| Faysal Bank Ltd - 2004 |
========================================================================================================== BALANCE SHEET AS AT DECEMBER 31, 2004 ========================================================================================================== Notes 2004 2003 Rupees '000 Restated ========================================================================================================== ASSETS Cash and balances with treasury banks 6 5,048,395 2,866,278 Balances with other banks 7 3,564,030 648,660 Lendings to financial institutions 8 4,417,378 872,132 Investments 9 11,502,805 11,218,501 Financing 10 51,373,254 29,626,223 Other assets 11 1,473,952 1,183,315 Fixed assets 12 1,158,407 1,030,352 Deferred tax asset - net 13 - 160,936 78,538,221 47,606,397 LIABILITIES Bills payable 15 905,637 430,862 Borrowings from financial institutions 16 8,478,048 6,529,810 Deposits and other accounts 17 56,460,329 31,332,172 Sub-ordinated loans - - Liabilities against assets subject to finance lease 18 18,434 16,404 Other liabilities 19 2,294,899 1,318,437 Deferred tax liabilities - net 13 166,442 - 68,323,789 39,627,685 NET ASSETS 10,214,432 7,978,712 REPRESENTED BY Issued, subscribed and paid-up share capital 20 2,912,635 2,647,850 Reserves 21 2,259,101 2,115,989 Unappropriated profit 1,079,492 846,016 6,251,228 5,609,855 Surplus on revaluation of assets 22 3,963,204 2,368,857 10,214,432 7,978,712 CONTINGENCIES AND COMMITMENTS 23 ========================================================================================================== ========================================================================================================== PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2004 ========================================================================================================== Notes 2004 2003 Rupees '000 ========================================================================================================== Mark-up/return earned 25 2,753,451 2,074,611 Mark-up/return expensed 26 1,118,118 946,485 Net mark-up income 1,635,333 1,128,126 Provision against non-performing financing 10.6 51,609 208,097 Provision for consumer financing - general 10.7 70,799 42,897 Reversal of provision for diminution in the value of investments 9.3 - (2,857) Bad debts written off directly 10.8 1,118 141 123,526 248,278 Net mark-up income after provisions 1,511,807 879,848 NON MARK-UP INCOME Fee, commission and brokerage income 397,064 251,189 Dividend income 697,499 763,697 Income from dealing in foreign currencies 162,444 107,473 Income from trading in government securities - - Gain on sale of investments (other than government securities) 572,035 1,588,942 Unrealised (loss) on revaluation of held-for-trading financial instruments (2,607) - Other income 27 5,050 2,554 Total non mark-up income 1,831,485 2,713,855 3,343,292 3,593,703 NON MARK-UP EXPENSES Administrative expenses 28 1,134,672 834,754 Other provisions 11.4 - 1,742 Other charges 29 1,150 11,935 Total non mark-up expenses 1,135,822 848,431 2,207,470 2,745,272 Extraordinary items/unusual items - - PROFIT BEFORE TAXATION 2,207,470 2,745,272 Taxation - Current 30 517,588 347,889 Taxation - Prior years (420,394) 106,443 Taxation - Deferred 356,806 139,596 454,000 593,928 PROFIT AFTER TAXATION 1,753,470 2,151,344 Unappropriated profit brought forward 846,016 475,380 Profit available for appropriation 2,599,486 2,626,724 APPROPRIATIONS Transfer to statutory reserve (350,693) (430,269) capital reserve - - capital market reserve (57,204) (238,341) Final cash dividend of 2003 or Rs. 2.0 per share (2002: Rs. 1.7 per share (529,570) (450,135) Interim cash dividend @ Rs. 2.0 per share (2003: Rs. 2.5 per share) (582,527) (661,963) (1,519,994) (1,780,708) Unappropriated profit carried forward 1,079,492 846,016 BASIC AND DILUTED EARNINGS PER SHARE 31 6.02 7.39 ========================================================================================================== ========================================================================================================== CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2004 ========================================================================================================== 2004 2003 Note Rupees '000 ========================================================================================================== Profit before taxation 2,207,470 2,745,272 Less: Dividend income (697,499) (763,697) Profit on available for sale securities (192,121) (86,419) 1,317,850 1,895,156 Adjustments for non-cash charges Depreciation/Amortisation 117,221 74,554 Provision against non-performing financing 51,609 208,097 Provision for consumer financing - general 70,799 42,897 Reversal of provision for diminution in value of investments - (2,857) Provision for other assets - 1,742 Bad debts written off directly 1,118 141 Unrealised (loss) on revaluation of held-for-trading financial instrume 2,607 - (Gain)/Loss on disposal of fixed assets (4,914) 12,743 Assets charged off - intangibles 4,703 - Finance charges on leased assets 1,664 844 Exchange gain (48,582) (3,390) 196,225 334,771 1,514,075 2,229,927 (Increase)/Decrease in operating assets Lendings to financial institutions (3,545,246) 2,114,348 Held-for-trading securities 150,561 (53,747) Financing (21,870,557) (7,571,408) Other assets (excluding advance taxation) (397,309) 170,368 (25,662,551) (5,340,439) Increase/(Decrease) in operating liabilities Bills payable 474,775 157,352 Borrowings from financial institutions 1,948,238 1,185,502 Deposits and other accounts 25,128,157 6,874,178 Other liabilities 972,566 429,366 28,523,736 8,646,398 4,375,260 5,535,886 Income tax (paid) / refund received 43,758 (82,541) Net cash flow from operating activities 4,419,018 5,453,345 CASH FLOW FROM INVESTING ACTIVITIES Net investments in available-for-sale securities 1,127,447 (3,481,810) Dividends received 686,321 860,332 Profit received on available-for-sale securities 169,019 64,817 Fixed capital expenditure (267,711) (435,879) Sale proceeds from disposal of fixed assets 22,646 4,155 Net cash flow from/(used in) investing activities 1,737,722 (2,988,385) CASH FLOW FROM FINANCING ACTIVITIES (Payments)/Receipts of lease obligations 366 15,560 Dividends paid (1,108,201) (1,104,401) Net cash used in financing activities (1,107,835) (1,088,841) Increase in cash and cash equivalents 5,048,905 1,376,119 Cash and cash equivalents at beginning of the year as previously report 3,514,938 2,135,429 Effects of exchange rate changes on cash and cash equivalents 48,582 3,390 Cash and cash equivalents at beginning of the year as restated 3,563,520 2,138,819 Cash and cash equivalents at end of the year 32 8,612,425 3,514,938 ========================================================================================================== ======================================================================================================================= STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2004 ======================================================================================================================= Share Share Reserve Statutory Capital Unappro- Total Capital Premium for issue of Reserve Market prioted bonus share Reserve Profit Rupees '000 ======================================================================================================================= Balance at December 31, 2002 - as previously reported 2,647,850 682,479 - 764,900 - 22,245 4,120,474 Effect of change in accounting policy (note 5.11) Final cash dividend for the year ended December 31, 2002 declared subsequent to the year end - - - - - 450,135 450,135 Balance or December 31, 2002 - restated 2,647,850 682,479 - 764,900 - 475,380 4,570,609 Effect of change in accounting policy (note 5.11) Final cash dividend for the year ended December 31, 2002 declared subsequent to the year end - - - - - (450,135) (450,135) Profit after tax for 2003 - - - - - 2,151,344 2,151,344 Transfer to statutory reserve - - - 430,269 - (430,269) - Transfer to capital market reserve - - - - 238,341 (234,341) - Interim cash dividend @ Rs. 2.50 per share - - - - - (661,963) (661,963) Final cash dividend @ Rs. 2.00 per share - - - - - (529,570) (529,570) Transfer to reserve for issue of bonus shares @ Re. 1 per share - (264,785) 264,785 - - - - Balance at December 31, 2003 - as previously reported 2,647,850 417,694 264,785 1,195,169 238,341 316,446 5,080,285 Effect of change in accounting policy (note 5.11) Final cash dividend for the year ended December 31, 2003 declared subsequent to the year end - - - - - 529,570 529,570 Transfer to reserve for issue of bonus shares declared subsequent to the year end - 264,785 (264,785) - - - - Balance at December 31, 2003 - restated 2,647,850 682,479 - 1,195,169 238,341 846,016 5,609,855 Effect of change in accounting policy (note 5.11) Final cash dividend for the year ended December 31, 2003 declared subsequent to the year end - - - - - (529,570) (529,570) Transfer to reserve for issue of bonus shares declared subsequent to the year end - (264,785) 264,785 - - - - Profit after tax for 2004 - - - - - 1,753,470 1,753,470 Bonus shares issued 264,785 - (264,785) - - - - Transfer to statutory reserve- - - - 350,693 - (350,693) - Transfer to capital market reserve- - - - - 57,204 (57,204) - Interim cash dividend @ Rs. 2.00 per share- - - - - - (582,527) (582,527) Balance at December 31, 2004- 2,912,635 417,694 - 1,545,862 295,545 1,079,492 6,251,228 =======================================================================================================================Appropriations of cash and stock dividend made by the Directors subsequent to the year ended December 31, 2004 are disclosed in note 45 of these financial statements. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2004 1. STATUS AND NATURE OF BUSINESS Faysal Bank Limited was incorporated on October 3, 1994 as a public limited company under the Companies Ordinance, 1984. Its shares are listed on Karachi and Lahore Stock Exchanges. The bank is engaged in commercial, consumer and investment banking activities. The bank operates 50 (2003: 39) branches and its registered office is situated at Trade Centre, I.I. Chundrigar Road, Karachi. The ultimate holding company of the bank is Dar Al-Maal Al-Islami (DMI) Trust, Bahamas. 2. BASIS OF PRESENTATION In accordance with the directives of Federal Government regarding the conversion of the banking system to Islamic modes, the State Bank of Pakistan (SBP) has issued various circulars from time to time. Permissible forms of trade-related modes of financing include (Morabaha) purchase of goods by the banks for their customers and resale to them at a profit 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 amounts of Morabahas including the appropriate portion of profit thereon. 3. STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984 and the Banking Companies Ordinance, 1962. Approved accounting standards comprise of such International Accounting Standards as notified under the provisions of the Companies Ordinance, 1984. Wherever the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or directives issued by the Securities and Exchange Commission of Pakistan and the State Bank of Pakistan differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or the requirements of the said directives take precedence. The State of Pakistan as per BSD Circular No. 10 dated August 26, 2002 has deferred the applicability of International Accounting Standard 39, Financial Instruments: Recognition and Measurement (IAS 39) and International Accounting Standard 40, Investment Property (IAS 40) for banking companies till further instructions. Accordingly, the requirements of these standards have not been considered in the preparation of these financial statements. However, investments have been classified in accordance with the categories prescribed by the State Bank of Pakistan through various circulars. 