| Soneri Bank Ltd - 2004 |
================================================================================================================= BALANCE SHEET AS AT 31 DECEMBER 2004 ================================================================================================================= Note 2004 2003 (Rupees in '000) ================================================================================================================= Assets Cash and balances with treasury banks 6 3,627,569 2,821,394 Balances with other banks 7 2,793,190 1,057,546 Lendings to financial and other institutions 8 3,585,421 2,705,000 Investments 9 13,982,828 11,912,517 Advances 10 24,375,905 17,348,525 Other assets 11 671,372 477,187 Operating fixed assets 12 815,614 643,960 Deferred tax assets - - 49,851,899 36,966,129 Liabilities Bills payable 13 893,762 808,858 Borrowings from financial institutions 14 7,957,364 4,998,149 Deposits and other accounts 15 37,383,756 27,868,418 Sub-ordinated loans - - Liabilities against assets subject to finance lease 16 - 3,301 Other liabilities 17 530,952 582,112 Deferred tax liabilities 18 42,757 101,445 46,808,591 34,362,283 Net Assets 3,043,308 2,603,846 Represented by Share capital 19 1,271,919 1,017,535 Reserves 1,592,071 1,210,203 Un-appropriated profit 14,771 2,643 2,878,761 2,230,381 Surplus on revaluation of assets 20 164,547 373,465 3,043,308 2,603,846 Contingencies and commitments 21 ================================================================================================================= ================================================================================================================= PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2004 ================================================================================================================= Notes 2004 2003 (Rupees in '000) ================================================================================================================= Mark-up / Return / Interest Earned 22 1,947,657 1,713,971 Mark-up / Return / Interest Expensed 23 (752,276) (789,645) Net Mark-up / Return / Interest Income 1,195,381 924,326 Reversal / (Provision) against non-performing loans and advances 10.3 15,054 (72,840) Provision for diminution in the value of investments - - Bad debts written-off directly - - 15,054 (72,840) Net mark-up / Return / Interest Income after provisions 1,210,435 851,486 Non Mark-up/ Interest Income Fee, Commission and Brokerage income 177,247 153,964 Dividend income 17,405 2,922 Income from dealing in foreign currencies 121,834 121,560 Other income 24 163,216 184,734 Total Non Mark-up / Interest Income 479,702 463,180 1,690,137 1,314,666 Non Mark-up / Interest Expenses Administrative expenses 25 (642,231) (499,924) Reversal / (Provision) against other assets 3 (87) Other charges 26 (1,343) (1,143) Total non mark-up / interest expenses (643,571) (501,154) 1,046,566 813,512 Extraordinary / unusual items - - Profit before taxation 1,046,566 813,512 Taxation - current 27 (365,000) (396,000) - Prior years 27 116,959 (4,854) - Deferred 27 (150,145) 26,054 (398,186) (374,800) Profit after taxation 648,380 438,712 Un-appropriated profit brought forward 2,643 6,057 Profit available for appropriation 651,023 444,769 Appropriations: Transfer to: Statutory reserve (129,676) (87,742) Proposed issue of bonus shares @ 30% (2003: 25%) (381,576) (254,384) General reserve (125,000) (100,000) (636,252) (442,126) Un-appropriated profit carried forward 14,771 2,643 Basic / diluted earnings per share (Rupees) 28 5.10 3.45 ================================================================================================================= ================================================================================================================= CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 ================================================================================================================= Note 2004 2003 (Rupees in '000) ================================================================================================================= Cash Flow from Operating Activities Profit before taxation 1,046,566 813,512 Less: Dividend income (17,405) (2,922) 1,029,161 810,590 Adjustments for Non-Cash Items Depreciation and write-offs 85,840 67,260 (Reversal) / provision against non-performing advances and other assets (15,057) 72,887 Profit on disposal of operating fixed assets (2,806) (1,003) Finance charges on leased assets 168 794 68,145 139,938 1,097,306 950,528 (Increase) / Decrease in Operating Assets Lendings to financial and other institutions (880,421) (96,250) Advances (7,012,326) (6,043,744) Other assets (excluding tax recoverable) (144,920) 199,288 (8,037,667) (5,940,706) Increase / (Decrease) in operating liabilities Bills payable 84,904 376,643 Borrowings from financial institutions 2,959,215 1,568,361 Deposits and other accounts 9,515,338 7,323,707 Other liabilities (excluding current taxation) (12,467) (423,451) 12,546,990 8,845,260 5,606,629 3,855,082 Income tax paid (335,996) (300,312) Net cash in flow from operating activities 5,270,633 3,554,770 Cash flow from investing activities Net investments in available-for-sale securities (1,420,070) (2,347,208) Net investments in held-to-maturity securities (1,067,992) - Dividend income 17,405 2,922 Investmens in operating fixed assets (258,656) (239,427) Sale proceeds of property and equipment disposed-off 3,968 3,246 Net cash out flow on investing activities (2,725,345) (2,580,467) Cash flow from Financing Activities Payments of lease obligations (3,469) (10,164) Dividend paid - (101,753) Net cash out flow on financing activities (3,469) (111,917) Increase in cash and cash equivalents 2,541,819 862,386 Cash and cash equivalents at beginning of the year 3,878,940 3,016,554 Cash and cash equivalents at end of the year 29 6,420,759 3,878,940 ================================================================================================================= ===================================================================================================================================
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004
===================================================================================================================================
Share Capital reserves General Un-appro- Total
capital Reserve Share Statutory reserve priated
for issue of premium reserve profit
bonus shares (a)
(Rupees in '000)
===================================================================================================================================
Balance at 01 January 2003 1,017,535 - 1,405 470,462 296,210 6,057 1,791,669
Profit for the year - - - - - 438,712 438,712
Transfers - - - 87,742 100,000 (187,742) -
Transfer to reserve for issue of bonus share - 254,384 - - - (254,384) -
Balance at 31 December 2003 1,017,535 254,384 1,405 558,204 396,210 2,643 2,230,381
Profit for the year - - - - - 648,380 648,380
Transfers - - - 129,676 125,000 (254,676) -
Issue of bonus shares 254,384 (254,384) - - - - -
Transfer to reserve for issue of bonus share - 381,576 - - - (381,576) -
Balance at 31 December 2004 1,271,919 381,576 1,405 687,880 521,210 14,771 2,878,761
=================================================================================================================================== (a) This represents reserve created under section 21(i)(a) of the Banking Companies Ordinance, 1962.NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004 1. STATUS AND NATURE OF BUSINESS Soneri Bank Limited was incorporated in Pakistan on 28 September 1991 as a public limited company under the Companies Ordinance, 1984 with registered office in Lahore, Punjab. Its shares are quoted on all the stock exchanges in Pakistan. The bank is engaged in banking services as described in the Banking Companies Ordinance, 1962 and operates 52 branches (2003: 44) in Pakistan. 2. BASIS OF PRESENTATION (a) In accordance with the directives of the federal government regarding the shifting of the banking system to Islamic modes, the State Bank of Pakistan has issued various circulars from time to time. One permissible form of trade related mode of financing include purchase of goods by the bank from its customers and immediate resale to them at appropriate mark-up in price on deferred payment basis. The purchases and sales arising under these arrangements are not reflected in these financial statements as such but are restricted to the amount of facility actually utilised and the appropriate portion of mark-up thereon. (b) The financial results and position of the Islamic Banking branch of the bank has been consolidated in these financial statements for reporting purposes, after eliminating material intra bank transactions/balances. The financial results of the Islamic Banking branch are disclosed in note 40 to these financial statements. 3. STATEMENT OF COMPLIANCE These financial statements are prepared in accordance with approved accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984 and the Banking Companies Ordinance, 1962. Approved accounting standards comprise of such International Accounting Standards as notified under the provisions of the Companies Ordinance, 1984. Wherever the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or the directives issued by the Securities and Exchange Commission of Pakistan and the State Bank of Pakistan differ with requirements of these standards, the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or the requirements of the said directives take precedence. The State Bank of Pakistan as per BSD Circular No. 10 dated 26 August 2002 has deferred the applicability of International Accounting Standarde 39, (IAS 39) 'Financial Instruments: Recognition and Measurement' and International Accounting Standard 40, (IAS 40) 'Investment Property' for Banking Companies. Accordingly, the requirements of these standards have not been considered in the preparation of these financial statements. However, investments have been classified in accordance with the requirements prescribed by the State Bank of Pakistan through various circulars. 