

Variable rate:
- Base rate/base lending rate plus 102,135,209 94,502,743 80,366,038 76,209,468
- Cost plus 17,922,029 17,017,202 14,358,610 13,997,844
- Other variable rates 909,213 616,741 - -
Gross loans, advances and financing 145,932,362 137,566,383 113,744,684 109,943,299

(iv) Loans, advances and financing analysed by their economic purposes are as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Purchase of securities 780,571 808,590 476,522 553,613

Purchase of transport vehicles 16,769,096 17,489,088 13,009,091 13,829,965
Residential property (housing) 73,335,991 67,437,747 57,330,388 53,224,466
Non-residential property 17,244,621 16,369,237 14,575,258 14,144,111
Purchase of fixed assets (excluding landed properties) 1,102,078 988,287 750,932 700,315
Personal use 3,437,021 3,389,881 2,089,238 2,065,876
Credit card 3,094,683 3,597,974 3,094,683 3,597,974
Construction 2,612,109 2,006,223 1,685,437 1,277,523
Mergers and acquisition 151,784 312,445 - 125,522
Working capital 25,929,408 23,791,965 19,821,776 19,545,202
Other purpose 1,475,000 1,374,946 911,359 878,732
Gross loans, advances and financing 145,932,362 137,566,383 113,744,684 109,943,299

Annual Report 2020 223

Notes to the Financial Statements
for the financial year ended 30 June 2020

8 LOANS, ADVANCES AND FINANCING (CONTINUED)

(v) Loans, advances and financing analysed by their geographical distribution are as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

In Malaysia 138,163,418 130,455,793 108,494,268 104,719,012

Outside Malaysia:
- Singapore 5,250,416 5,224,287 5,250,416 5,224,287
- Vietnam 909,213 616,741 - -
- Cambodia 1,609,315 1,269,562 - -
Gross loans, advances and financing 145,932,362 137,566,383 113,744,684 109,943,299

(vi) Impaired loans, advances and financing analysed by their economic purposes are as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Purchase of securities 284 51 284 5

Purchase of transport vehicles 71,019 122,105 53,363 90,856
Residential property (housing) 341,175 376,182 245,500 278,841
Non-residential property 150,277 169,127 131,656 161,694
Purchase of fixed assets (excluding landed properties) 4,648 5,325 4,427 5,325
Personal use 24,479 44,470 12,692 23,321
Credit card 24,568 32,505 24,568 32,505
Construction 9,663 17,350 8,632 15,583
Working capital 194,803 298,966 172,473 274,704
Other purpose 68,838 5,030 10,172 5,030
Gross impaired loans, advances and financing 889,754 1,071,111 663,767 887,864

(vii) Impaired loans, advances and financing analysed by their geographical distribution are as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

In Malaysia 881,407 1,063,910 662,511 886,352

Outside Malaysia:
- Singapore 1,256 1,512 1,256 1,512
- Vietnam 1,808 1,621 - -
- Cambodia 5,283 4,068 - -
Gross impaired loans, advances and financing 889,754 1,071,111 663,767 887,864

224 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

8 LOANS, ADVANCES AND FINANCING (CONTINUED)

(viii) Movements in expected credit losses for loans, advances and financing are as follows:

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Group RM’000 RM’000 RM’000 RM’000

2020
At 1 July 369,715 498,325 393,599 1,261,639
Changes in ECL due to transfer within stages (89,938) (133,376) 223,314 -
Transfer to Stage 1 16,035 (15,930) (105) -
Transfer to Stage 2 (105,843) 206,821 (100,978) -
Transfer to Stage 3 (130) (324,267) 324,397 -
New financial assets originated 55,031 2,236 1,513 58,780
Financial assets derecognised (19,751) (40,717) (22,042) (82,510)
Changes due to change in credit risk 262,886 117,887 192,808 573,581
Changes in models/risk parameters (28,743) (8,852) (10,855) (48,450)
Amount written off - - (501,536) (501,536)
Exchange difference 309 324 1,313 1,946
Other movements - - (4,324) (4,324)
At 30 June 549,509 435,827 273,790 1,259,126

The Group
2019
At 1 July 1,006,902
Effect of adopting MFRS 9 358,235
At 1 July, as restated 418,235 487,757 459,145 1,365,137
Changes in ECL due to transfer within stages (101,395) (144,111) 245,506 -
Transfer to Stage 1 23,070 (22,825) (245) -
Transfer to Stage 2 (124,364) 219,679 (95,315) -
Transfer to Stage 3 (101) (340,965) 341,066 -
New financial assets originated 53,847 4,018 110 57,975
Financial assets derecognised (34,796) (42,683) (29,024) (106,503)
Changes due to change in credit risk 33,367 193,217 42,342 268,926
Amount written off - - (282,501) (282,501)
Exchange difference 457 127 1,578 2,162
Other movements - - (43,557) (43,557)
At 30 June 369,715 498,325 393,599 1,261,639

Annual Report 2020 225

Notes to the Financial Statements
for the financial year ended 30 June 2020

8 LOANS, ADVANCES AND FINANCING (CONTINUED)

(viii) Movements in expected credit losses for loans, advances and financing are as follows: (continued)

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Bank RM’000 RM’000 RM’000 RM’000

2020
At 1 July 311,663 386,656 313,483 1,011,802
Changes in ECL due to transfer within stages (74,495) (88,115) 162,610 -
Transfer to Stage 1 12,762 (12,674) (88) -
Transfer to Stage 2 (87,141) 157,992 (70,851) -
Transfer to Stage 3 (116) (233,433) 233,549 -
New financial assets originated 22,920 1,701 1,510 26,131
Financial assets derecognised (4,889) (24,163) (11,830) (40,882)
Changes due to change in credit risk 178,900 76,802 138,440 394,142
Changes in models/risk parameters (25,488) (6,057) (7,782) (39,327)
Amount written off - - (410,609) (410,609)
Exchange difference 104 260 1,370 1,734
Other movements - - (3,327) (3,327)
At 30 June 408,715 347,084 183,865 939,664

The Bank
2019
At 1 July 801,663
Effect of adopting MFRS 9 329,521
At 1 July, as restated 367,527 388,100 375,557 1,131,184
Changes in ECL due to transfer within stages (83,815) (119,839) 203,654 -
Transfer to Stage 1 20,745 (20,533) (212) -
Transfer to Stage 2 (104,503) 173,541 (69,038) -
Transfer to Stage 3 (57) (272,847) 272,904 -
New financial assets originated 23,715 3,426 72 27,213
Financial assets derecognised (13,118) (29,233) (16,595) (58,946)
Changes due to change in credit risk 17,052 144,082 14,631 175,765
Amount written off - - (227,057) (227,057)
Exchange difference 302 120 1,588 2,010
Other movements - - (38,367) (38,367)
At 30 June 311,663 386,656 313,483 1,011,802

226 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

8 LOANS, ADVANCES AND FINANCING (CONTINUED)

(ix) Movements in the gross carrying amount of loans, advances and financing that contributed to changes in the expected
credit losses are as follows:

Stage 1 Stage 2 Stage 3 Total

The Group RM’000 RM’000 RM’000 RM’000

2020
At 1 July 129,692,478 6,802,794 1,071,111 137,566,383
Total transfer within stages (2,295,963) 1,713,211 582,752 -
Transfer to Stage 1 1,897,372 (1,875,740) (21,632) -
Transfer to Stage 2 (4,089,925) 5,218,887 (1,128,962) -
Transfer to Stage 3 (103,410) (1,629,936) 1,733,346 -
New financial assets originated 16,247,228 28,206 1,672 16,277,106
Financial assets derecognised (3,610,268) (278,290) (72,364) (3,960,922)
Changes due to change in credit risk (2,134,041) (825,104) (191,395) (3,150,540)
Modifications to contractual cash flows of financial
asset (Note) (432,686) (43,264) - (475,950)
Amount written off - - (503,360) (503,360)
Exchange difference 178,013 294 1,338 179,645
At 30 June 137,644,761 7,397,847 889,754 145,932,362

Stage 1 Stage 2 Stage 3 Total

The Group RM’000 RM’000 RM’000 RM’000

2019
At 1 July 121,850,099 6,093,286 1,125,175 129,068,560
Total transfer within stages (2,461,389) 1,838,959 622,430 -
Transfer to Stage 1 1,925,418 (1,935,460) 10,042 -
Transfer to Stage 2 (4,359,507) 5,294,532 (935,025) -
Transfer to Stage 3 (27,300) (1,520,113) 1,547,413 -
New financial assets originated 17,352,533 31,019 1,421 17,384,973
Financial assets derecognised (4,810,831) (331,978) (76,519) (5,219,328)
Changes due to change in credit risk (2,582,661) (832,894) (321,424) (3,736,979)
Amount written off - - (282,811) (282,811)
Exchange difference 344,727 4,402 2,839 351,968
At 30 June 129,692,478 6,802,794 1,071,111 137,566,383

Note:
The amount of loans, advances and financing whose cash flows were modified during the year was RM15,338,525,000.

Annual Report 2020 227

Notes to the Financial Statements
for the financial year ended 30 June 2020

8 LOANS, ADVANCES AND FINANCING (CONTINUED)

(ix) Movements in the gross carrying amount of loans, advances and financing that contributed to changes in the expected
credit losses are as follows: (continued)

Stage 1 Stage 2 Stage 3 Total

The Bank RM’000 RM’000 RM’000 RM’000

2020
At 1 July 103,858,790 5,196,645 887,864 109,943,299
Total transfer within stages (1,832,728) 1,422,508 410,220 -
Transfer to Stage 1 1,500,823 (1,486,640) (14,183) -
Transfer to Stage 2 (3,233,992) 4,066,619 (832,627) -
Transfer to Stage 3 (99,559) (1,157,471) 1,257,030 -
New financial assets originated 10,817,984 21,125 1,465 10,840,574
Financial assets derecognised (2,758,168) (206,458) (59,333) (3,023,959)
Changes due to change in credit risk (2,559,514) (713,076) (165,403) (3,437,993)
Modifications to contractual cash flows of financial
asset (Note) (260,837) (24,886) - (285,723)
Amount written off - - (412,249) (412,249)
Exchange difference 119,315 217 1,203 120,735
At 30 June 107,384,842 5,696,075 663,767 113,744,684

Stage 1 Stage 2 Stage 3 Total

The Bank RM’000 RM’000 RM’000 RM’000

2019
At 1 July 99,378,454 4,794,746 905,906 105,079,106
Total transfer within stages (1,804,213) 1,305,426 498,787 -
Transfer to Stage 1 1,615,819 (1,626,029) 10,210 -
Transfer to Stage 2 (3,394,845) 4,082,974 (688,129) -
Transfer to Stage 3 (25,187) (1,151,519) 1,176,706 -
New financial assets originated 12,489,662 24,539 1,367 12,515,568
Financial assets derecognised (4,119,637) (275,513) (39,404) (4,434,554)
Changes due to change in credit risk (2,372,932) (656,924) (254,753) (3,284,609)
Amount written off - - (226,689) (226,689)
Exchange difference 287,456 4,371 2,650 294,477
At 30 June 103,858,790 5,196,645 887,864 109,943,299

Note:
The amount of loans, advances and financing whose cash flows were modified during the year was RM9,977,058,000.

228 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

9 OTHER ASSETS

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Foreclosed properties 18,447 21,839 10,985 10,849

Sundry debtors and other prepayments 693,771 371,710 641,763 351,193
Treasury related receivables 370,435 242,617 370,383 242,617
Cash collateral pledged for derivative transactions 511,094 301,552 511,094 301,552
Other receivables 88,769 259,263 72,624 240,071
1,682,516 1,196,981 1,606,849 1,146,282

10 DERIVATIVE FINANCIAL INSTRUMENTS

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Derivatives at fair value through profit or loss:

- interest rate swaps 529,829 231,307 528,967 218,666
- cross currency swaps 175,725 154,015 175,726 154,017
- foreign currency forwards 365,216 125,951 310,422 120,766
- foreign currency options 6,746 8,129 6,746 8,129
- futures 500 32 500 32
- equity options 13,493 7,814 13,493 7,814
- swaption - - 1,807 12,563
- total return swap 19,960 1,008 19,960 1,008
Total derivative financial instruments assets 1,111,469 528,256 1,057,621 522,995

Annual Report 2020 229

Notes to the Financial Statements
for the financial year ended 30 June 2020

10 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

The Group The Bank

2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000

Derivatives at fair value through profit or loss:

- interest rate swaps (878,167) (438,543) (880,432) (439,477)
- cross currency swaps (133,567) (65,089) (133,577) (65,086)
- foreign currency forwards (202,851) (109,537) (156,207) (105,011)
- foreign currency options (7,343) (4,416) (7,343) (4,416)
- futures (65) (2,940) (65) (2,940)
- equity options (13,495) (7,814) (13,493) (7,814)
- swaption (12,945) (41,201) (12,945) (41,201)
- total return swap (19,960) (1,008) (19,960) (1,008)
Derivatives designated as cash flow hedge:
- interest rate swaps (a) (11,400) (3,385) (11,400) (3,385)
Derivatives designated as fair value hedge:
- interest rate swaps (b) (18,720) (4,704) (15,674) (4,704)
Total derivative financial instruments liabilities (1,298,513) (678,637) (1,251,096) (675,042)

(a) Cash flow hedge

The Group and the Bank's cash flow hedges principally consist of interest rate swaps that are used to protect against
exposures to variability in future interest cash flows on interest incurring liabilities. The amount and timing of the interest
cash flows, are projected on the basis of their contractual terms and other relevant factors, including estimates of renewal
of interest incurring liabilities. The aggregate projected interest cash flows over time form the basis for identifying gains
and losses on the effective portions of derivatives designated as cash flow hedges to forecast transactions. Gains and
losses are initially recognised directly in equity, in the cash flow hedge reserve, and are transferred to profit or loss when
the forecast cash flows affect the profit or loss.

The hedging relationship was fully effective for the total hedging period and as of the reporting date. As such, the unrealised
loss of RM8,489,000 (2019: unrealised loss of RM2,726,000) from the hedging relationship as disclosed in Note 30(e) was
recognised through other comprehensive income.

230 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

10 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

(a) Cash flow hedge (continued)

The cash flows of the hedging instruments and the hedged items are detailed below:

The Group and The Bank

Up to 1 >1-3 >3-6 > 6 - 12 >1-5
month months months months years
RM’000 RM’000 RM’000 RM’000 RM’000

2020
Cash inflows (hedging instruments) - 2,022 1,890 3,552 10,814
Cash outflows (hedged items) - (1,898) (1,662) (3,072) (9,499)
Net cash inflows - 124 228 480 1,315

2019
Cash inflows (hedging instruments) 1,380 3,062 4,399 5,854 24,384
Cash outflows (hedged items) (1,369) (2,778) (4,110) (5,349) (22,630)
Net cash inflows 11 284 289 505 1,754

(b) Fair value hedge

The Group and the Bank's fair value hedges principally consist of interest rate swaps that are used to protect against
changes in the fair value of financial assets due to movement in interest rates. The Group and the Bank have undertaken
fair value hedges on interest rate risk of RM657,738,000 (2019: RM486,310,000) at Group and Bank respectively on certain
receivables using interest rate swaps. The total fair value loss of the said interest rate swaps related to these hedges
amounted to RM15,674,000 (2019: fair value loss of RM4,704,000) at Group and Bank, respectively.

Included in the net non-interest income is the net gains and losses arising from fair value hedges that were effective during
the financial year as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Gain on hedging instruments 15,482 6,012 15,482 6,012

Loss on the hedged items attributable to the
hedged risks (16,533) (6,317) (16,533) (6,317)
(1,051) (305) (1,051) (305)

Annual Report 2020 231

Notes to the Financial Statements
for the financial year ended 30 June 2020

11 AMOUNT DUE FROM SUBSIDIARIES

The Bank
2020 2019
RM’000 RM’000

Intercompany settlement 106,363 13,095

Amount due from subsidiaries is unsecured, interest free, repayable on demand and is denominated in Ringgit Malaysia.

12 STATUTORY DEPOSITS WITH CENTRAL BANKS

The non-interest bearing statutory deposits are maintained by the Bank and its subsidiaries with Bank Negara Malaysia in
compliance with Section 26(2)(c) of the Central Bank of Malaysia Act, 2009, the amounts of which are determined at set
percentages of total eligible liabilities. A foreign subsidiary of the Group and a foreign branch of the Bank also maintained
non-interest bearing statutory deposits with their respective central banks in compliance with the respective applicable
legislations.

13 SUBSIDIARY COMPANIES

The Bank
2020 2019
RM’000 RM’000

Investment in subsidiary companies

Unquoted shares, at cost:
- in Malaysia 963,124 963,124
- outside Malaysia 775,989 775,989
1,739,113 1,739,113

Subordinated facilities issued by subsidiary companies, at amortised cost:

Multi-currency Additional Tier 1 subordinated sukuk wakalah financing facility issued by HLISB 401,855 401,799
Tier 2 subordinated sukuk murabahah financing facility issued by HLISB 400,742 400,788
Subordinated financing facility issued by Hong Leong Bank (Cambodia) PLC 17,191 16,637
819,788 819,224
2,558,901 2,558,337

232 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

13 SUBSIDIARY COMPANIES (CONTINUED)

The subsidiary companies of the Bank are as follows:

Percentage (%) of
equity held
Name 2020 2019 Principal activities

(a) Hong Leong Islamic Bank Berhad (“HLISB”) 100 100 Islamic Banking business and related
financial services
(b) HLB Principal Investments (L) Limited and its 100 100 Investment holding
subsidiary company:
- Promino Sdn Bhd 100 100 Holding of pooled motor vehicles for
HLBB group’s usage
(c) EB Nominees (Tempatan) Sendirian Berhad 100 100 Nominees services
(d) EB Nominees (Asing) Sendirian Berhad 100 100 In member’s voluntary liquidation
(e) EB Realty Sendirian Berhad 100 100 Property investment
(f) OBB Realty Sdn Bhd 100 100 Property investment
(g) HLF Credit (Perak) Bhd and its subsidiary companies: 100 100 Investment holding
(i) Gensource Sdn Bhd and its subsidiary company: 100 100 Investment holding
- Pelita Terang Sdn Bhd 100 100 Dormant
(ii) WTB Corporation Sdn Bhd - 100 Liquidated
(iii) Chew Geok Lin Finance Sdn Bhd - 100 Liquidated
(iv) Hong Leong Leasing Sdn Bhd* 100 100 Dormant
(v) HL Leasing Sdn Bhd 100 100 Dormant
(vi) HLB Realty Sdn Bhd 100 100 Property investment
(h) HLB Nominees (Tempatan) Sdn Bhd 100 100 Agent and nominee for Malaysian
clients
(i) HLB Nominees (Asing) Sdn Bhd 100 100 Agent and nominee for foreign
clients
(j) HL Bank Nominees (Singapore) Pte Ltd*+ 100 100 Dormant
(k) HLB Trade Services (Hong Kong) Limited* +
100 100 Ceased operations
(l) Hong Leong Bank Vietnam Limited* +
100 100 Commercial banking business
(m) Hong Leong Bank (Cambodia) PLC*+ 100 100 Commercial banking business
(n) Promilia Berhad 100 100 Holding of motor vehicles for HLBB
group’s usage
(o) DC Tower Sdn Bhd 100 100 Property management
(p) Unincorporated trust for ESOS * Ω
- - Special purpose vehicle

* Not audited by PricewaterhouseCoopers PLT
+ Audited by member firm of PricewaterhouseCoopers International
Ω
Deemed subsidiaries pursuant to MFRS 10 'Consolidated Financial Statements'

All the subsidiary companies are incorporated in Malaysia with the exception of HL Bank Nominees (Singapore) Pte Ltd which
is incorporated in Singapore, HLB Trade Services (Hong Kong) Limited which is incorporated in Hong Kong, Hong Leong Bank
Vietnam Limited which is incorporated in Vietnam and Hong Leong Bank (Cambodia) PLC which is incorporated in Cambodia.

Annual Report 2020 233

Notes to the Financial Statements
for the financial year ended 30 June 2020

14 INVESTMENT IN ASSOCIATED COMPANIES

The Group The Bank
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Quoted shares outside Malaysia, at cost 938,311 938,311 946,505 946,505

Unquoted shares in Malaysia, at cost 20 20 20 20
Unquoted shares outside Malaysia, at cost 24,657 24,657 24,657 24,657
Cumulative share of results, net of dividends received 3,187,738 2,695,242 - -
Cumulative share of changes in other comprehensive income 29,666 13,690 - -
Exchange fluctuation reserve 464,135 434,455 - -
4,644,527 4,106,375 971,182 971,182

(a) Information about associated companies

The Group
Percentage (%) of
Country of equity held
Name incorporation 2020 2019 Principal activities

Bank of Chengdu Co., Ltd. (“BOCD”) China 18% 18% Commercial banking
Community CSR Sdn Bhd (“CCSR”) Malaysia 20% 20% Investment holding
Sichuan Jincheng Consumer Finance
Limited Company (“JCCFC”) China 12% 12% Consumer financing

Nature of relationship

(i) BOCD

On 25 October 2007, HLB entered into a Share Subscription Agreement with BOCD to subscribe for new shares
representing 19.99% equity interest of the Enlarged Capital in BOCD. BOCD is a leading commercial bank in Western
and Central China with its base in Chengdu, the capital of Sichuan Province. The Subscription enables HLB to enter
into a strategic alliance with BOCD to tap into the promising and growing financial services sector of China. It will
strengthen and diversify the earnings base of HLB.

On 31 January 2018, BOCD was officially listed on the Shanghai Stock Exchange after completing its initial public
offering (“IPO”) of 361 million shares and raised 2.53 billion yuan. Arising from the IPO, the Bank's equity interest of
the enlarged capital in BOCD is now reduced to 18% from 20%.

The market value of BOCD's shares held by the Bank is RM3.15 billion (2019: RM3.46 billion) at RM4.85 (2019: RM5.32)
per share as at 30 June 2020.

The Group deems BOCD as a material associated company.

234 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

14 INVESTMENT IN ASSOCIATED COMPANIES (CONTINUED)

(a) Information about associated companies (continued)

(i) BOCD (continued)

As at 30 June 2020, the market value of investment in BOCD was below the carrying amount. The Group has performed
impairment assessment on the carrying amount of the investment in BOCD, which confirmed that no impairment
is required as at 30 June 2020 as the recoverable amount as determined by a value-in-use (“VIU”) calculation was
higher than the carrying value. Management believes that any reasonable possible change to the key assumptions
applied would not cause the carrying value to exceed its recoverable amount.

The VIU calculation uses discounted cash flows projections based on BOCD management’s best estimates of future
earnings taking into account of past performance and BOCD’s expectation of market development. This calculation
uses cash flows projections being the amount attributable to the shareholders based on the budget for the financial
year ending 2021 with a further projection of 4 years, which was approved by BOCD management. Cash flows
beyond the 5 year period are extrapolated using an estimated growth rate of 4.41% (2019: 6.12%) representing the
forecasted Gross Domestic Product growth rate of the country.

The discount rate of 11.5% (2019: 12.0%) used in determining the recoverable amount is derived based on a capital
asset pricing model calculation, using available market data.

(ii) CCSR

In 2011, HLB subscribed to RM50 million Cumulative Redeemable Preference Shares (“CRPS”) in Jana Pendidikan
Malaysia Sdn Bhd. For every RM1 million of subscription of CRPS, the Bank is entitled to subscribe for 1 ordinary share
of RM1 each in CCSR. As such, the Bank subscribed for 50 CCSR shares of RM1 each for cash at par which represent
20% equity interest of CCSR.

In November 2014, HLB subscribed to additional 19,950 CCSR Rights Issue of RM1 each.

CCSR is a private company and there is no quoted market price available for its shares.

(iii) JCCFC

On 1 March 2010, HLB together with BOCD, obtained operation approval from China Banking Regulatory Commission
(“CBRC”) for JCCFC, a joint venture company that is part of the first batch of approved companies, to start consumer
finance operations in Central and Western China. JCCFC focuses primarily in the consumer financing business with HLB
having a 49% equity interest and BOCD having a 51% equity interest in JCCFC. This strategic alliance between HLB and
BOCD to tap into the promising and growing financial services sector in China further cements the Bank's strategic
partnership in BOCD and affirms the Bank's vision and belief in the huge potential of China.

In March 2017, the Board of Directors had approved the divestment of 37% of the Bank's stake through
non-subscription of the issuance of new share capital by JCCFC and selling down the original share capital held by the
Bank to new strategic investors through an exercise via Southwest United Equity Exchange. The sale was completed
upon obtaining approval from CBRC vide its letter dated 3 September 2018. In 2019, the net gain on divestment of
joint venture of RM90,106,000 was recognised in the Group's statements of income (refer to Note 36).

Post completion of the divestment exercise, the retained interest of 12% was derecognised from the investment in
joint venture and classified as investment in associated companies.

Annual Report 2020 235

Notes to the Financial Statements
for the financial year ended 30 June 2020

14 INVESTMENT IN ASSOCIATED COMPANIES (CONTINUED)

(b) The summarised financial information of the material associated companies which is accounted for using the equity method
is as follows:

(i) BOCD

The Group
2020 2019
RM’000 RM’000

Total assets 329,160,110 324,735,826

Total liabilities (303,781,131) (302,292,283)
Net assets 25,378,979 22,443,543

The Group
2020 2019
RM’000 RM’000

Interest income 10,644,473 11,914,756

Interest expenses (4,960,078) (5,758,006)
Non-interest income 1,160,357 1,247,857
Profit before taxation 3,849,336 3,358,001
Profit after taxation 3,509,739 3,081,834
Total comprehensive income 3,598,544 3,159,322
Dividends declared by the associated company during the financial year 825,275 683,785

Share of results of associated companies (%) 18% 18%

Share of results of associated companies (RM’000) 631,402 554,422
Dividends accrued from the associated company (RM’000) 148,467 123,013

(ii) JCCFC

The Group
2020 2019
RM’000 RM’000

Total assets 4,419,536 3,236,527

Total liabilities (3,762,459) (2,663,343)
Net assets 657,077 573,184

236 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

14 INVESTMENT IN ASSOCIATED COMPANIES (CONTINUED)

(b) The summarised financial information of the material associated companies which is accounted for using the equity method
is as follows: (continued)

(ii) JCCFC (continued)

The Group
2020 2019
RM’000 RM’000

Interest income 555,086 295,636

Interest expenses (177,407) (85,464)
Non-interest income 32,111 10,631
Profit before taxation 118,651 97,599
Profit after taxation 91,093 72,402
Dividends paid/declared by the associated company during the financial year 11,417 36,667

Share of results of associated companies (%) 12% 12%

Share of results of associated companies (RM’000) 10,931 8,689
Dividends received/accrued from the associated company (RM’000) 1,370 4,400

(c) Reconciliation of the summarised financial information to the carrying amount of the interest in the material associated
companies recognised in the consolidated financial statements:

(i) BOCD

The Group
2020 2019
RM’000 RM’000

Opening net assets as at 1 July 22,443,543 20,295,116

Profit for the financial year 3,509,739 3,081,834
Other comprehensive profit for the financial year 88,805 77,488
Dividends declared (825,275) (683,785)
Exchange fluctuation reserve 162,167 (327,110)
Closing net assets as at 30 June 25,378,979 22,443,543

Interest in associated companies (%) 18% 18%

Interest in associated companies (RM’000) 4,565,678 4,037,593

Annual Report 2020 237

Notes to the Financial Statements
for the financial year ended 30 June 2020

14 INVESTMENT IN ASSOCIATED COMPANIES (CONTINUED)

(c) Reconciliation of the summarised financial information to the carrying amount of the interest in the material associated
companies recognised in the consolidated financial statements: (continued)

(ii) JCCFC

The Group
2020 2019
RM’000 RM’000

Opening net assets as at 1 July 573,184 -

Reclassified from investment in joint venture - 364,186
Effect arising from issuance of additional new shares - 189,642
Profit for the financial year 91,093 55,209
Dividends declared/paid (11,417) (36,667)
Exchange fluctuation reserve 4,217 814
Closing net assets as at 30 June 657,077 573,184

Interest in associated companies (%) 12% 12%

Interest in associated companies (RM’000) 78,849 68,782

The information presented above is based on the financial statements of the associated companies after reflecting
adjustments made by the Group when using the equity method, such as fair value adjustments made at the time of
acquisition and differences in accounting policies between the Group and the associated companies.

The summarised financial information above represents amount shown in the material associatesʼ financial statements
prepared in accordance with MFRSs (adjusted by the Group for equity accounting purposes).

238 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

15 PROPERTY AND EQUIPMENT

Office
Buildings on Buildings on furniture,
Leasehold Leasehold leasehold leasehold fittings, Capital
Buildings on land less land 50 years land less land 50 years equipment and Computer Motor work-in-
Freehold land freehold land than 50 years* or more* than 50 years or more renovations equipment vehicles progress Total
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2020

Cost

At 1 July 136,461 587,512 1,092 40,205 2,636 96,023 529,422 1,053,703 6,602 42,397 2,496,053

Additions - - - 600 - 17,522 13,641 24,233 923 124,423 181,342

Reclassification/Transfer - - - - - - 23,214 (68,136) - (86,571) (131,493)

Disposals/Write off (916) (1,513) - - - - (25,625) (22,601) (1,428) (4,529) (56,612)

Exchange fluctuation - - - - - - 830 1,477 17 44 2,368

At 30 June 135,545 585,999 1,092 40,805 2,636 113,545 541,482 988,676 6,114 75,764 2,491,658

Accumulated depreciation

At 1 July - 40,980 435 4,636 1,435 23,023 387,803 650,668 4,501 - 1,113,481

Charge for the financial year - 11,723 20 418 16 1,980 33,160 86,247 826 - 134,390

Reclassification/Transfer - - - - - - (40) (29,473) - - (29,513)

Disposals/Write off - (702) - - - - (5,155) (20,680) (1,426) - (27,963)

Exchange fluctuation - - - - - - 612 733 16 - 1,361

At 30 June - 52,001 455 5,054 1,451 25,003 416,380 687,495 3,917 - 1,191,756

Net book value as at 30 June 2020 135,545 533,998 637 35,751 1,185 88,542 125,102 301,181 2,197 75,764 1,299,902

* These are the right-of-use assets within the scope of MRFS 16. Refer to accounting policies for leases as disclosed on Note 2H.

HONG LEONG BANK BERHAD Annual Report 2020 239

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

15 PROPERTY AND EQUIPMENT (CONTINUED)

Office
Buildings on Buildings on furniture,
Leasehold Leasehold leasehold leasehold fittings, Capital
Buildings on land less land 50 years land less land 50 years equipment and Computer Motor work-in-
Freehold land freehold land than 50 years or more than 50 years or more renovations equipment vehicles progress Total
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2019

Cost

At 1 July 136,194 588,360 1,693 40,825 2,233 94,838 537,140 1,033,430 7,432 67,330 2,509,475

Additions - - 5 - 37 - 10,246 35,669 1,255 75,801 123,013

Reclassification/Transfer 267 (848) (606) (620) 622 1,185 31,503 53,188 - (100,602) (15,911)

Disposals/Write off - - - - (256) - (50,194) (70,525) (2,133) (155) (123,263)

Exchange fluctuation - - - - - - 727 1,941 48 23 2,739

At 30 June 136,461 587,512 1,092 40,205 2,636 96,023 529,422 1,053,703 6,602 42,397 2,496,053

Accumulated depreciation

At 1 July - 31,063 1,414 4,440 1,111 19,942 397,110 633,515 5,905 - 1,094,500

Charge for the financial year - 10,330 17 445 115 1,837 33,837 85,039 676 - 132,296

Reclassification/Transfer - (413) (996) (249) 414 1,244 (702) 644 - - (58)

Disposals/Write off - - - - (205) - (42,792) (69,727) (2,130) - (114,854)

Exchange fluctuation - - - - - - 350 1,197 50 - 1,597

At 30 June - 40,980 435 4,636 1,435 23,023 387,803 650,668 4,501 - 1,113,481

Net book value as at 30 June 2019 136,461 546,532 657 35,569 1,201 73,000 141,619 403,035 2,101 42,397 1,382,572

HONG LEONG BANK BERHAD Annual Report 2020 240

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

15 PROPERTY AND EQUIPMENT (CONTINUED)

Office
Buildings on Buildings on furniture,
Leasehold Leasehold leasehold leasehold fittings, Capital
Buildings on land less land 50 years land less land 50 years equipment and Computer Motor work-in-
Freehold land freehold land than 50 years* or more* than 50 years or more renovations equipment vehicles progress Total
The Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2020

Cost

At 1 July 56,099 55,640 628 39,774 3,269 91,596 497,605 1,013,224 6,153 40,259 1,804,247

Additions - - - 600 - 17,522 9,118 23,466 315 112,129 163,150

Reclassification/Transfer - - - - - - 19,035 (66,297) - (77,383) (124,645)

Disposals/Write off (916) (1,513) - - - - (25,178) (21,877) (1,424) (4,446) (55,354)

Exchange fluctuation - - - - - - 82 854 7 - 943

At 30 June 55,183 54,127 628 40,374 3,269 109,118 500,662 949,370 5,051 70,559 1,788,341

Accumulated depreciation

At 1 July - 17,967 162 4,616 1,036 19,811 367,624 627,263 4,129 - 1,042,608

Charge for the financial year - 1,099 15 417 83 1,842 29,502 82,279 720 - 115,957

Reclassification/Transfer - - - - - - (118) (28,579) - - (28,697)

Disposals/Write off - (702) - - - - (4,788) (20,076) (1,422) - (26,988)

Exchange fluctuation - - - - - - 62 224 6 - 292

At 30 June - 18,364 177 5,033 1,119 21,653 392,282 661,111 3,433 - 1,103,172

Net book value as at 30 June 2020 55,183 35,763 451 35,341 2,150 87,465 108,380 288,259 1,618 70,559 685,169

* These are the right-of-use assets within the scope of MRFS 16. Refer to accounting policies for leases as disclosed on Note 2H.

HONG LEONG BANK BERHAD Annual Report 2020 241

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

15 PROPERTY AND EQUIPMENT (CONTINUED)

Office
Buildings on Buildings on furniture,
Leasehold Leasehold leasehold leasehold fittings, Capital
Buildings on land less land 50 years land less land 50 years equipment and Computer Motor work-in-
Freehold land freehold land than 50 years or more than 50 years or more renovations equipment vehicles progress Total
The Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2019

Cost

At 1 July 55,832 56,163 433 39,774 1,972 91,596 505,994 995,582 6,990 66,082 1,820,418

Additions - - 195 - 1,297 - 9,445 34,374 1,255 68,907 115,473

Reclassification/Transfer 267 (523) - - 256 - 29,768 51,156 - (94,730) (13,806)

Disposals/Write off - - - - (256) - (47,895) (69,587) (2,133) - (119,871)

Exchange fluctuation - - - - - - 293 1,699 41 - 2,033

At 30 June 56,099 55,640 628 39,774 3,269 91,596 497,605 1,013,224 6,153 40,259 1,804,247

Accumulated depreciation

At 1 July - 17,054 155 4,171 997 17,989 378,287 613,314 5,598 - 1,037,565

Charge for the financial year - 1,116 7 445 41 1,822 30,671 81,212 620 - 115,934

Reclassification/Transfer - (203) - - 203 - (634) 634 - - -

Disposals/Write off - - - - (205) - (40,805) (68,916) (2,130) - (112,056)

Exchange fluctuation - - - - - - 105 1,019 41 - 1,165

At 30 June - 17,967 162 4,616 1,036 19,811 367,624 627,263 4,129 - 1,042,608

Net book value as at 30 June 2019 56,099 37,673 466 35,158 2,233 71,785 129,981 385,961 2,024 40,259 761,639

HONG LEONG BANK BERHAD Annual Report 2020 242

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

16 INTANGIBLE ASSETS

Core Customer Computer
deposits relationships software Total
The Group RM’000 RM’000 RM’000 RM’000

2020
Cost or valuation
At 1 July 152,434 127,426 532,758 812,618
Additions - - 27,275 27,275
Reclassification - - 131,493 131,493
Disposals/Write off - - (24,244) (24,244)
Exchange fluctuation - - 1,342 1,342
At 30 June 152,434 127,426 668,624 948,484

Amortisation and impairment

At 1 July 152,434 104,067 430,892 687,393
Amortisation during the financial year - 12,743 46,282 59,025
Reclassification - - 29,513 29,513
Disposals/Write off - - (15,887) (15,887)
Exchange fluctuation - - 935 935
At 30 June 152,434 116,810 491,735 760,979
Net book value as at 30 June 2020 - 10,616 176,889 187,505

Core Customer Computer

deposits relationships software Total
The Group RM’000 RM’000 RM’000 RM’000

2019
Cost or valuation
At 1 July 152,434 127,426 523,641 803,501
Additions - - 10,918 10,918
Reclassification - - 15,710 15,710
Disposals/Write off - - (18,136) (18,136)
Exchange fluctuation - - 625 625
At 30 June 152,434 127,426 532,758 812,618

Amortisation and impairment

At 1 July 152,434 91,324 407,202 650,960
Amortisation during the financial year - 12,743 41,446 54,189
Disposals/Write off - - (18,097) (18,097)
Exchange fluctuation - - 341 341
At 30 June 152,434 104,067 430,892 687,393
Net book value as at 30 June 2019 - 23,359 101,866 125,225

Annual Report 2020 243

Notes to the Financial Statements
for the financial year ended 30 June 2020

16 INTANGIBLE ASSETS (CONTINUED)

Core Customer Computer
deposits relationships software Total
The Bank RM’000 RM’000 RM’000 RM’000

2020
Cost or valuation
At 1 July 152,434 127,426 489,113 768,973
Additions - - 23,471 23,471
Reclassification - - 124,645 124,645
Disposals/Write off - - (24,190) (24,190)
Exchange fluctuation - - 90 90
At 30 June 152,434 127,426 613,129 892,989

Amortisation and impairment

At 1 July 152,434 104,067 401,577 658,078
Amortisation during the financial year - 12,743 41,166 53,909
Reclassification - - 28,697 28,697
Disposals/Write off - - (15,838) (15,838)
Exchange fluctuation - - 83 83
At 30 June 152,434 116,810 455,685 724,929
Net book value as at 30 June 2020 - 10,616 157,444 168,060

Core Customer Computer

deposits relationships software Total
The Bank RM’000 RM’000 RM’000 RM’000

2019
Cost or valuation
At 1 July 152,434 127,426 483,642 763,502
Additions - - 9,750 9,750
Reclassification - - 13,806 13,806
Disposals/Write off - - (18,116) (18,116)
Exchange fluctuation - - 31 31
At 30 June 152,434 127,426 489,113 768,973

Amortisation and impairment

At 1 July 152,434 91,324 382,578 626,336
Amortisation during the financial year - 12,743 37,075 49,818
Disposals/Write off - - (18,079) (18,079)
Exchange fluctuation - - 3 3
At 30 June 152,434 104,067 401,577 658,078
Net book value as at 30 June 2019 - 23,359 87,536 110,895

244 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

16 INTANGIBLE ASSETS (CONTINUED)

Customer relationships acquired in a business combination have value when they represent an identifiable and predictable source
of future cash flows to the combined business.

The valuation of business banking customer relationships was determined using an income approach, specifically the multi-
period excess earnings method (“MEEM”). This was done by discounting forecasted incremental customer revenues attributable
solely to EON Banking Group's existing business banking customer.

Core deposits comprising savings and current accounts are low cost source of funds. The valuation of core deposits was derived
using an income approach, specifically the cost savings method under the incremental cash flow method. This was done by
discounting forecast net interest savings from core deposits.

The discount rate used in discounting incremental cash flows was based on the risk associated with the identified intangible
assets. The remaining amortisation period of customer relationships is approximately 0.8 years (2019: 2 years).

17 RIGHT-OF-USE ASSETS

The Group
Properties Total
2020 RM’000 RM’000

At 1 July - -
Effect of adopting MFRS 16 309,219 309,219
At 1 July, as restated 309,219 309,219
Depreciation charge for the financial year (55,174) (55,174)
Gain on lease modification 145 145
Exchange fluctuation (1,072) (1,072)
At 30 June 253,118 253,118

The Bank
Properties Total
2020 RM’000 RM’000

At 1 July - -
Effect of adopting MFRS 16 487,342 487,342
At 1 July, as restated 487,342 487,342
Depreciation charge for the financial year (77,643) (77,643)
Gain on lease modification 20 20
Addition 10,738 10,738
Exchange fluctuation 196 196
At 30 June 420,653 420,653

Annual Report 2020 245

Notes to the Financial Statements
for the financial year ended 30 June 2020

18 GOODWILL

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Cost
As at 1 July/30 June 1,831,312 1,831,312 1,771,547 1,771,547

Allocation of goodwill to cash-generating units (“CGUs”)

Goodwill has been allocated to the following CGUs:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Personal Financial Services 1,188,705 1,188,705 1,149,911 1,149,911

Business & Corporate Banking 479,437 479,437 463,791 463,791
Global Markets 163,170 163,170 157,845 157,845
1,831,312 1,831,312 1,771,547 1,771,547

Impairment test for goodwill

The recoverable amount of CGUs is determined based on higher of fair value less costs to sell and value-in-use calculations.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants, less costs of disposal. This estimate is mainly determined, on 30 June 2020, on the basis of available market
information such as the fair value of the underlying assets and liabilities which have been marked-to-market.

Value-in-use is the present value of the future cash flows expected to be derived from the CGUs or groups of CGUs. The recoverable
amount of CGUs is determined based on value-in-use calculation. This calculation uses pre-tax cash flow projections based on
the budget for the financial year ending 2020, which is approved by the Board of Directors with a further projection of 4 years
(2019: 4 years). Cash flows beyond the 5 year period are extrapolated using an estimated growth rate of 3.6% (2019: 4.7%)
representing the forecasted Gross Domestic Product growth rate of the country for all cash generating units.

The cash flow projections are derived based on a number of key factors including past performance and management's
expectation of market developments.

The discount rates used are pre-tax and reflect specific risks relating to the CGUs.

246 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

18 GOODWILL (CONTINUED)

Impairment test for goodwill (continued)

The discount rates used in determining the recoverable amount are as follows:

Discount rate
2020 2019
% %

Personal Financial Services 9.20 9.12

Business & Corporate Banking 9.45 9.12
Global Markets 9.63 9.12

Based on the impairment test performed, impairment was not required for goodwill arising from all CGUs for the financial year
ended 30 June 2020. Management believes that any reasonable possible change to the key assumptions applied would not cause
the carrying value of any CGU to exceed its recoverable amount.

19 DEFERRED TAXATION

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when the deferred taxes relate to the same authority. The following amounts determined after appropriate set
off, are shown in the statements of financial position:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Deferred tax assets 86,578 16,030 55,984 -

Deferred tax liabilities - (6,506) - (6,506)
86,578 9,524 55,984 (6,506)

The analysis of deferred tax assets and deferred tax liabilities after appropriate set off is as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Deferred tax assets

- To be recovered within 12 months 228,313 116,039 199,295 94,353
- To be recovered after more than 12 months (141,735) (106,515) (143,311) (100,859)
86,578 9,524 55,984 (6,506)

Annual Report 2020 247

Notes to the Financial Statements
for the financial year ended 30 June 2020

19 DEFERRED TAXATION (CONTINUED)

The movements in deferred tax assets and liabilities during the financial year are as follows:

Property Financial Cash flow Expected

and instruments hedge Intangible credit
equipment at FVOCI reserve assets losses Provisions Total
The Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Deferred tax assets/

(liabilities)

2020
At 1 July (72,650) (42,604) 812 (5,606) 73,797 55,775 9,524
Credited to statements of
income 42 5,988 - - 3,052 77,813 33,042 119,895
Credited/(Charged) to equity 44 - (44,889) 1,870 - - - (43,019)
Exchange difference 74 - - - - 104 178
At 30 June (66,588) (87,493) 2,682 (2,554) 151,610 88,921 86,578

2019
At 1 July (79,647) 43,077 (161) (8,665) - 98,463 53,067
- Effect of adopting MFRS 9 - (14,080) - - - - (14,080)
At 1 July, as restated (79,647) 28,997 (161) (8,665) - 98,463 38,987
Credited/(Charged) to
statements of income 42 6,997 - - 3,059 73,797 (42,650) 41,203
Credited/(Charged) to equity 44 - (71,602) 973 - - - (70,629)
Exchange difference - - - - - (37) (37)
At 30 June (72,650) (42,605) 812 (5,606) 73,797 55,776 9,524

248 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

19 DEFERRED TAXATION (CONTINUED)

The movements in deferred tax assets and liabilities during the financial year are as follows: (continued)

Property Financial Cash flow Expected

and instruments hedge Intangible credit
equipment at FVOCI reserve assets losses Provisions Total
The Bank Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Deferred tax assets/

(liabilities)

2020
At 1 July (69,780) (33,095) 812 (5,607) 53,971 47,193 (6,506)
Credited to statements of
income 42 6,206 - - 3,058 66,613 36,436 112,313
Credited/(Charged) to equity 44 - (51,693) 1,870 - - - (49,823)
At 30 June (63,574) (84,788) 2,682 (2,549) 120,584 83,629 55,984

2019
At 1 July (75,994) 39,629 (161) (8,665) - 93,099 47,908
- Effect of adopting MFRS 9 - (12,743) - - - - (12,743)
At 1 July, as restated (75,994) 26,886 (161) (8,665) - 93,099 35,165
Credited/(Charged) to
statements of income 42 6,214 - - 3,058 53,971 (45,906) 17,337
Credited/(Charged) to equity 44 - (59,981) 973 - - - (59,008)
At 30 June (69,780) (33,095) 812 (5,607) 53,971 47,193 (6,506)

Annual Report 2020 249

Notes to the Financial Statements
for the financial year ended 30 June 2020

20 DEPOSITS FROM CUSTOMERS

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Amortised cost
Fixed deposits 94,503,266 91,064,010 70,442,696 70,785,542
Negotiable instruments of deposits 9,049,600 10,123,656 7,002,956 8,598,899
Short-term placements 20,370,873 17,161,123 17,866,840 14,131,227
123,923,739 118,348,789 95,312,492 93,515,668
Demand deposits 27,338,992 24,018,791 23,903,209 20,722,461
Savings deposits 21,018,664 17,706,562 17,452,144 14,663,658
Others 748,749 891,350 553,397 736,729
173,030,144 160,965,492 137,221,242 129,638,516

At fair value through profit and loss

Structured deposits linked to interest rate derivatives 463,933 2,159,671 413,741 1,812,544
Fair value changes arising from designation at fair value
through profit or loss* (1,416) (54,869) (1,621) (54,535)
462,517 2,104,802 412,120 1,758,009
173,492,661 163,070,294 137,633,362 131,396,525

* The Group and the Bank have issued structured deposits which are linked to interest rate derivatives and designated them at
fair value through profit or loss. This designation is permitted under MFRS 9 as it significantly reduces accounting mismatch.
These instruments are managed by the Group on the basis of fair value and includes terms that have substantive derivative
characteristics.

The fair value changes of the structured deposits which are linked to interest rate derivatives that are attributable to the
changes in own credit risk are not significant.

The carrying amount of the structured deposits of the Group is RM317,000 higher than the contractual amount at maturity
(2019: RM41,525,000 lower than the contractual amount at maturity) and the Bank is RM80,000 (2019: RM43,318,000)
lower than the contractual amount at maturity.

(i) The maturity structure of fixed deposits, negotiable instruments of deposits and short-term placements are as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Due within:
- six months 102,956,857 95,101,452 78,557,105 73,557,213
- six months to one year 19,785,172 21,763,420 15,821,608 18,818,766
- one year to five years 999,959 1,440,321 752,028 1,096,093
- more than five years 181,751 43,596 181,751 43,596
123,923,739 118,348,789 95,312,492 93,515,668

250 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

20 DEPOSITS FROM CUSTOMERS (CONTINUED)

(ii) The deposits are sourced from the following customers:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Government and statutory bodies 8,665,449 7,415,514 4,403,641 4,246,520

Business enterprises 69,639,804 67,038,577 53,475,665 51,715,857
Individuals 92,513,524 85,518,130 77,808,532 73,129,569
Others 2,673,884 3,098,073 1,945,524 2,304,579
173,492,661 163,070,294 137,633,362 131,396,525

21 INVESTMENT ACCOUNTS OF CUSTOMERS

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Unrestricted investment accounts 356,475 2,235 - -

22 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Licensed banks 5,263,923 7,059,886 5,639,271 7,059,770

Licensed investment banks - 95,023 - 95,023
Licensed Islamic banks - 140,000 - -
Central banks (Note) 1,176,258 12,222 1,011,970 -
Other financial institutions 60,899 51,293 - 50,141
6,501,080 7,358,424 6,651,241 7,204,934

Note:
Deposits and placements from central banks includes monies received by the Group and the Bank under government financing
scheme “BNM SRF SME Fund” as part of the government support measure in response to COVID-19 pandemic for the purpose of
SME lending at a below market rate with a six-year maturity amounting to RM1,011,970,000. The financing under the government
scheme is for lending at concession rates to SMEs.

