| Standard Chartered Bank - 2006 |
|
Balance Sheet as at 31 December 2006
======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
ASSETS
Cash and balances with treasury banks 5 22,797,606 9,927,597
Balances with other banks 6 3,544,796 1,340,279
Lendings to financial institutions 7 3,873,224 14,943,291
Investments 8 34,817,282 25,358,524
Advances 9 129,438,435 50,214,718
Operating fixed assets 10 3,421,016 517,367
Intangible assets 11 28,560,397 10,975
Deferred tax assets 12 2,935,518 189,875
Other assets 13 16,929,462 9,165,565
246,317,736 111,668,191
LIABILITIES
Bills payable 14 4,259,834 2,063,950
Borrowings from financial institutions 15 22,045,237 7,211,031
Deposits and other accounts 16 156,878,328 83,646,043
Sub-ordinated loans 17 2,414,851 -
Liabilities against assets 18 9,724 19,079
subject to finance lease
Deferred tax liabilities net - -
Other liabilities 19 20,479,649 10,322,394
NET ASSETS 40,230,113 8,405,694
REPRESENTED BY
Share capital - 20 38,715,850
Head office capital account 20 - 4,103,942
Reserves 21 1,113,606 -
Unappropriated profit 729,214 4,657,389
40,558,670 8,761,331
Deficit on revaluation of
assets - net of deferred tax 22 (328,557) (355,637)
40,230,113 8,405,694
CONTINGENCIES AND COMMITMENTS 23
======================================================================================Profit and Loss Account for the year ended 31 December 2006===========================================================================================================
1 January 30 December
2006 to 2006 to
29 December 31 December
Note 2006 2006 2006 2005
(Rupees in 000)
===========================================================================================================
MAHKUP I INTEREST INCOME
Mark-up / return / interest earned 24 14,438,562 126,465 14,565,027 7,013,439
Mark-up / return / interest expensed 25 (4,171,881) (56,835) (4,228,716) (1,737,811)
Net mark-up / return / interest income 10,266,681 69,630 10,336,311 5,275,628
Provision against non-performing 9.4 & 19.2 (1,477,286) - (1,477,286) (29,677)
loans and advances
Recovery of amounts written 119,621 - 119,621 92,683
off in previous years
Provision for diminution in the (45) - (45) -
value of investment
Bad debts written-off directly (206,099) - (206,099) -
(1,563,809) - (1,563,809) 63,006
Net mark-up / return I interest 8,702,872 69,630 8,772,502 5,338,634
income after provisions
NON MARK-UP / INTEREST INCOME
Fees, commission and brokerage income 2,482,186 20,325 2,502,511 1,778,925
Dividend income 77,851 - 77,851 9,866
Income from dealing in foreign currencies 699,354 - 699,354 655,045
Gain / (loss) on sale of securities 26 138,830 (115) 138,715 (189,193)
Unrealised gain on revaluation
of investment classified
as held for trading 5 - 5 19,447
Other income 27 268,803 - 268,803 176,044
Total non-markup / interest income 3,667,029 20,210 3,687,239 2,450,134
12,369,901 89,840 12,459,741 7,788,768
NON MARK-UP / INTEREST EXPENSES
Administrative expenses 28 (5,012,970) (59,090) (5,072,060) (2,348,699)
Other provisions / assets written-off (26,992) - (26,992) -
Other charges 29 (510) - (510) (13,096)
Total non-markup / interest expenses (5,040,472) (59,090) (5,099,562) (2,361,795)
Extra-ordinary / unusual items - - - -
PROFIT BEFORE TAXATION 7,329,429 30,750 7,360,179 5,426,973
Taxation - current (2,120,275) (10,762) (2,131,037) (1,400,000)
- prior years 197,319 - 197,319 16,682
- deferred 282,996 - 282,996 12,952
30 (1,639,960) (10,762) (1,650,722) (1,370,366)
PROFIT AFTER TAXATION 5,689,469 19,988 5,709,457 4,056,607
(Rupees)
Earnings per share - basic and diluted 31 3.06
===========================================================================================================Cash Flow Statement for the year ended 31 December 2006======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation 7,360,179 5,426,973
Dividend income (77,851) (9,866)
7,282,328 5,417,107
Adjustments for:
Depreciation 251,917 132,809
Amortization 342,837 3,466
Gain on disposal of fixed assets (1,072) (5,425)
Finance charges on leased assets 3,762 -
Other provisions/write offs 26,992 -
Provision for diminution in the 45 -
value of investments
Provision against loans and advances - net 1,683,385 29,677
2,307,866 160,527
9,590,194 5,577,634
Decrease / (increase) in operating assets
Lendings to financial institutions 16,378,795 (1,392,300)
Held-for-trading securities 2,003,263 (1,505,992)
Advances (15,105,723) 1,278,682
Other assets (4,378,015) (5,271,704)
(1,101,680) (6,891,314)
(Decrease)/ increase in operating liabilities
Bills payable 66,681 394,454
Borrowings from financial institutions (9,839,368) 249,457
Deposits and other accounts (6,542,680) 7,132,457
Other liabilities 7,287,148 5,375,711
(9,028,219) 13,152,079
Cash flow before taxation (539,705) 11,838,399
Income tax paid (2,634,295) (626,041)
Net cash (used in) / generated (3,174,000) 11,212,358
from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Net investment 12,835,478 (10,939,875)
Dividend income received 77,851 9,866
Cash out flow on acquisition of Union Bank (29,419,441) -
Investment in operating fixed assets (516,070) (282,797)
Sale proceeds on disposal of fixed assets 18,616 7,846
used in investing activities (17,003,566) (11,204,960)
======================================================================================CASH FLOW FROM FINANCING ACTIVITIES======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Remittances made in respect (4,026,973) (2,485,141)
of branches profit to SCB UK
Sub-ordinated term finance (16,316) -
certificates issued- net
Amount received from SCB PLC (UK) for 29,397,850 -
the purpose of financing acquisition
Payment of lease obligations (28,823) (17,580)
Net cash from / (used in) financing activities 25,325,738 (2,502,721)
Increase / (decrease) in cash and 5,148,172 (2,495,323)
cash equivalents for the period
Cash and cash equivalents in 9,926,354 -
Union Bank at the date of acquisition
Cash and cash equivalents at 32 11,267,876 13,763,199
beginning of the year
Cash and cash equivalents at end of the year 26,342,402 11,267,876
======================================================================================Statement of Changes in Equity for the year ended 31 December 2006==================================================================================================================================================
Share Head office Share Exchange Statutory Capital Unappropriate Total
Capital capital premium Translation reserve reserve Unremitted
account reserve profit
(Rupees in '000)
==================================================================================================================================================
Balance as at 31 December 2004 - 4,103,942 - - - 24,474 3,065,142 7,193,558
Recognised income and expense for the year - - - - - - 4,052,914 4,052,914
Transfer of capital reserve to unremitted p - - - - - (24,474) - 24,474 -
Profit of SCB branches for 2004 remitted to
head office - - - - (2,485,141) (2,485,141)
Balance as at 31 December 2005 - 4,103,942 - - 4,657,389 8,761,331
Shares issued for cash 29,397,850 - - - - - 29,397,850
Shares issued pursuant 9,318,000 (4,103,942) 1,036,090 - - - (4,821,600) 1,428,548
to amalgamation scheme
Recognised income and expense for the year - - - - - - 5,715,609 5,715,609
Transfer to statutory reserve - - - - 97,139 - (97,139) -
Exchange difference on translation of net
investment in foreign branches - - - (19,623) - - - (19,623)
Transfer to payable to holding company - - - - - (698,072) (698,072)
Profit of SCB branches for 2005 remitted to
head office - - - - - - (4,026,973) (4,026,973)
Balance as at 31 December 2006 38,715,850 - 1,036,090 (19,623) 97,139 - 729,214 40,558,670
Statement of recognised income and expenses
2006 2005
(Rupees in '000)
Actuarial gain / (loss) on 9,465 (3,693)
retirement benefits scheme
Deferred tax on items (3,313) -
recognised directly in equity 6,152 (3,693)
Profit after taxation 5,709,457 4,056,607
Total recognised income and expense for the year 5,715,609 4,052,914
==================================================================================================================================================Notes to the Financial Statements for the year ended 31 December 20061. STATUS AND NATURE OF BUSINESS Standard Chartered Bank (Pakistan) Limited ("the Bank") was incorporated in Pakistan on 19 July 2006 and was granted approval for commencement of banking business by State Bank of Pakistan, with effect from 30 December 2006. The ultimate holding company of the Bank is Standard Chartered Plc., incorporated in England. Its registered office is at Standard Chartered Bank Building, I.I. Chundrigar Road, Karachi. The Bank commenced formal operations on 30 December 2006 through amalgamation of entire undertaking of Union Bank Limited and the business carried on by the branches in Pakistan of Standard Chartered Bank, a bank incorporated by Royal Charter and existing under the laws of the England. The scheme of amalgamation was sanctioned by State Bank of Pakistan vide its order dated 4 December 2006. The Bank is engaged in the banking business as defined in the Banking Companies Ordinance, 1962 and has a total number of 115 branches in Pakistan and 2 branches in Sri Lanka (2005: 43 branches in Pakistan) in operation at 31 December 2006. Standard Chartered Bank (Pakistan) Limited has three subsidaries. All of them are incorporated in Pakistan. -- Union Leasing Limited -- Standard Chartered Modarba -- Standard Chartered Services of Pakistan (Private) Limited These financial statements are separate financial statements of the bank in which investments in subsidiaries are accounted for on the basis of direct equity interest rather than on the basis of reported results. Consolidated financial statements are presented separately. 2. BASIS OF PREPARATION 2.1 Basis of presentation In accordance with the directives of the Federal Government regarding the shifting of the banking System to Islamic modes, the State Bank of Pakistan (SBP) has issued various circulars from time to time. One permissible form of trade related mode of financing comprises of 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. 2.2 Statement of compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan, the requirements of the Banking Companies Ordinance, 1962 and the Companies Ordinance,1984. Approved accounting standards comprise of such International Financial Reporting Standards ("IFRS") as notified under the provisions of the Companies Ordinance, 1984. Wherever the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or directives issued by the Securities and Exchange Commission of Pakistan ("SECP") and the SBP 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 SECP has approved and notified the adoption of International Accounting Standard 39, 'Financial Instruments: Recognition and Measurement' (IAS 39) and International Accounting Standard 40, 'Investment Property' (IAS 40). The requirements of these standards have not been followed in the preparation of these financial statements as the SBP has deferred the implementation of these standards for the banks in Pakistan till further instructions. However, investments have been classified and valued in accordance with the requirements of various circulars issued by SBP. The SECP has notified the adoption of International Financial Reporting Standards 3 - Business combinations' on 6 December 2006. The Bank has adopted this standard for preparation of these financial statements. During 2005, the Securities and Exchange Commission of Pakistan notified the Islamic Financial Accounting Standard 1 issued by the Institute of Chartered Accountants of Pakistan relating to accounting for Murabaha transactions undertaken by a bank, effective for financial periods beginning on or after 1 January 2006. The standard has not been adopted by stand-alone Islamic branches of conventional banks pending resolution of certain issues, e.g., invoicing of goods, recording of inventories, concurrent application with other approved accounting standards in place for conventional banks, etc.. Pakistan Banks Association has taken up the matter with the State Bank of Pakistan. The adoption of this standard is not likely to have a material effect on these financial statements. 2.3 Basis of measurement These financial statements have been prepared under the historical cost convention, except that certain available for sale, trading and derivative financial instruments are measured at fair value. 2.4 Use of estimates and judgments The preparation of financial statements in conformity with approved accounting standards requires management to make judgments, estimates and assumptions that effect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following: -- Note 4 Fair value determination on acquisition -- Note 9.3 Provision for doubtful advances -- Note 30 Income taxes -- Note 34 Employees retirement benefit plans 2.5 Functional and presentation currency These financial statements are presented in Pakistan Rupees, which is the Bank's functional currency. Except as indicated, financial information presented in Pakistan Rupees has been rounded to the nearest thousand. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3.1 Business acquisitions Acquisitions from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented. For this purpose comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the combining entity's financial statements. Other acquisitions Other business combinations are accounted for by applying the purchase method. The cost of acquisition is measured as the fair value of the asset given, equity instruments issued and the liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identified assets acquired are fair valued at the acquisition date, irrespective of the extent of any minority interest. The excess of cost of acquisition over the fair value of identifiable net assets acquired is recorded as goodwill. 3.2 Cash and cash equivalents For the purposes of cash flow statement, cash and cash equivalents comprise of cash and balances with treasury bank and balances with other banks. 3.3 Investments The Bank classifies its investments as follows: a) Held fortrading These are securities, which are acquired with the intention to trade by taking advantage of short term market / interest rate movements and are carried at market value. The surplus / deficit arising as a result of revaluation at market value is taken to income. b) Held to maturity These are securities with fixed or determinable payments and fixed maturity that are held with the intention and ability to hold to maturity. These are carried at amortised cost. c) Available for sale These are investments that do not fall under the held for trading or held to maturity categories and are carried at market value. The surplus / deficit arising as a result of revaluation at market value is kept in a separate account below equity. d) Subsidiaries Investments in subsidiaries are carried at amortised cost. 3.4 Sale and repurchase agreements Securities sold subject to repurchase agreements ('repos') remain on the balance sheet; the counterparty liability is included in borrowings from financial institutions. Securities purchased under agreements to resell ('reverse repos') are recorded as lendings to financial institutions. The difference between sale and repurchase price is treated as interest/markup/return and accrued over the life of the agreements using the effective interest method. 3.5 Advances Advances are stated net of provision against non-performing advances. Specific and general provisions are made based on an appraisal of the loan portfolio that takes into account Prudential Regulations issued by SBP from time to time. Specific provisions are made where the repayment of identified loans is in doubt and reflect an estimate of the amount of loss expected. The general provision is for the inherent risk of losses which, although they have not been separately identified, are known from experience to be present in any loan porfolio. Provision made / reversed during the year is charged to the profit and loss account and accumulated provision is netted off against advances. Advances are written-off when there is no realistic prospect of recovery. When the Bank is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to ownership of an asset to the lessee, the arrangement is presented within loans and advances. 3.6 Operating fixed assets - tangible Owned Operating fixed assets are stated at cost, less accumulated depreciation. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit and loss account during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using straight line method to allocate their cost to their residual values over their estimated useful lives. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Gains and losses on disposal of fixed assets are included in profit and loss account currently. Leased Fixed assets held under finance lease are stated at lower of fair value of asset and present value of minimum lease payments at the inception of lease less accumulated depreciation. Financial charges are allocated over the period of lease term so as to provide a constant periodic rate of financial charge on the outstanding liability. Depreciation is charged on the basis similar to owned assets. 