Askari Bank Limited: Annual Report 2021

Transcription

3. CONTENTS 02 03 04 05 09 13 Vision & Mission Financial Highlights Corporate Information Products & Services Notice of the 30th Annual General Meeting Profile of Directors 24 25 26 34 41 42 Board Committees Chairman’s Review Directors’ Report to the Shareholders English Six Years’ Financial Summary Directors’ Report to the Shareholders - Urdu Horizontal & Vertical Analysis 44 45 46 48 Share & Debt Information Statement on Internal Controls Statement of Compliance Independent Auditors’ Review Report to the Members UNCONSOLIDATED FINANCIAL STATEMENTS 50 55 56 57 58 59 Independent Auditors’ Report to the Members Unconsolidated Statement of Financial Position Unconsolidated Profit and Loss Account Unconsolidated Statement of Comprehensive Income Unconsolidated Statement of Changes in Equity Unconsolidated Cash Flow Statement 60 134 135 136 Notes to the Unconsolidated Financial Statements Profile of Members of Shariah Board Report of Shariah Board - English Report of Shariah Board - Urdu CONSOLIDATED FINANCIAL STATEMENTS 148 153 154 155 156 157 Independent Auditors’ Report to the Members Consolidated Statement of Financial Position Consolidated Profit and Loss Account Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement 158 227 231 233 Notes to the Consolidated Financial Statements Pattern of Shareholding Form of Proxy English Form of Proxy Urdu
4. VISION To be a responsible customer focused bank providing inclusive and progressive financial services . MISSION To build long term relationships by delivering transformative customer experience, responsible banking, innovative technology, aiming to be employer of first choice and shaping opportunities that grow shareholders’ value. 02 Askari Bank Limited
5. FINANCIAL HIGHLIGHTS Rupees in million 2021 2020 Growth (%) Total Assets 1,259,144 992,517 26.86 Deposits 1,015,430 791,187 28.34 Advances - net 477,588 395,374 20.79 Investments 616,361 449,687 37.06 55,902 54,546 2.49 20,585 19,742 4.27 9,701 10,800 (10.18) 13.38 15.48 7.70 8.57 Market value per share - Rs. 22.02 23.39 Net book value per share - Rs. 44.3643.28 Shareholders’ Equity Operating profit Profit after taxation Capital adequacy ratio - (%) Earnings per share - Rs. 2021 2021 Profit After Tax Earnings Per Share Rs. in million 9,701 2020 10,800 2021 Rupees 7.70 2020 8.57 2021 Percentage Percentage Return on Equity Return on Assets 19.24 2020 25.45 0.86% 2020 1.18 Annual Report 2021 03
6. CORPORATE INFORMATION BOARD OF DIRECTORS AUDITORS Mr . Waqar Ahmed Malik KPMG Taseer Hadi & Co. Chairman / Non-Executive Director Chartered Accountants Mr. Sarfaraz Ahmed Rehman Non-Executive Director Mr. Arif Ur Rehman LEGAL ADVISORS Non-Executive Director RIAA, Barker Gillette Dr. Nadeem Inayat Advocates & Corporate Counselors Non-Executive Director Syed Bakhtiyar Kazmi Non-Executive Director Mr. Manzoor Ahmed Non-Executive Director / NIT Nominee Mr. Mohammad Aftab Manzoor SHARIAH BOARD Mufti Muhammad Zahid - Chairman Mufti Zakir Hassan Naumani - Member Dr. Lutfullah Saqib - Member Independent Director Dr. Muhammad Tahir Mansoori Mr. Mushtaq Malik Resident Shariah Board Member Independent Director COMPANY SECRETARY Ms. Zoya Mohsin Nathani Independent Director Raja Muhammad Abbas Independent Director Mr. Atif R. Bokhari President & Chief Executive BOARD COMMITTEES AUDIT Mr. Mohammad Aftab Manzoor - Chairman Dr. Nadeem Inayat Syed Bakhtiyar Kazmi Mr. Manzoor Ahmed Raja Muhammad Abbas HUMAN RESOURCE & REMUNERATION Ms. Zoya Mohsin Nathani - Chairperson Mr. Sarfaraz Ahmed Rehman Dr. Nadeem Inayat Mr. Manzoor Ahmed RISK MANAGEMENT Mr. Manzoor Ahmed - Chairman Dr. Nadeem Inayat Mr. Mushtaq Malik Ms. Zoya Mohsin Nathani Syed Ali Safdar Naqvi, FCA REGISTERED OFFICE AWT Plaza, The Mall, P. O. Box No. 1084 Rawalpindi - 46000, Pakistan Tel: (92 51) 8092624, UAN: (92 51) 111 000 787 Fax: (92 51) 2857448 Email: ir@askaribank.com.pk REGISTRAR & SHARE TRANSFER OFFICE CDC Share Registrar Services Limited (CDCSRSL) Mezzanine Floor, South Tower, LSE Plaza 19-Khayaban-e-Aiwan-e-Iqbal, Lahore Tel: Customer Support Services (Toll Free) 0800-CDCPL (23275) Tel: (92 42) 36362061-66 Fax: (92 42) 36300072 Email: info@cdcsrsl.com Website: www.cdcsrsl.com ENTITY RATINGS Long Term: AA+ Short Term: A1+ By PACRA Mr. Atif R. Bokhari BOARD INFORMATION TECHNOLOGY Mr. Mohammad Aftab Manzoor - Chairman Dr. Nadeem Inayat Mr. Mushtaq Malik Raja Muhammad Abbas Mr. Atif R. Bokhari WEBSITE www.askaribank.com SOCIAL MEDIA askaribankpakistan Askari_Bank askaribankpk askaribanklimited AskariBankOfficial 04 Askari Bank Limited
7. PRODUCTS & SERVICES Corporate, Commercial & Investment Banking International Banking At Askari Bank, we understand the unique business requirements of our corporate and institutional clients, and accordingly strive to meet their expectations by providing a customized and relationship-based banking approach. Having Correspondent Banking relationships with 450 banks in 89 countries around the world, we remain focused on tapping new markets in Europe apart from our strong presence in South East Asia and Middle East markets to boost international trade and remittances. Concentrated efforts are also being made to promote business from China, leveraging on positive spill-over of Chinese investment in Pakistan, especially under CPEC. Corporate Banking Corporate banking works on a long-term relationshipbased business model to provide a single point within the Bank which meets all business requirements of its corporate and institutional customers, including public sector enterprises. Along with innovative products and solutions, customer service remains our top priority. Our relationship-oriented outlook focuses on providing a complete array of tailored financing solutions that are practical and cost effective, some of which include: China Desk Askari China Desk was created with the sole intent of facilitating Chinese businesses working for various projects in Pakistan and has been immensely successful in term of fostering rich financial prospects and bringing in valuable Chinese deposits and trade. With an increasing number of Chinese investors entering Pakistan, by establishing dedicated China Desk, the Bank is wellplaced to cater the needs of all existing and new customer. • Working Capital Facilities • Term Loans • Letters of Guarantee Cash Management Services • Letters of Credit • Discounting Facilities Askari Cash Management Services aims to effectively manage the accounts receivable portfolio of medium and large corporate entities. • Export Financing • Cash Management and Employee Banking Solutions Commercial Banking Commercial Banking serves the middle tier segment by providing both general and tailored solutions encompassing all financial needs of the borrower ranging from Trade Finance to working capital requirements. Dedicated relationship managers provide customized solutions to our customers. Investment Banking Investment banking focuses on the origination and execution of a range of financial advisory and capital raising services to corporate and institutional clients. It also manages the Bank’s proprietary investments in local equity and debt markets. Investment banking offers various tailored financial solutions including debt syndications, project finance and advisory services, debt placements through capital markets as well as structured trade finance facilities. Whether a company is seeking to access the local or cross border syndications and debt capital markets, project financing needs, advisory services related to Mergers and Acquisitions and or local equity capital markets for raising capital, our Investment Banking is well positioned to provide due assistance. We tailor the right structured solutions to meet our customers’ needs in order to enhance business wealth and market competitiveness. Transactional banking primarily aims at providing clearing, collection and cash/transfer facility to corporate clients. Employee Banking provides efficient solution of payroll management to our Corporate clients under one resource center, which handles the process through the vast network of our branches. Institutional Sales Institutional sales offer tailor made and OTC products to its corporate clients catering to their needs alongwith consumer products for their employees at most affordable rates with premium services. Askari Aasaan Money TRANSFER Role of Home Remittance segment is pivotal in promoting remittances through its state-of-the-art web based portal “Askari Aasaan Money Transfer”. This service is completely free of cost and is available for all citizens across the country. Branch Banking Askari Bank aims to provide its customers with a wide array of financial solutions catering to diverse banking needs. We offer Conventional, Corporate, Consumer, Islamic and Agriculture Banking services through a network of 560 branches / sub-branches in major cities, towns and cantonments. Annual Report 2021 05
8. PRODUCTS & SERVICES Current Account • Askari Asaan Digital Account Current Accounts cater to a variety of transactional needs of our diverse customer base with value added benefits of Cheque books, Debit cards, Bankers’ cheques, i-Net Banking and much more. • Askari Asaan Digital Remittance Account • Askari Freelancer Digital Account • Range of other AKBL Accounts Savings Account Internet Banking Savings accounts are offered by the Bank to both individual and institutional customers include Askari Maximiser, Askari Special Deposit and regular Savings Account based on profit and loss sharing (PLS). Askari Savings products offer attractive features and competitive returns. Askari Bank is providing internet banking services to its valued customers absolutely FREE. In addition to account management services, our I-Net banking offers: Askari Maximiser Term Deposit • Online Insurance premium payment (for select insurance companies) Askari Maximiser Term Deposit is specifically designed for individual and corporate customers with a medium to long term investment horizon. It is designed to cater to the saving needs of customers who want monthly profits with the option of availing financing facility of up to 90% of the principal amount. Value Plus Current Account Askari Value Plus Current Account offers financial freedom and security with unmatched flexibility. Customers (individuals) can open this account to avail the benefits of free life insurance coverage and host of free banking services for transactional convenience – all with no minimum balance requirements. Askari Asaan Account Askari Bank offers Asaan Account to unbanked / underbanked individuals. The facility is available in Current and Savings account categories. It offers hassle-free account opening and operating procedure to facilitate lower income groups for their banking requirements. • Online Banker’s Cheque’s delivery at customers doorstep • • Online School fee payment • Online Shopping E-Commerce payments Mobile Banking Askari Bank has launched an upgraded version of its Mobile Banking App with friendly user interface and added security features. Salient features are: • QR / HCE Payments through Virtual Cards • Apply Online for Consumer Products • Discounts & Alliances information • Loan(s) details • Debit Card Management • Account Statement • Book Cinema and Bus Tickets • Cheque Management • Manage Daily limits • Enhanced Security Features trough biometric login & PIN Digital Banking Askari Digital offers convenient banking solutions from the comfort of home, office or on the go. Our valued customers needn’t wait in long queues for account opening, balance inquiry, statement of accounts, funds transfer, utility bill payment and host of other financial and non-financial activities Utility bills payment SMS Banking Askari Bank’s SMS banking provides our valued customers the ability to undertake several actions using our short messaging service: i) New Debit Card Activation Customer Digital On-Boarding ii) Debit Card PIN Change Askari Digital Onboarding platform provides online account opening to Resident Pakistanis. Our Customers can choose to open following accounts via digital onboarding and enjoy banking on the go with Askari Bank’s digital solutions: iii) Block/ Unblock Debit Card iv) Balance Inquiry v) Mini Statement vi) Cheque Book Issuance vii) Stop Cheque Payment 06 Askari Bank Limited
9. Cardless Cash Withdrawal Cardless Cash Withdrawal is a unique and value-added feature of both Askari Mobile Banking as well as I-Net banking . The facility allows cash withdrawal without requiring a Debit Card. Consumer Banking Consumer banking provides range of financing solutions to cater to meet our customers’ personal financing need through innovative products and offerings. We keep in mind customers’ needs at every stage of life. To enrich customer experience, we continuously seek new alliances to provide rich offerings and discounts. Ask4Car Askari Ask4Car is an auto financing product for new, used and imported vehicles. It offers competitive mark-up, flexible repayment plan and quick processing without any hidden charges. The product is offered to the customers for a maximum tenure of 7 years. Personal Finance With unmatched financing features in terms of loan amount, payback period and easy monthly installments, Askari Bank’s Personal Finance makes sure that our customers get the most out of their loans. The product tenure ranges from 1 – 5 years and is designed for salaried individuals and businessmen. Mortgage Finance Whether our customers plan to construct a house, buy a constructed house, or renovate a house, Askari Mortgage Finance enables them to pursue their goals without any hassle. Askari Mortgage Finance is a premium house financing product offered to customers for a period up to 25 years. Government’s “Mera Pakistan Mera Ghar – Housing Scheme” has also been launched to cater to the housing needs of low-income segment. Mastercard Credit Card Askari Bank offers a competitive suite of Classic, Gold, Platinum and Corporate MasterCard Credit Cards that provide superior services, travel privileges, exciting discounts, online payment facility along with reward points and transactional alerts through SMS as an enhanced security feature. The option for Flexible Credit Plans (FCP), Extended Payment Plan (EPP) and Balance Transfer is also available to customers at discounted mark-up rates. World Mastercard Credit Card Askari Bank pioneered Pakistan’s first ever “World MasterCard” in collaboration with MasterCard International. This credit card is specifically designed for customers seeking high-class service standards and travel privileges worldwide. Askari-PIA Co-Brand Credit Card Askari Bank & PIA join hands to launch one of the most promising travel Credit Card. Now our customers enjoy great travel benefits while travelling on Pakistan International Airline on Askari-PIA Co-Brand Credit Card. Unlock access to local & International departure lounges, Deals & Discounts, Accelerated Air Mile(s) earning and much more. Askari Union Pay Debit Card Askari Bank proudly introduces Pakistan’s first EMV & NFC enabled UnionPay Debit Card. Askari UnionPay Debit Card provides enhanced security with EMV and the convenience of NFC which enables to make quick payments directly from AKBL bank account. This card has the acceptance in more than 162 countries over millions of ATMs and merchants for retail and cash withdrawal transactions, and is ideal to carry while travelling abroad or domestically. Call Center Our Call Center provides a single point of contact to all callers and offers real-time information on products and services. This year the system has been upgraded to empower our customers by providing efficient self-service banking along with Contact Centre agent assistance round the clock. Automated Teller Machine (ATM) Askari Bank, as a member of 1-link, (Pakistan’s first payment system operator and service provider) shares network of over 16,000 ATMs, including 640 Askari Bank ATMs. This network provides ATM service in all major cities of Pakistan. Our fleet of ATMs include NFC enabled machines that allow the ability to draw funds with just a tap of the debit card and a pin. Small and Medium Enterprises (SME) Banking Askari Bank has been playing a significant role in the development of the SME sector by providing customers with the opportunity to access credit through strategically located branches across the country. The Bank also offers trade expertise and awareness on trade related activity through these access points, where specialized credit resources and empowered relationship management teams dedicatedly serve SMEs at the grass root level. Annual Report 2021 07
10. PRODUCTS & SERVICES In order to cater to the financial needs of SME segment, Askari Bank offers “Askari Smart Pack”, which includes the following products: • Askari Quick Finance • Askari Vendor’s Finance • Askari Business Solution • Askari Loan for Business Premises • Askari Lease Finance • Askari Loan for Fertilizer Dealers • Ask Fund Facility • Prime Minister’s Youth Entrepreneur Scheme Agriculture Banking Wide range of Products and services are being offered to timely and adequately meet the credit requirement of the agriculture and rural sector. Loans are being extended for crops, livestock, farm mechanization, irrigation & water harvesting, tunnel farming, construction of storage facilities, floriculture, poultry, fisheries, orchards, purchase of tractors, refrigerated trucks / pickups, value chains and small farmer loan schemes. Following is the list of products: Our customers enjoy the freedom to choose from a wide array of Shariah Compliant deposit products that offer flexible term deposit schemes, current accounts and savings accounts. Our Ahsan Munafa / Ahsan Munafa Corporate product is a chequing account that offers higher yields, calculated on a daily product basis. Askari Halal Savings Account is tailored to meet all business requirements of our customers and offers a host of valueadded services. Askari Islamic PakWatan Remittance account is being offered to potential remittance beneficiaries. Askari Halal Investment Accounts are Mudarabah based term deposit products that allow customers to invest their savings for different tenors ranging from 01 month to 07 years, and earn Halal returns on a periodic basis. Islamic Consumer Banking Products To provide customers with Shariah compliant option for consumer financing, following financing facilities are offered to customers; • Askari Ijarah Bis Sayyarah allows customers to get the car of their choice. • Askari Home Musharakah allows customers to purchase, build or renovate a house. • Askari Kissan Ever Green Finance • Askari Kissan Tractor Finance • Askari Kissan Farm Mechanization Finance • Askari Kissan Aabpashi Finance • Askari Kissan Transport Finance • Askari Kissan Livestock Development Finance • Askari Kissan Green House & Tunnel Finance Islamic Corporate Banking • Askari Kissan Farm Storage Finance. • Askari Kissan Gold Fish Finance. • Askari Kissan Murghban Finance. • Askari Kissan White Pearl Finance Our continuous efforts to provide a diversified range of Shariah Compliant, innovative financial products and solutions to corporate and commercial clients continue to win us new relationships. Following working capital and term facilities are provided; • Askari Kissan Samar Bahisht Finance •Murabaha • Askari Kissan Gulban Finance • Salam & Istisna • Running Musharakah • Finished Goods Financing • Diminishing Musharakah & Ijarah • SBP Refinance Facilities Islamic Banking Under the guidance of its Shariah Board and professional bankers, Askari Ikhlas Islamic Banking offers a diversified range of Shariah compliant products and services to its valued customers to fulfill their banking needs. Presently working with 101 dedicated Islamic banking branches (including 3 sub-branches) in 39 cities and towns spread across the country Askari Ikhlas Islamic has managed to increase its share in the banking Industry. 08 Islamic Deposit Products Askari Bank Limited • For housing finance at affordable rates, Government’s rental rate subsidy scheme is offered under Mera Pakistan Mera Ghar. • Shariah compliant solutions are offered to customers who have availed house finance facilities from conventional financial institutions, to transfer their facilities to Askari Ikhlas. We also provide Islamic solution to the customers who intend to avail Letter of Credits, Letter of Guarantee and Islamic Export Refinance facilities.
11. NOTICE OF THE 30TH ANNUAL GENERAL MEETING Notice is hereby given that the 30th Annual General Meeting (AGM) of the shareholders of Askari Bank Limited (“the Bank”) will be held on Thursday, March 24, 2022 at 10:00 am at Topi Rakh Complex (Galaxy Hall), Army Heritage Foundation, Ayub National Park, Jhelum Road, Rawalpindi and through Zoom to transact the following business: Ordinary Business: 1. To confirm the minutes of the 29th Annual General Meeting held on March 30, 2021. 2. To receive, consider and adopt the Annual Audited Financial Statements of the Bank for the year ended December 31, 2021 together with the Directors’ and Auditors’ Reports thereon. 3. To appoint statutory auditors of the Bank for the year ending December 31, 2022 and fix their remuneration. The present auditors of the Bank, KPMG Taseer Hadi & Co., Chartered Accountants, being eligible, have offered themselves for re-appointment and the Board of Directors has recommended their appointment in its meeting held on February 15, 2022. Special Business: 4. To consider and if thought fit, approve in terms of section 183(3) of the Companies Act, 2017, disposal of Askari Securities Limited (“ASL”) by Askari Bank Limited pursuant to the amalgamation of ASL with and into Foundation Securities (Private) Limited (“FSL”) and the consequent dissolution without winding up of ASL and to pass the ordinary resolution as proposed in the Statement of Material Facts. The Statement of Material Facts providing the information as required under Section 134 (3) of the Companies Act, 2017 is appended below. Any Other Business: 5. To consider any other business as may be placed before the meeting, with the permission of the Chair. By Order of the Board March 02, 2022 Rawalpindi Syed Ali Safdar Naqvi Company Secretary NOTES: Participation in AGM through electronic means In light of the continuing threats posed due to COVID-19 pandemic and to protect wellbeing of the Shareholders, the Securities & Exchange Commission of Pakistan (‘SECP’) vide its Circular No. SMD/SE/2(20)/2021/117 dated December 15, 2021 directed the listed companies to hold general meetings through video link, webinar, zooming etc. in addition to the requirements of holding physical meeting. Keeping in view of the above, please note that the Bank has made proper arrangements for the shareholders who will be participating in the 30th AGM proceedings through Zoom Link. For that purpose, the shareholders are requested to provide their Name, Folio/ CDS Account Number, Number of Share held, Mobile Numbers (active) and Email address in their names with subject “Registration for 30th AGM of AKBL” at ir@askaribank.com. pk. Zoom Link to join the AGM will be shared with only those shareholders from whom all required particulars, are received at the given email address at least 48 hours before the time of holding the AGM. The shareholders can also provide their comments and questions relating to agenda items of the AGM on email at ir@askaribank. com.pk. Annual Report 2021 09
12. NOTICE OF THE 30TH ANNUAL GENERAL MEETING 1 . 2. A member entitled to attend and vote at the meeting can appoint a proxy to attend and vote for him/her. No person shall act as a proxy, who is not a member of the Bank except that Government of Pakistan [GoP] or SBP or corporate entity may appoint a person who is not a member. 3. The instrument appointing a proxy should be signed by the member or his/her attorney duly authorized in writing. If the member is a corporate entity, certified true copy of the instrument authorizing the person to act as proxy shall be provided. 4. The Proxy Form, duly completed and signed, must be received at the Company Secretary Office, Askari Bank Limited, 4th Floor, NPT Building, F-8 Markaz, Islamabad at least 48 hours before the time of holding the meeting. 5. If a member appoints more than one proxy, and more than one instrument of proxy is deposited by a member, all such instruments shall be treated invalid. The proxy form shall be witnessed by two persons whose names, addresses and Computerized National Identity Card (CNIC) numbers shall be mentioned on the form. 6. 7. 10 The Share Transfer books of the Bank will remain closed from March 18, 2022 to March 24, 2022 (both days inclusive). Transfers received at the Bank’s Share Registrar Department, CDC Share Registrar Services Limited, Mezzanine Floor, South Tower, LSE Plaza, 19-Khayaban-e-Aiwan-e-Iqbal, Lahore and Share Transfer Office of the Bank at the close of the business hours on March 17, 2022 will be treated in time. Copy of the CNIC or passport of the beneficial owners shall be furnished with the proxy form. The proxy shall produce their original CNIC or original passport at the time of attending the meeting. In case of individual shareholder, original CNIC or original passport while for the CDC account holder or sub-account holder and for the person whose securities are in group account and their registration details are uploaded as per the regulations, his/her authentication would be made by showing his/her original CNIC or original Askari Bank Limited passport along with participant(s) ID Number and their account numbers. In case of corporate entity, certified true copy of the instrument authorizing the person to act as proxy shall be provided along with proxy form to the Bank. Special Notes to the Shareholders 8. Submission of Copies of CNIC (Mandatory) As per SECP directives the payment of dividend to the shareholders whose CNICs are not available with the Share Registrar are being withheld. All shareholders having physical shareholding are, therefore, advised to submit a photocopy of their valid CNICs to our Share Registrar. In case of nonreceipt of information, the Bank will be constrained to withhold payment of dividend to shareholders. Payment of Cash Dividend Electronically (e-Dividend) 9. Section 242 of Companies Act 2017, requires that in case of a listed company, any dividend payable in cash shall only be paid through electronic mode directly into the bank account (International Bank Account Number-IBAN) designated by the entitled shareholders. Provision of IBAN for cash dividend payments is mandatory and in order to comply with this regulatory requirement of direct credit of dividend amount in shareholder’s IBAN, shareholders are requested to provide relevant information to: 1. Their respective CDC Participant/CDC Investor Account Services (in case their shareholding is in Book Entry Form) OR 2. Share Registrar CDC Share Registrar Services Limited, Mezzanine Floor, South Tower, LSE Plaza, 19-Khayaban-e-Aiwan-eIqbal, Lahore (in case their shareholding is in Physical Form). 10. Transmission of Audited Financial Statements & Notices to Shareholders through email (Optional) or CD/DVD/USB Annual Audited Financial Statements of the Bank for the financial year ended December 31, 2021 have been placed on the Bank’s website i.e. www.askaribank.com.
13. In line with shareholders ’ approval accorded in 25th AGM of the Bank held on March 31, 2017, DVDs have been dispatched to all shareholders. In addition, hard copies of Annual Report 2021 have also been dispatched to Shareholders as per their demand. Share Registrar Services Limited, Mezzanine Floor, South Tower, LSE Plaza, 19-Khayaban-e-Aiwan-eIqbal, Lahore. 13. Change of Address / Particulars Shareholders are requested to immediately notify any change in their addresses to the Bank’s Shares Registrar, CDC Share Registrar Services Limited, Mezzanine Floor, South Tower, LSE Plaza, 19-Khayaban-e-Aiwan-e-Iqbal, Lahore. To facilitate the shareholders, a Form for Change of Particulars of Shareholders has been made available on the website of the Bank. 14. Zakat Declaration (CZ-50) Zakat will be deducted from the dividends at source at the rate of 2.5 % of the paid-up value of the share (Rs. 10/- each) and will be deposited within the prescribed period with the relevant authority. In case of claiming exemption, please submit your Zakat Declarations under Zakat and Ushr Ordinance, 1980 and Rule 4 of Zakat (Deduction and Refund) Rules, 1981, CZ-50 Form to the Share Registrar mentioning Askari Bank’s name and respective Folio and CDC Account Nos. _________________ Signature of Member 15. Unclaimed/Unpaid Certificates 12. Deposit of Physical Shares into Central Depository System Shareholders of the Bank are hereby informed that as per the record, there are many unclaimed/ uncollected / unpaid dividends and shares; details whereof are appearing on the Bank’s website www. askaribank.com. As per the provisions of section 244 of the Companies Act, 2017, any shares issued or dividend declared by the Bank which have remained unclaimed/unpaid for a period of three years from the date on which it was due and payable, are required to be deposited with SECP to the credit of Federal Government after issuance of notices to the shareholders to file their claim. Shareholders are requested to ensure that their claims for unclaimed dividend and shares are lodged promptly. In case, no claim is lodged, the Bank shall proceed to deposit the unclaimed/ unpaid amount and shares with the Federal Government pursuant to the provision of Section 244(2) of Companies Act, 2017. 11. Consent for Video Conference Facility Pursuant to Section 132 (2) of the Companies Act 2017, shareholders may avail video conference facility to attend 30th AGM provided the Bank receives consent from the shareholders holding aggregate 10% or more shareholding at least seven days prior to the date of the meeting. Please fill the following form and submit its signed copy to the Company Secretary, Askari Bank Limited, 4th Floor, NPT Building, F-8 Markaz, Islamabad or email signed form at ir@askaribank.com.pk: I/We, ---------------- of -------------------- being a Member of Askari Bank Limited, holder of --------Ordinary Share(s) as per Registered Folio No/CDC Sub-Account No.----------- hereby opt for video conference facility at -------------------. As per Section 72 of the Companies Act, 2017, all listed Companies are required to replace shares issued by them in physical form to book-entry form within four years of the promulgation of the Act. Accordingly, all shareholders of the Bank having physical folios/share certificates are requested to convert their shares into book-entry form at the earliest. Maintaining shares in book-entry form will make the process of share handling more efficient and risk-free. Further, this will facilitate shareholders in safe custody of shares with the CDC, instant credit of entitlements (bonus shares and rights share), eliminate the risk of loss; and readily available for sale/purchase in the open market etc. The shareholders may contact the Share Registrar of the Bank at address, CDC Dividend and Share Annual Report 2021 11
14. NOTICE OF THE 30TH ANNUAL GENERAL MEETING 16 . Postal Ballot/E-voting In accordance with the Companies (Postal Ballot) Regulations, 2018, and Section 143 and 144 of the Companies Act 2017, shareholders will be allowed to exercise their right of vote through postal ballot i.e., by post or e-voting, in the manner and subject to the conditions contained in the aforesaid regulations. The following statement sets out the material facts pertaining to the special business to be transacted in the 30th Annual General Meeting of the Bank to be held on Thursday, March 24, 2022: Agenda Item No. 4 The Bank owns one hundred percent (100%) of the issued share capital of ASL, a public unlisted company, and pursuant to the amalgamation of ASL with and into FSL, (i) the entire undertaking of ASL shall transfer to and vest in FSL, inclusive of all properties, assets, rights, liabilities, trademarks, patents, and obligations of ASL, (ii) ordinary shares of FSL shall be issued to Askari Bank Limited, and (iii) ASL shall dissolve, without winding up. The amalgamation of ASL with and into FSL has been approved by the respective Boards of ASL and FSL on December 29, 2021 and the Bank’s Board on January 10, 2022. The Board of Directors, AKBL (the Board), in its meeting, held on October 21, 2021 authorized to carry out due diligence and valuations for amalgamation of ASL with and into FSL subject to obtaining all necessary regulatory and corporate approvals. After Board’s approvals on October 21, 2021 and January 10, 2022, necessary disclosures to that effect were made to PSX/ SBP/ SECP on October 21, 2021 and January 11, 2022. 12 Statement under Section 134(3) of the Companies Act, 2017 in respect of Special Business This is now to inform that the Bank, ASL and FSL are in receipt of due diligence and valuation reports which were independently carried out by EY Ford Rhodes, Chartered Accountants. These reports along with Scheme of Arrangement for Askari Bank Limited amalgamation (copy attached) and Information Memorandum were presented before respective Boards of ASL, FSL and AKBL and were duly considered and approved. The amalgamation of ASL with and into FSL is being presented to the Shareholders of the Bank for their approval in terms of section 183(3) of the Companies Act, 2017 by passing the following resolutions as Ordinary Resolutions, if thought fit: 1. RESOLVED THAT in terms of section 183(3) of the Companies Act, 2017, subject to necessary approvals of the Regulatory Bodies, the disposal of ASL by the Bank pursuant to the amalgamation of ASL with and into FSL in terms of the Scheme of Arrangement dated 29 December 2021 (“Scheme”), as such Scheme may be amended from time to time in accordance with the terms of the Scheme, between ASL and its members and FSL and its members, be and is hereby approved. 2. FURTHER RESOLVED THAT the President & CE, or his delegates (the “Authorized Representatives” jointly and severally) of the Bank be and are hereby authorized to carry out, take and complete all actions required to be carried out, taken and completed for the purposes of the Amalgamation. FURTHER RESOLVED THAT all prior actions carried out, taken and completed by the Authorized Persons on behalf of Askari bank Limited in relation to the Amalgamation are hereby confirmed, ratified, and adopted by Askari Bank Limited in full. FURTHER RESOLVED THAT the Bank be and is hereby also authorized to make Disclosure of Material Information, if required, and seek necessary approvals from Regulatory Bodies.” The Directors of the Bank have no personal interest, directly or indirectly, in the above-mentioned special business that would require further disclosure.
15. PROFILE OF DIRECTORS Mr . Waqar Ahmed Malik (Non-Executive Director & Chairman) Mr. Waqar Ahmed Malik’s corporate and business experience spans over 30 years across three continents. Mr. Malik is a fellow of the Institute of Chartered Accountants in England and Wales and is also an alumnus of the Harvard Business School and INSEAD. Earlier, his career with The ICI Plc Group based in the UK spanned over 27 years and then later with Akzo Nobel N.V. based in The Netherlands. He has also been the Chief Executive Officer of ICI Pakistan Limited and the Chief Executive Officer and Chairman of Lotte Pakistan Limited (formerly Pakistan PTA Limited). During his career with ICI and Akzo Nobel, he worked in Europe and Americas’ in Corporate Finance and Strategy. He participates actively in social and philanthropic activities through “I – Care” Foundation, as a Trustee, where he contributes to improve the quality of life of underprivileged by enhancing the level of philanthropic support. A trustee of Duke of Edinburgh Trust Pakistan, he was awarded Prince of Wales Medal as a Trustee of the Prince of Wales Pakistan Recovery for the Flood Victims in 2010. Term of Office Joined the Board of Directors on April 22, 2020. Status Mr. Waqar Ahmed Malik joined Fauji Foundation as Managing Director and Chief Executive Officer on 9th April 2020. Non-Executive Director & Chairman He is also Chairman of Pakistan Oxygen Limited (formally Linde Pakistan, a subsidiary of Linde AG) acquired by Adira Capital Holdings (Private) that he co-founded. None Mr Waqar is a non-executive Member of the Board of JAZZ Pakistan which is a subsidiary of Veon Limited, as well as nonexecutive Director of Rafhan Maize. He is Managing Director and Chief Executive Officer of Fauji Foundation and is Chairman Board of Directors of following companies: Earlier, Mr. Waqar also served on the following prestigious boards:•Engro Corporation Limited – Director (Non-Executive & Independent) • Standard Chartered Bank Pakistan Limited – Director (NonExecutive & Independent) He played an instrumental role in development of Pakistan’s Regulatory System as well as for the advocacy to undertake economic reforms. Earlier he served as:• Director – State Bank of Pakistan • President – Overseas Chamber of Commerce & Industry (OICCI) • President – Management Association of Pakistan (MAP) • Director – Pakistan Business Council (PBC) Membership of Board Committees Other Directorships • • • • • • • • • • • • • • • • • Mari Petroleum Co Ltd (MPCL) Fauji Fertilizer Co Ltd (FFC) Fauji Fertilizer Bin Qasim Ltd (FFBL) Fauji Cement Co Ltd (FCCL) Fauji Kabirwala Power Company Ltd (FKPCL) Foundation Power Company Daharki Ltd (FPCDL) Daharki Power Holding Co Ltd (DPHL) Fauji Akbar Portia Marine Terminal Ltd (FAP) Foundation Wind Energy-I Limited FWEL-I) Foundation Wind Energy-II Ltd FWEL-II) FFC Energy Ltd (FFCEL) Fauji Fresh n Freeze Ltd (FFFL) FFBL Power Company Ltd (FFBL PCL) Fauji Oil Terminal & Distribution Co Ltd (FOTCO) Fauji Trans Terminal Ltd (FTTL) Askari Cement Ltd (ACL) Fauji Infravest Foods Ltd (FIFL) Mr. Waqar Malik is a member of the visiting faculty of Pakistan Institute of Corporate Governance, Former Member of Board of Governors of Lahore University of Management Science (LUMS) and Former Member of Board of Indus Valley School of Arts. Annual Report 2021 13
16. PROFILE OF DIRECTORS Mr . Sarfaraz Ahmed Rehman (Non-Executive Director) Sarfaraz, a chartered accountant by qualification, has contributed management expertise to several multinational companies such as Unilever, SB (GSK), Jardine Matheson / Olayan JV and PepsiCo during his varied career. Mr. Sarfaraz Ahmed Rehman has been appointed as Managing Director & Chief Executive Officer of FFC, FFCEL and FFFL w.e.f October 16, 2021. Term of Office In 2005, Sarfaraz established Engro Foods as its CEO. The company grew from a green-field to become the leading liquid dairy company in Pakistan. Engro Foods became the only Pakistani company to receive the ‘G20 Top 15 Company’ award. In 2012, he took a sabbatical from Engro Foods to establish the Karachi School for Business and Leadership. Sarfaraz rejoined Engro Foods as CEO in 2013, where he remained till 2015. Since Oct 2015, he has been involved in consultancy projects, among others with ICI, IBL, JSPE, Shan Foods, Al-Shaheer (Meat One), Soya Supreme, Burque Corp, CCL and ITL. Sarfaraz was contracted to Grant Thornton for 2016-17 as an executive coach during a culture change project at UBL. He conducts a well-established coaching / mentoring role, with business executives and university graduates. Sarfaraz has coached for Careem, Gatron-Novatex, Engro, ICI, Descon, PPL, UBL and City School. Sarfaraz was Chairman of the Broadcasters / Advertisers Council 2015-18 (joint body controlling advertising in Pakistan). Further, he was the Chairman of the 1st Effie Awards in Pakistan, in 2019. He is also on the Board of MAP and Patient Aid Foundation. Sarfaraz joined Fauji Group in June 2020 as MD & CEO of Fauji Fertilizer Bin Qasim Limited (FFBL) till October 2021. During his short stay in FFBL, his innovations and effective business strategy led to turnaround of FFBL making it a profitable entity. Additionally, Sarfaraz speaks at various forums. He has given motivational talks at Laye’s, Mondelez, Nutrico, RB, Engro, Octara, ICI, Shell, MAP etc. At universities, colleges, schools and on media occasions he holds climate change talks / sessions to create awareness. Sarfaraz is deeply interested in playing his part in giving back to society and has worked on an online interactive education model for mass education, to resolve the issue of literacy in Pakistan over the next decade. In the past he was associated with Shaukat Khanum Hospital as a Board of Governor and with WWF as a Director. He is also associated with Hisaar Foundation and its work on water / environmental issues in Pakistan. 14 Askari Bank Limited Joined the Board of Directors on June 10, 2020. Status Non-Executive Director Membership of Board Committees Human Resource & Remuneration Committee Other Directorships • • • • • • • • • • • • • • • • • Fauji Fertilizer Company Limited Fauji Fertilizer Bin Qasim Limited Fauji Foods Limited Uniliver Pakistan Foods Limited Fauji Fresh n Freeze Limited FFC Energy Limited OLIVE Technical Services (Privet) Limited Foundation Wind Energy - I Ltd Foundation Wind Energy - II Ltd Thar Energy Limited Fauji Meat Limited FFBL Power Company Limited Pakistan Maroc Phosphore SA Hisaar Foundation Patients Aid Foundation International Packaging Films Limited (IPAK) National Disaster & Risk Management Fund (NDRMF) • International Fertilizer Association (IFA)
17. Arif ur Rehman (Non-Executive Director) In July 2016, Mr. Arif ur Rehman was appointed Chief Manufacturing Officer, based at the Head Office in Lahore with responsibility for all aspects of manufacturing for the Fatima Group’s three Fertilizer Manufacturing facilities, Fatima Fertilizers, Sadiqabad; Pak Arab Fertilizer Company, Multan and Fatima Fertilizers, Lahore (Ex Dawood Hercules). He had responsibility for Operations, Costs, Budgets and People aspects for all Fertilizers. In addition he was also responsible for the Supply Chain Function for the entire group where he controls the budget of about USD 200 Million per year, growth, sustainability and strategy of the FG; Fertilizer Business. In 2007 he joined the Fatima Group as Project Director and led the USD 750 Million Project from ground breaking till its commissioning. This was a green field project comprising of Ammonia, Urea, NP, CAN, Nitric Acid, Utilities and related facilities. One of the salient features of the job was that it was a self-managed EPC Project. Mr. Arif was engaged with dozens of international contractors directly and completed the project successfully in 2011. After the commissioning of the project, he was appointed its Director Operations. In that role he brought the site to its full potential by a series of revamps that included the plants and organizational and systems improvement. As a result the production increased from 0.8 to 1,475 Million tons per year and the bottom line improved from -PKR 2.0 Billion to +10 Billion. improvement of the Ammonia Plant. For that project he remained in USA for about a year as Ammonia Plant Lead. Term of Office Joined the Board of Directors on October 16, 2021. Status Non-Executive Director Other Directorships He also holds directorship on the Board of following companies: • Fauji Fertilizer Bin Qasim Limited • FFBL Power Company Limited • Fauji Meat Limited • Fauji Foods Limited • Pakistan Maroc Phosphore S.A. In 1996, he joined ICI Pakistan’s PTA Business, which was the first and is still the only PTA plant in Pakistan with new technology. He worked as the commissioning leader for the most complex, Oxidation Plant. Later on he led all the remaining sections of the PTA plant (Purification and Utilities) and took over as the first local Production Manager for the PTA Business in 2001. He also worked as Technical Services & DBN Manager and was appointed as Site Operations Manager in 2005, where he was responsible for Operations, Maintenance, Inspection and Materials Management. Arif started his professional career from Fauji Fertilizer Co (FFC) where he initially worked as Process Engineer in the Ammonia, Urea and Utilities plants. Later on he worked as Process Engineering In-charge, Operations Engineer-Ammonia and Ammonia DBN Commissioning Engineer. In mid-1994, his services were transferred to FJFC (now FFBL) project team. He worked at FJFC for about 3 years and was a part of the multidisciplinary team that developed the FJFC Project from inception to firm order placement. He led the engineering and Annual Report 2021 15
18. PROFILE OF DIRECTORS Dr . Nadeem Inayat (Non-Executive Director) Dr. Nadeem Inayat holds a Doctorate in Economics and has over 37 years of diversified experience in the corporate sector. He has vast experience in corporate governance, policy formulation, project appraisal, implementation, monitoring & evaluation, restructuring, mergers and acquisitions. He also has conducted various academic courses on Economics, International Trade and Finance at reputable institutions of higher education in Pakistan. He is also a member of Pakistan Institute of Development Economics (PIDE). Term of Office Joined the Board of Directors on June 20, 2013. Status Non-Executive Director Membership of Board Committees Audit Committee Human Resource & Remuneration Committee Risk Management Committee Information Technology Committee 16 Askari Bank Limited Other Directorships • • • • • • • • • • • • • • • • • • • Fauji Fertilizer Company Ltd Fauji Fertilizer Bin Qasim Ltd Mari Petroleum Company Ltd Fauji Foods Ltd Hub Power Company Ltd Fauji Cement Company Ltd (FCCL) Pakistan Maroc Phosphore, S.A Morocco Fauji Oil Terminal & Distribution Company Ltd Fauji Trans Terminal Ltd FFBL Power Company Limited (FPCL) Fauji Meat Limited (FML) Fauji Akbar Portia Marine Terminals Ltd (FAP) Fauji Infraavest Foods Ltd (FIFL) Fauji Kabirwala Power Company Ltd (FKPCL) Foundation Power Company Daharki Ltd (FPCDL) Daharki Power Holding Ltd (DPHA) Fauji Fresh n Freeze Ltd (FFFL) Askari Cement Ltd (ACL) Foundation Wind Energy Ltd I &II (FWEL I&II)
19. Syed Bakhtiyar Kazmi (Non-Executive Director) Mr. Kazmi is a fellow chartered accountant with over 35 years of experience in a diverse range of sectorial and functional strata within national and regional economies. The key areas of his specialization are fiscal policy and macroeconomic research, greenfield and brownfield projects, strategic collaborations, mergers and acquisitions, outliers in accounting and finance, strategic level audit and assurance and tax reforms and strategic level advisory. Mr. Kazmi served KPMG for 35 years; last 25 years as a partner. As a partner he interacted with the leadership in almost every industry, understanding their vision, their insights, and most importantly on their business strategies. His rigorous exposure to a diverse range of sectors and projects, enabled him to conceive and culminate strategic value additions for his clients, pertaining to public and private sector organizations. He successfully implemented a comprehensive service delivery framework that ensures quality assured service provision to KPMG’s clients, and a cross-functional integration with the advisory and taxation services that allowed a robust and comprehensive service delivery package to the clients. As an auditor and an advisor, Mr. Kazmi successfully delivered his promise of providing best-inclass and integrity driven services. With his career progression, he branched into macroeconomic research with a focus on contributing towards fiscal and regulatory policies of Pakistan. He almost single-handedly established advisory practice of KPMG in Islamabad about 2 decades ago which today arguably is the go to advisory in Islamabad. This initiative covered financial projections, feasibilities, information memorandums, internal audit assessments, HR assessments, manuals for processes and controls, valuations, and development advisory which included an assessment of the Punjab and Sindh governments. Term of Office Joined the Board of Directors on November 18, 2020. Status Non-Executive Director Membership of Board Committees Audit Committee Other Directorships • • • • • • • • • • • • • • • • • • • • Fauji Fertilizer Company Limited Fauji Cement Company Limited Mari Petroleum Company Limited Fauji Fertilizer Bin Qasim Limited Fauji Foods Limited Fauji Infravest Foods Limited Fauji Kabirwala Power Company Limited Fauji Oil Terminal & Distribution Company Limited Foundation Solar Energy Limited Fauji Akbar Portia Marine Terminal Limited Askari Cement Limited Foundation Power Company Daharki Limited Dhaharki Power Holding Company Limited Fauji Trans Terminal Limited Foundation Wind Energy Limited-1 Foundation Wind Energy Limited-1 FFC Energy Limited Olive Technical Services Limited Fauji Fresh n Freeze Ltd Fauji Meat Ltd Mr. Kazmi has served on a number of diverse forums / Boards in the Private Sector, Public Sector & Civil Society Organization and regularly publishes in reputable dailies. Annual Report 2021 17
20. PROFILE OF DIRECTORS Mr . Manzoor Ahmed (Non-Executive Director) Mr. Manzoor Ahmed is Chief Operating Officer (COO) of National Investment Trust Limited (NIT). As COO, he has been successfully managing the operations and investment portfolio worth over Rs. 150 billion. He has experience of over 31 years of the Mutual Fund industry and has been placed at many key positions within NIT that includes capital market operations, investment management, research and liaising with the regulatory authorities. He has also served NIT as its Managing Director (Acting) twice from May 2013 to May 2014 and September 2017 to February 2019. He is M.B.A. and also holds D.A.I.B.P. He has also been the Council Member of The Institute of Bankers Pakistan. Presently, he is pursuing Chartered Financial Analyst (CFA) level III. Term of Office Mr. Manzoor Ahmed has vast experience of serving on the Boards of various top ranking companies of Pakistan belonging to the diverse sectors of economy. • • • • Mr. Ahmed has also attended various training courses organized by institutions of international repute like London Business School (LBS) UK, Institute of Directors, London and Financial Markets World, New York (USA). Currently, he represents NIT as Nominee Director on the Board of Directors of many leading national and multinational companies of Pakistan. Mr. Ahmed is also a Certified Director from Pakistan Institute of Corporate Governance. Mr. Manzoor Ahmed is also member of the Defence Authority Country and Golf Club - Karachi. 18 Askari Bank Limited Joined the Board of Directors on May 20, 2013. Status Non-Executive Director Membership of Board Committees Risk Management Committee - Chairman Audit Committee Human Resource & Remuneration Committee Other Directorships Hub Power Company Limited General Tyre & Rubber Company Limited Soneri Bank Limited Sui Northern Gas Pipelines Limited
21. Mr . Mohammad Aftab Manzoor (Independent Director) A senior banker with over 36 years of banking experience of which 19 years in leadership positions including 10 years as the CEO of 2 “big five” banks in Pakistan. He has an MBA Finance degree and has attended training seminars/certifications at Harvard Business School, MIT and IFC. His most recent position was at Soneri Bank Ltd. where he served as CEO for 9 years. Prior to that he was CEO at Allied Bank Ltd. for 3 years preceded by a 7 years stint as CEO of MCB Bank Ltd. During his tenure at MCB, the bank received the prestigious EuroMoney award for 6 years in a row as best domestic bank of Pakistan and secured the highest Moody’s rating in the country. He started his banking career with Citibank where he worked as Regional Head for Corporate Banking and subsequently as Business Head for the Product Group. Term of Office Joined the Board of Directors on April 22, 2020. Status Independent Director Membership of Board Committees Audit Committee - Chairman Information Technology Committee - Chairman Other Directorships • HSB Pak Ltd • Security Papers Ltd (SPL) He has twice served as Chairman Pakistan Banks Association (PBA) working closely with State Bank of Pakistan on regulatory and other banking industry related issues. Earlier he has served on the following Boards: • • • • • • • • • • • • • • • MCB Bank Ltd Allied Bank Ltd Habib Allied Bank UK Allied Asset Management Ltd Soneri Bank Ltd SME Bank Ltd Khushhali Bank Ltd First Women Bank Ltd KASB Bank Ltd Trading Corporation of Pakistan (TCP) Pakistan Institute of Corporate Governance (PICG) Lahore University of Management Sciences (LUMS) Institute of Bankers of Pakistan (IBP) Pakistan Banks Association (PBA) Competitiveness Support Fund Annual Report 2021 19
22. PROFILE OF DIRECTORS Mr . Mushtaq Malik (Independent Director) Mr. Mushtaq Malik holds Master’s degrees in Economics and in Business Administration from Boston University, USA with specialization in International Business Management and Finance. He has also done Executive course in Project Evaluation and Management from Harvard University and Marketing Management Diploma from Delft University of Netherland. Term of Office He has also attended courses on Microeconomic stability and Balance of Payment Management arranged by IMF at Washington DC and Project Planning, Implementation and Monitoring in Manila. He enjoys excellent working relations with all the political as well as bureaucratic elite of Pakistan and has worked at the top most positions in some of the important public sector organizations especially Ministry of Finance. He headed the Board of Investment (BOI) as a Federal Secretary and Pakistan Electronic Media Regulatory Authority (PEMRA) as Chairman. Also has been representing Pakistan at various international forums and has been the Economic Minister and Financial Advisor in the Embassy of Pakistan at Washington, DC. Membership of Board Committees He was on the Board of HBL and ECO bank for 5 years and 2 years, respectively and has served for 15 years in the Government of Punjab in various positions such as DG Local Government, Director of Industries and Mineral Development, Secretary Excise and Taxation, Secretary Environment Protection Development, Secretary Population Welfare and MD Punjab Mineral Development. Presently he is the advisor to MAS Group of Companies Ltd, Lahore, Byco Petroleum Pakistan Ltd, EPGL, FDH & SPARS Ltd. 20 Askari Bank Limited Joined the Board of Directors on March 31, 2017. Status Independent Director Risk Management Committee Information Technology Committee Other Directorships • M M Management Consultants (Pvt) Ltd • HinoPak Motors Limited • Sindh Insurance • Awan Foundation of Pakistan (Patron-in-Chief)
23. Ms . Zoya Mohsin Nathani (Independent Director) Ms. Zoya Mohsin Nathani is a senior banker with two decades of broad based experience in corporate banking relationship management, cash & trade sales, corporate finance, syndications, structured trade finance, SME Banking, Consumer Banking and Credit Risk Management. Ms. Nathani completed her Masters in Business Administration from IBA Karachi and holds a MSc degree in Finance and Accounting from London School of Economics. She has held various senior level positions in International and Local banks such as Director and Head of Global Corporates Pakistan, Standard Chartered Bank, Head of Corporate and Commercial Banking, Pakistan, JS Bank Ltd (Formerly American Express Bank), Director Capitas Group International and Head of Strategy Planning and SME, Burj Bank Limited. Term of Office Joined the Board of Directors on April 22, 2020. Status Independent Director Membership of Board Committees Human Resource & Remuneration Committee - Chairperson Risk Management Committee Other Directorships • MNZ Ltd Annual Report 2021 21
24. PROFILE OF DIRECTORS Raja Muhammad Abbas (Independent Director) Mr. Abbas brings with him rich experience in Governance, Public Administration, Personnel Management and Financial Management. He holds a Bachelor degree from the University of Karachi. He joined Pakistan Navy in June 71 and after completion of training got commissioned in 1973. He got inducted into District Management Group in March 1980. During his 34 years long span of illustrious public service, he has worked as Deputy Commissioner of District Jhelum, Gujranwala and Faisalabad where his role included Administration of Criminal Justice, Civil and Revenue legal matters and monitoring of development projects. He also held senior assignments at provincial level, such as Provincial Secretaries of Labor, Transport and Industries in the Government of Sindh, besides being Secretary Social Welfare, Women Development with the Government of the Punjab. Additionally, he has worked as Director General Lahore Development Authority as well as Director General Parks and Horticulture Authority Government of the Punjab. Mr. Abbas was elevated to the highest positions as Federal Secretary Ministry of Housing and Works, Managing Director Pakistan Housing Authority, Chief Secretary Government of Sindh, Secretary Board of Investment and finally before retirement as Secretary to the Ministry of Interior, where he dealt extensively with Financial and Administrative matters. He has been Chairman of the Board of Directors of Sindh Bank. 22 Askari Bank Limited Term of Office Joined the Board of Directors on April 22, 2020. Status Independent Director Membership of Board Committees Audit Committee Information Technology Committee Other Directorships • Sindh Insurance Limited • M M Management Consultants (Pvt) Ltd.
25. Mr . Atif R. Bokhari (President & Chief Executive) Mr. Bokhari is a career banker with 32 years of experience in domestic and international banking. He started his banking career in 1985 with Bank of America, where he handled diverse assignments over 15 years. Subsequent to leaving Bank of America in July 2000, Mr. Bokhari joined Habib Bank Limited where he was Head of Corporate and Investment Banking. In May 2004, Mr. Bokhari took charge of UBL as President and CE and remained in this position until June 2014. During this ten-year period, UBL ventured into new diversified business and revenue streams namely consumer financing, e-commerce, branchless banking, asset management and general insurance. UBL became the second largest private commercial bank in Pakistan with a network of over 1300 branches including 18 branches in 7 countries. Mr. Bokhari was also the Chairman of UBL Tanzania, UBL AG Zurich and Director of UBL UK. Mr. Bokhari had a two-year stint ending in December 2016 as President and CE of NIB Bank (Wholly owned subsidiary of Fullerton Financial Holdings - Temasek, Singapore). Term of Office Joined as President & Chief Executive of the Bank on August 23, 2021. Status President & Chief Executive Membership of Board Committees Risk Management Committee Information Technology Committee   Other Directorships • Board of Governors Shaukat Khanum Memorial Trust • Board of Governors Patients’ Aid Foundation • Board of Governors Kidney Centre Mr. Bokhari has also served as Minister of State & Chairman Board of Investment (BOI), Prime Minister Office, Pakistan, from March 2020 to June 2021. Mr. Bokhari has been actively involved with private sector programs for health and development of education in Pakistan. He was founding Director of the Karachi School for Business and Leadership. Mr. Bokhari has also served as Director State Bank of Pakistan (SBP) Board & Member Monetary Policy Committee. He also serves on the Board of Governors of Shaukat Khan Memorial Trust (SKMT), Patients’ Aid Foundation and Kidney Center. Annual Report 2021 23
26. BOARD COMMITTEES COMPOSITION AND BRIEF TERMS OF REFERENCE Board Audit Committee (BAC) BAC oversees the integrity and effectiveness of the financial reporting process as well as of the financial statements with focus on compliance of accounting and reporting standards. BAC assists the Board of Directors by providing an independent review of the effectiveness of the financial reporting process, corporate governance standards, internal control systems, transparency culture, compliance with legal and regulatory requirements, policy and procedural framework and cost efficiencies. BAC also maintains an oversight on the adherence of management and employees to Bank’s control framework and code of conduct. Board Human Resource & Remuneration Committee (BHR&RC) The primary responsibility of the BHR&RC is to have an effective oversight on the Bank’s human resource policies and procedures. The Committee reviews and provides recommendations on the human resource strategies, compensation and benefit schemes and related issues of strategic importance that affects the Bank’s ability to attract, develop and retain talent. The Committee is also responsible to devise a mechanism for identification of employees in the categories of ‘risk takers’ and ‘risk controllers’ including development of a remuneration structure for them in line with regulatory guidance. Board Risk Management Committee (BRMC) The purpose of the BRMC is to provide oversight of risk management and compliance risk management functions including risk management policies, procedures and practices relating to overall enterprise risk management as well as the management of credit, financial, liquidity, market, operational and other types of risk faced by the Bank. BRMC regularly reviews risk management performance relative to risk appetite, risk rating models and other tools to assess and monitor risk exposures and management’s view on the acceptable and appropriate levels for such risk exposures. The Committee also regularly reviews overall performance of Special Asset Management function managing the infected portfolio. Similarly, it also regularly reviews compliance function performance in order to assess the effectiveness of controls for combating the Money Laundering, Terrorist Financing, Proliferation Financing and Sanctions Risks. Board Information Technology Committee (BITC) BITC is responsible to advise and report to the Board of Directors about status of technology and digital initiatives of the Bank. BITC reviews and recommends information technology governance framework, information technology policies, information technology and digital strategy of the Bank. The Committee oversees the progress of the information technology and digital initiatives and ensures that risk management tools and strategies are designed and implemented to achieve resilience against all type of cyber threats along with assessment of Bank’s ability to effectively respond to wide-scale technology related disruptions. 24 Askari Bank Limited
27. CHAIRMAN ’S REVIEW Dear Shareholders I am pleased to present my 2nd review report as Chairman of the Board of Directors of Askari Bank. At the outset, I extend my welcome to our new President & CE, Mr. Atif R. Bokhari on to the Board. I am confident that his rich experience will lead Askari Bank’s transformation as per the recalibrated vision and mission statements. The Board continues to provide leadership and strategic direction through well established Board procedures and strategic planning processes that facilitate structured engagement with key management personnel of the Bank without indulging in day to day management. Diversity, skills and experience of my fellow Directors ensures good governance and sufficiency of debate, deliberation on the matters placed before the Board, paving the way for successful outcomes on strategic goals. An effective policy framework supports and enables business performance while ensuring compliance and controls, incorporating additional safeguards where deemed necessary. In my role as Chairman, I continue to ensure that the Board is prioritizing and effectively setting the tasks to deliver strategic direction of the Bank. The Board is assisted by four (04) Board Committees with oversight responsibility for certain functions warranting greater attention. During the year, the Board Committees increased the rigor of oversight to ensure that controls remain effective under the new normal and that key risks are identified and managed in line with the Bank’s appetite as pandemic exacerbated existing risks and spawned new threats. An effective and formal mechanism is in place for critical evaluation of the Board, its committees and individual directors for continuous improvement of our own processes and the adoption of best governance practices aligned with changing requirements and standards. The Bank’s transformative journey gained further traction with the completion of critical projects for navigating through 2021 and beyond; reorganization of operating model, reset business strategies, greater alignment of our human capital, upskilling our people and improved group synergies, will reshape our future and add value to the franchise. The holistic approach to performance delivery is embedded in Askari Bank’s corporate objectives and business operations. As a responsible financial institution, the Bank will continue to play its role for financial inclusion, access to finance and markets, and facilitating wealth creation. Identifying and pursuing funding for projects of socio-economic progress remains a key priority, particularly those driven by Government initiatives. The Bank adopts a progressive view, acknowledging wider responsibilities to multiple stakeholders and remains committed to sustainable value creation. On behalf of the Sponsors, I take this opportunity to convey my sincere gratitude to our Customers for placing their continued trust and patronage of Askari brand. I am thankful to the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan and other regulatory bodies for their continued support, to my Board colleagues for their wisdom and valuable guidance in setting the strategic direction of the Bank as a future ready organization. Lastly, I am thankful to the staff and leadership of the Askari team whose talents, unreserved effort and commitment propels the Bank to greater heights. Waqar Ahmed Malik Chairman, Board of Directors February 15, 2022 Rawalpindi Annual Report 2021 25
28. DIRECTORS ’ REPORT TO THE SHAREHOLDERS The Directors present the 30th Annual Report of Askari Bank Limited along with the audited unconsolidated and consolidated financial statements of the Bank and Auditors’ reports thereon, for the year ended December 31, 2021. The Board welcomes Mr. Atif R. Bokhari who joined the Bank as new President & CE in August, 2021. Mr. Bokhari is a seasoned banker and brings with him diversified and extensive experience of leading and managing domestic and international banks. The Board is confident that under his leadership Askari Bank will transform as a future ready financial service provider in the country. The Board also takes this opportunity to place on record our appreciation for the services rendered by Mr. Abid Sattar, the outgoing President & CE. Economy Pakistan’s economy gained further traction and growth is better than earlier estimates driven by accommodative monetary and fiscal policies. GDP growth rebounded to 3.94 percent (rebased 5.37 percent) mainly achieved through a turnaround in large scale manufacturing and expansion in services sector. Agriculture maintained its contribution as the decline in cotton was compensated by high growth in food crops. The successful management of the pandemic, various measures and incentives for businesses and accelerated vaccination drive allowed continued economic activity thereby mitigating the risk of covid induced recession. Though supply-driven volatility in food prices and rising global commodity prices contributed to headline inflation rising to 12.3 percent year on year, in December 2021. The regulatory measures introduced by the SBP to counter inflationary pressure, and to ensure sustained growth include; a cumulative 275 basis point increase in policy rate to 9.75 percent, higher cash reserve requirement and regulatory tightening of consumer finance. The expectation of energy tariff hike, higher commodity prices and removal of tax exemptions in the recent Finance (Supplementary) Act will keep inflation in check in the near-term, though a moderate decline is likely as administered price increases dissipate and the impact of demand-moderating policies materialize. Pakistan’s external account position showed significant improvement during first quarter of 2021. Current account remained in surplus with the surge in remittances, support from deferred payments on external debt, curtailment in international travel and lower oil prices. However, later part of the year witnessed a shift as imports increased by 66 percent year on year, to USD 40.6 billion. Energy 26 Askari Bank Limited and vaccine imports accounted for more than half of the rise. Exports grew by 15 percent year on year while remittances increased by 13 percent. Resultantly, current account deficit surged to USD 9.0 billion during first half of the current fiscal. Going forward, current account projection remains subject to the trends of commodity prices and outcome of the recent measures initiated by the Government aiming at fiscal consolidation. The resumption of IMF-Extended Fund Facility (EFF) with the successful completion of the 6th Review under the program is a positive development for the near-term economic outlook. The implementation of revenues measures; GST and personal income, simplifying and broadening of tax systems, removal of preferential tax treatment and exemptions will improve fiscal framework while prudent government spending and adoption of SBP Amendment Act will further discipline financial and debt management. The successful completion of the Review and combined efforts on the monetary and fiscal side also entails unlocking funding from bilateral and multilateral partners. Looking ahead, the pace of economic recovery is moderating as reflected by high frequency demand indicators e.g. cement dispatches, sale of petroleum products, tractors and commercial vehicles. Decelerated LSM production and easing of imports and tax revenue growth also reflect similar trend. Economic growth for current fiscal is expected in the range of 4 to 5 percent which is also aligned with IMF’s recent projections. Risks to the economic outlook include, on the domestic front, the current growing Omicron wave and, on the external front, the possibility of faster than anticipated tightening by the US Federal Reserve, geopolitical events in Europe and deteriorating security situation in the region. These may delay the critical reforms and have implications for the economic and financial conditions. Bank’s Performance Askari Bank posted an operating profit (profit before provisions and taxation) of Rs. 20.59 billion for the current year, marginally higher than Rs. 19.74 billion last year. Profit after tax is reported at Rs. 9.70 billion against Rs. 10.80 billion, a 10.2 percent decline since last year mainly due to higher provisions against non-performing assets; net provisions requirement increased to Rs. 4.94 billion from Rs. 1.97 billion last year reflecting prudent approach adopted by the Bank for provisioning against certain borrowers. Earnings per share of Rs. 7.70 per share for the year under review compares with Rs. 8.57 per share for last year.
