JS Bank Limited: Annual Report 2021

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3. Table of Contents Page No . 1 1 2 3 4 5 6 7 12 17 22 26 46 47 50 58 134 138 146 234 240 242 256 260
4. Vision To be the most innovative , customer centric and responsible bank in Pakistan. Mission Our mission is to be a world class bank providing innovative financial services to our customers through a motivated team of professionals, supported by the latest technology, whilst maintaining high ethical standards, creating value for all our stakeholders and contributing to the society through responsible and sustainable development. 1
5. Company Information Board of Directors Chief Financial Officer Mr . Kalim-ur-Rahman Mr. Adil Matcheswala Mr. Ashraf Nawabi Mr. G.M. Sikander Mr. Hassan Afzal Mr. Munawar Alam Siddiqui Ms. Nargis Ghaloo Mr. Sohail Aman Mr. Basir Shamsie Mr. Hasan Shahid Chairman Non-Executive Director Non-Executive Director Independent Director Non-Executive Director Non-Executive Director Independent Director Independent Director President & CEO Audit Committee Ms. Nargis Ghaloo Mr. Adil Matcheswala Mr. G.M. Sikander Mr. Munawar Alam Siddiqui Chairperson Member Member Member Human Resource, Remuneration & Nomination Committee Mr. Sohail Aman Mr. Adil Matcheswala Mr. G.M. Sikander Mr. Kalim-ur-Rahman Chairman Member Member Member Risk Management Committee Mr. Ashraf Nawabi Mr. Munawar Alam Siddiqui Ms. Nargis Ghaloo Mr. Basir Shamsie Chairman Member Member Member Board IT Committee Mr. Hassan Afzal Mr. Kalim-ur-Rahman Mr. Sohail Aman Mr. Basir Shamsie Company Secretary Mr. Ashraf Shahzad Auditors KPMG Taseer Hadi & Co. Chartered Accountants Sheikh Sultan Trust Building No. 2 Beaumont Road Karachi Legal Advisors Bawaney & Partners Haidermota & Co. Liaquat Merchant Associates Share Registrar CDC Share Registrar Services Limited CDC House, 99 – B, Block ‘B’, S.M.C.H.S., Main Shahra-e-Faisal, Karachi Registered office JS Bank Limited Shaheen Commercial Complex Dr. Ziauddin Ahmed Road P.O. Box 4847, Karachi-74200, Pakistan UAN: +92 21 111 JS Bank (572-265) 111-654-321 www.jsbl.com Chairman Member Member Member Annual Report 2021 2
6. Core Values Code of Conduct JS Bank ’s Code of Conduct is designed to guide the personal business ethics of its employees and does not tolerate any conduct which might be considered detrimental to the Bank and its reputation. The Bank considers honesty and integrity as cornerstones of ethical behaviour for lasting business relationships. The Bank aims to deliver products and services in a fair, transparent and ethical manner. Our Code of Conduct emphasises upholding ethical standards across all business dealings and relationships. The Bank aims to be transparent in all its dealings and enhance customer banking knowledge and inform them about banking services in a wholistic manner. The complete Code of Conduct is handed over to all employees and is available on the Bank’s website as well. Annual Report 2021 3
7. Corporate Profile of the Bank JS Bank Limited (the Bank / JSBL) is a banking company incorporated in Pakistan as a public limited company on March 15, 2006. The Bank is a subsidiary company of Jahangir Siddiqui & Co. Ltd. (JSCL) and its shares are listed on Pakistan Stock Exchange Limited (PSX). The Bank commenced its banking operations on December 30, 2006 and its registered office is situated at Shaheen Commercial Complex, Dr. Ziauddin Ahmed Road, Karachi. The Bank is a scheduled bank, engaged in commercial banking and related services as described in the Banking Companies Ordinance, 1962 and is operating through 307 (December 31, 2021: 282) branches / sub-branches in Pakistan and one wholesale banking branch in Bahrain (December 31, 2021: one). The Pakistan Credit Rating Agency Limited (PACRA) has assigned the long-term entity rating of the Bank to AA- (Double A Minus) whereas short-term rating is maintained at ‘A1+’ (A One Plus), which is the highest possible short-term rating. The ratings denote a very low expectation of credit risk and indicate very strong capacity for timely payment of financial commitments. largest securities brokerage and investment banking firms in Pakistan with a leadership position in the domestic capital markets. It is in the business of equity, fixed income, currencies and commodities brokerage and investment banking. It was incorporated in Pakistan on June 28, 2000 and is the successor to the securities business of Jahangir Siddiqui & Co. Ltd. and Bear Stearns Jahangir Siddiqui Limited. JS Investments Limited Holding 84.56% Profile: JS Investments Limited is a licensed Investment Adviser and Asset Management Company under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (the NBFC Rules) and the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations). In addition, the Company is also a licensed Pension Fund Manager under the Voluntary Pension System Rules 2005. Recently, JSIL also acquired the Private Equity and Venture Capital Fund Management Services license(s) from the Securities and Exchange Commission of Pakistan. Subsidiaries JS Global Capital Limited Holding 92.90% Profile: JS Global Capital Limited is one of the Annual Report 2021 4
8. Credit Rating AALong Term (Double A Minus) A1+ Short Term (A One Plus) (Assigned by Pakistan Credit Rating Agency) Annual Report 2021 5
9. OPERATING STRUCTURE Jahangir Siddiqui & Co. Ltd. (JSCL) JS Bank Limited (JSCL holds 75.02% of JSBL) JS Global Capital Limited (JSBL holds 92.90% of JSGCL) JS Investments Limited (JSBL holds 84.56% of JSIL) Annual Report 2021 6
10. Composition of the Board S .No Name of Directors Status 1 Mr. Kalim-ur-Rahman - Chairman Non- Executive Director 2 Mr. Adil Matcheswala Non- Executive Director 3 Mr. Ashraf Nawabi Non- Executive Director 4 Mr. G.M. Sikandar Independent Director 5 Mr. Hassan Afzal Non- Executive Director 6 Mr. Munawar Alam Siddiqui Non- Executive Director 7 Ms. Nargis Ghaloo Independent Director 8 Mr. Sohail Aman Independent Director 9 Mr. Basir Shamsie- President & CEO Non-Elected Executive Director The Board of Directors of JS Bank presently has three (3) directors as Independent Directors including one Female Independent Director. The Independent Directors meets the criteria of independence as defined in the Companies Act, 2017 and the State Bank of Pakistan directives. Further, the Board also has five Non-Executive Directors excluding President & CEO of the Bank who is a non-elected Executive Director. Annual Report 2021 7
11. Profile of the Board of Directors Mr . Kalim-ur-Rahman Non-Executive Director – Chairman Mr. Adil Matcheswala Non-Executive Director Mr. Kalim-ur-Rahman was formerly President & CEO of JS Bank Limited from 2010 to 2013 and has been a Director of the Bank since then. He was elected Chairman of the Board of Directors in August 2019. Mr. Adil Matcheswala is the CEO and founding Director of Speed (Private) Limited, a retail and distribution company that is incorporated in Pakistan. The Company’s portfolio includes numerous leading International brands such as Nike, Adidas, Under Armour, Birkenstock, Tag Heuer, Charles & Keith, Pedro and Timex. He is a seasoned banker with 50 years of experience in both international and domestic banking. He started his banking career with National & Grindlays Bank in 1963 as a Management trainee. After nearly three years of banking training in Pakistan and London, he was appointed as a covenanted officer of the Bank in 1966, and served in Karachi, Peshawar and London in senior positions till 1978, when he resigned and joined Middle East Bank, Dubai as Chief Manager, and subsequently promoted as Assistant General Manager - UAE Operations. During his tenure with Middle East Bank in Dubai, he conceived and implemented the online computerization of the UAE branches in 1980, being one of the first in UAE banking. In 1985, he was posted to Karachi as General Manager – South Asia, and till 1991 he saw Middle East Bank, Pakistan grow its profitability by 35% per annum CAGR from only three branches in the country. After 1991, Mr. Kalim-ur-Rahman served in several Pakistani banks in senior positions, including as the President & CEO of Askari Commercial Bank from 1999 to 2006, during this period the Bank saw a phenomenal growth in its assets (40% CAGR) and profitability (47% CAGR). He subsequently served as the General Manager of Arab Emirates Investment, Dubai 2007-2008. Mr. Kalim-ur-Rahman was the first Secretary General of the Pakistan Banks Association 2006- 2007. Mr. Kalim-ur-Rahman did his Senior Cambridge from Burn Hall School, Abbottabad and B.Sc. (Hons) from Government College, Lahore. He had a first class academic career throughout, and his name is inscribed on the College Roll of Honor. He is a Fellow of the Institute of Bankers in Pakistan and holds the Director’s certification from the Pakistan Institute of Corporate Governance as well as the Institute of Directors, London. Mr. Kalim-ur-Rahman is a member of the Board’s IT Committee and the HR, Remuneration & Nomination Committee. Directorships in other companies: Excel Labs (Pvt) Limited He started his professional career in the financial services industry in 1992 and was the Head of the Equity Sales Division of Jahangir Siddiqui & Co. Ltd. (formerly Bear Stearns Jahangir Siddiqui Limited). He has previously served as the Chairman of the Board and Chairman of the Audit Committee of JS Global Capital Ltd. as well as a Director of JS Value Fund. He has served on the Board of JS Bank Limited since 2012. He is also a member of the Board’s Audit Committee and HR, Remuneration & Nomination Committee of the Bank. Mr. Matcheswala graduated from Brown University with an A.B. in Economics. Directorships in other companies: Speed (PVT) Limited JOMO Technologies (PVT) Limited Mr. Ashraf Nawabi Non-Executive Director Mr. Ashraf Nawabi is a seasoned banker, working in United Arab Emirates since 1967. He has worked in United Bank Limited/BCCI, as CEO for their Middle East Regions. Presently he is working as Advisor in Emirates NBD Bank PSC, which is largest Commercial Bank in the Middle East & Africa. Mr. Nawabi is also Board member of Alliance Insurance P.S.C. Dubai. He was also a Board member of Union National Bank Abu Dhabi, the third largest Bank of U.A.E. for almost ten years. Apart from this he is CEO/ Director of First Jamia Services Limited Lahore and Chairman Alif Noon Parents Foundation. Mr. Nawabi, in coordination with Dubai ruling family members and businessmen established International School of Choueifat in Lahore in 1991. This school is one of its kind in the entire subcontinent, imparting high quality education to students for entry into leading Universities of Europe and America. Further branches of International School of Choueifat are planned to be opened in different cities of Pakistan in next few years. Annual Report 2021 8
12. On his own , with an up to date personal contribution of almost Rs. 200 million he has established KPSS School in Chakwal, specifically to impart quality education to under privileged children of the area. This School has enrolment of over 400 pupils which will gradually increase to 1500 students in next few years. To accommodate increase in students, substantial expansion is underway to increase the capacity of school. Global institutions, Pakistani corporates, businessmen and individuals from Pakistan and abroad continue to donate substantial amounts for this noble cause. Further schools are also planned to be opened in less developed areas. Mr. Nawabi has served on the Board of JS Bank since 2007. He is also a Chairman of the Board’s Risk Management Committee. Directorships in other companies: First Jamia Services Limited, Lahore Alliance Insurance Co. P.S.C. Dubai. Mr. G.M. Sikander Independent Director Mr. G.M. Sikander has been a career civil servant having served the Government of Pakistan in various capacities for 39 years. He retired as Federal Secretary of the Housing and Works Division. He has served as Assistant Commissioner and Deputy Commissioner in various districts of Punjab and contributed significantly towards social sector development. While serving as Deputy Commissioner of Kasur he single handedly established a public school on self-help basis which has now become a degree college with almost 5,000 students. Mr. Sikander has previously served as Secretary to the Government of the Punjab and (KPK) provinces and headed the departments of Services, Establishment, Information & Tourism, Housing & Physical Planning, Baitul Maal, Social Security and Cooperatives. He also served as Principal Secretary to five Chief Ministers in the Punjab for a record period of nearly 10 years. Mr. Sikander is also a Trustee of the Hamza Foundation in Lahore which is a foundation dedicated to supporting and educating deaf and mute students and a Life Trustee of the Marafie Foundation Pakistan which is engaged in the development of public health and education sectors in Gilgit Baltistan. Mr. Sikander has served on the Board of JS Bank Limited since 2013. He is also a member of the Board’s Audit Committee and HR, Remuneration & Nomination Committee of the Bank. Mr. Sikander received his M.A. in Political Science from Punjab University and completed a Diploma in Development Administration from the University of Birmingham. He has also completed the Advanced National Management Course from the former Pakistan Administrative Staff College Lahore and a special course in Development Administration from The National Institute of Public Administration. Furthermore, he also holds the Director’s Certification from the Institute of Chartered Accountants of Pakistan (ICAP). Directorships in Other Companies: Nil Mr. Hassan Afzal Non-Executive Director Mr. Hassan Afzal is the Chief Technology Officer of Afiniti, a company that offers AI products to transform how enterprises pair employees and customers. Mr. Afzal has been responsible for the company’s product engineering, professional services, and production support areas since 2007. Prior to joining the Afiniti team, Mr. Hassan held senior management positions with Deloitte Consulting, Commerce One and American Management Systems. At Deloitte Consulting, Mr. Afzal advised the CIOs of fortune 500 companies on technology strategy, merger integration, and enterprise system implementations. As Senior Principal at American Management Systems (AMS), Mr. Afzal was responsible for the systems deployment function of AMS’s healthcare product offering. As Senior Director at Commerce One, Mr. Afzal was responsible for professional services engagements in the Oil and Gas sector. Mr. Afzal was elected as director on the Board of JS Bank in 2019. He is also the Chairman of the Board’s Information Technology Committee of the Bank. Mr. Afzal holds a MSE in Computer and Information Systems from the University of Pennsylvania and a BS in Electrical Engineering from the University of Virginia. Directorships in other companies: Nil Mr. Munawar Alam Siddiqui Non-Executive Director Mr. Munawar Alam Siddiqui, retired as an Air Commodore from the Pakistan Air Force (PAF) in 2003. His last post was Assistant Chief of Air Staff (Administration) at Pakistan Air Force Headquarters. For his meritorious services to the PAF, he was awarded Tamgha-e-Imtiaz (Military) and Sitara-eImtiaz (Military). Annual Report 2021 9
13. He was commissioned in the GD (P) Branch of the Pakistan Air Force in 1974. He is a qualified flying instructor and has flown over 8000 hours on different aircraft types including C-130, Boeing and Dassault aircraft. He has served as a VVIP and Presidential Pilot during his tenure of service and has held various key command and staff appointments in the PAF. He served as Director of Air Transport at Air Headquarters from 1996 to 1998 and commanded an operational air force base with over 8,500 personnels from 2000 to 2002. Presently Mr. Siddiqui is Advisor to JS Investments Limited and was Chairman of JS Investments Limited from 2004 to 2013. Currently, he is Chairman of Peregrine Aviation (Pvt) Limited. As part of his social commitment, he works as a director on the boards of Fakhr-e-Imdad Foundation, Karachi Education Initiative, Karachi School for Business & Leadership and Karigar Training Institute. He is also a Trustee of the Cardiovascular Foundation. Mr. Siddiqui has served on the Board of JS Bank since 2016. He is also a member of the Board’s Audit Committee and Risk Management Committee of the Bank. Mr. Siddiqui holds a B.Sc. (Honours) in War Studies from Karachi University, a B.Sc. Avionics from Peshawar University, an M. Sc. in Defence and Strategic Studies from Quaide-Azam University and an M. Sc. in Strategic Studies from Karachi University. He is also an alumnus of the National Defence University. Directorships in other companies: Jahangir Siddiqui & Sons Limited Fakhr-e-Imdad Foundation Karachi Education Initiative Peregrine Aviation (Pvt) Limited Karigar Training Institute Ms. Nargis Ghaloo - Independent Director Ms. Nargis Ghaloo is a retired senior civil servant having served the Government of Pakistan in various capacities for 36 years. She retired as the Managing Director Public Procurement Regulatory Authority, Government of Pakistan. Ms. Ghaloo was Chairperson of State Life Insurance Corporation of Pakistan, Pakistan’s largest life assurer, from 2014 to 2016. She is also the Chairperson of Alpha Insurance Company Limited. Ms. Ghaloo joined the Civil Services of Pakistan in 1982, has many years of professional experience serving in senior management positions with provincial as well as federal government departments in diversified fields such as public sector management, administration, financial, judicial, health, insurance and planning. Ms. Ghaloo did her Masters in English from University of Sindh in 1981 and is a certified Director from The Pakistan Institute of Corporate Governance (PICG) and holds certificate of corporate governance from INSEAD and also holds a certificate in company direction from Institute of Directors, UK. Ms. Ghaloo has served on the Board of JS Bank since 2016. She is also a member of the Board’s Audit Committee and Risk Management Committee of the Bank. Directorships in other companies: Alpha Insurance Company Limited Hinopak Motors Limited Mr. Sohail Aman Independent Director Born in 1959, Air Chief Marshal Sohail Aman received his intermediate and graduate education at PAF College, Sargodha. Subsequently, he joined Pakistan Air Force and graduated from PAF Academy in 1980. He is a graduate of Pakistan Air Force War College and has two Masters Degrees: Strategic Studies from Karachi University and International Relations from Kings College, London. He is also a proud alumnus of Royal College of Defence Studies United Kingdom and has attended National & International Security Course at Harvard Kennedy School USA. During his career, Air Chief Marshal Sohail Aman has flown various types of fighter aircrafts including F-16 and has a grand total of over 3000 fighter hours to his credit. As a distinguished fighter pilot and Combat Commander, he has also evaluated modern fighter aircraft like SU27, SU30, Gripen and Euro fighter Typhoon. He has commanded a Fighter Squadron, Combat Commanders’ School, a Fighter Base and a Regional Air Command of Pakistan Air Force. Air Chief Marshal Sohail Aman also has a rich staff experience and has served as Director Operations, Director Plans, Assistant Chief of Air Staff Operations, Deputy Chief of Air Staff Training and Deputy Chief of Air Staff Operations at Air Headquarters. As Deputy Chief of Air Staff Training, he focused on the concept of Education for All; especially to the underprivileged children. In this regard he introduced various scholarship schemes for deserving PAF as well as civilian children. He also developed two medical colleges and three air university campuses Annual Report 2021 10
14. across the country during his tenure as the Chief . As Deputy Chief of the Air Staff Operations, he was the main architect of Pakistan Air Force’s campaign in support of successful counter terrorism operation Zarb-e-Azb that proved pivotal in eliminating the menace of terrorism from Pakistan and restoration of peace in the country. He personally led anti-terrorists missions in F16 aircraft depicting the nation’s resolve to combat terrorism. Mr. Aman was appointed as director on the Board of JS Bank in 2019. He is also the Chairman of the Board’s HR, Remuneration & Nomination Committee and member Board IT Committee of the Bank. Air Chief Marshal Sohail Aman is also highly regarded for orchestration and actualization of Pakistan Air Force’s modernisation plan. His relentless pursuit of indigenisation and focus on Human Resource development through industry academia linkage is evident in shape of development of “Aviation City” in PAF. The establishment of “PAF Airpower Center of Excellence” is yet another strategic initiative by the Air Chief Marshal. This unique institution aims to share PAF’s rare experiences in Counter Terrorism Air Operations (CT) with friendly air forces. The institute also lays special focus on Research and Development (R&D) in the field of ‘Airpower Application in Contemporary Warfare’. ACE’s R&D is closely linked to development of modern aviation hardware at Aviation City, especially Project ‘Azm’ which was initiated by him as the PAF effort to manufacture fifth generation fighter aircraft. He envisioned and developed PAF Base Bholari near Hyderabad and developed it at a record speed as a fighter base. Mr. Basir Shamsie is President & CEO of JS Bank Limited. Owing to his experience in security related issues and Leadership, Sohail Aman has extensively lectured at think tanks and audience at various high-ranking universities and staff & war colleges; both inland and abroad. Sohail Aman is also a man of great compassion which is evident from the monumental steps he has undertaken for the welfare of families of martyrs, Personnel with Special Needs (PSN) and education and wellbeing of low paid employees of PAF. In recognition of his meritorious and exceptionally dedicated services, he has been decorated with awards of Nishan-e-Imtiaz (Military), Hilal-e-Imtiaz (Military), Sitara-e-Imtiaz (Military) and Tamgha-eImtiaz (Military). He is also recipient of “The Legion of Merit” of Turkish Armed Forces, “King Abdul Aziz Medal of Excellence” by the Kingdom of Saudi Arabia and United States’ “Legion of Merit”, the highest military award of US Armed forces awarded to any foreign military official. Air Chief Marshal is currently studying Leadership, Policy Formulation and Governance and is undertaking projects relating philanthropic work. Directorships in other companies: Nil Mr. Basir Shamsie - President and CEO Mr. Shamsie has received his Bachelors in Business Administration from University of Texas at Austin. He has also completed the Program for Leadership Development from Harvard Business School. Mr. Shamsie joined Bear Stearns Jahangir Siddiqui & Co. (now Jahangir Siddiqui & Co. Ltd.) in 1994 in the Money and Bond Markets business. His particular expertise is in Treasury and Investment Banking and he is credited with over 60 capital market deals, many of which have been landmark transactions for Pakistan. He was part of the core team responsible for acquisition of American Express Bank’s Pakistan operations in 2006 and its merger into JS Bank, Mr. Shamsie has since been associated with JS Bank in various senior roles such as Group Head of Treasury, Wholesale & International Banking which he held till May of 2017. His last assignment was Deputy CEO of JS Bank. He has previously served as Chairman, JS Investments Limited and JS Global Capital Limited and Director of JS Bank Limited. He is also a member of the Board’s Risk Management Committee and Information Technology Committee of the Bank. Directorships in other companies: Nil Annual Report 2021 11
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16. Sustainability and Corporate Social Responsibility Responsibility to the community in which it operates is a foundational cornerstone for JS Bank and testament to our commitment , JS Bank in collaboration with the Government of Sindh launched Sindh’s first ever Drive Through Vaccination Center, as part of its CSR initiative to inoculate the citizens of Pakistan against COVID-19. People could come and get vaccinated in their cars, without any exposure to COVID-19, in a one-of-akind drive through facility. More than 50,000 people were vaccinated from the drive through (activity started on 19th July and ended on 30th September). The drive through was operational, come rain or shine, and we are committed to making an impact! JS Bank creates value by contributing to sustainable development and responsible business within our spheres of operation. We do this by dedicating significant resources to contribute to the well-being of society. We do this through a variety of ways which includes providing climate financing and sustainable solutions, building and inculcating awareness of responsible corporate practices while extending financial grants to our partner organisations working to support the underprivileged. JS Bank & the Environment Climate change is a threat multiplier, and there is a fundamental inequality in how people are impacted, with the poorest and those less equipped to withstand climate shocks and stresses— essentially those who did the least to cause the crisis — bearing the brunt. Pakistan, although only contributing 0.9% to global greenhouse gas (GHG) emissions, is one of the most vulnerable countries to the impacts of climate change. At JS Bank, we remain vigilant on climate change and have taken multiple initiatives over the years to mitigate its impact. We take pride in knowing that our initiatives have been acknowledged in the latest NDC of Pakistan and we aim to be one of the first private sector entities to lead public/public sustainable initiatives. We are trying to integrate environmental consciousness as part of organisational culture and reorientation of banking products/services and operations to reduce their environmental impact. Annual Report 2021 13
17. Fully Compliant with State Bank of Pakistan Green Banking Guidelines Issued by the State Bank of Pakistan , the Green Banking Guidelines (GBGs) acknowledges the responsibility of the Pakistani financial sector in supporting policy initiatives that will enable the transformation of the economy towards a low carbon and climate resilient economy. As of 2019, the Bank is fully compliant with the GBGs having undertaken: • Introduction of an Environmental and Social Risk Management (ESRM) Framework in 2019 creating awareness towards the environmental and social (E&S) risks involved in extension of credit and the procedures and authorities which have been established to manage these risks. The process recognises that environmental and social issues are mainstream issues and E&S risk assessment should be performed in addition to the conventional credit risk assessment. The objective of JS Bank’s ESRM is to fulfill our responsibility towards environmental protection and provide financing solution for resource efficient and climate resilient economic transformation. • Means to identify, assess and mitigate environmental risks for clients. While the primary responsibility of ensuring compliance with environmental laws and regulations rests with the borrowers, JS Bank goes above preestablished standards to create a holistic ecosystem of environmental risk management for all concerned. • Introduction of carbon reduction measures in self-operations. This extensive exercise including measurement of energy (on and off grid power) and paper consumption of all of JS Bank operating locations (Head Office, regional offices and the branch network). Recognition of gaps was followed by a rectification exercise through promulgation of energy efficient appliances (Inverter and LED based), increased usage of solar power (for technical equipment) and process automation to cut down on documentation. • Portfolio ERR Analysis: In CY 2021, we facilitated financing for over 3,700+ customers spreading across all our national footprint. From these new customers, less than 1% scored a high Environmental Risk Rating (ERR), a significant majority of our customers have low to medium environmental impact. For the limited high scoring customers, we regularly monitor and ensure that they remain compliant with relevant Environmental Protective Agency provisions and best practices and take initiatives for our customers to help them adopt a more environmentally approach of doing business. Source: https://www4.unfccc.int/sites/ndcstaging/ PublishedDocuments/Pakistan%20First/ Pakistan%20Updated%20NDC%202021.pdf Accreditation to the Green Climate Fund (GCF) In 2019, JS Bank became Pakistan’s first and only financial institution to have been accredited by the Green Climate Fund (GCF), the world’s largest climate fund. GCF’s aim is to provide facilities to public and private sector corporations in emerging economies to limit or reduce their greenhouse gas (GHG) emissions through investments in lowemission and climate-resilient programmes. As an accredited entity, JS Bank will be able to apply for funding of up to USD 250 million per project. As of December 31, 2019, the Fund had 124 active projects worldwide with 348 million beneficiaries and has a pledged total of nearly USD 10 Billion. JS Bank can also mobilise additional funds from private sector investors to support action on climate change. In addition to opening new paths of local and international funding, the Bank can partner in contributions to climate adaptation and mitigation financing in Pakistan. This approval was based on JS Bank meeting GCF’s stringent criteria including fiduciary standards, environmental and social safeguards, and specialised capacities in driving climate action. The bank is currently working on multiple projects to mobilise low-emission climate resilient impact financing through our partnership with GCF. Green Office Certification – Five Years Running: JS Bank is the only bank in Pakistan to be Green Office certified and is in its fifth year of being certified by the World Wildlife Fund Pakistan as a Green Office. A practical Environmental Management System developed specifically for office conditions, the Green Office initiative aims to reduce greenhouse gas emissions and decrease the ecological footprint at the workplace by reducing electricity consumption and paper waste. As a part of the certification process, WWF Annual Report 2021 14
18. Pakistan , undertook a comprehensive audit using stringent guidelines to check all the processes and procedures adopted by JS Bank for energy conversation and waste management at its head office. The Bank successfully met all the requirements set by WWF Pakistan. Among other initiatives, we also separate our waste so that it is much easier to recycle. Effective segregation of waste means that less waste goes to landfills which makes it cheaper and better for people and the environment. JS Bank initiatives for SDG’s during the period 2020-21 SDG Goal 5 – Gender Equality: JS Bank has been on the forefront to equality within the organisation Now we are proud to announce that we have 22 permanent resources in our regular workforce. SDG Goal 7 – Affordable & Clean Energy JS Bank has solarized 113 branches representing more than 33% of its total branch network across the country. We continue to increase our reliance on clean energy and overall promote the use of clean renewable energy products. SDG 11 Climate Action: GCF accreditation will enable JS Bank to aggressively take on Climate Action. SDG 3 – Good Health & Well Being – JS Bank launched Karachi’s First Drive Through Vaccination Center. Solar Financing Solutions During the year 2021, JS Bank has enhanced representation of women overall in the organisation and more importantly the company has added diversity in its leadership. JS Bank collaborated with International Finance Corporation and World Bank to create a family friendly workplace. Devised D&I targets for branches & departments bank wide and communicating to relevant staff. JS Bank is also proud to win the Global Diversity and Inclusion benchmark award for the year 2020 for benefits. Furthermore, JS Bank has introduced an initiative known as Reboot- A virtual returning to work programme for females after a career break, in multiple impactful roles. In order to provide solutions that are environmentally friendly, JS Bank has successfully financed over 226 solar projects for commercial, residential and agriculture purposes in CY 2021. It has also been actively working towards reducing the carbon footprint of the country and has deployed approximately 5 MW worth of solar panel systems with a further 18 MW under process. JS Bank customers are now able to generate their own electricity in a hassle-free manner through the solar panel system installed on their businesses / residences / farms without being dependent on the grid for electricity. SDG Goal 10 – Reduce Inequality: JS Bank focuses on Inclusion for All JS Bank is deeply committed to Corporate Social Responsibility (“CSR”) in Pakistan. The Bank contributes resources both financial and human towards supporting the Mahvash & Jahangir Siddiqui Foundation established in 2003 (“MJSF”). MJSF is a leading charitable, non-profit, nonpartisan organisation primarily focusing on healthcare, education, sustainable development through social enterprise and humanitarian relief. Through its various initiatives, MJSF aims to build an educated, healthy and prosperous society with dignity and honor for people by providing healthcare, education and promoting economic and social development of underprivileged members of our society. In achieving its mission, the Foundation has also partnered with internationally acknowledged organisations including The United Nations (UN), Provincial Disaster Management Authority Sindh (PDMA), World Food Programme (WFP), UN Habitat for Humanity, National University of Singapore (NUS), Weill Cornell Medical College At JS Bank, we have a mission of “Inclusion for All’, because for us diversity is an opportunity not a challenge. We believe, diversity (Disability, Race, Gender or Culture) offers tremendously unique perspectives that inspires innovation, there we not only strive to become a more diverse, Equitable, & inclusive organisation but we aim to create an impact. Continuing our mission of Inclusion for all, we kicked our project Uraan, For the “People of Determination” in March 2021. To induct, embed and empower people with disabilities in our workforce, induction of 25 interns amid several departments, along with a comprehensive HR policy review, perception surveys, sensitisation sessions to train organisation, role mapping to identify optimum roles to place interns and getting their internships turned into employment opportunities based on performance. Supporting Communities Annual Report 2021 15
19. Qatar , International Organisation for Migration (IOM) and various international and local academies / foundations for education, disability, healthcare etc. Partnering with organisations working in the fields of emotional and psychological health, gender, violence against women and children, education, and the psychological and reproductive health of adolescents; JS Bank has worked to create a measurable on-ground impact in the lives of the people of the nation. items and free primary medical camps at key distribution points in the province. These support activities helped provide relief for several thousand affected in the region. We have also extended our support for humanitarian relief in areas affected by flash floods in the Sindh province. This included provision of staple food 16
20. HIGHLIGHTS Deposits Rs . 460,705.01 million Profit Before Tax Rs. 2,208.93 million +9.19% +6.38% Profit After Tax Rs. 1,304.39 million ROE Rs. 6.16% +1.62% +13.42% Net Markup Income Rs. 11,894.75 million +21.66% 2021 Investments Rs. 231,266.28 million +14.66% Assets Rs. 584,288.85 million CAR 13.77% +9.79% Advances (Gross) Rs. 260,866.75 million +2.54% Equity Rs. 22,024.08 million +6.95% Annual Report 2021 17
21. Six Years ’ Financial Summary Rs. in million 2016 Statement of Financial Position Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments - net Advances - net Operating fixed assets Deferred tax assets Other assets Assets held for sale Total Assets 2021 2020 2019 2018 2017 34,267 1,186 31,939 231,266 254,184 13,302 18,145 584,289 30,421 1,106 23,240 201,698 250,199 10,086 14,678 739 532,168 25,589 463 30,321 142,568 242,945 11,964 9 16,194 374 470,427 32,111 969 1,937 148,690 251,991 8,415 287 12,354 456,754 17,334 1,034 3,116 169,612 184,140 7,113 9,131 391,479 15,509 753 11,334 133,727 93,794 5,837 6,490 267,444 Bills payable Borrowings Deposits and other accounts Sub-ordinated debt Deferred tax liabilities Other liabilities Total Liabilities 7,039 70,474 460,705 6,997 1,386 15,664 562,265 4,982 48,303 433,063 7,493 1,194 16,541 511,576 3,804 54,468 369,790 7,495 17,536 453,094 3,520 96,559 321,413 7,497 12,148 441,137 3,824 64,557 290,078 4,999 797 10,555 374,810 2,544 10,320 226,099 3,000 1,205 7,626 250,794 Net Assets 22,024 20,592 17,333 15,617 16,669 16,650 Share capital Discount on issue of shares Preference shares Reserves Surplus / (Deficit) on revaluation of assets - net of tax Unappropriated profits / (losses) Total Equity 12,975 (2,855) 2,331 12,975 (2,855) 1,991 12,975 (2,855) 1,750 12,975 (2,855) 1,712 12,225 (2,105) 1,500 1,541 12,225 (2,105) 1,500 1,334 2,467 7,107 22,024 2,334 6,148 20,592 637 4,828 17,333 (1,036) 4,821 15,617 490 4,519 16,669 1,223 3,973 16,650 39,125 3,207 95 1,198 574 3 44,202 43,099 3,596 1,873 1,040 98 70 49,775 41,595 2,860 (711) 1,010 300 484 45,538 29,997 2,669 (1,434) 688 109 109 32,138 20,381 2,124 1,234 357 167 169 24,433 15,081 1,427 2,965 313 98 59 19,942 27,231 33,322 34,566 21,188 14,139 9,353 2,267 681 360 406 203 (64) (234) (38) 45 12,723 41,993 275 324 132 13,019 47,752 (345) (107) 139 10,792 45,405 (220) 52 (149) 9,956 31,136 123 45 46 8,256 22,902 415 99 6,748 16,652 2,209 2,023 133 905 1,621 3,390 905 873 108 342 647 1,313 1,304 1,150 25 562 973 2,077 Profit & Loss Account Mark-up / return / interest earned Fee, commission and brokerage income Gain / (Loss) on sale of securities - net Income from dealing in foreign currencies Dividend income Other income Total Gross Income Mark-up / return / interest expensed Provision/ (reversal) against loans and advances Provision / (reversal) of diminution in value of investments Provision / (reversal) of fixed assests and others Worker welfare fund & Other Charges Operating expenses Total Operating Expenses Profit Before Tax Taxation Profit After Taxation Annual Report 2021 18
22. Six Years ’ Vertical Analysis Rs. in million Vertical Analysis Statement of Financial Position 2021 % 2020 % 2019 % 2018 % 2017 % 2016 % 34,267 6% 30,421 6% 25,589 5% 32,111 7% 17,334 4% 15,509 6% 1,186 0% 1,106 0% 463 0% 969 0% 1,034 0% 753 0% 31,939 5% 23,240 4% 30,321 6% 1,937 0% 3,116 1% 11,334 4% Investments - net 231,266 40% 201,698 38% 142,568 30% 148,690 33% 169,612 43% 133,727 50% Advances - net 254,184 44% 250,199 47% 242,945 52% 251,991 55% 184,140 47% 93,794 35% 13,302 2% 10,086 2% 11,964 3% 8,415 2% 7,113 2% 5,837 2% - 0% - 0% 9 0% 287 0% - 0% - 0% 18,145 3% 14,678 3% 16,194 3% 12,354 3% 9,131 2% 6,490 2% - 0% 739 0% 374 0% - 0% - 584,289 100% 532,168 Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Operating fixed assets Deferred tax assets Other assets Assets held for sale Total Assets 100% 470,427 100% 456,754 100% 391,479 100% 267,444 100% Bills payable 7,039 1% 4,982 1% 3,804 1% 3,520 1% 3,824 1% 2,544 Borrowings 70,474 12% 48,303 9% 54,468 12% 96,559 21% 64,557 16% 10,320 4% 460,705 79% 433,063 81% 369,790 79% 321,413 70% 290,078 74% 226,099 85% Sub-ordinated debt 6,997 1% 7,493 1% 7,495 2% 7,497 2% 4,999 1% 3,000 1% Deferred tax liabilities 1,386 0% 1,194 0% - 0% - 0% 797 0% 1,205 0% Other liabilities 15,664 3% 16,541 3% 17,536 4% 12,148 3% 10,555 3% 7,626 3% Total Liabilities 562,265 96% 511,576 96% 453,094 96% 441,137 97% 374,810 96% 250,794 94% 22,024 4% 20,592 4% 17,333 4% 15,617 3% 16,669 4% 16,650 6% Share capital 12,975 2% 12,975 2% 12,975 3% 12,975 3% 12,225 3% 12,225 5% Discount on issue of shares (2,855) 0% (2,855) 1% (2,855) -1% (2,855) -1% (2,105) -1% (2,105) -1% Deposits and other accounts Net Assets 1% Represented by: - 0% - 0% - 0% - 0% 1,500 1% 1,500 1% Reserves 2,331 0% 1,991 0% 1,750 0% 1,712 0% 1,541 0% 1,334 0% Surplus / (Deficit) on revaluation of 2,467 4% 2,334 0% 637 -0% (1,036) 0% 490 0% 1,223 1% Preference shares assets - net of tax 7,107 1% 6,148 1% 4,828 1% 4,821 1% 4,519 1% 3,973 1% 22,024 4% 20,592 4% 17,333 4% 15,617 3% 16,669 4% 16,650 6% 39,125 89% 43,099 87% 41,595 91% 29,997 93% 20,381 83% 15,081 76% 3,207 7% 3,596 7% 2,860 6% 2,669 8% 2,124 9% 1,427 7% 95 0% 1,873 4% (711) -2% (1,434) -4% 1,234 5% 2,965 15% 1,198 3% 1,040 2% 1,010 2% 688 2% 357 1% 313 2% 574 1% 98 0% 300 1% 109 0% 167 1% 98 0% 3 0% 70 0% 484 1% 109 0% 169 1% 59 Total Gross Income 44,202 100% 49,775 100% 45,538 100% 32,138 100% 24,433 100% 19,942 100% Mark-up / return / interest expensed 27,231 62% 33,322 67% 34,566 76% 21,188 66% 14,139 58% 9,353 47% 2,267 5% 681 1% 360 1% 406 1% 203 1% (64) 0% (234) -1% 275 1% (345) -1% (220) -1% 123 1% 415 2% (38) 0% 324 0% (107) 0% 52 0% 45 0% - 0% Unappropriated profits / (losses) Total Equity Profit & Loss Account Mark-up / return / interest earned Fee, commission and brokerage income Gain / (Loss) on sale of securities - net Income from dealing in foreign currencies Dividend income Other income Provision/ (reversal) against advances 0% Provision / (reversal) of diminution in value of investments Provision / (reversal) of fixed assets and others 45 0% 132 0% 139 0% (149) 0% 46 0% 99 0% Operating expenses 12,723 29% 95% 26% 10,792 24% 9,956 31% 8,256 34% 6,748 34% Total Operating Expenses 41,993 13,019 47,752 96% 45,405 100% 31,233 97% 22,812 93% 16,552 83% 2,209 5% 2,023 4% 133 0% 905 3% 1,621 7% 3,390 17% 905 2% 873 2% 108 0% 342 1% 647 3% 1,313 7% 1,304 3% 1,150 2% 25 0% 562 2% 973 4% 2,077 10% Worker welfare fund & Other Charges Profit Before Tax Taxation Profit After Taxation Annual Report 2021 19
23. Six Years ’ Horizontal Analysis Rs. in million Horizontal Analysis 6 Years 2021 2020 2019 2018 2017 2016 CAGR Balance Sheet Cash and balances with treasury banks 21% 34,267 30,421 25,589 32,111 17,334 Balances with other banks 13% 1,186 1,106 463 969 1,034 753 Lendings to financial institutions 44% 31,939 23,240 30,321 1,937 3,116 11,334 Investments - net 12% 231,266 201,698 142,568 148,690 169,612 133,727 Advances - net 22% 254,184 250,199 242,945 251,991 184,140 93,794 Operating fixed assets 19% 13,302 10,086 11,964 8,415 7,113 5,837 Deferred tax assets 0% - - 9 287 - - Other assets 21% 18,145 14,678 16,194 12,354 9,131 6,490 15,509 Assets held for sale 0% - 739 374 - - - Total Assets 18% 584,289 532,168 470,427 456,754 391,479 267,444 Bills payable 28% 7,039 4,982 3,804 3,520 3,824 2,544 Borrowings 4% 70,474 48,303 54,468 96,559 64,557 10,320 Deposits and other accounts 22% 460,705 433,063 369,790 321,413 290,078 226,099 Sub-ordinated loans 16% 6,997 7,493 7,495 7,497 4,999 3,000 Deferred tax liabilities (3)% 1,386 1,194 - - 797 1,205 Other liabilities 34% 15,664 16,541 17,536 12,148 10,555 7,626 Total Liabilities 19% 562,265 511,576 453,094 441,137 374,810 250,794 Net Assets 6% 22,024 20,592 17,333 15,617 16,669 16,650 Represented by: Share capital 1% 12,975 12,975 12,975 12,975 12,225 12,225 Discount on issue of shares 5% (2,855) (2,855) (2,855) (2,855) (2,105) (2,105) Preference shares 0% - - - - 1,500 1,500 Reserves 17% 2,331 1,991 1,750 1,712 1,541 1,334 Surplus / (Deficit) on revaluation of assets 43% 2,467 2,334 637 (1,036) 490 1,223 - net of tax Accumulated profits / (losses) 20% 7,107 Total Equity 6% 22,024 20,592 17,333 15,617 16,669 16,650 Mark-up / return / interest earned 17% 39,125 43,099 41,595 29,997 20,381 15,081 Fee, commission and brokerage income 19% 3,207 3,596 2,860 2,669 2,124 1,427 Gain on sale of securities - net -39% 95 1,873 (711) (1,434) 1,234 2,965 Income from dealing in foreign currencies 27% 1,198 1,040 1,010 688 357 313 Dividend income 38% 574 98 300 109 167 98 Other Income 0% 3 70 484 109 169 59 Total Gross Income 16% 44,202 49,775 45,538 32,138 24,433 19,942 Mark-up / return / interest expensed 19% 27,231 33,322 34,566 21,188 14,139 9,353 Provision/ (reversal) against advances 22% 2,267 681 360 406 203 (64) 415 6,148 4,828 4,821 4,519 3,973 Profit & Loss Account Provision / (reversal) of diminution in value 0% (296) 275 (345) (220) 123 Provision / (reversal) of fixed assets and others 0% 24 324 (107) 52 45 - Worker welfare fund & Other Charges -6% 45 132 139 (149) 46 99 Operating expenses 18% 12,723 13,019 10,792 9,956 8,256 6,748 Total Operating Expenses 18% 41,993 47,752 45,405 31,233 22,812 16,552 Profit Before Tax -6% 2,209 2,023 133 905 1,621 3,390 Taxation -4% 905 873 108 342 647 1,313 Profit After Taxation -7% 1,304 1,150 25 562 973 2,077 of investments Annual Report 2021 20
24. Financial Ratios 2021 Profit and Loss Account Mark-up / return / interest earned Mark-up / return / interest expensed Non-Fund based income Total income Operating expenses Operating profit before tax and provision Provision / write offs Profit before tax Profit after tax 2020 2019 2018 2017 2016 39,125 27,231 5,077 16,971 12,723 4,249 2,040 2,209 1,304 43,099 33,322 6,676 16,454 13,019 3,435 1,412 2,023 1,150 (Rs. in million) 41,595 29,997 34,566 21,188 3,943 2,141 10,972 10,950 10,792 9,956 180 994 47 89 134 905 25 562 Statement of Financial Position Authorized Share Capital (including preference shares) Paid up Capital Preference shares Reserves Unappropriated profit Surplus / (deficit) on revaluation of assets - net of tax Shareholders’ Equity Total assets Earning assets Lendings to financial institutions Gross Advances Advances - net of provisions Non Performing Loans Specific provisions against advances Investment - net Total liabilities Deposits and other accounts Borrowings 25,000 10,119 2,331 7,107 2,467 22,024 584,289 517,389 31,939 260,867 254,184 13,926 6,570 231,266 562,265 460,705 70,474 25,000 10,119 1,991 6,148 2,334 20,592 532,168 475,137 23,240 254,402 250,199 11,734 4,182 201,698 511,576 433,063 48,303 (Rs. in million) 25,000 25,000 10,120 10,120 1,750 1,712 4,828 4,821 637 (1,036) 17,335 15,617 470,427 456,754 415,834 402,618 30,321 1,937 246,453 255,147 242,945 251,991 10,353 8,309 3,340 2,990 142,568 148,690 453,093 441,137 369,790 321,413 54,468 96,559 20,000 8,620 1,500 1,541 4,519 490 16,670 391,480 356,868 3,116 186,879 184,140 3,258 2,639 169,612 374,810 290,078 64,557 15,000 8,620 1,500 1,334 3,973 1,223 16,650 267,444 238,855 11,334 96,453 93,794 3,328 2,618 133,727 250,794 226,099 10,320 Profitability Ratios Profit before tax ratio (PBT / Total Income) Gross yield on earning ratio Gross spread ratio Non Interest income to total income Cost/Income ratio Return on Equity (PAT / Average Equity) 13.02% 7.56% 30.40% 29.91% 74.97% 6.12% 12.29% 9.07% 22.69% 40.58% 79.13% 6.06% (Percentage) 1.22% 8.26% 10.00% 7.45% 16.90% 29.37% 35.94% 19.55% 98.36% 90.92% 0.15% 3.48% 15.74% 5.71% 30.63% 39.36% 80.21% 5.84% 32.02% 6.31% 37.98% 45.91% 63.72% 12.74% 4.82 1.01 16.97 6.30 0.89 15.87 7.52 0.74 15.54 10.81 1.77 15.52 16.05 6,253.78 1,297.46 28.40% 15.14 8,174.02 1,297.46 39.69% 11.23 9,562.31 1,297.46 61.23% 15.10 8,064.93 1,072.46 48.38% 15.52 11,593.34 1,072.46 69.63% 56.62% 55.17% 50.20% 5.34% 5.48% 47.18% 20.9 Times 26.5 Times 88.55% 58.74% 57.77% 46.57% 4.61% 4.69% 35.64% 21.0 Times 25.8 Times 89.28% (Percentage Times) 66.65% 79.38% 65.70% 78.40% 38.55% 46.26% 4.20% 3.26% 4.26% 3.30% 32.26% 35.98% 21.3 Times 20.6 Times 27.1 Times 29.2 Times 88.40% 88.15% 64.42% 63.48% 58.47% 1.74% 1.77% 81.00% 17.4 Times 23.5 Times 91.16% 42.66% 41.48% 59.15% 3.45% 3.55% 78.68% 13.6 Times 16.1 Times 89.31% 85.25% 86.67% 83.67% 66.88% 20,055 25,810 187,444 32.08% 10.70% 13.77% 4.88% 18,479 23,100 180,889 33.99% 10.22% 12.77% 7.32% 14,351 18,943 158,458 40.48% 9.06% 11.95% 4.56% 13,181 16,721 118,992 44.49% 11.08% 14.05% 4.09% 7.69% 4.57% 0.23% 0.3 Times 6.99% 4.35% 0.23% 0.4 Times (Percentage / Times) 0.22% 5.13% 0.10% 2.51% 0.01% 0.13% 0.4 Times 0.5 Times 9.45% 4.71% 0.30% 0.3 Times 19.62% 11.66% 0.86% 0.2 Times 55.17% 44.21% 57.77% 57.09% (Percentage) 65.70% 78.40% 43.91% 32.09% 63.48% 25.35% 41.48% 120.56% 282 4,487 308 5,311 323 4,998 307 4,163 Investors’ Ratios Market Price per share (Rs) Earning per share (Rs) Break Up Value or Net assets per share (Rs) Breakup Value per share without Surplus on Revaluation of property, plant and equipment (Rs) Market capitalisation (Rs in million) Number of shares (Number in million) Price to Book Ratio Assets Quality and Liquidity Ratios Gross Advances to Deposits ratio Net Advances to Deposits ratio Investments to Deposits ratio Infection Ratio (NPLs to Gross Advances) NPLs to Net Advances Ratio Coverage ratio (Specific provisions to NPLs) Deposits to shareholders’ equity Assets to shareholders’ equity Earning assets to total assets ratio Net interest income as a percentage of working funds /operating cost - Efficiency Ratio Capital Adequacy Tier 1 Capital Total Eligible Capital Risk Weight Assets (RWA) RWA to Total Assets Tier 1 to RWA Capital adequacy ratio Weighted Average cost of deposit Financial Ratios Net Operating Margin (PAT / Total Income) Return on capital employed Return on Assets (PAT / Average Assets) Debt to Equity Ratio (Long term Debt / Equity) Liquidity Ratios Advances to deposits ratio Cash to Current Liabilities Others Number of branches Number of Employees (Permanent, contractual and outsource) (Rs. in million / Percentage) 5.40 7.37 0.00 0.30 13.36 12.04 12.54 7,006.31 1,297.46 40.42% 98.79% 91.55% (Rs. in million / Percentage) 17,120 15,917 21,426 20,178 165,774 168,020 35.24% 36.79% 10.33% 9.47% 12.93% 12.01% 8.22% 4.94% (Number) 360 4,904 345 5,127 20,381 14,139 4,051 10,293 8,256 2,037 417 1,620 973 15,081 9,353 4,862 10,590 6,748 3,842 450 3,391 2,077 Annual Report 2021 21
25. Chairman ’s Review I am pleased to present this report to the valued stakeholders of JS Bank Limited (the “Bank”) on the overall performance of the Bank and the effectiveness of the role played by the Board in achieving the Bank’s objectives. The Bank’s continuous efforts to achieve a robust financial position were acknowledged by the Pakistan Credit Rating Agency (PACRA), reaffirming the long-term entity rating of the Bank at AA- (Double A Minus) with a short-term credit rating standing at A1+ (A One Plus), the highest possible in the category. The Bank is committed to its role of acting as a catalyst of progress within the national financial industry. One of our important goals for 2022 and beyond is to optimize the branch network. Deposit growth will be driven by low-cost deposits and ultimately our target is to achieve significant growth in the current account deposit ratio. On the lending product side, the focus would be SME driven. The Bank is already positioned as an SME bank and is recognized by the SBP and the Prime Minister for its accomplishments in PMYES loans. JS Bank is one of the eight banks selected by SBP for SME Assan Finance (SAAF) lending scheme. JS Bank is continuing its journey of greater impact by providing customers with innovative and value-added financial products and services designed to make their lives simple, easy and convenient. The Bank has continued to promote the use of digital channels for fulfilling banking needs by enhancing and providing uninterrupted digital banking services. Aligned with the digital banking initiatives, the Bank aims to provide services at the fingertips of the diversified customer base. To enhance the digital banking experience for our customers, the Bank has pioneered the launch of Zindigi – an innovative Digital Banking platform which enables various types of financial transactions in a digital mode, some of them for the first time in Pakistan. With this launch, we step into a new era of digitally enabled financial services that offer innovative banking services to an entirely new and exciting target market. As part of the core values of the Bank, the responsibility to the community is a cornerstone of the Bank’s activities through sustainable development and responsible business. After the outbreak of COVID -19 pandemic the bank had created a COVID Relief Fund in 2020 and later in the year 2021 the Bank launched a COVID-19 DriveThrough Vaccination facility for the country’s largest metropolis, namely Karachi, where more than 50,000 people were vaccinated. It was very well received by the public and got recognition from the UNOCHA (United Nation’s Office for the Coordination of Humanitarian Affairs). JS Bank continues to play its due role towards safeguarding the safety and health of the people of Pakistan and continues to contribute positively to society at large. In 2021, the Bank was recognized for its excellent contribution on national and international fronts. A few of the major awards received by JS Bank during the year included the Best Bank for SMEs – Pakistan, Asiamoney Award – Best SME Bank – Pakistan, GBO Awards – SME Bank of the Year, Pakistan – Asian Banking Finance Retail Banking Award. The Bank was also appreciated by the Prime Minister of Pakistan for its contribution towards the Government markup subsidy scheme – Kamyab Jawan. These local and global acknowledgements are a testimony to our constant efforts in delivering the best-in-class customer experience and drive us to constantly surpass customer expectations year on year. We, at JS Bank, believe that our people are our greatest strength. In 2021, the Bank continued to invest in their training and development as we firmly believe in developing capabilities from within the organisation. Training programs and e-courses were conducted through in-house learning Academy and external trainers to reinforce our commitment towards the transformation of our management and staff to higher levels of competence to better serve the customers, as well as avail of career growth opportunities. Ensuring good corporate governance through ethical and professional business conduct as well as effective risk and audit management are key foundation blocks for us. JS Bank has always been committed to sustainable value creation for all its stakeholders with high standards of corporate governance through a comprehensive system of Annual Report 2021 22
26. internal controls . The Board of JS Bank follows detailed criteria for its performance evaluation. The Board continually reviews the Bank’s financial and operational soundness, and significant policies inline with regulatory requirements. The Board has constituted its sub-committees for oversight of all key areas of the Bank covering risk management, audit-related matters, information technology and human resources for achieving the Bank’s strategic objectives. The Board has engaged Grant Thornton Anjum Rahman (GT) to perform an annual evaluation of its members and committees and their performance. I am confident that with our diversified Board of Directors, value-added offerings, unique emphasis on customer satisfaction and dedication towards excellence, we will succeed and thrive, no matter what the conditions or environment. On behalf of the Board of Directors, I would like to thank the Ministry of Finance, the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan and the Federal Board of Revenue for their continuous support and guidance. I would also like to thank our shareholders for their continued commitment and confidence in our longterm strategic vision, as well as our Management and staff for their commitment and hard work for the greater progress and prosperity of our Bank. Sincerely, Kalim-ur-Rahman March 02, 2022 Annual Report 2021 23
27.                                         AA-                                           A1+             2022                                                                                                            A1+                                                              2022                                                                                                                             2020                                               50,000         2021                                                                             2021                                                                                                                   2021                                                                                                                                                                     2021                                                            Annual Report 2021 24
28.                                                                                 2022   2 Annual Report 2021 25
29. Directors ’ Report We are pleased to present herein the 16th Annual Report of JS Bank Limited (“JSBL”) along with the audited accounts and auditors’ report for the year ended December 31, 2021. Economy review Favorable policies by the Government and Central Bank and post-Covid recovery in global economies supported domestic demand pickup during CY21. Real GDP recorded an impressive 5.4% growth in FY21 primarily on the back of revival in manufacturing production and wholesale & retail trade. However, being a consumption-led economy, this revival has also resulted in both cost-push and demand-pull inflationary pressures. Although average headline inflation for FY21 is recorded at 8.9% YoY, it is on the rise post August 2021 with December’s inflation clocking in 12.3% YoY. At the same time, pressures from the external front rose as the country’s import bill increased by 54% YoY during CY21 to US$67 billion. The mounting import bill, led by machinery imports, vaccine imports and higher commodity prices, overshadowed the 32% YoY growth in exports and 19% YoY growth in remittances. As a result, the overall Current Account Deficit (CAD) has increased to US$12.3 billion in CY21 as compared to a surplus of US$245 million during CY20. Despite increasing CAD, the country’s foreign exchange reserves increased by 31% YoY to US$24 billion as of 31 December 2021 on account of receipt of SDR allocation of US$2.7 billion, Saudi deposits of US$3 billion, Eurobond issuance and other multilateral/bilateral loans. Nonetheless, higher forex reserves were unable to support the forex market sentiments, resulting in PKR depreciation of 9.5% against the US$ during the year. Overall, a higher than expected economic recovery coupled with increasing inflation and depreciating PKR has led to SBP increasing the Policy Rate by 275 bps to 9.75% in CY21. Going forward, the Central Bank expects the pace of economic growth to moderate in next fiscal year. As a result, although the headline inflation may remain high, its pace of growth is expected to cool down. On the fiscal front, FBR collection for 1HFY22 has crossed Rs2,915 billion, marking a growth of 33% YoY and surpassing the target by Rs282 billion. While fiscal deficit for FY21 closed at 7.1% of GDP, 1QFY22 numbers clocked in at 0.8% of GDP, reflecting growth in revenues and steady expenditures. During the same period, the controlled deficit also contributed in reporting a positive primary balance of 0.3% of GDP. Banking sector review After keeping the Policy Rate steady at 7.5% for the most part of the year, the Monetary Policy Committee (MPC) announced a cumulative increase of 275bps, out of which most of the increase was announced in the last three months of the calendar year. The sharp increase took the Policy Rate up to 9.75%. On the other hand, the weighted average banking spreads trimmed by 82bps YoY, reaching 4.31%. The banking sector deposits touched PKR 20,972 billion, expanding by 17% YoY, and as per Sep2021 numbers, the deposit mix further tilted toward zero-cost deposits. The trend of parking most deposits in Investments continued this year as well as sector Investments reached PKR 14,124 billion, up 22% YoY. The higher growth in Investments took the IDR up to 67%. The higher increase in interest rates has so far not hampered the growth in Advances as the banking sector witnessed a credit growth of 19% YoY, taking it up to Rs10,149 billion. With that, the ADR increased to 48%. Moreover, the Non-Performing Loans as at 9MCY21 clocked in at Rs877 billion, keeping the sector’s Infection ratio close to 9%. Financial Performance 2021 was a year of consolidation as the Bank focused solely on improving Core Profitability. The Bank reported a profit before tax of PKR 2,209 million (profit after tax of PKR 1,304 million) for the year ended December 31, 2021 as compared to a profit before tax of PKR 2,023 million (profit after tax of PKR 1,150 million) last year. The Earnings Per Share (EPS) stand at PKR 1.01 (December 31, 2020: PKR 0.89). Annual Report 2021 26
30. Our Deposit book increased by 6 % YOY as we concentrated on mobilizing non-remunerative LCY Deposits, which grew by 15.8%. We also reduced our concentration on high-cost FI and institutional deposits, taking the average non-remunerative deposit composition up from 22.5% in 2020 to 25.7% in 2021. This resulted in a significant reduction in cost of deposits. We also remained conservative towards lending activities and only slightly increased our Advances book. Bank’s overall objective was to shift the portfolio from low-margin large ticket credit exposure to high-margin products with small ticket size and less risk weightage to improve core income and effectively utilize capital. Composition of Consumer book has increased from 5% to 6.5%; however, our mortgage book size has grown by 42% during the year thus making us one of the most active lenders in the housing finance sphere. Kamyab Jawan and SBP’s Solar financing scheme also performed well, capturing a cumulative share of 2.5% in Gross Advances. As a result of our cautious advances buildup, the core spread of the Bank has improved despite the SBP average policy rate remaining at 7.1% as compared to 8.9% last year. Hence, the net interest income (NII) of the Bank increased from PKR 9,777 million to PKR 11,894 million, up roughly 22%. Bank’s tech expenditure thus recorded a growth of 33% over last year. Nevertheless, we have managed to significantly contain the growth in Bank’s overall operating cost, despite inflationary pressures and currency depreciation. This was achieved on the back of streamlining the branch network and curtailing non-essential HR expenses. As a result, Bank’s cost to income ratio improved from 79.9% in the year 2020 to 75.2% in 2021. NII to Opex ratio also improved from 75.1% to 93.5% – a significant improvement due to an increase in core income. On the other hand, despite some buildup in the quantum of NPLs, the loan infection ratio (5.3%) remained significantly lower than the industry average. Increase in the bank’s core income and higher provisions also helped us improve the NPL coverage ratio from 35.6% in 2020 to 47.2% in 2021. Capital Adequacy As of December 31, 2021, JS Bank’s Capital Adequacy Ratio (CAR) stood at 13.77% as compared to 12.77% in 2020. The minimum required CAR (including Capital Conservation Buffer) as prescribed by SBP is 12.50%. However, the State Bank of Pakistan has temporarily reduced the requirement of CAR for banks by 1% as a regulatory relief to dampen the effects of COVID-19 Non-markup income (NFI) stood at PKR 5,077 million. Although fee & commission income was the highest contributor (PKR 3,207 million), it declined from last year owing to the rationalization of charges on ADC products to attract more retail customers. Our Trade business recorded an impressive growth of 24% – considerably higher than the deposit base of the Bank and thus improving our trade to advance reciprocity. Furthermore, the Bank has earned dividend income of PKR 574 million mainly from its subsidiary company and FX income of PKR 1,187 million. Trading activities remained limited due to our focus on improving core business, resulting in lower trading gains during the year. During the year, we continued to upgrade our technology infrastructure and turned around our Digital Financial Services segment to drive traction towards launching modern banking solutions for the tech-savvy millennial and Gen Z population. Annual Report 2021 27
31. Summarized financial data for the last six years is given below : Particulars Deposits Equity Total Assets Investments-Net Advances- Net Gross Mark-up Income Net Mark-up Income Non-Mark-up Income Profit Before Tax Profit After Tax Earnings Per Share (Basic) – PKR Return on Avg. Assets (ROAA) Return on Avg. Equity (ROAE) Capital Adequacy Ratio (CAR) Advances to Deposits Ratio (ADR) Branches Employees PKR ‘million’ 2017 2016 2021 2020 2019 2018 460,705 433,063 369,790 321,413 584,289 20,592 17,333 15,617 16,669 16,650 532,168 469,821 456,754 391,479 264,700 254,184 201,698 142,568 148,690 169,612 133,727 250,199 242,944 251,991 184,140 93,794 43,099 41,595 29,997 20,381 15,081 9,777 7,028 8,809 6,242 5,728 6,676 3,943 2,141 4,051 4,861 2,023 133 905 1,621 3,390 1,150 25 562 973 2,077 22,024 231,266 39,125 11,895 5,077 2,209 1,304 1.01 290,078 226,099 0.23% 0.89 0.0004 0.3 0.74 1.77 0.23% 0.01% 0.13% 0.30% 0.86% 13.77% 6.06% 0.15% 3.48% 5.84% 12.74% 12.77% 12.93% 12.01% 11.95% 14.05% 57.77% 65.70% 78.40% 63.48% 41.48% 308 360 345 323 307 5,311 4,904 5,127 4,998 4,163 6.12% 55.17% 282 4,487 Business Overview The year witnessed continued steady balance sheet growth, backed by sensible expansion in advances, deposit mobilization and diversified fee business. The Bank’s overall product strategy is to promote access to financial services for financial inclusion, identifying and fulfilling the needs of customers across all customer segments while also catering to niche market needs in an effort to stand apart from the competition. Deposits JJS Bank remained focused on core deposit mobilization, particularly targeting growth in lowcost deposits (Current Accounts – CA). The Bank was able to close CY2021 with a deposit base of PKR 461 billion, registering a growth of 6.4% over CY2020. Significant growth of 12.5% in the CA deposit base (26% of total deposits) has been augmented by focusing on affluent and mass affluent market segments, providing greater stability, strength and reduction in deposit cost to the Bank. The Bank embarked on several key initiatives to expand its deposit relationships in various segments including business accounts, employee banking, cash management relationships, corporate deposits and technology-based solutions. Advances On the assets side, our strategy involved prudent and coherent expansion through a complete product range designed for customers’ needs. The Bank continued to enhance its focus on the Small and Medium Enterprise (SME) landscape through a relationship lending model, operating through several SME hub branches. Furthermore, the secured consumer lending volumes remained strong throughout 2021. Overall, the Bank reported gross advances of PKR 261 billion in 2021, a growth of 2.5% over the last year. Investments JS Bank reported total Investments of PKR 231 billion in 2021, registering a growth of 14.7% over the last year. On the equity side, the surplus has increased by 36% as compared to FY2020. Annual Report 2021 28
32. Fee Business The Bank made concerted efforts to optimize the revenue mix between interest and fee-based income through parallel growth by cross-selling various fee-based products to new and existing customers alongside traditional fee income streams . In 2021, the Investment Banking Group (IBG) was revamped to go beyond conventional investment banking. IBG not only lead and participated in typical fund-based and non-fund-based financing facilities but also actively extended other services including Trusteeship, Equity Underwriting, Custodial Services and Private Equity. The Bank was also able to facilitate the first-ever Sukuk based acquisition financing of the pharmaceutical industry. JS Bank proved its market penetration by completing 16 diversified transactions this year. Digital The year 2021 has been pivotal for the Bank in terms of its digital initiatives. The bank restructured its digital business with the aim to increase its footprint in digital financial services. The DFS business achieved several milestones throughout 2021 with the development and launch of multiple new customer touchpoints such as WhatsApp bot, mobile banking, and internet banking. Furthermore, the DFS business launched use cases that have never been available in Pakistan before, such as Digi Cheque and in-App chat, CNIC update, and WHT certificate via WhatsApp bot. The State Bank initiatives have also been successfully deployed, with the pilot launch of Roshan Digital Account (RDA). Moreover, JS Bank was one of the first five banks to launch Raast and Digital Account Opening successfully, enabling customers to open a bank account from the convenience of their homes. Additionally, JS Bank is one of the only few banks having an open banking platform, allowing the startup community the availability of APIs (Application Programming Interface) in the sandbox environment, enabling integrations. Another key focus area has been processing improvement and enhancement of core banking services, such as Treasury, Retail Banking, Compliance, Customer Experience, Risk, Trade, Credit Administration, etc enabling them to build capacity on value-added operations and services. All these achievements are a testament to the strength of the Digital division and the strong foundations that it has built to revolutionize traditional banking in Pakistan. Customer Experience JS Bank Customer Experience (CE) Group organizes plan and monitors the bank’s Client Experience on all touchpoints to ensure optimized interaction between the bank and its clients. CE Group develops and implements strategies that are useful in building an overall healthy customer relationship. Customer-centricity is one of our core values resonating with grievance management, complaint handling, and valuing customer feedback to understand their needs and offer a best-in-class customer experience. Fair Treatment of Clients is an integral part of our corporate culture. The Bank has institutionalized a ‘Consumer Protection Framework’. Our priority is to keep client benefits in mind while designing, selling, and managing products and services, without any discrimination. Our focus is to maintain fairness in our client dealings, clarity in communication, develop a service culture and design an effective grievance handling mechanism. We also focus on the financial literacy of our clients, for promoting responsible conduct and informed financial decisions by consumers, through our consumer education and Financial Literacy Program. Risk Management The Board is committed to adopting the best risk management practices in letter and spirit. To maintain effective risk management oversight, the Bank follows an appropriate risk management framework according to the regulatory directives issued by SBP and other related guidelines under the Basel II / III framework. In this regard, the Bank has a comprehensive set of risk management policies, practices, and procedures in place which enable the Bank to take into consideration, in an appropriate manner, all major kinds of risks including credit, market, liquidity, operational, technology, and information security. Annual Report 2021 29
33. The overall risk management framework of the Bank is under the supervision of the Board of Directors (BoD)/Board Risk Management Committee (BRMC) while the operational level dayto-day functioning is carried out by the senior management of the Bank. In order to develop a holistic integrated risk management approach, a dedicated and independent Risk Management Function is in place to manage various aspects of risk management in the Bank with segregation of Credit Risk functions into other variants of risk management. To formalize and strengthen the risk management approach within the Bank, the following significant policies were developed/ reviewed and approved by the Board: • Risk Management Policy • Credit Policy • SME Credit Policy • Collateral Management Policy • Market Risk Management Policy • Operational Risk Management Policy • Liquidity Risk Management Policy • Country Risk Management Policy • Agricultural Credit Policy • Remedial Management Policy • Debt Property Swap Policy • Business Continuity Policy • Information Security Policy BRMC keeps an eye on the overall risk profile of the Bank. The Integrated Risk Management Committee (IRMC), Portfolio Management Committee (PMC), Operational Risk Management Committee (ORMC), Agri Credit Committee (ACC), Remedial Management Committee (RMC), IT Steering Committee (ITSC) and Assets & Liabilities Committee (ALCO) of the Management operate within an established framework in order to monitor the Bank’s activities and maintain the risk level within predefined limits. These Committees meet on a regular basis to review market developments and the level of financial and security risk exposures of the Bank. Risk Management plays a vital role in ensuring that an appropriate balance is maintained between risk and reward throughout the bank. Towards this end, the risk management function and framework has been significantly strengthened in the year under review. This includes but is not limited to the establishment of a separate Credit Risk Group overseeing the credit assessment of corporate, financial institutions and international banking, Credit Administration and Special Assets Management, under a dedicated Chief Credit Officer. The rest of the disciplines of risk management including market & liquidity, operational, portfolio, policy, agricultural credit, consumer & program lending, and information security risks remain under the umbrella of the Chief Risk Officer. The Bank also took the initiative of having a dedicated team of risk experts to combat digital risks and support the Digital Finance business. Market Risk measurement, monitoring and management reporting is done on a regular basis. The Market Risk & Basel Unit supported by the Treasury Middle Office is involved in daily monitoring of all related financial risk exposures in the form of interest rate risk, equity exposure risk, currency or foreign exchange risk, cross border or country risk, financial institutions (FI) exposure risks, liquidity risk and capital adequacy. The Bank is in the process of upgrading its system capabilities and has implemented the market risk module of Temenos Insight Risk Intelligence Solutions to enhance analytical capabilities and plans to implement modules for regulatory capital and asset & liability management. On the capital management side, the Bank’s practices ensure that it has reasonable capital to cover the risks associated with its activities. It is the prime objective of the Bank’s capital management to ensure that the bank complies with all regulatory capital requirements and at the same time maintains strong credit ratings and healthy capital ratios to support its business and maximize shareholders’ value. Apart from the usual monitoring of Risks and Control Self-Assessment (RCSA), operational loss data and Annual Report 2021 30
34. Key Risk Indicators (KRI), the Operational Risk management function also maintains the Business Continuity Policy and facilitates the annual testing of mission-critical systems and services that may be disrupted due to any unforeseen event or uncertainty. The Bank has also developed a Disaster Recovery (DR) site and plan, under the ownership of Information Technology, to ensure maximum availability of systems and services to customers and partners for critical (time-sensitive) and support functions. Credit Risk management is an ongoing process. The overall credit policy and the credit risk management guidelines are approved by the Board of Directors. In this regard, a Central Credit Committee (CCC) is entrusted with the responsibility of monitoring and controlling credit risk in the Bank. CCC meets regularly to actively supervise credit risk across the lending portfolio. In order to maintain a healthy growth of the credit portfolio, the Bank’s Credit Risk Management processes are consistently upgraded and improved to meet future challenges. Further, in order to bolster credit risk management monitoring activities, a Credit Risk Monitoring Unit is in place for regular portfolio monitoring, formulating and implementing credit risk management tools, including setting up of industry, geographic and sectorial limits, and devising credit risk quantification / statistical techniques to meet SBP and Basel II/III requirements. The health of the credit portfolio is being monitored through the Credit Administration, which is responsible for housekeeping elements along with the management of credit limits. The bank is conscious of risks and uncertainties associated with problem credit which requires a different and more intense risk management approach t. In this regard, a Special Asset Management Unit is in place following SBP’s regulatory guidelines to focus on remedial management issues, take ownership of classified portfolio for effective management and to determine the work-out modes for rehabilitation and settlements, as stipulated in the Remedial Management Policy of the Bank. In terms of Information Security, the Information Security Department performs security/risk assessments, as well as vulnerability assessment, monitors critical IT, and manages information and cyber security risks across the Bank. To improve the information security posture, defense in depth/ layered security architecture is deployed with realtime monitoring of emerging threats. To further strengthen cybersecurity, the Bank is striving to build a process-oriented culture, bring maturity in tool utilization and invest in IS staff to improve management/regulatory reporting and increase JS staff security awareness training. Statement on Internal Controls The Bank places the utmost emphasis on establishing stringent controls across all its operations. It is the cornerstone of the Bank’s policies to adhere to the best industry practices, ethical standards and regulatory requirements. In this context, the Board of Directors has promulgated policies that provide for assessing the overall effectiveness of the internal control environment.   Internal controls at JS bank are intended to provide a reasonable measure of assurance regarding the effectiveness and efficiency of the Bank’s operations, reliability of financial information and compliance with applicable laws and regulations. However, it is acknowledged that the systems put in place can only provide reasonable but not absolute assurances against material misstatement or loss since they are designed to manage, rather than eliminate, the risk of unforeseen situations. To ensure effective management of risk, the governance structure of internal control functions at the Bank consists of three levels of defense. The first line of defense is the business itself which owns its risks, including its operational risk and is responsible for its management. The second line of defense is the oversight provided by the Risk Management, Compliance and Control functions which identify and assess risks impacting existing and new business initiatives, coordinate risk mitigation with risk specialists and businesses, and then report and escalate it to the Risk Management Function for appropriate corrective measures. The last line of defense is an independent and effective Annual Report 2021 31
35. Internal Audit Function which reviews the effectiveness and adequacy of internal controls and continues to monitor compliance with policies and procedures . The Board of Directors is regularly kept up to date about the state of compliance through the Board Audit Committee. As a priority, all significant and material findings of the internal and external auditors and regulators are addressed by the management ensuring that appropriate corrective actions have been implemented. Adequate systems are in place to minimize breaches, repetition of mistakes, and strengthen the control environment. In addition, the Compliance Function is performing its due role to ensure regulatory compliance across the Bank. The Bank diligently follows SBP’s Guidelines on Internal Control to evaluate the effectiveness of the overall set of internal controls including financial reporting controls. Detailed documentation of bankwide processes and controls has been completed. Furthermore, the Bank has developed a comprehensive management testing and reporting framework for ensuring the operating effectiveness of key controls and has significantly addressed the identified design improvement opportunities. Upon satisfactory completion of the Internal Control over Financial Reporting (ICFR) Roadmap, State Bank of Pakistan granted exemption to the Bank in August 2016 from the submission of a Long Form Report (LFR) by external auditors. Further, as per SBP directive vide BSD-1 Circular Letter No. 1 of 2021 of July 06, 2021, the banks which have completed all the stages of ICFR roadmap, are allowed to discontinue submission of Annual Assessment Report on efficacy of ICFR to State Bank of Pakistan. However, SBP may evaluate Annual Assessment Report as part of supervisory assessments. Accordingly, Annual Assessment Report for December 31, 2021 on efficacy of ICFR shall be presented to Board Audit Committee. The Management considers that the internal control system presently existing is adequate, implemented effectively and continuously monitored. This statement is also endorsed by the Board of Directors. The Management will endeavor to continue enhancing its coverage and compliance with the SBP guidelines on Internal Controls and thereby strengthening its control environment on an ongoing basis. Corporate Governance The Bank prides itself on its good corporate governance by maintaining high levels of professional and business conduct, implementing effective internal controls and audit functions, including risk management framework and complying strictly with both local and international codes of practice. The Board closely reviews policy-related matters with long-term implications as per regulatory obligations which also meet the Bank’s operational requirements. The Management and the Board Committees have been duly constituted with a defined scope of work to ensure that they perform their prescribed functions precisely and efficiently as per their mandate and respective terms of reference. Corporate and Financial Reporting Framework The Directors confirm compliance with the Corporate and Financial Reporting Framework of the Securities & Exchange Commission of Pakistan’s Code of Corporate Governance for the following: • The financial statements prepared by the management present fairly the state of affairs of the Bank, the results of its operations, cash flow statement and statement of changes in equity. • Proper books of accounts of the Bank have been maintained. • Accounting policies as stated in the notes to the accounts have been consistently applied in the preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. • International Accounting Standards as applicable to banks in Pakistan have been followed in the preparation of the financial statements. • The system of internal controls is sound in design and has been effectively implemented Annual Report 2021 32
36. Subsidiary Companies and monitored . • There are no doubts about the Bank’s ability as a going concern. • There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations. • The details of outstanding statutory payments, if any, have been adequately disclosed in the financial statements. Holding Company Jahangir Siddiqui & Co. Limited, listed on the Pakistan Stock Exchange Limited, is the holding company of JS Bank Limited, owning 75.02% of the ordinary shares. JS Global Capital Limited and JS Investments Limited are subsidiaries of JS Bank with shareholdings of 92.9% and 84.5% respectively. The performance of these companies has been reviewed under the consolidated Directors’ Report. Attendance of Directors in the Board meetings Five meetings of the Board of Directors were held during the year 2021. The attendance of directors at Board Meetings was as follows: Election of Directors The election of directors of the Bank was held on March 28, 2019 at the AGM wherein eight directors were elected by the shareholders for a period of three years. Name of Director Mr. Kalim-ur-Rahman – Chairman Eligible to attend Meetings attended 5 5 5 Mr. Adil Matcheswala Mr. Ashraf Nawabi 5 5 Mr. G.M. Sikander 1 5 Mr. Hassan Afzal 5 5 Mr. Munawar A. Siddiqui 4 5 Ms. Nargis Ghaloo 5 5 Mr. Sohail Aman 5 5 Mr. Basir Shamsie, President & CEO 5 5 5 The attendance of directors at Board Committees meetings was as follows: Name of Director Audit Committee Risk Committee HR Committee IT Committee Eligible to attend Meetings attended Eligible to attend Meetings attended Eligible to attend Meetings attended Eligible to attend Meetings attended Mr. Kalim–ur-Rahman - - - 4 3 6 5 Mr. Adil Matcheswala 4 - - - - 4 2 - - - 4 - - 4 - - - - - Mr. Ashraf Nawabi Mr. G.M Sikander Mr. Hassan Afzal Mr. Munawar A. Siddiqui Ms. Nargis Ghaloo Mr. Sohail Aman Mr. Basir Shamsie President & CEO - 4 - 4 4 - 4 4 - 6 - 6 4 4 4 4 - - - - - - 4 4 6 6 4 4 - - 6 6 4 - 4 - 4 4 - - - - Annual Report 2021 33
37. Directors Remuneration The remuneration of directors is fixed by the Board of Directors in accordance with applicable laws . The remuneration for attending meetings of the Board and/or Board Committees is within the scale as is reasonably determined by the Board of Directors, provided that an Executive Director shall not be paid any remuneration for attending Board/ Board Sub Committee meetings. Pattern of Shareholding The pattern of shareholding at the close of December 31, 2021 as required u/s 227(f) of the Companies Act, 2017 is given on page number ____. Related Party Transactions Related party transactions are disclosed at note # 43 to the unconsolidated financial statements and the consolidated financial statements of the Bank for the year ended December 31, 2021. Corporate & Social Responsibility The Statement of Corporate & Social Responsibility is included in the Annual Report. Credit Ratings The Pakistan Credit Rating Agency Limited (PACRA) has maintained the long-term rating of the Bank at ‘AA-‘ (Double A Minus) and the short-term rating of “A1+” (A One Plus) which is the highest possible short-term rating. Dividend to Shareholders No dividend is being paid to the shareholders on the ordinary shares for the year 2021. Employee Benefit Schemes JS Bank operates a Staff Provident Fund (the Fund) and funded Gratuity Scheme (the Scheme) covering all its permanent employees. The contribution made toward the Fund during the year 2021 is PKR 248 million (2020 PKR 229 million). The un-audited balance of the asset of the Fund as of December 31, 2021 was PKR 2,360 million (2020: PKR 2,278 million. The contribution to be made to the Scheme is Nil for 2021 (2020: PKR 152 million). The un-audited balance of the assets of the Scheme as of December 31, 2021 was PKR 1,130 million (2020: PKR 1,392 million). Auditors The current auditors, KPMG Taseer Hadi & Co. Chartered Accountants, being retired offered themselves for reappointment. Auditors have confirmed that the firm is fully compliant with the International Federation of Accountants’ Guidelines of Code of Ethics, as adopted by the Institute of Chartered Accountants of Pakistan (ICAP) and has a satisfactory rating under the Quality Control Review Program of the ICAP. On the recommendation of the Board Audit Committee, the Board of Directors recommends the appointment of KPMG Taseer Hadi & Co. Chartered Accountants for the year ending December 31, 2021 at the upcoming Annual General Meeting of the Bank. Evaluation of the Board’s Performance The Board of Directors of JS Bank sets the Bank’s strategic direction and ensures that the organization stays true to this direction - enabling it to achieve its long-term objectives while ensuring regulatory compliance. To discharge its fiduciary responsibility of safeguarding the stakeholders’ interests, a formal and effective mechanism is put in place for an annual evaluation of the Board’s own performance, members of the Board and of its Committees as required by the State Bank of Pakistan and the Securities and Exchange Commission of Pakistan. The Board of Directors of JS Bank has a good mix of skills, core competencies, diversity, experience, and knowledge and is at the same time committed to strong corporate governance to protect the overall interests of the Bank and its stakeholders. The Board continually reviews the Bank’s financial and operational soundness, governance, internal controls, and significant policies as per regulatory requirements. Further, the Board Committees have been constituted, each with a prescribed mandate and terms of reference. Annual Report 2021 34