Annual Report 2020 251

Notes to the Financial Statements
for the financial year ended 30 June 2020

23 LEASE LIABILITIES

The Group The Bank

2020 2020
RM’000 RM’000

Lease liabilities 241,177 407,838

Scheduled repayment of lease liabilities

- Not later than one year 42,113 62,642
- Later than one year and not later than five years 121,831 236,406
- Later than five years 77,233 108,790
241,177 407,838

24 OTHER LIABILITIES

The Group The Bank

2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000

Zakat 350 350 - -

Post employment benefits obligation
- defined contribution plan 293 300 293 300
Loan advance payment 3,916,289 3,351,885 3,161,826 2,691,960
Interbranch clearing with subsidiary company - - - 571,263
Amount due to subsidiary companies - - 429,380 29
Treasury and cheque clearing 210,699 452,626 38,282 66,405
Treasury related payables 197,219 149,347 197,219 149,347
Sundry creditors and accruals 306,800 175,507 268,483 140,623
Provision for bonus and staff related expenses 155,437 164,504 146,030 155,941
Expected credit losses on financial guarantee
contracts (a) 8,480 7,928 6,944 7,117
Provision for reinstatement cost 22,614 - 28,039 -
Others 530,029 579,298 497,209 507,091
5,348,210 4,881,745 4,773,705 4,290,076

252 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

24 OTHER LIABILITIES (CONTINUED)

(a) Movements in expected credit losses of financial guarantee contracts are as follows:

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Group RM’000 RM’000 RM’000 RM’000

2020
At 1 July 2,380 5,527 21 7,928
Changes in ECL due to transfer within stages (53) 47 6 -
Transfer to Stage 1 4 (4) - -
Transfer to Stage 2 (57) 57 - -
Transfer to Stage 3 - (6) 6 -
New financial assets originated 177 1 - 178
Financial assets derecognised (24) (23) - (47)
Changes due to change in credit risk 772 (481) (19) 272
Exchange difference 8 149 - 157
Other movements - - (8) (8)
At 30 June 3,260 5,220 - 8,480

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Group RM’000 RM’000 RM’000 RM’000

2019
At 1 July -
Effect of adopting MFRS 9 6,920
At 1 July, as restated 2,065 4,855 - 6,920
Changes in ECL due to transfer within stages (13) (80) 93 -
Transfer to Stage 1 23 (23) - -
Transfer to Stage 2 (36) 36 - -
Transfer to Stage 3 - (93) 93 -
New financial assets originated 142 2 - 144
Financial assets derecognised (28) (12) - (40)
Changes due to change in credit risk 220 642 (68) 794
Exchange difference (6) 120 - 114
Other movements - - (4) (4)
At 30 June 2,380 5,527 21 7,928

Annual Report 2020 253

Notes to the Financial Statements
for the financial year ended 30 June 2020

24 OTHER LIABILITIES (CONTINUED)

(a) Movements in expected credit losses of financial guarantee contracts are as follows: (continued)

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Bank RM’000 RM’000 RM’000 RM’000

2020
At 1 July 1,574 5,521 22 7,117
Changes in ECL due to transfer within stages (52) 46 6 -
Transfer to Stage 1 4 (4) - -
Transfer to Stage 2 (56) 56 - -
Transfer to Stage 3 - (6) 6 -
New financial assets originated 172 1 - 173
Financial assets derecognised (23) (23) - (46)
Changes due to change in credit risk 53 (479) (19) (445)
Exchange difference 7 147 - 154
Other movements - - (9) (9)
At 30 June 1,731 5,213 - 6,944

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Bank RM’000 RM’000 RM’000 RM’000

2019
At 1 July -
Effect of adopting MFRS 9 6,749
At 1 July, as restated 1,909 4,840 - 6,749
Changes in ECL due to transfer within stages (14) (79) 93 -
Transfer to Stage 1 22 (22) - -
Transfer to Stage 2 (36) 36 - -
Transfer to Stage 3 - (93) 93 -
New financial assets originated 20 - - 20
Financial assets derecognised (26) (12) - (38)
Changes due to change in credit risk (308) 652 (67) 277
Exchange difference (7) 120 - 113
Other movements - - (4) (4)
At 30 June 1,574 5,521 22 7,117

254 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

25 RECOURSE OBLIGATION ON LOANS SOLD TO CAGAMAS BERHAD

This represents the proceeds received from housing loans sold directly to Cagamas Berhad with recourse to the Group and the
Bank. Under this agreement, the Group and the Bank undertake to administer the loans on behalf of Cagamas Berhad and to buy
back any loans which are regarded as defective based on prudential criteria set by Cagamas Berhad. Such financing transactions
and the obligation to buy back the loans are reflected as a liability on the statements of financial position. These financial
liabilities are stated at amortised cost.

26 TIER 2 SUBORDINATED BONDS

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

RM1.5 billion Tier 2 subordinated notes, at par 1,500,000 1,500,000 1,500,000 1,500,000
Add: Interest payable 2,254 2,370 2,254 2,370
1,502,254 1,502,370 1,502,254 1,502,370
Less: Unamortised discounts (30) (30) (30) (30)
1,502,224 1,502,340 1,502,224 1,502,340

On 25 June 2018, the Bank issued a second tranche of RM500.0 million nominal value of 10-year non-callable 5 years Sub Notes
callable on 26 June 2023 (and thereafter) and due on 23 June 2028 out of its RM10.0 billion Multi-Currency Sub Notes Programme.
The coupon rate for this second tranche of the Sub Notes is 4.86% per annum, which is payable semi-annually in arrears from the
date of the issue.

On 14 June 2019, the Bank issued a third tranche of RM1.0 billion nominal value of 10-year non-callable 5 years Sub Notes
callable on 14 June 2024 (and thereafter) and due on 14 June 2029 out of its RM10.0 billion Multi-Currency Sub Notes Programme.
The coupon rate for this third tranche of the Sub Notes is 4.23% per annum, which is payable semi-annually in arrears from the
date of the issue.

27 MULTI-CURRENCY ADDITIONAL TIER 1 CAPITAL SECURITIES

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

RM800 million Multi-currency Additional Tier-1

capital securities at par 800,000 800,000 800,000 800,000
Add: Interest payable 6,666 6,661 6,666 6,661
806,666 806,661 806,666 806,661
Less: Unamortised discounts (346) (476) (346) (476)
806,320 806,185 806,320 806,185

Annual Report 2020 255

Notes to the Financial Statements
for the financial year ended 30 June 2020

27 MULTI-CURRENCY ADDITIONAL TIER 1 CAPITAL SECURITIES (CONTINUED)

On 30 November 2017, the Bank issued a nominal value RM400.0 million perpetual Multi-currency Additional Tier 1 capital
securities (“Capital Securities”) under the RM10.0 billion Capital Securities Programme of which was fully subscribed by its
holding company, HLFG. The Capital Securities, which qualify as Additional Tier 1 capital for the Bank, carry a distribution rate of
5.13% per annum. The Capital Securities are perpetual with an Issuer's call option to redeem at the end of year 5. The proceeds
from the issuance was used to subscribe the RM400.0 million Multi-currency Additional Tier 1 subordinated sukuk wakalah issued
by HLISB, a wholly-owned subsidiary of the Bank.

On 29 March 2019 the Bank issued a second tranche nominal value of RM400.0 million perpetual Capital Securities fully subscribed
by HLFG. The Capital Securities carry a distribution rate of 4.72% per annum and are perpetual with an Issuer's call option to
redeem at the end of year 5. The proceeds from the issuance shall be utilised to fulfill the requirements of Additional Tier 1 capital
as per BNM's Capital Adequacy Framework (Capital Components) issued on 2 February 2018 and without limitation, to on-lend to
HLB's subsidiaries, for investment into HLB's subsidiaries, for working capital, general banking and other corporate purposes and/
or if required, the refinancing of any existing financing obligations of HLB and/or any existing capital securities issued under the
Capital Securities Programme.

28 INNOVATIVE TIER 1 CAPITAL SECURITIES

The Group and The Bank

2020 2019
RM’000 RM’000

RM500 million Innovative Tier 1 capital securities, at par - 500,000

Add: Interest payable - 12,658
- 512,658
Less: Unamortised discounts - (502)
Fair value adjustments on completion of business combination accounting - 112
- 512,268

On 10 September 2009, Promino Sdn Bhd (“Promino”) issued the first tranche of Innovative Tier 1 Capital Securities (“IT-1 Capital
Securities”) amounting to RM500.0 million in nominal value, from its RM1.0 billion IT-1 Capital Securities Programme. The IT-1
Capital Securities is structured in accordance with the Risk-Weighted Capital Adequacy Framework (General Requirements and
Capital Components) issued by BNM.

The RM500.0 million IT-1 Capital Securities has a tenor of 30 years and Promino has the option to redeem the RM500.0 million IT-1
Capital Securities at the 10th anniversary, subject to BNM approval. The RM500.0 million IT-1 Capital Securities has a coupon rate of
8.25% per annum, payable semi-annually. In the event the IT-1 Capital Securities is not redeemed at the 10th anniversary (the First
Optional Redemption Date), the coupon rate will be revised to 9.25% per annum from the 11th year to the final maturity.

On 1 July 2011, the above IT-1 Capital Securities was vested to HLB. The IT-1 Capital Securities constitute unsecured and
subordinated obligations of HLB and are subordinated to all deposit liabilities and all other liabilities except those liabilities which
rank equally in, and/or junior to, the rights of payment of the IT-1 Capital Securities. The IT-1 Capital Securities qualify as Tier 1
capital for the purpose of computing the capital adequacy ratio of the Group and the Bank.

On 10 September 2019, HLB had fully redeemed the RM500.0 million nominal value of IT-1 Capital Securities.

256 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

29 SHARE CAPITAL

The Group and The Bank

2020 2019
Number of Number of
ordinary ordinary
shares shares
‘000 RM’000 ‘000 RM’000

Ordinary shares issued and fully paid:

At 1 July/30 June - ordinary shares with no par value 2,167,718 7,739,063 2,167,718 7,739,063

30 RESERVES

The Group The Bank

2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000

Retained profits (a) 18,172,806 16,686,412 12,661,472 12,034,337

Other reserves:
Share options reserve (b) 54,913 39,170 54,913 39,170
Fair value reserve (c)
- Financial investments at FVOCI 341,819 150,952 325,937 129,590
Exchange fluctuation reserve (d) 809,103 731,018 231,951 218,330
Cash flow hedge reserve (e) (8,489) (2,726) (8,487) (2,726)
Regulatory reserves (f) 848,428 858,315 703,987 695,197
2,045,774 1,776,729 1,308,301 1,079,561
20,218,580 18,463,141 13,969,773 13,113,898

(a) The Bank can distribute dividends out of its entire retained earnings under the single-tier system.

(b) The share options reserve arose from share options and ordinary shares granted to eligible executives of the Bank pursuant
to the Bank's ESS. Terms of the Bank's ESS are disclosed in Note 57 to the financial statements.

Annual Report 2020 257

Notes to the Financial Statements
for the financial year ended 30 June 2020

30 RESERVES (CONTINUED)

(c) Movement of the fair value reserve is as follows:

The Group The Bank

2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000

At 1 July 150,952 164,127 129,590 194,544

Effect of adopting MFRS 9 - (288,588) - (291,679)
As restated 150,952 (124,461) 129,590 (97,135)

Equity instruments
- Net fair value changes 15,763 11,796 15,763 11,796
- Net loss on disposal - (51) - (51)
Debt instruments
- Net fair value changes 480,401 447,030 508,341 400,730
- Changes in expected credit losses 502 (862) 601 (931)
Reclassification to net profit on disposal and
impairment (276,886) (124,838) (276,665) (124,838)
Deferred taxation 44 (44,889) (71,602) (51,693) (59,981)
Share of fair value reserve of associated
company 15,976 13,940 - -
Net change in fair value reserve 190,867 275,413 196,347 226,725
At 30 June 341,819 150,952 325,937 129,590

(d) Currency translation differences arising from translation of the Bank’s foreign branches, subsidiaries, associated companies
and joint venture are recognised in exchange fluctuation reserve.

(e) Cash flow hedge reserve arises from cash flow hedge activities undertaken by the Bank to hedge the changes in the cash
flow of customer deposits arising from the movement of market interest rates. The reserve is non-distributable and is
reversed to the statements of income upon maturity or termination of the cash flow hedge.

(f) Regulatory reserves represent the Group’s and the Bank’s compliance with BNM’s Revised Policy Documents on Financial
Reporting and Financial Reporting for Islamic Banking Institutions with effect from 1 July 2018, whereby the Bank and
its domestic banking subsidiaries must maintain, in aggregate, loss allowance for non-credit impaired exposures and
regulatory reserves of no less than 1% of total credit exposures, net of loss allowance for credit-impaired exposures.

During the financial year, an amount of RM9.9 million at Group has been transferred to retained profits from regulatory
reserves and RM8.8 million at Bank has been transferred from retained profits to regulatory reserves.

Included in the Group is the regulatory reserve maintained by the Group's banking subsidiary company in Vietnam of
RM11.2 million (2019: RM11.2 million) in line with the requirements of the State Bank of Vietnam.

258 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

31 TREASURY SHARES

The Group The Bank

2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000

Purchase of own shares pursuant to Section 127,

Companies Act 2016 (a) 431,829 431,829 431,829 431,829
Treasury shares for ESS (b) 291,515 295,988 291,515 295,988
723,344 727,817 723,344 727,817

(a) Purchase of own shares pursuant to Section 127 of the Companies Act 2016

The shareholders of the Bank, via an ordinary resolution passed at the Annual General Meeting held on 23 October 2013,
had approved the Bank’s plan to purchase its own shares up to 10% of the issued and paid-up share capital. The Directors
of the Bank are committed to enhance the value of the Bank to its shareholders and believe that the share buyback plan
can be applied in the best interests of the Bank and its shareholders.

As at 30 June 2020, the total number of shares bought was 81,101,700 (2019: 81,101,700) and the shares held were
accounted as treasury shares in accordance with the provisions of Section 127 of the Companies Act 2016.

There was no resale or cancellation of treasury shares during the financial year. The number of issued shares with voting
rights as at 30 June 2020 after deducting treasury shares purchased is 2,086,616,584 shares (2019: 2,086,616,584).
Treasury shares have no rights to vote nor participation in dividends or other distribution.

(b) Treasury shares for ESS

In 2006, the Bank entered into a Trust for ESOS purposes established via the signing of a Trust Deed on 23 January 2006 with
an appointed Trustee in conjunction with the establishment of an Executive Share Option Scheme (“ESOS”). The trustee will
be entitled from time to time to accept financial assistance from the Bank upon such terms and conditions as the Bank and
the trustee may agree to purchase the Bank’s shares from the open market for the purposes of this trust.

MFRS 132 'Financial Instruments: Presentation' requires that if an entity reacquires its own equity instruments, those
instruments shall be deducted from equity and are not recognised as a financial asset regardless of the reason for which
they are reacquired.

In accordance with MFRS 132, the shares purchased for the benefit of the ESS holders are recorded as "Treasury Shares for
ESS" in the equity on the statements of financial position.

During the financial year ended 30 June 2020, a total of 434,370 ordinary shares were vested and transferred while a total
of 172,946 share options were exercised pursuant to the Bank’s ESS. As at 30 June 2020, the total number of shares held
was 39,575,096 (2019: 40,182,412).

Annual Report 2020 259

Notes to the Financial Statements
for the financial year ended 30 June 2020

32A INTEREST INCOME

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Loans, advances and financing (Note) 4,636,360 4,827,453 4,487,576 4,720,096

Money at call and deposit placements with financial
institutions 168,338 203,883 183,833 197,060
Securities purchased under resale agreements 49 12 49 12
Financial investments at FVOCI 687,729 816,881 692,225 815,988
Financial investments at amortised cost 416,058 427,136 415,255 423,467
Others 3,509 9,496 3,354 9,191
5,912,043 6,284,861 5,782,292 6,165,814

Of which:
Accretion of discount less amortisation of premium 150,279 237,117 150,279 237,117
Interest income earned on impaired loans, advances and
financing 3,275 12,915 3,212 12,893

Note:
During the financial year, the Group and the Bank granted an automatic moratorium on certain loan/financing repayments/
payments, by individuals and small and medium enterprises (SMEs) for a period of six months from 1 April 2020. This, among
other measures, was to assist borrowers experiencing temporary financial constraints due to the COVID-19 pandemic and the
introduction of the Movement Control Order implemented by the Malaysian Government to control the spread of the pandemic.
As a result of the payment moratorium, the Group and the Bank recognised a loss from the modification of cash flows of the
loan/financing.

The Group and the Bank also received funding from the Central Bank and/or the Government, for the purpose of on-lending/
financing to SMEs at a concessionary rate/below market rate. The lending/financing by the Group and the Bank is to provide
support for SMEs in sustaining business operations, safeguard jobs and encourage domestic investments during the COVID-19
pandemic. The benefit under the various government schemes for the Group and the Bank that is recognised in the statements
of income is applied to address some of the financial and accounting impact incurred by the Group and the Bank for COVID-19
related repayments/payments relief measures.

Please refer to note 35 for the financial effects of the above.

32B INTEREST INCOME FOR FINANCIAL ASSETS AT FVTPL

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Financial assets at FVTPL 268,718 397,201 268,718 397,201

260 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

33 INTEREST EXPENSE

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Deposits and placements of banks and other financial

institutions 150,008 265,971 161,977 272,408
Deposits from customers 2,789,184 3,031,773 2,735,742 2,984,869
Short-term placements 344,652 429,986 344,652 429,986
Tier 2 subordinated bonds 66,752 116,165 66,782 116,135
Multi-currency Additional Tier-1 capital securities 39,473 25,347 39,639 25,513
Innovative Tier 1 capital securities 8,413 41,053 8,413 41,053
Recourse obligation on loans sold to Cagamas 6,588 7,602 6,588 7,602
Others 11,307 - 19,147 -
3,416,377 3,917,897 3,382,940 3,877,566

34 INCOME FROM ISLAMIC BANKING BUSINESS

The Group
2020 2019
RM’000 RM’000

Income derived from investment of depositors’ funds and others (Note) 1,574,201 1,455,046
Income derived from investment of shareholders’ funds (Note) 188,049 176,972
Income derived from investment of investment account 37,536 12
Income attributable to depositors (928,214) (924,754)
Income attributable to depositors on investment account (25,032) (7)
846,540 707,269

Of which:
Financing income earned on impaired financing and advances 996 1,553

Note:
During the financial year, HLISB granted an automatic moratorium on certain financing repayments/payments, by individuals and
small and medium enterprises (SMEs) for a period of six months from 1 April 2020. This, among other measures, was to assist
borrowers experiencing temporary financial constraints due to the COVID-19 pandemic and the introduction of the Movement
Control Order implemented by the Malaysian Government to control the spread of the pandemic. As a result of the payment
moratorium, HLISB recognised a loss from the modification of cash flows of the financing.

HLISB also received funding from the Central Bank and/or the Government, for the purpose of on financing to SMEs at a
concessionary rate/below market rate. The financing by HLISB is to provide support for SMEs in sustaining business operations,
safeguard jobs and encourage domestic investments during the COVID-19 pandemic. The benefit under the various government
schemes for HLISB that is recognised in the statements of income is applied to address some of the financial and accounting
impact incurred by HLISB for COVID-19 related repayments/payments relief measures.

Please refer to note 35 for the financial effects of the above.

Annual Report 2020 261

Notes to the Financial Statements
for the financial year ended 30 June 2020

35 FINANCIAL EFFECTS OF LOSS FROM THE MODIFICATION OF CASH FLOWS AND BENEFITS RECOGNISED UNDER THE VARIOUS
GOVERNMENT SCHEMES

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

(i) Loss on modification of cash flow

included in interest income (note 32a) (285,723) - (285,723) -
included in income from Islamic Banking business
(note 34) (190,227) - - -
Subtotal (475,950) - (285,723) -

(ii) Benefits recognised under the various government

schemes
included in interest income (note 32a) 194,972 - 194,972 -
included in income from Islamic Banking business
(note 34) 138,511 - - -
Subtotal 333,483 - 194,972 -

Net effects of (i) and (ii)

included in interest income (note 32a) (90,751) - (90,751) -
included in income from Islamic Banking business
(note 34) (51,716) - - -
Total (142,467) - (90,751) -

262 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

36 NON-INTEREST INCOME

The Group The Bank
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Fee income
Commissions 153,694 168,070 151,024 165,064
Service charges and fees 43,739 51,723 43,121 49,761
Guarantee fees 13,291 15,488 13,131 15,360
Credit card related fees 199,483 239,129 199,483 239,129
Corporate advisory fees 141 1,447 141 1,447
Commitment fees 33,150 32,662 32,100 31,678
Fee on loans, advances and financing 37,187 37,074 34,197 33,469
Other fee income 39,825 39,712 39,436 39,527
520,510 585,305 512,633 575,435
Net income from securities
Net realised gain/(loss) on financial instruments:
- Financial assets at FVTPL 133,481 104,539 133,481 104,539
- Derivative financial instruments (67,285) (221,202) (67,285) (221,202)
- Financial investments at FVOCI 364,324 164,261 364,033 164,261
- Financial investments amortised cost - 15,902 - 15,902
Dividend income from:
- Subsidiary companies - - 19,000 20,020
- Associated companies - - 205,332 174,604
- Financial assets at FVTPL 226,380 279,533 226,380 279,533
- Financial investments at FVOCI 3,683 203 3,683 203
Net unrealised gain/(loss) on revaluation of:
- Financial assets at FVTPL 13,199 51,544 13,199 51,544
- Derivative financial instruments (131,991) 1,754 (131,991) 1,754
Net realised loss on fair value changes arising from
fair value hedges (2,643) (504) (2,643) (504)
Net unrealised loss on fair value changes arising from
fair value hedges (1,051) (305) (1,051) (305)
538,097 395,725 762,138 590,349

Annual Report 2020 263

Notes to the Financial Statements
for the financial year ended 30 June 2020

36 NON-INTEREST INCOME (CONTINUED)

The Group The Bank
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Other income
Foreign exchange gain 78,151 152,425 76,099 150,983
Rental income 13,880 12,113 7,393 7,494
Gain on disposal of property and equipment 4,085 1,539 4,084 1,657
Gain on redemption of redeemable preference shares - - 15,000 -
Net gain on divestment of a joint venture - 90,106 - 138,101
Other non-operating income 12,709 17,188 12,313 15,639
108,825 273,371 114,889 313,874
1,167,432 1,254,401 1,389,660 1,479,658

37 OVERHEAD EXPENSES

The Group The Bank
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Personnel costs 1,166,011 1,147,680 940,860 945,709

Establishment costs 526,286 516,258 468,143 465,554
Marketing expenses 153,076 173,860 133,192 166,576
Administration and general expenses 258,431 253,777 250,260 244,388
2,103,804 2,091,575 1,792,455 1,822,227

The overhead expenses of the Bank are net of shared services costs charged to subsidiaries.

(i) Personnel costs comprise the following:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Salaries, bonus and allowances 1,066,491 1,048,998 859,637 864,504

Medical expenses 38,898 31,587 32,469 26,472
Training and convention expenses 16,316 24,585 13,317 20,542
Staff welfare 10,004 10,012 7,972 8,632
Other employees benefits 34,302 32,498 27,465 25,559
1,166,011 1,147,680 940,860 945,709

264 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

37 OVERHEAD EXPENSES (CONTINUED)

The overhead expenses of the Bank are net of shared services costs charged to subsidiaries. (continued)

(ii) Establishment costs comprise the following:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Depreciation of property and equipment 134,390 132,296 115,957 115,934

Depreciation of right-of-use assets 55,174 - 77,643 -
Amortisation of intangible assets 59,025 54,189 53,909 49,818
Rental of premises 3,914 58,900 3,970 72,169
Information technology expenses 175,661 170,783 158,575 155,412
Security services 28,476 28,807 22,341 22,643
Electricity, water and sewerage 24,007 25,345 19,158 20,823
Hire of plant and machinery 13,623 12,605 5,435 11,968
Others 32,016 33,333 11,155 16,787
526,286 516,258 468,143 465,554

(iii) Marketing expenses comprise the following:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Advertisement and publicity 27,109 25,778 23,043 23,491

Sales commission and credit card related fees 108,683 128,651 96,959 128,651
Others 17,284 19,431 13,190 14,434
153,076 173,860 133,192 166,576

Annual Report 2020 265

Notes to the Financial Statements
for the financial year ended 30 June 2020

37 OVERHEAD EXPENSES (CONTINUED)

The overhead expenses of the Bank are net of shared services costs charged to subsidiaries. (continued)

(iv) Administration and general expenses comprise the following:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Teletransmission expenses 21,147 18,295 20,596 17,883

Stationery and printing expenses 13,025 14,074 12,492 13,359
Professional fees 91,967 87,840 90,860 85,395
Insurance fees 44,091 42,103 38,651 36,934
Stamp, postage and courier 14,749 13,876 14,460 13,526
Travelling and transport expenses 4,256 4,637 3,111 3,372
Registration and license fees 8,595 9,005 7,464 8,011
Brokerage and commission 8,534 8,382 4,371 4,489
Credit card fees 45,282 42,628 45,282 42,628
Others 6,785 12,937 12,973 18,791
258,431 253,777 250,260 244,388

The above expenditure includes the following statutory disclosures:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Auditors’ remuneration*:
Malaysian firm
- statutory audit 1,761 2,022 1,499 1,680
- regulatory related fees 731 731 496 496
- tax compliance 67 74 41 45
- other services 300 63 198 63
PwC overseas affiliated firms
- statutory audit 655 694 466 563
- regulatory related fees 186 189 186 189
- tax compliance 91 90 91 90
Loss on disposal of property and equipment 89 122 87 122
Property and equipment disposal/written off 26,399 7,902 26,156 7,460
Intangible assets disposal/written off 8,357 37 8,352 35

* There was no indemnity given to or insurance effected for the Group and the Bank during the financial year.

266 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

38 ALLOWANCE FOR/(WRITTEN BACK OF) IMPAIRMENT LOSSES ON LOANS, ADVANCES AND FINANCING

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Allowance for/(write back of) impairment losses on loans,

advances and financing:
- expected credit losses 501,804 221,296 339,746 144,291
Impaired loans, advances and financing:
- written off 17,976 17,679 12,877 14,337
- recovered from bad debt written off (192,125) (226,652) (164,290) (202,339)
327,655 12,323 188,333 (43,711)

39 ALLOWANCE FOR/(WRITTEN BACK OF) IMPAIRMENT LOSSES ON FINANCIAL INVESTMENTS AND OTHER FINANCIAL ASSETS

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Expected credit losses on:

- Financial investments at FVOCI 472 (906) 573 (973)
- Financial investments at amortised cost 20 178 24 174
- Other receivables (34) (240) (34) (240)
- Cash and short-term funds (371) 47 403 583
- Deposits and placements with banks and other financial
institutions (254) (51) 501 1,140
(167) (972) 1,467 684

Annual Report 2020 267

Notes to the Financial Statements
for the financial year ended 30 June 2020

40 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES

(a) Related parties and relationships

The related parties of and their relationships with the Bank are as follows:

Related parties Relationship

Hong Leong Company (Malaysia) Berhad Ultimate holding company

Hong Leong Share Registration Services Sdn Bhd, Subsidiary companies of ultimate holding company
HLCM Capital Sdn Bhd, Hong Leong Fund Management Sdn Bhd
and HL Management Co Sdn Bhd

Hong Leong Financial Group Berhad Holding company

Subsidiary companies of Hong Leong Financial Group Berhad as Subsidiary companies of holding company
disclosed in its financial statements

Hong Leong Industries Berhad and its subsidiary and associated Subsidiary and associated companies of ultimate holding
companies as disclosed in its financial statements company

HLMG Management Co Sdn Bhd Subsidiary companies of ultimate holding company

(formerly known as HLI-Hume Management Co Sdn Bhd)
Hume Cement Sdn Bhd
Hume Construction Sdn Bhd
Hume Plastics (Malaysia) Sdn Berhad
Hume Quarry (Sarawak) Sdn Bhd
Hongvilla Development Sdn Bhd
HIMB Overseas Limited
HIMB Trading Limited and Delta Touch Limited

Guoco Group Limited and its subsidiary and associated companies Subsidiary and associated companies of ultimate holding
as disclosed in its financial statements company

GuocoLand (Malaysia) Berhad and its subsidiary and associated Subsidiary and associated companies of ultimate holding
companies as disclosed in its financial statements company

Southern Steel Berhad and its subsidiary and associated companies Subsidiary and associated companies of ultimate holding
company

Subsidiary companies of the Bank as disclosed in Note 13 Subsidiary companies of the Bank

Associated companies of the Group as disclosed in Note 14 Associated companies of the Group

Key management personnel The key management personnel of the Bank consists of:
- All Directors of the Bank and eight members of senior
management of the Bank

Related parties of key management personnel deemed as related (i) Close family members and dependents of key
to the Bank management personnel

(ii) Entities that are controlled, jointly controlled or

significantly influenced by, or for which significant
voting power in such entity resides with, directly or
indirectly by key management personnel or its close
family members

268 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

40 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(b) Related party transactions and balances

Other Key
Parent related Associated management
company companies companies personnel
The Group RM’000 RM’000 RM’000 RM’000

2020
Income
Interest:
- loans - 5,956 - 27
- redeemable preference shares - 4,773 - -
Commitment fee and bank charges - - - 21
Dividend income - 214,878 - -
Commission on Group products/services sold - 33,843 - -
Brokerage commission - 582 - -
Reimbursement of shared service cost 461 7,138 - -
461 267,170 - 48

Expenditure
Rental and maintenance - 14,960 - -
Insurance 54 34,981 - -
Interest on current accounts and fixed deposits - 2,347 - 432
Interest on short-term placements 241 8,173 - 4,798
Interest on subordinated notes and capital securities - 3,287 - -
Management fees 8,974 31,416 - -
Other miscellaneous expenses 82 8,837 - -
9,351 104,001 - 5,230

Amounts due from

Current accounts - - 20,827 -
Redeemable preference shares - 25,000 - -
Loans - 137,887 - 2,597
Wholesale funds - 4,641,896 - -
Derivative assets - 25,233 - -
Credit card balances - - - 270
Advance rental and deposit - 5,743 - -
Others - 64 - -
- 4,835,823 20,827 2,867

Amounts due to
Current accounts and fixed deposits - 61,247 - 34,021
Short-term placements - 1,402,178 - 142,090
Subordinated notes and capital securities - 54,991 - -
Derivative liabilities - 17,419 - -
Others 278 16,256 - -
278 1,552,091 - 176,111

Commitments and contingencies

Derivative related contracts - 712,448 - 712,448

Annual Report 2020 269

Notes to the Financial Statements
for the financial year ended 30 June 2020

40 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(b) Related party transactions and balances (continued)

Other Key
Parent related Associated management
company companies companies personnel
The Group RM’000 RM’000 RM’000 RM’000

2019
Income
Interest:
- loans - 6,696 - 42
- redeemable preference shares - 1,301 - -
Commitment fee and bank charges - - - 43
Dividend income - 261,647 - -
Commission on Group products/services sold - 33,802 - -
Brokerage commission - 589 - -
Reimbursement of shared service cost 1,036 7,557 - -
1,036 311,592 - 85

Expenditure
Rental and maintenance - 14,525 - -
Insurance 54 31,206 - -
Interest on current accounts and fixed deposits - 934 - 1,670
Interest on short-term placements 87 10,667 - 3,535
Interest on subordinated notes and capital securities - 26,454 - -
Management fees 6,119 32,633 - -
Other miscellaneous expenses 130 12,284 - -
6,390 128,703 - 5,205

Amounts due from

Current accounts - - 20,414 -
Negotiable instruments of deposits - 300,534 - -
Redeemable preference shares - 30,866 - -
Loans - 125,522 - 662
Wholesale funds - 7,046,520 - -
Derivative assets 135 1,621 - -
Credit card balances - - - 405
Advance rental and deposit - 5,485 - -
Others 459 2,010 - -
594 7,512,558 20,414 1,067

Amounts due to
Current accounts and fixed deposits - 55,369 - 32,784
Short-term placements - 906,044 - 317,839
Subordinated notes and capital securities - 47,377 - -
Derivative liabilities - 17,509 - -
Others 278 24,746 - -
278 1,051,045 - 350,623

Commitments and contingencies

Derivative related contracts 100,000 708,803 - -

270 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

40 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(b) Related party transactions and balances (continued)

Other Key
Parent Subsidiary Associated related management
company companies companies companies personnel
The Bank RM’000 RM’000 RM’000 RM’000 RM’000

2020
Income
Interest:
- loans - 13,012 - 5,956 27
- interbank placements - 15,939 - - -
- current accounts - - 312 - -
- negotiable instruments of deposits - 8,851 - - -
- redeemable preference shares - - - 4,773 -
- subordinated facilities - 934 - - -
Dividend income - 19,000 205,332 214,878 -
Commitment fee and bank charges - - - - 21
Commission on Group products/
services sold - - - 33,843 -
Brokerage commission - - - 582 -
Reimbursement of shared service cost 461 183,030 - 7,138 -
461 240,766 205,644 267,170 48

Expenditure
Rental and maintenance - 918 - 14,673 -
Insurance 54 - - 34,981 -
Interest on current accounts and
fixed deposits - 1,459 - 4 415
Interest on short-term placements 241 - - 8,173 4,798
Interest on lease liabilities - 8,060 - - -
Interest on interbank placements - 10,805 - - -
Interest on subordinated notes and
capital securities - - - 3,287 -
Management fees 8,974 - - 31,416 -
Other miscellaneous expenses 82 1,438 - 8,826 -
9,351 22,680 - 101,360 5,213

Annual Report 2020 271

Notes to the Financial Statements
for the financial year ended 30 June 2020

40 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(b) Related party transactions and balances (continued)

Other Key
Parent Subsidiary Associated related management
company companies companies companies personnel
The Bank RM’000 RM’000 RM’000 RM’000 RM’000

2020
Amounts due from
Interbank placements - 710,259 - - -
Current accounts - - 20,827 - -
Redeemable preference shares - - - 25,000 -
Loans - 345,834 - 137,887 2,597
Right-of-use assets - 180,985 - - -
Wholesale funds - - - 4,641,896 -
Credit card balances - - - - 270
Derivative assets - 30,647 - 25,233 -
Advance rental and deposit - 8,783 - 5,743 -
Others - 106,363 - 64 -
- 1,382,871 20,827 4,835,823 2,867

Amounts due to
Current accounts and fixed deposits - 95,461 - 61,247 32,393
Short-term placements - - - 1,402,178 142,090
Subordinated notes and
capital securities - - - 54,991 -
Derivative liabilities - 4,618 - 17,419 -
Lease liabilities - 179,494 - - -
Provision for reinstatement cost - 6,940 - - -
Others - 429,380 - - -
- 715,893 - 1,535,835 174,483

Commitments and contingencies

Derivative related contracts - 1,468,247 - 712,448 -

272 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

40 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(b) Related party transactions and balances (continued)

Other Key
Parent Subsidiary Associated related management
company companies companies companies personnel
The Bank RM’000 RM’000 RM’000 RM’000 RM’000

2019
Income
Interest:
- loans - 14,718 - 6,696 42
- interbank placements - 16,684 - - -
- current accounts - - 511 - -
- negotiable instruments of deposits - 2,798 - - -
- redeemable preference shares - - - 1,301 -
- subordinated facilities - 908 - - -
Dividend income - 20,020 174,604 261,647 -
Commitment fee and bank charges - - - - 43
Commission on Group products/
services sold - - - 33,802 -
Brokerage commission - - - 589 -
Reimbursement of shared service cost 1,036 154,700 - 7,557 -
1,036 209,828 175,115 311,592 85

Expenditure
Rental and maintenance - 32,267 - 14,253 -
Insurance 54 - - 31,206 -
Interest on current accounts and
fixed deposits - 1,698 - 34 1,646
Interest on short-term placements 87 - - 10,667 3,535
Interest on interbank placements - 7,389 - - -
Interest on subordinated notes and
capital securities - - - 26,454 -
Management fees 6,119 - - 32,633 -
Other miscellaneous expenses 130 1,866 273 12,272 -
6,390 43,220 273 127,519 5,181

Annual Report 2020 273

Notes to the Financial Statements
for the financial year ended 30 June 2020

40 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(b) Related party transactions and balances (continued)

Other Key
Parent Subsidiary Associated related management
company companies companies companies personnel
The Bank RM’000 RM’000 RM’000 RM’000 RM’000

2019
Amounts due from
Interbank placements - 289,883 - - -
Current accounts - - 20,414 - -
Negotiable instruments of deposits - - - 300,534 -
Redeemable preference shares - - - 30,866 -
Loans - 352,137 - 125,522 662
Wholesale funds - - - 7,046,520 -
Credit card balances - - - - 405
Derivative assets 135 22,263 - 1,621 -
Advance rental and deposit - 8,414 - 5,485 -
Others 459 13,094 - 2,010 -
594 685,791 20,414 7,512,558 1,067

Amounts due to
Current accounts and fixed deposits - 134,099 - 55,369 32,322
Short-term placements - - - 906,044 317,839
Subordinated notes and capital
securities - - - 47,377 -
Derivative liabilities - 14,046 - 17,509 -
Others - 29 - - -
- 148,174 - 1,026,299 350,161

Commitments and contingencies

Derivative related contracts 100,000 1,661,642 - 708,803 -

274 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

40 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(b) Related party transactions and balances (continued)

The Group and The Bank

2020 2019
RM’000 RM’000

The approved limit on loans, advances and financing for key management personnel 10,516 5,316

(c) Key management personnel

Key management compensation

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Salaries and other short-term employee benefits 24,405 23,284 24,405 23,284

Director fees 1,288 1,141 1,112 973

ESS expenses 14,152 11,662 14,152 11,662

Included in the above is the Directors’ remuneration which is disclosed in Note 41 to the financial statements.

Loans made to key management personnel of the Group and the Bank will be on similar terms and conditions generally
available to other employees within the Group. No impairment allowances were required in 2020 and 2019 for loans made
to key management personnel.

(d) Credit transactions and exposures with connected parties

Credit exposures with connected parties as per BNM’s revised “Guidelines on Credit Transactions and Exposures with
Connected Parties” which became effective on 1 January 2008 are as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Outstanding credit exposures with connected parties 2,808,786 2,210,547 2,752,204 2,188,386
Percentage of outstanding credit exposures to
connected parties as a proportion of total credit
exposures 1.72% 1.43% 2.16% 1.78%
Percentage of outstanding credit exposures with
connected parties which is non-performing or in
default 0.0002% 0.0002% 0.0003% 0.0003%

Annual Report 2020 275

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

40 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(e) Intercompany charges

Breakdown of intercompany charges by type of services received and geographical distribution as per BNM’s Guidelines on Financial Reporting issued on 27 September 2019 are as follows:

Interest on
deposits and
placements Interest on
of banks and Interest on subordinated
other financial Interest on deposits from notes and Rental and Management
institutions lease liabilities customers capital securities maintenance fees Insurance Others
The Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2020
Malaysia - 8,060 9,474 3,287 6,145 40,065 35,021 9,789
Singapore - - 370 - 6,042 - - 1
Hong Kong - - 33 - 3,404 325 14 425
Cambodia 10,805 - - - - - - -
Others - - - - - - - 131
10,805 8,060 9,877 3,287 15,591 40,390 35,035 10,346

2019
Malaysia - - 9,849 26,454 37,696 38,436 31,246 13,699
Singapore - - 373 - 6,118 - - -
Hong Kong - - 42 - 2,706 316 14 501
Cambodia 7,389 - - - - - - 42
Others - - 2,222 - - - - 299
7,389 - 12,486 26,454 46,520 38,752 31,260 14,541

HONG LEONG BANK BERHAD Annual Report 2020 276

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

41 CHIEF EXECUTIVE OFFICER (“CEO”) AND DIRECTORS’ REMUNERATION

Forms of remuneration in aggregate for CEO and all Directors and for the financial year are as follows:

The Group The Bank

Salaries, bonuses, Salaries, bonuses,
allowances and Estimated allowances and Estimated
defined contribution money value for defined contribution money value for
retirement plan Director fees benefits-in-kind Total retirement plan Director fees benefits-in-kind Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2020
CEO
Mr Domenic Fuda 10,259 - 6,866 17,125 10,259 - 6,866 17,125

Executive Director
Mr Tan Kong Khoon - - - - - - - -

Non-executive Directors
YBhg Tan Sri Quek Leng Chan - - - - - - - -
Mr Kwek Leng Hai - - - - - - - -
Ms Chok Kwee Bee 32 275 - 307 32 275 - 307
YBhg Dato’ Nicholas John Lough @
Sharif Lough bin Abdullah 33 285 - 318 33 285 - 318
YBhg Datuk Dr Md Hamzah bin Md Kassim 26 343 - 369 9 167 - 176
Ms Chong Chye Neo 9 170 - 179 9 170 - 179
Ms Lau Souk Huan * 26 215 241 26 215 241
126# 1,288 - 1,414 109# 1,112 - 1,221
Directors of subsidiaries 3,327 644 - 3,971 - - - -
Total CEO and Directors’ remuneration 13,712 1,932 6,866 22,510 10,368 1,112 6,866 18,346
The movement and details of the Directors of the Group and the Bank in office and interests in shares and share options are reported in the Directors’ report.

* Appointed on 6 September 2019

# Directors’ meeting allowances

Note: During the financial year, Directors and Officers of the Group and the Bank are covered under the Directors’ & Officers’ Liability Insurance in respect of liabilities arising from acts committed in their capacity as, inter alia, Directors
and Officers of the Group and the Bank subject to the terms of the policy. The total amount of Directors' & Officers’ Liability Insurance effected for the Directors & Officers of the holding company was RM 10.0 million. The total
amount of premium paid for the Directors' & Officers' Liability Insurance by the Group and the Bank was RM58,938 and RM50,825 respectively.

HONG LEONG BANK BERHAD Annual Report 2020 277

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

41 CHIEF EXECUTIVE OFFICER (“CEO”) AND DIRECTORS’ REMUNERATION (CONTINUED)

Forms of remuneration in aggregate for CEO and all Directors and for the financial year are as follows: (continued)

The Group The Bank

Salaries, bonuses, Salaries, bonuses,
allowances and Estimated allowances and Estimated
defined contribution money value for defined contribution money value for
retirement plan Director fees benefits-in-kind Total retirement plan Director fees benefits-in-kind Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2019
CEO
Mr Domenic Fuda 8,141 - 7,202 15,343 8,141 - 7,202 15,343

Executive Director
Mr Tan Kong Khoon - - - - - - - -

Non-executive Directors
YBhg Tan Sri Quek Leng Chan - - - - - - - -
Mr Kwek Leng Hai - - - - - - - -
Ms Lim Lean See* 24 224 - 248 24 224 - 248
Ms Chok Kwee Bee 29 251 - 280 29 251 - 280
YBhg Dato’ Nicholas John Lough @ Sharif Lough
bin Abdullah 30 285 - 315 30 285 - 315
YBhg Datuk Dr Md Hamzah bin Md Kassim 24 328 - 352 9 160 - 169
Ms Chong Chye Neo** 3 53 - 56 3 53 - 56
110# 1,141 - 1,251 95# 973 - 1,068
Directors of subsidiaries 3,084 633 - 3,717 - - - -
Total CEO and Directors’ remuneration 11,335 1,774 7,202 20,311 8,236 973 7,202 16,411
The movement and details of the Directors of the Group and the Bank in office and interests in shares and share options are reported in the Directors’ report.

* Retired on 5 May 2019

** Appointed on 21 February 2019
# Directors’ meeting allowances

Note: The Directors' Remuneration in the current financial year represents remuneration for Directors of the Group, the Bank and its subsidiaries to comply with the requirements of Companies Act 2016. The names of Directors of
subsidiaries and their remuneration details are set out in the respective subsidiaries' statutory accounts and the said information is deemed incorporated herein by such reference and made a part hereof.
During the financial year, Directors and Officers of the Group and the Bank are covered under the Directors’ & Officers’ Liability Insurance in respect of liabilities arising from acts committed in their capacity as, inter alia, Directors
and Officers of the Group and the Bank subject to the terms of the policy. The total amount of Directors' & Officers’ Liability Insurance effected for the Directors & Officers of the holding company was RM 10.0 million. The total
amount of premium paid for the Directors' & Officers' Liability Insurance by the Group and the Bank was RM58,264 and RM51,462, respectively.

HONG LEONG BANK BERHAD Annual Report 2020 278

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

42 TAXATION

The Group The Bank
2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000

Current year income tax 611,471 610,102 530,134 518,815

Deferred taxation 19 (119,895) (41,203) (112,313) (17,337)
Under/(over) accrual in prior years 3,224 (47,386) 3,639 (42,482)
Taxation 494,800 521,513 421,460 458,996

The effective tax rate for the Group and Bank differed from the statutory rate of taxation due to:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Profit before taxation 2,989,397 3,186,020 2,075,475 2,385,907

Tax calculated at a rate of 24% 717,455 764,645 498,114 572,618

Tax effects of:
- Income not subject to tax (98,281) (101,178) (101,698) (109,126)
- Share of net income of foreign associated company and
joint venture company (154,160) (135,147) - -
- Expenses not deductible for tax purposes 26,562 40,579 21,405 37,986
Under/(over) accrual in prior years 3,224 (47,386) 3,639 (42,482)
Taxation 494,800 521,513 421,460 458,996

The Group
2020 2019
RM’000 RM’000

Unused tax losses from a wholly owned subsidiary for which no deferred tax is recognised in
the financial statements* 28,248 29,046

* Under the Malaysian Finance Act 2018 which was gazetted on 27 December 2018, the Group's unutilised tax losses with no
expiry period will be imposed with a time limited of utilisation. Any accumulated unutilised tax losses brought forward from
year of assessment 2019 can be carried forward for up to 7 consecutive years of assessment (i.e. from year of assessment
2019 to 2026).

Annual Report 2020 279

Notes to the Financial Statements
for the financial year ended 30 June 2020

43 EARNINGS PER SHARE

Basic earnings per share

Basic earnings per share from operations is calculated by dividing the net profit attributable to ordinary equity holders of the
Bank after taxation by the weighted average number of ordinary shares in issue during the financial year, excluding the average
number of ordinary shares purchased by the Bank and held as treasury shares.

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Net profit attributable to equity holders 2,494,597 2,664,507 1,654,015 1,926,911

Weighted average number of ordinary shares in issue (‘000) 2,046,702 2,045,995 2,046,702 2,045,995
Basic earnings per share (sen) 121.9 130.2 80.8 94.2

Diluted earnings per share

The Bank has two categories of dilutive potential ordinary shares, which are the share options and ordinary shares granted under
the ESS. For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value
(determined as the average annual market share price of the Bank’s shares) based on the monetary value of the subscription
rights attached to outstanding share options. The number of shares calculated as below is compared with the number of shares
that would have been issued assuming the exercise of the share options.

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Net profit attributable to equity holders 2,494,597 2,664,507 1,654,015 1,926,911

Weighted average number of ordinary shares in issue (‘000) 2,046,702 2,045,995 2,046,702 2,045,995
- adjustment for ESS 429 4,310 429 4,310
2,047,131 2,050,305 2,047,131 2,050,305
Diluted earnings per share (sen) 121.9 130.0 80.8 94.0

280 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

44 INCOME TAX RELATING TO COMPONENTS OF OTHER COMPREHENSIVE INCOME/(LOSS)

2020 2019
Net of Net of
Before Tax tax Before Tax tax
tax benefits amount tax benefits amount
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Debt instruments at fair

value through other
comprehensive income
- net fair value changes
and changes in
expected credit losses 204,017 (44,889) 159,128 321,330 (71,602) 249,728

Cash flow hedge

- net fair value (loss)/gain (7,633) 1,870 (5,763) (4,531) 973 (3,558)

The Bank
Debt instruments at fair
value through other
comprehensive income
- net fair value changes
and changes in
expected credit losses 232,277 (51,693) 180,584 274,961 (59,981) 214,980

Cash flow hedge

- net fair value (loss)/gain (7,631) 1,870 (5,761) (4,531) 973 (3,558)

Annual Report 2020 281

Notes to the Financial Statements
for the financial year ended 30 June 2020

45 DIVIDENDS

The Group and The Bank

2020 2019
Gross Amount Gross Amount
dividends of dividends dividends of dividends
per share net of tax per share net of tax
sen RM’000 sen RM’000

Final dividend paid

- for financial year ended 30 June 2019 34.0 695,813 - -
- for financial year ended 30 June 2018 - - 32.0 654,666
Interim dividend paid
- for financial year ended 30 June 2020 16.0 327,527 - -
- for financial year ended 30 June 2019 - - 16.0 327,390
50.0 1,023,340 48.0 982,056

A final single tier dividend in respect of the financial year ended 30 June 2020 of 20.0 sen per share (2019: 34.0 sen single tier
per share) will be proposed for shareholders’ approval at the forthcoming Annual General Meeting. Based on the Bank’s adjusted
total number of issued shares (excluding 81,101,700 treasury shares held pursuant to Section 127 of the Companies Act 2016 and
ESOS scheme of 39,575,096 shares) of 2,047,041,488 shares as at 30 June 2020, the dividend amount would approximately be
RM409,408,298. The proposed dividend will be reflected in the financial statements for the financial year ending 30 June 2021
when approved by shareholders.

282 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

46 COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Group and the Bank make various commitments and incur certain contingent liabilities
with legal recourse to its customers. No material losses are anticipated as a result of these transactions. These commitments and
contingencies are also not secured over the assets of the Group.