4. BASIS OF MEASUREMENT These financial statements have been prepared under the historical cost convention, except their certain investments are stated at market value and derivative financial instruments have been marked to market and staff retirement benefits are carried at present value. 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 5.1. CASH AND CASH EQUIVALENTS Cash and cash equivalents represents cash and balances with treasury and other banks. 5.2. LENDINGS TO/BORROWINGS FROM FINANCIAL INSTITUTIONS The bank enters into transactions of repos and reverse repos of contracted rates for a specified period of time. These are recorded as under: (a) Sale under repurchase obligation Securities sold subject to a re-purchase agreement (repo) are retained in the financial statements as investments and the counter party liability is included in borrowings. The differential in sale and re-purchase value is accrued over the period of the contract and recorded as an expense. (b) Purchase under resale obligation Securities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions or financing as appropriate. The differential between the contracted price and resale price is amortised over the period of the contract and recorded as income. (c) Other borrowings These are recorded at the proceeds received. Mark-up paid on such borrowings is charged to the profit and loss account over the period of borrowings. 5.3. INVESTMENTS Investments in securities are classified as follows: HELD FOR TRADING These represent securities, which are either acquired for the purpose of generating profit from short-term fluctuations in prices or dealer's margin or are securities included in the portfolio in which a pattern of short-term profit making assets. HELD TO MATURITY These are securities with fixed or determinable payments are maturity in respect of which the bank has the positive intent and ability to hold to maturity. AVAILABLE FOR SALE These represent securities, which do not fall under the held for trading or held to maturity categories. All purchase and sale of investments that require delivery within the time frame established by regulation or market convention are recognised at the trade date, which is the date the bank commits to purchase or sell the investment. Premium or discount on acquisition of investments is capitalised and amortised through the profit and loss account over the remaining period till maturity. In accordance with the requirements of State Bank of Pakistan, quoted securities other than those classified as held to maturity and investments in subsidiaries and associates are stated at market value. During the year, the bank has changed its accounting policy in respect of accounting for unrealised surplus / deficit arising on revaluation of held for trading financial. As per the new policy, surplus / deficit arising on revaluation of the bank's held for trading financial instruments is taken to the profit and loss account. This change has been made to comply with the requirements laid down in BSD Circular No. 10 dated July 13, 2004, issued by the State Bank of Pakistan. Previously, this surplus / deficit was being shown in the balance sheet below equity as per the State Bank of Pakistan's BSD Circular No. 20 dated August 04, 2000. In accordance with the allowed alternative treatment specified in International Accounting Standard (IAS) 8 Net Profit and Loss for the Period. Fundamental Errors and Changes in Accounting Policies, the effect of this change in accounting policy has been recognised in the current year and the comparative information has not been restated. Had the accounting policy not been changed, the profit before taxation for the year ended December 31, 2004 would have been higher by Rs. 2.607 million. Restated proforma information which assumes that the new policy had always been in use is given in note 24 to the financial statements. During the current year, the bank has also changed its accounting policy in respect of valuation of investments classified as held to maturity. According to the new policy, these investments are carried at amortised cost. Previously, these investments were marked to market as per the requirements of SBP's BSD Circular No. 10 August 04, 2000 and the related surplus / deficit was shown in the balance sheet below equity. This change has been made to comply with the requirements laid down in BSD Circular No 14 dated September 24, 2004, issued by the State Bank of Pakistan. The change in accounting policy did not have any impact on the profit and loss account for the current and prior period. The surplus / deficit arising on quoted securities classified as available for sale is kept in a separate account shown in the balance sheet below equity. Unquoted equity securities are valued at the lower of cost and break-up value. Subsequent increases or decreases in the carrying value are credited/charged to income. Break-up value of equity securities is calculated with reference to the net assets of the investee company as per the latest audited financial statements. Investments in subsidiaries and associates are stated at cost. Provision for diminution in the values of securities (except term finance certificates) is made after considering permanent impairment, if any, in their value. Provisions for diminution in value of term finance certificates are made as per the Prudential Regulations issued by the State Bank of Pakistan. 5.4. FINANCING Morabaha and ijara are stated at cost less provision. Specific provision is made for non-performing financing in accordance with the requirements of Prudential Regulations issued by State Bank of Pakistan. The bank also maintains general provision for present potential losses of performing morabaha, ijara financing and consumer financing portfolio. 5.5. FIXED ASSETS AND DEPRECIATION Owned assets are stated at cost less accumulated depreciation except feehold land and capital work in progress, which are stated at cost. Assets subject to finance lease are recognised at inception of lease at amounts equal to their fair value or present value of minimum lease payments, whichever is lower. 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 to income using the straight-line method so as to write off the historical cost of the assets over their estimated useful lives at the rates given in note 12.2. A full month's depreciation is charged in the month of addition and no depreciation is charged for the month in which the disposal is mode. Major renewals and improvements are capitalised and the asset so replaced, if any, are retired. Normal repairs and maintenance are charged to the profit and loss account as and when incurred. 5.6. OPERATING LEASES Lease payments under operating leases are charged to income on straight line basis over the lease term. 5.7. TAXATION CURRENT Provision for current taxation is based on the taxable income for the year determined in accordance with the prevailing laws for taxation on income. The charge for the current tax is calculated using prevailing tax rates. The charge for current tax also includes adjustments, where considered necessary relating to prior years, arising from assessments mode during the year. DEFERRED Deferred tax is recognised using the balance sheet liability method on all temporary differences arising between tax basis of assets and liabilities and their carrying amounts appearing in the financial statements. 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 utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realized. Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse, based on tax rates that have been enacted or substantively enacted by the balance sheet date Deferred tax is charged or credited to the profit and loss account. Deferred tax, if any, on revaluation of investments is recognised as an adjustment to surplus/(deficit) arising on revaluation. 5.8. PROVISIONS Provisions are recognised when the bank has a legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be mode. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate. 5.9. STAFF RETIREMENT BENEFITS THE BANK OPERATES a) an approved funded gratuity scheme for all its permanent employees. Contributions are made to cover the obligations under the scheme on the basis of actuarial valuation and are charged to income. Cumulative net unrecognized actuarial gains and losses at the end of previous year which exceed 10% of higher of present value of the bank's gratuity obligation and the fair value of the fund's assets are amortized over the expected average remaining working lives of the employees. b) An approved funded contributory provident fund for all its permanent employees to which equal monthly contributions are made both by the bank and the employees at the rate of 10% per annum of basic salary. Staff retirement benefits are payable to staff on completion of prescribed qualifying period of service under these schemes. 5.10. REVENUE RECOGNITION Profit and return on regular morabaha and investments is recognised an accrual basis. Profit on classified morabaha and investments is recognised on receipt basis. Profit on rescheduled/restructured morabaha is recognised as prescribed by the Prudential Regulations issued by the State Bank of Pakistan. Income on ijara is recognised over the term of the ijara so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the ijara. Income on classified ijara is recognised on receipt basis in compliance with the Prudential Regulations issued by SBP. Gains and losses on termination of ijara, documentation charges, front end fee and other ijara income are recognised on receipt. Fee, commission and brokerage income is recognised when earned. Dividend income from investments is recognised when bank's right to receive the dividend is established. Gains and losses on sale of investments and operating fixed assets are included in income currently. All exchange differences are recognised in income. 5.11. PROPOSED DIVIDEND During current year the management has changed its accounting policy pertaining to the recognition of dividends declared subsequent to the year end. The change has been made consequent to the amendment made by the Securities and Exchange Commission of Pakistan in the Companies Ordinance, 1984 and the new policy is in accordance with the requirements of IAS 10: Events after the Balance Sheet Date. As per the new policy dividends declared (including stock dividend) subsequent to the balance sheet date are considered as a non-adjusting event and are not recorded in the financial statements. Previously, such dividend declarations were being treated as adjusting events in the financial statements of the bank and were recorded as appropriation into the financial statements. The change in accounting policy has been applied retrospectively and comparative information has been restated in accordance with the benchmark treatment specified in International Accounting Standard (IAS) 8: Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies. Had there been no change in the accounting policy, the unappropriated profit would have been lower and other liabilities would have been higher for the higher ended December 31, 2003 by Rs. 529.57 million. In addition the share premium account as at December 31, 2003 would have been lower by Rs. 264.78 million and the reserve for issue of bonus shares would have been higher by the same amount. The effect of the change in accounting policy has been reflected in the statement of changes in equity. The change in accounting policy has not resulted in any change in the profit for the current year. 5.12. DERIVATIVE FINANCIAL INSTRUMENTS The bank enters into equity options and equity futures primarily to hedge the inherent market risk in investments. Derivative financial instruments are initially recognised at cost on the date on which the derivative contract is entered into 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. 5.13. FOREIGN CURRENCIES All monetary assets, liabilities and commitments for letters of credit, acceptances and guarantees in foreign currencies are translated at rates of exchange approximating those prevailing at the balance sheet date. Foreign currency transactions are recorded at the rates prevailing on the transaction date. Foreign bills purchased and forward contracts are valued at forward rates applicable to the respective maturities of the relevant contracts. 5.14. OFF SETTING Financial assets and liabilities are set off and the net amount is reported in the financial statements when there exists a legally enforceable right to set off and the bank intends either to settle the assets and liabilities on a net basis or to realize the assets and to settle the liabilities simultaneously. 6. CASH AND BALANCES WITH TREASURY BANKS ==========================================================================================================