38. In line with the best practices of corporate governance , the Board conducts a self-evaluation exercise on an annual basis. The Board of JS Bank in compliance with SBP’s Guidelines on Performance Evaluation of Board of Directors and Listed Companies (Code of Corporate Governance) Regulations, 2019 has conducted its self-evaluation. The evaluation covered various aspects of the performance of the Board. The evaluation was carried out using quantitative method, based on subjective assessment, and was conducted via questionnaires developed by the consultants. Acknowledgements On behalf of JS Bank, we would like to express our gratitude to our valued stakeholders for their continued patronage and support. We would also like to thank the Ministry of Finance, the State Bank of Pakistan, the Securities & Exchange Commission of Pakistan and other regulatory authorities for their guidance and support to our Bank. At the close, we extend our appreciation to all our colleagues at JS Bank for their commitment towards ever greater success and growth. Compliance with the Listed Companies (Code of Corporate Governance) Regulations, 2019. For and on behalf of the Board, The requirements of the Listed Companies (Code of Corporate Governance) Regulations, 2019 set out by the Securities & Exchange Commission of Pakistan (SECP) have been adopted by the Bank and have been duly complied with. A Statement to this effect is annexed with the report. Basir Shamsie President & CEO Adil Matcheswala Director March 02, 2022 Events after the Date of Statement of Financial Position There have not been any material events that occurred after the date of the Statement of Financial Position that requires adjustments to the enclosed financial statements. Annual Report 2021 35
39.         .                                                                                                                                          2019                                  2019                2019                                                                               2022   2 Annual Report 2021 36
40.         8    2019  28                                                  10    2021 31u.s 227(f)2017           43           2021 31                          A1+                    AA-                      2021                       2,278 2020 2,360      2021 31  2292020  2482021    1,392 2020 1,130     2021  1522020    2021                                                                                            2021 31             Annual Report 2021 37
41.            75.02                  84.592.9                            2021        5 5   5 5 1 5 5 5 4 5    5 5   5 5   5 5    5 5      5    6        3 4 4 4   6                         4 4 4 6 6 6      4 4 4      6 6       2 4     4 4 4 4 4 4 4 4 4        4 4 4     Annual Report 2021 38
42.                                                                                                               2016                        2021 31                      2021  1       2021  6                                                  2021 31                                                                                                                                                                                                                                                           Annual Report 2021 39
43.               Risk Intelligence Solutions                                                                                                                                                                                                     II/III                      /                                                                                                                                                                                                                                                                 Annual Report 2021 40
44.                   II/III                                               /                        /                                                                                                                                                                                                                                                                                                                  FI                         Temenos Insight           Annual Report 2021 41
45.        14.7    2312021 2020    36                                  2021                                                            16                    2021                    2021                                                                                                                                                                                                                                   Annual Report 2021 42
46.                2016 2017 2018 2019 2020 2021 226,099 290,078 321,413 369,790 433,063 460,705   16,650 16,669 15,617 17,333 20,592 22,024   264,700 391,479 456,754 469,821 532,168 584,289 133,727 169,612 148,690 142,568 201,698 231,266 93,794 184,140 251,991 242,944 250,199 254,184 15,081 20,381 29,997 41,595 43,099 39,125    5,728 6,242 8,809 7,028 9,777 11,895    4,861 4,051 2,141 3,943 6,676 5,077    3,390 1,621 905 133 2,023 2,209   2,077 973 562 25 1,150 1,304 1.77 0.74 0.3 0.0004 0.89 1.01 0.86% 0.30% 0.13% 0.01% 0.23% 0.23% 12.74% 5.84% 3.48% 0.15% 6.06% 6.12% 14.05% 11.95% 12.01% 12.93% 12.77% 13.77% 41.48% 63.48% 78.40% 65.70% 57.77% 55.17% 307 323 345 360 308 282 4,163 4,998 5,127 4,904 5,311 4,487                  ROAA    ROAE                                                                                                         461   2021          26     12.5  6.4 2020                                                                                                      2021  2.5     2612021       Annual Report 2021 43
47.       9     877       2021        48           2021  2,023      1,304 2,209  2021 31   0.892020 31  1.01      1,150    15.8    6             25.72021  22.52020                                                    5           42       6.5     2.5                     7.18.9  2211,894  9,777      3,207      5,077          24                            1,187  574                                             33      79.92020                   93.575.1   OpexNII 75.22021                     5.3%    47.2%202135.6%2020               13.7712.772020         2021 31                    12.50      12.50 Annual Report 2021 44
48. ` `          16       2021 31   16       2021 31       2021               2021                               5.4  12.3      2021   8.9     2021          67 54   2021                      19     32             2452020   12.3  2021  2021               2021 31            2.7 2431                               /          3  5.4                   9.5   2021   8.9     2021  2021               9.75  275                         54  282 2021     2,915      2022  33                   32   0.3                             2452020   12.3  2021      0.8      2022   7.1     21                     7.5              275    2021 31            4.31   82       9.75            20,972            2021 17 /                                3                                  14,12422          67              9.5  19              10,149  1            Annual Report 2021                   45
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50. Statement of Compliance Statement of Compliance with Listed Companies (Code of Corporate Governance) Regulations, 2019 (the ‘Regulations’) Name of company: Year ended: JS Bank Limited (the ‘bank’) December 31, 2021 The Bank has complied with the requirements of the Regulations in the following manner: 1. The total number of directors are nine as per the following: a. Male:Eight (Including CEO) b. Female: One 2. The composition of the Board is as follows: Category Names i) Independent Directors · · · Mr. G.M. Sikander Ms. Nargis Ghaloo Mr. Sohail Aman ii) Non-Executive Directors · · · · · Mr. Kalim-ur-Rahman - Chairman Mr. Adil Matcheswala Mr. Ashraf Nawabi Mr. Hassan Afzal Mr. Munawar Alam Siddiqui iii) Executive Director · Mr. Basir Shamsie – President & CEO (Non-elected deemed director) iv) Female Director · Ms. Nargis Ghaloo (Independent Director) 3. The directors have confirmed that none of them is serving as a director on more than seven listed companies, including this Bank. 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 significant policies of the Bank. The Board has ensured that complete record of particulars of the significant policies along with their date 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 Companies Act, 2017 (Act) and the Regulations. 7. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose. 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 have a formal policy and transparent procedures for remuneration of directors in accordance with the Act and the Regulations. Annual Report 2021 47
51. 9 . Out of nine directors, six directors have completed Director’ Training Program and two directors of the Bank are exempted from the requirement of Directors’ Training Program in accordance with the Regulations. Whereas, remaining one director will certify himself in due course. 10. No new appointment of Chief Financial Officer, Company Secretary and Head of Internal Audit has been made during the financial year. The Board has approved their remuneration and terms and conditions of employment and complied with relevant requirements of the Regulations; 11. Chief Financial Officer and Chief Executive Officer duly endorsed the financial statements before approval of the Board. 12. The Board has formed committees comprising of members given belowAudit Committee: Ms. Nargis Ghaloo (Independent Director) Chairperson Mr. Adil Matcheswala )Non-Executive Director( Member Mr. G.M. Sikander )Independent Director( Member Mr. Munawar Alam Siddiqui )Non-Executive Director( Member HR Remuneration & Nomination Committee: Mr. Sohail Aman (Independent Director) Chairman Mr. Adil Matcheswala )Non-Executive Director( Member Mr. G.M. Sikander )Independent Director( Member Mr. Kalim-ur-Rahman )Non-Executive Director( Member Risk Management Committee: Mr. Ashraf Nawabi (Non-Executive Director) Chairman Mr. Munawar Alam Siddiqui )Non-Executive Director( Member Ms. Nargis Ghaloo )Independent Director( Member Mr. Basir Shamsie )Executive Director and CEO( Member Annual Report 2021 48
52. IT Committee : Mr. Hassan Afzal )Non-Executive Director( Chairman Mr. Kalim ur Rehman )Non-Executive Director( Member Mr. Sohail Aman )Independent Director( Member Mr. Basir Shamsie )Executive Director and CEO( 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 of the committee was as per following: Committees Meetings held during the year Audit Committee Four HR Remuneration & Nomination Committee Four Risk Management Committee Four IT Committee Six 15. The Board has set up an effective internal audit function comprising of suitably qualified and experienced for the purpose and are 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 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 chief executive officer, chief financial officer, head of internal audit, company secretary or director 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 requirement 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 behalf of the Board Basir ShamsieKalim-ur-Rehman President & CEOChairman Karachi: March 02, 2022 Annual Report 2021 49
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60. 57
61. Unconsolidated Financial Statements for the Year Ended December 31 , 2021 58
62. JS BANK LIMITED UNCONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31 , 2021 2021 2020 ----- USD in '000 ----- 2021 2020 ----- Rupees in '000 ----- Note ASSETS Rate 194,132 176.5135 172,345 Cash and balances with treasury banks 6 Balances with other banks 7 1,185,786 1,105,969 Lendings to financial institutions 8 31,939,044 23,239,672 34,266,856 30,421,231 6,718 6,266 180,944 131,659 1,310,190 1,142,680 Investments 9 231,266,277 201,698,473 1,440,025 1,417,451 Advances 10 254,183,938 250,199,166 57,599 43,054 Fixed assets 11 10,167,038 7,599,538 17,758 14,088 Intangible assets 12 3,134,577 2,486,725 - 83,158 102,799 4,188 3,310,165 Deferred tax assets - - Other assets 13 Non-current assets held for sale 18,145,338 11.3 3,014,889 14,678,428 739,200 584,288,854 532,168,402 LIABILITIES 39,877 28,224 Bills payable 14 7,038,886 4,981,983 399,257 273,653 Borrowings 15 70,474,310 48,303,412 2,610,027 2,453,425 Deposits and other accounts 16 460,705,014 433,062,593 - - 39,639 42,449 7,850 6,766 88,743 93,712 3,185,393 2,898,229 124,772 116,660 Liabilities against assets subject to finance lease - - Subordinated debt 17 6,996,800 Deferred tax liabilities 18 1,385,648 7,492,800 1,194,252 Other liabilities 19 15,664,113 16,541,154 562,264,771 511,576,194 22,024,083 20,592,208 10,119,242 10,119,242 2,331,070 1,991,170 2,467,158 2,334,123 7,106,613 6,147,673 22,024,083 20,592,208 NET ASSETS REPRESENTED BY 57,328 57,328 Share capital - net 13,206 11,281 Reserves 13,977 13,223 Surplus on revaluation of assets 40,261 34,828 Unappropriated profit 124,772 116,660 CONTINGENCIES AND COMMITMENTS 21 22 The annexed notes from 1 to 49 form an integral part of these unconsolidated financial statements. __________________ President and Chief Executive Officer ____________________ Chief Financial Officer ___________ Director ___________ Director ___________ Chairman 59
63. JS BANK LIMITED UNCONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31 , 2021 2021 2020 ----- USD in '000 ----221,657 154,270 67,387 2021 2020 ----- Rupees in '000 ----- Note 244,168 188,777 55,391 Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / interest income 24 25 39,125,436 27,230,687 11,894,749 43,098,990 33,321,699 9,777,291 26 3,206,890 573,642 1,186,560 11,745 95,146 2,692 5,076,675 3,595,952 97,844 1,010,345 29,374 1,873,047 69,795 6,676,357 16,971,424 16,453,648 NON MARK-UP / INTEREST INCOME 18,168 3,250 6,722 67 539 15 28,761 20,372 554 5,724 166 10,611 395 37,822 Fee and commission income Dividend income Foreign exchange income Income from derivatives Gain on securities Other income Total non mark-up / interest income 96,148 93,213 Total Income 27 28 NON MARK-UP / INTEREST EXPENSES 72,078 250 3 72,331 23,817 73,756 229 519 74,504 18,709 Operating expenses Workers' welfare fund Other charges Total non-mark-up / interest expenses Profit before provisions 29 30 31 12,722,702 44,178 494 12,767,374 4,204,050 13,019,000 40,460 91,639 13,151,099 3,302,549 11,303 - 7,249 - Provisions and write offs - net Extraordinary / unusual items 32 1,995,125 - 1,279,608 - 12,514 11,460 PROFIT BEFORE TAXATION 2,208,925 2,022,941 5,124 4,945 Taxation 904,533 872,881 7,390 6,515 PROFIT AFTER TAXATION 1,304,392 1,150,060 33 ----- US Dollar ----0.006 ----- Rupee ----0.005 Basic and diluted earnings per share 34 1.01 0.89 The annexed notes from 1 to 49 form an integral part of these unconsolidated financial statements. ___________________ President and Chief Executive Officer ____________________ Chief Financial Officer _____________ Director _____________ Director _____________ Chairman 60
64. JS BANK LIMITED UNCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31 , 2021 2021 2020 ----- USD in '000 ----7,390 2021 2020 ----- Rupees in '000 ----- 6,515 Profit after taxation for the year 1,304,392 1,150,060 79,022 11,485 22,059 1,679,327 (122,036) (99,977) (20,955) 82,415 1,761,742 1,773,227 Other comprehensive (loss) / income Items that may be reclassified to profit and loss account in subsequent periods: 448 65 125 9,514 (691) (566) (118) 467 9,981 10,046 7,272 Effect of translation of net investment in foreign branch Movement in fair value of investments at FVOCI - net of tax (Pakistan operations) Movement in fair value of debt investments at FVOCI - net of tax (Bahrain Operations) 16,561 1,283,437 2,923,287 Items that will not be reclassified to profit and loss account in subsequent periods: (727) 1,648 1,503 - (64) 218 129 841 36 1,902 8,113 18,463 Remeasurement (loss) / gain on defined benefit obligations - net of tax Movement in surplus on revaluation of operating fixed assets - net of tax Movement in surplus on revaluation of non-banking assets - net of tax Movement in fair value of equity investments at FVOCI - net of tax (Bahrain operations) Total comprehensive income (128,339) 290,980 265,286 - (11,296) 38,398 22,787 148,438 6,288 335,666 1,431,875 3,258,953 The annexed notes from 1 to 49 form an integral part of these unconsolidated financial statements. ____________________ President and Chief Executive Officer ___________________ Chief Financial Officer _____________ Director _____________ Director _____________ Chairman 61
65. JS BANK LIMITED UNCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31 , 2021 Surplus / (deficit) on revaluation of Captial reserve Non UnapproShare Statutory exchange Fixed Banking priated capital reserve * translation Investments Assets Assets profit Total --------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------Balance as at January 01, 2020 Total comprehensive income for the year ended December 31, 2020 Profit after taxation Other comprehensive income - net of tax Transfer to statutory reserve 10,119,242 1,646,168 - 230,012 103,505 11,485 11,485 (516,769) 1,768,030 1,768,030 1,060,693 92,776 4,827,640 17,333,255 - 38,398 38,398 1,150,060 290,980 1,441,040 1,150,060 2,108,893 3,258,953 - - - - (230,012) - - 16,785 - 94 - 92,126 - Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Fixed assets - - - - (16,785) Non-banking assets acquired in satisfaction of claims - - - - - Non-current assets held for sale - - - - (92,126) Balance as at December 31, 2020 Total comprehensive income for the year ended December 31, 2021 Profit after taxation Other comprehensive income / (loss) - net of tax Transfer to statutory reserve 10,119,242 1,876,180 - 260,878 114,990 1,251,261 (94) - 951,782 131,080 6,147,673 20,592,208 265,286 265,286 (11,296) (11,296) 1,304,392 (128,339) 1,176,053 1,304,392 127,483 1,431,875 79,022 79,022 (77,190) (77,190) - - - - (260,878) - - 15,752 - 70 - 27,943 - Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Fixed assets - - - - (15,752) Non-banking assets acquired in satisfaction of claims - - - - - (70) Gain on disposal of equity investments at FVOCI to retained earnings - - - (27,943) - - Balance as at December 31, 2021 10,119,242 2,137,058 194,012 1,146,128 1,201,316 119,714 7,106,613 22,024,083 * This represents reserve created under Section 21(i)(a) of the Banking Companies Ordinance, 1962. The annexed notes from 1 to 49 form an integral part of these unconsolidated financial statements. ____________________ President and Chief Executive Officer _____________________ Chief Financial Officer _____________ Director _____________ Director _____________ Chairman 62
66. JS BANK LIMITED UNCONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31 , 2021 2021 2020 ----- USD in '000 ----- Note 2021 2020 ----- Rupees in '000 ----- CASH FLOW FROM OPERATING ACTIVITIES 12,514 (3,250) 9,264 11,460 (554) 10,906 4,252 61 5,210 762 2,196 (1,196) 28 (2,058) 12,490 250 23 (38) 21,980 31,244 3,933 16 5,060 640 2,299 903 (5) (86) 371 7,249 229 8 (6) (367) 20,244 31,150 (49,278) 135,368 (36,627) (12,498) 36,965 40,115 173,332 (45,034) 10,698 179,111 11,653 124,681 156,602 (9,362) 283,574 351,783 (8,066) 6,671 (32,130) 358,458 (1,879) 331,120 541,381 (860) (1,822) 343,717 538,699 Profit before taxation Less: Dividend income 2,208,925 (573,642) 1,635,283 2,022,941 (97,844) 1,925,097 750,618 10,711 919,584 134,447 387,693 (211,129) 62 4,940 (363,187) 2,204,726 44,178 4,000 (6,692) 3,879,951 5,515,234 694,312 2,862 893,148 113,052 405,879 159,436 (805) (15,148) 65,409 1,279,608 40,460 1,368 (1,000) (64,805) 3,573,776 5,498,873 (8,698,147) 23,894,308 (6,465,124) (2,205,978) 6,525,059 7,080,905 30,595,500 (7,949,193) 1,888,368 31,615,580 Gratuity paid Income tax paid 2,056,903 22,007,805 27,642,421 (1,652,602) 50,054,527 62,094,820 (1,423,735) 1,177,492 (5,671,449) 63,272,629 (331,624) 58,447,048 95,561,501 (151,882) (321,687) Net cash generated from operating activities 60,671,085 95,087,932 (31,140,076) (22,034,344) 446,016 (1,845,119) (783,946) 56,838 79,022 (55,221,609) (84,112,230) (3,249,717) (40,828) 97,844 (747,229) (328,417) 12,839 375,000 11,485 (87,981,253) (1,191,560) (496,000) (1,687,560) (1,135,860) (2,000) (1,137,860) 3,761,916 5,968,819 31,384,080 25,415,261 35,145,996 31,384,080 Adjustments: Depreciation Depreciation on non-banking assets Depreciation - Right of use assets Amortisation of intangible assets Mark-up / return / interest expense on lease liability against right-of-use assets (Gain) / charge for defined benefit plan Unrealised loss / (gain) on revaluation of investments classified as held-for-trading - net Unrealised loss / (gain) on revaluation of derivative instruments - net Unrealised (gain) / loss on revaluation of forward foreign exchange contracts Provisions and write offs - net Provision for workers' welfare fund Loss on sale of fixed assets - net Gain on sale of assets held for sale Gain on termination of leases 29 29 29 25 27 32 30 28 28 28 Decrease / (increase) in operating assets Lendings to financial institutions Held-for-trading securities Advances Other assets (excluding advance taxation) Increase / (decrease) in operating liabilities Bills payable Borrowings Deposits Other liabilities CASH FLOW FROM INVESTING ACTIVITIES (176,418) (124,831) 2,527 (10,453) (4,441) 322 448 (312,846) (476,520) (18,411) (231) 554 (4,233) (1,861) 73 2,124 65 (498,440) Investments in available-for-sale securities - net Investments in held-to-maturity securities - net Investment in associated companies Dividends received Investment in fixed assets Investment in intangible assets Proceeds from sale of fixed assets Proceeds from sale of assets held for sale Effect of translation of net investment in foreign branch Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES (6,751) (2,810) (9,561) (6,435) (11) (6,446) Payment of lease liability against right of use assets Repayment of subordinated debt - net Net cash used in financing activities 21,310 33,813 Increase in cash and cash equivalents 177,800 143,985 Cash and cash equivalents at beginning of the year 199,110 177,798 Cash and cash equivalents at end of the year 35 The annexed notes from 1 to 49 form an integral part of these unconsolidated financial statements. ____________________ President and Chief Executive Officer ____________________ Chief Financial Officer _____________ Director _____________ Director _____________ Chairman 63
67. JS BANK LIMITED NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2021 1. STATUS AND NATURE OF BUSINESS 1.1 JS Bank Limited (the Bank / JSBL) is a banking company incorporated in Pakistan as a public limited company on March 15, 2006. The Bank is a subsidiary company of Jahangir Siddiqui & Co. Ltd. (JSCL) and its shares are listed on Pakistan Stock Exchange Limited (PSX). The Bank commenced its banking operations on December 30, 2006 and its registered office is situated at Shaheen Commercial Complex, Dr. Ziauddin Ahmed Road, Karachi. The Bank is a scheduled bank, engaged in commercial banking and related services as described in the Banking Companies Ordinance, 1962 and is operating through 281 (2020: 307) branches / sub-branches in Pakistan and one wholesale banking branch in Bahrain (2020: one). The Pakistan Credit Rating Agency Limited (PACRA) has assigned the long-term entity rating of the Bank to AA- (Double A Minus) whereas short-term rating is maintained at 'A1+' (A One Plus), which is the highest possible short-term rating. The ratings denote a very low expectation of credit risk and indicate very strong capacity for timely payment of financial commitments. 1.2 Jahangir Siddiqui Investment Bank Limited, JSIBL, (formerly Citicorp Investment Bank Limited which was acquired by JSCL on February 01, 1999), and its holding company, JSCL, entered into a Framework Agreement with American Express Bank Limited, New York (AMEX) on November 10, 2005 for acquisition of its American Express Bank Limited Pakistan Branches, (AEBL). Consequently, a new banking company, JSBL was incorporated on March 15, 2006 and a restricted Banking License was issued by the State Bank of Pakistan (SBP) on May 23, 2006. A Transfer Agreement was executed on June 24, 2006 between JSIBL and JSBL for the transfer of entire business and undertaking of JSIBL to JSBL and a separate Transfer Agreement was also executed on June 24, 2006, between AMEX and JSBL for the transfer of AEBL’s commercial banking business in Pakistan with all assets and liabilities (other than certain excluded assets and liabilities) (AEBL business). The shareholders of JSIBL and JSBL, in their respective extra-ordinary general meetings held on July 31, 2006, approved a Scheme of Amalgamation (the Scheme) under Section 48 of the Banking Companies Ordinance, 1962. The Scheme was initially approved by the Securities and Exchange Commission of Pakistan (SECP) vide its letter No. SC/NBFC(J)-R/JSIBL/2006/517 dated September 28, 2006. Subsequently, the Scheme was sanctioned by the SBP vide its order dated December 02, 2006 and, in accordance therewith, the effective date of amalgamation was fixed at December 30, 2006. 1.3 The Bank is the holding company of JS Global Capital Limited (JSGCL) and JS Investments Limited (JSIL). 1.3.1 JS ABAMCO Commodities Limited (JSACL) did not intend to carry on the business of Futures Broker, therefore, the directors of JSIL were desirous of merging JSACL with and into JSIL. The Scheme of Arrangement under Section 284 of the Companies Act, 2017, for merger or amalgamation (the Scheme) of JSACL with and into JSIL, was approved by SECP under Rule 7(2) (cb) of Non-Banking Finance Companies (Establishment and Regulations) Rules 2003 vide its letter dated January 13, 2021. The Board of Directors of JSACL in their meeting held on February 19, 2021 has approved the Scheme with effect from March 31, 2021. Subsequently, the Scheme under section 284(2) of the Companies Act, 2017, submitted with Companies Registration Office, along with Form-35, which was approved dated June 24, 2021. Therefore, with effect from March 31, 2021, JSACL is merged with JS Investments Limited and is no more an indirect subsidiary of the Bank. 2. BASIS OF PRESENTATION These unconsolidated financial statements are separate financial statements of the Bank in which the investments in subsidiaries and associates are stated at cost and are accounted for on the basis of direct equity interest rather than on the basis of reported results. The consolidated financial statements of the Bank are being issued separately. These unconsolidated financial statements have been presented in Pakistan Rupees (PKR), which is the currency of the primary economic environment in which the Bank operates and functional currency of the Bank, in that environment as well. The amounts are rounded to nearest thousand except as stated otherwise. The US Dollar amounts shown on the statement of financial position, profit and loss account, statement of comprehensive income and cash flow statement are stated as additional information solely for the convenience of readers and have not been subject to audit by the external auditors. For the purpose of conversion to US Dollars, the rate of Rs. 176.5135 to 1 US Dollar has been used for 2021 and 2020 as it was the prevalent rate as on December 31, 2021. 64
68. JS BANK LIMITED 2 .1 Statement of compliance These unconsolidated financial statements have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan. These comprise of: - International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Act, 2017; Provisions of and directives issued under the Banking Companies Ordinance, 1962; Provisions of and directives issued under the Companies Act, 2017; and Directives issued by the SBP and the SECP from time to time. - Whenever 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, the requirements of the Banking Companies Ordinance, 1962, the Companies Act, 2017 and the said directives shall prevail. The SBP has deferred the applicability of International Accounting Standard (IAS) 39, ‘Financial Instruments: Recognition and Measurement’ and International Accounting Standard (IAS) 40, ‘Investment Property’ for banking companies vide BSD Circular Letter No. 10 dated August 26, 2002 till further instructions. Further, the SECP has deferred the applicability of International Financial Reporting Standard (IFRS) 7, ‘Financial Instruments: Disclosures’ on banks vide its notification S.R.O 411(I)/2008 dated April 28, 2008. 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 requirements prescribed by the SBP through various circulars. IFRS10 "Consolidated Financial Statements" was made applicable from period beginning on or after January 01, 2015 vide S.R.O 633(I)/2014 dated July 10, 2014 by SECP. However, SECP has directed through S.R.O56(I)/2016 dated January28, 2016, that the requirement of consolidation under section 228 of the 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. The application of the IFRS 9 'Financial Instruments' for all companies to prepare their financial satements in accordance with the requirements of IFRS 9 was implemented by SECP for reporting period / year ending on or after June 30, 2019 through its S.R.O. 229 (I)/2019 dated February 14, 2019. However, State Bank of Pakistan (SBP) has extended the effective date of applicability of IFRS 9 on or after January 01, 2022 through its BPRD Circular No. 24 dated July 05, 2021. The said circular contained instructions only for quarterly parallel run reporting of IFRS 9 from March 31, 2021 and onwards of which the Bank is adequately complied. Whereas it was stated that final instructions will be issued based on the results of parallel reporting, which are yet to be issued. As of reporting date, the guidelines and instructions on the application of IFRS 9 for the banking sector of Pakistan are yet to be issued by the State Bank of Pakistan (SBP). The Bank has continued to fulfil the requirements of Prudential Regulations and other SBP directives currently provide the accounting framework for the measurement and valuation of assets and provision/ impairment against non-performing assets. 2.2 The following International Financial Reporting Standards (IFRS Standards) as notified under the Companies Act, 2017 and the amendments and interpretations thereto will be effective for accounting periods beginning on or after 1 January 2022: - Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) effective for the annual period beginning on or after January 01, 2022 amends IAS 1 by mainly adding paragraphs which clarifies what comprise the cost of fulfilling a contract, Cost of fulfilling a contract is relevant when determining whether a contract is onerous. An entity is required to apply the amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). Restatement of comparative information is not required, instead the amendments require an entity to recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application. The adoption of the above standard is considered not to be relevant or do not have any significant effect on the Bank's operations. 2.3 The following annual improvements to approved accounting standards 2018-2020 are effective for annual reporting periods beginning on or after January 01, 2022. - IFRS 9 – The amendment clarifies that an entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf, when it applies the ‘10 percent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognize a financial liability. - IFRS 16 – The amendment partially amends Illustrative Example 13 accompanying IFRS 16 by excluding the illustration of reimbursement of leasehold improvements by the lessor. The objective of the amendment is to resolve any potential confusion that might arise in lease incentives. 65
69. JS BANK LIMITED - IAS 41 – The amendment removes the requirement in paragraph 22 of IAS 41 for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique. - IAS16 – Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) effective for the annual period beginning on or after January 01, 2022. Clarifies that sales proceeds and cost of items produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management e.g. when testing etc., are recognized in profit or loss in accordance with applicable Standards. The entity measures the cost of those items applying the measurement requirements of IAS 2. The standard also removes the requirement of deducting the net sales proceeds from cost of testing. An entity shall apply those amendments retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments. The entity shall recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of that earliest period presented. - Reference to the Conceptual Framework (Amendments to IFRS 3) - Reference to the Conceptual Framework, issued in May 2020, amended paragraphs 11, 14, 21, 22 and 23 of and added paragraphs 21A, 21B, 21C and 23A to IFRS 3. An entity shall apply those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 01, 2022. Earlier application is permitted if at the same time or earlier an entity also applies all the amendments made by Amendments to References to the Conceptual Framework in IFRS Standards, issued in March 2018. - Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) – the Board has issued amendments on the application of materiality to disclosure of accounting policies and to help companies provide useful accounting policy disclosures. The key amendments to IAS 1 include: - - 2.4 requiring companies to disclose their material accounting policies rather than their significant accounting policies; clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company’s financial statements. Classification of liabilities as current or non-current (Amendments to IAS 1) effective for the annual period beginning on or after January 01, 2023. These amendments in the standards have been added to further clarify when a liability is classified as current. The standard also amends the aspect of classification of liability as non-current by requiring the assessment of the entity’s right at the end of the reporting period to defer the settlement of liability for at least twelve months after the reporting period. An entity shall apply those amendments retrospectively in accordance with IAS 8. The Board also amended IFRS Practice Statement 2 to include guidance and two additional examples on the application of materiality to accounting policy disclosures. The amendments are effective for annual reporting periods beginning on or after January 01, 2023 with earlier application permitted. - Definition of Accounting Estimates (Amendments to IAS 8) – The amendments introduce a new definition for accounting estimates clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. The amendments are effective for periods beginning on or after 1 January 2023 and will apply prospectively to changes in accounting estimates and changes in accounting policies occurring on or after the beginning of the first annual reporting period in which the company applies the amendments. - Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) – The amendments narrow the scope of the initial recognition exemption (IRE) so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will need to recognize a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. For leases and decommissioning liabilities, the associated deferred tax asset and liabilities will need to be recognized from the beginning of the earliest comparative period presented, with any cumulative effect recognized as an adjustment to retained earnings or other components of equity at that date. The amendments are effective for annual reporting periods beginning on or after January 01, 2023 with earlier application permitted. - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) – The amendment amends accounting treatment on loss of control of business or assets. The amendments also introduce new accounting for less frequent transaction that involves neither cost nor full step-up of certain retained interests in assets that are not businesses. The effective date for these changes has been deferred indefinitely until the completion of a broader review. The adoption of the above standard and amendments are considered not to be relevant or do not have any significant effect on the Bank's operations. 66
70. JS BANK LIMITED 2 .5 Critical accounting estimates and key sources of estimation uncertainty The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires 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 historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions in accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The areas where various assumptions and estimates are significant to the Bank's financial statements or where judgment was exercised in application of accounting policies are as follows: i) ii) Classification of investments - In classifying investments as 'held-for-trading' the Bank has determined securities which are acquired with an intention to trade by taking advantage of short-term market / interest rate movements and are to be sold within 90 days of acquisition. - In classifying investments as 'held-to-maturity' the Bank follows the guidance provided in SBP circulars on classifying nonderivative financial assets with fixed or determinable payments and fixed maturity. In making this judgment, the Bank evaluates its intention and ability to hold such investments to maturity. - The investments which are not classified as 'held-for-trading' or 'held-to-maturity' are classified as 'available-for-sale'. Provision against non performing loans and advances The Bank reviews its loan portfolio to assess amount of non-performing loans and advances and provision required thereagainst. While assessing this requirement various factors including the delinquency in the account, financial position of the borrowers, the value of securities and the requirements of the Prudential Regulations are considered. For portfolio impairment / provision on consumer advances, the Bank follows requirements set out in Prudential Regulations. iii) Impairment on investments The Bank determines that investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged requires judgment. In making this judgment, the Bank evaluates among other factors, the normal volatility in securities price. In addition, impairment may be appropriate when there is an evidence of deterioration in the financial health of the investee, industry and sector performance, changes in technology and operational and financing cash flows. iv) Income taxes 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. In making the provision for deferred taxes, estimates of the Bank's future taxable profits are taken into account. v) Depreciation of fixed assets and amortization of intangible assets In making estimates of the depreciation / amortisation method, the management uses a method which reflects the pattern in which economic benefits are expected to be consumed by the Bank. The method applied is reviewed at each financial year end and if there is a change in the expected pattern of consumption of the future economic benefits embodied in the underlying assets, the method is changed to reflect the change in pattern. Such change is accounted for as change in accounting estimates in accordance with International Accounting Standard - 8, "Accounting Policies, Changes in Accounting Estimates and Errors". vi) Defined benefits plans and other benefits Liability is determined on the basis of actuarial advice using the Projected Unit Credit Method. vii) Impairment of Goodwill Impairment testing involves a number of judgmental areas which are subject to inherent significant uncertainty, including the preparation of cash flow forecasts for the periods that are beyond the normal requirements of management reporting and the assessment of the discount rate appropriate to the business. The carrying amount of goodwill at the balance sheet date was Rs.1,464 million. The detailed assumptions underlying impairment testing of goodwill are given in note 12.5 to these unconsolidated financial statements. viii) Lease term The Bank applies judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options.The assessment of whether the Bank is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised and its recoverable amount which is determined as higher of value-in-use and fair value less cost to sell. 67
71. JS BANK LIMITED 3 . BASIS OF MEASUREMENT These unconsolidated financial statements have been prepared under the historical cost convention except for: 4. - Certain classes of fixed assets and non-banking assets acquired in satisfaction of claims which are stated at revalued amounts less accumulated depreciation. - Investments classified as held-for-trading and available-for-sale and derivative financial instruments, which are measured at fair value. - Net obligations in respect of defined benefit schemes which are carried at their present values. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these unconsolidated financial statements are consistent with those of previous financial year. 4.1 Cash and cash equivalents Cash and cash equivalents represent cash and balances with treasury banks and balances with other banks net of any overdrawn nostro accounts. 4.2 Lendings to / borrowings from financial institutions The Bank enters into transactions of lendings to / borrowings from financial institutions at contracted rates for a specified period of time. These are recorded as under: (a) Sale under repurchase obligation Securities sold subject to a repurchase agreement (repo) are retained in the financial statements as investments and liability to counter party is included in borrowings. The difference in sale and repurchase value is accrued over the period of the contract and recorded as an expense using effective interest rate method. (b) Other lendings Other lendings include term lendings and unsecured lendings to financial institutions. These are stated net of provision. Markup on such lendings is charged to profit and loss account on a time proportionate basis using effective interest rate method except mark-up on impaired/delinquent lendings, which are recognized on receipt basis in accordance with the requirements of the Prudential Regulations of the SBP. (c) Purchase under resale obligation Securities purchased under agreement to resell (reverse repo) are not included in statement of financial position as the Bank does not obtain control over the securities. Amount paid under these agreements is included in lendings to financial institutions or advances as appropriate. The difference between the contracted price and resale price is amortised over the period of the contract and recorded as income using effective interest method. (d) Other borrowings Other borrowings include borrowings from the SBP and unsecured call borrowings which are recorded at the proceeds received. Mark-up paid on such borrowings is charged to the profit and loss account over the period of borrowings on time proportionate basis using effective interest method. 4.3 Investments 4.3.1 Initial recognition and measurement 4.3.1.1 The Management determines the appropriate classification of its investments at the time of purchase in held-for-trading, availablefor-sale or held-to-maturity as per SBP guidelines vide BSD circular No. 10 of 2004 dated July 13, 2004. These are initially recognised at cost, being the fair value of the consideration given plus, in the case of investments not held-for-trading, directly attributable acquisition costs. (a) Held-for-trading These are securities which are either acquired for generating profit from short-term fluctuations in market prices, interest rate movements, dealer's margin or are securities included in a portfolio in which a pattern of short-term profit taking exists. These securities are carried at fair value with any related gain or loss being recognized in profit and loss account. 68
72. JS BANK LIMITED (b) Held-to-maturity These are securities with fixed or determinable payments and fixed maturities that are held with the intention and ability to hold till maturity. Investments classified as held-to-maturity are carried at amortised cost. (c) Available-for-sale These are investments that do not fall under the held-for-trading or held-to-maturity categories. These are initially recognised at cost, being the fair value of the consideration given including the acquisition cost. These securities are carried at fair value with any related surplus or deficit on revaluation shall be taken to other comprehensive income. 4.3.1.2 Associates Associate is an entity over which the Bank has significant influence but not control. Investment in associate is carried at cost less accumulated impairment losses, if any. 4.3.1.3 Subsidiaries Subsidiary is an entity over which the Bank has control. Investment in subsidiary is carried at cost less accumulated impairment losses, if any. 4.3.1.4 Regular way contracts All 'regular way' purchases and sales of financial assets are recognised on the trade date, i.e. the date on which commitment to purchase / sale is made by the Bank. Regular way purchases or sales of financial assets are those, the contract for which requires delivery of assets within the time frame generally established by regulation or convention in the market place. 4.3.1.5 Premium or discount on acquisition of investments Premium or discount on acquisition of investments is capitalised and amortised through the profit and loss account using effective yield over the remaining period of the investment. 4.3.2 Subsequent measurement In accordance with the requirements of the SBP, quoted securities other than those classified as 'held-to-maturity' and investment in associates and subsidiaries, are subsequently remeasured on portfolio basis i.e. in case of government securities at PKRV and PKFRV rates whereas in case of other securities at market value. Investments classified as 'held-to-maturity' are carried at amortised cost using the effective interest method (less impairment, if any). Further, in accordance with the requirements of the SBP, gain or loss on revaluation of the Bank's held-for-trading investments is taken to the profit and loss account. In case of investments classified as available-for-sale, surplus or deficit is taken directly to equity. The surplus or deficit arising on these securities is taken to the profit and loss account when actually realised upon disposal. Unquoted equity securities, excluding investment in subsidiaries and associates are valued at lower of cost and the break-up value in accordance with the requirements of the Prudential Regulations issued by the SBP. Break-up value of equity securities is calculated with reference to the net assets of the investee company as per the latest available audited financial statements. Investment in subsidiaries and associates are carried at cost, less accumulated impairment losses, if any. 4.3.3 Impairment / diminution in the value of securities Impairment loss in respect of quoted equity securities classified as available for sale, associates, subsidiaries and held to maturity is recognised based on management's assessment of objective evidence of impairment as a result of one or more events that may have an impact on the estimated future cash flows of the investments. Objective evidence that the cost may not be recovered, in addition to qualitative impairment criteria, includes a significant or prolonged decline in the fair value below average cost. A decline to be considered as: - Significant if the fair value is below the weighted average cost by more than 30 percent. Prolonged if the fair value is below the weighted average cost for a period of more than one year. (a) Available-for-sale If an available-for-sale equity security is impaired, the cumulative loss that had been recognised in equity, shall be reclassified from equity to profit and loss as a reclassification adjustment even though the financial asset has not been derecognised, any further decline in the fair value at subsequent reporting dates is recognised as impairment. Therefore, at each reporting period, for an equity security that was determined to be impaired, additional impairments is recognised for the difference between the fair value and the original cost basis, less any previously recognised impairment. 69
73. JS BANK LIMITED If , in subsequent period, impairment losses recognised in profit and loss for an investment in an equity instrument classified as available for sale shall not be reversed through profit and loss except in case of derecognition. (b) Held to maturity, subsidiaries and associates Impairment losses are incurred if, and only if, there is objective evidence of impairment after initial recognition of the investment. The impairment loss is recognised in the profit and loss account. If, in a subsequent period, any indication that an impairment loss recognised in prior periods no longer exist or may have decreased, the impairment loss shall be reversed, with the amount of the reversal recognised in profit or loss. (c) Debt Securities PTCs, TFCs, Sukuk and other debt securities will be classified on the valuation date on the basis of default in their repayment in line with the criteria prescribed for classification of short, medium and long-term facilities in accordance with the requirements of the Prudential Regulations issued by the SBP. 4.4 Financial instruments 4.4.1 Financial assets and financial liabilities Financial assets and financial liabilities are recognized at the time when the Bank becomes 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 specified 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 at the time of de-recognition. The particular recognition and subsequent measurement method for significant financial assets and financial liabilities are disclosed in the individual policy statements associated with them. 4.4.2 Derivative financial instruments Derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently re-measured at fair value using 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. 4.5 Off-setting of financial assets and financial liabilities Financial assets and financial liabilities are set off and the net amount is reported in the financial statements when there is a legally enforceable right to set off and the Bank intends either to settle the assets and liabilities on a net basis or to realise the assets and to settle the liabilities simultaneously. Income and expenses arising from such assets and liabilities are accordingly offset. 4.6 Advances 4.6.1 Loan and advances Advances are stated net of general and specific provisions. General and specific provisions against funded loans are determined in accordance with the requirements of the Prudential Regulations issued by the SBP and charged to the profit and loss account. Advances are written off when there are no realistic prospects of recovery. 4.6.2 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 recognised at an amount equal to the present value of the lease payment including any guaranteed residual value, if any. Net investment in finance lease is included in loans and advances to customers. 4.7 Fixed assets 4.7.1 Property and equipment Operating fixed assets except office premises are shown at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditures that are directly attributable to the acquisition of the items. Office premises (which includes leasehold land and buildings) are stated at revalued amount less accumulated depreciation and impairment loss, if any. Depreciation is calculated and charged to profit and loss account using the straight-line method so as to write down the cost of the assets to their residual values over their estimated useful lives at the rates given in note 11.2. A full month’s depreciation is charged from the month in which assets are brought into use and no depreciation is charged for the month in which the disposal is made. The residual values, useful lives and depreciation methods are reviewed and changes, if any, are treated as change in accounting estimates, annually. 70
74. JS BANK LIMITED Subsequent costs are included in the asset ’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. The carrying amount of the replaced part is de-recognised. All other repairs and maintenance are charged to the profit and loss account during the period in which they are incurred. An item of property and equipment is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset is recognised in the profit and loss account in the year the asset is de-recognised. 4.7.2 Surplus / deficit on revaluation of fixed assets The surplus arising on revaluation is credited to other comprehensive income. However, the increase shall be recognised in profit and loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit and loss account. The deficit arising on a particular property as a result of a revaluation is recognised in profit and loss account as an impairment. However, the decrease to be recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. Depreciation on buildings which are revalued is determined with reference to the value assigned to such assets on revaluation and depreciation charge for the year is taken to the profit and loss account; and an amount equal to incremental depreciation for the year net of deferred taxation is transferred from “Surplus on Revaluation of Fixed Assets Account” to unappropriated profit through Statement of Changes in Equity to record realization of surplus to the extent of the incremental depreciation charge for the year. Gains or losses on disposal of assets are included in the profit and loss account currently, except that the related surplus on revaluation of fixed assets (net of deferred tax) is transferred directly to equity. 4.7.3 Capital work-in-progress Capital work-in-progress is stated at cost less impairment losses, if any. These are transferred to specified assets as and when assets are available for use. 4.8 Intangible assets Intangible assets are stated at cost less accumulated amortisation and impairment, if any. Intangible assets are amortised from the month when the assets are available for use, using the straight line method, whereby the cost of the intangible asset is amortised over its estimated useful life over which economic benefits are expected to flow to the Bank. The useful life and amortisation method are reviewed and adjusted, if appropriate, annually. Intangible assets having an indefinite useful life are carried at cost less any impairment in value and are not amortised. However, these are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. 4.9 Non-banking assets acquired in satisfaction of claims 4.9.1 Non-banking assets acquired in satisfaction of claims under Debt Property Swap (DPS) transactions, against the loans in category of loss, are initially carried at cost and subsequently at revalued amounts at each year-end date of the statement of financial position, being the fair value at the date of revaluation less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any. The valuation of properties acquired are conducted regularly, so as to ensure that their net carrying value does not materially differ from their fair value. All direct cost including legal fees, valuation and transfer costs of acquiring title to property shall be expensed when incurred through profit and loss account. Subsequent costs are included in the asset's carrying amounts only when it is probable that future benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other subsequent costs including repair and maintenance are charged to the profit and loss account as and when incurred. Depreciation on assets acquired in satisfaction of claims is charged to the profit and loss account in line with the depreciation charged on operating fixed assets. Any reductions in non-performing loans and corresponding reductions in provisions held against non-performing loans, as a result of the recognition of such assets, are disclosed separately in the notes to these unconsolidated financial statements. These assets are generally intended for sale. Gains and losses realised on the sale of such assets are disclosed separately from gains and losses realised on the sale of operating fixed assets in the notes to these un-consolidated financial statements. If such asset is subsequently used by the Bank for its own operations, the asset, along with any related surplus, is transferred to operating fixed assets. 71
75. JS BANK LIMITED 4 .9.2 Surplus / deficit on revaluation of non banking assets Revaluation of non-banking assets acquired in satisfaction of claims under DPS transactions is carried out under criteria given in regulations for DPS issued by SBP vide BPRD Circular 01 dated January 01, 2016 i.e. valuation of property shall be done on individual property basis and not on portfolio basis, whereas accounting treatment of revaluation is accounted for in accordance with applicable financial reporting standards i.e. International Accounting Standard (IAS) 16 as referred in note 4.7.2. Furthermore, revaluation surplus on such assets shall not be admissible for calculating Bank’s Capital Adequacy Ratio and exposure limits under the Prudential Regulations. However, the surplus can be adjusted upon realization of sale proceeds. 4.10 Impairment other than investments and deferred tax At each balance sheet date, the Bank reviews the carrying amounts of its assets (other than investment and deferred tax asset) to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss, if any. Recoverable amount is the higher of net selling price (being fair value less cost to sell) and value-in-use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the assets is reduced to its recoverable amount. Impairment losses are recognised as an expense in profit and loss account immediately. Where impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised recoverable amount but limited to the extent of the amount which would have been determined had there been no impairment. Reversal of impairment loss is recognized as income. 4.11 Borrowings / Deposits and their cost Borrowings / deposits are initially recorded at the amount of proceeds received. Cost of borrowings / deposits are recognised separately as part of other liabilities and is charged to the profit and loss account over the period on an accrual basis. 4.12 Subordinated debts Subordinated debts is initially recorded at the amount of proceeds received. Mark-up accrued on subordinated debts is recognised separately as part of other liabilities and is charged to the profit and loss account over the period on an accrual basis. 4.13 Taxation 4.13.1 Current The charge for current taxation is based on taxable income at the current rate of taxation after taking into account applicable tax credit, rebates and exemptions available, if any, or minimum tax on turnover, whichever is higher. The charge for current tax also includes adjustments, where considered necessary, relating to prior years arising from assessments made during the year. 4.13.2 Deferred Deferred tax is recognised using the balance sheet liability method on all temporary differences arising between tax bases of assets and liabilities and their carrying amounts appearing in the financial statements. Deferred tax liability is recognized on taxable temporary differences. Deferred tax asset is recognised for all deductible temporary differences and carry forward of unused tax losses, if any only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realised. Deferred tax is calculated at the rates that are expected to apply to the period when the differences are expected to reverse, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to the profit and loss account. Deferred tax, if any, on revaluation of investments is recognised as an adjustment to surplus / (deficit) arising on revaluation in accordance with the requirements of IAS-12 "Income Taxes". 4.14 Provisions Provisions are recognised when the Bank has a legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate. Provision against identified non-funded losses is recognised when intimated and reasonable certainty exists for the Bank to settle the obligation. The loss is charged to profit and loss account net of expected recovery. 72
76. JS BANK LIMITED 4 .15 Staff retirement benefits 4.15.1 Defined contribution plan The Bank has established a provident fund scheme for all permanent employees effective from January 01, 2007. Equal monthly contributions are made, both by the Bank and the employees, to the fund at the rate of 7.1 percent with effect from July 01, 2015 due to change in salary structure. Contribution by the Bank is charged to profit and loss account. 4.15.2 Defined benefit plan The Bank operates an approved funded gratuity scheme covering all its eligible employees who have completed minimum qualifying period. An actuarial valuation of defined benefit scheme is conducted at the end of every year or on occurrence of any significant change. The most recent valuation in this regard was carried out as at December 31, 2021, using the projected unit credit actuarial valuation method. Under this method cost of providing for gratuity is charged to profit and loss account so as to spread the cost over the service lives of the employees in accordance with the actuarial valuation. Past-service costs are recognised immediately in profit and loss account and actuarial gains and losses are recognised immediately in other comprehensive income. 4.16 Revenue recognition Revenue is recognized to the extent that economic benefits will flow to the Bank and the revenue can be reliably measured. These are recognized as follows: - Advances and investments Mark-up income / interest / profit on performing advances and debt securities is recognized on a time proportion basis as per the terms of the contract. Mark-up income / interest / profit on non-performing advances and debt securities is recognized on a receipt basis in accordance with the requirements of the Prudential Regulations issued by the State Bank of Pakistan. Mark-up income/ Interest / profit on rescheduled / restructured advances and debt securities are recognised as permitted by the State Bank of Pakistan or by the regulatory authorities of the countries where the Bank operates, except where, in the opinion of the management, it would not be prudent to do so. Premium or discount on acquisition of debt investments is capitalised and amortised through the profit and loss account over the remaining maturity of the debt security using the effective yield method. - Lease financing Financing method is used in accounting for income from lease financing. Under this method, the unearned lease income (defined as the excess of the sum of 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. Unrealised finance income in respect of non-performing lease finance is held in suspense account, where necessary, in accordance with the requirements of the Prudential Regulations issued by the SBP. Gains / losses on termination of lease contracts, documentation charges, front-end fees and other lease income are recognized as income on receipt basis. - Non Mark-up / interest income - Commission is recognised as income at the time of affecting the transaction to which it relates. Fees are recognised when earned. - Financial advisory fee is recognised when the right to receive the fee is established. - Dividend income from investments is recognised when the Bank’s right to receive the dividend is established. 4.17 Dividend and appropriation to reserves Dividend and appropriation to reserves, except for statutory reserves, are recognised in the financial statements in the periods in which these are approved. 4.18 Foreign currencies 4.18.1 Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Bank operates. The financial statements are presented in Pakistani Rupees, which is the Bank's functional and presentation currency. 73
77. JS BANK LIMITED 4 .18.2 Transactions and balances Transactions in foreign currencies are translated into Pakistani rupees at the exchange rates prevailing on the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account. Forward contracts relating to foreign currency deposits are valued at forward rates applicable to the respective maturities of the relevant foreign exchange contract. The forward cover received / paid on forward purchase contracts relating to foreign currency deposits are realised / charged directly to profit and loss account. 4.18.3 Foreign operations Assets and liabilities of foreign operations are translated into rupees at the exchange rate prevailing at the reporting date. The results of foreign operations are translated at average rate of exchange for the year. 4.18.4 Translation gains and losses Translation gains and losses arising on revaluations of net investment in foreign operations are taken to Exchange Translation Reserve in the statement of comprehensive income. These are recognised in the profit and loss account on disposal. 4.18.5 Commitments Commitments for outstanding forward foreign exchange contracts disclosed in these financial statements are translated at contracted rates. 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 ruling on the balance sheet date. 4.19 Goodwill Goodwill acquired in a business combination before July 01, 2009 is initially measured at cost, being the excess of the cost of the business combination over the Bank’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Bank’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquirer are assigned to those units or groups of units. 4.20 Earnings per share The Bank presents basic and diluted earnings per share (EPS). Basic EPS is calculated by dividing the profit or loss attributable to ordinary equity holders of the Bank (less preferrence dividend, if any) by the weighted average number of ordinary shares outstanding during the period / year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary equity holders of the Bank by dividing the weighted average number of shares outstanding, for the effects of all dilutive potential ordinary shares, if any. 4.21 Non-current assets held for sale and associated liabilities The Bank classifies an asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value. In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. A held for sale asset is carried at the lower of its carrying amount and the fair value less costs to sell. Impairment losses are recognised in the profit and loss account for any initial or subsequent write down of the asset to fair value less costs to sell. Subsequent gains in fair value less costs to sell are recognised to the extent these do not exceed the cumulative impairment losses previously recorded. An asset is not depreciated while classified as held for sale. 4.22 Segment reporting A segment is a distinguishable component of the Bank that is subject to risks and rewards that are different from those of other segments. A business segment is one that is engaged either in providing certain products or services, whereas a geographical segment is one engaged in providing certain products or services within a particular economic environment. 74
78. JS BANK LIMITED Segment information is presented as per the Bank 's functional structure and the guidance given under International Financial Reporting Standard (IFRS) 8. For management purposes, the Bank has been organised into five operating segments based on products and services, as follows: 4.22.1 Business segments Corporate finance This includes investment banking activities such as mergers and acquisitions, underwriting, privatization, securitization, Initial Public Offers (IPOs), specialised financial advice and trading and secondary private placements. Trading and sales This segment undertakes the Bank's treasury, money market and capital market activities. Retail banking Retail banking provides services to small borrowers i.e. consumers, small and medium enterprises (SMEs) and agricultural sector. It includes loans, deposits and other transactions with retail customers. Commercial banking This includes loans, deposits and other transactions with corporate customers. Others This includes the head office related activities and other functions which canot be classified in any of the above segments. The Leadership Team (LT) monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profits or losses and is measured consistently with operating profits or losses in these unconsolidated financial statements. However, income taxes are managed on a group basis and are not allocated to operating segments. Interest income is reported net as management primarily relies on net interest revenue as a performance measure, along with the gross income and expense Transfer prices between operating segments are based on the Bank’s internal pricing framework. No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Bank’s total revenue in 2020 or 2021. 4.22.2 Geographical segment The Bank operates with 281 (2020: 307) branches / sub-branches in Pakistan region and one wholesale banking branch in Bahrain (2020: one). 4.23 Fiduciary assets Assets held in a fiduciary capacity are not treated as assets of the Bank in statement of financial position. 5. FINANCIAL RISK MANAGEMENT The financial risk management objectives and policies adopted by the Bank are consistent with those disclosed in the unconsolidated financial statements for the year ended December 31, 2021. 75
79. JS BANK LIMITED Note 6 . 2021 2020 ----- Rupees in '000 ----- CASH AND BALANCES WITH TREASURY BANKS In hand Local currency Foreign currencies With State Bank of Pakistan in: Local currency current account Foreign currency current account - non remunerative Foreign currency deposit account - remunerative 6.1 6.2 6.3 With National Bank of Pakistan in: Local currency current accounts National Prize Bonds 7,286,182 957,434 8,243,616 6,337,089 1,301,503 7,638,592 19,934,402 1,085,558 2,616,420 23,636,380 16,268,165 1,086,874 2,261,337 19,616,376 2,345,795 2,609,635 41,065 34,266,856 556,628 30,421,231 6.1 This includes statutory liquidity reserves maintained with the SBP under the requirements of Section 22 of the Banking Companies Ordinance, 1962. 6.2 This includes cash reserve of 5% maintained with the SBP held under the New Foreign Currency Accounts Scheme (FE-25 deposits), as per BSD Circular No. 9 dated December 03, 2007. 6.3 This represents deposit accounts maintained with the SBP under the requirements of BSD Circular No. 14 dated June 21, 2008 and mandatory reserve maintained to facilitate collection and settlement of foreign currency accounts under FE-25, as prescribed by the SBP, carrying a mark-up rate 0% (2020: 0%) as per specific circular issued by the SBP at year end. 2021 2020 Note ----- Rupees in '000 ----BALANCES WITH OTHER BANKS 7. In Pakistan In current accounts In deposit accounts Outside Pakistan In current accounts 7.1 Less: General provision under IFRS 9 Balances with other banks - net of provision 7.2 128,812 73 128,885 125,677 73 125,750 1,056,918 1,185,803 (17) 1,185,786 980,669 1,106,419 (450) 1,105,969 7.1 This includes amount held in Automated Investment Plans. The Bank is entitled to earn interest from the foreign correspondent banks at agreed upon rates when the balance exceeds a specified amount which comes 0.01% per annum (2020: 0.01% per annum). 7.2 This represents general provision held under IFRS 9 by Bahrain branch of the Bank. Note 8. LENDINGS TO FINANCIAL INSTITUTIONS Call money lendings Repurchase agreement lendings (Reverse Repo) 8.2 Less: General provision under IFRS 9 Lending to Financial Institutions - net of provision 8.1 8.3 31,939,044 31,939,044 2,237,682 21,003,215 23,240,897 31,939,044 (1,225) 23,239,672 31,939,044 31,939,044 21,003,215 2,237,682 23,240,897 Particulars of lendings - gross In local currency In foreign currencies 8.2 2021 2020 ----- Rupees in '000 ----- These are secured short-term lendings to various financial institutions, carrying mark-up rate from 10.10% to 10.70% (2020: 6.75% to 7.40%) per annum. These are collateralized by Market Treasury Bills and Pakistan Investment Bonds as shown in note 8.2.1 below. 8.2.1 Market value of securities held as collateral against lending to financial institutions Held by bank Market Treasury Bills Pakistan Investment Bonds 8.3 8,923,921 23,046,627 31,970,548 2021 2020 Further Further given as Held by given as collateral Total bank collateral --------------------------- Rupees in '000 --------------------------- 8,923,921 23,046,627 31,970,548 21,160,868 21,160,868 - Total 21,160,868 21,160,868 This represents general provision held under IFRS 9 by Bahrain branch of the Bank. 76
80. JS BANK LIMITED 9 . INVESTMENTS 9.1 Investments by type 2021 2020 Cost / Cost / Carrying Carrying Amortised Provision for Surplus / Amortised Provision for Surplus / Value Value cost diminution (Deficit) cost diminution (Deficit) -------------------------------------------------------------- Rupees in '000 ---------------------------------------------------------------- Held-for-trading securities Federal Government Securities 1,109,466 Available-for-sale securities Federal Government Securities Shares Non Government Debt Securities Open End Mutual Funds Foreign Securities 159,686,158 1,916,891 2,966,418 2,175,087 1,844,989 168,589,543 Held-to-maturity securities Federal Government Securities 58,143,943 Associates 242,067 Subsidiaries 1,919,121 Total Investments 230,004,140 (136,589) (391,611) (68,232) (596,432) (62) 1,109,404 25,002,969 (370,270) 2,281,924 2,256 28,085 (63,097) 1,878,898 159,315,888 4,062,226 2,577,063 2,203,172 1,713,660 169,872,009 127,308,516 2,995,123 3,020,950 4,079,070 137,403,659 (411,955) (370,051) (122,758) (904,764) 805 97,527 1,692,166 (1,142) 136,466 1,925,017 25,003,774 127,406,043 4,275,334 2,649,757 4,092,778 138,423,912 - - 58,143,943 36,109,599 - - 36,109,599 (20,267) - 221,800 242,067 - - 242,067 (616,699) 1,878,836 1,919,121 1,919,121 231,266,277 200,677,415 (904,764) 1,925,822 1,919,121 201,698,473 9.1.1 Investments include certain approved / government securities which are held by the Bank to comply with the Statutory Liquidity Requirement determined on the basis of the Bank’s demand and time liabilities as set out under section 29 of the Banking Companies Ordinance, 1962. 9.2 Investments by segments: Note 2021 2020 Cost / Cost / Carrying Carrying Amortised Provision for Surplus / Amortised Provision for Surplus / Value Value cost diminution (Deficit) cost diminution (Deficit) -------------------------------------------------------------- Rupees in '000 ---------------------------------------------------------------- Held-for-trading securities Federal Government Securities Market Treasury Bills Pakistan Investment Bonds 9.4.1 9.4.1 1,109,264 202 1,109,466 - (61) (1) (62) 1,109,203 201 1,109,404 25,002,969 25,002,969 - 805 805 25,003,774 25,003,774 9.5.1 9.5.1 125,616,353 34,069,805 159,686,158 - (370,699) 429 (370,270) 125,245,654 34,070,234 159,315,888 90,027,949 37,280,567 127,308,516 - 20,041 77,486 97,527 90,047,990 37,358,053 127,406,043 9.5.2 9.5.2 1,769,302 136,589 (136,589) 2,281,924 - 4,051,226 - 2,847,534 136,589 (275,366) (136,589) 1,692,166 - 4,264,334 - 9.5.2 11,000 1,916,891 (136,589) 2,281,924 11,000 4,062,226 11,000 2,995,123 (411,955) 1,692,166 11,000 4,275,334 9.5.3.1 9.5.3.2 301,879 220,417 (151,867) - 363 1,893 150,375 222,310 305,182 308,583 (155,169) - (13) (1,129) 9.5.3.3 9.5.3.4 9.5.3.5 9.5.3.6 756,845 1,307,393 352,151 27,733 2,966,418 (212,011) (27,733) (391,611) 2,256 544,834 1,307,393 352,151 2,577,063 1,014,348 1,365,104 (214,882) - - 799,466 1,365,104 27,733 3,020,950 (370,051) (1,142) 27,733 2,649,757 9.5.4 2,175,087 - 28,085 2,203,172 9.5.5.1 9.5.5.2 9.5.2 1,372,854 376,486 95,649 1,844,989 (67,856) (376) (68,232) (63,011) (1,942) 1,856 (63,097) 1,241,987 374,168 97,505 1,713,660 3,633,601 379,654 65,815 4,079,070 9.6.1 9.6.1 11,463,014 46,680,929 58,143,943 - - 11,463,014 46,680,929 58,143,943 36,109,599 36,109,599 - - 36,109,599 36,109,599 (20,267) (20,267) - 180,000 41,800 221,800 180,000 41,800 20,267 242,067 - - 180,000 41,800 20,267 242,067 - - 1,357,929 561,192 1,357,929 561,192 - - 1,357,929 561,192 Available-for-sale securities Federal Government Securities: Market Treasury Bills Pakistan Investment Bonds Shares: Listed Companies Ordinary shares Preference shares Unlisted Companies Ordinary shares Non Government Debt Securities: Listed Term Finance Certificates Sukuk Certificates Unlisted Term Finance Certificates Sukuk Certificates Commercial Paper Certificates Preference shares Open End Mutual Funds Foreign Securities Government Debt Securities * Non Government Debt Securities * Ordinary shares - - (120,619) (2,139) (122,758) - 130,420 (3,628) 9,674 136,466 150,000 307,454 - 3,643,402 373,887 75,489 4,092,778 Held-to-maturity securities Federal Government Securities: Market Treasury Bills Pakistan Investment Bonds Associates Omar Jibran Engineering Industries Limited Veda Transit Solutions (Private) Limited Intercity Touring Company (Private) Limited 9.7 9.7 9.7 180,000 41,800 20,267 242,067 Subsidiaries JS Global Capital Limited JS Investments Limited 9.7 9.7 1,357,929 561,192 1,919,121 Total Investments 230,004,140 (616,699) 1,878,836 1,919,121 1,919,121 231,266,277 200,677,415 (904,764) 1,925,822 1,919,121 201,698,473 * Provision for diminution against foreign debt securities represents expected credit loss provisioning under IFRS 9 on portfolio pertaining to Bahrain Branch. 77
81. JS BANK LIMITED 9 .2.1 2021 2020 Cost Market value Cost Market value --------------------------- Rupees in '000 -------------------------- Investments given as collateral Held-for-trading securities Federal Government Securities Market Treasury Bills - - 4,864,464 4,864,680 4,902,054 4,902,054 4,902,811 4,902,811 Available-for-sale securities Federal Government Securities: Market Treasury Bills Pakistan Investment Bonds Foreign Debt Securities Government Debt Securities Non Government Debt Securities 9.3 19,922,016 15,063,158 34,985,174 19,852,789 15,073,822 34,926,611 842,316 842,316 814,484 814,484 35,827,490 35,741,095 Provision for diminution in value of investments Note Opening balance Charge during the year Reversal during the year 32 Impairment under IFRS 9 in Bahrain branch (Reversal) / charge during the year Exchange Gain Closing Balance 9.3.1 - 9,766,518 9,767,491 2021 2020 ----- Rupees in '000 ----904,764 506,640 48,000 (281,540) (233,540) 276,202 (836) 275,366 (62,148) 7,623 (54,525) 122,758 122,758 616,699 904,764 Particulars of provision against debt securities 2021 2020 NPI Provision NPI Provision --------------------- Rupees in '000 --------------------- Category of classification Domestic Other assets especially mentioned Substandard Doubtful Loss 9.4 - 391,611 391,611 391,611 391,611 370,051 370,051 370,051 370,051 Quality of Held-for-trading Securities Details regarding quality of Held-for-trading (HFT) securities are as follows: 9.4.1 Federal Government Securities - Government guaranteed Note Market Treasury Bills Pakistan Investment Bonds 9.4.1.1 2021 2020 Cost Market value Cost Market value ---------------------- Rupees in '000 ---------------------1,109,264 202 1,109,466 1,109,203 201 1,109,404 25,002,969 25,002,969 25,003,774 25,003,774 9.4.1.1 Principal terms of investment in Federal Government Securities Name of investment Market Treasury Bills Pakistan Investment Bonds Note Maturity Redemption Coupon 9.4.1.2 9.4.1.3 January 13, 2022 to March 10, 2022 Upto July 19, 2022 On maturity On maturity On maturity Half yearly 9.4.1.2 Market Treasury Bills are for the period of three to six months. The effective rates of profit on Market Treasury Bills range from 8.81% to 10.50% per annum (2020: 7.07% to 7.12% per annum). 9.4.1.3 Pakistan investment bonds are for the period of ten years. The effective rates of profit on Pakistan investment bonds range upto 12% per annum (2020: Nil). 9.5 Quality of Available-for-sale Securities Details regarding quality of Available-for-sale (AFS) securities are as follows: 9.5.1 Federal Government Securities - Government guaranteed Note Market Treasury Bills Pakistan Investment Bonds 9.5.1.1 2021 2020 Cost Market value Cost Market value ---------------------- Rupees in '000 ---------------------125,616,353 34,069,805 159,686,158 125,245,654 34,070,234 159,315,888 90,027,949 37,280,567 127,308,516 90,047,990 37,358,053 127,406,043 9.5.1.1 Principal terms of investment in Federal Government Securities Name of investment Market Treasury Bills Pakistan Investment Bonds Note Maturity 9.5.1.2 January 13, 2022 to June 30, 2022 9.5.1.3 July 19, 2022 to December 10, 2030 Redemption Coupon On maturity On maturity On maturity Half yearly 9.5.1.2 Market Treasury Bills are for the period of three to twelve months. The effective rates of profit on Market Treasury Bills range from 7.39% to 11.38% per annum (2020: 6.90% to 11.77% per annum). 9.5.1.3 Pakistan Investment Bonds (PIBs) are for the period of two to twenty years. The rates of profit ranging from 7% to 12% per annum (2020: 7% to 12% per annum). 78
82. JS BANK LIMITED Rating Industry Sector Shares 2021 Numbers Shares 9 .5.2 Market Market value value Cost 2021 2020 ---------------------------- Rupees in '000 ---------------------------Cost 2020 Listed Companies - Ordinary shares Shifa International Hospitals Pakistan Petroleum Limited Air Link Communication Limited Ferozsons A Unrated Miscellaneous Oil & Gas Marketing Companies Technology & Communication Pharmaceutical - Investment in related parties EFU General Insurance Limited EFU Life Assurance Limited Sitara Chemical Industries Limited TRG Pakistan Limited Hum Network Limited AA+ AA+ Unrated - Insurance Insurance Chemical Technology & Communication Technology & Communication Foreign securities Deutche Post AG Microsoft Corporation Limited Daimler AG The Walt Disney Co Total Energy Daimler Truck Holding AG Preference Shares Agritech Limited (note 9.5.2.1 & 9.5.2.3) Chenab Limited (note 9.5.2.2 & 9.5.2.3) Unlisted Companies - Ordinary shares ISE Towers REIT Management Limited (note 9.5.2.4) A3 A2 A1 BBB+ Unrated Unrated Logistics Technology & Communication Automobile and transportation equipment Technology & Communication Petroleum, oil and gas Automobile and transportation equipment * 16.77 15.45 ** 877,740 786,254 264,300 841,800 - 234,439 70,124 267,499 61,843 68,273 123,382 5,455,675 1,189,600 24,583,760 - 5,455,675 1,189,600 1,790,250 24,583,760 79,030,303 647,129 250,735 566,875 - 572,846 250,613 2,898,425 - 647,129 250,735 548,781 566,875 642,359 654,681 248,650 554,978 2,247,202 429,925 1,769,302 4,051,226 2,847,534 4,264,334 19,697 53,640 16,139 3,767 21,913 48,119 19,833 5,234 56,525 6,884 - 64,706 8,377 - 93,243 95,099 63,409 73,083 48,236 88,353 136,589 - 48,236 88,353 136,589 - 1,624 1,760 2,226 812 4,823,746 12,357,000 Chemical Textile Composite Break-up value per share 2021 2020 -----------Rupee----------- 4,607,293 189,800 Name of Chief Executive / Managing Director 8,100 220 - 4,823,746 12,357,000 2021 2020 -----------Numbers----------- Mr. Sagheer Mushtaq Breakup value - Breakup value 2021 2020 ------------------ Rupees in '000 ------------------ Cost Shares - 52,857 76,041 Cost 1,213,841 1,213,841 11,000 20,356 11,000 18,754 6 6 2,406 5,266 2,406 4,718 Foreign securities - Ordinary shares Society for Worldwide Interbank Financial Telecommunication (SWIFT) (note 9.5.2.5) Mr. Javier Perez Tasso * Based on audited accounts as of June 30, 2021 ** Based on audited accounts as of December 31, 2020 9.5.2.1 These are non-voting cumulative preference shares, carrying preference dividend @ 10% p.a and are convertible into ordinary shares at the option of the Bank after five years from the date of issuance i.e. February 2012. The investee company also has the option to redeem these preference shares plus any unpaid dividend in full or in part, within ninety days after expiry of each anniversary of the issue date. The Bank has recognised full impairment on these shares amounting to Rs. 48.236 million (2020: Rs.48.236 million) due to weak financial position of the company. 9.5.2.2 These are cumulative preference shares, carrying preference dividend @ 9.25% p.a and are redeemable in part after four years from the date of issuance i.e. August 2008. The investee company also has an option to redeem, in part, cumulative preference shares after August 2008. The Bank has recognized full impairment on these shares amounting to Rs. 88.353 million (2020: Rs. 88.353 million) due to weak financial position of the company. 9.5.2.3 Surplus arising due to re-measurement of these shares to the market value has not been recognized as the management believes that the market value may not be realized while selling them in open market. 9.5.2.4 In accordance with the requirements of the Stock Exchanges (Corporatization, Demutualization and Integration) Act, 2012 (the Act), the Bank has received 3,034,603 shares of Rs.10 each including trading right entitlement certificate (TREC) of the Islamabad Stock Exchange (ISE) in lieu of its Membership Card held by the Bank. Further upon integration of ISE under the "ISE Scheme of Integration" in 2016, TRE Certificates holders of ISE have been issued 1,213,841 (i.e 40%) ordinary shares of "ISE Towers REIT Management Limited" with trading rights, whereas the remaining 1,820,762 ordinary shares (i.e. 60%), are transferred to blocked CDC account maintained by ISEL. Further, the management believes that the carrying value of these shares is less than face value of shares therefore, no value has been allocated to TREC. 9.5.2.5 The Bank qualified as a member based on the financial contribution to SWIFT for network-based services. The Bank has made an investment as per the requirements of By-Laws of SWIFT, under the Share Re-allocation Process, as a result becoming entitled to invest in for six shares. The participation is mandatory to avail the desired network-based services for financial message transmission for cross-border payments and receipt. Further, the share re-allocation occurs every three years and will result in either an increase, decrease, or a status quo in individual shareholding. Cost 9.5.3 Non Government Debt Securities / Preference Shares (Debt Securities) 2021 2020 ----- Rupees in '000 ----Listed Unrated 151,867 155,169 A 150,012 150,013 AAA 220,417 308,583 522,296 613,765 Unlisted AAA 71,429 AA+, AA, AA200,034 200,037 A+, A, A1,599,393 1,749,104 Unrated 644,695 386,615 2,444,122 2,407,185 2,966,418 9.5.3.1 Term finance certificates - listed * Worldcall Telecom Limited (note 9.5.3.1.2) Soneri Bank Limited Number of certificates 2021 ---- Numbers ---90,650 30,000 Rating 2020 2021 2020 90,650 30,000 Unrated A Unrated A 3,020,950 2021 2020 Cost Market value Cost Market value ---------------- Rupees in '000 ---------------151,867 150,012 150,375 155,169 150,013 150,000 301,879 150,375 305,182 150,000 * Secured and have a face value of Rs.5,000 each unless specified otherwise. 79