The notional amounts of the commitments and contingencies constitute the followings:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Direct credit substitutes* 133,166 117,740 80,144 64,395

Certain transaction related contingent items 1,489,056 1,446,851 1,283,921 1,261,524
Short-term self liquidating trade related contingencies 538,144 674,511 508,190 638,625
Irrevocable commitments to extend credit:
- maturity more than one year 17,777,310 17,720,606 12,807,826 12,749,585
- maturity less than one year 20,856,358 19,020,280 17,067,748 15,541,640
Foreign exchange related contracts:^
- less than one year 40,277,996 34,829,534 33,398,925 33,337,605
- one year to less than five years 4,089,668 3,995,994 4,089,668 3,995,994
- five years and above 288,397 301,327 288,397 301,327
Interest rate related contracts:^
- less than one year 18,957,616 38,511,811 19,457,616 38,511,811
- one year to less than five years 32,060,237 34,300,635 32,260,237 35,195,635
- five years and above 2,609,803 3,170,389 2,571,708 3,320,389
Equity related contracts:^
- less than one year 264,263 591,385 264,263 591,386
- one year to less than five years 136,115 127,853 136,115 127,852
Credit related contracts:^
- five years and above 291,272 82,753 291,272 82,753
Unutilised credit card lines 7,463,767 7,276,500 7,463,767 7,276,500
147,233,168 162,168,169 131,969,797 152,997,021

^ These derivatives are revalued at gross position basis and the fair value have been reflected in Note 10 to the financial
statements as derivatives assets or derivatives liabilities.

* Included in direct credit substitutes above are the financial guarantee contracts of RM92,904,339 and RM42,901,839 at
Group and Bank, respectively (2019: RM103,153,716 and RM53,153,716 at Group and Bank, respectively), of which fair
value at the time of issuance is nil.

Annual Report 2020 283

Notes to the Financial Statements
for the financial year ended 30 June 2020

47 CAPITAL COMMITMENTS

The capital commitments are in respect of:

- property and equipment
- intangible assets

Capital expenditure approved by the Directors but not provided for in the financial statements are as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Authorised and contracted for 186,427 155,521 148,227 131,104

Authorised but not contracted for 28,052 51,570 22,294 51,438
214,479 207,091 170,521 182,542

48 LEASE COMMITMENTS

The Group and the Bank have lease commitments in respect of rented premise, photocopier machine and scanner, all of which
are classified as operating leases at 30 June 2019. From 1 July 2019, the Group and the Bank have recognised right-of-use assets
for these leases, except for short-term and low value leases which are scoped-out of MFRS 16. A summary of the future minimum
lease payments, under non-cancellable operating lease commitments are as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Not later than one year - 13,827 - 29,413

Later than one year and not later than five years - 1,075 - 1,075
Later than five years - 1,298 - 1,298
- 16,200 - 31,786

49 HOLDING AND ULTIMATE HOLDING COMPANIES

The holding and ultimate holding companies are Hong Leong Financial Group Berhad and Hong Leong Company (Malaysia)
Berhad, respectively. Both companies are incorporated in Malaysia.

284 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS

(a) Financial risk management objectives and policies

Overview and organisation

Group Risk Management (“GRM”)

The Group has implemented a risk management framework with the objective to ensure the overall financial soundness
and stability of the Group’s business operations. The Group's risk management framework outlines the overall governance
structure, aspiration, values and risk management strategies which aligns the Group's risk profile, capital strategies and
return objectives. Appropriate methodologies and measurements have been developed to manage uncertainties such that
deviations from intended strategic objectives are closely monitored and kept within tolerable levels.

From a governance perspective, the Board has the overall responsibility to define the Group's risk appetite and ensure
that a robust risk management and compliance culture prevails. The Board is supported by the Board Risk Management
Committee (“BRMC”) in approving the Group's risk management framework as well as the attendant capital management
and planning policy, risk appetite statements, risk management strategies and risk policies.

Dedicated management level committees are established to oversee the development and the effectiveness of risk
management policies, to review risk exposures and portfolio composition as well as to ensure appropriate infrastructures,
resources and systems are put in place for effective risk management activities.

BRMC is supported by the Group Risk Management (“GRM”) function. The GRM function has been established to provide
independent oversight on the adequacy, effectiveness and integrity of risk management practices at all levels within the
Group. The core functions of the GRM function is to support line management in identification and management of key and
emerging risks for the Group, to measure these risks, to manage the risk positions and to determine the optimum capital
allocations. The Group regularly reviews its risk management framework to reflect changes in markets, products, regulatory
requirements and emerging best market practices.

Credit Risk Management

Credit risk arises as a result of customers or counterparties not being able to or willing to fulfil their financial and contractual
obligations as and when they fall due. These obligations arise from lending, trade finance and other activities undertaken
by the Group.

The Group has established a credit risk governance policy to ensure that exposure to credit risk is kept within the Bank’s
financial capacity to withstand potential future losses. Lending activities are guided by the internal credit policies and
guidelines that are reviewed and concurred by the Management Credit Committee (“MCC”), endorsed by the Credit
Supervisory Committee (“CSC”) and the BRMC, and approved by the Board. These policies are subject to review and
enhancements, at least on an annual basis.

Credit portfolio strategies and significant exposures are reviewed by both the BRMC and the Board. These portfolio strategies
are designed to achieve a desired portfolio risk tolerance level and sector distribution.

The Group’s credit approving process encompasses pre-approval evaluation, approval and post-approval evaluation. While
the business units are responsible for credit origination, the credit approving function rests mainly with the Credit Evaluation
Departments, the MCC and the CSC. The Board delegates the approving and discretionary authority to the MCC, CSC and the
various personnel of the Bank based on job function and designation.

Annual Report 2020 285

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(a) Financial risk management objectives and policies (continued)

Credit Risk Management (continued)

For any new products, credit risk assessment also forms part of the new product sign-off process to ensure that the new
product complies with the appropriate policies and guidelines, prior to the introduction of the product.

The Group's exposure to credit risk is mainly from its retail, small and medium enterprise (“SME”), commercial and corporate
customers. The credit assessment for retail customers is managed on a portfolio basis and the risk scoring models and
lending templates are designed to assess the credit worthiness and the likelihood of the obligors to repay their debts.
The SME, commercial and corporate customers are individually assessed and assigned with a credit rating, which is based
on the assessment of relevant factors such as the customer’s financial position, industry outlook, types of facilities and
collaterals offered.

In addition, the Group also conducts periodic stress testing of its credit portfolios to ascertain the credit risk impact to
capital under the relevant stress scenarios.

Independent Credit Review Team conducts independent post approval reviews on sampling basis to ensure that the quality
of credit appraisals, approval standards and operational robustness are in accordance with the credit standards, lending
policies and the directives established and approved by the Group’s management.

Market Risk Management

Market risk is the risk of financial loss arising from exposure to adverse changes in values of financial instruments caused
by changes in market prices or rates, which include changes to interest rates.

The Group adopts a systematic approach in managing such risks by types of instruments and nature of exposure. Market
risk is primarily controlled via a series of cut-loss limits and potential loss limits, i.e. Value at Risk (“VaR”), set in accordance
with the size of positions and risk tolerance appetites.

Portfolios held under the Group’s trading books are tracked using daily mark-to-market positions, which are compared
against preset limits. The daily tracking of positions is supplemented by sensitivity analysis and stress tests, using VaR and
other measurements.

Foreign exchange risks arising from adverse exchange rate movements, is managed by the setting of preset limits, matching
of open positions against these preset limits and imposition of cut-loss mechanisms.

Interest rate risk is identified, measured and controlled through various types of limits. In addition, the Group regularly
review the interest rate outlook and develop strategies to protect the total net interest income from adverse changes
in market interest rates. This applies to both interest rate risk exposures in the trading book and the banking book. In
managing interest rate risk in the banking book, the Group measures earnings at risk and economic value or capital at risk.

The Group also conducts periodic stress testing of the respective portfolios and on an overall basis to ascertain market risk
under abnormal market conditions.

286 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(a) Financial risk management objectives and policies (continued)

Liquidity Risk Management

Liquidity risk is the risk of financial loss arising from the inability to fund increases in assets and/or meet obligations as
they fall due. Financial obligations arise from the withdrawal of deposits, funding of loans committed and repayment of
borrowed funds. It is the Group’s policy to ensure there is adequate liquidity across all business units to sustain ongoing
operations, as well as sufficient liquidity to fund asset growth and strategic opportunities.

Besides adhering to the Regulatory Liquidity Requirement, the Group has put in place a robust and comprehensive liquidity
risk management framework consisting of risk appetite, policies, triggers and controls which are reviewed and concurred
by the Group Assets and Liabilities Committee, endorsed by the BRMC and approved by the Board. The key elements of the
framework cover proactive monitoring and management of cashflow, maintenance of high quality long-term and short-
term marketable debt securities, diversification of funding base as well as maintenance of a liquidity compliance buffer to
meet any unexpected cash outflows.

The Group has in place liquidity contingency funding plan and stress test programs to minimise the liquidity risk that
may arise due to unforeseen adverse changes in the marketplace. Contingency funding plan sets out the crisis escalation
process and the various strategies to be employed to preserve liquidity including an orderly communication channel during
liquidity crisis scenarios. Liquidity stress tests are conducted regularly to ensure there is adequate liquidity contingency fund
to meet the shortfalls during liquidity crisis scenarios.

Pandemic Related Risk Management

Pandemic related risk is the risk of loss arising from infectious diseases spreading locally, regionally or globally at an
epidemic level, usually at an undetermined scale and duration. Financial risks may be caused by such disruptions on the
Group's customers, on financial markets and on the Group's operations.

The Group has put in place a strategic plan to ensure that its operations and services are maintained fully functional in the
event of a pandemic. In the continuing Covid-19 pandemic, businesses of the Group which are classified under the essential
services sector, operates under specific operating conditions with heightened public health safety and business continuity
requirements, as mandated in countries that the Group operates in. In demonstrating preparedness under crisis conditions,
the Group has implemented enhanced Business Continuity Management plans and processes to ensure the continuity of its
businesses and operations.

In managing credit risk exposures, the Group has implemented changes arising from central banks and governments'
supportive action, to introduce loan repayment moratorium or other forms of financial assistance for its customers that may
be adversely impacted by the pandemic.

As an additional measure to safeguard the health and safety of its employees, the Group established enhanced standard
operating procedures that provides detail guidance to its employees on disease containment measures, work safety
arrangements as well as reporting and incident escalation requirements.

Annual Report 2020 287

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk

Market risk sensitivity assessment is based on the changes in key variables, such as interest rates and foreign currency
rates, while all other variables remain unchanged. The sensitivity factors used are assumptions based on parallel shifts in
the key variables to project the impact on the assets and liabilities position of the Group and the Bank.

The scenarios used are simplified whereby it is assumed that all key variables for all maturities move at the same time
and by the same magnitude and do not incorporate actions that would be otherwise taken by the business units and risk
management to mitigate the effect of this movement in key variables. In reality, the Group and the Bank proactively seek
to ensure that the interest rate risk profile is managed to minimise losses and optimise net revenues.

(i) Interest/Profit rate risk sensitivity analysis

The interest/profit rate sensitivity results below shows the impact on profit after tax and equity of financial assets
and financial liabilities bearing floating interest/profit rates and fixed rate financial assets and financial liabilities
carried at fair value.

The Group The Bank

Impact Impact
on profit Impact on profit Impact
after tax on equity after tax on equity
2020 RM’000 RM’000 RM’000 RM’000

Increase/(Decrease)
+100 basis points (‘bps’) 190,924 (614,834) 143,989 (533,714)

-100 bps (190,924) 614,834 (143,989) 533,714

2019
Increase/(Decrease)
+100 basis points (‘bps’) 50,274 (300,025) 49,884 (230,924)

-100 bps (50,274) 300,025 (49,884) 230,924

288 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

(ii) Foreign currency risk sensitivity analysis

The Group and the Bank take on exposure to the effects of fluctuations in the prevailing foreign currency exchange
rates on their financial position and cash flows.

The table below sets out the principal structure of foreign exchange exposures of the Group and the Bank:

2020 2019
The Group RM’000 RM’000

Asset/(Liability)
United States Dollar (“USD”) 150,046 86,757
Euro (“EUR”) 3,504 5,932
Great Britain Pound (“GBP”) 10,035 13,718
Singapore Dollar (“SGD”) (49,285) (113,025)
Australian Dollar (“AUD”) (27,226) (20,861)
Chinese Yuan Renminbi (“CNY”) 6,492 5,207
Hong Kong Dollar (“HKD”) (97,570) (104,623)
Others 109,078 84,982
105,074 (41,913)

2020 2019
The Bank RM’000 RM’000
Asset/(Liability)
United States Dollar (“USD”) 228,932 112,895
Euro (“EUR”) (4,676) 969
Great Britain Pound (“GBP”) 1,494 8,323
Singapore Dollar (“SGD”) (52,631) (111,637)
Australian Dollar (“AUD”) (30,365) (23,091)
Chinese Yuan Renminbi (“CNY”) (2,368) 1,659
Hong Kong Dollar (“HKD”) (99,231) (105,594)
Others 119,536 37,931
160,691 (78,545)

Annual Report 2020 289

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

(ii) Foreign currency risk sensitivity analysis (continued)

An analysis of the exposures to assess the impact of a one per cent change in the foreign currency exchange rates to
the profit after tax are as follows:

2020 2019
The Group RM’000 RM’000

Increase/(Decrease)
-1%
United States Dollar (“USD”) (1,140) (659)
Euro (“EUR”) (27) (45)
Great Britain Pound (“GBP”) (76) (104)
Singapore Dollar (“SGD”) 375 859
Australian Dollar (“AUD”) 207 159
Chinese Yuan Renminbi (“CNY”) (49) (40)
Hong Kong Dollar (“HKD”) 742 795
Others (829) (646)
(797) 319

+1%
United States Dollar (“USD”) 1,140 659
Euro (“EUR”) 27 45
Great Britain Pound (“GBP”) 76 104
Singapore Dollar (“SGD”) (375) (859)
Australian Dollar (“AUD”) (207) (159)
Chinese Yuan Renminbi (“CNY”) 49 40
Hong Kong Dollar (“HKD”) (742) (795)
Others 829 646
797 (319)

290 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

(ii) Foreign currency risk sensitivity analysis (continued)

An analysis of the exposures to assess the impact of a one per cent change in the foreign currency exchange rates to
the profit after tax are as follows: (continued)

2020 2019
The Bank RM’000 RM’000

Increase/(Decrease)
-1%
United States Dollar (“USD”) (1,740) (858)
Euro (“EUR”) 36 (7)
Great Britain Pound (“GBP”) (11) (63)
Singapore Dollar (“SGD”) 400 848
Australian Dollar (“AUD”) 231 175
Chinese Yuan Renminbi (“CNY”) 18 (13)
Hong Kong Dollar (“HKD”) 754 803
Others (908) (288)
(1,220) 597

+1%
United States Dollar (“USD”) 1,740 858
Euro (“EUR”) (36) 7
Great Britain Pound (“GBP”) 11 63
Singapore Dollar (“SGD”) (400) (848)
Australian Dollar (“AUD”) (231) (175)
Chinese Yuan Renminbi (“CNY”) (18) 13
Hong Kong Dollar (“HKD”) (754) (803)
Others 908 288
1,220 (597)

Annual Report 2020 291

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

Interest/Profit rate risk

The tables below summarise the Group’s and the Bank’s exposure to interest/profit rate risks. Included in the tables are the Group’s and the Bank’s financial assets and financial liabilities at their carrying amounts,
categorised by the earlier of contractual repricing or maturity dates. The net interest sensitivity gap for items not recognised in the statements of financial position represents the net notional amounts of all interest/
profit rate sensitive derivative financial instruments. As interest rates and yield curves change over time, the Group and the Bank may be exposed to loss in earnings due to the effects of interest rates on the structure
of the statement of financial position. Sensitivity to interest/profit rates arises from mismatches in the repricing dates, cash flows and other characteristics of the financial assets and their corresponding financial
liabilities funding.

The Group
2020
Non-trading book
Non-interest/
Up to 1 to 3 3 to 12 1 to 5 Over 5 profit rate Trading
1 month months months years years sensitive book Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial assets
Cash and short-term funds 6,682,659 - - - - 1,879,510 - 8,562,169
Deposits and placements with banks and other financial institutions - 109,137 941,570 - - 1,672 - 1,052,379
Financial assets at fair value through profit or loss - - - - - 5,012,673 3,056,723 8,069,396
Financial investments at fair value through other comprehensive income 936,181 485,726 1,816,629 15,428,536 7,977,731 637,741 - 27,282,544
Financial investments at amortised cost 218,408 - 951,746 12,895,897 5,735,347 300,034 - 20,101,432
Loans, advances and financing
- performing 135,501,736 2,737,561 3,226,661 1,719,039 893,989 - - 144,078,986
- impaired ^ 110,030 606 22,432 63,034 419,862 - - 615,964
Other assets 23,037 - - - - 1,608,216 - 1,631,253
Derivative financial instruments
- trading derivatives - - - - - - 1,111,469 1,111,469
Statutory deposits with Central Banks - - - - 163,853 254,267 - 418,120
Total financial assets 143,472,051 3,333,030 6,959,038 30,106,506 15,190,782 9,694,113 4,168,192 212,923,712

^ This represents outstanding impaired loans after deducting expected credit losses.

HONG LEONG BANK BERHAD Annual Report 2020 292

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

Interest/Profit rate risk (continued)

The Group
2020
Non-trading book
Non-interest/
Up to 1 to 3 3 to 12 1 to 5 Over 5 profit rate Trading
1 month months months years years sensitive book Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial liabilities
Deposits from customers 70,681,569 32,585,292 42,065,154 941,259 545,147 26,674,240 - 173,492,661
Investment accounts of customers 42,681 304,611 5,137 - - 4,046 - 356,475
Deposits and placements of banks and other financial institutions 1,766,951 2,717,943 988,736 - 1,011,970 15,480 - 6,501,080
Obligations on securities sold under repurchase agreements 369,972 2,275,663 477,488 - - 1,009 - 3,124,132
Bills and acceptances payable 2,007 8,130 6,542 - - 117,374 - 134,053
Lease liabilities 3,503 7,025 31,426 121,286 77,937 - - 241,177
Other liabilities 5,187 355 2,938 - - 5,073,338 - 5,081,818
Derivative financial instruments
- trading derivatives - - - - - - 1,268,393 1,268,393
- hedging derivatives - - - 21,096 9,024 - - 30,120
Recourse obligation on loans sold to Cagamas - - - 1,042,085 - 6,920 - 1,049,005
Tier 2 subordinated bonds - - - 1,499,970 - 2,254 - 1,502,224
Multi-currency Additional Tier 1 Capital Securities - - - 799,655 - 6,665 - 806,320
Total financial liabilities 72,871,870 37,899,019 43,577,421 4,425,351 1,644,078 31,901,326 1,268,393 193,587,458

Net interest sensitivity gap 70,600,181 (34,565,989) (36,618,383) 25,681,155 13,546,704

Financial guarantees - - - - - 448,212

Credit related commitments and contingencies - - - - - 46,097,435
Treasury related commitments and contingencies (hedging) - - - 887,500 120,238 -
Net interest sensitivity gap - - - 887,500 120,238 46,545,647

HONG LEONG BANK BERHAD Annual Report 2020 293

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

Interest/Profit rate risk (continued)

The Group
2019
Non-trading book
Non-interest/
Up to 1 to 3 3 to 12 1 to 5 Over 5 profit rate Trading
1 month months months years years sensitive book Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial assets
Cash and short-term funds 3,043,906 - - - - 1,811,550 - 4,855,456
Deposits and placements with banks and other financial institutions - 867,749 417,180 - - 6,487 - 1,291,416
Financial assets at fair value through profit or loss - - - - - 7,402,652 4,728,381 12,131,033
Financial investments at fair value through other comprehensive income 635,857 1,301,245 1,761,639 15,990,018 3,848,771 316,980 - 23,854,510
Financial investments at amortised cost - - 53,820 13,010,653 1,884,567 204,159 - 15,153,199
Loans, advances and financing
- performing 114,796,095 1,217,840 639,349 9,223,211 9,754,210 - - 135,630,705
- impaired ^ 110,775 6,761 11,435 79,807 468,734 - - 677,512
Other assets 14,532 - - - - 1,116,804 - 1,131,336
Derivative financial instruments
- trading derivatives - - - - - - 528,256 528,256
Statutory deposits with Central Banks - - - - 209,674 4,379,159 - 4,588,833
Total financial assets 118,601,165 3,393,595 2,883,423 38,303,689 16,165,956 15,237,791 5,256,637 199,842,256

^ This represents outstanding impaired loans after deducting individual assessment impairment allowance and collective assessment impairment allowance.

HONG LEONG BANK BERHAD Annual Report 2020 294

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

Interest/Profit rate risk (continued)

The Group
2019
Non-trading book
Non-interest/
Up to 1 to 3 3 to 12 1 to 5 Over 5 profit rate Trading
1 month months months years years sensitive book Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial liabilities
Deposits from customers 62,890,768 31,251,833 41,379,505 2,701,208 1,291,598 23,555,382 - 163,070,294
Investment accounts of customers 198 2,030 1 - - 6 - 2,235
Deposits and placements of banks and other financial institutions 3,458,394 3,565,524 314,315 - - 20,191 - 7,358,424
Obligations on securities sold under repurchase agreements 178,431 2,150,720 - - - 4,765 - 2,333,916
Bills and acceptances payable 46,703 128,278 35,094 - - 182,948 - 393,023
Other liabilities 5,335 499 2,094 - - 4,621,297 - 4,629,225
Derivative financial instruments
- trading derivatives - - - - - - 670,548 670,548
- hedging derivatives - - 388 4,307 3,394 - - 8,089
Recourse obligation on loans sold to Cagamas - 200,059 - 50,000 - 3,532 - 253,591
Tier 2 subordinated bonds - - - 1,499,970 - 2,370 - 1,502,340
Multi-currency Additional Tier 1 Capital Securities - - - 799,523 - 6,662 - 806,185
Innovative Tier 1 Capital Securities - 499,611 - - - 12,657 - 512,268
Total financial liabilities 66,579,829 37,798,554 41,731,397 5,055,008 1,294,992 28,409,810 670,548 181,540,138

Net interest sensitivity gap 52,021,336 (34,404,959) (38,847,974) 33,248,681 14,870,964

Financial guarantees - - - - - 492,044

Credit related commitments and contingencies - - - - - 44,017,386
Treasury related commitments and contingencies (hedging) - - 200,000 453,571 332,738 -
Net interest sensitivity gap - - 200,000 453,571 332,738 44,509,430

HONG LEONG BANK BERHAD Annual Report 2020 295

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

Interest/Profit rate risk (continued)

The Bank
2020
Non-trading book
Non-interest/
Up to 1 to 3 3 to 12 1 to 5 Over 5 profit rate Trading
1 month months months years years sensitive book Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial assets
Cash and short-term funds 3,657,847 - - - - 1,885,953 - 5,543,800
Deposits and placements with banks and other financial institutions - 483,291 941,570 - 391,641 1,672 - 1,818,174
Financial assets at fair value through profit or loss - - - - - 5,012,673 3,035,054 8,047,727
Financial investments at fair value through other comprehensive income 686,381 485,726 1,649,809 15,076,662 6,225,157 614,170 - 24,737,905
Financial investments at amortised cost 218,408 - 573,438 9,470,984 4,576,302 239,949 - 15,079,081
Loans, advances and financing
- performing 110,412,589 140,697 250,555 1,325,455 214,777 - - 112,344,073
- impaired ^ 99,944 493 21,742 38,563 319,160 - - 479,902
Other assets 23,037 - - - - 1,531,406 - 1,554,443
Derivative financial instruments
- trading derivatives - - - - - - 1,057,621 1,057,621
Amount due from subsidiaries - - - - - 106,363 - 106,363
Statutory deposits with Central Banks - - - - - 254,181 - 254,181
Total financial assets 115,098,206 1,110,207 3,437,114 25,911,664 11,727,037 9,646,367 4,092,675 171,023,270

^ This represents outstanding impaired loans after deducting expected credit losses.

HONG LEONG BANK BERHAD Annual Report 2020 296

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

Interest/Profit rate risk (continued)

The Bank
2020
Non-trading book
Non-interest/
Up to 1 to 3 3 to 12 1 to 5 Over 5 profit rate Trading
1 month months months years years sensitive book Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial liabilities
Deposits from customers 56,077,379 24,804,122 31,962,056 847,910 494,942 23,446,953 - 137,633,362
Deposits and placements of banks and other financial institutions 2,181,665 2,871,812 569,889 - 1,011,970 15,905 - 6,651,241
Obligations on securities sold under repurchase agreements 369,972 2,275,663 477,488 - - 1,009 - 3,124,132
Bills and acceptances payable 1,762 6,663 5,498 - - 106,293 - 120,216
Lease liabilities 5,173 10,372 47,097 231,657 113,539 - - 407,838
Other liabilities 5,115 343 1,486 - - 4,559,262 - 4,566,206
Derivative financial instruments
- trading derivatives - - - - - - 1,224,022 1,224,022
- hedging derivatives - - - 21,096 5,978 - - 27,074
Recourse obligation on loans sold to Cagamas - - - 300,024 - 543 - 300,567
Tier 2 subordinated bonds - - - 1,499,970 - 2,254 - 1,502,224
Multi-currency Additional Tier 1 Capital Securities - - - 799,655 - 6,665 - 806,320
Total financial liabilities 58,641,066 29,968,975 33,063,514 3,700,312 1,626,429 28,138,884 1,224,022 156,363,202

Net interest sensitivity gap 56,457,140 (28,858,768) (29,626,400) 22,211,352 10,100,608

Financial guarantees - - - - - 366,709

Credit related commitments and contingencies - - - - - 37,339,341
Treasury related commitments and contingencies (hedging) - - - 887,500 120,238 -
Net interest sensitivity gap - - - 887,500 120,238 37,706,050

HONG LEONG BANK BERHAD Annual Report 2020 297

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

Interest/Profit rate risk (continued)

The Bank
2019
Non-trading book
Non-interest/
Up to 1 to 3 3 to 12 1 to 5 Over 5 profit rate Trading
1 month months months years years sensitive book Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial assets
Cash and short-term funds 2,626,955 - - - - 1,756,119 - 4,383,074
Deposits and placements with banks and other financial institutions - 1,042,272 417,180 - - 6,488 - 1,465,940
Financial assets at fair value through profit or loss - - - - - 7,402,652 4,213,086 11,615,738
Financial investments at fair value through other comprehensive income 526,067 1,102,265 1,512,743 14,387,485 2,931,424 286,014 - 20,745,998
Financial investments at amortised cost - - 53,820 9,713,703 976,211 150,771 - 10,894,505
Loans, advances and financing
- performing 93,123,924 1,064,611 465,650 6,868,124 6,838,280 - - 108,360,589
- impaired ^ 109,291 6,457 9,957 68,404 380,272 - - 574,381
Other assets 14,532 - - - - 1,071,264 - 1,085,796
Derivative financial instruments
- trading derivatives - - - - - - 522,995 522,995
Amount due from subsidiaries - - - - - 13,095 - 13,095
Statutory deposits with Central Banks - - - - - 3,564,423 - 3,564,423
Total financial assets 96,400,769 3,215,605 2,459,350 31,037,716 11,126,187 14,250,826 4,736,081 163,226,534

^ This represents outstanding impaired loans after deducting individual assessment impairment allowance and collective assessment impairment allowance.

HONG LEONG BANK BERHAD Annual Report 2020 298

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Market risk (continued)

Interest/Profit rate risk (continued)

The Bank
2019
Non-trading book
Non-interest/
Up to 1 to 3 3 to 12 1 to 5 Over 5 profit rate Trading
1 month months months years years sensitive book Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial liabilities
Deposits from customers 50,276,597 23,418,570 33,606,335 2,296,418 1,140,467 20,658,138 - 131,396,525
Deposits and placements of banks and other financial institutions 3,823,581 3,252,567 108,594 - - 20,192 - 7,204,934
Obligations on securities sold under repurchase agreements 178,431 2,150,720 - - - 4,765 - 2,333,916
Bills and acceptances payable 45,155 121,287 27,768 - - 168,368 - 362,578
Other liabilities 5,310 462 1,345 - - 4,085,585 - 4,092,702
Derivative financial instruments
- trading derivatives - - - - - - 666,953 666,953
- hedging derivatives - - 388 4,307 3,394 - - 8,089
Recourse obligation on loans sold to Cagamas - 200,059 - - - 2,895 - 202,954
Tier 2 subordinated bonds - - - 1,499,970 - 2,370 - 1,502,340
Multi-currency Additional Tier 1 Capital Securities - - - 799,523 - 6,662 - 806,185
Innovative Tier 1 Capital Securities - 499,611 - - - 12,657 - 512,268
Total financial liabilities 54,329,074 29,643,276 33,744,430 4,600,218 1,143,861 24,961,632 666,953 149,089,444

Net interest sensitivity gap 42,071,695 (26,427,671) (31,285,080) 26,437,498 9,982,326

Financial guarantees - - - - - 404,022

Credit related commitments and contingencies - - - - - 35,567,725
Treasury related commitments and contingencies (hedging) - - 200,000 453,571 332,738 -
Net interest sensitivity gap - - 200,000 453,571 332,738 35,971,747

HONG LEONG BANK BERHAD Annual Report 2020 299

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk

Liquidity risk is defined as the current and prospective risk arising from the inability of the Group and the Bank to meet its contractual or regulatory obligations when they become due without incurring substantial
losses. The liquidity risk is identified based on concentration, volatility of source of fund and funding maturity structure and it is measured primarily using BNM's New Liquidity Framework and depositor's concentration
ratios. The Group and the Bank seek to project, monitor and manage its liquidity needs under normal as well as adverse circumstances.

The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2020 based on the remaining contractual maturity:

The Group
2020
Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No specific
1 week 1 month months months months year maturity Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Assets
Cash and short-term funds 7,351,125 1,211,044 - - - - - 8,562,169
Deposits and placements with banks and other financial institutions - - 109,612 942,767 - - - 1,052,379
Financial assets at fair value through profit or loss - 30,189 212,916 545,446 251,679 6,698,530 330,636 8,069,396
Financial investments at fair value through other comprehensive income 56,799 714,461 492,567 344,235 1,339,087 24,275,301 60,094 27,282,544
Financial investments at amortised cost 171,289 218,737 1,564 31,568 1,037,159 18,641,115 - 20,101,432
Loans, advances and financing 13,609,685 5,664,321 3,052,206 2,495,965 890,314 118,982,459 - 144,694,950
Other assets 855,704 157,029 13,287 15,085 162,130 944 478,337 1,682,516
Derivative financial instruments 43,597 125,816 145,417 79,600 39,375 677,664 - 1,111,469
Statutory deposits with Central Banks - - - - - - 418,120 418,120
Investment in associated companies - - - - - - 4,644,527 4,644,527
Property and equipment - - - - - - 1,299,902 1,299,902
Intangible assets - - - - - - 187,505 187,505
Right-of-use assets - - - - - - 253,118 253,118
Goodwill - - - - - - 1,831,312 1,831,312
Deferred tax assets - - - - - - 86,578 86,578
Total assets 22,088,199 8,121,597 4,027,569 4,454,666 3,719,744 169,276,013 9,590,129 221,277,917

HONG LEONG BANK BERHAD Annual Report 2020 300

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2020 based on the remaining contractual maturity: (continued)

The Group
2020
Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No specific
1 week 1 month months months months year maturity Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Liabilities
Deposits from customers 70,662,686 25,547,266 32,731,390 22,338,170 19,850,434 2,362,715 - 173,492,661
Investment accounts of customers 6,562 36,841 307,920 5,152 - - - 356,475
Deposits and placements of banks and other financial institutions 331,101 1,620,526 2,689,770 767,018 80,695 1,011,970 - 6,501,080
Obligations on securities sold under repurchase agreements 23,415 346,863 2,276,277 477,577 - - - 3,124,132
Bills and acceptances payable 99 1,909 8,130 6,542 - - 117,373 134,053
Lease liabilities - 3,503 7,025 10,562 20,864 199,223 - 241,177
Other liabilities 5,092,129 145,093 11,219 567 12,751 - 86,451 5,348,210
Derivative financial instruments 44,698 64,878 63,053 124,718 86,286 914,880 - 1,298,513
Recourse obligation on loans sold to Cagamas - - 5,919 1,001 - 1,042,085 - 1,049,005
Tier 2 subordinated bonds - - - 2,254 - 1,499,970 - 1,502,224
Multi-currency Additional Tier 1 Capital Securities - - 4,866 1,799 - 799,655 - 806,320
Taxation - - - - - - 189,768 189,768
Total liabilities 76,160,690 27,766,879 38,105,569 23,735,360 20,051,030 7,830,498 393,592 194,043,618

Total equity - - - - - - 27,234,299 27,234,299

Total liabilities and equity 76,160,690 27,766,879 38,105,569 23,735,360 20,051,030 7,830,498 27,627,891 221,277,917

Net liquidity gap (54,072,491) (19,645,282) (34,078,000) (19,280,694) (16,331,286) 161,445,515 9,196,537 27,234,299

HONG LEONG BANK BERHAD Annual Report 2020 301

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2019 based on the remaining contractual maturity:

The Group
2019
Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No specific
1 week 1 month months months months year maturity Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Assets
Cash and short-term funds 4,309,642 545,814 - - - - - 4,855,456
Deposits and placements with banks and other financial institutions - - 872,409 272,868 146,139 - - 1,291,416
Financial assets at fair value through profit or loss 12,836 333 138,749 27,198 163,866 11,482,479 305,572 12,131,033
Financial investments at fair value through other comprehensive income 169,192 471,922 1,307,777 572,769 1,243,510 20,045,009 44,331 23,854,510
Financial investments at amortised cost 883 512 957 914 75,253 15,074,680 - 15,153,199
Loans, advances and financing 12,298,130 5,596,972 5,344,123 1,859,481 659,641 110,549,870 - 136,308,217
Other assets 788,102 9,560 6,219 7,499 1,298 28,957 355,346 1,196,981
Derivative financial instruments 42,006 32,344 41,184 51,789 46,785 314,148 - 528,256
Statutory deposits with Central Banks - - - - - - 4,588,833 4,588,833
Investment in associated companies - - - - - - 4,106,375 4,106,375
Property and equipment - - - - - - 1,382,572 1,382,572
Intangible assets - - - - - - 125,225 125,225
Goodwill - - - - - - 1,831,312 1,831,312
Deferred tax assets - - - - - - 16,030 16,030
Total assets 17,620,791 6,657,457 7,711,418 2,792,518 2,336,492 157,495,143 12,755,596 207,369,415

HONG LEONG BANK BERHAD Annual Report 2020 302

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2019 based on the remaining contractual maturity: (continued)

The Group
2019
Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No specific
1 week 1 month months months months year maturity Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Liabilities
Deposits from customers 59,062,352 27,177,389 31,419,431 19,699,578 21,909,182 3,802,362 - 163,070,294
Investment accounts of customers 13 187 2,034 1 - - - 2,235
Deposits and placements of banks and other financial institutions 2,288,410 1,269,354 3,631,083 127,940 41,637 - - 7,358,424
Obligations on securities sold under repurchase agreements 288,221 179,272 1,866,423 - - - - 2,333,916
Bills and acceptances payable 244 46,459 128,278 35,082 11 - 182,949 393,023
Other liabilities 4,594,642 777 499 405 194,073 - 91,349 4,881,745
Derivative financial instruments 26,398 26,395 47,253 33,564 56,802 488,225 - 678,637
Recourse obligation on loans sold to Cagamas - - 203,591 - - 50,000 - 253,591
Tier 2 subordinated bonds - - - 2,370 - 1,499,970 - 1,502,340
Multi-currency Additional Tier 1 Capital Securities - - 4,863 1,799 - 799,523 - 806,185
Innovative Tier 1 Capital Securities - - 512,268 - - - - 512,268
Taxation - - - - - - 95,864 95,864
Deferred tax liabilities - - - - - - 6,506 6,506
Total liabilities 66,260,280 28,699,833 37,815,723 19,900,739 22,201,705 6,640,080 376,668 181,895,028

Total equity - - - - - - 25,474,387 25,474,387

Total liabilities and equity 66,260,280 28,699,833 37,815,723 19,900,739 22,201,705 6,640,080 25,851,055 207,369,415

Net liquidity gap (48,639,489) (22,042,376) (30,104,305) (17,108,221) (19,865,213) 150,855,063 12,378,928 25,474,387

HONG LEONG BANK BERHAD Annual Report 2020 303

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2020 based on the remaining contractual maturity:

The Bank
2020
Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No specific
1 week 1 month months months months year maturity Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Assets
Cash and short-term funds 3,983,177 1,560,623 - - - - - 5,543,800
Deposits and placements with banks and other financial institutions - - 483,766 942,767 - 391,641 - 1,818,174
Financial assets at fair value through profit or loss - 30,189 212,916 545,446 251,679 6,676,861 330,636 8,047,727
Financial investments at fair value through other comprehensive income 56,799 464,661 492,567 323,860 1,191,962 22,147,962 60,094 24,737,905
Financial investments at amortised cost 171,289 218,737 1,564 21,922 665,408 14,000,161 - 15,079,081
Loans, advances and financing 12,094,117 4,821,027 2,671,136 1,754,594 543,315 90,939,786 - 112,823,975
Other assets 952,508 156,938 13,226 14,993 109,739 735 358,710 1,606,849
Derivative financial instruments 37,211 117,494 133,691 55,702 35,483 678,040 - 1,057,621
Amount due from subsidiaries - - - - - - 106,363 106,363
Statutory deposits with Central Banks - - - - - - 254,181 254,181
Subsidiary companies - - - - - - 2,558,901 2,558,901
Investment in associated companies - - - - - - 971,182 971,182
Property and equipment - - - - - - 685,169 685,169
Intangible assets - - - - - - 168,060 168,060
Right-of-use assets - - - - - - 420,653 420,653
Goodwill - - - - - - 1,771,547 1,771,547
Deferred tax assets - - - - - - 55,984 55,984
Total assets 17,295,101 7,369,669 4,008,866 3,659,284 2,797,586 134,835,186 7,741,480 177,707,172

HONG LEONG BANK BERHAD Annual Report 2020 304

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2020 based on the remaining contractual maturity: (continued)

The Bank
2020
Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No specific
1 week 1 month months months months year maturity Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Liabilities
Deposits from customers 59,080,600 19,361,117 24,916,058 16,177,232 15,879,412 2,218,943 - 137,633,362
Deposits and placements of banks and other financial institutions 626,707 1,568,326 2,873,734 489,809 80,695 1,011,970 - 6,651,241
Obligations on securities sold under repurchase agreements 23,415 346,863 2,276,277 477,577 - - - 3,124,132
Bills and acceptances payable 88 1,673 6,663 5,498 - - 106,294 120,216
Lease liabilities - 5,173 10,372 15,651 31,446 345,196 - 407,838
Other liabilities 4,112,847 145,045 11,207 549 2,717 429,380 71,960 4,773,705
Derivative financial instruments 38,362 52,293 48,769 113,668 84,505 913,499 - 1,251,096
Recourse obligation on loans sold to Cagamas - - - 543 - 300,024 - 300,567
Tier 2 subordinated bonds - - - 2,254 - 1,499,970 - 1,502,224
Multi-currency Additional Tier 1 Capital Securities - - 4,866 1,799 - 799,655 - 806,320
Taxation - - - - - - 150,979 150,979
Total liabilities 63,882,019 21,480,490 30,147,946 17,284,580 16,078,775 7,518,637 329,233 156,721,680

Total equity - - - - - - 20,985,492 20,985,492

Total liabilities and equity 63,882,019 21,480,490 30,147,946 17,284,580 16,078,775 7,518,637 21,314,725 177,707,172

Net liquidity gap (46,586,918) (14,110,821) (26,139,080) (13,625,296) (13,281,189) 127,316,549 7,412,247 20,985,492

HONG LEONG BANK BERHAD Annual Report 2020 305

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2019 based on the remaining contractual maturity:

The Bank
2019
Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No specific
1 week 1 month months months months year maturity Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Assets
Cash and short-term funds 3,618,599 764,475 - - - - - 4,383,074
Deposits and placements with banks and other financial institutions - - 1,046,933 272,868 146,139 - - 1,465,940
Financial assets at fair value through profit or loss 12,836 333 138,749 27,198 163,866 10,967,184 305,572 11,615,738
Financial investments at fair value through other comprehensive income 169,192 361,962 1,108,797 502,064 1,063,220 17,496,432 44,331 20,745,998
Financial investments at amortised cost 883 512 957 914 75,253 10,815,986 - 10,894,505
Loans, advances and financing 10,555,719 5,009,250 4,984,949 1,639,889 556,855 86,188,308 - 108,934,970
Other assets 773,946 6,881 5,990 7,171 1,223 28,882 322,189 1,146,282
Derivative financial instruments 41,938 30,745 39,105 50,672 46,451 314,084 - 522,995
Amount due from subsidiaries - - - - - - 13,095 13,095
Statutory deposits with Central Banks - - - - - - 3,564,423 3,564,423
Subsidiary companies - - - - - - 2,558,337 2,558,337
Investment in associated companies - - - - - - 971,182 971,182
Property and equipment - - - - - - 761,639 761,639
Intangible assets - - - - - - 110,895 110,895
Goodwill - - - - - - 1,771,547 1,771,547
Total assets 15,173,113 6,174,158 7,325,480 2,500,776 2,053,007 125,810,876 10,423,210 169,460,620

HONG LEONG BANK BERHAD Annual Report 2020 306

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)
The table below analyses the carrying amount of assets and liabilities (including non-financial instruments) as at 30 June 2019 based on the remaining contractual maturity: (continued)

The Bank
2019
Up to 1 week to 1 to 3 3 to 6 6 to 12 Over 1 No specific
1 week 1 month months months months year maturity Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Liabilities
Deposits from customers 48,549,789 22,288,137 23,539,897 14,856,490 18,933,045 3,229,167 - 131,396,525
Deposits and placements of banks and other financial institutions 2,724,471 1,115,297 3,255,858 67,671 41,637 - - 7,204,934
Obligations on securities sold under repurchase agreements 288,221 179,272 1,866,423 - - - - 2,333,916
Bills and acceptances payable 222 44,933 121,287 27,757 11 - 168,368 362,578
Other liabilities 4,054,048 768 462 388 184,733 - 49,677 4,290,076
Derivative financial instruments 26,352 24,611 44,739 33,749 56,432 489,159 - 675,042
Recourse obligation on loans sold to Cagamas - - 202,954 - - - - 202,954
Tier 2 subordinated bonds - - - 2,370 - 1,499,970 - 1,502,340
Multi-currency Additional Tier 1 Capital Securities - - 4,863 1,799 - 799,523 - 806,185
Innovative Tier 1 Capital Securities - - 512,268 - - - - 512,268
Taxation - - - - - - 42,152 42,152
Deferred tax liabilities - - - - - - 6,506 6,506
Total liabilities 55,643,103 23,653,018 29,548,751 14,990,224 19,215,858 6,017,819 266,703 149,335,476

Total equity - - - - - - 20,125,144 20,125,144

Total liabilities and equity 55,643,103 23,653,018 29,548,751 14,990,224 19,215,858 6,017,819 20,391,847 169,460,620

Net liquidity gap (40,469,990) (17,478,860) (22,223,271) (12,489,448) (17,162,851) 119,793,057 10,156,507 20,125,144

HONG LEONG BANK BERHAD Annual Report 2020 307

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The following table shows the contractual undiscounted cash flows payable for financial liabilities by remaining contractual
maturities. The balances in the table below will not agree to the balances reported in the statements of financial position as
the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.
The contractual maturity profile does not necessarily reflect the behavioural cash flows.

The Group
2020
Up to 1 to 3 3 to 12 1 to 5 Over 5
1 month months months years years Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial liabilities
Deposits from customers 59,248,633 34,276,739 45,842,275 34,989,392 415,296 174,772,335
Investment accounts of
customers 42,287 310,389 5,200 - - 357,876
Deposits and placements of
banks and other financial
institutions 2,138,608 2,942,481 638,995 1,011,982 - 6,732,066
Obligations on securities
sold under repurchase
agreements 370,838 2,287,776 478,268 - - 3,136,882
Bills and acceptances payable 117,373 - - - - 117,373
Lease liabilities 4,453 8,886 39,209 151,203 158,124 361,875
Other liabilities 5,078,525 355 2,938 - - 5,081,818
Derivative financial instruments
- Gross settled derivatives
- Inflow (8,382,799) (2,878,635) (7,048,324) (1,530,965) (111,431) (19,952,154)
- Outflow 8,475,338 2,922,880 7,190,505 1,571,395 109,162 20,269,280
- Net settled derivatives 17,595 61,876 344,162 597,971 88,948 1,110,552
Recourse obligation on loans
sold to Cagamas - 8,134 29,190 1,096,958 - 1,134,282
Tier 2 subordinated bonds - - 41,220 1,599,606 - 1,640,826
Multi-currency Additional Tier 1
Capital Securities - 9,518 29,882 887,556 - 926,956

Total financial liabilities 67,110,851 39,950,399 47,593,520 40,375,098 660,099 195,689,967

308 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The following table shows the contractual undiscounted cash flows payable for financial liabilities by remaining contractual
maturities. The balances in the table below will not agree to the balances reported in the statements of financial position as
the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.
The contractual maturity profile does not necessarily reflect the behavioural cash flows. (continued)

The Group
2019
Up to 1 to 3 3 to 12 1 to 5 Over 5
1 month months months years years Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial liabilities
Deposits from customers 56,637,447 32,833,750 44,208,357 30,505,103 831,502 165,016,159
Investment accounts of
customers 199 2,045 1 - - 2,245
Deposits and placements of
banks and other financial
institutions 3,624,191 3,690,086 110,421 - - 7,424,698
Obligations on securities
sold under repurchase
agreements 219,177 2,159,445 - - - 2,378,622
Bills and acceptances payable 225,460 106,380 20,490 - - 352,330
Other liabilities 4,626,632 499 2,094 - - 4,629,225
Derivative financial instruments
- Gross settled derivatives
- Inflow (5,053,049) (3,906,447) (6,449,277) (2,384,604) (1,631,205) (19,424,582)
- Outflow 5,079,703 3,937,181 6,494,165 2,437,467 1,642,106 19,590,622
- Net settled derivatives 13,046 16,189 273,659 247,136 90,555 640,585
Recourse obligation on loans
sold to Cagamas - 204,911 1,050 54,213 - 260,174
Tier 2 subordinated bonds - - 41,333 1,640,826 - 1,682,159
Multi-currency Additional Tier 1
Capital Securities - 9,518 29,990 926,956 - 966,464
Innovative Tier 1 Capital
Securities - 520,682 - - - 520,682

Total financial liabilities 65,372,806 39,574,239 44,732,283 33,427,097 932,958 184,039,383

Annual Report 2020 309

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The following table shows the contractual undiscounted cash flows payable for financial liabilities by remaining contractual
maturities. The balances in the table below will not agree to the balances reported in the statements of financial position as
the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.
The contractual maturity profile does not necessarily reflect the behavioural cash flows. (continued)

The Bank
2020
Up to 1 to 3 3 to 12 1 to 5 Over 5
1 month months months years years Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial liabilities
Deposits from customers 46,615,943 25,850,664 34,790,080 30,648,583 362,186 138,267,456
Deposits and placements of
banks and other financial
institutions 2,381,887 2,911,518 575,129 1,011,982 - 6,880,516
Obligations on securities
sold under repurchase
agreements 370,838 2,287,776 478,268 - - 3,136,882
Bills and acceptances payable 106,292 - - - - 106,292
Lease liabilities 6,668 13,310 59,436 277,957 191,306 548,677
Other liabilities 4,564,377 343 1,486 - - 4,566,206
Derivative financial instruments
- Gross settled derivatives
- Inflow (7,212,297) (2,050,523) (5,742,236) (1,530,965) (111,431) (16,647,452)
- Outflow 7,285,891 2,080,719 5,871,037 1,571,395 109,162 16,918,204
- Net settled derivatives 17,007 60,579 339,445 581,890 80,362 1,079,283
Recourse obligation on loans
sold to Cagamas - - 10,498 315,784 - 326,282
Tier 2 subordinated bonds - - 41,220 1,599,606 - 1,640,826
Multi-currency Additional Tier 1
Capital Securities - 9,518 29,882 887,556 - 926,956

Total financial liabilities 54,136,606 31,163,904 36,454,245 35,363,788 631,585 157,750,128

310 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The following table shows the contractual undiscounted cash flows payable for financial liabilities by remaining contractual
maturities. The balances in the table below will not agree to the balances reported in the statements of financial position as
the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.
The contractual maturity profile does not necessarily reflect the behavioural cash flows. (continued)

The Bank
2019
Up to 1 to 3 3 to 12 1 to 5 Over 5
1 month months months years years Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial liabilities
Deposits from customers 45,539,564 24,498,522 35,849,215 26,314,071 672,578 132,873,950
Deposits and placements of
banks and other financial
institutions 4,105,868 3,729,889 110,421 - - 7,946,178
Obligations on securities
sold under repurchase
agreements 219,177 2,159,445 - - - 2,378,622
Bills and acceptances payable 209,789 101,274 14,950 - - 326,013
Other liabilities 4,090,895 462 1,345 - - 4,092,702
Derivative financial instruments
- Gross settled derivatives
- Inflow (4,859,412) (3,700,913) (6,196,223) (2,384,604) (1,631,205) (18,772,357)
- Outflow 4,884,133 3,729,232 6,240,336 2,437,467 1,642,106 18,933,274
- Net settled derivatives 13,128 15,087 271,842 235,415 81,516 616,988
Recourse obligation on loans
sold to Cagamas - 203,850 - - - 203,850
Tier 2 subordinated bonds - - 41,333 1,640,826 - 1,682,159
Multi-currency Additional Tier 1
Capital Securities - 9,518 29,990 926,956 - 966,464
Innovative Tier 1 Capital
Securities - 520,682 - - - 520,682

Total financial liabilities 54,203,142 31,267,048 36,363,209 29,170,131 764,995 151,768,525

Annual Report 2020 311

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Liquidity risk (continued)

The following table presents the contractual expiry by maturity of the Group's and Bank's commitments and contingencies:

Less than Over

The Group 1 year 1 year Total
2020 RM’000 RM’000 RM’000

Direct credit substitutes 83,166 50,000 133,166

Short-term self liquidating trade related contingencies 315,046 - 315,046
Irrevocable commitments to extend credit 20,856,358 17,777,310 38,633,668
Unutilised credit card lines 7,463,767 - 7,463,767
Total commitments and contingencies 28,718,337 17,827,310 46,545,647

2019

Direct credit substitutes 67,590 50,150 117,740

Short-term self liquidating trade related contingencies 374,304 - 374,304
Irrevocable commitments to extend credit 19,020,280 17,720,606 36,740,886
Unutilised credit card lines 7,276,500 - 7,276,500
Total commitments and contingencies 26,738,674 17,770,756 44,509,430

The Bank

2020

Direct credit substitutes 80,144 - 80,144

Short-term self liquidating trade related contingencies 286,565 - 286,565
Irrevocable commitments to extend credit 17,067,748 12,807,826 29,875,574
Unutilised credit card lines 7,463,767 - 7,463,767
Total commitments and contingencies 24,898,224 12,807,826 37,706,050

2019

Direct credit substitutes 64,245 150 64,395

Short-term self liquidating trade related contingencies 339,627 - 339,627
Irrevocable commitments to extend credit 15,541,640 12,749,585 28,291,225
Unutilised credit card lines 7,276,500 - 7,276,500
Total commitments and contingencies 23,222,012 12,749,735 35,971,747

Undrawn loan commitments are recognised at activation stage and include commitments which are unconditionally
cancellable by the Group and the Bank. The Group and the Bank expect that not all of the contingent liabilities and undrawn
loan commitments will be drawn before expiry.