29. expenses increased by 4 .9 percent over last year mainly due to increase in compensation and other operating expense and additional provincial levy implemented during the year. Operating expenses to income ratio was maintained at 50 percent. Profit (Rs. in billion) 25 20 15 Advances and Deposits 10 1,200 (Rs. in billion) 1,000 5 800 0 2016 2017 2018 Profit after tax 2019 2021 2020 600 Operating Profit 400 200 Return on Average Assets (Rs. in billion) / Percentage 0 1,500 1.5 0.91% 0.90% 1.0 0.86% 0.65% 0.83% 600 0.5 300 0 2016 2017 2018 Total Assets 2019 2020 2021 2020 2021 0.0 Return on Average Assets Earnings per share (Rupees) 10 8 6 4 2 0 2017 2018 Deposits 2019 2020 2021 Advances - net 1.18% 1,200 900 2016 2016 2017 2018 2019 Net aggregate revenues recorded an increase of 4.6 percent, to Rs. 41.78 billion from Rs. 39.96 billion last year. Net mark-up income increased by 7.1 percent as declining interest margins were offset by balance sheet growth and improved mix of assets and liabilities. Fee commission and brokerage income registered a growth of 19.7 percent while foreign exchange income increased by 16.8 percent reflecting resumption of trade and transactions to normality. The uptick in trade and transactional volumes was mostly during the second half of the year as the first half had witnessed a pandemic related slowdown. However, aggregate non-mark-up incomes declined by 3.3 percent over last year due to lesser opportunities for gains on investments; investment gains reduced by 68.1 percent. Overall operating Total assets of the Bank grew by 26.9 percent to Rs. 1.259 trillion. During the year, customer deposits crossed Rs. 1 trillion mark and registered a year on year growth of 28.4 percent despite lower interest rates, reflecting the trust associated with Askari brand. CASA ratio was recorded at 80 percent at December 31, 2021. On the credit portfolio, the Bank was faced with managing elevated risks in an environment of volatility amidst pandemic. As the Bank strengthened credit culture through enhanced process efficiencies in loan originations, appraisals and approvals that proved catalytic in proactive support to clients in their stressful times on the road to recovery. However, addition of a large account to the non-performing portfolio warranted full provision which was duly set aside. Non-performing advances increased by 8.5 percent during the year while aggregate provisions increased by 14.3 percent resultantly the coverage ratio improved from 92.0 percent to 97.0 percent. At December 31, 2021, the Bank is fully compliant with the regulatory capital ratios. Capital Adequacy Ratio is reported at 13.38 percent against the regulatory requirement of 11.50 percent (including capital conservation buffer of 1.50 percent of the total Risk Weighted Assets (RWA). Leverage ratio is reported at 3.29 percent. The Bank is committed to maintain ample cushion in capital for increased risk absorption capacity. On a consolidated basis (i.e. with inclusion of share of profit from Bank’s wholly owned subsidiary, Askari Securities Limited) Askari Bank posted profit after tax (PAT) of Rs. 9.72 billion for 2021 (2020: Rs. 10.86 billion) translating into earnings per share (EPS) of Rs. 7.71 per share (2020: Rs. 8.61 per share). Annual Report 2021 27
30. DIRECTORS ’ REPORT TO THE SHAREHOLDERS Advances Concentration Deposits 3.03% (Rs. in billion) 4.68% 30.81% 7.48% 600 500 6.71% 400 7.41% 13.00% 300 200 26.89% 100 0 Public / Govt Individuals Agri, Sugar and Rice Others & Services Chemical & Pharma Textile and Leather 2016 2017 2018 2019 2020 2021 Power Current Construction, mining and cement Saving Fixed Appropriations The Board of Directors recommends the following appropriations for the year ended December 31, 2021: Rupees in ‘000 2021 2020 Year Ended December 31, Consolidated 9,715,733 12,770 830,008 10,846,333 (47,457) 78,576 Profit after taxation Effect of recognition of actuarial gains / (losses) Transfer from surplus on revaluation 10,558,511 – (1,940,277) 10,877,452 (3,780,781) (2,171,399) Profit available for appropriation Cash dividend - Nil (2020: 30%) Transfer to statutory reserve 8,618,234 4,925,272 7.71 8.61 Accumulated profit carried forward Earnings per share - Rupees Entity Rating The Bank’s entity rating was reaffirmed at ‘AA+’ (Double A Plus) for the long-term by Pakistan Credit Rating Agency Limited (PACRA), with outlook assigned as ‘Stable’. The Bank’s strong brand and affiliation with Fauji Foundation are recognized as the key rating drivers, supported by strengths in terms of market penetration, customer confidence, sustainable funding sources and avenues for generating mark-up and non-mark-up based income stream. The short-term rating was maintained at ‘A1+’ (A One Plus). 28 Unconsolidated Askari Bank is committed to achieving its strategic goals and will continue to participate in viable growth opportunities, along with higher investment in business enablers; network and technology. Given that these require support of robust operating platform and strong capital base, the Board of Directors, after due deliberations decided that it was prudent to retain earnings to strengthen the capital. Accordingly, no dividend payout has been recommended for the current year. We firmly believe that a strong capital base will enable the Bank to deliver greater returns to the shareholders in coming years. Askari Bank Limited 20212020 9,701,386 14,858 830,008 10,800,375 (44,926) 78,575 10,546,252 – (1,940,277) 10,834,024 (3,780,781) (2,160,075) 8,605,975 4,893,168 7.70 8.57 Distribution and Digital Channels Our branch network and other supportive elements enable us to increase banking penetration in pursuit of our inclusive banking policies. The Bank operates with 559 branches across the country; 458 conventional and 101 Islamic Banking branches, a wholesale bank branch in Bahrain and a representative office in Beijing, China. As the pandemic continued during 2021, our main concern remained the health and safety of staff, customers and outsourced service providers. Health and safety protocols were implemented throughout branch network to minimise the spread of virus. In a few instances where our staff were diagnosed, prompt communication and actions were initiated including closure of certain branches to minimise the contagion. The changing behaviors and customer preferences increased the transaction volume via digital channels, though branch network remains the focal point in customer relations and core to delivery of strategy due to current social norms. The Bank is actively investing in technology projects by building capabilities for valuable business insights along with process automation to optimize efficiency and reduce operating costs. Value added features on Askari i-net and mobile banking application include SBP integrated Raast payment service enabling funds transfers using cell numbers and IBAN. 65 ATMs were equipped with
31. NFC feature (near field communication) with added security. Upgraded system at contact centre now empowers our customers with self-service option for account and plastic card maintenance activities. Enhanced security features were added to debit and credit cards particularly for e-commerce transactions. Compliance with PCI DSS was achieved and Askari MasterCard is now protected by 3D secure platform for internet transactions. During the year, ‘Askari Digital Account Web Portal’ was launched that enables account opening without visiting a branch. Recognizing cyber security as a high risk, Askari Bank’s technology function works closely with the risk management and information security functions with assigned responsibility for technology aspects of projects implementation. Information systems and protocols re maintained in accordance with best practices, ensuring the highest levels of customer information security. Recognizing that digital is pivotal for future banking and that new technologies will disrupt banking, the Bank is continually upgrading systems and applications and adding security layers. The Bank will continue to invest in this key pillar to realise our vision of making Askari digital banking enjoyable, yet secure. The Bank’s consumer business remained focused on providing value to customers enabling them to achieve their financial aspirations. This business recognizes and actively pursues product innovation and service excellence as real differentiators along with opportunities involving strategic alliances to increase product offering while improving asset quality. The features of regular mortgage finance schemes under both conventional and Ikhlas Islamic finance, were extended and aligned with the Government’s initiative for the housing sector; Mera Pakistan Mera Ghar and Naya Pakistan Housing Finance. The Bank recognizes the growth opportunities in the housing sector and is committed to increase its contribution in this initiative of national importance. Ikhlas Islamic Banking Askari Ikhlas Islamic Banking offers a diversified range of Shariah compliant products and services to its valued customers to fulfill their banking needs. Askari Ikhlas has widened its footprint to 101 dedicated Islamic Banking Branches (including 03 subbranch), in 39 cities and towns spread across the Country. Compliance with the Principles of Shariah is the cornerstone of our Islamic banking operations. All our offerings are approved by an independent Shariah Board, which ensures strict Shariah compliance at the strategic as well as granular level through its dedicated functions. Islamic Banking is a strategically important segment for our Bank and focus is on increasing Islamic offerings. In line with SBP’s strategy, which aims at making Islamic banking one third of the overall banking industry by 2025; Askari Ikhlas continued its growth momentum and is moving ahead confidently. During the year, total assets of Islamic banking grew by 29 percent, gross financing increased by 11 percent and deposits posted a growth of 13 percent. Our efforts to provide a diversified range of Shariah compliant, innovative financial products and solutions to the clients continue to win us new relationships and we shall endeavor to actively pursue and augment this position in the years to come, Insha’Allah. Risk Management and Compliance Askari Bank has established a risk management framework that proactively supports the assessment, evaluation, monitoring and management of risks whilst creating a strong risk culture and supporting the Bank’s strategic objectives. Decisions are made in compliance with risk management policies and procedures and regulatory requirements / guidance mitigating and managing risks within defined tolerance. A risk management function executes risk strategy and ensures implementation of policies through application of various methodologies and tools aided by efficient systems and clearly articulated risk appetite. A dedicated committee of the Board of Directors, Board Risk Management Committee maintains oversight, along with multi-tier management supervision, including credit and risk committee, asset liability committee, with well-defined terms of reference. This approach helps in outlining the Bank’s risk tolerance level vis-à-vis it’s risk appetite in relation to its size, current position and market standing, with a view to refine processes, controls and guidelines to not only mitigate, but also to effectively manage risks. The Operational Risk Unit continued to perform regular control assessment on loss/near-miss incidents and helping the Bank to fine tune the operational policies/procedures and product guidelines. During the year, our principal focus was managing emerging risks and emerging compliance requirements across all metrics of the Bank whilst maintaining the rigour of enterprise wide management of embedded risks and compliance requirements in serving as an enabler for sustainable business decisions. Management of Compliance and Financial Crime risk was further strengthened through implementation of improved standards and enhanced automation for Compliance Risk Management and other critical Compliance functions. New sanctions and PEP screening system has improved coverage through comprehensive data base of Global Watch Lists and PEPs. The Fraud Risk Management (FRM) ensures round the clock monitoring of Debit/Credit Cards / I-Net / Mobile banking channels through Global payment schemes monitoring solution and robust mechanism. Bank continued to emphasis on staff trainings through e-learning as well as classroom sessions. A suite of e-learning module has been rolled out to ensure appropriate coverage of all critical areas and to achieve maximum outreach. The Bank will continue to drive business growth through detailed analyses coupled with regular insights of the business and industries to identify potential business propositions for enhance banking services. Prudent risk management is a cornerstone of the overall strategy as the Bank upholds its covenants to the Sponsors and key stakeholders. Annual Report 2021 29
32. DIRECTORS ’ REPORT TO THE SHAREHOLDERS Human Resource The Bank strives to incorporate the best HR practices through a comprehensive human capital policy framework and robust processes, procedures that are continuously reviewed and updated. The overall human resource function is managed by the human resource division with oversight and guidance provided by the President & CE and the Board through Board’s HR and Remuneration Committee. During the year a number of initiatives were implemented along with revision of certain policies to improve discipline and alignment with best practices. During the year, the Bank embarked on a strategic workforce planning with the primary objective of building a flexible, future ready team able to navigate a new normal post pandemic and ensuring the right skill, mind set for the right job. A detailed study to drive greater alignment of human capital strategy across the branch network and business support verticals identified a workforce optimization opportunity that formed the basis of a structured separation scheme, currently in execution. The Bank also initiated outsourcing non-core functions to meet staffing needs and also redesigned its premium ‘graduate training program’. Gender diversity and inclusion remained under focus resonating the regulator’s agenda. The Bank actively promotes female representation aiming at providing level playing field and increasing women participation via batches on both gender and inclusion. An agreement was also signed to pave future strategy around enhanced representation in these areas. The Bank has a comprehensive remuneration policy that ensures remuneration practices attract, retain and reward the best talent, comply with regulatory guidance and align with the Bank’s overall objectives. The remuneration structure has fixed and variable elements, and the remuneration policy prescribes the criteria for risk takers, controllers and the process for risk adjustments and deferrals. The Bank remained steadfast in its commitment to develop talent, and put forward innovative learning solutions to ensure continued learning amidst travel restrictions and limitation to classroom sessions. Despite the pandemic, continued development and trainings were provided to 98 percent of the field staff. Certifications programs were also initiated for dedicated field positions. Customer Experience Service excellence forms the basis of our customer value proposition, and is a key element of our transformational journey. During the year, the Bank continued to introduce process and technology improvements with the aim of simplifying transactions and providing our customers a seamless banking experience. Sales and service culture was further strengthened through continuous staff trainings while conduct assessment framework and structured tools gauged service delivery against standards. We also strengthened our grievance handling mechanism by enabling customer access through Askari i-net 30 Askari Bank Limited banking and mobile app, in addition to compliant registration through 24/7 contact center, website, email or branches. During the year 2021, a total of 57,735 complaints were registered where the average resolution time improved to 2.8 working days as compared to 3.5 last year Green Banking and CSR The Bank continues to support projects of national significance prioritizing financing of environmentally responsible initiatives. In addition to existing portfolio of renewable energy projects, the Bank introduced ‘Askari Ujala Finance’ under the SBP refinance scheme for small medium enterprise and retail segments. The product offers subsidized financing for sustainable and environmentally responsible energy projects to reduce consumption of traditional hydrocarbon-based energy sources. Digitization of customer solutions, improvements in operational processes and automation projects assign key priority to reducing paper consumption and printing. Installation of LED lights at all locations continue and during the year, conversion of select ATMs to solar energy was initiated as a pilot project. The Bank extended its CSR contributions during the year for health, education and social development. As part of CSR initiatives, the Bank organizes ‘Askari Bank Green Day’ on annual basis to mark its commitment to green banking by holding a plantation drives across major cities. For the past three years, Askari Bank has introduced specialized trainings for awareness and importance of green banking and to reinforce staff’s collective responsibility towards environment. Askari Securities Limited The Bank wholly owned subsidiary Askari Securities Limited (ASL) is in the process of dissolution. The Board of Directors has already consented to Expression of Interest received by Askari Securities Limited from Foundation Securities (Pvt) Limited (FSL) to explore possibility of Amalgamation of ASL with and into FSL for improved synergies and business prospects. By the effect of the Amalgamation the complete undertaking of ASL will be transferred and come to vest into FSL together with all properties, assets, liabilities and obligations of every description, the shares of ASL will be cancelled and for each share held in ASL by AKBL as a holder of 100 percent of shares thereof, twenty-seven million one hundred and forty thousand (27,140,000) shares of FSL will be issued to AKBL i.e. for every one (1) ordinary share of ASL of Pakistani Rupees Ten (PKR 10/) held by AKBL, one point one eight (1.18) ordinary shares of FSL of Pakistani Rupees Ten (PKR 10/-) each will be allotted to AKBL, and (c) ASL will then dissolve without winding up. Corporate Governance The Board of Directors of Askari Bank is committed to maintain high standards of corporate governance which has underpinned the Bank’s long-term competitiveness, growth and sustainability. The requirements of Code of Corporate Governance as set out in Pakistan Stock Exchange Limited Regulations in the rule book for the year ended December 31, 2021 have been fully adopted and have been duly complied with. A statement to this effect is annexed in annual report.
33. Corporate and Financial Reporting Framework : • The financial statements, prepared by the management of the Bank present its state of affairs fairly, the results of its operations, cash flows and changes in equity. • Proper books of accounts of the Bank have been maintained. • Appropriate accounting policies have been consistently applied in preparation of these financial statements and accounting estimates are based on reasonable and prudent judgment. • International Financial Reporting, Islamic and Shariah Standards, as applicable to banking companies in Pakistan, have been followed in preparation of these financial statements and there is no departure from the said standards. • The system of internal control is sound in design and has been effectively implemented and monitored. The Bank has made a statement on internal controls in this annual report, which has been endorsed by the Board of Directors. • There are no significant doubts upon the Bank’s ability to continue as a going concern. • Key operating and financial data for the last six years, in a summarized form, is included in this report. • There are no statutory payments on account of taxes, duties, levies and charges which are outstanding as of December 31, 2021, except as disclosed in annexed financial statements. • Following is the fair value of investments as at December 31, 2021: • – Provident Fund: Rs. 6,692 million based on un-audited financial statements (December 31, 2020: Rs. 6,136 million, based on audited financial statements) – Gratuity Fund: Rs. 3,399 million based on un-audited financial statements (December 31, 2020: Rs. 3,084 million based on audited financial statements) The Board consists of ten directors including one female director and the CEO as deemed director. During the year, eight meetings of the Board of Directors were held. The record of the meetings attended by the directors, is as follows: Board of Directors Meeting Total meetings held 8 Board Audit Committee 8 Board Human Resource & Remuneration Committee Board Risk Management Committee 10 Board Information Technology Committee 5 4 Name of Directors and their attendance in each meeting Mr. Waqar Ahmed Malik (Chairman) 8 NA NA NA NA Lt Gen Tariq Khan, (Retd) 3 NA NA NA NA Mr. Sarfaraz Ahmed Rehman 7 NA 9 NA NA Dr. Nadeem Inayat 8 7 7 1 1 Syed Bakhtiyar Kazmi 7 7 NA NA NA Mr. Manzoor Ahmed 8 8 10 5 NA Mr. Mohammad Aftab Manzoor 6 8 NA NA 4 Mr. Mushtaq Malik 8 NA NA 5 3 Ms. Zoya Mohsin Nathani 8 NA 10 5 NA Raja Muhammad Abbas 7 5 NA NA 4 Mr. Atif R. Bokhari (President & Chief Executive) 3 NA NA 2 2 Mr. Abid Sattar (Ex-President & Chief Executive) 3 NA NA 3 2 Mr. Khurshid Zafar (Acting President & CE) 1 NA NA NA NA Annual Report 2021 31
34. DIRECTORS ’ REPORT TO THE SHAREHOLDERS Board Evaluation The Board of Directors and its sub-committees are competent and experienced, representing diversified educational and vocational backgrounds which are invaluable in determining the overall direction of the organization. The Board of Directors is keen to ensure that the effectiveness of its performance is periodically evaluated and reviewed. The regulatory guidance prescribes such evaluation on an annual basis, and by an external independent evaluator at least once every three years. During the year, the Bank engaged Pakistan Institute of Corporate Governance (PICG) for this purpose. Such evaluation was undertaken through a comprehensive questionnaire, bifurcated into different sections; Board of Directors composition, planning, interaction, control oversight and procedures, as well as the objective contributions by individual directors. Quantitative techniques were used, where a scaled questionnaire was provided for each director’s feedback. Assessments were carried out for the overall Board, Chairman and President & CE, Board committees and individual directors. A Likert scale from 1 to 6 (1 being strongly disagree and 6 strongly agree) was used to quantify assessment criteria for each section. Feedback from each director was then collated and analysed to denote performance in percentage terms against respective categories. The evaluation of the board committees is primarily based on the assessment of the compliance with the terms of reference of each committee. The evaluation criteria for individual directors, is based on their participation, contribution and offering guidance to and understanding of the areas which were relevant to them in their capacity as a board member. The evaluation criteria for the Chairman of the Board in addition to the general criteria, also encompasses leadership abilities and effective management of meetings. This exercise in critical self-assessment allows the Board to evaluate its performance and overall effectiveness in setting strategies, devising control processes, reading market trends by monitoring micro and macroeconomic factors and responding to adverse unforeseen situations to further the cause of a learning organization. This process also ensures that the Board is constantly growing intellectually and the responsibility of steering the Bank for greater success is discharged effectively and efficiently. Final results of the annual evaluation of the Board’s performance are then presented for Board of Directors for review and actions. Disclosure on the mechanism of the 32 Askari Bank Limited evaluation process adopted by the Bank is published for all the stakeholders in compliance with the BPRD Circular No. 11, dated August 22, 2016. Directors remuneration details are disclosed in Note 39 of the un-consolidated financial statements. The Board’s remuneration policy sets out the principles for determining remuneration for attending board and committee meetings, to value their skills and expertise, in alignment with the market and in compliance with applicable regulatory guidelines. Pattern of Shareholding The pattern of shareholding at the close of December 31, 2021 is included in the annual report. Trading in Shares No trades in the shares of the Bank were carried out by the President & CE, CFO, Company Secretary their spouses and minor children during the year 2021. Auditors The present auditors, Messrs. KPMG Taseer Hadi & Co., Chartered Accountants retire and being eligible, offer themselves for reappointment. As required under the Listed Companies (Code of Corporate Governance) Regulations, 2019 the Board and the Audit Committee has recommended the appointment of Messrs. KPMG Taseer Hadi & Co., Chartered Accountants as auditors of the Bank for the year ending December 31, 2022. The appointment is subject to approval in the 30th Annual General Meeting. Events after the Date of Statement of Financial Position There have not been any material events that occurred subsequent to the date of the Statement of Financial Position that require adjustments to the attached financial statements. Looking Ahead Looking ahead, Askari Bank plans are focused on strengthening business sustainability supported by enhanced governance, compliance, credit and overall risk management culture to ensure a solid foundation. Our updated strategy is focused on growing our market share in retail segment, particularly low-cost deposits and consumer products. Greater emphasis will be on boosting trade volumes, increased penetration in cash management with focus on SME, commercial customers and strategic relationships. Customer experience remains a key priority aided by continued initiatives in the areas of process improvements, digitisation, automation and data
35. analytics . As part of the updated strategy the Bank has also revised its vision and mission statements (refer to page 2 of annual report). As we stand at the beginning of 2022, we look forward to a better year; one of a return to stability, growth and progress. The Bank is moving into expansionary phase which will put pressure on operating costs. However, certain planned initiatives that align our human capital strategy to a future fit growing organization will improve the cost structure and the Bank will be targeting to contain operating cost growth to within a single digit in periods to come. People development will be a key pillar along with technology enablement to provide deeper insights while planned upgrades of enabling systems, payment, cash management system and card system are expected to create considerable enhancements to the Bank’s overall customer value proposition. Acknowledgements: Atif R. Bokhari President & Chief Executive On behalf of the Board, we express our sincere appreciation to the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan and other regulatory bodies for the guidance and support extended to Askari Bank during the year. We also like to place on record our appreciation for the efforts of our Sharia Board for strengthening Sharia compliance and governance framework for Askari Ikhlas Islamic banking. We express our deepest appreciation and gratitude to our staff and their families for adhering to the new protocols, containing the transmission risk and ensuring uninterrupted delivery of customer offerings in these difficult times. Waqar Ahmed Malik Chairman, Board of Directors February 15, 2022 Rawalpindi Annual Report 2021 33
36. SIX YEARS ’ FINANCIAL SUMMARY - UNCONSOLIDATED December 31 Assets Advances - net Investments - net Cash, short term funds and statutory deposits with SBP Fixed / intangible assets Assets held for sale Other assets Total assets Non-performing loans Provisions for non-performing loans Liabilities Deposits and other accounts Refinance borrowings from SBP Subordinated loans Borrowings / other liabilities Total liabilities Shareholders’ funds Share capital Reserves Surplus on revaluation of assets – net of tax Total shareholders’ funds Profitability Interest income Interest expenditure Net interest income Fee and commission income Other income Non-markup expenses (Reversal) / provision and impairment against non-performing assets Operating profit Profit before taxation Taxation Profit after taxation Business transacted Imports Exports Guarantees 34 Askari Bank Limited 201620172018 20192020 2021 235,164 295,846 55,250 11,020 262 21,597 619,139 28,535 26,959 258,693 314,957 49,683 10,729 81 22,566 656,708 26,753 25,647 343,107 260,234 53,281 13,533 81 36,296 706,532 26,657 26,152 372,914 305,436 91,332 20,506 81 42,939 833,208 28,134 25,635 472,811 12,891 4,995 95,866 586,562 525,808 16,839 4,993 76,632 624,273 573,636 18,967 9,994 70,426 673,023 679,299 19,713 9,992 81,948 790,952 12,603 12,755 7,219 32,577 12,603 14,798 5,035 32,435 12,603 19,257 1,649 33,509 12,603 25,353 4,300 42,256 35,512 20,497 15,016 2,156 4,951 14,304 36,267 20,072 16,195 2,707 3,549 15,164 43,670 25,060 18,610 3,116 2,506 15,892 71,704 49,569 22,136 3,617 3,787 18,377 (659) 7,818 8,477 3,256 5,221 (1,205) 7,287 8,492 3,224 5,268 1,461 8,340 6,879 2,448 4,431 773 11,163 10,389 3,372 7,017 279 124 132 358 155 137 394 215 150 334 248 156 Rupees in million 395,374 477,588 449,687 616,361 81,606 92,887 22,357 21,350 - 43,493 50,957 992,517 1,259,144 28,736 31,165 26,446 30,228 Rupees in million 791,187 1,015,430 38,644 47,252 12,000 12,000 96,140 128,559 937,971 1,203,242 12,603 12,603 34,306 41,336 7,638 1,964 54,546 55,902 Rupees in million 79,105 77,550 48,842 45,140 30,263 32,410 3,851 4,609 5,843 4,761 20,215 21,194 1,975 4,940 19,742 20,585 17,767 15,645 6,967 5,944 10,800 9,701 Rupees in billion 371 541 206 264 112 142
37. December 31 Profitability ratios Return on average shareholders ’ equity (RoE) Return on average assets (RoA) Return on average capital employed Cost to income (CIR) Gross yield on average earning assets Weighted average cost of deposits Net advances to deposits NPLs to gross advances NPLs coverage Current accounts to total deposits Earning assets to total assets - gross Capital Adequacy (CAR) Share information Price earning (PE) - times Price to book - times Cash dividends - Interim (%) - Final (%) Earnings per share (EPS) - Rupees Market value per share - year end - Rupees Market value per share - high - Rupees Market value per share - low - Rupees Net asset per share - Rupees Other information Number of employees Female staff - (%) Number of branches 201620172018 20192020 2021 22.14 0.90 18.27 64.66 6.71 3.70 49.74 10.89 94.48 27.44 88.28 12.50 19.97 0.83 16.79 67.54 6.42 3.42 49.20 9.41 95.87 28.37 88.63 12.09 14.98 0.65 11.95 65.58 7.14 3.97 59.81 7.22 98.11 29.56 86.65 12.51 20.10 0.91 15.63 62.21 10.62 6.96 54.90 7.06 91.12 28.68 85.56 13.38 Percentage 25.45 19.24 1.18 0.86 20.21 15.54 50.59 50.73 9.44 7.85 5.54 4.18 49.97 47.03 6.81 6.14 92.03 96.99 31.78 30.46 86.53 87.65 15.48 13.38 6.03 0.97 - 15.00 4.14 24.95 25.61 17.50 25.85 4.62 0.75 10.00 - 4.18 19.31 28.03 17.75 25.74 6.80 0.90 - 10.00 3.52 23.92 26.49 19.20 26.59 3.33 0.55 - 15.00 5.57 18.54 24.46 15.53 33.53 2.73 0.54 - 30.00 8.57 23.39 23.59 13.00 43.28 2.86 0.50 7.70 22.02 25.70 18.77 44.36 7,252 13.40 501 7,534 12.80 516 7,538 12.90 516 7,848 13.70 535 7,949 14.00 537 7,478 13.69 560 Annual Report 2021 35
38. 36 Askari Bank Limited
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40. 38 Askari Bank Limited
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42. 40 Askari Bank Limited
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44. HORIZONTAL AND VERTICAL ANALYSIS Horizontal Analysis 202120202019201820172016 VsVsVsVsVsVs 20212020 20192018 20172016 202020192018201720162015 Rupees in million Variance Balance Sheet Assets Cash and balances with treasury banks 89 ,432 73,652 63,039 49,188 Balances with other banks 3,455 7,720 7,887 4,093 Lendings to financial institutions - - 20,406 - Investments 616,361 449,687 305,436 260,234 Advances 477,588 395,374 372,914 343,107 Operating fixed assets 21,350 22,357 20,506 13,533 Assets held for sale - - 81 81 Deferred tax assets 5,168 1,623 2,490 3,774 Other assets 45,789 42,105 40,451 32,522 1,259,144 992,517 833,208 706,532 Liabilities Bills payable 10,235 12,630 15,769 15,513 Borrowings 123,564 84,164 51,188 52,702 Deposits and other accounts 1,015,430 791,187 679,299 573,636 Subordinated loans 12,000 12,000 9,992 9,994 Deferred tax liabilities - - - - Other liabilities 42,012 37,990 34,704 21,178 1,203,242 937,971 790,952 673,023 Net Assets 55,902 54,546 42,256 33,509 Represented by Share capital 12,603 12,603 12,603 12,603 Reserves 32,730 25,632 19,366 15,543 Surplus on revaluation of assets - net of tax 1,964 7,638 4,300 1,649 Unappropriated profit 8,606 8,674 5,987 3,714 55,902 54,546 42,256 33,509 44,239 3,194 2,250 314,957 258,693 10,729 81 101 22,465 656,708 42,568 5,846 6,837 295,846 235,164 11,020 262 - 21,597 619,139 10,769 8,580 71,587 89,262 525,808 472,811 4,993 4,995 - 526 11,115 10,388 624,273 586,562 32,435 32,577 21% -55% 0% 37% 21% -5% 0% 218% 9% 27% 17% -2% -100% 47% 6% 9% -100% -35% 4% 19% 28% 93% 0% 17% 9% 52% 0% -34% 24% 18% 11% 28% -100% -17% 33% 26% 0% 3646% 45% 8% 4% -45% -67% 6% 10% -3% -69% 0% 4% 6% 43% -30% 741% 10% 18% 19% 0% 0% 9% 16% -19% 47% 28% 0% 0% 11% 28% 2% -20% 64% 16% 20% 0% 9% 19% 29% 2% -3% 18% 0% 0% 64% 18% 26% 44% -26% 9% 100% 0% 91% 8% 3% 26% -20% 11% 0% -100% 7% 6% 0% 41% 56% 9% 0% 446% 42% 15% 21% 12,603 11,948 5,035 2,850 32,435 12,603 8,671 7,219 4,084 32,577 0% 28% -74% -1% 2% 0% 32% 78% 45% 29% 0% 25% 161% 61% 26% 0% 30% -67% 30% 3% 0% 38% -30% -30% 0% 0% 35% 43% 48% 21% 36,267 20,072 16,195 35,512 20,497 15,016 0% -4% 7% 8% -5% 37% 64% 98% 19% 20% 25% 15% 2% -2% 8% -3% -6% 1% 2,707 303 843 2,055 347 6,255 22,451 2,156 305 640 3,527 479 7,106 22,122 20% 54% 17% -68% 18% -3% 5% 6% -1% 7% 246% 28% 31% 35% 16% 19% 57% 184% -36% 32% 22% 15% -24% 89% -87% 20% -10% 8% 26% -1% 32% -42% -27% -12% 1% 24% 1% -23% 9% -16% 6% 2% 14,949 170 24 15,142 7,309 (1,183) 8,492 (3,224) 5,268 14,079 170 52 14,301 7,821 (656) 8,477 (3,256) 5,221 4% 397% 87% 5% 4% 150% -12% -15% -10% 10% 2% -52% 10% 77% 155% 71% 107% 54% 12% -108% -48% 16% 34% -47% 51% 38% 58% 9% -418% 711% 5% 14% -223% -19% -24% -16% 6% 0% -55% 6% -7% 80% 0% -1% 1% 17% 2% 5% 17% -16% -171% 1% -4% 4% Profit and Loss Mark-up / return / interest earned 77,550 77,322 71,704 43,670 Mark-up / return / interest expensed 45,140 47,059 49,569 25,060 Net mark-up / interest income 32,410 30,263 22,136 18,610 Non mark-up/interest income Fee and commission income 4,609 3,851 3,617 3,116 Dividend income 420 273 274 231 Foreign exchange income 3,124 2,673 2,508 1,596 Gain on securities 815 2,556 739 260 Other income 402 341 266 418 Total non-markup / interest income 9,370 9,694 7,404 5,622 Total income 41,779 39,957 29,540 24,232 Non mark-up/interest expenses Operating expenses 20,891 20,123 18,235 16,241 Workers’ welfare fund 213 43 42 (540) Other charges 90 48 100 191 Total non-markup / interest expenses 21,194 20,215 18,377 15,892 Profit before provisions and tax 20,585 19,742 11,163 8,340 Provisions / (reversals) 4,940 1,975 773 1,461 Profit before taxation 15,645 17,767 10,389 6,879 Taxation (5,944) (6,967) (3,372) (2,448) Profit after taxation 9,701 10,800 7,017 4,431 Basic and diluted earnings per share - Rupees 7.70 8.57 5.57 3.52 42 Askari Bank Limited 4.18 4.14
45. Vertical Analysis 20212020 20192018 20172016 202120202019201820172016 Rupees in million Composition Balance Sheet Assets Cash and balances with treasury banks 89 ,432 73,652 63,039 49,188 Balances with other banks 3,455 7,720 7,887 4,093 Lendings to financial institutions – – 20,406 – Investments 616,361 449,687 305,436 260,234 Advances 477,588 395,374 372,914 343,107 Operating fixed assets 21,350 22,357 20,506 13,533 Assets held for sale – – 81 81 Deferred tax assets 5,168 1,623 2,490 3,774 Other assets 45,789 42,105 40,451 32,522 1,259,144 992,517 833,208 706,532 Liabilities Bills payable 10,235 12,630 15,769 15,513 Borrowings 123,564 84,164 51,188 52,702 Deposits and other accounts 1,015,430 791,187 679,299 573,636 Subordinated loans 12,000 12,000 9,992 9,994 Deferred tax liabilities – – – – Other liabilities 42,012 37,990 34,704 21,178 1,203,242 937,971 790,952 673,023 Net Assets 55,902 54,546 42,256 33,509 Represented by Share capital 12,603 12,603 12,603 12,603 Reserves 32,730 25,632 19,366 15,543 Surplus on revaluation of assets - net of tax 1,964 7,638 4,300 1,649 Unappropriated profit 8,606 8,674 5,987 3,714 55,902 54,546 42,256 33,509 44,239 3,194 2,250 314,957 258,693 10,729 81 101 22,465 656,708 42,568 5,846 6,837 295,846 235,164 11,020 262 – 21,597 619,139 10,769 8,580 71,587 89,262 525,808 472,811 4,993 4,995 – 526 11,115 10,388 624,273 586,562 32,435 32,577 7% 0% 0% 49% 38% 2% 0% 0% 4% 100% 7% 1% 0% 45% 40% 2% 0% 0% 4% 100% 8% 1% 2% 37% 45% 2% 0% 0% 5% 100% 7% 1% 0% 37% 49% 2% 0% 1% 5% 100% 7% 0% 0% 48% 39% 2% 0% 0% 3% 100% 7% 1% 1% 48% 38% 2% 0% 0% 3% 100% 1% 10% 81% 1% 0% 3% 96% 4% 1% 8% 80% 1% 0% 4% 95% 5% 2% 6% 82% 1% 0% 4% 95% 5% 2% 7% 81% 1% 0% 3% 95% 5% 2% 11% 80% 1% 0% 2% 95% 5% 1% 14% 76% 1% 0% 2% 95% 5% 12,603 11,948 5,035 2,850 32,435 12,603 8,671 7,219 4,084 32,577 1% 3% 0% 1% 4% 1% 3% 1% 1% 5% 2% 2% 1% 1% 5% 2% 2% 0% 1% 5% 2% 2% 1% 0% 5% 2% 1% 1% 1% 5% 36,267 20,072 16,195 35,512 20,497 15,016 100% 58% 42% 100% 61% 39% 100% 69% 31% 100% 57% 43% 100% 55% 45% 100% 58% 42% 2,707 303 843 2,055 347 6,255 22,451 2,156 305 640 3,527 479 7,106 22,122 6% 1% 4% 1% 1% 12% 54% 5% 0% 3% 3% 0% 13% 52% 5% 0% 3% 1% 0% 10% 41% 7% 1% 4% 1% 1% 13% 55% 7% 1% 2% 6% 1% 17% 62% 6% 1% 2% 10% 1% 20% 62% 14,949 170 24 15,142 7,309 (1,183) 8,492 (3,224) 5,268 14,079 170 52 14,301 7,821 (656) 8,477 (3,256) 5,221 27% 0% 0% 27% 27% 6% 20% -8% 13% 26% 0% 0% 26% 26% 3% 23% -9% 14% 25% 0% 0% 26% 16% 1% 14% -5% 10% 37% -1% 0% 36% 19% 3% 16% -6% 10% 41% 0% 0% 42% 20% -3% 23% -9% 15% 40% 0% 0% 40% 22% -2% 24% -9% 15% Profit and Loss Mark-up / return / interest earned 77,550 77,322 71,704 43,670 Mark-up / return / interest expensed 45,140 47,059 49,569 25,060 Net mark-up / interest income 32,410 30,263 22,136 18,610 Non mark-up/interest income Fee and commission income 4,609 3,851 3,617 3,116 Dividend income 420 273 274 231 Foreign exchange income 3,124 2,673 2,508 1,596 Gain on securities 815 2,556 739 260 Other income 402 341 266 418 Total non-markup / interest income 9,370 9,694 7,404 5,622 Total income 41,779 39,957 29,540 24,232 Non mark-up/interest expenses Operating expenses 20,891 20,123 18,235 16,241 Workers’ welfare fund 213 43 42 (540) Other charges 90 48 100 191 Total non-markup / interest expenses 21,194 20,215 18,377 15,892 Profit before provisions and tax 20,585 19,742 11,163 8,340 Provisions / (reversals) 4,940 1,975 773 1,461 Profit before taxation 15,645 17,767 10,389 6,879 Taxation (5,944) (6,967) (3,372) (2,448) Profit after taxation 9,701 10,800 7,017 4,431 Annual Report 2021 43
46. SHARE & DEBT INFORMATION 1. Share Information 1.1 The ordinary shares of Askari Bank Limited (“the Bank”) are listed on the Pakistan Stock Exchange. The audited financial statements have been submitted to the stock exchange within the requisite notice periods as required by the relevant Regulations. Askari Bank’s Central Depository System ID is 05132. 1.2 Market symbols Pakistan Stock Exchange – AKBL, Reuters – ASKB.KA, Bloomberg – AKBL: PA 1.3 Share price and volume - last 10 years Year Shares Shareholders' funds (equity) (in Numbers) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 813,071,084 1,260,260,180 1,260,260,180 1,260,260,180 1,260,260,180 1,260,260,180 1,260,260,180 1,260,260,180 1,260,260,180 1,260,260,180 1.4 Record of share issues Year Market capitalization KSE’s market capitalization (in Billion) 19.69 18.73 23.71 26.85 32.58 32.44 33.51 42.26 54.55 55.90 14.00 17.64 29.07 27.40 31.44 24.34 30.15 23.37 29.48 27.75 share in market capitalization Share Price High During the year (Percent) 4,242.28 6,056.51 7,380.53 6,947.36 9,628.51 8,570.93 7,692.79 7,811.81 8,035.36 7,900.14 0.33% 0.29% 0.39% 0.39% 0.33% 0.28% 0.39% 0.30% 0.37% 0.35% Issue Prior to public issue 1992 Public issue 1993 50% Rights issue @ Rs. 10 per share 1995 Bonus @ 15% 1996 50% Rights issue @ Rs. 20 per share 1996 Bonus @ 10% 1997 Bonus @ 15% 1998 Bonus @ 5% 2001 Bonus @ 5% 2002 Bonus @ 5% 2003 Bonus @ 5% 2004 Bonus @ 10% 2005 Bonus @ 20% 2006 Bonus @ 33% 2007 Bonus @ 50% 2008 Bonus @ 35% 2009 Bonus @ 25% 2010 Share issued to shareholders of erstwhile Askari Leasing Limited 2010 Bonus @ 20% 2011 Bonus @ 10% 2012 Bonus @ 15% 2013 55% Rights issue @ Rs. 10 per share Low During the year (in Rupees) 17.75 19.69 23.14 25.54 25.61 28.03 26.49 24.46 23.59 25.70 17.05 10.76 13.37 16.26 17.50 17.75 19.20 15.53 13.00 18.77 Number of shares 15,000,000 15,000,000 15,000,000 6,750,000 22,500,000 7,425,000 12,251,250 4,696,312 4,931,101 5,177,712 5,436,568 11,416,794 25,116,947 49,731,555 100,216,620 105,227,450 101,469,326 28,273,315 107,123,990 64,274,460 106,052,684 447,189,096 1,260,260,180 (in Numbers) 17.22 14.00 23.07 21.74 24.95 19.31 23.92 18.54 23.39 22.02 462,420,623 373,297,000 590,931,000 427,049,500 329,016,500 341,523,000 208,231,500 90,865,500 241,054,000 94,935,000 Share capital (Rs) 150,000,000 150,000,000 150,000,000 67,500,000 225,000,000 74,250,000 122,512,500 46,963,120 49,311,010 51,777,120 54,365,680 114,167,940 251,169,474 497,315,549 1,002,166,196 1,052,274,496 1,014,693,261 282,733,150 1,071,239,900 642,744,604 1,060,526,840 4,471,890,960 12,602,601,800 2. Debts Information 2.1 Askari Bank has issued Seven TFCs out of which the following Term Finance Certificates (TFCs) are outstanding - unsecured subordinated debt. (Rupees in million) IPO investors General Public Underwriters 44 shares traded during the year Close at December 31 Market Symbols / IDs at LSE Rating by PACRA Market Price as at December 31, 2021 (based on marketable lots of Rs. 1,000,000) Applicable Interest Rate (p.a.) as at December 31, 2021 Askari Bank Limited TFC - VI 6,000 – – 6,000 AKBLTFC6 AA- 6,000 12.96% TFC - VII 6,000 – – 6,000 AKBLTFC7 AA 6,000 12.01%
47. STATEMENT ON INTERNAL CONTROLS The Management of Askari Bank Limited (the Bank) assumes full responsibility for establishing and maintaining effective system of internal controls throughout the Bank to ensure reliable, accurate and fair financial reporting, effectiveness of operations and compliance with the applicable laws and regulations. Management understands that the effective maintenance of the internal controls system is an ongoing process under the ownership of the management. All significant policies and procedural manuals are in place; and the review, revision, and improvement to keep them updated to cope with latest challenges is actively pursued by the management. Architecture of the Bank’s internal control system involves different levels of monitoring activities i.e. line management, Compliance Division (CD) and Internal Audit Division (IAD). The Bank’s IAD is independent from line management and reviews the adequacy and implementation of control activities across the Bank as well as implementation of and compliance with all the prescribed policies and procedures. All significant and material findings pointed out by the internal, external auditors and regulators are addressed on priority basis by CD. The function also actively monitors implementation of the corrective / remedial measures to ensure that identified risks are mitigated to safeguard the interest of the Bank. In compliance with the SBP’s directives, the Bank had completed the implementation of road map regarding Internal Controls over Financial Reporting (ICFR) on September 30, 2012. This included detailed documentation of the existing processes, comprehensive evaluation of controls both at entity as well as activity level, development of detailed remedial action plans for the gaps identified as a result of such evaluation and devising comprehensive testing plans of the controls of all processes. Consequent to grant of exemption by the State Bank of Pakistan (SBP) from the requirement of submission of Long Form Report (LFR), the documentation including the testing results have been reviewed by internal auditors of the Bank, on the basis of which Annual Assessment Report is prepared and submitted to Board Audit Committee for review. During the year under review, we have endeavored to follow the guidelines issued by SBP on internal controls for evaluation and management of significant risks and we will continue to endeavor for further improvements in the Internal Controls system. While an internal controls system is effectively implemented and monitored; however, due to inherent limitations, internal controls system is designed to manage rather than eliminate the risk of failure to achieve the desired objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. Saleem Anwar Chief Financial Officer Syed Ali Raza Zaidi Chief Compliance Officer Irfan Johar Chief Internal Auditor Atif R. Bokhari President & Chief Executive February 15, 2022 Rawalpindi Annual Report 2021 45
48. STATEMENT OF COMPLIANCE WITH LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS, 2019 FOR THE YEAR ENDED DECEMBER 31, 2021 The Bank has complied with the requirements of the Regulations in the following manner: 1. The total number of directors is 11 as per the following detail: a. Male: 10 b.Female:01 2. The composition of Board is as follows: Category Name Independent Directors Mr. Mohammad Aftab Manzoor Mr. Mushtaq Malik Ms. Zoya Mohsin Nathani Raja Muhammad Abbas Non-Executive Directors Mr. Waqar Ahmed Malik - Chairman Mr. Sarfaraz Ahmed Rehman Mr. Arif Ur Rehman* Dr. Nadeem Inayat Syed Bakhtiyar Kazmi Mr. Manzoor Ahmed - Nominee NIT * (Fit & Proper Test by SBP cleared on February 15, 2022) 46 Executive Director / President & CE Mr. Atif R. Bokhari Female Director Ms. Zoya Mohsin Nathani 3. The directors have confirmed that none of them is serving as a director on more than seven listed companies, including Askari Bank Limited. 4. The Bank has prepared a Code of Conduct and has ensured that appropriate steps have been taken to disseminate it throughout the Bank along with its supporting policies and procedures. 5. The Board has developed a vision / mission statement, overall corporate strategy and has approved significant policies of the Bank. The Board has ensured that complete record of particulars of the significant policies along with the dates of approval or updating is maintained by the Bank. 6. All the powers of the Board have been duly exercised and decisions on relevant matters have been taken by the Board / shareholders as empowered by the relevant provisions of the Act and these Regulations. 7. The meetings of the Board were presided over by the Chairman. The Board has complied with the requirements of Act and the Regulations with respect to frequency, recording and circulating minutes of meeting of the Board. 8. The Board has a formal policy and transparent procedures for remuneration of directors in accordance with the Act and these Regulations. 9. The Bank is compliant with the requirement of director training program provided in these Regulations. The Bank has also arranged a Directors’ Orientation Session during the year. 10. The Board has approved the appointments of Chief Financial Officer (CFO), Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment and complied with relevant requirements of the Regulations. 11. CFO and the President & CEO duly endorsed the financial statements before approval of the Board. 12. The Board has formed Committees comprising of members given below: a) Board Audit Committee (BAC) 1 Mr. Mohammad Aftab Manzoor Chairman 2 Dr. Nadeem Inayat Member 3 Syed Bakhtiyar Kazmi Member 4 Mr. Manzoor Ahmed Member 5 Raja Muhammad Abbas Member Askari Bank Limited
49. b ) c) d) Board Human Resource & Remuneration Committee (BHR&RC) 1 Ms. Zoya Mohsin Nathani Chairperson 2 Mr. Sarfaraz Ahmed Rehman Member 3 Dr. Nadeem Inayat Member 4 Mr. Manzoor Ahmed Member Board Risk Management Committee (BRMC) 1 Mr. Manzoor Ahmed Chairman 2 Dr. Nadeem Inayat Member 3 Mr. Mushtaq Malik Member 4 Ms. Zoya Mohsin Nathani Member 5 Mr. Atif R. Bokhari Member Board Information Technology Committee (BITC) 1 Mr. Mohammad Aftab Manzoor Chairman 2 Dr. Nadeem Inayat Member 3 Mr. Mushtaq Malik Member 4 Raja Muhammad Abbas Member 5 Mr. Atif R. Bokhari Member 13. The terms of reference of the aforesaid committees have been formed, documented and advised to the committees for compliance. 14. The frequency of meetings (quarterly / half yearly / yearly) of the committees were as per following: Board Committees Frequency of Meetings Audit CommitteeQuarterly Risk Management Committee Quarterly HR & Remuneration Committee Twice in a year Information Technology Committee Quarterly 15. The Board has set-up an effective internal audit function which is considered suitably qualified and experienced for the purpose and is conversant with the policies and procedures of the Bank. 16. The statutory auditors of the Bank have confirmed that they have been given a satisfactory rating under the quality control review program of the Institute of Chartered Accountants of Pakistan (ICAP) and registered with Audit Oversight Board of Pakistan, that they and all their partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the Institute of Chartered Accountants of Pakistan and that they and the partners of the firm involved in the audit are not a close relative (spouse, parent, dependent and non-dependent children) of the President & CE, Chief Financial Officer, Chief Internal Auditor, Company Secretary or Directors of the Bank. 17. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the Act, these regulations or any other regulatory requirements and the auditors have confirmed that they have observed IFAC guidelines in this regard. 18. We confirm that all requirements of Regulations 3, 6, 7, 8, 27, 32, 33 and 36 of the Regulations have been complied with. For and on behalf of the Board February 15, 2022 Rawalpindi Waqar Ahmed Malik Chairman Annual Report 2021 47
50. KPMG Taseer Hadi & Co. Chartered Accountants 351 Shadman-1, Jail Road, Lahore 54000 Pakistan +92 (42) 111-KPMGTH (576484), Fax +92 (42) 3742 9907 INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF ASKARI BANK LIMITED REVIEW REPORT ON THE STATEMENT OF COMPLIANCE CONTAINED IN LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS, 2019 We have reviewed the enclosed Statement of Compliance with the Listed Companies (Code of Corporate Governance) Regulations, 2019 (the Regulations) prepared by the Board of Directors of Askari Bank Limited “The Bank” for the year ended 31 December 2021, in accordance with the requirements of regulation 36 of the Regulations. The responsibility for compliance with the Regulations is that of the Board of Directors of the Bank. Our responsibility is to review whether the Statement of Compliance reflects the status of the Bank’s compliance with the provisions of the Regulations and report if it does not and to highlight any non-compliance with the requirements of the Regulations. A review is limited primarily to inquiries of the Bank’s personnel and review of various documents prepared by the Bank to comply with the Regulations. As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors’ statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Bank’s corporate governance procedures and risks. The Regulations require the Bank to place before the Audit Committee, and upon recommendation of the Audit Committee, place before the Board of Directors for their review and approval, its related party transactions. We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of the Audit Committee. Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Bank’s compliance, in all material respects, with the requirements contained in the Regulations as applicable to the Bank for the year ended 31 December 2021. Lahore KPMG Taseer Hadi & Co. Chartered Accountants Date: February 24, 2022 UDIN: CR202110183KQJxlgrey KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 48 Askari Bank Limited
51. UNCONSOLIDATED FINANCIAL STATEMENTS OF ASKARI BANK LIMITED FOR THE YEAR ENDED DECEMBER 31 , 2021
52. KPMG Taseer Hadi & Co. Chartered Accountants 351 Shadman-1, Jail Road, Lahore 54000 Pakistan +92 (42) 111-KPMGTH (576484), Fax +92 (42) 3742 9907 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ASKARI BANK LIMITED REPORT ON THE AUDIT OF THE UNCONSOLIDATED FINANCIAL STATEMENTS Opinion We have audited the annexed unconsolidated financial statements of Askari Bank Limited (“the Bank”), which comprise the unconsolidated statement of financial position as at 31 December 2021 and the unconsolidated profit and loss account, the unconsolidated statement of comprehensive income, the unconsolidated statement of changes in equity and the unconsolidated statement of cash flows for the year then ended, along with unaudited certified returns received from the branches except for 25 branches which have been audited by us and notes to the unconsolidated financial statements, including a summary of significant accounting policies and other explanatory information and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit. In our opinion and to the best of our information and according to the explanations given to us, the unconsolidated statement of financial position, the unconsolidated profit and loss account, the unconsolidated statement of comprehensive income, the unconsolidated statement of changes in equity and the unconsolidated statement of cash flows together with the notes forming part thereof conform with the accounting and reporting standards as applicable in Pakistan, and, give the information required by the Banking Companies Ordinance, 1962 and the Companies Act, 2017 (XIX of 2017), in the manner so required and respectively give a true and fair view of the state of the Bank’s affairs as at 31 December 2021 and of the profit and other comprehensive loss, the changes in equity and its cash flows for the year then ended. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Unconsolidated Financial Statements section of our report. We are independent of the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the unconsolidated financial statements of the current year. These matters were addressed in the context of our audit of the unconsolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 50 Askari Bank Limited
53. KPMG Taseer Hadi & Co. Following are the Key Audit Matters: S. No. Key Audit Matters 1 Provision against advances How the matter was addressed in our audit Refer to note 9 and the accounting policies in notes Our audit procedures in respect of provision against loans and advances included the following: 4.6 to the unconsolidated financial statements. The Bank makes provision against advances on a time-based criteria that involves ensuring that all nonperforming loans and advances are classified in accordance with the time based criteria specified in the Prudential Regulations (PRs) issued by the State Bank of Pakistan (SBP). In addition to the above time-based criteria the PRs require a subjective evaluation of the credit worthiness of borrowers to determine the classification of advances. The PRs also require the Bank to recognize general provision against advances portfolio. •Assessing the design and operating effectiveness of manual and automated controls over classification and provisioning of advances including: - The accuracy of data input into the system used for disbursement and recovery of credit facilities; - Controls over correct classification of non-performing advances on time-based criteria; - Controls over accurate computation and recording of provisions; and - Controls over the governance and approval process related to provision. The Bank has recognized a net provision of Rs. 3.87 billion against advances in the current year. The Bank’s advances to the customers represent • Testing, on a sample basis, credit exposures identified by the management as displaying 37.92% of its total assets as at 31 December 2021 indicators of impairment, assessed the number and are stated at Rs. 477.58 billion which is net of of days overdue and assessed appropriateness provision of Rs. 30.22 billion at the year end. of amount reported for provision in accordance with the PRs; The determination of provision against advances based on the above criteria remains a significant area of judgement, requiring compliance with • Testing, on a sample basis, credit exposure where the management has not identified Prudential Regulations issued by State Bank of as displaying indicators of impairment Pakistan, requiring significant time and resource challenged the management’s assessment by to audit because of its significance and inherent reviewing the historical performances, account risk of material misstatement and the materiality movement, financial ratios and reports on of advances relative to the overall unconsolidated security maintained and formed our own view statement of financial position of the Bank , we whether any impairment indicators are present; considered the area of provision against advances as a key audit matter. • For consumer advances, verifying, on sample basis, repayments of loan / markup installments and checking that performing loans have been correctly classified and categorized; and • Checking, on a sample basis, accuracy of specific provision against non-performing advances and of general provision against consumer and SME advances by recomputing the provision made in accordance with the criteria prescribed under the PRs. KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Annual Report 2021 51
54. KPMG Taseer Hadi & Co. S. No. Key Audit Matters 2 Valuation of Investments How the matter was addressed in our audit Refer to note 8 and the accounting policies in notes Our procedures in respect of investments included the following: 4.5 to the unconsolidated financial statements. valuation of • Assessing the design and tested the operating As at 31 December 2021, the Bank has investments effectiveness of the relevant controls in place classified as “Available-for-sale” and “Held to relating to valuation of investments; maturity”, amounting to Rs. 616.19 billion which in aggregate represent 48.93 % of the total assets of • Performing recalculation and checking, on a the Bank. sample basis, the valuation of investments to supporting documents, externally quoted The significant portion of the investments comprise market prices and break-up values; and of equity, debt and government securities. Investments are carried at cost or fair value in • Evaluating the management’s assessment accordance with the Bank’s accounting policy of available for sale and held to maturity relating to their recognition and measurement. investments for any additional impairment in Provision against investments is made based on accordance with the Bank’s accounting policies impairment policy of the Bank which includes both and performed an independent assessment of objective and subjective factors. the assumptions. We identified assessing the carrying value of the investment as a key audit matter because of its significance to the financial statements and because assessing the key impairment assumptions involves a significant degree of management judgment. Information Other than the Unconsolidated Financial Statements and Auditor’s Report Thereon Management is responsible for the other information. The other information comprises the information included in the Bank’s Annual Report but does not include the unconsolidated financial statements and our auditors’ report thereon. Our opinion on the unconsolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the unconsolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the unconsolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and the Board of Directors for the Unconsolidated Financial Statements Management is responsible for the preparation and fair presentation of the unconsolidated financial statements in accordance with accounting and reporting standards as applicable in Pakistan, the requirements of Banking Companies Ordinance, 1962 and the Companies Act, 2017 (XIX of 2017) and for such internal control as management determines is necessary to enable the preparation of unconsolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the unconsolidated financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 52 Askari Bank Limited
55. KPMG Taseer Hadi & Co. The Board of directors is responsible for overseeing the Bank’s financial reporting process. Auditor’s Responsibilities for the Audit of the Unconsolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the unconsolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these unconsolidated financial statements. As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the unconsolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the unconsolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the unconsolidated financial statements, including the disclosures, and whether the unconsolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide to the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the unconsolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Annual Report 2021 53
56. KPMG Taseer Hadi & Co. Report on Other Legal and Regulatory Requirements: Based on our audit, we further report that in our opinion: a) proper books of account have been kept by the Bank as required by the Companies Act, 2017 (XIX of 2017) and the returns referred above from the branches have been found adequate for the purpose of our audit; b) the unconsolidated statement of financial position, the unconsolidated profit and loss account, the unconsolidated statement of comprehensive income, the unconsolidated statement of changes in equity and the unconsolidated statement of cash flows together with the notes thereon have been drawn up in conformity with the Banking Companies Ordinance, 1962 and the Companies Act, 2017(XIX of 2017) and are in agreement with the books of account and returns; c) investments made, expenditure incurred and guarantees extended during the year were in accordance with the objects and powers of the Bank and the transactions of the Bank which have come to our notice have been within the powers of the Bank; and d) zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Bank and deposited in the Central Zakat Fund established under section 7 of that Ordinance. We confirm that for the purpose of our audit we have covered more than sixty per cent of the total loans and advances of the Bank. The engagement partner on the audit resulting in this independent auditor’s report is M. Rehan Chughtai. Lahore KPMG Taseer Hadi & Co. Chartered Accountants Date: February 24, 2022 UDIN: AR202110183rnKcDCsBp KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 54 Askari Bank Limited
57. UNCONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31 , 2021 Rupees in ‘000 Note 20212020 Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Fixed assets Intangible assets Deferred tax assets Other assets 5 6 7 8 9 10 11 12 13 89,432,245 3,454,829 – 616,361,158 477,588,237 20,166,875 1,183,265 5,168,183 45,789,317 73,651,718 7,954,288 – 449,687,240 395,373,840 21,213,709 1,143,146 1,623,001 41,870,120 Liabilities 1,259,144,109 992,517,062 Bills payable 14 Borrowings 15 Deposits and other accounts 16 Liabilities against assets subject to finance lease Subordinated debts 17 Deferred tax liabilities Other liabilities 18 10,235,374 123,563,761 1,015,430,068 – 12,000,000 – 42,012,413 12,629,996 84,163,669 791,186,883 – 12,000,000 – 37,990,164 1,203,241,616 937,970,712 Net Assets Represented By 55,902,493 54,546,350 Share capital 19 Reserves Surplus on revaluation of assets - net of tax 20 Unappropriated profit 12,602,602 32,730,297 1,963,619 8,605,975 12,602,602 25,632,015 7,637,784 8,673,949 Contingencies and Commitments21 55,902,493 54,546,350 The annexed notes 1 to 48 and Annexures I and II form an integral part of these unconsolidated financial statements. Saleem Anwar Chief Financial Officer Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman Annual Report 2021 55
58. UNCONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note Mark-up / return / interest earned Mark-up / return / interest expensed 23 24 Net mark-up / interest income Non mark-up / interest income Fee and commission income 25 Dividend income Foreign exchange income Income / (loss) from derivatives Gain on securities 26 Other income 27 20212020 77,549,921 45,140,200 79,105,095 48,842,285 32,409,721 30,262,810 4,609,146 420,138 3,123,524 – 814,724 402,118 3,851,224 272,522 2,673,493 – 2,555,512 341,057 Total non-markup / interest income 9,369,650 9,693,808 Total income Non mark-up / interest expenses 41,779,371 39,956,618 Operating expenses Workers’ welfare fund Other charges 20,890,525 213,484 90,139 20,123,495 42,982 48,149 Total non-markup / interest expenses 21,194,148 20,214,626 Profit before provisions 20,585,223 19,741,992 28 29 30 Provisions and write offs - net 31 Extraordinary / unusual items 4,939,950 – 1,974,747 – Profit before taxation 15,645,273 17,767,245 Taxation (5,943,887) (6,966,870) 32 Profit after taxation 9,701,386 10,800,375 Rupees Basic and diluted earnings per share 33 7.70 8.57 The annexed notes 1 to 48 and Annexures I and II form an integral part of these unconsolidated financial statements. Saleem Anwar Chief Financial Officer 56 Askari Bank Limited Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman
59. UNCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note Profit after taxation for the year 20212020 9,701,386 10,800,375 264,837 9,514 (5,012,819) 1,584,923 (4,747,982) 1,594,437 Other comprehensive income Items that may be reclassified to profit and loss account in subsequent periods: Effect of translation of net investment in foreign branch Movement in (deficit) / surplus on revaluation of investments - net of tax 20 Items that will not be reclassified to profit and loss account in subsequent periods: Remeasurement gain / (loss) on defined benefit plan - net of tax 36.7 Movement in surplus on revaluation of operating fixed assets 20.1 Movement in surplus on revaluation of non-banking assets 20.2 14,858 – 168,662 (44,926) 1,529,292 299,944 183,520 1,784,310 Total comprehensive income 5,136,924 14,179,122 The annexed notes 1 to 48 and Annexures I and II form an integral part of these unconsolidated financial statements. Saleem Anwar Chief Financial Officer Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman Annual Report 2021 57
60. UNCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Share capital Balance as at January 1, 2020 12,602,602 ExchangeShare translation premium Statutory reserve account reserve 275,169 234,669 10,098,551 Surplus / (deficit) on revaluation of General Investments Fixed / non - Unappropriated reserve banking assets profit / (loss) 8,757,871 (1,534,291) 5,834,717 Total 5,986,556 42,255,844 Total comprehensive income for the year ended December 31, 2020 Profit after taxation for the year ended December 31,2020 – Other comprehensive income – Transfer to: Statutory reserve General reserve – – – – – 2,160,075 – – – 4,096,166 – – – (2,160,075) – (4,096,166) – – – – – 2,160,075 – – (6,256,241) – – – – – – – – – – – – – 12,602,602 284,683 – – Transfer from surplus on revaluation of assets to unappropriated profit – – – – 9,514 – – – 1,584,923 1,829,236 4,096,166 – – 10,800,375 10,800,375 (76,801) (44,926) 3,378,747 78,575 1,774 Transaction with owners, recorded directly in equity Final dividend 2019: Rs. 1.5 per share Balance as at January 1, 2021 234,669 12,258,626 12,854,037 – (1,890,390) (1,890,390) 50,632 7,587,152 8,673,949 54,546,350 Total comprehensive income for the year ended December 31, 2021 Profit after taxation for the year ended December 31,2021 Other comprehensive income Transfer to: Statutory reserve General reserve – Transfer from surplus on revaluation of assets to unappropriated profit on disposal Transaction with owners, recorded directly in equity Final dividend 2020: Rs. 3 per share Balance as at December 31, 2021 264,837 – – – – – – – (5,012,819) – 9,701,386 9,701,386 168,662 14,858 (4,564,462) – – – – – 1,940,277 – – – 4,893,168 – – – (1,940,277) – (4,893,168) – – – – – 1,940,277 4,893,168 – – (6,833,445) – – – – – – – – – – – – – 12,602,602 549,520 (830,008) 830,008 – (3,780,781) (3,780,781) 234,669 14,198,903 17,747,205 (4,962,187) 6,925,806 8,605,975 55,902,493 The annexed notes 1 to 48 and Annexures I and II form an integral part of these unconsolidated financial statements. Saleem Anwar Chief Financial Officer 58 Askari Bank Limited Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director – Waqar Ahmed Malik Chairman
61. UNCONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note 20212020 Cash flow from operating activities Profit before taxation Less: dividend income 15,645,273 (420,138) 17,767,245 (272,522) 15,225,135 17,494,723 Adjustments: Depreciation 967,122 1,101,398 Amortization 180,862 226,911 Depreciation on ROU assets 1,342,713 1,498,351 Markup expense on lease liability against ROU assets 894,286 891,977 Termination of lease contracts under IFRS - 16 Leases 250 81 Charge for defined benefit plans 391,288 466,626 Provisions and write offs - net 31 5,050,329 2,087,955 Gain on sale of fixed assets (20,501) (23,768) 8,806,349 6,249,531 (Increase) / decrease in operating assets Lendings to financial institutions Held for trading securities Advances Other assets (excluding advance taxation) 24,031,484 23,744,254 – – (85,996,563) (4,479,587) 14,075,190 41,591 (23,271,079) (2,281,037) Increase / (decrease) in operating liabilities Bills payable Borrowings from financial institutions Deposits Other liabilities (excluding current taxation) (90,476,150) (11,435,335) (2,394,622) 39,400,092 224,243,185 4,337,625 (3,138,951) 32,975,988 111,887,397 (164,243) 265,586,280 141,560,191 Payment made to defined benefit plan / compensated absences Income tax paid 199,141,614 (374,161) (6,433,669) 153,869,110 (49,593) (6,586,744) Net cash flow generated from operating activities 192,333,784 147,232,773 Cash flow from investing activities Net investments in available for sale securities Net investments in held to maturity securities Acquisition of further interest in subsidiary Dividend received Investments in operating fixed assets Investments in intangible assets Proceeds from sale of fixed assets Effect of translation of net investment in foreign branch (149,515,015) (25,559,592) – 426,282 (739,812) (261,601) 31,562 264,837 (122,115,655) (18,133,770) (50,830) 267,061 (1,011,376) (555,767) 33,025 9,514 Net cash flow used in investing activities (175,353,339) (141,557,798) Cash flow from financing activities Receipts of subordinated debts - net Payments against lease liabilities Dividends paid – (1,965,692) (3,733,683) 2,008,000 (1,549,511) (1,871,397) Net cash flow used in financing activities (5,699,375) (1,412,908) Increase in cash and cash equivalents 11,281,070 4,262,067 Cash and cash equivalents at beginning of the year 81,606,012 77,343,945 34 Cash and cash equivalents at end of the year 34 92,887,082 81,606,012 The annexed notes 1 to 48 and Annexures I and II form an integral part of these unconsolidated financial statements. Saleem Anwar Chief Financial Officer Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman Annual Report 2021 59
62. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 1. STATUS AND NATURE OF BUSINESS Askari Bank Limited (the Bank) was incorporated in Pakistan on October 9, 1991 as a Public Limited Company and is listed on the Pakistan Stock Exchange. The registered office of the Bank is situated at AWT Plaza, the Mall, Rawalpindi. The Bank is a scheduled commercial bank and is principally engaged in the business of banking as defined in the Banking Companies Ordinance, 1962. The Fauji Consortium: comprising of Fauji Foundation (FF), Fauji Fertilizer Company Limited (FFCL) and Fauji Fertilizer Bin Qasim Limited (FFBL) collectively owned 71.91 (2020: 71.91) percent shares of the Bank as on December 31, 2021. The ultimate parent of the Bank is Fauji Foundation. The Bank has 560 branches (2020: 537 branches); 559 in Pakistan and Azad Jammu and Kashmir including 101 (2020: 95) Islamic Banking branches and 56 (2020: 49) sub-branches and a Wholesale Bank Branch (WBB) in the Kingdom of Bahrain. 2. BASIS OF PRESENTATION These unconsolidated financial statements have been presented in accordance with the requirements of format prescribed by the State Bank of Pakistan’s BPRD Circular No. 2 dated January 25, 2018. 2.1 These unconsolidated financial statements are separate financial statements of the Bank in which the investments in subsidiary are stated at cost and have not been accounted for on the basis of reported results and net assets of the investees which is done in consolidated financial statements. In accordance with the directives of the Federal Government regarding shifting of the banking system to Islamic modes, the SBP has issued various circulars from time to time. One permissible form of trade related mode of financing comprises of purchase of goods by the Bank from its customers and resale to them at appropriate mark-up in price on a deferred payment basis. The purchases and sales arising under these arrangements are not reflected in these unconsolidated financial statements as such but are restricted to the amount of facilities actually utilized and the appropriate portion of profit thereon. The financial results of the Islamic banking branches have been consolidated in these unconsolidated financial statements for reporting purposes, after eliminating material inter-branch transactions / balances. Key figures of the Islamic banking branches are disclosed in Annexure - II to these unconsolidated financial statements. Items included in the unconsolidated financial statements are measured using the currency of the primary economic environment in which the Bank operates. The unconsolidated financial statements are presented in Pak. Rupee, which is the Bank’s functional and presentation currency. Figures have been rounded off to the nearest thousand of rupees unless otherwise stated. STATEMENT OF COMPLIANCE These are unconsolidated financial statements and have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan. The accounting and reporting standards comprise of: – International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Act, 2017; – Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan as are notified under the Companies Act, 2017; – Provisions of and directives issued under the Banking Companies Ordinance, 1962 and Companies Act, 2017; and – Directives issued by the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP). 60 Askari Bank Limited
63. Wherever the requirements of the Banking Companies Ordinance , 1962, the Companies Act, 2017 or the directives issued by the SBP and the SECP differ with the requirements of IFRS or IFAS the requirements of the Banking Companies Ordinance, 1962, the Companies Act, 2017 and the said directives, shall prevail. The State Bank of Pakistan has deferred the applicability of IFAS 3 ‘Profit and Loss Sharing on Deposits’, vide BPRD Circular No.04 dated February 25, 2015, International Accounting Standard 39,”Financial Instruments: Recognition and Measurement” (IAS 39) and International Accounting Standard 40, Investment Property, vide BSD Circular Letter no. 10 dated August 26, 2002, for banking companies till further instructions. Further, the SECP, through SRO 411(1)/2008 dated April 28, 2008, has deferred the applicability of IFRS 7, Financial Instruments: Disclosures, to banks. Additionally, the SBP vide BPRD Circular Letter No. 24 of 2021 dated July 5, 2021 has deferred the applicability of IFRS 9 to banks to accounting periods beginning on or after January 1, 2022. Accordingly, the requirements of these standards have not been considered in the preparation of these unconsolidated financial statements. However, investments have been classified and valued in accordance with the requirement prescribed by the SBP through various circulars. IFRS10 Consolidated Financial Statements was made applicable from period beginning on or after January 01, 2015 vide SRO 633(I)/2014 dated July 10, 2014 by SECP. However, SECP has directed through SRO 56(I) /2016 dated January 28, 2016, that the requirements of consolidation under section 228 of Companies Act 2017 and IFRS-10 “Consolidated Financial Statements” is not applicable in case of investment by companies in mutual funds established under Trust structure. Accordingly, the requirements of these standards have not been considered in the preparation of these unconsolidated financial statements. 2.2 2.3 Standards, interpretations of and amendments to published approved accounting standards that are effective in the current year There are certain new and amended standards, interpretations and amendments that have become applicable to the Bank for accounting periods beginning on or after January 1, 2021. These are considered either not relevant or not to have any significant impact on the Bank’s unconsolidated financial statements. Standards, interpretations of and amendments to published approved accounting standards that are not yet effective Following standards and amendments to published accounting standards will be effective in future periods and have not been early adopted by the Bank. IAS 1 IAS 8 IAS 37 IAS 12 IAS 16 IAS 28 IAS 41 IFRS 3 IFRS 10 IFRS 16 Effective date (periods ending on or after) Presentation of Financial Statements Accounting Policies, Changes in Accounting Estimates and Errors (Amendments) Provisions, Contingent Liabilities Income Taxes (Amendments) Property, Plant and Equipment (Amendments) Investments in Associates and Joint Ventures (Amendments) Agriculture (Amendments) Business Combinations Consolidated Financial Statements (Amendments) Leases (Amendments) January 1, 2023 January 1, 2023 January 1, 2022 January 1, 2023 January 1, 2022 Not yet finalized January 1, 2022 January 1, 2022 Not yet finalized January 1, 2022 As per the SBP’s BPRD Circular Letter no. 24 dated July 05, 2021, the applicability of IFRS 9 to banks in Pakistan has been deferred to accounting periods beginning on or after January 01, 2022. The impact of the application of Annual Report 2021 61
64. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 IFRS 9 in Pakistan on the Bank’s financial statements is being assessed and final implementation guidelines are awaited. Accordingly, the impact on initial application of IFRS 9 cannot be determined as required under IAS 8. Except for the implementation of IFRS 9 in Pakistan, The Bank expects that adoption of the amendments to existing accounting and reporting standards will not affect its financial statements in the period of initial application. IFRS 9, Financial Instruments: Classification and Measurement, addresses recognition, classification, measurement and derecognition of financial assets and financial liabilities. The standard has also introduced a new impairment model for financial assets which requires recognition of impairment charge based on an ‘expected credit losses’ (ECL) approach rather than the ‘incurred credit losses’ approach as currently followed. The ECL approach has an impact on all assets of the Bank which are exposed to credit risk. There are other new and amended standards and interpretations that are mandatory for the Bank’s accounting periods beginning on or after January 1, 2022 but are considered either not relevant or do not have any significant effect on the Bank’s operations and are therefore not detailed in these unconsolidated financial statements. 2.4 3. 62 Critical accounting estimates and judgments The preparation of unconsolidated financial statements in conformity with the approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Bank’s accounting policies. Estimates and judgments are continually evaluated and are based on historical experiences, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. The areas where assumptions and estimates are significant to the Bank’s financial statements or where judgment was exercised in the application of accounting policies are as follows: i) classification of investments (note 4.5) ii) provision against investments (note 4.5), advances (note 4.6) and fixed assets (note 4.7) iii) valuation of available for sale securities (note 4.5) iv) impairment of available for sale and held to maturity securities (note 4.5.2 and 4.17) v) useful life of property and equipment, intangible assets and revaluation of land (note 4.7) and non-banking assets acquired in satisfaction of claims (note 4.18) vi) staff retirement benefits (note 4.13) vii) taxation (note 4.16) viii) IFRS 16 - Leases (note 4.9) ix) Fair value of derivatives (note 4.22) BASIS OF MEASUREMENT These unconsolidated financial statements have been prepared under the historical cost convention as modified for certain investments and derivative financial instruments which are carried at fair value, non-banking assets acquired in satisfaction of claims, freehold and leasehold land which are shown at revalued amounts and staff retirement gratuity and compensated absences which are carried at present value. Askari Bank Limited
65. 4 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these unconsolidated financial statements. 4.1 Changes in accounting policies 4.2 There has been no change in the accounting policies implemented by the Bank during the current year. Cash and cash equivalents comprise of cash and balances with treasury banks, balances with other banks and call money lending. 4.3 4.4 Cash and cash equivalents Lending (reverse repo) Consideration for securities purchased under resale agreement (reverse repo) are included in lending to financial institutions. The difference between purchase and resale price is recognized as mark-up / return earned on a time proportion basis. Reverse repo balances are reflected under lending to financial institutions. Bai Muajjal receivable from other financial institutions In Bai Muajjal, the Bank sells Sukuk on deferred payment basis to other financial institutions. The deferred price is agreed at the time of sale and such proceeds are received at the end of the credit period. Bai Muajjal balances are reflected under lending to financial institutions. Bai Muajjal with the Federal Government is classified as investment. 4.5Investments Investments are classified as follows: Held for trading These represent securities acquired with the intention to trade by taking advantage of short-term market / interest rate movements and are to be sold within 90 days of acquisition. Available for sale These represent securities which do not fall under ‘held for trading’ or ‘held to maturity’ categories. Held to maturity These represent securities acquired with the intention and ability to hold them upto maturity. 4.5.1 Initial measurement All purchases and sales of investments that require delivery within the time frame established by regulation or market convention are recognized at trade date, which is the date at which the Bank commits to purchase or sell the investments except for money market and foreign exchange contracts, other than ready market transactions, which are recognized at settlement date. In case of investments classified as held for trading, transaction costs are expensed through profit and loss account. Transaction costs associated with investments other than those classified as held for trading are included in the cost of investments. 4.5.2 Subsequent measurement Held for trading These are marked to market and surplus / deficit arising on revaluation of ‘held for trading’ investments is taken to profit and loss account in accordance with the requirements prescribed by the SBP through various circulars. Annual Report 2021 63
66. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Available for sale In accordance with the requirements various circulars of SBP, available for sale securities for which ready quotations are available on Reuters Page (PKRV) or Stock Exchanges are valued at market value and the resulting surplus / deficit is taken through “Statement of Comprehensive Income (OCI)” and is shown in the shareholders’ equity in the unconsolidated statement of financial position. Unquoted equity securities are valued at the lower of cost and break-up value. Break-up value of equity securities is calculated with reference to the net assets of the investee as per the latest audited financial statements. If the break-up value is less than cost the difference is included in profit and loss account. Unquoted debt securities are valued using the market value of secondary market where available. Investments in other unquoted securities are valued at cost less impairment losses. Held to maturity These are carried at amortized cost less impairment, determined in accordance with the requirements of Prudential Regulations issued by the SBP. Investment in subsidiaries and associates Investments in subsidiaries and associates are carried at cost less impairment, if any. 4.6Advances Advances are stated net of specific and general provisions. Specific provision is determined in accordance with the requirements of the Prudential Regulations issued by the SBP from time to time. In addition, a general provision is maintained for advances against consumer and small enterprises in accordance with the requirements of Prudential Regulations and provision based on historical loan experience. General and specific provisions pertaining to overseas advances are made in accordance with the requirements of the regulatory authorities of the respective countries. The provisions against non-performing advances are charged to the profit and loss account. Advances are written off when there is no realistic prospect of recovery. The Bank reviews its loan portfolio to assess the amount of non-performing advances and provision required there against on regular basis. While assessing this requirement various factors including the delinquency in the account, financial position of the borrowers and the requirements of the Prudential Regulations are considered. 4.6.1 Finance lease receivables Leases where the Bank transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee are classified as finance leases. A receivable is recognized at an amount equal to the present value of the lease payments including any guaranteed residual value. Finance lease receivables are included in advances to the customers. 4.6.2 Islamic financing and related assets Ijarahs booked under Islamic Financial Accounting Standard 2 - Ijarah (IFAS - 2) are stated at cost less accumulated depreciation and impairment if any, and are shown under advances. Depreciation on Ijarah assets is charged to profit and loss account by applying the straight line method whereby the depreciable value of Ijarah assets is written off over the Ijarah period. The Bank charges depreciation from the date of delivery of respective assets to Mustajir upto the date of maturity / termination of Ijarah agreement. Impairment of Ijarah assets is determined in accordance with the Prudential Regulations issued by the SBP. 64 Askari Bank Limited
67. In Murabaha transactions , the Bank purchases the goods through its agent or client and after taking the possession, sells them to the customer on cost plus profit basis either in a spot or credit transaction. Under Murabaha financing, funds disbursed for purchase of goods are recorded as ‘Advance against Murabaha finance’. On culmination of Murabaha i.e. sale of goods to customers, Murabaha financing are recorded at the deferred sale price. Goods purchased but remaining unsold at the statement of financial position date are recorded as inventories. The Bank values its inventories at the lower of cost and net realizable value. The net realizable value is the estimated selling price in the ordinary course of business less the estimated cost necessary to make the sale. Cost of inventories represents actual purchases made by the Bank / customers as the agent of the Bank for subsequent sale. In Salam financing, the Bank pays full in advance to its customer for buying specified goods / commodities to be delivered to the Bank within an agreed time. The goods are then sold and the amount financed is received back by the Bank along with profit. In Musharakah a relationship is established under a contract by the mutual consent of the Bank and the customer for sharing of profits and losses arising from a joint enterprise or venture. Diminishing Musharakah (DM) is a form of co-ownership in which Bank and the customer share the ownership of a tangible asset in an agreed proportion and customer undertakes to buy in periodic installments the proportionate share of the Bank until the title to such tangible asset is completely transferred to the customer. In Istisna financing, the Bank acquires the described goods to be manufactured by the customer from raw material of its own and deliver to the Bank within an agreed time. The goods are then sold and the amount financed is received back by the Bank along with profit. In Running Musharakah based financing, the Bank enters into financing with the customer based on Shirkat-ulAqd or Business Partnership in the customer’s operating business where the funds can be withdrawn or refunded during the Musharakah period. 4.7 Fixed assets and depreciation Capital work-in-progress Capital work-in-progress is stated at cost less impairment losses, if any. Fixed assets are stated at cost less impairment losses and accumulated depreciation except for freehold / leasehold land. Land is carried at revalued amounts which is not depreciated. Land is revalued by professionally qualified valuers with sufficient regularity to ensure that the carrying amount does not differ materially from their fair value. Major renewals and improvements are capitalized. Gains and losses on disposal of operating fixed assets are taken to the profit and loss account. Surplus arising on revaluation of fixed assets is credited to the surplus on revaluation of assets account and is shown under the shareholders’ equity in the unconsolidated statement of financial position. Except to the extent actually realized on disposal of land which are revalued, the surplus on revaluation of land shall not be applied to set-off or reduce any deficit or loss, whether past, current or future, or in any manner applied, adjusted or treated so as to add to the income, profit or surplus of the Bank or utilized directly or indirectly by way of dividend or bonus. Surplus on revaluation of fixed assets (net of associated deferred tax) to the extent of the incremental depreciation charged on the related assets is transferred to unappropriated profit. Property and equipment Annual Report 2021 65
68. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Intangible assets Intangible assets are stated at cost less accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized from the month when these assets are available for use, using the straight line method, whereby the cost of the intangible assets are amortized over its estimated useful lives over which economic benefits are expected to flow to the Bank. The useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. 4.8 4.9 66 Depreciation / amortization Depreciation / amortization is computed on monthly basis over the estimated useful lives of the related assets at the rates set out in note 10.2 and 11.1 respectively on monthly basis. The cost of assets is depreciated / amortized on straight line basis, except for buildings which are depreciated on reducing balance method. Depreciation / amortization is charged for the full month of purchase / acquisition / availability for use of an asset while no depreciation / amortization is charged in the month of disposal of an asset. Maintenance and normal repairs are charged to profit and loss account as and when incurred. In making estimates of the depreciation / amortization, the management uses useful life and residual value which reflects the pattern in which economic benefits are expected to be consumed by the Bank. The useful life and the residual value are reviewed at each financial year end and any change in these estimates in future years might effect the carrying amounts of the respective item of operating fixed assets with the corresponding effect on depreciation / amortization charge. Assets held for sale Non-current assets and associated liabilities are classified as held for sale when their carrying amount will be recovered principally through a sale transaction rather than continuing use and a sale is highly probable. Assets designated as held for sale are carried at the lower of carrying amount at designation and fair value less costs to sell, if fair value can reasonably be determined. IFRS 16 - Leases A lessee recognizes a right-of-use (ROU) asset representing its right of using the underlying asset and a corresponding lease liability representing its obligations to make lease payments. Lease liabilities are initially measured at the present value of lease payment, discounted using the Bank’s contract wise incremental borrowing rate. The lease liabilities are subsequently measured at amortized cost using the effective interest rate method. The lease liability is also remeasured to reflect any reassessment or change in lease terms. These remeasurements of lease liabilities are recognised as adjustments to the carrying amount of related ROU assets after the date of initial recognition. Each lease payment is allocated between a reduction of the liability and a finance cost. The finance cost is charged to the profit and loss account as markup expense over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The ROU assets are initially measured based on the initial amount of the lease liability plus any initial direct costs incurred. ROU assets are subsequently stated at cost less any accumulated depreciation. The ROU assets are depreciated on a straight line basis over the lease term as this method most closely reflects the expected pattern of consumption of future economic benefits. The estimated useful lives of ROU assets are determined on the same basis as that used for owned assets. The ROU assets are reduced by impairment losses, if any, and adjusted for certain remeasurements of lease liability. Askari Bank Limited
69. 4 .10 Borrowings (Repo) Consideration received against securities sold under repurchase agreement (repo) are included in borrowings from financial institutions. The difference between sale and repurchase price is recognized as mark-up / return expensed on a time proportion basis. 4.11Deposits Deposits are recorded at the fair value of proceeds received. Markup accrued on deposits is recognized separately as part of other liabilities and is charged to profit and loss account on a time proportion basis. The Bank generates deposits in two modes i.e. “Qard” and “Modaraba” under Islamic Banking Operations. Deposits taken on Qard basis are classified as ‘Current Accounts’ and deposits generated on Modaraba basis are classified as ‘Saving Accounts’ and ‘Fixed Deposit Accounts’. 4.12 Subordinated debts Subordinated debts are initially recorded at the amount of proceeds received. Mark-up on subordinated debts is charged to the profit and loss account over the period on accrual basis. 4.13 Staff retirement benefits Defined benefit plan The Bank operates an approved funded gratuity scheme for all its regular employees. Contributions are made in accordance with the actuarial recommendation. The actuarial valuation is carried out periodically using “Projected Unit Credit Method”. Actuarial gain / losses arising from experience adjustment and changes in actuarial assumptions are recognized in other comprehensive income in the period of occurrence. Certain actuarial assumptions have been adopted as disclosed in note 36 of these unconsolidated financial statements for the actuarial valuation of staff retirement benefit plans. Actuarial assumptions are entity’s best estimates of the variables that will determine the ultimate cost of providing post employment benefits. Changes in these assumptions in future years may affect the liability / asset under these plans in those years. Defined contribution plan The Bank operates a recognized provident fund scheme for all its regular employees for which equal monthly contributions are made both by the Bank and by the employees at the rate of 8.33% of the basic salary of the employee. Compensated absences The Bank provides compensated absences to all its regular employees. Liability for unfunded scheme is recognized on the basis of actuarial valuation using the “Projected Unit Credit Method”. Provision for the year is charged to unconsolidated profit and loss account. The amount recognized in the unconsolidated statement of financial position represents the present value of defined benefit obligations. Actuarial gain / losses arising from experience adjustment and changes in actuarial assumptions are recognized in the profit and loss account in the period of occurrence. 4.14 Foreign currencies Foreign currency transactions Foreign currency transactions other than results of foreign operations are translated into Pak. Rupee at the exchange rates prevailing on the date of transaction. Monetary assets and liabilities in foreign currencies are translated to Pak. Rupee at the exchange rates prevailing at the reporting date. Forward transactions in foreign currencies and foreign bills purchased are valued at the rates applicable to the remaining maturities. Exchange gains and losses are included in unconsolidated profit and loss account currently. Annual Report 2021 67
70. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Foreign operation The assets and liabilities of Wholesale Bank Branch are translated to Pak. Rupee at exchange rates prevailing at the date of unconsolidated statement of financial position. The income and expenses of foreign operations are translated at the average rate of exchange for the year. Translation gains and losses Translation gains and losses are included in unconsolidated profit and loss account, except those arising on translation of the Bank’s net investment in foreign operations which are taken to equity under “Exchange Translation Reserve” through other comprehensive income and on disposal are recognized in unconsolidated profit and loss account. Commitments Commitments for outstanding forward foreign exchange contracts are disclosed in these unconsolidated financial statements at committed amounts. Contingent liabilities / commitments for letters of credit and letters of guarantee denominated in foreign currencies are expressed in Rupee terms at the rates of exchange prevailing at the statement of financial position date. 4.15 Revenue recognition Mark-up / interest on advances and return on investments is recognized on time proportionate basis except on classified advances and investments which is recognized on receipt basis. Mark-up / interest on rescheduled / restructured advances and investments is recognized as permitted by the regulations of the SBP or overseas regulatory authority of the country where branch operates, except where in the opinion of the management it would not be prudent to do so. Where debt securities are purchased at a premium or discount, such premium / discount is amortised through the profit and loss account over the remaining period of maturity using effective yield method. Fees and commission income is recognized at the time of performance of service. Dividend income is recognized when Bank’s right to receive the income is established. Gains or losses on sale of investments are recognized in unconsolidated profit and loss account. Unrealized lease income is suspended on classified leases, in accordance with the requirements of the Prudential Regulations issued by the SBP. Gains / losses on termination of lease contracts, documentation charges, frontend fees and other lease income are recognized as income on receipt basis. Profit on Murabaha sale transaction not due for the payment is deferred by recording a credit to the “Deferred Murabaha Income” account. Profits on Musharakah and Diminishing Musharakah financing are recognized on accrual basis. Profit required to be suspended in compliance with the Prudential Regulations issued by SBP is recorded on receipt basis. 68 Financing method is used in accounting for income from lease financing. Under this method, the unearned lease income (excess of the sum of the total lease rentals and estimated residual value over the cost of leased assets) is deferred and taken to income over the term of the lease period so as to produce a constant periodic rate of return on the outstanding net investment in lease. Repossessed vehicles on account of loan default are recorded in memorandum account. Profit on Salam finance is recognized on time proportionate basis. Rental income from Ijarah financing is recognised on an accrual basis. Depreciation on Ijarah asset is charged to income (net of with rental income) over the period of Ijarah using the straight line method. Profit on Istisna financing is recognised on a time proportionate basis. Askari Bank Limited
71. 4 .16Taxation Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the unconsolidated profit and loss account, except to the extent that it relates to items recognized directly in other comprehensive income, in which case it is recognized in other comprehensive income. In making the estimates for income taxes currently payable by the Bank, the management considers the current income tax laws and the decisions of appellate authorities on certain issues in the past. Current Provision for current taxation is based on taxable income at the current rates of taxation after taking into consideration available tax credits and rebates. The charge for current tax also includes adjustments where considered necessary, relating to prior years which arise from assessments framed / finalized during the year. Prior years The tax charge for prior years represents adjustments to the tax charge for prior years, arising from assessments, change in estimates and retrospectively applied changes to law, made during the year. Deferred Deferred tax is provided for by using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the date of unconsolidated statement of financial position. A deferred tax asset is recognized only to the extent that it is probable that the future taxable profit will be available and credits can be utilized. Deferred tax assets are reduced to the extent it is no longer probable that the related tax benefit will be realized. Deferred tax, on revaluation of investments, if any, is recognized as an adjustment to surplus / (deficit) arising on such revaluation. 4.17Impairment Available for sale The Bank determines that available for sale equity investments are impaired when there has been a significant or prolonged decline in the fair value of these investments below their cost. The determination of what is significant or prolonged requires judgment. In making this judgment, the Bank evaluates, among other factors, the normal volatility in share price in case of listed securities. Impairment loss on available for sale debt securities is determined in accordance with the requirements of Prudential Regulations issued by SBP. Non-financial assets The carrying amount of the Bank’s assets are reviewed at the reporting date to determine whether there is any indication of impairment. If such indication exists, the asset’s recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment loss is recognized as expense in the unconsolidated profit and loss account. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. 4.18 Non-banking assets acquired in satisfaction of claims Non-banking assets acquired in satisfaction of claims are carried at revalued amounts less accumulated depreciation and impairment, if any. These assets are revalued by professionally qualified valuers with sufficient regularity to ensure that their net carrying value does not differ materially from their fair value. Surplus arising on Annual Report 2021 69
72. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 revaluation of such properties is credited to the ‘surplus on revaluation of non banking assets’ account and any deficit arising on revaluation is taken to profit and loss account directly. Legal fees, transfer costs and direct costs of acquiring title to property are charged to profit and loss account and are not capitalized. 4.19 Other provisions Provisions are recognized when there are present, legal or constructive obligations as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amounts can be made. Provision for guarantee claims and other off balance sheet obligations is recognized when intimated and reasonable certainty exists to settle the obligations. Expected recoveries are recognized by debiting customer accounts. Charge to unconsolidated profit and loss account is stated net off expected recoveries. 4.20Off-setting Financial assets and financial liabilities are only set-off and the net amount is reported in the unconsolidated financial statements when there is a legally enforceable right to set-off the recognized amount and the Bank expects either to settle on a net basis, or to realize the assets and to settle the liabilities simultaneously. 4.21 Financial assets and liabilities Financial assets and financial liabilities are recognized at the time when the Bank becomes a party to the contractual provision of the instrument. Financial assets are de-recognized when the contractual right to future cash flows from the asset expires or is transferred along with the risk and reward of the asset. Financial liabilities are de-recognized when obligation specific in the contract is discharged, cancelled or expired. Any gain or loss on de-recognition of the financial asset and liability is recognized in the profit and loss account of the current period. The particular recognition and subsequent measurement methods adopted for significant financial assets and financial liabilities are disclosed in the individual policy statements associated with them. 4.22 Derivative financial instruments Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value using appropriate valuation techniques. All derivative financial instruments are carried as assets when fair value is positive and liabilities when fair value is negative. Any change in the fair value of derivative financial instruments is taken to the profit and loss account. The fair values of derivatives which are not quoted in active markets are determined by using valuation techniques. The valuation techniques take into account the relevant interest rates in effect at the reporting date and the rates contracted. 4.23 Appropriations subsequent to date of unconsolidated statement of financial position Appropriations subsequent to year end are recognized during the year in which those appropriations are made. 4.24 Dividend distribution and appropriation Dividends and appropriations (except for the appropriations required by law), made subsequent to the date of statement of financial position are considered as non-adjusting events and are recorded in the year in which these are approved / transfers are made. 4.25 Earnings per share 70 The Bank presents basic and diluted Earnings Per Share (EPS). Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares Askari Bank Limited
73. outstanding during the year . Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, if any. 4.26 Segment reporting A segment is a distinguishable component of the Bank that is engaged in providing products or services (business segment) or in providing product or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Bank’s primary format of reporting is based on business segments. 4.26.1Business segment Branch banking This segment consists of loans, deposits and other banking services including branchless banking services to small enterprises, medium enterprises, agriculture and individual customers. Corporate banking Corporate banking includes project financing, trade financing and working capital to corporate and commercial customers of the Bank. This segment is also involved in investment banking activities such as mergers and acquisition, underwriting, privatization, securitization, IPO’s related activities and secondary private placements. Treasury Treasury function is mainly engaged in money market activities, foreign exchange business and short term lending and borrowings from counterparties. Consumer banking Consumer banking segment provides both secured and unsecured loans to retail customers. This segment provides banking services to its customers in compliance with Shariah rules and directives, instructions and guidelines issued by SBP. Islamic banking Foreign operations Foreign operations consists of the banking activities performed through its Wholesale Bank Branch in the Kingdom of Bahrain. Head office / others This consists of banking operations not performed by any of above segments. 4.26.2Geographical segments The Bank operates in two geographic regions; Pakistan including its allied territories and the Middle East. 4.27Acceptances Acceptances comprise undertakings by the Bank to pay bills of exchange drawn on customers. The Bank expects most acceptances to be simultaneously settled with the reimbursement from the customers. Acceptances are accounted for on unconsolidated statement of financial position both as assets and liabilities. Annual Report 2021 71
74. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 5. CASH AND BALANCES WITH TREASURY BANKS In hand: Note 20212020 Local currency Foreign currencies 21,150,705 4,059,596 17,290,446 4,030,731 With the State Bank of Pakistan in: 25,210,301 21,321,177 Local currency current accounts Foreign currency current account Foreign currency deposit account 46,087,959 4,898,891 9,278,909 37,199,449 4,513,312 7,501,569 With National Bank of Pakistan in: 60,265,759 49,214,330 Local currency current accounts Prize Bonds 3,833,104 123,081 2,260,681 855,530 5.1 5.1 5.2 89,432,245 73,651,718 5.1 These represent current accounts maintained with the SBP to comply with the statutory cash reserve requirements. 5.2 This represents special cash reserve maintained with the SBP and carries mark-up at the rate of Nil (2020: Nil). Rupees in ‘000 6. BALANCES WITH OTHER BANKS In Pakistan Note 20212020 In current accounts In deposit accounts 455,110 – 230,682 151 Outside Pakistan 455,110 230,833 In current accounts In deposit accounts 6.1 1,425,930 1,573,797 2,206,020 5,517,441 Provision held against balances with other banks 2,999,727 7,723,461 (8) (6) 3,454,829 7,954,288 6.1 These represent placements with international correspondent banks, carrying interest rates upto 0.08% (2020: upto 0.45%) per annum. Rupees in ‘000 72 20212020 7. LENDINGS TO FINANCIAL INSTITUTIONS Purchase under resale arrangement of equity securities Provision held against lending to financial institutions 148,606 (148,606) Lending to financial institutions - net of provision – Askari Bank Limited 148,606 (148,606) –
75. 8 .INVESTMENTS 20212020 Rupees in ‘000 Note Cost / amortized cost Provision for diminution Carrying Cost / value amortized cost Provision for diminution Federal Government Securities Shares Units of open end mutual funds Fully paid preference shares Non Government Debt Securities Foreign securities 482,298,535 4,870,194 1,510,609 27,314 13,316,295 530,691 (50,489) (432,993) (140,558) (11,914) (1,386,785) (3,965) (8,400,351) 473,847,695 335,378,424 56,617 4,493,818 4,696,428 140,194 1,510,245 1,405,036 651 16,051 27,314 62,687 11,992,197 11,048,874 5,469 532,195 482,547 (31,877) (158,232) (140,558) (11,914) (1,422,704) (5,203) (525,781) 334,820,766 249,169 4,787,365 171,942 1,436,420 46,545 61,945 117,486 9,743,656 18,534 495,878 Held to maturity securities 502,553,638 (2,026,704) (8,134,733) 492,392,201 353,038,623 (1,770,488) 77,895 351,346,030 Federal Government Securities Non Government Debt Securities Foreign securities 120,213,557 110,000 3,757,721 (136,355) (110,000) (31,585) – 120,077,202 95,034,902 – – 110,000 – 3,726,136 3,376,784 (116,957) (110,000) (85,070) – 94,917,945 – – – 3,291,714 Subsidiary 124,081,278 (277,940) – 123,803,338 (312,027) – 98,209,659 8.1 Investments by type: Available for sale securities Askari Securities Limited 8.7 Total investments 165,619 626,800,535 – (2,304,644) Surplus / (deficit) – 165,619 98,521,686 165,619 (34,068) (8,134,733) 616,361,158 451,725,928 (2,116,583) Surplus / (deficit) – Carrying value 131,551 77,895 449,687,240 20212020 Rupees in ‘000 8.2 Investments by segments: Federal Government Securities Cost / amortized cost Provision for diminution Surplus / (deficit) Carrying Cost / value amortized cost Provision for diminution Surplus / (deficit) Carrying value Market Treasury Bills Pakistan Investment Bonds Euro Bonds GOP Bai Mujjal Ijarah Sukuks 237,198,334 320,877,899 10,925,079 4,215,092 29,295,688 – (290,335) 236,907,999 122,065,700 – (7,718,161) 313,159,738 282,938,195 (129,560) (16,614) 10,778,905 6,748,006 – – 4,215,092 5,246,146 (57,284) (375,241) 28,863,163 13,415,279 – – (115,622) – (33,212) 320,229 122,385,929 (831,857) 282,106,338 27,446 6,659,830 – 5,246,146 (41,599) 13,340,468 Shares Listed companies Unlisted companies 602,512,092 (186,844) (148,834) (525,781) 429,738,711 4,514,514 355,680 (427,313) (5,680) 56,617 – 4,143,818 350,000 4,340,748 355,680 (152,552) (5,680) 249,169 – 4,437,365 350,000 Units of open end mutual funds Fully paid preference shares Non Government Debt Securities 4,870,194 1,510,609 27,314 (432,993) (140,558) (11,914) 56,617 140,194 651 4,493,818 1,510,245 16,051 4,696,428 1,405,036 27,314 (158,232) (140,558) (11,914) 249,169 171,942 46,545 4,787,365 1,436,420 61,945 Listed Unlisted 1,641,790 11,784,505 (216,790) (1,279,995) (41,556) 104,243 1,383,444 10,608,753 2,136,636 9,022,238 (221,636) (1,311,068) 107,325 10,161 2,022,325 7,721,331 Foreign Securities 13,426,295 (1,496,785) 62,687 11,992,197 11,158,874 (1,532,704) 117,486 9,743,656 Government securities 4,288,412 (35,550) 5,469 4,258,331 3,859,331 (90,273) 18,534 3,787,592 (8,400,351) 593,924,897 430,413,326 Subsidiary Askari Securities Limited Total investments 8.7 165,619 – 626,800,535 (2,304,644) 165,619 (34,068) (8,134,733) 616,361,158 451,725,928 – 165,619 (2,116,583) – 131,551 77,895 449,687,240 Annual Report 2021 73
76. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 20212020 8.2.1 Investments given as collateral The market value of investments given as collateral is: Market Treasury Bills Pakistan Investment Bonds Euro Bonds Bahrain International Bonds Turkish Euro Bonds Turkish Sukuks Ijarah Sukuks Shares 9,967,040 31,984,000 7,386,911 – 596,977 – 4,372,827 161,829 13,715,612 7,005,600 6,442,504 501,081 – 973,391 5,069,713 191,168 8.3 Provision for diminution in value of investments 54,469,584 33,899,069 8.3.1 Opening balance 2,116,583 3,554,891 Exchange adjustments Charge / (reversals) Charge for the year (Reversal) / charge for the year under IFRS 9 related to WBB Reversals for the year 21,835 5,614 277,764 (38,547) (69,986) 491,171 41,248 (66,558) Net charge Reversal on disposals Transfer of provision against assets held for sale 169,231 (3,005) – 465,861 (1,943,851) 34,068 Closing balance 8.3.2 Particulars of provision against debt securities 2,304,644 2,116,583 2021 Rupees in ‘000 NPI 2020 Provision NPI Provision Category of classification Domestic Loss 1,496,785 1,496,785 1,532,704 1,532,704 8.3.3 In addition to the above, Bank’s Bahrain branch holds general provision of Rs 222,394 thousand (December 31, 2020: Rs 239,107 thousand) against investments in accordance with ECL requirement of IFRS 9. 74 Askari Bank Limited
77. 8 .4 Quality of available for sale securities Details regarding quality of available for sale securities are as follows: 20212020 Rupees in ‘000 Cost Federal Government Securities - Government guaranteed Market Treasury Bills Pakistan Investment Bonds Euro Bonds Ijarah Sukuks Shares 237,198,334 217,100,181 3,642,731 24,357,289 122,065,700 204,536,354 1,712,032 7,064,338 482,298,535 335,378,424 Listed Commercial banks Chemicals Fertilizer Cement Power generation and distribution Leasing companies Paper and board Engineering Insurance Oil and gas marketing companies Oil and gas exploration Textile composite Pharmaceuticals Real estate investment trust Technology and communication Transport Refinery 790,902 414,475 131,051 412,499 598,158 26,560 72,800 83,430 46,948 668,391 187,054 243,307 153,693 572,760 – 23,664 88,822 4,514,514 2021 Rupees in ‘000 Unlisted Pakistan Export Finance Guarantee Agency Limited 1Link (Pvt) Limited Pakistan Mortgage Refinance Company Limited 795,604 455,887 143,172 363,261 598,158 26,560 55,806 198,585 26,080 651,804 235,135 153,685 46,251 572,760 18,000 – – Cost 5,680 50,000 300,000 4,340,748 2020 Breakup value – 312,700 527,700 Cost Breakup value 5,680 50,000 300,000 – 230,850 486,300 355,680 840,400 355,680 Breakup value has been calculated on the basis of latest available financial statements. 717,150 Annual Report 2021 75
78. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 20212020 Cost Units of Open end mutual funds Listed National Investment Trust Limited National Investment (Unit) Trust Fund Islamic Equity Fund Asset Allocation Fund Islamic Money Market Fund Askari Asset Allocation Fund Askari High Yield Scheme Askari Sovereign Yield Enhancer Fund Askari Cash Fund (Formerly Askari Sovereign Cash Fund) Pak Oman Islamic Asset Allocation Fund Pak Oman Advantage Islamic Income Fund 500,000 50,000 100,000 100,000 100,846 479,137 100,000 37,509 42,705 412 500,000 50,000 100,000 – 100,846 173,565 100,000 337,509 42,705 411 1,510,609 1,405,036 Commercial Banks Textile 2,214 25,100 2,214 25,100 Non Government Debt Securities 27,314 27,314 AAA AA+, AA, AA- A+, A, A- Unrated 750,000 500,000 175,000 216,790 750,000 890,000 275,000 221,636 1,641,790 2,136,636 AAA AA+, AA, AA- A+, A, A- Unrated 8,798,860 600,650 1,105,000 1,169,995 6,385,420 600,750 725,000 1,201,068 11,674,505 8,912,238 Fully Paid Preference Shares Listed Listed Unlisted 2021 Rupees in ‘000 76 Cost 2020 Rating Cost Rating Foreign Securities Government of Bahrain securities Askari Bank Limited 530,691 B+ 482,547 B+
79. Rupees in ‘000 20212020 Cost 8.5 Particulars relating to Held to Maturity securities are as follows: Federal Government Securities - Government guaranteed Pakistan Investment Bonds Government of Pakistan Euro Bonds Ijarah Sukuks GOP Bai Muajjal 103,777,717 7,282,348 4,938,400 4,215,092 78,401,841 5,035,974 6,350,941 5,246,146 Non Government Debt Securities 120,213,557 95,034,902 110,000 110,000 Unlisted CCC and below 2021 Rupees in ‘000 Cost Foreign Securities Turkish Sukuk Turkish Euro Bonds Srilanka Euro Bond 2020 Rating 1,059,422 1,374,564 1,323,735 BB- BB- CCC+ Cost 961,594 1,218,628 1,196,562 Rating BBBBCCC+ 3,757,721 3,376,784 8.5.1Market value of held to maturity securities other than classified investments as at December 31, 2021 is Rs. 122,430,448 thousand (2020: Rs. 104,630,207 thousand). 8.6 Investments include Government securities which are held by the Bank to comply with the statutory liquidity requirements as set out under Section 29 of the Banking Companies Ordinance, 1962 8.7 Summarized financial information of subsidiary: Rupees in ‘000 Country of incorporation % age of interest held Revenue 2021 Askari Securities Limited Pakistan (audited based on December 31, 2021) 2020 Askari Securities Limited Pakistan (audited based on December 31, 2020) Profit after tax Assets Liabilities 100% 188,615 47,496 650,007 327,638 100% 147,458 47,263 740,771 454,995 Annual Report 2021 77
80. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 9.ADVANCES Performing Rupees in ‘000 Note Loans, cash credits, running finances, etc. 9.1 Islamic financing and related assets- note 2 of Annexure II Bills discounted and purchased Non performing Total 202120202021202020212020 383,720,771 309,788,761 25,413,635 24,338,648 409,134,406 334,127,409 69,979,661 22,950,694 62,691,358 20,603,372 2,885,460 2,866,232 2,684,267 1,713,484 72,865,121 25,816,926 65,375,625 22,316,856 Advances - gross 476,651,126 393,083,491 31,165,327 28,736,399 507,816,453 421,819,890 Provision against advances - Specific - General – (1,709,286) – (1,603,972) (28,518,930) – (24,842,078) – (28,518,930) (1,709,286) (24,842,078) (1,603,972) (1,709,286) (1,603,972) (28,518,930) (24,842,078) (30,228,216) (26,446,050) 474,941,840 391,479,519 2,646,397 3,894,321 477,588,237 395,373,840 Advances - net of provision 9.1 Includes net investment in finance lease as disclosed below: 20212020 Not later Rupees in ‘000 than one year Later than one and less Over five Not later than five years years Total than one year Later than one and less Over five than five years years Total Lease rentals receivable Residual value 2,453,266 855,053 2,644,563 1,356,416 – – 5,097,829 2,211,469 2,505,400 1,007,459 2,218,605 1,336,479 7,189 28,736 4,731,194 2,372,674 Minimum lease payments Financial charges for future periods 3,308,319 (299,942) 4,000,979 (315,781) – – 7,309,298 (615,723) 3,512,859 (254,200) 3,555,084 (230,039) 35,925 (60) 7,103,868 (484,299) Present value of minimum lease payments 3,008,377 3,685,198 – 6,693,575 3,258,659 3,325,045 35,865 6,619,569 Rupees in ‘000 9.2 Particulars of advances (Gross) In local currency In foreign currencies 20212020 465,203,559 42,612,894 398,239,110 23,580,780 507,816,453 421,819,890 9.3 Advances include Rs. 31,165,327 thousand (2020: Rs. 28,736,399 thousand) which have been placed under nonperforming status as detailed below: 78 Askari Bank Limited
81. 2021 2020 Non performing Provision Non performing Rupees in ‘000 loansloans Provision Category of classification Domestic Other Assets Especially Mentioned Substandard Doubtful Loss 140,824 1,576,529 1,223,288 28,012,320 445 308,449 570,556 27,616,118 1,406,324 480,927 1,956,085 24,567,474 – 63,119 766,400 23,991,404 Overseas 30,952,961 28,495,568 28,410,810 24,820,923 Not past due but Impaired Overdue by 181 to 365 days 212,366 23,362 – – – – 325,589 21,155 212,366 23,362 325,589 21,155 31,165,327 28,518,930 28,736,399 24,842,078 9.4 Particulars of provision against advances 20212020 Specific General Consumer Total Specific General Consumer (note 45.1) financing financing Rupees in ‘000 Note - general - general Opening balance Exchange adjustments Total 24,842,078 2,207 887,946 15,826 716,026 – 26,446,050 18,033 24,408,056 (299) 584,145 9,586 642,747 – 25,634,948 9,287 Charge for the year 6,382,786 Reversal under IFRS 9 related to WBB – Reversal for the year (2,597,059) 76,663 93,912 6,553,361 2,249,576 421,751 122,415 2,793,742 (5,555) (854) – (74,678) (5,555) (2,672,591) 21,454 (1,010,054) (105,360) (22,176) – (49,136) (83,906) (1,081,366) 3,785,727 (55,851) 70,254 – 19,234 – 3,875,215 (55,851) 1,260,976 (748,426) 294,215 – 73,279 – 1,628,470 (748,426) (55,231) – – (55,231) (78,229) – – (78,229) 28,518,930 974,026 735,260 30,228,216 24,842,078 887,946 716,026 26,446,050 Specific General Consumer Total Specific General Consumer (note 45.1) financing financing Rupees in ‘000 - general - general Total Amounts written off 9.5 Amounts charged off agriculture financing 9.7 Closing balance 9.4.1 Particulars of provision against advances 20212020 In local currency In foreign currencies 28,099,282 419,648 807,679 166,347 735,260 29,642,221 – 585,995 24,461,435 380,643 731,882 156,064 716,026 – 25,909,343 536,707 28,518,930 974,026 735,260 24,842,078 887,946 716,026 26,446,050 30,228,216 Annual Report 2021 79
82. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 9.4.2 The net FSV benefit already availed has been reduced by Rs. 220,594 thousand, which has resulted in increased charge for specific provision for the year by the same amount. Had the FSV benefit not reduced, before and after tax profit for the year would have been higher by Rs. 220,594 thousand (2020: higher by Rs. 66,326 thousand) and Rs. 134,563 thousand (2020: Rs. 40,459 thousand) respectively. Further, at December 31, 2021, cumulative net of tax benefit availed for Forced Sales Value (FSV) was Rs. 320,002 thousand (December 31, 2020: Rs. 454,565 thousand) under BSD circular No. 1 of 2011 dated October 21, 2011. Reserves and un-appropriated profit to that extent are not available for distribution by way of cash or stock dividend. 9.5 Particulars of write offs This represents write off against provision amounting to Rs. 55,851 thousand related to domestic advances (2020: Rs. 748,426 thousand). Rupees in ‘000 9.5.1 Against Provisions Directly charged to Profit & Loss account 55,851 – 748,426 – 55,851 Write offs of Rs. 500,000 and above - Domestic 55,642 - Overseas – Write offs of below Rs. 500,000 209 748,426 55,851 9.6 Details of loans written off - Rs. 500,000 and above 748,426 748,426 – – In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the statement in respect of written off loans or any other financial relief of rupees five hundred thousand or above allowed to a person(s) during the year ended December 31, 2021 is given in Annexure - I. 9.7 Amounts charged off - Agriculture financing This represents agriculture loans charged off as per time based criteria prescribed by the State Bank of Pakistan in Annexure II of Regulation R - 11 of Prudential Regulations for Agriculture Financing. Rupees in ‘000 Note 20212020 10. FIXED ASSETS Capital work-in-progress Property and equipment Right of use asset - IFRS 16 10.1 10.2 10.4 10.1 This represents civil works in progress during the year. 80 20212020 Askari Bank Limited 111,038 13,601,560 6,454,277 164,343 13,647,546 7,401,820 20,166,875 21,213,709
83. 10 .2 Property and equipment 2021 Land - Land - Buildings on Buildings on Renovation Furniture, fixtures Machine and Computer Vehicles Total freehold leasehold freehold land leasehold land of premises and office equipment equipment Rupees in ‘000 equipment As at January 1, 2021 Cost / Revalued Amount Accumulated Depreciation 3,737,141 – 5,815,489 1,228,823 – 481,313 984,192 475,292 3,934,777 3,348,654 1,656,334 830,762 3,592,039 2,620,591 3,056,694 2,649,776 181,622 133,177 24,187,111 10,539,565 Net book value 3,737,141 5,815,489 747,510 508,900 586,123 825,572 971,448 406,918 48,445 13,647,546 Year ended December 31, 2021 Opening net book value Additions Transfers from non banking assets Disposals Depreciation charge Other adjustments / transfers 3,737,141 – 137,350 – – – 5,815,489 – – – – – 747,510 – 1,449 – (36,567) – 508,900 – – – (24,850) – 586,123 159,567 – (579) (257,291) (142) 825,572 139,710 – (5,128) (150,225) 360 971,448 218,671 – (3,959) (312,009) (2,040) 406,918 228,057 – (139) (167,442) 2,103 48,445 13,647,546 47,112 793,117 – 138,799 (1,256) (11,061) (18,738) (967,122) – 281 Closing net book value 3,874,491 5,815,489 712,392 484,050 487,678 810,289 872,111 469,497 75,563 13,601,560 As at December 31, 2021 Cost / Revalued Amount Accumulated Depreciation 3,874,491 – 5,815,489 – 1,230,272 517,880 984,192 500,142 2,766,078 2,278,400 1,766,607 956,318 3,757,557 2,885,446 3,137,204 2,667,707 208,753 133,190 23,540,643 9,939,083 3,874,491 5,815,489 712,392 484,050 487,678 810,289 872,111 469,497 75,563 13,601,560 – – 5 5 20 10-20 10-20 20 20 Net book value Rate of depreciation (percentage) 2020 Land - Land - Buildings on Buildings on Renovation Furniture, fixtures Machine and Computer Vehicles Total freehold leasehold freehold land leasehold land of premises and office equipment equipment Rupees in ‘000 equipment As at January 1, 2020 Cost / Revalued Amount Accumulated Depreciation 3,226,063 – 4,797,275 – 1,228,823 442,905 984,192 449,166 3,755,191 3,074,905 1,468,499 774,976 3,425,162 2,359,732 3,043,096 2,619,244 218,696 173,192 22,146,997 9,894,120 Net book value 3,226,063 4,797,275 785,918 535,026 680,286 693,523 1,065,430 423,852 45,504 12,252,877 3,226,063 – 4,797,275 – 785,918 – 535,026 – 680,286 228,169 693,523 274,508 1,065,430 278,394 423,852 169,701 45,504 22,992 12,252,877 973,764 511,078 – – – 1,018,214 – – – – – (38,408) – – – (26,126) – – (3,335) (318,997) – – (4,562) (140,684) 2,787 – (1,198) (371,188) 10 – (162) (185,944) (529) – – (20,051) – 1,529,292 (9,257) (1,101,398) 2,268 Year ended December 31, 2020 Opening net book value Additions Movement in surplus on assets revalued during the year Disposals Depreciation charge Other adjustments / transfers Closing net book value 3,737,141 5,815,489 747,510 508,900 586,123 825,572 971,448 406,918 48,445 13,647,546 As at December 31, 2020 Cost / Revalued Amount Accumulated Depreciation 3,737,141 – 5,815,489 – 1,228,823 481,313 984,192 475,292 3,934,777 3,348,654 1,656,334 830,762 3,592,039 2,620,591 3,056,694 2,649,776 181,622 133,177 24,187,111 10,539,565 Net book value 3,737,141 5,815,489 747,510 508,900 586,123 825,572 971,448 406,918 48,445 13,647,546 Rate of depreciation (percentage) – – 5 5 20 10-20 10-20 20 20 Land - Land - Buildings on Buildings on Renovation Furniture, fixtures Machine and Computer Vehicles Total freehold leasehold freehold land leasehold land of premises and office equipment equipment Rupees in ‘000 equipment 10.2.1 Cost of fully depreciated property and equipment still in use of the Bank 2021 2020 – – – – 1,628,503 413,174 1,771,917 2,279,605 101,687 6,194,886 – – – – 2,224,980 367,583 1,371,822 2,080,043 80,721 6,125,149 Annual Report 2021 81
84. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 10.3 Disposal of assets to related parties: Book Sale Mode Particular of assets Cost Value Proceed Disposal Particular of Purchaser Rupees in ‘000 Vehicle Machine and equipment Computer equipment Furniture, fixtures and office equipment Vehicle Furniture, fixtures and office equipment Machine and equipment 2,970 1,727 149 185 1,720 33 197 1,287 1,106 62 – – 29 170 1,287 As per Bank’s Policy 1,106 -do- 62 -do- – -do- 1,975 -do- 29 -do- 170 -do- Rupees in ‘000 Mr. Abid Sattar - Ex - President & CE Mr. Abid Sattar - Ex - President & CE Mr. Abid Sattar - Ex - President & CE Mr. Khurram Mughal - Key Management Personnel Mr. Shahid Alam Siddiqui - Key Management Personnel Mr. Pervez Shahbaz Khan - Ex - Key Management Personnel Mr. Pervez Shahbaz Khan - Ex - Key Management Personnel 20212020 10.4 Right of use assets Opening balance Additions Depreciation Other adjustments (including termination) 7,401,820 499,359 (1,342,713) (104,189) 7,316,960 1,597,508 (1,498,351) (14,297) Closing balance 6,454,277 7,401,820 10.5 Freehold and leasehold land were revalued by the valuers approved by the Pakistan Banks’ Association on December 31, 2020. The valuation was carried out by M/s SMASCO on the basis of their professional assessment of the present market value, which resulted in increase of Rs. 1,529,292 thousand. The total surplus against revaluation of freehold and leasehold land as at December 31, 2021 amounts to Rs. 5,205,916 thousand. Had the freehold and leasehold land not been revalued, the total carrying amounts of revalued properties as at December 31, 2021 would have been Rs. 4,484,063 thousand (2020: Rs. 4,408,450 thousand) Rupees in ‘000 Note 11. INTANGIBLE ASSETS Computer software 11.1 Less: Provision against intangibles 948,523 (1,225) 777,695 (4,660) Capital work in progress 947,298 235,967 773,035 370,111 11.1Software 1,183,265 1,143,146 As at January 1, Cost Accumulated amortization 2,656,322 1,878,627 2,327,271 1,644,382 Net book value 777,695 682,889 777,695 682,889 395,745 (44,292) (180,862) 237 321,627 – (226,911) 90 948,523 777,695 Year ended December 31, Opening net book value Additions - directly purchased Charged off Amortization charge Other adjustments / transfers 82 20212020 Closing net book value Askari Bank Limited
85. Rupees in ‘000 20212020 As at December 31, Cost Accumulated amortization 2,422,602 1,474,079 2,656,322 1,878,627 Net book value 948,523 777,695 Rate of amortization (percentage) 10 10 Useful life 10 years 10 years 11.1.1Cost of fully amortized intangible assets still in use of the Bank amounts to Rs. 1,073,017 thousand (2020: Rs. 310,125 thousand). 2021 At January 1, Recognized in Rupees in ‘000 2021 P&L A/C 12. DEFERRED TAX ASSETS Deductible Temporary Differences on - Post retirement employee benefits - Accelerated tax depreciation - Deficit on revaluation of investments - Provision against advances Recognized in At December 31, OCI 2021 34,162 48,095 (27,263) 1,568,007 – 52,742 – 302,130 (9,499) – 3,199,809 – 24,663 100,837 3,172,546 1,870,137 1,623,001 354,872 3,190,310 5,168,183 At January 1, Recognized in Rupees in ‘000 2020 P&L A/C 2020 Recognized in At December 31, OCI 2020 Deductible Temporary Differences on - Post retirement employee benefits - Accelerated tax depreciation - Impact under IFRS 9 related to WBB - Provision against advances 9,971 (36,254) 3,934 1,568,007 – 84,349 – – - Impact under IFRS 9 related to WBB 1,545,658 117,937 84,349 – 20,257 (117,937) 1,650,264 – Taxable Temporary Differences on - Surplus on revaluation of investments 1,663,595 84,349 (97,680) 1,650,264 (853,420) (27,263) 2,489,752 (951,100) 1,623,001 826,157 – 84,349 24,191 – (3,934) – 34,162 48,095 – 1,568,007 Annual Report 2021 83
86. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 13. Note 20212020 OTHER ASSETS Income / mark-up accrued in local currency - net of provision 13.1 Income / mark-up accrued in foreign currencies Advances, deposits, advance rent and other prepayments Advance taxation (payments less provisions) Non banking assets acquired in satisfaction of claims 13.3 Due from State Bank of Pakistan Mark to market gain on forward foreign exchange contracts - net Stationary and stamps in hand Dividend receivable 13.2 Acceptances Switch fee receivable Others 18,861,858 694,389 441,073 6,224,368 1,446,968 667,793 17,403,537 558,371 440,767 6,089,464 2,426,242 – 341,824 74,065 1,221 14,601,271 359,687 530,756 – 99,829 7,365 11,829,891 – 781,460 Less: Provision held against other assets 13.4 44,245,273 (175,846) 39,636,926 (209,778) Other assets - net of provision Surplus on revaluation of non-banking assets acquired in satisfaction of claims 44,069,427 39,427,148 1,719,890 2,442,972 45,789,317 41,870,120 Other assets - total 13.1 This balance is net of interest in suspense amounting to Rs. 10,474,504 thousand (2020: Rs. 10,139,320 thousand). 13.2 This balance is net of dividend in suspense amounting to Rs. 81,020 thousand (2020: Rs. 81,020 thousand). Rupees in ‘000 20212020 13.3 Market value of non-banking assets acquired in satisfaction of claims 3,166,857 4,869,214 The Bank’s non-banking assets were revalued by the valuers approved by the Pakistan Banks’ Association on December 31, 2021. The latest valuation was carried out by M/s SMASCO on the basis of their professional assessment of the present market value. The total surplus arisen against revaluation of non-banking asset acquired in satisfaction of claims as at December 31, 2021 amounts to Rs. 1,719,889 thousand. 84 Askari Bank Limited
87. Rupees in ‘000 20212020 13.3.1Non-banking assets acquired in satisfaction of claims Opening balance Additions Revaluation Disposals Transfers to freehold land and building Adjustments Depreciation 4,869,214 – 168,662 (1,704,907) (138,799) (1,721) (25,592) 4,775,172 24,764 299,944 (656,376) – 476,948 (51,238) Closing balance 3,166,857 4,869,214 13.3.2Gain on disposal of non-banking assets acquired in satisfaction of claims Disposal proceeds Less - carrying value 1,722,458 (1,704,907) Gain 13.4 Provision held against other assets 17,551 12,502 Advances, deposits, advance rent and other prepayments Stationery and stamps in hand Others 4,838 – 171,008 4,838 2,285 202,655 13.4.1Movement in provision held against other assets 175,846 209,778 Opening balance 209,778 238,089 Charge for the year Reversals for the year 415 (34,348) Net charge Reversal on disposal Amount written off (33,933) – – (323) (15,952) (12,036) 14. Closing balance 175,845 209,778 In Pakistan 10,235,374 12,629,996 668,878 (656,376) 314 (637) BILLS PAYABLE Annual Report 2021 85
88. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note 20212020 15.BORROWINGS Secured Borrowings from the State Bank of Pakistan under: Export refinance scheme 15.1.1 Long term financing facility 15.1.2 Financing facility for storage of agricultural produce 15.1.3 Renewable energy financing facility 15.1.4 Credit guarantee scheme for women entrepreneurs Payment of wages and salaries 15.1.5 Temporary economic relief 15.1.6 Modernisation of SME Combating COVID-19 15.1.7 20,497,570 9,725,125 73,853 3,672,929 606 7,485,233 5,506,824 10,743 279,357 16,903,776 8,499,073 76,399 579,231 1,568 12,583,566 – – – Repurchase agreement borrowings State Bank of Pakistan 15.1.8 Financial institutions 15.1.9 47,252,240 38,643,613 32,000,000 18,910,076 7,000,000 23,042,628 Refinance from Pakistan Mortgage Refinance Company 15.1.10 50,910,076 2,372,387 30,042,628 1,923,886 Total secured Unsecured Call borrowings 15.1.11 Financial institutions Overdrawn nostro accounts 100,534,703 70,610,127 21,713,480 970,824 344,754 10,276,937 3,276,605 – Total unsecured 23,029,058 13,553,542 123,563,761 84,163,669 15.1.1This facility is secured against demand promissory note executed in favour of the SBP. The effective mark-up rate is 1% to 2% (2020: 1% to 2%) per annum payable on a quarterly basis. 15.1.2This facility is secured against demand promissory note executed in favour of the SBP. The effective mark-up rate is 0.5% to 8.4% (2020: 2% to 8.4%) per annum payable on a quarterly basis. 15.1.3These are secured against demand promissory note and carry markup of 2% (2020: 2%) per annum and have maturities upto May 2024. 15.1.4These are secured against demand promissory note and carry markup of 2% to 3% (2020: 2% to 3%) per annum and have maturities upto October 2033. 15.1.5These are secured against demand promissory note and carry markup of upto 2% (2020: 0.4% to 2%) per annum and have maturities upto April 2023 15.1.6These are secured against demand promissory note and carry markup of 1% per annum payable on quarterly basis and have maturities upto October 2031. 15.1.7These are secured against demand promissory note and carry NIL markup and have maturities upto March 2026. 15.1.8These are secured against collateral of Government Securities and carry markup of 9.91% to 9.96% (2020: 7.05%) per annum and have maturities upto 6 months (2020: 3 month). The market value of securities given as collateral is given in note 8.2.1. 86 Askari Bank Limited
89. 15 .1.9These are secured against collateral of Government Securities and carry markup of 0.88% to 10.65% (2020: 1.23% to 7%) per annum and have maturities upto 3 months (2020: 3 months). The market value of securities given as collateral is given in note 8.2.1. 15.1.10This is secured against mortgage finance portfolio of the Bank and carry markup of 6% to 8.5% (2020: 8.57% to 10.71%) per annum and has maturity upto 2031 (2020: upto 2023). 15.1.11These carry mark-up rate of 1.15% to 10.25% (2020: 0.8% to 7.50%) per annum and having maturity upto 1 month (2020: upto 5 months). Rupees in ‘000 20212020 15.2 Particulars of borrowings with respect to currencies In local currency In foreign currencies 102,888,997 20,674,764 68,940,191 15,223,478 123,563,761 84,163,669 16. DEPOSITS AND OTHER ACCOUNTS 20212020 Rupees in ‘000 In local currency In foreign Total currencies In local currency Customers Current accounts Savings deposits Fixed deposits 282,967,438 447,108,954 183,802,414 24,864,069 307,831,507 228,444,308 50,866,257 497,975,211 388,092,120 18,794,731 202,597,145 90,069,109 21,780,570 250,224,878 48,085,995 436,178,115 7,058,608 97,127,717 Financial institutions Current accounts Savings deposits Fixed deposits 913,878,806 94,525,057 1,008,403,863 706,605,537 76,925,173 783,530,710 1,449,604 1,931,912 3,581,709 62,980 – – 1,512,584 1,931,912 3,581,709 1,178,086 1,253,900 5,170,000 54,187 – – 1,232,273 1,253,900 5,170,000 6,963,225 62,980 7,026,205 7,601,986 54,187 7,656,173 920,842,031 94,588,037 1,015,430,068 714,207,523 In foreign currencies Total 76,979,360 791,186,883 Rupees in ‘000 20212020 16.1 Composition of deposits - Individuals - Government (Federal and Provincial) - Public Sector Entities - Banking Companies - Non-Banking Financial Institutions - Private Sector 336,699,027 326,650,675 86,068,562 448 7,025,757 258,985,599 295,671,457 257,514,945 63,778,517 102 7,656,072 166,565,790 1,015,430,068 791,186,883 16.2 Total deposits include eligible deposits of Rs. 404,645,277 thousand (2020: Rs. 359,362,370 thousand), to be covered under the Deposit protection Insurance arrangement, as required by the Deposit Protection Corporation (a subsidiary of SBP) vide circular no. 04 of 2018 dated June 22, 2018. Annual Report 2021 87
90. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 17. SUBORDINATED DEBTS Term Finance Certificates - VI (ADT-1) Term Finance Certificates - VII 20212020 6,000,000 6,000,000 6,000,000 6,000,000 12,000,000 12,000,000 17.1 The Bank has raised unsecured subordinated loans through issuance of Term Finance Certificates to improve the Bank’s capital adequacy. Liability to the TFC holders is subordinated to and rank inferior to all other indebtedness of the Bank including deposits and is not redeemable before maturity without prior approval of the SBP. The salient features of outstanding issues are as follows: 88 Term Finance Certificates - VI (ADT-1) Term Finance Certificates - VII Outstanding amount Rupees in ‘000 6,000,000 6,000,000 Issue amount Rupees 6,000 million Rupees 6,000 million Issue date July 03, 2018 March 17, 2020 Maturity date Perpetual March 16, 2030 Rating AA- AA Security Unsecured Unsecured Listing Listed Listed Profit payment frequency Payable six monthly Payable quarterly Redemption Perpetual 109-120th month: 100% Profit rate Base Rate plus 1.50% Base Rate plus 1.20% Base Rate is the simple average of the ask rate of six month KIBOR prevailing on the base rate setting date. Base Rate is the simple average of the ask rate of three month KIBOR prevailing on the base rate setting date. Call option Exercisable after 60 months from the date of issue subject to approval by the SBP. Exercisable after 60th month from the date of issue subject to approval by the SBP. Lock-in-clause Payment of profit will be subject to the condition that such payment will not result in breach of the Bank’s regulatory Minimum Capital Requirement or Capital Adequacy Ratio set by SBP from time to time. Any inability to exercise lock-in clause or the non-cummulative features will subject these As per the lock-in requirement for Tier II Issues, neither profit nor principal will be payable (even at maturity) in respect of the TFC, if such payment will result in a shortfall or increase in an existing shortfall in the Bank’s Leverage Ratio or Minimum Capital Requirement or Capital Adequacy Ratio. TFCs to mandatory conversion into common shares / write off at the discretion of SBP. That is, any payment (profit and/or principal) in respect of the TFC would be made, subject to the Bank being in compliance with the requirement of Leverage Ratio or Minimum Capital Requirement or Capital Adequacy Ratio. Askari Bank Limited
91. Loss absorption clause Rupees in ‘000 Term Finance Certificates - VI (ADT-1) Term Finance Certificates - VII The Instrument will be subject to loss absorption and / or any other requirements of SBP upon the occurrence of a Point of Non-Viability event as per Section A-53 of Annexure 5 of the Circular, which stipulates that SBP may, at its option, fully and permanently convert the TFCs into common shares of the issuer and / or have them immediately written off (either partially or in full). Number of shares to be issued to TFC holders at the time of conversion will be equal to the ‘Outstanding Value of the TFCs’ divided by market value per share of the Bank’s common share on the date of As per Loss Absorbency Clause requirement for Tier II capital purpose, the instrument will be subject to loss absorbency and/or any other requirements under SBP’s instructions on the subject. Upon the occurrence of a Point of Non-Viability event as defined under SBP BPRD Circular # 6 of 2013, SBP may at its option, fully and permanently convert the TFCs into common shares of the Bank and/or have them immediately written off (either partially or in full). Number of shares to be issued to TFC holders at the time of conversion will be equal to the ‘Outstanding Face Value of the TFCs’ divided by market trigger event as declared by SBP, subject to a specified cap. value per share of the Bank’s common share on the date of trigger of Point of Non-Viability (PONV) as declared by SBP subject to a cap of 245,042,630 shares. Note 18. OTHER LIABILITIES Mark-up / return / interest payable in local currency Mark-up / return / interest payable in foreign currencies Unearned commission and income on bills discounted Accrued expenses 18.1 Advance payments Acceptances Dividend payable Mark to market loss on forward foreign exchange contracts Branch adjustment account Payable to defined benefit plan 36.4 Provision for employees compensated absences Security deposit against lease / Ijarah financing Levies and taxes payable Workers’ Welfare Fund 29 Switch fee payable Provision against off-balance sheet obligations 18.2 Lease liability against ROU assets as per IFRS - 16 Leases Islamic pool management reserve Others 20212020 4,528,899 275,197 2,293,929 2,959,114 396,609 14,601,271 204,537 – 361,638 280,287 701,725 4,395,134 353,223 428,583 – 1,143,768 7,393,878 51,630 1,642,991 3,793,829 217,522 1,726,572 2,276,392 349,092 11,829,891 157,439 228,034 753,774 310,314 679,452 4,169,840 381,105 215,099 665,449 100,356 8,223,995 – 1,912,009 42,012,413 37,990,164 18.1 This includes provision against severance cost and related charges amounting to Rs. 1,246,395 thousand (2020: Rs. 750,000 thousand). Annual Report 2021 89
92. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 20212020 18.2 Provision against off-balance sheet obligations Opening balance Exchange adjustment 100,356 163 101,154 49 Charge for the year Reversal for the year 1,043,249 – – (847) Net charge 1,043,249 (847) 19. Closing balance 1,143,768 100,356 SHARE CAPITAL 19.1 Authorized capital 2021 2020 20212020 Number of sharesRupees in ‘000 2,000,000,000 2,000,000,000 Ordinary shares of Rs. 10 each 20,000,000 20,000,000 19.2 Issued, subscribed and paid up capital 2021 2020 514,689,096 514,689,096 717,297,769 717,297,769 28,273,315 28,273,315 20212020 Number of sharesRupees in ‘000 1,260,260,180 Fully paid in cash Issued as bonus shares Issued on Askari Leasing Limited merger 1,260,260,180 Number of shares 5,146,891 7,172,978 5,146,891 7,172,978 282,733 282,733 12,602,602 12,602,602 20212020 19.3 Composition of shares held by the Fauji Consortium is as follows: Fauji Foundation Fauji Fertilizer Company Limited Fauji Fertilizer Bin Qasim Limited 90,629,884 543,768,024 271,884,009 90,629,884 543,768,024 271,884,009 906,281,917 906,281,917 Rupees in ‘000 90 20. SURPLUS ON REVALUATION OF ASSETS - NET OF TAX Surplus / (deficit) on revaluation of: - Available for sale securities - Fixed Assets - Non-banking assets acquired in satisfaction of claims Note (8,134,733) 5,205,916 1,719,890 77,895 5,144,180 2,442,972 Deferred tax asset / (liability) on surplus / (deficit) on revaluation of: - Available for sale securities (1,208,927) 7,665,047 1,963,619 Askari Bank Limited 8.1 20.1 20.2 20212020 3,172,546 (27,263) 7,637,784
93. Rupees in ‘000 Note 20212020 20.1 Surplus on revaluation of fixed assets Surplus on revaluation of fixed assets as at January, 1 Recognised during the year Surplus on non banking asset transferred to owned property 5,144,180 – 61,736 3,614,888 1,529,292 – Surplus on revaluation of fixed assets as at December, 31 20.2 Surplus on revaluation of non-banking assets acquired in satisfaction of claims 5,205,916 5,144,180 Surplus on revaluation as at January, 1 Recognised during the year Realised on disposal / transfers during the year Transfer of surplus on non banking asset to owned property Transferred to unappropriated profit in respect of incremental depreciation charged during the year Adjustment during the year 2,442,972 168,662 (830,008) (61,736) 2,219,829 299,944 (72,135) – Surplus on revaluation as at December, 31 1,719,890 2,442,972 21. CONTINGENCIES AND COMMITMENTS - Guarantees - Commitments - Other contingent liabilities 274,886,748 396,004,041 1,095,098 220,222,941 373,435,453 1,151,583 21.1Guarantees 671,985,887 594,809,977 Financial guarantees Performance guarantees Other guarantees 6,015,847 155,588,123 113,282,778 9,952,617 138,751,395 71,518,929 21.2Commitments 274,886,748 220,222,941 190,672,407 159,457,683 201,560,195 3,639,700 209,279,794 4,625,000 31,295 100,444 34,298 38,678 21.2.1Commitments in respect of forward foreign exchange contracts 396,004,041 373,435,453 Purchase Sale 117,506,977 84,053,218 118,889,979 90,389,815 The above commitments have maturities falling within one year. 201,560,195 209,279,794 21.1 21.2 21.3 Documentary credits and short-term trade-related transactions - letters of credit Commitments in respect of: - forward foreign exchange contracts - non government securities transactions Commitments for acquisition of: - operating fixed assets - intangible assets 21.2.1 21.2.2 – – (14,240) 9,574 Annual Report 2021 91
94. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 20212020 21.2.2Commitments in respect of non government securities transactions Purchase 21.3 Other contingent liabilities 3,639,700 4,625,000 1,095,098 1,151,583 21.4 These represent certain claims by third parties against the Bank, which are being contested in the Courts of law. Based on legal advice and / or internal assessment, management is confident that the matters will be decided in Bank’s favour and the possibility of any outcome against the Bank is remote and accordingly no provision has been made in these unconsolidated financial statements 22. DERIVATIVE INSTRUMENTS The Bank at present does not offer derivative products such as Interest Rate Swaps, Cross Currency Swaps, Forward Rate Agreements or Foreign Exchange Options. The Bank’s Treasury and Investment Banking Groups buy and sell derivative instruments such as Forward Exchange Contracts (FECs) and Equity Futures (EFs). Tax related contingencies are disclosed in note 32.2 to these unconsolidated financial statements. 22.1 Forward exchange contracts FECs is a product offered to clients to hedge FX risk. The traders use this product to hedge themselves from unfavourable movements in a foreign currency, however, by agreeing to fix the exchange rate, they do not benefit from favourable movements in that currency. FECs is a contract between the obligor and the Bank in which both agree to exchange an amount of one currency for another currency at an agreed forward exchange rate for settlement over more than two business days after the FECs is entered into (the day on which settlement occurs is called the value date). FECs is entered with those obligors whose credit worthiness has already been assessed, and they have underlined trade transactions. If the relevant exchange rate moves unfavourably, the Bank will loose money, and obligor will benefit from that movement because the Bank must exchange currencies at the FEC rate. In order to mitigate this risk of adverse exchange rate movement, the Bank manages its exposure by hedging forward position in inter-bank foreign exchange. 22.2 Equity futures An equity futures contract is a standardized contract, traded on a futures counter of the stock exchange, to buy or sell a certain underlying scrip at a certain date in the future, at a specified price. The Bank uses equity futures as a hedging instrument to hedge its equity portfolio against equity price risk. Only selected shares are allowed to be traded on futures exchange as determined by the Exchange. Equity futures give flexibility to the Bank either to take delivery on the future settlement date or to settle it by adjusting the notional value of the contract based on the current market rates. Maximum exposure limit to the equity futures is 10% of Tier I Capital of the Bank, based on prevailing SBP Regulations. 92 Askari Bank Limited
95. The Risk Management Group monitors the Bank ’s exposure in equity futures and forward exchange contracts. Positions in equity futures and forward exchange contracts are marked-to-market. Forward contracts are included in measures of portfolio volatility including Value at Risk (VaR). Forward exchange contracts and equity futures are also included in capital charge and Risk Weighted Asset calculation in accordance with SBP Regulations. The accounting policies used to recognize and disclose derivatives are given in note 4.22. Rupees in ‘000 23. Note 20212020 MARK-UP / RETURN / INTEREST EARNED On: Loans and advances Investments Lendings to financial institutions Balances with banks Securities purchased under resale agreements (reverse repo) 32,681,989 44,305,066 111,572 7,260 444,034 38,969,854 39,433,209 223,621 83,799 394,612 24. MARK-UP / RETURN / INTEREST EXPENSED 77,549,921 79,105,095 Deposits Borrowings Subordinated debts Cost of foreign currency swaps against foreign currency deposits / borrowings Interest expense on lease liability against ROU assets 36,928,194 3,952,824 1,069,673 40,633,285 3,914,824 1,619,010 2,295,223 894,286 1,783,189 891,977 25. FEE AND COMMISSION INCOME 45,140,200 48,842,285 Branch banking customer fees Consumer finance related fees Card related fees (debit and credit cards) Credit related fees Investment banking fees Commission on trade Commission on guarantees Commission on remittances including home remittances Commission on Bancassurance Others 672,207 112,553 1,168,379 240,649 171,588 919,680 910,277 247,018 105,325 61,470 510,681 109,946 1,000,077 206,644 221,218 687,066 676,367 262,892 92,887 83,446 26. GAIN ON SECURITIES 4,609,146 3,851,224 Realised 26.1 814,724 2,555,512 26.1 Realised gain on: Federal Government Securities Shares Non Government Debt Securities 647,146 164,578 3,000 2,104,861 439,638 11,013 814,724 2,555,512 Annual Report 2021 93
96. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 27. Note 20212020 OTHER INCOME Rent on property Gain on sale of fixed assets Rent of lockers Gain on sale of non banking asset 27.1 Recovery of expenses from customers Government Grant - foreign branch Loss termination of lease contracts under IFRS - 16 Leases 23 20,501 50,572 17,551 313,721 – 27.1 Gain on sale of non-banking asset 402,118 22 23,768 46,279 12,502 252,213 6,354 (250) (81) 341,057 2021 Cost Name of Buyer Book value Cash received Gain on sale Mode of disposal Buy-back Tender Tender Rupees ‘000 M/s S.H. Haq Noor & Co. Mr Abid Ali M/s DHA Islamabad 252,250 300,000 315,000 15,190 23,449 26,000 608,900 1,381,458 1,381,458 15,000 2,551 – 876,340 1,704,907 1,722,458 17,551 2020 Cost Name of Buyer 94 Book value Cash received Gain on sale Mode of disposal Rupees ‘000 M/s Synergy Paper & Board Mills (Private) Limited Mr. Muhammad Idrees M/s Al Rehmat Traders 387,952 140,500 55,789 413,447 147,500 95,429 413,452 147,500 107,926 5 – 12,497 584,241 656,376 668,878 12,502 Askari Bank Limited Buy-back Tender Buy-back
97. Rupees in ‘000 28. OPERATING EXPENSES Total compensation expenses Note 11,720,691 11,551,156 Rent and taxes Insurance Utilities cost Security (including guards) Repair & maintenance Depreciation on ROU assets Depreciation 120,587 87,074 708,673 515,542 280,089 1,342,713 318,708 105,882 105,148 694,070 525,707 270,670 1,498,351 383,658 Information technology expense 3,373,386 3,583,486 Software maintenance Hardware maintenance Depreciation Amortisation Network charges 436,397 47,020 167,305 180,862 240,815 334,099 59,947 185,944 226,911 221,163 Other operating expenses 1,072,399 1,028,064 68,513 7,453 201,175 476,491 113,679 77,642 304,916 527,125 269,334 127,701 390,527 30,816 220,527 481,109 315,547 6,572 574,980 32,324 497,618 25,656 5,823 205,866 90,935 96,725 74,157 305,785 546,454 285,024 148,803 112,390 28,346 234,495 531,796 256,601 21,828 463,138 – 526,967 4,724,049 3,960,789 20,890,525 20,123,495 28.1 20212020 Property expense Directors’ fees, allowances Fees and allowances to Shariah Board Rates, taxes, insurance etc. Legal and professional charges Brokerage and commission NIFT clearing charges Repair and maintenance Communications Stationery and printing Marketing, advertisement and publicity Donations 28.2 Auditors’ remuneration 28.3 Travelling, conveyance and entertainment Depreciation Security service charges Training and development Deposit premium expense Outsourced service cost 28.4 Other expenditure Annual Report 2021 95
98. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note 20212020 28.1 Total compensation expenses Managerial remuneration i) Fixed ii)Variable - Cash bonus / awards etc. 4,579,828 4,359,104 1,333,157 1,241,441 Charge for defined benefit plans 28.1.1 Contribution to defined contribution plan 37 Rent and house maintenance Utilities Medical Conveyance Other staff cost 28.1.2 5,912,985 391,288 312,404 1,911,671 416,679 676,067 1,443,311 656,286 5,600,545 466,626 293,209 1,801,560 392,731 633,741 1,260,603 1,102,141 11,720,691 28.1.1This includes charge for defined benefit plan and compensated absences. 28.1.2This includes staff incentives, allowances, health coverage and provision for severance etc. 28.2 This represents: – – – 11,551,156 Bank’s contribution amounting to Rs. 376,223 thousand (2020: Rs. 109,000 thousand) for Fauji Foundation Group CSR activities where common directors interest is limited to the extent of their employment with Fauji Foundation; Cost of vehicle and laptop amounting to Rs. 7,004 thousand (2020: Rs. 3,390 thosuand) donated to DC Office Gawadar; and Contribution amounting to Rs. 7,300 thousand made to District Administration Gawadar for development of Model Village. Rupees in ‘000 20212020 28.3 Auditors’ remuneration Statutory auditors of the Bank Audit fee Special certifications, half year review, audit of consolidated financial statements and sundry advisory services Tax services Auditors of Wholesale Bank Branch, Bahrain Audit fee 4,500 4,100 7,735 15,000 7,560 13,500 27,235 25,160 3,581 3,186 30,816 28,346 28.4 This represents expenses relating to outsourced activities amounting to Rs. 32,324 thousand (2020: Nil) pertaining to the payment to companies incorporated in Pakistan. 96 Askari Bank Limited
99. Rupees in ‘000 Note 20212020 29. WORKERS’ WELFARE FUND Opening balance Charge for the year 215,099 213,484 172,117 42,982 30. Closing balance 428,583 215,099 This represents penalties imposed by the State Bank of Pakistan. Rupees in ‘000 31. Note 20212020 PROVISIONS AND WRITE OFFS - NET Provision for diminution in value of investments 8.3.1 Provision against loans and advances 9.4 Reversal of provision against other assets 13.4.1 Reversal of provision against intangible assets Provision / (reversal) against off-balance sheet obligations 18.2 Provision against cash and bank balances Recovery of written off / charged off bad debts 169,231 3,875,215 (33,933) (3,435) 465,861 1,628,470 (323) (5,206) 1,043,249 2 (110,379) (847) – (113,208) 32.TAXATION 4,939,950 1,974,747 Current Prior Years Deferred 6,247,648 51,111 (354,872) 7,051,219 – (84,349) 32.1 Relationship between tax expense and accounting profit 5,943,887 6,966,870 Profit before taxation 15,645,273 17,767,245 Tax at applicable tax rate of 39 percent (2020: 39 percent) Effect of: - Prior year - Others including permanent differences 6,101,656 6,929,226 51,111 (208,880) – 37,644 5,943,887 6,966,870 32.2 Tax status i) The Bank has filed tax returns for and up to tax year 2021. The assessments for and up to tax year 2020 were amended by the tax authorities creating accumulated additional tax demand, mainly in the matters of admissibility of recoveries against doubtful debts for Rs. 1,086 million, provision for diminution in the value of investments for Rs. 2,197 million, bad debts written off for Rs. 127.53 million, provision for substandard advances for Rs. 74.95 million, Provision against other assets/fixed assets for Rs. 109.43 million, disallowance of employee benefit expenses Rs. 330.87 Million and Other disallowances of expenses/credits for Rs. 180.08 million. Bank’s Appeals against these orders are currently pending before Commissioner Appeals, Appellate Tribunal and Islamabad High Court. The management and tax advisor of the Bank are confident that these matters will be decided in favor of the Bank and consequently no provision has been made thereon. Tax payments by the Bank against certain matters are being carried forward as receivable, as management and tax advisor of the Bank are confident of their realization. Annual Report 2021 97
100. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 ii) Consequent upon the amalgamation with and into the Bank, the outstanding tax issues relating to Askari Leasing Limited (ALL) are as follows: Tax returns of ALL have been filed for and up to tax year 2010. The returns for the tax years 2003 to 2010 were amended by the tax authorities mainly in the matter of admissibility of initial allowance claimed on leased vehicles. On appeals filed by ALL, partial relief was provided by the CIR(A) by allowing initial allowance on commercial vehicles. Re-assessment has not yet been carried out by the tax department. A tax demand is however not likely to arise after re-assessment. For and up to the assessment years 2002-2003, reference applications filed by the tax authorities in the matter of computation of lease income are pending decisions by the High Court. However the likelihood of an adverse decision is considered low due to a favorable decision of the High Court in a parallel case. 20212020 33. BASIC AND DILUTED EARNINGS PER SHARE Profit for the year - Rupees in ‘000 9,701,386 10,800,375 Weighted average number of Ordinary Shares - numbers 1,260,260,180 1,260,260,180 Basic and diluted earnings per share - Rupees 7.70 8.57 There is no dilutive effect on the basic earnings per share of the Bank, therefore dilutive earnings per share have not been presented separately. Rupees in ‘000 20212020 34. CASH AND CASH EQUIVALENTS Cash and balances with treasury banks Balances with other banks 89,432,245 3,454,837 73,651,718 7,954,294 92,887,082 81,606,012 2021 Liabilities Rupees in ‘000 Subordinated loan 34.1 Balances as at January 01, 2021 12,000,000 Changes from financing cash flows Payment of lease liability Dividend paid Other changes Additions / renewals of leases Interest expense on lease liability against ROU assets Other adjustments (including termination) Final cash dividend for the year ended December 31, 2020 98 Balances as at December 31, 2021 Askari Bank Limited Lease liability 8,223,995 Dividend payable 157,439 – – (1,965,692) – – (3,733,683) – (1,965,692) (3,733,683) – – – – – 12,000,000 507,715 894,286 (266,426) – – – – 3,780,781 1,135,575 3,780,781 7,393,878 204,537
101. 2020 Liabilities Rupees in ‘000 Balances as at January 01, 2020 Changes from financing cash flows Issuance of subordinated debt Redemption of subordinated debt Payment of lease liability Dividend paid Subordinated loan Other changes Additions / renewals of leases Interest expense on lease liability against ROU assets Other adjustments (including termination) Final cash dividend for the year ended December 31, 2019 7,358,016 6,000,000 (3,992,000) – – – – (1,549,511) – – – – (1,871,397) (1,549,511) (1,871,397) 2,008,000 – – – – Dividend payable 9,992,000 Lease liability – 12,000,000 138,446 1,597,508 891,977 (73,995) – – – – 1,890,390 2,415,490 1,890,390 8,223,995 157,439 20212020 Number of employees 35. STAFF STRENGTH Permanent On Bank’s contract 6,689 789 7,007 942 Total staff strength 7,478 7,949 Out of total employees, 6 (2020: 6) employees are working abroad. 36. DEFINED BENEFIT PLAN In addition to the above, 163 domestic employees (2020: Nil) of outsourcing services companies were assigned to the Bank as at the end of the year to perform services other than guarding and janitorial services. 36.1 General description The Bank operates an approved funded gratuity scheme for all its regular employees. Contributions are made in accordance with the actuarial recommendation. The benefits under the gratuity scheme are payable on retirement at the age of 60 years or earlier cessation of service in lump sum. The benefit is equal to one month’s last drawn basic salary for each year of eligible service or part thereof. 36.2 The number of employees covered under the defined benefit scheme are 6,658 employees (2020: 6,984 employees). 36.3 Principal actuarial assumptions The actuarial valuation was carried out for the year ended December 31, 2021 using “Projected Unit Credit Method”. The main assumptions used for actuarial valuation are as follows: Annual Report 2021 99
102. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Discount rate - per annum Expected rate of increase in salaries - per annum Expected rate of return on plan assets - per annum Duration Mortality rate Rupees in ‘000 20212020 11.75% 11.25% 9.75% 9 years SLIC 2001 - 2005 mortality table 9.75% 9.25% 13.00% 9 years SLIC 2001 - 2005 mortality table 20212020 36.4 Reconciliation of payable to defined benefit plan: Present value of defined benefit obligation Fair value of plan assets 3,678,851 (3,398,564) Net liability 36.5 Movement in defined benefit obligations 280,287 3,347,076 (3,036,762) 310,314 Obligation at beginning of the year Current service cost Past service cost Interest cost Re-measurement (gain) / loss Benefits paid by the Bank Benefits due but not paid 3,347,076 313,143 (23,627) 314,271 (10,500) (247,575) (13,937) 2,733,220 296,539 26,861 345,365 112,312 (153,137) (14,084) Obligation at end of the year 36.6 Movement in fair value of plan assets 3,678,851 3,347,076 3,036,762 299,143 13,857 310,314 (247,575) (13,937) 2,816,595 356,203 43,196 – (165,148) (14,084) 3,398,564 3,036,762 Fair value at beginning of the year Interest income on plan assets Actuarial gain on assets Contributions by employer Benefits paid Benefits due but not paid Fair value at end of the year 36.7 Movement in payable under defined benefit schemes Opening balance Charge for the year Contribution by the Bank Re-measurement (gain) / loss recognised in OCI during the year - note 36.8.2 310,314 304,644 (310,314) (71,364) 312,561 – (24,357) 69,117 Closing balance 36.8 Charge for defined benefit plan 280,287 310,314 Current service cost Past service cost Net interest cost on defined benefit liability 313,143 (23,627) 15,128 296,539 26,861 (10,838) 304,644 312,562 36.8.1Cost recognised in profit and loss 100 Askari Bank Limited
103. Rupees in ‘000 20212020 36.8.2Re-measurements recognised in OCI during the year (Gain) / loss on obligation - Experience adjustment - Demographic assumptions - Financial assumptions (23,223) – 12,723 20,904 37,311 54,098 Actuarial gain on plan assets (10,500) (13,857) 112,313 (43,196) Total re-measurements recognised in OCI 36.9 Components of plan assets (24,357) 69,117 Cash and cash equivalents Government securities Term Finance Certificates Shares Mutual funds Payables 2,438,114 260,000 176,000 87,566 450,988 (14,103) 30,889 2,477,000 156,000 92,801 294,156 (14,084) 3,398,565 3,036,762 The fund primarily invests in Government securities which do not carry any credit risk. These are subject to interest rate risk based on market movements. Equity securities are subject to price risk whereas non-Government debt securities are subject to both credit risk and interest rate risk. These risks are regularly monitored by the Trustees of the employee funds. 36.10Sensitivity analysis Sensitivity analysis is performed by changing only one assumption at a time while keeping the other assumptions constant. Sensitivity analysis of key assumptions is given below: Impact on Defined Benefit Obligations Assumptions Change in assumption Discount rate Salary increase Mortality rate change 36.11Expected charge for the next financial year is Rs. 344,120 thousand. 36.12Maturity profile 1.00% 1.00% 1 year Increase in assumption Decrease in assumption Rupees in ‘000 3,384,995 4,017,476 3,680,779 (4,013,899) (3,376,584) 3,677,075 The average duration of defined benefit obligation is 9 years (2020: 9 years). 36.13Funding Policy The Bank carries out the actuarial valuation of its defined benefit plan on periodic basis using “Projected Unit Credit Method”. Contributions are made annually in accordance with the actuarial recommendation. Annual Report 2021 101
104. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 36.14Significant risk associated with the staff retirement benefit scheme: Longevity Risks Salary Increase Risk Withdrawal Risk 37 38. The risk arises when the actual lifetime of retirees is longer than expectation. This risk is measured at the plan level over the entire retiree population. The most common type of retirement benefit is one where the benefit is linked with final salary. The risk arises when the actual increases are higher than expectation and impacts the liability accordingly. The risk of actual withdrawals varying with the actuarial assumptions can impose a risk to the benefit obligation. The movement of the liability can go either way. DEFINED CONTRIBUTION PLAN The Bank operates a recognized provident fund scheme for all its regular employees for which equal monthly contributions are made both by the Bank and by the employees to the fund at the rate of 8.33% of basic salary of the employee. Payments are made to the employees as specified in the rules of the fund. Contribution to the fund made by the Bank and the employees during the year amounts to Rs. 312,404 thousand (2020: Rs. 293,209 thousand) each. The fund covers 6,330 employees (2020: 6,092 employees). COMPENSATED ABSENCES 38.1 General description The Bank grants compensated absences to all its regular employees as per effective Service Rules. Provisions are recorded in accordance with the actuarial recommendation. Under this unfunded scheme, all employees of Askari Bank Limited are entitled to take 24 days of earned leaves every year which can be accumulated up to a maximum of 45 days. Leave encashment is made on the basis of gross salaries and paid to members on separation from service. 38.2 Principal actuarial assumptions The actuarial valuation was carried out for the year ended December 31, 2021 using “Projected Unit Credit Method”. Present value of obligation as at December 31, 2021 was Rs. 701,725 thousand (2020: Rs. 679,452 thousand). Expense for the year of Rs. 86,644 thousand (2020: Rs. 154,064 thousand) has been included in operating expenses. The main assumptions used for actuarial valuation are as follows: 102 Discount rate - per annum Expected rate of increase in salaries - per annum Leave accumulation factor - days Askari Bank Limited 20212020 11.75% 11.25% 11 13.00% 9.25% 11
105. 39 . COMPENSATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL 39.1 Total Compensation Expense For the year ended December 31, 2021 Chairman Items Non Executive Directors Members President & Key Other Material Shariah CE Management Risk Takers / Board Personnel Controllers Total Rupees in ‘000 Fees and Allowances etc. Managerial Remuneration i) Fixed ii) Total Variable of which a) Cash Bonus / Awards Charge for defined benefit plan Contribution to defined contribution plan Rent & house maintenance Utilities Medical Conveyance Others Total Number of Persons 3,450 – – – – – – – – 65,063 – – – – – – – – 6,950 – – – – – – 503 – 3,450 65,063 7,453 1 11 4 37,071 195,494 157,161 465,189 12,116 3,620 2,837 11,779 2,577 1,545 1,788 38 43,008 13,709 10,998 63,216 14,741 13,683 58,088 12,711 105,608 31,201 25,924 151,701 35,302 32,117 106,924 37,664 73,371 454,978 387,315 991,630 1 50,484 13,872 12,089 76,706 17,984 16,889 46,545 24,915 30 48 95 For the year ended December 31, 2020 Chairman Items Non Executive Directors Total Rupees in ‘000 Fees and Allowances etc. Managerial Remuneration i) Fixed ii) Total Variable of which a) Cash Bonus / Awards Charge for defined benefit plan Contribution to defined contribution plan Rent & house maintenance Utilities Medical Conveyance Others Members President & Key Other Material Shariah CE Management Risk Takers / Board Personnel Controllers Number of Persons 875 – – – – – – – – 24,781 – – – – – – – – 5,400 – – – – – – 443 – 875 24,781 5,843 1 15 3 24,962 172,807 147,632 376,457 5,569 2,033 1,872 10,113 2,247 2,247 – 120 30,882 10,527 10,425 61,531 12,784 12,784 48,780 13,038 77,441 26,392 22,804 137,552 29,603 29,566 88,078 38,834 49,163 397,682 348,383 826,727 1 40,990 13,832 10,507 65,908 14,572 14,535 38,855 25,676 27 53 100 The President & CE and certain executives are provided with bank maintained cars in accordance with their respective entitlements. Others mainly include cost of living allowance (COLA) given to certain executives. Total deferred bonus outstanding as at December 31, 2021 for the President & CE, Key Management Personnel and other Material Risk Takers / Material Risk Controllers amounts to Rs. 8,824 thousand (2020: Rs. 5,974 thousand). Annual Report 2021 103
106. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 39.2 Remuneration paid to Directors for participation in Board and Committee Meetings 2021 Meeting fees and allowances paid for Board Committees Human resource and Risk Board remuneration management Audit S. No Name of Director meetings committee committee committee Information technology committee Total amount paid – – 480 – – 1,969 – 1,703 972 – – – 3,450 5,938 10,206 4,200 11,918 8,344 9,644 6,094 6,381 1,475 144 719 5,124 68,513 Rupees in ‘000 1 2 3 4 5 6 7 8 9 10 11 12 Mr. Waqar Ahmed Malik Mr. Sarfaraz Ahmed Rehman Dr. Nadeem Inayat Syed Bakhtiyar Kazmi Mr. Manzoor Ahmed Mr. Muhammad Aftab Manzoor Mrs. Zoya Mohsin Nathani Mr. Raja Muhammad Abbas Mr. Mushtaq Malik Lt Gen Tariq Khan HI (M) Retd Mr. Imran Moid Mr. Rehan Laiq Total amount paid 3,450 2,675 3,118 2,100 3,118 2,518 3,118 2,819 3,118 1,475 144 288 – 3,263 2,999 – 3,655 – 4,169 – – – – – – – 911 – 2,129 – 2,357 – 2,291 – – – 27,941 14,086 7,688 – – 2,698 2,100 3,016 3,857 – 1,572 – – – 431 13,674 2020 Meeting fees and allowances paid for Board Committees Human resource and Risk Board remuneration management Audit S. No Name of Director meetings committee committee committee Information technology committee Total amount paid – – – 194 – – – – 625 656 – – – – – – 875 125 1,564 4,561 156 4,156 2,500 3,031 1,531 2,781 407 1,000 1,562 250 813 344 Rupees in ‘000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Mr. Waqar Ahmed Malik Lt Gen Syed Tariq Nadeem Gilani HI (M) Retd Mr. Sarfaraz Ahmed Rehman Dr. Nadeem Inayat Mr. Imran Moid Mr. Manzoor Ahmed Mr. Mushtaq Malik Mrs. Zoya Mohsin Nathani Mr. Raja Muhammad Abbas Mr. Muhammad Aftab Manzoor Lt Gen Javed Iqbal HI (M) Retd Lt Gen Tariq Khan HI (M) Retd Mr. Rehan Laiq Mr. Kamal A. Chinoy Syed Ahmed Iqbal Ashraf Brig Saleem Ahmed Moeen SI Retd Total amount paid 875 125 625 1,281 156 1,281 1,281 906 906 906 125 1,000 812 250 250 250 – – 939 1,070 – 1,063 240 1,156 – – 188 – – – 188 – 11,029 4,844 – – – 664 – 531 833 969 – – – – – – – 94 3,091 – – – 1,352 – 1,281 146 – – 1,219 94 – 750 – 375 – 5,217 1,475 25,656 39.3 Remuneration paid to Shariah Board Members For the year ended December 31, 20212020 Chairman Resident Non-resident Chairman Resident Non-resident Items membermembermembermember 104 Rupees in ‘000 Meeting Fees and Allowances Managerial Remuneration Fixed Fuel – 2,110 – – 2,110 503 – 2,730 – – 1,800 – – 1,800 443 – 1,800 – Total Amount 2,110 2,613 2,730 1,800 2,243 1,800 Total Number of Persons 1 1 2 1 Askari Bank Limited 11
107. 40 . FAIR VALUE MEASUREMENTS The fair values of traded investments are based on quoted market prices. The fair values of unquoted equity investments are estimated using the break-up value of the investee company. The fair value of unquoted debt securities, fixed term advances, fixed term deposits and borrowings, other assets and other liabilities cannot be calculated with sufficient reliability due to the absence of a current and active market for such assets and liabilities and reliable data regarding market rates for similar instruments. 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 they are either short-term in nature or, in the case of customer advances, deposits and certain long term borrowings, are frequently repriced. All assets and liabilities for which fair value is measured or disclosed in these unconsolidated financial statements are categorised within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. The Bank measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements: 40.1 Fair value of financial assets Level 1: Fair value measurements using quoted prices (unadjusted) in active markets (Pakistan Stock Exchange) for identical assets or liabilities. Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) available at MUFAP and Reuters page. Level 3: Fair value measurements using input for the asset or liability that are not based on observable market data (i.e. unobservable inputs). Valuation techniques used in determination of fair values within level 2 and level 3 Federal Government Securities Non Government Debt Securities Foreign Government Debt Securities Unit of Mutual Funds Forward foreign exchange contracts and Forward Government securities transactions The fair values of Federal Government Securities are determined on the basis of rates / prices sourced from Reuters. Fixed Assets and Non Banking Assets Acquired in Satisfaction of Claims Land and Non Banking assets acquired in satisfaction of claims are valued on a periodic basis using professional valuers. The valuation is based on their assessments of the market value of the assets. The effect of changes in the unobservable inputs used in the valuations cannot be determined with certainty. Accordingly, a qualitative disclosure of sensitivity has not been presented in these unconsolidated financial statements. Non Government Debt Securities are valued on the basis of rates announced by Mutual Fund Association of Pakistan (MUFAP). Foreign Government Debt Securities are valued on the basis of rates taken from custodian of the securities which are usually drawn from Bloomberg. Fair values of mutual funds are determined based on their net asset values as published at the close of reporting period. The fair values of forward foreign exchange contracts and forward Government securities transactions are determined using forward pricing calculations. Annual Report 2021 105
108. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 The following table provides the fair values of those of the Bank’s financial assets and liabilities that are recognised or disclosed at fair value in these unconsolidated financial statements: Rupees in ‘000 2021 Carrying / Notional Value Level 1 On balance sheet financial instruments Financial assets - measured at fair value Level 2 Investments Federal Government Securities 473,847,695 4,382,885 469,464,810 Shares 4,143,818 4,143,818 – Units of open end mutual funds 1,510,245 – 1,510,245 Fully paid preference shares 16,051 16,051 – Non Government Debt Securities 11,992,197 – 11,992,197 Foreign securities 532,195 532,195 – 492,042,201 9,074,949 482,967,252 Financial assets - disclosed but not measured at fair value Investments Unlisted shares 350,000 – – Subsidiary 165,619 – – Federal Government Securities 120,077,202 12,393,260 106,453,893 Foreign Securities 3,726,136 3,583,295 – Cash and balances with treasury banks 89,432,245 – – Balances with other banks 3,454,829 – – Advances 477,588,237 – – Other assets 35,887,791 – – 106 Level 3 Total – – – – – – 473,847,695 4,143,818 1,510,245 16,051 11,992,197 532,195 – 492,042,201 – – – – – – – – – – 118,847,153 3,583,295 – – – – 730,682,059 15,976,555 106,453,893 Off-balance sheet financial instruments - measured at fair value - 122,430,448 Forward purchase of foreign exchange Forward sale of foreign exchange Askari Bank Limited 117,506,977 – 736,509 – 736,509 84,053,218 – (394,684) – (394,684)
109. Rupees in ‘000 2020 Carrying / Notional Value Level 1 On balance sheet financial instruments Financial assets - measured at fair value Level 2 Level 3 Total Investments Federal Government Securities 334,820,766 3,244,480 331,576,286 Shares 4,437,365 4,437,365 – Units of open end mutual funds 1,436,420 – 1,436,420 Fully paid preference shares 61,945 61,945 – Non Government Debt Securities 9,743,656 – 9,743,656 Foreign securities 495,878 495,878 – – 334,820,766 – 4,437,365 – 1,436,420 – 61,945 – 9,743,656 – 495,878 – 350,996,030 350,996,030 8,239,668 342,756,362 Financial assets - disclosed but not measured at fair value Investments Unlisted shares 350,000 – Subsidiary 131,551 – Federal Government Securities 94,917,945 11,683,143 Foreign Securities 3,291,714 3,159,127 Cash and balances with treasury banks 73,651,718 – Balances with other banks 7,954,288 – Advances 395,373,840 – Other assets 30,377,969 – – – 89,787,937 – – – – – – – – – – – – – 89,787,937 – 104,630,207 606,049,025 14,842,270 – – 101,471,080 3,159,127 – – – – Off-balance sheet financial instruments - measured at fair value Forward purchase of foreign exchange 118,889,979 – (2,711,715) – (2,711,715) Forward sale of foreign exchange 90,389,815 – 2,483,681 – 2,483,681 The Bank’s policy is to recognise transfers into and out of the different fair value hierarchy levels at the date the event or change in circumstances that caused such transfer to takes place. There were no transfers between levels 1 and 2 during the year. Rupees in ‘000 20212020 Level 3 Level 3 40.2 Non-financial assets carried at revalued amounts Fixed assets Property and equipment (freehold and leasehold land) Other assets 9,689,980 9,552,630 Non-banking assets acquired in satisfaction of claims 3,166,857 4,869,214 Annual Report 2021 107
110. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 41. SEGMENT INFORMATION 41.1 Segment details with respect to Business Activities The segment analysis with respect to business activities is as follows: 2021 Rupees in ‘000 108 Branch banking Corporate Treasury banking Consumer banking Islamic Foreign Head office banking operations / others Total 12,779,676 36,485,550 (9,502,656) (31,276,976) 2,659,780 3,696,806 2,642,225 (1,379,999) 488,405 3,716,576 1,417,147 – (87,839) 454,406 16,512 (1,493,451) 32,409,721 4,093,353 – 122,896 9,369,650 2,722,798 Profit and loss Net mark-up / return / profit Inter segment revenue - net Non mark-up / return / interest income (23,138,002) 38,154,117 1,930,845 Total income 16,946,960 5,936,800 8,905,380 1,750,631 4,170,982 Segment direct expenses Inter segment expense allocation 11,514,501 1,051,525 754,085 868,139 293,661 10,229 1,069,556 164,265 2,329,818 – 119,612 5,112,915 21,194,148 – (2,094,158) – Total expenses 12,566,026 1,622,224 303,890 1,233,821 2,329,818 119,612 (Reversal of provisions) / provisions 307,704 3,599,278 277,761 119,073 642,649 (42,539) Profit / (loss) before tax 4,073,230 715,298 8,323,729 397,737 1,198,515 1,268,747 Statement of financial position Cash and bank balances Investments Advances - performing - net of provision Advances - non-performing - net of provision Others 38,294,869 3,233,876 43,286,336 151,401 – 8,521,775 555,083,246 – 15,233,937 346,926,181 – 21,054,155 463,099 563,226 – 248,084 538,831 19,513,936 8,897,467 541,821 Total assets 54,530,736 378,758,994 607,267,049 Borrowings Subordinated debts Deposits and other accounts Net inter segment balances - net Others Total liabilities Equity Total equity and liabilities Contingencies and commitments Askari Bank Limited 1,904,256 – 40,118,695 42,309,124 – – 683,963,786 257,131,733 – (642,233,536) 61,032,726 564,466,433 10,896,230 20,475,840 491,492 54,530,736 378,758,994 607,267,049 – – – 54,530,736 378,758,994 607,267,049 5,956,056 446,725,804 204,173,657 1,345,820 7,797,848 122,302 31,274,749 20,725,609 69,933,549 14,986,172 1,182,984 189,004 5,537,167 436,039 21,995,461 115,726,297 36,459,126 41,779,371 3,018,757 21,194,148 36,024 4,939,950 (331,983) 15,645,273 442 755,779 6,807,846 – 36,842,379 92,887,074 616,361,158 474,941,840 2,646,397 72,307,640 44,406,446 1,259,144,109 2,372,387 – 16,529,289 20,330,010 – 123,563,761 – – 12,000,000 12,000,000 4,042 18,886,136 732,896 73,585,947 646,139 98,421 1,015,430,068 11,291,769 12,386,371 (25,829,899) – 6,452,020 3,096,606 10,102,703 52,247,787 21,995,461 107,859,025 36,459,126 – 7,867,272 – 48,035,221 55,902,493 21,995,461 115,726,297 36,459,126 16,278 13,885,398 (3,628,775) 1,203,241,616 6,859 44,406,446 1,259,144,109 1,221,835 671,985,887
111. 2020 Rupees in ‘000 Branch banking Corporate Treasury banking Consumer banking Islamic Foreign Head office banking operations / others Total Profit and loss Net mark-up / return / profit Inter segment revenue - net Non mark-up / return / interest income (26,656,103) 18,632,163 32,173,633 39,566,158 (13,507,134) (28,107,774) 1,502,950 2,359,808 2,982,748 2,994,940 (1,648,046) 395,210 3,974,759 – 384,683 1,222,306 (158,354) 10,109 (2,078,888) 30,262,810 3,855,150 – 2,058,300 9,693,808 Total income 14,413,005 7,484,837 7,048,607 1,742,104 4,359,442 1,074,061 3,834,562 Segment direct expenses Inter segment expense allocation 11,233,312 561,797 800,115 952,795 315,756 5,414 954,513 182,059 2,157,676 – 113,515 – 4,639,739 20,214,626 (1,702,065) – Total expenses 11,795,109 1,752,910 321,170 1,136,572 2,157,676 113,515 2,937,674 20,214,626 (Reversal of provisions) / provisions (61,334) 473,360 491,171 232,521 438,931 (43,506) 443,604 1,974,747 Profit before tax 2,679,230 5,258,567 6,236,266 373,011 1,762,835 1,004,052 453,284 17,767,245 Statement of financial position Cash and bank balances 30,938,859 2,174,588 39,925,119 Investments – 8,559,870 409,207,953 Advances - performing - net of provision 12,987,203 280,191,484 – Advances - non-performing - net of provision 563,642 921,775 – Others 1,806,853 15,698,490 7,257,226 – 6,313,535 135,415 – 12,216,340 18,307,234 18,522,780 62,598,616 10,348,869 433,395 1,671,075 304,434 763,025 5,754,115 280,853 2,118,490 81,606,006 1,395,843 449,687,240 6,830,567 391,479,519 – 3,894,321 34,289,414 65,849,976 Total assets 46,296,557 307,546,207 456,390,298 19,719,200 88,553,681 29,376,805 44,634,314 992,517,062 Borrowings Subordinated debts Deposits and other accounts Net inter segment balances - net Others 2,148,089 32,344,618 20,712,692 – – – 564,770,077 160,149,553 – (533,524,209) 97,723,672 434,611,006 12,902,600 17,328,364 1,066,600 1,923,886 – 21,935 16,809,062 964,317 11,810,905 11,946,873 3,276,606 84,163,669 – – 12,000,000 12,000,000 65,305,888 858,355 81,075 791,186,883 – 11,188,408 (26,807,939) – 4,440,177 3,346,088 10,572,014 50,620,160 Total liabilities 46,296,557 307,546,207 456,390,298 19,719,200 81,556,970 27,339,724 Equity Total equity and liabilities Contingencies and commitments – – – – 46,296,557 307,546,207 456,390,298 19,719,200 4,929,608 368,782,235 198,781,152 – 6,996,711 2,037,081 88,553,681 29,376,805 11,741,980 9,352,213 39,956,618 (878,244) 937,970,712 45,512,558 54,546,350 44,634,314 992,517,062 1,222,789 594,809,977 Annual Report 2021 109
112. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 41.2 Segment details with respect to geographical locations Geographical segment analysis 2021 Rupees in ‘000 110 Pakistan Middle East Total Profit and loss Net mark-up / return / profit 30,992,574 1,417,147 Inter segment revenue - net 87,839 (87,839) – Non mark-up / return / interest income 9,353,138 16,512 9,369,650 Total income 40,433,551 1,345,820 41,779,371 Segment direct expenses 21,074,536 119,612 21,194,148 Inter segment expense allocation Total expenses Provisions / (reversals) Profit before tax Statement of financial position Cash and bank balances 92,764,772 122,302 92,887,074 Investments 595,635,549 20,725,609 616,361,158 Advances - performing - net of provision 459,955,668 14,986,172 474,941,840 Advances - non-performing - net of provision 2,457,393 189,004 2,646,397 Others 71,871,601 436,039 72,307,640 Total Assets 1,222,684,983 36,459,126 1,259,144,109 Borrowings 103,233,751 20,330,010 123,563,761 Subordinated debts Deposits and other accounts Net inter segment balances - net Others Total liabilities Equity Total equity and liabilities Contingencies and commitments Askari Bank Limited – – 32,409,721 – 21,074,536 119,612 21,194,148 4,982,489 (42,539) 4,939,950 14,376,526 1,268,747 15,645,273 12,000,000 – 12,000,000 1,014,783,929 646,139 (12,386,371) 12,386,371 – 49,151,181 3,096,606 52,247,787 1,166,782,490 36,459,126 1,203,241,616 55,902,493 – 1,015,430,068 55,902,493 1,222,684,983 36,459,126 1,259,144,109 671,979,028 6,859 671,985,887
113. 2020 Rupees in ‘000 Pakistan Middle East Total Profit and loss Net mark-up / return / profit 29,040,504 1,222,306 Inter segment revenue - net 158,354 (158,354) – Non mark-up / return / interest income 9,683,699 10,109 9,693,808 Total income 38,882,557 1,074,061 39,956,618 Segment direct expenses 20,101,111 113,515 20,214,626 Inter segment expense allocation – – – Total expenses 20,101,111 113,515 20,214,626 Provisions 2,018,253 (43,506) 1,974,747 Profit before tax 16,763,193 1,004,052 17,767,245 Statement of financial position Cash and bank balances 81,470,591 135,415 81,606,006 Investments 431,380,006 18,307,234 449,687,240 Advances - performing - net of provision 381,130,650 10,348,869 391,479,519 Advances - non-performing - net of provision 3,589,887 304,434 3,894,321 Others 65,569,123 280,853 65,849,976 Total Assets 963,140,257 29,376,805 992,517,062 Borrowings 72,216,796 11,946,873 84,163,669 Subordinated debts 12,000,000 – 12,000,000 Deposits and other accounts 790,328,528 858,355 791,186,883 Net inter segment balances - net (11,188,408) 11,188,408 – Others 47,274,072 3,346,088 50,620,160 Total liabilities 910,630,988 27,339,724 937,970,712 Equity 52,509,269 2,037,081 54,546,350 Total equity and liabilities 963,140,257 29,376,805 992,517,062 Contingencies and commitments 585,457,764 9,352,213 594,809,977 42. TRUST ACTIVITIES 30,262,810 The Bank acts as custodian and holds the securities on behalf of individuals, trusts, retirement benefit plans and other institutions. These are not assets of the Bank and, therefore, are not included in the unconsolidated statement of financial position 43. RELATED PARTY TRANSACTIONS Fauji Consortium comprising of Fauji Foundation, Fauji Fertilizer Company Limited and Fauji Fertilizer Bin Qasim Limited (the Parent) holds 71.91% of the Bank’s share capital at the year end. Accordingly all the subsidiaries and associates of Fauji consortium are the related parties of the Bank. The Bank also has related party relationships with its directors, key management personnel and employees’ funds. The Bank enters into transactions with related parties in the ordinary course of business and on substantially the same terms as for comparable transactions with person of similar standing. Contributions to and accruals in respect of staff retirement benefits and other benefit plans are made in accordance with the actuarial valuations / terms of the contribution plan. Remuneration to the executives / officers is determined in accordance with the terms of their appointment. Annual Report 2021 111
114. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Details of transactions with related parties and balances are as follows: 20212020 Key Other Key Other management related management related Rupees in ‘000 Parent Directors personnelSubsidiary parties Parent Directors personnelSubsidiary parties Investments Opening balance Investment made during the year Investment redeemed / disposed off during the year Transfer in / (out) - net – – – – – – 165,619 – 800,478 – – – – – – – – – – – – – Closing balance – – - Provision for diminution in value of investments – – 2,805,786 85,548,230 (83,830,101) – 4,523,915 114,789 50,830 1,019,311 461,454 – – (18,449) (92,688) – – – – – – 165,619 689,341 – – – 165,619 800,478 – – – – – – 34,068 – 28,671 438 (420) (28,646) 423,764 237,240 (150,992) (68,764) – 2,898 (2,898) – 43 441,248 – – (247,268) (433,019) Advances Opening balance Addition during the year Repaid during the year Transfer in / (out) - net Closing balance Other Assets Interest / mark-up receivable Advance rent 70,227 1,144 – – 92,634 – 4,766,042 5,035,504 12,098,633 121,938,314 (9,424,006) (124,168,032) 3,081,041 – 19,771 59,315 (50,406) (9) 364,453 – 4,701,476 125,382 – 9,941,779 (93,715) – (10,545,058) 27,644 667,845 2,805,786 28,671 423,764 492,285 – 46,571 1,081 425 – 84,087 – – 10,521,710 – – – 4,766,042 – – 90,799 – Borrowings Opening balance Borrowings during the year Settled during the year – – – – – – – – – – 1,923,886 – 1,500,000 – (1,051,499) – – – – – – – – – – 1,972,026 – 1,000,000 – (1,048,140) Closing balance – – – – 2,372,387 – – – – 1,923,886 Subordinated debt Opening balance Issued during the year Redemption during the year Transfer in / (out) - net – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Closing balance – – – – – – – – – Deposits and other accounts Opening balance Received during the year Withdrawn during the year Transfer in / (out) - net Closing balance Other Liabilities Interest / mark-up payable Payable to staff retirement fund Security deposits payable Others Contingencies and Commitments 8,018,104 768,812,177 (720,605,891) – 19,379 186,617 201,796 17,017,129 4,678,222 84,099 1,971,951 1,232,716 404,528,295 584,157,308 (76,565) (1,957,873) (1,166,304) (379,499,670) (580,817,426) (2,904) 10,564 – 242,803 – 56,224,390 24,009 211,259 268,208 42,288,557 87,473 – – 110,128 – – – – 3,413 – – 5,884 – – – – 1,233,702 – 42,122 40,000 6,790,000 – – – – – 64,239 117,562 211,929 1,095,412 (199,751) (1,016,580) (57,038) (9,777) 8,018,104 19,379 186,617 136,012 280,287 308,299 – 19,363 – – 4,986 – – – – 1,809 – 287 – 7,649,153 1,313,613 – – – 1,219,500 – 188,963 4,590,000 – – – – – 24,950 – (5) (24,945) – 53,174 19,941,993 980,756 286,741,848 (832,134) (288,220,362) – (1,446,350) 201,796 17,017,129 – – – – 40,000 72,941 310,314 296,198 – 3,951,782 Others 112 Securities held as custodian Securities given as collateral Askari Bank Limited – 6,992,500 – –
115. For the year ended December 31 , 2021 For the year ended December 31, 2020 Key Other Key Other management related management related Rupees in ‘000 Parent Directors personnelSubsidiary parties Parent Directors personnelSubsidiary parties Income Mark-up / return / interest earned Fee and commission earned Dividend income Gain on sale of fixed assets Other income Expense Mark-up / return / interest expensed Charge to defined benefit plan Contribution to defined contribution plan Remuneration and allowances Rent Communications Brokerage and Commission Directors’ Fee, Allowances Dividend paid Insurance Donations Others 216,765 51 – – – – 1,629,848 – – – 1,807 – – – 2,718,846 – 376,223 – 532 – – – – 17,578 – – 1,975 – 96 158 – – – 691,037 40,924 48,018 – – 209,445 105 – – – 709 1,280,812 – 304,644 – 312,404 – 7,453 – – – 56,671 2,122 48,949 – – – 42,350 – – – – – – 639,348 – – – 12,519 – – – 1,359,423 – 109,000 – 4,353 – – – – 20,126 – – – – – – – – – 536,474 3,141 33,788 – – – 318 – – – – – – 68,513 9 – – – 8,681 – – 672,535 – – – – 225 – – – 322 – – – – – – 25,656 4 – – – 6,922 – – 595,209 – – – – 113 – – – 37 1,984,017 – 312,562 – 293,102 – 5,823 – – – 33,002 3,500 13,958 – – – 11,745 – 63,404 – – – 2,364 In addition to above, rent free sub-branches are operating at FFC Sona Tower, FFBL Tower and Foundation University (along with booth and ATM). The term ‘key management personnel’ has the same meaning as defined in IAS 24 - Related party disclosures. During the year ended December 31, 2021, certain movable assets were settled against the final settlement of related parties as disclosed in note 10.4. 44. CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS The objective of managing capital is to safeguard the Bank’s ability to continue as a going concern, so that it could continue to provide adequate returns to shareholders by pricing products and services commensurately with the level of risk. It is the policy of the Bank to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Bank recognises the need to maintain a balance between the higher returns that might be possible with greater exposure and the advantages and security afforded by a sound capital position. Under the current scenario, the banks are under pressure to extend further credit to its borrowers, while overall deteriorating credit risk and increased NPL may also put additional pressures on the Bank from Capital Adequacy Ratio perspective. The SBP has relaxed the Capital Conversion Buffer (CCB) requirements for the banks to 1.5%, resulting in an overall CAR requirement of 11.5%. In addition to the measures by SBP, the Bank is continuously monitoring the impacts of various decisions of its CAR and taking further lending decisions based on the overall impacts on RWA. The Bank also believes that it has sufficient buffer in its CAR requirement to meet any adverse movements in credit, market or operational risks.” Annual Report 2021 113
116. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Minimum Capital Requirement (MCR): Paid-up capital (net of losses) 12,602,602 12,602,602 Eligible Common Equity Tier 1 (CET 1) Capital Eligible Additional Tier 1 (ADT 1) Capital 51,649,517 5,886,339 44,867,667 5,928,538 Total Eligible Tier 1 Capital Eligible Tier 2 Capital 57,535,856 8,502,535 50,796,205 13,104,622 Total Eligible Capital (Tier 1 + Tier 2) 66,038,391 63,900,827 Risk Weighted Assets (RWAs): Credit Risk Market Risk Operational Risk 397,629,708 28,800,513 66,981,093 324,807,165 31,566,562 56,352,087 Total 493,411,314 412,725,814 Common Equity Tier 1 Capital Adequacy ratio 10.47% 10.87% Tier 1 Capital Adequacy Ratio 11.66% 12.31% Total Capital Adequacy Ratio 13.38% 15.48% Capital Adequacy Ratio (CAR): As of December 2021, the Bank must meet a Tier 1 to RWA ratio and CAR, including CCB, of 10% and 11.50% respectively. Standardized Approach is used for calculating the Capital Adequacy for Market and Credit Risk while Basic Indicator Approach (BIA) is used for Operational Risk. Rupees in ‘000 114 20212020 Leverage Ratio (LR): Eligible Tier-1 Capital Total Exposures Leverage Ratio Total High Quality Liquid Assets Total Net Cash Outflow Liquidity Coverage Ratio Net Stable Funding Ratio (NSFR): Total Available Stable Funding Total Required Stable Funding Net Stable Funding Ratio 20212020 57,535,855 1,748,422,535 3.29% 50,796,205 1,419,666,541 3.58% Liquidity Coverage Ratio (LCR): 459,883,554 250,932,186 183.27% 986,752,063 512,579,835 192.51% 345,807,337 201,510,814 171.61% 812,357,633 441,907,178 183.83% The full disclosure on the CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS as per SBP instructions issued from time to time have been placed on the website. The link to the full disclosure can be accessed through Bank’s website at http://akbl.com.pk Askari Bank Limited
117. 45 . RISK MANAGEMENT The Bank believes that effective risk management is key to achieving desired level of return while maintaining acceptable level of risk exposure. Robust risk management processes and framework are in place to achieve the Bank’s overall objectives through a well thought out strategy, which enables the Bank to effectively manage Credit, Market, Operational and Liquidity risk in a proactive manner. The Bank’s approach is to ensure that risk management is deeply and firmly embedded in the culture of the Bank. All employees are therefore considered responsible for identification, measurement, monitoring and controlling risks within the scope of their assigned responsibilities. As a result of changing risk environment, the Bank continuously monitors and conducts holistic assessment of complex transactions on an integrated basis. The Bank has a Board Risk Management Committee (BRMC) in place and is updated regularly by the Bank’s Risk Management Group. BRMC is responsible for reviewing the extent of design and adequacy of the risk management framework. BRMC oversight ensures that risks are managed within the level of tolerance and risk appetite of the Bank. 45.1 Credit Risk: Credit risk arises from the potential that an obligor is either unwilling to perform on an obligation or its ability is impaired resulting in economic loss to the Bank. The Bank takes necessary measures to control such risk by monitoring credit exposures, limiting transactions with specific counter parties with increased likelihood of default and continually assessing the creditworthiness of counter parties. The Bank has built and maintains a sound loan portfolio in line with a well defined Risk Management Policy approved by the Board of Directors. Its credit evaluation system comprises of well-designed credit appraisal, sanctioning and review procedures for the purpose of emphasizing prudence in its lending activities and ensuring quality of asset portfolio. Advances portfolio constitutes around 38% of the total asset base and is also the largest source of credit risk for the Bank. The Bank’s advances portfolio is well diversified across various business segments, industries and geographical locations. Risk mitigants have been put in place at all stages of credit risk cycle i.e. identification, measurement, monitoring, controlling and reporting for effective risk management. Accordingly, portfolio monitoring function is in place at the Bank with dedicated resources to ensure that risk is not only minimized but is optimized from a risk / return perspective. Credit Risk Review is conducted at obligor as well as at portfolio level to ensure adherence to regulatory requirement as well as the Bank’s policies and procedures. The review process ensures that a sound and proactive risk management culture is maintained across the Bank. Scope of Pre-Approval Risk Assessment has been enhanced, covering the entire Corporate, Commercial and SME portfolios along with consumer and Agri Finance and Credit is approved under the 4 eye principal with equal ownership from both Business and Risk Management Groups. Audit and inspection division reviews the advances portfolio on a post approval basis. The Bank has undertaken a number of initiatives to strengthen its credit risk management framework including in-house development of internal risk rating models (obligor and facility) for the portfolio in respective segments and transition & migration matrices to study the realized default rates and performance of the risk rating models over the years. Based on a validation / back-testing exercise, a Probability of Default has been introduced for each obligor risk rating. Annual Report 2021 115
118. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 The Bank has implemented an Enterprise Risk Management solution and a Loan Origination System. These systems will not only enhance operational efficiency in the risk management processes, but also promote integrated risk assessment. Risk Asset Review (RAR) performs an independent review of the credit portfolio. It provides an independent assessment of portfolio quality, efficacy of processes for acquisition of risk assets, regulatory/policy compliance and appropriateness of classification and risk rating. Due to deferment / restructuring & rescheduling relief allowed by SBP, the management in last year created a time bound general provision of 0.5% amounting to Rs. 374,851 thousand on domestic funded, performing credit portfolio (Corporate/SME) of the borrowers where regulatory relief has been provided considering it is difficult to estimate the full potential effect of the economic stress due to uncertain economic environment. Since the potential impact of COVID - 19 has still not been eradicated, the management on a prudent basis has maintained this general provision at the year end. This provision is in addition and incremental to the 0.10% general provision on all performing loans. At December 31, 2021 the Bank is carrying a general provision amounting to Rs. 807,679 thousand in respect of potential loan losses which are not specifically identified. IFRS 9 is applicable to the overseas branch of the Bank and requires the estimation of Expected Credit Loss (ECL) based on current and forecast economic conditions. The Bank has reviewed the potential impact of the COVID 19 outbreak on the inputs and assumptions for IFRS 9 ECL measurement in light of available information and recognized provision of Rs. 44,128 thousand against investments. Credit risk - General disclosures The Bank follows the Standardized Approach for its credit risk exposures, which sets out fixed risk weights corresponding to external credit ratings or type of exposure, whichever is applicable. Under the Standardized Approach, the capital requirement is based on the credit rating assigned to counterparties by External Credit Assessment Institutions (ECAIs) duly recognized by the SBP. The Bank selects particular ECAIs for each type of exposure. The Bank utilizes the credit ratings assigned by Pakistan Credit Rating Agency (PACRA), Japan Credit Rating Company Limited – Vital Information Systems (JCR-VIS), Fitch, Moody’s and Standard & Poors (S&P). Types of exposure and ECAIs used Corporates Banks Public sector enterprises FITCH Moody’s S & P √ √ – √ √ – √ √ – PACRA √ √ √ JCR-VIS ECA Scores √1-5 √1-5 √1-2 * FITCH, Moody’s and S&P ratings (as applicable) are used where sovereign exposures are denominated in USD. 116 Askari Bank Limited