83. JS BANK LIMITED 9 .5.3.1.1 Other particulars of listed term finance certificates are as follows: Name of the company Worldcall Telecom Limited Soneri Bank Limited 9.5.3.1.2 Note Repayment frequency 9.5.3.1.2 Semi-annually Semi-annually September 20, 2026 December 06, 2028 Rating 2020 AAA AAA 2021 2020 Market Cost Market value value ------------------------ Rupees in '000 -----------------------Cost 220,417 222,310 308,583 307,454 220,417 222,310 308,583 307,454 Unlisted sukuk certificates are as follows: Profit rate per annum Repayment frequency Cnergyico Pk Limited (Formerly: Byco Petroleum Pakistan Limited) (Chief Executive: Mr. Amir Abbassciy) Note Quarterly Number of certificates 2021 2020 3 Month KIBOR ask rate plus 1.05%. 2021 Rating 2020 Face value per certificate ----- Rupees ----- Term finance certificates - unlisted Azgard Nine Limited 9.5.3.3.1 & - related party 9.5.3.3.2 Agritech Limited 9.5.3.3.2 Pakistan Water & Power Development Authority (WAPDA) NRSP Microfinance Bank Limited Airlink Communication Private Limited Secure Logistics Group Private Limited Bank Al Habib Limited 9.5.3.3.1 2021 5,290 5,290 Name of the company 9.5.3.3 6 Month KIBOR ask rate plus 1.60% 6 Month KIBOR ask rate plus 2.00%. Sukuk certificates - listed Cnergyico Pk Limited (Formerly: Byco Petroleum Pakistan Limited) 9.5.3.2.1 Maturity date Due to weak financial position of the company the Bank has recognised full impairment loss on these term finance certificates. Number of certificates 2021 2020 9.5.3.2 Profit rate per annum Maturity date January 18, 2022 Cost 2021 2020 ----- Rupees in '000 ----- 29,998 30,000 29,998 30,000 Unrated Unrated Unrated Unrated 5,000 5,000 62,151 149,860 65,022 149,860 1,000 192 288 40,000 100,000 384 288 40,000 AAUnrated AA AAA A AUnrated - 100,000 1,000,000 1,000,000 5,000 100,000 192,000 52,800 200,034 71,429 384,000 144,000 200,037 756,845 1,014,348 During the year, the Bank has restructured Azgard Nine Limited (ANL) Privately Placed Term Finance Certificates (TFCs) in accordance with the Scheme of Arrangement (Approved Scheme) approved by the Honorable Lahore High Court’s vide its order dated July 31, 2019 under section 279 to 283 of the Companies Act, 2017 for restructuring of liabilities towards its creditors. Approved Scheme is executed vide different agreements between ANL and agent banks, and are effective from time zero date i.e. April 29, 2021. Under the Approved Scheme the Bank has restructured its TFCs for ten years i.e. April 29, 2021 to April 29, 2031 and received new TFCs i.e. 22,261 certificates @ Rs. 5000 each both against its outstanding principal of PKR 48.280 million @ 5% p. a and will be repay with twenty equal quarterly installment after two years of grace period staring from July 29, 2023 and remaining PKR 13.870 million will be received in cash within two years from the time zero date, whereas TFCs of PKR 63.025 million received against its outstanding markup amount and will be repay by one bullet payment at the time of maturity i.e., April 29, 2031. 9.5.3.3.2 Due to weak financial position of the company the Bank has recognised full impairment loss on these term finance certificates. 9.5.3.3.3 Other particulars of unlisted term finance certificates are as follows: Name of the company Repayment frequency Semi-annually 6 Month KIBOR ask rate plus 1.75%. December 04, 2017 Agritech Limited (Chief Executive: Mr. Faisal Muzammil) Semi-annually 6 Month KIBOR ask rate plus 1.75%. November 29, 2019 NRSP Microfinance Bank Limited (President & CEO: Mr. Zahoor Hussain Khan) Quarterly 3 Month KIBOR ask rate plus 3.00%. July 9, 2028 Airlink Communication Private Limited (President & CEO: Mr. Muzaffar Hayat Piracha) Quarterly 3 Month KIBOR ask rate plus 1.00%. January 7, 2022 Secure Logistics Group Private Limited (President & CEO: Mr. Gulraiz A. Khan) Quarterly 3 Month KIBOR ask rate plus 1.00%. January 2, 2024 Semi-annually 3 Month KIBOR ask rate plus 1.50%. December 20, 2027 Note Number of certificates 2021 2020 2021 Rating 2020 Sukuk certificates - unlisted Ghani Gases Limited Pakistan Services Limited 9.5.3.4.1 Maturity date Azgard Nine Limited - related party (Chief Executive: Mr. Ahmed H. Shaikh) Bank Al Habib Limited (President & CEO: Mr. Mansoor Ali Khan ) 9.5.3.4 Profit rate per annum Face value per certificate --------- Rupees --------- 9.5.3.4.1 9.5.3.4.1 2,000 1,350 2,000 1,350 A A A A 87,500 90,000 Cost 2021 2020 ----- Rupees in '000 ----75,000 1,232,393 1,307,393 100,000 1,265,104 1,365,104 Other particulars of unlisted sukuk certificates are as follows: Name of the company Repayment frequency Profit rate per annum Maturity date Ghani Gases Limited (Chief Executive: Mr. Atique Ahmad Khan) Quarterly 3 Month KIBOR ask rate plus 1.00%. February 03, 2023 Pakistan Services Limited (Chief Executive: Mr. Murtaza Hashwani) Quarterly 3 Month KIBOR ask rate plus 1.00%. January 17, 2024 80
84. JS BANK LIMITED Number of certificates 2021 2020 9 .5.3.5 --------- Rupees --------- Number of shares 2021 2020 1,848,888 1,848,888 Name of fund Units 2021 2020 --------- Numbers --------- JS Cash Fund (Related Party) ABL Islamic Cash Fund ABL Cash Fund Lakson Money Market Fund 8,922,701 50,056,024 63,654,155 964,779 Rating 2020 Par Value 2021 2020 --------- Rupees --------- - - 10 10 - 69,807 282,344 352,151 Cost 2021 2020 --- Rupees in '000 -- 27,733 27,733 Net asset value per unit Rupees 106.47 9.99 9.82 103.74 - 2021 2020 Cost Market value Cost Market value ------------------------- Rupees in '000 ------------------------950,000 500,000 625,000 100,087 950,268 500,560 650,463 101,881 - - 2,175,087 2,203,172 - - Foreign Securities Coupon rate per annum Rating 2021 2020 BBCaa2 - BCaa1 BBBa3 B+ B+ B+ B B B+ B2 Ba3 Date of Maturity % 2021 2020 Market Market Cost Value Cost Value --------------------- Rupees in '000 --------------------- Government debt securities Islamic Republic Of Pakistan Islamic Republic Of Pakistan Republic of Srilanka The Third Pakistan International Sukuk Co Ltd The Third Pakistan International Sukuk Co Ltd Oman Government International Bond Republic of Turkey Republic of Turkey Republic of Turkey Arab Republic of Egypt Arab Republic of Egypt Republic of Kenya Republic of Nigeria Oman Government International Bond 9.5.5.2 2021 Cost 2021 2020 ----- Rupees in '000 ----- Open End Mutual Fund Name of Bond 9.5.5.1 1,000,000 100,000 January 11, 2022 July 31, 2022 Preference shares - unlisted Intercity Touring Company Private Limited 9.7.5 (associated company) 9.5.5 - 70 3,000 Note 9.5.4 Face value per certificate Commercial paper certificates - unlisted TPL Corporation Limited Waves Singer Pakistan Limited 9.5.3.6 Maturity 6.88% 8.25% 5.75% 5.50% 5.63% 6.00% 4.88% 6.13% 7.63% 6.59% 7.60% 7.25% 6.50% 5.63% December 5, 2027 April 15, 2024 April 18, 2023 - 557,281 570,070 245,503 - 533,147 562,674 146,166 - 508,091 210,499 159,186 163,296 419,735 158,289 313,692 90,973 510,058 350,286 257,393 248,288 243,815 498,909 151,557 161,516 163,443 411,374 161,350 340,588 92,129 525,769 366,718 268,347 257,666 244,036 1,372,854 1,241,987 3,633,601 3,643,402 186,645 189,841 - 182,361 191,807 - 339,826 39,828 331,385 42,502 376,486 374,168 379,654 373,887 Non Government debt securities Petroleos Mexicanos Petroleos Mexicanos Bank of Ireland Ba3 Ba3 - Ba2 - 6.84% 6.88% - October 23, 2029 August 4, 2026 - 9.5.5.3 The Bank has recognised general provision (expected credit loss) under IFRS 9 of Rs. 68.232 million (2020: Rs. 122.758) held on foreign debt securities by Bahrain branch of the Bank. However, the loss allowance is recognised in other comprehensive income and have not reduce the carrying amount of these securities. 9.6 Quality of Held to Maturity Securities Details regarding quality of Held to Maturity (HTM) securities are as follows 9.6.1 Cost 2021 2020 ---- Rupees in '000 ---- Federal Government Securities - Government guaranteed Market Treasury Bills Pakistan Investment Bonds 9.6.1.1 11,463,014 46,680,929 36,109,599 58,143,943 36,109,599 Principal terms of investment in Federal Government Securities Security type Market Treasury Bills Pakistan Investment Bonds Note Maturity 9.6.1.2 9.6.1.3 Upto May 19, 2022 July 19, 2022 to August 22, 2029 Redemption On maturity On maturity Coupon On maturity Half yearly 9.6.1.2 Market Treasury Bills having maturity of tweleve months. The rates of profits ranging from upto 7.65% per annum (2020: Nil). The market value of securities as at December 31, 2021 amounted Rs. 11,323.221 million (2020: Nil). 9.6.1.3 Pakistan Investment Bonds (PIBs) having maturity of three to ten years. The rates of profits ranging from 8.23% to 12% per annum (2020: 7.75% to 12%% per annum). The market value of securities as at December 31, 2021 amounted Rs. 45,940.114 million (2020: Rs. 35,862.699 million). 81
85. JS BANK LIMITED 9 .7 Investment in subsidiary and associated companies Note Subsidiary companies JS Global Capital Limited JS Investments Limited Associated company - unlisted companies Omar Jibran Engineering Industries Limited Veda Transit Solutions Private Limited Intercity Touring Company Private Limited Number of shares 2021 2020 Percentage holding 2021 2020 Cost 2021 2020 ------ Rupees in '000 ------ 9.7.1 9.7.2 25,525,169 52,236,978 25,525,169 52,236,978 92.90% 84.56% 83.53% 84.56% 1,357,929 561,192 1,919,121 1,357,929 561,192 1,919,121 9.7.3 7,200,000 7,200,000 9.60% 9.60% 180,000 180,000 9.7.4 & 9.7.3 2,064,187 2,064,187 3.92% 9.12% 41,800 41,800 9.7.3 & 9.7.5 1,351,111 1,351,111 9.12% 9.12% 20,267 242,067 20,267 242,067 9.7.1 The Bank acquired effective controlling interest in JS Global Capital Limited (JSGCL) on December 21, 2011, April 15, 2016, October 01, 2019 and June 02, 2021 of 51.05%, 16.11%,16.37% and 9.37% respectively. The ownership interest has increased by 41.85%, without any change in the cost of investment, due to the fact that JSGCL has bought back its 11,993,000 shares in April 15, 2016, 7,450,000 shares on October 02, 2019 and 27,477,297 share on June 02, 2021. 9.7.2 The Bank acquired effective controlling interest in JS Investments Limited (JSIL) on November 01, 2012, December 22, 2015 and August 31, 2019 of 52.24%,12.92% and 19.40% respectively. The ownership interest has increased by 32.32% without any change in the cost of investment, due to the fact that JSIL has bought back its 19,828,182 shares on December 22, 2015 and 18,397,562 shares on August 31, 2019. 9.7.3 The investment classified as asscociate company on account of it's significant influence over the investee company. 9.7.4 During the year, the Bank has renounce to subscribe right shares issued by Veda Transit Solutions Private Limited, the Company, resultanty sharehoding percentage is reduced to 3.92% from 9.12%. However, despite of that fact, the Bank has still have significant influence through the Shareholders' Reserved Matters and right to choose a representative on the Board. 9.7.5 During the year, the Bank has fully provided its investments held in Intercity Touring Company (Private) limited (“the Company”) i.e. Rs. 20.2 million against ordinary shares and Rs. 27.8 million against preference shares due to the fact that COVID impact has severely effect the Company’s operations and facing financial crises. As a result, the Company has completely shut down its operations and injected new equity by prospective investors with an agreement that existing shareholders (including preference shareholders) represents only 10% of new equity. 9.7.6 All subsidiaries and associated companies are incorporated in Pakistan. 9.7.7 The following is summarised audited financial information before inter-company eliminations with other companies in the group. Subsidiary companies JS Global Capital Limited JS Investments Limited December 31, December 31, December 31, December 31, 2021 2020 2021 2020 ---------------------------------------- Rupees' in 000 ---------------------------------------Total income / sales Profit / (loss) after tax Other comprehensive (loss) / income 1,166,701 410,526 5,932 727,409 206,954 5,932 Total assets Total liabilities Net assets 6,590,532 4,394,156 2,196,376 5,390,731 2,944,292 2,446,439 Cash flow (used in) / from operating activities Cash flow (used in) / from investing activities Cash flow (used in) / from financing activities Net (decrease) / increase in cash and cash equivalents Rating (188,046) (1,140,426) 993,797 (334,675) AA 798,327 (471,364) 91,523 418,486 AA 77,493 (300,076) 1,984,861 480,414 1,504,447 348,467 (39,801) 2,305,289 530,302 1,774,987 (206,172) 168,333 (49,274) (87,113) (95,691) 324,209 (232,524) (4,006) AM2 AM2 Associated companies Omar Jibran Engineering Veda Transit Solutions Industries Limited Private Limited June 30, June 30, June 30, June 30, 2021 2020 2021 2020 ---------------------------------------- Rupees' in 000 ---------------------------------------Total income / sales Pofit / (loss) after tax Other comprehensive (loss) / income 2,401,848 149,638 (1,757) 1,950,375 (137,700) 7,560 Total assets Total liabilities Net assets 3,953,414 2,096,455 1,856,959 3,752,367 2,043,290 1,709,077 Cash flow from operating activities Cash flow (used in) / from investing activities Cash flow (used in) / from financing activities Net increase / (decrease) in cash and cash equivalents 452,483 (122,945) (25,026) 304,512 108,972 (75,100) (39,955) (6,083) 863,681 47,622 - 785,016 19,797 - 1,726,311 629,075 1,097,236 609,304 429,690 179,614 154,937 (695,121) 760,326 85,040 (10,237) (54,777) 220,142 20,026 82
86. JS BANK LIMITED 10 . ADVANCES Note Loans, cash credits, running finances, etc. 10.1 Performing Non Performing Total 2021 2020 2021 2020 2021 2020 ----------------------------------------------- Rupees in '000 ----------------------------------------------231,795,962 231,066,384 15,144,516 11,602,390 246,940,478 242,668,774 Bills discounted and purchased Advances - gross 13,926,269 13,926,269 11,733,555 245,722,231 11,733,555 242,799,939 15,144,516 11,602,390 260,866,747 254,402,329 Provision against advances General General provision - under IFRS-9 (87,787) - - - (87,787) - 10.4.5 (25,193) (21,327) - - (25,193) (21,327) 10.4 (112,980) Specific - (6,569,829) (4,181,836) (6,569,829) (4,181,836) (21,327) (6,569,829) (4,181,836) (6,682,809) (4,203,163) 7,356,440 7,551,719 Not later than one year Later than one and less than five years - Advances - net of provision 246,827,498 242,647,447 2021 Not later than one year Later than one and less than five years 254,183,938 250,199,166 Over five years Total 2020 Over five years Total -------------------------------------- Rupees in '000 -------------------------------------10.1 Includes Net Investment in Finance Lease as disclosed below: Lease rentals receivable 3,825,624 3,157,347 3,894 6,986,865 4,923,114 5,173,453 2,318 941,675 1,925,134 3,372 2,870,181 1,008,381 2,449,909 2,248 3,460,538 4,767,299 5,082,481 7,266 9,857,046 5,931,495 7,623,362 4,566 13,559,423 (515,035) (406,237) (1,286,416) (1,443) (2,279,681) 4,252,264 4,676,244 6,336,946 3,123 11,279,742 Guaranteed residual value Minimum lease payments 10,098,885 Finance charges for future periods (346) (921,618) (991,822) Present value of minimum lease payments 6,920 8,935,428 4,939,673 2021 2020 ----- Rupees in '000 ----10.2 Particulars of advances (gross) In local currency In foreign currencies 246,970,728 13,896,019 260,866,747 245,005,622 9,396,707 254,402,329 10.3 Advances include Rs. 13,926.269 million (2020: Rs. 11,733.555 million) which have been placed under non-performing status as detailed below: Category of Classification 2021 2020 Non Non Performing Performing Loans Loans Provision Provision ---------------------- Rupees in '000 ---------------------- Domestic Other Assets Especially Mentioned 789,192 2,013 296,799 394 Substandard 814,434 91,936 1,177,804 156,095 Doubtful 1,930,747 435,448 3,264,335 724,426 Loss 10,391,896 6,040,432 6,994,617 3,300,921 Total 13,926,269 6,569,829 11,733,555 4,181,836 83
87. JS BANK LIMITED 10 .4 Particulars of provision against advances 2021 Note Opening balance Closing balance - 21,327 4,203,163 - 2,350 2,350 3,147,572 87,787 1,516 3,236,875 (758,874) 2,388,698 87,787 1,516 (758,874) 2,478,001 - - 87,787 25,193 - Charge for the year Reversals for the 10.4.2 & 10.4.4 year Amounts written off General General provision provision Specific General under IFRS-9 Total Specific General under IFRS-9 Total --------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------4,181,836 Exchange adjustments 10.5 10.4.3 & 10.4.6 2020 (705) 6,569,829 (705) 6,682,809 3,339,941 1,087,212 (245,317) 841,895 4,181,836 161,166 7,520 3,508,627 - 71 71 - 13,736 1,100,948 (161,166) (161,166) 13,736 - - - 21,327 (406,483) 694,465 4,203,163 - 10.4.1 Particulars of provision against advances 2021 Note In local currency In foreign currency 10.4.5 2020 General General provision provision Specific General under IFRS-9 Total Specific General under IFRS-9 Total --------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------6,569,829 6,569,829 87,787 87,787 25,193 25,193 6,657,616 25,193 6,682,809 4,181,836 4,181,836 - 21,327 21,327 4,181,836 21,327 4,203,163 10.4.2 This includes reversal of provision of Rs. 294.822 million (2020: Rs. 8.604 million) against reduction in non-performing loans of Rs. 1,475.823 million (2020: Rs. 90.180 million) of certain borrowers under ‘Debt Property Swap’ transactions, as disclosed in note 13.2.2. 10.4.3 The Bank, in accordance with BPRD circular letter No. 31 of 2020 dated July 10, 2020, has taken the benefit of general provision of Rs. 167.575 million to make good the specific provision requirement of the consumer financing portfolio till December 31, 2021 and thereafter, will be maintained as per prudential regulations of consumer financing. 10.4.4 The State Bank of Pakistan through various circulars has allowed benefit of the forced sale value (FSV) of Plant and Machinery under charge, pledged stock and mortgaged residential, commercial and industrial properties (land and building only) held as collateral against non-performing loans (NPLs) for a maximum of five years from the date of classification. As at December 31, 2021, the Bank has availed cumulative FSV benefit under the directives of the SBP of Rs. 5,019.150 million (2020: Rs. 4,763.931 million). The additional profit arising from availing the FSV benefit - net of tax amounts to Rs. 3,061.682 million (2020: Rs 2,905.998 million). The increase in profit, due to availing of the benefit, is not available for distribution of cash and stock dividend to share holders. 10.4.5 This represents general provision held under IFRS 9 by Bahrain branch of the Bank. 10.4.6 Advances - Deferred & Restructured / Rescheduled The SBP vide BPRD circular letter No. 13 of 2020 dated March 26, 2020, has relaxed certain classification criteria of SBP Prudential Regulation R-8 (Classification and Provisioning of Assets). Accordingly, certain exposures as at December 31, 2021 relating to facilities of customers have not been classified as non-performing on account of such relaxation. 10.5 Particulars of Write Offs: 2021 2020 ----- Rupees in '000 ----- 10.5.1 Against provisions Directly charged to profit and loss account 705 705 - 10.5.2 Write offs of Rs.500,000 and above - Domestic Write offs of below Rs.500,000 141 564 705 - 10.6 Details of loan write off of Rs. 500,000 and above In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the Statement in respect of written-off loans or any other financial relief of rupees five hundred thousand and above allowed to a person(s) during the year ended is given in Annexure-1. However, these write-offs do not affect the Bank's right to recover debts from these customers. 84
88. JS BANK LIMITED 2021 2020 ---- Rupees in '000 ---- Note 11. FIXED ASSETS Capital work-in-progress Property and equipment Right-of-use assets 11.1 1,300,884 6,021,075 2,845,079 10,167,038 291,402 4,925,430 2,382,706 7,599,538 13.2.3 199,556 584,880 20,122 496,326 1,300,884 72,500 152,720 1,013 61,794 3,375 291,402 Capital work-in-progress Advance for building Civil works Advance for purchase of furniture and fixtures Advance for purchase of equipment Advance for purchase of vehicle 11.2 11.1 11.2 & 11.3 11.4 Property and equipment 2021 Electrical, office Leasehold Building on Leasehold Furniture and computer land leasehold land improvements and fixture equipment Vehicles Total -----------------------------------------------------------------------------------Note Rupees in '000 ------------------------------------------------------------------------------------ At January 1, 2021 Cost / Revalued amount Accumulated depreciation Net book value Year ended December 2021 Opening net book value Additions Movement in surplus on assets 11.2.1 Disposals Cost Accumulated depreciation Depreciation charge Exchange rate adjustments Cost Accumulated depreciation Write back / (Write offs) Cost Accumulated depreciation Transferred / other adjustments Cost Accumulated depreciation 11.3 781,054 781,054 2,091,461 (262,216) 1,829,245 1,419,011 (686,068) 732,943 623,442 (370,757) 252,685 3,484,028 (2,237,146) 1,246,882 124,641 (42,020) 82,621 8,523,637 (3,598,207) 4,925,430 781,054 207,868 1,829,245 74,219 139,169 732,943 101,027 - 252,685 54,577 - 1,246,882 602,439 - 82,621 3,375 - 4,925,430 835,637 347,037 (13,977) 8,162 (5,815) (116,796) (35,618) 25,501 (10,117) (58,777) (158,488) 118,820 (39,668) (485,152) (6,571) 1,333 (5,238) (15,546) (214,654) 153,816 (60,838) (750,618) - (74,347) - - 2,958 (1,591) 1,367 923 (595) 328 771 (536) 235 509 (301) 208 5,161 (3,023) 2,138 - - (69,587) 35,593 (33,994) 4,587 (2,474) 2,113 31,692 (16,346) 15,346 2,904 (963) 1,941 (30,404) 15,810 (14,594) Closing net book value 739,200 739,200 1,728,122 At December 31, 2021 Cost / Revalued amount Accumulated depreciation Net book value Rate of depreciation (percentage) 1,728,122 1,728,122 - 1,968,286 2,304,849 (336,563) 1,968,286 1.01 - 4.78 678,732 240,809 1,439,432 (760,700) 678,732 10 647,911 (407,102) 240,809 12.5 (3,971) 1,654 (2,317) 1,337,765 3,956,471 (2,618,706) 1,337,765 12.5 - 33.3 67,361 735,229 1,654 736,883 6,021,075 124,858 (57,497) 67,361 20 10,201,643 (4,180,568) 6,021,075 2020 Electrical, office Leasehold Building on Leasehold Furniture and computer land leasehold land improvements and fixture equipment Vehicles Total ------------------------------------------------------------------------------------ Rupees in '000 -----------------------------------------------------------------------------------At January 1, 2020 Cost / Revalued amount Accumulated depreciation Net book value 1,520,254 1,520,254 2,093,587 (190,898) 1,902,689 1,499,313 (701,210) 798,103 623,007 (341,029) 281,978 3,310,440 (1,956,984) 1,353,456 131,961 (27,399) 104,562 9,178,562 (3,217,520) 5,961,042 Year ended December 2020 Opening net book value Additions 1,520,254 - 1,902,689 - 798,103 168,683 281,978 49,910 1,353,456 378,028 104,562 49 5,961,042 596,670 (1,852) (399) (2,251) (119,046) (14,146) 10,089 (4,057) (60,398) (45,929) 40,566 (5,363) (425,702) (4,313) 1,777 (2,536) (17,419) (66,240) 52,033 (14,207) (694,312) Disposals Cost Accumulated depreciation Depreciation charge Exchange rate adjustments Cost Accumulated depreciation Write offs Cost Accumulated depreciation Transferred / other adjustments Cost Accumulated depreciation Closing net book value At December 31, 2020 Cost / Revalued amount Accumulated depreciation Net book value Rate of depreciation (percentage) 11.3 - (71,747) - - (885) 280 (605) (276) 101 (175) (210) 105 (105) (152) 58 (94) (1,523) 544 (979) - - (246,248) 134,307 (111,941) (35,053) 20,480 (14,573) (158,301) 104,869 (53,432) (2,904) 963 (1,941) (442,506) 260,619 (181,887) 732,943 252,685 82,621 (741,326) 429 (740,897) 4,925,430 1,419,011 (686,068) 732,943 10 623,442 (370,757) 252,685 12.5 124,641 (42,020) 82,621 20 8,523,637 (3,598,207) 4,925,430 (739,200) (739,200) 781,054 781,054 781,054 - (2,126) 429 (1,697) 1,829,245 2,091,461 (262,216) 1,829,245 1.01 - 4.78 1,246,882 3,484,028 (2,237,146) 1,246,882 12.5 - 33.3 11.2.1 This includes transfer from capital work in progress during the year of Rs. 384.849 million. 85
89. JS BANK LIMITED 11 .2.2 2021 2020 ---- Rupees in '000 ---- The cost of fully depreciated property and equipment still in use Leasehold improvements Furniture and fixture Electrical, office and computer equipment Vehicles 281,922 175,197 1,322,528 12,910 1,792,557 265,850 156,677 1,135,788 2,258 1,560,573 11.2.3 The details of disposals of assets to related parties are given in Annexure II to these unconsolidated financial statements. 11.2.4 The properties of the Bank were revalued by M/s. Luckyhiya Associates Pvt Ltd, an independent professional valuator. The revaluation was carried out, as at December 31, 2021 on the basis of professional assessment of present market values and as results of revaluation an additional surplus of Rs. 347.037 million (Land Rs. 207.868 million and Building Rs. 139.169 million). Had there been no revaluation, the carrying value of revalued land and building on land as at December 31, 2021 would have been lower by Rs. 713.210 million and Rs. 800.176 million respectively, and net surplus on revaluation of fixed assets, deferred tax liability and incremental depreciation expense would have been lower by Rs. 1,201,317 million, Rs. 312.069 million and Rs. 25.823 million respectively. Note 11.3 2021 2020 ---- Rupees in '000 ---- Non-current assets held for sale Leasehold land 11.3.1 739,200 - 11.3.1 During the year, the management has decided to set-up regional offices by way of acquisition of owned properties in first tier cities. Therefore, considering the best interest of the Bank, the management has directed to retain the property for development of regional office and has reclassified said property for its own use under the International Accounting Standard (IAS)- 16 ‘Property, plant and equipment’, and its carrying value will be recovered through continued use and ceased to be classified as “held-for-sale”. As of December 31, 2021, the property is being measured at its carrying amount before the asset was classified as held-for-sale as adjusted for any subsequent re-valuation at the date of the decision not to sell i.e. Rs. 910 million. Note 11.4 The carrying amounts of right-of-use assets Opening balance Additional impact arised during the year - net Termination impact arised during the year-net Depreciation Exchange gain 12. 29 2,382,706 1,450,920 (71,459) (919,584) 2,496 2,845,079 3,593,492 31,080 (348,718) (893,148) 2,382,706 710,553 960,400 1,463,624 3,134,577 213,312 809,789 1,463,624 2,486,725 710,553 213,312 INTANGIBLE ASSETS Capital work-in-progress Computer software Goodwill 12.1 2021 2020 ---- Rupees in '000 ---- Capital work-in-progress Advance for purchase of software 12.1 12.2 12.2 & 12.4 12.1.1 12.1.1 During the year, advance against purchase of software was written off Rs. 3.964 million as disclosed in note 31. 86
90. JS BANK LIMITED 12 .2 Computer software and goodwill At January 1, 2021 Cost Accumulated amortisation and impairment Net book value Year ended December 2021 Opening net book value Additions: directly purchased Amortisation charge Exchange rate adjustments Cost Accumulated amortisation Transfer Cost Accumulated amortisation Other adjustments Cost Accumulated amortisation Closing net book value At December 31, 2021 Cost Accumulated amortisation and impairment Net book value Rate of amortisation (percentage) Useful life (year) Note 12.2.1 2021 Computer Goodwill Total software -------------------- Rupees in '000 -------------------1,365,890 (556,101) 809,789 1,463,624 1,463,624 2,829,514 (556,101) 2,273,413 809,789 1,463,624 2,273,413 282,459 (134,447) - 282,459 (134,447) 769 (415) 354 - 769 (415) 354 3,971 (1,654) 2,317 - 3,971 (1,654) 2,317 (48) (24) (72) 960,400 1,463,624 (48) (24) (72) 2,424,024 1,653,041 (692,641) 960,400 10 10 1,463,624 1,463,624 3,116,665 (692,641) 2,424,024 See note 12.4 2020 Computer software Goodwill Total --------- Rupees in '000 --------At January 1, 2020 Cost Accumulated amortisation and impairment Net book value Year ended December 2020 Opening net book value Additions: - directly purchased Amortisation charge Exchange rate adjustments Cost Accumulated amortisation Write offs Cost Accumulated amortisation Closing net book value At December 31, 2020 Cost Accumulated amortisation and impairment Net book value Rate of amortisation (percentage) Useful life (year) 1,152,900 (442,908) 709,992 1,463,624 1,463,624 2,616,524 (442,908) 2,173,616 709,992 212,692 (113,052) 1,463,624 - 2,173,616 212,692 (113,052) 230 (73) 157 - 230 (73) 157 68 (68) 809,789 1,463,624 68 (68) 2,273,413 1,365,890 (556,101) 809,789 10 10 1,463,624 1,463,624 2,829,514 (556,101) 2,273,413 See note 12.4 12.2.1 This includes transfer from capital work in progress during the year of Rs. 282.459 million. 87
91. JS BANK LIMITED 2021 2020 ---- Rupees in '000 ---12.3 The cost of fully amortised computer software still in use 182,982 160,694 12.4 Goodwill is recorded by the Bank upon the event fully disclose in note 1.2. For impairment testing, goodwill has been allocated to 'Trading and Sales' Segment as Cash Generating Unit (CGU), which is also a reportable segment. 12.5 Key assumptions used in value in use calculation The recoverable amount of the CGU has been determined based on value in use calculation, using cash flow projections based on business plan approved by the Board of Directors of the Bank covering a five year period. The discount rates applied to cash flows beyond five years are extrapolated using a terminal growth rate. The following rates are used by the Bank. 2021 2020 Percentages Discount rate Terminal growth rate 15.25 10.00 17.41 12.51 The calculation of value in use is most sensitive to following assumptions: a) Interest margins Interest margins are based on prevailing industry trends and anticipated market conditions. b) Discount rates Discount rates reflect management estimates of the rate of return required for each business and are calculated after taking into account the prevailing risk free rate, industry risk and business risk. Discount rates are calculated by using cost of equity of the Bank. c) Key business assumptions The assumptions are important as they represent management assessment of how the unit's position might change over the projected period. Based on the expansion plans, management expects aggressive growth in advances, investments and deposits during the projected periods and thereafter stabilisation in line with industry trends. Management believes that any significant change in key assumptions, on which CGU's recoverable amount is based, may impact the carrying amount to further exceed its recoverable amount. Value in use calculation of the CGU are sensitive to changes in assumptions for interest rate spreads, Non Funded Income (NFI), long term growth rates and discount rates. d) Sensitivity to changes in assumption The estimated recoverable amount of the 'Trading and Sales' CGU exceeds its carrying amount by approximately Rs. 5,465 million (2020: 5,345 million). Management has identified two key assumptions for which there could be a reasonably possible change that could cause the carrying amount to exceed the recoverable amount. The following table shows the amount that these two assumptions are required to change individually in order for the estimated recoverable amount to be equal to the carrying amount. Changes required for carrying amount to equal recoverable amount (%) 2021 2020 - Discount rate - Terminal growth rate 1.99 (2.67) 3.16 (4.88) 88
92. JS BANK LIMITED Note 13 . OTHER ASSETS Income / mark-up accrued in local currency Income / mark-up accrued in foreign currencies Advances, deposits, advance rent and other prepayments Acceptances Dividend receivable Taxation (payments less provision) Defined benefit plan assets - net Receivable against bancassurance / bancatakaful Stationery and stamps in hand Receivable in respect of home remittance Due from State Bank of Pakistan Rebates receivable from SBP and others Non-banking assets acquired in satisfaction of claims Mark to market gain on derivative instruments Mark to market gain on forward foreign exchange contracts Advance against investments in securities Inter bank fund transfer settlement Credit card settlement Insurance Others Less: Provision held against other assets Other assets (net of provisions) 37.5 13.1 13.2 & 19.2 23.2 13.3 13.4 Surplus on revaluation of non-banking assets acquired in satisfaction of claims 13.1 13.2 2021 2020 ---- Rupees in '000 ---7,170,902 93,851 777,512 3,689,343 127,626 721,567 318,319 20,889 22,864 27,549 179,197 68,142 2,537,863 51,215 467,017 705,198 88,237 283,370 75,884 609,360 18,035,905 (11,241) 18,024,664 6,879,923 93,950 477,717 3,603,192 84,522 317,581 30,660 22,730 30,656 245,310 305,331 1,176,143 175,454 334,735 140,899 7,636 628,121 14,554,560 (11,241) 14,543,319 120,674 18,145,338 135,109 14,678,428 This includes an amount of Rs. 67.555 million (2020: Rs. 297.218 million) receivable from State Bank of Pakistan in respect of home remittance services provided by the Bank. 2021 2020 Note ---- Rupees in '000 ---Non banking assets acquired in satisfaction of claims Market value of non-banking assets acquired in satisfaction of claims 2,658,537 1,311,252 1,311,252 1,529,159 (14,320) (156,843) (10,711) 2,658,537 1,182,425 90,178 41,511 (2,862) 1,311,252 13.2.1 Movement of Non banking assets acquired in satisfaction of claims at market value: As at January 01 Addition during the year Surplus derecognised during the year Transferred during the year Depreciation during the year 13.2.2 21.3 13.2.3 29 13.2.2 This represents, the properties acquired of Rs. 1,529.159 million (2020: Rs. 90.178 million) against debt swap transactions with borrowers resulting in reversal of provision of Rs. Rs. 294.822 million (2020: Rs. 8.604 million) against reduction in non-performing loans of Rs. 1,475.823 million (2020: Rs. 90.180 million) (refer note 10.4.2). 13.2.3 During the year, under section 10 of the Banking Companies Ordinance, 1962, the property (situated at 15th Floor, Pace Tower, Plot # 27, Block-H, Gulberg II, Lahore) acquired under debt property swap agreement is used by the Bank for its own operations. 13.2.4 Non-banking assets acquired in satisfaction of claims are carried at revalued amount according to the requirements of the ‘Regulation for Debt Property Swap’ (the regulations) issued by SBP vide the BPRD Circular No. 1 of 2016, dated January 01, 2016. Non-banking assets acquired in satisfaction of claims have been revalued by independent professional valuers as at December 31, 2021. The revaluation was carried out by M/s Sipra (Pvt Ltd). M/s Sardar Ent. (Pvt) Ltd, M/s. Luckyhiya Associates Pvt Ltd, M/s. bfa (Pvt) Ltd., M/s Tristar International Consultants (Pvt) Ltd, M/s Sipra & Company (Pvt.) Ltd., M/s Pakistan Inspection Co. (Pvt) Ltd. M/s Joseph Lobo (Private) Limited and Engineering Pakistan International (Pvt) Ltd. on the basis of professional assessment of present market values. Had there been no revaluation, the carrying value of non-banking assets acquired in satisfaction of claims would have been lower by Rs. 120.674 million (2020: 135.109 million), and surplus on revaluation of assets net, deferred tax liability and depreciation expense would have been lower by Rs. 119.714 million (2020: Rs. 131.080 million), Rs. 0.960 million (2020: Rs. 4.029 million) and Rs. 0.116 million (2020: Rs. 0.145 million) respectively. Note 13.2.5 Particulars of Non banking assets Lease hold land Building on lease hold land 13.3 13.4 2021 2020 ----- Rupees in '000 ----2,134,847 403,016 2,537,863 944,946 231,197 1,176,143 This represents advance against purchase of TFC amounting Rs. 250 million, ordinary shares and preference shares of foreign companies amounting Rs. 205.75 million and Rs. 249.448 million respectively. 2021 2020 Note ----- Rupees in '000 ----Movement in provision held against other assets Opening balance Charge for the year Reversal for the year Net charge for the year Closing balance 32 11,241 11,241 13,580 100 (2,439) (2,339) 11,241 89
93. JS BANK LIMITED Note 14 . BILLS PAYABLE In Pakistan Outside Pakistan 15. 6,786,643 252,243 7,038,886 4,752,985 228,998 4,981,983 20,775,516 2,558,982 20,962,803 2,518,310 246,691 1,322,204 448,799 5,428,540 5,439 72,171 724,109 9,029 8,256,982 31,591,480 13,500,000 45,091,480 193,029 433,085 32,900 11,543,118 96,192 229,984 51,871 33,901 12,614,080 36,095,193 36,095,193 22,160,140 2,916,027 25,076,167 9,667,181 2,397,468 12,064,649 70,167,647 48,159,842 306,663 306,663 143,570 143,570 70,474,310 48,303,412 69,579,709 894,601 70,474,310 48,159,842 143,570 48,303,412 BORROWINGS Secured Borrowings from State Bank of Pakistan under: Export Refinancing Scheme (ERF) Long-Term Finance Facility (LTFF) Other borrowings Financing Facility for Storage of Agricultural Produce (FFSAP) Financing Facility for Renewable Energy Projects Refinance and credit guarantee scheme for women entrepreneurs Refinance for Wages & Salaries Refinance facility for modernization of Small and Medium Enterprises (SMEs) Refinance facility for combating COVID-19 Temporary economic refinance facility (TERF) Small and Medium Enterprises' Financing Refinance facility for working capital of SMEs 15.2.1 15.2.2 15.2.3 Repurchase agreement borrowings 15.2.4 Borrowing from financial institutions Repurchase agreement borrowings Refinancing facility for mortgage loans 15.2.5 15.2.6 Total secured Unsecured Overdrawn nostro accounts Due against trade borrowings Total unsecured 15.1 2021 2020 ---- Rupees in '000 ---- Particulars of borrowings In local currency In foreign currencies 15.2.1 The Bank has entered into agreement with the SBP for extending export finance to customers. As per the terms of the agreement, the Bank has granted SBP the right to recover the outstanding amount from the Bank at the date of maturity of finances by directly debiting the current account maintained by the Bank with SBP. These borrowings are repayable on a quarterly basis and to be matured between January 04, 2022 and June 29, 2022 (2020: January 04, 2021 and February 08, 2027). These carry mark-up at the rate from 1% to 2% (2020: 1% to 3%) per annum. 15.2.2 These borrowings have been obtained from the SBP for providing financing facilities to exporters for adoption of new technologies and modernization of their plant and machinery. These borrowings will mature between February 20, 2022 and March 08, 2031 (2020: November 04, 2021 and November 18, 2030). These carry mark-up at rates ranging from 2.00% to 3.50% (2020: 2.00% to 3.50%) per annum. 15.2.3 Other borrowings have been obtained from SBP under various facilities on particulars mentioned below: Financing Facility for Renewable Energy Projects Refinance and credit guarantee scheme for women entrepreneurs Refinance for Wages & Salaries Refinance facility for modernization of Small and Medium Enterprises (SMEs) Refinance facility for combating COVID-19 Temporary economic refinance facility (TERF) Small and Medium Enterprises' Financing Refinance facility for working capital of SMEs Markup rate Per annum From Matured To 2%-2.5% 2%-3% 0%-0% 0%-2% 0%-0% 0%-0% 1%-1% 2%-2% January 1, 2022 June 1, 2022 January 29, 2022 October 1, 2022 June 3, 2024 April 1, 2025 November 30, 2023 December 18, 2025 February 22, 2028 July 26, 2031 November 30, 2026 April 1, 2023 June 22, 2026 July 16, 2026 November 1, 2031 September 8, 2026 15.2.4 This represents borrowing against Pakistan Investment Bonds carrying mark-up at the rates ranging upto from 9.9% to 10.05% per annum and will be matured on February 18, 2022. The cost and market value of securities given as collateral of amounting to Rs. 13,468 million and Rs. 13,466.250 million respectively. 15.2.5 This represents borrowing against Market Treasury Bills, Pakistan Investment Bonds and Foreign Currency Bonds (2020: Market Treasury Bills) carrying mark-up at the rates ranging upto from 1.25% to 10.70% (2020: 6.70%) per annum and will be matured between January 04, 2022 and September 20, 2022 (2020: January 11, 2021 and January 12, 2021). The cost and market value of securities given as collateral of amounting to Rs. 22,359.782 million (2020: Rs. 9,766.518 million) and Rs. 22,274.845 million (2020: Rs. 9,767.491 million) respectively. 15.2.6 The Bank has entered into agreement with the Pakistan Mortgage Refinance Company Limited (PMRC) for extending housing finance facilities to the Bank's customers on the agreed terms and conditions. The borrowing carries mark-up rate of 3 years PKRV less 100bps and will be matured on February 28, 2022 and June 30, 2031 (2020: February 28, 2022 and December 09, 2025). 90
94. JS BANK LIMITED 16 . DEPOSITS AND OTHER ACCOUNTS In Local Currency Customers Current deposits Savings deposits Term deposits Margin deposits Financial Institutions Current deposits Savings deposits Term deposits 2021 2020 In Foreign In Local In Foreign Currencies Total Currency Currencies ---------------------------------------- Rupees in '000 ---------------------------------------- Total 103,471,600 94,411,562 197,382,108 8,847,107 404,112,377 7,672,420 5,055,750 13,980,936 3,408 26,712,514 111,144,020 99,467,312 211,363,044 8,850,515 430,824,891 90,714,627 98,103,956 186,691,026 5,920,595 381,430,204 9,668,068 3,944,797 15,203,881 163 28,816,909 100,382,695 102,048,753 201,894,907 5,920,758 410,247,113 1,035,655 15,379,164 12,929,088 29,343,907 504,985 31,231 536,216 1,540,640 15,410,395 12,929,088 29,880,123 1,281,700 12,831,324 8,266,773 22,379,797 435,683 435,683 1,717,383 12,831,324 8,266,773 22,815,480 433,456,284 27,248,730 460,705,014 403,810,001 29,252,592 433,062,593 2021 2020 ---- Rupees in '000 ---16.1 Composition of deposits - Individuals - Government (Federal and Provincial) - Public Sector Entities - Banking Companies - Non-Banking Financial Institutions - Private Sector 152,824,495 93,109,449 39,277,014 5,663,632 24,216,491 145,613,933 460,705,014 147,143,479 92,317,151 52,156,536 2,950,286 19,865,194 118,629,947 433,062,593 16.2 Deposits include eligible deposits of Rs. 105,788.825 million (2020: Rs. 112,167.861 million, the number is revised from Rs. 143,210.503 million due to categorisation differences in eligible deposits) protected under Depositors Protection Mehanism introduced by State Bank of Pakistan. 2021 2020 ---- Rupees in '000 ---Note 17. SUBORDINATED DEBT Term Finance Certificates - First Issue Term Finance Certificates - Second Issue Term Finance Certificates - Third Issue Term Finance Certificates - Fourth Issue 17.1 17.2 17.3 17.4 1,996,800 2,500,000 2,500,000 6,996,800 2,995,200 1,997,600 2,500,000 7,492,800 17.1 During the year, the Bank exercised the call option of Term Finance Certificates - First Issue in accordance with the Trust Deed and Terms and Conditions for the TFC issue, after completing the regulatory requirements. Accordingly, the said TFCs were redeemed in full on December 28, 2021. 17.2 In 2017, the Bank has issued Rs. 2 billion of rated, privately placed and listed, unsecured and subordinated term finance certificates ("TFCs" or "the Issue") as an instrument of redeemable capital under Section 66 of the Companies Act, 2017 and as outlined by State Bank of Pakistan, SBP, under the BPRD circular No. 06 dated August 15, 2013 and Basel III guidelines. Summary of terms and conditions of the issue are: Purpose: To contribute towards the Bank's Tier II Capital for complying with the capital adequacy requirement and to utilize the funds in the Bank's business operations as permitted by its Memorandum & Articles of Association. Issue date: December 29, 2017 Tenure: Up to Seven years from the issue date. Maturity Date: December 29, 2024 Rating: A + (Single A Plus) Profit Rate: Floating rate of return at Base rate + 1.4 percent per annum; Base rate is defined as the average six months KIBOR prevailing on the Base Rate setting date. The Base Rate will be set for the first time on the last working day prior to the issue date and subsequently on the immediately preceding business day before the start of each six monthly period. 91
95. JS BANK LIMITED Profit payment : Semi-annual Redemption: The instrument is structured to redeem 0.24% of the Issue amount during the first six years after the issue date and the remaining Issue amount of 99.76% in two equal semi-annual installments of 49.88% each in the last year. Security: The Issue is unsecured and subordinated as to payment of Principal and profit to all other indebtedness of the Bank, including deposits, and will not be redeemable before maturity without prior approval of SBP. Call Option: Exercisable in part or in full on or after the 10th redemption, with prior approval of SBP. Lock-in-clause: Principal and profit will be payable subject to compliance with MCR or CAR set by SBP. Loss absorbency clause: Upon the occurrence of a Point of Non-Viability event as defined under SBP BPRD Circular # 6 of 2013 dated August 15, 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 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 319,982,544 shares. 17.3 In 2018, the Bank has issued Rs. 2.5 billion of rated, privately placed and listed, unsecured, subordinated, perpetual and noncumulative additional Tier I capital term finance certificates ("TFCs" or "the Issue") as an instrument of redeemable capital under Section 66(1) of the Companies Act, 2017 and as outlined by State Bank of Pakistan, SBP, under the BPRD circular No. 06 dated August 15, 2013 (the "Circular") and Basel III guidelines. Summary of terms and conditions of the issue are: Purpose: To contribute towards the Bank's Tier I Capital for complying with the capital adequacy requirement and to utilize the funds in the Bank's business operations as permitted by its Memorandum & Articles of Association. Issue date: December 31, 2018 Maturity date: Perpetual Rating: A (Single A) Profit Rate: Floating rate of return at Base rate + 2.25 percent per annum; Base rate is defined as the average six months KIBOR prevailing on the Base Rate setting date. The Base Rate will be set for the first time on the last working day prior to the issue date and subsequently on the immediately preceding business day before the start of each six monthly period. Profit payment frequency: Redemption: Semi-annually on a non-cumulative basis Security: The Issue is unsecured Subordination: The Issue is subordinated as to payment of Principal and profit to all other claims except common shares. Call Option: Exercisable in part or in full at a par value on or after five years from the issue date, with prior approval of SBP. The Bank shall not exercise the call option unless the called instrument is replaced with capital of same or better quality. Lock-in-clause: Payment of profit will be made from current year's earning and subject to compliance with MCR or CAR set by SBP. Not applicable Loss absorbency clause: Pre-Specified Trigger (“PST”) Upon the occurrence of a Pre-Specified Trigger as defined under SBP BPRD Circular # 6 of 2013 dated August 15, 2013 which stipulates that if an Issuer's Common Equity Tier 1 ("CET 1") ratio falls to or below 6.625% of Risk Weighted Assets ("RWA"), the Issuer will have full discretion to determine the amount of TFCs to be permanently converted into common shares or written off, subject to SBP regulations / instructions, and the cap specified below. The Bank will be able to exercise this discretion subject to: - If and when Bank's CET 1 reaches the loss absorption trigger point, the aggregate amount of Additional Tier-1 capital to be converted must at least be the amount sufficient to immediately return the CET 1 ratio to above 6.625% of total RWA (if possible); - The converted amount should not exceed the amount needed to bring the CET 1 ratio to 8.5% of RWA (i.e. minimum CET 1 of 6.0% plus capital conservation buffer of 2.5%); and 92
96. JS BANK LIMITED - In case , conversion of Additional Tier-1 capital Instrument is not possible following the trigger event, the amount of the Instrument must be written off in the accounts resulting in increase in CET 1 of the issuer. Point of NonViability (“PONV”) Upon the occurrence of a Point of Non-Viability event as defined under SBP BPRD Circular # 6 of 2013 dated August 15, 2013, 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 Issuer’s common / ordinary share on the date of the PONV trigger event as declared by SBP, subject to the cap specified below: The PONV trigger event is the earlier of: - A decision made by SBP that a conversion or temporary / permanent write-off is necessary without which the Issuer would become non-viable; - The decision to make a public sector injection of capital, or equivalent support, without which the issuer would have become non-viable, as determined by SBP; and - The maximum number of shares to be issued to TFC holders at the Pre-Specified Trigger and / or Point of Non Viability (or otherwise as directed by SBP) will be subject to a specified cap of 329,595,476 ordinary shares, or such other number as may be agreed to in consultation with SBP. 17.4 During the year, the Bank has issued Rs. 2.5 billion of rated, privately placed and unlisted (listing is in process), unsecured and subordinated term finance certificates ("TFCs" or "the Issue") as an instrument of redeemable capital under Section 66 of the Companies Act, 2017 and as outlined by State Bank of Pakistan, SBP, under the BPRD circular No. 06 dated August 15, 2013 and Basel III guidelines. Summary of terms and conditions of the issue are: Purpose: To contribute towards the Bank's Tier II Capital for complying with the capital adequacy requirement and to utilize the funds in the Bank's business operations as permitted by its Memorandum & Articles of Association. Issue date: December 28, 2021 Tenure: Up to Seven years from the issue date. Maturity Date: December 28, 2028 Rating: A + (Single A Plus) Profit Rate: Floating rate of return at Base rate + 2 percent per annum; Base rate is defined as the average six months KIBOR prevailing on the Base Rate setting date. The Base Rate will be set for the first time on the last working day prior to the issue date and subsequently on the immediately preceding business day before the start of each six monthly period. Profit payment: Semi-annual Redemption: The instrument is structured to redeem 0.24% of the Issue amount during the first six years after the issue date and the remaining Issue amount of 99.76% in two equal semi-annual installments of 49.88% each in the last year. Security: The Issue is unsecured Subordination: The Issue is subordinated all other indebtedness of the Bank including depositors, however, senior to the claims of investors in instruments eligible for inclusion in Tier I Capital Call Option: Exercisable in part or in full on or after the 10th redemption, with prior approval of SBP. Lock-in-clause: Principal and profit will be payable subject to compliance with MCR or CAR set by SBP. Loss absorbency clause: Upon the occurrence of a Point of Non-Viability event as defined under SBP BPRD Circular # 6 of 2013 dated August 15, 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 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 400,647,739 shares. 93
97. JS BANK LIMITED 18 . DEFERRED TAX LIABILITIES Note Deductible Temporary Differences on: Provision against investments Provision against loans and advances General provision under IFRS-9 Intangible other than Goodwill Taxable Temporary Differences on: Fixed assets Goodwill Surplus on revaluation of operating fixed assets Surplus on revaluation of non-banking assets acquired in satisfaction of claims Unrealized gain on revaluation of derivative instruments Mark to market gain / (loss) on forward foreign exchange contracts Unrealised gain on revaluation of investments classified as held for trading Surplus on revaluation of investments classified as available for sale (57,149) (287,840) (43,552) (2,904) (391,445) (6,531) (58,212) 43,552 289 (20,902) - (63,680) (346,052) (2,615) (412,347) 21 172,562 512,268 240,391 8,820 58,545 (10,072) 81,751 181,382 570,813 312,070 21 4,029 (45) 5,302 (5,302) - - (22,893) 22,893 - - - - 282 21 Note Deductible Temporary Differences on: Provision against investments Provision against loans and advances General provision under IFRS-9 Intangible other than Goodwill Mark to market gain / (loss) on forward foreign exchange contracts Other assets Taxable Temporary Differences on: Fixed assets Goodwill Surplus on revaluation of operating fixed assets Surplus on revaluation of non-banking assets acquired in satisfaction of claims Unrealized gain on revaluation of derivative instruments Unrealised (loss) / gain on revaluation of investments classified as held for trading Deficit / surplus on revaluation of investments classified as available for sale 2021 Recognised in Balance as at Recognised in other Balance as at January 01, profit and loss comprehensive December 31, 2021 account income 2021 -------------------------------- Rupees in '000 -------------------------------- (282) (3,024) 960 673,756 1,585,697 74,557 59,014 137,741 732,770 1,797,995 1,194,252 53,655 137,741 1,385,648 2020 Recognised in Balance as at Recognised in other Balance as at January 01, profit and loss comprehensive December 31, 2020 account income 2020 -------------------------------- Rupees in '000 -------------------------------(57,149) (132,305) (3,097) (2,514) (155,535) (40,455) (390) - (57,149) (287,840) (43,552) (2,904) 23,085 (628,569) (800,549) (45,978) 628,569 386,211 - (22,893) (414,338) 21 250,858 512,268 299,034 (78,296) (58,643) - 172,562 512,268 240,391 21 967 (51) 8,144 (1,218) 21 (278,261) 791,792 (8,757) 3,113 4,029 (2,842) - 5,302 1,500 - 282 (138,332) 952,017 955,130 673,756 1,608,590 247,879 955,130 1,194,252 94
98. JS BANK LIMITED Note 19 . OTHER LIABILITIES Mark-up / return / interest payable in local currency Mark-up / return / interest payable in foreign currencies Unearned income on guarantees Accrued expenses Acceptances Unclaimed dividends Mark to market loss on derivative instruments Mark to market loss on forward foreign exchange contracts Gratuity payable to contractual staff Withholding taxes payable Government challan collection Donation payable Security deposits against leases, lockers and others Workers' Welfare Fund Payable in respect of home remittance Retention money payable Lease liability against right-of-use assets Advance against sale of assets Insurance payable Payable to vendors against SBS goods Debit card settlement Inter bank fund transfer settlement Clearing and settlement accounts Others 19.1 2021 2020 ---- Rupees in '000 ---- 29.2 33.2 19.1 19.2 3,216,121 26,668 261,377 312,821 3,689,343 4,214 56,155 103,830 5,263 516,370 50,758 41,178 2,908,147 158,414 433,507 44,294 3,129,904 26,000 27,180 206,925 58,711 175,105 211,828 15,664,113 2,994,596 52,729 176,270 669,383 3,603,192 4,214 160,306 400,144 401,303 94,510 3,490,704 114,237 831,042 42,044 2,583,947 10,137 93,634 65,855 159,136 290,794 302,977 16,541,154 2,583,947 1,407,295 (82,912) 387,693 (1,191,560) 25,441 3,129,904 3,696,371 31,080 (417,536) 405,879 (1,131,847) 2,583,947 Lease liabilities The carrying amounts of lease liabilities and the movements during the year is as below: Opening balance Additional impact arised during the year - net Termination impact arised during the year - net Markup on lease liability against right-of-use assets Payments Exchange gain Closing balance 25 19.2 During the year, the Bank has entered into an agreement to sell the property situated at Plot No. D2451/RH, Gali Dogran, Inside Lahori Gate, Lahore of Rs. 26 million which was recovered against settlement of loans and advances and classified under 'non-banking assets acquired in satisfaction of claims' having a carrying value of Rs. 24.900 million as of reporting date. The sale deed is expected to be executed next year after completion of all legal formalities. 20. SHARE CAPITAL - NET 20.1 Authorised capital 20.1.1 Ordinary shares 2021 2020 -------- Number of shares -------2,350,000,000 20.1.2 23,500,000 23,500,000 150,000,000 Convertible preference shares of Rs.10 each 1,500,000 1,500,000 7,635,590 5,339,053 12,974,643 (2,855,401) 10,119,242 7,635,590 5,339,053 12,974,643 (2,855,401) 10,119,242 Issued, subscribed and paid-up capital 763,558,965 533,905,297 1,297,464,262 1,297,464,262 20.3 Ordinary shares of Rs.10 each Preference shares 150,000,000 20.2 2,350,000,000 2021 2020 ----- Rupees in '000 ----- 763,558,965 533,905,297 1,297,464,262 1,297,464,262 Ordinary shares Fully paid in cash Issued for consideration other than cash Less: Discount on issue of shares As at December 31, 2021, Jahangir Siddiqui & Co. Limited (the parent company) held 973,307,324 (2020: 973,307,324) ordinary shares of Rs.10 each i.e. 75.02% holding (2020: 75.02%). 95
99. JS BANK LIMITED 21 . SURPLUS ON REVALUATION OF ASSETS Surplus on revaluation of: Available-for-sale securities Fixed assets Non-banking assets acquired in satisfaction of claims Note 9.1 Deferred tax on surplus on revaluation of: Available-for-sale securities Fixed assets Non-banking assets acquired in satisfaction of claims 21.1 Bahrain: - Equity securities - Debt securities 21.1.1 Related deferred tax liability 1,925,017 1,192,173 135,109 3,252,299 (732,770) (312,070) (960) (1,045,800) 2,467,158 (673,756) (240,391) (4,029) (918,176) 2,334,123 2,281,924 28,085 (368,014) 1,941,995 1,692,166 96,385 1,788,551 1,856 (64,953) (63,097) 1,878,898 (732,770) 1,146,128 9,674 126,792 136,466 1,925,017 (673,756) 1,251,261 As of December 31, 2021, the Bank has recognized in profit and loss account expected credit loss of Rs. 68.232 million (December 31, 2020: Rs. 122.758 million) under IFRS-9 on foreign debt securities of the wholesale banking branch in Bahrain of the Bank against an adjustment in the loss allowance. However, the loss allowance is recognized in other comprehensive income without reducing the carrying amount of the said securities. Therefore, the surplus / deficit on revaluation of those securities are adjusted accordingly in these unconsolidated statements of financial position. Note 21.2 1,878,898 1,513,386 120,674 3,512,958 Available-for-sale securities Pakistan: - Equity securities - Open end mutual funds - Debt securities 21.1.1 2021 2020 ----- Rupees in '000 ----- Fixed assets Surplus on revaluation as at January 01 Recognised during the year - net Less: Transferred to unappropriated profit: Incremental depreciation during the year Related deferred tax liability Realised on disposal of asset classified under held for sale Related deferred tax liability Surplus on revaluation as at December 31 Less: Related deferred tax liability on: Surplus on revaluation as at January 01 Effect of change in tax rate Recognised / transfered during the year Transferred to profit and loss account on account of incremental depreciation Realised on disposal of asset classified under held for sale 2021 2020 ----- Rupees in '000 ----1,192,173 347,037 1,539,210 1,359,727 1,359,727 (15,752) (10,072) (25,824) 1,513,386 (16,785) (9,038) (92,126) (49,605) (167,554) 1,192,173 (240,391) (27,474) (54,277) 10,072 (312,070) (299,034) 9,038 49,605 (240,391) 1,201,316 21.3 951,782 Non-banking assets acquired in satisfaction of claims Surplus on revaluation as at January 01 Derecognised during the year Less: Transferred to unappropriated profit: Incremental depreciation during the year Related deferred tax liability Surplus on revaluation as at December 31 Less: Related deferred tax liability on: Surplus on revaluation as at January 01 Effect of change in tax rate Transferred to profit and loss account on account of incremental depreciation Derecognised during the year 135,109 (14,320) 120,789 93,743 41,511 135,254 (70) (45) (115) 120,674 (94) (51) (145) 135,109 (4,029) (460) 45 3,484 (960) (967) 51 (3,113) (4,029) 119,714 131,080 96
100. JS BANK LIMITED Note 22 . CONTINGENCIES AND COMMITMENTS Guarantees Commitments 22.1 2021 2020 ----- Rupees in '000 ----- 22.1 22.2 Guarantees: Financial guarantees Performance guarantees Other guarantees 22.1.1 49,835,924 53,141,448 102,977,372 58,779,594 65,262,832 124,042,426 816,746 25,611,507 23,407,671 49,835,924 1,024,422 36,678,881 21,076,291 58,779,594 22.1.1 Included herein are outstanding guarantees of Rs. 21.419 million (2020: Rs. 29.054 million) of related parties. 22.2 Commitments: 22.2.1 Documentary credits and short-term trade-related transactions - letters of credit 22.2.1 21,917,220 21,111,360 Commitments in respect of: - Forward foreign exchange contracts - Derivative instruments - Forward lending 22.2.2 22.2.3 22.2.4 26,688,581 3,440,120 639,565 38,178,262 5,362,948 384,230 Commitments for acquisition of: - Operating fixed assets 22.2.5 455,962 53,141,448 226,032 65,262,832 Included herein are the outstanding letter of credits of Rs. 201.246 million (2020: Rs. 86.543 million) of related parties. 2021 2020 ----- Rupees in '000 ----- 22.2.2 Commitments in respect of forward foreign exchange contracts Purchase Sale 17,655,035 9,033,546 26,688,581 23,137,733 15,040,529 38,178,262 22.2.2.1 The Bank utilises foreign exchange instruments to meet the needs of its customers and as part of its asset and liability management activity to hedge its own exposure to currency risk. At year end, all foreign exchange contracts have a remaining maturity of less than one Note 22.2.3 Commitments in respect of derivative instruments Purchase Sale 22.2.3.1 Interest rate swaps (notional principal) Purchase Sale 22.2.3.2 Options (notional principal) Purchase Sale 22.2.3.3 Commitments in respect of forward securities Purchase 22.2.4 2021 2020 ----- Rupees in '000 ----1,737,404 1,702,716 3,440,120 1,760,637 3,602,311 5,362,948 370,039 370,039 740,078 1,176,824 1,176,824 2,353,648 1,367,365 1,332,677 2,700,042 582,419 2,425,487 3,007,906 - 1,394 Commitments in respect of forward lending Undrawn formal standby facilities, credit lines and other commitments to lend 21.2.4.1 639,565 384,230 22.2.4.1 This represents commitments that are irrevocable because they cannot be withdrawn at the discretion of the Bank without the risk of incurring significant penalty or expense. 22.2.5 Commitments for acquisition of operating fixed assets 22.2.5.1 455,962 226,032 22.2.5.1 This represents commitments related to purchase of leasehold improvements, furniture and fixtures, hardware & network equipments and electrical equipments and computer software. 22.2.6 Tax related contingencies are disclosed in notes 33.2 to 33.5. 97
101. JS BANK LIMITED 23 . DERIVATIVE INSTRUMENTS Derivative instruments, such as Forward Exchange Contracts, Interest Rate Swaps and Options, are forward transactions that provide market making opportunities / hedge against the adverse movement of interest and exchange rates. Derivatives business also provides risk solutions for the existing and potential customers of the Bank. The Bank has entered into a Cross Currency Swap transaction with its customer on back-to-back basis with an Authorized Derivative Dealer (ADD) without carrying any open position in its books. Specific approvals for the transactions have been granted by State Bank of Pakistan. Policies in line with SBP instructions have been formulated and are operative. The Bank has also entered into Foreign Currency & Commodity Options from its Wholesale Banking Branch Bahrain for market making activities. These transactions cover the aspects of both market making and hedging. The risk management related to derivative is disclosed in note 45. Accounting policies in respect of derivative financial instruments are described in note 4.4.2. 23.1 Product analysis With Banks for Hedging Market making With FIs other than banks Hedging Market making Total Hedging Market making 2021 Interest Rate Swaps Options and Accumulators Forward securities Notional Mark to Notional Mark to Notional Mark to principal Market principal Market principal Market ------------------------------------------ Rupees in '000 ------------------------------------------ 740,078 - - 740,078 - 1,818 - - 2,700,042 - 1,818 - 2,700,042 (6,758) - - - - - (6,758) - - 2020 Interest Rate Swaps Options and Accumulators Forward securities Notional Mark to Notional Mark to Notional Mark to principal market principal Market principal Market -------------------------------------------------------------- Rupees in '000 -------------------------------------------------------------With Banks for Hedging Market making With FIs other than banks Hedging Market making Total Hedging Market making 2,353,648 - - 2,353,648 - 4,943 - - 3,007,906 - 4,943 - 3,007,906 10,205 - - - 1,394 - 10,205 1,394 - 23.1.1 The notional value of options includes Rs. 2,665.354 (2020: Nil) and the Bank has entered back to back arrangement to close the position at year end. 23.2 Maturity analysis Remaining maturity of Contracts Upto 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 2 years 2 to 3 years 3 to 5 years 5 to 10 years Above 10 years Number of contracts 2 1 2 4 2 11 Remaining maturity of Contracts Upto 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 2 years Number of contracts 5 1 7 10 2 25 2021 Mark to market Notional Positive Negative principal ----------------- Rupees in '000 ----------------115,278 4,825 (4,617) 34,688 (3,511) 156,200 5,541 (5,236) 2,665,354 17,298 (20,546) 468,600 23,551 (22,245) 3,440,120 51,215 (56,155) 2020 Mark to market Notional Positive Negative principal ----------------- Rupees in '000 ----------------669,991 29,685 (28,769) 317,656 (889) 1,345,571 13,001 (5,296) 2,914,453 121,563 (114,748) 115,277 11,205 (10,604) 5,362,948 175,454 (160,306) Net 208 (3,511) 305 (3,248) 1,306 (4,940) Net 916 (889) 7,705 6,815 601 15,148 98
102. JS BANK LIMITED Note 24 . MARK-UP / RETURN / INTEREST EARNED On: Loans and advances Investments Lendings to financial institutions Securities purchased under resale agreements 25. 25.1 19.1 26.1 393,464 50,168 24,571 2,929,076 417,860 3,815,139 357,578 46,242 10,941 1,111,507 363,095 1,889,363 127,640 70,883 363,319 335,612 174,417 791,362 426,161 9,756 187,487 128,638 2,711 281,364 23,103 249,799 34,638 3,206,890 240,908 39,700 652,096 358,650 97,520 671,804 393,993 4,755 252,078 180,460 29,008 372,892 24,096 250,355 27,637 3,595,952 2021 2020 ----- Rupees in '000 ----- GAIN ON SECURITIES Realised Unrealised - held for trading 27.1 29,390,170 1,889,363 900,310 735,977 405,879 33,321,699 This includes Rs. 79.085 million (2020: Rs. 149.705 million) in respect of commission income from home remittance services provided by the Bank. The amount is earned from State Bank of Pakistan at the rate of Saudi Riyal 20 (2020: Saudi Riyal 20) per transaction over USD 200 (2020: USD 200) and is shared between the Bank and various exchange companies as per terms of agreement with them. Note 27. 21,813,989 3,815,139 696,224 517,642 387,693 27,230,687 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 cash management Commission on remittances including home remittances Commission on bancassurance Commission on distribution of mutual funds Commission on online services Postage & courier income Rebate income Rebate on primary dealership 26.1 25,287,865 16,509,138 42,679 1,259,308 43,098,990 Borrowings Export Refinancing Scheme (ERF) Long-Term Finance Facility (LTFF) Other Borrowings from State Bank Bank of Pakistan Securities sold under repurchase agreements Other borrowings 26. 20,671,973 17,643,224 72,642 737,597 39,125,436 MARK-UP / RETURN / INTEREST EXPENSED Deposits Borrowings Subordinated debt Cost of foreign currency swaps against foreign currency deposits / borrowings Lease liability against right-of-use assets 25.1 2021 2020 ----- Rupees in '000 ----- 27.1 95,208 (62) 95,146 1,872,242 805 1,873,047 (9,218) 140,594 2,901 134,277 76,894 1,379,114 71 1,456,079 (107,386) 414,716 Realised gain / (loss) on: Federal government securities Market treasury bills Pakistan investment bonds Ijara sukuk certificates Shares Listed companies Non Government Debt Securities Term finance certificates Sukuk certificates Commercial paper certificates Mutual fund units Foreign currency bonds 22,645 64 22,709 5,626 39,982 95,208 450 450 4,355 (3,358) 1,872,242 99
103. JS BANK LIMITED Note 28 . OTHER INCOME Loss on sale of fixed assets - net Gain on termination of leases - net Gain on sale of assets held for sale Others 29. 2021 2020 ----- Rupees in '000 ----- (4,000) 6,692 2,692 (1,368) 64,805 1,000 5,358 69,795 OPERATING EXPENSES Total compensation expense Property expense Rent & taxes Insurance Utilities cost Security (including guards) Repair & maintenance (including janitorial charges) Depreciation Depreciation - Right of Use Assets Depreciation on non banking assets 29.1 11.4 13.2.1 Information technology expenses Software maintenance Hardware maintenance Depreciation Amortisation Network charges Other operating expenses Directors' fees and allowances Legal & professional charges Insurance Outsourced services costs Travelling & conveyance NIFT clearing charges Depreciation Training & development Postage & courier charges Communication Stationery & printing Marketing, advertisement & publicity Donations Auditors' Remuneration Staff Auto fuel & maintenance Bank Charges Stamp Duty Online verification charges Brokerage, fee and commission Card related fees (debit and credit cards) CDC and other charges Consultancy fee Deposit protection premium Entertainment expenses Repair and maintenance Cash handling charges Fee and Subscription Employees social security Generator fuel & maintenance Others 36 29.2 29.3 29.4 5,520,185 6,262,594 36,985 3,566 399,865 281,062 243,862 191,143 919,584 10,711 2,086,778 24,555 2,638 343,963 344,331 213,589 190,794 893,148 2,862 2,015,880 633,913 219,281 254,279 134,447 181,433 1,423,353 472,495 176,495 204,326 113,052 102,041 1,068,409 17,450 144,917 418,894 168,995 100,424 46,549 305,196 62,493 82,511 131,764 222,760 378,300 44,178 13,654 244,113 51,542 71,058 53,770 52,971 275,935 5,239 25,899 179,469 103,080 80,926 188,376 79,187 5,629 86,466 50,641 3,692,386 12,722,702 19,950 166,570 281,757 152,468 88,285 45,199 299,192 19,121 99,622 171,275 259,658 452,925 117,841 13,011 200,842 59,970 17,148 18,802 57,739 284,258 4,975 55,905 128,144 72,148 67,988 239,732 135,514 10,556 76,415 55,107 3,672,117 13,019,000 100
104. JS BANK LIMITED 29 .1 Total compensation expense Note Fees and Allowances etc. Managerial Remuneration i) Fixed ii) Variable of which; a) Cash Bonus / Awards etc. b) Commission Charge for defined benefit plan Contribution to defined contribution plan Leaving indemnity Medical Conveyance Insurance staff 29.1.1 2021 2020 ----- Rupees in '000 ----170,756 180,157 4,124,093 3,984,843 7,888 234,116 (211,129) 248,152 7,505 399,011 442,670 97,123 5,520,185 606,678 261,352 159,436 229,001 6,479 385,956 413,648 35,044 6,262,594 29.1.1 The Bank operates a short term employee benefit scheme which includes cash awards / special bonus for all employees. Under this scheme, the bonus for all employees, including the Chief Executive Officer (CEO) is determined on the basis of employees' evaluation and the Bank's performance during the year. 2021 2020 Note 29.2 Donations ----- Rupees in '000 ----Future Trust Agha Khan Foundation 29.2.1 44,178 44,178 112,841 5,000 117,841 29.2.1 This represents donation for a related party, wherein below mentioned persons are trustees. The registered office of the donee is located at 20th Floor, The Centre, Plot No. 28, SB-5, Abdullah Haroon Road, Saddar, Karachi- 74400, Pakistan. - Mr. Kalim-ur-Rehman - Mr. Hasan Shahid - 29.3 Mr. Najmul Hoda Khan Mr. Muhammad Yousuf Amanullah Mr. Tariq Usman Bhatti Ms. Rukhsana Shah Chairman of the Bank Chief Financial Officer of the Bank and Director of JS Investments Limited, a subsidiary company Chief Financial Officer of the Jahangir Siddiqui & Co. Ltd. (the parent company) Chief Operating Officer & Executive Director JS Global Capital Limited, subsidiary company Head of Money Market And Forex of JS Global Capital Limited, subsidiary company Chief Executive Officer - Autism Spectrum Disabilities Welfare Trust, Director - EFU Life Assurance Limited and Director - Pak Suzuki Motor Company Limited Auditors' remuneration Note Audit fee - Pakistan Audit fee - Bahrain Half-yearly review Fee for audit of employees funds Fee for other statutory certifications Special certification and sundry advisory services Out of pocket expenses and sales tax on services Taxation services 29.3.1 2021 2020 ----- Rupees in '000 ----1,794 1,873 619 143 3,275 3,748 2,202 13,654 1,794 1,717 619 143 1,010 5,413 2,045 270 13,011 10,813 2,841 13,654 10,406 2,605 13,011 29.3.1 Geographical analysis Pakistan Bahrain 29.4 Under the provision of section 5(2) of the Deposit Protection Corporation Act, 2016 (the Act), and DPC Circular No. 04 of 2018, the Bank is liable to pay annual premium, on quarterly basis, to the Deposit Protection Corporation, a subsidiary company of State Bank of Pakistan, @ 0.16% on eligible deposits as of December 31 of each preceding calendar year. The Bank's eligible deposits as of December 31, 2021 are amounting to Rs. 105,788.825 million on which total premium is payable of Rs. 169.262 million per annum (Rs. 139.880 million per quarter). 30. WORKERS' WELFARE FUND Charge during the year 30.1 2021 2020 ----- Rupees in '000 ----44,178 40,460 Provision held at @ 2% of the higher of profit before tax or taxable income under Sindh Workers' Welfare Act, 2014 and the Punjab Workers' Welfare Fund Act, 2019. 101
105. JS BANK LIMITED Note 31 . OTHER CHARGES Penalties imposed by State Bank of Pakistan 32. 2021 2020 ----- Rupees in '000 ----- 494 91,639 PROVISIONS AND WRITE OFFS - NET (Reversals) / provisions for diminution in value of investments Provisions against loans & advances - specific Provisions / (reversals) against loans & advances - general (Reversals) / provisions under IFRS-9 - general Fixed assets written off - net Intangible assets written off Other Provisions and write offs Insurance claim recovered against non performing advances Other reversals 9.3 10.4 10.4 32.1 11.2 12.1.1 32.2 (233,540) 2,388,698 87,787 (62,326) 14,594 3,964 5,548 (209,600) 1,995,125 275,366 841,895 (161,166) 138,345 181,887 5,620 (2,339) 1,279,608 (443) (1,251) (62,148) 1,516 (62,326) 384 (79) 124,303 13,737 138,345 32.1 (Reversals) / provisions under IFRS-9 - general (Reversal) / charge during the year Balances with other banks Lendings to financial institutions Investments Advances 9.3 10.4 32.2 This represents insurance claim received against fake gold financing of Rs. 741.73 million for policies covered under staff infidelity and goldsmith infidelity. The Bank has fully provided said loans in these unconsolidated financial statements and started recovery proceedings on merits in court of law against the persons who are involved in collusion of that fraud. 33. TAXATION Current Prior years Deferred 941,296 (90,418) 53,655 904,533 623,291 1,711 247,879 872,881 33.1 Relationship between income tax expense and accounting profit Profit before taxation Tax on income @ 39% (2020: 35%) Effect of change in tax rates Effect of permanent differences Others Tax charge for the year 2,208,925 861,481 44,124 193 (1,265) 904,533 2,022,941 708,029 (7,693) 32,074 140,471 872,881 33.2 Income Tax The income tax returns filed under Section 114 of the Income Tax Ordinance, 2001 for the tax years 2007 through 2021. These returns filed were deemed to have been assessed in terms the provisions prevailing under income tax laws as applicable in Pakistan. However, the Officers of Inland Revenue Services (OIR) conducted the proceedings for making certain amendments in the deemed assessments for tax years 2008 to 2018 and tax year 2020. This was done by taking recourse of conducting tax audit or alternatively a direct amendment in the assessment contending that certain matters in the deemed assessments were not admissible as not conforming to the law and prejudiced the interest of revenue. Based on the amended assessments in tax year 2008 to tax year 2018 and 2020, the department had made certain disallowances of expenses and tax deductible claims besides creating minimum tax and Workers’ Welfare Fund liabilities in the tax years 2010, 2011 & 2012 and tax years 2009, 2012 & 2013 respectively. In respect of WWF, the Supreme Court of Pakistan has held in Judgement, PLD 2017 SC 28, that the amendments made in the WWF Ordinance through Finance Act, 2006 and 2008 were illegal and without lawful authority i.e. the banks do not fall into definition of Industrial Undertaking and thus, not liable to pay WWF. Therefore based on this, the Bank’s contention is mandated and it is likely that its pending appeals in this will be decided favorably. The Bank has obtained appeal effect orders of respective years except 2013 and resultantly no demand is payable in this respect. 102
106. JS BANK LIMITED As a consequence of the 18th amendment to the Constitution , levy for the WWF was introduced by the Government of Sindh and Punjab through the Sindh WWF Act, 2014 ("the Act") and the Punjab Workers Welfare Fund Act, 2019 respectively. As per the Acts, the Bank is liable to pay WWF in both provinces. However in this respect: - the Bank has challenged the issue of jurisdiction claimed by Sindh Revenue Board before the Honorable High Court of Sindh (SHC) through Constitutional Petition 1546/2017 on grounds that banking companies cannot be considered as industrial establishment and that the Act will be applied to trans-provincial entities to the extent that the obligation under the provincial law is to make distribution to the extent of the proportionate profit of the Sindh Province. The Court has restrained the Sindh Revenue Board to collect / recover Sindh WWF till the next date of hearing. - the Bank will challenge the recovery of Punjab WWF in the court of law on same grounds in case of SWWF. In 2018, Based on decision of the Supreme Court of Pakistan, the Bank had reassessed the provision of WWF which was previously held on the entire operating results of the Bank (including all provinces, part of Pakistan, AJK and Bahrain Operations) and maintained WWF only to the extent of its operations within Sindh Province till 2019. In 2020 after promulgation of Punjab WWF, the Bank has again decided prudently to maintained provision on the entire results of the Bank. In respect of minimum tax, the Commissioner Inland Revenue-Appeals (the CIR(A)) has not accepted the Bank's contentions of gross loss position and also decided that non-mark-up income is the fall under the definition of turnover including capital gains and dividend income. As result the demand of Rs. 38.907 million has been payable. The Bank has contested the matter in further appeals before Appellate Tribunal Inland Revenue (ATIR) which are pending for hearing. For tax year 2008-2018 and 2020, the Bank has not accepted the amendments of Rs. 6.77 billion and have filed appeals before the Commissioner Inland Revenue-Appeals (the CIRA). CIR(A) has admitted the contention of the Bank in case of tax year 2008 that the amended order is barred by time and decided that any addition made in impugned order is annulled and not required to be further adjudicated. However, the department has filed an appeal against the decision of CIR(A) in ATIR which is held in bank's favor through order dated January 31, 2022. With regard to appeals filed for tax year 2009 to 2017, the CIR(A) has decided the appeals accepting the Bank’s contentions in respect of significant issues, and certain disallowance including amortization claim of goodwill have been decided in favor of department in all tax years. However, the Bank and the tax department are contested the matters in further appeals before Appellate Tribunal Inland Revenue (ATIR) which mostly held in favor of Bank including goodwill through order dated January 31, 2022. The tax department passed appeal effect/rectification orders and allowed deleted and set-aside issues in the light of CIR(A) orders for tax year 2008 to 2014. As a result of these orders, the Bank's taxable losses has increased to Rs. 3.464 billion and reduced the demand of Rs. 1.212 billion in relevant tax years after adjustment of these losses. Further for the tax year 2013, the ATIR has decided appeal filed by tax department in respect of calculating the amount of provisions against advances as allowable under Rule 1(c) of Seventh Schedule to the Income Tax Ordinance, 2001 and has maintained the CIR(A) decision that the allowability of provision for advances to be calculated at 1% of gross amount of advances as against the tax department contention that the same is to be calculated on net advances after deducting the amount of provisions created and allowed against advances. The matter of allowability of amortization relating to goodwill is contentious issue, therefore based on the opinion of lawyer there are arguments available to contend that goodwill on merger is an allowable deduction for tax purposes. Especially in the recent decision given by the High Court of Sindh in the case of merger of another bank in Pakistan where the Court has ruled in favour of taxpayer that goodwill generated in merger is ‘intangible’ and amortization relating to goodwill is allowable deduction. The Sindh High Court has dismissed the Bank’s petitions for tax years 2016 through 2019 wherein the Bank alongwith other taxpayers challenged the levy of super tax on constitutional grounds. Based on the opinion of legal counsel, the Bank has appealed before the Supreme Court against the decision of the Sindh High Court. The Supreme Court has allowed interim relief to the taxpayers subject to the payment of 50% of the super tax liability. However, the Bank has adjusted full amount of super tax liability for Tax year 2016 and 2019 against the available tax refunds. Further, the bank has obtained stay from the Sindh High Court on other technical grounds regarding the levy of Super Tax for tax years 2017 and 2018. 103
107. JS BANK LIMITED 33 .3 Withholding tax monitoring Withholding tax monitoring was initiated against the Bank for tax year 2014-2020. Orders in respect of tax years 2014, 2015, 2016 and 2017 has been passed against which appeals have been filed before the CIR(A). CIR(A) has remanded back the matters for rectification in respect of tax years 2014 and 2015 against which rectified orders have been passed and demands have been reduced. Appeal for tax year 2017 has been heard and reserved for order. In respect of tax year 2018 to 2020, proceedings are pending. 33.4 Sales tax The Bank as a registered person under Sindh Sales Tax on Services Act, 2011 has been issued a Sales Tax Order from the Sindh Revenue Board (SRB) creating a demand of Rs.193.44 million (besides Rs. 7.2 million is charged as penalty) against the Bank for allegedly non-payment of Sindh sales tax on certain ‘presumed non-taxable services / incomes’(i.e. Bancassurance, Home Remittances under Pakistan Remittance Initiative Scheme, SBP rebates on Government securities, Rebates from foreign correspondent Banks, and FX gain on remittance by Western Union)’ for the tax periods July 2011 to December 2013, 2015 to 2017 and 2019 to 2020. Bank has filed appeals before Commissioner (Appeals) Sindh Revenue Board, CA-SRB against the order of AC-SRB. 33.5 Azad Jammu & Kashmir Operations The Bank has commenced operations in Azad Jammu & Kashmir from tax year 2009 and has filed returns for the tax years 2009 to 2021 with the tax authorities of such region. The amendement proceedings and appeals are at various levels before AJK Tax authorities for the tax year 2011 to 2017, 2019 and 2020. 34. The management of the Bank is confident that the appeals filed in respect of the above matter will be decided in the Bank's favor and accordingly no demand for payment would arise. 2021 2020 Note ----- Rupees in '000 ----BASIC AND DILUTED EARNINGS PER SHARE Profit after taxation for the year - attributable to ordinary equity holders of the Bank 1,150,060 1,304,392 ----- Numbers ----Weighted average number of outstanding ordinary shares during the year 1,297,464,262 1,297,464,262 ----- Rupee ----Basic and diluted earnings per share 0.89 1.01 2021 2020 ----- Rupees in '000 ----- 35. CASH AND CASH EQUIVALENTS Cash and balances with treasury banks Balances with other banks - Gross Overdrawn nostro accounts 36. STAFF STRENGTH Permanent On Bank's contract Bank's own staff strength at the end of the year Third party contract (other guards and janitorial) 6 7 15 34,266,856 1,185,803 (306,663) 35,145,996 30,421,231 1,106,419 (143,570) 31,384,080 2021 2020 ----------- Number ----------3,502 541 4,043 444 4,487 3,773 1,055 4,828 483 5,311 4,480 7 4,487 5,304 7 5,311 36.1 Geographical segment analysis Pakistan Bahrain 104
108. JS BANK LIMITED 37 . DEFINED BENEFIT PLAN 37.1 General description The Bank operates a recognized gratuity fund for all employees who opted for this scheme introduced by the management with effect from January 01, 2007. The defined benefit is administered by a separate fund that is legally separate from the Bank. The plan is governed by the trust deed dated September 01, 2007. The trustees of the gratuity fund are composed of representatives from employers. The trustees of the gratuity fund are required by the trust deed to act in the interest of the fund and of all relevant stakeholders in the scheme, i.e. active employees, inactive employees, retirees and employers. The trustees of the gratuity fund are responsible for the investment policy with regard to the assets of the fund. 37.2 The plan in Pakistan typically exposes the Bank to actuarial risks such as: salary risk, discount rate risk, mortality risk and investment risk defined as follow: - Salary increase risk: The risk that the final salary at the time of cessation of services is greater than assumed. Since the benefit is calculated on the final salary (which will closely reflect inflation and other macroeconomic factors), the benefit amount increases as salary increases. - Discount rate risk The discount rate is based on the yield on government bonds. If the market yield of bonds varies, the discount rate would vary in the same manner and would affect the present value of obligation and fair value of assets. - Demographic Risks - Withdrawal risk: The risk of actual withdrawals experience is different from assumed withdrawal probability. The significance of the withdrawal risk varies with the age, service and the entitled benefits of the beneficiary. - Longevity Risk The risk that the actual mortality experience is different than the assumed mortality. This effect is more pronounced in schemes where the age and service distribution is on the higher side. - Investment risk This is the risk that the assets are under-performing and are not sufficient to meet the liabilities. 37.3 Number of employees under the schemes The number of employees covered under defined benefit scheme (gratuity fund) is 3,495 (2020: 3,756). 37.4 Principal actuarial assumptions Principal actuarial assumptions at the end of the reporting period expressed as weighted averages. The actuarial valuations were carried out on December 31, 2021 based on the Projected Unit Credit Method, using the following significant assumptions: 2021 2020 Valuation discount rate for year end obligation per annum 11.75% 9.75% Interest cost on defined benefit obligation per annum 9.75% 11.75% Interest income on plan assets per annum 9.75% 11.75% Future salary increase rate - upto one years - from two to three years - more than three years per annum per annum per annum 10.00% 11.75% 11.75% 8.00% 10.00% 9.75% The average duration of the defined benefit obligation years 9 10 Normal retirement age years 60 60 Moderate Moderate Withdrawal rates Mortality rates SLIC 2001SLIC 20012005, Setback 2005, Setback 1 Year 1 Year 105