312 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk

(i) Maximum exposure to credit risk

The maximum exposure to credit risk for financial assets recognised in the statements of financial position is their
carrying amounts. For contingent liabilities, the maximum exposure to credit risk is the maximum amount that
the Group and the Bank would have to pay if the obligations of the instruments issued are called upon. For credit
commitments, the maximum exposure to credit risk is the full amount of the undrawn credit facilities granted to
customers. The table below shows the maximum exposure to credit risk for the Group and the Bank on financial
instruments subject to impairment:

The Group
2020 2019
RM’000 RM’000

Credit risk exposure relating to on-balance sheet assets:

Short-term funds and placements with banks and other financial institutions
(exclude cash in hand) 7,853,759 4,587,073
Financial assets and investments portfolios (exclude shares):
- Financial investments at FVOCI 27,222,450 23,810,179
- Financial investments at amortised cost 20,101,432 15,153,199
Loans, advances and financing 144,694,950 136,308,217
Other assets 1,608,216 1,116,804

Credit risk exposure relating to off-balance sheet items:

Credit related commitments and contingencies 46,545,647 44,509,430
Total maximum credit risk exposure that are subject to impairment 248,026,454 225,484,902

Annual Report 2020 313

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(i) Maximum exposure to credit risk (continued)

The Bank
2020 2019
RM’000 RM’000

Credit risk exposure relating to on-balance sheet assets:

Short-term funds and placements with banks and other financial institutions
(exclude cash in hand) 5,972,509 4,514,288
Financial assets and investments portfolios (exclude shares):
- Financial investments at FVOCI 24,677,811 20,701,667
- Financial investments at amortised cost 15,079,081 10,894,505
Loans, advances and financing 112,823,975 108,934,970
Other assets 1,531,406 1,071,264
Amount due from subsidiaries 106,363 13,095

Credit risk exposure relating to off-balance sheet items:

Credit related commitments and contingencies 37,706,050 35,971,747
Total maximum credit risk exposure that are subject to impairment 197,897,195 182,101,536

The table below shows the credit exposure of the Group and the Bank on financial instruments that are not subject
to impairment:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Financial assets at FVTPL (exclude shares and

wholesale funds) 3,081,722 4,759,248 3,060,053 4,243,953
Derivative assets 1,111,469 528,256 1,057,621 522,995
4,193,191 5,287,504 4,117,674 4,766,948

314 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(ii) Collaterals

The main types of collateral obtained by the Group and the Bank are as follows:

(a) Fixed deposits, Mudharabah General Investment Account, negotiable instrument of deposits, foreign currency
deposits and cash deposits/margins
(b) Land and buildings
(c) Aircrafts, vessels and automobiles
(d) Quoted shares, unit trust, Malaysian Governments Bonds and securities and private debt securities
(e) Endowment life policies with cash surrender value
(f) Other tangible business assets, such as inventory and equipment

The Group and the Bank also accept non-tangible securities such as support, guarantees from individuals, corporates
and institutions, bank guarantees, debentures, assignment of contract payments, which are subject to internal
guidelines on eligibility.

The outstanding balance for loans, advances and financing for which no allowances is recognised because
of collateral as at 30 June 2020 amounted to RM159,402,000 (2019: RM184,663,000) and RM157,931,000
(2019: RM183,134,000) respectively for the Group and the Bank.

The financial effect of collateral (quantification to the extent to which collateral and other credit enhancements
mitigate credit risk) held for loans, advances and financing for the Group and the Bank is 86.84% (2019: 85.43%)
and 87.13% (2019: 85.13%) respectively. The financial effects of collateral held for the remaining financial assets are
insignificant.

The financial effect of collateral (quantification to the extent to which collateral and other credit enhancements
mitigate credit risk) held for net loans, advances and financing that are credit impaired as at 30 June 2020 for the
Group and the Bank is 85.91% (2019: 83.64%) and 92.57% (2019: 84.51%) respectively.

(iii) Credit exposure by stage

Financial assets of the Group and the Bank are classified into three stages as below:

Stages Description
Stage 1: 12 months ECL Stage 1 includes financial assets which have not had a significant increase in credit
- not credit impaired risk since initial recognition or which have low credit risk at reporting date. 12-months
ECL is recognised and interest income is calculated on the gross carrying amount of
the financial assets.

Stage 2: Lifetime ECL Stage 2 includes financial assets which have had a significant increase in credit risk
- not credit impaired since initial recognition (unless they have low credit risk at the reporting date) but do
not have objective evidence of impairment. Lifetime ECL is recognised and interest
income is calculated on the gross carrying amount of the financial assets.

Stage 3: Lifetime ECL Stage 3 includes financial assets that have objective evidence of impairment at the
- credit impaired reporting date. Lifetime ECL is recognised and interest income is calculated on the net
carrying amount of the financial assets.

For further details on the stages, refer to accounting policy Note 2N.

Annual Report 2020 315

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(iv) Credit quality

The Group and the Bank assess credit quality of loans, advances and financing using internal rating techniques
tailored to the various categories of products and counterparties. These techniques have been developed internally
and combine statistical analysis with credit officers judgement.

Credit quality description is summarised as follows:

Credit Quality Description

Good Obligors in this category exhibit strong capacity to meet financial commitments.

Adequate Obligors in this category have a fairly acceptable capacity to meet financial
commitments.

Marginal Obligors in this category have uncertain capacity to meet financial commitments and
is under closer monitoring.

No rating Obligors which are currently not assigned with a credit ratings as it do not satisfy the
criteria to be rated based on internal credit rating system.

Credit impaired Obligors assessed to be impaired.

The credit quality of financial instruments other than loans, advances and financing are determined based on the
ratings of counterparties as defined equivalent ratings of other internationals rating agencies as defined below:

Credit Quality Description

Sovereign Refer to financial asset issued by federal government or guarantee by federal

government.

Investment grade Refers to the credit quality of the financial asset that the issuer is able to meet payment
obligation and exposure bondholder to low credit risk of default.

Non-investment grade Refers to low credit quality of the financial asset that is highly expose to default risk.

Un-graded Refers to financial asset which are currently not assigned with ratings due to
unavailability of ratings models.

Credit impaired Refers to the asset that is being impaired.

316 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(iv) Credit quality (continued)

The following table shows an analysis of the credit exposure by stages, together with the ECL allowance provision:

The Group Stage 1 Stage 2 Stage 3 Total

2020 RM’000 RM’000 RM’000 RM’000

Short-term funds and placements with banks and

other financial institutions (exclude cash in hand)
Sovereign 3,268,993 - - 3,268,993
Investment grade 4,396,246 - - 4,396,246
Non-investment grade 188,740 - - 188,740
Gross carrying amount 7,853,979 - - 7,853,979
Expected credit losses (220) - - (220)
Net carrying amount 7,853,759 - - 7,853,759

Financial investments at FVOCI

Sovereign 17,104,883 - - 17,104,883
Investment grade 9,524,516 - - 9,524,516
Non-investment grade 593,051 - - 593,051
Gross carrying amount 27,222,450 - - 27,222,450
Expected credit losses (2,068) - - (2,068)

Financial investments at amortised cost

Sovereign 19,079,080 - - 19,079,080
Investment grade 1,022,554 - - 1,022,554
Gross carrying amount 20,101,634 - - 20,101,634
Expected credit losses (202) - - (202)
Net carrying amount 20,101,432 - - 20,101,432

Loans, advances and financing

Good 122,879,089 226,264 - 123,105,353
Adequate 14,765,672 1,070,469 - 15,836,141
Marginal - 5,856,829 - 5,856,829
No rating - 244,285 - 244,285
Credit impaired - - 889,754 889,754
Gross carrying amount 137,644,761 7,397,847 889,754 145,932,362
Expected credit losses (549,509) (435,827) (273,790) (1,259,126)
Others * 21,714 - - 21,714
Net carrying amount 137,116,966 6,962,020 615,964 144,694,950

* Included fair value changes arising from fair value hedges.

Annual Report 2020 317

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(iv) Credit quality (continued)

The following table shows an analysis of the credit exposure by stages, together with the ECL allowance provision:
(continued)

The Group Stage 1 Stage 2 Stage 3 Total

2019 RM’000 RM’000 RM’000 RM’000

Short-term funds and placements with banks and

other financial institutions (exclude cash in hand)
Sovereign 50,938 - - 50,938
Investment grade 4,504,003 - - 4,504,003
Non-investment grade 32,893 - - 32,893
Gross carrying amount 4,587,834 - - 4,587,834
Expected credit losses (761) - - (761)
Net carrying amount 4,587,073 - - 4,587,073

Financial investments at FVOCI

Sovereign 13,238,799 - - 13,238,799
Investment grade 10,145,615 - - 10,145,615
Non-investment grade 425,765 - - 425,765
Gross carrying amount 23,810,179 - - 23,810,179
Expected credit losses (1,566) - - (1,566)

Financial investments at amortised cost

Sovereign 14,137,326 - - 14,137,326
Investment grade 1,016,053 - - 1,016,053
Non-investment grade - - - -
Gross carrying amount 15,153,379 - - 15,153,379
Expected credit losses (180) - - (180)
Net carrying amount 15,153,199 - - 15,153,199

Loans, advances and financing

Good 115,595,574 11,860 - 115,607,434
Adequate 14,092,510 877,444 - 14,969,954
Marginal 4,394 5,626,041 - 5,630,435
No rating - 287,449 - 287,449
Credit impaired - - 1,071,111 1,071,111
Gross carrying amount 129,692,478 6,802,794 1,071,111 137,566,383
Expected credit losses (369,715) (498,325) (393,599) (1,261,639)
Others * 3,473 - - 3,473
Net carrying amount 129,326,236 6,304,469 677,512 136,308,217

* Included fair value changes arising from fair value hedges.

318 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(iv) Credit quality (continued)

The following table shows an analysis of the credit exposure by stages, together with the ECL allowance provision:
(continued)

The Bank Stage 1 Stage 2 Stage 3 Total

2020 RM’000 RM’000 RM’000 RM’000

Short-term funds and placements with banks and

other financial institutions (exclude cash in hand)
Sovereign 538,374 - - 538,374
Investment grade 4,768,238 - - 4,768,238
Non-investment grade 668,899 - - 668,899
Gross carrying amount 5,975,511 - - 5,975,511
Expected credit losses (3,002) - - (3,002)
Net carrying amount 5,972,509 - - 5,972,509

Financial investments at FVOCI

Sovereign 15,091,422 - - 15,091,422
Investment grade 8,993,338 - - 8,993,338
Non-investment grade 593,051 - - 593,051
Gross carrying amount 24,677,811 - - 24,677,811
Expected credit losses (2,055) - - (2,055)

Financial investments at amortised cost

Sovereign 14,075,927 - - 14,075,927
Investment grade 1,003,356 - - 1,003,356
Credit impaired - - - -
Gross carrying amount 15,079,283 - - 15,079,283
Expected credit losses (202) - - (202)
Net carrying amount 15,079,081 - - 15,079,081

Loans, advances and financing

Good 96,255,527 196,197 - 96,451,724
Adequate 11,129,315 946,262 - 12,075,577
Marginal - 4,309,672 - 4,309,672
No rating - 243,944 - 243,944
Credit impaired - - 663,767 663,767
Gross carrying amount 107,384,842 5,696,075 663,767 113,744,684
Expected credit losses (408,715) (347,084) (183,865) (939,664)
Others * 18,955 - - 18,955
Net carrying amount 106,995,082 5,348,991 479,902 112,823,975

* Included fair value changes arising from fair value hedges and unamortised fair value changes arising from
terminated fair value hedges.

Annual Report 2020 319

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(iv) Credit quality (continued)

The following table shows an analysis of the credit exposure by stages, together with the ECL allowance provision:
(continued)

The Bank Stage 1 Stage 2 Stage 3 Total

2019 RM’000 RM’000 RM’000 RM’000

Short-term funds and placements with banks and

other financial institutions (exclude cash in hand)
Sovereign 50,938 - - 50,938
Investment grade 4,046,260 - - 4,046,260
Non-investment grade 419,123 - - 419,123
Gross carrying amount 4,516,321 - - 4,516,321
Expected credit losses (2,033) - - (2,033)
Net carrying amount 4,514,288 - - 4,514,288

Financial investments at FVOCI

Sovereign 11,237,069 - - 11,237,069
Investment grade 9,038,833 - - 9,038,833
Non-investment grade 425,765 - - 425,765
Gross carrying amount 20,701,667 - - 20,701,667
Expected credit losses (1,454) - - (1,454)

Financial investments at amortised cost

Sovereign 9,897,499 - - 9,897,499
Investment grade 997,180 - - 997,180
Credit impaired - - - -
Gross carrying amount 10,894,679 - - 10,894,679
Expected credit losses (174) - - (174)
Net carrying amount 10,894,505 - - 10,894,505

Loans, advances and financing

Good 92,476,671 11,304 - 92,487,975
Adequate 11,377,725 717,907 - 12,095,632
Marginal 4,394 4,195,373 - 4,199,767
No rating - 272,061 - 272,061
Credit impaired - - 887,864 887,864
Gross carrying amount 103,858,790 5,196,645 887,864 109,943,299
Expected credit losses (311,663) (386,656) (313,483) (1,011,802)
Others * 3,473 - - 3,473
Net carrying amount 103,550,600 4,809,989 574,381 108,934,970

* Included fair value changes arising from fair value hedges and unamortised fair value changes arising from
terminated fair value hedges.

320 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(iv) Credit quality (continued)

Credit risk exposure analysed by industry in respect of the Group's and the Bank's financial assets are set out below:

The Group
2020
Short-term
funds and Undrawn Guarantees,
placements Financial Loans, loan endorsements
with banks and Financial Financial investments advances Total commitments and other
other financial assets investments at amortised and Other Derivative credit risk and other contingent
institutions at FVTPL at FVOCI cost financing assets assets exposures facilities items
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Agriculture - - 134,717 - 2,626,822 - - 2,761,539 1,146,564 2,715

Mining and quarrying - - - - 105,756 - - 105,756 327,537 -
Manufacturing - - - - 11,055,113 - - 11,055,113 7,920,108 169,890
Electricity, gas and water - 20,311 2,462,923 814,992 761,401 - - 4,059,627 218,450 147
Construction - - 422,886 - 3,958,560 - - 4,381,446 3,227,805 8,100
Wholesale and retail - - 44,383 - 11,686,123 - - 11,730,506 7,564,637 130,586
Transport, storage and communications - - 393,661 - 4,203,398 - - 4,597,059 1,149,634 3,501
Finance, insurance, real estate and business
services 4,584,766 468,929 10,952,336 2,073,480 10,119,192 1,598,313 1,111,469 30,908,485 5,149,032 90,426
Government and government agencies 3,268,993 2,592,482 12,811,544 17,212,960 - 9,903 - 35,895,882 - 34,998
Education, health and others - - - - 1,644,905 - - 1,644,905 466,979 1,498
Household - - - - 97,714,466 - - 97,714,466 18,902,360 3,081
Others - - - - 819,214 - - 819,214 24,329 3,270
7,853,759 3,081,722 27,222,450 20,101,432 144,694,950 1,608,216 1,111,469 205,673,998 46,097,435 448,212

HONG LEONG BANK BERHAD Annual Report 2020 321

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(iv) Credit quality (continued)

Credit risk exposure analysed by industry in respect of the Group's and the Bank's financial assets are set out below: (continued)

The Group
2019
Short-term
funds and Undrawn Guarantees,
placements Financial Loans, loan endorsements
with banks and Financial Financial investments advances Total commitments and other
other financial assets investments at amortised and Other Derivative credit risk and other contingent
institutions at FVTPL at FVOCI cost financing assets assets exposures facilities items
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Agriculture - - 117,121 - 2,537,496 - - 2,654,617 1,066,678 5,499

Mining and quarrying - - 85,623 - 109,767 - - 195,390 168,890 15,408
Manufacturing - - - - 9,995,994 - - 9,995,994 7,466,545 151,983
Electricity, gas and water - 15,124 2,123,206 816,281 223,037 - - 3,177,648 535,354 2,967
Construction - 58,076 346,009 - 3,002,638 - - 3,406,723 2,762,359 16,832
Wholesale and retail - - 41,996 - 11,275,506 - - 11,317,502 6,047,757 185,041
Transport, storage and communications - - 543,711 - 3,699,673 - - 4,243,384 920,009 6,514
Finance, insurance, real estate and business
services 4,562,859 364,729 10,537,703 2,020,015 10,141,388 1,109,299 528,256 29,264,249 4,089,637 92,263
Government and government agencies 24,214 4,321,319 10,014,810 12,316,903 - 7,505 - 26,684,751 - 8,641
Education, health and others - - - - 1,667,048 - - 1,667,048 463,471 4,295
Household - - - - 92,943,939 - - 92,943,939 20,356,649 2,601
Others - - - - 711,731 - - 711,731 140,037 -
4,587,073 4,759,248 23,810,179 15,153,199 136,308,217 1,116,804 528,256 186,262,976 44,017,386 492,044

HONG LEONG BANK BERHAD Annual Report 2020 322

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(iv) Credit quality (continued)

Credit risk exposure analysed by industry in respect of the Group's and the Bank's financial assets are set out below: (continued)

The Bank
2020
Short-term
funds and
placements Guarantees,
with banks Financial Loans, Undrawn loan endorsements
and other Financial Financial investments advances Amount Total commitments and other
financial assets investments at amortised and Other due from Derivative credit risk and other contingent
institutions at FVTPL at FVOCI cost financing assets subsidiaries assets exposures facilities items
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Agriculture - - 134,717 - 1,500,127 - - - 1,634,844 619,191 2,715

Mining and quarrying - - - - 94,883 - - - 94,883 60,126 -
Manufacturing - - - - 8,689,710 - - - 8,689,710 6,541,991 163,224
Electricity, gas and water - 20,311 2,436,264 546,738 269,634 - - - 3,272,947 152,249 147
Construction - - 422,886 - 3,299,508 - - - 3,722,394 2,590,326 5,603
Wholesale and retail - - 44,383 - 9,747,436 - - - 9,791,819 6,314,465 112,268
Transport, storage and communications - - 393,661 - 3,941,255 - - - 4,334,916 868,076 3,501
Finance, insurance, real estate and business
services 5,434,135 468,929 10,279,695 1,909,756 8,210,333 1,521,553 106,363 1,057,621 28,988,385 3,456,953 40,424
Government and government agencies 538,374 2,570,813 10,966,205 12,622,587 - 9,853 - - 26,707,832 - 34,998
Education, health and others - - - - 812,342 - - - 812,342 209,184 1,498
Household - - - - 76,242,056 - - - 76,242,056 16,519,311 2,331
Others - - - - 16,691 - - - 16,691 7,469 -
5,972,509 3,060,053 24,677,811 15,079,081 112,823,975 1,531,406 106,363 1,057,621 164,308,819 37,339,341 366,709

HONG LEONG BANK BERHAD Annual Report 2020 323

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(iv) Credit quality (continued)

Credit risk exposure analysed by industry in respect of the Group's and the Bank's financial assets are set out below: (continued)

The Bank
2019
Short-term
funds and
placements Guarantees,
with banks Financial Loans, Undrawn loan endorsements
and other Financial Financial investments advances Amount Total commitments and other
financial assets investments at amortised and Other due from Derivative credit risk and other contingent
institutions at FVTPL at FVOCI cost financing assets subsidiaries assets exposures facilities items
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Agriculture - - 117,121 - 1,712,903 - - - 1,830,024 530,412 -

Mining and quarrying - - 85,623 - 96,689 - - - 182,312 157,655 15,408
Manufacturing - - - - 8,250,198 - - - 8,250,198 6,138,440 142,277
Electricity, gas and water - 15,124 1,674,949 547,639 167,645 - - - 2,405,357 82,352 2,857
Construction - 58,076 325,407 - 2,424,506 - - - 2,807,989 2,230,226 14,240
Wholesale and retail - - 41,996 - 9,856,185 - - - 9,898,181 5,072,863 164,926
Transport, storage and communications - - 538,586 - 3,516,933 - - - 4,055,519 815,318 6,514
Finance, insurance, real estate and business
services 4,493,957 364,729 9,487,195 1,882,981 8,590,203 1,063,791 13,095 522,995 26,418,946 2,622,226 42,263
Government and government agencies 20,331 3,806,024 8,430,790 8,463,885 - 7,473 - - 20,728,503 - 8,641
Education, health and others - - - - 846,902 - - - 846,902 282,782 4,295
Household - - - - 73,410,853 - - - 73,410,853 17,522,646 2,601
Others - - - - 61,953 - - - 61,953 112,805 -
4,514,288 4,243,953 20,701,667 10,894,505 108,934,970 1,071,264 13,095 522,995 150,896,737 35,567,725 404,022

HONG LEONG BANK BERHAD Annual Report 2020 324

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(v) Repossessed collaterals

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Industrial and residential properties, lands and

automobiles 378,268 256,534 305,385 215,368

Repossessed collaterals are made available-for-sale in an orderly fashion, with the proceeds used to reduce or repay
the outstanding indebtedness. The Group and the Bank generally do not utilise the repossessed collaterals for its
business use.

(vi) Write-off policy

The Group and the Bank write off financial assets, in whole or in part, when it has exhausted all practical recovery
efforts and has concluded there is no reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include (i) ceasing enforcement activity and (ii) where the Group’s and the Bank’s recovery
method is foreclosing on collateral and the value of the collateral is such that there is no reasonable expectation of
recovering in full.

A write-off constitutes a derecognition event. The Group and the Bank may apply enforcement activities to financial
assets written off. Recoveries resulting from the Group’s and the Bank’s enforcement activities will be written back
as bad debts recovered in the statements of income.

The contractual amount outstanding on loans, advances and financing and securities portfolio that were
written off during the financial year ended, and are still subject to enforcement activities was RM398.3 million
(2019: RM263.2 million) for the Group and RM307.2 million (2019: RM207.0 million) for the Bank.

(vii) Modification of contractual cash flows

Where the original contractual terms of a financial asset have been modified for credit reasons and the instrument
has not been derecognised, the resulting modification loss is recognised within impairment in the income statements
with a corresponding decrease in the gross carrying value of the asset. If the modification involved a concession
that the Group and the Bank would not otherwise consider, the instrument is considered to be credit impaired and is
considered forborne.

ECL for modified financial assets that have not been derecognised and are not considered to be credit-impaired will
be recognised on a 12-month basis, or a lifetime basis, if there is a significant increase in credit risk. These assets are
assessed to determine whether there has been a significant increase in credit risk subsequent to the modification.

Although loans and financing may be modified for non-credit reasons, a significant increase in credit risk may occur.
The Group and the Bank may determine that the credit risk has significantly improved after restructuring, so that the
assets are moved from stage 3 or stage 2 to stage 1. This is only the case for assets which have been monitored for
consecutive six months observation period or more.

Annual Report 2020 325

Notes to the Financial Statements
for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(viii) Sensitivity analysis

The Group and the Bank have performed ECL sensitivity assessment on loans, advances and financing based on the
changes in key macroeconomic variables, such as consumer price index, private consumption, house price index,
unemployment rates, banking system credit and gross domestic product while all other variables remain unchanged.
The sensitivity factors used are assumptions based on parallel shifts in the key variables to project the impact on the
ECL of the Group and the Bank.

The table below outlines the effect of ECL on the changes in key variables used while other variables remain constant:

(a) Retail
The Group The Bank
2020 Changes RM’000 RM’000

Private consumption +/- 50 bps

House price index +/- 150 bps
Unemployment rate +/- 100 bps

Total decrease in ECL on the positive changes in key variables (7,238) (6,557)

Total increase/(decrease) in ECL on the negative changes in key variables 362 (162)

2019 Changes

Consumer price index +/- 50 bps

Private consumption +/- 50 bps
House price index +/- 150 bps
Unemployment rate +/- 100 bps

Total decrease in ECL on the positive changes in key variables (1,802) (1,721)

Total increase in ECL on the negative changes in key variables 2,120 1,950

326 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

50 FINANCIAL INSTRUMENTS (CONTINUED)

(d) Credit risk (continued)

(viii) Sensitivity analysis (continued)

The table below outlines the effect of ECL on the changes in key variables used while other variables remain constant:
(continued)

(b) Non-retail
The Group The Bank
2020 Changes RM’000 RM’000

Banking system credit +/- 100 bps

Gross domestic product +/- 50 bps

Total decrease in ECL on the positive changes in key variables (3,615) (3,124)

Total increase in ECL on the negative changes in key variables 1,466 1,491

2019 Changes

Banking system credit +/- 100 bps

Total decrease in ECL on the positive changes in key variables (2,690) (2,207)

Total increase in ECL on the negative changes in key variables 2,579 2,395

Annual Report 2020 327

Notes to the Financial Statements
for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments comprise of financial assets and financial liabilities. Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The
information presented herein represents the estimates of fair values as at the statements of financial position date.

Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable
market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk
characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the
uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates.

(a) Determination of fair value and fair value hierarchy

The Group and the Bank measure fair values using the following fair value hierarchy that reflects the significance of the
inputs used in making the measurements:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations
in which inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are not based on
observable market data.

Valuation techniques
Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued
by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted prices are
readily available, and the price represents actual and regularly occurring market transactions. An active market is one in
which transactions occur with sufficient volume and frequency to provide pricing information on an on-going basis. These
would include actively traded listed equities and actively exchange-traded derivatives.

Where fair value is determined using unquoted market prices in less active markets or quoted prices for similar assets and
liabilities, such instruments are generally classified as Level 2. In cases where quoted prices are generally not available,
the Group and the Bank then determine fair value based upon valuation techniques such as discounted cash flow that uses
inputs such as market parameters including but not limited to yield curves, volatilities and foreign exchange rates. The
majority of valuation techniques employ only observable market data and so reliability of the fair value measurement is
high. These would include certain corporate bonds, government bonds and derivatives.

Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on
observable market data (unobservable inputs). Such inputs are generally determined based on observable inputs of a
similar nature, historical observations on the level of the input or other analytical techniques. This category includes
unquoted shares held for socio-economic reasons. Fair value for shares held for socio-economic reasons are based on the
net tangible assets of the affected companies.

328 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

The table below analyses financial instruments carried at fair value analysed by level within the fair value hierarchy:

The Group
2020
Fair Value
Level 1 Level 2 Level 3 Total
RM’000 RM’000 RM’000 RM’000

Recurring fair value measurements

Financial Assets
Financial assets at FVTPL
- Money market instrument - 2,697,041 - 2,697,041
- Quoted securities 4,961,508 - - 4,961,508
- Unquoted securities - 80,211 330,636 410,847
Financial investments at FVOCI
- Money market instrument - 14,361,366 - 14,361,366
- Quoted securities 3,484,875 - - 3,484,875
- Unquoted securities - 9,376,209 60,094 9,436,303
Derivative financial instruments 8 1,097,969 13,492 1,111,469
8,446,391 27,612,796 404,222 36,463,409

Financial Liabilities
Derivative financial instruments 65 1,284,956 13,492 1,298,513
Financial liabilities designated at fair value
- Structured deposits linked to interest rate
derivatives - 462,517 - 462,517
65 1,747,473 13,492 1,761,030

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which
the transfer has occurred. The fair value of an asset to be transferred between levels is determined as of the date of the
event or change in circumstances that caused the transfer. There were no transfers between Level 1 and Level 2 of the fair
value hierarchy during the financial year (2019: RM Nil).

Annual Report 2020 329

Notes to the Financial Statements
for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

The table below analyses financial instruments carried at fair value analysed by level within the fair value hierarchy:
(continued)

The Group
2019
Fair Value
Level 1 Level 2 Level 3 Total
RM’000 RM’000 RM’000 RM’000

Recurring fair value measurements

Financial Assets
Financial assets at FVTPL
- Money market instrument - 4,397,706 - 4,397,706
- Quoted securities 7,234,755 - - 7,234,755
- Unquoted securities - 193,000 305,572 498,572
Financial investments at FVOCI
- Money market instrument - 11,200,720 - 11,200,720
- Quoted securities 3,414,587 - - 3,414,587
- Unquoted securities - 9,194,872 44,331 9,239,203
Derivative financial instruments 32 520,412 7,812 528,256
10,649,374 25,506,710 357,715 36,513,799

Financial Liabilities
Derivative financial instruments 2,940 667,885 7,812 678,637
Financial liabilities designated at fair value
- Structured deposits linked to interest rate
derivatives - 2,104,802 - 2,104,802
2,940 2,772,687 7,812 2,783,439

330 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

The table below analyses financial instruments carried at fair value analysed by level within the fair value hierarchy:
(continued)

The Bank
2020
Fair Value
Level 1 Level 2 Level 3 Total
RM’000 RM’000 RM’000 RM’000

Recurring fair value measurements

Financial Assets
Financial assets at FVTPL
- Money market instrument - 2,675,372 - 2,675,372
- Quoted securities 4,961,508 - - 4,961,508
- Unquoted securities - 80,211 330,636 410,847
Financial investments at FVOCI
- Money market instrument - 12,199,326 - 12,199,326
- Quoted securities 3,484,875 - - 3,484,875
- Unquoted securities - 8,993,610 60,094 9,053,704
Derivative financial instruments 8 1,044,121 13,492 1,057,621
8,446,391 24,992,640 404,222 33,843,253

Financial Liabilities
Derivative financial instruments 65 1,237,539 13,492 1,251,096
Financial liabilities designated at fair value
- Structured deposits linked to interest rate
derivatives - 412,120 - 412,120
65 1,649,659 13,492 1,663,216

The Bank recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which
the transfer has occurred. The fair value of an asset to be transferred between levels is determined as of the date of the
event or change in circumstances that caused the transfer. There were no transfers between Level 1 and Level 2 of the fair
value hierarchy during the financial year (2019: RM Nil).

Annual Report 2020 331

Notes to the Financial Statements
for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

The table below analyses financial instruments carried at fair value analysed by level within the fair value hierarchy:
(continued)

The Bank
2019
Fair Value
Level 1 Level 2 Level 3 Total
RM’000 RM’000 RM’000 RM’000

Recurring fair value measurements

Financial Assets
Financial assets at FVTPL
- Money market instrument - 3,882,411 - 3,882,411
- Quoted securities 7,234,755 - - 7,234,755
- Unquoted securities - 193,000 305,572 498,572
Financial investments at FVOCI
- Money market instrument - 9,322,560 - 9,322,560
- Quoted securities 3,381,473 - - 3,381,473
- Unquoted securities - 7,997,634 44,331 8,041,965
Derivative financial instruments 32 515,151 7,812 522,995
10,616,260 21,910,756 357,715 32,884,731

Financial Liabilities
Derivative financial instruments 2,940 664,290 7,812 675,042
Financial liabilities designated at fair value
- Structured deposits linked to interest rate
derivatives - 1,758,009 - 1,758,009
2,940 2,422,299 7,812 2,433,051

332 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

Reconciliation of fair value measurements in Level 3 of the fair value hierarchy, is as below:

Financial Assets Financial

Liability
Financial Financial Derivative Derivative
assets investments financial financial
at FVTPL at FVOCI instruments instruments
The Group RM’000 RM’000 RM’000 RM’000

2020
At 1 July 305,572 44,331 7,812 7,812
Fair value changes recognised in statements of income 25,064 - (8,397) (8,397)
Net fair value changes recognised in other
comprehensive income - 15,763 - -
Purchases - - (9,066) (9,066)
Settlements - - 23,143 23,143
At 30 June 330,636 60,094 13,492 13,492

Fair value changes recognised in statements of income

relating to assets/liability held on 30 June 2020 25,064 - (8,397) (8,397)

Total gain recognised in other comprehensive income

relating to assets held on 30 June 2020 - 15,763 - -

Annual Report 2020 333

Notes to the Financial Statements
for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

Reconciliation of fair value measurements in Level 3 of the fair value hierarchy, is as below: (continued)

Financial Assets Financial

Financial Liability
Financial Financial investments Derivative Derivative
assets investments available- financial financial
at FVTPL at FVOCI for-sale instruments instruments
The Group RM’000 RM’000 RM’000 RM’000 RM’000

2019
At 1 July - - 467,512 13,876 13,876
Effect of adopting MFRS 9 290,480 33,477 (467,512) - -
At 1 July, as restated 290,480 33,477 - 13,876 13,876
Fair value changes recognised in
statements of income 15,092 - - (12,653) (12,653)
Net fair value changes recognised in
other comprehensive income - 10,854 - - -
Purchases - - - (1,810) (1,810)
Settlements - - - 8,399 8,399
At 30 June 305,572 44,331 - 7,812 7,812

Fair value changes recognised in

statements of income relating to
assets/liability held on 30 June 2019 15,092 - - (12,653) (12,653)

Total gain recognised in other

comprehensive income relating to
assets held on 30 June 2019 - 10,854 - - -

334 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

Reconciliation of fair value measurements in Level 3 of the fair value hierarchy, is as below: (continued)

Financial Assets Financial

Liability
Financial Financial Derivative Derivative
assets investments financial financial
at FVTPL at FVOCI instruments instruments
The Bank RM’000 RM’000 RM’000 RM’000

2020
At 1 July 305,572 44,331 7,812 7,812
Fair value changes recognised in statements of income 25,064 - (8,397) (8,397)
Net fair value changes recognised in other
comprehensive income - 15,763 - -
Purchases - - (9,066) (9,066)
Settlements - - 23,143 23,143
At 30 June 330,636 60,094 13,492 13,492

Fair value changes recognised in statements of income

relating to assets/liability held on 30 June 2020 25,064 - (8,397) (8,397)

Total gain recognised in other comprehensive income

relating to assets held on 30 June 2020 - 15,763 - -

Annual Report 2020 335

Notes to the Financial Statements
for the financial year ended 30 June 2020

52 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

Reconciliation of fair value measurements in Level 3 of the fair value hierarchy, is as below: (continued)

Financial Assets Financial

Financial Liability
Financial Financial investments Derivative Derivative
assets investments available- financial financial
at FVTPL at FVOCI for-sale instruments instruments
The Bank RM’000 RM’000 RM’000 RM’000 RM’000

2019
At 1 July - - 467,512 13,876 13,876
Effect of adopting MFRS 9 290,480 33,477 (467,512) - -
At 1 July, as restated 290,480 33,477 - 13,876 13,876
Fair value changes recognised in
statements of income 15,092 - - (12,653) (12,653)
Net fair value changes recognised in
other comprehensive income - 10,854 - - -
Purchases - - - (1,810) (1,810)
Settlements - - - 8,399 8,399
At 30 June 305,572 44,331 - 7,812 7,812

Fair value changes recognised in

statements of income relating to
assets/liability held on 30 June 2019 15,092 - - (12,653) (12,653)

Total gain recognised in other

comprehensive income relating to
assets held on 30 June 2019 - 10,854 - - -

336 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

Quantitative information about fair value measurements using significant unobservable inputs (Level 3)

The Group and the Bank Inter-relationship between

Fair value Fair value Range significant unobservable
assets liabilities Valuation Unobservable (weighted inputs and fair value
Description RM’000 RM’000 technique(s) input average) measurement

2020

Financial assets at
FVTPL

Unquoted shares 330,636 - Net tangible Net tangible Not applicable Higher net tangible assets
assets assets results in higher fair value

Financial investments
at FVOCI

Unquoted shares 60,094 - Net tangible Net tangible Not applicable Higher net tangible assets
assets assets results in higher fair value

Derivative financial
instruments

Monte Carlo Equity volatility 4% to 98% Higher volatility, would

Simulation generally result in higher fair
valuation for long volatility
positions and vice versa
Equity derivatives 13,492 (13,492)
Monte Carlo Equity / FX -30% to -2% An increase in correlation,
Simulation Correlation would generally result
between in a higher fair value
underlyers measurement and vice versa

2019

Financial assets at
FVTPL

Unquoted shares 305,572 - Net tangible Net tangible Not applicable Higher net tangible assets
assets assets results in higher fair value

Financial investments
at FVOCI

Net tangible Net tangible Not applicable Higher net tangible assets
Unquoted shares 44,331 -
assets assets results in higher fair value

Annual Report 2020 337

Notes to the Financial Statements
for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

Quantitative information about fair value measurements using significant unobservable inputs (Level 3) (continued)

The Group and the Bank Inter-relationship between

Fair value Fair value Range significant unobservable
assets liabilities Valuation Unobservable (weighted inputs and fair value
Description RM’000 RM’000 technique(s) input average) measurement

2019

Derivative financial
instruments

Monte Carlo Equity volatility 2% to 53% Higher volatility, would

Simulation generally result in higher fair
valuation for long volatility
positions and vice versa
Equity derivatives 7,812 (7,812)
Monte Carlo Equity / FX -19% to 2% An increase in correlation,
Simulation Correlation would generally result
between in a higher fair value
underlyers measurement and vice versa

Sensitivity analysis for Level 3

Effect of reasonably possible

Sensitivity alternative assumptions to:
Type of of significant Statement of income
unobservable unobservable Favourable/(Unfavourable) changes
The Group and the Bank input input RM’000

2020
Financial assets
Derivative financial instruments
- Equity derivatives Equity volatility +10% (110)
-10% 118

Equity / FX +10% 26
Correlation -10% 16
Total* 50

Financial liabilities
Derivative financial instruments
- Equity derivatives Equity volatility +10% 110
-10% (118)

Equity / FX +10% (26)

Correlation -10% (16)
Total* (50)

* No or insignificant impact to the Group. All equity link derivatives with unobservable inputs are hedged back-to-back
with external parties.

338 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(a) Determination of fair value and fair value hierarchy (continued)

Sensitivity analysis for Level 3 (continued)

Effect of reasonably possible

Sensitivity alternative assumptions to:
Type of of significant Statement of income
unobservable unobservable Favourable/(Unfavourable) changes
The Group and the Bank input input RM’000

2019
Financial assets
Derivative financial instruments
- Equity derivatives Equity volatility +10% 1,172
-10% (1,023)

Equity / FX +10% (50)

Correlation -10% (84)
Total* 15

Financial liabilities
Derivative financial instruments
- Equity derivatives Equity volatility +10% (1,172)
-10% 1,023

Equity / FX +10% 50
Correlation -10% 84
Total* (15)

* No or insignificant impact to the Group. All equity link derivatives with unobservable inputs are hedged back-to-back
with external parties.

Annual Report 2020 339

Notes to the Financial Statements
for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(b) Fair values of financial instruments not carried at fair value

Set out below is the comparison of the carrying amounts and fair values of the financial instruments of the Group and
the Bank which are not carried at fair value in the financial instruments, but for which fair value is disclosed. It does not
include those short term/on demand financial assets and financial liabilities where the carrying amounts are reasonable
approximation of their fair values:

2020 2019
Carrying Fair Carrying Fair
Amount Value Amount Value
The Group RM’000 RM’000 RM’000 RM’000

Financial Assets
Financial investments at amortised cost
- Money market 14,408,008 14,674,737 9,508,230 9,516,299
- Quoted securities 1,003,155 996,921 997,006 987,230
- Unquoted securities 4,690,269 4,769,082 4,647,969 4,684,530
Loans, advances and financing 144,694,950 145,434,265 136,308,217 136,316,238
164,796,382 165,875,005 151,461,422 151,504,297

Financial Liabilities
Deposits from customers
- At amortised cost 173,030,144 173,214,979 160,965,492 161,366,043
Recourse obligation on loans sold to Cagamas 1,049,005 1,068,699 253,591 253,940
Tier 2 subordinated bonds 1,502,224 1,580,033 1,502,340 1,513,813
Multi-currency Additional Tier 1 capital securities 806,320 845,333 806,185 820,613
Innovative Tier 1 capital securities - - 512,268 564,011
176,387,693 176,709,044 164,039,876 164,518,420

The Bank
Financial Assets
Financial investments at amortised cost
- Money market 10,781,575 10,974,606 6,618,104 6,615,126
- Quoted securities 1,003,155 996,921 997,006 987,230
- Unquoted securities 3,294,351 3,350,922 3,279,395 3,285,583
Loans, advances and financing 112,823,975 113,313,572 108,934,970 108,862,877
127,903,056 128,636,021 119,829,475 119,750,816

Financial Liabilities
Deposits from customers
- At amortised cost 137,221,242 137,371,623 129,638,516 129,841,003
Recourse obligation on loans sold to Cagamas 300,567 303,755 202,954 203,010
Tier 2 subordinated bonds 1,502,224 1,580,033 1,502,340 1,513,813
Multi-currency Additional Tier 1 capital securities 806,320 845,333 806,185 820,613
Innovative Tier 1 capital securities - - 512,268 564,011
139,830,353 140,100,744 132,662,263 132,942,450

340 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(b) Fair values of financial instruments not carried at fair value (continued)

The following table analyses within the fair value hierarchy of the Group's and the Bank's assets and liabilities not measured
at fair value at 30 June 2020 but for which fair value is disclosed:

2020

Carrying Fair Value

Amount Level 1 Level 2 Level 3
The Group RM’000 RM’000 RM’000 RM’000

Financial Assets
Financial investments at amortised cost
- Money market 14,408,008 - 14,674,737 -
- Quoted securities 1,003,155 - 996,921 -
- Unquoted securities 4,690,269 - 4,769,082 -
Loans, advances and financing 144,694,950 - 145,434,265 -
164,796,382 - 165,875,005 -

Financial Liabilities
Deposits from customers
- At amortised cost 173,030,144 - 173,214,979 -
Recourse obligation on loans sold to Cagamas 1,049,005 - 1,068,699 -
Tier 2 subordinated bonds 1,502,224 - 1,580,033 -
Multi-currency Additional Tier 1 capital securities 806,320 - 845,333 -
Innovative Tier 1 capital securities - - - -
176,387,693 - 176,709,044 -

The Bank
Financial Assets
Financial investments at amortised cost
- Money market 10,781,575 - 10,974,606 -
- Quoted securities 1,003,155 - 996,921 -
- Unquoted securities 3,294,351 - 3,350,922 -
Loans, advances and financing 112,823,975 - 113,313,572 -
127,903,056 - 128,636,021 -

Financial Liabilities
Deposits from customers
- At amortised cost 137,221,242 - 137,371,623 -
Recourse obligation on loans sold to Cagamas 300,567 - 303,755 -
Tier 2 subordinated bonds 1,502,224 - 1,580,033 -
Multi-currency Additional Tier 1 capital securities 806,320 - 845,333 -
Innovative Tier 1 capital securities - - - -
139,830,353 - 140,100,744 -

Annual Report 2020 341

Notes to the Financial Statements
for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(b) Fair values of financial instruments not carried at fair value (continued)

The following table analyses within the fair value hierarchy of the Group's and the Bank's assets and liabilities not measured
at fair value at 30 June 2019 but for which fair value is disclosed:

2019

Carrying Fair Value

Amount Level 1 Level 2 Level 3
The Group RM’000 RM’000 RM’000 RM’000

Financial Assets
Financial investments at amortised cost
- Money market 9,508,224 - 9,516,299 -
- Quoted securities 997,006 - 987,230 -
- Unquoted securities 4,647,969 - 4,684,530 -
Loans, advances and financing 136,308,217 - 136,316,238 -
151,461,416 - 151,504,297 -

Financial Liabilities
Deposits from customers
- At amortised cost 160,965,492 - 161,366,043 -
Recourse obligation on loans sold to Cagamas 253,591 - 253,940 -
Tier 2 subordinated bonds 1,502,340 - 1,513,813 -
Multi-currency Additional Tier 1 capital securities 806,185 - 820,613 -
Innovative Tier 1 capital securities 512,268 - 564,011 -
164,039,876 - 164,518,420 -

The Bank
Financial Assets
Financial investments at amortised cost
- Money market 6,618,104 - 6,615,126 -
- Quoted securities 997,006 - 987,230 -
- Unquoted securities 3,279,395 - 3,285,583 -
Loans, advances and financing 108,934,970 - 108,862,877 -
119,829,475 - 119,750,816 -

Financial Liabilities
Deposits from customers
- At amortised cost 129,638,516 - 129,841,003 -
Recourse obligation on loans sold to Cagamas 202,954 - 203,010 -
Tier 2 subordinated bonds 1,502,340 - 1,513,813 -
Multi-currency Additional Tier 1 capital securities 806,185 - 820,613 -
Innovative Tier 1 capital securities 512,268 - 564,011 -
132,662,263 - 132,942,450 -

342 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(c) Fair value methodologies and assumptions

Short-term funds and placements with financial institutions

For short-term funds and placements with financial institutions with maturities of less than six months, the carrying value is
a reasonable estimate of fair value. For short-term funds and placements with maturities six months and above, estimated
fair value is based on discounted cash flows using prevailing money market interest rates at which similar deposits and
placements would be made with financial institutions of similar credit risk and remaining period to maturity.

Securities purchased under resale agreements

The fair values of securities purchased under resale agreements with maturities of less than six months approximate the
carrying values. For securities purchased under resale agreements with maturities of six months and above, the estimated
fair values are based on discounted cash flows using market rates for the remaining term to maturity.

FVTPL, FVOCI and financial investments at amortised cost

The estimated fair value is generally based on quoted and observable market prices. Where there is no ready market in
certain securities, the Group and the Bank establish the fair value by using valuation techniques.

Loans, advances and financing

For floating rate loans, the carrying value is generally a reasonable estimate of fair value. For fixed rate loans, the fair value
is estimated by discounting the estimated future cash flows using the prevailing market rates of loans with similar credit
risks and maturities.

Deposits from customers

For deposits from customers with maturities of less than six months, the carrying amounts are reasonable estimates of
their fair values. For deposit with maturities of six months and above, fair values are estimated using discounted cash flows
based on prevailing market rates for similar deposits from customers.

Deposits and placements of banks and other financial institutions, bills and acceptances payable

The estimated fair values of deposits and placements of banks and other financial institutions, bills and acceptances
payable with maturities of less than six months approximate the carrying values. For the items with maturities six months
and above, the fair values are estimated based on discounted cash flows using prevailing money market interest rates with
similar remaining period to maturities.

Recourse obligation on loans sold to Cagamas Berhad

For amounts due to Cagamas Berhad with maturities of less than one year, the carrying amounts are a reasonable estimate
of their fair values. For amounts due to Cagamas Berhad with maturities of more than one year, fair value is estimated
based on discounted cash flows using prevailing money market interest rates with similar remaining period to maturity.

Annual Report 2020 343

Notes to the Financial Statements
for the financial year ended 30 June 2020

51 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(c) Fair value methodologies and assumptions (continued)

Subordinated obligations and capital securities

The fair value of subordinated obligations and capital securities are based on quoted market prices where available.

Other financial assets and liabilities

The carrying value less any estimated allowance for financial assets and liabilities included in “other assets and liabilities”
are assumed to approximate their fair values as these items are not materially sensitive to the shift in market interest rates.

Credit related commitment and contingencies

The net fair value of these items was not calculated as estimated fair values are not readily ascertainable. These financial
instruments generally relate to credit risks and attract fees in line with market prices for similar arrangements. They are
not presently sold nor traded. The fair value may be represented by the present value of fees expected to be received, less
associated costs.

Foreign exchange and interest rate related contracts

The fair values of foreign exchange and interest rate related contracts are the estimated amounts the Group or the Bank
would receive to sell or pay to transfer the contracts at the date of statements of financial position.

