LABUAN IBFC INDUSTRY PERFORMANCE 2018 25 March 2019 1 28-year - PowerPoint PPT Presentation

LABUAN IBFC INDUSTRY PERFORMANCE 2018 25 March 2019 1

28-year journey: Trust and Confidence remained in Labuan IBFC 01 Evolving with international business landscape and regulatory changes 02 Adopted midshore approach to combine regulatory upscaling with business dynamism 03 Ensure sustainability by undertaking strategic transformation Greater contribution to regional business 04 growth 2

Key Highlights in 2018 • Lending activities by banks recorded historical high • Double-digit growth of 19.1% growth in loans 12.5% in new company 14.6% growth in total deposits incorporations • Labuan IBFC remains in the radar of Far Eastern investors - • Recovery of oil prices spur Japan, China and South Korea commodity trading and leasing activities 40.4% growth in LITCs’ revenue • Foreign insurance business – major source of six-year 88.6% growth in new leased high for gross premiums assets value underwritten 19.1% growth in gross • Digital market - hybridisation of premiums FinTech solutions and conventional 67.4% of captive financial products to create more premiums derived from out- innovative offerings out business • Digital exchanges, securities token, payment system, robo-advisors 3

Labuan IBFC Sectoral Business Performance 2018

Labuan companies continued the growing trend Newly Registered Companies Origin of Labuan Companies Number of Number of companies companies 700 1,400 1,280 Europe, 12.1% 600 1,200 Asia & The 1,059 12.6% Pacific, 60.1% Americas, 500 941 1,000 11.2% 836 790 6,031 12.1% 400 800 Labuan 708 Middle East, 630 3.8% Companies 4.5% 300 600 545 61% (2017: 5,789) 485 472 423 9.8% 200 400 Far East, 275 12.8% 2017 220 224 193 100 178 200 168 137 127 121 2018 0 0 2014 2015 2016 2017 2018 Trading Non - Trading Trading & Non-Trading New Incorporated/ Registered (RHS) 5

Trust companies positioned to expand service offerings Main source of income from Profitability trend improved secretarial services Profitability Source of Income Number of USD companies million Others, 58 30.0 60 19.6% 52 Secretarial, 47 58.5% 20.0% 25.0 50 43 Professional 39 Services, 55.3% 20.0 40 2.1% 2.9% 15.0 30 Administration 26.2 9.6% 24.6 24.6 23.6 23.5 Support, 11.8% 10.0 20 12.2% 2017 9.1 5.0 10 8.4 7.9 8.0 7.4 Trustee, 2018 8.0% 0.0 0 2014 2015 2016 2017 2018 Total Income Profit Before Tax Number of Trust Companies 6

Insurance premiums at a six-year high Driven by significant growth in reinsurance Largely contributed by ASEAN sector markets Premiums and Retention Premiums by Ownership USD % million Malaysian 1,800 80% Business 71.9% 35% 1,600 65.7% 70% 64.1% Foreign 40% 63.2% USD0.59bil 60.9% Business 1,400 60% 65% 1,200 USD1.08bil 50% 2017 1,000 2018 40% 800 30% Premiums by Country Concentration 600 20% 400 15% 10% 200 Malaysia 15% Singapore 4% 35% 0 0% 4% Japan 39% 2014 2015 2016 2017 2018 6% 4% United Kingdom 7% Direct General Insurance General Reinsurance Indonesia 6% Captive Lloyd's Syndicate 6% 2017 Thailand Net Retention Ratio 9% 8% China 16% 2018 Others 9% 17% 7

Insurance profitability remained strong despite higher claims experience Fire business remained the largest Higher claims narrowed underwriting sub-sector margin growth Profitability Premiums by Sector USD million 1,200 999.7 982.8 970.1 945.8 1,000 862.4 96 35% 286 59 33% 40% 37% 92 800 367 325 50 206 68 173 600 2017 60 65 191 173 197 10% 2018 400 8% 12% 622 8% 547 455 7% 200 388 10% 342 0 2014 2015 2016 2017 2018 Fire Marine Engineering Motors Misc. Net Claims Incurred Net Commission Management Expenses Underwriting Margin Earned Premium (Re)takaful Business  Total Gross Contribution: +4.4% to USD95.9 mil  Underwriting Margin: Improved from underwriting losses USD1mil to profit USD26.2 mil 8