3.7 Intangible assets Goodwill Goodwill represents the excess of cost of an acquisition over the fair value of the share of net identifiable assets acquired at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment. Computer software Acquired computer software licenses are capitalised on the basis of costs incurred to acquire and bring to use the specific software. These costs are amortised on the basis of the expected useful lives. Acquired intangibles in business combination Acquired intangibles in business combination that have finite lives are amortised over their economic useful life based on the manner that benefits of the relevant assets are consumed. 3.8 Impairment of non-financial assets The carrying amounts of the Bank's non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated. The recoverable amount of goodwill is estimated at each reporting date. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. 3.9 Staff retirement benefits Defined benefit plan The Bank operates approved funded pension and gratuity schemes for all its non-management employees and pension scheme for its management employees. The employees can opt either for pension or gratuity at the time of retirement / termination. The bank also operates a funded gratuity scheme for all of Union Bank employees. For defined benefit plans, the liability recognised in the balance sheet is the present value of defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using "Projected Unit Credit Actuarial Cost Method". Actuarial gains and losses that arise are recognised in shareholders' equity and are presented in the statement of recognised income and expenses in the period they arise. Past service costs are recognised immediately to the extent that benefits are vested and are otherwise recognised over average period until benefits are vested on a straight line basis. Current service costs and any past service costs together with the expected return on plan assets less the effect of the unwinding of the discount on plan liabilities are charged to operating expenses. Defined contribution plan The Bank also operates a defined contribution gratuity scheme for all its management staff and a provident fund scheme for all its permanent staff, contributing at rates ranging from 8.33 percent to 10 percent of basic salary. 3.10 Foreign currency transactions Transactions in foreign currencies are translated to the Pakistan Rupees at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to Pakistan Rupees at the exchange rate at that date. Foreign currency differences arising on retranslation are recognised in profit or loss. The assets and liabilities of foreign operations are translated to Pakistan Rupees at exchange rates at the reporting date. The income and expenses of foreign operations, are translated to Pakistan Rupees at exchange rates at the dates of the transactions. Foreign currency differences are recognised in the foreign currency translation reserve. 3.11 Taxation Income tax expense comprises current and deferred tax. Income tax expense is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting 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 assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 3.12 Revenue recognition Mark-up I return on advances and investments is recognised on an accrual basis using the effective interest rate method, except income which warrants carry forward in compliance with the Prudential Regulations of the SBP and with credit policies manual of the Bank. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability. The effective interest rate is established on initial recognition of the financial asset and liability and is not revised subsequently. Fees and commission income are generally recognised on an accrual basis when the service has been provided. Fees and commission which in substance amount to an additional interest charge, are recognised over the life of the underlying transaction on a level yield basis. Dividend income is recognised when the right to receive income is established. Usually this is the ex-dividend date for equity securities. 3.13 Derivative financial instruments Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair value. All derivative financial instruments are carried as assets when fair value is positive and liabilities when fair value is negative. Any change in the fair value of derivative financial instruments is taken to profit and loss account. 3.14 Provisions Provisions for restructuring costs and legal claims are recognised when: the Bank has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. 3.15 Fiduciary activities The Bank commonly acts in fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Bank. 3.16 Segment reporting A segment is a distinguishable component of the Bank that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Bank's primary format for segment reporting is based on business segments. 3.17 Offsetting Financial assets and liabilities are set off and the net amount presented in the balance sheet when, and only when, the Group has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. 3.18 Subordinated liabilities Subordinated liabilities are initially measured at fair value plus transaction costs, and subsequently measured at their amortised cost using the effective interest method. 3.19 New standards and interpretations not yet adopted The following standards, amendments and interpretations of approved accounting standards, effective for accounting periods beginning on or after 1 January 2007 are either not relevant to Bank's operations or are not expected to have significant impact on the Bank's financial statements other than certain increased disclosures: lAS 1- Presentation of Financial Statements - amendments relating to Capital disclosures. IFRS 2 - Share-Based Payments IFRS 5 - Non-current assets held for sale and discontinued operations IFRS 6 - Exploration for and evaluation of mineral resources IFRIC 8 - Scope of IFRS 2 Share-based Payments IFRIC 9 - Reassessment of Embedded Derivatives IFRIC 10 - Interim Financial Reporting and Impairment IFRIC 11 - Group and Treasury Share Transactions IFRIC 12 - Services Concession Arrangements. 4. BUSINESS COMBINATION Pursuant to a scheme of amalgamation duly approved by State Bank of Pakistan, the entire undertaking of Union Bank Limited and the banking trade and other trade business carried on by Standard Chartered Bank, a bank incorporated by Royal Charter and existing under the laws of England ("SCB") as a going concern at or through its permanent establishment in form of branch offices in Pakistan ("SCB Branch Business") were merged with and into Standard Chartered Bank (Pakistan) Limited effective 30 December 2006. Union Bank Limited On 5 September 2006, the Bank acquired 95.37 per cent of the share capital of Union Bank Limited, a listed bank incorporated in Pakistan. The acquired business contributed operating income of Rs. 3,045 million and profit before tax of Rs. 758 million to the Bank for the period from 5 September 2006 to 31 December 2006. If the acquisition had occurred on 1 January 2006, Union Bank Limited would have added approximately Rs. 8,399.079 million to Bank's operating income and Rs. 1,796.657 million to profit before tax for the period. Details of net assets acquired and goodwill are as follows: ======================================================================================
(Rupees in '000)
======================================================================================
Purchase consideration:
- cash paid 29,397,747
- Shares issued 1,428,549
- direct costs relating to the acquisition 21,694
Total purchase consideration 30,847,990
Fair value of net assets acquired 5,258,970
Goodwill 25,589,020
======================================================================================The goodwill is attributable to the significant synergies expected to arise from the development of Union within the Standard Chartered Group and to those intangibles, such as the branch network, which are not recognised separately.The assets and liabilities arising from the acquisition are as follows: ======================================================================================
Fair value Acquiree's
carrying
amount
(Rupees in '000)
======================================================================================
Cash and balances with treasury banks* 9,033,233 9,033,233
Balances with other banks 887,216 887,216
Lendings to financial institutions 5,308,728 5,308,728
Investments 24,422,541 24,854,316
Advances 68,187,988 72,890,248
Operating fixed assets 2,705,480 1,674,388
Intangible assets other than goodwill 3,302,952 156,459
Deferred tax assets 2,437,613 82,782
Other assets 2,901,651 3,697,864
Total assets 119,187,402 118,585,234
Bills payable 2,129,203 2,129,203
Borrowings from financial institutions 25,683,670 25,683,670
Deposits and other accounts 79,755,915 79,110,904
Sub-ordinated loans 2,431,167 2,496,820
Liabilities against assets 1,088 1,088
subject to finance lease
Other liabilities 3,757,980 3,687,082
Total liabilities 113,759,023 113,108,767
Minority interest 169,409 -
Net assets acquired 5,258,970 -
Purchase consideration and 29,419,441 -
direct costs settled in cash
Cash and cash equivalents 9,920,449 -
in subsidiary acquired
Cash outflow on acquisition 19,498,992 -
====================================================================================== * Cash and balances at central banks include amounts subject to regulatory restrictions. Due to the proximity of the acquisition to the year-end, the fair value amounts contain some provisional balances which will be finalised in the 2007 accounts.The intangible assets acquired as part of the acquisition of Union Bank Limited can be analysed as follows: ======================================================================================
(Rupees in '000)
======================================================================================
Brand names 389,400
Customer relationships 774,680
Core deposits 1,982,413
Capitalised software 156,459
Total 3,302,952
====================================================================================== SCB Branch BusinessThe entire undertaking of SCB Branch Business was transferred by SCB to the Bank effective 30 December 2006 and in consideration 892,554,151 ordinary shares of the Bank were issued and allotted at par to SCB as fully paid up. The assets and liabilities of the SCB Branch Business were transferred at their carrying values and acquisition has been accounted for as acqusitions from entities under common control (note 3.1). Amalgamation The assets and liabilities balances of Union Bank Limited and Pakistan branches of Standard Chartered Bank at 29 December 2006 transferred to the Standard Chartered Bank Pakistan Limited were as follows: ======================================================================================
SCB Union
Pakistan Bank
Branches Limited Total
(Rupees in '000)
======================================================================================
ASSETS
Cash and balances with treasury banks 13,939,270 7,818,523 21,757,793
Balances with other banks 1,684,948 3,252,488 4,937,436
Lendings to financial institutions 25,295,412 1,149,552 26,444,964
Investments 21,430,970 11,547,475 32,978,445
Advances 64,105,932 65,297,014 129,402,946
Operating fixed assets 868,457 2,552,559 3,421,016
Intangible assets other than goodwill 7,509 2,963,868 2,971,377
Deferred tax assets 508,800 2,425,971 2,934,771
Other assets 10,955,535 6,471,352 17,426,887
138,796,833 103,478,802 242,275,635
LIABILITIES
Bills payable 3,255,388 1,688,977 4,944,365
Borrowings from financial institutions 18,829,368 25,518,316 44,347,684
Deposits and other accounts 94,130,873 62,993,008 157,123,881
Sub-ordinated loans - 2,414,851 2,414,851
Liabilities against assets - 9,724 9,724
subject to finance lease
Other liabilities 13,655,662 5,135,385 18,791,047
129,871,291 97,760,261 227,631,552
NET ASSETS ACQUIRED 8,925,542 5,718,541 14,644,083
======================================================================================5. CASH AND BALANCES WITH TREASURY BANKS======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
In hand
- Local currency 5.1 2,979,435 1,535,669
- Foreign currencies 1,035,981 655,073
With State Bank of Pakistan in:
- Local currency current account 12,229,373 3,893,325
- Local currency current 419,982 94,982
account - Islamic Banking
- Foreign currency deposit account
Cash reserve account (5% of FE 25) 1,458,525 927,218
Special cash reserve account (15% of FE 25) 4,363,136 2,763,740
Local US Dollar collection account 16,897 18,178
With Other Central Bank in:
- Sri Lanka current account 5.2 27,249 -
With National Bank of Pakistan in:
- Local currency current account 267,028 39,412
22,797,606 9,927,597
======================================================================================5.1 This includes National Prize Bonds of Rs. 7.30 million (2005: Rs. 3.77 million). 5.2 These balances are held with the Central Bank of Sri Lanka in accordance with the local regulations of Sri Lanka. 6. BALANCES WITH OTHER BANKS ======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
In Pakistan
-In current accounts 256,721 1,000
Outside Pakistan
- In deposit accounts 6.1 378,788 -
- In current accounts 6.2 2,909,287 1,339,279
3,544,796 1,340,279
======================================================================================6.1 These include placements in foreign currency in respect of deposits accepted under the New Foreign Currency Accounts Scheme of SBP. These are placed at rates ranging from 3.51 % - 5.20% and are due to mature on various dates by April 2007.6.2 The balances include Rs. 2,120.22 million (2005: Rs. 1,330.89 million) held with branches of Standard Chartered Bank outside Pakistan. 7. LENDINGS TO FINANCIAL INSTITUTIONS ======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Call money lendings 7.1 362,269 400,000
Repurchase agreement 7.2 & 7.6 904,792 4,602,659
endings (Reverse Repo)
Certificates of Investment 7.3 578,000 1,700,000
Placements 7.4 1,977,523 8,240,503
Overdrawn vostros 50,640 129
3,873,224 14,943,291
======================================================================================7.1 Call money lendings carry mark-up at a rate of 9.20 to 10.15 percent per annum (2005: 9.00 percent per annum) payable on monthly basis and are due to mature by March 2007.7.2 These carry mark-up at rates ranging between 8.20 to 9.20 percent per annum (2005: 6.50 to 8.80 percent per annum) payable at maturity and are due to mature by February 2007. The arrangements are governed under Master Repurchase Agreements. 7.3 Certificate of investment carry mark-up at rate of 11.50 to 11.75 percent per annum (2005: ranging between 9.47 to 11.78 percent per annum) payable at maturity and are due to mature by February 2007. 7.4 This represents placements with the branches of Standard Chartered Bank at mark-up rates ranging between 3.60 and 5.06 percent per annum (2005: 2.30 to 4.55 percent per annum) and are due to mature in January 2007. 7.5 Particulars of lending ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
In local currency 1,809,657 6,702,788
In foreign currency 2,063,567 8,240,503
3,873,224 14,943,291
======================================================================================7.6 Securities held as collateral against lendings to financial institutions================================================================================================
2006 2005
================================================================================================
Held by Further Total Held by Further Total
bank given as bank given as
collateral collateral
(Rupees in '000)
================================================================================================
Market Treasury Bills 73,775 250,000 323,775 3,802,659 - 3,802,659
Pakistan Investment Bonds 581,017 - 581,017 800,000 - 800,000
654,792 250,000 904,792 4,602,659 - 4,602,659
================================================================================================The market value of securities held as collateral against lendings to financial institutions amounted to Rs. 909 million (2005:Rs. 4,651 million).8. INVESTMENTS 8.1 Investments by type =======================================================================================================================================
2006 2005
Held by Given as Total Held by Given as Total
bank collateral bank collateral
NOTES (Rupees in '000)
=======================================================================================================================================
Held for trading
Market Treasury Bills - - - 1,969,641 1,969,641
Pakistan Investment Bonds 976 - 976 15,156 15,156
Available for sale
Market Treasury Bills 8.5 18,230,006 5,163,376 23,393,382 9,950,533 5,987,755 15,938,288
Pakistan Investment Bonds 8.5 8,084,136 2,506,624 10,590,760 7,416,110 408,485 7,824,595
Ordinary shares of listed companies 8.6 141,044 - 141,044 - - -
Units / Certificates of mutual funds 8.7 203,293 - 203,293 - - -
Term Finance Certificates -listed 8.8 332,652 - 332,652 - - -
Term Finance Certificates -unlisted 8.9 133,698 - 133,698 - - -
Ordinary shares of unlisted companies 8.10 99,572 - 99,572 52,031 - 52,031
Subsidiaries 8.11
Standard Chartered Services of
Pakistan (Private) Limited 44,500 - 44,500 44,500 - 44,500
Standard Chartered Modaraba - listed 42,000 - 42,000 42,000 - 42,000
Union Leasing Limited - listed 332,200 - 332,200 - - -
27,644,077 7,670,000 35,314,077 19,489,971 6,396,240 25,886,211
Provision for diminution in
the value of investment (45) - (45) - - -
Investments (Net of Provisions) 27,644,032 7,670,000 35,314,032 19,489,971 6,396,240 25,886,211