4. BASIS OF MEASUREMENT These financial statements have been prepared under the historical cost convention, except that certain investments are stated at market value, derivative financial instruments have been marked to market and staff retirement benefits are carried at present value. 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 5.1. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprises cash and balances with treasury bank and balances with other banks. 5.2. LENDINGS TO / BORROWINS FROM FINANCIAL AND OTHER INSTITUTIONS The bank enters into transactions of repos and reverse repos at contracted rates for a specified period of time. These are recorded as under: (a) Sale under repurchase obligation Securities sold subject to a re-purchase agreement (repo) are retained in the financial statements as investments and the counter party liability is included in borrowings. The differential in sale and re-purchase value is accrued over the period of the contract and recorded as an expense. (b) Purchase under resale obligation Securities purchase under agreement to resell (reverse repo) are included in lendings to financial and other institutions. The differential between the contracted price and resale price is amortised over the period of the contract and recorded as income. (c) Other borrowings These are recorded at the proceeds received. Mark-up paid on such borrowings is charged to the profit and loss account over the period of borrowings. 5.3. INVESTMENTS The bank classifies its investments as follows: (a) Held for trading These are securities, which are either acquired for generating a profit from short-term fluctuation in market prices, interest rate movements, dealers margin or are securities included in a portfolio in which a pattern of short-term profit making exists. (b) Held to maturity These are securities with fixed or determinable payments and fixed maturity that the bank has the positive intent and ability to hold to maturity. (c) Available for sale These are investment that do not fall under the held for trading or held to maturity categories. All purchase and sale of investments that require delivery within the time frame established by regulation or market convention are recognised at the trade date, which is the date the bank commits to purchase or sell the investment. Premium or discount on acquisition of investments is capitalised and amortised through the profit and loss account over the remaining period till maturity. In accordance with the requirements of State Bank of Pakistan, quoted securities other than those classified as held to maturity are stated at market value. During the year the bank has changed its accounting policy in respect of accounting for unrealised surplus / (deficit) arising on revaluation of held for trading securities. As per the new policy, surplus / (deficit) arising on revaluation of the bank's held for trading securities is taken to the profit and loss account. This change has been made to comply with the requirements laid down in BSD Circular No. 10 dated 13 July 2004 issued by the State Bank of Pakistan. Previously, this surplus/(deficit) was required to be shown in the balance sheet below equity as per the State Bank of Pakistan's BSD Circular No. 20 dated 4 August 2000. The change in policy did not have any impact on the profit for the year as the bank has not classified any securities in this category. During the year, the bank has also changed its accounting policy in respect of valuation of investments classified as held to maturity. According to the new policy, these investments are carried at amortised cost. Previously, these investments were marked to market as per the requirements of SBP's BSD Circular No 20 dated 4 August 2000 and the related surplus / (deficit) was shown in the balance sheet below equity. This change has been made to comply with the requirements laid down in BSD Circular No. 14 dated 24 September 2004, issued by the State Bank of Pakistan. The change in accounting policy did not have any impact on the profit and loss account for the current and the prior period. Had the accounting policy not been changed, the surplus on revaluation of assets and the value of investments as at 31 December 2004 would have been lower by Rs 57.90 and Rs 93.40 million respectively and deferred tax liability would have been lower by Rs 35.50 million. The surplus / (deficit) arising on quoted securities classified as available for sale is kept in a separate account shown in the balance sheet below equity. Unquoted equity securities are valued at the lower of cost and break-up value. Subsequent increases or decreases in the carrying value are credited/charged to income. Break-up value of equity securities is calculated with reference to the net assets of the investee company as per the latest available audited financial statements. Investments in other unquoted securities are valued at cost less impairment losses. Provision for diminution in the values of securities (except term finance certificates) is made after considering permanent impairment, if any, in their value. Provisions for diminution in value of term finance certificates is made as per the Prudential Regulations issued by the State Bank of Pakistan. Profit and loss on sale of investments is included in income currently. 5.4. ADVANCES Advances are stated at cost less specific and general provisions. Specific provision is made for non performing advances in accordance with the requirements of the Prudential Regulations issued by the State Bank of Pakistan. The bank also maintains general provision for present potential losses of performing advances and consumer financing portfolio. 5.5. FIXED ASSETS AND DEPRECIATION OWNED Owned assets are stated at cost less accumulated depreciation and accumulated impairment loss (if any) except capital work in progress which is stated at cost. The cost of property and equipment is depreciated over the useful lives of the related assets under the straight line method. Fixtures costing Rs 10,000 or less and all other items of fixed assets costing Rs 2,000 or less are not capitalised and charged to income. Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are capitalised. Gains and losses on sale of fixed assets are included in income currently. LEASED Property and equipment subject to finance lease are accounted for by recording the assets and the related liability. These are stated at lower of fair value and present value of minimum lease payments at inception of the lease less accumulated depreciation. Financial charges are allocated over the period of lease term in a manner so as to provide a constant periodic rate of financial charge on the outstanding liability. Depreciation on assets held under finance lease is charged in a manner consistent with that for depreciable assets which are owned by the bank. 5.6. OPERATING LEASES Lease payments under operating leases are charged to income on a straight line basis over the lease term. 5.7. TAXATION CURRENT Provision for current taxation is based on the taxable income for the year determined in accordance with the prevailing laws for taxation on income. The charge for the current tax is calculated using prevailing tax rates. The charge for current tax also includes adjustments, where considered necessary relating to prior years, arising from assessments made during the year. DEFERRED Deferred tax is recognised using the balance sheet liability method on all temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and amounts used for taxation purposes. Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on tax rates that have been enacted by the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax asset is reduced to the extent that it is no longer probable that the related tax benefits will be realised. Deferred tax, if any, on revaluation of investments is recognised as an adjustment to surplus / (deficit) arising on revaluation. 5.8. PROVISIONS Provisions are recognised when the bank has a legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate. 5.9. STAFF BENEFITS DEFINED BENEFIT PLAN The bank operates an approved funded gratuity scheme for all its permanent employees. Contributions are made in accordance with the actuarial recommendation. DEFINED CONTRIBUTION PLAN The bank operates an approved provident fund scheme for all its permanent employees. Equal monthly contributions are made, both by the bank and its employees, to the fund at the rate of 8.33 percent of basic salaries of the employees. The minimum qualifying period of service for bank's contribution is five years. 5.10. EMPLOYEE COMPENSATED ABSENCES Employees' entitlement to annual leave is recognised when they accrue to employees. A provisions is made for estimated liability for annual leave as a result of services rendered by the employee against unavailed leaves upto the date of balance sheet. 5.11. REVENUE RECOGNITION Mark-up income and expense are recognsied on a time proportion basis taking into account the effective yield on the instrument. Mark-up / return on classified advances and investments is recognised on receipt basis. Interest, return, mark-up on rescheduled / restructured advances and investments is recognised as permitted by the Prudential Regulations issued by the State Bank of Pakistan, except where in the opinion of the management, it would not be prudent to do so. Fee, commission and brokerage income is recognised when earned. Dividend income from investments is recognised when the bank's right to receive the dividend is established. 5.12. FOREIGN CURRENCIES Foreign currency transactions are translated into rupees at the exchange rates prevailing on the date of the transaction. Assets and liabilities in the foreign currencies are translated into rupees at the exchange rates prevailing at the balance sheet date. The fair value of forward cover taken from the State Bank of Pakistan, if any, for foreign currency deposits is added / (deducted) from value of foreign currency deposits. Outstanding forward foreign exchange contracts and foreign bills purchased excluding swap contracts are valued at the rates applicable to the respective maturities. However, premium on swap contracts is amortised over the period of swap and the movement in ready rates since the initiation of swap is also accounted for. Exchange gains and losses are included in the current income. 