2004 2003
Notes Rupees '000
==========================================================================================================
In hand
- local currency 507,926 350,438
- foreign currency 62,503 45,968
With State Bank of Pakistan in
- local currency current account 6.1 3,292,752 1,805,918
- foreign currency current account 6.2 254,087 154,118
- local currency current account - -
- foreign currency deposit account 6.3 801,104 462,053
With National Bank of Pakistan
- local currency current account 129,363 46,894
- local currency deposit account 660 589
5,048,395 2,866,278
==========================================================================================================6.1. This represents current account maintained with SBP under the requirements of section 22 of the Banking Companies Ordinance, 1962.6.2. This represents current account maintained with SBP under the requirements of BSD Circular No. 18 dated March 31, 2001. 6.3. This represents deposit account maintained with SBP under the requirements of BSD Circular No. 18 dated March 31, 2001. Profit rates are fixed on monthly basis by SBP. Profit ranging between 0.59% to 1.34% per annum (2003: 0.60% to 0.88% per annum) was earned during the year. 7. BALANCES WITH OTHER BANKS ==========================================================================================================
Notes 2004 2003
Rupees '000
==========================================================================================================
In Pakistan
- Current accounts 72,492 36,085
- Deposit accounts 7.1 2,524 4,144
Outside Pakistan
- Current accounts 2,516,580 177,952
- Deposit accounts 7.2 972,434 430,479
3,564,030 648,600
==========================================================================================================7.1. These represent deposits payable on demand and carry return or approximately 1.0% per annum (2003: 1.0% per annum).7.2. This includes term placements of USD 9.5 million with associated companies @ 1.9% to 3.0% per annum with maturities up to January 31, 2005. 8. LENDINGS TO FINANCIAL INSTITUTIONS ==========================================================================================================
Notes 2004 2003
Rupees '000
==========================================================================================================
Repurchase agreement lendings 8.1 4,167,378 872,132
Certificates of Investments 8.2 250,000 -
4,417,378 872,132
==========================================================================================================8.1. SECURITIES HELD AS COLLATERAL AGAINST LENDINGS TO FINANCIAL INSTITUTIONS====================================================================================================
Notes 2004 2003
Held by Further Total Held by Further Total
bank given as bank given as
collateral collateral
Rupees '000
====================================================================================================
Treasury Bills 8.1.1 2,082,378 - 2,082,378 347,132 - 347,132
Pakistan Investment Bonds 8.1.2 1,450,000 350,000 1,800,000 525,000 - 525,000
Shares of listed companies 8.1.3 285,000 - 285,000 - - -
3,817,378 350,000 4,167,378 872,132 - 872,132
====================================================================================================8.1.1. Treasury Bills have been purchased under resale agreements at rates ranging from 2% to 4.0% per annum (2003: 4.5% per annum) with maturities up to March 2005.8.1.2. Pakistan Investment Bonds have been purchased under resale agreements at the rates ranging from 4.2% to 6.0% per annum (2003: 2.0% to 3.0% per annum) with maturities up to February 2005. 8.1.3. This represents lendings to 16.0% per annum with maturities in January 2005. 8.2. This represents placement with a financial institution at 6.5% per annum with maturity in January 2005. 9. INVESTMENTS 9.1. INVESTMENTS BY TYPE ======================================================================================================================
Notes 2004 2003
Held by Given as Total Held by Given as Total
bank collateral bank collateral
Rupees '000
======================================================================================================================
Held for trading securities
Ordinary shares of listed companies 47,644 - 47,644 198,205 - 198,205
Available for sale securities
Units of
- National Investment (Unit) Trust 2,271,516 - 2,271,516 2,271,521 - 2,271,521
- Pakistan Income Fund 7,928 - 7,928 8,641 - 8,641
- Faysal Balanced Growth Fund 200,000 - 200,000 - - -
Ordinary shares / certificates 1,100,546 - 1,100,546 3,555,734 - 3,555,734
Fully paid up preference shares 228,737 - 228,737 4,737 - 4,737
Term finance certificates and bonds 1,101,164 - 1,101,164 695,345 - 695,345
Treasury bills 896,417 - 896,417 98,802 - 98,802
Pakistan Investment Bonds 1,226,716 - 1,226,716 1,238,543 - 1,238,543
7,033,024 - 7,033,024 7,873,323 - 7,873,323
Subsidiaries
Shares of Faysal Management
Services (Private) Ltd. 108,000 - 108,000 108,000 - 108,000
Certificates of Fayzan
Manufacturing Modaraba 430,425 - 430,425 429,870 - 429,870
538,425 - 538,425 537,870 - 537,870
Associates
Shares of
- Sui Southern Gas Company Ltd. - - - 287,703 - 287,703
- BOC Pakistan Ltd. 8,733 - 8,733 8,733 - 8,733
- Faysal Asset Management Ltd. 15,000 - 15,000 15,000 - 15,000
23,733 - 23,733 311,436 - 311,436
7,642,826 - 7,642,826 8,920,834 - 8,920,834
Provision for diminution in
the value of investments 9.3 (55,27) - (55,276) (55,276) - (55,276)
Surplus on revaluation of
available for sale securities 22.1 3,917,862 - 3,917,862 2,303,041 - 2,303,041
(Deficit)/Surplus on revaluation
of held for trading
financial instruments (2,607) - (2,607) 49,902 - 49,902
Investments at revalued amounts
(net of provision) 11,502,805 - 11,502,805 11,218,501 - 11,218,501
======================================================================================================================9.2. INVESTMENTS BY SEGMENT==========================================================================================================
Notes 2004 2003
Rupees '000
==========================================================================================================
Federal Government Securities
- Treasury Bills 9.2.1 896,417 98,802
- Pakistan Investment Bonds 9.2.2 1,226,716 1,238,543
Fully Paid up Ordinary Shares / Certificates
- Listed companies/modarabas/mutual funds 1,459,045 4,478,458
- Unlisted companies 251,303 127,787
Fully Paid up Preference Shares
- Listed companies 134,737 4,737
- Unlisted companies 94,000 -
Term Finance Certificates and Bond
- Listed TFCs 1,091,486 680,827
- Unlisted - Bond 9,678 14,518
Others
- National Investment (Unit) Trust units 9.2.4 2,271,516 2,271,521
- Pakistan Income Fund units 7,928 8,641
- Faysal Balanced Growth Fund units 200,000 -
7,642,826 8,920,834
Pakistan for diminution in the value of investments 9.3 (55,276) (55,276)
Surplus/(deficit) on revaluation
of available for sale securitie 22.1 3,917,862 2,303,041
Surplus/(deficit) on revaluation of held for trading
financial instruments (2,607) 49,902
11,502,805 11,218,501
==========================================================================================================9.2.1. Treasury Bills are for a period of one year. Bank's yield ranges from 2.6% to 3.0% per annum (2003: 2.1% per annum) with maturities up to March 2005.9.2.2. Pakistan Investment Bonds are for periods of ten years. Bank's yield ranges from 4.6% to 6.3% per annum (2003: 4.6% to 6.3% per annum) with maturities from June 30; 2013 to December 2013. 9.2.3. Information relating to investments in ordinary and preference shares/certificates of listed and unlisted companies/modarabas/mutual funds and Term Finance Certificates and bonds, required to be disclosed as part of the financial statements under State Bank of Pakistan's BSD Circular No. 36 dated October 10, 2001, is given in Annexure 'I'. 9.2.4. These include 157,433,555 NIT units valued at market closing rate (repurchase price) as referred to in note 5.3. Further, to mitigate the risk of adverse fluctuation in prices, in 2001 Government of Pakistan issued letter of comfort assuring to facilitate redemption of these units at Rs. 13.70 per unit by NIT if the bank continues to hold subject units for a period of five years up to 2006. 9.3. PARTICULARS OF PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Opening balance 55,276 58,133
Charge for the year - 2,506
Reversals - (5,363)
- (2,857)
Closing balance 55,276 55,276
==========================================================================================================9.4. INVESTMENT DERIVATIVESFollowing are the details of derivatives outstanding at December 31, 2004: ================================================================================================
Positive Negative Notional Maturity
Fair Value Fair Value Amount 1 - 3 months Upto 1 year
Rupees '000
================================================================================================
Future equity
sale contracts - 1,717 154,298 154,298 -
- 1,717 154,298 154,298 -
================================================================================================9.5. BANK'S HOLDING IN ITS SUBSIDIARIES IS AS FOLLOWSFaysal Management Services (Private) Limited (FMSL) - shareholding 60.00% Fayzan Manufacturing Modaraba (FMM) - effective shareholding 59.81% The bank has been granted exemption by the Securities and Exchange Commission of Pakistan from the requirement of preparing consolidated financial statements. However, the key financial information of the subsidiary companies as at December 31, 2004 is as follows: =====================================================================================
FMSL FMM
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
Rupees '000
=====================================================================================
Total Assets 238,809 224,380 1,356,514 1,398,912
Liabilities 263 8,080 434,598 498,228
Equity 238,547 216,300 921,916 900,684
Profit after taxation 20,987 24,144 86,032 105,041
Rupees
Earning per share 11.66 13.41 0.96 1.17
=====================================================================================10. FINANCING==========================================================================================================
Notes 2004 2003
Rupees '000
==========================================================================================================
Morabaha and Term Finance Certificates - In Pakistan 10.2 39,468,352 24,120,187
Ijara financing - In Pakistan 10.3 10,084,859 5,303,759
