JS Bank Limited: Third Quarterly Report - 30 September 2020

Transcription

1. Third Quarterly Report September 30 , 2020 111-645-321 | www.jsbl.com Nationwide Branches
3. Contents Page # Company Information 1 Directors’ Report to the Members 2 Condensed Interim Unconsolidated Statement of Financial Position 11 Condensed Interim Unconsolidated Profit and Loss Account 12 Condensed Interim Unconsolidated Statement of Comprehensive Income 13 Condensed Interim Unconsolidated Statement of Changes in Equity 14 Condensed Interim Unconsolidated Cash Flow Statement 15 Notes to the Condensed Interim Unconsolidated Financial Statements 16 Condensed Interim Consolidated Statement of Financial Position 54 Condensed Interim Consolidated Profit and Loss Account 55 Condensed Interim Consolidated Statement of Comprehensive Income 56 Condensed Interim Consolidated Statement of Changes in Equity 57 Condensed Interim Consolidated Cash Flow Statement 58 Notes to the Condensed Interim Consolidated Financial Statements 59
4. Company Information Board of Directors Board IT Committee Mr . Adil Matcheswala Non-Executive Director Mr. Hassan Afzal Chairman Mr. Kalim-ur-RahmanMember Mr. Sohail Aman Member Mr. Basir Shamsie Member Mr. Ashraf Nawabi Non-Executive Director Chief Financial Officer Mr. Kalim-ur-Rahman Non-Executive Director-Chairman Mr. Hasan Shahid Mr. G.M. Sikander Independent Director Company Secretary Mr. Hassan Afzal Non-Executive Director Mr. Ashraf Shahzad Mr. Munawar Alam Siddiqui Non-Executive Director Auditors Ms. Nargis Ghaloo Independent Director Mr. Sohail Aman Independent Director Mr. Basir Shamsie 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 Chairman Mr. Adil Matcheswala Member Mr. G.M. Sikander Member Mr. Kalim-ur-RahmanMember Risk Management Committee Mr. Ashraf Nawabi Mr. Munawar Alam Siddiqui Ms. Nargis Ghaloo Mr. Basir Shamsie Chairman Member Member Member EY Ford Rhodes, Chartered Accountants (Member firm of Ernst & Young Global Limited) Legal Advisors Bawaney & Partners Haidermota BNR 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 1
5. Directors ’ Report to the Members We are pleased to present the unaudited financial statements of JS Bank Limited (“JSBL”) along with the consolidated financial statements for the nine months period ended September 30, 2020. Economic Review The period ended, 9MCY20 was one of the most challenging for the country’s economy and for the overall global economy owing to the COVID-19 pandemic. More than 35 million cases have so far been reported globally by the end of September 2020. Thankfully, Pakistan has been able to successfully flatten its curve, leading to a sharp decline in new cases. In recent weeks, there has been a slight resurgence in the number of new cases, sparking fears of a second wave. During the period under review, through a series of relief measures such as 625 basis point cut in interest rates, cheap lending to businesses for payments of staff salaries and other incentives, policy makers played an active role in ensuring that the business environment was spared the worst of the lockdown impact. Through effective smart management measures, the country was able to fare much better economically as compared to many other countries. On the external front, the country reported a current account surplus in all the months of 1QFY21, (surplus of USD 792 million vs a USD 1.5 billion deficit in the same period last year), via a reduction in imports and record-high remittances (USD 7.1 billion in 1QFY21 vs USD 5.5 billion in 1QFY20). Moreover, the SBP’s foreign exchange reserves stood at USD 12.4 billion at the end of September 2020 compared to USD 7.9 billion at the same date last year, pointing towards further stability in the local currency vis-à-vis the dollar. On the fiscal side, revenue collection has also started picking up and has exceeded the collection target for the latest quarter. Although inflation has been slightly higher than the markets’ expectations in September alone, this has mainly been due to food inflation and could taper down going forward. Banking Sector Review After a sharp monetary easing cycle during 1HCY20, the State Bank of Pakistan (SBP) kept the Policy Rate unchanged at 7%. To recall, the Policy Rate has declined by 625bps during 9MCY20, which has been a part of the relief measures announced by the SBP amid ongoing COVID-19 pandemic. Moreover, the SBP also continued to extend some of the earlier announced relief packages to consumers and SMEs. Along with lower interest rates, weighted average banking spreads declined by 53bps YoY during 9MCY20. The banking sector’s deposits witnessed a robust growth of 20% YoY as it reached PKR 16,886 billion as at 9MCY20. The sector’s Investments crossed PKR 11,000 billion, reporting 20% YoY growth. As a result, Investments-to-Deposit Ratio (IDR) decreased by 41 basis points, when compared to the same period last year, reaching 66%. Total Advances remained almost flat, recording 1% YoY growth, and clocking in at PKR 8,094 billion. Advances-to-Deposit Ratio (ADR) declined to 48%, as compared to 57% during 9MCY19. Private sector credit also remained flat with 1% YoY growth. Non-Performing Loans (NPLs) grew by PKR 85 billion to PKR 806 billion during 1HCY20, taking the Infection ratio from 9.3% to 10.3%. Nine Months ended: September 30, 2020 2
6. Performance Overview The highlights of the financial results of the Bank for the period ended September 30 , 2020 are presented below: Financial Position Shareholders’ Equity Total Deposits Total Assets Advances Net Investments Net Financial Performance Mark-up/Interest Income - Net Non-Markup/Interest Income Operating Expenses Profit Before (Provision)/Reversals - Net Profit/(Loss) Before Tax Profit After Tax Basic and Diluted Earnings / (Loss) Per Share – PKR PKR Million December 31, 2019 September 30, 2020 20,043 391,953 477,990 241,852 168,386 17,333 369,790 470,049 242,944 142,568 September 30, 2020 September 30, 2019 7,301 4,459 9,246 2,423 1,965 1,165 0.90 5,285 2,321 7,903 (297) (799) (578) (0.46) The Bank’s earnings during the nine months 2020 remain strong despite a challenging operating environment. The Bank reported a profit before tax of PKR 1,965 million (profit after tax of PKR 1,165 million) for the period ended September 30, 2020 as compared to a loss before tax of PKR 799 million (loss after tax of PKR 578 million) in the corresponding period last year. The Earnings Per Share (EPS) stands at PKR 0.90 (Sep 2019: PKR - 0.46). On the revenue side, the Bank reported total mark-up revenue of PKR 33,886 million compared to PKR 30,259 million from the corresponding period last year, an improvement of 12%. Net interest income was 38.1% higher than the corresponding period last year and closed at PKR 7,301 million. Non-markup income stood at PKR 4,459 million, higher by 92%, with major contribution from capital gains of PKR 918 million, FX income of PKR 735 million and fee & commission income PKR 2,674 million despite of slow economic activities in the country due to the pandemic lockdowns. Administrative expenses were PKR 9,246 million compared to PKR 7,903 million for the corresponding period last year, up by 17%. The cost to income ratio of the Bank improved to 79% as compared to 104% during the corresponding period last year, showing the Bank’s focus on cost control. During the period under review, the Bank’s deposits have continued to show steady growth, while the advances have remained stable. The Bank reported total deposits of PKR 392 billion with current account deposits of over PKR 93 billion during the period ended September 30, 2020. In terms of advances, gross advances were reported at PKR 246 billion and gross advances to deposits ratio stood at 63%. 3
7. At the close of the nine months period , the Bank remains satisfactorily capitalized with CAR at 12.68%. Committed to its role of acting as a catalyst of progress within the national financial industry, 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. JS Bank operates 307 branches across 160 cities nation-wide and one overseas wholesale banking branch in Manama, Bahrain. Consolidated Financial Statements In the consolidated financial statements, the Group earned profit before tax of PKR 2,092 million (profit after tax of 1,101 million) for the nine months period ended September 30, 2020 as compared to loss before tax of PKR 897 million (loss after tax of PKR 756 million) in the corresponding period last year. The earnings per share is PKR 0.85 for the nine months period ended September 30, 2020. Recognition In 2020 the Bank has been recognized for its commitment to excellence on a national and international level. The prestigious awards that we received during the year 2020 include: • Asiamoney Award - Best Bank for SMEs - Pakistan • Asiamoney Award - Best Bank for CSR - Pakistan • Asian Banking Finance Awards 2020 - SME Bank of the Year - Pakistan  • Certificate of Merit – Best Corporate Report Award 2019 by ICAP/ICMA Credit Ratings The Pakistan Credit Rating Agency Limited (PACRA) has assigned to the Bank a long-term rating of “AA-” (Double A Minus), and a short-term rating of “A1+” (A One Plus) which is the highest possible rating within the category. Acknowledgments On behalf of JS Bank, we would like to extend our gratitude to our customers and stakeholders for their ongoing trust and patronage. We would also like to thank the Ministry of Finance, the State Bank of Pakistan, the Securities & Exchange Commission of Pakistan, and other regulatory bodies for their continued support to our Bank. We would also thank our fellow colleagues for their commitment to hard work, excellence, and their drive to succeed. On behalf of the Board Basir Shamsie President & CEO Kalim-ur-Rahman Chairman Karachi: October 28, 2020 Nine Months ended: September 30, 2020 4
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9. Nine Months ended : September 30, 2020 6
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11. Nine Months ended : September 30, 2020 8
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13. Condensed Interim Unconsolidated Financial Statements Nine Months ended : September 30, 2020 10
14. Condensed Interim Unconsolidated Statement of Financial Position as at September 30 , 2020 Note ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Fixed assets Intangible assets Deferred tax assets Other assets Assets held for sale (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- 6 7 8 9 10 11 12 18 13 11.3 33,587,826 618,040 8,779,966 168,386,128 241,852,073 8,834,627 2,418,871 13,512,638 477,990,169 25,589,349 462,836 30,320,540 142,568,470 242,944,509 9,692,701 2,271,360 8,756 15,816,623 374,000 470,049,144 14 15 16 4,341,456 34,316,879 391,952,625 7,494,800 1,216,660 18,624,596 457,947,016 3,804,491 54,468,283 369,789,964 7,494,800 17,158,351 452,715,889 20,043,153 17,333,255 10,119,242 2,012,308 2,047,246 5,864,357 20,043,153 10,119,242 1,749,673 636,700 4,827,640 17,333,255 LIABILITIES Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to finance lease Subordinated debt Deferred tax liabilities Other liabilities 17 18 19 NET ASSETS REPRESENTED BY Share capital - net Reserves Surplus on revaluation of assets Unappropriated profit CONTINGENCIES AND COMMITMENTS 20 21 The annexed notes from 1 to 41 form an integral part of these unconsolidated condensed interim financial statements. __________________ President and Chief Executive Officer ___________________ Chief Financial Officer ___________ Director ___________ Director 11 ___________ Chairman
15. Condensed Interim Unconsolidated Profit and Loss Account (Un-audited) for the nine months period ended September 30, 2020 Note Mark-up / return / interest earned Mark-up / return / interest expensed Quarter ended Nine months period ended September 30, September 30, September 30, September 30, 2020 2019 2020 2019 ------------------------------- Rupees in ‘000 ------------------------------- 23 24 Net mark-up / interest income 9,536,135 7,385,431 11,198,953 9,624,771 33,885,978 26,584,840 30,259,114 24,973,660 2,150,704 1,574,182 7,301,138 5,285,454 925,958 9,968 383,243 8,267 133,835 21,660 1,482,931 663,686 9,935 243,698 1,595 (194,565) 25,081 749,430 2,687,435 64,415 735,166 27,005 917,987 26,546 4,458,554 2,008,747 57,095 680,819 44,970 (564,104) 93,252 2,320,779 3,633,635 2,323,612 11,759,692 7,606,233 NON MARK-UP / INTEREST INCOME Fee and commission income Dividend income Foreign Exchange Income Income from derivatives Gain / (loss) on securities Other income Total non mark-up / interest income 25 26 27 Total Income NON MARK-UP / INTEREST EXPENSES Operating expenses Workers welfare fund Other charges Total non-mark-up / interest expenses Profit / (loss) before provisions 28 29 30 3,124,695 4,026 20 3,128,741 504,894 2,617,093 886 2,617,979 (294,367) 9,246,166 15,723 74,607 9,336,496 2,423,196 7,902,328 1,134 7,903,462 (297,229) Provisions / (reversals) and write offs - net Extraordinary / unusual items 31 11,583 - (92,158) - 457,790 - 501,495 - 493,311 (202,209) 1,965,406 (798,724) 184,146 (65,971) 799,915 (220,809) 309,165 (136,238) 1,165,491 (577,915) PROFIT / (LOSS) BEFORE TAXATION Taxation 32 PROFIT / (LOSS) AFTER TAXATION ------------------------------------ Rupee ------------------------------------------Basic and diluted earnings / (loss) per share 33 0.24 (0.11) 0.90 (0.46) The annexed notes from 1 to 41 form an integral part of these unconsolidated condensed interim financial statements. __________________ President and Chief Executive Officer ___________________ Chief Financial Officer Nine Months ended: September 30, 2020 12 ___________ Director ___________ Director ___________ Chairman
16. Condensed Interim Unconsolidated Statement of Comprehensive Income for the nine months period ended September 30 , 2020 Quarter ended Nine months period ended September 30, September 30, September 30, September 30, 2020 2019 2020 2019 ---------------------------------------- Rupees in ‘000 -------------------------------309,165 (136,238) 1,165,491 (577,915) (7,895) (13,279) 29,537 38,935 Movement in surplus on revaluation of investments - net of tax Movement in general provision under IFRS 9 - net of tax (498,082) 211,725 1,474,084 861,375 15,155 (482,927) (490,822) (5,380) 206,345 193,066 40,786 1,514,870 1,544,407 (32,487) 828,888 867,823 Total comprehensive (loss) / income (181,657) 56,828 2,709,898 289,908 Profit / (loss) after taxation for the period Other comprehensive (loss) / income Items that may be reclassified to profit and loss account in subsequent periods: Effect of translation of net investment in foreign branches The annexed notes from 1 to 41 form an integral part of these unconsolidated condensed interim financial statements. __________________ President and Chief Executive Officer ___________________ Chief Financial Officer ___________ Director ___________ Director 13 ___________ Chairman
17. Condensed Interim Unconsolidated Statement of Changes in Equity for the nine months period ended September 30 , 2020 Reserves Share capital Surplus/(deficit) on revaluation of Exchange translation reserve Statutory reserve* Investments Non Banking Assets Fixed Assets Unappropriated profit Total ------------------------------------------------------ Rupees in ‘000 -----------------------------------------------------10,119,242 1,641,237 70,934 (2,180,113) 1,051,666 92,858 4,821,202 15,617,026 - - 38,935 38,935 828,888 828,888 - - (577,915) (577,915) (577,915) 867,823 289,908 - - - - - - - - Fixed assets - - - - (18,025) - 18,025 - Non-banking assets acquired in satisfaction of claims - - - - - (61) 61 - Preference dividend for the year ended December 31, 2018 @ 12% p.a. Balance as at September 30 30, 2019 - un-audited 10,119,242 1,641,237 109,869 (1,351,225) 1,033,641 92,797 (24,164) 4,237,209 (24,164) 15,882,770 - - (6,364) (6,364) 834,456 834,456 30,985 30,985 - 602,568 (11,160) 591,408 602,568 847,917 1,450,485 - 4,931 - - - - (4,931) - - - - - (3,933) - 3,933 - 10,119,242 1,646,168 103,505 (516,769) 1,060,693 (21) 92,776 21 4,827,640 17,333,255 - - 29,537 29,537 1,514,870 1,514,870 - - 1,165,491 1,165,491 1,165,491 1,544,407 2,709,898 - 233,098 - - - - (233,098) - Fixed assets - - - - (12,138) - 12,138 - Non-banking assets acquired in satisfaction of claims - - - - - (61) 61 - Assets held for sale - - - - (92,125) - 92,125 - 10,119,242 1,879,266 133,042 998,101 956,430 92,715 5,864,357 20,043,153 Balance as at December 31, 2018 Total comprehensive income for the nine months period ended September 30, 2019 - un-audited Loss after taxation Other comprehensive income - net of tax Transfer to statutory reserve Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Transaction with owners recorded directly in equity Total comprehensive income for the period ended December 31, 2019 Profit after taxation Other comprehensive (loss) / income - net of tax Transfer to statutory reserve Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Fixed assets Non-banking assets acquired in satisfaction of claims Balance as at December 31, 2019 - audited Total comprehensive income for the nine months period ended September 30, 2020 - un-audited Profit after taxation Other comprehensive income - net of tax Transfer to statutory reserve Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Balance as at September 30, 2020 - un-audited * This represents reserve created under Section 21(i)(a) of the Banking Companies Ordinance, 1962. The annexed notes from 1 to 41 form an integral part of these unconsolidated condensed interim financial statements. __________________ President and Chief Executive Officer ___________________ Chief Financial Officer Nine Months ended: September 30, 2020 14 ___________ Director ___________ Director ___________ Chairman
18. Condensed Interim Unconsolidated Cash Flow Statement (Un-audited) for the nine months period ended September 30, 2020 Note CASH FLOW FROM OPERATING ACTIVITIES Profit / (loss) before taxation Less: Dividend income September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----1,965,406 (64,415) 1,900,991 (798,724) (57,095) (855,819) 28 28 28 28 517,399 6,808 717,149 82,977 589,022 628 520,691 68,169 24 345,903 161,822 327,771 115,816 26 93 (23,936) (3,349) 457,790 15,723 11,919 (1,000) (32,755) 2,256,543 4,157,534 435 (30,265) 242,665 501,495 (93,252) 2,243,175 1,387,356 21,541,836 47,373,280 803,767 1,946,131 71,665,014 711,310 (15,094,668) 13,155,267 (981,710) (2,209,801) 536,965 (20,151,404) 22,162,661 1,985,808 4,534,030 80,356,578 (151,881) (13,773) (345,851) (36,286,020) 5,650,650 (872,777) (31,853,998) (32,676,443) (102,494) (329,516) 80,190,924 (33,108,453) (67,593,127) (3,336,453) (40,828) 64,415 (508,003) (230,488) 4,880 375,000 29,537 (71,235,067) 16,119,414 8,195,552 (21,239) 57,095 (1,545,631) (170,176) 149,020 38,935 22,822,970 (802,153) (802,153) (184,929) (1,000) (24,164) (210,093) Increase / (decrease) in cash and cash equivalents 8,153,704 (10,495,576) Cash and cash equivalents at beginning of the year 25,482,139 32,577,913 33,635,843 22,082,337 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 Charge for defined benefit plan Unrealised gain on revaluation of investments classified as held-for-trading - net Unrealised 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 / (gain) on sale of fixed assets - net Gain on sale of assets held for sale Gain on termination of leases 27 27 27 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 Gratuity paid Income tax paid Net cash flow from / (used in) operating activities CASH FLOW FROM INVESTING ACTIVITIES Net investments in available-for-sale securities Net investments in held-to-maturity securities 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) / flow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Payment of lease liability against right of use assets Subordinated debt Dividend paid to preference shareholders Net cash used in financing activities Cash and cash equivalents at end of the period 34 The annexed notes from 1 to 41 form an integral part of these unconsolidated condensed interim financial statements. __________________ President and Chief Executive Officer ___________________ Chief Financial Officer ___________ Director ___________ Director 15 ___________ Chairman
19. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 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 307 (December 31, 2019: 359) branches / sub-branches in Pakistan and one wholesale banking branch in Bahrain (December 31, 2019: 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 Investments Limited, JS Global Capital Limited and JS ABAMCO Commodities Limited. 2. BASIS OF PRESENTATION These condensed interim 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 condensed interim financial statements of the Bank are being issued separately. Nine Months ended: September 30, 2020 16
20. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 These condensed interim 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. 2.1 Statement of compliance These condensed interim 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 disclosures made in these condensed interim unconsolidated financial statements have been limited based on the format prescribed by the SBP vide BPRD circular letter No. 5 dated March 22, 2019 and IAS 34. These condensed interim unconsolidated financial Statements do not include all the information and disclosures required for annual unconsolidated financial statements and should be read in conjunction with the unconsolidated financial statements for the year ended December 31, 2019. 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 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 unconsolidated financial statements. 17
21. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 Through S.R.O. 229 (I)/2019 dated February 14, 2019, the SECP has deferred the applicability of the IFRS 9 ‘Financial Instruments’ for all companies required to prepare their financial statements in accordance with the requirements of IFRS for reporting period/year ending on or after June 30, 2019 (earlier application is permitted). However, SBP has extended the effective date of applicability of IFRS 9 to annual periods beginning on or after January 01, 2021 vide SBP BPRD Circular No.4 dated October 23,2019. Therefore, the Bank has not considered the impact of IFRS 9 for its Pakistan operations in these unconsolidated financial statements. Further, the Bank considers that as the Prudential Regulations and other SBP directives currently provide the accounting framework for the measurement and valuation of investments and provision against non performing loans and advances, the implementation of IFRS 9 may require changes in the regulatory regime and for this SBP would issue guidance and instruction on the application of IFRS 9 for the banking sector of Pakistan. 2.2 Standards, interpretations of and amendments to published approved accounting standards that are effective in the current period There are certain new and amended standards, interpretations and amendments that are mandatory for the Bank’s accounting periods beginning on or after January 1, 2020 but are considered not to be relevant or do not have any significant effect on the Bank’s operations. Therefore not detailed in these condensed interim unconsolidated financial statements other than IFRS 9 and reason for that is mentioned in note 2.1 as above. 2.3 Standards, interpretations of and amendments to published approved accounting standards that are not yet effective The following standards, amendments and interpretations of approved accounting standards will be effective for the accounting periods as stated below: Standard, Interpretation or Amendment - IFRS 9 ‘Financial Instruments (refer note 2.1 above) - IFRS 1 - First time adoption of IFRSs IFRS 17 - Insurance Contracts Effective date (annual periods beginning on or after) January 01, 2021 Further, following new standards have been issued by IASB which are yet to be notified by the SECP for the purpose of applicability in Pakistan. 3 January 01, 2014 January 01, 2021 CRITICAL ACCOUNTING ESTIMATES AND KEY SOURCES OF ESTIMATION UNCERTAINTY The basis for accounting estimates adopted in the preparation of these condensed interim unconsolidated financial statements are the same as that applied in the preparation of the unconsolidated financial statements for the year ended December 31, 2019. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies and methods of computation adopted in the preparation of these unconsolidated condensed interim financial statements are consistent with those applied in the preparation of the audited annual financial statements of the Bank for the year ended December 31, 2019. Nine Months ended: September 30, 2020 18
22. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 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, 2019 except for the following additional considerations due to the COVID-19. 5.1 COVID - 19 outbreak and it’s impact The COVID-19 and the measures to reduce its spread has impacted the economy of Pakistan significantly. Regulators and governments across the globe have introduced fiscal and economic stimulus measures to mitigate its impact. The State Bank of Pakistan (SBP) has responded to the crisis by cutting the policy rate by 625 basis points to 7 percent and by introducing regulatory measures to maintain banking system’s soundness and to sustain economic activity. These include: (i) reducing the capital conservation buffer by 100 basis points to 1.5 percent; (ii) increasing the regulatory limit on extension of credit to SMEs by 125 million to Rs 180 million; (iii) relaxing the debt burden ratio for consumer loans from 50 percent to 60 percent (iv) allowing banks to defer clients’ payment of principal and profit on financing obligations by one year; and (v) relaxing regulatory criteria for restructured/rescheduled loans for borrowers who require relief beyond the extension of principal repayment for one year. (vi) Relaxing credit requirements for exporters and importers; and (vii) Refinance schemes to support employment to prevent layoff of workers and health sector to combat COVID-19 Pandemic. COVID 19 has impacted the banks in Pakistan from various facets which includes increase in overall credit risk pertaining to loans and advances portfolio in certain sectors, reduced fee income due to slowdown in economic activity, operational issues such as operations of Branches, managing cyber security threat and managing investment banking activities including arrangement of syndicate loans, debt and capital advisory services etc. We have discussed below the major aspects of COVID 19 on the Bank’s risk management policies. 5.1.1 Assets quality and credit risk The Risk department of the Bank is regularly conducting assessments to identify borrowers operating in various sectors which are most likely to get affected. The Bank has further strengthened its credit review procedures in the light of COVID-19. The Bank has conducted various stress tests on the Credit portfolio and is confident that the CAR buffer currently maintained is sufficient. 5.1.2 Liquidity management Bank has received applications for deferral of principal and / or restructuring / rescheduling and is expected to receive further such applications. These applications are being reviewed by the Bank as per its established policies. The Asset and Liability Committee (ALCO) of the Bank is continuously monitoring the liquidity position and is taking due 19
23. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 precautionary measures where needed. The Bank has conducted various stress testing on its liquidity ratios and is confident that the liquidity buffer currently maintained by the Bank is sufficient to cater any adverse movement in cash flow maturity profile. 5.1.3 Equity investments SBP has given relaxation in recognition of impairment on equity securities in phased manner equally on quarterly basis during calendar year ending on December 31, 2020. The Bank has taken the impact of impairment on the basis of that relaxation in these unconsolidated condensed interim financial statements. 5.1.4 Foreign Exchange Risks Due to recent economic slowdown, the PKR has devalued against USD significantly from December 31, 2019 and the USD / PKR parity stood at Rs.165.7021 as at September 30, 2020. The exchange rate is expected to remain volatile till the uncertainty around COVID-19 resolves. The Bank has reviewed its Net Open Position and has had no significant impact on profitibility. 5.1.5 Operations The Bank is closely monitoring the situation and has invoked required actions to ensure safety and security of Bank staff and an uninterrupted service to our customers. The senior management of the Bank is continuously monitoring the situation and is taking timely decisions to resolve any concerns. Business Continuity Plans (BCP) for respective areas are in place and tested. The Bank has significantly enhanced monitoring for all cyber security risk during these times from its information security protocols. The remote work capabilities were enabled for staff and related risk and control measures were assessed to make sure they are fully protected using virtual private network (“VPN”) connections. Further, the Bank has also ensured that its remote access systems are sufficiently resilient to any unwanted cyber attacks. The Bank is communicating with its customers on how they can connect with the Bank through its full suite of channels including digital and online channels. The Bank has taken all measures to ensure that service levels are maintained, customer complaints are resolved as per SLAs and the Bank continues to meet the expectations of their clients as they would in a normal scenario. 5.1.6 Capital Adequacy Ratio Under the current scenario, the banks are under pressure to extend further credit to its borrowers, while overall deteriorating credit risk and increased NPL may also put additional pressures on the Bank from Capital Adequacy Ratio perspective. The SBP has relaxed the Capital Conversion Buffer (CCB) requirements for the Banks to 1.5%, resulting in an overall CAR requirement of 11.5%. The reduced CCB has also provided an additional limit to the bank for its tier 2 capital. Further, the regulatory limit for retail loans has also increased by SBP to 180 million, which will now result in reduced Risk Weighted Assets for some of its loans. In addition to the measures by SBP, the Senior management of the Bank is continuously monitoring the impacts of various decisions on its CAR and taking further lending decisions based on the overall impacts on RWA. The Bank also believes that it has buffer in its CAR requirement to meet any adverse movements in credit, market or operational risks. Nine Months ended: September 30, 2020 20
24. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 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 With National Bank of Pakistan in: Local currency current accounts National Prize Bonds 7. (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- 8,729,266 2,254,144 10,983,410 5,572,604 896,523 6,469,127 18,267,599 1,101,919 2,389,901 21,759,419 13,292,331 831,532 2,566,714 16,690,577 822,139 2,286,205 22,858 143,440 33,587,826 25,589,349 121,587 73 121,660 143,754 67 143,821 496,471 319,083 618,131 (91) 462,904 (68) 618,040 462,836 BALANCES WITH OTHER BANKS In Pakistan In current accounts In deposit accounts Outside Pakistan In current accounts Less: General provision under IFRS 9 7.1 Balances with other banks - net of provision 7.1 This represents general provision held under IFRS 9 by Bahrain branch of the Bank. 8. LENDINGS TO FINANCIAL INSTITUTIONS Call money lendings Repurchase agreement lendings (Reverse Repo) Less: General provision under IFRS 9 8.1 Lending to Financial Institutions - net of provision 100,000 8,679,966 8,779,966 - 283,887 30,037,915 30,321,802 (1,262) 8,779,966 30,320,540 8.1 This represents general provision held under IFRS 9 by Bahrain branch of the Bank. 8.2 Particulars of lendings - gross In local currency In foreign currencies 8,779,966 8,779,966 21 30,037,915 283,887 30,321,802
25. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 9. INVESTMENTS 9.1 Investments by type (Un-audited) (Audited) September 30, 2020 December 31, 2019 Cost / Provision Cost / Amortised for Surplus / Carrying Amortised Provision for Surplus / Carrying cost diminution (Deficit) Value cost diminution (Deficit) Value Note -------------------------------------------------------------- Rupees in ‘000 ---------------------------------------------------------------- Held-for-trading securities Federal Government Securities Available-for-sale securities Federal Government Securities Shares Non Government Debt Securities Foreign Securities Held-to-maturity securities Federal Government Securities 8,225,189 - (93) 8,225,096 55,601,087 - (2,618) 55,598,469 110,029,058 3,334,676 3,180,847 4,339,975 120,884,556 (183,788) (370,051) (553,839) 886,464 942,439 301 (356,412) 1,472,792 110,915,522 4,093,327 2,811,097 3,983,563 121,803,509 47,828,618 2,092,667 3,367,738 2,406 53,291,429 (136,589) (370,051) (506,640) (809,244) 20,675 (6,461) (795,030) 47,019,374 1,976,753 2,991,226 2,406 51,989,759 32,859,882 36,196,335 - - 36,196,335 32,859,882 - - Associates 242,067 - - 242,067 201,239 - - 201,239 Subsidiaries 1,919,121 - - 1,919,121 1,919,121 - - 1,919,121 167,467,268 (553,839) 1,472,699 168,386,128 143,872,758 (506,640) (797,648) 142,568,470 8,202,316 22,873 8,225,189 - (102) 9 (93) 8,202,214 22,882 8,225,096 55,601,087 55,601,087 - (2,618) (2,618) 55,598,469 55,598,469 55,963,228 54,065,830 110,029,058 - 251,201 635,263 886,464 56,214,429 54,701,093 110,915,522 12,071,266 35,757,352 47,828,618 - (364) (808,880) (809,244) 12,070,902 34,948,472 47,019,374 3,187,087 136,589 (47,199) (136,589) 942,439 - 4,082,327 - 1,945,078 136,589 (136,589) 20,675 - 1,965,753 - 11,000 3,334,676 (183,788) 942,439 11,000 4,093,327 11,000 2,092,667 (136,589) 20,675 11,000 1,976,753 305,182 308,583 (155,169) - (13) 314 150,000 308,897 305,183 396,750 (155,169) - (14) (6,447) 150,000 390,303 1,164,349 1,375,000 27,733 3,180,847 (214,882) (370,051) 301 949,467 1,375,000 27,733 2,811,097 1,179,739 1,458,333 27,733 3,367,738 (214,882) (370,051) (6,461) 964,857 1,458,333 27,733 2,991,226 4,329,983 9,992 4,339,975 - (357,169) 757 (356,412) 3,972,814 10,749 3,983,563 2,406 2,406 - - 2,406 2,406 9.2.4 36,196,335 - - 36,196,335 32,859,882 - - 32,859,882 Omar Jibran Engineering Industries Limited Veda Transit Solutions (Private) Limited 9.2.5 Intercity Touring Company (Private) Limited 180,000 41,800 20,267 242,067 - - 180,000 41,800 20,267 242,067 180,000 972 20,267 201,239 - - 180,000 972 20,267 201,239 1,357,929 561,192 1,919,121 - - 1,357,929 561,192 1,919,121 1,357,929 561,192 1,919,121 - - 1,357,929 561,192 1,919,121 167,467,268 (553,839) 1,472,699 168,386,128 143,872,758 (506,640) (797,648) 142,568,470 Total Investments 9.2 Investments by segments: Held-for-trading securities Federal Government Securities Market Treasury Bills Pakistan Investment Bonds 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 Preference shares 9.2.1 9.2.2 9.2.3 Foreign Securities Government Debt Securities * Non Government Debt Securities * Ordinary shares Held-to-maturity securities Federal Government Securities: Pakistan Investment Bonds Associates Subsidiaries JS Global Capital Limited JS Investments Limited Total Investments * Deficit on revaluation of foreign debt securities includes expected credit loss relating to investments held by the Banks’ Bahrain Branch as further explained in note 20.2. Nine Months ended: September 30, 2020 22
26. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 9.2.1 Included herein are the investments in related parties amounting to Rs. 2,736.585 million (December 31, 2019: Rs. 1,552.306 million) having market value of Rs. 3,530.860 million (December 31, 2019: Rs.1,554.335 million). 9.2.2 Included herein is the investment of Rs. 65.022 million (December 31, 2019: Rs. 65.022 million) in a related party at the rate of 6 months KIBOR + 1.75% matured on December 04, 2017. Due to weak financial position of the investee the Bank has recognised full impairment loss on these Term Finance Certificates. 9.2.3 This represents investment in an associated company amounting to Rs. 27.733 million (December 31, 2019: Rs. 27.733 million). 9.2.4 The market value of securities classified as held-to-maturity as at amounted to Rs. 36,196.335 million (December 31, 2019: Rs. 31,341.410 million). 9.2.5 During the period, Veda Transit Solutions Private Limited, an associate of the Bank, has issued shares against advance subscription of Rs. 40.828 million made by the Bank. Resultantly, shareholding of the Bank increased to 9.12% (December 31, 2019: 8%). The Bank has classified the investment as associate on account of it’s significant influence over the investee company. 9.3 Investments given as collateral (Un-audited) (Audited) September 30, 2020 December 31, 2019 Cost Market value Cost Market value ------------------ Rupees in ‘000 ----------------- Available-for-sale securities Federal Government Securities: Market Treasury Bills Pakistan Investment Bonds Foreign Debt Securities Government Debt Securities - - 4,453,165 22,232,264 26,685,429 4,452,597 21,475,720 25,928,317 2,702,782 2,702,782 2,524,650 2,524,650 26,685,429 25,928,317 Note 9.4 Provision for diminution in value of investments Opening balance Charge during the period / year Reversal during the period / year Charge / (reversal) for the period / year Closing Balance 9.4.1 (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----506,640 851,940 48,035 (836) 47,199 553,839 251,675 (596,975) (345,300) 506,640 9.4.1 SBP vide BPRD Circular Letter No. 13 of 2020 dated March 26, 2020 has provided regulatory relief to banks to recognize impairment losses resulting from the valuation of listed equity securities held as “Available for Sale” (AFS) in a phased manner equally on quarterly basis during calendar year ending on December 31, 2020. Pursuant to the circular, out of total impairment loss of Rs. 62.932 million, a portion of the impairment loss, amounting to Rs. 15.733 million has not been recognized in these unconsolidated condensed interim financial statements. 23
27. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 Had there been no relaxation, there would have been increase in provision for diminution in value of investments and surplus on revaluation of available for sale securities - net of tax by Rs. 15.733 and Rs. 10.226 million respectively, and decrease in unappropriated Profit by Rs. 7.678 million and profit after taxation by Rs. 9.598 million respectively. 9.4.2 (Un-audited) (Audited) September 30, 2020 December 31, 2019 NPI Provision NPI Provision ---------------------------- Rupees in ‘000 ---------------------------- Particulars of provision against debt securities Category of classification Domestic Other assets especially mentioned Substandard Doubtful Loss 10. ADVANCES Note Loans, cash credits, running finances, etc. Bills discounted and purchased Advances - gross Provision against advances General General provision - under IFRS-9 Specific 370,051 370,051 370,051 370,051 370,051 370,051 Performing Non Performing Total (Un-audited) (Audited) (Un-audited) (Audited) (Un-audited) (Audited) September 30, December 31, September 30, December 31, September 30, December 31, 2020 2019 2020 2019 2020 2019 --------------------------------------- Rupees in ‘000 --------------------------------------224,698,426 9,313,596 234,012,022 224,986,858 11,113,114 236,099,972 11,637,347 11,637,347 10,353,164 10,353,164 236,335,773 9,313,596 245,649,369 235,340,022 11,113,114 246,453,136 (24,203) (24,203) (161,166) (7,520) (168,686) (3,773,093) (3,773,093) (3,339,941) (3,339,941) (24,203) (3,773,093) (3,797,296) (161,166) (7,520) (3,339,941) (3,508,627) 233,987,819 235,931,286 7,864,254 7,013,223 241,852,073 242,944,509 10.3 Advances - net of provision 10.1 370,051 370,051 (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- Particulars of advances (gross) In local currency In foreign currencies 238,312,162 7,337,207 245,649,369 237,733,122 8,720,014 246,453,136 10.2 Advances include Rs. 11,637.347 million (December 31, 2019: Rs. 10,353.164 million) which have been placed under non-performing status as detailed below: (Un-audited) September 30, 2020 Category of Classification (Audited) December 31, 2019 Non Performing Non Performing Loans Provision Loans Provision ---------------------- Rupees in ‘000 ---------------------- Domestic Other Assets Especially Mentioned Substandard Doubtful Loss Total Nine Months ended: September 30, 2020 542,924 1,531,394 2,586,164 6,976,865 11,637,347 24 194 95,117 478,505 3,199,277 3,773,093 841,058 1,159,072 2,442,270 5,910,764 10,353,164 1,721 64,681 426,283 2,847,256 3,339,941
28. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 10.3 Particulars of provision against advances (Audited) December 31, 2019 (Un-audited) September 30, 2020 Specific Opening balance Exchange adjustments Charge for the period / year Reversals for the period / year Amounts written off Closing balance General provision under IFRS-9 General Total Specific General General provision under IFRS-9 Total ----------------------------------------------------- Rupees in ‘000 ----------------------------------------------------3,339,941 161,166 7,520 3,508,627 2,989,888 155,661 10,746 3,156,295 869 869 1,095 1,095 533,348 (100,196) (161,166) 15,814 - 549,162 (261,362) 880,994 (526,146) 5,505 - (4,321) 886,499 (530,467) 287,800 - 354,848 (4,795) 5,505 - (4,321) - 356,032 (4,795) 3,773,093 - 24,203 3,797,296 3,339,941 161,166 7,520 3,508,627 433,152 - (161,166) - 15,814 - 10.3.1 The Bank, 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. 10.3.2 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 September 30, 2020, the Bank has availed cumulative benefit of FSV of Rs. 4,902.266 million (December 31, 2019: Rs.4,120.009 million) under the directives of the SBP. Had the benefit not been taken the unappropriated profit after tax would have reduced by Rs. 3,186.473 million (December 31, 2019: Rs. 2,678.006 million). Further, as required by the SBP directives, this unappropriated profit will not be available for distribution as dividend or other appropriations. 10.3.3 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 as at September 30, 2020 relating to facilities of customers have not been classified as non-performing on account of such relaxation. 11. FIXED ASSETS Capital work-in-progress Property and equipment Right-of-use assets Note 11.1 11.2 &11.3 27.1 (Un-audited) (Audited) September 30, December 31, 2020 2019 ---- Rupees in ‘000 ---178,781 5,835,725 2,820,121 138,167 5,961,042 3,593,492 8,834,627 9,692,701 25
29. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 (Un-audited) September 30, 2020 (Audited) December 31, 2019 ---- Rupees in ‘000 ---- 11.1 Capital work-in-progress Civil works Advance for purchase of furniture and fixtures Advance for purchase of equipment 116,365 290 21,512 138,167 146,874 2,228 29,679 178,781 11.2 The following additions, book value of disposals and writeoffs have been made to fixed assets during the period: --------------------------------------- (Un-audited) ---------------------------------------Additions Disposal Write offs September 30, September 30, September 30, September 30, September 30, September 30, 2020 2019 2020 2019 2020 2019 ------------------------------------------------ Rupees in ‘000 -----------------------------------------------Capital work-in-progress - net 2,228 87,177 - - - - 113,863 36,774 317,592 49 468,278 640,700 157,146 69,760 353,420 320,893 1,541,919 11,019 1,593 3,336 851 16,799 1,789 1,079 7,064 45,836 55,768 43,754 5,144 9,610 58,508 - 470,506 1,629,096 16,799 55,768 58,508 - Property and equipment Building on leasehold land Leasehold improvements Furniture and fixture Electrical, office and computer equipment Vehicles (Un-audited) (Audited) September 30, December 31, 2020 2019 ---- Rupees in ‘000 ---- Note 11.3 Assets held for sale Building on leasehold land 11.3.1 - 374,000 11.3.1 In 2019, Bank had entered into an agreement to sell the Bank property located at 13th floor of Ocean Tower, plot No. G-3, Khayaban-e-Iqbal, Block 9, KDA Scheme No. 5, Clifton Karachi, Pakistan (“Property”) of Rs. 375 million and therefore, measured the property as a non-current asset held for sale. In this respect, during the period ended the sale proceeds were realised on August 11, 2020. 12. Note INTANGIBLE ASSETS Capital work-in-progress Computer software Goodwill 12.1 12.2 12.1 Capital work-in-progress Advance for purchase of software Nine Months ended: September 30, 2020 26 (Un-audited) (Audited) September December 31, 30, 2020 2019 ---- Rupees in ‘000 ---164,022 791,224 1,463,625 2,418,871 97,744 709,991 1,463,625 2,271,360 164,022 97,744
30. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 ----- Un-audited ----September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----- 12.2 Additions to intangible assets The following additions have been made to intangible assets during the period: Capital work-in-progress - net Computer software 13. OTHER ASSETS 148,884 163,900 312,784 (Un-audited) (Audited) September 30, December 31, 2020 2019 Note ----- Rupees in ‘000 ----- Income / mark-up accrued in local currency Income/ mark-up accrued in foreign currency Advances, deposits, advance rent and other prepayments Acceptances Dividend receivable Taxation (payments less provision) 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 for subscription of shares 9.2.5 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 Other assets - total 60,310 156,561 216,871 6,539,657 142,580 8,731,263 48,511 707,574 3,125,742 197,447 50,649 19,316 37,854 202,137 574,351 1,081,967 23,936 446,321 3,221,212 208,948 573,873 67,952 23,290 37,139 116,489 465,965 1,088,682 22,408 3,349 65,517 46,107 614,386 13,432,569 (13,580) 13,418,989 65,955 40,828 14,477 29,924 39,100 494,123 15,736,460 (13,580) 15,722,880 93,649 93,743 13,512,638 15,816,623 27
31. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 14. (Un-audited) (Audited) September 30, December 31, 2020 2019 ---- Rupees in ‘000 ---- BILLS PAYABLE In Pakistan Outside Pakistan 15. BORROWINGS Secured Borrowings from State Bank of Pakistan under: Export Refinancing Scheme (ERF) Long-Term Finance Facility (LTFF) Financing Facility for Storage of Agricultural Produce (FFSAP) Repurchase agreement borrowings Borrowing from financial institutions Repurchase agreement borrowings Refinancing facility for mortgage loans Total secured Unsecured Call borrowings Overdrawn nostro accounts Total unsecured 15.1 Particulars of borrowings In local currency In foreign currencies 16. 4,105,613 235,843 4,341,456 3,583,500 220,991 3,804,491 19,390,257 1,917,723 17,792,778 1,877,760 7,788,268 29,096,248 300,440 16,849,097 36,820,075 1,907,267 1,914,739 3,822,006 12,746,732 1,961,128 14,707,860 32,918,254 51,527,935 828,511 570,114 1,398,625 2,303,356 636,992 2,940,348 34,316,879 54,468,283 31,010,998 3,305,881 34,316,879 51,527,935 2,940,348 54,468,283 DEPOSITS AND OTHER ACCOUNTS (Un-audited) (Audited) September 30, 2020 December 31, 2019 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 79,231,536 80,772,112 177,039,785 6,308,327 343,351,760 6,205,693 4,180,477 14,903,053 587 25,289,810 85,437,229 84,952,589 191,942,838 6,308,914 368,641,570 70,341,319 73,442,779 164,602,876 5,455,786 313,842,760 6,412,941 2,898,794 11,409,815 15,234 20,736,784 76,754,260 76,341,573 176,012,691 5,471,020 334,579,544 1,227,052 9,875,569 11,712,315 22,814,936 496,119 496,119 1,723,171 9,875,569 11,712,315 23,311,055 859,151 13,450,440 20,900,829 35,210,420 - 859,151 13,450,440 20,900,829 35,210,420 366,166,696 25,785,929 391,952,625 349,053,180 20,736,784 369,789,964 Nine Months ended: September 30, 2020 28
32. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 17. SUBORDINATED DEBT Note Term Finance Certificates - First Issue Term Finance Certificates - Second Issue Term Finance Certificates - Third Issue 17.1 17.2 17.3 (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----2,996,400 1,998,400 2,500,000 7,494,800 2,996,400 1,998,400 2,500,000 7,494,800 17.1 In 2016, the Bank has issued Rs.3 billion of rated, privately placed, unsecured and subordinated term finance certificates (“TFCs” or “the Issue”) as an instrument of redeemable capital under Section 120 of the Companies Ordinance, 1984 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 toward the Bank’s Tier II Capital for complying with the Capital Adequacy Ratio requirement and to utilize the funds in the Bank’s business operations as permitted by its Memorandum & Articles of Association. Issue date: December 14, 2016 Tenure: Up to Seven years from the Issue date. Maturity Date: December 14, 2023 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. 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. 29
33. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 Loss absorbency clause: Upon the occurrence of a Point of Non-Viability event as defined by SBP’s Basel III Capital Rule vide 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 as declared by SBP of the non-viability event as declared by SBP, subject to a cap of 467,836,257 shares. 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 toward 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. 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. Nine Months ended: September 30, 2020 30
34. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 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 non-cumulative 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 toward 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: Semi-annually on a non-cumulative basis Redemption: Not applicable Security: The Issue is unsecured and 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 me be made from current year’s earning and subject to compliance with MCR or CAR set by SBP. 31
35. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 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 - 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 nonviable; - 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. Nine Months ended: September 30, 2020 32
36. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 Note 18. DEFERRED TAX (ASSETS) / LIABILITIES Deferred tax debits arising from: Provision against investments Provision against loans and advances General provision under IFRS-9 Intangible other than Goodwill Other assets Deferred tax credits arising due to: Fixed assets Goodwill Surplus on revaluation of operating fixed assets Surplus on revaluation of non-banking assets acquired in satisfaction of claims Mark to market gain on forward foreign exchange contracts Unrealized gain on revaluation of derivative instruments Unrealised loss on revaluation of investments classified as held for trading Surplus/ (deficit) on revaluation of investments classified as available for sale 19. (Un-audited) (Audited) September 30, December 31, 2020 2019 ---- Rupees in ‘000 ---(57,149) (161,235) (30,465) (2,778) (251,627) (57,149) (132,305) (3,097) (2,514) (628,569) (823,634) 165,236 512,268 242,893 250,858 512,268 299,034 934 967 1,172 23,085 8,378 8,145 (33) (1,218) 537,439 1,468,287 (278,261) 814,878 1,216,660 (8,756) 5,899,975 75,591 155,899 572,836 3,125,742 4,214 161,822 325,323 82,490 3,603,202 89,500 512,015 52,318 3,151,144 83,894 72,407 21,041 635,183 18,624,596 4,092,845 72,782 99,505 304,086 3,221,212 4,214 151,881 414,407 66,867 1,991 4,172,975 73,777 446,387 34,248 3,696,371 37,500 12,693 73,084 181,526 17,158,351 OTHER LIABILITIES Mark-up / return / interest payable in local currency Mark-up / return / interest payable in foreign currency Unearned income on guarantees Accrued expenses Acceptances Unclaimed dividends Payable in respect of defined benefit obligation - net Withholding taxes payable Government challan collection Donation payable Security deposits against leases, lockers and others Sindh Workers' Welfare Fund Payable in respect of home remittance Retention money payable Lease liability against right-of-use assets 11.3.1 Advance against assets held for sale Insurance payable Debit card settlement Inter bank fund transfer settlement Others 33
37. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 20. Note SURPLUS ON REVALUATION OF ASSETS Surplus / (deficit) on revaluation of: Available-for-sale securities Fixed assets Non-banking assets acquired in satisfaction of claims 9.1 & 20.1 Deferred tax on (deficit) / surplus on revaluation of: Available-for-sale securities Fixed assets Non-banking assets acquired in satisfaction of claims 20.1 (795,030) 1,359,727 93,680 2,828,512 93,743 658,440 (537,439) (242,893) 278,261 (299,034) (934) (781,266) 2,047,246 (967) (21,740) 636,700 (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- CONTINGENCIES AND COMMITMENTS Guarantees Commitments 21.1 1,535,540 1,199,323 This includes general provision under IFRS 9 of Rs. 62.748 million (December 31, 2019: Rs. Nil) by Bahrain branch of the Bank. Note 21. (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- 21.1 21.2 Guarantees: Financial guarantees Performance guarantees Other guarantees 21.1.1 61,744,460 86,855,756 148,600,216 45,650,803 76,025,492 121,676,295 1,249,078 37,310,594 23,184,788 61,744,460 2,464,411 21,483,841 21,702,551 45,650,803 21.1.1 Included herein are outstanding guarantees of Rs. 71.940 million (December 31, 2019: Rs.14.217 million) of related parties. Nine Months ended: September 30, 2020 34
38. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 21.2 Commitments: Documentary credits and short-term trade-related transactions Note (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- - letters of credit 21.2.1 14,730,978 13,965,258 Commitments in respect of: - Forward foreign exchange contracts - Derivative instruments - Forward lending 21.2.2 21.2.3 21.2.4 36,190,280 35,404,671 365,805 55,111,366 6,745,592 72,183 Commitments for acquisition of: - Fixed assets 21.2.5 164,022 86,855,756 131,093 76,025,492 21.2.1 Included herein are the outstanding letter of credits of Rs. 29.249 million (December 31, 2019: Rs.44.368 million) of related parties. 21.2.2 Commitments in respect of forward foreign exchange contracts Purchase Sale 24,222,671 11,967,609 36,190,280 33,104,108 22,007,258 55,111,366 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 period end, all foreign exchange contracts have a remaining maturity of less than one year. 21.2.3 Commitments in respect of derivative instruments Purchase Sale 21.2.3.1 Interest rate swaps (notional principal) Purchase Sale 21.2.3.2 Options (notional principal) Purchase Sale (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----3,486,041 31,918,630 35,404,671 3,622,107 3,123,485 6,745,592 1,442,033 1,443,033 2,885,066 2,099,175 2,100,175 4,199,350 2,044,008 30,475,597 32,519,605 1,023,310 1,023,310 2,046,620 - 499,622 21.2.3.3 Commitments in respect of forward government securities Purchase 35
39. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 21.2.4 Commitments in respect of forward lending Note Undrawn formal standby facilities, credit lines and other commitments to lend 21.2.4.1 (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----72,183 365,805 21.2.4.1 These represent commitments that are irrevocable because they cannot be withdrawn at the discretion of the Bank without the risk of incurring significant penalty or expense. 131,093 164,022 21.2.5 Commitments for acquisition of fixed assets 21.2.6 There are no changes in contingent liabilities since the date of annual unconsolidated audited financial statements for the year ended December 31, 2019. 22. 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 to the unconsolidated financial statements for the year ended December 31, 2019. Accounting policies in respect of derivative financial instruments are described in note 4.5.2 of the unconsolidated annual financial statements for the year ended December 31, 2019. 22.1 Product analysis With Banks for Hedging Market making (Un-audited) September 30, 2020 Interest Rate Swaps Options Forward securities Notional Mark to Notional Mark to Notional Mark to principal Market principal Market principal Market ----------------------------------------- Rupees in ‘000 ----------------------------------------2,885,066 - 6,854 - 32,519,605 - 17,082 - - - - - - - - - 2,885,066 - 6,854 - 32,519,605 - 17,082 - - - With FIs other than banks Hedging Market making Total Hedging Market making Nine Months ended: September 30, 2020 36
40. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 With Banks for Hedging Market making With FIs other than banks Hedging Market making Total Hedging Market making 22.1.1 23. (Audited) December 31, 2019 Interest Rate Swaps Options Forward securities Notional Mark to Notional Mark to Notional Mark to principal Market principal Market principal Market ----------------------------------------- Rupees in ‘000 ----------------------------------------4,199,350 - 13,327 - - 8,885 - 499,622 196 - - - - - - 4,199,350 - 13,327 - - 8,885 - 499,622 196 The notional value of options includes Rs. 1,882.127 million (December 31, 2019: Rs. 1,023.310 million) and the Bank has entered back to back arrangement to close the position at period end. MARK-UP / RETURN / INTEREST EARNED Note On: Loans and advances Investments Lendings to financial institutions Balances with other banks Securities purchased under resale agreements 24. ------- Un-audited ------September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----20,098,993 12,701,423 44,783 7,387 1,033,392 33,885,978 22,627,960 6,850,722 45,588 45,631 689,213 30,259,114 23,504,990 1,490,518 728,922 20,202,045 3,087,963 749,378 514,507 345,903 26,584,840 606,503 327,771 24,973,660 256,608 34,119 251,418 24,513 7,449 872,550 319,792 1,490,518 2,621 2,403,709 405,702 3,087,963 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 24.1 24.1 Borrowings Export Refinancing Scheme (ERF) Long-Term Finance Facility (LTFF) Financing Facility for Storage of Agricultural Produce (FFSAP) Securities sold under repurchase agreements Other borrowings 37
41. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 25. FEE AND COMMISSION INCOME Note 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. 199,157 21,987 478,923 298,064 71,989 475,632 288,489 3,054 214,202 135,560 26,190 251,225 16,601 178,725 27,637 2,687,435 132,572 14,847 362,542 210,403 42,565 395,736 249,142 4,388 81,095 105,814 94,070 132,694 14,964 160,997 6,918 2,008,747 918,080 (93) 917,987 (563,669) (435) (564,104) Federal government securities Market treasury bills Pakistan investment bonds Ijara sukuk certificates 76,804 857,350 56 3,850 (402,443) 633 Shares Listed companies (12,850) (159,776) 450 - 3,808 (7,538) 918,080 482 (6,415) (563,669) (11,919) 1,000 32,755 4,710 26,546 93,252 93,252 GAIN / (LOSS) ON SECURITIES Realised Unrealised - held for trading 26.1 26.1 Realised gain / (loss) on: Non Government Debt Securities Sukuk certificates Mutual fund units Foreign currency bonds 27. ------- Un-audited ------September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----- OTHER INCOME - NET (Loss) / gain on sale of operating fixed assets - net Gain on sale of assets held for sale Gain on termination of leases Others 11.3.1 27.1 27.1 This represents, gain on termination of leases against closure of fifty one branches under the Bank’s branch rationalisation strategy. Nine Months ended: September 30, 2020 38
42. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 28. OPERATING EXPENSES Note Total compensation expense Property expense Rent and taxes Insurance Utilities cost Security (including guards) Repair and maintenance (including janitorial charges) Depreciation Depreciation - Right of Use Assets Depreciation on non banking assets Information technology expenses Software maintenance Hardware maintenance Depreciation Amortisation Network charges Other operating expenses Directors' fees and allowances Legal and professional charges Insurance Outsourced services costs Travelling and conveyance NIFT clearing charges Depreciation Training and development Postage and courier charges Communication Stationery and printing Marketing, advertisement and publicity Donations Auditors Remuneration Staff Auto fuel and 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 corporation Entertainment expenses Repair and maintenance Cash handling charges Fee and Subscription Employees social security Generator fuel and maintenance Others 28.1 ------- Un-audited ------September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----4,701,295 3,851,929 22,398 2,638 248,050 242,353 152,017 143,324 717,149 6,808 1,534,737 220,375 7,913 232,185 213,103 130,482 144,831 520,691 628 1,470,208 280,216 132,222 150,780 82,977 90,109 736,304 183,891 108,746 126,403 68,169 81,351 568,560 13,250 125,322 147,809 116,000 52,304 26,851 223,295 11,828 75,697 94,234 195,237 333,422 60,841 4,975 149,615 43,568 9,634 12,951 34,072 5,036 3,709 25,892 93,204 49,319 46,349 155,540 65,260 7,743 53,350 37,523 2,273,830 9,246,166 6,050 94,730 135,490 105,285 65,074 28,932 317,788 21,942 61,111 81,125 184,295 207,031 5,126 174,842 47,475 33,019 14,122 23,382 6,317 4,075 26,158 104,821 46,657 46,804 48,868 33,284 5,722 57,824 24,282 2,011,631 7,902,328 39
43. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 28.1 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, 2019 are amounting to Rs. 87,425.180 million on which total premium is payable of Rs. 139.880 million per annum (Rs. 34.970 million per quarter). 29. WORKERS WELFARE FUND Provision held at 2% of the higher of profit before tax or taxable income to the extent of operations carried out under Sindh Workers’ Welfare Act, 2014. Note 30. OTHER CHARGES ------- Un-audited ------September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----- Penalties imposed by State Bank of Pakistan Others 31. 242 892 1,134 47,199 433,152 123,672 439,833 (161,166) 75,929 58,508 4,168 457,790 1,724 (61,967) (2,082) 315 501,495 390,199 409,716 799,915 550,410 (771,219) (220,809) PROVISIONS / (REVERSALS) AND WRITE OFFS - NET Provisions for diminution in value of investments 9.4.1 Provisions against loans & advances - specific (Reversals) / provisions against loans & advances - general Provisions / (reversals) under IFRS-9 - general Fixed assets written off Other assets written off Other reversals Bad debts written off directly 32. 74,607 74,607 TAXATION Current Deferred 32.1 There are no material changes in tax contingencies as disclosed in annual financial statements for the year ended December 31, 2019 except below: 32.1.1The 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 is now approaching the Supreme Court to challenge the aforesaid decision of the Sindh High Court and seek interim relief in respect of the outstanding super tax demand. Nine Months ended: September 30, 2020 40
44. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 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. ------------------------------ Un-audited -----------------------------Quarter ended 33. BASIC AND DILUTED EARNINGS / (LOSS) PER SHARE Nine months period ended September 30, September 30, September 30, September 30, 2020 2020 2019 2019 ----------------------------- Rupees in ‘000 ----------------------------- Profit / (loss) after taxation for the period attributable to ordinary equity holders of the Bank 309,165 (136,238) 1,165,491 (577,915) - - - (24,164) 309,165 (136,238) 1,165,491 (602,079) Preference dividend paid for the year December 31, 2018 @ 12% p.a Profit / (loss) after taxation for the period attributable to ordinary equity holders of the Bank for basic earnings --------------------------------- Number --------------------------------Weighted average number of outstanding ordinary 1,297,464,262 1,297,464,262 1,297,464,262 1,297,464,262 shares during the period for basic earnings Basic and diluted earnings / (loss) per share 34. ----------------------------------- Rupee ------------------------------------ CASH AND CASH EQUIVALENTS Cash and balances with treasury banks Balances with other banks Overdrawn nostro accounts 0.24 Note 6 7 15 Less: General provision under IFRS 9 35. (0.11) 0.90 (0.46) (Un-audited) (Audited) (Un-audited) September 30, December 31, September 30, 2020 2019 2019 ------------------- Rupees in ‘000 ------------------33,587,826 618,131 (570,114) 25,589,349 462,904 (570,114) 21,093,931 1,140,498 (152,092) 33,635,843 (91) 33,635,752 25,482,139 (68) 25,482,071 22,082,337 (83) 22,082,254 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 4.5 to the annual unconsolidated financial statements for the year ended December 31, 2019. 41
45. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 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. 35.1 Valuation techniques used in determination of fair values within level Item Valuation approach and input used Financial Instruments- Level 1 Shares of listed companies Fair values of investments in listed equity securities are valued on the basis of closing quoted market prices available at the Pakistan Stock Exchange. 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 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 rates (Reuters page). Investments in debt securities (comprising 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. Nine Months ended: September 30, 2020 42
46. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 Forward foreign exchange contracts Derivatives 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 10 and 13 of the unconsolidated annual financial statements December 31, 2019. 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. 35.2 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. 35.3 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. 43
47. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 (Un-audited) September 30, 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 - 8,225,096 - 8,225,096 4,082,327 4,082,327 110,915,522 458,897 3,972,814 115,347,233 - 110,915,522 4,082,327 458,897 3,972,814 119,429,560 4,082,327 36,196,335 159,768,664 - 36,196,335 163,850,991 - - 3,387,951 3,387,951 - - 1,175,616 4,563,567 1,175,616 4,563,567 - 24,085,306 11,826,893 - 24,085,306 11,826,893 Interest rate swaps Purchase Sale - 1,519,596 1,526,450 - 1,519,596 1,526,450 Options Purchase Sale - 2,038,193 30,498,492 - 2,038,193 30,498,492 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 Off balance sheet financial instruments Commitments in respect of: Forward foreign exchange contracts Purchase Sale Derivative instruments: Nine Months ended: September 30, 2020 44
48. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 On balance sheet financial instruments (Audited) December 31, 2019 Level 1 Level 2 Level 3 Total ------------------------- Rupees in ‘000 ------------------------- Financial assets - measured at fair value Held-for-trading securities Investments Federal Government Securities - 55,598,469 - 55,598,469 1,965,753 1,965,753 47,019,374 540,303 47,559,677 - 47,019,374 1,965,753 540,303 49,525,430 1,965,753 31,341,410 134,499,556 - 31,341,410 136,465,309 - - 3,797,180 3,797,180 - - 1,182,425 4,979,605 1,182,425 4,979,605 - 32,885,546 21,722,741 - 32,885,546 21,722,741 Forward government securities Purchase - 499,818 - 499,818 Interest rate swaps Purchase Sale - 1,474,016 2,738,661 - 1,474,016 2,738,661 Options Purchase Sale - 1,024,638 1,030,868 - 1,024,638 1,030,868 Available-for-sale securities Investments Federal Government Securities Shares Non Government Debt 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 Off balance sheet financial instruments Commitments in respect of: Forward foreign exchange contracts Purchase Sale Derivative instruments 45
49. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 36. SEGMENT INFORMATION Segment Details with respect to business activities Corporate Finance Trading and Sales Retail Banking (830,804) (1,157,607) 1,628,761 (359,650) 7,749,740 297,766 1,909,646 9,957,152 27,909 100,217 128,126 3,020 (1,202,429) 108,301 238,357 346,658 (706,308) 2,255,377 - Commercial Banking Others Total 2,612,379 1,451,531 878,710 4,942,620 (1,090,479) (587,753) (30,915) (1,709,147) 7,301,138 4,458,554 11,759,692 4,116,640 2,933,936 7,050,576 139,818 2,766,758 493,602 980,238 1,473,840 121,522 3,347,258 4,590,044 (4,252,748) 337,296 193,430 (2,239,873) 9,336,496 9,336,496 457,790 1,965,406 158,747,592 8,655,689 31,810,622 97,261,954 - 2,395,244 7,383,159 60,855,810 124,277 22,010,463 - 34,205,866 168,386,128 180,128,227 8,779,966 Others Total Assets 626 626 2,256,003 167,403,281 45,807,087 5,917,962 (1,410,657) 50,314,392 179,386,968 188,204,309 5,719,385 (2,386,639) 191,537,055 262,295,545 24,766,136 46,776,599 234,012,022 11,637,347 (3,797,296) 241,852,073 24,766,136 658,118,396 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total liabilities Equity Total Equity & liabilities 1,835 2,254,168 2,256,003 2,256,003 15,473,176 151,930,105 167,403,281 167,403,281 152,882,548 21,850,336 4,654,085 179,386,969 179,386,969 18,843,703 239,068,242 4,093,618 289,981 262,295,544 262,295,544 7,494,800 19,238,646 26,733,446 20,043,153 46,776,599 34,316,879 7,494,800 391,952,625 180,128,227 24,182,712 638,075,243 20,043,153 658,118,396 - 73,044,870 53,661,938 21,733,308 160,100 148,600,216 September 30, 2020 (Un-audited) Profit & Loss ------------------------------------------ Rupees in ‘000 ------------------------------------------ Net mark-up/return/profit / (loss) (1,139,698) Inter segment revenue - net (3,937) 72,352 Non mark-up / return / interest income Total Income (1,071,283) Segment direct expenses Inter segment expense allocation Total expenses Provisions Profit before tax September 30, 2020 (Un-audited) Balance Sheet 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 Nine Months ended: September 30, 2020 46
50. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 Trading and Sales Retail Banking Commercial Banking 51,341 51,341 2,843,999 (8,317,572) 196,328 (5,277,245) (5,201,665) 13,505,984 1,269,374 9,573,693 7,643,120 (5,188,412) 710,484 3,165,192 93,252 93,252 5,285,454 2,320,779 7,606,233 81,067 81,067 (29,726) 100,284 233,822 334,106 115,553 (5,726,904) 4,460,064 1,329,587 5,789,651 152,159 3,631,883 553,272 946,962 1,500,234 233,783 1,431,175 198,404 198,404 (105,152) 5,393,091 2,510,371 7,903,462 501,495 (798,724) - 17,153,413 142,568,470 30,320,540 8,898,772 202,362,517 - - 8,089,077 - 26,052,185 142,568,470 210,451,594 30,320,540 Others Total Assets - 4,831,115 194,873,538 94,201,743 3,508,735 (469,382) 97,241,096 3,925,690 312,428,075 141,898,229 6,844,429 (3,039,245) 145,703,413 5,017,351 150,720,764 14,389,284 22,478,361 236,099,972 10,353,164 (3,508,627) 242,944,509 28,163,440 680,500,738 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total liabilities Equity Total Equity & liabilities - 36,295,878 7,494,800 150,619,213 463,647 194,873,538 194,873,538 7,090,687 295,347,351 9,990,037 312,428,075 312,428,075 11,081,718 74,442,613 59,832,381 5,364,052 150,720,764 150,720,764 5,145,106 5,145,106 17,333,255 22,478,361 54,468,283 7,494,800 369,789,964 210,451,594 20,962,842 663,167,483 17,333,255 680,500,738 Contingencies & Commitments - 59,810,338 43,939,275 17,795,589 131,093 121,676,295 September 30, 2019 (Un-audited) Profit & Loss Net mark-up/return/profit / (loss) Inter segment revenue - net Non mark-up / return / interest income Total Income Segment direct expenses Inter segment expense allocation Total expenses Provisions Profit before tax Corporate Finance Others Total ------------------------------------------ Rupees in ‘000 ------------------------------------------ December 31, 2019 (Audited) Balance Sheet Cash & Bank balances Investments Net inter segment lending Lendings to financial institutions Advances - net Advances - performing Advances - non-performing Advances (Provisions) - Net 37. RELATED PARTY TRANSACTIONS The Bank has related party transactions with its parent, subsidiaries, associates, employee benefit plans, directors and Key Management Personnel and other related parties. The Banks enters into transactions with related parties in the ordinary course of business and on Arm’s Length basis i.e. 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. Details of transactions with related parties during the period, other than those which have been disclosed elsewhere in these financial statements are as follows: 47
51. As at December 31 , 2019 (Audited) Nine Months ended: September 30, 2020 48 - - Other Assets Interest mark-up accrued Receivable against bancassurance / bancatakaful Advance for subscription of TFC - unsecured Prepaid insurance Dividend Receivable Other receivable Provision against other assets - Advances Opening balance Addition during the period / year Repaid during the period / year Transfer in / (out) - net Closing balance - - Provision for diminution in value of investments Cost of disposal Accumulated depreciation of disposal WDV of disposal - Investments Opening balance Investment made during the period / year Investment redeemed / disposed off during the year Closing balance Fixed Assets Purchase of building - Lendings to financial institutions Opening balance Addition during the period / year Repaid during the period / year Closing balance - - - 40 (574) 23,126 22,592 - - - 412 - - - 596,257 121,985 (123,933) 129,236 723,545 - - - 598 - - - 96,682 96,682 - 1,919,121 1,919,121 - - - - 224,744 224,744 - 228,972 40,828 269,800 - 78,112 50,649 - - - 1,946,481 1,664,671 (1,938,242) 2,528,017 4,200,927 65,022 1,617,327 3,309,279 (2,125,000) 2,801,606 3,400,000 (3,400,000) - - - - 48 - - - 5,230 316 (5,546) - - - - - - - 473 - 43,410 (12,927) 30,483 - 448,575 322,590 (120,115) (54,793) 596,257 - - - 208,948 6,133 - - 607,299 - - 1,919,121 1,919,121 - 40,828 - - - - - 180,000 48,972 228,972 - 49,640 67,952 97,806 1,000 2,438 17,657 (8,002) 9,655 - 2,823,598 5,086,823 (6,320,068) 356,128 1,946,481 65,022 1,964,110 1,542,991 (1,889,774) 1,617,327 - Key Key management Other management Other related Parent Directors personnel Subsidiaries Associates related parties Parent Directors personnel Subsidiaries Associates parties ------------------------------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------------------------------- As at September 30, 2020 (Un-audited) Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30, 2020
52. - - - Subordinated debt Other Liabilities Interest / return / mark-up payable on deposits Interest / return / mark-up payable on subordinated debt Payable to defined benefit plan Others payable Contingencies and Commitments Letter of guarantee Letter of Credit - 9,733,073 24,444 295,524 (299,434) 2,777 23,311 271,648 4,583,096 (3,931,313) 923,431 Deposits and other accounts Opening balance Received during the period / year Withdrawn during the period / year Transfer in / (out) - net Closing balance - - - - - Borrowings Opening balance Borrowings during the period / year Settled during the period / year Closing balance Represented By Share Capital As at December 31, 2019 (Audited) - - 905 80 - - - - 727 - 59,593 1,246,363 543,849 382,950,341 (550,772) (382,232,615) (7,876) 44,794 1,964,089 - - - - - 23,104 473,525 (491,577) 5,052 - 71,940 29,249 45,655 147,060 35,495 161,822 - - 9,733,073 - - 17,330 - - 889,510 - - 24,308 160,210 (137,680) (22,394) 24,444 - 8,622,201 336,515 114,874,302 4,332,699 (114,012,876) (4,364,266) 1,442,126 (33,300) 10,925,753 271,648 11,105,705 (11,105,705) - - - 900 114 - - - - 5,638 - 74,950 1,606,413 1,437,872 538,270,222 (1,450,123) (538,630,272) (3,106) 59,593 1,246,363 - - - - - 14,217 44,368 81,765 286,949 2,220 147,885 - 889,588 9,656,833 1,023,592 235,460,531 (1,042,362) (236,784,614) 41,874 289,451 23,104 8,622,201 4,800,000 - 174,209,491 - (179,009,491) - Key Key management Other management Other related Parent Directors personnel Subsidiaries Associates related parties Parent Directors personnel Subsidiaries Associates parties ------------------------------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------------------------------- As at September 30, 2020 (Un-audited) Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30, 2020 49
53. - - Gain on sale of securities - net Other income Nine Months ended : September 30, 2020 50 - - - - Fee and subscription Donation Rental expense Advisory fee - - - Insurance premium paid Insurance claims settled Defined benefit plans paid Payments made during the period 2,551 - Net charge / (reversal) for defined benefit plans Reimbursement of expenses - Net charge for defined contribution plans 1,133 13,040 Other expenses 34,635 - Remuneration paid Non-executive directors' fee - - - 130 - - - - - - - - - Preference Dividend Paid - - 873 - - - 9 1,476 Commission / charges paid Mark-up / return / interest paid 25,586 - Dividend income Expense - - Mark-up / return / interest earned Fee and commission income Income For the nine months period ended September 30, 2019 (Un-audited) - - - 4,093 - - - - - - - - 189,599 - - 1,095 - - - 613 30,954 - - - - - - - - - - - - - - 7,882 125,144 - - - 40 - - - - - - - - - - - - - - - 1,952 - - - - 16,367 151,881 2,793 381,837 30,598 3,394 - 162 58,919 - 161,822 170,642 - - - - 626,267 - 3,808 62,762 176,599 165,033 - - - - 1,211 - - - - - - - - - - 622 - - - - - - - 5,700 - 161 - 1,665 - - - 29 211 23,419 - 29,605 - - - - - - - - - - - - - - - - - 343,874 - - 2,929 - - - 243 9,269 - - - 1,089 - - 2,945 - - - - - - - 3,349 181,490 1,594 - - - - - - - - - - - - - - - - - - - 1,829 - - - - - 102,494 8,036 311,253 - 1,929 15,000 - - - 115,816 157,763 - - 38 - 1,075,822 - 560 57,095 223,746 273,743 Key Key management Other related management Other related Parent Directors personnel Subsidiaries Associates parties Parent Directors personnel Subsidiaries Associates parties ------------------------------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------------------------------- For the nine months period ended September 30, 2020 (Un-audited) Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30, 2020
54. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 38. CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS 38.1 Minimum Capital Requirement (MCR): Minimum Capital Requirement (MCR): (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- 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 15,950,697 2,500,000 18,450,697 4,848,770 14,619,607 2,500,000 17,119,607 4,306,756 Total Eligible Capital (Tier 1 + Tier 2) 23,299,467 21,426,363 162,198,174 1,039,360 20,468,251 183,705,785 144,380,673 924,762 20,468,251 165,773,686 8.68% 8.82% Tier 1 Capital Adequacy Ratio 10.04% 10.33% Total Capital Adequacy Ratio 12.68% 12.93% 38.2 Leverage Ratio (LR): Eligible Tier-1 Capital Total Exposures Leverage Ratio 18,450,697 567,074,946 3.25% 17,119,607 501,440,747 3.41% 38.3 Liquidity Coverage Ratio (LCR): Total High Quality Liquid Assets Total Net Cash Outflow Liquidity Coverage Ratio 149,028,128 55,388,141 269.06% 83,221,592 55,819,412 149.09% 38.4 Net Stable Funding Ratio (NSFR): Total Available Stable Funding Total Required Stable Funding Net Stable Funding Ratio 316,842,950 262,212,382 120.83% 308,715,925 274,288,642 112.55% Risk Weighted Assets (RWAs): Credit Risk Market Risk Operational Risk Total Common Equity Tier 1 Capital Adequacy ratio 51
55. Notes to the Condensed Interim Unconsolidated Financial Statements for the nine months period ended September 30 , 2020 39. RECLASSIFICATION Corresponding figures have been re-arranged and re-classified to reflect more appropriate presentation of events and transactions to enhance comparability with the current period’s financial statements, which are as follows: From Reclassified Statement of financial position Other liabilities Other assets Cashflow Statement CASH FLOW FROM OPERATING ACTIVITIES Others Others Others Other liabilities 40. To Rs. in ‘000 Credit card settlement Inter bank fund transfer settlement Others Other assets 29,924 (91,642) 290,068 (165,858) GENERAL 40.1 These condensed interim 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. 5 dated March 22, 2019 and related clarifications / modifications. 40.2 The figures in these condensed interim unconsolidated financial statements have been rounded off to the nearest thousand. 41. DATE OF AUTHORISATION FOR ISSUE These condensed interim unconsolidated financial statements were authorised for issue by the Board of Directors of the Bank in their meeting held on October 28, 2020. __________________ President and Chief Executive Officer ___________________ Chief Financial Officer Nine Months ended: September 30, 2020 52 ___________ Director ___________ Director ___________ Chairman
56. Condensed Interim Consolidated Financial Statements