119. Mapping to SBP Rating Grades For all exposures , the selected ratings are translated to the standard rating grades given by the SBP. The mapping tables used for converting ECAI ratings to the SBP rating grades are given below: Long Term Rating Grades mapping SBP Rating grade FITCH Moody’s S & P PACRA JCR-VIS ECA scores 1 AAA Aaa AAA AAA AAA 0, 1 AA+Aa1 AA+ AA+ AA+ AAAa2AA AA AA AA-Aa3 AA- AA- AA- 2 A+A1 A+ A+ A+ 2 AA2A A A A-A3 A- A- A- 3 BBB+Baa1 BBB+ BBB+ BBB+ 3 BBBBaa2 BBB BBB BBB BBB-Baa3 BBB- BBB- BBB- 4 BB+Ba1 BB+ BB+ BB+ 4 BBBa2BB BB BB BB-Ba3 BB- BB- BB- 5 B+ B1 B+ B+ B+ 5, 6 BB2B B B B-B3 B- B- B- 6 CCC+ and Caa1 and CCC+ and CCC+ and CCC+ and 7 belowbelow below below below Particulars of the Bank’s significant on-balance sheet and off-balance sheet credit risk in various sectors are analysed as follows: Gross lendings Non-performing lendings Provision held Rupees in ‘000 202120202021202020212020 45.1.1 Lendings to financial institutions Credit risk by public / private sector Private 148,606 148,606 148,606 148,606 148,606 148,606 Annual Report 2021 117
120. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Gross investments Non-performing investments Provision held 202120202021202020212020 45.1.2 Investment in debt securities Credit risk by industry sector Agriculture, Forestry, Hunting and Fishing Textile Chemical and Pharmaceuticals Power and energy Telecommunication Financial Others – 140,000 280,643 311,716 1,279,352 999,352 7,300,860 7,135,420 216,790 221,636 606,860,741 432,764,076 4,288,412 3,859,331 620,226,798 445,431,531 – 280,643 999,352 – 216,790 – – 1,496,785 – 311,716 999,352 – 221,636 – – 1,532,704 – 280,643 999,352 – 216,790 – – 1,496,785 Credit risk by public / private sector Public/ Government Private Rupees in ‘000 – 311,716 999,352 – 221,636 – – 1,532,704 602,512,091 17,714,707 430,413,326 15,018,205 – 1,496,785 – 1,532,704 – 1,496,785 – 1,532,704 620,226,798 445,431,531 1,496,785 1,532,704 1,496,785 1,532,704 Gross advances Non-performing advances Provision held 202120202021202020212020 45.1.3Advances Credit risk by industry sector Agriculture, Forestry, Hunting and Fishing 7,041,920 Mining and Quarrying 7,935,720 Textile 64,650,892 Chemical and Pharmaceuticals 15,521,810 Cement 8,549,176 Sugar 14,988,981 Footwear and Leather garments 1,362,018 Automobile and transportation equipment 2,778,780 Electronics and electrical appliances 5,792,865 Food and allied 54,707,437 Construction 10,171,702 Power and energy 60,184,351 Oil and gas 42,835,417 Wholesale and Retail Trade 16,204,353 Transport, Storage and Communication 30,383,605 Financial 10,546,091 Insurance 189,162 Services 37,091,770 Individuals 37,608,626 Edible oil and ghee 5,510,139 Rice Processing (husking, semi-wholly milled etc.) 10,441,317 Metal and allied 21,765,266 Others 41,555,055 Credit risk by public / private sector Public/ Government Private 118 Askari Bank Limited 507,816,453 14,730,025 6,836,020 51,348,259 12,361,663 6,988,030 12,804,088 1,407,841 1,398,593 393,723 – 9,573,196 978,988 401 18,203 299,115 721,355 432,214 – 10,377,789 794,758 401 – 332,234 725,424 200,630 135,091 – – 9,462,490 10,217,822 845,793 667,129 401 401 9,102 – 299,115 332,234 648,427 557,853 5,010,733 31,213,168 11,249,072 52,409,615 30,471,251 13,332,550 1,104,739 – 840,935 3,278,797 2,199,598 450,205 1,114,668 – 654,219 3,140,231 16,303 489,250 1,104,739 – 742,383 2,255,635 2,124,778 369,169 1,109,918 – 605,003 1,421,836 16,303 421,089 26,103,971 6,103,625 130,155 28,835,351 33,989,548 4,723,727 8,529,132 12,886,482 48,956,991 461,390 – – 779,466 2,569,558 1,668,682 2,511,350 767,907 2,547,719 499,153 – – 567,031 2,662,811 1,681,161 2,537,505 399,464 2,311,783 461,390 – – 726,186 2,257,470 1,623,118 2,490,832 702,305 2,194,967 499,153 – – 562,670 2,185,396 1,200,857 2,507,507 399,464 2,002,352 421,819,890 31,165,327 28,736,399 28,518,930 24,842,078 156,455,831 351,360,622 129,318,506 292,501,384 – 31,165,327 – 28,736,399 – – 28,518,930 24,842,078 507,816,453 421,819,890 31,165,327 28,736,399 28,518,930 24,842,078
121. Rupees in ‘000 20212020 45.1.4Contingencies and Commitments Credit risk by industry sector Agriculture, Forestry, Hunting and Fishing Mining and Quarrying Textile Chemical and Pharmaceuticals Cement Sugar Footwear and Leather garments Automobile and transportation equipment Electronics and electrical appliances Real Estate & Construction Research and development Power and energy Wholesale and Retail Trade Oil and gas Transport, Storage and Communication Financial Insurance Food and allied Services Individuals Engineering Telecommunication Metal and allied Others 188,897 5,800,004 18,491,294 11,735,915 7,802,463 689,143 1,339,250 680,769 3,072,967 27,460,036 1,001,757 19,248,478 7,953,469 14,750,166 14,063,139 378,591,274 288,303 6,689,227 8,743,852 818,389 60,469,083 8,922,873 10,569,058 62,616,081 731,121 7,482,958 15,734,314 8,435,551 2,588,584 460,722 883,465 666,809 2,825,575 22,846,161 4,912,644 20,261,159 6,993,222 13,467,069 10,418,442 329,970,714 236,959 17,416,521 14,530,287 449,306 36,958,247 234,347 11,240,607 65,065,193 Credit risk by public / private sector 671,985,887 594,809,977 Public / Government Private 225,305,142 446,680,745 202,630,602 392,179,375 45.1.5Concentration of Advances 671,985,887 594,809,977 The Bank’s top 10 exposures on the basis of total funded and non-funded exposures aggregated to Rs. 368,943,908 thousand (2020: Rs. 282,075,320 thousand) are as following: Rupees in ‘000 20212020 Funded Non Funded 110,509,493 258,434,415 87,736,321 194,338,999 Total Exposure 368,943,908 282,075,320 The sanctioned limits against these top 10 exposures aggregated to Rs. 439,936,880 thousand (2020: Rs. 402,237,997 thousand). The above does not include any classified exposure. Annual Report 2021 119
122. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 45.1.6 Advances - Province / Region-wise disbursement and utilization 2021 Disbursements Utilization Punjab Sindh KPK including Baluchistan Islamabad AJK including Rupees in ‘000 FATA Gilgit Baltistan Province / Region Punjab Sindh KPK including FATA Baluchistan Islamabad AJK including Gilgit Baltistan Total 670,454,107 657,410,763 7,183,401 599,248,029 2,122,114 595,435,142 4,012,224 106,693 1,071 522,060 6,500 4,775 86,087,636 8,028,458 544,361 443,938 15,150 1,000 200,901 356,750 3,609,934 – 4,387,950 1,200 25,694 383,687 1,812 510,785 29,844 – 5,622,571 948,625 65,694 – 72,867,316 25,911 10,777 1,711 227,020 – 229,707 400,677 1,360,767,994 667,689,678 603,169,750 8,556,735 951,822 79,530,117 869,892 2020 Disbursements Utilization Punjab Sindh KPK including Baluchistan Islamabad AJK including Rupees in ‘000 FATA Gilgit Baltistan Province / Region Punjab Sindh KPK including FATA Baluchistan Islamabad AJK including Gilgit Baltistan Total 770,040,155 742,397,748 15,199,453 584,211,974 15,330,594 566,303,118 5,328,076 173,254 37,788 1,461,988 2,640 27,285 62,548,723 10,515,859 582,275 441,730 28,778 8,200 992,715 33,507 4,939,300 1,100 5,412,501 5,382 1,424,032,646 768,448,873 582,158,119 11,384,505 19,600 11,424,305 274,730 2,266,083 500 126,721 1,429,778 - 7,185 45,743,479 - 55,318 6,334 3,942 50,513 1,185 287,424 344,052 1,731,793 693,450 59,615,906 45.2 Market Risk: 120 Market risk is the risk that the value of on and off-balance sheet positions of a financial institution will be adversely affected by movements in market rates or prices such as interest rates, foreign exchange rates, equity prices and credit spreads, resulting in a loss to earnings and capital. The Bank is exposed to market risk from both its banking and trading books. Trading book for the Bank includes all Held for Trading ( HFT ) assets along with Available for Sale (AFS) securities that are held with intention of short term trade. All assets not included in trading book are included in the banking book. The Bank’s Risk Management Process seeks to identify, measure, monitor, and control market risks in order to shield against adverse movements in market factors and to attain an efficient risk / return profile of its open positions. Risk Management Group has developed and implemented market risk policy and risk measurement / monitoring methodology for review and reporting of market risk. The Bank makes use of the globally established Value-at-Risk (VaR) methodology to measure traded market risk. Additionally, sensitivity analysis is carried out to gauge the impact of extreme market movements on traded exposures, such as fixed income securities and equity capital market instruments. Further, stress testing is used to analyze the impact of abnormal market movements across different portfolios to assess non-traded market risk, in particular interest rate risk in the banking book. The performance of the Bank’s traded portfolios is evaluated through the use of risk / return analysis. Risk is assessed through the revaluation of all traded market risk exposed positions on a daily basis, and monitored by ensuring that these positions do not breach any regulatory limits as well as any internally established risk tolerance limits. Askari Bank Limited
123. Basel III Standardized Approach is used for calculating the Capital Adequacy for Market Risk . Total capital charge for market risk is Rs. 2,304,420 thousand (2020: Rs. 2,478,060 thousand). 45.2.1 Balance sheet split by trading and banking books 20212020 Rupees in ‘000 Cash and balances with treasury banks Balances with other banks Investments Advances Fixed assets Intangible assets Deferred tax assets Other assets Banking book 89,432,245 3,454,829 516,353,183 477,588,237 20,166,875 1,183,265 5,168,183 45,789,317 1,159,136,134 Trading book – – 100,007,975 – – – – – Total Banking book Trading book Total 89,432,245 3,454,829 616,361,158 477,588,237 20,166,875 1,183,265 5,168,183 45,789,317 73,651,718 7,954,288 335,342,200 395,373,840 21,213,709 1,143,146 1,623,001 41,870,120 – 73,651,718 – 7,954,288 114,345,040 449,687,240 – 395,373,840 – 21,213,709 – 1,143,146 – 1,623,001 – 41,870,120 100,007,975 1,259,144,109 878,172,022 114,345,040 992,517,062 45.2.2Foreign Exchange Risk Foreign exchange risk, or the risk that the Bank’s earnings and / or capital can fluctuate due to changes in foreign exchange rates, arises out of the Bank’s foreign exchange exposure which consists of foreign currency cash in hand, nostro / vostro accounts, forward contracts, forward bookings with exporters, foreign bills purchased, foreign currency placements with SBP and the Bank’s Wholesale Bank Branch, foreign currency lendings / deposits and capital investments in offshore operations. The Bank’s treasury manages consolidated foreign exchange exposure by matching foreign currency assets and liabilities in spot and forward. The foreign exchange exposure and nostro balances are maintained within regulatory limits and VaR is calculated for consolidated foreign exchange exposure on a daily basis. The impact of a change in USD / PKR parity on the net open position is also determined through daily sensitivity analysis. 2021 Foreign currency Foreign currency Off-balance Net foreign Rupees in ‘000 assets liabilities sheet items currency exposure United States Dollar Pound Sterling Euro Other European currencies Other currencies 83,087,836 1,619,550 1,772,425 183,399 863,444 107,540,707 5,665,038 3,675,471 – 2,069,471 26,606,423 3,932,037 1,636,015 (181,564) 1,460,847 2,153,552 (113,451) (267,031) 1,835 254,820 87,526,654 118,950,687 33,453,758 2,029,725 2020 Foreign currency Foreign currency Off-balance Net foreign Rupees in ‘000 assets liabilities sheet items currency exposure United States Dollar Pound Sterling Japanese Yen Euro Other European currencies Other currencies 64,905,509 1,140,446 – 1,882,281 22,151 1,308,122 86,127,444 5,123,400 – 3,222,945 – 1,803,003 22,235,297 3,963,115 – 1,637,176 – 664,576 1,013,362 (19,839) – 296,512 22,151 169,695 69,258,509 96,276,792 28,500,164 1,481,881 Annual Report 2021 121
124. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 2021 Banking book 2020 Trading book Banking book Trading book Impact of 1% change in foreign exchange rates on - Profit and loss account - Other comprehensive income 45.2.3Equity position risk – – 337,227 – – – 282,293 – Equity position risk is the risk that the value of equity positions inside the trading book and banking book will change as a result of general and specific equity market movements. Equity positions are monitored on daily basis through management action triggers. The Bank classifies its direct equity investments into held for trading, available for sale, and Held to Maturity. Held for trading equity exposures are of a short term nature and are undertaken to earn profit by exploiting market conditions and short term price fluctuations. Equities held in the available for sale portfolio are kept with the intent of earning profit due to underlying fundamental strength of each security. Strategic investments are undertaken in line with the long-term strategy of the Bank, i.e. to build strategic interest in other concerns. The Bank may also carry indirect equity exposure through financing against shares and reverse repos against shares. At the end of FY 2021 Bank’s equity investment portfolio was classified as held for trading and available for sale. Pretax impact of 5% change in equity prices are provided below; Rupees in ‘000 2021 Banking book 2020 Trading book Banking book Trading book Impact of 5% change in equity prices on - Profit and loss account (decrease) - Other comprehensive income (increase) – – (207,191) 207,191 – – (217,649) 217,649 45.2.4Yield / Interest Rate Risk in the Banking Book (IRRBB)-Basel III Specific The Bank’s interest rate exposure arises out from its investment, lending and borrowing activities. Interest Rate Risk in the Banking Book (IRRBB) in its various forms is the risk of adverse changes in earnings and/or capital due to (i) timing differences or mismatches in the maturity/repricing period of financial assets and liabilities (repricing risk), (ii) differences in the basis used for calculating interest rates received and paid (basis risk), (iii) and options implicit or explicit in the Bank’s financial assets and liabilities (options risk). The Asset and Liability Management Committee of the Bank monitors and controls mismatch of interest rate sensitive assets and liabilities on an ongoing basis through its regular meetings. The Market Risk Management Department monitors interest rate in the banking book from an earnings and economic value perspective. Key IRRBB measures include: 1. Interest Earnings at Risk (IAR): the rolling 12 months impact of a parallel shift in interest rates on Net Interest Margin. 2. Change in Economic Value of Equity (EVE): the impact of a parallel shift in interest rates on the present value of the Bank’s cash flows. 3. Repricing Gaps: mismatch between the Bank’s assets and liabilities in terms of repricing time bands based on residual maturity for repricing or actual maturity which ever is earlier. Repricing assumptions for noncontractual assets and liabilities have been set based on a behavioral study. 122 Askari Bank Limited
125. 2021 Rupees in ‘000 2020 Banking book Trading book Banking book Trading book 198,700 (1,302,000) (1,855,847) – Impact of 1% change in interest rates on - Profit and loss account 422,962 (2,462,303) - Other comprehensive income (1,768,929) – 45.2.5Mismatch of interest rate sensitive assets and liabilities Yield / interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual repricing or maturity date and for off-balance sheet instruments is based on settlement date. Rupees in ‘000 2021 Exposed to yield / interest risk Effective Non–interest Yield / Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 bearing Interest Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above 10 financial rate Total Month Months Months Year Years Years Years Years Years instruments On-balance sheet financial instruments Assets Cash and balances with treasury banks 0.00% 89,432,245 9,278,909 – – – – – – – – 80,153,336 Balances with other banks 0.14% 3,454,829 1,573,798 – – – – – – – – 1,881,031 Investments 8.30% 616,361,158 85,030,665 138,199,283 133,716,127 50,658,621 69,157,563 46,763,978 39,159,440 44,510,380 2,979,368 6,185,733 Advances 7.42% 477,588,237 131,965,090 88,869,183 123,897,451 13,509,795 6,115,080 15,245,680 9,724,346 5,247,789 – Other assets – 35,528,043 – 83,013,823 – – – 1,222,364,512 227,848,462 221,213,106 222,585,310 174,556,072 – 82,667,358 – 52,879,058 – 54,405,120 – 54,234,726 – 35,528,043 8,227,157 123,748,143 Liabilities Bills payable Borrowings – 10,235,374 6.23% – – – 123,563,761 73,572,263 19,513,580 4,568,715 88,234,745 45,280,935 37,715,900 6,000,000 6,000,000 Deposits and other accounts 4.18% 1,015,430,068 Subordinated loans 8.91% Other liabilities 12,000,000 – – 30,671,766 – 1,191,900,969 161,807,008 On-balance sheet gap Off–balance sheet financial instruments Forward foreign exchange contracts purchase 30,463,543 – 70,794,515 – 48,284,615 – 3,861,787 45,929,502 28,653,368 41,713,292 – 5,655,687 – 4,663,566 – 4,972,791 64,443,902 117,735,757 119,483,803 114,964,883 100,517,231 – 10,235,374 664,632 624,111 17,708,822 309,344,090 – – – – – – – – – – – – 30,671,766 68,305,689 123,202,386 125,139,490 119,628,449 105,490,022 66,041,454 150,418,591 174,300,695 106,250,383 117,506,977 – 5,466,629 1,210,815 – 18,373,454 350,875,341 (40,535,028) (72,260,432) (65,223,329) (51,255,296) (10,146,297) (227,127,198) – – – – – – Forward foreign exchange contracts sale 84,053,218 44,943,786 14,829,445 24,171,538 108,449 – – – – – – Off-balance sheet gap 33,453,758 985,716 13,823,922 17,541,754 1,102,366 – – – – – – Total yield / interest risk sensitivity gap 67,027,170 164,242,513 191,842,449 107,352,749 Cumulative yield / interest risk sensitivity gap 67,027,170 231,269,684 423,112,133 530,464,881 489,929,853 417,669,421 352,446,092 301,190,796 291,044,499 (40,535,028) (72,260,432) (65,223,329) (51,255,296) (10,146,297) (227,127,198) 63,917,301 Annual Report 2021 123
126. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Mismatch of interest rate sensitive assets and liabilities Rupees in ‘000 2020 Exposed to yield / interest risk Effective Non–interest Yield / Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 bearing Interest Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above 10 financial rate Total Month Months Months Year Years Years Years Years Years instruments On-balance sheet financial instruments Assets Cash and balances with treasury banks 0.00% 73,651,718 7,501,569 – – – – – – – – 66,150,149 Balances with other banks 0.76% 7,954,288 5,517,592 – – – – – – – – Investments 9.50% 449,687,240 15,622,941 Advances 9.59% 395,373,840 102,188,676 Other assets – 29,799,164 – 2,436,696 58,751,580 120,070,417 61,770,424 40,920,325 33,955,440 54,255,063 54,943,986 2,979,783 6,417,281 90,346,678 55,656,168 16,195,531 28,636,248 17,130,621 18,185,100 4,979,958 – – 62,054,860 – – 956,466,250 130,830,778 149,098,258 182,125,277 117,426,592 – 57,115,856 – 62,591,688 – 71,385,684 – 73,129,086 – 29,799,164 7,959,741 104,803,290 Liabilities Bills payable Borrowings 5.28% 84,163,669 49,154,031 11,325,742 2,269,358 Deposits and other accounts 5.54% 791,186,883 44,231,276 27,758,618 14,973,898 10.67% 12,000,000 – 6,000,000 6,000,000 – 27,917,964 – Subordinated loans Other liabilities – 12,629,996 On–balance sheet gap Off-balance sheet financial instruments 927,898,512 28,567,738 – 93,385,307 – – 45,084,360 – – 23,243,256 37,445,471 104,013,898 158,882,021 – 932,385 – 4,921,250 – 5,797,687 – – 4,881,608 4,184,236 32,548,775 103,410,010 101,094,323 109,372,558 86,691,947 – 12,629,996 697,372 – 14,393,710 256,711,768 – – – – – – – – – – – – 27,917,964 33,481,160 108,331,260 106,892,010 114,254,166 83,945,432 – 90,876,183 15,091,082 297,259,728 (51,215,404) (44,300,322) (42,868,482) (17,747,097) (7,131,341) (192,456,438) Forward foreign exchange contracts purchase 118,889,979 60,380,442 32,179,415 25,816,868 513,254 – – – – – – Forward foreign exchange contracts sale 90,389,815 36,356,969 35,031,116 18,963,099 38,631 – – – – – – 28,500,164 24,023,473 (2,851,701) – – – – – – Off-balance sheet gap 6,853,769 474,623 Total yield / interest risk sensitivity gap 61,468,944 101,162,197 165,735,790 84,420,055 Cumulative yield / interest risk sensitivity gap 61,468,944 162,631,141 328,366,931 412,786,986 361,571,582 317,271,260 274,402,778 256,655,681 249,524,340 (51,215,404) (44,300,322) (42,868,482) (17,747,097) (7,131,341) (192,456,438) 45.2.5.1Yield risk is the risk of decline in earnings due to adverse movement of the yield curve. 45.2.5.2Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates. 45.2.5.3Assets do not include fixed assets of Rs. 20,166,875 thousand (2020: Rs. 21,213,709 thousand), Intangible assets of Rs. 1,183,265 thousand (2020: Rs. 1,143,146 thousand), deferred tax asset or Rs. 5,168,183 thousand (2020: Rs. 1,623,001 thousand) and other assets consisting of advances, prepaid rent and other prepayments, advance taxation, non-banking assets acquired in satisfaction of claims, Stationary & Stamp and Others of Rs. 10,261,274 thousand (2020: Rs. 12,070,956 thousand). 45.2.5.4Liabilities do not include other liabilities consisting of advance payments, branch adjustment account, security deposit against lease, levies and taxes payable, provision against off-balance sheet items, Islamic pool management reserve and others of Rs. 11,340,647 thousand (2020: Rs. 10,072,200 thousand). 45.3 Operational Risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, systems and external events. The Bank strives to manage operational risk within acceptable levels through sound operational risk management practices. 124 Askari Bank Limited
127. Board Risk Management Committee defines the operational risk appetite and tolerance limits . Operational risk governance structure adopted by Bank is embedded within three lines of defense: Strategic, Macro and Micro. Bank already has in place an Operational Risk Management framework which is aligned with global best market practices. Bank has dedicated functions to manage Operational Risk, Business Continuity Risk and Information Security Risk governed through comprehensive frameworks in line with international best practices. 45.3.1Operational Risk-Disclosures Basel II specific Basel II Basic Indicator Approach is used for calculating the Capital Adequacy for Operational Risk. 45.4 Liquidity Risk Liquidity risk reflects an enterprises inability in raising funds to meet commitments. The Bank’s liquidity position is managed by the Asset and Liability Management Committee (ALCO). ALCO monitors the maintenance of financial position ,liquidity ratios, depositors concentration both in terms of the overall funding mix and avoidance of undue reliance on large individual deposits and liquidity contingency plans. Moreover, core retail deposits (current accounts and saving accounts) form a considerable part of the Bank’s overall funding and significant importance is attached to the stability and growth of these deposits. The Bank is confident that the liquidity buffer currently maintained is sufficient to cater to any adverse movement in the cash flow maturity profile. 45.4.1Maturities of Assets and Liabilities - based on contractual maturity of assets and liabilities of the Bank 2021 Rupees in ‘000 Total Over 1 Upto 1 day to 7 days Over 7 Over 14 Over 1 Over 2 Over 3 Over 6 Over 9 Over 1 Over 2 to 14 days to 1 days month to 2 months to 3 months to 6 months to 9 months months to 1 year to 2 years to 3 years to 5 years Over 5 years – 15,427,062 15,427,064 Assets Cash and balances with treasury banks 89,432,245 26,829,674 894,322 – – – – – – Balances with other banks 3,454,829 621,869 315,426 2,418 225,255 113,318 1,160,823 580,411 290,206 Investments 616,361,158 168,509 632,724 40,782,499 30,266,403 77,056,480 38,574,039 29,107,444 Advances 477,588,237 4,799,258 6,229,582 9,933,091 109,643,232 36,366,813 35,790,709 Fixed assets 20,166,875 6,613 39,681 46,294 105,839 190,805 190,878 Intangible assets 1,183,265 441 2,643 3,084 7,048 13,204 Deferred tax assets 5,168,183 105,086 630,518 840,691 1,576,296 Other assets 45,789,317 5,018,113 931,204 1,001,062 6,804,946 1,259,144,109 37,549,563 9,676,100 Over 3 15,427,062 15,427,061 – – – – 24,490,391 26,221,525 115,219,086 58,814,670 98,585,171 76,442,217 63,256,739 13,716,714 16,113,203 36,884,943 26,260,770 48,480,001 70,113,182 570,404 555,652 555,774 1,988,583 1,631,114 2,058,917 12,226,321 13,204 39,149 38,081 38,081 150,486 143,286 275,339 459,219 – – – 103,022 103,022 206,515 591,114 1,011,919 – 1,402,115 2,852,899 599,252 – 1,422,630 7,090,092 6,159,639 6,347,726 6,159,639 52,609,139 148,629,019 115,142,735 78,582,552 94,153,399 39,194,066 145,103 44,599,338 176,966,767 109,027,655 172,186,134 180,827,642 Liabilities Bills payable 10,235,374 3,275,320 934,490 – 776,865 2,709,006 1,354,503 677,252 338,626 169,312 – – – – Borrowings 123,563,761 2,691,567 62,419,610 4,603,563 4,231,989 9,335,303 10,392,258 4,604,378 1,630,044 2,231,743 5,466,629 5,655,687 4,663,566 5,637,424 Deposits and other accounts 1,015,430,068 33,960,039 33,391,992 23,088,902 107,890,109 33,453,693 23,665,832 37,715,900 23,790,129 40,653,773 164,588,057 166,336,104 161,817,184 165,078,354 Subordinated loans 12,000,000 – – – – – – – – – – – Other liabilities 42,012,413 6,349,132 7,884,930 1,242,955 6,804,946 1,402,115 2,852,899 599,252 – 1,422,630 4,014,207 3,083,753 28,935,420 119,703,909 46,900,117 38,265,492 43,596,782 25,758,799 68,242,618 40,317,060 50,556,617 13,435,267 Net assets 1,203,241,616 55,902,493 Share Capital 12,602,602 Reserves 32,730,297 Unappropriated profit 8,605,975 Surplus on revaluation of assets 1,963,619 46,276,058 104,631,022 (8,726,495) (94,954,922) 23,673,719 28,925,110 – 12,000,000 3,271,840 3,083,754 44,477,458 174,068,893 175,075,544 169,752,590 185,799,532 121,880 2,897,874 (66,047,889) 2,433,544 (4,971,890) 55,902,493 Annual Report 2021 125
128. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Maturities of Assets and Liabilities - based on contractual maturity of assets and liabilities of the Bank 2020 Rupees in ‘000 Total Upto 1 day Over 1 to 7 days Over 7 Over 14 Over 1 Over 2 Over 3 Over 6 Over 9 Over 1 Over 2 to 14 days to 1 days month to 2 months to 3 months to 6 months to 9 months months to 1 year to 2 years to 3 years Over 3 to 5 years Over 5 years 12,704,923 Assets Cash and balances with treasury banks 73,651,718 22,095,515 736,517 – – – – – – – 12,704,921 12,704,921 12,704,921 Balances with other banks 7,954,288 1,431,772 726,226 5,568 518,620 260,901 2,672,641 1,336,320 668,160 334,080 – – – – Investments 449,687,240 204,386 709,435 5,433,581 10,156,143 35,022,872 7,277,390 50,962,381 57,831,104 4,123,057 42,995,488 74,329,614 81,134,362 79,507,427 Advances 395,373,840 1,603,171 10,684,368 10,269,668 96,987,680 28,436,461 18,245,501 36,809,132 10,541,459 15,165,006 19,985,644 35,700,890 41,312,581 69,632,279 Fixed assets 21,213,709 6,635 42,529 46,445 107,359 190,184 201,257 572,564 547,878 563,203 2,031,929 1,743,704 2,389,507 12,770,515 Intangible assets 1,143,146 652 4,562 4,562 9,776 19,469 19,469 48,944 29,779 29,779 103,746 97,213 169,189 606,006 Deferred tax assets 1,623,001 33,001 198,006 264,008 495,015 – – – 32,353 32,353 64,853 185,632 317,780 – Other assets 41,870,120 4,849,035 1,402,414 1,590,959 4,176,670 965,505 770,425 1,212,382 1,097,649 910,431 5,978,028 6,863,147 6,120,781 5,932,694 992,517,062 30,224,167 14,504,057 17,614,791 112,451,263 64,895,392 29,186,683 90,941,723 70,748,382 21,157,909 83,864,609 131,625,121 144,149,121 181,153,844 Liabilities Bills payable 12,629,996 4,041,599 1,153,119 – 958,617 3,342,793 1,671,397 835,698 417,849 208,924 – – – – Borrowings 84,163,669 1,684,681 36,870,192 3,987,081 6,612,077 8,601,956 2,723,786 2,269,358 – 932,385 4,921,250 5,797,687 4,881,608 4,881,608 Deposits and other accounts 791,186,883 28,420,829 28,740,204 18,617,849 59,069,999 23,088,800 14,527,230 14,973,898 7,958,671 12,000,000 –– –––––––––– 12,000,000 37,990,164 6,074,968 8,032,458 1,814,251 4,176,670 965,505 770,425 1,212,382 1,097,649 937,970,712 40,222,077 74,795,973 24,419,181 70,817,363 35,999,054 19,692,838 19,291,336 9,474,169 26,641,845 150,378,670 149,824,538 156,444,327 159,969,341 Net assets 54,546,350 (9,997,910) (60,291,916) (6,804,390) 41,633,900 28,896,338 9,493,845 71,650,387 61,274,213 (5,483,936) Share Capital 12,602,602 Reserves 25,632,015 Unappropriated profit 8,673,949 Surplus on revaluation of assets 7,637,784 Other liabilities 126 24,590,105 142,469,198 140,153,510 148,431,745 140,144,845 Subordinated loans Askari Bank Limited 54,546,350 910,431 2,988,222 3,873,341 (66,514,061) (18,199,417) 3,130,974 (12,295,206) 2,942,888 21,184,503
129. 45 .4.2 Maturities of Assets and Liabilities - based on expected maturity of assets and liabilities of the Bank 2021 Over 1 Upto 1 to 3 Rupees in ‘000 Total Month Months Over 3 Over 6 to 6 Months to Months 1 Year Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years Over 5 to 10 Above 10 Years Years Assets Cash and balances with treasury banks 89,432,245 27,723,996 – Balances with other banks 3,454,829 1,164,969 1,274,141 Investments 616,361,158 71,850,136 115,630,519 Advances 477,588,237 130,605,162 72,157,522 Fixed assets 20,166,875 198,427 381,683 Intangible assets 1,183,265 13,215 26,407 Deferred tax assets 5,168,183 3,152,592 – Other assets 45,789,317 13,755,323 4,255,014 – – 15,427,062 15,427,062 15,427,062 13,223,196 2,203,867 580,411 435,308 – – – – – 29,107,444 50,711,916 115,219,086 58,814,670 98,585,171 73,133,650 3,308,566 63,256,739 29,829,918 36,884,943 26,260,770 48,480,001 33,568,607 36,544,575 570,404 1,111,427 1,988,583 1,631,114 2,058,917 1,698,265 10,528,055 39,149 76,163 150,486 143,286 275,340 459,219 – – 206,045 206,515 591,114 1,011,917 – – 599,252 1,422,630 7,090,092 6,159,639 6,347,726 5,279,690 879,951 1,259,144,109 248,463,820 193,725,286 94,153,399 83,793,407 176,966,767 109,027,655 172,186,134 127,362,627 53,465,014 Liabilities Bills payable 10,235,374 4,986,673 4,063,510 677,252 507,939 – – – – – Borrowings 123,563,761 73,946,730 19,727,561 4,604,378 3,861,787 5,466,629 5,655,687 4,663,566 4,972,791 664,632 Deposits and other accounts 1,015,430,068 198,331,044 57,119,524 37,715,900 64,443,902 164,588,057 166,336,104 161,817,184 140,676,346 24,402,007 Subordinated loans 12,000,000 – – – – – – – 6,000,000 6,000,000 Other liabilities 42,012,413 22,281,963 4,255,014 599,252 1,422,630 4,014,207 3,083,753 3,271,840 2,643,217 440,537 Net assets 1,203,241,616 299,546,410 55,902,493 85,165,609 43,596,782 70,236,258 174,068,893 175,075,544 169,752,590 154,292,354 31,507,176 (51,082,590) 108,559,677 50,556,617 13,557,149 21,957,838 2,897,874 (66,047,889) 2,433,544 (26,929,727) Share Capital 12,602,602 Reserves 32,730,297 Unappropriated profit 8,605,975 Surplus on revaluation of assets 1,963,619 55,902,493 Maturities of Assets and Liabilities - based on expected maturity of assets and liabilities of the Bank 2020 Over 1 Upto 1 to 3 Rupees in ‘000 Total Month Months Assets Cash and balances with treasury banks Balances with other banks Investments Advances Fixed assets Intangible assets Deferred tax assets Other assets 73,651,718 7,954,288 449,687,240 395,373,840 21,213,709 1,143,146 1,623,001 41,870,120 992,517,062 174,794,281 94,082,071 937,970,712 210,254,594 55,691,893 Net assets Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years Over 5 to 10 Above 10 Years Years 22,832,033 – – – 12,704,921 12,704,921 12,704,921 10,889,933 1,814,989 2,682,187 2,933,541 1,336,320 1,002,240 – – – – – 16,503,545 42,300,261 50,962,381 61,954,161 42,995,488 74,329,614 81,134,364 75,984,598 3,522,828 119,544,886 46,681,961 36,809,131 25,706,464 19,985,643 35,700,889 41,312,582 38,054,933 31,577,351 202,969 391,440 572,564 1,111,081 2,031,929 1,743,704 2,389,507 2,163,528 10,606,987 19,552 38,938 48,944 59,558 103,746 97,213 169,190 606,005 – 990,031 – – 64,706 64,853 185,632 317,779 – – 12,019,078 1,735,930 1,212,382 2,008,080 5,978,028 6,863,147 6,120,781 5,085,166 847,528 Liabilities Bills payable Borrowings Deposits and other accounts Subordinated loans Other liabilities Over 3 Over 6 to 6 Months to Months 1 Year 90,941,722 91,906,290 83,864,608 131,625,120 144,149,124 132,784,163 48,369,683 12,629,996 6,153,334 5,014,190 835,698 626,774 – – – – – 84,163,669 49,154,031 11,325,742 2,269,358 932,385 4,921,250 5,797,687 4,881,608 4,184,236 697,372 791,186,883 134,848,881 37,616,031 14,973,898 32,548,775 142,469,198 140,153,510 148,431,745 120,171,251 19,973,594 12,000,000 – – – – – – – 6,000,000 6,000,000 37,990,164 20,098,348 1,735,930 1,212,382 2,008,080 2,988,222 3,873,341 3,130,974 2,522,475 420,412 54,546,350 (35,460,313) 38,390,178 Share Capital Reserves Unappropriated profit Surplus on revaluation of assets 12,602,602 25,632,015 8,673,949 7,637,784 54,546,350 19,291,336 36,116,014 150,378,670 149,824,538 156,444,327 132,877,962 27,091,378 71,650,386 55,790,276 (66,514,062) (18,199,418) (12,295,203) (93,799) 21,278,305 Annual Report 2021 127
130. NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 45.5 Derivative Risk The Bank at present does not offer structured derivative products such as interest rate swaps, forward rate swap, forward rate agreements or foreign exchange options nor does it deal in market making and foreign exchange hedging. Bank’s derivative exposure is limited to hedging transactions undertaken by Treasury in instruments such as forward exchange contracts. The Risk Management Group monitors Bank’s overall derivative exposure in forward exchange contracts, which are marked to market and are included in Bank’s overall assessment of value at risk (VaR). Further, value at risk (VaR) is also separately monitored for forward exchange contracts. Derivative exposures are also included in Bank’s capital charge and risk weighted asset calculation in accordance with SBP regulations. 46.GENERAL 46.1 Non-adjusting events after the balance sheet date The Board of Directors in its meeting held on February 15, 2022 has proposed the following appropriations, which will be approved in the forthcoming Annual General Meeting. The unconsolidated financial statements for the year ended December 31, 2021 do not include the effect of the appropriations which will be accounted for in the unconsolidated financial statements for the year ending December 31, 2022 as follows: Rupees in ‘000 47. Transfer from unappropriated profit to: Proposed final cash dividend - Rs. Nil per share (2020: Rs. 3 per share) Subsequent to the year end, the Board of Directors of the Bank, through resolution by circulation dated 10 January, 2022, approved the scheme of arrangement for amalgamation of the wholly owned subsidiary, Askari Securities Limited (ASL) with and into Foundation Securities (Private) Limited (FSL). As per the approved scheme of arrangement, the entire undertaking of ASL inclusive of all properties, assets, rights, liabilities, trademarks, patents and obligations of ASL will be transferred to FSL against 27,140,000 shares of FSL (one share of FSL against 1.18 shares of ASL held by the Bank). ASL will be dissolved without winding up. The scheme of arrangement is subject to necessary regulatory and shareholder’s approvals. 48. – 3,780,781 NON-ADJUSTING EVENTS AFTER THE REPORTING DATE DATE OF AUTHORIZATION These unconsolidated financial statements were authorized for issue on February 15, 2022 by the Board of Directors of the Bank. Saleem Anwar Chief Financial Officer 128 20212020 Askari Bank Limited Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman
131. ANNEXURE –1 Statement Showing Written-Off Loans Or Any Other Financial Reliefs Of Five Hundred Thousand Rupees Or Above Provided During The Year Ended December 31, 2021 Statement in terms of sub-section (3) of section 33-A of Banking Companies Ordinance, 1962 in respect of written off loans or any other financial reliefs of Rs. 500,000 or above allowed to a person(s) during the year ended December 31, 2021 as referred to in note 9.6 to these financial statements Rupees in ‘000 Outstanding liabilities at beginning of the year Sr. # Name & address of the borrower Name of individuals / partners / directors (with NIC / CNIC No.) 1 Shahi Textile B-78, Block-18, Gulshan-e-Iqbal, Karachi. Naseem Ahmed 42000-0409635-9 Syed Ali Ahmed 42101-1493421-7 Muzammil Hussain 42201-0254722-1 Syed Aziz Ahmed Ali Hamid Travels A-653, Block-L, North Nazimabad, Karachi. Riaz Hussain Khan 42101-2628509-5 Hamid Hussain Khan 42101-4987925-9 Arshad Hussain Khan 42101-2637154-5 Ahmed Hussain Khan 2 Father’s / husband name 4 Bismillah Fabrics (Pvt) Ltd. 3.5 KM Jhumra Road, Khurrianwala, Faisalabad. Abdul Waheed Sheikh (CEO) 33100-4817666-5 Dildar Ahmed Sheikh (Director) 33100-9157713-1 Abdul Majeed Sheikh 5 Zelta Inc 39-A, Munawar Colony, Adyala Road, Rawalpindi. Ch. Amer Qayyum Khan 37405-0432924-5 Ch. Abdul Qayyum Khan 6 MRK Associates Office # 37, Rehmat Block, Session Court Gujranwala. Muhammad Riaz Khokhar 35201-8939604-5 Mrs. Nousheen Riaz 35201-7251040-4 Nazar Muhammad Khokhar Abdullah Textile Mills Ltd. RC1/1A, Nishter/ Baba-e-Urdu Road, Karachi. Sheikh Muhammad Amin Abdullah 42301-3604771-9 Sheikh Muhammad Ibrahim Abdullah 42301-8428485-1 Sheikh Muhammad Ismail Abdullah 42301-0996429-5 Sheikh Muhammad Ishaque Abdullah 42301-2775275-3 Sheikh Abdullah Ismail Muhammad Akhtar Mirza 35201-9676042-3 Sohail Maqsood 35021-4740143-5 Muhammad Ashraf Khan 35021-1346603-5 Abid Sattar 35202-2306906-3 Muhammad Arif 35201-1641317-5 Muhammad Junaid 35202-6261910-9 Muhammad Asif Akram 35404-2976207-1 Karam Dad Khan Haroon Amjad Electrical Industries G.T Road Opposite PEPSI Factory, Attawa, Gujranwala. Amjad Iqbal (Proprietor) 34101-3656318-7 8,397 65,095 - 73,492 - 65,095 - 65,095 - 1,563 - 1,563 - 1,563 - 1,563 2,676 1,404 - 4,080 - 1,389 - 1,389 106,027 40,925 109,404 256,356 - 40,925 109,404 150,329 112 257 331 700 - 256 331 587 5,000 576 1,978 7,554 - - 1,978 1,978 165,200 6,921 49,818 221,939 - 6,921 49,818 56,739 86,040 14,216 68,553 168,809 55,642 14,216 68,553 138,411 9,500 1,849 555 11,904 - 1,349 555 1,904 Total Ahmed Hussain Khan Muhammad Amin 9 Interest / mark-up Ahmed Hussain Khan Irfan Amin 42101-6628940-5 Paramount Spinning Mills Ltd. 2nd Floor, Garden Heights, 8-Aibak Block, New Garden Town, Lahore. Total Principal Abdul Majeed Khalid Traders Bungalow No.25, 7th Street, Gizri Lane, Phase 6, DHA, Karachi. 8 Other financial relief provided Syed Aziz Ahmed 3 7 Principal written-off Interest / mark - up waived-off / written off Other than interest / mark-up Haji Jalal Din Muhammad Riaz Khokhar Sheikh Abdullah Ismail Sheikh Abdullah Ismail Sheikh Abdullah Ismail Maqsood Elahi Muhammad Dilshad Khan Abdul Sattar Zahid Abdul Hameed Anwar Abdul Rasheed Muhammad Akram Abdul Aziz Annual Report 2021 129
132. ANNEXURE –1 Statement Showing Written-Off Loans Or Any Other Financial Reliefs Of Five Hundred Thousand Rupees Or Above Provided During The Year Ended December 31, 2021 Rupees in ‘000 130 Outstanding liabilities at beginning of the year Principal written-off Interest / mark - up waived-off / written off Other financial relief provided Total Principal Interest / mark-up Other than interest / mark-up 49,050 51,712 3,403 104,165 - 51,714 3,403 55,117 Muhammad Hussain - 748 - 748 - 748 - 748 Tahir Iqbal Cheema 34104-9850879-1 Sajjad Ali Cheema - 1,675 - 1,675 - 1,675 - 1,675 Imran Ashraf Aadhian Tehsil Muridky Distt. Sheikhupura. Imran Ashraf 35401-4700044-9 Muhammad Ashraf - 1,623 - 1,623 - 1,623 - 1,623 14 Kholla Javaid Mokal Tehsil Chunian Distt. Kasur. Kholla Javaid 35202-2498425-4 Javaid Aslam - 916 - 916 - 641 - 641 15 Amara Naeem Village Parwanwala, Tehsil Manchanabad Distt. Bahawalnagar. Amara Naeem 35202-3835008-8 Muhammad Naeem Khan - 705 - 705 - 705 - 705 16 Khalid Mehmood Manj Manj House Pir Bhar Shah Sheikhupura. Khalid Mehmood Manj 34103-1241217-7 Manzoor Hussain Manj - 710 - 710 - 710 - 710 17 Ahmad Ali Barkhurdar P.O Thatta Essa Tehsil & Distt. Nankana. Ahmad Ali 35401-4362966-3 Muhammad Sharif - 1,158 - 1,158 - 658 - 658 18 Rai Haroon Shadat Barkhurdar P.O Thatta Essa Tehsil & Distt. Nankana. Rai Haroon Shadat 35402-7324266-9 Shahdat Ali - 787 - 787 - 787 - 787 19 Rabia Bibi MS Moza Dalla Wagha, Thesil Muridke, Distt. Sheikhupura. Rabia Bibi MS 35401-1708857-4 Ch. Aanayat Ali - 3,296 - 3,296 - 3,296 - 3,296 20 Basharat Ullah Chak # 156 /JB P.O Same Tehsil Bhowana Distt. Chiniot. Basharat Ullah 33201-1690610-1 Muhammad Zawar - 1,766 - 1,766 1,766 - 1,766 21 Syed Zafar Ali Shah 03 Zamindara Colony Tehsil & Distt. Rahim Yar Khan. Syed Zafar Ali Shah 31303-2310012-7 Syed Muhammad Safdar Shah Hamdani - 1,468 - 1,468 1,468 - 1,468 22 Omer Hayyat Lambray P.O Khas, Tehsil Muridky Distt. Sheikhupura. Omer Hayyat 35401-2156872-7 Muhammad Akram 518 586 - 1,104 586 - 586 23 Salman Gul Cheema H.No. B-III-S-58 Wazirabad Tehsil Wazirabad, Distt. Gujranwala. Salman Gul Cheema 34104-2291035-5 Muhammad Munawar Cheema - 1,588 - 1,588 1,588 - 1,588 24 Azhar Hussain Khan H.No. 490 Street # 05 Muhallah Muhammad Bibi Tehsil Jaranwala Distt. Faisalabad. Azhar Hussain Khan 33104-8690393-1 Shahdat Ali Khan 500 748 - 1,248 561 - 561 Sr. # Name & address of the borrower Name of individuals / partners / directors (with NIC / CNIC No.) 10 Nisar Textile Corporation House No C-214, KDA Scheme No 1, Karachi M. Nisar Hanif 42201-4933338-9 M. Hanif Hashim 11 Sajjad Hussain Kot Boora Bashmola Mahay Tehsil Muridky Distt. Sheikhupura. Sajjad Hussain 35401-1765990-9 12 Tahir Iqbal Cheema Chak SAD P.O Darwishkey Tehsil Wazirabad Distt. Gujranwala. 13 Askari Bank Limited Father’s / husband name Total
133. Rupees in ‘000 Outstanding liabilities at beginning of the year Interest / mark - up waived-off / written off Other financial relief provided Total Principal Interest / mark-up Other than interest / mark-up 2,199 1,048 - 3,247 536 - 536 Altaf Hussain - 1,011 - 1,011 1,011 - 1,011 Muhammad Iqbal 35101-1716604-9 Muhammad Ishaq - 620 - 620 620 - 620 Naveed Ahmed Chak Sada P.O Darwishkey Tehsil Wazirabad, Distt. Gujranwala. Naveed Ahmed 34104-0268040-9 Muhammad Ashraf Cheema - 681 - 681 681 - 681 29 Aftab Ahmad Village Bunbajwa Tehsil Pasrur Distt. Sialkot. Aftab Ahmad 34602-0699425-5 Munshi Khan 491 928 - 1,419 - 528 - 528 30 Alia Kalsoom & Saeed Aslam Gill P-67, Muslim Town Faisalabad. Alia Kalsoom 33100-0616071-8 Saeed Aslam Gill 33102-1758462-7 Saeed Aslam 450 913 - 1,363 - 593 - 593 31 Liaquat Ali Talwandi Thata Ehsa Tehsil & Distt. Nankana Sahib. Liaquat Ali 35402-4022345-9 Rai Inayat Khan 500 1,218 - 1,718 - 852 - 852 32 Choudhry Irfan Ahmad Sindhu Mouza Botaywala P.O Gulzarpur Tehsil Multan Saddar, Distt. Multan. Choudhry Irfan Ahmad Sindhu 36302-0171209-9 Ch. Noor Ahmed Sindhu 2,000 2,733 - 4,733 - 1,776 - 1,776 33 Taimur Khan H.No. 180 ,Y Block, Housing Colony Nankana. Taimur Khan 35501-0184793-7 Salamat Ali Bhatti 996 1,645 - 2,641 - 1,234 - 1,234 34 Rai Zahid Hussain Meeran Pur P.O Khas Tehsil & Distt. Nankana. Rai Zahid Hussain 35501-0138416-9 Muhammad Hussain 533 917 - 1,450 - 677 - 677 35 Sikandar Ali Dharore Muslim, P.O Siri Rampura Tehsil Muridky, Distt. Sheikhupura. Sikandar Ali 35401-4997580-1 Karamat Ali 577 818 - 1,395 - 613 - 613 36 Zaka Ullah Khan Rai 878 D, Mohallah Niazabad, Kamalia Toba Tek Singh. Zaka Ullah Khan Rai 33302-3404360-3 Asad Ullah Khan 2,495 2,349 - 4,844 - 1,714 - 1,714 37 Najam Gull Ismail Pur Ratayka Minchanabad Distt. Bahawalpur. Najam Gull 35202-5127291-7 Ghulam Muhammad 2,686 5,373 - 8,059 - 4,029 - 4,029 38 Muhammad Afzal Mouza Salaray, P.O. Chiniot Tehsil & Distt. Chiniot. Muhammad Afzal 33401-0366823-9 Syed Ahmad 2,000 3,473 - 5,473 - 2,083 - 2,083 39 Sameena Nazir MS. Lambray Tehsil Muridke Distt. Sheikhupura. Sameena Nazir Ms 35202-2530960-6 Abdul Waheed 200 729 - 929 - 510 - 510 Sr. # Name & address of the borrower Name of individuals / partners / directors (with NIC / CNIC No.) 25 Khawaja Muhammad Nadeem H.No. 5-A Model Town Lahore. Khawaja Muhammad Nadeem 35200-1557965-7 Khawaja Muhammad Hanif 26 Faisal Zaman H.No. 35/8, BLOCK W, Mohallah Satellite Town Chiniot. Faisal Zaman 33201-6884224-7 27 Muhammad Iqbal Gehlan Hatharl P.O Khas Tehsil Chunian Distt. Kasur. 28 Father’s / husband name Total Principal written-off Muhammad Aslam Gill Annual Report 2021 131
134. ANNEXURE –1 Statement Showing Written-Off Loans Or Any Other Financial Reliefs Of Five Hundred Thousand Rupees Or Above Provided During The Year Ended December 31, 2021 Rupees in ‘000 132 Outstanding liabilities at beginning of the year Principal written-off Interest / mark - up waived-off / written off Other financial relief provided Total Principal Interest / mark-up Other than interest / mark-up Allah Ditta 988 924 - 1,912 - 647 - 647 Ghulam Rasool 35301-4630980-5 Allah Ditta 994 930 - 1,924 - 651 - 651 Muhammad Abbas Sargana Mouza Jund Sargana Tehsil Kabirwala Distt. Khanewal Muhammad Abbas Sargana 36102-9256251-1 Mahar Rabnawaz Sargana 700 1,420 - 2,120 - 1,065 - 1,065 43 Muhammad Nawaz Dera Sacheain Da Vill. Tatha Manak Tehsil Noshewra Virkan. Muhammad Nawaz 34103-1270734-5 Jalal - 1,649 - 1,649 - 1,649 - 1,649 44 Muhammad Akram Chak No.187/E.B, Gaggoo Mandi Tehsil Burewala. Muhammad Akram 36601-1511050-3 Rehmat Ali 1,999 1,133 - 3,132 - 850 - 850 45 Muhammad Hanif Khan Mouza Kelly, P.O Khas, Distt. Sheikhupura. Muhammad Hanif Khan 35404-2282521-7 Allah Deya Khan 494 1,129 - 1,623 - 790 - 790 46 Imtiaz Ahmed Chak No. 352-GB Tehsil Jaranwala Distt. Faisalabad. Imtiaz Ahmed 33104-3587604-7 Saleh Muhammad 117 1,294 - 1,411 - 903 - 903 47 Muhammad Nawaz Khan Chak No. 194-GB. P.O Khas, Tehsil & Distt. Toba Tek Singh. Muhammad Nawaz Khan 33303-8805144-1 Chiragh Khan 245 961 - 1,206 - 575 - 575 48 Manzoor Ahmed Khan Bulandi, Tehsil & Distt. Kasur. Manzoor Ahmed Khan 34101-5799108-9 Fazal Din Chishti 500 857 - 1,357 - 600 - 600 49 Muhammad Yar, Ahmad Yar, Muhammd Saqlain Chak # 777-GB, Tehsil Kamalia, Distt. Toba Tek Singh. Muhammad Yar 33302-6910255-5 Ahmad Yar 33302-7473929-7 Muhammad Saqlain 33302-1567456-3 Wali Muhammad 849 1,378 - 2,227 - 689 - 689 50 Bashir Ahmed Qasim PitafiI, Taluka Mirpur Mathelo, Distt. Ghotki. Bashir Ahmed 45104-4601909-9 Malao Khan 500 853 - 1,353 - 553 - 553 51 Rais Muhammad Afzal Warind Warind House Chandrami Sadiqabad, Tehsil Sadiqabad Distt. Rahim Yar Khan. Rais Muhammad Afzal Warind 42000-2537594-3 Haji Wahid Bakhsh 1,859 1,728 - 3,587 - 1,296 - 1,296 52 Abid Ali Tatha Qaider Shah, Sheikhupura.. Abid Ali 35404-2856097-5 Muhammad Iqbal 288 737 - 1,025 - 516 - 516 53 Muhammad Khursheed Chak 13-RB, Tehsil Safdarabad Distt. Sheikhupura. Muhammad Khursheed 35403-4399172-1 Noor Muhammad Urf Noro 380 1,004 - 1,384 - 652 - 652 54 Ghulam Abbass Chak # 92 /10R, Tehsil & Distt. Khanewal. Ghulam Abbass 36103-0276291-1 Mian Muhammad Sharif 1,000 1,714 - 2,714 - 1,077 - 1,077 Sr. # Name & address of the borrower Name of individuals / partners / directors (with NIC / CNIC No.) 40 Khalid Nawaz Karim Kot Pijri Pur Tehsil Depalpur Distt. Okara. Khalid Nawaz 35301-2022099-5 41 Ghulam Rasool Karim Kot Pijri Pur Tehsil Depalpur Distt. Okara. 42 Askari Bank Limited Father’s / husband name Total Wali Muhammad Wali Muhammad
135. Rupees in ‘000 Outstanding liabilities at beginning of the year Principal written-off Interest / mark - up waived-off / written off Other financial relief provided Total Principal Interest / mark-up Other than interest / mark-up Muhammad Aslam Urf Hashmal 1,000 1,535 - 2,535 - 998 - 998 Aftab Bashir Bhullar 36501-1606542-3 Bashir Ahmad Bhullar 1,999 588 - 2,587 - 563 - 563 Fazal Hussain Ch. / Qaiser Mahmood Balwara P.O Jatlan Tehsil & Distt. Mirpur, Azad Kashmir. Fazal Hussain Ch. 81302-4565124-1 Qaiser Mahmood 81302-0961110-7 Ghulam Muhammad 1,230 2,470 - 3,700 - 1,852 - 1,852 58 Khadim Hussain Village Khotray P.O Wandho, Tehsil Kamoki, Distt. Gujranwala. Khadim Hussain 34102-6474658-7 Said Muhammad 2,000 837 - 2,837 - 586 - 586 59 Jamshed ur Rehman H # 107, St # 10, Jinnah Abad Abbottabad KPK. Jamshed Ur Rehman 16101-7293937-3 Habib Ur Rehman 106 516 26 648 - 522 26 548 60 Rai Jabbar Ali House # 136, F Block Model Town Lahore. Rai Jabbar Ali 35201-0466811-3 Rai Shair Muhammad Kharal 32 42 760 834 - - 590 590 61 Ahmed Shafi House # 198 Abubakar Block New Garden Town Lahore. Ahmed Shafi 35202-3007870-9 Muhammad Rafi 241 446 547 1,234 - 140 547 687 62 Majid Hussain Majeeda Abad Ghafoor Wah Dakhana Khas Tehsil Burewala. Majid Hussain 36601-1611316-1 Fazal Ahmad Khan 373 110 1,122 1,605 - - 875 875 63 Ejaz Alam House # R/73 Gulistane-Johar Karachi. Ejaz Alam 42201-5563620-3 Anis Khan 3,600 720 297 4,617 - 427 259 686 64 Muhammad Aslam Bhatti H #2 Block B Green City Housing Burki Road Lahore. Muhammad Aslam Bhatti 35201-9075872-1 Muhammad Saddique Bhatti 3,615 1,921 242 5,778 - 1,289 212 1,501 473,256 253,644 237,036 963,936 55,642 236,587 236,551 528,779 Sr. # Name & address of the borrower Name of individuals / partners / directors (with NIC / CNIC No.) 55 Qadeer Hussain Raja Raam, Tehsil Shujabad, Distt. Multan. Qadeer Hussain 36304-1378695-9 56 Aftab Bashir Bhullar Chak No. 7/11-L, Lahorianwala, Tehsil & Distt. Sahiwal. 57 Total Father’s / husband name Total Fazal Hussain Annual Report 2021 133
136. PROFILE OF MEMBERS OF SHARIAH BOARD Mufti Muhammad Zahid Dr . Muhammad Tahir Mansoori Mufti Zakir Hassan Naumani Dr. Lutfullah Saqib (Chairman) (Resident Member) (Member) (Member) Mufti Muhammad Zahid is a notable figure in the field of Shariah and has been teaching various branches of Islam and Arabic language for over 30 years, besides being the Vice President of Jamia Imdadia, Faisalabad and a member of its Dar-ul-Ifta since 1989. Mufti Muhammad Zahid has authored various publications including ‫تعارف‬ ‫ )ایک – بنیادیں کی بینکاری اسالمی‬translation from English to Urdu of the work of Mufti Muhammad Taqi Usmani). Mufti Muhammad Zahid holds Shahadh Al-Alamiyyah ( ‫( العالمیة شھادة‬from Wifaqul-Madaris, Al-Arabiyyah Pakistan and Masters Degree in Arabic from International Islamic University, Islamabad. Dr. Muhammad Tahir Mansoori is an eminent scholar and recipient of the President of Pakistan’s Medal for Pride of Performance. Dr. Mansoori holds Moulvi Alim and Moulvi Fazil degrees from ‘Dar ululoom’ Mansoorah, LLM Shariah from International Islamic University, Islamabad and PhD in Islamic Studies from Punjab University, Lahore. Dr. Mansoori has taught and written on Fiqh and Usool-e-Fiqh matters for over three decades. He is the author of numerous publications including, Al-Madkhal-Al-Masrafi (Introduction to Islamic Banking) in Arabic, Islamic Law of Contracts and Business Transactions, and Shariah Maxims on Financial Matters. Term of Office Term of Office Joined the Shariah Board on June 1, 2015 Joined the Shariah Board on June 1, 2015 Mufti Zakir Hassan Naumani holds Master Degrees in Islamiyat and Arabic from University of Peshawar and ‫ )العالمیة شھادة‬Shahadh Al-Alamiyyah) from Wifaqul Madaris Al-Arabiyyah, Multan. Mufti Zakir possesses over 35 years of research experience and has authored 22 books in the field of Islamic economics, Tafseer, Fiqhi Masayel, Travelogue etc. He has also served as Shariah Advisor of Bank of Khyber from Year 2006 till Year 2010. Mufti Zakir Hassan Naumani is currently serving as Sheikh-ul-Hadith, Jamia Usmania, Peshawar. He has been teaching Quran, Hadith and Fiqh for around thirty years and has issued nearly 3,000 fatawa for various issues pertaining to the field of Islamic Jurisprudence, Islamic economics, Islamic law of contract, Social issues, Muslim Family law Islamic Finance and Islamic business & trade. Other Memberships Other Membership • Chairman Shariah Supervisory Committee, Bank of Khyber • Member Shariah Advisory Committee of Securities & Exchange Commission of Pakistan (SECP) Prof. Dr. Lutfullah Saqib is an expert in the domain of “Islamic Law and Jurisprudence”. He has done his LLB (Hons), LLM (Islamic commercial law), PhD (Shariah) and post doctorate in Islamic law from International Islamic University, Islamabad. Dr. Lutfullah Saqib is a prolific researcher. He has authored several books and has published 50+ research articles in the areas of Islamic commercial law/ Islamic law. In the last 12 years, as an academician and trainer, he has been associated with different universities and professional organizations; and has delivered numerous lectures, seminars, talks and training in Pakistan, Malaysia, Thailand, Brunei Darussalam, Oman and other countries. In addition to his academic responsibilities, Dr. Lutfullah is also on the panels of Shariah Advisor of SECP and NBFI Modaraba Association of Pakistan. Currently, he is also serving as Chairman of Department of Law and Shariah, University of Swat. • Chairman Shariah Board, Bank of Punjab Term of Office Joined the Shariah Board on June 25, 2021 Term of Office Joined the Shariah Board on June 25, 2021 Shariah Board (SB)- Attendance and Brief Terms of Reference The SB is empowered to consider, decide and supervise all Shariah related matters of Askari Islamic banking and advises and assists the Board of Directors in introducing and implementing an effective Shariah compliance framework. All SB’s decisions / rulings / fatawa are binding on the Ikhlas Islamic banking business of the Bank, whereas, the Shariah Board is responsible and accountable for all its Shariah decisions. The Resident Shariah Board Member (RSBM) oversees the procedures to be adopted for implementation of the resolutions, pronouncements and fatawa of the SB and provide guidance thereon. The SB ensures that all the procedure manuals, product programs / structures, process flows, related agreements, marketing advertisements, sales illustrations and brochures are in conformity with the rules and Principles of Shariah. Date of Meeting Shariah Board Members Attendance/ Total Meetings March 29, 2021 June 23, 2021 September 27, 2021 December 31, 2021 Name of Members and their attendance in each meeting Mufti Muhammad Zahid (Chairman) 4/4 1 1 1 1 Dr Muhammad Tahir Mansoori (RSBM) 4/4 1 1 1 1 Mufti Zakir Hassan Nomani (Member) 2/2 NA NA 1 1 Dr Lutfullah Saqib (Member) 2/2 NA NA 1 1 1/2 1 - NA NA Former Member Mufti Ismatullah (term completed on 24 June 2021) 134 Askari Bank Limited
137. REPORT OF SHARIAH BOARD FOR THE YEAR ENDED DECEMBER 31 , 2021 In the name of Allah, the Beneficent, the Merciful While the Board of Directors and Executive Management are solely responsible to ensure that the operations of Askari Ikhlas Islamic Banking are conducted in a manner that comply with Shariah Principles at all times, we are required by the SBP’s Shariah Governance Framework to submit a report on the overall Shariah compliance environment of Askari Ikhlas Islamic Banking. During the year 2021, four meetings of Shariah Board were held to review various Shariah issues, which predominantly include new products, existing product modifications, re-alignment of manuals & policies, Shariah reports etc. Apart from the quarterly meetings, the Shariah Board constantly remained involved with all the Shariah affairs of the Bank, by reviewing different proposals / matters, by way of circulation. SBP, as part of its strategic plan for Islamic banking industry, has introduced Shariah compliant Mudarabah based Open Market Operations and Standing Ceiling Facilities. SBP has also issued detailed instructions for management of Shariah non-compliance risk. Shariah Board acknowledges the facilitative role of SBP. To form our opinion as expressed in this report, the Shariah Compliance Department of the bank carried out reviews, on test check basis, of each class of transactions, the relevant documentation and process flows. Further, we have also reviewed the Shariah audit reports. Based on above, we are of the view that: i. Askari Ikhlas Islamic Banking has complied with the Shariah rules and principles in the light of fatawa, rulings and guidelines issued by its Shariah Board. ii. Askari Ikhlas Islamic Banking has complied with directives, regulations, instructions and guidelines related to Shariah compliance issued by SBP in accordance with the rulings of SBP’s Shariah Board. iii. Askari Ikhlas Islamic Banking has a comprehensive mechanism in place to ensure Shariah compliance in its overall operations. iv. Askari Ikhlas Islamic Banking has a well-defined system in place which is sound enough to ensure that any earnings realized from sources or by means prohibited by Shariah have been credited to charity account and are being properly utilized. v. Askari Ikhlas Islamic Banking has complied with the SBP instructions on profit and loss distribution and pool management. vi. The level of awareness, capacity and sensitization of the staff, management and the BOD in appreciating the importance of Shariah compliance in the products and processes of the bank is adequate and shall be further strengthened through orientation sessions / trainings. vii. The Shariah Board has been provided adequate resources enabling it to discharge its duties, effectively. Dr. Muhammad Tahir Mansoori Resident Shariah Board Member Dr. Lutfullah Saqib Member Shariah Board Mufti Zakir Hassan Naumani Member Shariah Board Mufti Muhammad Zahid Chairman Shariah Board Date of Report: February 04, 2022 Rawalpindi Annual Report 2021 135
138. 136 Askari Bank Limited
139. ANNEXURE –2 AS AT DECEMBER 31, 2021 The Bank is operating 101 Islamic banking branches including 3 sub-branches at the end of 2021 (2020: 95 including 3 sub-branches). Rupees in ‘000 Note 20212020 ASSETS Cash and balances with treasury banks Balances with other banks Due from financial Institutions Investments 1 Islamic financing and related assets - net 2 Fixed assets Intangible Other assets 7,149,581 648,268 – 31,274,749 71,116,539 1,477,974 – 4,769,976 5,161,165 1,152,370 – 12,216,340 64,269,691 1,756,603 – 5,562,647 Total assets LIABILITIES 116,437,087 90,118,816 Bills payable Due to financial institutions 3 Deposits and other accounts 4 Due to head office Other liabilities 1,769,395 16,529,289 73,585,947 12,000,000 4,659,368 1,477,496 11,810,905 65,305,888 – 4,527,816 108,543,999 83,122,105 NET ASSETS 7,893,088 6,996,711 4,600,000 25,815 (385,624) 3,652,897 4,600,000 – (57,670) 2,454,381 REPRESENTED BY Islamic Banking Fund Reserves 5 Deficit on revaluation of assets Unappropriated profit 6 CONTINGENCIES AND COMMITMENTS 7 7,893,088 6,996,711 13,885,398 11,741,980 The profit and loss account of the Bank’s Islamic banking branches for the year ended 31 December 2021 is as follows: Rupees in ‘000 Profit / return earned Profit / return expensed Note 20212020 8 9 6,489,772 2,773,195 7,247,479 3,272,719 Net Profit / return Other income Fee and commission income Dividend income Foreign exchange income Income / (loss) from derivatives Gain on securities Other income 3,716,577 3,974,760 266,832 1,352 98,235 – – 87,987 204,950 – 111,058 – 1,706 66,969 Total other income 454,406 384,683 Total Income 4,170,983 4,359,443 Other expenses Operating expenses Workers Welfare Fund Other charges 2,323,020 – 6,798 2,157,239 – 436 Total other expenses 2,329,818 2,157,675 Profit before provisions Provisions and write offs - net 1,841,165 642,649 2,201,768 438,931 Profit before taxation 1,198,516 1,762,837 Annual Report 2021 137
140. ANNEXURE –2 AS AT DECEMBER 31, 2021 2021 Rupees in ‘000 2020 Cost / Provision Cost / Provision amortized for Surplus / Carrying amortized for Surplus / Carrying cost diminution(deficit) value cost diminution(deficit) value 1. INVESTMENTS BY SEGMENTS Federal Government Securities -Ijarah Sukuks -GOP Bai Muajjal 23,560,581 4,215,092 – (385,792) 23,174,789 – – 4,215,092 Units of Open end Mutual Fund 27,775,673 100,000 – Non Government Debt Securities -Listed -Unlisted Total Investments (385,792) 27,389,881 10,784,950 168 100,168 – – – (58,148) 5,480,656 – 5,246,146 – – (58,148) 10,726,802 – – – – 4,344,663 (559,963) – – 70,000 – 3,784,700 1,979,023 – (559,963) 478 70,478 – 1,419,060 4,344,663 (559,963) – 3,784,700 2,049,023 (559,963) 478 1,489,538 32,220,336 (559,963) (385,624) 31,274,749 12,833,973 (559,963) (57,670) 12,216,340 5,538,804 5,246,146 Rupees in ‘000 Note 20212020 2. ISLAMIC FINANCING AND RELATED ASSETS Ijarah 2.1 Murabaha 2.2 Musharakah Diminishing Musharakah Salam Istisna Receivable against Sale of Istisna/Salam Inventory Service Ijarah Other Islamic Modes (Executive Car Finance-Qarz-e-Hasana) Advances against Islamic assets 2.3 Inventory related to Islamic financing 2.4 5,443,351 6,496,482 29,064,976 14,096,303 6,207,801 4,287,613 1,511,039 1,652,175 102,193 2,618,817 1,384,372 4,227,697 4,379,276 28,545,253 16,936,532 4,935,938 2,744,352 150,000 752,176 93,424 1,488,133 1,122,844 Gross Islamic financing and related assets 72,865,122 65,375,625 Less: Provision against Islamic financing - Specific - General 1,702,470 46,113 1,023,192 82,742 Islamic financing and related assets - net of provision 1,105,934 64,269,691 2021 Rupees in ‘000 1,748,583 71,116,539 Cost As at January 1, 2021 Additions Deletions Depreciation As at December 31, 2021 As at January 1, Charge forAdjustments / 2021 the year (Deletions) As at December 31, 2021 Book value as at December 31, 2021 2.1Ijarah 138 Plant and machinery Vehicles Equipment 773,792 5,920,217 – 507,850 (335,492) 946,150 478,547 2,647,805 (1,712,184) 6,855,838 2,075,679 33,885 – 33,885 – Total 6,694,009 3,189,540 (2,047,676) 7,835,873 2,554,226 1,042,264 (1,124,880) 2,471,610 5,364,263 Askari Bank Limited 87,847 945,099 9,318 (289,424) 276,970 669,180 (835,456) 2,185,322 4,670,516 – 9,318 24,567
141. 2020 Rupees in ‘000 Cost As at January 1, 2020 Additions Deletions Depreciation As at December 31, 2020 As at January 1, Charge forAdjustments / 2020 the year (Deletions) Book value as at December 31, 2020 As at December 31, 2020 Plant and machinery Vehicles Equipment 680,969 306,257 (213,434) 773,792 430,376 5,767,573 2,001,612 (1,848,968) 5,920,217 1,935,742 – – – – – 109,951 (61,780) 478,547 295,245 875,024 (735,087) 2,075,679 3,844,538 – – – – Total 6,448,542 984,975 2,307,869 (2,062,402) 6,694,009 2,366,118 Rupees in ‘000 2021 Not later than 1 year (796,867) 2,554,226 4,139,783 2020 Later than 1 year and less Over five than 5 years years Total Not later than 1 year Later than 1 year and less than 5 years Over five years Total Net investment under Ijarah Ijarah rentals receivable Residual value 80,941 1,788 – – – – 80,941 1,788 89,767 1,788 – – – – 89,767 1,788 Minimum Ijarah payments Profit for future periods 82,729 (3,641) – – – – 82,729 (3,641) 91,555 (3,641) – – – – 91,555 (3,641) Net Assets / Investments in Ijarah 79,088 – – 79,088 87,914 – – 87,914 Rupees in ‘000 Future Ijarah rental receivable Ijarah rentals receivable Rupees in ‘000 2021 Not later than 1 year 2020 Later than 1 year and less Over five than 5 years years Total 1,516,936 3,127,007 94,959 4,738,902 Note Not later than 1 year Later than 1 year and less than 5 years 1,379,360 2,035,536 Over five years Total 64,936 3,479,832 20212020 2.2Murabaha Murabaha financing 2.2.1 Inventory for Murabaha Advances for Murabaha 5,546,947 – 949,535 3,981,697 – 397,579 2.2.1 Murabaha receivable - gross 2.2.3 Less: Deferred murabaha income 2.2.4 Profit receivable shown in other assets 6,496,482 4,379,276 5,773,617 122,995 103,675 4,128,467 60,691 86,079 Murabaha financing 2.2.2 The movement in Murabaha financing during the year is as follows: 5,546,947 3,981,697 Opening balance Sales during the year Adjusted during the year 3,981,697 14,483,731 (12,918,481) 3,246,465 10,286,457 (9,551,225) Closing balance 5,546,947 3,981,697 2.2.3 Murabaha sale price Murabaha purchase price 5,773,617 (5,546,947) 4,128,467 (3,981,697) 226,670 146,770 2.2.4 Deferred murabaha income Opening balance Arising during the year Less: Recognised during the year 60,691 491,166 428,862 89,942 412,623 441,874 Closing balance 122,995 60,691 Annual Report 2021 139
142. ANNEXURE –2 AS AT DECEMBER 31, 2021 Diminishing Rupees in ‘000 Ijarah Musharakah Musharakah Salam Istisna Total 2.3 Advance against islamic assets 2021 1,356,711 2020 578,819 2.4 Inventory related to islamic financing 2021 – – – 139,095 1,245,277 1,384,372 2020 – – – 50,073 1,072,771 1,122,844 Rupees in ‘000 3. – 1,262,106 – – 2,618,817 – – – 1,488,133 909,314 Note 20212020 DUE TO FINANCIAL INSTITUTIONS Secured Musharakah from the State Bank of Pakistan under Islamic Export Refinance Facility 3.1 Investment from the State Bank of Pakistan under Islamic Refinance Scheme for Payment of Wages & Salaries 3.2 Islamic Temporary Economic Refinance Facility 3.2 2,776,000 2,336,000 939,167 1,514,122 1,814,905 – 5,229,289 4,150,905 Unsecured Other Musharakah 3.3 11,300,000 7,660,000 16,529,289 11,810,905 3.1 These Musharakah are on a profit and loss sharing basis maturing between January 2022 to June 2022 and are secured against demand promissory notes executed in favour of SBP. 3.2 These Investment are on profit and loss sharing basis which has been invested in general pool of the Bank and are secured against demand promissory notes executed in favor of SBP. 3.3 These Musharakah are on profit and loss sharing basis with banks. The expected average return on these Musharakah is around 10.08% (2020: 6.93%) per annum. These balances are maturing in January 2022 (2020: January 2021). 20212020 In local Rupees in ‘000 currency In foreign currencies Total In local In foreign currency currencies Total 4.DEPOSITS Customers 140 Current deposits - non remunerative Current deposits - remunerative Savings deposits Term deposits Others 31,098,387 939,863 21,640,107 15,152,962 815,129 1,123,444 32,221,831 22,397,739 – 939,863 975,625 366,588 22,006,695 22,726,587 – 15,152,962 12,058,779 22,010 837,139 563,095 914,894 23,312,633 – 975,625 892,475 23,619,062 – 12,058,779 21,634 584,729 Financial Institutions Current deposits - non remunerative Current deposits - remunerative Savings deposits Term deposits 69,646,448 1,512,042 71,158,490 58,721,825 1,829,003 60,550,828 5,068 50,001 370,033 2,001,709 646 5,714 – 50,001 – 370,033 – 2,001,709 18,991 – 335,484 4,400,000 585 19,576 – – – 335,484 – 4,400,000 2,426,811 646 2,427,457 4,754,475 585 4,755,060 72,073,259 Askari Bank Limited 1,512,688 73,585,947 63,476,300 1,829,588 65,305,888
143. Rupees in ‘000 20212020 4.1 Composition of deposits - Individuals - Government / Public Sector Entities - Banking Companies - Non-Banking Financial Institutions - Private Sector 38,521,456 8,426,460 28 2,427,429 24,210,574 33,402,378 7,336,967 61 4,754,999 19,811,483 73,585,947 65,305,888 4.2 This includes deposits eligible to be covered under insurance arrangements amounting to Rs. 51,430,689 thousand (2020: Rs. 44,110,489 thousand). 5. Profit Equalisation Reserve The profit equalisation reserve amounting to Rs. 25,815 thousand (December 31, 2020: Nil) classified in other liabilities in note 18 has been presented as reserve. Rupees in ‘000 20212020 6. ISLAMIC BANKING BUSINESS UNAPPROPRIATED PROFIT Opening balance Add: Islamic Banking profit for the year 2,454,381 1,198,516 691,544 1,762,837 Closing balance 3,652,897 2,454,381 7. CONTINGENCIES AND COMMITMENTS -Guarantees -Commitments 6,325,748 7,559,650 5,460,329 6,281,651 13,885,398 11,741,980 8. PROFIT / RETURN EARNED OF FINANCING, INVESTMENTS AND PLACEMENT Profit earned on: Financing Investments Placements Bai Muajjal from SBP & Financial Institutions 4,770,617 1,691,674 27,481 – 5,881,073 1,115,975 173,907 76,524 6,489,772 7,247,479 9. PROFIT ON DEPOSITS AND OTHER DUES EXPENSED Deposits and other accounts Due to Financial Institutions Due to head office Lease liability against right-of-use assets Profit Equalization Reserve 1,963,935 435,848 147,420 174,072 51,920 2,889,523 199,267 7,423 176,506 – 2,773,195 3,272,719 20,529 52,137 29,765 8 377 15,391 21 233 10. CHARITY FUND Opening balance Additions during the year - Received from customers on account of delayed payment - Profit on charity saving account - Others Payments / utilization during the year - Education - Health - Orphanage 30,150 15,645 (1,519) (19,447) (5,421) (1,055) (41,270) (4,928) (26,387) (47,253) 24,292 20,529 Closing balance Annual Report 2021 141