49,553,211 29,423,946
Bills discounted and purchased (excluding government
treasury bills)
Payable in Pakistan 10.4 927,204 840,116
Payable outside Pakistan 395,775 620,468
1,322,979 1,460,584
50,876,190 30,884,530
Financing in respect of carry over and reverse repo transactions 2,018,714 267,500
Provision for non-performing financing 10.6 (1,407,954) (1,482,910)
Provision for consumer financing - general 10.7 (113,696) (42,897)
51,373,254 29,626,223
==========================================================================================================10.1. PARTICULARS OF FINANCING10.1.1. ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
In local currency 50,791,802 27,102,295
In foreign currency 581,452 2,523,928
51,373,254 29,626,223
==========================================================================================================10.1.2.==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Short term (for upto one year) 26,912,947 17,425,833
Long term (for over one year) 24,460,307 12,200,390
51,373,254 29,626,223
==========================================================================================================10.2. This includes financing aggregating to Rs. 1.661 billion against unlisted Term Finance Certificates (TFCs) granted by the bank including TFCs having a face value of Rs. 1.416 billion which are in the process of being issued by Pakland Cement Limited and Saadi Cement Limited.The exposure of various financial institutions against the above customers has been restructured under a scheme of arrangement which has been sanctioned by the High Court of Sindh. The State Bank of Pakistan (SBP) vide their letter No. BPD/PU-22/22.03/X/2005/1836 dated February 15, 2005 has allowed that the above restructuring would constitute fresh financing by treating the existing amounts as paid-off. SBP has also granted certain specific exemptions to this financing from the requirements of the Prudential Regulations. Pakland Cement Limited and Saadi Cement Limited have applied to the Securities and Exchange Commission of Pakistan for change of their names to Deewan Cement Limited and Deewan Hattar Cement Limited respectively which is pending for approval. 10.3. IJARA FINANCING ===========================================================================================================
2004 2003
Not later Later than Over five Total Not later Later than Over five Total
than one one and years than one one and years
year less than year less than
five years five years
Rupees '000
===========================================================================================================
Lease rentals receivable 2,507,393 7,508,578 - 10,015,971 1,543,950 3,362,416 680,896 5,587,262
Residual value 445,848 1,231,367 - 1,677,215 90,282 574,258 44,966 709,506
Minimum lease payments 2,953,241 8,739,945 - 11,693,186 1,634,232 3,936,674 725,862 6,296,768
Return for future periods (566,463) (1,041,864) - (1,608,327) (283,769) (635,728) (73,512) (993,009)
Present value of minimum
lease payments 2,386,778 7,698,081 - 10,084,859 1,350,463 3,300,946 652,350 5,303,759
===========================================================================================================10.4. This includes receivable of a customer discounted by the bank. The balance outstanding at December 31, 2004 amounts to Rs. 162.58 million (2003: Rs. 194 million). The amount is receivable from National Bank of Pakistan.10.5. Financing includes Rs. 2.4 billion (2003: Rs. 3.2 billion) which have been placed under non-performing status as detailed below: =====================================================================================
Domestic Overseas Total Provision Provision
required held
Rupees '000
=====================================================================================
Category of classification
Other Assets Especially Mentioned 694,901 - 694,901 393,856 396,856
Substandard 309,330 - 309,330 66,156 66,156
Doubtful 67,100 - 67,100 12,533 12,533
Loss 1,350,231 - 1,350,231 729,451 729,451
2,421,562 - 2,462,562 1,204,996 1,204,996
=====================================================================================10.6. PARTICULARS OF PROVISION FOR NON-PERFORMING FINANCING==========================================================================================
Note 2004 2003
Specific General Total Specific General Total
Rupees '000
==========================================================================================
Opening balance 1,356,343 126,567 1,482,910 1,268,431 24,055 1,292,486
Charge for the year 97,220 76,391 173,611 156,925 102,12 259,437
Reversals (122,002) - (122,002) (51,340) - (51,340)
(24,782) 76,391 51,609 105,585 102,512 208,097
Amounts written off 10.8 (126,565) - (126,565) (17,673) - (17,673)
Closing balance 1,204,996 202,958 1,407,954 1,356,343 126,567 1,482,910
==========================================================================================10.6.1. During the current year, the bank has changed the method of computation of provision against non-performing financing in order to comply with the requirements of the revised Prudential Regulations, issued by the State Bank of Pakistan. In accordance with the revised regulations, banks are required to apply an adjustment factor of 80% to the Forced Sale Value (FSV) of mortgaged assets held as collateral against financing while determining the provision requirement against non-performing financing.The incremental provision arising as a result of the above mentioned discounting of FSV's of mortgaged assets amounted to Rs. 88.424 million which has been provided in these financial statements. Had the above mentioned discounting of collaterals not been carried out, the profit before taxation for the year ended December 31, 2004, and financing (net of provision) at the end of the year would have been higher by Rs. 88.424 million. 10.6.2. General provision represents provision made for potential losses and has been determined on the basis of management's best estimate. 10.7. PARTICULARS OF PROVISION FOR CONSUMER FINANCING - GENERAL ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Opening balance 42,897 -
Charge for the year 70,799 42,897
Reversals - -
113,696 42,897
==========================================================================================================10.7.1. General provision against consumer financing has been determined in accordance with the requirements of revised Prudential Regulations issued by the State Bank of Pakistan.10.8. PARTICULARS OF WRITE-OFF ==========================================================================================================
Note 2004 2003
Rupees '000
==========================================================================================================
Against provisions 10.6 126,565 17,673
Directly charged to profit and loss account 1,118, 141
127,683 17,814
==========================================================================================================10.8.2.==========================================================================================================
2004 2003
Note Rupees '000
==========================================================================================================
Write-offs of Rs. 500,000 and above 10.9 126,745 17,598
Write-offs of below Rs. 500,000 938 216
127,683 17,814
==========================================================================================================10.9. DETAILS OF FINANCING WRITTEN-OFF OF Rs 500,000 AND ABOVEIn terms of sub-section (3) of section 33A of the Banking Companies Ordinance, 1962 the Statement in respect of written-off financing or any other financial relief of five hundred thousand rupees or above allowed during the year ended December 31, 2004 is given in Annexure II to these financial statements. 10.10. PARTICULARS OF FINANCING TO DIRECTORS, ASSOCIATES, SUBSIDIARIES ETC ==========================================================================================================
Balances Maximum
as at total amount
December 31, of financing
2004 including
temporary
financing granted
during the year
Rupees '000
==========================================================================================================
Financing due by directors, executives or officers of the bank or any of
them either severally or jointly with any other persons 269,740 287,877
Financing due by companies or firms in which the directors of the bank
are interested as directors, partners or in the case of private companies
as members - -
Financing due by subsidiaries, controlled firms, managed modarabas
and other relate parties 285,783 285,938
==========================================================================================================11. OTHER ASSETS==========================================================================================================
Notes 2004 2003
Rupees '000
==========================================================================================================
Income/mark-up accrued in local currency 465,315 236,279
Income/mark-up accrued in foreign currency 4,254 4,391
Advances, deposits, advance rent and other prepayments 63,254 91,597
Taxation (payments less provisions) 553,886 694,838
Non-banking assets acquired in satisfaction of claim 11.1 35,000 35,000
Prepaid exchange risk fee - 1,289
Stationery and stamps on hand 3,715 2,072
Branch adjustment account - 26,517
Exchange difference on revaluation of forward foreign exchange
contracts 16,335 8,861
Subscription against TFCs 11.2 100,000 14,530
Receivable from brokers - secured 11.3 38,963 45,079
Others 198,338 27,970
1,479,060 1,188,423
Less: Provision held against other assets 11.4 (5,108) (5,108)
1,473,952 1,183,315
==========================================================================================================11.1.==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Market value of non-banking assets acquired in satisfaction of
claim - determined by professional valuer 133,000 133,000
==========================================================================================================11.2. This represents payment made by the bank as pre Initial Public Offering (IPO) subscription of TFCs of UBL for Rs. 100 million.11.3. This represents amount receivable from brokers against sale of shares. 11.4. PROVISION AGAINST OTHER ASSETS ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Opening balance 5,108 3,366
Charge for the year - 1,742
Reversals - -
Closing balance 5,108 5,108
==========================================================================================================12. FIXED ASSETS==========================================================================================================
2004 2003
Notes Rupees '000
==========================================================================================================
Capital work-in-progress 12.1 149,823 87,674
Property and equipment 12.2 1,008,584 937,690
Intangible assets 12.3 - 4,988
1,158,407 1,030,352
==========================================================================================================12.1. CAPITAL WORK-IN-PROGRESS==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Civil works 71,371 51,598
Advances to suppliers and contractors 78,452 36,076
149,823 87,674
==========================================================================================================12.2. PROPERTY AND EQUIPMENT================================================================================================================================
COST ACCUMULATED DEPRECIATION Book value at Rate of
As at Additions/ As at As at Charge/(on As at December 31, depreciation
January 1, (deletions)/ December January 1, deletions)/ December 2004 % per annum
2004 Adjustment* 31, 2004 2004 Adjustment* 31, 2004
Rupees '000