344 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

52 OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements are as follows:

The Group The Bank

Related amount not set off in the Related amount not set off in the
statements of financial position statements of financial position
Gross amount of Gross amount of
recognised recognised
financial assets/ Net amount financial assets/ Net amount
liabilities in the presented in the Values of liabilities in the presented in the Values of
statements of statements of the financial Cash collateral statements of statements of the financial Cash collateral
financial position financial position instruments received/pledged Net amount financial position financial position instruments received/pledged Net amount
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2020
Financial assets

Derivatives/financial
instruments 1,111,469 1,111,469 (643,374) (144,804) 323,291 1,057,621 1,057,621 (616,247) (144,804) 296,570

Total 1,111,469 1,111,469 (643,374) (144,804) 323,291 1,057,621 1,057,621 (616,247) (144,804) 296,570

Financial liabilities

Derivatives/financial
instruments 1,298,513 1,298,513 (643,374) (467,438) 187,701 1,251,096 1,251,096 (616,247) (467,438) 167,411

Obligations on securities
sold under repurchase
agreements 3,124,132 3,124,132 (3,124,132) - - 3,124,132 3,124,132 (3,124,132) - -

Total 4,422,645 4,422,645 (3,767,506) (467,438) 187,701 4,375,228 4,375,228 (3,740,379) (467,438) 167,411

HONG LEONG BANK BERHAD Annual Report 2020 345

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

52 OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)

Financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements are as follows: (continued)

The Group The Bank

Related amount not set off in the Related amount not set off in the
statements of financial position statements of financial position

Gross amount of Gross amount of

recognised recognised
financial assets/ Net amount financial assets/ Net amount
liabilities in the presented in the Values of liabilities in the presented in the Values of
statements of statements of the financial Cash collateral statements of statements of the financial Cash collateral
financial position financial position instruments received/pledged Net amount financial position financial position instruments received/pledged Net amount
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2019
Financial assets

Derivatives/financial
instruments 528,256 528,256 (330,125) (124,887) 73,244 522,995 522,995 (315,684) (124,887) 82,424

Total 528,256 528,256 (330,125) (124,887) 73,244 522,995 522,995 (315,684) (124,887) 82,424

Financial liabilities

Derivatives/financial
instruments 678,637 678,637 (330,125) (249,520) 98,992 675,042 675,042 (315,684) (249,520) 109,838

Obligations on securities
sold under repurchase
agreements 2,333,916 2,333,916 (2,333,916) - - 2,333,916 2,333,916 (2,333,916) - -

Total 3,012,553 3,012,553 (2,664,041) (249,520) 98,992 3,008,958 3,008,958 (2,649,600) (249,520) 109,838

HONG LEONG BANK BERHAD Annual Report 2020 346

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

53 CAPITAL ADEQUACY

The Group’s and the Bank’s regulatory capital is governed by BNM's Capital Adequacy Framework guidelines. The capital adequacy
ratios of the Group and the Bank are computed in accordance with BNM’s Capital Adequacy Framework (Capital Components)
(the “Framework”). The Framework sets out the approach for computing the regulatory capital adequacy ratios, the minimum
levels of the ratios at which banking institutions are required to operate as well as requirement on Capital Conservation Buffer
(“CCB”) and Counter-Cyclical Capital Buffer (“CCyB”). The Group and the Bank are also required to maintain CCB of up to 2.500% of
total risk-weighted assets (“RWA”), which is phased in starting with 0.625% in year 2016, 1.250% in year 2017, 1.875% in year
2018 and 2.500% in year 2019 onwards. The CCyB which ranges from 0% up to 2.500% is determined as the weighted average
of prevailing CCyB rates applied in the jurisdictions in which a financial institution has credit exposures. The minimum capital
adequacy including CCB for Common Equity Tier I (“CET I”) capital ratio, Tier I capital ratio and Total capital ratio for year 2019
onwards are 7.000%, 8.500% and 10.500% respectively.

BNM had issued a letter dated 24 March 2020 on additional measures to assist borrowers/customers affected by the COVID-19
outbreak. These measures allow banking institutions to remain focused on supporting the economy during these exceptional and
unprecedented circumstances, by providing flexibilities for banking institutions to respond swiftly to the needs of their customers.
To this effect, banking institutions are allowed to drawdown on the capital conservation buffer of 2.500%. However, BNM fully
expects banking institutions to restore their buffers within a reasonable period after 31 December 2020 and to be in position to
restore their buffers to the minimum regulatory requirements by 30 September 2021.

The Group and the Bank have adopted the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator
Approach for Operational Risk computation in deriving the RWA.

Individual entities within the Group comply with all externally imposed capital requirements to which they are subject to.

(a) The capital adequacy ratios of the Group and the Bank are as follows:

The Group The Bank

2020 2019 2020 2019

Before deducting proposed dividends

CET I capital ratio 13.950% 13.627% 13.761% 13.266%
Tier I capital ratio 14.523% 14.585% 14.118% 14.074%
Total capital ratio 16.750% 16.839% 16.245% 16.203%

After deducting proposed dividends

CET I capital ratio 13.657% 13.113% 13.395% 12.640%
Tier I capital ratio 14.230% 14.072% 13.752% 13.448%
Total capital ratio 16.456% 16.326% 15.879% 15.577%

Annual Report 2020 347

Notes to the Financial Statements
for the financial year ended 30 June 2020

53 CAPITAL ADEQUACY (CONTINUED)

(b) The components of CET I, Tier I and Tier II capital under the revised Capital Components Framework are as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

CET I capital
Share capital 7,739,063 7,739,063 7,739,063 7,739,063
Retained profits 18,172,806 16,686,412 12,661,472 12,034,337
Other reserves 1,029,080 849,361 433,536 315,816
Less: Treasury shares (723,344) (727,817) (723,344) (727,817)
Less: Deferred tax assets (86,578) (16,030) (55,984) -
Less: Other intangible assets (187,505) (125,225) (168,060) (110,895)
Less: Goodwill (1,831,312) (1,831,312) (1,771,547) (1,771,547)
Less: Investment in subsidiary companies/associated
companies/joint venture (4,644,527) (4,106,375) (2,727,486) (2,726,932)
Total CET I capital 19,467,683 18,468,077 15,387,650 14,752,025

Additional Tier I capital

Multi-currency Additional Tier 1 capital securities 799,654 799,523 799,654 799,523
Innovative Tier I capital securities - 499,498 - 499,498
Additional Tier I capital before regulatory adjustments 799,654 1,299,021 799,654 1,299,021
Less: Investment in Additional Tier 1 perpetual
subordinated sukuk wakalah - - (400,000) (400,000)
Additional Tier I capital after regulatory adjustments 799,654 1,299,021 399,654 899,021
Total Tier I capital 20,267,337 19,767,098 15,787,304 15,651,046

Tier II capital

Stage 1 and Stage 2 expected credit loss allowances

and regulatory reserves # 1,607,378 1,554,893 1,278,446 1,267,205
Subordinated bonds 1,499,970 1,499,970 1,499,970 1,499,970
Less: Investment in Tier 2 Subordinated
Sukuk Murabahah - - (400,000) (400,000)
Total Tier II capital 3,107,348 3,054,863 2,378,416 2,367,175
Total capital 23,374,685 22,821,961 18,165,720 18,018,221

# Includes the qualifying regulatory reserves for non-impaired loans of the Group and the Bank of RM837,183,000
(2019: RM847,070,000) and RM703,987,000 (2019: RM695,197,000) respectively.

348 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

53 CAPITAL ADEQUACY (CONTINUED)

(c) The breakdown of RWA by each major risk category is as follows:

The Group The Bank

2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000

Credit risk * 128,590,231 124,391,420 102,275,706 101,376,433

Market risk 2,496,060 2,558,573 2,562,366 2,595,185
Operational risk 8,468,140 8,577,308 6,983,001 7,233,933

Total RWA 139,554,431 135,527,301 111,821,073 111,205,551

* In accordance with BNM Investment Account Policy, the credit RWA of HLISB funded by Investment Account of
RM238,775,000 (2019: RM1,294,000) is excluded from the calculation of capital adequacy ratio of the Group.

(d) The capital adequacy ratios of the banking subsidiary company of the Group are as follows:

Hong Leong Islamic

Bank Berhad
2020 2019

Before deducting proposed dividends

CET I capital ratio 10.871% 10.529%
Tier I capital ratio 12.432% 12.258%
Total capital ratio 15.173% 15.150%

After deducting proposed dividends

CET I capital ratio 10.871% 10.529%
Tier I capital ratio 12.432% 12.258%
Total capital ratio 15.173% 15.150%

Annual Report 2020 349

Notes to the Financial Statements
for the financial year ended 30 June 2020

54 SEGMENT REPORTING

Business segment reporting

The business segment results are prepared based on the Group’s internal management reporting reflective of the organisation’s
management reporting structure.

The various business segments are described below:

Personal Financial Services focuses mainly on servicing individual customers and small businesses. Products and services that are
extended to customers include mortgages, credit cards, hire purchase and others.

Business & Corporate Banking focuses mainly on corporate and small medium enterprises. Products offered include trade
financing, working capital facilities, other term financing and corporate advisory services.

Global Markets refers to the Group’s domestic treasury and capital market operations and includes foreign exchange, money
market operations as well as capital market securities trading and investments.

Overseas/International Operations refers to Hong Leong Bank Berhad Overseas Branches, Subsidiaries, Associates, Joint Venture
and Representative Office. The overseas operations are mainly in commercial banking and treasury business.

Other operations refers to head office and other subsidiaries.

350 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

54 SEGMENT REPORTING (CONTINUED)

Business segment reporting (continued)

Personal Business & Overseas/ Inter-

Financial Corporate Global International Other Segment
Services Banking Markets Operations Operations Elimination Total
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2020
Revenue
- external 2,663,241 675,303 1,440,920 255,479 7,628 (264,215) 4,778,356
- inter-segment ^ (197,603) 495,810 (575,325) - 277,118 - -
Segment revenue 2,465,638 1,171,113 865,595 255,479 284,746 (264,215) 4,778,356

Overhead expenses of which: (1,375,381) (343,818) (114,622) (229,521) (27,902) (12,560) (2,103,804)
Depreciation of property and
equipment 53,353 5,513 3,891 6,016 65,482 135 134,390
Amortisation of intangible assets 9,276 1,556 936 9,261 37,996 - 59,025
(Allowance for)/written-back of
allowance for impairment losses
on loans, advances and financing 40,799 (72,798) - (97,655) (197,415) (586) (327,655)
(Allowance for)/written-back of
financial investments and other
financial assets - - (1,381) 542 - 1,006 167
Share of results of associated
companies - - - 642,333 - - 642,333
Segment results 1,131,056 754,497 749,592 571,178 59,429 (276,355) 2,989,397
Taxation (494,800)
Net profit for the financial year 2,494,597

Segment assets 101,402,143 36,483,167 61,533,549 15,563,980 - - 214,982,839

Unallocated assets 6,295,078
Total assets 221,277,917

Segment liabilities 99,009,237 43,863,396 34,056,539 14,571,564 - - 191,500,736

Unallocated liabilities 2,542,882
Total liabilities 194,043,618

Other significant segment items

Capital expenditure 39,192 4,876 124 13,853 150,572 - 208,617

^ Inter-segment transfer is based on internally computed cost of funds.

Note:
1. Total segment revenue comprises net interest income, income from Islamic Banking business and non-interest income.
2. Unallocated assets and liabilities are not directly attributed to the business segments and cannot be allocated on a reasonable basis.

Annual Report 2020 351

Notes to the Financial Statements
for the financial year ended 30 June 2020

54 SEGMENT REPORTING (CONTINUED)

Business segment reporting (continued)

Personal Business & Overseas/ Inter-

Financial Corporate Global International Other Segment
Services Banking Markets Operations Operations Elimination Total
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2019
Revenue
- external 2,719,983 651,765 1,227,251 259,519 141,964 (274,647) 4,725,835
- inter-segment ^ (227,330) 536,618 (710,213) - 400,925 - -
Segment revenue 2,492,653 1,188,383 517,038 259,519 542,889 (274,647) 4,725,835

Overhead expenses of which: (1,394,276) (337,143) (109,398) (223,314) (18,794) (8,650) (2,091,575)
Depreciation of property
and equipment 47,850 5,413 13,069 10,548 55,275 141 132,296
Amortisation of intangible assets 9,667 1,600 1,160 3,554 38,208 - 54,189
(Allowance for)/written-back of
allowance for impairment losses
on loans, advances and financing (33,061) (23,548) - (531) 45,408 (591) (12,323)
(Allowance for)/written-back of
financial investments and other
financial assets - - (944) 76 - 1,840 972
Share of results of associated
companies - - - 563,111 - - 563,111
Segment results 1,065,316 827,692 406,696 598,861 569,503 (282,048) 3,186,020
Taxation (521,513)
Net profit for the financial year 2,664,507

Segment assets 96,394,407 33,131,270 52,948,686 14,335,769 - - 196,810,132

Unallocated assets 10,559,283
Total assets 207,369,415

Segment liabilities 90,505,466 44,764,228 30,752,678 13,302,441 - - 179,324,813

Unallocated liabilities 2,570,215
Total liabilities 181,895,028

Other significant segment items

Capital expenditure 51,355 8,900 1,107 18,220 54,349 - 133,931

^ Inter-segment transfer is based on internally computed cost of funds.

Note:
1. Total segment revenue comprises net interest income, income from Islamic Banking business and non-interest income.
2. Unallocated assets and liabilities are not directly attributed to the business segments and cannot be allocated on a reasonable basis.

352 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

54 SEGMENT REPORTING (CONTINUED)

The Group operates in two main geographical areas:

- Malaysia, the home country of the Group, which includes all the areas of operations in the primary business segments.

- Overseas operations, which includes branch, subsidiary, associate and joint venture operations in Singapore, Hong Kong,
China, Vietnam and Cambodia. The overseas operations are mainly in commercial banking and treasury business.

Total Total Capital

Revenue assets liabilities expenditure
The Group RM’000 RM’000 RM’000 RM’000

2020
Malaysia 4,522,877 205,697,109 179,449,719 194,764
Overseas operations 255,479 15,580,808 14,593,899 13,853
4,778,356 221,277,917 194,043,618 208,617

2019
Malaysia 4,466,316 193,027,918 168,575,967 115,711
Overseas operations 259,519 14,341,497 13,319,061 18,220
4,725,835 207,369,415 181,895,028 133,931

55 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

(a) On 1 July 2019, the Bank announced that it had placed EB Nominees (Asing) Sendirian Berhad (“EB Nominees (Asing)”),
a wholly-owned subsidiary of the Bank, under member's voluntary winding-up pursuant to Section 439(1)(b) of the
Companies Act 2016. EB Nominees (Asing) is dormant.

(b) On 10 September 2019, the Bank had fully redeemed the RM500.0 million nominal value of Innovative Tier 1 Capital
Securities bearing coupon rate of 8.25% per annum.

(c) Chew Geok Lin Finance Sdn Bhd and WTB Corporation Sdn Bhd, wholly-owned subsidiaries of HLF Credit (Perak) Bhd which
in turn is a wholly-owned subsidiary of the Bank, were dissolved on 18 May 2020.

(d) Pursuant to Section 247(3) of the Companies Act 2016, the Companies Commission of Malaysia had granted its approval
for HLBCAM, a wholly-owned subsidiary of the Bank incorporated in the Kingdom of Cambodia, to have a different financial
year end from its holding company. The financial year end of HLBCAM is 31 December as required under the Prakas on
Annual Audit of Financial Statement of Banks and Financial Institutions issued by the National Bank of Cambodia.

56 SUBSEQUENT EVENTS AFTER THE FINANCIAL YEAR

There are no material subsequent events after the financial year that require disclosure or adjustments to the financial statements.

Annual Report 2020 353

Notes to the Financial Statements
for the financial year ended 30 June 2020

57 EQUITY COMPENSATION BENEFITS

Executive Share Scheme

The Bank has established and implemented an Executive Share Scheme.

(a) Executive Share Scheme (“ESS”)

The ESS of up to ten percent (10%) of the total number of issued shares (excluding treasury shares) of the Bank comprises
the Executive Share Option Scheme (“ESOS”) and the Executive Share Grant Scheme (“ESGS”).

The main features of the ESS are, inter alia, as follows:

1. Eligible executives are persons as defined by the ESS Bye-Laws.

2. The maximum allowable allotments for the full time Executive Directors had been approved by the shareholders of
the Bank in the annual general meeting held on 29 October 2013 and 25 October 2012. The Board, as defined by the
ESS Bye-Laws, may from time to time at its absolute discretion select and identify suitable eligible executives to be
offered options or grants.

3. At any point of time during the existence of the ESS, the aggregate number of shares comprised in the options and
grants under the ESS and any other executive share schemes established by the Bank which are still subsisting shall
not exceed 10% of the total number of issued shares (excluding treasury shares) of the Bank at any one time.

4. The exercise of the options under the ESOS or the vesting of shares under the ESGS may, at the absolute discretion of
the Board, be satisfied by way of issuance of new shares; transfer of existing shares purchased by a trust established
for the ESS; or a combination of both new shares and existing shares.

(i) ESOS

The ESOS which was approved by the shareholders of the Bank on 25 October 2012, was established on 12 March 2013
and would be in force for a period of ten (10) years.

On 18 September 2012, the Bank announced that Bursa Malaysia Securities Berhad had resolved to approve the
listing of new ordinary shares of the Bank to be issued pursuant to the exercise of options under the ESOS.

The ESOS would provide an opportunity for eligible executives who had contributed to the growth and development
of the HLB Group to participate in the equity of the Bank.

354 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

57 EQUITY COMPENSATION BENEFITS (CONTINUED)

(a) ESS (continued)

(i) ESOS (continued)

The main features of the ESOS are, inter alia, as follows:

1. The option price for the options to be granted under the ESOS shall not be at a discount of more than ten percent
(10%) (or such discount as the relevant authorities shall permit) from the 5-day weighted average market price of
the shares of the Bank preceding the Date of Offer as defined by the ESS Bye-Laws, and shall in no event be less than
the par value of the shares of the Bank.

2. The options granted to an option holder under the ESOS is exercisable by the option holder during his employment or
directorship with the HLB Group and upon meeting the vesting conditions of each ESOS plan as stated in the following
pages, subject to any maximum limit as may be determined by the Board under the Bye-Laws of the ESS.

During the financial year ended 30 June 2020, Nil (2019: Nil) share options have been granted under the ESOS with
13,702,915 (2019: 20,325,861) options remain outstanding.

The ordinary share options of the Bank granted under the ESOS that are still outstanding for the financial year ended
30 June 2020 is as follows:

(A) 37,550,000 share options at an exercise price of RM14.24 (exercise price adjusted to RM13.77 for rights issue):

2020 Adjustment Outstanding Exercisable

As at for As at As at
Grant date Expiry date 1-Jul-19 rights issue Forfeited Exercised 30-Jun-20 30-Jun-20

2 April 2015 28 July 2019 73,358 - - (73,358) - -

2 April 2015 28 July 2020 335,001 - - (99,588) 235,413 -
2 April 2015 28 July 2021 167,502 - - - 167,502 -
575,861 - - (172,946) 402,915 -

2019 Adjustment Outstanding Exercisable

As at for As at As at
Grant date Expiry date 1-Jul-18 rights issue Forfeited Exercised 30-Jun-19 30-Jun-19

2 April 2015 28 July 2019 3,949,705 - (3,614,704) (261,643) 73,358 -

2 April 2015 28 July 2020 3,949,705 - (3,614,704) - 335,001 -
2 April 2015 28 July 2021 1,974,853 - (1,807,351) - 167,502 -
9,874,263 - (9,036,759) (261,643) 575,861 -

On 30 November 2015 (“modified grant date”), the options exercise price was adjusted and additional share options
of 782,657 were granted due to the rights issue exercise pursuant to the ESS Bye-Laws.

Annual Report 2020 355

Notes to the Financial Statements
for the financial year ended 30 June 2020

57 EQUITY COMPENSATION BENEFITS (CONTINUED)

(a) ESS (continued)

(i) ESOS (continued)

The ordinary share options of the Bank granted under the ESOS that are still outstanding for the financial year ended
30 June 2020 is as follows: (continued)

Adjustments on exercise price due to Rights Issue

The fair value of share options granted on 2 April 2015 (“grant date”) and modified grant date was estimated using
the Black-scholes model, taking into account the terms and conditions upon which the options are granted. On
modified grant date, the incremental fair value was computed to incorporate the adjustments on exercise price due
to rights issue. The value of share options and the key inputs for share options valuation before and after rights issue
were as follows:

2020 2019
Before Rights After Rights Before Rights After Rights
Issue Issue Issue Issue

Fair value of share options (RM) 1.36-1.48 1.52-1.64 1.22-1.48 1.40-1.64

Share price at grant date/modified grant date (RM) 14.30 13.56 14.30 13.56
Exercise price (RM) 14.24 13.77 14.24 13.77
Weighted average option life at grant date/
modified grant date (Years) 3.40 3.00 5.12 4.46
Expected volatility (%) 11.74 12.21 11.74 12.21
Weighted average dividend yield (%) 1.96 2.04 3.20 3.33
Weighted average risk free rate (%) 2.31 2.44 3.82 4.03

The fair value of share options after the rights issue is inclusive of incremental fair value arising from adjusted
exercise price pursuant to the ESS Bye-Laws. The expected volatility reflects the assumption that the historical
volatility was indicative of future trends, which may not necessarily be the actual outcome.

The vesting conditions for the above share options are based on the achievement of pre-agreed key performance
indicators and milestones, and service (time) based periods. The vesting period of the options range from 4.83 to
5.83 years from grant date. The weighted average remaining option life as at 30 June 2020 is 0.25 years.

356 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

57 EQUITY COMPENSATION BENEFITS (CONTINUED)

(a) ESS (continued)

(i) ESOS (continued)

The ordinary share options of the Bank granted under the ESOS that are still outstanding for the financial year ended
30 June 2020 is as follows: (continued)

Adjustments on additional options due to Rights Issue

For the additional options granted on modified grant date due to Rights Issue exercise, the fair value of share options
was estimated using the Black-scholes model, taking into account the terms and conditions upon which the options
are granted. The value of share options and the key inputs for share options valuation were as follows:

2020 2019
After Rights After Rights
Issue Issue

Fair value of share options (RM) 1.09-1.22 0.95-1.22

Share price at grant date/modified grant date (RM) 13.56 13.56
Exercise price (RM) 13.77 13.77
Weighted average option life at grant date (Years) 3.00 4.46
Expected volatility (%) 12.21 12.21
Weighted average dividend yield (%) 2.04 3.33
Weighted average risk free rate (%) 2.44 4.03

The vesting conditions for the above share options are based on the achievement of pre-agreed key performance
indicators and milestones, and service (time) based periods. The vesting period of the options range from 4.16 to
5.17 years from grant date. The weighted average remaining option life as at 30 June 2020 is 0.25 years.

(B) 22,750,000 share options at an exercise price of RM16.46:

2020 Outstanding Exercisable

As at As at As at
Grant date Expiry date 1-Jul-19 Granted Forfeited Exercised 30-Jun-20 30-Jun-20

30 March 2018 31 August 2019 2,370,000 - (2,370,000) - - -

30 March 2018 31 August 2020 2,370,000 - (2,370,000) - - -
30 March 2018 31 August 2021 1,185,000 - (1,185,000) - - -
30 March 2018 31 August 2021 5,530,000 - (210,000) - 5,320,000 -
30 March 2018 31 August 2022 5,530,000 - (210,000) - 5,320,000 -
30 March 2018 31 August 2023 2,765,000 - (105,000) - 2,660,000 -
19,750,000 - (6,450,000) - 13,300,000 -

Annual Report 2020 357

Notes to the Financial Statements
for the financial year ended 30 June 2020

57 EQUITY COMPENSATION BENEFITS (CONTINUED)

(a) ESS (continued)

(i) ESOS (continued)

The ordinary share options of the Bank granted under the ESOS that are still outstanding for the financial year ended
30 June 2020 is as follows: (continued)

(B) 22,750,000 share options at an exercise price of RM16.46: (continued)

2019 Outstanding Exercisable

As at As at As at
Grant date Expiry date 1-Jul-18 Granted Forfeited Exercised 30-Jun-19 30-Jun-19

30 March 2018 31 August 2019 2,370,000 - - - 2,370,000 -

30 March 2018 31 August 2020 2,370,000 - - - 2,370,000 -
30 March 2018 31 August 2021 1,185,000 - - - 1,185,000 -
30 March 2018 31 August 2021 5,530,000 - - - 5,530,000 -
30 March 2018 31 August 2022 5,530,000 - - - 5,530,000 -
30 March 2018 31 August 2023 2,765,000 - - - 2,765,000 -
19,750,000 - - - 19,750,000 -

The estimated fair value of each share option granted is between RM3.91 and RM4.45 per share. This was calculated
using the Black-Scholes model. The model inputs were the share price at grant date of RM18.72, weighted average
option life at grant date of 3.0 years, exercise price of RM16.46, expected volatility of 17.79%, weighted average
expected dividend yield of 1.57% and a weighted average risk free interest rate of 2.70%.

The vesting conditions for the above share options are based on the achievement of pre-agreed key performance
indicators and milestones, and service (time) based periods. The vesting period of the options range from 3.25 to
5.25 years from grant date. The weighted average remaining option life as at 30 June 2020 is 1.38 years.

(ii) ESGS

The ESGS which was approved by the shareholders of the Bank on 29 October 2013, was established on 28 February 2014
and would end on 11 March 2023.

On 10 September 2013, the Bank announced that Bursa Malaysia Securities Berhad had resolved to approve in
principle the listing of new ordinary shares of the Bank to be issued pursuant to the ESGS.

The ESGS would provide the Bank with the flexibility to reward the eligible executives of the HLB Group for their
contribution with awards of the Bank’s shares without any consideration payable by the eligible executives.

The shares to be vested to a grant holder under the ESGS will be vested to the grant holder only during his employment
or directorship with the HLB Group and subject to any other terms and conditions as may be determined by the Board.

358 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

57 EQUITY COMPENSATION BENEFITS (CONTINUED)

(a) ESS (continued)

(ii) ESGS (continued)

(A) 696,946 ordinary shares at date of grant:

2020 Outstanding Exercisable

As at As at As at
Grant date Vesting date 1-Jul-19 Granted Forfeited Exercised 30-Jun-20 30-Jun-20

23 November 2016 29 February 2020 139,391 - - (139,391) - -

2019 Outstanding Exercisable

As at As at As at
Grant date Vesting date 1-Jul-18 Granted Forfeited Exercised 30-Jun-19 30-Jun-19

23 November 2016 28 February 2019 181,205 - - (181,205) - -

23 November 2016 28 February 2020 139,391 - - - 139,391 -
320,596 - - (181,205) 139,391 -

(B) 322,580 ordinary shares at date of grant:

2020 Outstanding Exercisable

As at As at As at
Grant date Vesting date 1-Jul-19 Granted Forfeited Exercised 30-Jun-20 30-Jun-20

18 December 2017 31 January 2020 161,290 - - (161,290) - -

2019 Outstanding Exercisable

As at As at As at
Grant date Vesting date 1-Jul-18 Granted Forfeited Exercised 30-Jun-19 30-Jun-19

18 December 2017 31 January 2019 161,290 - - (161,290) - -

18 December 2017 31 January 2020 161,290 - - - 161,290 -
322,580 - - (161,290) 161,290 -

Annual Report 2020 359

Notes to the Financial Statements
for the financial year ended 30 June 2020

57 EQUITY COMPENSATION BENEFITS (CONTINUED)

(a) ESS (continued)

(ii) ESGS (continued)

(C) 267,379 ordinary shares at date of grant:

2020 Outstanding Exercisable

As at As at As at
Grant date Vesting date 1-Jul-19 Granted Forfeited Exercised 30-Jun-20 30-Jun-20

3 December 2018 31 January 2020 133,689 - - (133,689) - -

3 December 2018 31 January 2021 133,690 - - - 133,690 -
267,379 - - (133,689) 133,690 -

2019 Outstanding Exercisable

As at As at As at
Grant date Vesting date 1-Jul-18 Granted Forfeited Exercised 30-Jun-19 30-Jun-19

3 December 2018 31 January 2020 - 133,689 - - 133,689 -

3 December 2018 31 January 2021 - 133,690 - - 133,690 -
- 267,379 - - 267,379 -

(D) 250,514 ordinary shares at date of grant:

2020 Outstanding Exercisable

As at As at As at
Grant date Vesting date 1-Jul-19 Granted Forfeited Exercised 30-Jun-20 30-Jun-20

8 January 2020 31 December 2020 - 125,257 (9,746) - 115,511 -

8 January 2020 31 December 2021 - 125,257 - - 125,257 -
- 250,514 (9,746) - 240,768 -

During the financial year ended 30 June 2020, an additional 250,514 ordinary shares have been granted on
8 January 2020 to eligible executives of the Bank.

During the financial year ended 30 June 2020, a total of 434,370 ordinary shares were vested and transferred pursuant to
the Bank’s ESGS, 9,746 ordinary shares forfeited with 374,458 ordinary shares remain outstanding.

During the financial year ended 30 June 2020, the Group and the Bank had recognised share-based compensation expense
arising from ESS amounting to RM23.1 million (2019: RM17.7 million).

360 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

57 EQUITY COMPENSATION BENEFITS (CONTINUED)

(b) Treasury shares for ESS

A trust has been set up for the ESOS and ESS (collectively “Schemes”) and it is administered by an appointed trustee. This
trustee will be entitled from time to time to accept financial assistance from the Bank upon such terms and conditions as
the Bank and the trustee may agree to purchase the Bank’s shares from the open market for the purposes of this trust. In
accordance with MFRS 132, the shares purchased for the benefit of the Schemes holdings are recorded as “Treasury Shares
for ESS” in the Shareholders’ Funds on the statements of financial position. The cost of operating the Schemes is charged
to the statements of income.

The number and market values of the ordinary shares held by the Trustee are as follows:

The Group and The Bank

2020 2019
Number of Number of
trust shares Market trust shares Market
held value held value
’000 RM’000 ’000 RM’000

As at end of the financial year 39,575 557,216 40,182 763,458

58 CHANGE IN ACCOUNTING POLICIES

Effects of adoption of MFRS 16 Leases

MFRS 16 ‘Leases’ (effective from 1 January 2019) supersedes MFRS 117 ‘Leases’ and the related interpretations. Under MFRS 16,
a lease is a contract (or part of a contract) that conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.

Annual Report 2020 361

Notes to the Financial Statements
for the financial year ended 30 June 2020

58 CHANGE IN ACCOUNTING POLICIES (CONTINUED)

Effects of adoption of MFRS 16 Leases (continued)

MFRS 16 eliminates the classification of leases by the lessee as either finance leases (on balance sheet) or operating leases
(off balance sheet). MFRS 16 requires a lessee to recognise a “right-of-use” (“ROU”) of the underlying asset and a lease liability
reflecting future lease payments for most leases.

The ROU asset is depreciated in accordance with the principle as set out in MFRS 116 ‘Property, Plant and Equipment’ and the
lease liability is accreted over time with interest expense recognised in statements of income.

For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue to classify all leases as either operating
leases or finance leases and account for them differently.

The Group and the Bank have adopted this standard from its mandatory adoption date of 1 July 2019. As permitted by MFRS
16, the Group and the Bank have applied the modified retrospective approach and will not restate comparative amounts for the
financial year prior to the first adoption. ROU assets for property leases will be measured on transition as if the new rules had
always been applied. All other ROU assets will be measured at the amount of the lease liability on adoption (adjusted for any
prepaid or accrued lease expenses).

On adoption of MFRS 16, the Group and the Bank recognised lease liabilities in relation to leases which had previously been
classified as ‘operating leases’ under the principles of MFRS 117 Leases. These liabilities were measured at the present value
of the remaining lease payments, discounted using the Group and the Bank's borrowing rate as of 1 July 2019. The weighted
average incremental borrowing rate applied to the lease liabilities on 1 July 2019 for the Group and the Bank was at 4.52% and
4.46% respectively per annum.

(i) The following table summarises the effects upon adoption of MFRS 16 as at 1 July 2019:

Effect of
As at adoption As restated
30 June 2019 of MFRS 16 1 July 2019
RM’000 RM’000 RM’000

The Group

Right-of-use assets - 309,219 309,219

Lease liabilities - 285,782 285,782
Other liabilities - provision for reinstatement cost - 23,437 23,437

The Bank

Right-of-use assets - 487,342 487,342

Lease liabilities - 459,572 459,572
Other liabilities - provision for reinstatement cost - 27,770 27,770

362 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Notes to the Financial Statements

for the financial year ended 30 June 2020

58 CHANGE IN ACCOUNTING POLICIES (CONTINUED)

Effects of adoption of MFRS 16 Leases (continued)

(ii) The following table analyses the impact of Capital Adequacy Ratios of the Group and the Bank:

Effect of
As at adoption As restated
30 June 2019 of MFRS 16 1 July 2019
RM’000 RM’000 RM’000

The Group

CET I capital ratio 13.113% -0.030% 13.084%

Tier I capital ratio 14.072% -0.032% 14.040%
Total capital ratio 16.326% -0.034% 16.292%

The Bank

CET I capital ratio 12.640% -0.055% 12.585%

Tier I capital ratio 13.448% -0.059% 13.390%
Total capital ratio 15.577% -0.063% 15.514%

(iii) The reconciliation on the operating lease commitments disclosed under MFRS 117 to MFRS 16 is as follows:

The Group The Bank

RM’000 RM’000

Operating lease commitments as at 30 June 2019 16,200 31,786

Discounted using the incremental borrowing rate (687) (886)
15,513 30,900
Finance lease liabilities recognised under MFRS 117
Out-of-scope contracts - (60)
Low-value lease recognised on a straight-line basis as expenses (42) (42)
Add: adjustments as a result of a different treatment of extension and termination
options 270,311 428,774
285,782 459,572
Lease liabilities recognised as at 1 July 2019 of which:
Current lease liabilities 43,794 61,926
Non-current lease liabilities 241,988 397,646
285,782 459,572

The recognised right-of-use assets relate to the following type of assets:

Properties 309,219 487,342

Annual Report 2020 363

Notes to the Financial Statements
for the financial year ended 30 June 2020

59 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

The Group and the Bank make estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables
that are anticipated to have material impact to the Group’s and the Bank’s results and financial position are tested for sensitivity
to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities within the next financial year are outlined below:

(a) Allowance for ECL

The measurement of the ECL for financial assets measured at amortised cost and FVOCI is an area that requires the use of
complex models and significant assumptions about future economic conditions and credit behaviour.

MFRS 9 introduces the use of macroeconomic factors which include, but is not limited to, unemployment, interest rates,
gross domestic product, private consumption, inflation and commercial property prices, and requires an evaluation of both
the current and forecast direction of the economic cycle. Incorporating forward looking information increases the level of
judgement as to how changes in these macroeconomic factors will affect ECL. The methodology and assumptions including
any forecasts of future economic conditions are reviewed regularly.

A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:

(i) Determining criteria for significant increase in credit risk;

(ii) Choosing appropriate models and assumptions for the measurement of ECL;

(iii) Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and
the associated ECL; and

(iv) Establishing groups of similar financial assets for the purposes of measuring ECL.

The sensitivity effect on the macroeconomic factor is further disclosed in Note 50(d)(viii) to the financial statements.

60 GENERAL INFORMATION

The Bank is a public limited liability company that is incorporated and domiciled in Malaysia. The registered office is at Level 30,
Menara Hong Leong, No.6, Jalan Damanlela, Bukit Damansara, 50490 Kuala Lumpur, Wilayah Persekutuan, Malaysia.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on
11 September 2020.

364 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Statement by Directors
Pursuant to Section 251(2) of the Companies Act 2016

We, Tan Kong Khoon and Chok Kwee Bee, two of the Directors of Hong Leong Bank Berhad, do hereby state that, in the opinion of the
Directors, the financial statements set out on pages 166 to 364 are drawn up so as to give a true and fair view of the financial position
of the Group and the Bank as at 30 June 2020 and the financial performance and the cash flows of the Group and the Bank for the
financial year then ended on that date, in accordance with Malaysian Financial Reporting Standards, International Financial Reporting
Standards and the requirements of the Companies Act 2016 in Malaysia.

On behalf of the Board,

Tan Kong Khoon

Chok Kwee Bee

Kuala Lumpur
11 September 2020

Statutory Declaration
Pursuant to Section 251(1) of the Companies Act 2016

I, Malkiat Singh @ Malkit Singh Maan A/L Delbara Singh, the officer primarily responsible for the financial management of Hong Leong
Bank Berhad, do solemnly and sincerely declare that the, financial statements set out on pages 166 to 364 are, to the best of my
knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the
provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by )

the abovenamed Malkiat Singh @ )
Malkit Singh Maan A/L Delbara Singh at )
Kuala Lumpur in Wilayah Persekutuan on )
11 September 2020 ) Malkiat Singh @ Malkit Singh Maan A/L Delbara Singh
MIA No. CA9305
Before me,

Tan Kim Chooi

Commissioner of Oaths

Annual Report 2020 365

Independent Auditors’ Report
to the members of Hong Leong Bank Berhad

Report on the Audit of the Financial Statements

Our opinion

In our opinion, the financial statements of Hong Leong Bank Berhad (“the Bank”) and its subsidiaries (“the Group”) give a true and
fair view of the financial position of the Group and of the Bank as at 30 June 2020, and of their financial performance and their cash
flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting
Standards and the requirements of the Companies Act 2016 in Malaysia.

What we have audited

We have audited the financial statements of the Group and of the Bank, which comprise the statements of financial position as at
30 June 2020 of the Group and of the Bank, and the statements of income, statements of comprehensive income, statements of
changes in equity and statements of cash flows of the Group and of the Bank for the financial year then ended, and notes to the
financial statements, including a summary of significant accounting policies, as set out on pages 166 to 364.

Basis for opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our
responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the financial statements”
section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and other ethical responsibilities

We are independent of the Group and of the Bank in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of
the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ International Code of
Ethics for Professional Accountants (including International Independence Standards) (“IESBA Code”), and we have fulfilled our other
ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Our audit approach

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements
of Group and the Bank. In particular, we considered where the Directors made subjective judgements; for example, in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in
all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration
of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements
as a whole, taking into account the structure of the Group and of the Bank, the accounting processes and controls, and the industry in
which the Group and the Bank operate.

366 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Independent Auditorsʼ Report

to the members of Hong Leong Bank Berhad

Report on the Audit of the Financial Statements (continued)

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the Group and of the Bank for the current financial year. These matters were addressed in the context of our audit of the
financial statements of the Group and of the Bank as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.

Key audit matters How our audit addressed the key audit matters
Impairment of loans, advances and financing for the Group and We tested the design and operating effectiveness of the controls
the Bank over impairment of loans, advances and financing. These controls
covered:
Refer to Note N of the summary of significant accounting policies,
and Notes 8 and 38 to the financial statements. • Identification of loans, advances and financing that
displayed objective evidence of impairment or loans,
We focused on this area due to the significant size of the carrying advances and financing that have experienced significant
value of loans, advances and financing, which represented 65.4% increase in credit risk;
and 63.5% of total assets for the Group and the Bank, respectively.
In addition, impairment is a highly subjective area as the Group • Governance over the impairment processes, including
exercised significant judgement on the following areas: model development, model approval and model validation;

Identification of Stage 2 and Stage 3 loans, advances and • Data used to determine the allowances for credit losses
financing including the completeness and accuracy of the key inputs
• Assessment of objective evidence of impairment of and assumptions used in the respective ECL models; and
loans, advances and financing based on obligatory and
judgemental triggers for Stage 3 loans, advances and • Review and approval of the ECL calculation.
financing; and
Individual assessment
• Identification of loans, advances and financing that have Where the loans, advances and financing are individually
experienced a significant increase in credit risk for Stage 2 assessed, we performed the following procedures:
loans, advances and financing.
• Examined a sample of loans, advances and financing
Individual assessment focused on loans, advances and financing identified by
• Estimates on the amount and timing of future cash flows the Group and the Bank as having lower credit quality,
based on realisation of collateral. rescheduled and restructured, and borrowers with
exposures in oil and gas, oil palm plantations, and property
development industry and formed our own judgement as
to whether there was a significant increase in credit risk or
any objective evidence of impairment; and

• Where objective evidence of impairment was identified and

impairment loss was individually calculated, we examined
both the quantum and timing of future cash flows used by
the Group and the Bank in the impairment loss calculation,
challenged the assumptions and compared estimates to
external evidence where available. Calculations of the
discounted cash flows were also re-performed.

Annual Report 2020 367

Independent Auditorsʼ Report
to the members of Hong Leong Bank Berhad

Report on the Audit of the Financial Statements (continued)

Key audit matters (continued)

Key audit matters How our audit addressed the key audit matters
Collective assessment Collective assessment
• Choosing the appropriate collective assessment models To determine the appropriateness of the MFRS 9 collective
used to calculate ECL. The models are inherently complex assessment ECL models implemented by the Group and the Bank,
and judgement is applied in determining the appropriate we have performed the following procedures:
construct of model;
• Assessed the methodologies inherent within the collective
• Assumptions used in the ECL models, which are expected assessment ECL models applied against the requirements
future cash flows, forward-looking macroeconomic factors of MFRS 9, including the basis used by the Group and the
and datasets to be used as inputs to the models. Bank to determine the key assumptions used in respective
ECL models;

• Assessed and tested the significant modelling assumptions,

including the basis or judgement used for management’s
overlays;

• Assessed and considered reasonableness of forward-

looking forecasts assumptions; and

• Tested the accuracy of data inputs used in ECL models and

checked the calculation of ECL amount, on a sample basis.

Based on the procedures performed, the outcome of our

independent testing results were not significantly different from
the Group’s and the Bank’s assessment on impairment of loans,
advances and financing.

Information other than the financial statements and auditors’ report thereon

The Directors of the Bank are responsible for the other information. The other information comprises of the Group and the Bank's annual
report does not include the financial statements of the Group and of the Bank and our auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Bank does not cover the other information and we do not express any
form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Bank, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of
the Bank or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.

368 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Independent Auditorsʼ Report

to the members of Hong Leong Bank Berhad

Report on the Audit of the Financial Statements (continued)

Responsibilities of the Directors for the financial statements

The Directors of the Bank are responsible for the preparation of the financial statements of the Group and of the Bank that give a
true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the
requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors
determine is necessary to enable the preparation of financial statements of the Group and of the Bank that are free from material
misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Bank, the Directors are responsible for assessing the Group’s and the
Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the Group or the Bank or to cease operations, or have no realistic
alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Bank as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on
auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:

(a) Identify and assess the risks of material misstatement of the financial statements of the Group and of the Bank, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.

(b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Bank’s internal
control.

(c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the Directors.

Annual Report 2020 369

Independent Auditorsʼ Report
to the members of Hong Leong Bank Berhad

Report on the Audit of the Financial Statements (continued)

Auditors’ responsibilities for the audit of the financial statements (continued)

(d) Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or
on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Bank or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditors’ report. However, future events or conditions may cause the Group or the Bank to cease to continue as a going concern.

(e) Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Bank, including the
disclosures, and whether the financial statements of the Group and of the Bank represent the underlying transactions and events
in a manner that achieves fair presentation.

(f) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the
financial statements of the Group and of the Bank for the current financial year and are therefore the key audit matters. We describe
these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted
as auditors, are disclosed in Note 13 to the financial statements.

Other Matters

This report is made solely to the members of the Bank, as a body, in accordance with Section 266 of the Companies Act 2016 in
Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

PRICEWATERHOUSECOOPERS PLT ONG CHING CHUAN

LLP0014401-LCA & AF 1146 02907/11/2021 J
Chartered Accountants Chartered Accountant

Kuala Lumpur
11 September 2020

370 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

1. INTRODUCTION

This document discloses Hong Leong Bank Berhad (“HLB” or “the Bank”) and its banking subsidiaries' (collectively known as
“the Group”) risk profile, risk management practices in accordance with the disclosure requirements as outlined in the Guidelines
on Risk-Weighted Capital Adequacy Framework (Basel II) (“RWCAF”) - Disclosure Requirements (Pillar 3) and Capital Adequacy
Framework for Islamic Bank (“CAFIB”) - Disclosure requirements (Pillar 3) issued by BNM.

The capital adequacy ratios of the Group and the Bank are computed in accordance with BNM’s Capital Adequacy Framework
(Capital Components) and Capital Adequacy Framework for Islamic Banks (Capital Components), which set out the approach for
computing the regulatory capital adequacy ratios, the minimum levels of the ratios at which banking institutions are required to
operate as well as requirement on Capital Conservation Buffer (“CCB”) and Counter-Cyclical Capital Buffer (“CCyB”). The Group and
the Bank are also required to maintain CCB of up to 2.500% of total risk-weighted assets (“RWA”), which is phased in starting with
0.625% in year 2016, 1.250% in year 2017, 1.875% in year 2018 and 2.500% in year 2019 onwards. The CCyB which ranges from
0% up to 2.500% is determined as the weighted average of prevailing CCyB rates applied in the jurisdictions in which a financial
institution has credit exposures. The minimum capital adequacy including CCB for Common Equity Tier I (“CET I”) capital ratio, Tier
I capital ratio and Total capital ratio for year 2019 onwards are 7.000%, 8.500% and 10.500% respectively.

BNM had issued a letter dated 24 March 2020 on additional measures to assist borrowers/customers affected by the COVID-19
outbreak. These measures allow banking institutions to remain focused on supporting the economy during these exceptional and
unprecedented circumstances, by providing flexibilities for banking institutions to respond swiftly to the needs of their customers.
To this effect, banking institutions are allowed to drawdown on the capital conservation buffer of 2.500%. However, BNM fully
expects banking institutions to restore their buffers within a reasonable period after 31 December 2020 and to be in position to
restore their buffers to the minimum regulatory requirements by 30 September 2021.

The Group and the Bank have adopted the Standardised Approach for the computation of Credit Risk and Market Risk, and the
Basic Indicator Approach for Operational Risk computation in deriving the RWA.

The following information concerning the Group's risk exposures, risk management practices and capital adequacy is disclosed
as accompanying information to the annual report and does not form part of the audited financial statements.

2. SCOPE OF APPLICATION

The capital adequacy ratios of the Group consist of capital base and RWA derived from the consolidated balances of the Bank and
its banking subsidiaries, namely Hong Leong Islamic Bank Berhad (“HLISB”), Hong Leong Bank Vietnam Limited and Hong Leong
Bank (Cambodia) PLC.

The Group’s capital requirements are generally based on the principles of consolidation adopted in the preparation of its financial
statements, as disclosed in Note 2A to the financial statements, except where deductions from eligible capital are required
under BNM’s Capital Adequacy Framework (Capital Components) and Capital Adequacy Framework for Islamic Banks (Capital
Components) or where separation requirements (set by BNM) are met by entities.

During the course of the year, the Bank and its banking subsidiaries did not experience any restrictions or other major impediments
on transfer of funds or regulatory capital within the Group.

Annual Report 2020 371

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

3. CAPITAL STRUCTURE AND ADEQUACY

The Group monitors the capital adequacy position of the Bank and its banking subsidiaries to ensure compliance with the
requirements of BNM and to take prompt actions to address projected capital deficiency. The capital position is reviewed on a
monthly basis and taking into account the levels and trends of material risks. The sufficiency of capital is assessed against various
risks on the balance sheet as well as future capital requirements based on the Group’s business plans.

The Group has also formalised an overall capital management and planning policy, which seeks to ensure that it is in line with
Basel III Capital Standards.

The following table sets forth details on the capital resources, capital adequacy ratios and risk-weighted assets for the Group
and the Bank as at 30 June 2020. BNM's Capital Adequacy Framework (Capital Components) and Capital Adequacy Framework
for Islamic Banks (Capital Components) set out the minimum capital adequacy ratios for the banking institutions and the
methodologies for calculating these ratios. As at 30 June 2020, the Group's and the Bank's CET I, Tier I capital ratio and Total
capital ratio were higher than BNM's minimum requirements.

BNM's Capital Adequacy Framework (Capital Components) and Capital Adequacy Framework for Islamic Banks (Capital Components)
set out the constituents of the total eligible capital for the Group and the Bank. For the main features of these capital instruments,
please refer to Note 26, Note 27 and Note 28 to the financial statements.