5.13. Provision for guarantee claims and other off balance sheet obligations Provision for guarantee claims and other off balance sheet obligations is recognised when intimated and reasonable certainty exists for the bank to settle the obligation. Expected recoveries are recognsied by debiting customers' account. Charge to profit and loss account is stated net of expected recoveries. 5.14. ACCEPTANCES Acceptances comprise undertakings by the bank to pay bills of exchange drawn on customers. The bank expects most acceptances to be simultaneously settled with the reimbursement from the customers. Acceptances are accounted for as off balance sheet transactions and are disclosed as contingent liabilities and commitments. 5.15. OFF-SETTING Financial assets and financial liabilities are only off-set and the net amount is reported in the financial statements when there exists a legally enforceable right to set-off and the bank intends either to settle on a net basis or to realise the assets and to settle the liabilities simultaneously. Income and expense items of such assets and liabilities are also off-set and the net amount is reported in the financial statements. 6. CASH AND BALANCES WITH TREASUARY BANKS =============================================================================================
2004 2003
Notes (Rupees in '000)
=============================================================================================
In hand
- Local currency 6.1 754,320 530,509
-Foreign currency 239,800 195,426
With State Bank of Pakistan in
Local currency current account 6.2 1,925,817 1,392,895
Foreign currency current account 6.3 147,173 158,418
Foreign currency deposit account against
foreign currency deposits mobilised 6.4 451,549 475,252
With National Bank of Pakistan in local currency
Current account 108,910 68,894
3,627,569 2,821,394
=============================================================================================6.1. This includes National Prize Bonds of Rs. 1.770 million (2003: Rs. 0.683 million).6.2. This represents statutory cash reserve maintained under section 22 of the Banking Companies Ordinance, 1962. 6.3. This represents current account maintained with the SBP under the requirements of BSD Circular No. 18 dated 31 March 2001. 6.4. This represents deposit account maintained with the SBP under the requirements of BSD Circular No. 18 dated 31 March 2001. Profit rates are fixed on a monthly basis by the SBP. During the current year, this deposit account was remunerated at rates ranging from 0.59% p.a. to 1.50% p.a. (2003: 0.62% p.a. to 0.88% p.a.). 7. BALANCES WITH OTHER BANKS =============================================================================================
2004 2003
Note (Rupees in '000)
=============================================================================================
In Pakistan
On current account 299,011 280,607
On deposit account 15 15
Outside Pakistan
On current account 7.1 2,494,164 776,924
2,793,190 1,057,546
=============================================================================================7.1. This includes Rs. 313.107 million (2003: Rs. 53.263 million) which were held in Automated Investment Plans. This balance is current by nature and on increase in the balance to specified amount, interest is received from the correspondent banks at agreed upon rates.8. LENDINGS TO FINANCIAL AND OTHER INSTITUTIONS =============================================================================================
2004 2003
Notes (Rupees in '000)
=============================================================================================
Call money lendings 8.1 1,100,000 800,000
Repurchase agreement lending (Reverse Repo) 8.2 2,035,421 1,150,000
Others-Letters of placement 8.3 450,000 755,000
3,585,421 2,705,000
=============================================================================================8.1. These represent lendings to various commercial banks in the inter bank money market. These carry mark-up at rates ranging from 4.35% to 7.00% p.a. (2003: From 2.55% to 7.50% p.a.) and have a maturity period of upto one month.8.2. SECURITIES HELD AS COLLATERAL AGAINST LENDINGS TO FINANCIAL AND OTHER INSTITUTIONS ==============================================================================================
2004 2003
Particulars Held by Further Total Held by Further Total
bank given as bank given as
collateral collateral
(Rupees in '000)
==============================================================================================
Pakistan Investment Bond 100,000 - 100,000 1,150,000 - 1,150,000
Ordinary shares 1,935,421 - 1,935,421 - - -
2,035,421 - 2,035,421 1,150,000 - 1,150,000
==============================================================================================The above lendings carry mark-up rates ranging from 3.80% p.a. to 14.00% p.a. (2003: From 2.25% to 7.00% p.a.) and have a maturity period of upto one month.8.3. These represent lendings to various financial institutions and carry mark-up at rates ranging from 5.00% to 6.00% p.a. (2003: From 2.50% to 9.50% p.a.) with a maturity period of up to three months. 9. INVESTMENS 9.1. INVESTMENTS BY TYPES ===========================================================================================================================
2004 2003
Held by Further Total Held by Further Total
bank given as bank given as
collateral collateral
(Rupees in '000)
===========================================================================================================================
Available-for-sale securities
Market Treasury Bills - - - 3,371,719 197,024 3,568,743
Pakistan Investment Bonds 2,591,335 1,006,982 3,598,317 4,318,706 1,144,452 5,463,158
Federal Investment Bonds 673,431 - 673,431 777,846 - 777,846
Fully paid-up ordinary shares 188,408 - 188,408 149,183 - 149,183
Units of mutual funds 225,641 - 225,641 49,870 - 49,870
Fully paid-up preference shares 25,000 - 25,000 - - -
Certificates of Investments/
Musharika - - - 1,095,000 - 1,095,000
Term Finance Certificates
and bonds - - - 808,717 - 808,717
3,703,815 1,006,982 4,710,797 10,571,041 1,341,476 11,912,517
Held-to-maturity securities
Market Treasury Bills 2,288,451 - 2,288,451 - - -
Pakistan Investment Bonds 2,994,113 526,242 3,520,355 - - -
Certificates of Investments/
Musharika 2,670,000 - 2,670,000 - - -
Term Finance Certificates
and bonds 793,225 - 793,225 - - -
8,745,789 526,242 9,272,031 - - -
12,449,604 1,533,224 13,982,828 10,571,041 1,341,476 11,912,517
===========================================================================================================================9.2. INVESTMENTS BY SEGMENT=================================================================================================================
2004 2003
Note (Rupees in '000)
=================================================================================================================
Federal Government Securities
Market Treasury Bills 2,288,451 3,568,743
Federal Investment Bonds 9.3 673,431 777,846
Pakistan Investment Bonds 7,118,672 5,463,158
Fully paid-up ordinary shares of Rs. 10 each
Listed Companies
- Hub Power Company Ltd [439,000 (2003: 289,000)] 14,048 11,141
- Sui Northern Gas Pipeline Co. Ltd. [Nil (2003: 5000)] - 206
- Fauji Fertilizer Company Ltd. [358,930 (2003: 138,200)] 49,891 12,998
- Pakistan Oilfields Ltd. [82,600 (2003: 82,600)] 19,308 19,394
- Pakistan State Oil Company Ltd. [64,000 (2003: 64,000)] 18,144 18,560
- Engo Chemicals Pakistan Ltd. [206,000 (2003: 106,000)] 26,430 9,312
- Oil & Gas Development Co. Ltd. [203,124 (2003: 903,124)] 14,666 46,872
- Askari Commercial Bank Ltd. [45,000 (2003: Nil)] 4,196 -
- Pakistan Telecommunication Co. Ltd. [250,000 (2003: Nil)] 11,025 -
Un-listed companies
-Khushhali Bank [25 (2003: 25)] shares of
Rs. 1,000,000 each 9.4 25,000 25,000
(President: Mr. M. Ghalib Nishtar)
- Pakistan Export Finance Guarantee Agency Ltd.
[569,958 (2003: 569,958)] 9.5 5,700 5,700
(Chief Executive: Mr. S.M. Zaeem)
Fully Paid up preference shares of Rs 10 each
Listed Companies
- Shakarganj Mills Ltd [2,500,000 (2003: Nil)] 25,000 -
Term Finance Certificates, Debenures, Bonds
and Participation Term Certificates
Listed Term Finance Certificates of Rs. 5,000 each
- Dewan Salman Fibre Ltd [Nil (2003: 5,000)] - 6,242
- Pak Arab Refinery Ltd [Nil (2003: 10,000)] - 49,960
- Shahmurad Sugar Mills Ltd [4,000 (2003: 4,000)] 9,996 16,660
- Dawood Leasing Co. Ltd [5,000 (2003: 5,000)] 25,000 25,000
- Orix Leasing Pakistan Ltd [10,000 (2003: 10,000)] 50,000 50,000
- Engro Chemicals Pakistan Ltd [10,000 (2003: 10,000)] 49,950 49,970
- Sui Southern Gas Co. Ltd [4,000 (2003: 4,000)] 16,653 19,988
- Quetta Textile Mills Ltd [Nil (2003: 9,590)] - 47,950
- Maple Leaf Cement Factory Ltd [4,000 (2003: 4,000)] 13,328 19,992
- Crescent Leasing Corporation Ltd [3,000 (2003: 3,000)] 15,000 15,000
- Shakarganj Mills Ltd [4,000 (2003: 4,000)] 15,990 19,992
- KASB Leasing Ltd [4,000 (2003: 4,000)] 17,493 19,996
- Gulistan Textile Mills Ltd. [3,000 (2003: 3,000)] 15,000 15,000
- Securetel SPV Ltd. [5,000 (2003: 5,000)] 10,417 18,750
- Atlas Investment Bank Ltd. [3,000 (2003: 3,000)] 4,996 9,992
- Paramount Leasing Ltd. [Nil (2003: 3,000)] - 14,997
- Trust Leasing Ltd. [3,000 (2003: Nil)] 15,000 -
- Bank Al-Habib Ltd. [5,000 (2003: Nil)] 25,000 -
- United Bank Ltd. [8,000 (2003: Nil)] 40,000 -
- Askari Commercial Bank Ltd. [5,000 (2003: Nil)] 25,000 -
- Jahangir Siddiqui & Co. Ltd. [4,000 (2003: Nil)] 19,996 -
Un-Listed Term Finance Certificates of Rs. 5,000 each
- Dewan Sugar Mills Ltd. [Nil (2003: 5,000)] - 15,156
- D.G. Khan Cement Co. Ltd. [Nil (2003: 10,000)] - 49,990
- Kohinoor Textile Mills Ltd. [5,000 (2003: 5,000)] 21,875 25,000
- Dewan Textile Mills Ltd. [10,000 (2003: 10,000)] 31,250 43,750
- Crescent Leasing Corporation Ltd. [6,000 (2003: 6,000)] 21,000 27,000
- Trust Commercial Bank Ltd. (formarly Fidelity Investment Bank Ltd.)