================================================================================================================================
Owned
Freehold land 30,497 - 30,497 - - - 30,497 -
Leasehold land 340,260 4,606 344,866 7,757 5,493 13,250 331,616 2
Building on freehold 41,648 - 41,648 12,655 780 10,197 31,451 2
land - (3,238)*
Leasehold property 377,932 49,456 425,882 39,672 19,369 62,274 363,608 2 to 20
and improvement (1,506) (5)
3,238*
Office furniture 364,795 86,265 446,339 225,469 67,892 291,493 154,846 20 to 33.33
fixtures, equipments (4,721) (1,868)
and computers
Vehicles 72,637 56,035 112,325 20,742 18,764 33,478 78,847 20
(16,347) (6,028)
1,227,769 196,362 1,401,557 306,295 112,298 410,692 990,865
(22,574) (7,901)
- -
Assets subject to
finance lease
Vehicles 17,972 9,000 23,389 1,756 4,438 5,670 17,719 20
(3,583) (524)
2004 1,245,741 205,362 1,424,946 308,051 116,736 416,362 1,008,584
(26,157) (8,425)
- -
2003 951,065 388,021 1,245,741 306,187 72,016 308,051 937,690
(87,049) (70,152)
(6,296)* -
================================================================================================================================12.2.1. Included in cost of property and equipment are fully depreciated items still in use having cost of Rs. 185.28 million (2003: Rs. 171.42 million).12.2.2. The fair value of property and equipment as per the management estimate, is not materially different from the carrying amount. 12.3. INTANGIBLE ASSETS ================================================================================================================================
COST ACCUMULATED DEPRECIATION Book value at Rate of
As at Additions/ As at As at Charge/(on As at December 31, depreciation
January 1, (deletions)/ December January 1, deletions)/ December 2004 % per annum
2004 Adjustment* 31, 2004 2004 Adjustment* 31, 2004
Rupees '000
================================================================================================================================
Computer software 14,815 200 - 8,927 485 - - 33.33
(15,015) (10,312)
2003 11,035 3,780 14,815 7,289 2,538 9,827 4,988
================================================================================================================================12.4. Details of disposal of fixed assets to executives, and other persons having cost more than Rs. 1 million or net book value Rs. 250,000 or above are as follows:===============================================================================================================
Cost Accumulated Book Sale Mode of Particulars of purchaser
depreciation value proceeds disposal
Rupees '000
===============================================================================================================
Vehicle 5,739 - 5,739 7,000 Negotiation Deinfa Motors
Vehicle 1,221 - 1,221 1,230 Tender Mrs. Munirah Wajid Jawad
1/2 Saba Avenue, DHA Phase 5, Karachi
Vehicle 1,245 291 955 1,245 Negotiation Standard Chartered Modaraba
Vehicle 1,169 117 1,052 1,041 Negotiation Mr. Muhammad Saleem (Ex executive)
Vehicle 1,169 117 1,052 1,169 Insurance Claim Adamjee Insurance Company Limited
Vehicle 1,169 136 1,033 1,047 Insurance Claim Adamjee Insurance Company Limited
Vehicle 920 - 920 1,150 Insurance Claim Adamjee Insurance Company Limited
Vehicle 849 127 722 754 Negotiation Mr. Abbas Bhujwala (Ex executive)
Vehicle 849 113 736 849 Insurance Claim EFU General Insurance
Vehicle 849 57 792 792 Insurance Claim Adamjee Insurance Company Limited
Vehicle 754 289 465 626 Tender Mr. Sherali A Allidina
TA/1, Crystal Hill
Apartments, plot # 2,
Bath Island, Karachi
Vehicle 692 - 692 650 Tender Mr. Saifuddin Lotia (Ex employee)
Vehicle 595 595 - 611 Tender Dr. Shariq A Siddiqui
House No. 3,
KDA Overseas, block 16-A
Gulistan-e-Johar, Karachi
Vehicle 560 47 513 560 Negotiation Mr. Tariq Mayet (Employee)
Vehicle 560 75 485 509 Tender Mr. Nauman Hassan Khan
A-908/12 Gulbergs, F.B
Area, Karachi
Vehicle 560 65 495 448 Bank Policy Mr. Sajjad Server
(Ex employee)
Vehicle 560 93 467 546 Negotiation Mr. Muhammad Adil Khan
(Ex employee)
Vehicle 559 - 559 569 Bank Policy Mr. Javed Iqbal (Ex employee)
Vehicle 550 202 348 500 Tender Ms. Naushaba Ali (Employee)
Vehicle 471 - 471 535 Tender Mr. Farhad Imdad South (Employee)
Vehicle 469 70 399 425 Bank Policy Mr. Shahid Hussain (Ex employee)
Vehicle 469 63 406 430 Bank Policy Mr. Muzfoor Mohsin
Gilani (Ex employee)
Vehicle 469 39 430 464 Tender Ch. Muhammad Haider Waraich
House No. 151/D, DHA phase 1,
Tehsil, Lahore
Vehicle 464 39 425 448 Tender Mr. Fareed Khan
344 Sharfabad, ST 19, Karachi.
Vehicle 432 432 - 366 Tender Mr. S. Naveed S. Rehman
B-159,block 14,
Gulistan-e-Johar, Karachi
Vehicle 390 - 390 975 Bank Policy Mr. Khalid S. Tirmizey (Executive)
===============================================================================================================13. DEFERRED TAX ASSET/(LIABILITY)==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Deferred tax debits arising in respect of:
- Provision against non-performing financing 329,886 534,002
- Deficit on revaluation of government securities 45,342 15,914
Deferred tax credit arising due to:
- Ijara operations (450,980) (352,124)
- Accelerated depreciation allowance (90,690) (36,886)
(166,442) 160,936
==========================================================================================================14. CONTINGENT ASSETSThere are no contingent assets as at December 31, 2004. 15. BILLS PAYABLE ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
In Pakistan 895,133 430,392
Outside Pakistan 10,504 10,470
905,637 430,862
==========================================================================================================16. BORROWINGS FROM FINANCIAL INSTITUTIONS==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
In Pakistan 8,264,601 6,147,505
Outside Pakistan 213,447 382,305
8,478,048 6,529,810
==========================================================================================================16.1. PARTICULARS OF BORROWINGS FROM FINANCIAL INSTITUTIONS==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
In local currency 8,264,601 6,090,108
In foreign currencies 213,447 439,702
8,478,048 6,529,810
==========================================================================================================16.2. DETAILS OF BORROWINGS FROM FINANCIAL INSTITUTIONS==========================================================================================================
2004 2003
Notes Rupees '000
==========================================================================================================
Secured
Borrowings from financial institutions - -
Borrowings from subsidiary companies, managed modarabas - -
Borrowings from directors (including chief executive) of the bank - -
Borrowings from State Bank of Pakistan
under export refinance scheme 16.3 3,964,601 2,990,108
Repurchase agreement borrowings 16.4 350,000 -
4,314,601 2,990,108
Unsecured
Interbank borrowings 16.5 3,950,000 3,157,397
Overdrawn nostro accounts 213,447 382,305
4,163,447 3,539,702
8,478,048 6,529,810
==========================================================================================================16.3. These represents borrowings from SBP under export refinance scheme at rates ranging from 2.5% to 3.5% per annum (2003: 1.5% to 2.0% per annum) maturing within six months up to June 2005. As per the terms of the agreements, the bank has granted SBP the right to recover the outstanding amount from the bank at the date of maturity of finances by directly debiting the current account of the bank maintained with SBP.16.4. This represents borrowing at 3.25% maturing on January 03, 2005. 16.5. These borrowings are at rates ranging from 3.45% to 5.75% per annum (2003: 1.75% to 3.65% per annum) maturing up to March 31, 2005. 17. DEPOSITS AND OTHER ACCOUNTS ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Customers
Term deposits 23,505,714 8,453,678
Saving deposits 20,107,441 15,213,682
Current accounts - Remunerative - -
Current accounts - Non-remunerative 10,628,837 5,864,003
Margin accounts 1,368,786 1,029,271
55,610,778 30,560,634
Financial Institutions
Remunerative deposits 826,312 694,272
Non-remunerative deposits 23,239 77,266
849,551 771,538
56,460,329 31,332,172
==========================================================================================================17.1. PARTICULARS OF DEPOSITS==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
In local currency 51,145,355 27,737,373
In foreign currencies 5,314,974 3,594,799
56,460,329 31,332,172
==========================================================================================================The above include deposits of related parties amounting to Rs. 507.31 million (2003: Rs. 299.95 million)18. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE ==================================================================================================
2004 2003
Minimum Financial Principal Minimum Financial Principal
lease charges for outstanding lease charges for outstanding
payments future periods payments future periods
Rupees '000
==================================================================================================
Not later than one year 6,547 1,089 5,458 4,835 1,220 3,615
Later than one year and
not later than five yea 13,923 947 12,976 14,010 1,221 12,789
20,470 2,036 18,434 18,845 2,441 16,404
==================================================================================================The bank has entered into agreements with a modaraba for lease of vehicles on commercial terms and conditions. Lease rentals are payable and include finance charges ranging between 7.5% to 14.0% per annum (2003: 7.5% to 14.0%) which have been used as respective discounting factors. There is no financial restriction in the lease agreement.19. OTHER LIABILITIES ==========================================================================================================
2004 2003
Note Rupees '000
==========================================================================================================
Mark-up/return payable in local currency 381,526 311,258
Mark-up/return payable in foreign currency 12,590 8,375
Unearned commission 18,601 12,324
Accrued expenses 110,513 97,481
Unclaimed dividends 20,185 16,289
Branch adjustment account 30,840 -
Due to associated undertakings - 31,884
Exchange difference on revaluation of forward
foreign exchange contracts - -
Withholding tax payable 3,289 1,968
Central Excise Duty payable 7,976 7,976
Security deposits against ijara 1,537,790 637,085
Payable to brokers 19.1 90,194 118,670
Others 81,395 75,127
2,294,899 1,318,437
==========================================================================================================19.1. This represents amounts payable to brokers against purchase of shares 20. SHARE CAPITAL 20.1. AUTHORISED CAPITAL ===================================================================================================
2004 2003 2004 2003
Rupees '000
===================================================================================================
350,000,000 350,000,000 Ordinary shares of Rs. 10 each 3,500,000 3,500,000
===================================================================================================20.2. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL===================================================================================================
2004 2003 Ordinary shares 2004 2003
Rupees '000
===================================================================================================
201,451,420 201,451,420 Fully paid in cash 2,014,514 2,014,514
74,152,080 47,673,580 Issued as bonus shares 741,521 476,736
15,660,000 15,660,000 Issued for consideration 156,600 156,600
291,263,500 264,785,000 Other than Cash 2,912,635 2,647,850