Basel III

(a) The capital adequacy ratios of the Group and the Bank are as follows:

The Group The Bank

30 June 2020 30 June 2019 30 June 2020 30 June 2019

Before deducting proposed dividends

CET I capital ratio 13.950% 13.627% 13.761% 13.266%
Tier I capital ratio 14.523% 14.585% 14.118% 14.074%
Total capital ratio 16.750% 16.839% 16.245% 16.203%

After deducting proposed dividends

CET I capital ratio 13.657% 13.113% 13.395% 12.640%
Tier I capital ratio 14.230% 14.072% 13.752% 13.448%
Total capital ratio 16.456% 16.326% 15.879% 15.577%

372 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

3. CAPITAL STRUCTURE AND ADEQUACY (CONTINUED)

(b) The components of CET I, Tier I and Tier II capital under the revised Capital Components Framework are as follows:

The Group The Bank

30 June 2020 30 June 2019 30 June 2020 30 June 2019
RM’000 RM’000 RM’000 RM’000

CET I capital
Share capital 7,739,063 7,739,063 7,739,063 7,739,063
Retained profits 18,172,806 16,686,412 12,661,472 12,034,337
Other reserves 1,029,080 849,361 433,536 315,816
Less: Treasury shares (723,344) (727,817) (723,344) (727,817)
Less: Deferred tax assets (86,578) (16,030) (55,984) -
Less: Other intangible assets (187,505) (125,225) (168,060) (110,895)
Less: Goodwill (1,831,312) (1,831,312) (1,771,547) (1,771,547)
Less: Investment in subsidiary companies/associated
companies (4,644,527) (4,106,375) (2,727,486) (2,726,932)
Total CET I capital 19,467,683 18,468,077 15,387,650 14,752,025

Additional Tier I capital

Multi-currency Additional Tier-1 capital securities 799,654 799,523 799,654 799,523
Innovative Tier I capital securities - 499,498 - 499,498
Additional Tier I capital before regulatory adjustments 799,654 1,299,021 799,654 1,299,021
Less: Investments in Additional Tier 1 perpetual
subordinated sukuk wakalah - - (400,000) (400,000)
Additional Tier I capital after regulatory adjustments 799,654 1,299,021 399,654 899,021
Total Tier I capital 20,267,337 19,767,098 15,787,304 15,651,046

Tier II capital
Stage 1 and Stage 2 expected credit loss allowances
and regulatory reserves# 1,607,378 1,554,893 1,278,446 1,267,205
Subordinated bonds 1,499,970 1,499,970 1,499,970 1,499,970
Less: Investment in Tier 2 Subordinated Sukuk
Murabahah - - (400,000) (400,000)
Total Tier II capital 3,107,348 3,054,863 2,378,416 2,367,175
Total Capital 23,374,685 22,821,961 18,165,720 18,018,221

* Includes the qualifying regulatory reserves for non-impaired loans of the Group and the Bank of RM837,183,000
(2019: RM847,070,000) and RM703,987,000 (2019: RM695,197,000) respectively.

Annual Report 2020 373

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

3. CAPITAL STRUCTURE AND ADEQUACY (CONTINUED)

Basel III (continued)

(c) The breakdown of risk-weighted assets (“RWA”) by each major risk category is as follows:

The Group The Bank
30 June 2020 30 June 2019 30 June 2020 30 June 2019
RM’000 RM’000 RM’000 RM’000

Credit risk* 128,590,231 124,391,420 102,275,706 101,376,433

Market risk 2,496,060 2,558,573 2,562,366 2,595,185
Operational risk 8,468,140 8,577,308 6,983,001 7,233,933
Total RWA 139,554,431 135,527,301 111,821,073 111,205,551

* In accordance with BNM Investment Account Policy, the credit RWA of HLISB funded by Investment Account of
RM238,775,000 (2019: RM1,294,000) is excluded from the calculation of capital adequacy ratio of the Group.

(d) The capital adequacy ratios of the banking subsidiary company of the Group are as follows:

Hong Leong Islamic Bank Berhad

30 June 2020 30 June 2019

Before deducting proposed dividends

CET I capital ratio 10.871% 10.529%
Tier I capital ratio 12.432% 12.258%
Total capital ratio 15.173% 15.150%

After deducting proposed dividends

CET I capital ratio 10.871% 10.529%
Tier I capital ratio 12.432% 12.258%
Total capital ratio 15.173% 15.150%

374 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

3. CAPITAL STRUCTURE AND ADEQUACY (CONTINUED)

Basel III (continued)

(e) The breakdown of RWA by exposure is as follows:

Minimum
Gross Net Risk capital
exposures exposures weighted requirements
before CRM after CRM assets at 8%
The Group RM’000 RM’000 RM’000 RM’000

30 June 2020
Exposure Class

Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks 40,954,628 40,954,628 - -
Public Sector Entities 163,152 163,152 32,630 2,610
Banks, Development Financial Institutions (“DFIs”) and
Multilateral Development Bank (“MDBs”) 10,894,274 10,894,274 4,235,745 338,860
Insurance Cos, Securities Firms (“SF”) and
Fund Managers (“FM”) 84,699 83,874 83,874 6,710
Corporates 41,717,461 40,029,696 36,556,929 2,924,554
Regulatory Retail 50,123,920 49,738,250 37,677,275 3,014,182
Residential Mortgages 57,049,871 57,000,634 27,694,609 2,215,569
Higher Risk Assets 75,562 75,562 113,343 9,067
Other Assets 9,589,379 9,589,379 7,273,554 581,884
Defaulted Exposures 696,397 676,675 824,516 65,961
Total On-Balance Sheet Exposures 211,349,343 209,206,124 114,492,475 9,159,397

Off-Balance Sheet Exposures

Over-the-counter (“OTC”) Derivatives 1,657,050 1,657,050 780,556 62,444
Credit Derivatives 14,564 14,564 2,913 233
Off-Balance Sheet Exposures Other Than
OTC Derivatives or Credit Derivatives 15,510,163 15,310,609 13,274,772 1,061,982
Defaulted Exposures 26,992 26,112 39,515 3,161
Total Off-Balance Sheet Exposures 17,208,769^ 17,008,335 14,097,756 1,127,820
Total On and Off-Balance Sheet Exposures 228,558,112 226,214,459 128,590,231 10,287,217

Long Short
Market Risk Position Position

Interest Rate Risk 61,150,796 58,446,602 2,058,271 164,662

Foreign Currency Risk 378,612 288,015 434,250 34,740
Option Risk - - 3,539 283
Total 61,529,408 58,734,617 2,496,060 199,685

Operational Risk 8,468,140 677,451

Total RWA and Capital Requirements 139,554,431 11,164,353

Note:
CRM - credit risk mitigation
^ The gross exposures before CRM of Off-Balance Sheet exposures refer to the credit equivalent of Off-Balance Sheet
items on page 406.

Annual Report 2020 375

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

3. CAPITAL STRUCTURE AND ADEQUACY (CONTINUED)

Basel III (continued)

(e) The breakdown of RWA by exposure is as follows: (continued)

Minimum
Gross Net Risk capital
exposures exposures weighted requirements
before CRM after CRM assets at 8%
The Group RM’000 RM’000 RM’000 RM’000

30 June 2019
Exposure Class

Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks 32,413,829 32,413,829 - -
Public Sector Entities 349,789 349,789 69,958 5,597
Banks, DFIs and MDBs 10,942,522 10,942,522 3,588,762 287,101
Insurance Cos, SF and FM 26,089 25,789 25,789 2,063
Corporates 38,974,262 37,834,678 34,599,505 2,767,960
Regulatory Retail 57,377,724 56,931,065 43,066,778 3,445,342
Residential Mortgages 44,884,425 44,866,727 19,885,853 1,590,868
Higher Risk Assets 101,117 101,117 151,675 12,134
Other Assets 10,943,545 10,943,545 8,629,040 690,323
Defaulted Exposures 740,357 737,992 897,500 71,800
Total On-Balance Sheet Exposures 196,753,659 195,147,053 110,914,860 8,873,188

Off-Balance Sheet Exposures

OTC Derivatives 1,522,871 1,522,871 749,869 59,990
Credit Derivatives 5,146 5,146 1,029 82
Off-Balance Sheet Exposures Other Than
OTC Derivatives or Credit Derivatives 15,068,292 14,885,626 12,685,353 1,014,828
Defaulted Exposures 26,976 26,748 40,309 3,225
Total Off-Balance Sheet Exposures 16,623,285^ 16,440,391 13,476,560 1,078,125
Total On and Off-Balance Sheet Exposures 213,376,944 211,587,444 124,391,420 9,951,313

Long Short
Market Risk Position Position

Interest Rate Risk 70,894,251 67,912,159 2,244,594 179,568

Foreign Currency Risk 275,919 246,955 283,554 22,684
Option Risk - - 30,425 2,434
Total 71,170,170 68,159,114 2,558,573 204,686

Operational Risk 8,577,308 686,185

Total RWA and Capital Requirements 135,527,301 10,842,184

Note:
^ The gross exposures before CRM of Off-Balance Sheet exposures refer to the credit equivalent of Off-Balance Sheet
items on page 407.

376 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

3. CAPITAL STRUCTURE AND ADEQUACY (CONTINUED)

Basel III (continued)

(e) The breakdown of RWA by exposure is as follows: (continued)

Minimum
Gross Net Risk capital
exposures exposures weighted requirements
before CRM after CRM assets at 8%
The Bank RM’000 RM’000 RM’000 RM’000

30 June 2020
Exposure Class

Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks 30,446,930 30,446,930 - -
Public Sector Entities 163,152 163,152 32,630 2,610
Banks, DFIs and MDBs 11,647,820 11,647,820 4,233,616 338,689
Insurance Cos, SF and FM 83,702 82,876 82,876 6,630
Corporates 33,271,431 31,859,130 28,810,421 2,304,834
Regulatory Retail 38,686,604 38,326,253 28,849,757 2,307,981
Residential Mortgages 44,735,448 44,693,763 21,248,234 1,699,859
Higher Risk Assets 74,237 74,237 111,356 8,908
Other Assets 9,162,467 9,162,467 7,231,979 578,558
Defaulted Exposures 561,364 560,646 700,588 56,047
Total On-Balance Sheet Exposures 168,833,155 167,017,274 91,301,457 7,304,116

Off-Balance Sheet Exposures

OTC Derivatives 1,432,726 1,432,726 685,121 54,810
Credit Derivatives 14,564 14,564 2,913 233
Off-Balance Sheet Exposures Other Than
OTC Derivatives or Credit Derivatives 12,126,150 11,941,311 10,276,307 822,104
Defaulted Exposures 7,391 6,510 9,908 793
Total Off-Balance Sheet Exposures 13,580,831^ 13,395,111 10,974,249 877,940
Total On and Off-Balance Sheet Exposures 182,413,986 180,412,385 102,275,706 8,182,056

Long Short
Market Risk Position Position

Interest Rate Risk 59,860,151 57,177,626 2,218,754 177,500

Foreign Currency Risk 340,073 193,839 340,073 27,206
Option Risk - - 3,539 283
Total 60,200,224 57,371,465 2,562,366 204,989

Operational Risk 6,983,001 558,640

Total RWA and Capital Requirements 111,821,073 8,945,685

Note:
^ The gross exposures before CRM of Off-Balance Sheet exposures refer to the credit equivalent of Off-Balance Sheet
items on page 408.

Annual Report 2020 377

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

3. CAPITAL STRUCTURE AND ADEQUACY (CONTINUED)

Basel III (continued)

(e) The breakdown of RWA by exposure is as follows: (continued)

Minimum
Gross Net Risk capital
exposures exposures weighted requirements
before CRM after CRM assets at 8%
The Bank RM’000 RM’000 RM’000 RM’000

30 June 2019
Exposure Class

Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks 24,812,946 24,812,946 - -
Public Sector Entities 349,789 349,789 69,958 5,597
Banks, DFIs and MDBs 10,467,756 10,467,756 3,453,840 276,307
Insurance Cos, SF and FM 25,072 24,772 24,772 1,982
Corporates 32,151,874 31,046,040 28,221,344 2,257,707
Regulatory Retail 45,674,263 45,252,363 34,002,873 2,720,230
Residential Mortgages 35,248,083 35,232,074 15,356,050 1,228,484
Higher Risk Assets 89,834 89,834 134,751 10,780
Other Assets 10,395,183 10,395,183 8,775,520 702,042
Defaulted Exposures 633,964 631,952 794,345 63,548
Total On-Balance Sheet Exposures 159,848,764 158,302,709 90,833,453 7,266,677

Off-Balance Sheet Exposures

OTC Derivatives 1,397,057 1,397,057 682,779 54,622
Credit Derivatives 5,146 5,146 1,029 82
Off-Balance Sheet Exposures Other Than
OTC Derivatives or Credit Derivatives 11,735,815 11,561,799 9,821,704 785,736
Defaulted Exposures 25,054 24,857 37,468 2,997
Total Off-Balance Sheet Exposures 13,163,072^ 12,988,859 10,542,980 843,437
Total On and Off-Balance Sheet Exposures 173,011,836 171,291,568 101,376,433 8,110,114

Long Short
Market Risk Position Position

Interest Rate Risk 67,656,252 65,189,455 2,320,516 185,641

Foreign Currency Risk 236,609 244,244 244,244 19,540
Option Risk - - 30,425 2,434
Total 67,892,861 65,433,699 2,595,185 207,615

Operational Risk 7,233,933 578,715

Total RWA and Capital Requirements 111,205,551 8,896,444

Note:
^ The gross exposures before CRM of Off-Balance Sheet exposures refer to the credit equivalent of Off-Balance Sheet
items on page 409.

378 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT

The Group has implemented a risk management and internal control framework with the objective to ensure the overall financial
soundness and stability of the Group’s business operations. The risk management and internal control framework outlines the
overall governance structure, aspiration, values and risk management strategies that balances between risk profiles and returns
objectives. Appropriate methodologies and measurements have been developed to manage uncertainties such that deviations
from intended strategic objectives are closely monitored and kept within tolerable levels.

As part of the risk management and internal control framework, the Group has formulated and implemented an Internal Capital
Adequacy Assessment Process (“ICAAP”) and a capital management framework to ensure that it maintains the appropriate level
of capital, the appropriate quality and structure of capital and the appropriate risk profile to support its strategic objectives. This
also includes determining the Group's minimum capital threshold and target capital levels.

From a governance perspective, the Board has the overall responsibility to define the Group's risk appetite and ensure that
a robust risk management and compliance culture prevails. The Board is assisted by the Board Risk Management Committee
(“BRMC”) in approving the risk management and internal control framework as well as the attendant capital management
framework, risk appetite statement, risk management and compliance strategies, and risk management and compliance policies.

Dedicated management level committees are established by the Group to oversee the development and the effectiveness of
risk management policies, to review risk exposures and portfolio composition as well as to ensure appropriate infrastructures,
resources and systems are put in place for effective risk management activities.

Operationally, the Group operates multiple lines of defences to effect a robust control framework. The business units being the
first line of defence are responsible for identifying, mitigating and managing risks within their lines of business. The Group Risk
Management (“GRM”) function being the second line of defence, is responsible for setting the risk management framework
and developing tools and methodologies for the identification, measurement, monitoring, control and mitigation of risks. In
addition, GRM undertakes validation to ensure that the business and operating units are in compliance to the Group's risk
appetite thresholds and to the regulatory requirements. The GRM's functions cover the oversight of the following areas: Market
Risk, Interest Rate Risk in the Banking Book, Liquidity Risk, Credit Portfolio Risk, Technology Risk, Operational Risk, ICAAP and
Integrated Stress Testing and Islamic Banking Risk.

The Group Internal Audit function, being the third line of defence, is responsible to provide independent assurance on the
effective functioning of the risk management and internal controls framework for the Group.

The risk management process for each key risk area of the Group and the various risk exposures are described in the following
sections of the Pillar 3 disclosures.

(A) Credit risk

Credit risk arises as a result of customers or counterparties not being able to or willing to fulfil their financial and contractual
obligations as and when they fall due. These obligations arise from lending, trade finance and other activities undertaken
by the Group.

The Group has established a credit risk governance policy to ensure that exposure to credit risk is kept within the Bank’s
financial capacity to withstand potential future losses. Lending activities are guided by the internal credit policies and
guidelines that are reviewed and concurred by the Management Credit Committee (“MCC”), endorsed by the Credit
Supervisory Committee (“CSC”) and the BRMC, and approved by the Board. These policies are subject to review and
enhancements, at least on an annual basis.

Annual Report 2020 379

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Credit portfolio strategies and significant exposures are reviewed by both the BRMC and the Board. These portfolio strategies
are designed to achieve a desired portfolio risk tolerance level and sector distribution.

The Group’s credit approving process encompasses pre-approval evaluation, approval and post-approval evaluation. While
the business units are responsible for credit origination, the credit approving function rests mainly with the Credit Evaluation
Departments, the MCC and the CSC. The Board delegates the approving and discretionary authority to the MCC, CSC and the
various personnel of the Bank based on job function and designation.

For any new products, credit risk assessment also forms part of the new product sign-off process to ensure that the new
product complies with the appropriate policies and guidelines, prior to the introduction of the product.

The Group's exposure to credit risk is mainly from its retail customers, small and medium enterprise (“SME”), commercial
and corporate customers. The credit assessment for retail customers is managed on a portfolio basis and the risk scoring
models and lending templates are designed to assess the credit worthiness and the likelihood of the obligors to repay their
debts.

The SME, commercial and corporate customers are individually assessed and assigned with a credit rating, which is based
on the assessment of relevant factors such as the customer’s financial position, industry outlook, types of facilities and
collaterals offered.

Under the Basel II Standardised Approach, the Group makes use of credit ratings assigned by credit rating agencies in
its calculation of credit risk weighted assets. This is applicable for exposures to sovereigns, central banks, public sector
entities, banking institutions, corporates as well as certain other specific portfolios.

The approved External Credit Assessment Institutions (“ECAI”) ratings and the prescribed risk weights on the above stated
asset classes are used in the computation of regulatory capital. An exposure would be deemed to have an external rating
if the issuer or the issue has a rating provided by an ECAI. In cases where an exposure does not have an issuer or issue
rating, the exposure shall be deemed unrated and shall be accorded a risk weight appropriate for unrated exposures in their
respective exposure category.

The ECAI used by the Bank are Fitch Ratings, Moody’s Investors Service, Standard & Poor’s, Malaysia Rating Corporation
Berhad (“MARC”) and Rating Agency Malaysia (“RAM”). ECAI ratings are mapped to a common credit quality grade as
prescribed by BNM.

In addition, the Bank also conducts periodic stress testing of its credit portfolios to ascertain the credit risk impact to capital
under the relevant stress scenarios.

380 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Gross credit exposure

(i) The table below sets out the breakdown of gross credit exposures by geographical distribution as follows:

Other
Malaysia countries Total
The Group RM’000 RM’000 RM’000

30 June 2020
On-Balance Sheet Exposures
Financial assets at fair value through profit or loss* 2,852,986 228,736 3,081,722
Financial investments at fair value through other comprehensive
income* 24,015,697 3,206,753 27,222,450
Financial investments at amortised cost 19,499,232 602,200 20,101,432
Loans, advances and financing 136,946,878 7,748,072 144,694,950
Derivative financial instruments 1,046,912 64,557 1,111,469
Total On-Balance Sheet Exposures 184,361,705 11,850,318 196,212,023

Off-Balance Sheet Exposures^

OTC Derivatives 1,530,584 126,466 1,657,050
Credit Derivatives 14,564 - 14,564
Off-Balance Sheet Exposures Other Than OTC Derivatives
or Credit Derivatives 15,351,411 185,744 15,537,155
Total Off-Balance Sheet Exposures 16,896,559 312,210 17,208,769

Total On and Off-Balance Sheet Exposures 201,258,264 12,162,528 213,420,792

30 June 2019

On-Balance Sheet Exposures

Financial assets at fair value through profit or loss* 4,558,918 200,330 4,759,248
Financial investments at fair value through other comprehensive
income* 20,925,358 2,884,821 23,810,179
Financial investments at amortised cost 14,621,619 531,580 15,153,199
Loans, advances and financing 129,215,956 7,092,261 136,308,217
Derivative financial instruments 497,996 30,260 528,256
Total On-Balance Sheet Exposures 169,819,847 10,739,252 180,559,099

Off-Balance Sheet Exposures^

OTC Derivatives 1,434,280 88,591 1,522,871
Credit Derivatives 5,146 - 5,146
Off-Balance Sheet Exposures Other Than OTC Derivatives
or Credit Derivatives 14,915,044 180,224 15,095,268
Total Off-Balance Sheet Exposures 16,354,470 268,815 16,623,285

Total On and Off-Balance Sheet Exposures 186,174,317 11,008,067 197,182,384

Note:
(1)
For this table, the Group and the Bank have allocated the loans, advances and financing to geographical areas
based on the country where the loans, advances and financing were provided.
* Excludes equity securities.
^ Off-Balance Sheet exposures refer to the credit equivalent of Off-Balance Sheet items on page 406 and page 407.

Annual Report 2020 381

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Gross credit exposure (continued)

(i) The table below sets out the breakdown of gross credit exposures by geographical distribution as follows: (continued)

Other
Malaysia countries Total
The Bank RM’000 RM’000 RM’000

30 June 2020
On-Balance Sheet Exposures
Financial assets at fair value through profit or loss* 2,831,317 228,736 3,060,053
Financial investments at fair value through other comprehensive
income* 21,587,413 3,090,398 24,677,811
Financial investments at amortised cost 14,496,079 583,002 15,079,081
Loans, advances and financing 107,581,098 5,242,877 112,823,975
Derivative financial instruments 993,065 64,556 1,057,621
Total On-Balance Sheet Exposures 147,488,972 9,209,569 156,698,541

Off-Balance Sheet Exposures^

OTC Derivatives 1,310,857 121,869 1,432,726
Credit Derivatives 14,564 - 14,564
Off-Balance Sheet Exposures Other Than OTC Derivatives
or Credit Derivatives 12,054,403 79,138 12,133,541
Total Off-Balance Sheet Exposures 13,379,824 201,007 13,580,831

Total On and Off-Balance Sheet Exposures 160,868,796 9,410,576 170,279,372

30 June 2019

On-Balance Sheet Exposures

Financial assets fair value through profit or loss* 4,043,623 200,330 4,243,953
Financial investments at fair value through other comprehensive
income* 17,969,178 2,732,489 20,701,667
Financial investments at amortised cost 10,381,793 512,712 10,894,505
Loans, advances and financing 103,719,693 5,215,277 108,934,970
Derivative financial instruments 492,781 30,214 522,995
Total On-Balance Sheet Exposures 136,607,068 8,691,022 145,298,090

Off-Balance Sheet Exposures^

OTC Derivatives 1,309,361 87,696 1,397,057
Credit Derivatives 5,146 - 5,146
Off-Balance Sheet Exposures Other Than OTC Derivatives
or Credit Derivatives 11,681,662 79,207 11,760,869
Total Off-Balance Sheet Exposures 12,996,169 166,903 13,163,072

Total On and Off-Balance Sheet Exposures 149,603,237 8,857,925 158,461,162

Note:
(1)
For this table, the Group and the Bank have allocated the loans, advances and financing to geographical areas
based on the country where the loans, advances and financing were provided.
* Excludes equity securities.
^ Off-Balance Sheet exposures refer to the credit equivalent of Off-Balance Sheet items on page 408 and page 409.

382 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Gross credit exposure (continued)

(ii) The table below sets out the breakdown of gross credit exposures by sector as follows:

Off-balance
sheet
Financial exposures
Financial investments Total other than Total Total on and
assets at fair value Financial on-balance OTC off-balance off-balance
at fair value through other investments Loans, Derivative sheet credit OTC and derivatives sheet sheet
through comprehensive at amortised advances and financial risk credit or credit credit risk credit risk
profit or loss* income* cost financing instruments exposures derivatives derivatives exposures exposures
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2020
Agriculture - 134,717 - 2,626,822 - 2,761,539 - 385,485 385,485 3,147,024
Mining and quarrying - - - 105,756 - 105,756 - 118,351 118,351 224,107
Manufacturing - - - 11,055,113 - 11,055,113 - 2,866,794 2,866,794 13,921,907
Electricity, gas and water 20,311 2,462,923 814,992 761,401 - 4,059,627 - 71,030 71,030 4,130,657
Construction - 422,886 - 3,958,560 - 4,381,446 - 1,041,655 1,041,655 5,423,101
Wholesale and retail - 44,383 - 11,686,123 - 11,730,506 - 2,636,912 2,636,912 14,367,418
Transport, storage and communications - 393,661 - 4,203,398 - 4,597,059 - 375,505 375,505 4,972,564
Finance, insurance, real estate and business
services 468,929 10,952,336 2,073,480 10,119,192 1,111,469 24,725,406 1,671,614 1,892,911 3,564,525 28,289,931
Government and government agencies 2,592,482 12,811,544 17,212,960 - - 32,616,986 - 78,617 78,617 32,695,603
Education, health and others - - - 1,644,905 - 1,644,905 - 163,264 163,264 1,808,169
Household - - - 97,714,466 - 97,714,466 - 5,897,946 5,897,946 103,612,412
Others - - - 819,214 - 819,214 - 8,685 8,685 827,899
Total On and Off-Balance Sheet Exposures 3,081,722 27,222,450 20,101,432 144,694,950 1,111,469 196,212,023 1,671,614 15,537,155 17,208,769 213,420,792

* Excludes equity securities.

HONG LEONG BANK BERHAD Annual Report 2020 383

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Gross credit exposure (continued)

(ii) The table below sets out the breakdown of gross credit exposures by sector as follows: (continued)

Off-balance
sheet
Financial exposures
Financial investments Total other than Total Total on and
assets at fair value Financial Loans, on-balance OTC off-balance off-balance
at fair value through other investments advances Derivative sheet credit OTC and derivatives sheet sheet
through comprehensive at amortised and financial risk credit or credit credit risk credit risk
profit or loss* income* cost financing instruments exposures derivatives derivatives exposures exposures
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2019

Agriculture - 117,121 - 2,537,496 - 2,654,617 - 375,991 375,991 3,030,608

Mining and quarrying - 85,623 - 109,767 - 195,390 - 84,139 84,139 279,529
Manufacturing - - - 9,995,994 - 9,995,994 - 2,686,836 2,686,836 12,682,830
Electricity, gas and water 15,124 2,123,206 816,281 223,037 - 3,177,648 - 203,484 203,484 3,381,132
Construction 58,076 346,009 - 3,002,638 - 3,406,723 - 922,511 922,511 4,329,234
Wholesale and retail - 41,996 - 11,275,506 - 11,317,502 - 2,275,710 2,275,710 13,593,212
Transport, storage and communications - 543,711 - 3,699,673 - 4,243,384 - 303,238 303,238 4,546,622
Finance, insurance, real estate and business
services 364,729 10,537,703 2,020,015 10,141,388 511,480 23,575,315 1,528,017 1,553,185 3,081,202 26,656,517
Government and government agencies 4,321,319 10,014,810 12,316,903 - - 26,653,032 - 17,599 17,599 26,670,631
Education, health and others - - - 1,667,048 - 1,667,048 - 164,451 164,451 1,831,499
Household - - - 92,943,939 15,770 92,959,709 - 6,465,428 6,465,428 99,425,137
Others - - - 711,731 1,006 712,737 - 42,696 42,696 755,433
Total On and Off-Balance Sheet Exposures 4,759,248 23,810,179 15,153,199 136,308,217 528,256 180,559,099 1,528,017 15,095,268 16,623,285 197,182,384

* Excludes equity securities.

HONG LEONG BANK BERHAD Annual Report 2020 384

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Gross credit exposure (continued)

(ii) The table below sets out the breakdown of gross credit exposures by sector as follows: (continued)

Off-balance
sheet
Financial exposures
Financial investments Total other than Total Total on and
assets at fair value Financial on-balance OTC off-balance off-balance
at fair value through other investments Loans, Derivative sheet credit OTC and derivatives sheet sheet
through comprehensive at amortised advances and financial risk credit or credit credit risk credit risk
profit or loss* income* cost financing instruments exposures derivatives derivatives exposures exposures
The Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2020
Agriculture - 134,717 - 1,500,127 - 1,634,844 - 193,647 193,647 1,828,491
Mining and quarrying - - - 94,883 - 94,883 - 18,212 18,212 113,095
Manufacturing - - - 8,689,710 - 8,689,710 - 2,348,169 2,348,169 11,037,879
Electricity, gas and water 20,311 2,436,264 546,738 269,634 - 3,272,947 - 46,445 46,445 3,319,392
Construction - 422,886 - 3,299,508 - 3,722,394 - 797,176 797,176 4,519,570
Wholesale and retail - 44,383 - 9,747,436 - 9,791,819 - 2,164,792 2,164,792 11,956,611
Transport, storage and communications - 393,661 - 3,941,255 - 4,334,916 - 270,798 270,798 4,605,714
Finance, insurance, real estate and business
services 468,929 10,279,695 1,909,756 8,210,333 1,057,621 21,926,334 1,447,290 1,137,889 2,585,179 24,511,513
Government and government agencies 2,570,813 10,966,205 12,622,587 - - 26,159,605 - 78,617 78,617 26,238,222
Education, health and others - - - 812,342 - 812,342 - 66,725 66,725 879,067
Household - - - 76,242,056 - 76,242,056 - 5,008,809 5,008,809 81,250,865
Others - - - 16,691 - 16,691 - 2,262 2,262 18,953
Total On and Off-Balance Sheet Exposures 3,060,053 24,677,811 15,079,081 112,823,975 1,057,621 156,698,541 1,447,290 12,133,541 13,580,831 170,279,372

* Excludes equity securities.

HONG LEONG BANK BERHAD Annual Report 2020 385

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Gross credit exposure (continued)

(ii) The table below sets out the breakdown of gross credit exposures by sector as follows: (continued)

Off-balance
sheet
Financial exposures
Financial investments Total other than Total Total on and
assets at fair value Financial Loans, on-balance OTC off-balance off-balance
at fair value through other investments advances Derivative sheet credit OTC and derivatives sheet sheet
through comprehensive at amortised and financial risk credit or credit credit risk credit risk
profit or loss* income* cost financing instruments exposures derivatives derivatives exposures exposures
The Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2019
Agriculture - 117,121 - 1,712,903 - 1,830,024 - 163,115 163,115 1,993,139
Mining and quarrying - 85,623 - 96,689 - 182,312 - 79,865 79,865 262,177
Manufacturing - - - 8,250,198 - 8,250,198 - 2,177,507 2,177,507 10,427,705
Electricity, gas and water 15,124 1,674,949 547,639 167,645 - 2,405,357 - 31,144 31,144 2,436,501
Construction 58,076 325,407 - 2,424,506 - 2,807,989 - 714,855 714,855 3,522,844
Wholesale and retail - 41,996 - 9,856,185 - 9,898,181 - 1,895,944 1,895,944 11,794,125
Transport, storage and communications - 538,586 - 3,516,933 - 4,055,519 - 263,998 263,998 4,319,517
Finance, insurance, real estate and business
services 364,729 9,487,195 1,882,981 8,590,203 506,219 20,831,327 1,402,203 892,480 2,294,683 23,126,010
Government and government agencies 3,806,024 8,430,790 8,463,885 - - 20,700,699 - 17,599 17,599 20,718,298
Education, health and others - - - 846,902 - 846,902 - 95,710 95,710 942,612
Household - - - 73,410,853 15,770 73,426,623 - 5,393,962 5,393,962 78,820,585
Others - - - 61,953 1,006 62,959 - 34,690 34,690 97,649
Total On and Off-Balance Sheet Exposures 4,243,953 20,701,667 10,894,505 108,934,970 522,995 145,298,090 1,402,203 11,760,869 13,163,072 158,461,162

* Excludes equity securities.

HONG LEONG BANK BERHAD Annual Report 2020 386

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Gross credit exposure (continued)

(iii) The table below sets out the breakdown of gross credit exposures by residual contractual maturity as follows:

Less than 1-5 Over 5

1 year years years Total
The Group RM’000 RM’000 RM’000 RM’000

30 June 2020
On-Balance Sheet Exposures
Financial assets at fair value through profit or
loss* 1,040,230 1,829,145 212,347 3,081,722
Financial investments at fair value through other
comprehensive income* 2,947,149 16,217,859 8,057,442 27,222,450
Financial investments at amortised cost 1,460,317 12,847,669 5,793,446 20,101,432
Loans, advances and financing 25,712,491 16,555,903 102,426,556 144,694,950
Derivative financial instruments 433,805 519,326 158,338 1,111,469
Total On-Balance Sheet Exposures 31,593,992 47,969,902 116,648,129 196,212,023

Off-Balance Sheet Exposures^

OTC Derivatives 1,452,642 100,259 104,149 1,657,050
Credit Derivatives - - 14,564 14,564
Off-Balance Sheet Exposures Other Than OTC
Derivatives or Credit Derivatives 6,683,725 8,853,430 - 15,537,155
Total Off-Balance Sheet Exposures 8,136,367 8,953,689 118,713 17,208,769
Total On and Off-Balance Sheet Exposures 39,730,359 56,923,591 116,766,842 213,420,792

30 June 2019

On-Balance Sheet Exposures

Financial assets at fair value through profit or loss* 342,982 3,542,503 873,763 4,759,248
Financial investments at fair value through other
comprehensive income* 3,765,170 16,154,118 3,890,891 23,810,179
Financial investments at amortised cost 78,519 13,163,875 1,910,805 15,153,199
Loans, advances and financing 25,758,347 15,511,681 95,038,189 136,308,217
Derivative financial instruments 214,108 232,572 81,576 528,256
Total On-Balance Sheet Exposures 30,159,126 48,604,749 101,795,224 180,559,099

Off-Balance Sheet Exposures^

OTC Derivatives 1,283,532 127,794 111,545 1,522,871
Credit Derivatives - - 5,146 5,146
Off-Balance Sheet Exposures Other Than OTC
Derivatives or Credit Derivatives 6,269,467 8,825,801 - 15,095,268
Total Off-Balance Sheet Exposures 7,552,999 8,953,595 116,691 16,623,285
Total On and Off-Balance Sheet Exposures 37,712,125 57,558,344 101,911,915 197,182,384

* Excludes equity securities.
^ Off-Balance Sheet exposures refer to the credit equivalent of Off-Balance Sheet items on page 406 and page 407.

Annual Report 2020 387

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Gross credit exposure (continued)

(iii) The table below sets out the breakdown of gross credit exposures by residual contractual maturity as follows: (continued)

Less than 1-5 Over 5
1 year years years Total
The Bank RM’000 RM’000 RM’000 RM’000

30 June 2020
On-Balance Sheet Exposures
Financial assets at fair value through profit or
loss* 1,040,230 1,829,144 190,679 3,060,053
Financial investments at fair value through other
comprehensive income* 2,529,849 15,862,736 6,285,226 24,677,811
Financial investments at amortised cost 1,078,920 9,379,605 4,620,556 15,079,081
Loans, advances and financing 21,884,189 11,823,176 79,116,610 112,823,975
Derivative financial instruments 379,581 520,811 157,229 1,057,621
Total On-Balance Sheet Exposures 26,912,769 39,415,472 90,370,300 156,698,541

Off-Balance Sheet Exposures ^

OTC Derivatives 1,297,691 96,594 38,441 1,432,726
Credit Derivatives - - 14,564 14,564
Off-Balance Sheet Exposures Other Than OTC
Derivatives or Credit Derivatives 5,730,046 6,403,495 - 12,133,541
Total Off-Balance Sheet Exposures 7,027,737 6,500,089 53,005 13,580,831

Total On and Off-Balance Sheet Exposures 33,940,506 45,915,561 90,423,305 170,279,372

30 June 2019

On-Balance Sheet Exposures

Financial assets at fair value through profit or
loss* 342,982 3,232,314 668,657 4,243,953
Financial investments at fair value through other
comprehensive income* 3,205,235 14,532,712 2,963,720 20,701,667
Financial investments at amortised cost 78,519 9,826,322 989,664 10,894,505
Loans, advances and financing 22,746,662 11,785,238 74,403,070 108,934,970
Derivative financial instruments 208,911 231,632 82,452 522,995
Total On-Balance Sheet Exposures 26,582,309 39,608,218 79,107,563 145,298,090

Off-Balance Sheet Exposures ^

OTC Derivatives 1,253,106 95,611 48,340 1,397,057
Credit Derivatives - - 5,146 5,146
Off-Balance Sheet Exposures Other Than OTC
Derivatives or Credit Derivatives 5,386,510 6,374,359 - 11,760,869
Total Off-Balance Sheet Exposures 6,639,616 6,469,970 53,486 13,163,072
Total On and Off-Balance Sheet Exposures 33,221,925 46,078,188 79,161,049 158,461,162

* Excludes equity securities.

^ Off-Balance Sheet exposures refer to the credit equivalent of Off-Balance Sheet items on page 408 and page 409.

388 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Loans, advances and financing

(i) The table below sets out the breakdown by sector the amount of past due loans, advances and financing, credit impaired loans, advances and financing, expected credit losses (Stage 1, 2 and 3), expected
credit losses charges/(write back) and write-offs for Stage 3 during the period as follows:

Charges/
(write back) Write-offs
Lifetime Lifetime lifetime lifetime
12-month expected credit expected credit expected credit expected credit
Past due Credit impaired expected losses-not credit losses-credit losses-credit losses-credit
loans, advances loans, advances credit losses impaired impaired impaired impaired
and financing and financing (Stage 1) (Stage 2) (Stage 3) (Stage 3) (Stage 3)
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2020
Agriculture 37,883 14,226 3,506 3,915 361 (62) 49
Mining and quarrying 1,170 2,889 287 259 900 (1,641) 20,332
Manufacturing 34,214 112,754 36,549 13,308 53,061 (1,186) 47,762
Electricity, gas and water 991 1,416 4,477 205 713 860 313
Construction 126,567 83,381 14,219 8,708 28,578 17,500 4,436
Wholesale and retail 73,277 103,523 44,190 18,150 25,642 101,246 128,173
Transport, storage and communications 10,061 7,399 7,483 2,476 1,329 (627) 9,597
Finance, insurance, real estate and business
services 133,958 85,840 43,470 20,263 9,052 52,596 10,582
Education, health and others 13,414 4,857 3,153 1,125 1,036 (25) 72
Household 4,657,884 473,429 389,799 366,180 153,077 216,164 279,705
Others 6,442 40 2,376 1,238 41 (100) 515
5,095,861 889,754 549,509 435,827 273,790 384,725 501,536

HONG LEONG BANK BERHAD Annual Report 2020 389

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Loans, advances and financing (continued)

(i) The table below sets out the breakdown by sector the amount of past due loans, advances and financing, credit impaired loans, advances and financing, expected credit losses (Stage 1, 2 and 3), expected
credit losses charges/(write back) and write-offs for Stage 3 during the period as follows: (continued)

Charges/
(write back) Write-offs
Lifetime Lifetime lifetime lifetime
12-month expected credit expected credit expected credit expected credit
Past due Credit impaired expected losses-not credit losses-credit losses-credit losses-credit
loans, advances loans, advances credit losses impaired impaired impaired impaired
and financing and financing (Stage 1) (Stage 2) (Stage 3) (Stage 3) (Stage 3)
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2019
Agriculture 42,365 13,684 2,056 4,316 594 506 302
Mining and quarrying 937 24,923 162 218 23,076 2,030 1
Manufacturing 130,067 107,149 22,137 15,001 55,565 629 2,619
Electricity, gas and water 3,247 301 1,562 229 171 149 -
Construction 152,151 67,566 6,404 7,687 16,420 9,011 5,798
Wholesale and retail 161,211 151,115 21,861 17,954 55,858 4,110 19,391
Transport, storage and communications 27,620 18,894 2,237 1,301 11,846 877 625
Finance, insurance, real estate and business
services 310,171 100,609 16,854 21,004 14,300 5,465 1,531
Education, health and others 33,723 6,181 1,778 1,182 1,243 1,181 782
Household 7,358,648 579,599 288,565 428,732 213,767 234,565 251,150
Others 22,251 1,090 6,099 701 759 436 302
8,242,391 1,071,111 369,715 498,325 393,599 258,959 282,501

HONG LEONG BANK BERHAD Annual Report 2020 390

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Loans, advances and financing (continued)

(i) The table below sets out the breakdown by sector the amount of past due loans, advances and financing, credit impaired loans, advances and financing, expected credit losses (Stage 1, 2 and 3), expected
credit losses charges/(write back) and write-offs for Stage 3 during the period as follows: (continued)

Charges/
(write back) Write-offs
Lifetime Lifetime lifetime lifetime
12-month expected credit expected credit expected credit expected credit
Past due Credit impaired expected losses-not credit losses-credit losses-credit losses-credit
loans, advances loans, advances credit losses impaired impaired impaired impaired
and financing and financing (Stage 1) (Stage 2) (Stage 3) (Stage 3) (Stage 3)
The Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2020
Agriculture 35,719 14,226 1,937 3,348 361 (15) 49
Mining and quarrying 1,150 2,889 238 144 900 (1,641) -
Manufacturing 29,057 41,623 27,982 12,414 6,230 (796) 47,715
Electricity, gas and water 991 268 1,804 193 189 329 313
Construction 62,601 79,547 11,063 8,000 27,074 15,947 4,205
Wholesale and retail 48,162 93,865 31,351 16,404 24,080 100,582 128,165
Transport, storage and communications 10,033 7,397 6,631 2,409 1,328 (625) 9,597
Finance, insurance, real estate and business
services 81,715 80,102 34,607 19,173 8,116 5,230 10,582
Education, health and others 8,178 3,249 1,854 525 843 (245) 42
Household 3,304,518 340,561 291,222 283,242 114,703 164,253 209,426
Others 1,965 40 26 1,232 41 (84) 515
3,584,089 663,767 408,715 347,084 183,865 282,935 410,609

HONG LEONG BANK BERHAD Annual Report 2020 391

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Loans, advances and financing (continued)

(i) The table below sets out the breakdown by sector the amount of past due loans, advances and financing, credit impaired loans, advances and financing, expected credit losses (Stage 1, 2 and 3), expected
credit losses charges/(write back) and write-offs for Stage 3 during the period as follows: (continued)

Charges/
(write back) Write-offs
Lifetime Lifetime lifetime lifetime
12-month expected credit expected credit expected credit expected credit
Past due Credit impaired expected losses-not credit losses-credit losses-credit losses-credit
loans, advances loans, advances credit losses impaired impaired impaired impaired
and financing and financing (Stage 1) (Stage 2) (Stage 3) (Stage 3) (Stage 3)
The Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2019
Agriculture 34,950 13,602 1,585 4,118 547 538 302
Mining and quarrying 847 4,591 144 38 2,744 2,848 1
Manufacturing 101,875 106,927 16,930 14,035 54,602 (368) 2,619
Electricity, gas and water 3,231 301 314 227 171 166 -
Construction 138,059 67,048 5,444 6,698 16,159 9,054 5,695
Wholesale and retail 131,401 145,632 17,984 16,539 54,752 3,987 19,314
Transport, storage and communications 20,410 18,888 1,902 1,229 11,844 839 566
Finance, insurance, real estate and business
services 270,348 99,080 22,838 15,218 14,300 5,341 1,426
Education, health and others 20,109 6,140 1,255 584 1,202 1,136 774
Household 5,364,740 424,592 239,865 327,269 156,419 177,513 196,298
Others 22,251 1,063 3,402 701 743 734 62
6,108,221 887,864 311,663 386,656 313,483 201,788 227,057

HONG LEONG BANK BERHAD Annual Report 2020 392

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Loans, advances and financing (continued)

(ii) The table below sets out the breakdown by geographical areas the amount of past due loans, advances and financing,
impaired loans, advances and financing, expected credit losses (Stage 1, 2 and 3) as follows:

Lifetime Lifetime
expected expected
Past due Impaired 12-month credit losses- credit
loans, loans, expected not credit losses-credit
advances and advances and credit losses impaired impaired
financing financing (Stage 1) (Stage 2) (Stage 3)
The Group RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2020
Malaysia 4,919,597 881,407 533,567 432,546 272,144
Other countries 176,264 8,347 15,942 3,281 1,646
5,095,861 889,754 549,509 435,827 273,790

The Bank
30 June 2020

Malaysia 3,514,775 662,511 403,072 345,774 183,279

Other countries 69,314 1,256 5,643 1,310 586
3,584,089 663,767 408,715 347,084 183,865

The Group

30 June 2019
Malaysia 7,776,906 1,063,911 354,309 497,445 391,559
Other countries 465,485 7,200 15,406 880 2,040
8,242,391 1,071,111 369,715 498,325 393,599

The Bank
30 June 2019
Malaysia 5,706,413 886,352 304,762 385,945 312,086
Other countries 401,808 1,512 6,901 711 1,397
6,108,221 887,864 311,663 386,656 313,483

Notes:
(1)
A financial asset is defined as "past due" when the counterparty has failed to make a principal or interest
payment when contractually due.
(2)
For description of approaches adopted by the Group and the Bank for the determination of expected credit
losses/individual and collective assessment impairment allowances, refer to Note 2N to the financial statements.