[5,000 (2003: 5,000)] 24,990 25,000
- Grays Leasing Ltd. [3,000 (2003: 3,000)] 13,125 15,000
- Crescent Steel & Allied Products Ltd. [8,000 (2003: Nil)] 40,000 -
- Dewan Farooque Spinning Mills Ltd. [5,000 (2003: Nil)] 9.6 25,000 -
- Tandlianwala Sugar Mills Ltd. [2,000 (2003: Nil)] 9.6 9,667 -
- Pakistan Mobile Communication (Pvt) Ltd. [10,000 (2003: Nil)] 50,000 -
Others - Units of Mutual Funds
Open ended
- National Investment Unit Trust [2,897,027 (2003: 1,445,850)] 108,349 38,966
- Meezan Islamic Fund [227,288 (2003: 200,000)] 9.7 14,217 10,904
- Atlas Stock Market Fund [20,000 (2003: Nil)] 9.8 10,242 -
- Faysal Balanced Growth Fund [101,837 (2003: Nil)] 10,598 -
Closed-end
- ABAMCO Composite Fund [3,889,697 (2003: Nil)] 31,506 -
- Pakistan Capital Market Fund [2,492,000 (2003: Nil)] 24,920 -
- Pakistan Strategic Allocation Fund [2,500,000 (2003: Nil)] 9.9 23,750 -
- PICIC Investment Fund [134,600 (2003: Nil)] 2,059 -
WAPDA Registered Bonds [250 (2003: 250)]
certificates of Rs 1,000,000 each 187,499 208,332
Certificates of Investment / Musharika 2,670,000 1,095,000
13,982,828 11,912,517
=================================================================================================================9.3. This includes securities having a book value of Rs. 38.113 million (2003: Rs. 41.729 million) pledged with the State Bank of Pakistan and the National Bank of Pakistan as security to facilitate T.T. discounting facility to branches of the bank.9.4. As per the terms of issue, the investment cannot be disposed of prior to completion of fifth anniversary of investment falling due on 10 October 2005. Profits if any, and other income of Khushhali Bank, shall not be used to pay any dividend to the members, and shall be utilised to promote the objective of Khushhali Bank. 9.5. THIS INVESTMENT CAN ONLY BE SOLD TO AN EXISTING INVESTOR 9.6. These represent payments made by the bank as per Initial Public Offering (IPO) subscription of TFCs. The term finance certificates against these subscriptions have not been issued by 31 December 2004. 9.7. As per the terms of issue, the units cannot be disposed prior to completion of second anniversary of investment falling due on 31 July 2005. 9.8. As per the terms of issue, the units cannot be disposed prior to completion of second anniversary of investment falling due on 30 October 2006. 9.9. As per the terms of issue, 15% of the total bank's holding (i.e. 375,000 units), cannot be disposed of prior to completion of second anniversary of investment falling due on 13 August 2006. 9.10. Market Treasury Bills, Federal Investment Bonds and Pakistan Investment Bonds are eligible for discounting with the State Bank of Pakistan. ===============================================================================================================
Name of investment Maturity Principal Payments Coupon rate Coupon payments
===============================================================================================================
Market Treasury Bills Jan 2005 to May 2005 On maturity 1.97% to 3.94% At maturity
Federal Investment Bonds Jan 2005 to Nov 2007 On maturity 15% Semi-annually
Pakistan Investment Bonds Jan 2005 to Jan 2024 On maturity 6% to 14% Semi-annually
Term Finance Certificates Jan 2005 to May 2014 Semi-annually 4.47% to 17% Semi-annually
WAPDA registered bonds Oct 2005 In four installments 12.50% Semi-annually
commencing from the
end of second year
Certificates
of Investment/ Jan 2005 to March 2005 On maturity 3.00% to 13.00% At maturity
Musharika
===============================================================================================================10. ADVANCES=================================================================================================================
2004 2003
Note (Rupees in '000)
=================================================================================================================
Loans, cash credits, running finances, etc.
In Pakistan 21,248,445 15,551,149
Bills discounted and purchased (excluding treasury bills)
Payable in Pakistan 333,676 136,054
Payable outside Pakistan 3,119,109 2,005,964
3,452,785 2,142,018
24,701,230 17,693,167
Provision against advances-specific and general 10.3 (325,325) (344,642)
24,375,905 17,348,525
=================================================================================================================10.1. PARTICULARS OF ADVANCES10.1.1. =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
In local currency 20,889,830 13,648,328
In foreign currencies 3,486,075 3,700,197
24,375,905 17,348,525
=================================================================================================================10.1.2.=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Short term (for upto one year) 20,151,787 15,014,585
Long term (for over one year) 4,224,118 2,333,940
24,375,905 17,348,525
=================================================================================================================10.2. Advances include Rs. 262.424 million (2003: Rs. 297.659 million) which have been placed under non-performing status as detailed below:=====================================================================================
Category of Classification Domestic Overseas Total Provision Provision
required held
(Rupees in '000)
=====================================================================================
Other assets especially mentioned - - - - -
Substandard - - - - -
Doubtful - - - - -
Loss 262,424 - 262,424 262,424 262,424
262,424 - 262,424 262,424 262,424
=====================================================================================10.3. PARTICULARS OF PROVISION AGAINST ADVANCES==========================================================================================
2004 2003
Specific General Total Specific General Total
(Rupees in '000)
==========================================================================================
Opening balance 304,142 40,500 344,642 271,842 - 271,842
Charge for the year 8,186 6,401 14,587 32,340 40,500 72,840
Amounts written off (4,263) - (4,263) - - -
Transfers (16,000) 16,000 - - - -
Reversals (29,641) - (29,641) (40) - (40)
Closing balance 262,424 62,901 325,325 304,142 40,500 344,642
==========================================================================================10.3.1. The provisioning requirement against non-performing advances and consumer financing has been determined after taking into account the directives contained in the revised Prudential Regulations issued by the State Bank of Pakistan which became applicable with effect from 01 January 2004.10.3.2. The general provision against consumer financing amounts to Rs. 12.901 million (2003: Rs. 6.500 million), being 1.5% against secured portfolio and 5% against unsecured portfolio and has been determined in accordance with the requirements of the revised Prudential Regulations. General provision also includes a provision of Rs 50 million (2003: Rs. 34.00 million) made for potential losses and has been determined on the basis of management's best estimate. 10.4. PARTICULARS OF WRITE OFFs 10.4.1. AGAINST PROVISIONS =================================================================================================================
2004 2003
Notes (Rupees in '000)
=================================================================================================================
10.3 4,263 -
Directly charged to Profit and Loss account - -
4,263 -
Write offs of Rs. 500,000 and above 10.5 4,263 -
Write offs of below Rs. 500,000 v -
4,263 -
=================================================================================================================10.5. DETAILS OF LOANS WRITE OFFS OF RS. 500,000 AND ABOVEIn terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the Statement in respect of written off loans or any other financial relief of five hundred thousand rupees or above allowed to persons during the year ended 31 December 2004 is given at Annexure-I. However, this write off does not effect the bank's right to recover the debts from these customers. 10.6. PARTICULARS OF LOANS AND ADVANCES TO DIRECTORS, ASSOCIATED COMPANIES, ETC =================================================================================================================
Balance as at Maximum total amount
31 December of advances including
2004 temporary advances
granted during the year
(Rupees in '000)
=================================================================================================================
Debts due by directors, executives or officers of the bank or
any of them either severally or jointly with any other persons 70,750 72,578
Debts due by companies or firms in which the directors of the
Bank are interested as directors, partners or in the case of
Private companies as members - -
Debts due by subsidiary companies, controlled firms, managed
modarabas and other related parties - -
70,750 72,578
================================================================================================================= * The maximum amount has been calculated by reference to month end balances.10.7. Mark-up on non-performing advances in memorandum account as at 31 December 2004 amounted to Rs. 52.278 million (2003: Rs. 57.709 million). =================================================================================================================
2004 2003
Note (Rupees in '000)
=================================================================================================================
Income / mark-up accrued in local currency 439,192 322,615
Income / mark-up accrued in foreign currency 8,637 8,922
Advances, deposits, advance rent and other prepayments 66,793 53,072
Non-banking assets acquired in satisfaction of claims - -
Unrealised gain on forward foreign exchange contracts 36,806 27,597
Stationery and stamps on hand 17,715 22,770
Due from the State Bank of Pakistan 17,358 43,543