Surplus on revaluation of
held for trading securities 5 - 5 19,447 - 19,447
Deficit on revaluation of
available for sale securities (340,108) (1 56~ 64 (496,755) (518,802) (28,332 (547,134)
Total Investments 27,303,929 7,513,353 34,817,282 18,990,616 6,367,908 25,358,524
=======================================================================================================================================8.2 Investments by segment======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Federal Government Securities:
- Market Treasury Bills 23,393,382 17,907,929
- Pakistan Investment Bonds 10,591,736 7,839,751
Fully paid up Ordinary Shares:
- Listed Companies 141,044 -
- Unlisted Companies 99,572 52,031
Investment in subsidiaries
- Standard Chartered Services 44,500 44,500
of Pakistan (Private) Limited
- Standard Chartered Modaraba 42,000 42,000
- Union Leasing Limited 332,200 -
Bonds and Participation Term Certificates
- Listed TFCs etc. 332,652 -
- Unlisted TFCs etc. 133,698 -
Investments in Mutual Funds 203,293 -
Total investment at Cost 35,314,077 25,886,211
Less: Provision for diminution in (45) -
the value of investment in
listed company shares
35,314,032 25,886,211
Surplus on revaluation of held for trading securities 5 19,447
Deficit on revaluation of available for sale securities (496,755) (547,134)
Total Investments 34,817,282 25,358,524
======================================================================================8.3 Investments include securities having book value of Rs. 18.63 million (2005: Rs. 18.80 million) pledged with the SBP as security to facilitate T.T. discounting facility to Pakistan branches of the Bank, including an amount earmarked against the facilities allocated to branches now in Bangladesh.8.4 Market Treasury Bills, Federal Investment Bonds and Pakistan Investment Bonds are eligible for discounting with the SBP. 8.5 Quality of Available for sale securities ===========================================================================================================
2006 2005
Rating Cost Market value Rating Cost Market value
(Rupees in '000) (Rupees in '000)
===========================================================================================================
Federal government securities
- Market Treasury Bills Unrated 23,393,382 23,419,908 Unrated 15,938,288 15,959,988
- Pakistan Investment Bonds Unrated 10,590,760 10,085,355 Unrated 7,824,595 7,255,761
33,984,142 33,505,263 23,762,883 23,215,749
===========================================================================================================8.6 Particulars of shares held - listed - Available for sale========================================================================================================================
Rating Cost Market value Cost Market value
(Rupees in '000)
2006 2005
(Number of Shares)
========================================================================================================================
8,999 - Askari Commercial Bank Limited AA+/A1 + 857 945 - -
2,645 - Bank AI-Falah Limited AA/A1� 119 111 - -
13,101 - Bank Of Punjab Limited AA/A1+ 1,192 1,326 - -
15,898 - Fauji Fertilizer Bin Qasim Limited Unrated 430 453 - -
4,156 - Fauji Cement Limited Unrated 84 63 - -
56,613 - Fauji Fertilizer Company Limited Unrated 6,674 5,976 - -
19,135 - Faysal Bank Limited AA/A1+ 1,248 1,158 - -
41,171 - Hub PowerCompanyLimited Unrated 1,061 1,111 - -
5,826 - Lucky Cement Limited Unrated 593 349 - -
8,921 - MCB Bank Limited AA+/A1+ 2,255 2,195 - -
6,830 - National Bank of Pakistan Limited AAA'Al+ 1,757 1,531 - -
4,270 - PICIC Commercial Bank Limited A�/A1 143 144 - -
8,539 - Oil & Gas Development Corporation Limit AAAJA1+ 1,134 980 - -
17 - Packages Pakistan Limited ANAl + 3 4 - -
5,137 - Pak Oil Fields Limited Unrated 1,690 1,797 - -
2,539 - Pakistan Petroleum Limited Unrated 606 589 - -
5,639 - Prime Commercial Bank Limited A+/A1 297 274 - - -
16,106 - Pakistan State Oil Limited AAA/A1+ 5,125 4,735 - -
30,349 - Pakistan Telecommunication Company Limi Unrated 1,274 1,345 - -
13,373 - Brothers Textile Mills Limited Unrated 40 38 - -
3,635 - BOC Pakistan Limited Unrated 506 513 - -
147,402 - Colony Mills Limited Unrated 1,088 1,282 - -
13,367 - Escort Investment Bank Limited A/Al 226 181 - -
2,194 - First Invest Modarba Unrated 3 4 - -
7,935 - Kot Addu Power Company Unrated 341 323 - -
8,828 - Kohinoor Industries Limited Unrated 124 96 - -
4,106 - Muhammad Farooq Textile Mills Limited Unrated 25 24 - -
4,360 - Mirza Sugar Mills Limited Unrated 12 12 - -
7,008 - Pakistan PTA Limited Unrated 40 34 - -
2,259 - Pakistan Synthetics Limited Unrated 20 16 - -
11,080 - Southern Electric Power Company Limited Unrated 70 66 - -
2,035 - Saudi Pak Commercial Bank Limited A-2 38 35 - -
10,720 - Sahrish Textile Mills Limited Unrated 19 18 - -
2,164 - Yousaf Weaving Mills Limited Unrated 11 12 - -
9,400 - Sakrand Sugar Mills Limited Unrated 29 30 - -
3,500 - Bawany Sugar Mills Limited Unrated 25 26 - -
13,700 - Dadabhoy Cement Industries Limited Unrated 91 82 - -
6,000 - Khurshid Spinning Mills Limited Unrated 10 10 - -
4,400 - Taj Textile Limited Unrated 11 12 - -
9,379,860 - World Call Telecommunication Limited A+/A1 110,380 100,830 - -
87,530 - Gulistan Textile Limited Unrated 1,393 1,747 - -
141,044 130,477 - -
========================================================================================================================All shares are ordinary shares of Rs. 10 each except otherwise mentioned.8.7 Particulars of Units/ certificates held in Mutual funds ========================================================================================================================
Rating Cost Market value Cost Market value
(Rupees in '000)
2006 2005
(Number of Units)
========================================================================================================================
25,171 - Picic Growth Fund MFR 3-Star 789 709 - -
13,685 - PICIC Investment Fund MFR 3-Star 208 199 - -
12,911 - Pakistan Premier Fund 5-Star 167 168 - -
22,494 - UTP- Growth Fund Unrated 306 292 - -
3,889,697 - UTP Large Capital Fund Unrated 29,757 31,116 - -
5,250 - Pakistan Capital Market Fund 5-Star 62 59 - -
17,235 - National Investment (Unit) Trust 4-Star 808 773 - -
500,000 - AMZ Plus Income Fund A(F) 51,107 53,122 - -
1,000,000 - AMZ Plus Stock Fund Unrated 97,840 97,150 - -
2,500,000 - Pakistan Strategic Allocation Fund 5-Star 22,249 21,250 - -
203,293 204,838 - -
========================================================================================================================8.8 Particulars of listed TFC=========================================================================================================
2006 2005
Rating Cost Market value Cost Market value
(Rupees in '000)
=========================================================================================================
Bank Al-Habib Limited - Sub-ordinated AAA1+ 65,485 65,483 - -
Bank Al-Falah Limited- TFC-l - Sub-ordinated AA/A1 + 28,638 24,741 - -
Bank Al-Falah Limited- TFC-II - Sub-ordinated AA/A1 + 9,668 9,667 - -
Askari Bank Ltd - Sub-ordinated AA�/A1 + 49,354 48,354 - -
Azgard Nine A/Al 95,227 95,217 - -
Al-Zamin Leasing Modarba A 7,044 7,032 - -
Pakistan Services Limited A 77,236 73,304 - -
332,652 323,798 - -
=========================================================================================================8.9 Particulars of unlisted TFC==================================================================================
2006 2005
Rating (Rupees in '000)
==================================================================================
Dewan Cement Limited A/Al 71,148 -
Coupon @ 6 months Kibor +2.5% Semi Annually;
Term: 7 years maturing on July 15, 2011.
Chief Executive: Dewan Mohammad Vousuf Farooqi
Dewan Hattar Cement Limited Unrated 62,550 -
Coupon @ 6 months Kibor +2.5% Semi Annually
Term: 7 years maturing on July 15, 2011.
Chief Executive: Dewan Mohammad Yousuf Farooqi
133,698 -
==================================================================================8.10 Particulars of shares held - Unlisted=================================================================================================
2006 2005
2006 2005 Rating (Number of Shares)
=================================================================================================
39,675 31,740 Investment Corporation of Pakistan Limited ANA1+ 12,726 2,031
Ordinary Shares of Rs. 100 each
Chief Executive; Tariq lqbal Khan
80 50 Khushali Bank Limited A-/A-i 83,088 50,000
Ordinary Shares of Rs. 1,000,000 each
Chief Executive; M. Ghalib Nishtar
573,769 - Pakistan Export Finance 2,835 -
Guarantee Agency Limited Unrated
Chief Executive; S.M. Zaeem
8 - Society for Worldwide Interbank Unrated 895 -
Fund Transfer
2 - Sindh Provincial Cooperative Bank Unrated - -
Ordinary Shares of Rs. 500 each
500 - Credit Information Bureau of Sri Lanka Unrated 28 -
99,572 52,031
=================================================================================================8.11 Investment in subsidiaries=================================================================================================
2006 2005
(Rupees in `000)
=================================================================================================
4,450,000 4,450,000 Standard Chartered Services of
Pakistan (Private) Limited - 100% owned 44,500 44,500
4,322,241 3,929,310 Standard Chartered Modaraba - listed 20% owned 42,000 42,000
25,917,296 - Union Leasing Limited, Listed 66.23% owned 332,200 -
418,700 86,500
=================================================================================================The subsidiary company, Standard Chartered Services of Pakistan (Private) Limited, exercises control over Standard Chartered Modaraba as its management company and also has a direct economic interest in it. Therefore, the modaraba is considered as a subsidiary of the Standard Chartered Services of Pakistan (Private) Limited.The market value of investments in quoted subsidiaries, Standard Chartered Modaraba and Union Leasing Limited, at 31 December 2006 amounted to Rs. 332.64 million (2005: Rs. 80.83 million) 9. ADVANCES ======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Loans, cash credits, running finances, etc.
- In Pakistan 132,249,025 49,697,119
- Outside Pakistan 873,929 -
133,122,954 49,697,119
Net Investment in Finance Lease
- In Pakistan 9.2 9,193 -
Bills discounted and purchased
(excluding treasury bills)
- Payable in Pakistan 2,335,038 698,647
- Payable outside Pakistan 2,941,080 432,235
5,276,118 1,130,882
Advances-gross 138,408,265 50,828,001
Provision for non-performing advances 9.4 (8,969,830) (613,283)
Advances-net of provision 129,438,435 50,214,718
======================================================================================9.1 Particulars of advances9.1.1 ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
In local currency 121,964,586 47,750,679
In foreign currencies 7,473,849 2,464,039
129,438,435 50,214,718
======================================================================================9.1.2======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Short term (for upto one year) 91,321,236 29,638,279
Long term (for over one year) 38,117,199 20,576,439
129,438,435 50,214,718
======================================================================================9.2 Net investment in finance lease======================================================================================
2006
======================================================================================
Not later Later than Total
than one and
one year less than
five years
(Rupees in '000)
======================================================================================
Lease rentals receivable 6,432 2,195 8,627
Residual Value 766 594 1,360
Minimum Lease payments 7,198 2,789 9,987
Financial charges for future periods 608 186 794
Present value of minimum lease payments 6,590 2,603 9,193
======================================================================================9.3 Advances include Rs. 7,497,718 million (2005: Rs. 400.70 million) which have been placed under non-performing status as detailed below:===============================================================================================================================================
2006
Classified advances Provision required Provision held
Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
(Rupees in '000)
===============================================================================================================================================
Category of classification
Substandard 1,935,518 - 1,935,518 455,598 - 455,598 455,598 - 455,598
Doubtful 1,060,585 3,212 1,063,797 593,091 3,212 596,303 593,091 3,212 596,303
Loss 4,414,869 83,534 4,498,403 4,186,271 43,397 4,229,668 4,186,271 43,397 4,229,668
7,410,972 86,746 7,497,718 5,234,960 46,609 5,281,569 5,234,960 46,609 5,281,569
General Provision - - - - - - 3,687,225 1,036 3,688,261
7,410,972 86,746 7,497,718 5,234,960 46,609 5,281,569 8,922,185 47,645 8,969,830
2005
Classified advances Provision required Provision held
Domestic Overseas Total Domestic Overseas Total Domestic Oversea Total
(Rupees in '000)
Substandard 37,695 - 37,695 13,102 - 13,102 13,102 - 13,102
Doubtful 7,000 - 7,000 6,530 - 6,530 6,530 - 6,530
Loss 356,000 - 356,000 312,468 - 312,468 312,468 - 312,468
400,695 - 400,695 332,100 - 332,100 332,100 - 332,100
General Provision - - - - - - 281,183 - 281,183
400,695 - 400,695 332,100 - 332,100 613,283 - 613,283
===============================================================================================================================================9.3.1 General provision as at December 31, 2006 represents a) balance arising out of fair value exercise of cx. Union Bank and b) balance determined in accordance with the Prudential Regulations issued by the SBP read with the SBP's letter dated 15 October 2004, addressed to the Bank, which requires maintenance of a general provision equivalent to 1% and 3% of the secured and unsecured consumer portfolio, respectively.9.4 Particulars of provision against non-performing advances: ===============================================================================================================
2006 2005
Note Specific General Total Specific General Total
(Rupees in '000) (Rupees in '000)
===============================================================================================================
Opening balance 332,100 281,183 613,283 951,429 47,967 999,396
Acquisition 4,123,012 3,396,588 7,519,600 - - -
Charge for the year 1,592,199 (26,958) 1,565,24l 359,212 254,350 613,562
Reversals (112,514) (112,514) (583,885) - (583,885)
1,479,685 (26,958) 1,452,727 (224,673) 254,350 29,677
Amounts written off 9.6 (628,982) - (628,982) (400,918) - (400,918)
Other movements (24,246) 37,448 13,202 6,262 (21,134) (14,872)
Closing balance 5,281,569 3,688,261 8,969,830 332,100 281,183 613,283
===============================================================================================================9.5 Particulars of provision against non-performing advances:========================================================================================================================
2006 2005
Specific General Total Specific General Total
(Rupees in '000) (Rupees in '000)
========================================================================================================================
In Local Currency 5,234,960 3,687,225 8,922,185 332,100 281,183 613,283
In Foreign Currency 46,609 1,036 47,645 - - -
5,281,569 3,688,261 8,969,830 332,100 281,183 613,283
========================================================================================================================9.6 Particulars of write offs:9.6.1 ==========================================================================================
2006 2005
(Rupees in '000)
==========================================================================================
Against provisions 628,982 400,918
Directly charged to profit and loss account 206,099 -
835,081 400,918
==========================================================================================9.6.2==========================================================================================
2006 2005
(Rupees in '000)
==========================================================================================
Write-offs of Rs. 500,000 and above 70,874 162,029
Write-offs of below Rs. 500,000 764,207 238,889
835,081 400,918
==========================================================================================9.7 Detail of loans written-off of Rs. 500,000 and above:In 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 a person(s) during the period ended 31 December 2006 is given in Annexure 1. 9.8 Particulars of loans and advances to directors associated companies, etc. ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
(i) Debts due by directors, executives or officers of the bank or any of them
either severally or jointly with any other persons
Balance at beginning of the year 1,012,724 1,015,559
Acquisition 1,290,470 -
Loans granted during the year 784,748 399,201
Repayments (700,177) (402,036)
Balance at end of the year 2,387,765 1,012,724
(ii) Debts due by subsidiary companies, controlled firms, managed modarabas
and other related parties
Balance at beginning of the year 474,608 462,163
Acquisition 341,429 -
Loans granted during the year 24,951,895 44,822,378
Repayments (24,951,291) (44,809,933)