Annual Report 2020 393

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Loans, advances and financing (continued)

(iii) The table below sets out the movements in expected credit losses for loans, advances and financing during the
financial year as follows:

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Group RM’000 RM’000 RM’000 RM’000

At 30 June 2020
At 1 July 369,715 498,325 393,599 1,261,639
Changes in ECL due to transfer within stages (89,938) (133,376) 223,314 -
Transfer to Stage 1 16,035 (15,930) (105) -
Transfer to Stage 2 (105,843) 206,821 (100,978) -
Transfer to Stage 3 (130) (324,267) 324,397 -
New financial assets originated 55,031 2,236 1,513 58,780
Financial assets derecognised (19,751) (40,717) (22,042) (82,510)
Changes due to change in credit risk 262,886 117,887 192,808 573,581
Changes in models/risk parameters (28,743) (8,852) (10,855) (48,450)
Amount written off - - (501,536) (501,536)
Exchange difference 309 324 1,313 1,946
Other movements - - (4,324) (4,324)
At 30 June 549,509 435,827 273,790 1,259,126

394 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Loans, advances and financing (continued)

(iii) The table below sets out the movements in expected credit losses for loans, advances and financing during the
financial year as follows: (continued)

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Bank RM’000 RM’000 RM’000 RM’000

At 30 June 2020
At 1 July 311,663 386,656 313,483 1,011,802
Changes in ECL due to transfer within stages (74,495) (88,115) 162,610 -
Transfer to Stage 1 12,762 (12,674) (88) -
Transfer to Stage 2 (87,141) 157,992 (70,851) -
Transfer to Stage 3 (116) (233,433) 233,549 -
New financial assets originated 22,920 1,701 1,510 26,131
Financial assets derecognised (4,889) (24,163) (11,830) (40,882)
Changes due to change in credit risk 178,900 76,802 138,440 394,142
Changes in models/risk parameters (25,488) (6,057) (7,782) (39,327)
Amount written off - - (410,609) (410,609)
Exchange difference 104 260 1,370 1,734
Other movements - - (3,327) (3,327)
At 30 June 408,715 347,084 183,865 939,664

Annual Report 2020 395

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Loans, advances and financing (continued)

(iii) The table below sets out the movements in expected credit losses for loans, advances and financing during the
financial year as follows: (continued)

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Group RM’000 RM’000 RM’000 RM’000

At 30 June 2019
At 1 July 1,006,902
Effect of adopting MFRS 9 358,235
At 1 July, as restated 418,235 487,757 459,145 1,365,137
Changes in ECL due to transfer within stages (101,395) (144,111) 245,506 -
Transfer to Stage 1 23,070 (22,825) (245) -
Transfer to Stage 2 (124,364) 219,679 (95,315) -
Transfer to Stage 3 (101) (340,965) 341,066 -
New financial assets originated 53,847 4,018 110 57,975
Financial assets derecognised (34,796) (42,683) (29,024) (106,503)
Changes due to change in credit risk 33,367 193,217 42,342 268,926
Amount written off - - (282,501) (282,501)
Exchange difference 457 127 1,578 2,162
Other movements - - (43,557) (43,557)
At 30 June 369,715 498,325 393,599 1,261,639

396 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Loans, advances and financing (continued)

(iii) The table below sets out the movements in expected credit losses for loans, advances and financing during the
financial year as follows: (continued)

Stage 1 Stage 2 Stage 3

Lifetime ECL Lifetime ECL
12 Months not credit credit
ECL impaired impaired Total ECL
The Bank RM’000 RM’000 RM’000 RM’000

At 30 June 2019
At 1 July 801,663
Effect of adopting MFRS 9 329,521
At 1 July, as restated 367,527 388,100 375,557 1,131,184
Changes in ECL due to transfer within stages (83,815) (119,839) 203,654 -
Transfer to Stage 1 20,745 (20,533) (212) -
Transfer to Stage 2 (104,503) 173,541 (69,038) -
Transfer to Stage 3 (57) (272,847) 272,904 -
New financial assets originated 23,715 3,426 72 27,213
Financial assets derecognised (13,118) (29,233) (16,595) (58,946)
Changes due to change in credit risk 17,052 144,082 14,631 175,765
Amount written off - - (227,057) (227,057)
Exchange difference 302 120 1,588 2,010
Other movements - - (38,367) (38,367)
At 30 June 311,663 386,656 313,483 1,011,802

Annual Report 2020 397

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Credit risk exposures by risk weight

The breakdown of credit risk exposures by risk weight is as follows:

The Group
30 June 2020 Exposures after Netting and Credit Risk Mitigation

Total
Exposures
Sovereigns/ Public Banks, Insurance Higher after Netting Total Risk
Central Sector DFIs Cos, SF Regulatory Residential Risk Other & Credit Risk Weighted
Banks Entities and MDBs and FM Corporates Retail Mortgages Assets Assets Mitigation Assets
Risk Weight RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

0% 40,997,504 - - - - - - - 1,848,611 42,846,115 -

20% - 338,403 4,646,666 - 3,945,908 - - - 614,018 9,544,995 1,987,273

35% - - - - - - 36,011,120 - - 36,011,120 12,603,892

50% - - 7,491,139 - 581,227 19,556 11,744,185 - - 19,836,107 9,897,310

75% - - - - - 55,507,213 87,367 - - 55,594,580 41,695,935

100% - - - 275,078 42,902,669 2,033,281 9,487,656 - 7,156,751 61,855,435 61,855,435

150% - - - - 314,681 135,855 - 75,571 - 526,107 789,161

Total 40,997,504 338,403 12,137,805 275,078 47,744,485 57,695,905 57,330,328 75,571 9,619,380 226,214,459 128,829,006

Risk Weighted Assets by Exposure - 67,681 4,732,432 275,078 44,454,486 43,877,251 28,029,166 113,357 7,279,555 128,829,006

Average Risk Weight 0% 20.00% 38.99% 100.00% 93.11% 76.05% 48.89% 150.00% 75.68% 56.95%

Deduction from Capital Base - - - - - - - - - -

HONG LEONG BANK BERHAD Annual Report 2020 398

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Credit risk exposures by risk weight (continued)

The breakdown of credit risk exposures by risk weight is as follows: (continued)

The Group
30 June 2019 Exposures after Netting and Credit Risk Mitigation

Total
Exposures
Sovereigns/ Public Banks, Insurance Higher after Netting Total Risk
Central Sector DFIs Cos, SF Regulatory Residential Risk Other & Credit Risk Weighted
Banks Entities and MDBs and FM Corporates Retail Mortgages Assets Assets Mitigation Assets
Risk Weight RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

0% 32,460,427 - - - - - - - 1,687,423 34,147,850 -

20% - 433,567 6,478,479 - 3,486,745 - - - 783,851 11,182,642 2,229,134

35% - - - - - - 30,649,896 - - 30,649,896 10,727,464

50% - - 5,701,759 - 911,024 50,303 10,161,484 - - 16,824,570 8,383,184

75% - - - - - 63,900,592 94,600 - - 63,995,192 47,996,394

100% - - - 226,846 39,799,631 1,522,522 4,227,534 - 8,472,273 54,248,806 54,248,806

150% - - - - 226,211 211,043 - 101,234 - 538,488 807,732

Total 32,460,427 433,567 12,180,238 226,846 44,423,611 65,684,460 45,133,514 101,234 10,943,547 211,587,444 124,392,714

Risk Weighted Assets by Exposure - 86,713 4,110,080 226,846 41,291,809 49,789,682 20,106,690 151,851 8,629,043 124,392,714

Average Risk Weight 0% 20.00% 33.74% 100.00% 92.95% 75.80% 44.55% 150.00% 78.85% 58.79%

Deduction from Capital Base - - - - - - - - - -

HONG LEONG BANK BERHAD Annual Report 2020 399

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Credit risk exposures by risk weight (continued)

The breakdown of credit risk exposures by risk weight is as follows: (continued)

The Bank
30 June 2020 Exposures after Netting and Credit Risk Mitigation

Total
Exposures
Sovereigns/ Public Banks, Insurance Higher after Netting Total Risk
Central Sector DFIs Cos, SF Regulatory Residential Risk Other & Credit Risk Weighted
Banks Entities and MDBs and FM Corporates Retail Mortgages Assets Assets Mitigation Assets
Risk Weight RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

0% 30,489,806 - - - - - - - 1,463,274 31,953,080 -

20% - 321,012 5,664,948 - 3,506,229 - - - 594,018 10,086,207 2,017,241

35% - - - - - - 29,771,046 - - 29,771,046 10,419,866

50% - - 6,997,850 - 577,450 14,007 8,224,677 - - 15,813,984 7,906,992

75% - - - - - 44,107,085 76,458 - - 44,183,543 33,137,657

100% - - - 222,145 33,541,267 467,930 6,879,164 - 7,115,172 48,225,678 48,225,679

150% - - - - 192,858 111,751 - 74,238 - 378,847 568,271

Total 30,489,806 321,012 12,662,798 222,145 37,817,804 44,700,773 44,951,345 74,238 9,172,464 180,412,385 102,275,706

Risk Weighted Assets by Exposure - 64,202 4,631,915 222,145 34,820,525 33,722,874 21,468,712 111,357 7,233,976 102,275,706

Average Risk Weight 0% 20.00% 36.58% 100.00% 92.07% 75.44% 47.76% 150.00% 78.87% 56.69%

Deduction from Capital Base - - - - - - - - - -

HONG LEONG BANK BERHAD Annual Report 2020 400

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Credit risk exposures by risk weight (continued)

The breakdown of credit risk exposures by risk weight is as follows: (continued)

The Bank
30 June 2019 Exposures after Netting and Credit Risk Mitigation

Total
Exposures
Sovereigns/ Public Banks, Insurance Higher after Netting Total Risk
Central Sector DFIs Cos, SF Regulatory Residential Risk Other & Credit Risk Weighted
Banks Entities and MDBs and FM Corporates Retail Mortgages Assets Assets Mitigation Assets
Risk Weight RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

0% 24,859,544 - - - - - - - 1,449,591 26,309,135 -

20% - 424,466 6,253,543 - 2,992,631 - - - 212,588 9,883,228 1,976,646

35% - - - - - - 24,995,689 - - 24,995,689 8,748,491

50% - - 5,286,532 - 877,823 36,284 7,291,943 - - 13,492,582 6,746,291

75% - - - - - 51,748,073 79,405 - - 51,827,478 38,870,609

100% - - - 168,135 32,020,983 291,711 3,067,749 - 8,733,001 44,281,579 44,281,579

150% - - - - 221,875 190,058 - 89,944 - 501,877 752,817

Total 24,859,544 424,466 11,540,075 168,135 36,113,312 52,266,126 35,434,786 89,944 10,395,180 171,291,568 101,376,433

Risk Weighted Assets by Exposure - 84,893 3,893,975 168,135 33,391,233 39,405,997 15,521,765 134,916 8,775,519 101,376,433

Average Risk Weight 0% 20.00% 33.74% 100.00% 92.46% 75.39% 43.80% 150.00% 84.42% 59.18%

Deduction from Capital Base - - - - - - - - - -

HONG LEONG BANK BERHAD Annual Report 2020 401

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

The following tables summarise the rated exposures according to ratings by External Credit Assessment Institutions
(“ECAIs”) as follows:

(i) Ratings of Public Sector Entities, Insurance Cos, SF and FM and Corporates by approved ECAIs

Moody’s Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to C Unrated

S&P AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
RAM AAA to AA3 A1 to A3 BBB1 to BB3 B to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
The Group RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2020
Exposure Class

On and Off-Balance
Sheet Exposures
Public Sector Entities 163,152 - - - 175,251
Insurance Cos, SF
and FM - - 28,179 - 246,899
Corporates 3,724,637 574,254 363,075 100,580 42,981,939
3,887,789 574,254 391,254 100,580 43,404,089

30 June 2019
Exposure Class

On and Off-Balance
Sheet Exposures
Public Sector Entities 349,789 - - - 83,778
Insurance Cos, SF
and FM - - - - 226,846
Corporates 3,486,745 904,080 227,159 - 39,805,627
3,836,534 904,080 227,159 - 40,116,251

402 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

The following tables summarise the rated exposures according to ratings by ECAIs as follows: (continued)

(i) Ratings of Public Sector Entities, Insurance Cos, SF and FM and Corporates by approved ECAIs (continued)

Moody's Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to C Unrated

S&P AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
RAM AAA to AA3 A1 to A3 BBB1 to BB3 B to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
The Bank RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2020
Exposure Class

On and Off-Balance
Sheet Exposures
Public Sector Entities 163,152 - - - 157,860
Insurance Cos, SF
and FM - - 28,179 - 193,966
Corporates 3,439,209 574,254 262,490 - 33,541,851
3,602,361 574,254 290,669 - 33,893,677

30 June 2019
Exposure Class

On and Off-Balance
Sheet Exposures
Public Sector Entities 349,789 - - - 74,677
Insurance Cos, SF
and FM - - - - 168,135
Corporates 2,992,632 870,966 227,159 - 32,022,555
3,342,421 870,966 227,159 - 32,265,367

Annual Report 2020 403

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

The following tables summarise the rated exposures according to ratings by ECAIs as follows: (continued)

(ii) Ratings of Sovereigns/Central Banks and Banking Institutions by approved ECAIs

Moody’s Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated

S & P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
RAM AAA to AA3 A1 to A3 BBB1 to BBB3 BB1 to B3 C1 to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- C+ to D Unrated
The Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2020
Exposure Class

On and Off-Balance
Sheet Exposures
Sovereigns/Central
Banks 1,973,791 279,345 173,277 163,853 - 38,407,238
Banks, DFIs and MDBs 846,548 5,468,359 1,567,019 - - 4,255,879
2,820,339 5,747,704 1,740,296 163,853 - 42,663,117

30 June 2019
Exposure Class

On and Off-Balance
Sheet Exposures
Sovereigns/Central
Banks 1,308,792 - 201,100 209,674 - 30,740,861
Banks, DFIs and MDBs 2,192,901 4,698,396 2,527,997 - - 2,760,944
3,501,693 4,698,396 2,729,097 209,674 - 33,501,805

404 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

The following tables summarise the rated exposures according to ratings by ECAIs as follows: (continued)

(ii) Ratings of Sovereigns/Central Banks and Banking Institutions by approved ECAIs (continued)

Moody’s Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated

S & P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
RAM AAA to AA3 A1 to A3 BBB1 to BBB3 BB1 to B3 C1 to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- C+ to D Unrated
The Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

30 June 2020
Exposure Class

On and Off-Balance
Sheet Exposures
Sovereigns/Central
Banks 1,973,791 279,345 - - - 28,236,670
Banks, DFIs and MDBs 2,916,883 5,304,942 1,431,110 - - 3,009,863
4,890,674 5,584,287 1,431,110 - - 31,246,533

30 June 2019
Exposure Class

On and Off-Balance
Sheet Exposures
Sovereigns/Central
Banks 1,175,925 - - - - 23,683,619
Banks, DFIs and MDBs 3,025,415 4,517,750 2,271,804 - - 1,725,106
4,201,340 4,517,750 2,271,804 - - 25,408,725

Annual Report 2020 405

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Credit risk mitigation

The Group grants credit facilities on the basis of the borrower’s credit standing, repayment and debt servicing ability. Where
possible, collateral is taken to mitigate and reduce any credit risk for the particular credit facility extended. The value of
the collateral is monitored periodically and where applicable, a revised valuation may be requested from the borrower.
The types of collateral accepted include cash, marketable securities, properties, machineries, equipments, inventories and
receivables. In certain cases, corporate guarantees are obtained where the credit worthiness of the corporate borrower is
insufficient for the amount sought. There are policies and processes in place to monitor collateral concentration. For Credit
Risk Management (“CRM”) purposes, only collateral or guarantees that are legally enforceable are taken into account. The
credit exposures are computed on a net basis only when there is a legally enforceable netting arrangements for loans and
deposits. The Group and the Bank use the Comprehensive Approach for computation of the adjusted exposures.

The following table summarises the breakdown of CRM by exposure as follows:

Exposures Exposures
covered by covered by
Exposures guarantees/ eligible
before credit financial
CRM derivatives collateral
The Group RM’000 RM’000 RM’000

30 June 2020
Exposure Class

On-Balance Sheet Exposures

Sovereigns/Central Banks 40,954,628 - -
Public Sector Entities 163,152 - -
Banks, DFIs and MDBs 10,894,274 - -
Insurance Cos, SF and FM 84,699 - 825
Corporates 41,717,461 - 1,687,765
Regulatory Retail 50,123,920 - 385,670
Residential Mortgages 57,049,871 - 49,237
Higher Risk Assets 75,562 - -
Other Assets 9,589,379 - -
Defaulted Exposures 696,397 - 19,722
Total On-Balance Sheet Exposures 211,349,343 - 2,143,219

Off-Balance Sheet Exposures

OTC Derivatives 1,657,050 - -
Credit Derivatives 14,564 - -
Off-Balance Sheet Exposures Other Than OTC Derivatives or Credit
Derivatives 15,510,163 - 199,554
Defaulted Exposures 26,992 - 880
Total Off-Balance Sheet Exposures 17,208,769 - 200,434

Total On and Off-Balance Sheet Exposures 228,558,112 - 2,343,653

406 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Credit risk mitigation (continued)

The following table summarises the breakdown of CRM by exposure as follows: (continued)

Exposures Exposures
covered by covered by
Exposures guarantees/ eligible
before credit financial
CRM derivatives collateral
The Group RM’000 RM’000 RM’000

30 June 2019
Exposure Class

On-Balance Sheet Exposures

Sovereigns/Central Banks 32,413,829 - -
Public Sector Entities 349,789 - -
Banks, DFIs and MDBs 10,942,522 - -
Insurance Cos, SF and FM 26,089 - 300
Corporates 38,974,262 - 1,139,584
Regulatory Retail 57,377,724 - 446,659
Residential Mortgages 44,884,425 - 17,698
Higher Risk Assets 101,117 - -
Other Assets 10,943,545 - -
Defaulted Exposures 740,357 - 2,365
Total On-Balance Sheet Exposures 196,753,659 - 1,606,606

Off-Balance Sheet Exposures

OTC Derivatives 1,522,871 - -
Credit Derivatives 5,146 - -
Off-Balance Sheet Exposures Other Than OTC Derivatives or Credit
Derivatives 15,068,292 - 182,666
Defaulted Exposures 26,976 - 228
Total Off-Balance Sheet Exposures 16,623,285 - 182,894

Total On and Off-Balance Sheet Exposures 213,376,944 - 1,789,500

Annual Report 2020 407

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Credit risk mitigation (continued)

The following table summarises the breakdown of CRM by exposure as follows: (continued)

Exposures Exposures
covered by covered by
Exposures guarantees/ eligible
before credit financial
CRM derivatives collateral
The Bank RM’000 RM’000 RM’000

30 June 2020
Exposure Class

On-Balance Sheet Exposures

Sovereigns/Central Banks 30,446,930 - -
Public Sector Entities 163,152 - -
Banks, DFIs and MDBs 11,647,820 - -
Insurance Cos, SF and FM 83,702 - 826
Corporates 33,271,431 - 1,412,301
Regulatory Retail 38,686,604 - 360,351
Residential Mortgages 44,735,448 - 41,685
Higher Risk Assets 74,237 - -
Other Assets 9,162,467 - -
Defaulted Exposures 561,364 - 718
Total On-Balance Sheet Exposures 168,833,155 - 1,815,881

Off-Balance Sheet Exposures

OTC Derivatives 1,432,726 - -
Credit Derivatives 14,564 - -
Off-Balance Sheet Exposures Other Than OTC Derivatives or Credit
Derivatives 12,126,150 - 184,839
Defaulted Exposures 7,391 - 881
Total Off-Balance Sheet Exposures 13,580,831 - 185,720

Total On and Off-Balance Sheet Exposures 182,413,986 - 2,001,601

408 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Credit risk mitigation (continued)

The following table summarises the breakdown of CRM by exposure as follows: (continued)

Exposures Exposures
covered by covered by
Exposures guarantees/ eligible
before credit financial
CRM derivatives collateral
The Bank RM’000 RM’000 RM’000

30 June 2019
Exposure Class

On-Balance Sheet Exposures

Sovereigns/Central Banks 24,812,946 - -
Public Sector Entities 349,789 - -
Banks, DFIs and MDBs 10,467,756 - -
Insurance Cos, SF and FM 25,072 - 300
Corporates 32,151,874 - 1,105,834
Regulatory Retail 45,674,263 - 421,900
Residential Mortgages 35,248,083 - 16,009
Higher Risk Assets 89,834 - -
Other Assets 10,395,183 - -
Defaulted Exposures 633,964 - 2,012
Total On-Balance Sheet Exposures 159,848,764 - 1,546,055

Off-Balance Sheet Exposures

OTC Derivatives 1,397,057 - -
Credit Derivatives 5,146 - -
Off-Balance Sheet Exposures Other Than OTC Derivatives or Credit
Derivatives 11,735,815 - 174,016
Defaulted Exposures 25,054 - 197
Total Off-Balance Sheet Exposures 13,163,072 - 174,213

Total On and Off-Balance Sheet Exposures 173,011,836 - 1,720,268

Annual Report 2020 409

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Counterparty credit risk

Counterparty credit risk is the risk of trading counterparties' failure to honour its obligations to the Group and the Bank. To
control over-exposure of counterparty credit risk, credit limits are established for each trading counterparty. The credit limits
are determined individually based on its credit strength and profile, which also takes into consideration the Group's and the
Bank's risk appetite and trading strategies.

Appropriate methodologies have been implemented to measure counterparty credit risk against credit limits of each trading
counterparty. These measurement methodologies implemented are in line with BNM's Capital Adequacy Framework on the
treatment of counterparty credit risk.

The Group and the Bank also engage in netting and margining agreements with major trading counterparties to mitigate
counterparty credit risks. Under these agreements, the counterparty credit exposures are mitigated with collaterals
whenever the exposures exceed the margin threshold.

Nature of commitments and contingencies

Direct credit substitutes comprise guarantees undertaken by the Group and the Bank to support the financial obligations of
their customers to third parties.

Non credit related contingent items represent financial products such as Performance Guarantee whose crystallisations are
dependent on specific events other than default payment by the customers.

Short term self liquidating trade-related contingencies relate to bills of exchange which have been accepted by the Group
and the Bank and represent liabilities in the event of default by the acceptors and the drawers of the bills.

Assets sold with recourse and commitments with certain drawdown represents assets sold by the Group and the Bank with
recourse in the event of defects in the assets, and investment or purchase commitments entered into by the Group and the
Bank, where drawdown is certain to occur.

Obligations under underwriting agreements arise from underwriting agreements relating to the issuance of equity and
debts securities, where the Group and the Bank are obliged to subscribe or purchase the securities in the event the
securities are not taken up when issued.

Irrevocable commitments to extend credit include all obligations on the part of the Group and the Bank to provide funding
facilities or the undrawn portion of an approved credit facilities to customers.

Forward foreign exchange contracts are agreements to buy or sell fixed amounts of currencies at agreed rates of exchange
on a specified future date.

Interest rate swaps involve the exchange of interest obligations with a counterparty for a specified period without the
exchange of the underlying principal.

410 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Counterparty credit risk (continued)

The Off-Balance Sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows:

Positive Fair
Value of Credit Risk
Principal Derivative Equivalent Weighted
Amount Contracts Amount* Assets*
The Group RM’000 RM’000 RM’000 RM’000

30 June 2020
Commitments and Contingent Liabilities
Direct credit substitutes 133,166 - 133,165 130,943

Transaction related contingent items 1,489,056 - 744,528 701,707

Short term self liquidating trade related contingencies 538,144 - 107,629 104,767

Irrevocable commitments to extend credit:

- More than one year 17,777,310 - 8,887,808 7,538,635
- Less than one year 20,856,358 - 4,171,272 3,717,435

Unutilised credit card lines 7,463,767 - 1,492,753 1,120,800

48,257,801 - 15,537,155 13,314,287

Derivative Financial Contracts

Foreign exchange related contracts:
- Less than one year 40,277,996 372,203 1,429,422 629,757
- One year to less than five years 4,089,668 169,709 52,158 50,276
- Five years and above 288,397 5,772 - -

Interest/profit rate related contracts:

- Less than one year 18,957,616 49,632 1,700 1,116
- One year to less than five years 32,060,237 373,309 39,453 12,837
- Five years and above 2,609,803 107,391 104,149 70,613

Equity related contracts:

- Less than one year 264,263 11,970 17,755 9,751
- One year to less than five years 136,115 1,523 12,413 6,206

Credit related contracts:

- Five years and above 291,272 19,960 14,564 2,913
98,975,367 1,111,469 1,671,614 783,469
147,233,168 1,111,469 17,208,769 14,097,756

* The credit equivalent amount and risk-weighted assets are arrived at using the credit conversion factors and risk-weights
as defined in BNM's revised RWCAF and CAFIB.

Annual Report 2020 411

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Counterparty credit risk (continued)

The Off-Balance Sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows: (continued)

Positive Fair
Value of Credit Risk
Principal Derivative Equivalent Weighted
Amount Contracts Amount* Assets*
The Group RM’000 RM’000 RM’000 RM’000

30 June 2019
Commitments and Contingent Liabilities
Direct credit substitutes 117,740 - 117,740 115,490

Transaction related contingent items 1,446,851 - 723,426 686,367

Short term self liquidating trade related contingencies 674,511 - 134,902 131,497

Irrevocable commitments to extend credit:

- More than one year 17,720,606 - 8,859,844 7,295,087
- Less than one year 19,020,280 - 3,804,056 3,404,420

Unutilised credit card lines 7,276,500 - 1,455,300 1,092,801

46,256,488 - 15,095,268 12,725,662

Derivative Financial Contracts

Foreign exchange related contracts:
- Less than one year 34,829,534 148,044 1,243,412 555,009
- One year to less than five years 3,995,994 112,655 41,933 41,934
- Five years and above 301,327 27,399 - -

Interest/profit rate related contracts:

- Less than one year 38,511,811 61,304 3,132 1,523
- One year to less than five years 34,300,635 130,863 72,580 45,231
- Five years and above 3,170,389 39,171 111,546 80,636

Equity related contracts:

- Less than one year 591,385 4,760 36,988 19,304
- One year to less than five years 127,853 3,052 13,280 6,232

Credit related contracts:

- Five years and above 82,753 1,008 5,146 1,029
115,911,681 528,256 1,528,017 750,898
162,168,169 528,256 16,623,285 13,476,560

* The credit equivalent amount and risk-weighted assets are arrived at using the credit conversion factors and risk-weights
as defined in BNM's revised RWCAF and CAFIB.

412 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Counterparty credit risk (continued)

The Off-Balance Sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows: (continued)

Positive Fair
Value of Credit Risk
Principal Derivative Equivalent Weighted
Amount Contracts Amount* Assets*
The Bank RM’000 RM’000 RM’000 RM’000

30 June 2020
Commitments and Contingent Liabilities
Direct credit substitutes 80,144 - 80,144 77,922

Transaction related contingent items 1,283,921 - 641,961 601,579

Short term self liquidating trade related contingencies 508,190 - 101,638 99,090

Irrevocable commitments to extend credit:

- More than one year 12,807,826 - 6,403,495 5,350,033
- Less than one year 17,067,748 - 3,413,550 3,036,791

Unutilised credit card lines 7,463,767 - 1,492,753 1,120,800

39,211,596 - 12,133,541 10,286,215

Derivative Financial Contracts

Foreign exchange related contracts:
- Less than one year 33,398,925 317,413 1,279,936 571,325
- One year to less than five years 4,089,668 169,708 48,393 48,393
- Five years and above 288,397 5,772 - -

Interest/profit rate related contracts:

- Less than one year 19,457,616 50,198 - -
- One year to less than five years 32,260,237 349,580 35,788 11,005
- Five years and above 2,571,708 131,497 38,441 38,441

Equity related contracts:

- Less than one year 264,263 11,970 17,755 9,751
- One year to less than five years 136,115 1,523 12,413 6,206

Credit related contracts:

- Five years and above 291,272 19,960 14,564 2,913
92,758,201 1,057,621 1,447,290 688,034
131,969,797 1,057,621 13,580,831 10,974,249

* The credit equivalent amount and risk-weighted assets are arrived at using the credit conversion factors and risk-weights
as defined in BNM's revised RWCAF and CAFIB.

Annual Report 2020 413

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(A) Credit risk (continued)

Counterparty credit risk (continued)

The Off-Balance Sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows: (continued)

Positive Fair
Value of Credit Risk
Principal Derivative Equivalent Weighted
Amount Contracts Amount* Assets*
The Bank RM’000 RM’000 RM’000 RM’000

30 June 2019
Commitments and Contingent Liabilities
Direct credit substitutes 64,395 - 64,395 62,145

Transaction related contingent items 1,261,524 - 630,762 593,703

Short term self liquidating trade related contingencies 638,625 - 127,725 124,319

Irrevocable commitments to extend credit:

- More than one year 12,749,585 - 6,374,359 5,211,412
- Less than one year 15,541,640 - 3,108,328 2,774,792

Unutilised credit card lines 7,276,500 - 1,455,300 1,092,801

37,532,269 - 11,760,869 9,859,172

Derivative Financial Contracts

Foreign exchange related contracts:
- Less than one year 33,337,605 142,860 1,214,682 540,592
- One year to less than five years 3,995,994 112,656 41,933 41,934
- Five years and above 301,327 27,399 - -

Interest/profit rate related contracts:

- Less than one year 38,511,811 61,291 1,436 676
- One year to less than five years 35,195,635 115,924 40,398 28,262
- Five years and above 3,320,389 54,045 48,340 45,779

Equity related contracts:

- Less than one year 591,386 4,760 36,988 19,304
- One year to less than five years 127,852 3,052 13,280 6,232

Credit related contracts:

- Five years and above 82,753 1,008 5,146 1,029
115,464,752 522,995 1,402,203 683,808
152,997,021 522,995 13,163,072 10,542,980

* The credit equivalent amount and risk-weighted assets are arrived at using the credit conversion factors and risk-weights
as defined in BNM's revised RWCAF and CAFIB.

414 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(B) Market risk

Market risk is the risk of loss in financial instruments or the balance sheet due to adverse movements in market factors
such as interest rates, foreign exchange rates, equities, spreads, volatilities and/or correlations.

The Bank adopts a systematic approach in managing such risks by types of instruments and nature of exposure. Market
risk is primarily controlled via a series of cut-loss limits and potential loss limits, i.e. Value at Risk (“VaR”). The amount of
market risk that the Bank is prepared to take for each financial year is based on the budget, business direction, its risk-
taking strategies, the impact on earnings and capital utilisation. These factors are used as a basis for setting market risk
limits for the Group and the Bank.

Market risk limits, the monitoring and escalation processes, delegation of authority, model validation and valuation
methodologies are built into the Bank’s market risk policies, which are reviewed and concurred by the Group Assets and
Liabilities Management Committee (“Group ALCO”), endorsed by the BRMC and approved by the Board.

The main market risk limits are stop loss limits, VaR limits, counterparty limits, sensitivity limits, position/instrument limits
and holding period limits.

VaR is defined as the maximum loss at a specific confidence level over a specified period of time under normal market
conditions. The Bank computes the Historical Simulation VaR on a daily basis based on the recent 250-days of market
observations at a 99.0% confidence level.

Over the course of the financial year, the VaR of the banking group's trading book ranged between RM2.8 million to
RM19.1 million with an average of RM7.0 million.

The Bank performs backtesting on VaR on a hypothetical and actual basis and the results are tabled to the Group ALCO.

In addition, stress tests are conducted regularly on the trading book. In performing stress-testing, the Bank uses the
following:

(1) Scenario analysis, which is a combination of expected movements on risk factors.

(2) Historical crisis event, which is based on actual movements that occurred in the relevant risk factors. The main risk
factors that are stressed are the KL Financial Bursa Composite Index, interest rates movements (for MYR, USD and
other major currencies), ratings migration and Foreign Exchange spot and volatilities.

In managing interest rate risk in the banking book, the Group measures earnings at risk and economic value or capital at risk.

(C) Market Conduct Risk

Market Conduct risk is the risk that arise from either an individual or group of individual dealers of the Bank, who through
non-compliant behaviour and/or behaviour that lack integrity or honesty, subjects the Bank to adverse consequences in
terms of monetary losses, reputational damage and regulatory fines.

Independent market conduct risk monitoring and surveillance is carried out to detect attempts on market misconduct
by Global Markets. Management oversight on market conduct is effected through the Risk and Compliance Governance
Committee (“RCGC”). A robust and comprehensive market conduct surveillance policy has been established by the Bank to
ensure all activities in Global Markets are in conformity with market best practices and compliance requirements, which is
reviewed and concurred by the RCGC, endorsed by the BRMC and approved by the Board.

Annual Report 2020 415

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(D) Liquidity risk

Liquidity risk is the risk of financial loss arising from the inability to fund increases in assets and/or meet financial obligations
as they fall due. Financial obligations arise from withdrawal of deposits, funding of loans committed and repayment of
borrowed funds. It is the Bank’s policy to ensure there is adequate liquidity across all business units to sustain ongoing
operations, as well as sufficient liquidity to fund asset growth and strategic opportunities.

Besides adhering to the Regulatory Liquidity Requirement, the Bank has put in place a robust and comprehensive liquidity
risk management framework consisting of risk appetite, policies, triggers and controls which are reviewed and concurred
by the Group ALCO, endorsed by the BRMC and approved by the Board. The key elements of the framework cover proactive
monitoring and management of cashflow, maintenance of high quality liquid assets, diversification of funding sources and
maintaining a liquidity compliance buffer to meet any unexpected cash outflow.

The Bank has in place liquidity contingency funding plan and stress test programs to minimise the liquidity risk that may
arise due to unforeseen adverse changes in the marketplace. Contingency funding plan sets out the crisis escalation
process and the various strategies to be employed to preserve liquidity including an orderly communication channel during
liquidity crisis scenarios. Liquidity stress tests are conducted regularly to ensure there is adequate liquidity contingency fund
to meet any shortfalls during liquidity crisis scenarios.

(E) Operational risk

Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from
external events which also include outsourcing and business continuity risks.

Management oversight on Operational Risk Management (“ORM”) matters are effected through the RCGC whilst Board
oversight is effected through the BRMC.

The Group’s ORM strategy is based on a framework of continuous improvements, good governance structure, policies and
procedures as well as the employment of risk mitigation strategies. The objective is to create a strong risk and internal
control culture by ensuring awareness of the significance of operational risk, its methodology of identification, analysis,
assessment, control and monitoring.

The Group adopts ORM tools such as loss event reporting, risk and control self assessment and key risk indicators to manage
operational risks and are used to assess risk by taking into consideration key business conditions, strategies and internal
controls. The ultimate aim is to enhance economic performance, achievement of corporate goals and the aspirations of
stakeholders.

These tools are based on international best practices for the management of operational risks and are explained in more
detail below:

(i) Risk and Control Self Assessment (“RCSA”) is an assessment process on severity of potential risk and control
effectiveness.

(ii) Key Risk Indicators (“KRI”) is a set of measures to allow the Group to monitor and facilitate early detection of
operational risks.

(iii) Loss Event Reporting (“LER”) is a process for collecting and reporting operational risk events. These are further used
for analysis of operational risks for the purpose of developing mitigating controls.

416 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

4. RISK MANAGEMENT (CONTINUED)

(E) Operational risk (continued)

The operational risk mitigation strategies that are implemented include:

(i) Policies and Standard Operating Procedures that define the roles and responsibilities of personnel and their respective
operating limits.

(ii) Insurance against operational losses as a form of risk mitigation especially for risks which are deemed as high
severity.

(iii) System of controls, established to provide reasonable assurance of effective and efficient operation.

(iv) Business Continuity Management to facilitate the continuance of business activities in the event of disaster or crisis
situations by means of ensuring appropriate redundancy of systems are available.

(v) Outsourcing Management to ensure proper due diligence review is performed prior to engaging outsource service
providers and continuous tracking of existing outsource service providers' performance, code of conduct, compliance,
and business viability.

(F) Financial hedges to mitigate interest rate risks

The following actions describe the accounting treatment for financial hedges that may be entered into to mitigate the
interest rate risk exposures of the Bank.

(i) Financial instruments designated as fair value through profit and loss

The Group and the Bank use derivative hedge instruments, such as interest rate swaps to undertake economic
hedges on part of their existing fixed rate loans to reduce the exposure on interest rate risk as part of its risk
management strategy.

(ii) Fair value hedges

The Group and the Bank use interest rate swap as the hedge instruments to hedge the interest rate risk of fixed rate
loans exposure. The interest rate swap contracts used for the hedging are contracted with other financial institutions.

(iii) Cash flow hedges

The Group and the Bank use interest rate swaps as hedge instruments to hedge the variability of future cash flows
on fixed deposits.

Further information relating to the cash flow hedges are disclosed in Note 10(a) to the financial statements.

(iv) The accounting policies on derivative financial instruments and hedge accounting are disclosed in Note 2K to the
financial statements.

Annual Report 2020 417

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

5. EQUITY EXPOSURES IN BANKING BOOK

The Group's and the Bank's banking book's equity investments consist of equity holdings in organisations which are set up for
specific socio-economic reasons and equity holdings and equity instruments received as a result of loan/financing restructuring
or loan/financing conversion.

The Group's and the Bank's banking book's equity investments are classified and measured in accordance with MFRS 9 and
are categorised as financial investments at fair value through other comprehensive income. Refer to Note 2D to the financial
statements for the accounting policies of the Group and the Bank.

Details of the Group and Bank's financial investments at fair value through other comprehensive income are set out in Note 6 to
the financial statements.

The following table summarises the Group's and the Bank's equity exposures in the banking book:

The Group The Bank

Exposures Exposures
subject to subject to
risk- Risk risk- Risk
weighting weights weighting weights
RM’000 % RM’000 %

30 June 2020
Financial investments at fair value through other
comprehensive income
Unquoted equity securities 60,094 150% 60,094 150%

30 June 2019
Financial investments available-for-sale
Unquoted equity securities 44,331 150% 44,331 150%

Realised gains arising from sales and liquidations of equity exposures are as follows:

The Group and the Bank
30 June 2020 30 June 2019
RM’000 RM’000

Net gains arising from sales of equity securities - 25,042

There are no unrealised gains/(losses) for equity securities that have not been reflected in the statements of income of the Group
and the Bank but have been recognised under other comprehensive income of the Group and the Bank for the financial year
ended 30 June 2020.

418 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Basel II Pillar 3 Disclosures

for the financial year ended 30 June 2020

6. INTEREST RATE RISK/RATE OF RETURN RISK IN THE BANKING BOOK (“IRRBB”/“RORRBB”)

The Group evaluates the impact of IRRBB/RORRBB via the earnings and the underlying economic value perspective.

The earnings perspective provides the impact via the reduction in earning arising from the changes in interest rate/rate of returns.
Earnings perspective focuses on the short-term effect of IRRBB/RORRBB. The components affecting the earnings perspective
include the timing of the repricing basis, yield curve risk and option positions.

The economic value perspective provides a long-term perspective for the impact of IRRBB/RORRBB. This perspective evaluates
the changes in the Group’s economic value via the present value of the Group’s future cash flow. The future cash flow projections
used to estimate the economic exposure provides a pro forma estimate of the future income generated by its current position.
In general, the measurement of present value of instruments will be able to give an overview of the Group’s economic value of
equity (“EVE”) over a longer time period.

Impact on positions 100 basis points parallel shift

Increase/(Decline) Increase/(Decline)
in Earnings in Economic Value
The Group RM’000 RM’000

30 June 2020
100 bps upward
Ringgit Malaysia 28,711 (818,119)

100 bps downward

Ringgit Malaysia (252,320) 870,464

30 June 2019
100 bps upward
Ringgit Malaysia 45,291 (1,097,724)

100 bps downward

Ringgit Malaysia (117,315) 1,149,673

Annual Report 2020 419

Basel II Pillar 3 Disclosures
for the financial year ended 30 June 2020

6. INTEREST RATE RISK/RATE OF RETURN RISK IN THE BANKING BOOK (“IRRBB”/“RORRBB”) (CONTINUED)

Impact on positions 100 basis points parallel shift

Increase/(Decline) in Increase/(Decline) in
Earnings Economic Value
The Bank RM’000 RM’000

30 June 2020
100 bps upward
Ringgit Malaysia 32,530 (523,831)

100 bps downward

Ringgit Malaysia (222,154) 559,071

30 June 2019
100 bps upward
Ringgit Malaysia 83,294 (760,816)

100 bps downward

Ringgit Malaysia (134,311) 795,071

7. SHARIAH GOVERNANCE DISCLOSURE

In October 2010, BNM has issued Shariah Governance Framework (“SGF”) to guide Islamic financial institutions to establish a
comprehensive governance policy framework which sets out the strategic roles and functions of each organ of governance and
mechanism in ensuring that the overall Islamic financial system operates in accordance with Shariah principles. On 30 June 2013,
Islamic Financial Services Act (“IFSA”) 2013 came into force. It is a statute that requires Islamic financial institutions to ensure that
their aim, operation, business, affairs and activities are Shariah-compliant at all times. It statutorily enforces the management of
Shariah non-compliance risk.

On 20 September 2019, Bank Negara Malaysia has issued the policy document on Shariah Governance (“SGPD”) for Islamic
financial institutions to replace the SGF. The policy document aims to further strengthen the effectiveness of Shariah governance
implementation and reinforce a closer integration of Shariah considerations in the business and risk strategies of the Islamic
financial institutions. The policy document takes effect from 1 April 2020.

HLISB has enhanced its own Shariah Governance Board Policy to ensure the structure and management of Shariah Governance
matters in the Bank is of the highest standard and in line with SGPD and IFSA.

The Bank's Shariah Governance Board Policy governs and guides HLISB on the on-going development and enhancement of its
Shariah governance functions and infrastructure which includes interaction, effective communication and reporting. It forms the
basic foundation upon which Shariah governance policies are to be developed, Shariah governance structure is to be operated in,
and Shariah governance initiatives are to be carried out.

420 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Other
Information

1. MATERIAL CONTRACTS
There are no material contracts (not being contracts entered into in the ordinary course of business) which had been entered
into by the Bank and its subsidiaries involving the interest of Directors, chief executives and major shareholders, either still
subsisting at the end of the financial year or entered into since the end of the previous financial year pursuant to Item 21, Part
A, Appendix 9C of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

2. ANALYSIS OF SHAREHOLDINGS AS AT 28 AUGUST 2020

Total number of issued shares : 2,167,718,284
Adjusted total number of issued shares : 2,086,616,584
(after deducting treasury shares pursuant to
Section 127 of the Companies Act 2016)
Class of shares : Ordinary shares
Voting rights : 1 vote for each share held

DISTRIBUTION SCHEDULE OF SHAREHOLDERS AS AT 28 AUGUST 2020

Size of Holdings No. of Shareholders % No. of Shares* %

Less than 100 397 3.28 8,565 0.00

100 – 1,000 3,518 29.09 2,064,559 0.10
1,001 – 10,000 6,511 53.85 21,960,180 1.05
10,001 – 100,000 1,290 10.67 39,677,405 1.90
100,001 – less than 5% of issued shares 374 3.09 447,907,473 21.47
5% and above of issued shares 2 0.02 1,574,998,402 75.48
12,092 100.00 2,086,616,584 100.00

* Excluding 81,101,700 shares bought back and retained by the Bank as treasury shares.

LIST OF THIRTY LARGEST SHAREHOLDERS AS AT 28 AUGUST 2020

Name of Shareholder No. of Shares %

1. Hong Leong Financial Group Berhad 1,340,137,681 64.23

2. Citigroup Nominees (Tempatan) Sdn Bhd 234,860,721 11.25
- Employees Provident Fund Board
3. MTrustee Berhad 39,339,683 1.88
- Exempt AN for Hong Leong Bank Berhad (ESOS)
4. AmanahRaya Trustees Berhad 34,000,000 1.63
- Amanah Saham Bumiputera
5. Kumpulan Wang Persaraan (Diperbadankan) 26,355,900 1.26
6. Cartaban Nominees (Asing) Sdn Bhd 16,561,180 0.79
- Exempt AN for State Street Bank & Trust Company (West Clt OD67)
7. Citigroup Nominees (Tempatan) Sdn Bhd 15,973,900 0.77
- Great Eastern Life Assurance (Malaysia) Berhad (Par 1)
8. CIMSEC Nominees (Tempatan) Sdn Bhd 14,294,300 0.68
- CIMB for Rakaman Anggun Sdn Bhd (PB)
9. Cartaban Nominees (Tempatan) Sdn Bhd 12,285,680 0.59
- PAMB for Prulink Equity Fund
10. AmanahRaya Trustees Berhad 11,332,300 0.54
- Amanah Saham Bumiputera 2

Annual Report 2020 421

Other
Information

2. ANALYSIS OF SHAREHOLDINGS AS AT 28 AUGUST 2020 (CONTINUED)

LIST OF THIRTY LARGEST SHAREHOLDERS AS AT 28 AUGUST 2020 (CONTINUED)

Name of Shareholder No. of Shares %

11. AmanahRaya Trustees Berhad 11,298,900 0.54

- Amanah Saham Malaysia
12. HSBC Nominees (Asing) Sdn Bhd 11,190,182 0.54
- JPMCB NA for Vanguard Total International Stock Index Fund
13. HSBC Nominees (Asing) Sdn Bhd 8,506,572 0.41
- JPMCB NA for Vanguard Emerging Markets Stock Index Fund
14. Cartaban Nominees (Asing) Sdn Bhd 6,680,174 0.32
- GIC Private Limited for Government Of Singapore (C)
15. Citigroup Nominees (Tempatan) Sdn Bhd 6,667,600 0.32
- Exempt AN for AIA Bhd
16. HLIB Nominees (Tempatan) Sdn Bhd 6,485,863 0.31
- Chew Brothers Development Corporation Sdn Bhd
17. Citigroup Nominees (Asing) Sdn Bhd 6,020,500 0.29
- CBNY for Norges Bank (FI 17)
18. AmanahRaya Trustees Berhad 6,000,000 0.29
- Amanah Saham Malaysia 2 – Wawasan
19. Cartaban Nominees (Asing) Sdn Bhd 5,784,208 0.28
- BBH And Co Boston for WGI Emerging Markets Smaller Companies Fund, LLC
20. HLB Nominees (Asing) Sdn Bhd 5,510,000 0.26
- Kwek Leng Hai (Custodian)
21. Pertubuhan Keselamatan Sosial 5,005,300 0.24
22. Citigroup Nominees (Asing) Sdn Bhd 4,976,296 0.24
- Exempt AN for Citibank New York (Norges Bank 14)
23. DB (Malaysia) Nominee (Asing) Sdn Bhd 4,351,396 0.21
- BNYM SA/NV for People’s Bank of China (SICL Asia EM)
24. DB (Malaysia) Nominee (Asing) Sdn Bhd 3,951,300 0.19
- State Street London Fund U8T8 for Pinebridge Asia Ex Japan Small Cap Equity Fund
(Pinebridge GL F)
25. Citigroup Nominees (Tempatan) Sdn Bhd 3,916,140 0.19
- Great Eastern Life Assurance (Malaysia) Berhad (Par 3)
26. HSBC Nominees (Asing) Sdn Bhd 3,732,800 0.18
- J.P. Morgan Securities PLC
27. HSBC Nominees (Asing) Sdn Bhd 3,710,920 0.18
- JPMCB NA for Blackrock Institutional Trust Company, N.A. Investment Funds for
Employee Benefit Trusts
28. DB (Malaysia) Nominee (Asing) Sdn Bhd 3,450,700 0.16
- SSBT Fund TRJS for Teacher Retirement System of Texas
29. Citigroup Nominees (Asing) Sdn Bhd 3,110,533 0.15
- Exempt AN for Citibank New York (Norges Bank 1)
30. HSBC Nominees (Asing) Sdn Bhd 2,899,380 0.14
- JPMCB NA for MSCI Equity Index Fund B - Malaysia
1,858,390,109 89.06

422 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Other
Information

2. ANALYSIS OF SHAREHOLDINGS AS AT 28 AUGUST 2020 (CONTINUED)

SUBSTANTIAL SHAREHOLDERS
According to the Register of Substantial Shareholders, the substantial shareholders of the Bank as at 28 August 2020 are as
follows:

Direct Interest Indirect Interest

Name of Shareholders No. of Shares % No. of Shares %

Hong Leong Financial Group Berhad 1,340,137,681 64.23 3,057,504 0.15(a)

Hong Leong Company (Malaysia) Berhad – – 1,345,971,529 64.50(b)
HL Holdings Sdn Bhd – – 1,345,971,529 64.50(c)
Tan Sri Quek Leng Chan – – 1,346,027,209 64.51(d)
Hong Realty (Private) Limited – – 1,345,971,529 64.50(c)
Hong Leong Investment Holdings Pte Ltd – – 1,345,971,529 64.50(c)
Kwek Holdings Pte Ltd – – 1,345,971,529 64.50(c)
Kwek Leng Beng – – 1,345,971,529 64.50(c)
Davos Investment Holdings Private Limited – – 1,345,971,529 64.50(c)
Kwek Leng Kee 282,344 0.01 1,345,971,529 64.50(c)
GuoLine Overseas Limited – – 1,343,195,185 64.37(e)
Guoco Group Limited – – 1,343,195,185 64.37(e)
GuoLine Capital Assets Limited - - 1,345,971,529 64.50(b)
Employees Provident Fund Board 246,143,121 11.80 – –

Notes:
(a)
Held through subsidiary
(b)
Held through subsidiary and Hong Leong Financial Group Berhad (“HLFG”)
(c)
Held through Hong Leong Company (Malaysia) Berhad (“HLCM”)
(d)
Held through HLCM and a company in which the substantial shareholder has interest
(e)
Held through HLFG

3. DIRECTORS’ INTERESTS AS AT 28 AUGUST 2020

Subsequent to the financial year end, there is no change, as at 28 August 2020, to the Directors’ interests in the ordinary shares,
preference shares and/or options over ordinary shares of the Bank and/or its related corporations (other than wholly-owned
subsidiaries), appearing in the Directors’ Report on pages 159 to 161 as recorded in the Register of Directors’ Shareholdings kept
by the Bank under Section 59 of the Companies Act, 2016 except for the changes set out below:

Indirect Interest Number of Shares %

YBhg Tan Sri Quek Leng Chan in:

GuocoLand Limited 836,631,438 70.70
GL Limited 980,303,634 71.66

4. GROUP MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER’S INTEREST AS AT 28 AUGUST 2020

Number of ordinary shares/shares issued or to be issued
Direct Interest or acquired arising from the exercise of options* %

Mr Domenic Fuda 435,215 0.02

249,103# N/A
5,600,000* N/A
#
Free ordinary shares to be vested pursuant to the Executive Share Scheme of HLB.