109. JS BANK LIMITED 37 .5 Movement in defined benefit obligations, fair value of plan assets and their components Net defined benefit liability / Defined benefit obligations Fair value of plan assets (asset) 2021 2020 2021 2020 2021 2020 ---------------------------------------- Rupees in '000 ---------------------------------------Balance as at January 01, 2021 1,074,298 Included in profit or loss Current service cost Past service cost Interest expense / income 178,234 (358,399) 101,035 (79,130) Included in other comprehensive (loss) / income Actuarial gains / losses arising from: - financial assumptions - experience adjustments Return on plan assets Other movements Contribution made during the year Benefits paid during the year Balance as at December 31, 2021 844,212 1,391,879 692,331 (317,581) 151,881 148,693 1,820 97,343 247,856 131,999 131,999 88,420 88,420 178,234 (358,399) (30,964) (211,129) 148,693 1,820 8,923 159,436 (11,622) (95,764) 317,777 210,391 14,025 (266) (490,776) (477,017) (11,622) (95,764) (107,386) 14,025 (266) 13,759 (317,777) (317,777) 490,776 490,776 (76,093) (76,093) (31,529) (31,529) (76,093) (76,093) 151,881 (31,529) 120,352 811,689 1,074,298 1,130,008 1,391,879 - (151,881) (151,881) (318,319) (317,581) 37.6 The composition of the plan assets at the end of the reporting period for each category, are as follows: Cost Fair value of plan assets 2021 2020 2021 2020 2021 2020 Rupees in '000 Rupees in '000 Percentage Cash and cash equivalents Cash at Bank 176,653 82,793 176,653 82,793 15.6% 5.9% Term deposits receipts 150,000 161,806 0.0% 11.6% 176,653 232,793 176,653 244,599 15.6% 17.6% Debt securities Pakistan Investment Bonds 147,712 388,863 146,157 411,079 12.9% 29.5% Market treasury bills 53,815 53,660 0.0% 3.9% Term finance certificates 50,503 50,503 51,082 50,370 4.5% 3.6% 198,215 493,181 197,239 515,109 17.5% 37.0% Ordinary Shares of listed companies 805,623 448,506 756,116 632,172 66.9% 45.4% 1,180,491 1,174,480 1,130,008 1,391,880 100% 100% 37.7 Maturity profile 37.7.1 Expected maturity analysis of undiscounted defined benefit obligation (benefit payments) for the gratuity fund is as follows: Over 10 and Up to Over Over Over above one year 1-2 years 2- 5 years 6-10 years Total years ---------------------------------------- Rupees in '000 ---------------------------------------- 37.8 Balance as at December 31, 2021 40,130 42,200 200,323 1,068,414 11,996,311 13,347,378 Balance as at December 31, 2020 45,445 71,699 268,697 1,245,714 11,997,565 13,629,120 Sensitivity analysis 37.8.1 Significant actuarial assumptions for the determination of the defined obligation are discount rate, and expected rate of salary increase. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant: Particulars Rate Present value of defined Net defined benefit liability / benefit obligation Fair value of plan assets (asset) ----------------------------------- Rupees in '000 ----------------------------------- Current results - 811,689 1,130,008 (318,319) Discount rate 1% Increase 1% Decrease 12.75% 10.75% 741,666 891,924 1,130,008 1,130,008 (388,342) (238,084) Salary Rate 1% Increase 1% Decrease 10.75% 8.75% 892,877 739,558 1,130,008 1,130,008 (237,131) (390,450) Withdrawal rate 10% Increase 10% Decrease Moderate + one year Moderate - one year 800,202 823,938 1,130,008 1,130,008 (329,806) (306,070) Mortality rate One year age set back One year age set forward Adjusted SLIC 2001-2005 one year Adjusted SLIC 2001-2005 + one year 811,915 811,427 1,130,008 1,130,008 (318,093) (318,581) Furthermore in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as applied in calculating the defined benefit obligation liability recognised in this unconsolidated statement of financial position. 106
110. JS BANK LIMITED 37 .9 Maturity profile The weighted average duration of the defined benefit obligation works out to 10 years. 37.10 Experience Adjustments The re-measurement gains / losses arise due to actual experience varying from the actuarial assumptions for the year. 2021 2020 2019 2018 2017 -------------------------------- Rupees in '000 -------------------------------Particulars Defined benefit obligation Fair value of plan assets Net defined benefit (assets) / liability Re-measurement (gain) / loss on obligation Re-measurement loss / (gain) on plan assets Other comprehensive income / (loss) 811,689 (1,130,008) (318,319) 1,074,298 (1,391,879) (317,581) 844,212 (692,331) 151,881 649,062 (546,568) 102,494 550,729 (375,611) 175,118 (107,386) 317,777 210,391 13,759 (490,776) (477,017) (836) 18,005 17,169 (52,391) 25,329 (27,062) 75,269 10,273 85,542 37.11 The average duration of the payment of benefit obligation at December 31, 2021 is within one year. 37.12 The Bank contributes to the gratuity fund as per actuarial's valuation of the year i.e. Nil for the next year. 37.13 Based on actuarial advice and management estimates, profit and loss account charge in respect of defined benefit obligation for the next one year works out to be Rs. 92.702 million. The amount of re-measurements to be recognised in other comprehensive income for year ending December 31, 2022 will be worked out as at the next valuation. 38. DEFINED CONTRIBUTION PLAN The Bank operates a contributory provident fund for all permanent employees. The employer and employee both contribute 7.1% of the basic salaries (2020: 7.1% of the basic salaries) to the funded scheme every month. Number of employees covered under this plan are 2,865 (2020: 3,164). During the year, the Bank has made a contribution of Rs. 248.152 million (2020: Rs. 229.001 million) to the fund. The employees have also made a contribution of equal amount to the fund. 39. COMPENSATION OF DIRECTORS AND EXECUTIVES 39.1 The aggregate amount charged in the financial statements for the year in respect of the remuneration and benefits to the President and Chief Executive Officer, Directors and Executives are as follows: 2021 Directors Items Fees and Allowances etc. Managerial Remuneration i) Fixed ii) Total Variable - Cash Bonus / Awards Charge for defined benefit plan Contribution to defined contribution plan Medical Conveyance Car allowance Others Total Number of persons Key Other Material NonPresident / Management Risk Takers/ Chairman Executives CEO Personnel Controllers -------------------------------- Rupees in '000 -------------------------------3,700 22,500 - - - 3,700 22,500 42,373 1,500 2,484 3,008 4,237 575 199 54,376 218,561 26,161 11,616 14,021 21,856 10,752 23,709 787 327,463 598,481 72,409 33,832 40,951 59,848 42,395 90,306 7,199 945,421 1 7 1 23 107 2020 Directors Items Fees and Allowances etc. Managerial Remuneration i) Fixed ii) Total Variable - Cash Bonus / Awards Charge for defined benefit plan Contribution to defined contribution plan Medical Conveyance Car allowance Others Total Number of persons Key Other Material NonPresident / Management Risk Takers/ Chairman Executives CEO Personnel Controllers -------------------------------- Rupees in '000 -------------------------------4,350 27,350 - - - 4,350 27,350 39,818 10,500 2,430 2,827 3,982 300 190 60,047 294,664 52,199 17,415 20,780 29,466 654 31,715 5,522 452,415 436,946 66,626 25,824 24,789 43,695 68,138 17,748 683,766 1 7 1 30 85 107
111. JS BANK LIMITED 39 .1.1 The CEO and COO are provided with free use of Bank maintained cars in accordance with their entitlement. 39.1.2 Managerial remuneration includes joining related payments made to certain Executives in line with their terms of employment. 39.1.3 All Executives, including the CEO of the Bank, are also entitled to certain short term employee benefits which are disclosed in note 39.1 to these unconsolidated financial statements. 39.1.4 The SBP, vide its BPRD Circular No. 01 dated January 25, 2017, issued Guidelines on Remuneration Practices, where the Bank is required to defer a certain portion of variable compensation of the Material Risk Takers (MRTs) and Material Risk Controllers (MRCs) subject to mandatory deferrals for a defined period. In this respect, deferral amount shall be withheld for a period of three years whereas remaining portion of the variable compensation shall be paid upfront to the MRTs and MRCs. The deferred remuneration shall vest proportionately over the deferral period following the year of variable remuneration award. The deferred portion of the variable remuneration shall be paid to the MRTs and MRCs on vesting, proportionally through yearly instalments, during the deferred period, in case no malus triggers are applicable. Details of MRTs and MRCs are given below: 2021 2020 Employees Covered under: ----- Numbers ----Marterial Risk Takers (MRTs) Marterial Risk Controllers (MRCs) 70 36 66 39 106 105 2021 2020 ----- Rupees '000 ----Movement of deferred remuneration Opening Deferred during the year Paid during the year Malus during the year Closing 48,495 10,934 (13,898) (1,702) 43,829 218 48,350 (73) 48,495 2021 Board Committees Human Resource, Remuneration Risk Board Audit & Nomination Management I.T Total Amount Meetings Committee Committee Committee Committee Paid --------------------------------------------- Rupees in '000 --------------------------------------------39.2 Meeting Fees and Allowances Paid 1 2 3 4 5 6 7 8 Name of Director Mr. Kalim-ur-Rahman Mr. Adil Matcheswala Mr. Ashraf Nawabi Mr. G.M. Sikander Mr. Hassan Afzal Mr. Munawar Alam Siddiqui Ms. Nargis Ghaloo Mr. Sohail Aman Total amount paid 1,250 1,250 250 1,250 1,000 1,250 1,250 1,250 8,750 600 600 600 600 2,400 450 600 600 600 2,250 300 600 600 1,500 750 900 900 2,550 2,450 2,450 550 2,450 1,900 2,450 2,450 2,750 17,450 2020 Board Committees Human Resource, Remuneration Risk Board Audit & Nomination Management I.T Total Amount Meetings Committee Committee Committee Committee Paid --------------------------------------------- Rupees in '000 --------------------------------------------Meeting Fees and Allowances Paid 1 2 3 4 5 6 7 8 Name of Director Mr. Kalim-ur-Rahman Mr. Adil Matcheswala Mr. Ashraf Nawabi Mr. G.M. Sikander Mr. Hassan Afzal Mr. Munawar Alam Siddiqui Ms. Nargis Ghaloo Mr. Sohail Aman Total amount paid 1,500 1,500 1,250 1,500 1,500 1,500 1,500 1,500 11,750 500 500 500 500 2,000 850 850 750 850 3,300 400 500 500 1,400 500 500 500 1,500 2,850 2,850 1,650 2,750 2,000 2,500 2,500 2,850 19,950 108
112. JS BANK LIMITED 40 . FAIR VALUE OF FINANCIAL INSTRUMENTS IFRS 13 "Fair Value Measurement" defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of quoted securities other than those classified as held to maturity, is based on quoted market price. Fair value of fixed term loans, other assets, other liabilities and fixed term deposits cannot be calculated with sufficient reliability due to absence of current and active market for assets and liabilities and reliable data regarding market rates for similar instruments. The provision for impairment of loans and advances has been calculated in accordance with the Bank's accounting policy as stated in note 4.6 to the annual unconsolidated financial statements for the year ended December 31, 2021. The repricing profile, effective rates and maturity are stated in note 45.2.4 to these financial statements. In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different from their carrying values since assets and liabilities are either short term in nature or in the case of customer loans and deposits are frequently repriced. Fair value hierarchy IFRS 13 requires the Bank to classify fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has following levels: Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Fair value measurements using unobservable inputs for the asset or liability. 40.1 Valuation techniques used in determination of fair values within level Item Financial Instruments- Level 1 Shares of listed companies Financial instruments - Level 2 Units of mutual funds Valuation approach and input used Fair values of investments in listed equity securities are valued on the basis of closing quoted market prices available at the Pakistan Stock Exchange. Fair values of investments in units of mutual funds are determined based on redemption prices disclosed at the Mutual Funds Association of Pakistan (MUFAP) as at the close of the business days. Market Treasury Bills(MTB) / Pakistan Investment Bonds(PIB), and GoP Sukuks (GIS) Debt Securities (TFCs) and Sukuk other than Government Fair values of Pakistan Investment Bonds and Market Treasury Bills are derived using PKRV and PKFRV rates (Reuters page). Investments in debt securities (comprising of Term Finance Certificates, Bonds and any other security issued by a company or a body corporate for the purpose of raising funds in the form of redeemable capital) are valued on the basis of the rates announced by the Mutual Funds Association of Pakistan (MUFAP) in accordance with the methodology prescribed by the SECP. Overseas Government Sukuks, Overseas and Euro Bonds Forward foreign exchange contracts The fair value of Overseas Government Sukuks, and Overseas Bonds are valued on the basis of price available on Bloomberg. The valuation has been determined by interpolating the foreign exchange revaluation rates announced by the State Bank of Pakistan. 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 underlying parameters including foreign currencies involved, interest rates, yield curves, volatilities, contracts duration, etc. Derivatives Financial instruments in level 3 Currently, no financial instruments are classified in level 3. The fair value of unquoted debt securities, fixed term loans, other assets, other liabilities, fixed term deposits and borrowings cannot be calculated with sufficient reliability due to the absence of a current and active market for these assets and liabilities and reliable data regarding market rates for similar instruments. Non- financial assets- Level 3 Fixed assets - Land and building Non-banking assets under satisfaction of claims Fixed assets and Non-banking assets under satisfaction of claims are carried at revalued amounts determined by professional valuers based on their assessment of the market values as disclosed in note 11 and 13 of these annual unconsolidated financial statements. The valuations are conducted by the valuation experts appointed by the Bank which are also on the panel of State Bank of Pakistan. The valuation experts used a market based approach to arrive at the fair value of the Bank’s properties. The market approach used prices and other relevant information generated by market transactions involving identical or comparable or similar properties. These values are adjusted to reflect the current condition of the properties. 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 financial statements. 40.2 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 the transfer occurred. There were no transfers between levels 1 and 2 during the year. 40.3 The following table provides an analysis of financial assets that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. 109
113. JS BANK LIMITED Level 1 On balance sheet financial instruments 2021 Level 2 Level 3 Total ------------------------- Rupees in '000 ------------------------- Financial assets - measured at fair value Held-for-trading securities Investments Federal Government Securities Available-for-sale securities Investments Federal Government Securities Shares Non Government Debt Securities Foreign Securities Open end mutual funds Financial assets - disclosed but not measured at fair value Investments Federal Government Securities - 1,109,404 - 1,109,404 4,148,731 4,148,731 159,315,888 372,685 1,616,155 2,203,172 163,507,900 - 159,315,888 4,148,731 372,685 1,616,155 2,203,172 167,656,631 4,148,731 58,143,943 222,761,247 - 58,143,943 226,909,978 Non-Financial assets - measured at fair value Revalued fixed assets Non-banking assets acquired in satisfaction of claims - - 3,696,407 2,658,537 6,354,944 3,696,407 2,658,537 6,354,944 Off balance sheet financial instruments Commitments in respect of: Forward foreign exchange contracts Purchase Sale Derivative instruments: - 18,064,443 9,079,267 - 18,064,443 9,079,267 Interest rate swaps Purchase Sale - 402,137 403,955 - 402,137 403,955 Options Purchase Sale - 1,363,325 1,329,959 - 1,363,325 1,329,959 Level 1 On balance sheet financial instruments 2020 Level 2 Level 3 Total ------------------------- Rupees in '000 ------------------------- Financial assets - measured at fair value Held-for-trading securities Investments Federal Government Securities Available-for-sale securities Investments Federal Government Securities Shares Non Government Debt Securities Foreign Securities Financial assets - disclosed but not measured at fair value Investments Federal Government Securities Non-Financial assets - measured at fair value Revalued fixed assets Non-banking assets acquired in satisfaction of claims - 25,003,774 - 25,003,774 4,339,823 4,339,823 127,406,043 457,454 4,017,289 131,880,786 - 127,406,043 4,339,823 457,454 4,017,289 136,220,609 4,339,823 36,109,599 192,994,159 - 36,109,599 197,333,982 - - 2,610,299 1,311,252 3,921,551 2,610,299 1,311,252 3,921,551 Off balance sheet financial instruments Commitments in respect of: Forward foreign exchange contracts Purchase Sale - 22,942,707 14,910,910 - 22,942,707 14,910,910 Forward securities Purchase - 1,394 - 1,394 Interest rate swaps Purchase Sale - 1,120,607 1,125,550 - 1,120,607 1,125,550 Options Purchase Sale - 581,042 2,437,068 - 581,042 2,437,068 Derivative instruments 110
114. JS BANK LIMITED 41 . SEGMENT INFORMATION 41.1 Segment details with respect to business activities: 2021 Corporate Trading and Retail Commercial Total Others Finance Sales Banking Banking ------------------------------------------ Rupees in '000 -----------------------------------------Profit & Loss Net mark-up / return / interest / (expense) Inter segment revenue - net Non mark-up / return / income / (loss) Total Income / (loss) Segment direct expenses Inter segment expense allocation Total expenses Provisions Profit / (loss) before tax (892,985) 907,098 253,443 267,556 13,766,791 (14,806,689) 1,681,337 641,439 196,683 8,802,290 1,642,956 10,641,929 (1,388,737) 5,097,301 1,503,778 5,212,342 212,997 (4,839) 208,158 11,894,749 5,076,675 16,971,424 5,120,240 5,287,097 10,407,337 2,668,909 (2,434,317) 887,464 786,969 1,674,433 (883,218) 4,421,127 278,607 278,607 (24,106) (46,343) 6,482,267 6,285,107 12,767,374 1,995,125 2,208,925 28,829 47,967 76,796 190,760 167,127 163,074 330,201 233,540 77,698 12,716,606 - 229,555,015 31,939,044 35,452,642 118,125,304 - 1,711,262 90,374,890 - 2,339,620 - 35,452,642 231,266,277 223,556,420 31,939,044 Others Total Assets 901,279 901,279 13,617,885 261,494,059 75,492,738 7,835,772 (3,430,477) 79,898,033 233,475,979 165,301,183 6,090,497 (3,252,332) 168,139,348 260,225,500 5,245,278 5,245,278 31,446,953 39,031,851 246,940,478 13,926,269 (6,682,809) 254,183,938 31,446,953 807,845,274 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total liabilities Equity Total Equity & liabilities 16,336 13,597,573 3,976 13,617,885 13,617,885 31,875,041 6,996,800 222,622,218 261,494,059 261,494,059 9,535,196 219,428,193 4,512,590 233,475,979 233,475,979 29,047,737 227,679,248 934,202 2,564,313 260,225,500 260,225,500 17,007,768 17,007,768 22,024,083 39,031,851 70,474,310 6,996,800 460,705,014 223,556,420 24,088,647 785,821,191 22,024,083 807,845,274 50,618,828 37,186,792 15,060,805 110,947 102,977,372 Statement of financial position Cash & Bank balances Investments Net inter segment lending Lendings to financial institutions Advances - net Advances - performing Advances - non-performing Advances - (Provisions)/reversals - Net Contingencies & Commitments - 2020 Corporate Trading and Retail Commercial Total Others Finance Sales Banking Banking ------------------------------------------ Rupees in '000 -----------------------------------------Profit & Loss Net mark-up / return / interest / (expense) Inter segment revenue - net Non mark-up / return / income Total Income 93,161 93,161 14,285,475 (17,035,715) 2,905,042 154,802 Segment direct expenses Inter segment expense allocation Total expenses Provisions Profit / (loss) before tax 33,286 33,286 59,875 149,059 334,127 483,186 344,219 (672,603) (8,543,152) 16,914,719 2,349,650 10,721,217 4,034,968 120,996 1,258,710 5,414,674 69,794 69,794 9,777,291 6,676,357 16,453,648 6,711,460 2,664,330 9,375,790 124,158 1,221,269 1,081,529 1,862,559 2,944,088 811,231 1,659,355 314,749 314,749 (244,955) 8,290,083 4,861,016 13,151,099 1,279,608 2,022,941 Statement of financial position Cash & Bank balances Investments Net inter segment lending Lendings to financial institutions Advances - net Advances - performing Advances - non-performing Advances (Provisions) - Net 2,891,836 - 20,722,345 198,806,637 23,239,672 10,804,855 129,898,985 - 109,429,008 - 11,732,961 - 31,527,200 201,698,473 251,060,954 23,239,672 Others Total Assets 2,891,836 4,590,700 247,359,354 52,152,981 4,760,888 (938,040) 55,975,829 3,570,545 200,250,214 190,515,793 6,972,667 (3,265,123) 194,223,337 3,315,506 306,967,851 14,027,140 25,760,101 242,668,774 11,733,555 (4,203,163) 250,199,166 25,503,891 783,229,356 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total liabilities Equity Total Equity & liabilities 2,891,836 2,891,836 2,891,836 12,208,219 7,492,800 227,156,281 502,054 247,359,354 247,359,354 1,996,091 166,087,049 21,012,836 11,154,238 200,250,214 200,250,214 34,099,102 266,975,544 5,893,204 306,967,850 306,967,850 5,167,893 5,167,893 20,592,208 25,760,101 48,303,412 7,492,800 433,062,593 251,060,953 22,717,389 762,637,147 20,592,208 783,229,355 60,973,417 44,793,723 18,141,644 133,642 124,042,426 Contingencies & Commitments - 111
115. JS BANK LIMITED 41 .2 Segment details with respect to geographical locations Profit & Loss 2021 Total Pakistan Bahrain ---------- Rupees in '000 ---------- Net mark-up / return / profit Inter segment revenue - net Non mark-up / return / interest income Total Income 11,480,019 38,222 4,924,671 16,442,912 414,730 (38,222) 152,004 528,512 11,894,749 5,076,675 16,971,424 Segment direct expenses Inter segment expense allocation Total expenses Provisions Profit before tax 6,280,862 6,244,503 12,525,365 2,057,451 1,860,096 201,405 40,604 242,009 (62,326) 348,829 6,482,267 6,285,107 12,767,374 1,995,125 2,208,925 Statement of financial position Cash & Bank balances Investments Net inter segment lending Lendings to financial institutions Advances - performing Advances - non-performing Advances - (Provisions) / reversals - Net Others Total Assets 35,233,450 229,555,022 220,055,275 31,939,044 238,134,364 13,926,269 (6,682,809) 245,377,824 31,276,046 793,436,661 219,192 1,711,255 3,501,145 8,806,114 8,806,114 170,907 14,408,613 35,452,642 231,266,277 223,556,420 31,939,044 246,940,478 13,926,269 (6,682,809) 254,183,938 31,446,953 807,845,274 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total liabilities Equity Total Equity & liabilities 66,385,227 6,996,800 455,218,749 220,055,275 23,999,986 772,656,037 20,780,624 793,436,661 4,089,083 5,486,265 3,501,145 88,661 13,165,154 1,243,459 14,408,613 70,474,310 6,996,800 460,705,014 223,556,420 24,088,647 785,821,191 22,024,083 807,845,274 Contingencies & Commitments 102,977,372 - 102,977,372 Profit & Loss 2020 Total Pakistan Bahrain ---------- Rupees in '000 ---------- Net mark-up / return / profit Inter segment revenue - net Non mark-up / return / interest income Total Income 9,442,805 20,830 6,513,962 15,977,597 334,486 (20,830) 162,395 476,051 9,777,291 6,676,357 16,453,648 Segment direct expenses Inter segment expense allocation Total expenses Provisions Profit before tax 12,951,890 12,951,890 1,141,263 1,884,444 199,209 199,209 138,345 138,497 13,151,099 13,151,099 1,279,608 2,022,941 Statement of financial position Cash & Bank balances Investments Net inter segment lending Lendings to financial institutions Advances - performing Advances - non-performing Advances - (Provisions) / reversals - net Others Total Assets 29,191,991 197,608,101 251,060,954 23,239,672 238,236,892 11,733,555 (4,181,836) 245,788,611 25,335,531 772,224,860 2,335,209 4,090,372 4,431,882 (21,327) 4,410,555 168,360 11,004,496 31,527,200 201,698,473 251,060,954 23,239,672 242,668,774 11,733,555 (4,203,163) 250,199,166 25,503,891 783,229,356 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total liabilities Equity Total Equity & liabilities 48,211,222 7,492,800 425,531,719 248,719,379 22,638,412 752,593,532 19,631,328 772,224,860 92,190 7,530,874 2,341,574 78,977 10,043,615 960,880 11,004,495 48,303,412 7,492,800 433,062,593 251,060,953 22,717,389 762,637,147 20,592,208 783,229,355 Contingencies & Commitments 115,794,298 8,248,128 124,042,426 112
116. JS BANK LIMITED 42 . TRUST ACTIVITIES The Bank under takes Trustee and other fiduciary activities that result in the holding or placing of assets on behalf of individuals and other organisations.These are not assets of the Bank and, therefore, are not included as such in these unconsolidated financial statements. Assets held under trust are shown in the table below: 2021 Securities Held (Face Value) No. of IPS Accounts Market Treasury Bills Category Pakistan Investment Government Bonds Ijara Sukuk ---------- Rupees in '000 ---------- 3 80,000 Companies 11 3,014,840 4,346,100 Employees Funds 48 8,128,370 14,344,900 Individuals 45 1,047,285 389,500 Insurance Companies 9 5,156,500 109,554,000 Others 9 3,577,400 12,187,700 125 21,004,395 140,914,200 Charitable Institutions Total 92,000 165,000 6,869,000 7,034,000 Total 172,000 7,360,940 22,638,270 1,436,785 121,579,500 15,765,100 168,952,595 2020 Securities Held (Face Value) No. of IPS Accounts Market Treasury Bills Category Assets Management Companies 1 23,000 Charitable Institutions 1 - 142,000 Total - 23,000 - 142,000 Companies 13 2,373,860 25,560,800 - 27,934,660 Employees Funds 51 7,194,410 17,927,950 69,000 25,191,360 Individuals 43 919,290 431,500 8 24,076,000 84,255,700 11 15,370,700 7,882,700 128 49,957,260 136,200,650 Insurance Companies Others Total 43. Pakistan Investment Government Bonds Ijara Sukuk ---------- Rupees in '000 ---------- 1,621,500 1,690,500 1,350,790 109,953,200 23,253,400 187,848,410 RELATED PARTY TRANSACTIONS The Bank has related party transactions with its parent, subsidiaries, associates, directors and Key Management Personnel and other related parties. The Banks enters into transactions with related parties in the ordinary course of business and 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. 113
117. JS BANK LIMITED Details of transactions with related parties , other than those which have been specially disclosed elsewhere in these unconsolidated financial statements are as follows: As at December 31, 2021 As at December 31, 2020 Key Key management Other related management Directors personnel Subsidiaries Associates parties Parent Directors personnel Subsidiaries Associates ------------------------------------------------------------------------------------------------ Rupees in '000 ------------------------------------------------------------------------------------------------ Parent Other related parties Statement of Financial Position Lendings to financial institutions Opening balance Addition during the year Repaid during the year Closing balance - - - Investments Opening balance Investment made during the year Investment redeemed / disposed off during the year Closing balance - - - Provision for diminution in value of investments - - - Advances Opening balance Addition during the year Repaid during the year Transfer in / (out) - net Closing balance - Other Assets Interest /mark-up accrued Receivable against bancassurance / bancatakaful Advance for subscription of TFC - unsecured Net defined benefit plan Prepaid insurance Dividend Receivable Other receivable Provision against other assets - 3,588 - Borrowings Opening balance Borrowings during the year Settled during the year Closing balance - - Deposits and other accounts Opening balance Received during the year Withdrawn during the year Transfer in / (out) - net Closing balance 172,019 8,763,862 (8,023,554) 912,327 122,106 11,327 (39,222) 31,558 125,769 212,335 1,236,232 (1,098,789) 38,628 388,406 779,655 192,519 (176,926) (337,067) 458,181 505 - 76,237 673,723 (667,310) (40,423) 42,227 - 1,919,121 1,919,121 - - 269,800 269,800 - 193,550 (96,775) 96,775 370,768 294,076 (222,529) 442,315 537 127,626 - 10,917 - 1,638,770 498,611,727 (498,895,530) 1,354,967 49,753 1,732,714 (1,741,157) 41,310 6,300,000 (6,300,000) - - - - 2,720,901 1,350,000 (1,594,011) 2,476,890 - - - - - - - - 110,151 4,093,430 4,026,927 (3,193,931) 302,893 5,229,319 79,089 20,889 318,319 379 379 10,365,166 295,223,429 (291,943,860) 754,045 14,398,780 58 (832) 122,880 122,106 - 1,919,121 1,919,121 - 596,257 265,948 (150,821) 68,271 779,655 - 2,801 - - 1,253 - - - - - 271,648 5,511,316 (5,610,945) 172,019 24,444 511,942 (324,417) 366 212,335 6 193,550 193,550 59,593 973,685 (869,813) (87,228) 76,237 1,246,363 499,101,485 (498,707,020) (2,058) 1,638,770 - 228,972 40,828 269,800 - 153,128 (2,235) 219,875 370,768 954 - 23,104 861,135 (834,486) 49,753 4,100,000 (4,100,000) - 1,617,327 4,009,279 (2,905,705) 2,720,901 277,456 1,946,481 6,402,913 (5,488,750) 1,232,786 4,093,430 52,998 28,051 317,581 379 (379) 11,105,705 (11,105,705) 8,622,201 160,825,941 (159,215,607) 132,631 10,365,166 114
118. JS BANK LIMITED As at December 31 , 2021 As at December 31, 2020 Key Key management Other related management Directors personnel Subsidiaries Associates parties Parent Directors personnel Subsidiaries Associates ------------------------------------------------------------------------------------------------ Rupees in '000 ------------------------------------------------------------------------------------------------ Parent Subordinated debt Opening balance Issued during the year Redeemed during the year Transfer in / (out) - net Closing balance - - - - - 889,432 (199,746) (49,910) 639,776 - Other Liabilities Interest / return / mark-up payable on deposits Interest / return / mark-up payable on borrowings Interest / return / mark-up payable on subordinated debt Acceptances Payable to defined benefit plan Donation Payable Others payable - - - - - 40,440 787 41,178 - - 31,173 3,500 - - 45,395 - - - - 21,419 201,246 Represented By Share Capital 9,733,073 Contingencies and Commitments Letter of guarantee Letter of Credit - 9,733,073 - ` - - - - 19,180 - - - 889,588 (156) 889,432 353 - 153,374 1,308 - 12,223 - - 45,323 - - - 29,054 86,543 85 For the year ended December 31, 2021 For the year ended December 31, 2020 Key Key management Other related management Directors personnel Subsidiaries Associates parties Parent Directors personnel Subsidiaries Associates ------------------------------------------------------------------------------------------------ Rupees in '000 ------------------------------------------------------------------------------------------------ Parent Other related parties Other related parties Profit and loss account Income Mark-up / return / interest earned Fee and commission income Dividend income (Loss) / gain on sale of securities - net Other Income 300 - Reversal / (provisions) and write offs - net Reversal / (provisions) for diminution in value of Investments - net 9,728 161 - 23,011 145 - - 4,334 1,501 382,878 - 280,152 136,324 180,570 (56,901) - - 3,279 11 - 42,627 784 - 3,204 - 5,816 - 178,695 227,206 90,633 242,439 - (48,000) 215,305 - - - - - (212,434) 2,536 - 988,981 248,152 (211,129) 3,000 7,420 1,262 46,099 2,036 3,490 54,790 19,950 - 3,204 414,220 6,632 - - 30,598 - - Expense Mark-up / return / interest paid Commission / charges paid Preference dividend paid Remuneration paid Non-executive directors' fee Net charge for defined contribution plans Net charge for defined benefit plans Fee and subscription Donation Rental expense Advisory fee Other expenses 72,255 1,425 19,706 60,067 17,450 333 1,329 377,596 - Reimbursement of expenses 33,278 288 4,491 - - 65 - 869 - - - - 588,182 15,242 - - - - - - 405,171 6,339 151,881 - - - - 105,603,967 14,336,615 46,081,123 17,650,739 1,645 - - - - 113,055,811 43,560,278 365,069,253 60,142,942 Payments made during the year Insurance premium paid Insurance claims settled Defined benefit plans paid Other Transactions Sale of Government Securities Purchase of Government Securities Sale of Foreign Currencies Purchase of Foreign Currencies - 195,331 - - 21,088 851 - 129,353 3,794 - 585,477 - 156,221 9,215 - 2,600 - 1,135,034 159,436 229,001 112,841 195 1,899 115
119. JS BANK LIMITED 2021 2020 ----- Rupees in '000 ----44. CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS Minimum Capital Requirement (MCR): Paid-up capital (net of losses) 10,119,242 10,119,242 Capital Adequacy Ratio (CAR): Eligible Common Equity Tier 1 (CET 1) Capital Eligible Additional Tier 1 (ADT 1) Capital Total Eligible Tier 1 Capital 17,554,963 2,500,000 20,054,963 16,227,512 2,251,350 18,478,862 5,754,681 4,621,001 25,809,644 23,099,863 159,682,820 868,345 26,892,646 187,443,811 155,761,884 1,144,972 23,981,730 180,888,586 Eligible Tier 2 Capital Total Eligible Capital (Tier 1 + Tier 2) Risk Weighted Assets (RWAs): Credit Risk Market Risk Operational Risk Total The SBP through its BSD Circular No. 07 dated April 15, 2009 has prescribed the minimum paid-up capital (net of accumulated losses) for banks to be raised to Rs.10,000 million by the year ending December 31, 2013. The paid-up capital of the Bank as at December 31, 2021 stood at Rs. 10,119.242 million (2020: Rs. 10,119.242 million) and is in compliance with SBP requirements. The Banks are also required to maintain a minimum Capital Adequacy Ratio (CAR) of 10.0% plus capital conservation buffer of 1.5% of the risk weighted exposures of the Bank. Further, under Basel III instructions, Banks are also required to maintain a Common Equity Tier 1 (CET 1) ratio and Tier 1 ratio of 6.5% and 7.5%, respectively, as at December 31, 2021. As at December 31, 2021 the Bank is fully compliant with prescribed ratios, as the Bank’s CAR is 13.77% whereas CET 1 and Tier 1 ratios stood at 9.37% and 10.70% respectively. The Bank has complied with all capital requirements throughout the year. Under the current capital adequacy regulations, credit risk and market risk exposures are measured using the Standardized Approach and operational risk is measured using the Basic Indicator Approach. Credit risk mitigants are also applied against the Bank’s exposures based on eligible collateral under comprehensive approach. Common Equity Tier 1 Capital Adequacy ratio 2021 2020 ----- Rupees in '000 ----8.97% 9.37% Tier 1 Capital Adequacy Ratio 10.70% 10.22% Total Capital Adequacy Ratio 13.77% 12.77% Leverage Ratio (LR): Eligible Tier-1 Capital Total Exposures Leverage Ratio 20,054,963 649,144,741 3.09% 18,478,862 605,685,437 3.05% Liquidity Coverage Ratio (LCR): Total High Quality Liquid Assets Total Net Cash Outflow Liquidity Coverage Ratio 191,897,219 66,462,622 288.73% 157,850,263 57,017,766 276.84% Net Stable Funding Ratio (NSFR): Total Available Stable Funding Total Required Stable Funding Net Stable Funding Ratio 376,145,622 294,820,480 127.58% 357,021,802 256,068,898 139.42% 44.1 The link to the full disclosure is available at https://jsbl.com/knowledge-centre/investor-information/ 116
120. JS BANK LIMITED 45 . RISK MANAGEMENT Risk Management is a discipline at the core of every financial institution and encompasses all the activities that affect its risk profile. At the Bank, it involves identification, measurement, monitoring and controlling risks to ensure that: a) b) c) d) e) f) g) The individuals who take or manage risks clearly understand it; The Bank's Risk exposure is within the limits established by Board of Directors (BoD); Risk taking decisions are in line with the business strategy and objectives set by BoD; The expected payoffs compensate for the risks taken; Risk taking decisions are explicit and clear; Sufficient capital as a buffer is available to take risk; and Risk management function is independent of risk taking unit. The Bank has a comprehensive set of Risk Management policies, practices and procedures which enable the Bank to take into consideration, in an appropriate manner, all major kinds of risks mainly credit, market, liquidity, operational and IT security risks. Keeping in view the dynamics of internal and external environment, we regularly review and update our Risk Management policies and procedures in accordance with regulatory environment and international standards. Risk Management activities remain at the forefront of all activities of the Bank which places the highest priority on conducting its business in a prudent manner in line with the relevant laws and regulatory requirements. Risk management framework of the Bank includes: a) Clearly defined risk management policies and procedures covering risk identification, acceptance, measurement, monitoring, reporting and control; b) Well constituted organizational structure, defining clearly roles and responsibilities of individuals involved in risk taking as well as managing it. The Bank, in addition to risk management functions for various risk categories, has instituted an Integrated Risk Management Committee (IRMC), Portfolio Management Committee (PMC), Operational Risk Management Committee (ORMC), Remedial Management Committee (RMC) as well as Central Credit Committee (CCC). IRMC oversees the overall risk management at the Bank and provides guidance in setting strategic targets as well as concentration limits and monitor progress related to earnings growth, keeping in view the capital constraints and also adheres to the concentration limits. The IRMC monitors the strategic target and aggregate limits at the Business Group level and concentration limits (by industry, geography, size, tenor) so that one category of assets or dimension of risk cannot materially harm the performance of the Bank. PMC monitors the advances portfolio, concentrations limits, aggregate limits at business level and various house keeping elements under Credit Administration. ORMC oversees the effectiveness of operational risk management for maintenance and implementation of operational risk management framework. It also monitors the Business Continuity Planning and reviews findings of any other management or board's sub committee. Remedial Management Committee (RMC) oversees the progress of non performing loans and cases under litigation along with the recommendation of transferring of any NPL to Corporate Restructuring Company (CRC). Whereas, Central Credit Committee (CCC) is entrusted with the responsibility of monitoring lending risk profile of the Bank. CCC meets regularly to actively supervise credit risk across its lending portfolio. c) An effective management information system that ensures flow of information from operational level to top management and a system to address any exceptions observed; and d) A mechanism to ensure an ongoing review of systems, policies and procedures for risk management and procedures to adopt changes. While the overall responsibility of risk management rests with the BoD, it is the duty of Senior Management to devise risk management strategy by setting up well defined policies and procedures for mitigating / controlling risks, duly approved by the Board. Giving due consideration to the above, the Bank has put in place the following hierarchy of Risk Management: - Board Risk Management Committee (BRMC); - Integrated Risk Management Committee (IRMC) comprises of the President / Chief Executive Officer (CEO), Chief Risk Officer, Chief Operating Officer, Chief Credit Officer, Chief Financial Officer, Chief Compliance Officer, Group Head Corporate & Public Sector Government, Group Head Operations, Chief of Staff, Group Hed Retail Banking, Head of Human Resources, and Chief Product & Marketing Officer. - Asset - Liability Committee (ALCO) comprises of the President / Chief Executive Officer (CEO), Treasurer, Chief Risk Officer, Chief Credit Officer, Group Head Investment Banking, Chief Financial Officer and attended by Other Business Heads. - Central Credit Committee (CCC) comprising of the President / CEO, Chief Operating Officer, Chief Credit Officer, Group Head Corporate & Public Sector Government, Group Head Emerging Corporate (South), Group Head Emerging Corporate (Central & North) and Head of Environmental Risk (for environmental risk only). 117
121. JS BANK LIMITED - Portfolio Management Committee (PMC) comprises of President/CEO, Chief Risk Officer, Chief Credit Officer, Group Head Corporate & Public Sector Government, Group Head Retail Banking, Heads of Credit Risk, Head CAD, Head of Consumer Risk, and Head Enterprise Risk Management. - Operational Risk Management Committee (ORMC) comprises of the Chief of Staff, Chief Risk Officer, Chief Compliance Officer, Chief Information Officer, Group Head Operations, Head of Human Resources, Chief Product & Marketing Officer, Group Head Retail Banking, Group Head Customer Experience and Head Enterprise Risk Management . - Remedial Management Committee (RMC) comprises of President/CEO, Chief Risk Officer, Chief Credit Officer, Chief of Staff, Chief Operating Officer, Chief Financial Officer, Head of SAM, CAD Head, Credit Risk Heads and Head of Legal. - IT Steering Committee (ITSC) comprises of President/CEO, Deputy CEO, Chief Risk Officer, Chief Financial Officer, Group Head Operations & Technology, Chief Information Officer, Chief Information Security Officer, Chief of Staff, Group Head Investment Banking & Emerging Business, Chief Digital Officer, Country Head Branch Banking Operations and Head Product Development & Consumer Business. - Risk Management Group (RMG), a dedicated and independent set-up headed by Chief Risk Officer (CRO) and comprises of Heads of Market & Liquidity Risks, Operational Risk and Treasury Middle Office, Consumer & Program Lending Risk, Information Security, Agricultural Credit Risk, Strategic Projects & Quantitative Analysis and Enterprise Risk Credit Risk Group (CRG) is also an independent function to business and is headed by Chief Credit Officer (CCO). Credit Risk Heads dealing in corporate, emerging corporate, middle market, small & medium enterprises, financial institutions and international operations are reporting into CCO. Special Assets Management (SAM) and Credit Administration (CAD) also report into CCO. Risk Matrix / Categories The Bank, in common with other banks, generates its revenues by accepting Country, Credit, Liquidity, Interest Rate Risk in the Banking Book, Market, Operational and other risks. Effective management of these risks is the decisive factor in the Bank's profitability. Risk Appetite The Bank's risk appetite is reflected in its endeavours to maintain a favourable credit rating and encompasses the following: - The business strategy The expectations of stakeholders at different time horizons The characteristics of the risk-bearing entities The nature and characteristics of the risks undertaken The possible spread of risk situations across organizational units, assets-at-risk, and future time horizons. Risk appetite drives business activity. It combines anticipations in risk and profitability with management preferences to control capital and resource allocation, as well as the distribution of exposure across activities and portfolios. The Bank's hedging strategy is embedded in its risk management practices for addressing material categories of risk. 45.1 Credit Risk Credit risk is the risk which arises with the possibility that one party to a financial instrument will fail to discharge its obligation and cause the other party to incur a financial loss. Credit risk is managed in terms of credit policies, approved by the BoD and regulations issued by the SBP. The bank is exposed to credit risk on loans and advances, fund placements with financial institutions and certain investments. Credit risk management is an ongoing process. The overall credit policy and the credit risk instructions are issued by the Board of Directors. In this regards, a Central Credit Committee (CCC) is entrusted with the responsibility of monitoring lending risk profile of the bank. In order to maintain healthy growth of the credit portfolio, the Bank’s Credit Risk Management processes are consistently upgraded and improved to meet future challenges. The Bank’s strategy is to minimise credit risk through product, geography, industry and customer diversification. Credit limits are established for all counter-parties after a careful assessment of their credit worthiness. An effective credit granting procedure, which requires pre-sanction evaluation of credit proposal, adequacy of security and pre-disbursement examination of charge documents is in place and managed by Risk Management Group (RMG) & Credit Administration Department (CAD). The Bank maintains a sound portfolio diversified in nature to counter the risk of credit concentration and further confines risk through diversification of its assets by geographical and industrial sector. For managing impaired assets in the portfolio, the Bank follows the Prudential Regulations and Risk Management guidelines issued by SBP and the Remedial Management Policy approved by the Board. 118
122. JS BANK LIMITED 45 .1.1 Credit risk: Standardised approach The Bank has adopted the Standardised Approach of Basel II for risk weighing its Credit Risk Exposures. The following table illustrates the approved External Credit Assessment Institutions (ECAIs) whose ratings are being utilised by the Bank with respect to material categories of exposures: Exposures Corporate Banks SME's (retail exposures) Sovereigns Securitisations Others (specify) VIS PACRA MOODY'S FITCH S&P P P P P P P P P P N/A N/A P P N/A N/A P N/A N/A P N/A N/A P N/A N/A The Bank has used Issue Specific Ratings for rating / risk weighing Issue Specific Exposures and Entity Ratings for rating / risk weighing claims against specific counterparties. Both short and long term ratings have been used to rate corresponding short and long term exposures. For this purpose, Mapping Grid provided by SBP as given below: Long - Term Ratings Grades Mapping Short - Term Ratings Grades Mapping 45.1.2 Policies and processes for collateral valuation and management as regards Basel II; For Credit Risk Mitigation purposes the Bank uses only the eligible collaterals under Comprehensive Approach of Credit Risk Mitigation under Standardised Approach as prescribed by SBP under Circular No. 8 of 2006, which includes Cash and Cash Equivalent Securities including Government Securities (like Cash Margins, Lien on Bank Accounts, Foreign Deposit Receipts, Term Deposit Receipts, Pledge of Defense Saving Certificates, Regular Income Certificates, Special Saving Certificates, TBills and Pakistan Investment Bonds etc.) and Shares, TFCs and Mutual Funds Listed on the Main Index. Under the Bank's policy all collaterals are subject to periodic valuations to monitor the adequacy of margins held. Shares / Marketable securities are valued by the Bank on daily basis to calculate the Drawing Power (DP). In case of any shortfall in the requisite margins, the DP is adjusted to the appropriate level and the business units are informed to take appropriate action as per the agreement with the customer. Particulars of bank's significant on-balance sheet credit risk in various sectors are analysed as follows: 119
123. JS BANK LIMITED 45 .1.3 Lendings to financial institutions Credit risk by public / private sector Public/ Government Private 45.1.4 Investment in debt securities Credit risk by industry sector Textile Chemical and Pharmaceuticals Power (electricity), Gas, Water, Sanitary Refinery Transport, Storage and Communication Financial Services Others Credit risk by public / private sector Public/ Government Private 45.1.5 Advances Credit risk by industry sector Agri finance Automobile and transportation equipment Brokerage Cement Chemical Construction Electronics and electrical appliances Engineering, IT and other services Fertilizer Financial Food / confectionery / beverages Individuals Insurance and security Metal and steel Mining and quarrying Paper / board / furniture Petroleum, oil and gas Pharmaceuticals Plastic Power and water Real estate Shipbreaking Storage Sugar Tele-communication Textile Composite Ginning Spinning Weaving Transportation Trust and non-profit organisations Tyre Wholesale and retail trade Others Provision held Gross lendings Non-performing lendings 2021 2020 2021 2020 2021 2020 ------------------------------------- Rupees in '000 ------------------------------------- 31,939,044 31,939,044 23,240,897 23,240,897 - - - 1,225 1,225 Non-performing Gross investments investments Provision held 2021 2020 2021 2020 2021 2020 -------------------------------------------- Rupees in '000 -------------------------------------------- 62,151 224,860 222,310 424,400 2,134,796 1,232,393 352,151 4,653,061 65,022 249,860 71,429 307,454 710,902 4,490,084 1,265,104 7,159,855 62,151 149,860 179,600 391,611 65,022 149,860 155,169 370,051 62,151 149,860 179,600 391,611 65,022 149,860 155,169 370,051 Non-performing Gross investments investments Provision held 2021 2020 2021 2020 2021 2020 -------------------------------------------- Rupees in '000 -------------------------------------------1,309,843 3,343,218 4,653,061 3,764,021 3,395,834 7,159,855 391,611 391,611 370,051 370,051 391,611 391,611 370,051 370,051 Gross Advances Non-performing Advances Provision held 2021 2020 2021 2020 2021 2020 ---------------------------------- Rupees in '000 ---------------------------------8,027,954 5,177,551 6,074,435 2,810,958 1,726,569 436,454 901,207 9,707,357 3,440,575 644,422 33,802,746 41,580,993 4,115 10,485,379 184,613 1,683,452 4,310,287 3,172,228 2,193,775 19,259,020 4,743,512 85,230 151,720 1,028,786 1,778,739 7,797,960 3,912,821 8,866,882 2,236,379 1,422,319 356,077 823,973 9,453,353 3,484,915 1,635,853 34,253,338 33,122,827 10,451 9,966,050 137,220 1,674,874 5,122,089 5,289,290 1,962,424 23,897,355 4,203,207 300,214 82,245 2,042,589 2,838,926 1,046,333 117,934 275,765 344 129,803 1,453,709 1,285,045 2,322,009 2,129,918 74,782 143,264 4,577 1,186,513 153,041 1,510,929 85,230 20,000 203,048 - 433,949 117,937 314,405 5,991 82,124 1,367,103 1,057,765 2,041,082 2,607,092 82,782 95,053 4,577 561,763 156,241 1,306,057 20,000 200,000 - 177,836 68,591 24,404 35,465 1,351,420 799,965 1,306,803 1,394,682 18,136 57,989 190,561 70,064 43 85,230 201,416 - 107,329 64,829 31,683 1,349,130 351,621 506,898 722,969 2,608 37,160 19,130 13 200,000 - 7,920,223 1,415,806 7,315,182 10,577,926 27,229,137 31,773,063 64,874 362,366 12,575,049 25,450,181 260,866,747 7,573,233 1,281,801 5,768,619 8,669,251 23,292,904 35,246,740 56,043 267,203 12,161,474 18,484,334 254,402,329 231,408 33,014 243,985 49,623 558,030 263,818 553,312 408,865 13,926,269 322,262 34,539 278,441 47,284 682,526 73,283 372,302 151,523 11,733,555 218,772 842 243,985 29,097 492,696 95,091 170,533 28,904 6,569,829 304,345 9,065 278,441 19,653 611,504 53,958 106,964 16,040 4,181,836 120
124. JS BANK LIMITED Gross Advances Non-performing Advances Provision held 2021 2020 2021 2020 2021 2020 ---------------------------------- Rupees in '000 ---------------------------------Credit risk by public / private sector Public/ Government Private 44,996,232 52,248,485 215,870,515 202,153,844 13,926,269 11,733,555 6,569,829 4,181,836 260,866,747 254,402,329 13,926,269 11,733,555 6,569,829 4,181,836 - - - - Contingencies and commitments 2021 2020 45.1.6 Credit risk by industry sector ---------- Rupees in '000 ---------2,362,615 2,371,968 Brokerage 882,879 850,500 Cement 537,508 779,749 Chemical 886,114 1,126,160 21,818,090 22,694,392 Automobile and transportation equipment Construction Electronics and electrical appliances Engineering, IT and other services 710,863 496,139 2,138,942 3,293,028 Fertilizer 1,367,611 2,350,294 Financial 30,581,783 43,920,788 3,281,255 2,855,033 487,572 592,229 Food / confectionery / beverages Individuals Insurance and security Metal and steel Mining and quarrying Paper / board / furniture 18,830 28,234 4,707,191 4,629,296 - - 1,421,643 808,302 971,191 656,214 1,390,255 856,079 Plastic 423,076 715,399 Power and water 161,575 795,807 7,022,164 16,516,933 16,965 56,758 Petroleum, oil and gas Pharmaceuticals Real estate Shipbreaking Sugar Tele-communication 8,851 8,601 1,358,623 1,172,080 2,144,343 1,384,271 Textile Composite 268,866 277,552 Spinning 2,667,336 3,497,170 Weaving 1,317,149 1,532,406 6,397,694 6,691,399 Ginning Transportation Trust and non-profit organisations Tyre Wholesale and retail trade Others Credit risk by public / private sector Public/ Government Private 94,127 30,537 800 116,293 50,178 89,489 3,491,088 3,320,259 10,387,889 6,220,466 102,977,372 124,042,426 Contingencies and commitments 2021 2020 ---------- Rupees in '000 ---------102,977,372 102,977,372 124,042,426 124,042,426 121
125. JS BANK LIMITED 45 .1.7 Concentration of Advances The bank top 10 exposures on the basis of total (funded and non-funded exposures) aggregated to Rs. 81,101.77 million (2020: Rs. 95,329.829 million) are as following: Note Funded Non Funded Total Exposure 45.1.7.1 45.1.7.2 2021 2020 ----- Rupees in '000 ----56,655,814 24,445,956 81,101,770 64,985,417 30,344,412 95,329,829 45.1.7.1 There are no classified advances placed under top 10 exposures. 45.1.7.2 The sanctioned limits against these top 10 exposures aggregated to Rs. 91,409.56 million (2020: Rs. 107,031.73 million). 45.1.8 Advances - Province / Region-wise Disbursement & Utilization 2021 Utilization KPK & AJK & GilgitPunjab Sindh FATA Balochistan Islamabad Baltistan Bahrain Disbursements ----------------------------------------------------------- Rupees in '000 ----------------------------------------------------------Province / Region Punjab Sindh KPK including FATA Balochistan Islamabad AJK including Gilgit-Baltistan Bahrain Total 93,498,987 130,560,717 3,562,470 365,284 15,168,259 828,605 13,538,873 257,523,195 93,498,987 93,498,987 130,560,717 130,560,717 3,562,470 3,562,470 365,284 365,284 15,168,259 15,168,259 828,605 828,605 13,538,873 13,538,873 2020 Utilization KPK & AJK & GilgitPunjab Sindh FATA Balochistan Islamabad Baltistan Bahrain Disbursements ----------------------------------------------------------- Rupees in '000 ----------------------------------------------------------Province / Region Punjab Sindh KPK including FATA Balochistan Islamabad AJK including Gilgit-Baltistan Bahrain Total 45.2 87,425,286 152,675,348 1,055,415 244,399 16,845,491 247,017 8,441,218 266,934,174 87,425,286 87,425,286 152,675,348 152,675,348 1,055,415 1,055,415 244,399 244,399 16,845,491 16,845,491 247,017 247,017 8,441,218 8,441,218 Market Risk Market risk is the risk of loss due to adverse changes in interest rates, foreign exchange rates, equity prices and market conditions. From the perspective of the Bank, market risk comprises of interest rate risk, foreign exchange risk and equity position risk, which the Bank is exposed to in its trading book. The Bank has an approved market risk policy wherein the governance structure for managing market risk, measurement tools used and the market risk exposure limits have been addressed. The Bank’s strategy for managing market risk is to relate the level of risk exposures to their risk appetite and the capital at hand. The Board of Directors (BoD) and the Asset and Liability Committee (ALCO) are responsible for addressing market risk from a strategic perspective and are assisted by the market risk function in meeting these objectives. The Market Risk Unit reports directly to Head ERM and is responsible for ensuring the implementation of market risk policy in line with the Bank’s strategy. Risk reporting undertaken by the market risk function includes: a) b) c) d) Portfolio Reports Limit monitoring reports Sensitivity analysis; and Stress testing of the portfolio Currently, the Bank is using the market risk standardised approach for the purpose of computing regulatory capital, the details of which are set out above. 122
126. JS BANK LIMITED 45 .2.1 Balance sheet split by trading and banking books 2021 2020 Banking Trading Banking book book Total book Trading book Total ---------------------------------------- Rupees in '000 ---------------------------------------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 Non-current assets held for sale 34,266,856 1,185,786 31,939,044 230,156,873 254,183,938 10,167,038 3,134,577 18,145,338 583,179,450 1,109,404 1,109,404 34,266,856 1,185,786 31,939,044 231,266,277 254,183,938 10,167,038 3,134,577 18,145,338 584,288,854 30,421,231 1,105,969 23,239,672 176,694,699 250,199,166 7,599,538 2,486,725 14,678,428 739,200 507,164,628 25,003,774 25,003,774 30,421,231 1,105,969 23,239,672 201,698,473 250,199,166 7,599,538 2,486,725 14,678,428 739,200 532,168,402 45.2.2 Foreign Exchange Risk Main objective of foreign exchange risk management is to ensure that the foreign exchange exposure of the Bank lies within the defined appetite of the Bank. Daily reports are generated to monitor the internal and regulatory limits with respect to the overall foreign currency exposures. The overall net open position, whether short or long has the potential to negatively impact the profit and loss depending upon the direction of movement in foreign exchange rates. Foreign exchange open and mismatched positions are marked to market on a daily basis. Currency risk arises where the value of financial instruments changes due to changes in foreign exchange rates. In order to manage currency risk exposure the bank enters into ready / spot, forward and swap transactions with SBP and in the interbank market. The Bank's foreign exchange exposure comprises of forward contracts, foreign currencies cash in hand, balances with banks abroad, foreign placement with SBP and foreign currencies assets and liabilities. The net open position is managed within the statutory limits, as fixed by SBP. Counter parties limit are also fixed to limit risk concentration. Appropriate segregation of duties exists between the front and back office functions while compliance with the net open position limit is independently monitored on an ongoing basis. 2021 Net foreign Off-balance currency Assets Liabilities sheet items exposure ------------------------- Rupees in '000 -----------------------United States Dollar Great Britain Pound Euro Other currencies 22,575,693 449,791 865,480 704,561 24,595,525 26,353,497 2,986,136 995,159 1,677,472 32,012,264 4,052,225 2,505,878 150,195 1,038,980 7,747,278 274,421 (30,467) 20,516 66,069 330,539 2020 Net foreign Off-balance currency Assets Liabilities sheet items exposure ------------------------- Rupees in '000 -----------------------United States Dollar Great Britain Pound Euro Other currencies 20,731,596 690,248 2,028,206 542,006 23,992,056 28,340,649 2,767,203 1,324,879 397,092 32,829,823 7,925,120 1,692,641 (938,258) (96,962) 8,582,541 316,067 (384,314) (234,931) 47,952 (255,226) 123
127. JS BANK LIMITED 2021 2020 Banking Banking book Trading book book Trading book ------------------ Rupees in '000 -----------------Impact of 1% change in foreign exchange rates on - Profit and loss account - 3,425 - 2,552 - Other comprehensive income - - - - 45.2.3 Equity position Risk Equity positions in the banking book include Investment in equities that are available-for-sale or held for strategic investment purposes. These investments are generally regarded as riskier relative to fixed income securities owing to the inherent volatility of stock market prices. The Bank mitigates these risks through diversification and capping maximum exposures in a single company, compliance with regulatory requirement, and following the guidelines laid down in the Bank’s Investment Policy as set by the Board of Directors (BoD). The Bank follows a delivery versus payment settlement system thereby minimizing risk available in relation to settlement risk. Equity price risk is managed by applying trading limit and scrip-wise and portfolio wise nominal limits. 2021 2020 Banking Banking book Trading book book Trading book ------------------ Rupees in '000 -----------------Impact of 5% change in equity prices on - Profit and loss account - Other comprehensive income - - 229,752 - - - 221,940 - 45.2.4 Yield / Interest Rate Risk in the Banking Book (IRRBB)-Basel II Specific Yield/ Interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual re-pricing or maturity date and for off-balance sheet instruments is based on settlement date. This also refers to the non-trading market risk. The gap analysis between the market rate sensitive assets and liabilities is given below: 2021 2020 Banking Banking book Trading book book Trading book ------------------ Rupees in '000 -----------------Impact of 1% change in interest rates on - Profit and loss account - Other comprehensive income 1,030,260 (1,315,776) 10,659 (392) 830,207 (1,401,710) 459,243 (13,396) 124
128. JS BANK LIMITED 45 .3 Mismatch of interest rate sensitive assets and liabilities Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in the market interest rates. The Bank is exposed to interest / mark-up rate risk as a result of mismatches or gaps in the amount of interest / mark up based assets and liabilities that mature or re-price in a given period. The Bank manages this risk by matching/re-pricing of assets and liabilities. The assets and liabilities committee (ALCO) of the Bank monitors and manages the interest rate risk with the objective of limiting the potential adverse effects on the profitability of the Bank. 2021 Effective yield interest rate - % Up to 1 month Total Over 1 to 3 months Over 3 to 6 months Over 6 months to 1 year Over 1 to 2 years Over 2 to 3 years Over 3 to 5 years Over 5 to 10 years Above 10 years Non-interest bearing financial instrument --------------------------------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------------------------------- On-balance sheet financial instruments Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Other assets 10.55 7.88 10.11 - 34,266,856 1,185,786 31,939,044 231,266,277 254,183,938 14,686,425 567,528,326 2,616,420 28,653,126 32,773,123 199,360,166 263,402,835 3,285,918 143,526,508 28,503,505 175,315,931 19,675,425 10,254,218 29,929,643 18,886,414 858,422 19,744,836 Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Other liabilities 5.84 8.18 13.09 - 7,038,886 70,474,310 460,705,014 6,996,800 15,664,113 560,879,123 6,649,203 12,767,722 172,902,810 185,670,532 77,732,303 31,999,709 44,308,572 76,308,281 99,007,650 3,716,042 57,801,750 6,996,800 68,514,592 (38,584,949) 15,724,911 51,951,487 67,676,398 (47,931,562) Commitments in respect of forward purchase, currency swaps, options and commitments to extent credits 19,392,439 6,715,012 5,151,416 5,278,025 1,779,761 468,225 - - - - - Commitments in respect of forward sale, currency swaps and options contacts (10,736,262) (6,501,664) (2,123,851) (1,377,299) (234,300) - - - - - 233,925 - - - - - On-balance sheet financial instruments Off-balance sheet gap 8,656,177 (499,148) 4,778,877 402,462 293,104 469,345 762,449 425,894 6,769,307 7,195,201 (6,432,752) 213,348 3,027,565 Total yield / interest risk sensitivity gap 77,945,651 102,035,215 (33,806,072) (47,529,100) (6,198,827) Cumulative yield / interest risk sensitivity gap 77,945,651 179,980,866 146,174,794 98,645,694 92,446,867 2,710,744 834,738 3,545,482 1,407,458 1,507,983 2,915,441 3,489,677 1,507,344 4,997,021 3,531,777 3,531,777 31,650,436 1,185,786 8,503,824 7,356,440 14,686,425 63,382,911 570,467 3,682,923 4,253,390 (707,908) 2,945,091 1,707,630 4,652,721 (1,737,280) 2,324,474 45,360 2,369,834 2,627,187 3,531,777 7,038,886 121,535,175 15,664,113 144,238,174 (80,855,263) (707,908) 91,738,959 (1,737,280) 2,627,187 3,531,777 90,001,679 92,628,866 96,160,643 (80,855,263) 125
129. JS BANK LIMITED 2020 Effective yield interest rate - % Up to 1 month Total Over 1 to 3 months Over 3 to 6 months Over 6 months to 1 year Over 1 to 2 years Over 2 to 3 years Over 3 to 5 years Over 5 to 10 years Above 10 years Non-interest bearing financial instrument --------------------------------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------------------------------- On-balance sheet financial instruments Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments - net Advances - net Other assets 6.56 8.03 8.36 - 30,421,231 1,105,969 23,239,672 201,698,473 250,199,166 12,866,729 519,531,240 2,261,337 18,351,972 33,368,890 204,905,144 258,887,343 4,887,700 92,486,042 20,326,844 117,700,586 42,997,826 10,212,582 53,210,408 13,795,354 641,483 14,436,837 7,241,191 263,840 7,505,031 1,386,421 695,674 2,082,095 135,586 1,885,879 2,021,465 3,747,419 1,674,415 5,421,834 2,974,156 2,974,156 28,159,894 1,105,969 6,539,744 6,619,149 12,866,729 55,291,485 2.88 6.94 10.12 - 4,981,983 48,303,412 433,062,593 7,492,800 16,541,154 510,381,942 9,149,298 12,866,768 164,808,483 7,492,800 185,168,051 73,719,292 13,316,211 54,866,725 68,182,936 49,517,650 4,720,046 35,168,621 39,888,667 13,321,741 70,980 64,716,449 64,787,429 (50,350,592) 13,221,857 2,264,241 15,486,098 (7,981,067) 540,672 82,723 623,395 1,458,700 2,387,895 3,134,515 5,522,410 (3,500,945) 1,178,983 1,178,983 4,242,851 2,974,156 4,981,983 108,020,836 16,541,154 129,543,973 (74,252,488) 24,898,370 8,127,500 11,419,586 3,996,659 1,296,986 57,639 - - - - - (18,642,840) (10,702,206) (3,031,387) (2,619,805) (2,231,803) (57,639) - - - - - 6,255,530 (2,574,706) 8,388,199 1,376,854 (934,817) - - - - - - Total yield / interest risk sensitivity gap 71,144,586 57,905,849 14,698,595 (51,285,409) (7,981,067) 1,458,700 (3,500,945) 4,242,851 2,974,156 Cumulative yield / interest risk sensitivity gap 71,144,586 129,050,435 143,749,030 92,463,621 84,482,554 85,941,254 82,440,309 86,683,160 89,657,316 Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Other liabilities On-balance sheet financial instruments Commitments in respect of forward purchase contacts and commitments to extent credits Commitments in respect of forward exchange contracts - sale Off-balance sheet gap 2021 2020 --------- Rupees in '000 --------Reconciliation to total assets Balance as per balance sheet 2021 2020 --------- Rupees in '000 --------Reconciliation to total liabilities 584,288,854 532,168,402 Less: Non financial assets Fixed assets Intangible assets Deferred tax assets - net Other assets Non-current assets held for sale (74,252,488) Balance as per balance sheet Less: Non financial liabilities Deferred tax liabilities - net 10,167,038 3,134,577 3,458,913 16,760,528 567,528,326 7,599,538 2,486,725 1,811,699 739,200 12,637,162 519,531,240 562,264,771 511,576,194 1,385,648 1,194,252 560,879,123 510,381,942 126
130. JS BANK LIMITED 45 .4 Liquidity risk Liquidity risk is the risk that the Bank will not be able to raise funds to meet its commitments. The Bank's Asset and Liability Committee (ALCO) manages the liquidity position on a continuous basis. The Bank's policy to liquidity management is to maintain adequate liquidity at all times and in all currencies under both normal and stress conditions, to meet our contractual and potential payment obligations without incurring additional and unacceptable cost to the business. Treasury is responsible for the managing liquidity risk under the guidance of Asset-Liability Committee of the Bank. The Bank's liquidity risk management approach starts at the intraday level (operational liquidity) managing the daily payments queue and factoring in our access to the qualifying securities of State Bank of Pakistan. It then covers tactical liquidity risk management dealing with the access to unsecured funding sources and the liquidity characteristics of our asset inventory (asset liquidity). Finally, the strategic perspective comprises the maturity profile of all assets and liabilities on our statement of financial position. For monitoring and controlling liquidity risk, the Bank generates a scenario sensitive maturity statement of financial position, and run controlled mismatches that are monitored and discussed by ALCO members regularly. The Bank prepares various types of reports and analysis for assisting ALCO in taking necessary strategic actions for managing liquidity risk in the Bank. These include liquidity ratios, Concentration analysis, Gap reports, Stress testing, Liquidity Coverage ratio & Net Stable Funding Ratio analysis etc. 45.4.1 Maturities of Assets and Liabilities - based on contractual maturities Total Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Fixed assets Intangible assets Deferred tax assets - net Other assets Non-current assets held for sale Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Liabilities against assets subject to finance lease Deferred tax liabilities - net Other liabilities Net assets Share capital Reserves Surplus on revaluation of assets - net of tax Unappropriated profit Upto 1 day 2021 Over 1 Over 7 Over 14 Over 1 Over 2 Over 3 Over 6 Over 9 Over 1 Over 2 to 7 to 14 days to 1 to 2 to 3 to 6 to 9 months to 1 to 2 to 3 days days month months months months months year years years --------------------------------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------------------------------- Over 3 to 5 years Over 5 years 34,266,856 1,185,786 31,939,044 231,266,277 254,183,938 10,167,038 3,134,577 18,145,338 584,288,854 34,266,856 1,185,786 84,214,932 2,111 441 119,670,126 19,975,317 192,000 2,282,278 12,482 2,451 22,464,528 3,875,015 10,662,728 1,909,680 14,562 2,859 3,900 16,468,744 4,802,794 19,885,483 6,014,733 307,867 6,511 16,448,818 47,466,206 3,285,918 81,350,214 19,971,499 137,639 12,227 1,048,079 105,805,576 11,284,542 15,599,042 1,437,900 722,780 213,424 29,257,688 18,037,585 18,994,835 399,811 36,566 429,895 37,898,692 18,886,214 10,372,244 393,263 36,569 1,222 29,689,512 17,527,073 14,571,890 354,090 36,535 32,489,588 6,319,534 25,431,607 1,244,228 144,149 33,139,518 4,217,757 23,175,116 839,404 132,167 28,364,444 5,545,865 20,720,613 896,566 240,009 27,403,053 37,357,282 10,925,469 4,127,115 1,761,313 54,171,179 7,038,886 70,474,310 460,705,014 6,996,800 234,630 306,720 227,594,364 - 1,642,407 9,996,530 16,969,798 - 3,284,813 525,579 4,596,376 - 1,877,036 1,938,893 36,426,930 - 27,100,408 16,545,427 - 4,899,301 27,763,145 - 3,716,042 57,801,750 900 10,099,952 25,548,314 - 5,624,959 35,253,690 900 425,894 6,769,307 2,501,800 570,467 3,682,923 1,996,200 2,945,091 1,707,630 2,000 2,324,474 45,360 2,495,000 1,385,648 15,664,113 562,264,771 22,024,083 3,129,906 231,265,620 (111,595,494) 28,608,735 (6,144,207) 8,406,768 8,061,976 1,626 200,805 40,445,290 7,020,916 (84,887) 9,664,028 53,224,976 52,580,600 (9,523) 171,037 32,823,960 (3,566,272) (44,996) 221,916 61,695,612 (23,796,920) (44,996) 35,603,270 (5,913,758) (12,772) 351,061 41,217,838 (8,728,250) 129,430 924,206 10,750,637 22,388,881 202,707 518,719 6,971,016 21,393,428 185,584 479,063 5,319,368 22,083,685 1,063,475 3,372 5,931,681 48,239,498 10,119,242 2,331,070 2,467,158 7,106,613 22,024,083 127
131. JS BANK LIMITED Total Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Fixed assets Intangible assets Deferred tax assets - net Other assets Non-current assets held for sale Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Liabilities against assets subject to finance lease Deferred tax liabilities - net Other liabilities Net assets Share capital - net Reserves Surplus on revaluation of assets - net of tax Unappropriated profit Upto 1 day 2020 Over 1 Over 7 Over 14 Over 1 Over 2 Over 3 Over 6 Over 9 Over 1 Over 2 to 7 to 14 days to 1 to 2 to 3 to 6 to 9 months to 1 to 2 to 3 days days month months months months months year years years --------------------------------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------------------------------- Over 3 to 5 years Over 5 years 30,421,231 1,105,969 23,239,672 201,698,473 250,199,166 7,599,538 2,486,725 14,678,428 739,200 532,168,402 30,421,231 1,105,969 2,485,829 91,706,484 1,999 335 125,721,847 3,500,000 2,515,294 11,092 2,008 6,028,394 3,291,063 13,786,643 1,262,175 12,941 2,343 433,835 18,789,000 9,075,080 16,960,223 9,566,816 78,862 5,356 13,115,780 48,802,117 4,524,776 14,007,429 121,156 10,043 518,574 19,181,978 4,887,700 71,635,378 13,560,823 411,539 223,310 41,047 90,759,797 44,446,234 19,565,688 356,226 29,820 534,067 64,932,035 12,966,751 9,544,829 352,328 29,612 35,125 22,928,645 1,006,802 13,087,897 320,673 29,598 739,200 15,184,170 7,947,713 31,914,264 1,198,183 117,664 41,177,824 4,772,925 21,520,367 947,931 115,429 27,356,652 3,470,764 13,641,989 967,673 198,284 18,278,710 20,180,264 8,305,111 2,818,935 1,722,923 33,027,233 4,981,983 48,303,412 433,062,593 7,492,800 166,066 234,381 217,192,381 - 1,162,463 368,146 9,135,642 - 2,324,925 9,724,181 21,400,684 - 1,328,529 2,540,060 19,179,855 - 5,539,400 29,458,673 - 7,776,811 25,408,052 - 4,720,046 35,168,621 1,000 26,292 13,995,688 - 44,687 56,641,519 1,000 13,221,857 2,264,241 2,000 540,672 82,723 5,493,600 2,387,895 3,134,514 1,995,200 1,178,984 - 1,194,252 16,541,154 511,576,194 20,592,208 217,592,828 (91,870,981) 10,666,251 (4,637,857) 33,449,790 (14,660,790) 1,913 385,097 23,435,454 25,366,663 (70,329) 10,561,165 45,488,909 (26,306,931) (3,502) 266,283 33,447,644 57,312,153 (35,557) 502,414 40,356,524 24,575,511 (35,292) 101,165 14,087,853 8,840,792 (42,574) 700,828 57,345,460 (42,161,290) 110,333 1,778,734 17,377,165 23,800,659 176,118 1,311,459 7,604,572 19,752,080 158,819 827,329 8,503,757 9,774,953 934,323 106,680 2,219,987 30,807,246 10,119,242 1,991,170 2,334,123 6,147,673 20,592,208 128
132. JS BANK LIMITED 45 .4.2 Maturity of assets and liabilities - Based on working prepared by the Asset and Liability Committee (ALCO) of the Bank 2021 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Upto 1 to 3 to 6 months to to 2 to 3 to 5 to 10 Above Total month months months 1 year years years years years 10 years --------------------------------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------------------------------Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Fixed assets Intangible assets Deferred tax assets - net Other assets Non-current assets held for sale Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Liabilities against assets subject to finance lease Deferred tax liabilities - net Other liabilities Net assets Share capital - net Reserves Surplus on revaluation of assets - net of tax Unappropriated profit 34,266,856 1,185,786 31,939,044 231,266,277 254,183,938 10,167,038 3,134,577 18,145,338 584,288,854 34,266,856 1,185,786 28,653,126 30,740,211 24,163,139 337,022 12,262 16,452,717 135,811,119 3,285,918 92,634,756 39,192,112 1,575,539 735,007 1,261,504 138,684,836 18,037,585 25,513,664 399,811 36,566 429,895 44,417,521 36,413,287 85,062,218 747,353 73,104 1,222 122,297,184 6,319,534 25,431,607 1,244,228 144,149 33,139,518 4,217,757 23,175,116 839,404 132,167 28,364,444 5,545,865 20,720,613 896,566 240,009 27,403,053 37,357,282 6,616,081 920,285 288,410 45,182,058 7,038,886 70,474,310 460,705,014 6,996,800 7,038,886 12,767,722 62,576,351 - 31,999,709 52,262,289 - 3,716,042 67,909,988 900 15,724,911 71,959,846 900 425,894 24,511,814 2,501,800 570,467 20,739,135 1,996,200 2,945,091 160,700,231 2,000 2,324,474 45,360 2,495,000 1,385,648 15,664,113 562,264,771 22,024,083 1,626 528,536 82,913,121 52,897,998 (94,410) 9,925,061 94,092,649 44,592,187 (44,996) 396,830 71,978,764 (27,561,243) (57,769) 796,093 88,423,981 33,873,203 129,430 1,664,865 29,233,803 3,905,715 202,707 971,280 24,479,789 3,884,655 185,584 814,603 164,647,509 (137,244,456) 1,063,476 566,845 6,495,155 38,686,903 4,309,388 3,206,830 1,472,903 8,989,121 8,989,121 10,119,242 2,331,070 2,467,158 7,106,613 22,024,083 129
133. JS BANK LIMITED 2020 Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Upto 1 to 3 to 6 months to to 2 to 3 to 5 to 10 Above Total month months months 1 year years years years years 10 years --------------------------------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------------------------------Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Fixed assets Intangible assets Deferred tax assets - net Other assets Non-current assets held for sale Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Liabilities against assets subject to finance lease Deferred tax liabilities - net Other liabilities Net assets Share capital - net Reserves Surplus on revaluation of assets - net of tax Unappropriated profit 30,421,231 1,105,969 23,239,672 201,698,473 250,199,166 7,599,538 2,486,725 14,678,428 739,200 532,168,402 30,421,231 1,105,969 18,351,972 30,746,866 33,881,197 104,894 10,042 13,549,615 128,171,786 4,887,700 76,160,154 31,253,743 532,695 233,353 559,621 113,627,266 44,446,234 26,199,571 356,226 29,820 534,067 71,565,918 13,973,553 80,557,471 673,001 59,210 35,125 739,200 96,037,560 7,947,713 31,914,264 1,198,183 117,664 41,177,824 4,772,925 17,826,671 947,931 115,429 23,662,956 3,470,764 13,641,989 967,673 198,284 18,278,710 20,180,264 5,182,115 668,086 259,299 26,289,764 4,981,983 48,303,412 433,062,593 7,492,800 4,981,983 12,866,768 54,275,887 - 13,316,211 61,275,517 - 4,720,046 43,747,135 1,000 70,979 80,264,150 1,000 13,221,857 18,199,605 2,000 540,672 13,101,050 5,493,600 2,387,895 162,199,249 1,995,200 1,178,984 - 1,194,252 16,541,154 511,576,194 20,592,208 1,913 385,097 72,511,648 55,660,138 (73,831) 10,827,448 85,345,345 28,281,921 (35,557) 502,414 48,935,038 22,630,880 (77,866) 801,993 81,060,256 14,977,304 110,333 1,778,734 33,312,529 7,865,295 176,118 1,311,459 20,622,899 3,040,057 158,819 827,329 167,568,492 (149,289,782) 934,323 106,680 2,219,987 24,069,777 9,742,145 2,150,849 1,463,624 13,356,618 13,356,618 10,119,242 1,991,170 2,334,123 6,147,673 20,592,208 45.4.3 To identify the behavioural maturities of non-contractual assets and liabilities, the Bank has used the following methodology: For determining the core portion of non contractual liabilities (non-volatile portion), the bank has used the average method whereby average balance maintained over past five year has been classified as core and has been placed in 'over 3 to 5 years' maturity bucket. Non contractual assets and remaining volatile portion of non contractual liabilities have been stratified in relevant maturity bucket using bucket wise percentages determined by using average volatility in respective period / bucket. 130
134. JS BANK LIMITED 45 .5 OPERATIONAL RISK The Bank currently uses Basic Indicator Approach to Operational Risk for regulatory capital calculations. We define operational risk as the risk of loss resulting from inadequate or failed internal processes, people and system or from external events. With the evolution of Operational Risk Management into a separate distinct discipline, the Bank's strategy is to further strengthen its risk management system along new industry standards. Accordingly the Bank has set up a separate Operational Risk Management (ORM) Unit. ORM Unit resides within Risk Management Group (RMG). Its responsibility is to implement Operational Risk management framework across the bank for effective measurement and monitoring of operational risk faced by different areas of the Bank. Bank’s operational risk management process involves a structured and uniform approach across the Bank. It includes risk identification and assessments, the monitoring of Key Risk Indicators (KRIs) and Risk & Control Self-Assessment (RCSA) activities for key operational risks. In order to build a robust operational risk monitoring mechanism, an Operational Risk Management Committee (ORMC) has been constituted to effectively address operational risk issues. The bank has implemented a comprehensive “Operational Risk Management Policy” which has also been approved by the Board of Directors. The purpose of bank-wide Operational Risk Management Policy is aimed at laying out clearly defined roles and responsibilities of individuals / units across different functions of the Bank that are involved in performing various operational risk management tasks. Operational risk is much more pervasive in a financial institution and every operating unit is exposed to operational risk, regardless of whether it is a business or a support function. This policy has been devised to explain the various building blocks of the operational risk management functions and their inter-relationships. The policy also captures both qualitative and quantitative guidelines for managing and quantifying operational risks across the Bank. The ORM Unit conducts operational risk assessment for all major functions of the Bank and assists various functions of the Bank in developing RCSA and KRIs which are monitored against predefined thresholds. Findings from KRIs are used as predictive indicators of potential operational risks. Operational risk incidents and loss data collection is governed by Bank’s Operational Risk Management Policy and process documents which have been developed and implemented to collate operational losses and near misses in a systematic and organized way. The Bank's Business Continuity (BCP) Policy includes risk management strategies to mitigate inherent risks and prevent interruption of mission critical services caused by disaster events. The resilience of BCP is tested and rehearsed on an annual basis by the Bank. 46. DERIVATIVE RISK The policy guidelines for taking derivative exposures are approved by the Board of Directors (BOD). Bank's Asset & Liability Committee (ALCO) is responsible for reviewing and managing associated risks of the transactions. The nature, scope and purpose of derivatives business, for trading purposes or hedging purpose and the types of derivative in which they deal. The overall responsibility for offering derivative products and sustaining profitability lies with the Treasurer and in his absence with his delegate. The Market Risk Unit / Treasury Middle Office of the Bank responsible for measurement & monitoring of the market risk exposures, analysis of present and potential risk factors. 131
135. JS BANK LIMITED The Market Risk Unit also monitors associated Credit , Market and Liquidity Risk in line with Board of Directors approved limit framework. The unit coordinates with the business regarding approvals for derivatives risk limits and produces various reports / analysis for ALCO / BRMC on periodic basis. These reports provide details of outstanding un-hedged positions, profitability and status of compliance with limits. Treasury Operations records derivatives activity in the Bank’s books and is responsible for reporting to the SBP. The derivative transaction such as Cross Currency Swaps carries credit risk which is the risk that a party to a derivative contract will fail to perform its obligation. There are two types of credit risk associated with derivative transactions; 1) settlement, and 2) pre-settlement risk. Bank’s Central Credit Committee is responsible for reviewing and managing associated Counterparty Credit Risks of the transaction. The Bank has also entered into Foreign Currency & Commodity Options from its Wholesale Banking Branch Bahrain for market making activities. The Bank can hedge its risk by taking on & off-balance sheet position in interbank market, where available. 47. CUSTOMER SATISFACTION AND FAIR TREATMENT JS Bank Client Experience (JSBCE) Group organize, plan and monitor Bank’s client experience on all touchpoints to ensure optimized interaction between the Bank and its clients. JSBCE Group develops and implement strategies useful in improving client relationship, dedication, and satisfaction. Our core values – client centricity, resonates directly with effective grievance management, complaint handling and listening to voice of clients to fully understand the needs of our clients and stakeholders to adapt our product and services and exceed their expectations. A total of 23,261 complaints were received by the Bank in 2021 and the average time taken to resolve these complaints was 6 working days. The complaint handling policy and grievance redressal mechanism ensures that complaints are resolved in a timely manner and recurrence of complaints is prevented where possible. Complaint management process is kept as transparent as possible through logging, acknowledgement, interim response where applicable and resolution of complaints. Clients are also given the option of contacting the Banking Ombudsman (Mohtasib) in case they are dissatisfied with the response received from the Bank. To create enhanced visibility of the recourse mechanism available to its clients, the Bank has incorporated awareness messages of its complaint handling function in several client communications such as account statements, ATM screens and SMS messages. Complete grievance redressal mechanism, touchpoints and online feedback forms have been made available through the Bank's website, and email broadcasts have been sent to the clients for client education and awareness. JS Bank Contact Center supports client interactions across a range of channels, including phone calls, email, SMS chat, Whatsapp, Website form and the emerging adoption of social media interactions, and is distinct from telephony-only call centers. JS Bank Contact Centre is equipped with trained professionals who offer a wide array of information and problem resolution support round the clock. The clients are further facilitated by key underlying technologies include automatic call distribution, computer-telephony integration, and interactive voice response. 132
136. JS BANK LIMITED 48 . GENERAL 48.1 These unconsolidated financial statements have been prepared in accordance with the revised format for financial statements of Banks issued by the SBP through BPRD Circular no. 2 dated January 25, 2018 and related clarifications / modifications. 48.2 Corresponding figures have been re-arranged / re-classified, wherever necessary, to facilitate comparison in the presentation in the current period. However, there are no material re-arrangements / re-classifications to report. 48.3 The figures in these unconsolidated financial statements have been rounded off to the nearest thousand. 49. DATE OF AUTHORISATION FOR ISSUE These unconsolidated financial statements were authorised for issue by the Board of Directors of the Bank in their meeting held on March 02, 2022. ___________________ President and Chief Executive Officer ______________ Chief Financial Officer ___________ Director ___________ Director _____________ Chairman 133
137. Directors ’ Report On Consolidated Financial Statement For the year ended December 31, 2021 On behalf of the Board of Directors, we are pleased to present the Annual Report on the audited consolidated financial statements of JS Bank Limited (the ‘Bank) and its subsidiaries and the auditors’ report thereon for the year ended December 31, 2021. Consolidated financial highlights 2021 2020 (PKR million) 2,258 (1,041) 1,217 23 1,194 0.92 232,221 589,329 459,350 23,832 Profit/(Loss) before taxation Taxation Profit /(Loss) after taxation Profit /(Loss) attributable to non-controlling interest Profit /(Loss) attributable to equity holders of the Bank Profit /(Loss) per share - Basic (Rupees) Investments – net Total assets Deposits Shareholders’ equity Pattern of Shareholding The pattern of shareholding as of December 31, 2021 is included in the Annual Report. Subsidiary Companies JS Global Capital Limited JS Global Capital Limited is one of the largest securities brokerage and investment banking firms in Pakistan with a leadership position in the domestic capital markets. It is in the business of equity, fixed income, currencies and commodities brokerage and investment banking. It was incorporated in Pakistan on June 28, 2000 and is the successor to the securities business of Jahangir Siddiqui & Co. Ltd. and Bear Stearns Jahangir Siddiqui Limited. JS Bank has 92.90% ownership of the company. JS Global has a paid-up capital of PKR 275 million and shareholder equity of PKR 2,196 million as of December 31, 2021. It is listed on the Pakistan Stock Exchange. PACRA has assigned long-term and short-term entity ratings to JS Global of “AA” (Double A) and “A1+” (A One plus), respectively. The ratings denote a very low expectation of credit risk emanating from very strong capacity for timely 2,169 (1,060) 1,108 (2) 1,110 0.86 201,808 536,077 431,424 22,916 payment of financial commitments. Summarized results of the company are set out below: PKR million Particulars December 31,2021 (Audited) December 31,2020 (Audited) Profit Before Tax 535 290 Profit After Tax 411 207 EPS (Rupees) 14.27 6.77 JS Investments Limited JS Investments Limited (JSIL) has a paid-up capital of PKR 618 million and shareholder equity of PKR 1,504 million as of December 31, 2021. It is listed on the Pakistan Stock Exchange. JS Bank has 84.56% ownership of the company. The company is a licensed Investment Adviser and Asset Management Company under the NonBanking Finance Companies (Establishment and Regulation) Rules, 2003 (the NBFC Rules) and the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations). In addition, JSIL also has a license for Pension Fund Manager under the Voluntary Pension Annual Report 2021 134
138. System Rules 2005 and the Private Equity & Venture Capital Fund Management Services license from the Securities and Exchange Commission of Pakistan . System Rules 2005 and the Private Equity & Venture Capital Fund Management Services license from the Securities and Exchange Commission of Pakistan . Summarized results of the Company are set out below: PKR million Particulars December 31,2021 (Audited) December 31,2020 (Audited) Profit/(Loss) before tax (289) (23) Profit/(Loss) after tax (300) (40) EPS (Rupees) (4.86) (0.64) For and on behalf of the Board, Basir Shamsie President & CEO Kalim-ur-Rahman Chairman Adil Matcheswala Director Adil Matcheswala Adil Matcheswala Adil Matcheswala Matcheswala Director Adil Director Director March 02, 2022 Annual Report 2021 135
139.                   202031     2021 31 290 535 207 411 6.77 14.27                            1,504618         2021 31   84.56                                   2003                                    2008              202031     2021 31 (23) (289) (40) (300) (0.64) (4.86)                          2022   2 Annual Report 2021 136