===================================================================================================As at December 31, 2004 Dar Al-Maal Al-Islami (DMI) Trust, Bahamas through its subsidiaries and nominees held 202,389,217 (2003: 185,554,611) ordinary shares of Rs. 10 each.21. RESERVES ==========================================================================================================
2004 2003
Notes Rupees '000
==========================================================================================================
Capital reserve
Share premium 417,694 417,694
Reserve for issue of bonus shares - 264,785
Statutory reserve 21.1 1,545,862 1,195,169
Revenue reserve
Capital market reserve 21.2 295,545 238,341
2,259,101 1,115,989
==========================================================================================================21.1. Appropriations are made to statutory reserve as required by section 21 of the Banking Companies Ordinance, 1962.21.2. This represents reserve created to meet unforeseen future contingencies in the capital market. 22. SURPLUS/(DEFICIT) ON REVALUATION OF ASSETS 22.1. SURPLUS/(DEFICIT) ON REVALUATION OF SECURITIES ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Available for sale
i) Federal Government Securities (129,547) (45,466)
ii) NIT Units 3,679,854 1,971,590
iii) Shares/Certificates/Other units 367,555 558,435
iv) Equity derivatives - (181,518)
3,917,862 2,303,041
Held for trading financial instruments
i) Shares - 49,902
Add: Related deferred tax asset 45,342 15,914
3,963,204 2,368,857
==========================================================================================================23. CONTINGENCIES AND COMMITMENTS23.1. DIRECT CREDIT SUBSTITUTES Contingent liability in respect of guarantees favouring: ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
i) Government - -
ii) Banking companies and other institutions 341,895 434,219
iii) Others - -
341,895 434,219
==========================================================================================================23.2. TRANSACTION-RELATED CONTINGENT LIABILITIESContingent liability in respect of performance bonds, bid bonds, shipping guarantees and standby letters of credit etc favouring: ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Contingent liability in respect of performance bonds, bid bonds, shipping
guarantees and standby letters of credit etc favouring:
i) Government 2,618,828 2,315,275
ii) Banking companies and other financial institutions 50,255 71,949
iii) Others 2,137,043 1,366,242
4,806,126 3,753,466
==========================================================================================================23.3. TRADE-RELATED CONTINGENT LIABILITIES==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Letters of credit 10,429,983 5,505,737
Acceptances 2,076,857 1,732,816
12,506,840 7,238,553
==========================================================================================================23.4. COMMITMENTS IN RESPECT OF FORWARD LENDING / SALE==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Commitment to extend credit - Morabaha financing 500,000 25,000
Commitment to invest in securities 2,079,050 155,000
Commitment to sell shares of listed companies - -
==========================================================================================================23.5. COMMITMENTS IN RESPECT OF FORWARD EXCHANGE CONTRACTS==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Purchase 7,818,662 4,804,132
Sale 7,387,889 4,603,506
==========================================================================================================23.6. COMMITMENTS IN RESPECT OF LEASE RENTALS==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Not later than one year 8,525 27,788
Later than one year and not later than five years 152 16,263
8,677 44,051
==========================================================================================================All leases are on commercial terms and conditions. In case of premature termination, on additional charge at the rate of 3.5% of the remaining principal amount is applicable.23.7. COMMITMENTS FOR ACQUISITION OF OPERATING FIXED ASSETS ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
381,273 298,912
==========================================================================================================23.8. COMMITMENTS IN RESPECT OF REPO TRANSACTIONS==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Repurchase 350,093 -
Resale 6,232,136 1,156,871
==========================================================================================================23.9. OTHER CONTINGENCIES==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
i) Suit filed by a customer for recovery of alleged losses suffered
which is pending in the High Court of Sindh, bank's legal
advisors are confident that the bank has a strong case 2,500,000 2,500,000
ii) Indemnity issued on behalf of a customer 457,543 457,543
iii) Claims against the bank not acknowledged as debt 804,659 804,659
==========================================================================================================24. CHANGE IN ACCOUNTING POLICYRestated proforma information as referred to in note 5.3 is prescribed below: ==============================================================================================
Proforma
For the year ended For the year ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
(restated) (resated)
Rupees '000
==============================================================================================
EXTRACT OF PROFIT AND LOSS ACCOUNT
Profit after taxation
for the year before incorporating
the effect of change in accounting policy 1,756,077 2,151,344 1,756,077 2,151,344
Cumulative effect of change in accounting
policy as stated above (2,607) - (52,509) 51,714
Profit after taxation for the year 1,753,470 2,151,344 1,703,568 2,203,058
EXTRACT OF STATEMENT OF UNAPPROPRIATED PROFIT
Proforma
Opening balance of unapproriated profit as
previously reported but
offer incorporating effect of
change in policy as per note 5.11 846,016 475,380 846,016 475,380
Effect of change in accounting
policy as stated above - - 49,902 (1,812)
Opening balance of unappropriated
profit as restated 846,016 475,380 895,918 473,568
Profit after taxation for the year 1,753,470 2,151,344 1,703,568 2,203,058
Transfer to statutory reserve (350,693) (430,269) (350,693) (430,269)
Transfer to capital market reserve (57,204) (238,341) (57,204) (238,341)
Interim cash dividend (582,527) (661,963) (582,527) (661,963)
Final cash dividend (529,570) (450,135) (529,570) (450,135)
1,079,492 846,016 1,079,492 895,918
==============================================================================================24.1. The proforma information has been prepared after taking into account the change in accounting policy relating to recognition of dividends declared subsequent to the year end. The change in accounting policy is disclosed in note 5.11 to the financial statements and is reflected in the statement of changes in equity.25. MARK-UP/RETURN EARNED ==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
a) On financing to:
i) customers 2,251,597 1,730,297
ii) financial institutions 67,873 120,926
b) On investments in:
i) held for trading securities - -
ii) available for sale securities 191,121 86,419
c) On deposits with treasury bank and
financial institutions 43,836 33,410
d) On securities purchased under resale agreements 198,024 103,559
2,753,451 2,074,611
==========================================================================================================26. MARK-UP/RETURN EXPENSED==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Deposits 974,042 791,580
Securities sold under repurchase agreements 211 1,933
Other short term borrowings 143,865 152,972
1,118,118 946,485
==========================================================================================================27. OTHER INCOME==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Profit on disposal of fixed assets 4,914 -
Others 136 2,554
5,050 2,554
==========================================================================================================28. ADMINISTRATIVE EXPENSES==========================================================================================================
2004 2003
Notes Rupees '000
==========================================================================================================
Salaries, allowances, etc. 492,160 397,158
Charge for defined benefit plan 12,578 12,902
Contribution to defined contribution plan 15,679 12,829
Rent, taxes, insurance, electricity, etc. 153,364 107,411
Legal and professional charges 6,107 10,021
Communications 15,662 15,053
Repairs and maintenance 27,054 25,994
Lease rentals 31,505 28,458
Finance charge on leased assets 1,664 844
Stationery and printing 37,996 26,695
Advertisement and publicity 29,045 20,157
Licence and technical fee 56,202 19,861
Auditors' remuneration 28.1 6,050 6,050
Depreciation 12.2 116,736 72,016
Amortization 12.3 485 2,538
Travelling, conveyance and entertainment 11,793 9,877
Vehicle running expenses 30,481 20,099
Books, periodicals and subscription 7,601 7,169
Brokerage and commission 22,405 11,543
Others 60,105 28,079
1,134,672 834,754
==========================================================================================================28.1. AUDITORS' REMUNERATION==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Audit fee 1,250 1,250
Review of half yearly financial statements 250 250
Special certifications and sundry advisory services 1,750 1,750
Tax services 2,500 2,500
Out-of-pocket expenses 300 300
6,050 6,050
==========================================================================================================29. OTHER CHARGES==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Penalties imposed by the State Bank of Pakistan 1,246 531
Penalties reversed by the State Bank of Pakistan (96) (1,339)
Loss on disposal of fixed assets - 12,743
1,150 11,935
==========================================================================================================30. TAXATION==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
For the year
Current 517,588 347,889
Deferred 67,116 61,526
584,704 409,415
For prior year
Current (420,394) 106,443
Deferred 289,690 78,070
(130,704) 184,513
454,000 593,928
==========================================================================================================30.1. RELATIONSHIP BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Profit before taxation 2,207,470 2,745,272
Tax calculated at the rate of 41%(2003: 44%) 905,063 1,207,920
Effect of:
- permanent differences 60,275 82,730
- income chargeable to tax at reduced rate (251,100) (297,842)
- income exempt from tax (129,534) (607,572)
- write-off of deferred tax asset
due to reduction in tax rate - 24,179
- prior year charge (130,704) 184,513
Tax charge for the year 454,000 593,928