Balance at end of the year 816,641 474,608
======================================================================================10. OPERATING FIXED ASSETS======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Capital work-in-progress 10.1 212,289 178,165
Property and equipment 10.2 3,208,727 339,202
3,421,016 517,367
======================================================================================10.1 Capital work-in-progress======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Civil works 45,659 -
Advance payment towards property and equipments 118,467 23,489
Consultants fee and other charges 49,077 109,017
212,289 178,165
======================================================================================10.2 Property and equipment==================================================================================================================================================================
2006
COST DEPRECIATION Book value
As at Acqusition Addition/ As at As at Acqusition Charge/ As at as at Rate of
1 January (Deletions/ 31 December 1 January (Deletions/ 31 December 31 December depreciatoin
2006 Write off) 2006 2006 Write Off) 2006 2006 %
/Adjustrnents /Adjustments
(Rupees in '000)
==================================================================================================================================================================
Land and buildings on
freehold land 87,174 2,454,708 8,208 2,549,284 47,415 534,223 58,149 639,097 1,910,187 5% - 6.67%
(690) (690)
(116)
Land and buildings on
leasehold land 261,751 - 233,740 493,315 171,966 - 38,232 208,288 285,027 6.67%25%
(2,176) (1,910)
Furniture, fixtures
and office equipment 806,109 1,289,125 257,679 2,349,406 615,328 771,787 133,351 1,518,226 831,180 10% 33.33%
(2,723) (1,772)
(784) (468)
Vehicles 5,057 225,485 20,602 224,705 5,057 59,006 14,859 68,872 155,833 20%
(26,437) (10,050)
(2)
Assets held under
finance lease:
Computer equipment 208,117 73,970 - 282,087 189,240 60,267 7,148 256,655 25,432 20%33.33%
Vehicles - 3,195 - 3,054 - 1,871 178 1,986 1,068 20%
(141) (63)
1,368,208 4,046,483 520,229 5,901,851 1,029,006 1,427,154 251,917 2,693,124 3,208,727
(32,026) (14,422)
(1,043) (531)
================================================================================================================================================================== Property and equipment========================================================================================================================================
2005
========================================================================================================================================
COST DEPRECIATION Book value
As at Additions/ As at As at Charge/ As at as at Rate of
1 January (Deletions/ 31 December 1 January (Deletions/ 31 December 31 December depreciation
2005 Write off)/ 2005 2005 Write off)/ 2005 2005 %
Adjustments Adjustments
========================================================================================================================================
(Rupees in '000)
========================================================================================================================================
Land and buildings on
freehold land 87,174 - 87,174 42,033 5,382 47,415 39,759 6.67%
Land and buildings on
leasehold land 201,435 66,442 261,751 150,271 27,821 171,966 89,785 6.67%
(6,126) (6,126)
Furniture, fixtures
and office equipment 755,434 51,337 806,109 533,452 82,538 615,328 190,781 33.33%
(662) (662)
Vehicles 8,116 2,402 5,057 7,752 345 5,057 - 20%
(5,461) (3,040)
Assets held under
finance lease:
computer equipment 208,117 - 208,117 172,517 16,723 189,240 18,877 33.33%
vehicles - - - - - - - 20%
1,260,276 120,181 1,368,208 906,025 132,809 1,029,006 339,202
(12,249) (9,828)
========================================================================================================================================10.2.1 Depreciation rates for furniture, fixtures and office equipment are as follows:======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Furniture and fixtures 10-20 percent
Printers 20 percent
Other office equipment 20 percent
Computer equipment 20-33.33 percent
======================================================================================10.3 Details of disposal of assets whose original cost or the book value exceeds Rs. 1 million or Rs. 250,000, which ever is lesser and assets disposed off to the chief executive or to a director or to executives or to shareholder holding not less than 10% of the voting shares of the bank or to any related party, irrespective of value, are given below:==========================================================================================================================
Particulars Cost Accumulated Book Value at Sale Proceed Gain / (Loss) Mode of Particulars of
Depreciation the Time of on Sale Disposal Purchaser
Till Date of Disposal
==========================================================================================================================
Disposal
Vehicles 1,042 226 816 886 70 Under Agreement Mr. Mehmood Batla
Vehicles 560 131 429 403 (26) Under Agreement Ms. Fauzia Sohail
Vehicles 1,268 592 676 592 (84) Under Agreement Mr. Akbar Chughtai
Vehicles 845 394 451 437 (14) Under Agreement Mr. Akbar Chughtai
Vehicles 600 580 20 196 176 Under Agreement Mr. Basir Mirza
Vehicles 560 140 420 411 (9) Under Agreement Mr. Azim Ullah Khan
Vehicles 560 131 429 411 (18) Under Agreement Mr. lkhlaq Ahmed
Vehicles 876 321 555 608 53 Under Agreement Mr. Asad Abbas
Vehicles 1,293 474 819 769 (50) Under Agreement Mr. Masroor A. Qureshi
Vehicles 1,268 697 570 592 22 Under Agreement Mr. Shamsul Hasan
Vehicles 885 221 664 649 (15) Under Agreement Mr. Zulifiqar All Khan
Vehicles 886 177 709 709 - Under Agreement Mr. Brian Tellis
Vehicles 1,288 558 730 790 60 Under Agreement Mr. Shamsul Hasan
Vehicles 936 94 842 645 (197) Under Agreement Mr. Rafi Mohammad Khan
Vehicles 560 140 420 403 (17) Under Agreement Mr. Zikar Makani
Vehicles 600 30 570 504 (66) Under Agreement Mr. Wasib Mohsin
Vehicles 580 145 4.35 433 (2) Under Agreement Ms. BushraAhad
Vehicles 555 37 518 500 (18) Under Agreement Mr. M. OmerAfzal
Vehicles 1,010 1,010 - 331 331 Under Agreement Mr. Irshad Nazir
Vehicles 1,042 174 868 955 87 Under Agreement Ms. Shafaq Rahid
Vehicles 560 93 467 448 (19) Under Agreement Ms. Rabia Omar Hassan
Vehicles 841 252 588 628 40 Under Agreement Mr. Ahmed Qureshi
Vehicles 615 41 574 504 (70) Under Agreement Mr. Sardar Hashim Ali
Vehicles 560 28 532 495 (37) Under Agreement Mr. Mohammed Hanif
Vehicles 399 399 - 180 180 Under Agreement Mr. Zahid Aftab
Vehicles 560 149 411 396 (15) Under Agreement Mr. Amin Lalani
Vehicles 495 149 347 268 (79) Under Agreement Mr. Nooman Mahmood
Vehicles 413 214 200 277 77 Under Agreement Mr. Muzammil Hussain
Vehicles 560 103 457 4.48 (9) Under Agreement Mr. Fawad Hamid
Vehicles 936 140 796 649 (147) Under Agreement Mr. Asnif All Mehdi
Vehicles 1,248 499 749 769 20 Under Agreement Mr. Zahid Hanif
Office Equipment 18 1 17 17 - Under Agreement Mr. Shamsul Hasan
Office Equipment 49 3 46 41 (5) Under Agreement Mr. Shaukat Tarin
Office Equipment 28 14 15 23 8 Under Agreement Mr. Shaukat Tarin
Office Equipment 28 10 18 23 5 Under Agreement Mr. ShaukatTarin
Office Equipment 49 4 46 41 (5) Under Agreement Mr. Shaukat Tann
Computer Equipme 111 15 95 95 - Under Agreement Mr. Shamsul Hasan
24,684 8,386 16,299 16,526 227
==========================================================================================================================
Furniture, fixtures, office equipment and computer equipments
Items having book value of less than Rs. 250,000 and cost of less
than Rs. 1,000,00 7,233 5,988 1,245 2,090 845
31,917 14,374 17,544 18,616 1,072
============================================================================
Furniture, fixtures, office equipment and computer equipments
Minor writeoffs 109 48 61 - (61)
32,026 14,422 17,605 18,616 1,011
============================================================================11. INTANGIBLE ASSETS======================================================================================================================================================================
2006
COST AMORTIZATION Book value Rate of as at
As at Acquisition Additions (Deletions As at As at Acquisition Charge (Deletions As at amortization
1 January /Write off) 31 December January / Write off) 31 December 31 December
2006 Adjustments 2006 2006 Adjustments 2006 2006
(Rupees in '000)
======================================================================================================================================================================
Goodwill - 25,589,020 - 25,589,020 - - - - - - 25,569,020
Core deposits intangibl - 1,982,413 - 1,982,413 - - 203,351 - - 203,351 1,779,062
Customer relationships
intangible - 774,680 - 774,680 - 108,818 - 108,818 665,862
Brand names - 389,400 - 389,400 - - 13,200 - 13,200 376,200
Computer
software 17,329 210,870 27,510 (34,546) 221,163 6,354 54,411 17,468 (7,323) 70,910 150,253 20%
17,329 28,946,383 27,510 (34,546) 28,956,676 6,354 54,411 342,837 (7,323) 396,279 28,560,397
2005
COST AMORTIZATION Book value Rate of as at
As at Acquisition Additions (Deletions As at As at Acquisition Charge (Deletions As at amortization
1 January /Write off) 31 December January / Write off) 31 December 31 December
2006 Adjustments 2006 2006 Adjustments 2006 2006
(Rupees in '000)
Computer
Software 17,329 - - - 17,329 2,888 - 3,466 - 6,354 10,975 20%
17,329 - - - 17,329 2,888 - 3,466 6,354 10,975
======================================================================================================================================================================12. DEFERRED TAX ASSET / (LIABILITY)The following are major deferred tax assets / (liabilities) recognised and movement thereon. ==================================================================================================
2006
At 1 January Acquisition (Charge)/ Debit/ (credi At 31
2006 credit to pro to equity December
and loss 2006
(Rupees in '000)
==================================================================================================
Available for sale investments 191,497 - (23,299) 168,198
Investments - Union Bank Limited - 152,794 - - 152,794
Provisions for loans and advances - 2,396,163 576,286 - 2,972,449
Other assets - (16,913) - - (16,913)
Fixed assets 12,952 (256,910) (37,849) - (281,807)
Deposits - 225,754 (101,522) - 124,232
Subordinated loans - (22,979) - - (22,979)
Liabilities against assets subject
to finance lease - (143) (174) - (317)
Other liabilities 11,492 - - 11,492
Goodwill - (153,745) - (153,745)
Actuarial gains on retirement
benefits (14,574) - - (3,312) (17,886)
189,875 2,489,258 282,996 (26,611) 2,935,518
==================================================================================================
2005
At 1 January (Charge)/ Debit/ (credi At 31
2005 credit to pro to equity December
and loss 2005
(Rupees in '000)
==================================================================================================
Available for sale investments 121,047 70,450 191,497
Fixed assets - 12,952 12,952
Actuarial gains on retirement benefits (18,852) 4,278 (14,574)
102,195 12,952 74,728 189,875
==================================================================================================13. OTHER ASSETS======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Income / mark-up accrued in local currency 2,891,297 894,239
Income / mark-up accrued in foreign currency 58,650 46,262
Advances, deposits, advance 1,123,285 176,316
rent and other prepayments
Receivable from Defined Benefit Plans 215,898 176,548
Clearing Suspense account 154,462 193,360
Unrealized gain on forward 101,646 228,957
foreign exchange contracts
Interest rate derivatives and currency 4,534,440 4,704,233
option - positive fair value
Receivable from SBP / Government of Pakistan 289,534 947,942
Non-banking assets acquired 13.1 108,787 -
in satisfaction of claims
Tax compensation under section
102 of the Income Tax Ordinance 160,653 -
Bank acceptances 13.2 7,059,040 1,734,885
Syndication commission receivable - 12,000
Others 339,073 86,318
17,036,765 9,201,060
Less: Provision against other assets 13.3 (107,303) (35,495)
16,929,462 9,165,565
======================================================================================13.1 The market value of non banking assets acquired in satisfaction of claims amounted to Rs. 108.8 million.13.2 Other assets and other liabilities include Rs. 7.059 billion (31 December 2005: Rs. 1.735 billion) in respect of acceptances which were previously classified as off balance sheet items. 13.3 PROVISION AGAINST OTHER ASSETS ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Opening balance 35,495 -
Acquisition 71,808 -
Charge for the year - 35,495
Closing balance 107,303 35,495
======================================================================================14. BILLS PAYABLE======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
In Pakistan 4,172,599 2,011,724
Outside Pakistan 87,235 52,226
4,259,834 2,063,950
======================================================================================15. BORROWINGS FROM FINANCIAL INSTITUTIONS======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
In Pakistan 21,471,968 7,208,283
Outside Pakistan 573,269 2,748
22,045,237 7,211,031
======================================================================================15.1 Particulars of borrowings with respect to currencies======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
In local currency 21,471,968 6,918,657
In foreign currency 573,269 292,374
22,045,237 7,211,031
======================================================================================15.2 Details of borrowings secured / unsecured Secured Borrowings from State Bank of Pakistan under:======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Export refinance scheme 15.2.1 4,945,568 367,800
LTF - Export oriented projects 15.2.2 650,387 -
Repurchase agreement borrowings 15.2.3 8,842,164 6,373,558
14,438,119 6,741,358
Unsecured
Call borrowings 15.2.4 7,359,665 289,625
Overdrawn nostro accounts 15.2.5 247,453 180,048
22,045,237 7,211,031
======================================================================================15.2.1 Mark-up on export refinance from the SBP is charged at rates ranging between 6.0 to 7.5 percent (2005: 8.00 to 9.00 percent) per annum. These loans are secured against demand promissory notes executed by the Bank in favour of the SBP.15.2.2 Mark-up on long term finance for export oriented projects from the SBP is charged at rates ranging between 4.0 to 6.0 percent per annum . These loans are secured against demand promissory notes executed by the Bank in favour of the SBP. 15.2.3 Repos carry mark-up at rates ranging between 8.35 to 9.40 percent per annum (2005: 5.9 to 8.4 percent per annum) payable at maturity and are due to mature by March 2007. 15.2.4 Call borrowings carry mark-up at rates ranging between 8.00 to 12.00 percent per annum (2005: 2.15 to 4.45 percent per annum) payable on monthly basis and are due to mature by January 2007. 15.2.5 This also includes overdrawn nostro accounts with branches of the Bank outside Pakistan amounting to Rs. 238.60 million (2005: Rs. 2.75 million). 16. DEPOSITS AND OTHER ACCOUNTS ======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Customers
- Fixed deposits 46,701,158 18,046,959
- Savings deposits 55,137,774 35,989,837
- Current accounts - Non-remunerative 53,347,573 28,960,122
- Margin accounts 555,627 349,272
- Special exporters' account 25,453 40,001
155,767,585 83,386,191
Financial Institutions
- Remunerative deposits 640,457 -
- Non-remunerative deposits 16.1 470,286 259,852
1,110,743 259,852
156,878,328 83,646,043
======================================================================================16.1 This includes Rs. 91.88 million (2005: As. 43.81 million) for balances of other branches of Standard Chartered Bank outside Pakistan.16.2 Particulars of deposits ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
In local currency 128,175,169 64,766,744
In foreign currencies 28,703,159 18,879,299
156,878,328 83,646,043
======================================================================================17. SUB-ORDINATED LOANS======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Term Finance Certificates issued 2,414,851 -
======================================================================================17.1 The Bank has issued subordinated term finance certificates in three issues. First issue of Rs. 750 million was made in 2002, the second issue of Rs. 750 million was made in December 2003, and the third issue of Rs. 1,000 million was offered to private investors in December 2005 and the public offer was made in February 2006.17.2 The TFCs are unsecured and are subordinated to the depositors and other creditors of the bank and carry following terms: =========================================================================================
First Second Third
Issue Issue Issue
=========================================================================================
Year of issue 2002 2003 2005
Rating A A A+
Rate 2.25% above the 0.75% above the 2.00% above the six
cut-off yield of last cut-off yield of last month Karachi Inter-Bank
successful auction successful auction Offered Rate (" KIBOA")
of five years PIB of five years PIB prevailing one working
day prior to the beginning
of each semi annual
period.
