GE30303

FINANCIAL REPORT ANALYSIS

SEMESTER 2
(2018/2019)

GROUP ASSIGNMENT

“FINANCIAL REPORT ANALYSIS OF BANK ISLAM

MALAYSIA BERHAD”

GROUP MEMBERS:
Awayna Binti Mezlan (BG16110419)
Noor Fatin Binti Sharifmuddin (BG16110016)
Norhidaya Binti Udah (BG16110119)
Nur Ain Syamimie Binti Shahrum
(BG16110004)
Rodhiah Wahidah Binti Abdul Wahid
(BG16160652) Lecturer:
Dr. Haneffa Muchlis
Gazali

Date of
Submission:
19 April 2019
 CONTENTS
INTRODUCTION.......................................................................................................................
.......2
QUALITATIVE
ANALYSIS.............................................................................................................2
QUANTITATIVE
ANALYSIS..........................................................................................................6
CONCLUSION .........................................................................................................................
.......10
REFERENCES ..........................................................................................................................
.......10

1
 INTRODUCTION

Bank Islam Malaysia Berhad (BIMB) was the first Islamic bank in Malaysia and has been
established
on 1 July 1983. Since then, BIMB has grown rapidly by reaching over four million customers
nationwide as
the Islamic Banking Institution and now, there are 147 branches of BIMB with more than 1100 self-
service
terminals nationally. BIMB provides Islamic banking and related financial services. The banking
activities
are based on Sharia principles which represent the absolute ethical codes of Islamic religion and
culture.
Therefore, the objective in conducting this study is to investigate the BIMB’s accounting standard,
external
auditor and their asset and liabilities. The second objective is to calculate certain financial
statement of BIMB,
forQUALITATIVE ANALYSIS
example, their Return of Asset (ROA) and Earning per Share (EPS). The data for this study is
obtained by
1. Explain
reviewing the the accounting
BIMB’s standards
Annual Report used
from year by until
2013 the bank
2017. in preparing the
annual reports.
Bank Islam Malaysia Berhad is known as the first bank that are implementing Sharia’ rules
in its
operations, not only in Malaysia, but also the first in the South East Asia (Bank Islam Malaysia
Berhad,
2016 ). BIMB has started to operate since July 1983 with a branch in Kuala Lumpur (Anitha Rosland,
2013).
has been achieving many awards such as the Best Commercial Bank – Malaysia 2016 in
Conjunction with
As
thecan
11thbe seen, Business
Islamic this bankand
plays an important
Finance Awards,role
BestinIslamic
the development of nation’s
Green Financing Islamic
and Best banking
Islamic Bank
industry.
Malaysia It
(Bank Islam Malaysia Berhad,
2016 ).
In the annual report of Bank Islam Malaysia Berhad for the year of 2017 stated that, the
financial
reports of the current year and the previous year are prepared by following to the Malaysian
Financial
Reporting Standards (MFRS), International Financial Reporting Standards (IFRS) and requirement
of the
Companies Act 2016 in Malaysia and Sharia’ requirements (Bank Islam Malaysia Berhad, 2017 ). A
slight
All of the guidelines policies used for preparing the annual report for BIMB has been
changes occur in the preparation of this report because in the year of 2016, BIMB are using the
acknowledge
Companies
by the Malaysian Accounting Standards Board (MASB). MASB is the institution in Malaysia that
Act 1965 in preparing its annual financial report (Bank Islam Malaysia Berhad, 2016 ).
actively
involved in the development of Islamic Accounting Standard (IAS) in order to reorganize the
reporting to
Islamic Financial Institutions at the early year of 2000’s (Nor Farizal Mohammed, 2019). During the
process
of developing IAS, MASB is making a collaboration with the authorities in Sharia’ Law and
principles in
which the Islamic Accounting Standard will be develop based on the accounting standards
practiced by
2
Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) in the country of
Bahrain
(Malaysian Accounting Standards Board, 2018). This institutions is giving a guidelines about the
Malaysian
Financial Reporting Standards (MFRS) framework, which has been used in preparing the annual
reports of
BIMB.
MFRS or known as Malaysian Financial Reporting Standards is the framework that has been
used
from 1 January 2012, is the IFRS-compliant framework that improves credibility and transparency