144. ANNEXURE –2 AS AT DECEMBER 31, 2021 Rupees in ‘000 10.1 Charity in excess of Rs. 500,000 was paid to following institutions: Bin Qutab Foundation, Lahore Bali Memorial Trust, Lahore Cancer Care Hospital & Research Center, Lahore Chef International, Islamabad Dar-us-Shifa Foundation, Karachi Friends Welare Trust,Rawalpindi Pakistan Thalaseaemia Welfare Society, Rawalpindi Hamza Foundation Welfare Hospital, Peshawar Pakistan Children’s Heart Foundation, Lahore Patient Welfare Foundation-Creek General Hospital, Karachi Sundus Foundation, Islamabad / Gujranwala The Helpcare Society, Lahore 11. 20212020 – 5,420 5,421 – 6,500 2,000 – 1,674 – – 3,503 900 25,418 3,000 4,928 3,900 1,600 – – 6,523 1,143 20,000 500 4,604 900 47,098 POOL MANAGEMENT 11.1 Bank generates deposit on the basis of following two modes: 1. Qard 2. Mudaraba The Bank also accepted / acquired customer and inter-bank funds, for short term liquidity requirement under Musharakah mode. Profits realized in Musharakah pools are distributed in pre agreed profit sharing ratio. Besides above, the bank also accept funds from State Bank of Pakistan in Islamic Export Refinance pool under Musharakah mode. The features, risk and reward of this Musharakah pool are in accordance with the SBP IERS scheme and circulars issued from time to time. Asset pools are created at the Bank’s discretion and the Bank can add, amend, and transfer an asset to any other pool in the interest of deposit holders. During the year following two Mudaraba based customer pools were maintained by the Bank having below mentioned key features: Deposits taken on Qard Basis are classified as ‘Current Account’ and deposits generated on Mudaraba basis are classified as ‘Savings Account’ and ‘Fixed Deposit Accounts’. a. General Pool The objective of the pool is to invest funds on a Shariah Compliant basis and maximize profits for the Rabbul-Mal on a Gross Mudarabah Basis. As required under regulatory instructions, SBP funds obtained under it’s various schemes are also made part of General pool. In this pool, portfolio diversification strategy has been used to mitigate the risk of loss. Diversification may marginally reduce returns but it also spreads risk by reducing chances of loss. b. Foreign Currency Pool 142 The objective of the pool is to invest funds on a Shariah Compliant basis and maximize profits for the Rabb-ulMal i.e. depositors in foreign currency: US dollars on a Gross Mudaraba Basis. Due to dearth and limitations of foreign denominated investment opportunities available to Islamic Banks operating in Pakistan, the returns would be linked with an earning assets pool comprising of Shariah compliant assets, with reliance mainly on placement(s) with other known Islamic Financial Institutions. Under the above Mudaraba based pools, the Bank accepted funds on Mudaraba basis from depositors (Rabbul-Mal) where the Bank acted as Manager (Mudarib) and invested the funds in Shariah Compliant modes of financings, investments and placements. Also, as allowed, the Bank at its discretion comingled its own funds including current accounts as equity with the depositor’s funds in all the pools. However, for investment purposes, Rabb-ul-Mal’s funds were given priority over own funds (equity). During the year Bank also maintained Profit Equalisation Reserve Pool, funds of which were entirely invested in SLR eligible Securities. The net profit of each deposit pool is calculated on all the remunerative assets booked by utilizing the funds from the pool after deduction of direct expenses as approved by Shariah Board, if any. The directly related costs comprise of depreciation on Ijarah assets, Wakalah tul Istismar fee, Brokerage fee paid for placement of funds under Islamic modes,Takaful / Insurance expense, Registration expense and Commission to car ijarah dealers, staff & others. The general and specific provisions created against non-performing financings and diminution in the value of investments shall be borne by the Bank as Mudarib. However, write-offs of financings and loss Askari Bank Limited
145. on sale of investments shall be charged to respective pool (s) along with other direct expenses. Provisions/ write offs shall revert to Mudarib / pool(s) to which it was originally charged. From the net return, profit is paid to the Mudarib in the ratio of Mudarib’s equity in the pool to the total pool. The Mudarib’s share is deducted from this profit to calculate distributable profit. Rabb-ul-Mal’s share is distributed among depositors according to weightages assigned at the inception of profit calculation period. In order to remain competitive in the industry and to retain existing customer / mobilize deposits from new customers, the Bank as a Mudarib distributed part of its share of profit to Rabb-ul-Mal as HIBA. Income generated from banking operations (e.g. fee and commission income etc.) is not shared with depositors. In case of loss in a pool during the profit calculation period, the loss is distributed among the depositors (remunerative) according to their ratio of Investments. 11.2 The Bank managed following General and Specific Pools : 2021 Pool Profit rate and Profit Profit Profit Minimum Maximum Mudarib Percentage of Amount of Mudaraba Pool Currency rate / return weightage weightage announcement ratio earned distributed period weightage sharing rate / return during the year during the year share mudarib share mudarib share transferred through hiba transferred through hiba Rupees Rupees General Pool PKR Monthly 50% 6.86% 3.56% 0.60 1.83 1,127,731,856 3.73% Profit Equalization Reserve Pool PKR Monthly 90% 6.68% 6.01% 1.00 1.00 186,347 0% 42,023,807 – Foreign Currency Pool USD Monthly 50% 0.10% 0.06% 0.40 1.20 309,036 17.46% 53,955 2020 Pool Profit rate and Profit Profit Profit Minimum Maximum Mudarib Percentage of Amount of Mudaraba Pool Currency rate / return weightage weightage announcement ratio earned distributed period weightage sharing rate / return during the year during the year share mudarib share mudarib share transferred through hiba transferred through hiba Rupees Rupees General Pool PKR Monthly 50% 10.00% 6.34% 0.45 1.99 2,034,238,422 25% Financial Institution Pool PKR Monthly 50% – – 0.70 2.10 – – 513,453,618 – Foreign Currency Pool USD Monthly 50% 3.30% 1.37% 1.00 1.00 8,360,833 1.29% 107,448 2021 Pool Profit rate and Profit Profit Profit Minimum Maximum Mudarib Percentage of Amount of Musharakah Pool Currency rate / return weightage weightage announcement ratio earned distributed period weightage sharing rate / return during the year during the year share mudarib share mudarib share transferred through hiba transferred through hiba N/A Interbank borrowing pool PKR As required * IERS pool PKR Monthly * Special Musharakah Certificate pool PKR As required * 6.98%-13.44% 4.50%-10.75% 5.25% 2.08% 6.98%-13.44% 5.00%-11.00% – – – N/A – – – N/A N/A – – – N/A N/A 2020 Pool Profit rate and Profit Profit Profit Minimum Maximum Mudarib Percentage of Amount of Musharakah Pool Currency rate / return weightage weightage announcement ratio earned distributed period weightage sharing rate / return during the year during the year share mudarib share mudarib share transferred through hiba transferred through hiba N/A Interbank borrowing pool PKR As required * IERS pool PKR Monthly * Special Musharakah Certificate pool PKR As required * 7.13%-14.60% 3.50%-11.20% 6.22% 2.17% 7.25%-16.38% 6.00%-13.50% – – – N/A – – – N/A N/A – – – N/A N/A * The investment ratio and profit sharing ratio varies on case to case/monthly basis Annual Report 2021 143
146. ANNEXURE –2 AS AT DECEMBER 31, 2021 11.3 Maturity profile of funds mobilised under various modes: Rupees in ‘000 2021 Over 1 month Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Upto 1 upto 3 months months year years years years Over 10 Type Currency Mode month months upto 6 months upto 1 year upto 2 years upto 3 years upto 5 years upto 10 years years Total Fixed deposit account PKR Mudaraba 1,025,031 1,171,444 1,891,158 2,068,911 49,694 53,644 30,358 – – 6,290,240 Savings account PKR Mudaraba 1,610,002 – – – 5,336,001 Savings account USD Mudaraba 25,658 – – – SBP Funds against Various Schemes PKR Mudaraba – – – – – – 2,453,289 Musharkah funds from HO PKR Musharka 12,000,000 – – – – – – – – 12,000,000 Interbank borrowing PKR Musharka 11,300,000 – – – – – – – – 11,300,000 Special Musharakah Certificate PKR Musharka 6,404,196 – – – – – 10,864,431 IERS borrowing from SBP PKR Musharka – 4,063,646 221,589 1,665,600 951,771 158,629 34,030,487 6,186,861 2,271,376 Rupees in ‘000 175,000 – 2,243,911 5,359,000 5,359,000 4,577,001 85,048 85,416 85,416 72,952 907,024 1,546,265 – 6,377,767 – 7,044,325 – 5,474,774 – 4,649,953 759,000 23,000,004 12,098 366,588 – 2,776,000 771,098 69,050,552 2020 Over 1 month Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Upto 1 upto 3 months months year years years years Over 10 Type Currency Mode month months upto 6 months upto 1 year upto 2 years upto 3 years upto 5 years upto 10 years years Total Fixed deposit account PKR Mudaraba 2,217,792 1,515,723 2,078,701 2,247,557 66,143 69,215 59,568 – – 8,254,699 Savings account PKR Mudaraba 1,682,639 – – – 5,576,745 Savings account USD Mudaraba 62,475 – – – 18,149 SBP Funds against Various Schemes PKR Mudaraba Musharka funds from HO PKR Musharka Interbank borrowing PKR Musharka 7,660,000 Special Musharakah Certificate PKR Musharka 782,080 IERS borrowing from SBP PKR Musharka – 18,149 5,600,783 5,600,783 4,783,502 793,244 24,037,696 207,055 207,946 207,946 177,602 29,451 892,475 444,652 444,652 444,652 381,130 63,521 1,814,905 – – – – – – – – – – – – – – – – – – 7,660,000 – – – – – – 8,204,080 3,351,000 4,071,000 1,401,600 800,914 133,486 13,824,735 5,685,786 6,283,187 – 2,247,557 – 6,294,595 Rupees in ‘000 – 6,322,596 – 6,312,949 – 5,342,234 – – 2,336,000 886,216 53,199,855 20212020 11.4 Class of assets by sources of financing: 144 Jointly financed by the Bank and PLS deposit account holders. Murabaha Ijarah Diminishing Musharakah Salam Musharakah Istisna Receivables against Sale of Salam/Istisna Inventory Balances with other & treasury Banks Sukuk Open end Mutual Fund (NIT-IMMF) Bai Muajjal-GOP 5,568,137 7,067,756 13,402,874 6,346,896 29,064,976 5,532,890 1,511,039 5,155,267 27,293,651 100,168 4,215,092 3,981,697 4,951,581 16,199,974 4,935,938 28,545,253 2,905,352 150,000 4,045,328 7,027,864 – 5,246,146 105,258,746 77,989,133 Askari Bank Limited
147. 11 .5 Sectors of economy used for deployment of Mudarba based PKR deposits alongwith equity Agriculture / Agribusiness Automobiles & Allied Cables / Electronics Cements Chemicals / Pharmaceuticals Education Fertilizers Food and Allied Fuel / Energy Ghee and Edible Oil Glass and Ceramics GOP Ijarah Sukuk GOP Bai Muajjal Hotels and Restaurants Individuals Investment Banks / Scheduled Banks Open end Mutual Funds Iron / Steel Leather Products and Shoes Modarabas Paper and Board Plastic products Production and transmission of energy Real Estate / Construction Rice Processing and trading Services (Other than Financial, Hotelling & Travelling) Sugar Surgical equipment / Metal Products Textile Transport and communication Public sector / Government Others 20212020 Rupees in ‘000 Percent Rupees in ‘000 1,418,521 653,717 348,659 816,918 3,251,799 197,789 – 630,346 – 1,573,139 222,842 7,530,929 87,092 13,748 4,874,832 707,903 100,168 2,116,964 39,251 476,926 561,501 498,859 3,052,930 973,177 250,000 2.28 1.05 0.56 1.31 5.23 0.32 – 1.01 – 2.53 0.36 12.11 0.14 0.02 7.84 1.14 0.16 3.40 0.06 0.77 0.90 0.80 4.91 1.56 0.40 1,872,706 201,545 278,146 2,028,493 1,010,610 151,226 70,000 52,469 419,658 887,052 853,202 5,538,804 5,246,146 49,643 3,806,038 551,001 3.36 0.36 0.50 3.64 1.81 0.27 0.13 0.09 0.75 1.59 1.53 9.94 9.41 0.09 6.83 0.99 1,336,827 127,588 314,121 643,781 392,255 4,559,183 2,268,814 90,000 2.40 0.23 0.56 1.16 0.70 8.18 4.07 0.16 1,069,345 5,446,267 – 4,686,525 680,342 17,869,096 2,041,686 1.72 8.76 – 7.54 1.09 28.73 3.28 218,358 3,664,965 6,600 4,403,427 737,792 10,811,204 3,135,553 0.39 6.58 0.01 7.90 1.32 19.40 5.63 62,191,271 100.00 55,727,207 11.6 Sectors of economy used for deployment of Mudarba based USD deposits alongwith equity Investment Banks / Scheduled Banks Public sector / Government Percent 100.00 20212020 Rupees in ‘000 Percent Rupees in ‘000 Percent 834,899 40,324 95.39 4.61 1,073,721 98,172 91.62 8.38 875,223 100.00 1,171,893 100 Annual Report 2021 145
148. This Page Is Left Intentionally Blank 146 Askari Bank Limited
149. CONSOLIDATED FINANCIAL STATEMENTS OF ASKARI BANK LIMITED FOR THE YEAR ENDED DECEMBER 31 , 2021
150. KPMG Taseer Hadi & Co. Chartered Accountants 351 Shadman-1, Jail Road, Lahore 54000 Pakistan +92 (42) 111-KPMGTH (576484), Fax +92 (42) 3742 9907 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ASKARI BANK LIMITED REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Opinion We have audited the annexed consolidated financial statements of Askari Bank Limited and its subsidiary (“the Group”), which comprise the consolidated statement of financial position as at 31 December 2021 and the consolidated profit and loss account, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information. In our opinion, consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the accounting and reporting standards as applicable in Pakistan. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the Institute of the Chartered Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 148 Askari Bank Limited
151. KPMG Taseer Hadi & Co. Following are the Key Audit Matters: S. No. Key Audit Matters 1 Provision against advances How the matter was addressed in our audit Refer to note 9 and the accounting policies in notes Our audit procedures in respect of provision against loans and advances included the following: 4.7 to the consolidated financial statements. The Group makes provision against advances on a time-based criteria that involves ensuring that all nonperforming loans and advances are classified in accordance with the time based criteria specified in the Prudential Regulations (PRs) issued by the State Bank of Pakistan (SBP). In addition to the above time-based criteria the PRs require a subjective evaluation of the credit worthiness of borrowers to determine the classification of advances. The PRs also require the Group to recognize general provision against advances portfolio. •Assessing the design and operating effectiveness of manual and automated controls over classification and provisioning of advances including: – The accuracy of data input into the system used for disbursement and recovery of credit facilities; – Controls over correct classification of non-performing advances on time-based criteria; – Controls over accurate computation and recording of provisions; and – Controls over the governance and approval process related to provision. The Group has recognized a net provision of Rs 3.87 billion against advances in the current year. The Group’s advances to the customers represent • Testing, on a sample basis, credit exposures identified by the management as displaying 37.93% of its total assets as at 31 December 2021 indicators of impairment, assessed the number and are stated at Rs. 477.67 billion which is net of of days overdue and assessed appropriateness provision of Rs. 30.22 billion at the year end. of amount reported for provision in accordance with the PRs; The determination of provision against advances based on the above criteria remains a significant area of judgement, requiring compliance with • Testing, on a sample basis, credit exposure where the management has not identified Prudential Regulations issued by State Bank of as displaying indicators of impairment Pakistan, requiring significant time and resource challenged the management’s assessment by to audit because of its significance and inherent reviewing the historical performances, account risk of material misstatement and the materiality movement, financial ratios and reports on of advances relative to the overall consolidated security maintained and formed our own view statement of financial position of the Group, we whether any impairment indicators are present; considered the area of provision against advances as a key audit matter. • For consumer advances, verifying, on sample basis, repayments of loan / markup installments and checking that performing loans have been correctly classified and categorized; and • Checking, on a sample basis, accuracy of specific provision against non-performing advances and of general provision against consumer and SME advances by recomputing the provision made in accordance with the criteria prescribed under the PRs. KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Annual Report 2021 149
152. KPMG Taseer Hadi & Co. S. No. Key Audit Matters 2 Valuation of Investments How the matter was addressed in our audit Refer to note 8 and the accounting policies in notes Our procedures in respect of investments included the following: 4.6 to the consolidated financial statements. valuation of • Assessing the design and tested the operating As at 31 December 2021, the Group has investments effectiveness of the relevant controls in place classified as “Available-for-sale” and “Held to relating to valuation of investments; maturity”, amounting to Rs. 616.23 billion which in aggregate represent 48.93 % of the total assets of • Performing recalculation and checking, on a the Group. sample basis, the valuation of investments to supporting documents, externally quoted The significant portion of the investments comprise market prices and break-up values; and of equity, debt and government securities. Investments are carried at cost or fair value in • Evaluating the management’s assessment accordance with the Group’s accounting policy of available for sale and held to maturity relating to their recognition and measurement. investments for any additional impairment Provision against investments is made based on in accordance with the Group’s accounting impairment policy of the Group which includes both policies and performed an independent objective and subjective factors. assessment of the assumptions. We identified assessing the carrying value of the investment as a key audit matter because of its significance to the financial statements and because assessing the key impairment assumptions involves a significant degree of management judgment. Information Other than the Consolidated Financial Statements and Auditor’s Report Thereon Management is responsible for the other information. The other information comprises the information included in the Group’s Annual Report but does not include the consolidated financial statements and our auditors’ report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and the Board of Directors for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting and reporting standards as applicable in Pakistan, Companies Act, 2017 and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.   KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 150 Askari Bank Limited
153. KPMG Taseer Hadi & Co. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. The Board of directors is responsible for overseeing the Group’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Annual Report 2021 151
154. KPMG Taseer Hadi & Co. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide to the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is M. Rehan Chughtai. Lahore KPMG Taseer Hadi & Co. Chartered Accountants Date: February 24, 2022 UDIN: AR202110183kdBjer6fT KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 152 Askari Bank Limited
155. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31 , 2021 Rupees in ‘000 Note 20212020 Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Fixed assets Intangible assets Deferred tax assets Other assets 5 6 7 8 9 10 11 12 13 89,432,245 3,556,215 – 616,231,172 477,673,022 20,179,222 1,188,985 5,161,697 45,906,052 73,651,718 8,196,147 – 449,611,987 395,416,055 21,232,750 1,158,857 1,597,334 42,021,813 Liabilities 1,259,328,610 992,886,661 Bills payable 14 Borrowings 15 Deposits and other accounts 16 Liabilities against assets subject to finance lease Subordinated debts 17 Deferred tax liabilities Other liabilities 18 10,235,374 123,563,761 1,015,162,254 – 12,000,000 – 42,326,358 12,629,996 84,163,669 790,982,287 – 12,000,000 – 38,429,434 1,203,287,747 938,205,386 Net Assets Represented By 56,040,863 54,681,275 Share capital 19 Reserves Surplus on revaluation of assets - net of tax 20 Unappropriated profit 12,602,602 32,832,051 1,987,976 8,618,234 12,602,602 25,701,665 7,670,955 8,706,053 56,040,863 54,681,275 Contingencies and Commitments 21 The annexed notes 1 to 48 and Annexure I and II form an integral part of these consolidated financial statements. Saleem Anwar Chief Financial Officer Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman Annual Report 2021 153
156. CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note Mark-up / return / interest earned Mark-up / return / interest expensed 23 24 20212020 77,569,443 45,139,897 79,118,320 48,842,539 Net mark-up / interest income 32,429,546 30,275,781 Non mark-up / interest income Fee and commission income 25 Dividend income Foreign exchange income Income / (loss) from derivatives Gain on securities 26 Other income 27 Total non-markup / interest income 4,785,268 421,964 3,123,524 – 814,724 402,118 3,991,285 273,524 2,673,493 – 2,555,400 349,438 9,547,598 9,843,140 Total income 41,977,144 40,118,921 Non mark-up / interest expenses Operating expenses Workers’ welfare fund Other charges 28 29 30 21,017,376 213,484 90,139 20,217,974 42,982 48,149 Total non-markup / interest expenses 21,320,999 20,309,105 Profit before provisions 20,656,145 19,809,816 Provisions and write offs - net 31 Extraordinary / unusual items 4,983,944 – 1,974,747 – Profit before taxation 15,672,201 17,835,069 Taxation (5,956,468) (6,978,072) 9,715,733 10,856,997 9,715,733 – 10,846,333 10,664 32 Profit after taxation Attributable to: Equity holders of the Bank Non-controlling interest 9,715,733 10,856,997 Rupees Basic and diluted earnings per share 33 7.71 8.61 The annexed notes 1 to 48 and Annexure I and II form an integral part of these consolidated financial statements. Saleem Anwar Chief Financial Officer 154 Askari Bank Limited Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman
157. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note Profit after taxation for the year 20212020 9,715,733 10,856,997 Other comprehensive income Items that may be reclassified to profit and loss account in subsequent periods: Effect of translation of net investment in Foreign Branch Movement in (deficit) / surplus on revaluation of investments - net of tax 20 264,837 9,514 (5,021,633) 1,592,442 (4,756,796) 1,601,956 Items that will not be reclassified to profit and loss account in subsequent periods: Remeasurement gain / (loss) on defined benefit plan - net of tax Movement in surplus on revaluation of operating fixed assets 20.1 Movement in surplus on revaluation of non-banking assets 20.2 12,770 – 168,662 (47,457) 1,529,292 299,944 181,432 1,781,779 Total comprehensive income 5,140,369 14,240,732 Attributable to: Equity holders of the Bank Non-controlling interest 5,140,369 – 14,230,068 10,664 5,140,369 14,240,732 The annexed notes 1 to 48 and Annexure I and II form an integral part of these consolidated financial statements. Saleem Anwar Chief Financial Officer Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman Annual Report 2021 155
158. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31 , 2021 Surplus / (deficit) on revaluation of Exchange Share Fixed / un- Non Share translation premium Statutory General Investments non-bankingappropriated Sub controlling Rupees in ‘000 capital reserve account reserve reserve assets profit / (loss) total interest Balance as at January 1, 2020 12,602,602 275,169 234,669 10,098,727 8,800,324 (1,508,638) 5,834,717 Total 6,002,253 42,339,823 48,546 42,388,369 – – – 10,846,333 10,846,333 – 1,592,442 1,829,236 (47,457) 3,383,735 10,664 10,856,997 – 3,383,735 Total comprehensive income for the year ended December 31, 2020 Net profit for the year ended December 31,2020 Other comprehensive income Transfer to: Statutory reserve General reserve – - – 9,514 – – – – – – – – – 2,171,399 – – – 4,111,863 – – – (2,171,399) – (4,111,863) – – – – – – Transfer from surplus on revaluation of assets to unappropriated profit on disposal – – – 2,171,399 4,111,863 – – (6,283,262) – – – – – – – – – (76,802) 78,576 1,774 Transaction with owners, recorded directly in equity Final dividend 2019: Rs. 1.5 per share (1,890,390) (1,890,390) Acquisition of further interest in subsidiary – – – – – – – – – Balance as at January 1, 2021 12,602,602 Total comprehensive income for the year ended December 31, 2021 Net profit for the year ended December 31,2021 Other comprehensive income Transfer to: Statutory reserve General reserve Transfer from surplus on revaluation of assets to unappropriated profit on disposal Transaction with owners, recorded directly in equity Final dividend 2020: Rs. 3 per share 284,683 234,669 12,270,126 12,912,187 – – – (5,021,633) – (1,890,390) (59,210) (59,210) 8,706,053 54,681,275 – 54,681,275 – 9,715,733 9,715,733 168,662 12,770 (4,575,364) – 9,715,733 – (4,575,364) – 264,837 – – – – – 1,940,277 – – – 4,925,272 – – – (1,940,277) – (4,925,272) – – – – – – – – – 1,940,277 4,925,272 – – (6,865,549) – – – – – – – – – – – – – – – – – – 549,520 – – 7,587,151 234,669 14,210,403 17,837,459 (4,937,829) (830,008) 830,008 – (3,780,781) (3,780,781) 6,925,805 8,618,234 56,040,863 – (3,780,781) – 56,040,863 The annexed notes 1 to 48 and Annexure I and II form an integral part of these consolidated financial statements. Saleem Anwar Chief Financial Officer 156 Askari Bank Limited 1,774 – – Balance as at December 31, 2021 12,602,602 – – 83,804 – Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman
159. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note 20212020 Cash flow from operating activities Profit before taxation Less: dividend income 15,672,201 (421,964) 17,835,069 (273,524) 15,250,237 17,561,545 Adjustments: Depreciation 969,838 1,103,181 Amortization 181,321 227,421 Depreciation on ROU assets 1,342,713 1,498,351 Markup expense on lease liability against ROU assets 894,286 891,977 Termination of lease contracts under IFRS - 16 Leases 250 81 Charge for defined benefit plans 396,977 469,441 Provisions and write offs - net 31 5,094,323 2,087,955 Gain on sale of fixed assets (20,501) (23,768) 8,859,207 6,254,639 24,109,444 (Increase) / decrease in operating assets Lendings to financial institutions – Held for trading securities 193 Advances (86,039,133) Other assets (excluding advance taxation) (4,454,168) 23,816,184 14,075,190 57,065 (23,288,035) (2,390,498) Increase / (decrease) in operating liabilities Bills payable Borrowings Deposits Other liabilities (excluding current taxation) (90,493,108) (11,546,278) (2,394,622) 39,400,092 224,179,967 4,213,141 (3,138,951) 32,975,988 111,735,975 142,737 265,398,578 141,715,749 Payment made to defined benefit plan / compensated absences Income tax paid 199,014,914 (383,645) (6,435,428) 153,985,655 (55,324) (6,589,507) Net cash flow generated from operating activities 192,195,841 147,340,824 Cash flow from investing activities Net investments in available for sale securities Net investments in held to maturity securities Acquisition on non-controlling interest in subsidiary Dividend received Investments in operating fixed assets Investments in intangible assets Proceeds from sale of fixed assets Effect of translation of net investment in foreign branch (149,515,019) (25,559,592) – 428,108 (745,017) (261,995) 32,809 264,837 (122,124,862) (18,087,759) (50,830) 268,063 (1,017,039) (555,800) 33,025 9,514 Net cash flow used in investing activities (175,355,869) (141,525,688) Cash flow from financing activities Receipts of subordinated debts - net Payments against lease liabilities Dividends paid – (1,965,692) (3,733,683) 2,008,000 (1,549,511) (1,871,397) Net cash flow used in financing activities (5,699,375) (1,412,908) Increase in cash and cash equivalents 11,140,597 4,402,228 Cash and cash equivalents at beginning of the year 81,847,871 77,445,643 34 Cash and cash equivalents at end of the year 34 92,988,468 81,847,871 The annexed notes 1 to 48 and Annexure I and II form an integral part of these consolidated financial statements. Saleem Anwar Chief Financial Officer Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman Annual Report 2021 157
160. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 1. STATUS AND NATURE OF BUSINESS 1.1 The Group consists of Askari Bank Limited, the holding company and Askari Securities Limited, a wholly owned subsidiary. 1.2 1.3 2. 2.1 Askari Bank Limited (the Bank) was incorporated in Pakistan on October 9, 1991 as a Public Limited Company and is listed on the Pakistan Stock Exchange. The registered office of the Bank is situated at AWT Plaza, the Mall, Rawalpindi. The Bank is a scheduled commercial bank and is principally engaged in the business of banking as defined in the Banking Companies Ordinance, 1962. The Fauji Consortium: comprising of Fauji Foundation (FF), Fauji Fertilizer Company Limited (FFCL) and Fauji Fertilizer Bin Qasim Limited (FFBL) collectively owned 71.91 (2020: 71.91) percent shares of the Group as on December 31, 2021. The ultimate parent of the Group is Fauji Foundation. The Bank has 560 branches (2020: 537 branches); 559 in Pakistan and Azad Jammu and Kashmir including 101 (2020: 95) Islamic Banking branches and 56 (2020: 49) sub-branches and a Wholesale Bank Branch (WBB) in the Kingdom of Bahrain. Askari Securities Limited (ASL) was incorporated in Pakistan on October 1, 1999 under the repealed Companies Ordinance, 1984 as a public limited company. The Group holds 100% Ordinary Shares of ASL. The principal activity includes share brokerage, investment advisory and consultancy services. The registered office of ASL is situated in Islamabad. BASIS OF PRESENTATION These consolidated financial statements have been presented in accordance with the requirements of format prescribed by the State Bank of Pakistan’s BPRD Circular No. 2 dated January 25, 2018. In accordance with the directives of the Federal Government regarding shifting of the banking system to Islamic modes, the SBP has issued various circulars from time to time. One permissible form of trade related mode of financing comprises of purchase of goods by the Group from its customers and resale to them at appropriate mark-up in price on a deferred payment basis. The purchases and sales arising under these arrangements are not reflected in these consolidated financial statements as such but are restricted to the amount of facilities actually utilized and the appropriate portion of profit thereon. The financial results of the Islamic banking branches have been consolidated in these consolidated financial statements for reporting purposes, after eliminating material inter-branch transactions / balances. Key figures of the Islamic banking branches are disclosed in Annexure - II to unconsolidated financial statements. Items included in the consolidated financial statements are measured using the currency of the primary economic environment in which the Group operates. The consolidated financial statements are presented in Pak. Rupee, which is the Group’s functional and presentation currency. Figures have been rounded off to the nearest thousand of rupees unless otherwise stated. STATEMENT OF COMPLIANCE These consolidated financial statements have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan. The accounting and reporting standards comprise of: – International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Act, 2017; – Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan as are notified under the Companies Act, 2017; – Provisions of and directives issued under the Banking Companies Ordinance, 1962 and the Companies Act, 2017; and – Directives issued by the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP). 158 Askari Bank Limited
161. 2 .2 2.3 Wherever the requirements of the Banking Companies Ordinance, 1962, the Companies Act, 2017 or the directives issued by the SBP and the SECP differ with the requirements of IFRS or IFAS the requirements of the Banking Companies Ordinance, 1962, the Companies Act, 2017 and the said directives, shall prevail. The State Bank of Pakistan has deferred the applicability of IFAS 3 ‘Profit and Loss Sharing on Deposits’, vide BPRD Circular No.04 dated February 25, 2015, International Accounting Standard 39,”Financial Instruments: Recognition and Measurement” (IAS 39) and International Accounting Standard 40, Investment Property, vide BSD Circular Letter no.10 dated August 26, 2002, for banking companies till further instructions. Further, the SECP, through SRO 411(1)/2008 dated April 28, 2008, has deferred the applicability of IFRS 7, Financial Instruments: Disclosures, to banks. Additionally, the SBP vide BPRD Circular Letter No. 24 of 2021 dated July 5, 2021 has deferred the applicability of IFRS 9 to banks to accounting periods beginning on or after January 1, 2022. Accordingly, the requirements of these standards have not been considered in the preparation of these consolidated financial statements. However, investments have been classified and valued in accordance with the requirement prescribed by the SBP through various circulars. IFRS10 Consolidated Financial Statements was made applicable from period beginning on or after January 01, 2015 vide SRO 633(I)/2014 dated July 10, 2014 by SECP. However, SECP has directed through SRO 56(I) /2016 dated January 28, 2016, that the requirements of consolidation under section 228 of Companies Act 2017 and IFRS-10 “Consolidated Financial Statements” is not applicable in case of investment by companies in mutual funds established under Trust structure. Accordingly, the requirements of these standards have not been considered in the preparation of these consolidated financial statements. Standards, interpretations of and amendments to published approved accounting standards that are effective in the current year There are certain new and amended standards, interpretations and amendments that have become applicable to the Group for accounting periods beginning on or after January 1, 2021. These are considered either not relevant or not to have any significant impact on the Group’s consolidated financial statements. Standards, interpretations of and amendments to published approved accounting standards that are not yet effective Following standards and amendments to published accounting standards will be effective in future periods and have not been early adopted by the Group. IAS 1 IAS 8 IAS 37 IAS 12 IAS 16 IAS 28 IAS 41 IFRS 3 IFRS 10 IFRS 16 Effective date (periods ending on or after) Presentation of Financial Statements Accounting Policies, Changes in Accounting Estimates and Errors (Amendments) Provisions, Contingent Liabilities Income Taxes (Amendments) Property, Plant and Equipment (Amendments) Investments in Associates and Joint Ventures (Amendments) Agriculture (Amendments) Business Combinations Consolidated Financial Statements (Amendments) Leases (Amendments) January 1, 2023 January 1, 2023 January 1, 2022 January 1, 2023 January 1, 2022 Not yet finalized January 1, 2022 January 1, 2022 Not yet finalized January 1, 2022 As per the SBP’s BPRD Circular Letter no. 24 dated July 05, 2021, the applicability of IFRS 9 to banks in Pakistan has been deferred to accounting periods beginning on or after January 01, 2022. The impact of the application of IFRS 9 in Pakistan on the Bank’s financial statements is being assessed and final implementation guidelines are awaited. Accordingly, the impact on initial application of IFRS 9 cannot be determined as required under IAS 8. Annual Report 2021 159
162. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Except for the implementation of IFRS 9 in Pakistan, The Bank expects that adoption of the amendments to existing accounting and reporting standards will not affect its financial statements in the period of initial application. IFRS 9, Financial Instruments: Classification and Measurement, addresses recognition, classification, measurement and derecognition of financial assets and financial liabilities. The standard has also introduced a new impairment model for financial assets which requires recognition of impairment charge based on an ‘expected credit losses’ (ECL) approach rather than the ‘incurred credit losses’ approach as currently followed. The ECL approach has an impact on all assets of the Group which are exposed to credit risk. There are other new and amended standards and interpretations that are mandatory for the Group’s accounting periods beginning on or after January 1, 2022 but are considered either not relevant or do not have any significant effect on the Group’s operations and are therefore not detailed in these consolidated financial statements. 2.4 Critical accounting estimates and judgments The preparation of consolidated financial statements in conformity with the approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Group’s accounting policies. Estimates and judgments are continually evaluated and are based on historical experiences, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. The areas where assumptions and estimates are significant to the Group’s financial statements or where judgment was exercised in the application of accounting policies are as follows: i) ii) iii) iv) v) vi) vii) viii) ix) 3. 4. 4.1 classification of investments (note 4.6) provision against investments (note 4.6), advances (note 4.7) and fixed assets (note 4.8) valuation of available for sale securities (note 4.6) impairment of available for sale and held to maturity securities (note 4.6.2 and 4.18) useful life of property and equipment, intangible assets and revaluation of land (note 4.8) and non-banking assets acquired in satisfaction of claims (note 4.19) staff retirement benefits (note 4.14) taxation (note 4.17) IFRS 16 - Leases (note 4.10) Fair value of derivatives (note 4.23) BASIS OF MEASUREMENT These consolidated financial statements have been prepared under the historical cost convention as modified for certain investments and derivative financial instruments which are carried at fair value, non-banking assets acquired in satisfaction of claims, freehold and leasehold land which are shown at revalued amounts and staff retirement gratuity and compensated absences which are carried at present value. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. Changes in accounting policies 4.2 There has been no change in the accounting policies implemented by the Group during the current year. The consolidated financial statements include the financial statements of the Bank and its subsidiary company, ASL with 100% holding (2020: 74%) collectively referred to as “the Group”. Basis of consolidation 160 Askari Bank Limited
163. 4 .3 4.4 4.5 Subsidiary is that enterprise in which the holding company directly or indirectly controls, beneficially owns or holds more than 50% of the voting securities or otherwise has the power to elect and appoint more than 50% of its directors. The financial statements of the subsidiary are included in the consolidated financial statements from the date control commences until the date that control ceases. The assets and liabilities of subsidiary company have been accounted for as per the requirements of IFRS 10 Consolidated Financial Statement and has been consolidated on a line by line addition basis. Material intra-group balances and transactions have been eliminated. Non-controlling interests are part of net results of the operations and of net assets of the subsidiary attributable to interests which are not owned by the Group. Non-controlling interests are presented as separate item in the consolidated financial statements. Cash and cash equivalents Cash and cash equivalents comprise of cash and balances with treasury banks, balances with other banks and call money lendings. Lendings (reverse repo) Consideration for securities purchased under resale agreement (reverse repo) are included in lendings to financial institutions. The difference between purchase and resale price is recognized as mark-up / return earned on a time proportion basis. Reverse repo balances are reflected under lending to financial institutions. Bai Muajjal receivable from other financial institutions In Bai Muajjal, the Group sells Sukuk on deferred payment basis to other financial institutions. The deferred price is agreed at the time of sale and such proceeds are received at the end of the credit period. Bai Muajjal balances are reflected under lending to financial institutions. Bai Muajjal with the Federal Government is classified as investment. 4.6Investments Investments are classified as follows: These represent securities acquired with the intention to trade by taking advantage of short-term market / interest rate movements and are to be sold within 90 days of acquisition. Held for trading Available for sale These represent securities which do not fall under ‘held for trading’ or ‘held to maturity’ categories. These represent securities acquired with the intention and ability to hold them upto maturity. Held to maturity 4.6.1 Initial measurement All purchases and sales of investments that require delivery within the time frame established by regulation or market convention are recognized at trade date, which is the date at which the Group commits to purchase or sell the investments except for money market and foreign exchange contracts, other than ready market transactions, which are recognized at settlement date. In case of investments classified as held for trading, transaction costs are expensed through profit and loss account. Transaction costs associated with investments other than those classified as held for trading are included in the cost of investments. Annual Report 2021 161
164. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 4.6.2 Subsequent measurement Held for trading These are marked to market and surplus / deficit arising on revaluation of ‘held for trading’ investments is taken to profit and loss account in accordance with the requirements prescribed by the SBP through various circulars. Available for sale In accordance with the requirements of various circulars of SBP, available for sale securities for which ready quotations are available on Reuters Page (PKRV) or Stock Exchanges are valued at market value and the resulting surplus / deficit is taken through “Statement of Comprehensive Income (OCI)” and is shown in the shareholders’ equity in the consolidated statement of financial position. Unquoted equity securities are valued at the lower of cost and break-up value. Break-up value of equity securities is calculated with reference to the net assets of the investee as per the latest audited financial statements. If the break-up value is less than cost the difference is included in profit and loss account. Unquoted debt securities are valued using the market value of secondary market where available. Held to maturity These are carried at amortized cost less impairment, determined in accordance with the requirements of Prudential Regulations issued by the SBP. 4.7Advances Advances are stated net of specific and general provisions. Specific provision is determined in accordance with the requirements of the Prudential Regulations issued by the SBP from time to time. In addition, a general provision is maintained for advances against consumer and small enterprises in accordance with the requirements of Prudential Regulations and provision based on historical loan experience. General and specific provisions pertaining to overseas advances are made in accordance with the requirements of the regulatory authorities of the respective countries. The provisions against non-performing advances are charged to the profit and loss account. Advances are written off when there is no realistic prospect of recovery. The Group reviews its loan portfolio to assess the amount of non-performing advances and provision required there against on regular basis. While assessing this requirement various factors including the delinquency in the account, financial position of the borrowers and the requirements of the Prudential Regulations are considered. 4.7.1 Finance lease receivables Leases where the Group transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee are classified as finance leases. A receivable is recognized at an amount equal to the present value of the lease payments including any guaranteed residual value. Finance lease receivables are included in advances to the customers. 4.7.2 Islamic financing and related assets 162 Ijarahs booked under Islamic Financial Accounting Standard 2 - Ijarah (IFAS - 2) are stated at cost less accumulated depreciation and impairment if any, and are shown under advances. Depreciation on Ijarah assets is charged to profit and loss account by applying the straight line method whereby the depreciable value of Ijarah assets is written off over the Ijarah period. The Group charges depreciation from the date of delivery of respective assets to Mustajir upto the date of maturity / termination of Ijarah agreement. Impairment of Ijarah assets is determined in accordance with the Prudential Regulations issued by the SBP. In Murabaha transactions, the Group purchases the goods through its agent or client and after taking the possession, sells them to the customer on cost plus profit basis either in a spot or credit transaction. Under Askari Bank Limited
165. Murabaha financing , funds disbursed for purchase of goods are recorded as ‘Advance against Murabaha finance’. On culmination of Murabaha i.e. sale of goods to customers, Murabaha financing are recorded at the deferred sale price. Goods purchased but remaining unsold at the statement of financial position date are recorded as inventories. The Group values its inventories at the lower of cost and net realizable value. The net realizable value is the estimated selling price in the ordinary course of business less the estimated cost necessary to make the sale. Cost of inventories represents actual purchases made by the Bank / customers as the agent of the Group for subsequent sale. In Salam financing, the Group pays full in advance to its customer for buying specified goods / commodities to be delivered to the Group within an agreed time. The goods are then sold and the amount financed is received back by the Group along with profit. In Musharakah a relationship is established under a contract by the mutual consent of the Group and the customer for sharing of profits and losses arising from a joint enterprise or venture. Diminishing Musharakah (DM) is a form of co-ownership in which Group and the customer share the ownership of a tangible asset in an agreed proportion and customer undertakes to buy in periodic installments the proportionate share of the Group until the title to such tangible asset is completely transferred to the customer. In Istisna financing, the Group acquires the described goods to be manufactured by the customer from raw material of its own and deliver to the Group within an agreed time. The goods are then sold and the amount financed is received back by the Group along with profit. In Running Musharakah based financing, the Group enters into financing with the customer based on Shirkat-ulAqd or Business Partnership in the customer’s operating business where the funds can be withdrawn or refunded during the Musharakah period. 4.8 Fixed assets and depreciation Capital work-in-progress Capital work-in-progress is stated at cost less impairment losses, if any. Fixed assets are stated at cost less impairment losses and accumulated depreciation except for freehold / leasehold land. Land is carried at revalued amounts which is not depreciated. Land is revalued by professionally qualified valuers with sufficient regularity to ensure that the carrying amount does not differ materially from their fair value. Major renewals and improvements are capitalized. Gains and losses on disposal of operating fixed assets are taken to the profit and loss account. Property and equipment Surplus arising on revaluation of fixed assets is credited to the surplus on revaluation of assets account and is shown under the shareholders’ equity in the consolidated statement of financial position. Except to the extent actually realized on disposal of land which are revalued, the surplus on revaluation of land shall not be applied to set-off or reduce any deficit or loss, whether past, current or future, or in any manner applied, adjusted or treated so as to add to the income, profit or surplus of the Group or utilized directly or indirectly by way of dividend or bonus. Surplus on revaluation of fixed assets (net of associated deferred tax) to the extent of the incremental depreciation charged on the related assets is transferred to unappropriated profit. Intangible assets Intangible assets are stated at cost less accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized from the month when these assets are available for use, using the straight line method, whereby the cost of the intangible assets are amortized over its estimated useful lives over which Annual Report 2021 163
166. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 economic benefits are expected to flow to the Group. The useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. Depreciation / amortization Depreciation / amortization is computed on monthly basis over the estimated useful lives of the related assets at the rates set out in note 10.2 and 11.1 respectively on monthly basis. The cost of assets is depreciated / amortized on straight line basis, except for buildings which are depreciated on reducing balance method. Depreciation / amortization is charged for the full month of purchase / acquisition / availability for use of an asset while no depreciation / amortization is charged in the month of disposal of an asset. Maintenance and normal repairs are charged to profit and loss account as and when incurred. In making estimates of the depreciation / amortization, the management uses useful life and residual value which reflects the pattern in which economic benefits are expected to be consumed by the Group. The useful life and the residual value are reviewed at each financial year end and any change in these estimates in future years might effect the carrying amounts of the respective item of operating fixed assets with the corresponding effect on depreciation / amortization charge. 4.9 Assets held for sale Non-current assets and associated liabilities are classified as held for sale when their carrying amount will be recovered principally through a sale transaction rather than continuing use and a sale is highly probable. Assets designated as held for sale are carried at the lower of carrying amount at designation and fair value less costs to sell, if fair value can reasonably be determined. 4.10 IFRS 16 - Leases A lessee recognizes a right-of-use (ROU) asset representing its right of using the underlying asset and a corresponding lease liability representing its obligations to make lease payments. Lease liabilities are initially measured at the present value of lease payment, discounted using the Group’s contract wise incremental borrowing rate. The lease liabilities are subsequently measured at amortized cost using the effective interest rate method. The lease liability is also remeasured to reflect any reassessment or change in lease term. These remeasurements of lease liabilities are recognized as adjustments to the carrying amount of related ROU asset after the date of initial recognition. Each lease payment is allocated between a reduction of the liability and a finance cost. The Finance cost is charged to the profit and loss account as markup expense over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The ROU assets are initially measured based on the initial amount of the lease liability plus any initial direct costs incurred. ROU assets are subsequently stated at cost less any accumulated depreciation. The ROU assets are depreciated on a straight line basis over the lease term as this method most closely reflects the expected pattern of consumption of future economic benefits. The estimated useful lives of ROU assets are determined on the same basis as that used for owned assets. The ROU assets are reduced by impairment losses, if any, and adjusted for certain remeasurements of lease liability. 4.11 Borrowings (Repo) Consideration received against securities sold under repurchase agreement (repo) are included in borrowings from financial institutions. The difference between sale and repurchase price is recognized as mark-up / return expensed on a time proportion basis. 4.12Deposits Deposits are recorded at the fair value of proceeds received. Markup accrued on deposits is recognized separately as part of other liabilities and is charged to profit and loss account on a time proportion basis. 164 Askari Bank Limited
167. The Group generates deposits in two modes i .e. “Qard” and “Modaraba” under Islamic Banking Operations. Deposits taken on Qard basis are classified as ‘Current Accounts’ and deposits generated on Modaraba basis are classified as ‘Saving Accounts’ and ‘Fixed Deposit Accounts’. 4.13 Subordinated debts Subordinated debts are initially recorded at the amount of proceeds received. Mark-up on subordinated debts is charged to the profit and loss account over the period on accrual basis. 4.14 Staff retirement benefits Defined benefit plan The Bank and ASL operates an approved funded gratuity scheme for all its regular employees. Contributions are made in accordance with the actuarial recommendation. The actuarial valuation is carried out periodically using “Projected Unit Credit Method”. Actuarial gain / losses arising from experience adjustment and changes in actuarial assumptions are recognized in other comprehensive income in the period of occurrence. Certain actuarial assumptions have been adopted as disclosed in note 36 of these consolidated financial statements for the actuarial valuation of staff retirement benefit plans. Actuarial assumptions are entity’s best estimates of the variables that will determine the ultimate cost of providing post employment benefits. Changes in these assumptions in future years may affect the liability / asset under these plans in those years. Defined contribution plan The Bank operates a recognized provident fund scheme for all its regular employees for which equal monthly contributions are made both by the Bank and by the employees at the rate of 8.33% of the basic salary of the employee. ASL operates funded provident fund scheme for all its regular employees for which equal monthly contributions are made by ASL and the employees at the rate of 10% of basic salary of the employee. Compensated absences The Bank and ASL provides compensated absences to all its regular employees. Liability for unfunded scheme is recognized on the basis of actuarial valuation using the “Projected Unit Credit Method”. Provision for the year is charged to consolidated profit and loss account. The amount recognized in the consolidated statement of financial position represents the present value of defined benefit obligations. Actuarial gain / losses arising from experience adjustment and changes in actuarial assumptions are recognized in the profit and loss account in the period of occurrence. 4.15 Foreign currencies Foreign currency transactions Foreign currency transactions other than results of foreign operations are translated into Pak. Rupee at the exchange rates prevailing on the date of transaction. Monetary assets and liabilities in foreign currencies are translated to Pak. Rupee at the exchange rates prevailing at the reporting date. Forward transactions in foreign currencies and foreign bills purchased are valued at the rates applicable to the remaining maturities. Exchange gains and losses are included in consolidated profit and loss account currently. Foreign operation The assets and liabilities of Wholesale Bank Branch are translated to Pak. Rupee at exchange rates prevailing at the date of consolidated statement of financial position. The results of foreign operations are translated at the average rate of exchange for the year. Annual Report 2021 165
168. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Translation gains and losses Translation gains and losses are included in consolidated profit and loss account, except those arising on translation of the Group’s net investment in foreign operations which are taken to equity under “Exchange Translation Reserve” through other comprehensive income and on disposal are recognized in consolidated profit and loss account. Commitments Commitments for outstanding forward foreign exchange contracts are disclosed in these consolidated financial statements at committed amounts. Contingent liabilities / commitments for letters of credit and letters of guarantee denominated in foreign currencies are expressed in Rupee terms at the rates of exchange prevailing at the statement of financial position date. 4.16 Revenue recognition Mark-up / interest on advances and return on investments is recognized on time proportionate except on classified advances and investments which is recognized on receipt basis. Mark-up / interest on rescheduled / restructured advances and investments is recognized as permitted by the regulations of the SBP or overseas regulatory authority of the country where branch operates, except where in the opinion of the management it would not be prudent to do so. Where debt securities are purchased at a premium or discount, such premium / discount is amortized through the profit and loss account over the remaining period of maturity using effective yield method. Fees and commission income is recognized at the time of performance of service. Unrealized lease income is suspended on classified leases, in accordance with the requirements of the Prudential Regulations issued by the SBP. Gains / losses on termination of lease contracts, documentation charges, frontend fees and other lease income are recognized as income on receipt basis. Dividend income is recognized when Group’s right to receive the income is established. Gains or losses on sale of investments are recognized in consolidated profit and loss account. Financing method is used in accounting for income from lease financing. Under this method, the unearned lease income (excess of the sum of the total lease rentals and estimated residual value over the cost of leased assets) is deferred and taken to income over the term of the lease period so as to produce a constant periodic rate of return on the outstanding net investment in lease. Repossessed vehicles on account of loan default are recorded in memorandum account. Profit on Murabaha sale transaction not due for the payment is deferred by recording a credit to the “Deferred Murabaha Income” account. Profits on Musharakah and Diminishing Musharakah financing are recognized on accrual basis. Profit required to be suspended in compliance with the Prudential Regulations issued by SBP is recorded on receipt basis. Profit on Salam finance is recognized on time proportionate basis. Rental income from Ijarah financing is recognized on an accrual basis. Depreciation on Ijarah asset is charged to income (net of with rental income) over the period of Ijarah using the straight line method. Profit on Istisna financing is recognized on a time proportionate basis. 4.17Taxation 166 Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the consolidated profit and loss account, except to the extent that it relates to items recognized directly in other comprehensive income, in which case it is recognized in other comprehensive income. In making the estimates Askari Bank Limited
169. for income taxes currently payable by the Group , the management considers the current income tax laws and the decisions of appellate authorities on certain issues in the past. Current Provision for current taxation is based on taxable income at the current rates of taxation after taking into consideration available tax credits and rebates. The charge for current tax also includes adjustments where considered necessary, relating to prior years which arise from assessments framed / finalized during the year. Prior years The tax charge for prior years represents adjustments to the tax charge for prior years, arising from assessments, change in estimates and retrospectively applied changes to law, made during the year. Deferred Deferred tax is provided for by using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the date of consolidated statement of financial position. A deferred tax asset is recognized only to the extent that it is probable that the future taxable profit will be available and credits can be utilized. Deferred tax assets are reduced to the extent it is no longer probable that the related tax benefit will be realized. Deferred tax, on revaluation of investments, if any, is recognized as an adjustment to surplus / (deficit) arising on such revaluation. 4.18Impairment Available for sale The Group determines that available for sale equity investments are impaired when there has been a significant or prolonged decline in the fair value of these investments below their cost. The determination of what is significant or prolonged requires judgment. In making this judgment, the Group evaluates, among other factors, the normal volatility in share price in case of listed securities. Impairment loss on available for sale debt securities is determined in accordance with the requirements of Prudential Regulations issued by SBP. Non-financial assets The carrying amount of the Group’s assets are reviewed at the reporting date to determine whether there is any indication of impairment. If such indication exists, the asset’s recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment loss is recognized as expense in the consolidated profit and loss account. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. 4.19 Non-banking assets acquired in satisfaction of claims Non-banking assets acquired in satisfaction of claims are carried at revalued amounts less accumulated depreciation and impairment, if any. These assets are revalued by professionally qualified valuers with sufficient regularity to ensure that their net carrying value does not differ materially from their fair value. Surplus arising on revaluation of such properties is credited to the ‘surplus on revaluation of non banking assets’ account and any deficit arising on revaluation is taken to profit and loss account directly. Legal fees, transfer costs and direct costs of acquiring title to property are charged to profit and loss account and are not capitalized. Annual Report 2021 167
170. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 4.20 Other provisions Provisions are recognized when there are present, legal or constructive obligations as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amounts can be made. Provision for guarantee claims and other off balance sheet obligations is recognized when intimated and reasonable certainty exists to settle the obligations. Expected recoveries are recognized by debiting customer accounts. Charge to consolidated profit and loss account is stated net off expected recoveries. 4.21Off-setting Financial assets and financial liabilities are only set-off and the net amount is reported in the consolidated financial statements when there is a legally enforceable right to set-off the recognized amount and the Group intends either to settle on a net basis, or to realize the assets and to settle the liabilities simultaneously. 4.22 Financial assets and liabilities Financial assets and financial liabilities are recognized at the time when the Group becomes a party to the contractual provision of the instrument. Financial assets are de-recognized when the contractual right to future cash flows from the asset expires or is transferred along with the risk and reward of the asset. Financial liabilities are de-recognized when obligation specific in the contract is discharged, cancelled or expired. Any gain or loss on de-recognition of the financial asset and liability is recognized in the profit and loss account of the current period. The particular recognition and subsequent measurement methods adopted for significant financial assets and financial liabilities are disclosed in the individual policy statement associated with them. 4.23 Derivative financial instruments Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value using appropriate valuation techniques. All derivative financial instruments are carried as assets when fair value is positive and liabilities when fair value is negative. Any change in the fair value of derivative financial instruments is taken to the profit and loss account. The fair values of derivatives which are not quoted in active markets are determined by using valuation techniques. The valuation techniques take into account the relevant interest rates in effect at the reporting date and the rates contracted. 4.24 Appropriations subsequent to date of consolidated statement of financial position Appropriations subsequent to year end are recognized during the year in which those appropriations are made. 4.25 Dividend distribution and appropriation Dividends and appropriations (except for the appropriations required by law), made subsequent to the date of statement of financial position are considered as non-adjusting events and are recorded in the year in which these are approved / transfers are made. 4.26 Earnings per share The Group presents basic and diluted Earnings Per Share (EPS). Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, if any. 168 Askari Bank Limited
171. 4 .27 Segment reporting A segment is a distinguishable component of the Group that is engaged in providing products or services (business segment) or in providing product or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Group’s primary format of reporting is based on business segments. 4.27.1Business segment Branch banking This segment consists of loans, deposits and other banking services including branchless banking services to small enterprises, medium enterprises, agriculture and individual customers. Corporate banking Corporate banking includes project financing, trade financing and working capital to corporate and commercial customers of the Bank. This segment is also involved in investment banking activities such as mergers and acquisition, underwriting, privatization, securitization, IPO’s related activities and secondary private placements. Treasury Treasury function is mainly engaged in money market activities, foreign exchange business and short term lendings and borrowings from counterparties. Consumer banking Consumer banking segment provides both secured and unsecured loans to retail customers. This segment provides banking services to its customers in compliance with Shariah rules and directives, instructions and guidelines issued by SBP. Islamic banking Foreign operations Foreign operations consists of the banking activities performed through its Wholesale Bank Branch in the Kingdom of Bahrain. Head office / others This consists of banking operations not performed by any of above segments. 4.27.2Geographical segments The Group operates in two geographic regions; Pakistan and the Middle East. 4.28Acceptances Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group expects most acceptances to be simultaneously settled with the reimbursement from the customers. Acceptances are accounted for on consolidated statement of financial position both as assets and liabilities. Annual Report 2021 169
172. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 5. CASH AND BALANCES WITH TREASURY BANKS In hand: Note 20212020 Local currency Foreign currencies 21,150,705 4,059,596 17,290,446 4,030,731 With the State Bank of Pakistan in: 25,210,301 21,321,177 Local currency current accounts Foreign currency current account Foreign currency deposit account 46,087,959 4,898,891 9,278,909 37,199,449 4,513,312 7,501,569 With National Bank of Pakistan in: 60,265,759 49,214,330 Local currency current accounts Prize Bonds 3,833,104 123,081 2,260,681 855,530 5.1 5.1 5.2 89,432,245 73,651,718 5.1 These represent current accounts maintained with the SBP to comply with the statutory cash reserve requirements. 5.2 This represents special cash reserve maintained with the SBP and carries mark-up at the rate of Nil (2020: Nil). Rupees in ‘000 6. BALANCES WITH OTHER BANKS In Pakistan Note 20212020 In current accounts In deposit accounts 552,186 4,310 703,753 3,612 Outside Pakistan 556,496 707,365 In current accounts In deposit accounts 6.1 1,425,930 1,573,797 1,971,347 5,517,441 2,999,727 7,488,788 Provision held against balances with other banks (8) (6) 3,556,215 8,196,147 6.1 These represent placements with international correspondent banks, carrying interest rates upto 0.08% (2020: upto 0.45%) per annum. Rupees in ‘000 170 20212020 7. LENDINGS TO FINANCIAL INSTITUTIONS Purchase under resale arrangement of equity securities Provision held against lending to financial institutions 148,606 (148,606) Lending to financial institutions - net of provision – Askari Bank Limited 148,606 (148,606) –