Banking sector maintained its business momentum Driven by lending to Growth in deposits, however Predominantly to oil residents funding still primarily supported and gas related sector by Head Office Total Loans and Assets USD USD billion billion 55.0 Financing by Sector Total Deposits 35.0 51.0 51.0 50.7 Agriculture, Hunting, USD Forestry and Fishing 47.4 47.4 50.0 Miscellaneous billion 44.3 44.3 30.0 Mining and Other Services 11.2 11.2 12.0 Quarrying 10.8 10.8 Financing, 40.0 25.0 Insurance and 9.5 Manufacturing 10.0 9.1 9.1 Business Services 8.3 20.0 30.0 2017 8.0 Transport, 2018 Storage and 15.0 Communications Electricity, 20.0 Gas and 6.0 Wholesale and Water 10.0 Retail Trade Property 10.0 4.0 2.8 5.0 2.5 Financing by Region 1.8 1.6 1.2 2.0 0.0 0.0 Others 2014 2015 2016 2017 2018 Middle East Loans to Non Resident Africa 0.0 Latin America Loans to Resident 2014 2015 2016 2017 2018 Total Financing (RHS) Europe Total Assets (RHS) Resident Non Resident Total Deposits 2017 ASEAN Islamic Business 2018  Financing: +8.4% to USD2.7 bil 9  Deposits: +10% to USD212.7 mil  Assets: +2.4% to USD3.2 bil

Banks profit margin reduced due to high interest expense Slower growth in PBT due to higher Interest expenses to interest income ratio interest expenses and trading losses grew significantly over the last 5 years PBT, ROA and ROE Net Interest Income USD USD % % million million 700 25 1,800 0.8 1,600 67.0% 0.7 600 20 1,400 56.2% 0.6 500 1,200 14.5% 46.7% 0.5 14.0% 15 400 1,000 39.0% 38.5% 0.4 800 300 10 0.3 600 200 0.2 400 5 100 0.1 200 0.9% 0.9% 0 0 0 0.0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Profit Before Tax ROE (%) ROA (%) Total Interest Income Total Interest Expenses Interest Expenses to Interest Income (%) 10

Labuan international commodity trading expanded in tandem with oil prices recovery Total Revenue Local Spending and Employment Number of Number of USD billion USD million LITCs Jobs 40 60 200 800 698 33.4 180 35 700 652 50 30.0 160 30 557 600 537 528 140 40 23.8 25 500 120 19.0 57 30 20 100 400 17.1 177 48 80 15 300 144 50 20 60 114 111 109 43 10 200 40 10 37 36 5 100 20 24 6 10 12 0 0 0 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Local Expenditure No. of LITCs Revenue Tax Revenue Contribution (Estimated) Employment 11

Leasing market rationalising under the new Labuan Tax Framework Leasing Companies and Leased Assets by Sectors New Lease Assets by sectors Number of Number of Companies/ USD billion Companies Subsequent USD billion Transactions 40.0 500 37.8 7.0 180 165 34.1 450 160 35.0 33.0 32.6 32.3 6.0 143 400 140 30.0 350 5.0 120 25.0 300 4.0 20.4 100 20.0 250 68 15.8 80 15.6 3.0 200 60 15.0 13.1 12.0 60 150 2.0 45 10.0 36 35 40 100 1.0 18 5.0 20 50 1.2 0.9 0.8 0.0 0.6 4.1 1.6 2.2 5.3 0.0 1.0 3.7 0.0 3.1 5.8 0.0 0.4 0 0.0 0.0 0 2014 2015 2016 2017 2018 2015 2016 2017 2018 Oil & Gas Oil & Gas Aviation Others Total Number Aviation Others Total New Companies Total New Subsequent Transactions 12

Emerging businesses continued to draw regional investors especially FinTech-based business solutions Capital Market Money Broking Private Fund • 9 new money brokers (2017: 7) • 10 new private funds (2017: 10) • Of the total 35, 37.1% are from Far East region, mainly from • USD0.9bil approved fund size mostly served as investment Japan and Hong Kong vehicles for infrastructure projects in ASEAN region • Digitised platform to improve clients trade experience and Intermediaries further expand on product range • FinTech help to deliver innovative solutions with cost • Circular on Innovative Financial Services in Labuan IBFC was efficiency for better investment decisions issued to facilitate FinTech-related business Wealth Management • 38 new foundations (2017: 29) • Of total 162, 31 are Charitable and 131 are Non-Charitable Foundations • Mainly from Asia & the Pacific region • 105 Labuan trusts: 14 registered and 91 unregistered 14

Employment across key industries Total Number of Total Number of Employment Employment 1200 2,800 2,702 2,700 1000 2,600 2,549 2,545 800 2,500 600 2,400 2,300 400 2,200 200 2,100 0 2,000 Banks Insurance Trust Companies LITCs Banks Insurance Trust Companies LITCs Banks Insurance Trust Companies LITCs 2016 2017 2018 Malaysian Foreign Total Employment 14

Key strategies moving forward EMBRACE TECHNOLOGICAL- BASED SOLUTIONS Attract new players and enhance products offerings 02 Reputable Sustainable 03 01 UPSCALE SUPERVISION AND STRENGTHEN SUBSTANCE ENFORCEMENT FOR BUSINESSES Enhance supervisory and regulatory Leveraging on substance functions for market stability, business requirements confidence and reputation