of the
financial reporting regime in Malaysia (Malaysian Accounting Standards Board, 2018). In 2015
annual report
of BIMB, it stated that several MFRSs framework that will be used during the preparation of annual
report in
2016 which is: MFRS 14, Regulatory Deferral Accounts, Amendments to MFRS 5, Non-current
Assets
Held for Sale and Discontinued Operations (Annual Improvements 2012-2014 Cycle),
Amendments to
MFRS 7, Financial Instruments: Disclosures (Annual Improvements 2012-2014 Cycle),
Amendments to
MFRS 10, Consolidated Financial Statements, MFRS 12, Disclosure of Interests in Other
Entities and
MFRS 128, Investments in Associates and Joint Ventures – Investment Entities: Applying the
Consolidation
Exception, Amendments to MFRS 11, Joint Arrangements – Accounting for Acquisitions of
Interests in Joint
Operations, Amendments to MFRS 101, Presentation of Financial Statements – Disclosure
Initiative,
Amendments to MFRS 116, Property, Plant and Equipment and MFRS 138, Intangible
Assets While
– in the annual report of BIMB for the year of 2016, it also has stated another
MFRS’s
Clarification of Acceptable Methods of Depreciation and Amortisation, Amendments to
MFRS 116,interpretations and amendments effective for annual periods that will be use beginning
framework,
on or afterPlant and Equipment and MFRS 141, Agriculture – Agriculture: Bearer Plants,
Property,
Amendments
1 January 2017to and that is: Amendments to MFRS 12, Disclosure of interests in Other Entities
(Annual119, Employee Benefits (Annual Improvements 2012-2015 Cycle), Amendments to
MFRS
MFRS 127,
Improvements to MFRS Standards 2014 – 2016 Cycle), Amendments to MFRS 107, Statement
of Cash
Separate Financial
Financial Statements
reports – Equity
of Bank Islam Method
Malaysia in Separate
Berhad Financial
in the year of 2017Statements, and lastly
are also being
is the
Flows –prepared with
Disclosure Initiative and the last one is the Amendments to MFRS 112, Income Taxes –
Recognition
Amendments
accordance to the to MFRS
Companies134, Act
Interim
2016Financial
in whichReporting
it replaced(Annual Improvements
the previous 2012-2015
version used by
Cycle)
previous
of (Bank
Deferredyear
TaxofAssets for Unrealised Losses (Bank Islam Malaysia Berhad, 2016 ).
Islam Malaysia
financial Berhad,
statement, 2015). Act 1965. Some of the changes made in these new act are
Companies
related to the
removal of the authorised share capital, ordinary shares of the Bank ceased to have par or nominal
value and
the Bank’s share premium became part of the share capital (Bank Islam Malaysia Berhad, 2017 ).
At the end
of the year 2017, about RM264,79,400 share premium has been moved to the share capital
pursuant to the
transition provisions set out in Section 618(2) of the CA 2016 and this give no consequences
towards the
3
number of ordinary shares in issue or the relative entitlement of any of the members as a result of
this transfer
of the amount in the share premium account to the share capital account (Bank Islam Malaysia
Berhad, 2017 ).
2. Who is the external auditor for the bank’s annual reports? Besides, explain the roles
performed by
the auditor in ensuring fair presentation of the
annual reports.
The external auditors for Bank Islam Malaysia Berhad is Messrs. KPMG Desa Megat PLT.
This
company are the one that auditing the financial statements of Bank Islam Malaysia Berhad for the
purpose of
ensuring the fair presentation of BIMB’s annual report. The audit that has been done on BIMB’s
financial
statement are following the approved standards on auditing in Malaysia and International
The on
Standards purpose of Messrs. KPMG Desa Megat PLT auditing the financial statement of BIMB’s
are
Auditing (Bank Islam Malaysia Berhad, 2017 ).
because they want to make sure that Bank Islam Malaysia Berhad annual report free from
material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes their
opinions in the
As part of an audit that is following the approved standards on auditing in Malaysia and
financial statement for the best presentation of the report (Bank Islam Malaysia Berhad, 2017 ).
International
Standards on Auditing, Messrs. KPMG Desa Megat PLT are practicing professional judgement and
always
keep professional scepticism during the auditing process in the Bank Islam Malaysia Berhad
(Bank Islam
Malaysia Berhad, 2017 ). Their first role in ensuring the fair presentation of BIMB’s financial
statement is