140.      2021 31               2021 31        2020 2021    2,169 2,258  1,060 (1,041) 1,108 1,217  2 23 1,110 1,194 0.86 0.92 201,808 232,221 536,077 589,329 431,424 459,350 22,916 23,832 (  /    (  /     /     /          /                   2021 31                                                                      2000 28    92.90        2,196 275         2021 31           A1+            AA-                   Annual Report 2021 137
141. 138
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149. Consolidated financial statements for the Year Ended December 31 , 2021 146
150. JS BANK LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31 , 2021 2021 2020 ----- USD in '000 ----- Note 2021 2020 ----- Rupees in '000 ----- ASSETS Rate 194,133 176.5135 172,347 6,955 6,391 Cash and balances with treasury banks 6 34,267,180 30,421,531 Balances with other banks 7 1,227,606 1,128,135 180,944 131,659 Lendings to financial institutions 8 31,939,044 23,239,672 1,315,600 1,143,299 Investments 9 232,221,074 201,807,654 1,442,190 1,418,903 Advances 10 254,566,072 250,455,534 65,175 51,139 Fixed assets 11 11,504,329 9,026,764 17,853 14,251 Intangible assets 12 3,151,210 2,515,549 - - 115,869 94,855 4,188 3,338,719 Deferred tax assets - - Other assets 13 Non-current assets held for sale 20,452,393 11.3 3,037,032 16,743,107 739,200 589,328,908 536,077,146 LIABILITIES 39,877 28,224 Bills payable 14 7,038,886 4,981,983 408,176 273,653 Borrowings 15 72,048,604 48,303,412 2,602,351 2,444,141 Deposits and other accounts 16 459,350,047 431,423,822 - - 39,639 42,449 7,235 6,139 106,424 112,601 3,203,702 2,907,207 135,017 129,825 Liabilities against assets subject to finance lease - - Subordinated debt 17 Deferred tax liabilities 18 1,277,069 1,083,590 Other liabilities 19 18,785,095 19,875,838 565,496,501 513,161,445 23,832,407 22,915,701 10,119,242 10,119,242 2,331,069 1,991,169 3,228,929 3,247,593 7,764,840 7,029,251 23,444,080 22,387,255 388,327 528,446 23,832,407 22,915,701 NET ASSETS 6,996,800 7,492,800 REPRESENTED BY 57,328 57,328 Share capital - net 13,206 11,281 Reserves 18,293 18,399 Surplus on revaluation of assets 43,990 39,823 Unappropriated profit 132,817 126,831 2,200 2,994 135,017 129,825 21 Non-controlling interest CONTINGENCIES AND COMMITMENTS 22 The annexed notes from 1 to 49 form an integral part of these consolidated financial statements. ________________ President and Chief Executive Officer ___________________ Chief Financial Officer _____________ Director ____________ Director _____________ Chairman 147
151. JS BANK LIMITED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31 , 2021 2021 2020 --------- USD in '000 --------222,234 154,097 68,137 Note 244,696 188,548 56,148 Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / interest income 25,035 1,163 6,736 47 924 108 222 34,235 102,372 24,780 765 5,724 97 10,880 (86) 619 42,779 98,927 NON MARK-UP / INTEREST INCOME Fee, commission and brokerage income Dividend income Foreign exchange income Income from derivatives Gain on securities Share of (loss) / profit associates Other income Total non mark-up / interest income Total Income 78,057 312 3 78,372 24,000 11,208 - 78,754 263 519 79,536 19,391 7,102 - NON MARK-UP / INTEREST EXPENSES Operating expenses Workers' welfare fund Other charges Total non-mark-up / interest expenses Profit before provisions Provisions and write offs - net Extraordinary / unusual items 12,792 12,289 PROFIT BEFORE TAXATION 5,895 6,007 Taxation 6,897 6,282 PROFIT AFTER TAXATION 6,768 129 6,897 6,291 (9) 6,282 2021 2020 --------- Rupees in '000 --------- 24 25 39,227,333 27,200,186 12,027,147 43,192,069 33,281,347 9,910,722 26 4,419,039 205,317 1,189,061 8,316 163,131 19,006 39,160 6,043,030 18,070,177 4,373,942 135,120 1,010,345 17,045 1,920,510 (15,257) 109,306 7,551,011 17,461,733 13,778,191 55,103 494 13,833,788 4,236,389 1,978,414 - 13,901,226 46,472 91,639 14,039,337 3,422,396 1,253,585 - 2,257,975 2,168,811 1,040,543 1,060,376 1,217,432 1,108,435 1,194,695 22,737 1,217,432 1,110,373 (1,938) 1,108,435 27 28 29 30 31 32 33 Attributable to: Equity holders of the Bank Non-controlling interest --------- US Dollar --------0.005 --------- Rupee --------- 0.005 Basic and diluted earnings per share 34 0.92 0.86 The annexed notes from 1 to 49 form an integral part of these consolidated financial statements. ___________________ President and Chief Executive Officer ___________________ Chief Financial Officer _____________ Director _____________ Director _____________ Chairman 148
152. JS BANK LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31 , 2021 2021 2020 --------- USD in '000 --------6,897 2021 2020 --------- Rupees in '000 --------- 6,282 Profit after taxation for the year 1,217,432 1,108,435 79,022 11,485 Other comprehensive income / (loss) Items that may be reclassified to profit and loss account in subsequent periods 65 448 (738) 10,829 (691) 452 (1) (1,430) Effect of translation of net investment in foreign branch (13) 11,268 Movement in fair value of investments at FVOCI - net of tax (Pakistan operations) Movement in fair value of debt investments at FVOCI - net of tax (Bahrain Operations) Share of other comprehensive loss from associated companies - net of tax (130,323) 1,911,420 (122,036) 79,793 (169) (252,528) (2,316) 1,988,897 (128,339) 290,980 265,286 75,356 (11,296) 38,398 22,787 - Items that will not be reclassified to profit and loss account in subsequent periods: (727) 1,648 427 1,503 (64) 218 129 - 841 (141) 7 2,300 13,633 6,756 19,915 Remeasurement gain / (loss) on defined benefit obligations - net of tax Movement in surplus on revaluation of operating fixed assets - net of tax Movement in surplus on revaluation of non-banking assets - net of tax Movement in fair value of equity investments at FVOCI - net of tax (Bahrain operations) Share of other comprehensive income from associated companies - net of tax Total other comprehensive income Total comprehensive (loss) / income 148,438 (25,068) 1,216 405,950 2,406,332 1,192,364 3,514,767 1,193,903 (1,539) 1,192,364 3,482,182 32,585 3,514,767 Attributable to: 6,764 (8) 6,756 19,728 187 19,915 Equity holders of the Bank Non-controlling interest The annexed notes from 1 to 49 form an integral part of these consolidated financial statements. ____________________ President and Chief Executive Officer ____________________ Chief Financial Officer _____________ Director _____________ Director _____________ Chairman 149
153. JS BANK LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31 , 2021 Attributable to shareholders of the Bank NonCapital Surplus / (Deficit) on revaluation of UnapproNon controlling Total reserve Fixed priated Sub-total banking interest exchange Investments assets profit assets translation ------------------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------------- Balance as at January 01, 2020 Share capital Statutory reserve * 10,119,242 1,646,167 103,505 (365,795) 1,581,550 92,776 5,795,596 18,973,041 508,271 19,481,312 - - 1,110,373 1,110,373 (1,938) 1,108,435 76,572 76,572 38,398 38,398 288,664 1,399,037 2,371,809 3,482,182 34,523 32,585 2,406,332 3,514,767 Total comprehensive income for the year ended December 31, 2020 Profit / (loss) after taxation - - - Other comprehensive income / (loss) - net of tax - - 11,485 11,485 Transfer to statutory reserve - 230,012 1,956,690 1,956,690 - - - - (230,012) - - - - 40,378 - - - 94 - - - 92,126 - - - Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Fixed assets - - - - (40,378) Non-banking assets acquired in satisfaction of claims - - - - - - - - - (92,126) (94) Non-current assets held for sale Pre-acquisition surplus (net) on available-for-sale investments realised during the year Balance as at December 31, 2020 10,119,242 1,876,179 114,990 1,590,895 1,525,618 131,080 (67,968) (67,968) (12,410) (80,378) 7,029,251 22,387,255 528,446 22,915,701 - 1,194,695 1,194,695 22,737 1,217,432 (11,296) (11,296) (128,508) 1,066,187 (792) 1,193,903 (24,276) (1,539) (25,068) 1,192,364 Total comprehensive income for the year ended December 31, 2021 Profit after taxation - - - Other comprehensive income / (loss) - net of tax - - 79,022 79,022 Transfer to statutory reserve - 260,878 (205,296) (205,296) 265,286 265,286 - - - - (260,878) - - - - 39,345 - - - 70 - - - Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Fixed assets - - - - (39,345) Non-banking assets acquired in satisfaction of claims - - - - - (70) Buy-back of shares by subsidiary from NCI and others adjustments - - - - - - (137,078) Gain on disposal of equity investments at FVOCI to retained earnings - - - (27,943) - - 27,943 Interim cash dividend to non-controlling interest by subsidiary company @ Rs. 15 per share Balance as at December 31, 2021 10,119,242 - 2,137,057 194,012 - 1,357,656 - 1,751,559 119,714 - 7,764,840 - (137,078) - 23,444,080 (109,298) (246,376) - - (29,282) 388,327 - (29,282) 23,832,407 * This represents reserve created under Section 21(i)(a) of the Banking Companies Ordinance, 1962. The annexed notes from 1 to 49 form an integral part of these consolidated financial statements. ____________________ President and Chief Executive Officer _____________________ Chief Financial Officer _____________ Director _____________ Director _____________ Chairman 150
154. JS BANK LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31 , 2021 2021 2020 ------- USD in '000 ------12,792 (1,163) (108) 11,521 12,289 (765) 86 11,610 4,820 61 5,448 793 (1,196) 408 (2,058) 47 12,396 312 2,383 (70) (38) 23,306 34,827 4,426 16 5,406 669 903 (80) 371 (16) 7,102 263 2,555 (61) (6) (367) 21,181 32,791 (49,278) 129,351 (37,339) (14,973) 27,761 40,115 175,817 (44,556) 6,467 177,843 11,653 133,599 158,210 (10,532) 292,930 355,518 (8,474) 347,044 6,671 (32,130) 356,235 4,412 335,188 545,822 (860) (2,348) 542,614 (176,233) (124,831) 1,169 (10,785) (4,409) 467 448 (314,174) (475,680) (18,411) (231) 759 (8,732) (1,876) 206 2,124 65 (501,776) (7,076) (2,810) (1,396) (166) (11,448) (6,964) (11) (6,975) 21,422 33,863 177,927 199,349 144,066 177,929 Note CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Less: Dividend income (Less) / add : Share of (profit) / loss from associates 2021 2020 ------- Rupees in '000 ------2,257,975 (205,317) (19,006) 2,033,652 2,168,811 (135,120) 15,257 2,048,948 850,754 10,711 961,584 139,889 (211,129) 72,072 (363,187) 8,369 2,188,015 55,103 420,654 (12,311) (6,692) 4,113,832 6,147,484 781,330 2,862 954,275 118,032 159,436 (14,202) 65,409 (2,819) 1,253,585 46,472 451,047 (10,682) (1,000) (64,805) 3,738,940 5,787,888 (8,698,147) 22,832,138 (6,590,890) (2,642,915) 4,900,186 7,080,905 31,034,008 (7,864,762) 1,141,537 31,391,688 2,056,903 23,582,099 27,926,225 (1,859,060) 51,706,167 62,753,837 (1,495,708) 61,258,129 1,177,492 (5,671,449) 62,880,219 778,760 59,165,022 96,344,598 (151,881) (414,455) 95,778,262 (31,107,488) (22,034,344) 206,420 (1,903,735) (778,197) 82,495 79,022 (55,455,827) (83,963,914) (3,249,717) (40,828) 134,017 (1,541,230) (331,107) 36,312 375,000 11,485 (88,569,982) CASH FLOW FROM FINANCING ACTIVITIES Payment of lease liability against right of use assets Subordinated debt Shares bought back from non-controlling interest Dividend paid to non-controlling interest Net cash used in financing activities (1,249,050) (496,000) (246,376) (29,282) (2,020,708) (1,229,285) (2,000) (1,231,285) Increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 3,781,594 5,976,995 31,406,546 35,188,140 25,429,551 31,406,546 Adjustments: Depreciation Depreciation on non-banking assets Depreciation - right of use assets Amortisation of intangible assets (Gain) / charge for defined benefit plan Unrealised loss on revaluation of investments classified as held-for-trading - net Unrealised gain on revaluation of forward foreign exchange contracts Unrealised gain on revaluation of derivative instruments - net Provisions and write offs - net Provision for workers' welfare fund Mark-up / return / interest expense on lease liability against right-of-use assets (Gain) / loss on sale of fixed assets - net Gain on sale of assets held for sale Gain on termination of leases 29 29 29 27 32 30 25 28 28 28 Decrease / (increase) in operating assets Lendings to financial institutions Held-for-trading securities Advances Other assets (excluding advance taxation) Increase / (decrease) in operating liabilities Bills payable Borrowings Deposits and other accounts Other liabilities Gratuity paid Income tax paid Net cash generated from operating activities CASH FLOW FROM INVESTING ACTIVITIES Investments in available-for-sale securities - net Investments in held-to-maturity securities - net Investment in associated companies Dividend received Investments in fixed assets Investments in intangible assets Proceeds from sale of fixed assets Proceeds from sale of assets held for sale Effect of translation of net investment in foreign branch Net cash flows used in investing activities 35 The annexed notes from 1 to 49 form an integral part of these consolidated financial statements. ____________________ President and Chief Executive Officer ___________________ Chief Financial Officer _____________ Director _____________ Director _____________ Chairman 151
155. JS BANK LIMITED 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: 1.1.1 Holding Company: JS Bank Limited JS Bank Limited (the Bank / JSBL) is a banking company incorporated in Pakistan as a public limited company on March 15, 2006. The Bank is a subsidiary company of Jahangir Siddiqui & Co. Ltd. (JSCL) and its shares are listed on Pakistan Stock Exchange Limited (PSX). The Bank commenced its banking operations on December 30, 2006 and its registered office is situated at Shaheen Commercial Complex, Dr. Ziauddin Ahmed Road, Karachi. The Bank is a scheduled bank, engaged in commercial banking and related services as described in the Banking Companies Ordinance, 1962 and is operating through 281 (2020: 307) branches / sub-branches in Pakistan and one wholesale banking branch in Bahrain (2020: one). The Pakistan Credit Rating Agency Limited (PACRA) has assigned the long-term entity rating of the Bank to AA- (Double A Minus) whereas short-term rating is maintained at 'A1+' (A One Plus), which is the highest possible short-term rating. The ratings denote a very low expectation of credit risk and indicate very strong capacity for timely payment of financial commitments. 1.1.2 Jahangir Siddiqui Investment Bank Limited, JSIBL, (formerly Citicorp Investment Bank Limited which was acquired by JSCL on February 01, 1999), and its holding company, JSCL, entered into a Framework Agreement with American Express Bank Limited, New York (AMEX) on November 10, 2005 for acquisition of its American Express Bank Limited Pakistan Branches, (AEBL). Consequently, a new banking company, JSBL was incorporated on March 15, 2006 and a restricted Banking License was issued by the State Bank of Pakistan (SBP) on May 23, 2006. A Transfer Agreement was executed on June 24, 2006 between JSIBL and JSBL for the transfer of entire business and undertaking of JSIBL to JSBL and a separate Transfer Agreement was also executed on June 24, 2006, between AMEX and JSBL for the transfer of AEBL’s commercial banking business in Pakistan with all assets and liabilities (other than certain excluded assets and liabilities) (AEBL business). The shareholders of JSIBL and JSBL in their respective extraordinary general meetings held on July 31, 2006 approved a Scheme of Amalgamation (the Scheme) under Section 48 of the Banking Companies Ordinance, 1962. The Scheme was initially approved by the Securities and Exchange Commission of Pakistan vide its letter No. SC/NBFC(J)-R/JSIBL/2006/517 dated September 28, 2006. Subsequently, the Scheme was sanctioned by the SBP vide its order dated December 02, 2006 and, in accordance therewith, the effective date of amalgamation was fixed at December 30, 2006. The ultimate parent of the Group is Jahangir Siddiqui & Co. Limited which holds 75.02% shares of the Holding Company. 1.1.3 Ownership interest and voting power held by Composition of the Group Note Subsidiary JS Global Capital Limited JS Investment Limited JS ABAMCO Commodities Limited 1.1.3.1 2021 The Group 92.90% 84.56% - NCI 7.10% 15.44% - 2020 The Group 83.53% 84.56% 84.56% NCI 16.47% 15.44% 15.44% 1.1.3.1 JS ABAMCO Commodities Limited (JSACL) did not intend to carry on the business of Futures Broker, therefore, the directors of JSIL were desirous of merging JSACL with and into JSIL. The Scheme of Arrangement under Section 284 of the Companies Act, 2017, for merger or amalgamation (the Scheme) of JSACL with and into JSIL, was approved by SECP under Rule 7(2) (cb) of Non-Banking Finance Companies (Establishment and Regulations) Rules 2003 vide its letter dated January 13, 2021. The Board of Directors of JSACL in their meeting held on February 19, 2021 has approved the Scheme with effect from March 31, 2021. Subsequently, the Scheme under section 284(2) of the Companies Act, 2017, submitted with Companies Registration Office, along with Form-35, which was approved dated June 24, 2021. Therefore, with effect from March 31, 2021, JSACL is merged with JS Investments Limited and is no more an indirect subsidiary of the Holding Company. 1.1.4 Composition of the Associated Companies Ownership interest and voting power held by Bank Associates 2021 2020 Omar Jibran Engineering Industries Limited Veda Transit Solutions (Private) Limited Intercity Touring Company (Private) Limited 9.60% 3.92% 9.12% 9.60% 9.12% 9.12% 152
156. JS BANK LIMITED 1 .1.5 Subsidiary Companies JS Global Capital Limited (JSGCL) JS Global Capital Limited is principally owned by the Bank, holding 92.9% of its equity interest. The Holding Company acquired effective controlling interest in JS Global Capital Limited (JSGCL) on December 21, 2011, April 15, 2016, October 01, 2019 and June 02, 2021 of 51.05%, 16.11%,16.37% and 9.37% respectively. The ownership interest has increased by 41.85%, without any change in the cost of investment, due to the fact that JSGCL has bought back its 11,993,000 shares in April 15, 2016, 7,450,000 shares on October 02, 2019 and 27,477,297 share on June 02, 2021. JSGCL is a public listed company incorporated in Pakistan under the repealed Companies Ordinance, 1984. The shares of the JSGCL are listed on Pakistan Stock Exchange (PSX). Further, the JSGCL is a corporate member of PSX and member of Pakistan Mercantile Exchange. The principal business of the JSGCL is to carry out share brokerage, money market, forex and commodity brokerage, advisory and consultancy services. Other activities include investment in a mix of listed and unlisted equity and debt securities and reverse repurchase transactions. The registered office of the Company is situated at 17th Floor, The Centre, Plot No. 28, SB-5, Abdullah Haroon Road, Saddar, Karachi, Pakistan. The Company has eight branches (2020: eight) in seven cities of Pakistan. JS Investments Limited (JSIL) JS Investments Limited is principally owned by the Holding Company, holding 84.56% of its equity interest. The Bank acquired effective controlling interest in JS Investments Limited (JSIL) on November 01, 2012, December 22, 2015 and August 31, 2019 of 52.24%,12.92% and 19.40% respectively. The ownership interest has increased by 32.32% without any change in the cost of investment, due to the fact that JSIL has bought back its 38,225,744 ordinary shares out of its 100 million ordinary shares. JSIL is a public listed company incorporated in Pakistan on February 22, 1995 under the repealed Companies Ordinance, 1984. The shares of the JSIL are listed on the Pakistan Stock Exchange (PSX), formerly since April 24, 2007. The registered office of the Company is situated at The Centre, 19th Floor, Plot No. 28, SB-5, Abdullah Haroon Road, Saddar, Karachi. The JSIL has obtained the license of an “Investment Advisor” and “Asset Management Company” (AMC) under the NonBanking Finance Companies (Establishment and Regulation) Rules, 2003 (the NBFC Rules) and the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations). In addition, JSIL has also obtained registration to act as Pension Fund Manager under the Voluntary Pension System Rules, 2005. JSIL is an asset management company of the following funds: Open end funds: JS Growth Fund Unit Trust of Pakistan JS Income Fund JS Islamic Fund JS Fund of Funds JS Islamic Income Fund JS Cash Fund JS Large Cap. Fund JS Islamic Hybrid Fund of Funds (JSIHFOF) JS Islamic Hybrid Fund of Funds -3 (JSIHFOF3) JS Islamic Dedicated Equity Fund JS Islamic Daily Dividend Fund - Private Equity & Venture Capital fund: - JS Motion Picture Fund Pension funds: - JS Pension Savings Fund - JS Islamic Pension Savings Fund These funds have been treated as related parties in these consolidated financial statements. 1.1.6 Associated Companies Omar Jibran Engineering Industries Limited (OJEIL) The Holding Company has invested in the shares of Omar Jibran Engineering Industries Limited (OJEIL), a public unlisted company. The Holding Company has classified the investment as an associate on account of its significant influence over the investee company. OJEIL was incorporated on June 25, 1987 in Pakistan as an unquoted public limited company under the repealed Companies Ordinance, 1984. The registered office of the OJEIL is situated at DSU-10, Pakistan Steel Industries Estate Bin Qasim, Karachi. The OJEIL is mainly engaged in the manufacture and sale of automotive parts and armouring of vehicles. 153
157. JS BANK LIMITED Veda Transit Solutions (Private) Limited The Holding Company has invested in the shares of VEDA Transit Solutions (Private) Limited (VEDA), a private limited company. The Bank has classified the investment as an associate on account of its significant influence over the investee company. VEDA was incorporated on June 10, 2016 in Pakistan as private limited company under the repealed Companies Ordinance, 1984. The registered office of the VEDA is situated at Raaziq Logistics Centre 16 KM, Multan Road, Near Dina Nath Stop, Lahore. The VEDA is mainly engaged in the rural / urban, intracity / intercity transportation of passenger and goods. Intercity Touring Company (Private) Limited The Holding Company has invested in the shares of Intercity Touring Company (Private) Limited (ITC), a private limited company. The Holding Company has classified the investment as an associate on account of its significant influence over the investee company. ITC was incorporated on April 25, 2014 in Pakistan as private limited company under the repealed Companies Ordinance, 1984. The registered office of the ITC is situated at 147-P Gulberg III, Lahore. The ITC is mainly engaged in the transportation, touring and logistics related services. 2. BASIS OF PRESENTATION 2.1 These consolidated financial statements include financial statements of JS Bank Limited and its subsidiary companies, (the "Group") and share of the profit / reserves of associates. These consolidated financial statements have been presented in Pakistan Rupees(PKR), which is the currency of the primary economic environment in which the Holding Company operates and functional currency of the Holding Company, in that environment as well. The amounts are rounded off to the nearest thousand rupees except as stated otherwise. The US Dollar amounts shown on the statement of financial position, profit and loss account, statement of comprehensive income and cash flow statement are stated as additional information solely for the convenience of readers and have not been subject to audit by the external auditors. For the purpose of conversion to US Dollars, the rate of Rs. 176.5135 to 1 US Dollar has been used for 2020 and 2021 as it was the prevalent rate as on December 31, 2021. 2.2 Statement of Compliance These consolidated financial statements have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan. These comprise of: - International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Act, 2017; - Provisions of and directives issued under the Banking Companies Ordinance, 1962; - Provisions of and directives issued under the Companies Act, 2017; and - Directives issued by the SBP and the Securities & Exchange Commission of Pakistan (SECP) from time to time. Whenever 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, the requirements of the Banking Companies Ordinance, 1962, the Companies Act, 2017 and the said directives shall prevail. The SBP has deferred the applicability of International Accounting Standard (IAS) 39, ‘Financial Instruments: Recognition and Measurement’ and International Accounting Standard (IAS) 40, ‘Investment Property’ for banking companies vide BSD Circular Letter No. 10 dated August 26, 2002 till further instructions. Further, the SECP has deferred the applicability of International Financial Reporting Standard (IFRS) 7, ‘Financial Instruments: Disclosures’ on banks vide its notification S.R.O 411(I)/2008 dated April 28, 2008. 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 requirements prescribed by the SBP through various circulars. IFRS10 "Consolidated Financial Statements" was made applicable from period beginning on or after January 01, 2015 vide S.R.O 633(I)/2014 dated July 10, 2014 by SECP. However, SECP has directed through S.R.O56(I)/2016 dated January 28, 2016, that the requirement of consolidation under section 228 of the 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. The application of the IFRS 9 'Financial Instruments' for all companies to prepare their financial satements in accordance with the requirements of IFRS 9 was implemented by SECP for reporting period / year ending on or after June 30, 2019 (earlier application was also permitted) through its S.R.O. 229 (I)/2019 dated February 14, 2019. However, State Bank of Pakistan (SBP) has extended the effective date of applicability of IFRS 9 on or after January 01, 2022 through its BPRD Circular No. 24 dated July 05, 2021. The said circular contained instructions only for quarterly parallel run reporting of IFRS 9 from March 31, 2021 and onwards of which the Bank is adequately complied. Whereas it was stated that final instructions will be issued based on the results of parallel reporting, which are yet to be issued. 154
158. JS BANK LIMITED As of reporting date , the guidelines and instructions on the application of IFRS 9 for the banking sector of Pakistan has not been issued by the State Bank of Pakistan (SBP), therefore, the Bank has not considered the impact of IFRS 9 for its domestic operations in these unconsolidated financial statements. The Bank has continued to fulfil the requirements of Prudential Regulations and other SBP directives currently provide the accounting framework for the measurement and valuation of assets and provision/ impairment against non-performing assets. 2.3 BASIS OF CONSOLIDATION 2.3.1 Subsidiary 2.3.2 - The consolidated financial statements include the financial statements of the Bank (The Holding Company) and its subsidiary companies together - "the Group". - Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed, or has rights, to variable returns from its investment with investee and has the ability to effect those return through its power over the investee except investment in mutual funds established under trust structure where IFRS 10 'Consolidated Financial Statements' is not applicable in case of investment by companies in mutual funds established under Trust structure. - These consolidated financial statements incorporate the financial statements of subsidiaries from the date that control commences until the date that control ceases. - The financial statements of the subsidiary companies are prepared for the same reporting year as the holding company for the purpose of consolidation, using consistent accounting policies. - The assets, liabilities, income and expenses of subsidiary companies have been consolidated on a line by line basis. - Non-controlling interests are that part of the net results of operations and of net assets of subsidiaries attributable to interest which are not owned by the holding company. - Material intra-group balances and transactions are eliminated. Associate Associates are those entities in which the Group has significant influence, but not control, over the financial and operating polices. Associates are accounted for using the equity method. 2.3.3 Acquisition of business not under common control Acquisitions of businesses not under common control are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the bank, liabilities incurred by the bank to the former owners of the acquiree and the equity interests issued by the bank in exchange for control of the acquiree. Acquisition-related costs are recognised in profit and loss account as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date. Goodwill on acquisition after July 01, 2009 is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. 155
159. JS BANK LIMITED Goodwill acquired in a business combination before July 01 , 2009 is initially measured at cost, being the excess of the cost of business combination over the Bank's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the Group's net assets in the event of liquidation is measured at proportionate share of net assets of the acquiree at the date of the acquisition. 2.3.4 Acquisition of business under common control Acquisition of business under common control are accounted for under 'pooling liabilities of the combining businesses for the period in which the combination combination at their respective book values. Appropriate adjustments are made to consistent accounting policies in the combining businesses. Any difference between consideration transferred in form of cash or other assets are adjusted against equity. of interest method'. The assets and occurs are merged on the date of the book values to reflect application the amount of net assets merged and Expenditure incurred in relation to the business combination are recognized as expenses in the period in which they are incurred. 2.4 The following International Financial Reporting Standards (IFRS Standards) as notified under the Companies Act, 2017 and the amendments and interpretations thereto will be effective for accounting periods beginning on or after 1 January 2022: - Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) effective for the annual period beginning on or after January 01, 2022 amends IAS 1 by mainly adding paragraphs which clarifies what comprise the cost of fulfilling a contract, Cost of fulfilling a contract is relevant when determining whether a contract is onerous. An entity is required to apply the amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). Restatement of comparative information is not required, instead the amendments require an entity to recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application. The adoption of the above standard is considered not to be relevant or do not have any significant effect on the Holding Company's operations. 2.5 The following annual improvements to approved accounting standards 2018-2020 are effective for annual reporting periods beginning on or after January 01, 2022. - IFRS 9 – The amendment clarifies that an entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf, when it applies the ‘10 percent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognize a financial liability. - IFRS 16 – The amendment partially amends Illustrative Example 13 accompanying IFRS 16 by excluding the illustration of reimbursement of leasehold improvements by the lessor. The objective of the amendment is to resolve any potential confusion that might arise in lease incentives. - IAS 41 – The amendment removes the requirement in paragraph 22 of IAS 41 for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique. - Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) effective for the annual period beginning on or after 1 January 2022. Clarifies that sales proceeds and cost of items produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management e.g. when testing etc., are recognized in profit or loss in accordance with applicable Standards. The entity measures the cost of those items applying the measurement requirements of IAS 2. The standard also removes the requirement of deducting the net sales proceeds from cost of testing. An entity shall apply those amendments retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments. The entity shall recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of that earliest period presented. - Reference to the Conceptual Framework (Amendments to IFRS 3) - Reference to the Conceptual Framework, issued in May 2020, amended paragraphs 11, 14, 21, 22 and 23 of and added paragraphs 21A, 21B, 21C and 23A to IFRS 3. An entity shall apply those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 01, 2022. Earlier application is permitted if at the same time or earlier an entity also applies all the amendments made by Amendments to References to the Conceptual Framework in IFRS Standards, issued in March 2018. 156
160. JS BANK LIMITED - - 2 .6 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) – the Board has issued amendments on the application of materiality to disclosure of accounting policies and to help companies provide useful accounting policy disclosures. The key amendments to IAS 1 include: - requiring companies to disclose their material accounting policies rather than their significant accounting policies; - clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and - clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company’s financial statements. Classification of liabilities as current or non-current (Amendments to IAS 1) effective for the annual period beginning on or after January 01, 2023. These amendments in the standards have been added to further clarify when a liability is classified as current. The standard also amends the aspect of classification of liability as non-current by requiring the assessment of the entity’s right at the end of the reporting period to defer the settlement of liability for at least twelve months after the reporting period. An entity shall apply those amendments retrospectively in accordance with IAS 8. The Board also amended IFRS Practice Statement 2 to include guidance and two additional examples on the application of materiality to accounting policy disclosures. The amendments are effective for annual reporting periods beginning on or after 1 January 2023 with earlier application permitted. - Definition of Accounting Estimates (Amendments to IAS 8) – The amendments introduce a new definition for accounting estimates clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. The amendments are effective for periods beginning on or after 1 January 2023 and will apply prospectively to changes in accounting estimates and changes in accounting policies occurring on or after the beginning of the first annual reporting period in which the company applies the amendments. - Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) – The amendments narrow the scope of the initial recognition exemption (IRE) so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will need to recognize a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. For leases and decommissioning liabilities, the associated deferred tax asset and liabilities will need to be recognized from the beginning of the earliest comparative period presented, with any cumulative effect recognized as an adjustment to retained earnings or other components of equity at that date. The amendments are effective for annual reporting periods beginning on or after 1 January 2023 with earlier application permitted. - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) – The amendment amends accounting treatment on loss of control of business or assets. The amendments also introduce new accounting for less frequent transaction that involves neither cost nor full step-up of certain retained interests in assets that are not businesses. The effective date for these changes has been deferred indefinitely until the completion of a broader review. The adoption of the above standard and amendments are considered not to be relevant or do not have any significant effect on the Holding Company's operations. 2.7 Critical accounting estimates and key sources of estimation uncertainty The preparation of these consolidated financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires 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 historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions in accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. 157
161. JS BANK LIMITED The areas where various assumptions and estimates are significant to the Group 's financial statements or where judgment was exercised in application of accounting policies are as follows: i) ii) Classification of investments - In classifying investments as 'held-for-trading' the Group has determined securities which are acquired with an intention to trade by taking advantage of short-term market / interest rate movements and are to be sold within 90 days of acquisition. - In classifying investments as 'held-to-maturity' the Group follows the guidance provided in SBP circulars on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity. In making this judgment, the Group evaluates its intention and ability to hold such investments to maturity. - The investments which are not classified as 'held-for-trading' or 'held-to-maturity' are classified as 'available-forsale'. Provision against non performing loans and advances The Holding Company reviews its loan portfolio to assess amount of non-performing loans and advances and provision required thereagainst. While assessing this requirement various factors including the delinquency in the account, financial position of the borrowers, the value of securities and the requirements of the Prudential Regulations are considered. For portfolio impairment / provision on consumer advances, the Bank follows requirements set out in iii) Impairment on investments The Group determines that investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged requires judgment. In making this judgment, the Bank evaluates among other factors, the normal volatility in securities price. In addition, impairment may be appropriate when there is an evidence of deterioration in the financial health of the investee, industry and sector performance, changes in technology and operational and financing cash flows. iv) Income taxes In making the estimates 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. In making the provision for deferred taxes, estimates of the Group's future taxable profits are taken into account. v) Depreciation of fixed assets and amortization of intangible assets In making estimates of the depreciation / amortisation method, the management uses a method which reflects the pattern in which economic benefits are expected to be consumed by the Bank. The method applied is reviewed at each financial year end and if there is a change in the expected pattern of consumption of the future economic benefits embodied in the underlying assets, the method is changed to reflect the change in pattern. Such change is accounted for as change in accounting estimates in accordance with International Accounting Standard - 8, "Accounting Policies, Changes in Accounting Estimates and Errors". vi) Defined benefits plans and other benefits Liability is determined on the basis of actuarial advice using the Projected Unit Credit Method. vii) Impairment of Goodwill Impairment testing involves a number of judgmental areas which are subject to inherent significant uncertainty, including the preparation of cash flow forecasts for the periods that are beyond the normal requirements of management reporting and the assessment of the discount rate appropriate to the business. The carrying amount of goodwill at the balance sheet date was Rs.1,464 million. The detailed assumptions underlying impairment testing of goodwill are given in note 12.7 to these consolidated financial statements. viii) Lease term The Group applies judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Bank is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised and its recoverable amount which is determined as higher of value-in-use and fair value less cost to sell. 158
162. JS BANK LIMITED 3 . BASIS OF MEASUREMENT These consolidated financial statements have been prepared under the historical cost convention except for: 4. - Certain classes of fixed assets and non-banking assets acquired in satisfaction of claims which are stated at revalued amounts less accumulated depreciation. - Investments classified as held-for-trading and available-for-sale and derivative financial instruments, which are measured at fair value. - Net obligations in respect of defined benefit schemes which are carried at their present values. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are consistent with those of previous financial year. 4.1 Cash and cash equivalents Cash and cash equivalents represent cash and balances with treasury banks and balances with other banks net of any overdrawn nostro accounts. 4.2 Lendings to / borrowings from financial institutions The Group enters into transactions of lendings to / borrowings from financial institutions at contracted rates for a specified period of time. These are recorded as under: (a) Purchase under resale obligation Securities purchased under agreement to resell (reverse repo) are not included in statement of financial position as the Bank does not obtain control over the securities. Amount paid under these agreements is included in lendings to financial institutions or advances as appropriate. The difference between the contracted price and resale price is amortised over the period of the contract and recorded as income using effective interest method. (b) Other lendings Other lendings include term lendings and unsecured lendings to financial institutions. These are stated net of provision. Mark-up on such lendings is charged to profit and loss account on a time proportionate basis using effective interest rate method except mark-up on impaired/delinquent lendings, which are recognized on receipt basis in accordance with the requirements of the Prudential Regulations of the SBP. (c) Sale under repurchase obligation Securities sold subject to a repurchase agreement (repo) are retained in the financial statements as investments and liability to counter party is included in borrowings. The difference in sale and repurchase value is accrued over the period of the contract and recorded as an expense using effective interest rate method. (d) Other borrowings Other borrowings include borrowings from the SBP and unsecured call borrowings which are recorded at the proceeds received. Mark-up paid on such borrowings is charged to the profit and loss account over the period of borrowings on time proportionate basis using effective interest method. 4.3 Investments 4.3.1 Initial recognition and measurement 4.3.1.1 The Management determines the appropriate classification of its investments at the time of purchase in held-for-trading, available-for-sale or held-to-maturity as per SBP guidelines vide BSD circular No. 10 of 2004 dated July 13, 2004. These are initially recognised at cost, being the fair value of the consideration given plus, in the case of investments other than held-for-trading, directly attributable acquisition costs. (a) Held-for-trading These are securities which are either acquired for generating profit from short-term fluctuations in market prices, interest rate movements, dealer's margin or are securities included in a portfolio in which a pattern of short-term profit taking exists. These securities are carried at fair value with any related gain or loss being recognized in profit and loss account. 159
163. JS BANK LIMITED (b) Held-to-maturity These are securities with fixed or determinable payments and fixed maturities that are held with the intention and ability to hold till maturity. Investments classified as held-to-maturity are carried at amortised cost. (c) Available-for-sale These are investments that do not fall under the held-for-trading or held-to-maturity categories. These are initially recognised at cost, being the fair value of the consideration given including the acquisition cost. These securities are carried at fair value with any related surplus or deficit on revaluation shall be taken to other comprehensive income. 4.3.1.2 Associates Associates are all entities over which the Group has significant influence but not control. These are accounted for using the equity method of accounting. Under the equity method, the investment in associates are initially recognised at cost and the carrying amount of investment is increased or decreased to recognise the investor's share of the post acquisition profits or losses, share of other comprehensive income or loss and share of the post acquisition movement in other reserves. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. However, in case where associates are considered as fully impaired and financial statements are not available these investments are stated at cost less provision. 4.3.1.3 Regular way contracts All 'regular way' purchases and sales of financial assets are recognised on the trade date, i.e. the date on which commitment to purchase / sale is made by the Group. Regular way purchases or sales of financial assets are those, the contract for which requires delivery of assets within the time frame generally established by regulation or convention in the market place. 4.3.1.4 Premium or discount on acquisition of investments Premium or discount on acquisition of investments is capitalised and amortised through the consolidated profit and loss account using effective yield over the remaining period of the investment. 4.3.2 Subsequent measurement In accordance with the requirements of the State Bank of Pakistan, SBP, quoted securities other than those classified as 'held-to-maturity' and investment in associates and subsidiaries, are subsequently remeasured on portfolio basis i.e. in case of Government securities at PKRV and PKFRV rates whereas in case of other securities at market value. Investments classified as 'held-to-maturity' are carried at amortised cost using the effective interest method (less impairment, if any). Further, in accordance with the requirements of the SBP, gain or loss on revaluation of the Group's held-for-trading investments is taken to the profit and loss account. In case of investments classified as available-for-sale, surplus or deficit is taken directly to equity. The surplus or deficit arising on these securities is taken to the profit and loss account when actually realised upon disposal. Unquoted equity securities, excluding investment in subsidiaries and associates are valued at lower of cost and the breakup value in accordance with the requirements of the Prudential Regulations issued by the SBP. Break-up value of equity securities is calculated with reference to the net assets of the investee company as per the latest available audited financial statements. Investment in subsidiaries and associates are carried at cost, less accumulated impairment losses, if any. 4.3.3 Impairment / diminution in the value of securities Impairment loss in respect of quoted equity securities classified as available for sale, associates, subsidiaries and held to maturity is recognised based on management's assessment of objective evidence of impairment as a result of one or more events that may have an impact on the estimated future cash flows of the investments. Objective evidence that the cost may not be recovered, in addition to qualitative impairment criteria, includes a significant or prolonged decline in the fair value below average cost. A decline to be considered as: - Significant if the fair value is below the weighted average cost by more than 30 percent. Prolonged if the fair value is below the weighted average cost for a period of more than one year. 160
164. JS BANK LIMITED (a) Available-for-sale If an available-for-sale equity security is impaired, the cumulative loss that had been recognised in equity, shall be reclassified from equity to profit and loss account as a reclassification adjustment even though the financial asset has not been derecognised, any further decline in the fair value at subsequent reporting dates are recognised as impairment. Therefore, at each reporting period, for an equity security that was determined to be impaired, additional impairment is recognised for the difference between the fair value and the original cost basis, less any previously recognised impairment. If, in subsequent period, impairment losses recognised in profit and loss for an investment in an equity instrument classified as available for sale shall not be reversed through profit and loss except in case of derecognition. (b) Held to maturity, Subsidiaries and Associates Impairment losses are incurred if, and only if, there is objective evidence of impairment after initial recognition of the investment. The impairment loss is recognised in the profit and loss account. If, in a subsequent period, any indication that an impairment loss recognised in prior periods no longer exist or may have decreased, the impairment loss shall be reversed, with the amount of the reversal recognised in profit or loss. (c) Debt Securities PTCs, TFCs, Sukuk and other debt securities will be classified on the valuation date on the basis of default in their repayment in line with the criteria prescribed for classification of short, medium and long-term facilities in accordance with the requirements of the Prudential Regulations issued by the SBP. 4.4 Financial instruments 4.4.1 Financial assets and financial liabilities Financial assets and financial liabilities are recognized at the time when the Bank becomes 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 specified 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 at the time of de-recognition. The particular recognition and subsequent measurement method for significant financial assets and financial liabilities are disclosed in the individual policy statements associated with them. 4.4.2 Derivative financial instruments Derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently re-measured at fair value using 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. 4.5 Off-setting of financial assets and financial liabilities Financial assets and financial liabilities are set off and the net amount is reported in the financial statements when there is a legally enforceable right to set off and the Group intends either to settle the assets and liabilities on a net basis or to realise the assets and to settle the liabilities simultaneously. Income and expenses arising from such assets and liabilities are accordingly offset. 4.6 Advances 4.6.1 Loan and advances Advances are stated net of general and specific provisions. General and specific provisions against funded loans are determined in accordance with the requirements of the Prudential Regulations issued by the SBP and charged to the profit and loss account. Advances are written off when there are no realistic prospects of recovery. 4.6.2 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 recognised at an amount equal to the present value of the lease payment including any guaranteed residual value, if any. Net investment in finance lease is included in loans and advances to customers. 161
165. JS BANK LIMITED 4 .7 Fixed assets 4.7.1 Property and equipment Fixed assets except office premises are shown at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditures that are directly attributable to the acquisition of the items. Office premises (which includes leasehold land and buildings) are stated at revalued amount less accumulated depreciation and impairment loss, if any. Depreciation is calculated and charged to profit and loss account using the straight-line method so as to write down the cost of the assets to their residual values over their estimated useful lives at the rates given in note 11. A full month’s depreciation is charged from the month in which assets are brought into use and no depreciation is charged for the month in which the disposal is made. The residual values, useful lives and depreciation methods are reviewed and changes, if any, are treated as change in accounting estimates, annually. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is de-recognised. All other repairs and maintenance are charged to the profit and loss account during the period in which they are incurred. An item of property and equipment is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset is recognised in the profit and loss account in the year the asset is de-recognised. 4.7.2 Surplus / deficit on revaluation of fixed assets The surplus arising on revaluation is credited to other comprehensive income. However, the increase shall be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit and loss account. The deficit arising on a particular property as a result of a revaluation is recognised in profit and loss account as an impairment. However, the decrease to be recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. Depreciation on buildings which are revalued is determined with reference to the value assigned to such assets on revaluation and depreciation charge for the year is taken to the profit and loss account; and an amount equal to incremental depreciation for the year net of deferred taxation is transferred from “Surplus on Revaluation of Fixed Assets Account” to unappropriated profit through Statement of Changes in Equity to record realization of surplus to the extent of the incremental depreciation charge for the year. Gains or losses on disposal of assets are included in the profit and loss account currently, except that the related surplus on revaluation of fixed assets (net of deferred tax) is transferred directly to equity. 4.7.3 Capital work-in-progress Capital work-in-progress is stated at cost less impairment losses, if any. These are transferred to specified assets as and when assets are available for use. 4.8 Intangible assets Intangible assets are stated at cost less accumulated amortisation and impairment, if any. Intangible assets are amortised from the month when the assets are available for use, using the straight line method, whereby the cost of the intangible asset is amortised over its estimated useful life over which economic benefits are expected to flow to the Group. The useful life and amortisation method are reviewed and adjusted, if appropriate, annually. Intangible assets having an indefinite useful life are carried at cost less any impairment in value and are not amortised. However these are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. 4.9 Assets subject to finance leases Assets held under finance leases are initially recorded at the lower of the present value of minimum lease payments under the lease agreements and the fair value of the leased assets. The related obligations under the lease, net of financial charges allocated to future periods, are shown as a liability. The financial charges are allocated to accounting periods in a manner so as to provide a period rate of interest on the outstanding liability. 162
166. JS BANK LIMITED 4 .10 Non-banking assets acquired in satisfaction of claims 4.10.1 Non-banking assets acquired in satisfaction of claims under Debt Property Swap (DPS) transactions, against the loans in category of loss, are initially carried at cost and subsequently at revalued amounts at each year-end date of the statement of financial position, being the fair value at the date of revaluation less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any. The valuation of properties acquired are conducted regularly, so as to ensure that their net carrying value does not materially differ from their fair value. All direct cost including legal fees, valuation and transfer costs of acquiring title to property shall be expensed when incurred through profit and loss account. Subsequent costs are included in the asset's carrying amounts only when it is probable that future benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other subsequent costs including repair and maintenance are charged to the profit and loss account as and when incurred. Depreciation on assets acquired in satisfaction of claims is charged to the profit and loss account in line with the depreciation charged on operating fixed assets. Any reductions in non-performing loans and corresponding reductions in provisions held against non-performing loans, as a result of the recognition of such assets, are disclosed separately in the notes to these consolidated financial statements. These assets are generally intended for sale. Gains and losses realised on the sale of such assets are disclosed separately from gains and losses realised on the sale of fixed assets in the notes to these consolidated financial statements. If such asset is subsequently used by the Bank for its own operations, the asset, along with any related surplus, is transferred to fixed assets. 4.10.2 Surplus / deficit on revaluation of non banking assets Revaluation of non-banking assets acquired in satisfaction of claims under Debt Property Swap (DPS) transactions are carried out under criteria given in regulations for DPS issued by State Bank of Pakistan vide BPRD Circular 01 dated January 01, 2016 i.e. valuation of property shall be done on individual property basis and not on portfolio basis, whereas accounting treatment of revaluation is accounted for in accordance with applicable financial reporting standards i.e. International Accounting Standard (IAS) 16 as referred in note 4.7.2. Furthermore, revaluation surplus on such assets shall not be admissible for calculating the Group’s Capital Adequacy Ratio and exposure limits under the Prudential Regulations. However, the surplus can be adjusted upon realization of sale proceeds. 4.11 Impairment other than investments and deferred tax At each balance sheet date, the Bank reviews the carrying amounts of its assets (other than investment and deferred tax asset) to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss, if any. Recoverable amount is the higher of net selling price (being fair value less cost to sell) and value-in-use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the assets is reduced to its recoverable amount. Impairment losses are recognised as an expense in profit and loss account immediately. Where impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised recoverable amount but limited to the extent of the amount which would have been determined had there been no impairment. Reversal of impairment loss is recognized as income. 4.12 Borrowings / deposits and their cost Borrowings / deposits are initially recorded at the amount of proceeds received. Cost of borrowings / deposits are recognised separately as part of other liabilities and is charged to the profit and loss account over the period on an accrual basis. 4.13 Subordinated debt Subordinated debts is initially recorded at the amount of proceeds received. Mark-up accrued on subordinated debts is recognised separately as part of other liabilities and is charged to the profit and loss account over the period on an accrual basis. 163
167. JS BANK LIMITED 4 .14 Taxation 4.14.1 Current Provision for current taxation is based on taxable income for the year determined in accordance with the prevailing laws for taxation on income. For income covered under final tax regime, taxation is based on applicable tax rate under such regime. The charge for current tax also includes adjustments, where considered necessary, relating to prior years arising from assessments made during the year. 4.14.2 Deferred Deferred tax is recognised using the balance sheet liability method on all temporary differences arising between tax bases of assets and liabilities and their carrying amounts appearing in the consolidated financial statements. Deferred tax liability is recognized on taxable temporary differences. Deferred tax asset is recognised for all deductible temporary differences and carry forward of unused tax losses, if any only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realised. Deferred tax is calculated at the rates that are expected to apply to the period when the differences are expected to reverse, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to the profit and loss account. Deferred tax, if any, on revaluation of investments, fixed assets and non banking assets is recognised as an adjustment to surplus / (deficit) arising on revaluation in accordance with the requirements of IAS-12 "Income Taxes". 4.15 Provisions Provisions are recognised when the Group has a legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate. Provision against identified non-funded losses is recognised when intimated and reasonable certainty exists for the Group to settle the obligation. The loss is charged to consolidated profit and loss account net of expected recovery. 4.16 Staff retirement benefits Defined contribution plan - the Group The Group has established a provident fund scheme for all its permanent employees in accordance with the trust deed and rules made there under. Equal monthly contributions are made, both by the Group and the employees, to the fund at the rate defined below of basic salary. Contribution by the Group is charged to profit and loss account. - The Bank (Holding Company) JS Global Capital Limited (Subsidiary) JS Investment Limited (Subsidiary) 7.10% 7.33% 7.33% 4.16.1 Defined benefit plan (Holding Company) The Holding Company operates an approved funded gratuity scheme covering all its eligible employees who have completed minimum qualifying period. An actuarial valuation of defined benefit scheme is conducted at the end of every year or on occurrence of any significant change. The most recent valuation in this regard was carried out as at December 31, 2021, using the projected unit credit actuarial valuation method. Under this method cost of providing for gratuity is charged to profit and loss account so as to spread the cost over the service lives of the employees in accordance with the actuarial valuation. Past-service costs are recognised immediately in profit and loss account and actuarial gains and losses are recognised immediately in other comprehensive income. 4.17 Revenue recognition Revenue is recognized to the extent that economic benefits will flow to the Group and the revenue can be reliably measured. These are recognized as follows: - Advances and investments Mark-up income / interest / profit on performing advances and debt securities is recognized on a time proportion basis as per the terms of the contract. 164
168. JS BANK LIMITED Mark-up income / interest / profit on non-performing advances and debt securities is recognized on a receipt basis in accordance with the requirements of the Prudential Regulations issued by the State Bank of Pakistan. Mark-up income/ Interest / profit on rescheduled / restructured advances and debt securities are recognised as permitted by the State Bank of Pakistan or by the regulatory authorities of the countries where the Bank operates, except where, in the opinion of the management, it would not be prudent to do so. Premium or discount on acquisition of debt investments is capitalised and amortised through the profit and loss account over the remaining maturity of the debt security using the effective yield method. Unrealised interest income in respect of non-performing loans and advances are held in suspense account, where necessary, in accordance with the requirements of the Prudential Regulations issued by the SBP. - Lease financing Financing method is used in accounting for income from lease financing. Under this method, the unearned lease income (defined as the excess of the sum of 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. Unrealised finance income in respect of non-performing lease finance is held in suspense account, where necessary, in accordance with the requirements of the Prudential Regulations issued by the SBP. Gains / losses on termination of lease contracts, documentation charges, front-end fees and other lease income are recognized as income on receipt basis. - Non Mark-up / interest income Commission is recognised as income at the time of affecting the transaction to which it relates. Fees are recognised when earned. Financial advisory fee is recognised when the right to receive the fee is established. Dividend income from investments is recognised when the Bank’s right to receive the dividend is established. 4.18 Dividend and appropriation to reserves Dividend and appropriation to reserves except for statutory reserves are recognised in the consolidated financial statements in the periods in which these are approved. 4.19 Foreign currencies 4.19.1 Functional and presentation currency 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 Pakistani Rupees, which is the Group's functional and presentation currency. 4.19.2 Transactions and balances Transactions in foreign currencies are translated into Pakistani rupees at the exchange rates prevailing on the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account. Forward contracts relating to foreign currency deposits are valued at forward rates applicable to the respective maturities of the relevant foreign exchange contract. The forward cover received / paid on forward purchase contracts relating to foreign currency deposits are realised / charged directly to profit and loss account. 4.19.3 Foreign operations Assets and liabilities of foreign operations are translated into rupees at the exchange rate prevailing at the reporting date. The results of foreign operations are translated at average rate of exchange for the year. 165
169. JS BANK LIMITED 4 .19.4 Translation gains and losses Translation gains and losses arising on revaluations of net investment in foreign operations are taken to Exchange Translation Reserve in the statement of comprehensive income. These are recognised in the profit and loss account on disposal. 4.19.5 Commitments Commitments for outstanding forward foreign exchange contracts disclosed in these consolidated financial statements are translated at contracted rates. 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 ruling on the consolidated statement of financial position date. 4.20 Goodwill Goodwill acquired in a business combination before July 01, 2009 is initially measured at cost, being the excess of the cost of the business combination over the Holding Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Holding Company’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquirer are assigned to those units or groups of units. 4.21 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 equity holders of the Bank (less preference dividend, if any) by the weighted average number of ordinary shares outstanding during the period / year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary equity holders of the Bank by dividing the weighted average number of shares outstanding, for the effects of all dilutive potential ordinary shares, if any. Age number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, if any. 4.22 Non-current assets held for sale and discontinued operations The Holding Company classifies an asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value. In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. A held for sale asset is carried at the lower of its carrying amount and the fair value less costs to sell. Impairment losses are recognised in the profit and loss account for any initial or subsequent write down of the asset to fair value less costs to sell. Subsequent gains in fair value less costs to sell are recognised to the extent these do not exceed the cumulative impairment losses previously recorded. An asset is not depreciated while classified as held for sale. 4.23 Segment reporting A segment is a distinguishable component of the Group that is subject to risks and rewards that are different from those of other segments. A business segment is one that is engaged either in providing certain products or services, whereas a geographical segment is one engaged in providing certain products or services within a particular economic environment. Segment information is presented as per the Group's functional structure and the guidance given under International Financial Reporting Standard (IFRS) 8. For management purposes, the Group has been organised into Seven operating segments based on products and services, as follows: 166
170. JS BANK LIMITED 4 .23.1 Business segments Corporate finance This includes investment banking activities such as mergers and acquisitions, underwriting, privatization, securitization, Initial Public Offers (IPOs), specialised financial advice and trading and secondary private placements. Trading and sales This segment undertakes the Group's treasury, money market and capital market activities. Retail banking Retail banking provides services to small borrowers i.e. consumers, small and medium enterprises (SMEs) and agricultural sector. It includes loans, deposits and other transactions with retail customers. Commercial banking This includes loans, deposits and other transactions with corporate customers. Brokerage This includes brokerage commission earned on transactions in capital, money, foreign exchange and commodity markets. Asset management This includes fee for services rendered in connection with advisory and management of mutual funds. The Leadership Team (LT) monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profits or losses and is measured consistently with operating profits or losses in the consolidated financial statements. However, income taxes are managed on a group basis and are not allocated to operating segments. Interest income is reported net as management primarily relies on net interest revenue as a performance measure, along with the gross income and expense Transfer prices between operating segments are based on the group’s internal pricing framework. No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Bank’s total revenue in 2020 and 2021. Others This includes the head office related activities and other functions which cannot be classified in any of the above segments. 4.23.2 Geographical segment The Holding Company operates with 281 (2020: 307) branches / sub-branches in Pakistan region and one wholesale banking branch in Bahrain (2020: one). 4.24 Fiduciary assets Assets held in a fiduciary capacity are not treated as assets of the Bank in statement of financial position. 5. FINANCIAL RISK MANAGEMENT The financial risk management objectives and policies adopted by the Bank are consistent with those disclosed in the consolidated financial statements for the year ended December 31, 2021. 167
171. JS BANK LIMITED 6 . CASH AND BALANCES WITH TREASURY BANKS Note In hand: Local currency Foreign currencies With State Bank of Pakistan in: Local currency current account Foreign currency current account - non remunerative Foreign currency deposit account - remunerative 6.1 6.2 6.3 With National Bank of Pakistan in: Local currency current accounts National Prize Bonds 2021 2020 ----- Rupees in '000 ----7,286,506 957,434 8,243,940 6,337,389 1,301,503 7,638,892 19,934,402 1,085,558 2,616,420 23,636,380 16,268,165 1,086,874 2,261,337 19,616,376 2,345,795 2,609,635 41,065 34,267,180 556,628 30,421,531 6.1 This includes statutory liquidity reserves maintained with the SBP under the requirements of Section 22 of the Banking Companies Ordinance, 1962. 6.2 This include cash reserve of 5% is required to be maintained with the SBP held under the New Foreign Currency Accounts Scheme (FE-25 deposits), as per BSD Circular No. 9 dated December 03, 2007. 6.3 This represents deposit accounts maintained with the SBP under the requirements of BSD Circular No. 14 dated June 21, 2008 and mandatory reserve maintained to facilitate collection and settlement of foreign currency accounts under FE-25, as prescribed by the SBP, carrying a markup rate 0% (2020: 0%) as per specific circular issued by the SBP at year end. 7. BALANCES WITH OTHER BANKS Note 2021 2020 ----- Rupees in '000 ----- In Pakistan In current accounts In deposit accounts 146,826 23,879 170,705 123,526 24,390 147,916 1,056,918 1,227,623 (17) 1,227,606 980,669 1,128,585 (450) 1,128,135 Outside Pakistan In current accounts 7.1 Less: General provision under IFRS 9 Balances with other banks - net of provision 7.2 7.1 This includes amount held in Automated Investment Plans. The Holding Company is entitled to earn interest from the foreign correspondent banks at agreed upon rates when the balance exceeds a specified amount which comes 0.01% per annum (2020: 0.01% per annum). 7.2 This represents general provision held under IFRS 9 by Bahrain branch of the Holding Company. 8. LENDINGS TO FINANCIAL INSTITUTIONS Note Call money lendings Repurchase agreement lendings (Reverse Repo) Due against bills re-discounting 8.2 Less: General provision under IFRS 9 Lending to Financial Institutions - net of provision 8.1 8.3 31,939,044 31,939,044 2,237,682 21,003,215 23,240,897 31,939,044 (1,225) 23,239,672 31,939,044 31,939,044 21,003,215 2,237,682 23,240,897 Particulars of lendings - gross In local currency In foreign currencies 8.2 2021 2020 ----- Rupees in '000 ----- These are secured short-term lendings to various financial institutions, carrying mark-up rate from 10.10% to 10.70% (2020: 6.75% to 7.40%) per annum. These are collateralized by Market Treasury Bills and Pakistan Investment Bonds as shown in note 8.2.1 below. 8.2.1 Market value of securities held as collateral against lending to financial institutions 2021 2020 Further Further Held by given as Held by given as bank collateral Total bank collateral Total --------------------------------------------- Rupees in '000 --------------------------------------------Market Treasury Bills Pakistan Investment Bonds 8.3 8,923,921 23,046,627 31,970,548 - 8,923,921 23,046,627 31,970,548 21,160,868 21,160,868 - 21,160,868 21,160,868 This represents general provision held under IFRS 9 by Bahrain branch of the Holding Company. 168
172. JS BANK LIMITED 9 . INVESTMENTS - NET 9.1 Investments by type 2021 2020 Cost / Cost / Amortised Provision for Surplus / Carrying Amortised Provision for Surplus / Carrying cost diminution (Deficit) Value cost diminution (Deficit) Value -------------------------------------------------------------------- Rupees in '000 -------------------------------------------------------------------- Held-for-trading securities Federal Government Securities Shares Open end mutual funds 1,109,466 1,391,004 190,357 2,690,827 - (62) 1,505 (74,659) (73,216) 1,109,404 1,392,509 115,698 2,617,611 25,002,969 194,428 310,221 25,507,618 (370,270) 2,289,154 2,501 269,958 (63,097) 2,128,246 159,315,888 4,092,517 2,733,247 3,314,578 1,713,660 171,169,890 127,308,516 3,018,184 3,579,278 826,188 4,079,070 138,811,236 - 805 12,981 416 14,202 25,003,774 207,409 310,637 25,521,820 Available-for-sale securities Federal Government Securities Shares Non Government Debt Securities Open end mutual funds Foreign Securities 159,686,158 1,939,952 3,448,813 3,044,620 1,844,989 169,964,532 (136,589) (718,067) (68,232) (922,888) (411,955) (696,507) (122,758) (1,231,220) 97,527 1,701,753 (420) 390,100 136,466 2,325,426 127,406,043 4,307,982 2,882,351 1,216,288 4,092,778 139,905,442 Held-to-maturity securities Federal Government Securities Associates Total Investments 58,143,943 - - 58,143,943 36,109,599 - - 289,630 - - 289,630 270,793 - - 232,221,074 200,699,246 231,088,932 (922,888) 2,055,030 (1,231,220) 2,339,628 36,109,599 270,793 201,807,654 9.1.1 Investments include certain approved / government securities which are held by the Bank to comply with the Statutory Liquidity Requirement determined on the basis of the Bank’s demand and time liabilities as set out under section 29 of the Banking Companies Ordinance, 1962. 9.2 Investments by segments: Note 2021 2020 Cost / Cost / Carrying Carrying Amortised Provision for Surplus / Amortised Provision for Surplus / Value Value cost diminution (Deficit) cost diminution (Deficit) -------------------------------------------------------------------- Rupees in '000 -------------------------------------------------------------------- Held-for-trading securities Federal Government Securities: Market Treasury Bills Pakistan Investment Bonds 9.4.1 9.4.1 1,109,264 202 1,109,466 - Shares: Listed Companies Ordinary shares 9.4.2 1,391,004 - Open End Mutual Funds 9.4.3 190,357 2,690,827 9.5.1 9.5.1 9.5.1 125,616,353 34,069,805 159,686,158 9.5.2 9.5.2 1,792,363 136,589 (136,589) 9.5.2 11,000 1,939,952 9.5.3.1 9.5.3.2 (61) (1) (62) 1,109,203 201 1,109,404 25,002,969 25,002,969 - 805 805 25,003,774 25,003,774 1,505 1,392,509 194,428 - 12,981 207,409 - (74,659) (73,216) 115,698 2,617,611 310,221 25,507,618 - 416 14,202 310,637 25,521,820 - (370,699) 429 (370,270) 125,245,654 34,070,234 159,315,888 90,027,949 37,280,567 127,308,516 - 20,041 77,486 97,527 90,047,990 37,358,053 127,406,043 2,289,154 - 4,081,517 - 2,870,595 136,589 (275,366) (136,589) 1,701,753 - 4,296,982 - (136,589) 2,289,154 11,000 4,092,517 11,000 3,018,184 (411,955) 1,701,753 11,000 4,307,982 436,745 241,490 (151,867) - 592 1,909 285,470 243,399 442,682 402,955 (155,169) - (147) (273) 287,366 402,682 9.5.3.3 9.5.3.4 9.5.3.5 9.5.3.6 1,083,301 1,307,393 352,151 27,733 3,448,813 (538,467) (27,733) (718,067) 2,501 544,834 1,307,393 352,151 2,733,247 1,340,804 1,365,104 27,733 3,579,278 (541,338) (696,507) (420) 799,466 1,365,104 27,733 2,882,351 9.5.4 3,044,620 - 269,958 3,314,578 826,188 9.5.5.1 9.5.5.2 9.5.2 1,372,854 376,486 95,649 1,844,989 (67,856) (376) (68,232) (63,011) (1,942) 1,856 (63,097) 1,241,987 374,168 97,505 1,713,660 3,633,601 379,654 65,815 4,079,070 (120,619) (2,139) (122,758) 169,964,532 (922,888) 171,169,890 138,811,236 (1,231,220) Available-for-sale securities Federal Government Securities: Market Treasury Bills Pakistan Investment Bonds GoP Ijara Sukkuk Shares: Listed Companies Ordinary shares Preference shares Unlisted Companies Ordinary shares Non Government Debt Securities: Listed Term Finance Certificates Sukuk Certificates Unlisted Term Finance Certificates Sukuk Certificates Commercial Paper Certificates Preference shares Open End Mutual Funds Foreign Securities Government Debt Securities * Non Government Debt Securities * Ordinary shares 2,128,246 - 390,100 1,216,288 130,420 (3,628) 9,674 136,466 3,643,402 373,887 75,489 4,092,778 2,325,426 139,905,442 Held-to-maturity securities Federal Government Securities: Market Treasury Bills Pakistan Investment Bonds Associates Omar Jibran Engineering Industries Limited Veda Transit Solutions (Private) Limited Intercity Touring Company (Private) Limited Total Investments 9.6.1 9.6.1 9.7 9.7 9.7 11,463,014 46,680,929 58,143,943 - - 11,463,014 46,680,929 58,143,943 36,109,599 36,109,599 - - 36,109,599 36,109,599 237,192 52,438 289,630 - - 237,192 52,438 289,630 215,793 54,302 698 270,793 - - 215,793 54,302 698 270,793 232,221,074 200,699,246 231,088,932 (922,888) 2,055,030 (1,231,220) 2,339,628 201,807,654 * Provision for diminution against foreign debt securities represents expected credit loss provisioning under IFRS 9 on portfolio pertaining to Bahrain Branch. 169
173. JS BANK LIMITED 9 .2.1 2021 2020 Cost Market value Cost Market value --------------------------- Rupees in '000 --------------------------- Investments given as collateral Held-for-trading securities Federal Government Securities Market Treasury Bills - Available-for-sale securities Federal Government Securities: Market Treasury Bills Pakistan Investment Bonds Foreign Securities Government Debt Securities Non Government Debt Securities 9.3 Provision for diminution in value of investments 9.3.1 Opening balance - 19,852,789 15,073,822 34,926,611 4,902,054 4,902,054 4,902,811 4,902,811 842,316 842,316 814,484 814,484 35,827,490 35,741,095 9,766,518 9,767,491 Note 2021 2020 ----- Rupees in '000 ----1,231,220 32 Impairment under IFRS 9 in Bahrain branch (Reversal) / charge during the year Exchange Gain Closing balance 859,119 27,733 (281,540) (253,807) 276,202 (26,859) 249,343 (62,148) 7,623 (54,525) 122,758 122,758 922,888 1,231,220 Particulars of provision against debt securities 2021 2020 NPI Provision NPI Provision --------------------------- Rupees in '000 --------------------------- Category of classification Domestic Other assets especially mentioned Substandard Doubtful Loss 9.4 4,864,680 19,922,016 15,063,158 34,985,174 Charge during the year Reversal during the year 9.3.2 4,864,464 718,067 718,067 718,067 718,067 696,507 696,507 696,507 696,507 Quality of Held-for-trading Securities Details regarding quality of Held-for-trading (HFT) securities are as follows Cost 9.4.1 Federal Government Securities - Government guaranteed Note Market Treasury Bills Pakistan Investment Bonds 9.4.1.1 9.4.1.1 2021 2020 Market Value Cost Market Value ---------------------- Rupees in '000 ---------------------- 1,109,264 202 1,109,466 1,109,203 201 1,109,404 25,002,969 25,002,969 25,003,774 25,003,774 Principal terms of investment in Federal Government Securities Name of investment Market treasury bills Pakistan Investment Bonds Note Maturity Redemption Coupon 9.4.1.2 9.4.1.3 January 13, 2022 to March 10, 2022 Upto July 19, 2022 On maturity On maturity On maturity Half yearly 9.4.1.2 Market Treasury Bills are for the period of three to six months. The effective rates of profit on Market Treasury Bills range from 8.81% to 10.50% per annum (2020: 7.07% to 7.12% per annum). 9.4.1.3 Pakistan investment bonds are for the period of ten years. The effective rates of profit on Pakistan investment bonds range upto 12% per annum (2020: Nil). 9.4.2 Shares Rating Listed Companies Ordinary shares - Ghandhara Nissan Limited - Pak Elektron Limited - Waves Singer Pakistan Limited - Cherat Cement Company Limited - D.G. Khan Cement Company Limited - Fauji Cement Company Limited - Lucky Cement Limited - Maple Leaf Cement Factory Limited - Pioneer Cement Limited - Power Cement Limited - Engro Polymer & Chemicals Limited - Ghani Global Holdings Limited - Lotte Chemical Pakistan Limited - Bank Al Habib Limited - Bank Alfalah Limited - Habib Bank Limited - MCB Bank Limited - Meezan Bank Limited - National Bank of Pakistan Limited - Silkbank Limited - United Bank Limited - Aisha Steel Mills Limited - Amreli Steels Limited - International Industries Limited - International Steels Limited - Mughal Iron & Steel Industries Limited - Engro Corporation Limited - Engro Fertilizers Limited - Fauji Fertilizer Bin Qasim Limited - Fauji Fertilizer Company Limited - Al Shaheer Corporation Limited - Fauji Foods Limited - Treet Corporation Limited - Unity Foods Limited - Unity Foods Limited (Right Shares) - Ghani Global Glass Limited - Tariq Glass Industries Limited - Dawood Hercules Corporation Limited - Meezan Pakistan Exchange Traded Fund NBP Pakistan Growth Exchange Traded Fund NIT Pakistan Gateway Exchange Traded Fund TPL Properties Limited UBL Pakistan Enterprise Exchange Traded Fund Oil & Gas Development Company Limited Pakistan Oilfields Limited Pakistan Petroleum Limited Hascol Petroleum Limited Pakistan State Oil Company Limited Sui Northern Gas Pipelines Limited AGP Limited The Searle Company Limited K-Electric Limited The Hub Power Company Limited Attock Refinery Limited Cnergyico Pk Limited National Refinery Limited Pakistan Refinery Limited Avanceon Limited Hum Network Limited NetSol Technologies Limited Pakistan Telecommunication Company Ltd Systems Limited Telecard Limited TPL Corp Limited TRG Pakistan Limited Gul Ahmed Textile Mills Limited Nishat Chunian Limited Nishat Mills Limited Pakistan International Bulk Terminal Limited A A+ A AAUnratted AA+ AA AAAAAA AA+ AAA AAA AAA AAA AAAA AAAA+ A+ AA+ AA AA+ Unratted Unratted AA A BBB+ A+ AA Unratted Unratted Unratted A+ Unratted AAA Unratted Unratted AA+ AAA+ AAAA AA+ AA AAA+ AAA+ Unratted AAA Unratted Unratted A Unratted A A AA A Industry Sector Auto Mobile Assembler Cable & Electrical Goods Cable & Electrical Goods Cement Cement Cement Cement Cement Cement Cement Chemical Chemical Chemical Commercial Banks Commercial Banks Commercial Banks Commercial Banks Commercial Banks Commercial Banks Commercial Banks Commercial Banks Engineering Engineering Engineering Engineering Engineering Fertilizer Fertilizer Fertilizer Fertilizer Food & Personal Care Products Food & Personal Care Products Food & Personal Care Products Food & Personal Care Products Food & Personal Care Products Glass & Ceramics Glass & Ceramics Investment Banks / Investment Companies And Securities Miscellaneous Miscellaneous Miscellaneous Miscellaneous Miscellaneous Oil & Gas Exploration Companies Oil & Gas Exploration Companies Oil & Gas Exploration Companies Oil & Gas Marketing Companies Oil & Gas Marketing Companies Oil & Gas Marketing Companies Pharmaceuticals Pharmaceuticals Power Generation & Distribution Power Generation & Distribution Refinery Refinery Refinery Refinery Technology & Communication Technology & Communication Technology & Communication Technology & Communication Technology & Communication Technology & Communication Technology & Communication Technology & Communication Textile Composite Textile Composite Textile Composite Transport Shares 2021 2020 ------- Numbers ------- 2021 2020 Cost Market value Cost Market value ---------------------------- Rupees in '000 ---------------------------- 35,500 65,500 1,467,000 8,294 44,500 574 107,636 4,000 355,500 553,500 358 500,000 45,364 224 50,197 214,000 1,210,000 585 20,500 5,000 761,000 992,500 1,755 9,595 348 5,000 280,000 108,000 4,260,046 517 8,000 14,500 - 130,000 2,000 1,791 1,416 3,429 1,000 1,000,000 77,000 581 448 1,293 601 104 4,000 2,095 145,500 119,500 2,424 4,916 31,500 1,205 2,395,500 347 2,802 1,446 23,097 647 834 468 3,617 246 19,071 14,346 34 17,025 5,227 48 6,906 7,297 1,597 85 298 692 49,757 99,357 569 721 48 71 2,609 4,483 112,099 1 116 1,537 - 2,774 1,475 22,871 688 817 390 3,870 355 19,272 13,350 25 17,300 5,290 34 6,732 7,387 1,755 80 309 694 50,317 103,329 478 730 35 67 2,573 4,503 112,763 1 113 1,574 - 5,019 294 194 873 133 106 9,470 1,209 33 15 158 98 8 176 256 6,947 11,255 715 305 776 119 67,423 44 5,217 292 205 986 154 103 9,880 1,160 40 16 171 111 11 172 264 7,022 11,142 745 311 798 131 76,800 42 233,000 27,000 16,000 696,000 26,500 1,899,751 114 302,359 558,142 1,028,000 5,000 1,038 1,100,000 289,370 121,453 1,916,500 17,177 99,000 989,500 1,517,500 139,500 4,000,000 21 101,500 19,500 3,561,612 180,000 380,500 48,500 11,000 251,000 20,500 17,000 16,500 15,262 1,046 11,647 806,837 5,639 8,088 12,431 321,500 6,628 19,000 358,000 288,500 75,500 1,000 1,020,000 2,539 347 264 25,428 271 164,028 58 24,013 100,275 34,662 468 178 3,586 20,778 16,598 12,852 4,382 1,251 89,209 9,974 13,266 33,419 24 1,618 311 423,725 8,466 17,917 3,869 77 2,050 276 177 22,724 338 163,760 41 23,898 101,520 34,387 485 149 3,784 20,644 17,493 13,051 4,888 1,428 90,163 9,803 13,093 34,800 16 1,609 323 419,914 8,471 17,332 3,860 81 2,597 207 164 225 1,616 366 1,062 11,898 1,166 386 3,054 1,223 510 3,359 7,544 26,627 13,589 101 13,108 2,676 224 200 225 1,584 414 1,052 11,852 1,214 359 3,098 1,257 526 3,459 8,517 26,787 14,973 102 13,117 1,391,004 1,392,509 194,428 207,409 170