Floor 11% 5% -
Ceiling 15.50% 10.75% -
Repayment 5 years 7 years 7 years
=========================================================================================18. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE=========================================================================================================================
2006 2005
Minimum Financial Security Principal Minimum Financial Security Principal
lease charges for deposits outstanding lease charges for deposit outstanding
payments future payments future
periods periods
(Rupees in '000)
=========================================================================================================================
Not later than one year 17,565 397 7,444 9,724 21,044 1,965 - 19,079
Later than one year
but not later than five ye - - - - - - -
17,565 397 7,444 9,724 21,044 1,965 - 19,079
=========================================================================================================================The Bank has entered into Sale and Lease-Back Agreements with Union Leasing Limited for Vehicles, Computers and Office Equipment. Lease rentals are payable in monthly installments by June 2007. Financial charges, included in the lease rentals, are determined on the basis of discount factors applied at the rate of 15% per annum.19. OTHER LIABILITIES ======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Mark-up / return / interest 1,039,623 186,336
payable in local currency
Mark-up return / interest 104,984 35,167
payable in foreign currencies
Accrued expenses 1,280,871 531,000
Provision for taxation 927,386 1,256,177
Advance payments 241,463 189,669
Sundry creditors 1,129,477 73,690
Unrealised loss on forward 68,149 281,836
foreign exchange contracts
Interest rate derivatives and 4,370,389 4,679,909
currency options - negative values
Payable to defined contribution plans 161,598 182,954
Due to holding company 19.1 744,492 8,360
Unclaimed balances 28,615 58,289
Clearing suspense account 422,815 599,603
Branch adjustment account - 313,677 303,600
outside Pakistan branches
Provision against contingencies 19.2 72,932 4,963
Short sell - Treasury Bills / 344,512 157,389
Pakistan Investment Bonds
Bank acceptances 7,059,040 1,734,885
Unsettled trades 1,835,200 -
Others 334,426 38,567
20,479,649 10,322,394
======================================================================================19.1 Due to Holding company======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
On account of Eastern Bank 1,387 1,387
On account of SCB Pakistan Branches 19.1.1 698,072 -
Due to Chittagong branch of the Holding Company 6,177 6,177
Other 38,856 796
744,492 8,360
======================================================================================19.1.1 This represents excess of the net assets of the SCB Pakistan branches over the number of shares issued on transfer of SCB branches business effective 29 December 2006. The amount is to be remitted to the holding company.19.2 Provision against off-balance sheet obligations ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Opening balance 4,963 4,963
Acquisition 43,410 -
Charge for the year 24,559 -
Closing balance 72,932 4,963
======================================================================================20. SHARE CAPITAL HEAD OFFICE CAPITAL ACCOUNT20.1 Authorized Capital =================================================================================
2006 2005 2006 2005
(Numbers of shares) (Rupees in '000)
=================================================================================
4,000,000,00 - Ordinary shares of Rs.10 each 40,000,000 -
=================================================================================20.2 Issued, subscribed and paid up=================================================================================
2006 2005 2006 2005
(Numbers of shares) (Rupees in '000)
=================================================================================
Ordinary shares of Rs.10 each
fully paid
2,939,785,01 - Fully paid in cash 29,397,850 -
931,800,003 - Issued in terms of scheme of
amalgamation 20.3 9,318,000 -
3,871,585,02 - 38,715,850 -
=================================================================================20.3 These represent 892,554,151 shares of Rs. 10 each issued and allotted at par to Standard Chartered Bank, United Kingdom against transfer of entire undertaking of SCB Branch Business by SCB to the Bank and 39,245,852 shares issued and allotted at par credited as fully paid up to persons who were registered shareholders of Union Bank. These shares have been issued in accordance with the scheme of amalgamation duly approved by State Bank of Pakistan on 4 December 2006.20.4 At 31 December 2006, Standard Chartered Bank, United Kingdom held 99% of the shares of the Bank. 20.5 Head Office Capital Account This represented amount invested by SCB branches in unencumbered approved securities as permitted by Banking Companies Ordinance, 1962, having a face value of As. 4.11 billion. 21. RESERVES ======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Share premium 21.1 1,036,090 -
Statutory reserve 21.2 97,139 -
Exchange translation reserve (19,623) -
1,113,606 -
======================================================================================21.1 This represents excess of fair value of the shares over par value of shares issued to registered shareholders of Union Bank in terms of the amalgamation scheme.21.2 In accordance with the Banking Companies Ordinance, 1962, the bank is required to transfer twenty percent of its profit of each year to reserve fund untill the amount in such fund equals the paid up capital of the bank. 22. SURPLUS! (DEFICIT) ON REVALUATION OF SECURITIES - NET ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Market Treasury Bills 26,526 21,700
Pakistan Investment Bonds (505,405) (568,834)
Term Finance Certificates (8,854) -
Quoted Shares (9,022) -
(496,755) (547,134)
Deferred tax asset recognised 168,198 191,497
(328,557) (355,637)
======================================================================================23. CONTINGENCIES AND COMMITMENTS23.1 Transaction-related contingent liabilities Guarantees issued favouring: ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
- Government 16,003,491 5,495,878
- Others 4,324,691 6,458,436
======================================================================================23.2 Trade-related contingent liabilities======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Letters of credit 16,724,705 5,367,665
======================================================================================23.3 Other contingencies======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Claims against the Bank not acknowledged as 23.3.1 1,477,559 1,056,792
======================================================================================23.3.1 This includes claims for penal interest and additional surcharge amounting to Rs. 81.18 million claimed by Customs authorities in respect of certain bank guarantees issued on behalf of a customer in favour of Collector of Customs, Government of Pakistan. The guarantees remaining outstanding against the said customer at 31 December 2006 amount to Rs. 80.83 million.The bank has referred the claims to Alternate Dispute Resolution (ADR) Committee, where it has yet to come up for a hearing. The bank considers that the above amounts are not payable and if it is required to settle the claims, it would be able to recover them from the customer. 23.4 Commitments in respect of forward exchange contracts ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Purchase
State Bank of Pakistan 7,984,596 3,314,812
Other banks 37,896,773 25,388,429
Customers 7,208,756 3,734,431
Sale
State Bank of Pakistan 3,671,030 8,962
Other banks 22,891,934 25,238,753
Customers 16,152,302 3,582,160
======================================================================================23.5 Commitments in respect of operating leases======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Not later than one year 8,993 10,968
Later than one year and not later than five years 16,897 25,996
======================================================================================23.6 Derivative Instruments23.6.1 Product Analysis ===============================================================================
Interest Rate Swaps FX Options
Counter parties No. of Notional No. of Notional
Contracts Principal Contracts Principal *
(Rupees in '000)
===============================================================================
With Banks for
Hedging - - - -
Market Making 27 74,831,260 4 252,051
With FIs other than banks
Hedging - - - -
Market Making 4 1,350,000 - -
With other entities for
Hedging - - - -
Market Making 84 113,246,790 4 252,051
Total
Hedging - - - -
Market Making 115 189,428,050 8 504,102
2005 Total Market Making 21 101,941,691 82 11,394,136
=============================================================================== * At the exchange rate prevailing at the end of the reporting periodContracts with banks represent contracts entered with branches of Standard Chartered Bank, UK to obtain cover against the contracts with customers. 23.6.2 Maturity Analysis ====================================================================================
Interest Rate Swaps
Remaining No. of Notional Mark to Market
Maturity contracts principal Negative Positive Net
(Rupees in '000)
====================================================================================
Upto 1 month 11 11,994,413 (6,919) 7,053 134
1 to 3 months 12 1,071,778 (2,792) 2,757 (35)
3 to 6 months 21 9,984,834 (19,953) 20,716 763
6 month to 1 Year 3 1,005,371 - 14,237 14,237
1 to 2 Year 17 6,705,274 (22,083) 33,008 10,925
2 to 3Years 19 124,382,658 (4,166,109) 4,177,902 11,793
3 to 5Years 24 6,886,157 (61,562) 122,506 60,944
5 to 10 years 8 27,397,566 (45,555) 152,296 106,741
Above 10 Years - - - - -
====================================================================================24. MARK-UP/ RETURN/INTEREST EARNED ======================================================================================
2006 2005
(Rupees in 000)
======================================================================================
On loans and advances to customers 10,279,367 4,769,658
On loans and advances to financial institutions 821,344 437,752
On held for trading securities 566,833 -
On available for sale securities 1,870,357 1,323,658
On deposits with financial institutions / the
State Bank of Pakistan 188,792 62,697
On securities purchased under resale agreements 838,334 419,674
14,565,027 7,013,439
======================================================================================25. MARK-UP RETURN INTEREST EXPENSED======================================================================================
2006 2005
(Rupees in 000)
======================================================================================
Deposits 2,818,222 1,245,762
Securities sold under repurchase agreements 777,647 397,293
Call borrowings 428,294 68,787
Borrowings from State Bank of Pakistan under
export refinance scheme 116,384 25,969
Term finance certificates 88,169 -
4,228,716 1,737,811
======================================================================================26. GAIN / (LOSS) ON SALE OF SECURITIES======================================================================================
2006 2005
(Rupees in 000)
======================================================================================
Federal Government Securities
Market treasury bills 93,060 19,483
Pakistan Investment Bonds 15,856 (208,676)
Shares 29,799 -
138,715 (189,193)
======================================================================================27. OTHER INCOME======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Rent on property 2,179 1,661
Profit on sale of property and equipment 1,072 5,425
Liabilities no longer required written back - 75,845
Income on interest rate derivatives 163,400 59,898
Others 102,152 33,215
268,803 176,044
======================================================================================28. ADMINISTRATIVE EXPENSES======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
Salaries, allowances, etc. 2,217,551 1,034,365
Contribution to defined contribution plan 96,822 63,019
Charge for defined benefit plans 15,271 350
Rent, taxes, insurance, electricity, etc. 476,337 244,513
Legal and professional charges 92,139 15,368
Communications 221,647 111,842
Travel 174,089 58,781
Repairs and maintenance 258,587 179,848
Rentals of operating leases 11,538 12,831
Stationery and printing 276,249 74,492
Finance charges on finance leases 3,762 5,475
Advertisement and publicity 230,642 146,996
Donations 3,926 21,725
Auditors' remuneration 28.3 10,862 5,620
Depreciation 251,917 132,809
Amortisation 342,837 3,466
Others 387,884 237,199
5,072,060 2,348,699
======================================================================================28.1 Head office expenses in respect of SCB branches in Pakistan have not been incorporated in these financial statements.28.2 Details of the donations given in excess of Rupees 100,000 are given as below: ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
The Kidney Centre - 1,500
President Relief Fund Earth Quake Victims 3,000 20,000
Behbud Association 700 -
Murshid Hospital & Health Care Center 120 -
======================================================================================No donation was made to any donee in which any executive or director of the Bank had any interest at the time of donation.28.3 Auditors' remuneration ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Audit fee 4,232 3,000
Fee for audit of pension, gratuity and provident funds 220 500
Special certifications and others 3,965 320
Taxation services 2,400 1,800
Out-of-pocket expenses 45 -
10,862 5,620
======================================================================================29. OTHER CHARGES======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Penalties 510 13,096
======================================================================================These were imposed by the SBP mainly as a result of late submission of returns and shortfall in maintaining statutory liquidity reserve.30. TAXATION ======================================================================================
2006 2005
Note (Rupees in '000)
======================================================================================
For the year
- Current 30.1 2,131,037 1,400,000
- Deferred (282,996) (12,952)
1,848,041 1,387,048
For prior years (197,319) (16,682)
1,650,722 1,370,366
======================================================================================30.1 Relationship between tax expense and accounting profit======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Profit before taxation 7,360,179 5,426,973
Tax at the applicable tax rate of 35 percent 2,576,063 2,062,250
(2005: 38 percent)
Income exempt from tax (18,801) (7,569)
Dividend income at reduced rate (15,760) (987)
Expenses that are not deductible 1,300 258,945
in determining taxable income
Income that are not taxable (235,688) (365,072)
in determining taxable income
Head office expenses not booked in statutory
financial statements of SCB Pakistan branches (532,700) (538,460)
Others 73,627 (22,059)
1,848,041 1,387,048
======================================================================================30.2 The income tax assessments of SCB Pakistan branches have been finalized upto and including the tax year 2004. Bank's / departmental appeals for the assessment / tax years 1976-77 to 2004 are pending before different appellate levels.Despite management's expectation of favourable decision in the pending appeals, any tax liability in case of adverse decision has been fully provided. 30.3 Union Bank's tax assessments for the assessment years 1993-94 to 2001-02 and tax year 2005 are under various stages of appeal against certain disallowances. The assessment for 2005 was raised with additional demand of Rs. 753 million and company's appeal before CIT (A) was successful but the department has filed an appeal before the Income Tax Appellate Tribunal against the order of the Commissioner Income Tax (Appeals). However, the date of hearing of the appeal is yet to be decided. The management is confident of favourable outcome from appeals process. 30.4 EBI's (acquired by the Union Bank in 2002) assessments for the assessment years 1981-82 to 2001-02 are under various stages of appeal. The management is confident of favourable outcome from appeals process. 30.5 One of the assets acquired as part of the acquisition of Emirates Bank Pakistan's operations (EBIL) by Union Bank included tax compensation receivable from CBR amounting to As 160.653 million on account of delayed refunds. The taxation officer had determined the amount of compensation of As 44.320 million through order dated 27 January 2006 as against the bank's claim of As 160.653 million. Appeal was filed before the Commissioner of Income tax (Appeals) who has allowed further compensation of As 72.476 million vide order no. 16 to 26 dated 31 May 2006. The bank and tax department have filed appeals before the Income Tax Appellate Tribunal which are pending for adjudication. The bank has also filed an application for resolution of this dispute by the Alternate Dispute Resolution Committee but the matter has not been heard as yet. As a matter of prudence, the bank has made a provision of As 43.857 million against the afore-mentioned tax compensation. 31. BASIC EARNINGS PER SHARE ======================================================================
2006
(Rupees in '000)
======================================================================
Profit for the year 5,709,457
(Number of shares)
Weighted average number of ordinary shares 1,863,799,728
Basic earning per share Rupees 3.06
======================================================================32. CASH AND CASH EQUIVALENTS ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Cash and balances with treasury bank 22,797,606 9,927,597
Balances with other banks 3,544,796 1,340,279
26,342,402 11,267,876
======================================================================================33. STAFF STRENGTH======================================================================================
Number Number
======================================================================================
Permanent 3,025 1,160
Temporary / on contractual basis 21 -
Daily wages 35 -
Bank's own staff at the end of the year 3,081 1,160
Outsourced 5,039 2,594
Total staff strength 8,120 3,754
======================================================================================34. DEFINED BENEFIT PLANS34.1 General description Non Management Staff Pension Fund The plan provides a pension calculated as 50% of the average pensionable salary after completing 30 years of service. The employees of the bank are entitled to either pension or gratuity, but not both. However, the employees of ANZ Grindlays Bank transferred to the bank are entitled to both pension and gratuity and the minimum number of years required for entitlement of pension is 25 years for these employees. Pension is calculated as 1/1 20 times the last drawn merged salary for each years of service. Non Management Staff Gratuity Fund For the employees of SCB, the plan provides a lump sum gratuity calculated as last drawn merged salary for each year of service (Maximum 31 months) after completing 5 years of service. For the employees of ANZ Grindlays Bank, the plan provides a lump sum calculated at 50% of last drawn merged salary for each year of service (Maximum 24 months) after completing 5 years of service. However, if the employee is not entitled for pension, the percentage is increased to 100%. The employees of SCB are entitled to either Pension or Gratuity, but not to both. Management Staff Pension Fund The plan is closed to active employees. The entire liability is in respect of existing pensioners. Union Bank Gratuity Fund The scheme provides for gratuity benefits at graduated rates depending on the period of service to all employees of Union Bank. 34.2 Principal Actuarial Assumptions The last actuarial valuation of the scheme was carried out on 31 December 2006 and the key assumptions used for actuarial valuation were as follows ======================================================================================
2006 2005
======================================================================================
Discount rate 10% p.a. 9% p.a.
