Affin Bank Berhad | Annual Report 2020

226 ORGANISATION EXECUTIVE SUMMARY CORPORATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION PERFORMANCE IN FINANCIAL YEAR ENDED 31 DECEMBER 2020 This financial year was challenging for the Group as the Covid-19 pandemic disrupted daily lives and affected businesses negatively. Bank Negara Malaysia (‘BNM’) had, on 11 February 2021, announced that the Malaysian economy contracted by 5.6% for 2020. Malaysia is navigating through the current health crisis against the backdrop of political uncertainty which contributed to the downgrade of Fitch’s Long-Term Foreign-Currency Issuer Default Rating to ‘’BBB+ with a stable outlook’’ from A- previously. For the financial year ended 31 December 2020, the Group recorded a consolidated profit before tax (‘PBT’) of RM386.7 million, a decrease of RM290.3 million or 42.9% as compared to the previous financial year while profit after tax (‘PAT’) for the financial year was RM272.8 million. The net income expanded by RM350.5 million, mainly attributable to higher non-interest income of RM329.4 million, income from Islamic Banking of RM70.5 million and net interest income of RM29.0 million, reduced by a one-off modification loss related to Covid-19 relief measures by BNM of RM78.4 million. The operating expenses of the Group increased by RM144.4 million or 12.0%, mainly due to the rise in personnel costs. However, the overall cost to income ratio improved slightly to 59.6% from 63.0% in FY2019. For the FY2020, earnings per share was 11.4 sen as compared to 24.6 sen in the previous year. The total assets of the Group increased by RM1.2 billion or 1.7% to RM69.5 billion, mainly attributable to the increase in both loans, advances and financing portfolio and financial investments at FVOCI. Gross loans, advances and financing increased by RM0.3 billion or 0.7% to RM46.3 billion as at 31 December 2020. Total customer deposits contracted by RM1.2 billion or 2.4% to RM49.9 billion. The Total Capital ratio of the Group was at 22.24%, while Common Equity Tier 1 and Tier 1 ratios stood at 14.52% and 16.29% respectively as at 31 December 2020, after proposed dividends. ECONOMIC AND BUSINESS OUTLOOK FOR 2021 The International Monetary Fund (‘IMF’) in its January 2021 issue of the World Economic Outlook (‘WEO’) forecasted global Gross Domestic Product (‘GDP’) to rebound by 5.2% in 2021 and 4.2% in 2022. The recent vaccine approvals have raised hopes of a return to normality in the second half of 2021. Nevertheless, resurgence and new variants of the virus may still pose a risk. BNM also indicated that it will maintain an accommodative monetary policy by keeping its OPR unchanged at 1.75%. The Government announced another Movement Control Order (‘MCO 2.0’) from 13 January 2021 until 4 March 2021 to curb the increasing number of cases since November 2020. The implementation of MCO 2.0 would lead to higher corporate earnings risk, although the negative impact on most economic sectors is expected to be less severe than that experienced in 2Q2020 as MCO 2.0 was less restrictive than the earlier one in early 2020. Following the implementation of MCO 2.0, the Government announced additional stimulus measures worth RM15 billion under Perlindungan Ekonomi dan Rakyat Malaysia (‘PERMAI’). This is on top of the earlier stimulus packages namely PRIHATIN, PRIHATIN SME+, PENJANA and KITA PRIHATIN that was to mitigate the impact of the pandemic on affected households and businesses. The implementation of these stimulus packages are being tracked by LAKSANA, a unit under the Ministry of Finance to ensure that aid reaches the targeted groups. The economic stimulus packages amounting to RM320 billion are anticipated to spur economic recovery in 2021. GDP growth is expected to remain negative in 1Q2021 due to the MCO 2.0 and is projected to improve and turn positive from 2Q2021 onwards, supported by better external demand from the expansion in global growth, ongoing fiscal measures as well as the expectation of the rollout of vaccines. The Government through the National Covid-19 Immunisation Programme is targeting to vaccinate 80% of the population or 26.5 million people by 1Q2022. DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020