57. Condensed Interim Consolidated Statement of Financial Position as at September 30 , 2020 Note ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Fixed assets Intangible assets Deferred tax assets Other assets Assets held for sale (Unaudited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- 6 7 8 9 10 11 12 18 13 11.3 33,588,181 689,984 8,779,966 168,285,734 242,145,482 10,141,397 2,448,628 14,662,624 480,741,996 25,590,173 476,302 30,320,540 143,124,623 243,285,308 10,693,945 2,302,474 125,857 17,148,346 374,000 473,441,568 14 15 16 4,341,456 34,316,879 389,988,538 7,494,800 1,100,755 21,227,370 458,469,798 3,804,491 54,468,283 368,543,603 7,494,800 19,649,079 453,960,256 22,272,198 19,481,312 10,119,242 2,012,307 2,906,401 6,721,271 21,759,221 512,977 10,119,242 1,749,672 1,308,531 5,795,596 18,973,041 508,271 22,272,198 19,481,312 LIABILITIES Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to finance lease Subordinated debt Deferred tax liabilities Other liabilities 17 18 19 NET ASSETS REPRESENTED BY Share capital - net Reserves Surplus on revaluation of assets Unappropriated profit 20 Non-controlling interest CONTINGENCIES AND COMMITMENTS 21 The annexed notes from 1 to 41 form an integral part of these condensed interim consolidated financial statements. _____________________ President and Chief Executive Officer ___________________ Chief Financial Officer Nine Months ended: September 30, 2020 54 ___________ Director ___________ Director ___________ Chairman
58. Condensed Interim Consolidated Profit and Loss Account (Un-audited) for the nine months period ended September 30, 2020 Note Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / interest income Quarter ended Nine months period ended September 30, September 30, September 30, September 30, 2020 2019 2020 2019 ----------------------------------- Rupees in ‘000 ---------------------------------- 23 24 9,557,420 7,396,155 2,161,265 11,228,560 9,598,520 1,630,040 33,958,743 26,571,027 7,387,716 30,335,091 24,919,550 5,415,541 25 1,161,948 11,594 383,243 16,776 154,995 1,829 44,104 1,774,489 780,525 14,705 243,716 (12,382) (151,034) (1,051) 25,992 900,471 3,254,673 96,611 735,166 33,983 937,592 (13,969) 84,052 5,128,108 2,387,111 140,829 680,837 36,270 (520,033) 12,753 107,151 2,844,918 3,935,754 2,530,511 12,515,824 8,260,459 NON MARK-UP / INTEREST INCOME Fee, commission and brokerage income Dividend income Foreign exchange income Income from derivatives Gain / (loss) on securities Share of profit / (loss) from associates Other income Total non mark-up / interest income 26 27 Total Income NON MARK-UP / INTEREST EXPENSES Operating expenses Workers welfare fund Other charges Total non-mark-up / interest expenses Profit / (loss) before provisions 28 29 30 3,339,688 6,600 20 3,346,308 589,446 2,870,424 40 886 2,871,350 (340,839) 9,897,564 20,320 74,607 9,992,491 2,523,333 8,654,171 606 1,134 8,655,911 (395,452) Provisions / (reversals) and write offs - net Extraordinary / unusual items 31 11,583 - (91,831) - 431,767 - 501,822 - 577,863 (249,008) 2,091,566 (897,274) 239,500 (67,331) 990,986 (140,951) 338,363 (181,677) 1,100,580 (756,323) 333,364 4,999 338,363 (204,465) 22,788 (181,677) 1,107,038 (6,458) 1,100,580 (727,858) (28,465) (756,323) PROFIT / (LOSS) BEFORE TAXATION Taxation 32 PROFIT / (LOSS) AFTER TAXATION Attributable to: Equity holders of the Bank Non-controlling interest ----------------------------------------- Rupee ----------------------------------------Basic and diluted earnings / (loss) per share 33 0.26 (0.16) 0.85 (0.58) The annexed notes from 1 to 41 form an integral part of these condensed interim consolidated financial statements. _____________________ President and Chief Executive Officer ___________________ Chief Financial Officer ___________ Director ___________ Director 55 ___________ Chairman
59. Condensed Interim Consolidated Statement of Comprehensive Income for the nine months period ended September 30 , 2020 Quarter ended Nine months period ended September 30, September 30, September 30, September 30, 2020 2019 2020 2019 -------------------------- Rupees in ‘000 -------------------------Profit / (loss) after tax for the period 338,363 (181,677) 1,100,580 (756,323) (7,895) (13,279) 29,537 38,935 (329,999) 149,942 1,626,105 714,416 15,155 (5,380) 40,786 (32,487) (314,844) 144,562 (2,316) 1,664,575 681,929 - - 75,356 365,354 (322,739) 131,283 1,216 76,572 1,770,684 31,727 397,081 1,117,945 15,624 (50,394) 2,871,264 361,622 (15,468) 31,092 15,624 54,530 (104,924) (50,394) 2,854,148 17,116 2,871,264 420,155 (58,533) 361,622 Other comprehensive (loss) / income Items that may be reclassified to profit and loss account in subsequent periods: Effect of translation of net investment in foreign branch Movement in surplus / (deficit) on revaluation of investments - net of tax Movement in general provision under IFRS 9 - net Share of other comprehensive loss from associated companies - net of tax Items that will not be reclassified to profit and loss account in subsequent periods: Movement in surplus on revaluation of operating fixed assets - net of tax Share of other comprehensive income from associated companies - net of tax Total other comprehensive income Total comprehensive income / (loss) Attributable to: Equity holders of the Bank Non-controlling interest The annexed notes from 1 to 41 form an integral part of these condensed interim consolidated financial statements. _____________________ President and Chief Executive Officer ___________________ Chief Financial Officer Nine Months ended: September 30, 2020 56 ___________ Director ___________ Director ___________ Chairman
60. Condensed Interim Consolidated Statement of Changes in Equity for the nine months period ended September 30 , 2020 Attributable to shareholders of the Bank Reserves Share capital Statutory reserve* Surplus / (Deficit) on revaluation of Exchange translation Investments Fixed assets Non banking assets Unappropriated profit Noncontrolling interest Sub-total Total ------------------------------------------------------------------------------- Rupees in ‘000 --------------------------------------------------------------------------Opening balance as at January 01, 2019 - audited 10,119,242 1,641,236 70,934 (2,080,364) 1,164,974 92,858 5,825,742 16,834,622 1,604,197 - - 38,935 38,935 734,673 734,673 374,397 374,397 - (727,858) 8 (727,850) (727,858) 1,148,013 420,155 (28,465) (30,068) (58,533) 18,438,819 Total comprehensive income for the nine months period ended September 30, 2019 - un-audited Loss after taxation Other comprehensive income / (loss) - net of tax (756,323) 1,117,945 361,622 Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Fixed assets - - - - (22,086) - 22,086 - - - Non-banking assets acquired in satisfaction of claims - - - - - (61) 61 - - - Transaction with owners recorded directly in equity Preference dividend paid for the year ended December 31, 2018 @ 12% p.a. - - - - - - (24,164) (24,164) - (24,164) Buy-back of shares by subsidiary from NCI - - - - - - - - (497,271) (497,271) Gain arised on buy back of shares by subsidiary - - - - - - 108,240 108,240 57,874 166,114 Balance as at September 30, 2019 - unaudited 10,119,242 1,641,236 109,869 (1,345,691) 1,517,285 92,797 5,204,115 17,338,853 1,106,267 18,445,120 Profit after taxation Other comprehensive (loss) / income - net of tax - - (6,364) (6,364) 979,896 979,896 77,900 77,900 - 482,573 (11,090) 471,483 482,573 1,040,342 1,522,915 17,142 (55,964) (38,822) 499,715 984,378 1,484,093 Transfer to statutory reserve - 4,931 - - - - (4,931) - - - Total comprehensive income for the period ended December 31, 2019 Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Fixed assets - - - - (13,635) - 13,635 - - - Non-banking assets acquired in satisfaction of claims - - - - - (21) 21 - - - Transaction with owners recorded directly in equity Interim cash dividend to non-controlling interest by subsidiary company @ Rs. 4 per share - - - - - - - - (38,152) (38,152) Buy-back of shares by subsidiary from NCI - - - - - - - - (504,382) (504,382) Gain arised on buy back of shares by subsidiary - - - - - - 111,273 111,273 (16,640) 94,633 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 Profit / (loss) after taxation Other comprehensive income / (loss) net of tax - - 29,537 29,537 1,643,317 1,643,317 76,572 76,572 - 1,107,038 (2,316) 1,104,722 1,107,038 1,747,110 2,854,148 (6,458) 23,574 17,116 1,100,580 1,770,684 2,871,264 Transfer to statutory reserve - 233,098 - - - - (233,098) - - - Balance as at December 31, 2019 - audited Total comprehensive income for the nine months period ended September 30, 2020 - un-audited Transfer from surplus on revaluation of assets to unappropriated profit - net of tax Fixed assets - - - - (29,833) - 29,833 - - - Non-banking assets acquired in satisfaction of claims - - - - - (61) 61 - - - Assets held for sale - - - - (92,125) - 92,125 - - - Pre-acquisition surplus (net) on available-for-sale investments realised during the year - - - - - - (67,968) (67,968) (12,410) (80,378) Balance as at Sepetmber 30, 2020 - unaudited 10,119,242 1,879,265 133,042 1,277,522 1,536,164 92,715 6,721,271 21,759,221 512,977 22,272,198 * This represents reserve created under Section 21(i)(a) of the Banking Companies Ordinance, 1962. The annexed notes from 1 to 41 form an integral part of these condensed interim consolidated financial statements. _____________________ President and Chief Executive Officer ___________________ Chief Financial Officer ___________ Director ___________ Director 57 ___________ Chairman
61. Condensed Interim Consolidated Cash Flow Statement (Un-audited) for the nine months period ended September 30, 2020 Note CASH FLOW FROM OPERATING ACTIVITIES Profit before taxation Less: Dividend income Add / (less): Share of loss / (profit) from associates Adjustments: Depreciation Depreciation on non-banking assets Depreciation - right of use assets Amortisation of intangible assets Charge for defined benefit plan Unrealised loss /(gain) on revaluation of investments classified as held-for-trading - net Unrealised (gain) / loss 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 Loss / (gain) on sale of fixed assets - net Gain on sale of assets held for sale Gain on termination of leases September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----2,091,566 (96,611) 13,969 2,008,924 (897,274) (140,829) (12,753) (1,050,856) 28 28 28 29 579,380 6,808 768,609 86,669 161,822 651,210 628 583,847 71,641 115,816 26 7,633 (3,349) (23,936) 431,767 20,320 (14,910) 242,665 (21,565) 501,822 606 401,562 172 (1,000) (52,510) 2,383,947 4,392,871 382,477 (98,048) 2,416,189 1,365,333 21,541,836 47,967,739 851,157 2,091,780 72,452,512 711,310 (15,669,657) 13,250,923 (274,750) (1,982,174) 536,965 (20,084,526) 21,444,935 2,349,103 4,246,477 81,091,860 (151,881) (92,454) 80,847,525 (345,851) (36,286,020) 5,358,704 (1,632,002) (32,905,169) (33,522,010) (102,494) (397,230) (34,021,734) (67,455,732) (3,336,453) (40,828) 96,611 (1,132,999) (232,823) 16,490 375,000 29,537 (71,681,197) 17,190,970 8,195,552 (21,239) 137,701 (1,017,349) (173,504) 150,105 38,935 24,501,171 (887,737) (887,737) 8,278,591 (24,164) (209,064) (1,000) (331,157) (565,385) (10,085,948) 31 24 27 27 27 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 flow from / (used) in operating activities CASH FLOW FROM INVESTING ACTIVITIES Net investment in available-for-sale securities Net investment in held-to-maturity securities 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 (used in) / flow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Dividend paid on preference shares Payment of lease liability against right of use assets Subordinated debt Shares bought back from non-controlling interest Increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period 34 Cash and cash equivalents at end of the period 25,429,551 32,587,698 33,708,142 22,501,750 The annexed notes from 1 to 41 form an integral part of these consolidated condensed interim financial statements. _____________________ ___________________ President and Chief Financial Officer Chief Executive Officer 58 Nine Months ended: September 30, 2020 ___________ Director ___________ Director ___________ Chairman
62. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 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 307 (December 31, 2019: 359) branches / sub-branches in Pakistan and one wholesale banking branch in Bahrain (December 31, 2019: 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 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 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. Ltd. which holds 75.02% shares of the Bank. 59
63. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 1.1.3 Composition of the Group Ownership interest and voting power held September 30, 2020 December 31, 2019 Note The Group NCI The Group NCI Subsidiary companies JS Global Capital Limited 1.1.3.1 83.53% JS Investment Limited 84.56% 84.56% JS ABAMCO Commodities Limited 16.47% 15.44% 15.44% 67.16% 65.16% 65.16% 32.84% 34.84% 34.84% Ownership interest and voting power held by Bank 1.2 Composition of the Associated Companies Omar Jibran Engineering Industries Limited Veda Transit Solutions (Private) Limited Intercity Touring Company (Private) Limited September 30, 2020 9.60% 9.12% 9.12% December 31, 2019 9.60% 8.00% 9.12% 2. BASIS OF PRESENTATION 2.1 These consolidated financial statements include financial statements of JS Holding Company Limited and its subsidiary companies, (the “Group”) and share of the profit or loss / 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. 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 Holding Companying 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 Holding Companying 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 Holding Companying Companies Ordinance, 1962, the Companies Act, 2017 and the said directives shall prevail. The disclosures made in these condensed interim consolidated financial statements have been limited based on the format prescribed by the SBP vide BPRD circular letter No. 5 dated March 22, 2019 and IAS 34. Nine Months ended: September 30, 2020 60
64. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 These condensed interim consolidated financial Statements do not include all the information and disclosures required for annual consolidated financial statements and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2019. 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 Holding Companying 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 Holding Companys 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 condensed interim 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 condensed interim consolidated financial Statements. Through S.R.O. 229 (I)/2019 dated February 14, 2019, the SECP has extended the applicability of the IFRS 9 ‘Financial Instruments’ for all companies required to prepare their financial statements in accordance with the requirements of IFRS for reporting period/year ending on or after June 30, 2019 (earlier application is permitted). However, SBP has further extended the effective date of applicability of IFRS 9 from annual period beginning on or after January 01, 2021 vide SBP BPRD Circular No. 4 dated October 23, 2019. Therefore, the Group has not considered the impact of IFRS 9 for its Pakistan operations in these condensed interim consolidated financial Statements. Further, the Holding Company considers that as the Prudential Regulations and other SBP directives currently provide the accounting framework for the measurement and valuation of investments and provision against non performing loans and advances, the implementation of IFRS 9 may require changes in the regulatory regime and for this SBP would issue guidance and instruction on the application of IFRS 9 for the Holding Companying sector of Pakistan. 2.3 BASIS OF CONSOLIDATION 2.3.1 The Group - The condensed interim consolidated financial Statements include the financial statements of the Holding Company (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 61
65. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 - 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 condensed interim consolidated financial Statements incorporate the financial statements of subsidiaries from the date that control commences until the date that control ceases. - 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. 2.3.2 Associates 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. 2.4 Standards, interpretations of and amendments to published approved accounting standards that are effective in the current year There are certain new and amended standards, interpretations and amendments that are mandatory for the Holding Company’s accounting periods beginning on or after January 1, 2020 but are considered not to be relevant or do not have any significant effect on the Holding Company’s operations. Therefore not detailed in these condensed interim consolidated financial statements other than IFRS 9 and reason for that is mentioned in note 2.1 as above. Standards, interpretations of and amendments to published approved accounting standards that are not yet effective The following standards, amendments and interpretations of approved accounting standards will be effective for the accounting periods as stated below: Standard, Interpretation or Amendment IFRS 9 ‘Financial Instruments (refer note 2.1 above) Effective date (annual periods beginning on or after) January 01, 2021 Further, following new standards have been issued by IASB which are yet to be notified by the SECP for the purpose of applicability in Pakistan. IFRS 1 - First time adoption of IFRSs IFRS 17 - Insurance Contracts 3. January 01, 2014 January 01, 2021 CRITICAL ACCOUNTING ESTIMATES AND KEY SOURCES OF ESTIMATION UNCERTAINTY The basis for accounting estimates adopted in the preparation of these condensed interim consolidated financial statements are the same as that applied in the preparation of the audited annual consolidated financial statements for the year ended December 31, 2019. Nine Months ended: September 30, 2020 62
66. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies and methods of computation adopted in the preparation of these condensed interim consolidated financial statements are consistent with those applied in the preparation of the audited annual consolidated financial statements of the Holding Company for the year ended December 31, 2019. 5. FINANCIAL RISK MANAGEMENT 5.1 COVID - 19 outbreak and it’s impact The financial risk management objectives and policies adopted by the Holding Company are consistent with those disclosed in the audited annual consolidated financial statements for the year ended December 31, 2019 except following additional considerations due to the COVID-19. The COVID-19 and the measures to reduce its spread has impacted the economy of Pakistan significantly. Regulators and governments across the globe have introduced fiscal and economic stimulus measures to mitigate its impact. The State Bank of Pakistan (SBP) has responded to the crisis by cutting the policy rate by 625 basis points to 7 percent and by introducing regulatory measures to maintain banking system’s soundness and to sustain economic activity. These include: (i) reducing the capital conservation buffer by 100 basis points to 1.5 percent; (ii) increasing the regulatory limit on extension of credit to SMEs by 125 million to Rs 180 million; (iii) relaxing the debt burden ratio for consumer loans from 50 percent to 60 percent (iv) allowing banks to defer clients’ payment of principal and profit on financing obligations by one year; and (v) relaxing regulatory criteria for restructured/rescheduled loans for borrowers who require relief beyond the extension of principal repayment for one year. (vi) Relaxing credit requirements for exporters and importers; and (vii) Refinance schemes to support employment to prevent layoff of workers and health sector to combat COVID-19 Pandemic. COVID 19 has impacted the Holding Company in Pakistan from various facets which includes increase in overall credit risk pertaining to loans and advances portfolio in certain sectors, reduced fee income due to slowdown in economic activity, operational issues such as operations of Branches and managing cyber security threats. We have discussed below the major aspects of COVID 19 on the Holding Company’s risk management policies. 5.1.1 Assets quality and credit risk The Risk department of the Holding Company is regularly conducting assessments to identify borrowers operating in various sectors which are most likely to get affected. The Holding Company has further strengthened its credit review procedures in the light of COVID-19. The Holding Company has conducted various stress tests on the Credit portfolio and is confident that the CAR buffer currently maintained is sufficient. 5.1.2 Liquidity management The Holding Company has received applications for deferral of principal and / or restructuring / rescheduling and is expected to receive further such applications. These applications are being reviewed by the Holding Company as per its established policies. The Asset and Liability Committee (ALCO) of the Holding Company is continuously 63
67. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 monitoring the liquidity position and is taking due precautionary measures where needed. The Holding Company has conducted various stress testing on its liquidity ratios and is confident that the liquidity buffer currently maintained by the Holding Company is sufficient to cater any adverse movement in cash flow maturity profile. 5.1.3 Equity investments SBP has given relaxation in recognition of impairment on equity securities in phased manner equally on quarterly basis during calendar year ending on December 31, 2020. The Holding Company has taken the impact of impairment on the basis of that relaxation in these consolidated condensed interim financial statements. 5.1.4 Foreign Exchange Risk Due to recent economic slowdown, the PKR has devalued against USD significantly from December 31, 2019 and the USD / PKR parity stood at Rs 165.7021 as at September 30, 2020. The exchange rate is expected to remain volatile till the uncertainty around COVID 19 resolves. The Holding Company has reviewed its Net Open Position and has had no significant impact on profitability. 5.1.5 Operations The Holding Company is closely monitoring the situation and has invoked required actions to ensure safety and security of Bank staff and an uninterrupted service to our customers. The senior management of the Holding Company is continuously monitoring the situation and is taking timely decisions to resolve any concerns. Business Continuity Plans (BCP) for respective areas are in place and tested. The Holding Company has significantly enhanced monitoring for all cyber security risk during these times from its information security protocols. The remote work capabilities were enabled for staff and related risk and control measures were assessed to make sure they are fully protected using virtual private network (“VPN”) connections. Further, the Holding Company has also ensured that its remote access systems are sufficiently resilient to any unwanted cyber attacks. The Holding Company is communicating with its customers on how they can connect with the Holding Company through its full suite of channels including digital and online channels. The Holding Company has taken all measures to ensure that service levels are maintained, customer complaints are resolved as per SLAs and the Holding Company continues to meet the expectations of their clients as they would in a normal scenario. 5.1.6 Capital Adequacy Ratio Under the current scenario, the banks are under pressure to extend further credit to its borrowers, while overall deteriorating credit risk and increased NPL may also put additional pressures on the Bank from Capital Adequacy Ratio perspective. The SBP has relaxed the Capital Conversion Buffer (CCB) requirements for the Banks to 1.5%, resulting in an overall CAR requirement of 11.5%. The reduced CCB has also provided an additional limit to the bank for its tier 2 capital. Further, the regulatory limit for retail loans has also increased by SBP to 180 million, which will now result in reduced Risk Weighted Assets for some of its loans. In addition to the measures by SBP, the Senior management of the Holding Company is continuously monitoring the impacts of various decisions on its CAR and taking further lending decisions based on the overall impacts on RWA. The Holding Company also believes that it has buffer in its CAR requirement to meet any adverse movements in credit, market or operational risks. Nine Months ended: September 30, 2020 64
68. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 6. CASH AND BALANCES WITH TREASURY BANKS (Unaudited) (Audited) September 30, December 31, 2020 2019 Note ----- Rupees in ‘000 ----- 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 With National Bank of Pakistan in: Local currency current accounts National Prize Bonds 7. 8,729,621 2,254,144 10,983,765 5,573,428 896,523 6,469,951 18,267,599 13,292,331 1,101,919 2,389,901 21,759,419 831,532 2,566,714 16,690,577 822,139 2,286,205 22,858 33,588,181 143,440 25,590,173 135,277 58,327 193,604 150,722 6,565 157,287 496,471 319,083 690,075 (91) 476,370 (68) 689,984 476,302 BALANCES WITH OTHER BANKS In Pakistan In current accounts In deposit accounts Outside Pakistan In current accounts Less: General provision under IFRS 9 7.1 Balances with other banks - net of provision 7.1 This represents general provision held under IFRS 9 by Bahrain branch of the Holding Company. 8. LENDINGS TO FINANCIAL INSTITUTIONS Call money lendings Repurchase agreement lendings (Reverse Repo) Less: General provision under IFRS 9 Lending to Financial Institutions - net of provision 8.1 100,000 8,679,966 8,779,966 - 283,887 30,037,915 30,321,802 (1,262) 8,779,966 30,320,540 8.1 This represents general provision held under IFRS 9 by Bahrain branch of the Holding company. 8.2 Particulars of lendings - gross In local currency In foreign currencies 8,779,966 8,779,966 65 30,037,915 283,887 30,321,802
69. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 9. INVESTMENTS 9.1 Investments by type Note (Un-audited) (Audited) September 30, 2020 December 31, 2019 Cost / Amortised Provision for Surplus / Carrying Cost / Provision for Surplus / Carrying cost diminution (Deficit) Value Amortised cost diminution (Deficit) Value -------------------------------------------------------------- Rupees in ‘000 ---------------------------------------------------------------- Held-for-trading securities Federal Government Securities Shares Open end mutual funds Available-for-sale securities Federal Government Securities Shares Non Government Debt Securities Open end mutual funds Foreign Securities Held-to-maturity securities Federal Government Securities Associates Total Investments 9.2 8,225,189 91,529 283,312 8,600,030 - (93) (6,165) (1,376) (7,634) 8,225,096 85,364 281,936 8,592,396 55,601,087 486,634 444,902 56,532,623 - (2,618) 551 11,070 9,003 55,598,469 487,185 455,972 56,541,626 110,029,058 3,357,737 3,744,375 831,909 4,339,975 122,303,054 (183,788) (696,507) (880,295) 886,464 955,727 1,206 315,178 (356,412) 1,802,163 110,915,522 4,129,676 3,049,074 1,147,087 3,983,563 123,224,922 47,828,618 2,115,728 3,931,294 969,276 2,406 54,847,322 (136,589) (696,507) (26,023) (859,119) (809,244) 25,107 (6,889) 279,616 (511,410) 47,019,374 2,004,246 3,227,898 1,222,869 2,406 53,476,793 36,196,335 - - 36,196,335 32,859,882 - - 32,859,882 272,081 - - 272,081 246,322 - - 246,322 167,371,500 (880,295) 1,794,529 168,285,734 144,486,149 (859,119) (502,407) 143,124,623 8,202,316 22,873 8,225,189 - (102) 9 (93) 8,202,214 22,882 8,225,096 55,601,087 55,601,087 - (2,618) (2,618) 55,598,469 55,598,469 Investments by segments: Held-for-trading securities Federal Government Securities Market Treasury Bills Pakistan Investment Bonds Shares: Listed Companies Ordinary shares 91,529 - (6,165) 85,364 486,634 - 551 487,185 283,312 - (1,376) 281,936 444,902 - 11,070 455,972 55,963,228 54,065,830 110,029,058 - 251,201 635,263 886,464 56,214,429 54,701,093 110,915,522 12,071,266 35,757,352 47,828,618 - (364) (808,880) (809,244) 12,070,902 34,948,472 47,019,374 3,210,148 136,589 (47,199) (136,589) 955,727 - 4,118,676 - 1,968,139 136,589 (136,589) 25,107 - 1,993,246 - 11,000 3,357,737 (183,788) 955,727 11,000 4,129,676 11,000 2,115,728 (136,589) 25,107 11,000 2,004,246 9.2.3 430,182 321,083 (155,169) - (13) 204 275,000 321,287 445,183 493,850 (155,169) - (134) (6,755) 289,880 487,095 9.2.4 9.2.5 1,490,805 1,474,572 27,733 3,744,375 (541,338) (696,507) 1,015 1,206 949,467 1,475,587 27,733 3,049,074 1,506,195 1,458,333 27,733 3,931,294 (541,338) (696,507) (6,889) 964,857 1,458,333 27,733 3,227,898 9.2.6 831,909 - 315,178 1,147,087 969,276 (26,023) 279,616 1,222,869 4,329,983 9,992 4,339,975 - (357,169) 757 (356,412) 3,972,814 10,749 3,983,563 2,406 2,406 - - 2,406 2,406 9.2.7 36,196,335 - - 36,196,335 32,859,882 - - 32,859,882 Omar Jibran Engineering Industries Limited Veda Transit Solutions (Private) Limited 9.2.5 Intercity Touring Company (Private) Limited 214,044 48,553 9,484 272,081 - - 214,044 48,553 9,484 272,081 224,782 4,774 16,766 246,322 - - 224,782 4,774 16,766 246,322 167,371,500 (880,295) 1,794,529 168,285,734 144,486,149 (859,119) (502,407) 143,124,623 Open End Mutual Funds 9.2.1 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 Preference shares Open End Mutual Funds 9.2.2 Foreign Securities Government Debt Securities * Non Government Debt Securities * Ordinary shares Held-to-maturity securities Federal Government Securities: Pakistan Investment Bonds Associates Total Investments *Deficit on revaluation of foreign debt securities includes expected credit loss relating to investments held by the Banks’ Bahrain Branch as further explained in note 20.2. Nine Months ended: September 30, 2020 66
70. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 9.2.1 This represents the investments in related parties of the Group. 9.2.2 Included herein are the investments in related parties amounting to Rs. 2,736.585 million (December 31, 2019: Rs. 1,552.306 million) having market value of Rs. 3,530.860 million (December 31, 2019: Rs. 1,554.335 million). 9.2.3 Included herein are the investments in related parties amounting to Rs. 12.5 million (December 31, 2019: Rs. 15.000 million) having market value of Rs. 12.390 million (December 31, 2019: Rs. 14.880 million). 9.2.4 Included herein is the investment of Rs. 391.478 million (December 31, 2019: Rs. 391.478 million) in a related party at the rate of 6 months KIBOR + 1.75% to 11% having maturity dates of December 04, 2017 to October 19, 2020. Due to weak financial position of the investee, the Group has recognised full impairment loss on these Term Finance Certificates. 9.2.5 Included herein are the investments in an associated company amounting to Rs. 27.733 million (December 31, 2019: Rs. 27.733 million). 9.2.6 This represents the investments in related parties amounting to Rs. 1,115.221 million (December 31, 2019: Rs. 969.276 million) having market value of Rs. 1,429.023 million (December 31, 2019: Rs. 1,222.869 million). 9.2.7 The market value of securities classified as held-to-maturity as at amounted to Rs. 36,196.335 million (December 31, 2019: Rs. 31,341.410 million). 9.2.8 During the period, Veda Transit Solutions Private Limited, an associate of the Bank, has issued shares against advance subscription of Rs. 40.828 million made by the Bank. Resultantly, shareholding of the Bank increased to 9.12% (December 31, 2019: 8%). The Bank has classified the investment as associate on account of it’s significant influence over the investee company. 9.3 Investments given as collateral (Un-audited) (Audited) September 30, 2020 December 31, 2019 Market Cost Cost Market value value ----------------- Rupees in ‘000 ------------------ Available-for-sale securities Federal Government Securities: Market Treasury Bills Pakistan Investment Bonds Foreign Securities Government Debt Securities Non Government Debt Securities - - 4,453,165 22,232,264 26,685,429 4,452,597 21,475,720 25,928,317 2,702,782 2,702,782 2,524,650 2,524,650 - - 2,702,782 2,524,650 26,685,429 25,928,317 67
71. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 9.4 (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- Provision for diminution in value of investments 9.4.1 Opening balance Charge during the period / year Reversal during the period / year Charge / (reversals) during the period / year Closing balance 859,119 1,204,419 48,035 (26,859) 21,176 880,295 251,675 (596,975) (345,300) 859,119 SBP vide BPRD Circular Letter No. 13 of 2020 dated March 26, 2020 has provided regulatory relief to banks to recognize impairment losses resulting from the valuation of listed equity securities held as “Available for Sale” (AFS) in a phased manner equally on quarterly basis during calendar year ending on December 31, 2020. Pursuant to the circular, out of total impairment loss of Rs. 62.932 million, a portion of the impairment loss, amounting to Rs. 15.733 million has not been recognized in these consolidated condensed interim financial statements. Had there been no relaxation, there would have been increase in provision for diminution in value of investments and surplus on revaluation of available for sale securities - net of tax by Rs. 15.733 million and Rs. 10.226 million respectively, and decrease in unappropriated Profit by Rs. 7.678 million and profit after taxation by Rs. 9.598 million respectively. 9.4.2 Particulars of provision against debt securities (Un-audited) (Audited) September 30, 2020 December 31, 2019 NPI Provision NPI Provision --------------- Rupees in ‘000 --------------- Category of classification Domestic Other assets especially mentioned Substandard Doubtful Loss 10. ADVANCES Note 696,507 696,507 696,507 696,507 696,507 696,507 Performing Non Performing Total (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) September 30, December 31, September 30, December 31, September 30, December 31, 2020 2019 2020 2019 2020 2019 --------------------------------------- Rupees in ‘000 --------------------------------------- Loans, cash credits, running finances, etc. Bills discounted and purchased Advances - gross 234,305,431 234,305,431 225,327,657 11,113,114 236,440,771 11,637,347 11,637,347 10,353,164 10,353,164 245,942,778 245,942,778 235,680,821 11,113,114 246,793,935 Provision against advances General General provision - under IFRS-9 10.3.2 Specific 10.3 (24,203) (24,203) (161,166) (7,520) (168,686) (3,773,093) (3,773,093) (3,339,941) (3,339,941) (24,203) (3,773,093) (3,797,296) (161,166) (7,520) (3,339,941) (3,508,627) 234,281,228 236,272,085 7,864,254 7,013,223 242,145,482 243,285,308 238,605,571 7,337,207 245,942,778 238,073,921 8,720,014 246,793,935 Advances - net of provision 10.1 696,507 696,507 Particulars of advances (gross) In local currency In foreign currencies Nine Months ended: September 30, 2020 68
72. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 10.2 Advances include Rs. 11,637.347 million (December 31, 2019: Rs.10,353.164 million) which have been placed under non-performing status as detailed below: (Un-audited) (Audited) September 30, 2020 December 31, 2019 Non Non Performing Performing Loans Provision Loans Provision ---------------------- Rupees in ‘000 ---------------------- Category of Classification Domestic Other Assets Especially Mentioned Substandard Doubtful Loss Total 542,924 1,531,394 2,586,164 6,976,865 194 95,117 478,505 3,199,277 841,058 1,159,072 2,442,270 5,910,764 1,721 64,681 426,283 2,847,256 11,637,347 3,773,093 10,353,164 3,339,941 10.3 Particulars of provision against non-performing advances (Audited) December 31, 2019 (Un-audited) September 30, 2020 Specific Opening balance Exchange adjustments Charge for the period/ year Reversals for the period/ year Amount written off from the opening balance Closing Balance General provision under IFRS-9 General Specific Total General General provision under IFRS-9 Total ------------------------------------------------------------ Rupees in ‘000 -----------------------------------------------------------3,339,941 161,166 7,520 3,508,627 2,989,888 155,661 10,746 3,156,295 869 869 1,095 1,095 533,348 (100,196) 433,152 (161,166) (161,166) 15,814 - 15,814 549,162 (261,362) 287,800 880,994 (526,146) 5,505 - (4,321) 886,499 (530,467) 354,848 5,505 (4,321) 356,032 - - - - (4,795) - - (4,795) 3,773,093 - 24,203 3,797,296 3,339,941 161,166 7,520 3,508,627 10.3.1 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. 10.3.2 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 September 30, 2020, the Holding Company has availed cumulative benefit of FSV of Rs. 4,902.266 million (December 31, 2019: Rs.4,120.009 million) under the directives of the SBP. Had the benefit not been taken the unappropriated profit after tax would have reduced by Rs. 3,186.473 million (December 31, 2019: Rs. 2,678.006 million). Further, as required by the SBP directives, this unappropriated profit will not be available for distribution as dividend or other appropriations. 69
73. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 10.3.3 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 September 30, 2020 relating to facilities of customers have not been classified as nonperforming on account of such relaxation. 11. Note FIXED ASSETS Capital work-in-progress Property and equipment Right-of-use assets 11.1 11.1.1 & 27.1 (Un-audited) (Audited) September 30, December 31, 2020 2019 ---- Rupees in ‘000 ---802,922 6,260,340 3,078,135 10,141,397 146,181 6,438,632 4,109,132 10,693,945 396,416 374,423 2,228 29,679 176 802,922 124,350 290 21,541 146,181 11.1 Capital work-in-progress Civil works Advance for purchase of leasehold Building 11.1.1 Advance for purchase of furniture and fixtures Advance for purchase of vehicles Advance for purchase of equipment and software 11.1.1 During the period, the Company entered into an ‘agreement to sale’ with JS Lands (Private) Limited (a related party), after obtaining shareholders’ approval in Annual general meeting held on April 22, 2020, whereby, the Company agrees to acquire certain properties at an estimated cost of Rs. 748.5 million (out of which Rs. 374.423 million has been paid during the period), subject to completion of certain work as explained in the exhibit of ‘agreement to sale’. Up till the previous reporting period, such properties were accounted for under IFRS 16 ‘Leases’, as the same were on rental basis. However, pursuant to the aforementioned agreement, the Company has now reassessed the situation and modified the lease term in view of expected date of transfer of ownership which is estimated to be materialized by end of August 2020. Accordingly, the right of use asset, earlier recorded has been reduced by Rs. 206.165 million, with corresponding liability reduced by Rs. 225.932 million. Consequently, the Company has recognised Rs. 19.766 million as gain on lease modification during the period (which is included in other operating income). Nine Months ended: September 30, 2020 70
74. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 11.2 The following additions, book value of disposals and writeoffs have been made to fixed assets during the period: --------------------------------------- (Un-audited) ---------------------------------------Additions Disposal Write offs September 30, September 30, September 30, September 30, September 30, September 30, 2020 2019 2020 2019 2020 2019 ------------------------------------------------------ Rupees in ‘000 ------------------------------------------------------ Capital work-in-progress - net Property and equipment Building on leasehold land Leasehold improvements Furniture and fixture Electrical, office and computer equipment Vehicles 2,228 - - - - - 113,863 53,496 33,401 161,095 126,946 11,019 1,789 753 43,754 5,144 - 321,425 179 488,963 384,900 329,893 1,036,235 4,792 851 16,662 6,898 42,617 52,057 9,610 58,508 - 491,191 1,036,235 16,662 52,057 58,508 - 11.3 Assets held for sale Building on leasehold land Note 11.3.1 (Un-audited) (Audited) September 30, December 31, 2020 2019 ---- Rupees in ‘000 ---- 374,000 11.3.1 In 2019, the Holding Company had entered into an agreement to sell the Bank property located at 13th floor of Ocean Tower, plot No. G-3, Khayaban-e-Iqbal, Block 9, KDA Scheme No. 5, Clifton Karachi, Pakistan (“Property”) of Rs. 375 million and therefore, measured the property as a non-current asset held for sale. In this respect, during the period ended the sale proceeds were realised on August 11, 2020. 12. INTANGIBLE ASSETS Capital work-in-progress Computer software Goodwill 12.1 Capital work-in-progress Advance for purchase of software 12.2 Additions to intangible assets (Un-audited) (Audited) September 30, December 31, 2020 2019 Note ---- Rupees in ‘000 ---12.1 12.2 174,322 810,681 1,463,625 2,448,628 107,533 731,316 1,463,625 2,302,474 174,322 107,255 ----- Un-audited ----September 30, September 30, 2020 2020 ----- Rupees in ‘000 ----- The following additions have been made to intangible assets during the period: Capital work-in-progress - net Computer software 148,884 165,723 314,607 71 9,855 160,172 170,027
75. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 13. (Un-audited) (Audited) September 30, December 31, 2020 2019 Note ----- Rupees in ‘000 ----- OTHER ASSETS Income/ Mark-up accrued in local currency net of provision Income/ Mark-up accrued in foreign currency Trade receivable from brokerage and advisory business - net Advances, deposits, advance rent and other prepayments Acceptances Taxation (payments less provision) 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 for subscription of investments 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 6,547,836 142,580 8,746,909 48,511 1,068,066 976,902 869,129 3,125,742 381,949 107,018 50,649 19,316 37,854 202,137 574,351 1,081,967 30,914 3,349 65,517 46,107 647,402 15,001,883 (432,908) 14,568,975 1,040,356 3,221,212 794,463 123,074 67,952 23,290 37,139 116,489 465,965 1,088,682 22,498 65,955 63,108 14,477 29,924 39,100 501,505 17,487,511 (432,908) 17,054,603 93,649 14,662,624 93,743 17,148,346 403,318 29,590 432,908 403,318 29,590 432,908 4,105,613 235,843 4,341,456 3,583,500 220,991 3,804,491 13.1 Provision held against other assets Trade receivable from brokerage and advisory business - net Others 14. BILLS PAYABLE In Pakistan Outside Pakistan Nine Months ended: September 30, 2020 72
76. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 15. (Un-audited) (Audited) September 30, December 31, 2020 2019 ---- Rupees in ‘000 ---- BORROWINGS Secured Borrowings from State Bank of Pakistan under: Export refinancing scheme (ERF) Long-Term Finance Facility (LTFF) Financing Facility for Storage of Agricultural produce (FFSAP) Repurchase agreement borrowings Borrowing from financial institutions Repurchase agreement borrowings Refinancing facility for mortgage loans Total secured Unsecured Call borrowings Overdrawn nostro accounts Total unsecured 15.1 Particulars of borrowings In local currency In foreign currencies 16. 19,390,257 1,917,723 17,792,778 1,877,760 7,788,268 29,096,248 300,440 16,849,097 36,820,075 1,907,267 1,914,739 3,822,006 12,746,732 1,961,128 14,707,860 32,918,254 51,527,935 828,511 570,114 1,398,625 2,303,356 636,992 2,940,348 34,316,879 54,468,283 30,970,998 3,305,881 34,276,879 51,527,935 2,940,348 54,468,283 DEPOSITS AND OTHER ACCOUNTS (Audited) December 31, 2019 (Un-audited) September 30, 2020 Customers Current deposits Savings deposits Term deposits Margin deposits Financial Institutions Current deposits Savings deposits Term deposits In Local In Foreign In Local In Foreign Currency Currencies Total Currency Currencies Total ------------------------------------------------------ Rupees in ‘000 -----------------------------------------------------79,231,536 80,772,112 177,039,785 6,308,327 343,351,760 6,205,693 4,180,477 14,903,053 587 25,289,810 85,437,229 84,952,589 191,942,838 6,308,914 368,641,570 70,341,319 73,442,779 164,602,876 5,455,786 313,842,760 6,412,941 2,898,794 11,409,815 15,234 20,736,784 76,754,260 76,341,573 176,012,691 5,471,020 334,579,544 1,226,805 7,911,729 11,712,315 20,850,849 496,119 496,119 1,722,924 7,911,729 11,712,315 21,346,968 858,905 12,204,325 20,900,829 33,964,059 - 858,905 12,204,325 20,900,829 33,964,059 364,202,609 25,785,929 389,988,538 347,806,819 20,736,784 368,543,603 73
77. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 17. SUB-ORDINATED DEBT Note Term Finance Certificates - First Issue Term Finance Certificates - Second Issue Term Finance Certificates - Third Issue 17.1 17.2 17.3 (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----2,996,400 1,998,400 2,500,000 7,494,800 2,996,400 1,998,400 2,500,000 7,494,800 17.1 In 2016, the Holding company has issued Rs.3 billion of rated, privately placed, unsecured and subordinated term finance certificates (“TFCs” or “the Issue”) as an instrument of redeemable capital under Section 120 of the Companies Ordinance, 1984 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 toward the Bank’s Tier II Capital for complying with the Capital Adequacy Ratio requirement and to utilize the funds in the Bank’s business operations as permitted by its Memorandum & Articles of Association. Issue date: December 14, 2016 Tenure: Up to Seven years from the Issue date. Maturity Date: December 14, 2023 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. 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. Nine Months ended: September 30, 2020 74
78. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 Loss absorbency clause: Upon the occurrence of a Point of Non-Viability event as defined by SBP’s Basel III Capital Rule vide 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 as declared by SBP of the non-viability event as declared by SBP, subject to a cap of 467,836,257 shares. 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 toward 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. 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. 75
79. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 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 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 toward 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 and 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 me be made from current year’s earning and subject to compliance with MCR or CAR set by SBP. Nine Months ended: September 30, 2020 76
80. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 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 Non-Viability (“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. - 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. 77
81. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 18. DEFERRED TAX (ASSETS) / LIABILITIES (Un-audited) September 30, 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 Unrealised loss / (gain) on revaluation of investments classified as held for trading Provision for workers' welfare fund Taxable Temporary Differences on: Operating fixed assets Liability against assets subject to finance lease - net Goodwill Surplus on revaluation of operating fixed assets Surplus on revaluation of non-banking assets acquired in satisfaction of claims Mark to market gain / (loss) on forward foreign exchange contracts Unrealized gain on revaluation of derivative financial instruments Surplus / (deficit) on revaluation of investments classified assets as available for sale 19. (Audited) December 31, 2019 ---- Rupees in ‘000 ---(57,149) (161,235) (122,297) (30,465) (2,778) (57,149) (132,305) (845,243) (3,097) (2,507) 59 (3,143) (377,008) (665) (3,143) (1,044,109) 176,977 (1,040) 512,268 242,893 260,103 (7,082) 512,268 374,394 934 967 1,172 (51,092) 8,378 82,321 536,181 1,477,763 (253,627) 918,252 1,100,755 (125,857) 6,028,290 75,591 155,899 675,439 3,125,742 1,713,867 7,576 5,325 161,822 521,336 82,490 3,603,202 134,115 512,015 52,318 3,459,285 83,894 72,407 21,041 735,716 21,227,370 4,166,772 72,782 99,505 415,112 3,221,212 1,426,057 7,576 41,102 151,881 539,702 66,867 1,991 4,172,975 113,795 446,387 34,248 4,260,358 37,500 12,693 73,084 287,480 19,649,079 OTHER LIABILITIES Mark-up / return / interest payable in local currency Mark-up / return / interest payable in foreign currency Unearned commision income on guarantees Accrued expenses Acceptances Trade payable from brokerage business Unclaimed dividends Dividend payable Payable in respect of defined benefit obligation - net 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 assets held for sale 11.3.1 Insurance payable Debit card settlement Inter bank fund transfer Others Nine Months ended: September 30, 2020 78
82. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 20. SURPLUS ON REVALUATION OF ASSETS Surplus / (deficit) on revaluation of: Available-for-sale securities Operating fixed assets Non-banking assets acquired in satisfaction of claims Note 9.1 & 20.2 Deferred tax on (surplus) / deficit on revaluation of: Available-for-sale securities Operating fixed assets Non-banking assets acquired in satisfaction of claims (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----1,864,911 1,779,057 (591,788) 1,955,940 93,649 3,737,617 93,743 1,457,895 (536,181) (242,893) 253,627 (374,390) (934) (780,008) 2,957,609 (967) (121,730) 1,336,165 2,906,401 51,208 2,957,609 1,308,531 27,634 1,336,165 20.1 Group's share Non-controlling interest 20.2 This includes general provision under IFRS 9 of Rs. 62.748 million (December 31, 2019: Rs. Nil) by Bahrain branch of the Bank. Note 21. CONTINGENCIES AND COMMITMENTS Guarantees Commitments 21.1 (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- 21.1 21.2 61,744,460 87,585,270 149,329,730 45,650,803 77,013,578 122,664,381 1,249,078 37,310,594 23,184,788 61,744,460 2,464,411 21,483,841 21,702,551 45,650,803 Guarantees: Financial guarantees Performance guarantees Other guarantees 21.1.1 21.1.1 Included herein are outstanding guarantees of Rs. 71.940 million (December 31, 2019: Rs.14.217 million) of related parties. 79
83. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 21.2 Note 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 (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- 21.2.1 14,730,978 13,965,258 21.2.2 21.2.3 21.2.4 36,190,280 35,487,779 365,805 55,111,366 7,238,695 72,183 21.2.5 400,000 400,000 5,642 5,305 404,786 87,585,270 220,771 77,013,578 21.2.6 21.2.7 21.2.1 Included herein are the outstanding letter of credits of Rs. 87,585,270 million (December 31, 2019: Rs.44.368 million) of related parties. 21.2.2 Commitments in respect of forward foreign exchange contracts Purchase Sale 24,222,671 11,967,609 36,190,280 33,104,108 22,007,258 55,111,366 21.2.2.1 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 period ended, all foreign exchange contracts have a remaining maturity of less than one year. 21.2.3 Commitments in respect of derivative instruments Purchase Sale 21.2.3.1 Interest rate swaps (notional principal) Purchase Sale Nine Months ended: September 30, 2020 80 (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----3,486,041 32,001,738 35,487,779 3,622,107 3,616,588 7,238,695 1,442,033 1,443,033 2,885,066 2,099,175 2,100,175 4,199,350
84. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 (Un-audited) (Audited) September 30, December 31, 2020 2019 Note ----- Rupees in ‘000 ----- 21.2.3.2 Options (notional principal) Purchase Sale 2,044,008 30,475,597 32,519,605 1,023,310 1,023,310 2,046,620 83,108 83,108 499,622 493,103 992,725 365,805 72,183 21.2.3.3 Commitments in respect of forward securities Purchase Sale 21.2.4 Commitments in respect of forward lending Undrawn formal standby facilities, credit lines and other commitments to lend 21.2.4.1 21.2.4.1 These represent commitments that are irrevocable because they cannot be withdrawn at the discretion of the bank without the risk of incurring significant penalty or expense. 21.2.5 Bank Guarantee from a commercial Bank in favor of National Clearing Company of Pakistan Limited 21.2.6 Outstanding settlements against margin financing contracts - net 21.2.7 Commitments for acquisition of operating fixed assets 400,000 400,000 5,642 5,305 404,786 220,771 21.2.8 There are no changes in contingent liabilities since the date of annual consolidated audited financial statements for the year ended December 31, 2019. 22. 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. 81
85. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 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 to the financial statements. Accounting policies in respect of derivative financial instruments are described in note 4.5.2 of the consolidated annual financial statements for the year ended December 31, 2019. 22.1 Product analysis With Banks Hedging Market making (Unaudited) September 30, 2020 Interest Rate Swaps Options Forward securities Notional Mark to Notional Mark to Notional Mark to principal Market principal Market principal Market ----------------------------------------- Rupees in ‘000 ----------------------------------------2,885,066 - 6,854 - 32,519,605 - 17,082 - 83,108 6,978 - - - - - - 2,885,066 - 6,854 - 32,519,605 - 17,082 - 83,108 6,978 With FIs other banks Hedging Market making Total Hedging Market making With Banks Hedging Market making (Audited) December 31, 2019 Interest Rate Swaps Options Forward securities Notional Mark to Notional Mark to Notional Mark to principal Market principal Market principal Market ----------------------------------------- Rupees in ‘000 ----------------------------------------- 8,885 - 4,199,350 - 13,327 - 992,725 286 With FIs other banks Hedging Market making - - - - - - Total Hedging Market making - 8,885 - 4,199,350 - 13,327 - 992,725 286 Nine Months ended: September 30, 2020 82
86. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 23. MARK-UP / RETURN / INTEREST EARNED Note On: Loans and advances Investments Lendings to financial institutions Balances with other banks Securities purchased under resale agreements 24. ------- Un-audited ------September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----- 20,146,165 12,725,037 44,783 9,366 1,033,392 33,958,743 22,670,654 6,875,243 45,588 54,393 689,213 30,335,091 23,435,518 1,490,518 728,922 20,093,229 3,087,963 749,378 514,507 401,562 26,571,027 606,503 382,477 24,919,550 256,608 34,119 251,418 24,513 7,449 872,550 319,792 1,490,518 2,621 2,403,709 405,702 3,087,963 199,107 21,987 478,923 298,064 93,402 475,632 288,489 3,054 214,202 135,560 26,190 251,225 16,601 178,725 27,637 405,423 140,452 3,254,673 132,531 14,847 362,542 210,403 69,047 395,736 249,142 4,388 81,095 105,814 94,070 132,694 14,964 160,997 6,918 201,975 149,948 2,387,111 MARK-UP / RETURN / INTEREST EXPENSED On: Deposits Borrowings 24.1 Subordinated debt Cost of foreign currency swaps against foreign currency deposits / borrowings Lease liability against right-of-use assets 24.1 Borrowings Export refinancing scheme (ERF) Long-Term Finance Facility (LTFF) Financing Facility for Storage of Agricultural produce (FFSAP) Securities sold under repurchase agreements Other short term borrowings 25. 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 83
87. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 Note 26. GAIN / (LOSS) ON SECURITIES - NET Realised Unrealised - held for trading 26.1 26.1 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 Mutual fund units Foreign currency bonds 27. ------- Un-audited ------September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----- 945,225 (7,633) 937,592 (534,943) 14,910 (520,033) 76,822 857,655 56 3,850 (401,449) 633 110 (154,154) 30,972 450 8,050 - (13,302) (7,538) 945,225 14,542 (6,415) (534,943) (172) 1,000 52,510 30,714 84,052 3,897 98,048 5,206 107,151 OTHER INCOME - NET Rent on Property Gain on sale of fixed assets - net Gain on sale of assets held for sale Gain on termination of leases Others 11.3.1 27.1 27.1 This represents, gain on termination of leases against closure of fifty one branches under the Bank’s branch rationalisation strategy. Nine Months ended: September 30, 2020 84
88. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 28. OPERATING EXPENSES Note Total compensation expense Property expense Rent and taxes Insurance Utilities cost Security (including guards) Repair and maintenance (including janitorial charges) Depreciation Depreciation on right-of-use assets Depreciation on non banking assets Information technology expenses Software maintenance Hardware maintenance Depreciation Amortisation Network charges Other operating expenses Directors' fees and allowances Legal and professional charges Insurance Outsourced services costs Travelling and conveyance NIFT clearing charges Depreciation Depreciation on right-of-use assets Training and development Postage and courier charges Communication Stationery and printing Marketing, advertisement & publicity Donations Auditors remuneration Staff auto fuel and 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 corporation Entertainment expenses Repair and maintenance Cash handling charges Fee and Subscription Employees social security Generator fuel and maintenance Fee and allowances to Shariah Board Royalty Others Less: Reimbursement of selling and distribution expenses 28.1 ------- Un-audited ------September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----5,035,866 4,202,198 25,972 2,640 263,643 243,474 172,100 179,271 768,609 6,808 1,662,517 234,758 7,916 245,194 214,335 151,521 186,558 576,367 628 1,617,277 289,846 141,862 159,129 86,669 98,249 775,755 189,849 119,625 132,862 71,641 88,140 602,117 15,463 145,375 154,595 119,039 82,179 26,851 240,980 11,988 76,363 103,260 199,145 339,185 60,841 7,778 151,304 43,762 9,724 12,951 33,341 5,036 20,268 30,167 93,204 51,829 46,349 155,540 99,310 8,481 53,363 52 22,500 39,357 2,459,580 9,933,718 8,750 121,707 140,917 108,350 103,637 28,932 331,790 7,480 22,975 61,637 92,785 187,796 216,273 200 8,772 177,602 47,727 33,056 14,122 25,609 6,317 23,636 30,733 104,821 49,631 46,804 48,868 79,708 6,461 57,940 34 22,500 26,157 2,243,727 8,665,319 (36,154) 9,897,564 (11,148) 8,654,171 28.1 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. 85
89. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 The Bank’s eligible deposits as of December 31, 2019 are amounting to Rs. 87,425.180 million on which total premium is payable of Rs. 139.880 million per annum (Rs. 34.970 million per quarter). 29. WORKERS WELFARE FUND Provision held at 2% of the higher of profit before tax or taxable income to the extent of operations carried out under Sindh Workers’ Welfare Act, 2014. 30. Note OTHER CHARGES Penalties imposed by State Bank of Pakistan Others 31. 74,607 74,607 242 892 1,134 21,176 433,152 123,672 439,833 (161,166) 75,929 58,508 4,168 431,767 1,724 (61,967) (1,755) 315 501,822 504,968 486,018 990,986 592,694 (733,645) (140,951) PROVISIONS / (REVERSALS) AND WRITE OFFS - NET Provisions for diminution in value of investments Provisions against loans & advances (Reversals) / provisions against loans & advances - general Provisions / (reversals) under IFRS-9 -general Fixed assets written off Other assets written off Other reversals Bad debts written off directly 32. ------- Un-audited ------September 30, September 30, 2020 2019 ----- Rupees in ‘000 ----- 9.3.4 TAXATION Current Prior years Deferred 32.1. JS Bank Limited, the Holding Company There are no material changes in tax contingencies as disclosed in consolidated annual financial statements for the year ended December 31, 2019 except below: The Sindh High Court has dismissed the Holding company’s petitions for tax years 2016 through 2019 wherein the Holding Company’s alongwith other taxpayers challenged the levy of super tax on constitutional grounds. Based on the opinion of legal counsel, the Holding Company is now approaching the Supreme Court to challenge the aforesaid decision of the Sindh High Court and seek interim relief in respect of the outstanding super tax demand. Further, the Holding Company has obtained stay order from the Sindh High Court on other technical grounds regarding the levy of Super Tax for Tax Years 2017 and 2018. Nine Months ended: September 30, 2020 86
90. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 32.2. JS Global Capital Limited, the Subsidiary Compnay For the tax years 2015, 2016 and 2017, orders under section 4B were passed by the tax officer raising demands of Super tax at Rs. 24,317,509, Rs. 24,483,669, Rs. 19,490,281 for each of the above tax years respectively. The orders raising demand pertaining to super tax was later confirmed by the CIRA and the Honorable ATIR. The Company has also now filed reference application before the Honorable SHC against the appellate order of the ATIR [ITRA Nos. 52 to 53 of 2020] wherein the case will be decided on merits. In pursuance of the judgement of Hon’able Supreme Court of Pakistan (SCP) , the Company has paid 50% of tax demands raised in respect of tax years 2016 and 2017 to maintain the suits before Sindh High Court. Whereas, no amount of super tax demand has been paid for tax year 2015. The Honorable SHC vide order dated July 21, 2020 has dismissed the CP pertaining to TY 2015, however suits pertaining to TY 2016 and 2017 have not been disposed of. The Company is currently evaluating the legal options to approach the Supreme Court to challenge the aforesaid decision of SHC and seek interim relief in respect of the outstanding super tax demand for all three years. 33. BASIC AND DILUTED EARNINGS / (LOSS) PER SHARE ------------------------------ Un-audited -----------------------------Quarter ended Half year ended September 30, September 30, September 30, September 30, 2020 2019 2020 2019 ----------------------------- Rupees in ‘000 ----------------------------- Profit / (loss) after taxation for the period - attributable to ordinary equity holders of the holding company for diluted earnings company for diluted earnings Preference dividend for the year December 31, 2018 @ 12% p.a Profit / (loss) after taxation for the period - attributable to ordinary equity holders of the holding company for basic earnings Weighted average number of basic outstanding ordinary shares during the period 333,364 (204,465) 1,107,038 (727,858) - - - (24,164) 333,364 (204,465) 1,107,038 (752,022) --------------------------------- Number --------------------------------1,297,464,262 1,297,464,262 1,297,464,262 1,297,464,262 ----------------------------------- Rupee ------------------------------------ Basic and diluted earnings / (loss) per share 0.26 (0.16) 0.85 87 (0.58)
91. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 34. (Un-audited) (Audited) (Un-audited) September 30, December 31, September 30, 2020 2019 2019 CASH AND CASH EQUIVALENTS Note ----- Rupees in ‘000 ----Cash and balances with treasury banks Balances with other banks Overdrawn nostro accounts Less: General provision under IFRS 9 35. 6 7 15 33,588,181 690,075 (570,114) 33,708,142 (91) 33,708,051 25,590,173 476,370 (636,992) 25,429,551 25,429,551 21,094,250 1,559,592 (152,092) 22,501,750 (83) 22,501,667 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 4.5 to the annual consolidated financial statements for the year ended December 31, 2019. 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. 35.1 Valuation techniques used in determination of fair values within level Item Valuation approach and input used Financial Instruments- Level 1 Shares of listed companies Fair values of investments in listed equity securities are valued on the basis of closing quoted market prices available at the Pakistan Stock Exchange. Nine Months ended: September 30, 2020 88
92. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 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 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 rates (Reuters page). Investments in debt securities (comprising 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. 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 10 and 13 of the consoliadated annual financial statements December 31, 2019. 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. 89
93. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 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. 35.2 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 period / year. 35.3 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. (Un-audited) September 30, 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 Financial assets - disclosed but not measured at fair value Investments Federal Government Securities 85,364 85,364 8,225,096 216,634 8,441,730 - 8,225,096 85,364 216,634 8,527,094 4,118,676 4,118,676 110,915,522 696,874 3,972,814 1,147,087 116,732,297 - 110,915,522 4,118,676 696,874 3,972,814 1,147,087 120,850,973 4,204,040 36,196,335 161,370,362 - 36,196,335 165,574,402 - - 3,387,951 1,175,616 3,387,951 1,175,616 - - 4,563,567 4,563,567 - 24,085,306 11,826,893 - 24,085,306 11,826,893 Non-Financial assets - measured at fair value Revalued fixed assets Non-banking assets acquired in satisfaction of claims Off balance sheet financial instruments Commitments in respect of: Forward foreign exchange contracts Purchase Sale Derivative instruments Forward investments securities Sale 90,086 - - 90,086 Interest rate swaps Purchase Sale - 1,519,596 1,526,450 - 1,519,596 1,526,450 Options Purchase Sale - 2,038,193 30,498,492 - 2,038,193 30,498,492 Nine Months ended: September 30, 2020 90
94. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 On balance sheet financial instruments (Audited) December 31, 2019 Level 1 Level 2 Level 3 Total ------------------------- Rupees in ‘000 ------------------------- Financial assets - measured at fair value Held-for-trading securities Investments Federal Government Securities Shares Open end mutual funds 487,185 487,185 55,598,469 455,902 56,054,371 - 55,598,469 487,185 455,902 56,541,556 1,993,246 - - 1,993,246 47,019,374 776,975 1,222,869 49,019,218 - - 47,019,374 1,993,246 776,975 1,222,869 51,012,464 2,480,431 31,341,410 136,414,999 - 31,341,410 138,895,430 - - 3,797,180 3,797,180 - - 1,182,425 4,979,605 1,182,425 4,979,605 - 32,885,546 21,722,741 - 32,885,546 21,722,741 Forward government securities Purchase Sale - 499,818 493,193 - 499,818 493,193 Interest rate swaps Purchase Sale - 1,474,016 2,738,661 - 1,474,016 2,738,661 Options Purchase Sale - 1,024,638 1,030,868 - 1,024,638 1,030,868 Available-for-sale securities Investments Federal Government Securities Shares Non Government Debt Securities Open end mutual funds 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 Off balance sheet financial instruments Commitments in respect of: Forward foreign exchange contracts Purchase Sale Derivative instruments 91
95. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 36. SEGMENT INFORMATION 36.1Segment Details with respect to Business Activities: Corporate Finance Trading and Sales Retail Banking Commercial Banking Asset management Brokerage Others Total ------------------------------------------ Rupees in ‘000 ------------------------------------------ September 30, 2020 (Unaudited) Profit & Loss Net mark-up / return / profit (1,139,698) (760,734) 7,749,740 2,612,379 30,190 (13,682) (1,090,479) 7,387,716 Inter segment revenue - net (3,937) (1,157,607) 297,766 1,451,531 - - (587,753) - Non mark-up / return / interest income 72,352 1,614,792 1,909,646 878,710 526,549 156,974 (30,915) 5,128,108 (1,071,283) (303,549) 9,957,152 4,942,620 556,739 143,292 (1,709,147) 12,515,824 27,909 104,154 4,116,640 493,602 402,645 257,498 4,590,043 9,992,491 allocation 100,217 238,357 2,933,936 980,238 - - (4,252,748) - Total expenses 128,126 342,511 7,050,576 1,473,840 402,645 257,498 337,295 9,992,491 Total Income Segment direct expenses Inter segment expense Provisions Profit before tax 3,020 - 139,818 121,522 - (26,023) 193,430 431,767 (1,202,429) (646,060) 2,766,758 3,347,258 154,094 (88,183) (2,239,872) 2,091,566 - - 31,810,622 2,395,244 68,936 3,363 - 34,278,165 2,255,377 156,820,985 - 7,383,159 234,690 1,591,523 - 168,285,734 180,128,227 September 30, 2020 (Unaudited) Balance Sheet Cash & Bank balances Investments Net inter segment lending - - 97,261,954 60,855,810 - - 22,010,463 Lendings to financial institutions - 8,655,689 - 124,277 - - - 8,779,966 626 - 45,807,087 188,204,309 329,693 (36,284) - 234,305,431 - - 5,917,962 5,719,385 - - - 11,637,347 - - (1,410,657) (2,386,639) - - - (3,797,296) 626 - 50,314,392 191,537,055 329,693 (36,284) - 242,145,482 Advances - performing Advances - non-performing Advances - (provisions) / reversals - net Others - - - - 1,792,793 693,720 24,766,136 27,252,649 2,256,003 165,476,674 179,386,968 262,295,545 2,426,112 2,252,322 46,776,599 660,870,223 Borrowings - 15,473,176 - 18,843,703 - - - 34,316,879 Subordinated debt - - - - - - 7,494,800 7,494,800 1,835 - 152,882,548 237,104,155 - - - 389,988,538 2,254,168 151,930,105 21,850,336 4,093,618 - - - 180,128,227 - 49,502 4,654,085 289,981 1,986,349 451,025 19,238,639 26,669,581 2,256,003 167,452,783 179,386,969 260,331,457 1,986,349 451,025 26,733,439 638,598,025 - - - - - - 21,759,221 21,759,221 - - - - - - 512,977 512,977 2,256,003 167,452,783 179,386,969 260,331,457 1,986,349 451,025 49,005,637 660,870,223 - 73,044,870 53,661,938 21,733,308 729,514 - 160,100 149,329,730 Total Assets Deposits & other accounts Net inter segment borrowing Others Total Liabilities Equity Non-controlling interest Total Equity & Liabilities Contingencies & Commitments Nine Months ended: September 30, 2020 92
96. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 Corporate Finance Trading and Sales Retail Banking Commercial Banking Brokerage Asset management Others Total ------------------------------------------ Rupees in ‘000 ------------------------------------------ September 30, 2019 (Unaudited) Profit & Loss Net mark-up / return / profit Inter segment revenue - net Non mark-up / return / interest income Total Income - 2,843,999 (8,317,572) (5,201,665) 13,505,984 7,643,120 (5,188,412) 138,986 - (8,899) - - 5,415,541 - 51,341 51,341 209,081 (5,264,492) 1,269,374 9,573,693 710,484 3,165,192 310,840 449,826 200,546 191,647 93,252 93,252 2,844,918 8,260,459 81,067 81,067 (29,726) 100,284 233,822 334,106 115,553 (5,714,151) 4,460,064 1,329,587 5,789,651 152,159 3,631,883 553,272 946,962 1,500,234 233,783 1,431,175 425,999 (1,297) 424,702 327 24,797 330,692 (2,945) 327,747 (136,100) 198,404 198,404 (105,152) 6,149,782 2,506,129 8,655,911 501,822 (897,274) - 17,153,412 140,656,932 30,320,540 - 8,898,772 202,362,517 94,201,743 3,508,735 141,898,229 6,844,429 11,141 626,350 336,821 - 3,150 1,841,341 3,978 - 8,089,077 - 26,066,475 143,124,623 210,451,594 30,320,540 236,440,771 10,353,164 Others Total Assets - 4,831,115 192,961,999 (469,382) 97,241,096 3,925,690 312,428,075 (3,039,245) 145,703,413 5,017,351 150,720,764 336,821 1,933,157 2,907,469 3,978 548,024 2,396,493 14,189,285 22,278,362 (3,508,627) 243,285,308 30,444,622 683,693,162 Borrowings Subordinated debt Deposits & other accounts Net inter segment borrowing Others Total Liabilities - 36,295,878 7,494,800 150,619,213 513,149 194,923,040 7,090,687 295,347,351 9,990,037 312,428,075 11,081,718 73,196,252 59,832,381 5,364,052 149,474,403 1,858,304 1,858,304 762,518 762,518 4,765,510 4,765,510 54,468,283 7,494,800 368,543,603 210,451,594 23,253,570 664,211,850 Equity Non-controlling interest Total Equity & Liabilities - 194,923,040 312,428,075 149,474,403 1,858,304 762,518 18,973,041 508,271 24,246,822 18,973,041 508,271 683,693,162 Contingencies & Commitments - 59,810,338 43,939,275 17,795,589 988,086 - 131,093 122,664,381 Segment direct expenses Inter segment expense allocation Total expenses Provisions Profit before tax December 31, 2019 (Audited) Balance Sheet Cash & Bank balances Investments Net inter segment lending Lendings to financial institutions Advances - performing Advances - non-performing Advances - (provisions) / reversals - net 37. RELATED PARTY TRANSACTIONS The Group has related party transactions with its parent, associates, employee benefit plans, directors & Key Management Personnel and other related parties. The Holding company enters into transactions with related parties in the ordinary course of business and on arm’s length basis i.e. 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. Details of transactions with related parties during the period, other than those which have been disclosed elsewhere in these financial statements are as follows: 93
97. Nine Months ended : September 30, 2020 94 - Fixed Assets Cost of disposal Accumulated depreciation of disposal WDV of disposal Provision against other assets - 120 575 304 - Advances Opening balance Addition during the period / year Repaid during the period / year Transfer in / (out) - net Closing balance Other Assets Interest mark-up accrued Receivable against bancassurance / bancatakaful Advance for subscription of TFC - unsecured Trade receivable Prepaid insurance Advance against purchase of property Other receivable - 15,000 (2,500) 12,500 - Provision for diminution in value of investments Investments Opening balance Investment made during the period / year Investment redeemed / disposed off during the period / year Closing balance Lendings to financial institutions Opening balance Addition during the period / year Repaid during the period / year Closing balance As at December 31, 2019 (Audited) - - - 40 (574) 23,126 22,592 - - - - 412 24 - - 596,257 127,905 (129,312) 129,236 724,086 - - - - 4,370 - 224,744 224,744 - 228,972 40,828 269,800 - - 78,112 50,649 109,911 299,076 9,652 - 1,946,481 1,664,671 (1,938,242) 2,528,017 4,200,927 65,022 3,234,272 3,515,439 (2,609,555) 4,140,156 3,400,000 (3,400,000) - - 736 80,255 296 - - 48 2 - - 5,230 316 (5,546) - - - - - 20,250 (5,250) 15,000 - - 473 - 43,410 (12,927) 30,483 448,575 322,590 (120,115) (54,793) 596,257 - - - - 40,828 - - - - 180,000 48,972 228,972 - 2,438 49,640 67,952 134,238 97,806 26,261 12,095 17,657 (8,002) 9,655 2,823,598 5,086,823 (6,320,068) 356,128 1,946,481 65,022 3,230,125 3,498,164 (3,494,017) 3,234,272 - Key management Other Key management Other related Parent Directors personnel Associates related parties Parent Directors personnel Associates parties ------------------------------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------------------------------- As at September 30, 2020 (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30, 2020
98. - - Contingencies and Commitments Letter of guarantee Letter of Credit Represented By Share Capital Other Liabilities Interest / return / mark-up payable on deposits Interest / return / mark-up payable on subordinated debt Accrued expenses Trade payable Payable to defined benefit plan Others payable - 9,733,073 34,985 - 24,444 295,524 (299,434) 2,777 23,311 271,648 4,583,096 (3,931,313) 923,431 Deposits and other accounts Opening balance Received during the period / year Withdrawn during the period / year Transfer in / (out) - net Closing balance - - - - - Borrowings Opening balance Borrowings during the period / year Settled during the period / year Closing balance Subordinated loans As at December 31, 2019 (Audited) - 905 80 728 - - 59,593 543,849 (550,772) (7,876) 44,794 - - - - - 23,104 473,525 (491,577) 5,052 - 71,940 29,249 45,655 147,060 35,495 880 161,822 2,268 889,510 8,622,201 114,874,302 (114,012,876) 1,442,126 10,925,753 11,105,705 (11,105,705) - - 9,733,073 - 17,330 1,306 - - - - 24,308 160,210 (137,680) (22,394) 24,444 - 336,515 4,332,699 (4,364,266) (33,300) 271,648 - - 900 114 3,115 - - 74,950 1,437,872 (1,450,123) (3,106) 59,593 - - - - - 1,023,592 (1,042,362) 41,874 23,104 - 14,217 44,368 81,765 286,949 2,220 1,176 147,885 1,464 889,588 9,656,833 235,460,531 (236,784,614) 289,451 8,622,201 4,800,000 174,209,491 (179,009,491) - Key management Other Key management Other related Parent Directors personnel Associates related parties Parent Directors personnel Associates parties ------------------------------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------------------------------- As at September 30, 2020 (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30, 2020 95
99. - - Gain / (loss) on sale of securities - Net Rental income Nine Months ended: September 30, 2020 96 - - - - - Net charge / (reversal) for defined benefit plans Donation Rental expense Advisory fee Royalty - - - Insurance premium paid Insurance claims settled Defined benefit plans paid Payments made during the year 6,646 - Net charge for defined contribution plans Reimbursement of expenses - Non-executive directors' fee 1,133 - Remuneration paid Other expenses - Preference Dividend Paid 25,586 - 6,057 Fee, commission and brokerage income Dividend income 1,522 Mark-up / return / interest earned Mark-up / return / interest paid For the nine months period ended September 30, 2019 (Unaudited) - - - 130 - - - - - - - 15,090 60,210 - 873 - - - 9 1,476 - - - - - - - - - - - 411,158 - 1,095 - - - 2,516 30,954 - - - - - - - - - - - - - - 1,952 - - - - 16,367 151,881 2,793 395,254 30,598 13,775 22,500 - 28,541 58,919 161,822 187,289 - - - 626,267 - 4,068 77,718 340,954 165,033 - - - - - - 622 1,211 - - - - - - - - 7,000 - - - - - - - - - 161 - 1,665 29,605 - - - 54 211 23,419 - - - 1,303 1,912 - - - - - - - - - - - - 418,828 - 2,929 - - - 243 9,269 - - - - - - - - - - - - - - 1,829 - - - - - 102,494 8,036 331,262 - 2,946 22,500 15,000 - - 115,816 175,505 675 - 38 1,075,822 3,035 16,577 75,690 385,151 273,743 Key management Other related Key management Other related Parent Directors personnel Associates parties Parent Directors personnel Associates parties ------------------------------------------------------------------------------------------- (Rupees in ‘000) ------------------------------------------------------------------------------------------- For the nine months period ended September 30, 2020 (Unaudited) Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30, 2020
100. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 38. CAPITAL ADEQUACY, LEVERAGE RATIO & LIQUIDITY REQUIREMENTS 38.1 Minimum Capital Requirement (MCR): Paid-up capital (net of losses) (Un-audited) (Audited) September 30, December 31, 2020 2019 ----- Rupees in ‘000 ----- 10,119,242 10,119,242 17,074,233 2,205,203 19,279,436 5,759,168 25,038,604 16,145,623 2,118,958 18,264,581 4,965,069 23,229,650 160,428,962 3,327,404 22,096,563 185,852,929 142,862,324 4,219,399 22,096,563 169,178,286 9.19% 9.54% Tier 1 Capital Adequacy Ratio 10.37% 10.80% Total Capital Adequacy Ratio 13.47% 13.73% 38.2 Leverage Ratio (LR): Eligiblle Tier-1 Capital Total Exposures Leverage Ratio 19,279,436 569,267,527 3.39% 18,264,582 544,436,725 3.35% 38.3 Liquidity Coverage Ratio (LCR): Total High Quality Liquid Assets Total Net Cash Outflow Liquidity Coverage Ratio 162,259,579 56,563,273 286.86% 83,221,592 55,819,412 149.09% 38.4 Net Stable Funding Ratio (NSFR): Total Available Stable Funding Total Required Stable Funding Net Stable Funding Ratio 318,570,091 264,950,620 120.24% 308,715,925 274,288,642 112.55% 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) Risk Weighted Assets (RWAs): Credit Risk Market Risk Operational Risk Total Common Equity Tier 1 Capital Adequacy ratio 97
101. Notes to the Condensed Interim Consolidated Financial Statements for the nine months period ended September 30 , 2020 39. RECLASSIFICATION Corresponding figures have been re-arranged and re-classified to refelect more appropriate presentation of events and transactions to enhance comparability with the current period’s financial statements, which are as follows: From Statement of financial position Cashflow Statement Reclassified Other liabilities Other assets Others Others Others Rs. in ‘000 Credit card settlement Inter bank fund transfer settlement Others 29,924 (91,642) 290,068 CASH FLOW FROM OPERATING ACTIVITIES Other liabilities 40. To Other assets (165,858) GENERAL 40.1 These condensed interim 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. 5 dated March 22, 2019 and related clarifications / modifications. 40.2 The figures in these condensed interim consolidated financial statements have been rounded off to the nearest thousand. 41. DATE OF AUTHORISATION FOR ISSUE These condensed interim consolidated financial statements were authorized for issue by the Board of Directors of the Holding Company in their meeting held on October 28, 2020. _____________________ President and Chief Executive Officer ___________________ Chief Financial Officer Nine Months ended: September 30, 2020 98 ___________ Director ___________ Director ___________ Chairman
102. Shaheen Commercial Complex , Dr. Ziauddin Ahmed Road, P.O Box 4867, Karachi-74200, Pakistan. UAN: +92-21-111-JS BANK (572-265)