Expected rate of increase in salary in future years 8% p.a. 9% p.a.
Expected rate of return on plan assets 10% p.a. 9% p.a.
Expected long term rate of increase in pension 4% p.a. 3% p.a.
Mortality rate LIC (1975-79)
Ultimate mortality table
Withdrawal rate "Light"
======================================================================================34.3 Reconciliation of payable / (receivable) to/from defined benefit plan=========================================================================================================================================================================
SCB Non Management SCB Non Management SCB Management Union Bank Total
Pension Fund Gratuity Fund Pension Fund Gratuity Fund
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
(Rupees in '000)
=========================================================================================================================================================================
Present value of defined benefit obligation 58,761 60,134 15,170 19,918 47,578 46,909 157,431 - 278,940 126,961
Fair value of plan assets (61,209) (59,361) (19,738) (16,146) (226,513) (228,002) (187,378) - (494,838) (303,509)
Asset recognised in Balance Sheet (2,448) 773 (4,568) 3,772 (178,935) (181,093) (29,947) - (215,898) (176,548)
=========================================================================================================================================================================34.4 Movement in defined benefit obligation;-=========================================================================================================================================================================
SCB Non Management SCB Non Management SCB Management Union Bank Total
Pension Fund Gratuity Fund Pension Fund Gratuity Fund
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
(Rupees in '000)
=========================================================================================================================================================================
- Obligation as at 1 January 60,134 50,727 19,918 16,019 46,909 43,415 136,870 - 263,831 110,161
- Current service cost 232 263 725 676 - - 30,505 - 31,462 939
- Interest cost 5,139 4,001 1,623 1,282 3,945 3,471 13,687 - 24,394 8,754
- Benefits (paid) / received (7,492) (4,475) (3,090) (1,155) (4,236) 6,286 (32,0311 - (46,849) 656
- Actuarial (gain) loss on obligation 748 9,618 (4,006) 3,096 960 (6,263) 8,400 - 6,102 6,451
- Obligation as sf1 December 58,761 60,134 15,170 19,918 47,578 46,909 157,431 - 278,940 126,961
=========================================================================================================================================================================34.5 Movement in fair value of plan assets=========================================================================================================================================================================
SCB Non Management SCB Non Management SCB Management Union Bank Total
Pension Fund Gratuity Fund Pension Fund Gratuity Fund
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
(Rupees in '000)
=========================================================================================================================================================================
- Fair value as at 1 January 59,361 58,117 16,146 16,019 228,002 367,492 181,447 - 484,956 441,628
- Expected return on plan assets 4,844 4,590 1,298 1,282 30,589 3,471 16,444 - 53,175 9,343
-Contribution by the bank 773 2,650 - - (34,000) (149,247) 29,689 - (3,538) (146,597)
Benefits paid (7,492) (4,475) (3,090) (1,155) (4,236) 6,286 (32,031) - (46,849) 656
-Actuarial gain/(Ioss)on plan assets 3,723 (1,521) 5,384 - 6,158 - (8,171) - 7,094 (1,521)
- Fair value as at 31 December 61,209 59,361 19,738 16,146 226,513 228,002 187,378 - 494,838 303,509
=========================================================================================================================================================================34.6 Movement in (receivable) / payable to defined benefit=========================================================================================================================================================================
SCB Non Management SCB Non Management SCB Management Union Bank Total
Pension Fund Gratuity Fund Pension Fund Gratuity Fund
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
(Rupees in '000)
=========================================================================================================================================================================
Balance as at 1 January 773 (7,390) 3,772 - (181,093) (324,077) (36,105) - (212,653) (331467)
Charge for the year 527 (326) 1,050 676 - - 27,748 - 29,325 350
Compensation during the year - - - - (26,644) (25,753) - - (26,644) (25,753)
Contribution to the fund during the year (773) (2,650) - - 34,000 175,000 (29,689) - 3,538 172,350
Actuarial Loss recognised in equity (2,975) 11,139 (9,390) 3,096 (5,198) (6,263) 8,099 - (9,464) 7,972
Balance as at 31 December (2,448) 773 (4,568) 3,772 (178,935) (181,093) (29,947) - (215,898) (176,548)
=========================================================================================================================================================================34.7 Charge for defined benefit plan=========================================================================================================================================================================
SCB Non Management SCB Non Management SCB Management Union Bank Total
Pension Fund Gratuity Fund Pension Fund Gratuity Fund
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
(Rupees in '000)
=========================================================================================================================================================================
Current service cost 232 263 725 676 - - 30,505 - 31,462 939
Interest cost 5,139 '4,001 1,623 1,282 3,945 3,471 13,687 - 24,394 8,754
Expected return on plan assets (4,844) (4,590) (1,298) (1,282) (3,945) (3,471) (16,444) - (26,531) (9,343)
527 (326) 1,050 676 - - 27,748 - 29,325 350
=========================================================================================================================================================================Charge for Union Bank gratuity fund represents charge for the whole year and not the charge for four months accounted for in these financial statements.34.8 Actual return on plan assets =========================================================================================================================================================================
SCB Non Management SCB Non Management SCB Management Union Bank Total
Pension Fund Gratuity Fund Pension Fund Gratuity Fund
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
(Rupees in '000)
=========================================================================================================================================================================
- Expected return on plan assets 4,844 4,590 1,298 1,282 30,589 29,224 16,444 - 53,175 35,096
- Actuarial gain/ (loss) on plan assets 3,723 (1,521) 5,384 (1,155) 6,158 10,775 (8,171) - 7,094 8,099
8,567 3,069 6,682 127 36,747 39,999 8,273 - 60,269 43,195
=========================================================================================================================================================================34.9 Cumulative amount of actuarial gains /(losses) recoginised in statement ofrecognised income and expense =========================================================================================================================================================================
SCB Non Management SCB Non Management SCB Management Union Bank Total
Pension Fund Gratuity Fund Pension Fund Gratuity Fund
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
(Rupees in '000)
=========================================================================================================================================================================
21,396 18,421 220 (9,170) 37,587 32,388 (8,099) - 51,104 41,639
=========================================================================================================================================================================34.10 Expected contributions for next ye =========================================================================================================================================================================
SCB Non Management SCB Non Management SCB Management Union Bank Total
Pension Fund Gratuity Fund Pension Fund Gratuity Fund
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
(Rupees in '000)
=========================================================================================================================================================================
- - - - -
=========================================================================================================================================================================34.11 Components of plan assets as a percentage of total plan assets================================================================================================================================== Equities 0% 0% 0% 0% 0% 0% 18% Bonds 101% 104% 133% 125% 99% 95% 57% Cash & net current assets -1% -4% 26% 47% 1% 4% 25% Others 0% 0% -59% -72% 0% 1% 0% ==================================================================================================================================34.12 Five year data on surplus/ (deficit) of the plans & experience adjustments ====================================================================================================
2006 2005 2004 2003 2002
(Rupees in '000)
====================================================================================================
Present value of defined 278,940 263,831 224,108 185,659 176,023
benefit obligation
- Fair value of plan assets 494,839 484,956 602,787 537,814 446,973
- Surplus/ (Deficit) 215,899 221,125 378,679 352,155 270,950
Experience adjustments on plan
liabilities loss / (gain) (6,675) (10,023) 2,499 1,762 (7,555)
Experience adjustments on plan
assets/(gain) 7,094 14,574 515 41,071 10,120
====================================================================================================35. COMPENSATION OF CHIEF EXECUTIVE AND EXECUTIVES============================================================================================================
Chief Executive Director Executives
Note 2006 2005 2006 2005 2006 2005
(Rupees in '000)
============================================================================================================
Directors' remuneration - - 968 - - -
Managerial remuneration 35.1 35,570 32,490 - - 575,243 266,983
Contribution to defined
contribution plan 2,534 2,011 - - 41,594 25,357
Rent and house maintenance 5,529 4,388 - - 89,229 60,693
Utilities 674 1,097 - - 14,594 15,173
Medical 708 - - - 60,674 -
Others 3,310 265 - - 28,810 9,975
48,325 40,251 968 - 810,144 378,181
Number of persons 1 1 1 - 392 137
============================================================================================================35.1 Directors remuneration represents the amount paid to one independent non-executive director for carrying out extra work as assigned by the Board.35.2 The Bank also provides free use of furnished accommodation to the Chief Executive and Bank maintained cars to the Chief Executive and some of the Executives of the Bank. In addition the Chief Executive and some of the Executives are also reimbursed for cost of medical expenses and other benefits like club subscription and education etc. 36. FAIR VALUE OF FINANCIAL INSTRUMENTS 36.1 On-balance sheet financial instruments Except for investment in subsidiaries, unlisted companies, fixed term advances ot over one year, staff loans and fixed term deposits of over one year, the fair value of on balance sheet financial assets and liabilities are not significantly different from their book value as these assets and liabilities are either short term in nature or are frequently re-priced. The fair value of fixed term advances of over one year, staff loans, fixed term deposits of over one year and investment in subsidiaries cannot be calculated with sufficient reliability due to non-availability of relevant active market for similar assets and liabilities. The fair value of investment in quoted subsidiaries is disclosed in note 8.11. 36.2 Off-balance sheet financial instruments ====================================================================================================
2006 2005
Book value Fair value Book value Fair value
(Rupees in '000)
====================================================================================================
Interest Rate swaps /
Foreign currency options /
Forward purchase contracts 153,598,253 158,098,648 88,154,446 82,417,215
Interest Rate swaps /
Foreign currency options /
Forward sale contracts
132,139,290 136,504,516 86,404,127 80,730,126
====================================================================================================37. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIESThe segment analysis with respect to business activity. ===================================================================================================
2006
Global Corporate and Consumer Total
Markets Institutional Banking
Banking
(Rupees in '000)
===================================================================================================
Total income (net of interest expense) 2,214,612 2,794,728 9,014,210 14,023,550
Total expenses (439,879) (728,648) (5,494,844) (6,663,371)
Net income 1,774,733 2,066,080 3,519,366 7,360,179
Segment Assets (Gross) 94,683,389 95,362,549 65,241,628 255,287,566
Segment Non Performing Loans - 4,625,264 2,872,454 7,497,718
Segment Provision Required - 5,196,915 3,772,915 8,969,830
Segment Liabilities 28,019,638 49,550,172 128,517,813 206,087,623
Segment Return on Assets
(ROA) (%) *1.64% 2.97% 7.63% 2.78%
Segment Cost of funds (%) **3.23% 3.87% 4.05% 3.79%
===================================================================================================
2005
Global Corporate and Consumer Total
Markets Institutional Banking
Banking
(Rupees in
===================================================================================================
Total income (net of interest expense) 1,424,804 1,780,417 4,520,541 7,725,762
Total expenses (164,581) (84,891) (2,049,317) (2,298,789)
Net income 1,260,223 1,695,526 2,471,224 5,426,973
Segment Assets (Gross) 54,633,685 33,055,011 24,592,778 112,281,474
Segment Non Performing Loans -273,540 127,155 400,695
Segment Provision Required -242,403 370,880 613,283
Segment Liabilities 13,426,428 27,445,198 62,390,871 103,262,497
Segment Return on Assets
(ROA) (%) *2.31% 5.17% 10.20% 4.86%
Segment Cost of funds (%) **1.28% 1.96% 2.66% 2.04%
=================================================================================================== * Segment ROA Net income I (Segment Assets - Segment Provisions) For 2006 Segment ROA have been computed based on the the full year net income of SCB branches and annualised net income of ex. Union bank branches.** Segment cost of funds have been computed based on the average balances. The business activities of the Bank are confined to three segments i.e. Consumer banking, Global Markets and Corporate & Institutional Banking (Wholesale Banking). The products and services offered by these segments are as follows: Global markets Overall management of the treasury of the bank and offering various cash and interest risk management products to the customers. The products include FX forwards, FX options and interest rate swaps. Consumer Banking Wealth management, deposits, mortgages, auto finance, cards and loans. Corporate and institutional banking Trade and lending activities for the corporates and financial institutions. 38. RELATED PARTY TRANSACTIONS Related parties comprise of Standard Chartered Plc., ultimate parent company, its subsidiaries, key management personnel, and employees retirement benefit funds. The transactions with related parties are conducted at commercial terms. The bank also provides advances to employees at reduced rates in accordance with their terms of employment. The transactions and balances with related parties are summarised as follows: ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Group
Nostro balances with other branches 2,120,220 1,330,887
Overdrawn nostro balances with other branches 238,604 2,748
Vostro balances of other branches 91,881 43,811
Overdrawn vostro balances of other branches 50,640 129
Placements with other branches 1,977,523 8,240,503
Mark-up / Interest / Income earned 373,166 281,833
from other branches
Commission on derivative transactions 19,891 43,274
with other branches
Payment to group company for 134,653 -
direct sales services rendered
Subsidiaries
Administrative expenses including 2,390 -
rent & other charges
Dividend Income 26,179 270
Mark-up / Interest / Income earned 56,478 9,447
Mark-up / Interest / Income expensed 4,269 5,420
Lease rentals paid during the period 38,375 22,730
Reimbursement of salaries from modaraba 8,731 4,997
Liabilities against assets subject to finance lease - 19,079
Key management personnel