Suspense account 13,093 3,181
Income tax recoverable 49,262 -
Advance against Membership Card of Islamabad Stock Exchange 11,100 -
Others 14,935 4,432
674,891 486,132
Provision held against other assets 11.1 (3,519) (8,945)
671,372 477,187
=================================================================================================================11.1. PROVISION AGAINST OTHER ASSETS=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Opening balance 8,945 8,858
Charge for the year - 87
Reversals (3) -
Amount written off (5,423) -
Closing balance 3,519 8,945
=================================================================================================================12. FIXED ASSETS=================================================================================================================
2004 2003
Notes (Rupees in '000)
=================================================================================================================
Capital work-in-progress 12.1 50,305 73,159
Property and equipment 12.2 765,309 570,801
815,614 643,960
=================================================================================================================12.1. CAPITAL WORK-IN-PROGRESS=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Civil works 35,724 40,987
Consultants' fee and other charges 1,953 3,587
Advances to suppliers and contractors 388 2,372
Advance against purchase of premises 12,240 26,213
50,305 73,159
=================================================================================================================12.2. PROPERTY AND EQUIPMENT=============================================================================================================================================
COST ACCUMULATED DEPRECIATION Book value Rate of
At 1 Jan Additionsl Disposals/ At 31 Dec At 1 Jan Charge/ Disposals/ At 31 DecAt 31 Dec depreciation
2004 Transfers Adjustments 2004 2004 Transfer Adjustments 2004 2004 (% per annum)
(Rupees in '000)
=============================================================================================================================================
Leasehold land and
buildings on
leasehold land 416,045 180,347 - 694,679 74,267 24,042 - 137,377 557,302 5
98,287 39,068
Furniture, fixtures
and equipment 430,882 77,987 (7,898) 413,986 232,936 51,680 (7,783) 243,299 170,687 10 - 20
(86,985) (33,534)
Vehicles 53,561 23,176 (5,450) 71,287 28,252 10,118 (4,403) 33,967 37,320 20
Assets held under
finance lease:
Furniture, fixtures and
equipment 11,302 - - - 5,534 - - - - 10 -20
(11,302) (5,534)
2004 911,790 281,510 (13,348) 1,179,952 340,989 85,840 (12,186) 414,643 765,309
- - - -
2003 677,777 244,570 (10,557) 911,790 282,040 67,178 (8,229) 340,989 570,801
- - - -
=============================================================================================================================================12.2.1. The cost of fully depreciated property and equipment still in use amounted to Rs. 126.852 million (2003: Rs. 136.626 million).12.2.2. As per the management's estimate, the fair value of the property and equipment is not materially different from the carrying amount. 12.2.3. Disposals/deletions of fixed assets with original cost or book value in excess of Rupees one million or two hundred fifty thousand respectively (which ever is less): ===============================================================================================================
Particulars Cost Book Sale Mode of Particulars of purchaser
value price disposal
(Rupees in '000)
===============================================================================================================
Furniture, fixtures and equipment
WDV below Rs. 100,000/- each7,898 115 528 Tender Various
Motor vehicles 849 537 700 Insurance claim EFU General Insurance Ltd.
560 457 530 Insurance claim EFU General Insurance Ltd.
WDV below Rs. 100,000/- each4,041 53 2,210 Tender Various
5,450 1,047 3,440
===============================================================================================================In addition to above, no other assets with original cost or book value in excess of Rupees one million or two hundred fifty thousand (whichever is less) were disposed-of during the year.Further, during the year no assets were disposed-of to chief executive or a director or an executive or a shareholder holding not less than ten percent of the voting shares of the bank or any related party. 13. BILLS PAYABLE =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
In Pakistan 893,762 808,858
Outside Pakistan - -
893,762 808,558
=================================================================================================================14. BORROWINGS FROM FINANCIAL INSTITUTIONS=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
In Pakistan 6,008,764 4,317,245
Outside Pakistan 1,948,600 680,904
7,957,364 4,998,149
=================================================================================================================14.1. PARTICULARS OF BORROWINGS FROM FINANCIAL INSTITUTIONS=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
In local currency 6,008,764 4,317,245
In foreign currencies 1,948,600 680,904
7,957,364 4,998,149
=================================================================================================================14.2. DETAILS OF BORROWINGS FROM FINANCIAL INSTITUTIONS=================================================================================================================
2004 2003
Notes (Rupees in '000)
=================================================================================================================
Secured
Borrowings from the State Bank of Pakistan
under export refinance scheme 14.2.1 4,608,764 3,170,348
Repurchase agreement borrowings 14.2.2 1,400,000 1,146,897
6,008,764 4,317,245
Unsecured
Overdrawn nostro accounts 1,948,600 680,904
7,957,364 4,998,149
=================================================================================================================4.2.1. As per the Export Refinance Scheme, the State Bank of Pakistan charges rates ranging from 1.50% to 3.50% pre annum (2003: 1.50% to 3% per annum). These are secured against demand promissory notes.14.2.2. These funds are borrowed in the local inter-bank market against pledge of Government Securities at rates ranging between 3.00% to 4.75% per annum (2003: 1.50% to 2.95% per annum), maturing up to three months. 15. DEPOSITS AND OTHER ACCOUNTS =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Customers
Remunerative
Fixed deposits 4,702,875 5,901,673
Saving deposits 22,874,208 16,008,942
Non-Remunerative
Current accounts 7,616,711 4,828,447
Call deposits 253,345 186,807
Margin deposits 188,463 192,538
Special exporter account 48,714 -
Others 51,862 19,019
35,736,178 27,137,426
Financial Institutions
Remunerative saving deposits 839,548 712,544
Remunerative fixed deposits 807,733 18,446
Non-remunerative current deposits 297 2
1,647,578 730,992
37,383,756 27,868,418
=================================================================================================================15.1. PARTICULARS OF DEPOSITS=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
In local currency 34,448,875 24,751,006
In foreign currencies 2,934,881 3,117,412
37,383,756 27,868,418
=================================================================================================================16. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE==================================================================================================
2004 2003
Minimum Financial Principal Minimum Financial Principal
lease charges for outstanding lease charges for outstanding
payments future periods payments future periods
(Rupees in '000)
==================================================================================================
Not later than one year - - - 3,469 168 3,301
Later than one year and
not later than five - - - - - -
- - - 3,469 168 3,301
==================================================================================================The bank had entered into various lease agreements with leasing companies and modarabas for furniture, equipment and vehicles. Monthly lease rentals included financial charges ranging between 11.59% to 15.07% per annum. The Bank had an option to purchase the assets upon completion of lease period which was duly excercised during the year.17. OTHER LIABILITIES =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Income / mark-up / interest payable in local currency 194,228 259,834
Income / mark-up / interest payable in foreign currency 878 1,613
Unearned commission 15,775 10,856
Accrued expenses 47,074 9,805
Provision for compensated absences 20,197 20,793
Current taxation (provision less payments) 170,952 209,645
Branch adjustment account 30,211 31,920
Others 51,637 37,646
530,952 582,112
=================================================================================================================18. DEFERRED TAX LIABILITIES=================================================================================================================
2004 2003
Note (Rupees in '000)
=================================================================================================================
Deferred tax credits arising due to:
Accelerated tax depreciation 100,832 -
Excess of accounting book value of leased assets over
lease liabilities - 1,085
Surplus on revaluation of securities 20 84,604 293,437
185,436 294,522
Deferred tax debits arising in respect of:
Provision against non-performing advances (123,624) (151,642)
Mark-up in suspense (19,055) (22,064)
Tax depreciation - (19,371)
(142,679) (193,077)
42,757 101,445
=================================================================================================================19. SHARE CAPITAL19.1. AUTHORISED CAPITAL ===================================================================================================