==========================================================================================================30.2. Applicable tax rate is changed in accordance with the requirements of Income Tax Ordinance, 2001.30.3. Income tax assessments of the bank have been finalised upto income year 2001 (assessment year 2002-2003). While finalising the assessments for the income years ended December 31, 1999 to 2001 (assessment years 2000-2001 to 2002-2003) the Taxation Officer (TO) had disallowed depreciation on leased assets amounting to Rs. 177.15 million and had taxed dividend income at the banking company's tax rate instead of the applicable reduced rate. Further, the TO had increased the taxable income of the bank in these years by disallowing loss on disposal of leased assets amounting to Rs. 248.73 million. The bank had filed an appeal with the Commissioner of Income Tax Appeals [CIT(A)] against the afore-mentioned disallowances/treatments. In addition, the bank had also filed appeals before the Income Tax Appellate Tribunal (ITAT) against the disallowances of provision for bad debts and suspended income for assessment years 1999-2000 to 2001-2002 and before the High Court regarding disallowance of depreciation on leased assets in respect of assessment years 1995-96 and 1996-97. During the year the CIT(A) has given decision in favour of the bank in respect of depreciation charged on leased assets and the taxability of bank's dividend income at reduced rates. Further, the CIT(A) has also set aside the matter pertaining to disallowance of loss on disposal of leased assets. The department filed an appeal against the decision of CIT(A) on the issue of dividend income which has been dismissed by the ITAT. In addition, ITAT has also decided the appeal for assessment years 1999-2000 to 2001-2002 in favour of the bank. The management is confident of favourable outcome in respect of its appeal on disallowance of loss on disposal of leased assets in assessment years 2000-2001 to 2002-2003 and disallowance of depreciation on leased assets in respect of assessment years 1995-96 and 1996-97 and has accordingly not made any provision in respect of tax impact of the above disallowances amounting to Rs. 290.77 million. 31. BASIC AND DILUTED EARNINGS PER SHARE ==========================================================================================================
2004 2003
==========================================================================================================
Profit after taxation for the year (Rupees) 1,753,470 2,151,344
Number of shares
in thousand
Number of ordinary shares 291,264 291,264
Rupees
Basic and diluted earnings per share 6.02 7.39
==========================================================================================================32. CASH AND CASH EQUIVALENTS==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Cash and balances with treasury banks 5,048,395 2,866,278
Balances with other banks 3,564,030 648,660
8,612,425 3,514,938
==========================================================================================================33. STAFF STRENGTH==========================================================================================================
2004 2003
==========================================================================================================
Total number of employees at the end of the year 899 722
==========================================================================================================34. DEFINED BENEFIT PLAN34.1. PRINCIPAL ACTUARIAL ASSUMPTIONS The latest actuarial valuation of the bank's defined benefit plan based on Projected Unit Credit Actuarial Cost Method was carried out as at December 31, 2004. Following are the significant assumptions used in the valuation. ==========================================================================================================
2004 2003
Percentage per annum
==========================================================================================================
Discount factor used 8 6
Expected long term rate of return on plan assets 8 6
Salary increase 8 6
Normal retirement age 60 years 60 years
==========================================================================================================34.2. RECONCILIATION OF PAYABLE TO DEFINED BENEFIT PLAN==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Rupees '000
Present value of defined benefit obligations 79,512 56,912
Fair value of plan assets (64,070) (60,376)
Net actuarial gains / (losses) not recognized (15,442) 3,464
- -
==========================================================================================================34.3. MOVEMENT IN PAYABLE TO DEFINED BENEFIT PLAN==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Opening balance - (82)
Charge for the year 12,430 12,902
Contribution to fund made during the year (12,430) (12,820)
Closing balance - -
==========================================================================================================34.4. CHARGE FOR DEFINED BENEFIT PLAN==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
Current service cost 12,480 11,941
Interest cost 3,825 4,592
Expected return on plan assets (3,875) (4,870)
Amortization of transitional obligation - 1,239
12,430 12,902
==========================================================================================================34.5. ACTUAL RETURN ON PLAN ASSETS==========================================================================================================
2004 2003
Rupees '000
==========================================================================================================
4,272 4,362
==========================================================================================================35. REMUNERATION OF DIRECTORS AND EXECUTIVES=========================================================================================
Chief Executive Officer Executives
2004 2003 2004 2003
Rupees '000
=========================================================================================
Managerial remuneration 32,997 30,150 88,202 73,446
Charge for defined benefit plan 1,741 1,075 4,322 3,768
Contribution to defined contribution 2,090 1,290 5,188 4,524
Rent and house maintenance 10,395 6,936 23,638 20,963
Utilities 3,135 1,935 5,188 4,524
Medical 84 79 3,466 3,003
Leave fare assistance 2,321 2,149 8,185 8,029
Others 283 405 15,244 9,302
53,046 405 15,244 9,302
Number of persons 1 1 53 44
=========================================================================================35.1. The Chief Executive and Executives are provided with free use of household equipments. Further, Chief Executive and certain executives are provided with free use of bank's maintained cars and security services.36. MATURITIES OF ASSETS AND LIABILITIES ==================================================================================================
2004
Total Upto three Over three Over one Over
months months to year to five years
one year five years
Rupees '000
==================================================================================================
Assets
Cash and balances with treasury banks 5,048,395 2,809,685 865,729 438,011 934,970
Balances with other banks 3,564,030 3,564,030 - - -
Lendings to financial institutions 4,417,378 4,417,378 - - -
Investments 11,502,805 1,080,296 1,788,385 7,168,079 1,466,045
Financing 51,373,254 18,563,035 8,349,912 21,273,940 3,186,367
Other assets 1,473,952 302,924 515,949 555,079 100,000
Fixed assets 1,158,407 29,184 88,881 485,311 555,031
78,538,221 30,766,532 11,608,856 29,920,420 6,242,413
Liabilities
Bills payable 905,637 905,637 - - -
Borrowings from financial institution 8,478,048 4,513,447 3,964,601 - -
Deposits and other accounts 56,460,329 28,399,169 13,251,792 6,504,152 8,305,216
Liabilities against assets subject to
finance lease 18,434 1,612 3,846 12,976 -
Other liabilities 2,294,899 432,765 369,962 1,491,842 330
Deferred tax liabilities 166,442 - - 211,785 (45,343)
68,323,789 34,252,630 17,590,201 8,220,755 8,260,203
Net assets 10,214,432 (3,486,098) (5,981,345) 21,699,665(2,017,790)
Share capital 2,912,635
Reserves 2,259,101
Unappropriated profit 1,079,492
6,251,228
Surplus on revaluation of assets 3,963,204
10,214,432
================================================================================================== * Included in cash and balances with treasury banks are the current and deposit accounts with the State Bank of Pakistan which are maintained to meet the Statutory Liquidity Reserve requirements. Thus these are classified in the categories based on the maturity of deposits and other accounts with the bank.36.1. Liquidity risk is the risk that the bank will not be able to raise funds to meet its commitments. The bank's Asset and Liability Management Committee manages the liquidity position on a continuous basis. The Committee monitors the maintenance of balance sheet liquidity ratios, depositors' concentration both in terms of overall funding mix and avoidance of undue reliance on large individual deposits and liquidity contingency part of bank's overall funding, therefore, significant importance is attached to the stability and growth of these deposits. 37. YIELD/INTEREST RATE RISK Yield/Interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual re-pricing and maturity date and for off-balance sheet instruments is based on settlement date. ===================================================================================================================================
2004
Effective Exposed to yield/interest risk Not exposed
yield/ Total Upto three Over three Over one Over five to yield/
interest months months to year to five years interest risk
rate % one year years
Rupees '000
===================================================================================================================================
On balance sheet
financial instruments
Assets
Cash and balances
with treasury
banks 0.62% 5,048,395 313,366 14,213 21,781 452,403 4,246,632
Balances with
other banks 3.23% 3,564,030 974,958 - - - 2,589,072
Lendings to
financial
institutions 5.28% 4,417,378 4,417,378 - - - -
Investments 6.23% 11,502,805 1,035,260 166,253 452,643 1,466,045 8,382,604
Financing 6.76% 51,373,254 18,563,035 8,349,912 21,273,940 3,186,367 -
Other assets 821,812 - - - - 821,812
76,727,674 25,303,997 8,530,378 21,748,364 5,104,815 16,040,120
Liabilities
Bills payable 905,637 - - - - 905,637
Borrowings
from financial
institutions 3.82% 8,478,048 4,300,000 3,964,601 - - 213,447
Deposits and
other accounts 2.46% 56,460,329 33,295,132 8,100,497 1,990,501 1,053,337 12,020,862
Liabilities against
assets subject to
finance lease 8.69% 18,434 1,612 3,846 12,976 - -
Other liabilities 2,276,298 - - - - 2,276,298
68,138,746 37,596,744 12,068,944 2,003,477 1,053,337 15,416,244
On-balance sheet gap 8,588,928 (12,292,747) (3,538,566) 19,744,887 4,051,478 623,876
Off-balance sheet
financial instruments
Commitment to extend
credit-Morabaha financing (500,000) (500,000) - - - -
Commitment to invest
in listed securities (2,079,050) (2,079,050) - - - -
Off-balance sheet gap (2,579,050) (2,579,050) - - - -
Total yield/interest risk
sensitivity gap (14,871,797) (3,538,566) 19,744,887 4,051,478
Cumulative yield/interest
risk sensitivity gap (14,871,797) (18,410,363) 1,334,524 5,386,002
===================================================================================================================================37.1. Yield risk is the risk of decline in earnings due to adverse movement of the yield curve.37.2. Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates. 37.3. The interest rate exposure taken by the bank arises from investing in corporate, small medium enterprises, consumer financing, investment banking and interbank activities where variation in market interest rates may effect the profitability of the bank. This risk is addressed by an Asset and Liability Management Committee, which reviews the interest rate dynamics or regular intervals and decides repricing of assets and liabilities ensuring that the spread of the bank remains at an acceptable level. 37.4. The finances and deposits of the bank are repriced on a periodic basis based on interest rates scenario. 38. CURRENCY RISK =========================================================================
2004
Assets Liabilities Off-balance Net foreign
and share sheet items currency
holders' exposure
equity
Rupees '000
=========================================================================
Pakistan rupee 73,346,914 72,815,702 (445,494) 85,718
United States dollar 4,440,685 4,903,911 382,179 (81,047)
Great Britain pound 485,962 506,625 17,318 (3,345)
Japanese yen 13,483 (584) (13,774) 293
Euro 248,760 307,739 59,771 792