Mark-up / Interest / Income earned 4,318 1,026
Mark-up / Interest / Income expensed 461 142
Sale of Vehicle 87 -
Salaries and benefits 168,176 65,037
Post retirement benefits 7,437 5,889
Others
Deposits by staff retirement benefit funds 157,597 32,219
Deposits by customers with common directorship 538,724 -
Contribution to Staff retirement benefit funds 89,615 62,872
Remuneration paid to independent director 968 - 1
======================================================================================38.1 Loans and advances===================================================================================================
Balance as at Acquisition Net Net Balance as at
31 December disbursements repayments / 31 December
2005 deposits withdrawals 2006
(Rupees in 000)
===================================================================================================
Modaraba
Term Loan (Musharika) 400,000 - 4,790,000 (4,705,000) 485,000
Working Capital Facility 74,608 - 2,414,198 (2,488,806) -
474,608 - 7,204,198 (7,193,806) 485,000
Key Management Personnel 56,047 55,215 48,422 (39,131) 120,553
Subsidiary - 341,429 1,543,170 (1,553,170) 331,429
===================================================================================================38.2 Deposits===================================================================================================
Balance as at Acquisition Net Net Balance as at
31 December disbursements repayments / 31 December
2005 deposits withdrawals 2006
(Rupees in 000)
===================================================================================================
Group companies - - 143,642 (130,545) 13,097
Modaraba 8,890 - 3,869,558 (3,755,062) 123,386
Subsidiary 37,998 19,747 2,345,565 (2,211,786) 191,524
Key Management Personnel 16,454 15,758 262,160 (258,061) 36,311
===================================================================================================39. CAPITAL ADEQUACYThe risk weighted assets to capital ratio, calculated in accordance with the State Bank's guidelines on capital adequacy was as follows:- ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
Regulatory Capital Base
Tier I Capital
Shareholders Capital /
Head Office capital account 38,715,850 4,103,942
Reserves 1,113,606 -
Unappropriated / Unremitted profit 729,214 4,392,249
40,558,670 8,496,191
Less: Adjustments (29,307,653) (400,137)
Total Tier I Capital 11,251,017 8,096,054
Tier II Capital
General provisions subject to 1.25%
of Total Risk Weighted Assets 1,771,374 281,183
Subordinated Debt Upto 50% of total Equity 1,683,093
Total Tier II Capital 3,454,467 281,183
Eligible Tier III Capital - -
Total Regulatory Capital (a) 14,705,484 8,377,237
====================================================================================== Risk-Weighted Exposures==========================================================================================
2006 2005
Book Value Risk Adjusted Book Value Risk Adjusted
Value Value
(Rupees in '000)
==========================================================================================
Credit Risk
Balance Sheet Items:-
Cash and other liquid Assets 26,342,402 1,926,956 10,867,876 2,844,596
Money at call 362,269 72,454 400,000 80,000
Investments 38,328,237 884,558 40,301,815 42,000
Loans and Advances 129,438,435 99,731,347 50,214,718 30,939,055
Fixed Assets 31,981,413 3,421,017 528,342 528,337
Other Assets 19,864,980 9,472,463 9,355,440 7,325,235
246,317,736 115,508,795 111,668,191 41,759,223
Off Balance Sheet items
Loan Repayment Guarantees 7,059,040 7,051,656 1,734,885 1,734,885
and acceptances
Performance Bonds etc 20,328,182 6,205,688 11,800,170 3,767,349
Interest Rate Swaps 189,428,050 4,929,891 101,941,692 2,083,634
Stand By Letters of Credit 16,724,705 7,497,393 5,367,665 2,683,833
Outstanding Foreign
Exchange Contracts
-Purchase 53,090,125 255,218 32,437,672 163,677
-Sale 42,715,266 255,218 28,829,875 163,677
FX Options 504,102 6,049 11,394,136 136,729
329,849,470 26,201,113 193,506,095 10,733,784
Credit risk-weighted exposures 141,709,908 52,493,007
Market Risk
General market risk 192,256 53,765
Specific market Risk 14,053 19,185
Market risk-weighted exposures 206,309 72,950
Total Risk-Weighted exposures (b) 144,288,770 53,404,882
Capital Adequacy Ratio [(a) 1(b) x 100) 10.19% 15.69%
==========================================================================================40. RISK MANAGEMENTThrough its risk management structure the Bank seeks to manage efficiently the core risks: credit, market, country, and liquidity risk. These arise directly through the Bank's commercial activities whilst compliance and regulatory risk, operational risk and reputational risks are normal consequences of any business undertaking. The basic principles of risk management followed by the bank include: Balancing risk and reward Risk is taken in support of the requirements of the Bank's stakeholders. Risk should be taken in support of the Bank strategy and within its risk appetite. Responsibility Given the Bank is in the business of taking risk, it is everyone's responsibility to ensure that risk taking is both disciplined and focused. The Bank takes account of its social, environmental and ethical responsibilities in taking risk to produce a return. Accountability Risk is taken only within agreed authorities and where there is appropriate infrastructure and resource. All risk taking must be transparent, controlled and reported. Anticipation The Bank looks to anticipate future risks and to maximise awareness of all risk. Risk management The Bank aims to implement best practices and have a specialist risk function of international standards, with strength in depth, experience across risk types and economic scenarios. Ultimate responsibility for the effective management of risk rests with the Company's Board. Acting within an authority delegated by the Board, the Executive Committee, reviews specific risk areas and monitors the activities of the Risk Committee ("RC") and the Asset and Liability Committee ("ALCO"). RC headed by Chief Risk Officer (CR0), through authority delegated by the Board, is responsible for credit risk, market risk, operational risk, compliance and regulatory risk, legal risk and reputational risk. ALCO, through authority delegated by the Board, is responsible for liquidity risk, for structural interest rate and foreign exchange exposures, and for capital ratios. The day to day responsibility for managing risk rests with CR0 who overseas and manages the risk through a team of a managers; Senior Credit Officer responsible for credit risk in Wholesale Bank, Head of Consumer Credit responsible for credit risk in Consumer Bank (including SME), Head of Special Assets Management responsible for remedial risk management, Head of Credit Risk Controls responsible for collateral management, security documentation, credit MIS and controls, Head of Market Risk responsible for liquidity risk and risks associated with price movements, arising from interest and exchange rate movements. The Bank has established polices, procedures, processes, and controls and have provided the Risk team adequate support by way of risk systems and tools for measuring and reporting risk for monitoring, controlling, reviewing and managing risk. 40.1 Credit risk Credit risk is the risk that a counter party will not settle its obligations in accordance with agreed terms. Credit exposures may arise from lending, trade finance, securities and derivative exposures. Credit exposures include both individual borrowers and groups of connected counterparties and portfolios in the banking and trading books. The Board of Directors has delegated down the authority to CEO and the Bank's Executive Committee to establish credit risk appetite and make recommendations to the Board for approval of policies for managing credit risk. The CEO and the Executive Committee in turn rely on CR0 and the Risk Committee to determined these and recommend for their support and Boards approval. The CR0 is also delegated down by the CEO responsibility to delegate credit authorities to independent Risk Officers. Credit risk appetite is established through business strategy papers and underwriting standards by the business managers, which are approved by the the Executive Committee once recommended and supported by the Risk Committee chaired by the CR0. Specific procedures for managing credit risk within Wholesale and Consumer (including SME) are determined at the Senior Credit Officer and Head of Consumer Credit levels for their respective jurisdictions with specific policies and procedures being adapted to different risk environment and business goals. Credit analysis includes review of facility details, credit grade determination and financial spreading/ratio analysis. Portfolio review, Early Alerts and Stress Testing based on scenario analysis is a combined responsibility of Client Relationship and Risk function. Client relationship origination and credit approval roles are clearly segregated throughout Wholesale and Consumer Banks. 40.1.1 Wholesale Banking Within the Wholesale Banking business, a numerical grading system is used for quantifying the risk associated with counterparty. The grading is based on a probability of default measure, with customers analysed against a range of quantitative and qualitative measures. Expected Loss is used for the further assessment of individual exposures and portfolio analysis. There is a clear segregation of duties with loan applications being prepared separately from the approval chain. 40.1.2 Consumer Banking For Consumer Banking, standard credit application forms are generally used, which are processed in central units for different products and market segments. As with Wholesale Banking, origination and approval roles are segregated. 40.1.3 segment by class of business =================================================================================================================
2006
Contingencies
and
Advances Deposits Commitments
(Rupees Percent (Rupees Percent (Rupees Percent
in '000) in '000) in '000)
=================================================================================================================
Chemical and pharmaceuticals 8,722,014 6.30 1,982,750 1.26 1,935,553 5.22
Agri business 1,053,674 0.76 1,944,733 1.24 641,298 1.73
Textile 19,607,411 14.17 1,117,641 0.71 2,260,676 6.10
Construction - - 2,711,219 1.73 31,626 0.09
Consumer goods 1,768,098 1.28 2,599,763 1.66 - -
Insurance 280,000 020 328,030 0.21 - -
Telecommunications and
information technology 2,039,851 1.47 2,123,999 1.35 49,314 0.13
Cement 4,238,105 3.06 107,545 0.07 989,255 2.67
Sugar 1,494,873 1.08 12,671 0.01 180,736 0.49
Automobile and transportation
equipment
1,641,691 1.19 649,207 0.41 753,099 2.03
Financial 4,775,955 3.45 398,171 0.25 2,460,470 6.64
Electronics and electrical
appliances
1,601,242 1.16 2,320,104 1.48 4,076,588 11.00
Production and transmission
of energy 1,492,242 1.08 2,937,798 1.87 320,686 0.87
Communication 228,712 0.17 1,385,153 0.88 - -
Shoes and leather garments 685,705 0.50 154,405 0.10 98,616 0.27
Individuals 58,022,735 41.91 104,694,638 66.74 53,342 0.14
Others 30,755,957 22.22 31,410,501 20.02 23,201,628 62.62
138,408,265 100.00 156,878,328 100.00 37,052,887 100.00
=================================================================================================================
2005 Contingencies
and
Advances Deposits Commitments
(Rupees Percent (Rupees Percent (Rupees Percent
in '000) in '000) in '000)
=================================================================================================================
Chemical and pharmaceuticals 1,883,917 3.71 1,549,978 1.85 3,669,942 21.19
Agri business - - 199,685 0.24 - -
Textile 6,508,523 12.80 176,882 0.21 1,036,466 5.98
Cement 2,878,487 5.66 16,145 0.02 96,760 0.56
Sugar 200,000 0.39 - - 1,672 0.01
Automobile and transportation
equipment
275,622 0.54 417,442 0.50 392,845 2.27
Financial 2,844,550 5.60 237,416 0.28 11,405 0.07
Electronics and electrical
appliances
634,279 1.25 463,428 0.55 1,969,952 11.37
Production and transmission
of energy 304 - 2,008,924 2.40 415,804 2.40
Communication 2,104,434 4.14 1,155,200 1.38 488,001 2.82
Individuals 14,625,763 28.78 61,479,292 73.50 - -
Others 18,872,122 37.13 15,941,651 19.06 9,239,132 53.34
50,828,001 100.00 83,646,043 100.00 17,321,979 100.00
=================================================================================================================40.1.4 Details of non-performing advances and specific provisions by class of business segment===============================================================================================
2006 2005
Classified Specific Classified Specific
Advances Provision Advances Provision
held held
(Rupees in '000)
===============================================================================================
Chemical and pharmaceuticals 156,971 74,914 60,043 60,689
Agri business 318,145 151,833 - -
Textile 2,095,145 2,273,990 87,195 87,185
Footwear and Leather garments 14,937 7,129 - -
Automobile and transportation equipment 36,475 17,408 - -
Financial 4,782 2,282 - -
Production and transmission of energy 199,742 95,326 - --
Individuals 2,593,153 1,639,724 127,154 89,696
Others 2,078,368 1,018,963 126,303 94,530
7,497,718 5,281,569 400,695 332,100
===============================================================================================40.1.5 Segment by sector=====================================================================================================
2006
Contingencies
and
Advances Deposits Commitments
Rupees % Rupees % Rupees %
in '000 in '000 in '000
=====================================================================================================
Public /
Government 8,527,869 6.16 11,399,565 7.27 5,546,111 14.97
Private 129,880,396 93.84 145,478,763 92.73 31,506,776 85.03
138,408,265 100.00 156,878,328 100.00 37,052,887 100.00
=====================================================================================================
2005 Contingencies
and
Advances Deposits Commitments
Rupees % Rupees % Rupees %
in '000 in '000 in 000
=====================================================================================================
Public /
Government 6,118,605 12.04 - - 6,154,000 35.53
Private 44,709,396 87.96 83,646,043 100.00 11,167,979 64.47
50,828,001 100.00 83,646,043 100.00 17,321,979 100.00
=====================================================================================================40.1.6 Details of non-performing advances and specific provisions by sector=================================================================================
2006 2005
Classified Specific Classified Specific
Advances Provision Advances Provision
held held
(Rupees in '000)
=================================================================================
Public / Government - -
Private 7,497,718 5,281,569 400,695 332,100
7,497,718 5,281,569 400,695 332,100
=================================================================================40.1.7 GEOGRAPHICAL SEGMENT ANALYSIS=================================================================================
2006
Profit Total Net Assets Contingencies
before assets employed and
taxation employed Commitments
(Rupees in '000)
=================================================================================
Pakistan 7,347,646 245,050,659 39,875,838 36,446,695
Sri Lanka 12,533 1,267,077 354,275 606,192
7,360,179 246,317,736 40,230,113 37,052,887
=================================================================================In year 2005 all of the branches of the bank were located in Pakistan only.40.2 Market Risk The Bank recognises market risk as the exposures created by potential changes in market prices and rates. Market risk exposures arise primarily from interest rate and foreign exchange related contracts. The Bank has no significant exposure to equity and commodity price risk. Market risk is managed by the Head of Market Risk reporting directly to the CRO, who agrees policies and procedures and levels of risk appetite in terms of Value at Risk ("VaR"). Limits are then proposed by the business within the terms of agreed policy. These are agreed and delegated down by CRO under delegated authority from the CEO and are monitored by Head of Market Risk as part of an independent risk management function. Policies cover both the trading and non-trading books. In addition to market risk policies as well as VaR and other market risk limits, independent stress testing of portfolios, factor sensitivity measures and derivatives are also employed as additional risk management tools to manage and hedge market risk exposures. Risk models are periodically back tested against actual results to ensure pre-determined levels of accuracy are maintained. 40.3 Foreign Exchange Risk =======================================================================================
2006
Assets Liabilities Off-balance Net foreign
sheet items currency
exposure
(Rupees in '000)
=======================================================================================
Pakistan rupee 189,217,184 174,852,072 (9,570,466) 4,794,646
United States dollar 14,841,059 23,788,773 9,090,226 142,512
Great Britain pound 1,596,230 3,797,345 2,201,943 828
Euro 2,719,047 1,785,660 (924,096) 9,291
Swiss Franc 10,614 10,614 47 47
Japanese yen 230,627 13 (230,302) 312
Others 1,502,106 925,759 (567,352) 8,995