2004 2003
200,000,000 150,000,000 Ordinary shares of Rs. 10 each 2,000,000 1,500,000
===================================================================================================
19.2. Issued, subscribed and paid up capital
===================================================================================================
33,000,000 33,000,000 Ordinary shares of Rs. 10 each fully paid in cash 330,000 330,000
Ordinary shares of Rs. 10 each issued as
94,191,796 68,753,437 fully paid bonus shares 941,919 687,535
127,191,796 101,753,437 1,271,919 1,017,535
===================================================================================================20. SURPLUS ON REVALUATION OF ASSETS20.1. SURPLUS/(DEFICIT) ON REVALUATION OF AVAILABLE FOR SALE SECURITIES =================================================================================================================
2004 2003
Note (Rupees in '000)
=================================================================================================================
Federal Government securities 222,642 647,669
Quoted shares/mutual funds 26,509 19,375
Others - (142)
249,151 666,902
Less: Related deferred tax liability 8 84,604 293,437
164,547 373,465
=================================================================================================================21. CONTINGENCIES AND COMMITMENTS21.1. DIRECT CREDIT SUBSTITUTES =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Financial guarantees issued favouring:
- Government 18,703 18,123
- Others 29,738 4,962
48,441 23,085
=================================================================================================================21.2. TRANSACTION-RELATED CONTINGENT LIABILITIES=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Guarantees issued favouring:
- Government 1,236,193 674,965
- Financial Institutions 48,615 41,240
- Others 375,392 386,089
1,660,200 1,102,294
=================================================================================================================21.3. TRADE-RELATED CONTINGENT LIABILITIES=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Letters of credit 6,190,240 5,221,648
Acceptances 2,788,568 1,582,297
=================================================================================================================21.4. COMMITMENTS IN RESPECT OF FORWARD LENDINGS=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Commitments to extend credit 170,243 1,033,543
=================================================================================================================21.5. COMMITMENTS IN RESPECT OF FORWARD EXCHANGE CONTRACTS=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Purchase
- From the State Bank of Pakistan - -
- From other banks 3,249,377 2,443,328
- From customers 3,736,598 2,609,972
Sale
- To banks 3,770,464 4,448,475
- To customers 1,913,848 194,600
=================================================================================================================21.6. COMMITMENTS IN RESPECT OF REPO TRANSACTIONS=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Repurchase (Repo) 1,407,273 1,156,423
Resale (Reverse Repo) 100,958 1,153,452
=================================================================================================================21.7. CONTINGENT ASSETSThere are no contingent assets as at 31 December 2004 22. MARK-UP / RETURN / INTEREST EARNED =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
On loans and advances to customers 1,069,758 869,365
On investments in available for sale and held to maturity securities 774,738 666,774
On deposits with financial institutions / the State Bank of Pakistan 5,861 3,622
On securities purchased under resale agreements 38,636 18,053
On call money lendings 40,273 21,277
On placements with financial institutions 18,391 133,513
Others - 1,367
1,947,657 1,713,971
=================================================================================================================23. MARK-UP / RETURN / INTEREST EXPENSED=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Deposits 618,605 669,293
Securities sold under repurchase agreements 60,024 67,349
Call borrowings 398 775
Borrowings from the State Bank of Pakistan under export
re-finance scheme 73,249 52,228
752,276 789,645
=================================================================================================================24. OTHER INCOME=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Rent on lockers 2,811 2,773
Net profit on sale of property and equipment 2,806 1,003
Recovery of expenses from customers 63,535 43,514
Net gain on sale of investments in available for sale securities 33,815 85,818
Service charges 36,373 34,553
Miscellaneous 23,876 17,073
163,216 184,734
=================================================================================================================25. ADMINISTRATIVE EXPENSES=================================================================================================================
2004 2003
Notes (Rupees in '000)
=================================================================================================================
Salaries, allowances, etc. 184,189 152,397
Charge for compensated absences 10,878 7,734
Charge for defined benefit plan 31.5 5,218 4,779
Contribution to defined contribution plan 6,223 5,035
Non-executive directors' fees, allowances
and other expenses 37 20
Brokerage and commission 9,083 10,328
Rent, taxes, insurance, electricity, etc. 60,780 50,125
Legal and professional charges 5,192 4,887
Communications 40,180 34,955
Repairs and maintenance 10,298 9,792
Finance charges on leased assets 168 794
Stationery and printing 23,797 19,576
Advertisement and publicity 20,020 12,638
Auditors' remuneration 25.1 963 1,062
Depreciation 12.2 85,840 67,178
Automation expenses 61,560 34,733
Entertainment expenses 11,435 10,243
Fees and subscriptions 8,694 4,074
Motor vehicles running expense 14,090 10,727
Remittance charges 18,298 13,816
Service charges 21,694 19,210
Travelling expenses 9,897 7,555
Others 33,697 18,266
642,231 499,924
=================================================================================================================25.1. AUDITORS' REMUNERATION=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Audit fee 500 500
Fee for half-yearly review of financial statements 100 100
Fee for audit of provident and gratuity funds 15 -
Special certifications 280 405
Out of pocket expenses 68 57
963 1,062
=================================================================================================================26. OTHER CHARGES=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Penalties imposed by the State Bank of Pakistan
as a result of annual inspection 982 1,061
Operating fixed assets written-off - 82
Zakat paid 361 -
1,343 1,143
=================================================================================================================27. TAXATION=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
For the year
Current 365,000 396,000
Deferred 150,145 (26,054)
515,145 369,946
For prior years
Current (116,959) 4,854
398,186 374,800
=================================================================================================================27.1. RELATIONSHIP BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Profit before taxation 1,046,566 813,512
Tax at the applicable tax rate of 41% (2003:44%) 429,092 357,945
Effect of change in tax rate 26,329 10,592
Income chargeable to tax at reduced rates (6,266) (1,139)
Income exempt from tax (13,649) (1,752)
Deferred tax charge in respect of allowances relating to prior years 80,747 -
Others (1,108) 4,300
515,145 369,946
Current taxation 365,000 396,000
Deferred taxation 150,145 (26,054)
515,145 369,946
=================================================================================================================27.2. The income tax assessments of the bank have been finalised upto and including the assessment year 2002-2003 (income year ended 31 December 2002). Matters of disagreement exist between the bank and tax authorities for the assessment years 1993-1994 and 1998-1999 to 2002-2003 and are pending with the Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal.The issues mainly relate to addition of mark-up in suspense to income and disallowances of certain expenses. The Bank has, however, made provisions in respect of these disallowances on account of prudence. 28. BASIC / DILUTED EARNING PER SHARE =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Profit for the year after taxation 648,380 438,712
Weighted average number (in thousand of
ordinary shares) 127,192 127,192
Earnings per share (Rupees) 5.10 3.45
=================================================================================================================29. CASH AND CASH EQUIVALENTS=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Cash and balances with treasury banks 3,627,569 2,821,394
Balances with other banks 2,793,190 1,057,546
6,420,759 3,878,940
=================================================================================================================30. STAFF STRENGTH=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Total number of employees at the end of the year 937 882
=================================================================================================================31. DEFINED BENEFIT PLAN31.1. GENERAL DESCRIPTION The benefits under the gratuity scheme are payable on retirement at the age of 60 or earlier cessation of service, in lumpsum. The benefit is equal to one month's last drawn salary for each year of eligible service or part thereof, subject to a minimum of five years of service. 31.2. PRINCIPAL ACTUARIAL ASSUMPTIONS The actuarial valuation is carried out annually at year-end using "Projected Unit Credit Actuarial Cost Method". The main assumptions used for actuarial valuation were as follows: - Discount rate is 8% per annum. - Expected rate of increase in salaries is 8% per annum. - Expected rate of return on investments is 8% per annum. - Withdrawal rate before normal retirement age is "moderate". A portion of the actuarial gain or losses is recognised if the net cumulative unrecognised actuarial gains or losses at the end of the previous year exceeds the "corridor" which is defined as the greater of: a) 10% of the present value of the defined benefit obligation at that date (before deducting plan assets) and; b) 10% of the fair value of any plan assets at that date. =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Present value of defined obligations 53,054 42,087