Annual Report 2020 423

Other
Information

HLBB LIST OF PROPERTIES HELD AS AT 30 JUNE 2020

Description Approx. Net book

of property Gross Area Age value Date of
Location Tenure held (Sq-ft) (Years) (RM’000) acquisition

1 No. 1, Light Street Freehold Branch 20,594 86 7,422 30/12/1986

Georgetown premises
10200 Pulau Pinang

2 No. 15-G-1, 15-1-1 & 15-2-1 Freehold Branch 9,968 21 2,027 26/06/1997
Medan Kampung Relau premises
Bayan Point
11900 Pulau Pinang

3 No. 42, Jalan Pending Leasehold Branch 4,425 38 1,386 27/12/1983

93450 Kuching - 859 years premises
Sarawak (31/12/2779)

4 No. 133, 135 & 137 Freehold Branch 4,871 28 2,835 28/12/1992
Jalan Kampong Nyabor premises
96000 Sibu
Sarawak

5 Jungle land at Sungai Limut Rajang Leasehold Jungle land 1,217,938 n/a 1 31/12/1938
Sarawak Occupation Ticket - 99 years
612 of 1931 (31/12/2026)

6 No. 25 & 27, Jalan Tun Ismail Freehold Branch 1,600 29 1,094 29/06/1996
25000 Kuantan premises
Pahang Darul Makmur

7 No. 69, 70 & 71, Freehold Branch 6,000 Pre-war 1,387 27/12/1994
Jalan Dato’ Bandar Tunggal premises
70000 Seremban
Negeri Sembilan Darul Khusus

8 No. 26, Lorong Rahim Kajai 14 Freehold Branch 3,750 34 487 30/12/1986
Taman Tun Dr Ismail premises
60000 Kuala Lumpur

9 No. 120-122, Jalan Mersing Leasehold Branch 3,355 54 513 31/05/1990

86000 Kluang - 99 years premises
Johor Darul Takzim (22/08/2063)

10 No. 100, Jalan Gurney Freehold Branch 5,107 34 2,011 25/06/1992

72100 Bahau premises
Negeri Sembilan Darul Khusus

424 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Other
Information

HLBB LIST OF PROPERTIES HELD AS AT 30 JUNE 2020 (CONTINUED)

Description Approx. Net book

of property Gross Area Age value Date of
Location Tenure held (Sq-ft) (Years) (RM’000) acquisition

11 No. 12, 14 & 16, Freehold Branch 4,174 29 3,438 25/06/1992

Jalan Wong Ah Fook premises
80000 Johor Bahru
Johor Darul Takzim

12 No. 63 & 65, Jalan SS 23/15 Freehold Vacant 4,760 25 3,115 28/04/1997
47400 Petaling Jaya
Selangor Darul Ehsan

13 No. 24, Medan Taming 2 Freehold Branch 3,037 24 943 28/04/1997

Taman Taming Jaya premises
43300 Balakong
Selangor Darul Ehsan

14 No. 1, Jalan Takal 15/21 Leasehold Branch 2,625 33 1,092 26/06/1997

Seksyen 15 - 99 years premises
40000 Shah Alam (29/06/2086)
Selangor Darul Ehsan

15 Lot 3594 & 3595 Leasehold Branch 3,199 26 186 26/06/1997

Jalan Baru Pak Sabah - 84 years premises
23000 Dungun (02/02/2079)
Terengganu Darul Iman

16 Lot 3073 & 3074, Leasehold Branch 2,582 23 926 26/06/1997

Jalan Abang Galau, - 60 years premises
97000 Bintulu, Sarawak (12/02/2056)

17 Lot 34, Putra Industrial Park Freehold Warehouse 96,219 24 2,567 26/01/1995
47000 Sungai Buloh
Selangor Darul Ehsan

18 No. 1540, Jalan Sultan Badlishah Leasehold Vacant 10,619 45 21 30/06/1977

05000 Alor Setar - 60 years
Kedah Darul Aman (19/07/2030)

19 No. 9A & 9B, Freehold Branch 9,320 27 735 01/01/1994

Jalan Kampong Baru premises
08000 Sungai Petani
Kedah Darul Aman

20 No. 45, Jalan Burma Freehold Vacant 14,277 42 1,773 24/11/1978

10500 Pulau Pinang

Annual Report 2020 425

Other
Information

HLBB LIST OF PROPERTIES HELD AS AT 30 JUNE 2020 (CONTINUED)

Description Approx. Net book

of property Gross Area Age value Date of
Location Tenure held (Sq-ft) (Years) (RM’000) acquisition

21 No. 33A-C, Lintang Angsana Leasehold Vacant 4,394 25 332 26/12/1995

Bandar Baru Air Hitam - 83 years
11500 Pulau Pinang (08/04/2082)

22 No. 55-57, Jalan Yang Kalsom Freehold Vacant 11,720 41 926 01/10/1984
30250 Ipoh
Perak Darul Ridzuan

23 No. 27, Jalan Dewangsa Leasehold Branch 4,694 25 234 24/11/1995

31000 Batu Gajah - 79 years premises
Perak Darul Ridzuan (26/02/2078)

24 No. 75, Jalan Sultan Idris Shah Freehold Branch 1,900 23 588 15/06/1998
30000 Ipoh premises
Perak Darul Ridzuan

25 No. 80 & 82, Jalan Othman 1/14 Leasehold Branch 9,062 30 822 01/06/1994
46000 Petaling Jaya - 90 years premises
Selangor Darul Ehsan (15/06/2089)

26 No. 19, Jalan 54, Desa Jaya Leasehold Branch 5,859 38 311 29/11/1985
52100 Kepong - 99 years premises
Selangor Darul Ehsan (08/03/2081)

27 Lot 111, Jalan Mega Mendung Leasehold Vacant 4,978 40 383 31/07/1988
Kompleks Bandar - 99 years
Off Jalan Klang Lama (11/10/2076)
58200 Kuala Lumpur

28 No. 161, Jalan Imbi Freehold Vacant 2,454 24 2,673 14/02/1996

55100 Kuala Lumpur

29 No. 8A-D, Jalan Station Freehold Vacant 12,854 27 325 22/10/1977

80000 Johor Bahru
Johor Darul Takzim

30 No. 109, Main Road Freehold Branch 2,740 32 200 01/09/1988

83700 Yong Peng premises
Johor Darul Takzim

426 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Other
Information

HLBB LIST OF PROPERTIES HELD AS AT 30 JUNE 2020 (CONTINUED)

Description Approx. Net book

of property Gross Area Age value Date of
Location Tenure held (Sq-ft) (Years) (RM’000) acquisition

31 No. 1, Bentong Heights Freehold Branch 5,432 52 30 30/06/1977

28700 Bentong premises
Pahang Darul Makmur

32 No. 36, Main Road Tanah Rata Leasehold Branch 1,728 80 83 30/08/1982
39000 Cameron Highland - 99 years premises
Pahang Darul Makmur (24/11/2039)

33 W-1-0, W-2-0 & W-1-1 Freehold Branch 4,545 21 1,122 18/12/1999

Subang Square Business Centre premises
Jalan SS15/4G
47500 Subang Jaya
Selangor Darul Ehsan

34 No. 2828-G-02 & 2828-1-02 Freehold Vacant 12,173 21 2,134 18/12/1999

Jalan Bagan Luar
12000 Butterworth
Pulau Pinang

35 Plot No. 20, Jalan Bidor Raya Freehold Branch 3,243 21 449 23/11/1999
35500 Bidor premises
Perak Darul Ridzuan

36 No. 1, Persiaran Greentown 2 Leasehold Branch 7,870 20 1,432 23/11/1999

Greentown Business Centre - 99 years premises
30450 Ipoh (21/11/2094)
Perak Darul Ridzuan

37 Lots 39 & 40 Leasehold Branch 5,988 21 1,079 31/05/1991

Kompleks Munshi Abdullah - 99 years premises
75100 Melaka (24/02/2084)

38 No. 1 & 2 Jalan Raya, Freehold Branch 5,840 19 344 20/09/2000

09800 Serdang premises
Kedah Darul Aman

39 No. 133 & 135, Jalan Gopeng Freehold Branch 4,700 19 318 13/12/2000
31900 Kampar premises
Perak Darul Ridzuan

40 No. 65-67, Jalan Tun HS Lee Freehold HLB’s CSR 2,223 24 4,676 14/10/1996
50000 Kuala Lumpur Community
Center

Annual Report 2020 427

Other
Information

HLBB LIST OF PROPERTIES HELD AS AT 30 JUNE 2020 (CONTINUED)

Description Approx. Net book

of property Gross Area Age value Date of
Location Tenure held (Sq-ft) (Years) (RM’000) acquisition

41 No. 64, Jalan Tun Mustapha Leasehold Branch 1,370 29 383 30/05/1991
87007 Labuan - 999 years premises
(28/12/2881)

42 No. 159, Jalan Imbi Freehold Vacant 1,688 15 2,532 25/11/2005

55100 Kuala Lumpur

43 No. 163, Jalan Imbi Freehold Vacant 1,688 15 2,609 25/10/2005

55100 Kuala Lumpur

44 No. 114 & 116, Jalan Cerdas Leasehold Branch 12,200 14 3,451 07/06/2006
Taman Connaught - 99 years premises
56000 Kuala Lumpur (16/10/2078)

45 Lot A08-A09 Freehold Branch 9,800 14 2,548 06/07/2006

Jalan SS 6/5A Dataran Glomac premises
Pusat Bandar Kelana Jaya
47301 Petaling Jaya

46 No. 2 Jalan Puteri 2/4 Freehold Branch 11,850 13 4,960 28/06/2007

Bandar Puteri premises
Puchong
47100 Selangor Darul Ehsan

47 Tower A Leasehold Branch 194,489 12 71,177 21/07/2008

PJ City Development - 99 years premises
46100 Petaling Jaya (14/08/2094)
Selangor

48 OUG
No. 2, Lorong 2/137C Leasehold Branch 17,300 10 4,646 01/04/2011
Off Jalan Kelang Lama - 99 years premises
58200 Kuala Lumpur (year 2088)

49 KEP
Lot No. 77C & 77D Leasehold Branch 30,613 10 8,095 01/05/2011
Lot No.58529 Jalan Kepong - 99 years premises
52100 Kuala Lumpur (07/01/2101)

50 No. 122, Kapit By-Pass Leasehold Branch 1,200 27 151 30/04/1985

96807 Kapit, Sarawak - 60 years premises
(29/04/2045)

428 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Other
Information

HLBB LIST OF PROPERTIES HELD AS AT 30 JUNE 2020 (CONTINUED)

Description Approx. Net book

of property Gross Area Age value Date of
Location Tenure held (Sq-ft) (Years) (RM’000) acquisition

51 No. 12A, Block B Leasehold 1 unit 1,792 33 102 24/05/1983

Level 2, Fraser’s Hill - 99 years apartment
Condominium (23/05/2082)
49000 Bukit Fraser’s
Pahang Darul Makmur

52 No. 9, Jalan Cheng Lock Freehold Vacant 2,199 47 262 18/09/1972

50000 Kuala Lumpur
Wilayah Persekutuan

53 No. 3, Jalan Bandar Satu Freehold Branch 4,687 25 1,688 03/04/1997

Pusat Bandar Puchong premises
47100 Puchong
Selangor Darul Ehsan

54 No. 32 & 34, Jalan 21/19 Freehold Vacant 3,080 57 2,099 19/08/1997
Sea Park
46300 Petaling Jaya
Selangor Darul Ehsan

55 No. 26 & 27, Jalan Kenari 1 Freehold Branch 3,600 24 1,343 22/01/1999
Bandar Puchong Jaya premises
47100 Puchong
Selangor Darul Ehsan

56 No. 2, Jalan PJU 5/8 Leasehold Branch 12,892 16 3,254 12/02/2005

Dataran Sunway, Kota Damansara - 99 years premises
47810 Petaling Jaya (23/11/2100)
Selangor Darul Ehsan

57 No. J09-6 and J02-06 Leasehold 2 units 2,088 24 174 21/04/1994

Paradise Lagoon Holiday - 99 years apartment
Apartment, Batu 3 1/2 Jalan Pantai (06/07/2087)
70100 Port Dickson
Negeri Sembilan Darul Khusus

58 No. S-3, Kompleks Negeri Leasehold Vacant 1,680 36 232 29/06/1981

Jalan Dr. Krishnan - 99 years
70000 Seremban (30/01/2078)
Negeri Sembilan Darul Khusus

59 No. 105 & 107, Jalan Melaka Raya 24 Leasehold Vacant 3,132 24 462 17/04/1998
Taman Melaka Raya - 99 years
75000 Melaka (20/03/2094)

Annual Report 2020 429

Other
Information

HLBB LIST OF PROPERTIES HELD AS AT 30 JUNE 2020 (CONTINUED)

Description Approx. Net book

of property Gross Area Age value Date of
Location Tenure held (Sq-ft) (Years) (RM’000) acquisition

60 No. 67 & 69, Jalan Merdeka Leasehold Branch 3,080 25 620 15/08/1999
75000 Taman Merdeka Raya - 99 years premises
Melaka (07/07/2093)

61 No. 21 & 23, Jalan Indah 15/1 Freehold Vacant 5,090 18 1,304 27/05/2002
Bukit Indah, 81200 Johor Bahru
Johor Darul Takzim

62 No. 35, 37 & 39 Freehold Branch 13,965 17 1,880 12/02/2003

Jalan Johor Satu premises
Taman Desa Cemerlang
81800 Ulu Tiram
Johor Darul Takzim

63 No. 21, Jalan Permas 10/1 Freehold Branch 2,624 23 930 05/04/1999
Bandar Baru Permas Jaya premises
81750 Masai
Johor Darul Takzim

64 No. B-278 & B-280 Freehold Branch 3,208 19 1,332 04/08/1999

Jalan Beserah premises
25300 Kuantan
Pahang Darul Makmur

65 No. 31, 33, 35 & 37 Freehold Branch 15,844 17 1,113 10/07/2003

Jalan Usahaniaga 1 premises
Taman Niagajaya
14000 Bukit Mertajam
Seberang Perai Tengah, Penang

66 Lot 171, Jalan Council Leasehold Branch 1,740 24 127 21/06/1990

95000 Bandar Sri aman - 60 years premises
Sarawak (20/06/2050)

67 Lot No. 2013, Jalan Pisang Barat Leasehold Storage 1,390 27 - 23/09/1992
93150 Kuching - 99 years
Sarawak (31/12/2038)

68 No. 3/G14, 3/G15 & 3/G16 Leasehold Branch 4,141 25 1,582 04/02/1997
Block 3, Lorong Api-Api 2 - 99 years premises
Api-Api Centre (31/12/2086)
88000 Kota Kinabalu
Sabah

430 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Other
Information

HLBB LIST OF PROPERTIES HELD AS AT 30 JUNE 2020 (CONTINUED)

Description Approx. Net book

of property Gross Area Age value Date of
Location Tenure held (Sq-ft) (Years) (RM’000) acquisition

69 No. 177, Limbok Hill Freehold Single-storey 6,730 47 10 16/08/1972

70000 Seremban, Detached house
Negeri Sembilan Darul Khusus

70 No. 11, Jalan Emas 2 Freehold Vacant 5,804 27 - 25/05/1993

Taman Emas Cheras
43200 Cheras, Selangor

71 No. 53 & 55, Jalan Sultan Ismail Freehold Branch 9,600 23 17,454 01/06/2015
50250 Kuala Lumpur premises

72 No. 9, Jalan Kundang Freehold Vacant 7,060 38 2,586 01/06/2015

Taman Bukit Pasir
83000 Batu Pahat
Johor Darul Takzim

73 No. 300, Jalan Jelutong Freehold Branch 16,652 18 13,421 23/06/2015

11600 Pulau Pinang premises

74 Lot 1, Block 35 Leasehold Branch 13,880 48 4,764 17/08/2015

Fajar Commercial Complex - 998 years premises
Jalan Lembaga (31/12/2895)
91000 Tawau, Sabah

75 Menara Hong Leong Freehold Head Office/ 668,331 5 567,845 03/07/2015

No. 6, Jalan Damanlela Branch
Bukit Damansara
50490 Kuala Lumpur

76 01-01, 01-02, 01-03, 01-05 Leasehold Branch 18,317 2 16,031 16/11/2018

Block D -99 years
Komersil Southkey Mozek (21/02/2100)
Persiaran Southkey 1
Kota Southkey, 80150
Johor Bahru

77 No. 8, Jalan 3/5-C, Taman Setapak Leasehold Branch 6,908 2 2,071 13/09/2018
Indah Jaya, Off Jalan Genting Klang -99 years
53300 Kuala Lumpur (28/08/2086)

Annual Report 2020 431

Local & Overseas
Branches
As At 30 June 2020

KUALA LUMPUR 14 No. 50, Jalan Manis 1 26 Lot No. 70, Level G2
Taman Segar, Cheras Publika Shopping Gallery
1 53 & 55, Jalan Sultan Ismail 56100 Kuala Lumpur Solaris Dutamas
50250 Kuala Lumpur Jalan Dutamas 1
15 Level 1, Menara Hong Leong
2 No. 50, Jalan Merlimau 50480 Kuala Lumpur
No. 6, Jalan Damanlela
Off Jalan Kenanga Bukit Damansara 27 No. 31 and 33, Jalan 1/116B
55200 Kuala Lumpur 50490 Kuala Lumpur Kuchai Entrepreneurs Park
3 Ground & Mezzanine Floors Off Jalan Kuchai Lama
16 26, Lorong Rahim Kajai 14
Wisma Sin Heap Lee 58200 Kuala Lumpur
Taman Tun Dr Ismail
No. 346, Jalan Tun Razak 60000 Kuala Lumpur 28 No. 2-0 Lorong 2/137C
50400 Kuala Lumpur Off Jalan Kelang Lama
17 Lot 2-21A & 2-21A1
4 Level 1, Wisma Hong Leong 58200 Kuala Lumpur
Jalan Desa 1/1
18, Jalan Perak Desa Aman Puri 29 71 and 73
50450 Kuala Lumpur 52100 Kuala Lumpur Jalan Radin Tengah Zone J 4
5 Suite G2.01, Menara Raja Laut Bandar Baru Seri Petaling
18 No. 77C & D, Lot 58529
No. 288, Jalan Raja Laut 57000 Kuala Lumpur
Jalan Kepong
50350 Kuala Lumpur 52100 Kuala Lumpur 30 A54 Jalan Tuanku 4
6 No. 34, 36 and 38, Jalan Petaling Salak South Garden
19 166 & 168, Jalan 2/3A
50000 Kuala Lumpur Off Jalan Sg Besi
Off KM 12, Jalan Ipoh
57100 Kuala Lumpur
7 E-1-2 Level 1 Blok E 68100 Batu Caves, Kuala Lumpur
Southgate Commercial Centre 31 No. 7 and 9, Jalan 2/109 F
20 No. 44 & 46
No. 2 Jalan Dua Plaza Danau 2
Block A Plaza Sinar
Off Jalan Chan Sow Lin Taman Danau Desa
Jalan 8/38D
55200, Kuala Lumpur Off Jalan Klang Lama
Tmn Sri Sinar, Segambut
58100 Kuala Lumpur
8 No. 468-B2(A), Block B 51200 Kuala Lumpur
Ground Floor 32 No. 8 and 10, Jalan 3/50C
21 Ground & 1st Floor
Rivercity 3rd Mile Taman Setapak Indah Jaya
No. 63 Jalan Medan Putra 1
Jalan Ipoh Off Jalan Genting Kelang
Medan Putra Business Centre
51200 Kuala Lumpur 53300 Kuala Lumpur
Menjalara
9 150, Jalan Tun Sambanthan 52200 Kuala Lumpur 33 No. 266 and 267
50470 Kuala Lumpur Jalan Bandar 12, Taman Melawati
22 Ground Floor, No. 6 & 8
53100 Kuala Lumpur
10 114 and 116, Jalan Cerdas Block 5, Jalil Link
Taman Connaught, Cheras Jalan Jalil Jaya 6, Bukit Jalil 34 No. 2, Jalan Rampai Niaga 1
56000 Kuala Lumpur 57000 Kuala Lumpur Rampai Business Park
Taman Sri Rampai
11 No. 180-0-7 and 180-0-8 23 Ground & 1st Floor
53300 Kuala Lumpur
Wisma Mahkota Unit 25-G & 25-1
Taman Maluri, Cheras Signature Office, Mid Valley City 35 Ground & 1st Floor, No. 10-G-1
55100 Kuala Lumpur Lingkaran Syed Putra Jalan 14/48A, The Boulevard
59200 Kuala Lumpur Shopoffice Off Jalan Sentul
12 Ground Floor, No. 111 51000 Kuala Lumpur
Jalan Dwitasik 1 24 37, Jalan Telawi 3
Bandar Sri Permaisuri Bangsar Baru 36 Hong Leong Islamic Bank Berhad
56100 Kuala Lumpur 59100 Kuala Lumpur No 28, Ground & First Floor
Jalan Setiawangsa 10/55A
13 No. 15, 16 & 17, Jalan Midah Satu 25 No. 2, Jalan 22A/70A
Taman Setiawangsa
Tmn Midah, Cheras Desa Sri Hartamas
54200 Kuala Lumpur
56000 Kuala Lumpur 50480 Kuala Lumpur

432 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Local & Overseas

Branches
As At 30 June 2020

SELANGOR DARUL EHSAN 50 No. 18 and 20, Jalan 20/16A 63 Wisma Meru
Taman Paramount 1 Lintang Pekan Baru
37 2-G, 2-1 & 2A-G 46300 Petaling Jaya, Selangor Off Jalan Meru
Jalan Cheras Maju 41050 Klang, Selangor
Pusat Perniagaan Cheras Maju 51 No. 80 and 82
43200 Balakong Selangor Jalan Othman 1/14 64 90, Persiaran Raja Muda Musa
46000 Petaling Jaya, Selangor 42000 Pelabuhan Klang, Selangor
38 No. 24, Medan Taming 2
Taman Taming Jaya 52 Ground Floor, Tower A 65 No. 1 and 3
43300 Balakong, Selangor PJ City Development Jalan Sri Sarawak 17
15A, Jalan 219, Sec 51A Taman Sri Andalas
39 No. 1, Jalan Temenggung 21/9 46100 Petaling Jaya, Selangor 41200 Klang, Selangor
Bandar Mahkota Cheras
43200 Cheras, Selangor 53 No. 9 & 11, Jalan 52/2 66 169, Jalan Teluk Pulai
PJ New Town 41100 Klang Selangor
40 3 and 5, Jalan Sl 1/4, Bandar Sg Long 46200 Petaling Jaya, Selangor
43000 Kajang, Selangor 67 No. 36, Jalan Dato Shahbudin 30
54 No. 22 & 24, Jalan 14/14 Taman Sentosa
41 No. 1 and 3, Jalan Seri Tanming 1F 46100 Petaling Jaya, Selangor 41200 Klang, Selangor
Taman Seri Tanming, Batu 9
43200 Cheras, Selangor 55 No. 28 & 30, Jalan SS2/67 68 No. 174 and 174A
47300 Petaling Jaya, Selangor Jalan Besar
42 Ground & First Floor 42800 Tanjung Sepat
No. 8 Jalan Suarasa 8/5 56 2, Jalan PJU 5/8, Dataran Sunway
Kuala Langat, Selangor
Bandar Tun Hussein Onn Kota Damansara
43200 Cheras, Selangor 47810 Petaling Jaya, Selangor 69 Ground Floor, No. 109 & 111
Jalan Mahogani 5, Bandar Botanic
43 Ground & 1st Floor 57 Lot G-18 and G-19
41200 Klang, Selangor
No. 19 Jalan Kijang Perdana The Place
Taman Suntex, Batu 9 Damansara Perdana 70 Ground & First Floor, Lot 529
43200 Cheras, Selangor 47820 Petaling Jaya Jalan Besar Kapar, KU13
42200 Klang, Selangor
44 No. 11 and 13, Jalan M/J 1 58 A-G-08, A-1-08, A-2-08
Taman Majlis Jaya A-G-09, A-1-09, A-2-09 71 No. 15 and 16
Jalan Sungai Chua Glomac Square, Jalan SS6/54 Jalan Menteri Besar 2
43000 Kajang, Selangor Dataran Glomac New Sekinchan Business Centre
Pusat Bandar Kelana Jaya 45400 Sekinchan, Selangor
45 No. 7 and 9, Jalan Pasar Baru 2 47301 Petaling Jaya, Selangor
Seksyen 3, Bandar Semenyih 72 No. 64 Jalan Stesen
43500 Semenyih, Selangor 59 12 and 14, Jalan PJS 11/28A 45000 Kuala Selangor, Selangor
Metro Bandar Sunway
46 Ground Floor, 36, Jalan Sulaiman 73 No. 64 Jalan BRP 1/2
Bandar Sunway
43000 Kajang, Selangor Bukit Rahman Putra
46150 Petaling Jaya, Selangor
47000 Sungai Buloh, Selangor
47 No. 2, Jalan Bangi Avenue 1/8 60 No. 68 Lorong Batu Nilam 4A
Taman Bangi Avenue 74 51 & 53, Jalan TSB 10A
Bandar Bukit Tinggi
43000 Kajang, Selangor Taman Industri Sg Buloh
41200 Klang, Selangor
47000 Sg Buloh, Selangor
48 No. 1 & 3, Jalan Pju 1/43 61 No. 119 and 121
Aman Suria 75 19 Jalan 54, Desa Jaya
Jalan Sultan Abdul Samad
47301 Petaling Jaya, Selangor 52100 Kepong Selangor
42700 Banting, Selangor
49 No. 25-G, 27-G, 29-G and 29-1 76 No. 23 and 24, Jalan KIP 1
62 26-32, Jalan Kapar
Jalan SS21/60 Taman Perindustrian KIP
41400 Klang, Selangor
47400 Damansara Utama 52200 Selangor
Petaling Jaya, Selangor
77 59A, Jalan Welman
48000 Rawang, Selangor

Annual Report 2020 433

Local & Overseas
Branches
As At 30 June 2020

78 No. 2 Jalan Public 92 Lot 43 & 45, Jalan USJ 10/1G 106 Hong Leong Islamic Bank Berhad
Kampung Baru 47620 UEP Subang Jaya, Selangor Lot G13A (Ground Floor) D’pulze
Sungai Buloh Shopping Centre, P-01, D’pulze
93 W-1-0, W-2-0 and W-1-1
40160 Shah Alam, Selangor Lingkaran Cyber Point Timur
Subang Square Business Centre
Cyberjaya 12, Cyberjaya
79 No. 39 and 41, Jalan SJ 17 Jalan SS15/4G
63000 Selangor
Taman Selayang Jaya 47500 Subang Jaya, Selangor
68100 Batu Caves, Selangor
94 Ground Floor, Lot G01
80 No. 5 & 7, Jalan Cempaka 1 Giant Hypermarket Putra Heights PAHANG DARUL MAKMUR
Taman Cempaka, 48200 Serendah Persiaran Putra Perdana
Hulu Selangor, Selangor 47560 Putra Heights, Selangor 107 No. 1 Bentong Heights
28700 Bentong, Pahang
81 No.G-16, 1-16, 2-16, G-17 95 No. 3-G, Jalan Anggerik Vanilla
1-17 & 2-17, Jalan Prima SG1 N31/N, Kota Kemuning 108 No. 39 and 41, Jalan Tun Razak
Taman Prima Sri Gombak 40460 Shah Alam, Selangor 27600 Raub Pahang
68100 Batu Caves, Selangor 109 No. 113, Jalan Inderapura 1
96 3, Jalan Takal 15/21, Seksyen 15
82 Wisma Keringat 2 40000 Shah Alam, Selangor Bandar Inderapura
No. 17 Lorong Batu Caves 2 27000 Jerantut, Pahang
97 30, 32 and 34, Jalan Perbahan Satu
68100 Batu Caves, Selangor 110 No. B278 & B280, Jalan Beserah
Section 26/2A
83 No. 5 & 7 Jalan Besar Susur 1 40000 Shah Alam, Selangor 25300 Kuantan, Pahang
43300 Seri Kembangan, Selangor 111 No. 25, 27 and 29, Jalan Tun Ismail
98 19, Jalan Setia Prima RU 13/R
84 Ground Floor, No.4G & 6G Setia Alam 25000 Kuantan, Pahang
Jalan Equine 1B 40170 Shah Alam, Selangor 112 59 and 60, Jalan Temerloh
Taman Equine Boulevard Locked Bag No. 9
99 1G-3G, Jalan Wawasan 2/10
43300 Seri Kembangan, Selangor 28409 Mentakab, Pahang
Bandar Baru Ampang
85 No. 21 Jalan BS10/6 68000 Ampang, Selangor 113 F105 and F106, Jalan Kuantan
Seksyen 10, Bukit Serdang 28000 Temerloh Pahang
100 No. 91, Lorong Mamanda 1
43300 Seri Kembangan, Selangor
Ampang Point 114 No. 36 Main Road Tanah Rata
86 3, Jalan Bandar Satu 68000 Ampang, Selangor 39000 Cameron Highlands Pahang
Pusat Bandar Puchong
101 No. 7 and 9
47100 Puchong, Selangor
Jalan Bunga Tanjong 6A
87 No. 2 Jalan Puteri 2/4 Taman Putra TERENGGANU DARUL IMAN
Bandar Puteri 68000 Ampang, Selangor
115 Lot 3594 and 3595
47100 Puchong, Selangor
102 Ground Floor No. 8 Jalan Baru Pak Sabah
88 2, Jalan Kinrara Jalan UP 1/5, Taman Ukay Perdana 23000 Dungun, Terengganu
Taman Kinrara, Jalan Puchong 68000 Ampang, Selangor
116 No. 5686 & 5694-B
47100 Selangor
103 No. 1-GM, Jalan Perdana 4/6 Jalan Kubang Kurus
89 No. 26 & 27, Jalan Kenari 1 Pandan Perdana 24000 Kemaman, Terengganu
Bandar Puchong Jaya 55300 Kuala Lumpur
117 No. 1107-R, S & T, Jalan Pejabat
47100 Puchong, Selangor
104 No. 1 & 3, Jalan Pandan 3/5 20200 Kuala Terengganu
90 No. E-01-07 and E-01-08 Pandan Jaya Terengganu
Jalan Puchong Prima 5/3 55100 Kuala Lumpur
118 Hong Leong Islamic Bank Berhad
Puchong Prima
105 No. 23GM and 25GM No. 31, Jalan Sultan Ismail
47100 Puchong, Selangor
Jalan Pandan Indah 4/8 20200 Kuala Terengganu
91 No. 120 Jalan PUJ 3/2 Pandan Indah Terengganu
Taman Puncak Jalil 55100 Kuala Lumpur
Bandar Putra Permai
43300 Seri Kembangan, Selangor

434 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Local & Overseas

Branches
As At 30 June 2020

KELANTAN DARUL NAIM 130 Lot No 4, 5 & 6, Block C 144 Lot 3073 and 3074
Lorong KK Taipan 2 Jalan Abang Galau
119 PT 320 & 321, Seksyen 25 Inanam New Township 97000 Bintulu, Sarawak
Jalan Sultan Yahya Petra 88450 Kota Kinabalu, Sabah
15200 Kota Bahru, Kelantan 145 Lot 2499 & 2500
131 MDLD 4712, Lot 4 Ground & 1st Floor
120 Hong Leong Islamic Bank Berhad Jalan Kastam Lama Boulevard Commercial Centre
No. 1121A & 1121B 91100 Lahad Datu, Sabah Jalan Miri-Pujut, KM 3
Jalan Padang Garong, Seksyen 12 98000 Miri, Sarawak
15000 Kota Bahru, Kelantan
146 Lot 1078-1079, Buangsiol Road
SARAWAK P.O. Box 69
98707 Limbang, Sarawak
FEDERAL TERRITORY LABUAN 132 Sub Lot 6, Lot 538
Jalan Lee Kai Teng, P.O. Box 34 147 No. 722, Jalan Masjid
121 64 Jalan Tun Mustapha 95700 Betong, Sarawak P.O. Box 19
87007 Labuan
96400 Mukah, Sarawak
133 345-347
Central Park Commercial Centre 148 Ground & First Floor, Lot 715
Jalan Tun Ahmad Zaidi Adruce Merbau Road
SABAH
93200 Kuching 98000 Miri, Sarawak
122 Ground and 1st Floor
134 Lot 122, 123 & 124 149 8-10, Lorong Maju
Lot No. 1 Block 35
Jalan Song Thian Cheok P.O. Box 279
Fajar Commercial Complex
93100 Kuching, Sarawak 96508 Bintangor, Sarawak
Jalan Lembaga
91013 Tawau, Sabah 135 42, Jalan Pending 150 18, Chew Geok Lin Street
93450 Kuching, Sarawak P.O. BOX 1461
123 No. 5 and 6 (Aras Bawah)
96000 Sibu, Sarawak
Lorong Lintas Plaza 1, Lintas Plaza 136 35 Jalan Khoo Hun Yeang
88300 Kota Kinabalu, Sabah 93000 Kuching 151 122, Jalan Yong Moo Chai
P.O. Box 15
124 Lots 1, 2 and 3, Block 18, Mile 4 137 Lot 10901 & 10902
96807 Kapit, Sarawak
North Road, Bandar Indah Jalan Tun Jugah
90722 Sandakan, Sabah 93350 Kuching 152 No. 22 & 23, Suria Permata
Commercial Centre, Jalan Lanang
125 Ground Floor, Wisma Sandaraya 138 No. 127-129, RH Plaza
96000 Sibu, Sarawak
Humphrey Street Jalan Lapangan Terbang
90000 Sandakan, Sabah 93350 Kuching 153 No. 133, 135 and 137
Jalan Kampung Nyabor
126 19 Jalan Haji Saman 139 No. 155C, Jalan Satok
96000 Sibu, Sarawak
P.O. Box 11989 93400 Kuching, Sarawak
88821 Kota Kinabalu, Sabah 154 10, 12, 14, 16 & 18, Mission Road
140 Lot 171, Jalan Council
P.O. Box 656
127 Lot 38, Block E 95000 Bdr Sri Aman, Sarawak
96007 Sibu, Sarawak
Alamesra Plaza Permai
141 Lot 13 and 14, Olive Garden
88400 Kota Kinabalu, Sabah 155 No. 18C & 20, Lorong Tun Razak 1
7th Mile Bazaar, Jalan Pensrissen
Jalan Masjid Lama
128 Lot 3-0-14 To 3-0-16, Block 3 93250 Kuching, Sarawak
96100 Sarikei, Sarawak
Lorong Api-Api 2, Api-Api Centre
142 175, Serian Bazaar
88000 Kota Kinabalu, Sabah
94700 Serian, Sarawak
129 No. 8, Jalan Pantai
143 Lot 124, Saratok Bazaar
Locked Bag No. 124
P.O. Box 71
88999 Kota Kinabalu, Sabah
95407 Saratok, Sarawak

Annual Report 2020 435

Local & Overseas
Branches
As At 30 June 2020

KEDAH DARUL AMAN 170 No. 1, Light Street, Georgetown 184 No. 1, Jalan Besar
10200 Pulau Pinang Taman Tempua
156 167 & 168 14000 Simpang Ampat
Susuran Sultan Abdul Hamid 11 171 Unit G-02, Mezzanine & 2-02B
Pulau Pinang
Kompleks Perniagaan Sultan Abdul Burmah House, No. 405
Hamid Fasa 2 Jalan Burma, 10350, Penang 185 1435 & 1436, Jalan Besar
05050, Alor Setar, Kedah 14200 Sg Bakap
172 No. 723-G-G, 723-H-G
Seberang Prai Selatan
157 No. 212-212A, Jalan Gangsa and 723-I-G Jalan Sungai Dua
Pulau Pinang
Seberang Jalan Putra 11700 Pulau Pinang
05150 Alor Setar, Kedah 186 No. 1823-G1
173 Lot G17 & G18
Jalan Perusahaan Auto City
158 18K & 18L, Jalan Raya Penang Times Square
North-South Highway Juru
08300 Gurun, Kedah Jalan Dato Keramat
Interchange, 13600 Prai
10150 Pulau Pinang
159 No. 62 and 63, Jalan Bayu 1 Pulau Pinang
09000 Kulim, Kedah Darul Aman 174 306-F, Jalan Dato Ismail Hashim
187 Ground & First Floor
11900 Bayan Lepas, Pulau Pinang
160 No. 93, Langkawi Mall No. 1 Medan Limau Emas
Jalan Kelibang 175 No. 16A & 16B Pusat Perniagaan Limau Emas
07000, Langkawi, Kedah Lebuhraya Thean Teik Off Jalan Song Ban Keng
Bandar Baru Ayer Itam 14000 Bukit Mertajam
161 No. 1 and 2, Jalan Raya 11500 Pulau Pinang Pulau Pinang
09800 Serdang, Kedah Darul Aman
176 Ground Floor & 1st Floor
162 Ground and First Floor No. 82 Jalan Besar, Balik Pulau
No. 64 and 65 Jalan Pengkalan 11000 Pulau Pinang PERAK DARUL RIDZUAN
Taman Pekan Baru
08000 Sungai Petani, Kedah 177 No. 1, Lebuh Kurau 1 188 75 Jalan Sultan Idris Shah
Taman Chai Leng 30000 Ipoh, Perak
163 No. 255, Jalan Legenda 10 13700 Prai, Pulau Pinang
Legenda Heights 189 No. 91 and 93
08000 Sg Petani, Kedah 178 No. 9 and 10, Jalan Todak 2 Jalan Dato Lau Pak Khuan
Pusat Bandar, Seberang Jaya Ipoh Garden 31400 Ipoh
164 9A and 9B Jalan Kampong Baru 13700 Prai, Pulau Pinang Perak
08000 Sungai Petani, Kedah
179 No. 26, 28 & 30, Lorong Murni 1 190 Lot A-G-2, A-1-2 and A-1-4, No. 1
165 Ground Floor, Lot 1520-2A Taman Desa Murni, Sg. Dua Persiaran Greentown 2
Pantai Halban 13800 Butterworth, Pulau Pinang Greentown Business Centre
06000 Jitra, Kedah 30450 Ipoh, Perak
180 No. 3350 & 3351
Jalan Rozhan 191 579 and 579A Jalan Pasir Puteh
Taman Industri Alma Jaya 31650 Ipoh Perak
PULAU PINANG
14000 Bukit Mertajam 192 No. 396 & 398, Taman Saujana
166 19 Jalan Bertam Pulau Pinang 34600 Kamunting, Perak
13200 Kepala Batas
181 No. 31, 33, 35 193 39 and 41, Jalan Taiping
Seberang Prai, Pulau Pinang
Jalan Usahaniaga 1 34200 Parit Buntar, Perak
167 15-G-1 (Bayan Point) Taman Niagajaya
Medan Kampong Relau 14000 Bukit Mertajam, Penang 194 No. 53, 55 and 57, Jalan Stesyen
11900 Pulau Pinang 34000 Taiping, Perak
182 No. 6963 and 6964
168 No. 300, Jalan Jelutong Jalan Ong Yi How 195 No. 254, Jalan Raja Dr Nazrin Shah
11600 Pulau Pinang Kawasan Perindustrian Raja Uda Gunung Rapat
13400 Butterworth, Pulau Pinang 31350 Ipoh, Perak
169 98-G-15 Prima Tanjong
Jalan Fettes 10470 Tanjong Tokong 183 No. 1781 Jalan Nibong Tebal
Pulau Pinang Taman Panchor Indah
14300 Nibong Tebal, Pulau Pinang

436 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Local & Overseas

Branches
As At 30 June 2020

196 Ground & First Floor 210 Lot PT 5759 & 5730 JOHOR DARUL TAKZIM
No. 362, Medan Bercham Jalan TS 2/1D, Taman Semarak
Jalan Bercham 71800 Nilai, Negeri Sembilan 222 Ground Floor, Penggaram Complex
31400 Ipoh, Perak No. 1 Jalan Abdul Rahman
211 No. 69, 70 and 71 Off Jalan Rahmat
197 86 & 88, Jalan Besar Jalan Dato Bandar Tunggal 83000 Batu Pahat, Johor
32400 Ayer Tawar, Perak 70000 Seremban, Negeri Sembilan
223 120 and 122, Jalan Mersing
198 N-20, Jalan Bidor Raya 212 1278 Jalan Rasah 86000 Kluang, Johor
Off Jalan Persatuan 70300 Seremban, Negeri Sembilan
35500 Bidor, Perak 224 No. 70, Jalan Segamat
213 No. 145-G, 145-1 & 146-G 85300 Labis, Johor
199 27 Jalan Dewangsa Block M Taipan Senawang
31000 Batu Gajah, Perak Jalan Taman Komersil Senawang 1 225 No. 2 and 3, Pusat Dagangan Bakri
70450 Seremban, Negeri Sembilan Jalan Bakri
200 133 and 135 Jalan Gopeng 84000 Muar Johor
31900 Kampar, Perak 214 No. 7 & 8, Jalan S2 B15
Biz Avenue, Seremban 2 226 No. 43A & 45
201 No. PT 1167 & 1168 Jalan Genuang Kampung
70300 Seremban, Negeri Sembilan
Jalan Chui Chak Kampung Abdullah
36700 Langkap, Perak 85000 Segamat, Johor
202 No. 116 & 117, Jalan Besar MELAKA 227 No. LC531, Jalan Payamas
31450 Menglembu, Ipoh, Perak 84900 Tangkak, Johor
215 Lot 215 & 130, Jalan Besar
203 No. 28, Medan Silibin 78300 Masjid Tanah, Melaka 228 108, 109 & 110 Main Road
30100 Ipoh, Perak 83700 Yong Peng, Johor
216 345, Jalan Ong Kim Wee
204 No. 16 and 17, Taman Sitiawan 75300 Melaka 229 No. 345A, Jalan Ismail
Maju, Jalan Lumut 86800 Mersing, Johor
32000 Sitiawan, Perak 217 No. 67 & 69, Jalan Merdeka
Taman Melaka Raya 230 No. 6 and 7, Jalan Anggerik 1
205 No. 25 & 27, Jalan Bunga 75000 Melaka Taman Kulai Utama
Anggerik, Taman Bunga Raya 81000 Kulai, Johor
35900 Tanjong Malim, Perak 218 150 and 152
Kompleks Munshi Abdullah 231 No. 25 & 25A
206 11 and 12 Jalan Munshi Abdullah Jalan Kenanga 29/1, Indahpura
Kompleks Menara Condong 75100 Melaka 81000 Kulai, Johor
Jalan Bandar
36000 Teluk Intan, Perak 219 Lot BB-371A & B 232 Ground Floor, No. 121 & 123
Taman Melaka Baru Jalan Austin Heights 3
Batu Berendam Taman Mount Austin
75350 Melaka 81100 Johor Bahru, Johor
NEGERI SEMBILAN DARUL
KHUSUS 220 No. 1, 1-1 & 3 233 No. 8-10, Jalan Nusaria 11/7
Jalan Malim Jaya 2/7A Taman Nusantara
207 100, Jalan Gurney 81550 Gelang Patah, Johor
Taman Malim Permai
72100 Bahau, Negeri Sembilan
75250 Melaka 234 No. 24-25, Jalan Ahmad Ujan
208 112 Jalan Yam Tuan Raden Taman Kota Besar
221 No. 76 Jalan Inang 4
72000 Kuala Pilah, Negeri Sembilan 81900 Kota Tinggi, Johor
Taman Paya Rumput Utama
209 Lot 3120 & 3121 76300 Paya Rumput, Melaka 235 No. 2 Jalan Jati Satu
Jalan Besar Lukut Taman Nusa Bestari Jaya
71010 Port Dickson 81300 Skudai, Johor Bahru, Johor
Negeri Sembilan
236 1, 1A, 1B & 1C, Jalan Belimbing
81400 Senai, Johor

Annual Report 2020 437

Local & Overseas
Branches
As At 30 June 2020

237 6 & 8, Jalan Nakhoda 12 251 No. 29 & 31, Jalan Molek 2/4 SINGAPORE
Taman Ungku Tun Aminah Taman Molek
81300 Skudai, Johor 81100 Johor Bahru, Johor 1 Main Office
1 Wallich Street
238 Ground Floor, No. 1 252 Ground Floor #29-01 Guoco Tower
Jalan Setia Tropika 1/15 Bangunan Persekutuan Singapore 078881
Taman Setia Tropika Tiong Hua JB, No. 8, Jalan Keris
81200 Johor Bahru, Johor Taman Sri Tebrau Banking Hall
80050 Johor Bahru, Johor 7 Wallich Street
239 1 & 3
#B1-25 & B1-26
Jalan Persiaran Tanjung Susur 1
Tanjong Pagar Center
Taman Bukit Alif, Tampoi
81200 Johor Bahru, Johor PERLIS Singapore 078884

240 No. 39 & 41 253 No. 40 and 42, Jalan Bukit Lagi
Jalan Kebudayaan 1 01000 Kangar, Perlis
HONG KONG
Taman Universiti
81300 Skudai, Johor 1 Rm 1504 & 50/F
FEDERAL TERRITORY The Center
241 No. 5 Jalan Camar 1/3
PUTRAJAYA 99 Queen’s Road Central
Taman Perling Central, Hong Kong
81200 Johor Bahru, Johor 254 Hong Leong Islamic Bank Berhad
Lot T00-U01, No. 5
242 No. 30 & 31, Jalan Delima
Jalan 16, Precint 16
Pusat Perdagangan Pontian VIETNAM
62150 Putrajaya
82000 Pontian, Johor
Wilayah Persekutuan 1 Hong Leong Bank Vietnam
243 37 & 39, Jalan Johar 1 Limited
Taman Desa Cemerlang Ground Floor, Centec Tower
81800 Ulu Tiram, Johor BUREAU DE CHANGE 72-74 Nguyen Thi Minh Khai Street
District 3, Ho Chi Minh City
244 12-16, Jalan Wong Ah Fook 1 Bureau De Change KLIA2
80000 Johor Bahru, Johor Lot S2-3-L34 2 Hong Leong Bank Vietnam
Departure Level Public Concourse Limited
245 105-106, Jalan Besar
Pacific Place, GF, Unit 08-09
81750 Masai, Johor KLIA2 Airport
83B Ly Thuong Kiet Str
64000 Sepang
246 30 & 31, Jalan Mawar 1 Tran Hung Dao Ward
Selangor Darul Ehsan
Taman Mawar Hoan Kiem District
81700 Pasir Gudang, Johor 2 Bureau De Change Bukit Bintang Hanoi, Vietnam
No. 53 & 55 Jalan Sultan Ismail
247 No. 173 & 175, Jalan Sri Pelangi 3 Hong Leong Bank Vietnam
50250 Kuala Lumpur
Taman Pelangi Limited
80400 Johor Bahru, Johor 3 Bureau De Change Kuantan Binh Duong Branch
No. 25, Jalan Tun Ismail Unit 102, 103 Canary Plaza
248 No. 21, Jalan Permas 10/1 Binh Duong Boulevard
25000 Kuantan
Bandar Baru Permas Jaya Thuan An District, Binh Duong
81750 Masai, Johor Pahang Darul Makmur 
Vietnam
249 No. 20 & 21 4 Hong Leong Bank Vietnam
Jalan Harimau Tarum, Taman Abad Limited
80250 Johor Bahru, Johor Transaction Office
250 80, Jalan Dedap 13 62-62A Hau Giang, District 6
Taman Johor Jaya Ho Chi Minh City, Vietnam
81100 Johor Bahru Johor

438 HONG LEONG BANK BERHAD

 CORPORATE FINANCIALS ADDITIONAL INFORMATION

Local & Overseas

Branches
As At 30 June 2020

CAMBODIA LABUAN OFFSHORE

1 Hong Leong Bank (Cambodia) PLC 1 Hong Leong Bank Berhad
Head Office Branch: Labuan International Branch
No. 28, Samdech Pan Avenue Level 6 (G), Main Office Tower
(St. 214), Sangkat Boeung Raing Financial Park Labuan Complex
Khan Daun Penh, Phnom Penh Jalan Merdeka
Kingdom of Cambodia 87000 Labuan F.T. Malaysia 
2 Hong Leong Bank (Cambodia) PLC
Tuol Kork Branch:
No. 150 G & 150 M
Street 289 Sangkat Boeung Kak 1
Khan Toul Kork, Phnom Penh

3 Hong Leong Bank (Cambodia) PLC

Olympic Branch:
No. 345, 347, and 349, Street 274
Sangkat Veal Vong, Khan 7 Makara
Phnom Penh

4 Hong Leong Bank (Cambodia) PLC

Pet Lok Sang Branch:
No. 23, Street 271
Sangkat Toeuk Thla
Khan Sensok, Phnom Penh
Cambodia

5 Hong Leong Bank (Cambodia) PLC

Mao Tse Toung Branch:
No. 167CD
Mao Tse Toung Blvd (St. 245)
Sangkat Toul Svay Prey 1
Khan Chamkamorn, Phnom Penh

6 Hong Leong Bank (Cambodia) PLC

Boeung Snor Branch:
# SL08 and SL09 of Polaris Shop
National Road N01
Boeung Chhouk Village
Sangkat Niroth, Khan Chbar Ampov
Phnom Penh, Cambodia

7 Hong Leong Bank (Cambodia) PLC

Sen Sok Branch:
# 65 and 67, St1003, Phum Bayab,
Sangkat Phnom Penh Thmey, Khan
Sen Sok, Phnom Penh, Cambodia

Annual Report 2020 439

FORM OF PROXY Registration No. 193401000023 (97141-X)

I/We

NRIC/Passport/Company No.

of
being a member of HONG LEONG BANK BERHAD (the “Bank”), hereby appoint

NRIC/Passport No.
of
or failing him/her
NRIC/Passport No.
of

or failing him/her, the Chairman of the meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Seventy-Ninth Annual General
Meeting of the Bank to be held at Wau Bulan Ballroom, Level 2, Sofitel Kuala Lumpur Damansara, No. 6, Jalan Damanlela, Bukit Damansara, 50490 Kuala
Lumpur on Friday, 30 October 2020 at 10:30 a.m. and at any adjournment thereof.

My/Our proxy/proxies is/are to vote as indicated below with an “X”:

RESOLUTIONS FOR AGAINST

1. To declare a final single-tier dividend of 20 sen per share
2. To approve the payment of Director Fees and Directors’ Other Benefits
3. To re-elect YBhg Tan Sri Quek Leng Chan as Director
4. To re-elect Ms Chok Kwee Bee as Director
5. To re-elect YBhg Dato‘ Nicholas John Lough @ Sharif Lough bin Abdullah as Director
6. To re-appoint PricewaterhouseCoopers PLT as Auditors of the Bank and to authorise the Directors to fix their
remuneration
SPECIAL BUSINESS
7. To approve the ordinary resolution on Authority to Directors to Allot Shares
8. To approve the ordinary resolution on Proposed Renewal of Shareholders’ Mandate for Recurrent Related
Party Transactions of a Revenue or Trading Nature with Hong Leong Company (Malaysia) Berhad (“HLCM”) and
Persons Connected with HLCM

Dated this day of 2020

Number of shares held Signature(s) of Member

Notes:-

1. For the purpose of determining members’ eligibility to attend this meeting, only members whose names appear in the Record of Depositors as at 22 October 2020
shall be entitled to attend this meeting or appoint proxy(ies) to attend and vote on their behalf.
2. If you wish to appoint other person(s) to be your proxy, insert the name(s) and address(es) of the person(s) desired in the space so provided.
3. If there is no indication as to how you wish your vote(s) to be cast, the proxy will vote or abstain from voting at his/her discretion.
4. A proxy may but need not be a member of the Bank.
5. Save for a member who is an exempt authorised nominee, a member shall not be entitled to appoint more than two (2) proxies to attend, participate, speak and vote
at the same meeting. Where a member of the Bank is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint
not more than two (2) proxies in respect of each securities account it holds with ordinary shares of the Bank standing to the credit of the said securities account. A
member who is an exempt authorised nominee for multiple beneficial owners in one securities account (“Omnibus Account”) may appoint any number of proxies in
respect of the Omnibus Account.
6. Where two (2) or more proxies are appointed, the proportion of shareholdings to be represented by each proxy must be specified in the instrument appointing the
proxies, failing which the appointments shall be invalid (please see note 9 below).
7. In the case where a member is a corporation, this Form of Proxy must be executed under its Common Seal or under the hand of its Attorney.
8. All Forms of Proxy must be duly executed and deposited at the Registered Office of the Bank at Level 30, Menara Hong Leong, No. 6, Jalan Damanlela, Bukit
Damansara, 50490 Kuala Lumpur or lodge electronically via email at cosec-hlfg@hongleong.com.my, not less than forty-eight (48) hours before the time appointed
for holding of the meeting or adjourned meeting.
9. In the event two (2) or more proxies are appointed, please fill in the ensuing section:

Name of Proxies % of shareholdings to be represented

10. Pursuant to Paragraph 8.29 A (1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all the resolutions set out in the notice will be put to
vote by way of a poll.
Fold this flap for sealing

Then fold here

AFFIX
STAMP

The Group Company Secretary

HONG LEONG BANK BERHAD

Registration No. 193401000023 (97141-X)

Level 30, Menara Hong Leong

No. 6, Jalan Damanlela
Bukit Damansara
50490 Kuala Lumpur
Malaysia

1st fold here

Hong Leong Bank Berhad
Registration No. 193401000023 (97141-X)

Level 19, Menara Hong Leong

No. 6, Jalan Damanlela
Bukit Damansara
50490 Kuala Lumpur
Tel : 03-2081 8888
Fax : 03-2081 7801

www.hlb.com.my

As part of Hong Leong Bank’s support for environmental sustainability, this Annual Report
is printed on Forest Stewardship Council (FSC) certified paper.