Other currencies 2,417 4,828 - (2,411)
78,538,221 78,538,221 - -
=========================================================================38.1. Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The bank does not take any currency exposure except to the extent of statutory Net Open Position limit prescribed by SBP.Foreign Exchange open and mismatch positions are controlled through internal limits and are marked to market on a daily basis to contain forward exposures. Counterparty and stop loss limits are also in place in accordance with the bank's approved Standard Operating Procedures to limit risk and concentration. 39. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of traded investments is based on quoted market price. Fair value of unquoted equity investments is determined on the basis of break-up value of these investments as per the latest financial statements. Fair value of fixed term financing, other assets, other liabilities and fixed term deposits cannot be calculated with sufficient reliability due to absence of current and active market for assets and liabilities and reliable data regarding market rates for similar instruments. The provision for impairment of financing has been calculated in accordance with bank's accounting policy as stated in note 5.4 of these financial statements. The maturity and repricing profile and effective rates are stated in note 36 and 37 respectively. In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different from their carrying values since assets and liabilities are either short term in nature or in the case of customer financing and deposits are frequently repriced. 40. CONCENTRATION OF CREDIT RISK Credit risk is the risk that if one party to a financial instrument fails to discharge an obligation, it will cause the other party to incur a financial loss. Concentration of credit risk arises when a number of counter parties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Out of the total financial assets of Rs. 76.73 billion, the financial assets which were subject to credit risk amounted to Rs. 71.81 billion. The Bank's major credit risk is concentrated in textile sector. To manage credit risk, the Bank applies credit limits to its customers and obtains adequate collaterals. Investments amounting to Rs. 4.16 billion are guaranteed by the Government of Pakistan (including amount guaranteed through letter of comfort issued in respect of NIT units). 40.1. SEGMENT BY CLASS OF BUSINESS ==========================================================================================================
2004
Financing Deposits Contingencies and
Commitments
Rupees '000 Percent Rupees '000 Percent Rupees '000 Percent
==========================================================================================================
Chemical and Pharmaceuticals 1,520,458 3.0 2,396,739 4.3 614,615 3.5
Agribusiness 206,864 0.4 709,417 1.3 55,712 0.3
Textile 13,621,324 26.5 1,600,274 2.8 2,899,260 16.4
Construction 2,110,262 4.1 1,442,525 2.6 463,222 2.6
Cement 2,072,538 4.0 362,476 0.6 2,568,123 14.5
Sugar 705,191 1.4 53,452 0.1 120,411 0.7
Shoes and leather garments 669,299 1.3 199,958 0.4 80,682 0.5
Automobile and
transportation equipment 766,524 1.5 1,696,482 3.0 97,492 0.6
Financial Institutions 1,401,214 2.7 1,060,209 1.9 332,392 1.9
Oil Refining/Marketing 2,248,818 4.4 8,909,258 15.8 1,581,890 9.0
Distribution/Trading 3,229,982 6.3 3,169,614 5.6 596,819 3.4
Electronics and
electrical appliances 1,234,515 2.4 473,986 0.8 959,816 5.4
Production and transmission
of energy 1,349,076 2.6 4,176,102 7.4 2,300,551 13.0
Iron and Steel 735,004 1.4 753,554 1.3 367,042 2.1
Food and allied 1,560,146 3.0 501,420 0.9 552,926 3.1
Synthetic and Rayon 3,071,568 6.0 154,371 0.3 178,065 1.0
Paper and Board 724,672 1.4 130,491 0.2 217,317 1.2
Individuals 7,527,491 14.7 15,323,312 27.1 46,732 0.3
Others 6,618,308 12.9 13,346,689 23.6 3,621,794 20.5
51,373,254 100.0 56,460,329 100.0 17,654,861 100.0
==========================================================================================================40.2. SEGMENT BY SECTOR==========================================================================================================
2004
Financing Deposits Contingencies and
Commitments
Rupees '000 Percent Rupees '000 Percent Rupees '000 Percent
==========================================================================================================
Public/Government 204,347 0.4 9,314,881 16.5 1,802,301 10.21
Private 51,168,907 99.6 47,145,448 83.5 15,852,560 89.79
51,373,254 100.0 56,460,329 100.0 17,654,861 100.0
==========================================================================================================40.3. Portfolio management is an integral part of bank's credit process. Risk concentration may arise where total exposure to a particular group or industry is high in relation to shareholders' equity. The bank has set up a portfolio strategy and planning function with an aim to monitor the overall risk to avoid high exposure to a single group or industry.The bank has a well-defined credit structure duly approved by the Board of Directors under which credit committees at various levels comprising of senior officers with required credit background are operating which critically scrutinize and sanction financing. The emphasis is to provide short to medium term trade related financing to reputable names, which are self-liquidating. Besides financial, industry and transaction analysis, the credit evaluation also includes risk-rating system which gauges risk rating of all customers having numeric value assigned to each one. The risk appraisal system of the bank has enabled it to build a sound portfolio. The bank has developed system to monitor problem accounts so that instant instructions based on early warning signals are passed on to units to deal with potential problem accounts. 41. GEOGRAPHICAL SEGMENT ANALYSIS ====================================================================================
2004
Profit Total Net assets Contingencies
before assets employed and
taxation employed commitments
Rupees '000
====================================================================================
Pakistan 2,207,470 78,538,221 10,214,432 17,654,861
Asia Pacific (including South Asia) - - - -
Europe - - - -
United States of America and Canada - - - -
Middle East - - - -
Others - - - -
2,207,470 78,538,221 10,214,432 17,654,861
====================================================================================42. RELATED PARTY TRANSACTIONSThe Bank has related party relations with its associated undertakings, subsidiary companies (refer note 9.1), employee benefit plans (refer note 5.9) and its directors and executive officers (including their associates). Banking transactions with the related parties are executed substantially on the same terms, except transaction with directors and executive officers that are as per the terms of employment, including mark-up rates and collateral, as those prevailing at the time of comparable transactions with unrelated parties and do not involve more than a normal risk. Details of financing to the companies or firms in which the directors of the Bank are interested as directors, partners or in case of private companies as members are given in note 10.10 to these financial statements. Contributions to and accruals in respect of staff retirements and other benefit plans are made in accordance with the actuarial valuations/terms of contribution plan (refer note 5.9. and note 34 to these financial statements for the details of the plans). Remuneration to the executives, disclosed in note 35 to these financial statements are determined in accordance with the terms of their appointment. ==========================================================================================================
Subsidiariesssociates
2004 2003
Rupees '000
==========================================================================================================
i. Financing
Balance at beginning of year 288,627 119,131
Disbursement during the year 2,000 203,275
Repayment during the year (1,362) (33,779)
Balance at end of year 289,265 288,627
ii. Deposits
Balance at beginning of year 299,947 3,406,382
Placement during the year 16,480,714 13,421,773
Withdrawals during the year (16,273,354) (16,528,208)
Balance at end of year 507,307 299,947
iii. Foreign currency placement of funds /
nostro balances with associates 604,540 432,278
iv. Profit or fee paidccrued 58,786 65,368
v. Profit/return earned 38,650 42,316
vi. Shares of associated companies and subsidiary purchased 204,339 464,842
vii. Shares of associated companies sold 291,487 166,728
viii. Dividend income from subsidiaries 63,597 73,052
ix. Dividend income from associates 308 19,572
x. Dividend paid to holding company and associates 767,739 772,569
xi. Guarantee given on behalf of a subsidiary 5,000 5,000
xii. Commission charged on guarantee given to a subsidiary 80 60
xiii. Contributions to employee benefit plans 28,257 25,732
==========================================================================================================42.1. Finances to directors and executive officers are granted as per terms of their employment and their deposits maintained at the bank are subject to commercial terms. Hence, these finances and deposits have been excluded from related party transactions.43. DATE OF AUTHORISATION FOR ISSUE These financial statements were authorised for issue on February 22, 2005 by the Board of Directors of the bank. 44. PORTFOLIO MANAGEMENT SCHEME The assets and liabilities of the Scheme are not reflected in these financial statements. The outstanding funds under this Scheme as at December 31, 2004 were Nil (December 31, 2003: Rs. 6.44 million). 45. NON-ADJUSTING EVENT AFTER THE BALANCE SHEET DATE The Board of Directors in its meeting held on February 22, 2005 has proposed a cash dividend of Rs. 2.5 per share (2003: Rs. 2 per share). In addition, the directors have also announced a bonus issue of 10 percent, which will be issued out of the share premium account. These appropriations will be approved in the forthcoming Annual General Meeting. The financial statements for the year ended December 31, 2004 do not include the effect of these appropriations, which will be accounted for in the financial statements for the year ending December 31, 2005 as follows: ===========================================================================================
Rupees '000
===========================================================================================
Transfer from unappropriated profit to proposed dividend 728,159
Transfer from share premium account to the reserve for issue of bonus shares 291,264
===========================================================================================46. GENERALPrevious year's figures have been rearranged and reclassified wherever necessary for the purposes of comparison. Major changes made during the year are as follows: ===========================================================================================
Reclassification from Reclassification to Reason for Rupees
Notes Component Notes Component reclassification '000
===========================================================================================
9.1 Unlisted Term Finance 10 Financing Presentation as per 206,249
9.2 & Certificate International Accounting
9.2.6 Standard
25 b ii) Mark-up/return earned 25 a i) Mark-up/return Presentation as per 56,014
on investments in available earned on International
for sale securities financing to Accounting
customers Standard
===========================================================================================Comparative information has also been restated to give effect to the change in accounting policy described in note 5.11. |