Fair value of plan assets (50,864) (42,141)
Net actuarial (losses) or gains not recognised (2,190) 54
- -
=================================================================================================================The gratuity plan assets include a deposit maintained with the bank at a fair value of Rs 2.462 million (2003: Rs. 6.036 million).31.4. MOVEMENT IN PAYABLE TO DEFINED BENEFIT PLAN =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Opening balance - -
Charge for the year 5,218 4,779
Contribution made during the year (5,218) (4,779)
Closing balance - -
=================================================================================================================31.5. CHARGE FOR DEFINED BENEFIT PLAN=================================================================================================================
2004 2003
Note (Rupees in '000)
=================================================================================================================
Current service cost 5,221 4,628
Interest cost 2,352 2,961
Expected return on plan assets (2,355) (2,810)
25 5,218 4,779
=================================================================================================================31.6.=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Actual return on plan assets 6,236 4,864
=================================================================================================================32. REMUNERATION OF DIRECTORS AND EXECUTIVES========================================================================================================
Particulars President/ Chief Director *Exectives
Executive Officer
2004 2003 2004 2003 2004 2003
(Rupees in '000)
========================================================================================================
Fees - - 37 20 - -
Managerial remuneration 3,846 3,496 19 97 6,543 4,661
Charge for defined benefit plan 481 437 11 10 567 402
Contribution to defined
contribution plan 320 291 - - 599 427
Rent and house maintenance 1,831 1,673 8 39 2,617 1,864
Utilities 217 177 2 10 654 466
Conveyance - - - 3 - -
Bonus and leave encashment 961 982 4 53 4,659 3,532
7,656 7,056 81 232 15,639 11,352
Number of persons 1 1 5 3 8 6
========================================================================================================The bank also provides free use of bank's maintained cars to chief executive and executives.*Executive means employees, other than the chief executive and directors, whose basic salary exceeds five hundred thousand rupees in a financial year. 33. MATURITIES OF ASSETS AND LIABILITIES ====================================================================================================
2004
Total Upto three Over three months Over one year Over five
Months to one year to five years years
(Rupees in '000)
====================================================================================================
Assets
Cash and balances with
treasury banks 3,627,569 3,627,569 - - -
Balances with other banks 2,793,190 2,793,190 - - -
Lending to financial and
other institutions 3,585,421 3,585,421 - - -
Investments 13,982,828 4,809,217 1,827,713 3,181,534 4,164,364
Advances 24,375,905 6,383,263 13,768,524 2,776,971 1,447,147
Other assets 671,372 656,117 11,100 - 4,155
Fixed assets 815,614 233 52,113 184,204 579,064
49,851,899 21,855,010 15,659,450 6,142,709 6,194,730
Liabilities
Bills payable 893,762 893,762 - - -
Borrowing from financial
institutions 7,957,364 7,957,364 - - -
Deposits and other accounts 37,383,756 12,675,877 9,791,347 8,055,047 6,861,485
Liabilities against assets
subject to finance lease - - - - -
Other liabilities 530,952 360,000 170,952 - -
Deferred tax liabilities 42,757 - - 42,757 -
46,808,591 21,887,003 9,962,299 8,097,804 6,861,485
Net assets 3,043,308 (31,993) 5,697,151 (1,955,095) (666,755)
Share capital 1,271,919
Reserves 1,592,071
Un-appropriated profit 14,771
Surplus on revaluation of assets 164,547
3,043,308
====================================================================================================33.1. The deposits and other accounts include saving deposits which have no contractual maturity, however these deposits have been allocated into the above item bands based on actual trend of withdrawal of the said deposits.33.2. The bank's Asset and Liability Committee regularly monitors liquidity risk by taking corrective measures in respect of the maturity mismatch in its assets and liabilities. 34. YIELD / INTEREST RATE RISK Yield risk is the risk decline in earnings due to adverse movement of the yield curve. Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in the market interest rates. The bank is exposed to yield/interest rate risk as a result of mismatches or gaps in the amount of assets and liabilities and off balance sheet instruments that mature or re-price in a given period. The bank manages this risk by matching the re-pricing of assets and liabilities and off-balance sheet instruments. The bank's yield/ interest rate sensitivity position, based on the earlier of contractual re-pricing or maturity date, is as follows: ================================================================================================================================================================
2004
Effective Total Exposed to yield/interest rate risk Not exposed to
yield / interest Upto three Over three Over one Over Yield/interest
rate (a) months months to years to five years rate risk
one year five year
upees in '000)
================================================================================================================================================================
On-balances sheet financial instruments
Assets
Cash and balances with treasury banks 1.29% 3,627,569 598,722 - - - 3,028,847
Balances with other banks 1.25% 2,793,190 2,494,164 - - - 299,026
Lendings to financial and
other institutions 10.50% 3,585,421 3,585,421 - - - -
Investments 6.26% 13,982,828 4,370,168 1,827,905 3,181,342 4,164,364 439,049
Advances (b) 5.85% 24,375,905 6,383,263 13,768,524 2,776,971 1,447,147 -
Other assets 0.00% 550,058 - - - - 550,058
48,914,971 17,431,738 15,596,429 5,958,313 5,611,511 4,316,980
Liabilities
Bills payable 0.00% 893,762 - - - - 893,762
Borrowing from financial and
other institutions 3.51% 7,957,364 6,008,763 - - - 1,948,601
Deposits and other accounts (c) 1.97% 37,383,756 4,516,484 9,791,347 8,055,047 6,861,485 8,159,393
Liabilities against assets subject
to finance lease 0.00% - - - - - -
Other liabilities 0.00% 417,173 - - - - 417,173
46,652,055 10,525,247 9,791,347 8,055,047 6,861,485 11,418,929
On-balance sheet gap 2,262,916 6,906,491 5,805,082 (2,096,734) (1,249,974) (7,101,949)
Total yield / interest rate risk sensitivity gap 6,906,491 5,805,082 (2,096,734) (1,249,974)
Cumulative yield / interest rate risk sensitivity gap 6,906,491 12,711,573 10,614,839 9,364,865
================================================================================================================================================================The on-balance sheet gap represents the net amounts of on-balance sheet items.(a) The effective interest rate is a historical rate for a fixed rate instrument carried at amortised cost and a current market rate for a floating rate instrument. (b) The effective interest rate has been computed by excluding non-performing advances. (c) The effective interest rate has been computed by excluding non-remunerative deposits. 35. CURRENCY RISK Currency risk is the risk that the value of a financial instrument will fluctuate due to change in foreign exchange rates. Foreign currency forward contracts are revalued daily on mark to market basis which reflects the extent risk against each contract. Other off balance sheet items are revalued at each balance sheet date. The bank also maintains overall foreign exchange risk position within ten percent of its capital as advised by the State Bank of Pakistan. =========================================================================
2004
Assets Liabilities Off balance Net foreign
sheet items currency
exposure
(Rupees in'000)
=========================================================================
Pakistan rupee 45,228,278 41,682,395 (1,318,120) 2,227,763
United States dollar 3,265,447 4,323,115 1,070,974 13,306
Great Britain pound 144,968 291,008 149,680 3,640
Japanese yen 12,654 19,835 6,670 (511)
Euro 245,826 328,540 82,568 (146)
Other currencies 17,798 7,162 8,228 18,864
48,914,971 46,652,055 - 2,262,916
=========================================================================36. FAIR VALUE OF FINANCIAL INSTRUMENTS36.1. The fair value is the amount for which an asset could be exchanged or a liability settled, between knowledgeable willing parties in an arm's length transaction. 36.2. ON-BALANCES SHEET FINANCIAL INSTRUMENTS ==========================================================================================
2004 2003
Book value Fair value Book value Fair value
(Rupees in '000)
==========================================================================================
Assets
Cash and balance with
treasury banks 3,627,569 3,627,569 2,821,394 2,821,394
Balances with other banks 2,793,190 2,793,190 1,057,546 1,057,546
Lending to financial and