detecting and assess all the risks for both Group and the Bank itself, that may cause any
misstatement of the
financial statements that are caused by fraud or error, designing and do any suitable audit
procedures towards
the financial statement and the company if any misstatement happen in the financial report, and
they will also
obtain Messrs.
and findKPMG Desa
an audit Megat PLT
evidence thatwill also evaluating
is sufficient the suitability
and applicable of accounting
to provide a source policies
for their used
opinionand
because
rationality
the risk of accounting
of not detecting estimates
a material and relatedcausing
misstatement disclosures
from made byhigher
fraud is the Directors
than the(Bank Islam
one that
Malaysia
are resulting
Berhad,
from 2017
error, ). Besides,
as fraud this company
may involve also falsification,
conspiracy, evaluate theintentional
overall presentation, structure and
omissions and
content of the
misrepresentations (Bank
financial
Islam statements
Malaysia or 2017
Berhad, annual ). report of the Group and of the Bank, including the disclosures and
whether the
3. Identify
financial and explain
statements of thethe
Groupbank’s assets
and the Bankand liabilities
represent (see the transactions
the underlying balance sheet, 2013,
and events
2014, 2015,
in a manner 2016
Balance sheet is an accounting tool that lists assets and liabilities. An asset is any item of
and 2017
that gives a) true and fair view (Bank Islam Malaysia Berhad, 2017 ).
economic
value which could be converted into cash or other economic benefits that are needed. The asset
for Islamic
bank’s balance sheet may include various instruments with a different maturities and risk returns.
There are
three categories of assets such as, an asset resulting from short-term trade financing such as
Murabahah and
Salam. Second, an asset resulting from medium term investments such as Ijarah and Istisna’.
Third, as asset
resulting from long-term investments such as Musharakah. For amount to be recognized as an
asset in the
4
balance sheet, it should first be recognized as legal from the shari’ah view and the bank must be
able to obtain
benefit from it and control the access of others to it. Next, assets as interest receivable in the
conventional
balance sheets are not considered as asset in Islamic bank’s balance sheets. The asset should also
be capable
of financial measurement with a reasonable level of reliability and should not be attributed to a
duty orAs for statements for Bank Islam’s financial position of assets are including cash and
right
short-term
to another party.
funds, deposits and placements with banks and other financial institutions, financial assets held-
for-trading,
derivative financial assets, financial assets available-for-sale, financial assets held-to-maturity,
financing,
advances and others, other assets, statutory deposits with Bank Negara Malaysia, current tax
assets, deferred
tax assets, investments in subsidiaries and last property and equipment. It stated that, Bank
Islam’s total assets
are increased in number
While liabilities arefor about RM2,066,939
obligation in from
that are arise between at the end
a transaction orofother
the year 2016
event thatand 2017.
have
This is occurred
most and
likely
which to happen
involve because
Islamic bank there
in the are increase
transfer in number
of future including
cash, goods cash and
or services, short-term
or to funds,
release future
Financing,
cash transfers,
advances
dates and and others,
solutions others
that can asset, also from
be measured statutory
with deposits
reasonable with Bank
accuracy Negaraand
(Regulation Malaysia.
Supervision,
Corporate
Governance and Financial Accounting of Islamic Banks; IBBI; 2009). Even an obligation that is not
valid As for Bank Islam’s liabilities are including deposits from customers, investment
accounts of
from the Islamic view should be considered as a liability to the Islamic banks.
customers, deposits and placements of banks and other financial institutions, derivative financial
liabilities,
bills and acceptance payable, subordinated Sukuk Murabahah, other liabilities and lastly, zakat and
taxation.
Bank Islam’s total liabilities are also increased in number for about RM1,493,3888. This is because,
there are
increase in number such as deposits from customers, investment accounts of customers. Also,
there much
increase in bills and acceptance payable from RM46,278 to RM420,258 and subordinated Sukuk
Murabahah
from RM704,393 to RM1,006,486.