174. JS BANK LIMITED 9 .4.3 Open End Mutual Fund Name of fund 2020 A+(f) - A+(f) AA- (f) AA(f) 100.49 21.52 51.8 106.5 - Rating 2021 2020 ------------- Numbers ------------Investment in related parties JS Income Fund JS Motion Picture Fund JS Islamic Hybrid Fund of Funds - Mutanasib JS Cash Fund JS Islamic Hybrid Fund of Funds - Mustehkam JS Islamic Hybrid Fund of Funds - Mufeed JS Islamic Fund JS Islamic Income Fund JS Islamic Daily Dividend Fund 9.5 2021 Net asset value per unit Rupees Units 461,361 1,000,000 61,443 419,093 - 1,129,255 1,000,000 49,068 3,305 76,142 123,571 382,292 407,754 AA- (f) AA(f) 2021 2020 Cost Market value Cost Market value ---------------------------- Rupees in '000 ---------------------------44,018 97,700 4,466 44,173 - 46,362 21,520 3,183 44,633 - 110,989 99,990 3,000 288 3,000 12,000 40,179 40,775 111,785 97,700 3,698 218 3,659 12,367 40,435 40,775 190,357 115,698 310,221 310,637 Quality of Available-for-sale Securities Details regarding quality of Available-for-sale (AFS) securities are as follows: 2021 2020 Cost Market Value Cost Market Value ---------------------------- Rupees in '000 ---------------------------- Note 9.5.1 Federal Government Securities - Government guaranteed Market Treasury Bills Pakistan Investment Bonds 125,616,353 34,069,805 159,686,158 9.5.1.1 9.5.1.1 125,245,654 34,070,234 159,315,888 90,047,990 37,358,053 127,406,043 Principal terms of investment in Federal Government Securities Name of investment Note 9.5.1.2 9.5.1.3 Market treasury bills Pakistan investment bonds Maturity January 13, 2022 to June 30, 2022 July 19, 2022 to December 10, 2030 Redemption Coupon On maturity On maturity On maturity Half yearly 9.5.1.2 Market Treasury Bills are for the period of three to twelve months. The effective rates of profit on Market Treasury Bills range from 7.39% to 11.38% per annum (2020: 6.90% to 11.77% per annum). 9.5.1.3 Pakistan Investment Bonds (PIBs) are for the period of two to twenty years. The rates of profit ranging from 7% to 12% per annum (2020: 7% to 12% per annum). 9.5.2 Shares Rating Industry Sector Listed Companies - Ordinary shares Shifa International Hospitals Pakistan Petroleum Limited Pakistan Petroleum Limited Air Link Communication Limited Ferozsons Pakistan Stock Exchange Limited (PSXL) - Investment in related parties EFU General Insurance Limited EFU Life Assurance Limited Sitara Chemical Industries Limited TRG Pakistan Limited Hum Network Limited Foreign securities Deutche Post AG Microsoft Corporation Limited Daimler AG The Walt Disney Co Total Energy Daimler Truck Holding AG Number of Shares 2021 2020 ----------- Numbers ----------- Cost Market value Market value 2021 2020 ---------------------------- Rupees in '000 ---------------------------- Cost A Unrated Miscellaneous Oil & Gas Marketing Companies Technology & Communication Pharmaceutical 4,607,293 189,800 264,300 841,800 - 234,439 70,124 267,499 61,843 68,273 123,382 52,857 76,041 Unrated Investment Company 2,202,953 2,202,953 23,061 30,291 23,061 32,648 AA+ AA+ Unrated - Insurance Insurance Chemical Technology & Communication Technology & Communication 5,455,675 1,189,600 24,583,760 - 5,455,675 1,189,600 1,790,250 24,583,760 79,030,303 647,129 250,735 566,875 1,792,363 572,846 250,613 2,898,425 4,081,517 647,129 250,735 548,781 566,875 642,359 2,870,595 654,681 248,650 554,978 2,247,202 429,925 4,296,982 1,624 1,760 2,226 812 8,100 220 - 19,697 53,640 16,139 3,767 93,243 21,913 48,119 19,833 5,234 95,099 56,525 6,884 63,409 64,706 8,377 73,083 4,823,746 12,357,000 48,236 88,353 136,589 - 48,236 88,353 136,589 - A3 A2 A1 BBB+ Preference Shares Agritech Limited (note 9.5.2.1 & 9.5.2.3) Chenab Limited (note 9.5.2.2 & 9.5.2.3) - 90,027,949 37,280,567 127,308,516 Unrated Unrated Un-listed Companies Break-up value per share 2021 2020 ------------ Rupee------------ Ordinary shares ISE Towers REIT Management Limited (formerly Islamabad Stock Exchange Limited) (note 8.5.2.4) * 16.77 * 15.45 ** 877,740 ** 638,551 Logistics Technology & Communication Automobile and transportation equipment Technology & Communication Petroleum, oil and gas Automobile and transportation equipment Chemical Textile Composite Name of Chief Executive / Managing Director Mr. Sagheer Mushtaq 4,823,746 12,357,000 Cost Cost Breakup value Breakup value 2021 2020 ---------------------------- Rupees in '000 ---------------------------- Number of shares 2021 2020 1,213,841 1,213,841 11,000 17,592 11,000 17,592 6 6 2,406 5,266 2,406 5,266 Foreign securities - Ordinary shares Society for Worldwide Interbank Financial Telecommunication (SWIFT) (note 9.5.2.5) Mr. Javier Perez Tasso * Based on audited accounts as of June 30, 2021 ** ** Based on audited accounts as of December 31, 2020 9.5.2.1 These are non-voting cumulative preference shares, carrying preference dividend @ 10% p.a and are convertible into ordinary shares at the option of the Bank after five years from the date of issuance i.e. February 2012. The investee company also has the option to redeem these preference shares plus any unpaid dividend in full or in part, within ninety days after expiry of each anniversary of the issue date. The Holding Company has recognised full impairment on these shares amounting to Rs. 48.236 million (2020: Rs.48.236 million) due to weak financial position of the company. 9.5.2.2 These are cumulative preference shares, carrying preference dividend @ 9.25% p.a and are redeemable in part after four years from the date of issuance i.e. August 2008. The investee company also has an option to redeem, in part, cumulative preference shares after August 2008. The Bank has recognized full impairment on these shares amounting to Rs. 88.353 million (2020: Rs.88.353 million) due to weak financial position of the company. 9.5.2.3 Surplus arising due to re-measurement of these shares to the market value has not been recognized as the management believes that the market value may not be realized while selling them in open market. 9.5.2.4 In accordance with the requirements of the Stock Exchanges (Corporatization, Demutualization and Integration) Act, 2012 (the Act), the Bank has received 3,034,603 shares of Rs.10 each including trading right entitlement certificate (TREC) of the Islamabad Stock Exchange (ISE) in lieu of its Membership Card held by the Bank. Further upon integration of ISE under the "ISE Scheme of Integration" in 2016, TRE Certificates holders of ISE have been issued 1,213,841 (i.e 40%) ordinary shares of "ISE Towers REIT Management Limited" with trading rights, whereas the remaining 1,820,762 ordinary shares (i.e. 60%), are transferred to blocked CDC account maintained by ISEL. Further, the management believes that the carrying value of these shares is less than face value of shares therefore, no value has been allocated to TREC. 9.5.2.5 The Holding Company qualified as a member based on the financial contribution to SWIFT for network-based services. The Holding Company has made an investment as per the requirements of By-Laws of SWIFT, under the Share Re-allocation Process, as a result becoming entitled to invest in for six shares. The participation is mandatory to avail the desired network-based services for financial message transmission for cross-border payments and receipt. Further, the share re-allocation occurs every three years and will result in either an increase, decrease, or a status quo in individual shareholding. Cost 2021 2020 Non Government Debt Securities ----- Rupees in '000 ----- 9.5.3 Listed AAA AA+, AA, AAA+, A, AUnrated Unlisted AAA AA+, AA, AAA+, A, AUnrated 221,413 134,866 170,089 151,867 678,235 309,750 210,700 170,018 155,169 845,637 200,034 1,599,393 971,151 2,770,578 71,429 200,037 1,749,104 713,071 2,733,641 3,448,813 3,579,278 171
175. JS BANK LIMITED 9 .5.3.1 Number of certificates 2021 2020 ---- Numbers ---- Term finance certificates - listed * Worldcall Telecom Limited (note 9.5.3.1.2) Jahangir Siddiqui & Co. Ltd. - XI - related party Bank Al Habib Limited Soneri Bank Limited Rating 2021 2020 Cost 2021 2020 Market value Cost Market value ---------------- Rupees in '000 ---------------- 90,650 90,650 Unrated Unrated 151,867 - - 3,000 25,000 30,000 3,000 25,000 30,000 AA+ AA A AA+ AAA 9,866 125,000 150,012 10,095 125,000 150,375 12,500 125,000 150,013 12,366 125,000 150,000 436,745 285,470 442,682 287,366 155,169 * Secured and have a face value of Rs.5,000 each unless specified otherwise. 9.5.3.1.1 Listed term finance certificates are as follows: Name of the company Worldcall Telecom Limited Jahangir Siddiqui & Co. Ltd. - XI - related party Bank Al Habib Limited Soneri Bank Limited 9.5.3.1.2 9.5.3.2 Profit rate per annum Maturity date Semi-annually Semi-annually Semi-annually Semi-annually 6 Month KIBOR ask rate plus 1.60% 6 Month KIBOR ask rate plus 1.40% 6 Months KIBOR ask rate plus 1.50% 6 Month KIBOR ask rate plus 2.00%. September 20, 2026 March 06, 2023 Perpetual December 06, 2028 Due to weak financial position of the company, the group has recognised full impairment loss on these term finance certificates. Number of certificates 2021 2020 ---- Numbers ---- Sukuk certificates - listed Cnergyico Pk Limited (Formerly: Byco Petroleum Pakistan Limited) Bank Islami Pakistan Limited - Ehad Sukuk Dawood Hercules Corporation Limited - Sukuk - I Dawood Hercules Corporation Limited - Sukuk - II 9.5.3.2.1 Repayment frequency 5,310 4,016 - 5,310 4,001 520 600 Cost AAA A- AAA AAA AA 221,413 20,077 - 223,319 20,080 - 309,750 20,005 31,200 42,000 308,616 20,005 31,542 42,519 241,490 243,399 402,955 402,682 Repayment frequency Profit rate per annum Maturity date Quarterly 3 Month KIBOR ask rate plus 1.05%. January 18, 2022 Monthly 3 Months Kibor + 2.75% Perpetual Cnergyico Pk Limited (Formerly: Byco Petroleum Pakistan Limited) (Chief Executive: Mr. Amir Abbassciy) Bank Islami Pakistan Limited - Ehad Sukuk (Chief Executive: Syed Amir Ali) Note Term finance certificates unlisted, secured Azgard Nine Limited 9.5.3.3.1 & - related party 9.5.3.3.2 Azgard Nine Limited (related party) (privately placed TFCs) 9.5.3.3.3 Agritech Limited 9.5.3.3.2 Pakistan Water & Power Development Authority (WAPDA) NRSP Microfinance Bank Limited Airlink Communication Private Limited Secure Logistics Group Private Limited Bank Al Habib Limited 9.5.3.3.1 2021 2020 Market value Cost Market value ---------------- Rupees in '000 ---------------- 2020 Other particulars of listed sukuk certificates are as follows: Name of the company 9.5.3.3 Rating 2021 Number of certificates 2021 2020 ----- Rupees ----- Rating 2021 Face value per certificate 2020 ----- Rupees ----- Cost 2021 2020 ----- Rupees in '000 ----- 29,998 29,998 Unrated Unrated 5,000 62,151 65,022 12 30,000 12 30,000 Unrated Unrated Unrated Unrated 5,000 5,000 326,456 149,860 326,456 149,860 1,000 192 288 40,000 100,000 AAUnrated AA AAA AUnrated AA- 1,00,000 1,000,000 1,000,000 5,000 100,000 192,000 52,800 200,034 71,429 384,000 144,000 200,037 1,083,301 1,340,804 384 288 40,000 During the year, the Bank has restructured Azgard Nine Limited (ANL) Privately Placed Term Finance Certificates (TFCs) in accordance with the Scheme of Arrangement (Approved Scheme) approved by the Honorable Lahore High Court’s vide its order dated July 31, 2019 under section 279 to 283 of the Companies Act, 2017 for restructuring of liabilities towards its creditors. Approved Scheme is executed vide different agreements between ANL and agent banks, and are effective from time zero date i.e. April 29, 2021. Under the Approved Scheme the Bank has restructured its TFCs for ten years i.e. April 29, 2021 to April 29, 2031 and received new TFCs i.e. 22,261 certificates @ Rs. 5000 each both against its outstanding principal of PKR 48.280 million @ 5% p. a and will be repay with twenty equal quarterly installment after two years of grace period staring from July 29, 2023 and remaining PKR 13.870 million will be received in cash within two years from the time zero date, whereas TFCs of PKR 63.025 million received against its outstanding markup amount and will be repay by one bullet payment at the time of maturity i.e., April 29, 2031. 9.5.3.3.2 Due to weak financial position of the company the Bank has recognised full impairment loss on these term finance certificates. 9.5.3.3.3 These PPTFCs are held by JS Global Capital Limited has recognised full provision considering the financial position of the issuer amounting to Rs. 326.456 million (2020: Rs. 326.456 million). 172
176. JS BANK LIMITED 9 .5.3.3.4 Other particulars of unlisted term finance certificates are as follows: Name of the company Repayment frequency Profit rate per annum Maturity date Azgard Nine Limited - related party (Chief Executive: Mr. Ahmed H. Shaikh) Semi-annually 6 Month KIBOR ask rate plus 1.75% and 11%. December 04, 2017 and October 19, 2020 Agritech Limited (Chief Executive: Mr. Faisal Muzammil) Semi-annually 6 Month KIBOR ask rate plus 1.75%. November 29, 2019 Quarterly 3 Month KIBOR ask rate plus 3.00%. July 9, 2028 Airlink Communication Private Limited (President & CEO: Mr. Muzaffar Hayat Piracha) Quarterly 3 Month KIBOR ask rate plus 1.00%. January 7, 2022 Secure Logistics Group Private Limited (see note 9.5.3.3.3.1) (President & CEO: Mr. Gulraiz A. Khan) Quarterly 3 Month KIBOR ask rate plus 1.00%. January 2, 2024 Semi-annually 3 Month KIBOR ask rate plus 1.50%. December 20, 2027 NRSP Microfinance Bank Limited (President & CEO: Mr. Zahoor Hussain Khan) Bank Al Habib Limited (President & CEO: Mr. Mansoor Ali Khan ) Note 9.5.3.4 9.5.3.4.1 9.5.3.4.1 2,000 --------- Rupees --------- 2,000 1,350 Cost 2021 2020 ----- Rupees in '000 ----- A A A 87,500 90,000 75,000 1,232,393 100,000 1,265,104 1,307,393 1,365,104 Repayment frequency Profit rate per annum Maturity date Ghani Gases Limited (Chief Executive: Mr. Atique Ahmad Khan) Quarterly 3 Month KIBOR ask rate plus 1.00%. February 03, 2023 Pakistan Services Limited (Chief Executive: Mr. Murtaza Hashwani) Quarterly 3 Month KIBOR ask rate plus 1.00%. January 17, 2024 Number of certificates 2021 2020 --------- Numbers --------- Maturity 2021 2020 Face value per certificate --------- Rupees --------- Cost 2021 2020 ----- Rupees in '000 ----- Commercial paper certificates - unlisted TPL Corporation Limited Waves Singer Pakistan Limited 70 3,000 - Preference shares - unlisted Shares 2021 2020 --------- Numbers --------- Intercity Touring Company Private Limited 9.5.3.6.1 (associated company) 1,848,888 Note 9.5.3.6 Face value per certificate 2020 Other particulars of unlisted sukuk certificates are as follows: Name of the company 9.5.3.5 Rating 2021 Sukuk certificates - unlisted Ghani Gases Limited Pakistan Services Limited 9.5.3.4.1 Number of certificates 2021 2020 --------- Numbers --------- 1,848,888 January 11, 2022 July 31, 2022 Rating 2021 2020 Unrated Unrated 1,000,000 100,000 10 Due to weak financial position of the company, the Bank has recognised full impairment loss on these term finance certificates. 9.5.4 Open End Mutual Fund Name of fund Units 2021 2020 --------- Numbers --------- ABL Islamic Cash Fund ABL Cash Fund Lakson Money Market Fund Related parties JS Cash Fund (Related Party) JS Value Fund JS Growth Fund JS Fund of Funds JS Islamic Pension Savings Fund - Equity JS Islamic Pension Savings Fund - Debt JS Islamic Pension Savings Fund - Money Market JS Pension Savings Fund Money Market JS Pension Savings Fund - Debt JS Pension Savings Fund - Equity 50,056,024 63,654,155 964,779 - - 352,151 - Cost 2021 2020 2021 2020 ------------------ Rupees in '000 ------------------ 9.5.3.6.1 Net asset value per unit Rupees 69,807 282,344 10 27,733 27,733 2021 2020 Cost Market value Cost Market value ------------------------- Rupees in '000 ------------------------- 10.00 10.22 105.60 500,000 625,000 100,087 500,560 650,463 101,881 8,922,701 3,175,696 3,373,965 1,343,094 1,937,116 2,822,294 106.50 166.02 59.16 950,000 578,727 189,638 950,268 527,229 199,604 249,115 323,937 148,838 286,643 348,448 179,583 147,900 182,354 636.46 13,437 94,132 16,567 119,969 213,852 213,852 260.16 21,385 55,636 21,385 51,942 222,303 222,303 225.53 22,230 50,136 22,230 47,159 177,463 137,349 205,210 177,463 137,349 205,210 260.66 323.65 457.86 17,746 13,735 12,635 3,044,620 46,258 44,453 93,958 3,314,578 17,746 13,735 12,635 826,188 43,074 41,339 98,131 1,216,288 173
177. JS BANK LIMITED 9 .5.5 Foreign Securities Name of Bond 9.5.5.1 2020 BBCaa2 - B- Coupon rate % Date of Maturity 2021 2020 Cost Market value Cost Market value --------------------- Rupees in '000 --------------------- Government Debt securities Islamic Republic Of Pakistan Islamic Republic Of Pakistan Republic of Srilanka The Third Pakistan International Sukuk Co Ltd The Third Pakistan International Sukuk Co Ltd Oman Government International Bond Republic of Turkey Republic of Turkey Republic of Turkey Arab Republic of Egypt Arab Republic of Egypt Republic of Kenya Republic of Nigeria Oman Government International Bond 9.5.5.2 Rating 2021 Caa1 BBBa3 B+ B+ B+ B B B+ B2 Ba3 6.88% 8.25% 5.75% 5.50% 5.63% 6.00% 4.88% 6.13% 7.63% 6.59% 7.60% 7.25% 6.50% 5.63% December 5, 2027 April 15, 2024 April 18, 2023 - 557,281 570,070 245,503 - 533,147 562,674 146,166 - 508,091 210,499 159,186 163,296 419,735 158,289 313,692 90,973 510,058 350,286 257,393 248,288 243,815 498,909 151,557 161,516 163,443 411,374 161,350 340,588 92,129 525,769 366,718 268,347 257,666 244,036 1,372,854 1,241,987 3,633,601 3,643,402 186,645 189,841 - 182,361 191,807 - 339,826 39,828 331,385 42,502 376,486 374,168 379,654 373,887 Non Government Debt securities Petroleos Mexicanos Petroleos Mexicanos Bank of Ireland Ba3 Ba3 - Ba2 - 6.84% 6.88% - October 23, 2029 August 4, 2026 - 9.5.5.3 The Holding Company has recognised general provision (expected credit loss) under IFRS 9 of Rs. 68.232 million (2020: Rs. 122.758 million) held on foreign debt securities by Bahrain branch. However, the loss allowance is recognised in other comprehensive income and have not reduce the carrying amount of these securities. 9.6 Quality of Held to Maturity Securities Details regarding quality of Held to Maturity (HTM) securities are as follows 9.6.1 9.6.1.1 Federal Government Securities - Government guaranteed Cost 2021 2021 ------ Rupees in '000 ------ Market treasury bills Pakistan investment bonds 11,463,014 46,680,929 36,109,599 58,143,943 36,109,599 Security type Market Treasury Bills Pakistan investment bonds Note Maturity Redemption Coupon 9.6.1.2 9.6.1.3 Upto May 19, 2022 July 19, 2022 to August 22, 2029 On maturity On maturity On maturity Half yearly 9.6.1.2 Market treasury bills having maturity of tweleve months. The rates of profits ranging from upto 7.65% per annum (2020: Nil). The market value of securities as at December 31, 2021 amounted Rs. 11,323.221 million (2020: Nil). 9.6.1.3 Pakistan Investment Bonds (PIBs) having maturity of three to ten years. The rates of profits ranging from 8.23% to 12% per annum (2020: 7.75% to 12%% per annum). The market value of securities as at December 31, 2021 amounted Rs. 45,940.114 million (2020: Rs. 35,862.699 million). 9.7 Investment in associated company Shares Note Omar Jibran Engineering Industries Limited Veda Transit Solutions Private Limited Intercity Touring Company Private Limited 9.7.1 9.7.1 & 9.7.2 9.7.1 2021 Percentage holding 2021 2021 2021 --- Numbers --- Cost 2021 2021 ------ Rupees in '000 ------ 7,200,000 7,200,000 9.60% 9.60% 237,192 215,793 48,000 48,000 3.92% 9.12% 52,438 54,302 1,351,111 1,351,111 9.12% 9.12% 289,630 698 270,793 9.7.1 The investments classified as associate on account of it's significant influence over the investee companies. All associated companies are incorporated in Pakistan. 9.7.2 During the year, the Holding Company has renounce to subscribe right shares issued by Veda Transit Solutions Private Limited, the Company, resultanty sharehoding percentage is reduced to 3.92% from 9.12%. However, despite of that fact, the Holding Company has still have significant influence through the Shareholders' Reserved Matters and right to choose a representative on the Board. 9.7.4 The following is summarised financial information before inter-company eliminations with other companies in the group: Associated companies Omar Jibran Engineering Veda Transit Solutions June 30, June 30, June 30, June 30, 2021 2020 2021 2020 ------ Rupees in '000 -----Total income / sales (Loss) / profit after tax Total comprehensive income 2,401,848 149,638 (1,757) 1,950,375 (137,700) 7,560 Total assets Total liabilities Net assets 3,953,414 2,096,455 1,856,959 3,752,367 2,043,290 1,709,077 Cash flow from operating activities Cash flow (used in) / from investing activities Cash flow (used in) / from financing activities Net increase / (decrease) in cash and cash equivalents 452,483 (122,945) (25,026) 304,512 108,972 (75,100) (39,955) (6,083) 863,681 47,622 - 785,016 19,797 - 1,726,311 629,075 1,097,236 609,304 429,690 179,614 154,937 (695,121) 760,326 85,040 (10,237) (54,777) 220,142 20,026 174
178. JS BANK LIMITED Performing 2021 10 . ADVANCES Note Loans, cash credits, running finances, etc. 10.1 Non Performing 2020 2021 Total 2020 2021 2020 ------------------------------------------------ Rupees in '000 ------------------------------------------------ Bills discounted and purchased 232,178,096 15,144,516 231,322,752 11,602,390 13,926,269 - 11,733,555 - 246,104,365 15,144,516 243,056,307 11,602,390 Advances - gross 247,322,612 242,925,142 13,926,269 11,733,555 261,248,881 254,658,697 Provision against advances General General provision - under IFRS-9 (87,787) - 10.4.5 (25,193) - (21,327) - (6,569,829) (4,181,836) (25,193) (6,569,829) (21,327) (4,181,836) 10.4 (112,980) (21,327) (6,569,829) (4,181,836) (6,682,809) (4,203,163) 7,356,440 7,551,719 Specific Advances - net of provision 10.1 247,209,632 242,903,815 - - (87,787) 254,566,072 - 250,455,534 Particulars of net investment in finance lease 2021 Not later than one year Later than one and less than five years 2020 Over five years Total -------------------------- Rupees in '000 -------------------------Lease rentals receivable Guaranteed residual value Minimum lease payments Finance charges for future periods Later than one and less than five years Not later than one year Over five years Total -------------------------- Rupees in '000 -------------------------- 3,825,624 3,157,347 3,894 6,986,865 4,923,114 5,173,453 2,318 10,098,885 941,675 1,925,134 3,372 2,870,181 1,008,381 2,449,909 2,248 3,460,538 4,767,299 5,082,481 7,266 9,857,046 5,931,495 7,623,362 4,566 13,559,423 (1,286,416) (1,443) (2,279,681) 6,336,946 3,123 11,279,742 (515,035) (406,237) (346) (921,618) (991,822) Present value of minimum lease payments 4,252,264 4,676,244 6,920 8,935,428 4,939,673 2021 2020 ----- Rupees in '000 ----10.2 Particulars of advances (gross) In local currency 247,352,862 In foreign currencies 10.3 245,261,990 13,896,019 9,396,707 261,248,881 254,658,697 Advances include Rs. 13,926.269 million (2020: Rs. 17,733.555 million) which have been placed under non-performing status as detailed below: 2021 Non Performing Loans Category of classification 2020 Provision Non Performing Loans Provision -------------------------- Rupees in '000 -------------------------- Domestic Other Assets Especially Mentioned 789,192 2,013 296,799 394 Substandard 814,434 91,936 1,177,804 156,095 Doubtful 1,930,747 435,448 3,264,335 724,426 Loss 10,391,896 6,040,432 6,994,617 3,300,921 Total 13,926,269 6,569,829 11,733,555 4,181,836 175
179. JS BANK LIMITED 10 .4 Particulars of provision against non-performing advances 2021 Note Opening balance Exchange adjustments Charge for the year Reversals for the year 10.4.2 & 10.4.4 4,181,836 3,147,572 87,787 21,327 2,350 1,516 4,203,163 2,350 3,236,875 (758,874) 2,388,698 87,787 1,516 (758,874) 2,478,001 - - 87,787 25,193 Amount written off from the opening balance Closing Balance 10.4.1 (705) 10.4.3 & 10.4.6 2020 General General provision provision Specific General under IFRS-9 Total Specific General under IFRS-9 Total ------------------------------------------------------------ Rupees in '000 ------------------------------------------------------------ 6,569,829 (705) 6,682,809 3,339,941 1,087,212 (245,317) 841,895 4,181,836 161,166 - 7,520 71 13,736 (161,166) (161,166) 13,736 - - - 21,327 3,508,627 71 1,100,948 (406,483) 694,465 4,203,163 Particulars of provision against non-performing advances 2021 Note In local currency In foreign currency 10.4.5 2020 General General provision provision Specific General under IFRS-9 Total Specific General under IFRS-9 Total ------------------------------------------------------------ Rupees in '000 -----------------------------------------------------------6,569,829 6,569,829 87,787 87,787 25,193 25,193 6,657,616 25,193 6,682,809 4,181,836 4,181,836 - 21,327 21,327 4,181,836 21,327 4,203,163 10.4.2 This includes reversal of provision of Rs. 294.822 million (2020: Rs. 8.604 million) against reduction of non-performing loans in Rs. 1,475.823 million (2020: Rs. 90.180 million) of certain borrowers under ‘Debt Property Swap’ transactions, as disclosed in note 13.2.2. 10.4.3 The Holding Company, in accordance with BPRD circular letter No. 31 of 2020 dated July 10, 2020, has taken the benefit of general provision to make good the specific provision requirement of the consumer financing portfolio till December 31, 2021. 10.4.4 The State Bank of Pakistan through various circulars has allowed benefit of the forced sale value (FSV) of Plant and Machinery under charge, pledged stock and mortgaged residential, commercial and industrial properties (land and building only) held as collateral against non-performing loans (NPLs) for a maximum of five years from the date of classification. As at December 31, 2021, the Bank has availed cumulative FSV benefit under the directives of the SBP of Rs. 5,019.150 million (2020: Rs. 4,763.931 million). The additional profit arising from availing the FSV benefit - net of tax amounts to Rs. 3,061.682 million (2020: Rs 2,905.998 million). The increase in profit, due to availing of the benefit, is not available for distribution of cash and stock dividend to share holders. 10.4.5 This represents general provision held under IFRS 9 by Bahrain branch of the Holding company. 10.4.6 Advances - Deferred & Restructured / Rescheduled The SBP vide BPRD circular letter number 13 of 2020 dated March 26, 2020, has relaxed certain classification criteria of SBP Prudential Regulation R-8 (Classification and Provisioning of Assets). Accordingly, certain exposures of the Holding Company as at December 31, 2021 relating to facilities of customers have not been classified as non-performing on account of such relaxation. 2021 2020 -------- Rupees in '000 -------- 10.5 Particulars of Write Offs: 10.5.1 Against provisions Directly charged to profit and loss account 705 705 - 10.5.2 Write offs of Rs.500,000 and above Write offs of below Rs.500,000 141 564 705 - 10.6 Details of loan write off of Rs. 500,000/- and above In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the Statement in respect of written-off loans or any other financial relief of rupees five hundred thousand or above allowed to a person(s) during the year ended is given in Annexure-I. 176
180. JS BANK LIMITED 11 . FIXED ASSETS Capital work-in-progress Property and equipment Right-of-use assets 11.1 11.1 11.2 & 11.3 11.4 1,316,790 7,135,467 3,052,072 11,504,329 298,971 6,099,025 2,628,768 9,026,764 13.2.3 199,556 600,786 20,122 496,326 1,316,790 72,500 160,289 1,013 61,794 3,375 298,971 Capital work-in-progress Advance for building Civil works Advance for purchase of furniture and fixtures Advance for purchase of vehicles Advance for purchase of equipment and software 11.2 2021 2020 ----- Rupees in '000 ----- Note Property and equipment Note At January 01, 2021 Cost / Revalued amount Accumulated depreciation Net book value Year ended December 2021 Opening net book value Additions Movement in surplus on assets revalued during the year Adjustments in surplus 11.2.1 Disposals Cost Accumulated Depreciation 2021 Building on Electrical, office Leasehold Building on lease hold Lease hold Furniture and computer land free hold land land improvements and fixture equipment Vehicles Total ------------------------------------------------------------------------------------ Rupees in '000 -----------------------------------------------------------------------------------781,054 781,054 - 2,952,568 (361,848) 2,590,720 1,592,638 (752,637) 840,001 956,432 (478,494) 477,938 3,700,067 (2,411,776) 1,288,291 225,084 (104,063) 121,021 10,207,843 (4,108,818) 6,099,025 781,054 - - 2,590,720 74,219 840,001 101,027 477,938 60,738 1,288,291 636,551 121,021 13,381 6,099,025 885,916 207,868 - - 139,169 - - - (93,516) - - - - - - - 347,037 - (13,977) 8,162 (5,815) (151,385) (36,364) 25,709 (10,655) (64,895) (161,289) 121,565 (39,724) (511,475) (8,897) (5,093) (13,990) (29,483) (220,527) 150,343 (70,184) (850,754) - 2,958 (1,591) 1,367 923 (595) 328 771 (536) 235 509 (301) 208 5,161 (3,023) 2,138 - - (69,587) 35,593 (33,994) 4,587 (2,474) 2,113 31,692 (16,346) 15,346 2,904 (963) 1,941 (30,404) 15,810 (14,594) 739,200 739,200 - - - - (3,971) 1,654 (2,317) - 735,229 1,654 736,883 Closing net book value 1,728,122 - 2,710,592 751,201 465,567 1,386,907 93,078 7,135,467 At December 31, 2021 Cost / Revalued amount Accumulated depreciation Net book value 1,728,122 1,728,122 - 3,165,956 (455,364) 2,710,592 1,613,059 (861,858) 751,201 986,316 (520,749) 465,567 4,203,821 (2,816,914) 1,386,907 232,981 (139,903) 93,078 11,930,255 (4,794,788) 7,135,467 Depreciation charge Exchange rate adjustments Cost Accumulated Depreciation Write (offs) / backs Cost Accumulated Depreciation Transferred / other adjustments Cost Accumulated Depreciation Rate of depreciation (percentage) - Note At January 01, 2020 Cost / Revalued amount Accumulated depreciation Net book value Year ended December 2020 Opening net book value Additions Movement in surplus on assets revalued during the year Adjustments in surplus Disposals Cost Accumulated Depreciation - 1.01 - 4.78 10 12.5 12.5 - 33.3 20 2020 Building on Electrical, office Leasehold Building on lease hold Lease hold Furniture and computer land free hold land land improvements and fixture equipment Vehicles Total ------------------------------------------------------------------------------------ Rupees in '000 -----------------------------------------------------------------------------------1,520,254 1,520,254 - 2,187,969 (285,735) 1,902,234 1,650,673 (734,004) 916,669 955,778 (443,155) 512,623 3,522,707 (2,106,270) 1,416,437 253,832 (83,417) 170,415 10,091,213 (3,652,581) 6,438,632 1,520,254 - - 1,902,234 766,725 916,669 190,950 512,623 50,484 1,416,437 382,908 170,415 49 6,438,632 1,391,116 - - - - - (76,542) - - - - - - - - (1,852) (399) (2,251) (152,821) (14,501) 10,444 (4,057) (66,364) (47,037) 41,535 (5,502) (452,015) (25,741) 11,921 (13,820) (33,588) (89,131) 63,501 (25,630) (781,330) - (885) 280 (605) (276) 101 (175) (210) 105 (105) (152) 58 (94) (1,523) 544 (979) - - (246,248) 134,307 (111,941) (35,053) 20,480 (14,573) (158,301) 104,869 (53,432) (2,904) 963 (1,941) (442,506) 260,619 (181,887) (739,200) (739,200) - (2,126) 429 (1,697) - (741,326) 429 (740,897) Closing net book value 781,054 - 2,590,720 840,001 477,938 1,288,291 121,021 6,099,025 At December 31, 2020 Cost / Revalued amount Accumulated depreciation Net book value 781,054 781,054 - 2,952,568 (361,848) 2,590,720 1,592,638 (752,637) 840,001 956,432 (478,494) 477,938 3,700,067 (2,411,776) 1,288,291 225,084 (104,063) 121,021 10,207,843 (4,108,818) 6,099,025 Depreciation charge Exchange rate adjustments Cost Accumulated Depreciation Write offs Cost Accumulated Depreciation Transferred / other adjustments Cost Accumulated Depreciation 11.3 Rate of depreciation (percentage) - - 1.01 - 4.78 - 10 - 12.5 - 12.5 - 33.3 20 11.2.1 This includes transfer from capital work in progress during the year of Rs. 384.849 million. 177
181. JS BANK LIMITED 2021 2020 ----- Rupees in '000 ----11.2.2 The cost of fully depreciated property and equipment still in use Lease hold improvements Furniture and fixture Electrical, office and computer equipment Vehicles 284,913 185,336 1,456,722 32,552 1,959,523 268,841 195,614 1,192,927 10,669 1,668,051 11.2.3 The details of disposals of assets to related parties are given in annexure II these consolidated financial statements. 11.2.4 The properties of the Holding Companies were revalued by M/s. Luckyhiya Associates Pvt Ltd, an independent professional valuator. The revaluation was carried out, as at December 31, 2021 on the basis of professional assessment of present market values and as results of revaluation an additional surplus of Rs. 347.037 million (Land Rs. 207.868 million and Building Rs. 139.169 million). Had there been no revaluation, the carrying value of revalued land and building on land as at December 31, 2021 would have been lower by Rs. 713.210 million and Rs. 1,350.419 million respectively, and net surplus on revaluation of fixed assets, deferred tax liability and incremental depreciation expense would have been lower by Rs. 1,751,559 million, Rs. 312.070 million and Rs. 49.417 million respectively. 11.3 Non-current assets held for sale Note Leasehold land 11.3.1 2021 2020 ----- Rupees in '000 ----- 739,200 11.3.1 During the year, the management has decided to set-up regional offices by way of acquisition of owned properties in first tier cities. Therefore, considering the best interest of the Holding Company, the management has directed to retain the property for development of regional office and has reclassified said property for its own use under the International Accounting Standard (IAS)- 16 ‘Property, plant and equipment’, and its carrying value will be recovered through continued use and ceased to be classified as “held-for-sale”. As of December 31, 2021, the property is being measured at its carrying amount before the asset was classified as held-for-sale as adjusted for any subsequent re-valuation at the date of the decision not to sell i.e. Rs. 910 million. 11.4 The carrying amounts of right-of-use assets Note Opening balance 2,628,768 Additional impact / adjustments arised during the year - net 1,453,851 Termination of leases Depreciation 29 Exchange gain 31,080 (557,169) (961,584) (954,275) - 3,052,072 2,628,768 223,901 INTANGIBLE ASSETS Capital work-in-progress 12.1 711,192 Computer software 12.2 976,394 828,024 1,463,624 1,463,624 3,151,210 2,515,549 711,192 223,901 Goodwill 12.1 4,109,132 (71,459) 2,496 Closing balance 12. 2021 2020 ----- Rupees in '000 ----- 12.2 & 12.6 Capital work-in-progress Advance for purchase of software 12.1.1 12.1.1 During the year, advanace against purchase software was written off amounting Rs. 4.964 million as disclosed in note 32. 178
182. JS BANK LIMITED 12 .2 INTANGIBLE ASSETS At January 1, 2021 Cost Accumulated amortisation and impairment Net book value Year ended December 2020 Opening net book value Additions: - directly purchased Impairment loss recognised in the profit and loss account - net Amortisation charge Exchange rate adjustments Cost Accumulated Amortisation Transfer Cost Accumulated Amortisation Write offs Cost Accumulated Amortisation Other adjustments Cost Accumulated Amortisation Closing net book value At December 31, 2021 Cost Accumulated amortisation and impairment Net book value Rate of amortisation (percentage) Useful life (years) 2021 Membership Trading right card - Pakistan entitlement Mercantile certificate Exchange Computer (TREC) Limited software Goodwill Total ---------------------------------------- Rupees in '000 ---------------------------------------- 5,727 (3,227) 2,500 3,500 3,500 1,437,537 (615,513) 822,024 1,463,624 1,463,624 2,910,388 (618,740) 2,291,648 2,500 3,500 822,024 1,463,624 2,291,648 - - 286,660 - 286,660 - - (139,889) - (139,889) - - 769 (415) 354 - 769 (415) 354 - - 3,971 (1,654) 2,317 - 3,971 (1,654) 2,317 - (1,000) (1,000) - - (1,000) (1,000) - - (48) (24) (72) - (48) (24) (72) 2,500 2,500 971,394 1,463,624 2,440,018 5,727 (3,227) 2,500 - 2,500 2,500 - 1,728,889 (757,495) 971,394 10% 10 1,463,624 1,463,624 3,200,740 (760,722) 2,440,018 See note 12.6 2020 Membership card - Pakistan Computer Goodwill Total Mercantile software Exchange Limited ---------------------------------------- Rupees in '000 ---------------------------------------- Trading right entitlement certificate (TREC) At January 1, 2020 Cost Accumulated amortisation and impairment Net book value Year ended December 2020 Opening net book value Additions: - directly purchased Impairment loss recognised in the profit and loss account - net Amortisation charge Exchange rate adjustments Cost Accumulated Amortisation Write offs Cost Accumulated Amortisation Closing net book value At December 31, 2020 Cost Accumulated amortisation and impairment Net book value Rate of amortisation (percentage) Useful life (years) 5,727 (3,227) 2,500 3,500 3,500 1,222,657 (497,340) 725,317 1,463,624 1,463,624 2,695,508 (500,567) 2,194,941 2,500 3,500 725,317 1,463,624 2,194,941 - - 214,582 - 214,582 - - (118,032) - (118,032) - - 230 (73) 157 - 230 (73) 157 2,500 3,500 68 (68) 822,024 1,463,624 68 (68) 2,291,648 5,727 (3,227) 2,500 - 3,500 3,500 - 1,437,537 (615,513) 822,024 10% 10 1,463,624 1,463,624 See note 12.6 - 2,910,388 (618,740) 2,291,648 179
183. JS BANK LIMITED 12 .2.1 This includes transfer from capital work in progress during the year of Rs. 282.459 million. 2021 2020 ----- Rupees in '000 ----12.3 The cost of fully amortized computer software still in use 195,911 173,623 12.4 This represents Trading Right Entitlement Certificate (TREC) received from PSX in accordance with the requirements of the Stock Exchanges (Corporatisation, Demutualization and integration) Act, 2012 (the Act). The company has also received shares of PSX after completion of the demutualisation process. 12.5 This represents membership cards of Pakistan Mercantile Exchange. It has an indefinite useful life and is carried at cost. 12.6 Goodwill is recorded by the group upon the event fully disclose in note 1.1.2. For impairment testing, goodwill has been allocated to 'Trading and Sales' Segment as Cash Generating Unit (CGU), which is also a reportable segment. 12.7 Key assumptions used in value in use calculation The recoverable amount of the CGU has been determined based on value in use calculation, using cash flow projections based on business plan approved by the Board of Directors of the Holding Company covering a five year period. The discount rates applied to cash flows beyond five years are extrapolated using a terminal growth rate. The following rates are used by the Holding Company. 2021 2020 Percentages Discount rate Terminal growth rate 15.25 10.00 17.41 12.51 The calculation of value in use is most sensitive to following assumptions: a) Interest margins Interest margins are based on prevailing industry trends and anticipated market conditions. b) Discount rates Discount rates reflect management estimates of the rate of return required for each business and are calculated after taking into account the prevailing risk free rate, industry risk and business risk. Discount rates are calculated by using cost of equity of the Bank. c) Key business assumptions The assumptions are important as they represent management assessment of how the unit's position might change over the projected period. Based on the expansion plans, management expects aggressive growth in advances, investments and deposits during the projected periods and thereafter stabilisation in line with industry trends. Management believes that any significant change in key assumptions, on which CGU's recoverable amount is based, may impact the carrying amount to further exceed its recoverable amount. Value in use calculation of the CGU are sensitive to changes in assumptions for interest rate spreads, Non Funded Income (NFI), long term growth rates and discount rates. d) Sensitivity to changes in assumption The estimated recoverable amount of the 'Trading and Sales' CGU exceeds its carrying amount by approximately Rs. 5,465 million (2020: 5,345 million). Management has identified two key assumptions for which there could be a reasonably possible change that could cause the carrying amount to exceed the recoverable amount. The following table shows the amount that these two assumptions are required to change individually in order for the estimated recoverable amount to be equal to the carrying amount. Changes required for carrying amount to equal recoverable amount (%) 2021 - Discount rate - Terminal growth rate 2020 1.99 (2.67) 3.16 (4.88) 180
184. JS BANK LIMITED 13 . OTHER ASSETS Income / mark-up accrued in local currency Income/ mark-up accrued in foreign currencies Trade receivable from brokerage and advisory business - net Advances, deposits, advance rent and other prepayments Acceptances Dividend receivable Taxation (payments less provision) Net defined benefit plan Balances due from funds under management Receivable against bancassurance / bancatakaful Stationery and stamps in hand Receivable in respect of home remittance Due from State Bank of Pakistan Rebates receivable from SBP and others Non-banking assets acquired in satisfaction of claims Mark to market gain on derivative instruments Mark to market gain on forward foreign exchange contracts Advance against investments in securities Inter bank fund transfer settlement Credit card settlement Insurance Others Less: Provision held against other assets Other assets (net of provisions) Surplus on revaluation of non-banking assets acquired in satisfaction of claims 13.1 13.2 Note 37.5 13.1 13.2 & 19.2 23.2 13.3 13.4 2021 2020 ----- Rupees in '000 ----7,184,845 93,851 1,895,846 1,439,495 3,689,343 865,822 318,319 105,157 20,889 22,864 27,549 179,197 68,142 2,537,863 51,215 467,017 705,198 88,237 283,370 75,884 642,185 20,762,288 (430,569) 20,331,719 120,674 20,452,393 6,885,407 93,950 1,515,019 1,082,525 3,603,192 1,103 292,053 317,581 109,501 30,660 22,730 30,656 245,310 305,331 1,176,143 175,454 334,735 1,645 140,899 7,636 667,037 17,038,567 (430,569) 16,607,998 135,109 16,743,107 This includes an amount of Rs. 67.555 million (2020: Rs. 297.218 million) receivable from State Bank of Pakistan in respect of home remittance services provided by the Holding Company. 2021 2020 Non banking assets acquired in satisfaction of claims Note ----- Rupees in '000 ----Market value of non-banking assets acquired in satisfaction of claims 2,658,537 1,311,252 1,311,252 1,529,159 (14,320) (156,843) (10,711) 2,658,537 1,182,425 90,178 41,511 (2,862) 1,311,252 13.2.1 Movement of Non banking assets acquired in satisfaction of claims at market value: As at January 01 Addition during the year Surplus recognised during the year Transferred during the year Depreciation during the year 13.2.2 21.3 13.2.3 29 13.2.2 During the year, the Holding Company has acquired properties of Rs. 1,529.159 million (2020: Rs. 90.178 million) against debt swap transactions with borrowers resulting in reversal of provision of Rs. Rs. 294.822 million (2020: Rs. 8.604 million) against reduction in non-performing loans of Rs. 1,475.823 million (2020: Rs. 90.180 million) (refer note 10.4.2). 13.2.3 During the year, under section 10 of the Banking Companies Ordinance, 1962, the property (situated at 15th Floor, Pace Tower, Plot # 27, Block-H, Gulberg II, Lahore) acquired under debt property swap agreement is used by the Bank for its own operations. 13.2.4 Non-banking assets acquired in satisfaction of claims are carried at revalued amount according to the requirements of the ‘Regulation for Debt Property Swap’ (the regulations) issued by SBP vide the BPRD Circular No. 1 of 2016, dated January 01, 2016. Non-banking assets acquired in satisfaction of claims have been revalued by independent professional valuers as at December 31, 2021. The revaluation was carried out by M/s Sipra (Pvt Ltd). M/s Sardar Ent. (Pvt) Ltd, M/s. Luckyhiya Associates Pvt Ltd, M/s. bfa (Pvt) Ltd., M/s Tristar International Consultants (Pvt) Ltd, M/s Sipra & Company (Pvt.) Ltd., M/s Pakistan Inspection Co. (Pvt) Ltd. M/s Joseph Lobo (Private) Limited and Engineering Pakistan International (Pvt) Ltd. on the basis of professional assessment of present market values. Had there been no revaluation, the carrying value of non-banking assets acquired in satisfaction of claims would have been lower by Rs. 120.674 million (2020: 135.254 million), and surplus on revaluation of assets net, deferred tax liability and depreciation expense would have been lower by Rs. 119.714 million (2020: Rs. 31.080 million), Rs. 0.960 million (2020: Rs. 4.029 million) and Rs. 0.115 million (2020: Rs. 0.145 million) respectively. 2021 2020 ----- Rupees in '000 ----Written down value: Leasehold Land Building on leasehold land 13.3 13.4 2,134,847 403,016 2,537,863 944,946 231,197 1,176,143 This represents advance against purchase of TFC amounting Rs. 250 million, ordinary shares and preference shares of foreign companies amounting Rs. 205.75 million and Rs. 249.448 million respectively. 2021 2020 Provision held against other assets ----- Rupees in '000 ----Trade receivable from brokerage and advisory business - net Others 403,318 27,251 430,569 403,318 27,251 430,569 430,569 430,569 432,908 100 (2,439) (2,339) 430,569 13.4.1 Movement in provision held against other assets Opening balance Charge for the year Reversal for the year Net (reversal) / charge for the year Closing balance 181
185. JS BANK LIMITED 14 . BILLS PAYABLE Note In Pakistan Outside Pakistan 15. 6,786,643 252,243 7,038,886 4,752,985 228,998 4,981,983 20,775,516 2,558,982 21,496,075 1,985,038 246,691 1,322,204 448,799 5,428,540 5,439 72,171 724,109 9,029 8,256,982 31,591,480 13,500,000 45,091,480 193,029 433,085 32,900 11,543,118 96,192 229,984 51,871 33,901 12,614,080 36,095,193 36,095,193 22,160,140 2,916,027 630,885 25,707,052 70,798,532 9,667,181 2,397,468 12,064,649 48,159,842 306,663 943,409 1,250,072 143,570 143,570 72,048,604 48,303,412 71,154,003 894,601 72,048,604 48,159,842 143,570 48,303,412 BORROWINGS Secured Borrowings from State Bank of Pakistan under: Export refinancing scheme (ERF) Long-Term Finance Facility (LTFF) Other borrowings Financing Facility for Storage of Agricultural Produce (FFSAP) Financing Facility for Renewable Energy Projects Refinance and credit guarantee scheme for women entrepreneurs Refinance for Wages & Salaries Refinance facility for modernization of Small and Medium Enterprises (SMEs) Refinance facility for combating COVID-19 Temporary economic refinance facility (TERF) Small and Medium Enterprises' Financing Refinance facility for working capital of SMEs 15.2.1 15.2.2 15.2.3 Repurchase agreement borrowings 15.2.4 Borrowing from financial institutions Repurchase agreement borrowings Refinancing facility for mortgage loans Mortgage loan 15.2.5 15.2.6 15.2.7 Total secured Unsecured Overdrawn nostro accounts Commercial papers Total unsecured 15.1 2021 2020 ----- Rupees in '000 ----- 15.2.8 Particulars of borrowings In local currency In foreign currencies 15.2.1 The Holding Company has entered into agreement with the SBP for extending export finance to customers. As per the terms of the agreement, the Holding Company has granted SBP the right to recover the outstanding amount from the Bank at the date of maturity of finances by directly debiting the current account maintained by the Bank with SBP. These borrowings are repayable on a quarterly basis and to be matured between January 04, 2022 and June 29, 2022 (2020: January 04, 2021 and February 08, 2027). These carry mark-up at the rate from 1% to 2% (2020: 1% to 3%) per annum. 15.2.2 These borrowings have been obtained from the SBP for providing financing facilities to exporters for adoption of new technologies and modernization of their plant and machinery. These borrowings will mature between February 20, 2022 and March 08, 2031 (2020: November 04, 2021 and November 18, 2030). These carry mark-up at rates ranging from 2.00% to 3.50% (2020: 2.00% to 3.50%) per annum. 15.2.3 Other borrowings have been obtained from SBP under various facilities on particulars mentioned below: Financing Facility for Storage of Agricultural Produce (FFSAP) Financing Facility for Renewable Energy Projects Refinance and credit guarantee scheme for women entrepreneurs Refinance for Wages & Salaries Refinance facility for modernization of Small and Medium Enterprises (SMEs) Refinance facility for combating COVID-19 Small and Medium Enterprises' Financing Markup rate Per annum From Matured To 2%-2.5% 2%-3% 0%-0% 0%-2% 0%-0% 0%-0% 2%-2% January 1, 2022 June 1, 2022 January 29, 2022 October 1, 2022 June 3, 2024 April 1, 2025 December 18, 2025 February 22, 2028 July 26, 2031 November 30, 2026 April 1, 2023 June 22, 2026 July 16, 2026 September 8, 2026 15.2.4 This represents borrowing against Pakistan Investment Bonds carrying mark-up at the rates ranging upto from 9.9% to 10.05% per annum and will be matured on February 18, 2022. The cost and market value of securities given as collateral of amounting to Rs. 13,468 million and Rs. 13,466.250 million respectively. 15.2.5 This represents borrowing against Market Treasury Bills, Pakistan Investment Bonds and Foreign Currency Bonds (2020: Market Treasury Bills) carrying mark-up at the rates ranging upto from 1.25% to 10.70% (2020: 6.70%) per annum and will be matured between January 04, 2022 and September 20, 2022 (2020: January 11, 2021 and January 12, 2021). The cost and market value of securities given as collateral of amounting to Rs. 22,359.782 million (2020: Rs. 9,766.518 million) and Rs. 22,274.845 million (2020: Rs. 9,767.491 million) respectively. 15.2.6 The Holding Company has entered into agreement with the Pakistan Mortgage Refinance Company Limited (PMRC) for extending housing finance facilities to the Holding Company's customers on the agreed terms and conditions. The borrowing carries mark-up rate of 3 years PKRV less 100bps and will be matured on February 28, 2022 and June 30, 2031 (2020: February 28, 2022 and December 09, 2025). 15.2.7 This represents Diminishing Musharika borrowing against carrying profit rate 3 months KIBOR plus 1.25% and will be matured on November 24, 2024. 15.2.8 This represents unsecured, unlisted and rated Commercial Paper in the form of promissory notes with a face value of Rs.1,000 million (inclusive of greenshoe option of Rs.500 million) with a tenor of six months and carrying mark-up rate of six months KIBOR plus 175 bps and will be redeemed at face value on maturity May 30, 2022. 182
186. JS BANK LIMITED 16 . DEPOSITS AND OTHER ACCOUNTS 2021 2020 In Local In Foreign In Local In Foreign Currency currencies Total Currency currencies Total ---------------------------------------------- Rupees in '000 ---------------------------------------------Customers Current deposits Savings deposits Term deposits Margin deposits Financial Institutions Current deposits Savings deposits Term deposits 16.1 103,471,600 94,411,562 197,382,108 8,847,107 404,112,377 7,672,420 5,055,750 13,980,936 3,408 26,712,514 111,144,020 99,467,312 211,363,044 8,850,515 430,824,891 90,714,627 98,103,956 186,691,026 5,920,595 381,430,204 9,668,068 3,944,797 15,203,881 163 28,816,909 100,382,695 102,048,753 201,894,907 5,920,758 410,247,113 1,035,444 14,024,408 12,929,088 27,988,940 504,985 31,231 536,216 1,540,429 14,055,639 12,929,088 28,525,156 1,281,453 11,192,800 8,266,773 20,741,026 435,683 435,683 1,717,136 11,192,800 8,266,773 21,176,709 432,101,317 27,248,730 459,350,047 402,171,230 29,252,592 431,423,822 Composition of deposits Note 2021 2020 -------- Rupees in '000 -------- 16.2 152,824,495 93,109,449 39,277,014 5,663,632 22,861,524 145,613,933 459,350,047 - Individuals - Government (Federal and Provincial) - Public Sector Entities - Banking Companies - Non-Banking Financial Institutions - Private Sector 16.2 This includes deposits eligible to be covered under insurance arrangements amounting to Rs. 105,788.825 million (2020: Rs. 112,167.861 million, the number is revised from Rs. 143,210.503 million due to categorization differences in eligible deposits). Note 17. 147,143,479 92,317,151 52,156,536 2,950,286 18,226,423 118,629,947 431,423,822 2021 2020 -------- Rupees in '000 -------- SUB-ORDINATED DEBT Term Finance Certificates - First Issue Term Finance Certificates - Second Issue Term Finance Certificates - Third Issue Term Finance Certificates - Fourth Issue 17.1 17.2 17.3 17.4 1,996,800 2,500,000 2,500,000 6,996,800 2,995,200 1,997,600 2,500,000 7,492,800 17.1 During the year, the Holding Company exercised the call option of Term Finance Certificates - First Issue in accordance with the Trust Deed and Terms and Conditions for the TFC issue, after completing the regulatory requirements. Accordingly, the said TFCs were redeemed in full on December 28, 2021. 17.2 In 2017, the Holding company has issued Rs. 2 billion of rated, over the counter listed, unsecured and subordinated term finance certificates ("TFCs" or "the Issue") as an instrument of redeemable capital under Section 66 of the Companies Act, 2017 and as outlined by State Bank of Pakistan, SBP, under the BPRD circular No. 06 dated August 15, 2013 and Basel III guidelines. Summary of terms and conditions of the issue are: Purpose: To contribute towards the Bank's Tier II Capital for complying with the capital adequacy requirement and to utilize the funds in the Bank's business operations as permitted by its Memorandum & Articles of Association. Issue date: December 29, 2017 Tenure: Up to Seven years from the issue date. Maturity Date: December 29, 2024 Rating: A + (Single A Plus) Profit Rate: Floating rate of return at Base rate + 1.4 percent per annum; Base rate is defined as the average six months KIBOR prevailing on the Base Rate setting date. The Base Rate will be set for the first time on the last working day prior to the Issue Date and subsequently on the immediately preceding business day before the start of each six monthly period. Profit payment: Semi-annual Redemption: The instrument is structured to redeem 0.24% of the Issue amount during the first six years after the issue date and the remaining Issue amount of 99.76% in two equal semi-annual installments of 49.88% each in the last year. Security: The Issue is unsecured and subordinated as to payment of Principal and profit to all other indebtedness of the Bank, including deposits, and will not be redeemable before maturity without prior approval of SBP. 183
187. JS BANK LIMITED 17 .3 Call Option: Exercisable in part or in full on or after the 10th redemption, subject to SBP's approval. Lock-in-clause: Principal and profit will be payable subject to compliance with MCR or CAR set by SBP. Loss absorbency clause: Upon the occurrence of a Point of Non-Viability event as defined under SBP BPRD Circular # 6 of 2013 dated August 15, 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 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 319,982,544 shares. In 2018, the Holding company has issued Rs. 2.5 billion of rated, privately placed, unsecured, subordinated, perpetual and non-cumulative term finance certificates ("TFCs" or "the Issue") as an instrument of redeemable capital under Section 66(1) of the Companies Act, 2017 and as outlined by State Bank of Pakistan, SBP, under the BPRD circular No. 06 dated August 15, 2013 (the "Circular") and Basel III guidelines. Summary of terms and conditions of the issue are: Purpose: To contribute towards the Bank's Tier I Capital for complying with the capital adequacy requirement and to utilize the funds in the Bank's business operations as permitted by its Memorandum & Articles of Association. Issue date: December 31, 2018 Maturity Date: Perpetual Rating: A (Single A) Profit Rate: Floating rate of return at Base rate + 2.25 percent per annum; Base rate is defined as the average six months KIBOR prevailing on the Base Rate setting date. The Base Rate will be set for the first time on the last working day prior to the Issue Date and subsequently on the immediately preceding business day before the start of each six monthly period Profit payment frequency: Semi-annually on a non-cumulative basis Redemption: Not applicable Security: The Issue is unsecured Subordination: The Issue is subordinated as to payment of Principal and profit to all other claims except common shares. Call Option: Exercisable in part or in full at a par value on or after five years from the issue date, with prior approval of SBP. The Bank shall not exercise the call option unless the called instrument is replaced with capital of same or better quality. Lock-in-clause: Payment of profit will be made from current year's earning and subject to compliance with MCR or CAR set by SBP. Loss absorbency clause: Pre-Specified Trigger (“PST”) Upon the occurrence of a Pre-Specified Trigger as defined under SBP BPRD Circular # 6 of 2013 dated August 15, 2013 which stipulates that if an issuer's Common Equity Tier 1 ("CET 1") ratio falls to or below 6.625% of Risk Weighted Assets ("RWA"), the Issuer will have full discretion to determine the amount of TFCs to be permanently converted into common shares or written off, subject to SBP regulations / instructions, and the cap specified below. The Bank will be able to exercise this discretion subject to: - If and when Bank's CET 1 reaches the loss absorption trigger point, the aggregate amount of Additional Tier-1 capital to be converted must at least be the amount sufficient to immediately return the CET 1 ratio to above 6.625% of total RWA (if possible); - The converted amount should not exceed the amount needed to bring the CET 1 ratio to 8.5% of RWA (i.e. minimum CET 1 of 6.0% plus capital conservation buffer of 2.5%); - In case, conversion of Additional Tier-1 capital Instrument is not possible following the trigger event, the amount of the Instrument must be written off in the accounts resulting in increase in CET 1 of the issuer; Point of NonViability Upon the occurrence of a Point of Non-Viability event as defined under SBP BPRD Circular # 6 of 2013 dated August 15, 2013, 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 Issuer’s common / ordinary share on the date of the PONV trigger event as declared by SBP, subject to the cap specified below; The PONV trigger event is the earlier of: - A decision made by SBP that a conversion or temporary / permanent write-off is necessary without which the Issuer would become non-viable; 184
188. JS BANK LIMITED - The decision to make a public sector injection of capital , or equivalent support, without which the Issuer would have become non-viable, as determined by SBP. - The maximum number of shares to be issued to TFC holders at the Pre-Specified Trigger and / or Point of Non Viability (or otherwise as directed by SBP) will be subject to a specified cap of 329,595,476 ordinary shares, or such other number as may be agreed to in consultation with SBP. 17.4 During the year, the Holding Company has issued Rs. 2.5 billion of rated, privately placed and unlisted (listing is in process), unsecured and subordinated term finance certificates ("TFCs" or "the Issue") as an instrument of redeemable capital under Section 66 of the Companies Act, 2017 and as outlined by State Bank of Pakistan, SBP, under the BPRD circular No. 06 dated August 15, 2013 and Basel III guidelines. Summary of terms and conditions of the issue are: Purpose: To contribute towards the Bank's Tier II Capital for complying with the capital adequacy requirement and to utilize the funds in the Bank's business operations as permitted by its Memorandum & Articles of Association. Issue date: December 28, 2021 Tenure: Up to Seven years from the issue date. Maturity Date: December 28, 2021 Rating: A + (Single A Plus) Profit Rate: Floating rate of return at Base rate + 2 percent per annum; Base rate is defined as the average six months KIBOR prevailing on the Base Rate setting date. The Base Rate will be set for the first time on the last working day prior to the Issue Date and subsequently on the immediately preceding business day before the start of each six monthly period. Profit payment: Semi-annual Redemption: The instrument is structured to redeem 0.24% of the Issue amount during the first six years after the issue date and the remaining Issue amount of 99.76% in two equal semi-annual installments of 49.88% each in the last year. Security: The Issue is unsecured Subordination: The Issue is subordinated all other indebtedness of the Bank including depositors, however, senior to the claims of investors in instruments eligible for inclusion in Tier I Capital Call Option: Exercisable in part or in full on or after the 10th redemption, subject to SBP's approval. Lock-in-clause: Principal and profit will be payable subject to compliance with MCR or CAR set by SBP. Loss absorbency clause: Upon the occurrence of a Point of Non-Viability event as defined under SBP BPRD Circular # 6 of 2013 dated August 15, 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 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 400,647,739 shares. 185
189. JS BANK LIMITED 2021 18 . DEFERRED TAX LIABILITIES Note Deductible Temporary Differences on: Provision against investments Provision against loans and advances Other assets General provision under IFRS-9 Intangible other than Goodwill Unrealised gain on revaluation of investments classified as held for trading Provision for workers' welfare fund Taxable Temporary Differences on: Operating fixed assets Goodwill Surplus on revaluation of operating fixed assets Surplus on revaluation of non-banking assets acquired in satisfaction of claims Unrealised gain / (loss) on revaluation of derivative financial instruments Liability against assets subject to finance lease - net Mark to market gain / (loss) on forward foreign exchange contracts Government Grant Surplus on revaluation of investments classified assets as available for sale Recognised in Balance as at Recognised in other Balance as at January 01, profit and loss comprehensive December 31, 2021 account income 2021 -------------------------- Rupees in '000 -------------------------- (57,149) (287,840) (119,330) (43,552) (2,904) (6,531) (58,207) 28,450 43,552 289 - (63,680) (346,047) (90,880) (2,615) 4,032 (179) (506,922) (32,878) 179 (25,146) - (28,846) (532,068) 21 188,533 512,268 240,391 (1,338) 58,545 (10,073) 81,752 187,195 570,813 312,070 21 4,029 (45) 21 (3,024) 960 5,302 (11,381) (5,302) 16,220 - 4,839 (22,893) 1,888 22,893 (1,338) - 550 672,375 1,590,512 79,562 60,335 139,063 732,710 1,809,137 1,083,590 54,416 139,063 1,277,069 2020 Note Deductible Temporary Differences on: Provision against investments Provision against loans and advances Other assets General provision under IFRS-9 Intangible other than Goodwill Liability against assets subject to finance lease - net Mark to market gain / (loss) on forward foreign exchange contracts Provision for workers' welfare fund Taxable Temporary Differences on: Operating fixed assets Goodwill Surplus on revaluation of operating fixed assets Surplus on revaluation of non-banking assets acquired in satisfaction of claims Unrealised (loss) / gain on revaluation of derivative financial instruments Unrealised loss / (gain) on revaluation of investments classified as held for trading Government Grant (Deficit) / surplus on revaluation of investments classified assets as available for sale Recognised in Balance as at Recognised in other Balance as at January 01, profit and loss comprehensive December 31, 2020 account income 2020 -------------------------- Rupees in '000 -------------------------(57,149) (132,305) (845,243) (3,097) (2,507) (7,082) (155,535) 725,913 (40,455) (397) (4,299) - (57,149) (287,840) (119,330) (43,552) (2,904) (11,381) 28,199 2,964 556,390 - (22,893) (179) (545,228) 21 260,103 512,268 374,394 (71,570) (58,646) (75,357) 188,533 512,268 240,391 21 967 (51) 82,321 (51,092) (3,143) (1,101,618) (665) - 3,113 4,029 (77,019) - 5,302 4,697 1,888 - 4,032 1,888 21 (253,627) 975,761 (26,142) (226,843) 952,144 879,900 672,375 1,628,818 18.1 (125,857) 329,547 879,900 1,083,590 18.1 As of December 31, 2021, the JSIL has accumulated losses of Rs. 383.134 million (2020: 359.015 million). The deferred tax on such losses works out to Rs. 138.922 million (2020: Rs. 104.751 million), however, the JSIL has recognised deferred tax asset on such losses to the extent of deferred tax liability of Rs. 27.813 million (2020: Rs. 0.637 million). Unrecognized deferred tax asset on carried forward business losses as at December 31, 2021 amounted to Rs. 166.734 million. 186
190. JS BANK LIMITED 19 . OTHER LIABILITIES Note Mark-up / return / interest payable in local currency Mark-up / return / interest payable in foreign currencies Unearned commission income on guarantees Accrued expenses Acceptances Trade payable from brokerage business Unclaimed dividends Mark to market loss on derivative instruments Mark to market loss on forward foreign exchange contracts Dividend payable Gratuity Payable to contractual staff Withholding taxes payable Government challan collection Donation payable Security deposits against leases, lockers and others Provision for Workers' Welfare Fund Payable in respect of home remittance Retention money payable Lease liability against right-of-use assets Advance against sale of assets Insurance payable Payable to vendors against SBS goods Debit card settlement Inter bank fund transfer Clearing and settlement accounts Others 19.1 37.5 29.2 19.1 2021 2020 -------- Rupees in '000 -------3,391,010 26,668 261,377 500,369 3,689,343 2,170,742 7,576 59,584 103,830 4,946 5,263 631,372 50,758 43,433 2,908,147 215,713 433,507 44,294 3,415,585 26,000 27,180 206,925 58,711 175,105 327,657 18,785,095 3,132,699 52,729 176,270 809,789 3,603,192 2,353,304 7,576 172,635 400,144 5,183 599,853 94,510 3,490,704 160,165 831,042 42,044 2,891,226 10,137 93,634 65,855 159,136 290,794 433,217 19,875,838 2,891,226 1,416,067 (82,912) 420,654 (1,254,891) 25,441 3,415,585 4,260,358 22,284 (613,771) 451,047 (1,228,692) 2,891,226 Lease liabilities The carrying amounts of lease liabilities and the movements during the year is as below: Opening balance Additional impact arised during the year - net Termination impact arised during the year-net Lease liability against right-of-use assets Payments Exchange gain Closing balance 25 19.2 During the year, the Bank has entered into an agreement to sell the property situated at Plot No. D2451/RH, Gali Dogran, Inside Lahori Gate, Lahore of Rs. 26 million which was recovered against settlement of loans and advances and classified under 'non-banking assets acquired in satisfaction of claims' having a carrying value of Rs. 24.900 million as of reporting date. The sale deed is expected to be executed next year after completion of all legal formalities. 20. SHARE CAPITAL 20.1 Authorised capital 20.1.1 Ordinary shares 2021 2020 ----- Rupees in '000 ----- 2021 2020 ----- Number of shares ----2,350,000,000 2,350,000,000 Ordinary shares of Rs.10 each 20.1.2 Preference shares 20.2 Issued, subscribed and paid-up capital 150,000,000 150,000,000 763,558,965 533,905,297 1,297,464,262 763,558,965 533,905,297 1,297,464,262 1,297,464,262 1,297,464,262 Convertible preference shares of Rs.10 each Ordinary shares Fully paid in cash Issued for consideration other than cash Less: Discount on issue of shares 23,500,000 23,500,000 1,500,000 1,500,000 7,635,590 5,339,053 12,974,643 7,635,590 5,339,053 12,974,643 (2,855,401) 10,119,242 (2,855,401) 10,119,242 187
191. JS BANK LIMITED 21 . SURPLUS ON REVALUATION OF ASSETS Note Surplus on revaluation of: Available-for-sale securities Operating fixed assets Non-banking assets acquired in satisfaction of claims 9.1 21.2 21.3 Deferred tax on surplus on revaluation of: Available-for-sale securities Operating fixed assets Non-banking assets acquired in satisfaction of claims 21.1 Group's share Non-controlling interest 2021 2020 -------- Rupees in '000 -------- 2,128,246 2,063,629 120,674 4,312,549 2,325,426 1,766,009 135,109 4,226,544 (732,710) (312,070) (960) (1,045,740) 3,266,809 (672,375) (240,391) (4,029) (916,795) 3,309,749 3,228,929 37,880 3,266,809 3,247,593 62,156 3,309,749 2,289,154 269,958 (367,769) 2,191,343 1,701,753 390,100 97,107 2,188,960 1,856 (64,953) (63,097) 2,128,246 (732,710) 1,395,536 9,674 126,792 136,466 2,325,426 (672,375) 1,653,051 Available-for-sale securities Pakistan: - Equity securities - Open end mutual funds - Debt securities Bahrain: - Equity securities - Debt securities 21.1.1 Related deferred tax liability 21.1.1 21.2 As of December 31, 2021, the Holding Company has recognized in profit and loss account expected credit loss of Rs. 68.232 million (December 31, 2020: Rs. 122.758 million) under IFRS-9 on foreign debt securities of the wholesale banking branch in Bahrain of the Holding Company against an adjustment in the loss allowance. However, the loss allowance is recognized in other comprehensive income without reducing the carrying amount of the said securities. Therefore, the surplus / deficit on revaluation of those securities are adjusted accordingly in these consolidated statements of financial position. 2021 2020 Fixed assets -------- Rupees in '000 -------Surplus on revaluation as at January 01 Recognised during the year - net Less: Transferred to unappropriated profit: Incremental depreciation during the year Related deferred tax liability Realised on disposal of asset classified under held for sale Related deferred tax liability Surplus on revaluation as at December 31 Less: Related deferred tax liability on: Surplus on revaluation as at January 01 Restatement of opening value due to change in tax rate Recognised / transferred during the year Transferred to profit and loss account on account of incremental depreciation Realised on disposal of asset classified under held for sale 21.2.1 1,766,009 347,037 2,113,046 1,955,940 1,216 1,957,156 (39,345) (10,072) (49,417) 2,063,629 (40,378) (9,038) (92,126) (49,605) (191,147) 1,766,009 (240,391) (27,474) (54,277) 10,072 (312,070) (374,390) 75,356 9,038 49,605 (240,391) 1,751,559 1,525,618 188
192. JS BANK LIMITED Note 21 .3 Non-banking assets acquired in satisfaction of claims Surplus on revaluation as at January 01 Derecognised during the year Transferred to fixed assets Less: Transferred to unappropriated profit: Incremental depreciation during the year Related deferred tax liability Surplus on revaluation as at December 31 Less: Related deferred tax liability on: Surplus on revaluation as at January 01 Restatement of opening value due to change in tax rate Transferred to profit and loss account on account of incremental depreciation Drecognised during the year Transferred to fixed assets 22. 22.1 22.2 22.1.1 (94) (51) (145) 135,109 (4,029) (460) 45 3,484 (960) (967) 51 (3,113) (4,029) 119,714 131,080 49,835,924 54,937,231 104,773,155 58,779,594 65,953,138 124,732,732 816,746 25,611,507 23,407,671 49,835,924 1,024,422 36,678,881 21,076,291 58,779,594 2021 2020 ----- Rupees in '000 ----- Commitments: Documentary credits and short-term trade-related transactions - letters of credit Commitments in respect of: - Forward foreign exchange contracts - Derivative instruments - Forward lending - Bank Guarantee from a commercial Bank in favor of National Clearing Company of Pakistan Limited - Outstanding settlements against margin financing contracts - net Commitments for acquisition of: - Operating fixed assets 22.2.1 (70) (45) (115) 120,674 Included herein are outstanding guarantees of Rs. 21.419 million (2020: Rs. 29.054 million) of related parties. Note 22.2 135,254 Guarantees: Financial guarantees Performance guarantees Other guarantees 22.1.1 93,743 41,511 135,109 (14,320) 120,789 CONTINGENCIES AND COMMITMENTS Guarantees Commitments 22.1 2021 2020 ----- Rupees in '000 ----- 22.2.1 21,917,220 21,111,360 22.2.2 22.2.3 22.2.4 26,688,581 4,835,903 639,565 38,178,262 5,564,000 384,230 22.2.5 22.2.6 400,000 - 400,000 57,411 22.2.7 455,962 54,937,231 257,875 65,953,138 Included herein are the outstanding letter of credits of Rs. 201.246 million (2020: Rs. 86.543 million) of related parties. 189
193. JS BANK LIMITED 2021 2020 ----- Rupees in '000 ----22.2.2 Commitments in respect of forward foreign exchange contracts Purchase Sale 17,655,035 9,033,546 26,688,581 23,137,733 15,040,529 38,178,262 22.2.2.1 The Holding company utilises foreign exchange instruments to meet the needs of its customers and as part of its asset and liability management activity to hedge its own exposure to currency risk. At year ended, all foreign exchange contracts have a remaining maturity of less than one year. Note 22.2.3 2021 2020 ----- Rupees in '000 ----- Commitments in respect of derivative instruments Purchase Sale 1,737,404 3,098,499 4,835,903 1,760,637 3,803,363 5,564,000 370,039 370,039 740,078 1,176,824 1,176,824 2,353,648 1,367,365 1,332,677 2,700,042 582,419 2,425,487 3,007,906 1,395,783 1,395,783 1,394 201,052 202,446 639,565 384,230 22.2.3.1 Interest rate swaps (notional principal) Purchase Sale 22.2.3.2 Options (notional principal) Purchase Sale 22.2.3.3 Commitments in respect of forward securities Purchase Sale 22.2.4 Commitments in respect of forward lending Undrawn formal standby facilities, credit lines and other commitments to lend 22.2.4.1 22.2.4.1 This represents commitments that are irrevocable because they cannot be withdrawn at the discretion of the bank without the risk of incurring significant penalty or expense. Note 22.2.5 Bank Guarantee from a commercial Bank in favor of National Clearing Company of Pakistan Limited 22.2.6 Outstanding settlements against margin financing contracts - net 22.2.7 Commitments for acquisition of operating fixed assets 2021 2020 ----- Rupees in '000 ----400,000 - 22.2.7.1 455,962 400,000 57,411 257,875 22.2.7.1 This represents commitments related to purchase of leasehold improvements, furniture and fixtures, hardware & network equipments and electrical equipments and computer software. 22.2.8 Commitments of associated company - Omar Jibran Engineering Industries Limited Stores, spares and raw material under letter of credit amounting to Rs. 24,196.459 million (June 30, 2020: Rs. 6,310.142 million). Guarantees issued by the other bank on the behalf of the assocaited company amounting to Rs. 2 million (June 30, 2020: Rs. 2 million) The associated company has entered into Ijarah arrangement with the Orix Leasing Company for Vehicles and Plant and Machnery. Commitment of Ijarah rentals under this agreement are Rs. 97.377 million (June 30, 2020: Rs. 128.578 million). 22.2.9 There are no changes in contingent liabilities since the date of annual consolidated audited financial statements for the year ended December 31, 2020 except those as disclosed in note 33.2 and 33.5. 190
194. JS BANK LIMITED 23 . DERIVATIVE INSTRUMENTS Derivative instruments, such as Forward Exchange Contracts, Interest Rate Swaps and Options, are forward transactions that provide market making opportunities / hedge against the adverse movement of interest and exchange rates. Derivatives business also provides risk solutions for the existing and potential customers of the Group. The Group has entered into a Cross Currency Swap transaction with its customer on back-to-back basis with an Authorized Derivative Dealer (ADD) without carrying any open position in its books. Specific approvals for the transactions have been granted by State Bank of Pakistan. Policies in line with SBP instructions have been formulated and are operative. The Holding Company has also entered into Foreign Currency & Commodity Options from its Wholesale Banking Branch Bahrain for market making activities. These transactions cover the aspects of both market making and hedging. The risk management related to derivative is disclosed in note 45. Accounting policies in respect of derivative financial instruments are described in note 4.4.2. 23.1 Product Analysis With Banks Hedging Market making With FIs other banks Hedging Market making Total Hedging Market making 2021 Interest rate swaps Options and Accumulators Forward securities Notional Mark to Notional Mark to Notional Mark to principal market principal market principal market ------------------------------------------ Rupees in '000 -----------------------------------------740,078 - 1,818 - - - 740,078 - 2,700,042 - 1,818 - 2,700,042 (6,758) (6,758) 1,395,783 (3,429) 1,395,783 (3,429) 2020 Interest rate swaps Options and Accumulators Forward securities Notional Mark to Notional Mark to Notional Mark to principal market principal market principal market ------------------------------------------ Rupees in '000 -----------------------------------------With Banks Hedging Market making With FIs other banks Hedging Market making Total Hedging Market making 23.2 2,353,648 - 4,943 - - - 2,353,648 - 3,007,906 - 4,943 - 3,007,906 10,205 10,205 201,052 (12,329) 1,394 202,446 (12,329) Maturity Analysis Remaining maturity of contracts 2021 Number of Notional Mark to market contracts Positive Negative principal --------------------------------- Rupees in '000 --------------------------------3 1 2 4 2 Upto 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 2 years 2 to 3 years 3 to 5 years 5 to 10 years Above 10 years Remaining maturity of contracts 12 1,511,061 34,688 156,200 2,665,354 468,600 4,835,903 4,825 5,541 17,298 23,551 51,215 (8,046) (3,511) (5,236) (20,546) (22,245) (59,584) 2020 Number of Notional Mark to market contracts Positive Negative principal --------------------------------- Rupees in '000 --------------------------------- Upto 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 2 years 2 to 3 years 3 to 5 years 5 to 10 years Above 10 years 6 1 7 10 2 26 871,043 317,656 1,345,571 2,914,453 115,277 5,564,000 29,685 13,001 121,563 11,205 175,454 (41,098) (889) (5,296) (114,748) (10,604) (172,635) Net (3,221) (3,511) 305 (3,248) 1,306 (8,369) Net (11,413) (889) 7,705 6,815 601 2,819 191
195. JS BANK LIMITED 24 . 2021 2020 ----- Rupees in '000 ----- MARK-UP / RETURN / INTEREST EARNED On: Loans and advances Investments Lendings to financial institutions Balances with other banks Securities purchased under resale agreements 25. 25.1 27. 357,578 46,242 10,941 1,111,507 291,219 1,817,487 127,575 70,883 363,319 335,612 349,959 791,362 426,161 9,756 187,487 128,638 2,711 281,364 23,103 249,799 34,638 882,639 154,033 4,419,039 240,843 39,700 652,096 358,650 119,315 671,804 393,993 4,755 252,078 180,460 29,008 372,892 24,096 250,355 27,637 582,761 173,499 4,373,942 27.1 235,203 (72,072) 163,131 1,906,308 14,202 1,920,510 (9,214) 142,783 2,901 136,470 76,912 1,381,058 71 1,458,041 (88,546) 429,881 44,327 64 44,391 32,832 450 33,282 Realised gain on: Federal government securities Market treasury bills Pakistan investment bonds Ijara sukuk certificates Shares Listed companies Non Government Debt Securities Term finance certificates Sukuk certificates Commercial paper certificates Mutual fund units Foreign currency bonds 28. 393,464 50,168 24,571 2,929,076 395,933 3,793,212 This includes Rs. 79.085 million (2020: Rs. 149.705 million) in respect of commission income from home remittance services provided by the Bank. The amount is earned from State Bank of Pakistan at the rate of Saudi Riyal 20 (2020: Saudi Riyal 20) per transaction over USD 200 (2020: USD 200) and is shared between the Bank and various exchange companies as per terms of agreement with them. 2021 2020 GAIN / (LOSS) ON SECURITIES - NET Note ----- Rupees in '000 ----Realised Unrealised - held for trading 27.1 29,376,526 1,817,487 900,310 735,977 451,047 33,281,347 FEE, COMMISSION AND BROKERAGE 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 cash management Commission on remittances including home remittances Commission on bancassurance Commission on distribution of mutual funds Commission on online Services Postage & Courier income Rebate income Rebate on primary dealership Brokerage income Management fee 26.1 21,772,454 3,793,212 696,224 517,642 420,654 27,200,186 Borrowings Export refinancing scheme (ERF) Long-Term Finance Facility (LTFF) Other Borrowings from State Bank of Pakistan Securities sold under repurchase agreements Other short term borrowings 26. 25,277,186 16,537,576 42,679 75,320 1,259,308 43,192,069 MARK-UP / RETURN / INTEREST EXPENSED On: Deposits Borrowings Subordinated debt Cost of foreign currency swaps against foreign currency deposits / borrowings Lease liability against right-of-use assets 25.1 20,705,914 17,658,516 72,642 52,664 737,597 39,227,333 102,906 39,982 235,203 (11,538) (3,358) 1,906,308 12,311 6,692 20,157 39,160 10,682 64,805 1,000 32,819 109,306 OTHER INCOME Gain / (loss) on sale of fixed assets - net Gain on termination of leases - net Gain on sale of assets held for sale Others 192
196. JS BANK LIMITED 29 . Note 2021 2020 ----- Rupees in '000 ----- 29.1 6,123,680 6,735,714 26,786 3,566 426,547 282,624 274,306 258,160 961,584 10,711 2,244,284 24,143 2,641 365,121 345,866 241,197 243,485 954,275 2,862 2,179,590 646,263 239,553 264,832 139,889 192,823 1,483,360 484,910 189,878 215,310 118,032 113,602 1,121,732 19,400 170,451 446,691 172,514 150,436 46,549 327,762 64,091 83,276 143,318 228,251 398,733 54,433 17,470 248,881 51,986 72,343 53,770 53,670 275,935 36,744 31,799 179,469 106,865 80,926 188,376 115,867 6,375 86,480 131 32,083 52,766 3,997,841 13,849,165 (70,974) 13,778,191 23,100 191,690 290,204 156,524 128,243 45,199 322,535 19,520 100,484 182,699 265,011 461,634 122,341 16,697 205,187 60,168 17,238 18,802 56,849 284,258 27,250 61,605 128,144 75,802 67,988 239,732 171,948 11,444 76,467 74 30,000 57,586 3,916,423 13,953,459 (52,233) 13,901,226 OPERATING EXPENSES Total compensation expense Property expense Rent & taxes Insurance Utilities cost Security (including guards) Repair & maintenance (including janitorial charges) Depreciation Depreciation on right-of-use assets Depreciation on non banking assets 11.4 13.2.1 Information technology expenses Software maintenance Hardware maintenance Depreciation Amortisation Network charges Other operating expenses Directors' fees and allowances Legal & professional charges Insurance Outsourced services costs Travelling & conveyance NIFT clearing charges Depreciation Training & development Postage & courier charges Communication Stationery & printing Marketing, advertisement & publicity Donations Auditors' remuneration Staff auto fuel & maintenance Bank charges Stamp duty Online verification charges Brokerage, fee and commission Card related fees (debit and credit cards) CDC and other charges Consultancy fee Deposit protection premium Entertainment expenses Repair and maintenance Cash handling charges Fee and Subscription Employees social security Generator fuel & maintenance Fee and allowances to Shariah Board Royalty Others Less: Reimbursement of selling and distribution expenses 36 29.2 29.3 29.4 29.5 29.6 193
197. JS BANK LIMITED 29 .1 2021 2020 ----- Rupees in '000 ----- Total compensation expense Fees and Allowances etc. Managerial Remuneration: i) Fixed ii) Variable of which; a) Cash Bonus / Awards etc. b) Commission Charge for defined benefit plan Contribution to defined contribution Plan Leaving indemnity Medical House rent allowance Utilities Conveyance Insurance Staff Others 198,873 204,736 4,483,059 4,316,171 96,100 325,682 (211,129) 271,836 7,505 400,472 1,803 200 446,324 97,563 5,392 6,123,680 656,678 292,603 159,436 251,053 6,479 387,404 1,694 188 415,478 41,259 2,535 6,735,714 29.1.1 The Group operates a short term employee benefit scheme which includes cash awards / special bonus for all employees. Under this scheme, the bonus for all employees, including the Chief Executive Officer (CEO) is determined on the basis of employees' evaluation and the Bank's performance during the year. 2021 2020 29.2 Donations Note ----- Rupees in '000 ----Future Trust Hope Uplift Foundation Agha Khan Foundation 29.2.1 54,433 54,433 117,341 5,000 122,341 29.2.1 This represents donation to a related party, wherein below mentioned persons are trustees. The registered office of the donee is located at 7th Floor, The Forum, Block 9, Clifton, Karachi. - Mr. Kalim-ur-Rehman - Mr. Hasan Shahid - Mr. Najmul Hoda Khan - Mr. Muhammad Yousuf Amanullah - Mr. Tariq Usman Bhati - Ms. Rukhsana Shah 29.3 Chairman of the Bank Chief Financial Officer of the Bank and Director of JS Investments Limited, the Subsidiary Company Chief Financial Officer of Jahangir Siddiqui & Co. Ltd. (the parent company) Chief Operating Officer & Executive Director JS Global Capital Limited, subsidiary company Head of Money Market And Forex of JS Global Capital Limited, subsidiary company Chief Executive Officer - Autism Spectrum Disabilities Welfare Trust, Director - EFU Life Assurance Limited and Director - Pak Suzuki Motor Company Limited Auditors' remuneration Note Audit fee - Pakistan Audit fee - Bahrain Half-yearly review Fee for audit of employees funds Fee for other statutory certifications Special certification and sundry advisory services Out of pocket expenses and sales tax on services Taxation services 29.3.1 2021 2020 ----- Rupees in '000 ----3,581 1,873 1,228 143 3,435 4,437 2,773 17,470 3,672 1,717 1,228 143 1,177 5,783 2,707 270 16,697 14,629 2,841 17,470 14,092 2,605 16,697 29.3.1 Geographical analysis Pakistan Bahrain 29.4 Under the provision of section 5(2) of the Deposit Protection Corporation Act, 2016 (the Act), and DPC Circular No. 04 of 2018, the Bank is liable to pay annual premium, on quarterly basis, to the Deposit Protection Corporation, a subsidiary company of State Bank of Pakistan, @ 0.16% on eligible deposits as of December 31 of each preceding calendar year. The Bank's eligible deposits as of December 31, 2021 are amounting to Rs. 105,788.825 million on which total premium is payable of Rs. 169.262 million per annum (Rs. 139.880 million per quarter). 29.5 Royalty represents amounts payable to Mr. Jahangir Siddiqui on account of use of name in the subsidiary of the Bank. 29.6 The SECP vide Circular 40/2016 dated December 30, 2016, prescribed certain conditions on Asset Management Companies (AMC) for charging of selling and marketing expenses to open end equity funds, for opening of new branches in cities, except Karachi, Lahore, Islamabad and Rawalpindi. Expenses can be charged to the extent of 0.4% per annum of net assets of fund or actual expenses whichever is lower. 194
198. JS BANK LIMITED 2021 2020 ----- Rupees in '000 ----30. WORKERS' WELFARE FUND Charge during the year 55,103 46,472 Provision held at @ 2% of the higher of profit before tax or taxable income under Sindh Workers' Welfare Act, 2014 and the Punjab Workers' Welfare Fund Act, 2019. 31. OTHER CHARGES Note 2021 2020 ----- Rupees in '000 ----- Penalties imposed by State Bank of Pakistan 32. 494 PROVISIONS AND WRITE OFFS - NET (Reversals) / provisions for diminution in value of investments Provisions against loans & advances Provisions / (reversals) against loans & advances - general (Reversals) / provisions under IFRS-9 -general Fixed assets written off - net Intangible assets written off Other Provisions and write offs Insurance claim recovered against non performing advances Other reversals 9.3.1 10.4 32.1 32.1 11.2 12.1.1 32.2 (253,807) 2,388,698 87,787 (62,326) 14,594 4,964 8,104 (209,600) 1,978,414 32.1 91,639 249,343 841,895 (161,166) 138,345 181,887 5,620 (2,339) 1,253,585 (Reversals) / provisions under IFRS-9 - general (Reversal) / charge during the year Balances with other banks Lendings to financial institutions Investments Advances 9.3.1 10.4 (443) (1,251) (62,148) 1,516 (62,326) 384 (79) 124,303 13,737 138,345 32.2 This represents insurance claim received against fake gold financing of Rs. 741.73 million for policies covered under staff infidelity and goldsmith infidelity. The Holding Company has fully provided said loans in these consolidated financial statements and started recovery proceedings on merits in court of law against the persons who are involved in collusion of that fraud. 33. TAXATION Current Prior years Deferred 33.1 1,104,586 (118,459) 54,416 1,040,543 745,311 (14,482) 329,547 1,060,376 Profit before taxation 2,257,975 2,168,811 Tax at applicable rates in the Group Effect of change in tax rates Effect of permanent differences Others 1,016,014 42,302 193 (17,966) 1,040,543 793,461 42,596 (50,923) 228,459 1,060,376 Relationship between income tax expense and accounting profit 33.1.1 33.1.1 The Group has recognised taxation impact on the basis of deemed tax return to be file on applicable tax rate with tax authorities, which Tax Rate JS Bank Limited JS Investments Limited JS Global Capital Limited JS ABAMCO Commodities limited 2021 2020 39% 29% 29% 35% 29% 29% 29% - 195