other institutions 3,585,421 3,585,421 2,705,000 2,705,000
Investments 13,982,828 13,889,450 11,912,517 11,940,155
Advances:
- Term finance of over one year 4,224,118 4,224,118 6,541,655 6,541,655
- Staff loans 70,750 70,750 56,125 56,125
- Other advance 20,081,037 20,081,037 10,750,745 10,750,745
Other assets 550,058 550,058 380,554 380,554
48,914,971 48,821,593 36,225,536 36,253,174
Liabilities
Bills payable 893,762 893,762 808,858 808,858
Borrowings from financial institutions 7,957,364 7,957,364 4,998,149 4,998,149
Deposits:
- Fixed term deposits of over
one year 1,193,562 1,193,562 1,278,090 1,278,090
- Other deposits 36,190,194 36,190,194 26,590,328 26,590,328
Liabilities against assets subject to
finance lease - - 3,301 3,301
Other liabilities 417,173 417,173 307,883 307,883
46,652,055 46,652,055 33,986,609 33,986,609
==========================================================================================The fair value of Government Securities, listed Term Finance Certificates, listed share, units of mutual funds and WAPDA Registered Bonds is based on quoted prices. In the opinion of management, the fair value of remaining financial assets and liabilities are not significantly different from the book value since assets and liabilities are either short term in nature or frequently re-priced, except for fixed term advances of over one year, staff loans and fixed term deposits of over one year.In the opinion of management, the fair value of fixed term advances of over one year, staff loans and fixed term deposits of over one year cannot be calculated with sufficient reliability due to non-availability of relevant active market for similar asset and liabilities. 36.3. OFF-BALANCE SHEET FINANCIAL INSTRUMENT =========================================================================================
2004 2003
Book Fair Book Fair
value value value value
(Rupees in '000)
=========================================================================================
Forward purchase of foreign exchange 6,943,244 6,985,975 5,025,592 5,053,300
Forward sale of foreign exchange 5,677,016 5,684,312 4,642,965 4,643,075
=========================================================================================37. CONCENTRATION OF CREDIT AND DEPOSITS37.1. CREDIT RISK AND CONCENTRATION OF CREDIT RISK Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The bank attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counter-parties and continually assessing the credit worthiness of counter-parties. It also obtains security where appropriate. Concentration of credit risk arises when a number of counter-parties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by change in economic, political or other conditions. Concentration of credit risk indicates the relatives sensitive of the bank's performance of developments, affecting a particular industry or geographical location. The bank seeks to manage its credit risk exposure through diversification of lending activities to avoid overdue concentration of risks with individuals or groups of customer in specific location or business. 37.2. SEGMENT BY CLASS OF BUSINESS ====================================================================================================================
2004
Advances Deposits Contingencies and commitments
(Rupees in'000) (Percent) (Rupees in'000) (Percent) (Rupees in'000) (Percent)
====================================================================================================================
Textile 11,268,844 46.23 2,310,858 6.18 1,785,764 16.71
Food and allied 2,507,893 10.29 253,445 0.68 794,666 7.44
Individuals 1,615,400 6.63 14,466,378 38.70 8,779 0.08
Other 8,983,768 36.85 20,353,075 54.44 8,098,240 75.77
24,375,905 100.00 37,383,756 100.00 10,687,449 100.00
====================================================================================================================37.2.1. ALL OTHER BUSINESS CLASSES ARE LESS THAN TEN PERCENT OF THE TOTAL EXPOSURE. 37.3. SEGMENT BY SECTOR ====================================================================================================================
2004
Advances Deposits Contingencies and commitments
(Rupees in'000) (Percent) (Rupees in'000) (Percent) (Rupees in'000) (Percent)
Public/Government - - 7,217,706 19.31 207,596 1.94
Private 24,375,905 100.00 30,166,050 80.69 10,479,853 98.06
24,375,905 100.00 37,383,756 100.00 10,687,449 100.00
====================================================================================================================38. GEOGRAPHICAL SEGMENT ANALYSISThese financial statements represent operations of the bank in Pakistan only. 39. RELATED PARTY TRANSATIONS The related parties comprise related group companies, directors and their close family member, staff retirement funds, executives and major shareholders of the bank holding not less than ten percent of the total shareholding. Usual transaction with related parties other than executives includes deposits, advances, acceptances and provision of other banking services. Transaction with executives are undertaken at terms in accordance with employment agreements and service rules and includes provision of advances on terms softer than those offered to the customers of the bank. The details of transaction with related parties during the year other than those which have been disclosed else where in these financial statements, are as follows: =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
Advances given during the year - -
Advances repaid during the year - -
Deposit (at year end) 1,724,850 1,019,770
Mark-up / interest expensed 50,322 29,581
Mark-up / interest earned - -
Contribution to employees' benefit 11,441 9,814
=================================================================================================================Transactions entered into with directors / executive officers as per their terms of employment are excluded from related party transactions.40. ISLAMIC BANKING BUSINESS The bank is operating one Islamic Banking branch at the end of reporting period as compared to no Islamic banking branch at the end of last year. The branch's financial statements are as follows: =================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
BALANCE SHEET AS AT 31 DECEMBER Note
ASSETS
CASH AND BALANCES WITH TREASURY BANKS 10,000 -
BALANCES WITH AND DUE FROM FINANCIAL INSTITUTIONS 43,090 -
INVESTMENTS (i) - -
FINANCING AND RECEIVABLES (ii) - -
OTHER ASSETS - -
TOTAL ASSETS 53,090 -
LIABILITIES
BILLS PAYABLE 500 -
DUE TO FINANCIAL INSTITUTIONS - -
DEPOSITS AND OTHER ACCOUNTS (iii) 2,590 -
DUE TO HEAD OFFICE - -
OTHER LIABILITIES - -
TOTAL LIABILITIES 3,090 -
NET ASSETS 50,000 -
REPRESENTED BY
ISLAMIC BANKING FUND 50,000 -
RESERVES - -
UN-APPROPRIATED PROFIT - -
50,000 -
SURPLUS / (DEFICIT) ON REVALUATION OF ASSETS - -
50,000 -
==================================================================================================================
================================================================================================
PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED DECEMBER 31 2004
================================================================================================
Current
period ended Prior period Prior period
on 31 December year to date corres- corres-
2004 ponding to ponding to
A B A B
(Rupees in '000)
================================================================================================
Mark-up/Return/profit earned - - - -
Profit distributed to depositers - - - -
Other Mark-up/Return/Profit expensed - - - -
Net Mark-up/Return/Profit Income - - - -
Provision and write offs - - - -
Net mark-up/Return/Profit Income
after provisions - - - -
Non Mark-up/Return/Profit Income - - - -
- - - -
Administrative and other expense - - - -
Profit Before Taxation - - - -
Taxation - - - -
Profit After Taxation - - - -
Un-appropriated profit brought forward - - - -
Profit available for appropriation - - - -
Un-appropriated profit carried forward - - - -
CHARITY FUND
Opening Balance - - - -
Additions during the period - - - -
Payments/ Utilization during the period - - - -
Closing Balance - - - -
ISLAMIC BANKING BUSINESS
NOTE TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2004
================================================================================================
=================================================================================================================
2004 2003
(Rupees in '000)
=================================================================================================================
i) INVESTMENTS
Held-for-trading securities - -
Available-for-sale securities - -
Held-to-maturity securities - -
Associates - -
Subsidiaries - -
- -
ii) FINANCING AND RECEIVABLES
Murabaha - -
Ijara - -
Musharika / Diminishing Musharika - -
Other Islamic modes - -
- -
iii)Deposits and other accounts
Current accounts - -
Saving accounts 2,590 -
Term deposits - -
Others - -
Deposits from Financial Institutions - Remunerative - -
Deposits from Financial Institutions
- Non Remunerative - -
2,590 -
iv) CONTINGENCIES AND COMMITMENTS
Direct credit substitutes - -
Transaction-related contingent liabilities - -
Trade related contingent liabilities - -
Other contingencies - -
Commitments - -
- -
=================================================================================================================41. DATE OF AUTHORISATIONThese financial statements were authorized for issue on 16 February 2005 by the Board of Directors of the bank. 42. GENERAL a) Captions, as prescribed by BSD Circular No 36 dated 10 October 2001 issued by the State Bank of Pakistan, in respect of which there are no amounts have not been reproduced in these financial statements, except for the captions of the balance sheet and profit and loss account. b) Corresponding figures have been rearranged and reclassified, wherever necessary, for the purpose of comparison. |