5
 QUANTITATIVE ANALYSIS

1. Return on Asset

푿ퟏퟎퟎ
푷풓풐풇풊풕 풃풆풇풐풓풆 풛풂
푭풐풓풎풖풍풌풂풕 풂풏풅 풕풂풙
풂 = 푨풗풆풓풂품풆 푻풐풕풂
풍 푨풔풔풆풕풔

RM683,018
퐑퐎퐀(ퟐퟎퟏퟑ) 푋100
= (RM37,450,798 + RM42,836,531)/2
= 1.70%

2013 2014 2015 2016 2017

Profit before
zakat 683,018 701,190 685,131 720,441 766,109

42,836,531 45,829,287 49,767,067 55,683,301

45,829,287 49,767,067 55,683,301 57,750,240

44,332,909 47,798,177 52,725,184 56,716,770.5

0

Return on asset (ROA) is a profitability ratio that provides how much profit a company is able to
generate
from its assets. ROA is used as tools to measure how efficient a company’s management in
generating
earnings from their economic resources or assets on their balance sheet. Based on the diagram
above, the
ROA for Bank Islam Malaysia Berhad in 2016 is 1.37%, where it is decrease in 2017 to 1.35%. The
amount
is decrease 0.02% compared to ROA of Bank Islam Malaysia Berhad in 2016 and this show that
Bank Islam
Malaysia Berhad
2. Return on is not performing better in managing their assets in 2017 compare to 2016. As we
know, the
Equity
higher the return on asset, the better the management, because the company is earning more
푿ퟏퟎퟎ
푷풓풐풇풊풕 풃풆풇풐풓풆 풛풂
money on less 풌풂풕 풂풏풅 풕풂풙
푭풐풓풎풖풍
풂 = 푨풗풆풓풂품풆 푺풉풂풓풆풉풐풍풅
investment. 풆풓′ 풔 푬풒풖풊풕풚

RM683,018
퐑퐎퐄(ퟐퟎퟏퟑ) 푋100
= (RM3,099,615.00 + RM3,329,374.00)/2
= 21.25%

6
 2013 2014 2015 2016 2017
Profit before
zakat 683,018 701,190 685,131 720,441 766,109
and tax (RM)
Beginning of
Shareholder 3,099,615 3,329,374 3,730,628 4,033,053 4,385,955
Equity
(RM)
Ending of 3,329,374 3,730,628 4,033,053 4,385,955 4,959,506
Shareholder
Equity
Average
(RM)
Shareholder 3,214,494.50 3,530,001 3,881,840.50 4,209,504 4,672,730.50
Equity (RM)
ROE 21.25% 19.86% 17.65% 17.11% 16.40%

Return on equity (ROE) is a measure of financial performance calculated by dividing net

income by
shareholder’s equity. ROE is used as tools to measure how efficient the management in using the
company’s
assets to create profits. ROE can be calculated by dividing net income with average
shareholder’s equity.
Based on the diagram above, the ROE for Bank Islam Malaysia Berhad in 2016 is 17.11%. The
value shown
a decreasing trend on the next year where the ROE of Bank Islam Malaysia Berhad in 2017 is
decrease to
16.40%. The decreasing
3. Capital Adequecy trends will affect the decision of the investor to invest in the Bank Islam
Malaysia
Ratio
Berhad. The higher the ROE, the better it is because it shows how well the bank’s management in
deploying
the shareholder’s capital.