199. JS BANK LIMITED 33 .2 JS Bank Limited (Holding Company, the Bank) 33.2.1 Income Tax The income tax returns filed under Section 114 of the Income Tax Ordinance, 2001 for the tax years 2007 through 2021. These returns filed were deemed to have been assessed in terms the provisions prevailing under income tax laws as applicable in Pakistan. However, the Officers of Inland Revenue Services (OIR) conducted the proceedings for making certain amendments in the deemed assessments for tax years 2008 to 2018 and tax year 2020. This was done by taking recourse of conducting tax audit or alternatively a direct amendment in the assessment contending that certain matters in the deemed assessments were not admissible as not conforming to the law and prejudiced the interest of revenue. Based on the amended assessments in tax year 2008 to tax year 2018 and 2020, the department had made certain dis-allowances of expenses and tax deductible claims besides creating minimum tax and Workers’ Welfare Fund liabilities in the tax years 2010, 2011 & 2012 and tax years 2009, 2012 & 2013 respectively. In respect of WWF, the Supreme Court of Pakistan has held in Judgement, PLD 2017 SC 28, that the amendments made in the WWF Ordinance through Finance Act, 2006 and 2008 were illegal and without lawful authority i.e. the banks do not fall into definition of Industrial Undertaking and thus, not liable to pay WWF. Therefore based on this, the Holding Company’s contention is mandated and it is likely that its pending appeals in this will be decided favorably. The Holding Company has obtained appeal effect orders of respective years except 2013 and resultantly no demand is payable in this respect. As a consequence of the 18th amendment to the Constitution, levy for the WWF was introduced by the Government of Sindh and Punjab through the Sindh WWF Act, 2014 ("the Act") and the Punjab Workers Welfare Fund Act, 2019 respectively. As per the Acts, the Holding Company is liable to pay WWF in both provinces. However in this respect: - the Holding Company has challenged the issue of jurisdiction claimed by Sindh Revenue Board before the Honorable High Court of Sindh (SHC) through Constitutional Petition 1546/2017 on grounds that banking companies cannot be considered as industrial establishment and that the Act will be applied to trans-provincial entities to the extent that the obligation under the provincial law is to make distribution to the extent of the proportionate profit of the Sindh Province. The Court has restrained the Sindh Revenue Board to collect / recover Sindh WWF till the next date of hearing. - the Holding Company will challenge the recovery of Punjab WWF in the court of law on same grounds in case of SWWF. In 2018, Based on decision of the Supreme Court of Pakistan, the Holding Company had reassessed the provision of WWF which was previously held on the entire operating results of the Holding Company (including all provinces, part of Pakistan, AJK and Bahrain Operations) and maintained WWF only to the extent of its operations within Sindh Province till 2019. In 2020 after promulgation of Punjab WWF, the Holding Company has again decided prudently to maintained provision on the entire results of the Holding Company. In respect of minimum tax, the Commissioner Inland Revenue-Appeals (the CIR(A)) has the not accepted the Holding Company's contentions of gross loss position and also decided that non-mark-up income is the fall in the definition of turnover including capital gains and dividend income. As result the demand of Rs. 38.907 million has been payable. The Holding Company has contested the matter in further appeals before Appellate Tribunal Inland Revenue (ATIR) which are pending for hearing. For tax year 2008-2018 and 2020, the Holding Company has not accepted the amendments of Rs. 6.77 billion and have filed appeals before the Commissioner Inland Revenue-Appeals (the CIRA). CIR(A) has admitted the contention of the Holding Company in case of tax year 2008 that the amended order is barred by time and decided that any addition made in impugned order is annulled and not required to be further adjudicated. However, the department has filed an appeal against the decision of CIR(A) in ATIR which is held in the Holding Company's favor through order dated January 31, 2022. With regard to appeals filed for tax year 2009 to 2017, the CIR(A) has decided the appeals accepting the Holding Company’s contentions in respect of significant issues, and certain disallowance including amortization claim of goodwill have been decided in favor of department in all tax years. However, the Holding Company and the tax department are contested the matters in further appeals before Appellate Tribunal Inland Revenue (ATIR) which mostly held in favor of Holding Company including goodwill through order dated January 31, 2022. The tax department passed appeal effect/rectification orders and allowed deleted and set-aside issues in the light of CIR(A) orders for tax year 2008 to 2014. As a result of these orders, the Holding Company's taxable losses has increased to Rs. 3.464 billion and reduced the demand of Rs. 1.212 billion in relevant tax years after adjustment of these losses. Further for the tax year 2013, the ATIR has decided appeal filed by tax department in respect of calculating the amount of provisions against advances as allowable under Rule 1(c) of Seventh Schedule to the Income Tax Ordinance, 2001 and has maintained the CIR(A) decision that the allowability of provision for advances to be calculated at 1% of gross amount of advances as against the tax department contention that the same is to be calculated on net advances after deducting the amount of provisions created and allowed against advances. The matter of allowability of amortization relating to goodwill is contentious issue, therefore based on the opinion of lawyer there are arguments available to contend that goodwill on merger is an allowable deduction for tax purposes. Especially in the recent decision given by the High Court of Sindh in the case of merger of another bank in Pakistan where the Court has ruled in favour of taxpayer that goodwill generated in merger is ‘intangible’ and amortization relating to goodwill is allowable deduction. The Sindh High Court has dismissed the Holding Company’s petitions for tax years 2016 through 2019 wherein the Holding Company alongwith other taxpayers challenged the levy of super tax on constitutional grounds. Based on the opinion of legal counsel, the Holding Company has appealed before the Supreme Court against the decision of the Sindh High Court. The Supreme Court has allowed interim relief to the taxpayers subject to the payment of 50% of the super tax liability. However, the Holding Company has adjusted full amount of super tax liability for Tax year 2016 and 2019 against the available tax refunds. Further, the Holding Company has obtained stay from the Sindh High Court on other technical grounds regarding the levy of Super Tax for tax years 2017 and 2018. 196
200. The Sindh High Court has dismissed the Holding Company ’s petitions for tax years 2016 through 2019 wherein the Holding Company alongwith other taxpayers challenged the levy of super tax on constitutional grounds. Based on the opinion of legal counsel, the Holding Company has appealed before the Supreme Court against the decision of the Sindh High Court. The Supreme Court has allowed interim relief to the taxpayers subject to the payment of 50% of the super tax liability. However, JS the BANK HoldingLIMITED Company has adjusted full amount of super tax liability for Tax year 2016 and 2019 against the available tax refunds. Further, the Holding Company has obtained stay from the Sindh High Court on other technical grounds regarding the levy of Super Tax for tax years 2017 and 2018. 33.2.2 Withholding tax monitoring Withholding tax monitoring was initiated against the Holding Company for tax year 2014-2020. Orders in respect of tax years 2014, 2015, 2016 and 2017 has been passed against which appeals have been filed before the CIR(A). CIR(A) has remanded back the matters for rectification in respect of tax years 2014 and 2015 against which rectified orders has been passed and demands have been reduced. Appeal for tax year 2017 has been heard and reserved for order. In respect of tax year 2018 to 2020, proceedings are pending. 33.2.3 Sales tax The Holding Company as a registered person under Sindh Sales Tax on Services Act, 2011 has been issued a Sales Tax Order from the Sindh Revenue Board (SRB) creating a demand of Rs.193.44 million (besides Rs. 7.2 million is charged as penalty) against the Holding Company for allegedly non-payment of Sindh sales tax on certain ‘presumed non-taxable services / incomes’(i.e. Bancassurance, Home Remittances under Pakistan Remittance Initiative Scheme, SBP rebates on Government securities, Rebates from foreign correspondent Banks, and FX gain on remittance by Western Union)’ for the tax periods July 2011 to December 2013, 2015 to 2017 and 2019 to 2020. The Holding Company has filed appeals before Commissioner (Appeals) Sindh Revenue Board, CASRB against the decision of AC-SRB. The management of Holding Company is confident that the appeals filed in respect of the above matter will be decided in the Holding Company's favor and accordingly no demand for payment would arise. 33.2.4 Azad Jammu & Kashmir Operations The Holding Company has commenced operations in Azad Jammu & Kashmir from tax year 2009 and has filed returns for the tax years 2009 to 2021 with the tax authorities of such region. The amendement proceedings and appeals are at various levels before AJK Tax authorities for the tax year 2011 to 2017, 2019 and 2020. 33.3 JS Global Capital Limited (Subsidiary, the Company) 33.3.1 Income tax Except for tax year 2009, 2014, 2015, 2016, 2017 and 2018 income tax assessments have been filed and are deemed to have been assessed under the Income Tax Ordinance, 2001 (the Ordinance) unless selected by taxation authorities for audit purposes. For tax year 2009, an ITRA no. 07/2013 was filed by the Commissioner Inland Revenue against an order passed by the Learned Appellate Tribunal Inland Revenue (ATIR) in ITA no. 923/KB/2011 dated August 28, 2012 which was related to the apportionment of expenses, allowability of expenses and claiming of tax deducted at source aggregating to Rs. 61.16 million. However, the same is pending for decision before the Sindh High Court (SHC). For tax year 2015, an order dated November 23, 2016 was passed under section 4B of the Ordinance by the Deputy Commissioner Inland Revenue (DCIR). Through said order, an income of Rs.810.584 million was computed under section 4B of the Ordinance and resultant demand of super tax of Rs. 24.318 million was raised. An appeal was filed against the above order before CIR-A on December 01, 2016 identifying various errors / details not considered. The CIR-A, has confirmed DCIR’s order vide his order dated May 30, 2017. In pursuance of the order of CIR-A, the Company has filed appeal before ATIR along with application for stay against recovery of demand. The appeal before ATIR has been heard and order is reserved whilst ATIR vide order dated July 18, 2017 has granted stay for 60 days and subsequently the said stay was further extended vide various orders by ATIR. Subsequently, recovery of aforesaid tax demand was previously stayed by the Honorable Sindh High Court (SHC) through C.P No 4915 of 2018 vide order dated June 28, 2018 with direction to the Department not to enforce recovery of tax demand till the decision of ATIR. However, based on its order dated July 21, 2020, the SHC has dismissed the aforementioned C.P and has declared the super tax for TY 2015 to be constitutionally vires. The Company has however filed an Income Tax Reference Application (ITRA) No. 52 of 2020 before SHC which is pending adjudication. For tax year 2016 and 2017, notices dated December 27, 2016 and January 3, 2018 were issued under section 4B of the Ordinance by the DCIR. In the said notices the DCIR has contended that the Company is liable to pay Super Tax amounting to Rs. 24.483 million and Rs. 19.490 million on ‘income’ of Rs. 816.122 million and Rs. 649.676 million for Tax Years 2016 and 2017 respectively. The Company has challenged both notices through writ petition before SHC on constitutional grounds wherein the SHC has, vide its orders dated January 16, 2017 and January 11, 2018 for Tax Years 2016 and 2017 respectively, has stated that no coercive action shall be taken against the Company. The DCIR passed the orders under section 4B vide order dated April 23, 2018 and May 4, 2018 for tax years 2016 and 2017 respectively to levy Super tax of above mentioned amounts under the view that SHC has not restrained the department from passing the orders. In pursuance of the said orders, Company filed appeals which were rejected by CIR-A vide its order dated October 12, 2018 for both years. As a result, the Company has filed appeals before Appellant Tribunal Inland Revenue (ATIR) against the orders of CIR-A. Meanwhile, the Company paid 50% of tax demand of both tax years to maintain the above suits in light of judgment of Hon’able Supreme Court of Pakistan (Civil Appeals No. 1171/2017 and other connected appeals) wherein, the pending suits are declared to be entertained on the condition that a minimum of 50% of tax demand is deposited with tax authorities during the pendency of appeal. During the year the appeal has been heard before ATIR and is reserved for order. The Company has however filed an Income Tax Reference Application (ITRA) No. 53 and 54 of 2020 before SHC which is pending adjudication. For tax year 2018, a notice under section 4B of the Ordinance by the DCIR dated December 7, 2018 was issued, contending that the Company is liable to pay Super Tax amounting to Rs. 45.211 million on ‘income’ of Rs. 1,507.039 million. The Company had challenged the notice on constitutional grounds before SHC through C.P. No. 8670 of 2018. The SHC, vide its order dated December 14, 2018, had stated that no coercive action shall be taken against the Company. However the SHC based on its order issued in September 2020 has dismissed the aforementioned C.P. The Company is hence awaiting the conclusion of ATIR on the above matter before it files a reference application for TY 2018. To date, no order has been passed by the Department, consequently, no outstanding tax demand exists to date. For tax year 2016, an amended assessment order has been passed under section 122(5A) of the Ordinance by the Additional Commissioner Inland Revenue (ACIR). Through the said order, the ACIR raised demand amounting to Rs. 241.217 million. Upon appeal filed, CIR-A confirmed the ACIR’s order vide its order dated December 12, 2017. In pursuance of the order of CIR-A, the Company had filed an appeal before ATIR. During last year ATIR vide its order dated March 29, 2019 had annulled ClRA's action on confirming disallowances made in the order passed by ACIR dated November 02, 2017, with directions to CIRA to pass speaking and reasoned order after providing due opportunity of being heard. As a result, the likely assessment position after appeal effect of ATIR's 197
201. For tax year 2016 , an amended assessment order has been passed under section 122(5A) of the Ordinance by LIMITED the Additional JS BANK Commissioner Inland Revenue (ACIR). Through the said order, the ACIR raised demand amounting to Rs. 241.217 million. Upon appeal filed, CIR-A confirmed the ACIR’s order vide its order dated December 12, 2017. In pursuance of the order of CIR-A, the Company had filed an appeal before ATIR. During last year ATIR vide its order dated March 29, 2019 had annulled ClRA's action on confirming disallowances made in the order passed by ACIR dated November 02, 2017, with directions to CIRA to pass speaking and reasoned order after providing due opportunity of being heard. As a result, the likely assessment position after appeal effect of ATIR's order under section 124 of the Ordinance is that only tax demand on account of undistributed reserves is outstanding, which has also been stayed by SHC vide interim order in CP No. 0-2343 of 2019 dated April 09, 2019. Furthermore during last year, a rectification application was filed for erroneously considered share premium reserves while computing excess reserves under section 5A of the Ordinance by the AClR, in its order dated November 2, 2017. As a result of which tax demand under section 5A would be reduced to Rs. 7.523 million. The Honourable Sindh High Court vide an interim order dated May 21, 2021 granted relief against the said notice. For tax year 2017, an amended assessment order has been passed under section 122(5A) of the Ordinance by the Tax Officer. Through the said order, the Tax Officer raised a demand amounting to Rs. 17.649 million. The Company has filed an appeal before CIR-A which has been heard, however, no order has been passed till date. The total tax demand was partially stayed by the order of SHC vide CP No. 5431 of 2017 dated August 16, 2017, while the remaining liability was adjusted from the available refunds as declared in the return for tax year 2017. Furthermore, the case of the Company has been selected for income tax audit under section 214C of the Ordinance and a notice dated April 12, 2019 under section 177 of the Ordinance has been issued requiring submission of details and documents. Partial details have been submitted and extension is requested for submission of remaining details. For tax year 2017, a show-cause notice under section 161/205 of the Ordinance has been issued by tax authority. Through the said order, the Company was alleged for non-deduction of tax under section 150 of the Ordinance on payment made to shareholders in respect of buy back of shares. The said notice has been challenged before Sindh High Court (SHC) through legal counsel of the Company and SHC has prohibited tax department from passing any order without its permission. On the directions of court, detailed reply to show-cause notice has also been submitted vide our letter dated January 26, 2018. Tax authorities have issued a subsequent notice dated March 6, 2018, requesting to provide certain factual details which have also been submitted vide our letter dated March 16, 2018 and the matter is now pending adjudication before the SHC. 33.3.2 Sales Tax During 2013, the Company received a show cause notice from the Sindh Revenue Board (SRB) under section 47 of the Sindh Sales Tax on Services Act, 2011. Subsequently, an order was passed reducing the demand to Rs. 9.86 million along with default surcharge. The Company filed an appeal before the CIR-A and after being decided against the Company, it subsequently filed an appeal before Appellate Tribunal SRB. During the year 2014, the Company paid an amount of Rs. 7.15 million in respect of the abovementioned liability before June 25, 2014 under the notification SRB 3-4/8/2014 to avail the exemption from application of penalty and 75% of default surcharge. Appellate Tribunal SRB vide order dated November 29, 2017 decided the issue of Sindh Sales Tax (SST) in favor of the Company. However, the issue of SST on advisory and consultancy services and commission earned on purchase/sale of mutual funds have been remanded back whilst the issue relating to SST on commission on foreign exchange dealing, services rendered outside Sindh and levy of default surcharge and penalty have been decided against the Company. The Company has filed a reference application before SHC in respect of the issues decided against the Company and remanded back. During 2014, the Company also received another show cause notice from SRB under section 47 of the Sindh Sales Tax on Services Act, 2011. Subsequently, an order was passed raising a tax demand amounting to Rs. 10.77 million. The Company has filed an appeal against the order with CIR-A which is pending. Further, in respect of the same, rectification application has also been filed with the department. The Company and other stock brokers have also filed petition with the SHC and has been granted interim stay against recovery of demand. However, the Company has paid an amount of Rs. 9.24 million before June 25, 2014 under the notification SRB 34/8/2014 to avail the exemption of penalty and 75% of default surcharge. Furthermore, for fiscal year 2014 and 2015, SRB alleged short payment of SST vide Notice dated February 02, 2017. The Company has submitted all the required details in response to the notice and no order in this respect has been passed. SRB has also issued an order in another proceeding for tax periods January 2014 to December 2016, which were confronted, vide notice dated August 15, 2017, levying sales tax on certain services and disallowance of input tax of Rs. 35,877,012. In pursuance of the said order the Company filed an appeal before Commissioner (Appeals), SRB which has been partly heard. However the recovery of the of aforesaid tax demand has been stayed by the Hon'able SHC in Suit no 767 of 2018 vide order dated April 13, 2018. 198
202. JS BANK LIMITED 33 .3.3 Federal Excise Duty (FED) Tax department issued a show cause notice dated June 08, 2015 confronting (alleged) non payment of Federal Excise Duty (FED) on Company's services under Federal Excise Act, 2005 and subsequently issued an order raising a demand amounting to Rs.78.003 million for tax year 2010 to tax year 2013. The Company filed a rectification appeal, in addition, to filing an appeal to the SHC, through Stockbroker Association (of which the Company is also the member) against aforementioned order on the grounds that after 18th amendment to the Constitution, the services that were previously subjected to FED under the federal laws are now subject to the provincial sales tax and the Company has accordingly discharged its tax obligation. The SHC initially, stayed Federal Board of Revenue from demanding sales tax on services from stockbrokers and subsequently, disposed of the order in Company’s favor. However, CIR-A on the matter of appeal filed by the Company issued an order in favor of the department vide its order dated January 31, 2017. In pursuance of the order of CIR-A the Company had filed an appeal before Appellate Tribunal SRB along with application for stay of demand which was granted initially for 30 days and was subsequently extended vide various orders. Appellate Tribunal SRB has decided the matter vide order dated December 20, 2017, received by the Company on April 09, 2018, whereby ATIR decided that FED is applicable only on the commission earned from trading of shares and no other type of commission comes under the ambit of FED. With this opinion, ATIR has remanded back the issue related to pre amendment era. For post amendment era, ATIR has relied upon the decision of SHC (stated above) and declared the charge of FED after July 01, 2011 null and void. 33.4 JS Investments Limited (Subsidiary, the Company) 33.4.1 Income tax In respect of the appeals filed by the Company before Commissioner Inland Revenue (Appeals) [CIR (Appeals)] against orders passed for tax years 2006 and 2009 against demand of Rs. 162 million and Rs. 66 million respectively, the CIR (Appeals) had not accepted the basis of additions by tax authorities and set aside both the orders in respect of allocation of expenses between various sources of income for fresh proceedings with the directions to apportion the common expenditure according to actual incurrence of expenditure to the various sources of income. In respect of the above said order of CIR (Appeals) for tax years 2006 and 2009, the Company filed second appeal before the Appellate Tribunal Inland Revenue (ATIR) in respect of apportionment of expenses. The ATIR vide order dated April 20, 2017 deleted the additions on proration of expenses for tax year 2006 however, confirmed the CIR(A)’s order whereby CIR(A) remanded back / setaside the issue of apportionment of expenses. The Appellate Tribunal Inland Revenue vide order dated May 21, 2016 deleted the additions of tax amortization of management rights and remanded back the issues of disallowed provisions and advertisement expenses for the tax year 2009. The tax authorities issued orders giving effect (hereinafter referred collectively as ‘appeal effect orders’) to the order of CIR (Appeals) for both tax years 2006 and 2009 whereby demands for these tax years were reduced to Rs. 77.33 million and Rs. 59.93 million respectively. As the allocation of expenditure in the said appeal effect orders was not made according to actual incurrence of expenditure to the various sources of income, therefore, the Company again filed appeals before the CIR (Appeals) against the said orders. In respect of second round of appeal filed by the Company before CIR (Appeals) against appeal effect orders for tax years 2006 and 2009, the CIR (Appeals) for tax year 2006 confirmed apportionment of expenditure made by the tax authorities in appeal effect order, however, adjustment of allowable expenses were set aside. For the tax year 2009, CIR (Appeals) had set aside the appeal effect order in entirety for fresh assessment, which is yet to be made by tax authorities. The CIR (Appeals) also rectified the order passed by his predecessor for the tax year 2006, whereby the addition regarding the portion of capital gain included in dividend received from mutual funds was held deleted. Resulted appeal effect order reflects refund of Rs. 29 million. The tax authorities have filed an appeal before ATIR against said order of CIR (Appeals) in respect of deletion of addition regarding the portion of capital gain included in dividend. The ATIR vide order dated December 07, 2016 set-aside with the direction that the ACIR should examine the issue in the light of FBR Circular letter dated September 10, 2002. In respect of tax year 2006, management contends, based on views of its tax advisor, that amendment of assessment for such tax year by tax authorities is time barred. Accordingly, the Company has filed an appeal before the Appellate Tribunal Inland Revenue. The ATIR is of the view that the amendment of assessment is not time bared however, the ATIR deleted the addition of tax amortization of management right vide order dated February 10, 2017. Order under section 122(1)/(5) dated December 30, 2017 for the tax year 2015 passed by the DCIR created demand of Rs.40 million against which the Company has filed an appeal before the CIR(A). The DCIR considered our request for rectification and passed order under section 221 dated February 27, 2017 as a result of the above order the demand reduced to Rs.36.904 million. The CIR(A) vide order dated May 6, 2019 partly considered our submissions put before him. The DCIR passed appeal effect order dated February 17, 2020 determined refund of Rs. 30.66 million. The company submitted appeal before the CIR (Appeal) against the appeal effect order. The Company also submitted appeal before the ATIR against the order of the CIR(A). The DCIR passed order under section 122(1)/(5) of the Income Tax Ordinance, 2001 dated June 23, 2014 and reduced the refund claim of Rs .8.499 million to Rs. 3.102 million for the tax year 2012. The learned CIR (Appeal) vide order dated May 06, 2019 confirmed the ACIR’s order and held that the appeal was not entertainable being barred by time limitation for the tax year 2012. The Company submitted appeal before the ATIR against the order of the CIR(A). 199
203. JS BANK LIMITED 33 .4.1 Sales Tax This represents amount payable against Federal Excise Duty (FED) on management fees received / receivable from the Funds under management. The amount is being held for payment to Federal Board of Revenue on the basis of stay order of the Honorable High Court of Sindh dated September 04, 2013. The stay order was granted as a result of petition filed by asset management companies on the forum of MUFAP against the amendment in Finance Act, 2013 which levied FED on the fees received by asset management companies from funds under management. The Honorable Sindh High Court in its decision dated July 16, 2016 maintained the previous order passed against other constitutional petition whereby levy of FED is declared to be ‘Ultra Vires’ the Constitution. On September 23, 2016, the Federal Government has filed an appeal against the said order in the Honorable Supreme Court of Pakistan (SCP) and thus, the previous balance of FED has not been reversed. Further, the Federal Government vide Finance Act, 2016 has excluded asset management companies and other non-banking finance companies from charge of FED on their services. Accordingly, no provision for FED is made from July 01, 2016 onwards. 33.4.2 Federal Excise Duty (FED) In view of promulgation of Sindh Workers Welfare Fund Act, 2014, wherein the financial institutions have also been brought into definition of Industrial establishments, the Company has maintained an aggregated provision against Sindh Workers Welfare Fund as the year end amounting to Rs. 11.286 (2020: Rs. 10.839) million. The Company is under litigation with Sindh Revenue Board vide Constitution Petition No. 1005 dated February 13, 2019, filed before the Honorable Sindh High Court, which is a pending adjudication. 33.5 Omar Jibran Engineering Industries Limited (Associated Company) During the period June 30, 2020, the Federal Board of Revenue imposed tax liability of Rs. 71.975 million under section 161 (1) vide dated December 03, 2019. However, the associated company has obtained stay order from the Commissioner Inland Revenue (Appeals-II), Karachi on the imposed liability till December 31, 2019 and the matter is set aside by Appellate Tribunal Inland Revenue Pakistan through their order dated January 08, 2021 thus on further notices issued by the Inland Revenue Pakistan and the matter has been concluded in favor of the Company. Management, based on views of its legal counsel, is confident of a favorable outcome in respect of above matters. 34. BASIC AND DILUTED EARNINGS PER SHARE 2021 2020 ----- Rupees in '000 ----- Profit after taxation for the year - attributable to ordinary equity holders of the holding company 1,194,695 1,110,373 ----- Numbers ----Weighted average number of basic outstanding ordinary shares during the year 1,297,464,262 1,297,464,262 ----- Rupee ----Basic and diluted earnings per share 35. CASH AND CASH EQUIVALENTS Cash and balances with treasury banks Balances with other banks Overdrawn nostro accounts 36. 36.1. STAFF STRENGTH 0.92 Note 6 7 15 0.86 2021 2020 ----- Rupees in '000 ----34,267,180 1,227,623 (306,663) 35,188,140 30,421,531 1,128,585 (143,570) 31,406,546 2021 2020 ----------- Numbers ---------- Permanent On Group's contract Group's own staff strength at the end of the year 3,773 541 4,314 4,038 1,057 5,095 Third party contract (other guards and janitorial) 444 4,758 483 5,578 4,751 7 4,758 5,571 7 5,578 Geographical segment analysis Pakistan Bahrain 200
204. JS BANK LIMITED 37 . DEFINED BENEFIT PLAN 37.1 General description The Bank operates a recognized gratuity fund for all employees who opted for this scheme introduced by the management with effect from January 01, 2007. The defined benefit is administered by a separate fund that is legally separate from the Bank. The plan is governed by the trust deed dated September 01, 2007. The trustees of the gratuity fund are composed of representatives from employers. The trustees of the gratuity fund are required by the trust deed to act in the interest of the fund and of all relevant stakeholders in the scheme, i.e. active employees, inactive employees, retirees and employers. The trustees of the gratuity fund are responsible for the investment policy with regard to the assets of the fund. 37.2 The plan in Pakistan typically exposes the Bank to actuarial risks such as: salary risk, discount rate risk, mortality risk and investment risk defined as follow: - Salary increase risk: The risk that the final salary at the time of cessation of services is greater than assumed. Since the benefit is calculated on the final salary (which will closely reflect inflation and other macroeconomic factors), the benefit amount increases as salary increases. - Discount rate risk The discount rate is based on the yield on government bonds. If the market yield of bonds varies, the discount rate would vary in the same manner and would affect the present value of obligation and fair value of assets. - Demographic Risks Withdrawal risk: The risk of actual withdrawals experience is different from assumed withdrawal probability. The significance of the withdrawal risk varies with the age, service and the entitled benefits of the beneficiary. Longevity Risk The risk that the actual mortality experience is different than the assumed mortality. This effect is more pronounced in schemes where the age and service distribution is on the higher side. - Investment risk This is the risk that the assets are under-performing and are not sufficient to meet the liabilities. 37.3 Number of employees under the schemes The number of employees covered under defined benefit scheme (gratuity fund) is 3,495 (2020: 3,756). 37.4 Principal actuarial assumptions Principal actuarial assumptions at the end of the reporting period expressed as weighted averages. The actuarial valuations were carried out on December 31, 2021 based on the Projected Unit Credit Method, using the following significant assumptions: 2021 2020 Valuation discount rate for year end obligation per annum 11.75% 9.75% Valuation discount rate for interest cost for the year per annum 9.75% 11.75% Expected return on plan assets per annum 9.75% 11.75% Future salary increase rate - upto one years - from two to three years - more than three years per annum per annum per annum 10.00% 11.75% 11.75% 8.00% 10.00% 9.75% The average duration of the defined benefit obligation years 9 10 Normal retirement age years 60 60 Moderate Moderate SLIC 20012005, Setback 1 Year SLIC 20012005, Setback 1 Year Withdrawal rates Mortality rates 201
205. JS BANK LIMITED 37 .5 Movement in defined benefit obligations, fair value of plan assets and their components Defined benefit Net defined benefit liability obligations Fair value of plan assets (asset) 2021 2020 2021 2020 2021 2020 ---------------------------------------- Rupees in '000 ---------------------------------------Balance as at January 01, 2021 Included in profit or loss Current service cost Past service cost Interest cost / income Included in other comprehensive income Actuarial gains / losses arising from: financial assumptions experience adjustments Return on plan assets Other movements Contribution made during the year Benefits paid during the year Balance as at December 31, 2021 37.6 1,074,298 178,234 (358,399) 101,035 (79,130) 844,212 1,391,879 692,331 (317,581) 151,881 148,693 1,820 97,343 247,856 131,999 131,999 88,420 88,420 178,234 (358,399) (30,964) (211,129) 148,693 1,820 8,923 159,436 (11,622) (95,764) 317,777 210,391 14,025 (266) (490,776) (477,017) (11,622) (95,764) (107,386) 14,025 (266) 13,759 (317,777) (317,777) 490,776 490,776 (76,093) (76,093) (31,529) (31,529) (76,093) (76,093) 151,881 (31,529) 120,352 811,689 1,074,298 1,130,008 1,391,879 (318,319) (151,881) (151,881) (317,581) The composition of the plan assets at the end of the reporting period for each category, are as follows: Cash and cash equivalents Cash at Bank Term deposits receipts Debt securities Pakistan Investment Bonds Market treasury bills Term finance certificates Ordinary Shares of listed companies Cost 2021 2020 Rupees in '000 Fair value of plan assets 2021 2020 2021 2020 Rupees in '000 Percentage 176,653 176,653 82,793 150,000 232,793 176,653 176,653 82,793 161,806 244,599 15.6% 0.0% 15.6% 5.9% 11.6% 17.5% 147,712 50,503 198,215 388,863 53,815 50,503 493,181 146,157 51,082 197,239 411,079 53,660 50,370 515,109 12.9% 0.0% 4.5% 17.4% 29.5% 3.9% 3.6% 37.0% 805,623 1,180,491 448,506 1,174,480 756,116 1,130,008 632,172 1,391,880 67.0% 100% 45.5% 100% 37.7 Maturity profile 37.7.1 Expected maturity analysis of undiscounted defined benefit obligation (benefit payments) for the gratuity fund is as follows: Up to one year Over 10 and Over Over Over above years 1-2 years 2- 5 years 6-10 years ------------------------------------ Rupees in '000 ------------------------------------ Total Balance as at December 31, 2021 40,130 42,200 200,323 1,068,414 11,996,311 13,347,378 Balance as at December 31, 2020 45,445 71,699 268,697 1,245,714 11,997,565 13,629,120 202
206. JS BANK LIMITED 37 .8 Sensitivity analysis 37.8.1 Significant actuarial assumptions for the determination of the defined obligation are discount rate, and expected rate of salary increase. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant: Particulars Present value Net defined of defined Fair value of benefit benefit any plan liability / obligation assets (assets) ------------- Rupees in '000 ------------- Rate Current results - 811,689 1,130,008 (318,319) Discount rate 1% Increase 1% Decrease 10.75% 12.75% 741,666 891,924 1,130,008 1,130,008 (388,342) (238,084) Salary Rate 1% Increase 1% Decrease 10.75% 8.75% 892,877 739,558 1,130,008 1,130,008 (237,131) (390,450) Withdrawal rate 10% Increase 10% Decrease Moderate + one year Moderate - one year 800,202 823,938 1,130,008 1,130,008 (329,806) (306,070) 811,915 811,427 1,130,008 1,130,008 (318,093) (318,581) Mortality rate One year age set back One year age set forward Adjusted SLIC 2001-2005 - one year Adjusted SLIC 2001-2005 + one year Furthermore in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as applied in calculating the defined benefit obligation liability recognised in this unconsolidated statement of financial position. 37.9 Maturity profile The weighted average duration of the defined benefit obligation works out to 10 years. 37.10 Experience Adjustments The re-measurement gains / losses arise due to actual experience varying from the actuarial assumptions for the year. 2021 2020 2019 2018 2017 --------------------------------- Rupees in '000 --------------------------------Particulars Defined benefit obligation Fair value of plan assets Net defined benefit liability Re-measurement loss / (gain) on obligation Re-measurement loss / (gain) on plan assets Other comprehensive income 811,689 (1,130,008) (318,319) 1,074,298 (1,391,879) (317,581) 844,212 (692,331) 151,881 649,062 (546,568) 102,494 550,729 (375,611) 175,118 (107,386) 317,777 210,391 13,759 (490,776) (477,017) (836) 18,005 17,169 (52,391) 25,329 (27,062) 75,269 10,273 85,542 37.11 The average duration of the payment of benefit obligation at December 31, 2021 is within one year. 37.12 The Holding Company contributes to the gratuity fund as per actuarial's valuation of the year i.e. Nil for the next year. 37.13 Based on actuarial advice and management estimates, profit and loss account charge in respect of defined benefit obligation for the next one year works out to be Rs. 92.702 million. The amount of re-measurements to be recognised in other comprehensive income for year ending December 31, 2022 will be worked out as at the next valuation. 38. DEFINED CONTRIBUTION PLAN The Group operates a contributory provident fund scheme for all permanent employees. The employer and employee both make a contribution of equal amount to the fund as follows: Contribution Contribution made during the basic salary Number of employees year 2021 2020 2021 2020 -------- Rupees in '000 -------Percentages ------- Numbers ------Holding company - JS Bank Limited 3,164 229,001 7.1% 2,865 248,152 Subsidiary companies - JS Global Capital Limited - JS Investments Limited 7.33% 7.33% 161 78 165 77 14,977 8,707 13,277 8,775 203
207. JS BANK LIMITED 39 . COMPENSATION OF DIRECTORS AND EXECUTIVES 39.1 The aggregate amount charged in the financial statements for the year in respect of the remuneration and benefits to the President / Chief Executive, Directors and Executives are as follows: Items Fees and Allowances etc. Managerial Remuneration i) Fixed ii) Total Variable - Cash Bonus / Awards Charge for defined benefit plan Contribution to defined contribution plan Medical Utilities House rent allowance Conveyance Car allowance Others Total Number of persons Items Fees and Allowances etc. Managerial Remuneration i) Fixed ii) Total Variable - Cash Bonus / Awards Charge for defined benefit plan Contribution to defined contribution plan Medical Utilities House rent allowance Conveyance Car allowance Others Total Number of persons 2021 Key Other Directors NonPresident / Management Material Risk Other Chairman Executives CEO Personnel Takers/ Executives -------------------------------------- Rupees in '000 -----------------------------------3,700 25,550 3,700 1 25,550 24 84,741 1,500 2,484 5,966 6,303 203 1,823 575 708 104,303 4 420,281 34,912 11,616 27,133 40,820 10,752 23,709 6,055 575,278 61 598,481 72,409 33,832 40,951 59,848 42,395 90,306 7,199 945,421 107 68,397 8,751 4,485 6,840 5,268 93,741 23 2020 Key Other Directors NonPresident / Management Material Risk Other Chairman Executives CEO Personnel Takers/ Executives -------------------------------------- Rupees in '000 -----------------------------------4,350 32,550 4,350 1 32,550 21 79,678 24,500 2,430 5,574 5,992 1,141 1,268 300 219 121,102 3 478,878 66,352 17,415 32,359 46,577 654 31,715 10,574 684,524 67 330,277 61,626 25,824 17,927 34,338 68,138 17,748 555,878 49 184,214 14,153 11,579 17,111 5,052 232,109 59 39.1.1 The CEO and COO are provided with free use of Bank maintained cars in accordance with their entitlement. 39.1.2 Managerial remuneration includes joining related payments made to certain Executives in line with their terms of employment. 39.1.3 All Executives, including the CEO of the Bank, are also entitled to certain short term employee benefits which are disclosed in note 39.1 to these unconsolidated financial statements. 39.1.3 During the year, in JSIL, Ms. Iffat Zehra Mankani has been appointed as Chief Executive Officer in place of Mr. Hasnain Raza Nensey, whereas Mr. Zahidullah Khan and Mr. Sadeed Hasan Barlas have been appointed as Non-Executive Directors in place of Mr. Kamran Jaffer and Mr. Tahir Ali Sheikh. 39.1.4 The SBP, vide its BPRD Circular No. 01 dated January 25, 2017, issued Guidelines on Remuneration Practices, where the Bank is required to defer a certain portion of variable compensation of the Material Risk Takers (MRTs) and Material Risk Controllers (MRCs) subject to mandatory deferrals for a defined period. In this respect, deferral amount shall be withheld for a period of three years whereas remaining portion of the variable compensation shall be paid upfront to the MRTs and MRCs. The deferred remuneration shall vest proportionately over the deferral period following the year of variable remuneration award. The deferred portion of the variable remuneration shall be paid to the MRTs and MRCs on vesting, proportionally through yearly instalments, during the deferred period, in case no malus triggers are applicable. Details of MRTs and MRCs are given below: Employees Covered under: Marterial Risk Takers (MRTs) Marterial Risk Controllers (MRCs) 2021 2020 ----- Numbers ----70 69 36 39 106 108 2021 2020 ----- Rupees '000 ----- Movement of deferred remuneration Opening Deferred during the year Paid during the year Malus during the year Closing 48,495 10,934 (13,898) (1,702) 43,829 218 48,350 (73) 48,495 204
208. JS BANK LIMITED 39 .2. Meeting Fees and Allowances Paid 2021 Board Committees Human Resource, Remuneration Risk Total Board Audit & Nomination Management I.T Executive Amount Meetings Committee Committee Committee Committee Committee Paid -------------------------------------------------- Rupees in '000 ------------------------------------------------ 1 2 3 4 5 6 7 8 8 8 8 8 8 8 Name of Director Mr. Kalim-ur-Rahman Mr. Adil Matcheswala Mr. Ashraf Nawabi Mr. G.M. Sikander Mr. Hassan Afzal Mr. Munawar Alam Siddiqui Ms. Nargis Ghaloo Mr. Sohail Aman Mr. Khusro Iqbal Mumtaz Mr. Iftikhar Ahmed Rao Mr. Shahab Anwar Khawaja Mr. Asif Raza Sana Ms. Aisha Fariel Salahuddin Mr. Tahir Ali Shaikh 1,250 1,250 250 1,250 1,000 1,250 1,250 1,250 100 250 200 200 250 100 600 600 600 600 50 150 50 75 100 - 450 600 600 600 50 200 25 - 300 600 600 50 50 - 750 900 900 - 50 2,450 2,450 550 2,450 1,900 2,450 2,450 2,750 250 450 450 275 375 150 Total amount paid 9,850 2,825 2,525 1,600 2,550 50 19,400 2020 Board Committees Human Resource, Remuneration Risk Total Board Audit & Nomination Management I.T Executive Amount Meetings Committee Committee Committee Committee Committee Paid -------------------------------------------------- Rupees in '000 ------------------------------------------------ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Name of Director Mr. Kalim-ur-Rahman Mr. Adil Matcheswala Mr. Ashraf Nawabi Mr. G.M. Sikander Mr. Hassan Afzal Mr. Munawar Alam Siddiqui Ms. Nargis Ghaloo Mr. Sohail Aman Mr. Abdul Hamid Mihrez Mr. Munir Hassan Mr. Iftikhar Ahmed Rao Mr. Shahab Anwar Khawaja Mr. Asif Raza Sana Ms. Aisha Fariel Salahuddin Mr. Tahir Ali Shaikh Total amount paid 1,500 1,500 1,250 1,500 1,500 1,500 1,500 1,500 350 350 350 350 200 250 200 500 500 500 500 250 250 100 100 - 850 850 750 850 100 25 - 400 500 500 250 - 500 500 500 - 25 2,850 2,850 1,650 2,750 2,000 2,500 2,500 2,850 600 600 450 600 300 375 225 13,800 2,700 3,425 1,650 1,500 25 23,100 205
209. JS BANK LIMITED 40 . FAIR VALUE OF FINANCIAL INSTRUMENTS IFRS 13 "Fair Value Measurement" defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of quoted securities other than those classified as held to maturity, is based on quoted market price. Fair value of fixed term loans, other assets, other liabilities and fixed term deposits cannot be calculated with sufficient reliability due to absence of current and active market for assets and liabilities and reliable data regarding market rates for similar instruments. The provision for impairment of loans and advances has been calculated in accordance with the Bank's accounting policy as stated in note 4.6 to the annual consolidated financial statements. The repricing profile, effective rates and maturity are stated in note 45.2.4 to these financial statements. In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different from their carrying values since assets and liabilities are either short term in nature or in the case of customer loans and deposits are frequently repriced. Fair value hierarchy IFRS 13 requires the Bank to classify fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has following levels: 40.1 Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Fair value measurements using unobservable inputs for the asset or liability. Valuation techniques used in determination of fair values within level Item Financial Instruments- Level 1 Shares of listed companies Financial instruments - Level 2 Units of mutual funds Market Treasury Bills(MTB) / Pakistan Investment Bonds(PIB), and GoP Sukuks (GIS) Debt Securities (TFCs) and Sukuk other than Government Overseas Government Sukuks, Overseas and Euro Bonds Forward foreign exchange contracts Derivatives Valuation approach and input used Fair values of investments in listed equity securities are valued on the basis of closing quoted market prices available at the Pakistan Stock Exchange. Fair values of investments in units of mutual funds are determined based on redemption prices disclosed at the Mutual Funds Association of Pakistan (MUFAP) as at the close of the business days. Fair values of Pakistan Investment Bonds and Market Treasury Bills are derived using PKRV and PKFRV rates (Reuters page). Investments in debt securities (comprising of Term Finance Certificates, Bonds and any other security issued by a company or a body corporate for the purpose of raising funds in the form of redeemable capital) are valued on the basis of the rates announced by the Mutual Funds Association of Pakistan (MUFAP) in accordance with the methodology prescribed by the SECP. The fair value of Overseas Government Sukuks, and Overseas Bonds are valued on the basis of price available on Bloomberg. The valuation has been determined by interpolating the foreign exchange revaluation rates announced by the State Bank of Pakistan. 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 underlying parameters including foreign currencies involved, interest rates, yield curves, volatilities, contracts duration, etc. Financial instruments in level 3 Currently, no financial instruments are classified in level 3. The fair value of unquoted debt securities, fixed term loans, other assets, other liabilities, fixed term deposits and borrowings cannot be calculated with sufficient reliability due to the absence of a current and active market for these assets and liabilities and reliable data regarding market rates for similar instruments. Non- financial assets- Level 3 Fixed assets - Land and building Non-banking assets under satisfaction of claims Fixed assets and Non-banking assets under satisfaction of claims are carried at revalued amounts determined by professional valuers based on their assessment of the market values as disclosed in note 11 and 13 of these annual consolidated financial statements. The valuations are conducted by the valuation experts appointed by the Bank which are also on the panel of State Bank of Pakistan. The valuation experts used a market based approach to arrive at the fair value of the Bank’s properties. The market approach used prices and other relevant information generated by market transactions involving identical or comparable or similar properties. These values are adjusted to reflect the current condition of the properties. 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 financial statements. 40.2 The Group'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 the transfer occurred. There were no transfers between levels 1 and 2 during the year. 40.3 The following table provides an analysis of financial assets that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. 206
210. JS BANK LIMITED 2021 Level 1 Level 2 Level 3 Total ------------------------- Rupees in '000 ------------------------On balance sheet financial instruments Financial assets - measured at fair value Held-for-trading securities Investments Federal Government Securities Shares Open end mutual funds Available-for-sale securities Investments Federal Government Securities Shares Non Government Debt Securities Foreign Securities Open end mutual funds 1,392,509 1,392,509 1,109,404 115,698 1,225,102 - 1,109,404 1,392,509 115,698 2,617,611 4,179,022 4,179,022 159,315,888 528,869 1,616,155 3,314,578 164,775,490 - 159,315,888 4,179,022 528,869 1,616,155 3,314,578 168,954,512 58,143,943 - 58,143,943 224,144,535 - 229,716,066 Financial assets - disclosed but not measured at fair value Investments Federal Government Securities 5,571,531 Non-Financial assets - measured at fair value Revalued fixed assets Non-banking assets acquired in satisfaction of claims - - 3,696,407 2,658,537 6,354,944 3,696,407 2,658,537 6,354,944 Off balance sheet financial instruments Commitments in respect of: Forward foreign exchange contracts Purchase - 18,064,443 - 18,064,443 Sale - 9,079,267 - 9,079,267 - 1,392,354 Derivative instruments Forward investments securities Sale 1,392,354 - Interest rate swaps (notional principal) Purchase - 402,137 - 402,137 Sale - 403,955 - 403,955 Options Purchase - 1,363,325 - 1,363,325 Sale - 1,329,959 - 1,329,959 207
211. JS BANK LIMITED 2020 Level 1 Level 2 Level 3 Total ------------------------- Rupees in '000 ------------------------On balance sheet financial instruments Financial assets - measured at fair value Held-for-trading securities Investments Federal Government Securities Shares Open end mutual funds Available-for-sale securities Investments Federal Government Securities Shares Non Government Debt Securities Foreign Securities Open end mutual funds 207,409 207,409 25,003,774 244,002 25,247,776 - 25,003,774 207,409 244,002 25,455,185 4,372,471 4,372,471 127,406,043 690,048 4,017,289 1,216,288 133,329,668 - 127,406,043 4,372,471 690,048 4,017,289 1,216,288 137,702,139 36,109,599 - 36,109,599 Financial assets - disclosed but not measured at fair value Investments Federal Government Securities 4,579,880 194,687,043 - 199,266,923 Non-Financial assets - measured at fair value Revalued fixed assets Non-banking assets acquired in satisfaction of claims - - 2,610,299 1,311,252 3,921,551 2,610,299 1,311,252 3,921,551 Off balance sheet financial instruments Commitments in respect of: Forward foreign exchange contracts Purchase - 22,942,707 - 22,942,707 Sale - 14,910,910 - 14,910,910 Derivative instruments Forward investments securities Purchase Sale 188,723 - - - - - 188,723 Interest rate swaps (notional principal) Purchase - 1,120,607 - 1,120,607 Sale - 1,125,550 - 1,125,550 Options Purchase - 581,042 - 581,042 Sale - 2,437,068 - 2,437,068 208
212. JS BANK LIMITED 41 . SEGMENT INFORMATION 41.1. Segment Details with respect to Business Activities: 2021 Corporate finance Profit & Loss Net mark-up / return / interest / (expense) Inter segment revenue - net Non mark-up / return / income / (loss) Total Income / (loss) Segment direct expenses Inter segment expense allocation Total expenses Provisions / (reversals) Profit / (loss) before tax Statement of financial position Cash & Bank balances Investments Net inter segment lending Lendings to financial institutions Advances - performing Advances - non-performing Advances - (provisions) / reversals - net (892,985) 907,098 253,443 267,556 28,829 47,967 76,796 190,760 Trading and Retail Commercial Asset sales banking banking Brokerage management Others ----------------------------------------------------------------- Rupees in '000 ----------------------------------------------------------------- 13,855,323 (14,806,689) 1,317,465 366,099 148,171 163,074 311,245 213,273 (158,419) Total 196,683 8,802,290 1,642,956 10,641,929 (1,388,737) 5,097,301 1,503,778 5,212,342 68,196 1,119,482 1,187,678 (24,330) 210,745 186,415 212,997 (4,839) 208,158 12,027,147 6,043,030 18,070,177 5,120,240 5,287,097 10,407,337 2,668,909 (2,434,317) 887,464 786,969 1,674,433 (883,218) 4,421,127 753,362 753,362 434,316 332,009 332,009 3,556 (149,150) 278,606 278,606 (24,106) (46,342) 7,548,681 6,285,107 13,833,788 1,978,414 2,257,975 Others Total Assets 12,716,606 901,279 901,279 13,617,885 227,703,724 31,939,044 259,642,768 35,452,642 118,125,304 75,492,738 7,835,772 (3,430,477) 79,898,033 233,475,979 1,711,262 90,374,890 165,204,408 6,090,497 (3,252,332) 168,042,573 260,128,725 39,693 1,453,984 476,508 476,508 3,061,275 5,031,460 2,451 1,352,104 2,401 2,401 599,705 1,956,661 2,339,620 5,245,278 5,245,278 31,446,952 39,031,850 35,494,786 232,221,074 223,556,420 31,939,044 247,322,612 13,926,269 (6,682,809) 254,566,072 35,107,932 812,885,328 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total Liabilities Equity Non-controlling interest Total Equity & Liabilities 16,336 13,597,573 3,976 13,617,885 13,617,885 31,875,041 6,996,800 222,622,218 49,502 261,543,561 261,543,561 9,535,196 219,428,193 4,512,590 233,475,979 233,475,979 29,047,736 226,324,281 934,202 2,564,313 258,870,532 258,870,532 1,574,295 2,527,223 4,101,518 4,101,518 435,673 435,673 435,673 17,007,773 17,007,773 23,444,080 388,327 40,840,180 72,048,604 6,996,800 459,350,047 223,556,420 27,101,050 789,052,921 23,444,080 388,327 812,885,328 50,618,828 37,186,792 15,060,805 1,795,783 110,947 104,773,155 Contingencies & Commitments - - 2020 Corporate finance Trading and Retail Commercial Asset sales banking banking Brokerage management Others ----------------------------------------------------------------- Rupees in '000 ----------------------------------------------------------------- Total Profit & Loss Net mark-up / return / interest / (expense) Inter segment revenue - net Non mark-up / return / income / (loss) Total Income / (loss) 93,161 93,161 14,372,945 (17,035,715) 2,889,785 227,015 Segment direct expenses Inter segment expense allocation Total expenses Provisions Profit / (loss) before tax 33,286 33,286 59,875 129,646 334,127 463,773 344,219 (580,977) Statement of financial position Cash & Bank balances Investments Net inter segment lending Lendings to financial institutions Advances - performing Advances - non-performing Advances - (provisions) / reversals - net (8,543,152) 16,914,719 2,349,650 10,721,217 4,034,968 120,996 1,258,710 5,414,674 66,628 700,131 766,759 (20,667) 189,780 169,113 69,794 69,794 9,910,722 7,551,011 17,461,733 6,711,460 2,664,330 9,375,790 124,158 1,221,269 1,081,529 1,862,559 2,944,088 811,231 1,659,355 570,320 570,320 196,439 337,332 337,332 (26,023) (142,196) 314,748 314,748 (244,954) 9,178,321 4,861,016 14,039,337 1,253,585 2,168,811 Others Total Assets 2,891,836 2,891,836 20,722,345 196,878,742 23,239,672 4,590,700 245,431,459 10,804,855 129,898,985 52,152,981 4,760,888 (938,040) 55,975,829 3,570,545 200,250,214 109,429,008 190,322,242 6,972,667 (3,265,123) 194,029,786 3,315,506 306,774,300 19,153 347,651 446,088 446,088 2,854,534 3,667,426 3,313 1,689,425 3,831 3,831 666,196 2,362,765 11,732,961 14,027,138 25,760,099 31,549,666 201,807,654 251,060,954 23,239,672 242,925,142 11,733,555 (4,203,163) 250,455,534 29,024,619 787,138,099 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total Liabilities Equity Non-controlling interest Total Equity & Liabilities 2,891,836 2,891,836 2,891,836 12,208,219 7,492,800 227,156,281 551,556 247,408,856 247,408,856 1,996,091 166,087,049 21,012,836 11,154,238 200,250,214 200,250,214 34,099,102 265,336,773 5,893,204 305,329,079 305,329,079 2,728,064 2,728,064 2,728,064 446,461 446,461 446,461 5,167,888 5,167,888 22,387,255 528,446 28,083,589 48,303,412 7,492,800 431,423,822 251,060,953 25,941,411 764,222,398 22,387,255 528,446 787,138,099 60,973,417 44,793,723 18,141,644 690,306 133,642 124,732,732 Contingencies & Commitments - - 209
213. JS BANK LIMITED 41 .2. Segment details with respect to geographical locations 2021 Total Pakistan Bahrain ---------- Rupees in '000 ---------11,612,417 414,730 12,027,147 38,222 (38,222) 5,891,026 152,004 6,043,030 17,541,665 528,512 18,070,177 Profit & Loss Net mark-up / return / interest / (expense) Inter segment revenue - net Non mark-up / return / income / (loss) Total Income Segment direct expenses Inter segment expense allocation Total expenses Provisions Profit before tax 7,347,276 6,244,503 13,591,779 2,040,740 1,909,146 Statement of financial position Cash & Bank balances Investments Net inter segment lending Lendings to financial institutions Advances - performing Advances - non-performing Advances - (Provisions)/reversals - Net 7,548,681 6,285,107 13,833,788 1,978,414 2,257,975 Others Total Assets 35,275,594 230,509,819 220,055,275 31,939,044 238,516,498 13,926,269 (6,682,809) 245,759,958 34,937,025 798,476,715 219,192 1,711,255 3,501,145 8,806,114 8,806,114 170,907 14,408,613 35,494,786 232,221,074 223,556,420 31,939,044 247,322,612 13,926,269 (6,682,809) 254,566,072 35,107,932 812,885,328 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total Liabilities Equity Non-controlling interest Total Equity & Liabilities 67,959,521 6,996,800 453,863,782 220,055,275 27,012,389 775,887,767 22,200,621 388,327 798,476,715 4,089,083 5,486,265 3,501,145 88,661 13,165,154 1,243,459 14,408,613 72,048,604 6,996,800 459,350,047 223,556,420 27,101,050 789,052,921 23,444,080 388,327 812,885,328 Contingencies & Commitments 104,773,155 Profit & Loss Net mark-up/return/profit Inter segment revenue - net Non mark-up / return / income / (loss) Total Income 2020 Total Pakistan Bahrain ---------- Rupees in '000 ---------9,576,236 334,486 9,910,722 20,830 (20,830) 7,388,616 162,395 7,551,011 16,985,682 476,051 17,461,733 Segment direct expenses Inter segment expense allocation Total expenses Provisions Profit before tax 8,979,112 4,861,016 13,840,128 1,115,240 2,030,314 Statement of financial position Cash & Bank balances Investments Net inter segment lending Lendings to financial institutions Advances - performing Advances - non-performing Advances - (Provisions)/reversals - Net 42. 201,405 40,604 242,009 (62,326) 231,580 - 199,209 199,209 138,345 138,497 104,773,155 9,178,321 4,861,016 14,039,337 1,253,585 2,168,811 Others Total Assets 29,214,457 197,717,282 251,060,954 23,239,672 238,493,260 11,733,555 (4,181,836) 246,044,979 28,856,259 776,133,603 2,335,209 4,090,372 4,431,882 (21,327) 4,410,555 168,360 11,004,496 31,549,666 201,807,654 251,060,954 23,239,672 242,925,142 11,733,555 (4,203,163) 250,455,534 29,024,619 787,138,099 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total liabilities Equity Non-controlling interest Total Equity & liabilities 48,211,222 7,492,800 423,892,948 248,719,379 25,862,434 754,178,783 21,426,375 528,446 776,133,604 92,190 7,530,874 2,341,574 78,977 10,043,615 960,880 11,004,495 48,303,412 7,492,800 431,423,822 251,060,953 25,941,411 764,222,398 22,387,255 528,446 787,138,099 Contingencies & Commitments 116,484,604 8,248,128 124,732,732 TRUST ACTIVITIES The Holding Company under takes Trustee and other fiduciary activities that result in the holding or placing of assets on behalf of individuals and other organisations.These are not assets of the Holding Company and, therefore, are not included as such in these consolidated financial statements. Assets held under trust are shown in the table below: No. of IPS Accounts Category Assets Management Companies Charitable Institutions Companies Employees Funds Individuals Insurance Companies Others - Total 2021 Securities Held ( Face Value) Pakistan Market Investment Government Treasury Bills Bonds Ijara Sukuk (Rupees in '000) Total 3 11 48 45 9 9 80,000 3,014,840 8,128,370 1,047,285 5,156,500 3,577,400 92,000 4,346,100 14,344,900 389,500 109,554,000 12,187,700 165,000 6,869,000 - 172,000 7,360,940 22,638,270 1,436,785 121,579,500 15,765,100 125 21,004,395 140,914,200 7,034,000 168,952,595 No. of IPS Accounts 2020 Securities Held ( Face Value) Market Pakistan Government Treasury Bills Investment Ijara Sukuk (Rupees in '000) Total Category Assets Management Companies Charitable Institutions Companies Employees Funds Individuals Insurance Companies Others 1 1 13 51 43 8 11 23,000 2,373,860 7,194,410 919,290 24,076,000 15,370,700 142,000 25,560,800 17,927,950 431,500 84,255,700 7,882,700 69,000 1,621,500 - 23,000 142,000 27,934,660 25,191,360 1,350,790 109,953,200 23,253,400 Total 128 49,957,260 136,200,650 1,690,500 187,848,410 210
214. JS BANK LIMITED 43 . RELATED PARTY TRANSACTIONS The Group has related party transactions with its parent, associates, directors & Key Management Personnel and other related parties. The Group enters into transactions with related parties in the ordinary course of business and 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. The details of transactions with related parties, other than those which have been specifically disclosed elsewhere in these consolidated financial statements are as follows: As at December 31, 2021 As at December 31, 2020 Key management Other related Key management Other related Parent Directors personnel Associates parties Parent Directors personnel Associates parties --------------------------------------------------------------------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------------------------------------------------------------------Statement of financial position Lendings to financial institutions Opening balance Addition during the year Repaid during the year Closing balance - - - 12,500 (2,634) 9,866 - - Provision for diminution in value of investments - - - Advances Opening balance Addition during the year Repaid during the year Transfer in / (out) - net Closing balance - Other Assets Interest /mark-up accrued Receivable against bancassurance / bancatakaful Net defined benefit plan Trade receivable Advance against purchase of property Other receivable 284 284 Provision against other assets - - - - Borrowings Opening balance Borrowings during the year Settled during the year Closing balance - - - - Investments Opening balance Investment made during the year Investment redeemed / disposed off during the year Closing balance Deposits and other accounts Opening balance Received during the year Withdrawn during the year Transfer in / (out) - net Closing balance 172,019 8,763,862 (8,023,554) 912,327 122,106 11,327 (39,222) 31,558 125,769 3,588 - 212,335 1,236,232 (1,098,789) 38,628 388,406 791,027 217,758 (188,022) (337,067) 483,696 505 14 - 76,237 673,723 (667,310) (40,423) 42,227 - 269,800 269,800 - 370,768 294,076 (222,529) 442,315 10,917 - 49,753 1,732,714 (1,741,157) 41,310 6,300,000 (6,300,000) - - - - 4,527,652 3,029,006 (3,673,342) 3,883,316 15,000 (2,500) 12,500 - - - - - - - 416,340 4,093,430 4,026,927 (3,193,931) 302,893 5,229,319 58 (832) 122,880 122,106 344 73,455 281 2,801 - 379 - 474,283 474,283 - 79,089 20,889 318,319 130,533 6,655 10,365,166 295,223,429 (291,943,860) 754,045 14,398,780 271,648 5,511,316 (5,610,945) 172,019 596,257 284,284 (157,785) 68,271 791,027 - 228,972 40,828 269,800 - 153,128 (2,235) 219,875 370,768 6 80 - 954 - - - - - - - 24,444 511,942 (324,417) 366 212,335 59,593 973,685 (869,813) (87,228) 76,237 23,104 861,135 (834,486) 49,753 4,100,000 (4,100,000) - 3,560,728 4,298,203 (3,331,279) 4,527,652 391,478 1,946,481 6,402,913 (5,488,750) 1,232,786 4,093,430 52,998 28,051 317,581 158,590 8,889 379 11,105,705 (11,105,705) - 8,622,201 160,825,941 (159,215,607) 132,631 10,365,166 211
215. JS BANK LIMITED As at December 31 , 2021 As at December 31, 2020 Key management Other related Key management Other related Directors personnel Associates parties Parent Directors personnel Associates parties ------------------------------------------------------------------------------------------------ Rupees in '000 ------------------------------------------------------------------------------------------------ Parent Subordinated debt Opening balance Issued during the year Redeemed during the year Transfer in / (out) - net Closing balance Other Liabilities Interest / return / mark-up payable on deposits Interest / return / mark-up payable on borrowings Interest / return / mark-up payable on subordinated debt Accrued expenses Trade payable Donation Payable Others payable Represented By Share Capital - - 889,432 (199,746) (49,910) 639,776 - - - 889,588 (156) 889,432 - 85 6,314 - - 153,374 1,308 783 4,500 1,571 19,180 12,223 - 45,323 - - - 29,054 86,543 130,337 - - 40,440 5,534 787 254,964 43,433 2,812 75 9,733,073 31,173 3,500 - 45,395 9,733,073 - - - 21,419 201,246 - - For the year ended December 31, 2021 For the year ended December 31, 2020 Key management Other related Key management Other related Directors personnel Associates parties Parent Directors personnel Associates parties ------------------------------------------------------------------------------------------------ Rupees in '000 ------------------------------------------------------------------------------------------------ Parent 1,084 13,162 - 9,728 161 - 23,011 16,830 - 21,088 851 - 281,666 362,756 189,356 (45,458) - 1,522 8,710 - 3,279 11 - 42,627 4,557 - 5,816 - 178,695 444,432 106,277 251,482 - - (27,733) 235,572 - - - - (212,434) 2,536 - 988,981 271,836 (211,129) 3,000 28,850 7,420 32,083 1,262 117,824 46,099 225 2,036 7,205 3,490 85,851 23,100 869 - - - - 420,957 6,471 151,881 - 1,645 - - - 113,055,811 43,560,278 365,069,253 60,142,942 - - Expense Mark-up / return / interest paid Remuneration paid Non-executive directors' fee Net charge for defined contribution plans Net charge for defined benefit plans Donation Rental expense Advisory fee Royalty Other expenses Reimbursement of expenses 72,255 375 1,425 66,043 19,706 92,109 22,927 333 288 Payments made during the year Insurance premium paid Insurance claims settled Defined benefit plans paid Donation paid on behalf of the employees - - - - 617,272 15,242 12,500 - - - - 107,821,521 14,344,749 46,081,123 17,650,739 Other Transactions Sale of Government Securities Purchase of Government Securities Sale of Foreign Currencies Purchase of Foreign Currencies - 100 Profit and loss account Reversals / (provisions) and write offs - net Reversal / (provisions) for diminution in value of Investments - net - 224,151 75 Contingencies and Commitments Letter of guarantee Letter of Credit Income Mark-up / return / interest earned Fee, commission and brokerage income Dividend income (Loss) / gain on sale of securities - net Rental income - 195,331 - 1,329 533,162 4,491 585,477 - 3,204 646,812 - 2,600 - 1,135,034 181,488 229,001 117,341 38,135 30,000 17,070 98,459 212
216. JS BANK LIMITED 44 . CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS 2021 2020 ----- Rupees in '000 ----- Minimum Capital Requirement (MCR): Paid-up capital (net of losses) 10,119,242 10,119,242 Capital Adequacy Ratio (CAR): Eligible Common Equity Tier 1 (CET 1) Capital Eligible Additional Tier 1 (ADT 1) Capital Total Eligible Tier 1 Capital Eligible Tier 2 Capital Total Eligible Capital (Tier 1 + Tier 2) 18,420,460 2,200,260 20,620,720 6,468,101 27,088,821 17,433,159 1,965,291 19,398,450 5,558,052 24,956,502 159,002,189 5,643,001 28,489,224 193,134,414 154,573,487 3,835,995 25,579,240 183,988,722 Risk Weighted Assets (RWAs): Credit Risk Market Risk Operational Risk Total The SBP through its BSD Circular No. 07 dated April 15, 2009 has prescribed the minimum paid-up capital (net of accumulated losses) for banks to be raised to Rs.10,000 million by the year ending December 31, 2013. The paid-up capital of the Bank as at December 31, 2021 stood at Rs. 10,119.242 million (2020: Rs. 10,119.242 million) and is in compliance with SBP requirements. The Banks are also required to maintain a minimum Capital Adequacy Ratio (CAR) of 10.0% plus capital conservation buffer of 1.5% of the risk weighted exposures of the Bank. Further, under Basel III instructions, Banks are also required to maintain a Common Equity Tier 1 (CET 1) ratio and Tier 1 ratio of 6.5% and 7.5%, respectively, as at December 31, 2021. As at December 31, 2021 the Bank is fully compliant with prescribed ratios, as the Bank’s CAR is 14.03% whereas CET 1 and Tier 1 ratios stood at 9.62% and 10.68% respectively. The Bank has complied with all capital requirements throughout the year. Under the current capital adequacy regulations, credit risk and market risk exposures are measured using the Standardized Approach and operational risk is measured using the Basic Indicator Approach. Credit risk mitigants are also applied against the Bank’s exposures based on eligible collateral under comprehensive approach. 2021 2020 ----- Rupees in '000 ----Common Equity Tier 1 Capital Adequacy ratio 9.48% 9.54% Tier 1 Capital Adequacy Ratio 10.68% 10.54% Total Capital Adequacy Ratio 14.03% 13.56% Leverage Ratio (LR): Eligible Tier-1 Capital Total Exposures Leverage Ratio 20,620,720 658,499,520 3.13% 19,398,450 623,856,077 3.11% Liquidity Coverage Ratio (LCR): Total High Quality Liquid Assets Total Net Cash Outflow Liquidity Coverage Ratio 198,158,980 67,063,612 295.48% 166,890,275 57,575,341 289.86% Net Stable Funding Ratio (NSFR): Total Available Stable Funding Total Required Stable Funding Net Stable Funding Ratio 376,864,272 298,941,131 126.07% 358,895,534 259,861,191 138.11% 44.1 The link to the full disclosure is available at https://jsbl.com/knowledge-centre/investor-information/ 45. RISK MANAGEMENT Risk Management is a discipline at the core of every financial institution and encompasses all the activities that affect its risk profile. At the Bank, it involves identification, measurement, monitoring and controlling risks to ensure that: a) b) c) d) e) f) g) The individuals who take or manage risks clearly understand it; The Bank's Risk exposure is within the limits established by Board of Directors (BoD); Risk taking decisions are in line with the business strategy and objectives set by BoD; The expected payoffs compensate for the risks taken; Risk taking decisions are explicit and clear; Sufficient capital as a buffer is available to take risk; and Risk management function is independent of risk taking unit. 213
217. JS BANK LIMITED The Group has a comprehensive set of Risk Management Policies , practices and procedures which enable the Holding Company to take into consideration, in an appropriate manner, all major kinds of risks mainly credit, market, liquidity, operational and IT security risks. Keeping in view the dynamics of internal and external environment, we regularly review and update our Risk Management policies and procedures in accordance with regulatory environment and international standards. Risk Management activities remain at the forefront of all activities of the Group which places the highest priority on conducting its business in a prudent manner in line with the relevant laws and regulatory requirements. Risk management framework of the Group includes: a) Clearly defined risk management policies and procedures covering risk identification, acceptance, measurement, monitoring, reporting and control; b) Well constituted organizational structure, defining clearly roles and responsibilities of individuals involved in risk taking as well as managing it. The Bank, in addition to risk management functions for various risk categories, has instituted an Integrated Risk Management Committee (IRMC), Portfolio Management Committee (PMC), Operational Risk Management Committee (ORMC), Remedial Management Committee (RMC) as well as Central Credit Committee (CCC). IRMC oversees the overall risk management at the Bank and provides guidance in setting strategic targets as well as concentration limits and monitor progress related to earnings growth, keeping in view the capital constraints and also adheres to the concentration limits. The IRMC monitors the strategic target and aggregate limits at the Business Group level and concentration limits (by industry, geography, size, tenor) so that one category of assets or dimension of risk cannot materially harm the performance of the Bank. PMC monitors the advances portfolio, concentrations limits, aggregate limits at business level and various house keeping elements under Credit Administration. ORMC oversees the effectiveness of operational risk management for maintenance and implementation of operational risk management framework. It also monitors the Business Continuity Planning and reviews findings of any other management or board's sub committee. Remedial Management Committee (RMC) oversees the progress of non performing loans and cases under litigation along with the recommendation of transferring of any NPL to Corporate Restructuring Company (CRC). Whereas, Central Credit Committee (CCC) is entrusted with the responsibility of monitoring lending risk profile of the Bank. CCC meets regularly to actively supervise credit risk across its lending portfolio. An effective management information system that ensures flow of information from operational level to top management and a system to address any exceptions observed; and c) d) A mechanism to ensure an ongoing review of systems, policies and procedures for risk management and procedures to adopt changes. While the overall responsibility of risk management rests with the BoD, it is the duty of Senior Management to devise risk management strategy by setting up well defined policies and procedures for mitigating / controlling risks, duly approved by the Board. Giving due consideration to the above, the Group has put in place the following hierarchy of Risk Management: - Board Risk Management Committee (BRMC); - Integrated Risk Management Committee (IRMC) comprises of the President / Chief Executive Officer (CEO), Chief Risk Officer, Chief Operating Officer, Chief Credit Officer, Chief Financial Officer, Chief Compliance Officer, Group Head Corporate & Public Sector Government, Group Head Operations, Chief of Staff, Group Hed Retail Banking, Head of Human Resources, and Chief Product & Marketing Officer. - Asset - Liability Committee (ALCO) comprises of the President / Chief Executive Officer (CEO), Treasurer, Chief Risk Officer, Chief Credit Officer, Group Head Investment Banking, Chief Financial Officer and attended by Other Business Heads. 214
218. JS BANK LIMITED - Central Credit Committee (CCC) comprising of the President / CEO, Chief Operating Officer, Chief Credit Officer, Group Head Corporate & Public Sector Government, Group Head Emerging Corporate (South), Group Head Emerging Corporate (Central & North) and Head of Environmental Risk (for environmental risk only). - Portfolio Management Committee (PMC) comprises of President/CEO, Chief Risk Officer, Chief Credit Officer, Group Head Corporate & Public Sector Government, Group Head Retail Banking, Heads of Credit Risk, Head CAD, Head of Consumer Risk, and Head Enterprise Risk Management. - Operational Risk Management Committee (ORMC) comprises of the Chief of Staff, Chief Risk Officer, Chief Compliance Officer, Chief Information Officer, Group Head Operations, Head of Human Resources, Chief Product & Marketing Officer, Group Head Retail Banking, Group Head Customer Experience and Head Enterprise Risk Management . - Remedial Management Committee (RMC) comprises of President/CEO, Chief Risk Officer, Chief Credit Officer, Chief of Staff, Chief Operating Officer, Chief Financial Officer, Head of SAM, CAD Head, Credit Risk Heads and Head of Legal. - IT Steering Committee (ITSC) comprises of President/CEO, Deputy CEO, Chief Risk Officer, Chief Financial Officer, Group Head Operations & Technology, Chief Information Officer, Chief Information Security Officer, Chief of Staff, Group Head Investment Banking & Emerging Business, Chief Digital Officer, Country Head Branch Banking Operations and Head Product Development & Consumer Business. - Risk Management Group (RMG), a dedicated and independent set-up headed by Chief Risk Officer (CRO) and comprises of Heads of Market & Liquidity Risks, Operational Risk and Treasury Middle Office, Consumer & Program Lending Risk, Information Security, Agricultural Credit Risk, Strategic Projects & Quantitative Analysis and Enterprise Risk Management. Credit Risk Group (CRG) is also an independent function to business and is headed by Chief Credit Officer (CCO). Credit Risk Heads dealing in corporate, emerging corporate, middle market, small & medium enterprises, financial institutions and international operations are reporting into CCO. Special Assets Management (SAM) and Credit Administration (CAD) also report into CCO. Risk Matrix / Categories The Bank, in common with other banks, generates its revenues by accepting Country, Credit, Liquidity, Interest Rate Risk in the Banking Book, Market, Operational and other risks. Effective management of these risks is the decisive factor in the Bank's profitability. Risk Appetite The Group's risk appetite is reflected in its endeavours to maintain a favourable credit rating and encompasses the following: - The business strategy The expectations of stakeholders at different time horizons The characteristics of the risk-bearing entities The nature and characteristics of the risks undertaken The possible spread of risk situations across organizational units, assets-at-risk, and future time horizons. Risk appetite drives business activity. It combines anticipations in risk and profitability with management preferences to control capital and resource allocation, as well as the distribution of exposure across activities and portfolios. The Group's hedging strategy is embedded in its risk management practices for addressing material categories of risk. 215
219. JS BANK LIMITED 45 .1 Credit Risk Credit risk is the risk which arises with the possibility that one party to a financial instrument will fail to discharge its obligation and cause the other party to incur a financial loss. Credit risk is managed in terms of credit policies, approved by the BoD and regulations issued by the SBP. The bank is exposed to credit risk on loans and advances, fund placements with financial institutions and certain investments. Credit risk management is an ongoing process. The overall credit policy and the credit risk instructions are issued by the Board of Directors. In this regards, a Central Credit Committee (CCC) is entrusted with the responsibility of monitoring lending risk profile of the bank. In order to maintain healthy growth of the credit portfolio, the Groups Credit Risk Management processes are consistently upgraded and improved to meet future challenges. The Group's strategy is to minimise credit risk through product, geography, industry and customer diversification. Credit limits are established for all counter-parties after a careful assessment of their credit worthiness. An effective credit granting procedure, which requires pre-sanction evaluation of credit proposal, adequacy of security and pre-disbursement examination of charge documents is in place and managed by Risk Management Group (RMG) & Credit Administration Department (CAD). The Bank maintains a sound portfolio diversified in nature to counter the risk of credit concentration and further confines risk through diversification of its assets by geographical and industrial sector. For managing impaired assets in the portfolio, the Bank follows the Prudential Regulations and Risk Management guidelines issued by SBP and the Remedial Management Policy approved by the Board. 45.1.1 Credit risk: Standardised approach The Holding Company has adopted the Standardised Approach of Basel II for risk weighing its Credit Risk Exposures. The following table illustrates the approved External Credit Assessment Institutions (ECAIs) whose ratings are being utilised by the Bank with respect to material categories of exposures: Exposures VIS PACRA MOODY'S FITCH S&P Corporate Banks SME's (retail exposures) Sovereigns Securitisations Others (specify) P P P P N/A N/A P P P P N/A N/A P P N/A N/A P P N/A N/A P P N/A N/A The Bank has used Issue Specific Ratings for rating / risk weighing Issue Specific Exposures and Entity Ratings for rating / risk weighing claims against specific counterparties. Both short and long term ratings have been used to rate corresponding short and long term exposures. For this purpose, Mapping Grid has been provided by SBP as given below: Long - Term Ratings Grades Mapping Short - Term Ratings Grades Mapping 45.1.2 Policies and processes for collateral valuation and management as regards Basel II; For Credit Risk Mitigation purposes the Bank uses only the eligible collaterals under Comprehensive Approach of Credit Risk Mitigation under Standardised Approach as prescribed by SBP under Circular No. 8 of 2006, which includes Cash and Cash Equivalent Securities including Government Securities (like Cash Margins, Lien on Bank Accounts, Foreign Deposit Receipts, Term Deposit Receipts, Pledge of Defense Saving Certificates, Regular Income Certificates, Special Saving Certificates, T-Bills and Pakistan Investment Bonds etc.) and Shares, TFCs and Mutual Funds Listed on the Main Index. 216
220. JS BANK LIMITED Under the Bank 's policy all collaterals are subject to periodic valuations to monitor the adequacy of margins held. Shares / Marketable securities are valued by the Bank on daily basis to calculate the Drawing Power (DP). In case of any shortfall in the requisite margins, the DP is adjusted to the appropriate level and the business units are informed to take appropriate action as per the agreement with the customer. Particulars of bank's significant on-balance sheet and off-balance sheet credit risk in various sectors are analysed as follows: Provision held Gross lendings Non-performing lendings 2021 2020 2021 2020 2021 2020 -------------------------------------------- Rupees in '000 -------------------------------------------45.1.3 Lendings to financial institutions Credit risk by public / private sector Public/ Government Private 31,939,044 23,240,897 - - - 1,225 31,939,044 23,240,897 - - - 1,225 Non-performing Gross investments investments Provision held 2021 2020 2021 2020 2021 2020 -------------------------------------------- Rupees in '000 -------------------------------------------45.1.4 Investment in debt securities Credit risk by industry sector Textile Chemical and Pharmaceuticals Construction Power (electricity), Gas, Water, Sanitary Refinery Transport, Storage and Communication Financial Services 388,607 224,860 - 391,478 249,860 - 388,607 149,860 - 222,310 424,400 71,429 308,616 2,134,796 1,378,482 362,246 710,902 4,635,089 1,351,531 179,600 - 155,169 - 179,600 - 155,169 - 5,135,701 7,718,905 718,067 696,507 718,067 696,507 - 391,478 149,860 - 388,607 149,860 - 391,478 149,860 - - - Non-performing Gross investments investments Provision held 2021 2020 2021 2020 2021 2020 -------------------------------------------- Rupees in '000 -------------------------------------------Credit risk by public / private sector Public/ Government Private 1,309,843 3,825,858 3,764,021 3,954,884 718,067 696,507 718,067 696,507 5,135,701 7,718,905 718,067 696,507 718,067 696,507 217
221. JS BANK LIMITED 45 .1.5 Advances Gross Advances Non-performing Advances Provision held 2021 2020 2021 2020 2021 2020 -------------------------------------------- Rupees in '000 -------------------------------------------- Credit risk by industry sector Agri finance Automobile and transportation equipment Brokerage Cement Chemical Construction Electronics and electrical appliances Engineering, IT and other services Fertilizer Financial Food / confectionery / beverages Individuals Insurance and security Metal and steel Mining and quarrying Paper / board / furniture Petroleum, oil and gas Pharmaceuticals Plastic Power and water Real estate Shipbreaking Storage Sugar Tele-communication Textile Composite Ginning Spinning Weaving Transportation services Trust and non-profit organisations Tyre Wholesale and retail trade Others 8,027,954 7,797,960 1,046,333 433,949 177,836 107,329 5,177,551 6,074,435 2,810,958 1,726,569 436,454 3,912,821 8,866,882 2,236,379 1,422,319 356,077 117,934 275,765 - 117,937 314,405 - 68,591 24,404 - 64,829 - 901,207 9,707,357 3,440,575 1,026,556 33,802,746 41,580,993 4,115 10,485,379 184,613 1,683,452 4,310,287 3,172,228 2,193,775 19,259,020 4,743,512 85,230 151,720 1,028,786 1,778,739 823,973 9,453,353 3,484,915 1,442,302 34,253,338 33,122,827 10,451 9,966,050 137,220 1,674,874 5,122,089 5,289,290 1,962,424 23,897,355 4,203,207 300,214 82,245 2,042,589 2,838,926 344 129,803 1,453,709 1,285,045 2,322,009 2,129,918 74,782 143,264 4,577 1,186,513 153,041 1,510,929 85,230 20,000 203,048 - 5,991 82,124 1,367,103 1,057,765 2,041,082 2,607,092 82,782 95,053 4,577 561,763 156,241 1,306,057 20,000 200,000 - 35,465 1,351,420 799,965 1,306,803 1,394,682 18,136 57,989 190,561 70,064 43 85,230 201,416 - 31,683 1,349,130 351,621 506,898 722,969 2,608 37,160 19,130 13 200,000 - 7,920,223 1,415,806 7,315,182 10,577,926 27,229,137 7,573,233 1,281,801 5,768,619 8,669,251 23,292,904 231,408 33,014 243,985 49,623 558,030 322,262 34,539 278,441 47,284 682,526 218,772 842 243,985 29,097 492,696 304,345 9,065 278,441 19,653 611,504 31,773,063 64,874 362,366 12,575,049 25,450,181 35,246,740 56,043 267,203 12,161,474 18,934,253 263,818 553,312 408,865 73,283 372,302 151,523 95,091 170,533 28,904 53,958 106,964 16,040 261,248,881 254,658,697 13,926,269 11,733,555 6,569,829 4,181,836 Gross Advances Non-performing Advances Provision held 2021 2020 2021 2020 2021 2020 -------------------------------------------- Rupees in '000 -------------------------------------------Credit risk by public / private sector Public/ Government Private 44,996,232 216,252,649 261,248,881 52,248,485 202,410,212 254,658,697 13,926,269 13,926,269 11,733,555 11,733,555 6,569,829 6,569,829 4,181,836 4,181,836 218
222. JS BANK LIMITED Contingencies and commitments 45 .1.6 Credit risk by industry sector Automobile and transportation equipment Brokerage Cement Chemical Construction Electronics and electrical appliances Engineering, IT and other services Fertilizer Financial Food / confectionery / beverages Individuals Insurance and security Metal and steel Mining and quarrying Paper / board / furniture Petroleum, oil and gas Pharmaceuticals Plastic Power and water Real estate Shipbreaking Sugar Tele-communication Textile Composite Ginning Spinning Weaving Transportation Trust and non-profit organisations Tyre Wholesale and retail trade Others 2021 2020 ---------- Rupees in '000 ---------2,362,615 2,678,662 537,508 886,114 21,818,090 710,863 2,138,942 1,367,611 30,581,783 3,281,255 487,572 18,830 4,707,191 1,421,643 971,191 1,390,255 423,076 161,575 7,022,164 16,965 8,851 1,358,623 2,371,968 1,540,806 779,749 1,126,160 22,694,392 496,139 3,293,028 2,350,294 43,920,788 2,855,033 592,229 28,234 4,629,296 808,302 656,214 856,079 715,399 795,807 16,516,933 56,758 8,601 1,172,080 2,144,343 268,866 2,667,336 1,317,149 6,397,694 1,384,271 277,552 3,497,170 1,532,406 6,691,399 94,127 800 50,178 3,491,088 10,387,889 104,773,155 30,537 116,293 89,489 3,320,259 6,220,466 124,732,732 Contingencies and commitments Credit risk by public / private sector Public/ Government Private 2021 2020 ---------- Rupees in '000 ---------104,773,155 104,773,155 124,732,732 124,732,732 219