173. 8 .INVESTMENTS 20212020 Rupees in ‘000 8.1 Investments by type: Held for trading securities Cost / amortized cost Provision for diminution Surplus / (deficit) Carrying Cost / value amortized cost Provision for diminution Surplus / (deficit) Carrying value Fully paid ordinary shares Units of open end mutual funds – – – – – – – – – 193 – – – – – 193 Available for sale securities Federal Government Securities Shares Units of open end mutual funds Fully paid preference shares Non Government Debt Securities Foreign securities – – – – 193 – – 193 482,298,535 4,874,699 1,510,609 27,314 13,316,295 530,691 (50,489) (432,993) (140,558) (11,914) (1,386,785) (3,965) (8,400,351) 473,847,695 335,378,424 87,745 4,529,451 4,710,140 140,194 1,510,245 1,405,036 651 16,051 27,314 62,687 11,992,197 11,048,874 5,469 532,195 482,547 (31,877) (158,232) (140,558) (11,914) (1,422,704) (5,203) (525,781) 334,820,766 291,562 4,843,470 171,942 1,436,420 46,545 61,945 117,486 9,743,656 18,534 495,878 Held to maturity securities Federal Government Securities Non Government Debt Securities Foreign securities 502,558,143 (2,026,704) (8,103,605) 492,427,834 353,052,335 (1,770,488) 120,288 351,402,135 120,213,557 110,000 3,757,721 (136,355) (110,000) (31,585) – 120,077,202 95,034,902 – – 110,000 – 3,726,136 3,376,784 (116,957) (110,000) (85,070) – 94,917,945 – – – 3,291,714 124,081,278 (277,940) – 123,803,338 98,521,686 (312,027) – 98,209,659 626,639,421 (2,304,644) (8,103,605) 616,231,172 451,574,214 (2,082,515) 120,288 449,611,987 Cost / amortized cost Provision for diminution Total investments 20212020 Rupees in ‘000 8.2 Surplus / (deficit) Carrying Cost / value amortized cost Surplus / (deficit) Carrying value Investments by segments: Federal Government Securities Market Treasury Bills Pakistan Investment Bonds Euro Bonds GOP Bai Muajjal Ijarah Sukuks 237,198,334 320,877,899 10,925,079 4,215,092 29,295,688 – (290,335) – (7,718,161) (129,560) (16,614) – – (57,284) (375,241) Shares Listed companies Unlisted companies 602,512,092 (186,844) 4,514,514 360,185 (427,313) (5,680) 56,617 31,128 4,143,818 385,633 Units of open end mutual funds Fully paid preference shares Non Government Debt Securities Listed Unlisted 4,874,699 1,510,609 27,314 (432,993) (140,558) (11,914) 87,745 140,194 651 1,641,790 11,784,505 (216,790) (1,279,995) 13,426,295 Foreign Securities Government securities Provision for diminution Total investments 236,907,999 122,065,700 313,159,738 282,938,195 10,778,905 6,748,006 4,215,092 5,246,146 28,863,163 13,415,279 – – (115,622) – (33,212) 320,229 122,385,929 (831,857) 282,106,338 27,446 6,659,830 – 5,246,146 (41,599) 13,340,468 (148,834) (525,781) 429,738,711 4,354,460 355,680 (152,552) (5,680) 291,562 – 4,493,470 350,000 4,529,451 1,510,245 16,051 4,710,140 1,405,229 27,314 (158,232) (140,558) (11,914) 291,562 171,942 46,545 4,843,470 1,436,613 61,945 (41,556) 104,243 1,383,444 10,608,753 2,136,636 9,022,238 (221,636) (1,311,068) 107,325 10,161 2,022,325 7,721,331 (1,496,785) 62,687 11,992,197 11,158,874 (1,532,704) 117,486 9,743,656 4,288,412 (35,550) 5,469 4,258,331 3,859,331 (90,273) 18,534 3,787,592 626,639,421 (2,304,644) (8,103,605) 616,231,172 451,574,214 (2,082,515) (8,400,351) 593,924,897 430,413,326 120,288 449,611,987 Annual Report 2021 171
174. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 20212020 8.2.1 Investments given as collateral The market value of investment given as collateral is as follows Market Treasury Bills Pakistan Investment Bonds Euro Bonds Bahrain International Bonds Turkish Euro Bonds Turkish Sukuks Ijarah Sukuks Shares 9,967,040 31,984,000 7,386,911 – 596,977 – 4,372,827 161,829 13,715,612 7,005,600 6,442,504 501,081 –973,391 5,069,713 191,168 54,469,584 33,899,069 8.3.1 Opening balance 2,082,515 3,554,891 Exchange adjustments Charge / (reversals) Charge for the year (Reversal) / charge for the year under IFRS 9 related to WBB Reversals for the year 21,836 5,614 277,764 (38,547) (35,919) 491,171 41,248 (66,558) Reversal on disposals 203,298 (3,005) 465,861 (1,943,851) Closing balance 8.3.2 Particulars of provision against debt securities 2,304,644 8.3 Provision for diminution in value of investments 2,082,515 2021 Rupees in ‘000 NPI 2020 Provision NPI Provision Category of classification Domestic Loss 1,496,785 1,496,785 1,532,704 1,532,704 8.3.3 In addition to the above, Group’s Bahrain branch holds general provision of Rs. 222,394 thousand (December 31, 2020: Rs. 239,107 thousand) against investments in accordance with ECL requirement of IFRS 9. 172 Askari Bank Limited
175. 8 .4 Quality of available for sale securities Details regarding quality of available for sale securities are as follows: 20212020 Rupees in ‘000 Cost Federal Government Securities - Government guaranteed Market Treasury Bills Pakistan Investment Bonds Euro Bonds Ijarah Sukuks 237,198,334 217,100,181 3,642,731 24,357,289 122,065,700 204,536,354 1,712,032 7,064,338 482,298,535 335,378,424 Commercial banks Chemicals Fertilizer Cement Power generation and distribution Leasing companies Paper and board Engineering Insurance Oil and gas marketing companies Oil and gas exploration Textile composite Pharmaceuticals Real estate investment trust Technology and communication Transport Refinery 790,902 414,475 131,051 412,499 598,158 26,560 72,800 83,430 46,948 668,391 187,054 243,307 153,693 572,761 – 23,664 88,821 795,604 455,887 143,172 363,261 598,158 26,560 55,806 198,585 26,080 651,804 235,135 153,685 46,251 586,472 18,000 – – 4,514,514 4,354,460 Shares Listed 2021 Rupees in ‘000 Unlisted Pakistan Export Finance Guarantee Agency Limited 1Link (Pvt) Limited Pakistan Mortgage Refinance Company Limited ISE REIT Management Company Limited Cost 5,680 50,000 300,000 4,505 2020 Breakup value – 312,700 527,700 50,902 Cost 5,680 50,000 300,000 – 360,185 891,302 355,680 Breakup value has been calculated on the basis of latest available financial statements. Breakup value – 230,850 486,300 – 717,150 Annual Report 2021 173
176. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 20212020 Cost Units of Open end mutual funds Listed National Investment Trust Limited National Investment (Unit) Trust Fund Islamic Equity Fund Asset Allocation Fund Islamic Money Market Fund Askari Asset Allocation Fund Askari High Yield Scheme Askari Sovereign Yield Enhancer Fund Askari Cash Fund (Formerly Askari Sovereign Cash Fund) Pak Oman Islamic Asset Allocation Fund Pak Oman Advantage Islamic Income Fund Others 500,000 50,000 100,000 100,000 100,846 479,137 100,000 37,509 42,705 412 – 500,000 50,000 100,000 – 100,846 173,565 100,000 337,509 42,705 411 193 1,510,609 1,405,229 Commercial Banks Textile 2,214 25,100 2,214 25,100 Non Government Debt Securities 27,314 27,314 AAA AA+, AA, AA- A+, A, A- Unrated 750,000 500,000 175,000 216,790 750,000 890,000 275,000 221,636 1,641,790 2,136,636 AAA AA+, AA, AA- A+, A, A- Unrated 8,798,860 600,650 1,105,000 1,169,995 6,385,384 600,750 725,000 1,201,104 11,674,505 8,912,238 Fully Paid Preference Shares Listed Listed Unlisted 174 Askari Bank Limited
177. 2021 Rupees in ‘000 Foreign Securities Government of Bahrain securities Cost 530,691 2020 Rating B+ Rupees in ‘000 8.5 Particulars relating to Held to Maturity securities are as follows: Federal Government Securities - Government guaranteed Cost Rating 482,547 B+ 20212020 Cost Pakistan Investment Bonds Government of Pakistan Euro Bonds Ijarah Sukuks GOP Bai Muajjal 103,777,717 7,282,348 4,938,400 4,215,092 78,401,841 5,035,974 6,350,941 5,246,146 Non Government Debt Securities Unlisted CCC and below 120,213,557 95,034,902 110,000 110,000 2021 Rupees in ‘000 Cost 2020 Rating Cost Rating Foreign Securities Turkish Sukuk Turkish Euro Bonds Srilanka Euro Bond 1,059,422 1,374,564 1,323,735 BB- BB- CCC+ 961,594 1,218,628 1,196,562 BBBBCCC+ 3,757,721 3,376,784 8.5.1Market value of held to maturity securities other than classified investments as at December 31, 2021 is Rs. 122,430,448 thousand (2020: Rs. 104,630,207 thousand). 8.6 Investments include Government securities which are held by the Group to comply with the statutory liquidity requirements as set out under Section 29 of the Banking Companies Ordinance, 1962 Annual Report 2021 175
178. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 9.ADVANCES Performing Rupees in ‘000 Note Loans, cash credits, running finances, etc. 9.1 Islamic financing and related assets- note 2 of Annexure II Bills discounted and purchased Non performing Total 202120202021202020212020 383,805,556 309,830,976 25,413,635 24,338,648 409,219,191 334,169,624 69,979,661 22,950,694 62,691,358 20,603,372 2,885,460 2,866,232 2,684,267 1,713,484 72,865,121 25,816,926 65,375,625 22,316,856 Advances - gross 476,735,911 393,125,706 31,165,327 28,736,399 507,901,238 421,862,105 Provision against advances - Specific - General – (1,709,286) – (1,603,972) (28,518,930) – (24,842,078) – (28,518,930) (1,709,286) (24,842,078) (1,603,972) (1,709,286) (1,603,972) (28,518,930) (24,842,078) (30,228,216) (26,446,050) 475,026,625 391,521,734 2,646,397 3,894,321 477,673,022 395,416,055 Advances - net of provision 9.1 Includes net investment in finance lease as disclosed below: 20212020 Not later Rupees in ‘000 than one year Later than one and less Over five Not later than five years years Total than one year Later than one and less Over five than five years years Total Lease rentals receivable Residual value 2,453,266 855,053 2,644,563 1,356,416 – – 5,097,829 2,211,469 2,505,400 1,007,459 2,218,605 1,336,479 7,189 28,736 4,731,194 2,372,674 Minimum lease payments Financial charges for future periods 3,308,319 (299,942) 4,000,979 (315,781) – – 7,309,298 (615,723) 3,512,859 (254,200) 3,555,084 (230,039) 35,925 (60) 7,103,868 (484,299) Present value of minimum lease payments 3,008,377 3,685,198 – 6,693,575 3,258,659 3,325,045 35,865 6,619,569 Rupees in ‘000 9.2 Particulars of advances (Gross) In local currency In foreign currencies 20212020 465,288,344 42,612,894 398,281,325 23,580,780 507,901,238 421,862,105 9.3 Advances include Rs. 31,165,327 thousand (2020: Rs. 28,736,399 thousand) which have been placed under nonperforming status as detailed below: 176 Askari Bank Limited
179. 2021 2020 Non performing Provision Non performing Rupees in ‘000 loansloans Provision Category of classification Domestic Other Assets Especially Mentioned Substandard Doubtful Loss 140,824 1,576,529 1,223,288 28,012,320 445 308,449 570,556 27,616,118 1,406,324 480,927 1,956,085 24,567,474 – 63,119 766,400 23,991,404 Overseas 30,952,961 28,495,568 28,410,810 24,820,923 Not past due but Impaired Overdue by 181 to 365 days 212,366 23,362 – – – – 325,589 21,155 212,366 23,362 325,589 21,155 31,165,327 28,518,930 28,736,399 24,842,078 9.4 Particulars of provision against advances 20212020 Specific General Consumer Total Specific General Consumer (note 45.1) financing financing Rupees in ‘000 Note - general - general Opening balance Exchange adjustments 24,842,078 2,207 887,946 15,826 6,382,786 76,663 93,912 – (2,597,059) (5,555) (854) 3,785,727 (55,851) 70,254 – (55,231) – Closing balance 28,518,930 974,026 Charge for the year Provision under IFRS 9 related to WBB Reversal for the year Amounts written off 9.5 Amounts charged off agriculture financing 9.7 716,026 26,446,050 – 18,033 Total 24,408,056 (299) 584,145 9,586 642,747 25,634,948 – 9,287 6,553,361 2,249,576 421,751 122,415 2,793,742 – (74,678) (5,555) (2,672,591) 21,454 (1,010,054) (105,360) (22,176) – (49,136) (83,906) (1,081,366) 19,234 – 3,875,215 (55,851) 1,260,976 (748,426) 294,215 – 73,279 – 1,628,470 (748,426) (55,231) (78,229) – – (78,229) 30,228,216 24,842,078 887,946 716,026 26,446,050 – 735,260 9.4.1 Particulars of provision against advances 20212020 Specific General Consumer Total Specific General Consumer (note 45.1) financing financing Rupees in ‘000 - general - general Total In local currency In foreign currencies 28,099,282 419,648 807,679 166,347 735,260 29,642,221 – 585,995 24,461,435 380,643 731,882 156,064 716,026 – 25,909,343 536,707 28,518,930 974,026 735,260 24,842,078 887,946 716,026 26,446,050 30,228,216 Annual Report 2021 177
180. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 9.4.2 The net FSV benefit already availed has been reduced by Rs. 220,594 thousand, which has resulted in increased charge for specific provision for the year by the same amount. Had the FSV benefit not reduced, before and after tax profit for the year would have been higher by Rs. 220,594 thousand (2020: higher by Rs. 66,326 thousand) and Rs. 134,563 thousand (2020: Rs. 40,459 thousand) respectively. Further, at December 31, 2021, cumulative net of tax benefit availed for Forced Sales Value (FSV) was Rs. 320,002 thousand (December 31, 2020: Rs. 454,565 thousand) under BSD circular No. 1 of 2011 dated October 21, 2011. Reserves and un-appropriated profit to that extent are not available for distribution by way of cash or stock dividend. 9.5 Particulars of write-offs This represents write off against provision amounting to Rs. 55,851 thousand related to domestic advances (2020: Rs. 748,426 thousand). Rupees in ‘000 9.5.1 Against Provisions Directly charged to Profit & Loss account 55,851 – 748,426 – Write offs of Rs. 500,000 and above - Domestic - Overseas Write offs of below Rs. 500,000 55,851 748,426 55,642 – 209 748,426 – – 9.6 Details of loans written off - Rs. 500,000 and above 55,851 748,426 9.7 In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the statement in respect of written off loans or any other financial relief of rupees five hundred thousand or above allowed to a person(s) during the year ended December 31, 2021 is given in Annexure - I. Amounts charged off - Agriculture financing This represents agriculture loans charged off as per time based criteria prescribed by the State Bank of Pakistan in Annexure II of Regulation R - 11 of Prudential Regulations for Agriculture Financing. Rupees in ‘000 10. FIXED ASSETS Capital work-in-progress Property and equipment Right of use asset - IFRS 16 Note 10.1 10.2 10.4 10.1 This represents civil works in progress during the year. 178 20212020 Askari Bank Limited 20212020 111,038 13,613,907 6,454,277 164,343 13,666,587 7,401,820 20,179,222 21,232,750
181. 10 .2 Property and equipment 2021 Land - Land - Buildings on Buildings on Renovation Furniture, fixtures Machine and Computer Vehicles Total freehold leasehold freehold land leasehold land of premises and office equipment equipment Rupees in ‘000 equipment As at January 1, 2021 Cost / Revalued Amount 3,737,140 5,815,489 1,228,823 996,238 3,936,670 Accumulated Depreciation – – 481,313 479,254 3,350,547 Net book value 1,663,906 831,787 3,592,039 2,619,928 3,063,566 2,654,218 183,582 133,819 24,217,453 10,550,866 586,123 832,119 972,111 409,348 49,763 13,666,587 Year ended December 31, 2021 Opening net book value 3,737,140 5,815,489 747,510 516,984 586,123 Additions – – – – 159,567 Transfers from non banking assets 137,350 - 1,449 – – Disposals – – – – (579) Depreciation charge – – (36,567) (25,303) (257,291) Other adjustments / transfers – – – (7,945) (142) 832,119 140,268 – (5,216) (151,012) 360 972,111 218,671 – (3,959) (312,009) (2,040) 409,348 232,704 – (165) (168,759) 2,103 49,763 13,666,587 47,112 798,322 – 138,799 (2,379) (12,298) (18,897) (969,838) – (7,664) Closing net book value 487,678 816,519 872,774 475,231 75,599 13,613,907 As at December 31, 2021 Cost / Revalued Amount 3,874,490 5,815,489 1,230,272 989,962 2,766,078 Accumulated Depreciation – – 517,880 506,226 2,278,400 1,774,926 958,407 3,758,220 2,885,446 3,148,685 2,673,454 208,806 133,207 23,566,927 9,953,020 13,613,907 Net book value Rate of depreciation (percentage) 3,737,140 3,874,490 5,815,489 5,815,489 747,510 712,392 516,984 483,736 3,874,490 5,815,489 712,392 483,736 487,678 816,519 872,774 475,231 75,599 – – 5 5 20 10-20 10-20 20 20 2020 Land - Land - Buildings on Buildings on Renovation Furniture, fixtures Machine and Computer Vehicles Total freehold leasehold freehold land leasehold land of premises and office equipment equipment Rupees in ‘000 equipment As at January 1, 2020 Cost / Revalued Amount 3,226,062 4,797,275 1,228,823 995,261 3,757,084 Accumulated Depreciation – – 442,905 450,697 3,076,798 3,226,062 680,286 220,603 173,510 22,170,700 9,902,672 696,208 1,065,430 425,191 47,093 12,268,028 Net book value Year ended December 31, 2020 Opening net book value 3,226,062 4,797,275 785,918 544,564 680,286 Additions – – – – 228,169 Movement in surplus on assets revalued during the year 511,078 1,018,214 – – – Disposals – – – – (3,335) Depreciation charge – – (38,408) (27,580) (318,997) Other adjustments / transfers – – – – – 696,208 278,580 1,065,430 278,394 425,191 171,239 47,093 23,045 12,268,028 979,427 – (4,562) (140,903) 2,796 – (1,197) (370,526) 10 – (163) (186,392) (528) – – (20,375) – 1,529,292 (9,257) (1,103,181) 2,278 Closing net book value 516,984 586,123 832,119 972,111 409,348 49,763 13,666,587 As at December 31, 2020 Cost / Revalued Amount 3,737,140 5,815,489 1,228,823 996,238 Accumulated Depreciation – – 481,313 479,254 3,936,670 3,350,547 1,663,906 831,787 3,592,039 2,619,928 3,063,566 2,654,218 183,582 133,819 24,217,453 10,550,866 Net book value 49,763 13,666,587 Rate of depreciation (percentage) 747,510 544,564 3,048,429 2,623,238 5,815,489 785,918 3,425,162 2,359,732 3,737,140 4,797,275 1,472,000 775,792 3,737,140 5,815,489 747,510 516,984 586,123 832,119 972,111 409,348 – – 5 5 20 10-20 10-20 20 20 Land - Land - Buildings on Buildings on Renovation Furniture, fixtures Machine and Computer Vehicles Total freehold leasehold freehold land leasehold land of premises and office equipment equipment Rupees in ‘000 equipment 10.2.1 Cost of fully depreciated property and equipment still in use of the Group 2021 2020 – – – – 1,628,503 413,174 1,771,917 2,279,605 101,687 6,194,886 – – – – 2,224,980 367,583 1,371,822 2,080,043 80,721 6,125,149 Annual Report 2021 179
182. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 10.3 Disposal of assets to related parties: Book Sale Mode Particular of assets Cost Value Proceed Disposal Particular of Purchaser Rupees in ‘000 Vehicle Machine and equipment Computer equipment Furniture, fixtures and office equipment Vehicle Furniture, fixtures and office equipment Machine and equipment Vehicle 2,970 1,727 149 185 1,720 33 197 1,907 1,287 1,106 62 – – 29 170 1,123 1,287 As per Group’s Policy 1,106 -do- 62 -do- – -do- 1,975 -do- 29 -do- 170 -do- 1,123 -do- Rupees in ‘000 Mr. Abid Sattar - Ex - President & CE Mr. Abid Sattar - Ex - President & CE Mr. Abid Sattar - Ex - President & CE Mr. Khurram Mughal - Key Management Personnel Mr. Shahid Alam Siddiqui - Key Management Personnel Mr. Pervez Shahbaz Khan - Ex - Key Management Personnel Mr. Pervez Shahbaz Khan - Ex - Key Management Personnel Mr. Muhammad Irfan - Ex - CEO of ASL 20212020 10.4 Right of use assets Opening balance Additions Depreciation Other adjustments (including termination) 7,401,820 499,359 (1,342,713) (104,189) 7,316,960 1,597,508 (1,498,351) (14,297) Closing balance 6,454,277 7,401,820 10.5 Freehold and leasehold land were revalued by the valuers approved by the Pakistan Banks’ Association on December 31, 2020. The valuation was carried out by M/s SMASCO on the basis of their professional assessment of the present market value, which resulted in increase of Rs. 1,529,292 thousand. The total surplus against revaluation of freehold and leasehold land as at December 31, 2021 amounts to Rs. 5,205,916 thousand. Had the freehold and leasehold land not been revalued, the total carrying amounts of revalued properties as at December 31, 2021 would have been Rs. 4,484,063 thousand (2020: Rs. 4,408,450 thousand). Rupees in ‘000 Note 11. INTANGIBLE ASSETS Software 11.1 Pakistan Mercantile Exchange - Membership Card Trading Right Entitlement Certificates Less: Provision against intangibles 949,243 2,500 12,426 (11,151) 778,480 2,500 12,426 (4,660) Capital work in progress 953,018 235,967 788,746 370,111 11.1Software 1,188,985 1,158,857 As at January 1, Cost Accumulated amortization 2,658,212 1,879,732 2,329,806 1,645,655 Net book value 778,480 684,151 778,480 684,151 396,139 (44,292) (181,321) 237 321,660 – (227,421) 90 949,243 778,480 Year ended December 31, Opening net book value Additions - directly purchased Charged off Amortization charge Other adjustments / transfers 180 20212020 Closing net book value Askari Bank Limited
183. Rupees in ‘000 As at December 31, Cost Accumulated amortization 20212020 2,425,825 1,476,582 2,658,212 1,879,732 Net book value 949,243 778,480 Rate of amortization (percentage) 10-20 10-20 Useful life 5-10 years 5-10 years 11.1.1Cost of fully amortized intangible assets still in use of the Group amounts to Rs. 1,073,017 thousand (2020: Rs. 310,125 thousand). 2021 At January 1, Recognized in Rupees in ‘000 2021 P&L A/C 12. DEFERRED TAX ASSETS Deductible Temporary Differences on - Post retirement employee benefits - Accelerated tax depreciation - Deficit on revaluation of investments - Provision against advances Recognized in At December 31, OCI 2021 34,162 31,649 (36,484) 1,568,007 – 69,472 – 302,130 (9,499) – 3,202,260 – 24,663 101,121 3,165,776 1,870,137 1,597,334 371,602 3,192,761 5,161,697 At January 1, Recognized in Rupees in ‘000 2020 P&L A/C 2020 Recognized in At December 31, OCI 2020 Deductible Temporary Differences on - Post retirement employee benefits - Accelerated tax depreciation - Impact under IFRS 9 related to WBB - Provision against advances 9,971 (36,254) 3,934 1,568,007 – 67,903 – – - Impact under IFRS 9 related to WBB 1,545,658 117,937 67,903 – 20,257 (117,937) 1,633,818 – Taxable Temporary Differences on - Surplus on revaluation of investments 1,663,595 67,903 (97,680) 1,633,818 (862,641) (36,484) 2,489,752 (960,321) 1,597,334 826,157 – 67,903 24,191 – (3,934) – 34,162 31,649 – 1,568,007 Annual Report 2021 181
184. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 13. Note 20212020 OTHER ASSETS Income / mark-up accrued in local currency - net of provision 13.1 Income / mark-up accrued in foreign currencies Advances, deposits, advance rent and other prepayments Advance taxation (payments less provisions) Non banking assets acquired in satisfaction of claims 13.3 Due from State Bank of Pakistan Mark to market gain on forward foreign exchange contracts - net Stationery and stamps in hand Dividend receivable 13.2 Acceptances Switch fee receivable Others 18,861,858 694,389 547,562 6,226,607 1,446,968 667,793 17,403,537 558,371 580,679 6,101,241 2,426,242 – 341,824 74,065 1,221 14,601,271 359,687 538,764 – 99,829 7,365 11,829,891 – 781,464 Less: Provision held against other assets 13.4 44,362,009 (175,846) 39,788,619 (209,778) Other assets - net of provision 44,186,163 39,578,841 Surplus on revaluation of non-banking assets acquired in satisfaction of claims 1,719,889 2,442,972 Other assets - total 45,906,052 42,021,813 13.1 This balance is net of interest in suspense amounting to Rs. 10,474,504 thousand (2020: Rs. 10,139,320 thousand). 13.2 This balance is net of dividend in suspense amounting to Rs. 81,020 thousand (2020: Rs. 81,020 thousand). Rupees in ‘000 20212020 13.3 Market value of Non-banking assets acquired in satisfaction of claims 3,166,857 4,869,214 The Group’s non-banking assets were revalued by the valuers approved by the Pakistan Banks’ Association on December 31, 2021. The latest valuation was carried out by M/s SMASCO on the basis of their professional assessment of the present market value. The total surplus arisen against revaluation of non-banking assets acquired in satisfaction of claims as at December 31, 2021 amounts to Rs 1,719,889 thousand. 182 Askari Bank Limited
185. Rupees in ‘000 20212020 13.3.1Non-banking assets acquired in satisfaction of claims Opening balance Additions Revaluation Disposals Transfers to freehold land and building Adjustments Depreciation 4,869,214 – 168,662 (1,704,907) (138,799) (1,721) (25,592) 4,775,172 24,764 299,944 (656,376) – 476,948 (51,238) Closing balance 13.3.2Gain on disposal of non-banking assets acquired 3,166,857 4,869,214 in satisfaction of claims Disposal proceeds Less - carrying Value 1,722,458 (1,704,907) 13.4 Gain 17,551 12,502 Provision held against other assets Advances, deposits, advance rent and other prepayments Stationery and stamps in hand Others 4,838 – 171,008 4,838 2,285 202,655 13.4.1Movement in provision held against other assets 175,846 209,778 Opening balance 209,778 238,089 Charge for the year Reversals for the year 416 (34,348) 314 (637) Reversal on disposal Amount written off (33,932) – – (323) (15,952) (12,036) 14 Closing balance 175,846 209,778 In Pakistan 10,235,374 12,629,996 668,878 (656,376) BILLS PAYABLE Annual Report 2021 183
186. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note 20212020 15.BORROWINGS Secured Borrowings from the State Bank of Pakistan under: Export refinance scheme 15.1.1 Long term financing facility 15.1.2 Financing facility for storage of agricultural produce 15.1.3 Renewable energy financing facility 15.1.4 Credit guarantee scheme for women entrepreneurs Payment of wages and salaries 15.1.5 Temporary economic relief 15.1.6 Modernisation of SME Combating COVID-19 15.1.7 20,497,570 9,725,125 73,853 3,672,929 606 7,485,233 5,506,824 10,743 279,357 16,903,776 8,499,073 76,399 579,231 1,568 12,583,566 – – – Repurchase agreement borrowings State Bank of Pakistan 15.1.8 Financial institutions 15.1.9 47,252,240 38,643,613 32,000,000 18,910,076 7,000,000 23,042,628 Refinance from Pakistan Mortgage Refinance Company 15.1.10 50,910,076 2,372,387 30,042,628 1,923,886 Total secured Unsecured Call borrowings 15.1.11 Financial institutions Overdrawn nostro accounts 100,534,703 70,610,127 21,713,480 970,824 344,754 10,276,937 3,276,605 – 23,029,058 13,553,542 Total unsecured 123,563,761 84,163,669 15.1.1This facility is secured against demand promissory note executed in favor of the SBP. The effective mark-up rate is 1% to 2% (2020: 1% to 2%) per annum payable on a quarterly basis. 15.1.2This facility is secured against demand promissory note executed in favor of the SBP. The effective mark-up rate is 0.5% to 8.4% (2020: 2% to 8.4%) per annum payable on a quarterly basis. 15.1.3These are secured against demand promissory note and carry mark-up of 2% (2020: 2%) per annum and have maturities up to May 2024. 15.1.4These are secured against demand promissory note and carry mark-up of 2% to 3% (2020: 2% to 3%) per annum and have maturities up to October 2033. 15.1.5These are secured against demand promissory note and carry mark-up of up to 2% (2020: 0.4% to 2%) per annum and have maturities up to April 2023 15.1.6These are secured against demand promissory note and carry mark-up of 1% per annum payable on quarterly basis and have maturities up to October 2031. 15.1.7These are secured against demand promissory note and carry NIL mark-up and have maturities up to March 2026. 15.1.8These are secured against collateral of Government Securities and carry mark-up of 9.91% to 9.96% (2020: 7.05%) per annum and have maturities up to 6 months (2020: 3 month). The market value of securities given as collateral is given in note 8.2.1. 184 Askari Bank Limited
187. 15 .1.9These are secured against collateral of Government Securities and carry markup of 0.88% to 10.65% (2020: 1.23% to 7%) per annum and have maturities up to 3 months (2020: 3 months). The market value of securities given as collateral is given in note 8.2.1. 15.1.10This is secured against mortgage finance portfolio of the Group and carry mark-up of 6% to 8.5% (2020: 8.57% to 10.71%) per annum and has maturity up to 2031 (2020: up to 2023). 15.1.11These carry mark-up rate of 1.15% to 10.25% (2020: 0.8% to 7.50%) per annum and having maturity up to 1 month (2020: up to 5 months). Rupees in ‘000 20212020 15.2 Particulars of borrowings with respect to currencies In local currency In foreign currencies 102,888,997 20,674,764 68,940,191 15,223,478 16. DEPOSITS AND OTHER ACCOUNTS 123,563,761 84,163,669 20212020 Rupees in ‘000 In local currency In foreign Total currencies In local currency Customers Current accounts 282,967,438 24,864,069 307,831,507 228,444,308 Savings deposits 447,108,954 50,866,257 497,975,211 388,092,120 Fixed deposits 183,802,414 18,794,731 202,597,145 90,069,109 913,878,806 Financial Institutions Current accounts 1,228,216 Savings deposits 1,885,486 Fixed deposits 3,581,709 6,695,411 920,574,217 94,525,057 1,008,403,863 706,605,537 In foreign currencies Total 21,780,570 250,224,878 48,085,995 436,178,115 7,058,608 97,127,717 76,925,173 783,530,710 62,980 – – 1,291,196 1,885,486 3,581,709 976,401 1,250,989 5,170,000 54,187 – – 1,030,588 1,250,989 5,170,000 62,980 6,758,391 7,397,390 54,187 7,451,577 94,588,037 1,015,162,254 714,002,927 76,979,360 790,982,287 Rupees in ‘000 20212020 16.1 Composition of deposits - Individuals - Government (Federal and Provincial) - Public Sector Entities - Banking Companies - Non-Banking Financial Institutions - Private Sector 336,699,027 326,650,675 86,068,562 448 7,025,757 258,717,785 295,671,457 257,514,945 63,778,517 102 7,656,072 166,361,194 1,015,162,254 790,982,287 16.2 Total deposits include eligible deposits of Rs. 404,645,277 thousand (2020: Rs. 359,362,370 thousand), to be covered under the Deposit protection Insurance arrangement, as required by the Deposit Protection Corporation (a subsidiary of SBP) vide circular no. 04 of 2018 dated June 22, 2018. Annual Report 2021 185
188. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 17. SUBORDINATED DEBTS Term Finance Certificates - VI (ADT-1) Term Finance Certificates - VII 20212020 6,000,000 6,000,000 6,000,000 6,000,000 12,000,000 12,000,000 17.1 The Group has raised unsecured subordinated loans through issuance of Term Finance Certificates to improve the Group’s capital adequacy. Liability to the TFC holders is subordinated to and rank inferior to all other indebtedness of the Group including deposits and is not redeemable before maturity without prior approval of the SBP. The salient features of outstanding issues are as follows: 186 Term Finance Certificates - VI (ADT-1) Term Finance Certificates - VII Outstanding amount Rupees in ‘000 6,000,000 6,000,000 Issue amount Rupees 6,000 million Rupees 6,000 million Issue date July 03, 2018 March 17, 2020 Maturity date Perpetual March 16, 2030 Rating AA- AA Security Unsecured Unsecured Listing Listed Listed Profit payment frequency Payable six monthly Payable quarterly Redemption Perpetual 109-120th month: 100% Profit rate Base Rate plus 1.50% Base Rate plus 1.20% Base Rate is the simple average of the ask rate of six month KIBOR prevailing on the base rate setting date. Base Rate is the simple average of the ask rate of three month KIBOR prevailing on the base rate setting date. Call option Exercisable after 60 months from the date of issue subject to approval by the SBP. Exercisable after 60th month from the date of issue subject to approval by the SBP. Lock-in-clause Payment of profit will be subject to the condition that such payment will not result in breach of the Group’s regulatory Minimum Capital Requirement or Capital Adequacy Ratio set by SBP from time to time. Any inability to exercise lock-in clause or the non-cumulative features will subject these As per the lock-in requirement for Tier II Issues, neither profit nor principal will be payable (even at maturity) in respect of the TFC, if such payment will result in a shortfall or increase in an existing shortfall in the Group’s Leverage Ratio or Minimum Capital Requirement or Capital Adequacy Ratio. TFCs to mandatory conversion into common shares / write off at the discretion of SBP. That is, any payment (profit and/or principal) in respect of the TFC would be made, subject to the Group being in compliance with the requirement of Leverage Ratio or Minimum Capital Requirement or Capital Adequacy Ratio. Askari Bank Limited
189. Loss absorption clause Rupees in ‘000 Term Finance Certificates - VI (ADT-1) Term Finance Certificates - VII The Instrument will be subject to loss absorption and / or any other requirements of SBP upon the occurrence of a Point of Non-Viability event as per Section A-53 of Annexure 5 of the Circular, which stipulates that SBP may, at its option, fully and permanently convert the TFCs into common shares of the issuer and / or have them immediately written off (either partially or in full). Number of shares to be issued to TFC holders at the time of conversion will be equal to the ‘Outstanding Value of the TFCs’ divided by market value per share of the Group’s common share on the date of As per Loss Absorbency Clause requirement for Tier II capital purpose, the instrument will be subject to loss absorbency and/or any other requirements under SBP’s instructions on the subject. Upon the occurrence of a Point of Non-Viability event as defined under SBP BPRD Circular # 6 of 2013, SBP may at its option, fully and permanently convert the TFCs into common shares of the Group and/or have them immediately written off (either partially or in full). Number of shares to be issued to TFC holders at the time of conversion will be equal to the ‘Outstanding Face Value of the TFCs’ divided by market trigger event as declared by SBP, subject to a specified cap. value per share of the Group’s common share on the date of trigger of Point of NonViability (PONV) as declared by SBP subject to a cap of 245,042,630 shares. Note 18. OTHER LIABILITIES Mark-up / return / interest payable in local currency Mark-up / return / interest payable in foreign currencies Unearned commission and income on bills discounted Accrued expenses 18.1 Advance payments Acceptances Dividend payable Mark to market loss on forward foreign exchange contracts Branch adjustment account Payable to defined benefit plan Provision for employees’ compensated absences Security deposit against lease / Ijarah financing Levies and taxes payable Workers’ Welfare Fund Switch fee payable Provision against off-balance sheet obligations 18.2 Lease liability against ROU assets as per IFRS - 16 Leases Islamic pool management reserve Others 20212020 4,528,899 275,197 2,293,929 2,960,239 396,609 14,601,271 204,537 – 361,638 282,866 703,222 4,395,134 353,223 428,583 – 1,143,768 7,393,878 51,630 1,951,735 3,793,829 217,522 1,726,572 2,275,359 349,092 11,829,891 157,439 228,034 753,774 313,295 681,402 4,169,841 381,105 215,099 665,449 100,356 8,223,995 – 2,347,380 42,326,358 38,429,434 18.1 This includes provision against severance cost and related charges amounting to Rs. 1,246,395 thousand (2020: Rs. 750,000 thousand). Annual Report 2021 187
190. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 20212020 18.2 Provision against off-balance sheet obligations Opening balance Exchange adjustment 100,356 163 101,154 49 Charge for the year Reversal for the year 1,043,249 – – (847) Net charge 1,043,249 (847) 19. Closing balance 1,143,768 100,356 SHARE CAPITAL 19.1 Authorized capital 2021 2020 20212020 Number of sharesRupees in ‘000 2,000,000,000 2,000,000,000 Ordinary shares of Rs. 10 each 20,000,000 20,000,000 19.2 Issued, subscribed and paid up capital 2021 2020 Number of shares 514,689,096 514,689,096 717,297,769 717,297,769 28,273,315 28,273,315 1,260,260,180 20212020 Ordinary shares of Rs. 10 each: Rupees in ‘000 Fully paid in cash Issued as bonus shares Issued on Askari Leasing Limited merger 1,260,260,180 Number of shares 5,146,891 7,172,978 5,146,891 7,172,978 282,733 282,733 12,602,602 12,602,602 20212020 19.3 Composition of shares held by the Fauji Consortium is as follows: Fauji Foundation Fauji Fertilizer Company Limited Fauji Fertilizer Bin Qasim Limited 90,629,884 543,768,024 271,884,009 90,629,884 543,768,024 271,884,009 906,281,917 906,281,917 Rupees in ‘000 Note 20. SURPLUS ON REVALUATION OF ASSETS - NET OF TAX Surplus / (deficit) on revaluation of: - Available for sale securities - Fixed assets - Non-banking assets acquired in satisfaction of claims 8.1 20.1 20.2 Deferred tax asset / (liability) on (deficit) / surplus on revaluation of: - Available for sale securities 188 Askari Bank Limited 20212020 (8,103,605) 5,205,916 1,719,889 120,288 5,144,180 2,442,971 (1,177,800) 7,707,439 3,165,776 1,987,976 (36,484) 7,670,955
191. Rupees in ‘000 Note 20212020 20.1 Surplus on revaluation of fixed assets Surplus on revaluation of fixed assets as at January, 1 Recognized during the year Surplus on non-banking assets transferred to owned property 5,144,180 – 61,736 3,614,888 1,529,292 – Surplus on revaluation of fixed assets as at December, 31 5,205,916 5,144,180 Surplus on revaluation as at January, 1 Recognized during the year Realized on disposal during the year Transfer of surplus on non-banking assets to owned property Transferred to unappropriated profit in respect of incremental depreciation charged during the year Adjustment during the year 2,442,971 168,662 (830,008) (61,736) 2,219,829 299,944 (72,135) – – – (14,240) 9,573 21 1,719,889 2,442,971 CONTINGENCIES AND COMMITMENTS - Guarantees - Commitments - Other contingent liabilities 274,886,748 396,110,413 1,095,098 220,222,941 373,621,429 1,151,583 672,092,259 594,995,953 Financial guarantees Performance guarantees Other guarantees 6,015,847 155,588,123 113,282,778 9,952,617 138,751,395 71,518,929 274,886,748 220,222,941 190,672,407 159,457,683 201,560,195 3,639,700 209,279,794 4,625,000 31,295 100,444 34,298 38,678 20.2 Surplus on revaluation of non-banking assets acquired in satisfaction of claims Surplus on revaluation as at December, 31 21.1 21.2 21.3 21.1Guarantees 21.2Commitments Documentary credits and short-term trade-related transactions - letters of credit Commitments in respect of: - forward foreign exchange contracts - non government securities transactions Commitments for acquisition of: - operating fixed assets - intangible assets 21.2.1 21.2.2 Commitments in respect of future contract transactions of equity securities 106,372 185,976 396,110,413 373,621,429 Purchase Sale 117,506,977 84,053,218 118,889,979 90,389,815 The above commitments have maturities falling within one year. 201,560,195 209,279,794 3,639,700 4,625,000 21.2.1Commitments in respect of forward foreign exchange contracts 21.2.2Commitments in respect of non government securities transactions Purchase Annual Report 2021 189
192. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 20212020 21.3 Other contingent liabilities 21.3.1These represent certain claims by third parties against the Group, which are being contested in the Courts of law. Based on legal advice and / or internal assessment, management is confident that the matters will be decided in Group’s favor and the possibility of any outcome against the Group is remote and accordingly no provision has been made in these consolidated financial statements 1,095,098 1,151,583 21.3.2ASL has pledged/hypothecated Trading Right Entitlement Certificate (TREC) of Pakistan Stock Exchange Limited (PSX) at a notional value of Rs. 2.5 million and 3,034,603 shares of ISE Towers REIT Management Co. Ltd aggregating to Rs. 35.63 million against the Base Minimum Capital (BMC) requirement of Rs. 27.25 million as of year end. 21.4 Tax related contingencies are disclosed in note 32.2 to these consolidated financial statements. 22 DERIVATIVE INSTRUMENTS The Group at present does not offer derivative products such as Interest Rate Swaps, Cross Currency Swaps, Forward Rate Agreements or Foreign Exchange Options. The Group’s Treasury and Investment Banking Groups buy and sell derivative instruments such as Forward Exchange Contracts (FECs) and Equity Futures (EFs). 22.1 Forward exchange contracts FECs is a product offered to clients to hedge FX risk. The traders use this product to hedge themselves from unfavorable movements in a foreign currency, however, by agreeing to fix the exchange rate, they do not benefit from favorable movements in that currency. FECs is a contract between the obligor and the Group in which both agree to exchange an amount of one currency for another currency at an agreed forward exchange rate for settlement over more than two business days after the FECs is entered into (the day on which settlement occurs is called the value date). FECs is entered with those obligors whose credit worthiness has already been assessed, and they have underlined trade transactions. If the relevant exchange rate moves un-favorably, the Group will lose money, and obligor will benefit from that movement because the Group must exchange currencies at the FEC rate. In order to mitigate this risk of adverse exchange rate movement, the Group manages its exposure by hedging forward position in inter-bank foreign exchange. 22.2 Equity futures An equity futures contract is a standardized contract, traded on a futures counter of the stock exchange, to buy or sell a certain underlying scrip at a certain date in the future, at a specified price. The Group uses equity futures as a hedging instrument to hedge its equity portfolio against equity price risk. Only selected shares are allowed to be traded on futures exchange as determined by the Exchange. Equity futures give flexibility to the Group either to take delivery on the future settlement date or to settle it by adjusting the notional value of the contract based on the current market rates. Maximum exposure limit to the equity futures is 10% of Tier I Capital of the Group, based on prevailing SBP Regulations. 190 Askari Bank Limited
193. The Risk Management Group monitors the Group ’s exposure in equity futures and forward exchange contracts. Positions in equity futures and forward exchange contracts are marked-to-market. Forward contracts are included in measures of portfolio volatility including Value at Risk (VaR). Forward exchange contracts and equity futures are also included in capital charge and Risk Weighted Asset calculation in accordance with SBP Regulations. The accounting policies used to recognize and disclose derivatives are given in note 4.23. Rupees in ‘000 23. Note 20212020 MARK-UP / RETURN / INTEREST EARNED On: Loans and advances Investments Lendings to financial institutions Balances with banks Securities purchased under resale agreements 32,688,171 44,316,288 111,572 9,378 444,034 38,976,281 39,438,002 223,621 85,804 394,612 24. MARK-UP / RETURN / INTEREST EXPENSED 77,569,443 79,118,320 Deposits Borrowings Subordinated debts Cost of foreign currency swaps against foreign currency deposits / borrowings Interest expense on lease liability against ROU assets 36,927,485 3,953,230 1,069,673 40,633,248 3,915,115 1,619,010 2,295,223 894,286 1,783,189 891,977 45,139,897 48,842,539 25. FEE AND COMMISSION INCOME Branch banking customer fees Consumer finance related fees Card related fees (debit and credit cards) Credit related fees Investment banking fees Commission on trade Commission on guarantees Commission on remittances including home remittances Commission on Bancassurance Others 672,049 112,553 1,168,379 240,649 171,588 919,680 910,277 247,018 105,325 237,750 510,681 109,946 1,000,077 206,644 221,218 687,066 676,367 262,892 92,887 223,507 26. GAIN ON SECURITIES 4,785,268 3,991,285 814,724 2,555,400 Federal Government Securities Shares Non Government Debt Securities 647,146 164,578 3,000 2,104,861 439,526 11,013 814,724 2,555,400 Realized 26.1 Realized gain on: 26.1 Annual Report 2021 191
194. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note 27. OTHER INCOME Rent on property Gain on sale of fixed assets Rent of lockers Gain on sale of non-banking assets 27.1 Recovery of expenses from customers Government Grant - foreign branch Loss termination of lease contracts under IFRS - 16 Leases Gain on acquisition of non controlling interest in subsidiary 20212020 27.1 Gain on sale of non-banking assets 23 20,501 50,572 17,551 313,721 – (250) – 22 23,768 46,279 12,502 252,213 6,354 (81) 8,381 402,118 349,438 2021 Cost Name of buyer Revalued amount Cash received Gain on sale Mode of disposal Rupees ‘000 M/s S.H. Haq Noor & Co. Mr. Abid Ali M/s DHA Islamabad 252,250 300,000 315,000 15,190 23,449 26,000 608,900 1,381,458 1,381,458 15,000 2,551 – 876,340 1,704,907 1,722,458 17,551 Buy-back Tender Tender 2020 Cost Name of buyer Cash received Gain on sale Mode of disposal Buy-back Tender Buy-back Rupees ‘000 M/s Synergy Paper & Board Mills (Private) Limited Mr. Muhammad Idrees M/s Al Rehmat Traders 387,952 140,500 55,789 413,447 147,500 95,429 413,452 147,500 107,926 5 – 12,497 584,241 656,376 668,878 12,502 192 Revalued amount Askari Bank Limited
195. Rupees in ‘000 28. OPERATING EXPENSES Total compensation expenses Note 11,810,712 11,623,029 Rent and taxes Insurance Utilities cost Security (including guards) Repair & maintenance Depreciation on ROU assets Depreciation 125,222 87,074 710,562 515,542 281,484 1,342,713 318,708 110,080 105,180 695,782 525,707 270,670 1,498,351 383,658 Information technology expense 3,381,305 3,589,428 Software maintenance Hardware maintenance Depreciation Amortization Network charges 436,397 47,020 167,305 181,321 240,815 334,099 59,947 185,944 227,421 221,163 Other operating expenses 1,072,858 1,028,574 68,513 7,453 201,209 480,657 111,557 77,642 304,916 530,849 270,819 127,701 390,527 31,934 223,225 483,825 315,547 6,572 574,980 32,324 512,251 25,656 5,823 205,866 92,496 94,541 74,157 305,785 550,085 285,923 148,803 112,390 29,609 235,773 533,579 256,601 21,828 463,138 – 534,889 4,752,501 3,976,942 21,017,376 20,217,974 28.1 20212020 Property expense Directors’ fees, allowances Fees and allowances to Shariah Board Rates, taxes, insurance etc. Legal and professional charges Brokerage and commission NIFT clearing charges Repair and maintenance Communications Stationery and printing Marketing, advertisement and publicity Donations 28.2 Auditors’ remuneration 28.3 Travelling, conveyance and entertainment Depreciation Security service charges Training and development Premium paid to Deposit Protection Corporation Outsourced service cost 28.4 Other expenditure Annual Report 2021 193
196. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Note 20212020 28.1 Total compensation expenses Managerial remuneration i) Fixed ii)Variable - Cash bonus / awards etc. 4,662,046 4,423,732 1,333,157 1,241,441 Charge for defined benefit plans 28.1.1 Contribution to defined contribution plan 37 Rent and house maintenance Utilities Medical Conveyance Other staff cost 28.1.2 5,995,203 396,977 314,518 1,911,671 416,679 676,067 1,443,311 656,286 5,665,173 469,441 294,940 1,801,560 392,731 633,741 1,263,303 1,102,140 11,810,712 11,623,029 28.1.1This includes charge for defined benefit plan and compensated absences. 28.1.2This mainly includes staff incentives, allowances, health coverage and provision for severance etc. 28.2 This represents: Group’s contribution amounting to Rs. 376,223 thousand (2020: Rs. 109,000 thousand) for Fauji Foundation Group CSR activities where common directors interest is limited to the extent of their employment with Fauji Foundation; Cost of vehicle and laptop amounting to Rs. 7,004 thousand (2020: Rs. 3,390 thousand) donated to DC Office Gawadar; and Contribution amounting to Rs. 7,300 thousand made to District Administration Gawadar for development of Model Village. Rupees in ‘000 20212020 28.3 Auditors’ remuneration Statutory auditors of the Bank Audit fee Special certifications, half year review, audit of consolidated financial statements and sundry advisory services Tax services 4,500 4,100 7,735 15,000 7,560 13,500 Auditors of Wholesale Bank Branch, Bahrain Audit fee 27,235 25,160 3,581 3,186 Statutory auditors of ASL Audit fee Other assurance and non assurance services Out of pocket expenses 30,816 28,346 600 463 55 550 663 50 1,118 1,263 Total 31,934 29,609 28.4 This represents expenses relating to outsourced activities amounting to Rs. 32,324 thousand (2020: Nil) pertaining to the payment to companies incorporated in Pakistan. 194 Askari Bank Limited
197. Rupees in ‘000 Note 20212020 29. WORKERS’ WELFARE FUND Opening balance Charge for the year 215,099 213,484 172,117 42,982 30. 31. Closing balance 428,583 215,099 This represents penalties imposed by the State Bank of Pakistan. PROVISIONS AND WRITE OFFS - NET Provision for diminution in value of investments 8.3.1 Provision against loans and advances 9.4 Reversal of provision against other assets 13.4.1 Provision / (reversal) of provision against intangible assets Provision / (reversal) against off-balance sheet obligations 18.2 Provision against cash and bank balances Recovery of written off / charged off bad debts 203,298 3,875,215 (33,932) 465,861 1,628,470 (323) 6,491 (5,206) 1,043,249 2 (110,379) (847) – (113,208) 32.TAXATION 4,983,944 1,974,747 Current Prior Years Deferred 6,258,135 51,927 (353,594) 7,045,975 – (67,903) 5,956,468 6,978,072 Profit before taxation 15,672,201 17,835,069 Tax at applicable tax rate of 39 percent (2020: 39 percent) Effect of: - Prior years - Others 6,112,149 6,955,677 51,927 (207,608) – 22,395 32.2 Tax status 5,956,468 6,978,072 32.1 Relationship between tax expense and accounting profit i) The Bank has filed tax returns for and up to tax year 2021. The assessments for and up to tax year 2020 were amended by the tax authorities creating accumulated additional tax demand, mainly in the matters of admissibility of recoveries against doubtful debts for Rs. 1,086 million, provision for diminution in the value of investments for Rs. 2,197 million, bad debts written off for Rs. 127.53 million, provision for substandard advances for Rs. 74.95 million, Provision against other assets/fixed assets for Rs. 109.43 million, disallowance of employee benefit expenses Rs. 330.87 Million and Other disallowances of expenses/credits for Rs. 180.08 million. Bank’s Appeals against these orders are currently pending before Commissioner Appeals, Appellate Tribunal and Islamabad High Court. The management and tax advisor of the Bank are confident that these matters will be decided in favor of the Bank and consequently no provision has been made thereon. Tax payments by the Bank against certain matters are being carried forward as receivable, as management and tax advisor of the Bank are confident of their realization. Annual Report 2021 195
198. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 ii) Consequent upon the amalgamation with and into the Bank, the outstanding tax issues relating to Askari Leasing Limited (ALL) are as follows: Tax returns of ALL have been filed for and up to tax year 2010. The returns for the tax years 2003 to 2010 were amended by the tax authorities mainly in the matter of admissibility of initial allowance claimed on leased vehicles. On appeals filed by ALL, partial relief was provided by the CIR(A) by allowing initial allowance on commercial vehicles. Re-assessment has not yet been carried out by the tax department. A tax demand is however not likely to arise after re-assessment. For and up to the assessment years 2002-2003, reference applications filed by the tax authorities in the matter of computation of lease income are pending decisions by the High Court. However the likelihood of an adverse decision is considered low due to a favorable decision of the High Court in a parallel case. 33. BASIC AND DILUTED EARNINGS PER SHARE Profit for the year - Rupees in ‘000 20212020 9,715,733 10,846,333 1,260,260,180 1,260,260,180 Basic and diluted earnings per share - Rupees 7.71 8.61 Weighted average number of Ordinary Shares - numbers There is no dilutive effect on the basic earnings per share of the Group, therefore dilutive earnings per share have not been presented separately. Rupees in ‘000 34. CASH AND CASH EQUIVALENTS Cash and balances with treasury banks Balances with other banks 89,432,245 3,556,223 73,651,718 8,196,153 92,988,468 81,847,871 2021 Liabilities Rupees in ‘000 Subordinated loan 34.1 Balances as at January 01, 2021 12,000,000 Changes from financing cash flows Payment of lease liability Dividend paid 196 20212020 Lease liability Dividend payable 8,223,995 157,439 – – (1,965,692) – – (3,733,683) – (1,965,692) (3,733,683) Other changes Additions / renewals of leases Interest expense on lease liability against ROU assets Other adjustments (including termination) Final cash dividend for the year ended December 31, 2020 – – – – 507,715 894,286 (266,426) – – – – 3,780,781 – 1,135,575 3,780,781 Balances as at December 31, 2021 7,393,878 204,537 Askari Bank Limited 12,000,000
199. 2020 Liabilities Rupees in ‘000 Balances as at January 01, 2020 Changes from financing cash flows Issuance of subordinated debt Redemption of subordinated debt Payment of lease liability Dividend paid Subordinated loan Other changes Additions / renewals of leases Interest expense on lease liability against ROU assets Other adjustments (including termination) Final cash dividend for the year ended December 31, 2019 Dividend payable 9,992,000 7,358,016 6,000,000 (3,992,000) – – – – (1,549,511) – – – – (1,871,397) (1,549,511) (1,871,397) Lease liability 2,008,000 – – – – 138,446 1,597,508 891,977 (73,995) – – – – 1,890,390 – 2,415,490 1,890,390 12,000,000 8,223,995 157,439 20212020 Number of employees 35. STAFF STRENGTH Permanent On Bank’s contract 6,737 789 7,057 942 Total staff strength 7,526 7,999 Out of total employees, 6 (2020: 6) employees are working abroad. Permanent employees include 48 (2020: 50) employees working for ASL as at December 31, 2021 In addition to the above, 163 domestic employees (2020: Nil) of outsourcing services companies were assigned to the Group as at the end of the year to perform services other than guarding and janitorial services. 36. DEFINED BENEFIT PLAN 36.1 General description The Bank and ASL operates an approved funded gratuity scheme for all its regular employees. Contributions are made in accordance with the actuarial recommendation. The benefits under the gratuity scheme are payable on retirement at the age of 60 years or earlier cessation of service in lump sum. The benefit is equal to one month’s last drawn basic salary for each year of eligible service or part thereof. 36.2 The number of employees covered under the defined benefit scheme of the Bank are 6,658 employees (2020: 6,984 employees) and ASL are 16 employees (2020: 16 employees). 36.3 Principal actuarial assumptions The actuarial valuation was carried out for the year ended December 31, 2021 using “Projected Unit Credit Method”. The main assumptions used for actuarial valuation are as follows: Annual Report 2021 197
200. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Discount rate - per annum Expected rate of increase in salaries - per annum Expected rate of return on plan assets - per annum Duration Mortality rate Rupees in ‘000 20212020 11.75% 11.25% 9.75% 9 years SLIC 2001 - 2005 mortality table 9.75% 9.25% 13.00% 9 years SLIC 2001 - 2005 mortality table 20212020 36.4 Reconciliation of payable to defined benefit plan: Present value of defined benefit obligation Fair value of plan assets 3,678,851 (3,398,564) 3,347,076 (3,036,762) Net liability 280,287 310,314 36.4.1In addition, the net liability in respect of defined benefit plan of ASL is Rs. 2,579 thousand (2020: Rs. 2,984 thousand), expense for the year is Rs. 1,855 thousand (2020: Rs. 1,450 thousand) and effect of remeasurement loss recognized in statement of comprehensive income is Rs. 2,941 thousand (202 Rs. 2,531 thousand). Rupees in ‘000 20212020 36.5 Movement in defined benefit obligations Obligation at beginning of the year Current service cost Past service cost Interest cost Re-measurement (gain) / loss Benefits paid by the Bank Benefits due but not paid 3,347,076 313,143 (23,627) 314,271 (10,500) (247,575) (13,937) 2,733,220 296,539 26,861 345,365 112,312 (153,137) (14,084) Obligation at end of the year 36.6 Movement in fair value of plan assets 3,678,851 3,347,076 Fair value at beginning of the year Interest income on plan assets Actuarial gain on assets Contributions by employer Benefits paid Benefits due but not paid 3,036,762 299,143 13,857 310,314 (247,575) (13,937) 2,816,595 356,203 43,196 – (165,148) (14,084) Fair value at end of the year 36.7 Movement in payable under defined benefit schemes 3,398,564 3,036,762 Opening balance Charge for the year Contribution by the Bank Re-measurement (gain) / loss recognized in OCI during the year - note 36.8.2 310,314 304,644 (310,314) (71,365) 312,562 – (24,357) 69,117 280,287 310,314 198 Closing balance Askari Bank Limited
201. Rupees in ‘000 20212020 36.8 Charge for defined benefit plan 36.8.1Cost recognized in profit and loss Current service cost Past service cost Net interest cost on defined benefit liability 313,143 (23,627) 15,128 296,539 26,861 (10,838) 36.8.2Re-measurements recognized in OCI during the year 304,644 312,562 (Gain) / loss on obligation - Experience adjustment - Demographic assumptions - Financial assumptions (23,223) – 12,723 20,904 37,311 54,098 Actuarial gain on plan assets (10,500) (13,857) 112,313 (43,196) Total re-measurements recognized in OCI 36.9 Components of plan assets (24,357) 69,117 Cash and cash equivalents Government securities Term Finance Certificates Shares Mutual funds Payables 2,438,114 260,000 176,000 87,566 450,988 (14,104) 30,889 2,477,000 156,000 92,801 294,156 (14,084) 3,398,564 3,036,762 In addition to above Rs. 17,562 thousand were kept in cash & cash equivalent (2020: Rs. 6,449 thousand in cash & cash equivalent and Rs. 11,470 thousand in equity) by ASL. The fund of the Bank primarily invested in Government securities which do not carry any credit risk. These are subject to interest rate risk based on market movements. Equity securities are subject to price risk whereas non government debt securities are subject to both credit risk and interest rate risk. These risks are regularly monitored by the Trustees of the employee funds. 36.10Sensitivity analysis Sensitivity analysis is performed by changing only one assumption at a time while keeping the other assumptions constant. Sensitivity analysis of key assumptions is given below: Assumptions Impact on Defined Benefit Obligation Change in assumption Discount rate Salary increase Mortality rate change 36.11Expected charge for the next financial year is Rs. 344,120 thousand. 1.00% 1.00% 1 year Increase in assumption Decrease in assumption Rupees in ‘000 3,384,995 4,017,476 3,680,779 (4,013,899) (3,376,584) 3,677,075 Annual Report 2021 199
202. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 36.12Maturity profile The average duration of defined benefit obligation is 9 years (2020: 9 years). 36.13Funding Policy The Bank and ASL carries out the actuarial valuation of its defined benefit plan on periodic basis using “Projected Unit Credit Method”. Contributions are made annually in accordance with the actuarial recommendation. 36.14Significant risk associated with the staff retirement benefit scheme: 37. Longevity Risks The risk arises when the actual lifetime of retirees is longer than expectation. This risk is measured at the plan level over the entire retiree population. Salary Increase Risk The most common type of retirement benefit is one where the benefit is linked with final salary. The risk arises when the actual increases are higher than expectation and impacts the liability accordingly. Withdrawal Risk The risk of actual withdrawals varying with the actuarial assumptions can impose a risk to the benefit obligation. The movement of the liability can go either way. DEFINED CONTRIBUTION PLAN The Bank operates a recognized provident fund scheme for all its regular employees for which equal monthly contributions are made both by the Bank and by the employees to the fund at the rate of 8.33% of basic salary of the employee. Payments are made to the employees as specified in the rules of the fund. Contribution to the fund made by the Bank and the employees during the year amounts to Rs. 312,404 thousand (2020: Rs. 293,209 thousand) each. The fund covers 6,330 employees (2020: 6,092 employees). ASL operates funded provident fund scheme for all its regular employees for which equal monthly contributions are made by ASL and the employees at the rate of 10% of basic salary of the employee. Contribution to the fund made by ASL and its employees during the year amounts to Rs. 2,114 thousand (2020: Rs. 1,731 thousand) each. 38. COMPENSATED ABSENCES 38.1 General description The Bank and ASL grants compensated absences to all its regular employees as per effective Service Rules. Provisions are recorded in accordance with the actuarial recommendation. Under this unfunded scheme, all employees of Askari Bank Limited are entitled to take 24 days of earned leaves every year which can be accumulated up to a maximum of 45 days. Leave encashment is made on the basis of gross salaries and paid to members on separation from service. 38.2 Principal actuarial assumptions The actuarial valuation was carried out for the year ended December 31, 2021 using “Projected Unit Credit Method”. Present value of obligation as at December 31, 2021 was Rs. 701,725 thousand (2020: Rs. 679,452 thousand). Expense for the year of Rs. 86,644 thousand (2020: Rs. 154,064 thousand) has been included in operating expenses. The main assumptions used for actuarial valuation are as follows: 38.3 200 Discount rate - per annum Expected rate of increase in salaries - per annum Leave accumulation factor - days 20212020 11.75% 11.25% 11 13.00% 9.25% 11 In addition, the net liability in respect of staff compensated absences of ASL is Rs. 1,497 thousand (2020: Rs. 1,950 thousand) and expense for the year is Rs. 3,834 thousand (2020: Rs. 1,365 thousand) Askari Bank Limited
203. 39 . COMPENSATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL 39.1 Total Compensation Expense For the year ended December 31, 2021 Chairman Items Non Executive Directors Members President & Key Other Material Shariah CE Management Risk Takers / Board Personnel Controllers Total Rupees in ‘000 Fees and Allowances etc. Managerial Remuneration i) Fixed 3,450 65,063 ii) Total Variable of which a) Cash Bonus / Awards – – Charge for defined benefit plan – – Contribution to defined contribution plan – – Rent & house maintenance – – Utilities – – Medical – – Conveyance – – Others – – Total Number of Persons 6,950 – – – – – – 503 – 3,450 65,063 7,453 1 11 4 37,071 199,428 157,161 469,123 12,116 3,620 2,837 11,779 2,577 1,545 1,788 38 105,608 31,201 26,317 153,470 35,695 32,117 106,924 41,594 50,484 13,872 12,482 78,475 18,377 16,889 46,545 28,845 43,008 13,709 10,998 63,216 14,741 13,683 58,088 12,711 73,371 465,397 387,315 1,002,049 1 33 48 98 For the year ended December 31, 2020 Chairman Items Non Executive Directors Members President & Key Other Material Shariah CE Management Risk Takers / Board Personnel Controllers Fees and Allowances etc. Managerial Remuneration i) Fixed ii) Total Variable of which a) Cash Bonus / Awards Charge for defined benefit plan Contribution to defined contribution plan Rent & house maintenance Utilities Medical Conveyance Others 875 24,781 – – – – – – – – – – – – – – – – – – 5,400 24,962 177,194 – – – – 5,569 40,990 – 2,033 13,832 – 1,872 10,945 – 10,113 67,883 – 2,247 15,010 – 2,247 14,535 443 – 38,855 – 120 27,912 875 24,781 5,843 1 15 3 Total Rupees in ‘000 Number of Persons 147,632 – 30,882 10,527 10,425 61,531 12,784 12,784 48,780 13,038 380,844 – 77,441 26,392 23,242 139,527 30,041 29,566 88,078 41,070 49,163 407,156 348,383 836,201 1 30 53 103 The President & CE and certain executives of the Bank are provided with bank maintained cars in accordance with their respective entitlements. Others mainly include cost of living allowance (COLA) given to certain executives of the Bank. Total deferred bonus outstanding as at December 31, 2021 for the President & CE, Key Management Personnel and other Material Risk Takers / Material Risk Controllers of the Bank amounts to Rs. 8,824 thousand (2020: Rs. 5,974 thousand). The key management personnel includes the compensation to chief executive of ASL amounting to Rs. 5,796 thousand (2020: Rs. 3,832 thousand) and two executives amounting to Rs. 4,624 thousand (2020: Rs. 5,643 thousand). Annual Report 2021 201
204. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 39.2 Remuneration paid to Directors of the Bank for participation in Board and Committee Meetings 2021 Meeting fees and allowances paid for Board Committees Human resource and Risk Board remuneration management Audit S. No Name of Director meetings committee committee committee Information technology committee Total amount paid – – 480 – – 1,969 – 1,703 972 – – – 3,450 5,938 10,206 4,200 11,918 8,344 9,644 6,094 6,381 1,475 144 719 5,124 68,513 Rupees in ‘000 1 2 3 4 5 6 7 8 9 10 11 12 Mr. Waqar Ahmed Malik Mr. Sarfaraz Ahmed Rehman Dr. Nadeem Inayat Syed Bakhtiyar Kazmi Mr. Manzoor Ahmed Mr. Muhammad Aftab Manzoor Mrs. Zoya Mohsin Nathani Mr. Raja Muhammad Abbas Mr. Mushtaq Malik Lt Gen Tariq Khan HI (M) Retd Mr. Imran Moid Mr. Rehan Laiq Total amount paid 3,450 2,675 3,118 2,100 3,118 2,518 3,118 2,819 3,118 1,475 144 288 – 3,263 2,999 – 3,655 – 4,169 – – – – – – – 911 – 2,129 – 2,357 – 2,291 – – – – – 2,698 2,100 3,016 3,857 – 1,572 – – – 431 27,941 14,086 7,688 13,674 2020 Meeting fees and allowances paid for Board Committees Human resource and Risk Board remuneration management Audit S. No Name of Director meetings committee committee committee Information technology committee Total amount paid Rupees in ‘000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Mr. Waqar Ahmed Malik Lt Gen Syed Tariq Nadeem Gilani HI (M) Retd Mr. Sarfaraz Ahmed Rehman Dr. Nadeem Inayat Mr. Imran Moid Mr. Manzoor Ahmed Mr. Mushtaq Malik Mrs. Zoya Mohsin Nathani Mr. Raja Muhammad Abbas Mr. Muhammad Aftab Manzoor Lt Gen Javed Iqbal HI (M) Retd Lt Gen Tariq Khan HI (M) Retd Mr. Rehan Laiq Mr. Kamal A. Chinoy Syed Ahmed Iqbal Ashraf Brig Saleem Ahmed Moeen SI Retd Total amount paid 875 125 625 1,281 156 1,281 1,281 906 906 906 125 1,000 812 250 250 250 – – 939 1,070 – 1,063 240 1,156 – – 188 – – – 188 – – – – 664 – 531 833 969 – – – – – – – 94 – – – 1,352 – 1,281 146 – – 1,219 94 – 750 – 375 – – – – 194 – – – – 625 656 – – – – – – 875 125 1,564 4,561 156 4,156 2,500 3,031 1,531 2,781 407 1,000 1,562 250 813 344 11,029 4,844 3,091 5,217 1,475 25,656 39.3 Remuneration paid to Shariah Board Members For the year ended December 31, 20212020 Chairman Resident Non-resident Chairman Resident Non-resident Items membermembermembermember 202 Rupees in ‘000 a. Meeting Fees and Allowances b. Managerial Remuneration Fixed c. Fuel – 2,110 – – 2,110 503 – 2,730 – – 1,800 – – 1,800 443 – 1,800 – Total Amount 2,110 2,613 2,730 1,800 2,243 1,800 Total Number of Persons 1 1 2 1 1 1 Askari Bank Limited
205. 40 . FAIR VALUE MEASUREMENTS The fair values of traded investments are based on quoted market prices. The fair values of unquoted equity investments are estimated using the break-up value of the investee company. The fair value of unquoted debt securities, fixed term advances, fixed term deposits and borrowings, other assets and other liabilities cannot be calculated with sufficient reliability due to the absence of a current and active market for such assets and liabilities and reliable data regarding market rates for similar instruments. 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 they are either short-term in nature or, in the case of customer advances, deposits and certain long term borrowings, are frequently repriced. All assets and liabilities for which fair value is measured or disclosed in these consolidated financial statements are categorized within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. 40.1 Fair value of financial assets Level 1: Fair value measurements using quoted prices (unadjusted) in active markets (Pakistan Stock Exchange) for identical assets or liabilities. Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) available at MUFAP and Reuters page. Level 3: Fair value measurements using input for the asset or liability that are not based on observable market data (i.e. unobservable inputs). Valuation techniques used in determination of fair values within level 2 and level 3 Federal Government The fair values of Federal Government Securities are determined on the basis of Securities rates / prices sourced from Reuters. Non Government Non Government Debt Securities are valued on the basis of rates announced by Debt Securities Mutual Fund Association of Pakistan (MUFAP). Foreign Government Foreign Government Debt Securities are valued on the basis of rates taken from Debt Securities custodian of the securities which are usually drawn from Bloomberg. Unit of Mutual Funds Fair values of mutual funds are determined based on their net asset values as published at the close of reporting period. Fixed Assets and Non Land and Non Banking assets acquired in satisfaction of claims are valued on a periodic Banking Assets basis using professional valuers. The valuation is based on their assessments of the market Acquired in value of the assets. The effect of changes in the unobservable inputs used in the valuations Satisfaction of Claims cannot be determined with certainty. Accordingly, a qualitative disclosure of sensitivity has not been presented in these consolidated financial statements Annual Report 2021 203
206. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 The following table provides the fair values of those of the Group financial assets and liabilities that are recognized or disclosed at fair value in these consolidated financial statements: Rupees in ‘000 On balance sheet financial instruments Financial assets - measured at fair value 2021 Carrying / Notional Value Level 1 Level 2 Level 3 Total Investments Federal Government Securities Shares Units of open end mutual funds Fully paid preference shares Non Government Debt Securities Foreign securities 473,847,695 4,179,451 1,510,245 16,051 11,992,197 532,195 4,382,885 469,464,810 4,143,818 35,633 – 1,510,245 16,051 – – 11,992,197 532,195 – – 473,847,695 – 4,179,451 – 1,510,245 – 16,051 – 11,992,197 – 532,195 492,077,834 9,074,949 483,002,885 – 492,077,834 Investments Unlisted shares Federal Government Securities Foreign Securities Cash and balances with treasury banks Balances with other banks Advances Other assets 350,000 120,077,202 3,726,136 89,432,245 3,556,215 477,673,022 35,895,799 – – 12,393,260 106,453,893 3,583,295 – – – – – – – – – – – – 118,847,153 – 3,583,295 – – – – – – – – 730,710,619 15,976,555 106,453,893 – 122,430,448 1,222,788,453 25,051,504 589,456,778 – Financial assets - disclosed but not measured at fair value 614,508,282 Off-balance sheet financial instruments - measured at fair value 204 Forward purchase of foreign exchange Forward sale of foreign exchange Askari Bank Limited 117,506,977 – 736,508 – 736,508 84,053,218 – (394,684) – (394,684)
207. Rupees in ‘000 On balance sheet financial instruments Financial assets - measured at fair value 2020 Carrying / Notional Value Level 1 Level 2 Level 3 Total Investments Federal Government Securities Shares Units of open end mutual funds Fully paid preference shares Non Government Debt Securities Foreign securities 334,820,766 4,493,470 1,436,613 61,945 9,743,656 495,878 – 334,820,766 4,437,365 56,105 – 1,436,613 61,945 – – 9,743,656 495,878 – – 334,820,766 – 4,493,470 – 1,436,613 – 61,945 – 9,743,656 – 495,878 351,052,328 4,995,188 346,057,140 – 351,052,328 Financial assets - disclosed but not measured at fair value Investments Unlisted shares Federal Government Securities Foreign Securities Cash and balances with treasury banks Balances with other banks Advances Other assets 350,000 94,917,945 3,291,714 73,651,718 8,196,147 395,416,055 30,377,973 – 11,683,143 3,159,127 – – – – – 89,787,937 – – – – – – – – 101,471,080 – 3,159,127 – – – – – – – – 606,201,552 14,842,270 89,787,937 – 104,630,207 Off-balance sheet financial instruments - measured at fair value 957,253,880 19,837,458 435,845,077 – 455,682,535 118,889,979 – (2,711,715) – (2,711,715) 90,389,815 – 2,483,681 – 2,483,681 Forward purchase of foreign exchange Forward sale of foreign exchange The Group’s policy is to recognize transfers into and out of the different fair value hierarchy levels at the date the event or change in circumstances that caused such transfer to take place. There were no transfers between levels 1 and 2 during the year. Rupees in ‘000 20212020 Level 3 Level 3 40.2 Non-financial assets carried at revalued amounts Fixed assets Property and equipment (freehold and leasehold land) Other assets 9,689,979 9,552,629 3,166,857 4,869,214 Non-banking assets acquired in satisfaction of claims Annual Report 2021 205
208. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 41. SEGMENT INFORMATION 41.1 Segment details with respect to Business Activities The segment analysis with respect to business activities is as follows: 2021 Rupees in ‘000 206 Branch banking Corporate Treasury banking Consumer banking Islamic Foreign Head office banking operations / others Total 12,779,676 36,485,550 (9,502,656) (31,276,976) 2,659,780 3,696,806 2,642,225 (1,379,999) 488,405 3,716,576 – 454,406 1,417,147 (87,839) 16,512 (1,473,626) 32,429,546 4,093,353 – 300,844 9,547,598 1,345,820 2,920,571 Profit and loss Net mark-up / return / profit Inter segment revenue - net Non mark-up / return / interest income (23,138,002) 38,154,117 1,930,845 Total income 16,946,960 5,936,800 8,905,380 1,750,631 4,170,982 Segment direct expenses Inter segment expense allocation 11,514,501 1,051,525 754,085 868,139 293,661 10,229 1,069,556 164,265 2,329,818 – 119,612 5,239,766 21,320,999 – (2,094,158) – Total expenses 12,566,026 1,622,224 303,890 1,233,821 2,329,818 119,612 3,145,608 21,320,999 (Reversal of provisions) / provisions 307,704 3,599,278 277,761 119,073 642,649 (42,539) 80,018 4,983,944 Profit / (loss) before tax 4,073,230 715,298 8,323,729 397,737 1,198,515 1,268,747 (305,055) 15,672,201 Statement of financial position Cash and bank balances Investments Advances - performing - net of provision Advances - non-performing - net of provision Others 38,294,869 3,233,876 43,286,336 151,401 7,797,848 122,302 – 8,521,775 555,083,246 – 31,274,749 20,725,609 15,233,937 346,926,181 – 21,054,155 69,933,549 14,986,172 463,099 563,226 – 248,084 1,182,984 189,004 538,831 19,513,936 8,897,467 541,821 5,537,167 436,039 101,828 92,988,460 625,793 616,231,172 6,892,631 475,026,625 – 2,646,397 36,970,695 72,435,956 Total assets 54,530,736 378,758,994 607,267,049 44,590,947 1,259,328,610 Borrowings Subordinated debts Deposits and other accounts Net inter segment balances - net Others Total liabilities Equity Total equity and liabilities Contingencies and commitments Askari Bank Limited 1,904,256 40,118,695 42,309,124 – – – 683,963,786 257,131,733 – (642,233,536) 61,032,726 564,466,433 10,896,230 20,475,840 491,492 54,530,736 378,758,994 607,267,049 – – – 54,530,736 378,758,994 607,267,049 5,956,056 446,725,804 204,173,657 21,995,461 115,726,297 36,459,126 41,977,144 2,372,387 16,529,289 20,330,010 – 123,563,761 – – – 12,000,000 12,000,000 4,042 73,585,947 646,139 (169,393)1,015,162,254 18,886,136 11,291,769 12,386,371 (25,829,899) – 732,896 6,452,020 3,096,606 10,416,648 52,561,732 21,995,461 107,859,025 36,459,126 – 7,867,272 – 21,995,461 115,726,297 36,459,126 16,278 13,885,398 6,859 (3,582,644)1,203,287,747 48,173,591 56,040,863 44,590,947 1,259,328,610 1,328,207 672,092,259
209. 2020 Rupees in ‘000 Branch banking Corporate Treasury banking Profit and loss Net mark-up / return / profit Inter segment revenue - net Non mark-up / return / interest income Consumer banking Islamic Foreign Head office banking operations / others Total (26,656,103) 18,632,163 32,173,633 39,566,158 (13,507,134) (28,107,774) 1,502,950 2,359,808 2,982,748 2,994,940 (1,648,046) 395,210 3,974,759 1,222,306 – (158,354) 384,683 10,109 (2,065,917) 30,275,781 3,855,150 – 2,207,632 9,843,140 Total income 14,413,005 7,484,837 7,048,607 1,742,104 4,359,442 1,074,061 3,996,865 Segment direct expenses Inter segment expense allocation 11,233,312 561,797 800,115 952,795 315,756 5,414 954,513 182,059 2,157,676 – 113,515 – 4,734,218 20,309,105 (1,702,065) – Total expenses 11,795,109 1,752,910 321,170 1,136,572 2,157,676 113,515 3,032,153 20,309,105 Provisions / (reversal of provisions) (61,334) 473,360 491,171 232,521 438,931 (43,506) 443,604 1,974,747 Profit before tax 2,679,230 5,258,567 6,236,266 373,011 1,762,835 1,004,052 521,108 17,835,069 Statement of financial position Cash and bank balances Investments Advances - performing - net of provision Advances - non-performing - net of provision Others 30,938,859 2,174,588 39,690,446 234,673 6,313,535 135,415 – 8,559,870 409,207,953 – 12,216,340 18,307,234 12,987,203 280,191,484 – 18,522,780 62,598,616 10,348,869 563,642 921,775 – 433,395 1,671,075 304,434 1,806,853 15,698,490 7,491,899 528,352 5,754,115 280,853 2,360,349 81,847,865 1,320,590 449,611,987 6,872,782 391,521,734 – 3,894,321 34,450,192 66,010,754 Total assets 46,296,557 307,546,207 456,390,298 45,003,913 992,886,661 Borrowings Subordinated debts Deposits and other accounts Net inter segment balances - net Others Total liabilities Equity Total equity and liabilities Contingencies and commitments 2,148,089 32,344,618 20,712,692 – – – 564,565,481 160,149,553 – (533,319,613) 97,723,672 434,611,006 12,902,600 17,328,364 1,066,600 46,296,557 307,546,207 456,390,298 – – – 46,296,557 307,546,207 456,390,298 4,929,608 368,782,235 198,781,152 19,719,200 88,553,681 29,376,805 1,923,886 11,810,905 11,946,873 3,276,606 – – – 12,000,000 21,935 65,305,888 858,355 81,075 16,809,062 – 11,188,408 (27,012,535) 964,317 4,440,177 3,346,088 11,011,284 19,719,200 – 19,719,200 81,556,970 27,339,724 6,996,711 2,037,081 88,553,681 29,376,805 – 11,741,980 9,352,213 40,118,921 84,163,669 12,000,000 790,982,287 – 51,059,430 (643,570) 938,205,386 45,647,483 54,681,275 45,003,913 992,886,661 1,408,765 594,995,953 Annual Report 2021 207
210. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 41.2 Segment details with respect to geographical locations Geographical segment analysis 2021 Rupees in ‘000 208 Pakistan Middle East Total Profit and loss Net mark-up / return / profit 31,012,399 1,417,147 Inter segment revenue - net 87,839 (87,839) – Non mark-up / return / interest income 9,531,086 16,512 9,547,598 Total income 40,631,324 1,345,820 41,977,144 Segment direct expenses 21,201,387 119,612 21,320,999 Inter segment expense allocation – –– – Total expenses 21,201,387 119,612 21,320,999 Provisions / (reversals) 5,026,483 (42,539) 4,983,944 Profit before tax 14,403,454 1,268,747 15,672,201 Statement of financial position Cash and bank balances 92,866,158 122,302 92,988,460 Investments 595,505,563 20,725,609 616,231,172 Advances - performing - net of provision 460,040,453 14,986,172 475,026,625 Advances - non-performing - net of provision 2,457,393 189,004 2,646,397 Others 71,999,917 436,039 72,435,956 Total Assets 1,222,869,484 36,459,126 1,259,328,610 Borrowings 103,233,751 20,330,010 123,563,761 Subordinated debts 12,000,000 – 12,000,000 Deposits and other accounts 1,014,516,115 646,139 1,015,162,254 (12,386,371) 12,386,371 – 49,465,126 3,096,606 52,561,732 1,166,828,621 36,459,126 1,203,287,747 56,040,863 – 56,040,863 1,222,869,484 36,459,126 1,259,328,610 672,085,400 6,859 672,092,259 Net inter segment balances - net Others Total liabilities Equity Total equity and liabilities Contingencies and commitments Askari Bank Limited 32,429,546
211. 2020 Rupees in ‘000 Pakistan Middle East Total Profit and loss Net mark-up / return / profit 29,053,475 1,222,306 Inter segment revenue - net 158,354 (158,354) – Non mark-up / return / interest income 9,833,031 10,109 9,843,140 Total income 39,044,860 1,074,061 40,118,921 Segment direct expenses 20,195,590 113,515 20,309,105 Inter segment expense allocation Total expenses Provisions Profit before tax Statement of financial position Cash and bank balances 81,712,450 135,415 81,847,865 Investments 431,304,753 18,307,234 449,611,987 Advances - performing - net of provision 381,172,865 10,348,869 391,521,734 Advances - non-performing - net of provision 3,589,887 304,434 3,894,321 Others 65,729,901 280,853 66,010,754 Total Assets 963,509,856 29,376,805 992,886,661 Borrowings 72,216,796 11,946,873 84,163,669 Subordinated debts 12,000,000 Deposits and other accounts 790,123,932 858,355 Net inter segment balances - net (11,188,408) 11,188,408 – Others 47,713,342 3,346,088 51,059,430 Total liabilities 910,865,662 27,339,724 938,205,386 Equity 52,644,194 2,037,081 54,681,275 Total equity and liabilities 963,509,856 29,376,805 992,886,661 Contingencies and commitments 585,643,740 9,352,213 594,995,953 42. TRUST ACTIVITIES The Group acts as custodian and holds the securities on behalf of individuals, trusts, retirement benefit plans and other institutions. These are not assets of the Group and, therefore, are not included in the consolidated statement of financial position 43. – – 30,275,781 – 20,195,590 113,515 20,309,105 2,018,253 (43,506) 1,974,747 16,831,017 1,004,052 17,835,069 – 12,000,000 790,982,287 RELATED PARTY TRANSACTIONS Fauji Consortium comprising of Fauji Foundation, Fauji Fertilizer Company Limited and Fauji Fertilizer Bin Qasim Limited (the Parent) holds 71.91% of the Group’s share capital at the year end. Accordingly all the subsidiaries and associates of Fauji consortium are the related parties of the Group. The Group also has related party relationships with its directors, key management personnel and employees’ funds. The Group enters into transactions with related parties in the ordinary course of business and on substantially the same terms as for comparable transactions with person of similar standing. Contributions to and accruals in respect of staff retirement benefits and other benefit plans are made in accordance with the actuarial valuations / terms of the contribution plan. Remuneration to the executives / officers is determined in accordance with the terms of their appointment. Annual Report 2021 209
212. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Details of transactions with related parties and balances are as follows: 20212020 KeyOther KeyOther management relatedmanagement related Rupees in ‘000 Parent Directorspersonnel parties ParentDirectorspersonnel parties Investments Opening balance Investment made during the year Investment redeemed / disposed off during the year Transfer in / (out) - net – – – – – – 800,478 – – – – – – – 1,019,311 461,454 – – – – – – (18,449) (92,688) – – – – – – (247,268) (433,019) Closing balance – – – 689,341 – – – 800,478 2,805,786 85,548,230 (83,830,101) – 28,671 438 (420) (28,646) 423,764 237,240 (150,992) (68,764) 4,766,042 12,098,633 (9,424,006) 3,081,041 4,523,915 43 441,248 10,521,710 70,227 1,144 – – 92,634 – Advances Opening balance Addition during the year Repaid during the year Transfer in / (out) - net Closing balance Other Assets Interest / mark-up receivable Advance rent 5,035,504 121,938,314 (124,168,032) - 19,771 59,315 (50,406) (9) 364,453 125,382 (93,715) 27,644 4,701,476 9,941,779 (10,545,058) 667,845 2,805,786 28,671 423,764 4,766,042 492,285 – 46,571 1,081 425 – 84,087 – 90,799 – Borrowings Opening balance Borrowings during the year Settled during the year – – – – – – – – – 1,923,886 1,500,000 (1,051,499) – – – – – – – – – 1,972,026 1,000,000 (1,048,140) Closing balance – – – 2,372,387 – – – 1,923,886 Subordinated debt Opening balance Issued during the year Redemption during the year Transfer in / (out) - net – – – – – – – – – – – – – – – – – – – – – – – – – – – – 24,950 – (5) (24,945) Closing balance – – – – – – – – Deposits and other accounts Opening balance Received during the year Withdrawn during the year Transfer in / (out) - net 8,018,104 768,812,177 (720,605,891) – 19,379 84,099 (76,565) (2,904) 186,617 17,017,129 1,971,951 404,528,295 (1,957,873) (379,499,670) 10,564 242,803 4,678,222 584,157,308 (580,817,426) – 64,239 211,929 (199,751) (57,038) 117,562 1,095,412 (1,016,580) (9,777) 19,941,993 286,741,848 (288,220,362) (1,446,350) Closing balance 56,224,390 24,009 211,259 42,288,557 8,018,104 19,379 186,617 17,017,129 Other Liabilities Interest / mark-up payable Payable to staff retirement fund Security deposits payable Others 87,473 – – 110,128 – – – – 3,413 – – 5,884 136,012 282,866 308,299 – 19,363 – – 4,986 – – – – 1,809 – 287 4,588 72,941 313,295 296,198 – Contingencies and Commitments 1,233,702 – 42,122 7,649,153 1,313,613 – – 3,951,782 6,790,000 – – – – – 1,219,500 188,963 4,590,000 – – – – – 6,992,500 – Others 210 Securities held as custodian Securities given as collateral Askari Bank Limited
213. For the year ended December 31 , 2021 For the year ended December 31, 2020 KeyOther KeyOther management relatedmanagement related Rupees in ‘000 Parent Directorspersonnel parties ParentDirectorspersonnel parties Income Mark-up / return / interest earned Fee and commission earned Dividend income Gain on sale of fixed assets Expense Mark-up / return / interest expensed Charge to defined benefit plan Contribution to defined contribution plan Remuneration and allowances Rent Communications Brokerage and Commission Directors’ Fee, Allowances Dividend paid Insurance Donations Others 216,765 51 – – 1,629,848 – – – 1,807 – – - 2,718,846 – 376,223 – 532 – – – 318 – – – – – – 68,513 9 – – – 17,578 158 – 1,975 691,037 40,924 48,018 – 209,445 105 – – 4,353 – – – 20,126 – – – 536,474 3,141 33,788 – 8,681 – – 682,955 – – – – 225 – – – 1,280,812 306,499 314,518 7,453 – 56,671 48,949 – 42,350 – – – 639,348 – – – 12,519 – – – 1,359,423 – 109,000 – 322 – – – – – – 25,656 4 – – – 6,922 – – 604,684 – – – – 113 – – – 1,984,017 314,012 294,940 5,823 – 33,002 13,958 – 11,745 63,436 – 2,364 In addition to above, rent free sub-branches are operating at FFC Sona Tower, FFBL Tower and Foundation University (along with booth and ATM). The term ‘key management personnel’ has the same meaning as defined in IAS 24 - Related party disclosures. During the year ended December 31, 2021, certain movable assets were settled against the final settlement of related parties as disclosed in note 10.3. 44. CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS The objective of managing capital is to safeguard the Group’s ability to continue as a going concern, so that it could continue to provide adequate returns to shareholders by pricing products and services commensurately with the level of risk. It is the policy of the Group to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group recognizes the need to maintain a balance between the higher returns that might be possible with greater exposure and the advantages and security afforded by a sound capital position. Under the current scenario, the banks are under pressure to extend further credit to its borrowers, while overall deteriorating credit risk and increased NPL may also put additional pressures on the Group from Capital Adequacy Ratio perspective. The SBP has relaxed the Capital Conversion Buffer (CCB) requirements for the banks to 1.5%, resulting in an overall CAR requirement of 11.5%. In addition to the measures by SBP, the Group is continuously monitoring the impacts of various decisions of its CAR and taking further lending decisions based on the overall impacts on RWA. The Group also believes that it has sufficient buffer in its CAR requirement to meet any adverse movements in credit, market or operational risks. Annual Report 2021 211
214. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Minimum Capital Requirement (MCR): Paid-up capital (net of losses) 12,602,602 12,602,602 Eligible Common Equity Tier 1 (CET 1) Capital Eligible Additional Tier 1 (ADT 1) Capital 51,760,746 5,886,339 44,953,711 5,928,538 Total Eligible Tier 1 Capital Eligible Tier 2 Capital 57,647,085 8,526,893 50,882,249 13,137,795 Total Eligible Capital (Tier 1 + Tier 2) 66,173,978 64,020,044 Risk Weighted Assets (RWAs): Credit Risk Market Risk Operational Risk 397,474,330 28,800,513 67,104,701 325,175,823 31,566,562 56,484,088 Total 493,379,544 413,226,473 Common Equity Tier 1 Capital Adequacy ratio 10.49% 10.88% Tier 1 Capital Adequacy Ratio 11.68% 12.31% Total Capital Adequacy Ratio 13.41% 15.49% Capital Adequacy Ratio (CAR): As of December 2021, the Group must meet a Tier 1 to RWA ratio and CAR, including CCB, of 10% and 11.50% respectively. Standardized Approach is used for calculating the Capital Adequacy for Market and Credit Risk while Basic Indicator Approach (BIA) is used for Operational Risk. Rupees in ‘000 212 20212020 20212020 Leverage Ratio (LR): Eligible Tier-1 Capital Total Exposures 57,647,085 1,749,233,676 50,882,249 1,420,206,406 Leverage Ratio 3.30% 3.58% Total High Quality Liquid Assets Total Net Cash Outflow 459,883,554 250,932,186 345,807,337 201,510,814 Liquidity Coverage Ratio 183.27% 171.61% Net Stable Funding Ratio (NSFR): Total Available Stable Funding Total Required Stable Funding 986,776,859 512,679,784 812,464,916 442,061,686 Net Stable Funding Ratio 192.47% 183.79% Liquidity Coverage Ratio (LCR): The full disclosures on the CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS as per SBP instructions issued from time to time have been placed on the website. The link to the full disclosure can be accessed through Group’s website http://akbl.com.pk. Askari Bank Limited
215. 45 . RISK MANAGEMENT The Group believes that effective risk management is key to achieving desired level of return while maintaining acceptable level of risk exposure. Robust risk management processes and framework are in place to achieve the Group’s overall objectives through a well thought out strategy, which enables the Group to effectively manage Credit, Market, Operational and Liquidity risk in a proactive manner. The Group’s approach is to ensure that risk management is deeply and firmly embedded in the culture of the Group. All employees are therefore considered responsible for identification, measurement, monitoring and controlling risks within the scope of their assigned responsibilities. As a result of changing risk environment, the Group continuously monitors and conducts holistic assessment of complex transactions on an integrated basis. The Group has a Board Risk Management Committee (BRMC) in place and is updated regularly by the Group’s Risk Management Group. BRMC is responsible for reviewing the extent of design and adequacy of the risk management framework. BRMC oversight ensures that risks are managed within the level of tolerance and risk appetite of the Group. 45.1 Credit Risk: Credit risk arises from the potential that an obligor is either unwilling to perform on an obligation or its ability is impaired resulting in economic loss to the Group. The Group takes necessary measures to control such risk by monitoring credit exposures, limiting transactions with specific counter parties with increased likelihood of default and continually assessing the creditworthiness of counter parties. The Group has built and maintains a sound loan portfolio in line with a well defined Risk Management Policy approved by the Board of Directors. Its credit evaluation system comprises of well-designed credit appraisal, sanctioning and review procedures for the purpose of emphasizing prudence in its lending activities and ensuring quality of asset portfolio. Advances portfolio constitutes around 38% of the total asset base and is also the largest source of credit risk for the Group. The Group’s advances portfolio is well diversified across various business segments, industries and geographical locations. Risk mitigants have been put in place at all stages of credit risk cycle i.e. identification, measurement, monitoring, controlling and reporting for effective risk management. Accordingly, portfolio monitoring function is in place at the Group with dedicated resources to ensure that risk is not only minimized but is optimized from a risk / return perspective. Credit Risk Review is conducted at obligor as well as at portfolio level to ensure adherence to regulatory requirement as well as the Group’s policies and procedures. The review process ensures that a sound and proactive risk management culture is maintained across the Group. Scope of Pre-Approval Risk Assessment has been enhanced, covering the entire Corporate, Commercial and SME portfolios along with consumer and Agri Finance and Credit is approved under the 4 eye principal with equal ownership from both Business and Risk Management Groups. Audit and inspection division reviews the advances portfolio on a post approval basis. The Group has undertaken a number of initiatives to strengthen its credit risk management framework including in-house development of internal risk rating models (obligor and facility) for the portfolio in respective segments and transition & migration matrices to study the realized default rates and performance of the risk rating models over the years. Based on a validation / back-testing exercise, a Probability of Default has been introduced for each obligor risk rating. Annual Report 2021 213
216. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 The Group has implemented an Enterprise Risk Management solution and a Loan Origination System. These systems will not only enhance operational efficiency in the risk management processes, but also promote integrated risk assessment. Risk Asset Review (RAR) performs an independent review of the credit portfolio. It provides an independent assessment of portfolio quality, efficacy of processes for acquisition of risk assets, regulatory/policy compliance and appropriateness of classification and risk rating. Due to deferment / restructuring & rescheduling relief allowed by SBP, the management in last year created a time bound general provision of 0.5% amounting to Rs. 374,851 thousand on domestic funded, performing credit portfolio (Corporate/SME) of the borrowers where regulatory relief has been provided considering it is difficult to estimate the full potential effect of the economic stress due to uncertain economic environment. Since the potential impact of COVID - 19 has still not been eradicated, the management on a prudent basis has maintained this general provision at the year end. This provision is in addition and incremental to the 0.10% general provision on all performing loans. At December 31, 2021 the Group is carrying a general provision amounting to Rs. 807,679 thousand in respect of potential loan losses which are not specifically identified. IFRS 9 is applicable to the overseas branch of the Group and requires the estimation of Expected Credit Loss (ECL) based on current and forecast economic conditions. The Group has reviewed the potential impact of the COVID 19 outbreak on the inputs and assumptions for IFRS 9 ECL measurement in light of available information and recognized provision of Rs. 44,128 thousand against investments. Credit risk - General disclosures The Group follows the Standardized Approach for its credit risk exposures, which sets out fixed risk weights corresponding to external credit ratings or type of exposure, whichever is applicable. Under the Standardized Approach, the capital requirement is based on the credit rating assigned to counterparties by External Credit Assessment Institutions (ECAIs) duly recognized by the SBP. The Group selects particular ECAIs for each type of exposure. The Group utilizes the credit ratings assigned by Pakistan Credit Rating Agency (PACRA), Japan Credit Rating Company Limited – Vital Information Systems (JCR-VIS), Fitch, Moody’s and Standard & Poors (S&P). Types of exposure and ECAIs used Corporates Banks Public sector enterprises 214 FITCH Moody’s S & P √ √ – √ √ – √ √ – PACRA √ √ √ JCR-VIS ECA Scores √1-5 √1-5 √1-2 * FITCH, Moody’s and S&P ratings (as applicable) are used where sovereign exposures are denominated in USD. Askari Bank Limited
217. Mapping to SBP Rating Grades For all exposures , the selected ratings are translated to the standard rating grades given by the SBP. The mapping tables used for converting ECAI ratings to the SBP rating grades are given below: Long Term Rating Grades mapping SBP Rating grade FITCH Moody’s S & P PACRA JCR-VIS ECA scores 1 AAA Aaa AAA AAA AAA 0, 1 AA+Aa1 AA+ AA+ AA+ AAAa2AA AA AA AA-Aa3 AA- AA- AA- 2 A+A1 A+ A+ A+ 2 AA2A A A A-A3 A- A- A- 3 BBB+Baa1 BBB+ BBB+ BBB+ 3 BBBBaa2 BBB BBB BBB BBB-Baa3 BBB- BBB- BBB- 4 BB+Ba1 BB+ BB+ BB+ 4 BBBa2BB BB BB BB-Ba3 BB- BB- BB- 5 B+ B1 B+ B+ B+ 5, 6 BB2B B B B-B3 B- B- B- 6 CCC+ and Caa1 and CCC+ and CCC+ and CCC+ and 7 Particulars of the Group’s significant on-balance sheet and off-balance sheet credit risk in various sectors are analysed as follows: Gross lendings Non-performing lendings Provision held Rupees in ‘000 202120202021202020212020 45.1.1 Lendings to financial institutions Credit risk by public / private sector Private 148,606 148,606 148,606 148,606 148,606 148,606 Annual Report 2021 215
218. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 Gross investments Non-performing investments Provision held 202120202021202020212020 45.1.2 Investment in debt securities Credit risk by industry sector Agriculture, Forestry, Hunting and Fishing Textile Chemical and Pharmaceuticals Power and energy Telecommunication Financial Others Credit risk by public / private sector Public/ Government Private Rupees in ‘000 – 280,643 1,279,352 7,300,860 216,790 606,860,741 4,288,413 140,000 311,716 999,352 7,135,420 221,636 432,764,076 3,859,331 – 280,643 999,352 – 216,790 – – – 311,716 999,352 – 221,636 – – – 280,643 999,352 – 216,790 – – – 311,716 999,352 – 221,636 – – 620,226,799 445,431,531 1,496,785 1,532,704 1,496,785 1,532,704 602,512,092 17,714,707 430,413,326 15,018,205 – 1,496,785 – 1,532,704 – 1,496,785 – 1,532,704 620,226,799 445,431,531 1,496,785 1,532,704 1,496,785 1,532,704 Gross advances Non-performing advances Provision held 202120202021202020212020 45.1.3Advances Credit risk by industry sector Agriculture, Forestry, Hunting and Fishing Mining and Quarrying Textile Chemical and Pharmaceuticals Cement Sugar Footwear and Leather garments Automobile and transportation equipment Electronics and electrical appliances Food and allied Construction Power and energy Oil and gas Wholesale and Retail Trade Transport, Storage and Communication Financial Insurance Services Individuals Edible oil and ghee Rice Processing (husking, semi- wholly milled etc.) Metal and allied Others Credit risk by public / private sector Public/ Government Private 216 Askari Bank Limited 7,041,920 7,935,720 64,650,892 15,521,810 8,549,176 14,988,981 1,362,018 2,778,780 5,792,865 54,707,437 10,171,702 60,184,351 42,835,417 16,204,353 14,730,025 6,836,020 51,348,259 12,361,663 6,988,030 12,804,088 1,407,841 1,398,593 5,010,733 31,213,168 11,249,072 52,409,615 30,471,251 13,332,550 393,723 – 9,573,196 978,988 401 18,203 299,115 721,355 1,104,739 – 840,935 3,278,797 2,199,598 450,205 432,214 – 10,377,789 794,758 401 – 332,234 725,424 1,114,668 – 654,219 3,140,231 16,303 489,250 200,630 135,091 – – 9,462,490 10,217,822 845,793 667,129 401 401 9,102 – 299,115 332,234 648,427 557,853 1,104,739 1,109,918 – – 742,383 605,003 2,255,635 1,421,836 2,124,778 16,303 369,169 421,089 30,383,605 10,546,091 189,162 37,091,770 37,608,626 5,510,139 10,441,317 21,765,266 41,639,840 26,103,971 6,103,625 130,155 28,835,351 33,989,548 4,723,727 8,529,132 12,886,482 48,999,206 461,390 – – 779,466 2,569,558 1,668,682 2,511,350 767,907 2,547,719 499,153 – – 567,031 2,662,811 1,681,161 2,537,505 399,464 2,311,783 507,901,238 421,862,105 31,165,327 28,736,399 28,518,930 24,842,078 156,455,831 351,445,407 129,318,506 292,543,599 – 31,165,327 – 28,736,399 – – 28,518,930 24,842,078 507,901,238 421,862,105 31,165,327 28,736,399 28,518,930 24,842,078 461,390 – – 726,186 2,257,470 1,623,118 2,490,832 702,305 2,194,967 499,153 – – 562,670 2,185,396 1,200,857 2,507,507 399,464 2,002,352
219. Rupees in ‘000 20212020 45.1.4Contingencies and Commitments Credit risk by industry sector Agriculture, Forestry, Hunting and Fishing Mining and Quarrying Textile Chemical and Pharmaceuticals Cement Sugar Footwear and Leather garments Automobile and transportation equipment Electronics and electrical appliances Real Estate & Construction Research and development Power and energy Wholesale and Retail Trade Oil and gas Transport, Storage and Communication Financial Insurance Food and allied Services Individuals Engineering Telecommunication Metal and allied Others 188,897 5,800,004 18,491,294 11,735,915 7,802,463 689,143 1,339,250 680,769 3,072,967 27,460,036 1,001,757 19,248,478 7,953,469 14,750,166 14,063,139 378,591,274 288,303 6,689,227 8,743,852 818,389 60,469,083 8,922,873 10,569,058 62,722,453 731,121 7,482,958 15,734,314 8,435,551 2,588,584 460,722 883,465 666,809 2,825,575 22,846,161 4,912,644 20,261,159 6,993,222 13,467,069 10,418,442 329,970,714 236,959 17,416,521 14,530,287 449,306 36,958,247 234,347 11,240,607 65,251,169 Credit risk by public / private sector 672,092,259 594,995,953 Public / Government Private 225,305,142 446,787,117 202,630,602 392,365,351 45.1.5Concentration of Advances 672,092,259 594,995,953 The Group’s top 10 exposures on the basis of total funded and non-funded exposures aggregated to Rs. 368,943,908 thousand (2020: Rs. 282,075,320 thousand) are as follows: Rupees in ‘000 20212020 Funded Non Funded 110,509,495 258,434,413 87,736,321 194,338,999 Total Exposure 368,943,908 282,075,320 The sanctioned limits against these top 10 exposures aggregated to Rs. 439,936,880 thousand (2020: Rs. 402,237,997 thousand). The above does not include any classified exposure. Annual Report 2021 217
220. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 45.1.6 Advances - Province / Region-wise disbursement and utilization 2021 Disbursements Utilization Punjab Sindh KPK including Baluchistan Islamabad AJK including Rupees in ‘000 FATA Gilgit Baltistan Province / Region Punjab Sindh KPK including FATA Baluchistan Islamabad AJK including Gilgit Baltistan Total 670,454,107 657,410,763 7,183,401 599,248,029 2,122,114 595,435,142 4,012,224 106,693 1,071 522,060 6,500 4,775 86,087,636 8,028,458 544,361 443,938 15,150 1,000 200,901 356,750 3,609,934 – 4,387,950 1,200 25,694 383,687 1,812 510,785 29,844 – 5,622,571 948,625 65,694 – 72,867,316 25,911 10,777 1,711 227,020 – 229,707 400,677 1,360,767,994 667,689,678 603,169,750 8,556,735 951,822 79,530,117 869,892 2020 Disbursements Utilization Punjab Sindh KPK including Baluchistan Islamabad AJK including Rupees in ‘000 FATA Gilgit Baltistan Province / Region Punjab Sindh KPK including FATA Baluchistan Islamabad AJK including Gilgit Baltistan Total 770,040,155 742,397,748 15,199,453 584,211,974 15,330,594 566,303,118 5,328,076 173,254 37,788 1,461,988 2,640 27,285 62,548,723 10,515,859 582,275 441,730 28,778 8,200 992,715 33,507 4,939,300 1,100 5,412,501 5,382 1,424,032,646 768,448,873 582,158,119 11,384,505 19,600 11,424,305 274,730 2,266,083 500 126,721 1,429,778 - 7,185 45,743,479 - 55,318 6,334 3,942 50,513 1,185 287,424 344,052 1,731,793 693,450 59,615,906 45.2 Market Risk: 218 Market risk is the risk that the value of on and off-balance sheet positions of a financial institution will be adversely affected by movements in market rates or prices such as interest rates, foreign exchange rates, equity prices and credit spreads, resulting in a loss to earnings and capital. The Group is exposed to market risk from both its banking and trading books. Trading book for the Group includes all Held for Trading ( HFT ) assets along with Available for Sale (AFS) securities that are held with intention of short term trade. All assets not included in trading book are included in the Banking book. The Group’s Risk Management Process seeks to identify, measure, monitor, and control market risks in order to shield against adverse movements in market factors and to attain an efficient risk / return profile of its open positions. Risk Management Group has developed and implemented market risk policy and risk measurement / monitoring methodology for review and reporting of market risk. The Group makes use of the globally established Value-at-Risk (VaR) methodology to measure traded market risk. Additionally, sensitivity analysis is carried out to gauge the impact of extreme market movements on traded exposures, such as fixed income securities and equity capital market instruments. Further, stress testing is used to analyze the impact of abnormal market movements across different portfolios to assess non-traded market risk, in particular interest rate risk in the banking book. The performance of the Group’s traded portfolios is evaluated through the use of risk / return analysis. Risk is assessed through the revaluation of all traded market risk exposed positions on a daily basis, and monitored by ensuring that these positions do not breach any regulatory limits as well as any internally established risk tolerance limits. Askari Bank Limited
221. Basel III Standardized Approach is used for calculating the Capital Adequacy for Market Risk . Total capital charge for market risk is Rs. 2,304,041 thousand (2020: Rs. 2,478,060 thousand). 45.2.1 Balance sheet split by trading and banking books 20212020 Rupees in ‘000 Cash and balances with treasury banks Balances with other banks Investments Advances Fixed assets Intangible assets Deferred tax assets Other assets Banking book Trading book Total Banking book Trading book Total 89,432,245 3,556,215 516,223,197 477,673,022 20,179,222 1,188,985 5,161,697 45,906,052 – 89,432,245 – 3,556,215 100,007,975 616,231,172 – 477,673,022 – 20,179,222 – 1,188,985 – 5,161,697 – 45,906,052 73,651,718 8,196,147 335,266,947 395,416,055 21,232,750 1,158,857 1,597,334 42,021,813 – 73,651,718 – 8,196,147 114,345,040 449,611,987 – 395,416,055 – 21,232,750 – 1,158,857 – 1,597,334 - 42,021,813 1,159,320,635 100,007,975 1,259,328,610 878,541,621 114,345,040 992,886,661 45.2.2Foreign Exchange Risk Foreign exchange risk, or the risk that the Group’s earnings and / or capital can fluctuate due to changes in foreign exchange rates, arises out of the Group’s foreign exchange exposure which consists of foreign currency cash in hand, nostro / vostro accounts, forward contracts, forward bookings with exporters, foreign bills purchased, foreign currency placements with SBP and the Group’s Wholesale Bank Branch, foreign currency lendings / deposits and capital investments in offshore operations. The Group’s treasury manages consolidated foreign exchange exposure by matching foreign currency assets and liabilities in spot and forward. The foreign exchange exposure and nostro balances are maintained within regulatory limits and VaR is calculated for consolidated foreign exchange exposure on a daily basis. The impact of a change in USD / PKR parity on the net open position is also determined through daily sensitivity analysis. 2021 Foreign currency Foreign currency Off-balance Net foreign Rupees in ‘000 assets liabilities sheet items currency exposure United States Dollar Pound Sterling Euro Other European currencies Other currencies 83,087,836 1,619,550 1,772,425 183,399 863,444 107,540,707 5,665,038 3,675,471 – 2,069,471 26,606,423 3,932,037 1,636,015 (181,564) 1,460,847 2,153,552 (113,451) (267,031) 1,835 254,820 87,526,654 118,950,687 33,453,758 2,029,725 2020 Foreign currency Foreign currency Off-balance Net foreign Rupees in ‘000 assets liabilities sheet items currency exposure United States Dollar Pound Sterling Japanese Yen Euro Other European currencies Other currencies 64,905,509 1,140,446 – 1,882,281 22,151 1,308,122 86,127,444 5,123,400 – 3,222,945 – 1,803,003 22,235,297 3,963,115 – 1,637,176 – 664,576 1,013,362 (19,839) – 296,512 22,151 169,695 69,258,509 96,276,792 28,500,164 1,481,881 Annual Report 2021 219
222. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Rupees in ‘000 2021 Banking book 2020 Trading book Impact of 1% change in foreign exchange rates on - Profit and loss account – 337,227 - Other comprehensive income – – 45.2.3Equity position risk Banking book Trading book – – 282,293 – Equity position risk is the risk that the value of equity positions inside the trading book and banking book will change as a result of general and specific equity market movements. Equity positions are monitored on daily basis through management action triggers. The Group classifies its direct equity investments into held for trading, available for sale, and Held to Maturity. Held for trading equity exposures are of a short term nature and are undertaken to earn profit by exploiting market conditions and short term price fluctuations. Equities held in the available for sale portfolio are kept with the intent of earning profit due to underlying fundamental strength of each security. Strategic investments are undertaken in line with the long-term strategy of the Group, i.e. to build strategic interest in other concerns. The Group may also carry indirect equity exposure through financing against shares and reverse repos against shares. At the end of FY 2021 Group’s equity investment portfolio was classified as held for trading and available for sale. Pretax impact of 5% change in equity prices are provided below; Rupees in ‘000 2021 Banking book 2020 Trading book Banking book Trading book Impact of 5% change in equity prices on - Profit and loss account (decrease) - Other comprehensive income (increase) – – (207,191) 207,191 – – (217,649) 217,649 45.2.4Yield / Interest Rate Risk in the Banking Book (IRRBB)-Basel III Specific The Group’s interest rate exposure arises out from its investment, lending and borrowing activities. Interest Rate Risk in the Banking Book (IRRBB) in its various forms is the risk of adverse changes in earnings and/or capital due to (i) timing differences or mismatches in the maturity/repricing period of financial assets and liabilities (repricing risk), (ii) differences in the basis used for calculating interest rates received and paid (basis risk), (iii) and options implicit or explicit in the Group’s financial assets and liabilities (options risk). The Asset and Liability Management Committee of the Group monitors and controls mismatch of interest rate sensitive assets and liabilities on an ongoing basis through its regular meetings. The Market Risk Management Department monitors interest rate in the Grouping book from an earnings and economic value perspective. Key IRRBB measures include: 1. Interest Earnings at Risk (IAR): the rolling 12 months impact of a parallel shift in interest rates on Net Interest Margin. 2. Change in Economic Value of Equity (EVE): the impact of a parallel shift in interest rates on the present value of the Bank’s cash flows. 3. Repricing Gaps: mismatch between the Bank’s assets and liabilities in terms of repricing time bands based on residual maturity for repricing or actual maturity which ever is earlier. Repricing assumptions for noncontractual assets and liabilities have been set based on a behavioral study. 220 Askari Bank Limited
223. 2021 Rupees in ‘000 2020 Banking book Trading book Banking book Trading book 195,700 (1,304,000) (1,855,847) – Impact of 1% change in interest rates on - Profit and loss account 422,962 (2,462,303) - Other comprehensive income (1,768,929) – 45.2.5Mismatch of interest rate sensitive assets and liabilities Yield / interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual repricing or maturity date and for off-balance sheet instruments is based on settlement date. Rupees in ‘000 2021 Exposed to yield / interest risk Effective Non–interest Yield / Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 bearing Interest Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above 10 financial rate Total Month Months Months Year Years Years Years Years Years instruments On-balance sheet financial instruments Assets Cash and balances with treasury banks 0.00% 89,432,245 9,278,909 – – – – – – – – 80,153,336 Balances with other banks 0.14% 3,556,215 1,578,107 – – – – – – – – 1,978,108 Investments 8.30% 616,231,172 85,030,667 138,199,283 133,716,127 50,658,621 69,157,563 46,763,978 39,159,440 44,510,380 2,979,368 Advances 7.41% 477,673,022 132,049,874 88,869,183 123,897,451 Other assets 13,509,795 6,115,080 15,245,680 9,724,346 5,247,790 – – – – – – – 35,528,043 1,222,420,697 227,937,557 221,213,106 222,585,310 174,556,072 82,667,358 52,879,058 54,405,120 54,234,726 – 35,528,043 – 83,013,823 6,055,745 – – 8,227,158 123,715,232 Liabilities Bills payable Borrowings – 10,235,374 – – – – – – – – – 10,235,374 6.23% 123,563,761 73,572,263 19,513,580 4,568,715 3,861,787 5,466,629 5,655,687 4,663,566 4,972,791 664,632 624,111 Deposits and other accounts 4.18% 1,015,162,254 Subordinated loans 8.91% 90,394,668 45,915,350 38,125,967 12,000,000 – 6,000,000 6,000,000 Other liabilities – – – – – – – 30,675,470 – – – – – – – – – 1,191,636,859 163,966,931 71,428,930 48,694,682 On-balance sheet gap Off-balance sheet financial instruments Forward foreign exchange contracts purchase 30,783,838 65,140,960 119,506,180 121,272,584 105,459,784 102,030,479 69,002,747 124,972,809 126,928,271 110,123,350 107,003,270 63,970,626 149,784,176 173,890,628 105,553,325 117,506,976 45,929,502 28,653,368 41,713,292 1,210,814 18,193,579 309,122,703 – 30,675,470 18,858,211 350,657,658 (42,305,451) (74,049,213) (55,718,230) (52,768,544) (10,631,053) (226,942,426) – – – – – – Forward foreign exchange contracts sale 84,053,218 44,943,786 14,829,445 24,171,538 108,449 – – – – – – Off-balance sheet gap 33,453,758 985,716 13,823,923 17,541,754 1,102,365 – – – – – – Total yield / interest risk sensitivity gap 64,956,342 163,608,099 191,432,382 106,655,690 Cumulative yield / interest risk sensitivity gap 64,956,342 228,564,441 419,996,823 526,652,513 484,347,062 410,297,849 354,579,619 301,811,075 291,180,022 (42,305,451) (74,049,213) (55,718,230) (52,768,544) (10,631,053) (226,942,426) 64,237,596 Annual Report 2021 221
224. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Mismatch of interest rate sensitive assets and liabilities Rupees in ‘000 2020 Exposed to yield / interest risk Effective Non–interest Yield / Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 bearing Interest Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above 10 financial rate Total Month Months Months Year Years Years Years Years Years instruments On-balance sheet financial instruments Assets Cash and balances with treasury banks 0.00% 73,651,718 7,501,569 – – – – – – – – 66,150,149 Balances with other banks 0.76% 8,196,147 5,521,053 – – – – – – – – 2,675,094 Investments 9.50% 449,611,987 15,622,941 58,751,580 120,070,417 61,770,426 40,920,325 33,955,440 54,255,063 54,943,986 2,979,781 6,342,028 Advances 9.59% 395,416,055 101,982,157 90,388,893 62,261,378 55,656,168 16,195,531 28,636,248 17,130,621 18,185,100 4,979,959 – Other assets – – – – – – – – 29,799,164 956,675,071 130,627,720 149,140,473 182,331,795 117,426,594 57,115,856 62,591,688 71,385,684 73,129,086 7,959,740 104,966,435 – 29,799,164 – Liabilities Bills payable Borrowings Deposits and other accounts Subordinated loans Other liabilities – 12,629,996 – – – – – – – – – 12,629,996 5.28% 84,163,669 49,158,624 11,328,334 2,269,802 932,385 4,919,342 5,795,780 4,879,701 4,182,601 697,100 – 32,540,359 104,645,578 102,345,766 110,588,032 87,746,675 5.54% 790,982,287 44,578,348 27,748,891 14,970,025 10.67% 12,000,000 – 6,000,000 6,000,000 – – – – – – – – 27,919,912 – – – – – – – – – 27,919,912 927,695,864 93,736,972 45,077,225 23,239,827 33,472,744 109,564,920 108,141,546 115,467,733 91,929,276 15,260,247 291,805,374 (52,449,064) (45,549,858) (44,082,049) (18,800,190) (7,300,507) (186,838,939) On-balance sheet gap Off-balance sheet financial instruments 28,979,208 36,890,748 104,063,248 159,091,968 83,953,850 14,563,147 251,255,466 Forward foreign exchange contracts purchase 118,889,979 60,380,442 32,179,415 25,816,868 513,254 – – – – – – Forward foreign exchange contracts sale 90,389,815 36,356,969 35,031,116 18,963,099 38,631 – – – – – – Off-balance sheet gap 28,500,163 24,023,473 (2,851,701) 6,853,769 474,623 – – – – – – 84,428,473 Total yield / interest risk sensitivity gap 60,914,221 101,211,547 165,945,737 Cumulative yield / interest risk sensitivity gap 60,914,221 162,125,768 328,071,505 412,499,978 360,050,914 314,501,056 270,419,007 251,618,817 244,318,310 (52,449,064) (45,549,858) (44,082,049) (18,800,190) (7,300,507) (186,838,938) 57,479,371 45.2.5.1Yield risk is the risk of decline in earnings due to adverse movement of the yield curve. 45.2.5.2Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates. 45.2.5.3Assets do not include fixed assets of Rs. 20,179,222 thousand (2020: Rs. 21,232,750 thousand), intangible assets of Rs. 1,188,985 thousand (2020: Rs. 1,158,857 thousand), deferred tax asset or Rs. 5,161,697 thousand (2020: Rs. 1,597,334 thousand) and other assets consisting of advances, prepaid rent and other prepayments, advance taxation, non-banking assets acquired in satisfaction of claims, Stationary & Stamp and Others of Rs. 10,378,009 thousand (2020: Rs. 12,222,649 thousand). 45.2.5.4Liabilities do not include other liabilities consisting of advance payments, branch adjustment account, security deposit against lease, levies and taxes payable, provision against off-balance sheet items, Islamic pool management reserve and others of Rs. 11,650,888 thousand (2020: Rs. 10,509,523 thousand). 45.3 Operational Risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, systems and external events. The Group strives to manage operational risk within acceptable levels through sound operational risk management practices. 222 Askari Bank Limited
225. Board Risk Management Committee defines the operational risk appetite and tolerance limits . Operational risk governance structure adopted by Group is embedded within three lines of defense: Strategic, Macro and Micro. Group already has in place an Operational Risk Management framework which is aligned with global best market practices. Group has dedicated functions to manage Operational Risk, Business Continuity Risk and Information Security Risk governed through comprehensive frameworks in line with international best practices. 45.3.1Operational Risk-Disclosures Basel II specific Basel II Basic Indicator Approach is used for calculating the Capital Adequacy for Operational Risk. 45.4 Liquidity Risk Liquidity risk reflects an enterprises inability in raising funds to meet commitments. The Group’s liquidity position is managed by the Asset and Liability Management Committee (ALCO). ALCO monitors the maintenance of financial position ,liquidity ratios, depositors concentration both in terms of the overall funding mix and avoidance of undue reliance on large individual deposits and liquidity contingency plans. Moreover, core retail deposits (current accounts and saving accounts) form a considerable part of the Group’s overall funding and significant importance is attached to the stability and growth of these deposits. The Group is confident that the liquidity buffer currently maintained is sufficient to cater to any adverse movement in the cash flow maturity profile. 45.4.1Maturities of Assets and Liabilities - based on contractual maturity of assets and liabilities of the Group 2021 Rupees in ‘000 Total Over 1 Upto 1 day to 7 days Over 7 Over 14 Over 1 Over 2 Over 3 Over 6 Over 9 Over 1 Over 2 to 14 days to 1 days month to 2 months to 3 months to 6 months to 9 months months to 1 year to 2 years to 3 years Over 3 to 5 years Over 5 years 15,427,063 Assets Cash and balances with treasury banks 89,432,245 26,829,674 894,322 – – – – – – – 15,427,062 15,427,062 15,427,062 Balances with other banks 3,556,215 640,119 324,682 2,489 231,865 116,644 1,194,888 597,444 298,722 149,362 – – – – Investments 616,231,172 168,509 632,724 40,782,499 30,266,403 77,056,480 38,574,039 29,107,444 24,490,391 26,221,525 115,219,086 58,814,670 98,515,845 76,381,557 Advances 477,673,022 4,799,258 6,229,582 9,933,091 109,643,232 36,451,598 35,790,709 63,256,739 13,716,714 16,113,203 36,884,943 26,260,770 48,480,001 70,113,182 Fixed assets 20,179,222 6,613 39,681 46,294 105,839 190,805 190,878 570,404 555,652 555,774 1,988,583 1,631,114 2,058,917 12,238,668 Intangible assets 1,188,985 441 2,643 3,084 7,048 13,204 13,204 39,149 38,081 38,081 150,486 143,286 275,339 464,939 Deferred tax assets 5,161,697 104,955 629,727 839,637 1,574,319 – – – 102,893 102,893 206,255 590,372 1,010,646 – Other assets 45,906,052 5,036,872 933,760 1,004,260 6,804,946 1,402,115 2,852,899 599,252 – 1,422,630 7,113,148 6,182,694 6,370,781 6,182,695 1,259,328,610 37,586,441 9,687,121 52,611,354 148,633,652 115,230,846 78,616,617 94,170,432 39,202,453 44,603,468 176,989,563 109,049,968 172,138,591 180,808,104 Liabilities Bills payable 10,235,374 3,275,320 934,490 – 776,865 2,709,006 1,354,503 677,252 338,626 169,312 – – – – Borrowings 123,563,761 2,691,567 62,419,610 4,603,563 4,231,989 9,335,303 10,392,258 4,604,378 1,630,044 2,231,744 5,466,629 5,655,687 4,663,566 5,637,423 Deposits and other accounts 1,015,162,254 34,326,838 33,752,028 23,338,711 109,073,389 33,822,303 23,931,637 38,125,967 24,048,025 41,092,934 166,358,481 168,124,885 152,312,085 166,854,971 Subordinated loans 12,000,000 – – – – – – – – Other liabilities 42,326,358 6,421,779 7,972,395 1,255,513 6,804,946 1,402,115 2,852,899 599,252 – 29,197,787 120,887,189 47,268,727 38,531,297 44,006,849 26,016,695 67,962,119 40,085,320 50,163,583 13,185,758 1,203,287,747 Net assets Share Capital 12,602,602 Reserves 32,832,051 Unappropriated profit 8,618,234 Surplus on revaluation of assets 1,987,976 56,040,863 46,715,504 105,078,523 (9,129,063) (95,391,402) 23,413,567 27,746,463 – – – 1,422,630 4,049,526 3,119,072 – 12,000,000 3,307,159 3,119,072 44,916,620 175,874,636 176,899,644 160,282,810 187,611,466 (313,152) 1,114,927 (67,849,676) 11,855,781 (6,803,362) 56,040,863 Annual Report 2021 223
226. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 Maturities of Assets and Liabilities - based on contractual maturity of assets and liabilities of the Group 2020 Rupees in ‘000 Total Over 1 Upto 1 day to 7 days Over 7 Over 14 Over 1 Over 2 Over 3 Over 6 Over 9 Over 1 Over 2 to 14 days to 1 days month to 2 months to 3 months to 6 months to 9 months months to 1 year to 2 years to 3 years Over 3 to 5 years Over 5 years 12,704,921 Assets Cash and balances with treasury banks 73,651,716 22,095,515 736,517 – – – – – – – 12,704,921 12,704,921 12,704,921 Balances with other banks 8,196,146 1,475,306 748,308 5,737 534,389 268,834 2,753,905 1,376,953 688,476 344,238 – – – – Investments 449,611,989 207,060 616,638 5,442,018 10,161,206 35,028,778 7,257,340 50,902,231 57,816,066 4,108,022 42,936,518 74,270,645 81,257,589 79,607,877 Advances 395,416,055 1,603,171 10,684,368 10,269,668 96,987,680 28,478,676 18,245,501 36,809,132 10,541,459 15,165,006 19,985,644 35,700,890 41,312,583 69,632,277 Fixed assets 21,232,750 6,635 42,529 46,445 107,359 190,184 201,257 572,564 547,878 563,203 2,031,929 1,743,704 2,408,548 12,770,515 Intangible assets 1,158,857 652 4,562 4,562 9,776 19,469 19,469 48,944 29,779 29,779 103,746 97,213 184,900 606,006 Deferred tax assets 1,597,334 32,479 194,875 259,833 487,187 – – – 31,841 31,841 63,828 182,696 312,754 - Other assets 42,021,814 4,873,413 1,405,736 1,595,115 4,176,670 965,505 770,425 1,212,382 1,097,649 910,431 6,007,988 6,893,107 6,150,740 5,962,653 992,886,661 30,294,231 14,433,533 17,623,378 112,464,267 64,951,446 29,247,897 90,922,206 70,753,148 21,152,520 Bills payable 12,629,997 4,041,599 1,153,119 – 958,617 3,342,793 1,671,397 835,698 417,849 208,925 – – – – Borrowings 84,163,670 1,685,382 36,873,716 3,987,310 6,612,217 8,603,658 2,724,676 2,269,802 – 932,385 4,919,342 5,795,780 4,879,701 4,879,701 Deposits and other accounts 790,982,286 28,413,479 28,732,772 18,613,035 59,054,725 23,082,831 14,523,473 14,970,025 7,956,613 Subordinated loans Other liabilities 24,583,746 142,432,355 140,117,267 148,393,362 140,108,603 12,000,000 –––––––––––– 12,000,000 38,429,433 6,176,614 8,154,839 1,831,822 4,176,670 965,505 770,425 1,212,382 1,097,649 938,205,386 40,317,074 74,914,446 24,432,167 70,802,229 35,994,787 19,689,971 19,287,907 9,472,111 26,635,487 150,389,337 149,835,806 156,453,455 159,980,610 Net assets 54,681,275 (10,022,843) (60,480,913) (6,808,789) 41,662,038 28,956,659 9,557,926 71,634,298 61,281,037 (5,482,967) Share Capital 12,602,602 Reserves 25,701,665 Unappropriated profit 8,706,053 Surplus on revaluation of assets 7,670,955 224 83,834,575 131,593,176 144,332,035 181,284,249 Liabilities Askari Bank Limited 54,681,275 910,431 3,037,639 3,922,759 (66,554,761) (18,242,630) 3,180,392 (12,121,420) 2,992,306 21,303,639
227. 45 .4.2 Maturities of Assets and Liabilities - based on expected maturity of assets and liabilities of the Group 2021 Over 1 Upto 1 to 3 Rupees in ‘000 Total Month Months Over 3 Over 6 to 6 Months to Months 1 Year Over 1 to 2 Years Assets Cash and balances with treasury banks Balances with other banks Investments Advances Fixed assets Intangible assets Deferred tax assets Other assets 89,432,245 27,723,996 – 3,556,215 1,199,156 1,311,532 616,231,172 71,850,135 115,630,519 477,673,022 130,605,163 72,242,307 20,179,222 198,427 381,683 1,188,985 13,215 26,407 5,161,697 3,148,637 – 45,906,052 13,779,839 4,255,014 – 597,444 29,107,444 63,256,739 570,404 39,149 – 599,252 – 15,427,062 448,083 – 50,711,916 115,219,086 29,829,918 36,884,943 1,111,427 1,988,583 76,163 150,486 205,786 206,255 1,422,630 7,113,148 Over 2 to 3 Years Over 3 to 5 Years Over 5 to 10 Above 10 Years Years 15,427,062 15,427,062 13,223,196 2,203,867 – – – – 58,814,670 98,515,845 73,081,656 3,299,901 26,260,770 48,480,001 33,568,607 36,544,574 1,631,114 2,058,917 1,698,265 10,540,402 143,286 275,340 464,939 – 590,372 1,010,647 – – 6,182,694 6,370,780 5,299,452 883,243 Liabilities Bills payable Borrowings Deposits and other accounts Subordinated loans Other liabilities 1,259,328,610 248,518,568 193,847,462 94,170,432 83,805,923 176,989,563 109,049,968 172,138,592 127,336,115 53,471,987 10,235,374 4,986,674 123,563,761 73,946,729 1,015,162,254 200,490,966 12,000,000 – 42,326,358 22,454,633 4,063,510 19,727,561 57,753,939 – 4,255,014 677,252 507,938 – – – – 4,604,378 3,861,787 5,466,629 5,655,687 4,663,566 4,972,791 38,125,967 65,140,960 166,358,481 168,124,885 152,312,085 142,189,594 – – – – – 6,000,000 599,252 1,422,630 4,049,526 3,119,072 3,307,159 2,673,491 – 664,633 24,665,377 6,000,000 445,581 1,203,287,747 301,879,002 85,800,024 44,006,849 70,933,315 175,874,636 176,899,644 160,282,810 155,835,876 31,775,591 (53,360,434) 108,047,438 50,163,583 12,872,608 21,696,396 Net assets 56,040,863 Share Capital Reserves Unappropriated profit Surplus on revaluation of assets 12,602,602 32,832,051 8,618,234 1,987,976 1,114,927 (67,849,676) 11,855,782 (28,499,761) 56,040,863 Maturities of Assets and Liabilities - based on expected maturity of assets and liabilities of the Group 2020 Over 1 Upto 1 to 3 Rupees in ‘000 Total Month Months Over 3 Over 6 to 6 Months to Months 1 Year Over 1 to 2 Years Over 2 to 3 Years Over 3 to 5 Years Assets Cash and balances with treasury banks 73,651,718 22,832,033 – – – 12,704,921 Balances with other banks 8,196,147 2,763,740 3,022,739 1,376,953 1,032,715 – Investments 449,611,987 16,426,922 42,286,118 50,902,231 61,924,088 42,936,518 Advances 395,416,055 119,544,887 46,724,177 36,809,132 25,706,465 19,985,644 Fixed assets 21,232,750 202,969 391,440 572,564 1,111,081 2,031,930 Intangible assets 1,158,857 19,552 38,938 48,944 59,558 103,746 Deferred tax assets 1,597,334 974,374 - - 63,682 63,828 Other assets 42,021,813 12,050,931 1,735,930 1,212,382 2,008,080 6,007,988 12,704,921 – 74,270,645 35,700,890 1,743,704 97,213 182,696 6,893,107 12,704,921 – 81,252,671 41,312,583 2,389,507 169,190 312,754 6,150,741 Over 5 to 10 Above 10 Years Years 10,889,933 – 76,076,230 38,054,926 2,182,568 621,716 – 5,110,846 1,814,989 3,536,564 31,577,351 10,606,987 – – 851,808 992,886,661 174,815,408 94,199,342 90,922,206 91,905,669 83,834,575 131,593,176 144,292,367 132,936,219 48,387,699 Liabilities Bills payable 12,629,996 6,153,334 5,014,190 835,698 626,774 – – – – – Borrowings 84,163,669 49,158,624 11,328,333 2,269,802 932,385 4,919,342 5,795,780 4,879,701 4,182,602 697,100 Deposits and other accounts 790,982,287 134,814,012 37,606,304 14,970,025 32,540,359 142,432,355 140,117,267 148,393,362 120,140,174 19,968,429 Subordinated loans 12,000,000 – – – – – – – 6,000,000 6,000,000 Other liabilities 38,429,434 20,339,943 1,735,930 1,212,382 2,008,080 3,037,639 3,922,759 3,180,392 2,564,833 427,476 Net assets 938,205,386 210,465,913 55,684,757 54,681,275 (35,650,505) 38,514,585 19,287,907 36,107,598 150,389,336 149,835,806 156,453,455 132,887,609 27,093,005 71,634,299 55,798,071 (66,554,761) (18,242,630) (12,161,088) 48,610 21,294,694 Share Capital 12,602,602 Reserves 25,701,665 Unappropriated profit 8,706,053 Surplus on revaluation of assets 7,670,955 54,681,275 Annual Report 2021 225
228. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 45.5 Derivative Risk The Group at present does not offer structured derivative products such as interest rate swaps, forward rate swap, forward rate agreements or foreign exchange options nor does it deal in market making and foreign exchange hedging. Group’s derivative exposure is limited to hedging transactions undertaken by Treasury in instruments such as forward exchange contracts. The Risk Management Group monitors Group’s overall derivative exposure in forward exchange contracts, which are marked to market and are included in Group’s overall assessment of value at risk (VaR). Further, value at risk (VaR) is also separately monitored for forward exchange contracts. Derivative exposures are also included in Group’s capital charge and risk weighted asset calculation in accordance with SBP regulations. 46.GENERAL 46.1 Non-adjusting events after the balance sheet date The Board of Directors in its meeting held on February 15, 2022 has proposed the following appropriations, which will be approved in the forthcoming Annual General Meeting. The consolidated financial statements for the year ended December 31, 2021 do not include the effect of the appropriations which will be accounted for in the consolidated financial statements for the year ending December 31, 2022 as follows: Rupees in ‘000 20212020 47 Transfer from unappropriated profit to: Proposed final cash dividend - Rs. Nil per share (2020: Rs. 3 per share) Subsequent to the period end, the Board of Directors of the Group, through resolution by circulation dated 10 January, 2022, approved the scheme of arrangement for amalgamation of the wholly owned subsidiary, Askari Securities Limited (ASL) with and into Foundation Securities (Private) Limited (FSL). As per the approved scheme of arrangement, the entire undertaking of ASL inclusive of all properties, assets, rights, liabilities, trademarks, patents and obligations of ASL will be transferred to FSL against 27,140,000 shares of FSL (one share of FSL against 1.18 shares of ASL held by the Bank). ASL will be dissolved without winding up. The scheme of arrangement is subject to necessary regulatory and shareholder’s approvals. 48. DATE OF AUTHORIZATION – 3,780,781 NON-ADJUSTING EVENTS AFTER THE REPORTING DATE These consolidated financial statements were authorized for issue on February 15, 2022 by the Board of Directors of the Group. Saleem Anwar Chief Financial Officer 226 Askari Bank Limited Atif R. Bokhari President & Chief Executive Dr. Nadeem Inayat Director Mohammad Aftab Manzoor Director Waqar Ahmed Malik Chairman
229. PATTERN OF SHAREHOLDING AS AT DECEMBER 31 , 2021 Shareholding Number of shareholders From 1 101 501 1,001 5,001 10,001 15,001 50,001 500,001 1,030,001 2,085,001 5,295,001 22,925,001 542,565,001 To Total shares held 1,905 2,824 1,897 4,002 1,738 854 789 383 28 19 19 7 5 1 100 500 1,000 5,000 10,000 15,000 50,000 500,000 1,000,000 2,000,000 5,000,000 10,635,000 271,885,000 542,570,000 75,867 817,541 1,458,178 10,142,121 12,814,801 10,780,078 20,489,194 53,475,088 20,267,264 26,886,267 67,415,641 48,749,500 444,321,916 542,566,724 14,471 1,260,260,180 Categories of Shareholders Numbers of Shares Held Percentage Particularsshareholders Directors, CEO, Children Associated Companies & Related Parties Executives / Employees of the Bank Banks, DFI & NBFI, Insurance Companies, Takaful, Modarabas, Pension Funds ICP Insurance Companies Mutual Funds & Mudarabas General Public (Local) General Public (Foreign) Others Foreign investors (Foreign Companies) 6 9 13 3,000 920,398,417 86,835 0.0002 73.0324 0.0069 34 1 10 17 14,197 25 154 5 4,869,696 3,737 24,724,153 30,421,176 237,538,153 96,127 37,260,109 4,858,777 0.3864 0.0003 1.9618 2.4139 18.8483 0.0076 2.9565 0.3855 Total 14,471 1,260,260,180 100.0000 Associated Companies & Related Parties: Fauji Foundation Group 9 920,398,417 73.0324 Fauji Foundation Fauji Fertilizer Company Limited Fauji Fertilizer Bin Qasim Limited Related Parties 2 2 1 90,629,884 543,768,024 271,884,009 7.1914 43.1473 21.5736 Trustees of FFC Employees Gratuity Fund Trustees Of FFC Mgnt Staff Pension Fund Trustees of Askari Bank Limited Employees Gratuity Fund Trustees of Askari Bank Limited Employees Provident Fund Modarabas & Mutual Funds 1 1 1 1 4,954,500 1,332,000 915,000 6,915,000 0.3931 0.1057 0.0726 0.5487 17 30,421,176 2.4139 Safeway Fund (Pvt) Limited First Tri-Star Modaraba Management Investec Mutual Fund Limited Asian Stocks Fund Limited Investec Mutual Fund Limited First U.D.L. Modaraba CDC - Trustee AKD Index Tracker Fund Tri-Star Mutual Fund Limited 1 1 1 1 1 1 1 1 496 89 61 2,893 1 359 89,813 166 0.0000 0.0000 0.0000 0.0002 0.0000 0.0000 0.0071 0.0000 Annual Report 2021 227
230. PATTERN OF SHAREHOLDING AS AT DECEMBER 31 , 2021 Categories of Shareholders Numbers of Shares Held Percentage Particularsshareholders CDC - Trustee NBP Stock Fund 1 1,300,000 0.1032 CDC - Trustee APF-Equity Sub Fund 1 119,500 0.0095 CDC - Trustee Alfalah GHP Alpha Fund 1 439,500 0.0349 CDC - Trustee NIT-Equity Market Opportunity Fund 1 4,448,442 0.3530 CDC- Trustee First Habib Stock Fund 1 240,000 0.0190 CDC - Trustee National Investment (Unit) Trust 1 23,126,856 1.8351 CDC - Trustee First Habib Asset Allocation Fund 1 61,000 0.0048 CDC - Trustee NBP Financial Sector Fund 1 462,000 0.0367 CDC - Trustee NIT Asset Allocation Fund 1 130,000 0.0103 Board of Directors Shareholding Mr. Arif Ur Rehman Dr. Nadeem Inayat Mr. Mohammad Aftab Manzoor Mr. Mushtaq Malik Ms. Zoya Mohsin Nathani Raja Muhammad Abbas 1 1 1 1 1 1 500 500 500 500 500 500 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 Shareholding Board of Directors Executives / Employees of the Bank 6 3,000 0.0002 13 86,835 0.0069 1 3,737 0.0003 Banks, Development Financial Institutions, Non- Banking Financial Institutions, Insurance Companies, 44 29,593,849 2.3482 General Public (Local) - Individuals General Public (Foreign) - Individuals Foreign Companies Others 14,197 25 5 154 237,538,153 96,127 4,858,777 37,260,109 18.8483 0.0076 0.3855 2.9565 14,381 279,753,166 22.1980 ICP Total 14,471 1,260,260,180 100.0000 Note 1: For the purpose of reporting trades in the shares of the Bank, as per requirement of 5.6.4 of Rule Book of Pakistan Stock Exchange Limited, Executive(s) mean person(s), who have access to price sensitive information. Note 2: During the year. there have been no trades in the shares of the Bank by it’s Directors, Chief Executive Officer, Chief Financial Officer, Company Secretary and their spouses and minor children except sale of 75,000 shares by Mr. Rashid Nawaz Tipu, Executive of the Bank. 228 Askari Bank Limited
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232. AGM Thursday , March 24, 2022 at 10:00 am at Topi Rakh Complex (Galaxy Hall), Army Heritage Foundation, Ayub National Park, Jhelum Road, Rawalpindi 230 Askari Bank Limited
233. FORM OF PROXY ASKARI BANK LIMITED 30TH ANNUAL GENERAL MEETING I /We S/o/ D/o/ W/o of being member(s) Askari Bank Limited (the Bank), hold ordinary shares vide Folio/CDC Account No. hereby appoint Mr./Mrs./Ms. Folio/CDC Account No. of failing him/ her, Mr./Mrs./Ms. Folio/CDC Account No. of of , do , as my/our proxy in my/our absence to attend and vote on my/our behalf at the 30th Annual General Meeting of the Bank to be held on Thursday, March 24, 2022 at 10:00 am at Topi Rakh Complex (Galaxy Hall), Army Heritage Foundation, Ayub National Park, Jhelum Road, Rawalpindi and through Zoom and at any adjournment thereof. Signed this day of March 2022. . Signature of Member (The signature should agree with the specimen registered with the Bank) (Please affix revenue stamp of Rs. 5) Witnesses No. 1: Witnesses No. 2: Name:Name: C.N.I.C. No.: C.N.I.C. No.: Address:Address: IMPORTANT NOTES: A.General: 1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote for him/her. No person shall act as a proxy, who is not a member of the Bank except that corporate entity may appoint a person who is not a member. 2. The instrument appointing a proxy should be signed by the member or his/her attorney duly authorized in writing. If the member is a corporate entity, certified true copy of the instrument authorizing the person to act as proxy shall be provided. 3. The Proxy Form, duly completed and signed, must be received at the Company Secretary Office, Askari Bank Limited, 4th Floor, NPT Building, F-8 Markaz, Islamabad at least 48 hours before the time of holding the meeting. 4. The proxy form shall be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form. 5. If a member appoints more than one proxy, and more than one instrument of proxy is deposited by a member, all such instruments of proxy shall be rendered invalid. B. For CDC Account Holders 1. Copies of the CNIC or passport of the beneficial owners shall be furnished with the proxy form. 2. The proxy shall produce his / her original CNIC or original passport at the time of the meeting. 3. In case of Corporate entity, certified true copy of the instrument authorizing the person to act as proxy shall be provided along with proxy form to the Bank. Annual Report 2021 231
234. The Company Secretary ASKARI BANK LIMITED 4th Floor , NPT Building F-8 Markaz Islamabad - Pakistan 232 Askari Bank Limited
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236. The Company Secretary ASKARI BANK LIMITED 4th Floor , NPT Building F-8 Markaz Islamabad - Pakistan 234 Askari Bank Limited