210,116,867 205,160,236 - 4,956,631
=======================================================================================
2005
Assets Liabilities Off-balance Net foreign
sheet items currency
exposure
(Rupees in '000)
=======================================================================================
Pakistan rupee 90,762,792 81,422,407 (812,656) 8,527,729
United States dollar 17,407,349 17,537,681 363,011 232,679
Great Britain pound 1,845,779 2,737,477 895,514 3,816
Euro 127,457 212,677 85,364 144
Japanese yen 596,680 60,146 (536,302) 232
Others 33,601 35,932 5,069 2,738
110,773,658 102,006,320 - 8,767,338
=======================================================================================Currency risk is the risk that the value of a financial instrument will fluctuate due to change in foreign exchange rates. The Bank undertakes currency risk mostly to support its trade services and maintains overall foreign exchange risk position within ten percent of its capital as advised by the SBP and reduces its forward exposure by matching future maturities.The management set limits on the level of exposure by currency in total for both overnight & intra day positions which are monitored daily. 40.4 MISMATCH OF INTEREST RATE SENSITIVE ASSETS AND LIABILITIES =====================================================================================================================================================================================================================
2006
Exposed to yield
/ interest rate risk Non Internet
Effective Total Upto one Over one Over three Over six Over one Over two Over three Over five Over five bearing finance
yield / month month to months to months to year to years to years to years to ten years Instruments
interest rate three months six months one year two years three years five years ten years
- (Rupees in '000)
=====================================================================================================================================================================================================================
On-balance sheet financial instruments
Assets
Cash and balances with
treasury banks 4.05% 22,797,606 4,363,136 - - - - - - - - 18,343,470
Balances with other banks 3.5%-5.2% 3,544,796 259,438 - 119,350 - - - 3,166,008
Lendings to financial
institutions 4.5% -9.05% 3,873,224 2,967,144 906,080 - - - - - - -
Investments 8.06% 34,817,282 3,013,004 1,468,970 3.923,598 17,186,574 630,100 1,552,841 2,742,067 3,954,784 - 345,344
Advances 12.87% 129,438,435 63,009,164 10,309,523 7,341 .726 8,444,674 9,092,129 8,811,619 11,527,430 7,025,970 1,660,051 2,216,149
Other assets 15,645,524 11,695,126 - - - - - - - - 3,950,149
210,116,867 85,307,012 12,684,573 11,384,674 25,631,248 9,722,229 10,364,460 14,269,497 10,980,754 1,660,051 28,112,369
Liabilities
Bills payable 4,259,834 - - - - - - - - - 4,259,834
Borrowings 7.05%-92% 22,045,237 16,078,415 4,531,219 1,226,869 12,067 166,667 30,000 - - - -
Deposits and other accounts 3.71% 77,342,389 11,211,589 6,615,991 6,891,275 315,587 90,005 12,540 13 - 54,398,939 -
Sub-ordinatedloan-TFCs 11.09% 146 193 246,132 3.38 239,570 275,679 976,826 675,967 - - - -
Liabilities against assets subject
to finance lease 15.00% 3,349 6,375 - - - - - - - - -
Other liabilities - 11,497,577 - - - - - - - - 8,054,685 -
104,921,876 15,749,376 8,088,992 6903,680 721,824 395,684 989,366 675,980 - 66,713,4 -
On-balance sheet gap 4,956,631 (19,614,864) (3,064,803) 3,295,682 18,727,568 9,000,405 9,968,776 13,280,131 10,304,774 1,660,051 (38,601,089)
Off-balance sheet financial instruments
Forward Lending
Interest Rate Swap 100,256,077 8,208,013 941,606 2,879,207 1,005,370 3,552,097 62,559,908 4,400,188 16,709,688 - -
Foreign Currency option 252,051 - - 252,051 - - - - - - -
Forward Foreign Exchange Contracts 51,890,814 16,742,996 14,881,687 19,253,938 1,012,193 - - - - - -
152,398,942 24,951,009 15,823,293 22,385,196 2,017,563 3,552,097 62,559,908 4,400,188 16,709,688 - -
Forward Borrowing
lnterest Rate Swap 89,171,973 3,786,400 130,171 7,138,957 - 3,153,177 61,822,751 2,452,639 10,687,878 - -
Foreign Currency option 252,051 - - 252,051 - - - - - - -
Forward Foreign Exchange Contracts 41,653,853 16,023,139 13,317,020 11,210,358 1,103,336 - - - - - -
131,077,877 19,809,539 13,447,191 18,601,366 1,103,336 3,153,177 61,822,751 2,452,639 10,687,878 - -
Off-balance sheet gap 21,321,065 5,141,470 2,376,102 3,783,830 914,227 398,920 737157 1,947,549 6,021,810 - -
Total yield / interest risk sensitivity gap 26,277,696 114,473,394) (688,701) 7,079,512 19,641,795 9,399,325 10,705,933 15,227,680 16,326,584 1,660,051 -
Cumulative yield/interest risk sensitivity gap (15,162,095) (8,082,583) 11,559,212 20,958,537 31,664,470 46,892,150 63,218,734 64,878,785
=====================================================================================================================================================================================================================
2005
Exposed to yield Non Internet
/ interest rate risk
Effective Total Upto one Over one Over three Over six Over one Over two Over three Over five Over five bearing finance
yield / month month to months to months to year to years to years to years to ten years Instruments
interest rate three months six months one year two years three years five years ten years
- (Rupees in '000)
=====================================================================================================================================================================================================================
On-balance sheet financial instruments
Assets
Cash and balances with
Treasury banks 0.97% 9,927,597 2,763,740 - - - - - - - - 7,163,857
Balances with other banks 1.59% 1,340,279 - - - - - - - - - 1,340,279
Leadings to financial
institutions 2.31% 14,943,291 10,501,440 3,591,722 850,000 - - - - - - 129
Investments 3.69% 25,358,524 699,553 15,086 769,744 16,479,849 2,225,807 570,728 1,270,812 3,188,415 - 138,530
Advances 5.64% 50,214,718 15,148,065 4,840,542 4,245,906 4,204,290 2,453,956 2,619,366 8,055,607 7,447,509 - 1,199,477
Other assets - 8,989,249 4,933.190 - - - - - - - - 4,056.059
110,773,558 34,045,988 8,447,350 5,865,650 20,684,139 4,679,763 3,190,094 9,326,419 10,635,924 - 13,898,331
Liabilities - -
Bills payable - 2,063,950 - - - - - - - - - 2,063,950
Borrowings 2.61% 7,211,031 6,738,283 400,000 70,000 - - - - - - 2,748
Deposits and other accounts 2.60% 83,646,043 42,371,889 5,734.442 2,170,979 2,682,607 856,006 209,458 11,420 - - 29,609,242
Liabilities against assets subject - -
to finance lease 17.00% 19,079 4,872 - 5,079 9,128 - - - - -
Other liabilities - 9,066,217 4,424,292 - - - - - - - - 4,641,925
102,006,320 53,539,336 6,134,442 2,246,058 2,691,735 856,006 209,458 11,420 - - 36,317,865
On-balance sheet gap 8,767,338 (19,493,348) 2,312,908 3,619,592 17,992,404 3,823,757 2,980,636 9,314,999 10,635,924 - (22,419,534)
Off. balance sheet financial instruments - -
Forward Lending - -
Interest Rate Swap 51,899,484 853,457 1,624,320 1,529,645 2,058,342 643,298 35,218,391 943,484 9,028,547 - -
Foreign Currency option 5,697,068 - - 5,697,068 - - - - - - -
Forward Foreign Exchange Contracts 28,829,875 12,218,375 9,528,345 5,325,875 1,757,280 - - - - - -
86,426,427 13,071,832 11,152,665 12,552,588 3,815,622 643,298 35,218,391 943,484 9,028,547 - -
- -
Forward Borrowing - -
Interest Rate Swap 50,042,206 546,986 1,568,412 1,456,987 1,932,549 - 32,084,756 8,156,132 4,296,384 - -
Foreign Currency option 5,697,068 - - 5,697,068 - - - - - - -
Forward Foreign Exchange Contracts 28,829,875 13,521,879 15,232,698 75,298 - - - - - - -
84,569,149 14,068,865 16,801,110 7,229,353 1,932,549 - 32,084,756 8,156,132 4,296,384 - -
Off-balance sheet gap 1,857,278 (997,033) (5,648,445) 5,323,235 1,883,073 643,298 3,133,635 (7,212,648) 4,732,163 - -
Total yield/interest risk sensitivity gap 10,624,616 (20,490,381) (3,335,537) 8,942,827 19,875,477 4,467,055 6,114,271 2,102,351 15,368,087 - (22,419,534)
Cumulative yield/interest risk (23,825,918) (14,883,091) 4,992,386 9,459,441 15,573,712 17,676,063 33,044,150
=====================================================================================================================================================================================================================40.5 Yield / Interest Rate RiskYield risk is the risk of 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 various risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. The bank manages this risk by matching the re-pricing of assets and liabilities and off-balance sheet instruments. 40.6 Liquidity Risk The Bank defines liquidity risk as the risk that the Bank either does not have sufficient financial resources available to meet all its obligations and commitments as and when they fall due, or can access them only at excessive cost. Liquidity risk is managed through the Asset and Liability Committee ("ALCO"). This committee, chaired by the Chief Executive Officer, is responsible for both statutory and prudential liquidity. Liquidity risk is monitored through the internal liquidity risk management policy. A range of tools are used for the management of liquidity. These comprise commitment and wholesale borrowing guidelines, key balance sheet ratios, medium term funding requirements and day to day monitoring of future cash flows. In addition, liquidity contingency funding plans are reviewed periodically to ensure that alternative funding strategies are in place and can be implemented on a timely basis to minimise the liquidity risk that may arise due to unforeseen adverse changes in the market place. A substantial portion of the Bank's assets are funded by customer deposits made up of current and savings accounts and other deposits. These customer deposits, which are widely diversified by type and maturity, represent a stable source of funds. The Bank also maintains significant levels of marketable securities either for compliance with local statutory requirements or as prudential investments of surplus funds. 40.7 MATURITIES OF ASSETS AND LIABILITIES ========================================================================================================================================================================================
2006
Total Upto one Over one Over three Over six Over one Over two Over three Over five Over ten
month month to months to months to year to years to years to years to years
three months six months one year two years three years five years ten years
Assets (Rupees in '000)
========================================================================================================================================================================================
Cash and balances with
treasury bank 22,797,606 22,797,606 - - - - - - - -
Balances with other banks 3,544,796 3,425,446 119,350 - - - - - - -
Lendings to financial
institutions 3,873,224 2,967,144 906,080 - - - - - - -
Investments 34,817,282 3,060,545 1,493,020 3,923,598 17,186,574 630,100 1,552,841 2,742,067 4,228,537 1,660,051
Advances 129,438,435 65,225,313 10,309,523 7,341,726 8,444,674 9,092,129 8,811,619 11,527,430 7,025,970 -
Other assets 16,929,462 10,902,129 5,542,085 485,248 - - - - -
Operating fixed assets 3,421,016 75,828 125,373 205,648 315,418 410,624 493,245 558,799 1,034,518 201,563
Intangible assets 28,560,397 414,312 632,519 741,654 856,843 985,658 1,494,804 3,198,523 3,261,980 16,974,104
Deferred tax assets 2,935,518 503,022 - - - 2,432,496 - -
246,317,736 109.371,345 19,008,600 12,331,976 27,288,757 11,118,511 12,352,509 20,459,315 15,551,005 18,835,718
Liabilities
Bills payable 4,259,834 3,152,616 1,107,218 - - - - - -
Borrowings 22,045,237 16,078,415 4,531,219 1,226,869 12,067 166,667 30,000 - - -
Deposits and other-accounts 156,878,328 114,915,553 28,037,367 6,615,991 6,891,280 315,587 90000 12,540 10
Sub-ordinated loan - TFCs 2,414,851 1,036,690 1,378,161 - - - -
Liabilities against assets
Subject to finance lease 9,724 1,773 3,373 1,515 3,063 - - - - - -
Other liabilities 20,479,649 19,390,665 - - 1,088,984 - - - - -
206,087,623 154,575,712 35,057,338 7,844,375 7,995,394 482,257 120,000 12,540 10 -
40,230,113 (45,204,367) (16,048,738) 4,487,601 19,293,363 10,636,257 12,232,509 20,446,775 15,550,995 18,835,718
========================================================================================================================================================================================
Net assets
Share capital 38,715,850
Reserves 1,113,606
Unappropriated profit 729,214
Surplus/(deficit) on revaluation
of assets (328,557)
40,230,113
========================================================================================================================================================================================
2005
Total Upto one Over one Over three Over six Over one Over two Over three Over five Over ten
month month to months to months to year to years to years to years to years
three months six months one year two years three years five years ten years
Assets (Rupees in '000)
========================================================================================================================================================================================
Cash and balances with
treasury bank 9,927,597 9,927,597 - - - - - - - -
Balances with other banks 1,340,279 1,340,279 - - - - - - - -
Lendings to financial
institutions 14,943,291 10,501,569 3,591,722 850,000
Investments 25,358,524 699,553 15,086 769,744 16,479,849 2,225,807 570,728 1,270,812 3,326,945
Advances - Performing 50,214,718 16,278,947 4,840,542 4,245,906 4,204,290 2,453,956 2,619,366 8,055,607 7,447,509
-Non-Performing - 68,595 - - - - - - - -
Other assets 9,165,565 8,984,239 - - 181,326 - - - - -
Operating fixed assets 528,342 18,879 - - - - - 374,330 135,133
Deferred tax assets 189,875 189,875 -
111,668,191 48,009,533 8,447,350 5,865,650 20,865,465 4,679,763 3,190,094 9,700,749 10,909,587
Liabilities
Bills payable 2,063,950 2,063,950 - - - - - - - -
Borrowings 7,211,031 6,811,031 400,000 - - - - - - -
Deposits and other accounts 83,646,043 71,981,131 5,734,442 2,170,979 2,682,607 856,006 209,458 11,420 - -
Sub-ordinated loan - TFCs - - - - - - - - -
Liabilities against assets
subject to finance lease 19,079 4,872 - 5,079 9,128 - - - - -
Other liabilities 10,322,394 10,136,925 - - 185,469 - - - - -
Deferred tax liabilities -
103,262,497 90,997,909 6,134,442 2,176,058 2,877,204 856,006 209,458 11,420 - - -
8,405,694 (42,988,376) 2,312,908 3,689,592 17,988,261 3,823,757 2,980,636 9,689,329 10,909,587 - -
========================================================================================================================================================================================
Net assets
Head office capital account 4,103,942
Un-remitted profit 4,657,389
Surplus/(deficit) on revaluation
of assets (355,637)
8,405,694
========================================================================================================================================================================================40.8 Operational RiskOperational risk is the risk of a direct or indirect loss being incurred due to an event or action arising from the failure of technology, processes, infrastructure, personnel and other risks having operational risk impact. The Country Operational Risk Group ("CORG") has been established to ensure that an appropriate risk management framework is in place at a grass root level and to report, monitor and manage operational, social, ethical and environmental risk. The CORG is chaired by the Chief Executive Officer and CR0 is an active member of this forum. All business units within the Bank monitor their operational risks using set standards and indicators. Significant issues and exceptions are reported to the CORG and are also picked up by independent Risk function for discussion at the Risk Committee chaired by CR0. Disaster recovery procedures, business contingency planning, self-compliance audits and internal audits also form an integral part of the operational risk management process. 41. ISLAMIC BANKING BUSINESS The Bank is operating with 3 Islamic Banking branches at the end of current year as compared to 3 Islamic Banking branch last year. ======================================================================================
2006 2005
(Rupees in '000)
======================================================================================
ASSETS
Cash and balances with treasury banks 21,987 17,536
Balances with and due from Financial Institutions 419,982 94,982
Financing and receivables
- Murabaha 805,966 565,564
- Diminishing Musharaka 2,482,581 1,021,526
Other Assets 37,248 318,276
LIABILITIES 3,767,764 2,017,884
Deposits and other accounts
- Current accounts 772,859 768,830
- Saving accounts 88,334 -
- Term deposits 1,149,501 -
- Others 34,337 -
Due to Head Office 1,033,933 945,588
Other liabilities 129,918 55,096
(3,208,882) (1,769,514)
NET ASSETS 558,882 248,370
REPRESENTED BY
Islamic Banking Fund 200,000 150,000
Reserves 358,882 98,370
558,882 248,370
Remuneration to Shariah Advisor / Board - -
Charity fund - -
======================================================================================42. DATE OF AUTHORIZATIONThese financial statements were authorized for issue in the Board of Directors meeting held on April 3, 2007 |