223. JS BANK LIMITED 45 .1.7 Concentration of Advances The Holding Company top 10 exposures on the basis of total (funded and non-funded exposures) aggregated to Rs. 81,101.77 million (2020: Rs. 95,329.829 million) are as following: 2021 Note ----- Rupees in '000 ----- 45.1.7.1 Funded Non Funded 45.1.7.2 Total Exposure 2020 56,655,814 64,985,417 24,445,956 30,344,412 81,101,770 95,329,829 AJK & Gilgit Baltistan Bahrain 45.1.7.1 There are no classified advances placed under top 10 exposures. 45.1.7.2 The sanctioned limits against these top 10 exposures aggregated to Rs. 91,409.56 million (2020: Rs. 107,031.73 million). 45.1.8 Advances - Province / Region-wise Disbursement & Utilization 2021 Utilization Disbursements Punjab KPK & FATA Sindh Balochistan Islamabad ----------------------------------------------------------- Rupees in '000 ----------------------------------------------------------Province / Region Punjab 93,498,987 Sindh 130,612,221 KPK including FATA Balochistan Islamabad 3,562,470 365,284 - 93,498,987 - 130,612,221 - - - - - - - - - - - - - - - - - - - - - 3,562,470 - - - 365,284 15,168,259 - - - - 828,605 - - - - - - - - - 15,168,259 AJK including GilgitBaltistan Bahrain Total 13,538,873 257,574,699 93,498,987 130,612,221 3,562,470 365,284 828,605 - 15,168,259 828,605 Islamabad AJK & GilgitBaltistan 13,538,873 13,538,873 2020 Utilization Disbursements Punjab KPK & FATA Sindh Balochistan Bahrain ----------------------------------------------------------- Rupees in '000 ----------------------------------------------------------Province / Region Punjab 87,425,286 Sindh 152,726,852 KPK including FATA Balochistan Islamabad 1,055,415 244,399 87,425,286 - 152,726,852 - - - - - - - - - - - - - - - - - - - - - 1,055,415 - - - 244,399 16,845,491 - - - - 247,017 - - - - - - - - - 16,845,491 AJK including GilgitBaltistan Bahrain Total 8,441,218 266,985,678 87,425,286 152,726,852 1,055,415 244,399 16,845,491 247,017 247,017 8,441,218 8,441,218 220
224. JS BANK LIMITED 45 .2 Market Risk Market risk is the risk of loss due to adverse changes in interest rates, foreign exchange rates, equity prices and market conditions. From the perspective of the Group, market risk comprises of interest rate risk, foreign exchange risk and equity position risk, which the Group is exposed to in its trading book. The Group has an approved market risk policy wherein the governance structure for managing market risk, measurement tools used and the market risk exposure limits have been addressed. The Group’s strategy for managing market risk is to relate the level of risk exposures to their risk appetite and the capital at hand. The Board of Directors (BoD) and the Asset and Liability Committee (ALCO) are responsible for addressing market risk from a strategic perspective and are assisted by the market risk function in meeting these objectives. The Market Risk Unit reports directly to Head ERM and is responsible for ensuring the implementation of market risk policy in line with the Group’s strategy. Risk reporting undertaken by the market risk function includes: a) b) c) d) Portfolio Reports Limit monitoring reports Sensitivity analysis ; and Stress testing of the portfolio Currently, the Group is using the market risk standardised approach for the purpose of computing regulatory capital, the details of which are set out above. 45.2.1 Balance sheet split by trading and banking books Banking book 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 Non-current assets held for sale 34,267,180 1,227,606 31,939,044 231,111,670 254,566,072 11,504,329 3,151,210 20,452,393 588,219,504 2021 2020 Trading book Total Banking book Trading book --------------------------------- Rupees in '000 ---------------------------1,109,404 1,109,404 34,267,180 1,227,606 31,939,044 232,221,074 254,566,072 11,504,329 3,151,210 20,452,393 589,328,908 30,421,531 1,128,135 23,239,672 176,803,880 250,455,534 9,026,764 2,515,549 16,743,107 739,200 511,073,372 25,003,774 25,003,774 Total 30,421,531 1,128,135 23,239,672 201,807,654 250,455,534 9,026,764 2,515,549 16,743,107 739,200 536,077,146 45.2.2 Foreign Exchange Risk Main objective of foreign exchange risk management is to ensure that the foreign exchange exposure of the Group lies within the defined appetite of the Group. Daily reports are generated to monitor the internal and regulatory limits with respect to the overall foreign currency exposures. The overall net open position, whether short or long has the potential to negatively impact the profit and loss depending upon the direction of movement in foreign exchange rates. Foreign exchange open and mismatched positions are marked to market on a daily basis. Currency risk arises where the value of financial instruments changes due to changes in foreign exchange rates. In order to manage currency risk exposure the bank enters into ready / spot, forward and swap transactions with SBP and in the interbank market. The Group's foreign exchange exposure comprises of forward contracts, foreign currencies cash in hand, balances with banks abroad, foreign placement with SBP and foreign currencies assets and liabilities. The net open position is managed within the statutory limits, as fixed by SBP. Counter parties limit are also fixed to limit risk concentration. Appropriate segregation of duties exists between the front and back office functions while compliance with the net open position limit is independently monitored on an ongoing basis. 221
225. JS BANK LIMITED 2021 Net foreign Off-balance currency Assets Liabilities sheet items exposure -------------------- Rupees in '000 -----------------United States Dollar Great Britain Pound Euro Other currencies 22,575,693 449,791 865,480 704,561 24,595,525 26,353,497 2,986,136 995,159 1,677,472 32,012,264 4,052,225 2,505,878 150,195 1,038,980 7,747,278 274,421 (30,467) 20,516 66,069 330,539 2020 Net foreign Off-balance currency Assets Liabilities sheet items exposure -------------------- Rupees in '000 -----------------United States Dollar Great Britain Pound Euro Other currencies 20,731,596 690,248 2,028,206 542,006 23,992,056 28,340,649 2,767,203 1,324,879 397,092 32,829,823 7,925,120 1,692,641 (938,258) (96,962) 8,582,541 2021 Banking book 316,067 (384,314) (234,931) 47,952 (255,226) 2020 Trading book Banking book Trading book ------------------ Rupees in '000 -----------------Impact of 1% change in foreign exchange rate on - Profit and loss account - Other comprehensive income - 3,425 - - 2,552 - 45.2.3 Equity position Risk Equity positions in the banking book include Investment in equities that are available-for-sale or held for strategic investment purposes. These investments are generally regarded as riskier relative to fixed income securities owing to the inherent volatility of stock market prices. The Group mitigates these risks through diversification and capping maximum exposures in a single company, compliance with regulatory requirement, and following the guidelines laid down in the Group’s Investment Policy as set by the Board of Directors (BoD). The Bank follows a delivery versus payment settlement system thereby minimizing risk available in relation to settlement risk. Equity price risk is managed by applying trading limit and scrip-wise and portfolio wise nominal limits. 2021 Banking book 2020 Trading book Banking book Trading book ------------------ Rupees in '000 -----------------Impact of 5% change in equity prices on - Profit and loss account - Other comprehensive income 207,231 69,629 211,940 15,750 45.2.4 Yield / Interest Rate Risk in the Banking Book (IRRBB)-Basel II Specific Yield/ Interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual re-pricing or maturity date and for off-balance sheet instruments is based on settlement date. This also refers to the non-trading market risk. The gap analysis between the market rate sensitive assets and liabilities is given below: 2021 Banking book 2020 Trading book Banking book Trading book ------------------ Rupees in '000 -----------------Impact of 1% change in interest rates on - Profit and loss account - Other comprehensive income 1,030,260 (1,315,776) 10,659 (392) 20,570 1,033,253 235,507 - 222
226. JS BANK LIMITED 45 .2.5 Mismatch of interest rate sensitive assets and liabilities Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in the market interest rates. The Group is exposed to interest / mark-up rate risk as a result of mismatches or gaps in the amount of interest / mark up based assets and liabilities that mature or re-price in a given period. The Group manages this risk by matching/re-pricing of assets and liabilities. The assets and liabilities committee (ALCO) of the Bank monitors and manages the interest rate risk with the objective of limiting the potential adverse effects on the profitability of the Group. 2021 Effective yield interest rate - % Total Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Up to 1 to 3 to 6 months to to 2 to 3 to 5 to 10 Above month months months 1 year years years years years 10 years --------------------------------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------------------------------- Non-interest bearing financial instrument On-balance sheet financial instruments Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Other assets Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Liabilities against assets subject to finance lease Other liabilities 10.55 7.88 10.11 - 34,267,180 1,227,606 31,939,044 232,221,074 254,566,072 16,331,497 570,552,473 2,616,420 47,500 28,653,126 32,774,132 199,360,166 263,451,344 3,285,918 143,526,508 28,503,505 175,315,931 19,675,425 10,157,443 29,832,868 19,031,494 1,337,331 20,368,825 293,104 469,345 762,449 2,710,744 834,738 3,545,482 1,407,458 1,507,983 2,915,441 3,499,772 1,507,344 5,007,116 5.84 8.18 13.09 7,038,886 72,048,604 459,350,047 6,996,800 12,767,722 172,875,719 - 31,999,709 44,267,929 - 4,659,451 57,747,608 6,996,800 15,724,911 51,870,299 - 425,894 6,647,573 - 1,201,352 3,588,090 - 2,945,091 772,505 - 2,324,474 45,360 - - 18,785,095 564,219,432 6,333,041 185,643,441 77,807,903 76,267,638 99,048,293 69,403,859 (39,570,991) 67,595,210 (47,226,385) 7,073,467 (6,311,018) 4,789,442 (1,243,960) 3,717,596 (802,155) 2,369,834 2,637,282 19,392,439 6,715,012 5,151,416 5,278,025 1,779,761 468,225 - - - - - (12,132,045) (7,897,447) (2,123,851) (1,377,299) (234,300) - - - - - 7,260,394 (1,182,435) 3,027,565 233,925 - - - - - On-balance sheet financial instruments Commitments in respect of forward purchase and commitments to extend credits Commitments in respect of forward exchange contracts - sale Off-balance sheet gap (499,148) 4,778,877 402,462 Total yield / interest risk sensitivity gap 76,625,468 102,075,858 (34,792,114) (46,823,923) (6,077,093) (1,243,960) Cumulative yield / interest risk sensitivity gap 76,625,468 178,701,326 143,909,212 97,085,289 91,008,196 89,764,236 (802,155) 88,962,081 3,531,777 3,531,777 3,531,777 2,637,282 3,531,777 91,599,363 95,131,140 31,650,760 1,180,106 9,302,437 7,356,440 16,331,497 65,821,240 7,038,886 121,534,964 18,785,095 147,358,945 (81,537,705) (81,537,705) 223
227. JS BANK LIMITED 2020 Effective yield interest rate - % Total Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Up to 1 to 3 to 6 months to to 2 to 3 to 5 to 10 Above month months months 1 year years years years years 10 years -------------------------------------------------------------------------------------------------- Rupees in '000 ------------------------------------------------------------------------------------------------- Non-interest bearing financial instrument On-balance sheet financial instruments Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Other assets 6.56 8.03 8.36 - 30,421,531 1,128,135 23,239,672 201,807,654 250,455,534 14,326,600 521,379,126 2,261,337 24,317 18,351,972 33,368,890 204,908,975 258,915,491 4,887,700 92,486,042 20,772,932 118,146,674 42,997,826 10,019,031 53,016,857 13,940,359 641,483 14,581,842 7,273,895 263,840 7,537,735 2.88 6.94 10.12 4,981,983 48,303,412 431,423,822 7,492,800 12,866,768 164,775,712 7,492,800 13,316,211 54,817,591 - 4,720,046 35,103,103 - 70,980 64,634,567 - 13,221,857 2,133,246 - - 19,875,838 512,077,855 9,301,271 185,135,280 73,780,211 68,133,802 50,012,872 39,823,149 13,193,708 64,705,547 (50,123,705) 15,355,103 (7,817,368) 24,898,370 8,127,500 11,419,586 3,996,659 1,296,986 57,639 - - - - - (18,843,892) (10,903,258) (3,031,387) (2,619,805) (2,231,803) (57,639) - - - - - 6,054,478 (2,775,758) 8,388,199 1,376,854 (934,817) - - - - - - Total yield / interest risk sensitivity gap 71,004,453 58,401,071 14,570,562 (51,058,522) (7,817,368) 1,599,530 (2,321,032) 4,255,217 2,974,156 Cumulative yield / interest risk sensitivity gap 71,004,453 129,405,524 143,976,086 92,917,564 85,100,196 86,699,726 84,378,694 88,633,911 91,608,067 Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt Liabilities against assets subject to finance lease Other liabilities On-balance sheet financial instruments Commitments in respect of forward purchase and commitments to extend credits Commitments in respect of forward exchange contracts - sale Off-balance sheet gap 2021 2020 Rupees in '000 Reconciliation to total assets Balance as per balance sheet Less: Non financial assets Fixed assets Intangible assets Deferred tax assets - net Other assets Non-current assets held for sale 1,428,940 695,674 2,124,614 540,672 (15,588) 525,084 1,599,530 135,586 1,885,879 2,021,465 3,759,785 1,674,415 5,434,200 2,387,895 1,954,602 - 1,178,983 - 4,342,497 (2,321,032) 1,178,983 4,255,217 2,974,156 2,974,156 2,974,156 28,160,194 1,103,818 6,416,331 6,619,149 14,326,600 56,626,092 3,804,491 83,084,431 16,458,705 103,347,627 (46,721,535) (46,721,535) 2021 2020 Rupees in '000 Reconciliation to total liabilities 589,328,908 536,077,146 11,504,329 3,151,210 4,120,896 18,776,435 570,552,473 9,026,764 2,515,549 2,416,507 739,200 14,698,020 521,379,126 Balance as per balance sheet Less: Non financial liabilities Other liabilities Deferred tax liabilities - net 565,496,501 513,161,445 1,277,069 1,277,069 1,083,590 1,083,590 564,219,432 512,077,855 224
228. JS BANK LIMITED 45 .3 Liquidity risk Liquidity risk is the risk that the Group will not be able to raise funds to meet its commitments. The Group's Asset and Liability Committee (ALCO) manages the liquidity position on a continuous basis. The Group's policy to liquidity management is to maintain adequate liquidity at all times and in all currencies under both normal and stress conditions, to meet our contractual and potential payment obligations without incurring additional and unacceptable cost to the business. Treasury is responsible for the managing liquidity risk under the guidance of Asset-Liability Committee of the Group. The Group's liquidity risk management approach starts at the intraday level (operational liquidity) managing the daily payments queue and factoring in our access to the qualifying securities of State Bank of Pakistan. It then covers tactical liquidity risk management dealing with the access to unsecured funding sources and the liquidity characteristics of our asset inventory (asset liquidity). Finally, the strategic perspective comprises the maturity profile of all assets and liabilities on our statement of financial position. For monitoring and controlling liquidity risk, the Group generates a scenario sensitive maturity statement of financial position, and run controlled mismatches that are monitored and discussed by ALCO members regularly. The Group prepares various types of reports and analysis for assisting ALCO in taking necessary strategic actions for managing liquidity risk in the Group. These include liquidity ratios, Concentration analysis, Gap reports, Stress testing, Liquidity Coverage ratio & Net Stable Funding Ratio analysis etc. 45.3.1 Maturities of Assets and Liabilities - based on contractual maturities 2021 Total Over 1 Over 7 Over 14 Over 1 Over 2 Over 3 Over 6 Over 9 Over 1 Over 2 Upto 1 to 7 to 14 days to 1 to 2 to 3 to 6 to 9 months to 1 to 2 to 3 Over 3 to 5 Over 5 day days days month months months months months year years years years years ------------------------------------------------------------------------------------------------------------------------- Rupees in '000 ------------------------------------------------------------------------------------------------------------------------Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions 34,267,180 34,267,180 - - - - - - - - - - - - 1,227,606 1,227,606 - - - - - - - - - - - - - - - - - - - 31,939,044 - Investments 232,221,074 Advances Fixed assets Intangible assets Deferred tax assets - net Other assets Non-current assets held for sale 19,975,317 3,875,015 4,802,794 3,285,918 1,009 192,000 10,662,728 21,277,992 81,350,214 12,511,646 18,135,706 18,886,214 17,672,153 6,319,534 4,217,757 5,545,865 35,448,256 254,566,072 84,214,932 2,282,278 1,909,680 6,014,733 19,971,499 15,599,042 18,994,835 10,275,469 15,050,799 25,431,607 23,175,116 20,720,613 10,925,469 11,504,329 2,111 12,482 14,562 307,867 137,639 1,437,900 399,811 393,263 354,090 1,244,228 839,404 2,233,858 4,127,114 3,151,210 441 2,451 2,859 6,511 12,227 722,780 36,566 36,569 36,535 144,149 132,167 256,642 1,761,313 - - - - - - - - - - - - 3,900 1,222 - - - - - - - - - - - - 20,452,393 - 2,307,055 - 16,448,818 - 589,328,908 122,020,334 22,464,528 16,468,744 48,858,715 1,048,079 105,805,576 213,424 30,484,792 429,895 37,996,813 29,592,737 33,113,577 33,139,518 28,364,444 28,756,978 - 52,262,152 Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt 7,038,886 234,630 1,642,407 3,284,813 1,877,036 72,048,604 306,720 9,996,530 525,579 1,938,893 27,100,408 4,899,301 4,659,451 10,099,952 5,624,959 425,894 1,201,352 2,945,091 459,350,047 226,239,397 16,969,798 4,596,376 36,426,930 16,545,427 27,763,145 57,801,750 25,548,314 35,253,690 6,769,307 3,682,923 1,707,630 45,360 900 2,501,800 1,996,200 2,000 2,495,000 6,996,800 - - - - - - - - - - - - - - - - - (27,179) (84,852) (9,494) - 900 - - - - - - 2,324,474 Liabilities against assets subject to finance lease Deferred tax liabilities - net Other liabilities Net assets Share capital - net Reserves 1,277,069 18,785,095 565,496,501 23,832,407 6,250,878 233,031,625 (111,011,291) 28,608,735 (6,144,207) 8,406,768 8,061,976 200,805 9,664,028 40,416,485 8,442,230 53,225,011 52,580,565 171,037 32,823,989 (2,339,197) (104,239) 221,916 62,579,778 (24,582,965) - - (90,332) 1,788 35,557,934 (5,965,197) 351,061 41,232,398 (8,118,821) 129,847 203,118 186,425 1,071,987 924,206 518,719 479,063 3,382 10,751,054 22,388,464 7,602,312 20,762,132 5,320,209 23,436,769 5,940,203 46,321,949 10,119,242 2,331,069 Surplus on revaluation of assets - net of tax Unappropriated profit Non-controlling interest 3,228,929 7,764,840 388,327 23,832,407 - 225
229. JS BANK LIMITED Maturity of assets and liabilities - based on contractual maturities of assets and liabilities of the Bank 2020 Total Over 1 Over 7 Over 14 Over 1 Over 2 Over 3 Over 6 Over 9 Over 1 Over 2 Upto 1 to 7 to 14 days to 1 to 2 to 3 to 6 to 9 months to 1 to 2 to 3 Over 3 to 5 Over 5 day days days month months months months months year years years years years ------------------------------------------------------------------------------------------------------------------------- Rupees in '000 ------------------------------------------------------------------------------------------------------------------------Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions 30,421,531 30,421,531 - - - - - - - - - - - - 1,128,135 1,128,135 - - - - - - - - - - - - 23,239,672 2,485,829 - - - - - - Investments 201,807,654 Advances - 3,500,000 - 3,291,063 9,075,080 - 4,887,700 13,786,643 17,167,632 4,524,776 73,162,303 44,507,608 12,966,751 1,151,807 7,980,417 4,815,444 3,470,764 18,273,509 - 250,455,534 91,706,484 2,515,294 1,262,175 9,566,816 14,457,348 13,560,823 19,372,137 9,544,829 13,087,897 31,914,264 21,520,367 13,641,989 8,305,111 Fixed assets 9,026,764 1,031,116 11,092 12,941 78,862 121,156 411,539 356,226 352,328 320,673 1,198,183 947,931 2,394,899 1,789,818 Intangible assets 2,515,549 15,846 2,008 2,343 5,356 10,043 223,310 29,820 29,612 29,598 117,664 115,429 226,108 1,708,412 - - - - - - - - - - - - 35,125 - - - - - - - - Deferred tax assets - net Other assets Non-current assets held for sale 16,743,107 739,200 2,064,679 - - 433,835 - 13,115,780 - 536,077,146 128,853,620 6,028,394 18,789,000 49,009,526 518,574 19,631,897 41,047 92,286,722 534,067 64,799,858 22,928,645 739,200 15,329,175 41,210,528 27,399,171 19,733,760 30,076,850 Liabilities Bills payable Borrowings Deposits and other accounts Subordinated debt 4,981,983 166,066 1,162,463 2,324,925 1,328,529 - - 48,303,412 234,381 368,146 9,724,181 2,540,060 5,539,400 7,776,811 4,720,046 26,292 44,687 13,221,857 431,423,822 217,192,381 9,135,642 21,400,684 19,147,079 29,458,673 25,358,911 35,103,094 13,995,688 56,559,628 2,133,228 1,000 2,000 7,492,800 - - - - - - - - - 1,000 - - - - - - - - - - - - - 5,722 (70,276) (3,587) (99,650) (99,702) (42,802) - - - - 540,672 2,387,895 (15,603) 1,954,417 - 1,995,200 - 5,493,600 1,178,984 Liabilities against assets subject to finance lease Deferred tax liabilities - net Other liabilities Net assets Share capital - net Reserves 1,083,590 19,875,838 513,161,445 22,915,701 3,334,684 220,927,512 (92,073,892) 10,666,251 (4,637,857) 33,449,790 (14,660,790) 385,097 23,406,487 25,603,039 10,561,165 45,488,962 (25,857,065) 266,283 502,414 101,165 33,398,418 58,888,304 40,226,904 24,572,954 14,023,443 8,905,202 700,828 57,263,341 (41,934,166) - - 159,820 - 110,765 176,412 946,888 1,778,734 1,311,459 827,329 106,680 17,246,584 23,963,944 7,506,540 19,892,631 7,324,661 12,409,099 2,232,552 27,844,298 10,119,242 1,991,169 Surplus on revaluation of assets - net of tax Unappropriated profit Non-controlling interest 3,247,593 7,029,251 528,446 22,915,701 226
230. JS BANK LIMITED 45 .3.2 Maturity of assets and liabilities - Based on working prepared by the Asset and Liability Committee (ALCO) of the Bank 2021 Total Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Up to 1 to 3 to 6 months to to 2 to 3 to 5 Over 5 to 10 Above month months months 1 year years years years years 10 years ------------------------------------------------------------------------------------ Rupees in '000 -----------------------------------------------------------------------------------Assets Cash and balances with treasury banks 34,267,180 34,267,180 - - - - - - - - 1,227,606 1,227,606 - - - - - - - - 31,939,044 28,653,126 3,285,918 - - - - - - - Investments 232,221,074 32,133,729 93,861,860 18,135,706 36,558,367 6,319,534 4,217,757 5,545,865 35,448,256 Advances 254,566,072 24,163,139 39,192,112 25,513,664 85,444,352 25,431,607 23,175,116 20,720,613 6,616,081 4,309,388 11,504,329 337,022 1,575,539 399,811 747,353 1,244,228 839,404 2,233,857 920,285 3,206,830 3,151,210 12,262 735,007 36,566 73,104 144,149 132,167 256,642 288,410 1,472,903 - - - - - - - 1,222 - - - - - - - - - - Balances with other banks Lendings to financial institutions Fixed assets Intangible assets Deferred tax assets - net Other assets Non-current assets held for sale 20,452,393 589,328,908 18,759,772 139,553,836 1,261,504 139,911,940 429,895 44,515,642 122,824,398 33,139,518 28,364,444 28,756,977 43,273,032 - 8,989,121 Liabilities Bills payable 7,038,886 7,038,886 Borrowings 72,048,604 12,767,722 31,999,709 4,659,451 15,724,911 425,894 1,201,352 2,945,091 2,324,474 - 459,350,047 62,549,257 52,221,638 67,855,835 71,878,650 24,390,065 20,644,285 159,764,957 45,360 - 900 900 2,501,800 1,996,200 2,000 2,495,000 - Deposits and other accounts Subordinated debt 6,996,800 - - - - - - - - - - Liabilities against assets subject to finance lease Deferred tax liabilities - net Other liabilities Net assets Share capital - net Reserves 1,277,069 - - (27,179) (94,345) 18,785,095 3,649,508 9,925,061 565,496,501 23,832,407 85,978,194 53,575,642 94,052,063 45,859,877 - - (104,239) (88,545) 396,830 72,808,777 (28,293,135) - - - - - 129,847 203,118 186,425 1,071,987 - 796,093 1,664,865 971,280 814,603 566,855 - 88,312,009 34,512,389 29,112,471 4,027,047 25,016,235 3,348,209 163,713,076 (134,956,099) 6,503,676 36,769,356 8,989,121 10,119,242 2,331,069 Surplus on revaluation of assets - net of tax 3,228,929 Unappropriated profit Non-controlling interest 7,764,840 388,327 23,832,407 227
231. JS BANK LIMITED 2020 Total Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Up to 1 to 3 to 6 months to to 2 to 3 to 5 Over 5 to 10 Above month months months 1 year years years years years 10 years ---------------------------------------------------------------------------------------------- Rupees in '000 --------------------------------------------------------------------------------------------Assets Cash and balances with treasury banks 30,421,531 30,421,531 - - - - - - - - 1,128,135 1,128,135 - - - - - - - - 23,239,672 18,351,972 4,887,700 - - - - - - - Investments 201,807,654 30,954,275 77,687,079 44,507,608 14,118,558 7,980,417 4,815,444 3,470,764 18,273,509 Advances 250,455,534 33,881,197 31,703,662 26,006,020 80,557,471 31,914,264 17,826,671 13,641,989 5,182,115 9,742,145 Fixed assets 9,026,764 104,894 532,695 356,226 673,001 1,198,183 947,931 2,394,899 668,086 2,150,849 Intangible assets 2,515,549 10,042 233,353 29,820 59,210 117,664 115,429 227,108 259,299 1,463,624 - - - - - - - 35,125 - - - - - 739,200 - - - - Balances with other banks Lending to financial institutions Deferred tax assets - net Other assets Non-current assets held for sale 16,743,107 739,200 536,077,146 15,614,294 130,466,340 559,621 115,604,110 534,067 71,433,741 96,182,565 41,210,528 23,705,475 19,734,760 24,383,009 - 13,356,618 Liabilities Bills payable 4,981,983 4,981,983 Borrowings 48,303,412 12,866,768 13,429,576 4,606,681 70,979 13,221,857 540,672 2,387,895 431,423,822 54,243,111 61,226,376 43,681,608 80,182,259 18,068,592 13,002,724 161,019,152 - - 1,000 1,000 2,000 5,493,600 1,995,200 - - - - Deposits and other accounts Subordinated debt 7,492,800 - - - - - - - - 1,178,984 - Liabilities against assets subject to finance lease Deferred tax liabilities - net Other liabilities Net assets Share capital - net Reserves - - - 1,083,590 - 5,722 (73,863) (99,650) (142,504) - 19,875,838 3,719,781 10,827,448 502,414 513,161,445 22,915,701 75,817,365 54,648,975 85,409,537 30,194,573 48,692,053 22,741,688 - - - 110,765 176,412 159,820 946,888 - 801,993 1,778,734 1,311,459 827,329 106,680 - 80,913,727 15,268,838 33,181,948 8,028,580 20,524,867 3,180,608 166,389,396 (146,654,636) 2,232,552 22,150,457 13,356,618 10,119,242 1,991,169 Surplus on revaluation of assets - net of tax Unappropriated profit Non-controlling interest 45.3.3 3,247,593 7,029,251 528,446 22,915,701 To identify the behavioural maturities of non-contractual assets and liabilities, the Group has used the following methodology: For determining the core portion of non contractual liabilities (non-volatile portion), the Group has used the average method whereby average balance maintained over past five year has been classified as core and has been placed in 'over 3 to 5 years' maturity bucket. Non contractual assets and remaining volatile portion of non contractual liabilities have been stratified in relevant maturity bucket using bucket wise percentages determined by using average volatility in respective period / bucket. 228
232. JS BANK LIMITED 45 .4 OPERATIONAL RISK The Group currently uses Basic Indicator Approach to Operational Risk for regulatory capital calculations. We define operational risk as the risk of loss resulting from inadequate or failed internal processes, people and system or from external events. With the evolution of Operational Risk Management into a separate distinct discipline, the Group's strategy is to further strengthen its risk management system along new industry standards. Accordingly ,the Group has set up a separate Operational Risk Management (ORM) Unit. ORM Unit resides within Risk Management Group (RMG). Its responsibility is to implement Operational Risk management tools across the Group for effective measurement and monitoring of operational risk faced by different areas of the Group. The Group’s operational risk management process involves a structured and uniform approach across the bank. It includes risk identification and assessments, the monitoring of Key Risk Indicators (KRIs) and Risk Control Self-Assessment (RCSA) activities for key operational risks. In order to build a robust operational risk monitoring mechanism, an Operational Risk Steering Committee (ORSC) has been constituted to effectively address operational risk issues. The Group has implemented a comprehensive “Operational Risk Management Framework” which has also been approved by the Board of Directors. The purpose of bank-wide Operational Risk Management Framework is aimed at laying out clearly defined roles and responsibilities of individuals / units across different functions of the Group that are involved in performing various operational risk management tasks. Operational risk is much more pervasive in a financial institution and every operating unit is exposed to operational risk, regardless of whether it is a business or a support function. This framework has been devised to explain the various building blocks of the operational risk management processes, and their interrelationships. The framework also captures both qualitative and quantitative guidelines for managing and quantifying operational risks across the Group. The ORM Unit conducts operational risk profiling for all major operational areas of the Group and assists various functions of the bank in developing KRIs which are monitored against predefined thresholds. Findings from KRIs are used as predictive indicators of potential operational risks. Operational risk incidents and loss data collection is governed by Group’s Operational Risk Management Policy and process documents which have been developed and implemented to collate operational losses and near misses in a systematic and organized way. The Group's Business Continuity (BCP) Policy includes risk management strategies to mitigate inherent risks and prevent interruption of mission critical services caused by disaster events. The resilience of BCP is tested and rehearsed on an annual basis by the Group. 46 DERIVATIVE RISK The policy guidelines for taking derivative exposures are approved by the Board of Directors (BOD). The Holding Company's Asset & Liability Committee (ALCO) is responsible for reviewing and managing associated risks of the transactions. The nature, scope and purpose of derivatives business, for trading purposes or hedging purpose and the types of derivative in which they deal. The overall responsibility for offering derivative products and sustaining profitability lies with the Treasurer and in his absence with his delegate. The Market Risk nit / Treasury Middle Office of the Holding Company responsible for measurement & monitoring of the market risk exposures, analysis of present and potential risk factors. 229
233. JS BANK LIMITED The Market Risk Unit also monitors associated Credit , Market and Liquidity Risk in line with Board of Directors approved limit framework. The unit coordinates with the business regarding approvals for derivatives risk limits and produces various reports / analysis for ALCO / BRMC on periodic basis. These reports provide details of outstanding un-hedged positions, profitability and status of compliance with limits. Treasury Operations records derivatives activity in the Bank’s books and is responsible for reporting to the SBP. The derivative transaction such as Cross Currency Swaps carries credit risk which is the risk that a party to a derivative contract will fail to perform its obligation. There are two types of credit risk associated with derivative transactions; 1) settlement, and 2) pre-settlement risk. The Holding Company’s Central Credit Committee is responsible for reviewing and managing associated Counterparty Credit Risks of the transaction. The Holding Company has also entered into Foreign Currency & Commodity Options from its Wholesale Banking Branch Bahrain for market making activities. The Bank can hedge its risk by taking on & off-balance sheet position in interbank market, where available. 47. CUSTOMER SATISFACTION AND FAIR TREATMENT The Holding Company Client Experience (CE) Group organize, plan and monitor the Holding Company’s Client Experience on all touchpoints to ensure optimized interaction between the Bank and its clients. CE Group develops and implement strategies useful in improving client relationship, dedication, and satisfaction. Our core values – Client Centricity, resonates directly with effective grievance management, complaint handling and listening to voice of clients to fully understand the needs of our clients and stakeholders to adapt our product and services and exceed their expectations. A total of 23,261 complaints were received by the Holding Company in 2021 and the average time taken to resolve these complaints was 6 working days. The complaint handling policy and grievance redressal mechanism ensures that complaints are resolved in a timely manner and recurrence of complaints is prevented where possible. Complaint management process is kept as transparent as possible through logging, acknowledgement, interim response where applicable and resolution of complaints. Clients are also given the option of contacting the Banking Ombudsman (Mohtasib) in case they are dissatisfied with the response received from the Holding Company. To create enhanced visibility of the recourse mechanism available to its clients, the Bank has incorporated awareness messages of its complaint handling function in several client communications such as account statements, ATM screens and SMS messages. Complete grievance redressal mechanism, touchpoints and online feedback forms have been made available through the Bank's website, and email broadcasts have been sent to the clients for client education and awareness. The Holding Company Contact Center supports client interactions across a range of channels, including phone calls, email, SMS chat, Whatsapp, Website form and the emerging adoption of social media interactions, and is distinct from telephony-only call centers. The Holding Company Contact Centre is equipped with trained professionals who offer a wide array of information and problem resolution support round the clock. The clients are further facilitated by key underlying technologies include automatic call distribution, computer-telephony integration, and interactive voice response. 230
234. JS BANK LIMITED 48 . GENERAL 48.1 These consolidated financial statements have been prepared in accordance with the revised format for financial statements of Banks issued by the SBP through BPRD Circular no. 2 dated January 25, 2018 and related clarifications / modifications. 48.2 Corresponding figures have been re-arranged / re-classified, wherever necessary, to facilitate comparison in the presentation in the current period. However, there are no material re-arrangements / re-classifications to report. 48.3 The figures in these consolidated financial statements have been rounded off to the nearest thousand. 49. DATE OF AUTHORISATION FOR ISSUE These consolidated financial statements were authorized for issue by the Board of Directors of the Holding Company in their meeting held on March 02, 2022. _____________________ President and Chief Executive Officer ___________________ Chief Financial Officer _____________ Director _____________ Director _____________ Chairman 231
235. JS BANK LIMITED Annexure - I STATEMENT SHOWING WRITTEN-OFF LOANS OR ANY OTHER FINANCIAL RELIEF OF RUPEES FIVE HUNDRED THOUSAND OR ABOVE PROVIDED DURING THE YEAR ENDED DECEMBER 31 , 2021 S. No. Name and address of the borrower Name of individuals/ partners/ directors (with CNIC No.) Father's/ Husband's name 1 2 3 4 1 KBA Holdings (Pvt.) Ltd. 18 Km, Multan Road, Lahore Umar Belal Belal Ahmed Outstanding Liabilities at beginning of year Principal Interest/ Other Total Mark-up than Interest/ Mark-up 5 Principal written-off Interest/ Mark-up written-off/ waived Other financial relief provided Total (9+10+11) 6 7 8 9 10 11 12 ------------------------------------------------------------------------- Rupees in '000 ------------------------------------------------------------------------1,364 1,425 6 2,795 703 - 703 35202-3193491-9 Khwaja Saqib Masood Khawaja Masood Sidiq 35202-0694748-9 2 Shaheer Petroleum Services Station Road, Ghotki, Karachi 3 Usama Petroleum Service Mian Channu, Tehsil Mian Channu, District Khanewal 4 Rijas Farms Pvt Ltd Ali Asghar Daudpota Sain Dino - 679 - 679 - 679 - 679 9,940 1,985 - 11,925 - 1,998 - 1,998 18,333 4,128 - 22,461 - 3,161 - 3,161 Farman Ali Khan 13,038 4,701 - 17,739 - 2,713 - 2,713 Ghulam Mustafa 3,000 1,433 - 4,433 - 1,407 - 1,407 Muhammad Ilyas Alvi 5,000 1,484 6,541 - 1,483 - 1,483 108,952 26,608 135,560 - 19,559 - 19,559 2,306 755 38 3,099 141 703 - 844 161,933 43,198 101 205,232 141 32,406 45102-5388687-3 Shafiq Ullah Adnan Atta Ullah Malik 35202-2540762-9 Ahsan Shahzad Suite No 710, 7th Floor, Business Centre, Shahrah-e-Faisal, 35201-5415698-5 Karachi Nida Ahsan Shahzada Waseem Ahsan Shahzad 35201-0152746-6 5 Noreen Farman Khan 163-D-1, Johar Town, Lahore 6 Rana Nadeem Mustafa H No 283-X, Ph- 3 DHA, Lahore 7 Malik Moeed Ilyas H No 113 A, St No 6, Bahria Town Ph 2, Rawalpindi 8 Omar Danial Baweja Faiza Ahmed 126 By 2, Main Khayaban E Muhafiz, Phase 6 DHA ,Karachi 9 Mirza Umair Afzal H 147, St 4, Peer Colony Walton Road, Lahore Noreen Farman Khan 35202-1421515-0 Rana Nadeem Mustafa 35201-1471739-3 Malik Moeed Ilyas Omar Danial Baweja Faiza Ahmed S Mahmood Baweja - 42301-3857295-9 Mirza Umair Afzal Muhammad Afzal 33100-3526955-7 TOTAL: * 57 37405-4283340-7 - 32,547 Relief includes amounts which would be due to the Bank under contractual arrangements whether or not accrued in the books. 232
236. JS BANK LIMITED Annexure II As at December 31 , 2021 As referred to in note 11.2.3 to the unconsolidated and consolidated financial statements Details of disposal of fixed assets made to related parties Accumulated Particulars Written Sale Cost depreciation down value proceeds Gain --------------------------------- Rupees in '000 -------------------------------- Mode of Buyers' particulars and relationship with disposal Bank (if any) Electrical, office and computer equipment Communication Equipment Office Machines and Equipments Computer Lease hold improvements Furniture and fixture 3,931 12,457 5,786 2,416 7,663 5,324 1,515 4,794 462 2,140 6,179 3,611 625 1,385 3,149 22,174 15,403 6,771 11,930 5,159 4,193 1,730 2,463 2,717 254 789 27,156 758 17,891 31 9,265 595 15,242 564 Insurance Insurance Insurance Insurance Insurance Name EFU General Insurance Limited - related party, Address 1st Floor Kashif Centre Main Shahra-e-faisal Karachi Name EFU General Insurance Limited - related party, Address 1st Floor Kashif Centre Main Shahra-e-faisal Karachi Name EFU General Insurance Limited - related party, Address 1st Floor Kashif Centre Main Shahra-e-faisal Karachi Name EFU General Insurance Limited - related party, Address 1st Floor Kashif Centre Main Shahra-e-faisal Karachi Name EFU General Insurance Limited - related party, Address 1st Floor Kashif Centre Main Shahra-e-faisal Karachi 5,977 233
237. Branch Network SINDH KARACHI Boat Basin Branch 021-35177903-4 Shaheen Complex 021 -111 572 265 / 021-38907700” Boat Basin Branch 021-35177903/4 North Nazimabad Branch 021-36721010-7 North Industrial Area Branch 02136962912-11-15 Nazimabad Branch 021-36612325 /36612236 /36612336 New Sabzi Mandi Branch 0345-8211641-43 Gulshan-E-Iqbal Branch 021-34829055/60/61 Gulistan-E-Jauhar Branch 021-34662002/4/6 Safoora Goth Branch 021-34661805 Gulshan Chowrangi Branch 021-34833293-5 Ibrahim Hyderi Branch 0346-1012281 Fisheries Branch 021-32384011-14 Soldier Bazar Branch 021-32244531 / 32 / 33 Garden East Branch 021-32244281-283 Hawksbay Road Branch 021-32373030-32 Gulshan-E-Hadeed Branch 021-36697925-31 Bahadarabad Branch 021-34922802-05 Korangi Rd Dha Phase I Branch 021-35803541-46 Jheel Park Branch 021-34544831-35 Kh-E-Ittehad Dha Phase II Ext Branch 021-35313811-4 26Th Street Dha Phase V Branch 021-35304685 Urdu Bazar (AWT Plaza) Branch 021-32630208/10 Lucky Star Branch 021-35622434-39 Electronic Market Branch 021-32700431 / 2 / 3 / 6 / 7 Zamzama Branch 021-35295221-4 Jodia Bazar Branch 021-32463456/460 Site Branch 021-32550081-84 New Challi Branch 021-32602100-01-02 Timber Market Branch 021-32763054/ 32763079/ 32763047 Cloth Market Branch 021- 32464042 - 47 North Napier Road Branch 021-32467791-94 Teen Talwar Branch 021-35836974-35835867 Park Towers Clifton Branch 021-35832011 Korangi Industrial Area Branch 021-3505 5826/7 021-3505 2773/5 Stock Exchange Branch 021-32462851/55 Chase Store Jail Chowrangi Branch021-34370270-71 Khadda Market Dha Phase V Branch 021-35242401-4 Progressive Center Sh-E-Faisal Branch021-34324682-5 Shahrah-E-Faisal Branch 021-34373240 Kh-E-Shahbaz Dha Phase VI Branch 021-35243416/18 Dha Phase VIII Branch 021-35171731-33 Shah Faisal Colony Branch 021-34686191-95 Ocean Tower Branch 021-35166601-6 HYDERABAD Badin Branch 0297-861203 Site HYD Branch 022-3885192-93 Cloth Market Branch 022-2618271/3 Saddar Branch 022-2730925-26 Anaj Mandi Branch 022-2638802 Citizen Colony Branch 022-2100893-95 Annual Report 2021 234
238. Qasimabad Branch 022-2652190-91 DHA Branch  Branch 022-2108078 Latifabad Branch Branch 022 3817971/84/86 Latifabad Unit No VI Branch 022-3422521-6 Kohsar Branch 022-3400914 Jamshoro Branch 022-3878103-104 /109 /36612336 New Sabzi Mandi Branch 0345-8211641-43 Kot Ghulam Muhammad Branch 0233-866242-4 Kunri Branch 023-8558163-66 Maatli Branch 029-7841514 Mirpur Khas Branch 023-3876001-4 Sultanabad Branch Branch 022-3404106-7 Tando Allah Yaar Branch 022-3892001/4 Thatta Branch 029-8550934 SUKKUR Bhiria City Branch 024-2460182 Chambar Branch 022 -3897033/35/36 Daharki Dist Ghotki Branch 0723-641290 Digri Branch “0233-870245 / 0233-870305 /306 /307” Ghotki Branch 0723-600480-481-484 Kandhkot Branch 072-2573048 Kashmore Kandhkot Branch 072-2577701/07 Khairpur Branch 0243-715318/19 Sheikh Bhirkio Branch 0345-8211923/24 Shikarpur Branch 072-6540374-75 Sukkur Housing Society Branch 071-5815209 Military Road Sukkur Branch 071-5630825-32 Tando Jam Branch 022-2765612/14 Larkana Branch 074-4058603 Tando Mohammad Khan Branch 022-3340594 / 022-3340617-8 Mehar Branch 025-4730307-308-309 Umer Kot Branch 023-8570157-59 Mirpur Mathelo Ghotki Branch 0723-663313/5 LAHORE Kandhkot Branch 072-2573048 Khanewal Branch 065-2557491-93 Mithi Branch 0232-261650 Shadman Town Branch 042-37503712 / 20 Moro Branch 0242-413200 DHA Phase 3 Y-Block Branch 0423-5898010-11 Naushahro Feroze Branch 0242-448415 Dha Phase VI Branch 042-37180745 Nawabshah Branch 024-4330561/4 Airport Road Dha Branch 042-35700081-85 Pano Aqil Branch 071-5809304/6 Dha T-Block Branch 042-35707651/6 Sanghar Branch 023-5800162/63 Upper Mall Branch 042 111 572 265 042-35776515-18 042-35776530 Sehwan Shareef Branch 025-4620305/7 Shahdadkot Branch 074-4013178/31 Shahdadpur Branch 0235-843174 /75 Zarar Shaheed Road Branch 042-36639902-05 Gulshan Ravi Branch 042-35464541- 43 Annual Report 2021 235
239. The Mall Branch 042-36285673-75 Daroughawala Branch 042-36530316 Bhakkar Branch 0453-510407-9 Allama Iqbal Town Branch 042-37805026 /28 Mcleod Road Branch 042-36311176 Burewala Branch 067-3770363/65 Model Town Branch 042-35915614/48 Shah Alam Market Branch 042-37375734-37 Ludan Road Burewala Branch 067-3351441 New Garden Town Branch 042-35940463-67 Urdu Bazar Branch 042-37115915/7 Chakwal Branch 054-3665688 Peco Road Branch 042 35203014 Azam Cloth Market Branch 042-37671195-96 Chichawatni Branch 040 5481792/95 College Road Township Branch 042 -35117491-4 MM Alam Road Branch 042-35761527 Wapda Town Branch 042-35182874/75/77 Cavalry Branch 042-36610282-90 Chiniot Branch 047-6332713 / 14 047-6332592 /93 /94 Bahria Town Branch 042-35976212-14 Chowburji Branch 042-37362981-8 Raiwind Road Branch 042-35291247-70 Ferozepur Road Branch 042-35402151-53 Johar Town Branch 042-35241084/90 Rahimyar Khan Branch 068-5879511 / 14 Sunder Industrial Estate Branch 0311-0013425-26 Shiekhupura Branch 056 3810273/6 Circular Road Branch 042-37667922 /25 Gulberg Lhr Branch 042-35771036-38 Badami Bagh Branch 042-37946853/54 ISLAMABAD Shahdara Branch 0423-7931903-5 Arifwala Branch 0457-835478-81 Shadbagh Branch 042-37604549-51 Attock Branch 057-2610500 / 057-2610480 / 057-2610780 Brandreth Road Branch 042 3630307-9 Baghbanpura Branch 042-36858873-74 Mughalpura Branch 042-36533818 Bahawalnagar Branch 063-2279435/38 Dha Phase II ISB Branch 051-5161525 Bahawalpur Branch 062-2889176/78 Chishtian Branch 0345-8233957 Daska Branch 052-6610461/63 Depalpur Branch 044-4542246-49 DG Khan Branch 064-2470952/56 Dahranwala Chishtian Branch 063-2441147 Dinga Branch 053-7401368 Ghakkhar Mandi Branch 055-3882556-59 / 055-3882561 Gohadpur Branch 052-4265498-99 Gojra Branch 046-3513637/40 Gt Road Gujrat Branch 053 -3729474/5 Kacheri Chowk Branch 053-3600584-6 Annual Report 2021 236
240. Gulyana Branch 053-7588459 Wah Cantt Branch 051-4624015 /016/017 Pak Pattan 045-7352591-93-94 Hafizabad Branch 054-7526407-10 Blue Area Branch 051-111572265 / 051-2810121-4 Qaboola Dist Pak Pattan Branch 0457-851248-51 Haroonabad Branch 063- 2250615 Hasilpur Branch 062-2441302-8 Bara Kahu Branch 051-2165032-7 F-10 Markaz Branch 051-2112960/61 F-11 Markaz Branch 051-2103404-6 F-7 Markaz Branch 051 - 2653901 / 4 051-2608404 /05 F-8 Markaz Branch 051-2818296 /97 /98 G-11 Markaz Branch 051-2363475/77 G-15 Markaz Branch 051-2160240-41 G-8 Markaz Branch 051-2340537 Gulberg Green Branch 0310-5998931 I-8 Markaz Branch 051-4862471-2 I-9 Markaz Branch 051-4431296/8 Branch Stock Exchange 051-2894407/09 NPF O-9 Pwd Road Branch 051-5170584/5 Khanna Pul Branch 051-4478006 /07 Tarlai Branch 051-2241863-4 /66 Jehlum 0544 611840 -3 Kamoki Branch 055-6810282 / 83 / 85 Kasur Branch 049 2761581-84 Mouza Kachi Jamal Khanpur Branch 068-5577193-195 Kharian Branch 0537-602784-85 Mouza Parhar Sharqi Kot Addu Branch 066-2240146 /49 Pattoki Kasur Branch 049-4424053/4 Rabwa Branch 047-6214042/44 Mouza Chak 72 Rahim Yar Khan 068-5708069-74 Sadiqabad Branch 068-5803933/38 Sahiwal Branch 040 4222733/35 Chak 89 Dist Sahiwal Branch 040-4550409/10/11/16 Sambrial Branch 052-6524106/07 Sargodha Branch 048-3768123/24/25 Taunsa Sharif DG Khan Branch 064-2601147 Lala Musa Branch 0537-519656/8 Taxila 0514-535315-17 Layyah Branch 0606-415045/47 Toba Tek Singh Branch 046- 2512052-55 Lodhran Branch 0608-361892/93/96 Ugoki Branch 052-3513953/54 Mandi Bahauddin Branch 0546-509452-53-55 Vehari Branch 067-3360715/18 Mian Chunnoo Branch 065-2661282-85 Wazirabad Branch 055-6605841-4 Muridke Branch 042 37166455-7 Okara Branch 044-2528728 / 30 Annual Report 2021 237
241. GUJRANWALA MULTAN Wapda Town Branch 055-4285573-75 Abdali Road Branch 061-4574363 / 061-4574496/97 Bank Square Branch 055-4234401-3 GT Road Branch 055-3257363 / 055-3257365 / 055-3254407 SIALKOT Bosan Road Branch 061-6223416 /17 Vehari Road Branch 061-6241102-4 Wapda Town Phase I Branch 061-6524733-38 GHQ Branch 051-5202344 BALOCHISTAN Gawadar Branch 086-4210246 Khuzdar Branch 0848-550334-336 Loralai Branch 0824-410104 RAWALPINDI Muslim Bagh Branch 082-3669335/36 Paris Road Branch 052-4269535/6 Air Port Cop Housing Society (AECHS) 051-5497012-15 Ormara Branch 086-3310140 / 144 / 143 / 142 / 147 Shahabpura Ind Est Branch 052-3242681 /84 Bahria Town Phase IV Branch 051-5731351-4 Quetta Cantt Branch 081-2863335 Pasroor Road Nekapura Branch 052-3543582-4 Bahria Town Phase VII Branch 051-5154891-4 MA Jinnah Road Quetta Branch 081-286 5507-04 Kashmir Road Branch 052-4272702-3-4 Bank Road Saddar Branch 051-5120731-3 Zarghoon Road Quetta Branch 081-2472981/82 FAISALABAD Chaklala Scheme 3, Branch 051-5766277-79 Turbat Branch 0852-414201 Chakri Road Branch 051-5129024 Zhob Balochistan Branch 0822-412027028 Jinnah Road Branch 051 -5778560-63 KPK Cantt Sailkot Branch 052-4272351/53 Liaquat Road Branch 041-2541284-86 Grain Market Branch 041-2633382/84 Gulistan Colony Branch 041-8785791-5 Karkhana Bazar Branch 041-2624501-3 Ghulam Mohammad Abad Branch 041-2692192-94 Jaranwala Branch 041-4313032/35 Muzaffargarh Branch 066-2424691-92 Peshawar Road Branch 051-5492873-75 Range Road Branch Cant 051-5128871 / 051-5128875 Saidpur Road Branch 051-5768049/51/53 Satellite Town Branch 051-4842984 /86 Peshawar Abbottabad Branch 099-416110 /112/114 Bannu Branch 0928-6601673 Chakdarah Lower Dir Branch 094-5703336/337 Charsadda Branch 091-6512054 Chitral Branch 0943-413027-29 Annual Report 2021 238
242. Darra Adam Khel Branch 092-22810187 Topi Branch 0938-272003 /4 DI Khan Branch 0966-733216/19 GILGIT REGION Gallanai Branch 0345-9068830 Haripur Branch 0995-627370 Mansehra Branch 0997-301882-84 Mardan Branch 0937 -873445 - 873452 Mingora Branch 0946-711740/43 Nowshera Branch 092-3612004 Parachinar Branch 0926-311777 Dabgari Garden Branch 091-2591425-7 Fakhr-E-Alam Road Branch 091- 527 9981/4 Naz Cinema Branch 091-2211026/24 University Road Branch 091 -571 1572 /75 Wazir Colony Ring Road Branch 0310-5998901-3 Nowshera Saleh Khana Branch 0923-651113/17 Shaidu Nowshera Branch 0923-510013-14 Shakas Khyber Agency Branch 091-5602382/83/85 Timergara Branch 0945-821921 Gilgit Branch 05811-450610 /7 Skardu Branch 0581-5457306 AZAD JAMMU & KASHMIR (AJK) Bagh Branch 0582-3445338 Chaksawari Branch 05827-454791-94 Charroi Branch 05826-415474 / 76 Dadyal Branch 0582-7465 668 / 69 Jatlan Branch 05827-404389 /91 Khui Ratta Branch 0582-6414907 Kotli Branch 05826-448229/31 Mirpur Branch 05827-448867273 Muzaffarabad Branch 05822-923251-2 Sehensa Branch 05826-422779 / 422300 Seri Ajk 05826 -432731/4 INTERNATIONAL BRANCH Bahrain Manama Branch 00973-17104603 Annual Report 2021 239
243. Pattern Of Shareholdings As on December 31 , 2021 S.No No. of Shareholders Total Shares Held 1 569 Shareholding From 1 To 100 6,732 2 585 Shareholding From 101 To 500 235,396 3 608 Shareholding From 501 To 1000 571,734 4 1217 Shareholding From 1001 To 5000 3,534,246 5 412 Shareholding From 5001 To 10000 3,312,631 6 634 Shareholding From 10001 To 500000 15,620,247 7 94 Shareholding From 50001 To 1000000 7,531,867 8 112 Shareholding From 100001 To 5000000 24,107,402 9 18 Shareholding From 500001 To 10000000 12,348,403 10 43 Shareholidng From 10000001 To 1297464262 1,230,195,604 Total 4,292 Percentage: 100% 1,297,464,262 Shareholdings Annual Report 2021 240
244. Pattern Of Shareholdings Particulars Shares Held Percentage Directors and their spouse (s) and minor children Mr. Kalim-ur-Rahman Mr. Adil Matcheswala Mr. Ashraf Nawabi Mr. G.M. Sikander Mr. Munawar Alam Siddiqui Ms. Nargis Ghaloo Mr. Hassan Afzal Mr. Sohail Aman Mr. Basir Shamsie Mrs. Safia Munawar Mrs. Hafsa Shamsie 1,500,000 200,000 1 1 1 1 1 1 1 285,000 1,132,320 0.12 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.09 Sub-Total 3,050,328 0.24 973,307,324 75.02 972 0.00 172,451 0.01 23,959,194 1.85 Foreign Investors 9,175,643 0.71 Others 6,072,604 0.47 141,408,415 10.90 1,297,464,262 100.00 Associated companies, undertakings and related parties Jahangir Siddiqui & Co. Limited NIT & ICP Banks, development finance institutions, non-banking finance companies, Insurance Companies Individual - Local Totals Details of the transactions carried out by the Directors, Chief Executive Officer, Chief Financial Officer, Company Secretary and their spouse and minor children during the period from January 01, 2021 to December 31, 2021. Ms. Safia Munawar Spouse of Mr. Munawar Alam Siddiqui who purchase 100,000 shares of the bank, Ms. Nargis Ghalo independent Director who sale 33,000 shares of the Bank. Annual Report 2021 241
245. JS BANK LIMITED NOTICE OF SIXTEENTH ANNUAL GENERAL MEETING Notice is hereby given that the Sixteenth Annual General Meeting of the shareholders of JS Bank Limited (the “Bank”) will be held on Wednesday, March 30, 2022 at 10:00 a.m. at 15th Floor, The Center, Plot No.28, SB-5, Abdullah Haroon Road, Sadar, Karachi, to transact the following business ORDINARY BUSINESS: i. ii. iii. To receive, consider and adopt the Annual Audited Standalone and Consolidated Financial Statements of the Bank for the year ended December 31, 2021 together with the Directors’ and Auditors’ Reports thereon. To appoint Bank’s Auditors and fix their remuneration. Audit Committee and the Board of Directors have recommended the appointment of the retiring auditors, Messrs KPMG Taseer Hadi & Co., Chartered Accountants, who being eligible have offered themselves for reappointment. To elect seven (7) directors as fixed by the Board of the Bank under section 159(1) of the Companies Act, 2017 for three years commencing from March 30, 2022. The names of retiring directors, who are eligible to offer themselves for re-election, are as follows: Mr. Kalim-ur-Rahman Mr. Ashraf Nawabi Mr. Hassan Afzal Ms. Nargis Ali Akber Ghaloo Mr. Adil Matcheswala Mr. G.M. Sikander Mr. Munawar Alam Siddiqui Mr. Sohail Aman SPECIAL BUSINESS: iv. To consider and if thought fit, approve the conversion of rated, privately placed/listed (at the option and discretion of the Bank, pursuant to the Privately Placed Debt Securities’ Listing Regulations), unsecured, subordinated, Term Finance Certificates (“TFCs”) of PKR 2,500,000,000/- (Pak Rupees Two Billion Five Hundred Million) inclusive of a green shoe option of PKR 500 million (Pak Rupees Five Hundred Million Only) of the Bank into common shares if (i) directed by State Bank of Pakistan (“SBP”) on the occurrence of a point of nonviability as determined by SBP, or (ii) upon the occurrence of a pre-specified trigger point pursuant to Basel III Capital Instructions of SBP, or (iii) due to any inability to exercise the Lock-in Clause or Non-Cumulative features of TFCs, on such terms and conditions as may be determined by SBP, subject to a maximum of 400,647,739/- (Four Hundred Million Six Hundred Forty Seven Thousand Seven Hundred Thirty Nine Only) additional ordinary shares to be issued, and which ordinary shares shall be issued other than by way of rights in accordance with section 83(1)(b) of the Companies Act, 2017. The resolutions to be passed by the members of the Bank as Special Resolutions are as under: “RESOLVED THAT with respect to the Tier-2 capital raised by the Bank in the amount of up to PKR 2,500,000,000/- (Pak Rupees Two Billion Five Hundred Million) in the form of rated, privately placed/listed (at the option and discretion of the Bank, pursuant to the Privately Placed Debt Securities’ Listing Regulations), unsecured, subordinated, Term Finance Certificates (“TFCs”) as approved by the Board of Directors on August 25, 2021 and 242
246. in accordance with the directions under the ‘Instructions for Basel III Implementation in Pakistan’ (“Basel III Regulations”) issued by the SBP, the TFCs may be converted into ordinary shares of the Bank (i) if so directed by SBP on the occurrence of a point of nonviability as determined by SBP, at a price equivalent to the market value of the shares of the Bank on the date of trigger of the point of non-viability as declared by SBP, or (ii) upon the occurrence of a pre-specified trigger point pursuant to Basel III Capital Instructions, at a price equivalent to the market value of the shares of the Bank on the date of occurrence of the prespecified trigger point, or (iii) due to any inability to exercise the lock-in clause or noncumulative features of the TFCs, on such terms and conditions as may be determined by SBP, in accordance with the applicable rules and regulations of SBP (collectively the “Conversion Events”), which ordinary shares shall be issued other than by way of rights in accordance with section 83(1)(b) of the Companies Act, 2017.” “FURTHER RESOLVED that the issuance of such shares upon the occurrence of any of the Conversion Events shall be subject to a cap of 400,647,739/- (Four Hundred Million Six Hundred Forty Seven Thousand Seven Hundred Thirty Nine Only) additional ordinary shares to be issued and shall further be subject to the approval of the Securities and Exchange Commission of Pakistan in accordance with section 83(1)(b) of the Companies Act, 2017.” “FURTHER RESOLVED that any two of the President & CEO, Chief Operating Officer, Chief Financial Officer, Company Secretary and Group Head Operations of the Bank (the “Authorized Representative”), be and are hereby authorized to take all steps necessary, ancillary, and incidental to the above-mentioned resolutions, as and when required, and are further authorized to sign, execute, and deliver all necessary documents, agreements, and letters on behalf of the Bank, as may be deemed appropriate and as may be required for the purposes above-mentioned.” v. To consider and, if thought fit, pass with or without modification, the following resolutions as special resolution as envisaged under Section 199 of the Companies Act, 2017 and the Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2017, for the purpose of approving long term equity investment in the ordinary shares of its associated company BankIslami Pakistan Limited. “RESOLVED THAT subject to obtention of approval of the State Bank of Pakistan (‘SBP’) as well as other regulatory approvals, consent and approval of the shareholders be and is hereby accorded in terms of Section 199 of the Companies Act, 2017, to make long term equity investment into and acquire 86,316,954 ordinary shares of BankIslami Pakistan Limited (“BIPL”), (constituting 7.79% paid-up capital) of BIPL, an associated company, from Emirates NBD Bank PJSC at a price of upto PKR 13.24 per share, making the aggregate sale consideration to stand at upto PKR 1,142,836,470.96. FURTHER RESOLVED that formal applications be made to the SBP and the Competition Commission of Pakistan (‘CCP’) for approval of the proposed acquisition and investment of 7.79% paid up capital of BIPL; FURTHER RESOLVED that any two of the President & CEO, Chief Operating Officer, Chief Financial Officer and/or Company Secretary of the Bank (the “Authorized Representative”), be and are hereby authorized to negotiate, finalize and execute all agreements and transaction 243
247. documents , appointing legal advisers and consultants, personal and written representations and submission of formal applications for approvals of the proposed investment from SBP and CCP, whenever required and signing all documents, deeds and agreement related thereto for achieving the above purposes, and to take any or all such necessary and ancillary actions and steps and do all such acts, deeds and things which may be required to give effect to this resolution and for making the investment of the above-mentioned amount in the purchase of the ordinary shares of BIPL.” Karachi: March 9, 2022 By Order of the Board Ashraf Shahzad Company Secretary Notes: a) Share transfer books of the Bank will remain closed from March 24, 2022 to March 30, 2022 (both days inclusive). Transfers received in order at Bank’s Independent Share Registrar, CDC Share Registrar Services Limited, CDC House, Shahra-e-Faisal, Karachi at the close of business on March 22, 2022 will be treated in time for purpose of attending and vote at the Meeting. b) A member of the Bank entitled to attend, and vote may appoint another member as his/her proxy to attend and vote instead of him/her. c) Proxies must be received at the Registered Office of the Bank not later than 48 hours before the time of the Meeting. d) Beneficial owners of the shares registered in the name of CDC Share Registrar Services Limited (CDCSRSL) and/or their proxies will have to follow the following guidelines as laid down by the Securities and Exchange Commission of Pakistan: For Attending the Meeting • In case of Individuals, the account holder and/or sub-account holder whose registration details are uploaded as per the CDC Regulations, shall authenticate his/her identity by showing his/her original CNIC or original Passport along with Participant ID number and the account number at the time of attending the Meeting. • In case of corporate entity, the Board’s resolution / power of attorney with specimen signature of the nominee shall be produced (unless it has been provided earlier) at the time of the Meeting. For Appointing Proxies • In case of individuals, the account holder and/or sub-account holder whose registration details are uploaded as per the CDC Regulations shall submit the proxy form as per above requirements. • The proxy form shall be witnessed by two persons, whose names, addresses and CNIC numbers shall be mentioned on the form. • Attested copies of the CNIC or the passport of beneficial owners and the proxy shall be furnished with the proxy form. • The proxy shall produce his original CNIC or original passport at the time of the Meeting. • Proxy form must be received at the Registered Office of the Bank located at 1 st Floor Shaheen Commercial Complex, Dr, Ziauddin Ahmed Road, Karachi, duly stamped and signed not less than 48 hours before the time of the meeting. • In case of corporate entity, the Board’s resolution / power of attorney with specimen signature shall be furnished (unless it has been provided earlier) along with proxy form to the Bank. 244
248. • e) Shareholders are requested to notify immediately for any change in their address to the Bank Registrar. Any person seeking to contest the election, whether retiring Director or otherwise, must file with the Company at its Registered Office the following documents not later than fourteen (14) days before the date of the meeting: • • • f) The intention to offer himself/herself for the election of Directors in terms of Section 159(3) of the Companies Act, 2017 along with (a) consent on Form 28 (Consent to act as a Director) under Section 167 of the Companies Act, 2017; (b) a declaration under clause (3) of the Listed Companies (Code of Corporate Governance) Regulations 2019 that he/she is not serving as a director in more than seven (7) listed companies (including JS Bank Limited and excluding the listed subsidiaries of listed holding companies); and (c) a declaration that he/she is not ineligible to become a director in terms of Section 153 of the Companies Act, 2017 or under any circular/directive of the State Bank of Pakistan or any other applicable laws and regulations. Person contesting as Independent Director shall also submit a declaration that he/she qualifies the criteria of eligibility and independence notified under the Companies Act, 2017 and rules and regulations issued thereunder. Duly filled proforma for Fit and Proper Test and Questionnaire in the prescribed form along with an affidavit, recent photograph and copy of attested CNIC/passport to meet the requirement of State Bank of Pakistan’s Prudential Regulation G-1 and Fit and Proper Test for Appointment of Directors. Elected director shall remain subject to the fit and proper test approval of the State Bank of Pakistan. Shareholders are requested to notify immediately for any change in their address. Notice to Shareholders who have not provided CNIC: The Companies (Distribution of Dividends) Regulations, 2017 requires that the dividend warrants should bear the Identification Number which includes: (i) in the case of a registered shareholder or an authorized person, the Computerized National Identity Card Numbers (CNIC); (ii) in the case of a minor, child registration number or juvenile card number; and (iii) in the case of corporate shareholders registration number or national tax number. The Identification Number of the shareholders is, therefore, mandatory for the issuance of dividend warrants and in the absence of such information, payment of dividend may be withheld in terms of the Companies (Distribution of Dividends) Regulations, 2017. Therefore, the shareholders who have not yet provided their Identification Numbers advised to provide their Identification Numbers (if not already provided) directly to our Independent Share Registrar at the address given herein above without any further delay. Placement of Financial Statements The Bank has placed the annual Audited Financial Statements for the year ended December 31 2021, along with the Auditors and Directors Reports on its website: www.jsbl.com. Further, the Annual Report of the Bank for the year ended December 31, 2021 is dispatched to the shareholders through CD. Under Section 223(6) of the Companies Act, 2017, listed companies are allowed to send the Audited Financial Statements etc., through an electronic mail system (e-mail). The members are hereby 245
249. requested to convey their consent via email on a standard request form which is available at the Bank ’s website i.e. www.jsbl.com. Please ensure that your email account has sufficient rights and space available to receive such email which may be greater than 1 MB in size. Members can request a hard copy of Audited Financial Statements which shall be provided free of cost within seven days from the date of requisition. Further, it is the responsibility of the member(s) to timely update the Share Registrar of any change in his (her/its/their) registered email address at the address of Company's Share Registrar mentioned above. Mandate for E-DIVIDENDS for shareholders Under the provisions of Section 242 of the Companies Act, 2017, it is mandatory for a listed Company to pay cash dividends to its shareholders only through electronic mode directly into bank account designated by the entitled shareholders. In order to receive dividends directly into their bank account, shareholders are requested to fill in the Electronic Credit Mandate Form available on Company’s website and send it duly signed along with a copy of CNIC to the Registrar of the Company M/s. CDC Share Registrar Services Limited, CDC House, Shahra-e-Faisal, Karachi in case of physical shares. In case shares are held in CDC then Electronic Credit Mandate Form must be submitted directly to the shareholder’s broker/participant/CDC account services. Deduction of Income Tax from Dividend at Revised Rates Pursuant to the provisions of the Finance Act deduction of income tax from dividend payments shall be made on the basis of filers and non-filers as follows: N S.No 1 2 Nature of Shareholders Filers of Income Tax Return Non-Filers of Income Tax Return Rate of deduction 15% 30% Income Tax will be deducted on the basis of Active Tax Payers List posted on the Federal Board of Revenue website. To enable the Bank to make tax deductions of the amount of cash dividend @15% instead of 30%, all shareholders whose names are not entered into the Active Tax-payers List (ATL) provided on the website of FBR, despite the fact that they are filers, are advised to make sure that their names are entered into the ATL before the date for payment of the cash dividend otherwise tax on their cash dividend will be deducted @30% instead of 15%. The Shareholders who have joint shareholdings held by filers and non-filers shall be dealt with separately and in such particular situation, each account holder is to be treated as either a Filer or a Non-Filer and tax will be deducted according to his shareholding. If the share is not ascertainable, then each account holder will be assumed to hold equal proportion of shares and the deduction will be made accordingly. Therefore, in order to avoid deduction of tax at a higher rate, the joint account holders are requested to provide the below details of their shareholding to the Share Registrar of the Bank. Folio /CDC Account No Total Shares Principal Shareholder Name Shareholding &CNIC proportion Joint Shareholder Name &CNIC Shareholding proportion 246
250. Members seeking exemption from deduction of income tax or are eligible for deduction at a reduced rate are requested to submit a valid tax certificate or necessary documentary evidence , as the case may be. Unclaimed Dividend/Shares Shareholders who could not collect their dividend/physical shares are advised to contact our Share Registrar to collect/enquire about their unclaimed dividend or shares, if any. E-Voting Pursuant to SECP S.R.O. No. 43(I)/2016 dated January 22, 2016, members can also exercise their right to vote through e-voting by giving their consent in writing at least 10 days before the date of meeting to the Bank on the appointment by the Intermediary as a Proxy. Provision of Video Link Facility The Securities & Exchange Commission of Pakistan (SECP) vide its Notification # SMD/SE/2(20)/2021/117 dated December 15, 2021, has instructed companies to hold the general meeting physically and virtually to ensure maximum participation by the members. The Bank has therefore decided to also conduct Annual General Meeting via Zoom Video Link. The Bank has encouraged members to attend the general meeting through video conferencing with a view to protect the well-being of its members in view of the threats posed by the recent wave of COVID19. To attend and participate in the 16th AGM of the Bank through video link arrangement, members are requested to complete and fill the ‘Video Link Facility Form’ available at the Bank’s website and provide all the requisite information at the following email address i.e. AGM@jsbl.com. The video link of the meeting will be sent to the members on their email addresses. 247
251. Statement Under Section 134 (3) of the Companies Act, 2017 This statement sets out the material facts pertaining to the special business to be transacted at the Annual General Meeting of JS Bank Limited (the “Bank”) to be held on March 30, 2022. Special Business # iv The Bank on December 28, 2021 issued rated, privately placed/listed (at the option and discretion of the Bank, pursuant to the Privately Placed Debt Securities’ Listing Regulations), unsecured, subordinated, Term Finance Certificates (“TFCs”) of PKR 2,500,000,000/- (Pak Rupees Two Billion Five Hundred Million) as Tier - 2 Capital instrument (“TFC Issue”). The Basel III regulations as implemented vide SBP’s Circular BPRD Circular No. 06 dated August 15, 2013 (“SBP Circular”), which prescribes a loss absorption feature for Tier - 2 capital instruments pursuant to which the TFCs will be converted into ordinary shares of the Bank at the Point of Non-Viability (“PONV”) trigger event or at the breach of Common Equity Tier-2 (CET-1) trigger event as defined in the SBP Circular and as reproduced below. In accordance with the requirements of the SBP Circular, the Bank has agreed with the SBP for the issuance of maximum 400,647,739 (Four Hundred Million Six Hundred Forty Seven Thousand Seven Hundred Thirty Nine Only) shares against subject TFCs in case of the occurrence of a conversion event as per the terms of the TFCs and SBP Circular (the “Conversion Events”). As per the requirements of Basel III under the aforementioned SBP Circular, the terms and conditions of the TFC Issue must have a provision of “loss absorbency” for it to be qualified as a Tier 2 Capital instrument. The relevant portion of the Basel III Circular relating to “loss absorbency” is reproduced below: “A-5-3 Loss Absorbency of Non-Equity Capital Instruments at the Point of Non-Viability i. The terms and conditions of all non-CET1 and Tier 2 instruments issued by banks must have a provision in their contractual terms and conditions that the instruments, at the option of the SBP, will either be fully and permanently converted into common share upon the occurrence of a non-viability trigger event called the Point of Non-Viability (PONV) as described below; ii. The PONV trigger event is the earlier of; a. A decision made by SBP that a conversion is necessary without which the bank would become non-viable. b. The decision to make a public sector injection of capital, or equivalent support, without which the bank would have become non-viable, as determined by SBP. iii. The issuance of any new shares as a result of the trigger event must occur prior to any public sector injection of capital so that the capital provided by the public sector is not diluted. iv. The amount of non-equity capital to be converted will be determined by the SBP. v. Where an Additional Tier-1 capital instrument or Tier-2 capital instrument provides for conversion into ordinary shares, the terms of the instruments should include provision that 248
252. upon a trigger event the investors holding 5 % or more of paid-up shares (ordinary or preferred) will have to fulfill fit and proper criteria (FPT) of SBP. vi. The conversion terms of the instruments must contain pricing formula linked to the market value of common equity on or before the date of trigger event. However, to quantify the maximum dilution and to ensure that prior shareholder/ regulatory approvals for any future issue of the required number of shares is held, the conversion method must also include a cap on the maximum number of shares to be issued upon a trigger event. vii. The conversion method should describe and take into account the order (hierarchy of claims) in which the instruments will absorb losses in liquidation/ gone concern basis. These terms must be clearly stated in the offer documents. However, such hierarchy should not impede the ability of the capital instrument to be immediately converted. viii. There should be no impediments (legal or other) to the conversion i.e. the bank should have all prior authorizations (sufficient room in authorized capital etc.) including regulatory approvals to issue the common shares upon conversion. ix. The contractual terms of all Additional Tier 1 and Tier 2 capital instruments must state that SBP will have full discretion in deciding/ declaring a bank as a non-viable bank. SBP will, however, form its opinion based on financial and other difficulties by which the bank may no longer remain a going concern on its own unless appropriate measures are taken to revive its operations and thus, enable it to continue as a going concern. The difficulties faced by a bank should be such that these are likely to result in financial losses and raising the CET1/ MCR of the bank should be considered as the most appropriate way to prevent the bank from turning non-viable. Such measures will include conversion of non-equity regulatory capital into common shares in combination with or without other measures as considered appropriate by the SBP.” As per the loss absorbency conditions, upon the occurrence of PONV, SBP may at its option, fully and permanently convert the TFCs into common shares of the issuer, i.e. the Bank. In light of the above-contemplated Conversion Events including the PONV, the Bank is required to obtain all approvals (in advance) for the issuance of such additional shares as stated hereinabove. It may further be noted that issuance of such additional shares shall further be subject to the approval of the Securities and Exchange Commission of Pakistan in accordance with section 83(1)(b) of the Companies Act, 2017. The information required to be annexed to the notice is set out below: Name and brief profile of the banks/financial The shares will be issued to the TFC institutions to whom such shares are proposed holders (at that time) in accordance with to be issued the directions of SBP at the time of trigger of PONV. Price at which the proposed shares will be The price of the shares shall be issued at issued the market value of the shares of the Bank, on the date of trigger of PONV as declared by SBP however, total no. of shares to be issued are capped at 249
253. 400 ,647,739 or such other number as may be agreed to in consultation with SBP. Purpose of the issue of shares other than right, To convert the outstanding TFCs utilization of the proceeds of the issue and amount (in whole or part) into shares of benefits to the Bank and its shareholders with the Bank, as per the directions of the SBP. necessary details Existing shareholding of the banks / financial Not Applicable institutions to whom the proposed shares will be issued Total shareholding of the banks / financial Not Applicable institutions after the proposed issue of shares Whether the banks/financial institutions have The terms of the TFC Issuance provided written consent for purchase of such Agreement dated for the TFC Issue shares contain the details regarding such conversion. Justification as to why proposed shares are to be This is in accordance with the issued otherwise than rights and not as rights requirements of the SBP vide its Circular shares No. 6 of Banking Policy and Regulation Department dated August 15, 2013 and further directions of SBP in this matter. Justification, with details of the latest available Not Applicable market price and break-up value per share, if such price differs from par value. Details of the average market price during the Not Applicable last 3 (three) months and 6 (six) months preceding the board announcement as well as the latest available market price. The shares issued will rank pari passu in all respects with the existing shares of the Bank. The issue of shares other than by way of rights is subject to approval from the Securities and Exchange Commission of Pakistan. None of the directors, whether directly or indirectly, is interested in the special resolution except to the extent of their shareholding in the bank. Special Business # v Investment and Acquisition of 7.79% Ordinary Shares of BankIslami Pakistan Limited The Board of Directors of JS Bank Limited (‘the Bank’) in their meeting held on March 08, 2022, have resolved that subject to necessary approvals from the shareholders of the Bank by way of special resolution as required under Section 199 of the Companies Act, 2017, and permission from the State Bank of Pakistan, the Competition Commission of Pakistan and final consent from Emirates NBD BANK PJSC, consent and approval be and is hereby accorded to the Bank to invest into and acquire 86,316,954 shares of BankIslami Pakistan Limited (“BIPL”), (an associated entity) constituting to 7.79% paid-up capital of BIPL, from Emirates NBD BANK PJSC, at the rate of upto PKR 13.24 per share, making the aggregate sale consideration to stand at upto PKR 1,142,836,470.96; 250
254. BIPL is one of the premier Islamic banks of Pakistan , having a total deposit base of PKR 345 billion as of December 31, 2021. Its total asset size as per its balance sheet dated December 31, 2021 stands at PKR 408 billion. Currently, it has 340 branches across all cities of Pakistan. The Pakistan Credit Rating Agency (PACRA) has assigned a long-term credit rating of A+ and short term entity ratings of 'A1'. Jahangir Siddiqui & Co. Limited (‘JSCL’) is the holding company of the Bank by virtue of 75.02% shareholding. JSCL holds 21.26% shares of BIPL. Consequently, JSCL has more than 20% direct interest over the voting shares of both entities which makes BIPL an associated entity of the Bank. Post the proposed investment, the aggregate absolute holding of JSCL and the Bank, together, in BIPL shall stand at 29.04% paid up capital of BIPL. Considering the fact that the Bank does not have any Islamic Banking operations or window, this acquisition shall allow it to have some (indirect) presence in the sector, which will help develop synergies which previously were not possible. Secondly, this will also help the Bank in benefiting from various Islamic financing avenues and transactions which previously could not be capitalized due to no presence of the Bank in the Islamic banking sector. All legal, corporate and regulatory formalities will be fulfilled in consultation with the Legal Advisors. Nature of information required to be disclosed pursuant to the Companies (Investment in Associated Companies and Undertakings) Regulations, 2017, for investment in associated company M/s BankIslami Pakistan Limited is as follows: Ref Requirement No. (a) Disclosures for all types of investments Relevant Information (A) Details pertaining to the Associated Entity i name of associated company BankIslami Pakistan Limited (‘BIPL’) ii basis of relationship The associated relationship is established based on the common shareholding of Jahangir Siddiqui & Co. Ltd. (JSCL), having 21.26% shareholding in BIPL and 75.02% shareholding in the Bank. Consequently, JSCL has more than 20% direct interest over the voting shares of both entities. iii earnings per share for the last three years 2019: PKR 1.060 per share 2020: PKR 1.536 per share 2021: PKR 1.922 per share 251
255. iv break-up value per share , based on latest PKR 20.30 per share as of December audited financial statements 31, 2021 v financial position, including main items of PKR Million statement of financial position and profit and loss account on the basis of its latest financial Financial Position Dec. 31, 2021 statements Total Assets: 408,390 Islamic Financing, related assets and advances: 181,176 Investments – net: 124,838 Liabilities: 385,879 Deposits and other accounts: 344,788 Shareholders' equity 22,511 Financial Performance - Dec. 31, 2021 Total income 13,052 Other expenses 9,623 Profit before tax 3,397 Profit after tax 2,131 vi in case of investment in relation to a project N/A of the associated company or associated undertaking that has not commenced operations, following further information, namely:(I) description of the project and its history since conceptualization; (II) starting date and expected date of completion of work; (III) time by which such project shall become commercially operational; (IV) expected time by which the project shall start paying return on investment; and (V) funds invested or to be invested by the promoters, sponsors, associated company or associated undertaking distinguishing between cash and noncash amounts. B) General Disclosures: - i maximum amount of investment to be made Upto PKR 1,142,836,470.96 ii purpose, benefits likely to accrue to the investing company and its members from such investment and period of investment - To allow the Bank to have (indirect) presence in Islamic 252
256. banking , which is not currently available with the Bank. - To benefit from the expected future growth of BIPL iii sources of funds to be utilized for investment The Bank has sufficient resources to and where the investment is intended to be acquire 7.79% shares of BIPL from made using borrowed funds:ENBD. (I) justification for investment through borrowings; (II) detail of collateral, guarantees provided and assets pledged for obtaining such funds; and (III) cost-benefit analysis iv salient features of the agreement(s), if any, None with the associated company or associated undertaking with regards to the proposed investment v direct or indirect interest of directors, JSCL holding/parent company of JS sponsors, majority shareholders and their Bank has the following direct and relatives, if any, in the associated company or indirect interest in BIPL: associated undertaking or the transaction a) JSCL hold 21.26% under consideration (235,684,306) shares of BIPL; b) JSCL has representation on the Board of BIPL. As per the information available with the Bank, major shareholders, sponsor and directors (or their relatives) of the Bank have no direct or indirect interest in the transaction or in BIPL except to the extent of their shareholding, if any, in BIPL. vi vii in case any investment in associated N/A company or associated undertaking has already been made, the performance review of such investment including complete information/justification for any impairment or write offs; and any other important details necessary for the The founding shareholders of BIPL members to understand the transaction had agreed to a pre-emption right in case anyone, inter se, decides to divest. Accordingly, the entitlement of JSCL in the overall shares held by Emirates NBD Bank PSJC (ENBD) 253
257. stands at 7 .79%. JSCL permitted the Bank to make this investment as per the proportional entitlement. Final approval from the State Bank of Pakistan will be required for the Bank to consummate the investment. In case of equity investment, following disclosures in addition to those provided under clause (a) of sub-regulation (1) of regulation 3 shall be made: i maximum price at which securities will be Upto PKR 13.24 per share acquired ii in case the purchase price is higher than The price is close to the past 12 market value in case of listed securities and weeks’ weighted average market fair value in case of unlisted securities, price of the shares of BIPL. justification thereof Secondly, large number of shares are not available in the ready market and are therefore traded at a premium to market price. iii maximum number of securities to be 86,316,954 shares acquired iv number of securities and percentage thereof Before: Nil held before and after the proposed After: 86,316,954 shares (7.79%) investment v current and preceding twelve weeks' weighted average market price where investment is proposed to be made in listed securities; and vi fair value determined in terms of sub- N/A regulation (1) of regulation 5 for investments in unlisted securities. Market price March 7, 2022: PKR 10.25 per share Average market price (Dec. 1, 2021 – Mar. 1, 2022): PKR 13.11 per share The Directors of the Bank undertake that they have carried out necessary due diligence for the proposed investment in BankIslami Pakistan Limited. The due diligence report is available for inspection at the registered office of the Bank. All legal, corporate, and regulatory formalities will be fulfilled in consultation with the Legal Advisors. No prejudice shall be caused to any existing shareholder and/or depositor of the Bank. On the contrary, the proposed acquisition will be in the best interest of the stakeholders as it 254
258. would give the Bank to venture into Islamic banking activities , thereby opening up new opportunities and diversification. The Directors, including the Chief Executive Officer and other Key Executives (as defined in the applicable prudential regulations) of the Bank have no personal interest in the transaction directly or indirectly except to the extent of their and their spouse shareholdings held by them in the Bank. Statement under Regulation 4 (2) of the Companies (Investment in Associated Companies or Associated Undertaking) Regulation, 2012 The Bank in its Annual General Meeting held on March 27, 2020 had approved long term equity investments of up to PKR 675 million in ordinary shares of each of the following associated companies of the Bank. The resolution is valid for a period of three years commencing from March 27, 2020. S.No 1 Name of Company Total Investment approved upto PKR Amount of Investment till Dec. 31, 2021 PKR EFU Life Assurance Ltd 675 million 250 million Reasons for not making complete investment in the specified time Time remaining Material change in Financial Statement of Associated Companies No 255
259. FORM OF PROXY 16th Annual General Meeting The Company Secretary JS Bank Limited Shaheen Commercial Complex Dr . Ziauddin Ahmed Road P.O. Box 4847 Karachi 74200 Pakistan I/We __________________________ of _____________ being member(s) of JS Bank Limited holding _____________ Ordinary shares as per Register Folio No/CDC /A/c No. __________________ hereby appoint _____________________ of ___________________or failing him __________________ of _____________________ as my / our proxy to attend, act and vote for me / us and on my / our behalf at the 16th Annual General Meeting of the Bank to be held on March 30, 2022 and / or any adjournment thereof. As witness my / our hand / seal this ____ day of _______________ 2022 signed by _________________________ in the presence of (name & address) Witness: 1. Name: _________________________ Address _________________________ CNIC or _________________________ Passport No. _________________________ Signature_________________________ Signature on Rs. 5/Revenue Stamp The signature should agree with the specimen registered with the Bank Witness: 2. Name: _________________________ Address _________________________ CNIC or _________________________ Passport No. _________________________ Signature_________________________ Annual Report 2021 256
260. Important : 1. A member of the Bank entitled to attend and vote may appoint another member as his / her proxy to attend and vote instead of him / her. 2. The proxy form, duly completed and signed, must be received at the Office of the Bank situated at Shaheen Commercial Complex Dr. Ziauddin Ahmed Road, Karachi 74200 not less than 48 hours before the time of holding the meeting. 3. No person shall act as proxy unless he / she himself is a member of the Bank, except that a corporation may appoint a person who is not a member. 4. If a member appoints more than one proxy and / or more than one instruments of proxy are deposited by a member with the Bank, all such instruments of proxy shall be rendered invalid. 5. Beneficial Owner of the physical shares and the shares registered in the name of CDC Share Registrar Services Limited (CDCSRSL) and / or their proxies are required to produce their original Computerized National Identity Card (CNIC) or Passport for identification purposes at the time of attending meeting. The Form of proxy must be submitted with the Bank within the stipulated time, duly witnessed by two persons whose names, address and CNIC numbers must be mentioned on the form, along with attested copies of CNIC or the Passport of the beneficial owner and the proxy. In case of a corporate entity, the Board of Directors’ Resolution / Power of Attorney along with the specimen signature shall be submitted (unless it has been provided earlier along with the proxy form to the Bank). 257
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