RM3,276, 734 +
퐂퐀퐑(ퟐퟎퟏퟑ)
RM278,115 푋100
=
RM25,448,752
= 13.97%

2013 2014 2015 2016 2017

Tier one capital 3,276,734 3,683,883 3,982,346 4,322,052 4,842,048
(RM)
Tier two capital 278,115 336,819 1,069,357 1,091,727 1,414,193
(RM)
Risk Weighted 25,448,752 30,214,978 33,051,425 34,962,864 38,122,639
Assets (RM)
CAR 13.97% 13.31% 15.28% 15.48% 16.41%

Capital adequecy ratios (CAR) are measure of the amount of BIMB capital in relation to the
amount of its
risk weighted credit exposures. It is calculated by dividing a bank’s capital by its risk weighted
assets. Tier 1
7
capital is a core capital and Tier 2 capital is unaudited retained earnings, unaudited reserves and
general loss
reserves. While risk weighted assets are used to determine minimum amount of capital use by
bank to reduce
risk. In BIMB, there is difference 0.931% between 2016 and 2017. The amount is increasing for
both years
and it shows a positive change for BIMB. Generally, if a bank with a high capital adequecy ratio is
considered
safe and likely to meet its financial obligations. CAR is to ensure that it can absorb a reasonable
4. Gross
amount of Impaired Financing
Ratio
loss.
푿ퟏퟎퟎ
푰풎풑풂풊풓풆풅 푭풊풏
푭풐풓풎풖풍 풂풏풄풊풏품
풂 = 푻풐풕풂풍 푮풓풐풔풔 푭
풊풏풂풏풄풊풏품

RM285,302
퐆퐈퐅(ퟐퟎퟏ 푋100
ퟑ) = RM24,242,520

2014 2015 2016 2017

344,539 398,277

30,111,712 34,960,226 39,872,443 42,685,936

1.14% 0.93%

Gross impaired financing ratio (GIF) is the possible outcome or percent that the principal and profit
payment
would not be collected. In conventional it is called gross impaired loan ratio. In BIMB, the amount
of GIF is
decreasing year by year. In 2016 and 2017, the amount decreases by 0.05%. This shows a
positive outcome
as the customers make payment for their financing. From this they can prevent non-performing
5. Financing to Deposit
financing
Ratio
which a customers who never bother to pay back.
푿ퟏퟎퟎ
푵풆풕 풇풊풏풂풏풄풊풏품 &
푭풐풓풎풖풍푨풅풗풂풏풄풆풔
풂 = 푪풖풔풕풐풎풆풓′ 풔
푫풆풑풐풔풊풕

RM23,740,948
퐅퐃퐑(ퟐퟎퟏퟑ) 푋100
= RM37,272,452
= 63.70%

2013 2014 2015 2016 2017

Net Financing & 23,740,948 29,524,571 34,294,690 39,189,274 42,113,420
Advances (RM)
Customer’s 37,272,452 41,010,332 43,556,350 45,940,414 46,192,910
Deposit
(RM) FDR 63.70% 71.99% 78.73% 85.30% 91.17%

8
Financing to deposit ratio (FDR) is applied to assess a bank's liquidity. Referred on the table
above, the
amount is increasing by 27.47% from year 2013 to 2017. In 2016, the FDR is 85.30%. Then, the
percentage
is increase in 2017 which is 91.17% as the value of net financing & advance with the customer’s
deposit also
6. Earnings per
increase.
Share
푵풆풕 푰풏풄풐풎풆 − 푷풓풆풇풆풓풓풆풅
푫풊풗풊풅풆풏풅풔
푾풆풊품풉풕풆풅 푨풗풆풓풂품풆 푺풉풂풓풆풔
푭풐풓풎풖풍풂 =
푶풖풕풔풕풂풏풅풊풏품

RM485,726,000
퐄퐏퐒(ퟐퟎퟏퟑ) =
RM2,265,579,521 +
RM2,265,490,000/2

2014 2015 2016 2017

510,502,000 507,262,000 530,962,000 566,118,000

Preferred
Dividends - - - - -
(RM)
Weighted
Average
Shares 2,432,597,69
Outstanding 9
During the
Year (RM)
Weighted
Average
Shares 2,265,490,000 2,265,579,521 2,304,002,824 2,337,037,729
Outstanding 2,381,774,336
on Previous
Year (RM)
Weighted
Average
Shares
Outstanding 2,265,534,761 2,284,791,173 2,320,520,277 2,359,406,033
(RM) 2,407,177,018
EPS RM0.21 RM0.22 RM0.22 RM0.23 RM0.24

Earnings per share (EPS) is an indicator to know how much profit a company has generated.
Earnings per
share is the portion of a company's profit that is allocated to each outstanding share of its
common stock.
Based on the table, the EPS in 2016 is RM0.23 and increase by RM0.01 in 2017, which is RM0.24. It
proven
that BIMB’s profitability is better year by year as the EPS increase.

9
 CONCLUSION

The qualitative analysis can be concluded that the accounting standards used by Bank
Islam Malaysia
Berhad in preparing the annual reports is MFRS or known as Malaysian Financial Reporting
Standards.
MFRS is the Islamic Financial Report Standard (IFRS) which is the compliant framework that
improves
credibility and transparency of the financial reporting regime in Malaysia. Meanwhile, the external
auditor
for the BIMB’s annual reports is Messrs. KPMG Desa Megat PLT and they need to audit the
financial
statements of BIMB for the purpose of ensuring the fair presentation of BIMB’s annual report. To
ensure fair
presentation of the annual reports of BIMB, one of their roles is detecting and assess all the risks
for both
Group and the Bank itself. Next, as for the BIMB’s assets and liabilities, both are increasing from
year 2016
to 2017. Meanwhile, for quantitative analysis, BIMB is not performing better in managing their
asset and
equity as their ROA and ROE is decrease from year 2016 to 2017. As the CAR shows the positive
change for
BIMB, we can see that the BIMB is likely to meet its financial obligations meanwhile for the BIMB’s
REFERENCES
GIF, it
Anitha
also Rosland,
shows M. outcome
a positive H. (2013).
andProduk Simpanan
they can Berasaskan Ganjaran:
prevent non-performing financingKajian
which Kes Di Bank
a customers
Islam
who never
Malaysia Berhad (BIMB) Dan Bank Simpanan Nasional (BSN). Labuan e-Journal of
bother to pay back. Lastly, the FDR of BIMB is increasing from year 2016 to 2017 by 5.87% while
the EPSMuamalat and Society, 74.
Bank Islam Malaysia Berhad. (2015). 2015 Annual Report.
is BIMB.
increasing too, which is by RM0.01 and tt proven that BIMB’s profitability is better year by year.
Bank Islam Malaysia Berhad. (2016 ). 2016 Annual Report. Bank Islam Malaysia
Berhad.

Bank Islam Malaysia Berhad. (2017 ). 2017 Annual Report. Bank Islam Malaysia
Berhad.
Malaysian Accounting Standards Board. (2018). MASB. Retrieved from
MASB:http://www.masb.org.my/press_list.php?
id=132
Malaysian Accounting Standards Board. (2018). MASB. Retrieved from
MASB:http://www.masb.org.my/pages.php?
id=250
Nor Farizal Mohammed, F. M. (2019). The need for Islamic accounting standards: the
Malaysian
Islamic financial institutions experience. Journal of Islamic Accounting and
Business
Research, 119.

10